Daily Prelims MCQs — Economy — 30th July 2025
- TPP
- Jul 30
- 7 min read
Welcome to today’s handpicked set of Multiple-Choice Questions (MCQs) from the Economy — crafted specially for the UPSC Prelims! These questions aren’t just a quiz — they’re a smart way to see how current affairs connect with core concepts, just like UPSC asks in the exam.
Each question is based on recent news and backed by clear explanations to help you build strong links between dynamic events and static knowledge.
Today’s topics include: India - UK FTA, repo rate mechanism, pre-payment penalties, synthetic rubber, 2019 Sveriges Riksbank Prize in Economic Sciences, PMMY, Garib Kalyan Rojgar Abhiyaan and more...
Click Here to read the Monthly Current Affairs Pointers (CAP).
QUESTION 1
Examine the following statements regarding the India–United Kingdom Free Trade Agreement (FTA):
Statement 1: The India-UK FTA guarantees extensive market access for goods across all sectors, addressing all of India’s major export interests.
Statement 2: Under the agreement, India stands to gain from the removal of tariffs on around 99% of tariff lines, which collectively represent nearly the entire trade value.
Which of the following options accurately reflects the validity of these statements?
(a) Both Statement 1 and Statement 2 are correct, and Statement 2 explains Statement 1.
(b) Both Statement 1 and Statement 2 are correct, but Statement 2 does not explain Statement 1.
(c) Statement 1 is correct, but Statement 2 is incorrect.
(d) Statement 1 is incorrect, but Statement 2 is correct.
Answer (a)
Explanation:
At the formal signing event of the India–UK trade pact, Prime Minister Narendra Modi emphasized that the agreement would significantly benefit India's key export-driven sectors such as textiles, gems and jewellery, as well as Micro, Small and Medium Enterprises (MSMEs). He also highlighted that the deal would make products like medical devices and aircraft parts more affordable for Indian consumers.
Further, India has allowed phased access to luxury UK exports, such as premium automobiles and alcoholic beverages like whisky. Importantly, the India-UK FTA is designed to ensure broad-based market access for goods, encompassing all significant areas relevant to India’s export ambitions. Hence, Statement 1 is correct.
Additionally, the Ministry of Commerce and Industry has noted that approximately 99% of tariff lines will see tariff elimination under the agreement, covering nearly 100% of the total trade value between the two countries. This substantiates Statement 2.
Since the removal of tariffs on such a large scale directly supports India’s ability to export freely across sectors, Statement 2 explains Statement 1.
QUESTION 2
Consider the following pairs regarding recently developed or ongoing railway projects and the states they aim to connect:
Bairabi–Sairang line – Mizoram
Sivok–Rangpo line – Sikkim
Dimapur–Kohima line – Arunachal Pradesh
How many of the above pairs are correctly matched?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer (b)
Explanation:
In recent years, Indian Railways has faced significant challenges in executing infrastructure projects across the Northeastern region, suffering losses exceeding ₹200 crore over a five-year period due to frequent natural calamities like landslides and floods.
Among the prominent rail development efforts:
The Bairabi–Sairang railway line, designed to establish rail connectivity with Aizawl, the capital of Mizoram, is nearing completion and is expected to boost mobility and economic activity in the state.
The Sivok–Rangpo rail link is another vital project, intended to integrate Sikkim with the Indian railway network for the very first time.
On the other hand, the Dimapur–Kohima line (specifically the Dhansiri–Zubza stretch), aims to connect Kohima, the capital of Nagaland, not Arunachal Pradesh.
Thus, Pair 3 is incorrectly matched, while Pairs 1 and 2 are correctly matched.
QUESTION 3
Regarding the repo rate mechanism in India, consider the following statements:
The Reserve Bank of India raises the repo rate when it intends to stimulate economic growth.
The interest rate offered by the central bank to commercial banks for parking surplus funds is referred to as the repo rate.
The RBI reduces the repo rate when aiming to control inflation.
How many of the above statements are accurate?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer (d)
Explanation:
The repo rate is the interest rate at which the RBI lends funds to commercial banks when they face short-term liquidity shortages. It is not the rate paid by RBI when banks deposit money — that is the reverse repo rate. Hence, Statement 2 is incorrect.
To stimulate economic activity, the central bank typically lowers the repo rate. A reduced repo rate makes borrowing cheaper for commercial banks, which in turn can reduce lending rates for businesses and consumers. This promotes spending and investment. Hence, Statement 1 is incorrect.
On the contrary, when inflationary pressures rise, the RBI may increase the repo rate. This discourages borrowing and reduces money supply in the economy, thereby helping to control inflation. Hence, Statement 3 is incorrect
QUESTION 4
The Reserve Bank of India has mandated that no pre-payment penalties be applied on loans with a sanctioned limit or amount of up to ₹50 lakh. This direction is applicable to loans extended by which of the following institutions?
