UPSC CAPF Archives

21. Which of the following statements is NOT correct for Pradhan Mantri Mu

Which of the following statements is NOT correct for Pradhan Mantri Mudra Yojana (PMMY)?

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It was launched in 2015

It grants loans of up to ₹15 lakhs for income generating manufacturing, trading and services sectors

Under this scheme only the term loan requirements can be met and not the working capital requirements

There is no insistence on collateral for the sanction of loan

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Statement B is NOT correct. Pradhan Mantri Mudra Yojana (PMMY), launched in 2015, provides loans up to ₹10 lakhs to eligible micro and small enterprises in the non-corporate, non-farm sector. The loans are categorized into Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakhs), and Tarun (₹500,001 to ₹10 lakhs). Statement B incorrectly states the maximum loan amount as ₹15 lakhs. Statement A is correct as the scheme was launched in 2015. Statement C is incorrect; PMMY covers both term loans (for acquiring fixed assets) and working capital requirements (often facilitated through the Mudra Card). Statement D is correct; a key feature of PMMY is that these loans are provided without requiring collateral security.

PMMY facilitates collateral-free institutional credit to micro-enterprises to support income-generating activities, thereby promoting entrepreneurship and self-employment.

The scheme aims to address the financial needs of the ‘unfunded’ micro-enterprises and play a role in formalizing this segment of the economy. Loans are provided through various financial institutions, including banks and NBFC-MFIs.

22. Population data of the year 2011 was first introduced in the tax devol

Population data of the year 2011 was first introduced in the tax devolution formula for sharing Union tax revenue with the States by

Thirteenth Finance Commission

Fifteenth Finance Commission

Fourteenth Finance Commission

Twelfth Finance Commission

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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The Fourteenth Finance Commission (period 2015-2020) was the first to incorporate the 2011 population census data into its formula for horizontal devolution of central tax revenues among states. Previous Finance Commissions (12th and 13th) primarily used the 1971 population data. The Fifteenth Finance Commission (period 2020-2025) also used the 2011 population data, but included an additional criterion for demographic performance to address concerns of states that had successfully controlled population growth.

Population data is a key determinant in the horizontal devolution formula of the Finance Commission, influencing the distribution of shared taxes among states. The shift to 2011 data by the 14th FC marked a significant change in this methodology.

The rationale for using the 1971 population data for a long period was to avoid penalizing states that had effectively controlled population growth. However, the 2011 data reflects the current demographic reality, leading to adjustments in the shares of states in the divisible pool.

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23. Consider the following statements regarding Public Goods and Externali

Consider the following statements regarding Public Goods and Externalities :

1. Non-rivalry and non-excludability are two characteristics of Public Goods
2. Market can provide the optimal amount of a good in the presence of externalities

Which of the statements given above is/are correct ?

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1 only

2 only

Both 1 and 2

Neither 1 nor 2

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Statement 1 is correct. Public goods are defined by two main characteristics: non-rivalry (consumption by one person does not reduce availability for others) and non-excludability (it is difficult or impossible to prevent individuals who have not paid from consuming the good). Examples include national defense or street lighting. Statement 2 is incorrect. Markets typically fail to provide the optimal amount of a good when externalities are present. Negative externalities (like pollution) lead the market to produce too much of a good from a societal perspective, while positive externalities (like vaccination) lead the market to produce too little. The market price does not reflect the full social costs or benefits in the presence of externalities, leading to inefficiency.

Public goods and externalities are classic examples of market failures, where the unfettered market mechanism does not lead to a socially optimal outcome.

Government intervention, such as direct provision (for public goods) or Pigouvian taxes/subsidies, regulations, or tradable permits (for externalities), is often required to address these market failures and move towards a more efficient allocation of resources.

24. Which of the following statements with regard to National Logistics Po

Which of the following statements with regard to National Logistics Policy (NLP) is NOT correct ?

