Are you gearing up for the UPSC Civil Services Preliminary Examination 2026? A strong grasp of economic concepts is crucial for success. To aid your revision, here is a detailed breakdown of key questions from a recent subject-wise quiz on the Indian Economy, covering vital areas like renewable energy schemes, international trade, and banking operations.
Solar Parks Scheme: Objectives and Progress
A significant question focused on the 'Development of Solar Parks and Ultra-Mega Solar Power Projects' scheme. This initiative, launched by the government, plays a pivotal role in India's renewable energy expansion.
The scheme, which was initiated in 2014 and not 2018, encourages state governments and Union Territories to utilize government-owned wasteland or non-agricultural plots for establishing large solar parks. The goal is to streamline land acquisition and create dedicated zones for solar power generation.
As of recent data, a total of 55 solar parks with a combined sanctioned capacity of nearly 40 Gigawatts (GW) have been approved across 13 states. Out of these, 33 parks are being developed through collaborations between Central Public Sector Undertakings (CPSUs) and state governments. These 33 parks account for a cumulative capacity of 20.7 GW.
It is important to note that the minimum capacity for these solar parks is 500 MW and above, not 1000 MW. The government aims to have these parks operational by the 2025-26 timeframe. Currently, around 14.9 GW of capacity has been commissioned, with the remainder at various stages of implementation.
Understanding Core Financial and Trade Concepts
The quiz also tested knowledge on fundamental economic mechanisms. One question delved into Carry Trade, a strategy common in foreign exchange markets. For a carry trade to be profitable, two primary conditions are necessary: a significant interest rate differential between two currencies and relative currency stability. Traders borrow in a currency with low interest rates and invest in assets offering higher returns in another currency.
Another key concept was Open Market Operations (OMOs), a major tool of the Reserve Bank of India (RBI) for liquidity management. OMOs involve the RBI buying or selling government securities (G-Secs) in the open market. When the banking system faces a liquidity shortage, the RBI purchases securities, injecting money into the economy. Conversely, to absorb excess liquidity, the RBI sells securities. This is distinct from setting repo rates or direct lending to banks.
India-New Zealand Trade Relations and FTA
A current affairs-based question examined the trade dynamics between India and New Zealand. The two countries recently concluded negotiations on a Free Trade Agreement (FTA). This agreement is expected to be a game-changer, with an official target of doubling bilateral trade within the next five years.
In the financial year 2024-25, the total bilateral trade stood at approximately $1.3 billion. Contrary to some assumptions, the trade value has not seen a consistent year-on-year rise; it witnessed a dip in 2023-24 before increasing again in 2024-25. Furthermore, India has maintained a trade surplus with New Zealand in merchandise trade in recent years, not a deficit.
A landmark feature of this FTA is its provisions for Indian students. It removes numerical caps, guarantees work rights during studies, and offers extended post-study work visas—up to three years for STEM graduates and four years for PhD holders—marking a first in New Zealand's agreements.
Statutory Liquidity Ratio (SLR) Requirements for Banks
The quiz concluded with a technical question on the Statutory Liquidity Ratio (SLR). SLR mandates that banks maintain a certain percentage of their Net Demand and Time Liabilities (NDTL) in safe and liquid assets like cash, gold, or government securities.
As per the Banking Regulation Act, 1949, this requirement applies to a wide range of banks. This includes Primary (Urban) Co-operative Banks (UCBs), State Co-operative Banks (SCBs), and District Central Co-operative Banks (DCCBs). DCCBs have the additional flexibility of maintaining their SLR balance as cash deposits with their respective State Co-operative Bank. The Reserve Bank of India periodically specifies the exact SLR percentage, which cannot exceed 40%.
Regular practice through such focused quizzes is essential for UPSC aspirants to identify strengths, rectify weaknesses, and solidify their understanding of static and dynamic portions of the Economy syllabus for the Prelims examination.
