Indian Economy- PYQs 2024
- ✅ — 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. Consider the following statements in respect of the digital rupee:
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1)
It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.
Hint: Who has the legal authority to issue currency in India? Does this same authority also guide monetary policy decisions?
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2)
It appears as a liability on the RBI’s balance sheet.
Hint: Physical currency notes carry the statement, “I promise to pay the bearer the sum of ___ rupees,” signed by the RBI Governor. Would this make the note an asset or a liability on the RBI’s balance sheet? Think about whether digital rupee would follow the same principle.
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3)
It is insured against inflation by its very design.
Hint: Can any currency, physical or digital, automatically adjust its value to counter inflation?
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4)
It is freely convertible against commercial bank money and cash.
Hint: If the digital rupee could not be exchanged for bank money or cash, would people trust and use it easily? What feature ensures user confidence?
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The digital rupee is a sovereign currency and recorded as a liability on the RBI’s balance sheet. It is convertible to commercial bank money and cash. Statement 3 is incorrect as it is not inherently inflation-protected.
Q. With reference to the Digital India Land Records Modernisation Programme (DILRMP), consider the following statements:
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1)
To implement the scheme, the Central Government provides 100% funding.
Hint: Schemes that deal with nationwide digital databases or IT-based standardisation, where uniformity is key, often get full central funding. Does land record modernisation fall in that category?
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2)
Under the scheme, Cadastral Maps are digitised.
Hint: Cadastral maps record land boundaries and ownership details. If the aim is modernization and transparency in land records, digitising such maps would logically be part of it.
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3)
An initiative has been undertaken to transliterate the Records of Rights from local language to any of the languages recognized by the Constitution of India.
Hint: Consider efforts toward interoperability and integration across states — making data accessible across language barriers supports a unified digital land database.
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Why? DILRMP is a Central Sector Scheme with 100% funding by the Centre. It digitises cadastral maps and records, and includes transliteration into all Constitution-recognised languages to enable nationwide data access and standardisation.
Q. Consider the following statements:
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1)
If the United States of America (USA) were to default on its debt, holders of US Treasury Bonds will not be able to exercise their claims to receive payment.
Hint: Consider what happens when a sovereign i.e., a nation-state with ultimate authority over its currency and debt, defaults. For bondholders to enforce payment, there must be an authority capable of compelling the government to pay.
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2)
The USA Government debt is not backed by any hard assets, but only by the faith of the Government.
Hint: Recall that government bonds are fiat instruments. They are not secured by physical assets like gold or silver, but rely solely on the government's credibility and ability to collect revenue.
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Why? US Treasury Bonds are backed by the full faith and credit of the government; if the US defaults, bondholders cannot compel payment. Statement-II explains why this risk exists.
Q. Consider the following statements:
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1)
Syndicated lending spreads the risk of borrower default across multiple lenders.
Hint: Why might multiple banks join together for a single large loan? Consider the impact on individual lender exposure.
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2)
The syndicated loan can be fixed amount/lump sum of funds, but cannot be a credit line.
Hint: For large, long-term projects, think about whether funding needs to be strictly fixed or could vary over time.
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Why? Syndicated loans spread default risk among lenders. They can be structured as either fixed-term loans or credit lines, so Statement-II is incorrect.
Q. Consider the following statements in respect of the digital rupee:
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1)
It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.
Hint: Who has the legal authority to issue currency in India? Does this same authority also guide monetary policy decisions?
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2)
It appears as a liability on the RBI’s balance sheet.
Hint: Physical currency notes carry the statement, “I promise to pay the bearer the sum of ___ rupees,” signed by the RBI Governor. Would this make the note an asset or a liability on the RBI’s balance sheet? Think about whether digital rupee would follow the same principle.
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3)
It is insured against inflation by its very design.
Hint: Can any currency, physical or digital, automatically adjust its value to counter inflation?
