04

GENERAL STUDIES Economy 1021

ECONOMY
After proper analyses of previous year question papers, it has been noted that around 5-6 questions are
asked from the Economy section. Concepts which are asked in the paper include national income,
demographic dividend, important scheme related to welfare, health, housing, concept related to poverty
and unemployment etc. Some questions are also asked based on current economy and international
organisations.

INTRODUCTION OF ECONOMY
Economy defines the condition of a country in respect with production, consumption of goods and services and supply of
money. The study of economy of any country helps us in finding out financial condition of the population as well as the
different working sector of economy. It also helps in comparing the economic condition of different countries. The
economy of India is the 7th largest in the world by nominal GDP and the 3rd largest by Purchasing Power Parity (PPP).
In the Indian GDP, service sector’s contribution is maximum followed by manufacturing and agriculture.

Characteristics of Indian Economy

Presently, Indian economy is a developing economy. Following are the five main characteristics of Indian economy
i. More than 50% of population is engaged in the field of agriculture and related activities.
ii. Both private and public sector co-exists. India opted for mixed economy in Industrial Policy of 1948.
iii. Low per capita income (income per person, it is calculated by measuring total income from all sources and dividing it
by the total population).
iv. More persons are employed in the primary sector.
v. Prevalence of under-employment and unemployment and unequal-distribution of wealth and assets.

Sectors of Indian Economy

Following are the three major sectors of Indian economy
i. Primary Sector It is directly depend on environment as these refers to utilisation of Earth’s resource ex-land and
water. e.g. agriculture, forestry, fishing. This sector contributes 17% (approx) in Indian economy.
ii. Secondary Sector It adds values to resources available on Earth and transform these resources into valuable product.
e.g. manufacturing, mining, electricity, construction. This sector contributes 32% (approx) in Indian economy.
iii. Tertiary Sector It is also known as Service Sector. In this different services are produced. e.g. business, transport,
communication, banking, insurance etc.
1022 NDA/NA Pathfinder

The other sectors of economy are as follow v. Per Capita Income (PCI) It is a measure of the amount
Quaternary Sector It is also a kind of service sector, of the money that is being earned per person in a certain
but this sector is specifically based on knowledge. area.
e.g. information technology, research, media, Per Capita Income of a country
consultancy etc. National Income
=
Quinary Sector It is a top economic sector. High level Population of the Country
decision are made by top-level executive in the vi. Gross Value Added (GVA) It is a measure of the value
government, industry and non-profit organisations. of goods and services produced in an area, industry or
sector of an economy. In national accounts, GVA is
output minus intermediate consumption, it is a balancing
NATIONAL INCOME item of the national accounts and production accounts.
• National income measures the net value of goods and
services produced in a country and net earned foreign Human Development Index (HDI)
income during a year. National income is a flow not
a stock and it measures the flow of goods and The United Nations Development Programme (UNDP)
services in an economy. introduced the HDI in its first Human Development Report
• To estimate the National Income, first attempt was (HDR), prepared under the stewardship of Mahbub-ul-Haq in
made by Dadabhai Naoriji in his book, Poverty and 1990 HDR. 1990 defined human development as the process
Un-British Rule in India. of widening people’s choices as well as raising the level of
well being achieved.
• Professor VKRV Rao in 1931, divided Indian
economy into 13 sectors. Three main indicators of HDI are as follow
• The Government of India appointed a National i. Life Expectancy Index
Income Committee under the chairmanship of Dr PC ii. Educational Attainment Index
Mahalanobis in 1949. iii. Standard of Living Index
• In January 2015, the Central Statistical Organisation • In the 2015 report of HDR, India with a score of 0.609 has
(CSO) introduced the new series of National been ranked 130 out of 188 countries in terms of HDI.
Accounts Statistics (NAS) with the base year 2011-12
(Seventh series of the base year) in place of the
previous series with the base year 2004-05.
PLANNING IN INDIA
Concepts of National Income • Planning provides a forum, in which the union ministers
Six main concepts of National Income are as follow and chief ministers of states discuss the plans at important
stages in their formulation.
i. Gross Domestic Product (GDP) It is a market
value of all goods and services produced within the • The fundamental objective of planning in India is to
country. GDP includes net indirect tax and achieve an increase in National Income and Per Capita
depreciation. GDP is the primary measure of Income.
National Income.
If GDP is calculated at current market price, it is History of Planning in India
called as Nominal GDP and when GDP is • First attempt to initiate economic planning in India was
calculated at a price of base year it is called made by Sir M Visvesvaraya, a noted engineer and
Real GDP. politician, in 1934 through his book Planned Economy for
ii. Gross National Product (GNP) It is the monetary India.
value of goods and services produced by citizens of
• In 1938, ‘National Planning Committee’ was set-up under
country in the country and outside the country.
the chairmanship of Jawaharlal Nehru by the Indian
iii. Net National Product (NNP) It is obtained by National Congress.
subtracting depreciation value from Gross National
Product. Depreciation is the decrease in the
• In 1944, ‘Bombay Plan’ was presented by 8 leading
monetary value of assets due to use, wear and tear. industrialists of Bombay. It was drafted by GD Birla and
JRD Tata.
iv. Net Domestic Product (NDP) The NDP equals
the Gross Domestic Product minus depreciation on • In 1944, ‘Gandhian Plan’ was given by Shriman Narayan
a country’s capital goods. NDP accounts for capital Agarwal.
that has been consumed over the year in the form • In 1945, ‘People’s Plan’ was given by MN Roy.
of housing, vehicle or machinery deterioration. • In 1950, ‘Sarvodaya Plan’ was given by JP Narayan. A few
NDA = GDP − Depreciation points of this plan were accepted by the government.
GENERAL STUDIES Economy 1023

Planning Commission FIVE YEAR PLANS

• The Planning Commission was set-up on
15th March, 1950 under the chairmanship First Five Year Plan (1951-56)
of Jawaharlal Nehru, by a resolution of • It was based on Harrod-Domar Model. Targeted growth rate was
Union Cabinet. 2.1% and achieved rate was 3.6%. Only plan to see prices declining.
• It was an extra-constitutional and • Its objective to initiate a process of all-round balanced development
non-statutory body. It consisted of Prime to ensure a rising national income and a steady improvement in living
Minister as the ex-officio Chairman, one standards. It emphasised on agriculture, price stability, power and
Deputy Chairman appointed by the Prime transport.
Minister and some full time members. Last
Deputy Chairman of Planning Commission Second Five Year Plan (1956-61)
was Montek Singh Ahluwalia. • It is also called asMahalanobis Plan after its chief architect PC
Mahalanobis. Its objective was rapid industrialisation, particularly
National Development basic and heavy industries such as iron and steel, heavy chemicals like
nitrogenous fertilizers, heavy engineering and machine building
Council (NDC) industry.
• The Industrial Policy of 1956 emphasised the role of public sector
• All the plans made by the Planning
and accepted the establishment of a socialistic pattern of the society
Commission were to be approved by as the goal of economic policy. Durgapur, Bhilai and Rourkela steel
National Development Council (NDC). plants were founded.
• NDC was constituted to build co-operation
between the States and the Planning Third Five Year Plan (1961-66)
Commission for economic planning. It was • It is also called Gadgil Yojana. The objectives of the plan included
an extra-constitutional and extra-legal body. the expansion of basic industries, optimum utilisation of country’s
labour power and reducing the inequalities of income and wealth.
• It was set-up on 6th August, 1952 by a
• Complete failure due to unforeseen misfortunes, viz. Chinese
proposal of the government, the PM was
the ex-officio chairman of NDC. Other aggression (1962), Indo-Pak War (1965), severest drought (1965-66).
members are Union Cabinet Ministers, Annual Plans (1966-69)
Chief Ministers and Finance Ministers of all • Due to the unfortunate failure of the Third Plan, the production in
states, Lt. Governors of Union Territories various sectors of the economy because stagnant.
and Governors of centrally-ruled states. • In 1966, the Government of India declared the devaluation of rupee,
• Now, both Planning Commission and with a view to increase the exports of the country. So, the Fourth
National Development Council have been Plan was postponed and three Annual Plans were implemented. Some
abolished. of the economists called him period (from 1966-1969) as Plan
Holiday.
NITI Aayog Fourth Five Year Plan (1969-74)
• National Institute for Transforming India • Its objectives were growth with stability and progress towards
(NITI) Aayog came into existence in 2015. self-reliance. Main emphasis on agricultural growth rate targeted 5.7%
It has taken place of Planning Commission, but achieved 3.3% growth rate only.
after Planning Commission was abolished • Nationalisation of 14 banks and the Green Revolution began.
by Modi Government in 2014.
• Its chairman is Prime Minister of India,
Fifth Five Year Plan (1974-79)
vice-chairperson is Arvind Pangariya and • The Fifth Plan prepared and launched by DD Dhar. He proposed to
CEO is Amitabh Kant. It is a policy achieve two main objectives viz, ‘Removal of Poverty’ (Garibi Hatao)
think-tank which aims to foster and ‘Attainment of Self-reliance’, through promotion of high rate of
involvement and participation of states and growth, better distribution of income and a very significant growth in
Government of India in decision-making the domestic rate of savings.
process. • It targeted a growth rate of 4.4% but achieved a growth rate of
• The key difference between Planning 4.8%. The plan was terminated in 1978 (instead of 1979) when Janta
Commission and Niti Aayog is that while Government came to power.
Planning Commission had powers to
allocate funds to ministries and states; this
Rolling Plan (1978-80)
function will be now of finance ministry. • The Concept of Rolling Plan was given by Gunnar Myrdall. It was
Niti Aayog is essentially a think-tank and a brought out by Janta Party. It meant that expenditures budgeted but
truly advisory body. unspent at the end of year would be carried over to the next year.
1024 NDA/NA Pathfinder

• The focus of the plan was enlargement of the housing, transport, small-scale industries, modern
employment potential in agriculture and allied activities, retailing, entertainment, IT-enabled services etc.
encouragement to household and small industries
î The Tenth Five Year Plan achieved a growth rate of 7.8% below
producing consumer goods for consumption and to raise
the targeted 8.0%, but higher than all previous five year plans.
the incomes of the lowest income classes through
minimum needs programme. Eleventh Five Year Plan (2007-2012)
• Faster and inclusive development was its central theme.
Sixth Five Year Plan (1980-85)
The growth rate during the Eleventh Plan period was
• Sixth Five Year Plan targeted 5.2%, but achieved a
about 8.1%, which is higher than the 7.9% growth rate
growth rate of 5.7%
achieved in the Eleventh Plan.
• It includes increase in national income, modernisation of
• The service sector continued to register a growth rate of
technology, ensuring continuous decrease in poverty and
more than 10%. However, the industrial growth rate
unemployment, population control through family
showed at 7.9%.
planning etc.
Twelfth Five Year Plan (2012-17)
Seventh Five Year Plan (1985-90)
• The approach paper to the plan is based on the theme
• The Seventh Plan aimed at rapid growth in foodgrains
‘‘faster, sustainable and more inclusive growth”. Total
production, increased employment opportunities and
plan size of Twelfth Plan is ` 37.7 lakh crore, 13.7%
modern technological development.
more than the Eleventh Plan.
• The economy recorded 6% growth rate against the
• The paper indicates 14 key areas to be focussed by the
targeted 5%. Indian economy finally broke the Hindu
Twelfth Five Year Plan. Some of these are energy
growth rate barrier.
transport, natural resources, rural transformation, health,
Annual Plan (1991-92) transport, education and skill development.
Due to severe economic crisis, Eighth Five Year Plan was Key Targets
delayed by 2 years. The intervening years (1990-91 and There are eleven key targets of Twelfth Five Year Plan,
1991-92) were declared Annual Plans. which are as follow
Eighth Five Year Plan (1992-97) i. Real GDP growth rate 8% (down from earlier 8.1%).
• It was based on Rao and Manmohan mode of economic ii. Agricultural growth rate 4%.
growth. It sought to gradually open the Indian economy iii. Manufacturing growth rate 10%.
through LPG Liberalisation, Privatisation and Globalisation iv. Consumption poverty to be reduced by 10% points.
measures.
v. Employment 50 million new work opportunities in
• The most notable feature of the Eighth Plan period was the non-farm sector.
that the GDP grew at an average rate of 6.68%
vi. Mean years of schooling increase it to 7 years by 2017.
exceeding the target growth rate of 5.4%.
vii. Infant Mortality Rate (IMR) reduce to 25.
Ninth Five Year Plan (1997–2002) viii. Maternal Mortality Rate (MMR) reduce to 1 per
• Its objective was growth with social justice and equity. 1000 live births.
• Growth rate of GDP during the plan was 5.4% per ix. Child (0-6) sex ratio raise it to 950 by 2017.
annum as against the target of 6.5%. x. Total fertility rate reduce it to 2.1.
xi. Gross irrigated area increase it from 90 million hectare
Tenth Five Year Plan (2002-2007)
to 103 million hectare by 2017.
• Its objectives were to attain a growth rate of 8.1% and
reduction of poverty ratio to 20% by 2007 and to 10% 15 YEARS VISION DOCUMENT IN PLACE
by 2012.
OF FIVE YEAR PLAN
• Universal access to primary education by 2007.
The first 15 years vision document will come into
• The Tenth Plan focussed on ways and means of effect from 2017-18 after the end of the Twelfth Five
correcting the regional imbalance, gender inequality Year Plan. It will be formulated with central objective
education, health of mother, infants and reducing of eradication of poverty. It will come alongwith a 7
pollution. years National Development Agenda which will lay
• The growth strategy of the Tenth Plan sought to ensure down the programmes, schemes and strategies to
achieve a long-term vision. The long vision document
the rapid growth of those sectors which are most likely
(perspective plan) will comprise of 3 years mass
to create high quality employment opportunities, which
economic framework.
included such sectors as construction, real estate and
GENERAL STUDIES Economy 1025

