📘 PUBLIC DEBT IN INDIA

1. Public Debt
   • Debt contracted against the Consolidated Fund of India
2. Other Liabilities
   • Liabilities in the Public Account

• Internal Debt
• External Debt

1. Marketable Debt
   • Government-dated securities
   • Treasury Bills
2. Non-Marketable Internal Debt
   • Intermediate Treasury Bills issued to State Governments
   • Select Central Bank Securities
   • Securities issued to International Financial Institutions, including:
     • IMF
     • IBRD
     • IDA
     • Asian Development Bank
     • African Development Bank
     • International Fund for Agricultural Development

📊 NATIONAL INCOME CONCEPTS

• Estimates the value of final goods and services produced by a country’s residents
• Production location does NOT matter
• Intermediary goods and services are excluded
• Formula:
  • GNP = GDP + Net Factor Income from Abroad

• Market value of all final goods and services produced within the country

• Total value of finished goods and services produced by a country’s citizens:
  • Domestically and internationally
• Minus depreciation
• Relationship:
  • GNP – NNP = Depreciation

 DEFICIT & FISCAL CONCEPTS

• Difference between:
  • Primary Deficit = Fiscal Deficit – Interest Payments
• Indicates government borrowing excluding interest

• Shortfall between:
  • Government income and expenditure

• When actual revenue and/or expenditure do not match:
  • Budgeted revenue and expenditure

• Gap between expenditure and income in:
  • Central Government
  • Local Governments
  • Social Insurance

DEFICIT FORMULAS (COMPLETE)

• Definition:
  • Revenue Expenditure + Capital Expenditure
  • minus all Revenue & Capital Receipts except borrowings
• Causes:
  • Increase in capital expenditure
  • Increase in revenue deficit
• Formula (as given):
  • Fiscal Deficit = Revenue Received + Capital Received − Total Expenditure

• Revenue Deficit = Revenue Expenditure − Revenue Received

• Primary Deficit = Fiscal Deficit − Interest Payments on previous borrowings

 BUDGETARY & DEFICIT CONCEPTS

• Budgetary deficit is:
  • Sum of deficits of the Revenue Account and the Capital Account

 DEFICITS & BALANCE OF TRADE

• Revenue Deficit = Revenue Expenditure − Revenue Receipts
• Fiscal Deficit = Total Expenditure − (Total Receipts excluding borrowings)
• Primary Deficit = Fiscal Deficit − Interest Payments
• Trade Deficit
  • Imports > Exports
  • Impact:
    • GDP ↓
    • Local currency depreciates
    • Unemployment ↑

CAPITAL RECEIPTS

• Capital receipts are amounts received from:
  • Sale of assets
  • Shares
  • Debentures

• These receipts:
  • Create liabilities, or
  • Cause reduction in government assets

• Recovery of loans and advances
• Disinvestment
• Borrowing:
  • Domestic
  • External
• Small savings
• Etc.

• Part of Capital Receipts
• Classified as:
  • Non-debt creating capital receipts
• Results in:
  • Reduction in government assets

REVENUE RECEIPTS

• Revenue receipts are:
  • Amount received from the sale of goods and services

• Money received by a business from:
  • Normal business operations

• Tax revenue
• Interest earned
• Profits and dividends earned
• Income from other sources

 TAXATION SYSTEM

• Progressive Tax: Income Tax
• Regressive Tax: GST, Cess, VAT

🏛️ FINANCE COMMISSION

• Article 280
• Functions:
  • Vertical Devolution
  • Horizontal Devolution

 DEVALUATION OF CURRENCY

• Exports → Increase (++++ )
• Imports → Decrease (------ )
• Trade Deficit → Decreases

• Common Man: Burden increases
• Infrastructure: Negative impact

📈 INFLATION

• Hyperinflation: Inflation rate above 50%
• Cost-Push Inflation: Supply restricted, Demand increased
• Demand-Pull Inflation: Demand outpaces supply

National Planning Committee

• Year: 1938
• Chairman: Jawaharlal Nehru
• President: Subhas Chandra Bose

CONGRESS ECONOMIC RESOLUTIONS

• Fundamental Rights & Economic Policy Session
  • Year: 1931
  • Place: Karachi
• Resolution on Economic Policy
  • Year: 1938
  • Place: Faizpur

