4.indina Economy RRP

INDIAN ECONOMY
1. As the global economy battles through a unique set of challenges India is expected
to grow at 6.5 to 7.3 % in FY 2023. In the light of this statement, discuss the key
drivers of growth for India.
Answer:
Demand of the question

Introduction:
Begin the answer by writing about the various global challenges that emerged in the
deade of 2020
Body:
Here mention the various key drivers of growth in India
Conclusion:
Conclude by saying that the economy has rebounded and is expected to reach the pre-
Pandemic levels.
Introduction:
Before 2020 commenced, the global economic turbulences were generally spaced out
allowing economies breathing time to recover before preparing for the next challenge, for
example the two world wars and the Great Depression. But the third decade of this
millennium has come with a series of challenges like Covid-19 Pandemic,the Russia-
Ukraine war, Monetary tightening all across the world, Slowing of cross border trade and
slowdown in china.
Body:
Despite all the above challenges, as per international agencies and even according to
estimates released by NSO, India is expected to grow in the range of 6.5 - 7.3% in FY
2023.This is reflection of India's underlying economic resilience.
The key growth drivers for India are as follows:
1. Rebound in Domestic Consumption:
Private consumption as a % of GDP stood at 58.4% in Q2 of FY23, the highest
among the second quarters of all the years since 2013-14, supported by rebound in
contact-intensive services such as trade, hotel and transport, which registered a
sequential growth of 16% in real terms in Q2 of FY23 compared to previous.
Near Universal Coverage of Vaccination was the single most factor which brought
people out and repopulated the marketplace. The contact-based service providers
like restaurants, hotels etc ran a thriving business and significantly contributed to
consumer sentiments.
2. Much Enlarged Capital Budget of Central Government:
Budget FY22 and Budget FY23 have seen substantial increase in capital
expenditure. Going by the Capex multiplier estimated for the country, the economic
output of the country is set to increase by at least four times the amount of capex.
States are also performing well in capital expenditure. It is supported by Centre's
grant-in- aid for capital works and an interest free loan repayable over 50 years.
This capex is not only improving infrastructure but is also leading to crowding in
private investment into an economic landscape broadened by the vacation of non-
strategic PSEs (disinvestment).
3. Strong Balance Sheet of Corporates:
In the last decade, Indian non-financial private sector debt and non-financial
corporate debt as a share of GDP declined by nearly 30%. This has limited the
interest costs and has saved overheads during COVID-19 pandemic and may have
further contributed to strengthening of the balance sheet. This has also led to
increased profit in the corporate world. Better profitability helped corporates to pay
their debts. Therefore, even corporates have more scope of taking loans and doing
capex.
4. Increased Robustness of Banking Sector:
In the last few years, finances of public sector banks have seen a significant
turnaround. Profits of banks have increased and NPAs have gone down. It has been
made possible by an effective Insolvency and Bankruptcy Code which has allowed
quicker resolution and liquidation of assets. Further, the government has also
provided adequate budgetary support ensuring that the Capital to Risk Weighted
Adjusted Ratio (CRAR) remains comfortably above the threshold levels of adequacy.
Further, banks have negligible cross-border claims in times when currency risk is
high.
5. Inflation in Control:
RBI has projected headline inflation at 6.8% in FY23. Though this is outside RBI's
target range it is not high enough to deter private consumption and also not so low
as to weaken the inducement to investment.
Conclusion:
India is the third-largest economy in the world in PPP terms and the fifth largest in
market exchange rates. As expected of a nation of this size, the Indian economy in FY23
has nearly "recouped" what was lost, "renewed" what had paused, and "re-
energized" what had slowed during the pandemic and since the conflict in
Europe.
2. Write about the concepts of growth and development. Bring out the contrast in
these two concepts.
Answer:

Introduction:
Here write about the concepts of growth and development
Body:
Here talk about the differences between these concepts
Conclusion:
Conclude by saying that both are important for a country
Introduction:
Economic Growth:
Economic growth refers to an increase over time in a country’s real output of goods
and services (or) product per capita. Historically, rapid economic growth has been
accompanied by greater industrialisation. But more accurately the process of. economic
growth can be described in terms of greater commercialisation of economic activities.
Economic development:
Economic development implies progressive changes in the socio-economic structure of a
country. Development goals are defined in terms of progressive reduction in
unemployment, poverty and inequalities. It is taken to be growth plus progressive
changes in certain crucial variables that determine the well being of the people.
Body:
Growth and Development : A contrast in concepts
Till the 1960’s, the term ‘economic development’ was often used as a synonym of
‘economic growth’ in economic literature. Now, economic development is no longer
considered identical with economic growth. It is taken to mean growth plus progressive
changes in certain crucial variables which determine the well-being of the people. There
are qualitative dimensions in the development process which may be missing in the
growth of an economy.
The following are the differences between economic growth and economic development.
Growth Development
1. It shows the real rise in production 1. Economic development is growth plus

and productivity of goods and certain variables like quality of
services. life,freedoms,health and a good
environment
2. It is quantitative and unidirectional. 2. It is qualitative and multidimensional

3. Government intervention is not 3. Government intervention/role is
mandatory. mandatory in terms of welfare schemes
4. Uses traditional economic literature 4. Uses modern economic literature like

like trickle down approaches. direct benefit transfers and JAM
5. It is a narrower concept and 5. It is a much broader concept and

generally short term. generally is long term
6. Social change may or may not be 6. Social change is mandatory in it

possible
7. It is an income based approach 7. It is based on improvements in Human

Resources, standard of living and
reduction of poverty.
Conclusion:
Modern growth processes leave large segments of the population completely untouched.
This led to the adoption of an alternative conception of economic development. Policies
must be implemented to ensure a rising and properly distributed supply of goods and
basic needs of the people are to be met.
3. In the development process the economies move from agriculture to industry and
then to services but India is an exception. Why?
Answer:

Introduction:
Begin the answer by giving data related to the contribution of agriculture and services to
GDP.
Body:
Here give various reasons for ignoring the manufacturing sector
Conclusion:
Conclude by saying that the reasons led to decline in manufacturing industry
Introduction:
In the last 75 years after independence, the Indian economy has moved from a dominant
agricultural sector to the services sector constituting 54% share in India's GDP.
Generally, the economies move from agriculture to industry (manufacturing) and then to
services in their process of development but India is an exception and shifted directly
from agriculture to services while ignoring the industrial sector.
Body:
Why India ignored manufacturing?
1. Availability of land (or easier land acquisition processes): With very high
population density and the second largest population, there is less availability of
land per person. Also complicated land acquisition procedures made it very difficult
to acquire large tracts of land required for industrial purposes. A services industry
may get established on a small piece of land or on a rented floor like software, IT
etc. but to establish a manufacturing industry thousands of acres of land is
required. And till now, we have not been able to provide land easily to set up an
enterprise.
2. Better and cheaper transportation infrastructure like railway and roads: Any
manufacturing industry requires connectivity to source the raw materials and
supply the finished products in the market. In India, we have not been able to
provide better quality roads and the connectivity in the rural areas is still an issue.
In case of railway, the freight fare is one of the costliest among the world and
we have not added the railway tracks as per the demand which has created a huge
congestion leading to poor average speed and inordinate delays. All this makes the
Indian transportation system a costly and time-consuming affair which hurts the
efficiency of our manufacturing enterprises making products costly and less
competitive with other economies like China, Japan, South Korea, Taiwan etc.
3. Simple labour laws (or easy to comply labour laws): In India we had 44 central
labour laws which the government has merged into four labour codes and more than
hundred State labour laws making it one of the most rigid labour markets all over
the world. It is almost impossible for any manufacturing firm to comply with all the
labour laws. Companies cannot fire a worker on its own and require government
approval which is very difficult to come by, if they employ more than 100 labourers.
Service establishments are required to abide by only a few labour laws but for a
manufacturing firm, a whole gamut of laws exist which deter entrepreneurs from
venturing out in the manufacturing industry.
4. Simple procedures for getting approval/clearances like environment, forest,
water, power: Most of the industries in the manufacturing sector require approvals
from the government regarding environment and forest clearances. Since the
industries also require a very large amount of water and power supply, they need to
take approval of the government which may not be required for a service industry.
These approvals are difficult to get and time consuming because of red tapism and
also there is no fix time frame provided by the government to grant these clearances
5. Simplified tax system: In India, we had one of the most complicated tax
structures. Due to federal structure of taxation, both Centre and State levy and
collect taxes leading to cascading effect and double taxation and in turn the
products produced in India become costlier. Now it has been simplified through GST
in 2017.
Conclusion:
As the government in India was not able to provide the above requirements in the years
after independence and till now, we are still a laggard in the manufacturing sector. Ann
the services industry has leapfrogged.
4. Discuss the main features of national income (NNP) growth during the period of
planning.
Answer:

