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Part 015 – Indian Economy Previous Year Questions

Q1. Redistribution of income in a country can be brought about through
(a) Progressive taxation combined with progressive expenditure
(b) Progressive taxation combined with regressive expenditure
(c) Regressive taxation combined with regressive expenditure
(d) Regressive taxation combined with progressive expenditure
Ans: (a) Redistribution of income and redistribution of wealth are respectively the transfer of income and of wealth (including physical property) from some individuals to others by means of taxation, monetary policies, etc. This can be achieved with a combination or progressive taxation and progressive expenditure. Progressive tax is one such means since they are imposed in an attempt to reduce the tax incidence of people with a lower ability to pay, as such taxes shift the incidence increasingly to those with a higher ability- to-pay. Regarding the distributive impact of public expenditure, the principle of maximum social advantage should be the underlying criteria of public spending. Hence, progressive public expenditure is the best antidote to reduce income inequality existing in the society. The expenditure on social security like free medical aid, free education, subsidized houses etc. is progressive in nature. For example, if only the lower salaried employees were given free residential quarters, it is a case of progressive expenditure. Such expenditure helps to reduce the glaring inequality existing in the distribution of income. Progressive redistributive expenditure may also take the shape of provision of cheap or free services and commodities. Free primary education, free medical aid, subsidies to food and housing and the provision of free meals to school children are examples of this type of progressive grant. Such expenditure benefits the poorer among the poorest and helps to raise the living standards of the weaker sections.

Q2. Who was the first Indian governor of the Reserve Bank of India?

(a) C.D. Deshmukh
(b) Sachindra Roy
(c) S Mukherjee
(d) None of these
Ans: (a) C.D. Deshmukh was the first India to be appointed as the Governor of the Reserve Bank of Indian in 1943. He subsequently served as the Finance Minister in the Union Cabinet (1950–1956). He was a civil servant by profession.

Q3. Which among the following is a tax levied by Centre and not shared with States ?

(a) Sales Tax
(b) Excise Duty
(c) Corporation Tax
(d) Income Tax
Ans: (c) Taxes levied, collected and retained by the Centre are: Ø Corporation Tax (Corporate tax) Ø Customs Duties. Ø Surcharge on Income Tax. Ø Taxes on capital value of assets of individual and companies. Ø Fees on matters of the Union list. These taxes belong to the centre exclusively. In other words, no part of the proceeds of these taxes can be assigned to the states.

Q4. ‘Pradhan Mantri Jan-Dhan Yojana’ has been launched for :

(a) Promoting financial inclusion in the country
(b) Providing loans to poorest people in the country
(c) Providing financial help to the marginalised community
(d) Promoting women in backward areas
Ans: (a) Pradhan Mantri Jan Dhan Yojana is India’s national mission for financial inclusion to ensure access to financial services, namely banking savings & deposit accounts, remittance, credit, insurance, pension in an affordable manner. This financial inclusion campaign was launched by the Prime Minister of India Narendra Modi on 28 August 2014.

Q5. Which of the following sets of taxes belongs to Central Government?

(a) Excise duty, Sales tax and Custom duty
(b) Income tax, Custom duty and House tax
(c) Excise duty, Custom duty and Income tax
(d) Custom duty, Entertainment tax and Income tax
Ans: (c) The taxing powers of the central government encompass taxes on income (except agricultural income), excise on goods produced (other than alcohol), customs duties, and inter-state sale of goods. The authority to levy a tax is comes from the Constitution which allocates the power to levy various taxes between the Centre and the State.

Q6. The headquarters of RBI is in

(a) Delhi (b) Kanpur
(c) Mumbai (d) Nasik
Ans: (c) The headquarters of Reserve Bank of India (RBI) is located at Mumbai, Maharashtra. Initially, the headquarter of RBI was in Calcutta (Now Kolkata) but in 1937 it was permanently moved to Bombay (now Mumbai). The RBI commenced its operations on 1 April, 1935 during the British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934.

Q7. Economic Survey in India is published officially, every year by the :

(a) Reserve Bank of India
(b) NITI Aayog
(c) Ministry of Finance
(d) Ministry of Commerce
Ans: (c) The Economic Survey of India is a flagship annual document of the Ministry of Finance, Government of India. It reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government and the prospects of the economy.

Q8. As per the 2016–17 Budget, the largest source of money to the Government of India is :

(a) Income Tax
(b) Corporation Tax
(c) Nontax revenues
(d) Borrowings and other liabilities
Ans: (d) According to the 2016-17 budget, Borrowings and other liabilities contribute the maximum of about 21% of total government earnings. It is followed by Corporation Tax (19%) and Income Tax (14%). Corporation tax and income tax together constitute one third of the total government earnings.

Q9. What is a bank rate ?

(a) Rate at which Central bank of a country advances loans to other banks in the country
(b) Rate at which banks advance loans to the customers
(c) Rate at which banks lend among themselves
(d) Rate at which banks lend to money lenders
Ans: (a) Bank Rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial/cooperative banks, development banks etc. Such loans are given out either by direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills. Thus, bank rate is also known as discount rate.

Q10. Which of the following tax systems will help to reduce economic inequalities in India ?

(a) Regressive Tax
(b) Progressive Tax
(c) Flat rate tax
(d) None of these
Ans: (b) A progressive tax is a tax in which the tax rate increases as the taxable amount increases. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with a lower ability to pay, as such taxes shift the incidence increasingly to those with a higher ability-to-pay. It reduces tax burdens on people who can least afford to pay them and is, thus, considered as effective in reducing economic inequalities.

Q11. Beginning from the Financial Year 2017–18 NITI Ayog plans to replace the 5 year plans with which of the following?

(a) 5 year Vision Document
(b) 10 year Vision Document
(c) 15 year Vision Document
(d) 20 year Vision Document
Ans: (c) Abandoning the ancient concept of five-year plans that India has been following since 1951, the National Institution for Transforming India (NITI) Aayog has decided to come up with a 15-year vision document in tandem with global trends and economic growth.Cleared by Prime Minister Narendra Modi in May 2016, the new blueprint will be implemented after the last of the five-year plans, the 12th (2012- 17) ends in 2017.

Q12. Which one of the following organisations is a financial institution ?

(a) KVIC (b) IFCO
(c) SEBI (d) ICICI
Ans: (c) ICICI (Industrial Credit and Investment Corporation of India) Bank is an Indian multinational banking and financial services company headquartered in Mumbai, Maharashtra. It is the largest private sector bank and overall the second largest bank in India after State Bank of India.

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