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SSC-Standard General Studies Foundation · Chapter 4

Economics: Sectors, Money and Credit, Globalisation

What to remember

  • Three sectors: primary (nature), secondary (factories), tertiary (services). Services now give the largest share of national income, but agriculture still gives work to many people.
  • Money and credit: the Reserve Bank of India (RBI) issues currency notes (except the one-rupee note) and controls banks. Formal credit is cheaper and safer than informal credit.
  • Globalisation links countries through trade, investment and technology. Consumer laws protect buyers from unfair practices.

Sectors of the economy

Economic activities are grouped into three sectors.

  • Primary sector (agriculture and allied sector): uses natural resources directly. Examples are farming, fishing, mining, dairy and forestry.
  • Secondary sector (industrial sector): turns raw material into finished goods. Examples are making sugar from sugarcane, cloth from cotton, steel and cement.
  • Tertiary sector (service sector): does not make goods but helps the other two sectors. Examples are transport, banking, trade, teaching, medical care and telecom.

A newer idea adds a fourth group, the quaternary sector, for knowledge-based work such as research and information technology. Some books also name a quinary sector for top-level decisions. For most exams, the three-sector model is enough.

Gross Domestic Product (GDP) is the value of all final goods and services produced inside a country in one year. Only *final* goods are counted. Counting intermediate goods (such as wheat sold to a flour mill) again would be double counting. Over time, the share of the tertiary sector in GDP has grown the most. This is a common pattern as an economy develops.

Employment pattern: Even though agriculture's share in GDP has fallen, many people still depend on it. This creates disguised unemployment (underemployment): more people work on a farm than are needed, so some could leave without reducing output.

Type of unemploymentMeaning
DisguisedToo many workers on a job; extra workers add nothing to output
SeasonalWork only in some months, as in farming
OpenWilling to work but no job is found
StructuralSkills do not match the jobs available
CyclicalDue to a fall in the business cycle

Organised and unorganised sectors: The organised sector has fixed hours, regular pay, registration with the government and benefits such as provident fund. The unorganised sector has small, scattered units, irregular income and few rules. Most Indian workers are in the unorganised sector.

Public and private sectors: The public sector is owned by the government (Indian Railways, for example). The private sector is owned by individuals or companies. The public sector works for public welfare; the private sector works mainly for profit.

Employment guarantee: The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) gives a legal right to work in rural areas. A rural household could ask for up to 100 days of unskilled manual work in a year. From 1 July 2026 MGNREGA was replaced by the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G), which guarantees up to 125 days of wage employment a year. If work is not given, the person can claim an unemployment allowance.

Money and banking

Functions of money: a medium of exchange, a measure of value, a store of value and a standard of deferred payment. Money removes the need for barter, which needs a "double coincidence of wants".

Forms of money: coins and currency notes, and bank deposits. In India, the RBI issues notes, while the Government of India issues the one-rupee note and coins. Demand deposits (savings and current accounts) can be withdrawn at any time. Cheques and digital payments move deposit money.

Reserve Bank of India: the central bank, set up in 1935 and later nationalised. It issues currency, acts as banker to the government and to banks, keeps foreign exchange reserves and controls the supply of money and credit.

Tools of monetary policy

ToolWhat it does
Repo rateRate at which the RBI lends short-term money to banks
Reverse repo rateRate at which the RBI takes money from banks
Cash Reserve Ratio (CRR)Share of deposits a bank must keep with the RBI as cash
Statutory Liquidity Ratio (SLR)Share of deposits a bank must keep with itself in safe assets such as gold and government securities
Open market operationsBuying or selling government securities to change money supply

When the RBI raises the repo rate, loans become costlier and demand falls. This is used to control inflation. When it lowers the repo rate, loans become cheaper and spending rises.

Types of banks: commercial banks (public sector, private sector, foreign), regional rural banks, cooperative banks and small finance banks. The apex body for agriculture and rural credit is NABARD, set up in 1982. The Small Industries Development Bank of India (SIDBI) helps small industries. Banks accept deposits and lend a larger amount than they keep. The difference between the interest on loans and the interest on deposits is their income.

