Indian Economy Multiple Choice Questions (MCQs) for State and UPSC Civil Services Examinations. Objective Questions on Indian Economy for competitive examinations.
41. How the government uses fiscal policy as an instrument to combat inflation?
By increasing public expenditure
By increasing public debt
By delaying the payment of old debts
By increasing taxes
Select the correct option from the codes given below:
[A] Only 1, 2 & 3 [B] Only 2, 3 & 4 [C] Only 1, 3 & 4 [D] 1, 2, 3 & 4
Notes: Tax-to-GDP ratio is the total government tax collections divided by the country’s GDP. India has very low tax-to-GDP ratio. The tax-to-GDP ratio for the central government is 10 percent and state plus centre is about 15.5 percent.
43. Global Competitiveness Report is published by_____?
[A] World Bank [B] International Monetary Fund [C] World Economic Forum [D] World Trade Organization
Notes: World economic forum publishes the global competitiveness report annually.
44. In recent times, India has been one of the most favourite equity market for the foreign institutional investors (FII). A Foreign Institutional Investor is allowed to invest in India in__:
Primary Markets
Secondary Markets
Treasury Bills
Select the correct option from the codes given below:
[A] Only 1 & 2 [B] Only 2 & 3 [C] Only 1 & 3 [D] 1, 2 & 3
Notes: FIIs are not allowed to invest in primary as well as secondary markets in India. In 2014, RBI had prohibited the FIIs from investment in T-Bills in India to save them from interest rate volatility.
45. Which among the following are generally known as the ‘twin deficit’?
[A] Revenue deficit and current account deficit [B] Revenue deficit and capital account deficit [C] Fiscal deficit and current account deficit [D] Fiscal deficit and capital account deficit
Notes: Fiscal consolidation refers to steps taken by government to reduce the spending and check Fiscal deficit. RBI increasing Repo Rate
This is correct because RBI increasing Repo rate will curb the commercial banks lending and contribute to fiscal consolidation. Increasing SLR
This is correct because increase in SLR will again curb the commercial banks lending capacity and contribute to fiscal consolidation. Startup India
This is incorrect because Start-up India programme is leading to fiscal stimulus in economy and this is opposite to what fiscal consolidation would mean to.
Issue Issuing Government Bonds and T-Bills
This is incorrect because government borrowing in bonds and T-bills will increase government’s liability and hence no fiscal consolidation.
47. Consider the following statements:
While Real GDP calculation takes inflation in account, Nominal GDP does not.
Nominal GDP is often higher than real GDP.
GDP in India is calculated by the Central Statistics Office.
Which of the above statements is/are correct?
[A] Only 1 & 2 [B] Only 2 & 3 [C] Only 1 & 3 [D] 1, 2 & 3
Notes: Demat refers to a dematerialised account. Just as we open a bank account to hold money and make payments, we need to open a Demat account now to buy and sell securities (listed stocks), ETFs as well as debentures in the financial markets. Demat account is a requirement stipulated by SEBI for individual Indian Citizens. In the Demat account, shares and securities are held electronically instead of the investor taking physical possession of share certificates. Whenever an investor registers with an investment broker or sub broker, a Demat Account is opened by him/ her and the Demat account number is quoted for all transactions to enable electronic settlements of trades to take place.
49. With reference to the Statutory Liquidity Ratio (SLR), consider the following observations: 1. Banks can keep cash, government bonds as well as gold to meet their SLR requirements 2. SLR is one of the means to finance government’s fiscal deficit Which of the above is / are correct statements?
[A] Only 1 [B] Only 2 [C] Both 1 & 2 [D] Neither 1 nor 2
Notes: The Economic Survey has made a case to bring down the SLR gradually while discussing about the “double financial repression” being faced by the PSU banks. On one side, they need to keep higher protion of their assets as SLR while on the other hand, they have to comply with the Priority sector requirements. This is what has been called “double financial repression”. SLR The Statutory Liquidity Ratio is a requirement on banks to hold a certain share of their resources in liquid assets such as cash, government bonds and gold. In principle, the SLR can perform a prudential role because any unexpected demand from depositors can be quickly met by liquidating these assets. SLR requirements have traditionally been high. From 38 per cent in the period before 1991, there was a dramatic decline to about 25 per cent at the end of the 1990s. Since then however, the number has hovered around the quarter century mark, only recently falling to 22 per cent. As of Feb 4, 2015 the minimum requirement is 21.5 per cent of total assets. Banks typically keep more than the required SLR, the current realised SLR is in fact over 25 per cent. In practice, the SLR has become a means of financing (at less than market rates presumably) a bulk of the government’s fiscal deficit, suggesting that SLR cuts are related to the government’s fiscal position.
50. Consider the following statements about the Prepaid Payment Instruments:
These are regulated by RBI
These instruments do not permit cash withdrawal facilities
Which of the above statements is/are correct?
[A] 1 Only [B] 2 Only [C] Both 1 & 2 [D] Neither 1 nor 2
Notes: Pre-paid Payment Instruments (PPIs) are payment instruments that facilitate transactions like purchase of goods and services, including funds transfer, against the value stored on such instruments. These prepaid payments instruments are regulated by RBI. The existing prepaid payment instruments (PPI model) like Airtel Money does not give pay any interest on deposits. Closed system payment instruments facilitate the purchase of goods and services from it but do not facilitate cash withdrawal, whereas open system payment instruments facilitate purchase of goods and services as well as provide cash withdrawal facilities.
