UPSC Prelims 2012 Economy questions: topic-wise weightage
UPSC Prelims 2012 asked 20 economy questions in GS Paper I, spread over 5 topics. See the economy weightage for 2012 below, then attempt each question with the official answer and an explanation.
Economy 2012: questions by topic
- Money, banking, monetary policy and inflation3
- Fiscal policy, budget and taxation2
- External sector and international economic institutions2
- Agriculture, food security and allied sectors4
- Industry, infrastructure, poverty, employment and social sector9
Counted from the 20 questions on this page, tagged by topic in the Battle IAS PYQ bank.
Seeing 20 Economy questions spread over 5 topics can feel overwhelming. That's exactly why the Battle IAS PYQ Book maps every question topic by topic, so you know what to study first. Download free sample
Money, banking, monetary policy and inflation 3
The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following?
- 1. Other banks retain their deposits with the RBI.
- 2. The RBI lends funds to the commercial banks in times of need.
- 3. The RBI advises the commercial banks on monetary matters.
Select the correct answer using the codes given below :
Answer (d) & explanation
All three are correct (d). As the bankers' bank, the RBI does for banks what a bank does for its customers. Banks keep part of their deposits with it as cash reserves (CRR) (1). It lends to banks in need, through the repo window, the Marginal Standing Facility, and as lender of last resort (2). It advises and guides banks on monetary and credit matters (3). So options (a), (b) and (c) leave out real functions.
Notice the other roles: issuer of currency, banker to the government, regulator of banks and NBFCs, and manager of foreign exchange. The RBI was set up in 1935 on the Hilton Young Commission's advice and nationalised in 1949. Trap: all three are textbook features of a central bank.
Answer as per the official UPSC answer key.
Which of the following measures would result in an increase in the money supply in the economy?
- 1. Purchase of government securities from the public by the Central Bank
- 2. Deposit of currency in commercial banks by the public
- 3. Borrowing by the government from the Central Bank
- 4. Sale of government securities to the public by the Central Bank
Select the correct answer using the codes given below :
Answer (c) & explanation
Items 1 and 3 are correct (c). When the central bank buys government securities from the public, it pays with new money, so supply rises (1). When the government borrows from the central bank, the RBI creates new money (monetisation of deficit), so supply rises (3). Item 4 is the reverse: selling securities absorbs money. Item 2 is neutral: depositing cash in a bank only changes money's form from currency to deposits; UPSC treats it as no increase, though it could later enable more lending. So (a), (b) and (d) fail.
Notice the tools: these are open market operations. The 1997 agreement ended automatic monetisation through ad hoc Treasury Bills, and the FRBM Act bars RBI from primary market purchases except in special cases. Trap: deposits feel like 'more money', but the total is unchanged.
Answer as per the official UPSC answer key.
The basic aim of Lead Bank Scheme is that
Answer (c) & explanation
Option (c) is correct. Under the Lead Bank Scheme, started in 1969 on the Gadgil Study Group and Nariman Committee recommendations, each district was assigned to one bank as its lead bank. That bank takes charge of credit planning and coordinates banks and government agencies for intensive development of the district. (a) is wrong: opening offices everywhere was not the aim. (b) is wrong: the scheme sought coordination, not competition. (d) is wrong: deposit mobilisation was not the core goal.
Notice the machinery: the District Consultative Committee and the State Level Bankers' Committee (SLBC), convened by a convenor bank, review credit plans; the Potential Linked Credit Plans are prepared by NABARD. The RBI reviewed the scheme in 2017. Trap: 'big banks' sounds right, but the idea is district adoption.
Answer as per the official UPSC answer key.
Fiscal policy, budget and taxation 2
Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission?
- 1. A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design
- 2. A design for the creation of lakhs of jobs in the next ten years in consonance with India’s demographic dividend
- 3. Devolution of a specified share of central taxes to local bodies as grants
Select the correct answer using the codes given below :
Answer (c) & explanation
Statements 1 and 3 are correct (c). The 13th Finance Commission (chair Vijay Kelkar, covering 2010–15) proposed a 'model GST' and a ₹50,000-crore compensation package for states that adopted it (1). It also linked grants to local bodies to a specified share of the divisible pool of central taxes (3). Statement 2 is wrong: job creation plans are not a Finance Commission task. So (a), (b) and (d) fail.
