UPSC Prelims 2023 Economy questions: topic-wise weightage
UPSC Prelims 2023 asked 20 economy questions in GS Paper I, spread over 6 topics. See the economy weightage for 2023 below, then attempt each question with the official answer and an explanation.
Economy 2023: questions by topic
- Money, banking, monetary policy and inflation5
- Fiscal policy, budget and taxation1
- External sector and international economic institutions6
- Financial markets and instruments3
- Agriculture, food security and allied sectors3
- Industry, infrastructure, poverty, employment and social sector2
Counted from the 20 questions on this page, tagged by topic in the Battle IAS PYQ bank.
Seeing 20 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 5
Consider the following statements :
Statement-I :
In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Statement-II :
Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
Which one of the following is correct in respect of the above statements?
Answer (a) & explanation
Both statements are correct and II explains I (a). Statement I is right: after 2021, prices rose sharply worldwide because of supply chains broken by the pandemic and the Ukraine war. The US Federal Reserve, the European Central Bank, the Bank of England and the RBI all raised policy rates; the RBI raised the repo rate by 250 basis points in 2022–23, to 6.5%. Statement II is right and is the reason: central banks believe that dearer credit cools spending and demand, and so brings inflation down.
Notice the limit: monetary policy works on demand, but much of that inflation came from supply shocks, such as fuel and food. With inflation falling, the RBI began cutting rates again in 2025.
Answer as per the official UPSC answer key.
Which one of the following activities of the Reserve Bank of India is considered to be part of 'sterilization'?
Answer (a) & explanation
Open Market Operations are used for sterilisation (a). When the RBI buys dollars to stop the rupee rising too fast, it pays in rupees, which adds money to the system and can push up inflation. To soak up that extra money, it sells government securities through open market operations. Cancelling the effect of forex operations on money supply this way is called sterilisation. Option (b) is wrong: overseeing payment systems is a separate RBI role. Option (c) is wrong: debt and cash management for governments is its banker role. Option (d) is wrong: regulating NBFCs is supervision.
Notice other sterilisation tools: the Market Stabilisation Scheme (2004), the Standing Deposit Facility (2022) and forex swaps, which avoid selling bonds.
Answer as per the official UPSC answer key.
Consider the following statements with reference to India :
- 1. According to the 'Micro, Small and Medium Enterprises Development (MSMED) Act, 2006', the 'medium enterprises' are those with investments in plant and machinery between ₹15 crore and ₹25 crore.
- 2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.
Which of the statements given above is/are correct?
Answer (b) & explanation
Only statement 2 is correct (b). Statement 1 is wrong: since 2020, a medium enterprise has had a combined test of investment and turnover, and the limits were raised again in 2025 to investment up to ₹125 crore and turnover up to ₹500 crore. The old 2006 limit for medium manufacturing firms was ₹10 crore. None of these is ₹15–25 crore. Statement 2 is right: under the RBI's priority sector rules, all bank loans to MSMEs that meet the MSMED definition count as priority sector lending.
Notice the target: banks must give 40% of their loans to priority sectors, with a sub-target of 7.5% for micro enterprises. MSMEs register on the Udyam portal, and over 6 crore firms have done so.
Answer as per the official UPSC answer key.
With reference to Central Bank digital currencies, consider the following statements :
- 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
- 2. A digital currency can be distributed with a condition programmed into it such as a time-frame for spending it.
Which of the statements given above is/are correct?
Answer (c) & explanation
Both statements are correct (c). Statement 1 is right: Central Bank Digital Currencies can be exchanged directly between central banks or users on a shared platform, as tested in projects like mBridge, with no need for the US dollar or the SWIFT messaging network. Statement 2 is right: CBDCs can be programmable: money can be issued only for a set purpose, or with an expiry date, as tested in India's e-rupee pilots for targeted payments such as subsidies.
Notice India's e-rupee, issued by the RBI since December 2022 in wholesale and retail forms. Unlike crypto, a CBDC is legal tender, a direct liability of the central bank. Programmability raises privacy concerns, which the RBI says it will handle carefully.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
- 2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
- 3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.
How many of the above statements are correct?
Answer (b) & explanation
Two statements are correct (b). Statement 1 is wrong: the SHG-Bank Linkage Programme was started by NABARD in 1992, not by the SBI. Statement 2 is right: in an SHG, members guarantee each other's loans, called joint liability; this peer pressure replaces collateral. Statement 3 is right: commercial banks, Regional Rural Banks and cooperative banks all lend to SHGs.
Notice the scale: India has over 90 lakh SHGs, mostly of women, under the DAY-NRLM. The Lakhpati Didi target aims to help 3 crore SHG women earn at least ₹1 lakh a year. SHGs have very low loan default rates, which shows how trust works as security. Kerala's Kudumbashree is a well-known model.
