Indian Economy

Part A: Basic Concepts

• GDP (Gross Domestic Product): total market value of all final goods/services produced within a country's borders in a given period.
• GNP (Gross National Product): GDP + net income from abroad.
• Per Capita Income: national income divided by population.
• National Income measured by: Central Statistics Office (CSO), now under National Statistical Office (NSO).
• Inflation: sustained rise in general price level. Measured by Wholesale Price Index (WPI) and Consumer Price Index (CPI) — RBI's inflation targeting uses CPI.
• Fiscal Deficit: total expenditure minus total receipts (excluding borrowings) of the government.
• Disinvestment: sale of government stake in Public Sector Undertakings.
• Types of economy: Capitalist, Socialist, Mixed — India follows a Mixed Economy.
• Sectors of economy: Primary (agriculture, mining), Secondary (manufacturing/industry), Tertiary (services).

Part B: Planning in India

• Planning Commission: established 1950, replaced by NITI Aayog (National Institution for Transforming India) on 1 January 2015.
• NITI Aayog is a policy think-tank (not a constitutional/statutory body), chaired by the Prime Minister; first Vice-Chairman was Arvind Panagariya.
• Five-Year Plans (1951-2017, 12 plans total, discontinued after NITI Aayog formation):
  • 1st Plan (1951-56): focused on agriculture, based on Harrod-Domar model.
  • 2nd Plan (1956-61): Mahalanobis model, focus on heavy industries.
  • 3rd Plan (1961-66): "Gadgil Yojna."
  • Plan holidays occurred 1966-69 due to wars and drought.
  • 8th Plan (1992-97): launched with economic liberalisation.
  • 12th (final) Plan (2012-17): faster, more inclusive growth.

Part C: Economic Reforms — 1991 Liberalisation

• 1991 Balance of Payments crisis: India nearly defaulted; forced to pledge gold reserves.
• LPG Reforms (Liberalisation, Privatisation, Globalisation) introduced by then Finance Minister Dr. Manmohan Singh under PM P.V. Narasimha Rao.
• Key measures: devaluation of rupee, dismantling of License Raj, opening to foreign investment (FDI/FII), reduction of import tariffs, disinvestment of PSUs.

Part D: Banking System

• Reserve Bank of India (RBI): central bank of India, established 1 April 1935 under the RBI Act 1934, based on recommendations of the Hilton Young Commission. Nationalised in 1949. HQ: Mumbai.
• Functions: issues currency (except ₹1 notes/coins — issued by Ministry of Finance), banker's bank, controls monetary policy, banker to the government, regulates forex.
• Monetary Policy Tools:
  • Repo Rate: rate at which RBI lends to commercial banks.
  • Reverse Repo Rate: rate at which RBI borrows from commercial banks.
  • CRR (Cash Reserve Ratio): % of deposits banks must keep with RBI as reserves.
  • SLR (Statutory Liquidity Ratio): % of deposits banks must maintain in liquid assets (cash, gold, govt securities).
  • Bank Rate: rate at which RBI lends long-term funds.
• Monetary Policy Committee (MPC): 6-member committee (3 from RBI, 3 external), decides repo rate, headed by RBI Governor.

Types of Banks

• Scheduled Commercial Banks: Public Sector Banks (PSBs — majority govt-owned, e.g., SBI, PNB, Bank of Baroda), Private Sector Banks (HDFC, ICICI, Axis), Foreign Banks, Regional Rural Banks (RRBs), Small Finance Banks, Payments Banks.
• State Bank of India (SBI): largest public sector bank, origins trace to Bank of Calcutta (1806) → Imperial Bank of India → SBI (1955).
• Bank Nationalisation: 14 major banks nationalised in 1969 (under PM Indira Gandhi), 6 more in 1980.
• NABARD: apex bank for agriculture and rural development, established 1982.
• SIDBI: Small Industries Development Bank of India.
• EXIM Bank: Export-Import Bank of India.

Part E: Budget, Taxation & Financial Terms

• Union Budget: presented by Finance Minister, typically on 1 February each year (since 2017; earlier was end of February); "Railway Budget" merged with Union Budget starting 2017.
• Economic Survey: presented a day before the Budget, prepared under the Chief Economic Adviser.
• Types of taxes:
  • Direct Tax: paid directly to government, burden cannot be shifted (Income Tax, Corporate Tax).
  • Indirect Tax: burden can be shifted (GST, earlier VAT/Excise/Service Tax).
• GST (Goods and Services Tax): implemented 1 July 2017, "One Nation One Tax," subsumed multiple indirect taxes; based on 101st Constitutional Amendment; GST Council chaired by Union Finance Minister.
• Fiscal Responsibility and Budget Management (FRBM) Act, 2003: aims to reduce fiscal deficit.

Stock Markets

• BSE (Bombay Stock Exchange): Asia's oldest stock exchange, established 1875; index — Sensex (30 companies).
• NSE (National Stock Exchange): established 1992; index — Nifty 50.
• SEBI: regulator of securities markets, statutory status since 1992.

Part F: Currency & Important Terms

• Indian currency: Rupee (₹); symbol adopted 2010, designed by D. Udaya Kumar.
• Currency notes issued by RBI (signed by RBI Governor); coins issued by Government of India (Ministry of Finance).
• Legal Tender: currency that must be accepted for payment of debt.
• Demonetisation: 8 November 2016 — ₹500 and ₹1,000 notes withdrawn.

Key Reports & Indices related to Economy

• Economic Survey of India: annual, Ministry of Finance.
• World Economic Outlook: by IMF.
• Ease of Doing Business Report: was published by World Bank (discontinued in 2021).
• Global Competitiveness Report: World Economic Forum.

Agencies and Institutions

• World Bank: provides loans to developing countries, HQ Washington D.C.
• IMF: promotes international monetary cooperation, HQ Washington D.C.
• Asian Development Bank (ADB): HQ Manila, Philippines.
• New Development Bank (NDB, "BRICS Bank"): HQ Shanghai, China.
• AIIB (Asian Infrastructure Investment Bank): HQ Beijing, China-led initiative, India is a major shareholder.