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
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With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct ?
- 1. Quantitative restrictions on imports by foreign investors are prohibited.
- 2. They apply to investment measures related to trade in both goods and services.
- 3. They are not concerned with the regulation of foreign investment.
Select the correct answer using the code given below :
Answer (c) & explanation
Statements 1 and 3 are correct (c). The WTO's TRIMs Agreement bans investment rules that distort trade in goods. Statement 1 is right because it prohibits quantitative restrictions on what a foreign investor may import, along with local content requirements and trade-balancing rules. Statement 3 is right because TRIMs does not regulate foreign investment itself; a country may still decide who may invest and how much, as long as the rules do not distort trade. Statement 2 is wrong because TRIMs covers goods only; investment in services falls under GATS.
Notice the other Uruguay Round agreements: TRIPS (intellectual property), GATS (services) and the Agreement on Agriculture. The US once challenged India's solar mission at the WTO over local content rules.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
- 2. The WPI does not capture changes in the prices of services, which CPI does.
- 3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct ?
Answer (a) & explanation
Statements 1 and 2 are correct (a). Statement 1 is right because food has a weight of about 46% in CPI (Combined), but only about 24% in the WPI. Statement 2 is right because the WPI covers goods only, while the CPI includes services such as education, health, housing and transport. Statement 3 is wrong because, after the Urjit Patel Committee (2014), the RBI adopted CPI (Combined) as its key inflation measure, not WPI. Under flexible inflation targeting, the target is 4%, with a band of 2–6%.
Notice the agencies: the NSO (MoSPI) compiles CPI, and the Office of the Economic Adviser (DPIIT) compiles WPI. Both use the base year 2011–12 for WPI and 2012 for CPI, with revisions under way.
Answer as per the official UPSC answer key.
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?
- 1. Cut and optimize the Statutory Liquidity Ratio
- 2. Increase the Marginal Standing Facility Rate
- 3. Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below :
Answer (b) & explanation
The RBI would not raise the MSF rate (b). An expansionist monetary policy makes money cheaper and more plentiful to boost growth. Statement 1 fits it: cutting the Statutory Liquidity Ratio frees bank funds that were locked in government securities, so banks can lend more. Statement 3 fits it too: cutting the repo rate and bank rate lowers the cost of borrowing from the RBI. Statement 2 does not fit: raising the Marginal Standing Facility rate makes emergency overnight borrowing dearer, which is a tightening step. So 2 is the only thing it would not do.
Notice the Liquidity Adjustment Facility: since 2022, the Standing Deposit Facility is its floor and the MSF its ceiling. The Monetary Policy Committee has six members.
"would it not do". Mark the tightening step, not the easing ones.
Answer as per the official UPSC answer key.
With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements :
- 1. AIIB has more than 80 member nations.
- 2. India is the largest shareholder in AIIB.
- 3. AIIB does not have any members from outside Asia.
Which of the statements given above is/are correct?
Answer (a) & explanation
Only statement 1 is correct (a). Statement 1 is right because the AIIB, set up in 2016 with its headquarters in Beijing, had more than 80 approved members by 2019, and now has about 110. Statement 2 is wrong because China is the largest shareholder, with about 26% of the voting power. India is the second-largest shareholder and the bank's biggest borrower. Statement 3 is wrong because the AIIB has many members from outside Asia, such as the UK, Germany, France, Brazil and Egypt. The USA and Japan are not members.
Notice the comparison: the Asian Development Bank (Manila, 1966) is led by Japan and the USA. The New Development Bank of the BRICS is in Shanghai.
Answer as per the official UPSC answer key.
Consider the following statements :
The Reserve Bank of India's recent directives relating to 'Storage of Payment System Data', popularly known as data diktat, command the payment system providers that
- 1. they shall ensure that entire data relating to payment systems operated by them are stored in a system only in India
- 2. they shall ensure that the systems are owned and operated by public sector enterprises
- 3. they shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year
Which of the statements given above is/are correct?
Answer (a) & explanation
Only statement 1 is correct (a). The RBI circular of April 2018 on Storage of Payment System Data required all payment system operators, such as Visa, Mastercard and payment apps, to store the entire data about payments they run only in India (1). They were given six months to comply. Statement 2 is wrong because it did not require the systems to be owned by public sector firms. Statement 3 is wrong because the system audit report, by a CERT-In empanelled auditor, goes to the RBI, not the CAG.
