Indian Economy: UPSC Previous Year Questions (Prelims)
392 previous year UPSC Prelims Indian Economy questions are on this page, from 1996 to 2025, in 14 chapters. Banking Sector in India is the largest, followed by External Sector, Industry, Agriculture and Human Development. Recent papers favour statement-based questions on institutions, schemes and money and banking concepts. Filter by chapter to revise one area, or by year to see how a single paper tested the economy.
Explanations state facts as of the year each question was asked; words like “recently” refer to that year.
Showing 141–150 of 392 questions
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UPSC 2016Indian Economy · Banking Sector in India
Q141. The term ‘Core Banking Solution’ is sometimes seen in the news. Which of the following statements best describes/describe this term? 1. It is a network of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts. 2. It is an effort to increase RBI’s control over commercial banks through computerization. 3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank. Select the correct answer using the code given below.
Explanation
Statement 1 is correct: Core Banking Solution (CBS) is a centralized platform that connects all branches of a bank, allowing customers to access and manage their accounts from any branch, ATM, or online. It’s a software application that integrates various banking operations and provides a unified view of customer information. Statements 2 and 3 are incorrect:
The implementation of Core Banking Solutions is primarily driven by individual banks aiming to improve operational efficiency and customer service. Core Banking Solutions are unrelated to the processes of bank mergers or acquisitions. They are technological systems that enable centralized operations and do not pertain to the takeover procedures of banks with significant non-performing assets.
Additional insight:
Core Banking Solutions (CBS) is a centralized banking system that enables banks to handle their daily operations, such as deposit accounts, loan processing, fund transfers, and customer transactions, through one unified platform.With CBS, all bank branches are connected to a central database, allowing customers to access banking services easily, no matter which branch they use. This system supports real-time transaction processing and ensures that data is consistently updated across all branches. The Reserve Bank of India (RBI) uses E-kuber as its core banking solution, which was launched in 2012. E-kuber enables commercial banks to access their RBI current accounts anytime and from any location. It can be accessed via the internet or IN-FINET (Indian Financial Network), a secure network for member banks and financial institutions. INFINET serves as the communication backbone for the National Payments System.
UPSC 2016Indian Economy · Banking Sector in India
Q142. What is/are the purpose/purposes of the Marginal Cost of the Fund-Based Lending Rate (MCLR) announced by RBI? 1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances. 2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks. Select the correct answer using the code given below.
Explanation
MCLR is the lowest interest rate a bank can charge for loans. It helps banks calculate the minimum interest rate for different types of loans. The Reserve Bank of India (RBI) introduced the MCLR system on April 1, 2016, to make monetary policy transmission more effective and increase transparency in setting interest rates. It replaced the base rate system, which had been used since July 2010.
Statement 1 is correct: Bringing transparency in the methods followed by various banks for the determination of interest rate is one of the key objectives of MCLR regime. Before banks used various methods to set lending rates which lead to opacity and confusion for borrowers. MCLR introduced a standardized, transparent calculation method, requiring banks to disclose its components, helping borrowers better understand their loan rates.
Statement 2 is correct: By standardizing the methodology for calculating lending rates, the MCLR guidelines aim to ensure that interest rates are "fair" to Borrowers and Banks:
The transparent methodology prevents banks from arbitrarily charging high interest rates. The MCLR framework allows banks to factor in their actual cost of funds when determining lending rates, ensuring that they can maintain profitability.
UPSC 2016Indian Economy · Public Finance
Q143. There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit? 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalising subsidies 4. Reducing import duty Select the correct answer using the code given below.
Explanation
A budget deficit occurs when government expenses exceed revenue. It can be used as an indicator of the financial health of a country. It is a term more commonly used to refer to government spending and receipts rather than businesses or individuals. When a budget deficit occurs, it means that the current expenses surpass the income generated from regular operations. To correct its nation’s budget deficit, often referred to as a fiscal deficit, a government may cut back on certain expenditures or increase revenue-generating activities.
Statement 1 is correct: Reducing the revenue expenditure will certainly help in bridging the gap. Reducing revenue expenditure (such as government spending on salaries, interest payments, and subsidies) directly reduces the fiscal deficit. By controlling unproductive expenditure, the government can balance its budget more effectively.
Statement 2 is incorrect: Introducing new welfare schemes will most likely result in increasing expenditure and so will expanding industries which would require capital infusion. These steps will increase the budget deficit.
Statement 3 is correct: Rationalizing subsidies (for instance, by cutting unnecessary subsidies or targeting them better) can help reduce the fiscal deficit. Subsidies consume a significant portion of government revenue, and streamlining them would lead to savings.
