India General Knowledge MCQs

MODULE 6: Indian Economy MCQs

Topic: Indian Economy MCQs for Competitive Exams

These MCQs are systematically divided into well-defined sub-topics, covering the basic structure, planning, sectors, national income, inflation, banking, taxation, reforms, and current economic framework of India.

Sub-Topic I: Nature & Structure of Indian Economy

Q1. The Indian economy is best described as a:

A. Capitalist economy
B. Socialist economy
C. Mixed economy
D. Command economy

Correct Answer: C

Explanation:
India follows a mixed economy, where both public and private sectors coexist, combining features of socialism and capitalism to promote growth with social justice.

Q2. Which sector contributes the highest share to India’s GDP at present?

A. Primary sector
B. Secondary sector
C. Tertiary sector
D. Quaternary sector

Correct Answer: C

Explanation:
The tertiary (service) sector contributes the largest share to India’s GDP, reflecting structural transformation of the economy.

Q3. Which sector is known as the backbone of the Indian economy due to employment?

A. Industry
B. Services
C. Agriculture
D. Mining

Correct Answer: C

Explanation:
Despite a declining GDP share, agriculture remains the largest employer, especially in rural India.

Q4. India is classified by the World Bank as a:

A. High-income country
B. Upper middle-income country
C. Lower middle-income country
D. Low-income country

Correct Answer: C

Explanation:
Based on per capita income, India is classified as a lower middle-income economy.

Q5. Economic growth refers to:

A. Increase in population
B. Increase in national income at constant prices
C. Increase in money supply
D. Increase in exports only

Correct Answer: B

Explanation:
Economic growth is measured by increase in real national income or real GDP over time.

Sub-Topic II: National Income & Measurement

Q6. GDP at market prices includes:

A. Only indirect taxes
B. Only subsidies
C. Indirect taxes minus subsidies
D. Direct taxes

Correct Answer: C

Explanation:
GDP at market prices = GDP at factor cost + indirect taxes – subsidies.

Q7. Which indicator best reflects average standard of living?

A. GDP
B. National Income
C. Per Capita Income
D. Gross Value Added

Correct Answer: C

Explanation:
Per capita income shows average income per person and is widely used to assess living standards.

Q8. Which organisation releases India’s national income estimates?

A. RBI
B. NITI Aayog
C. Ministry of Finance
D. National Statistical Office

Correct Answer: D

Explanation:
The National Statistical Office (NSO) compiles and releases official GDP and national income data.

Q9. Which of the following is NOT included in GDP calculation?

A. Salary of government employees
B. Transfer payments
C. Profits of companies
D. Rent from buildings

Correct Answer: B

Explanation:
Transfer payments like pensions and scholarships do not represent production of goods or services.

Q10. GVA measures:

A. Output minus intermediate consumption
B. Output plus taxes
C. Income plus subsidies
D. GDP minus exports

Correct Answer: A

Explanation:
Gross Value Added (GVA) measures contribution of each sector by deducting intermediate inputs from output.

Sub-Topic III: Planning & Economic Reforms

Q11. Economic planning in India began in:

A. 1947
B. 1950
C. 1951
D. 1955

Correct Answer: C

Explanation:
Economic planning started with the First Five-Year Plan (1951–56).

Q12. The Planning Commission was replaced by:

A. Finance Commission
B. RBI
C. NITI Aayog
D. Economic Advisory Council

Correct Answer: C

Explanation:
NITI Aayog replaced the Planning Commission in 2015 to promote cooperative federalism.

Q13. Economic reforms in India were introduced in:

A. 1985
B. 1991
C. 1995
D. 2000

Correct Answer: B

Explanation:
The 1991 reforms introduced Liberalisation, Privatisation, and Globalisation (LPG).

Q14. Liberalisation mainly aims at:

A. Increasing government control
B. Reducing trade barriers and regulations
C. Nationalising industries
D. Increasing subsidies

Correct Answer: B

Explanation:
Liberalisation reduces restrictions to encourage private participation and competition.

Q15. Privatisation refers to:

A. Expansion of public sector
B. Transfer of ownership to private sector
C. Government regulation
D. Import substitution

Correct Answer: B

Explanation:
Privatisation involves reducing government ownership and increasing private sector role.

Sub-Topic IV: Inflation, Poverty & Employment

Q16. Inflation means:

A. Fall in prices
B. Rise in general price level
C. Increase in production
D. Increase in wages

Correct Answer: B

Explanation:
Inflation is a sustained rise in the general price level, reducing purchasing power.

Q17. Which index measures retail inflation in India?

A. WPI
B. GDP deflator
C. CPI
D. IIP

Correct Answer: C

Explanation:
Consumer Price Index (CPI) is used to measure retail inflation.

Q18. Poverty line in India is determined by:

A. RBI
B. Parliament
C. NITI Aayog
D. Expert committees

Correct Answer: D

Explanation:
Poverty estimation is based on expert committee recommendations, approved by the government.