In 2021, the RBI barred Mastercard, American Express and Diners Club from adding new customers for not complying. Notice the wider law: the DPDP Act, 2023 and its Rules (2025), which allow most cross-border transfers.
Answer as per the official UPSC answer key.
In a given year in India, official poverty lines are higher in some States than in others because
Answer (b) & explanation
Price levels vary from State to State (b). A poverty line is the money a person needs to buy a fixed basket of food and non-food items. The basket is the same everywhere, but prices differ between States and between rural and urban areas. So the line is higher where prices are higher. Under the Tendulkar method (2011–12), for example, the rural line was higher in Goa than in Odisha. Options (a), (c) and (d) are wrong because the poverty rate, State GDP and PDS quality are results or other factors, not what sets the line.
Notice the newer picture: the Rangarajan Committee (2014) suggested higher lines. The World Bank's $3 a day line (2025) and NITI Aayog's Multidimensional Poverty Index are used today.
Answer as per the official UPSC answer key.
What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?
Answer (d) & explanation
The ICA aims at faster resolution of stressed assets (d). The Inter-Creditor Agreement, signed in July 2018, came from the Sunil Mehta Committee's "Project Sashakt". It applies to stressed loans of ₹50 crore or more given by a consortium of several banks. The lead lender draws up a resolution plan within 180 days, and once lenders holding 66% of the debt by value agree, it binds all of them. This avoids long fights among creditors. It does not deal with the fiscal or current account deficit (a), is not an infrastructure scheme (b), and is not a regulator (c).
Notice the wider tools: the Insolvency and Bankruptcy Code (2016), the RBI's June 2019 framework, and the National Asset Reconstruction Company (NARCL), the "bad bank" set up in 2021.
Answer as per the official UPSC answer key.
The money multiplier in an economy increases with which one of the following?
Answer (b) & explanation
The money multiplier rises with the banking habit (b). When people keep more of their money in banks instead of as cash, banks can lend more of each rupee. Each loan returns to the system as a new deposit, which can be lent again. So the money multiplier, the ratio of broad money to reserve money, rises with the banking habit of the people. Options (a) and (c) are wrong because a higher CRR or SLR locks up more of banks' money, lowering the multiplier. Option (d) is wrong because population size does not change the multiplier directly.
Notice the factors that raised India's banking habit: Jan Dhan accounts (over 55 crore), UPI, and demonetisation (2016), which pushed cash into banks. UPSC asked the same question again in 2021.
Answer as per the official UPSC answer key.
Among the following, which one is the largest exporter of rice in the world in the last five years?
Answer (b) & explanation
India is the largest rice exporter (b). India has been the world's top rice exporter since about 2012, with around 40% of world trade in recent years. It sells basmati mainly to West Asia, such as Saudi Arabia and Iran, and non-basmati rice to Africa and Asia. Thailand and Vietnam (d) come next. China (a) is the world's largest producer of rice, but also a major importer. Myanmar (c) is a smaller exporter.
Notice the policy swings: India banned non-basmati white rice exports in July 2023 to control prices, and lifted the curbs in September–October 2024. India also passed China to become the largest rice producer in 2024–25, by USDA estimates.
Answer as per the official UPSC answer key.
The Chairmen of public sector banks are selected by the
Answer (a) & explanation
The Banks Board Bureau selected them (a). In 2019, the Banks Board Bureau, set up in 2016 on the P.J. Nayak Committee's advice, recommended names for chairmen, MDs and whole-time directors of public sector banks. The government then made the appointment. The BBB was meant to make bank governance more professional and less political. The RBI (b) regulates banks but does not pick their heads. The Finance Ministry (c) appoints on the recommendation; it does not run the selection. The bank's management (d) has no role.
Notice the change: in 2022, the BBB was replaced by the Financial Services Institutions Bureau (FSIB), which also selects heads of public sector insurers and other financial bodies. It was set up after the Delhi High Court questioned the BBB's legal standing.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Coal sector was nationalized by the Government of India under Indira Gandhi.
- 2. Now, coal blocks are allocated on lottery basis.
