Indian Economy MCQs

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CRISIL was the first credit rating agency in India, formed in the year1988. In 2005, it became a subsidiary of American company S&P Global. The highest credit risk rating awarded to any company is ‘AAA’ and the lowest is ‘D’.

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Speculation involves taking positions to profit from expected price changes, accepting risk for potential gain. Hedging uses opposite positions to reduce price risk, while speculation increases risk exposure for possible reward. Both activities occur in securities, currency, and futures markets. Speculators provide market liquidity by accepting risk. Regulators monitor speculative activities to maintain market stability.

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Substitute goods are those goods which can be used in place of each other. Examples of substitute goods are : tea and coffee; ghee and edible oil. In case of substitute goods like tea and coffee, demand for a commodity falls with a fall in the price of other substitute goods.

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In the 1983 Budget, Finance Minister R. Venkataraman emphasized “basic reforms in the international financial and trading system” for the first time in India. This was a pivotal moment as it marked a shift towards liberalization and modernization of India’s economy, laying the groundwork for future reforms in the 1990s. The 1983 Budget aimed to address economic challenges and improve India’s global trade position.

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The correct answer is “State Government 100%.” In India, stamp duty on promissory notes is governed by the Stamp Act of 1899, which allows state governments to levy stamp duty. Each state has the authority to set its own rates, and the revenue collected from stamp duty is retained entirely by the state government. This is a important source of revenue for states, contributing to their financial resources for development and public services.

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Commercial Paper is issued as an unsecured promissory note. It was first introduced in India in 1990. CPs have maturities ranging from 7 days to 1 year. Only companies with a high credit rating can issue CPs. The Reserve Bank of India regulates CP issuance. CPs are used for short-term funding needs by corporate bodies, primary dealers, and financial institutions.

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The correct answer is “Base Rate.” The Base Rate is the minimum interest rate set by a bank for lending to its customers. It serves as a benchmark for various loans and is influenced by factors like the central bank’s policy rate and the bank’s cost of funds. The Base Rate ensures that banks cover their costs and maintain profitability while lending. In many countries, including India, the Base Rate is a crucial component of monetary policy and financial stability.

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Open Market Operations refer to the purchase and sale of the Government securities (G-Secs) by RBI from / to market.

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SWIFT facilitates secure international financial messaging for cross-border transactions. Bank transfers using SWIFT account for the highest share of inward remittance flows to India as per central bank reports post-2023. SWIFT is preferred due to extensive global reach, regulatory compliance, and ability to process high-value transactions efficiently. Remittance patterns have shifted toward advanced economies, increasing reliance on SWIFT network transactions.

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Call money is the money lent/borrowed for maximum period of 14 days. No Collateral is required in Call Money transaction. Banks borrow primarily from the inter-bank (call money) market.