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.
In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?
- 1. The foreign currency earnings of India's IT sector
- 2. Increasing the government expenditure
- 3. Remittances from Indians abroad
Select the correct answer using the code given below.
Answer (b) & explanation
Statements 1 and 3 are correct (b). A currency crisis happens when a country runs short of foreign exchange to pay for imports and debts, and its currency crashes. IT and services exports (1) bring in large, steady dollar earnings; India's services exports are over $380 billion a year. Remittances (3) from Indians abroad add to this: India is the world's largest recipient, at about $135 billion in 2024–25. Statement 2 is wrong because higher government spending raises the fiscal deficit and demand for imports, which adds to the risk instead of reducing it.
Notice the history: India's 1991 crisis, when reserves fell to about two weeks of imports and gold was pledged. This led to the LPG reforms.
Answer as per the official UPSC answer key.
With reference to the cultivation of Kharif crops in India in the last five years, consider the following statements :
- 1. Area under rice cultivation is the highest.
- 2. Area under the cultivation of jowar is more than that of oilseeds.
- 3. Area of cotton cultivation is more than that of sugarcane.
- 4. Area under sugarcane cultivation has steadily decreased.
Which of the statements given above are correct?
Answer (a) & explanation
Statements 1 and 3 are correct (a). Statement 1 is right because rice covers about 40 million hectares in kharif, the largest area of any crop. Statement 3 is right because cotton, at about 12–13 million hectares, covers much more land than sugarcane, at about 5 million hectares. Statement 2 is wrong because kharif oilseeds, mainly soybean and groundnut, cover about 19 million hectares, far more than jowar, which has been shrinking. Statement 4 is wrong because the sugarcane area rises and falls with prices and rain; it has not fallen steadily.
Notice the policy push: the National Mission on Edible Oils (oil palm in 2021, oilseeds in 2024) aims to cut import dependence. Millets, including jowar, got a boost from the International Year of Millets (2023).
Answer as per the official UPSC answer key.
Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?
Answer (d) & explanation
A Participatory Note is used (d). A P-Note is an offshore derivative instrument issued by a SEBI-registered Foreign Portfolio Investor. Its value is tied to Indian shares or bonds. This lets an overseas investor gain from the Indian market without registering with SEBI directly. A Certificate of Deposit (a) is a short-term deposit issued by banks. Commercial Paper (b) is short-term unsecured debt issued by companies. A Promissory Note (c) is a written promise to pay money.
Because P-Notes can hide the real owner, they raise concerns about round-tripping and black money. Notice that SEBI has tightened KYC and disclosure rules. The Hindenburg–Adani row (2023) brought offshore fund ownership into the news again.
Answer as per the official UPSC answer key.
Among the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
Answer (d) & explanation
Vegetable oils lead India's farm imports (d). Edible oils are India's biggest agricultural import by value, often $15–20 billion a year. India imports about 55–60% of the edible oil it uses: palm oil from Indonesia and Malaysia, soybean oil from Argentina and Brazil, and sunflower oil from Russia and Ukraine. Pulses (c) come a distant second, mainly from Canada, Australia, Myanmar and Africa. Fresh fruits (b), such as apples and dates, and spices (a) are much smaller imports; India is in fact a major spice exporter.
Notice the policy response: the National Mission on Edible Oils – Oil Palm (2021) and – Oilseeds (2024), which aim to raise home output, and changing import duties on crude edible oils to balance farmers' and consumers' interests.
Answer as per the official UPSC answer key.
With reference to land reforms in independent India, which one of the following statements is correct?
Answer (b) & explanation
Option (b) is correct. After independence, land reforms aimed to give land to the tiller and the landless. The steps were abolishing zamindari and other intermediaries, tenancy reform, fixing ceilings on holdings and giving surplus land to the landless. Option (a) is wrong because ceilings were first fixed on individual holdings, and the 1972 national guidelines shifted them to family holdings. Option (c) is wrong because cash crops did not become the main form of farming because of land reforms. Option (d) is wrong because plantations, orchards, religious trusts and some efficient farms were exempted from ceilings, which weakened the reform.
Notice the success stories: Kerala and West Bengal's Operation Barga (1978). Land reform laws were placed in the Ninth Schedule to protect them from court challenges.
Answer as per the official UPSC answer key.
With reference to India's Five-Year Plans, which of the following statements is/are correct?
- 1. From the Second Five-Year Plan, there was a determined thrust towards substitution of basic and capital good industries.
- 2. The Fourth Five-Year Plan adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power.