- 3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self-sufficient in coal production.
Which of the statements given above is/are correct?
Answer (a) & explanation
Only statement 1 is correct (a). Statement 1 is right because coal mines were nationalised in 1971–73 under Indira Gandhi, coking coal first and then non-coking coal. Coal India Limited was formed in 1975. Statement 2 is wrong because, after the Supreme Court cancelled 214 coal block allocations in 2014 (the "Coalgate" case), blocks are now given by transparent e-auction, not lottery. Statement 3 is wrong because India still imports coal, mainly coking coal for steel and high-grade coal for coastal power plants.
Notice the newer facts: commercial coal mining by private firms opened in 2020, and India's coal output crossed 1 billion tonnes in FY2024–25. India is still the world's second-largest coal producer and consumer, after China.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Petroleum and Natural Gas Regulatory Board (PNGRB) is the first regulatory body set up by the Government of India.
- 2. One of the tasks of PNGRB is to ensure competitive markets for gas.
- 3. Appeals against the decisions of PNGRB go before the Appellate Tribunals for Electricity.
Which of the statements given above are correct?
Answer (b) & explanation
Statements 2 and 3 are correct (b). Statement 1 is wrong because the PNGRB, set up in 2006 under the PNGRB Act, came long after other regulators such as SEBI (statutory from 1992), TRAI (1997) and CERC (1998). Statement 2 is right because its tasks include protecting consumers, promoting competitive markets for gas, and authorising city gas distribution networks and pipelines. Statement 3 is right because, under the Act, appeals against PNGRB orders go to the Appellate Tribunal for Electricity (APTEL).
Notice the push for gas: India aims to raise natural gas to 15% of its energy mix by 2030, up from about 6%. PNGRB's "One Nation, One Grid, One Tariff" reform (2023) unified pipeline tariffs.
Answer as per the official UPSC answer key.
Consider the following statements :
As per the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018
- 1. if rules for fixed-term employment are implemented, it becomes easier for the firms/companies to lay off workers
- 2. no notice of termination of employment shall be necessary in the case of temporary workman
Which of the statements given above is/are correct?
Answer (c) & explanation
Both statements are correct (c). The 2018 amendment to the Industrial Employment (Standing Orders) Central Rules allowed fixed-term employment in all sectors, not just apparel. Statement 1 is right because a fixed-term contract simply ends on its date. The employer need not follow retrenchment procedures or give compensation, which makes it easier to let workers go. Fixed-term workers still get the same wages and benefits as permanent workers. Statement 2 is right because the rules say no notice of termination is needed for a temporary workman, whether employed for a fixed term or not.
Notice the change since then: these ideas were included in the Industrial Relations Code, 2020. The four Labour Codes were brought into force in November 2025, and fixed-term workers became eligible for gratuity after one year.
Answer as per the official UPSC answer key.
Which one of the following is not a sub-index of the World Bank's 'Ease of Doing Business Index'?
Answer (a) & explanation
Maintenance of law and order was not a sub-index (a). The World Bank's Doing Business report ranked countries on ten areas: starting a business, dealing with construction permits (d), getting electricity, registering property (c), getting credit, protecting minority investors, paying taxes (b), trading across borders, enforcing contracts and resolving insolvency. Law and order was never one of them, though "enforcing contracts" looked at courts.
India jumped from 142nd (2014) to 63rd (2020). Notice what happened next: the World Bank stopped the report in 2021 after data irregularities involving China and Saudi Arabia. It was replaced by Business Ready (B-READY), first published in October 2024. India also runs its own Business Reforms Action Plan (BRAP) ranking for states.
Answer as per the official UPSC answer key.
The Service Area Approach was implemented under the purview of
Answer (b) & explanation
The Service Area Approach came under the Lead Bank Scheme (b). The Lead Bank Scheme, started by the RBI in 1969 on the Gadgil Study Group's advice, gave one bank the lead role in credit planning for each district. The Service Area Approach (SAA), introduced in 1989, went further. Each rural and semi-urban bank branch was given a set of villages and made responsible for planning and meeting their credit needs. It was relaxed in 2004, except for government-sponsored schemes. The IRDP (a), MGNREGS (c) and Skill Mission (d) are unrelated.
