UPSC Prelims 2022 Economy questions: topic-wise weightage
UPSC Prelims 2022 asked 22 economy questions in GS Paper I, spread over 6 topics. See the economy weightage for 2022 below, then attempt each question with the official answer and an explanation.
Economy 2022: questions by topic
- Money, banking, monetary policy and inflation3
- Fiscal policy, budget and taxation3
- External sector and international economic institutions7
- Financial markets and instruments4
- Agriculture, food security and allied sectors2
- Industry, infrastructure, poverty, employment and social sector3
Counted from the 22 questions on this page, tagged by topic in the Battle IAS PYQ bank.
Seeing 22 Economy questions spread over 6 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
With reference to the Indian economy, consider the following statements :
- 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
- 2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
- 3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
Which of the statements given above are correct ?
Answer (b) & explanation
Statements 2 and 3 are correct (b). Statement 1 is wrong: to fight high inflation, the RBI sells government securities through open market operations, pulling money out of the system; buying them would add money. Statement 2 is right: to stop the rupee falling fast, the RBI sells dollars from its forex reserves, which raises the supply of dollars. Statement 3 is right: when US or EU interest rates fall, foreign money flows into India and the rupee tends to rise, so the RBI buys dollars to smooth this and add to reserves.
Notice sterilisation: when the RBI buys dollars it releases rupees, so it may sell bonds to soak them up. India's forex reserves crossed $700 billion in 2024.
statement 1 has the right tool but the wrong direction. Always ask: does this action add money or remove it?
Answer as per the official UPSC answer key.
With reference to the 'Banks Board Bureau (BBB)', which of the following statements are correct ?
- 1. The Governor of RBI is the Chairman of BBB.
- 2. BBB recommends for the selection of heads for Public Sector Banks.
- 3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.
Select the correct answer using the code given below :
Answer (b) & explanation
Statements 2 and 3 are correct (b). The Banks Board Bureau was set up in 2016 under the Indradhanush plan to clean up how public sector banks were run. Statement 2 is right: it recommended heads and whole-time directors of public sector banks and state-run financial institutions. Statement 3 is right: it advised these banks on strategy, governance and capital raising. Statement 1 is wrong: its chairman was an eminent professional, the first being former CAG Vinod Rai, not the RBI Governor.
Notice that in 2022 the BBB was replaced by the Financial Services Institutions Bureau (FSIB), which now also selects heads of public sector insurance companies. Indradhanush stood for seven reforms: Appointments, BBB, Capitalisation, De-stressing, Empowerment, Accountability and Governance.
the RBI Governor heads many bodies, so statement 1 looks safe. BBB was deliberately kept independent of the regulator.
Answer as per the official UPSC answer key.
In India, which one of the following is responsible for maintaining price stability by controlling inflation ?
Answer (d) & explanation
The Reserve Bank of India controls inflation (d). The RBI Act, 1934, amended in 2016, says the primary objective of monetary policy is price stability while keeping growth in mind. The government sets a CPI inflation target of 4%, with a band of 2–6%, and the six-member Monetary Policy Committee sets the repo rate to meet it. Option (a) is wrong: the Department of Consumer Affairs tracks prices of essentials and runs consumer protection. Option (b) is wrong: the Expenditure Management Commission (2014) only advised on government spending. Option (c) is wrong: the FSDC, chaired by the Finance Minister, looks after financial stability, not inflation.
Notice that if inflation stays outside the band for three quarters in a row, the RBI must explain it in writing to the government.
Answer as per the official UPSC answer key.
Fiscal policy, budget and taxation 3
Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India ?
Answer (d) & explanation
Indirect transfer means shares abroad deriving value from Indian assets (d). An indirect transfer happens when shares of a foreign company change hands abroad, but those shares get their substantial value from assets located in India. India claims the right to tax the gain. Options (a) and (b) describe ordinary cross-border investment and taxing of profits. Option (c) describes a direct sale of foreign assets by an Indian firm.
Notice the Vodafone case: its 2007 purchase of Hutchison's Indian business through a Cayman Islands company led to a tax demand. The Supreme Court ruled for Vodafone in 2012, and the government then passed a retrospective tax amendment. The Taxation Laws (Amendment) Act, 2021 withdrew that retrospective tax, ending the Cairn dispute as well.
Answer as per the official UPSC answer key.
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct ?
- 1. Acquiring new technology is capital expenditure.
