State PSC (e.g. BPSC / UPPSC / MPSC) Indian Economy and Development Syllabus

Define deflation, disinflation, and stagflation.

Deflation: a sustained fall in the general price level. Disinflation: a reduction in the rate of inflation (prices still rise but slower). Stagflation: high inflation combined with stagnant growth and high unemployment.

What is India's inflation target under the flexible inflation targeting framework?

4% CPI inflation, with a tolerance band of +/- 2% (i.e., 2% to 6%), set by the Government in consultation with the RBI under the Monetary Policy Framework.

What is money supply and what are India's monetary aggregates M1 to M4?

Money supply is the total stock of money in circulation. M1 = currency with public + demand deposits + other deposits with RBI (narrow money). M2 = M1 + post office savings deposits. M3 = M1 + time deposits with banks (broad money). M4 = M3 + total post office deposits.

Who conducts monetary policy in India and through which body are rates decided?

The Reserve Bank of India (RBI) conducts monetary policy. The repo rate and policy decisions are taken by the six-member Monetary Policy Committee (MPC), chaired by the RBI Governor.

What is the difference between the repo rate and the reverse repo rate?

The repo rate is the rate at which the RBI lends short-term funds to commercial banks against securities. The reverse repo rate is the rate at which the RBI borrows from banks (absorbs liquidity).

What are CRR and SLR?

CRR (Cash Reserve Ratio) is the percentage of a bank's deposits it must keep as cash reserves with the RBI. SLR (Statutory Liquidity Ratio) is the percentage of deposits banks must maintain in liquid assets (cash, gold, approved securities) with themselves.

What is Open Market Operations (OMO)?

OMO is the buying and selling of government securities by the RBI in the open market to regulate liquidity/money supply. Buying securities injects liquidity; selling them absorbs liquidity.

What is the difference between quantitative and qualitative tools of monetary policy?

Quantitative tools affect the overall volume of credit (CRR, SLR, repo rate, OMO, bank rate). Qualitative/selective tools direct credit to specific sectors (margin requirements, moral suasion, credit rationing).

What is the structure of the Indian banking system?

RBI is the apex/central bank. Scheduled banks include commercial banks (public sector, private sector, foreign, regional rural banks) and cooperative banks. There are also payments banks and small finance banks.

What is financial inclusion?

Financial inclusion means ensuring access to affordable financial services (banking, credit, insurance, payments) to all sections of society, especially the weaker and low-income groups.

What is the Pradhan Mantri Jan Dhan Yojana (PMJDY)?

Launched in 2014, PMJDY is the National Mission for Financial Inclusion providing universal access to zero-balance bank accounts, RuPay debit cards, overdraft facility, and accident/life insurance cover.

What is Priority Sector Lending (PSL)?

PSL requires banks to allocate a portion of their lending (40% of Adjusted Net Bank Credit for domestic commercial banks) to priority sectors such as agriculture, MSMEs, education, housing, and weaker sections.

What is the difference between a payments bank and a small finance bank?

A payments bank can accept deposits (up to a limit, currently Rs 2 lakh per customer) and offer payments/remittances but cannot lend or issue credit cards. A small finance bank can both accept deposits and lend, focusing on unserved/underserved segments.

What is fiscal policy?

Fiscal policy refers to the government's use of taxation and public expenditure to influence the economy, manage demand, growth, employment, and price stability.

What is the difference between fiscal deficit and revenue deficit?

Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings); it shows total borrowing requirement. Revenue Deficit = Revenue Expenditure − Revenue Receipts; it shows shortfall in current/revenue account.

What is the primary deficit?

Primary Deficit = Fiscal Deficit − Interest Payments. It indicates the government's borrowing requirement excluding interest obligations, reflecting current fiscal stance.

What does the FRBM Act aim to achieve?

The Fiscal Responsibility and Budget Management Act (2003) aims to ensure fiscal discipline by setting targets to reduce fiscal deficit and eliminate revenue deficit, promoting transparency in fiscal operations.

What is the difference between revenue expenditure and capital expenditure?

Revenue expenditure is recurring spending that does not create assets (salaries, subsidies, interest). Capital expenditure creates assets or reduces liabilities (infrastructure, loans repayment, investments).

What is the difference between direct and indirect taxes?

Direct taxes are levied directly on income/wealth and the burden cannot be shifted (income tax, corporate tax). Indirect taxes are levied on goods/services and the burden can be shifted to consumers (GST, customs duty).

What is GST and when was it implemented in India?

GST (Goods and Services Tax) is a comprehensive, destination-based indirect tax on supply of goods and services, implemented on 1 July 2017 through the 101st Constitutional Amendment Act (replacing many central and state taxes).

What are the components of GST (CGST, SGST, IGST)?

CGST (Central GST) and SGST (State GST) are levied on intra-state supplies, shared by Centre and State. IGST (Integrated GST) is levied by the Centre on inter-state supplies and imports.

What is the GST Council and how are its decisions made?

The GST Council (Article 279A) is the apex body for GST decisions, chaired by the Union Finance Minister with state finance ministers as members. Decisions need a 3/4th majority, with Centre having 1/3rd and states 2/3rd of voting weight.

What is the difference between the primary market and secondary market in capital markets?

The primary market is where new securities are issued for the first time (e.g., IPOs) to raise capital. The secondary market is where existing securities are traded among investors (stock exchanges like NSE, BSE).

Who regulates the securities/capital market in India?

The Securities and Exchange Board of India (SEBI), established in 1988 and given statutory status in 1992, regulates the securities market and protects investor interests.

Name the key financial sector regulators in India and their domains.

RBI (banking, monetary policy), SEBI (securities/capital markets), IRDAI (insurance), PFRDA (pensions), and IBBI (insolvency). FSDC coordinates among regulators.

What is the difference between absolute poverty and relative poverty?

Absolute poverty measures deprivation against a fixed poverty line (minimum needs/calorie/consumption). Relative poverty measures inequality—being poor relative to others in society (e.g., bottom income groups).

What are the main types of unemployment in India?

Disguised unemployment (more workers than needed, common in agriculture), seasonal, structural, cyclical, frictional, and open unemployment. Disguised and seasonal unemployment are prominent in rural India.

What does the Gini coefficient measure?

The Gini coefficient measures income/consumption inequality, ranging from 0 (perfect equality) to 1 (perfect inequality). It is derived from the Lorenz curve.

What is the Human Development Index (HDI) and its three dimensions?

The HDI, published by UNDP, is a composite measure of human development based on three dimensions: a long and healthy life (life expectancy), knowledge (education—mean and expected years of schooling), and a decent standard of living (GNI per capita, PPP).

What is the goal of Indian food security policy and which Act guarantees it?

To ensure availability, accessibility, and affordability of food to all. The National Food Security Act, 2013 provides subsidized foodgrains to about two-thirds of the population through the Public Distribution System (PDS).

What is the Minimum Support Price (MSP) and which body recommends it?

MSP is the guaranteed price at which the government purchases crops from farmers to protect them from price falls. It is recommended by the Commission for Agricultural Costs and Prices (CACP) and announced by the government.