• A brief memorandum
• Outlined a plan for economic development of India

🏭 MAHALANOBIS MODEL & PLANNING

• P.C. Mahalanobis
  • Emphasis on:
    • Setting up heavy industries
    • Capital-intensive industries

• Based on Mahalanobis model
• Focus on heavy and basic industries

🏭 ECONOMIC REFORMS & PLANNING

• Meaning:
  • Decreasing traits of a state-controlled economy
  • Reduction of government control in economic activities

• Pruning the list of items reserved for SSI units

• Inflation control
• Balance of Payments adjustments
• Currency devaluation

1. Trade and capital inflow reforms
2. Industrial reforms
3. Tax reforms
4. Fiscal reforms
5. Monetary and financial reforms
6. Privatization

HUMAN DEVELOPMENT INDEX (HDI)

• Developed by:
  • Amartya Sen
  • Mehbub Ul Haq (Pakistani economist)
  • Gustav Ranis
  • Lord Meghnad Desai

POVERTY IN INDIA – CAUSES

1. Population explosion
2. Unemployment
3. Large size of the family
4. Income inequalities

• Coined by Mahatma Gandhi
• Meaning: “Universal Uplift”, Progress of all

📘 ECONOMIC SURVEY OF INDIA

• First Economic Survey presented in: 1950–51
• Up to 1964: Presented along with the Union Budget
• From 1964 onwards: Delinked from the Budget
• Presented normally one day before the Union Budget
• Presented in Parliament by: Finance Minister
• Prepared by:
  • Economics Division
  • Department of Economic Affairs
  • Ministry of Finance
• Under guidance of: Chief Economic Adviser
• Released after approval by the Finance Minister

📚 FOUNDATIONS OF ECONOMICS

• Ragnar Frisch: Divided economics into Macroeconomics & Microeconomics
• Central Problems of Economics
  1. What is produced and in what quantities
  2. For whom are goods produced
  3. How are goods produced

1. Demand, Supply and Equilibrium
2. Production theory
3. Cost of production
4. Labour economics

MARKET ECONOMY / CAPITALISM

• Only those consumer goods are produced:
  • Which are in demand

PUBLIC GOODS

• Available for all public
• Characteristics:
  • Non-excludable
  • Non-rivalrous

📈 PRODUCTION POSSIBILITY CURVE (PPC)

• Growth of resources causes:
  • Concave PPC to shift rightward

 BALANCE OF PAYMENTS (BoP)

• Goods
• Services

• Services
• Transfers
• Remittances

• Services
• Transfers
• Income

• External assistance

EXCHANGE RATE SYSTEM

• Restricted Floating: Error-prone swings
• Currency exchange methodology in India: Managed Exchange Rate Regime

 FISCAL POLICY

• Surplus Budget: Total Receipts > Expenditure
• Deficit Budget: Total Expenditure > Receipts
• Balanced Budget: Total Receipts = Expenditure

RICARDIAN EQUIVALENCE PROPOSITION

• Taxation and borrowing are equivalent means of financing government expenditure
• Important Note:
  • If funding for a larger budget deficit comes from international financial investors
  • Then: Budget deficit may be accompanied by a trade deficit

 TAXATION TYPES

• Customs Duty: Tax imposed on import and export of commodities
• Excise Tax: An indirect tax charged on sale of a particular good or service
• VAT (Value Added Tax): A consumption tax imposed whenever value is added at each stage of supply chain, from production to point of sale

 GOODS & SERVICES TAX (GST)

• Introduced by 101st Constitutional Amendment Act
• Implemented in 2017

AGRICULTURE & TRADE RANKINGS

• Fruit Production: China > India (2nd)
• Vegetable Production: India – 1st

• Rice Export: India > Vietnam
• Rice Import: China > India > Indonesia

ECONOMIC PLANNING & ADMINISTRATION

• Russia: First country to introduce national planning
• HRD: Established in 1985

POVERTY MEASUREMENT

• Poverty Gap: Measures intensity of poverty
• Indicates how far people fall below poverty line on average

