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ECONOMICS
Banking
Agriculture
Human development
ECONOMICS STRATEGY
Print
Current Affairs
History
Geography
Polity
Economics
Culture
Environment
ECONOMICS
(Economic and Social Development-Sustainable, Development, Poverty, Inclusion, Demographics, Social Sector
Initiatives, etc.)
Books/Sources to Refer ->
1. Weightage given since 2011
2. How to Prepare
3. Basic Economic and Indian Economy
3.5.1 Budget
3.5.2 Taxation
3.5.3 Planning
3.6 Market
4.
5.
6.
7.
Economic Survey
Social Development, Poverty and Inclusion
Demographics
Social Sector initiatives
Economy may be daunting to some, but the questions are based on your conceptual understanding of
macroeconomics. No matter how many times you read and mug-up the data, you are bound to falter in the exam.
Conceptual clarity is what matters the most in Economics.
Weightage given to Economics (since 2011)
For Example:
If the interest rate is decreased in an economy, it will (2014)(a) decrease the
consumption expenditure in the economy
(b) increase the tax collection of the Government
(c) increase the investment expenditure in the economy
(d) increase the total savings in the economy
Solution (c)
Under which of the following circumstances may capital gains arise? (2012)
1. When there is an increase in the sales of a product2. When there is a. natural increase in the value of the property
owned
3. When you purchase a painting and there is a growth in its value due to increase in its popularity
Select the correct answer using the codes given below :
(a) 1 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3
Solution (b)
Once you get hold of this subject, it will take very less time to revise and also more accuracy can be achieved in the
exam.
Introduction to Economics:
Focus:
Understanding the basic concepts of:
Example: To measure Growth- GDP is used and for Development HDI (Human Development Index)
National Income Accounting Gross National Product (GNP), Gross Domestic Product (GDP), Gross
National Income (GNI), Factor cost, Market Price, Purchasing power parity(PPP), Per-Capita Income (PCI) a
general understanding on how they are calculated and what all factors go into their calculation
Example: GDP is calculated using either of the following 3 methods- production method, expenditure
the GDP
Example: Primary sector covers agriculture and allied activities, mining . It contributes 13.7% to Indias
GDP
Capitalist, State, Mixed Economic System which type of Economic system India has adopted and
why?
Note: Dont just read definitions, analyze! For example: When do we use GDP for measurement of Growth and not
GNP? Which method is followed in India and why?
When we say why a particular method was adopted- it means that, one has to understand both positives and
negatives of the method.
Example: 2013 Previous Year Question
The national income of a country for a given period is equal to the:(a) total value of
goods and services produced by the nationals(b) sum of total consumption and investment
2.
Focus:
Poverty concepts like Below Poverty line (BPL), Poverty Gap, Poverty estimates by National Sample
Survey Organisation (NSSO), which Institution in India decides on Poverty line- Planning Commission
Different Committees set-up to measure poverty, methodology used Alag committee, Lakadwala,
Suresh Tendulkar Committee, NC Saxena Committee, Rangarajan Committee A general understanding of how
each committee differed in their measurement.
Example: Rangarajan Committee was set-up by Planning Commission in 2012; Methodology used is
Monthly Expenditure of family of five. According to the estimates- poverty per day per person in urban area is
47 Rs and in rural area it is 32 Rs
Inequality how is it measured Gini co-efficient , Lorenz Curve; concepts like relative inequality, absolute
inequality.
Issues
with
employment,
different
types
of
unemployment
like
disguised
unemployment,
Initiatives like Make in India, Innovation Council, Skill Development Initiative Scheme (SDIS)
Example: 2013 Previous Year Question
Disguised unemployment generally means (2013)(a) large number of people remain
unemployed
(b) alternative employment is not available
(c) marginal productivity of labour is zero
(d) productivity of workers is low
Solution (c)
3.
Focus:
Inflation, Depression, Recession and related terms and concepts like deflation, disinflation, reflation,
Types of Inflation based on the rate of growth of the prices creeping, trotting, galloping, hyper-inflation
necessary? If so why?
