# UPSC

Explore popular questions from Structure of Indian Economy for UPSC. This collection covers Structure of Indian Economy previous year UPSC questions hand picked by experienced teachers.

## History

Structure of Indian Economy

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Q 1. Corporation tax:

A

is levied and appropriated by the States

B

is levied by the Union and collected and appropriated by the States

C

is levied by the Union and shared by the Union and the States

is levied by the Union and belongs to it exclusively

##### Explanation

Corporation tax is a direct tax levied, collected and appropriated by the Union or the central government. No part of this tax can be assigned to the states.

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Q 2. Which of the following constitute the World Bank?
1. International Bank for Reconstruction and Development
2. International Finance Corporation
3. International Development Association
4. International Monetary Fund
Codes:

1, 2 and 3

B

1 and 2

C

3 and 4

D

1, 2, 3 and 4

##### Explanation

World Bank is made up of two development institutions owned by 187 member countries: International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA). IBRD aims to reduce poverty in middle-income and creditworthy poorer countries, while IDA focuses on world's poorest countries. Their work is complemented by that of the International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA) and International Centre for the Settlement of Investment Disputes (ICSID). There is a difference between the World Bank and the World Bank Group.

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Q 3. Which one of the following is not an instrument of selective credit control in India?

A

Regulation of consumer credit

B

Rationing of credit

C

Margin requirements

Variable cost reserve ratios

##### Explanation

Variable Reserve Ratio (Cash Reserve Ratio) is aimed to control only volume of credit (quantitative method) not both volume and purpose of credit for which bank gives loans. (Qualitative method and selective control method are used for these purposes. It has a number of limitations.

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Q 4. The Dinesh Goswami Committee was concerned with:

A

de-nationalisation of banks

electoral reforms

C

steps to put down insurgency in the north-east

D

the problem of the Chakmas

##### Explanation

Dinesh Goswami Committee (1990) was concerned with electoral reforms. It suggested providing state funding in kind to political parties. It also suggested that a candidate should not be allowed to contest election from more than two constituencies.

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Q 5. Bank Rate implies the rate of interest:

A

paid by the Reserve Bank of India on the Deposits of Commercial Banks

B

charged by Banks on loans and advances

C

payable on Bonds

at which the Reserve Bank of India discounts the Bills of Exchange

##### Explanation

Bank Rate is that rate of interest at which central bank of a country provides refinancing facilities to commercial banks. The bank rate, a benchmark rate at which RBI buys or re-discounts bills of exchange or other commercial papers eligible for purchase. Every bank needs refinancing as it is very difficult to match borrowings and flow of deposits.

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Q 6. Consider the following:
1. Industrial Finance Corporation of India
2. Industrial Credit and Investment Corporation of India
3. Industrial Development Bank of India
4. Unit Trust of India
The correct sequence in which the above were established is:

A

1, 2, 3, 4

B

1, 3, 2, 4

C

4, 3, 2, 1

None of these

##### Explanation

Best answer should be (1243). IFCI - July 1948; ICICI - 1955; IDBI - UTI - 1963 July 1964

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Q 7. As part of the liberalisation programme and with a view to attract foreign exchange, the government and the RBI have, devised two scheme known as FCNR 'A' and FCNR 'B'.
Which of the following is/are true regarding these two schemes?
1. Under scheme 'A' RBI bears exchange rate fluctuations.
2. Under scheme 'B' other banks are to meet out the difference in exchange rate fluctuations.
3. Both the schemes stand withdrawn now.
4. Only scheme 'A' has been withdrawn
Codes:

A

3 only

B

1 and 2

C

1, 2 and 3

1, 2 and 4

##### Explanation

FCNR 'B' - Foreign Currency Non-Resident (bank) Account

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Q 8. Which of the following were the aims behind the setting up of the World Trade Organization (WTO) ?
1. Promotion of free trade and resource flows across countries
2. Protection of intellectual property rights
3. Managing balanced trade between different countries
4. Promotion of trade between the former East Bloc countries and the western world
Select the correct answer by using the codes given below:
Codes:

A

1, 2, 3 and 4

1 and 2

C

2 and 3

D

1 and 4

##### Explanation

World Trade Organization (WTO) is a body making global trade rules with binding effects on its members. It is not only an institution, but also a set of agreements. The WTO regime is known as the rules-based multilateral trading system. The history of the Organization dates back to 1947, when the General Agreement on Tariffs and Trade (GATT) was set up to reduce tariffs barriers, remove trade barriers and facilitate international trade in goods and services. Over the years, GATT held eight rounds of multilateral trade negotiations, the last and most extensive being the Uruguay Round (1986-1994). The WTO came into being at Marrakesh in 1995, following the conclusion of the Uruguay Round. Ater this GATT ceased to exist, and its legal texts were incorporated into the WTO as GATT- 1994. The eastern bloc nations have no special status as a member of WTO.

