Economy — Batch 1 | BPSC Practice Questions

Economy — GDP

Q881EasyBPSC Prelims

India's GDP is measured at:

ACurrent prices only (nominal GDP)

BBoth current prices (nominal GDP) and constant prices (real GDP) — real GDP removes inflation to show actual growth

CPurchasing Power Parity (PPP) only

DFactor cost only

Show Answer

✔ B — Both current prices (nominal GDP) and constant prices (real GDP) — real GDP removes inflation to show actual growth

India's GDP is reported in two forms: (1) Nominal GDP (at current prices) — uses prices prevailing in the current year; (2) Real GDP (at constant prices) — uses base year prices (currently 2011-12 as the base year) to eliminate price changes and show actual volume of production. Real GDP growth rate is the standard measure of economic growth. India also uses GDP at factor cost (production side) vs GDP at market prices (includes indirect taxes minus subsidies). As of 2023-24, India's nominal GDP is approximately ₹293 lakh crore ($3.5 trillion), making it the 5th largest economy globally by nominal GDP. By PPP, India is the 3rd largest economy.
*Why A is wrong:* Only nominal GDP is not sufficient — real GDP is more important for growth measurement.
*Why C is wrong:* PPP is used for international comparisons, not India's primary GDP measurement.
*Why D is wrong:* GDP at factor cost is one method, but market price GDP is also used.

Q904EasyBPSC Prelims

India became the world's 5th largest economy (by nominal GDP) surpassing which country?

AGermany

BUnited Kingdom

CFrance

DJapan

Show Answer

✔ B — United Kingdom

India surpassed the United Kingdom (UK) to become the world's 5th largest economy by nominal GDP in 2022 (calendar year), a symbolic milestone — India was once a British colony. The current ranking (nominal GDP, approximately 2024): (1) USA (~$27 trillion); (2) China (~$18 trillion); (3) Germany (~$4.5 trillion); (4) Japan (~$4.2 trillion); (5) India (~$3.7 trillion); (6) UK (~$3.1 trillion). In terms of PPP (Purchasing Power Parity), India is the 3rd largest economy after USA and China. India is on track to become the 3rd largest economy by nominal GDP by 2030 (projections by IMF, Goldman Sachs, Morgan Stanley).
*Why A is wrong:* Germany is currently ranked 3rd — India surpassed UK (6th), not Germany.
*Why C is wrong:* France is ranked 7th — India hasn't specifically been compared in this milestone context.
*Why D is wrong:* Japan is ranked 4th — India hasn't yet surpassed Japan.

Economy — National Income

Q882MediumBPSC Prelims

The difference between Gross Domestic Product (GDP) and Gross National Product (GNP) is:

AGDP includes services; GNP does not

BGNP = GDP + Net Factor Income from Abroad (NFIA); if NFIA is positive (income earned abroad > foreigners' income in India), GNP > GDP

CGDP includes government spending; GNP excludes it

DGNP = GDP minus depreciation

Show Answer

✔ B — GNP = GDP + Net Factor Income from Abroad (NFIA); if NFIA is positive (income earned abroad > foreigners' income in India), GNP > GDP

GDP measures the total value of goods and services produced WITHIN India's geographical territory, regardless of who produces it. GNP measures the total value produced by India's RESIDENTS (citizens and entities), regardless of location. GNP = GDP + Net Factor Income from Abroad (NFIA). NFIA = Income earned by Indian residents abroad MINUS income earned by foreign residents in India. For India: NFIA is typically small but varies. NNP (Net National Product) = GNP minus Depreciation (Consumption of Fixed Capital). NI (National Income) = NNP at factor cost. India's National Income statistics are published by CSO/MOSPI.
*Why A is wrong:* Both GDP and GNP include services.
*Why C is wrong:* Both include government spending.
*Why D is wrong:* GDP minus depreciation = NDP (Net Domestic Product), not GNP.

Q914HardBPSC Prelims

India's base year for National Income calculation was revised from 2004-05 to 2011-12. What were the key changes in this revision?

AOnly the base year changed — methodology remained the same

BBase year changed to 2011-12; GDP shifted from factor cost to market prices; GVA (Gross Value Added) at basic prices introduced; new data sources: MCA21 database for corporate sector, NSSO surveys; GDP estimate revised upward significantly (India's GDP surpassed China in growth rate calculation)

CGDP calculation became entirely survey-based — census abandoned

DInternational System of National Accounts (SNA) 2003 adopted for the first time

Show Answer

✔ B — Base year changed to 2011-12; GDP shifted from factor cost to market prices; GVA (Gross Value Added) at basic prices introduced; new data sources: MCA21 database for corporate sector, NSSO surveys; GDP estimate revised upward significantly (India's GDP surpassed China in growth rate calculation)

India's National Statistical Office (NSO/MOSPI) revised the National Accounts Statistics in January 2015: (1) Base year changed from 2004-05 to 2011-12; (2) Shift from GDP at factor cost to GVA (Gross Value Added) at basic prices — GVA at basic prices + Taxes on products − Subsidies on products = GDP at market prices; (3) New data sources: MCA21 (Ministry of Corporate Affairs' company database) for corporate sector activity (earlier extrapolated from RBI sample survey); IIP (Index of Industrial Production) for manufacturing; (4) GDP revised significantly upward — India's 2013-14 growth revised from 4.7% to 6.9%; (5) SNA 2008 adopted (latest international methodology). The revision was controversial — some felt the base year and methodology changes inflated GDP.
*Why A is wrong:* The methodology changed significantly along with the base year.
*Why C is wrong:* Both survey and census (administrative) data are used.
*Why D is wrong:* SNA 2008 (not 2003) was adopted.

Economy — Inflation

Q883EasyBPSC Prelims

The Consumer Price Index (CPI) in India is used to measure:

AWholesale price changes

BChanges in average retail prices paid by consumers for a fixed basket of goods — used as the official inflation measure by RBI since 2014

CChanges in factory output prices

DChanges in government expenditure

Show Answer

✔ B — Changes in average retail prices paid by consumers for a fixed basket of goods — used as the official inflation measure by RBI since 2014

The Consumer Price Index (CPI) measures the change in prices of a fixed basket of goods and services purchased by households. In India: (1) CPI (Combined) covers urban and rural consumers; (2) Since 2014, RBI uses CPI as the official target for monetary policy under the Flexible Inflation Targeting (FIT) framework — target is 4% ± 2% (i.e., 2%–6%); (3) CPI is compiled by MOSPI (Ministry of Statistics and Programme Implementation); (4) CPI base year is 2012 = 100. CPI includes food, beverages, pan/tobacco, clothing, housing, fuel, and miscellaneous items. Food and beverages have the highest weight (~45.86%) in CPI.
*Why A is wrong:* Wholesale prices are measured by WPI (Wholesale Price Index) — used for producer prices.
*Why C is wrong:* Factory output prices relate to Producer Price Index (PPI) — not yet fully implemented in India.
*Why D is wrong:* Government expenditure is not measured by CPI.

Economy — Banking

Q884HardBPSC Prelims

The Reserve Bank of India (RBI) uses "Monetary Policy Tools" to control inflation and growth. Which of the following is NOT a direct monetary policy instrument of the RBI?

ARepo Rate (rate at which RBI lends to commercial banks)

BCash Reserve Ratio (CRR — proportion of deposits banks must keep with RBI)

CStatutory Liquidity Ratio (SLR — proportion banks must maintain in liquid assets)

DCorporate Tax Rate (rate of tax on company profits)

Show Answer

✔ D — Corporate Tax Rate (rate of tax on company profits)

RBI's monetary policy instruments: (1) Repo Rate — rate at which RBI lends overnight funds to banks; increasing it makes borrowing costlier, reducing money supply; (2) Reverse Repo Rate — rate at which RBI borrows from banks (lower than Repo); (3) CRR (Cash Reserve Ratio) — banks must keep this percentage of deposits with RBI as cash reserves; currently around 4%; (4) SLR (Statutory Liquidity Ratio) — banks must keep this percentage in liquid assets (cash, gold, government securities); currently ~18%; (5) Open Market Operations (OMO) — RBI buys/sells government securities to inject/absorb liquidity; (6) MSF (Marginal Standing Facility) — emergency overnight borrowing at above-repo-rate. Corporate Tax Rate is set by the Finance Ministry/Parliament through the Finance Act — NOT an RBI monetary policy tool.
*Why A is wrong:* Repo Rate IS a direct monetary policy tool.
*Why B is wrong:* CRR IS a direct monetary policy tool.
*Why C is wrong:* SLR IS a direct monetary policy tool.