NLP was launched in 2022

NLP would improve the competitiveness of Indian goods

NLP would enhance economic growth and increase employment opportunities

NLP would provide an opportunity for deleveraging balance sheets and providing fiscal space for investment in new infrastructure assets

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Statement D is NOT correct. The National Logistics Policy (NLP), launched in 2022, aims to reduce logistics costs, improve efficiency, enhance competitiveness, and boost economic growth and employment by creating a digitally integrated and efficient logistics ecosystem. Statements A, B, and C accurately reflect these aims and the launch year. Statement D, which talks about deleveraging balance sheets and providing fiscal space for new infrastructure investment, is not a direct stated objective of the NLP itself. While improved logistics might indirectly support investment and economic health, the primary focus of the policy is on the logistics sector’s performance, not government fiscal maneuvers like deleveraging or creating fiscal space through the policy’s mechanisms.

The National Logistics Policy (NLP) 2022 is focused on bringing down logistics costs, which are currently high in India compared to global benchmarks, to improve India’s trade competitiveness and economic efficiency.

The NLP is supported by initiatives like the Unified Logistics Interface Platform (ULIP) for digital integration and the Gati Shakti National Master Plan for coordinated infrastructure development, working towards building a seamless and multi-modal logistics network.

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25. Consider the following statements regarding instruments of Monetary Po

Consider the following statements regarding instruments of Monetary Policy:

1. The Central Bank can increase the money supply by increasing the bank rate
2. The Central Bank can increase the money supply by purchasing securities from the public
3. The Central Bank can decrease the money supply by increasing the cash reserve ratio

Which of the statements given above is/are correct ?

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2 only

2 and 3 only

1 and 3 only

1, 2 and 3

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Statement 1 is incorrect. Increasing the bank rate is a contractionary monetary policy tool. A higher bank rate makes it more expensive for commercial banks to borrow from the central bank, which tends to decrease the money supply in the economy as banks lend less. Statement 2 is correct. When the central bank purchases securities from the public or commercial banks through Open Market Operations (OMO), it injects money into the banking system, thereby increasing the money supply. Statement 3 is correct. Increasing the Cash Reserve Ratio (CRR) requires commercial banks to hold a larger proportion of their deposits as reserves with the central bank. This reduces the amount of funds available with banks for lending, thus decreasing the money supply in the economy.

Central banks use various instruments like the bank rate, open market operations (OMO), and reserve ratios (CRR, SLR) to control the money supply and credit conditions, influencing inflation and economic activity.

OMOs are often the most frequently used tool. A purchase of securities is expansionary, and a sale is contractionary. Changes in CRR have a significant impact as they affect the lending capacity of the entire banking system. The bank rate serves as a benchmark rate for long-term lending.

26. What is the percentage weightage assigned to Forest and Ecology in the

What is the percentage weightage assigned to Forest and Ecology in the devolution formula given by the Fifteenth Finance Commission of India for sharing of Union tax revenue with the States ?

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10%

15%

7.5%

2.5%

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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The Fifteenth Finance Commission (15th FC) used several criteria for determining the share of individual states in the divisible pool of central taxes for the period 2021-26. The weightage assigned to ‘Forest and Ecology’ was 10%. This criterion was included to incentivize states to maintain and increase forest cover.

The 15th Finance Commission’s horizontal devolution formula included Population (2011), Area, Forest and Ecology, Income Distance, Demographic Performance, and Tax and Fiscal Effort.

The 14th Finance Commission also used ‘Forest Cover’ as a criterion with a 7.5% weightage. The 15th FC increased this weightage to 10% and broadened the term to ‘Forest and Ecology’, reflecting an increased emphasis on environmental factors in resource devolution.

27. In recent years, which one among the following is the source of demand

In recent years, which one among the following is the source of demand in the Indian economy in descending order ?

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Private Consumption, Government Consumption, Net Exports, Gross Fixed Capital Formation

Government Consumption, Private Consumption, Net Exports, Gross Fixed Capital Formation

Private Consumption, Gross Fixed Capital Formation, Government Consumption, Net Exports

Government Consumption, Private Consumption, Gross Fixed Capital Formation, Net Exports

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Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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The components of GDP by expenditure in descending order of magnitude in the Indian economy are typically:
1. Private Final Consumption Expenditure (PFCE or Private Consumption)
2. Gross Fixed Capital Formation (GFCF or Investment)
3. Government Final Consumption Expenditure (GFCE or Government Consumption)
4. Net Exports (Exports minus Imports)
Private Consumption (Household spending) is the largest component, followed by Investment, then Government spending, and finally, Net Exports which are often negative or relatively small. Option C lists these components in the typical descending order: Private Consumption, Gross Fixed Capital Formation, Government Consumption, Net Exports.

