Brief Theory Overview

Indian Economy is classified into three sectors—Primary (agriculture, mining), Secondary (manufacturing, construction) and Tertiary (services, banking). Since 1991, India moved from a closed, license-raj system to LPG (Liberalisation, Privatisation, Globalisation) reforms, triggering higher GDP growth, FDI inflows and expansion of the services sector. Key institutions—RBI (monetary policy), NITI Aayog (policy think-tank), Finance Commission (fiscal federalism)—shape macro-economic stability.

The five-year plans have been replaced by NITI Aayog’s 15-year Vision & 3-year Action Plan. Inflation is targeted by RBI at 4 ± 2 % under the Monetary Policy Framework; fiscal deficit is anchored below 4.5 % of GDP by FY26. Important metrics—GDP (size ≈ $3.7 tn), Per-capita income, Gini coefficient (inequality), Human Development Index, ease of doing business—are frequently asked. Railways exams focus on basic definitions, latest budget & economic survey highlights, schemes (PM-KISAN, MGNREGA, PLI) and static concepts like nationalisation, disinvestment, GST slabs.

Practice MCQs

1. Which sector contributes the largest share to India’s Gross Value Added (GVA) at current prices?
   A. Primary
   B. Secondary
   C. Tertiary
   D. Agriculture & Allied

2. The 1991 balance-of-payments crisis led India to pledge gold abroad under which scheme?
   A. Gold Monetisation Scheme
   B. Gold Bond Scheme
   C. Gold Pledging Scheme
   D. Gold Swap Scheme

3. Who is the ex-officio Chairman of the NITI Aayog?
   A. President of India
   B. Vice-President of India
   C. Prime Minister of India
   D. Finance Minister

4. The term “Inflation” in India is most commonly measured by which index?
   A. GDP deflator
   B. Wholesale Price Index (WPI)
   C. Consumer Food Price Index (CFPI)
   D. Consumer Price Index (CPI)

5. What is the present (FY 2023-24) statutory liquidity ratio (SLR) for commercial banks?
   A. 18 %
   B. 18.25 %
   C. 18.50 %
   D. 18.75 %

6. Which of the following is NOT a direct tax in India?
   A. Corporation Tax
   B. Income Tax
   C. Customs Duty
   D. Capital Gains Tax

7. The GST Council is chaired by
   A. RBI Governor
   B. Union Finance Minister
   C. NITI Aayog CEO
   D. Prime Minister

8. The minimum support price (MSP) for crops is recommended by
   A. NABARD
   B. CACP
   C. FCI
   D. SEBI

9. Which Five-Year Plan had the objective of “Growth with Justice”?
   A. 3rd
   B. 5th
   C. 7th
   D. 10th

10. “Disinvestment” in India means
    A. Shutting down PSU units
    B. Selling government stake in PSUs
    C. Buying private companies
    D. Merging two PSUs

11. The PLI (Production-Linked Incentive) scheme launched in 2020-21 aims to boost
    A. Agriculture exports
    B. Manufacturing & exports
    C. Service sector
    D. Tourism

12. As per Economic Survey 2022-23, India’s real GDP growth estimate for FY23 was
    A. 6.8 %
    B. 7.0 %
    C. 7.2 %
    D. 8.7 %

13. Which of the following is the largest item of non-plan revenue expenditure of the Union Government?
    A. Defence
    B. Subsidies
    C. Interest payments
    D. Pensions

14. The term “Stagflation” refers to
    A. High inflation & high unemployment
    B. Low inflation & low growth
    C. High growth & low inflation
    D. Negative growth & deflation

15. The 15th Finance Commission recommended vertical devolution of divisible pool to states at
    A. 32 %
    B. 41 %
    C. 42 %
    D. 45 %

16. Which committee recommended the introduction of GST in India (2004)?
    A. Chelliah Committee
    B. Kelkar Committee
    C. Raja Chelliah Task Force
    D. Vijay Kelkar Task Force

17. The “Inclusive Growth” term was first prominently used in which plan document?
    A. 9th Plan
    B. 10th Plan
    C. 11th Plan
    D. 12th Plan

18. Which of the following is a measure of “Fiscal Consolidation”?
    A. Rising fiscal deficit
    B. Rising revenue deficit
    C. Falling primary deficit
    D. Rising primary deficit

19. The “Phillips Curve” postulates a trade-off between
    A. Inflation and unemployment
    B. Growth and inflation
    C. Imports and exports
    D. Tax and subsidies

