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.
With reference to 'Bitcoins', sometimes seen in the news, which of the following statements is/are correct?
- 1. Bitcoins are tracked by the Central Banks of the countries.
- 2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
- 3. Online payments can be sent without either side knowing the identity of the other.
Select the correct answer using the code given below.
Answer (b) & explanation
Statements 2 and 3 are correct (b). Bitcoin (2009, created by "Satoshi Nakamoto") is a decentralised cryptocurrency. Its transactions are recorded on a public blockchain kept up by a network of users, so statement 1 is wrong: no central bank tracks or issues it. Anyone with a Bitcoin address can send coins to and receive them from any other address, peer to peer (2). Users are known only by their addresses, so payments can be made without either side knowing the other's real identity (3). This is called being pseudonymous.
In India, crypto gains are taxed at 30% with 1% TDS, and exchanges must register with the FIU-IND. Notice the contrast with the RBI's e-rupee (CBDC), which is a central-bank-issued, legal-tender digital currency.
central banks issue and manage fiat money. Bitcoin's whole design avoids any central authority.
Answer as per the official UPSC answer key.
Which of the following is/are the indicator/indicators used by IFPRI to compute the Global Hunger Index Report?
- 1. Undernourishment
- 2. Child stunting
- 3. Child mortality
Select the correct answer using the code given below.
Answer (c) & explanation
All three are indicators (c). The Global Hunger Index uses four: undernourishment, child stunting, child wasting and child mortality (under five). So undernourishment, stunting and child mortality are all part of it, and options leaving any out are incomplete.
IFPRI helped compile the GHI until 2017; it is now published by Welthungerhilfe and Concern Worldwide. India often ranks low, mainly because of high child wasting, and the government has questioned the methodology. Notice how hunger links to nutrition schemes such as POSHAN Abhiyaan, the PDS and mid-day meals.
"Child" items look like health, not hunger. GHI deliberately mixes food supply with child nutrition outcomes.
Answer as per the official UPSC answer key.
Why does the Government of India promote the use of 'Neem-coated Urea' in agriculture?
Answer (b) & explanation
The neem-oil coating slows down the dissolution and breakdown of urea in the soil (b), so nitrogen is released slowly and less is lost. Crops use it better, and less urea is needed. Option (a) is wrong: neem does not boost nitrogen fixation. Option (c) is wrong because "not at all" is too extreme; nitrous oxide emissions are reduced, not eliminated. Option (d) is wrong: it is not a weedicide-fertiliser mix.
Neem coating was made compulsory for all urea in 2015, which also stopped subsidised urea being diverted to industry. Notice how a simple coating saves subsidy, soil and money.
"not at all" in option (c). Neem coating lowers nitrous oxide losses; it cannot stop them.
Answer as per the official UPSC answer key.
In India, the steel production industry requires the import of
Answer (c) & explanation
Indian coal has a high ash content, so steel plants import most of their coking (metallurgical) coal, mainly from Australia, and also from the USA, Russia and others (c). Saltpetre (a) is used for explosives and fertilisers, and rock phosphate (b) for phosphatic fertilisers; neither is needed for steel, so (d) also fails.
India is the world's second-largest steel producer and aims for 300 million tonnes of capacity by 2030 under the National Steel Policy 2017. Notice how this import dependence links steel, trade and energy security, which is why coal washeries and Mission Coking Coal matter.
Answer as per the official UPSC answer key.
With reference to the Fourteenth Finance Commission, which of the following statements is/are correct?
- 1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent.
- 2. It has made recommendations concerning sector-specific grants.
Select the correct answer using the code given below.
Answer (a) & explanation
The 14th Finance Commission (chaired by Y. V. Reddy, covering 2015–20) raised the States' share of the divisible pool from 32% to 42%, the biggest jump ever (1 correct). It gave grants only for local bodies, disaster relief and revenue deficits, and deliberately made no sector-specific grants, preferring untied funds, so statement 2 is wrong. The answer is (a).
The 15th Finance Commission (N. K. Singh) set the share at 41% after Jammu and Kashmir became a Union Territory, and the 16th (Arvind Panagariya) covers 2026–31. Notice how Article 280 makes this body the balance wheel of fiscal federalism.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The Accelerated Irrigation Benefits Programme was launched during 1996-97 to provide loan assistance to poor farmers.
- 2. The Command Area Development Programme was launched in 1974-75 for the development of water-use efficiency.
Which of the statements given above is/are correct?
Answer (b) & explanation
Only statement 2 is correct (b). The Accelerated Irrigation Benefits Programme (1996-97) gave Central loan assistance to States, not poor farmers, to complete large irrigation projects stuck for lack of funds, so statement 1 is wrong. The Command Area Development Programme (1974-75) aimed to close the gap between irrigation capacity created and actually used by improving water-use efficiency through field channels and land levelling.
