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 the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements :
- 1. There is no minimum capital requirement for wholly owned banking subsidiaries in India.
- 2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
Which of the statements given above is/are correct ?
Answer (d) & explanation
Neither statement is correct (d). Statement 1 is wrong: under the RBI's 2013 scheme, a foreign bank's wholly owned subsidiary needs a minimum paid-up capital of ₹500 crore. Statement 2 is wrong as worded: on the board, at least 50% must be Indian nationals, NRIs or PIOs, and at least one-third must be Indian nationals resident in India. Statement 2 narrows the rule to Indian nationals alone, so UPSC treated it as wrong.
Notice why the RBI prefers subsidiaries to branches: a subsidiary is a separate Indian company with its own capital, so it is easier to control in a crisis. Subsidiaries also get near national treatment. SBM Bank and DBS Bank India were among the first to take this route.
statement 2 is close to the rule but not the rule. In regulatory questions, a changed group of people makes a statement wrong.
Answer as per the official UPSC answer key.
With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements :
- 1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
- 2. CSR rules do not specify minimum spending on CSR activities.
Which of the statements given above is/are correct ?
Answer (a) & explanation
Only statement 1 is correct (a). Statement 1 is right: the CSR Rules, 2014 exclude spending that benefits only the company's own employees or is done in the normal course of business. Statement 2 is wrong: Section 135 of the Companies Act, 2013 requires a company above a set size, with net worth of ₹500 crore, turnover of ₹1,000 crore or net profit of ₹5 crore, to spend at least 2% of its average net profit of the last three years on CSR.
Notice that India was the first country to make CSR spending mandatory by law. Since 2019, unspent money must go to a special account or to funds like the PM CARES or PM's National Relief Fund. Education and health get the most CSR money.
Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds will not be able to exercise their claims to receive payment.
Statement-II :
The USA Government debt is not backed by any hard assets, but only by the faith of the Government.
Which one of the following is correct in respect of the above statements ?
Answer (a) & explanation
Both statements are correct and Statement II explains Statement I (a). Statement II is right: US Treasury bonds are backed only by the "full faith and credit" of the US government, not by gold, land or any other hard asset. Statement I follows from it: there is no collateral a bondholder could seize, and a sovereign cannot be taken to court and forced to pay like a private borrower. So in a default, holders would have no asset to enforce their claim against. Options (b), (c) and (d) wrongly break this cause-and-effect link.
Notice the wider idea: most modern government debt and fiat money rest on trust, not on gold. That is why fights over the US debt ceiling shake world markets, and why rating agencies watch them closely.
it feels as if a bondholder can always "claim" payment. A claim needs something to enforce it against; sovereign debt has only trust behind it.
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Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
Syndicated lending spreads the risk of borrower default across multiple lenders.
Statement-II :
The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.
Which one of the following is correct in respect of the above statements ?
No official answer (question dropped) & notes
UPSC dropped this question, so no answer was counted. Learn the idea anyway. Statement I is right: in a syndicated loan, a group of banks, led by an arranger or lead bank, lends together to one large borrower, so each bank carries only part of the default risk. Statement II is wrong: a syndicated loan can be a lump sum (a term loan), a revolving credit line that the borrower draws on as needed, or a mix of both. So, on the facts, option (c) would fit best.
Notice where this matters: big infrastructure, airline and power projects need more money than one bank should risk. The RBI's rules on large exposures also push banks to share such loans rather than lend alone.
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.
With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of :
Answer (c) & explanation
CBLO was a money market instrument (c). Collateralised Borrowing and Lending Obligation (CBLO) was a short-term borrowing tool run by the Clearing Corporation of India (CCIL), using government securities as collateral, for periods from one day up to a year. Anything that lends and borrows for up to one year belongs to the money market. Option (a) is wrong: the bond market deals in long-term debt. Option (b) is wrong: the forex market deals in currencies. Option (d) is wrong: the stock market deals in shares.
Notice that CBLO was replaced in 2018 by TREPS (tri-party repo), which works the same way and is now the largest part of India's money market. Mutual funds and banks use it to park spare cash.
the word "collateral" makes one think of bonds. Look at the time period: short-term funds mean money market.