Inflation measurements like CPI, WPI, GDP deflator
Which measurement is better indicator of inflation and why? Which index is used to measure
inflation in India currently?
Base year from which its calculated.
Example: In WPI there are totally 676 items, out of that 20% weightage is given to Food, 14% to
Power and Fuel, 66% to Manufactured goods. It does not include Services. Base year for WPI is 2010-11. It is
published by Ministry of Commerce and Industry
A rise in general level of prices may be caused by: (2013)1. an increase in the money
supply
2. a decrease in the aggregate level of output
3. an increase in the effective demandSelect the correct answer using the codes given
below.
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3Solution (d)
(d.) None of the statements (a), (b) and (c) given above is correct in this contextSolution (c)
4.
Focus:
Role and functions of RBI
Monetary Policy/measures taken by RBI like Bank rate, repo rate, reverse repo rate, Statutory Liquidity
Ratio (SLR), Cash reserve Ratio (CRR), Liquidity Adjustment Facility (LAF), Marginal Standing Facility (MSF)
What impact it has on the Supply of money, Inflation and the Economy?
Different types of Banks and their functioning Commercial Banks, RRBs, Development banks,
NABARD, Co-operative Banks, Development Banks, Merchant Banks, Non-Banking Financial Companys (NBFCs),
Regional Rural Banks (RRBs) etc.
How are these Banks regulated? Concepts like priority sector lending
Example: NBFCs are regulated by RBI, unlike the normal banks, NBFC cannot accept demand
deposits (DD); NBFCs do not form part of the payment and settlement system and cannot issue cheques
drawn on itself.
Banking reforms like Bank Nationalisation (1969, 1980) Basel Norms etc.
Assets, Shadow Banks, Weak Bank, Core Banking, Bank Run, Priority Sector lending, Capital to Risk Weighted
Assets (CRAR) etc., and other related concepts related to Banking what steps have been taken by the
Government and RBI in this regard.
Steps taken by government with regard to Financial Inclusion.
Example: Introduction of Business Correspondent model in rural areas or Woman only banks, Jan
Dan Yojana, Micro-finance, Mudra Bank etc
Recent Committees setup with regard to Banking Reforms and its important recommendations
(2014)A.
decrease the
The Reserve Bank of India regulates the commercial banks in matters of (2013)1.
liquidity of assets
2. branch expansion
3. merger of banks
4. winding-up of banksSelect the correct answer using the codes given below.
(a) 1 and 4 only
(b) 2, 3 and 4 only
(c) 1, 2 and 3 only
(d) 1, 2, 3 and 4Solution (d)
What is/are the facility/facilities the beneficiaries can get from the services of
Business Correspondent (Bank Saathi) in branchless areas? (2014)1. It enables the
beneficiaries to draw their subsidies and social security benefits in their villages.
2. It enables the beneficiaries in the rural areas to make deposits and withdrawals.Select the
correct answer using the code given below.A.1 only
B.2 only
C.Both 1 and 2
D.Neither 1 nor 2
Solution (c
ECONOMICS STRATEGY-2
Print
Current Affairs
History
Geography
Polity
Economics
Culture
Environment
Fiscal Responsibility and Budgetary Management (FRBM) Act, other actions taken by the Finance Ministry
(Government), Disinvestment of Public Sector Units (PSUs) to improve the financial health of the Economy
Financial Sector Reforms brought about by the government in these sectors -Banking, Insurance,
Provident Fund (PF).
Example: In 2015, Raising of Foreign Direct Investment (FDI) limit in defence to 49%, In Railway infrastructure
to 100% etc.
Financial Regulators Reserve Bank of India(RBI), Securities and Exchange Board of India(SEBI),
Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority
(PFRDA) powers, functions, jurisdiction issues between the regulators
Sources of financial resources for Government Tax and Non-tax revenue (Foreign aid, Disinvestment
from PSUs etc), Disinvestment, Borrowings (internal and external), User Charges.
