Prelims · Economy & social development · 24 questions

National income, growth & inflation

Every UPSC Prelims question on this topic, 2016–2026, newest first. Tap an option to check yourself; the answer and explanation open below it.

Asked in 6 of 11 years · most in 2024 (2)

UPSC syllabus: “Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.” See the full syllabus →

Prelims 2022 · Q7

Easy

Which of the following activities constitute real sector in the economy?

1.Farmers harvesting their crops
2.Textile mills converting raw cotton into fabrics
3.A commercial bank lending money to a trading company
4.A corporate body issuing Rupee Denominated Bonds overseas

Select the correct answer using the code given below:

Answer & explanation

Answer: (a) 1 and 2 only

The real sector is the part of the economy that actually produces goods and services — farms, factories and the like. Bank lending and bond issues move money and claims around; they belong to the financial sector, however useful they are to production.

✓ 1. Harvesting crops is primary-sector production of real goods from natural resources.
✓ 2. A textile mill turning raw cotton into fabric is manufacturing — secondary-sector production.
✗ 3. A bank loan is a financial transaction: it creates a claim (a debt) rather than producing a good, so it is financial-sector activity.
✗ 4. Issuing rupee-denominated (masala) bonds abroad is a way of raising funds in financial markets, not production of goods or services.

Remember · Real sector = production of goods and services (agriculture, industry, services output). Lending, borrowing and bond issues = financial sector.

📘 Read it in NCERT: Class 10 Understanding Economic Development, Ch 2 (practise this chapter) · Class 10 Understanding Economic Development, Ch 2 (practise this chapter)

Sources

NCERT Class 10 · Understanding Economic Development, Chapter 2 “The secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity.”
NCERT Class 10 · Understanding Economic Development, Chapter 2 “Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this sector is also called agriculture and related sector.”

Question and answer: UPSC's official GS Paper I (2022, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2022 · Q68

Easy

In India, which one of the following is responsible for maintaining price stability by controlling inflation?

Answer & explanation

Answer: (d) Reserve Bank of India

The Reserve Bank of India is responsible for price stability and for keeping inflation on target. Its Monetary Policy Committee sets the policy rate to meet the inflation target that the Central Government notifies.

✓ (d) Under the RBI Act, 1934 the primary objective of monetary policy is price stability, keeping growth in mind. The Act gives a statutory basis to flexible inflation targeting, and the RBI controls money supply through the bank rate, open market operations and reserve ratios.
✗ (a) The Department of Consumer Affairs is a government department and has no power over money supply or the policy rate, so it cannot be the body that controls inflation through monetary policy.
✗ (c) The Financial Stability and Development Council is a coordination forum for financial-sector regulators; the inflation target and policy rate are the RBI's job.

Remember · Price stability and the inflation target (4 per cent CPI, with a 2-6 per cent band) are the RBI's mandate, delivered by its six-member Monetary Policy Committee.

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 3 (practise this chapter)

Sources

Reserve Bank of India: Monetary Policy overview ↗ “RBI is entrusted with the responsibility of conducting monetary policy in India with the primary objective of maintaining price stability while keeping in mind the objective of growth.”
NCERT Class 12 · Introductory Macroeconomics, Chapter 3 “It controls money supply of the country through various methods, like bank rate, open market operations and variations in reserve ratios.”

Question and answer: UPSC's official GS Paper I (2022, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

The same topic in Mains

Economy: planning, growth & employmentGS 3 syllabus
Inclusive growthGS 3 syllabus

Read it in NCERT

Class 10 Understanding Economic Development, Chapter 2cited in 2 explanations
Class 12 Introductory Macroeconomics, Chapter 3cited in 1 explanation