UPSC CSE Prelims
Indian Economy Previous Year Questions (PYQs)
Solved Previous Year Questions (PYQs) for Indian Economy in UPSC CSE Prelims in English & Hindi Medium.
Chapter Breakdown: Scroll →
Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
Detailed Explanation:
Answer: Option 4 — Following an expansionary monetary policy
An expansionary monetary policy involves lowering interest rates and increasing money supply, which makes the rupee less attractive to foreign investors and encourages capital outflow. This increases the supply of rupees in the forex market, leading to further depreciation rather than stabilizing it. To stop rupee depreciation, the RBI typically adopts a contractionary monetary policy (raising interest rates) to attract foreign capital inflows and support the currency.
✅ Option 1 – Likely measure: Curbing non-essential imports reduces dollar outflow while promoting exports increases dollar inflow, both supporting the rupee.
✅ Option 2 – Likely measure: Masala Bonds (rupee-denominated bonds issued abroad) attract foreign investment without creating dollar repayment obligations, supporting the rupee.
✅ Option 3 – Likely measure: Easing external commercial borrowing norms encourages dollar inflows from foreign lenders, increasing forex reserves and supporting the rupee.
❌ Option 4 – NOT a likely measure: Expansionary monetary policy weakens the currency by reducing returns on rupee assets and encouraging capital flight.
📝 Short Notes: Measures to Control Rupee Depreciation
| Type of Measure | Specific Actions | Impact on Rupee |
|---|---|---|
| Trade Measures | • Curb non-essential imports • Promote exports • Impose import duties |
Reduces dollar outflow and increases inflow |
| Capital Inflow Measures | • Masala Bonds • Ease FDI/FPI norms • Sovereign bonds |
Increases foreign investment without dollar liability |
| Monetary Policy | • Raise interest rates (contractionary) • Reduce liquidity |
Attracts foreign capital through higher returns |
| Forex Management | • RBI sells dollars from reserves • Forward rate management • Swap arrangements |
Directly increases dollar supply in market |
| External Borrowing | • Ease ECB norms • NRI deposit schemes • Bilateral currency swaps |
Increases dollar availability |
The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus
Detailed Explanation:
Answer: Option 3 — Procurement incidentals and distribution cost
The economic cost of food grains to the Food Corporation of India (FCI) comprises the Minimum Support Price (MSP) and bonus paid to farmers, plus all expenses incurred during procurement and distribution. Procurement incidentals include costs like commission to agents, bagging materials, labor charges, and transportation from collection centers to storage depots. Distribution costs cover transportation to fair price shops, handling charges, storage losses, and delivery expenses. While interest costs and godown charges are part of overall FCI operations, the specific economic cost formula focuses on procurement incidentals and distribution costs as the primary additional components beyond MSP.
📝 Short Notes: FCI Economic Cost Components
| Component | Details |
|---|---|
| Minimum Support Price (MSP) | Base price paid to farmers; announced by government for 23 crops based on CACP recommendations |
| Bonus | Additional payment over MSP by some states to incentivize farmers |
| Procurement Incidentals | Commission to procurement agencies, bagging, stitching, labor, loading/unloading, internal transport to godowns |
| Distribution Cost | Transportation from godowns to FPS, handling charges, transit losses, delivery expenses |
| Economic Cost Formula | Economic Cost = MSP + Bonus + Procurement Incidentals + Distribution Cost |
| Issue Price | Subsidized price at which food grains are sold through PDS; difference between economic cost and issue price is subsidy |
Consider the following statements:
- CoaI sector was nationalized by the Government of India under Indira Gandhi.
- Now, coal blocks are allocated on a lottery basis.
- Till recently, India imported coal to meet the shortage of domestic supply, but now India is self- sufficient in coal production.
Which of the statements given above is/arc correct?
Detailed Explanation:
Answer: Option 1 — 1 only
The coal sector was indeed nationalized during the Indira Gandhi government in the 1970s through the Coal Mines (Nationalisation) Act. However, coal blocks are now allocated through competitive auctions (not lottery), and India continues to import significant quantities of coal despite increased domestic production, indicating it is not self-sufficient.
✅ Statement 1 – Correct: The coal sector was nationalized by the Indira Gandhi government in phases during the 1970s through the Coal Mines (Nationalisation) Act, 1973.
❌ Statement 2 – Incorrect: Coal blocks are allocated through competitive auctions (introduced after 2014), not on a lottery basis.
