Daily Static Quiz (Economy) December 5, 2025
Daily Static Quiz (Economy) December 5, 2025
1. Sir M. Visvesvaraya’s economic plan of 1934 proposed to double the national income of India over a ten-year period through rapid industrialization. Which of the following was a defining characteristic of his plan?
(a) Emphasis on agricultural development as the primary driver of growth
(b) Strong role for the State in industrial development and infrastructure with a target investment of Rs. 1,000 crore
(c) Promotion of free-market capitalism with minimal state intervention
(d) Partnership model between the State and private sector similar to the Bombay Plan
2. With reference to the Second Five Year Plan of India, consider the following statements:
The Mahalanobis model was the theoretical framework for the Second Plan.
Five steel plants were established during the Second Plan period.
The Second Plan achieved its target growth rate of 4.5% in national income.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2, and 3
3. Consider the following statements regarding different types of inflation:
Demand-pull inflation occurs when aggregate demand exceeds aggregate supply at full employment level, leading to a “too much money chasing too few goods” scenario.
Cost-push inflation is always accompanied by a decrease in real output, distinguishing it from demand-pull inflation.
Stagflation refers to a situation of simultaneous rise in prices and unemployment with declining economic growth.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2, and 3
4. With reference to land reforms in post-independence India, consider the following:
The abolition of the zamindari system aimed to eliminate the intermediary layer between cultivators and the state.
Land ceiling laws were applied uniformly across all states without exception.
The Kumarappa Committee recommended comprehensive agrarian reform measures including abolition of intermediaries and fixing of land ceilings.
Which of the statements given above is/are correct?
(a) 1 and 3 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2, and 3
5. Consider the following statements regarding the World Trade Organization (WTO):
The Most Favoured Nation (MFN) principle requires WTO members to grant preferential tariffs only to developing and least-developed countries.
Free Trade Agreements (FTAs) between WTO members are exceptions to the MFN principle.
The WTO’s mandate encompasses the facilitation of trade in goods, services, and intellectual property.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
6. With reference to NABARD’s functions, which one of the following is NOT among its primary roles?
(a) Providing refinance support to rural banks and cooperative banks
(b) Regulating and supervising all commercial banks in urban areas
(c) Linking Self-Help Groups with banks for microfinance support
(d) Funding research on improving agricultural practices and rural livelihoods
7. Consider the following statements regarding the Payment of Wages Act, 1936:
The Act permits deductions from wages only for fines, absence from duty, or advances paid to employees.
The total permissible deductions in a month cannot exceed 50% of wages, except where deductions include payments to cooperative societies (which can extend to 75%).
Employers are liable to a fine of not less than Rs. 200 but which may extend to Rs. 1,000 for failing to pay wages on time.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
8. With reference to Urban Cooperative Banks (UCBs), consider the following statements:
Following the 2020 Banking Regulation Amendment Act, RBI gained direct regulatory powers over UCBs for the first time.
UCBs are subject to dual regulation by both the RBI and the Registrar of Cooperative Societies.
Unlike commercial banks, borrowers in UCBs cannot serve as shareholders.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 1 only
(c) 2 only
(d) 1, 2, and 3
9. Regarding blockchain technology in banking as approved by the RBI, consider the following statements:
The RBI’s Regulatory Sandbox has identified specific mandatory areas for blockchain deployment in all Indian banks.
A blockchain-based deep-tier financing solution using tokenized invoices for MSMEs has been approved by the RBI following successful pilot testing.
Blockchain technology in banking primarily addresses fraud mitigation, transparency, and cost reduction in supply chain financing.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
10. With reference to the Banking Regulation Act, 1949, consider the following statements:
The Banking Regulation Amendment Act of 2020 extended RBI’s regulatory framework to approximately 1,540 urban and multi-state cooperative banks.
Under the Act, cooperative banks must maintain capital adequacy, risk control, and lending norms equivalent to those prescribed for commercial banks.