Answer as per the official UPSC answer key.
Consider the following statements in respect of the digital rupee :
- 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.
- 2. It appears as a liability on the RBI's balance sheet.
- 3. It is insured against inflation by its very design.
- 4. It is freely convertible against commercial bank money and cash.
Which of the statements given above are correct ?
Answer (d) & explanation
Statements 1, 2 and 4 are correct (d). Statement 1 is right: the e-rupee (Central Bank Digital Currency, pilots since 2022) is legal tender issued by the RBI in line with its monetary policy. Statement 2 is right: like a currency note, it is a liability on the RBI's balance sheet. Statement 4 is right: it can be swapped one-to-one for bank deposits and cash. Statement 3 is wrong: like any currency, it loses value with inflation; nothing in its design protects it.
Notice the difference from crypto: Bitcoin has no issuer and its price swings, while the e-rupee is just a digital form of the rupee. The RBI runs both a retail (e₹-R) and a wholesale (e₹-W) version, and has added offline and programmable features.
"insured against inflation". No currency, paper or digital, is.
Answer as per the official UPSC answer key.
The total fertility rate in an economy is defined as :
Answer (d) & explanation
TFR is the average number of children a woman would bear (d). The Total Fertility Rate is the average number of live births a woman would have over her child-bearing years (15–49), if current age-wise birth rates held. Option (a) is wrong: that is the crude birth rate, births per 1,000 people a year. Option (b) is wrong: TFR is measured per woman, not per couple. Option (c) is wrong: birth rate minus death rate is the natural growth rate.
Notice the trend: India's TFR fell to 2.0 in NFHS-5 (2019–21), just below the replacement level of 2.1, the level at which a population just replaces itself. Later sample surveys show it slightly lower still. Bihar has the highest TFR and Sikkim the lowest, below 1.1.
option (b) says "a couple". TFR is always measured per woman.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. India is a member of the International Grains Council.
- 2. A country needs to be a member of the International Grains Council for exporting or importing rice and wheat.
Which of the statements given above is/are correct ?
Answer (a) & explanation
Only statement 1 is correct (a). Statement 1 is right: India is a member of the International Grains Council (IGC), based in London. It runs the Grains Trade Convention of 1995, shares market data and promotes cooperation in trade in wheat, maize, rice, barley and oilseeds. Statement 2 is wrong: membership is not a licence. Any country can export or import grain without joining; trade rules come from the WTO and national laws.
Notice the related Food Aid Convention, linked to the IGC, on food aid commitments. India is a top rice exporter, and its export curbs (such as on non-basmati rice in 2023, later eased) move world prices. Do not confuse the IGC with the FAO.
statement 2 makes a forum sound like a gatekeeper. Membership bodies rarely control who may trade.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
- 2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
- 3. In India, Stock Exchanges can offer separate trading platforms for debts.
Which of the statements given above is/are correct ?
Answer (c) & explanation
All three statements are correct (c). Statement 1 is right: the Liquidity Adjustment Facility (repo and reverse repo) is open to banks and to standalone primary dealers, which are themselves NBFCs registered with the RBI. Statement 2 is right: foreign portfolio investors may hold G-Secs within limits, and some bonds are fully open to them under the Fully Accessible Route (FAR). Statement 3 is right: NSE and BSE run separate debt segments for trading bonds.
Notice the big change: from 2024, Indian government bonds entered global indices such as JP Morgan's, bringing in large foreign money. The FAR, introduced in 2020, made this possible. Primary dealers help the RBI sell government bonds.
statement 1 sounds wrong because the LAF is "for banks". Primary dealers are NBFCs, and they use it.
Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
India does not import apples from the United States of America.
Statement-II :
In India, the law prohibits the import of Genetically Modified food without the approval of the competent authority.
Which one of the following is correct in respect of the above statements ?
Answer (d) & explanation
Statement I is wrong, Statement II is right (d). Statement II is right: under the Food Safety and Standards Act, 2006, no genetically modified food may be imported or sold without the approval of the FSSAI. Statement I is wrong: India does import Washington apples from the USA. In 2023, India even removed the extra retaliatory duty on US apples after settling disputes at the WTO. So options (a), (b) and (c) fail.
