UPSC Prelims 2015
Indian Economy Previous Year Questions (PYQs)
Explore 18 solved UPSC Prelims 2015 Indian Economy questions with detailed step-by-step bilingual solutions, option analysis, and answer keys.
The terms ‘Agreement on Agriculture’, ‘Agreement on the Application of Sanitary and Phytosanitary Measures’ and ‘Peace Clause’ appear in the news frequently in the context of the affairs of the:
Detailed Explanation:
Agreement on Agriculture (AoA), Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), and Peace Clause are all key agreements/provisions under the World Trade Organization (WTO).
AoA regulates international agricultural trade and subsidies; SPS Agreement sets standards for food safety and plant/animal health in trade; Peace Clause protects developing countries from legal challenges on certain agricultural subsidies provided they meet specified conditions.
In India the steel production industry requires the import of
Detailed Explanation:
India has abundant reserves of iron ore, the primary raw material for steel production.
However, India lacks sufficient high-quality coking coal (metallurgical coal), which is essential for the blast furnace process in steel manufacturing, making it a key import.
Saltpetre (potassium nitrate) is used in fertilizers and explosives, while rock phosphate is a fertilizer raw material—neither is directly used in steel production.
There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?
- Reducing revenue expenditure
- Introducing new welfare schemes
- Rationalizing subsidies
- Expanding industries
Select the correct answer using the code given below.
Detailed Explanation:
✅ Statement 1 – Correct: Reducing revenue expenditure (salaries, pensions, subsidies, interest payments) directly decreases government spending and helps narrow the fiscal deficit.
❌ Statement 2 – Incorrect: Introducing new welfare schemes increases government expenditure, thereby widening the budget deficit rather than reducing it.
✅ Statement 3 – Correct: Rationalizing subsidies (targeting, reducing non-merit subsidies) controls unnecessary revenue expenditure and improves fiscal management.
❌ Statement 4 – Incorrect: Expanding industries may increase tax revenue in the long term but requires initial capital expenditure and does not immediately reduce the deficit.
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When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
Detailed Explanation:
Statutory Liquidity Ratio (SLR) is the minimum percentage of Net Demand and Time Liabilities (NDTL) that commercial banks must maintain in liquid assets (cash, gold, government securities).
✅ Statement 3 – Correct: Reducing SLR by 50 basis points frees up funds previously locked in government securities, increasing loanable funds with banks, enabling them to cut lending rates to stimulate borrowing.
❌ Statement 1 – Incorrect: SLR reduction is a monetary policy tool with moderate impact; GDP growth depends on multiple factors, not just one policy change causing 'drastic' increase.
❌ Statement 2 – Incorrect: Foreign Institutional Investors (FIIs) respond to interest rate differentials, equity market returns, and global conditions, not domestic SLR adjustments.
❌ Statement 4 – Incorrect: SLR reduction increases liquidity in the banking system by releasing funds for lending, not reducing it.
Which one of the following issues the “Global Economic Prospects” report periodically?
Detailed Explanation:
The World Bank publishes the Global Economic Prospects (GEP) report twice a year (January and June).
The report examines global economic developments and provides growth forecasts for emerging market and developing economies (EMDEs).
Convertibility of rupee implies:
Detailed Explanation:
Convertibility of rupee refers to the freedom to convert Indian rupees into other currencies and vice versa without restrictions, enabling cross-border transactions.
Option 1 refers to the outdated gold standard, Option 2 describes a floating exchange rate system, and Option 4 refers to currency trading infrastructure—none of which defines convertibility itself.
A decrease in tax to GDP ratio of a country indicates which of the following?
- Slowing economic growth rates
- Less equitable distribution of national income
Choose the correct code:
Detailed Explanation:
✅ Statement 1 – Correct: A decrease in tax-to-GDP ratio often indicates slowing economic growth, as lower incomes and profits reduce tax collections, or reflects economic contraction where tax revenues fall faster than GDP.
❌ Statement 2 – Incorrect: The tax-to-GDP ratio measures government revenue collection efficiency, not income distribution equity. A decreasing ratio could occur with progressive tax cuts benefiting all income groups, or with regressive taxes declining – it provides no direct information about income inequality or distribution patterns.
With reference to the Indian economy, consider the following statements:
- The rate of growth of real Gross Domestic Product has steadily increased in the last decade.
- The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
Detailed Explanation:
❌ Statement 1 – Incorrect: The rate of growth of real GDP has fluctuated significantly during the last decade, not steadily increased. India experienced high growth in mid-2000s, slowdown during 2008 global financial crisis, brief recovery, and again deceleration around 2012-13. A steady increase would require the growth rate to rise every year, which did not occur.
✅ Statement 2 – Correct: GDP at market prices (in rupees) has steadily increased in absolute terms over the last decade. As long as the growth rate remained positive (which it did), the total size of economy in nominal rupee terms continued to expand year after year, despite fluctuations in the percentage growth rate.
The substitution of steel for wooden ploughs in agricultural production is an example of
Detailed Explanation:
Capital-augmenting technological progress increases the productivity of existing capital without necessarily increasing the quantity of capital.
Replacing wooden ploughs with steel ploughs enhances the effectiveness and durability of the same capital good (plough), allowing more efficient agricultural production with the same or less capital investment — this is capital-augmenting progress, not labour-augmenting (which increases labour productivity) or capital-reducing.
The Fair and Remunerative Price of Sugarcane is approved by the -
Detailed Explanation:
Fair and Remunerative Price (FRP) for sugarcane is approved by the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister.
The Commission for Agricultural Costs and Prices (CACP) recommends the FRP based on cost of production, input costs, and various economic factors, but the final approval rests with CCEA.
