Prelims

UPSC CSE PRELIMS 2025 DETAILED ANALYSIS (ECONOMICS – Part 2)

Author: VisionIAS Editorial Team

Jun 12, 2025Prelims15 min read

UPSC CSE PRELIMS 2025 DETAILED ANALYSIS (ECONOMICS – Part 2)

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.

Table of Contents

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 Consider the following statements:

Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

Statement II: Bondholders are lenders to a company whereas stockholders are its owners.

Statement III: For repayment purposes, bondholders are prioritized over stockholders by a company.

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

(a) Both Statement II and Statement III are correct and both of them explain Statement I

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

(d) Neither Statement II nor Statement III is correct

Answer: A

Explanation:

Statement I is correct: Bondholders have fixed interest payments and are paid before shareholders, making their investments less risky.
Statement II is correct: Bondholders lend money to the company (debt), while stockholders own equity (a share in ownership).
Statement III is correct: For repayment purposes, bondholders are prioritized over stockholders by a company. In liquidation or bankruptcy, bondholders are paid before shareholders.
Since both II and III are correct, and both explain why bondholders are at lower risk (Statement I), the correct answer is (a) Both Statement II and Statement III are correct and both of them explain Statement I.

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

Motivation:

Financial Market has always been an important topic especially due to increase in the interest in investing in the share market and Mutual Funds.

Sources:

https://www.investopedia.com/terms/s/stock.asp
https://timesofindia.indiatimes.com/blogs/voices/is-your-investment-safe-with-bonds/

VisionIAS All India Test Series/ Sandhan/Open Test

Sandhan Vision IAS Prelims Test Series Initiative

Consider the following statements:

1. Shares are debt instruments issued by a company with a fixed rate of interest.

2. Shareholders do not get any right to vote in company’s general meetings.

3. Shares are considered riskier investments compared to the debentures.

How many of the above statements are correct?

(a) Only one

(b) Only two

(d) None

UPSC Prelims Economics Q. Consider the following statements:

I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.

II. India’s stock market has grown rapidly in the recent past even overtaking Hong Kong’s at some point of time.

III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: A

Explanation:

Statement I is correct: India has emerged as a dominant player in the global equity options market. In the first quarter of 2024, over 84% of all equity options traded globally were on Indian exchanges, a significant increase from just 15% a decade earlier.
Statement II is correct: In January 2024, the combined value of shares listed on Indian exchanges reached $4.33 trillion, surpassing Hong Kong’s $4.29 trillion, making India the world’s fourth-largest stock market.
Statement III is not correct: India has an active regulatory body, the Securities and Exchange Board of India (SEBI), which oversees the securities market. SEBI has taken several measures to protect investors, including issuing warnings to unregistered investment advisors and implementing regulations to curb speculative trading in derivatives

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

Motivation:

Recently, the growth in the Indian financial market was covered in the news.

Sources:

https://www.icicidirect.com/research/equity/finace/indias-global-turnover-of-fno-trading
https://www.thehindu.com/business/markets/india-overtakes-hong-kong-to-become-fourth-largest-stock-market/article67767916.ece
https://economictimes.indiatimes.com/tech/technology/sebi-warns-public-against-unregistered-platforms-offering-unlisted-debt-securities/articleshow/116013100.cms?from=mdr

VisionIAS All India Test Series/ Sandhan/Open Test

2025 All India Test Series – 4707

Consider the following statements regarding the Securities and Exchange Board of India (SEBI):

1. It is a statutory body.

2. It regulates all intermediaries in stock exchanges like share brokers, underwriters and mutual funds.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Explanation: Functions of SEBI Regulation of capital market (Primary as well as secondary market). To register and regulate all intermediaries in stock exchanges like share brokers, underwriters, Mutual Fund etc. Hence statement 2 is correct.

To check malpractices in stock exchanges.
To protect investor’s interest and to promote investors’ education and awareness.
Regulating substantial acquisition of shares and take over of companies

VisionIAS Current Affairs Source:

PT 365 2025 Economy: Article 3.3 SEBI
Monthly Current Affairs January 2024: Article 3.8.1. India Becomes Fourth-Largest Stock Market
News Today
- (15 Feb 2024): INDIA BECOMES FOURTH-LARGEST STOCK MARKET
- (03 Sep 2024): Investor Education and Protection Fund Authority (IEPFA)

UPSC Prelims Economics Q Consider the following statements:

I. Capital receipts create a liability or cause a reduction in the assets of the Government.

II. Borrowings and disinvestment are capital receipts.

III. Interest received on loans creates a liability of the Government.

Which of the statements given above are correct?