Q885MediumBPSC Prelims

The Monetary Policy Committee (MPC) was established in India to:

ASet the Union Budget's fiscal targets

BDetermine the policy repo rate to achieve the inflation target of 4% ± 2% — 6-member committee (3 from RBI including Governor, 3 external members appointed by Government)

CRegulate the securities market (SEBI's role)

DManage India's foreign exchange reserves

Show Answer

✔ B — Determine the policy repo rate to achieve the inflation target of 4% ± 2% — 6-member committee (3 from RBI including Governor, 3 external members appointed by Government)

The Monetary Policy Committee (MPC) was constituted under the RBI Act (amended in 2016) to set the benchmark interest rate (Repo Rate) to achieve the inflation target. Composition: (1) Governor of RBI (Chairperson); (2) Deputy Governor of RBI (in charge of Monetary Policy); (3) One RBI Executive Director; (4) Three external members appointed by Central Government (for 4-year terms). Decisions by majority vote; RBI Governor has casting vote in case of tie. The MPC meets at least 4 times a year (bimonthly). Flexible Inflation Target: 4% CPI ± 2% (band: 2%–6%). Failure to maintain target for 3 consecutive quarters requires RBI to explain to Government.
*Why A is wrong:* Union Budget fiscal targets are set by the Finance Ministry.
*Why C is wrong:* SEBI (Securities and Exchange Board of India) regulates securities markets.
*Why D is wrong:* Foreign exchange reserve management is an RBI function but not the MPC's role.

Q887MediumBPSC Prelims

Priority Sector Lending (PSL) norms require commercial banks in India to lend what percentage of their Adjusted Net Bank Credit (ANBC) to priority sectors?

A20%

B30%

C40%

D50%

Show Answer

✔ C — 40%

RBI mandates that all scheduled commercial banks (domestic and foreign with 20+ branches) must lend 40% of ANBC (Adjusted Net Bank Credit) or Credit Equivalent of Off-Balance Sheet Exposure (whichever is higher) to Priority Sectors. Priority sectors include: Agriculture (18% mandatory for domestic banks, with 8% to small/marginal farmers); Micro, Small & Medium Enterprises (MSMEs); Education; Housing (for affordable housing); Social Infrastructure; Renewable Energy; Others (artisans, weaker sections, state-sponsored organizations). Banks failing to meet targets must contribute shortfall to RIDF (Rural Infrastructure Development Fund) or other priority sector funds maintained with NABARD/NHB. PSL norms help direct credit to vital but underfinanced sectors.
*Why A is wrong:* 20% is not the PSL target — it would be too low for adequate priority sector coverage.
*Why B is wrong:* 30% is below the actual 40% target.
*Why D is wrong:* 50% would be excessively high for priority sector mandates.

Q891MediumBPSC Prelims

Non-Performing Assets (NPAs) in banking refer to:

ABank assets that are performing below market returns

BLoans or advances where interest or principal repayment is overdue for more than 90 days (for most loans); classified as Substandard, Doubtful, or Loss assets

CBank investments in foreign currencies

DRegulatory capital reserves that are not actively lending

Show Answer

✔ B — Loans or advances where interest or principal repayment is overdue for more than 90 days (for most loans); classified as Substandard, Doubtful, or Loss assets

Non-Performing Assets (NPAs) are loans/advances where: (1) Interest or principal has been overdue for more than 90 days for term loans; (2) For agriculture loans: overdue for 2 crop seasons (short duration) or 1 crop season (long duration); Classification: Substandard — NPA for ≤12 months; Doubtful — NPA for >12 months (Doubtful 1, 2, 3 based on duration); Loss — identified as loss, irrecoverable. India's NPA crisis: Public sector bank NPAs peaked around 11-12% in 2018 due to infrastructure lending gone bad, steel sector, telecom, power. Solutions: IBC (Insolvency and Bankruptcy Code 2016), SARFAESI Act, NCLT resolution. Gross NPA ratio has since declined. Bihar-specific: Bank of Bihar (merged with SBI) historical NPAs.
*Why A is wrong:* Below-market return is not the NPA definition — it's about overdue payment.
*Why C is wrong:* Foreign currency investments are not NPAs.
*Why D is wrong:* Regulatory capital reserves (CRR, SLR) are different from NPAs.

Q894MediumBPSC Prelims

NABARD (National Bank for Agriculture and Rural Development) was established in:

A1935

B1975

C1982

D1991

Show Answer

✔ C — 1982

NABARD (National Bank for Agriculture and Rural Development) was established on July 12, 1982, under the NABARD Act, 1981, based on the recommendations of the B. Sivaraman Committee. It was set up by amalgamating the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of RBI, and the entire undertaking of Agricultural Refinance and Development Corporation (ARDC). Key functions: (1) Refinance for rural credit (commercial banks, cooperative banks, RRBs); (2) Credit for agriculture, MSME, handicraft; (3) Development of rural infrastructure through RIDF (Rural Infrastructure Development Fund); (4) Supervises cooperative banks and Regional Rural Banks (RRBs); (5) Priority Sector shortfall funds are channeled through NABARD. Headquarters: Mumbai. It plays a critical role in Bihar's agricultural credit through state cooperative banks.
*Why A is wrong:* 1935 is when RBI was established — NABARD came much later.
*Why B is wrong:* 1975 is not when NABARD was established.
*Why D is wrong:* 1991 is LPG reforms year — NABARD was established in 1982.

Q899HardBPSC Prelims

What is the "Prompt Corrective Action" (PCA) framework of RBI, and what triggers it?

APCA is a mechanism to recapitalize public sector banks through budget allocation

BPCA is a supervisory framework under which RBI imposes restrictions on banks showing deterioration in key financial metrics — triggered when Capital Adequacy Ratio (CRAR) falls below threshold, Net NPA ratio rises above threshold, or Return on Assets turns negative — restrictions include cap on dividend payout, reduction in high-risk lending, ban on opening new branches

CPCA automatically merges weak banks with stronger ones

DPCA is an investor protection mechanism for depositors to reclaim deposits from failed banks

Show Answer

✔ B — PCA is a supervisory framework under which RBI imposes restrictions on banks showing deterioration in key financial metrics — triggered when Capital Adequacy Ratio (CRAR) falls below threshold, Net NPA ratio rises above threshold, or Return on Assets turns negative — restrictions include cap on dividend payout, reduction in high-risk lending, ban on opening new branches

RBI's Prompt Corrective Action (PCA) Framework imposes corrective restrictions on banks showing financial distress. Triggers (as per revised 2021 framework): (1) Capital Risk: CRAR < 10.5%; (2) Net NPA: Net NPA > 6%; (3) Profitability: Negative Return on Assets (RoA) for 2 consecutive years. Under PCA, restrictions include: (1) No new business diversification; (2) Cap on deposit acceptance; (3) Reduction in high-risk lending; (4) Bar on opening new branches; (5) Cap on management compensation; (6) Prohibition on dividend payment. Multiple banks were under PCA framework during 2017-2019 NPA crisis (e.g., Allahabad Bank, Central Bank of India). Banks exit PCA when they improve beyond trigger thresholds.
*Why A is wrong:* Recapitalization through budget is a separate mechanism (bank recap bonds).
*Why C is wrong:* PCA doesn't automatically merge banks — that's a separate RBI decision.
*Why D is wrong:* Depositor insurance is provided by DICGC (Deposit Insurance and Credit Guarantee Corporation) — up to ₹5 lakh per depositor.

Q905HardBPSC Prelims

The Insolvency and Bankruptcy Code (IBC), 2016 created what framework for resolution of corporate insolvency?

ABanks directly liquidate assets of defaulting companies

BTime-bound resolution process: NCLT (National Company Law Tribunal) admits insolvency application; IRP (Insolvency Resolution Professional) manages company; 180-day resolution period (extendable by 90 days); CoC (Committee of Creditors) approves resolution plan; liquidation if no plan approved

CRBI handles all corporate insolvency cases directly

DSupreme Court adjudicates all NPA cases above ₹100 crore

Show Answer

✔ B — Time-bound resolution process: NCLT (National Company Law Tribunal) admits insolvency application; IRP (Insolvency Resolution Professional) manages company; 180-day resolution period (extendable by 90 days); CoC (Committee of Creditors) approves resolution plan; liquidation if no plan approved

The Insolvency and Bankruptcy Code (IBC), 2016 established a comprehensive framework: (1) Application: Financial creditor/operational creditor/corporate debtor can apply to NCLT (Corporate Insolvency Resolution Process — CIRP); (2) IRP (Interim Resolution Professional) takes over management of the company; (3) CIRP period: 180 days + 90 day extension = 270 days maximum (amended to 330 days including litigation); (4) CoC (Committee of Creditors — financial creditors): evaluates resolution plans; (5) Resolution Plan approved by 66% CoC majority → NCLT approval → implementation; (6) No approved plan → Liquidation (waterfall priority: secured creditors > unsecured > government dues > equity). Notable resolutions: Essar Steel (₹49,211 crore — Arcelor Mittal), Bhushan Steel (₹35,000 crore — Tata Steel). IBBI (Insolvency and Bankruptcy Board of India) regulates IPs and process.
*Why A is wrong:* Banks don't directly liquidate — NCLT process is followed.
*Why C is wrong:* RBI is not the adjudicating authority — NCLT is.
*Why D is wrong:* Supreme Court is not the first adjudicating authority — NCLT is at first instance.

