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.

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Indian Economy and Policy Questions

Multiple choice

The object of Alauddin Khalji economic regulations was mainly

  1. to encourage trade

  2. to maintain a strong army

  3. to punish shopkeepers

  4. the welfare of the people
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Alauddin Khalji's economic regulations (price control, market supervision, grain rationing) were primarily designed to maintain a large, well-fed standing army at reduced cost. By controlling prices of essential commodities, he could pay soldiers lower salaries while ensuring their basic needs were met. This wasn't about encouraging trade, public welfare, or punishing shopkeepers - it was military logistics strategy.

Multiple choice

In India the principal source of a state's revenue is

  1. gain from government companies/enterprises

  2. from taxes and loans

  3. grants/foreign aid from other countries

  4. none of these

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Indian states primarily derive their revenue from taxes (state GST, VAT, stamp duty, land revenue) and loans (market borrowings, central loans). These constitute the major sources of state government income for funding development and welfare programs.

Multiple choice

Which of the following statement correctly defines the term 'drain theory' as propouned by Dadabhai Naoroji?

  1. That the resources of the country were being utilized in the interest of Britain.

  2. That a part of India's national wealth or total annual product was being exported to Britain for which India got no material returns.

  3. That the British industrialists were being given an opportunity to invest in India under the protection of the imperial power.

  4. That the British goods were being imported to the country making it poorer day by day.

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

Dadabhai Naoroji's Drain Theory argued that Britain was systematically draining India's wealth through various mechanisms - excessive taxation, unfair trade practices, and drain of resources to Britain without economic return. While Option A captures the essence of this exploitation, Option B is technically more precise in defining the drain mechanism. Option A is acceptable as it correctly identifies the core concept.

Multiple choice

The government had set up a committee under the Chairmanship of economist Dr. Rakesh Mohan for its advice on which of the following?

  1. Capital Account Convertibility

  2. Recapitalisation of public sector banks

  3. National Transport policy

  4. FDI in retail

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

The Rakesh Mohan Committee (formed in 2010) was specifically constituted to advise the government on developing a comprehensive National Transport Policy. This committee was tasked with addressing infrastructure bottlenecks across road, rail, air, and water transport. Dr. Rakesh Mohan was a noted economist and former Deputy Governor of RBI.

Multiple choice

Directions: Choose the correct option for the given question.

Which of the following statements is not correct?

  1. Working capital is made available by the banks to the export sector at subsidized rates of interest.

  2. Market Development Fund provides the necessary financial assistance for market promotion.

  3. Export Houses/Star Trading houses are granted additional license against exports made during the preceding year.

  4. Export profits enjoy a variety of tax concessions in India.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The statement about Export Houses/Star Trading Houses receiving 'additional license against exports made during the preceding year' is incorrect. Export licenses are typically granted based on current or projected export performance, not exports from the previous year. The other statements are accurate: working capital is subsidized for exporters, Market Development Fund assists with promotion, and export profits receive tax concessions.

Multiple choice

Consider the following reasons of continuous decline in average landholding size in India

  1. Law of inheritance
  2. Consolidation
  3. Farm mechanisation
  4. Desire of land ownership Pick the correct answer from the options given below:

  1. 1, 2, 3 and 4

  2. 1, 3 and 4

  3. 1 and 4

  4. 1 and 2
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Fragmentation of landholdings occurs primarily due to the law of inheritance (land divided among heirs) and the cultural desire for land ownership. Consolidation (2) actually increases average holding size by merging small plots. Farm mechanization (3) can encourage consolidation to make machines economically viable, rather than reducing holdings.

Multiple choice

The Govt. of India has announced a Rs.14,000 crore help package to exporters. Why exporters need a help of such nature?

  1. Rupee is appreciating sharply

  2. Few consignments of exports were destroyed by terrorists

  3. China has reduced its VAT rates hence its products have become cheaper for importers

  4. It was done to promote exports to SAARC member nations

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

When the rupee appreciates sharply against foreign currencies, Indian exports become more expensive for international buyers, making them less competitive in global markets. A Rs.14,000 crore package would be a government stimulus to help offset this disadvantage. The other options - terrorism damage, China's VAT rates, or SAARC promotion - are not the primary economic reasons for such export assistance.

Multiple choice

Why does the writer suggest that India needs an industrial revolution along with another green revolution?