SBI is the biggest lender to SHGs today, but the scheme began with NABARD.
Answer as per the official UPSC answer key.
Fiscal policy, budget and taxation 1
Consider the following :
- 1. Demographic performance
- 2. Forest and ecology
- 3. Governance reforms
- 4. Stable government
- 5. Tax and fiscal efforts
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population, area and income distance?
Answer (b) & explanation
Three of the five were criteria (b). The 15th Finance Commission, chaired by N.K. Singh, shared central taxes among States using: income distance 45%, population (2011 Census) 15%, area 15%, forest and ecology 10%, demographic performance 12.5% and tax and fiscal effort 2.5%. So items 1, 2 and 5 count. Item 3 is wrong: governance reforms was not a criterion. Item 4 is wrong: stable government was never used. The States' total share was 41% of the divisible pool.
Notice that demographic performance rewards States that brought down fertility, mostly southern States, which feared losing out by the use of the 2011 Census. The 16th Finance Commission, chaired by Arvind Panagariya, covers 2026–31.
Answer as per the official UPSC answer key.
External sector and international economic institutions 6
Consider the following infrastructure sectors :
- 1. Affordable housing
- 2. Mass rapid transport
- 3. Health care
- 4. Renewable energy
On how many of the above does UNOPS Sustainable Investments in Infrastructure and Innovation (S3i) initiative focus for its investments?
Answer (c) & explanation
S3i focuses on three of the four (c). The UN Office for Project Services (UNOPS) launched Sustainable Investments in Infrastructure and Innovation (S3i) in 2018 to bring private money into infrastructure in developing countries. Its three focus areas are affordable housing, renewable energy and health infrastructure. Item 2 is wrong: mass rapid transport is not one of them. So options (a), (b) and (d) are wrong.
Notice that S3i projects included plans for affordable homes in countries such as Ghana, Kenya and Pakistan, and renewable projects in the Caribbean. UNOPS itself is a UN body based in Copenhagen that manages projects for governments and other UN agencies. The initiative later ran into financial mismanagement concerns and was wound down.
Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
Switzerland is one of the leading exporters of gold in terms of value.
Statement-II :
Switzerland has the second largest gold reserves in the world.
Which one of the following is correct in respect of the above statements?
Answer (c) & explanation
Statement I is correct but Statement II is wrong (c). Statement I is right: Switzerland refines a huge share of the world's gold, at refineries in Ticino and elsewhere. It imports raw gold and old bars, and exports refined bars, so it is one of the largest exporters of gold by value. Statement II is wrong: the Swiss central bank's reserves, about 1,040 tonnes, rank around seventh or eighth, not second. The USA holds the most, over 8,000 tonnes, followed by Germany.
Notice India's place: the RBI holds about 880 tonnes, among the top ten, and has been buying and bringing gold home from London. India is also one of the world's two biggest gold consumers, along with China.
the export is from refining, not from a big vault. Trade and reserves are different things.
Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
Recently, the United States of America (USA) and the European Union (EU) have launched the 'Trade and Technology Council'.
Statement-II :
The USA and the EU claim that through this they are trying to bring technological progress and physical productivity under their control.
Which one of the following is correct in respect of the above statements?
Answer (c) & explanation
Statement I is correct but Statement II is wrong (c). Statement I is right: the EU–US Trade and Technology Council was launched in June 2021 to coordinate on trade, supply chains, semiconductors and technology standards, based on shared democratic values. Statement II is wrong: its stated goals are cooperation and common rules, such as on artificial intelligence, not "control" over technological progress and productivity.
Notice that India and the EU set up their own Trade and Technology Council, announced in 2022 and launched in 2023, the EU's second after the USA and India's first such body with any partner. It has working groups on strategic technologies, clean energy and resilient supply chains. India and the EU also concluded their long-pending free trade talks.
Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
India accounts for 3.2% of global export of goods.
Statement-II :
Many local companies and some foreign companies operating in India have taken advantage of India's 'Production-linked Incentive' scheme.
Which one of the following is correct in respect of the above statements?
Answer (d) & explanation
Statement I is wrong but Statement II is correct (d). Statement I is wrong: India's share of world merchandise exports is only about 1.8%, not 3.2%. Its share of services exports is much higher, over 4%, led by IT and business services. Statement II is right: the Production-Linked Incentive scheme (2020) covers 14 sectors, such as mobile phones, pharmaceuticals, solar modules and automobiles, and has drawn both Indian firms and foreign ones such as Apple's suppliers Foxconn and Pegatron.
Notice the success story: India is now a major smartphone exporter, and phones have become one of its top export items. PLI pays firms a share of their extra sales, to boost manufacturing and cut imports.
the 3.2% figure is close to India's share of world GDP or services trade. For goods it is far lower.
