Short notes:- Memory Recall Single page, no Repetitive Category + Latest

updates

1. Economic Introduction

Easy Recall Format

📌 Key Differences

Concept Definition Scope Example

🌍 Economy System of production & trade A country’s market

system Indian economy, US economy

📚 Economics Study of how resources are allocated

Theoretical & applied study Keynesian Economics, Behavioral
Economics

🏠 MicroeconomicsStudy of individuals & firms Small-scale

(consumers, firms) Price of onions, consumer choices

🌏 Macroeconomics Study of the whole economy Large-scale

(GDP, inflation) India’s GDP growth, RBI’s monetary policy

📊 Key Differences in Focus

Feature Microeconomics 📉Macroeconomics 📈

Focus Individuals & Firms Entire Economy

Key Topics Demand & Supply, Pricing GDP, Inflation, Interest

Rates

Examples Price of a product National Unemployment Rate

Key Takeaways & Full References

Economy = The real-world system of trade & production.

Economics = The study of how economies function.

Microeconomics = Small-scale decisions (firms,

households).

Macroeconomics = Large-scale economic factors (GDP,

inflation).
 2. Organization of economic activities

Types of Economic Organization

Type Ownership Decision Making Price Determination

Example

🏢 Market Economy Private Individuals & firms

Demand & Supply USA, UK

Planned Economy Government State-controlled Fixed

by Govt North Korea, USSR

⚖️Mixed Economy Both Private & Govt Market + State

Market forces with Govt Regulation India, France

Difference between free economy and command economy

Feature Free Economy (Capitalist) 🏢 Command Economy

(Socialist)

Ownership Private individuals & firms Government

Incentives Profit motive acts as incentive for owners and

managers Government give little incentive to be efficient and profitable

Decision-making Market forces (Demand & Supply) Central

Planning

Profit Motive High – Focus on profit 💰 Low – Focus on social

welfare 🤝

Role of Government Minimal intervention 🚫 Full control 📜

Innovation & Competition Encouraged 🏆 to cut costs and

efficient Restricted ❌

Lack of incentives often demotivate them, inefficient

Wealth Distribution Unequal ⚖️ Equal but often inefficient ⚠️

Examples USA, UK, Japan 🇺🇸🇬🇧, Hong-Kong Singapore North

Korea- Soviet Union, Former USSR-The Union of Soviet Socialist Republics,
China until 1991, Cuba

Problems Inequality, market failure, monopoly

Inefficiency, bureaucratic, shortages, Surpluses, less choice.

📈 Key Takeaways & Full References

 Economic activities are organized differently based on the
economic system.

Market economies focus on profit & private ownership,

while planned economies are government-controlled.

India follows a Mixed Economy with both private and

government involvement.

Free Economy = Market-driven, Private-owned, High Profit

Motive

Command Economy = Government-controlled, No Private

Ownership, Welfare Focus

India follows a Mixed Economy, balancing both

approaches.

According to Ludwig von Mises, there is no competition

and there are no reasons to innovate or to look for different solutions to a
problem, in a planned economy

3. Sectors of Indian Economy

1️⃣ Based on Economic Activities

🟢 Primary Sector (Agriculture & Allied Activities) 🌾

✔ Utilizes natural resources (farming, fishing, mining,

dairy)

✔ Sikkim – 1st organic farming state (2003) ✅

🟠 Secondary Sector (Manufacturing & Industry) 🏭

✔ Converts raw materials into finished goods (factories,

construction)

✔ Examples – Textile, Oil Refinery, Food Processing

✔ Delhi-Mumbai Economic Corridor (DMIC) 🚆

Length: 1,504 km | Covers: 6 states

Investment: $100 billion (~₹8 lakh crore)

 Includes: Freight Corridor, Industrial Hubs, Smart
Cities

2024 Update: Industrial zones developing, freight

corridor partially operational

🔵 Tertiary Sector (Services Sector) 💻

✔ Provides services, not goods (IT, Banking, Healthcare)