Both now form part of PMKSY (2015), whose motto is "Har Khet Ko Pani" and "More Crop Per Drop". Notice how building dams is only half the job; water must reach the field.
Answer as per the official UPSC answer key.
A decrease in tax to GDP ratio of a country indicates which of the following?
- 1. Slowing economic growth rate
- 2. Less equitable distribution of national income
Select the correct answer using the code given below.
Answer (a) & explanation
Tax collections are buoyant: they rise faster than GDP in good years and fall faster in slow years. So a falling tax-to-GDP ratio usually signals slowing growth (1 correct). Statement 2 is wrong because the ratio says nothing about how income is shared among people; that needs measures such as the Gini coefficient. The answer is (a).
India's combined tax-GDP ratio is around 17–18%, low compared with many developed economies, partly because of a large informal sector. Notice how GST and better compliance aim to widen the tax base without raising rates.
Answer as per the official UPSC answer key.
'Basel III Accord' or simply 'Basel III', often seen in the news, seeks to
Answer (b) & explanation
Basel III seeks to improve the banking sector's ability to absorb financial and economic stress and to strengthen risk management (b). Agreed in 2010 by the Basel Committee on Banking Supervision at the Bank for International Settlements, after the 2008 crisis, it asks banks to hold more and better capital, plus buffers, a leverage ratio and liquidity ratios such as the LCR. Option (a) describes the CBD, (c) the Kyoto Protocol and (d) the Montreal Protocol.
India's capital adequacy norm of 11.5% including the conservation buffer is stricter than the Basel minimum. Notice how strong banks protect the whole economy.
Basel is also linked to a convention on hazardous waste. Basel III on its own means banking.
Answer as per the official UPSC answer key.
In the 'Index of Eight Core Industries', which one of the following is given the highest weight?
Answer (b) & explanation
The Index of Eight Core Industries, released by the Office of the Economic Adviser in DPIIT, covers coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. On the 2011-12 base, refinery products weigh about 28% and electricity about 20% (b). Steel (d) is about 18%, coal (a) about 10% and fertilisers (c) under 3%. Among the options, electricity is the highest.
Together these eight industries make up about 40% of the Index of Industrial Production. Notice how core-sector data is watched as an early signal of where the wider economy is heading.
refinery products are heavier still, but they are not among the options.
Answer as per the official UPSC answer key.
With reference to Indian economy, consider the following statements :
- 1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
- 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
Answer (b) & explanation
Only statement 2 is correct (b). The real GDP growth rate rose and fell between 2005 and 2015, dipping in 2008-09 after the global financial crisis and again in 2012-13, so it did not rise steadily. Nominal GDP at market prices in rupees rose every year because of both real growth and inflation.
The key idea is that a level can rise steadily even when its growth rate does not. Real GDP removes the effect of price changes, while nominal GDP does not. Notice how the GDP deflator links the two, and how this distinction appears in many economics questions.
Answer as per the official UPSC answer key.
The Fair and Remunerative Price (FRP) of sugarcane is approved by the
Answer (a) & explanation
The Fair and Remunerative Price of sugarcane is approved by the Cabinet Committee on Economic Affairs (a). The CACP (b) only recommends it. The Directorate of Marketing and Inspection (c) handles grading and AGMARK, and the APMC (d) regulates mandis, so neither fixes the FRP.
Sugar mills must pay farmers at least the FRP, under the Sugarcane (Control) Order issued under the Essential Commodities Act. Some States, such as Uttar Pradesh, announce a higher State Advised Price. The FRP replaced the Statutory Minimum Price in 2009. Notice how cane pricing ties farmer welfare to mill finances.
CACP only recommends. UPSC asked who approves.
Answer as per the official UPSC answer key.
With reference to Indian economy, consider the following :
- 1. Bank rate
- 2. Open market operations
- 3. Public debt
- 4. Public revenue
Which of the above is/are component/components of Monetary Policy?
Answer (c) & explanation
Monetary policy is run by the RBI through tools such as the bank rate, repo rate, CRR, SLR and open market operations. So 1 and 2 are correct (c). Public debt and public revenue concern government borrowing and taxes, which belong to fiscal policy, run by the government through the Budget.
Since 2016 a six-member Monetary Policy Committee sets the repo rate to keep CPI inflation at 4% within a 2–6% band. Notice how the two policies must work together: loose fiscal policy can push up inflation, forcing tighter monetary policy.
Answer as per the official UPSC answer key.
Which one of the following issues the 'Global Economic Prospects' report periodically?
Answer (d) & explanation
The World Bank publishes Global Economic Prospects twice a year, in January and June (d). The Asian Development Bank (a) publishes the Asian Development Outlook. The EBRD (b) publishes its own Regional Economic Prospects for its region, and the US Federal Reserve (c) issues monetary policy statements, not this report.
