UPSC Essentials | Daily subject-wise quiz : Economy MCQs on debt-to-GDP ratio, saffron cultivation in PPP mode and more (Week 148)

3. The real GDP growth forms the basis of the debt-to-GDP ratio.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: This issue is regularly included in the Economic Survey, Union Budget, and FRBM framework, hence it is a high-probability idea for Prelims. This question tests the distinction between nominal and real GDP, a common UPSC pitfall in fiscal statistics.

Explanation

— The Centre has projected the debt-to-GDP ratio to decline to 50±1% by March 2031 from an estimated 56.1% in March 2026. Most economists estimate the Centre to peg it at 55% of the GDP for FY27 in the Budget. Hence, statement 2 is correct.

— The debt-to-GDP ratio is a metric that compares a country’s public debt to its gross domestic product (GDP). Hence, statement 1 is correct.

— The debt-to-GDP ratio will be contingent upon nominal GDP growth, which forms the basis of the ratio, along with the government’s borrowing and repayment obligations. The increase in the government’s financial burden in the years to come will also be a factor once the 8th Pay Commission recommendations get implemented. Hence, statement 3 is not correct.

Therefore, option (b) is the correct answer.

(Other Source: http://www.investopedia.com)

QUESTION 2

When the RBI wants to encourage economic activity in the economy, it:

(a) reduces the repo rates

(b) increases the repo rates

(c) reduces the reverse repo rates

(d) increases the reverse repo rates

Relevance: This question tests core monetary policy transmission, a repeatedly asked static concept in Prelims. It also links RBI’s policy tools with growth–inflation trade-off, an important concept for UPSC.

Explanation

— The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is widely expected to keep the repo rate – the key policy rate – unchanged in its upcoming policy meeting scheduled from February 4 to 6. The MPC may also retain a neutral policy stance, economists said.

What is the repo rate?

— People go to commercial banks either to deposit their savings or to get a loan. On savings/deposits, the bank pays interest to the depositor while on loans, it charges interest to the borrower. Typically, the interest rate banks charge on loans is higher than the interest they pay on deposits. This is how they make money.

— The interest rate that the RBI charges when commercial banks borrow money from it is called the repo rate. The interest rate the central bank pays commercial banks when they park their excess cash is called the reverse repo rate.

— When the RBI wants to encourage economic activity in the economy, it reduces the repo rates. Doing this enables commercial banks to bring down the interest rates they charge (on their loans) as well as the interest rate they pay on deposits. This, in turn, incentivises people to spend money, because keeping their savings in the bank now pays back a little less, and businesses are incentivised to take new loans for new investments because new loans now cost a little less as well.

Therefore, option (a) is the correct answer.

QUESTION 3

With reference to the ‘CHAKRA’ — Centre of Excellence (CoE), consider the following statements:

1. It is a platform for financing sunrise sectors.

2. The semiconductors and decarbonisation sectors are excluded from the CHAKRA.

3. It has been launched by the RBI.

Which of the statements given above is/are correct?

(a) 1 and 3 only

(b) 2 and 3 only

(c) 1 only

(d) 3 only

Relevance: Bank-led financing initiatives, such as CHAKRA, are crucial for Prelims because they combine public sector banks, sunrise sectors, and green/strategic technology. The question connects economic policy to energy transition, semiconductors, and decarbonisation, all of which are major topics in recent tests.

Explanation

— The country’s largest lender, the State Bank of India (SBI), launched CHAKRA — Centre of Excellence (CoE) for financing eight sunrise sectors, including renewable energy, advanced cell chemistry and battery storage. Other sunrise domains are data centre infrastructure, smart infrastructure, electric mobility, green hydrogen, semiconductors and decarbonisation. Hence, statement 1 is correct and statement 2 and 3 are not correct.

— “India’s growth over the coming decades will be anchored in innovation, sustainability and advanced manufacturing. With CHAKRA, SBI is strengthening its institutional capability to understand emerging sectors, design specialised financing solutions and partner with the ecosystem to enable projects that meaningfully contribute to the nation’s development journey,” said C S Setty, chairman, SBI.

Therefore, option (c) is the correct answer.

QUESTION 4

The iCET and TRUST initiatives are associated with:

(a) India-EU partnership on green financing and climate transition

(b) India-US strategic collaboration in crucial and emerging technologies

(c) Quad Framework for Indo-Pacific Supply Chain Resilience

(d) WTO-led changes regarding technology transfer and intellectual property

Relevance: These initiatives are recently in news and linked to cooperation in advanced technologies and innovation ecosystems. The question tests the ability to correctly map initiatives to the appropriate institutional or partnership framework amid similarly named global groupings.

Explanation

— The India-US trade deal can be a major catalyst for India’s electronics, semiconductor, and technology ecosystem. By improving market access, enabling smoother flow of capital equipment and advanced technologies, and—when complemented by the iCET and TRUST initiatives—strengthening trusted supply chains and deepening technology collaboration, the agreement significantly enhances India’s attractiveness as a global manufacturing and innovation hub.

— It will accelerate semiconductor design and manufacturing, boost electronics value addition, and expand cooperation across AI, data centres, and advanced manufacturing — creating high-skill jobs and positioning India as a strategic and reliable partner in the global technology value chain. A $500 billion bilateral trade vision can yield over $100 billion in trade for the electronics and semiconductor sector.

Therefore, option (b) is the correct answer.

QUESTION 5

Which of the following states is allowing private companies to participate under a public-private-partnership (PPP) model to take up large-scale saffron cultivation?

(a) Kerala

(b) Karnataka

(c) Meghalaya

(d) Andhra Pradesh

Relevance: This question links state agricultural policy with innovative PPP approaches, a recurring Prelims theme. It also helps distinguish which states are expanding high-value crop cultivation beyond traditional regions.

Explanation

— Andhra Pradesh Chief Minister N Chandrababu Naidu has announced plans to attract entrepreneurs, agriculture firms, and private companies to participate under a public-private-partnership (PPP) model to take up large-scale saffron cultivation at Lambasingi in the Alluri Sitharama Raju district.

— Lambasingi, about 90 km from the scenic Araku Valley, is known as the “Kashmir of the South” in Andhra Pradesh. In India, saffron is currently primarily cultivated in Kashmir.

Therefore, option (d) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 143)

Daily subject-wise quiz — Polity and Governance (Week 148)

Daily subject-wise quiz —  Science and Technology (Week 148)

Daily subject-wise quiz — Economy (Week 147)

Daily subject-wise quiz — Environment and Geography (Week 147)

Daily subject-wise quiz – International Relations (Week 147)

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