B. Budget
Focus:
What constitutes Plan and Non plan expenditure? Difference between them.
Key Terms like pubic debt, External debt, Internal debt, Revenue Deficit, Primary Deficit, deficit financing,
fiscal consolidation Zero-based Budgeting
With reference to Union Budget, which of the following, is/are covered under NonPlan Expenditure?
1.
2.
3.
4.
Defense expenditure
Interest payments
Salaries and pensions
Subsidies
1 only
B.
2 and 3 only
C.
1, 2, 3 and 4
D.
None
Solution (c )
C. Taxation
Focus:
Direct, Indirect tax and other Taxes like Pigovian tax, Ad Valorem tax, Tobin Tax, Difference between a
Cess and a Surcharge
Direct Tax like Corporate Tax, Income Tax, Wealth Tax, Stock Market transactions
Taxation Reforms Direct Tax Code (DTC), General Anti-Avoidance Rule (GAAR),Goods and Service
Tax (GST).
Example: With regard to GST Purpose; advantages and disadvatages of GST; issues with regard to
implementation of GST;
Understand the basic concepts like what is Tax Base, Progressive taxation,Tax Expenditure, Tax
avoidance, Tax evasion, Tax Havens, Tax elasticity, Tax Buoyancy, Laffer curve, Crowding-out.
Example (2014 Prelims Questions Paper):
The sales tax you pay while purchasing a toothpaste is a
a.
b.
c.
d.
Solution (d)
D. Planning
Focus:
A general idea on how planning has evolved over the years (since Independence)
Its purpose
Solution (d)
6. Market:
Focus:
Money Market Treasury Bills, Commercial paper, Certificate of Deposit, Call Money
Regulatory Bodies SEBI, IRDA , PFRDA their power, functions in regulating Market, Mutual funds,
Pension Fund etc.; reforms brought about by the Regulatory Bodies
Have a Basic understanding of these terms Primary market, Secondary market, Bull and Bear (what
does it symbolize), Derivatives, Futures, Bonds, Debentures partially and fully convertible , Participatory Notes,
Hedge Funds, Blue chip shares, Market depth.
Mechanisms to raise money in the Capital Market in India by Foreign countries- Indian Depository
Receipts (IDRs); Similarly for an Indian company to raise money in the Foreign market Global Depository
Receipts (GDRs) and in America it is known as American Depository Receipts (ADRs)
Example (2014 Prelims Question)
What does venture capital mean?
A.
B.
C.
D.
Solution (b)
Purpose/Objectives of PSUs
Industry:
A general idea about Industrial Policies in India
Medium and Small-Scale Enterprises (MSMEs ), Small-Scale Industries (SSI), Village and Cottage
Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?
1. The Government intends to use the revenue earned-from the disinvestment mainly to pay back the external debt.
2. The Government no longer intends to retain the management control of the CPSEs.
Which of the statements given above is/are correct?
(a.) I only
(b.) 2 only
(c.) Both 1 and 2
(d.) Neither 1 nor 2
Solution (d)
ECONOMICS STRATEGY-3
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Current Affairs
History
Geography
Polity
Economics
Culture
Environment
Capital and Current Account Convertibility India has full Current Account Convertibility but when it
comes to Capital Account Convertibility, it is only partial. Why?
A general idea about MRTP Act, 1969; FERA, 1973; FEMA, 1999 this will help you in understanding
the changes made to capital account convertibility and why India is yet to go for full convertibility and
what is the present status
What is CAD?
reduce CAD?
o
Reserves?
Difference between Depreciation and Devaluation of currency (in Indian rupee) Why
does a country devaluate its currency?
Who determines it ?
What is Nominal Effective Exchange Rate (NEER), Real Effective Exchange Rate (REER)?
