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JAIIB IE&IFS practice questions

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Question 1Indian Economy

In the context of India's national income accounting, which of the following is included while estimating Gross Domestic Product at market prices?

  1. Value of intermediate goods consumed during production
  2. Value of services rendered by a housewife within the household
  3. Value of goods produced for self-consumption by a farmer Correct answer.
  4. Sale proceeds of second-hand machinery

Explanation

GDP counts the market value of all final goods and services produced within the domestic territory during a year, and output retained for self-consumption is imputed at market value. Intermediate goods are excluded to avoid double counting, and second-hand sales are not fresh production.

Question 2Indian Economy

Which organisation releases the Monetary Policy Statement and fixes the policy repo rate in India?

  1. Union Ministry of Finance
  2. NITI Aayog
  3. Securities and Exchange Board of India
  4. Monetary Policy Committee of the Reserve Bank of India Correct answer.

Explanation

Under the amended RBI Act, the six-member Monetary Policy Committee determines the policy repo rate to achieve the inflation target. The Ministry of Finance sets the target in consultation with the RBI but does not set the rate.

Question 3Indian Economy

The Consumer Price Index (Combined) released by the National Statistical Office measures price change in a fixed basket of goods and services consumed by:

  1. Only government employees
  2. Only industrial workers in organized manufacturing
  3. Rural households only
  4. Households across the country, both rural and urban Correct answer.

Explanation

CPI-Combined is a national retail index covering consumption expenditure of households in both rural and urban areas. It is the headline measure used for inflation targeting by the RBI.

Question 4Indian Economy

Which of the following is a direct tax in the Indian tax structure?

  1. Customs duty on imported electronic goods
  2. Goods and Services Tax on restaurant services
  3. Income tax on salary income Correct answer.
  4. Excise duty on petroleum products

Explanation

A direct tax is levied on income or wealth and its burden cannot be shifted to another person, so income tax falls directly on the assessee. GST, customs duty and excise are indirect taxes collected through prices passed on to consumers.

Question 5Indian Economy

Which of the following transactions is recorded in the current account of India's balance of payments?

  1. Remittances received from Indians working abroad Correct answer.
  2. External commercial borrowing by a corporate
  3. Foreign direct investment inflow into a manufacturing plant
  4. Change in RBI's foreign exchange reserves

Explanation

The current account covers trade in goods and services, primary income and secondary income such as personal remittances. FDI, external commercial borrowing and reserve changes are capital account items.

Question 6Indian Economy

The Reserve Bank of India is described as the 'lender of last resort' primarily because it:

  1. Gives long-term project finance to infrastructure companies
  2. Lends to the central government to finance the fiscal deficit
  3. Subsidises priority sector loans given by commercial banks
  4. Provides emergency liquidity support to banks facing temporary cash shortages Correct answer.

Explanation

As lender of last resort, the central bank provides emergency liquidity to solvent banks facing temporary liquidity stress, preventing contagion. It does not fund the government deficit or lend directly to industry.

Question 7Indian Economy

Which measure of money supply is the most liquid and includes currency with the public plus demand deposits with banks plus other deposits with the RBI?

  1. M4
  2. M3
  3. M1 Correct answer.
  4. M2

Explanation

M1 is the narrowest and most liquid measure, comprising currency with the public, demand deposits with the banking system and other deposits with the RBI. M3 is broad money and M2 and M4 add progressively less liquid components.

Question 8Indian Economy

Which of the following is a qualitative instrument of credit control available to the Reserve Bank of India?

  1. Open market operations
  2. Bank rate
  3. Moral suasion Correct answer.
  4. Cash Reserve Ratio

Explanation

Moral suasion is a selective or qualitative tool by which the RBI persuades banks to follow desired lending practices without a binding quantitative rule. CRR, bank rate and open market operations are quantitative instruments.

Question 9Indian Economy

A sustained rise in the general price level accompanied by falling output and rising unemployment is best described as:

  1. Disinflation
  2. Deflation
  3. Stagflation Correct answer.
  4. Demand-pull inflation

Explanation

Stagflation combines stagnation, meaning low or negative growth and high unemployment, with inflation. It typically arises from adverse supply shocks that push costs up while depressing output.

Question 10Indian Economy

If nominal GDP grows by 12 per cent in a year while the GDP deflator rises by 5 per cent, the approximate growth in real GDP is:

  1. 17 per cent
  2. 12 per cent
  3. 7 per cent Correct answer.
  4. 5 per cent

Explanation

Real growth is approximately nominal growth minus the deflator inflation, so 12 minus 5 gives about 7 per cent. The deflator converts nominal values into constant-price values.