✔ Thalinomics (Economic Survey 2019-20)

Food affordability improved (since 2015-16)

Thali price drop: Veg (-29%) | Non-Veg (-18%)

Linked to: MSP, Food Subsidies, Inflation Control

Annual Savings:

Veg Thali: ₹10,887/year

Non-Veg Thali: ₹11,787/year (2 thali/day)

2️⃣ Based on Ownership

🏛 Public Sector – Govt-owned (Indian Railways, ONGC)

🏢 Private Sector – Privately owned (Tata, Reliance)

📊 Easy Recall Format

Sector Nature of Activity Examples

🌾 Primary Extraction of natural resources Farming,

Mining, Fishing

🏭 Secondary Manufacturing & Industry Car

Production, Steel, Textile

💻 Tertiary Service-based industries Banking, IT,

Healthcare

📈 Contribution to GDP (2023-24 Estimates)

✔ 🌾 Primary – ~18%

✔ 🏭 Secondary – ~29%

✔ 💻 Tertiary – ~53%
 4. LPG Reforms (Liberalization, Privatization, and Globalization)

🔥 Memory Boost – 5 Key Sectors of Liberalization (1991) 🔥

Use L-FIFT to remember:

L – Liberalization of Industry (License Raj Abolished)

F – Financial Sector Reforms (Banking, Stock Market,

Insurance)

I – Industrial & Public Sector Reforms (PSU

Disinvestment, Autonomy)

F – Fiscal Reforms (Tax, Deficit Control,

Disinvestment)

T – Trade Reforms (Import Tariffs Cut, Export Boost,

SEZs)

🚀 1. Industrial Reforms (License Raj Abolished)

Key Reforms Impact

Abolition of License Raj Freed private industries except 8

critical sectors

MRTP Act Amendments Allowed business expansion,

boosted competition

Foreign Direct Investment (FDI) Opened multiple

sectors to foreign investment

Private Sector Entry Allowed in banking, telecom,

aviation, insurance

Global Competitiveness Indian industries became more

export-oriented

👉 Mnemonic: "Liberal Industries Move Forward Globally"

(LIMFG)

🏦 2. Financial Sector Reforms (Modernized Banking, Stock

Market)

Before 1991 Problems:

✅ Public sector dominance → Inefficiency

 ✅ High Govt. Control → No private competition

✅ Weak Stock Market → Investor mistrust

✅ Rigid Interest Rates → No competition among banks

Major Reforms & Impact

Reform Impact

Private & Foreign BanksHDFC, ICICI, Axis entered; better

services

CRR & SLR Reduced More liquidity for lending

Stock Market Reforms SEBI (1992) formed, FIIs allowed

Basel Norms (Capital Adequacy) Ensured financial

stability

FEMA (1999) Replaced FERA Liberalized forex

management

👉 Mnemonic: "P-CBS-F" (Private banks, CRR-SLR, Basel,

SEBI, FEMA)

💰 3. Fiscal Reforms (Tax Reforms, Deficit Reduction)

Key Fiscal Reforms Impact

Tax Reduction Income Tax highest slab cut from 56% to

40%

VAT Introduced Simplified indirect tax system

Subsidy Reduction Controlled fiscal deficit

PSU Disinvestment Reduced government financial

burden

FRBM Act (2003) Limited fiscal deficit & borrowing

👉 Mnemonic: "T-V-SPF" (Tax cut, VAT, Subsidies reduced,

PSU Disinvestment, FRBM)

🌍 4. Foreign Trade Reforms (Boosted Exports, Reduced

Tariffs)

Reform Impact
 Import Tariffs Reduced (300% → 30%) Cheaper imports,
cost-effective industries

Devaluation of Rupee (1991) Boosted export

competitiveness

Import Licensing Abolished Eased access to raw

materials

Special Economic Zones (SEZs) Promoted exports,

better infrastructure

FDI & FEMA Reforms Opened Indian economy to global

players

👉 Mnemonic: "I-DISE" (Imports cut, Devaluation, Import

License removed, SEZs, Exports boosted)