ECONOMIC ACTIVITIES

• Quinary Activities: Jobs requiring high level of degree qualification and high level of innovation

 E-COMMERCE

• B2B
• B2C
• C2C
• Important Note: D2D is NOT a type of E-commerce

 MONEY & CURRENCY CONCEPTS

• Fiat Money: Government-issued currency, not backed by commodities like gold
• Allows central banks to control money supply
• Examples: US Dollar, British Pound, Euro, Indian Rupee
• Risk: Excess printing may cause hyperinflation

HIGH POWERED MONEY (MONETARY BASE)

• Currency (notes and coins in circulation)
• Vault cash of commercial banks
• Deposits held by:
  • Government of India
  • Commercial banks with RBI

GRESHAM’S LAW

• Related to circulation of currency
• Statement: “Bad money drives out good money”

MONETARY POLICY TOOL

• MSF (Marginal Standing Facility): Overnight borrowing
• Flow: Scheduled Commercial Banks → RBI

MONEY SUPPLY MEASURES (RBI)

• M1 = Currency + DD
• M2 = M1 + Savings deposits with Post Office savings banks
• M3 = M1 + Net time deposits of commercial banks
• M4 = M3 + Total deposits with Post Office savings organizations (excluding National Savings Certificates)

• Narrow Money: M1, M2
• Broad Money: M3, M4

• Decreasing order of liquidity: M1 → M2 → M3 → M4
• M1: Most liquid
• M4: Least liquid

• Most commonly used measure of money supply
• Known as Aggregate Monetary Resources
• Includes: M0, M1, M2 plus less liquid components

📉 DEMAND CURVE

• Demand curve slopes downward from left to right

• Changes in factors other than price and quantity can shift the demand curve rightward or leftward

• As price increases, quantity demanded decreases (ceteris paribus)

• Graphical representation of demand schedule

🔁 SHIFT IN DEMAND CURVE

• Income increases
• Future price expected to increase
• Price of substitute rises

• Price of complementary good increases
  • Example: Charcoal price ↑ → Demand for grilled corn ↓

⚠️ EXCEPTIONS TO THE LAW OF DEMAND

• Non-luxury goods, no viable substitute
• Example: Staple foods like bread or rice
• Demand increases when price increases
• Demand falls when price decreases
• Demand curve upward sloping, violates law of demand

• Goods whose demand rises with increase in price
• Reason: Status symbol, exclusive nature
• Demand curve upward sloping
• Examples: Cars, yachts, fine wines, designer jewelry

 KINKED DEMAND CURVE (OLIGOPOLY)

• Illustrates interdependence of firms in oligopoly
• Proposed by Paul Sweezy
• Explains price rigidity

• Demand curve has a kink at prevailing price
• Portion above prevailing price: Highly elastic
• Portion below prevailing price: Inelastic

 ELASTICITY OF DEMAND

• Demand curve horizontal
• Price increase above market price → Quantity demanded becomes zero

EQUILIBRIUM

• Decrease in demand + Increase in supply → Fall in equilibrium price

🏦 FINANCIAL MARKETS

• NSE Prime launched in 2021

CORPORATE SUSTAINABILITY ASSESSMENT

• Founded in 1999
• Serves as foundation for S&P Dow Jones Sustainability Index

 NATIONAL INCOME CONCEPTS

• PI ≡ NI − Undistributed profits − Net interest payments made by households − Corporate tax + Transfer payments to households from government and firms

CONSUMPTION THEORY

• MPC = ΔC / ΔY
• Range: 0–1
  • Entire income consumed → MPC = 1
  • Entire income saved → MPC = 0

KEYNESIAN CONCEPT

• Given by John Maynard Keynes
• Individual savings may harm economy

LABOUR STATISTICS

• Periodic Labour Force Survey (PLFS)
• Launched 2017
• Conducted by National Statistical Office (NSO)
• Recommendation: Amitabh Kundu

DEMAND–SUPPLY & EQUILIBRIUM

• Decrease in demand + Increase in supply → Fall in equilibrium price

🏦 FINANCIAL MARKETS & SUSTAINABILITY

• NSE: NSE Prime launched 2021
• Corporate Sustainability Assessment (CSA) founded 1999