- 2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Select the correct answer using the code given below :
Answer (a) & explanation
Only statement 1 is correct (a). Statement 1 is right: capital expenditure buys assets that last for years, such as machines, buildings and new technology. Revenue expenditure meets day-to-day costs, such as wages, rent and repairs. Statement 2 is wrong: debt and equity are not expenditure at all; they are sources of funds. A firm raises money by borrowing (debt) or selling shares (equity), and then spends it as capital or revenue expenditure. The statement mixes up how money is raised with how it is spent.
Notice the same split in the Union Budget: the revenue account and the capital account. Interest payments are the largest item of the Centre's revenue expenditure; capital spending builds roads, railways and defence assets.
Answer as per the official UPSC answer key.
With reference to the Indian economy, consider the following statements :
- 1. A share of the household financial savings goes towards government borrowings.
- 2. Dated securities issued at market-related rates in auctions form a large component of internal debt.
Which of the above statements is/are correct ?
Answer (c) & explanation
Both statements are correct (c). Statement 1 is right: household savings kept in banks, insurance, provident funds and small savings schemes are partly lent to the government, because these institutions buy G-Secs, and small savings funds go into the National Small Savings Fund. Statement 2 is right: dated securities, long-term bonds sold through RBI auctions at market rates, are the largest part of the Centre's internal debt, far ahead of Treasury Bills and other items.
Notice the difference: internal debt is owed within India; external debt is owed abroad. India's public debt is mostly internal and in rupees, which lowers risk. The RBI manages government borrowing as its debt manager.
Answer as per the official UPSC answer key.
External sector and international economic institutions 7
"Rapid Financing Instrument" and "Rapid Credit Facility" are related to the provisions of lending by which one of the following ?
Answer (b) & explanation
Both are IMF lending windows (b). The Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) are emergency windows of the International Monetary Fund for countries facing an urgent balance of payments need, such as after a natural disaster, a conflict or the COVID-19 shock. The RFI is open to all members. The RCF gives concessional (zero or low-interest) loans to low-income countries through the Poverty Reduction and Growth Trust. Neither needs a full IMF programme. The ADB (a), UNEP FI (c) and World Bank (d) do not run these facilities.
Notice the IMF's other tools: the Extended Fund Facility and Stand-By Arrangements, and Special Drawing Rights (SDRs). India took an IMF loan in 1991.
"Financing" and "Credit" sound like a development bank. Quick, short-term BoP help is the IMF's job.
Answer as per the official UPSC answer key.
With reference to the Indian economy, consider the following statements :
- 1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
- 2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
- 3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct ?
Answer (c) & explanation
Statements 1 and 3 are correct (c). Statement 1 is right: NEER (Nominal Effective Exchange Rate) is a weighted average of the rupee against a basket of trading partners' currencies; a rise means the rupee has appreciated. Statement 2 is wrong: REER adjusts NEER for inflation differences. A rising REER means Indian goods are getting dearer abroad, so competitiveness falls, not improves. Statement 3 is right: if India's inflation runs higher than its partners', REER rises even when NEER does not, so the two drift apart.
Notice that the RBI publishes NEER and REER on 40-currency and 6-currency baskets. A REER above 100 suggests the rupee is overvalued against the base year.
statement 2 reverses the effect. A stronger real rupee hurts exporters; it does not help them.
Answer as per the official UPSC answer key.
With reference to the "G20 Common Framework", consider the following statements :
- 1. It is an initiative endorsed by the G20 together with the Paris Club.
- 2. It is an initiative to support Low Income Countries with unsustainable debt.
Which of the statements given above is/are correct ?
Answer (c) & explanation
Both statements are correct (c). Statement 1 is right: the Common Framework for Debt Treatments beyond the DSSI was agreed in November 2020 by the G20 together with the Paris Club of creditor nations. Statement 2 is right: it lets low-income countries with unsustainable debt seek restructuring with all official creditors at one table, including newer lenders such as China that are not in the Paris Club. Zambia, Ghana and Ethiopia applied under it.
Notice its forerunner, the Debt Service Suspension Initiative (DSSI) of 2020, which paused repayments during COVID. India, as G20 president in 2023, pushed for faster debt relief for the Global South. Critics say the framework has been slow.
Answer as per the official UPSC answer key.
With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ?
- 1. They can sell their own goods in addition to offering their platforms as market-places.