🌍💰 5. Foreign Exchange Reforms (1991)

🔴 Problem: 1991 BoP Crisis

✔️Forex Reserves Critically Low – Less than $1.1 billion

(only 2 weeks’ import cover)

✔️High Trade Deficit – Imports > Exports

✔️IMF Bailout – India pledged gold reserves to secure a

loan

🟢 Key Reforms Introduced

Reform Impact

Devaluation of Rupee (1991) 📉 Rupee value reduced

by 18-19%, boosting exports

Shift to Market-Based Exchange (1992-93) 🔄 1992:

LERMS (Dual exchange rate: 40% official, 60% market) → 1993: Fully market-
determined

Current Account Convertibility (1994-95) 💳 Free forex

conversion for trade, education, travel

FERA to FEMA (1999) 🏦 Replaced restrictive FERA with

business-friendly FEMA
 Encouraging Foreign Investment 📈 100% FDI in key
sectors (Telecom, IT, Manufacturing) + Opened Stock Markets to FPIs

📊 Impact of Foreign Exchange Reforms (1991)

Category Impact

✅ Forex Reserves Surge $1.1 billion (1991) → $650+ billion

(2023)

✅ Export Boom IT, Pharma, Textile industries benefited

✅ Financial Market Growth Stock markets saw higher

foreign investment

✅ Global Integration India became a major trade &

finance player

⚠️Challenges & Current Issues

Issue Impact

❌ Rupee Volatility Global shocks impact currency stability

❌ Trade Deficit High crude oil imports drain forex

reserves

❌ Capital Flight Risks Foreign investors withdraw funds

during uncertainty

🎯 Conclusion

1991 Foreign Exchange Reforms helped stabilize India’s

economy, attract FDI, and integrate globally. However, forex stability &
reducing trade deficits remain key challenges.

🔹LIBERALIZATION OF FOREIGN TRADE & FOREIGN INVESTMENT

POLICY (1990-91)

🔴 Problems Before 1991

Issue Details

BoP Crisis Forex reserves < $1.1B (covered only 2 weeks'

imports).
 High Import Tariffs 100%-300% duties made foreign
goods costly.

Strict Licensing (License Raj) Govt. approval needed for

imports.

Limited Foreign Investment No FDI or FPI, restricted

capital flow.

🟢 Key Trade & Investment Reforms (1991)

Reform Details

📉 Import Tariff Reduction Slashed 300% → 50% (later

25%).

🚫 Import Licensing Abolished Allowed private sector to

trade freely.

📈 Export Promotion Rupee Devaluation (1991) →

Boosted exports.

💰 FDI Liberalization Opened Telecom, Power, IT, Retail

to foreign investors.

📊 FPI Allowed Foreign Institutional Investors (FIIs)

permitted in stock markets.

🏦 Forex & Banking Reforms FEMA (1999) → Replaced

restrictive FERA for easier forex transactions.

📊 Impact of Reforms

Indicator 1991 2023

🌍 Forex Reserves $1.1B$650B+

💰 FDI Inflows $100M $85B+

📈 Exports $18B $450B+

📊 Stock Market Sensex ~1,000 Sensex ~70,000

📌 Rise in Private Sector → More competition, better

efficiency ✅
 📉 Challenges Today:

❌ Trade Deficit (Imports > Exports)

❌ Rupee Depreciation due to high foreign dependence

❌ Global Uncertainty (Geopolitical tensions, trade wars)

🔍 Sector-Wise Impact

1️⃣ Fiscal Reforms (Budget & Taxation) 💰

✔ Fiscal Deficit Reduction: 8.4% → ~5% (by 1996)

✔ Tax Reforms: Simplified income tax, corporate tax

✔ Privatization Revenue: PSU disinvestment boosted govt.

finances

2️⃣ Trade Policy Reforms 🌎📦

✔ Import Tariff Cut: 300% → 50% (later 25%)