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: A

Explanation:

The government receives money by way of loans or from the sale of its assets. Loans will have to be returned to the agencies from which they have been borrowed. Thus they create liability. Sale of government assets, like sale of shares in Public Sector Undertakings (PSUs) which is referred to as PSU disinvestment, reduce the total amount of financial assets of the government. All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. Hence statements I and II are correct.
Non-tax revenue receipts of the central government mainly consist of interest receipts on account of loans by the central government, dividends and profits on investments made by the government, fees and other receipts for services rendered by the government. They do not create liability. Hence statement III is not correct.

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

Motivation:

Although conceptually static in nature, the Union Budget (Fiscal Policy) is an important topic. Every year the Union Budget is presented on Feb 1, 2025.

Sources:

https://ncert.nic.in/textbook/pdf/leec105.pdf

VisionIAS All India Test Series/ Sandhan/Open Test:

Sandhan Vision IAS Prelims Test Series Initiative

Which of the following are the main items of capital receipts?

1. Market borrowings

2. Profits of public enterprises

3. National Savings Certificate

4. Provident funds

Select the correct answer using the code given below.

(a) 1, 2, and 4 only

(b) 2 and 3 only

(d) 1, 2, 3 and 4

Explanation: Capital Receipts: The main items of capital receipts are loans raised by the government from the public which are called market borrowings, borrowing by the government from the Reserve Bank and commercial banks and other financial institutions through the sale of treasury bills, loans received from foreign governments and international organizations, and recoveries of loans granted by the central government. Other items include small savings (Post-Office Savings Accounts, National Savings Certificates, etc), provident funds, and net receipts obtained from the sale of shares in Public Sector Undertakings (PSUs). Hence option (c) is the correct answer.

Note: Revenue receipts are current income receipts from all sources such as taxes, profits of public enterprises, grants, etc. Revenue receipts neither create any liability nor cause any reduction in the assets of the government. Capital receipts, on the other hand, are the receipts of the government that either create liability or cause any reduction in the assets of the government. e.g., borrowings, recovery of loans,s and disinvestment, etc.

UPSC Prelims Economics Q. Suppose the revenue expenditure is Rs.80,000 crores and the revenue receipts of the Government are Rs.60,000 crores. The Government budget also shows borrowings of Rs.10,000 crores and interest payments of Rs.6,000 crores. Which of the following statements are correct?

I. Revenue deficit is Rs.20,000 crores.

II. Fiscal deficit is Rs.10,000 crores.

III. Primary deficit is Rs.4,000 crores.

Select the correct answer using the code given below.

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: D

Explanation:

I. Revenue Deficit = Revenue Expenditure – Revenue Receipts = 80,000 – 60,000 = ₹20,000 crores. Option I is correct.
II. Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts) Here, borrowings = ₹10,000 crores → this indicates fiscal deficit is ₹10,000 crores. Option II is correct.
III. Primary Deficit = Fiscal Deficit – Interest Payments = 10,000 – 6,000 = ₹4,000 crores Option III is correct.

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

Motivation:

The Union Budget is a basic yet important topic.

Sources:

https://ncert.nic.in/textbook/pdf/leec105.pdf

VisionIAS All India Test Series/ Sandhan/Open Test:

Test Code (4707)

Consider the following:

1. Gross Fiscal Deficit is obtained by excluding both revenue receipts and non-debt creating capital receipts from total expenditure.

2. The primary deficit is gross fiscal deficit minus gross interest liabilities.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

VisionIAS Current Affairs Source:

https://visionias.in/current-affairs/budget/2025/annexure/glossary-1

UPSC Prelims Economics Q. A country’s fiscal deficit stands at Rs.50,000 crores. It is receiving Rs.10,000 crores through non-debt creating capital receipts. The country’s interest liabilities are Rs.1,500 crores. What is the gross primary deficit?

(a) Rs.48,500 crores

(b) Rs.51,500 crores

(d) None of the above

Answer: A

Explanation:

Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts)
Gross Primary Deficit = Fiscal Deficit – Interest Payments
Thus Gross Primary Deficit = Rs 50,000 crores – Rs 1,500 crores = Rs 48,500 crores
Hence option (a) is the correct answer.

