Hae Oma .o ees " @ EARS ae ONSE G ZY sesene O xo VI" to XII" NR Useful for all Competitive Exams SS L > Mahesh Kumar Barnwal ACTEM nurs)© Copyright of Author ‘The facts and figures written in the book are meticulously studied and validated, However, the publisher holds no responsibility for any discrepancy in any information or fact. Do not publish any material, diagram "| ormap of this book without author's permission, Otherwise a legal action may be taken. All legal disputes are ___ subjectto the Delhi jurisdiction only. 25 October, 2020 First Edition (The Gist of NCERT) Yr toxn a TCC Kunal Verma Sonu Singh and Neetika Sarsar Divesh Kumar Cover Design Publisher & Distributor ‘TM No. 07181859 qosn0e PUBLICATION PUBLICATION . mer tS ayes tea ee ee ete) B 011-45082119, 011-42460946 | x4 : cosmospublication98@[Link] ® +91 8448899217 | © +91 9250604879 Be:Index Unit |: Macro Economics + Experimental Beonomies 10) * Circular Economics 10] 1. Introduction to Economics 1412 Objective Questions ig + Introduction 2 + Economics vs Economy 2 Market Mechanism 13-19 + Importance/Significance of Economics 2 Market Mechanism 13 + Definitions of Economics & ° Market B ls Macroeconomics 3 Demand and Supply 13-14 + Microeconomics: Dena 15 |* Central Economic Problems "+, Decuend Carve 1415 fe HennouiieActivtion 45 | * Elastic vs Inclastic Demand 15 J+ Types of Economies Other Types‘of Demand 15-16 + Classification on the basis of Regulation 37 Aatonomoss Terma ‘sag + Free Market Economy/Liberal Economy 22 Stet Teemt and Lone Ferm emai ig + Command Economy/Socialist Economy Supply ig + Mixed Economy : Blasicity 16-18 }* Classification of countries based on 5, Detean Elastity 1etf Economic Activities/Extent of Development * Price Equilibrium 17 + Developed Countries + Laffer Curve n * Developing Countries * Phillips Curve 7 * Least Developed Countries * Kuznets Curve 17-18 + classification on the bass of Global Relations Objective Questions 18-19 + Closed Economy Investment and Consumption 20-28 + Open Economy Investment 2021 + Classification on the basis of Sectors + Relationship between Savings and + Agrarian Economy Investment 20 * Industrial Economy * Factors of Production 20-21 + Service Economy Factors Affecting Investment 21-22 + Traditional Economy + Depreciation 21-22 + Sectors of Economy Investment Models 2 + Primary Sector Public Investment Model 2 + Secondary Sector + Advantages & Significance of Public + Tertiary Sector Tanvestment 2 + Other Sectors of Economy Private Investment Model. 2B. + Quaternary Sector Public-Private Partnership Model 23, + Quinary Sector Investment Models in India (Retated to State |. Emerging Models in the field of Economics Planning) B, + Behavioural Economics + Harrod-Domar Model a © Welfare Economics + _Solow-Swan Model Bi z Indian Economy+ Feldman-Mahalanobis Mode! 23 First National Income Estimations in India. 35 ¢ Rio: Maumohan Model 23 | © Gross Fixed Capital Formation (GFCF) 35.36 + Types of Goods 24.25 Indian Organisations related to National + Normal Goods 24 | Income Account aad + Luxury Goods oy + Ministry of Statistics and Programme + Inferior Goods 24 Implementation ‘e + Necessity Goods 4 + Central Statistical Office (CSO) 36 + Comfort Goods 24 | + National Sample Survey Office (NSSO) 36.37 + Complementary Goods 24 | + Trends in the Growth and Structure of the + Substitute Goods 24 al Income 7 . fin Goods 24-25 Middle-Income Trap 37-38 + Veblen/Snob Goods 25 Objective Questions 39.40) eee 25 | 5. EconomicGrowthand Development 41-55 + Demerit Goods 25 tae 3s | * Beonomie: Growth 41 te eae bq | 7 Beonomie Development 4l fcreiasaedis be | 7 Factors of Esonomie Development 42-43 cepacia [Link] | * Balanced vs Unbalanced Growth 4B + Objective Ques 26-28 Economic Growth vs Sustainable Development 43.44 Unit Il: National Income and Human Development Index (HDD) “ State of Economy Gross National Happiness (GNH) “4 Multidimensional Poverty Index (MPI) 4445 ‘4. National Income 30-40 Global Hunger Index (GHI) 45 J+ National Income 30 Gini Index 45 + Circular Flow of Income in Three-Sector National Prosperity Index (NPI) 45 ‘Economy a ‘Human Development Report, 2019 45-46 = Saving and Investment inthe Cireular Flow 30-31. | - . nequality-adjusted Human Development Index |. Government Sector in the Circular Flow 31 (DH 461 |. Methods of Measuring National Income 3132 + Gender Develpment Index 46 + Concept of Market Price and Factor Cost 32, | + Gender Inequality Index 46 J+ Depreciation 32 | + Multidimensional Poverty Index 46 + National Income Related Concepts 32.33, ‘Millennium Development Goals 46 + Gross Domestic Product (GDP) 32 MDG and India’s Progress (46-48 * Nominal GDP 32 + MDG 1: Eradicate Extreme Poverty and + Real DP 32 Hunger 4647 os aust atonal rtp (GE sess | * MDG2:Aeiovethivss iy fs Gest ©) Nb ome Ger Eglo we Empower Women a + National Income at Factor Cost — 33.| . MDG4:Reduce Child Mortality a + recap income cron 3334 | 1 saoGs:tnproved Medal Heath a * Personal Income (PI) cad + MDG 6: Combat HIV/AIDS, Malaria and + Disposable Income (DI) 34 ‘Other Diseases. a7 indian EconomyMDG 7 = Ensure Environment Sustainability 47-48 ] 7. Inflation 66-78 MDG 8 : Develop a Global Partnership + Inflation 66-68 for Development 48 | 5 inflationary Gap “ + Sustainable Development Goals (SDGs) 4852 |. Deflationary Gap 6 + Goal 1 No Poverty 491 5 tnftation Tax o + Goal 2: Zero Hunger 491 Refation 6 + Goal3:GoodHeathand WelBeing 49-50 | ghevfiation 6 * Goal 4: Quality Education 50.) «Ss syeaeane ‘a + Goal 5: Gender Equality 50]. cateuation of inflation 68-10 + Goat 6 Clean Water and Sanitation 50] << wickle Prce aden CH) e + Goal7:Afforableand Clean Energy 5081 | | itterence betwen WPI & CPT 70 + Goal 8 : Decent Work and Economie Sa nilgesotPHL 7 yo Gage saga 51] 6 index of tndustil Production (IP) aoe” 1 | ¢ Headline Inflation 1 + Goal 10: Redice Inequalities 51. COTATI a + Gott SosinbieCissaniConmnis | * ‘Hin tntaton vor tfon n + Goal 12: Responsible Production and cae cae nese i a Consumption si-s2 | + GDPDeftator n + Goal 13: Climate Actions 52 | + Stagflation RB + Goal 14: Life Below Water sz | + Base Effet 2 + Gol 15: Life on tand 52 | * Inflation Trend in india 13-6 + Goal 16 : Peas; justice and Strong + Philips Curve 16) Institutions 52 | + “Measures to control Inflation 16 + Goal 17: Partnership forthe Goals 52] + Monetary Measures 16 + Indinand Sustainable DevelopmentGoals 52-53. | + Fiscal Measures 16 + Objective Questions 54.55 | + Objective Questions m8 Unit Ill : Mone y Supply Unit IV : Monetary and Fiscal Policy |S. Money Supply 57-65 | 8 Banking Sector in India 80-101] + Money 37 | + Banking 40] + Barter System 37 | + History of Banking in india a0| + Representative Money 57-58 | + TheBanking Regulation (Amendment) Bill2020 80-81 + Various Forms of Money 58-59 | + Functions of Banks 1-83 + Paper Money vis-a-vis Plastic Money + Primary Functions si and Cryptocurreney 59 | + Secondary Functions 2 + Block Chain Technology 58:60, | ~ tTranetie of Bands 2 I+ Money Supply 60 * Dealer in Securities 82 + Unified Payments Interface (UPI) 6l * Utility Functions 82-83 nian + Collection of Funds and Cheques 83| + Cashless Beonomy 61-63 | + Payment of Bills/Expenses 2 + Effects on Economy and Security 63 | + Financial tnermedition 8 Yle-_ objective Questions 64-65 | _+ _RiskManagement 8 Indian EconomyReserve Bank of India Role of RBI Functions of RBI 84 84 84 85 Note-Issuing Authority Banker to Banks Regulator and Supervisor Custodian of Foreign Reserves 85 Banker to the Government 85 Quantitative Credit Control 85-87 Qualitative Credit Control 87 Monetary Policy 87-89 Flexible Inflation Targeting Framework (FITF) 88 Monetary Policy Framework (MPF) 88 ‘Monetary Policy Process (MPP) 88 “Monetary Policy Committee (MPC) ‘Scheduled Commercial Banks Role of Commercial Banks + Nationalised Banks Foreign Banks Private Banks Regional Rural Banks Non-scheduled Banks Exim Bank NABARD NHB SIDBI PRIMARY Dealers (PD) ‘Non Banking Finance Companies (NBFC) + Significance of NBFCs Co-operative Banks + Shadow Banking + Small Finance Banks 94 + SFB Cannot Perform 95 + Guidelines 95 Payments Bank 95 Foreign Exchange Reserve Mudra Bank 96 Non Performing Assets (NPA) %6 NPA Crisis 96-97 + NPAs of Public Sector Banks ” Problems faced by Nationalised Banks in India 97-98 + Lowering of Capital to Risk-weighted Assets Ratio(CRAR) 97-98, ‘Banks under Prompt Corrective Action (PCA) Performance of the National Company Law Tribunal (NCLT) + Incentives for PSB employees Incorporation of Technology in Banking Sector + Blockchain Technology + Artificial Intelligence (Al) and Big Data. Teaser Loans + Core Banking Solutions + Operation Twist + BASEL accord Objective Questions Public Finance and Fiscal Policy 1 Public + Public Revenue + Tax Revenue ‘Tax Structure in India Direct Taxes + Corporation Tax Indirect Taxes Goods and Services Tax (GST) + GST Compensation ‘Types of GST Non-Tax Revenue Public Expenditure Public Debt + Internal Debt + Extemnal Debt + Necessity of Public Debt + Debt to GDP Ratio + Public Debt vs Private Debt Finance Commission 158 Finance Commission Recommendations of 15 Finance Commission Fiscal Policy 112-113 ‘Types of Fiscal Policy + Expansionary Fiscal Policy + Contractionary Fiscal Policy + Neutral Fiscal Policy Objectives of Fiscal Policy ina Developing 98 98.99] 98 98.99) 99-100 99-100 100 100 100-101 102-121 102 102 102-103 104 104-105 104-105 105-106 106-107 107 107-108 108-109| 109 110 110 10 10 no no im Mm 12 113-114 13 13 3-114] Indian Economy Ta+ Foreign Investment 126 ae hte ee toate 8 Unit V : Human Capital J+ Foreign Direct Investment (FDI) 127.128 | 11. Demographic Profile of India 440-152 + Foreign lastitutional Investment (FI) 128 | + Demography 140 + Qualified Foreign Investor (QF) 128 | + Size and Growth of India’s Population 140-141 |. Foreign Exchange Reserves 128 | + Population Explosion 140-141 + Forex Reserve 128-129 | + Components of Population Growth 141-142 ‘Economy T4115, + Employment Generation 4 + Price Stability 4 + Accelerating rate of Economic Development 114 + Optimum allocation of Resources 14 + Equitable distribution of Income and Wealth 4-115 + Economic Stability ns + Capital Formation and Growth us + Encouraging Investment us + Budget 115-116 + Budget Formation Process 115-116 + Types of Budget 16 + Types of Deficits u7 + Effective Revenue Deficit 47 + Fiscal Deficit 7 + Primary Deficit 117-18 + Deficit Financing 118-119 + Instances of breching the FRBM targeting the past 119 |. FRBM Act, 2003 119 + Escape Clause 120 + During the Budget 2020-21 Presentation 120 + Objective Questions 120-121 10. Balance of PaymentandForeign 122-138 + Balance of Payment (BoP) 122 + Current Account 123 + Goods Account 123, + Service Accounts 123, + Unilateral Transfer Account 123 J+ Balance of Trade 124-125 + Exports and Imports of Goods 125-126 + Export and Import at Services 125 + Capital Account 125 Components of Capital Account 126-127 128 128 128-129 + Total Foreign Currencies, + Special Drawing Rights + Reserve Tranche with the IMF + Foreign Currency Assets 129 Current Account Convertibility vs Capital ‘Account Convert 129 Capital Account Convertibility in India 129-130 Recommedations of Tarapore Committee on Capital Account Convertibility, + Pre-Conditions Foreign Exchange Evolution of Exchange Rates in India + Fixed Exchange Rate + Floating Exchange Rate 130 130 130 130-131 130 131 Determination of Exchange Rate 131 NEER and REER 132 Special Economic Zone 132 Extemal Debt 133-135 + Sovereign Debt 133 + Trade Cre 133 + Bilateral Debt 133 + Multilateral Debt + External Commercial Borrowings (ECB) + Foreign Currency Cunvertible Bonds (FCCB) 133-134 134 133 133 + Debt Service Ratio + Conessional Debt 134 + NRIDeposits 14 + Non-Rresident (external) Rupee (NRE) Account 14 + Non-Resident Ordinary Rupee (NRO) Accountl34 + Foreign Currency non-resident bank deposits 134 Balance of Payment Crisis 135 Foreign Trade Policy 2015-20 138-136 + Major Highlights 135-136 Objective Questions 137138 Indian Economy a+ Birth and Death Rates 14 ‘Rural and Urban Population 149 + Infant Mortality Rate 141 «Density 149 + Density of Population 141-142 | + Sex Ratio 149-150 + Real Population Density 142 + Child Population 150 5: ER, 142 | + Religious Demography 150 + Important Facts related to Rural/Urban Population + Objective Questions 151-152 (2011 Census) a + Migration Effect 142 | [Link] Capital 153-161 + Demographic Attributes 142-145 | * Human Capital 153-155 + Age Structure/Composition 142-143 | + Human Development through Planning in India 155 + Life Expectancy 143 | + Human Capital Development 155-156 + Sex Ratio 144 | + Major Initiatives taken by the Goverment 156-157 + Literacy 144 | + Skill Development 156-157 + Dependency ratio 144 | + Health Sector 137 + Mortality rate 144 | +. Boosting Skills and Entrepreneurship 187 + Demographic Dividend 144-145 | «Right to education Act 137 + Advantages of Demographic Dividend 145 | «Challenges of Human Capital Formation in + Rise in Workforce 145 | India 157-158 + Bileetive Policy Making 145. | + BrainDrain 187 + Challenges of Demographic Dividend 145-146 | + Unemployability 158 + Asymmetric Demography 145 | tnitiatives taken to provide the quality education + Unskilled / Semiskilled workforce 145-146 | in government schools and institutions 159 + Unemployment 146 | + Objective Questions 159-161 + Low Human Development Parameters 146 Fe poe ug | 13-Poverty and Unemployment 162-182 J+ Way Forward 146-149 | * Poverty 162 + Building Human Capital 146 | * Absolute Poverty 162-163 > Bleeder 146-147 | * Relative Poverty 