✔ Export Promotion: Rupee devaluation boosted exports

✔ Special Economic Zones (SEZs) introduced for trade

growth

3️⃣ Industrial Policy Reforms 🏭🚀

✔ End of License Raj: No approval needed for most

industries

✔ FDI Reforms: 100% FDI in IT, Telecom, Manufacturing

✔ Rise of Indian MNCs: Infosys, Tata, Reliance, Wipro

4️⃣ Public Sector Reforms (Privatization)

✔ Loss-making PSUs Privatized (e.g., VSNL, BALCO)

✔ "Navratna" PSUs (e.g., ONGC, NTPC) given autonomy

✔ Public-Private Partnerships (PPP) in infrastructure 🚆

📊 Graph – Forex Reserves Growth (1991-2023)

📈 Forex Reserves ($Billion)

📊 1991 → 2023

1️⃣ $1.1B → 2️⃣ $650B+

 📌 Why? FDI, Export Growth, Economic Liberalization ✅

⚠️Challenges Today

❌ Trade Deficit (High oil & electronic imports)

❌ FDI & FPI Dependence → Market volatility

❌ Inefficient PSUs still under govt. control

🎯 Conclusion

✅ 1991 Reforms transformed India into an open,

investment-friendly economy.

📌 Future Focus: Reduce trade deficits, attract sustainable

foreign capital, boost domestic manufacturing.

🔹Privatization & Disinvestment Policy (1991) 📜💰

1️⃣ Why Was Privatization Needed? (Pre-1991 Issues) 🚨

Issue Description

Loss-Making PSUsHigh inefficiency & low productivity in

government-run enterprises.

High Fiscal Deficit Reached 8.4% of GDP (1991); PSUs were

a financial burden.

Lack of Competition Public sector monopolies led to

slow economic growth.

Globalization Demand India needed to open its economy

to remain competitive.

2️⃣ Key Privatization & Disinvestment Reforms (1991

Onwards) 🚀

Reform Key Features

🏛 Industrial Policy Reform (1991) - PSUs restricted to 4

core sectors (Atomic Energy, Railways, Defense, Strategic Minerals).

- Private sector entry in Telecom, Banking, Aviation,

Insurance.

- End of License Raj – Industries freed from excessive

regulations.
 💰 Disinvestment Policy (1991-Present) - 1991: First
disinvestment of ₹3,000 crore in 31 PSUs.

- Types:

✔️Minority Stake Sale – Govt. retains control (e.g., LIC

IPO).

✔️Strategic Disinvestment – Govt. transfers

management control (e.g., Air India to Tata).

✔️Privatization – Full PSU exit (100% stake sale).

🏦 Banking & Financial Sector Privatization - 1993: Allowed

private banks (ICICI, HDFC, Axis, Kotak, Yes Bank).

- 1999: Insurance sector opened to private & foreign

insurers.

🚄 Public-Private Partnerships (PPP) - Private sector

participation in roads, railways, ports, power, and metro projects.

- Examples: Delhi Metro (PPP model), GMR (Delhi

Airport).

3️⃣ Impact of Privatization & Disinvestment 📊

Impact Outcome

✅ Revenue Generation Over ₹4 lakh crore raised since

1991.

✅ PSU Efficiency Improved Profitability of BSNL, GAIL,

NTPC improved.

✅ Stock Market Growth Listed PSUs (ONGC, NTPC, LIC)

attracted investors.

✅ Rise of Private Sector Reliance, Tata, Infosys, Wipro

became global players.

✅ More FDI & Global Competitiveness Private

investment boosted telecom, aviation, banking, etc.

4️⃣ Challenges & Criticism ⚠️

Challenge Details
 ❌ Opposition from Trade Unions PSU employees feared
job losses.

❌ Slow Disinvestment Process Govt. still owns many

inefficient PSUs.

❌ Monopolization Risk Some sectors dominated by a few

private players.

