UPSC Essentials | Daily subject-wise quiz : Economy MCQs on high copper prices, coal gasification and more (Week 179)

(a) Both Statement 1 and Statement 2 are correct and Statement 2 is the correct explanation for Statement 1.

(b) Both Statement 1 and Statement 2 are correct and Statement 2 is not the correct explanation for Statement 1.

(c) Statement 1 is correct but Statement 2 is incorrect.

(d) Statement 1 is incorrect but Statement 2 is correct.

Relevance: This question is relevant to the external sector and balance of payments, particularly India’s import dependence on energy and its implications for the economy. The topic also connects with energy security, current account pressures, imported inflation and exchange-rate stability, making it relevant for integrating current affairs with core Economy concepts.

Explanation

— International crude oil benchmark Brent has breached the $100-per-barrel-mark again after one-and-a-half months, triggered by the recent sharp escalation in the West Asia conflict, including attacks on oil tankers and petroleum infrastructure in the region. The $100 threshold was breached on Wednesday, and Brent futures continue to trade above that level on Thursday.

— High oil prices are of particular concern for India, which depends on imports to meet the lion’s share of its petroleum requirement. More than any momentary elevation of oil prices beyond the psychologically-important $100-per-barrel mark, the worry for India is how long prices are expected to remain high. Oil prices have gained over 25% since early August.

— Energy imports are a major component of India’s overall imports, and any meaningful increase has ramifications for the country’s trade balance, current account, inflation, and the rupee’s exchange rate, among others. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 88% of its requirement. Put simply, an oil shock can be considered an external tax on the Indian economy. Hence, statements 1 and 2 are correct.

— Given its high oil consumption and import dependency, India is already bearing the brunt of high oil prices. The country imports 1.8-2 billion barrels of oil a year, and every $1-per-barrel increase in price bumps up its oil import bill by up to $2 billion on an annualised basis. According to a March report by Nomura, India is among the three Asian economies most vulnerable to high oil prices, the other two being Thailand and South Korea.

— Why Statement 2 does not explain Statement 1: Statement 1 concerns the composition of India’s imports, whereas Statement 2 describes the exchange-rate implications of higher energy prices.

Therefore, option (b) is the correct answer.

QUESTION 2

Consider the following statements:

1. Copper is essential to the modern economy, with uses ranging from housing and manufacturing to power grids, clean energy, artificial intelligence and defence.

2. A rise in copper prices is considered a signal of robust economic growth, while falling prices tend to raise concerns about an economic slowdown.

Which one of the following is correct in respect of the above statements?

(a) Both Statement 1 and Statement 2 are correct and Statement 2 is the correct explanation for Statement 1.

(b) Both Statement 1 and Statement 2 are correct and Statement 2 is not the correct explanation for Statement 1.

(c) Statement 1 is correct but Statement 2 is incorrect.

(d) Statement 1 is incorrect but Statement 2 is correct.

Relevance: Copper is relevant to the mineral resources and industrial economy sections, particularly its role as a critical input in infrastructure, manufacturing, power transmission and emerging technologies. The question tests the relationship between commodity prices and economic activity, including how copper demand and prices can reflect trends in industrial production and investment.

Explanation

— Despite prospects of steady global economic growth being clouded by trade tensions, the West Asia conflict, and uncertainty, copper prices have surged in recent months to hit a record high of $14,708 per tonne on Tuesday (September 8).

— The red metal is essential to the modern economy, with uses ranging from housing and manufacturing to power grids, clean energy, artificial intelligence and defence. Thus, its price is often seen as a barometer of economic health. A rise in copper prices is considered a signal of robust economic growth, while falling prices tend to raise concerns about an economic slowdown. Hence, statements 1 and 2 are correct.

— According to industry insiders, the surge is less about expectations of stronger global economic growth and more about concerns over potential tariffs by the United States, which could come into effect from January 2027 and are already influencing copper trade flows and inventories.

— Why Statement 2 is not the explanation for Statement 1: Statement 1 explains why copper is economically important, whereas Statement 2 describes how copper prices can reflect expectations about economic activity.

Therefore, option (b) is the correct answer.

QUESTION 3

With reference to coal gasification, consider the following statements:

1. It is a biochemical process of converting coal into synthesis gas (syngas).

2. The coal gasification process involves the reduction of coal at lower temperatures and pressures to produce syngas.

3. The government’s push for coal gasification aims at reducing dependence on imports of LNG, urea, ammonia, and methanol.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: Coal gasification is relevant to the energy sector of the Indian economy, particularly the utilisation of domestic coal for producing commercially valuable fuels and industrial feedstocks. Government initiatives on coal gasification make it important for understanding how domestic resource utilisation can reduce import dependence and support India’s industrial and energy strategy.

Explanation

— Adani Enterprises Ltd has emerged as the most prominent applicant in the first round of the government’s flagship Rs 37,500-crore scheme to promote surface coal and lignite gasification projects, with three of the seven projects belonging to the company.

— The new scheme is an addition to the existing viability gap funding scheme worth Rs 8,500 crore approved in 2024 for incentivising coal and lignite gasification projects. As per the government, eight gasification projects are already under implementation under the earlier scheme.

