Daily Static Quiz (Economy) Nov 28, 2025

Daily Static Quiz (Economy) Nov 28, 2025

Question 1

Consider the following statements regarding Infrastructure Investment Trusts (InvITs):

1. InvITs are required to invest at least 80% of their assets in revenue-generating completed infrastructure projects or eligible infrastructure assets.

2. According to SEBI regulations, an InvIT must maintain a minimum holding of 15% units by the sponsor for a minimum period of 3 years from the date of listing.

3. InvITs can be established as a company and registered with SEBI under the Companies Act.

Which of the statements given above is/are correct?

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

Question 2

With reference to Non-Banking Financial Institutions (NBFCs) in India, consider the following:

1. NBFCs cannot undertake the acquisition of securities issued by the Government of India.

2. NBFCs are regulated by the Reserve Bank of India with prescribed prudential norms.

3. NBFCs can accept deposits from the general public similar to commercial banks.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) 1 and 3 only
(d) None of the above

Question 3

Consider the following statements regarding Open Market Operations (OMOs):

1. OMOs are conducted by the RBI through the purchase and sale of government securities to regulate liquidity in the money market.

2. When the RBI sells government securities, it aims to inject liquidity into the banking system.

3. OMOs are a primary tool used to manage both inflation and short-term interest rates.

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

Question 4

With respect to Certificate of Deposits (CDs) and Commercial Papers (CPs) in India’s money market, which of the following statements is/are correct?

1. CDs can be issued only by scheduled commercial banks and have maturities ranging from less than one year to three years.

2. CPs typically have a maturity period of 7 days to 1 year and are negotiable instruments issued primarily by non-financial companies.

3. Both CDs and CPs are negotiable and tradable in the money market.

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

Question 5

Consider the following statements about Development Financial Institutions (DFIs) in India:

1. IFCI was the first DFI established in 1948 and initially focused on providing long-term loans to industrial enterprises.

2. IDBI was converted into a commercial bank in 2004 and is no longer classified as a DFI.

3. SIDBI is the apex organisation for financing and development of small-scale enterprises and was established in 1989 as a subsidiary of IDBI.

Which of the statements given above is/are correct?

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

Question 6

With regard to intangible investments, consider the following examples:

1. Patents and copyrights

2. Factory buildings and equipment

3. Brand recognition and goodwill

4. Inventory of raw materials

5. Trademarks and software

How many of the above are classified as intangible investments?

(a) Two
(b) Three
(c) Four
(d) All five

Question 7

Consider the following statements regarding horizontal tax devolution in India:

1. Horizontal tax devolution refers to the distribution of the divisible pool of taxes among the Union and the States collectively.

2. The Finance Commission uses criteria such as income distance, population, area, forest and ecology, and tax-fiscal efforts for determining horizontal devolution.

3. The current vertical devolution (share of states in divisible pool) as per the 15th Finance Commission stands at 41%.

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

Question 8

Consider the following statements regarding Domestic Systemically Important Banks (D-SIBs) in India:

1. D-SIBs are classified as “Too Big To Fail” (TBTF) banks whose failure could cause widespread disruption to the financial system and economy.

2. The RBI framework for D-SIBs mandates that these banks must maintain additional Common Equity Tier 1 (CET1) capital based on their systemic importance bucket.

3. Only banks with aggregate deposits exceeding Rs. 5 lakh crore are eligible for D-SIB classification.

4. As of 2024, the State Bank of India, HDFC Bank, and ICICI Bank are classified as D-SIBs, with SBI placed in Bucket 4, HDFC Bank in Bucket 3, and ICICI Bank in Bucket 1.

Which of the statements given above is/are correct?

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

Question 9

The GDP Deflator is a comprehensive measure of inflation. With reference to this, consider the following statements:

1. The GDP deflator captures price changes of all goods and services produced domestically, including exports but excluding imports.

2. Unlike the Consumer Price Index (CPI), the GDP deflator automatically reflects changes in consumption and investment patterns.

3. The GDP deflator formula is: (Nominal GDP ÷ Real GDP) × 100.

Which of the statements given above is/are correct?

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

Question 10

Which Five Year Plan adopted the Mahalanobis Model, which emphasized the importance of heavy industries and capital goods as the foundation for long-term economic growth?

(a) First Five Year Plan (1951-1956)
(b) Second Five Year Plan (1956-1961)
(c) Third Five Year Plan (1961-1966)
(d) Fourth Five Year Plan (1966-1971)

ANSWER KEY & DETAILED EXPLANATIONS

Question 1 – Answer: (b) 1 and 2 only

Explanation:

Statement 1: CORRECT – According to the SEBI (Infrastructure Investment Trusts) Regulations, 2014, InvITs are required to invest a minimum of 80% of their assets in completed, revenue-generating infrastructure projects or other eligible infrastructure assets. The remaining 20% can be invested in other permissible instruments including under-construction infrastructure projects (not exceeding 10%) and securities.