Notice the related bodies: District Consultative Committees and State Level Bankers' Committees. Today, financial inclusion relies more on Jan Dhan accounts and bank correspondents.
Answer as per the official UPSC answer key.
The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus
Answer (c) & explanation
The cost includes procurement incidentals and distribution cost (c). The economic cost of food grains to the Food Corporation of India has three parts. First is the price paid to farmers, the MSP plus any state bonus. Second is procurement incidentals: mandi charges, state taxes, commission to arhtiyas, gunny bags and handling. Third is distribution cost: freight, storage, interest, handling and transit losses until the grain reaches the ration shop. Options (a) and (b) name only one cost each. Option (d) is wrong because godown charges are only one part of distribution cost.
The economic cost of wheat and rice is now over ₹3,000 and about ₹4,000 per quintal. Notice that PMGKAY gives free grain to about 81 crore people until 2028, making FCI's costs a big part of the food subsidy.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Most of India's external debt is owed by governmental entities.
- 2. All of India's external debt is denominated in US dollars.
Which of the statements given above is/are correct?
Answer (d) & explanation
Neither statement is correct (d). Statement 1 is wrong because most of India's external debt is owed by the non-government sector. This includes commercial borrowings by companies, NRI deposits and short-term trade credit. Sovereign (government) debt makes up only about a fifth of the total. Statement 2 is wrong because only about half of the debt is in US dollars. The rest is in Indian rupees (such as masala bonds and NRI rupee deposits), Japanese yen, SDRs and euros.
India's external debt was about $736 billion in March 2025, around 19% of GDP, which is low by global standards. Notice the forex reserves of about $700 billion, which cover most of this debt and protect against crises.
"All" in statement 2. The rupee itself is a major currency of India's external debt.
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Answer as per the official UPSC answer key.
In the context of any country, which one of the following would be considered as part of its social capital?
Answer (d) & explanation
Mutual trust and harmony are social capital (d). Social capital is the network of trust, shared norms, cooperation and relationships that helps people work together. Examples are community groups, self-help groups and civic bodies, made famous by Robert Putnam's Bowling Alone. Option (a) is wrong because literacy is part of human capital: the skills, education and health of people. Option (b) is wrong because buildings, infrastructure and machines are physical capital. Option (c) is wrong because the size of the working-age population is a demographic fact, the basis of the demographic dividend.
Notice India's examples of social capital: the women's SHG movement under DAY-NRLM (over 9 crore members), Kerala's Kudumbashree, and the cooperative model of Amul.
option (a) is about people too. Skills sit in individuals (human capital); trust sits between them (social capital).
Answer as per the official UPSC answer key.
Which of the following is not included in the assets of a commercial bank in India?
Answer (b) & explanation
Deposits are not a bank's asset (b). A bank's deposits belong to its customers, and the bank must repay them on demand or when due. So they are a liability on the bank's balance sheet, along with capital and borrowings. Advances (a), meaning loans to customers, earn interest and are the bank's main asset. Investments (c) in government securities and bonds, including those held for the SLR, are also assets. Money at call and short notice (d) is money lent to other banks for very short periods, from one day to two weeks, and is an asset.
Notice the related ratios: the CRR (cash kept with the RBI) and SLR (liquid assets kept by banks). Both are worked out as a share of deposits, the bank's net demand and time liabilities.
deposits feel like the bank's money. For the bank, they are money owed.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.
- 2. In terms of PPP dollars, India is the sixth largest economy in the world.
Which of the statements given above is/are correct?
Answer (a) & explanation
Only statement 1 is correct (a). Purchasing Power Parity (PPP) exchange rates compare what the same basket of goods and services costs in different countries. This removes differences in price levels, so a rupee buys more in India than its market value in dollars suggests. Statement 2 is wrong because, by PPP, India is the world's third-largest economy, after China and the USA. Sixth was India's rank at market exchange rates around 2018.
PPP figures come from the World Bank's International Comparison Program, whose 2021 round was released in 2024. Notice India's rise at market rates: it became the fourth-largest economy in 2025, passing Japan, and aims to pass Germany soon. Per person, though, India still ranks low, around 125th by PPP.
the "sixth" was a real rank, but at market exchange rates. PPP lifts India much higher.
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Answer as per the official UPSC answer key.