Forex Reserves
o
Concepts like Trade deficits, Elasticity of Demand, Savings, Investment, J-curve effect
Comprehensive
Economic
Partnership
Agreement
(CEPA),
Comprehensive
Economic
A general awareness on the countries with which India has signed these agreements recently and
what are the issues involved and benefits from the same
Note: Issues like GAAR, Euro Zone Crisis, Gold imports or any issue that you come across in the newspaper,
make a note of it.
1 only
B.
2 and 3
C.
1 and 3
D.
1, 2 and 4
Solution (c)
A general idea on how WTO came into being and what was the set-up before WTO
Difference between General Agreement on tariffs and Trade (GATT) and WTO
What is the objective of WTO? How does it function (example- WTO works on the principle one
country one vote, unlike WB or IMF)
Doha round why is Doha round stalled? Issues between developed and developing countries
WTO and India how has it helped India, if so in what way? what are the issues- is it a boon or a bane to
India?
WTO principles Most Favoured Nation (MFN)- non-discriminatory Trade, General system of Preference
(GSP) for developing countries and Preferential Trade Agreement (PTA), Free Trade Agreement (FTA) for
economics integration
Stages in economic integration PTA > FTA > Customs Union > Monetary Union
Others Safeguard mechanisms Safeguard Mechanisms, Sanitary and Phytosanitary agreement (SPS),
Technical Barriers to Trade (TBT)
WTO agreements
1.
Agreement on Agriculture(AoA) Domestic support (Green Box, Amber Box, Blue Box), Export
subsidies, Market access
2.
Copyrights, Trademark, Industrial Design right for what type of products are each given
Example: Copyrights for creative and artistic work, whereas Patents for inventions
Geographical indicators significance; to what products and for whom are they granted to? A general
awareness on the latest products which have been granted the status
3.
instruments of protectionism- tariffs, import quotas, administrative barriers, anti-dumping duties, direct or
export subsidies, exchange rate manipulation
A general idea about Anti-Counterfeiting Trade Agreement (ACTA) by World Intellectual Property
Organisation (WIPO), Non-Agricultural Market Access (NAMA) group, NAMA 11
Regional trade agreements and Regional Groupings like ASEAN FTA, SAFTA, MERCOSUR, BRICS,
SAARC, The Asia-Pacific Economic Cooperation (APEC), Trans-Pacific Partnership (TPP), G20 etc.
o
their objectives
Note: Make a note of the International Economic organisations to which India is not a member of; and on
Asian Development Bank (ADB), G4.
B.
C.
D.
Solution (a)
2. Fertilizers
3. Natural gas
4. Refinery products
5. Textiles
Select the correct answer using the codes given below :
(a) 1 and 5 only
(b) 2, 3 and 4 only
(c) 1, 2, 3 and 4 only
(d) 1, 2, 3, 4 and 5
Solution (c)
Note : Economic Terms Inflation, Recession, Depression, Balance of Payment, Financial Inclusion, Fiscal
Consolidation, Deficit Financing, Overheated Economy, Fiscal drag, Fiscal Neutrality, Giffen goods etc. Basic
understanding of the key terms is important.
12. Demographics:
This section overlaps with Human geography. Statistical data from Economic Survey will be helpful here like
population, working age of the population, sex-ratio, literacy, Maternal Mortality Rate (MMR), Infant Mortality Rate
(IMR) etc
Basic Economic and Indian Economy: Social Development, Poverty and Inclusion: Prelims Questions
and Solutions
India has experienced persistent and high food inflation in the recent past. What could be the
reasons?(2011)
1.
Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food
grains has steadily decreased in the last five years by about 30%.
2.
As a consequence of increasing incomes, the consumption patterns of the% people have undergone a
significant change.
3.
In terms of economy, the visit by foreign nationals to witness the XIX Common Wealth Games in India
amounted to(2011)
(a.) Export
(b.) Import
(c.) Production
(d.)Consumption
Solution (a)
Which one of the following statements appropriately describes the fiscal stimulus?(2011)
(a.) It is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet
the demand surge caused by rapid economic growth
(b.) It is an intense affirmative action of the Government to boost economic activity in the country
(c.) It is Governments intensive action on financial institutions to ensure disbursement of loans to agriculture and
allied sectors to promote greater food production and contain food inflation
(d.) It is an extreme affirmative action by the Government to pursue its policy of financial inclusion
Solution (b)
2.
