Economy: previous-year questions
347 real UPSC Prelims questions (2011–2026) with the official answer and a clear explanation. 96 of them came in the last five papers.
How often UPSC asks this
Questions per year, counted from the official papers.
Subtopics
Agriculture, food security and allied sectors
81 questions
Economic development, reports and indices
28 questions
Economic growth, planning and national income
7 questions
External sector and international economic institutions
70 questions
Financial markets and instruments
36 questions
Fiscal policy, budget and taxation
51 questions
Industry, infrastructure, poverty, employment and social sector
125 questions
Money, banking, monetary policy and inflation
85 questions
Attempt the questions
Newest papers first. Tap an option; the answer and the reason appear instantly.
Pradhan Mantri MUDRA Yojana is aimed at
Answer (a) & explanation
MUDRA brings small entrepreneurs into the formal financial system (a). Pradhan Mantri MUDRA Yojana (2015) gives collateral-free loans to non-farm micro and small enterprises through banks, NBFCs and MFIs. It has slabs called Shishu (up to ₹50,000), Kishore (up to ₹5 lakh) and Tarun (up to ₹10 lakh). Since 2024, Tarun Plus goes up to ₹20 lakh. It is not a crop loan scheme (b), which is the Kisan Credit Card's job. It is not a pension scheme (c), which is NSAP's, and it does not fund NGOs (d).
MUDRA stands for Micro Units Development and Refinance Agency, a SIDBI arm that refinances lenders. Notice how the target is the "missing middle": the unfunded, informal small business.
Answer as per the official UPSC answer key.
Which one of the following is a purpose of 'UDAY', a scheme of the Government?
Answer (d) & explanation
UDAY (Ujwal DISCOM Assurance Yojana, November 2015) aimed at the financial turnaround and revival of power distribution companies (d). States took over 75% of their DISCOMs' debt and issued bonds for it, while the DISCOMs had to cut losses and revise tariffs. Option (b), electricity for every household, was the goal of Saubhagya (2017). Options (a) and (c), renewable start-ups and replacing coal plants, are not UDAY's purpose.
The later Revamped Distribution Sector Scheme (2021) continued this effort. Notice how weak DISCOMs remain the weakest link in India's power sector.
Answer as per the official UPSC answer key.
The term 'Core Banking Solutions' is sometimes seen in the news. Which of the following statements best describes/describe this term?
- 1. It is a networking of a bank's branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
- 2. It is an effort to increase RBI's control over commercial banks through computerization.
- 3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.
Select the correct answer using the code given below.
Answer (a) & explanation
Only statement 1 is correct (a). Core Banking Solutions link all of a bank's branches to one central server, so a customer can deposit, withdraw or transfer from any branch on the network, not just the "home branch". Statement 2 is wrong: CBS is a technology for customer service, not a tool for the RBI to control banks. Statement 3 is wrong: taking over a bank with heavy NPAs is a merger or resolution process, unrelated to CBS.
"CORE" is often expanded as Centralised Online Real-time Exchange. Notice how CBS laid the base for ATMs, internet banking, NEFT and RTGS, and later for the UPI and digital-payments boom.
Answer as per the official UPSC answer key.
'Global Financial Stability Report' is prepared by the
Answer (b) & explanation
The IMF prepares the Global Financial Stability Report (b). It comes out twice a year and judges risks to the world financial system. It is one of the IMF's flagship reports, along with the World Economic Outlook and the Fiscal Monitor. The ECB (a) publishes its own Financial Stability Review for the euro area. The IBRD (c), part of the World Bank, publishes reports such as Global Economic Prospects. The OECD (d) puts out its own Economic Outlook.
In India, the RBI publishes a Financial Stability Report twice a year, drawing on the FSDC sub-committee. Notice a common trap: the Global Competitiveness Report belongs to the WEF, and the World Development Report belongs to the World Bank. Learn these by heart.
Answer as per the official UPSC answer key.
With reference to 'IFC Masala Bonds', sometimes seen in the news, which of the statements given below is/are correct?
- 1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
- 2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.
Select the correct answer using the code given below.
Answer (c) & explanation
Both are correct (c). The International Finance Corporation, the private-sector arm of the World Bank Group, first used the name "Masala bonds" in 2014 (1). They are rupee-denominated bonds issued abroad and serve as a source of debt financing (2).
