The Indian Economy forms a vital, dynamic segment of State Public Service Commission (PSC) and civil services examinations, testing candidates’ understanding of macroeconomic principles, fiscal policies, banking structures, and developmental planning. This domain evaluates awareness of national income accounting, inflation dynamics, poverty alleviation schemes, agricultural reforms, and international trade frameworks. Practicing structured multiple-choice questions helps aspirants master economic terminology, budget indicators, and policy shifts required for preliminary screening tests.
1. Which term describes the total market value of all final goods and services produced within a country's borders in a specific time period?
Correct Answer: b) Gross Domestic Product
Explanation:
Gross Domestic Product (GDP) measures the monetary value of final goods and services produced within the geographic boundaries of a country over a specific period.
2. Who is widely regarded as the father of modern economics and author of 'The Wealth of Nations'?
Correct Answer: c) Adam Smith
Explanation:
Adam Smith published 'The Wealth of Nations' in 1776, laying the foundational framework for classical economics and capitalism.
3. Which sector is traditionally known as the primary sector of the Indian economy?
Correct Answer: b) Agriculture, Forestry, and Fishing
Explanation:
The primary sector encompasses economic activities that involve extracting or harvesting natural resources, primarily agriculture, animal husbandry, forestry, and fishing.
4. What does 'Green Revolution' in India primarily refer to?
Correct Answer: b) Significant increase in agricultural production due to high-yielding variety seeds and modern inputs
Explanation:
The Green Revolution, initiated in the 1960s, transformed India into a food-surplus nation through high-yielding variety (HYV) seeds, chemical fertilizers, and irrigation.
5. Who is known as the father of the Green Revolution in India?
Correct Answer: b) M. S. Swaminathan
Explanation:
Dr. M. S. Swaminathan was a renowned agronomist who spearheaded the introduction of high-yielding wheat and rice varieties in India, earning him the title of father of the Indian Green Revolution.
6. What is the White Revolution in India associated with?
Correct Answer: b) Increase in milk production (Operation Flood)
Explanation:
The White Revolution, or Operation Flood launched in 1970, made India one of the largest milk producers in the world, spearheaded by Dr. Verghese Kurien.
7. Which Five-Year Plan in India is famously known as the 'Gadgil Formula' plan emphasizing rapid industrialization?
Correct Answer: b) Second Five-Year Plan
Explanation:
The Second Five-Year Plan (1956–1961), based on the Mahalanobis model, focused heavily on heavy industries and public sector growth.
8. When were the landmark economic reforms of Liberalization, Privatization, and Globalization (LPG) introduced in India?
Correct Answer: c) 1991
Explanation:
Facing a severe balance of payments crisis, India introduced comprehensive structural economic reforms under the New Economic Policy in July 1991.
9. Who was the Prime Minister of India when the 1991 economic reforms were initiated?
Correct Answer: c) P. V. Narasimha Rao
Explanation:
P. V. Narasimha Rao was the Prime Minister, and Dr. Manmohan Singh was the Finance Minister who implemented the 1991 economic reforms.
10. Which organization acts as the central bank of India?
Correct Answer: b) Reserve Bank of India
Explanation:
The Reserve Bank of India (RBI), established on April 1, 1935, is India's central banking institution regulating the monetary policy and currency.
11. When was the Reserve Bank of India (RBI) nationalized?
Correct Answer: c) 1949
Explanation:
The Reserve Bank of India was nationalized on January 1, 1949, under the Reserve Bank (Transfer of Public Ownership) Act, 1948.
12. What is the primary objective of monetary policy managed by the Reserve Bank of India?
Correct Answer: b) Price stability while keeping in mind economic growth
Explanation:
The primary mandate of the RBI's monetary policy framework is maintaining price stability while supporting growth.
13. What does 'Repo Rate' mean in monetary economics?
Correct Answer: b) The rate at which the RBI lends short-term money to commercial banks against securities
Explanation:
Repo Rate (Repurchase Rate) is the benchmark interest rate at which the central bank lends funds to commercial banks against government securities.
