Daily Static Quiz (Economy) Nov 21, 2025

Daily Static Quiz (Economy) Nov 21, 2025

Question 1:

Consider the following statements regarding the Reserve Bank of India’s sources of income:

I. Interest earnings on government securities held through Open Market Operations
II. Profit from trading in foreign exchange assets
III. Seigniorage earned from printing and distribution of currency notes
IV. Commission earned from managing pension funds
V. Interest income from direct lending to private companies

Which of the above statements are correct?

(a) I, II and IV only

(b) I, II and V only

(c) I, II and III only

(d) II, III and IV only

Question 2:

Which of the following minerals are included in India’s priority list of 30 critical minerals for which India joined the Minerals Security Partnership?

I. Lithium
II. Cobalt
III. Rare Earth Elements
IV. Phosphate
V. Coal

Select the correct answer using the code given below:

(a) I, II and III only

(b) II, III and IV only

(c) I, II and IV only

(d) All of the above

Question 3:

In the context of circular economy and India’s municipal solid waste management, which of the following statements are correct?

I. Municipal solid waste can generate approximately Rs 30,000 crore annual revenue through resource recovery by 2030
II. Dry waste comprises the most economically valuable component of municipal waste
III. India’s Swachh Bharat Mission increased waste treatment capacity from 18% in 2014 to 68% currently
IV. The circular economy model involves only waste reduction and not reuse or recycling
V. Hyderabad has emerged as a pioneer city in adopting circular economy principles for waste management

Which of the above are correct?

(a) I, II, III and V only

(b) I, II and IV only

(c) II, III and V only

(d) I, III, IV and V only

Question 4:

Consider the following statements about Basel Norms and their evolution:

I. Basel III introduced a minimum capital adequacy ratio of 12.9% for banks
II. Basel III created two liquidity ratios: Liquidity Coverage Ratio (LCR) and Net Stable Funds Rate (NSFR)
III. Capital conservation buffer under Basel III is an optional buffer maintained at bank discretion
IV. Basel III’s LCR measures short-term (30 days) resilience while NSFR measures medium-term (1 year) resilience
V. India adopted Basel III norms in March 2019 and has maintained complete implementation since then

Which statements are correct?

(a) I, II, and IV only

(b) II, III, and V only

(c) I, II, IV, and V only

(d) All statements are correct

Question 5:

With reference to India’s trade relations with neighboring countries, consider the following:

I. China has consistently been India’s largest trading partner with a trade surplus in India’s favor
II. India maintained a trade deficit with China exceeding USD 99 billion in 2024-25
III. Bangladesh is India’s largest development partner among neighboring countries
IV. India’s export basket to China is limited, primarily comprising iron ore, cotton, and agricultural products
V. India experiences trade surplus with the United States but deficit with China

Which of the above statements are correct?

(a) II, III, IV and V only

(b) I, III and V only

(c) II and IV only

(d) I, II, IV and V only

Question 6:

Consider the following statements regarding the Statutory Liquidity Ratio (SLR):

I. The maximum limit of SLR in India is 40% of Net Demand and Time Liabilities (NDTL)
II. SLR is prescribed under Section 24(2A) of the Banking Regulation Act, 1949
III. SLR is used to control credit expansion and manage inflation
IV. The current SLR rate in India is 20.75%, which cannot be reduced below this floor
V. SLR liquid assets must include cash, gold, and RBI-approved government securities

Which statements are correct?

(a) I, II, III and V only

(b) I, II, IV and V only

(c) II, III, IV and V only

(d) All statements are correct

Question 7:

Regarding the General Agreement on Tariffs and Trade (GATT) and India’s trade policies, which statements are correct?

I. India was one of the 23 founding Contracting Parties to GATT, established in October 1947
II. GATT principles of Most Favored Nation (MFN) treatment require equal treatment of all trading partners
III. India increased its proportion of tariff lines bound from 6% before Uruguay Round to 67% after it
IV. GATT allows member countries to impose quantitative restrictions on imports without any restrictions
V. The principle of National Treatment under GATT requires internal taxes to not discriminate against imported goods

Which statements are correct?

(a) I, II, III and V only

(b) I, III and IV only

(c) II, III, IV and V only

(d) All statements are correct

Question 8:

Consider the following statements about West Texas Intermediate (WTI) crude oil and its significance:

I. WTI is a crude oil stream traded at Cushing, Oklahoma, used as a benchmark for global oil pricing
II. WTI prices significantly influence India’s import costs and current account deficit
III. Oil price shocks directly impact India’s inflation rates and fiscal deficit
IV. India’s dependence on oil imports makes it immune to international oil price fluctuations
V. WTI prices also affect the development of renewable energy alternatives in India

Which statements are correct?