MGNREGA

• Guarantees 100 days of employment for unskilled rural labour
• If work not provided within 15 days: Employment allowance payable
• Largest social security scheme in the world

MACROECONOMICS BASICS

• Base Year: Year whose prices are used to calculate Real GDP
• Subject: Principle of National Income

MONEY & BANKING

• Non-excludable, Non-rivalrous

BALANCE OF PAYMENTS

• Summarizes an economy’s international economic dealings

FINANCIAL INSTITUTIONS & CREDIT

• Debt recovery handled through self-help organisations

• Marginal Cost of Funds-based Lending Rate
• Introduced 1 April 2016

🧾 GST & TAXATION

• Under GST, tax liability shifts to recipient
• Scrap steel industry demand: Inclusion under RCM
• ITC:
  • Recipient cannot claim ITC if supplier has not paid GST

• Publishes GDP value in Indian Rupees

CLASSICAL ECONOMICS – DAVID RICARDO

• First argued: High deficits → People save more
• Law of Comparative Advantage: Attributed to David Ricardo
• Book: On the Principles of Political Economy and Taxation (1817)

POLICY & PLANNING

• Licensing Policy: Aim to keep private sector under control
• Gross Primary Deficit: Formula → Gross Fiscal Deficit − Net Interest Liabilities
• Agro-Climatic Zones: India has 15
• P.C. Mahalanobis: Head of National Income Committee

PARLIAMENT & ECONOMY

• Budget Session 2023: 31 January – 6 April 2023

PRICE & POVERTY

• NNPFC = NNPMP − Indirect Taxes + Subsidy
• GDP Deflator: Implicit price deflator
• Bernstein Henry: 4D approach of poverty
• Shrinkflation: PARLEG method → Same price, reduced quantity

TAXATION TYPES

• Progressive Tax: High income → High tax
• Regressive Tax: Inverse / Indirect tax
• Proportional Tax: Flat tax (Corporate tax)
• Payroll Tax: Employer’s payroll

BANKING & FINANCE

• Regional Rural Banks (RRBs): Established via ordinance 26 September 1975
• Governed by RRB Act, 1976
• Purpose: Credit for agriculture & rural sectors

1. Value Added Method
2. Expenditure Method
3. Income Method

• Estb. July 1, 1948
• India’s first Development Bank

GOVERNMENT BONDS & TAX DATA

1. Sovereign Gold Bond
   • Interest rate: 2.5%
   • Issued by RBI
2. Direct Tax Collection
   • Increased by 172.83% (last 9 years – CBDT)
3. Sovereign Green Bonds
   • Uniform price auction
   • Specified securities under FAR
   • Eligible for repurchase transactions

BANK MERGERS

• OBC + UBI → PNB
• BOB + Vijaya Bank
• Indian Bank + Allahabad Bank
• Canara Bank + Syndicate Bank
• Union Bank of India + Andhra Bank + Corporation Bank

BANKING REGULATIONS

• Minimum paid-up voting equity capital for universal bank: ₹500 crore

1. SBI
2. ICICI Bank
3. HDFC Bank

DEVELOPMENT & COST CONCEPTS

• Envisions balanced growth where people and planet thrive together

• Easily quantifiable costs, payments for factors of production
• Includes wages, rent, raw materials, etc.
• Explicit cost of capital: Known as discount rate

UTILITY THEORY

• H. H. Gossen: Formulated Law of Diminishing Marginal Utility

TAXATION & STARTUPS

• Section 56(2)(viib) of Income Tax Act, 1961
• Abolished from 1 April 2025
• Rate (historical reference): 30.9%
• Exemption moot; provision removed, all startups free from angel tax

MONETARY & FINANCIAL MARKETS

• RBI allowed banks from 18 countries to trade in rupee

• = Coupon Amount / Price

• Total members: 6
  • RBI Governor (Chairperson)
  • RBI Deputy Governor (Monetary Policy)
  • One RBI nominee
  • Three Government of India nominees

