Q281. In India, which department under the Ministry of Finance is responsible for managing the disinvestment of government equity in Central Public Sector Enterprises?
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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Q282. Identify the correct statement regarding the ‘National Monetisation Pipeline’ (NMP).
Explanation
This initiative focuses on generating revenue from existing public infrastructure assets without selling them permanently. The government leases these assets, such as roads, railways, or power lines, to private operators for a specific period in exchange for upfront or periodic payments. This approach allows the state to raise funds for new infrastructure projects while retaining ultimate ownership of the national assets.
Q283. Match the following terms related to disinvestment in List I with their meanings in
List II.
List I: (Term)
A. Initial Public Offering (IPO)
B. Offer for Sale (OFS)
C. Strategic Disinvestment
D. Asset Monetization
List II: (Meaning)
i. Leasing core infrastructure assets to private operators
ii. Unlisted PSU offering shares to the public for the first time
iii. Transfer of ownership and management control
iv. Listed PSU promoters selling shares on the exchange platform
List II.
List I: (Term)
A. Initial Public Offering (IPO)
B. Offer for Sale (OFS)
C. Strategic Disinvestment
D. Asset Monetization
List II: (Meaning)
i. Leasing core infrastructure assets to private operators
ii. Unlisted PSU offering shares to the public for the first time
iii. Transfer of ownership and management control
iv. Listed PSU promoters selling shares on the exchange platform
Explanation
An initial public offering occurs when a company sells shares to the public for the first time. An offer for sale is used by promoters of listed companies to sell their holdings. Strategic disinvestment involves a transfer of control to a private buyer. Asset monetization focuses on leasing out infrastructure to private entities to generate revenue while maintaining public ownership.
Q284. Read the following statements and select the correct option.
Statement I: Disinvestment always leads to the complete privatization of a Public Sector Enterprise.
Statement II: The government can disinvest up to 49% of its equity in a PSU while still retaining majority ownership and control.
Statement I: Disinvestment always leads to the complete privatization of a Public Sector Enterprise.
Statement II: The government can disinvest up to 49% of its equity in a PSU while still retaining majority ownership and control.
Explanation
Disinvestment does not always mean a company is fully privatized; it can involve selling only a small fraction of shares. The government often chooses to sell up to forty-nine percent of its equity, which allows it to raise significant capital while still maintaining a majority stake and full management control. This strategy balances the need for revenue with continued public oversight.
Q285. The proceeds received by the Government of India from the disinvestment of Central Public Sector Enterprises are channeled into which of the following funds?
Explanation
Money raised from the sale of shares in public enterprises is deposited into a specific fund created for this purpose. These resources are intended to be used for social sector programs and for supporting the capital requirements of other public sector units. This ensures that the proceeds from selling national assets are reinvested into productive and welfare-oriented activities for the entire country.
Q286. Which of the following best defines the concept of fiscal federalism in the Indian context?
Explanation
Fiscal federalism involves the systematic allocation of financial resources and responsibilities among different government levels. This framework ensures that both the Union and the States have the necessary funds to perform their constitutional duties. It is characterized by the structured division of revenue-raising powers and expenditure obligations to maintain overall economic stability and equity.
Q287. Consider Statement I and Statement II regarding fiscal federalism.
Statement I: Fiscal federalism requires a clear demarcation of revenue-raising powers to ensure macroeconomic stability.
Statement II: In India, the residuary powers of taxation are vested in the State Legislatures to promote regional autonomy.
Statement I: Fiscal federalism requires a clear demarcation of revenue-raising powers to ensure macroeconomic stability.
Statement II: In India, the residuary powers of taxation are vested in the State Legislatures to promote regional autonomy.
Explanation
Financial stability requires specific demarcation of revenue powers, which is why the Union handles elastic taxes. However, unlike legislative residuary powers, taxation residuary powers in India are vested with the Union Parliament under the Constitution. This centralizes key fiscal authorities to ensure uniform economic policy throughout the country while supporting regional administrative needs.
Q288. What is the primary cause of horizontal fiscal imbalance in a federal structure?
Explanation
Horizontal fiscal imbalance occurs when different states possess varying abilities to generate revenue due to differences in natural resources, industrial development, and historical factors. States with lower income levels or difficult terrains cannot provide the same standard of public services as wealthier states. The Finance Commission addresses this through a specific formula for tax redistribution.
Q289. Consider the following statements regarding vertical fiscal imbalance in India:
I. It arises because the Central government is assigned taxes with higher elasticity and wider bases.
II. States are assigned expenditure responsibilities that exceed their independent revenue-generating capacities.
III. The Constitution provides for the Finance Commission as the sole mechanism to resolve this imbalance.
Which of the combinations given above is/are correct?
I. It arises because the Central government is assigned taxes with higher elasticity and wider bases.
II. States are assigned expenditure responsibilities that exceed their independent revenue-generating capacities.
III. The Constitution provides for the Finance Commission as the sole mechanism to resolve this imbalance.
Which of the combinations given above is/are correct?
Explanation
Vertical fiscal imbalance exists because the Central government is assigned major taxes with higher revenue potential, such as income and corporation tax. Conversely, States have extensive responsibilities in sectors like health and education. While the Finance Commission is a key mechanism, other tools like discretionary grants and Centrally Sponsored Schemes also play a role.
Q290. Given below are two statements, one labeled as
Assertion (A) and the other as Reason (R):
Assertion (A): The Constitution of India incorporates mechanisms like tax devolution and grants-in-aid to states.
Reason (R): Vertical fiscal imbalance is inherent in the constitutional design of revenue and expenditure assignments.
Assertion (A) and the other as Reason (R):
Assertion (A): The Constitution of India incorporates mechanisms like tax devolution and grants-in-aid to states.
Reason (R): Vertical fiscal imbalance is inherent in the constitutional design of revenue and expenditure assignments.
Explanation
The Indian Constitution acknowledges the inherent vertical gap between the revenue powers and expenditure duties of the Centre and States. To bridge this, the framework includes mandatory tax devolution and statutory grants. These mechanisms ensure that States have sufficient financial autonomy to manage their functions effectively despite having fewer independent revenue sources than the Centre.Answer key for these questions
| Q | Correct answer |
|---|---|
| 281 | (c) Department of Investment and Public Asset Management |
| 282 | (d) Unlocking value in brownfield assets via leasing |
| 283 | (a) A-ii, B-iv, C-iii, D-i |
| 284 | (d) Statement I is incorrect but Statement II is correct |
| 285 | (b) National Investment Fund (NIF) |
| 286 | (b) The division of tax powers and spending duties between different government tiers |
| 287 | (c) Statement I is correct but Statement II is incorrect |
| 288 | (c) The unequal economic capacities, resource endowments, and developmental levels among different States |
| 289 | (a) I and II only |
| 290 | (a) Both A and R are true and R is the correct explanation of A. |
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.