- 2. The degree to which they can own big sellers on their platforms is limited.
Select the correct answer using the code given below :
Answer (d) & explanation
Neither statement is correct (d). India allows 100% FDI in e-commerce only in the marketplace model, where the platform connects buyers and sellers. Statement 1 is wrong: a foreign-owned platform may not hold its own inventory and sell its own goods; the inventory model is barred for FDI. Statement 2 is wrong as worded: since the 2018 rules, a seller in which the platform or its group has any equity cannot sell on that platform at all. This is a ban, not a limit on the degree of ownership.
Notice that the rules targeted Amazon and Flipkart (Walmart). India also built ONDC (Open Network for Digital Commerce, 2022), a government-backed open network meant to give small sellers a fairer chance.
statement 2 sounds mild and true. The rule does not limit such ownership; it bars those sellers outright.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Tight monetary policy of US Federal Reserve could lead to capital flight.
- 2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs).
- 3. Devaluation of domestic currency decreases the currency risk associated with ECBs.
Which of the statements given above are correct ?
No official answer (question dropped) & notes
UPSC dropped this question, so no answer was counted. Still, the ideas are core economy. Statement 1 is sound: when the US Federal Reserve raises rates, investors pull money out of emerging markets for safer US returns. This is capital flight, and it weakens their currencies. Statement 2 is sound: a weaker rupee means a firm with External Commercial Borrowings needs more rupees to pay the same dollar interest. Statement 3 is wrong: devaluation raises, not lowers, the currency risk of foreign-currency loans.
Notice the 2013 "taper tantrum", when Fed hints sank the rupee. That is why the RBI asks firms to hedge ECBs and keeps large forex reserves.
UPSC did not evaluate this question, so no official answer exists. Use it for practice only.
UPSC dropped this question from evaluation; there is no official answer.
Consider the following :
- 1. Asian Infrastructure Investment Bank
- 2. Missile Technology Control Regime
- 3. Shanghai Cooperation Organisation
India is a member of which of the above ?
Answer (d) & explanation
India is a member of all three (d). Item 1 is right: India is a founding member of the Asian Infrastructure Investment Bank, which began work in 2016 in Beijing, and is its second-largest shareholder after China, as well as its largest borrower. Item 2 is right: India joined the Missile Technology Control Regime in June 2016, which helps it buy and sell missile technology. Item 3 is right: India became a full member of the Shanghai Cooperation Organisation in 2017, along with Pakistan. So options (a), (b) and (c) all leave something out.
Notice India's place in the export control clubs: it is in the MTCR, the Wassenaar Arrangement (2017) and the Australia Group (2018), but its bid for the Nuclear Suppliers Group stays blocked by China.
AIIB is led by China, so many assume India stayed out. India is in fact its largest borrower.
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Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Vietnam has been one of the fastest growing economies in the world in the recent years.
- 2. Vietnam is led by a multi-party political system.
- 3. Vietnam's economic growth is linked to its integration with global supply chains and focus on exports.
- 4. For a long time Vietnam's low labour costs and stable exchange rates have attracted global manufacturers.
- 5. Vietnam has the most productive e-service sector in the Indo-Pacific region.
Which of the statements given above are correct ?
Answer (c) & explanation
Statements 1, 3 and 4 are correct (c). Statement 1 is right: Vietnam has grown at about 6–7% a year for most of the past decade, among the fastest anywhere. Statement 3 is right: that growth comes from joining global supply chains and exporting electronics, phones and garments. Statement 4 is right: low wages and a stable currency drew makers such as Samsung, and many firms moving out of China. Statement 2 is wrong: Vietnam is a one-party state run by the Communist Party. Statement 5 is wrong: nothing marks its e-services as the region's most productive.
Notice the "China plus one" strategy, under which companies add a second base outside China. Vietnam is India's main rival for these factories, which India chases through PLI schemes.
Answer as per the official UPSC answer key.
Financial markets and instruments 4
With reference to the Indian economy, what are the advantages of "Inflation-Indexed Bonds (IIBs)" ?
- 1. Government can reduce the coupon rates on its borrowing by way of IIBs.
- 2. IIBs provide protection to the investors from uncertainty regarding inflation.
- 3. The interest received as well as capital gains on IIBs are not taxable.
Which of the statements given above are correct ?