Statement 4 is incorrect: Reducing import duties can reduce government revenue (as import duties are a source of income). This could increase the fiscal deficit if the loss in revenue isn’t compensated by other measures or increased economic activity.
UPSC 2016Indian Economy · Public Finance
Q144. Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc. 2. Loans received from foreign governments 3. Loans and advances granted to the States and Union Territories Select the correct answer using the code given below.
Explanation
Capital Budget consists of capital receipts (like disinvestment, borrowing, loans from public or foreign governments, Reserve Bank of India, etc) and capital expenditure (like expenditure on development of machinery, health facilities, etc). Capital budgeting implies setting targets for projects/schemes to ensure maximum profitability.
Statement 1 is correct: Capital Expenditure includes the expenditure on the acquisition of land, building, machinery, equipment, creating assets such as roads and hospitals, repayment of government borrowings.
Statement 2 is correct: Capital receipts components are Loan borrowings, disinvestments, funds received from the issue of shares or debentures, etc.
Statement 3 is correct: Loans, and advances by the central government to state and union territory governments, etc. are also included in the capital budget of the Government of India.
Additional insight:
The capital budget is divided into two parts i.e. capital receipts and capital expenditure. Capital Receipts: Capital receipts refer to incoming cash flows. They can be both non-debt and debt receipts. Loans from the general public, foreign governments and RBI form a major part of capital receipts. Capital Expenditure: Capital expenditure is the expenditure on the development of machinery, equipment, building, health facilities, acquisition of assets like land, research & development, education, etc.
UPSC 2016Indian Economy · Public Finance
Q145. With reference to ‘Financial Stability and Development Council’, consider the following statements: 1. It is an organ of NITI Aayog. 2. It is headed by the Union Finance Minister. 3. It monitors macroprudential supervision of the economy. Which of the statements given above is/are correct?
Explanation
Statement 1 is incorrect: The Financial Stability and Development Council (FSDC) was set up by the government in December 2010. It serves as the top forum for financial matters. The FSDC was established well before the NITI Aayog came into existence.
Statement 2 is correct: The Chairman of the Financial Stability and Development Council (FSDC) is the Union Finance Minister.
Statement 3 is correct: The Council monitors macro-prudential supervision of the economy, which includes functioning of large financial conglomerates.
Additional insight:
The Chairman of the Financial Stability and Development Council (FSDC) is the Union Finance Minister and its members include:
The heads of financial sector Regulators (RBI, SEBI, PFRDA & IRDAI) Finance Secretary and/or Secretary, Department of Economic Affairs, Secretary, Department of Financial Services, Chief Economic Adviser. The Council can invite experts to its meeting if required. Functions of the FSDC:
To improve inter-regulatory coordination, institu-tionalise financial sector development, and strengthen the system for preserving financial stability. To monitor macro-prudential supervision of the economy. It assesses the functioning of the large financial conglomerates.
Exam tip:
S1 and S2 itself contradicts, an organ of NITI and headed by FM, hence either is clearly false, eliminating options A and D. The name ""Financial stability" make the probability of S2 being true more.
UPSC 2016Indian Economy · External Sector of India
Q146. Consider the following statements: 1. New Development Bank has been set up by APEC. 2. The headquarters of New Development Bank is in Shanghai. Which of the statements given above is/are correct?
Explanation
Statement 1 is incorrect: The New Development Bank (NDB) was not set up by APEC (Asia-Pacific Economic Cooperation). It was established by the BRICS nations (Brazil, Russia, India, China, and South Africa) in 2014 during the 6th BRICS Summit in Fortaleza, Brazil. APEC is a regional economic forum comprising 21 Pacific Rim member economies.
Statement 2 is correct: The headquarters of the New Devel-opment Bank is in Shanghai, China. The bank became operational in 2015 and focuses on infrastructure and sustainable development projects in BRICS and other emerging economies. The headquarters was designed with a focus on innovation, efficiency, and sustainability which reflects the bank’s commitment to sustainable development.
UPSC 2016Indian Economy · External Sector of India
Q147. Which of the following best describes the term ‘import cover’, sometimes seen in the news?
Explanation
‘Import cover’ refers to the duration (typically measured in months) that a country’s foreign exchange reserves can sustain its current level of imports. This metric is crucial for assessing a nation’s external vulnerability and economic stability. To calculate import cover, the total foreign exchange re-serves are divided by the average monthly import expenditure. For instance, if a country has foreign exchange reserves of $60 billion and its average monthly imports amount to $10 billion, the import cover would be 6 months. A higher import cover indicates a stronger buffer against external economic shocks, as the country can continue to fund its import needs even during periods of reduced foreign exchange inflows. Conversely, a lower import cover suggests greater vulnerability to external pressures, such as fluctuations in global commodity prices or capital outflows.
