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UPSC CSE 2026 Economy Previous Year Questions

15 questions with answers and explanations. Practice these interactively

Question 1

A bond whose proceeds are used only to finance or refinance a combination of both environmental and social projects is called:

  1. (a) Green Bond
  2. (b) Social Bond
  3. (c) Sustainability Bond
  4. (d) Sovereign Bond

Answer: (c)

Explanation

A Green Bond funds only environmental projects; a Social Bond funds only social projects. A Sustainability Bond funds a combination of both environmental and social projects, which matches the question. A Sovereign Bond simply refers to a bond issued by a national government, unrelated to project-use classification.

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Question 2

The artificially fixed rupee-sterling exchange rate prescribed by the Hilton-Young Commission (1926) was adopted by the British Government for which one of the following reasons?

  1. (a) Aiding the flow of remittances from India and maintaining India's creditworthiness
  2. (b) Providing support to Indian importers
  3. (c) Encouraging export of cotton produce from India
  4. (d) Preventing depreciation of the Rupee in terms of gold

Answer: (a)

Explanation

The Hilton-Young Commission (Royal Commission on Indian Currency and Finance, 1926) recommended fixing the rupee-sterling rate at an artificially high 1s 6d (instead of the market-driven 1s 4d). Britain adopted this mainly to ease its "Home Charges" — massive sterling remittances from India covering administrative costs, pensions, military expenses, and public debt interest. An artificially strong rupee meant fewer rupees were needed to buy the sterling required for these transfers, easing remittance flows and preserving India's perceived creditworthiness in London. It wasn't primarily about supporting Indian importers (a side effect, not the goal), and it actually hurt cotton exports by making Indian goods costlier abroad, rather than encouraging them. Gold-depreciation prevention was a separate, secondary concern.

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Question 3

Which one of the following pairs of semiconductor plants in India and their locations is not correctly matched?

  1. (a) CG Power and Industrial Solutions Pvt. Ltd. in partnership with Renesas Electronics and STARS Microelectronics : Gujarat
  2. (b) Tata Semiconductor Assembly and Test Pvt. Ltd. : Assam
  3. (c) HCL-Foxconn Joint Venture India Chip Ltd. - Madhya Pradesh
  4. (d) SicSem Pvt. Ltd. : Odisha

Answer: (c)

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Question 4

An e-commerce revenue model where the seller has control over pricing but doesn't keep products in stock and instead transfers customer orders and shipment details to a 3rd party supplier, who ships the goods directly to customer, is called:

  1. (a) Dropshipping Model
  2. (b) Affiliate Revenue Model
  3. (c) Transaction Fee Revenue Model
  4. (d) Agency Revenue Model

Answer: (a)

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Question 5

Which one of the following correctly represents the three key sub-indices of the Financial Inclusion Index (FI-Index) of the Reserve Bank of India (RBI)?

  1. (a) Credit access, Insurance depth, and Pension coverage
  2. (b) Banking access, GDP contribution, and Financial literacy
  3. (c) Access, Usage, and Quality
  4. (d) Access, Affordability, and Transparency

Answer: (c)

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Question 6

Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct?

  1. (a) UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency.
  2. (b) In case of UPI, settlement for end users happens instantly as the money gets immediately debited or credited but in case of Digital Rupee, there is no settlement as the wallet balance gets transferred to another wallet.
  3. (c) UPI transactions are recorded by banks and reflected in bank statements but in case of Digital Rupee, no data is captured in bank statements as transactions are from one wallet to another.
  4. (d) In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.

Answer: (d)

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Question 7

Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy?

  1. (a) A situation where private investment increases due to increased Government spending
  2. (b) A situation where Govt borrowing leads to higher interest rates, which reduces private investment
  3. (c) A situation where an increase in taxes leads to increased private sector investment
  4. (d) A situation where Government spending has no impact on aggregate demand

Answer: (b)

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Question 8

Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India:

1. NBFCs cannot accept demand deposits.

2. All the NBFCs operating in India have to be registered with the RBI.

3. NBFCs form part of the payment and settlement system and can issue cheque drawn on itself.

4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs.

Which of the statements given above is/are correct?