— Coal gasification is a thermochemical process of converting coal into synthesis gas (syngas), which is a mixture of fuel-rich gases like carbon monoxide (CO), carbon dioxide (CO2), hydrogen (H2), and methane (CH4). The syngas can be used for producing Synthetic Natural Gas (SNG), electricity generation, energy fuel (methanol and ethanol), ammonia for fertilisers, and chemicals. Hence, statement 1 is not correct.

— The coal gasification process involves oxidation of coal at higher temperatures and pressures to produce syngas. There are two main types of gasification: Surface gasification and Underground coal gasification (UCG). The present scheme primarily focuses on surface gasification projects. Hence, statement 2 is not correct.

— The government push for coal gasification mainly aims at enhancing energy security and reducing dependence on imports of key products such as LNG, urea, ammonia, and methanol. This is considered to have become more significant in the backdrop of growing concerns over disruptions in global energy supplies due to the ongoing West Asia crisis. Hence, statement 3 is correct.

Therefore, option (a) is the correct answer.

QUESTION 4

The term “PERM”, or Program Electronic Review Management, was in the news. It refers to:

(a) a US programme for reviewing applications for temporary employment visas for foreign workers.

(b) a federal system through which foreign workers directly apply for employment-based permanent residence.

(c) a US mechanism for determining the eligibility of foreign professionals for H-1B visas based on their qualifications and occupation.

(d) a US system through which employers generally obtain labour certification before sponsoring a foreign employee for an employment-based Green Card.

Relevance: The topic helps to understand the US employment-based immigration framework, including labour certification, employer sponsorship and pathways to permanent residency. The issue also connects with India’s skilled workforce, migration, remittances and global labour mobility, making it useful for linking current affairs with broader economic concepts.

Explanation

— The US Department of Labor has suspended IT services giant Cognizant’s filings under PERM, a key system used by American employers to sponsor foreign workers for permanent residency, as authorities investigate alleged fraud and misuse of employment-based immigration programmes.

— PERM, or Program Electronic Review Management, is the system through which employers generally obtain labour certification before sponsoring a foreign employee for an employment-based Green Card. Unlike a visa application, which is primarily made by an individual, the PERM filing is done by the employer on behalf of the worker.

— Before filing, an employer must obtain a prevailing wage determination for the position and carry out prescribed recruitment. Broadly, the process is intended to establish that hiring a foreign worker permanently will not adversely affect the job opportunities, wages or working conditions of US workers. Once the Labour Department certifies the application, the employer can proceed to the next stage of the Green Card process.

— The date on which the Labour Department accepts the labour certification application also generally becomes the worker’s “priority date”, which is effectively their place in the queue for an employment-based immigrant visa. This is particularly important for workers from countries such as India, where demand for Green Cards far exceeds the number available.

Therefore, option (d) is the correct answer.

QUESTION 5

With reference to Non-Banking Financial Companies (NBFCs), consider the following statements:

1. NBFCs can undertake lending and investment activities similar to banks, but they are not banks merely because they provide credit facilities.

2. NBFCs can accept demand deposits from the public in the same manner as commercial banks.

3. Rapid growth in retail credit by NBFCs can have implications for financial stability and household indebtedness.

Which of the statements given above is/are correct?

(a) 1 and 3 only

(b) 2 only

(c) 1 and 2 only

(d) 1, 2 and 3

Relevance: This question is relevant for understanding the structure, functions and regulatory framework of NBFCs, an important area under the Indian Economy syllabus. The recent expansion of NBFC retail credit, including gold loans, makes the topic important for linking current economic developments with static concepts of credit, financial stability and regulation.

Explanation

— Retail credit extended by non-banking financial companies (NBFCs), including housing finance companies (HFCs), rose sharply in July 2026, with loans against gold jewellery and financing for consumer durables emerging as the fastest-growing segments, according to data released by the Reserve Bank of India (RBI).

— Outstanding retail loans of NBFCs rose 21.4% year-on-year to Rs 26.06 lakh crore in July 2026, from Rs 21.46 lakh crore a year earlier. This was significantly faster than the 13.7% growth recorded in July 2025 over July 2024.

— Within retail credit, loans against gold jewellery recorded the steepest expansion. Outstanding gold loans surged 68.5% year-on-year to Rs 3.54 lakh crore in July 2026, compared with Rs 2.10 lakh crore in July 2025. The segment had already grown 43.9% in July 2025 over the year-earlier period, RBI data shows.

— Rapid expansion of retail credit by NBFCs can raise concerns relating to household indebtedness, credit quality and financial stability. Hence, statement 3 is correct.

What are NBFCs?

— NBFCs are companies engaged in the business of loans and advances, acquisition of securities, leasing, hire-purchase, insurance business, chit business, etc. However, they are different from banks in important respects. Hence, statement 1 is correct.

— The NBFCs cannot accept demand deposits. RBI also states that NBFCs permitted to accept public deposits can accept only specified term deposits, and deposits repayable on demand are prohibited. Hence, statement 2 is not correct.

Therefore, option (a) is the correct answer.

(Other Source: rbi.org.in)

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 163)

Daily subject-wise quiz — Polity and Governance (Week 179)

Daily subject-wise quiz —  Science and Technology (Week 179)

Daily subject-wise quiz — Economy (Week 178)

Daily subject-wise quiz — Environment and Geography (Week 178)

Daily subject-wise quiz – International Relations (Week 178)

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