❌ Statement 3 – Incorrect: India still imports substantial quantities of coal (especially coking coal for steel industry) and is not self-sufficient in coal production.
📝 Short Notes: Coal Sector in India
| Aspect | Details |
|---|---|
| Nationalization | Coal Mines (Nationalisation) Act, 1973 – nationalized coal mines except coking coal mines; Coking coal mines nationalized in 1973 |
| Current Allocation Method | Competitive auction system introduced through Coal Mines (Special Provisions) Act, 2015 after cancellation of coal block allocations by Supreme Court in 2014 |
| Major Public Sector Companies | Coal India Limited (CIL) – accounts for over 80% of domestic coal production; Singareni Collieries Company Limited (SCCL) |
| Coal Imports | India imports coal to meet demand-supply gap, particularly coking coal (used in steel production) and high-grade thermal coal |
| Major Coal Reserves | Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh |
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In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?
- The foreign currency earnings of India’s IT sector
- Increasing the government expenditure
- Remittances from Indians abroad
Select the correct answer using the code given below.
Detailed Explanation:
Answer: Option 2 — 1 and 3 only
A currency crisis occurs when a country faces rapid depletion of foreign exchange reserves, making it unable to meet its international payment obligations. Factors that increase foreign currency inflows help build reserves and reduce such risks.
✅ Statement 1 – Correct: India's IT sector earns substantial foreign exchange through service exports, directly strengthening forex reserves and providing a cushion against currency volatility.
❌ Statement 2 – Incorrect: Increasing government expenditure, especially if financed through borrowing, can widen fiscal deficits and potentially weaken investor confidence, thereby increasing rather than reducing currency crisis risk.
✅ Statement 3 – Correct: Remittances from Indians working abroad constitute a steady inflow of foreign currency, which bolsters forex reserves and acts as a buffer against external shocks.
📝 Short Notes: Factors Reducing Currency Crisis Risk
- Foreign Exchange Reserves: Act as a cushion to meet import bills and external debt obligations during times of stress.
- Current Account Balance: Export earnings (goods and services) and remittances improve the current account, reducing dependency on foreign capital.
- IT & Service Exports: India's IT sector is a major net foreign exchange earner, contributing significantly to invisible receipts.
- Remittances: India is the largest recipient of remittances globally, providing a stable source of foreign currency inflows.
- Fiscal Discipline: Excessive government expenditure leading to high fiscal deficits can trigger capital outflows and currency depreciation if financed unsustainably.
- Capital Controls: Prudent management of capital flows helps prevent sudden stops and reversals that trigger currency crises.
Consider the following statements:
- Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.
- In terms of PPP dollars, India is the sixth largest economy in the world.
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 1 — 1 only
This question tests understanding of Purchasing Power Parity (PPP) and India's global economic ranking. Statement 1 correctly defines PPP methodology, while Statement 2 contains outdated information about India's PPP ranking.
✅ Statement 1 – Correct: PPP exchange rates are indeed calculated by comparing the prices of an identical basket of goods and services across different countries, eliminating the effect of exchange rate fluctuations and providing a more accurate comparison of living standards and economic productivity.
❌ Statement 2 – Incorrect: India is the third-largest economy in the world in terms of PPP dollars (after China and the United States), not the sixth-largest. In nominal GDP terms, India ranks fifth, but the question specifically asks about PPP dollars.
📝 Short Notes: Purchasing Power Parity (PPP)
- Definition: PPP is an economic theory and method that compares different countries' currencies through a "basket of goods" approach, eliminating differences in price levels between countries.
- Purpose: PPP exchange rates provide a better comparison of real income levels and living standards than nominal exchange rates, as they account for cost of living differences.
- PPP vs Nominal GDP: PPP adjusts for price differences, making it more suitable for comparing economic welfare; nominal GDP uses market exchange rates and reflects international purchasing power.
- India's Global Ranking (PPP): India is the 3rd largest economy by PPP GDP (after China and USA), but 5th by nominal GDP (after USA, China, Germany, and Japan).
- Largest Economies by PPP (2023-24): 1. China, 2. United States, 3. India, 4. Japan, 5. Germany.
- IMF and World Bank: Both international organizations regularly publish PPP-based GDP estimates for comparative economic analysis across nations.
Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?
Detailed Explanation:
Answer: Option 4 — Participatory Note
Participatory Notes (P-Notes) are financial instruments issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to invest in Indian securities without directly registering with SEBI. The FPI holds the underlying Indian securities on behalf of the overseas investor, and the P-Note represents their beneficial ownership.