14. What is 'Reverse Repo Rate'?
Correct Answer: b) The rate at which the RBI borrows money from commercial banks
Explanation:
Reverse Repo Rate is the interest rate at which the RBI absorbs liquidity from commercial banks by parking funds with it.
15. What does CRR stand for in banking terminology?
Correct Answer: b) Cash Reserve Ratio
Explanation:
Cash Reserve Ratio (CRR) refers to the minimum percentage of a bank's total deposits that commercial banks must maintain in liquid cash with the RBI.
16. What does SLR stand for in the context of banking regulations?
Correct Answer: a) Statutory Liquidity Ratio
Explanation:
Statutory Liquidity Ratio (SLR) is the minimum percentage of deposits that a commercial bank must maintain in the form of gold, cash, or approved securities before lending to customers.
17. Which index is commonly used to measure retail inflation in India?
Correct Answer: b) Consumer Price Index (CPI)
Explanation:
The Reserve Bank of India utilizes the Consumer Price Index (CPI - Combined) as the primary benchmark for targeting retail inflation.
18. What is the inflation-targeting band mandated for the Reserve Bank of India by the government?
Correct Answer: b) 4% with a band of +/- 2% (i.e., 2% to 6%)
Explanation:
Under the monetary policy framework agreement, the RBI is tasked with keeping retail inflation at 4% with an upper tolerance limit of 6% and lower limit of 2%.
19. Which regulatory body governs the securities and stock markets in India?
Correct Answer: c) SEBI
Explanation:
The Securities and Exchange Board of India (SEBI), established in 1992, is the statutory regulator for securities markets in India.
20. When was Goods and Services Tax (GST) implemented nationwide in India?
Correct Answer: b) July 1, 2017
Explanation:
GST, a comprehensive indirect tax subsuming multiple levies, came into effect across India on July 1, 2017.
21. Which tax category does GST belong to?
Correct Answer: b) Indirect Tax
Explanation:
GST is a destination-based single indirect tax levied on the supply of goods and services across the nation.
22. What body makes final policy and tax recommendations for GST implementation in India?
Correct Answer: b) GST Council
Explanation:
The GST Council, chaired by the Union Finance Minister and comprising state finance ministers, is the apex constitutional body for GST decisions under Article 279A.
23. What is 'Fiscal Deficit'?
Correct Answer: a) Total government expenditure minus total government revenue excluding borrowings
Explanation:
Fiscal deficit indicates the total borrowing requirements of the government to meet its expenditures when total expenditure exceeds non-borrowed receipts.
24. What is 'Revenue Deficit'?
Correct Answer: b) Excess of government revenue expenditure over revenue receipts
Explanation:
Revenue deficit occurs when the government's revenue expenditures exceed its revenue receipts, indicating that the government is borrowing for daily operational consumption.
25. What is 'Primary Deficit'?
Correct Answer: a) Fiscal deficit minus interest payments on previous borrowings
Explanation:
Primary deficit is the fiscal deficit of the current year minus interest payments due on past debt, showing the borrowing requirement independent of past debt servicing.
26. What act governs fiscal discipline and targets for reducing fiscal deficits in India?
Correct Answer: b) FRBM Act (Fiscal Responsibility and Budget Management Act, 2003)
Explanation:
The FRBM Act enacted in 2003 institutionalized financial discipline, setting targets to eliminate revenue deficits and reduce fiscal deficits.
27. Which apex institution provides refinance facilities for agriculture and rural development in India?
Correct Answer: b) NABARD
Explanation:
National Bank for Agriculture and Rural Development (NABARD), established in 1982 on the recommendation of the B. Sivaraman Committee, promotes rural credit and development.
28. What does MSME stand for in the Indian industrial sector?
Correct Answer: b) Micro, Small and Medium Enterprises
Explanation:
MSME stands for Micro, Small and Medium Enterprises, a critical sector driving employment and manufacturing output in India.
