Q271. A manufacturer in Rajasthan sells goods to a dealer in Gujarat. Under the destination-based principle of GST, which entity receives the tax revenue on the final consumption?
Indian Economy: RAS Prelims MCQs
848 RAS Prelims practice MCQs on the Indian economy are on this page, in 10 chapters. They cover economic growth and development, the Human Development Index, monetary and fiscal policy and the Union Budget, fiscal federalism, agricultural development, industrial reforms and LPG, the service sector, energy and transport, skill development and employment, and social justice. Each question has an answer and an explanation.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
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Q272. Consider the following taxes:
I. Central Excise Duty
II. State Value Added Tax (VAT)
III. Custom Duty (Basic)
IV. Entry Tax / Octroi
Which of the above taxes were subsumed under the Goods and Services Tax (GST)?
I. Central Excise Duty
II. State Value Added Tax (VAT)
III. Custom Duty (Basic)
IV. Entry Tax / Octroi
Which of the above taxes were subsumed under the Goods and Services Tax (GST)?
Explanation
Several central and state-level indirect taxes were replaced by the unified system to simplify the tax structure. These included central excise duties, state value-added taxes, and local levies like octroi and entry tax. However, basic customs duties on international imports were not merged into this system and continue to be levied separately by the central government on foreign trade.
Q273. Which of the following items is currently kept OUTSIDE the purview of the Goods and Services Tax (GST) in India?
Explanation
While most goods and services are covered under the new tax regime, certain high-revenue products have been temporarily excluded. These include specific fuels like petrol, diesel, and aviation turbine fuel. Currently, these items remain subject to state-level taxes and central excise duties. Bringing them under the unified tax system would require a consensus among all members of the council.
Q274. Consider the following methods of resource mobilization by the government:
I. Expanding the base of direct taxes.
II. Rationalizing subsidies to save expenditure.
III. Monetizing public assets.
IV. Increasing non-tax revenues like spectrum auctions.
V. Borrowing heavily from external commercial markets at high interest.
Which of the above are considered healthy and sustainable methods of resource mobilization?
I. Expanding the base of direct taxes.
II. Rationalizing subsidies to save expenditure.
III. Monetizing public assets.
IV. Increasing non-tax revenues like spectrum auctions.
V. Borrowing heavily from external commercial markets at high interest.
Which of the above are considered healthy and sustainable methods of resource mobilization?
Explanation
Sustainable ways to increase government funds include expanding the tax net, making spending more efficient through subsidy reform, and utilizing public assets effectively. These methods generate revenue without creating long-term debt burdens. While borrowing is sometimes necessary, relying on high-interest external loans is generally seen as unsustainable and risky for the long-term financial health and stability of the economy.
Q275. Which of the following statements about government borrowing as a tool for resource mobilization is correct?
Explanation
Borrowing allows the government to fund its current expenditures and investment projects when revenues fall short. While this provides immediate cash flow for development, it also creates an obligation to repay the principal and interest in the future. This debt must be carefully managed to ensure it does not lead to a fiscal crisis or unfairly burden future generations.
Q276. Match the specific resource mobilization receipts in List I with their budget category in
List II.
List I: (Receipt)
A. Issuance of Sovereign Gold Bonds
B. 5G Spectrum Auction receipts
C. Income Tax revenues
D. Disinvestment of Air India
List II: (Budget Category)
i. Tax Revenue Receipt
ii. Non-Tax Revenue Receipt
iii. Debt Capital Receipt
iv. Non-Debt Capital Receipt
List II.
List I: (Receipt)
A. Issuance of Sovereign Gold Bonds
B. 5G Spectrum Auction receipts
C. Income Tax revenues
D. Disinvestment of Air India
List II: (Budget Category)
i. Tax Revenue Receipt
ii. Non-Tax Revenue Receipt
iii. Debt Capital Receipt
iv. Non-Debt Capital Receipt
Explanation
Issuing bonds represents borrowing, which is a debt-creating capital receipt. Revenue from spectrum auctions is a non-tax income source, while income tax is a standard tax revenue. Disinvestment of a public company involves selling an asset, which is categorized as a non-debt capital receipt. These various types of receipts show how the government manages its finances through income and borrowing.
