UPSC CSE 2025 Prelims
Q1. Consider the following statements:
I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
III. Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?
a) I and II only
b) II and III only
c) I and III only
d) I, II and III
Correct Answer: a) I and II only
Explanation:
Statement I is correct. Capital receipts are government receipts that either create a liability (e.g., borrowings, loans) or reduce an asset (e.g., disinvestment, which is selling shares in a PSU).
Statement II is correct. Borrowings (a liability) and disinvestment (a reduction of assets) are both classic examples of capital receipts.
Statement III is incorrect. Interest received on loans given by the government is an income and is classified as a Revenue Receipt (specifically, a non-tax revenue receipt). It does not create a liability; it's an asset.
Q2. Suppose the revenue expenditure is ₹80,000 crores and the revenue receipts of the Government are ₹60,000 crores. The Government budget also shows borrowings of ₹10,000 crores and interest payments of ₹6,000 crores. Which of the following statements are correct?
I. Revenue deficit is ₹20,000 crores.
II. Fiscal deficit is ₹10,000 crores.
III. Primary deficit is ₹4,000 crores.
Select the correct answer using the code given below.
a) I and II only
b) II and III only
c) I and III only
d) I, II and III
Correct Answer: d) I, II and III
Explanation:
Revenue Deficit = Revenue Expenditure – Revenue Receipts
₹80,000 crores – ₹60,000 crores = ₹20,000 crores. (Statement I is correct)
Fiscal Deficit = Total Borrowings
The problem directly states borrowings are ₹10,000 crores. (Statement II is correct)
Primary Deficit = Fiscal Deficit – Interest Payments
₹10,000 crores – ₹6,000 crores = ₹4,000 crores. (Statement III is correct)
Since all three statements are correct, the answer is (d).
Q3. A country’s fiscal deficit stands at ₹50,000 crores. It is receiving ₹10,000 crores through non-debt creating capital receipts. The country’s interest liabilities are ₹1,500 crores. What is the gross primary deficit?
a) ₹48,500 crores
b) ₹51,500 crores
c) ₹58,500 crores
d) None of the above
Correct Answer: a) ₹48,500 crores
Explanation: The formula for the Gross Primary Deficit is Fiscal Deficit minus Interest Liabilities. The "non-debt creating capital receipts" (like disinvestment proceeds) are already used to calculate the main fiscal deficit figure and are not needed for this specific calculation.
Gross Primary Deficit = ₹50,000 crores (Fiscal Deficit) – ₹1,500 crores (Interest Liabilities) = ₹48,500 crores.
Q4. Consider the following statements:
Statement I: In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.
Statement II: In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.
Which one of the following is correct in respect of the above statements?
a) Both Statement I and Statement II are correct and Statement II explains Statement I
b) Both Statement I and Statement II are correct but Statement II does not explain Statement I
c) Statement I is correct but Statement II is not correct
d) Statement I is not correct but Statement II is correct
Correct Answer: d) Statement I is not correct but Statement II is correct
Explanation:
Statement I is not correct. Income from allied activities like poultry farming is not automatically exempted. It is considered business income, though there are specific deductions available under sections like 80JJ of the Income-tax Act. An exemption and a deduction are different; exemption means it's not part of total income, while deduction means it's subtracted from gross total income.
Statement II is correct. Under Section 2(14) of the Income-tax Act, 1961, rural agricultural land in India is explicitly excluded from the definition of a "capital asset." Therefore, its sale does not attract capital gains tax.
Q5. Which of the following are the sources of income for the Reserve Bank of India?
I. Buying and selling Government bonds
II. Buying and selling foreign currency
III. Pension fund management
IV. Lending to private companies
V. Printing and distributing currency notes
Select the correct answer using the code given below.
a) I and II only
b) II, III and IV
c) I, III, IV and V
d) I, II and V
Correct Answer: d) I, II and V
Explanation:
I. Buying and selling Government bonds: Correct. This is part of Open Market Operations (OMOs), and the RBI earns interest (coupon) on the bonds it holds.
II. Buying and selling foreign currency: Correct. The RBI manages India's forex reserves and earns income from interest on its foreign assets and from appreciation in their value.
III. Pension fund management: Incorrect. Pension funds (like NPS) are managed by dedicated Pension Fund Managers (e.g., SBI, HDFC), not the RBI.
IV. Lending to private companies: Incorrect. The RBI lends to commercial banks (via the repo rate) and the government, not directly to private companies.
V. Printing and distributing currency notes: Correct. The RBI earns "Seigniorage," which is the profit made from printing currency (the difference between the face value of a note and its printing cost).