29. Which program aims to transform India into a global manufacturing hub?
Correct Answer: b) Make in India
Explanation:
Launched in 2014, the 'Make in India' initiative encourages domestic and foreign companies to manufacture their products within India.
30. What is 'FDI' an acronym for in international economics?
Correct Answer: b) Foreign Direct Investment
Explanation:
FDI (Foreign Direct Investment) represents an ownership stake in a foreign company or project by an entity based in another country.
31. Which route allows foreign investment in Indian companies without requiring prior government approval in most sectors?
Correct Answer: b) Automatic Route
Explanation:
Under the Automatic Route, non-resident investors do not require prior clearance from the Government of India or the RBI to invest in permitted sectors.
32. What is 'Poverty Line' in India traditionally estimated based on?
Correct Answer: a) Per capita calorie intake and consumer expenditure surveys
Explanation:
Historically, India's poverty line has been estimated using consumption expenditure data collected by NSSO, factoring in calorie norms (rural vs. urban).
33. Which committee recommended poverty estimation based on a multidimensional approach rather than just calorie consumption?
Correct Answer: b) Tendulkar Committee and S. Rangarajan Committee
Explanation:
The Tendulkar and Rangarajan committees broadened poverty estimation parameters to include health, education, and expenditure on non-food items.
34. What does Multidimensional Poverty Index (MPI) measure?
Correct Answer: b) Deprivations across health, education, and standard of living simultaneously
Explanation:
The MPI assesses overlapping deprivations experienced by individuals across health, education, and standard of living indicators.
35. What is 'Unemployment' where people appear employed but their marginal productivity is zero known as?
Correct Answer: c) Disguised unemployment
Explanation:
Disguised unemployment occurs when more people are engaged in a job than actually required, often witnessed in Indian agriculture where marginal productivity is zero.
36. What type of unemployment arises due to economic recessions or downturns in the business cycle?
Correct Answer: a) Cyclical unemployment
Explanation:
Cyclical unemployment results from fluctuations in economic activity during recessions when overall demand for goods and services declines.
37. Which scheme guarantees 100 days of wage employment in rural areas of India?
Correct Answer: b) MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme)
Explanation:
Enacted in 2005, MGNREGA legally guarantees at least 100 days of unskilled manual work per year to every rural household whose adult members volunteer.
38. What is the primary goal of the Pradhan Mantri Jan Dhan Yojana (PMJDY)?
Correct Answer: b) Financial inclusion by ensuring access to financial services like bank accounts
Explanation:
PMJDY launched in 2014 is India's national mission for financial inclusion, providing universal access to banking services with zero-balance accounts.
39. Which sector contributes the largest share to India's Gross Value Added (GVA) and GDP currently?
Correct Answer: c) Tertiary Sector (Services)
Explanation:
The services sector (tertiary sector) is the largest contributor to India's GDP, accounting for over 50% of the total economic output.
40. What is 'Balance of Payments' (BoP) of a country?
Correct Answer: a) A statement of all transactions between entities in one country and the rest of the world over a period
Explanation:
BoP records all economic transactions made between residents of a country and foreign residents, comprising the current account and capital account.
41. What constitutes the 'Current Account' of the Balance of Payments?
Correct Answer: a) Trade in goods, services, investment income, and unilateral transfers
Explanation:
The current account records exports and imports of merchandise goods, services, net income from abroad, and net current transfers like remittances.
42. What does 'Capital Account' in Balance of Payments record?
Correct Answer: b) Foreign investments (FDI/FPI), loans, and banking capital flows changing foreign assets/liabilities
Explanation:
The capital account records all international capital transactions, including foreign direct investment, portfolio investments, and external loans.
43. What is 'Devaluation' of a currency?
Correct Answer: a) An official reduction in the value of a country's currency relative to other foreign currencies under a fixed exchange rate regime
Explanation:
Devaluation is a deliberate downward adjustment of a country's value of money against a foreign currency or standard basket in a fixed exchange system.