Pradhan Mantri Suraksha Bima Yojana

GOVERNMENT SCHEMES It is a government-backed accident insurance scheme
The Government of National Democratic Alliance (NDA) was in India. It was formally launched in May, 2015. It is
formed in May, 2014. In its tenure of more than 2 years, the available to people between 18 and 70 years of age
present government has started various schemes, programmes with bank accounts. The premium is just ` 12 per
and missions in different areas. It is very informative and helpful annum for each member. In case of accidental death
to know about these schemes and programmes. Here is the or full disability, the payment to the nominee will be
categorywise description of various schemes and programmes ` 2 lakh and in case of partial permanent disability
launched. ` 1 lakh.
Pradhan Mantri Jeevan Jyoti Bima Yojana
Financial Inclusion Schemes It is a government-backed Life Insurance Scheme in
India launched in May, 2015. It is available to people
Mission Indradhanush between 18 and 50 years of age with bank accounts.
It was launched as a seven pronged plan, to revamp functioning It has an annual premium of ` 330.
of public sector banks in August, 2015. The seven elements
include appointments, board of bureau, capitalisation, Beti Bachao, Beti Padhao
de-stressing, empowerment, framework of accountability and It was launched in January, 2015. The scheme is
governance reforms. designed to address the issue of declining Child Sex
Ratio and related issues of empowerment of women
Pradhan Mantri Mudra Yojana through a life cycle continuum. The main objective is
Pradhan Mantri Mudra Yojana (PMMY) under the Micro Units to prevent gender biased sex selective elimination by
Development and Refinance Agency (MUDRA). Bank is a new strict enforcement of laws with stringent punishment
institution being set-up by the Government of India for to violators.
development and refinancing activities relating to micro units.
PMMY three categories of interventions has been named which Sukanya Samriddhi Yojana
includes— Shishu (loan upto ` 50000), Kishore (loan ranging upto It was launched in January, 2015, under the ‘Beti
` 5 lakh) and Tarun (loan upto ` 10 lakh). Bachao, Beti Padhao’ campaign. This scheme was
launched to meet the expense of the girl child’s higher
PAHAL Yojana education and marriage.
The full form of PAHAL Yojana is Pratyaksh Hanstantarit
In the account, a minimum of ` 1000 and maximum
Labh and concerns the LPG customers. PAHAL has been
of ` 1 lakh 50 thousand can be deposited annually,
launched in January, 2015.
upon which interest of 8.6% will be accrued.
Pradhan Mantri Jan-Dhan Yojana
It is India’s National Mission for financial inclusion to ensure Health Schemes
access to financial services, namely; banking savings and deposit
accounts, remittance, credit, insurance, pension in an Pradhan Mantri Surakshit Matritva Yojana
affordable manner. This financial inclusion campaign was It was launched in June, 2016. The scheme namely
launched on 28th August, 2014. Pradhan Mantri Surakshit Matritva Yojana Abhiyan,
is for the pregnant women who are suffering from
Social Security Schemes several deseases during their pregnancy.
Sugamya Bharat Abhiyan
Pradhan Mantri Ujjwala Yojana
The Union Government has launched Sugamya
Pradhan Mantri Ujjwala Yojana is a welfare scheme of the
Bharat Abhiyan (Accessible India Campaign), a
Government of India launched in May, 2016. Ujjwala Yojana is
nationwide campaign in a bid to achieve universal
aimed at providing 5 crore LPG connections in the name of
accessibility to persons with disabilities. It was
women in BPL (Below Poverty Line) households across
launched in December, 2015.
the country.
Mission Indradhanush
Atal Pension Yojana (APY)
It was launched in December, 2014. Under it, children
It is a government-backed pension scheme in India targeted at
will be vaccinated against seven preventable diseases.
the unorganised sector. It was formally launched in May. The
The diseases include diphtheria, whooping cough,
minimum age of joining APY is 18 years and maximum age is
tetanus, polio, tuberculosis, measles and hepatitis-B.
40 years. The age of exit and start of pension would be 60 years.
Under this universal vaccination programme, all
The subscribers are required to opt for a monthly pension from
vaccines will be made available free of cost.
` 1000 to ` 5000.
1026 NDA/NA Pathfinder

Smart Cities Mission

Housing Schemes Smart Cities Mission is an urban renewal and retrofitting
Pradhan Mantri Awas Yojana–Gramin programme by the Government of India with a mission to
It was launched in March, 2016. It will be develop 100 cities all over the country making them citizen
implemented in rural areas across the country except friendly and sustainable was launched on 25th June, 2015. Smart
Delhi and Chandigarh. An allowance of ` 120000 in cities are projected to be equipped with basic infrastructure
plain areas and ` 130000 in hilly areas will be (citation needed) will offer a good quality of life through
provided for construction of homes. smart solutions.

Housing for All AMRUT Mission

It was launched in June, 2015 with an aim to It was launched in June, 2015 with the focus of the urban
provide affordable housing to urban poor. Under renewal projects is to establish infrastructure that could ensure
PMAY, it is proposed to build 2 crore houses for adequate robust sewerage networks and water supply for urban
urban poor including economically weaker sections transformation.
and low income groups in urban areas by the Namami Ganga Yojana
year 2022.
This yojana is an ambitious Union Government project, which
integrates the efforts to clean and protect the Ganga river in a
Infrastructure Development comprehensive manner.
Schemes HRIDAY Yojana
Setu Bharatam Project National Heritage City Development and Augmentation Yojana
(HRIDAY) was launched in January, 2015 with the aim of
It was launched in March, 2016 with an aim to make
bringing together urban planning, economic growth and heritage
all national highways free of railway crossings
conservation in an inclusive manner to preserve the heritage
by 2019. Under the project, as many as 208 rail over
character of each heritage city.
and under bridges would be constructed at
unmanned railway crossings on national highways. Saansad Adarsh Gram Yojana
Shyama Prasad Mukherji Rurban Mission It was launched in October, 2014 for the development of
model villages. Under the yojana, Members of Parliament (MPs)
In an ambitious bid to transform rural areas to will be responsible for developing the socio-economic and
economically, socially and physically sustainable physical infrastructure of three villages each by 2019 and a total
spaces. The Rurban Mission will thus, develop a of eight villages each by 2024.
cluster of smart villages.
Swachh Bharat Mission
Ujjwal DISCOM Assurance Yojana (UDAY)
It was launched on 2nd October, 2014. To accelerate the efforts
In November, 2015, the government had launched to achieve universal sanitation coverage and to put focus on
Ujjwal DISCOM Assurance Yojana (UDAY) scheme sanitation. It aims to achieve Swachh Bharat by 2019, as a fitting
to provide a permanent solution for financial turn tribute to the 150th Birth Anniversary of Mahatma Gandhi.
around and revival of Power Distribution companies
(discoms).
Employment / Skill
Deendayal Upadhyaya Gram
Jyoti Yojana (DUGJY) Development Schemes
It was launched in July, 2015. The flagship scheme Startup India/Standup India
was launched with an aim to provide 24×7 In January, 2016 the Union Government has launched a ‘Start-up
uninterrupted electricity supply to each rural India’ action plan to give boost to the Start-up India Movement.
household across the country by 2022. It should be The Stand-up India scheme aimed at providing credit to
noted that, this scheme replaces Rajiv Gandhi Scheduled Caste (SC), Scheduled Tribe (ST), and women
Grameen Vidyutikaran Yojana (RGGVY). borrowers in the non-farm sector. Composite loan between ` 10
Digital India lakh and upto ` 1 crore will be provided to SC/ST and women
and also inclusive of working capital component for setting-up
It was launched in July, 2015. Digital India is a any new enterprise.
campaign launched by the Government of India to
ensure that government services are made available Nai Manzil Scheme
to citizens electronically by improving online It was launched in August, 2015. Under the scheme girls from
infrastructure and by increasing internet connectivity minority communities will be imparted 3 months skill
or by making the country digitally empowered in development training in seven identified sectors relevant to
the field of technology. the region.
GENERAL STUDIES Economy 1027

Pradhan Mantri Kaushal Pradhan Mantri Krishi Sinchai Yojana

Vikas Yojana (PMKVY) The broad objectives of PMKSY are – Har Khet ko Pani;
It was launched in July, 2015. PMKVY, a flagship enhance the physical access of water on the farm and expand
programme of Ministry of Skill Development and cultivable area under assured irrigation, enhance adoption of
Entrepreneurship, has completed 10 lakh enrolments precision-irrigation and other water saving technologies under
under the scheme. The scheme has been implemented by More Crop Per Drop and promotion of micro-irrigation in
National Skill Development Corporation (NSDC) the form of drips, sprinklers, pivots, rain-guns in the farm
through a network of 1012 training partners affiliated to (Jal Sinchan).
the scheme. Soil Health Card Scheme
Deen Dayal Upadhyay Grameen Kaushalya The Soil Health Card scheme has been launched in February,
Yojana (DDU-GKY) 2015. The ‘Soil Health Card’ would carry crop-wise
It is a Government of India youth employment scheme. recommendations of nutrients/fertilizers required for farms in
It was launched in September, 2014 on the occasion of a particular village, so that the farmers can improve
98th birth anniversary of Pandit Deendayal Upadhyay. productivity by using inputs judiciously.
It aims to target youth, under the age group of Rashtriya Gokul Mission
15-35 years. A corpus of ` 1500 crore and is aimed at
It was launched in July, 2014 by the government for
enhancing the employability of rural youth.
conservation and development of indigenous breeds in a
Make in India focussed and scientific manner.
Make in India is an initiative launched by the
Government of India to encourage multinational, as well Miscellaneous Schemes
as national companies to manufacture their products in
India. It was launched in September, 2014. India hoped Swadesh Darshan Scheme
to emerge, after initiation of the programme in 2015 as It was approved by the Union Tourism Ministry for the
the top destination globally for foreign direct development of Heritage circuit in Madhya Pradesh and
investment, surpassing the United States of America as Uttarakhand, Ramayana circuit in Uttar Pradesh, North-East
well as the People’s Republic of China. circuit in Sikkim and coastal circuit of Tamil Nadu.
Skill India Gold India Schemes
Skill India is a campaign launched in July, 2015 with an Prime Minister Narendra Modi launched three gold related
aim to train over 40 crore people in India in different schemes viz. Gold Monetisation Scheme (GMS), Sovereign
skills by 2022. It includes various initiatives of the Gold Bond Scheme (SGBS) and Indian Gold Coins (IGC) in
government like National Skill Development Mission, November, 2015 to reduce the physical demand for gold and
National Policy for Skill Development and fish out 20000 tonnes of the precious metal lying idle with
Entrepreneurship, 2015, Pradhan Mantri Kaushal Vikas households and institutions.
Yojana (PMKVY) and the Skill Loan scheme. Mera Zila Meri Yojana
USTAAD Scheme It aims to educate adults in the age group of 40-60. This
USTAAD (Upgrading the Skills and Training in scheme works under the guidance of the National Literacy
Traditional Arts/Crafts for Development) scheme has Mission Authority, an independent wing of the Ministry of
been launched in May, 2015. The scheme aims at Human Resources and Development.
upgrading skills and training of minority communities Pradhan Mantri Khanij Kshetra
by preservation of traditional ancestral arts and crafts.
Kalyan Yojana (PMKKKY)
It was launched in September, 2015 for the welfare of tribals
Agriculture-related Schemes and other affected persons in mining areas. Under this
Pradhan Mantri Fasal Bima Yojana scheme, the mining companies will need to contribute 10 to
30% of royalty for welfare of people directly or indirectly
Pradhan Mantri Fasal Bima Yojana is the new crop
affected by mining.
damage insurance scheme that has been approved by the
Union Cabinet in January, 2016. It will replace the Pandit Deendayal Upadhyay Shramev
existing two crop insurance schemes National Agricultural Jayate Karyakram (PDUSJK)
Insurance Scheme (NAIS) and Modified NAIS. It was launched in October, 2014 by the Government
This scheme will help in decreasing the burden of of India. Objective of this scheme is to create conducive
premiums on farmers who take loans for their environment for industrial development and doing business
cultivation and will also safeguard them against the with ease and also expanding government support to impart
inclement weather. skill training for workers.
1028 NDA/NA Pathfinder

UJALA Scheme
The Union Government has launched National LED UNEMPLOYMENT
programme–Unnat Jyoti by Affordable LEDs for All (UJALA)
It is a situation where in the person willing to work
on 11th March, 2016. The scheme will help reduce electricity
fails to find a job that earn them living.
bills of consumers, contribute to the energy security of India
Unemployment rate in India averaged 7.32% from
and also help in environment protection.
1980s to 2013. At present, it is around 5%.