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Q 9. The emerging trading blocs in the world, such as NAFTA, ASEAN and the like, are expected to :

A

act as constrictions in free trade across the world

promote free trade on the lines laid down by the WTO

C

permit transfer of technology between member countries

D

promote trade in agricultural commodities between countries of the North and South

##### Explanation

These are local trading blocks which will enable free trade between member nations.

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Q 10. The sum of which of the following constitutes Broad Money in India?
1. Currency with the public
2. Demand deposits with banks
3. Time deposits with banks
4. Other deposits with RBI
Choose the correct answer using the codes given below:

A

1 and 2

B

1, 2 and 3

1, 2, 3 and 4

D

1, 2 and 4

##### Explanation

Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence cannot be withdrawn before expiry of this period. When we add the time despots into the narrow money, we get the broad money, which is denoted by M3. M3 = Narrow money + Time Deposits of public with banks. We note here that the Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money.

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Q 11. The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called:

A

SBR (Statutory Bank Ratio)

SLR (Statutory Liquid Ratio)

C

CBR (Central Liquid Reserve)

D

CLR (Central Liquid Reserve)

##### Explanation

SLR or the Statutory Liquidity Ratio is that ration of total deposits which a commercial bank has to maintain with itself at any given point of time in the form of liquid assets like cash in hand, current balances with other banks and first class securities which can be turned into cash (gold, cash or other approve securities). This ratio at present is 25%. Some assets have to be in liquid form to take care of financial emergencies which every bank has to face. It regulates the credit growth in India.

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Q 12. The accounting year of the Reserve Bank of India is:

A

April-March

July-June

C

October-September

D

January-December

##### Explanation

The central bank's accounting year runs from July 1 to June 30. On 11 Mar, 1940, RBI Accounting Year changed from Jan-Dec to July-June.

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Q 13. Which one of the following is the correct sequence of decreasing order of the given currencies in terms of their value in Indian Rupees?

US dollar, Canadian dollar, New Zealand dollar, Hong Kong dollar

B

US dollar, New Zealand dollar, Canadian dollar, Hong Kong dollar

C

US dollar, Hong Kong dollar, Canadian dollar, New Zealand dollar

D

Hong Kong dollar, US dollar, New Zealand dollar, Canadian Dollar.

##### Explanation

According to current time period, it should be Canadian, US, New Zealand, Hong Kong Dollar. As Rs 100 = 2.18891 USD, 2.17600 CAD, 2.83517 NZD, 17.0466 HKD

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Q 14. Economic Survey in India is published officially, every year by the:

A

Reserve Bank of India

B

Planning Commission of India

Ministry of Finance, Govt. of India

D

Ministry of Industries, Govt. of India

##### Explanation

Economy Survey in India is published officially, every year by the Ministry of Finance, Govt. of India. and issued before the annual budget. It reviews the development in the Indian economy over the previous 12 months.

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Q 15. The farmers are provided credit from a number of sources for their short and long term needs. The main sources of credit to the farmers include:

the Primary Agricultural Cooperative Societies, commercial banks, RRBs and private money lenders

B

the NABARD, RBI, commercial banks and private money lenders

C

the District Central Cooperative Banks (DCCB), the lead banks, IRDP and JRY

D

the Large Scale Multi-purpose Adivasis Programme, DCCB, IFFCO and commercial banks

##### Explanation

Regional rural banks were established under RRB Act 1976. They provide credit to agriculture and other rural activities. As of March 2014, the number of RRBs has been reduced to 57.

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Q 16. Match List-I with List-II and select the correct answer using the codes given below the lists:

 List-I List-II A. WTO 1. Provides loans to address shortterm balance payment problems B. IDA 2. Multilateral trade negotiation body C. IMF 3. Sanction of soft loans D. IBRD 4. Facilitating lending and borrowing for reconstruction and development

Codes:

A

A- 2; B - 3; C - 4; D -1

A- 2; B - 3; C - 1; D -4

C

A- 3; B - 2; C - 4; D -1

D

A- 3; B - 2; C - 1; D -4

##### Explanation

In 1995, the World Trade Organization (WTO) replaced the GATT as the administrative body. A current round of multilateral trade negotiations was conducted in the Doha Development Agenda round. IDA as an agency to provide 'soft-loans' to developing countries, was floated within the Bank under the stewardship of President Eugene Black. Historically, the bulk of non-concessional IMF assistance has been provided through SBAs. The SBA is designed to help countries address short-term balance of payments problems. Most of IBRD's lending generally falls under two categories: investment project financing and development policy operations.