Q908HardBPSC Prelims

The distinction between NEFT, RTGS, and IMPS payment systems in India is:

AAll three operate in real-time, 24/7 basis

BNEFT — deferred net settlement (now 24/7, earlier batch processing); RTGS — Real-Time Gross Settlement (individual transactions settled immediately, minimum ₹2 lakh, 24/7 since Dec 2020); IMPS — Immediate Payment Service (real-time, 24/7, any amount up to ₹5 lakh)

CNEFT is for international transactions only

DRTGS is operated by SEBI; NEFT by RBI

Show Answer

✔ B — NEFT — deferred net settlement (now 24/7, earlier batch processing); RTGS — Real-Time Gross Settlement (individual transactions settled immediately, minimum ₹2 lakh, 24/7 since Dec 2020); IMPS — Immediate Payment Service (real-time, 24/7, any amount up to ₹5 lakh)

Payment Systems operated by RBI/NPCI: (1) NEFT (National Electronic Funds Transfer): Operated by RBI; deferred net settlement — transactions settled in batches; available 24x7 since December 2019; no minimum/maximum transaction limit; (2) RTGS (Real-Time Gross Settlement): Operated by RBI; settles each transaction individually in real-time; minimum transaction value ₹2 lakh; 24x7 since December 2020; used for large value transactions; (3) IMPS (Immediate Payment Service): Operated by NPCI (National Payments Corporation of India); available 24x7 including holidays; instant settlement; for retail payments up to ₹5 lakh; works through mobile banking; (4) UPI (Unified Payments Interface): NPCI operated; real-time, 24/7; for any amount (up to ₹1 lakh typically, ₹2 lakh for verified merchants); uses virtual payment address.
*Why A is wrong:* All three are now 24/7, but they differ in settlement mechanism (batch vs. real-time gross vs. immediate).
*Why C is wrong:* NEFT is for domestic transactions — international is through SWIFT.
*Why D is wrong:* Both RTGS and NEFT are operated by RBI — not SEBI.

Q913EasyBPSC Prelims

Regional Rural Banks (RRBs) were established in India in:

A1947

B1969 (bank nationalization year)

C1975 (based on Narasimham Committee recommendation)

D1982

Show Answer

✔ C — 1975 (based on Narasimham Committee recommendation)

Regional Rural Banks (RRBs) were established in 1975 based on the recommendations of the Narasimham Working Group (1975). The first RRB — Prathama Bank — was established on October 2, 1975 in Moradabad, UP. RRBs are set up under the Regional Rural Banks Act, 1976. Ownership: Central Government (50%) + Sponsor Bank (35%) + State Government (15%). Purpose: Provide banking and credit facilities particularly to small/marginal farmers, agricultural laborers, artisans, and small entrepreneurs in rural areas. RRBs operate in a single state. They have been amalgamated — from 196 RRBs at peak to 43 RRBs currently (post-2021 amalgamations). Bihar has Bihar Gramin Bank (sponsored by Central Bank of India) and Madhya Bihar Gramin Bank (sponsored by PNB).
*Why A is wrong:* 1947 — India's independence; RRBs didn't exist yet.
*Why B is wrong:* 1969 is nationalization of 14 major banks — RRBs were a different institution.
*Why D is wrong:* 1982 is NABARD's establishment year.

Q919EasyBPSC Prelims

India's largest bank by assets is:

AHDFC Bank (private)

BState Bank of India (SBI) — public sector bank; formed by merger of Imperial Bank of India and princely state banks in 1955

CICICI Bank

DPunjab National Bank

Show Answer

✔ B — State Bank of India (SBI) — public sector bank; formed by merger of Imperial Bank of India and princely state banks in 1955

State Bank of India (SBI) is India's largest bank by total assets, deposits, branches, and employees. Key facts: (1) Established 1955 by nationalizing the Imperial Bank of India (itself created in 1921 by merging three presidency banks); (2) Parent: Government of India (holds ~57% ownership); (3) Total assets: Over ₹60 lakh crore (~$700 billion); (4) Branches: Over 22,000 in India + overseas presence; (5) Associate Banks: 5 Associate Banks merged with SBI in 2017 (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore), making it vastly larger; (6) Bharatiya Mahila Bank merged in 2017; (7) Present at over 13,000 ATMs and extensive digital banking. Bihar has one of the highest SBI branch densities among states.
*Why A is wrong:* HDFC Bank is India's largest PRIVATE SECTOR bank — SBI is the largest overall.
*Why C is wrong:* ICICI Bank is the 2nd largest private sector bank.
*Why D is wrong:* PNB is a large public sector bank but smaller than SBI.

Economy — Budget

Q886EasyBPSC Prelims

In the Indian Union Budget, "Revenue Deficit" means:

ATotal government expenditure exceeds total government revenue

BGovernment's Revenue Expenditure exceeds Revenue Receipts — deficit in day-to-day operations (salaries, subsidies, interest) not covered by revenue income

CCapital expenditure exceeds capital receipts

DTax revenues fall short of non-tax revenues

Show Answer

✔ B — Government's Revenue Expenditure exceeds Revenue Receipts — deficit in day-to-day operations (salaries, subsidies, interest) not covered by revenue income

Budget Deficits in India: (1) Revenue Deficit = Revenue Expenditure − Revenue Receipts: measures the shortfall in operational/day-to-day finances; (2) Fiscal Deficit = Total Expenditure − Revenue Receipts − Non-Debt Capital Receipts: measures total government borrowing requirement (the most watched deficit); (3) Primary Deficit = Fiscal Deficit − Interest Payments: fiscal deficit minus interest — shows current borrowing excluding past debt obligations; (4) Effective Revenue Deficit = Revenue Deficit − Grants for Capital Asset Creation: shows pure consumption spending gap. Revenue Deficit implies government is borrowing even for current consumption — not desirable as it represents dissaving.
*Why A is wrong:* When total expenditure exceeds total revenue, it's the Fiscal Deficit (approximate).
*Why C is wrong:* Capital account shortfall is related to capital deficit, not revenue deficit.
*Why D is wrong:* Revenue Deficit is about expenditure vs. receipts on the revenue account, not tax vs. non-tax.

Economy — Trade Policy

Q888HardBPSC Prelims

The WTO (World Trade Organization) replaced which body and was established in:

AGATT; established in 1947

BUNCTAD; established in 1964

CGATT (General Agreement on Tariffs and Trade); WTO established January 1, 1995 as part of Uruguay Round (1986-1994) outcomes

DIMF; established in 1944

Show Answer

✔ C — GATT (General Agreement on Tariffs and Trade); WTO established January 1, 1995 as part of Uruguay Round (1986-1994) outcomes

The World Trade Organization (WTO) replaced GATT (General Agreement on Tariffs and Trade) and was established on January 1, 1995, as the outcome of the Uruguay Round of multilateral trade negotiations (1986–1994). GATT (1948) was a provisional agreement on trade — WTO is a permanent international organization with legal personality. WTO's key features: (1) Most Favored Nation (MFN) principle — treat all members equally; (2) National Treatment — treat foreign goods same as domestic after entering; (3) Dispute Settlement Mechanism (DSM); (4) Trade Policy Review; (5) Covers goods (GATT), services (GATS), and intellectual property (TRIPS). India is a founding member. WTO headquarters: Geneva. Current Director General: Ngozi Okonjo-Iweala (appointed 2021).
*Why A is wrong:* GATT was established in 1947, but the WTO (which replaced GATT) was established in 1995.
*Why B is wrong:* UNCTAD (1964) still exists separately; WTO didn't replace UNCTAD.
*Why D is wrong:* IMF was established in 1944 at Bretton Woods; WTO replaced GATT, not IMF.

Economy — Planning

Q889EasyBPSC Prelims

NITI Aayog replaced the Planning Commission in:

A2013

BJanuary 1, 2015

CApril 1, 2016

D2012

Show Answer

✔ B — January 1, 2015

NITI Aayog (National Institution for Transforming India) was established on January 1, 2015, replacing the Planning Commission (which was dissolved in 2014). Key differences from Planning Commission: (1) Planning Commission could allocate funds to states; NITI Aayog is purely a think-tank/advisory body — no fund allocation power; (2) NITI Aayog emphasizes cooperative federalism (states as equal partners); (3) NITI Aayog does not prepare Five-Year Plans (the 12th Five-Year Plan was the last: 2012–17); replaced by 3-year Action Plan, 7-year Medium-term Strategy, and 15-year Vision Document. Chairman: PM Narendra Modi (ex-officio). Vice Chairman and CEO: different appointees. The Governing Council includes all Chief Ministers and Lt. Governors.
*Why A is wrong:* 2013 — Planning Commission was still operational.
*Why C is wrong:* April 1, 2016 — NITI Aayog was already in operation by then.
*Why D is wrong:* 2012 — Planning Commission was still active (preparing 12th Five-Year Plan).

Q893HardBPSC Prelims

The NITI Aayog's "Aspirational Districts Programme" (ADP) was launched to:

ADevelop all districts equally

BFocus on the most backward districts (now called Aspirational Districts) in India — initially 115 districts identified; convergent effort on 49 key indicators across Education, Health, Agriculture, Basic Infrastructure, and Financial Inclusion; districts of Bihar feature prominently

CDevelop hill districts only

DFocus only on districts with smart city potential

Show Answer

✔ B — Focus on the most backward districts (now called Aspirational Districts) in India — initially 115 districts identified; convergent effort on 49 key indicators across Education, Health, Agriculture, Basic Infrastructure, and Financial Inclusion; districts of Bihar feature prominently

The Aspirational Districts Programme (ADP), launched in January 2018, identifies 115 districts across India that are backward on key development indicators. Objectives: (1) Rapid transformation of these districts through convergence (combining existing Central and State scheme resources); (2) Collaboration with State governments and Union Ministries; (3) Competition among districts on 49 indicators across 5 themes: Health & Nutrition, Education, Agriculture, Basic Infrastructure, Financial Inclusion & Skill Development; (4) Monthly ranking published (Delta ranking for progress). Bihar features prominently — 13 Bihar districts in the list including Araria, Aurangabad, Banka, Begusarai, Gaya, Jamui, Kaimur, Khagaria, Muzaffarpur, Nawada, Purnia, Sheohar, Sitamarhi. This has channeled massive central funds to Bihar's lagging districts.
*Why A is wrong:* ADP specifically targets the MOST BACKWARD districts — not all districts equally.
*Why C is wrong:* Hill districts are not the exclusive focus — it's cross-country backward districts.
*Why D is wrong:* Smart Cities Mission is a separate programme for urban areas.

