📈 Indian Economy16 PYQs

Indian Economy: 2025 PYQ.

UPSC Prelims Indian Economy previous year questions from 2025, with answers and explanations.

16 questions · sorted by year
2025Multi-statement (How Many Style)Financial Markets & Instruments

With reference to investments, consider the following: I. Bonds II. Hedge Funds III. Stocks IV. Venture Capital How many of the above are treated as Alternative Investment Funds?

A.Only one
B.Only two
C.Only three
D.All the four
Explanation: * Alternative Investment Funds (AIFs) collect capital to invest in non-public or complex instruments beyond traditional choices like listed stocks and bonds. * Item II is an AIF: Hedge Funds employ complex trading strategies and leverage, classified under Category III AIF. * Item IV is an AIF: Venture Capital funds invest in startups or early-stage ventures, classified under Category I AIF. * Therefore, only two options (II and IV) are treated as Alternative Investment Funds.
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📌 Money and Capital MarketsRelevance 55%
2025Multi-statement (Traditional Style)Banking & Monetary Policy

Which of the following are the sources of income for the Reserve Bank of India? I. Buying and selling Government bonds II. Buying and selling foreign currency III. Pension fund management IV. Lending to private companies V. Printing and distributing currency notes Select the correct answer using the code given below.

A.I and II only
B.II, III and IV
C.I, III, IV and V
D.I, II and V
Explanation: * Item I is correct: Open market operations, where the central bank buys or sells government bonds to regulate money supply, are a major source of income for the RBI. * Item II is correct: Transactions in the foreign exchange market (buying foreign currency cheaply and selling it later for a profit) also contribute to earnings. * Item III is incorrect: The RBI does not manage pension funds; this is done by entities like EPFO or PFRDA. * Item IV is incorrect: The RBI does not lend directly to private companies; it lends to commercial banks and financial institutions. * Item V is correct: The RBI earns income through "seigniorage," as currency notes cost significantly less to produce than their face value.
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📌 RBI and The Banking SystemRelevance 95%
2025Pairs/Matching (How Many Style)Fiscal Policy & Taxation

With reference to the Government of India, consider the following information: Organization | Some of its functions | It works under I. Directorate of Enforcement | Enforcement of the Fugitive Economic Offenders Act, 2018 | Internal Security Division-I, Ministry of Home Affairs II. Directorate of Revenue Intelligence | Enforces the provisions of the Customs Act, 1962 | Department of Revenue, Ministry of Finance III. Directorate General of Systems and Data Management | Carrying out big data analytics to assist tax officers for better policy and nabbing tax evaders | Department of Revenue, Ministry of Finance In how many of the above rows is the information correctly matched?

A.Only one
B.Only two
C.All the three
Explanation: * Row I is incorrectly matched: The Directorate of Enforcement (ED) handles the Fugitive Economic Offenders Act, 2018, but operates under the Department of Revenue, Ministry of Finance, not the Ministry of Home Affairs. * Row II is correctly matched: The Directorate of Revenue Intelligence (DRI) enforces the Customs Act, 1962, under the CBIC, Department of Revenue, Ministry of Finance. * Row III is incorrectly matched: Carrying out big data analytics to assist tax officers and nab evaders is the function of the Directorate General of Analytics and Risk Management (DGARM), which was set up in 2018 under the CBIC. * Therefore, only one row is correctly matched.
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📌 Investment Models and PPPRelevance 55%
2025Current AffairsMulti-statement (Traditional Style)Banking & Monetary Policy

Consider the following statements: I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR). II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature. Which of the statements given above is/are correct?

A.I only
B.II only
C.Both I and II
D.Neither I nor II
Explanation: * Statement I is not correct: The reporting requirements on ESG parameters called the Business Responsibility and Sustainability Report (BRSR) were introduced by the Securities and Exchange Board of India (SEBI), not the RBI. * Statement II is correct: The BRSR is intended to mandate quantitative, standardized disclosures on ESG (Environment, Social, Governance) parameters to support comparisons, making the disclosures largely non-financial in nature.
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📌 Sustainability and Climate Change - India and the WorldRelevance 95%
2025Statement-I & Statement-II (Assertion-Reason Style)Fiscal Policy & Taxation

Consider the following statements: Statement I: In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax. Statement II: In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961. Which one of the following is correct in respect of the above statements?