POVERT Y Types of Unemployment

It can be defined as paucity of certain basic means to live viz There are six categories of unemployment, which are as
lacking monetary resource, social security etc. follow
It is of two types, which are as follow i. Open Unemployment It is a condition where
person has no work to do. Here persons are
Absolute Poverty willing to work, but unable to find a work.
• It refers to lack of means necessary to meet very basic needs ii. Structural Unemployment This unemployment
such as food, shelter and clothing. For measuring absolute occurs due to changes in the demand or due to
poverty a minimum physical quantity of cereals, pulse etc and structural shift in economy. Ex-shift from labour
the price quotations convert the physical quantities into intensive to capital intensive, skill intensive and
monetary term. technology intensive economy.
• Then aggregating all these quoted price, a figure expressing iii. Frictional Unemployment This unemployment
Per Capita Consumption Expenditure (PCE) determined. If a occurs when person is switching from job to
person is below the fixed PCE, person will be said to be another. For temporary period in between old
living below poverty line. India uses this concept to determine job and new job he may be unemployed for
the number of people living in poverty. some time.
iv. Under Employment It is a situation under
Relative Poverty which person is working well below his
When poverty is measured with respect to some value taken as efficiency and he is capable of more productive
control value. e.g. this concept can be used to compare two work.
different sections of population on the basis of their income or v. Disguised Unemployment When person’s
consumption expenditure. This concept also tells about the contribution to total output is nil. In this case,
inequality by using Gini-co-efficient. person seems to employed but he is not doing
productive work. It is common in rural areas
especially in agriculture.
Committees for Estimation
vi. Seasonal Unemployment In this peculiar case,
of Poverty person is employed during few month in a year
and for rest of the months in a year he is
Suresh Tendulkar Committee unemployed. This type unemployment is common
• It was constituted by Planning Commission in 2005. in agriculture and some agro-processing units.
Committee recommended a shift away from the calorie based
model and made concept of poverty line broader by including
monthly spending on education, health, electricity and POPULATION
transport. Tendulkar committee adopted the cost of living as Population is the dynamic factor of an economy. The
the basis for identifying the poor. growth of an economy is determined on the basis of
• This panel suggested a benchmark daily per capita expenditure development level of masses.
of ` 27 for rural areas and ` 33 for urban areas for estimating
population below poverty line. It arrived at final figure which Census of India, 2011
said only 22% of population is below poverty line.
• Census is useful for formation of development
Rangarajan Committee policies, plan and democrating constituencies of
election.
Because of criticism of very low level of expenditure fixed by
Tendulkar committee to determine poverty, government • The Census of India has been conducted 15 times,
appointed Rangarajan committee. Rangarajan committee raised as of 2011. Census 2011 were released in New
the level of expenditure to ` 32 for rural and ` 47 for urban Delhi on 31st March, 2011 by Union Home
areas. Final estimation of poverty was raised to 30% by this Secretary GK Pillai and Registrar General and
committee. Census Commissioner C Chandramouli.
GENERAL STUDIES Economy 1029

• The Census 2011, was the 15th National census of the Revolution Production
country. The census has covered 28 States and 7 Union Red Revolution Meat and tomato production
Territories, 640 districts, 5767 tehsils, 7933 towns and
more than 6 lakh villages. The motto of Census 2011 Round Revolution Potato production
was ‘Our census, Our future’. Silver Fibre Revolution Cotton production
• Census 2011 took place before the creation of Telangana, Silver Revolution Egg/Poultry production
thus the census provides data for 28 states only. It may
Yellow Revolution Oil seeds production
be noted that all the States and Union Territories have
shown an increase in literacy rate during 2001-2011. White Revolution Milk production
India has the second largest population of older (60+) Evergreen Revolution Organic agriculture and sustainability
persons in the world.
Important Data of Census, 2011 Tricolour Revolution
India Census 2011 The reference to a Tricolour Revolution was made by
Total population 1210854977 Prime Minister Narendra Modi. This phrase has three
Males 623.7 million (51.54%) components, which are as follow
Females 586.46 million (48.46%) i. Saffron Energy Revolution This revolution is for
promotion and better utilisation of solar energy.
Population of 0-6 age group 164478150 (13.58%)
ii. White Revolution This is to ensure cattle welfare and
Population density (per sq km) 382
further the goals of White Revolution.
Literacy 73.0% (72.99%) iii. Blue Revolution This revolution is for fishermen’s
Decadal growth rate 181455986 (17.7%) welfare, cleansing rivers and sea and conserving water.
Population increase (2001-2011) 181 million

INDUSTRY
AGRICULTURE • Industry refers to an economic activity concerned with
the processing of raw materials and manufacture of
• Agriculture is the largest sector of the Indian economy goods in factories. Industries are often classified based
and has a crucial role to play in the country’s economic on their principle product e.g. steel industry, automobile
development by providing food, raw materials and industry, textile industry etc.
employment to a very large proportion of population,
• Rapid growth of national income is possible only
capital for its own development and surpluses for
national economic development. through industrialisation as growth in agriculture is
limited by factors including natural factors.
• Agricultural sector contributes a significantly large share
to the national income of India. However, it has come
down from as high as 56% during the 1950s to 17.4% in Industrial Licensing
2015-16. • The Government of India announced the New Industrial
• As against a growth target of 4% for agriculture and Policy on 24th July, 1991. The main objective of this
allied sector in the Twelfth Plan, the growth registered policy is to unshackle the Indian industrial economy
in the first four years is 1.6% (average). from administrative and legal controls.
• Its main aim is to raise industrial efficiency to the
Agricultural Revolutions
international level through substantial deregulation of the
Revolution Production industrial sector of the country.
Brown Revolution Leather/Non-conventional (India)/ Cocoa
production Industries Requiring Compulsory
Golden Fibre Revolution Jute production Licensing (Presently)
Golden Revolution Overall horticulture development/Honey • Distillation and brewing of alcoholic drinks.
production
• Cigars and cigarettes of tobacco and manufactured
Green Revolution Foodgrains (cereals, wheat and tobacco substitutes.
leguminous plant) production
• Electronic aerospace and defence equipment all types.
Grey Revolution Fertilizer revolution
• Industrial explosives including match boxes.
Pink Revolution Onion production/Pharmaceutical (India)/
Prawn production • Specific hazardous chemicals viz hydrocyanic acid,
phosgene, isocyanates and diisocyanates of hydrocarbon.
1030 NDA/NA Pathfinder

Important Industries of India Refineries

• There are 23 refineries in India including both private
Iron and Steel Industry sector and public sector. Most of the refineries are
• First Steel Industry was set-up at Kulti (West Bengal) government owned.
‘Bengal Iron Works Company’ in 1870. • Jamnagar refinery in Gujarat is world largest refinery.
• First large-scale steel plant TISCO was set-up at Indian Oil Corporation Limited, Hindustan Petroleum
Jamshedpur in 1907 followed by IISCO at Burhanpur in Corporation Limited and Bharat Petroleum
1919. Both belonged to private sector. Corporation Limited are government companies
controlling public sector refineries in India.
• The first public sector unit was ‘Visvesvaraya Iron and
Steel Works’ at Bhadrawati.
• Steel Authority of India Limited (SAIL) was
Maharatnas
established in 1974 and was made responsible for the In 2009, the government established the Maharatnas
development of the steel industry. status, which raises a company’s investment ceiling from
` 1000 crore to ` 5000 crore. The Maharatna firms can
• Bhilai, Durgapur and Rourkela were established during
now decide on investments of upto 15% of their net
the Second Five Year Plan. Bokaro was established during
worth in a project. BHEL was the first company to be
the Third while the steel plants at Salem, Vijay Nagar and
declared Maharatna International Organisation and
Visakhapatnam were established in the Fourth Five Year
groupings.
Plan.
• Presently, India is the 4th largest steel producing country Criteria
in the world, ranked behind China, Japan, US in that The six criterias for eligibility as Maharatnas are as follow
order.
i. Having Navratna status.
Public Sector Steel Plants ii. Listed on Indian stock exchange with minimum
Location Assistance prescribed public shareholding under SEBI
Rourkela (Odisha) Germany - 1955 regulations.
Bhilai (Chhattisgarh) Russian Government - 1955 iii. An average annual turnover of more than ` 20000 crore
during the last 3 years. Earlier it was ` 25000 crore.
Durgapur (West Bengal) Britain Government - 1955
iv. An average annual net worth of more than ` 10000 crore
Bokaro (Jharkhand) Russian Government - 1964
during the last 3 years. Earlier it was ` 15000 crore.
Visakhapatnam (Andhra Pradesh) Russian Government - 1971
v. An average annual net profit after tax of more than
` 2500 crore during the last 3 years. Earlier it was
Cotton and Textile Industry ` 5000 crore.
Oldest industry of India and employs largest number of vi. Should have significant global presence/international
workers. It is the largest organised and broad-based industry operations.
which accounts for about 4% of GDP, 14% to the industrial
production and 11% of total export earnings. Maharatna Companies
i. Coal India Limited (CIL)
Petroleum Industry ii. Indian Oil Corporation Limited (IOCL)
• Production of crude oil and natural gas has increased
iii. National Thermal Power Corporation Limited
generally in the recent years except in few years. Refining
(NTPCL)
capacity has been considerably increased in the recent
year. iv. Oil and Natural Gas Corporation Limited (ONGC)
• Most of India’s crude oil reserve are located in Western v. Steel Authority of India Limited (SAIL)
Coast, Gulf of Cambay (Mumbai High) and in the vi. Bharat Heavy Electricals Limited (BHEL)
North-Eastern part of country. Undeveloped reserves are vii. Gas Authority of India Limited (GAIL)
also found in offshore Bay of Bengal and in Rajasthan.
• Natural gas production in India is from Western offshore Navratnas
region Mumbai high complex, Gulf of Cambay, the
• Navratnas was the title given originally to Nine Public
onshore field in Asom, Andhra Pradesh and Gujarat also
produces natural gas. Sector Enterprises or PSE identified by the
Government of India in 1997, which allowed them
• Production of crude oil and natural gas is not sufficient to
greater autonomy to complete in the global market.
meet the demands so they are imported. Petroleum is
• The number of PSEs having Navratna status is 17.
imported from Arbian countries, Iran, Iraq and Venezuela.
GENERAL STUDIES Economy 1031