44. What is 'Depreciation' of a currency?
Correct Answer: b) A decrease in the value of a currency in a floating exchange rate system due to market forces of demand and supply
Explanation:
Currency depreciation occurs organically in a floating exchange rate market when market demand for foreign currency exceeds its supply.
45. What is 'Stagflation'?
Correct Answer: b) A combination of stagnant economic growth, high unemployment, and high inflation
Explanation:
Stagflation is an anomalous economic condition characterized by stagnant growth, high joblessness, and persistent high inflation simultaneously.
46. What does 'Phillips Curve' depict in economics?
Correct Answer: a) The inverse relationship between unemployment and inflation
Explanation:
The Phillips curve illustrates that economic growth with low unemployment is associated with higher inflation, and vice versa.
47. What does 'Laffer Curve' represent?
Correct Answer: a) The relationship between tax rates and government tax revenue collection
Explanation:
The Laffer curve demonstrates that tax revenue doesn't continuously rise with tax rates; past a certain optimal threshold, higher rates stifle activity and lower total revenue.
48. What is 'Gini Coefficient' used to measure?
Correct Answer: b) Income or wealth inequality within a nation
Explanation:
The Gini coefficient is a statistical measure of economic inequality, ranging from 0 (perfect equality) to 1 (complete inequality).
49. What is 'Lorenz Curve'?
Correct Answer: a) A graphical representation of income or wealth distribution
Explanation:
The Lorenz curve graphically plots cumulative income against cumulative population shares to visualize inequality, from which the Gini coefficient is derived.
50. What is 'Human Development Index (HDI)' composed of?
Correct Answer: b) Life expectancy, education (mean years of schooling), and per capita income
Explanation:
The UNDP's HDI evaluates a country's overall achievement in three basic dimensions of human development: health, knowledge, and standard of living.
51. Which institution publishes the annual Human Development Report (HDR)?
Correct Answer: c) United Nations Development Programme (UNDP)
Explanation:
The UNDP publishes the Human Development Report annually, featuring the flagship Human Development Index.
52. What does 'Open Economy' refer to?
Correct Answer: b) An economy that engages in international trade of goods, services, and capital flows with other nations
Explanation:
An open economy interacts freely with the rest of the world through exports, imports, and international financial capital movements.
53. What is 'Crowding Out Effect' in fiscal economics?
Correct Answer: a) When high government borrowing drives up interest rates and reduces private sector investment
Explanation:
Crowding out occurs when heavy government borrowing increases demand for loanable funds, driving up interest rates and depressing private sector investments.
54. What is 'Demonetization'?
Correct Answer: b) The act of stripping a currency unit of its status as legal tender
Explanation:
Demonetization is the withdrawal of a specific form of currency from national circulation, rendering old bank notes invalid as legal tender (e.g., India's 2016 note ban).
55. What is 'Universal Basic Income (UBI)'?
Correct Answer: b) A social welfare proposal where all citizens receive a regular, unconditional sum of money from the government
Explanation:
UBI is a model where every citizen receives a periodic, unconditional cash payment from the state, regardless of income or employment status.
56. What is 'Inclusive Growth'?
Correct Answer: b) Economic growth that creates employment opportunities and ensures equitable distribution of benefits across all sections of society
Explanation:
Inclusive growth implies economic expansion that generates widespread livelihoods, reduces poverty, and reduces socioeconomic disparities.
57. What is 'Sustainable Development' as commonly defined?
Correct Answer: b) Development that meets the needs of the present without compromising the ability of future generations to meet their own needs
Explanation:
The classic Brundtland Commission definition emphasizes balancing economic progress with environmental protection and resource conservation for future generations.
58. What is 'Green GDP'?
Correct Answer: b) An index of economic growth that accounts for environmental degradation and depletion of natural resources
Explanation:
Green GDP adjusts traditional GDP by factoring in environmental costs like pollution, resource depletion, and ecological damage.