20. The base year for the present series of GDP (2011-12) was revised by which organisation?
    A. CSO (now NSO)
    B. RBI
    C. NITI Aayog
    D. Planning Commission

21. Which of the following is an example of “Capital Receipt” in Union Budget?
    A. Interest receipts
    B. Dividend from PSUs
    C. Disinvestment proceeds
    D. GST collections

22. The “Gini Coefficient” of 0 represents
    A. Perfect inequality
    B. Perfect equality
    C. 50 % inequality
    D. Median income

23. Which of the following is NOT a component of “Revenue Expenditure”?
    A. Salaries of government employees
    B. Interest payment on past loans
    C. Purchase of defence aircraft
    D. Subsidies on fertilizers

24. The “Twin Balance Sheet Problem” in India (2015) referred to
    A. High fiscal deficit & current account deficit
    B. Stressed corporate & bank balance sheets
    C. Rising inflation & unemployment
    D. States & Centre fiscal imbalances

25. Which of the following best describes “Green GDP”?
    A. GDP at constant prices
    B. GDP adjusted for environmental degradation
    C. GDP plus NRI remittances
    D. GDP minus indirect taxes

Answers

1. Answer

   Correct: Option C. Tertiary (services) sector accounts for >50 % of GVA.
2. Answer

   Correct: Option C. 47 tonnes were pledged under “Gold Pledging Scheme” via SBI-Bank of England.
3. Answer

   Correct: Option C. PM is ex-officio Chairman; CEO is appointed separately.
4. Answer

   Correct: Option D. CPI (combined) is RBI’s headline inflation anchor.
5. Answer

   Correct: Option B. RBI kept SLR at 18.25 % w.e.f. Oct 2022.
6. Answer

   Correct: Option C. Customs is an indirect tax on imports.
7. Answer

   Correct: Option B. Union FM chairs; 1/3 weight to states.
8. Answer

   Correct: Option B. Commission for Agricultural Costs & Prices (CACP).
9. Answer

   Correct: Option C. 7th FYP (1985-90) emphasised growth with social justice.
10. Answer

    Correct: Option B. Govt sells equity to raise non-debt receipts.
11. Answer

    Correct: Option B. PLI targets 14 sectors like mobiles, textiles, pharma to cut import bills.
12. Answer

    Correct: Option C. Survey projected 7.2 % for FY23; final MoSPI est. 7.2 %.
13. Answer

    Correct: Option C. Interest payments >40 % of revenue receipts.
14. Answer

    Correct: Option A. Stagnant output + rising prices = stagflation.
15. Answer

    Correct: Option B. 15th FC kept 41 % share (1 % for UTs).
16. Answer

    Correct: Option D. Kelkar Task Force 2004 recommended GST roadmap.
17. Answer

    Correct: Option C. 11th Plan (2007-12) titled “Towards Faster & More Inclusive Growth”.
18. Answer

    Correct: Option C. Falling primary deficit shows consolidation.
19. Answer

    Correct: Option A. Inverse relation between inflation & unemployment.
20. Answer

    Correct: Option A. CSO (Central Statistics Office) revised base to 2011-12.
21. Answer

    Correct: Option C. Disinvestment is non-debt capital receipt.
22. Answer

    Correct: Option B. 0 = equal income distribution; 1 = maximum inequality.
23. Answer

    Correct: Option C. Aircraft purchase is capital expenditure.
24. Answer

    Correct: Option B. Stressed corporates unable to repay → NPAs for banks.
25. Answer

    Correct: Option B. Deducts environmental costs from conventional GDP.

Quick Shortcuts & Tips

1. SLR vs Repo trick: Repo always ends with 0 (currently 6.50 %), SLR ends with 5 or 25 (18.25 %).
2. Direct vs Indirect tax: Direct taxes have “income/person” in name; indirect are on “goods/services”.
3. CPI vs WPI: Railway GK mostly asks CPI—remember “C for Consumer & RBI target”.
4. **Finance Commission tenure ends with “0”: 15th (2020-25), 16th will start 2026.
5. Plans vs NITI: 12th plan was last (2012-17); replace “Five” with “NITI Vision”.
6. Disinvestment target colour code: Budget 2023-24 → ₹51k cr (remember 51 = DI-51).
7. Gini 0-1 scale: 0 = equal, 1 = unequal—think “0 looks like O for One big equal family”.
8. Twin balance sheet: Two “B” – Banks & corporates both “B”alance sheets stressed.