13 previous year UPSC Prelims questions on Indian Economy in the UPSC 2021 Prelims. Choose an option to see the answer and explanation.
Explanations state facts as of the year each question was asked; words like “recently” refer to that year.
Showing 11–13 of 13 questions
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UPSC 2021Indian Economy · Security Market in India
Q11. Indian Government Bond Yields are influenced by which of the following? 1. Actions of the United States Federal Reserve 2. Actions of the Reserve bank of India 3. Inflation and short-term interest rates Select the correct answer using the code given below.
Explanation
Bond yield is the return an investor gets on that bond or on a particular government security. It depends on the price of the bond which is impacted by its demand.
Statement 1, 2 and 3 are correct:
Factor Scenario Impact Effect on Bond Yields
1. US Federal Reserve Actions Raises Inter-est Rates Capital outflows from In-dia as US bonds become more attractive. Yields rise due to lower demand for Indian bonds. Lowers Interest Rates Capital inflows to India as Indian bonds offer better returns. Yields fall due to higher demand for Indian bonds.
2. RBI Actions Increases Repo Rates (Tightening Policy) Higher borrowing costs slow down credit growth and economic activity. Yields rise as new bonds offer higher interest. Cuts Repo Rates (Easing Policy) Cheaper borrowing encourages economic activity and credit flow. Yields fall as new bonds are issued at lower rates.
3. Inflation and Short-Term Interest Rates Rising Inflation Reduces the real value of bond interest payments. Yields rise to compensate for inflation. Falling Inflation Improves real returns on bonds, making them more attractive. Yields fall due to increased bond demand.
UPSC 2021Indian Economy · Security Market in India
Q12. With reference to India, consider the following statements: 1. Retail investors through Demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in the primary market. 2. The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India. 3. ‘Central Depository Services Ltd’ is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange. Which of the statements given above is/are correct?
Explanation
Statement 1 is correct: Retail investors can participate in government securities (G-Secs) like Treasury Bills (T-Bills) and Government of India Bonds through schemes such as Retail Direct Scheme facilitated by the Reserve Bank of India (RBI). This allows them to invest directly in the primary market using Demat accounts.
Statement 2 is correct: The NDS-OM platform, is an electronic trading platform, operated by the RBI, is an anonymous order-matching system for secondary market trading in government securities (G-Secs)
Statement 3 is incorrect: CDSL is promoted by the Bombay Stock Exchange (BSE) but not by the Reserve Bank of India. It is promoted by BSE Ltd. jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank and Union Bank of India.
UPSC 2021Indian Economy · Human Development and Sustainable Development
Q13. With reference to ‘Water Credit’, consider the following statements: 1. It puts microfinance tools to work in the water and sanitation sector. 2. It is a global initiative launched under the aegis of the World Health Organization and the World Bank. 3. It aims to enable poor people to meet their water needs without depending on subsidies. Which of the statements given above are correct?
Explanation
Statements 1 and 3 are correct: WaterCredit is a powerful solution and puts microfinance tools to work in the water and sanitation sector. It helps bring small loans to those who need access to affordable financing and expert resources to make household water and toilet solutions a reality.
Statement 2 is incorrect: WaterCredit is not launched by the WHO or the World Bank. It is an initiative of Water.org, a non-profit organization co-founded by Gary White and Matt Da-mon. While it may collaborate with various global partners, it is not directly under the aegis of these organizations.
Exam tip:
S2 aligns with Function-person/organisation/ministry match trap as it’s easy to manipulate to make it false. What possible role does WHO and World bank can play in "Water credits’’. Isn’t it a misfit? Highly plausible hence likely false.
Answer key for these questions
Q
UPSC year
Correct answer
11
2021
(d) 1, 2 and 3
12
2021
(b) 1 and 2
13
2021
(c) 1 and 3 only
Frequently asked questions
How many previous year UPSC questions are there on Indian Economy?
This page covers 13 previous year UPSC Prelims GS Paper-I questions on Indian Economy in the UPSC 2021 Prelims, asked from 1996 to 2025. Each has the correct answer and an explanation.
How should I use previous year UPSC questions for Prelims?
Attempt each question first, then open the answer and read the explanation for every option. Repeat by chapter, and track which statements UPSC reuses across years. Previous year questions show the exam pattern and difficulty level.
Which years are covered for Indian Economy?
Questions on Indian Economy in the UPSC 2021 Prelims are available for 30 years, from 1996 to 2025. Use the Year filter to practise a single paper.