Economy — Fiscal Policy

Q890HardBPSC Prelims

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 set deficit targets for the Union Government. Which of the following correctly describes its provisions and history?

AFRBM mandates zero fiscal deficit by 2010; never revised

BFRBM originally targeted eliminating Revenue Deficit and reducing Fiscal Deficit to 3% of GDP by 2008-09; N.K. Singh Committee (2017) recommended new FRBM target of Fiscal Deficit 3% of GDP with escape clauses for extraordinary circumstances

CFRBM was repealed and replaced by the Fiscal Management Act in 2015

DFRBM applies only to states, not the Central Government

Show Answer

✔ B — FRBM originally targeted eliminating Revenue Deficit and reducing Fiscal Deficit to 3% of GDP by 2008-09; N.K. Singh Committee (2017) recommended new FRBM target of Fiscal Deficit 3% of GDP with escape clauses for extraordinary circumstances

The FRBM Act, 2003: (1) Original targets: Zero Revenue Deficit by 2008-09; Fiscal Deficit of 3% of GDP by 2008-09; (2) These targets were revised multiple times due to the 2008 global financial crisis, stimulus packages, COVID-19, etc.; (3) N.K. Singh Committee (2017): Recommended retaining 3% Fiscal Deficit target by 2020-21; debt target of 60% of GDP (Centre 40% + States 20%); introduced escape clauses for natural calamities, national security, structural reforms — allowing deviation of 0.5% of GDP; (4) COVID-19 led to massive deviation from FRBM targets; special windows were opened. States have their own FRBMs. The Central Government's Fiscal Deficit has ranged from 3.5% to 9.2% in recent years due to COVID and capital expenditure push.
*Why A is wrong:* Zero fiscal deficit was never the FRBM target — zero REVENUE deficit by 2008-09 was the target.
*Why C is wrong:* FRBM Act 2003 is still in force — not repealed.
*Why D is wrong:* FRBM applies to the CENTRAL Government primarily; states have separate FRBMs.

Q926HardBPSC Prelims

The 15th Finance Commission (2020-25) devolved what percentage of central taxes to states, and what was its key recommendation regarding Bihar?

A41%; no specific Bihar recommendation

B41% devolution; recommended higher grants for states with large populations and poor infrastructure; Bihar received specific grants for health, education, and disaster relief — being a "revenue-deficit state" Bihar receives Post-Devolution Revenue Deficit (PDRD) grants

C45%; all states to receive equal per capita grant

D38%; Bihar received the highest per capita grant

Show Answer

✔ B — 41% devolution; recommended higher grants for states with large populations and poor infrastructure; Bihar received specific grants for health, education, and disaster relief — being a "revenue-deficit state" Bihar receives Post-Devolution Revenue Deficit (PDRD) grants

The 15th Finance Commission (Chairman: N.K. Singh; Period: 2021-22 to 2025-26): (1) Devolution: 41% of central divisible pool to states (same as 14th FC's 42%, reduced by 1% to account for J&K becoming a UT); (2) Criteria for distribution among states: Population (15%), Demographic Change (12.5%), Income Distance (45%), Forest and Ecology (10%), Tax Effort (2.5%), Area (15%); (3) Post-Devolution Revenue Deficit (PDRD) Grants: For states unable to meet their revenue expenditure even after devolution — Bihar is a major recipient; (4) Sector-specific grants: Health, education, disaster risk management, urban local bodies, rural local bodies; (5) Bihar — being a low per-capita income state with high population — benefits significantly from Income Distance criterion (higher weight to poorer states) and PDRD grants.
*Why A is wrong:* Bihar does have specific grant recommendations as a revenue-deficit state.
*Why C is wrong:* 45% is not the actual devolution; equal per capita grants is not the methodology.
*Why D is wrong:* 38% is lower than the actual 41% devolution.

Economy — GST

Q892EasyBPSC Prelims

The Goods and Services Tax (GST) in India was implemented on:

AApril 1, 2017

BJuly 1, 2017

CJanuary 1, 2016

DMarch 31, 2018

Show Answer

✔ B — July 1, 2017

India's Goods and Services Tax (GST) was implemented on July 1, 2017, replacing a complex web of Central and State indirect taxes (Central Excise, Service Tax, VAT, Octroi, Entry Tax, etc.). GST is a comprehensive destination-based, multi-stage, dual-structure indirect tax. Dual GST: CGST (Central GST) collected by Centre + SGST (State GST) collected by States for intra-state transactions; IGST (Integrated GST) for inter-state transactions. GST Council (Article 279A) is chaired by Union Finance Minister with all state Finance Ministers. Tax slabs: 0%, 5%, 12%, 18%, 28% (plus cess on sin goods). Petroleum products, alcohol for human consumption kept outside GST. GST enabled by 101st Constitutional Amendment (2016).
*Why A is wrong:* April 1, 2017 — GST not yet implemented (budget date).
*Why C is wrong:* January 1, 2016 — GST was far from implementation.
*Why D is wrong:* March 31, 2018 — GST had already been operational for about 9 months.

Economy — Insurance

Q895EasyBPSC Prelims

The Insurance Regulatory and Development Authority of India (IRDAI) regulates:

ABanking sector

BSecurities market

CInsurance industry (life, general, health, reinsurance) in India

DPension funds

Show Answer

✔ C — Insurance industry (life, general, health, reinsurance) in India

IRDAI (Insurance Regulatory and Development Authority of India) is the apex regulatory body for the insurance sector in India, established under the IRDA Act, 1999. Functions: (1) Licensing and regulating insurance companies; (2) Protecting policyholder interests; (3) Promoting efficiency and growth of the insurance sector; (4) Setting solvency margins and financial norms for insurers; (5) Framing tariff rates for certain insurance classes. Key insurance companies: Life Insurance Corporation (LIC — public sector, largest), New India Assurance (general insurance), ICICI Prudential, HDFC Life (private). IRDAI headquarters: Hyderabad (moved from Delhi in 2001). India has a very low insurance penetration compared to global standards. FDI in insurance: raised to 74% (previously 49%, then 74% in 2021).
*Why A is wrong:* Banking sector is regulated by RBI.
*Why B is wrong:* Securities market is regulated by SEBI (Securities and Exchange Board of India).
*Why D is wrong:* Pension funds are regulated by PFRDA (Pension Fund Regulatory and Development Authority).

Economy — Public Finance

Q896HardBPSC Prelims

Direct taxes and indirect taxes differ in which fundamental way?

ADirect taxes are paid to state governments; indirect taxes to central government

BDirect taxes are borne by the person on whom they are imposed (incidence and impact on same person — income tax, corporate tax, wealth tax); indirect taxes are shifted to another (burden passed to consumer — GST, customs duty, excise)

CDirect taxes are mandatory; indirect taxes are optional

DDirect taxes fund defence; indirect taxes fund social welfare

Show Answer

✔ B — Direct taxes are borne by the person on whom they are imposed (incidence and impact on same person — income tax, corporate tax, wealth tax); indirect taxes are shifted to another (burden passed to consumer — GST, customs duty, excise)

Distinction between Direct and Indirect Taxes: Direct Taxes: Impact (assessment) and Incidence (burden) fall on the SAME person — cannot be shifted; Examples: Income Tax, Corporate Tax, Capital Gains Tax, Securities Transaction Tax, Wealth Tax (abolished 2015); Progressive (higher income → higher rate); Collected by CBDT (Central Board of Direct Taxes) under Finance Ministry. Indirect Taxes: Impact (assessment) falls on ONE person but Incidence (burden) is SHIFTED to another (typically consumer); Examples: GST (CGST + SGST + IGST), Customs Duty, Central Excise (on petroleum, alcohol outside GST); Regressive in nature (same rate regardless of income); Collected by CBIC (Central Board of Indirect Taxes and Customs). Direct taxes are generally considered more equitable as they're linked to ability to pay.
*Why A is wrong:* Both direct and indirect taxes can be central or state — income tax is central, SGST is state.
*Why C is wrong:* Both are legally mandatory where applicable.
*Why D is wrong:* Revenue goes into the Consolidated Fund — no such earmarking.

Economy — Poverty

Q897MediumBPSC Prelims

The Tendulkar Committee (2009) revised India's poverty line using which methodology?