Q19. Disguised unemployment is mainly seen in:

A. Industrial sector
B. Service sector
C. Agricultural sector
D. Banking sector

Correct Answer: C

Explanation:
In agriculture, more workers are employed than required, leading to zero marginal productivity.

Q20. Employment generation is closely linked to:

A. Capital-intensive growth
B. Labour-intensive growth
C. Import growth
D. Fiscal deficit

Correct Answer: B

Explanation:
Labour-intensive sectors create more jobs per unit of investment.

Sub-Topic V: Banking, Monetary & Fiscal System

Q21. The central bank of India is the:

A. SBI
B. NABARD
C. Reserve Bank of India
D. SEBI

Correct Answer: C

Explanation:
The Reserve Bank of India (RBI) controls monetary policy and banking regulation.

Q22. Repo rate is the rate at which RBI lends to:

A. Government
B. Public
C. Commercial banks
D. NBFCs only

Correct Answer: C

Explanation:
Repo rate is the short-term lending rate at which RBI lends to commercial banks.

Q23. Fiscal policy relates to:

A. Money supply
B. Government expenditure and taxation
C. Banking regulation
D. Foreign trade

Correct Answer: B

Explanation:
Fiscal policy involves taxation, public expenditure, and borrowing by the government.

Q24. Budget deficit indicates:

A. Excess revenue
B. Excess expenditure over revenue
C. Trade surplus
D. Export growth

Correct Answer: B

Explanation:
A budget deficit arises when government expenditure exceeds revenue.

Q25. Which tax was introduced to unify indirect taxes in India?

A. Income Tax
B. Excise Duty
C. Service Tax
D. GST

Correct Answer: D

Explanation:
Goods and Services Tax (GST) created a single national market, promoting cooperative federalism.

Sub-Topic VI: External Sector & Current Framework

Q26. Balance of Payments records:

A. Domestic transactions only
B. Government budget
C. International economic transactions
D. Inflation trends

Correct Answer: C

Explanation:
Balance of Payments (BoP) records all economic transactions with the rest of the world.

Q27. FDI refers to:

A. Portfolio investment
B. Short-term capital flow
C. Long-term investment with management control
D. External borrowing

Correct Answer: C

Explanation:
Foreign Direct Investment involves long-term investment and ownership interest.

Q28. Atmanirbhar Bharat aims at:

A. Economic isolation
B. Import dependence
C. Self-reliant economic growth
D. Trade restrictions

Correct Answer: C

Explanation:
Atmanirbhar Bharat promotes self-reliance while remaining globally integrated.

Q29. Inclusive growth emphasizes:

A. GDP growth only
B. Growth with social justice
C. Industrial expansion
D. Export promotion

Correct Answer: B

Explanation:
Inclusive growth ensures benefits of growth reach all sections of society.

Q30. The primary objective of Indian economic policy is:

A. Profit maximisation
B. Wealth concentration
C. Economic growth with equity
D. Export surplus

Correct Answer: C

Explanation:
Indian economic policy aims at balanced growth, poverty reduction, and social welfare.

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⭐ Strengthen Indian Economy Concepts with Exam-Ready MCQs

This MCQ set on the Indian Economy offers a clear, structured, and concept-driven approach to understanding economic fundamentals. Covering national income, sectors of the economy, inflation, banking, fiscal and monetary policy, reforms, and external sector issues, these questions help aspirants build strong conceptual clarity and exam confidence. Regular practice of these MCQs ensures effective preparation for one of the most scoring and frequently tested sections in competitive examinations.

❓ FAQ Section

Q1. Why are Indian Economy MCQs important for competitive exams?

Indian Economy MCQs test understanding of GDP, inflation, banking, fiscal policy, reforms, and current economic concepts frequently asked in exams.

Q2. What topics are covered under Indian Economy MCQs?

These MCQs cover economic structure, national income, planning, reforms, inflation, poverty, employment, banking system, taxation, and external sector.

Q3. Are these MCQs suitable for school and university students?

Yes. The questions are aligned with NCERT-based Indian Economy syllabus, making them useful for school, college, and university exams.

Q4. Do these MCQs help in prelims as well as mains preparation?

Yes. MCQs improve factual accuracy for prelims and build conceptual clarity required for mains and descriptive answers.

Q5. How should aspirants revise Indian Economy MCQs effectively?

Aspirants should practice topic-wise MCQs, focus on explanations, revise key economic terms, and link concepts with current affairs.

🎯 Targeting Exams 

Examinations Covered

These Indian Economy MCQs for Competitive Exams are carefully designed for:

• UPSC Civil Services (Prelims & Mains)

• State Public Service Commission (PSC) Exams

• SSC (CGL, CHSL, MTS, GD)

• Banking Exams (IBPS, SBI, RBI)

• Railways & Defence Examinations

• State Government Recruitment Exams

• School Board Exams (CBSE & State Boards)

• College & University Examinations

• General Studies & GK-Based Entrance Tests