Economics · Banking Financial Awareness

Indian Economy and Policy

1,777 Questions

Indian economy and policy questions cover the structural dynamics and regulatory measures shaping the national market. Topics include foreign direct investment, taxation reforms, and government initiatives for growth. This section is highly relevant for competitive exams requiring economic awareness.

Foreign direct investmentGST impactEconomic reformsTrade policyGovernment economic initiatives

Indian Economy and Policy Questions

Multiple choice

What factors led to the formulation of India's Look West Policy?

  1. Decisive failure of India's Look East Policy
  2. The prospect of the Gulf region becoming a major economic power house
  3. High proportion of NRI population (almost 4 million) living in the gulf region
  4. To minimize Pakistan's influence in the Gulf

  1. 1, 2 and 3

  2. 2 and 3 only

  3. 1, 3 and 4

  4. 2, 3 and 4
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

India has had its eye on Central Asia for a long time. Its primary interests there are in energy, minimizing Pakistan's influence and establishing itself as a significant player in the interplay of outside powers that is taking shape. As a convergent measure taking care of all these interest and concerns, India launched its Look West Policy. Note: India's Look East Policy was a success. The Look East Policy recognizes South-East Asia and East Asia, especially the regional organization ASEAN as central to India's policy in the Asia-Pacific.

Multiple choice

In which of the following activities is the Foreign Direct Investment in India not allowed?

  1. Real estate business
  2. Rubber plantation
  3. Manufacturing of cigarette
  4. Business of chit fund
  5. Nidhi company

  1. Only 2

  2. 2, 4 and 5

  3. Only 5

  4. 1, 2, 3, 4 and 5
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

FDI in India is prohibited in the following areas:

  • Business of chit fund
  • Nidhi company (a non-banking finance company)
  • Real estate business (business dealing in land and immovable property with a view of earning profit or earning income there from and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships) or construction of farm houses
  • Trading in Transferable Development Rights (TDRs)
  • Retail Trading (except single brand product retailing)
  • Atomic Energy
  • Lottery business including government/private lottery, online lotteries, etc.
  • Gambling and betting including casinos, etc.
  • Activities/sectors not opened to private sector investment
  • Agriculture (excluding floriculture, horticulture, development of seeds, animal husbandry, pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and plantations (other than tea plantations)
  • Manufacturing of cigars, cheroots, cigarillos and cigarettes of tobacco or of tobacco substitutes, though distribution is allowed
Partnership firms/proprietorship concerns having investments as per FEMA regulations are not allowed to engage in print media sector.

Multiple choice

India is taking several steps to promote exports mainly because

  1. it will provide freight for India ships

  2. it will reduce the trade deficit

  3. it will enable exporters to make profit

  4. it will provide makers for local produce
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

India promotes exports primarily to reduce its trade deficit. A trade deficit occurs when a country's imports exceed its exports. By boosting exports, India can earn more foreign exchange, reduce the deficit, improve its balance of payments, and strengthen the economy. Export promotion also helps domestic industries grow and create jobs.

Multiple choice

What is ‘Open sky scheme’?

  1. Tax free policy for importers

  2. Free economy policy for boosting up FDI inflows

  3. Export promotion scheme of Civil Aviation Ministry

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

  Option 3 is the correct answer.

Multiple choice

The main reason for low growth rate in India, in spite of high rate of savings and capital formation, is

  1. high birth rate

  2. low level of foreign aid

  3. low capital output ratio

  4. high capital output ratio
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The capital output ratio is used to produce an output over a period of time. This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output. Hence, the resulting capital output ratio is low.

Multiple choice

In September 2016, the Union Cabinet has given its approval for simplification and liberalisation of the Foreign Direct Investment (FDI) Policy, 2016 in various sectors announced in June, 2016. In which of the following sectors was FDI allowed under 100%?

  1. Animal Husbandry

  2. Civil Aviation Sector

  3. Private Security Agencies

  4. Food Products manufactured or produced in India

  5. Pharmaceutical Sector
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the September 2016 FDI liberalization, Private Security Agencies became one of the sectors where 100% FDI was allowed under the automatic route. Other sectors mentioned had different FDI caps: Civil Aviation (49% except regional), Food Products (100% for products manufactured/produced in India), while Animal Husbandry and Pharmaceuticals had stricter norms with FDI caps or government approval routes.

Multiple choice

Economic liberalisation in India started with

  1. substantial changes in the Industrial Licensing Policy

  2. the convertibility of the Indian Rupee

  3. doing away with the procedural formalities for Foreign Direct Investment

  4. significant reduction in the tax rates
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Economic liberalisation in India started with industrial de-licensing.

