Daily Prelims MCQs - Economy - 19th August 2025
- TPP
- Aug 19
- 11 min read
Welcome to this daily set of UPSC Prelims Economy Current Affairs MCQs (19th August 2025). This quiz features 8 carefully curated multiple-choice questions with detailed explanations, based on the most relevant developments in India’s economy and financial sector.
These economy-focused MCQs are designed to help UPSC aspirants:
Revise dynamic topics relevant for UPSC Prelims 2026
Link static concepts with current events (the way UPSC asks)
Strengthen conceptual clarity with enriched explanations, inline definitions, and contextual notes.
This set covers key topics such as: SEBI’s penalty trends and regulatory enforcement, Proposed amendments to the Insolvency and Bankruptcy Code (IBC), Benefits of ethanol-blended fuel (E20), The upgraded Cheque Truncation System (CTS), The challenge of stagflation in global and Indian contexts, Special Rupee Vostro Accounts (SRVA) for trade settlements, India’s crude oil import patterns from West Asia and Russia, and more...
Click Here to read the Monthly Current Affairs Pointers (CAP).
QUESTION 1
Consider the following statements:
The Securities and Exchange Board of India (SEBI) imposed penalties that were nearly 11 times higher in 2024–25 compared to 2023–24.
The number of entities (companies or individuals) penalized for violating securities regulations increased in 2024–25 as compared to the previous year.
The largest number of violations recorded in 2024–25 were related to Listing Obligations and Disclosure Requirements (LODR).
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer (a)
Explanation:
Statement 1 is Correct: In 2024–25, SEBI imposed penalties amounting to ₹813.83 crore, a huge rise from ₹74.66 crore in 2023–24. This shows an 11-fold increase.
(SEBI: Securities and Exchange Board of India, the market regulator ensuring fair trading practices and investor protection.)
Statement 2 is Incorrect: Even though the penalty amount surged, the number of violators declined. SEBI’s Annual Report (2024–25) records 463 entities violating regulations, down from 629 entities in 2023–24 — a fall of about 26%.
Statement 3 is Incorrect: The highest number of violations were under Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations, where 155 entities were penalized. Listing Obligations and Disclosure Requirements (LODR) violations were the second highest, with 116 entities.
(PFUTP: Rules to prevent fraud, manipulation, or unfair trade in the securities market.)
(LODR: Obligations requiring listed companies to disclose accurate and timely financial/operational information to investors.)
In 2024–25, SEBI also issued:
Debarment orders against 202 entities (ban from market participation),
Debarment + disgorgement orders against 89 entities (ban + return of unfair gains),
Disgorgement-only orders against 15 entities.
QUESTION 2
Which of the following are among the proposed changes in the amendment of the Insolvency and Bankruptcy Code (IBC)?
Faster admission of insolvency cases.
Provision of an out-of-court settlement mechanism.
Introduction of group insolvency and cross-border insolvency frameworks.
Select the correct answer using the codes given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer (d)
Explanation:
Statement 1 is Correct: The amendment bill seeks to ensure quicker admission of insolvency cases, thereby reducing delays in the resolution process.
(Insolvency case admission: The initial stage where a tribunal admits a petition from creditors or debtors, officially starting the resolution process.)
Statement 2 is Correct: The bill proposes an out-of-court mechanism to handle genuine business failures. This means some disputes could be resolved without going through lengthy judicial proceedings.
(Out-of-court mechanism: A framework that allows companies and creditors to settle insolvency matters through negotiation/mediation instead of relying solely on the National Company Law Tribunal (NCLT).)
Statement 3 is Correct: It also introduces frameworks for group insolvency and cross-border insolvency.
(Group insolvency: Mechanism to deal with insolvency of companies that belong to the same corporate group, ensuring coordinated resolution.)
(Cross-border insolvency: Legal framework to handle cases where a company with assets/creditors across multiple countries faces insolvency.)