Question 11Indian Economy

The revenue deficit of the central government is defined as:

  1. Fiscal deficit minus interest payments
  2. Total expenditure minus total receipts excluding borrowings
  3. Capital expenditure minus capital receipts
  4. Revenue expenditure minus revenue receipts Correct answer.

Explanation

Revenue deficit is the excess of revenue expenditure over revenue receipts, showing the shortfall in meeting running costs from current income. Fiscal deficit is the broader gap covering total expenditure over total receipts excluding borrowings.

Question 12Indian Economy

Under the Fiscal Responsibility and Budget Management framework, the fiscal deficit of the central government is targeted mainly to:

  1. Maximise capital expenditure regardless of borrowing
  2. Keep the revenue deficit above the fiscal deficit
  3. Reduce the debt-to-GDP ratio and ensure inter-generational equity Correct answer.
  4. Ensure a balanced budget every year

Explanation

The FRBM framework aims at fiscal discipline by capping the fiscal deficit so that public debt remains sustainable and future generations are not burdened. The target is not a zero deficit, but a prudent limit.

Question 13Indian Economy

An increase in the Cash Reserve Ratio by the RBI will most directly:

  1. Reduce the money multiplier and credit creation Correct answer.
  2. Increase the lending capacity of banks
  3. Lower the cost of borrowing for banks
  4. Raise the exchange rate of the rupee

Explanation

A higher CRR locks up a larger share of deposits with the RBI, reducing excess reserves and the money multiplier, so credit creation contracts. It is a contractionary quantitative tool.

Question 14Indian Economy

Which of the following would be classified as a capital receipt in the Union Budget?

  1. Interest received on loans given to states
  2. Dividends from the RBI
  3. Corporation tax collections
  4. Proceeds from disinvestment of a public sector undertaking Correct answer.

Explanation

Capital receipts either create a liability or reduce a financial asset, and disinvestment proceeds reduce the government's equity holding. Tax revenue, interest receipts and dividends are revenue receipts.

Question 15Indian Economy

The primary deficit is calculated as:

  1. Revenue deficit plus capital expenditure
  2. Total expenditure minus revenue receipts
  3. Fiscal deficit minus interest payments Correct answer.
  4. Fiscal deficit plus interest payments

Explanation

Primary deficit strips out interest payments from the fiscal deficit, showing the current year's borrowing need excluding the burden of past debt. It indicates whether fresh borrowing is financing new spending or servicing old debt.

Question 16Indian Economy

Under the inflation targeting framework adopted in India, the flexible inflation target for CPI inflation is:

  1. 5 per cent with a tolerance band of plus or minus 3 per cent
  2. 6 per cent with a tolerance band of plus or minus 1 per cent
  3. 2 per cent with a tolerance band of plus or minus 1 per cent
  4. 4 per cent with a tolerance band of plus or minus 2 per cent Correct answer.

Explanation

The inflation target notified for the RBI is 4 per cent CPI inflation with a tolerance band of plus or minus 2 per cent, giving a range of 2 to 6 per cent. The MPC is accountable if inflation stays outside this band for three consecutive quarters.

Question 17Indian Economy

A depreciation of the Indian rupee against the US dollar is most likely to:

  1. Make Indian exports costlier and imports cheaper
  2. Reduce the rupee value of foreign debt servicing
  3. Make Indian exports cheaper in foreign markets and imports costlier Correct answer.
  4. Leave the trade balance unaffected in the short run

Explanation

When the rupee depreciates, each dollar buys more rupees, so Indian goods priced in rupees become cheaper abroad while imports become costlier in rupee terms. This generally improves export competitiveness but raises the import bill.

Question 18Indian Economy

Which of the following is the correct sequence of the phases of a typical business cycle?

  1. Contraction, expansion, peak, trough
  2. Trough, contraction, peak, expansion
  3. Expansion, peak, contraction, trough Correct answer.
  4. Peak, expansion, trough, contraction

Explanation

A business cycle moves from expansion through a peak, then contraction or recession, reaching a trough before recovery begins again. The cycle is recurring but not strictly periodic.

Question 19Indian Economy

Which of the following best describes the concept of 'fiscal drag'?