UPSC 2016Indian Economy · External Sector of India
Q148. In the context of which of the following do you sometimes find the terms ‘amber box, blue box and green box’ in the news?
Explanation
The terms Amber Box, Blue Box, and Green Box are classifications used within the framework of the World Trade Organization (WTO) to categorize different types of agricultural subsidies based on their trade-distorting effects. Amber Box: This category includes subsidies that are considered to distort production and trade. Examples encompass measures such as price support schemes and subsidies directly related to production quantities. These are subject to reduction commitments under the WTO agreements. Blue Box: Subsidies in this box are also trade-distorting but are conditioned upon programs that limit production. For instance, direct payments under production-limiting programs fall into this category. Blue Box subsidies are exempt from reduction commitments. Green Box: This box contains subsidies that cause minimal or no trade distortion. They are typically government-funded and do not involve price support. Examples include research funding, environmental programs, and disaster relief payments. Green Box subsidies are permitted without limits under WTO rules.
UPSC 2016Indian Economy · External Sector of India
Q149. With reference to the International Monetary and Financial Committee (IMFC), consider the following statements: 1. IMFC discusses matters of concern affecting the global economy, and advises the International Monetary Fund (IMF) on the direction of its work. 2. The World Bank participates as an observer in IMFC’s meetings. Which of the statements given above is/are correct?
Explanation
Statement 1 is correct: The International Monetary and Financial Committee (IMFC) is a key body within the IMF structure. It discusses pressing issues related to the global economy and provides guidance to the IMF on its policies and work. It plays a crucial role in shaping the IMF’s agenda and priorities.
Statement 2 is correct: The World Bank participates as an observer in IMFC meetings. This allows for coordination and collaboration between the IMF and the World Bank on issues related to international finance and development. Given the interconnectedness of their work, it’s essential for both institutions to be aligned.
UPSC 2016Indian Economy · Human Development and Sustainable Development
Q150. Pradhan Mantri MUDRA Yojana is aimed at.
Explanation
Pradhan Mantri MUDRA Yojana (PMMY) launched in 2015 by the Government of India, provides collateral-free institutional loans up to Rs. 10 lakhs for small business enterprises. The scheme aims to bring enterprises into the formal financial system. Mantri MUDRA Yojana (PMMY) offers three loan products:
Shishu: Loans up to Rs. 50,000 Kishore: Loans between Rs. 50,000 and Rs. 5 lakh Tarun: Loans between Rs. 5 lakh and Rs. 10 lakh An increase in the loan limit to 20 lakh was announced during the Union Budget 2024-25 To strengthen support for aspiring entrepreneurs.
Answer key for these questions
Q
UPSC year
Correct answer
141
2016
(a) 1 only
142
2016
(c) Both 1 and 2
143
2016
(c) 1 and 3 only
144
2016
(d) 1, 2 and 3
145
2016
(c) 2 and 3 only
146
2016
(b) 2 only
147
2016
(d) It is the number of months of imports that could be paid for by a country’s international reserves
148
2016
(a) WTO affairs
149
2016
(c) Both 1 and 2
150
2016
(a) Bringing the small entrepreneurs into formal financial system
What UPSC has tested in Indian Economy
Money and banking questions test how RBI tools work: repo, CRR, open market operations, lender of last resort and the Monetary Policy Committee.
Public finance questions often use small calculations, such as revenue deficit and fiscal deficit in the 2025 paper.
Institutions and publications are tested by who issues what, such as the World Bank’s Ease of Doing Business or the IMF’s World Economic Outlook.
Agriculture and industry questions focus on schemes and prices: MSP, FRP, e-NAM, UDAY and the Rashtriya Gokul Mission.
Frequently asked questions
How many previous year UPSC questions are there on Indian Economy?
This page covers 392 previous year UPSC Prelims GS Paper-I questions on Indian Economy, asked from 1996 to 2025. Each has the correct answer and an explanation.
Which Indian Economy chapters have the most questions?
Banking Sector in India has the most with 74 questions, then External Sector of India with 49, Industry with 44, Agriculture with 35 and Important Concepts in Economy and Human Development with 29 and 28.
How can I use these questions to prepare for the Economy section?
Take one chapter at a time using the Chapter filter, attempt the questions, and read the facts UPSC has tested at the end of the page. Repeat the banking and public finance chapters, since they are asked every year.
Are the 2025 Economy questions included?
Yes. The 2025 paper’s 19 Indian Economy questions, on revenue deficit, fiscal deficit, RBI income, RTGS and NEFT, bonds and stocks and the 15th Finance Commission, are included with explanations.