Notice what followed: GST arrived in July 2017 through the 101st Amendment, with a five-year compensation cess; the 14th FC raised states' share to 42%, the 15th set it at 41%, and the 16th (Arvind Panagariya) kept 41% for 2026–31. Trap: 'demographic dividend' is a buzzword, not a commission mandate.
Answer as per the official UPSC answer key.
Under which of the following circumstances may ‘capital gains’ arise?
- 1. When there is an increase in the sales of a product
- 2. When there is a natural increase in the value of the property owned
- 3. When you purchase a painting and there is a growth in its value due to increase in its popularity
Select the correct answer using the codes given below :
Answer (b) & explanation
Statements 2 and 3 are correct (b). A capital gain is the rise in value of a capital asset, such as land, a house, shares, gold or art, over what was paid for it, realised when the asset is sold. A natural rise in the value of property (2) and a painting that gains value as it becomes popular (3) both give capital gains. Statement 1 is wrong: higher sales of a product raise business income or profit, not a capital gain. So (a), (c) and (d) fail.
Notice the tax rules: gains are short-term or long-term depending on holding period. From July 2024, LTCG tax on listed equity rose to 12.5% with an exemption of ₹1.25 lakh, and indexation was removed for most assets. Trap: revenue growth is not asset appreciation.
Answer as per the official UPSC answer key.
External sector and international economic institutions 2
Which of the following would include Foreign Direct Investment in India?
- 1. Subsidiaries of foreign companies in India
- 2. Majority foreign equity holding in Indian companies
- 3. Companies exclusively financed by foreign companies
- 4. Portfolio investment
Select the correct answer using the codes given below :
Answer (d) & explanation
Items 1, 2 and 3 are correct (d). FDI is investment that brings a lasting interest and control in an enterprise. Subsidiaries of foreign companies in India (1), majority foreign equity in Indian companies (2), and companies wholly financed by foreign companies (3) all qualify. Item 4 is wrong: portfolio investment buys shares and bonds for returns without management control; it is FPI. So (a), (b) and (c) fail.
Notice the threshold: following the Arvind Mayaram Committee (2014), a foreign stake of 10% or more in a listed company counts as FDI, and below 10% as FPI. Press Note 3 (2020) requires government approval for FDI from countries sharing land borders with India. Trap: portfolio money is foreign, but not 'direct'.
Answer as per the official UPSC answer key.
Consider the following statements :
The price of any currency in international market is decided by the
- 1. World Bank
- 2. demand for goods/services provided by the country concerned
- 3. stability of the government of the concerned country
- 4. economic potential of the country in question
Which of the statements given above are correct?
Answer (b) & explanation
Statements 2 and 3 are correct per UPSC's key (b), but the key is doubtful on item 4. Under a floating exchange rate, a currency's price is set by demand and supply in the forex market. Demand for a country's goods and services raises demand for its currency (2), and political stability draws in capital (3). Item 1 is wrong: the World Bank plays no part in setting exchange rates. Item 4 is the doubt: a country's economic potential clearly attracts investment and supports its currency, so many argue for including it; UPSC treated it as too vague to move the price directly.
Notice India's system: the rupee is a managed float, and the RBI intervenes to curb volatility using its reserves. Trap: the World Bank is often confused with the IMF.
Answer as per the official UPSC answer key.
Agriculture, food security and allied sectors 4
Government of India encourages the cultivation of ‘sea buckthorn’. What is the importance of this plant?
- 1. It helps in controlling soil erosion and in preventing desertification.
- 2. It is a rich source of biodiesel.
- 3. It has nutritional value and is well-adapted to live in cold areas of high altitudes.
- 4. Its timber is of great commercial value.
Which of the statements given above is/are correct?
Answer (c) & explanation
Statements 1 and 3 are correct (c). Sea buckthorn is a thorny shrub of cold deserts such as Ladakh, Lahaul-Spiti and Sikkim. Its deep, spreading roots bind soil and help check erosion and desertification (1). Its orange berries are rich in vitamin C, omega oils and antioxidants, used in juices, medicines and cosmetics, and it thrives in cold, high-altitude areas (3). Statement 2 is wrong: it is not a biodiesel crop. Statement 4 is wrong: as a shrub, it has no commercial timber value. So (a), (b) and (d) fail.