163, ors 147 | * Poverty Estimation in India 163 + Job Creation M7 + Rovervrdalindl 163 SS tahaetiod 147 | * Poverty Estimation Committees 163-165 ‘+ National Population Policy 7 Sy. YR Alagh Comesattee\(1973) 163 «National Population Poti (2000) 147 | Lakdawala Formuta (1993) 163-164 «Objectives of NPP, 2000 147 | * Tendulkar Methodology (2009) 164 + Twelfth Plan and Family Welfare + Rangarajan Committee on Poverty 164 Programmes 14g | * SECC Methodology 164 + Socio-Economic and Caste Census * Poverty Gap Ratio 164 (SECC, 2011) 148 | + Poverty Line 165 + + Census, 2011 Old Age People 148 | + Measures of Poverty 165 + National Population Register (NPR) 148 | + Head Count Ratio 165 ot Aadhar Card 148 | + Head Count Ratio or Poverty Ratio 165 + “Indian Census 2011 : Major Highlights 149-150 | + Poverty Gap Index (PGI) 165 + India’s Population 149 | + Causes of Poverty in India 165-166 Indian EconomyData Collection Methods 166 Approaches to address Poverty 166-167 + Trickle Down effect 166-167 + Inclusive Growth Model 167 Elements of Inclusive Growth 167-168 + Skill Development 167 + Financial Inclusion 167 + Social Development 167 + Technological Advancement 168, Challenges in Achieving Inclusive Growth 168, + Poverty 168 + Unemployment 168 + Issues with Social Development 168 + Regional Disparities, 168, + Multidimensional Poverty Index 168, Poverty Alleviation Programmes in India, 169 Inclusive Development Index (IDI) 170-171 + Social Progress Index (SPI) 170-171 UN Report on Indian Poverty In-t72 + Measurement of Poverty by UNDP. m Employment and Unemployment m + Employment, 1m + Unemployment 12 ‘Unemployment im + Unemployment Trap m ‘Types of Unemployment 173-174 + Vulnerable Employment 173 + Cyelieal Unemployment 173 + Frictional Unemployment 173 + Structural Unemployment 3 + Seasonal Unemployment 173 + Industrial Unemployment 173 + Educated Unemployment 173 + Disguised Unemployment 174 + Under-employment 174 ‘+ Types of Under-employment 74 ‘Nature and Estimation of Unemployment in India 174 Key Indicators for estimation of Under-employment inIndia 174 + Statistics related to the State of Unemployment inindia 173) + Reasons for Low Female LFPR 175-176, + Measures of Unemployment in India 176 + Consequences of Unemployment 176| + Programme related to Employment and Poverty Eradication 176-179 + Jawahar Rozgar Yojana GRY) 17 + Indira Awaas Yojana 17 + National Food Security Mission 171] + Skill Development Programme 7 + Prime Minister’s National Council on Skill Development 71 + Pradhan Mantri Kaushal Vikas Yojana 177-178 + Skill Loan Scheme 178 + Mahatama Gandhi National Rural Employment |) Guarantee Scheme (MGNREGS) 178 + National Rural Livelihood Mission (NRLM) 178-179 + National Urban Livelihood Mission (NULM) 179 + Income Inequality 179-180 + Objective Questions 181-182| Unit VI Nature of Economy and Infrastructure 14. Natural Resources and Development 184-193 + Natural Resources and Development 184] + . Classification of Natural Resources 184] *+ Resource Distribution 185-186 * Renewable Resources 185 + Nottenewable Resources 185-186} + Sustainable Development 186 + Global Distibution of Resources 186-187 *+ Resources in India 188 + Types of Natural Resources in India 138-189 + Land Resources: 188| * Forest Resources 188] + Water Resources, 188 + Fisheries 188-189) + Mineral Resources 189] Areas of Concern 189-190]+ Degradation of Natural Resources 189-190 | + Objective Questions 2508 + Desertification and Land Degradation 190 Saba * 191 | 16:Challenges Faced by indian Economy cies and Programmes = 206-231 se Cones boli rte oe eas oe + Integrated Watershed Management Programme era 7 ems on | + Populist Schemes 206 + Desert Development Programme 191 | * Agrarian Distress 206-207 + Soil Conservation in the Catchment of River Valley} * a 207 Projects and Flood Prone Rivers 191 | + Raising Productivity 208-209 + National Afforestation Programme 191 | Igation 208 + National Action Programme to Combat + Seeds and Fertilisers 208! Desertification 191 | + New Technology 208 + Fodder and Feed Development Scheme 191. | + _Shiftto High Value Commo: 208 + National Action Plan on Climate Change 192 | + Horticulture 208 + National Mission on Green India 192 + Animal Husbandry 208, + Integration of Land and Water Schemes 19 + Blue Economy 208-209 ‘Tackle Land Degradation 192) 6 Forestry 209] + Objective Questions 192-193 |. agricultural Land Policy: Leasing and a 2 15. Urbanization 194-205 pee id pees ouiog | 1 Relist Measures 209 Pas ee + Issues concerning. Public Sector Bank 209-210 ‘Nature of Urbanization in India 195 + Way Forward 210-211 ‘Components of Urban Growth 195-196 I it Te ‘lated to Urbanization 196-197 | 7 Dilan Gasisectat alias enireieapacbamancaae ae 7 * Major challenges to Oil and Gas sector 211-212 + Urban Agglomeration (UA) ee re + Out Growths (OG) 197 fees + Foreign Investment 212.213 + Over-Urbanization 7 / " + New FDI Policy 213 + Sub-urbanization 197 ; + Savings and Capital Formation 213 | + Counter-urbanization 197 + Savings 213 + Hidden Urbanization 197 * Capital Formation 213-214) Urban Development 197-199 : aoe + Creation of Savings 214 + Urban Planning in India 198 * Effective Mobilization of Savings 214) + Urban Governance 198-199 + Investment of Saving 214 * Urbanization and Govemance 199 : + Tax Compliance in India 215-216, Urbanization in nda 199.201 ‘+ Fall in the collection of Direct Taxes 216 Urban Transport 202 + Direct Tax Reforms 216 Problems because of Poor Urban Transportation 202 + GST Revenues 216 Government Initiatives to address Urban id a Poneehiased, gor-208 | * Reasons for Low GST Collections * Jawaharlal Nehru National Urban Renewal parent oa Mission JNNURM, 2005, 302-203 | +. -‘nfiatcn ns + Benefits of Low Inflation 217.218} + Government initiatives to sustain ‘Uitiendzigon 203-204 + Disadvantages of Low Inflation ais! ma: | 7 IndianEconomy_ |Income redistribution 218 ‘Improve access to sanitation and other basic, infrastructure 29, + Negative ral interest rates 218 tusitncrtibed Soc of volo ae + Making education more equitable and strengthen ‘vocational raining 229 + Government spending 218 : ite uid dsl * Inflation expectations and wage demands 218 ne ee 336 + Business competitiveness in domestic + Further enlarge access to finance 229 and international markets Et 5” Hessel ead a + Business uncertainty and planned investment 218 |. Nutrition and Food Security 29 + Socialeostsofhigh and volatile infaion 218 |. imate Change, Clean Energy and Disaster + Functions of money 218 Resilience 229 Public Expenditure Management 219.220 | + objective Questions 230-231 Lack of tndustral Growth in Ini : et 70 | 47. Economie Reforms in India 232.245 * Concentration of Capita incentive Manufacturing : ee ME) | + Reonomic Reforms 22 * Promotion of Labour Incentive Manufacturing ‘se yeeiinaien Consent Bre Units ‘209 | © Indian Economy 233-234 Employability of Labour Force 20-222 | + Co-existence of Public and Private Sectors 233 + Major Government Initiatives 221 * Planned Development me + Bottlenecks of Start up ecosystem 221-222 | *_ Role of Public Sector 28 Protectionist Policies of Government 222-223, “2 sPaivaty Sector aH + Devaluation as an instrument of Protectionism “.¢: Synthesis of Public and Private Sectots EG 222.223 | * Mixed Economy 234 oie 223.224 | * ‘Types of Mixed Eeonomies 24 Nien te youd ‘24 | * Features ofthe Mixed Economy 234.236 Black Money as a parallel Economy 225-226 a aoa of Public and Private 234-038 aterprses 1 + Black Mone 22s fone a sastise + State Control over Private Sector 235 foney Laundering + Price Mechanism and State Directions. ~ 235 General Anti-Avoidance Rule (GAAR) 226-227 i eae * Protection of Consumer's Sovereignty 235 Beonoie Slowdown ami aay | * Protection to Weaker Sections of the Society a athe a Specially Workers and Labourers 235) + Nature of Savings and Investment Natur gs and Inves 7 + Measures to Control Monopoly and + Major Sectors affected 227 Concentration of Economie Powers 235 CHAMPIONS 227-229 | + Reduction of eonomic Disparities 235-236 + Tourism and Hospitality Sector 228 | + Economic Reforms in India 236) + Aviation Sector 228 | + Factors leading to 1991 LPG Reforms 26 + Automobile Sector 228 * International Events Associated with + Real Estate Sector 228-229 i Reforms 236-237 Potential Priority Areas for India 229 | * Generations of Economic Reforms 237 + Reforming the tax code and expanding social * Fist Generation Reforms (1991-2000) aT ilotecibol 229 | + Second Generation Reforms + Reducing red tape and fostering formal (2000-01 onwards) 237-238 entrepreneurship 229 | + Third Generation Reforms 28 indian Economy imLiberalization 238-239, + High Speed Trains/Bullet Trains 7258-259 + Privatization 239 | + Hyperloop 259 |* Globalization 239-240 | + Water Transport 259 + Outcome of the LPG reforms 240-241 * Inland Water (IWT) 259-260 + Positive Outcomes 240]. Shipping 260.261 + Negative Outcomes 241 + Categories of Shipping 261 + Recent Economic Revival Package Post- + Air Transport Civil Aviation) 261-263 Lockdown 24 * — Recent Intiatives to Promote the Aviation |* Strategic vs Non Strategic PSUs 241 Industry © 262 + Deplobaization 242-243 | «Draft Unmanned Aircraft System (UAS) Rules, Gig Economy 23 2020 262 + Economy in the backdrop of Pandemic and + National Civil Aviation Policy (NCAP) 2015 262 Lockdown 243 + Aims of the Policy 262 + Objective Questions 244.245 | + Smart Highways 263 [Link] 2ng-27o | * Pipeline Network 263-264 + Power Sector 264 _-laeaatepenite 248287 * Power for All 2022 264 > Mining 24820) ‘Telecom Sector 264-265 + Mining Laws in India 248 |. 66feorolution 265-266 * District Mineral Foundation 249 | «Issues and Challenges of Telecom Sector 266 ‘+ Offshore Areas Minerals (Development + Logistics Sector 267 & Regulation) Act, 2002 249 «Government Initiative to improve Logistics + Private Sector and Mining 249.| sector 267-268 + National infrastructure Pipeline 249-250] + Bharatmala Pariyojana 261 ° Urban Infrastructure 250-251 * Sagarmala Programme 267-268 |. Urban Planning 252 + Dedicated Freight Corridor 268 + Transport System in India 252 | + Ganga Waterway (Prayagraj to Haldi 268 + Road Transport 252-254 + Logistics Portal 268 + National Highways : 252 + Features of the Draft Logistics Policy 268 © Sate Highways 253 | * Objective Questions 269.270 + Pradhan Mantri Gram Sadak Yojana eae Unit VII : Agricultural Economy + Pradhan Mantri Bharat Jodo Pariyojana 19. Agricultural Sector 272-286 (PMBIP) 253-254 | . Agricultural Sector mm + Roads for LWE Districts 254 | «Cropping Patter 272 + Railways 255-259 | « Types of Cropping Pattems m7 * Types of Railway Lines 255 | + Factors affecting Cropping Pattern 23 * Dedicated Freight Corridor (DFC) 256 * Features of Indian Agricultural Sector 273 + High Level Safety Review Committee + Green Revolution 273-274 (Railways) 256-257 * Drawbacks of First Green Revolution 274 + Metro Ral Projects 257-258 | + Zero Budget Natural Farming (ZBNF) 274.216 + Rapid Rail 258 + Pillars of 2BNF 25 Indian Economy‘Evergreen Revolution + Rainbow Revolution + Tricolour Revolution ‘Structural Reforms in Agrarian Sector Irrigation + Neeranchal Watershed Yojana Storage Farm Subsidies Issues Related to Farm Subsidies + Capital Investment + Unregulated use + Cropping Pattern Food Security + Public Distribution System (PDS) +> Revamped Public Distribution System + Targeted Public Distribution System Alternatives to the PDS + Universal PDS + Food Coupons + Direct Benefit Transfer (DBT) Food Corporation of India (FCI) + Agriculture Prices and Procurement + National Food Security Act 2013 (NFSA) + Storage Capacty and Constraints Commission for Agricultural Costs & Prices NABARD Essential Commodites Act, Major Schemes in Agricultural Sector Pradhan Mantri Kisan Samman Nidhi Yoja Similar Programmers by States KUSUM Scheme Agriculture Marketing National Agricultural Market Gobardhan Yojana Benefits of the Scheme Fasal Bima Yojana Soil Health Card National Food Security National Horticulture Mission 275-276 216 276-277 an 2m 277-278 278-279 278-279 279 219 279-280 280 280 280 280-281 280 280-281 281 281-282 281 281 282 282 283 283 283-285 283 283, 283-284 284 284 284 284 284 284 ‘National Mission for Sustainable Agriculture Agriculture Export Poicy, 2018 20. Land Reforms in India + Land Reforms Scope and Dimensions of Land Reforms Land Reforms in India Abolishment of Intermediaries ‘Tenancy Reforms + Regulation of Rents + Security of Tenure + Ownership Rights of Tenants Land Ceilings Government Initiatives Towards Land Reforms Land Consolidation Cooperative Farming, Benami Transactions Government Reforms and Status of Current Landholding Digitisation of Land Records Digital India Land Record Modernization Programme (DILRMP) + Land Acquisition for Public Purpose ‘Causes for failure of Land Reforms in India + Benami Transfers + Land as a symbol of soci + Lackof Political Will + Shortfalls in the Ceiling Laws + Objective Questions [Link] Reforms in India + Rural Development Significance of Rural Development Challenges of Rural Development Rural Credit Problems of Rural Credit + Inadequate Loans + Loan Overdues Inadequate Institutional Coverage + Red Tapism ‘Loan Waiver Rationale for Loan Waver * Criticism of Farm Loan Waivers Cooperative Credit Societies Challengs in Agricultural Marketing itiatives in the field of Land 289) 289-290] 290) 200} 200) 200) 290-291 201 prestige in India2 [> Employment outside Agriculture 298-299 | + Salient Features (IPR-1956) af + Animal Rearing 298-299 | + Industrial Licensing 312 + 20° Livestock Census 299-300 | + Competition Act, 2002 312 |+ Fisheries 300 + Composition of CCL 312 + Horticulture 300 + Eligibility of Members 32 + Cottage and Small Seale Industries 301 | + New Industrial Policy, 1991 (NIP) 312 + Organic Farming 301 | + Government Initiatives Related to Economic |... structure of Rural Economy 302 | Reforms 313, + People's Participation in Rural Development 302. | * Major Structural Adjustment Programme (SAP) inindia + Developing modem and appropriate Technologies 313 and Innovations 302 | + National Manujacturing Policy, 2011(NMP) 313 + Skiing of Rural Youth 302-303 | + Public Sector 314 + Developing appropriate ecosystem for + Micro, Small and Medium Enterprises 314-3015 ‘establishing rural enterprises 303 | + MSME Policy, 2012 316 J+ Rural Heattheare 303 | + Small Scale Industries 316 J+ Ministry of Rural Development 303 | + Cottage Industries 316 + Government InitiativesinRuralHealtheare 304-305 | + Village Industries 316 f+ Major Government 305.306 | + Government Measures to Promote + Mahatma Gandhi National Rural Employment Small-Scale Industries 317 Guarantee Scheme (MGNREGS) 305 | + Organisational Measures 317 + Pradhan Mantri Gram Sadak Yojana (PMGSY) + Reservation of Items for SSIs 317 Deradijal Rosai vaca weaned 305 | «Major Industries 317 + Deen jana - National : Denial Ange Vie : tase a on Inpats/Raw Materials a + Pradhan Mantri Awaas Yojana - Grain oes Incase (MAY-G) 305.306 | * Cotton Textile Industry 317318 + Deen Dayal Upadhyays-Grameen Kaushalya + Jute Industry 318 Yojana (DDU-GKY) 306 | + Food Processing Industry 318 + National Social Assistance Programme (NSAP) + Sugar Industry 318 pas: + Mineral Based Industries 318-319 + Shyama Prasad Mukherjee RURBAN Mission + ron and Steet Industry 519 (SPMRM) ate + Cement Industry 319) + Saansad Adarsh Gram Yojana (SAGY) an + Petrochemical Industry 319, anna eae 306 | «Chemical Based Industries 319 + Objective Questions 307-308 | ° . pecilze Industry Sia Unit VII : Manufacturing Sector + Automobile Industry 319-320 + Government Initiatives 320 |22. Manufacturing Sector 310-324 |. Industrial Growth 320 + Indian Industries 310 | +” Makein India 320 + Significance of Manufacturing 310 | + Startup India 320-321 + Industrial Policy aul * Stand-up India Scheme 320-321 + Industrial Policy Resolution, 1948 (IPR) 311 | «Performance of Manufacturing Sector 321 * Salient Features of IPR, 1948 311 | + Industry Report of the Indian Manufacturing + Industrial Policy Resolution, 1956 31 Sector 321-322 Ea Indian Economy ae a|" Capital Goods 322 + Government Initiatives 322 + Objective Questions 323-324 |23. Labour Policies in India 325-334 + industrial Legislation 325-329 + Industrial Disputes Act, 1947 326 + Trade Unions Act, 1926 326 * Minimum Wages Act, 1948 327 + Payment of Wages Act, 1936 327 * Payment of Bonus Act, 1965 327 + Employees" Provident Funds and Miscellaneous Provisions Act, 1952 327 + Employees’ State Insurance Act, 1948 327 + Payment of Gratuity Act, 1972 327 + Factories Act, 1948 327-328 + Maternity Benefit Act, 1961 328 + Bonded Labour System (Abolition) Act, 1976 328 * Child Labour (Prohibition & Regulation) Act, 1986 + Sexual Harassment at Workplace (Prohibition, 328 Prevention and Redressal) Act, 2013 328-329 + Issued Related to Indian Labour Laws 329 + Recent amendments in Labour Laws-2020 330 ‘]f> Recent Labour Reforms 331 (J+ Legislative initiatives : Labour Law Reforms 331 ']|+ Govemance Reforms Through Technology 331 + Shram Suvidha Portal 331 + Start Up India 331 + Social Security Schemes 331-332 *+ Pradhan Mantri Shram Yogi Maan- Miniratnas 5 + Models of Privatization 336-337 + Public Private Partnership (PPP) 336 + Build-Operate Transfer (BOT) 336.337 + Build-Own Operate (BOO) 337 + Build-Operate-Lease-Transfer (BOLT). 337 + Design-Build-Operate-Transfer(DBFOT) 337 + Lease-Develop-Operate (LDO) 337 + Build-Operate-Lease-Transfer (BOOT) 337 + Hybrid Annuity Model (HAM) 337 ‘+ Privatization and Disinvestment 337-338 + Disinvestment 338 + Strategic Disinvestment 338 + The Causes of Inefficiency of PSUs 338-339 + Lack of autonomy 338 + Revenue losses 338] + Lack of Competitiveness 338] + Poor performance 338 + Disinvestment in India 339] ‘+ Significance of Disinvestment 340-341] + Criterion for Disinvestment 340-341] + Challenges of Disinvestments + Various modes of Disinvestment Policy followed by the Government 341-342 ‘+ Impact of Privatization 342) + Objective Questions 344-345 — eee Unit IX : Miscellaneous 28. International Financi: * Intemational Organisations Institutions 347-367 341] * Role of International Organisations 341| * Bretton Woods Conference Mi + The World Bank 347-348 * International Bank for Reconstruction | and Development (IBRD) 348) Intemational Finanee Corporation (IFC) 348-349] Indian Economy —ges * Special Drawing Rights (SDR) 351-352 | 360-365 + DebtRelief 352 + Bank for International Settlement (BIS) 360 Intemational Monetary and Finance Committee 352 + Financial Stability Board 360 General Agreement on Tariffs and Trade 352 + Asian Development Bank (ADB) 360 World Trade Organisation (WTO) 353-354 + New Development Bank 361 * — Structure of WTO. 353 © Objectives 361 os Mlereeniect op Aredia As + Asian Infrastructure Investment Bank (AUB) Implications 353-354 361-362 + General Agreement on Trade in Services 8 a Objectives 3 + Trade Related Aspects of Intellectual + Notingpatterm : 2 Property Rights (TRIPS) 354 + Regional Comprehensive Economic Partnership + Non-Agricultural Market Access(NAMA) 354 (RCEP) pone + WTO’s Appellate Body. 354 + Objectives 362-363, International Labour Organisation (ILO) 355 | + India’s Concerns with regard to RCEP 363 ‘World Economic Forum (WEF) 355 + Association of World Election Bodies (A-WEB) 363 + WEF Objectives and Challenges 355, + Trans-Pacific Partnership (TPP) 363-364 Regional Organisations 355.360 + Objectives 363 + G-7 (fomerly G-8) 355 | + Financial Action Task Force (FATF) 364 + 620 355-356 |. Asia Pacific Group 365 + European Union (UN) 356 | Objective Questions 365-367 + Organisation for Economic Co-operaton and Development (OECD) 356 | 26. Economic Survey and Union Budget || _ + Intemational Energy Ageney(IEA) 356357 see-ont + Asia-Pacific Economie Co-operation (APEC) 4 357 | © Economic Survey 368-369 fe + Organisation of Petroleum Exporting + Highlights of the Economie Survey 369.372] Countries (OPEC) 357 | «Budget (Anmua Financial Statement) anf «© Association of South-East Asian-Nations 357. | « Themes of Union Budget 2020-21 374-376/) + East Asia Summit 357-358 |. Highlights of Budget 2020-21 376381] + South-South Cooperation 358 ei + Global Context and trends 358 Unit X : Appendix ee + Developing Countries Africa 358 Developing Countries A rice ‘Appendix 3e0-4g5) ‘© South-Asian Association for Regional ‘Co-operation (SAARC) [Link] | * Important Economic Terms and Concepts * South-Asian Preferential Trade Agreement ags-ate (GAPTA) 359 | + Beonomic integration and Trade Agreements + South Asian Free Trade Agreement (SAFTA) 383 359 | + Preferential Trade Agreement (PTA) 383 + India-Brazil South Africa (IBSA) 359 | + Comprehensive Economie Cooperation Agreement + Brazil-Russia-India-China-South Africa (CECA)/Comprehensive Economie Partnership (BRICS) 362 ‘Agreement (CEPA) 383 + BIMSTEC 359 | + Comprehensive Economic Cooperatio Agreement «Shanghai Cooperation Organisation (SCO) 360 (CECA) 383 Indian Economy]‘Comprehensive Economic Partnership Agreement Capital Growth (CEPA) 383 Core Inflation Customs Union 384 Depression and Recession ‘Common Market 384 Depreciation Economic Union 384 Domestic Institutional Investors Economic and Monetary Union 384 Due Date Multilateral Trade Agreements 384 ‘Dumping and Anti Dumping Duty + Regional Comprehensive Economic Partnership Debt Write-off (RCEP) 34 Matual Fund Most Favoured Nation 384-385 Exchange Rate Extemality 385 Fair Trade Price + Positive Extemalities 385 Fiscal Restraint + Negative Extemalities 385 Fiscal Consolidation Pollution Taxes 385.386 Future Market Phases of Globalisation 386 Forward Market Globalization 1.0 386 Spot Market Globalization 2:0 386 SEZ:: Special Economic Zone Globalization 3.0 386 Globalization 4.0 386 Major Features 386 Inter Bank Transfer 387 + National Electronic Funds Transfer (NEFT) 387 +, Real Time Gross Settlement (RTGS) 387 ey + Unified Payments Interface (UPI) 387 . + Cheque Truncation System (CTS) 387 jovernment Security (G-Sec) 387 * Treasury Bills (T-bills) Direct Monetization (borrowing from RBI) 387 Cash Management Bills (CMBs) Challenges of Direct Monetization and Areas of + Dated G-sees Concern 387-388, Sovereign Gold Bond (SGB) GST Councit Sovereign Risk True Cost Economics Inverted Duty Structure Venture Capital Angel Investors Greenfield and Brownfield Projects Monetization + Monetsation of Deficit 388 + Open Market Operations vs vis Monetization Quatemary Activites 388. Quinary Activities Economie Glossary : Important Economic Terms Pink Collar Worker and Concepts in news 389-398 Liquid Aseet Assets 389 Liquidity Tap Liabilities 389 Priority Sector Lending (PSL) Asset Turnover Ratio 389 Production Gap Bailout 389 Stimulus Package 389-390 ‘Blue Chip Companies 390 Bankruptcy 390 Net Interest Margin Bharat Emission Standards 390 Sunrise Industry Recessionary Gap Gig Economy Net Interest Income Indian EconomySoft Loan, ~ 398 > Higher Education 402 ‘Underwriting 398 + ‘Teacher Education and Training 402 ‘Unemployment Trap 308 + Skill Development 403 Manetarism: 398 + PublicHealth Managementand Action 403 Oligopoly 398 + Comprehensive Primary Health Care 403 Opportunity Cost 398 + Human Resourees for Health 403 ‘The Invisible Hand 398 + Universal Health Coverage 403 Bear Market 398 + Nutrition 403 Bull Market 398 ia Gee 403 Sategy for New India@75 399-404 «Senior Citizens, Persons with Disability Highlights ofthe Vision Document 399 and Transgender Persons 403 Drivers 399-400 + Persons with disabilities 403 + Growth 399 ‘+ Transgender Persons 403-404 + Employment and Labour Reforms 399-400 + Scheduled Castes (SCs), Scheduled Tribes + Technology and Innovation 400 (STS), Other Backward Classes (OBCs), Othe} + Tbdisey 400 Tribal Groups and Minorities 404 + Doubling Farmers’ Income (I) : Modernizing + Minorities oe Agriculture 400 | + Governance 404: + Doubling Farmers” Income (Il): Policy + Balanced Regional Development Transforming and Governance 400 Aspirational Districts 404 + Doubling Farmers’ Income (Il): ValueChainand + The North-East Region 404 poe eee 20 + Legal, Judicial and Police Reforms 404 + Financial Inclusion 400 bo Gasiieariecs eatoeaa ail + Hoag ee Al ied + Modernizing City Governance for Urban +Travel, Tourism and Hospitality 400 “Transformation 404 + Minerals 400" + Optimizing the Use of Land Resources 404 Tnfeastrichee ae + Data Led Governance and Policy Making 404 + Eoeey as ‘nance Commissions 405-406 |] * _-Seaface Mrangport 401 |. State Finance Commissions (SFCs) 405 Baltes 401 |. RBLGovemors 405 aan 401 | tmportant Economie Schemes recently in News + Ports, Shipping and Inland Waterways 401 ais + Logistics 401 |. National Logisties Policy 406 = Piglet Oaaneed 401 |. Single Window Interface For Trade 406 + Smart Cities for Urban Transformation 402 | ss ge vishwas Scheme “se 1 Benet Blase Mieaes: 402 | Sable Vishwas-Legacy Dispute Resolution + Water Resources 402 Scheme, 2019 a0 + Sustainable Environment 402 |. National Technical Textiles Mission 407 Inclusion zoe + Samarth Scheme (Scheme for capacity + School Education 402 building in the textiles sector) 407 Indian EconomyImportant Indian Economic Institutions Skills Acquisition and Knowledge Awareness for Livelihood Promotion(SANKALP) 407-408 ‘Skills Strengthening for Industrial Value Enhancement (STRIVE) 408, Fund of Funds for Startups (FFS) 408 Startup India 408 NIRVIK Scheme 408 Gold Monetisation Scheme 408 Sovereign Gold Bond Scheme 409 ‘Scheme for Remission of Duties and Taxes ‘on Exported Products (RODTEP) 2020 409 Merchandise Exports from India Scheme 409 Fully Accessible Route (FAR) 409 Dairy processing and Infrastructure Development Fund (DIDF) Scheme 409-410 + Objectives of the scheme 410 ‘Smart Cities Mission 410 ‘Mega Food Park Scheme 410 Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 410 Bharatmala Pariyojana 410-411 PM Kisan SAMPADA Yojana au SWAYATT au Sagarmala Project 4 Pret) Prime Minister’s Economic Advisory Council (PMEAC) + Functions AUL-a12 4ui-4i2 ‘Competition Commission of India 412 Insolvency and Bankruptcy Board of India 412 Department of Investment and Put Asset Management (DIPAM) 42 Khadi and Village Industries Commission 412 GST Council 412-413 Indian Railway Finance Corporation 413 National Investment and Infrastructure Fund (NIIF) 413 + Functioning ‘a3 IRDAL 413-414 + Functions of IRDA a4 ‘Advisory Board for Banking Frauds(ABBF) 414 indian Economy > Functions ‘Small Finance Banks (SFB) + Features Co-operative Banks National Financial Reporting Authority + Funetions and Duties Intellectual Property Appellate Board (IPAB) | Financial Stability and Development Council 415, ‘Agricultural and Processed Food Products Export Development Authority 415-416 National Anti-profiteering Authority(NAA) 416] Monetary Policy Committee (MPC) 416 North Eastern Regional Agricultural Marketing Corporation Limited (NERAMAC) 416] ‘Tribal Cooperative Marketing Development Federation of India (TRIFED) 416] + National Payments Corporation of India 416-417] Credit Rating Agencies in India 417-419} + CRISIL 47 + CARE an + ICRA + Acuite Ratings and Research/SMERA Fitch India Brickwork Ratings Standard & Poor's, Moody's Fitch Significance of Credit Rating Agencies + Conflict of Interest Certification Marks in India Major standard certification marks in India + AGMARK + Ist + BIS Hallmark + FPO Mark ‘The Green and Brown Dots India Organic Certification + Ecomark Pay Commissions in India {ist of Nobel Prize Laureates in Eeonomi sin EconomiesIntroduction The term economics owes its origin to the Greek word Oikonomia meaning household management, Economies is a social science concerned with the produetion, distribution and consumption of goods and services. It studies how individuals, businesses and governments allocate resources of production, exchange and consumption, implies that consumer wants will never be completely satisfied. The fundamental economic problem is the issue of Introduction to Economics scarcity and how best to produce and distribute th searce resources. Economics vs Economy : Economies is a discipline studying economi behaviour of human beings with theory of markets, inflation etc, dealing with the employment, price, theory aspect. q ‘On the other hand, Economy is an area ofthe production, consumption and distribution of goods and services by different agent, thus itis the social domain thet lay stress on practices and discourse associated with the product and the management of resources. 