Indian Economy- PYQs 2023
- ✅ — Statement is definitely true
- 🟢 — Statement is likely true
- 🔴 — Statement is likely false
- ❌ — Statement is definitely false
- 💡 — View hint for guidance
- ⚪ / ⚫ — Mark statement(s) for conflict comparison
Q. With reference to Central Bank Digital Currencies (CBDCs), consider the following statements:
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1)
It is possible to make payments in a digital currency without using the US dollar or the SWIFT system.
Hint: CBDCs are sovereign digital currencies issued by central banks. Think whether such transactions would still require an international payment system like SWIFT or depend on the US dollar as an intermediary.
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2)
A digital currency can be distributed with conditions programmed into it, such as a time-frame for spending it.
Hint: One of the key advantages of digital currencies using blockchain or similar technology is programmability. Could a central bank, in theory, attach usage or time conditions to such money?
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CBDCs can enable direct cross-border transactions between central banks without relying on the US dollar or SWIFT. They also allow programmable features such as conditional transfers or expiry periods, depending on policy design.
Q. Consider the following statements:
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Statement–I:
Interest income from InvIT deposits distributed to investors is exempt from tax, while dividend is taxable.
Hint: InvITs/REITs follow a pass-through taxation model, where income is taxed in the hands of investors. Would it make sense to exempt interest but tax dividends? Such inconsistency could complicate taxation.
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Statement–II:
InvITs are recognized as borrowers under the SARFAESI Act, 2002.
Hint: SARFAESI enables secured creditors to recover dues from borrowers. InvITs, which raise funds and can pledge assets, fit this definition under the Act.
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Explanation: Statement–I is incorrect because under the pass-through taxation model, both interest and dividend distributions by InvITs are taxable in investors’ hands. Statement–II is correct as InvITs are recognized as “borrowers” under the SARFAESI Act, 2002 for enforcement of security interest.
Q. Consider the following statements:
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Statement–I:
In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Hint: Reflect on global monetary trends after COVID-19 — inflation pressures surged. Would central banks likely respond by raising rates?
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Statement–II:
Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
Hint: Consider the standard role of a central bank: controlling inflation through policy rates, reserve requirements, and other monetary tools. Is this their usual mandate?
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Explanation: Statement–I is correct because central banks in major economies raised interest rates post-pandemic to combat inflation. Statement–II is correct and explains Statement–I, as central banks use monetary policy tools to manage consumer price rises.
Q. Consider the following statements:
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Statement–I:
Carbon markets are likely to be one of the most widespread tools in the fight against climate change.
Hint: Carbon markets, such as cap-and-trade systems or carbon credit trading, are designed to put a price on carbon emissions. Given their adoption in major economies, are they increasingly seen as a key tool to fight climate change?
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Statement–II:
Carbon markets transfer resources from the private sector to the State.
Hint: Carbon markets mostly involve trading emission allowances between companies. Does the payment go directly to the government, or primarily between private firms? Is the system meant for resource transfer or emission reduction?
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Explanation: Statement–I is correct as carbon markets are globally recognized as effective tools for emission reduction. Statement–II is incorrect because carbon markets primarily involve private sector trading of allowances, not resource transfer to the State.
Q. Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilization’?
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(a)
Conducting ‘Open Market Operations’
Hint: This is the RBI’s main tool to inject or absorb liquidity from the system. Would such operations neutralize the impact of foreign capital inflows?
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(b)
Oversight of settlement and payment systems
Hint: Ensures smooth functioning of financial transactions, but does not directly adjust domestic liquidity.
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(c)
Debt and cash management for the Central and State Governments
Hint: Focuses on government borrowing and cash flow, not on controlling money supply.
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(d)
Regulating the functions of Non-banking Financial Institutions
Hint: Supervision of NBFCs impacts financial stability but is unrelated to sterilization operations.
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Explanation: Sterilization is the RBI’s method of offsetting excess liquidity caused by foreign inflows. Conducting Open Market Operations—buying or selling government securities—is the key tool used for this purpose.
Q. Consider the following markets:
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1)
Government Bond Market
Hint: Involves issuance and trading of long-term government securities, typically over 1 year. Would this qualify as part of the capital market?
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2)
Call Money Market
Hint: Facilitates very short-term lending (overnight to 14 days) between banks. Does it handle long-term finance?
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3)
Treasury Bill Market
Hint: Trades government securities with maturity up to 1 year. Would this be part of the capital market or money market?
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4)
Stock Market
Hint: Trades equity shares which investors can hold for long periods. Does this fall under capital markets?
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Explanation: Government Bond Market and Stock Market are part of capital markets due to their long-term financing nature. Call Money and Treasury Bill Markets are short-term instruments and belong to the money market.
Q. Which one of the following best describes the concept of ‘Small Farmer Large Field’?
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1)
Resettlement of a large number of people, uprooted from their countries due to war, by giving them a large cultivable land which they cultivate collectively and share the produce.
Hint: This describes refugee resettlement and collective farming, not voluntary agricultural collaboration among small farmers.
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2)
Many marginal farmers in an area organize themselves into groups and synchronize and harmonize selected agricultural operations.
Hint: Aligns with the principle of coordinating resources and labor to optimize production while retaining land ownership.
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3)
Many marginal farmers in an area together make a contract with a corporate body and surrender their land to the corporate body for a fixed term for which the corporate body makes a payment of agreed amount to the farmers.
Hint: This involves transferring land control, not voluntary collaboration among small farmers.
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4)
A company extends loans, technical knowledge and material inputs to a number of small farmers in an area so that they produce the agricultural commodity required by the company for its manufacturing process and commercial production.
Hint: This is contract farming under corporate supervision, not farmer-led collaboration.