A.Both Statement I and Statement II are correct and Statement II explains Statement I
B.Both Statement I and Statement II are correct but Statement II does not explain Statement I
C.Statement I is correct but Statement II is not correct
D.Statement I is not correct but Statement II is correct
Explanation: * Statement I is not correct: While core agricultural income is exempted under the Income Tax Act, non-agricultural income such as earnings from poultry farming, dairy farming, and bee hiving is not exempted from taxation. * Statement II is correct: Under section 2(14) of the Income-tax Act, 1961, the term "capital asset" explicitly excludes rural agricultural land in India, meaning any gain from its sale is not taxable as capital gains. Thus, option (d) is correct.
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📌 Tax structure in IndiaRelevance 95%
2025Current AffairsMulti-statement (Traditional Style)Infrastructure, Industry & Minerals

Consider the following statements: I. India has joined the Minerals Security Partnership as a member. II. India is a resource-rich country in all the 30 critical minerals that it has identified. III. The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals. Which of the statements given above are correct?

A.I and II only
B.II and III only
C.I and III only
D.I, II and III
Explanation: * Statement I is correct: India became the 14th member of the Minerals Security Partnership (MSP) in June 2023 alongside countries like the US, Australia, and Japan. * Statement II is incorrect: India's Ministry of Mines identified 30 critical minerals, but the country does not have proven domestic reserves for all 30 and remains dependent on imports for many (such as lithium, cobalt, and nickel). * Statement III is correct: The Parliament amended the MMDR Act, 1957 in 2023, empowering the Central Government to exclusively auction mining leases and composite licenses for specified critical and strategic minerals.
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📌 Industrial Policy and PSEsRelevance 40%
2025Statement-I & Statement-II (Assertion-Reason Style)Financial Markets & Instruments

Consider the following statements: Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders. Statement II: Bondholders are lenders to a company whereas stockholders are its owners. Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company. Which one of the following is correct in respect of the above statements?

A.Both Statement II and Statement III are correct and both of them explain Statement I
B.Both Statement I and Statement II are correct and Statement I explains Statement II
C.Only one of the Statements II and III is correct and that explains Statement I
D.Neither Statement II nor Statement III is correct
Explanation: * Statement I is correct: Bondholders generally face lower financial risk than stockholders because they receive fixed interest payments and hold priority positions. * Statement II is correct: Bondholders lend money to the company (debt), while stockholders purchase equity shares and act as its owners. * Statement III is correct: In liquidation or bankruptcy situations, bondholders are legally prioritized over stockholders for repayment. * Since both II (creditor status) and III (payment priority) explain why bondholders are at lower risk than equity holders, option (a) is correct.
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📌 Money and Capital MarketsRelevance 95%
2025Current AffairsMulti-statement (Traditional Style)Financial Markets & Instruments

Consider the following statements: I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom. II. India's stock market has grown rapidly in the recent past even overtaking Hong Kong's at some point of time. III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard. Which of the statements given above are correct?

A.I and II only
B.II and III only
C.I and III only
D.I, II and III
Explanation: * Statement I is correct: India has safely emerged as a dominant global player in equity options; in early 2024, over 84% of all equity option contracts traded globally were executed on Indian exchanges. * Statement II is correct: In January 2024, the combined value of shares listed on Indian exchanges reached $4.33 trillion, briefly surpassing Hong Kong's market value to make India the world's fourth-largest stock market. * Statement III is not correct: India has an active regulatory body, the Securities and Exchange Board of India (SEBI), which actively monitors options risks, issues public warnings, and regulates unregistered investment platforms or financial advisors.
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📌 Money and Capital MarketsRelevance 80%
2025Multi-statement (Traditional Style)Fiscal Policy & Taxation

Consider the following statements: I. Capital receipts create a liability or cause a reduction in the assets of the Government. II. Borrowings and disinvestment are capital receipts. III. Interest received on loans creates a liability of the Government. Which of the statements given above are correct?