❌ Bank NPAs (Bad Loans) Some private banks

mismanaged funds.

5️⃣ Key PSU Disinvestments & Privatizations Since 1991 🔑

Period Major Disinvestments

1991-2000 Minor stake sales (ONGC, SAIL, GAIL).

2000s Strategic Disinvestment (VSNL, IPCL, BALCO).

2014-Present Air India sold to Tata (2021), LIC IPO

(2022).

6️⃣ Disinvestment – Concept & Methods 📉

Type of Disinvestment Definition Example

Minority Stake Sale Govt. sells a small stake but retains

control. LIC IPO (2022)

Strategic Disinvestment Govt. sells a controlling stake

& transfers management. Air India sale to Tata

Privatization Govt. fully exits a company (100% stake

sale). VSNL, BALCO, Maruti Udyog

Exchange-Traded Funds (ETFs) Govt. sells PSU stocks

through ETFs. CPSE ETF, Bharat 22 ETF

7️⃣ Recent Disinvestment Cases 📢

Company Disinvestment Year Stake Sale Value

Air India 2022 Sold to Tata for ₹18,000 crores

LIC IPO 2022 Govt. divested 3.5% stake, raised

₹21,000 crores

IDBI Bank Ongoing Strategic disinvestment in progress

 8️⃣ Challenges in Disinvestment 📉

Challenge Explanation

❌ Political & Labor Unions Opposition Workers protest

against job losses.

❌ Valuation & Market Conditions PSU stock prices

fluctuate, affecting sale value.

❌ Legal & Regulatory Hurdles Approval processes delay

privatization.

9️⃣ Way Forward 📈

Solution Explanation

✔️Transparent Process Clear criteria for selecting PSUs for

privatization.

✔️Strategic Sector-Wise Approach Focus on sectors where

private players can bring efficiency.

✔️Public-Private Partnerships (PPP) More collaboration in

infrastructure & essential services.

🔟 Conclusion 🎯

The 1991 Privatization & Disinvestment Policy transformed

India’s economy by improving efficiency, increasing government revenue,
and attracting foreign investments. However, slow PSU reforms, political
opposition, and monopolization risks remain key challenges.

📌 Budget 2024-25 Disinvestment Target: ₹50,000 crores

🔹Globalization 1991 – Memory Map for Bank Exams

🔹 1. What is Globalization?

Aspect Details

Definition Integration of a country’s economy with the

global economy through trade, investment, technology, and labor mobility.

Key Features Free trade, foreign investment,

outsourcing, cultural exchange.

India’s Shift (1991) Adopted LPG (Liberalization,

Privatization, Globalization) reforms under economic crisis.
 🔹 2. Globalization Reforms in India (1991) 🔄

Reform Area Key Measures

Foreign Direct Investment (FDI) Allowed MNCs to invest

in India.

Trade Liberalization Import tariffs reduced, export

promotion.

Privatization Opened various sectors to private

participation.

Technology & IT Growth Boosted telecom, software exports,

and outsourcing.

📊 Impact of Globalization (1991-2023):

Exports Growth: $18B (1991) → $770B+ (2023)

FDI Inflows: $75M (1991) → $85B (2022)

India’s Global Integration: WTO (1995), ASEAN trade

pacts, FTAs

🔹 3. Factors Driving Globalization

Factor Impact

Economic Factors 🌐 Free trade, FDI inflows, global

supply chains, economic reforms.

Technological Factors 📡 Digital revolution, AI, automation,

e-commerce boom.

Political & Institutional Factors WTO, IMF, regional

trade blocs (ASEAN, EU, BRICS).

Social & Cultural Factors 👩‍🎓 Workforce mobility, global

brands, OTT platforms (Netflix, Prime).

Environmental Factors 🌿 Paris Agreement, renewable

energy investments, sustainability policies.