(a) I, II, III and V only

(b) I, III, IV and V only

(c) II, III and IV only

(d) All statements are correct

Question 9:

With reference to Foreign Portfolio Investment (FPI) in India, consider the following:

I. FPI is regulated by SEBI under the SEBI (FPI) Regulations, 2019
II. FPI investments are considered long-term and provide control over target companies
III. Category I FPIs include sovereign wealth funds and pension funds with lower risk profiles
IV. SEBI recently mandated that non-individual FPIs provide a 20-character Legal Entity Identifier (LEI)
V. FPIs holding more than 10% of paid-up equity capital in a listed company are automatically classified as FDI

Which statements are correct?

(a) I, III, IV and V only

(b) I, II and III only

(c) I, III and IV only

(d) II, III, IV and V only

Question 10:

Consider the following statements regarding capital account convertibility and India’s position:

I. Capital account convertibility allows unrestricted conversion of domestic financial assets into foreign assets
II. India has achieved full capital account convertibility
III. Current account convertibility refers to freedom in converting rupees for current transaction purposes without restrictions
IV. India allows individuals to invest up to USD 250,000 annually in foreign assets under liberalized norms
V. Complete capital account convertibility may expose India to volatile capital flows and currency instability

Which statements are correct?

(a) I, III, IV and V only

(b) I, II and V only

(c) II, III and IV only

(d) I, III and IV only

ANSWER KEY AND EXPLANATIONS

Question 1

Correct Answer: (C)

The correct answer is (c) I, II and III only.

Statement I is correct: The RBI earns substantial income through Open Market Operations (OMO) where it buys and sells government securities. When the RBI holds government bonds, it earns interest payments from the government. Additionally, capital gains from price movements contribute to RBI’s income.

Statement II is correct: As per the Foreign Exchange Management Act, 1999 (FEMA), the RBI manages India’s foreign exchange reserves. It generates income by investing foreign currency assets in interest-bearing instruments and through valuation gains/losses on foreign currency holdings.

Statement III is correct: The RBI is the sole authority to issue banknotes in India under the RBI Act, 1934. It earns seigniorage—the profit from the difference between the face value of currency notes and their production cost.

Statement IV is incorrect: The RBI does not manage pension funds; this function is performed by the Pension Fund Regulatory and Development Authority (PFRDA).

Statement V is incorrect: The RBI does not directly lend to private companies. It operates primarily through the banking system, lending to banks which then lend to companies.

Question 2

Correct Answer: (A)

The correct answer is (a) I, II and III only.

When India joined the Minerals Security Partnership (MSP) in June 2023, it identified 30 critical minerals crucial for its energy transition and economic development.

Statement I is correct: Lithium is a critical mineral essential for battery technology and clean energy transition.

Statement II is correct: Cobalt is a key mineral used in electronic equipment and batteries, and is critical for India’s renewable energy goals.

Statement III is correct: Rare Earth Elements (REEs) are 17 minerals vital for high-tech applications and green energy technologies.

Statement IV is incorrect: Phosphate, while important for fertilizers, was not listed as a priority critical mineral in India’s 30 minerals list.

Statement V is incorrect: Coal, despite its importance in India’s energy sector, is not classified as a “critical mineral” in the context of the MSP, which focuses on minerals needed for clean energy transition like lithium, cobalt, and rare earths.

The Minerals Security Partnership aims to diversify India’s mineral supply chains away from Chinese dominance and supports India’s net-zero emission target by 2070.

Question 3

Correct Answer: (A)

The correct answer is (a) I, II, III and V only.

Statement I is correct: According to the Ministry of Housing and Urban Affairs report on ‘Circular Economy in Municipal Solid and Liquid Waste’, treatment of municipal solid, wet, and construction wastes can generate nearly Rs 30,000 crore revenue per annum through resource recovery and recycling initiatives.

Statement II is correct: Dry waste is the most economically valuable component of municipal solid waste due to high recovery value of its components like plastics, metals, and paper. India generates approximately 1.45 lakh tonnes of solid waste daily, with 35% being dry waste.

Statement III is correct: India’s Swachh Bharat Mission-Urban (SBM-U) launched in 2014 successfully increased urban India’s solid waste treatment capacity from 18% in 2014 to 68% currently.

