UPSC Prelims Practice Questions — A predictable rise

Q1. Consider the following statements regarding the changes brought about in India's monetary policy framework by the 2016 amendment to the Reserve Bank of India Act, 1934: 1. The inflation target is determined by the Central Government in consultation with the Reserve Bank, once every five years. 2. The policy repo rate, earlier decided within the Reserve Bank, is now determined by a statutory committee that includes members from outside the Reserve Bank. 3. The committee that determines the policy rate is constituted by the Central Board of the Reserve Bank through regulations framed under the Act. Which of the statements given above is/are correct?

  1. The inflation target is determined by the Central Government in consultation with the Reserve Bank, once every five years.
  2. The policy repo rate, earlier decided within the Reserve Bank, is now determined by a statutory committee that includes members from outside the Reserve Bank.
  3. The committee that determines the policy rate is constituted by the Central Board of the Reserve Bank through regulations framed under the Act.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q2. Under India's flexible inflation targeting framework, if average inflation remains outside the notified tolerance band for three consecutive quarters, the report setting out the reasons for the deviation and the proposed remedial actions is submitted by which body, and to whom?

  • A. By the Monetary Policy Committee, to the Central Board of the Reserve Bank of India
  • B. By the Central Government, to both Houses of Parliament during the Budget session
  • C. By the Reserve Bank of India, to the Central Government
  • D. By the Reserve Bank of India, to the Financial Stability and Development Council

Q3. In the event of an equality of votes among the members of the Monetary Policy Committee on a rate decision, who exercises a second or casting vote?

  • A. The Deputy Governor of the Reserve Bank in charge of monetary policy
  • B. The senior-most among the three members appointed by the Central Government
  • C. The officer of the Reserve Bank nominated by its Central Board
  • D. The Governor of the Reserve Bank of India

Q4. The retention of the 4 per cent CPI inflation target with a tolerance band of 2 to 6 per cent for the period April 1, 2026 to March 31, 2031 was given effect through which one of the following?

  • A. A resolution adopted by the Monetary Policy Committee at its bi-monthly meeting held in March 2026
  • B. A notification of the Central Government in the Official Gazette, issued in consultation with the Reserve Bank of India
  • C. A decision of the Central Board of the Reserve Bank of India, subsequently ratified by the Ministry of Finance
  • D. An amendment to the Reserve Bank of India Act, 1934 passed by Parliament in the Budget session of 2026

Q5. Consider the following statements about the inflation targeting framework and its periodic review in India: 1. The inflation target of 4 per cent with an upper tolerance level of 6 per cent and a lower tolerance level of 2 per cent first took effect from August 5, 2016. 2. At the first review, on March 31, 2021, both the target and the tolerance band were retained for the period April 1, 2021 to March 31, 2026. 3. The target period currently in force runs from April 1, 2026 to March 31, 2031. 4. Under the Reserve Bank of India Act, 1934 the inflation target is required to be determined once every three years. Which of the statements given above is/are NOT correct?

  1. The inflation target of 4 per cent with an upper tolerance level of 6 per cent and a lower tolerance level of 2 per cent first took effect from August 5, 2016.
  2. At the first review, on March 31, 2021, both the target and the tolerance band were retained for the period April 1, 2021 to March 31, 2026.
  3. The target period currently in force runs from April 1, 2026 to March 31, 2031.
  4. Under the Reserve Bank of India Act, 1934 the inflation target is required to be determined once every three years.
  • A. 1 and 3
  • B. 4 only
  • C. 2 and 4
  • D. 3 and 4

Q6. The monthly all-India Consumer Price Index on base 2024=100, which reported a headline retail inflation rate of 4.45 per cent for July 2026, is compiled and released by which one of the following?