A.I and II only
B.II and III only
C.I and III only
D.I, II and III
Explanation: * Statement I is correct: All those receipts of the government that either create a financial liability or cause a reduction in fiscal assets are termed capital receipts. * Statement II is correct: Borrowings raise an obligation (creating liability), and disinvestment (sale of government assets or PSU shares) reduces the total asset pool, so both are capital receipts. * Statement III is incorrect: Interest received on loans granted by the central government is classified as non-tax revenue receipt. It represents current income and does not create any liability or reduce public assets.
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📌 Public Finance in IndiaRelevance 95%
2025Multi-statement (Traditional Style)Welfare & Social Indicators

Consider the following statements about the Rashtriya Gokul Mission: I. It is important for the upliftment of rural poor as majority of low producing indigenous animals are with small and marginal farmers and landless labourers. II. It was initiated to promote indigenous cattle and buffalo rearing and conservation in scientific and holistic manner. Which of the statements given above is/are correct?

A.I only
B.II only
C.Both I and II
D.Neither I nor II
Explanation: * The Rashtriya Gokul Mission (RGM) is being implemented for development and conservation of indigenous bovine breeds. * The scheme is crucial for the upliftment of the rural poor, as more than 80% of low-producing indigenous animals are with small and marginal farmers and landless labourers. * One of its primary objectives is to promote indigenous cattle & buffalo rearing and conservation in a scientific and holistic manner.
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📌 Core Agriculture and Allied SectorsRelevance 40%
2025Multi-statement (Traditional Style)Fiscal Policy & Taxation

Suppose the revenue expenditure is 80,000 crores and the revenue receipts of the Government are 60,000 crores. The Government budget also shows borrowings of 10,000 crores and interest payments of 6,000 crores. Which of the following statements are correct? I. Revenue deficit is 20,000 crores. II. Fiscal deficit is 10,000 crores. III. Primary deficit is 4,000 crores. Select the correct answer using the code given below.

A.I and II only
B.II and III only
C.I and III only
D.I, II and III
Explanation: * All three calculations are correct: * I. Revenue Deficit = Revenue Expenditure (80,000 cr) - Revenue Receipts (60,000 cr) = 20,000 crores. * II. Fiscal Deficit is equivalent to total government borrowings, which stands at 10,000 crores. * III. Primary Deficit = Fiscal Deficit (10,000 cr) - Interest Payments (6,000 cr) = 4,000 crores.
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📌 Public Finance in IndiaRelevance 95%
2025Direct Conceptual / Factual MCQFiscal Policy & Taxation

A country's fiscal deficit stands at 50,000 crores. It is receiving 10,000 crores through non-debt creating capital receipts. The country's interest liabilities are 1,500 crores. What is the gross primary deficit?

A.48,500 crores
B.51,500 crores
C.58,500 crores
D.None of the above
Explanation: * (a) is correct: The Gross Primary Deficit is calculated by subtracting interest liabilities directly from the overall Fiscal Deficit. * Primary Deficit = Fiscal Deficit (50,000 crores) - Interest Payments (1,500 crores) = 48,500 crores. (The non-debt creating capital receipts are already evaluated within the net fiscal deficit total).
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📌 Public Finance in IndiaRelevance 95%
2025Multi-statement (Traditional Style)Fiscal Policy & Taxation

Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct? I. It has recommended grants of 4,800 crores from the year 2022-23 to the year 2025-26 for incentivizing States to enhance educational outcomes. II. 45% of the net proceeds of Union taxes are to be shared with States. III. 45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms. IV. It reintroduced tax effort criteria to reward fiscal performance.

