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 351–360 of 848 questions
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RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q351. Consider the following statements contrasting the Planning Commission with NITI Aayog: I. Unlike the Planning Commission, NITI Aayog does not possess the power to allocate funds to States or Ministries. II. NITI Aayog includes State Chief Ministers in its Governing Council, promoting cooperative federalism. III. NITI Aayog functions under the mandate of promoting policy coordination. Which of the combinations given above is correct?
Explanation
NITI Aayog serves as a policy think-tank and does not have the power to allocate funds, which distinguishes it from the erstwhile Planning Commission. Its Governing Council, including Chief Ministers, fosters a bottom-up approach to development. While it coordinates policy, it does not manage the mandatory devolution of taxes, which remains the constitutional responsibility of the Finance Commission.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q352. What was the defining characteristic of "Plan grants" administered by the erstwhile Planning Commission that caused friction in fiscal federalism?
Explanation
Plan grants under the Planning Commission were often criticized for being discretionary and tied to specific central conditions. This gave the Centre significant influence over state development agendas, sometimes at the expense of local priorities. The lack of a rigid, formula-based approach led to friction, as states felt their fiscal autonomy was being undermined by the top-down nature of these allocations.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q353. Which statement correctly highlights a federal implication of replacing the Planning Commission with NITI Aayog?
Explanation
With the abolition of the Planning Commission, the role of the Finance Commission in fiscal devolution has become even more central. Most financial transfers to states are now governed by the commission’s recommendations, reducing the prevalence of discretionary plan grants. This shift emphasizes formula-based, transparent devolution, aiming to provide states with more predictable and untied resources for their developmental activities.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q354. What is a primary effect of NITI Aayog’s introduction of indices like the Health Index and the Export Preparedness Index among States?
Explanation
NITI Aayog’s use of performance indices encourages states to improve their governance through healthy competition. By ranking states on health, education, and exports, the Aayog highlights best practices and areas for improvement. This "competitive federalism" motivates states to innovate and improve public service delivery, as they strive to climb the rankings and attract investment through better performance metrics.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q355. Consider the following statements about Special Category States (SCS): I. The concept was first introduced on the recommendations of the Fifth Finance Commission. II. SCS status provides states with significant benefits in Central assistance and tax exemptions. III. The Constitution of India explicitly defines the criteria for granting SCS status in Part XXI. IV. After the 14th Finance Commission recommendations, no new states have been granted official SCS status, and central plan assistance is largely subsumed in higher tax devolution. Which combination represents the correct statements?
Explanation
Special Category Status was introduced by the 5th Finance Commission to support disadvantaged states with hilly terrains and low resources. While it provided significant aid, the 14th Finance Commission’s move to increase general tax devolution to forty-two percent led to the phasing out of the SCS designation for new states. Central assistance is now primarily through increased tax shares.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q356. Which of the following is an original criterion developed under the Gadgil Formula to designate a State as a Special Category State?
Explanation
The Gadgil Formula identified states needing extra support based on geographical and economic disadvantages. Hilly and difficult terrain was a primary criterion, as it increases the cost of infrastructure and service delivery. Other factors included low population density, strategic international borders, and economic backwardness. States meeting these criteria received preferential treatment in central plan assistance to ensure balanced national development.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q357. Arrange the following developments related to fiscal federalism in correct chronological order: I. Implementation of the Goods and Services Tax II. Introduction of the Gadgil Formula for plan assistance III. Establishment of NITI Aayog IV. Recommendations of the 14th Finance Commission increasing tax devolution to 42% Select the correct sequence:
Explanation
Fiscal federalism in India has evolved through several key milestones. The Gadgil Formula for plan assistance was established early on. Much later, the 14th Finance Commission recommended a record increase in tax devolution. This was followed by the creation of NITI Aayog in 2015 and the nationwide implementation of the Goods and Services Tax in 2017, transforming the country’s economic landscape.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q358. Which of the following statements about the current status of Special Category States (SCS) is incorrect?
Explanation
The 14th Finance Commission did not recommend granting Special Category Status to additional states. Instead, it focused on increasing the general tax devolution to forty-two percent for all states. This shift was intended to provide states with more untied funds, reducing the need for the discretionary assistance associated with SCS, though existing beneficiaries in the North-East and Himalayan regions continue to receive support.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q359. A state frequently demands "Special Category Status" citing low infrastructural development and historical disadvantages. Why has the Union Government consistently denied new grants of this status post-2015?
Explanation
Following the 14th Finance Commission’s recommendations, the Union Government stopped granting Special Category Status to new states. The commission argued that the significant increase in tax devolution from thirty-two percent to forty-two percent gave all states enough fiscal space to manage their own developmental needs. This move aimed to replace discretionary, status-based assistance with a more uniform and substantial formulaic tax sharing.
RAS PrelimsIndian Economy · Fiscal Federalism and Finance Commission
Q360. Consider the following statements about a State’s own tax revenues: I. States have the power to levy taxes on agricultural income. II. Stamp duties and registration fees form a major component of a State’s own tax revenue. III. State excise duty on alcoholic liquor for human consumption is exclusively levied by the States. IV. Property tax is generally devolved by States to local bodies. V. The implementation of GST significantly expanded the independent taxation powers of the States over services. Which of the combinations given above represents correct statements?
Explanation
States possess several independent revenue sources, including taxes on agricultural income, stamp duties, and registration fees. Excise duty on liquor remains a critical source of income outside the GST regime. While property taxes are important, they are often devolved to local bodies. However, the introduction of GST actually limited states’ independent power to tax many services, as these were unified under the new regime.
Answer key for these questions
Q
Correct answer
351
(a) I and II only
352
(d) They were discretionary and conditional, often bypassing local state priorities
353
(c) Devolution is now channelled primarily through the Central Finance Commission
354
(b) It fosters competitive federalism by benchmarking state performance.
355
(a) I, II and IV only
356
(a) Hilly and difficult terrain
357
(a) II, IV, III, I
358
(a) The 14th Finance Commission explicitly recommended extending SCS status to Bihar and Odisha.
359
(d) The 14th Finance Commission subsumed plan assistance into higher tax devolution
360
(a) I, II, III and IV 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.