Navratna Companies In accordance with the provision of Micro, Small and

Medium Enterprises Development (MSMED) Act, 2006, the
i. Bharat Electronics Limited (BEL)
Micro, Small and Medium Enterprises (MSMEs) are classified
ii. Bharat Petroleum Corporation Limited (BPCL) in these classes:
iii. Hindustan Aeronautics Limited (HAL)
Manufacturing Sector Service Sector
iv. Hindustan Petroleum Corporation Limited (HPCL)
Enterprises Investment in
v. Mahanagar Telephone Nigam Limited (MTNL) Investment in Plant and
Machineries Equipments
vi. National Aluminium Company Limited (NALCO)
Micro Enterprises Does not exceed ` 25 Does not exceed ` 10
vii. National Mineral Development Corporation lakh. lakh.
(NMDC) Small Enterprises More than ` 25 lakh, but More than ` 10 lakh, but
viii. Power Finance Corporation Limited (PFC) does not exceed does not exceed
` 5 crore. ` 2 crore.
ix. Power Grid Corporation of India Limited (PGC)
Medium Enterprises More than ` 5 crore, but More than ` 2 crore, but
x. Rural Electrification Corporation Limited (REC) does not exceed does not exceed
` 10 crore. ` 5 crore.
xi. Shipping Corporation of India Limited (SCL)
xii. Neyveli Lignite Corporation Limited (NLCL)
xiii. Rashtriya Ispat Nigam Limited (RINL)
xiv. Oil India Limited (OIL)
MONEY MARKET
xv. Container Corporation of India Limited Money market is the cluster of financial institutions that
xvi. National Building Construction Corporation deals in short-term securities and loans, gold and foreign
Limited exchange. It has a time value and therefore, it is bought and
xvii. Engineers India Limited sold against a payment of interest.
The functions of money market are as follow
Miniratnas • It provides an equilibrating mechanism for demand and
supply of short-term funds.
In addition, the government created another category
called Miniratna. Miniratna can also enter into joint • It enables borrowers and lenders of short-term funds to
ventures, set subsidiary companies and overseas offices, fulfil their borrowing and investment requirements at an
but with certain conditions. efficient market clearing price.
• Monetary market is regulated by RBI in India and it forms
Category-I Miniratna monetary policy to control the movement of rupees in the
This designation applies to PSEs that have made profits market.
continuously for the last three years or earned a net • Monetary policy is made by Central Bank to manage
profit of ` 30 crore or more in one of the 3 years. These money supply to achieve specific goal such as constraining
miniratnas are granted certain autonomy like incurring inflation, maintaining an appropriate exchange rate,
capital expenditure without government approval upto generating jobs and growth.
` 500 crore or equal to their networth, whichever is
• Monetary policy involves changing interest rates either
lower. Currently, there are 58 miniratnas in category-I.
directly or indirectly through open market operations,
Category- II Miniratna setting reserve requirements or trading in foreign exchange.
This category includes those PSEs which have made • Monetary policy will be set by Monetary Policy
profits for the last three years continuously and should Committee earlier it was duty of RBI Governor. Monetary
have a positive networth. Category-II miniratnas have policy is released every 2 months by RBI.
autonomy to incurring the capital expenditure without
government approval upto ` 300 crore or upto 50% of
their whichever is lower. Currently, there are 15 RESERVE BANK OF INDIA (RBI)
miniratnas in category-II. • RBI is the Central Bank of the country. It was
set-up on the basis of Hilton Young Commission’s
The Micro, Small and Medium recommendation in April, 1935, with the enactment of RBI
Act, 1934. Its first Governor was Sir Osborne Smith.
Enterprises (MSMEs) • RBI was nationalised in 1949 and its first Indian Governor
Over the last five decades, the Small-Scale Industries was CD Deshmukh. The headquarter of the RBI is in
(SSIs) sector has acquired place of prominence in the Mumbai.
economy of the country. It has contributed • There are 14 Directors in Central Board of Directors
significantly to the growth of the GDP, employment besides the Governor, four Deputy Governors and one
generation and exports. Government Official.
1032 NDA/NA Pathfinder

Repo Rate It is the rate, at which RBI lends

Functions of RBI •
short-term money to the banks against securities.
The main functions of the RBI includes Repo rate injects liquidity in the market.
• It issues currency except coins which are minted by the • Reverse Repo Rate It is the rate, at which banks
Union Government. It is banker and debt manager to park short-term excess liquidity with the RBI. Reverse
government and banker of banks. It is regulator of banking repo rate withdraws liquidity from the market. This is
system and manager of foreign exchange. It maintains always 100 base point 1% less than repo rate.
financial stability and it is regulator and supervisor of the • Open Market Operations (OMOs) Under OMOs,
payment and settlement system. when the RBI sells government securities in the
market, it withdraws money liquidity from the
• Since 1952, Monetary Policy of the RBI emphasise on twin
market and thus, reduces volume of credit leading to
goals. These are as follow control of inflation when it buys government
– Economic growth – Inflation control securities, it injects liquidity into the market and
• Instrument of credit control can be divided into two thus, increases credit-volume leading to higher
namely; qualitative/selective credit control and quantitative economic growth.
credit control. • Marginal Cost of Funds Based Lender Rate The
• RBI has signed agreement with government to control RBI has issued now guidelines for setting lending rate
inflation. by commercial banks under the name Marginal Cost
of Funds based Lending Rate (MCLR). It has
replaced the base rate system from April, 2016
BANKING OMBUDSMAN SCHEME onwards.
●
The scheme is in operation since, 1995 and works
under the control and supervision of the RBI. Qualitative/Selective/Direct
●
The scheme is applicable to all commercial banks, Credit Control
RRBs and scheduled primary co-operative banks.
Qualitative measures are used to make sure that
●
The Banking Ombudsman currently have their offices
purpose, for which loan is given is not misused. It is
at 15 centres.
done through credit rationing and regulating loan to
●
The RBI’s Quasi Judicial Authority for resolving consumption etc.
disputes between commercial banks, primary
co-operative and RRB’s and their customers. At present,
there are 15 Banking Ombudsmen in India. INDIAN BANKING SYSTEM
Banking system is the pillar of an economic system.
India’s banking system is a stable one, under the
Credit Control supervision and regulatory framework of the Reserve
Instruments of credit control can be divided into two parts, Bank of India (RBI).
which are as follow Indian banks are also following the basel norms of
banking
Quantitative/General Credit Control • Currently, Basel-II is being followed from 2013.
Quantitative credit control is used to control the volume of • Basel-III regulation will come into force.
credit and indirectly to control the inflationary and
deflationary pressures caused by expansion and contraction of Types of Banking
credit. There are three types of banking, which are as follow
The quantitative/general credit control consists of i. Core Banking It is a banking service provided by
• Bank Rate It is also called the Rediscount Rate. It is the rate, a group of networked bank branches where
at which the RBI gives finance to commercial banks. customers may access their bank account and
perform basic transactions from any of the member
• Cash Reserve Ratio (CRR) The RBI (Amendment) Bill, branch offices.
2006, empowers RBI to prescribe CRR-Cash that banks
deposits with the RBI without any floor rate or ceiling ii. Retail Banking It is when a bank executes
rate. An increase in the CRR takes out the money from the transactions directly with consumers, rather than
money market, while a decrease in the CRR injects corporations or other banks. Services offered
additional resources in the economy. include savings and transactional accounts,
mortgages, personal loans, debit cards and credit
• Statutory Liquidity Ratio (SLR) It is the ratio of liquid cards.
asset, which all commercial banks have to keep in the form
of cash, gold and unencumbered approved securities equal iii. Narrow Banking It is also called a Safe Bank.
to not more than 40% of their total demand and time Narrow banking restricts banks to hold liquid and
deposits liabilities. safe government bonds.
GENERAL STUDIES Economy 1033

Scheduled and Development Banks

Non-Scheduled Banks They provide long-term capital for industries and
agriculture. e.g. NABARD, SIDBI, IFCI, EXIM Bank.
• Commercial banks are classified into two types, which are
as follow EXIM
i. Schedule banks ii. Non-schedule banks
It is established in 1982 by government. Recognising the
• The scheduled banks are those, which are entered in the important role of exports in maintaining the viability of
Second Schedule of the RBI Act, 1934. external sector and in generating employment, RBI had
• All commercial banks (Indian and foreign), regional rural sought to ensure adequate availability of concessional
banks and state co-operative banks are scheduled banks. bank credit to exporters. Main function of EXIM is to
Non-scheduled banks are those, which are not included in promote export.
the Second Scheduled of the RBI Act, 1934.
NABARD
State Bank of India • It is a National Bank for Agriculture and Rural
• Bank of Calcutta (Bank of Bengal), Bank of Bombay and Development (NABARD) established in 12th July, 1982.
Bank of Madras were unified as the Imperial Bank of India • It is an apex body handles matters concerning
in 1921. Imperial bank was reconstituted as SBI in 1955. policy, planning and operating the field of credit
• In 1959, the State Bank of India (subsidiary banks) Act was for agriculture and other development activities in
passed. This made SBI take over eight former rural areas.
state-associated banks as it subsidaries. • It gives long-term loans to state governments to
enable them to subscribe to the share of corporative
Bharatiya Mahila Bank (BMB) credit societies. It act as a apex refinancing bank for
• Former Prime Minister Dr Manmohan Singh and UPA agriculture.
Chairperson, Sonia Gandhi jointly inaugurated India’s first
all women bank, Bharatiya Mahila Bank in Mumbai on PAYMENT BANKS
19th November, 2013, on the birth anniversary
of former Prime Minister Indira Gandhi. These banks have been conceptualised by RBI. They
can accept a deposits which is currently limited to 1
• The main objective of the bank is to focus on lakh per customer account. These banks cannot issue
the banking needs of women and to promote their loans. They can operate current and saving account and
economic empowerment. can also issue ATM card, debit card, online banking
• The Union Cabinet on June, 2016 approved the merger of and mobile banking.
five associate banks as well as BMB with SBI.

Bank Board Bureau Private Sector Banks in India

• The Bank Board Bureau is constituted on 28th February, • All those banks, where greater parts of stake or equity
2016. The bureau is mandated to play a critical role in are held by the private shareholders and not by the
reforming the troubled public sector banks by government are called private sector banks.
recommending appointments to leadership positions and • There are two categories of private sector bank old
boards in those banks and advise them on ways to raise and new.
funds and how to go ahead with mergers and acquisitions. • Banking Regulation Act, 1949 was amended in 1993
• Vinod Rai, former Comptroller and Auditor General of and once again in 2001 to permit the entry of new
India, was named the first Chairman of the Banks Board private sector banks in the Indian banking sector; the
Bureau. objective was to instill greater competition in the
banking system to increase productivity and
INDRADHANUSH SCHEME, 2015 efficiency.
The Public Sector Banks (PSBs) plays a vital role in Indian
financial system. The assests quality of PSBs have Criteria for Private Sector Banks
deteriorated because of rising Non-Performing Assets (NPA). 2001 revised guidelines has set certain criteria for the
Indradhanush Scheme is for the banking reforms in India. establishment of the new private sector banks. Some of
The seven key reforms of Indradhanush mission includes these are as follow
appointments, de-stressing capitalisation, empowerment,
framework of accountability and governance reforms. • The bank should have minimum net worth of ` 100
crore.
1034 NDA/NA Pathfinder