Statement IV is incorrect: The circular economy model is NOT limited to waste reduction alone. It involves the 3R principles: Reduce, Reuse, and Recycle, along with resource recovery, composting, and energy recovery from waste.

Statement V is correct: Hyderabad has emerged as a pioneer city in implementing circular economy principles for waste management, processing approximately 9,000 tonnes of waste daily and achieving zero-landfill status in certain areas, serving as a model for other Indian cities.

Question 4

Correct Answer: (A)

The correct answer is (a) I, II, and IV only.

Statement I is correct: Basel III framework stipulates that banks should maintain a minimum capital adequacy ratio of 12.9%, which is higher than Basel II’s requirement of 8%. This includes minimum Tier 1 capital ratio of 10.5% and Tier 2 capital ratio of 2%.

Statement II is correct: Basel III created two innovative liquidity ratios to address gaps in banking liquidity management:

• Liquidity Coverage Ratio (LCR): Requires banks to maintain high-quality liquid assets

• Net Stable Funds Rate (NSFR): Requires banks to maintain stable funding profiles

Statement III is incorrect: The capital conservation buffer under Basel III is NOT optional. It is mandatory and banks must maintain an additional capital conservation buffer of 2.5% over and above minimum capital requirements, along with a counter-cyclical buffer of 0-2.5%.

Statement IV is correct: LCR measures short-term (30-day) resilience to meet liquidity needs, while NSFR measures medium-term (1-year) resilience for stable funding.

Statement V is incorrect: While India initially adopted Basel III norms in March 2019, the RBI extended deadlines to March 2020 and further extended implementation by 6 months due to COVID-19 pandemic. Full compliance wasn’t immediate.

Question 5

Correct Answer: (A)

The correct answer is (a) II, III, IV and V only.

Statement I is incorrect: While China is one of India’s major trading partners, it is NOT India’s largest trading partner overall. India’s trade with China shows a persistent deficit favoring China, not India. In 2024-25, the USA remained India’s largest trading partner.

Statement II is correct: India’s trade deficit with China reached approximately USD 99 billion in 2024-25, demonstrating the asymmetry in bilateral trade where India imports much more from China than it exports.

Statement III is correct: Bangladesh is indeed India’s largest development partner among South Asian neighbors. The bilateral trade between the two nations was reported at $15.9 billion in FY 22-23, with India providing significant Lines of Credit for infrastructure development.

Statement IV is correct: India’s export basket to China is indeed limited, primarily comprising iron ore, cotton, shrimps, and agricultural products. Despite these competencies, India cannot expand its export basket due to China’s high tariff and non-tariff barriers on Indian goods.

Statement V is correct: India maintains a consistent trade surplus with the United States while facing persistent deficits with China. This contrasting pattern reflects differences in market access and trade policies.

Question 6

Correct Answer: (A)

The correct answer is (a) I, II, III and V only.

Statement I is correct: The maximum limit of SLR is 40% of NDTL, and the RBI has the authority to increase SLR up to this ceiling if required. The minimum floor for SLR is 0%, indicating flexibility in monetary policy implementation.

Statement II is correct: SLR is formally prescribed under Section 24(2A) of the Banking Regulation Act, 1949, making it a statutory requirement for commercial banks in India.

Statement III is correct: SLR is a powerful monetary policy tool used by the RBI to:

• Control credit expansion by restricting funds available for lending

• Manage inflation by reducing money supply

• Ensure solvency of commercial banks

When RBI increases SLR, it reduces credit availability; decreasing SLR increases liquidity.

Statement IV is incorrect: The floor rate of 20.75% was REMOVED following the amendment of the Banking Regulation Act in January 2017. Currently, the SLR is set at 18% (as of April 11, 2020) with no fixed floor, allowing more flexibility in monetary policy adjustments.

Statement V is correct: SLR liquid assets must comprise cash, gold, and other RBI-approved securities (primarily government bonds and securities approved by RBI).

Question 7

Correct Answer: (A)

The correct answer is (a) I, II, III and V only.

Statement I is correct: India was indeed one of the 23 founding Contracting Parties to GATT, which was concluded in October 1947 as a foundational international trade agreement.

Statement II is correct: The Most Favored Nation (MFN) principle is a core GATT principle requiring that any advantage or privilege granted to one member country must be extended to all other member countries on an equal basis.

Statement III is correct: India significantly expanded its tariff commitments as part of Uruguay Round agreements. It increased the proportion of tariff lines bound from 6% before the Uruguay Round to 67% afterwards, representing major liberalization of India’s trade policy.