  1. The reduction in public debt due to higher tax collection
  2. The tendency of a progressive tax system to slow economic growth when nominal incomes rise during inflation Correct answer.
  3. The delay in implementing capital expenditure projects
  4. The fall in government borrowing caused by a rise in the repo rate

Explanation

Fiscal drag occurs when rising nominal incomes push taxpayers into higher slabs, increasing tax collection and reducing aggregate demand, acting as an automatic stabiliser. It can slow growth if not corrected through indexation or rate adjustments.

Question 20Indian Economy

The term 'twin deficits' in the Indian macroeconomic context refers to:

  1. Budget deficit and monetised deficit together
  2. Fiscal deficit and current account deficit together Correct answer.
  3. Trade deficit and capital account deficit together
  4. Revenue deficit and primary deficit together

Explanation

Twin deficits refer to the simultaneous existence of a large fiscal deficit and a wide current account deficit, often linked through higher government borrowing raising domestic demand and imports. The combination can pressure interest rates and the exchange rate.

Question 21Indian Economy

Which of the following is the primary objective of the Insolvency and Bankruptcy Code in the context of India's economic reform?

  1. To replace the role of the RBI in banking regulation
  2. To resolve insolvency in a time-bound manner and improve credit discipline Correct answer.
  3. To nationalise defaulting companies
  4. To provide subsidies to loss-making firms

Explanation

The IBC provides a time-bound resolution framework for distressed assets, protecting creditor rights and improving credit discipline in the economy. It does not nationalise firms or replace regulatory institutions.

Question 22Indian Economy

Which of the following is a component of India's foreign exchange reserves as reported by the RBI?

  1. Foreign currency assets, gold, SDRs and reserve tranche position with the IMF Correct answer.
  2. Foreign direct investment inflows during the year
  3. Gold held by private jewellers and households
  4. Only foreign currency assets held by commercial banks

Explanation

India's official reserves comprise foreign currency assets, gold, special drawing rights and the reserve tranche position with the IMF. Commercial bank holdings and private gold are not part of official reserves.

Question 23Indian Economy

A country's current account deficit widens sharply. Which of the following combinations of policy responses would most directly aim to correct it?

  1. Increase import subsidies and reduce export incentives
  2. Increase the fiscal deficit and expand money supply
  3. Raise government spending and cut interest rates
  4. Allow the currency to depreciate and tighten aggregate demand Correct answer.

Explanation

A depreciating currency improves export competitiveness and makes imports costlier, while demand compression reduces import volumes, both narrowing the current account deficit. Expansionary fiscal and monetary measures would worsen it by raising imports.

Question 24Indian Economy

In the context of India's monetary transmission, which of the following best explains why a cut in the repo rate may not immediately reduce lending rates?

  1. The RBI fixes all lending rates directly by regulation
  2. Banks rely on high-cost legacy deposits and hold large government securities, slowing pass-through Correct answer.
  3. The repo rate affects only foreign exchange markets
  4. Deposit rates are administratively fixed by the government

Explanation

Transmission is slowed when banks fund lending from older high-cost deposits and prefer safe government securities, so a repo cut does not immediately lower loan rates. The external benchmark system was introduced to speed up pass-through.

Question 25Indian Economy

Which of the following statements about the Human Development Index used in India's economic assessment is correct?

  1. It is published exclusively by the Ministry of Finance
  2. It combines life expectancy, education and per capita income into a composite measure Correct answer.
  3. It measures the inflation-adjusted exchange rate of a currency
  4. It measures only the per capita income of a country

Explanation

The HDI is a composite index of health, education and standard of living, represented by life expectancy, schooling and gross national income per capita. It is published by the UNDP, not by a national ministry.

Question 26Indian Economy

Which body prepares the Economic Survey of India that is tabled in Parliament before the Union Budget?

  1. The Chief Economic Adviser in the Ministry of Finance Correct answer.
  2. The Reserve Bank of India's Monetary Policy Committee
  3. The NITI Aayog Governing Council
  4. The Department of Economic Affairs, Budget Division

Explanation

The Economic Survey is authored by the Chief Economic Adviser and his team within the Ministry of Finance and is presented in Parliament ahead of the Union Budget. It reviews the year's economic developments and offers policy perspectives. The RBI and NITI Aayog do not prepare it.

Question 27Indian Economy

In the national income accounting of India, which organisation releases the official estimates of Gross Domestic Product and Gross Value Added?

