Indian Economy — UPSC Prelims practice questions

Question 1

Which of the following is NOT a component of GST in India? (A) CGST (B) SGST (C) IGST (D) FGST

Accepted Answer

(D) FGST — Correct. There is no constitutional GST component called FGST in India.

Question 2

Consider the following statements about the relationship between oil prices and inflation in India:
1. India imports a significant share of its crude oil requirement, making it vulnerable to imported inflation from oil price spikes.
2. Higher oil prices raise transportation costs, which can push up prices across a wide range of goods.
Which of the statements given above is/are correct? (A) Both 1 and 2 (B) 1 only (C) 2 only (D) Neither 1 nor 2

Accepted Answer

(A) Both 1 and 2 — Correct. India imports over 80 per cent of its crude oil, and oil price rises feed into transportation, manufacturing, and agriculture costs, generating broad-based cost-push inflation.

Question 3

The Benami Transactions (Prohibition) Amendment Act is primarily aimed at: (A) Regulating foreign direct investment flows (B) Prohibiting transactions where property is held in a fictitious name or by a person who has not paid for it (C) Taxing agricultural income (D) Regulating cryptocurrency transactions

Accepted Answer

(B) Prohibiting transactions where property is held in a fictitious name or by a person who has not paid for it — Correct. The Act prohibits benami transactions and provides for confiscation of benami property where the real owner is different from the recorded owner.

Question 4

Which one of the following actions by the central bank directly increases money supply in the economy? (A) Selling government securities to the public (B) Purchasing government securities from the public (C) Raising the cash reserve ratio (D) Increasing the statutory liquidity ratio

Accepted Answer

(B) Purchasing government securities from the public — Correct. When the central bank buys securities, it injects liquidity into the system and expands money supply.

Question 5

Which of the following statements about surcharge and cess is correct? (A) Both are part of the divisible pool of central taxes (B) Neither can be imposed by the Union (C) Surcharge generally goes to the Union and is not shareable with states through devolution (D) Cess must always be permanent in nature

Accepted Answer

(C) Surcharge generally goes to the Union and is not shareable with states through devolution — Correct. Surcharge on certain central taxes accrues to the Union and is generally excluded from the divisible pool shared with states.

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