Indian Economy
Key Concepts & Formulas
| # | Concept | Quick Explanation |
|---|---|---|
| 1 | GDP Calculation | GDP = C + I + G + (X-M) where C=Consumption, I=Investment, G=Govt spending, X=Exports, M=Imports |
| 2 | Inflation Rate | Inflation Rate = [(CPI current - CPI previous)/CPI previous] × 100 |
| 3 | Fiscal Deficit | Fiscal Deficit = Total Expenditure - Total Revenue (excluding borrowings) |
| 4 | Repo Rate | Rate at which RBI lends to commercial banks; ↑Repo = ↑Interest rates = ↓Money supply |
| 5 | Current Account Deficit (CAD) | CAD = (Imports - Exports) + (Income payments - Income receipts) + (Transfers) |
| 6 | Five Year Plan Duration | 12th FYP: 2012-2017; 13th FYP replaced by NITI Aayog’s 3-year action plan (2017-2020) |
| 7 | SLR & CRR | SLR: % of deposits banks must invest in govt securities; CRR: % of deposits kept with RBI |
10 Practice MCQs
Q1. What is the full form of GDP? A) Gross Domestic Product B) General Domestic Product C) Gross Development Product D) General Development Process
Answer: A) Gross Domestic Product
Solution: GDP stands for Gross Domestic Product, which measures the total value of all goods and services produced within a country’s borders in a specific time period.
Shortcut: Remember “Gross” = Total, “Domestic” = Within country borders, “Product” = Goods & services
Concept: Indian Economy - Basic terminology
Q2. Who is the current Governor of RBI (as of 2024)? A) Urjit Patel B) Shaktikanta Das C) Raghuram Rajan D) D Subbarao
Answer: B) Shaktikanta Das
Solution: Shaktikanta Das has been serving as the 25th Governor of RBI since December 2018.
Shortcut: Remember “S.D.” = Shaktikanta Das (current)
Concept: Indian Economy - RBI leadership
Q3. What is the main objective of the Five Year Plans? A) Military development B) Economic development C) Political development D) Cultural development
Answer: B) Economic development
Solution: Five Year Plans are centralized and integrated national economic programs designed to achieve balanced economic development.
Shortcut: “Plan” always relates to “Economic” growth
Concept: Indian Economy - Planning Commission
Q4. If India’s GDP is ₹200 lakh crore and population is 140 crore, what is the per capita income? A) ₹1.43 lakh B) ₹1.20 lakh C) ₹1.50 lakh D) ₹1.35 lakh
Answer: A) ₹1.43 lakh
Solution: Per Capita Income = GDP ÷ Population = ₹200 lakh crore ÷ 140 crore = ₹200,00,000 crore ÷ 140 crore = ₹1,42,857 ≈ ₹1.43 lakh
Shortcut: Remove “crore” from both: 200 lakh ÷ 140 = 1.43 lakh
Concept: Indian Economy - National income calculation
Q5. A train ticket costs ₹500 in 2023 and ₹550 in 2024. What is the inflation rate? A) 8% B) 9% C) 10% D) 11%
Answer: C) 10%
Solution: Inflation Rate = [(550-500)/500] × 100 = (50/500) × 100 = 10%
Shortcut: 50/500 = 1/10 = 10%
Concept: Indian Economy - Inflation calculation
Q6. If railway’s total revenue is ₹2.5 lakh crore and expenditure is ₹3.2 lakh crore, what is the fiscal deficit? A) ₹50,000 crore B) ₹70,000 crore C) ₹90,000 crore D) ₹70,000 crore
Answer: B) ₹70,000 crore
Solution: Fiscal Deficit = Total Expenditure - Total Revenue = ₹3.2 lakh crore - ₹2.5 lakh crore = ₹0.7 lakh crore = ₹70,000 crore
Shortcut: Subtract smaller from larger: 3.2-2.5 = 0.7 lakh crore
Concept: Indian Economy - Budget deficit
Q7. RBI increases repo rate from 6% to 6.5%. This will: A) Increase money supply B) Decrease inflation C) Increase inflation D) No effect on inflation
Answer: B) Decrease inflation
Solution: Higher repo rate → Higher lending rates → Less borrowing → Less money supply → Reduced demand → Lower inflation
Shortcut: ↑Repo = ↓Inflation (inverse relationship)
Concept: Indian Economy - Monetary policy
Q8. A railway project costs ₹1200 crore. If 60% is funded by the government and rest by private partners, what is the PPP investment? A) ₹720 crore B) ₹480 crore C) ₹600 crore D) ₹500 crore
Answer: B) ₹480 crore
Solution: Government share = 60% of ₹1200 crore = ₹720 crore PPP investment = Total cost - Government share = ₹1200 crore - ₹720 crore = ₹480 crore