📌 Global Trade Growth: $5T (1990) → $32T (2023)

📌 Internet Users: 0.4B (2000) → 5.3B+ (2023)

🔹 4. Impact of Globalization in India 🚀

 Positive Effects ✅ Challenges ⚠️

Higher GDP Growth: 4% (1991) → 6-8% avg. post-reforms

Income Inequality: Rich-poor gap widened.

IT Boom: Bengaluru = “Silicon Valley of India” Jobless

Growth: Automation reduced unskilled job opportunities.

FDI & Forex Reserves Surge Foreign Dependence: Trade

deficit & reliance on imports.

Urbanization & Infrastructure Growth Environmental

Degradation: Industrial pollution, resource depletion.

📊 Stock Market Boom: Sensex ~1,000 points (1991) →

65,000+ (2023)

📊 India as Export Hub: Pharma, textiles, software exports

surged

🔹 5. Current Trends & Future Outlook (2024 Onwards) 📊

Trend Details

PLI Scheme 📈 Boosting domestic manufacturing in

Electronics, Pharma, Automobiles.

Atmanirbhar Bharat 🇮🇳 Focus on self-reliance while

balancing globalization.

Rising FTAs 📜 India signed FTAs with UAE, UK, Australia,

EU in progress.

China+1 Strategy 🌏 Reducing dependence on China for

supply chains.

📊 Manufacturing GDP Share: ~17% (1991) → ~15% (2023)

→ Need for 'Make in India' push

📖 World Trade Organization (WTO) & International Monetary Fund

(IMF) – Memory Boost for Bank Exams

This structured memory recall format ensures quick revision with

icons, key facts, and comparisons.

5. World Trade Organization (WTO)

 Aspect Details

Established 1st January 1995

Headquarters Geneva, Switzerland

Members 164 countries (as of 2024)

Predecessor GATT (1948 – General Agreement on Tariffs &

Trade)

Objective Promote free trade, reduce trade barriers & resolve

disputes.

✅ Key Functions

📜 Formulates global trade rules

⚖️Dispute Settlement Body (DSB) resolves trade disputes

📈 Monitors trade policies of member nations

✅ Key Agreements Under WTO

Agreement Purpose

GATT 🏭 Trade liberalization in goods (tariff reduction).

GATS 📡 Covers services trade (banking, IT, telecom).

TRIPS 📜 Protects intellectual property (patents, trademarks).

AoA 🌾 Regulates agricultural subsidies & fair trade.

📊 India & WTO

✅ Defended farm subsidies (MSP issue)

✅ Opposed e-commerce rules (data localization concerns)

✅ Advocated developing nations' special status

⚠️Criticism of WTO

❌ Biased towards developed nations (US, EU dominance)

❌ Slow dispute resolution (US blocked appellate judges)

❌ Restrictions on agricultural subsidies affect Indian farmers

💰 International Monetary Fund (IMF)

 Aspect Details

Established 1944 (Bretton Woods Conference)

Headquarters Washington, D.C., USA

Members 190 countries

Objective Ensure global monetary stability, economic growth &

crisis management.

✅ Key Functions

📈 Lends to countries facing financial crises (BoP issues)

📉 Monitors global economies & advises policies

💵 Provides technical assistance & economic data

✅ IMF Financial Assistance Mechanisms

Scheme Purpose

Stand-by Arrangements (SBA) Short-term crisis loans to

stabilize economies.

Extended Fund Facility (EFF) Medium-term financial support for

deeper reforms.

Poverty Reduction & Growth Trust (PRGT) Low-interest loans for

developing nations.