- 3. In the Fifth Five-Year Plan, for the first time, the financial sector was included as an integral part of the Plan.
Which of the statements given above is/are correct?
Answer (a) & explanation
Statements 1 and 2 are correct (a). Statement 1 is right because the Second Plan (1956–61), based on the Mahalanobis model, pushed heavy industries and capital goods to replace imports. Steel plants at Bhilai, Durgapur and Rourkela came then. Statement 2 is right because the Fourth Plan (1969–74) aimed at "growth with stability" and progress towards self-reliance, and sought to reduce the concentration of wealth and economic power. Bank nationalisation (1969) and the MRTP Act (1969) fit this aim. Statement 3 is wrong because the financial sector became an integral part of the Plan only in the Eighth Plan (1992–97), after the 1991 reforms.
The Twelfth Plan (2012–17) was the last. Notice that NITI Aayog replaced the Planning Commission in 2015.
Answer as per the official UPSC answer key.
Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
Answer (d) & explanation
An expansionary monetary policy is not a likely measure (d). To support a falling rupee, the government and the RBI try to reduce dollar outflows and attract inflows. Curbing non-essential imports and promoting exports (a) cut demand for dollars. Masala bonds (b), issued abroad in rupees, bring in foreign money without currency risk for the borrower. Easing external commercial borrowing rules (c) lets companies bring in foreign loans. An expansionary monetary policy lowers interest rates, which pushes foreign money out and raises inflation, weakening the rupee further.
The RBI also sells dollars from its reserves to steady the rupee. Notice the push for rupee trade settlement (2022) and Special Rupee Vostro Accounts to reduce dependence on the dollar.
Answer as per the official UPSC answer key.
The Global Competitiveness Report is published by the
Answer (c) & explanation
The World Economic Forum published it (c). The WEF, based in Geneva and known for its Davos meeting, brought out the Global Competitiveness Report, which ranked countries on 12 pillars such as institutions, infrastructure and innovation. It was paused after 2019 because of COVID. The WEF also publishes the Global Gender Gap Report and the Global Risks Report. The IMF (a) publishes the World Economic Outlook, UNCTAD (b) the World Investment Report, and the World Bank (d) the World Development Report and the now-discontinued Ease of Doing Business rankings, replaced by B-READY.
India ranked 68th in the 2019 report. Notice that India ranked 131st in the WEF's Gender Gap Report 2025, a frequent Prelims topic.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
- 2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
- 3. As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.
Which of the statements given above is/are correct ?
Answer (c) & explanation
Statements 1 and 3 are correct (c). The N. K. Singh FRBM Review Committee (2017) suggested a general government debt limit of 60% of GDP by 2023: 40% for the Centre and 20% for the States (1). It also proposed a fiscal council. Statement 2 is wrong because it reverses the numbers. The Centre's liabilities are far larger, about 49% of GDP, against about 21% for the States. Statement 3 is right because, under Article 293(3), a State that owes money to the Centre needs the Centre's consent to borrow.
Kerala challenged the Centre's borrowing limits in the Supreme Court in 2024, and the case went to a Constitution Bench. Notice that the Centre now aims for a debt-to-GDP ratio of about 50% by 2031.
statement 2 has the right numbers in the wrong places.
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Answer as per the official UPSC answer key.
Consider the following statements :
Human capital formation as a concept is better explained in terms of a process which enables
- 1. individuals of a country to accumulate more capital.
- 2. increasing the knowledge, skill levels and capacities of the people of the country.
- 3. accumulation of tangible wealth.
- 4. accumulation of intangible wealth.
Which of the statements given above is/are correct ?
Answer (c) & explanation
Statements 2 and 4 are correct (c). Human capital formation is the process of adding to people's knowledge, skills, health and abilities through education, training, health care and migration (2). These skills cannot be seen or touched and cannot be sold separately from the person, so they count as intangible wealth (4). Building up ordinary capital (1) or tangible wealth (3), such as machines and buildings, is physical capital formation.
The NCERT Economics textbook uses this exact framing. Notice how India invests in human capital: NEP 2020, Skill India, and Ayushman Bharat. Economists such as T. W. Schultz and Gary Becker showed that spending on people brings returns just like spending on machines.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The quantity of imported edible oils is more than the domestic production of edible oils in the last five years.
- 2. The Government does not impose any customs duty on all the imported edible oils as a special case.
Which of the statements given above is/are correct ?