  1. Reserve Bank of India
  2. NITI Aayog
  3. National Statistical Office Correct answer.
  4. Ministry of Commerce and Industry

Explanation

The National Statistical Office, under the Ministry of Statistics and Programme Implementation, compiles and releases GDP and GVA estimates. The RBI uses these figures but does not produce the national accounts. GVA at basic prices is the headline supply-side measure in the new series.

Question 28Indian Economy

Which of the following is the correct description of Gross Value Added at basic prices?

  1. Factor cost plus depreciation minus net indirect taxes
  2. Compensation of employees plus operating surplus plus mixed income plus consumption of fixed capital Correct answer.
  3. GDP at market prices minus subsidies plus indirect taxes
  4. Gross output minus intermediate consumption

Explanation

GVA at basic prices is the sum of compensation of employees, operating surplus, mixed income and consumption of fixed capital, adjusted for production taxes less production subsidies. It measures the value generated by producers before product taxes and subsidies are added to reach GDP at market prices.

Question 29Indian Economy

If a household grows vegetables in its kitchen garden for its own consumption, how is this treated in India's national accounts?

  1. It is excluded because no market transaction occurs
  2. It is included only if it exceeds a notified threshold value
  3. It is included as mixed income of households in GVA Correct answer.
  4. It is treated as a transfer and excluded from GDP

Explanation

Own-account production of agricultural goods for self-consumption is imputed at market prices and included in GVA as mixed income of households. This is why the production boundary of national accounts covers such non-market output. Purely non-marketed services of own labour, by contrast, are excluded.

Question 30Indian Economy

In the new GDP series with base year 2011-12, which approach is used as the headline method for estimating GDP?

  1. Value-added tax approach
  2. Income approach
  3. Production (GVA) approach Correct answer.
  4. Expenditure approach

Explanation

India's headline GDP estimate is compiled from the production side, aggregating GVA across sectors and then adding net product taxes. The expenditure and income approaches are used as cross-checks. This is why sectoral GVA growth figures are widely tracked alongside GDP.

Question 31Indian Economy

The difference between GDP at market prices and Gross National Income is best explained by:

  1. Changes in inventory valuation
  2. Consumption of fixed capital
  3. Net primary income from abroad Correct answer.
  4. Net indirect taxes

Explanation

GNI equals GDP plus net primary income from abroad, which covers factor incomes such as compensation of employees and investment income earned by residents from abroad minus similar payments to non-residents. Depreciation converts gross to net, not GDP to GNI. Net indirect taxes convert between market prices and factor cost.

Question 32Indian Economy

A sustained rise in India's Wholesale Price Index with a stable Consumer Price Index would most plausibly indicate:

  1. A broad-based demand-pull inflation across the economy
  2. Rising input and commodity costs concentrated at the producer stage Correct answer.
  3. A deflationary trend in the services sector
  4. An appreciation of the rupee reducing import costs

Explanation

WPI tracks producer-level and commodity prices and excludes services, so a rise there with stable CPI suggests cost-push pressure at the input stage that has not yet passed through to retail. Demand-pull inflation would typically lift both indices. Rupee appreciation would reduce, not raise, imported input costs.

Question 33Indian Economy

Which of the following items carries the highest weight in the Consumer Price Index (Combined) used for India's inflation target?

  1. Fuel and light
  2. Housing
  3. Miscellaneous goods and services
  4. Food and beverages Correct answer.

Explanation

Food and beverages has the largest weight in the CPI (Combined), which is why food price shocks dominate headline CPI movements and complicate the inflation targeting framework. Housing and miscellaneous are the next largest groups. Fuel and light has a comparatively small weight.

Question 34Indian Economy

A finance professional's salary rises by 8 per cent while CPI inflation is 6 per cent. The approximate change in real purchasing power is:

  1. A fall of about 2 per cent
  2. A rise of about 14 per cent
  3. A rise of about 2 per cent Correct answer.
  4. No change in real terms

Explanation

Real growth is approximated by nominal growth minus inflation, so 8 minus 6 gives roughly 2 per cent. More precisely, the real change is (1.08/1.06) minus 1, which is also close to 2 per cent. The nominal rise does not translate fully into purchasing power.

Question 35Indian Economy

Disguised unemployment in the Indian context typically refers to:

  1. Employment in the informal sector without written contracts
  2. Workers who are unemployed but not actively seeking work
  3. More people engaged in a job than are needed to produce the given output Correct answer.
  4. Seasonal unemployment in agriculture during the harvest season

Explanation

Disguised unemployment occurs when surplus labour is engaged in an activity, commonly family farms, such that marginal productivity is near zero and output would not fall if some were withdrawn. It is distinct from open unemployment and from informal employment. It reflects underutilisation of labour rather than absence of work.