Notice the local names: 'Leh berry' in Ladakh. The DRDO's DIHAR at Leh promotes it, and it fixes nitrogen in poor soils. Trap: its oil is medicinal, not fuel.
Answer as per the official UPSC answer key.
Which of the following is the chief characteristic of ‘mixed farming’?
Answer (c) & explanation
Rearing animals and growing crops together is correct (c). Mixed farming means crops plus livestock on the same farm: animals give milk, meat and draught power, and their dung becomes manure, while crops and residues give fodder. This cycle cuts costs and spreads risk. (a) is wrong: growing both cash and food crops is just diversified cropping. (b) is wrong: growing two or more crops in the same field is mixed cropping or intercropping. (d) fails because (c) is correct.
Notice the related terms: integrated farming systems add fish, poultry and bees, and multiple cropping means more than one crop a year on the same land. Most Indian smallholdings practise mixed farming. Trap: 'mixed farming' and 'mixed cropping' sound alike but differ.
Answer as per the official UPSC answer key.
Consider the following crops of India :
- 1. Cowpea
- 2. Green gram
- 3. Pigeon pea
Which of the above is/are used as pulse, fodder and green manure?
Answer (a) & explanation
Cowpea and green gram are correct (a). Cowpea (lobia) and green gram (moong) are short, leafy legumes that can be grown for grain (pulse), cut as fodder, or ploughed into the soil as green manure, where their root nodules add nitrogen (1, 2). Pigeon pea (arhar or tur) is a woody, long-duration crop grown mainly for grain; it is too tough for fodder or green manure (3). So (b), (c) and (d) fail.
Notice the policy angle: India is the largest producer and consumer of pulses, and a Mission for Aatmanirbharta in Pulses (2025–26 to 2030–31) focuses on tur, urad and masoor. Summer moong after wheat helps Punjab's soils. Trap: all three are legumes, but only two have all three uses.
Answer as per the official UPSC answer key.
Consider the following crops of India :
- 1. Groundnut
- 2. Sesamum
- 3. Pearl millet
Which of the above is/are predominantly rainfed crop/crops?
Answer (d) & explanation
All three are correct (d). Groundnut, sesamum (til) and pearl millet (bajra) are hardy dryland crops grown mostly in the kharif season on monsoon rain, with little irrigation, in Gujarat, Rajasthan, Maharashtra and the Deccan. Bajra tolerates heat and poor sandy soils; groundnut and sesame are oilseeds suited to light, well-drained soils. So options (a), (b) and (c) leave out real rainfed crops.
Notice the wider pattern: about half of India's net sown area is still rainfed, growing most pulses, oilseeds and coarse cereals. Rajasthan leads in bajra, Gujarat in groundnut. Millets were promoted as 'Shree Anna' during the International Year of Millets 2023. Trap: groundnut is sometimes irrigated in rabi, but it is predominantly rainfed.
Answer as per the official UPSC answer key.
Industry, infrastructure, poverty, employment and social sector 9
With reference to National Rural Health Mission, which of the following are the jobs of ‘ASHA’, a trained community health worker?
- 1. Accompanying women to the health facility for antenatal care checkup
- 2. Using pregnancy test kits for early detection of pregnancy
- 3. Providing information on nutrition and immunization
- 4. Conducting the delivery of baby
Select the correct answer using the codes given below :
Answer (a) & explanation
Statements 1, 2 and 3 are correct (a). An ASHA (Accredited Social Health Activist), created under the National Rural Health Mission (2005), is a trained village woman who links families to the health system. She accompanies women for antenatal check-ups and institutional delivery (1), uses pregnancy test kits for early detection (2), and gives advice on nutrition and immunisation (3). Statement 4 is wrong: she does not conduct deliveries; she encourages delivery at a health facility, where trained staff attend. So (b), (c) and (d) fail.
Notice the scale: India has about 10 lakh ASHAs, paid through task-based incentives. They were recognised with the WHO Global Health Leaders Award in 2022. ASHAs work with ANMs and Anganwadi workers. Trap: helping with delivery is not conducting it.
Answer as per the official UPSC answer key.
How does the National Rural Livelihood Mission seek to improve livelihood options of rural poor?