Directions: Read the given passage carefully and choose the best answer to the question out of the four alternatives.

Economic activity in India has one foot in the past and is poised to step forward into the future. Currently it seems that India prefers to grow crops and selling services rather than making and manufacturing goods. As it stands, manufacturing is about 15% of India’s output which is far below the norms of other Asian countries. India needs a big manufacturing base, especially because there is nothing else which will likely hire 250 million youngsters who are set to reach working age in the next 15 years. Mahatma Gandhi once complained that India was engaged in reckless industrialization, but this is exactly what India needs to compete with its neighbors. Along with another green revolution, an industrial revolution within India will be very beneficial for the country. The brain drain, in which educated Indians are leaving the country, is a symptom not only of an exploding population, but also of a very weak economy. The Indian government needs to provide a cure by promoting competition among companies and regulation in order to curtail corruption.

  1. It will bring reckless industrialization.

  2. It will be very beneficial for India.

  3. It will provide a cure for India’s weak economy.

  4. It will provide jobs for many youngsters.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  1. Incorrect – The writer is suggesting this, but along with a green revolution. This, however is not the reason, which is that it will be very beneficial for India.
    2. Correct – This is the reason why the writer is suggesting this. It will be beneficial for India.
    3. Incorrect – This might be true, but this is not the reason. The reason is that it will be very beneficial for India.
    1. Incorrect – This might be true, but this is not the reason. The reason is that it will be very beneficial for India.
Multiple choice

Why did the writer say that economic activity in India has one foot in the past?

Directions: Read the given passage carefully and choose the best answer to the question out of the four alternatives.

Economic activity in India has one foot in the past and is poised to step forward into the future. Currently it seems that India prefers to grow crops and selling services rather than making and manufacturing goods. As it stands, manufacturing is about 15% of India’s output which is far below the norms of other Asian countries. India needs a big manufacturing base, especially because there is nothing else which will likely hire 250 million youngsters who are set to reach working age in the next 15 years. Mahatma Gandhi once complained that India was engaged in reckless industrialization, but this is exactly what India needs to compete with its neighbors. Along with another green revolution, an industrial revolution within India will be very beneficial for the country. The brain drain, in which educated Indians are leaving the country, is a symptom not only of an exploding population, but also of a very weak economy. The Indian government needs to provide a cure by promoting competition among companies and regulation in order to curtail corruption.

  1. Because India prefers to grow crops and sell services.

  2. Because India would rather manufacture goods.

  3. Because India’s manufacturing is 15% of output.

  4. India’s output is far below the norms of other Asian countries.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  1. Correct – This is the reason. India prefers to grow crops and sell services.
    2. Incorrect- The passage states that India prefers to grow crops and sell service, not that it would rather manufacture goods. Hence, this is incorrect.
    3. Incorrect – The passage states this, but this is not the reason. The reason is that India prefers to grow crops and sell services.
    1. Incorrect – This is true according to the passage, but this is not the reason. The reason is that India prefers to grow crops and sell services.
Multiple choice

People are leaving the country not just because of its huge population, but because

Directions: Read the given passage carefully and choose the best answer to the question out of the four alternatives.

Economic activity in India has one foot in the past and is poised to step forward into the future. Currently it seems that India prefers to grow crops and selling services rather than making and manufacturing goods. As it stands, manufacturing is about 15% of India’s output which is far below the norms of other Asian countries. India needs a big manufacturing base, especially because there is nothing else which will likely hire 250 million youngsters who are set to reach working age in the next 15 years. Mahatma Gandhi once complained that India was engaged in reckless industrialization, but this is exactly what India needs to compete with its neighbors. Along with another green revolution, an industrial revolution within India will be very beneficial for the country. The brain drain, in which educated Indians are leaving the country, is a symptom not only of an exploding population, but also of a very weak economy. The Indian government needs to provide a cure by promoting competition among companies and regulation in order to curtail corruption.

  1. the population is exploding

  2. they are suffering from brain drain

  3. they cannot curtail corruption

  4. the country’s economy is weak
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  1. Incorrect – This is said in the question nor is this a reason. The reason is because of the country’s weak economy.
    2. Incorrect – This is not the reason. The reason is because of the country’s weak economy.
    3. Incorrect – This is not the reason. The reason is because of the country’s weak economy.
    1. Correct – This is a reason why people are leaving India. It is because of the country’s weak economy.
Multiple choice

What does the writer mean by “the brain drain”?