Statement IV is incorrect: GATT actually imposes restrictions on the use of quantitative restrictions (QRs). India had to invoke the balance of payments provision of Article XVIII(B) to delay implementation of commitments to phase out QRs on approximately 2,300 tariff lines after facing WTO disputes.

Statement V is correct: The principle of National Treatment (Article III) of GATT requires that once goods have entered a country, they must not face internal taxes, regulations, or standards that treat them less favorably than domestic goods.

Question 8

Correct Answer: (A)

The correct answer is (a) I, II, III and V only.

Statement I is correct: WTI (West Texas Intermediate) is a crude oil stream traded at Cushing, Oklahoma, and serves as a key benchmark for global oil pricing. It is one of the most widely used reference prices for crude oil globally.

Statement II is correct: As a major oil importer, India is significantly affected by WTI prices. High oil prices increase India’s import costs, widen the current account deficit, and strain foreign exchange reserves. Changes in WTI directly impact India’s energy security and economic metrics.

Statement III is correct: Oil price shocks have dual effects on India’s economy:

• They directly impact inflation through higher fuel and transportation costs

• They affect fiscal deficit through increased government subsidy requirements for fuel and by reducing tax revenues from lower economic activity

Statement IV is incorrect: This is a contradictory statement. India is NOT immune to international oil price fluctuations; rather, India is HIGHLY VULNERABLE to such shocks due to its massive dependence on oil imports. Oil imports constitute a major component of India’s import bill and external vulnerability.

Statement V is correct: WTI prices influence India’s renewable energy transition. When oil prices are high, renewable energy becomes more competitive economically, encouraging greater investment and policy support for alternative energy sources.

Question 9

Correct Answer: (C)

The correct answer is (c) I, III and IV only.

Statement I is correct: The SEBI (Foreign Portfolio Investors) Regulations, 2019 govern Foreign Portfolio Investment in India. SEBI issued operational guidelines on November 5, 2019, to streamline registration and compliance for FPIs.

Statement II is incorrect: FPI is characterized as SHORT-TERM investment, not long-term. FPIs are passive investors seeking quick returns on their investments. In contrast, FDI is long-term investment that seeks to acquire control over companies. This is a fundamental distinction between the two investment categories.

Statement III is correct: Category I FPIs include low-risk entities such as:

• Sovereign wealth funds

• Pension funds

• Foreign government entities

• Entities regulated by their nation’s government

These are considered lower-risk compared to Category II FPIs.

Statement IV is correct: SEBI has mandated that non-individual FPIs provide a Legal Entity Identifier (LEI)—a 20-character code—as part of enhanced due diligence measures. This requirement was introduced to prevent stock market manipulation and improve regulatory compliance.

Statement V is incorrect: The rule is that FPIs holding more than 10% of paid-up equity capital are classified as FDI, but this is applied through the principle “Once an FDI, always an FDI”—meaning once classified as FDI, the entity remains FDI. However, automatic reclassification at the 10% threshold is not strictly automatic; it depends on the nature and intent of investment.

Question 10

Correct Answer: (A)

The correct answer is (a) I, III, IV and V only.

Statement I is correct: Capital account convertibility means the freedom to conduct investment transactions across borders without restrictions. It includes freedom in converting rupees to foreign currency for asset acquisition and vice versa, without limits on investment transactions.

Statement II is incorrect: India has achieved PARTIAL (not full) capital account convertibility. India maintains selective capital account openness while retaining restrictions on certain categories of flows. The country maintains a measured approach to capital account liberalization to prevent macroeconomic instability.

Statement III is correct: Current account convertibility specifically refers to the freedom to convert rupees into other internationally accepted currencies for current transaction purposes (trade in goods and services, remittances, dividends, etc.) without restrictions. India has achieved 100% current account convertibility under Article VIII of the IMF framework.

Statement IV is correct: India has implemented liberalized norms allowing Indian residents to invest up to USD 250,000 annually in foreign assets, shares, and securities as part of its graduated approach to capital account liberalization.

Statement V is correct: Economists and policymakers like Arvind Panagariya have cautioned that complete capital account convertibility can expose India to:

• Volatile and speculative capital flows

• Exchange rate instability

• Currency depreciation or appreciation risks

• Vulnerability to global financial disruptions

This is why Panagariya advised against rushing into full capital account convertibility at India’s current per capita income level.

Daily Static Quiz