- 1. By setting up a large number of new manufacturing industries and agribusiness centres in rural areas
- 2. By strengthening ‘self-help groups’ and providing skill development
- 3. By supplying seeds, fertilizers, diesel pump-sets and micro-irrigation equipment free of cost to farmers
Select the correct answer using the codes given below :
Answer (b) & explanation
Statement 2 only is correct (b). The National Rural Livelihood Mission (Aajeevika, 2011), now DAY-NRLM, organises poor rural women into self-help groups and their federations, links them to bank credit, and provides skill training for self-employment and placement-linked jobs (2). Statement 1 is wrong: it does not set up manufacturing industries or agribusiness centres itself. Statement 3 is wrong: it does not supply seeds, fertilisers, pump-sets or micro-irrigation equipment free to farmers. So (a), (c) and (d) fail.
Notice the scale: about 10 crore women in some 90 lakh SHGs. Its 'Lakhpati Didi' drive aims at women earning ₹1 lakh a year, and DDU-GKY handles skilling. Trap: free inputs and factories sound helpful but are not its method.
Answer as per the official UPSC answer key.
The Multi-dimensional Poverty Index developed by Oxford Poverty and Human Development Initiative with UNDP support covers which of the following?
- 1. Deprivation of education, health, assets and services at household level
- 2. Purchasing power parity at national level
- 3. Extent of budget deficit and GDP growth rate at national level
Select the correct answer using the codes given below :
Answer (a) & explanation
Statement 1 only is correct (a). The Multidimensional Poverty Index, developed by OPHI (Oxford) with UNDP in 2010, measures household-level deprivations in three dimensions: health, education and living standards, using ten indicators such as nutrition, child mortality, years of schooling, cooking fuel, sanitation, water, electricity, housing and assets (1). Statement 2 is wrong: it uses no PPP figures. Statement 3 is wrong: it ignores budget deficits and GDP growth. So (b), (c) and (d) fail.
Notice India's figures: NITI Aayog's national MPI adds maternal health and bank accounts, and estimates about 24.8 crore people escaped multidimensional poverty between 2013–14 and 2022–23. A person is poor if deprived in a third or more of the weighted indicators. Trap: MPI is non-income by design.
Answer as per the official UPSC answer key.
What is/are the recent policy initiative(s) of Government of India to promote the growth of manufacturing sector?
- 1. Setting up of National Investment and Manufacturing Zones
- 2. Providing the benefit of ‘single window clearance’
- 3. Establishing the Technology Acquisition and Development Fund
Select the correct answer using the codes given below :
Answer (d) & explanation
All three are correct (d). The National Manufacturing Policy (2011) aimed to raise manufacturing's share of GDP to 25% and create 10 crore jobs. It provided for National Investment and Manufacturing Zones (NIMZs), large integrated industrial townships (1), single-window clearance to cut red tape (2), and a Technology Acquisition and Development Fund to help MSMEs buy green technology (3). So options (a), (b) and (c) leave out real measures.
Notice the later push: Make in India (2014), PLI schemes (2020) across 14 sectors, PM Gati Shakti (2021), and the National Manufacturing Mission announced in the 2025–26 Budget. Manufacturing is still around 17% of GDP. Trap: all three look like generic reforms, but each was named in the 2011 policy.
Answer as per the official UPSC answer key.
Consider the following specific stages of demographic transition associated with economic development :
- 1. Low birthrate with low death rate
- 2. High birthrate with high death rate
- 3. High birthrate with low death rate
Select the correct order of the above stages using the codes given below :
Answer (c) & explanation
The order 2, 3, 1 is correct (c). In the demographic transition model, poor agrarian societies start with high birth and high death rates, so population grows slowly (2). Better food, medicine and sanitation bring the death rate down while births stay high, causing a population boom (3). Finally education, urbanisation and women's empowerment bring births down too, giving low birth and low death rates (1). So (a), (b) and (d) give the wrong order.
Notice India's stage: India's TFR fell to 2.0 in NFHS-5, below replacement (2.1), so it is entering the late stage, with a demographic dividend until about the 2040s. Some models add a fifth stage where births fall below deaths, as in Japan. Trap: the list deliberately starts with the final stage.
Answer as per the official UPSC answer key.
In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following are among those Eight Core Industries?