Why other options are incorrect:
• Certificate of Deposit is a short-term debt instrument issued by banks to mobilize deposits, not related to stock market participation.
• Commercial Paper is an unsecured short-term debt instrument issued by corporations to meet working capital needs, not for foreign portfolio investment.
• Promissory Note is a written promise to pay a specified sum of money at a future date, unrelated to stock market investment mechanisms.
📝 Short Notes: Participatory Notes (P-Notes)
- Definition: Offshore derivative instruments issued by registered FPIs to overseas investors for investing in Indian securities without direct SEBI registration.
- Regulatory Body: Securities and Exchange Board of India (SEBI) regulates P-Notes through FPI regulations.
- Advantages: Easier market access for foreign investors, reduced compliance burden, and anonymity for investors.
- Concerns: Potential for round-tripping of funds, lack of transparency regarding ultimate beneficiaries, and money laundering risks.
- SEBI Regulations: SEBI has tightened P-Note norms over time, requiring FPIs to conduct proper KYC of P-Note subscribers and restricting certain derivative structures.
- Market Impact: P-Notes constitute a significant portion of FPI investments in India, though their share has declined due to stricter regulations.
The Chairman of public sector banks are selected by the
Detailed Explanation:
Answer: Option 1 — Banks Board Bureau
The Chairman of public sector banks in India are selected by the Banks Board Bureau (BBB), an autonomous body established in 2016 based on the recommendations of the P.J. Nayak Committee Report (2014). The BBB is responsible for recommending candidates for appointments to the Boards of Directors and top management positions in Public Sector Banks (PSBs) and state-owned financial institutions, thereby bringing greater transparency and professionalism to the selection process.
📝 Short Notes: Banks Board Bureau
- Establishment: The Banks Board Bureau was established on 28th February 2016 as an autonomous body by the Government of India.
- Genesis: It was formed based on the recommendations of the P.J. Nayak Committee Report (2014) on governance reforms in PSBs.
- Key Functions: Recommends persons for appointment as Whole-Time Directors and Non-Executive Chairmen of PSBs; assists banks in developing strategies and capital-raising plans; evaluates performance of bank boards.
- Composition: The BBB comprises eminent professionals from banking and finance sectors, including former RBI Governors, bankers, and industry experts.
- Objective: To improve governance, enhance professionalism, and ensure merit-based selection in public sector banks and financial institutions.
- Status: The BBB functions as an autonomous body but provides recommendations to the government, which makes the final appointments.
With reference to the cultivation of Kharif crop in India in the last five years, consider the following statements:
- Area under rice cultivation is the highest.
- Area under the cultivation of jowar is more than that of oilseeds.
- Area of cotton cultivation is more than that of sugarcane.
- Area under sugarcane cultivation has steadily decreased.
Which of the statements given above are correct?
Detailed Explanation:
Answer: Option 1 — 1 and 3 only
This question tests knowledge of the relative area under cultivation of major Kharif crops in India. Based on agricultural statistics from the last five years, rice has the largest cultivated area among all Kharif crops, and cotton cultivation area significantly exceeds that of sugarcane.
✅ Statement 1 – Correct: Rice has the highest area under cultivation among Kharif crops, ranging around 430-441 lakh hectares annually.
❌ Statement 2 – Incorrect: The area under jowar (sorghum) cultivation is significantly less than the area under oilseeds cultivation.
✅ Statement 3 – Correct: Cotton cultivation area is more than double that of sugarcane, with cotton around 120-125 lakh hectares versus sugarcane around 50-55 lakh hectares.
❌ Statement 4 – Incorrect: Sugarcane cultivation area has shown fluctuations rather than a steady decrease over the period.
📝 Short Notes: Kharif Crops in India
- Kharif Season: Crops sown in June-July (with monsoon onset) and harvested in September-October.
- Major Kharif Crops (by area): Rice (highest, ~440 lakh ha), Maize, Bajra, Jowar, Cotton, Sugarcane, Groundnut, Soybean, Tur (Arhar).
- Rice Dominance: Rice occupies nearly 40% of total Kharif crop area, being the staple food crop.
- Cotton vs Sugarcane: Cotton requires less water and has larger area coverage (~120-125 lakh ha) compared to water-intensive sugarcane (~50-55 lakh ha).