Private Consumption is the dominant driver of demand in the Indian economy, followed by Investment (Gross Fixed Capital Formation) and Government Consumption. Net Exports generally play a smaller, often negative, role.

GDP = PFCE + GFCE + GFCF + Changes in Stocks + Valuables + Net Exports (Exports – Imports). The question focuses on the primary sources of demand corresponding to PFCE, GFCE, GFCF, and Net Exports.

28. Consider the following statements : 1. Burden of a tax on a commodit

Consider the following statements :

1. Burden of a tax on a commodity is independent of who (buyer or seller) it is explicitly imposed upon
2. Burden of a tax on a commodity depends on the slope of the demand and supply curves

1 only

2 only

Both 1 and 2

Neither 1 nor 2

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Statement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence.
Statement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves.
Since both statements are correct, option C is the correct answer.

Tax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.

If demand is perfectly inelastic (vertical demand curve), consumers bear the entire tax burden. If supply is perfectly inelastic (vertical supply curve), producers bear the entire tax burden. Conversely, if demand is perfectly elastic (horizontal demand curve), producers bear the entire burden. If supply is perfectly elastic (horizontal supply curve), consumers bear the entire burden.

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29. Which of the following does NOT show an improvement in rural areas fro

Which of the following does NOT show an improvement in rural areas from the National Family Health Survey 4 to National Family Health Survey 5 ?

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Infant mortality rate

Obesity in women

Anaemia in children

Total fertility rate

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Comparing data for rural areas from NFHS-4 (2015-16) and NFHS-5 (2019-21):
A) Infant mortality rate: Decreased, showing improvement.
B) Obesity in women (BMI >= 25.0 kg/m2): Increased, showing worsening, i.e., no improvement.
C) Anaemia in children (6-59 months): Increased, showing worsening, i.e., no improvement.
D) Total fertility rate: Decreased, often considered a positive demographic trend (improvement in terms of population stabilization).
Both Obesity in women and Anaemia in children increased, meaning neither showed improvement. However, as a single-choice question, Option B (Obesity in women) is the chosen correct answer in many sources referencing this specific question, highlighting the significant increase in obesity as a key non-improvement.

NFHS-5 data revealed concerning trends in several health indicators compared to NFHS-4, notably increases in the prevalence of overweight/obesity and anaemia across various population groups, including in rural areas, while indicators like IMR and TFR generally showed improvement.

The increase in obesity and anaemia in rural areas between NFHS-4 and NFHS-5 points towards emerging public health challenges related to diet, nutrition, and lifestyle, requiring targeted interventions.

30. Consider the following statements: 1. The 15th Finance Commission us

Consider the following statements:

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1. The 15th Finance Commission used fiscal effort as a criterion for horizontal devolution unlike the 14th Finance Commission.
2. Both the 14th and the 15th Finance Commission used pre-2011 demographic variables as a criteria for horizontal devolution.

Which of the statements given above is/are correct ?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CAPF – 2024

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Statement 1 is incorrect: Both the 14th Finance Commission (2015-20) and the 15th Finance Commission (2020-25) used criteria related to fiscal performance/effort for horizontal devolution. The 14th FC used ‘Fiscal Discipline’ (10% weightage), and the 15th FC used ‘Tax and Fiscal Effort’ (2.5% weightage).
Statement 2 is incorrect: The 14th Finance Commission used the 1971 population data (17.5% weightage) and Forest Cover (7.5% weightage). The 15th Finance Commission used the 2011 population data (15% weightage) and Demographic Performance based on TFR (12.5% weightage). Therefore, while the 14th FC used pre-2011 population data, the 15th FC shifted to using 2011 population data.
Since both statements are incorrect, option D is the correct answer.

Finance Commissions use various criteria for horizontal devolution of taxes to states, including population, area, income distance, demographic performance, forest cover/ecology, and fiscal effort. The specific weights and choice of demographic data (1971 vs 2011 population) have varied between commissions.

The shift from 1971 to 2011 population data by the 15th FC was a point of contention among states, particularly southern states which have shown better demographic control and lower TFRs since 1971. The inclusion of ‘Demographic Performance’ was intended to somewhat compensate states that controlled their population growth.