Q277. What is a likely macroeconomic effect if a developing country suffers from a persistently low tax base?
Explanation
When a government cannot collect sufficient revenue from its citizens and businesses, it faces a persistent gap between its spending needs and available funds. To bridge this shortfall, the state must borrow from domestic or international markets. This reliance on debt leads to higher interest payments, larger fiscal deficits, and limited resources for essential public investments in health and education.
Q278. The Laffer Curve conceptually relates to resource mobilization by illustrating the relationship between:
Explanation
This economic concept suggests that there is an optimal tax rate that maximizes total revenue. At very low rates, increasing the tax rate raises revenue. However, if rates become too high, they can discourage work, investment, and compliance, leading to a decrease in total collections. Understanding this trade-off helps policymakers design tax systems that balance revenue needs with economic incentives.
Q279. In the context of government finance, ‘Disinvestment’ refers to:
Explanation
This process involves the government selling its shares in companies that it owns or controls. By reducing its ownership, the state can raise funds for various development projects or to reduce the fiscal deficit. Disinvestment can range from selling a small portion of shares to the public to a complete transfer of ownership and management to private investors or other entities.
Q280. Consider the following statements distinguishing ‘Strategic Disinvestment’ from ‘Minority Stake Sale’:
I. Strategic disinvestment involves the transfer of management control to a private entity.
II. Minority stake sale allows the government to retain more than 51% ownership and management control.
III. Both methods are classified as Revenue Receipts in the Union Budget.
Which of the above statements are correct?
I. Strategic disinvestment involves the transfer of management control to a private entity.
II. Minority stake sale allows the government to retain more than 51% ownership and management control.
III. Both methods are classified as Revenue Receipts in the Union Budget.
Which of the above statements are correct?
Explanation
Strategic sales involve the government giving up both a significant portion of its shares and the control over the company’s management. In contrast, a minority stake sale allows the government to raise capital while still remaining the majority owner and decision-maker. These transactions are classified as non-debt capital receipts in the budget because they involve the sale of public assets.Answer key for these questions
| Q | Correct answer |
|---|---|
| 271 | (c) Central and Gujarat governments share the revenue |
| 272 | (b) I, II and IV only |
| 273 | (a) Five petroleum products including petrol and diesel |
| 274 | (c) I, II, III and IV only |
| 275 | (d) Creates current resources but carries future liability |
| 276 | (a) A-iii, B-ii, C-i, D-iv |
| 277 | (b) Forced reliance on borrowing and high deficits |
| 278 | (d) Tax rates and the amount of tax revenue collected |
| 279 | (d) The government liquidating its stake in Public Sector Enterprises (PSEs) |
| 280 | (a) I and II only |
Key facts from Indian Economy
- The RPSC syllabus lists economic concepts and the Indian economy as the first part of the Economy paper, followed by the economy of Rajasthan.
- Concept questions test definitions: nominal and real GDP, GNP and NDP, per capita income and the value-added method.
- Policy questions pair a tool with its effect, for example a rise in CRR reduces the lendable resources of banks.
- Scheme questions ask for the target group, ministry or year of schemes such as PMKVY, NAPS, PM SVANidhi and PM-SYM.
- Questions on Finance Commission and GST link the body to its Article, such as Article 280.
Frequently asked questions
How many RAS Prelims practice MCQs are there on Indian Economy?
This page has 848 practice MCQs on Indian Economy. Each has the correct answer, and most have an explanation.
Which chapters does the Indian economy set cover?
Ten chapters: economic growth, development and sustainable development; measurement of development (HDI); monetary and fiscal policy and the Union Budget; fiscal federalism and the Finance Commission; agricultural development; industrial growth and LPG reforms; the service sector; energy, transport and communication; skill development and employment; and social justice and empowerment.
Is the Indian economy in the RAS Prelims syllabus?
Yes. RPSC lists Economic Concepts and the Indian Economy as the first part of the Economy paper. The second part covers the economy of Rajasthan, which is on its own page.
How should I revise economy for RAS Prelims?
Learn the definitions and the cause-and-effect chains first, then the schemes with their year, ministry and target group. Attempt each chapter, read every explanation and keep a one-line note for each scheme and body.