The 2025 amendment to the Banking Regulation Act increased the threshold for “substantial interest” from Rs. 5 lakh to Rs. 2 crore, a modification unchanged since 1968.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 1, 2, and 3
(c) 2 and 3 only
(d) 1 and 3 only
ANSWER KEY WITH EXPLANATIONS
Answer 1: (b)
Explanation:
Sir M. Visvesvaraya’s plan of 1934, outlined in his book “Planned Economy for India,” was a pioneering pre-Independence economic blueprint. The plan specifically proposed:
Timeframe: A ten-year plan for economic development
Investment: Total outlay of Rs. 1,000 crore (a massive investment for that era)
Target: Doubling national income over the period
Growth target: Proposed 600% increase in industrial output per annum
State Role: Strong emphasis on state-led industrialization and infrastructure development
The plan was fundamentally technocratic and productivity-driven, focusing on India’s transformation from an agricultural to an industrial economy. This distinguishes it from option (d), the Bombay Plan (1944), which emphasized a mixed economy with both public and private sector participation.
Why other options are incorrect:
(a) The Visvesvaraya Plan prioritized industrial development, not agriculture
(c) It explicitly rejected free-market capitalism and advocated for strong state intervention
(d) The partnership model between state and private sector was characteristic of the Bombay Plan, not the Visvesvaraya Plan
Answer 2: (a)
Explanation:
The Second Five Year Plan (1956-1961) was a landmark period in India’s economic planning:
Statement 1 – TRUE: The Mahalanobis model, propounded by famous statistician Prasanta Chandra Mahalanobis, was the theoretical framework for the Second Plan. This model advocated for rapid industrialization through capital accumulation, focusing on development of heavy industries.
Statement 2 – TRUE: Five steel plants were established during the Second Five Year Plan period, including those at Durgapur, Rourkela, and Bhilai. Additionally, the Atomic Energy Commission was established in 1957 during this period.
Statement 3 – FALSE: The Second Plan lagged behind its target. The target growth rate for national income was 4.5%, but the actual achievement was only 4.27%, making it not a successful plan in terms of meeting its defined objectives.
Key Historical Context: The Atomic Energy Commission’s establishment during the Second Plan was a significant developmental achievement, marking India’s entry into nuclear technology.
Answer 3: (b)
Explanation:
Statement 1 – TRUE: Demand-pull inflation occurs precisely when aggregate demand exceeds aggregate supply at full employment level. This creates the classic scenario of “too much money chasing too few goods,” leading to upward pressure on prices across the economy.
Statement 2 – FALSE: While cost-push inflation often leads to a decrease in real output, this is not always the case and is not a definitional characteristic. Cost-push inflation is fundamentally about rising production costs (wages, raw materials) being passed to consumers. The decrease in output is a potential consequence of stagflation (when cost-push inflation coincides with stagnant growth), not a defining feature of cost-push inflation itself.
Statement 3 – TRUE: Stagflation is precisely characterized by the simultaneous occurrence of:
Rising prices (inflation)
Rising unemployment
Declining or stagnant economic growth
This phenomenon was notably observed during the 1970s oil crisis globally and has been described as the most dangerous form of inflation for policymakers.
Key Distinction: The critical difference between demand-pull and cost-push inflation is that demand-pull inflation occurs with rising output, while cost-push inflation typically occurs with declining output (leading to stagflation).
Answer 4: (a)
Explanation:
Statement 1 – TRUE: The abolition of the zamindari system was a cornerstone of post-independence land reforms. It aimed to eliminate the intermediary layer (zamindars and jagirdars) who stood between the actual cultivators and the state, thereby enabling direct contact between cultivators and government. This reform was relatively effective in most areas in weakening the economic and political power of intermediaries and transforming approximately 2 crore tenants into landowners.
Statement 2 – FALSE: Land ceiling laws were NOT applied uniformly across all states without exception. While states like West Bengal legalized the abolition comprehensively, in other states (notably Jammu & Kashmir), intermediaries were allowed to retain possession of lands under their personal cultivation without clear limits being set. This variation reflected differing political contexts and federal-state dynamics.
Statement 3 – TRUE: The Kumarappa Committee (named after J. C. Kumarappan) played a crucial advisory role. A committee under his chairmanship was appointed to examine land reform problems and recommended comprehensive agrarian reform measures including:
Abolition of intermediaries
Tenancy reforms
Land ceiling fixations
Consolidation of landholdings
Historical Context: The Zamindari Abolition and Land Reforms Act of 1950 was the first major legislative measure implementing these recommendations.
Answer 5: (b)
Explanation:
Statement 1 – FALSE: The Most Favoured Nation (MFN) principle establishes that WTO members must grant equal treatment to all other WTO members. If a member grants a trade advantage (like reduced customs duties) to one country, it must extend the same benefit to all other WTO members. Preferential treatment for developing and least-developed countries is an exception to MFN (not the rule itself) and requires specific protocols. Statement 1 reverses this logic incorrectly.