Credit (loan): an agreement in which a lender gives money and the borrower promises to repay with interest. Security given against a loan is called collateral (land, house, gold). Terms of credit include the interest rate, collateral, documents needed and mode of repayment.

Formal creditInformal credit
Banks and cooperativesMoneylenders, traders, relatives
Supervised by the RBINo supervision
Lower interestOften very high interest
Needs documents and collateralEasy to get, but risk of debt trap

Self Help Groups (SHGs) are small groups, mostly of women, who save money together and lend to members at a reasonable rate. They link rural people to banks and reduce dependence on moneylenders. In Andhra Pradesh, women's SHGs are widely active and are often discussed in welfare programmes.

Financial inclusion: The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched in 2014 to give every household a bank account. It offers a zero-balance account and a RuPay debit card. Unified Payments Interface (UPI) is an instant mobile payment system developed by the National Payments Corporation of India (NPCI).

Globalisation

Globalisation means greater connection among the economies of the world through trade, investment, movement of people and flow of technology. Goods, services, money and ideas move across borders more easily.

Key terms

  • Foreign trade: buying and selling goods across borders. It gives buyers more choice and links markets.
  • Foreign direct investment (FDI): a foreign company sets up a factory or office in another country.
  • Multinational company (MNC): a company that owns or controls production in more than one country.
  • Liberalisation: reducing government controls on trade and industry.
  • Trade barriers: taxes (tariffs) and quotas on imports.

1991 reforms: In 1991 India started new economic policies called LPG: Liberalisation, Privatisation and Globalisation. Licences were cut, import duties reduced and foreign investment allowed in more areas. These reforms followed a balance-of-payments crisis.

World Trade Organization (WTO): the global body that sets rules of trade. It began in 1995 and has its headquarters in Geneva. It replaced GATT (the General Agreement on Tariffs and Trade).

Special Economic Zones (SEZs) are areas with relaxed tax and business rules to promote exports and investment.

GainConcern
More choice and lower prices for consumersSmall producers face tough competition
Larger markets for exportersJobs may become less secure
New technology and investmentWealth may reach only some groups

Consumer rights

A consumer is a person who buys goods or uses services for personal use. Markets can be unfair to buyers through hoarding, adulteration, overcharging and false advertising.

The Consumer Protection Act, 2019 replaced the earlier Act of 1986. It set up the Central Consumer Protection Authority and gave rules on e-commerce, misleading ads and product liability. Consumer courts work at three levels: District Commission, State Commission and National Commission. These are quasi-judicial bodies and are meant to give quick, low-cost relief.

Six consumer rights: right to safety, to be informed, to choose, to be heard, to seek redress, and to consumer education. India observes National Consumer Day on 24 December and World Consumer Rights Day on 15 March.

Quality marks: ISI (industrial goods), Agmark (farm products), BIS Hallmark (gold jewellery), FSSAI mark (food products) and ISO (management standards).

The Right to Information Act, 2005 helps citizens ask for information from public offices. It was also a major step for consumer empowerment.

Exam traps

  • Primary, secondary, tertiary: do not mix mining (primary) with manufacturing (secondary).
  • Repo rate is what banks pay the RBI; reverse repo is what the RBI pays banks.
  • CRR is kept as cash with the RBI; SLR is kept with the bank itself.
  • The one-rupee note is issued by the Government of India, not the RBI.
  • RBI is the central bank; NABARD is the apex agricultural bank.
  • Disguised unemployment is hidden in agriculture; seasonal unemployment is only in some months.
  • GDP counts final goods only; counting intermediate goods causes double counting.
  • Consumer Protection Act 1986 is the old Act; the 2019 Act replaced it.