Statement 2: CORRECT – The SEBI InvIT Regulations mandate that the sponsor(s) must collectively hold not less than 15% of the total units of the InvIT on a post-issue basis for a period of at least 3 years from the date of listing. This ensures that the sponsor maintains significant skin-in-the-game.

Statement 3: INCORRECT – InvITs are structured as trusts, not as companies. According to the SEBI Regulations, an InvIT must be established as a trust under the Indian Trust Act, 1882, with the trust deed duly registered under the Registration Act, 1908. A trust structure, not a corporate structure, is mandatory for InvIT registration.

Question 2 – Answer: (b) 2 only

Explanation:

Statement 1: INCORRECT – NBFCs are permitted to undertake acquisition of securities issued by the Government of India, state governments, or other marketable securities. This is actually one of their core functions in the financial system.

Statement 2: CORRECT – The Reserve Bank of India has prescribed comprehensive prudential norms for all NBFCs. These norms are designed to minimize risks and ensure the stability of the non-banking financial sector. RBI’s prudential framework includes requirements for capital adequacy, asset classification, and provisioning, among others.

Statement 3: INCORRECT – One of the key distinctions between NBFCs and commercial banks is that NBFCs cannot accept demand deposits (such as savings accounts or current accounts) like commercial banks do. They can only accept certain types of deposits under specific conditions and with RBI’s permission, and these are not demand deposits but typically term deposits.

Question 3 – Answer: (b) 1 and 3 only

Explanation:

Statement 1: CORRECT – Open Market Operations are precisely defined as operations conducted by the RBI through the purchase and sale of government securities to regulate rupee liquidity conditions in the money market on a durable basis. This is a core monetary policy tool of the RBI.

Statement 2: INCORRECT – This is exactly opposite to the actual mechanism. When the RBI sells government securities in the open market, it absorbs excess liquidity from the banking system, thereby reducing the money supply. When the RBI wants to inject liquidity, it purchases government securities from the market.

Statement 3: CORRECT – OMOs are a primary and important tool used by the RBI for managing both inflation and short-term interest rates in the economy. By adjusting the liquidity in the banking system, the RBI influences the repo rates and ultimately the overall interest rate structure, which impacts inflation and economic activity.

Question 4 – Answer: (d) 1, 2, and 3

Explanation:

Statement 1: CORRECT – Certificates of Deposit (CDs) are issued by scheduled commercial banks (since 1989) and development financial institutions. The maturity period ranges from less than one year to three years. Since 1993, the RBI allowed financial institutions like IFCI, IDBI, and Exim Bank to issue CDs with maturity periods above one year and up to three years.

Statement 2: CORRECT – Commercial Papers (CPs) are short-term instruments issued primarily by creditworthy companies for short-term financing needs. The maturity typically ranges from 7 days to 1 year (often between 30 to 270 days). They are issued at a discount to face value and are negotiable instruments traded in the money market.

Statement 3: CORRECT – Both CDs and CPs are negotiable instruments, meaning they can be traded in the secondary market before their maturity date. This high degree of liquidity makes them attractive to investors who need to access their funds before maturity or want to exit their positions.

Question 5 – Answer: (c) 1, 2, and 3 only

Explanation:

Statement 1: CORRECT – The Industrial Finance Corporation of India (IFCI) was indeed the first Development Financial Institution established in 1948. It was specifically set up to provide long-term finance for industrial projects and enterprises. IFCI played a crucial role in post-independence industrialization in India.

Statement 2: CORRECT – The Industrial Development Bank of India (IDBI), which was initially set up as a subsidiary of the RBI in 1964 and granted autonomy in 1976, was converted into a Universal Bank (IDBI Bank) with effect from October 11, 2004. It is no longer classified as a DFI but as a commercial bank performing both universal banking functions and some development financing functions.

Statement 3: CORRECT – The Small Industries Development Bank of India (SIDBI) was indeed established in 1989 as a subsidiary of IDBI and was later granted autonomy in 1998. SIDBI is designated as the apex organization in the field of small-scale and small industries financing and development in India.

Question 6 – Answer: (b) Three

Explanation:

Intangible Investments (Non-physical assets with value):

1. Patents and copyrights – INTANGIBLE ✓ (Intellectual property rights)

2. Factory buildings and equipment – TANGIBLE ✗ (Physical assets with material substance)

3. Brand recognition and goodwill – INTANGIBLE ✓ (Non-physical assets representing market value)

4. Inventory of raw materials – TANGIBLE ✗ (Physical goods held for production/sale)

5. Trademarks and software – INTANGIBLE ✓ (Legal rights and non-physical creations)

Total Intangible Investments: 3 (Patents & copyrights, Brand recognition & goodwill, Trademarks & software)

Intangible assets lack physical substance but derive significant value from intellectual property, brand value, and customer relationships. They have become increasingly important in modern economies, with intangibles accounting for approximately 90% of the market value of S&P 500 companies.