5 Importance/Significance of Economics i? Importance/Sigt icance of Econo! : 1 1 sora est ato produce how jc, rho produce Economy Availability of Informed Choices to prot Resources ‘Achieving Socio/ economic Efficiency Economics seeks to understand and address the problem of scarcity. A modern economy displays the division of labour (specialization) allowing the organizations to maximize producti Economics governs the life of an individual, society, nation as a whole and plays a significant role in regulating global affairs. It explains the relationship between the producer and consumer (demand & supply) labour and management and individual and state (taxation). It explains how one sector of the economy is related to the other and how it gets affected through mutual interaction Economics provide insights into methods of production, modes of distribution and main an effective supply chain, It provides mechanism to mini produetion and maximize the profit through an efficient and economic management. the cost of T T Understanding | Opportunty Cost Consumer Behaviour of Decisions Regulating Monetary — Fixing Mark & Fiscal Poli Mechanism an efficient utilization of both natural and human resources. Ei Economics play a vital role in generating National . wealth and enhancing National income through’ Economie planning. The purpose of planning is © minimize poverty by increasing the National Income and wealth, Economics is significant for maintaining an uninterrupted supply chain, Money supply (through state interventions), effective credit system and. efficient working of Banking system, Peconic also plays a significant role as laying wn principles for legislators to formulate and draft economic laws, tax mechanism and an efficient Fevenue generation mechanism, Indian Economy,Definitions of Economics + Forthe sake of convenience, let us classify the various definitions into four groups : Science of Wealth + In 1776, Adam Smith, the Father of Modern Economics published his work titled the Wealth of Nations, + He defined economics as An inquiry into the Nature and Causes of Wealth of Nations, 2. Science of Material Well-being + Alfred Marshall, the Neo-Classicist raised economics from its ignoble position to a noble one, + According to him, Economies is a study of mankind in the ordinary business of life, He shifted the emphasis from wealth to welfare, + He published his work titled Principles of Economics in 1890 which is a leading textbook about the ‘economics then called the political econom| 3. Science of Making Choice + Prof. Lionel Robbins published his famous book Nature and Significance of Eeonomic Sciencein 1932, 4 - According to Robbins, Economics is the seience which studies human behaviour as.a relationship between ends and searce means which have alternative uses, This was criticized because the concept of welfare was not explicitly mentioned, Science of Dynamic Growth and Development Paul A. Samuelson defines economics as the study of how men and society choose, with or without money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in future among various people ‘and groups of society. Economics as a { Somnenwinso Dement Fx ndaetote Bosve Science] _[ Normative Since ] T T + what ought 0 be? what should happen? + What should have happened? + Whatis? © What was? = What will be? Difference between Positive Economics and Normative Economics Positive Economies ‘Normative Economics are actually solved. It deals with what is or how the economic problems Itdeals with what ought to be orhow the] economic problems should be solved. Verification | It can be verified with actual data It cannot be verified with actual data, Purpose _| Itaims to make real description of an economic activity.| It alms to determine the ideals. Suggestive | It is based upon facts, and thus, not suggestive. Itis based upon individual opinion and therefore, itis suggestive in nature Value Itdoes not give any value judgements, Le. itis Tt gives value judgements, Judgements | neutral between ends. Examples | 1. Prices in Indian economy are constantly rising. 1 India should take steps to control rising 2. There are inequalities of income in our economy. prices. 2. Income inequall should be reduced. ‘Macroeconomics + Macroeconomics is defined as the study of overall ‘economic phenomena such as employment, Gross National Produet (GNP), poverty, inflation, savings, investment, aggregate consumption, aggregate investment, ceonomic growth ete, + It is also known as Theory of Income and Employment since its major subject-matter deals with the determination of income and employment, Microeconomics Microeconomics is defined as the study of behavior of individual decision-making units, such as consumers, firms and resource owners. Itis also known as the Price Theory since its major subject-matter deals with determinat commodities and factors. Indian EconomyMicroeconomics use a set of fundamental principles to * One of these basic principles of microeconomics is ‘make predictions about how individuals behavein certain _that individuals make decisions to maximize their satisfaction. In microeconomics, this is called situations involving economic or financial transactions. aw ig utility. ‘These principles include the Inw of supply and demand, opportunity costs and utility maximization, + Anothar economic principte thst comes nto, play af i i consumers make decisions, is the opportunity cost. * Microeconomics uses certain basie principles toexplain When an individual makes a decision, she also calculates pow jediriduals and Beefmesest: mao decislons. the cost of forgoing the next best alternative. Branches of Economics T a ee ‘Macroeconomics ‘Microeconomics T T ‘+ Branch of economics that studies the behaviour ofthe | [+ Branch of economics that studies the behaviour of an whole economy (both national andinternational). Individuals consumer, firm, family ‘+ Itcovers various issues lke national income, general | |+ Itcovers various issues like demand, supply, product pricing, price level, distribution, employment, money etc. production, consumption, economicwelfareetc. + It helps to solve the central problem of full| |+ Ithelps to solve the problem of what, how and for whom to employmentof resourcesinthe economy. produce inthe economy. + Its main tool are aggregate demand and supply of | |+ its main tool are demand and supply of a particular economyasawhole, commodity. + Itsparticularfocusonincome analysts, + _tsparticular focus on price analysis. Central Economic Problems + The Central Economie Problem is further divided into four basic economic problems. These are: + Human wants are unlimited and productive while resources are scarce. This gives rise to the problem of how to use these scarce resources to attain maximum satisfaction. This is generally referred to (iv) What provisions (if any) be made for economic as Economie Problem. : growth. {Activities rns orers cee en eT eee eT oeroacl (i) What to produce (ii) How to produce (iil) For whom to produce ‘+ The activities which are concerned with buying, sellin, ||+ The activities which are performed with the purpose providingand making ofthe commoditiesby the people. cof rendering services to others without any financial + These activities include manufacturing, distributing and || gain. utilizing produets or services. ‘+ These activities are initiated for personaleontentand * They involve monetary transactions for the exchange of || innersatisfaction without any monetary incentive or produetsand services. consideration + The three major types of Economic Activities include -||+ Examples include - Letsure activities, pursuing Business, Profession and Employment. hobbies, family activities/household chores, + The primary purpose of an Economic Activity isto produce || cultural and religious activities and social welfare | [uate forinavcuats activities. Economic Activities Consumption : cue + Consumption is defined as the final purchase of + Production is an organised activity of transforming #0 and services by individuals, resources from intermediate goods/raw material * It is usually effected by prices, taxation policy, into finished goods. savings and consumer confidence in fiseal policy. mm Indian Economy,Exchange : the market place, where securities, + Exchange fatives and other financial commodities, deri instruments are traded. ‘Security: A security isa negotiable financial instrument ‘which holds certain monetary value. There aretwo types of securities: Debt Securities and Equity Securities. Derivative: It is a type of security or contract which derives its value from an underlying financial asset. Investment + + It refers to the purchase of goods not for immediate consumption or saving but the for the creation of capital/wealth in the future. Distribution : + It refers to the systematic sharing of national income or wealth among the owners of the factors of production (land, labour, capital). + At micro level, it ean also be defined as a supply ‘mechanism through which the ownership of goods and services is transferred from a seller to a buyer, Public Finance : + Under this, individual income, expenditure, financial administration and revenue are studied. Types of Economies + Typically, Economics is divided into different types based on the extent of government involvement in economic decision making. + Based on the above criteria, the following are the major types of economics. ‘ Classification of Economies ‘ {on the basis of) £ i T Control/Regulation [evelopment Income T T T I 1 £ 1 z 1 Liberal Economy | | [Mixed Economy] [ Developed | (Under Developed rues Higher (us &éurope) || | (india) Economy Income Income. ‘Command | Developing Middle Economy Economy Income [Socialist Economy] Communist Global Relations “Sectors (Russia) Economy (China)| (slob ears] T 1 £ 1 1 5 Closed Economy] [Open Economy | [Agrarian] [Industrial] [Service » Economy | | Economy | | Economy '| Classification on the basis of Regulation but the economies of the Unites States and Austral Free Market Economy/Liberal Economy + Itis the type of economy which is free from the control or regulation of the government. Under this system, the means of production and distribution of wealth are self -regulated by the forces and laws of demand and supply + Resources for production are based on urban private covwnership and they make their decisions with the desire to maximise profits. + Although, there is ino pure free market economies come close to this type of economic system, Capitalist Economy + Capitalism is the economic system based on private| or corporate ownership, production and| distribution of goods. + Capitalists favour a system of free enterprise which| means he government doesnot interfere in the economy] that the laws of demand and supply will make sure| that the economy runs most efficiently in meeting people's needs. Capitalism is characterised by the competition to produce economic goods & services. [aneCommand Economy/Socialist Economy * Under this system, the resources of production are completely under government controV/regulation. ‘The functioning of these economies is based on controlled planning. + Due to lack of competition, resource allocation is inefficient and consumers have very little choices. + Communists/Socialists countries such as former Soviet Union orthe USSR and North Korea exhibit such type of economic system. Socialist Economy Itis an economic systemin which means of production are owned by the collective units or community to ‘ensure equitable distribution of resources in order to meet the human needs instead of generating profits + Socialism tends to favour co-operation whereas capitalismis characterised by competition. A form of socialism called communismsprang up based on the writings of Karl Marx and Friedrich Engels. Communismadvocates class struggleand revolution to establish a society of co-operation with strong| government control + Communism predominated in the former Soviet| Union and much of Eastern Europe during the cold! + Currently, it predominates in Chinaand Cuba, but its Influence has reduced owing to the disintegration of Soviet Union Mixed Economy + This type of economy consists of a combination of public sector and private sector units. Here, the government is the decision-maker for the public sector and individuals and industrialists