UPSC Prelims 2025 — GS Paper I

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UPSC Prelims 2025 — GS Paper I — solved practice questions

12 UPSC Previous Year Papers questions with step-by-step solutions. Attempt each, then reveal the answer.

1. Q1medium
   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?
   • AOnly one
   • BOnly two
   • COnly three
   • DAll the four
   Show answer & solution

   Correct answer: (B) Only two

   Alternative Investment Funds (AIFs) are privately pooled investment vehicles regulated by SEBI under the AIF Regulations, 2012. Category I covers venture capital, SME, social venture and infrastructure funds; Category II covers private equity and debt funds; Category III covers hedge funds and similar funds using complex strategies. So Hedge Funds (II) and Venture Capital (IV) are AIFs. Bonds and stocks are ordinary securities that investors buy directly. They are not pooled fund structures, so they are not AIFs. Only two of the four qualify, hence option (b).
2. Q2medium
   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.
   • AI and II only
   • BII, III and IV
   • CI, III, IV and V
   • DI, II and V
   Show answer & solution

   Correct answer: (A) I and II only

   The RBI earns mainly from interest and gains on its holdings of government securities, which it buys and sells in open market operations (I), and from buying and selling foreign currency and earning on its foreign exchange assets (II). Pension fund management is not an RBI function; it is regulated by PFRDA, so III is wrong. The RBI lends to the government and to banks (repo, liquidity support), not to private companies, so IV is wrong. Printing currency notes is an expense for the RBI, not a source of income, so V is wrong. Hence I and II only, option (a).
3. Q3hard
   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?
   • AOnly one
   • BOnly two
   • CAll the three
   • DNone
   Show answer & solution

   Correct answer: (A) Only one

   Row I is wrong. The Directorate of Enforcement, which enforces FEMA, PMLA and the Fugitive Economic Offenders Act, 2018, works under the Department of Revenue, Ministry of Finance, not under the Internal Security Division of the Ministry of Home Affairs. Row II is correct: the Directorate of Revenue Intelligence is an anti-smuggling and intelligence agency under the Department of Revenue that enforces the Customs Act, 1962. Row III is the trap. 'Big data analytics to assist tax officers for better policy and nabbing tax evaders' describes the Directorate General of Analytics and Risk Management (set up in 2017), not the Directorate General of Systems and Data Management, which is the IT and data systems wing. So only one row is correctly matched, which is option (a), as in UPSC's official key.
4. Q4medium
   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?
   • AI only
   • BII only
   • CBoth I and II
   • DNeither I nor II
   Show answer & solution

   Correct answer: (B) II only

   Statement I is incorrect on two counts. The BRSR framework was introduced by SEBI, the securities market regulator, not the RBI. It is also mandatory only for the top 1,000 listed companies by market capitalisation (from FY 2022-23), not for all listed companies. Statement II is correct. The BRSR is an ESG-type disclosure covering environmental matters (emissions, energy, water, waste), social matters (employees, human rights, communities) and governance and ethics. These disclosures are largely non-financial in nature. Hence II only, option (b).
5. Q5medium
   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 Income-tax Act, 1961. Which one of the following is correct in respect of the above statements?
   • ABoth Statement I and Statement II are correct and Statement II explains Statement I
   • BBoth Statement I and Statement II are correct but Statement II does not explain Statement I
   • CStatement I is correct but Statement II is not correct
   • DStatement I is not correct but Statement II is correct
   Show answer & solution

   Correct answer: (D) Statement I is not correct but Statement II is correct

   Statement I is incorrect. Only income from agriculture as defined in Section 2(1A) of the Income-tax Act, 1961 (basically raising crops and basic processing by the cultivator) is exempt. Income from allied activities such as poultry farming, dairy, wool rearing or fisheries is generally not treated as agricultural income and can be taxed. Statement II is correct. Under Section 2(14), rural agricultural land (outside the specified municipal limits and distance and population thresholds) is excluded from 'capital asset', so its sale does not attract capital gains tax. Hence I is wrong and II is right, option (d).
6. Q6medium
   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?
   • AI and II only
   • BII and III only
   • CI and III only
   • DI, II and III
   Show answer & solution

   Correct answer: (C) I and III only

   Statement I is correct: India joined the US-led Minerals Security Partnership in 2023 to help secure critical mineral supply chains. Statement II is incorrect. India has identified 30 critical minerals (2023 list), but it is not resource-rich in all of them. It depends heavily on imports for lithium, cobalt, nickel and several others. Statement III is correct: the Mines and Minerals (Development and Regulation) Amendment Act, 2023 empowers the Central Government to conduct the auction of mining leases and composite licences for specified critical and strategic minerals. Hence I and III only, option (c).
7. Q7easy
   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?
   • ABoth Statement II and Statement III are correct and both of them explain Statement I
   • BBoth Statement I and Statement II are correct and Statement I explains Statement II
   • COnly one of the Statements II and III is correct and that explains Statement I
   • DNeither Statement II nor Statement III is correct
   Show answer & solution

