Indian Economy

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Indian Economy — solved practice questions

8 WBCS Indian Polity & Economy questions with step-by-step solutions. Attempt each, then reveal the answer.

1. Q1easy

   In the standard classification of an economy, which of the following activities belongs to the primary sector?

   • AFishing and forestry
   • BManufacturing of textiles
   • CSoftware development
   • DBanking and insurance
   Show answer & solution

   Correct answer: (A) Fishing and forestry

   The primary sector covers activities that directly use natural resources, such as agriculture, fishing, forestry and mining; manufacturing is secondary and banking or IT services are tertiary.

2. Q2easy

   Which institution in India is responsible for issuing currency notes (other than the one-rupee note) and acting as the country's central bank?

   • AState Bank of India
   • BReserve Bank of India
   • CMinistry of Finance
   • DNITI Aayog
   Show answer & solution

   Correct answer: (B) Reserve Bank of India

   The Reserve Bank of India (RBI) is the central bank and the sole authority for issuing currency notes except the one-rupee note and coins, which are issued by the Government of India.

3. Q3easy

   The Green Revolution in India, which sharply raised foodgrain production, was primarily associated with increased output of which crops?

   • AWheat and rice
   • BTea and coffee
   • CCotton and jute
   • DSugarcane and tobacco
   Show answer & solution

   Correct answer: (A) Wheat and rice

   The Green Revolution centred on high-yielding varieties of wheat and rice, boosting cereal production; wheat gains in states like Punjab and Haryana were especially dramatic.

4. Q4easy

   The Goods and Services Tax (GST) introduced in India is best described as which type of tax?

   • AA direct tax on personal income
   • BAn indirect tax on the supply of goods and services
   • CA tax levied only on corporate profits
   • DA tax on inherited wealth
   Show answer & solution

   Correct answer: (B) An indirect tax on the supply of goods and services

   GST is an indirect tax levied on the supply of goods and services; it replaced multiple indirect taxes like excise duty, service tax and VAT.

5. Q5medium

   NITI Aayog, established in 2015, replaced which earlier body as the premier policy think-tank of the Government of India?

   • AThe Finance Commission
   • BThe Planning Commission
   • CThe National Development Council
   • DThe University Grants Commission
   Show answer & solution

   Correct answer: (B) The Planning Commission

   NITI Aayog (National Institution for Transforming India) replaced the Planning Commission, shifting from centralised five-year planning to a think-tank and cooperative federalism role.

6. Q6medium

   When the Reserve Bank of India raises the repo rate, what is the most direct intended effect on the economy?

   • ABorrowing becomes cheaper and inflation is encouraged
   • BBorrowing becomes costlier, helping to control inflation
   • CThe government's fiscal deficit automatically falls
   • DForeign exchange reserves are directly transferred to banks
   Show answer & solution

   Correct answer: (B) Borrowing becomes costlier, helping to control inflation

   The repo rate is the rate at which the RBI lends to commercial banks; raising it makes borrowing costlier, tends to reduce money supply and demand, and is used to control inflation.

7. Q7medium

   Fiscal policy, as distinct from monetary policy, is primarily concerned with which of the following?

   • AGovernment taxation and public expenditure
   • BSetting the repo rate and cash reserve ratio
   • CManaging the money supply through open market operations
   • DFixing the exchange rate of the rupee
   Show answer & solution

   Correct answer: (A) Government taxation and public expenditure

   Fiscal policy deals with government taxation and public expenditure and is managed by the government (Ministry of Finance), whereas monetary policy deals with money supply and interest rates and is managed by the RBI.

8. Q8medium

   In the Union Budget, which of the following is an example of a direct tax?

   • AGoods and Services Tax
   • BCustoms duty
   • CCorporation tax
   • DExcise duty
   Show answer & solution

   Correct answer: (C) Corporation tax

   A direct tax is paid directly by the person on whom it is levied and cannot be shifted; income tax and corporation tax are direct taxes, while GST and customs duty are indirect taxes.

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