Notice India's GM picture: Bt cotton is the only GM crop grown commercially; GM mustard (DMH-11) got environmental release approval but is stuck in court. The Genetic Engineering Appraisal Committee (GEAC) clears GM crops. India's main apple-growing states are Jammu and Kashmir and Himachal Pradesh.
Answer as per the official UPSC answer key.
In India, which of the following can trade in Corporate Bonds and Government Securities ?
- 1. Insurance Companies
- 2. Pension Funds
- 3. Retail Investors
Select the correct answer using the code given below :
Answer (d) & explanation
All three can trade in corporate bonds and G-Secs (d). Item 1 is right: insurance companies are among the biggest long-term buyers of bonds; IRDAI rules require them to hold a share of their funds in G-Secs. Item 2 is right: pension funds, such as those under the NPS, also invest heavily in government and corporate bonds, as rules require. Item 3 is right: retail investors can buy corporate bonds on stock exchanges and G-Secs directly through the RBI Retail Direct portal, launched in November 2021.
Notice that India was among the first countries to let ordinary people open a gilt account directly with the central bank. SEBI also cut the minimum face value of corporate bonds to ₹10,000 to widen retail access.
one may think G-Secs are only for banks. Retail Direct opened them to individuals.
Answer as per the official UPSC answer key.
Consider the following statements :
Statement-I :
Recently, Venezuela has achieved a rapid recovery from its economic crisis and succeeded in preventing its people from fleeing/emigrating to other countries.
Statement-II :
Venezuela has the world's largest oil reserves.
Which one of the following is correct in respect of the above statements ?
Answer (d) & explanation
Statement I is wrong, Statement II is right (d). Statement II is right: Venezuela holds the world's largest proven oil reserves, about 300 billion barrels, ahead of Saudi Arabia. Most of it is heavy crude in the Orinoco Belt. Statement I is wrong: years of hyperinflation, falling output, mismanagement and US sanctions led over seven million people to leave the country. There was no rapid recovery, so options (a), (b) and (c) fail.
Notice the lesson: big reserves did not save the economy, a case of the "resource curse". India's Reliance and ONGC Videsh have dealt in Venezuelan crude. Venezuela is a founder member of OPEC, set up in 1960.
Answer as per the official UPSC answer key.
Consider the following :
- 1. Exchange-Traded Funds (ETF)
- 2. Motor vehicles
- 3. Currency swap
Which of the above is/are considered financial instruments ?
Answer (d) & explanation
ETFs and currency swaps are financial instruments (d). A financial instrument is a contract that gives one party a financial asset and another a liability or equity. Item 1 is right: an Exchange-Traded Fund unit is a share in a fund that tracks an index, and it trades on the stock exchange like a share. Item 3 is right: a currency swap is a derivative contract in which two parties exchange payments in different currencies. Item 2 is wrong: a motor vehicle is a physical asset. A loan taken to buy it is a financial instrument, but the car itself is not.
Notice India's CPSE ETF and Bharat 22 ETF, used by the government for disinvestment. The RBI also signs currency swap deals with other central banks, such as Japan and SAARC countries.
Answer as per the official UPSC answer key.
With reference to the Digital India Land Records Modernisation Programme, consider the following statements :
- 1. To implement the scheme, the Central Government provides 100% funding.
- 2. Under the Scheme, Cadastral Maps are digitised.
- 3. An initiative has been undertaken to transliterate the Records of Rights from local language to any of the languages recognized by the Constitution of India.
Which of the statements given above are correct ?
Answer (d) & explanation
All three statements are correct (d). Statement 1 is right: the Digital India Land Records Modernisation Programme (DILRMP) has been a Central Sector scheme with 100% central funding since 2016. Statement 2 is right: it digitises cadastral maps and links them to the computerised Records of Rights. Statement 3 is right: Records of Rights are being transliterated into any of the 22 Eighth Schedule languages, so people can read them in their own language.
Notice the ULPIN, a 14-digit unique land parcel number, called "Bhu-Aadhaar", and NGDRS, a single system for registering property. The aim is conclusive titling, fewer land disputes and easier loans. The SVAMITVA scheme maps village homes using drones.
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.
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 :
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 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.
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.
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.