59. What is 'Venture Capital'?
Correct Answer: b) Financing provided to early-stage, high-potential startup companies in exchange for equity
Explanation:
Venture capital is private equity investment directed towards risky startups and small businesses believed to have long-term growth potential.
60. What is 'Crowdfunding'?
Correct Answer: b) The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet
Explanation:
Crowdfunding leverages internet platforms to pool tiny financial contributions from a broad public audience to finance creative or business projects.
61. What is 'Inflation' defined as?
Correct Answer: b) A sustained increase in the general price level of goods and services in an economy over a period of time
Explanation:
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
62. What is 'Deflation'?
Correct Answer: b) A general decline in prices for goods and services, typically associated with a contraction of the money supply
Explanation:
Deflation is the opposite of inflation, representing a sustained drop in the overall price level across the economy.
63. What is 'Disinflation'?
Correct Answer: b) A temporary slowdown in the rate of inflation
Explanation:
Disinflation occurs when inflation rate slows down—prices are still rising, but at a slower pace than before.
64. What is 'Core Inflation'?
Correct Answer: b) Inflation excluding volatile items like food and fuel prices
Explanation:
Core inflation strips out transient, highly volatile price components like food and energy to reveal the underlying long-term inflation trend.
65. What does 'Open Market Operations (OMOs)' conducted by the RBI involve?
Correct Answer: a) Buying and selling of government securities in the open market to regulate money supply
Explanation:
OMOs are quantitative monetary policy instruments where the central bank buys or sells government securities to adjust liquidity in the banking system.
66. What is 'Bank Rate'?
Correct Answer: b) The standard rate at which the RBI is prepared to buy or rediscount bills of exchange or lend long-term funds to commercial banks
Explanation:
Bank rate is the official discount rate charged by the central bank for long-term rediscounting and lending facilities to commercial banks.
67. What does 'MSF' (Marginal Standing Facility) stand for in RBI's policy framework?
Correct Answer: b) Marginal Standing Facility
Explanation:
MSF is a window through which scheduled commercial banks can borrow overnight emergency funds from the RBI against approved government securities at a rate higher than the repo rate.
68. What is 'Priority Sector Lending (PSL)' in Indian banking?
Correct Answer: b) Mandatory lending by banks to socially critical sectors like agriculture, MSMEs, education, and weaker sections
Explanation:
PSL guidelines require banks to allocate a specified percentage of their lending to vital sectors of the economy that might otherwise lack adequate credit access.
69. What are 'Non-Performing Assets (NPAs)' in the banking sector?
Correct Answer: b) Loans or advances where principal or interest payments remain overdue for a period of 90 days or more
Explanation:
An asset becomes non-performing (NPA) when it ceases to generate income for the bank, specifically when interest or principal installments are overdue beyond 90 days.
70. What is the popular moniker for the proposed 'Bad Bank' set up in India to consolidate and resolve stressed assets?
Correct Answer: a) National Asset Reconstruction Company Limited (NARCL)
Explanation:
NARCL was set up as an asset management company to acquire and aggregate bad loans from commercial banks for effective resolution.
71. What is 'MCLR' in bank lending rates?
Correct Answer: b) Marginal Cost of Funds-based Lending Rate
Explanation:
MCLR is the internal benchmark lending rate introduced by the RBI for commercial banks, calculated based on the marginal cost of procuring funds.
72. What is 'Repo Linked Lending Rate (RLLR)'?
Correct Answer: a) A retail lending rate directly tied to the RBI's policy Repo Rate
Explanation:
RLLR is an external benchmark rate introduced to ensure faster transmission of RBI policy rate changes to retail borrowers.
73. What is 'Universal Banking'?
Correct Answer: b) A financial model where banks offer a wide gamut of financial services including commercial banking, investment banking, and insurance under one roof
Explanation:
Universal banks provide diverse financial services ranging from traditional deposits and loans to underwriting, mutual funds, and insurance.