make decisions for private sector. + Itbasically incorporates government involvement in, a market based economy. Examples of this types of economies are India, Russia and UK ete, Classification of countries based on Economic Activities/Extent of Development (On the basis of the parameters such as (i) Per Capita Income or GDP (ii) Level of Industrialization (iii) General Standard of Living and (iv) Extent of Public Infrastructure, the countries have been classified as Developed, Developing and Under-developed or the Least Developed Count Developed Countries + The economies which enjoy a high level of per ea income and a high level of living standard are called Developed Countries. Ex- the USA, Canada, Japan ete. + The developed countries have a predominance of industrial andservice sector with higher exploitation of resources along with technological advancement. + They also have a high rank in the Human Development Index (HDI) released by the World Bank. + Acountry's degree of development is evaluated on the basis of per captia income or GDP, level of industrialisation, general standard of living and the amount of widespread infrastructure. Developing Countries + The countries which are not developed yet but are passing through the process of growth and development to become more advanced economies are called Developing Countries. For ex. India, Indonesia, Turkey, Thailand ete. + The occupational structure in the developing countries is gradually shifting from the primary ot (@gricultural based) to secondary (manufacturing) and tertiary (service) sector + Though, the per eapita income is relatively lower in the developing countries but it is gradually rising ‘owing to improvements in the national income of the country. Least Developed Countries + According to the United Nations, countries having lowest indicator or socio-economic development with the lowest HDI ratings are called least developed countries. + The Under-developed countries are marked by high level of unemployment, high level of poverty, low standard of living, high growth rate of population, unequal distribution of resources, predominance of primary sector and technological backwardness. Indian EconomyIndia’s Gross National per capita Income Is $2020 or 81,38,087, [Classification on the b Ma oes s ‘ewer income Economy ] [Midate income Economy | [Higher income Economy ; Tosca boone hs T Gross National per capita income i less than or equivalent 10 $1,025 0r€70,069. [Lower Middle Economy) | catego mostly Ain 8 ran) [Upper Middle Economy] * Gross National per capita income is equivalent to or | Mostly the African countries belong to this category along with Afganistan and Nepal (rom Asia} with a total of 32 countries ‘with Somaliaat the bottom, + Gross National per capita income lies between $ 1,026-$ 3,995 (870,137-8 2,73,098), more than $12,376 or 2| 3,46,023. | In 2018, there were 81 countries in this category including UK, USA and Canada. + Gross National per capita income lies between $ 3,996-5 12,375 (273,167-% 8,45,955}, Example China, Russia, Maldives and Sri Lanka + Example India, Pakistan ‘and Bhutan with a total of 3 countries. with a total of 56 countries. Classification on the basis of Global Relations Closed Economy An economy is said to be closed, if it has no trade or trade access to other economies. In this economy, the consumer gets everything within the borders of the country and government acts as the arbitrator, articulator and facilitator while providing goods and The government puts (rade restrictions through the ‘aviff duties as an instrument for regulating import and export. Open Economy ‘An economy is said to be open, if it has trade relations with other economies. In this economy, market is mostly free from trade barriers and exports and ports form a large percentage of the GDP. The degree of the openness of a economy is determined by government's freedom to pursue economic policies of its choice and the susceptibility. of the country to international economic cycles. Classification on the basis of Sectors Agrarian Economy If the share of the primary sector (agricultural and allied activities) in an economy is 50% or more in the GDP of a country, then it is said to be an Agrarian Economy. India traditionally remained an agrarian economy since its large section of population was involved in the agriculture and allied activities known as dependency ratio, but recently it has shifted towards service sector from where a major part of its GDP contribution comes from. industrial Economy + If the secondary sector (manufacturing and construction) contributes to more than 50% or more share of the GDP of a country, itis called an Industrial Economy. + The western economies (mostly the European countries that remained the cradle of Industrialization) and USA are primarily known as Industrial economies. Most countries belonging to the bracket of Industrial economy fall into the category of Developed countries. Service Economy If the tertiary sector contributes 50% or more to the GDP of a country then it is called the Service Econon + Most of the island countries like Maldives, Mauritius ‘Thailand etc, depend on the tourism sector for a \jor part of its income or GDP. India's economy has also witnesses a paradigm shift from the agrarian to service sector such that it contributes around 30% to the GDP of India, Indian Economy‘Under this system, there is no provision of exehange of commodities on currency or monetary basis rather it uses the the barter system for the exchange. It is generally defined as primitive or under- developed type of economy. For ex. Tribal economy. Sectors of Economy Traditional Economy : + Traditional economy is the type of economic zation which is guided by the customs, jons and beliefs for the production and istribution of goods and services. Sectors of Economy iu = Secondary Sector Tertiary Sector 3 T Primary Sector = It is mainly concerned with the extraction of the natural resources fromthe earth + The primary sector includes ‘agriculture and allied activities, ‘quarrying, fishery, forestry, mining and dairy farmingete + The manufacturing sector takes raw materials and converts them into finished products + Under the industria sector, thenatural products are changed into other forms ‘through the process of manufacturing Ina factory oraworkshop. “It ig mainly concerned with the service providing activities which may not always producea tangible good. += These activities help in the development of primary and secondary sector such as Banking, Transport, Trade, Storage, ‘Communication, Legal, Medical and Edu- cational Services. + Annation’s economy can be classified divided into various sectors to define the proportion of people engaged in a particular sector. + Generally, economies are divided into the following three sectors : Primary Sector + This sector is involved in the extraction or harvesting of natural resources or products from the earth. It includes the production of raw materials and food materials. + Some of the activities included in this sector are Agriculture, Mining, Forestry, Fishing, Quarrying ete. + The packaging and processing of raw material also considered as a part of the primary sector. + Asan economy develops, the share of primary sector in total production and employment goes down. Secondary Sector + The secondary sector of the economy refers to the production of finished goods through the process of manufacturing. +All manufacturing, processing and construction activities are included in this sector. + Some of the activities in this sector are metallurgy, automobile manufacturing, textile production, ship building ete. ‘Most economies in their process of development go through the middle phase (transitory phase) where the secondary sector becomes the largest sector of the economy in terms of production and employment with the reduction in importance of the primary sector. India is an exception, where we have directly moved to the development of service sector, without first improving the manufacturing eapabilities, owing to high population and educated employable youth. Make in India initiative of the Indian Government aims to boost/give impetus to manufacturing sector in Indian economy which has witnessed a decline in its contribution to the GDP. Tertiary Sector ‘The tertiary sector of the economy is also known as the Service sector. This sector helps in the development of the primary and secondary sector. Some of the activities which are part ofthis sector are retail, (ransportation, entertainment, tourism and banking sector etc. In the advanced developed economies, the tertiary sector is the [Link] terms of production and employment. Sometimes, two more sectors, ie. Quaternary and Quinary are defined separately, even though these can also be considered as part of the services sector itself. Indian Economy TapaOther Sectors of Economy Quaternary Sector ‘The sector consists of knowledge based activities. Examples of activities associated with this sector are Research and Development, Culture, Information, Technology, Consultation firms, Financial Planning, Education ete, Quinary Sectors + Itis the branch of economy in which the high level of decision are made by top level executives in ‘government, in health, in education etc, Major differences between Developed and Developing Economies is Developed Economies T ‘+ Countries having an effective rate of industrialisation and high individual/per capita income and high GDP. ‘= Unemploymentrateand povertyis low. ‘+ In terms of health indices lke infant mortality rate, birth rate and death rate are comparatively lower and high life expectancy is observed andhigh standard of living, + Factors of production are effectively utilized. + Literacy rate is found to be high with better ‘employment opportunities. utilizing it's Human Resource Capital ‘+ Theyhave good infrastructure. Countries having 2 slow rate or minimum degree of Industrialization and low percapitaincomeandlowGDP. | | _ Unemploymentrateishigher withhighdegree of Poverty. | | ‘These countries score poor on health indices with high infant mortality rate and birth rate with low Life Expectancy and Standard ofliving. Factors of production remain under utilized, Literacy rate is usually low or lack of employment opportunities lead to unutilized human capital often resulting in Brain drain from developing countries to | | developed countries. Usually devoid of properinfrastructure. Classical vs Keynesian Models of Economics ‘= Classical economics emphasises the fact that free markets lead to an efficient outcome and are self- regulating. in macroeconomics, classi assumes the long run aggregate supply curve is inelastic; therefore any deviation from full employment will only be temporary. | economics! + Classical economics places little emphasis on the use of fiscal policy to manage aggregate demand Classical theory is the basis for Monetarism, which only concentrates on managing the money supply, through monetary policy. + The Classical model stresses the importance of limiting government intervention and striving to) keep markets free of potential barriers to their efficient operation. + Classicaleconomics assumes that people ae rational and not subject to large swings in ‘confidence. Keynesian economies suggests that in dificult times, the confidence of businessmen and consumers can collapse-causing a ‘much larger fallin demand & investment. ‘+ This fallin confidence can cause a rapid rise in saving, and fall in investment, and it can last a long time -| without some change in policy. + The classical model is often termed laissez-faire because there is little need for the government to| intervene in managing the economy. + Keynesians argue that the economy can be below| full capacity for a considerable time due toimperfect| markets, * Keynesians place a greater role for expansionary| fiscal policy (government intervention) to overcome) _ recession, + The Keynesian model makes a case for greater levels| of government intervention, especially in arecession when there is a need for government spending to offset the fall in private sector investment. ‘+ Keynesian economics suggests governments need to| use fiscal policy, especially in a recession. Indian Economy :Emerging Models in the field of Economics Behavioural Economics Behavioral Economies is the study of psychology as it relates to the economic decision-making processes of individuals and institutions. US academic Richard Thaler won Nobel Prize in Economies in 2017 for his pioneering work in Behavioural Economics Sciences. ‘The theory is particularly useful for companies and marketers who are looking to increase the looking to increase sales by encouraging changes in behaviour by consumers. Welfare Economics + Welfare economies is the study of how the structure of markets and the allocation of economie goods and resources determine the overall well-being of the society, through the application of uiiity theory inmiero economies. Welfare economics seeks to evaluate the costs and benefits of changes to the ceonomy and guide public policy towards total good of the society using tools Applications of Economics { it T such as Cost Benefits Analysis and Social Welfare Funetions. “Amartya Sen was awarded Nobel Prize in Economics in 1998 for his contribution in welfare economics. His prominent publication been Development as Freedom. Experimental Economics It examines human behaviour in the field or in a controlled laboratory setting. Data collected in experiments are used to estimate effect size, test the validity of economic theories and illuminate market mechanisms. Circular Economics It promotes reuse, sharing, repair, refurbishment, remanufacturing and recycling, minimising the use of resource input and eliminating creation of waste, pollution and emissions. It promotes the use of biodegradable materials in the manufacturing of products - biological nutrients so that they can get back to nature without causing, much environmental damage. 