Answer as per the official UPSC answer key.
Consider the following statements :
The 'Stability and Growth Pact' of the European Union is a treaty that
- 1. limits the levels of the budgetary deficit of the countries of the European Union
- 2. makes the countries of the European Union to share their infrastructure facilities
- 3. enables the countries of the European Union to share their technologies
How many of the above statements are correct?
Answer (a) & explanation
Only one statement is correct (a). Statement 1 is right: the Stability and Growth Pact (1997) is a set of fiscal rules for EU members: the budget deficit should stay below 3% of GDP and public debt below 60% of GDP. Countries that break the rules face an excessive deficit procedure. Statement 2 is wrong: it says nothing about sharing infrastructure. Statement 3 is wrong: it says nothing about sharing technology.
Notice that the rules were suspended during COVID-19 and reformed in 2024, giving countries more time to cut debt. The aim is to keep the euro stable, since members share a currency but run their own budgets. India's version is the FRBM Act, 2003, which sets fiscal deficit targets for the Centre.
Answer as per the official UPSC answer key.
Consider the following statements about G-20 :
- 1. The G-20 group was originally established as a platform for the Finance Ministers and Central Bank Governors to discuss the international economic and financial issues.
- 2. Digital public infrastructure is one of India's G-20 priorities.
Which of the statements given above is/are correct?
Answer (c) & explanation
Both statements are correct (c). Statement 1 is right: the G-20 began in 1999, after the Asian financial crisis, as a meeting of finance ministers and central bank governors to discuss global economic issues. It was raised to leaders' level in 2008, after the global financial crisis. Statement 2 is right: during its 2023 presidency, India pushed digital public infrastructure, such as UPI and Aadhaar-style platforms, as a key priority, and the New Delhi Declaration endorsed it.
Notice India's other G-20 wins: the African Union became a permanent member, and the theme was "Vasudhaiva Kutumbakam", One Earth, One Family, One Future. India also launched the Global Biofuels Alliance. South Africa held the presidency in 2025, the first in Africa.
Answer as per the official UPSC answer key.
Financial markets and instruments 3
Consider the following statements :
Statement-I :
Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.
Statement-II :
InvITs are recognized as borrowers under the 'Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002'.
Which one of the following is correct in respect of the above statements?
Answer (d) & explanation
Statement I is wrong but Statement II is correct (d). Statement I is wrong because it is reversed: interest income that an InvIT passes on to investors is taxable in their hands. Dividends are usually exempt, as long as the project company has not opted for the lower corporate tax regime. Statement II is right: the Finance Act, 2021 made InvITs and REITs borrowers under the SARFAESI Act, 2002, so lenders can enforce security against them, which makes lending to them safer.
Notice what an InvIT is: like a mutual fund for infrastructure. It pools investors' money into income-earning assets such as toll roads, power lines and pipelines, and passes on most of the income. SEBI regulates both InvITs and REITs. The government uses InvITs for asset monetisation.
Statement I swaps interest and dividend. One swap is enough to make it wrong.
Answer as per the official UPSC answer key.
Consider the following markets :
- 1. Government Bond Market
- 2. Call Money Market
- 3. Treasury Bill Market
- 4. Stock Market
How many of the above are included in capital markets?
Answer (b) & explanation
Two of them belong to the capital market (b). The capital market deals in long-term funds, over one year. It includes the stock market (item 4), where shares are traded, and the government bond market (item 1), where long-dated bonds are bought and sold. The money market deals in funds for up to one year. Item 2 is wrong: call money is borrowing between banks for one day, up to 14 days for notice money. Item 3 is wrong: Treasury Bills are short-term government papers of 91, 182 and 364 days.
Notice the regulators: SEBI watches the capital market, while the RBI looks after the money market and government securities. Commercial paper and certificates of deposit are other money market tools.
both bonds and T-Bills are government paper. What decides the market is maturity, not the issuer.
Answer as per the official UPSC answer key.
In the context of finance, the term 'beta' refers to
Answer (d) & explanation
Beta measures how a stock moves with the market (d). Beta tells how much a share price moves when the whole market moves. A beta of 1 means it moves in step with the market. Above 1, it swings more, so it is riskier, like many tech shares. Below 1, it is steadier, like utilities. Option (a) describes arbitrage: buying cheap on one platform and selling dear on another. Option (b) describes asset allocation. Option (c) describes basis risk, not beta.
Notice its partner, alpha: the extra return a fund manager earns beyond what beta predicts. Index funds aim for a beta of exactly 1 at low cost. Beta captures market risk only, not risks special to one company.
Answer as per the official UPSC answer key.
Agriculture, food security and allied sectors 3
Consider the following statements :
- 1. India has more arable area than China.