ACalorie-based minimum nutrition approach

BPoverty line based on per capita per month expenditure — ₹446 per month in rural areas and ₹578 per month in urban areas (at 2004-05 prices) — using the Mixed Reference Period (MPCE) approach from NSSO household surveys

CMulti-Dimensional Poverty Index (MPI) methodology

DInternational dollar-per-day standard (World Bank approach)

Show Answer

✔ B — Poverty line based on per capita per month expenditure — ₹446 per month in rural areas and ₹578 per month in urban areas (at 2004-05 prices) — using the Mixed Reference Period (MPCE) approach from NSSO household surveys

The Tendulkar Committee (2009, chaired by Suresh Tendulkar) revised India's poverty line away from the calorie-norm approach to an expenditure-based approach using Mixed Reference Period (MRP) consumption expenditure data from NSSO surveys. The 2011-12 estimates: Poverty line ≈ ₹816/month (rural) and ₹1000/month (urban). National poverty ratio: 21.9% in 2011-12 (earlier estimates were lower/higher depending on methodology). Criticisms: poverty line too low (barely $1.9/day). The Rangarajan Committee (2014) revised it upward: ₹972/month (rural), ₹1407/month (urban) — poverty: 29.5% in 2011-12. The calorie-based approach (Lakdawala, 1993) was the earlier method. India's current poverty measurement uses MPI (Multi-Dimensional Poverty Index) alongside income poverty.
*Why A is wrong:* Calorie-based approach was the OLD Lakdawala Committee methodology; Tendulkar moved away from it.
*Why C is wrong:* MPI is a separate methodology used by UNDP alongside income poverty — not what Tendulkar used.
*Why D is wrong:* International $1.9/day is World Bank's global poverty line — Tendulkar used India-specific consumption data.

Economy — Development

Q898EasyBPSC Prelims

The Human Development Index (HDI) is published by:

AWorld Bank

BIMF

CUNDP (United Nations Development Programme) — annually in the Human Development Report

DRBI

Show Answer

✔ C — UNDP (United Nations Development Programme) — annually in the Human Development Report

The Human Development Index (HDI) is published annually by UNDP (United Nations Development Programme) in the Human Development Report. HDI was conceptualized by Pakistani economist Mahbub ul Haq and Indian economist Amartya Sen in 1990. HDI measures three dimensions: (1) Long and healthy life — Life Expectancy at Birth; (2) Knowledge — Education Index (Mean Years of Schooling + Expected Years of Schooling); (3) Decent standard of living — GNI per capita (PPP). HDI range: 0 to 1 (1 = highest development). India's HDI rank: 134 out of 193 (2023/2024 report). HDI classification: Very High (0.8+), High (0.7-0.8), Medium (0.55-0.7), Low (<0.55). India is in the "Medium Human Development" category.
*Why A is wrong:* World Bank publishes the World Development Report and Ease of Doing Business Index (now discontinued).
*Why B is wrong:* IMF publishes World Economic Outlook.
*Why D is wrong:* RBI publishes monetary policy and banking reports, not HDI.

Q922EasyBPSC Prelims

The Sustainable Development Goals (SDGs) adopted by the UN in 2015 consist of:

A7 goals to be achieved by 2025

B17 goals to be achieved by 2030 — covering poverty, hunger, health, education, gender equality, water, energy, economic growth, inequality, climate, marine life, land biodiversity, peace, justice, partnerships

C10 goals with no specific timeline

D25 goals to replace the Millennium Development Goals

Show Answer

✔ B — 17 goals to be achieved by 2030 — covering poverty, hunger, health, education, gender equality, water, energy, economic growth, inequality, climate, marine life, land biodiversity, peace, justice, partnerships

The Sustainable Development Goals (SDGs) were adopted at the UN Sustainable Development Summit in September 2015, replacing the Millennium Development Goals (MDGs — 2000-2015). SDGs: 17 Goals + 169 Targets + 232 indicators to be achieved by 2030. Key SDGs relevant to India/Bihar: SDG 1 (No Poverty), SDG 2 (Zero Hunger), SDG 3 (Good Health), SDG 4 (Quality Education), SDG 5 (Gender Equality), SDG 6 (Clean Water), SDG 8 (Decent Work), SDG 13 (Climate Action). India's SDG performance: NITI Aayog publishes India's SDG Index annually. Bihar's SDG Index scores have improved but remain among the lower-ranking states. Bihar performs poorly on SDG 5 (gender), SDG 3 (health), SDG 4 (education).
*Why A is wrong:* 7 goals is not correct — SDGs have 17 goals.
*Why C is wrong:* SDGs have a clear 2030 deadline.
*Why D is wrong:* SDGs have 17 goals (not 25); they DO replace MDGs.

Economy — Agriculture

Q900MediumBPSC Prelims

The Minimum Support Price (MSP) in India is:

AThe price at which farmers must sell to the government

BThe minimum price declared by the government for specific crops to protect farmers from market price fluctuations — procurement at MSP done by FCI, NAFED, and state agencies; covers 23 crops

CThe maximum price consumers can pay for food grains

DThe price imported food grains must be sold at

Show Answer

✔ B — The minimum price declared by the government for specific crops to protect farmers from market price fluctuations — procurement at MSP done by FCI, NAFED, and state agencies; covers 23 crops

Minimum Support Price (MSP): (1) Government declares MSP before each crop season for 23 crops (14 Kharif + 6 Rabi + 2 others + copra); (2) MSP provides a price floor — if market prices fall below MSP, government agencies procure at MSP through NAFED (NAFED for oilseeds/pulses), FCI (wheat/rice), and state agencies; (3) CACP (Commission for Agricultural Costs and Prices) recommends MSP to the Cabinet; (4) MSP currently calculated on A2+FL cost (actual paid out costs + family labor) plus 50% profit (PM-AASHA 2018 commitment) — earlier on C2 cost controversy; (5) MSP is NOT legally mandatory — procurement depends on government decisions. The farm laws controversy (2020–2021) related partly to demands for legal guarantee of MSP. Bihar doesn't have strong MSP procurement infrastructure.
*Why A is wrong:* MSP is not compulsory to sell to the government — it's a price floor where government OFFERS to buy.
*Why C is wrong:* Maximum price (ceiling) is different — MSP is a minimum, not maximum.
*Why D is wrong:* Import price controls are separate policy instruments.

Q909MediumBPSC Prelims

PM Fasal Bima Yojana (PMFBY) was launched in 2016 to provide:

AFree fertilizers to all farmers

BCrop insurance to farmers at low premiums (2% of sum insured for Kharif crops, 1.5% for Rabi, 5% for horticulture) — rest of premium paid by Central and State Governments equally; covers area as unit

CIrrigation water at subsidized rates

DMinimum Support Price guarantee for all crops

Show Answer

✔ B — Crop insurance to farmers at low premiums (2% of sum insured for Kharif crops, 1.5% for Rabi, 5% for horticulture) — rest of premium paid by Central and State Governments equally; covers area as unit

Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched on February 18, 2016, replacing earlier schemes (NAIS and MNAIS). Key features: (1) Premium: 2% for Kharif crops, 1.5% for Rabi crops, 5% for annual commercial/horticultural crops — rest paid by Centre and State (50:50 or some variation for NE states); (2) Coverage: Natural calamities (drought, flood, hailstorm, cyclone, inundation, pest/disease); Post-harvest losses for 2 weeks; Localized risks; (3) Unit: Village/village panchayat as the basic unit; (4) Technology: Satellite data, smartphone apps for loss estimation; (5) Made voluntary from 2020 for loanee farmers (earlier mandatory for crop loan borrowers). Bihar has significant PMFBY enrollment given its flood/drought-prone status. Criticism: Insurance companies making profits in normal years.
*Why A is wrong:* Free fertilizers are under different subsidy schemes.
*Why C is wrong:* Irrigation subsidies are under different irrigation programmes.
*Why D is wrong:* MSP guarantee is demanded but not yet provided — PMFBY is specifically crop insurance.

Q911HardBPSC Prelims

The "E-NAM" (Electronic National Agriculture Market) platform was launched to:

ADigitize all farm records and land ownership

BCreate a unified national online trading platform for agricultural commodities — to reform the APMC (Agriculture Produce Market Committee) system, enable farmers to get competitive prices through online bidding across mandis

CProvide online soil testing services to farmers

DOnline portal for applying for Kisan Credit Cards

Show Answer

✔ B — Create a unified national online trading platform for agricultural commodities — to reform the APMC (Agriculture Produce Market Committee) system, enable farmers to get competitive prices through online bidding across mandis

e-NAM (Electronic National Agriculture Market) was launched by the Government of India in April 2016 to create a unified national market for agricultural commodities. Key features: (1) Online trading platform connecting APMC mandis across India; (2) Farmers can sell to buyers across the country, not just local mandi traders; (3) Online bidding ensures competitive price discovery; (4) Reduces role of middlemen; (5) As of 2023, 1,361 mandis of 23 states/UTs integrated on e-NAM; (6) Promotes transparency in commodity prices; (7) e-NAM connects with 193 commodities. APMCs (Agriculture Produce Market Committees) have traditionally been state-level institutions with local monopolies — e-NAM's integration enables inter-state trading. The Farm Laws 2020 controversy related partly to bypassing APMCs — they were repealed in 2021.
*Why A is wrong:* Land records digitization is a separate scheme (DILRMP — Digital India Land Records Modernisation Programme).
*Why C is wrong:* Soil testing is under Soil Health Card scheme.
*Why D is wrong:* Kisan Credit Cards are applied through banks/cooperative societies — not e-NAM.