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4)
It is freely convertible against commercial bank money and cash.
Hint: If the digital rupee could not be exchanged for bank money or cash, would people trust and use it easily? What feature ensures user confidence?
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Why? The digital rupee is a sovereign currency and recorded as a liability on the RBI’s balance sheet. It is convertible to commercial bank money and cash. Statement 3 is incorrect as it is not inherently inflation-protected.
Q. Consider the following statements:
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1)
India does not import apples from the United States of America.
Hint: Does the USA grow apples? Of course it does. If Himachal Pradesh has areas suitable for apples, the US certainly does too. During Christmas, apple pies are common there. So if they grow apples, India likely imports at least some from the US.
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2)
In India, the law prohibits the import of Genetically Modified food without the approval of the competent authority.
Hint: It makes sense to regulate GM foods for public health concerns.
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Why? India does import apples from the USA, so Statement I is incorrect. Statement II is correct because the FSSAI requires approval for import of GM foods.
Q. Consider the following statements:
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1)
Recently, Venezuela has achieved a rapid recovery from its economic crisis and succeeded in preventing its people from fleeing/emigrating to other countries.
Hint: Recall Venezuela’s recent history of hyperinflation and economic collapse. Even if rapid recovery occurs, would it instantly stop people from migrating abroad for better opportunities and stability?
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2)
Venezuela has the world’s largest oil reserves.
Hint: Once Statement I is found incorrect, this becomes secondary, but it’s still worth recalling that Venezuela is a member of OPEC (Organisation of Petroleum Exporting Countries) and has large oil reserves.
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Why? Venezuela continues to face severe economic and migration challenges, so Statement I is incorrect. However, Statement II is correct, as Venezuela holds the world’s largest proven oil reserves.
Q. Consider the following airports:
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1)
Donyi Polo Airport
Hint: Located near Itanagar, Arunachal Pradesh, a region that had no earlier operational airport and difficult terrain unsuitable for expansion. The project aimed to provide first-ever commercial air connectivity to the state capital.
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2)
Kushinagar International Airport
Hint: Situated in eastern Uttar Pradesh near Gorakhpur, Kushinagar had no prior civil airport. It was developed to promote international Buddhist tourism (Bodh Gaya–Lumbini–Kushinagar circuit).
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3)
Vijayawada International Airport
Hint: Vijayawada, a major urban hub in Andhra Pradesh, already had an operational airport at Gannavaram. After state bifurcation, it was expanded and upgraded to international status.
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Why? Donyi Polo and Kushinagar were new airports built to provide first-time air connectivity to their regions (Greenfield), while Vijayawada was an expansion of an existing airport (Brownfield).
Q. Consider the following statements:
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In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
Hint: Primary Dealers (PDs) have formal recognition and collateral arrangements with the RBI to access LAF. Are PDs classified as NBFCs?
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2)
In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
Hint: Does the government have external debt?
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3)
In India, Stock Exchanges can offer separate trading platforms for debts.
Hint: G-Secs and corporate bonds are traded electronically. It is therefore likely that stock exchanges can operate dedicated platforms for debt instruments.
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Why? Primary Dealers (a category of NBFCs) can access LAF; FIIs can hold G-Secs; stock exchanges can operate dedicated debt trading platforms under SEBI regulations.
Q. In India, which of the following can trade in Corporate Bonds and Government Securities?
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1)
Insurance Companies
Hint: They are institutional investors handling large, long-term funds. They seek secure long-term returns.
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2)
Pension Funds
Hint: Similar to Insurance companies, they are institutional investors handling large, long-term funds. They seek secure, long-term returns.
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3)
Retail Investors
Hint: Think of RBI’s Retail Direct Scheme. Retail investors now have channels to trade in G-Secs.
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Why? All three—insurance companies, pension funds, and retail investors—can trade in corporate bonds and G-Secs. Institutional investors participate through primary and secondary markets, while retail investors access them via RBI and exchange platforms.