3.
Adopting suitable policies which attract greater FDI and more funds from FIIs.
Which of the above action/actions can help in reducing the current account deficit?
(a.) 1 and 2
(b.) 2 and 3
(c.) 3 only
(d.) 1 and 3
Solution (a)
A rapid increase in the rate of inflation is sometimes attributed to the base effect. What is base
effect?(2011)
(a.) It is the impact of drastic deficiency in supply due to failure of crops
(b.) It is the impact of the surge in demand due to rapid economic growth
(c.) It is the impact of the price levels of previous year on the calculation of inflation rate
(d.)None of the statements (a), (b) and (c) given above is correct in this context
Solution (c)
Why is the offering of teaser loans by commercial banks a cause of economic concern?(2011)
1.
The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the
risk of defaulters in future.
2.
In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or
export units.
The growth rate of GDP has steadily increased in the last five years.
2.
The growth rate in per capita income has steadily increased in the last five years.
In India, which of the following have the highest share in the disbursement of credit to agriculture and
allied activities?(2011)
(a.) Commercial Banks
(b.) Cooperative Banks
(c.) Regional Rural Banks
(d.) Microfinance Institutions
Solution (a)
Economic growth is usually coupled with (2011)
(a.) Deflation
(b.) Inflation
(c.) Stagflation
(d.) Hyperinflation
Solution (b)
The lowering of Bank Rate by the Reserve Bank of India leads to (2011)
(a.) More liquidity in the market
(b.) Less liquidity in the market
(c.) No change in the liquidity in the market
(d.) Mobilization of more deposits by commercial banks
Solution (a)
Which one of the following is not a feature of Value Added Tax? (2011)
(a.) It is a multi-point destination-based system of taxation
(b.) It is a tax levied on value addition at each stage of transaction in the production-distribution chain
(c.) It is a tax on the final consumption of goods or services and must ultimately be borne by the consumer
(d.) It is basically a subject of the Central Government and the State Governments are only a facilitator for its
successful implementation
Solution (c)
Microfinance is the provision of financial services to people of low-income groups. This includes both
the consumers and the self-employed. The service/services rendered under micro-finance is/are:
(2011)
1.
Credit facilities
2.
Savings facilities
3.
Insurance facilities
4.
Select the correct answer using the codes given below the lists:
(a.) 1 only
(b.) 1 and 4 only
(c.) 2 and 3 only
(d.) 1, 2, 3 and 4
Solution (d)
Which of the following can aid in furthering the Governments objective of inclusive growth? (2011)
1.
2.
3.
(d.) 1, 2 and 3
Solution (d)
Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises
(CPSEs)? (2011)
1.
2.
The Government intends to use the revenue earned-from the disinvestment mainly to pay back the
external debt.
The Government no longer intends to retain the management control of the CPSEs.
The Reserve Bank of India (RBI) acts as a bankers bank. This would imply which of the
following? (2012)
1.
2.
3.
Under which of the following circumstances may capital gains arise? (2012)
1.
2.
3.
When you purchase a painting and there is a growth in its value due to increase in its popularity
Which of the following measures would result in an increase in the money supply in the economy?
(2012)
1.
2.
3.
4.
Which of the following would include Foreign Direct Investment in India? (2012)
1.
2.
3.
4.
Portfolio investment
World Bank
2.
3.
4.
In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a
combined weight of 37-90%. Which of the following are among those Eight Core Industries? (2012)
1.
Cement
2.
Fertilizers
3.
Natural gas
4.
Refinery products
5.
Textiles
The Reserve Bank of India regulates the commercial banks in matters of (2013)
1.
liquidity of assets
2.
branch expansion
3.
merger of banks
4.
winding-up of banks
1.
Foreign Loans
2.