Q927MediumBPSC Prelims

The "Green Revolution" in India primarily benefited which states and which crops?

AAll states equally; all crops

BPrimarily Punjab, Haryana, and western UP; primarily wheat (first wave, 1960s-70s) and rice (second wave); introduced High Yielding Varieties (HYV), chemical fertilizers, irrigation — "IR-8" rice variety and "Kalyansona" wheat were breakthrough varieties

CBihar, Bengal, and Odisha; rice and jute

DMaharashtra, Gujarat, and Rajasthan; cotton and pulses

Show Answer

✔ B — Primarily Punjab, Haryana, and western UP; primarily wheat (first wave, 1960s-70s) and rice (second wave); introduced High Yielding Varieties (HYV), chemical fertilizers, irrigation — "IR-8" rice variety and "Kalyansona" wheat were breakthrough varieties

Green Revolution (1960s-1970s): (1) Initiated by M.S. Swaminathan (India) and Norman Borlaug (international — Nobel Peace Prize 1970); (2) Key elements: High Yielding Varieties (HYV) of wheat and rice, chemical fertilizers, pesticides, assured irrigation, mechanization; (3) Benefited: Punjab and Haryana most (wheat); Western UP (wheat/rice); Tamil Nadu and AP (rice); (4) Bihar largely missed the Green Revolution due to: Poor irrigation infrastructure (despite major rivers), fragmented landholdings, delayed implementation of land reforms, lack of credit; (5) Criticism: Soil degradation, groundwater depletion, unequal regional distribution, decline of crop diversity, neglect of pulses/oilseeds. Second Green Revolution proposals target Bihar, Eastern India, and pulses/oilseeds. E-Krishnamitra and Pradhan Mantri Krishi Sinchai Yojana are trying to extend benefits to eastern India.
*Why A is wrong:* Green Revolution was NOT equal across states — it favored irrigated northwest India.
*Why C is wrong:* Bihar and Bengal largely MISSED the Green Revolution benefits.
*Why D is wrong:* Maharashtra/Gujarat/Rajasthan were not the primary beneficiaries.

Economy — Schemes

Q901EasyBPSC Prelims

Pradhan Mantri Jan Dhan Yojana (PMJDY), launched in 2014, primarily aimed to:

AProvide jobs to unemployed youth

BFinancial inclusion — open bank accounts for every unbanked household (zero balance accounts with RuPay debit card, accident insurance of ₹1 lakh, and life insurance of ₹30,000)

CProvide free rations to BPL families

DBuild rural roads and infrastructure

Show Answer

✔ B — Financial inclusion — open bank accounts for every unbanked household (zero balance accounts with RuPay debit card, accident insurance of ₹1 lakh, and life insurance of ₹30,000)

Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on August 28, 2014 — PM Modi's first major scheme — for financial inclusion. Key features: (1) Zero-balance savings account (Basic Savings Bank Deposit Account — BSBDA); (2) RuPay debit card with built-in accident insurance of ₹1 lakh (now ₹2 lakh for new accounts); (3) Life insurance cover of ₹30,000; (4) Overdraft facility up to ₹10,000 (for accounts with good history); (5) No minimum balance required. Achievement: Over 50 crore accounts opened (as of 2023); Bihar has opened crores of accounts. PMJDY enabled Direct Benefit Transfer (DBT) — subsidies and benefits transferred directly to bank accounts (LPG subsidy, PM-KISAN, etc.), eliminating middlemen.
*Why A is wrong:* PMJDY is about banking/financial inclusion — not employment (MGNREGS provides employment).
*Why C is wrong:* Free rations are under the National Food Security Act/PM Garib Kalyan Anna Yojana.
*Why D is wrong:* Rural roads are under PMGSY (Pradhan Mantri Gram Sadak Yojana).

Economy — External Sector

Q902HardBPSC Prelims

India's "Current Account Deficit" (CAD) is primarily driven by which factor?

AGovernment's domestic borrowing

BTrade deficit (merchandise imports > exports, especially oil, gold, and electronics) plus net invisibles — CAD financed through capital account surpluses (FDI, FPI, ECBs)

CFDI inflows exceeding FPI outflows

DBudget deficit of the Union Government

Show Answer

✔ B — Trade deficit (merchandise imports > exports, especially oil, gold, and electronics) plus net invisibles — CAD financed through capital account surpluses (FDI, FPI, ECBs)

Current Account = Merchandise Trade Balance + Invisibles (Services + Transfers + Income). India typically runs a Current Account Deficit (CAD) because: (1) Merchandise trade deficit: India imports crude oil (~$130-180 billion annually), gold (~$35-45 billion), electronics, machinery — exceeds exports (engineering goods, petroleum products, gems & jewellery, textiles); (2) Partially offset by: Software/IT services exports (~$250 billion in FY24), remittances (~$125 billion — world's largest recipient). CAD is financed through: FDI inflows (~$70-80 billion), FPI inflows, External Commercial Borrowings (ECBs), NRI deposits. Large CAD = higher demand for foreign exchange = depreciation pressure on Rupee. India's CAD: ~1-3% of GDP in normal years; rose to 4.4% in FY23 due to high oil prices.
*Why A is wrong:* Government domestic borrowing is fiscal policy — related to fiscal deficit, not directly CAD.
*Why C is wrong:* FDI/FPI surpluses appear in the CAPITAL account (not current account).
*Why D is wrong:* Budget deficit is a domestic fiscal concept — related to but not the same as CAD.

Q910EasyBPSC Prelims

Foreign Direct Investment (FDI) refers to:

AShort-term portfolio investment in Indian stocks by foreigners

BLong-term investment by a foreign entity in an Indian business with significant ownership/control (typically 10%+ equity) — creates productive capacity; opposite of FPI which is short-term portfolio investment

CIndian government borrowing from foreign governments

DForeign tourists spending money in India

Show Answer

✔ B — Long-term investment by a foreign entity in an Indian business with significant ownership/control (typically 10%+ equity) — creates productive capacity; opposite of FPI which is short-term portfolio investment

Foreign Direct Investment (FDI): (1) Long-term investment by foreign entity in Indian business; (2) Involves ownership of at least 10% equity; (3) Creates productive assets — factories, offices, infrastructure; (4) Two routes: Automatic Route (no prior government approval, subject to sectoral caps); Approval Route (FIPB/Government approval needed); (5) FDI cap varies by sector: 100% in manufacturing, 100% in retail (single brand), 51% in multi-brand retail, 74% in defence, 74% in insurance, 100% in infrastructure. India received ~$71 billion FDI in FY22-23. Key FDI sources: Mauritius, Singapore, USA, UAE (routing through these for tax benefits). FPI (Foreign Portfolio Investment) is short-term — stocks and bonds; "hot money" that can leave quickly.
*Why A is wrong:* Short-term portfolio investment is FPI (Foreign Portfolio Investment) — not FDI.
*Why C is wrong:* Government borrowing is "External Debt" or "ECB" (External Commercial Borrowing) — different from FDI.
*Why D is wrong:* Tourist spending is counted in the "travel" component of services trade/current account.

Economy — Agricultural Finance

Q903MediumBPSC Prelims

MUDRA (Micro Units Development and Refinance Agency) was established in 2015 to:

AProvide crop insurance to farmers

BProvide credit to non-corporate, non-farm micro and small enterprises through banks, MFIs, and NBFCs — three tiers: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), Tarun (₹5 lakh to ₹10 lakh)

CProvide loans for housing construction in rural areas

DFinance import-export businesses

Show Answer

✔ B — Provide credit to non-corporate, non-farm micro and small enterprises through banks, MFIs, and NBFCs — three tiers: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), Tarun (₹5 lakh to ₹10 lakh)

MUDRA (Micro Units Development and Refinance Agency) was established in April 2015 under PMMY (Pradhan Mantri MUDRA Yojana). It provides loans (not directly to borrowers but through banks, MFIs, NBFCs) to micro-enterprises engaged in manufacturing, trading, and services. Three categories: (1) Shishu loans — up to ₹50,000 (micro units in early stage); (2) Kishore loans — ₹50,001 to ₹5 lakh (established micro units needing growth capital); (3) Tarun loans — ₹5 lakh to ₹10 lakh (bigger micro enterprises). A new category — Tarun Plus — ₹10-20 lakh (added later). MUDRA loans are collateral-free. Borrowers include street vendors, small manufacturers, dairy, artisans. Bihar has been a major beneficiary with millions of MUDRA loans.
*Why A is wrong:* Crop insurance is under PMFBY (Pradhan Mantri Fasal Bima Yojana).
*Why C is wrong:* Rural housing loans are under PMAY-Grameen (PM Awas Yojana).
*Why D is wrong:* Import-export finance is provided by EXIM Bank.