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Explanation: ‘Small Farmer Large Field’ involves marginal farmers collaborating to coordinate and harmonize selected agricultural operations, achieving economies of scale without losing ownership of their land.
Q. Consider the following statements regarding niger (Guizotia abyssinica) seeds:
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1)
The Government of India provides Minimum Support Price for niger (Guizotia abyssinica) seeds.
Hint: MSP is generally declared for major cereals, pulses, oilseeds, and some commercial crops. Niger is a minor oilseed.
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2)
Niger is cultivated as a Kharif crop.
Hint: Kharif crops are sown with the onset of monsoon. Niger, grown mainly in rainfed tribal regions, fits that pattern.
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3)
Some tribal people in India use niger seed oil for cooking.
Hint: Tribal areas often rely on locally available oilseeds for edible oil. India has a large and diverse tribal population, so it is very likely that some of them use niger oil.
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Explanation: All three statements are correct. According to the Ministry of Agriculture, niger seed is included in the list of crops with an MSP. It is cultivated mainly as a Kharif oilseed in tribal and hilly regions, and its oil is traditionally used for cooking by several tribal communities.
Q. Consider the following investments in assets:
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1)
Brand recognition
Hint: It doesn’t have a physical form but adds immense long-term value to a business.
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2)
Inventory
Hint: Inventory consists of goods physically held for sale or production.
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3)
Intellectual property
Hint: Patents, copyrights, and trademarks fall under this category of intangible assets.
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4)
Mailing list of clients
Hint: Stored digitally, its value lies in information and customer relationships.
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Explanation: Brand recognition, intellectual property, and mailing lists are intangible assets because they lack physical presence but hold economic value. Inventory, being a tangible good, is not an intangible investment.
Q. In the context of finance, the term ‘beta’ refers to —
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1)
The process of simultaneous buying and selling of an asset from different platforms.
Hint: This is clearly about exploiting price gaps between markets — that’s arbitrage.
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2)
An investment strategy of a portfolio manager to balance risk versus reward.
Hint: This sounds like a risk–return balancing method used by fund managers — portfolio diversification.
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3)
A type of systemic risk that arises where perfect hedging is not possible.
Hint: This points to unavoidable market-risk.
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4)
A numeric value that measures the fluctuations of a stock to changes in the overall stock market.
Hint: Beta does sound like a number.
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Explanation: Beta is a statistical measure showing how much a stock’s price moves in response to market movements. A higher beta indicates greater volatility relative to the market, helping investors assess the stock’s market risk.
Q. Consider the following statements regarding Self-Help Groups (SHGs):
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1)
The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
Hint: The SHG movement is linked to early microfinance efforts in India. Do you think it would involve a commercial bank like SBI or AIFIs like NABARD?
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2)
In an SHG, all members of a group take responsibility for a loan that an individual member takes.
Hint: The idea of group lending is central to SHGs.
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3)
The Regional Rural Banks and Scheduled Commercial Banks support SHGs.
Hint: SHG–bank linkage involves multiple banking institutions, not just one category.
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Explanation: Statements 2 and 3 are correct. The SHG–Bank Linkage Programme was launched by NABARD in 1992, not by SBI. SHGs follow group responsibility norms for loans, and both Regional Rural Banks and Scheduled Commercial Banks actively support them.
Q. Consider the following heavy industries:
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1)
Fertilizer plants
Hint: Fertilizer production, particularly ammonia synthesis, relies heavily on hydrogen. Transitioning from conventional hydrogen to green hydrogen can significantly reduce carbon emissions in this sector.
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2)
Oil refineries
Hint: Refineries require hydrogen for various processes, including hydrocracking and desulfurization. Utilizing green hydrogen in these processes can lower the carbon footprint of oil refining.
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3)
Steel plants
Hint: Steel production traditionally uses coke as a reducing agent, emitting substantial CO₂. Green hydrogen can replace coke in direct reduction, aiding in the decarbonization of steelmaking.
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Explanation: Green hydrogen is relevant for decarbonizing all three sectors: as a feedstock in fertilizer production, as process hydrogen in refineries, and as a reducing agent in steelmaking.
Q. Consider the following statements:
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1)
India accounts for 3.2% of global export of goods.
Hint: India's share in global merchandise exports is relatively low, which is considered one of its economic weaknesses. A figure of 3.2% appears too high; it is actually less than 2%.
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2)
Many local companies and some foreign companies operating in India have taken advantage of India’s ‘Production-linked Incentive’ scheme.
Hint: The PLI scheme is intended to enhance manufacturing and exports by incentivizing both domestic and foreign firms to produce in India.
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Explanation: Statement-I is incorrect; India’s share of global merchandise exports is around 1.8%, not 3.2%. Statement-II is correct; the PLI scheme has attracted both domestic and foreign companies, supporting India’s manufacturing and export growth.
Q. Consider the following statements with reference to India:
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1)
According to the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the ‘medium enterprises’ are those with investments in plant and machinery between ₹15 crore and ₹25 crore.
Hint: MSME definitions were revised in 2020 and again recently in 2025. Investment limits are no longer this narrow. Think if “₹15–₹25 crore” sounds too tight for a “medium” category under the updated norms.
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2)
All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.
Hint: The MSME sector is a major engine of growth and a large employment generator, so it makes sense to include it under Priority Sector Lending to ensure easier access to credit.
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Explanation: Statement 1 is incorrect — the MSMED Act (after 2020 amendment) defines medium enterprises as those with investment up to ₹50 crore and turnover up to ₹250 crore, not ₹15–₹25 crore. Statement 2 is correct — all loans to MSMEs are classified as priority sector advances under RBI’s PSL guidelines.