Background Context:
The amendment bill was introduced in the Lok Sabha by Finance Minister Nirmala Sitharaman.
Its objective is to reduce delays, maximize value for stakeholders, and strengthen governance of processes under the IBC.
The IBC, enacted in 2016, was designed to provide a time-bound insolvency resolution system to save distressed enterprises.
Although it has encouraged credit discipline and accountability, challenges such as procedural delays, shortage of trained professionals, and uneven implementation have limited its effectiveness.
QUESTION 3
What are the significant advantages of using E20 fuel (petrol blended with 20% ethanol)?
Provides better acceleration and smoother ride quality.
Helps in reducing carbon emissions.
Has a lower octane number compared to petrol.
Reduces the density of the air–fuel mixture.
Select the correct answer using the codes given below:
(a) 1 and 2 only
(b) 1, 2 and 4
(c) 2, 3 and 4
(d) 3 and 4 only
Answer (a)
Explanation:
India recently achieved the 20% ethanol blending target (E20) — five years ahead of the original 2030 target, and even earlier than the revised deadline of 2025–26.
Ethanol blending supports energy security (less dependence on imported crude oil), farmers’ income (since ethanol is produced from sugarcane, maize, etc.), and environmental goals (lower emissions).
E20 is a part of India’s broader push for biofuels and sustainable mobility solutions.
Statement 1 is Correct: E20 fuel improves acceleration and ride quality. Vehicles designed or modified for E20 show quicker pick-up, which is particularly useful in city driving conditions where stop-and-go traffic demands faster response.
Statement 2 is Correct: E20 significantly reduces carbon emissions. As per the Ministry of Petroleum and Natural Gas (MoPNG), E20 fuel can cut emissions by around 30% compared to E10 (10% ethanol blend).
(Carbon emissions: The release of CO₂ and other greenhouse gases into the atmosphere, contributing to global warming.)
Statement 3 is Incorrect: Ethanol actually has a higher octane rating than petrol, not lower. Ethanol’s octane rating is about 108.5, whereas normal petrol has an octane value of 84.4.
(Octane rating: A measure of a fuel’s ability to resist engine knocking or premature combustion. Higher octane fuels are better for high-performance engines.)
Statement 4 is Incorrect: Instead of decreasing, ethanol’s high heat of vaporisation lowers intake temperatures, which actually increases the density of the air–fuel mixture. This improves volumetric efficiency (the effectiveness with which the engine cylinder fills with air–fuel mixture).
(Volumetric efficiency: A measure of how effectively an engine draws in the air–fuel mixture for combustion. Higher efficiency = better power output.)
QUESTION 4
Regarding the Cheque Truncation System (CTS) in India, consider the following assertions:
CTS functions as a digital, image-driven cheque clearing arrangement in which the presenting/collecting branch scans the cheque and electronically transmits the cheque image along with its MICR line data for processing.
The CTS ecosystem is safeguarded through a Public Key Infrastructure (PKI)–based security framework with layered authentication and controls.
From 4 October 2025, the Reserve Bank of India (RBI) plans to introduce a cheque-clearing workflow that targets clearance within a few hours.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer (c)
Explanation:
RBI has been upgrading paper-based clearing to reduce settlement time and risk. While today’s CTS typically settles cheques in T+1 working day (sometimes two, depending on deposit timing), the next phase—effective 4 October 2025—shifts to continuous, business-hours processing, aiming to deliver clearance within a few hours rather than batch cycles.
Statement 1 is Correct: CTS replaces the movement of physical cheques with electronic transmission of the scanned cheque image and its MICR data captured at the collecting (presenting) branch.
(CTS: “Truncation” means stopping physical movement of the cheque and using its image instead.)
(MICR: Magnetic Ink Character Recognition—machine-readable characters on the cheque that encode bank/branch/account and cheque number for fast sorting.)