PARLIAMENTARY BILLS

• Comparable to Money Bill because:
  • Originates only in Lok Sabha
  • Introduced only on President’s recommendation
• All Money Bills are Financial Bills
• Not all Financial Bills are Money Bills
• Rajya Sabha: Cannot amend/reject Money Bill; can amend/reject Financial Bill

ENVIRONMENT & DEMOGRAPHY

• India’s first National Centre of Excellence in Green Port & Shipping → Gurugram, Haryana
• Population growth rate in India started declining from 1981

CAPITAL & MONEY MARKETS

• Capital Market includes government bonds, stock market
• Not part: Treasury Bills (≤ 1 year), Call Money Market

MONETARY POLICY & GDP

• MSF & Reverse Repo Rate → Determine corridor for WACMR

• Supply-side measure, value of output − intermediate inputs
• Value added shared between labour & capital

ENERGY & INFLATION

• Kirit Parikh Committee → Review gas pricing formula
• RBI launched Inflation Expectations Survey of Households (IESH) – Jan 2023
• India–Malaysia trade settlement in Indian Rupees

• RBI buys/sells government securities
• Offsets impact of forex intervention on money supply

DEMOGRAPHY & SOCIAL INDICATORS

• Annual population growth rate (%) in India started declining from 1981

CAPITAL MARKET & SEBI

• Minimum issue size: ₹1 crore
• Minimum application size: ₹2 lakh

• Vault Manager regulated as SEBI intermediary
• Minimum net worth: ₹50 crore
• Must preserve records for minimum 5 years

MONEY SUPPLY & FISCAL TERMS

• Wage Bill ❌ Not a capital expenditure

MONETARY POLICY & RBI TOOLS

• MSF + Reverse Repo Rate → Determine corridor for WACMR

• Standing Deposit Facility (SDF): Uncollateralised overnight deposits
• MSF: Penal overnight borrowing by dipping into SLR (up to 2%)
• Liquidity Adjustment Facility (LAF): Injects/absorbs liquidity; includes repo, reverse repo, SDF, MSF

NATIONAL INCOME ACCOUNTING

• GDP Formula: GDP = GVA + Taxes − Subsidies
• GVA: Supply-side measure, value of output − intermediate inputs, shared between labour & capital

CPI – IW

• Compiled by Labour Bureau
• Measures retail prices for working-class families
• Base year revised: 2001 → 2016
• Increase in food & energy prices ❌ does not raise core CPI inflation

EXTERNAL SECTOR & FOREX

• India–Malaysia trade settlement in Indian Rupees (April 1, 2023)

• Sale/purchase of government securities neutralizes impact of forex intervention on money supply

AGRICULTURE & MARKETING POLICIES

1. Public Distribution System (PDS)
2. Minimum Support Price (MSP)
3. Buffer Stock

• Amber Box → MSP
• Blue Box → Production-linked restrictions
• Green Box → No price support

TYPES OF FARMING

• Capital-intensive, machine-based
• Grain farming, mixed farming, plantations

• Small scale, nomadic cultivation, shifting cultivation

MALPRACTICES IN TRADING

• Buying & selling without actual movement of goods, often via shell companies

• Illegal trading practice
• Types: Sell–Sell–Buy, Buy–Buy–Sell
• Recent case: LIC official Yogesh Garad (with 5 others)

 INDUSTRIAL HISTORY

• Nepanagar – First newsprint industry
• Raniganj – First coalfield

📉 STOCK MARKET SETTLEMENT

• 1996 – T+5
• 2002 – T+3
• 2003 – T+2
• Rolling settlement introduced: July 2001
• Trading days:
  • BSE – Friday
  • NSE – Tuesday

GLOBAL ECONOMY & SOCIAL SECURITY

• UK surpassed India as 6th largest equity market
• ESIC unemployment benefits: Extended to 2 years

 ECONOMIC TERMS

🪙 ELECTRONIC GOLD RECEIPTS (EGR) – SEBI

• Vault Manager: Body corporate incorporated in India, minimum net worth ₹50 crore
• Record preservation: Minimum 5 years

📉 MAJOR GLOBAL RECESSIONS

• Great Depression (1929–1939)
• Oil Crisis Recession (1973–1975)
• Dot-Com Bubble (2000–2002)
• Global Financial Crisis (2007–2009)
• Eurozone Debt Crisis (2010–2014)

