UPSC Essentials | Daily subject-wise quiz : Economy MCQs on Carbon Credits Trading Scheme, new GDP series and more (Week 181)

QUESTION 1

In which of the following sectors was the new GDP series, which used the ‘double deflation’ method, not implemented?

1. Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats

2. Manufacture of dairy products

3. Manufacture of pharmaceuticals; medicinal chemicals and botanical products

4. Manufacture of textiles and cotton ginning

Select the correct answer using the codes given below:

(a) 1, 2, 3 and 4

(b) 2 and 4 only

(c) 1 and 2 only

(d) 1 and 3 only

Relevance: The question is relevant to understanding GDP estimation methodology, particularly the shift towards using the double deflation method for measuring real Gross Value Added (GVA) in manufacturing. It tests the distinction between nominal and real GVA, and how appropriate price indices for inputs and outputs affect the measurement of economic growth.

Explanation

— The new GDP series used the ‘double deflation’ method in 28 of 30 categories for the manufacturing sector, the statistics ministry’s ‘Sources and Methods’ document, released on Monday, said. It added that work is on so that double deflation can be used in the remaining two categories too.

— The two manufacturing sector categories for which the so-called ‘single extrapolation’ method has been used are ‘production, processing and preservation of meat, fish, fruit, vegetables, oils and fats’ and ‘manufacture of pharmaceutical; medicinal chemicals and botanical products’.

— In these two categories, the share of imported inputs is high. This makes it “challenging” to directly map input items with their elementary, item-level output Producer Price Index, the Ministry of Statistics and Programme Implementation (MoSPI) said.

— To find the value added by a sector – or the Gross Value Added (GVA) – the value of inputs it uses is subtracted from the value of output it produces. This is GVA in current prices, or nominal terms. To find the GVA after accounting for changes in prices – or real GVA – the output and input values are adjusted by their respective inflation rates. This is called double deflation.

Therefore, option (d) is the correct answer.

QUESTION 2

With reference to the Carbon Border Adjustment Mechanism (CBAM), consider the following statements:

1. CBAM targets carbon-intensive goods imported into the EU market.

2. CBAM applies only to the cement and fertilisers sectors.

3. When an Indian firm exports to Europe, the Indian seller must buy certificates for the carbon dioxide released in making them.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: The question links international trade with carbon pricing, trade competitiveness and the economic implications of climate-related trade measures. It is important for understanding the EU’s CBAM, its coverage, import-related carbon costs and implications for exporters from countries such as India.

Explanation

— On September 12, the leaders of the 11-member BRICS bloc adopted the New Delhi Declaration. Paragraph 108 of the declaration opposes “unilateral, punitive, discriminatory and protectionist measures” — naming carbon border adjustment mechanisms (CBAM) as an example.

— CBAM covers selected carbon-intensive goods imported into the EU, aiming to account for the carbon emissions embedded in their production through a corresponding carbon price. Hence, statement 1 is correct.

— Europe charges its own factories for the carbon dioxide they release. But imports that may not have paid such a fee would be cheaper. So, from January 1, 2026, the EU began applying a charge on that carbon at its borders (which importers will start paying from February 2027). This tax is the Carbon Border Adjustment Mechanism, or CBAM, and covers six kinds of goods: iron and steel, aluminium, cement, fertilisers, hydrogen and electricity. Hence, statement 2 is not correct.

— When an Indian mill sells any of these to Europe, the European buyer must buy certificates for the carbon dioxide released in making them. The certificates track Europe’s own carbon market and cost a little over €75 (per tonne) each in the first two quarters of this year. Each certificate covers a tonne of carbon dioxide, not a tonne of the product. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

QUESTION 3

With reference to the Carbon Credits Trading Scheme (CCTS) in India, consider the following statements:

1. It is a mechanism designed to reduce greenhouse gas (GHG) emissions through carbon pricing.

2. Carbon Credit Certificates (CCCs) issued under a CCTS can be traded freely via over-the-counter (OTC) cash deals between private companies.

3. Recently, the Centre has amended a notification setting legally binding greenhouse-gas (GHG) emission-intensity reduction targets for petroleum refineries and the textile sector.

Which one of the following conclusions based on the above statements is correct?

(a) All three statements are correct.

(b) There are two correct statements, that include statement 1.

(c) There is only one correct statement.

(d) There is no correct statement.

Relevance: The question links carbon markets with market-based instruments, carbon pricing and the economic cost of greenhouse-gas emissions. The question helps understand how emission-intensity targets and carbon pricing can influence industries, investment decisions and the transition towards a low-carbon economy.

Explanation

— The Centre has amended a notification setting legally binding greenhouse-gas (GHG) emission-intensity reduction targets for petroleum refineries and the textile sector. The amendment revises the baseline emission figures for at least seven refineries and leaves the targets for 2025–26 blank, ostensibly due to the end of the compliance period. Hence, statement 3 is correct.

— The Ministry of Environment, Forest and Climate Change has introduced GHG emission intensity targets, or GEI targets, for various sectors to bring them under the purview of the country’s domestic carbon market, as part of the Carbon Credits Trading Scheme (CCTS).