• The promoters holding should be a minimum of 25% of

the paid-up capital. MUDRA Bank
• Within 3 years of the starting of the operations, the bank Micro Units Development and Refinance Agency Bank
should offer shares to public. (MUDRA Bank) was launched by Prime Minister
Narendra Modi on 8th April, 2015 with a corpus of
Top Five Private Sector Banks ` 20000 crore and a credit guarantee corpus of ` 3000
Top five private sector banks are as follow crore. It is a public sector financial institution in India.
• ICICI Bank, 1994 Vadodara It provides loans at low rates to small entrepreneurs.
• HDFC Bank, 1994 Mumbai
Classification of MUDRA Bank
• Axis Bank, 1994 Ahmedabad
• MUDRA Bank has rightly classified the borrowers
• Kotak Mahindra Bank, 1985 Mumbai
into three segments: the starters, the mid-stage
• Yes Bank, 2004 Mumbai finance seekers and the next level growth seekers.
• To address the three segments, MUDRA Bank has
RBI Guidelines for New Bank Licensing launched three loan instruments which are as follow
While preparing guidelines, RBI recognises the need for an
i. Shishu-cover loans upto ` 50000.
explicit policy on banking structure in India keeping in view
the recommendations of the Narsimham committee, Raghuram ii. Kishor-cover loans above ` 50000 and upto
Rajan committee and others view points. ` 5 lakh.
iii. Tarun-cover loans above ` 5 lakh and upto
New Bank ` 10 lakh.
• These new banks will be provided license under the
Banking Regulation Act, 1949 (Section 22(1)), only after the
fulfilment of these two conditions.
CURRENCY
• Rupee was first minted in India during the reign of
• Bandhan Finance It is a microfinance company, based in
Sher Shah Suri around 1542.
West Bengal. It is headed by Shri Chandra Shekhar Ghosh
and has a net worth of ` 1100 crore. About 45 % of its • India became a member of International Monetary
branches in the rural areas. Bandhan Bank received the Fund (IMF) in 1947 and exchange value of rupee
inprinciple approval of the RBI in April 2014, the banking came to be fixed by IMF standards.
regulator gave its final nod in June, 2015. • All coins and one rupee note are issued by
• IDFC The Infrastructure Development and Finance Government of India. That’s why one rupee note
Corporation is based in Mumbai. It is originally an doesn’t bear the signature of Governor of RBI. It
investment finance company, headed by Shri Rajiv bears the signature of Finance Secretary,
Lal. IDFC has the net worth of ` 21000 crore, but with a Government of India.
lower rural presence. IDFC started operating banking • The symbol of Indian rupee (`) came into use on
services on 1st October, 2015 under RBI Banking licence. 15th July, 2010.
Printing of Securities and Minting in India
Important Committees
Security Press Station Established Year Related by
The various committees related to development in the field of Currency Notes Nasik, 1928 Bank notes from
banking are as follow Press Maharashtra
` 1 to ` 100
Narasimham Committee Banking reform
Security Paper Hoshangabad 1967-68 Banks and
Raghuram Rajan Committee Financial sector reform currency notes
paper
Urjit Patel Committee Monetary policy
Bank Notes Dewas 1974 Bank notes of
Nachiket Mor Financial inclusion Press ` 20, ` 50,
Dr Raja J Chelliah Tax reform ` 100 and ` 500

C Rangarajan Committee Public expenditure Modernised Mysore 1995

Currency Notes (Karnataka),
Bimal Jalan Committee Expenditure management (to reduce subsidy) Press Salbani
(West Bengal)
Kelkar Committee Fiscal consolidation
Coins are minted at four places viz, Mumbai, Kolkata, Hyderabad and
BN Srikrishna Committee Financial sector legislative reform Noida.
GENERAL STUDIES Economy 1035

Capital Market INSURANCE

• It refers to market for funds with a maturity of 1 year • It is an important part of Indian financial system.
and above, funds include medium or long-term funds. Previously, only public sector companies were eligible to
• The demand for funds comes from both the provide insurance services but now private sector
government for its investment and also private sectors. companies are also allowed.
• Bank, Public Financial Institutions like LIC, GIC, • Foreign Direct Investment is allowed in insurance sector.
Non-banking Financial Company, Development 49% FDI is now allowed under automatic route.
Financial Institutions like ICICI, IDBI, IDFC etc. FII • There are 52 insurance companies in India of which 24 are
(Foreign Institutional Investors) mutual funds like UTI in life insurance business and 28 in general insurance.
are main participants in the market. • Life Insurance Corporation (LIC) established in 1956 and
General Insurance Corporation (GIC) established in 1973
Stock Exchange in India are two important public sector insurance companies.
• Insurance Regulatory and Development Authority of
• Stock is the capital raised by a corporation through
India (IRDAI) constituted in April, 2000 aims to protect
issuance and sale of shares. It is market for dealing in the interest of holder of insurance policies to regulate,
shares, debentures and financial securities. In a stock promote and ensure growth of insurance industry.
exchange investors through stock brokers buy and sell
shares in a wide range of listed companies.
• There are 25 stock exchanges in the country. 21 of
INFLATION
them are regional one. Some stock exchange of India • Inflation is that state in which the prices of goods and
are as follow services rise on the one hand and value of money falls on
– National Stock Exchange
the other. When money circulation exceeds the production
of goods and services, the state of inflation takes place in
– Bombay Stock Exchange
the economy.
– OTC Exchange of India
• Inflation can also be due to reduction in supply of goods
– Inter-Connected Stock Exchange
and services in comparison with demand. So more
• Bombay Stock Exchange in Asia’s first stock exchange demand than supply inflation will happen.
and was established in 1875.
• National Stock Exchange was established in 1992 and Types of Inflation
started trading in 1993. Four types of inflation, which are as follow
• LIBOR and MIBOR are reference rate of NSE. i. Demand Pull Inflation Inflation created and sustained
• Over The Counter Exchange of India (OTCEI) was by excess of aggregate demand for goods and services
incorporated in 1990. over the aggregate supply. In other words, demand pull
• BSE GREENEX measures the performance of the inflation takes place when increase in production lags
company’s interims of carbon emissions, launched in behind the increase in money supply.
2012. ii. Cost Push Inflation Inflation which is created and
sustained by increase in cost of production which is
independent of the state of demand (e.g. trade unions can
Securities and Exchange Board bargain for higher wages and hence, contribute to
of India (SEBI) inflation).
• It was established in 1988 and given a statutory basis in iii. Stagflation In this type, there is fall in the output
1992. The capital market in India are regulated by and employment levels. Due to various pressures, the
SEBI. entrepreneurs have to raise the price to maintain their
margin of profit. But as they only partially succeed in
• SEBI regulates the working of stock exchange and
raising the prices, they are faced with a situation of
intermediaries such as stock broker and merchant declining output and investment. Thus, on one side
bankers. there is a rise in the general price level and on the
• SEBI accords approval for mutual funds and register other side, there is a fall in the output and
Foreign Institutional Investors (FIIs). It prohibits employment.
fradulent, unfair trade practices and insider trading. iv. Hyper Inflation It is very rapid growth in the rate of
SEBI protects the interest of investor in securities. inflation in which money loses its value to the point
• SEBI has head office in Mumbai and three regional where alternative mediums of exchanges-such as barter
offices are in New Delhi, Kolkata and Chennai. UK or foreign currency are commonly used. It is also called
Sinha is present Chairman of SEBI. Galloping Inflation.
1036 NDA/NA Pathfinder

DEFLATION 14th Finance Commission

• 14th Finance Commission was constituted by the
• Deflation is that state in which the value of money
Government of India consisting of Dr YV Reddy, former
rises and the price of goods and services falls. Governor Reserve Bank of India, as the Chairman and the
• The state of deflation may appear in the economy due following four members
to following reasons i. Professor Abhijit Sen ii. Ms Sushma Nath
– When the government withdraws money from
iii. Dr M Govinda Rao iv. Dr Sudipto Mundle
circulation.
• The 14th Finance Commission is of the view that tax
– When government imposes heavy direct taxes or
devolution should be the primary route for transfer of
takes heavy loans from the public (voluntary or resources to the states.
compulsory or both).
• In understanding the states needs, it has ignored the plan
– When the Central Bank sells the securities in open
and non-plan distinctions.
market (which reduces the quantity of money in
circulation). • 14th Finance Commission recommended increase in the
– When the Central Bank increases the bank rate
share of states in the centre’s tax revenue from the current
(which curtails the quantity of credit in the 32% to 42%.
economy).
State Finance Commission
States in India appoint a State Finance Commission. It
Measures of Checking Deflation reviews the financial position of the panchayats.
• To increase money supply. To promote credit • Recommends as to the distribution of taxes, tolls and fees
creation by the banks. between the state and panchayats.
• Curtailment in taxes so as to increase the purchasing • Determines taxes, duties, tolls and fees that can be assigned
power of people. to panchayats.
• To increase the public expenditure and to increase the • Recommends on principles to determine grant-in-aid to the
employment opportunities in the economy. panchayats.
• To increase the money supply in circulation by
repayment of old public debts.
• To provide economic subsidy by the government to
UNION BUDGET
the industrial sector of the economy. • The budget is an extensive account of the governments
finances, in which revenues from all sources and expenses
Special Economic Zones (SEZ) of all activities undertaken are aggregated.
A special economic zone is a designated area in a • The Finance Minister presents the Union Budget every year
country that has economic and other laws for more free in the Parliament that contains the Government of India’s
market oriented than regular national laws. With quality revenue and expenditure for one fiscal year, which runs
infrastructure and attractive fiscal package, SEZ aims to from 1st April to 31st March.
promote exports of goods and services and generation of • In the Constitution of India the term budget is no where
additional economic activity. used. It is rather mentioned as Annual Financial Statement
under Article 112 comprising the revenue budget capital
budget and also the estimates for the next fiscal year called
FINANCE COMMISSION Budgeted Estimates.
Finance Commission is constituted to define financial • Government has two kinds of accounts, which are as follow
relations between the Centre and the States. Under the
i. Capital account ii. Revenue account
provision of Article 280 of the Constitution, the
President appoints a Finance Commission for the • Government gets money by capital receipts and revenue
specific purpose of devolution of non-plan revenue receipts.
resources. • Government spends money by two ways, which are as
follow
Functions of Finance Commission i. Capital expenditure ii. Revenue expenditure
The functions of the Finance Commission are to make • Capital receipts include loans from banks, money from
recommendations to the President in respect of the disinvestment, loan from multi-lateral institution.
distribution of net proceeds of taxes to be shared
• Revenue receipts include earning from taxes, penalties and
between the Union and the States.
from maintenance charges.
GENERAL STUDIES Economy 1037

• Capital expenditure are those which are used for assest • Property of the union and public debt of the union.
building. e.g. infrastructure development. • Railways, rates of stamps duty in respect of bills of
• Revenue expenditure It includes expenditure on exchanges, cheques, promissory notes, etc.
maintenance, salary to employees etc. • Taxes on transactions in stock exchanges and future
• Revenue deficit is difference between revenue receipt and markets.
revenue expenditure. • Terminal taxes on goods or passengers, carried by
• Fiscal deficit is the difference between government total railways, sea or air.
earning and its total expenditure.
Primary deficit = Gross fiscal deficit − Net interest State Sources
liabilities The state sources of revenue are as follow
• Capitation tax, duties in respect of succession to
TAX STRUCTURE agricultural land.
• Duties of excise on certain goods produced or
Tax is a compulsory payment by the citizens to the
manufactured in the state, such as alcoholic liquids,
government to meet the public expenditure. It is legally
imposed by the government on the taxpayer and in no case opium, etc, estate duty in respect of agricultural land.
taxpayer can deny to pay taxes to the government. • Fees in respect of any of the matters in the State List,
but not including fees taken in any court.
Taxes are of two types, which are as follow
• Land revenue, rates of stamps duty in respect of
i. Direct Tax A direct tax is that tax, which is borne
documents other than those specified in the Union List.
by the person on whom it is levied. A direct tax
cannot be shifted to other person. • Taxes on agricultural income and on land and
buildings.
ii. Indirect Tax Indirect taxes are those taxes, which are
charged on the goods and services consumed by person. • Taxes on the consumption or sale of electricity.
• Taxes on the sale and purchase of goods other than
List of Taxes newspapers. Taxes on advertisements other than those
Direct Tax Indirect Tax published in newspapers.
Personal Income Tax Excise Duty • Taxes on goods and passengers carried by road or on
Corporation Tax Custom Duty inland waterways, taxes on vehicles.
Wealth Tax Sales Tax • Taxes on animals and boats, taxes on professions, trades
Gift Tax Service Tax
callings and employments.
Land Revenue Value Added Tax
• Taxes on luxuries, including taxes on entertainments,
amusements, betting and gambling, tolls.
Profession Tax Passenger Tax
Stamp Duty and Registration Charges Entertainment Tax Goods and Services Tax (GST)
Securities Transaction Tax Electricity Duty The Goods and Services Tax (GST) will simplify and
Banking Cash Transaction Tax Motor Vehicles Tax harmonise the indirect tax regime in country. The GST
will be levied both on goods (manufacturing) and services.
Sources of Revenue : Union and State It will convert the country into unified market, replacing
most indirect taxes with one tax. It would have a dual
The following list will show the respective sources of structure–a central component levied and collected by the
revenue for the Union and the State. Centre and a State component administered by State.
Union/Central Sources Government of India planned GST to be implemented on
1st April, 2017.
The central sources of revenue are as follow
• Corporation tax, currency, coinage and legal tender,
foreign exchange. MERGING OF TAXES IN GOODS AND
• Duties of customs including export duties. SERVICES TAX (GST)
• Duties of excise on tobacco and certain goods The final consumer will bear only the GST charged by
manufactured or produced in India. the last dealer in the supply chain, at the central level,
central excise duty, additional excise duty, service tax,
• Estate duty in respect of property other than agricultural
countervailing duty and special additional duty of
land.
customs will be subsumed. At the state value-added
• Foreign loans, lotteries organised by the Government of
tax/sales tax, entertainment tax, central sales tax, octroi
India or the Government of a State. and entry tax, purchase tax, luxury tax and taxes on
• Post office, savings bank, posts and telegraphs, telephones, lottery, betting and gambling will be subsumed.
wireless, broadcasting and other like forms of
communication.
1038 NDA/NA Pathfinder