Because they are in rupees, the foreign investor bears the currency risk, not the Indian borrower. HDFC and NTPC were among the early Indian issuers, and the Kerala Infrastructure Investment Fund Board also used them. Notice how this helps internationalise the rupee, along with steps such as rupee trade settlement.
Answer as per the official UPSC answer key.
India's ranking in the 'Ease of Doing Business Index' is sometimes seen in the news. Which of the following has declared that ranking?
Answer (c) & explanation
The World Bank published the Ease of Doing Business ranking through its annual Doing Business report (c). The OECD (a) works on economic policy for rich countries, the World Economic Forum (b) publishes the Global Competitiveness Report, and the WTO (d) deals with trade rules; none ran this index.
India climbed from 142nd in the 2015 report to 63rd in the 2020 report, helped by reforms such as the IBC and GST. After data irregularities came to light, the World Bank discontinued the report in 2021. Its replacement is B-READY (Business Ready). Notice how rankings can shape both policy and investor perception.
Answer as per the official UPSC answer key.
Regarding 'Atal Pension Yojana', which of the following statements is/are correct?
- 1. It is a minimum guaranteed pension scheme mainly targeted at unorganized sector workers.
- 2. Only one member of a family can join the scheme.
- 3. Same amount of pension is guaranteed for the spouse for life after subscriber's death.
Select the correct answer using the code given below.
Answer (c) & explanation
Statements 1 and 3 are correct (c). Atal Pension Yojana (2015), run by PFRDA under the NPS setup, guarantees a monthly pension of ₹1,000 to ₹5,000 from age 60. It is aimed mainly at unorganised sector workers who join between 18 and 40 (1). After the subscriber dies, the spouse gets the same pension for life (3), and then the nominee receives the built-up corpus. Statement 2 is wrong because there is no one-per-family limit. Any eligible citizen with a savings bank account can join.
Since October 2022, income-tax payers cannot join. Notice how it differs from PM-SYM, a 50:50 matched-contribution scheme that pays a fixed ₹3,000 to unorganised workers. APY is now one of India's largest micro-pension schemes.
"only one member of a family". That limit belongs to no pension scheme; do not mix it up with household-based schemes.
Answer as per the official UPSC answer key.
In the context of which of the following do you sometimes find the terms 'amber box, blue box and green box' in the news?
Answer (a) & explanation
The terms belong to WTO affairs (a). The Agreement on Agriculture sorts farm subsidies into boxes. Amber box subsidies, such as price support, distort trade and are capped. Blue box subsidies are tied to production limits, and green box subsidies, such as research and environmental programmes, cause minimal distortion; neither is capped. SAARC (b), the UNFCCC (c) and India–EU FTA talks (d) do not use these terms.
Developing countries also have a de minimis allowance of 10% of production value. Notice how India's MSP procurement is debated within these rules, linked to the Peace Clause.
Answer as per the official UPSC answer key.
What is/are the purpose/purposes of the 'Marginal Cost of Funds based Lending Rate (MCLR)' announced by RBI?
- 1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
- 2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.
Select the correct answer using the code given below.
Answer (c) & explanation
Both statements are correct (c). The RBI introduced MCLR in April 2016 to make banks' loan-pricing method more transparent (1) and to ensure credit at rates fair to both borrowers and banks (2). Banks set lending rates from their marginal, or latest, cost of funds using a fixed formula, so policy rate cuts reach borrowers faster than under the old base rate.
MCLR replaced the base rate system (2010). Because transmission was still slow, from October 2019 new floating-rate retail and MSME loans were linked to an external benchmark such as the repo rate. Notice how each change aims at faster monetary transmission.
Answer as per the official UPSC answer key.
'European Stability Mechanism', sometimes seen in the news, is an
Answer (b) & explanation
The ESM lends to eurozone countries in financial trouble (b). The European Stability Mechanism was set up in 2012 as a permanent rescue fund for the eurozone after the sovereign debt crisis. It is based in Luxembourg and replaced the temporary EFSF. It lends to member states, with conditions on reforms. Greece, Spain, Cyprus and Portugal used it or its predecessor. It does not deal with refugees (a), which is FRONTEX's area. It does not handle trade agreements (c), which is the European Commission's job, and it does not settle disputes among members (d), which goes to the EU Court of Justice.
Notice the comparison: the ESM is like a regional IMF for the euro area, and it offers loans in exchange for strict reforms.
Answer as per the official UPSC answer key.
Which of the following is/are included in the capital budget of the Government of India?