- 2. The proportion of irrigated area is more in India as compared to China.
- 3. The average productivity per hectare in Indian agriculture is higher than that in China.
How many of the above statements are correct?
Answer (a) & explanation
Only one statement is correct (a). Statement 1 is right: India has about 156 million hectares of arable land, among the largest in the world and more than China's roughly 120 million. Statement 2 is wrong: by the data used for the question, China irrigated a larger share of its farmland than India, where much farming still depends on the monsoon. Statement 3 is wrong: China's yields per hectare of rice and wheat are much higher than India's, thanks to more fertiliser, seeds and mechanisation.
Notice the lesson: India's problem is not land but productivity. Small fragmented holdings, rain-fed farming and low investment hold it back, which is why schemes stress micro-irrigation and seeds.
India's big farm area tempts you to tick all three. Area is not productivity.
Answer as per the official UPSC answer key.
Which one of the following best describes the concept of 'Small Farmer Large Field'?
Answer (b) & explanation
Small farmers acting together as one large field (b). Under Small Farmer Large Field, neighbouring small and marginal farmers keep their own land but act as a group. They sow the same variety at the same time, buy seeds and fertiliser in bulk, hire machines jointly and sell together. This gives them the economies of scale of a big farm without giving up ownership. Option (a) describes refugee resettlement with collective farming. Option (c) describes land leasing to a company, where farmers give up control. Option (d) describes contract farming, where a company buys the crop.
Notice the link with Farmer Producer Organisations (FPOs): the government's scheme to form 10,000 FPOs follows the same idea. The model came from Vietnam's rice sector.
option (d) also involves many small farmers. In SFLF the farmers themselves organise; no company is in charge.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The Government of India provides Minimum Support Price for niger (Guizotia abyssinica) seeds.
- 2. Niger is cultivated as a Kharif crop.
- 3. Some tribal people in India use niger seed oil for cooking.
How many of the above statements are correct?
Answer (c) & explanation
All three statements are correct (c). Statement 1 is right: nigerseed (Guizotia abyssinica) is one of the 22 crops that get a Minimum Support Price, among the kharif oilseeds. Statement 2 is right: it is sown as a kharif crop, often late in the season, on poor, sloping hilly soils where little else grows. Statement 3 is right: it is grown mainly in the tribal belts of Odisha, Madhya Pradesh, Chhattisgarh and Maharashtra, and tribal families use its oil for cooking.
Notice the MSP list: 14 kharif crops, 6 rabi crops, plus jute and copra, with a Fair and Remunerative Price for sugarcane. The CACP recommends these prices. India still imports much of its edible oil, hence the oilseed missions.
Answer as per the official UPSC answer key.
Industry, infrastructure, poverty, employment and social sector 2
With reference to India's projects on connectivity, consider the following statements :
- 1. East-West Corridor under Golden Quadrilateral Project connects Dibrugarh and Surat.
- 2. Trilateral Highway connects Moreh in Manipur and Chiang Mai in Thailand via Myanmar.
- 3. Bangladesh-China-India-Myanmar Economic Corridor connects Varanasi in Uttar Pradesh with Kunming in China.
How many of the above statements are correct?
Answer (d) & explanation
None of the statements is correct (d). Statement 1 is wrong: the East-West Corridor links Silchar in Assam to Porbandar in Gujarat, and it was part of NHDP Phase II, not the Golden Quadrilateral, which links Delhi, Mumbai, Chennai and Kolkata. Statement 2 is wrong: the India–Myanmar–Thailand Trilateral Highway runs from Moreh in Manipur to Mae Sot in Thailand, not Chiang Mai. Statement 3 is wrong: the BCIM corridor was planned from Kolkata to Kunming, not from Varanasi.
Notice that each statement has one wrong end-point; UPSC tests exact names. India has gone cool on BCIM because it overlaps China's Belt and Road, preferring the Kaladan project and the Trilateral Highway.
each statement keeps one correct name. UPSC changed only one end of each route.
Answer as per the official UPSC answer key.
Consider the investments in the following assets :
- 1. Brand recognition
- 2. Inventory
- 3. Intellectual property
- 4. Mailing list of clients
How many of the above are considered intangible investments?
Answer (c) & explanation
Three of the four are intangible (c). An intangible asset has value but no physical form. Brand recognition (item 1) is intangible: people pay more for a trusted name. Intellectual property (item 3), such as patents, copyrights and trademarks, is intangible. A mailing list of clients (item 4) is intangible: it is information that brings in business. Item 2 is wrong: inventory means goods in stock, raw material, half-made goods or finished products, so it is a tangible asset you can touch and count.
Notice why this matters: in modern firms like tech companies, most value lies in intangibles such as software, data and brands, not machines. This makes them harder to value, tax and lend against.
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.