- Oilseeds: Include groundnut, soybean, sunflower, etc., collectively covering more area than individual cereals like jowar.
- Regional Variations: Rice predominates in eastern and southern India; cotton in western and central regions; sugarcane in UP, Maharashtra.
In a given year in India, official poverty lines are higher in some States than in others because
Detailed Explanation:
Answer: Option 2 — price levels vary from State to State
The official poverty line in India is determined by the cost of a basket of essential goods and services required to meet basic needs. Since the prices of these essential commodities vary significantly across different states due to regional economic conditions, transportation costs, and local market dynamics, the poverty line must be adjusted accordingly. States with higher price levels for essential goods naturally have a higher official poverty line to ensure that the threshold reflects the actual cost of living in that region.
📝 Short Notes: Poverty Line in India
- Definition: The poverty line represents the minimum level of income deemed adequate to secure the necessities of life in a country.
- Methodology: Calculated based on the cost of a consumption basket that includes food, clothing, fuel, and other essential items.
- State-wise Variation: Different states have different poverty lines primarily due to variations in price levels (Cost of Living Index).
- Tendulkar Committee (2009): Recommended shifting from calorie-based norm to consumption expenditure-based approach, considering both food and non-food items.
- Rangarajan Committee (2014): Further revised methodology suggesting higher poverty lines than Tendulkar Committee, accounting for health and education expenses.
- Current Approach: Poverty estimates are based on consumption expenditure data from NSSO surveys, adjusted for state-specific price indices.
- Not Based On: Poverty rates, Gross State Product, or quality of public distribution systems do not determine the poverty line itself—these are outcomes or separate indicators.
In spite of being a high saving economy, capital formation may not result in a significant increase in output due to -
Detailed Explanation:
Answer: Option 4 — high capital-output ratio
Even when an economy has high savings leading to substantial capital formation, if the capital-output ratio (COR) is high, it means more capital is required to produce each unit of output, resulting in inefficient conversion of investment into GDP growth. This inefficiency can stem from technological backwardness, poor infrastructure, inadequate skill levels, or misallocation of resources, making the investment less productive.
Why other options are incorrect:
• Weak administrative machinery affects implementation efficiency but doesn't directly define the capital-output relationship.
• Illiteracy affects human capital quality but isn't the primary reason why capital formation fails to generate proportionate output.
• High population density may create employment challenges but doesn't directly explain why invested capital produces limited output.
📝 Short Notes: Capital-Output Ratio and Economic Growth
- Capital Formation: Net addition to the existing stock of capital goods (machinery, buildings, infrastructure) in an economy during a given period.
- Capital-Output Ratio (COR): Measures the amount of capital required to produce one unit of output. Formula: COR = Capital Stock / Output (GDP)
- Low COR: Indicates efficient use of capital — less capital needed for each unit of output (desirable for rapid growth)
- High COR: Indicates inefficient capital use — more capital needed for each unit of output (slows growth despite high investment)
- Incremental Capital-Output Ratio (ICOR): Measures additional capital needed for additional unit of output. Used in growth models and planning.
- Factors causing high COR: Technological obsolescence, poor infrastructure, skill gaps, capital-intensive but low-productivity sectors, bureaucratic delays, and underutilization of capacity.
- Policy implication: Merely increasing savings and investment isn't sufficient; improving productivity and efficiency of capital use is crucial for sustained economic growth.
Consider the following:
- Areca nut
- Barley
- Coffee
- Finger millet
- Groundnut
- Sesamum
- Turmeric
The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the above?
Detailed Explanation:
Answer: Option 2 — 2, 4, 5 and 6 only
The Cabinet Committee on Economic Affairs (CCEA) announces Minimum Support Price (MSP) for 22 mandated crops, which include cereals, pulses, oilseeds, and commercial crops. Among the given options, only Barley (cereal), Finger millet (cereal), Groundnut (oilseed), and Sesamum (oilseed) are covered under the MSP regime. Areca nut, Coffee, and Turmeric are plantation/spice crops not included in the MSP list.
✅ Statement 1 (Areca nut) – Incorrect: Areca nut is a plantation crop and is not included in the 22 mandated crops for MSP.
✅ Statement 2 (Barley) – Correct: Barley is one of the seven cereals for which MSP is announced.
✅ Statement 3 (Coffee) – Incorrect: Coffee is a plantation/beverage crop not covered under MSP.
✅ Statement 4 (Finger millet) – Correct: Finger millet (Ragi) is a cereal included in the MSP list.