Question 7 – Answer: (b) 2 and 3 only

Explanation:

Statement 1: INCORRECT – This statement confuses horizontal and vertical devolution. Horizontal tax devolution refers to the distribution of the divisible pool of taxes among the states themselves (state-to-state distribution). Vertical devolution refers to the distribution of taxes between the Union and the States collectively. Horizontal devolution works within the share already allocated to states through vertical devolution.

Statement 2: CORRECT – The Finance Commission uses multiple criteria for determining horizontal devolution among states. As per the 15th Finance Commission, the criteria and their weightages are: Income Distance (45%), Area (15%), Population 2011 (15%), Demographic Performance (12.5%), Forest and Ecology (10%), and Tax and Fiscal Efforts (2.5%). These criteria ensure an equitable distribution among states based on various developmental indicators.

Statement 3: CORRECT – According to the recommendations of the 15th Finance Commission (2021-2026), the vertical share of the divisible pool of taxes allocated to states stands at 41%. This represents the Union’s commitment to share tax revenues with states for their development and functioning.

Question 8 – Answer: (c) 1, 2, and 4 only

Explanation:

Statement 1: CORRECT – Domestic Systemically Important Banks are indeed classified as “Too Big To Fail” (TBTF) institutions. Their failure could cause widespread disruption to the financial system and create systemic risk, leading to spillover effects on the broader economy. This classification reflects their size, interconnectedness, and critical role in the payment and settlement infrastructure of the country.

Statement 2: CORRECT – The RBI’s D-SIB framework, announced in July 2014, mandates that D-SIBs maintain additional Common Equity Tier 1 (CET1) capital beyond the standard regulatory requirements. The additional CET1 requirement is determined by the systemic importance bucket in which the bank is placed, ranging from 0.20% of Risk Weighted Assets (RWAs) for lower buckets to 0.80% for the highest bucket.

Statement 3: INCORRECT – The eligibility for D-SIB classification is not based on a fixed deposit threshold like Rs. 5 lakh crore. Instead, the RBI uses a two-step process: (1) Banks with size above 2% of GDP (calculated using Basel III Leverage Ratio Exposure Measure) are included in the sample for assessment, and (2) A composite score is calculated based on five indicators: size, cross-jurisdictional activity, complexity, substitutability, and interconnectedness. Banks exceeding a certain threshold are classified as D-SIBs.

Statement 4: CORRECT – As of 2024, the RBI has retained the State Bank of India, HDFC Bank, and ICICI Bank as Domestic Systemically Important Banks. Their bucket placements are: SBI in Bucket 4 (highest systemic importance, requiring 0.80% additional CET1), HDFC Bank in Bucket 3 (requiring 0.40% additional CET1), and ICICI Bank in Bucket 1 (requiring 0.20% additional CET1).

Question 9 – Answer: (d) 1, 2, and 3

Explanation:

Statement 1: CORRECT – The GDP deflator is indeed a comprehensive measure that captures price changes of all goods and services produced domestically within a country. Importantly, it includes exports (part of domestic production) but excludes imports (not part of domestic production). This makes it broader than the CPI, which is limited to a consumer basket of goods.

Statement 2: CORRECT – A key advantage of the GDP deflator over the CPI and WPI is its ability to dynamically adjust to changes in consumption and investment patterns. When new goods and services are introduced or consumption patterns shift, the GDP deflator automatically reflects these changes. In contrast, the CPI uses a fixed basket of goods, which may not capture such shifts promptly.

Statement 3: CORRECT – The formula for calculating the GDP deflator is: GDP Deflator = (Nominal GDP ÷ Real GDP) × 100. This formula shows the ratio of the value of goods and services at current prices to their value at base year prices, effectively measuring the percentage change in prices. A GDP deflator of 110 would mean there has been a 10% increase in prices compared to the base year.

Question 10 – Answer: (b) Second Five Year Plan (1956-1961)

Explanation:

The Mahalanobis Model was adopted during the Second Five Year Plan (1956-1961), which was India’s second phase of planned economic development after independence.

Key Points about the Mahalanobis Model:

• Developer: The model was developed by renowned Indian statistician P.C. Mahalanobis.

• Core Focus: The model emphasized the development of heavy industries and capital goods as the foundation for long-term economic growth and self-reliance.

• Rationale: It focused on building a strong industrial base through capital-intensive industries such as steel, machinery, and other capital goods, which would generate multiplier effects throughout the economy.

• Strategic Shift: The Second Plan marked a significant shift from the First Plan’s (1951-1956) agriculture-focused Harrod-Domar model approach to an industrialization-centric strategy.

• Significance: This model laid the foundation for India’s industrial development during the planned economy era and was instrumental in building institutions like the Bhilai Steel Plant and the Rourkela Steel Plant.

• Context: The other plans – First (Harrod-Domar), Third (agricultural focus), and Fourth (growth with stability) – did not adopt the Mahalanobis Model, making the Second Plan unique in this regard. 

Daily Static Quiz