UPSC CSE PRELIMS 2025 SUBJECT WISE ANALYSIS, ECONOMICS

12 Jun 2025

Table of Contents

UPSC Prelims exam is conduct on 25 May 2025 , consisting GS paper 1 and CSAT . In this we will cover Subject wise analysis of Economics.

Economics has consistently been a subject of great relevance in the UPSC CSE Prelims, with questions covering both current affairs and static concepts. Thus, a clear understanding of economic fundamentals is essential to secure good marks in this section. Additionally, the dynamic nature of the subject also necessitates the coverage of current affairs.

This year, that is in CSE Prelims 2025, the number of questions from Economics was close to the average taken over the last 10 years. The themes were from the expected topics like fiscal policy (Union Budget), agriculture, financial market. Over the years, the topic of the payment ecosystem has been given its due importance. This year also, two questions from digital payment systems found place among the nearly 15 questions from Economics.

Surprisingly, there was no direct question from National Income Accounting and two similar questions with an element of calculation (basic arithmetic) featured from the section Government revenue & expenditure. As mentioned above, the topic of financial markets did get a substantial space, as questions on AIF, stock market featured in this year's CSE.

Given below is the breakdown of the 100 questions asked in CSE Prelims 2025.

The Detailed Analysis of UPSC Prelims 2025 from Economics section are as follows

UPSC Prelims Economics Q. With reference to investments, consider the following:

I. Bonds

II. Hedge Funds

III. Stocks

IV. Venture Capital

How many of the above are treated as Alternative Investment Funds?

(a) Only one

(b) Only two

(d) All the four

Answer: B

Explanation

In recent times, there is growing popularity of funds which pool-in resources from Ultra High- Networth Individual, or Institutional Investors and invest in Non-public Markets –i.e., markets for securities which are not listed on stock exchanges and invest in instruments which are of complex nature and hence carry high risk. Such funds are collectively called Alternative Investment Funds (AIFs). Alternative Investment Funds play an important role in the financial market by providing investment opportunities to investors who are seeking higher returns or diversification beyond traditional investment options such as stocks and bonds.
SEBI (Alternative Investment Funds) Regulations, 2012 provide a legal framework for the pooled investment funds in India such as venture capital, real estate, private equity, hedge funds etc., other than Mutual Funds.
- Category I AIF: AIF which invests in start-up or early-stage ventures or social ventures or SMEs or Infrastructure or Distressed assets. Ex: Venture Capital Funds, SME Funds, Social Venture Funds Infrastructure Funds, Special Situations Funds etc.
- Category II AIF: AIF which does not fall in category I &III, and which does not undertake leverage other than to meet day-to-day operations as permitted by SEBI Regulations. Ex: Private Equity Fund
- Category III AIF: AIF which employs diverse / complex trading strategies and may employ leverage through investment in listed or unlisted derivatives. Ex: Hedge Funds.
Hence option (b) is the correct answer.

MOTIVATION, SOURCES AND COVERAGE OF PRELIMS QUESTION IN THE VISIONIAS SOURCES

Motivation: As per the SEBI, about 20% of AIF money was used to circumvent laws. Otherwise also, AIF has always been a hot topic.

Sources:

Coverage of the topic in the VisionIAS Current Affairs Sourses

PT 365 2025 Economy: Article 8.2 India’s Start Up ecosystem
Monthly Current Affairs July 2024: Article 3.2. Angel Tax

Sandhan VisionIAS Prelims Test Series Initiative

Which of the following are considered as Alternative Investment Funds in India as per the Securities and Exchange Board of India (SEBI)?

1. Angel Funds

2. Social Venture Funds

3. Hedge Funds

4. Mutual Funds

Select the correct answer using the code given below.

(a) 1, 2 and 3 only

(b) 2, 3 and 4 only

(d) 1, 2 and 4 only

UPSC Prelims Economics Q. Which of the following are the sources of income for the Reserve Bank of India?

I. Buying and selling Government bonds

II. Buying and selling foreign currency

III. Pension fund management

IV. Lending to private companies

V. Printing and distributing currency notes

Select the correct answer using the code given below.