- 1. Cement
- 2. Fertilizers
- 3. Natural gas
- 4. Refinery products
- 5. Textiles
Select the correct answer using the codes given below :
Answer (c) & explanation
Items 1, 2, 3 and 4 are correct (c). The eight core industries are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, so cement (1), fertilisers (2), natural gas (3) and refinery products (4) are included. Item 5 is wrong: textiles is not a core industry. So (a), (b) and (d) fail.
Notice the weights: on the 2011–12 base, the eight cores make up about 40.27% of the IIP; refinery products carry the largest weight (about 28%), followed by electricity and steel, while fertilisers carry the least. The index is released monthly by the Office of the Economic Adviser, DPIIT. Trap: textiles is a big industry but not 'core' infrastructure.
Answer as per the official UPSC answer key.
The endeavour of ‘Janani Suraksha Yojana’ Programme is
- 1. to promote institutional deliveries
- 2. to provide monetary assistance to the mother to meet the cost of delivery
- 3. to provide for wage loss due to pregnancy and confinement
Which of the statements given above is/are correct?
Answer (a) & explanation
Statements 1 and 2 are correct (a). Janani Suraksha Yojana (2005, under the National Rural Health Mission) promotes institutional deliveries to cut maternal and infant deaths (1), and gives cash assistance to poor pregnant women for delivery in a health facility (2). The ASHA who escorts her also gets an incentive. Statement 3 is wrong: compensation for wage loss during pregnancy came under a different scheme, the Indira Gandhi Matritva Sahyog Yojana (2010), now the Pradhan Mantri Matru Vandana Yojana (2017), which pays ₹5,000 for the first child and ₹6,000 for a second girl child under Mission Shakti. So (b), (c) and (d) fail.
Notice the outcome: institutional births rose to about 89% (NFHS-5), and India's MMR fell to about 93 per lakh (2019–21). Trap: two maternity schemes are blended into one.
Answer as per the official UPSC answer key.
Consider the following :
- 1. Hotels and restaurants
- 2. Motor transport undertakings
- 3. Newspaper establishments
- 4. Private medical institutions
The employees of which of the above can have the ‘Social Security’ coverage under Employees’ State Insurance Scheme?
Answer (d) & explanation
All four are correct (d). The Employees' State Insurance Act, 1948 began with factories and has been extended by notifications to shops, hotels and restaurants (1), road motor transport undertakings (2), cinemas, newspaper establishments (3), and private medical and educational institutions (4) employing 10 or more people. Covered workers get medical care, sickness, maternity, disability and dependants' benefits. So options (a), (b) and (c) leave out real coverage.
Notice the current frame: the Code on Social Security, 2020, in force since 21 November 2025, subsumes the ESI Act and allows ESIC coverage to be extended to all districts and, voluntarily, to establishments with fewer workers and gig workers. The wage ceiling is ₹21,000 a month. Trap: the scheme's name suggests factories only.
Answer as per the official UPSC answer key.
How do District Rural Development Agencies (DRDAs) help in the reduction of rural poverty in India?
- 1. DRDAs act as Panchayati Raj Institutions in certain specified backward regions of the country.
- 2. DRDAs undertake area-specific scientific study of the causes of poverty and malnutrition and prepare detailed remedial measures.
- 3. DRDAs secure inter-sectoral and inter-departmental coordination and cooperation for effective implementation of anti-poverty programmes.
- 4. DRDAs watch over and ensure effective utilization of the funds intended for anti-poverty programmes.
Which of the statements given above is/are correct?
Answer (b) & explanation
Statements 3 and 4 are correct (b). The District Rural Development Agency is the district-level body that coordinates departments, banks and agencies for anti-poverty programmes (3) and monitors the use of funds meant for them (4). Statement 1 is wrong: a DRDA is not a Panchayati Raj institution; it is a registered society, often chaired by the Zila Parishad head or Collector. Statement 2 is wrong: it is not a research body that studies the causes of poverty and malnutrition. So (a), (c) and (d) fail.
Notice the later change: from April 2022, the separate DRDA administration scheme was merged, and DRDAs were folded into Zila Parishads or district rural development cells in most states, to strengthen panchayats. Trap: 'scientific study' sounds impressive but is not its role.
Answer as per the official UPSC answer key.
All years by topic
Every question from 2011 to 2026, grouped by syllabus topic, with year-wise trends.