For aspirants targeting the Union Public Service Commission (UPSC) Civil Services Preliminary Examination 2026, consistent revision of core subjects is paramount. The Indian Express's UPSC Essentials initiative offers a focused subject-wise quiz series, designed to help candidates assess their preparation on static portions of the syllabus. This edition, published on January 1, 2026, presents a crucial set of multiple-choice questions (MCQs) on the Indian Economy, covering contemporary and foundational topics.
Key Economy Topics for UPSC Prelims Revision
The quiz underscores several high-yield areas for the exam, blending current affairs with static economic concepts. It tests precise knowledge on digital currency regulations, foreign investment norms, financial inclusion mechanisms, nuclear energy, and inflation measurement.
Analyzing the Quiz: Questions and Detailed Explanations
Question 1: The Reality of Stablecoins
This question tests understanding of cryptocurrencies, specifically stablecoins. Candidates must evaluate three statements. First, stablecoins are indeed cryptocurrencies engineered to maintain a stable value, typically by being pegged to assets like fiat currencies or commodities. This statement is correct.
Second, the claim that stablecoins always involve third-party auditors for reserve verification is false. While some issuers opt for audits to build trust, this practice is neither mandatory nor universally adopted across all stablecoin projects.
Third, despite their design for stability, stablecoins have demonstrated volatility and susceptibility to confidence shocks, as highlighted by the Reserve Bank of India (RBI). The RBI's Financial Stability Report warns that their widespread adoption could threaten monetary sovereignty and financial stability, making this statement correct. Therefore, only two statements are accurate.
Question 2: Foreign Direct Investment in Indian Private Banks
This MCQ delves into the nuanced foreign investment limits within India's banking sector. The first statement is precise: under the automatic route, a foreign bank can hold up to 20% stake in an Indian private sector bank. To increase this holding to 24.99%, approval from the RBI is required, but the investor is not classified as a promoter.
The second statement, claiming a 99% overall foreign investment cap, is incorrect. The actual aggregate foreign investment limit in private banks is capped at 74% of the paid-up capital. Any stake acquisition beyond 25% subjects the investor to promoter classification and stringent regulatory scrutiny.
Question 3: The State of Banking Correspondents
Focusing on financial inclusion, this question examines the Banking Correspondent (BC) model. Contrary to the first statement, RBI data shows a significant decline in BC outlets, from 15.47 lakh in FY24 to 13.10 lakh in FY25—a drop of nearly 2.30 lakh agents. This contraction raises concerns about last-mile banking access.
The second statement correctly identifies the weakening sustainability of the BC framework, especially in rural areas. BCs rely on commissions that often fail to cover operational costs, making their business model fragile. Hence, only the second statement is correct.
Question 4: Pressurised Heavy-Water Reactors and Thorium
Linking to India's three-stage nuclear programme, this question covers Pressurised Heavy-Water Reactors (PHWRs). The first statement is accurate: PHWRs, which use heavy water as a moderator, are considered more suitable for utilizing thorium fuel. Heavy water absorbs fewer neutrons, allowing more to be absorbed by thorium to breed fissile material.
The second statement is also correct. With 19 operational units, India hosts the highest number of PHWRs globally, followed by Canada (17), Argentina, South Korea, China, and Romania, as per International Atomic Energy Agency data.
Question 5: Components Excluded from the Consumer Price Index
This question checks knowledge of the Consumer Price Index (CPI) basket's composition. The current CPI series includes groups like food and beverages, clothing and footwear, and fuel and light. However, it explicitly excludes capital goods (such as machinery, tools, and factories) and real estate or land prices. These are considered part of investment or asset price categories, not direct consumer consumption.
Strategic Importance for UPSC Aspirants
These questions exemplify the UPSC's trend of asking application-based questions from seemingly straightforward topics. The explanations provided bridge static knowledge with current developments, such as the RBI's stance on stablecoins versus Central Bank Digital Currency (CBDC) or the recent trends in BC outlets. Regular practice with such quizzes helps in identifying knowledge gaps, understanding the 'why' behind facts, and avoiding common traps set by the commission, especially in areas like precise percentage limits and definitions.