Statement 2 – TRUE: Free Trade Agreements (FTAs) between WTO members are explicitly recognized exceptions to the MFN principle. When countries enter FTAs or customs unions, they can grant preferential benefits exclusively to FTA members without extending those benefits to all other WTO members. This exception is codified in WTO rules.
Statement 3 – TRUE: The WTO’s mandate is comprehensive and explicitly encompasses:
Trade in goods (traditional merchandise trade)
Trade in services (GATS – General Agreement on Trade in Services)
Intellectual property (TRIPS – Trade-Related Aspects of Intellectual Property Rights)
WTO Core Principles: The WTO operates on principles of:
Non-discrimination (MFN and National Treatment)
Transparency
Predictability
Promotion of fair competition
Answer 6: (b)
Explanation:
NABARD (National Bank for Agriculture and Rural Development) functions across three primary domains:
CORRECT FUNCTIONS OF NABARD:
(a) TRUE: Providing refinance support to rural banks (RRBs), cooperative banks, and other rural lending institutions
(c) TRUE: Linking Self-Help Groups (SHGs) with banks for microfinance and empowerment initiatives
(d) TRUE: Funding research institutions and projects for agricultural development and rural livelihoods improvement
INCORRECT FUNCTION:
(b) FALSE: NABARD does NOT regulate or supervise commercial banks in urban areas. This is exclusively the function of the Reserve Bank of India (RBI). NABARD’s supervisory role is limited to:
Cooperative banks (both rural and urban cooperative banks)
Regional Rural Banks (RRBs)
Rural finance institutions
Institutional Division of Labor: The division of financial institutions’ regulation is clear:
RBI: Commercial banks, foreign banks, payment systems, monetary policy
NABARD: Rural banks, cooperative banks, agricultural credit, rural development
SEBI: Securities markets
IRDAI: Insurance sector
Answer 7: (b)
Explanation:
Statement 1 – FALSE: While the Act does permit deductions for fines, absence from duty, and advances, the Act is restrictive about which deductions are permissible. Specifically, the Act allows deductions for:
Fines (imposed in accordance with Act procedures)
Absence from duty (with specified conditions)
Damage or loss caused by employee’s negligence or willful act
Advances paid to employees
Deductions authorized by Central/State Government
However, not all employer deductions are permitted. The Act has strict provisions limiting what employers can deduct, making statement 1 incomplete/misleading.
Statement 2 – TRUE: The Act establishes clear quantitative limits on deductions:
General limit: Total deductions in a month cannot exceed 50% of wages
Special limit: For deductions including payments to cooperative societies, the limit extends to 75% of wages
These limits protect workers from excessive deduction practices and arbitrary wage reduction.
Statement 3 – TRUE: The Payment of Wages Act, 1936 (Section 20) prescribes penalties for non-compliance:
Violation of payment timing: Fine not less than Rs. 200 but which may extend to Rs. 1,000
Subsequent offenses: Enhanced penalties—fine not less than Rs. 500 but which may extend to Rs. 3,000, or imprisonment for not less than one month but which may extend to three months, or both
Administrative Mechanism: The Act also established authority for redressal through Labour Commissioners and tribunals, with a 12-month time limit for filing claims.
Answer 8: (c)
Explanation:
Statement 1 – FALSE: It is historically inaccurate to claim that RBI gained direct regulatory powers over UCBs “for the first time” in 2020. The RBI has held regulatory authority over UCBs since they were brought within the purview of the Banking Regulation Act in 1966. What the 2020 amendment did was expand and strengthen RBI’s existing regulatory powers over UCBs, not create new authority. The 2020 Banking Regulation Amendment Act enhanced RBI’s supervisory capabilities, governance powers, and management directives over cooperative banks.
Statement 2 – TRUE: UCBs indeed remain subject to dual regulation—a characteristic feature since 1966:
RBI Regulation: Covers banking operations including capital adequacy, risk control, lending norms, branch licensing, asset quality, and prudential requirements
Registrar of Cooperative Societies Regulation: Covers management, governance, cooperative principles, member relations, and dispute resolution
This dual regulatory structure creates complexities and is recognized as an ongoing governance challenge for UCB stability and competitiveness.