Question 36Indian Economy

Which type of unemployment is most closely associated with the business cycle downturn in India's organised manufacturing sector?

  1. Technological unemployment
  2. Structural unemployment
  3. Frictional unemployment
  4. Cyclical unemployment Correct answer.

Explanation

Cyclical unemployment arises from a shortfall in aggregate demand during a downturn and falls when the economy recovers. Structural and technological unemployment stem from lasting changes in skills or production methods. Frictional unemployment is transitional search unemployment.

Question 37Indian Economy

The labour force participation rate is defined as:

  1. The share of the working-age population that is either employed or seeking work Correct answer.
  2. The share of the total population that is employed
  3. The share of the working-age population that is employed
  4. The share of the labour force that is unemployed

Explanation

The labour force participation rate measures the proportion of the working-age population that is in the labour force, that is, employed or actively seeking work. It differs from the worker population ratio, which counts only the employed. The unemployment rate is the share of the labour force without work.

Question 38Indian Economy

Periodic Labour Force Survey data show a fall in the unemployment rate alongside a fall in the labour force participation rate. Which interpretation is most consistent?

  1. The working-age population must have shrunk
  2. The economy has definitely created more jobs
  3. Underemployment has been fully eliminated
  4. Discouraged workers may have left the labour force Correct answer.

Explanation

A falling unemployment rate can be misleading when participation also falls, because people who stop seeking work exit the labour force and are no longer counted as unemployed. This discouraged worker effect can lower the measured rate without job creation. Job creation, population change and underemployment cannot be inferred from these two indicators alone.

Question 39Indian Economy

Which of the following is the nodal agency for implementing the Mahatma Gandhi National Rural Employment Guarantee Scheme at the national level?

  1. Ministry of Labour and Employment
  2. Ministry of Rural Development Correct answer.
  3. NITI Aayog
  4. Ministry of Panchayati Raj

Explanation

The Ministry of Rural Development is the nodal ministry for MGNREGS, which guarantees at least 100 days of unskilled wage employment per rural household per year on demand. Implementation runs through state governments and gram panchayats. It is a demand-driven legal entitlement rather than a supply-driven programme.

Question 40Indian Economy

India's demographic dividend refers to:

  1. A rising share of the elderly in the population
  2. A surplus in the balance of payments due to remittances
  3. An increase in the savings rate caused by higher interest rates
  4. An economic advantage arising from a large share of working-age population relative to dependents Correct answer.

Explanation

The demographic dividend arises when the working-age population grows faster than the dependent population, lowering the dependency ratio and supporting higher savings and growth, provided enough productive jobs exist. It is a window of opportunity rather than an automatic gain. Ageing and skill shortages can erode it.

Question 41Indian Economy

Which of the following best describes the concept of the dependency ratio?

  1. The ratio of imports to exports in a given year
  2. The ratio of the unemployed to the total labour force
  3. The ratio of public debt to gross domestic product
  4. The ratio of the population outside the working-age group to the working-age population Correct answer.

Explanation

The dependency ratio compares the young and old populations, typically those below 15 and above 64, with the working-age population aged 15 to 64. A high ratio implies a larger burden on the productive age group. It is a demographic indicator, distinct from fiscal or trade ratios.

Question 42Indian Economy

Which of the following is a characteristic feature of the unorganised sector in India?

  1. Regular written contracts and statutory leave
  2. Universal coverage under the Employees' State Insurance scheme
  3. Mandatory Provident Fund coverage for all workers
  4. Predominance of casual and self-employment without social security Correct answer.

Explanation

The unorganised sector is characterised by casual wage labour and self-employment, often without written contracts, social security or statutory benefits. A large share of India's workforce is engaged here, which limits the reach of formal social protection. Formal benefits like EPF and ESI apply mainly to the organised sector.

Question 43Indian Economy

Which of the following measures would most directly improve the quality of employment rather than merely its quantity in India?

  1. Strengthening skill certification and apprenticeship-linked placement Correct answer.
  2. Increasing the number of job seekers registered on employment exchanges
  3. Raising the retirement age in the public sector
  4. Expanding short-term public works employment

Explanation

Quality of employment improves when workers move into more productive, better-paid and secure jobs, which skill certification and apprenticeships with placement linkages support. Short-term public works provide income support but are transitional. Registration counts and retirement age changes do not improve job quality.