— According to pib.gov.in, “The Carbon Credit Trading Scheme (CCTS) in India is a mechanism designed to reduce greenhouse gas (GHG) emissions through carbon pricing. It involves two key elements: a compliance mechanism for obligated entities (primarily industrial sectors) and an offset mechanism for voluntary participation. The CCTS aims to incentivise and support entities in their efforts to decarbonise the Indian economy. CCTS laid the foundation for the Indian Carbon Market (ICM) by establishing the institutional framework.” Hence, statement 1 is correct.

— CCCs under the CCTS are not traded through over-the-counter (OTC) cash deals between private companies; instead, they are traded through power exchanges, with the Central Electricity Regulatory Commission (CERC) overseeing and approving the trading arrangements. Hence, statement 2 is not correct.

Therefore, option (b) is the correct answer.

QUESTION 4

Consider the following statements:

1. Crude oil prices have increased sharply in recent weeks amid escalating geopolitical tensions and supply disruptions in West Asia.

2. The surge was driven by renewed US-Iran conflict, the shutdown of Saudi Arabia’s East-West pipeline, and heightened Houthi threat around the Bab el-Mandeb and the Red Sea region.

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: The question helps understand how geopolitical tensions and supply disruptions affect global crude oil prices and India’s import-dependent energy economy. The topic covers the strategic importance of West Asia, Bab el-Mandeb and the Red Sea as critical routes for global energy trade.

Explanation

— The jump in crude oil and petroleum product prices globally amid the recent flare-ups in the West Asia conflict is leading to significant pain for the three public sector oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum, and Hindustan Petroleum — in the absence of a hike in retail fuel prices. These companies are currently estimated to be losing Rs 9 per litre on diesel sales, Rs 8 per litre on petrol sales, and Rs 300 per cylinder on domestic liquefied petroleum gas (LPG) sales, with their daily fuel marketing losses pegged at about Rs 530 crore, according to calculations by ratings agency ICRA.

— Crude oil prices have increased sharply in recent weeks amid escalating geopolitical tensions and supply disruptions in West Asia. The surge was driven by renewed US-Iran conflict, the shutdown of Saudi Arabia’s East-West pipeline, and heightened Houthi threat around the Bab el-Mandeb and the Red Sea region. The Indian crude basket rose to $117.4 per barrel on September 21 from the 2025-26 average of around $66. Hence, statements 1 and 2 are correct.

— While the OMCs are benefitting from high gross refining margins (GRMs) in their refinery operations owing to a surge in fuel margins globally, these gains are likely to provide only a partial cushion to the companies’ overall financials. This is primarily because the OMCs retail higher volumes of fuels than they produce by buying them from other refiners, including standalone refiners that don’t have much of a retail network of their own. The three public sector OMCs account for about 90% of India’s petrol and diesel retail network, and are the only players in LPG retail to households.

Therefore, option (a) is the correct answer.

QUESTION 5

India’s Unified Payments Interface (UPI) is operational in:

1. Bhutan

2. Nepal

3. Mauritius

4. Myanmar

5. Singapore

6. Thailand

Select the correct answer using the codes given below:

(a) 1, 2 and 5 only

(b) 1, 2, 3, 5 and 6

(c) 2, 3, 4 and 5 only

(d) 1, 2, 3 and 5 only

Relevance: The question covers digital payments and financial infrastructure, with UPI representing India’s indigenous real-time retail payment system. It is important for understanding cross-border payment linkages, interoperability and India’s efforts to promote UPI globally.

Explanation

— Ahead of the BRICS Leaders’ Summit, member countries have called for “pragmatic” and “efficient” cross-border payment mechanisms, including promotion of local currencies for trade and investments. Separately, Commerce Minister Piyush Goyal urged the bloc to link payment systems and trade in each other’s currencies.

— Addressing the opening session of the BRICS Business Forum on Friday, Goyal spoke about India’s Unified Payments Interface (UPI). “I would urge the BRICS member countries and partner countries to link our payment systems, trade in each other’s local currencies, make digital trade global and build together for the future emerging technologies,” he said.

According to pib.gov.in:

— UPI is operational in Bhutan, Nepal, Singapore, the UAE, France, Sri Lanka, Mauritius and Qatar, enabling seamless cross-border digital payments. In June 2026, NPCI International Payments Limited partnered with ACLEDA Bank Plc. to launch UPI acceptance in Cambodia, further strengthening India’s cross-border digital payment connectivity

— In June 2026, UPI went Live in Greece for Cross Border Remittances, where eligible customers can transfer money instantly, securely, and seamlessly between Greece – India (through Eurobank).

— On 30th July 2026, Cross Border Remittances between the Maldives Instant Payment System, ‘Favara’, and India’s UPI went live, marking a transformative milestone in cross-border digital financial connectivity and bilateral economic cooperation between the Maldives and India.

Therefore, option (d) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 165)

Daily subject-wise quiz — Polity and Governance (Week 181)

Daily subject-wise quiz —  Science and Technology (Week 181)

Daily subject-wise quiz — Economy (Week 180)

Daily subject-wise quiz — Environment and Geography (Week 180)

Daily subject-wise quiz – International Relations (Week 180)

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