Answer (a) & explanation
Statements 1 and 2 are correct (a). In an Inflation-Indexed Bond, the principal, and so the interest, is adjusted for inflation. Statement 2 is right: this protects the investor's real return from uncertain inflation. Statement 1 is right: because of this cover, investors accept a lower coupon, which saves the government money on its borrowing. Statement 3 is wrong: there is no tax break; interest and capital gains on IIBs are taxable like any other bond.
Notice that India's IIBs of 2013 were linked to the WPI, and later ones to the CPI, but they drew little interest. Other countries' versions include the US TIPS. The Sovereign Gold Bond (2015) offered a different hedge, linked to gold prices.
statement 3 adds a tax benefit that sounds attractive. Indian IIBs never had one.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. In India, credit rating agencies are regulated by Reserve Bank of India.
- 2. The rating agency popularly known as ICRA is a public limited company.
- 3. Brickwork Ratings is an Indian credit rating agency.
Which of the statements given above are correct ?
Answer (b) & explanation
Statements 2 and 3 are correct (b). Statement 2 is right: ICRA began in 1991 as the Investment Information and Credit Rating Agency and is a public limited company listed on the stock exchanges; Moody's is its major shareholder. Statement 3 is right: Brickwork Ratings was an Indian credit rating agency set up in Bengaluru, though SEBI cancelled its registration in 2022 for lapses. Statement 1 is wrong: credit rating agencies are registered and regulated by SEBI under the CRA Regulations, 1999, not by the RBI. The RBI only lists which agencies banks may use for capital rules.
Notice the other Indian agencies: CRISIL (S&P), CARE, India Ratings (Fitch) and Acuité.
ratings are used by banks, so the RBI comes to mind. The RBI only accredits agencies for bank capital rules; SEBI regulates them.
Answer as per the official UPSC answer key.
With reference to Convertible Bonds, consider the following statements :
- 1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
- 2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
Which of the statements given above is/are correct ?
Answer (c) & explanation
Both statements are correct (c). A convertible bond pays fixed interest but lets the holder turn it into the company's shares later. Statement 1 is right: investors value that option, so the company can pay a lower coupon than on a plain bond. Statement 2 is right: when consumer prices rise, company revenues and share prices usually rise too, so the right to convert gives some protection, a partial indexation, against inflation. A plain fixed-coupon bond loses real value as prices rise.
Notice the Indian link: Foreign Currency Convertible Bonds (FCCBs) let Indian firms borrow abroad cheaply. Compare inflation-indexed bonds, whose principal itself rises with prices, and perpetual bonds, which never mature.
Answer as per the official UPSC answer key.
With reference to Non-Fungible Tokens (NFTs), consider the following statements :
- 1. They enable the digital representation of physical assets.
- 2. They are unique cryptographic tokens that exist on a blockchain.
- 3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions.
Which of the statements given above are correct ?
Answer (a) & explanation
Statements 1 and 2 are correct (a). Statement 2 is right: a Non-Fungible Token is a unique cryptographic token recorded on a blockchain, such as Ethereum. Statement 1 is right: an NFT can stand for ownership of digital art, music, game items, or even physical assets like property or luxury goods. Statement 3 is wrong: non-fungible means no two tokens are alike, so they cannot be swapped at par. That is why NFTs cannot work as money, unlike rupees or Bitcoin, which are fungible: any one unit equals any other.
Notice the tax angle: India treats NFTs and crypto as virtual digital assets, with a flat 30% tax on gains and 1% TDS on transfers since 2022. The RBI's own digital currency is the e-rupee.
statement 3 describes fungible tokens. The name itself tells you NFTs are not equivalent to each other.
Answer as per the official UPSC answer key.
Agriculture, food security and allied sectors 2
"System of Rice Intensification" of cultivation, in which alternate wetting and drying of rice fields is practised, results in :
- 1. Reduced seed requirement
- 2. Reduced methane production
- 3. Reduced electricity consumption
Select the correct answer using the code given below :
Answer (d) & explanation
All three results follow (d). The System of Rice Intensification (SRI) changes how rice is grown. Item 1 is right: it transplants young single seedlings with wide spacing, so it needs far less seed, often only 5–8 kg per hectare against 40–50 kg normally. Item 2 is right: fields are not kept flooded; alternate wetting and drying lets air into the soil, which cuts the bacteria that produce methane. Item 3 is right: less water to pump means less electricity for tube wells.