Economy — Trade

Q906MediumBPSC Prelims

Special Economic Zones (SEZs) in India are governed by:

AForeign Investment Promotion Board (FIPB) regulations

BThe SEZ Act, 2005 — providing customs-duty free zones for manufacturing and services exports; duty-free imports of capital goods; single-window clearance; tax benefits

CEXIM Bank's export promotion guidelines

DRBI's external commercial borrowing norms

Show Answer

✔ B — The SEZ Act, 2005 — providing customs-duty free zones for manufacturing and services exports; duty-free imports of capital goods; single-window clearance; tax benefits

Special Economic Zones (SEZs) in India are governed by the SEZ Act, 2005 and SEZ Rules, 2006. Key features: (1) Duty-free import of goods for production in SEZ; (2) Single-window clearance for businesses; (3) Tax holidays (income tax and indirect tax benefits); (4) Foreign exchange transactions liberalized; (5) Labour law flexibility for manufacturing; (6) SEZ developers get income tax deduction on profits; (7) Treated as a foreign territory for customs purposes. SEZs are set up by developers (private, public, or joint) and can be for specific products/sectors or multi-product. India has 200+ functional SEZs. Notable SEZs: GIFT City (Gujarat — financial services SEZ), SEEPZ (Mumbai), Noida SEZ, Falta SEZ (West Bengal). Bihar: Limited SEZ presence; some textile/garment SEZs proposed. Criticism: "Land banks" accusation, underutilization.
*Why A is wrong:* FIPB was abolished in 2017; FDI approval is now largely under automatic route or FIPB's successor.
*Why C is wrong:* EXIM Bank provides financing — not SEZ governance.
*Why D is wrong:* RBI ECB norms relate to overseas borrowing — different from SEZ governance.

Q917HardBPSC Prelims

India's "Make in India" initiative was launched in 2014 to:

ABan all imports into India

BPromote India as a global manufacturing hub — targeting 25% contribution of manufacturing to GDP (from ~15%), job creation for 100 million by 2022, focusing on 25 sectors including automobiles, electronics, aerospace, textiles, pharmaceuticals

CEncourage Indians to buy only Indian-made goods

DCreate 100 new industrial parks in one year

Show Answer

✔ B — Promote India as a global manufacturing hub — targeting 25% contribution of manufacturing to GDP (from ~15%), job creation for 100 million by 2022, focusing on 25 sectors including automobiles, electronics, aerospace, textiles, pharmaceuticals

Make in India was launched on September 25, 2014 by PM Narendra Modi. Objectives: (1) Increase manufacturing sector's GDP contribution to 25% (from ~15–16%); (2) Create 100 million jobs in manufacturing by 2022; (3) Make India a global manufacturing destination — FDI, technology transfer, ease of doing business; (4) Initially 25 focus sectors (now 36, added defense, tourism, wellness etc.); Key initiatives under Make in India: Production Linked Incentive (PLI) scheme for various sectors (electronics, mobile phones, pharmaceuticals, textiles, auto, drones, etc.); Dedicated freight corridors; Industrial corridors (Delhi-Mumbai, Chennai-Bengaluru); Logistics improvements. PLI schemes (launched 2020-21) have attracted significant manufacturing investment, especially in mobile phones (Apple/Foxconn in India).
*Why A is wrong:* Make in India doesn't ban imports — it promotes domestic manufacturing while keeping trade open.
*Why C is wrong:* "Vocal for Local" is a different slogan — Make in India is about production, not just consumption.
*Why D is wrong:* 100 industrial parks in one year is not the Make in India target.

Economy — Government Schemes

Q912MediumBPSC Prelims

The PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) scheme provides:

AFree seeds and fertilizers to all farmers

BDirect income support of ₹6,000 per year (in 3 equal instalments of ₹2,000) to all landholder farmer families — transferred directly to bank accounts

CCrop insurance at zero premium for small farmers

DIrrigation facility for 2 acres of land free of cost

Show Answer

✔ B — Direct income support of ₹6,000 per year (in 3 equal instalments of ₹2,000) to all landholder farmer families — transferred directly to bank accounts

PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) was launched in December 2018 (effective from December 1, 2018) to provide income support to farmers. Key features: (1) ₹6,000 per year in three equal instalments of ₹2,000 (every 4 months); (2) Covers all landholder farmer families (regardless of land size — originally only small/marginal farmers with <2 ha); (3) Transferred directly to bank accounts via DBT; (4) Beneficiaries: ~11 crore farmers; (5) Excludes institutional landholders, income tax payers, high-salary government employees. PM-KISAN is fully funded by the Central Government. Bihar: Millions of farmers have been beneficiaries. The scheme was initially for small/marginal farmers and expanded to all farmers in May 2019.
*Why A is wrong:* Free seeds/fertilizers are under different schemes — PM-KISAN is cash income support.
*Why C is wrong:* Zero-premium crop insurance is under PMFBY (different scheme).
*Why D is wrong:* Irrigation provision is under PM Krishi Sinchayee Yojana.

Economy — Monetary Policy

Q915MediumBPSC Prelims

The Open Market Operations (OMO) by RBI refer to:

AOpening new bank branches in rural areas

BRBI buying or selling government securities (G-Secs) in the open market to inject or absorb liquidity from the banking system — buying injects money (expansionary); selling absorbs money (contractionary)

CAllowing foreign investors to buy Indian company shares

DOpening the economy to foreign trade

Show Answer

✔ B — RBI buying or selling government securities (G-Secs) in the open market to inject or absorb liquidity from the banking system — buying injects money (expansionary); selling absorbs money (contractionary)

Open Market Operations (OMOs) are one of RBI's key monetary policy instruments for liquidity management: (1) When RBI BUYS government securities from banks → banks receive cash → money supply increases (expansionary OMO); (2) When RBI SELLS government securities to banks → banks pay cash → money supply decreases (contractionary OMO); (3) OMOs are used to manage long-term liquidity in the banking system (Repo/Reverse Repo for short-term); (4) During COVID-19, RBI conducted large-scale OMO purchases to inject liquidity (similar to Quantitative Easing in advanced economies); (5) G-SAP (Government Securities Acquisition Programme) was a structured OMO launched in 2021 to give markets certainty about RBI's bond purchases. OMOs also help manage government bond yields.
*Why A is wrong:* Opening bank branches is branch expansion — not OMO.
*Why C is wrong:* Foreign investors buying shares is FPI — different from OMO.
*Why D is wrong:* Opening the economy to trade is trade policy — not monetary policy OMO.

Economy — Inclusive Growth

Q918MediumBPSC Prelims

The Saansad Adarsh Gram Yojana (SAGY) was launched to:

AProvide ₹1 crore to each MP for development

BMPs adopt villages (one each year) and develop them holistically — social, economic, and cultural model villages using existing Central and State schemes; focus on infrastructure, social harmony, community participation

CProvide free internet to all villages in India

DMandatory afforestation by MPs in their constituency

Show Answer

✔ B — MPs adopt villages (one each year) and develop them holistically — social, economic, and cultural model villages using existing Central and State schemes; focus on infrastructure, social harmony, community participation

Saansad Adarsh Gram Yojana (SAGY) was launched on October 11, 2014 (Jaiprakash Narayan's birthday — chosen by PM Modi). Key features: (1) Each Member of Parliament (Lok Sabha and Rajya Sabha) must adopt one gram panchayat (village cluster) and develop it as a model village; (2) 2 more villages to be adopted by 2019, and one each for 2019-24 and 2024-29 periods; (3) Development is not by providing additional funds, but by converging and optimizing existing Central/State schemes; (4) Focus on: basic amenities (roads, electricity, sanitation), education quality, health care, social harmony, e-governance; (5) No specific budget allocation — village plans prepared by MPs with district administration. Bihar MPs have adopted several villages under SAGY.
*Why A is wrong:* MPLADS (Members of Parliament Local Area Development Scheme) gives MPs ₹5 crore annually — different from SAGY.
*Why C is wrong:* Free internet to villages is under BharatNet project.
*Why D is wrong:* Afforestation is not the focus of SAGY.

Economy — Urban Development

Q920HardBPSC Prelims

Smart Cities Mission was launched in 2015. How many cities were to be developed as Smart Cities in the original mission?

A50 cities

B100 cities — in phases; cities compete through "City Challenge" to qualify; ₹48,000 crore central funding over 5 years (now extended) for area-based development and pan-city solutions

C200 cities

D500 cities

Show Answer

✔ B — 100 cities — in phases; cities compete through "City Challenge" to qualify; ₹48,000 crore central funding over 5 years (now extended) for area-based development and pan-city solutions

Smart Cities Mission was launched on June 25, 2015 with 100 cities to be developed. Key features: (1) City Challenge (competition-based selection): Cities compete by proposing innovative solutions; (2) Two components: Area-Based Development (retrofitting, redevelopment, greenfield development of a specific area) + Pan-city solutions (IT-driven improvements across the entire city); (3) ₹500 crore per city per year (₹48,000 crore total Central funding over 5 years, now extended to 2024); (4) SPV (Special Purpose Vehicle) created for each smart city to implement projects; (5) Focus areas: E-governance, waste management, water management, public transport, affordable housing, energy efficiency. Bihar's Smart Cities: Bhagalpur, Biharsharif, Muzaffarpur selected. Mission completion extended to June 2024 and beyond.
*Why A is wrong:* 50 cities is too few — the mission originally targeted 100 cities.
*Why C is wrong:* 200 cities exceeds the actual target.
*Why D is wrong:* 500 cities is the AMRUT (Atal Mission for Rejuvenation and Urban Transformation) coverage.