• FDI occurs when a company invests in a business that

India’s Export-Import is located in another country and it is investing not
• India was 19th largest exporter and 12th largest importer of less than 10% of shares belonging to the foreign
merchandise trade in world. In services, India’s export company. It is a non-debt capital flow. FII (Foreign
ranking is 8th and of import is 10th. Institutional Investment). Foreign portfolio investment
• Top five countries to which India exports are USA, UAE, occurs, when foreign investment in the form of shares,
Hong Kong, China and Saudi Arabia. equities and bonds, is made by a foreign company.
• Top five countries from which India imports are China, • The three main institutions that handle FDI related
Saudi Arabia, UAE, Switzerland and USA. issues in India are the Foreign Investment Promotion
• India exports mostly petroleum products, gem and Board (FIPB), the Foreign Investment Implementation
jewellery, textile products, chemical and related products Authority (FIIA) and the Secretariat for Industrial
and agri-allied products etc. They are given in descending Assistance (SIA) activities/sectors not opened to
order of their share. private sector, viz railways and atomic energy.
• India imports crude petroleum, gem and jewellery, chemical • Since, 20th May, 2011 FDI in Limited Liability
and related products, electronic items and machinery etc. Partnership (LLP) has been allowed.
They are given in descending order of their share in total
imports.
• India has signed Free Trade Agreement (FTA) with INTERNATIONAL ORGANISATIONS
different countries, which are India-Sri Lanka, India-Nepal,
India-Bhutan, India-Thailand, India-Singapore, India-South
AND REGIONAL GROUPS
Korea, India-Japan and India-Malaysia. An International Organisation has been defined as a
form of co-operation of Sovereign states based on
Balance of Payment multilateral international agreement and comprising of a
• The Balance of Payment (BoP) records the transaction in relatively stable range of participants.
goods, services and assets between resident of the country
and rest of the world for a specified time period mostly for Bretton Woods Conference
a year (April-March). The Bretton Woods Conference, officially known as the
• The two main accounts in the Balance of Payment (BoP), United Nations Monetary and Financial Conference,
which are the current account and the capital account. was a gathering of delegates from 44 nations that met
• The current account record-trade of goods (export and from 1st to 22nd July, 1944, in Bretton Woods, New
import of goods), trade of services (export and import of Hampshire, to agree upon a series of new rules for the
services) and transfer payments. Trade in services also post World War II.
called as trade in invisibles. Transfer payment includes The two major accomplishments of the conference were
remittance and gifts. the creation of the International Monetary Fund (IMF)
• Capital account includes all international purchase, sale of and the International Bank for Reconstruct and
assets, such as stock, bond etc, investment made in India, Development (IBRD) also known as World Bank.
foreign direct investment in India, borrowing or loans from
other countries and organisation. India giving loans to other World Bank
countries and investing in foreign lands. Since, its inception in 1944, the World Bank has
• Balance of capital account can be determined by expanded from a single institution to a closely associated
substracting money went from India with money came to group of five development institutions.
India. If more money came to India then it went then this Their mission evolved from the International Bank for
is called capital account surplus and vice-versa condition Reconstruction and Development (IBRD) as facilitator
will be capital account deficit. of post-war reconstruction and development to the
present-day mandate of worldwide poverty alleviation in
Foreign Direct Investment (FDI) close coordination with the International Development
• FDI is a type of investment that involves the injection of Association and other Members of the World Bank
foreign funds into an enterprises that operates in a different Group.
country of origin from the invester. FDI play an On 1st July, 2012, Jim Yong Kim became the 12th
extraordinary and growing role in global business. It can President of the World Bank Group. He has been
provide a firm with new markets and marketing channels, reappointed for a Second Five Year term beginning July
cheaper production facilities, access to new technology, 2017.
products, skill and financing.
GENERAL STUDIES Economy 1039

International Monetary Fund (IMF) International Labour Organisation (ILO)

International Monetary Fund (IMF) was established Established on 11th April, 1919
alongwith the IBRD at the Conference of 44 nations held
Associated with UNO 14th December, 1946
at Bretton Woods, New Hampshire, USA in July 1944. At
present, 189 nations are Members of IMF. India is a Headquarters Geneva
founder Member of the IMF. Membership 185
The IMF’s primary purpose is to ensure the stability of the Director-General Guy Ryder (2012-17)
International Monetary System—the system of exchange
Nobel Peace Prize 1969
rates and international payments that enables countries
(and their citizens) to transact with one another.
OPEC
World Trade Organisation (WTO) It is the Organisation of the Petroleum Exporting
The World Trade Organisation (WTO) is the only global Countries (OPEC). It is an oil cartel whose mission is to
International Organisation dealing with the rules of trade coordinate the policies of the oil-producing countries. The
between nations. The goal is to help producers of goods goal is to secure a steady income to the member states and
and services, exporters and importers conduct their to secure supply of oil to the consumers.
businesses smoothly. The members of the World Trade
Organisation (WTO) agree to accord MFN status to each Food and Agriculture Organisation (FAO)
other. The Food and Agriculture Organisation (FAO) is an agency
of the United Nations that leads international efforts to
TRIPS (TRADE RELATED ASPECTS defeat hunger. Serving both developed and developing
OF INTELLECTUAL PROPERTY RIGHTS) countries, FAO acts as a neutral forum where all nations
The 1995 TRIPS Agreement provided for both Product
meet as equal to negotiate agreements and debate policy.
patents and Process patents. Product patents are meant
to protect the individual product, while Process patent OECD
protect the process used to create the product. The OECD (Organisation for Economic Cooperation and
agreement gave developing countries 10 years to enact Development) is an international economic organisation of
laws to protect intellectual property. Thus, India enacted 35 countries founded in 1961 to stimulate economic progress
its Patents (Amendment) Act in 2005 to confirm to the and world trade. It is a forum of countries committed to
agreement. Developed countries on the other hand had democracy and free market economy. Its headquarter is
to enact laws in 1995 itself. Under the agreement, located in Paris.
protection to patents had to be provided for 20 years.
TRIPS agreement is administered by WTO.
Asian Development Bank (ADB)
The Asian Development Bank (ADB), an International
GATS Partnership of 67 member countries, was established in 1966
with its headquarters at Manila, Philippines. India is a
GATS (General Agreement on Trade in Service) was one founder member. The Asian Development Bank was
of the three agreements signed in 1995, along with established following the recommendations of the United
Agreement on Agriculture and TRIPS. It provided for Nations Economic and Social Commission for Asia and the
regulations on International Trade in services for the first Pacific. It was formed to foster economic growth and
time, which were not there even in GATS. cooperation in the region of Asia and the Pacific.
GATS negotiations are conducted among nations bilaterally
on the basis of requests and offers. GATS cover broad IBSA (India- Brazil- South Africa)
range of economic activity– health care, education, The IBSA is a international group for promoting
telecommunication, banking, insurance, tourism, BPO etc. international co-operation between India, Brazil and South
Africa. The main objective of IBSA is to promote
ILO co-operation and build consensus on the issue of
The International Labour Organisation (ILO) emerged international importance.
with the League of Nations from the Treaty of Versailles
in 1919. It was founded to give expression to the growing APEC
concern for social reform after World War I and the Asia-Pacific Economic Co-operation or APEC, is the
conviction that any reform had to be conducted at an premier forum for facilitating economic growth,
international level. co-operation, trade and investment in the Asia-Pacific
The ILO has generated such hallmarks of industrial society region. APEC is the only inter-governmental grouping in
as the eight-hour working day, maternity protection, child the world operating on the basis of non-binding
labour laws and a range of policies, which promote commitments, open dialogue and equal respect for the
workplace safety and peaceful industrial relations. views of all participants.
1040 NDA/NA Pathfinder

BRICS Motor vehicle agreement has been signed to ease the

movement of people and goods between Nepal, Bhutan,
BRICS is an acronym that refer to countries Brazil, Russia,
India and Bangladesh. India has decided to dedicate a
India, China and South Africa which are all deemed to be
satellite to SAARC country. Secretariat of SAARC is
at similar stage of newly advanced economic development.
situated in Nepal.
BRICS bank have opened in year 2014 with headquarter
at Shanghai. Bank is known by name of New ASEAN
Development Bank.
ASEAN (Association of South-East Asian Nations) was
New Development Bank (NDB) established on 8th August, 1967, in Bangkok, Thailand,
with the signing of the ASEAN Declaration (Bangkok
The New Development Bank (NDB) formerly referred to Declaration) by the Founding Fathers of ASEAN, namely;
as the BRICS Development Bank, created by Brazil, Indonesia, Malaysia, Philippines, Singapore and Thailand.
Russia, India, China and South Africa (BRICS) nations Now, it has 10 members Brunei, Myanmar and Vietnam
formally started its operations on 21st July, 2015 from its have joined it.
headquarters in Shanghai, China.
SAFTA and SAPTA
Asian Infrastructure The South Asian Free Trade Area (SAFTA) is an
Investment Bank (AIIB) agreement reached on 6th January, 2004 at the 12th
International financial institution that aims to support the SAARC Summit in Islamabad, Pakistan. It created a free
building of infrastructure in the Asia-Pacific region. Bank trade area of 1.6 billion people in Bangladesh, Bhutan,
has 57 members and it started working from January, 2016. India, Maldives, Nepal, Pakistan and Sri Lanka.
Its headquarter is located at Beijing, China. India is In December, 1991, the Sixth Summit held in Colombo
founding member of AIIB. approved the establishment of an Inter-Governmental
Group (IGG) to formulate an agreement to establish a
D-8 South Asian Preferential Trading Arrangement (SAPTA)
The Developing-8 (D-8) is a group of developing countries by 1997.
with large Muslim populations that have formed economic Given the consensus within SAARC, the Agreement on
development alliance. It consists of Bangladesh, Egypt, SAPTA was signed on 11th April, 1993 and entered into
Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey. force on 7th December, 1995 well in advance of the date
The objectives of D-8 are to improve member states stipulated by the Colombo Summit.
position in the global economy, diversify and create new
opportunities in trade relations, enhance participation in European Union
decision-making at international level and improve The European Union (EU) is an economic and political
standards of living. union of 28 member states that are located primarily in
Europe. The European Union received the 2012 Nobel
IFAD Peace Prize for having ‘‘contributed to the advancement of
IFAD (International Fund for Agricultural Development) peace and reconciliation, democracy and human rights in
Europe.’’ On 1st July, 2013, Croatia became the 28th EU
is a specialised agency of the United Nations dedicated to
member.
eradicate rural poverty in developing countries. It was
established as an international financial institution in 1977
as one of the major outcomes of the 1974 World Food BREXIT
Conference. Brexit is an acronym for British Exit. It is used for the
separation of the UK from European Union. In the Brexit
SAARC referendum; the ‘leave’ side won decisively by securing
51.9% of the total votes.
SAARC (South Asian Association for Regional
Co-operation) is an organisation of South Asian nations,
founded in December, 1985 and dedicated to economic, Financial Action Task Force (FATF)
technological, social and cultural development emphasising It is an inter-governmental body responsible for setting
collective self-reliance. Its seven founding members are global standards for anti-money laundering and combating
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and financing of terrorism. Its secretariat is located at the
Sri Lanka. Afghanistan joined it in 2007. headquarters of OECD in Paris.
GENERAL STUDIES Economy 1041

