MCQs on India’s Public Debt: Concerns and Way Forward

1. What is public debt?
   A) Debt incurred by private individuals
   B) Debt incurred by the government
   C) Debt incurred by corporations
   D) Debt incurred by foreign nations
   Answer: B) Debt incurred by the government
2. Which of the following is a major component of India’s public debt?
   A) External debt
   B) Internal debt
   C) Both A and B
   D) None of the above
   Answer: C) Both A and B
3. What is the primary reason for the increase in India’s public debt?
   A) Infrastructure development
   B) Increased tax revenues
   C) Natural disasters
   D) Fiscal deficits
   Answer: D) Fiscal deficits
4. Which body is responsible for managing public debt in India?
   A) Reserve Bank of India
   B) Ministry of Finance
   C) Planning Commission
   D) SEBI
   Answer: A) Reserve Bank of India
5. As of 2022, what is the approximate percentage of India’s GDP represented by public debt?
   A) 60%
   B) 80%
   C) 90%
   D) 100%
   Answer: B) 80%
6. Which of the following is a concern related to high public debt?
   A) Increased economic growth
   B) Higher interest payments
   C) More employment opportunities
   D) Increased savings
   Answer: B) Higher interest payments
7. What is the Fiscal Responsibility and Budget Management (FRBM) Act aimed at?
   A) Increasing public debt
   B) Reducing fiscal deficits
   C) Promoting public sector enterprises
   D) Increasing tax revenue
   Answer: B) Reducing fiscal deficits
8. Which of the following is NOT a method to finance public debt?
   A) Borrowing from foreign governments
   B) Printing more currency
   C) Increasing tax revenue
   D) Selling public assets
   Answer: D) Selling public assets
9. What is the main concern regarding the rising public debt-to-GDP ratio?
   A) It indicates higher national income.
   B) It could lead to inflation.
   C) It limits the government’s ability to spend on welfare.
   D) It enhances international credit rating.
   Answer: C) It limits the government’s ability to spend on welfare.
10. Which of the following is a direct effect of high public debt?
    A) Decreased interest rates
    B) Increased inflation
    C) Lower government spending
    D) Increased savings
    Answer: B) Increased inflation
11. Which international organization often advises India on managing its public debt?
    A) World Health Organization
    B) International Monetary Fund
    C) World Bank
    D) United Nations
    Answer: B) International Monetary Fund
12. What role does the government play in reducing public debt?
    A) Increase borrowing
    B) Enhance economic growth
    C) Reduce tax rates
    D) Decrease spending
    Answer: B) Enhance economic growth
13. Which type of debt is considered more manageable for India?
    A) Foreign debt
    B) Internal debt
    C) Short-term debt
    D) Long-term debt
    Answer: B) Internal debt
14. What happens when a country defaults on its public debt?
    A) Improved credit rating
    B) Decreased inflation
    C) Loss of investor confidence
    D) Increased economic growth
    Answer: C) Loss of investor confidence
15. Which of the following measures can help in reducing public debt?
    A) Increasing government spending
    B) Cutting taxes
    C) Improving tax compliance
    D) Expanding welfare schemes
    Answer: C) Improving tax compliance
16. How can public debt influence monetary policy?
    A) It has no impact.
    B) It can lead to lower interest rates.
    C) It can restrict the central bank’s actions.
    D) It can enhance foreign reserves.
    Answer: C) It can restrict the central bank’s actions.
17. What is the consequence of high public debt on future generations?
    A) Increased inheritance
    B) Higher taxes
    C) Greater job opportunities
    D) Lower cost of living
    Answer: B) Higher taxes
18. Which of the following can be a long-term strategy for managing public debt?
    A) Continuous borrowing
    B) Boosting economic growth
    C) Increasing subsidies
    D) Reducing exports
    Answer: B) Boosting economic growth
19. What type of loans are included in India’s external public debt?
    A) Loans from Indian banks
    B) Loans from international financial institutions
    C) Loans from local governments
    D) Loans from state governments
    Answer: B) Loans from international financial institutions
20. Which of the following is a key challenge in managing public debt?
    A) Inflation control
    B) Attracting foreign investment
    C) Ensuring budgetary discipline
    D) Increasing foreign reserves
    Answer: C) Ensuring budgetary discipline
21. Which program has been initiated by the Indian government to ensure better financial management?
    A) Make in India
    B) Digital India
    C) Start-Up India
    D) Skill India
    Answer: B) Digital India
22. What effect does high public debt have on interest rates?
    A) Decreases interest rates
    B) Stabilizes interest rates
    C) Increases interest rates
    D) Has no effect
    Answer: C) Increases interest rates
23. What is a significant risk associated with high levels of public debt?
    A) Increased government revenue
    B) Economic stagnation
    C) Job creation
    D) Enhanced international reputation
    Answer: B) Economic stagnation
24. What fiscal measure can help reduce public debt?
    A) Increased spending on subsidies
    B) Decreased revenue collection
    C) Efficient tax collection
    D) Increased external borrowing
    Answer: C) Efficient tax collection
25. Which sector is primarily affected by rising public debt?
    A) Agriculture
    B) Manufacturing
    C) Service
    D) All of the above
    Answer: D) All of the above
26. Which of the following can lead to an increase in public debt?
    A) Budget surplus
    B) Economic recession
    C) Increased exports
    D) High employment
    Answer: B) Economic recession
27. Which policy can help in mitigating the impact of public debt?
    A) Promoting fiscal responsibility
    B) Encouraging public spending
    C) Reducing interest rates
    D) Increasing subsidies
    Answer: A) Promoting fiscal responsibility
28. In terms of public debt, what does the term ‘debt sustainability’ refer to?
    A) The ability to maintain high debt levels indefinitely
    B) The ability to repay debt without requiring further borrowing
    C) The ability to borrow without any restrictions
    D) The ability to reduce government spending
    Answer: B) The ability to repay debt without requiring further borrowing
29. What is the primary aim of public debt management in India?
    A) Increase government spending
    B) Minimize the cost of borrowing
    C) Expand social welfare programs
    D) Enhance tax revenues
    Answer: B) Minimize the cost of borrowing
30. Which of the following strategies can improve public debt levels?
    A) Increase government salaries
    B) Encourage private sector investment
    C) Increase public sector employment
    D) Expand unproductive expenditures
    Answer: B) Encourage private sector investment

These MCQs can be useful for preparing for the Civil Services Examination, focusing on understanding the nuances of India’s public debt situation.