Small Finance Banks
Regional Rural Banks
State Cooperative Banks
Non-Banking Financial Companies – Medium Layer (NBFC-ML)
Select the correct option using the codes provided below:
(a) 1 and 2 only
(b) 1 and 4 only
(c) 2, 3 and 4
(d) 1, 2, 3 and 4
Answer (d)
Explanation:
The Reserve Bank of India (RBI) has released a directive stating that lenders such as commercial banks, tier-4 urban cooperative banks, NBFCs in the upper layer (NBFC-UL), and All India Financial Institutions must not impose any pre-payment charges on loans taken by individuals and small businesses for business-related purposes.
Additionally, the RBI specified that the following institutions are prohibited from levying pre-payment penalties on loans up to ₹50 lakh, irrespective of the end-use of the loan:
Small Finance Banks (SFBs)
Regional Rural Banks (RRBs)
Tier-3 Primary (Urban) Co-operative Banks, State Cooperative Banks, and Central Cooperative Banks
NBFCs classified in the Medium Layer (NBFC-ML)
QUESTION 5
In the context of synthetic rubber, consider the following statements:
Malaysia is among the leading global exporters of synthetic rubber.
The import of synthetic rubber has negatively affected the prices received by natural rubber producers in India.
Which of the above statements is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer (b)
Explanation:
As per recent developments linked to India's trade negotiations—particularly those involving the United States—there has been heightened concern over the potential impact on the domestic agricultural sector.
The Indian Coordination Committee of Farmers Movements (ICCFM), representing cultivators across 11 Indian states, has argued that agriculture should be kept outside the scope of the proposed India–US trade deal. One of the major concerns raised is the surge in synthetic rubber imports, especially from the United States, which is in fact one of the largest global exporters of this product. Hence, statement 1 is incorrect, as it is not Malaysia, but the US that dominates synthetic rubber exports.
Furthermore, the ICCFM has asserted that these synthetic rubber imports have had a detrimental effect on the farm-gate prices of natural rubber in India. The import data supports this claim: India brought in synthetic rubber and related products worth ₹1,556.54 crore in 2017–18, and this figure soared to ₹71,490.73 crore in 2018–19. This influx of cheaper synthetic alternatives has undermined the earnings of rubber farmers. Thus, statement 2 is correct.
QUESTION 6
Why were Abhijit Banerjee, Esther Duflo, and Michael Kremer jointly awarded the 2019 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel by the Royal Swedish Academy of Sciences?
(a) For pioneering research on how institutional frameworks influence economic prosperity
(b) For their innovative experimental methodology aimed at addressing global poverty
(c) For advancements in auction theory and the development of novel auction mechanisms
(d) None of the above
Answer (a)
Explanation:
In 2019, the Royal Swedish Academy of Sciences conferred the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel upon Abhijit Banerjee, Esther Duflo, and Michael Kremer. Their award recognized groundbreaking contributions in the field of development economics, specifically for adopting an experimental approach to combat global poverty.
Their work introduced rigorous field experiments—often referred to as randomized controlled trials (RCTs)—to evaluate the effectiveness of various interventions in education, healthcare, and social welfare in low-income countries. This empirical method brought about a transformation in how economists and policymakers design and assess poverty-alleviation strategies.
Therefore, the correct answer is option (a).
QUESTION 7
With reference to the Pradhan Mantri MUDRA Yojana (PMMY), consider the following statements:
The scheme offers credit up to ₹20 lakh to non-corporate, non-agricultural small or micro-enterprises, particularly for those who have previously availed and successfully repaid loans under the ‘Tarun’ category.
Lending under PMMY is carried out by institutions such as Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks, Micro Finance Institutions (MFIs), and Non-Banking Financial Companies (NBFCs).
Which of the above statements is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer (c)
Explanation:
The Pradhan Mantri MUDRA Yojana (PMMY), launched on April 8, 2015, aims to provide financial assistance to small and micro-enterprises operating in the non-corporate and non-farm sectors. According to official information from mudra.org.in, the scheme allows for loans up to ₹20 lakh, especially for entrepreneurs who have earlier availed and successfully repaid a ‘Tarun’ category loan.
The loans under this scheme are facilitated through a wide range of financial institutions including Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks, Micro Finance Institutions (MFIs), and Non-Banking Financial Companies (NBFCs).
PMMY categorizes its loan offerings based on the stage of the business into four products: Shishu, Kishore, Tarun, and TarunPlus, thereby providing a structured framework for micro-entrepreneurs to scale their businesses gradually.
Hence, both statements are correct
QUESTION 8
Which ministry was designated as the nodal agency by the Government of India to oversee and coordinate the implementation of the Garib Kalyan Rojgar Abhiyaan, a rural employment initiative?
(a) Ministry of Rural Development
(b) Department of Economic Affairs
(c) Ministry of Labour and Employment
(d) None of the above
Answer (a)
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