Q6. Consider the following statements in respect of RTGS and NEFT:
I. In RTGS, the settlement time is instantaneous while in case of NEFT, it takes some time to settle payments.
II. In RTGS, the customer is charged for inward transactions while that is not the case for NEFT.
III. Operating hours for RTGS are restricted on certain days while this is not true for NEFT.
Which of the statements given above is/are correct?
a) I only
b) I and II
c) I and III
d) III only
Correct Answer: a) I only
Explanation:
Statement I is correct. RTGS stands for Real-Time Gross Settlement, meaning transactions are settled individually and instantaneously. NEFT (National Electronic Funds Transfer) settles transactions in batches, which takes more time.
Statement II is incorrect. The RBI has mandated that no charges can be applied to inward transactions for both RTGS and NEFT.
Statement III is incorrect. As per RBI regulations, both RTGS and NEFT are available 24x7x365.
Q7. Consider the following countries:
I. United Arab Emirates
II. France
III. Germany
IV. Singapore
V. Bangladesh
How many countries amongst the above are there other than India where international merchant payments are accepted under UPI?
a) Only two
b) Only three
c) Only four
d) All the five
Correct Answer: b) Only three
Explanation: Of the countries listed, UPI is accepted for international merchant payments in:
United Arab Emirates (UAE)
France
Singapore
While agreements may be in place or planned, as of late 2024/early 2025, merchant payments are not operational in Germany or Bangladesh in the same way. Therefore, only three of the listed countries are correct.
Q8. With reference to investments, consider the following:
I. Bonds
II. Hedge Funds
III. Stocks
IV. Venture Capital
How many of the above are treated as Alternative Investment Funds?
a) Only one
b) Only two
c) Only three
d) All the four
Correct Answer: b) Only two
Explanation: Alternative Investment Funds (AIFs) are investments other than traditional assets like stocks, bonds, and cash.
I. Bonds: Traditional investment.
II. Hedge Funds: AIF (SEBI-regulated as Category III AIF).
III. Stocks: Traditional investment.
IV. Venture Capital: AIF (SEBI-regulated as Category I AIF).
Therefore, only two of the items are AIFs.
Q9. Consider the following statements:
I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR).
II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature.
Which of the statements given above is/are correct?
a) I only
b) II only
c) Both I and II
d) Neither I nor II
Correct Answer: b) II only
Explanation:
Statement I is incorrect. The Business Responsibility and Sustainability Report (BRSR) is mandated by SEBI (Securities and Exchange Board of India) for the top listed companies, not the RBI.
Statement II is correct. The BRSR requires disclosures on Environmental, Social, and Governance (ESG) parameters, which are by nature largely non-financial.
Q10. Consider the following statements:
Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.
Statement II: Bondholders are lenders to a company whereas stockholders are its owners.
Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.
Which one of the following is correct in respect of the above statements?
a) Both Statement II and Statement III are correct and both of them explain Statement I
b) Both Statement I and Statement II are correct and Statement I explains Statement II
c) Only one of the Statements II and III is correct and that explains Statement I
d) Neither Statement II nor Statement III is correct
Correct Answer: a) Both Statement II and Statement III are correct and both of them explain Statement I
Explanation:
Statement I is correct. Bondholders have a more predictable (though usually lower) return and are at a lower risk of losing their principal compared to stockholders.
Statement II is correct. Bondholders are lenders (creditors) to the company. Stockholders are owners (equity holders).
Statement III is correct. In the event of bankruptcy or liquidation, bondholders (as creditors) have a senior claim on the company's assets and must be paid back before any remaining value is distributed to stockholders.
Reasoning: Because bondholders are lenders (II) and have priority in repayment (III), their investment is considered lower risk (I).
Q11. Consider the following statements:
I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.
II. India’s stock market has grown rapidly in the recent past even overtaking Hong Kong’s at some point of time.
III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.
Which of the statements given above are correct?
a) I and II only
b) II and III only
c) I and III only
d) I, II and III
Correct Answer: a) I and II only
Explanation:
Statement I is correct. In 2023, India's National Stock Exchange (NSE) became the world's largest derivatives exchange by number of contracts traded, driven by a massive boom in equity index options trading.
Statement II is correct. In early 2024, the market capitalization of the Indian stock market surpassed that of Hong Kong, making it the fourth-largest in the world.
Statement III is incorrect. SEBI is the regulatory body that oversees the securities market. It has a framework for (and acts against) unregistered financial advisors and regularly issues warnings to small investors about the risks of derivatives trading.
Q12. Consider the following statements:
I. India has joined the Minerals Security Partnership as a member.
II. India is a resource-rich country in all the 30 critical minerals that it has identified.
III. The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals.
Which of the statements given above are correct?
a) I and II only
b) II and III only
c) I and III only
d) I, II and III
Correct Answer: c) I and III only
Explanation:
Statement I is correct. India joined the US-led Minerals Security Partnership (MSP) in June 2023.