One-liners

  • 1. Farming and mining belong to the primary sector.
  • 2. Transport and banking belong to the tertiary sector.
  • 3. GDP counts only final goods and services.
  • 4. Disguised unemployment is common in agriculture.
  • 5. MGNREGA promised up to 100 days of work; its replacement, VB-G RAM G (2025), promises up to 125 days.
  • 6. The RBI was set up in 1935.
  • 7. NABARD was set up in 1982 for rural credit.
  • 8. Collateral is security given against a loan.
  • 9. LPG reforms started in 1991.
  • 10. The WTO has its headquarters in Geneva.
  • 11. Consumer courts have district, state and national levels.
  • 12. National Consumer Day is on 24 December.

Practice questions

  1. Which activity belongs to the primary sector?

    1. Banking
    2. Making cement
    3. Teaching
    4. Fishing
    Answer

    D. Fishing

    Fishing uses natural resources directly, so it is primary.

  2. Making cloth from cotton belongs to which sector?

    1. Tertiary
    2. Secondary
    3. Primary
    4. Quaternary
    Answer

    B. Secondary

    Turning raw material into goods is secondary activity.

  3. Transport and banking are examples of which sector?

    1. Primary
    2. Secondary
    3. Tertiary
    4. Unorganised only
    Answer

    C. Tertiary

    Services that support other sectors are tertiary.

  4. GDP is the value of which of the following produced in a country in one year?

    1. Only agricultural goods
    2. All final goods and services
    3. Only exported goods
    4. All intermediate goods
    Answer

    B. All final goods and services

    GDP counts final goods and services to avoid double counting.

  5. Counting wheat sold to a flour mill and then again the bread sold from that flour is an example of

    1. Liberalisation
    2. Disguised unemployment
    3. Hoarding
    4. Double counting
    Answer

    D. Double counting

    Intermediate goods must not be counted again in GDP.

  6. More workers on a farm than are needed, so some can leave without lowering output, is called

    1. Open unemployment
    2. Seasonal unemployment
    3. Disguised unemployment
    4. Cyclical unemployment
    Answer

    C. Disguised unemployment

    Extra workers add nothing to output; the unemployment is hidden.

  7. Work only in some months of the year, as in farming, causes

    1. Disguised unemployment
    2. Seasonal unemployment
    3. Structural unemployment
    4. Cyclical unemployment
    Answer

    B. Seasonal unemployment

    Work depends on the crop season.

  8. Workers in the organised sector usually get

    1. No registration at all
    2. Irregular daily income
    3. No benefits of any kind
    4. Fixed hours and regular pay
    Answer

    D. Fixed hours and regular pay

    The organised sector follows rules and gives regular pay and benefits.

  9. MGNREGA gives a rural household a legal right to unskilled work for up to

    1. 100 days a year
    2. 200 days a year
    3. 150 days a year
    4. 50 days a year
    Answer

    A. 100 days a year

    The Act promises up to 100 days of manual work in a year.

  10. Which of these is NOT a function of money?

    1. Measure of value
    2. Store of value
    3. Medium of exchange
    4. Producing goods
    Answer

    D. Producing goods

    Money exchanges and measures value; it does not produce goods.

  11. Barter needs a

    1. Fixed interest rate
    2. Central bank
    3. Double coincidence of wants
    4. Cheque book
    Answer

    C. Double coincidence of wants

    Both sides must want what the other offers.

  12. In India, currency notes (except the one-rupee note) are issued by the

    1. Reserve Bank of India
    2. State Bank of India
    3. Government of India
    4. NABARD
    Answer

    A. Reserve Bank of India

    The RBI issues notes; the Government issues the one-rupee note and coins.

  13. The Reserve Bank of India was set up in

    1. 1949
    2. 1935
    3. 1947
    4. 1969
    Answer

    B. 1935

    The RBI began in 1935.

  14. The rate at which the RBI lends short-term money to banks is the

    1. Repo rate
    2. Cash reserve ratio
    3. Reverse repo rate
    4. Bank rate of NABARD
    Answer

    A. Repo rate

    Repo means banks borrow from the RBI.

  15. The share of deposits a bank must keep with the RBI as cash is the

    1. Reverse repo rate
    2. Repo rate
    3. Statutory Liquidity Ratio
    4. Cash Reserve Ratio
    Answer

    D. Cash Reserve Ratio

    CRR is held with the RBI; SLR is held by the bank itself.