Economy — Taxation

Q923HardBPSC Prelims

The Income Tax Act, 1961 in India has which of the following as the source of tax revenue provision?

ASchedule 7 of the Constitution (State List, Entry 82)

BUnion List Entry 82 of the 7th Schedule — Parliament has exclusive power to levy income tax (other than agricultural income which is a state subject under Entry 46 of State List)

CConcurrent List — both Centre and States can levy income tax

DRBI Act empowers Parliament to levy income tax

Show Answer

✔ B — Union List Entry 82 of the 7th Schedule — Parliament has exclusive power to levy income tax (other than agricultural income which is a state subject under Entry 46 of State List)

Constitutional basis for Income Tax: (1) Income Tax is in the Union List (List I), Entry 82 of the 7th Schedule — Parliament has exclusive power to levy taxes on income other than agricultural income; (2) Agricultural Income Tax is in the State List (List II), Entry 46 — State governments can levy tax on agricultural income (few states do so); (3) The Income Tax Act, 1961 (with annual amendments through Finance Acts) governs income tax in India; (4) CBDT (Central Board of Direct Taxes) administers income tax collection; (5) The Finance Commission decides the share of income tax revenue to be distributed to states under Article 280 (currently 41% devolution to states per 15th Finance Commission). Surcharge on income tax goes entirely to Centre.
*Why A is wrong:* Entry 82 is in the UNION LIST (List I), not State List.
*Why C is wrong:* Income tax (other than agricultural) is NOT in the Concurrent List — it's exclusively Parliament's.
*Why D is wrong:* RBI Act governs banking/monetary policy — not income tax.

Economy — Microfinance

Q924MediumBPSC Prelims

Self-Help Groups (SHGs) in India primarily serve:

ALarge corporations for bulk lending

BGroups of 10-20 individuals (typically women from similar socioeconomic backgrounds) who save regularly and access credit from banks through SHG-Bank Linkage Programme — largest microfinance model in the world; NABARD promoted

CIndustrial workers' unions for welfare funds

DGovernment employees for housing loans

Show Answer

✔ B — Groups of 10-20 individuals (typically women from similar socioeconomic backgrounds) who save regularly and access credit from banks through SHG-Bank Linkage Programme — largest microfinance model in the world; NABARD promoted

Self-Help Groups (SHGs): Informal groups of 10-20 members (predominantly women) from similar socioeconomic backgrounds who: (1) Save regularly (weekly/monthly) into a common fund; (2) Lend internally among members at reasonable interest rates; (3) After 6-12 months of good track record, eligible for bank credit (SHG-Bank Linkage Programme). SHG-Bank Linkage Programme (SBLP): (1) Promoted by NABARD since 1992; (2) Largest microfinance programme in the world — over 12.5 million SHGs with over 142 million members (2023); (3) Loan outstanding: Over ₹2.5 lakh crore; (4) DAY-NRLM (Deendayal Antyodaya Yojana — National Rural Livelihoods Mission) promotes SHGs as social mobilization for poverty reduction. Bihar: Bihar Rural Livelihoods Promotion Society (JEEViKA) has been one of India's most successful SHG programs.
*Why A is wrong:* SHGs serve small, informal groups — not corporations.
*Why C is wrong:* Industrial worker unions are different bodies.
*Why D is wrong:* Government employees have separate housing loan schemes through banks.

Economy — Digital India

Q925EasyBPSC Prelims

UPI (Unified Payments Interface) is operated by:

ARBI (Reserve Bank of India)

BSEBI (Securities and Exchange Board of India)

CNPCI (National Payments Corporation of India)

DSBI (State Bank of India)

Show Answer

✔ C — NPCI (National Payments Corporation of India)

UPI (Unified Payments Interface) is operated by NPCI (National Payments Corporation of India). NPCI is an umbrella organization for retail payment systems in India, set up under the guidance of RBI and Indian Banks Association (IBA) in 2008. NPCI also operates: IMPS, RuPay, NACH (National Automated Clearing House), BBPS (Bharat Bill Payment System), AePS (Aadhaar-enabled Payment System), FASTag (electronic toll collection). UPI launched in April 2016; has grown to become the world's largest real-time payment system by volume — processing over 12-14 billion transactions per month in 2023-24. India accounts for ~46% of global real-time digital payment transactions. UPI has been exported to Singapore (PayNow link), UAE, France, Bhutan, Nepal, etc.
*Why A is wrong:* RBI regulates NPCI and the payment system but doesn't operate UPI directly.
*Why B is wrong:* SEBI regulates securities markets — not payment systems.
*Why D is wrong:* SBI participates in UPI as a bank — it doesn't operate the system.

Economy — Finance Commission

Q928EasyBPSC Prelims

The Finance Commission of India is appointed every:

A2 years

B5 years under Article 280 of the Constitution

C10 years

DAs required by Parliament

Show Answer

✔ B — 5 years under Article 280 of the Constitution

Under Article 280 of the Indian Constitution, the Finance Commission is constituted every 5 years by the President. Composition: Chairman + 4 members (with expertise in Finance/Economics/Administration). The Finance Commission: (1) Recommends distribution of tax revenues between Centre and States (vertical devolution %); (2) Recommends distribution of states' share among individual states (horizontal distribution criteria); (3) Recommends principles governing grants-in-aid to states; (4) Recommends measures to augment consolidated fund of a state to supplement resources of panchayats and municipalities. The Finance Commissions so far: 1st (1952-57) to 15th (2021-26). 16th Finance Commission under Arvind Panagariya (constituted 2023, recommendations for 2026-31 period expected by 2025).
*Why A is wrong:* 2 years would be too frequent — 5 years is correct.
*Why C is wrong:* 10 years would be too infrequent given changing economic circumstances.
*Why D is wrong:* Finance Commission is constituted on a fixed schedule — every 5 years.

Economy — Poverty Alleviation

Q929HardBPSC Prelims

The National Rural Livelihoods Mission (NRLM), renamed Deendayal Antyodaya Yojana-NRLM (DAY-NRLM), was launched to:

AProvide direct cash transfers to rural poor

BMobilize rural poor households into Self-Help Groups (SHGs), provide skill training and financial inclusion, build institutional platforms for sustainable livelihoods — world's largest poverty reduction programme; covers all rural poor households; Bihar's JEEViKA is a model implementation

CCreate government jobs for rural youth

DProvide free agricultural inputs to rural poor

Show Answer

✔ B — Mobilize rural poor households into Self-Help Groups (SHGs), provide skill training and financial inclusion, build institutional platforms for sustainable livelihoods — world's largest poverty reduction programme; covers all rural poor households; Bihar's JEEViKA is a model implementation

DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihoods Mission): (1) Launched 2011 as NRLM, renamed 2015 as DAY-NRLM; (2) Objectives: Mobilize 0.1 billion (10 crore) rural poor households into 10 million SHGs; provide skill training and placement through DDUGKY (Deen Dayal Upadhyaya Grameen Kaushalya Yojana); universal financial inclusion; livelihood promotion; (3) Focuses on poorest and most marginalized — SC, ST, minorities, persons with disabilities; (4) Bihar's JEEViKA (Bihar Rural Livelihoods Promotion Society — BRLPS) was the pilot/inspiration for NRLM: 6 million women, 500,000 SHGs; (5) Interest subvention: Loans at 7% to SHGs, with up to 3% rebate for timely repayment (effectively 4% interest for prompt repayers). Bihar's JEEViKA has become a model for rural women's empowerment nationally.
*Why A is wrong:* Direct cash transfers are under DBT/PM-KISAN — NRLM is about building institutions and livelihoods.
*Why C is wrong:* Government employment is MGNREGA — NRLM focuses on self-employment and private sector livelihoods.
*Why D is wrong:* Free agricultural inputs are under different schemes — NRLM is about economic institution building.

Economy — Economic Survey

Q930MediumBPSC Prelims

The Economic Survey of India is presented:

AAfter the Union Budget on Budget Day

BOne day before the Union Budget (typically last working day of January or first day of February session), prepared by Chief Economic Adviser (CEA) — analyzes economy, reviews major schemes, and recommends policies

CQuarterly — every three months

DOn the last day of the financial year (March 31)

Show Answer

✔ B — One day before the Union Budget (typically last working day of January or first day of February session), prepared by Chief Economic Adviser (CEA) — analyzes economy, reviews major schemes, and recommends policies

The Economic Survey is an annual flagship document of the Ministry of Finance, Government of India, presenting a comprehensive overview of the Indian economy. Key facts: (1) Presented to Parliament one day before the Union Budget; (2) Prepared by the Economic Division under the Chief Economic Adviser (CEA) to the Government of India; (3) Contains analysis of sectoral and macro performance, review of government policies, global economic context, and policy recommendations; (4) Volume I: Thematic analysis (CEA's vision and insights); Volume II: Economic data tables and sector-wise analysis; (5) The Economic Survey is placed before Parliament for discussion; (6) Notable recent CEAs: V. Anantha Nageswaran (current), K.V. Subramanian (previous), Arvind Subramanian (Chakravyuha analysis, JAM Trinity concept).
*Why A is wrong:* Economic Survey is presented BEFORE the Budget — not after.
*Why C is wrong:* Economic Survey is annual — not quarterly.
*Why D is wrong:* March 31 is the last day of the financial year — Economic Survey is in late January/early February.