   Correct answer: (A) Both Statement II and Statement III are correct and both of them explain Statement I

   Bondholders are lenders to the company. They get fixed interest and their principal back at maturity. Stockholders are the owners; their dividends are variable and depend on profits, so Statement II is correct. If a company is wound up or defaults, bondholders have a prior claim on its assets and are paid before stockholders, so Statement III is correct. Because lenders get fixed returns and are repaid first, bonds are considered relatively less risky than stocks, so Statement I is correct. Both II and III explain why I holds. Hence option (a).
8. Q8medium
   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?
   • AI and II only
   • BII and III only
   • CI and III only
   • DI, II and III
   Show answer & solution

   Correct answer: (A) I and II only

   Statement I is correct: according to global derivatives exchange data, India (through NSE) accounts for a very large share of equity option contracts traded worldwide, reflecting a boom in retail options trading. Statement II is correct: in early 2024 India's stock market capitalisation overtook that of Hong Kong, making India the fourth-largest equity market. Statement III is incorrect: SEBI regulates the securities market. It issues risk warnings on derivatives trading, registers investment advisers and research analysts, and takes action against unregistered advisers. Hence I and II only, option (a).
9. Q9easy
   Consider the following statements : Statement I : Circular economy reduces the emissions of greenhouse gases. Statement II : Circular economy reduces the use of raw materials as inputs. Statement III : Circular economy reduces wastage in the production process. Which one of the following is correct in respect of the above statements?
   • ABoth Statement II and Statement III are correct and both of them explain Statement I
   • BBoth Statement II and Statement III are correct but only one of them explains Statement I
   • COnly one of the Statements II and III is correct and that explains Statement I
   • DNeither Statement II nor Statement III is correct
   Show answer & solution

   Correct answer: (A) Both Statement II and Statement III are correct and both of them explain Statement I

   A circular economy keeps materials in use through reuse, repair, remanufacturing and recycling instead of the take-make-dispose model. Because recycled and reused materials replace virgin inputs, it reduces the use of raw materials (Statement II). Because by-products and waste are recovered and fed back into production, it reduces wastage in the production process (Statement III). Less extraction, processing and waste disposal means lower energy use and fewer greenhouse gas emissions (Statement I). Both II and III therefore explain I. Hence option (a).
10. Q10easy
    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?
    • AI and II only
    • BII and III only
    • CI and III only
    • DI, II and III
    Show answer & solution

    Correct answer: (A) I and II only

    Capital receipts are government receipts that either create a liability (for example borrowings) or reduce the government's assets (for example disinvestment or sale of assets, and recovery of loans). So Statement I is correct. Borrowings and disinvestment proceeds are both classified as capital receipts, so Statement II is correct. Statement III is wrong. Interest received on loans given by the government is a revenue receipt. It is income from an asset and does not create any liability. Hence I and II only, option (a).
11. Q11easy
    Consider the following statements about Raja Ram Mohan Roy : I. He possessed great love and respect for the traditional philosophical systems of the East. II. He desired his countrymen to accept the rational and scientific approach and the principle of human dignity and social equality of all men and women. Which of the statements given above is/are correct?
    • AI only
    • BII only
    • CBoth I and II
    • DNeither I nor II
    Show answer & solution

    Correct answer: (C) Both I and II

    Raja Ram Mohan Roy (1772-1833), founder of the Brahmo Samaj, studied Sanskrit, Persian, Arabic and English texts. He respected the Upanishads and Vedanta, translated them into Bengali and English, and held that the original Hindu philosophy was monotheistic, so Statement I is correct. He also wanted Indians to adopt reason, modern science and education, and believed in human dignity and equality of men and women. He campaigned against sati and for women's rights, so Statement II is also correct. Hence both statements are correct, option (c).
12. Q12medium
    Consider the following subjects with regard to Non-Cooperation Programme : I. Boycott of law-courts and foreign cloth II. Observance of strict non-violence III. Retention of titles and honours without using them in public IV. Establishment of Panchayats for settling disputes How many of the above were parts of Non-Cooperation Programme?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll the four
    Show answer & solution

    Correct answer: (C) Only three

    The Non-Cooperation Programme (1920-22) included the boycott of government law courts, schools and foreign cloth (I), strict adherence to non-violence (II), and the setting up of national schools and panchayats to settle disputes (IV). It also asked people to surrender titles and honours and resign from nominated posts in local bodies. Statement III says titles and honours were to be retained without using them in public, which is wrong. They were to be given up. So three items, I, II and IV, were parts of the programme. Hence option (c).

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