Introduction:
Here give the importance of national income trends
Body:
Write about the salient features of growth during the period of planning
Conclusion:
Conclude by summarising the features of NNP growth.
Introduction:
The national income trends particularly the changes in the gross or net national product
reflect the progress of the economy.
Body:
There main features of national income during the planning period is as follows:
1. Erratic growth:-The increase in national income during the period of economic
planning has been erratic. On careful scrutiny of the growth rates in different years,
we notice that out of 65 years of economic planning in as many as 9 years, either
the net national product registered a decline or the rate of increase in it was lower
than the rate of population growth. The data on the national income clearly suggest
that whatever growth we witnessed in this country has taken place only in about
half of the years of economic planning. In the rest of the years there has been little
growth or the country has actually suffered economic retrogression. It clearly
suggests that the national income trends during the period of economic planning do
not indicate a consistent increase.
2. Growth rate fluctuates with fluctuations in agriculture:- The national income
level and the rate of growth in it fluctuates with fluctuations in the harvest. This is
inevitable in agricultural countries as they generate about one third of their national
income. However, in India’s case it is somewhat surprising that the planning and
the investment in agriculture under the various plants have not made any
significant impact on the uncertainty in agriculture. Weather conditions,
especially the rains, even now put agriculture out of gear and this, in turn
affects the performance of other sectors as well.
3. Acceleration in growth rate in recent period:- India emerged as the fastest
growing major economy in the world in some of the recent years. India’s economy
performed considerably well in the last few years with GDP at constant prices
increasing at a rate of 8.3% in 2016-17, 7.0% in 2017-18 and 6.1% in 2018-19.
However, the rate of growth fell to just 4% in 2019-20 and significantly negative(-
7.3%) in 2020-21 because of the impact of COVID-19.
4. Post-1991 reform growth less fragile:- In the post-reform period, the pro-
business policies followed in the 1980s,the role played by liberalisation during the
90s and incremental rather than revolutionary individual reforms have led to an
acceleration in the growth rate. The versions of growth rates also reduced and the
post-1991 reform growth is less fragile.
Conclusion:
Thus, the above description gives a broad outline of the significant features of the
national income during the period of planning.
5. Of all the factors that determine the rate of growth of a country, the rate of capital
formation is the most important. Comment
Answer:

Introduction:
Here give a brief introduction about the capital formation in the country
Body:
Here write about why it's an important factor. Give India’s position and the causes for
low capital formation.
Conclusion:
Suggest some measures so as to increase the capital formation in the country.
Introduction:
Capital formation actually signifies a very important aspect of economic development.
This means making and increasing more capital goods, such as machines, tools,
factories, buildings, raw materials, fuels, etc., which are to be further used in producing
more goods. It does not mean increase in money capital, but it actually refers to increase
in physical capital like machinery, factories etc
Body:
Of all the factors which determine the rate of growth, the rate of capital formation is
the most important. Generally in underdeveloped countries when a large part of the
national income is saved and invested not only the output rises but a sound base for
further development is created. The process of capital formation involves three
distinct though interdependent activities.
1. The first thing that is required is savings. It is through this activity that resources
which might be exercised in favour of current consumption are set aside and thus
become available for production purposes.
2. But most people who do savings in the society are not the ones who make
investments. Their savings are to be mobilised before they can be used for productive
purposes. Thus,in the process of capital formation the second activity is finance.
3. The third is investment itself. The activity that rises productive capacity of the
country.
The rate of capital formation in India is very low as compared to many advanced
countries like the U.S.A and Japan, etc.
Some important reasons for lower rate of capital formation are as under:
1. Low saving ability: The people in India have the desire to save and possess all
those factors, which motivate the ‘will to save’, like old age considerations, family
affection, social and political influence, but they have lower per capita income. Low
per capita income leads to low savings which lead to lower rate of capital formation.
2. Inflation: Due to inflationary trends, the prices of commodities go very high and
the middle-class people find it very difficult to save any amount. Rather, it is
becoming increasingly impossible for them to meet both the ends. Under such
conditions of inflation, the majority of the middle-class is contributing very little to
capital formation.
3. Taxation policy: High level of taxes on property in India, affect the savings and
accumulation of capital adversely. The industrialists and businessmen believe that
the level of taxation should be reduced so that people’s capacity to save is improved;
simultaneously improving their capacity to invest.
4. Unequal distribution of income and wealth: In a country like India there is
extreme unequal distribution of income and wealth which keeps the rate of capital
formation relatively low. In fact, it restricts real investment in the economy.
Conclusion:
Steps should be taken by the government for equal distribution of wealth and incomes,
controlling of inflation and to promote savings in the economy so as to increase the rate
of capital formation.
6. “A single poverty line based on a calorie or expenditure norm is bound to be
arbitrary depending wholly on who is setting up this line.” Comment
Answer:-

Introduction:
Here give a brief introduction about the poverty in India
Body:
Here talk about the multidimensional nature of poverty and the problem of focusing on
a single line
Conclusion:
Conclude by giving the need for a multidimensional approach for poverty measurement
Introduction:
In almost all underdeveloped countries where per capita income is very low, income
inequality has resulted in a number of evils of which poverty is certainly the most
serious one. In India, even now in spite of all the development during the period of
planning, a large number of people living below the poverty line. Most of the time, these
people suffer from extreme destitution
Body:
As pointed out by the Tendulkar Committee, the concept of poverty is associated with
socially perceived deprivation with respect to basic human needs. These basic human
needs are usually listed in the material dimension as the need to be adequately
nourished, the need to be decently clothed, the need to be reasonably sheltered,
the need to escape avoidable diseases, the need to be (at least) minimally educated
and the need to be mobile for purposes of social interaction and participation in
economic activity. This shows that the concept of poverty is multidimensional.
However, quantitative measurement of income to define poverty line on the basis of such
a wide concept of poverty is not possible as this concept includes both material and non-
material dimensions. Accordingly, while measuring the poverty line, the focus generally
has been on the material dimensions and even in this respect, only on minimum
consumption requirements. In other words, absolute (private) consumption poverty line
is taken to convey the inability of an individual or household to afford a socially perceived
normative minimal basket of basic human needs that is expected to be reflected in some
normative minimal standard of living that should be assured to every individual /
household.
Because of the controversies surrounding the definition of poverty lines based on
calorie or expenditure norms, and the ease with which the government can manipulate
these lines to show that the levels of poverty are declining, many economists have in
recent years been advocating the abandonment of the very idea of such poverty lines.
They argued that a single poverty line based on a calorie or expenditure norm is
bound to be arbitrary depending wholly on who is setting up this line. Moreover,
such a line cannot take into account the various dimensions of poverty. This is clear from
the fact that while income does focus on an important dimension of poverty, it gives only
a partial picture of the many ways human lives can be blighted.
Conclusion:
As noted by the Human Development Report "Someone can enjoy good and live but be
illiterate and thus cut-off from learning, from communication and from interactions with
others. Another person may be literate and quite well educated but prone to premature
death because of epidemiological characteristics or physical disposition. Yet, a third may
be excluded from participating in the important decision-making processes affecting
his/her life."
Poverty is thus a denial of choices and opportunities for living a tolerable life.
7. Is there a case for the introduction of Universal Basic income in India? Give your
views.
Answer:-