Statement II is incorrect. India is not resource-rich in all its identified critical minerals. In fact, it is heavily import-dependent for many of them (like lithium and cobalt), which is the primary reason for joining the MSP and amending its mining laws.
Statement III is correct. The Mines and Minerals (Development and Regulation) Amendment Act, 2023, empowers the Central Government to exclusively auction mining leases for certain critical minerals (like lithium, beryllium, etc.).
Q13. With reference to India, consider the following pairs:
| Organization | Union Ministry |
|---|---|
| I. The National Automotive Board | Ministry of Commerce and Industry |
| II. The Coir Board | Ministry of Heavy Industries |
| III. The National Centre for Trade Information | Ministry of Micro, Small and Medium Enterprises |
How many of the above pairs are correctly matched?
a) Only one
b) Only two
c) All the three
d) None
Correct Answer: d) None
Explanation: All three pairs are incorrectly matched.
I. The National Automotive Board is under the Ministry of Heavy Industries.
II. The Coir Board is under the Ministry of Micro, Small and Medium Enterprises (MSME).
III. The National Centre for Trade Information was established by the Ministry of Commerce and Industry.
Q14. Consider the following activities:
I. Production of crude oil
II. Refining, storage and distribution of petroleum products
III. Marketing and sale of petroleum products
IV. Production of natural gas
How many of the above activities are regulated by the Petroleum and Natural Gas Regulatory Board in our country?
a) Only one
b) Only two
c) Only three
d) All the four
Correct Answer: b) Only two
Explanation: The Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006, gives it the mandate to regulate "downstream" activities. The Act specifically excludes the "production of crude oil and natural gas" (upstream activities).
I. Production of crude oil: Not regulated by PNGRB.
II. Refining, storage and distribution...: Regulated.
III. Marketing and sale...: **RegD`.
IV. Production of natural gas: Not regulated by PNGRB.
Therefore, only two of the listed activities are regulated by the PNGRB.
Q15. Consider the following statements:
Statement I: In India, State Governments have no power for making rules for grant of concessions in respect of extraction of minor minerals even though such minerals are located in their territories.
Statement II: In India, the Central Government has the power to notify minor minerals under the relevant law.
Which one of the following is correct in respect of the above statements?
a) Both Statement I and Statement II are correct and Statement II explains Statement I1
b) Both Statement I and Statement II are correct but Statement II does not explain Statement I2
c) Statement I is correct but Statement II is 3not correct
d) Statement I is not correct but Statement II is correct
Correct Answer: d) Statement I is not correct but Statement II is correct
Explanation:
Statement I is not correct. Section 15 of the Mines and Minerals (Development and Regulation) Act, 1957, explicitly empowers State Governments to make rules for granting concessions for minor minerals.
Statement II is correct. Section 3(e) of the same Act defines "minor minerals" and gives the Central Government the power to declare any mineral a "minor mineral" by notifying it in the Official Gazette.
Q16. Consider the following statements about turmeric during the year 2022–23:
I. India is the largest producer and exporter of turmeric in the world.
II. More than 30 varieties of turmeric are grown in India.
III. Maharashtra, Telangana, Karnataka and Tamil Nadu are major turmeric producing States in India.
Which of the statements given above are correct?
a) I and II only
b) II and III only
c) I and III only
d) I, II and III
Correct Answer: d) I, II and III
Explanation:
Statement I is correct. India is consistently the world's largest producer, consumer, and exporter of turmeric, accounting for a majority of global trade.
Statement II is correct. India's diverse agro-climatic zones support the cultivation of over 30 varieties of turmeric (e.g., 'Lakadong', 'Erode', 'Sangli').
Statement III is correct. These four states are among the top turmeric producers in the country, along with Andhra Pradesh and Odisha.
Q17. Consider the following statements about the Rashtriya Gokul Mission:
I. It is important for the upliftment of rural poor as majority of low producing indigenous animals are with small and marginal farmers and landless labourers.
II. It was initiated to promote indigenous cattle and buffalo rearing and conservation in a scientific and holistic manner.
Which of the statements given above is/are correct?
a) I only
b) II only
c) Both I and II
d) Neither I nor II
Correct Answer: c) Both I and II
Explanation:
Statement I is correct. A key objective of the mission is to make dairy farming more profitable for rural farmers, especially small and marginal farmers and landless laborers, who own a large percentage of the country's indigenous, low-production cattle.
Statement II is correct. The mission's official goal, as launched in 2014, is to develop and conserve indigenous bovine breeds in a "scientific and holistic manner" to improve milk production and productivity.