Statement 3 – FALSE: This statement reverses the actual situation. Unlike commercial banks where shareholders and borrowers are distinct entities:
In UCBs: Borrowers can indeed serve as shareholders simultaneously
This is a fundamental cooperative banking principle where customers/borrowers are often the primary members/shareholders
This distinguishing feature reflects the cooperative nature of these institutions
Post-2020 Context: The 2020 amendment attempted to harmonize cooperative bank governance standards with commercial bank prudential norms while maintaining cooperative principles, establishing more uniform standards across UCBs.
Answer 9: (b)
Explanation:
Statement 1 – FALSE: The RBI’s Regulatory Sandbox has NOT identified specific mandatory areas for blockchain deployment in Indian banks. According to official RBI statements and parliamentary replies:
RBI considers blockchain technology as “one of many promising technologies”
The Regulatory Sandbox encourages innovators to test blockchain solutions but does NOT mandate specific areas for its use
Under the Cross Border Payments theme, entities have tested blockchain applications voluntarily, but this is exploratory, not prescriptive
Blockchain deployment remains optional and innovation-driven, not mandatory
Statement 2 – TRUE: This represents a significant recent development in India’s financial technology landscape:
A blockchain-based deep-tier financing solution for MSMEs, developed by the Indian Banks’ Digital Infrastructure Company (IBDIC), successfully exited RBI’s Fifth Regulatory Sandbox Cohort
The system uses tokenized invoices on a permissioned blockchain, creating tamper-proof digital assets
MSMEs can leverage these tokens as collateral for financing from banks and NBFCs
Major banks including HDFC, ICICI, Yes Bank, and Aditya Birla Capital participated in the successful pilot
This represents the first full regulatory clearance for a blockchain solution in India’s regulated fintech ecosystem
Statement 3 – TRUE: Blockchain technology in banking addresses multiple critical challenges:
Fraud Mitigation: Immutable transaction records prevent duplicate invoicing and fraud
Transparency: Real-time verification of invoice authenticity and supply chain data
Cost Reduction: Elimination of intermediary steps, reduced onboarding time, and lower operational overhead
Efficiency: Streamlined financing process with faster capital access for underserved MSMEs
Regulatory Significance: RBI’s approval signals institutional confidence in regulated blockchain applications and may pave the way for further fintech innovations.
Answer 10: (b)
Explanation:
Statement 1 – TRUE: The Banking Regulation Amendment Act of 2020 represented a watershed moment in cooperative bank regulation:
Brought approximately 1,540 urban cooperative banks and multi-state cooperative banks under RBI’s enhanced and unified regulatory framework
These institutions were previously under the dual control regime but now face more consistent RBI oversight
The amendment was precipitated by instances of major governance failures and large loans to corporate entities with insufficient due diligence, which threatened depositor interests
Statement 2 – TRUE: A core objective of the 2020 amendments was harmonization of prudential standards:
Cooperative banks must now maintain capital adequacy ratios aligned with BASEL-III standards (similar to commercial banks)
Risk control norms prescribed by RBI for cooperative banks now mirror those applicable to commercial banks
Lending norms and asset quality standards are now equivalent across both banking categories
This convergence was necessary to prevent competitive disadvantages and maintain financial system stability
However, cooperative banking principles regarding member governance are still preserved
Statement 3 – FALSE: The 2025 amendment did increase the threshold for “substantial interest,” but the statement contains a temporal inaccuracy:
The threshold was increased from Rs. 5 lakh to Rs. 2 crore (this is correct)
However, the Rs. 5 lakh threshold had remained unchanged since 1968, not “unchanged since 1968” implying it was modified in 2025
The 2025 amendment represented the first significant revision of this threshold in approximately 57 years (1968-2025)
This revision aimed to align the definition with current economic realities and prevent director disqualifications for nominal substantial interests in large cooperative banks
2025 Amendment Context: The 19 major amendments in 2025 focused on:
Strengthened governance standards for cooperative banks
Enhanced depositor protection mechanisms
Improved audit quality and regulatory reporting
Director tenure adjustments aligned with constitutional amendments
Comparative Evolution:
1966: Cooperative banks first brought under Banking Regulation Act provisions
2020: Major expansion of RBI powers over cooperative banks (1,540 institutions)
2025: 19 reforms including substantial interest threshold revision
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