3.
Private Remittances
4.
Portfolio Investment
2.
Priority Sector Lending by banks in India constitutes the lending to: (2013)
(a) agriculture
(b) micro and small enterprises
(c) weaker sections
(d) All of the above
Solution (d)
2.
3.
Which one of the following groups of items is included in Indias foreign-exchange reserves? (2013)
(a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
(b) Foreign-currency assets, gold holdings of the RBI and SDRs
(c) Foreign-currency assets, loans from the World Bank and SDRs
(d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank
Solution (b)
Which one of the following is likely to be the most inflationary in its effect? (2013)
(a) Repayment of public debt
(b) Borrowing from the public to finance a budget deficit
(c) Borrowing from banks to finance a budget deficit
(d) Creating new money to finance a budget deficit
Solution (d)
Supply of money remaining the same when there is an increase in demand for money, there will
be: (2013)
(a) a fall in the level of prices
(b) an increase in the rate of interest
(c) a decrease in the rate of interest
(d) an increase in the level of income and employment
Solution (b)
The national income of a country for a given period is equal to the: (2013)
(a) total value of goods and services produced by the nationals
(b) sum of total consumption and investment expenditure
(c) sum of personal income of all individuals
(d) money value of final goods and services produced
Solution (a)
Which of the following grants/ grant direct credit assistance to rural households? (2013)
1.
2.
3.
The terms Marginal Standing Facility Rate and Net Demand and Time Liabilities, sometimes
appearing in news, are used in relation to (2014)
1.
banking operations
2.
communication networking
3.
military strategies
4.
Solution (a)
What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent
(Bank Saathi) in branchless areas?(2014)
1.
It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
2.
It enables the beneficiaries in the rural areas to make deposits and withdrawals.
1 only
2.
2 only
3.
Both 1 and 2
4.
Neither 1 nor 2
Solution (c)
2.
3.
4.
Solution (3)
In the context of Indian economy which of the following is/are the purpose/purposes of Statutory
Reserve Requirements?
1.
To enable the Central Bank to control the amount of advances the banks can create
2.
3.
4.
To force the banks to have sufficient vault cash to meet their day-to-day requirements
1 only
2.
1 and 2 only
3.
2 and 3 only
4.
1, 2, 3 and 4
Solution (b)
2.
3.
4.
Solution (c)
With reference to Union Budget, which of the following is/are covered under Non-Plan Expenditure?
1.
Defense -expenditure
2.
Interest payments
3.
4.
Subsidies
1 only
2.
2 and 3 only
3.
1, 2, 3 and 4
4.
None
Solution (c)
2.
tax imposed by the Central Government but collected by the State Government
3.
tax imposed by the State Government but collected by the Central Government
4.
Solution (d)
2.
3.
4.
Solution (d)
2.
3.
4.
Solution (b)
With reference to Balance of Payments, which of the following constitutes/constitute the Current
Account?
1.
Balance of trade
2.
Foreign assets
3.
Balance of invisibles
4.
1 only
2.
2 and 3
3.
1 and 3
4.
1, 2 and 4
Solution (c)
Which of the following organizations brings out the publication known as World Economic Outlook?
1.
2.
3.
4.
Solution (a)
Demographics:
India is regarded as a country with Demographic Dividend. This is due to: (2011)
(a.) Its high population in the age group below 15 years
(b.) Its high population in the age group of 15-64 years
(c.) Its high population in the age group above 65 years
(d.) Its high total population
Solution (b)
Consider the following specific stages of demographic transition associated with economic
development : (2012)
1.
2.
3.
Select the correct order of the above stages using the codes given below :
(a) 1, 2, 3
(b) 2, 1, 3
(c) 2, 3, 1
(d) 3, 2, 1
Solution (c)
To obtain full benefits of demographic dividend, what should India do? (2013)
(a) Promoting skill development
(b) Introducing more social security schemes
(c) Reducing infant mortality rate
(d) Privatization of higher education
Solution (a)