Question 44Indian Economy

The Green Revolution in India primarily involved the adoption of:

  1. Mechanised harvesting in plantation crops
  2. Organic farming practices with reduced chemical inputs
  3. Contract farming for horticulture exports
  4. High-yielding variety seeds with assured irrigation and fertiliser use Correct answer.

Explanation

The Green Revolution of the late 1960s relied on high-yielding varieties of wheat and rice combined with irrigation, fertilisers and institutional credit, mainly in Punjab, Haryana and western Uttar Pradesh. It raised foodgrain output and reduced dependence on imports. It was not an organic or export-horticulture programme.

Question 45Indian Economy

Under the minimum support price mechanism, the price is recommended by:

  1. The Food Corporation of India
  2. The Ministry of Finance
  3. The Commission for Agricultural Costs and Prices Correct answer.
  4. The Reserve Bank of India

Explanation

The Commission for Agricultural Costs and Prices recommends minimum support prices based on costs of cultivation and market conditions, and the government announces them for notified crops. The Food Corporation of India procures and stores foodgrain at these prices. The RBI and Ministry of Finance have no role in setting MSPs.

Question 46Indian Economy

A government raises the minimum support price for a water-intensive crop well above its cost of cultivation without matching procurement demand. The most likely consequence is:

  1. Distortion of cropping patterns and pressure on groundwater Correct answer.
  2. An immediate fall in the fiscal subsidy bill
  3. A reduction in buffer stock requirements
  4. A fall in the crop's area under cultivation

Explanation

An attractive assured price encourages farmers to shift area towards that crop, often regardless of water availability, distorting cropping patterns and depleting groundwater. It also raises procurement and storage costs, increasing the fiscal burden. Area and buffer needs tend to rise, not fall.

Question 47Indian Economy

Which institution regulates the securities market in India and is responsible for investor protection in that market?

  1. Securities and Exchange Board of India Correct answer.
  2. Insurance Regulatory and Development Authority of India
  3. Reserve Bank of India
  4. Insolvency and Bankruptcy Board of India

Explanation

SEBI is the statutory regulator of the securities market, with a mandate covering investor protection, market development and regulation of intermediaries. The RBI regulates banking and payment systems, IRDAI regulates insurance, and the IBBI oversees insolvency professionals. Each regulator covers a distinct segment.

Question 48Indian Economy

A sharp rise in non-performing assets in Indian public sector banks most directly weakens the transmission of monetary policy because:

  1. The exchange rate becomes fixed
  2. Deposit insurance premiums fall automatically
  3. Banks become reluctant to lend and hold safer government securities instead Correct answer.
  4. The central bank loses its power to set the repo rate

Explanation

High NPAs erode bank capital and prompt risk aversion, so banks prefer government securities over fresh lending to firms, blunting the pass-through of rate cuts to borrowers. This is the balance-sheet channel of monetary transmission. The RBI's rate-setting power and the exchange rate regime are unaffected.

Question 49Indian Economy

Which of the following best describes financial inclusion as pursued through the Pradhan Mantri Jan Dhan Yojana?

  1. Universal access to a basic savings bank account with RuPay card and overdraft facility Correct answer.
  2. Providing subsidised crop loans to large farmers
  3. Setting a ceiling on interest rates charged by microfinance institutions
  4. Mandatory pension coverage for all informal workers

Explanation

PMJDY aims at universal access to basic savings accounts, with a RuPay debit card and a small overdraft facility, supported by Aadhaar-linked KYC. It is a supply-side access measure rather than a credit subsidy or pension scheme. Financial inclusion covers access, usage and quality of financial services.

Question 50Indian Economy

Aadhaar-enabled payment systems and direct benefit transfers improve the efficiency of government spending mainly by:

  1. Raising tax rates on higher income groups
  2. Shifting subsidies from the centre to the states
  3. Increasing the total budgetary allocation to welfare schemes
  4. Reducing leakage through identity verification and de-duplication of beneficiaries Correct answer.

Explanation

Aadhaar-based identity verification and DBT reduce ghost and duplicate beneficiaries, so subsidies reach intended recipients and leakages fall. The gain is in efficiency of delivery, not in the size of the allocation. Tax rates and centre-state devolution are separate policy decisions.