UPSC Prelims Practice Questions — FROM STABILITY TO STRENGTH: GROWTH ACCELERATES ALONG WITH LOWER INFLATION

Q1. According to the Economic Survey 2025-26, which one of the following was identified as the principal driver of the sharp disinflation ('Goldilocks moment') in 2025-26?

  • A. Fall in prices of food items such as vegetables, pulses and spices
  • B. Successive repo-rate hikes by the Monetary Policy Committee
  • C. Appreciation of the rupee against the US dollar
  • D. Reduction in import duties on crude petroleum

Q2. The Economic Survey 2025-26 is prepared under the supervision of the Chief Economic Adviser. Which one of the following bodies actually authors and compiles the Survey?

  • A. Department of Economic Affairs, Ministry of Finance
  • B. NITI Aayog
  • C. Ministry of Statistics and Programme Implementation
  • D. Department of Expenditure, Ministry of Finance

Q3. With reference to the growth-inflation trajectory presented in the Economic Survey 2025-26, consider the following statements: 1. Real GDP growth accelerated from 6.5% in 2024-25 to 7.4% in 2025-26. 2. Real GDP growth for 2026-27 is projected in the range of 6.8% to 7.2%. 3. India's medium-term potential growth is estimated at around 7%. Which of the statements given above are correct?

  1. Real GDP growth accelerated from 6.5% in 2024-25 to 7.4% in 2025-26.
  2. Real GDP growth for 2026-27 is projected in the range of 6.8% to 7.2%.
  3. India's medium-term potential growth is estimated at around 7%.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q4. Consider the following headline CPI inflation figures cited in the Economic Survey 2025-26: 1. 2024-25 — 4.6% 2. April-December 2025 — 1.7% 3. 2025-26 estimated real GDP growth — 7.4% 4. 2025-26 CPI inflation exceeded the RBI's upper tolerance of 6% Which of the above are correctly identified?

  1. 2024-25 — 4.6%
  2. April-December 2025 — 1.7%
  3. 2025-26 estimated real GDP growth — 7.4%
  4. 2025-26 CPI inflation exceeded the RBI's upper tolerance of 6%
  • A. 1, 2 and 3
  • B. 1 and 4 only
  • C. 2, 3 and 4
  • D. 3 and 4 only

Q5. With reference to the Flexible Inflation Targeting (FIT) framework in India, consider the following statements: 1. Under Section 45ZA of the RBI Act, 1934, the inflation target is fixed by the Central Government in consultation with the RBI. 2. The 4% target with a +/-2% tolerance band has been retained for the period 2026-2031. 3. FIT replaced the earlier 'multiple-indicator approach' to the conduct of monetary policy. Which of the statements given above are correct?

  1. Under Section 45ZA of the RBI Act, 1934, the inflation target is fixed by the Central Government in consultation with the RBI.
  2. The 4% target with a +/-2% tolerance band has been retained for the period 2026-2031.
  3. FIT replaced the earlier 'multiple-indicator approach' to the conduct of monetary policy.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q6. Under the Flexible Inflation Targeting framework, once in how many years does the Central Government notify the inflation target for the RBI?

  • A. Three years
  • B. Four years
  • C. Five years
  • D. Six years

Q7. In the Consumer Price Index (Combined) with base year 2012=100, which one of the following groups carries the largest weight?

  • A. Food and beverages
  • B. Fuel and light
  • C. Housing
  • D. Miscellaneous

Q8. Which one of the following compiles and releases the Consumer Price Index (Combined), base 2012=100, that serves as the RBI's nominal anchor?

  • A. National Statistical Office under the Ministry of Statistics and Programme Implementation
  • B. Reserve Bank of India
  • C. Labour Bureau under the Ministry of Labour and Employment
  • D. Department of Economic Affairs, Ministry of Finance

Q9. With reference to Private Final Consumption Expenditure (PFCE) as noted in the Economic Survey 2025-26, consider the following statements: 1. The share of PFCE in GDP rose to 61.5% in 2025-26, the highest since 2011-12. 2. Private consumption was the principal demand-side driver of growth in 2025-26. 3. The PFCE share in 2025-26 fell below its 2024-25 level. Which of the statements given above are correct?

  1. The share of PFCE in GDP rose to 61.5% in 2025-26, the highest since 2011-12.
  2. Private consumption was the principal demand-side driver of growth in 2025-26.
  3. The PFCE share in 2025-26 fell below its 2024-25 level.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q10. According to the Economic Survey 2025-26, which one of the following distinctions did India record relative to other major Emerging Market and Developing Economies (EMDEs) in 2025?

  • A. One of the sharpest declines in headline inflation
  • B. The highest fiscal deficit as a share of GDP
  • C. The largest currency depreciation against the US dollar
  • D. The highest policy interest rate

Q11. With reference to India's external sector as reported in the Economic Survey 2025-26, consider the following: 1. The Current Account Deficit was 0.8% of GDP in the first half of 2025-26. 2. The Current Account Deficit was 1.3% of GDP in the first half of 2024-25. 3. FDI inflows in 2025 were about USD 81 billion. 4. Foreign exchange reserves as on 16 January 2026 covered the entire external debt (100%). Which of the above are correctly identified?

  1. The Current Account Deficit was 0.8% of GDP in the first half of 2025-26.
  2. The Current Account Deficit was 1.3% of GDP in the first half of 2024-25.
  3. FDI inflows in 2025 were about USD 81 billion.
  4. Foreign exchange reserves as on 16 January 2026 covered the entire external debt (100%).
  • A. 1, 2 and 3
  • B. 1 and 4 only
  • C. 2, 3 and 4
  • D. 1, 2, 3 and 4

Q12. The Monetary Policy Committee (MPC) that sets the policy repo rate to meet the inflation target consists of how many members?

  • A. Four
  • B. Five
  • C. Six
  • D. Seven