  1. (a) 1 and 4
  2. (b) 1, 2 and 3
  3. (c) 4 only
  4. (d) 2, 3 and 4

Answer: (a)

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Question 9

Consider the following statements about Multidimensional Poverty Index (MPI):

1. MPI is calculated using Alkire-Foster methodology.

2. MPI calculated by NITI Aayog has a total of twelve indicators.

3. Maternal Health and Bank Account are common indicators in the MPI of NITI Aayog and MPI of United Nations Development Programme (UNDP).

Which of the statements given above is/are correct?

  1. (a) 1 and 2 only
  2. (b) 1, 2 and 3
  3. (c) 1 and 3 only
  4. (d) 2 only

Answer: (a)

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Question 10

With reference to different Committees in India, consider the following details:

Committee:
1. RN Malhotra Committee
2. L.C. Gupta Committee
3. Urjit R. Patel Committee
4. Y.H. Malegam Committee

Objective:
1. Comprehensive reforms of Insurance sector in India
2. Preparing a roadmap for the introduction of derivatives trading in India
3. Preparing a roadmap for reforming bank lending to the Housing sector
4. Preparing a roadmap for reforms in Microfinance sector in India

Organization under which it was formed:
1. Insurance Regulatory and Development Authority of India
2. Securities and Exchange Board of India
3. Reserve Bank of India
4. Reserve Bank of India

In

which of the above rows are all the details correctly matched?

  1. (a) 2 only
  2. (b) 2 and 3
  3. (c) 1, 3 and 4
  4. (d) 2 and 4

Answer: (d)

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Question 11

Which of the following statements about Crowdfunding is/are correct?

1. Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project.

2. Small and Medium Enterprises (SMEs) are able to raise funds at lower cost of capital without undergoing rigorous procedures.

Select the answer using the code given below:

  1. (a) 1 only
  2. (b) 2 only
  3. (c) Both 1 and 2
  4. (d) Neither 1 nor 2

Answer: (c)

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Question 12

Which of the following statements about M1xchange's role in Micro, Small & Medium Enterprises (MSMEs) financing is/are correct?

1. M1xchange provides collateral based loans to MSMEs.

2. M1xchange facilitates discounting of invoices and Bills of Exchange for MSMEs.

3. M1xchange functions as a credit rating agency for MSMEs.

Select the answer using the code given below:

  1. (a) 1, 2 and 3
  2. (b) 2 only
  3. (c) 2 and 3 only
  4. (d) 1 only

Answer: (b)

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Question 13

Which of the following statements about Real-World Assets (RWA) Tokenization are correct?

1. Tokenization is the process of turning real world assets into digital tokens using blockchain technology.

2. Tokenization of real world assets offers 24 x 7 access, promoting financial inclusion.

3. Tokenization of real world assets will allow the access to high growth investment opportunities for individuals in India.

Select the answer using the code given below:

  1. (a) 1, 2 and 3
  2. (b) 2 and 3 only
  3. (c) 1 and 2 only
  4. (d) 1 and 3 only

Answer: (a)

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Question 14

Which of the following statements regarding the features of blockchain technology are correct?

1. Records stored in the database may be made visible to relevant stakeholders without risk of alteration.

2. Copies of the entire database are stored on multiple computers on a network, syncing within seconds.

3. Consortium blockchain is a blend of public and private blockchains allowing selective data access.

4. Mathematical algorithms make it impossible to change or delete any data once recorded and accepted.

Select the answer using the code given below:

  1. (a) 2 and 4 only
  2. (b) 1 and 3
  3. (c) 1, 2 and 4
  4. (d) 1 and 4 only

Answer: (c)

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Question 15

Which among the following is/are the objective(s) of the Rainfed Area Development (RAD) initiative under the National Mission for Sustainable Agriculture (NMSA)?

1. Encouraging monoculture in rainfed areas

2. Increasing rice cultivation in irrigated regions

3. Enhancing productivity and minimising climatic risks through Integrated Farming Systems (IFS)

Select the answer using the code given below:

  1. (a) 1 only
  2. (b) 1 and 2
  3. (c) 2 and 3
  4. (d) 3 only

Answer: (d)

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