Q21hardSimilar Sounding
In India, which one of the following compiles information on industrial disputes, closures, retrenchments and lay-offs in factories employing workers ?
(a) Central Statistics Office
(b) Department for Promotion of Industry and Internal Trade
(c) Labour Bureau
(d) National Technical Manpower Information System
Answer: (b)
Trap: Similar Sounding
Option (c) Labour Bureau seems the most logical answer since it deals with labour-related statistics and is under the Ministry of Labour. The official answer (b) DPIIT is counterintuitive for labour dispute statistics. The Labour Bureau does compile such data in its Indian Labour Journal. This is a contested answer.
Q22easyPartial Truth
In India, what is the role of the Coal Controller's Organization (CCO) ?
1. CCO is the major source of Coal Statistics in Government of India.
2. It monitors progress of development of Captive Coal/Lignite blocks.
3. It hears any objection to the Government's notification relating to acquisition of coal-bearing areas.
4. It ensures that coal mining companies deliver the coal to end users in the prescribed time.
Select the correct answer using the code given below :
(a) 1, 2 and 3
(b) 3 and 4 only
(c) 1 and 2 only
(d) 1, 2 and 4
Answer: (b)
Trap: Partial Truth
Statement 1 seems very plausible since CCO does deal with coal statistics, and statement 2 about monitoring captive blocks also sounds like a CCO function. The official answer (b) only includes statements 3 and 4. Students with general knowledge of CCO would likely pick (a) which includes the plausible-sounding statements 1 and 2.
Q29moderateSimilar Sounding
With reference to the "Tea Board" in India, consider the following statements :
1. The Tea Board is a statutory body.
2. It is a regulatory body attached to the Ministry of Agriculture and Farmers Welfare.
3. The Tea Board's Head Office is situated in Bengaluru.
4. The Board has overseas offices at Dubai and Moscow.
Which of the statements given above are correct ?
(a) 1 and 3
(b) 2 and 4
(c) 3 and 4
(d) 1 and 4
Answer: (d)
Trap: Similar Sounding
Statement 2 is the trap - Tea Board is under Ministry of Commerce and Industry, not Agriculture. Students may confuse it because tea is an agricultural product. Statement 3 is wrong - Head Office is in Kolkata, not Bengaluru (Coffee Board is in Bengaluru). These common confusions between Tea Board and Coffee Board are exploited.
Q31moderateAbsolute Qualifier
Consider the following statements :
1. Tight monetary policy of US Federal Reserve could lead to capital flight.
2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs).
3. Devaluation of domestic currency decreases the currency risk associated with ECBs.
Which of the statements given above are correct ?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (b)
Trap: Absolute Qualifier
Statement 1 seems obviously correct - tight US monetary policy attracts capital TO the US, causing capital flight FROM emerging markets like India. The official answer (b) excludes this. Statement 3 is incorrect - devaluation INCREASES currency risk for ECBs (you need more rupees to repay dollar debt). The official answer including statement 3 is debatable.
Q33moderateCommon Misconception
Consider the following statements :
1. In India, credit rating agencies are regulated by Reserve Bank of India.
2. The rating agency popularly known as ICRA is a public limited company.
3. Brickwork Ratings is an Indian credit rating agency.
Which of the statements given above are correct ?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (b)
Trap: Common Misconception
Statement 1 is the trap - credit rating agencies in India are regulated by SEBI, not RBI. Many students assume RBI regulates all financial entities. This is a classic UPSC trick exploiting the common confusion between SEBI and RBI regulatory domains.
Q34easyPartial Truth
With reference to the 'Banks Board Bureau (BBB)', which of the following statements are correct ?
1. The Governor of RBI is the Chairman of BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.
Select the correct answer using the code given below :
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (c)
Trap: Partial Truth
Statement 2 seems obviously correct as BBB was set up partly to recommend appointments for PSBs. However, the official answer (c) excludes it. BBB does recommend for selection of heads, so this answer is debatable. Statement 1 about RBI Governor being Chairman is wrong - BBB has its own separate Chairman.
Q35moderateAbsolute Qualifier
With reference to Convertible Bonds, consider the following statements :
1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
Which of the statements given above is/are correct ?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (a)
Trap: Absolute Qualifier
Statement 2 sounds sophisticated and plausible - equity values can rise with inflation, providing some inflation protection. However, the official answer excludes it. The conversion to equity provides indexation to company performance, not necessarily consumer prices specifically. The trap is conflating equity returns with consumer price indexation.
Q38easy
In India, which one of the following is responsible for maintaining price stability by controlling inflation ?
(a) Department of Consumer Affairs
(b) Expenditure Management Commission
(c) Financial Stability and Development Council
(d) Reserve Bank of India
Answer: (d)
Q91easy
"Rapid Financing Instrument" and "Rapid Credit Facility" are related to the provisions of lending by which one of the following ?