📊 India & IMF

✅ 1991 Economic Crisis → $2.2B IMF Loan (Led to Liberalization

Reforms)

✅ IMF praised India’s digital payment & GST implementation

✅ IMF concerns over India’s inflation & fiscal deficit

⚠️Criticism of IMF

❌ Harsh conditionalities – forces austerity measures

❌ Voting power imbalance – US & EU dominate decisions

❌ Encourages privatization, harming developing nations

📊 Current Global Trade & Economic Trends (2024 Onwards)

 📌 WTO under reform talks – Focus on Appellate Body restoration

📌 India pushing for WTO flexibility in e-commerce & subsidies

📌 IMF projects India's GDP growth ~6.5% (2024)

📌 US-China trade war impacts WTO trade dynamics

6. Types of economics Models

Model Concept Key Theorists Principle Real-World

Application Pros ✅ Cons ⚠️

Classical Model (Laissez-Faire) Minimal government

intervention; free markets regulate themselves.Adam Smith, David Ricardo
Invisible Hand – Markets adjust automatically based on supply &
demand. 19th-century Britain, Early US capitalism. 📈 Encourages efficiency
& innovation. ❌ Can lead to monopolies & income inequality.

💰 Lower taxes & fewer regulations.

❌ No protection for workers or environment.

Keynesian Model (Demand-Side Economics) 💰 Government

intervention needed to stabilize economy. John Maynard Keynes Public
spending boosts demand during recession. US New Deal (1930s), Post-
WWII economies. 📊 Reduces unemployment & stabilizes economy. ❌ Can
lead to high government debt.

Encourages public investments

(infrastructure, welfare). ❌ Risk of inflation due to excessive spending.

📌 Quick Takeaways for Exams

✅ Classical Model → Free markets regulate themselves (Adam

Smith).

✅ Keynesian Model → Govt. intervention needed to manage

demand (Keynes).

✅ Real-World Applications – Classical (Laissez-Faire Capitalism),

Keynesian (Public Spending during crises).

7. TYPES OF ECONOMIC MODELS

Economic System Definition 📖 Key Features 🔑 Pros ✅ Cons

⚠️ Examples 🌍
 Traditional Economy 🌾 Based on customs, traditions, and barter;
guided by ancestral practices. ✅ Subsistence-based (produce only what
is needed). ✔️Sustainable & eco-friendly. ❌ Low productivity. 🌱 Tribal
societies in Africa & Amazon.

✅ Barter system (no formal currency). ✔️Strong

social bonds. ❌ Vulnerable to natural disasters. Inuit communities in
Canada.

✅ Community-oriented & follows traditions. ✔️

Self-sufficient communities. ❌ No economic growth & innovation. 🌾
Rural India (historically).

✅ Minimal technological advancement.

✅ Little to no government role.

Capitalist Economy (Free Market) 💰 Private individuals own

resources & operate for profit with minimal government intervention. ✅
Private ownership of land, labor & capital.✔️Encourages innovation &
efficiency. ❌ Income inequality (rich vs. poor). 🇺🇸 USA (Corporate
capitalism).

✅ Profit motive drives businesses. ✔️Higher

productivity & economic growth. ❌ Risk of monopolies & exploitation.
🇬🇧 UK (Welfare capitalism).

✅ Market forces (supply & demand) determine prices.

✔️Consumer choice & variety. ❌ Prone to recessions & financial crises.
🇯🇵 Japan (Industrial capitalism).

✅ Competition leads to innovation. 🇩🇪

Germany (Social market economy).

✅ Minimal government interference.

Market Economy 🏪 Economic system where supply &

demand drive production, with little to no government control. ✅ Private
ownership. ✔️Efficient resource allocation. ❌ Wealth inequality. 🇨🇦
Canada.

✅ Prices determined by supply & demand.✔️

Consumer freedom & variety. ❌ Market failures (pollution, monopolies). 🇩🇪
Germany (Regulated market economy).
 ✅ Competition fuels innovation & efficiency. ✔️
High economic growth potential. ❌ Economic instability (booms &
recessions).🇬🇧 UK.

✅ Profit motive encourages businesses.

🇺🇸 USA.

✅ Consumer sovereignty (people decide market

trends).

Command Economy ⚙️ Government controls all production,

pricing & distribution to achieve social goals. ✅ State ownership of
industries & resources. ✔️Ensures economic stability. ❌ Lack of consumer
choice. 🚩 North Korea (strict control).

