Indian Economy MCQs
Indian Economy Multiple Choice Questions (MCQs) for SSC, State and all One Day Examinations of India. Objective Questions on Indian Economy for competitive examinations.
1. In the capital market, simultaneous purchase and sale of securities to reduce the loss on purchase is known as __?
[A] Arbitrage
[B] Hedging
[C] Trend following
[D] Shorting
Show Answer
Correct Answer: A [Arbitrage]
Notes:
Arbitrage is a type of trade in which a security is simultaneously bought and sold, in different markets. This type of trade takes advantage of the difference in prices of the same financial instrument being offered on different exchanges.
2. When are stock market circuit breakers triggered?
[A] On special exchange-designated days
[B] When a new share trades for first time
[C] When trading volume of a stock exceeds a threshold
[D] When the S&P 500 Index falls by a set percentage
Show Answer
Correct Answer: D [When the S&P 500 Index falls by a set percentage]
Notes:
Market-wide circuit breakers in the United States are triggered if the S&P 500 Index falls by 7%, 13%, or 20% from the previous day’s closing value. Level 1 and Level 2 trigger 15-minute trading halts if before 3:25 p.m. A Level 3 decline causes trading to be halted for the remainder of the day. Circuit breakers were introduced in 1988 after the 1987 Black Monday crash.
3. Which RBI action is a qualitative credit control instrument?
[A] RBI increases Reverse Repo rate in quarterly policy review
[B] RBI decreases the CRR rate in quarterly policy review
[C] RBI decreases the Bank rate in quarterly policy review
[D] RBI announces selective credit control in quarterly policy review
Show Answer
Correct Answer: D [RBI announces selective credit control in quarterly policy review]
Notes:
Selective credit control is a qualitative instrument used by RBI to restrict or channel credit to specific sectors. RBI issues directives and margin requirements under the Banking Regulation Act, 1949. It was used for commodities such as foodgrains, sugar, and cotton. Selective credit control is distinguished from quantitative tools like CRR, SLR, bank rate, and repo rates, which affect the overall money supply.
4. Which RBI function shows its role as the Bankers’ Bank in India?
[A] Issuance of Currency
[B] Ways & Means Advances
[C] Liquidity Adjustment Facility
[D] Maintenance of Currency Chests
Show Answer
Correct Answer: C [Liquidity Adjustment Facility]
Notes:
The Liquidity Adjustment Facility (LAF) was introduced by RBI in June 2000. RBI uses LAF to manage liquidity by allowing banks to borrow money through repurchase agreements (repos) or lend money to RBI through reverse repo. The facility assists banks with short-term liquidity mismatches and enables RBI to maintain monetary stability. LAF operates daily and is managed via electronic bids on the CBS platform.
5. Which is the biggest borrower in India?
[A] Indian Government
[B] Reserve Bank of India
[C] Indian Railways
[D] State Governments
Show Answer
Correct Answer: A [Indian Government]
Notes:
The Indian central government projected total debt is ₹214.82 lakh crore by March 2027. In FY 2026-27, the government plans to borrow ₹17.2 lakh crore through gross market borrowings. Net market borrowings are projected at ₹11.7 lakh crore. Reserve Bank of India mainly conducts monetary operations and does not borrow such amounts. State governments’ borrowings are lower than the Centre.
6. Which fund did NABARD launch in 1995-96 for rural infrastructure financing?
[A] National Credit Fund
[B] National Rural Credit Fund
[C] National Credit Stabilization Fund
[D] Rural Infrastructure Development Fund
Show Answer
Correct Answer: D [Rural Infrastructure Development Fund]
Notes:
The Rural Infrastructure Development Fund was set up by the Government of India in 1995-96 through NABARD. It began with an initial corpus of Rs. 2,000 crore. RIDF aims to provide low-cost finance for rural infrastructure, including roads, irrigation, and bridges. By 2023-24, total allocation reached approximately Rs. 4,98,411 crore. The fund covers 39 eligible activities across India.
7. With reference to the business, what is working capital?
[A] The investment made in the business
[B] Fixed assets
[C] Circulating assets- stocks, cash and debts owed to the business
[D] Amount spent on machinery or for building up stock
Show Answer
Correct Answer: C [ Circulating assets- stocks, cash and debts owed to the business ]
Notes:
Current Assets minus Current Liabilities is known as working capital.
8. Which among the following bodies regulated the cooperative banks in India?
[A] Reserve Bank of India
[B] Small Industries Development Bank of India
[C] National Bank for Agriculture and Rural Development
[D] National Cooperative Union of India
Show Answer
Correct Answer: A [ Reserve Bank of India ]
Notes:
As per the Cooperative Societies Act, Reserve Bank of India (RBI) regulates the cooperative banks and these are governed by the Banking Regulations Act, 1949 and the Banking Laws (Cooperative Societies) Act, 1965.
9. Tank irrigation is mainly practiced in which region of India?
[A] South India
[B] West India
[C] North India
[D] North-East India
Show Answer
Correct Answer: A [South India]
Notes:
Tank irrigation is concentrated in South India, especially in Tamil Nadu, Andhra Pradesh, and Karnataka. South India receives irregular rainfall, making tank irrigation essential for water storage. Tank irrigation systems have existed in South India since ancient times, supported by regional rulers and local communities. The percentage of tank-irrigated area is highest in South Indian states compared to other regions of India.
10. Which method allows central banks to inject money when rates are near zero?
[A] Open Market Operation
[B] Reverse Repo
[C] Quantitative Easing
[D] Repo
Show Answer
Correct Answer: C [Quantitative Easing]
Notes:
Quantitative Easing is a monetary policy used by central banks to buy government securities or other securities from the market to increase money supply and encourage lending and investment. This policy is usually deployed when interest rates are close to zero and conventional monetary policy becomes ineffective. Quantitative Easing was used by the US Federal Reserve in 2008 and by the European Central Bank in 2015.