  16. Gold and government securities held by banks as a fixed share of deposits form the

    1. Repo rate
    2. Statutory Liquidity Ratio
    3. Cash Reserve Ratio
    4. Reverse repo rate
    Answer

    B. Statutory Liquidity Ratio

    SLR is kept with the bank in safe assets.

  17. If the RBI raises the repo rate, the likely effect is that

    1. Prices always fall to zero
    2. Loans become cheaper
    3. Loans become costlier
    4. Banks stop taking deposits
    Answer

    C. Loans become costlier

    A higher repo rate raises borrowing costs and cuts demand.

  18. The apex institution for agriculture and rural credit is

    1. NABARD
    2. SEBI
    3. SIDBI
    4. NPCI
    Answer

    A. NABARD

    NABARD (set up in 1982) supports rural credit.

  19. Security given by a borrower against a loan is called

    1. Premium
    2. Dividend
    3. Collateral
    4. Subsidy
    Answer

    C. Collateral

    Collateral such as land or gold guards the lender.

  20. Which is a feature of informal credit?

    1. Lower interest than banks
    2. Often very high interest and no supervision
    3. Supervised by the RBI
    4. Needs a bank account
    Answer

    B. Often very high interest and no supervision

    Moneylenders are not supervised by the RBI.

  21. Self Help Groups mainly help members by

    1. Printing currency
    2. Setting the repo rate
    3. Running consumer courts
    4. Pooling savings and giving small loans
    Answer

    D. Pooling savings and giving small loans

    SHGs save together and lend to members.

  22. The Pradhan Mantri Jan Dhan Yojana is mainly meant for

    1. Giving every household a bank account
    2. Cutting import duties
    3. Starting the WTO
    4. Issuing the one-rupee note
    Answer

    A. Giving every household a bank account

    It is a financial inclusion scheme with zero-balance accounts.

  23. UPI, the instant mobile payment system, was developed by

    1. NABARD
    2. RBI Board of Taxes
    3. SEBI
    4. NPCI
    Answer

    D. NPCI

    The National Payments Corporation of India runs UPI.

  24. India's LPG reforms started in

    1. 1971
    2. 1991
    3. 2001
    4. 1985
    Answer

    B. 1991

    New economic policy was begun in 1991.

  25. In economics, LPG stands for

    1. Licence, Profit, Growth
    2. Loan, Payment, Grant
    3. Liberalisation, Privatisation, Globalisation
    4. Labour, Production, Goods
    Answer

    C. Liberalisation, Privatisation, Globalisation

    These were the three pillars of the 1991 reforms.

  26. The headquarters of the World Trade Organization is in

    1. Geneva
    2. Paris
    3. Washington
    4. New York
    Answer

    A. Geneva

    The WTO is based in Geneva.

  27. A company that controls production in more than one country is a

    1. Self Help Group
    2. Multinational company
    3. Cooperative society
    4. Public sector unit
    Answer

    B. Multinational company

    MNCs own or control production in many countries.

  28. A foreign company setting up a factory in India is an example of

    1. Hoarding
    2. Disguised employment
    3. Foreign direct investment
    4. Barter
    Answer

    C. Foreign direct investment

    FDI means investment to build a business abroad.

  29. The Consumer Protection Act of 2019 replaced the Act of

    1. 1991
    2. 1976
    3. 2005
    4. 1986
    Answer

    D. 1986

    The 2019 Act replaced the 1986 Act.

  30. National Consumer Day in India is observed on

    1. 2 October
    2. 26 January
    3. 24 December
    4. 15 March
    Answer

    C. 24 December

    15 March is World Consumer Rights Day.

  31. The Agmark quality mark is given to

    1. Electronic goods
    2. Gold jewellery
    3. Management systems
    4. Farm products
    Answer

    D. Farm products

    Agmark certifies agricultural produce; BIS Hallmark is for gold.