1 q Drafting Monetary] [Reg Policies Drafting F policies [ Bodget [Formation [ Inflation ulating | {Poverty estimates and drafting most suitable poverty alleviation measures 1 ‘Categorising Goods on the basis of merit, utility, externalities, scarcity , competitiveness and taxing them ina manner so as to reap maximum benefit as a whole 1 q ‘Optimum utilisation Determining the most of Resources q q 1 ‘esti catare an I Forward Backward Linkages ‘Mabileation | ot Resources | Skill formation Dealing 1 resource limitations economy suited to a country ig with scarcity and [Benefiting from Demography| by transforming it into Human Capital | Sunk Cost Fallacy f Determination of ‘Opportunity Cost i ‘Applications in havioural Economies 1 ‘Applications in Welfare Economics io Indian EconomyHuman Capital Human Capitals an Intangible asset quality not listed on a company's balance sheet. It can be classified as the economic value of a worker's experience and skill. This includes assets like education, training, intelligence, | skills, health and other things employers value such as loyalty and punctuality, ‘The concept of human capital recognizes that not all labour is equal but employers can improve the quality ofthat | i in employees through enhancing the education, experience, and abilities of employees which capital by investin ‘alll have economic value for employers and for the economy as a whole. Social Capital Social Capitals a positive product of human interaction. The positive outcome may be tangible or intangible| _ ‘and may include useful information, innovative ideas and future opportunities, In business terms, social capital is the contribution to an organization's success that can be attributed to personal relationships and networks, both within the organization and outside of it. The term social capitals also sometimes used to describe the personal relationships within a company that help build trust and respect among employees, leading to an enhanced company performance, Objective Questions Itstudies employment, Gross Domestic Product and| inflation Which of the statements(s) given above is/are correct? | (A) Only! ®) Only? (©) Both and2 — (D) Neither 1 nor 2 A Closed Economy is an economy in which (A) Money supply is fully controlled (B) Deficit financing takes place (©) _ Only export takes place (D) Neither export not import takes place miles Edonniny cegate'ah ean Waa 5. In which of the following types of economy, the| resources of production are completely under control @ Bothepicaltne and indy ae uly promoted of State Government? y the state (A) Mixed economy (B) Open economy (B) There is co-existence of private sector along with the public sector (C) Closed economy (D) Command economy (C) There is importance of small scale industries along | 6. In which type of economy, resources for production with heavy industries are under private ownership and they make thelr| (D) Economy is controlled by military as well ascivilian | decisions with the desire to maximise profits? rales (A) Command economy (B) Capitalist economy [3 Which one of the following statements regarding (©) Free Market economy socialist economy isnot correct? (A) In this system, means of production is socially | (D) Mixed economy owned i" ° 7. In which type of economy, the consumers get ©) Sects sonomy vous coneatvesociey |” Eyeing thin the ccnomte Benders ane | (©) It predominates in USA and Cuba government acts as the arbitrator? | ©) _Ieemphasises on meeting human needs instead of | (A) Closed economy (B) Open economy creating profits (©) Capitalisteconomy —_|&. Consider the following statements regarding Macro | (D) Mixed economy | economies F 8. An economy is said to be Open Economy if: is concemed with the overall economy Indian EconomyaE (A) It has trade with other ecahonies ®) _Ithas no trade area with other counties (©) Whasially incorporates government involvement (D) None of these 12. Ina Economy Development Stage refers to- (A) + Steady increase in the growth of economy (B) Bad economy (©) : Economy is on the verge of destroying (D) All tariffs to be removed 10. The terms Microeconomics and Macroeconomics were coined by- (A) AlffedMarshal (B) Ragnar Nurkse | (©) Ragnar Frisch (D)_J.M. Keynes 111. Arthashastra by Kautilya is related with— (A) Statecraft (B) Economic Policy | © Military Strategy (D) AU of these }12. Amartya Sen was awarded the Nobel Prize for contribution in the field of? (A) Monetary Economics @) (©) Econometrics (@) Welfare Economics Developmental Economics _]43. With which form of economy is the term Laissez-Faire | associated? (A) _Copitaist Economy B) Socialist Economy (©) Mixed Economy (©) Classical Eeonomies 14, The word Oikonomia means (A) Houschold Management (B) _ Individual Management (©) Political Management () Fiscal Management 115. The author of The Nature and Causes of Wealth of Nations is? (A) Alfred Marshall (©) Lionel Robbins (B) Adam Smith (D) None of them 76: Which ofthe followings ot bse economic ach? | (A) Production (B) Consumption © (D) Redistribution 17, Which of the following cannot be regarded as a central economic problem? (A) What to produce (B) How to produce (©) How to ensure equitable distribution of resources) (D) Provisions of Economic growth | Investment 18, Village Communities form which type of economy? (A) Communist economy [ (B) Socialist economy (©) Traditional economy (D) Command economy | 19, Mining forms part of which sector of the economy? (A) Primary sector (B) Secondary sector (©) Tertiary sector (D) Quinary sector 20. Tourism forms part of which sector of the economy? (A) Primary sector (B) Secondary sector (©) Tertiary sector (D) Quatemnary sector 24. Lower middle income countries are placed in the per capita income bracket of? (A) <8995 (B)_ $ 1,026-8 3,995 (©) $3,895-§ 12,055 (D) > $ 12,055 22, Education is placed in which sector of the economy? (A) Primary sector (B) Secondary sector (©) Quatemary sector (D) Quinary sector 23. Country's degree of development is evaluated on the| basis of? 1. Economic growth 2. Pereapta income |. 3. GDP 4. Levelofindustrialization | 5. Standard of iving 6, Infrastructure 7. Gender parity 8. Agricultura land 9. Happiness index 10, Degree of Involvement in Secondary sector Code : i @) 1,234,687 @B) 12,345,687 |. (C) 1,2,3,4,5&6 (D) Allofthem indian EconomyMarket Services by utility maximizing. services by profit maximizing Market Mechanism Economies is the study of production, di cconstumption and it can be divided into two broad areas of study- Macro economies and Micro economics. It studies how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their wants and needs, trying to determine how these groups should organize and coordinate efforts to achieve maximum output. Macro economics deals with aggregate economic ‘quantities such as national output and national income, On the other hand Micro economics basically deals with the study of how buyers and sellers interact to determine transaction prices ‘and quantities ‘Micro Economics In capitalist/private enterprise economies, households own the factors of production (land, labour, capital and raw materials used for production). Firms, which ultimately are owned by individuals cither as a single entity or through some organisation, buy the service of those factors of production, Households try to save certain amount of their income as savings after consumption which is used for accumulating financial capital which can further be used to earn interests, dividends and capital gains, Expenditure ae tncome — (Consumption) ans (ovestment) : (caring interests, dividends) Capital Formation Consumers Market Fie] Consuntion Proton (Demand of Goods and {supply of goods and individuals) firms) It is the mechanismi/system which Tinks the actions of three economic agents- consumers, producers and the owners of the factors of production. Market mechanism is used to describe the manner in which the consumer and producer determine the price of goods and service that are produced. ‘Markets T co —_ Factor Markets (Good Markets = Markets forthe output of| production, = Firmsaresellers and both households and firms are buyers. Firms buy capital goods here + Markets for the sale and purchase of factors of production. Households are sellers and firms are buyers Example: labour market. Expenditure is the spending of money on consumption or on certain investment, Expenditure pc at Revenue Capital ‘Operating Expenclture Expenditure Cost T T This form of expenditure does not result in the creation of capital assets Expenses incurred in dally business like rent, Inventory costs etc. Funds used by an individual as investment ‘or by an organisation to acquire, upgrade ‘and maintain physica assets Demand and Supply 1 is the quantity of good or service, the buyers are able and willing to purchase at a particular price. Dem: Supply is the quantity of a good the sellers are willing ‘and able to deliver at a particular price. Law of Demand :Higher the price, lower willbe the demand of the goods. indian EconomyIn a perfect free market, for any goods or service, the total quantity supplied by the sellers and the total ‘quantity demanded by the buyers will reach a state of economic equilibrium over time, Perfect Competition Conditions for Free Market ‘Absence of Government quota and regulations + Perfect Competition refers toa market situation where there are very large number of buyers and sellers and they are well informed that all the elements of monopoly are absent. Under it, homogenous products are produced by all the firms and price of the product is beyond the control ofthe buyer and seller. Supply and Demand Demand Price Equilibrium. a 10 20 30 40 50 60 Quantity + Perfect Competition assumes that no seller is large ‘enough to dominate the market owing to its large market share and eash reserves, + Though in reality in a Capitalist System, itis observed that major corporations often influence the market through domination and even wipe out smaller business organisations/groups in the absence of government regulations, + Consequently, Government regulations become important to ensure efficient functioning of the market by preventing monopolies of giant corporations and to check any unfair practices, + However, too much of Government regulation and ‘quotas (as witnessed in Pre- LPG era before 1991 in India) tightened the grip of Bureaucracy over market through a license permit mechanism, hindering the natural process towards equilibrium, Price equilibrium is themarket price, where the quantity of goods supplied is equal to the quantity of goods demanded, ‘The point where demand and supply curves intersect. + Elasticity is defined as the change in quantity of the goodsassociated with a change in the prices, It depends on the nature of product (necessity good or luxury good) and the number of substitutes/alternatives available in the market, + Utility is the satisfaction, one achieves from consuminga good or service, The marginal utility is the extra satisfaction one gets from each additional tuni¢ of consumption, Features of perfect competition + Demand is an economic principle referring to a consumer's desire and willingness to pay a price for a specific good or service, ‘An increase in the price of a good or service will decrease its demand, and vice versa, while keeping all other factors constant. Thus, the Law of Demand T ~~ T T a product knowledge demand curve 2 Demand Curve Demand = Demand + ‘The demand curve is @ graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time, Price Tndian Economy‘Aggregate Demand vs Individual Demand + Aggregate demand refers to the overall or average| demand of goods amd services in the economy at 2 given time. Elements of Demand T Tee Desire Means to Willingness Time Purchase topay Individual demand refers to the demand of a particular} consumer. For example, 2 particular consumer's demand for a product is strongly influenced by her personal income. “The degree by which quantity changes as price changes is called the price elasticity of demand, Elasticity is the degree to which demand or supply reacts to a change in price. Price Elasticity of Demand = % Change in Quantity Demanded/% Change in Price. * Substitution Effect: When therelative price (opportunity cost) of a good or service rises, people seek substitutes fort, so the quantity demanded of the good or service decreases. Income Effect : When the price of a good or service rises relative to income, people cannot afford all the things they previously used to buy, so the quantity demanded of the good or service decreases. Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over anoth 4 T [ Determinants of Demand Pic of Relative Commodi] Income T 1 If the income of household ‘Complementary Commodities | Ifthe price of a commodity’ falls & vice versa ‘Substitute Goods || increases, demand for inferior * Also ¢; used i + Commodities that are used together. Example Tea 8. sugar, bike & petrol, pen &ink + Afallin the price of one commodity increases the demand of another complementary commodity irther Coffee theincreaseindemand for coffee ea rem se ‘goods wil fall & luxury goods demand will rise alled competing goods, which can be in place of the either. Example : Tea & isa rise In prices oftea, it may lead to Other Factor | ‘Taste & Preference of Consumers T ‘Future expectations + Population/Demography + Income Distribution A change in preferences of the ‘consumer may increase the demand Elastic vs Inelastic Demand ‘A commodity is considered Inclastc if its quantity ‘demand does not change much when its price increases ‘or decreases (fuctuates). For example : Salt, Petrol, Essential drugs ec, On the other hand, a product is said to be elastic if its quantity demand changes drastically when its price increases or decreases (fluctuates) For example: Gold, Luxury Cars etc, Inelastic demand is expected for goods with the following characteristics Goods and services with no substitutes ‘Necessity Goods (that cannot be replaced) ‘Goods that are inexpensive and form a smaller part, of consumer’s budget, Other types of Demand Autonomous Demand ‘An autonomous demand or dircet demand for a commodity is one that arises on its own out of a tural desire to consume or possess a commodity, This type of demand is independent of the demand for other commodities.” Indian EconomyDurable Goods Vs Non-Durable Goods _| Short-Term and Long-Term Demand Short-term demand refers to the demand for goods over short period of time. The Short-Term Demand is, * Durable goods are those goods for which the total] * Utility or usefulness is not exhaustible in the short- run use. Such goods can be used repeatedly over a Likely to be more inelastic. period of time +The long-term demand refers to the demand which + Non durable goods are the products that expires more] exists over a long period of time. The Long-Term acy Demand is Likely to be cross elasticity x + The demand for non-durable goods largely depends | [ Inthe short-run itis possible to justify subsides granted to on their current prices, consumers’ income, and|_| food suppliers; however, in the long run, this might led to fashion. It is also subject to frequent changes. higher taxes. Exceptions to Law of Demand errr er a Dene op Lamury Goods Gifen Goods | Conspicuous Necessities) T T T * Higher is the price, more is the | [+ It is a good where a higher price causes an | | Lavish spendings like marriage demand since such goods are || increase in its demand and'its demand falls | | ceremonies do not decrease or purchased for display of wealth || when the prices fas. Examples include -| | get affected since these and toattain social statusike an || Bread, Riceand wheat occassions are used as to attain Audtora ports vehicle orsome ||» They refer to those goods which are| | asocialstatus ; imported workor painting. considered Inferior when compared to their substitutes. Example - Bread and Chicken (Bread will be consumed more when chicken’ price rises). ‘Supply : ~ supply provided by producers will rise ifthe price rises because all firms look to maximize profits. € Exceptions for Law of Supply + Supply is the quantity of a -—gappr commodity which a or an pey organisaion/company is able 4 i rey: and willing to sell ata particular |" 3) oa Future Agricultural Perishable Rare Backward price, a [Expectations Goods Goods Goods Countries| + Higher is the price, greater |__~ Supply—=" | © ‘The Law OF Supply : The law of supply says that as will be the incentive for the firm to produce and sell the price of an item goes up, suppliérs will attempt to fae maximize their profits by increasing the quantity offered for sale, Thus, there is a direct relationship + Supply is a fundamental economic concept that Seven Price and Supa describes the total amount of a specific good orservice that is available to consumers. Elasticity + Supply can relate to the amount available ata specific price or the amount available across a range of prices if displayed ona graph. + The degree to which demand or supply reacts to a change in price is called elasticity, + Elasticity varies from product to product because Stock- It is referred to total quantity of a particular some products may be more essential to the consumer commodity thats available with a firm ata particular point than others. time. 2 : Demandelasticity : ; + This relates closely to the demand foragood orservice . The demand elasticity (elasticity of demand) refers to. at a specific price; all factors to remain constant the how sensitive the demand for a good is to changes in En indian onary+ Demand elasti other economic variables, such as pricesand consumer income. ty i calculated as the percent change in the quantity demanded divided by a percent change in another economic variable. +A higher demand elasticity for an economic variable ‘means that consumers are more responsive to changes in variable. Price Elasticity of Demand = Percentage change in Quantit Demanded / Percentage change in Price. + Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of 4 product in relation to its price change. Factors Affecting Price Determination] Product | Extent of Competition | Pricing | Cost the Market Objectives Utility and Government and Marketing Demand Legal Regulations Methods Used) Price Equilibrium + The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded, ie. both supply and demand are balanced. + This is the point at which the demand and supply curves in the market intersect. Deter rants of Supply ea yp a i Cost of Production ‘Taxation Policy Goals/Objectives of the Company T > An increased cost of production| reduces the supply. J+: If the cost of production is decreased, the quantity supplied increases. + An increase ‘manufactured goods and corporate tax will discourage the company to produce lessence reducing the supply. T i rate of taxation on the] |» Supply of a good or services is] also determined to a great extent by the organisational goalsand objectives. Laffer Curve + The Laffer Curve is a theory developed by supply-si economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue ‘collected by governments. The Laffer Curve ‘Tax Revenue Tax Rate (96) * The curve is used to illustrate Laffer’s main premise thatthe more an activity — such as production is taxed, the less of it is generated. Likewise, the less an activity is taxed, the more of it is generated. Phillips Curve + Phillips Curve is an economic concept developed by Alban William Housego (the leading New Zealander Indian Economy ‘economist) stating that inflation and unemployment have a stable and inverse relationship. + The theory claims that with economic growth comes rate of inflation , which in turn should lead to more jobs and less rate of unemployment. + However, the Phillips Curve has not been observed in the long run during recent times. i Phillips Curve High Inflation- t Low Unemployment Inflation rate Low Inflation- | High Unemployment Unemployment rate Kuznets Curve +A. Kuznets curve graphs the hypothess that as an conomy develops, market forces First increase and then decrease the economie inequality.It also hypothesizes that industrializing nations experience a rise and subsequent decline in income inequality. * The rise in inequality occurs after rural labor migrates to urban areas and becomes socially mobile. + After a certain income level is reached, inequality declines as a welfare state takes hold. + A modification of the curve, known as environmental Kuznets curve, has become popular to chart the rise and decline of pollution in an industrializing nation’s, economy. + The theory was developed by Simon Kuznets Kuznets Curve Income per Capita ze Objective Questions Zz 1. Which of the following are studied under Economics ? (A) Production (B)_ Consumption (©) Distribution —(D)_All of them 2. Markets can be best described through which of the following statement? (A) Aplace where commodities are sold (B) A place where Goods and services are sold (©) platform for the interaction of Consumers and Firms (D) A platform for the interaction of Consumers and Goods and Services producing firms Which of the following are the features of Factor market? 1, Market for the output of Production 2. Houscholds are sellers 3. Firms are buyers (A) Land? (©) lands (B) 2and3 (D) Allofthe above 14. Which of the following are the features of Good market? 1. Market for the output of Production 2. Firms are sellers 3, Households are buyers 4, Both firms and households are buyers (A) 1,2and3 ®) 2,3and4 (©) 1,2and4 (D) All of the above 5. Which of the following are the components of Expenditure ? (A) Revenue Expenditure (B) Capital Expenditure (©) Operating Cost (D) All of them 6. Which of the following statements define Perfect Free ‘Market in the most appropriate manner? (A) Total quantity supplied by the sellers exceeds the Total quantity demanded by the consumers (B) Total quantity demanded by the consumers exceeds the Total quantity supplied by the sellers (C) Total quantity supplied by the sellers is in equilibrium to the Total quantity demanded by the consumers (D) None of them 7. Which of the following are the prerequisites of Perfect Free Market? ~ 1. Absence of Competition 2. Monopoly 3. Perfect Competition 4. Government regulations and license permit. 5. Absence of Government quotas and regulations (A) 1,2and3 (®) 2,3and4 (©) 3,4ands () 3anas 8. Which of the following are the elements of Demand? 1. Desire 2. Means to Purchase 3. Willingness to purchase 4. Time Indian Economy(A) i2and3 © 1,2and4 ® 23and4 (D) Allof the above . Which of the following can be regarded as Complementary Goods? 1. Teaand Sugar 2. 3. Penandink = 4 ®) 2,3and4 (D) Allofthe above Tea and Coffee Bike and Petrol (@) 1,2and3 (©) 1,3and4 10. Which of the following are exceptions to the Law of Demand ? 1. Luxury Goods 2. Giffen Goods 3. Conspicuous Necessities 4, Inferior Goods (A) 1,2and3 © 1,3and4 (B) 2,3and4 (D) Allofthe above 12. Which of the following are the determinants of Supply? 1. Cost of production 2. 3. Purchasing Power Parity 4. Objectives of the company (A) 1,2and3 ®) 2,3and4 (© 1,3ana4 (D) Allofthe above Taxation policy 12. Ifthe interest rate is decreased in an economy, it will, lead to which of the following? (A) decrease the consumption expenditure in the economy ®) Increase the tax collection of the Government (©) Increase the investment expenditure in the economy (D) Increase the total savings in the economy Utility and Demand 3. Pricing Objectives4. Extent of Demand (A) 1,2and3 ®) 2,3and4 © 1,3ana4 (D) All are correct 14. Which of the following are correct with regard tol _ Revenue expenditure? 1. It leads to the creation of physical assets 2. Itassociates to the expenses incurred for the normal operations of the government 3. Interest payments on debt is an example of Revenue| expenditure 4, Salaries and other monetary incentives can be considered as Revenue expenditure (A) 1,2and3 (B) 2,3and4 © 13and4 (D) Alllare correct 15. Which of the following are correct with regard to Capital expenditure? 1, It leads to the creation of physical assets 2. Itreduces the lity of the government 3. Repayment of loans, Purchase of machinery, are an example of Capital expenditure 4, Salaries and other monetary incentives can be| included under it (A) 1,2and3 (© 1,3and4 ®B) 2,3and4 () Allare correct 16. Which of the following are an example of Factor] Market? 1. Land 2. Labour 3. Appliance manufacturing industry 4, Job search websites 13. Which of the following are the factors affecting Price | (A) 1, 2 and 3 @®) 2,3and4 Determination? © = 1,3and4 (D) Allare correct OOOOH Indian Economy a aaa [Saas+ Credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debtor financial obligation. + Credit Rating Agency (CRA) is a company that assigns ‘redit ratings, which rate a debtor’s ability to pay back debt by making timely principal and interest payments and the likelihood of default. There are six credit rating agencies registered | | under SEB fitch India Jenn | cate | era Acuite Ratings and Brickwork Research (Earlier SMERA) _ Ratings CRISIL + CRISIL stands for Credit ory Rating Information | ~ Services of India Limited [sraunano Poor's compan and it was the first credit rating agency set up int India in 1987. + Itrates companies, researches the markets and provides risk and policy advisory services to its ctients. + The agency started operations in 1988. + CRISIL is headquartered in Mumbat. + CRISIL provides independent opinion and efficient solutions by performing data analysis and research. It has a strong track record of growth and innovati + CRISTL has expanded its business operation to USA, UK, Poland, Argentina, Hong Kong, China and Singapore apart from India. +The majority shareholder of CRISIL is Standard & Credit Rating Agencies in India Poor's, one of the biggest credit rating agencies of the world CARE dee Ratings Credit Analysis Research limited was established in 1993 and since then it has gone on to become India's second largest credit rating agency. It was promoted by Industrial Development Bank of India (DBD, Unit Trust of India (UTD Bank, Canara [Banik and other financial institutions. CARE has the primary function to perform rating of debt and Profesional Rik Opinion instruments, credit analysis rating, loan rating, corporate govemance rating, claims-paying ability of insurance companies, etc. It also grades construction entities and courses undertaken by maritime training institutions. Ratings provided by CARE include financial institutions, state governments and municipal bodies, public utilities and special purpose vehiles @icra Tt was a joint venture of Moody’s and Indian financial ‘and banking service organizations. ICRA