PRACTICE EXERCISE
1. India has Codes 15. Inflation implies
(a) socialistic economy (a) 1 and 2 (b) 2 and 3 (a) rise in budget deficit
(b) gandhian economy (c) 1 and 3 (d) Only 3 (b) rise in money suply
(c) mixed economy 11. Rolling plan was designed for (c) rise in general price index
(d) free economy the period (d) rise in prices of consumer goods
2. India opted for ‘mixed economy’ in (a) 1978-80 (b) 1980-85 16. Consider the following statement(s)
(a) Framing of the Constitution (c) 1985-90 (d) 1974-97 1. NABARD is an apex institution
(b) Second Five Year Plan 12. Which one of the following can handling matters concerning
(c) Industrial Policy of 1948 aid in furthering the policy, planning and operating the
(d) None of the above field of credit for agriculture and
government objective of
3. Which one of the following was the inclusive growth? other developmental activities in
task of the Planning Commission? rural India.
1. Promotion of self help groups.
(a) Preparation of the plan 2. NABARD operates through its
2. Promotion of micro, small and
(b) Implementation of the plan head office at Delhi.
medium enterprises.
(c) Financing of the plan Which of the statement(s) given
3. Implementing the right to
(d) Both ‘a’ and ‘b’ above is/are correct?
education.
4. Who wrote the book ‘Planned (a) Only 1
Select the correct answer using (b) Only 2
Economy for India’? the codes given below. (c) Both 1 and 2
(a) M Visvesvaraya (a) Only 1 (b) 1 and 3 (d) Neither 1 nor 2
(b) Sardar Vallabhbhai Patel (c) 1 and 2 (d) All of these
(c) Jawaharlal Nehru 17. Consider the following statement(s)
(d) Mahatma Gandhi 13. Consider the following
1. MNREGA was launched in the
statements regarding the Eleventh Five Year Plan.
5. The contribution of agriculture to underdeveloped nature of the
India’s economy is 2. Indira Awas Yojana was launched
economy of India
(a) increasing (b) decreasing in the Ninth Five Year Plan.
1. Inequitable distribution of
(c) constant (d) None of these Which of the statement(s) given
income.
6. Planning in India drew on above is/are correct?
2. High unemployment in the
(a) Only 1
(a) the New Economic Programme of economy.
Lenin (b) Only 2
3. Slow rate of increase in (c) Both 1 and 2
(b) the Fabian Socialism of Sidney and national income. (d) Neither 1 nor 2
Beatrice Web
4. Slow rate of growth of road
(c) the British welfare mechanism
infrastructure. 18. Hard Currency is defined as
(d) new democratic development currency
Which of the statements given
packages (a) which can hardly be used for
above are correct? international transactions
7. National Development Council (a) 3 and 4 (b) 1, 2 and 3
(b) which is used in times of war
was set-up in (c) 2 and 3 (d) All of these
(c) which loses its value very fast
(a) 1948 (b) 1950 (c) 1551 (d) 1952
14. Which one of the following (d) traded in foreign exchange market
8. Economic Planning is a subject statements is/are correct about for which demand is persistently
(a) in the Union List the Pradhan Mantri Gram relative to the supply
(b) in the State List Sadak Yojana (PMGSY)? 19. A Scheduled Bank is one which is
(c) in the Concurrent List (a) It provides connectivity to all the included in the
(d) unspecified in any Special List unconnected habitations of more (a) Second Schedule of Banking
9. Economic survey is published by than 1000 persons in the rural Regulation Act
(a) Ministry of Finance areas by good quality all-weather
(b) Second Schedule of Constitution
(b) Planning Commission roads
(c) Second Schedule of Reserve Bank
(c) Government of India (b) It was launched in 2005 as a
of India Act
(d) Indian Statistical Institute fully funded centrally sponsored
scheme (d) None of the above
10. The Planning Commission of India (c) It provides connectivity to all 20. When was the Reserve Bank of
1. was set-up in 1950. unconnected habitations of more India taken over by the
2. is a constitutional body. than 250 persons in the hilly and Government?
desert areas by good quality (a) 1945 (b) 1949
3. is an advisory body.
all-weather roads (c) 1952 (d) 1956
4. is a government department. (d) Both ‘a’ and ‘c’
1042 NDA/NA Pathfinder

21. Match the following 27. Exim Bank was set-up in 35. Consider the following statements
(a) 1980 (b) 1982 1. Life Insurance Corporation of
List I List II (c) 1985 (d) 1986 India is the oldest insurance
(Five Year Plans) (Objectives) company in India.
28. Open market operations of a
A. First Plan 1. Growth with social Central Bank are sale and 2. National Insurance Company
justice Limited was nationalised in the
purchase of
B. Third Plan 2. Sustainable year 1972 and made a subsidiary
inclusive growth
(a) foreign currencies
(b) corporate securities of General Insurance Corporation
C. Ninth Plan 3. Self-reliant and of India.
self-generating (c) trade bills
economy (d) government securities 3. Headquarters of United India
D. Twelfth Plan 4. Agriculture,
Insurance Company Limited are
29. The place where bankers meet located at Chennai.
irrigation and
power projects and settle their mutual claims
Which of the statements given
and accounts is known as
Codes above are correct?
(a) treasury
A B C D A B C D (a) 1 and 3 (b) 1 and 2
(b) clearing house
(a) 2 4 3 1 (b) 2 3 4 1 (c) 2 and 3 (d) All of these
(c) collection centre
(c) 4 3 1 2 (d) 1 3 2 4 (d) dumping ground 36. In 1921, the presidency banks of
22. For regulation of the Insurance 30. The Imperial Bank of India, Bengal, Madras and Bombay were
Trade in the country the after nationalisation was given nationalised to give birth to
Government has formed (a) Punjab National Bank
the name of
(a) SEBI (b) Syndicate Bank
(a) Reserve Bank of India
(c) State Bank of India
(b) Reserve Bank of India (b) Bank of India
(d) Punjab and Sind Bank
(c) Insurance Regulatory and (c) State Bank of India
Development Authority (d) Indian Overseas Bank 37. The standard of living in a country is
(d) General Insurance Corporation represented by its
31. If the cash reserve ratio is
(a) national income
23. The Reserve Bank of India issues lowered by the Central Bank,
(b) per capita income
(a) all the currency notes what will be its effect on credit
(c) poverty ratio
(b) all the currency notes except the creation? (d) unemployment rate
one rupee note (a) Decrease (b) Increase
(c) all the currency notes except the (c) No change (d) None of these 38. Consider the following statements
hundred rupee note with regard to Statutory Liquidity
32. The main function of the Exim
(d) only notes of ` 10 and above Ratio (SLR)
Bank is
24. Consider the following statement(s) (a) to help RBI in the regulation of
1. To meet SLR, commercial banks
1. NABARD inherited all the apex foreign exchange can use cash only.
roles from Reserve Bank of (b) to prevent unlicensed transaction 2. SLR is maintained by the banks
India. (c) to promote exports and imports with themselves.
2. NABARD gives long-term loans (d) to conserve foreign exchange 3. SLR restricts the banks leverage
to State Governments to enable in pumping more money into the
them to subscribe to the share of 33. Which of the following are the economy.
co-operative credit societies. functions of the Central Bank of
Which of the statement(s) given
Which of the statement(s) given India?
above are correct?
above is/are correct? 1. Regulation of currency and (a) 1 and 2
(a) Only 1 (b) Only 2 flow of credit system. (b) 1 and 3
(c) Both 1 and 2 (d) Neither 1 nor 2 2. Maintaining exchange value of (c) 3 and 2
rupee. (d) All of the above
25. The ‘Rolling Plan’ concept in
3. Formulating Monetary policy of
national planning was introduced 39. Which of the following is not true
India.
by about ‘vote-on account’?
4. Supervisory powers over the
(a) Indira Gandhi (a) It is a budget presented in the
indigenous bankers and leasing
(b) The National Front Government Parliament to cover the deficit left
companies.
(c) The Janata Government by the last budget
(d) Rajeev Gandhi Select the correct answer using
the codes given below. (b) It does not allow the government to
26. ‘Repo rate’ is the rate at which (a) 1 and 3 (b) 1, 2 and 3 set for the economic policies of the
(a) the Reserve Bank of India lends to (c) 1, 2 and 4 (d) All of these new plan which starts from 1st April
State Government (c) It prevents the government from
(b) the international aid agencies lend 34. Which bank gives long-term imposing fresh taxes or withdrawing
to Reserve Bank of India loans to farmers? old one
(c) the Reserve Bank of India lends to (a) NABARD
(d) This allows the government to
banks (b) Land Development Bank
withdraw an amount for a period
(d) the bank lend to Reserve Bank of (c) SBI
with the consent of Parliament
India (d) Rural banks
GENERAL STUDIES Economy 1043

40. Which one of the following 48. The National Income is more at 56. Match the following
statements is correct? Fiscal current prices than at constant
List I List II
Responsibility and Budget prices because
(a) increase in price is equal to A. Depression 1. Co-existence of inflation
Management Act (FRBMA) and stagnation
concerns increase in production
(b) increase in price is more than B. Recession 2. Recovery from depression
(a) fiscal deficit
production C. Reflation 3. Reduction in prodution over
(b) revenue deficit a short period
(c) Both fiscal and revenue deficit (c) increase in production is more
than increase in price D. Stagflation 4. Insufficient demand leading
(d) neither fiscal deficit nor revenue to idle men machinery over
deficit (d) of decrease in production only a long time
41. Temporary tax levied to obtain 49. Which of the following taxes is 5. Reduction in level of
not levied by the Union economy due to falling
additional revenue is called prices
Government?
1. cess 2. rate
(a) Corporation Tax (b) Excise Duty Codes
3. fee 4. surcharge (c) Octroi (d) Income Tax
Codes A B C D A B C D
(a) 1 and 2 (b) 1 and 4 50. The principal source of revenue to (a) 1 2 3 5 (b) 4 3 2 5
(c) 2 and 4 (d) Only 3 the State Government in India is (c) 4 3 2 1 (d) 3 4 2 1
(a) Income tax
42. Which among the following (b) Sales tax 57. The headquarters of International
formulates fiscal policy? (c) State Excise duties Monetary Fund and World Bank
(a) RBI (d) Land revenue are located at
(b) Finance Ministry (a) Geneva and Montreal
(c) SEBI 51. Which of the following is an (b) Geneva and Vienna
(d) Planning Commission indirect tax? (c) New York and Geneva
(a) Corporation tax
(d) Both Washington DC
43. What is ‘Recession’? (b) Excise duty
(a) Rise in the cost of production, (c) Wealth tax 58. Which one of the following is not a
especially because of wage (d) Capital Gains tax member of Organisation of the
increase Petroleum Exporting Countries
(b) Increase in money supply without 52. Customs duties, export duties,
corporation taxes, taxes on (OPEC)?
a matching increase in production
capital value of assets (excluding (a) Algeria (b) Brazil
(c) Reduction in production and
agricultural land of individuals (c) Ecuador (d) Nigeria
employment for want of sufficient
demand for goods and companies) are 59. Which of the following thing India
(d) None of the above (a) taxes and duties levied by the exports in large quantity?
Centre but collected by the States 1. Petroleum products, gems and
44. Funds belonging to Government
(b) taxes and duties levied by the jewellery, chemicals
of India are kept in Centre but wholly appropriated by
1. Consolidated Fund of India. 2. Petroleum, electronic products,
the States
medical equipments
2. Public Account Fund of India. (c) taxes levied and collected by the
Union but shared with the States 3. Gold metal, platinum, coal
3. Contingency Fund of India.
Select the correct answer using (d) taxes and duties that accrue Which of the statement(s) given
wholly to the Union Government above is/are correct?
the codes given below.
(a) 1 and 3 (b) 2 and 3
(a) 1 and 2 (b) 2 and 3 53. The largest contribution in
(c) Only 1 (d) Only 2
(c) 1 and 3 (d) All of these India’s National Income is from
45. Deficit financing is spending (a) primary sector 60. Consider the following statement(s)
(b) secondary sector regarding Monetary Policy
(a) by getting foreign aid
(c) tertiary sector Committee are correct?
(b) less than what is needed
(d) Any of the above
(c) in excess of revenue 1. This committee will have
(d) by borrowing from RBI 54. What are ‘Open Market 3 members from RBI and other
46. Excise duties are taxes on Operations’? 3 members will be appointed by
(a) sale of commodities (a) Activities of SEBI-registered Central Government.
(b) export of commodities brokers 2. Governor of RBI will be the
(c) production of commodities (b) Selling of securities by the RBI ex-offico chairman of committee.
(d) import of commodities (c) Selling of gilt-edged securities by 3. Monetary Policy Committee will
the Government
47. The maximum effect of direct be entrusted with fixing
(d) Sale of shares by FIIs
taxes is on benchmark policy rates.
(a) food price 55. Which of the following sectors Which of the statement(s) given
(b) consumer goods does not come under tertiary above is/are correct?
(c) capital goods sector? (a) 1 and 2 (b) 2 and 3
(d) income (a) Transport (b) Trade (c) Only 3 (d) All of these
(c) Business Services (d) Electricity
1044 NDA/NA Pathfinder