- 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc.
- 2. Loans received from foreign governments
- 3. Loans and advances granted to the States and Union Territories
Select the correct answer using the code given below.
Answer (d) & explanation
All three are included (d). The capital budget has capital receipts and capital expenditure. Loans received from foreign governments (2) are capital receipts because they create a liability. Acquiring assets such as roads and buildings (1) and loans to States and UTs (3) are capital expenditure because they create an asset or a claim.
The revenue budget, by contrast, covers taxes, interest and day-to-day spending that create no asset or liability. The government has pushed capital spending to over ₹11 lakh crore to boost growth. Notice how capital spending has a bigger multiplier effect than revenue spending.
statement 2 is a receipt, not spending. The capital budget covers both sides.
Traps like this come back in new clothes. The PYQ Book collects all of them, topic by topic, so none catch you twice. Try the free sample
Answer as per the official UPSC answer key.
With reference to 'Initiative for Nutritional Security through Intensive Millets Promotion', which of the following statements is/are correct?
- 1. This initiative aims to demonstrate the improved production and post-harvest technologies, and to demonstrate value addition techniques, in an integrated manner, with cluster approach.
- 2. Poor, small, marginal and tribal farmers have larger stake in this scheme.
- 3. An important objective of the scheme is to encourage farmers of commercial crops to shift to millet cultivation by offering them free kits of critical inputs of nutrients and microirrigation equipment.
Select the correct answer using the code given below.
Answer (c) & explanation
Statements 1 and 2 are correct (c). INSIMP (2011–12, under the RKVY) showed improved production and post-harvest technologies for millets in an integrated manner, using a cluster approach (1). Millets are grown mainly by poor, small, marginal and tribal farmers on dry land, so they have the largest stake (2). Statement 3 is wrong: shifting commercial-crop farmers to millets with free kits was never an aim.
INSIMP aimed to boost millet output and value addition. Notice how millets returned to the spotlight as "Shree Anna" during the International Year of Millets 2023, proposed by India, for their nutrition and climate resilience.
Answer as per the official UPSC answer key.
Which of the following is/are the advantage/advantages of practising drip irrigation?
- 1. Reduction in weed
- 2. Reduction in soil salinity
- 3. Reduction in soil erosion
Select the correct answer using the code given below.
Answer (c) & explanation
Statements 1 and 3 are correct (c). Drip irrigation sends water slowly through pipes and emitters straight to the root zone. The spaces between plants stay dry, so fewer weeds grow (1). The gentle flow does not wash soil away, so there is no erosion (3). It also saves 30–70% water and allows fertigation, where fertiliser is mixed into the water. Statement 2 is wrong because drip does not lower existing soil salinity. Salts can build up at the edges of the wetted zone, so the soil needs flushing now and then.
Notice the policy angle: drip and sprinkler come under "Per Drop More Crop" (PMKSY). Sugarcane in Maharashtra and orchards in Gujarat and Andhra Pradesh are standard cases, since water-hungry crops gain the most.
statement 2 sounds plausible because drip saves water. Removing salts needs leaching, which drip does not do.
Answer as per the official UPSC answer key.
Recently, which one of the following currencies has been proposed to be added to the basket of IMF's SDR?
Answer (d) & explanation
In November 2015 the IMF decided to add the Chinese renminbi (yuan) to the SDR basket from 1 October 2016 (d). The rouble (a), rand (b) and Indian rupee (c) are not in the basket.
The basket now has five currencies: the US dollar, euro, renminbi, yen and pound sterling. The SDR is an international reserve asset created by the IMF in 1969, not a currency itself. Its basket is reviewed every five years. Notice how the renminbi's inclusion marked China's growing role in global finance.
Answer as per the official UPSC answer key.
With reference to 'Financial Stability and Development Council', consider the following statements :
- 1. It is an organ of NITI Aayog.
- 2. It is headed by the Union Finance Minister.
- 3. It monitors macroprudential supervision of the economy.
Which of the statements given above is/are correct?
Answer (c) & explanation
Statements 2 and 3 are correct (c). The Financial Stability and Development Council (FSDC) was set up in 2010 by executive order after the global financial crisis. It is chaired by the Union Finance Minister (2). Its members include the heads of the RBI, SEBI, IRDAI, PFRDA and IBBI. It oversees macroprudential supervision of the economy and also looks after inter-regulator coordination and financial literacy and inclusion (3). Statement 1 is wrong because it sits under the Ministry of Finance, not NITI Aayog.