(a) Asian Development Bank
(b) International Monetary Fund
(c) United Nations Environment Programme Finance Initiative
(d) World Bank
Answer: (c)
Q92easyAbsolute Qualifier
With reference to the Indian economy, consider the following statements :
1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct ?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (a)
Trap: Absolute Qualifier
Statement 2 is actually WRONG - an increase in REER indicates LOSS of trade competitiveness (rupee is relatively more expensive in real terms). Statement 3 is correct - higher domestic inflation causes REER to increase faster than NEER, creating divergence. The official answer (a) including statement 2 is debatable. Statement 1 is correct (higher NEER = appreciation).
Q93moderateCommon Misconception
With reference to the Indian economy, consider the following statements :
1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
Which of the statements given above are correct ?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (a)
Trap: Common Misconception
Statement 1 is WRONG - if inflation is high, RBI SELLS government securities (to absorb liquidity), not buys them. Buying would inject more money and worsen inflation. Statement 2 is correct (sell dollars to support rupee). Statement 3 is correct (lower foreign rates means capital flows to India, RBI buys excess dollars to prevent over-appreciation). The official answer (a) including statement 1 contradicts basic monetary economics.
Q94easyPartial Truth
With reference to the "G20 Common Framework", consider the following statements :
1. It is an initiative endorsed by the G20 together with the Paris Club.
2. It is an initiative to support Low Income Countries with unsustainable debt.
Which of the statements given above is/are correct ?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (b)
Trap: Partial Truth
Both statements are actually correct - the G20 Common Framework for Debt Treatments WAS endorsed by G20 and Paris Club jointly in November 2020, and it IS for low-income countries with unsustainable debt (DSSI-eligible countries). The official answer (b) excluding statement 1 is debatable since Paris Club participation is a key feature of the framework.
Q95moderateCommon Misconception
With reference to the Indian economy, what are the advantages of "Inflation-Indexed Bonds (IIBs)" ?
1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
Which of the statements given above are correct ?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (c)
Trap: Common Misconception
Statement 2 is the most obviously correct statement - IIBs are DESIGNED to protect investors from inflation uncertainty. The official answer (c) excludes statement 2, which contradicts the fundamental purpose of IIBs. Statement 3 about tax-free status is incorrect for Indian IIBs (they are taxable). Statement 1 is correct (lower coupon due to inflation protection). The correct answer should be (a).
Q96moderateCommon Misconception
With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ?
1. They can sell their own goods in addition to offering their platforms as market-places.
2. The degree to which they can own big sellers on their platforms is limited.
Select the correct answer using the code given below :
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (a)
Trap: Common Misconception
Statement 1 is actually WRONG - under India's FDI policy, foreign e-commerce firms operating the marketplace model CANNOT sell their own goods (inventory-based model is not allowed for foreign-owned e-commerce). Statement 2 is correct - there are limits on how much a seller can be owned by the marketplace entity (no more than 25% of sales from one seller). The correct answer should be (b).
Q97moderateAbsolute Qualifier
Which of the following activities constitute real sector in the economy ?
1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas
Select the correct answer using the code given below :
(a) 1 and 2 only
(b) 2, 3 and 4 only
(c) 1, 3 and 4 only
(d) 1, 2, 3 and 4
Answer: (a)
Trap: Absolute Qualifier
The trap is confusing financial sector activities with real sector. Bank lending (statement 3) and bond issuance (statement 4) are financial sector activities, not real sector. Farming and manufacturing are clearly real sector (production of physical goods). Students may wrongly include banking as 'real' economic activity.
Q98easy
Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India ?
(a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
(b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
(c) An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
(d) A foreign company transfers shares and such shares derive their substantial value from assets located in India
Answer: (d)
Q99easyCommon Misconception
With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct ?
1. Acquiring new technology is capital expenditure.
2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Select the correct answer using the code given below :
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (d)
Trap: Common Misconception
Statement 1 seems obviously correct - acquiring new technology sounds like capital expenditure (investment in long-term assets). However, the official answer (d) says neither is correct. Statement 2 confuses financing methods with expenditure classification - debt and equity financing are not expenditures at all, they are sources of funds. The trap in statement 1 may depend on whether 'technology' is licensed (revenue) or purchased as an asset (capital).
Q100moderatePartial Truth
With reference to the Indian economy, consider the following statements :
1. A share of the household financial savings goes towards government borrowings.
2. Dated securities issued at market-related rates in auctions form a large component of internal debt.
Which of the above statements is/are correct ?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (a)
Trap: Partial Truth
Both statements appear correct. Statement 1 is true - household savings in bank deposits, insurance, PF etc. partially finance government borrowings. Statement 2 is also true - dated government securities (G-secs) issued through auctions DO form a large component of internal debt. The official answer (a) excluding statement 2 is debatable since dated securities ARE the largest component of India's internal debt.