74. What is 'Narrow Banking'?
Correct Answer: b) When a bank invests its deposits in risk-free liquid assets like government securities rather than risky commercial loans
Explanation:
Narrow banking minimizes credit risk by holding safe government securities instead of advancing risky loans, typically proposed for turning around weak banks.
75. What is 'Shadow Banking'?
Correct Answer: b) Financial intermediaries providing services similar to commercial banks but outside traditional banking regulations (NBFCs)
Explanation:
Shadow banking comprises non-bank financial intermediaries (like NBFCs) that facilitate credit creation across the financial system without direct central bank deposit insurance.
76. What is 'Cryptocurrency'?
Correct Answer: b) A digital or virtual currency secured by cryptography, operating independently of a central bank
Explanation:
Cryptocurrencies are decentralized digital assets using cryptography for security, operating outside government-backed fiat currency systems.
77. What is 'CBDC' (Central Bank Digital Currency) in India?
Correct Answer: a) Digital Rupee issued legally by the Reserve Bank of India
Explanation:
The Digital Rupee (e₹) is a central bank digital currency introduced by the RBI as a digital form of legal tender.
78. What is 'Crowd Funding' platform regulation in India primarily handled by?
Correct Answer: b) SEBI
Explanation:
SEBI regulates crowdfunding initiatives, particularly equity-based crowdfunding frameworks, to protect retail investors.
79. What is 'Venture Philanthropy'?
Correct Answer: b) Applying venture capital investment strategies and business principles to achieve social and environmental goals
Explanation:
Venture philanthropy borrows tools from venture capital finance to fund social enterprises and non-profits targeting sustainable impact.
80. What does 'PPP' stand for in infrastructure and economic development projects?
Correct Answer: b) Public-Private Partnership
Explanation:
A Public-Private Partnership (PPP) is a cooperative arrangement between two or more public and private sectors, typically of a long-term nature for infrastructure.
81. What is 'BOT' (Build-Operate-Transfer) model in infrastructure projects?
Correct Answer: b) A private entity builds the infrastructure, operates it for a period to recover costs, and then transfers it to the government
Explanation:
Under the BOT model, a private concessionaire funds, builds, and operates a facility for a specified concession period before transferring it back to the public authority.
82. What is 'Disinvestment'?
Correct Answer: b) The dilution or sale of government stake in public sector enterprises (PSEs) to private entities or the public
Explanation:
Disinvestment refers to the government liquidating its shareholding in public sector undertakings to raise revenue and enhance market efficiency.
83. What is 'Strategic Disinvestment'?
Correct Answer: b) The sale of a substantial portion of government shareholding in a public enterprise up to fifty percent or more, along with transfer of management control
Explanation:
Strategic disinvestment involves transferring ownership and operational control of a Public Sector Enterprise to a strategic private buyer.
84. Which department under the Ministry of Finance handles disinvestment transactions in India?
Correct Answer: c) Department of Investment and Public Asset Management (DIPAM)
Explanation:
DIPAM is the nodal department under the Ministry of Finance responsible for managing government investments and executing disinvestment policies.
85. What is 'Subsidies' in public finance context classified as?
Correct Answer: b) Revenue expenditure
Explanation:
Subsidies (like food, fertilizer, and petroleum subsidies) form a major component of the government's recurring revenue expenditure.
86. What is 'Direct Benefit Transfer (DBT)' initiative designed to achieve?
Correct Answer: a) Transferring subsidies directly into the bank accounts of beneficiaries to plug leakages and intermediaries
Explanation:
DBT uses Aadhaar and bank accounts to transfer welfare benefits directly to citizens, eliminating middlemen and administrative leakages.
87. What is 'Minimum Support Price (MSP)' in Indian agriculture?
Correct Answer: b) A market intervention price by the government to insure agricultural producers against sharp fall in farm prices
Explanation:
MSP is the rate at which the government purchases crops directly from farmers, acting as a financial safety net against price volatility.