  32. Consumer courts are set up at which three levels?

    1. District, State and National
    2. Village, Block and District
    3. Zone, Circle and Region
    4. Taluk, State and Union
    Answer

    A. District, State and National

    District, State and National Commissions exist.

  33. Consider the statements about the sectors of the economy. 1. Mining is a primary sector activity. 2. Insurance is a secondary sector activity.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    Insurance is a service, so it is tertiary.

  34. Consider the statements about the repo rate. 1. A fall in the repo rate generally makes bank loans cheaper. 2. The repo rate is the rate at which the RBI borrows from banks.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    Repo is the rate at which the RBI lends; the RBI borrowing rate is the reverse repo.

  35. Consider the statements about banking in India. 1. The one-rupee note is issued by the Government of India. 2. Cooperative banks are part of formal credit.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are correct.

  36. Consider the statements about unemployment. 1. Disguised unemployment is common in agriculture. 2. In disguised unemployment, removing extra workers lowers output greatly.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    In disguised unemployment extra workers add almost nothing.

  37. Consider the statements about formal credit. 1. It is supervised by the RBI. 2. It always carries a higher interest rate than moneylenders.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    Formal credit is usually cheaper.

  38. Consider the statements about the WTO. 1. It began in 1995. 2. It replaced GATT.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both statements are correct.

  39. Consider the statements about consumer rights. 1. The right to be informed lets a buyer know the quality and price of goods. 2. The right to seek redress means consumers can approach courts when cheated.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are among the six consumer rights.

  40. Consider the statements about the NABARD and RBI. 1. RBI is the central bank of India. 2. NABARD issues currency notes.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    NABARD does not issue notes; RBI does.

  41. Consider the statements about MGNREGA. 1. It gives a legal right to work in rural areas. 2. It gives skilled office jobs in cities.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    It offers unskilled manual work in rural areas.

  42. Consider the statements about GDP. 1. Only final goods and services are counted. 2. Goods bought for resale are always counted twice.

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    Intermediate items are not counted again.

  43. Match the term (left) with its meaning (right). P. Collateral Q. CRR R. Liberalisation S. Disguised unemployment

    1. P-security for loan, Q-fewer controls on trade, R-cash kept with RBI, S-extra workers in a job
    2. P-security for loan, Q-cash kept with RBI, R-fewer controls on trade, S-extra workers in a job
    3. P-cash kept with RBI, Q-security for loan, R-fewer controls on trade, S-extra workers in a job
    4. P-security for loan, Q-cash kept with RBI, R-extra workers in a job, S-fewer controls on trade
    Answer

    B. P-security for loan, Q-cash kept with RBI, R-fewer controls on trade, S-extra workers in a job

    Each term matches its standard meaning in option A.

  44. Match the quality mark (left) with the product (right). P. Agmark Q. Hallmark R. FSSAI S. ISI

    1. P-food, Q-gold, R-farm produce, S-industrial goods
    2. P-farm produce, Q-gold, R-food, S-industrial goods
    3. P-gold, Q-farm produce, R-food, S-industrial goods
    4. P-farm produce, Q-gold, R-industrial goods, S-food
    Answer

    B. P-farm produce, Q-gold, R-food, S-industrial goods

    Agmark is for farm produce; Hallmark for gold; FSSAI for food; ISI for industrial goods.

  45. Match the date (left) with the event (right). P. 24 December Q. 15 March R. 1991 S. 1935

    1. P-World Consumer Rights Day, Q-National Consumer Day, R-LPG reforms, S-RBI set up
    2. P-National Consumer Day, Q-World Consumer Rights Day, R-RBI set up, S-LPG reforms
    3. P-LPG reforms, Q-RBI set up, R-National Consumer Day, S-World Consumer Rights Day
    4. P-National Consumer Day, Q-World Consumer Rights Day, R-LPG reforms, S-RBI set up
    Answer

    D. P-National Consumer Day, Q-World Consumer Rights Day, R-LPG reforms, S-RBI set up

    These pairings are standard facts.

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