Answer (a) & explanation
Only statement 1 is correct (a). India is the world's largest importer of edible oil. It imports about 55–60% of what it uses, which is more than it produces at home (1). Most imports are palm oil from Indonesia and Malaysia, and soybean and sunflower oil from Argentina, Brazil, Russia and Ukraine. Statement 2 is wrong because the government changes customs duty on crude and refined edible oils often, lowering it when prices rise and raising it to protect farmers. It has never exempted all edible oils from duty as a fixed rule.
Notice the self-reliance schemes: the National Mission on Edible Oils – Oil Palm (2021), focused on the northeast and Andaman, and NMEO–Oilseeds (2024), which aims to make India more self-reliant by 2030–31.
"all" in statement 2. Duties on some oils are cut at times, never on all as a fixed policy.
Answer as per the official UPSC answer key.
Despite being a high saving economy, capital formation may not result in significant increase in output due to
Answer (d) & explanation
A high capital-output ratio is the reason (d). The capital-output ratio, or ICOR (incremental capital-output ratio), is how much investment is needed to raise output by one unit. If it is high, a lot of saving and investment produces only a little extra output. This happens when capital is used inefficiently, when projects take years to finish, or when money is locked in idle capacity. Weak administration (a), illiteracy (b), and population density (c) may matter, but this is the direct economic reason.
The Harrod–Domar model says growth = savings rate ÷ ICOR, and it shaped India's early Five-Year Plans. Notice India's ICOR of about 4 today. The Economic Survey often warns that it needs to come down.
Answer as per the official UPSC answer key.
Increase in absolute and per capita real GNP do not connote a higher level of economic development, if
Answer (c) & explanation
GNP growth is not development if poverty and unemployment rise (c). Growth is a rise in output. Development means a better life for most people: less poverty, more jobs, and better health and education. If GNP and even per capita GNP rise while poverty and unemployment increase, the gains have gone to a few, and the economy has grown without developing. Options (a) and (b) describe changes in the structure of output, and (d) describes trade, not people's welfare.
This is why UNDP's Human Development Index (1990, Mahbub ul Haq and Amartya Sen) looks at health, education and income. Notice the related ideas: "jobless growth", inequality measured by the Gini coefficient, and the Multidimensional Poverty Index used by NITI Aayog.
Answer as per the official UPSC answer key.
Which one of the following links all the ATMs in India ?
Answer (c) & explanation
The NPCI links all ATMs in India (c). The National Financial Switch (NFS), run by the NPCI, connects the ATMs of all banks, so a card from one bank can be used at another bank's ATM. The IDRBT started the NFS in 2004, and it moved to NPCI in 2009. The Indian Banks' Association (a) is an industry lobby group. NSDL (b) is a securities depository for shares and bonds. The RBI (d) regulates payments but does not run the ATM switch.
NPCI also runs UPI, RuPay, IMPS, NACH, AePS, FASTag and BBPS. Notice the RBI's ATM rules: limited free transactions per month, plus interchange fees paid by the card's bank to the ATM owner, which were raised in 2025.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
- 2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
- 3. Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct ?
Answer (c) & explanation
Statements 2 and 3 are correct (c). Statement 1 is wrong because the RBI manages public debt for the Centre by law (RBI Act, Section 21) and for State Governments by agreement (Section 21A). It auctions their State Development Loans (SDLs). Statement 2 is right because Treasury Bills are issued only by the Centre. States raise short-term money through other means, such as Ways and Means Advances. Statement 3 is right: T-bills are zero-coupon instruments sold at a discount and repaid at face value, and the difference is the investor's return.
Today's T-bills come in 91, 182 and 364-day maturities. Notice the RBI Retail Direct platform (2021), which lets ordinary people buy G-secs and T-bills directly.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
- 2. CAR is decided by each individual bank.
Which of the statements given above is/are correct ?
Answer (a) & explanation
Only statement 1 is correct (a). Capital Adequacy Ratio (CAR), also called CRAR, is a bank's own capital as a share of its risk-weighted assets. It is the cushion that absorbs losses when borrowers fail to repay (1). Statement 2 is wrong because the RBI sets it, not each bank, following the Basel III norms. Indian banks must hold 9%, plus a capital conservation buffer of 2.5%, which is stricter than Basel's 8%. Big D-SIBs like SBI, HDFC Bank and ICICI must hold extra capital.
Capital is split into Tier 1 (equity and reserves) and Tier 2 (some bonds). Notice the RBI's Prompt Corrective Action framework, which restricts banks whose CAR or NPAs cross set limits.
Answer as per the official UPSC answer key.
With reference to the circumstances in Indian agriculture, the concept of "Conservation Agriculture" assumes significance. Which of the following fall under the Conservation Agriculture?
