Indian Economy MCQs

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The CRR is the reserve ratio that the banks have to keep with the RBI. It earn no interest rate. It should be kept in the cash form.

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Bank rate is the rate at which the RBI extends credit to the commercial banks.

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The FDI limit in Indian insurance companies increased to 74% in 2021. The Insurance Act, 1938 was amended to permit up to 100% foreign direct investment from February 5, 2026. Foreign investors and FPIs can now collectively own 100 percent equity in Indian insurance companies, according to the Sabka Bima Sabki Raksha Act, operative from February 2026. This act ended all previous sectoral FDI cap restrictions.

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India’s government health expenditure was approximately 2.1% of GDP in 2022-23. The Economic Survey reports health spending increased from 1.4% to 1.8% during FY20 to FY26. Total healthcare spending, including public and private sectors, remains around 3.3% of GDP. Government budget allocations reflect a gradual rise in health financing compared to previous years.

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Maharashtra approved its caravan tourism policy in 2021. The policy permits private operators to run caravans and set up caravan parks. Incentives under this policy include GST refunds and waiver of stamp and electricity duties. Maharashtra became the third Indian state after Karnataka and Madhya Pradesh to implement such a policy. The policy aims to boost tourism infrastructure in the state.

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This question talks about increasing marginal return at a decreasing rate, which is, in fact, a diminishing marginal return. In economics, the law of diminishing returns states: “If an increasing amount of one variable factor is applied to a fixed quantity of other factors per unit of time, the increase in total output will first increase but beyond some point, it will decrease. According to Richard A. Bilas’s law of diminishing returns “If the investment of one resource in other resources is held constant, total output will increase but beyond some point, the resulting output growth will become smaller and smaller.” So as the marginal return increases at a decreasing rate, the total return will eventually decrease.

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Average fixed cost curve is never ‘U’ shaped. Since total fixed cost remains unchanged with increase in output, the average fixed cost curve continues to fall as output increases.

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Interest earned on deposits is recognized as non-contractual income. Such income arises without a direct contract specifying performance obligations as per accounting standards like ASC 606. This type of income is typically from financial assets, and it does not involve customer contracts, unlike salary or rent, which are clearly defined by formal agreements.

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Consistent return to scale occurs when a given percentage change in all inputs results in the same percentage in output. For example, if all the inputs are doubled, the output is also doubled.

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Domestic inflation increases production costs and prices, reducing export competitiveness for the country. Higher prices make exports costlier compared to global competitors. Inflation leads to a fall in the value of money and a rise in the cost of living. Profit margins may increase if firms can pass costs to consumers. Periods of high inflation often coincide with declining export growth.