assigns corporate governance rating, performance ratings, grading and provides ranking to mutual funds, hospitals and construction and real estate companies. ICRA ratings are used to analyze the credit risk in Indi ICRA Originally named as Investment Information and Credit Rating Agency, the organization was set up in 1991. Indian Economy"| Acuite Ratings and Research/SMERA * Founded in 2005, SMERA stands for Small and ‘medium enterprises rating agency of Indi It works exclusively for the Micro, Small and Medium Enterprises and has more than 350000 enterprises under it. Fitch India * Headquartered io Mumbai, [= 7 it is-a major financial | © Ratings infocustion ervish provider and rng ogncy having a gubal prasex a tore thin 30 coentres. iti 100% owned ebay of Fiteh tnd, Brickwork Ratings + Brickwork Ratings India vee Private Led opemtes a 9} Br ickvtork credit rating agency. The | =~ ‘Company offers bank loans, — ‘commercial paper, MSME, municipal corporation, hospital, IPO, educational institution, and issuer ratings. Brickwork Ratings conducts business operations throughout India + The following Three Credit Rating Agencies control more than 90% of the credit ratings market internationally. Standard & Poor's STANDARD POOR'S + Itis the oldest credit rating agency of the world which started its operations in 1860 by Henry Poor. + The standard part was set up in 1906 and both the organizations were merged in 1940s and came to be called as Standard & Poor. + Curently itis the biggest rating agency with headquarters at New York. + trates borrowers on a scale from AAA to D, with AAA being the highest rating and being the lowest. It was founded in 1909 by John Moody to produce ‘manual of statistics related to bonds and stocks. It is only in 1975 that it was identified as Nationally Recognized ‘al Rating Organization by US. It rates debt securities which includes government or corporate bonds and does research in risk management. ‘The securities are assigned the rating from Aaa to C, with Aaa being the highest quality and C of the lowest quality Fitch It was founded by John Knowles Fitch in 1914 as the Fitch Publishing company. It got identified as Nationally Recognized Statistical Rating Organization in 1975 by US. It has dual headquarters at New York as well as UK (London), Its the smallest among big three credit rating agencies and covers more limited market. Significance of Credit Rating Agencies For The Money Lenders Better Investment Decision : With eredit rating, lenders get an idea about the credit worthiness of an individual or company (who is borrowing the money) and the risk factor attached with them, By evaluating this, they can make a better investment decision Safety Assured: High credit rating means an assurance about the safety of the money and that it will be paid back with interest on time. For Borrowers Easy Loan Approval: With high ereditrating, banks will approve loan application of borrowers easily. ‘Credit ratings will enable independent benchmarks for pricing debt, ushered in a culture of financial dsciptine, helped allocate capital efficiently by pricing risk ‘appropriately, and supported financial innovation io Indian Economy)‘Area's of Concern Tack of Uniformity Lack of Transparency Lack of Standardization Lack of Accountability Lack of Reliability Conflict of Interest SEBI has asked credit rating agencies to analyse the deterioration in the liquidity conditions of the issuer ‘and take info account any asset-libility mismatch while reviewing ratings. Besides, rating agencies will also have to disclose any linkage to external support for meeting near-term maturing obligations. SEBI also introduced a specific section on liquidity among Key rating drivers to highlight parameters such as liquid investments or cash balances, access to unutilised credit lines, liquidity coverage ratio, adequacy of cash flows for servicing maturing debt obligation among others. While carrying out monitoring of repayment schedules, CRAs should analyse the deterioration in the liquidity conditions of the issuer and also take into account any asset-liability mismatch. Ifa subsidiary company gets support from the parent ‘group or government, credit rating agencies will have to name the parent company or government that will provide support towards timely debt servicing. Certification Marks in India AGMARK AGMARK isa certification ‘mark used for agricultural Products in India, This mark assures that the Product conforms to a set of standards approved by | the Directorate of Marketing and Inspection | Major standard certification marks in India national standards body of India, was registered as a Society under the Societies Registration Act, 1860 in January 1947. Its mandate was to prepare and promote standards for adoption by Indian industry. Later, its mandate was expanded to include Product Certification activity through the Indian Standards Institution (Certification Marks) Act, 1952. In the mid 1980s it was felt necessary to confer a statutory status to ISI’s functioning which led to the enactment of the BIS Act 1986. ISI was renamed as the Bureau of Indian Standards (BIS), to promote harmonious development of standardization, and quality certification of goods, with a clearly defined statutory powers. The Act has now been revised as BIS Act, 2016 and establishes BIS as the National Standards Body. The BIS Act 2016, Rules and Regulations framed there under authorizes BIS to undertake conformity assessmeit of products, services, systems and processes. Under the product certification scheme ~ I, BIS grants licence to use the standard mark or grants certificate of conformity as per conformity assessment schemes given in BIS (Conformity Assessment) Regulations, 2018 . Product Certification Schemes of BIS aims at providing Third Party assurance of quality, safety and reliability of products to the customer. Presence of BIS certification mark, known as Standard Mark, on @ product is an assurance of conformity to the specifications. of the Government of India. Currently, AGMARK standards cover quality guidelines for various products like essential oils, vegetable oils, pulses, cereals, fruits, vegetable and semi-processed products like Vermiceli. Ist “+ ISI Mark is a certification mark used for industrial‘This mark assures that the Product conforms to Indian Standards and is issued by the Bureau of Indian Standards (BIS). This mark is both ‘mandatory and voluntary. Mandatory ISI certification products consist of electrical appliances, medical equipment, stec! Products, stainless stecl, chemicals, fertilizers, ‘cement, LPG cylinder, batteries, and packed drinking, water. tstmar BIS Hallmark BIS Hallmark is @ marking system, set up to certify the Purity of gold jewelry and gold coins. ‘This mark was introduced for gold in the year 2000 and for silver jawellery in 2005. BIS certified gold jawellery comes with a BIS stamp, | FPO Mark Itis compulsory to have an FPO Mark ‘on all processed fruit products sold in India. The example of processed fruit products are fruit jams, packaged fruit beverages, erushes, squashes, pickles, dehydrated fruit products, and fruit extracts. The FPO mark confirms that the product was ‘manufactured in a hygienic food-safe environment and is fit for consumption. The green and brown dot The green or brown dot isa common mark, printed fon almost all food products. ‘The brown dot on the packed food item indicates that the food is non-vegetarian. ‘The green dot indicates that the food in the package is vegetarian. India Organic Certification India Organic Certificati label provided to farm products. processed in India The ‘guarantees that an organic food. product adheres to the National Standards for Organie Products. Itassures you that the product or the raw materials used in the product, were grown through organic farming, without using any chemical fertilizers, pesticides, or induced hormones. cettification mark Ecomark This mark is issued by the BIS to those products which conform to a set of standards aimed at cat impact on the ecosystem. @ Pay Commissions in India Pay Commission Tenure Chairman First Pay Commission 1947-59, Srinivasa Varadachariar Second Pay Commi 1959-73 Jaganath Das ‘Third Pay Commission 1973-87 Raghubir Dayal Fourth Pay Commission 1987.96 PN Singhal Fifth Pay Commission 1996-2006 Justice § Ratnavel Pandian Six Pay Commission 2006-16 Justice BN Srikrishna ‘Seventh Pay Commission 2016-26 Justice Ashok Kumar Mathur Indian Economy =a“Te Sveriges Riksbank Prize in Economic Sclencesin Memory of Alfred Nobel vas established in 968 and has been awardea 54 times to 84 Laureates between 1969 and 2019, List of Nobel Prize Laureates in Economics : Year Nobel Laureates Subject 2020 Paul R, Milgrom and Robert 8. Wilson ‘Auction formats for goods and services that ae difficult to sellin traditional way, such as radio frequencies 2019 ‘Abhijt Banerjee, Esther Duflo and Michael Kremer For their experimental approach to alleviating global poverty 2018 William D. Nordhaus aul M. Romer For integrating climate change into long-run macroeconomic] For integrating technological innovations into long, macroeconomic analysisanalys n 2017 | Richard H. Thaler For his contributions to behavioural economics 2016 | Oliver Hart and Bengt Holmstrom For their contributions to contract theory 2015 | Angus Deaton For his analysis of consumption, poverty, and welfare 2014 | Jean Tirole For his analysis of market power and regulation Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller For their empirical analysis of asset prices Alvin E. Rath and Lloyd S, Shapley For the theory of stable allocations and the practice of market design Thomas J. Sargent and Christopher A. Sims For their empirical research on cause and effect in the macroeconomy Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides For their analysis of markets with search frictions 2009 | Elinor Ostrom For her analysis of economic governance, especialy the commons Oliver E. Williamson For his analysis of economic governance, especially the boundaries of the firm 2008 | Paul Krugman For his analysis of trade patterns and location of economic activity 2007 | Leonid Hurwicz, Eric S, Maskin and Roger 8. Myerson _| For having laid the foundations of mechanism design theory 2006 ies Edmund S. Phelps For his analysis of intertemporal tradeoffs in macro economic policy Robert J, Aumann and Thomas C. Schelling For having enhanced our understanding of conflict and cooperation through game-theory analysis Finn €. Kydland and Edward C. Prescott For their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles | 2003 Robert F. Engle i Clive Wa. Granger For methods of analyzing economic time series with time- varying volatility (ARCH) For methods of analyzing economic time series with common trends (cointegration) | 2002 Daniel Kahneman Vernon L. Smith For having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty For having established laboratory experiments as a tool ‘empirical economic analysis, especially in the study of alternative market mechanisms George A. Akrlo A. Michael Spence and Joseph E Stiglitz ir analyses of markets with asymmetie information indian EconomyYear ‘Nobel Laureates sa \d methods for ar 2000 | James). Heckman, Forge aero eer or peed ae dierete choice oa eee Forhis development of theory and methods for analyng selective samples Geo | Gober For his analysis of monetary and fiscal policy under different ‘exchange rate regimes and his analysis of optimum currency| 1998 ‘AmartyaSen’ For his contributions to welfare economics 1997 Robert C. Merton and Myron S. Scholes. For anew method to determine the value of derivatives 1996 James A. Mirrlees and William Vickrey For their fundamental contributions to the economie theory| of incentives under asymmetric information 1995 Robert E. Lucas J for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy 1994) John C. Harsanyi, John F, Nash Jr. and Reinhard Selten For their pioneering analysis of equilibria in the theory of non-cooperative games 1993, Robert W. Fogel and Douglass C. North For having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change | 1992, Gary. Becker For having extended the domain of microeconomic analysis ‘to awide range of human behaviour and interaction, including| nonmarket behaviour 1991 Ronald H. Coase For his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy 1990 Harry M. Markowitz, Merton H. Miller and William F. sharpe For their pioneering work in the theory of financial economics 1989 “Trygve Haavelmo For his clarification of the probability theory foundations of econometrics and his analyses of simultaneous economic structures 1988 Maurice Allais for his pioneering contributions to the theory of markets and| efficent utilization of resources 1987 Robert M. Solow For his contributions to the theory of economie growth 1986 James M. Buchanan Jr. For his development of the contractual and constitutional bases for the theory of economic and political decision- making 1985, Franco Modigliani For his pioneering analyses of saving and of financial markets 1984 Richard Stone For having made fundamental contributions to the development of systems of national accounts and hence | greatly improved the basis for empirical economic analysis 1983, Gerard Debreu For having incorporated new analytical methods into economic theory and for his rigorous reformulation of the theory of general equilibrium George J. Stigler For his seminal studies of industrial structures, functioning cof markets and causes and effects of public regulation.