✅ Statement 5 (Groundnut) – Correct: Groundnut is one of the seven oilseeds covered under MSP.
✅ Statement 6 (Sesamum) – Correct: Sesamum is an oilseed for which MSP is announced.
✅ Statement 7 (Turmeric) – Incorrect: Turmeric is a spice crop not among the 22 mandated crops for MSP.
📝 Short Notes: Minimum Support Price (MSP) Crops
| Category | Crops Covered under MSP | Total |
|---|---|---|
| Cereals | Paddy, Wheat, Maize, Sorghum (Jowar), Pearl Millet (Bajra), Barley, Finger Millet (Ragi) | 7 |
| Pulses | Gram (Chana), Tur (Arhar), Moong, Urad, Lentil (Masur) | 5 |
| Oilseeds | Groundnut, Rapeseed-Mustard, Soyabean, Sesamum, Sunflower, Safflower, Nigerseed | 7 |
| Commercial Crops | Copra, Cotton (Medium Staple & Long Staple), Sugarcane (FRP) | 3 |
| Total Crops | 22 + Sugarcane (FRP) | |
- CCEA Role: The Cabinet Committee on Economic Affairs announces MSP based on recommendations from the Commission for Agricultural Costs and Prices (CACP).
- Excluded Crops: Plantation crops (coffee, tea, rubber, areca nut), spices (turmeric, cardamom), and most horticultural crops are not covered under MSP.
- MSP Objective: To provide assured prices to farmers and protect them from price fluctuations, ensuring minimum remuneration for their produce.
Which one of the following statements correctly describes the meaning of legal tender money?
Detailed Explanation:
Answer: Option 2 — The money which a creditor is under compulsion to accept in settlement of his claims
Legal tender is any form of payment recognized by law that a creditor is legally obligated to accept for the settlement of a debt or financial obligation. The defining characteristic of legal tender is the legal compulsion on the creditor—if a debtor offers legal tender to settle a claim, the creditor cannot refuse it and subsequently sue for non-payment of the debt.
Why other options are incorrect:
❌ Option 1 – Incorrect: This misinterprets 'legal tender' as money used in legal proceedings, which is not the correct definition.
❌ Option 3 – Incorrect: Cheques, drafts, and bills of exchange are 'fiduciary money' whose acceptance depends on trust between parties; creditors are not legally compelled to accept them and can insist on cash payment.
❌ Option 4 – Incorrect: Legal tender includes both metallic coins and paper currency notes; defining it solely as metallic money is incomplete.
📝 Short Notes: Legal Tender Money
- Definition: Legal tender is the form of payment that must be accepted by law for settlement of debts and obligations within a jurisdiction.
- In India: Currency notes issued by the Reserve Bank of India (RBI) and coins issued by the Government of India constitute legal tender under the Reserve Bank of India Act, 1934 and the Coinage Act, 2011.
- Legal Compulsion: A creditor cannot refuse legal tender offered for debt settlement; refusal may result in the debtor being discharged from the obligation.
- Limitations on Coins: Under the Coinage Act, 2011, coins are legal tender only up to certain limits (e.g., ₹1,000 for coins of ₹10 denomination and below).
- Bank Money vs Legal Tender: Cheques, drafts, and bills of exchange are not legal tender as their acceptance is voluntary and based on mutual trust (fiduciary money).
- Demonetization Impact: When currency is demonetized (as in 2016), those notes cease to be legal tender from the specified date.
Consider the following statements: Human capital formation as a concept is better explained in terms of a process, which enables
- individuals of a country to accumulate more capital.
- increasing the knowledge, skill levels and capacities of the people of the country.
- accumulation of tangible wealth.
- accumulation of intangible wealth.
Which of the statements given above is/are correct?
Detailed Explanation:
Answer: Option 2 — 2 and 4 only
Human capital formation refers to the process of enhancing the productive capacities of people through investment in education, health, and skills. It is an intangible asset that increases the knowledge and capabilities of the workforce, thereby contributing to economic development.
✅ Statement 1 – Incorrect: Human capital formation focuses on developing people's skills and knowledge, not on accumulating physical or financial capital.
✅ Statement 2 – Correct: This statement accurately defines human capital formation as the process of increasing knowledge, skills, and capacities of people.
✅ Statement 3 – Incorrect: Tangible wealth refers to physical assets like land and buildings, whereas human capital is intangible.
