UPSC Prelims 2026 · Question 62 of 96
UPSC Prelims 2026 question on Crowdfunding Features
- ExamUPSC CSE
- Year2026
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicSecurity Market in India
- DifficultyMedium
- TypeStatement
Which of the following statements about Crowdfunding is/are correct?
1. Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project.
2. Small and Medium Enterprises (SMEs) are able to raise funds at lower cost of capital without undergoing rigorous procedures.
Select the answer using the code given below:
Show answer
Answer: C. Both 1 and 2
Verdict
Both statements are correct, so the answer is Option (c).
Analysis
Crowdfunding is a method of raising funds by collecting small contributions from a large number of individuals, generally through online platforms or social networking websites, to support a particular project, business initiative, or cause. Small and Medium Enterprises (SMEs) benefit from crowdfunding because it provides access to capital without the extensive regulatory and procedural requirements associated with conventional financing options such as IPOs or bank borrowing. It can also reduce the overall cost of raising funds.
The Securities and Exchange Board of India (SEBI) has released consultation papers on crowdfunding, acknowledging its potential as a funding mechanism for startups and SMEs.
Statement by statement
Statement 1 is correct: Crowdfunding is the process of raising small amounts of funds from multiple investors through a web-based platform or social networking site for a specific project. This accurately represents the commonly accepted definition of crowdfunding.
Statement 2 is correct: SMEs can raise funds at a lower cost of capital without undergoing complex procedures. Crowdfunding enables SMEs to overcome many traditional financing barriers and obtain funding more conveniently, often at a comparatively lower cost.