Statement 2 is Correct: CTS employs a PKI-based architecture to assure authenticity, integrity, and confidentiality of transactions. Controls include dual access, user IDs/passwords, and hardware-backed cryptography (e.g., cryptobox/smart-card interfaces).
(PKI: A system of digital certificates and keys enabling secure authentication and encrypted data exchange.)
Statement 3 is Correct: RBI’s new intra-day clearing setup from 4 October 2025 will scan, process, and settle cheques continuously during business hours, compressing the current T+1 cycle to a few hours. This enhances customer convenience and lowers settlement risk.
(T+1: Settlement on the next working day after the transaction day “T”.)
(Settlement risk: The possibility that a party fails to deliver funds when due.)
Why this matters: Faster, image-based clearing improves liquidity for customers, reduces operational bottlenecks from paper handling, and tightens risk controls through cryptographic assurance.
QUESTION 5
Concerning the phenomenon of stagflation, examine the following statements:
It refers to a situation where the economy faces sluggish growth, rising unemployment, and inflation at the same time.
The condition can be resolved simply by lowering interest rates.
It occurs only when demand in the economy becomes excessively high.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer (a)
Explanation:
The term stagflation gained prominence in the 1970s when advanced economies like the US and UK faced a peculiar combination of stagnant growth and high inflation, often triggered by oil supply shocks. Recently, economists including Nobel laureate Paul Krugman (2008 Economics Prize) have highlighted signs of stagflationary pressures in the US economy.
Statement 1 is Correct: Stagflation is defined as an economic state where:
Growth slows down (stagnation),
Unemployment increases, and
Prices rise (inflation).
This combination is unusual because normally inflation is associated with strong growth, not weak growth.
Statement 2 is Incorrect: Simply cutting interest rates cannot solve stagflation.
Lower interest rates might stimulate demand, but they also fuel more inflation, worsening the situation.
Policymakers therefore face a dilemma: fighting inflation often slows growth further, while supporting growth risks intensifying inflation.
Statement 3 is Incorrect: Stagflation is not caused by excessive demand.
It usually results from supply-side shocks (e.g., sudden rise in oil prices, trade disruptions, or tariffs).
Such shocks reduce output and employment while simultaneously pushing up prices.
For example, the Trump administration’s tariffs in 2025 created concerns about long-term stagflation in the US by raising import costs (inflationary) while hurting domestic growth (stagnation).
Tackling stagflation requires a balanced mix of supply-side reforms and monetary-fiscal discipline, not just interest rate cuts.
QUESTION 6
What is the main purpose of establishing a Special Rupee Vostro Account (SRVA)?
(a) To settle international trade exclusively in foreign currencies.(b) To make possible the settlement of cross-border trade transactions in Indian Rupees.(c) To permit foreign banks to open deposit accounts in India for their individual citizens.(d) To provide export-linked loans to Indian businesses in foreign currency.
Answer (b)
Explanation:
In July 2022, the Reserve Bank of India (RBI) unveiled the Special Rupee Vostro Account (SRVA) framework. This was aimed at strengthening the international role of the Indian Rupee, particularly at a time when global supply chains and payment mechanisms were being disrupted by sanctions and currency shortages.
The SRVA mechanism allows exporters and importers to invoice, make payments, and settle trade directly in Indian Rupees (INR), instead of depending only on foreign currencies like the US dollar.
This helps reduce India’s dependence on hard currencies, conserves foreign exchange, and promotes the Rupee as a trade-settlement currency.
A Vostro Account is an account that a domestic bank holds on behalf of a foreign bank in the domestic currency.
Example: If a Russian bank wants to trade with India in Rupees, it can open an SRVA with an Indian bank. Payments from Indian importers go into this account, and the Russian bank uses it to pay Russian exporters.
Why SRVA Matters:
It provides a rupee-based settlement route for international trade, especially with countries facing currency or sanctions-related challenges.