✅ Statement 4 – Correct: Human capital is indeed an intangible wealth as it represents the stock of skills, knowledge, and health embodied in people, which has economic value but no physical form.
📝 Short Notes: Human Capital Formation
- Definition: The process of acquiring and increasing the number of persons with education, skills, and experience critical for economic development.
- Components: Education, health, training, migration, and information.
- Nature: Intangible asset that cannot be physically touched but has immense economic value.
- Investment Sources: Government expenditure on education and health, private spending on training, and individual investments in skill development.
- Benefits: Increases productivity, promotes innovation, reduces poverty, and accelerates economic growth.
- Difference from Physical Capital: Physical capital refers to tangible assets (machinery, buildings), while human capital refers to the skills and knowledge of people.
Consider the following statements:
- The quantity of imported edible oils is more than the domestic production of edible oils in the last five years.
- The Government does not impose any customs duty on all the imported edible oils as a special case.
Which of the two statements given above is/are correct?
Detailed Explanation:
Answer: Option 1 — 1 only
This question tests knowledge about India's edible oil economy. Statement 1 correctly identifies India's heavy dependence on imported edible oils, while Statement 2 incorrectly claims that no customs duty is imposed on imported edible oils.
✅ Statement 1 – Correct: India is the world's largest importer of edible oils, with imports accounting for 60-65% of total consumption in recent years, significantly exceeding domestic production (35-40%).
❌ Statement 2 – Incorrect: The Government of India does impose customs duties on imported edible oils (including Basic Customs Duty and Agriculture Infrastructure and Development Cess), which are periodically adjusted to protect domestic oilseed farmers and manage prices.
📝 Short Notes: Edible Oils in India
- Import Dependence: India imports about 60-65% of its edible oil requirements, making it the world's largest importer of edible oils.
- Major Sources: Palm oil (from Indonesia and Malaysia), soybean oil, and sunflower oil are the primary imports.
- Domestic Production: India produces mainly groundnut oil, mustard oil, and a smaller quantity of palm oil, accounting for 35-40% of consumption.
- Customs Duty Policy: The government periodically revises customs duties on imported edible oils to balance consumer prices and farmer interests. Duties include Basic Customs Duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC).
- Key Oilseeds: Major oilseeds grown in India include groundnut, rapeseed-mustard, soybean, sunflower, safflower, and sesame.
- Government Initiatives: National Mission on Oilseeds and Oil Palm (NMOOP) aims to increase domestic production and reduce import dependence.
Consider the following items:
- Cereal grains hulled
- Chicken eggs cooked
- Fish processed and canned
- Newspapers containing advertising material
Which of the above items is/are exempted under GST (Goods and Services Tax)?
Detailed Explanation:
Answer: Option 4 — 1, 2 and 4 only
This question tests knowledge of GST exemptions on various goods. Items 1 (cereal grains hulled), 2 (chicken eggs cooked), and 4 (newspapers with advertising) are exempted under GST, while item 3 (processed and canned fish) is taxable as a value-added product.
✅ Statement 1 – Correct: Cereal grains hulled (HSN 1104) are exempted from GST when not sold in branded unit containers, keeping basic food staples affordable.
✅ Statement 2 – Correct: Birds' eggs (including chicken eggs cooked) are specifically exempted under HSN 0407, regardless of whether they are fresh, preserved, or cooked.
❌ Statement 3 – Incorrect: While fresh fish is GST-exempt, processed and canned fish (HSN 1604) is a value-added product subject to GST at 5%.
✅ Statement 4 – Correct: Newspapers, journals, and periodicals (HSN 4902) are exempt from GST, whether or not they contain advertising material.
📝 Short Notes: GST Exemptions on Essential Goods
- Zero-rated vs Exempt: Zero-rated supplies allow input tax credit, while exempt supplies do not; most food items fall under exempt category.
- Exempted Food Items: Fresh vegetables, fruits, milk, curd, lassi, unbranded cereal grains, fresh fish/meat, jaggery, honey, and eggs are exempt from GST.
- Taxable Food Items: Processed, packaged, or branded food items attract GST; processed fish/meat products (5%), ice cream (18%), and branded packaged foods (5-18%) are taxable.
- Print Media: All newspapers, journals, and periodicals are exempt under HSN 4902, ensuring affordable access to information regardless of advertising content.
- HSN Classification: Harmonized System of Nomenclature (HSN) codes determine GST applicability; similar products may have different tax treatment based on processing level.