Directions: Read the given passage carefully and choose the best answer to the question out of the four alternatives.

Economic activity in India has one foot in the past and is poised to step forward into the future. Currently it seems that India prefers to grow crops and selling services rather than making and manufacturing goods. As it stands, manufacturing is about 15% of India’s output which is far below the norms of other Asian countries. India needs a big manufacturing base, especially because there is nothing else which will likely hire 250 million youngsters who are set to reach working age in the next 15 years. Mahatma Gandhi once complained that India was engaged in reckless industrialization, but this is exactly what India needs to compete with its neighbors. Along with another green revolution, an industrial revolution within India will be very beneficial for the country. The brain drain, in which educated Indians are leaving the country, is a symptom not only of an exploding population, but also of a very weak economy. The Indian government needs to provide a cure by promoting competition among companies and regulation in order to curtail corruption.

  1. Youngsters are leaving the country.

  2. Educated people are leaving India.

  3. Exploding population is making people leave India.

  4. The weak economy is making people leave India.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  1. Incorrect - This is not what is meant by brain drain. What is meant is that educated people are leaving the country.
    2. Correct - This is what the writer means by “brain drain”, that educated people are leaving the country.
    3. Incorrect - This is not what is meant by brain drain. What is meant is that educated people are leaving the country.
    1. Incorrect - This is not what is meant by brain drain. What is meant is that educated people are leaving the country.

Multiple choice

The Indian government needs to

Directions: Read the given passage carefully and choose the best answer to the question out of the four alternatives.

Economic activity in India has one foot in the past and is poised to step forward into the future. Currently it seems that India prefers to grow crops and selling services rather than making and manufacturing goods. As it stands, manufacturing is about 15% of India’s output which is far below the norms of other Asian countries. India needs a big manufacturing base, especially because there is nothing else which will likely hire 250 million youngsters who are set to reach working age in the next 15 years. Mahatma Gandhi once complained that India was engaged in reckless industrialization, but this is exactly what India needs to compete with its neighbors. Along with another green revolution, an industrial revolution within India will be very beneficial for the country. The brain drain, in which educated Indians are leaving the country, is a symptom not only of an exploding population, but also of a very weak economy. The Indian government needs to provide a cure by promoting competition among companies and regulation in order to curtail corruption.

  1. promote competition among companies

  2. promote regulation among companies

  3. curtail corruption among companies

  4. promote competition and regulation among companies
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  1. Incorrect - This is true, but this is just part of what India needs. It also needs to promote regulation in order to curtail corruption.
    2. Incorrect - This is true, but this is just part of what India needs. It also needs to promote competition among companies.
    3. Incorrect - This is true, but this is just part of what India needs. It needs to promote competition and regulation among companies. The regulation will curtail corruption.
    1. Correct - This is what India needs. It needs to promote both competition and regulation among companies.

Multiple choice

Why does the writer say that India embraced a system of socialism?

Directions: Read the given passage carefully and choose the best answer to the question out of the four alternatives.

To a large degree, India embraced a system of socialism at the time it became Independent from the British. This system still continues today. Currently we find government-run or state-run companies and other organizations. Despite this, throughout the world, socialism has proven to be unsuccessful and has come to an end in many countries which have adopted it. While free market economies are certainly not problem-free, it is acknowledged that things are not equal. This inequality is certain, but rather than trying to remove it, working against it is more successful. In the recent past, the average yearly income for an Indian citizen has been steadily improving since 1980. This is a good sign for India and its economy.

  1. Because it is the system India adopted.

  2. Because India has government-run companies and organizations.

  3. Because socialism has been successful throughout the world.

  4. Because socialism has failed throughout the world.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  1. Incorrect – This is true, but this is not the reason. The reason is that India has government run companies and organizations.
    2. Correct – This is the reason. India has government-run companies and organizations.
    3. Incorrect – The passage states the opposite nor is this the reason. The reason is that India has government-run companies and organizations.
    1. Incorrect – The passage states this, but this is not the reason. The reason is that India has government-run companies and organizations.
Multiple choice

India does not import which of the following?

  1. Inorganic chemicals

  2. Petroleum products

  3. Chemicals and allied products

  4. Fertilisers

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

This is the correct answer as 24.04% of exports from India account for chemicals and allied products.