It supports India’s broader objective of “internationalisation of the Rupee.”
QUESTION 7
Consider the following statements about India’s crude oil consumption and import pattern:
India ranks as the third-largest consumer of crude oil globally and relies on imports for more than 85% of its oil needs.
Based on recent figures, India’s imports from West Asia constitute a larger share than its crude imports from Russia.
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 (c)
Explanation:
India’s dependence on imported crude oil is a central theme in its energy security strategy. Shifts in global geopolitics (including sanctions on Russia, volatility in West Asian markets, and changing shipping routes) have altered India’s sourcing patterns in recent years.
Statement 1 is Correct: India is the third-largest consumer of crude oil after the US and China.
It relies on imports to meet over 85% of its requirements, making oil import dependence a major vulnerability for the country’s energy security.
This dependence also exposes India to risks such as supply disruptions (e.g., closure of key chokepoints like the Strait of Hormuz) and global price shocks.
Statement 2 is Correct: As per tanker movement data (April–May), West Asia (Middle East) supplied more crude oil to India than Russia.
Russian crude accounted for about 39% of India’s imports.
West Asian crude made up a slightly higher share at around 41%.
Importantly, Russian oil reaches India mostly via Suez Canal/Red Sea or sometimes via Cape of Good Hope or Pacific Ocean routes, while West Asian oil predominantly moves through the Strait of Hormuz.
The Strait of Hormuz is one of the world’s most critical chokepoints for oil transport, carrying over 45% of India’s crude imports in May. Thus, India’s energy supply security is closely tied to developments in West Asia and maritime stability in this region.
QUESTION 8
Consider the following statements with reference to Bank Notes in India:
India’s banknotes are produced at four printing presses, and all four are owned by the Reserve Bank of India (RBI).
The promissory clause on a banknote—“I promise to pay the bearer the sum of Rupees …”—records the obligation of the issuing authority to the holder of that note.
The highest denomination banknote ever printed by the RBI was the ₹10,000 note.
Two or more banknotes cannot share the same serial number.
Which of the statements given above is/are correct?
(a) 1, 2 and 4 only
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1, 2, 3 and 4
Answer (b)
Explanation:
India prints its currency at four presses operated by two different institutions: the Government of India’s Security Printing and Minting Corporation of India Ltd. (SPMCIL) and the RBI’s wholly owned subsidiary Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL). RBI’s FAQs clarify ownership and locations, the meaning of the promissory clause, and how serial numbers work on banknotes.
Statement 1 is Incorrect:
While there are four presses in total, ownership is split:
SPMCIL (Government of India): Nashik (Maharashtra) and Dewas (Madhya Pradesh).
BRBNMPL (RBI subsidiary): Mysuru (Karnataka) and Salboni (West Bengal).
Therefore, it is not true that all four presses are owned by the RBI.
Statement 2 is Correct:
The promissory clause—“I promise to pay the bearer the sum of Rupees …”—is a legal undertaking by the issuer (the RBI through the Governor’s signature) acknowledging a liability to the bearer.
Promissory clause: The printed commitment that establishes the note as a sovereign liability and underpins public confidence in currency.
Statement 3 is Correct:
The ₹10,000 banknote is the highest denomination ever printed by the RBI (issued in earlier periods; subsequently demonetised).
Statement 4 is Incorrect:
It is possible to find banknotes that share the same serial number, because they can be distinguished by other markers such as:
Inset Letter (an alphabet in the Number Panel),
Year of printing, or
Signature of a different RBI Governor.
Inset Letter: A small alphabet printed in the number panel to indicate press/series variations.
Number Panel: The area on the note where the serial number appears.
Previous Daily UPSC Prelims MCQs Set
Previous Week Current Affairs MCQs Set
Click for NCERTs Pdfs
Click for Daily Quotes:
Stay updated with the latest news by joining our Telegram channel – The PRESS Pad , and follow us on Instagram and X.
Comments