  • A. The Price Monitoring Division of the Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution
  • B. The Labour Bureau, an attached office of the Ministry of Labour and Employment
  • C. The National Statistical Office, Ministry of Statistics and Programme Implementation
  • D. The Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade

Q7. With reference to the provisional Consumer Price Index data for July 2026, consider the following: 1. Headline CPI inflation (combined) stood at 4.45 per cent, up from 4.38 per cent in June 2026. 2. Rural headline inflation, at 4.84 per cent, was higher than urban headline inflation, at 3.96 per cent. 3. Consumer Food Price Index inflation (combined) stood at 5.52 per cent, with urban food inflation exceeding rural food inflation. 4. Housing inflation (combined) stood at 2.22 per cent. Which of the above is/are correctly identified?

  1. Headline CPI inflation (combined) stood at 4.45 per cent, up from 4.38 per cent in June 2026.
  2. Rural headline inflation, at 4.84 per cent, was higher than urban headline inflation, at 3.96 per cent.
  3. Consumer Food Price Index inflation (combined) stood at 5.52 per cent, with urban food inflation exceeding rural food inflation.
  4. Housing inflation (combined) stood at 2.22 per cent.
  • A. 1 and 2 only
  • B. 1, 2 and 4
  • C. 2, 3 and 4
  • D. 1 and 4 only

Q8. Retail prices used for compiling the all-India Consumer Price Index are collected every month from 1,465 villages and 1,407 urban markets across all States and Union Territories by which one of the following?

  • A. The Price Monitoring Division of the Department of Consumer Affairs, through State civil supplies departments
  • B. The Field Operations Division of the National Statistical Office, Ministry of Statistics and Programme Implementation
  • C. The regional field offices of the Labour Bureau, Ministry of Labour and Employment
  • D. The Directorate of Economics and Statistics, Ministry of Agriculture and Farmers Welfare

Q9. In the revised Consumer Price Index series on base 2024=100, the adoption of the COICOP 2018 framework specifically means which one of the following?

  • A. Items in the basket are grouped by origin of production into primary articles, fuel and power, and manufactured products
  • B. Items in the basket are sorted into traded and non-traded categories so that a measure of underlying price pressure can be derived
  • C. Items in the basket are arranged into twelve divisions in place of the six broad groups used earlier, aligning the series with an international standard
  • D. Items in the basket are compiled separately for the rural and urban sectors and then combined using the population shares of the two sectors

Q10. With reference to the decisions and projections announced by the Reserve Bank of India in its monetary policy statement of August 2026, consider the following: 1. The policy repo rate was left unchanged at 5.25 per cent. 2. The Monetary Policy Committee retained the neutral policy stance. 3. The CPI inflation projection for 2026-27 was lowered to 5 per cent, with the highest quarterly projection being for the second quarter of 2026-27. 4. Real GDP growth for 2026-27 was projected at 6.7 per cent. Which of the above is/are NOT correct?

  1. The policy repo rate was left unchanged at 5.25 per cent.
  2. The Monetary Policy Committee retained the neutral policy stance.
  3. The CPI inflation projection for 2026-27 was lowered to 5 per cent, with the highest quarterly projection being for the second quarter of 2026-27.
  4. Real GDP growth for 2026-27 was projected at 6.7 per cent.
  • A. 1 and 3
  • B. 2 and 4
  • C. 3 only
  • D. 3 and 4

Q11. Consider the following statements comparing price movements underlying India's retail inflation in July 2026: 1. Ginger recorded a sharper year-on-year price rise than garlic. 2. Onion recorded a sharper year-on-year price rise than garlic. 3. The increase in food inflation between June and July 2026 was larger, in percentage-point terms, than the increase in headline inflation over the same two months. Which of the statements given above is/are correct?

  1. Ginger recorded a sharper year-on-year price rise than garlic.
  2. Onion recorded a sharper year-on-year price rise than garlic.
  3. The increase in food inflation between June and July 2026 was larger, in percentage-point terms, than the increase in headline inflation over the same two months.
  • A. 1 only
  • B. 1 and 2 only
  • C. 1 and 3 only
  • D. 1, 2 and 3