- 1. Avoiding the monoculture practices
- 2. Adopting minimum tillage
- 3. Avoiding the cultivation of plantation crops
- 4. Using crop residues to cover soil surface
- 5. Adopting spatial and temporal crop sequencing/crop rotations
Select the correct answer using the code given below :
Answer (c) & explanation
Practices 2, 4 and 5 are correct (c). The FAO defines conservation agriculture by three principles: minimum soil disturbance, such as zero or minimum tillage (2); permanent soil cover using crop residues or cover crops (4); and crop diversification through rotation and sequencing in space and time (5). Statement 3 is wrong because nothing in it forbids plantation crops. Statement 1 is a trap: less monoculture is a result, but the actual named practice is crop rotation, so the key leaves it out.
Notice India's use: the Happy Seeder and zero-till drills in Punjab and Haryana sow wheat straight into rice stubble. This cuts stubble burning, a major cause of Delhi's winter smog.
Answer as per the official UPSC answer key.
With reference to the provisions made under the National Food Security Act, 2013, consider the following statements :
- 1. The families coming under the category of 'below poverty line (BPL)' only are eligible to receive subsidised food grains.
- 2. The eldest woman in a household, of age 18 years or above, shall be the head of the household for the purpose of issuance of a ration card.
- 3. Pregnant women and lactating mothers are entitled to a 'take-home ration' of 1600 calories per day during pregnancy and for six months thereafter.
Which of the statements given above is/are correct ?
Answer (b) & explanation
Only statement 2 is correct (b). Statement 1 is wrong because the National Food Security Act, 2013 covers up to 75% of rural and 50% of urban people, far more than the BPL list. Priority households get 5 kg of grain per person per month, and Antyodaya families get 35 kg per household. Statement 2 is right because the eldest woman aged 18 or above is the head of the household for the ration card. Statement 3 is wrong because pregnant women and nursing mothers get a free meal or take-home ration of about 600 calories a day, not 1,600, plus a maternity benefit of at least ₹6,000.
Since January 2024, grain under PMGKAY is free for five years. Notice the One Nation One Ration Card scheme, which lets ration cards be used anywhere in India.
the 1600 figure. The real norm is 600 calories plus 18-20 g of protein.
Answer as per the official UPSC answer key.
With reference to Pradhan Mantri Kaushal Vikas Yojana, consider the following statements :
- 1. It is the flagship scheme of the Ministry of Labour and Employment.
- 2. It, among other things, will also impart training in soft skills, entrepreneurship, financial and digital literacy.
- 3. It aims to align the competencies of the unregulated workforce of the country to the National Skill Qualification Framework.
Which of the statements given above is/are correct ?
Answer (c) & explanation
Statements 2 and 3 are correct (c). Statement 1 is wrong because PMKVY, launched in 2015, is the flagship scheme of the Ministry of Skill Development and Entrepreneurship (MSDE), not the Labour Ministry. It is run through the National Skill Development Corporation (NSDC). Statement 2 is right because, besides trade skills, it trains people in soft skills, entrepreneurship, and financial and digital literacy. Statement 3 is right because its Recognition of Prior Learning (RPL) part tests and certifies informal workers against the National Skills Qualifications Framework (NSQF).
The scheme is now in PMKVY 4.0, with a focus on new-age skills such as AI, drones and coding. Notice the related Skill India Digital Hub and the PM Vishwakarma scheme (2023) for traditional artisans.
"Labour and Employment" sounds right for a jobs scheme. Skilling has had its own ministry since 2014.
Answer as per the official UPSC answer key.
Consider the following statements :
- 1. In India, State Governments do not have the power to auction non-coal mines.
- 2. Andhra Pradesh and Jharkhand do not have gold mines.
- 3. Rajasthan has iron ore mines.
Which of the statements given above is/are correct ?
Answer (d) & explanation
Only statement 3 is correct (d). Statement 1 is wrong because, under the MMDR Act, State Governments own and auction most non-coal mineral blocks. The 2015 amendment made auctions compulsory. The 2023 amendment let the Centre auction critical minerals, such as lithium and REEs. Statement 2 is wrong because Jharkhand has gold at Parasi and Lawa, and Andhra Pradesh has gold at Chigargunta and Ramagiri. Statement 3 is right because Rajasthan has iron ore in Jaipur, Jhunjhunu (Dabla–Singhana) and Udaipur.
Karnataka's Hutti is India's main working gold mine. Notice the newer resources: lithium found in Reasi, J&K (2023), and the National Critical Mineral Mission (2025), which looks for these minerals at home and abroad.
Answer as per the official UPSC answer key.