Multiple choice

In the context of independent India’s economy, which one of the following was the earliest event to take place?

  1. Nationalization of Insurance companies

  2. Nationalization of State Bank of India

  3. Enactment of Banking Regulation Act

  4. Introduction of First Five-Year Plan
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Nationalization of State Bank of India- 1955; Introduction of First Five-Year Plan- 1951; Enactment of Banking Regulation Act – 1949; Nationalization of Insurance Companies – 1955-56.

Multiple choice

GE (General Electric), the US based company, which held its Corporate Excellence Council (CEC) meeting in New Delhi on March 14-15, 2011, decided to invest $ 200 in India. Which is/are true about the investment of GE in India?

(I) Investment would be made in a phased manner. (II) In 1st phase, an investment of $50 million would be made of total investment.

  1. Only I

  2. Only II

  3. Both I and II

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Investment would be made in a phased manner and In 1st phase, an investment of $50 million would be made of total investment. Hence both I and II are correct.

Multiple choice

India earns maximum foreign exchange through the export of—

  1. Tea

  2. Jute

  3. coffee

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

While tea is a major export, gems and jewelry typically earn India the maximum foreign exchange. However, given the era of this question and the options provided, tea would have been a significant export commodity. The answer may be dated.

Multiple choice

Why did the inflow of fine Indian cotton began to decline in the British market?

  1. The quality of Indian cotton declined due to diseased plants and it affected the demand.

  2. The British cotton manufacture expanded with industrialisation.

  3. British industrialists pressurised the government to restrict cotton imports and protect local industries.

  4. All of the above

  5. Both 2 and 3
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

This is the correct answer as both expansion of industries in Britain and industrialists' demand to restrict cotton imports caused a decline in inflow of Indian cotton in the British markets.

Multiple choice

According to the passage, why does the textile industry hold importance to the economy?

Directions: Read the given passage carefully and answer the question that follows.

Since ancient times, India has been well known for its textile goods. During the colonial regime, the traditional textile industry of India had virtually decayed. However, in the early nineteenth century, the modern textile industry took birth in India when the first textile mill was established at Fort Gloster near Calcutta in 1818. It is among one of the industries which were earliest to come into existence in India. This industry provides one of the most basic needs of people and holds importance; maintaining sustained growth for improving the quality of life. It has an image of being a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing, which forms a major contribution to the country's economy. India's textile industry is one of the leading textile industries in the world.

  1. Because it helps in maintaining sustained growth for improving the quality of life

  2. Because it was decayed during the colonial times

  3. Because the textile industry was well-known since ancient times

  4. Because it is among the earliest industries to come into existence in India

  5. .
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is the correct answer.

Multiple choice

What does the passage mean by the phrase ‘self reliant industry’?

Directions: Read the given passage carefully and answer the questions that follow.

Since ancient times, India has been well known for its textile goods. During the colonial regime, the traditional textile industry of India had virtually decayed. However, in the early nineteenth century, the modern textile industry took birth in India when the first textile mill was established at Fort Gloster near Calcutta in 1818. It is among one of the industries which were earliest to come into existence in India. This industry provides one of the most basic needs of people and holds importance; maintaining sustained growth for improving the quality of life. It has an image of being a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing, which forms a major contribution to the country's economy. India's textile industry is one of the leading textile industries in the world.

  1. It has substantial value-addition at each stage of processing.

  2. It provides one of the most basic needs of people and holds importance.

  3. It takes care of production of raw materials to the delivery of finished products.

  4. It is one of the leading textile industries in the world.

  5. .
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is the correct answer as it explains how the industry is self reliant by completing tasks for a variety of tasks from production of raw materials to the delivery of finished goods.

Multiple choice

Which of the following options will be a suitable heading for the given passage?

Directions: Read the given passage carefully and answer the questions that follow.

Since ancient times, India has been well known for its textile goods. During the colonial regime, the traditional textile industry of India had virtually decayed. However, in the early nineteenth century, the modern textile industry took birth in India when the first textile mill was established at Fort Gloster near Calcutta in 1818. It is among one of the industries which were earliest to come into existence in India. This industry provides one of the most basic needs of people and holds importance; maintaining sustained growth for improving the quality of life. It has an image of being a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing, which forms a major contribution to the country's economy. India's textile industry is one of the leading textile industries in the world.

  1. Textile Industry in Ancient India

  2. The State of Textile Industry in India during Colonial Regime

  3. A Brief History of Textile Industry in Modern India

  4. Growth of the Textile Industry in Ancient India

  5. .
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is an appropriate heading for the given passage as the passage covers a brief history of the textile industry and its position and growth in modern India.