Q. Consider the following:
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1)
Exchange-Traded Funds (ETF)
Hint: ETFs represent pooled investment products traded on exchanges.
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2)
Motor vehicles
Hint: A physical asset used for transport.
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3)
Currency Swap
Hint: An agreement to exchange cash flows in different currencies.
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Why? ETFs and currency swaps are financial instruments as they represent financial contracts or marketable securities; motor vehicles are tangible physical assets, not financial instruments.
Q. With reference to the sectors of the Indian economy, consider the following pairs:
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Storage of agricultural produce — Secondary
Hint: Secondary sector involves transformation or manufacturing. Does storing produce involve any conversion or processing?
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2)
Dairy farm — Primary
Hint: The primary sector includes extraction and natural processes like farming, fishing, and animal rearing.
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3)
Mineral exploration — Tertiary
Hint: Exploration is part of extraction, not service delivery. Which sector covers natural resource extraction?
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4)
Weaving cloth — Secondary
Hint: Weaving converts raw material (yarn) into a finished good (cloth).
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Why? Dairy farming (Primary) and weaving cloth (Secondary) are correctly matched. Storage of produce is a tertiary (service) activity, while mineral exploration belongs to the primary sector.
Q. With reference to physical capital in the Indian economy, consider the following pairs:
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Farmer’s plough — Working capital
Hint: Working capital refers to inputs that are used up during production. A plough, however, is durable and used repeatedly.
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2)
Computer — Fixed capital
Hint: Computers are long-term assets used over multiple production cycles, much like machines and tools.
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3)
Yarn used by the weaver — Fixed capital
Hint: Yarn is consumed in the production process.
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4)
Petrol — Working capital
Hint: Petrol is a consumable input, used up during production or transport. Once used, it cannot be reused.
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Why? Computer and petrol are correctly matched. Plough and yarn are misclassified—the plough is fixed capital, while yarn is working capital.
Q. With reference to the rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements:
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1)
There is no minimum capital requirement for wholly owned banking subsidiaries in India.
Hint: RBI’s prudential norms aim to ensure bank stability. Would it allow a bank to function in India without a baseline capital?
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2)
For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
Hint: Local board representation protects India’s financial interests. Think carefully, does RBI require strictly Indian citizens, or are OCIs/PIOs included?
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Why? RBI mandates a minimum capital of ₹500 crore for wholly owned foreign bank subsidiaries. The 50% board requirement includes Persons of Indian Origin (PIOs) and OCI holders, with one-third being residents in India, not strictly Indian nationals. Hence, both statements are incorrect.
Q. With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:
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1)
CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
Hint: Think about the purpose of CSR. Would the law allow spending that only benefits the company itself?
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2)
CSR rules do not specify minimum spending on CSR activities.
Hint: Consider why CSR exists. Does it make sense to leave the amount entirely to company discretion?
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Why? CSR rules under Section 135 of the Companies Act, 2013 clearly state that activities benefiting only the company or its employees are excluded from CSR. However, the law does mandate a minimum expenditure of 2% of the average net profits of the previous three years on CSR activities — hence statement 2 is incorrect.
Q. With reference to the Indian economy, “Collateral Borrowing and Lending Obligations” are the instruments of:
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Bond market
Hint: Bonds are instruments for raising long-term finance. Borrowing and lending as a recurring activity is not their main function.
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2)
Forex market
Hint: Forex involves currency exchange and international transactions. Collateralized borrowing/lending without a central authority to enforce it is unlikely.
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3)
Money market
Hint: Money market deals with borrowing and lending of funds. Collateral is often used to secure such transactions.
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4)
Stock market
Hint: Stock market mainly facilitates trading of equity and derivatives, not lending/borrowing secured by collateral.
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Why? CBLOs are money market instruments that enable entities to borrow and lend funds on a secured basis, typically backed by collateral such as government securities.