Indian Economy Questions and Answers

Answer: D

It is an ad valorem tax on domestic final consumption, collected at every stage of production and distribution.

Each seller pays tax on his sales and takes credit for the tax on his purchases, so the levy falls only on the value he has added. The cascading of tax upon tax is thereby avoided, and the whole burden rests on final consumption.

Answer: A

CRISIL evaluates the credit standing of a company.

The Credit Rating Information Services of India, set up in 1987, was India's first credit rating agency. It grades debt instruments by the issuer's ability to service them, so that investors can price risk. It does not itself lend.

Answer: D

It is the flow of expenditure devoted to increasing or maintaining the capital stock.

Gross domestic capital formation counts all investment in fixed assets and inventories before any deduction. Subtracting depreciation gives net capital formation - which is what the fourth option describes.

Answer: A

It relates to the education of girls.

The Kasturba Gandhi Balika Vidyalaya scheme, launched in 2004, set up residential upper primary schools for girls from Scheduled Caste, Scheduled Tribe, other backward class and minority families in educationally backward blocks.

Answer: B

The serious effort began with the Second Plan.

The First Plan was largely a collection of ongoing projects. The Second, framed on the Mahalanobis model in 1956, made rapid industrialisation the route to raising incomes and employment, and set the pattern for the plans that followed.

Answer: D

Legal tender includes coins and bank notes.

Coins issued by the government are limited legal tender - beyond a certain amount they need not be accepted - while bank notes issued by the RBI are unlimited legal tender, carrying the Governor's promise to pay the bearer.

Answer: B

Government expenditure must be equal to government income.

In equilibrium, total injections equal total leakages. If planned saving alone equals planned investment, then the other pair - government spending and taxation - must balance too; otherwise a deficit or surplus would disturb the equality.

Answer: A

Devaluation is a reduction in the value of a currency against major international currencies.

It is a deliberate act by the authorities under a fixed or managed exchange rate, and it makes exports cheaper abroad and imports dearer at home. India devalued in 1949, 1966 and 1991. A market-driven fall is called depreciation, not devaluation.

Answer: A

The guidelines govern the entry of new private sector banks.

The Narasimham Committee of 1991 recommended opening banking to competition, and the RBI issued entry norms in 1993 covering capital, promoter shareholding and branch obligations. Nine new private banks were licensed under them, among them HDFC, ICICI and Axis.

Answer: C

It is the Secretary of the Planning Commission.

The National Development Council was chaired by the Prime Minister, with all Chief Ministers and Union Cabinet ministers as members, and the Planning Commission's Secretary served as its secretary ex officio.