Unit: 1 Introduction to Indian Economy : Alternative Development Strategies – Trends in National Income, Growth and Structure since 1991 - New Industrial Policy 1991 – Recent changes in Trade Policy - Competition Policy - Public Sector Reform - Privatization and Disinvestments – Progress of Human Development in India Unit: 2 Planning and Economic Development : Redefining the Role of the State – Human Capital Formation in India – Problem of Foreign Aid – Economic Reforms and Reduction of Poverty – Measures to Remove Regional Disparities Unit: 3 Indian Industries : Review of Industrial Growth under 10th and 11th Five year plan - Growth and present state of IT industry in India – Outsourcing, Nationalism and Globalization – Small Sector Industrial Policy Unit: 4 a) Foreign Trade: Trends of Exports and Imports of India – Composition of India’s Foreign Trade - Direction of India’s Foreign Trade – Growth and Structure of India’s Foreign Trade since 1991 – Balance of Payments since the New Economic Reforms of 1991. b) Foreign Capital : Need for Foreign Capital – Foreign Investment Inflows – Role of Special Economic Zones (SEZ) Unit: 5 India in the Global Setting : India in Global Trade – Liberalization and Integration with the Global Economy – Globalization Strategies – India’s Foreign Exchange Reserves – Convertibility of the Rupee – WTO and India.

1. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies) 1
Sinhgad Institute of Business
Administration & Computer
Application (SIBACA)
NOTES FOR
MBA - Semester: IV
(Specialization IB)
Course Code: 404IB
Type: Subject – Core
Course Title: Indian Economy and
Trade Dependencies
BY:
Dr. Bhati Rakesh Kumar

2. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies) 2
OBJECTIVE QUESTIONS AND ANSWERS
1) In which year Reserve Bank of India was
nationalised?
A) 1935 B) 1942 C) 1949 D) 1952
2) The observation that 'Supply creates its own
demand' is popularly called?
A) Say's Law B) Greham's Law C) Murphy's Law
D) Newton's Law
3) What was the main objective of Green
Revolution in India ?
A) To increase the extent of cash crop cultivation
B) To increase the area of green forests under social
forestry scheme
C) Modernisation of agriculture through science and
technology
D) To introduce the Japanese method of paddy
cultivation
4) ____ is the ex-officio chairman of Planning
Commission and National Development Council.
A) Prime Minister B) President
C) Finance Minister D) Commerce Minister
5) 70% of working population of India is engaged
in:
A) public sector B) primary sector
C) secondary sector D) tertiary sector
6) A closed economy is an economy in which:
A) the money supply is fully controlled
B) deficit financing takes place
C) only exports take place
D) neither exports nor imports take place
7) A good method of providing employment to
rural labor and utilizing it fully is through?
A) Rural industries B) Agriculture
C) Public works programmes D) Cattle rearing
8) A hammer in the hands of a housewife is a
_________ good.
A) capital B) free C) intermediary D) consumer
9) A high rate of inflation tends to worsen
balance of payments because:
A) prices of imported goods rise
B) prices of exported goods rise making exports less
competitive
C) prices of imported goods fall and hence more is
imported
D) prices of exported goods fall and hence less
amount is obtained in terms of foreign exchange
10) A non-performing asset is
A) Money at call and short notice
B) Cash balance with the bank
C) Cash balance with the RBI
D) An asset that ceases to generate income
11) A rolling plan was a plan for:
A) one year B) three years
C) five years D) four years
12) A Scheduled Bank is one which is included in
the:
A) II Schedule of Banking Regulation Act
B) II Schedule of Constitution
C) II Schedule of Reserve Bank of India Act
D) None of these
13) A steady increase in the general level of
prices as a result of excessive increase in
aggregate demand as compared to aggregate
supply is termed as :
A) demand-pull inflation B) cost-push inflation
C) stagflation D) structural inflation
14) A very rapid growth in prices in which
money loses its value to the point where even
barter may be preferable is known as:
A) inflation B) hyper-inflation
C) deflation D) disinflation
15) Absolute Poverty means:
A) poverty in terms of absolute number of people
B) poverty in terms of the basic minimum calorie
requirements
C) poverty in terms of the prevailing price level
D) poverty in terms of the absolute level of
unemployment
16) According to the law of demand, when Price?
A) Decreases, demand decreases
B) Decreases, demand does not change
C) Increases, demand decreases
D) Increases, demand increases
17) Among the reasons for disguised
unemployment in the rural areas is :
A) choice of a heavy industry model for economic
development
B) low levels of technological development in the
country
C) heavy pressure of population along with slow
implementation of land reforms
D) high illiteracy rate
18) Among the remedies of inflation we cannot
include:
A) better capacity utilisation
B) lowering bank rate
C) reducing budgetary deficit
D) an efficient public distribution system
19) Amongst the currency quotes USD/JPY,
USD/Euro and USD/CAD, which one of the
following is referred as the base currency for
quotes?
A) US $ B) JPY C) Euro D) CAD
20) An ad valorem duty is a tax on the basis of?
A) The unit of the commodity
B) The advertisement expenditure
C) The price of a commodity
D) None of these
21) An economy is in equilibrium when
A) Planned consumption exceeds planned saving
B) Planned consumption exceeds planned
investment

3. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies) 3
C) Intended investment equals intended saving
D) Intended investment exceeds intended saving
22) An essential attribute of inflation is:
A) fall in production
B) increase in prices
C) absence of black market
D) presence of black market
23) An increase in the quantity supplied
suggests?
A) a rightward shift of the supply curve
B) a leftward shift of the supply curve
C) a movement up along the supply curve
D) a movement down the supply curve
24) As on 2013, Foreign Direct Investment(FDI)
ceilings in the telecom sector is?
A) 49 percent
B) 50 percent
C) 75 percent
D) 100 percent
25) Bank rate is the rate at which:
A) a bank lends to the public
B) the Reserve Bank of India lends to the public
C) the Government of India lends to other countries
D) the Reserve Bank of India gives credit to
commercial banks
26) Banks in India are required to maintain a
portion of their demand and time liabilities with
the Reserve Bank of India. This portion is called
A) Statutory Liquidity Ratio
B) Reverse Repo
C) Bank Deposit
D) Cash Reserve Ratio
27) Black money is :
A) counterfeit currency
B) illegally earned money
C) money earned through underhand deals
D) income on which payment of tax is usually
evaded
28) Broad money in India is :
A) M1 B) M2 C) M3 D) M4
29) Capital output ratio of a commodity
measures
A) Its per unit cost of production
B) The amount of capital invested per unit of output
C) The ratio of capital depreciation to quantity of
output
D) The ratio of working capital employed to
quantity of output
30) Consequent upon the recommendations of
the Working Group on Rural Banks, 5 Rural
Regional Banks were initially set up in the year:
A) 1973 B) 1974 C) 1975 D) 1976
31) Consumer's surplus is the highest in the case
of ?
A) necessities
B) comforts
C) luxuries
D) durable goods
32) Convertibility of the rupee implies:
A) being able to convert rupee notes into gold
B) freely permitting the conversion of rupee to other
major currencies and vice versa
C) allowing the value of the rupee to be fixed by
market forces
D) developing an international market for currencies
in India
33) Cyclical unemployment refers to:
A) seasonal unemployment
B) disguised unemployment
C) voluntary unemployment
D) unemployment during recessionary phase of a
trade cycle
34) Dadabhai Naoroji theorised on the drain of
wealth from India in his book:
A) Poverty under British Rule in India
B) Poverty in British Rule in India
C) Poverty and Un-British Rule in India
D) Poverty of Economic Drain in British India
35) To prevent recurrence of scams in Indian
Capital Market, the Government has assigned
regulatory powers to:
A) RBI
B) SBI
C) SEBI
D) ICICI
36) Debenture holders of a company are its?
A) Creditors
B) Debtors
C) Shareholders
D) Directors
37) Deficit financing creates additional paper
currency to fill the gap between expenditure and
revenue. This device aims at economic
development but if it fails, it generates :
A) inflation
B) devaluation
C) deflation
D) demonetization
38) Deficit financing implies?
A) Public expenditure in excess of public revenue
B) Replacing new currency with worn out currency
C) Public revenue in excess of public expenditure
D) Printing new currency notes
39) Deficit financing leads to inflation in general,
but it can be checked if?
A) Only aggregate demand is increased
B) Government expenditure leads to increase in the
aggregate supply in ratio of aggregate demand
C) All the expenditure is denoted national debt
payment only
D) All of these
40) Deficit Financing means that the government
borrows money from the?
A) Reserve Bank of India
B) Asian Development Bank
C) World Bank
D) International Monetary Fund

4. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies) 4
41) Demand in Economics means
A) Market demand
B) Individual demand
C) Demand backed by purchasing power
D) Aggregate demand
42) Depreciation means?
A) Closure of a plant due to labour trouble
B) Destruction of a plant in a fire accident
C) Loss of equipment over time due to wear and tear
D) Closure of a plant due to lock out
43) Devaluation means:
A) converting rupee into gold
B) lowering of the value of one currency in
comparison of some foreign currency
C) making rupee dealer in comparison to some
foreign currency
D) None of these
44) Devaluation of currency by a country is
meant to lead to : (1) expansion of import trade,
(2) promotion of import substitution, (3)
expansion of export trade.
A) 1 only B) 2 and 3 C) 1 and 2 D) 1 and 4
45) Devaluation of currency leads to?
A) Erratic fluctuations in domestic prices
B) No impact on domestic prices
C) Increase in domestic prices
D) Fall in domestic prices
46) Development expenditure of the Central
government does not include?
A) Expenditure on economic services
B) Defence expenditure
C) Grant to states
D) Expenditure on social and community services
47) Disguised unemployment in India is mainly
related to : (1) agricultural sector, (2) rural area,
(3) factory sector, (4) urban area.
A) 1 and 2
B) 1 and 3
C) 2 and 4
D) 3 and 4
48) During which 5-year Plan did prices show a
decline?
A) First
B) Third
C) Fifth
D) None of these
49) During which Five Year Plan was the total
expenditure on agriculture the highest?
A) First Five Year Plan
B) Second Five Year Plan
C) Third Five Year Plan
D) Fourth Five Year PIan
50) During which Plan period did agricultural
production register a negative growth?
A) First
B) Second
C) Third
D) Fourth
51) Economic Planning is a subject:
A) in the Union List
B) in the State List
C) in the Concurrent List
D) unspecified in any special list
52) Economic planning is an essential feature of ?
A) Dual economy
B) Mixed economy
C) Socialist economy
D) Capitalist economy
53) 'Economic Planning' refers to ?
A) The allocation of resources
B) The planning of manpower
C) The mobilisation of both taxes and manpower
D) The mobilisation of taxes
54) Economic survey is published by :
A) Ministry of Finance
B) Planning Commission
C) Govt. of India
D) Indian Statistical Institute
55) Equilibrium of the monopolistic firm
A) necessarily is profitable
B) occurs where P = MC
C) occurs where MR = MC
D) occurs where P = MR
56) Estimates of national income in India are
prepared by the?
A) Ministry of finance
B) Reserve bank of India
C) Central statistical organization
D) Planning commission
57) Excise Duty is a tax levied on the?
A) export of goods
B) import of goods
C) production of goods
D) sale of goods
58) EXIM Bank was set-up in the year:
A) 1980 B) 1982 C) 1985 D) 1987
59) Fiscal Deficit in the Union Budget means?
A) The sum of budgetary deficit and net increase in
internal and external borrowings
B) The sum of monetized deficit and budgetary
deficit
C) The difference between current expenditure and
current revenue
D) Net increase in Union Government borrowings
from the RBI
60) Fiscal Policy is connected with?
A) exports and imports
B) Issue of currency
C) public revenue and expenditure
D) None of these
61) For internal financing of Five Year Plans, the
government depends on:
A) taxation only
B) taxation and public borrowing
C) public borrowing and deficit financing
D) taxation, public borrowing and deficit financing

5. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies) 5
62) For regulation of the Insurance Trade in the
country the Government has formed:
A) SEBI
B) Reserve Bank of India
C) Insurance Regulatory and Development
Authority
D) General Insurance Corporation
63) Fresh evaluation of every item of expenditure
from the very beginning of each financial year is
called ?
A) Fresh Budgeting
B) Deficit Budgeting
C) Performance Budgeting
D) Zero-based Budgeting
64) From which country India adopted the Five
Year Plans?
A) USSR B) USA C) Australia D) Germany
65) Gilt-edged market means?
A) Market of government securities
B) Bullion market
C) Market of commodities
D) Market of pure metals
66) Globalisation of Indian Economy means:
A) stepping up external borrowings
B) establishing Indian business units abroad
C) having minimum possible restrictions on
economic relations with other countries
D) giving up programmes of import substitution
67) Goa's economy is mainly based on ?
A) Export of ores
B) Tourism
C) Agriculture
D) None of these
68) Government imposes taxes to ?
A) Run the machinery of state
B) Uplift weaker sections
C) Check the accumulation of wealth among the
rich
D) None of these
69) Gross domestic capital formation is defined
as?
A) Expenditure incurred on physical assets only
B) Production exceeding demand
C) Flow of expenditure devoted to increased or
maintaining of the capital stock
D) Net addition to stock after depreciation
70) Gross Domestic Product (GDP) is the
monetary value of?
A) goods for the market and for self consumption
B) stock of goods and services
C) all final goods and services produced in a year
D) goods produced for the markets only
71) Growth rate of population means
A) The difference of growth between male and
female.
B) The difference in population between urban and
rural area.
C) The number of births per thousand people.
D) The difference between birth and death rates.
72) Hard Currency is defined as currency:
A) which can hardly be used for international
transactions
B) which is used in times of war
C) which loses its value very fast
D) traded in foreign exchange market for which
demand is persistently relative to the supply
73) If the price of an inferior good falls, then its
demand
A) Rises
B) Falls
C) Remains constant
D) Can be any of these
74) If the RBI adopts an expansionist open
market operations policy, this means that it will?
A) Openly announce to the market that it intends to
expand credit
B) Sell securities in the open market
C) Offer commercial banks more credit in the open
market
D) Buy securities from non-government holders
75) In a free economy, inequalities of income are
mainly due to ?
A) Free competition
B) Private property and inheritance
C) Differences in the marginal productivity of
labour
D) Private property only
76) In equilibrium, a perfectly competitive firm
will equate
A) Marginal social cost with marginal social benefit
B) Market supply with market demand
C) Marginal profit with marginal cost
D) Marginal revenue with marginal cost
77) In estimating the budgetary deficit, the
official approach in India is to exclude
A) Long term borrowings from the market
B) Borrowings from the Reserve Bank of India
C) Drawing down of the cash balance
D) Borrowings from Reserve Bank in the form of
ways and means advance
78) In general our five year plans aim at making
our country to attain the status of a/an?
A) Rich country
B) Developed country
C) Self sufficient country
D) Industrially advanced country
79) In India largest share of revenue comes
from?
A) Direct Taxes B) Excise Duties
C) Sales Tax D) None of these
80) In India which of the following measures of
Money denotes the Broad Money ?
A) M1 B) M2 C) M3 D) M4
81) In India, the bank NABARD does not
provide refinance to :
A) Scheduled Commercial Banks
B) Regional Rural Banks

6. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies) 6
C) Export-Import Banks
D) State Land Development Banks
82) In India, the first bank of limited liability
managed by Indians and founded in 1881 was:
A) Hindustan Commercial Bank
B) Oudh Commercial Bank
C) Punjab National Bank
D) Punjab and Sind Bank
83) In India, which of the following have the
highest share in the disbursement of credit to
agriculture and allied activities?
A) Commercial Banks
B) Cooperative Banks
C) Regional Rural Banks
D) Microfinance Institutions
84) In India, Inflation is measured by the?
A) National Income Deflation
B) Consumers Price Index for agriculture workers
C) Consumers Price Index for urban non-manual
workers
D) Wholesale Price Index number
85) In India, Paper Currency first started in the
year?
A) 1774 B) 1810 C) 1852 D) 1861
86) In India, present trend of rapid urbanisation
is due to:
A) lack of employment opportunities in rural areas
B) influence of cinema and electronic media
C) break up of joint family system
D) abolition of zamindari system
87) In India, present trend of rapid urbanisation
is due to?
A) Break up of joint family system
B) Abolition of zamindari system
C) Lack of employment opportunities in rural areas.
D) Influence of cinema and electronic media
88) In India, the concepts of Minimum Heeds
and Directed Anti-poverty Programmes were the
innovations of:
A) Fourth Five-year Plan
B) Fifth Five-year Plan
C) Sixth Five-year Plan
D) Seventh Five-year Plan
89) In India, the first bank of limited liability
managed by Indians and founded in the year
1881 was?
A) Punjab National Bank
B) Punjab and Sind Bank
C) Oudh Commercial Bank
D) Hindustan Commerical Bank
90) In India, the interest rate on savings accounts
in all the nationalised commercial banks is fixed
by
A) Finance Minister of India
B) Union Finance Commission
C) Indian Bank Association
D) Reserve Bank of India
91) The place where bankers meet and settle
their mutual claims and accounts is known as:
A) treasury B) clearing house
C) collection centre D) dumping ground
92) In India, the Public Sector is most dominant
in?
A) Steel production
B) Organised term lending financial institutions.
C) Transport
D) Commercial banking
93) In India, which of the following affects
poverty line the most?
A) Quantum of gold reserve
B) Per capita income
C) Production quantum
D) Level of prices
94) In the context of India's Five Year Plans, a
shift in the pattern of industrialization, with
lower emphasis on heavy industries and more on
infrastructure begins in:
A) fourth Plan B) sixth Plan
C) eighth Plan D) tenth Plan
95) In the last one decade, which one among the
following sectors has attracted the highest
foreign direct investment(FDI) inflows into
India?
A) Services sector
B) Insurance sector
C) Telecommunication
D) Defence sector
96) In the second phase of nationalization of
commercial banks, how many banks were
nationalized?
A) 4 B) 6 C) 8 D) 10
97) In the terms of economics, the recession
occurring two times with a small gap in between
is known as:
A) Double Deflation B) Deflation
C) Deep Recession D) Double Dip Recession
98) In the year 1969 how many banks were
nationalised?
A) 12 B) 14 C) 16 D) 18
99) In which of the Five Year Plans, preference
was given to the weaker sections of the society?
A) Second B) Third C) Fourth D) Fifth
100) In which one of the following five year plans
the actual growth performance in India in
respect of GDP (at factor cost) was less than the
target set?
A) Sixth five year plan
B) Seventh five year plan
C) Eighth five year plan
D) Ninth five year plan

7. Dr. Bhati Rakesh (Indian Economy and Trade Dependencies)
7