Introduction:
Begin by writing about the concept of UBI
Body:
Here, give various points about the case for introduction of UBI in India
Conclusion:
Conclude by saying that there a case for introduction but in a phased manner.
Introduction:
The concept of Universal Basic Income(UBI) is premised on the idea that a just society
needs to guarantee to each individual income which they can count on and which
provides the necessary material foundation for a life with access to basic goods and a life
of dignity.
Body:
A universal basic income is like many rights unconditional and universal — it requires
every person to have a right to basic income to cover their needs, just by virtue of being
citizens. According to the economic survey of 2016-17, the time has come to think of UBI
for the following reasons -
1. Social Justice: UBI is, first and foremost, a test of just and non-exploitative society.
A society that fails to guarantee a decent minimum income to all citizens will fail the
test of justice. In fact, no society can be just or stable if it does not give all members
of the society a stake.
2. Poverty Reduction: Conditional on the presence of a well-functioning financial
system, a Universal Basic Income may simply be the fastest way of reducing
poverty. UBI is also, paradoxically, more feasible in a country like India, where it
can be pegged at relatively low levels of income but still yield immense welfare gains.
3. Agency: The poor in India have been treated as objects of government policy. Our
current welfare system inflicts an indignity upon the poor by assuming that they
cannot take economic decisions relevant to their lives. As against this, an
unconditional cash transfer treats them as agents. Moreover, UBI gives the freedom
to the poor to allocate the cash received according to their own priorities regarding
spending. Government is in no position to decide which risks of the different poor
people need to be mitigated and how priorities are to be set.
4. Employment and better bargaining: UBI is an acknowledgement that society's
obligation to guarantee a minimum living standard is even more urgent in an era of
uncertain employment generation. Moreover, UBI could also open up new
possibilities for labour markets. UBI will also improve the bargaining power of
workers as they will no longer be forced to accept any working conditions, just so
that they can subsist.
5. Administrative Efficiency: In India, in particular the case for UBI has been
enhanced because of the weakness of existing welfare schemes which are riddled
with misallocation, leakages and exclusion of the poor.
Conclusion:
Implementing a UBI for a country as large and diverse as India is quite difficult and full
of challenges. A guiding principle is that the UBI must be embraced in a deliberate and
phased manner - weighing the costs and benefits at every step.
8. What are the various causes of unemployment in India?
Answer:-

Introduction:
Here give a brief introduction as to the unemployment situation in the country.
Body:
Here talk about the various causes for unemployment in India.
Conclusion:
Conclude by saying what needs to be done for dealing with the problem of unemployment.
Introduction:
The size of employment in a country depends to a great extent on the level of development.
Therefore, when a country makes progress and its production expands, the
employment opportunities grow. In India, production has expanded in all the sectors
of the economy over the years. In response to this, the absolute level of employment has
also grown. However, unemployment in absolute terms has also increased. This has
happened because jobs in adequate numbers were not created.
Body:
The following are the main causes of unemployment in India-
1. Jobless and job loss growth: The rate of growth of employment in India has been
considerably less than the rate of economic growth. Employment elasticity declined
progressively over time across sectors. During the period 2004-05 to 2011-12 when
output growth was most rapid, employment elasticity was just 0.04 (i.e., almost zero).
This indicates a situation of "jobless growth."
The impressive pace of economic growth was driven by increases in labour productivity
rather than increases in employment. The main reason for jobless and job loss growth
is that investment on the required scale is not happening.
2. Increase in Labour force: Since Independence, the death rate has rapidly declined
and the country has entered the second stage of demographic transition. Over the
years, the mortality rate has declined rapidly without a corresponding fall in birth
rate and the country has thus registered an unprecedented population growth. This
was naturally followed by an equally large expansion in the labour force. In the Indian
context, social factors affecting the labour supply are as important as
demographic factors. Since Independence, education among women has changed
their attitude towards employment. Many of them now compete with men for jobs in
the labour market. The economy has, however, failed to respond to these challenges
and the net result is continuous increase in the unemployment backlog. In rural
areas, whereas on account of growing labour force, unemployment has increased
mainly in disguised form and in urban areas it is open and visible.
3. Inappropriate technology: In India, while capital is a scarce factor, labour is
available in abundant quantities. Under these circumstances, if market forces
operate freely and efficiently, the country would have labour-intensive techniques of
production. However, not only in industries, but also in agriculture, producers are
increasingly substituting capital for labour. In the Western countries, where
capital is in abundant supply, use of automatic machines and other sophisticated
equipment is both rational and justified while in India, on account of abundance of
labour, this policy results in large unemployment.
4. Inappropriate educational system: The educational system in India is defective. It
is, in fact, the same educational system which Macaulay had introduced in this
country during the colonial period. According to Gunnar Myrdal, India's educational
policy does not aim at development of human resources. It merely produces clerks
and lower cadre executives for the government and private concerns. With the
expansion in the number of institutions which impart this kind of education, an
increase in unemployment is inevitable. It is so because education in arts, commerce
and science will not ensure employment on account of its limited utility for productive
purposes. Myrdal considers all those who receive merely this kind of education not
only as inadequately educated but also wrongly educated. Myrdal's criticism of
India's educational system is valid. If the problem of unemployment is to be solved
in this country, radical changes will have to be made in the educational system.
Any educational system which fails to develop human resources properly will not be
able to provide employment to all those who have received it and, accordingly, would
need drastic changes.
Conclusion:
Government must take active steps to make organised manufacturing the engine of
growth for India’s economy by expanding the domestic market, removing the supply-side
constraints and ensuring Hugh employment elasticity.
9. Define Unemployment. What are the various types of it?

Answer:-

Introduction:
Here define the concept of unemployment
Body:
Write about the various types of unemployment
Conclusion:
Conclude by summarising the above information
Introduction:
The whole population of the country can be categorised into “labour force” and “not in
the labour force”. “Not in the labour force” means that population who cannot do a job
like children and elderly or who are keeping house or any other person who is not
interested in doing any job. Labour force means that population who is either
employed or who is unemployed that is not employed but actively looking for a job.
Economists define an unemployed person as one who is not able to get employment for
even one hour in half a day. Unemployment is referred to as the percentage of the number
of unemployed people to that of the labour force.
Unemployment% = Unemployed people x 100% Labour Force
Body:
Different types of Unemployment:
1. Structural Unemployment:
● A longer lasting form of unemployment caused by fundamental shifts in the economy.
Structural unemployment occurs for a number of reasons like workers lacking the
requisite job skills, change in government policy or change in technology, or they may
live far from regions where jobs are available but are unable to move there or simply
unwilling to work because existing wage levels are too low. So, while jobs are
available, there is a serious mismatch between what companies need and what
workers can offer.
● Structural unemployment exists when there are jobs available and people willing to
do work, but there are not a sufficient number of people qualified to fill the
vacant jobs. In other words, employers can neither find enough workers nor can
workers find jobs for which they are qualified. Structural unemployment often occurs
when the demand for specific types of labour changes as the economy changes
2. Cyclical Unemployment:
● This type of unemployment occurs because of the cyclical trends in the business
cycle. When business cycles are at their peak, cyclical unemployment will be low
because economic activity is high. When the economic output falls, the business
cycle is at low and cyclical unemployment will rise. Cyclical unemployment arises
because the overall demand for labour declines due to business cycle downturns.
3. Frictional Unemployment:
● This kind of unemployment arises due to people moving between jobs, career or
location or people entering and exiting the labour force or workers and employers
having inconsistent or incomplete information. Many people first leave a job and then
they try to find a new job according to their choice and this process takes some time
to apply for new jobs and for employers to make a selection and hence they remain
unemployed for this transition period.
● That is why frictional unemployment is also called “transitional unemployment”
and it is always present in the economy. Frictional unemployment can occur even
when an economy is at full employment
4. Disguised Unemployment:
● Disguised unemployment exists where part of the labour force is either left without
work or is working in a redundant manner.
● Under this kind of unemployment, the overall productivity of labour is very less and
marginal productivity of labour is zero.
● Disguised/hidden unemployment exists frequently in developing countries whose
large populations create a surplus in the labour force.
● In India, the agriculture sector is facing this kind of unemployment.
5. Seasonal Unemployment: Seasonal unemployment occurs when people are
unemployed at certain times of the year, because they work in industries where they
are not needed all year round. Examples of industries where demand, production
and employment are seasonal include tourism and leisure, farming, sugar factory
etc.
6. Open Unemployment:
● Open unemployment is a situation in which all those who, owing to lack of work, are
not working but either seek work through employment exchanges, intermediaries,
friends or relatives or by making applications to prospective employers or express
their willingness or availability for work under the prevailing condition of work and
remunerations.
● This kind of unemployment is clearly visible in the society.
Conclusion:
The above gives a description of the various types of unemployment in general.
10. Discuss the various objectives, strategies and approach of Pradhan Mantri Kaushal
Vikas Yojana(PMKVY).
Answer:-