 GREEN FINANCE

• Green Bonds (2007): Long-term debt instruments for climate-friendly projects

UNEMPLOYMENT TYPES

• Cyclical: Recession, layoffs
• Frictional: Job change/resignation
• Structural: Skill mismatch

PLANNING IN INDIA

• Indicative Planning: 1992–97
• State acts as facilitator, not controller

RBI BALANCE SHEET

1. Rupee securities (T-Bills)
2. Loans & advances
3. Foreign exchange reserves
4. Gold bullion & coins

1. Currency notes
2. Paid-up capital & reserve fund

POVERTY & ENTERPRISE CLASSIFICATION

• National MPI: Indian version of Global MPI, nodal agency NITI Aayog
• Based on NFHS-4

EXCHANGE RATE & INEQUALITY

• Floating exchange rate: Market-determined
• GINI Coefficient: Income distribution

 BASE YEARS

• WPI – 2011–12
• CPI – 2011–12
• GDP – 2011–12

EXTERNAL SECTOR

• Capital Account → Capital flows
• Current Account → Trade in goods & services

• Adverse trade: Import > Export
• Favourable trade: Export > Import

INTELLECTUAL PROPERTY

• Government allows someone else to produce patented product/process without owner’s consent
• Government may also use patented invention

POVERTY & INEQUALITY

1. Nationalized version of Global MPI
2. NITI Aayog – nodal agency
3. Baseline report based on NFHS-4

• Urban: 2100 calories/day
• Rural: 2400 calories/day
• Poverty line calculated every 5 years
• BPL population: Rural 25.7%, Urban 13.7%

• Alagh Committee (1979)
• Lakdawala Committee (1993)
• Tendulkar Committee (2009)
• Survey responsibility of BPL households → SDO
• NITI Aayog replaced Planning Commission

EXCHANGE RATE SYSTEM

• Floating Exchange Rate: Market-determined, based on demand and supply

INDUSTRIAL LOCATION

FINANCIAL & MONETARY FACTS

• RBI nationalised 1949
• FERA repealed 1998 (Vajpayee govt)
• FEMA introduced IT provisions
• BIND Scheme: ₹2500 crore

INTERNATIONAL ORGANISATIONS

• International Seabed Authority: India → Pioneer Investor

GREEN FINANCE & AGRICULTURE

• India’s first sovereign green bond: HDFC Bank
• GREEN = H for Hara
• Fertilizer subsidy → Central Government
• NMSA (2011-12): Food security, land, water, biodiversity protection

AGRICULTURAL & SOCIAL MOVEMENTS

• Rewa Rice Movement (1947): 28 Feb 1947
• Leaders killed: Bhairav Prasad Urmaliya, Tribhuvan Tiwari
• Against forced levy collection by Rewa State

BUSINESS & MARKET TYPES

• Customers generate value for firms
• Examples: Google AdSense, Shutterstock
• Focus: Market research, Audience engagement

FOOD SECURITY ACT, 2013

• Household coverage: 1 + 5 members, 1 secretary, Minimum 2 women members

PUBLIC FINANCE & ECONOMICS

• Fiscal Drag: Higher tax burden due to income rise in progressive taxation
• Closed Economy: No exports, no imports
• Human Capital Formation: Skill & education accumulation, essential for development

INSOLVENCY & BANKRUPTCY

• Bankruptcy: Legal process for debt relief
• Insolvency: Inability to pay debts
• IBBI: Regulator for insolvency & bankruptcy, established October 2016, New Delhi

MACROECONOMIC TERMS

• Stagflation: High inflation, high unemployment, stagnant demand
• Demographic Dividend: Age group 15–59 years

INDUSTRIAL GEOGRAPHY

• Footloose industries: Location-independent

ECONOMIC INDICATORS & SYSTEMS

• Best indicator of economy → Per capita income
• Capitalist economy: Output depends on demand & supply
• Public Key Infrastructure: Digital security framework

NATIONAL INCOME AUTHORITIES

• NNP @ FC = National Income
• National Income compiled by CSO
• GDP compiled by NSO