(a) I and II only

(b) II, III and IV

(d) I, II and V

Answer: D

Explanation

The RBI earns money in a variety of ways. Open market operations, wherein a central bank purchases or sells bonds (including government bonds) in the open market in order to regulate money supply in the economy, are a major source of income for the RBI.
Apart from the interest received from these bonds, the RBI may also profit from favourable changes in bond prices. Dealings in the foreign exchange market that the RBI engages in may also contribute to the bank’s profits. The RBI, for instance, may buy dollars cheaply and sell them dear in the future to pocket profits.
The RBI also earns income by printing currency which is called seigniorage - since notes cost less to produce than their face value.
The Reserve Bank of India does not manage pension funds as a source of income. It is generally done by entities like EPFO or PFRDA in India. RBI does not lend directly to private companies. It lends to commercial banks and other financial institutions, as part of its monetary policy operations.
Hence option (d) is the correct answer.

MOTIVATION, SOURCES AND COVERAGE OF PRELIMS QUESTION IN THE VISIONIAS SOURCES

Motivation: Basic facts related to the RBI functions of the RBI are important

Sources:

Coverage of the topic in the VisionIAS All India Test Series/ Sandhan/Open Test

Sandhan Vision IAS Prelims Test Series Initiative

Which of the following form the sources of income of the Reserve Bank of India?

1. Interest on government bonds held for conducting open market operations.

2. Fees from governments market borrowing programmes.

3. Income from investments in foreign currency assets.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(d) 1, 2 and 3

VisionIAS Current Affairs Source

PT 365 2025 Economy: Article 1.4 RBI Surplus Transfer
Monthly Current Affairs June 2024: Article 3.2 RBI Surplus Transfer
News today (24 May 2025): RBI Board Approves Transfer of Rs 2.69 Lakh Crore Surplus to Centre for 2024-25

Q3. Consider the following statements:

I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR).

II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature.

Which of the statements given above is/are correct?

(a) I only

(b) II only

(d) Neither I nor II

Answer: B

Explanation:

Statement I is not correct: In terms of amendment to regulation 34 (2) (f) of LODR Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021/22, SEBI introduced new reporting requirements on ESG parameters called the Business Responsibility and Sustainability Report (BRSR).
Statement II is correct: The BRSR is intended towards having quantitative and standardized disclosures on ESG parameters (Environment, Social, Governance) to enable comparability across companies, sectors and time.Such disclosures will be helpful for investors to make better investment decisions.

MOTIVATION, SOURCES AND COVERAGE OF PRELIMS QUESTION IN THE VISIONIAS SOURCES

Motivation

Recently, the Securities and Exchange Board of India (SEBI) was working on revamping its Business Responsibility and Sustainability Reporting (BRSR)

Sources

VisionIAS All India Test Series/ Sandhan/Open Test

Sandhan Vision IAS Prelims Test Series Initiative

Business Responsibility and Sustainability Report, which was recently in the news, is published by:

(a) RBI

(b) SEBI

(d) ASSOCHAM

VisionIAS Current Affairs Source

PT 365 2025 Environment: Article 4.7.6. Business Responsibility and Sustainability

Reporting (BRSR)

News today (24 May 2024): SEBI Releases Consultation Paper for Changes in BRSR Framework

UPSC Prelims Economics Q Consider the following statements:

Statement I: In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.

Statement II: In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.

Which one of the following is correct in respect of the above statements?

(a) Both Statement I and Statement II are correct and Statement II explains Statement I

(b) Both Statement I and Statement II are correct but Statement II does not explain Statement I

(d) Statement I is not correct but Statement II is correct

Answer: D

Explanation:

Agricultural income is specifically defined under the Income Tax Act, and agricultural income is exempted from Income Tax.
The following are some the examples of agricultural income:
- Income from the sale of seeds and replanted trees, Interest on capital received by a partner from a firm engaged in agricultural operations, Income from growing flowers and creepers, Rent received for agricultural land etc.
- Below are some examples of non-agricultural income: Income from poultry farming, dairy farming and bee hiving, Any dividend paid from an organization’s agriculture income etc. It is not exempted from taxation. Hence statement I is not correct.
Under the Income-tax Act, 1961 of India, rural agricultural land is not considered a "capital asset", and hence any gain arising from its sale is not taxable as capital gains.
Under section 2(14), the term "capital asset" excludes:
"Agricultural land in India, which is not situated within the jurisdiction of a municipality or cantonment board with a population of not less than 10,000; or within 2 km from such a municipality/cantonment (population 10,001–1,00,000), within 6 km (population 1,00,001–10,00,000), within 8 km (population more than 10,00,000)."

On the other hand, urban agricultural land, which lies within specified municipal limits, is treated as a capital asset and is taxable when sold.

Hence statement II is correct.