Introduction:
Begin by writing about the basics of the scheme
Body:
Here write about the various objectives,strategy and approach of PMKVY
Conclusion:
Conclude the answer by saying that it is a step in the right direction
Introduction:
Currently, only a very small proportion of India's workforce has any formal skill training.
As a result of it several sectors of the economy face shortage of skilled people and are
mired with low productivity levels due to poor quality of workforce. Government has to
invest in bridging the skill gap in the vocational education and training sector to improve
the employability of people. It was in this context, skill development has become a key
priority area for the country and Pradhan Mantri Kaushal Vikas Yojana (PMKVY) has
been launched. It is the flagship outcome-based skill training scheme of the new
Ministry of Skill Development and Entrepreneurship (MSDE) and implemented by the
National Skill Development Council (NSDC)
Body:
Objectives
The objective of this scheme is to encourage skill development for youth by providing
monetary rewards for successful completion of approved training programmes.
Specifically, the Scheme aims to:
1. Encourage standardisation in the certification process and initiate a process of
creating a registry of skills.
2. Enable and mobilise a large number of Indian youth to take up skill training and
become employable and earn their livelihood, increase productivity of the existing
workforce and align the training and certification to the needs of the country.
3. Provide Monetary Awards for Skill Certification to boost employability and
productivity of youth by incentivizing them for skill training.
4. Reward candidates undergoing skill training by authorised institutions at an average
monetary reward of ₹8,000 per candidate.
5. Benefit 24 lakh youth at an approximate total cost of 1,500 crore.
Strategy and Approach
● PMKVY will provide monetary incentives for successful completion of market-driven
skill training and certification to approximately 24 lakh youth. This scheme shall be
implemented through public private partnerships.
● Demand-driven targets: Based on assessment of skill demand and 'Skill Gap
Studies', target for skill training would be allocated to sector skill councils by NSDC
in consultation with the SSCs, States/Union Territories and the Central
Ministries/Departments under the oversight of the Steering Committee of PMKVY.
● Target aligned to national flagship programmes and regions: Target for skill
training would be aligned to the demand from the Central government's flagship
programmes such as 'Swachh Bharat', 'Make in India', 'Digital India', 'National Solar
Mission', and so on.
● Training Content: While the thrust would be on outcomes in terms of third party
assessment/certification, training providers will focus on improved curricula, better
technology enabled pedagogy and upgrading the capacity of instructors to enable the
overall ecosystem for high quality skill training in the country. All skill training will
include soft skill training, personal grooming, behavioural change for cleanliness,
and good work ethics as a part of the training curricula.
Conclusion:
According to the recently established National Skill Development Council (NSDC), there
is a severe quality gap and lack of availability of trainers in the vocational education and
training sector. By 2017, this skill gap within the vocational training sector including
both teachers and non-teachers will reach a figure of 2,11,000. The workforce
requirement is projected to increase to 3,20,000 by 2022. PMKVY is a step in the right
direction to bridge the skill gap in the vocational education and training sector.
11. What are the different types of money supply in India? Do you think that the
control of money supply is necessary?
Answer:
Demand of the Question:

Introduction: Define or describe money supply.
Body: Explains about types of Money supply such as M1, M2, M3 & M4 in the first part
and need for controlling in the second part.
Conclusion: Summarise
Introduction:
Money supply is the total amount of money present in an economy at a particular point
in time. The standard measures to define money usually include currency in circulation
and demand deposits.
Body:
In India, the different types of money supplies are:
M1:M1 is known as narrow money as it includes only 100% liquid deposits which is a
very narrow definition of the money supply.
M2 = M1 + Savings account deposits with Post Offices
M2 includes M1 and only saving account deposits with Post offices. Post offices have no
facility for the opening of current accounts. The types of accounts that can be opened are
– Savings account, Fixed deposit, and Recurring deposit. Though the size of post office
saving accounts is negligible M2 term is used as all the deposits in M2 are not liquid.
M3 = M1 + TD (Broad Money)
M3 is called Broad money as along with liquid deposits it also includes time deposits
thus making it a broad classification of Money. Time Deposits (TD) with Banks Includes
fixed deposits, Recurring deposits, and time liability of Savings accounts. The most
common measure used for money supply is M3.
M4 = M3 + Total Deposits with Post Office (excluding National Savings Certificates)
As the total deposits with the post office are negligible there is not much difference
between M3 and M4.
M1 and M2 are known as narrow money. M3 and M4 are known as broad money. These
gradations are in decreasing order of liquidity. M1 is most liquid and easiest for
transactions whereas M4 is least liquid of all. M3 is the most commonly used measure of
money supply. It is also known as aggregate monetary resources.
The control of money supply is necessary for a few reasons:
Price stability: If there is too much money in circulation, it can lead to inflation as people
have more money to spend, which can lead to a rise in demand and ultimately higher
prices. On the other hand, if there is too little money in circulation, it can lead to deflation
as people have less money to spend, leading to a decrease in demand and ultimately
lower prices.
By controlling the money supply, RBI aims to maintain price stability and avoid inflation
and deflation.
1. Economic growth: By controlling the money supply, central banks can influence
interest rates, which can impact borrowing and lending activities, investment
decisions, and economic growth. If interest rates are too high, borrowing and lending
activities may decrease, leading to a slowdown in economic growth. If interest rates
are too low, borrowing and lending activities may increase, leading to inflation and
other economic imbalances.
2. Financial stability: Central banks also aim to maintain financial stability by
controlling the money supply. If there is too much money in circulation, it can lead
to excessive risk-taking and financial instability. By controlling the money supply,
central banks can help to prevent financial crises.
3. Exchange rate stability: The money supply can also affect the exchange rate of a
country's currency. If a country increases its money supply, its currency may
depreciate relative to other currencies, which can negatively affect international trade
and investment. By controlling the money supply, central banks can help to maintain
exchange rate stability.
4. Controlling the money multiplier effect: The money multiplier effect is the
phenomenon where banks can create money by lending out a portion of their
reserves. If the central bank increases the money supply too much, it can lead to an
increase in the money multiplier effect, which can further expand the money supply
and potentially lead to inflation.
Conclusion:
By controlling the money supply, central banks can limit the money multiplier effect and
prevent the excessive creation of money by commercial banks.
Overall, the control of money supply is a critical tool for central banks to achieve their
objectives of price stability, economic growth, and financial stability.
12. Describe the history of the Indian banking system.

Answer:

Introduction: Give the traces of banking in India.
Body: Write about the evolution of banking in India from pre-independence to till now.
Conclusion: Write about the current status.
Introduction:
The Indian banking system has a long and diverse history that can be traced back to the
ancient Vedic period, where money lending was practised by the Aryans. The modern
Indian banking system, however, can be attributed to the British colonial rule that
established the first commercial bank, the Bank of Hindustan, in 1770.
Body:
Evolution of Indian Banking Industry
First Generation Banking: During the pre-Independence period (till 1947), the Swadeshi
Movement saw the birth of many small and local banks. Most of them failed mainly due
to internal frauds, interconnected lending, and the combining of trading and banking
books.
Second Generation Banking (1947-1967): Indian banks facilitated concentration of
resources (mobilised through retail deposits) in a few business families or groups, and
thus neglected credit flow to agriculture.
Third Generation Baking (1967-1991): The government was successful in breaking the
nexus between industry and banks through the nationalisation of 20 major private banks
in two phases (1969 and 1980) and introduction of priority sector lending (1972). These
initiatives resulted in the shift from ‘class banking’ to ‘mass banking’. Further, it had a
positive impact on the expansion of branch networks across (rural) India, massive
mobilisation of public deposits and incremental credit flow to agriculture and allied
sectors.
Fourth Generation Banking (1991-2014): This period saw landmark reforms such as
issue of fresh licences to private and foreign banks to infuse competition, enhanced
productivity as well as efficiency.
This was done by leveraging technology; introduction of prudential norms; providing
operational flexibility coupled with functional autonomy; focus on implementation of best
corporate governance practices; and strengthening of capital base as per the Basel norms.
Current Model: Since 2014, the banking sector has witnessed the adoption of the JAM
(Jan-Dhan, Aadhaar, and Mobile) trinity, and issuance of licences to Payments Banks
and Small Finance Banks (SFBs) to achieve last-mile connectivity in the financial
inclusion drive.
Conclusion:
Today, the Indian banking system is composed of several public sector banks, private
sector banks, foreign banks, and regional rural banks, offering a wide range of financial
products and services to individuals and businesses. The Reserve Bank of India (RBI) is
the central bank of the country and regulates and supervises the entire banking system.
13. There is a paradigm shift in the banking system in India today. In this context,
according to you what would be the future of the Indian banking system?
Answer:

Introduction: Brief the reason for the shift.
Body: Write about the future generation of banking.
Conclusion: Summarise.
Introduction:
The Indian banking system is indeed going through a paradigm shift with the
introduction of new technologies, changes in regulations, and evolving customer
expectations. The future of the Indian banking system is likely to be shaped by several
factors and will be based on Fifth Generation Banking.
Body:
Fifth Generation Banking includes:
Big Banks: The Narasimham Committee Report (1991), emphasised that India should
have three or four large commercial banks, with domestic and international presence,
along with foreign banks. The second tier may comprise several mid-size lenders,
including niche banks, with economy-wide presence.
Need for Differentiated Banks: Though the universal banking model has been widely
preferred, there is a need for niche banking to cater to the specific and varied
requirements of different customers and borrowers. Essentially, these specialised banks
would ease the access to finance in areas such as RAM (retail, agriculture, MSMEs).
Blockchain Banking: Risk management can be more specific and the neo-banks can
leverage the technology to further (digital) financial inclusion and finance higher growth
of aspirational/new India. In this context, technologies like Blockchain can be
implemented in Indian Banking.
Mitigating Moral Hazard: Till date, failure of public sector banks has been a rare
phenomenon and the hidden sovereign guarantee is the main reason for superior public
confidence in the banks.
However, with the privatisation drive of PSBs, this may not always be true.
Therefore, fifth generation banking reforms should focus on the need for higher individual
deposit insurance and effective orderly resolution regimes to mitigate moral hazard and
systemic risks with least cost to the public exchequer.
ESG Framework: Differentiated Banks also may be encouraged to get listed on a
recognised stock exchange and adhere to ESG (Environment, Social Responsibility, and
Governance) framework to create value for their stakeholders in the long run.
Empowering Banks: The government should tighten the loose ends by allowing them to
build diversified loan portfolios, establishing sector-wise regulators, bestowing more
powers to deal effectively with wilful defaulters.
There is also a need to pave the way for the corporate bond market (shift from bank-led
economy) to create a responsive banking system in a dynamic real economy.
Conclusion:
There is a trend of growing complexity and individual centric in Indian banking system.
Therefore, the present scenario calls for a paradigm shift in the banking sector to improve
its resilience and maintain financial stability.
14. In India, credit control is a vital tool to mitigate the volatility of the supply of
money in the market. In this context, what are the limitations faced by the central
bank (RBI) in controlling credit?
Answer:

Introduction: Define what is Credit Control (CC).
Body: Give the limitations of CC by RBI.
Conclusion: Way forward
Introduction:
Credit control is a set of policies and measures implemented by the central bank (in India,
the Reserve Bank of India) to regulate the availability and cost of credit in the economy.
The aim of credit control is to maintain price stability and to promote sustainable
economic growth.
Body:
However, the RBI faces several limitations in credit control due to various factors. Some
of the limitations faced by the RBI in credit controlling are:
1. Incomplete Information: The RBI may not have complete and accurate information
about the demand and supply of credit in the market. This can make it difficult to
accurately assess the demand for credit and determine the appropriate policy
measures.
2. Time Lag: The impact of policy measures taken by the RBI may not be immediate
and can take some time to filter through the banking system. This time lag can make
it difficult to control credit and interest rates in a timely and effective manner.
3. Interest Rate Volatility: Interest rates are subject to market forces, and the RBI
may not be able to control them entirely. Factors such as inflation, government
borrowing, and global economic conditions can impact interest rates, making it
difficult for the RBI to maintain a stable interest rate environment.
4. Lack of Coordination: The RBI may not have complete control over the actions of
individual banks, which can limit its ability to control credit. Banks may pursue their
own lending policies and priorities, which can make it difficult for the RBI to achieve
its credit control objectives.
5. External Factors: The RBI's ability to control credit may be limited by external
factors such as changes in government policies, political instability, and global
economic conditions. These factors can impact the overall economic environment and
can make it difficult for the RBI to maintain stability in the credit market.
Conclusion:
Thus, the RBI faces several limitations in credit controlling due to various factors.
However, the RBI continues to use a range of policy tools and measures to control credit
and maintain financial stability in the Indian economy.
15. What are the different classifications of Non-Banking Financial Companies (NBFC).
How are NBFCs different from mainstream banking?
Answer:

Introduction: Describe NBFC briefly.
Body: Write its categorization by RBI in first part and how it differs in second part of the
answer.
Conclusion: Summarise.
Introduction:
A Non-Banking Financial Company (NBFC) is a company registered under the Companies
Act, 1956 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local authority or
other marketable securities of a like nature, leasing, hire-purchase, insurance business,
chit business
Body:
The Reserve Bank of India (RBI) has classified non-banking financial companies (NBFCs)
registered with it into various categories based on the nature of their business activities.
The different types/categories of NBFCs registered with the RBI are as follows:
1. Asset Finance Company (AFC): An AFC is an NBFC that is engaged in financing the
purchase of physical assets such as machinery, equipment, vehicles, and other fixed
assets.
2. Investment Company (IC): An IC is an NBFC that is primarily engaged in the
acquisition of securities, including shares, bonds, and debentures, and holds them
for investment purposes.
3. Loan Company (LC): An LC is an NBFC that is primarily engaged in the business of
providing loans or advances, whether secured or unsecured.
4. Infrastructure Finance Company (IFC): An IFC is an NBFC that is primarily
engaged in providing long-term finance for infrastructure projects, such as power,
telecom, roads, and ports.
5. Systemically Important Core Investment Company (CIC-ND-SI): A CIC-ND-SI is
an NBFC that holds investments in subsidiaries, joint ventures, and other group
companies. If the total assets of a CIC-ND-SI exceed Rs. 100 crore, it is deemed to be
a systemically important NBFC.
6. Infrastructure Debt Fund-Non-Banking Financial Company (IDF-NBFC): An IDF-
NBFC is an NBFC that is set up to provide long-term debt financing for infrastructure
projects.
7. Micro Finance Institution (MFI): An MFI is an NBFC that is primarily engaged in
providing financial services, such as small loans and other financial products, to low-
income individuals and households.
8. Non-Banking Financial Company-Micro and Small Enterprises (NBFC-MSE): An
NBFC-MSE is an NBFC that is primarily engaged in providing finance to micro and
small enterprises.
9. Non-Banking Financial Company-Factors (NBFC-Factor): An NBFC-Factor is an
NBFC that is engaged in the business of factoring, which involves the purchase of
accounts receivable at a discount.
Compared to mainstream banking, NBFCs differ in a following ways:
1. NBFCs do not hold a banking licence and are not allowed to accept deposits from the
public. In contrast, banks are authorised to accept deposits from customers.
2. NBFCs typically specialise in specific financial services, while banks offer a range of
financial services.
3. NBFCs are not part of the payment and settlement system, while banks are involved
in clearing and settlement of payments.
4. NBFCs are subject to different regulatory requirements and oversight compared to
banks. While both are regulated by the Reserve Bank of India, the regulations for
NBFCs are generally less stringent than those for banks.
Conclusion:
Therefore, NBFCs play an important role in the Indian financial system, especially in
providing credit to small and medium-sized enterprises (SMEs) and individuals who may
not have access to traditional banking services.
16. Define fiscal policy. What are the various types of fiscal policy that the government
can follow on the basis of business cycles ?
Answer:

Introduction:
Start by defining fiscal policy and the various objectives of it
Body:
Here elaborate on the various business cycles and the types depending on action that the
government can take
Conclusion:
Conclude by taking the fiscal stance that is taken in India.
Introduction:
Fiscal policy is the means by which the government adjusts its spending levels and tax
rates to monitor and influence a nation's economy. It is a sister strategy to monetary
policy. Fiscal policy and monetary policy are used in various combinations to direct a
country's economic goals.
The main objectives of government's fiscal policy are:
1. Economic Growth that is stabilisation of business cycles.
2. Maintain high level of employment
3. Control inflation
Body:
Government's fiscal policy has a big role in stabilising the economy during business
cycles.
The two important phases of business cycles are boom and recession. A recession
should not be allowed to grow into a deep recession. Likewise a boom should not explode
bigger. We may say that amplifying the business cycle is dangerous
Practically fiscal policy responses using taxation and expenditure can go in two ways in
response to the business cycle:
A. Counter-cyclical
B. Pro-cyclical.
A. Counter Cyclical Policy: A counter-cyclical fiscal policy refers to strategy by the
government to counter boom or recession through fiscal measures. It works against
the ongoing boom or recession trend and thus tries to stabilise the economy.
The countercyclical fiscal policy works in two different directions during these two
phases.
● During the boom phase, countercyclical fiscal policy tries to reduce the aggregate
demand by reducing government expenditure and increasing tax levels.
● During the recession phase, countercyclical fiscal policy raises aggregate demand by
increasing expenditure and reducing tax levels.
In sum, a counter cyclical fiscal policy tends to cool down the economy when there is
a boom and stimulate the economy when there is a slowdown.
B. Pro Cyclical policy
Pro-cyclical is the opposite of countercyclical. Here the fiscal policy goes in line with the
current mood of the business cycle that is amplifying them.
● During the time of boom, the government makes high expenditures and doesn't hike
taxes. So the boom grows further. Such a policy is dangerous and brings instability
in the economy.
● During recession, the government reduces spending and increases the tax leading to
further slowdown in the economy. This kind of fiscal policy is dangerous and brings
instability in the economy.
The following table sums up both the policies:
Conclusion:
The Economic Survey 2016-17 has acknowledged that India's fiscal stance has an in-
built bias toward higher deficits because spending rises pro-cyclically during growth
surges while revenue and spending are deployed counter-cyclically during
slowdowns.
17. Discuss the salient features of Fiscal responsibility and budget management act
of 2003.
Answer:

Introduction:
Here talk about the need for FRBM and its main objectives
Body:
Here write about the salient features of the act
Conclusion:
You can conclude by writing the fiscal accountability that the law results in
Introduction:
The government of India enacted the Fiscal responsibility and budget management act ,
2003 (FRBM Act) for fiscal prudence/ responsibility based on the recommendations
of the committee chaired by Dr. EAS Sharma.
Body:
The main objectives of the FRBM Act 2003 were:
1. To ensure inter-generational equity
2. Long term macroeconomic stability
The above two objectives were to be achieved broadly by
1. Achieving sufficient revenue surplus
2. Removing fiscal obstacles to monetary policy
3. Effective debt management by limiting deficits and borrowing
Some of the important features of the FRBM Act 2003 are:
1. The central government shall -
(a) Take appropriate measures to limit the fiscal deficit up to 3% percent of GDP by 31st
March 2021
(b) Endeavour to ensure that-
(i) The general government debt (equal to central govt. debt plus state govt. debt)
does not exceed 60 per cent of GDP by 2024-25
(ii) The central government debt does not exceed 40 per cent of GDP by 2024-25
2. The central government shall prescribe the annual targets for reduction of fiscal
deficit
3. The central government shall not borrow from the RBI except by way of advances to
meet temporary excess of cash disbursements over cash receipts.
4. Central government shall lay, in each financial year, before both the houses of
parliament the following statements of fiscal policy along with the budget document :
(a) Medium Term Fiscal Policy Statement
(b) Fiscal Policy Strategy Statement
(c) Macroeconomic Framework Statement
(d) Medium-Term expenditure Framework Statement
5. Measures for fiscal transparency :
(a) The central government shall take suitable measures to ensure greater
transparency in its fiscal operations in public interest and minimise secrecy as far
as practicable in the preparation of annual budget
(b) The central government at the time of presentation of the budget make such
disclosures in such form as may be prescribed
6. The Central Government may entrust the Comptroller and Auditor General of India
to review periodically the compliance of the provisions of this Act and such reviews
shall be laid on the table of both Houses of Parliament.
7. Like the Centre, Every state has also fixed the Fiscal deficit limit of 3% in their laws.
Conclusion 1:
India has a multi-party parliamentary system where electoral concerns play an important
role in determining expenditure policies. A legislative provision that is applicable to
all present and future governments is likely to be effective in keeping the deficits
under control.
Conclusion 2:
Pandemic led to increased borrowings and the resultant deviation of FRBM targets.
However, according to the economic survey of 2022-23, the medium term situation is
going to improve. This is because of the glide path towards lower fiscal deficit targets,
buoyancy in revenue, aggressive asset monetization, efficiency gains, and privatisation.
(Economic Survey of India)
18. Highlight the major reforms that were introduced in the Union Budgets over the
last few years.
Answer:
Note: There is a box on the reforms undertaken in the recent economic survey and hence
the question.

Introduction:
Write about why the fiscal reforms are important
Body:
Here highlight the various reforms undertaken by the government in recent years
Conclusion:
Here conclude by saying that the reforms have resulted in greater efficiency and
transparency.
Introduction:
A transparent, comprehensive and realistic budgetary process enables better fiscal
management.
Body:
The following are the major reforms that are introduced in the budgets from 2015
:
1. Improved fiscal transparency and realistic revenue assumptions in the Budget
:-
● The Union Government has accorded the highest priority to improving transparency
in its financial statements and accounts by bringing below-the-line expenditures
above the line. The Extra-Budgetary borrowings of the Union Government were
brought down from ₹ 1.48 lakh crore in FY20 and ₹ 1.21 lakh crore in FY21 to ₹750
crore in FY22. No Extra Budgetary Resources were estimated for FY23 in the
Budget.
● In addition to cleaner fiscal accounting, Budget 2022 based its revenue projections
on realistic assumptions, thus providing a buffer to the government in an uncertain
global environment.
● These measures credibly demonstrate the government's commitment to sound fiscal
management and provide an adequate buffer to deal with global challenges.
2. Discontinuation of Plan-Non plan classification
● The Budget FY 18 discontinued having Plan and Non-Plan classifications of
Government expenditure.
● The reform gave a greater emphasis to the Revenue and Capital classification of
Government expenditure.
● Over the years, a broad understanding had been that Plan expenditures were good
and Non-Plan expenditures were bad, resulting in skewed allocations in the
Budget.
● The reform enabled effective planning and allocation of resources in the Budget.
3. Merger of railway Budget with the Main Budget
● The railway budget was merged with the Union Budget from FY18. The reform gave
a holistic picture of the government's financial position.
● The initiative envisaged facilitating multimodal transport planning between
highways, railways and inland waterways, which has been strengthened in the
subsequent years through Ghatishakti.
● The reform has helped to enhance the efficiency of resources for both Railways and
the Union Government.
● While the merger has exempted Railways from paying dividends to the Government
Revenues, it allows the Ministry of Finance to have a greater elbow room at the mid-
year review for better allocation of resources.
● It has also enabled the Ministry of Finance to ensure a coherent emphasis on capital
expenditure across sectors.
4. Shifting the date of the Budget to 1 February
● The date of the Budget was advanced to 1 February from the Budget FY18. The
advancement of Budget presentation by a month has paved the way for early
completion of the Budget cycle. It has also enabled the Ministries to ensure better
planning and execution of schemes from the beginning of the financial year.
Conclusion:
These major governance reforms introduced in the Union Budget over the last few years
have resulted in greater efficiency in public spending.
19. Define public debt. What are the various components of it ? Explain the trends in
public debt since the pandemic.
Answer:

Introduction:
Here briefly write about the constitutional provisions related bo debt
Body:
Here talk about the various components of public debt and the recent trends as pointed
out by the economic survey of 2022-23
Conclusion:
Here conclude by stating that the situation as of now is stable and risk free.
Introduction:
Public debt is the debt that the government of India incurs both internally and externally.
Article 292 of the Constitution states that the government of India can borrow amounts
specified by the Parliament from time to time.
Body:
Components of Public Debt:
Internal Debt and external debt combined together is also called Public Debt of
Government of India and it is contracted against the Consolidated Fund of India.
The following are the various components of public debt
1. Internal Debt -
a. It is basically what the Government of India borrows by issuing Debt Securities like
Treasury Bills and Dated Securities in the domestic market. It is also called Domestic
Market Borrowings.
2. External Debt -
b. It is basically borrowing from other Governments (bilateral debt) and Multilateral
Agencies like World Bank, IMF and ADB etc.
India’s Government Debt Profile:

N K Singh Committee report on FRBM:-
1. As per the N K Singh Committee report and further amendments in the FRBM Act
2003, the Central Government will bring down the Central Govt. Debt to GDP ratio
to 40% by 2024- 25.
2. The committee has recommended states to bring down their debt to 20% of GDP.
3. So, the General Government (Centre + States) Debt reduces to 60% of GDP by 2024-
25.
Trends of Public debt since 2020:
1. Most of the governments across the world increased their debt profile due to
Pandemic shock in FY21.
2. The IMF projected the global government debt at 91% of the GDP in 2022, about 7.5%
points above pre-pandemic levels.
a. In the case of Europe, even in FY23, government debt is expected to go up as the
government is providing relief to households and small businesses from mounting
energy bills.
3. In India, the Government debt witnessed a sharp spike in FY21.
a. In Financial Year 22 the total debt of Indian Government was 134.08 lakh crores
which includes ₹121.21 lakh crore of public debt of which 114 lakh crore is internal
and 6.59 lakh crore is external
b. And 11.8 crores of Public Accounts Liability and 1.39 crores of Extra Budgetary
Liability
c. Making total liability go to 134.08 lakh crores.
d. The Share of external liability in public debt is only 4.9%.
e. Thus, India’s public debt profile is relatively stable and is characterised by low
currency and interest rate risks. Further, public debt in India is primarily contracted
at fixed interest rates.
4. This moderated in FY22.
Conclusion: Since most of India's public debt is held by the residents and denominated
in domestic currency, India's public debt profile is relatively stable and is
characterised by low currency and interest rate risks
20. Direct tax collection is growing at a robust pace and reached an all time high in
the financial year 2021-22. What are the key reasons for the recent increase?
Answer:
Demand of the Question

Introduction: Begin the answer by defining the direct taxes and giving the recent Data
on tax collections
Body: here, give the various steps that have been taken by the government regarding
taxation and the key reasons for the increase
Conclusion: Conclude the answer by what more needs to be done to further increase the
tax collections.
Introduction:-
Direct taxes are those taxes where impact and incidence lies on the same point that is
the burden for the tax falls on the entity that is being taxed. These taxes are generally
progressive in nature and are highly elastic.
Net direct tax collection (income tax and corporate tax) reached an all-time high of Rs
14.09 lakh crore in FY 2021-22 against 9.45 lakh in FY 2020-21. This indicates the
strengthening of the Indian Economy.
Body:-
The key reasons for this increase are as follows:
1. Revival of economic growth after the COVID-19 pandemic
2. Technological innovations by CBDT have improved the department's functioning
and information collection system.
a. Everybody's financial transactions from different sources and different entities are
compiled.
b. Faceless assessment Scheme is one of the biggest direct tax reforms in India based
on key principles of Efficiency, Transparency and Accountability.
3. Reforms in recent years
a. Steps towards settling pending tax disputes for example Vivad Se Vishwas initiative
b. Streamlining of GST system
c. Cross Seeding of PAN with Bank Accounts and Linking PAN with Aadhar.
d. Steps to expand digital payments system
e. Steps towards formalisation of economy
4. Simplified process:
a. Movement towards digital assessment and increase in the number of cases being
picked up for scrutiny.
b. Simplified ITR filing process through a 1 page SAHAJ return process for individual
income tax and One nation One ITR
5. Ease of getting refund, majorly by small and medium taxpayers have also
encouraged more filing of ITRs.
Conclusion:-
The above growth in tax collections is still not good enough and the Tax base is still very
low. The Direct Tax to GDP ratio of around 12% is still lower than the ASEAN countries.
Because the direct taxes are progressive, they bring equity in society.Therefore, the direct
taxes need to be monitored carefully.
21. What exactly does economic planning mean in India? Discuss the rationale for
planning.
Answer:

Introduction:
Begin by underlining the need for economic planning in India
Body:
Here talk about the various limitation of the Indian economy that necessitates central
planning
Conclusion:
Conclude by the need for an external intervention to give direction to the economy
Introduction:
Planned economies developed in countries that do not have a well-endowed private sector
to drive economic growth. The responsibility for growth is assumed by the state which
may own completely or partially the economy and manage its growth in a centralised
manner. The priorities for growth are set by the state. Depending on its capability, the
private sector is given a larger or smaller role.
Body:
Most planned economies are based on mixed economies. A mixed economy like India
merges features of both market economies and socialist plan economies. The state
owns a significant portion of economic resources in a mixed economy and the rest is
owned by the private sector. For four decades since Independence, the public sector
predominated. However, since the period of economic reforms in 1991, the most
significant role for the private sector defined the economy. Thus, since 1991 a state-
market mix changed towards the market, but the economy was predominantly
mixed.
Rationale for Planning in India:
The rationale for planning in india is as follows:
1. Limitations of the market mechanism:- The most important rationale for adopting
planning is the limitations of the market economy. When India won Independence
in 1947, it was very backward economically and the general consensus was that
planning was required for the economic development of the country. Relying entirely
on the market mechanism, we could not even hope to come out of the low level
equilibrium trap in which it had fallen during the period of its colonial subjugation.
2. The need for social justice:- The experience of many free enterprise economies
shows that the gains of economic growth do not necessarily trickle down. Market
forces operate in such a manner that further concentration of economic power takes
place and the growth bypasses those very people who deserve to be helped most.
Therefore, planning was advocated in this country for designing poverty alleviation
programmes, tackling the unemployment problem and employing human resources
in a fruitful manner.
3. Resource mobilisation and allocation in the context of overall development
programme:- Since India suffered from extreme resource constraints, it had to use
the available resources judiciously. It was argued that investment projects in this
country could not be chosen on the basis of private profitability as this would
have diverted large investments to socially low priority areas. In a society plagued by
a highly skewed income distribution, competitive markets would have dictated a
pattern of investment in conflict with the overall long-term objectives of the country.
In developing countries the choice of development projects has to be based on
social benefits rather than private profitability.
Conclusion:
Thus taking into consideration the above limitation, planning for economic development
in India is undertaken presumably because the pace of development taking place in
the absence of external intervention is not considered to be satisfactory and
because it is further held that appropriate external intervention will result in
increasing considerably the pace of development and directing it properly.
22.Outline the salient features of the Planning process as seen in India.

Answer:

Introduction:
Begin by writing about the importance of planning
Body:
Here, talk about the main features of planning in india.
Conclusion:
Here conclude by giving the significance of the planning commission of India.
Introduction:
Planning is an integral task to achieve the best possible use of the scarce resources for
economic development.
Body:
The main features of planning as practised in India have been as follows:
1. Indicative economic planning.
● The Indian plans did not carry an element of compulsion or inevitability as found in
the planning of socialist countries. The Indian plans generally laid down targets even
for those sectors of the economy over which the government had no control. For
instance, practically the whole agricultural sector in India is in private hands but the
government persisted in laying down detailed targets for this sector.
● The main reason for this state of affairs was the presence of the mixed economy.
Such a system gives ample incentives to the private capital and uses few controls.
There is no compulsion or inevitability in any work though there might be some
regulation and regimentation of economic activities.
● As against the private sector, it is indeed more essential to accomplish the targets
laid down for the public sector. However, even here there was no compulsion as such.
● This shows that Indian planning has been indicative economic planning or planning
by inducement only.
2. Physical planning.
Economic planning may be either
a. Physical planning, or
b. Financial planning.
Physical Planning:- It implies allocation of resources in terms of men, material and
power to accomplish the targets laid down in the plan documents.
Financial planning: It implies the provision of financial resources to make this possible.
Both are complementary and proceed side by side in a rational planning system. However,
P.C. Mahalanobis and Pitambar Pant who influenced the framing of the Second Plan
most were physical planners. They believed that "provided the investments were
technically feasible, savings ought to be forthcoming somehow." The obviously wrong
assumption that "What is physically possible is financially possible too" resulted in
shaping Indian planning primarily as physical planning.
3. Indian planning has been social planning.
● Indian planning has all along focused on social planning rather than pure economic
planning. It is precisely on account of this factor that its economic character became
distorted.
● Because of its social nature, the impact of all those factors that affect the political
environment has been very much visible on Indian planning as well.
● As far as the political environment is concerned, the impact of the capitalist class, the
zamindars and the prosperous large farmers has always been very much in evidence.
● The government policies were formulated keeping the interests of these classes in
view.
Conclusion:
The India economy as a result of British rule has stagnated for a long period and would
not grow unless ‘ a big push’ is given to it. The Indian economy needed this push when
the country got independence. This push was given by the planning commission.
23. The broad vision of the 12 th five year plan is “Faster, Sustainable and More
Inclusive Growth.” Discuss
Answer