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

Motivation:

There were two questions in the UPSC CSE Prelims related to Fiscal and Primary Deficit with a lot of similarities. Again, the Union Budget is a basic yet important topic.

Sources:

https://ncert.nic.in/textbook/pdf/leec105.pdf

VisionIAS All India Test Series/ Sandhan/Open Test:

Test Code (4707)

Consider the following:

1. Gross Fiscal Deficit is obtained by excluding both revenue receipts and non-debt creating capital receipts from total expenditure.

2. The primary deficit is gross fiscal deficit minus gross interest liabilities.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

VisionIAS Current Affairs Source:

https://visionias.in/current-affairs/budget/2025/annexure/glossary-1

The remaining content of CSE Prelims 2025 Economics will be featured in the next blog post.

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

TO WATCH THE CSE PRELIMS 2025 ANALYSIS VIDEO, CLICK ON THE FOLLOWING LINK

UPSC Prelims 2025 Analysis | GS Paper 1 – YouTube

TO WATCH THE VISIONIAS PYQ ANALYSIS VIDEO, CLICK ON THE FOLLOWING

UPSC CSE Prelims | 3 Years PYQs (2022, 2023 & 2024 and Approach 2026-2027) Analysis – YouTube

Table of Contents

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 Consider the following statements:

Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

Statement II: Bondholders are lenders to a company whereas stockholders are its owners.

Statement III: For repayment purposes, bondholders are prioritized over stockholders by a company.

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

(a) Both Statement II and Statement III are correct and both of them explain Statement I

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

(d) Neither Statement II nor Statement III is correct

Answer: A

Explanation:

Statement I is correct: Bondholders have fixed interest payments and are paid before shareholders, making their investments less risky.
Statement II is correct: Bondholders lend money to the company (debt), while stockholders own equity (a share in ownership).
Statement III is correct: For repayment purposes, bondholders are prioritized over stockholders by a company. In liquidation or bankruptcy, bondholders are paid before shareholders.
Since both II and III are correct, and both explain why bondholders are at lower risk (Statement I), the correct answer is (a) Both Statement II and Statement III are correct and both of them explain Statement I.

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

Motivation:

Financial Market has always been an important topic especially due to increase in the interest in investing in the share market and Mutual Funds.

Sources:

https://www.investopedia.com/terms/s/stock.asp
https://timesofindia.indiatimes.com/blogs/voices/is-your-investment-safe-with-bonds/

VisionIAS All India Test Series/ Sandhan/Open Test

Sandhan Vision IAS Prelims Test Series Initiative

Consider the following statements:

1. Shares are debt instruments issued by a company with a fixed rate of interest.

2. Shareholders do not get any right to vote in company’s general meetings.

3. Shares are considered riskier investments compared to the debentures.

How many of the above statements are correct?

(a) Only one

(b) Only two

(d) None

UPSC Prelims Economics Q. Consider the following statements:

I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.

II. India’s stock market has grown rapidly in the recent past even overtaking Hong Kong’s at some point of time.

III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: A

Explanation:

Statement I is correct: India has emerged as a dominant player in the global equity options market. In the first quarter of 2024, over 84% of all equity options traded globally were on Indian exchanges, a significant increase from just 15% a decade earlier.
Statement II is correct: In January 2024, the combined value of shares listed on Indian exchanges reached $4.33 trillion, surpassing Hong Kong’s $4.29 trillion, making India the world’s fourth-largest stock market.
Statement III is not correct: India has an active regulatory body, the Securities and Exchange Board of India (SEBI), which oversees the securities market. SEBI has taken several measures to protect investors, including issuing warnings to unregistered investment advisors and implementing regulations to curb speculative trading in derivatives

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

Motivation:

Recently, the growth in the Indian financial market was covered in the news.

Sources:

https://www.icicidirect.com/research/equity/finace/indias-global-turnover-of-fno-trading
https://www.thehindu.com/business/markets/india-overtakes-hong-kong-to-become-fourth-largest-stock-market/article67767916.ece
https://economictimes.indiatimes.com/tech/technology/sebi-warns-public-against-unregistered-platforms-offering-unlisted-debt-securities/articleshow/116013100.cms?from=mdr

VisionIAS All India Test Series/ Sandhan/Open Test

2025 All India Test Series – 4707

Consider the following statements regarding the Securities and Exchange Board of India (SEBI):

1. It is a statutory body.

2. It regulates all intermediaries in stock exchanges like share brokers, underwriters and mutual funds.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