61. Which of the following pairs are 3. Its advices are binding on the 69. When the Basel III is going to be
correct? government. fully implemented.
(a) Sugamya Bharat : For disable person 4. Cabinet Secretary will be the (a) 31st March, 2017
CEO of NITI Aayog. (b) 31st March, 2018
(b) SWAYAM : Online portal for
Labour Ministry Which of the statements given (c) 31st March, 2019
(c) Diamond Ministry of above are not correct? (d) None of the above
:
quadrilateral Transport (a) 2 and 4 70. Which of the following scheme
(d) Mission : Insurance sector (b) 1, 3 and 4 provide the insurance coverage and
Indradhanush (c) 3 and 4
financial support to the farmers in
(d) 1, 2 and 3
62. Consider the following regarding the event of failure of crops and
Good and Service Tax 66. Which of the following subsequent low crop yield?
1. Initially GST will not apply to statements is true about GST? (a) NNAIS (b) MNAIS
petroleum crude, high speed (a) Government of India planned GST (c) GIC (d) LNAIS
diesel, petrol and natural gas. to be implemented on 1st April,
2017 71. Which one among the following
2. Tobacco and its product will be
(b) The GST will be levied both on statements regarding the Eighth
subjected to GST.
goods (manufacturing) and Five Year Plan in India is not
3. Alcoholic liquor will be free services correct?
from GST.
(c) It will convert the country into a (a) The plan was postponed by two
Which of the statement(s) given unified market, replacing most years because of political upheavals
above are correct? indirect taxes with one tax at the centre
(a) 1 and 2 (d) All of the above (b) It aimed at high growth of both
(b) 1 and 3 agriculture and manufacturing
(c) 2 and 3
67. The Government of India has
sectors
(d) All of the above implemented a modified version
(c) Its emphasis was on growth in
of GAAR, from
63. Arrange the following taxes in export and import, improvement in
(a) 1st March, 2016
trade and current account deficit
descending order according to the (b) 31st March, 2016
(d) It set before itself the two principal
amount collected by government. (c) 1st April, 2016
objectives of ‘growth with stability’
1. Income tax 2. Corporation tax (d) 31st April, 2016 and ‘growth with justice’
3. Service tax 4. Excise duty 68. Consider the following
Codes 72. Which among the following
statement(s) about 14th Finance
(a) 1 > 2 > 3 > 4 statement(s) is/are true with regard
Commission
(b) 2 > 1 > 3 > 4 to WTO membership?
1. The Commission recommended
(c) 2 > 1 > 4 > 3 1. All WTO members automatically
increase in the share of states
(d) 1 > 2 > 4 > 3 receive the ‘most favoured nation’
in the centre’s tax revenue from
64. India is member in ongoing status.
the current 32% to 42%, the
multilateral trade agreement single largest increase ever 2. Over 75% of WTO members are
discussion known as Regional recommended. from developing countries, WTO
Comprehensive Economic membership allows them access to
2. The 14th Finance Commission,
Partnership. Along with India developed markets at the lower
headed by former RBI Governor
who others are also members of tariff.
YV Reddy, has called for an
this group? autonomous and independent Select the correct answer using the
(a) Australia, Canada, China GST compensation fund. codes given below.
(b) Japan, South Korea, Asian (a) Only 1
3. The 14th Finance Commission
members (b) Only 2
is of the view that tax
(c) New Zealand, Australia, Chile (c) Both 1 and 2
devolution should be the
(d) Canada, US, China (d) Neither 1 nor 2
primary route for transfer of
65. Consider the following resources to the states. 73. TRIPS (Trade Related Aspects of
statements regarding NITI Aayog Which of the statement(s) given Intellectual Property Rights)
1. It is statutory body. above is/are correct? agreement is administered by
2. It has governing council (a) Only 1 (a) United Nations Conference on Trade
comprises of Chief Ministers, (b) Only 2 and Development (UNCTAD)
Governors of Union Territories (c) 2 and 3 (b) United Nations Organisation (UNO)
and Union Minister. (d) All of the above (c) World Trade Organisation (WTO)
(d) World Bank (WB)
GENERAL STUDIES Economy 1045

QUESTIONS FROM
NDA/NA EXAM (2012-2016)
2012 (I) 2012 (II) 2013 (II)
1. Schemes run under the 4. Consider the following 8. Which of the following statement(s)
National Rural Employment characteristics of industries about ‘Chit Fund’ in India is/are
Guarantee Act are sponsored 1. They can be located in a wide correct?
(NREGA) variety of places. 1. It is a kind of savings scheme.
(a) by the Central Government 2. They are not dependent on any 2. There are no acts regulating the
alone specific raw material. activities relating the activities
(b) partly by the Central relation to Chit Funds in India.
3. They are generally not polluting
Government and partly by the industries. Select the correct answer using the
State Government codes given below.
4. The most important factor in
(c) by Centre, State and (a) Only 1 (b) Only 2
their location is accessibility.
Panchayat bodies together (c) Both 1 and 2 (c) Neither 1 nor 2
(d) on public-private partnership Which one of the following types of
basis industries has the above
characteristics? 2014 (II)
2. The World Bank was created (a) Market-oriented (b) Foot loose
immediately after the World 9. Which one of the following is the
(c) Sunset (d) Sunrise correct sequence of economic sectors in
War II. Its activities are
focused on the developing 5. A high level committee set-up by terms of their contribution to the GDP
the Ministry of Housing and of India in decreasing order?
countries.
Urban Poverty Alleviation, (a) Service—Industry—Agriculture
Which among the following conducted a survey of the slum (b) Agriculture—Industry—Service
are the activities of the bank? populations in India’s states. (c) Industry—Service—Agriculture
1. Human development. (d) Agriculture—Service—Industry
Which one among the following
2. Agriculture and rural states was identified as being the 10. Which one of the following is not an
development. one with highest slum population? ASEAN member?
3. Environmental protection (a) Andhra Pradesh (b) Madhya Pradesh (a) Cambodia (b) Laos
and governance. (c) Maharashtra (d) Tamil Nadu (c) Myanmar (d) Taiwan
4. Loans and grants to the
member countries.
11. Which one among the following
Select the correct answer 2013 (I) countries was the top contributor to
India’s FDI for the year 2013-14?
using the codes given below. 6. Which of the following (a) Mauritius (b) Singapore
(a) 1, 2 and 3 statement(s) is/are correct? (c) USA (d) Japan
(b) 3 and 4 1. The 14th Finance Commission
(c) 2 and 4 was constituted under the
(d) All of the above Chairmanship of Shri Vijay 2015 (I)
3. Consider the following Kelkar. 12. The Concept of Demographic
statement(s) relating to 2. The 14th Finance Commission Transition provides a model for
planning in India. has been specifically asked also (a) analysing government responses to
to recommend how non-priority changing pattern of population growth
1. In the year 1938, the
PSUs be relinquished. (b) explaining major patterns of global
National Planning
population movement throughout the
Committee was set up in Select the correct answer using history
India under the the codes given below. (c) analysing spatial variations in the
chairmanship of Jawaharlal (a) Only 1 (b) Only 2 distribution, growth and movement of
Nehru. (c) Both 1 and 2 (d) Neither 1 nor 2 population overtime
2. The Bombay Plan was 7. Which one among the following (d) examining the relationship between
prepared by the Indian economic development and natural
stock exchanges was closed for population change
industrialists.
two continuous days in October,
3. Acharya Kripalani prepared 2012 due to the devastating 13. The Second Five Year Plan that called
the Gandhian Plan. for the establishment of socialist
effects of Hurricane Sandy?
Which of the statement(s) (a) New York Stock Exchange pattern of society was commonly
given above is/are correct? (b) Toronto Stock Exchange
referred to as the
(a) Only 1 (b) Only 2 (a) Harrod-Domar Plan
(c) National Stock Exchange of
(c) 1 and 2 (d) All of these (b) Mahalanobis Plan
Australia
(c) Nehru Plan
(d) London Stock Exchange
(d) People’s Plan
1046 NDA/NA Pathfinder

(c) Maternal mortality rate is on the (c) Enhancing agricultural and rural
2015 (II) rise due to lack of medical facilities incomes
14. Which one of the following (d) Percentage of women giving birth in (d) Checking inflation and
continents accounts for the health institutions is on the rise strengthening non-economic
maximum share in exports from variables like nutritional
18. The First Five Year Plan (1951-56) requirements, health and family
India? was drafted by
(a) Asia (b) Europe planning
(a) PC Mahalanobis (b) KN Raj
(c) Africa (d) North America 22. Which of the following is/are the
(c) JC Kumarappa (d) Jawaharlal Nehru
15. During the Eleventh Five Year component/components of the
Plan, agriculture sector in India Integrated Power Development
witnessed a growth rate of 3.3% 2016 (I) Scheme launched by the
per annum which is higher than 19. Areas which are engines for Government of India recently?
2.4% per annum in the previous economic growth supported by 1. Strengthening of
Five Year Plan. This is largely due quality infrastructure and sub-transmission and
to better performance of complemented by an attractive distribution networks in the
(a) crops and livestock fiscal package are known as urban areas.
(b) oilseeds and fibres 2. Metering of distribution
(a) Export Processing Zones
(c) fishing and oilseeds transformers/feeders/ consumers
(b) Duty Free Tariff Zones
(d) fibres and fishing in the rural areas.
(c) Special Economic Zones
16. Which of the following (d) Technology Parks Select the correct answer using
statement(s) about the livestock the codes given below.
sector in India is/are correct? 20. Which one of the following is not a (a) Only 1 (b) Only 2
feature of the Nehru-Mahalanobis (c) Both 1 and 2 (d) Neither 1 nor 2
1. Livestock contributed about 25%
of gross value added in model of development strategy?
(a) Development of capital goods 23. Which of the following is/are not
agriculture.
industries FDI policy change(s) after 2010?
2. It provides self employment to a
(b) Major involvement of the state in 1. Permission of 100% FDI in
large segment of population.
the economy automotive sector.
3. Rapid growth of livestock sector
(c) Industrial deregulation and 2. Permitting foreign airlines to
can be egalitarian and inclusive.
disinvestment in the public sector make FDI upto 49%.
Select the correct answer using the (d) Enhancing the scope and 3. Permission of upto 51% FDI
codes given below. importance of the public sector under the government approval
(a) Only 3 (b) 1 and 2 route in multi-brand retailing,
(c) 2 and 3 (d) All of these 21. Which of the following best subject to specified conditions.
17. Which one of the following is not explains the stated broad vision 4. Amendment of policy on FDI in
correct in the current Indian and aspirations of the Twelfth Five single-brand product retail
scenario? Year Plan (2012-17)? trading for aligning with global
(a) Life expectancy is on the increase (a) Faster, sustainable and more practices.
and is about 67 years as of now inclusive growth Select the correct answer using
(b) Infant mortality rate is on the (b) Modernisation of industries and the codes given below.
decline and has reached 47 per strengthening infrastructure (a) Only 1 (b) 2 and 4
thousand (c) 1 and 2 (d) 1, 2 and 3

ANSWERS
Practice Exercise
1 c 2 c 3 a 4 a 5 b 6 a 7 d 8 c 9 a 10 c
11 a 12 d 13 b 14 d 15 c 16 a 17 b 18 d 19 c 20 b
21 c 22 c 23 b 24 b 25 c 26 c 27 b 28 d 29 b 30 c
31 b 32 c 33 d 34 b 35 c 36 c 37 b 38 c 39 d 40 c
41 b 42 b 43 c 44 d 45 c 46 c 47 d 48 c 49 c 50 b
51 b 52 d 53 c 54 b 55 d 56 c 57 d 58 b 59 c 60 d
61 a 62 d 63 c 64 b 65 b 66 d 67 c 68 d 69 c 70 b
71 b 72 c 73 c

Questions From NDA/NA Exam 2012-16

1 b 2 d 3 c 4 b 5 c 6 b 7 a 8 a 9 a 10 d
11 a 12 d 13 b 14 a 15 a 16 d 17 c 18 b 19 c 20 c
21 a 22 a 23 a