Consider the following statements:
- The Accelerated Irrigation Benefits Programme was launched during 1996-97 to provide loan assistance to poor farmers.
- The Command Area Development Programme was launched in 1974-75 for the development of water-use efficiency.
Which of the statements given above is/are correct?
Detailed Explanation:
❌ Statement 1 – Incorrect: The Accelerated Irrigation Benefits Programme (AIBP) was launched in 1996-97 to provide central loan assistance to states for accelerating completion of ongoing irrigation projects, not to provide loan assistance to poor farmers.
✅ Statement 2 – Correct: The Command Area Development Programme (CADP) was launched in 1974-75 to improve water-use efficiency and agricultural productivity in command areas of major and medium irrigation projects.
‘Basel III Accord’ or simply ‘Basel III’, often seen in the news, seeks to -
Detailed Explanation:
Basel III is a set of international banking regulations developed by the Basel Committee on Banking Supervision (BCBS) in response to the 2007-2008 financial crisis.
It strengthens the banking sector's resilience through higher capital adequacy requirements, enhanced liquidity standards (Liquidity Coverage Ratio and Net Stable Funding Ratio), and improved risk management frameworks to absorb financial shocks.
The problem of international liquidity is related to the non-availability of -
Detailed Explanation:
International liquidity refers to the availability of foreign exchange reserves (primarily hard currencies like the US Dollar, Euro, Yen, and Pound Sterling) that a country holds to meet its short-term international payment obligations.
The problem of international liquidity arises when there is a shortage of reserve currencies needed for import payments, debt servicing, and foreign exchange market interventions, not a lack of physical goods, precious metals, or exportable surplus.
In India, markets in agricultural products are regulated under the -
Detailed Explanation:
Agricultural Produce Market Committee (APMC) Acts enacted by State Governments regulate agricultural markets in India by establishing and managing market yards and market committees.
Each state divides its geographical area into market areas under the jurisdiction of Market Committees, where wholesale marketing activities require authorization from the committee.
With reference to Indian economy, consider the following :
- Bank rate
- Open market operations
- Public debt
- Public revenue
Which of the above is/are component/components of Monetary Policy?
Detailed Explanation:
Monetary Policy instruments are tools used by the Reserve Bank of India (RBI) to control money supply and credit in the economy.
✅ Bank Rate (Statement 1): Rate at which RBI lends to commercial banks; a key quantitative tool of monetary policy.
✅ Open Market Operations (Statement 2): Buying/selling of government securities by RBI to control liquidity in the banking system.
❌ Public Debt (Statement 3): Total government borrowing; part of fiscal policy, not monetary policy.
❌ Public Revenue (Statement 4): Government income from taxes and non-tax sources; component of fiscal policy, not monetary policy.
In the Index of Eight Core Industries, which one of the following is given the highest weight?
Detailed Explanation:
The Index of Eight Core Industries (ICI) measures the combined and individual performance of production in eight core industries with a total weight of 40.27% in the Index of Industrial Production (IIP).
The weightage in decreasing order is: Refinery Products (28.04%) > Electricity (19.85%) > Steel (17.92%) > Coal (10.33%) > Crude Oil (8.98%) > Natural Gas (6.88%) > Cement (5.37%) > Fertilizers (2.63%).
Among the given options, Electricity generation has the highest weight (19.85%), making Option 2 the correct answer.
Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’?
Detailed Explanation:
The Labour Bureau, under the Ministry of Labour and Employment, compiles and publishes the Consumer Price Index Number for Industrial Workers (CPI-IW).
The Labour Bureau also maintains CPI for Rural Labourers and CPI for Agricultural Labourers, while the Ministry of Statistics and Programme Implementation (MOSPI) publishes the general CPI and CPI for rural/urban areas.
With reference to inflation in India, which of the following statements is correct?
Detailed Explanation:
✅ Statement 3 – Correct: Decreased money circulation (contractionary monetary policy) reduces aggregate demand and liquidity in the economy, which helps control demand-pull inflation.
❌ Statement 1 – Incorrect: Controlling inflation is a joint responsibility of both the Government of India (fiscal policy, supply-side measures) and the Reserve Bank of India (monetary policy).
❌ Statement 2 – Incorrect: The RBI plays a central role through the Monetary Policy Committee (MPC), which adjusts policy rates (Repo rate) to maintain the inflation target of 4% ± 2% under the RBI Act, 1934.
❌ Statement 4 – Incorrect: Increased money circulation raises aggregate demand, which if not matched by supply, leads to demand-pull inflation.
UPSC Prelims 2015 - Indian Economy Chapter-wise Distribution
Money, Banking & Financial System
3 Qs (16.7%)Agriculture
3 Qs (16.7%)Public Finance & Fiscal Policy
2 Qs (11.1%)International Trade and Economic Organizations
2 Qs (11.1%)Inflation
2 Qs (11.1%)Industry
2 Qs (11.1%)External Sector
2 Qs (11.1%)Sustainable Development & Environment
1 Qs (5.6%)National Income & Economic Development
1 Qs (5.6%)UPSC Prelims 2015 - Indian Economy Questions FAQs
Q1 How many Indian Economy questions were asked in UPSC Prelims 2015?
Q2 What is the chapter-wise question distribution for Indian Economy in UPSC Prelims 2015?
- Money, Banking & Financial System: 3 questions (16.7%)
- Agriculture: 3 questions (16.7%)
- Public Finance & Fiscal Policy: 2 questions (11.1%)
- International Trade and Economic Organizations: 2 questions (11.1%)
- Inflation: 2 questions (11.1%)
- Industry: 2 questions (11.1%)
- External Sector: 2 questions (11.1%)
- Sustainable Development & Environment: 1 questions (5.6%)
- National Income & Economic Development: 1 questions (5.6%)