UPSC 2026 Economy Previous Year Questions

Question 1

Consider the following statements about Multidimensional Poverty Index (MPI): 1. MPI is calculated using Alkire-Foster methodology. 2. MPI calculated by NITI Aayog has a total of twelve indicators. 3. Maternal Health and Bank Account are common indicators in the MPI of NITI Aayog and MPI of United Nations Development Programme (UNDP). Which of the statements given above is/are correct?

Accepted Answer

Correct Option: A. 1 and 2 only | 1, 2 and 3 | 1 and 3 only | 2 only. MPI uses the Alkire-Foster method and NITI Aayog's national MPI uses 12 indicators. Maternal health and bank account are not common indicators in both NITI and UNDP MPI frameworks.

Question 2

Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India: 1. NBFCs cannot accept demand deposits. 2. All the NBFCs operating in India have to be registered with the RBI. 3. NBFCs form part of the payment and settlement system and can issue cheque drawn on itself. 4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs. Which of the statements given above is/are correct?

Accepted Answer

Correct Option: A. 1 and 4 | 1, 2 and 3 | 4 only | 2, 3 and 4. NBFCs cannot accept demand deposits, and DICGC deposit insurance is not available to depositors of deposit-taking NBFCs. Not all NBFCs require RBI registration and they cannot issue cheques drawn on themselves.

Question 3

With reference to different Committees in India, consider the following details: Row 1: R.N. Malhotra Committee; Objective: Comprehensive reforms of Insurance sector in India; Organization under which it was formed: Insurance Regulatory and Development Authority of India. Row 2: L.C. Gupta Committee; Objective: Preparing a roadmap for the introduction of derivatives trading in India; Organization under which it was formed: Securities and Exchange Board of India. Row 3: Urjit R. Patel Committee; Objective: Preparing a roadmap for reforming bank lending to the Housing sector; Organization under which it was formed: Reserve Bank of India. Row 4: Y.H. Malegam Committee; Objective: Preparing a roadmap for reforms in Microfinance sector in India; Organization under which it was formed: Reserve Bank of India. In which of the above rows are all the details correctly matched?

Accepted Answer

Correct Option: D. 2 only | 2 and 3 | 1, 3 and 4 | 2 and 4. The L.C. Gupta Committee under SEBI concerned derivatives trading, and the Y.H. Malegam Committee under RBI concerned microfinance. The Malhotra and Urjit Patel rows are mismatched.

Question 4

Which of the following statements about Crowdfunding is/are correct? 1. Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project. 2. Small and Medium Enterprises (SMEs) are able to raise funds at lower cost of capital without undergoing rigorous procedures. Select the answer using the code given below:

Accepted Answer

Correct Option: C. 1 only | 2 only | Both 1 and 2 | Neither 1 nor 2. Crowdfunding raises small contributions from many investors through online platforms, allowing SMEs/projects to access capital with fewer traditional financing procedures.

Question 5

Which of the following statements about insurance in aviation sector is/are correct? 1. 'Aviation Hull Insurance' covers the physical aircraft, including the body, engine, and on-board equipment. 2. Under the Montreal Convention, adopted in 1999 by over 130 countries, including India, airlines are strictly liable to pay compensation to the family/nominee of every deceased passenger without requiring the family to prove fault. Select the answer using the code given below:

Accepted Answer

Correct Option: C. 1 only | 2 only | Both 1 and 2 | Neither 1 nor 2. Aviation hull insurance covers the aircraft and onboard equipment, and the Montreal Convention imposes strict liability up to prescribed limits without requiring proof of fault.

Question 6

Which of the following statements about Rare Earth Elements (REEs) and Critical Minerals is/are correct? 1. Modern technological innovations including Artificial Intelligence, robotics and space exploration extensively utilise Rare Earth Elements (REEs). 2. China has the highest share in mining of REEs followed by India. 3. The Government of India launched the National Critical Mineral Mission (NCMM) in 2025 to establish a robust framework for self-reliance in the critical mineral sector. 4. Rare Earth Elements are a set of 13 metallic elements. Select the answer using the code given below:

Accepted Answer

Correct Option: A. 1 and 3 only | 3 only | 1, 3 and 4 | 1, 2 and 4. REEs are used in advanced technologies and India launched the National Critical Mineral Mission in 2025. China leads REE mining but India is not second, and REEs are generally 17 elements, not 13.

Question 7

Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy?

Accepted Answer

Correct Option: B. A situation where private investment increases due to increased Government spending | A situation where Government borrowing leads to higher interest rates, which reduces private investment | A situation where an increase in taxes leads to increased private sector investment | A situation where Government spending has no impact on aggregate demand. Crowding out occurs when government borrowing pushes up interest rates and reduces private investment.

Question 8

Which of the following statements about M1xchange's role in Micro, Small & Medium Enterprises (MSMEs) financing is/are correct? 1. M1xchange provides collateral based loans to MSMEs. 2. M1xchange facilitates discounting of invoices and Bills of Exchange for MSMEs. 3. M1xchange functions as a credit rating agency for MSMEs. Select the answer using the code given below:

Accepted Answer

Correct Option: B. 1, 2 and 3 | 2 only | 2 and 3 only | 1 only. M1xchange is a TReDS platform enabling invoice/bill discounting for MSMEs; it is not a collateral-loan provider or credit rating agency.

Question 9

A bond whose proceeds are used only to finance or refinance a combination of both environmental and social projects is called:

Accepted Answer

Correct Option: C. Green Bond | Social Bond | Sustainability Bond | Sovereign Bond. A bond financing a mix of environmental and social projects is a sustainability bond.

Question 10

Which of the following statements about Real-World Assets (RWA) Tokenization are correct? 1. Tokenization is the process of turning real world assets into digital tokens using blockchain technology. 2. Tokenization of real world assets offers 24 × 7 access, promoting financial inclusion. 3. Tokenization of real world assets will allow the access to high growth investment opportunities for individuals in India. Select the answer using the code given below.

Accepted Answer

Correct Option: A. 1, 2 and 3 | 2 and 3 only | 1 and 2 only | 1 and 3 only. Real-world asset tokenization converts assets into blockchain tokens, can enable 24x7 access, and can broaden access to high-growth investment opportunities.

UPSC 2026 Economy PYQs with Answers