A.I, II and III
B.I, II and IV
C.I, III and IV
D.II, III and IV
Explanation: * Statement I is correct: The 15th Finance Commission (XVFC) recommended performance-based incentive grants totaling ₹4,800 crore (allocated as ₹1,200 crore each year) from 2022–23 to 2025–26 to encourage states to step up educational outcomes. * Statement II is incorrect: To preserve financial predictability and resource stability during the pandemic, the vertical devolution share to the states was maintained at 41 per cent, not 45%. (This adjusted the previous 42% rule by 1% to account for the changed status of Jammu & Kashmir into the Union Territories of Ladakh and J&K). * Statement III is correct: The commission specifically recommended setting aside an allocation of ₹45,000 crore as a performance-linked financial incentive for states executing agricultural reforms. * Statement IV is correct: The horizontal tax devolution framework re-introduced a specialized tax effort criterion to explicitly reward superior fiscal performance among states.
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📌 Public Finance in IndiaRelevance 95%
2025Multi-statement (Traditional Style)Digital Payments & FinTech

Consider the following statements in respect of RTGS and NEFT: I. In RTGS, the settlement time is instantaneous while in case of NEFT, it takes some time to settle payments. II. In RTGS, the customer is charged for inward transactions while that is not the case for NEFT. III. Operating hours for RTGS are restricted on certain days while this is not true for NEFT.

A.I only
B.I and II
C.I and III
D.III only
Explanation: * Statement I is correct: Real Time Gross Settlement (RTGS) is a financial system that processes fund transfers continuously and instantaneously on an individual transaction-by-transaction basis without any netting. National Electronic Funds Transfer (NEFT) is a batch-based electronic clearing transfer system that processes queued transactions at specific hourly intervals, meaning it takes time to clear. * Statement II is incorrect: Under the service fee rationalization mandated by the Reserve Bank of India, inward digital fund transactions arriving via RTGS or NEFT must be credited absolutely free, with no charges levied on the recipient customer. * Statement III is incorrect: To expand digital banking, the RBI made both centralized systems available 24x7x365 throughout the year, removing previous operational restrictions on weekends or holidays.
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📌 FinTech and Digital EcosystemRelevance 70%
2025Current AffairsMulti-statement (How Many Style)Digital Payments & FinTech

Consider the following countries: I. France II. United Arab Emirates III. Germany IV. Singapore V. Bangladesh How many countries amongst the above are there other than India where international merchant payments are accepted under UPI?

A.Only two
B.Only three
C.Only four
D.All the five
Explanation: * Unified Payments Interface (UPI) merchant payments are active internationally at specific merchant venues outside India. * Item I (UAE), Item II (France—officially launched at the iconic Eiffel Tower), and Item IV (Singapore) are countries where international merchant acceptance is live. * Item III (Germany) and Item V (Bangladesh) do not currently support UPI international merchant payment frameworks. * Therefore, exactly three countries on the list are valid merchant acceptance territories.
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📌 FinTech and Digital EcosystemRelevance 100%
2025Multi-statement (How Many Style)Infrastructure, Industry & Minerals

Consider the following activities: I. Production of crude oil II. Refining, storage and distribution of petroleum III. Marketing and sale of petroleum products IV. Production of natural gas How many of the above activities are regulated by the Petroleum and Natural Gas Regulatory Board in our country?

A.Only one
B.Only two
C.Only three
D.All the four
Explanation: * The Petroleum and Natural Gas Regulatory Board (PNGRB) was established under a statutory Act of 2006 to protect consumer interests and monitor downstream networks. * As mandated by the Act, the board regulates the refining, processing, storage, transport, distribution, marketing, and commercial sale of petroleum, petroleum products, and natural gas. This validates Activities II and III. * The statutory framework explicitly excludes the core upstream extraction and production of crude oil (Activity I) and natural gas (Activity IV) from the board's regulatory domain. * Therefore, exactly two activities are regulated.
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📌 Power and Energy SectorRelevance 40%
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