88. Which commission recommends the Minimum Support Prices (MSPs) for crops in India?
Correct Answer: b) Commission for Agricultural Costs and Prices (CACP)
Explanation:
The CACP, operating under the Ministry of Agriculture and Farmers Welfare, recommends MSPs for specified agricultural commodities.
89. Which central agency is responsible for procuring, storing, and distributing food grains under the public distribution system (PDS)?
Correct Answer: b) Food Corporation of India (FCI)
Explanation:
FCI, established under the Food Corporations Act 1964, executes food security policies, procurement, buffer stock management, and public distribution.
90. What is 'Buffer Stock' maintained by the government used for?
Correct Answer: b) Ensuring food security during droughts, crop failures, and stabilizing open market price spikes
Explanation:
Buffer stocks of food grains are stockpiled by the state to manage food security crises and smooth out seasonal price volatility.
91. What is 'National Income'?
Correct Answer: b) Net National Product at Factor Cost (NNP at FC)
Explanation:
National Income is officially defined as Net National Product at Factor Cost, measuring the total income earned by residents of a country.
92. What is 'Per Capita Income'?
Correct Answer: b) Total National Income divided by the total population of the country
Explanation:
Per capita income measures the average income earned per person in a given area or country in a specified year.
93. Which organization in India is responsible for compiling and publishing national income statistics?
Correct Answer: b) National Statistical Office (NSO) / erstwhile CSO
Explanation:
The National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI) compiles macroeconomic aggregates like GDP and National Income.
94. What is 'Purchasing Power Parity (PPP)' exchange rate concept?
Correct Answer: b) A theory estimating the amount of adjustment needed for the exchange rates of two countries for an identical basket of goods to cost the same
Explanation:
PPP compares economic productivity and standards of living between countries across different currency systems by equalizing the purchasing power of various currencies.
95. Where does India generally rank globally in terms of GDP measured on a Purchasing Power Parity (PPP) basis?
Correct Answer: b) Third
Explanation:
India ranks as the third-largest economy in the world in terms of GDP on a Purchasing Power Parity basis, following China and the United States.
96. What is 'Fiscal Federalism'?
Correct Answer: b) The financial and budgetary relations between different levels of government (Union, State, and Local bodies in a federal structure)
Explanation:
Fiscal federalism deals with how revenue collection and public expenditure functions are distributed across various tiers of a federal government.
97. What is the primary mandate of the Finance Commission under Article 280?
Correct Answer: b) Recommending the vertical and horizontal sharing of divisible tax revenues between the Centre and States
Explanation:
The Finance Commission is a constitutional body that recommends how central tax revenues should be distributed between the Union and states, and among states inter se.
98. What is 'Cess' in Indian taxation?
Correct Answer: b) A tax levied on top of existing taxes for specific earmarked public purposes
Explanation:
A cess is a special-purpose tax charged over and above basic tax rates (e.g., education cess, health cess), whose proceeds are dedicated to specific causes.
99. What is 'Surcharge' in tax terminology?
Correct Answer: b) An additional charge or tax levied on taxpayers exceeding specified income thresholds
Explanation:
A surcharge is an extra levy on high-earning individuals or corporations, calculated as a percentage of the base income tax.
100. What is 'Progressive Taxation'?
Correct Answer: a) A tax system where tax rates increase as the taxable income increases
Explanation:
Progressive taxation imposes a higher tax rate on individuals with higher incomes, aiming to reduce income inequality (e.g., individual income tax slabs).
101. What is 'Regressive Taxation'?
Correct Answer: b) A tax that takes a larger percentage of income from low-income earners than from high-income earners
Explanation:
Regressive taxes (such as flat indirect sales taxes or GST on essential items) impact lower-income households proportionately harder than wealthy households.
102. What is 'Proportional Taxation'?
Correct Answer: a) A tax system where the same percentage of tax is levied on all taxpayers regardless of income
Explanation:
Under a proportional tax system, every taxpayer pays a constant flat percentage, regardless of whether their income is high or low.