✅ Centralized production planning. ✔️Reduces

income inequality. ❌ Inefficient resource allocation. 🇨🇳 China (Before
1978 reforms).

✅ Price controls set by government. ✔️Guarantees

employment & welfare. ❌ Low innovation due to lack of competition.
Soviet Union (USSR, 1917–1991).

✅ Equal income distribution.

✅ No profit motive (goal: social welfare).

Mixed Economy ⚖️ A blend of capitalism & socialism; both

private & government roles exist. ✅ Private & public ownership coexist.
✔️Promotes economic growth while ensuring welfare. ❌ Can suffer from
excessive regulations. 🇮🇳 India (Post-1991 reforms).

✅ Market forces operate with govt. regulations. ✔️

Reduces extreme wealth disparity. ❌ Risk of corruption & inefficiency. 🇫🇷
France (State involvement in key sectors).

✅ Govt. provides essential services (health,

education). ✔️Protects consumers & workers. ❌ Balancing private & public
interests is challenging. 🇨🇳 China (Since economic liberalization).

✅ Balances profit motive & social welfare.

Socialism Government controls key industries, but allows

private ownership in some areas. ✅ Govt. controls major industries
(healthcare, transport). ✔️Reduces inequality & provides welfare. ❌ High
taxes can discourage innovation. 🇸🇪 Sweden.
 ✅ Wealth redistribution through taxation & welfare.
✔️Ensures economic stability & social security. ❌ Govt. inefficiencies
may slow progress. 🇳🇴 Norway.

✅ Democratic governance in most socialist

economies. ✔️Balances capitalism & public welfare. ❌ Risk of excessive
state control. 🇮🇳 India (Pre-1991 socialist model).

✅ Free market & govt. regulations coexist.

Communism 🚩 Extreme socialism where all resources are

state-owned & equally distributed. ✅ No private ownership (govt. owns
everything). ✔️Eliminates class differences. ❌ No incentive for
innovation. 🚩 Soviet Union (1917–1991).

✅ No class system (everyone earns equally). ✔️

Ensures basic needs are met for all.❌ Bureaucratic inefficiencies. 🚩 North
Korea (Full state control).

✅ Central planning dictates economy. ✔️No

unemployment (state assigns jobs).❌ Economic stagnation & black markets.
🚩 China (Before 1978 reforms).

✅ Focus on collective welfare, not individual gain.

📌 Quick Memory Boost 🧠

✅ Traditional Economy → Subsistence-based, barter, no

government role.

✅ Capitalist Economy → Free market, private ownership, profit-

driven.

✅ Market Economy → Prices set by supply & demand, competition

fuels growth.

✅ Command Economy → Government-controlled, no competition,

social welfare focus.

✅ Mixed Economy → Govt. + Private sector work together

(balance of capitalism & socialism).

✅ Socialism → Govt. controls key industries, aims for welfare &

reduced inequality.

✅ Communism → No private ownership, state controls everything,

extreme socialism.
 8. 🏦 Consensus in Economics

Concept Explanation

Definition 📖 Broad agreement among economists on policies that

promote economic stability, growth, and efficiency.

Origin 🌍 Coined by John William (1989), focusing on economic

development in Latin America, Southeast Asia, and other regions.

Purpose 🎯 Set of neoliberal prescriptions made by IMF, World

Bank, and U.S. Treasury for developing countries facing economic crises.

Key Ideas ✅ 🔹 Free Markets + Govt. Role – Markets drive growth,

but regulation is needed for stability.

🔹 Macroeconomic Stability – Controlling inflation, fiscal

deficits, and monetary discipline.

🔹 Structural Reforms – Privatization, deregulation, and

trade liberalization.

🔹 Progressive Taxation & Redistribution – Fair taxes + social

programs for equality.

🔹 Globalization & Trade – Encouraging free trade &

investments, but with regulations.

🔹 Govt. Market Failures – Too much state control creates

inefficiencies.

🔹 Regime Uncertainty – Stable economic policies prevent

instability from political changes.