Introduction:
Here give a brief introduction about the 12th FYP
Body:
Here focus on elaborating the 3 aspects of 12 FYP
Conclusion:
Conclude by underlining the main theme of 12 FYP
Introduction:
The 12th FYP was the last five year plan to be implemented in the country as the planning
has now been abandoned. The broad vision and aspirations which the Twelfth Plan
sought to fulfil are reflected in the subtitle of the Plan itself that is Faster, Sustainable
and More Inclusive Growth.
Body:
1. Rapid Growth
● While the objective of development is broad- based improvement in the economic
and social conditions, the rapid growth of GDP is an essential requirement for
achieving this objective.
● GDP growth is important for the inclusiveness objective because of the following
reasons:
○ Rapid growth of GDP produces a larger expansion in total income and production
which will directly raise living standards of a large section of the population by
providing larger employment opportunities and other income enhancing activities.
○ Rapid growth generates higher revenues which help to finance critical
programmes of inclusiveness like Mahatma Gandhi National Rural Employment
Guarantee Scheme,Sarva Shiksha Abhiyan,Mid Day Meals etc.
● The target for GDP growth in the Twelfth Plan was kept at 8.0 percent per annum.
2. Inclusiveness
The Plan emphasised the following dimensions of inclusiveness:
1. Inclusiveness as poverty reduction.
Distributional concerns have traditionally been viewed as ensuring an adequate flow of
benefits to the poor and the most marginalised. Therefore this was an important policy
focus of the Twelfth Plan.
2. Inclusiveness as group equality.
While poor are certainly one target group, inclusiveness must also embrace the
concern of other groups such as the scheduled castes, scheduled tribes and others.
Also gender-based issues also need to be addressed.
3. Inclusiveness as regional balance.
Another aspect of inclusiveness relates to whether all States and all regions are seen to
benefit from the growth process. From this angle, it is necessary to identify backward
areas and design specific policies for their growth.
4. Inclusiveness and inequality. Inclusiveness also means greater attention to income
inequality. In this context, the Plan focused particularly on providing 'greater
equality of opportunity'.
5. Inclusiveness as empowerment: Inclusiveness is not just about ensuring a broad-
based flow of benefits or economic opportunities, it is also about empowerment and
participation. Focus on empowerment and participation brings to the fore issues of
governance, accountability and peoples participation.
3. Environmental Sustainability: With increasing levels of environmental pollution
around the world and the threat of climate change caused by the accumulation of
greenhouse gases in the atmosphere due to anthropogenic causes, the issues of
Environmental Sustainability have emerged as a crucial focal point of the plan
document. It noted that Development cannot take place without additional energy
and the energy requirement of development will have to be reconciled with the
objective of protection of the environment.
Conclusion:
Thus the 12 FYP called for a Faster, Sustainable and More Inclusive Growth.
24. Define Inclusive growth. What are the major concerns for India to achieve
Inclusive growth?
Answer:
Demand of the Answer

Introduction:
Begin by defining inclusive growth.
Body:
Here give the various hinderenches that may come in the way of achieving inclusive
growth for a developing country like India
Conclusion:
Conclude by giving suggestions on what needs to be done to achieve inclusive growth.
Answer:
Introduction:
Definition of Inclusive Growth:
The Eleventh Plan defines inclusive growth to be "a growth process which yields broad-
based benefits and ensures equality of opportunity for all'. It stands for "equitable
development" or "growth with social justice". Inclusive growth basically means making
sure everyone is included in growth, regardless of their economic class, gender, sex,
disability and religion. Inclusive growth is economic growth that creates opportunity for
all segments of the population and distributes the dividends of increased prosperity to
every section of the society.
Body:
For a developing country like India, the need for inclusive growth is vital to achieve the
overall progress of the country.
Following are the major concerns for developing countries like India to achieve
the inclusive growth:
1. Poverty: India is still having 30% of the population below the poverty line (as per
Rangrajan committee report.) The poor people lack the education and skills required
to be employed in a formal job reducing their productivity and wages.
2. Employment: The quality and quantity of employment in India is very low due to
illiteracy and due to over dependence on agricultural employment. More than 90% of
the labour is in the unorganised sector where wages and productivity are very low
with no social security benefits. The generation of productive and formal employment
for our labour force is the toughest task for the country
3. Agriculture: 42% of the population is still dependent on agriculture contributing just
15% of the GDP. Productivity and wages are very low in the agriculture sector as there
is disguised unemployment. The agriculture sector suffers with fragmented land
holdings, declining yield with more than 50% of the agricultural land dependent on
monsoon.Agriculture sector has remained excluded from the high growth which the
economy achieved after the reforms of 1991.
4. Social Development: Social development is one of the key concerns in inclusive
growth.Various problems in the social sector like low level of public expenditure on
health, poor quality of primary educational institutions, significant gender disparities,
malnutrition among children is making the path critical to inclusive growth in the
country.
5. Regional Disparities: Due to different levels of development in agriculture and
industrial sector across regions, some regions in India developed fast and some areas
are still facing scarcity. For example, the per capita income of Punjab is four times
that of Bihar.
Conclusion:
The increase in the number of incidents such as theft, murder and naxalism is a direct
result of the economic exclusion and the unfulfilled aspirations of the bottom billion.
These aspirations of the bottom billion cannot be wished away. If India is unable to
address these aspirations, the "demographic dividend" will become a demographic
nightmare. This mammoth task cannot be done by the government alone. Industry and
civil society must partner with the government to drive inclusive growth.
25. What do you understand by the terms liberalisation, privatisation and globalisation
? List out the major reforms carried out in 1991 in India?
Answer:

Introduction:
Begin the answer by defining the terms LPG
Body:
Here elaborate on the direction that the 1991 reforms took place in various sectors
Conclusion:
Conclude by underlining the themes of 1991 reforms
Introduction:
The term liberalisation means removal of state restrictions on private individual activities
and Privatization means transfer of business, industry or service from public to private
ownership and control. Globalisation is the flow of goods, services, capital and labour
across international borders.
Body:
The main objective of the economic reforms was to integrate the Indian economy with
the global economy through trade, investment and technology flows.The economic
reforms of 1991 were carried out mainly in three directions: -
1. We dismantled the complex regime of licences, permits and controls.
2. We reversed the strong bias towards state ownership of means of production and
proliferation of public sector enterprises in almost every sphere of economic activity.
3. We abandoned the inward-looking trade policy.
The following lists down the details of the major reforms carried out in June-July
1991:
1. Fiscal Stabilisation:
a. Fiscal stabilisation is an essential precondition for the success of economic reforms.
b. A reduction in the Central Government's fiscal deficit was therefore critical for the
reforms to take off which had reached 8.4% in 1990-91. Steps like Abolition of export
subsidies and stopping of budget support to loss-making public-sector units were
taken to reduce the fiscal deficit.
2. Industrial Policy:
a. The most radical changes implemented in the reform package have been in the area
of industrial policy. The system License Raj prevalent earlier was abolished.
b. Licensing is now required only for a small list of industries primarily because of
environmental and pollution considerations.
c. The list of industries exclusively reserved for the public sector was drastically
pruned and many critical areas were opened for the private sector like power
generation, hydrocarbon, telecommunication etc.
3. Foreign Investment:
a. Before 1991, India's policy towards foreign investment was very selective and was
widely perceived as being unfriendly. The new policy was much more actively
supportive of foreign investment in a wide range of activities.
b. Various restrictions earlier applied on the operation of companies with foreign
ownership of more than 40% were eliminated by replacing the Foreign Exchange
Regulation Act (FERA) 1973 with Foreign Exchange Management Act (FEMA) 1999,
and all companies incorporated in India were now treated alike, irrespective of the
level of foreign ownership.
4. Financial Sector Reforms:
a. The Banking Sector was opened up to private competition from new private banks
and several new banking licences were granted.
b. Transparency and supervision in trading practices in capital markets. SEBI was
established as an independent statutory authority for regulating stock exchanges and
supervising the major players in the capital markets.
c. Capital market was opened for portfolio investments and Indian companies were
allowed to access international capital markets by issuing equity/ shares abroad
through Global Depository Receipts (GDR).
Conclusion:
The 1991 crisis compelled India to create a new framework in which the fundamental
principle would be that competition is the key to improving efficiency. Therefore, the
common thread running through the various reform measures that have been
implemented is to improve productivity by infusing competition.

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INDIAN ECONOMY

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1. It shows the real rise in production 1. Economic development is growth plus

2. It is quantitative and unidirectional. 2. It is qualitative and multidimensional

4. Uses traditional economic literature 4. Uses modern economic literature like

5. It is a narrower concept and 5. It is a much broader concept and

6. Social change may or may not be 6. Social change is mandatory in it

7. It is an income based approach 7. It is based on improvements in Human

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9. Define Unemployment. What are the various types of it?

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12. Describe the history of the Indian banking system.

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India’s Government Debt Profile:

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22.Outline the salient features of the Planning process as seen in India.

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