Note that it is not a statutory body. Its sub-committee is chaired by the RBI Governor. Notice the difference between the two kinds of supervision: macroprudential looks at risk to the whole system, while microprudential looks at one bank at a time.
"organ of NITI Aayog" also appeared for NIIF in 2017 Q55. Both are Finance Ministry bodies.
Answer as per the official UPSC answer key.
With reference to the International Monetary and Financial Committee (IMFC), consider the following statements :
- 1. IMFC discusses matters of concern affecting the global economy, and advises the International Monetary Fund (IMF) on the direction of its work.
- 2. The World Bank participates as observer in IMFC's meetings.
Which of the statements given above is/are correct?
Answer (c) & explanation
Both are correct (c). The IMFC is a 24-member committee of the IMF Board of Governors, mostly finance ministers and central bank governors. It meets twice a year to discuss matters affecting the global economy and advises the IMF on the direction of its work (1). Several bodies, including the World Bank, attend its meetings as observers (2).
The parallel body for the World Bank is the Development Committee. Both meet during the IMF–World Bank Spring and Annual Meetings. Notice how the Bretton Woods twins coordinate their work through such committees.
Answer as per the official UPSC answer key.
The term 'Base Erosion and Profit Shifting' is sometimes seen in the news in the context of
Answer (b) & explanation
BEPS is about curbing tax avoidance by multinationals (b). Base Erosion and Profit Shifting means MNCs move profits to low-tax places, shrinking the tax base where they really do business. The OECD/G20 BEPS project gave 15 actions in 2015 to fight it. It has nothing to do with mining in backward areas (a), biopiracy of genetic resources (c), or environmental costs of projects (d).
India brought in the equalisation levy (2016) on digital ads and joined the Two-Pillar solution. Pillar Two sets a 15% global minimum corporate tax. India dropped its 6% levy on online ads from April 2025. Notice the overlap with GAAR and the Place of Effective Management rule, two domestic tools used against treaty shopping.
Answer as per the official UPSC answer key.
Which of the following best describes the term 'import cover', sometimes seen in the news?
Answer (d) & explanation
Import cover is the number of months of imports a country could pay for with its international reserves (d). It is not the ratio of imports to GDP (a), the total value of imports (b) or an export–import ratio between two countries (c).
In 1991 India's reserves covered barely two weeks of imports, which led to the balance-of-payments crisis. In recent years they have covered about 10–11 months. A cover of at least three months is usually seen as safe. Notice how this indicator links trade, the rupee and economic stability.
Answer as per the official UPSC answer key.
Recently, India's first 'National Investment and Manufacturing Zone' was proposed to be set up in
Answer (a) & explanation
Andhra Pradesh is the answer (a). National Investment and Manufacturing Zones (NIMZs) come from the National Manufacturing Policy, 2011. The policy aimed to raise manufacturing to 25% of GDP and create 100 million jobs. NIMZs are large integrated industrial townships of at least 5,000 hectares, with world-class infrastructure and simpler rules. At the time of the question, a NIMZ in Prakasam district was in the news as India's first proposed one. Gujarat (b), Maharashtra (c) and Uttar Pradesh (d) had other zones, such as those on the DMIC corridor, but not this "first" one.
Notice the difference between NIMZs, SEZs (export-focused, with duty benefits) and the newer industrial smart cities being built under the National Industrial Corridor programme.
Answer as per the official UPSC answer key.
With reference to 'Pradhan Mantri Fasal Bima Yojana', consider the following statements
- 1. Under this scheme, farmers will have to pay a uniform premium of two percent for any crop they cultivate in any season of the year.
- 2. This scheme covers post-harvest losses arising out of cyclones and unseasonal rains.
Which of the statements given above is/are correct?
Answer (b) & explanation
Only statement 2 is correct (b). Under PMFBY (2016), the farmer's premium is 2% for kharif, 1.5% for rabi food and oilseed crops, and 5% for commercial and horticultural crops, so it is not uniform; statement 1 is wrong. The scheme covers post-harvest losses for up to 14 days from cyclones, cyclonic rain and unseasonal rain (2).
The rest of the premium is shared by the Centre and States, and enrolment became voluntary in 2020. Technology such as remote sensing and drones is used to assess crop loss. Notice how insurance shields farmers from climate risk.
Answer as per the official UPSC answer key.