To check malpractices in stock exchanges.
To protect investor’s interest and to promote investors’ education and awareness.
Regulating substantial acquisition of shares and take over of companies

VisionIAS Current Affairs Source:

PT 365 2025 Economy: Article 3.3 SEBI
Monthly Current Affairs January 2024: Article 3.8.1. India Becomes Fourth-Largest Stock Market
News Today
- (15 Feb 2024): INDIA BECOMES FOURTH-LARGEST STOCK MARKET
- (03 Sep 2024): Investor Education and Protection Fund Authority (IEPFA)

UPSC Prelims Economics Q Consider the following statements:

I. Capital receipts create a liability or cause a reduction in the assets of the Government.

II. Borrowings and disinvestment are capital receipts.

III. Interest received on loans creates a liability of the Government.

Which of the statements given above are correct?

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: A

Explanation:

The government receives money by way of loans or from the sale of its assets. Loans will have to be returned to the agencies from which they have been borrowed. Thus they create liability. Sale of government assets, like sale of shares in Public Sector Undertakings (PSUs) which is referred to as PSU disinvestment, reduce the total amount of financial assets of the government. All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. Hence statements I and II are correct.
Non-tax revenue receipts of the central government mainly consist of interest receipts on account of loans by the central government, dividends and profits on investments made by the government, fees and other receipts for services rendered by the government. They do not create liability. Hence statement III is not correct.

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

Motivation:

Although conceptually static in nature, the Union Budget (Fiscal Policy) is an important topic. Every year the Union Budget is presented on Feb 1, 2025.

Sources:

https://ncert.nic.in/textbook/pdf/leec105.pdf

VisionIAS All India Test Series/ Sandhan/Open Test:

Sandhan Vision IAS Prelims Test Series Initiative

Which of the following are the main items of capital receipts?

1. Market borrowings

2. Profits of public enterprises

3. National Savings Certificate

4. Provident funds

Select the correct answer using the code given below.

(a) 1, 2, and 4 only

(b) 2 and 3 only

(d) 1, 2, 3 and 4

I. Revenue deficit is Rs.20,000 crores.

II. Fiscal deficit is Rs.10,000 crores.

III. Primary deficit is Rs.4,000 crores.

Select the correct answer using the code given below.

(a) I and II only

(b) II and III only

(d) I, II and III

Answer: D

Explanation:

I. Revenue Deficit = Revenue Expenditure – Revenue Receipts = 80,000 – 60,000 = ₹20,000 crores. Option I is correct.
II. Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts) Here, borrowings = ₹10,000 crores → this indicates fiscal deficit is ₹10,000 crores. Option II is correct.
III. Primary Deficit = Fiscal Deficit – Interest Payments = 10,000 – 6,000 = ₹4,000 crores Option III is correct.

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

Motivation:

The Union Budget is a basic yet important topic.

Sources:

https://ncert.nic.in/textbook/pdf/leec105.pdf

VisionIAS All India Test Series/ Sandhan/Open Test:

Test Code (4707)

Consider the following:

1. Gross Fiscal Deficit is obtained by excluding both revenue receipts and non-debt creating capital receipts from total expenditure.

2. The primary deficit is gross fiscal deficit minus gross interest liabilities.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

VisionIAS Current Affairs Source:

https://visionias.in/current-affairs/budget/2025/annexure/glossary-1

(a) Rs.48,500 crores

(b) Rs.51,500 crores

(d) None of the above

Answer: A

Explanation:

Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-debt Capital Receipts)
Gross Primary Deficit = Fiscal Deficit – Interest Payments
Thus Gross Primary Deficit = Rs 50,000 crores – Rs 1,500 crores = Rs 48,500 crores
Hence option (a) is the correct answer.

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

Motivation:

There were two questions in the UPSC CSE Prelims related to Fiscal and Primary Deficit with a lot of similarities. Again, the Union Budget is a basic yet important topic.

Sources:

https://ncert.nic.in/textbook/pdf/leec105.pdf

VisionIAS All India Test Series/ Sandhan/Open Test:

Test Code (4707)

Consider the following:

1. Gross Fiscal Deficit is obtained by excluding both revenue receipts and non-debt creating capital receipts from total expenditure.

2. The primary deficit is gross fiscal deficit minus gross interest liabilities.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

VisionIAS Current Affairs Source:

https://visionias.in/current-affairs/budget/2025/annexure/glossary-1

The remaining content of CSE Prelims 2025 Economics will be featured in the next blog post.

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