Notice that SRI was developed in Madagascar in the 1980s by Henri de Laulanié. Notice related methods: Direct Seeded Rice and System of Wheat Intensification. SRI also often raises yields.
Answer as per the official UPSC answer key.
With reference to the "Tea Board" in India, consider the following statements :
- 1. The Tea Board is a statutory body.
- 2. It is a regulatory body attached to the Ministry of Agriculture and Farmers Welfare.
- 3. The Tea Board's Head Office is situated in Bengaluru.
- 4. The Board has overseas offices at Dubai and Moscow.
Which of the statements given above are correct ?
Answer (d) & explanation
Statements 1 and 4 are correct (d). Statement 1 is right: the Tea Board was set up under the Tea Act, 1953, so it is a statutory body. Statement 4 is right: it keeps overseas offices in Dubai and Moscow to promote Indian tea in key markets. Statement 2 is wrong: like the Coffee, Rubber and Spices boards, it works under the Ministry of Commerce and Industry, because these are export crops, not under the Agriculture Ministry. Statement 3 is wrong: its head office is in Kolkata; it is the Coffee Board that sits in Bengaluru.
Notice the other boards: the Spices Board is in Kochi and the Rubber Board in Kottayam. The commodity boards have long been under review for merger and reform.
plantation crops are farm products, but their Boards sit with Commerce. Bengaluru belongs to the Coffee Board.
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Answer as per the official UPSC answer key.
Industry, infrastructure, poverty, employment and social sector 3
Which of the following activities constitute real sector in the economy ?
- 1. Farmers harvesting their crops
- 2. Textile mills converting raw cotton into fabrics
- 3. A commercial bank lending money to a trading company
- 4. A corporate body issuing Rupee Denominated Bonds overseas
Select the correct answer using the code given below :
Answer (a) & explanation
Harvesting crops and making fabric are real sector activities (a). The real sector produces goods and services: farming, mining, manufacturing, construction and the like. Item 1 is right: farmers harvesting crops produce real goods. Item 2 is right: textile mills turning cotton into fabric create real output. Item 3 is wrong: a bank lending money is a financial sector activity; it moves money, not goods. Item 4 is wrong: a firm issuing Rupee Denominated Bonds overseas, called masala bonds, is also a financial activity.
Notice that GDP counts real output; the financial sector adds value through its services, but its transfers of money are not new goods. The Twin Balance Sheet problem linked stressed real-sector firms with stressed banks.
Answer as per the official UPSC answer key.
In India, which one of the following compiles information on industrial disputes, closures, retrenchments and lay-offs in factories employing workers ?
Answer (c) & explanation
The Labour Bureau compiles this data (c). The Labour Bureau, under the Ministry of Labour and Employment, with offices at Shimla and Chandigarh, collects statistics on industrial disputes, closures, retrenchments and lay-offs. It also compiles the Consumer Price Index for Industrial Workers (CPI-IW), used to set dearness allowance. Option (a) is wrong: the Central Statistics Office, now part of the NSO, handles national accounts and GDP. Option (b) is wrong: DPIIT compiles the Wholesale Price Index and the index of eight core industries. Option (d) is wrong: NTMIS tracked technical manpower supply.
Notice that the Labour Bureau now also runs the Quarterly Employment Survey. The Periodic Labour Force Survey (PLFS), by contrast, comes from the NSO.
Answer as per the official UPSC answer key.
In India, what is the role of the Coal Controller's Organization (CCO) ?
- 1. CCO is the major source of Coal Statistics in Government of India.
- 2. It monitors progress of development of Captive Coal/Lignite blocks.
- 3. It hears any objection to the Government's notification relating to acquisition of coal-bearing areas.
- 4. It ensures that coal mining companies deliver the coal to end users in the prescribed time.
Select the correct answer using the code given below :
Answer (a) & explanation
Statements 1, 2 and 3 are correct (a). The Coal Controller's Organisation, based in Kolkata under the Ministry of Coal, does three things named here. Statement 1 is right: it is the main source of coal statistics in the Government of India. Statement 2 is right: it monitors progress of captive coal and lignite blocks. Statement 3 is right: it hears objections to notifications for acquiring coal-bearing land under the Coal Bearing Areas (Acquisition and Development) Act, 1957. Statement 4 is wrong: timely delivery of coal to buyers is a commercial matter between companies and their customers.
Notice that Coal India produces about three-quarters of India's coal. Commercial coal mining by private firms was opened up in 2020.
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.