UPSC Essentials | Daily subject-wise quiz : Economy MCQs on Windfall Tax, India-ASEAN trade, Special Drawing Rights and more (Week 161)

3. India’s trade deficit with the fast-growing ASEAN region has declined over the last decade.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: This topic is important for UPSC Prelims because ASEAN is central to India’s Act East Policy, regional connectivity, and Indo-Pacific strategy. It helps in understanding free trade agreements, regional economic integration, and India’s trade relations with major Southeast Asian economies.

Explanation

—Prime Minister Narendra Modi said that India and the Association of Southeast Asian Nations (ASEAN) countries will update the trade agreement between the two trade partners by the end of the year. The deal was originally signed in 2009 under the UPA government, and both trade partners began renegotiating the deal in 2024 amid a ballooning trade gap. Hence, statement 1 is correct.

—Speaking at a joint press conference with Vietnamese President To Lam in New Delhi, PM Modi said: “Bilateral trade between India and Vietnam has doubled over the past decade, reaching $16 billion. To take it to $25 billion by 2030, we have taken several important decisions today. We have also reached an agreement to update the India-ASEAN Trade Agreement (AITIGA) by the end of this year. This will give new energy to trade and investment between India and all ASEAN nations.” Hence, statement 2 is correct.

—The India-ASEAN trade deal review has been one of the most challenging negotiations that the Commerce and Industry Ministry has engaged in, as ASEAN nations have an edge over India under the current deal. India’s trade deficit with the fast-growing ASEAN region has risen to $44 billion in FY23, from $8 billion in FY13. Hence, statement 3 is not correct.

Therefore, option (b) is the correct answer.

QUESTION 2

The value of Special Drawing Rights (SDRs) is based on:

1. US dollar

2. Gold

3. Euro

4. Japanese yen

5. Indian Rupee

6. Chinese renminbi

Select the correct answer using the codes given below:

(a) 1, 2 and 3 only

(b) 1, 3, 4 and 6 only

(c) 1, 2, 5 and 6 only

(d) 1, 2, 3, 4, 5 and 6

Relevance: This question is important for UPSC Prelims because SDRs are linked to international monetary systems, global financial stability, and the role of the International Monetary Fund. Questions on institutions, currency baskets, and global financial mechanisms can be asked in the Economy and International Relations sections of the syllabus.

Explanation

—India’s forex reserves have four components: foreign currency (FX) assets, gold, Special Drawing Rights (SDRs), and the Reserve Tranche Position with the International Monetary Fund (IMF).

—SDRs are a buffer of sorts for IMF members, who can exchange it for currency when they are in trouble. The value of SDRs is based on a basket of five currencies – the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the pound sterling. As of March 13, India’s SDR holdings were worth $18.7 billion. The reserve tranche position with the IMF is akin to an emergency line of credit. India’s reserve position is worth $4.8 billion.

—Gold and Indian Rupee are not a component of the SDR.

Therefore, option (b) is the correct answer.

QUESTION 3

The “Project Freedom” refers to:

(a) Restoring freedom of navigation for commercial shipping through the Strait of Hormuz.

(b) A national initiative to provide interest-free agricultural credit to marginal farmers.

(c) A programme launched to promote ethanol-based farming and biofuel crop cultivation in dryland regions.

(d) A trade facilitation scheme aimed at removing export restrictions on essential food grains.

Relevance: This topic is important for UPSC Prelims because it focuses on recent international initiatives and strategic projects that have implications for global trade and economic stability. Questions may also test awareness of contemporary global events, strategic regions, and their economic significance for India and the world.

Explanation

—Brent crude oil price dropped to $108 per barrel from about $115 earlier this week, after Trump’s announcement to pause “Project Freedom”, an ⁠effort ​to guide ships through the Strait of Hormuz out of the Gulf, citing “great progress” in talks with Iran.

—U.S. Central Command (CENTCOM) forces began supporting Project Freedom to restore freedom of navigation for commercial shipping through the Strait of Hormuz.

Therefore, option (a) is the correct answer.

QUESTION 4

With reference to the nationalisation of banks in India, consider the following statements:

1. Initially, banks with deposits of Rs 500 crore were listed for nationalisation, then it was lowered to Rs 100 crore.

2. On July 19, 1969, an Ordinance was promulgated to nationalise 14 major banks.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Relevance: Bank nationalisation is an important topic for UPSC Prelims as it connects with India’s post-independence economic policies, banking reforms, and state-led development model. Questions can be framed around historical economic events, important ordinances, committees, and the role of the banking sector in economic planning.

Explanation

—Initially, banks with deposits of Rs 100 crore were listed for nationalisation. It then emerged that some important banks, like Dena Bank, with deposits of Rs 98 crore, would be left out. The limit was thus lowered to Rs 50 crore. Hence, statement 1 is not correct.

—The criterion of Rs 50 crore deposits was itself based on the then prevalent RBI classification of banks into two categories—banks with deposits of Rs 50 crore and above, and banks having deposits of less than Rs 50 crore.

—On July 19, 1969, an Ordinance was promulgated to nationalise 14 major banks with deposits exceeding Rs 50 crore with immediate effect. The Ordinance was signed by the Vice President, VV Giri, who was then also the acting President. Hence, statement 2 is correct.

Therefore, option (b) is the correct answer.

QUESTION 5

With reference to the Windfall Tax, consider the following statements:

1. It is a higher tax imposed by the government on specific industries that experience unexpected and above-average profits due to global and geopolitical events beyond their control.

2. India has never implemented the Windfall Tax.

3. The windfall tax helps the government recover losses from financial crises.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: Windfall tax is important for UPSC Prelims because it is linked to taxation policy, energy economics, and government revenue mobilisation during global crises. It helps in understanding how geopolitical events, crude oil price fluctuations, and extraordinary corporate profits influence fiscal decisions.

Explanation

—The government has significantly reduced the export duties on diesel and aviation turbine fuel (ATF), or jet fuel, in line with the price fluctuations in the international market.

—According to a Finance Ministry notification, the duty on diesel exports for the first fortnight of May has been slashed to Rs 23 per litre from Rs 55.5, while on jet fuel exports, the levy has been reduced to Rs 33 per litre from Rs 42. The export levies, or windfall gains taxes — in the form of excise duties — were imposed from March 27 with the objective of ensuring adequate availability of these fuels in the domestic market by disincentivising exports amid a major price difference between domestic and international markets. Global oil and fuel prices have surged due to the West Asia war.

—A Windfall Tax is a higher tax levied by the government on specific industries that generate unexpected and above-average earnings as a result of global and geopolitical events beyond their control. Hence, statement 1 is correct.

Therefore, option (b) is the correct answer.

🚨Click Hereto read the UPSC Essentials magazine forApril 2026.Share your views and suggestions in the comment box or at manas.srivastava@indianexpress.com🚨

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 155)

Daily subject-wise quiz — Polity and Governance (Week 161)

Daily subject-wise quiz — Science and Technology (Week 161)

Daily subject-wise quiz — Economy (Week 160)

Daily subject-wise quiz — Environment and Geography (Week 160)

Daily subject-wise quiz – International Relations (Week 160)

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