MOTIVATION, SOURCES AND COVERAGE OF PRELIMS QUESTION IN THE VISIONIAS SOURCES

Motivation:

Taxing agricultural income has always been in the news.

Sources:

VisionIAS All India Test Series/ Sandhan/Open Test

Q. Capital gains tax in India will be applicable if:

1. a rural agricultural land, held for five years, is sold at a profit.

2. equity shares of a listed company, held for more than one year, are sold at a loss.

3. a house purchased 5 years ago, is sold at a profit.

Select the correct answer using the code given below.

(a) 2 and 3 only

(b) 3 only

(d) 1, 2 and 3

Q. A family has three male members, a man and his two sons. All three of them are employed. The father is a poultry farmer. The elder son owns a wine shop and the younger son sells newspapers. Assuming that each of them has only one occupation, consider the following statements:

1. Only the commodities sold by the father and the younger son are subject to the application of GST (Goods and Services Tax).

2. The Central Government can levy and retain tax on the sales of the elder son.

3. The father (a poultry farmer) is exempted from paying income tax under the Income Tax Act, 1961.

Which of the statements given above is/are correct?

(a) 3 only

(b) 2 only

(d) None

UPSC Prelims Economics Q Consider the following statements:

I. India has joined the Minerals Security Partnership as a member.

II. India is a resource-rich country in all the 30 critical minerals that it has identified.

III. The Parliament in 2023 amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite licenses for certain critical minerals.

Which of the statements given above are correct?

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: C

Explanation:

India became the 14th member of the Mineral Security Partnership (MSP) in June 2023. The other member countries are the United States, Australia, Canada, Finland, France, Germany, Italy, Japan, Norway, the Republic of Korea, Sweden, the United Kingdom and the European Commission. MSP seeks to bolster critical minerals supply chains to support economic prosperity and climate objectives. Hence, statement 1 is correct.
India’s Ministry of Mines identified a list of 30 critical minerals in November 2022. However, India has not yet proven domestic reserves for all 30 and remains dependent on imports for many such as lithium, cobalt, nickel, and vanadium. Hence, statement 2 is not correct.
The MMDR Amendment Act, 2023 has empowered the Central Government to exclusively auction Mining Leases (ML) and Composite Licences (CL)(prospecting licence-cum-mining lease) in respect of any ‘critical and strategic mineral’ specified in Part D of the First Schedule of the MMDR Act. Hence, statement 3 is correct.

MOTIVATION, SOURCES AND COVERAGE OF PRELIMS QUESTION IN THE VISIONIAS SOURCES

Motivation:

India exploring and acquiring critical minerals from resource rich countries was in the news.

Sources:

https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1946416&utm_
https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2114466&utm_

VisionIAS All India Test Series/ Sandhan/Open Test:

Test Code (4720)

Consider the following statements:

Statement-I: India joined the US-led Minerals Security Partnership (MSP) Finance Network to secure sustainable supply chains for critical minerals.

Statement- II: The USA is responsible for more than 60 percent of global production of critical minerals.

Which one of the following is correct in respect of the above statements?

(a)Both Statement-I and Statement- II are correct and Statement- II is the correct explanation for Statement-I

(b) Both Statement-I and Statement- II are correct and Statement- II is not the correct explanation for Statement-I

(d) Statement-I is incorrect but Statement- II is correct

VisionIAS Current Affairs Source:

PT 365 2025 SnT: Article 9.4. Critical Minerals
Monthly Current Affairs July 2024: Article 1.5.6. Supreme Court’s Judgment on Mineral Taxation
September 2024: Article 3.8. Minerals Security Partnership Finance Network
News today (17 Mar 2025): India launches first exploration license (EL) auction for critical minerals under EL regime

The remaining content of CSE Prelims 2025 Economics will be featured in two other blog posts.

As can be seen from the above analysis, questions from Economics in CSE Prelims 2025, were a mix of conceptual and factual type. Most of the themes were drawn from the VisionIAS Sandhan Initiative, All India Test Series 2025 and the various components of VisionIAS Current Affairs.

As the importance of the Previous Year Questions (PYQs) cannot be overstated, it is always an indispensable source for every serious aspirant to go ahead with a well–guided strategy.

The VisionIAS 10-year strategy document for Economics is a sought-after source for the PYQ analysis.

DOWNLOAD THE VISIONIAS 10-YEAR PYQ ANALYSIS DOCUMENT FOR ECONOMICS