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Q 17. The Employment Assurance Scheme envisages financial assistance to rural areas for guaranteeing employment to at least:

A

50 percent of the men and women seeking jobs in rural areas

B

50 percent of the men seeking jobs in rural areas

one man and one woman in a rural family living below the poverty line

D

one person in a rural landless household living below the poverty line

##### Explanation

Employment Assurance Scheme was launched on 2nd October, 1993 for implementation in 1778 identified backward blocks of different States. Later, the scheme was extended to the remaining blocks of the country in a phased manner. At present, the scheme is being implement in all the rural blocks of the country. The programme has been restructured from 1.4.99. The primary objective of the EAS is to provide gainful employment during the lean agricultural season to all able bodied adults in rural areas who are in need and desirous of work, but cannot find work. The secondary objective is the creation of community, social and economic assets for sustained employment and development. Internal debt comprises loans raised in the open markets. It also includes borrowings through treasury bills issued to State Government.

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Q 18. Consider the following statements regarding Reserve Bank of India:
1. It is a banker to the Central Government
2. It formulates and administers monetary policy
3. It acts as an agent of the Government in respect of India
4. It handles the borrowing programme of Government of India
Which of these statements are correct?

A

1 and 2

B

2, 3 and 4

1, 2, 3 and 4

D

3 and 4

##### Explanation

Functions of RBI: sole authority to issue currency; government's bank; banker's bank; guardian of money market; lender of the last resort; sole reservoir of
Foreign exchange reserves; controller of credit; clearing house for settling inter bank transactions. It follows an independent monetary policy

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Q 19. The largest share of Foreign Direct Investment (1997-2000) went to:

A

food and food-product sector

B

engineering sector

C

electronics and electric equipment sector

services sector

##### Explanation

Out of the total FDI inflows of $31 bn received during April-March 2014-15, the services sector accounted for almost 17% of the cumulative inflows. Despite the government's efforts to increase investments in the manufacturing sector to boost its growth, services sector still continues to attract most foreign direct investment (FDI). Out of the total FDI inflows of$31 billion received during April-March 2014-15, the services sector accounted for almost 17 per cent of the cumulative inflows.

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Q 20. Consider the following:
1. Currency with the public
2. Demand deposits with banks
3. Time deposits with banks
Which of these are included in Broad Money (M3) in India ?

A

1 and 2

B

1 and 3

C

2 and 3

1, 2 and 3

##### Explanation

Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence cannot be withdrawn before expiry of this period. When we add the time despots into the narrow money, we get the broad money, which is denoted by M3.
M3 = Narrow money + Time Deposits of public with banks. We note here that the Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money.

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Q 21. Consider the following financial institutions of India:
1. Industrial Finance Corporation of India (IFCI)
2. Industrial Credit and Investment Corporation of India (ICICI)
3. Industrial Development Bank of India (IDBI)
4. National Bank for Agriculture and Rural Development (NABARD)
The correct chronological sequence of the establishment of these institution is :

1, 2, 3, 4

B

2, 3, 4, 1

C

3, 4, 1, 2

D

4, 1, 2, 3

##### Explanation

IFCI - 1948; ICICI - 1955; IDBI - 1964; NABARD -1982

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Q 22. Assertion (A) : During the year 2001-02, the value of India's total exports declined, registering a negative growth of 2.17 %.
Reason (R) : During the year 2001-02, negative growth in exports was witnessed in respect of iron and steel, coffee, textiles and marine products.

A

Both A and R are individually true and R is the correct explanation of A

B

Both A and R are individually true but R is not the correct explanation of A

C

A is true but R is false

A is false but R is true

##### Explanation

During the year 2001-02, there was a decline of 1.6% and not 2.17% in Indian exports.

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Q 23. Debenture holders of a company are its:

A

shareholders

creditors

C

debtors

D

directors

##### Explanation

Debenture is a long-term bond issued by a company in return for a loan which have a fixed rate of interest.

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Q 24. Consider the following statements:
1. Reserve Bank of India was nationalized on 26 January, 1950
2. The borrowing programme of the Government of India is handled by the Department of Expenditure, Ministry of Finance
Which of the statements given above is/are correct?

A

1 only

B

2 only

C

Both 1 and 2

Neither 1 nor 2

##### Explanation

RBI was established in 1935 and its shares were held by private individuals. There are 20 directors who govern its activities. It was nationalized on 1 January, 1949. The borrowing programme of the Government of India is handled by Department of Economic Affairs under Union Finance Ministry.

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Q 25. Consider the following statements:
1. Sensex is based on 50 of the most important stocks available on the Bombay stock Exchange (BSE).
2. For calculating the Sensex, all the stock are assigned proportional weightage.
3. New York Stock Exchange is the oldest stock exchange in the world.
Which of the statements given above is/are correct?

2 only

B

1 and 3

C

2 and 3

D

none

##### Explanation

The 'BSE SENSEX' is a value-weighted index composed of 30 stocks and was started in 1 January, 1986. The origin of the NYSE can be traced to 17 May, 1792. When the Buttonwood Agreement was signed by 24 stock brokers outside 68 Wall Street in New York under a buttonwood tree. Amsterdam stock exchange (1602) is considered oldest in the world and was established by the Dutch East India company.