Do not confuse it with the IMF's World Economic Outlook and Global Financial Stability Report. The World Bank also publishes the World Development Report. Notice how UPSC repeatedly tests which body publishes which report; a small table of reports and publishers is well worth keeping.
Answer as per the official UPSC answer key.
With reference to inflation in India, which of the following statements is correct?
Answer (c) & explanation
Inflation is often too much money chasing too few goods, so reduced money circulation helps control it (c). Option (a) is wrong: inflation control is shared, with the RBI in the lead. Option (b) is wrong for the same reason. Option (d) is the reverse of the truth.
Since 2016 the RBI has had a legal mandate under the amended RBI Act to keep CPI inflation at 4%, within a band of 2–6%, through its Monetary Policy Committee. The government helps through supply-side steps such as buffer stocks and import duty changes. Notice how monetary and supply measures work together against inflation.
Answer as per the official UPSC answer key.
When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
Answer (c) & explanation
The SLR is the share of deposits banks must keep in safe liquid assets such as government securities, gold or cash. A cut frees funds for lending, raising liquidity, so banks may cut lending rates (c). Option (a) is wrong: a 0.5-point cut cannot "drastically" raise GDP growth. Option (b) does not follow, since FII flows depend on wider returns and risk. Option (d) is the reverse: an SLR cut raises liquidity.
The SLR is set under the Banking Regulation Act and has fallen over the years to about 18%. Notice how SLR and CRR together shape how much money banks can lend.
"drastically" in options (a) and (d). A small cut has small, likely effects.
Answer as per the official UPSC answer key.
The substitution of steel for wooden ploughs in agricultural production is an example of
Answer (b) & explanation
The plough is a capital good. A steel plough lasts longer and does more work than a wooden one, so the same capital becomes more productive. Technical change that raises the efficiency of capital is called capital-augmenting (b). If it made each worker more effective, it would be labour-augmenting (a). It does not reduce capital (c), so (d) also fails.
Economists such as Robert Solow showed that technological progress explains much of long-term growth. Notice how this links to the Green Revolution, where better seeds and tools transformed farm output with the same land.
Answer as per the official UPSC answer key.
In India, markets in agricultural products are regulated under the
Answer (b) & explanation
Agricultural marketing is a State subject (Entry 28, State List), so markets are regulated under the APMC Acts enacted by each State (b). These set up regulated mandis run by market committees. The Essential Commodities Act (a) controls supply, stocking and prices, not market yards. The Grading and Marking Act (c) deals only with AGMARK standards, and the food product orders (d) cover processing and quality.
The 2017 model APLM Act urged States to reform these laws, and e-NAM links mandis online. Notice how the repealed farm laws of 2020 also sought to change mandi regulation.
Answer as per the official UPSC answer key.
The problem of international liquidity is related to the non-availability of
Answer (c) & explanation
International liquidity means the stock of assets accepted for settling international payments: US dollars and other hard currencies, plus gold, SDRs and IMF reserve positions. So the problem relates to their non-availability (c). A shortage of goods and services (a) or an exportable surplus (d) affects trade but is not liquidity itself. Gold and silver (b) are only part of the story; silver plays no role today.
India faced a severe liquidity crisis in 1991, when reserves fell to about two weeks of imports and gold was pledged. Notice how this led to the economic reforms and why forex reserves matter.
Answer as per the official UPSC answer key.
Which of the following brings out the 'Consumer Price Index Number for Industrial Workers'?
Answer (c) & explanation
The CPI for Industrial Workers is compiled by the Labour Bureau, Shimla, under the Ministry of Labour (c), as are the CPIs for Agricultural and Rural Labourers. It is used to fix dearness allowance for government employees and wages in industry. The RBI (a) uses inflation data but does not compile CPI-IW; the Department of Economic Affairs (b) and DoPT (d) do not compile it either.
The headline CPI (Rural, Urban, Combined) used for inflation targeting is compiled by the NSO under MoSPI. Notice how different price indices serve different purposes: wages, policy and contracts.
Answer as per the official UPSC answer key.
Which one of the following best describes the main objective of 'Seed Village Concept'?
Answer (b) & explanation
The Seed Village concept involves training farmers in quality seed production so that good seed is available to others nearby, on time and at an affordable cost (b). Option (a) is wrong: it does not discourage buying seed but improves farm-saved seed quality. Option (c) is wrong: villages are not set aside only for certified seed. Option (d) is wrong: it does not set up seed companies.
Farmers get foundation seed at subsidised rates and training in raising, storing and processing seed. This raises the seed replacement rate. Notice how one village's skill helps a whole area grow better crops.
Answer as per the official UPSC answer key.