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.
Showing 311–320 of 848 questions
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RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q311. Given below are two statements, one labeled as Assertion (A) and the other as Reason (R): Assertion (A): The 15th Finance Commission was mandated to use the population data of 2011 for its calculations. Reason (R): Using the 1971 population data penalized states that had successfully implemented demographic management and family planning measures.
Explanation
The 15th Finance Commission used the 2011 population data to reflect current demographic realities across all regions fairly. Earlier commissions used 1971 data to avoid penalizing states with effective population control. The move to 2011 was balanced by a demographic performance criterion that rewards states for successfully managing their fertility rates and improving socio-economic outcomes, not penalizing them.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q312. Which of the following statements about the Terms of Reference of the 15th Finance Commission is incorrect?
Explanation
The 15th Finance Commission’s mandate included reviewing debt levels, proposing performance-based incentives, and exploring a separate defence funding mechanism. It did not seek to abolish State Finance Commissions, as they are constitutional bodies essential for local governance. Instead, the commission aimed to strengthen fiscal relations and encourage states to adopt better administrative and business-friendly practices across the country.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q313. Which constitutional article explicitly outlines the core duties of the Finance Commission, including the distribution of net proceeds of taxes?
Explanation
Article 280(3) sets out the duties of the Finance Commission, which include recommending how the net proceeds of taxes are shared between the Union and the States and among the States.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q314. Consider the following matters regarding the duties of the Finance Commission: I. Distribution of the net proceeds of taxes between Union and States. II. Principles governing grants-in-aid to States out of the Consolidated Fund of India. III. Measures to augment the Consolidated Fund of a State to supplement resources of local bodies. IV. Resolution of inter-state water disputes having financial implications. Which combination represents the correct functions?
Explanation
The Finance Commission focuses on tax distribution, grants-in-aid principles, and measures to strengthen the resources of local bodies. These functions are vital for maintaining fiscal balance across various government tiers. While the commission deals with financial matters, resolving inter-state water disputes is not within its mandate; such issues are handled through separate judicial or administrative mechanisms and tribunals.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q315. Match the horizontal devolution criteria in List I with the weights assigned by the 15th Finance Commission in List II:
The 15th Finance Commission assigned specific weights to various criteria for horizontal tax devolution. Income distance remained the most significant factor at forty-five percent. Population and area were each assigned fifteen percent. Forest and ecology received a ten percent weight, while demographic performance and tax effort were also included to reward states for policy success and efficiency in revenue collection.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q316. Select the correct historical sequence of the establishment of these institutions/bodies in India from earliest to latest:
Explanation
India’s institutional framework has evolved significantly over time. The Planning Commission was established in 1950, followed by its replacement, NITI Aayog, in 2015. The GST Council was created in 2016 through the 101st Amendment to manage the new tax regime. Finally, the 15th Finance Commission was constituted in 2017 to recommend the devolution of taxes for the subsequent period.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q317. What is the most appropriate reason for the 15th Finance Commission reducing the vertical tax devolution to States from 42% (under 14th FC) to 41%?
Explanation
The vertical devolution share was adjusted from forty-two percent to forty-one percent to account for the status change of Jammu and Kashmir. Following its reorganization into the Union Territories of Jammu and Kashmir and Ladakh, the responsibility for their funding shifted to the Centre. This one percent reduction ensured that the necessary resources remained available for the newly formed territories.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q318. Consider Statement I and Statement II regarding the 15th Finance Commission. Statement I: The 15th Finance Commission introduced a new criterion called "Demographic Performance" in horizontal devolution. Statement II: The purpose of the "Demographic Performance" criterion was to reward states with a lower Total Fertility Rate (TFR).
Explanation
The 15th Finance Commission introduced the "Demographic Performance" criterion to reward states that effectively managed their population growth. This was measured using the Total Fertility Rate, incentivizing states that met replacement level targets. By including this metric, the commission balanced the use of 2011 population data, ensuring that states with successful family planning programs were not financially disadvantaged.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q319. Consider the following statements regarding the 15th Finance Commission recommendations: I. It recommended a non-lapsable fund for modernisation of defence and internal security. II. It recommended revenue deficit grants for all 28 states for the entire award period. III. Sector-specific grants were recommended for health, school education, and agriculture. IV. It suggested a glide path to reduce the combined debt-to-GDP ratio of Centre and States. V. It recommended states to update their Fiscal Responsibility Legislation. Which of the combinations given above represents correct statements?
Explanation
The 15th Finance Commission recommended a non-lapsable defence fund, sector-specific grants, and a debt reduction glide path. It also urged states to modernize their fiscal responsibility laws. However, it did not recommend revenue deficit grants for all states for the whole period; instead, these grants were targeted only at states that faced persistent budgetary gaps after tax devolution.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q320. Which criterion was entirely dropped by the 15th Finance Commission for horizontal devolution that was previously used by the 14th Finance Commission?
Explanation
Previous Finance Commissions relied on 1971 population data to prevent penalizing states with lower birth rates. However, the 15th Finance Commission shifted exclusively to 2011 population data to reflect the current fiscal needs of states more accurately. To address concerns about population control, the commission introduced a new demographic performance criterion, effectively replacing the outdated 1971 population metric.
Answer key for these questions
Q
Correct answer
311
(c) A is true but R is false.
312
(b) It was mandated to abolish the State Finance Commissions to centralize fiscal devolution.
313
(c) Article 280(3)
314
(a) I, II, and III only
315
(a) A-iii, B-ii, C-i, D-iv
316
(a) Planning Commission -- NITI Aayog -- GST Council -- 15th Finance Commission
317
(b) To adjust for the reorganization of Jammu and Kashmir into Union Territories
318
(a) Both Statement I and Statement II are correct
319
(b) I, III, IV and V only
320
(d) Population of 1971
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.