Shortcut: 40% of 1200 = 0.4 × 1200 = 480
Concept: Indian Economy - Public Private Partnership
Q9. If railway freight earnings grow from ₹1.2 lakh crore to ₹1.5 lakh crore in 2 years, what is the annual growth rate? A) 10.5% B) 11.8% C) 12.5% D) 13.2%
Answer: B) 11.8%
Solution: Using compound growth formula: Final = Initial × (1+r)^n 1.5 = 1.2 × (1+r)^2 1.25 = (1+r)^2 √1.25 = 1+r 1.118 = 1+r r = 0.118 = 11.8%
Shortcut: √1.25 ≈ 1.118 → 11.8% growth
Concept: Indian Economy - Growth rate calculation
Q10. A station earns ₹50 lakh daily from 25,000 passengers. If ticket price increases by 20% and passenger count drops by 10%, what is the new daily revenue? A) ₹54 lakh B) ₹55 lakh C) ₹56 lakh D) ₹57 lakh
Answer: A) ₹54 lakh
Solution: Original ticket price = ₹50 lakh ÷ 25,000 = ₹200 New price = ₹200 × 1.2 = ₹240 New passengers = 25,000 × 0.9 = 22,500 New revenue = ₹240 × 22,500 = ₹54 lakh
Shortcut: (1.2 × 0.9) = 1.08; 50 × 1.08 = 54
Concept: Indian Economy - Price elasticity & revenue
5 Previous Year Questions
PYQ 1. Which Five Year Plan focused on “Faster, More Inclusive and Sustainable Growth”? [RRB NTPC 2021 CBT-1]
Answer: 12th Five Year Plan (2012-2017)
Solution: The 12th Five Year Plan (2012-2017) had the theme “Faster, More Inclusive and Sustainable Growth” with target growth rate of 8%.
Exam Tip: Remember 12th plan = “Inclusive” (both start with ‘I’)
PYQ 2. What is the current inflation target set by RBI for 2024? [RRB Group D 2022]
Answer: 4% ± 2% (2% to 6% range)
Solution: RBI’s inflation targeting framework mandates maintaining inflation at 4% with tolerance band of ±2% (2%-6%).
Exam Tip: Remember “4±2” = 2-6% range
PYQ 3. Which sector contributes most to India’s GDP? [RRB ALP 2018]
Answer: Service Sector (Tertiary)
Solution: Service sector contributes approximately 54% to India’s GDP, followed by industry (25%) and agriculture (21%).
Exam Tip: Remember “S” = Service = Largest
PYQ 4. What is the minimum SLR requirement for banks as of 2024? [RRB JE 2019]
Answer: 18%
Solution: RBI mandates Statutory Liquidity Ratio (SLR) of 18% of banks’ net demand and time liabilities.
Exam Tip: SLR = 18% (remember “18” sounds like “SLR”)
PYQ 5. Which organization replaced the Planning Commission? [RPF SI 2019]
Answer: NITI Aayog
Solution: NITI Aayog (National Institution for Transforming India) replaced Planning Commission on 1st January 2015.
Exam Tip: “NITI” = New Institution Transforming India
Speed Tricks & Shortcuts
| Situation | Shortcut | Example |
|---|---|---|
| Calculating Growth Rate | Rule of 72 | For 12% growth, doubling time = 72/12 = 6 years |
| Remembering Plan Periods | Add 5 to start year | 12th Plan: 2012+5 = 2017 (end year) |
| RBI Governor Sequence | Alphabetical order | Reddy-Rajan-Patel-Das (R-R-P-D) |
| Fiscal Deficit % | Always < 10% of GDP | If GDP = 200 lakh cr, deficit >20 lakh cr is alarming |
| Inflation Targeting | 4±2 Rule | 4% target, 2-6% tolerance band |
Common Mistakes to Avoid
| Mistake | Why Students Make It | Correct Approach |
|---|---|---|
| Confusing GDP & GNP | Both sound similar | GDP = Domestic (within borders), GNP = National (citizens worldwide) |
| Mixing up Repo & Reverse Repo | Similar names | Repo = RBI to Banks, Reverse Repo = Banks to RBI |
| Wrong inflation calculation | Using wrong base year | Always use previous year as base: (Current-Previous)/Previous × 100 |
| Fiscal vs Revenue deficit | Similar concepts | Fiscal includes capital expenditure, revenue only current expenditure |
| Plan duration confusion | Counting inclusively | 5-year plan = 5 calendar years, not 4 (e.g., 2012-2017 = 5 years) |
Quick Revision Flashcards
| Front (Question/Term) | Back (Answer) |
|---|---|
| What is the formula for GDP? | GDP = C + I + G + (X-M) |
| Current Repo Rate (2024) | 6.50% |
| Full form of NITI Aayog | National Institution for Transforming India |
| SLR current rate | 18% |
| CAD full form | Current Account Deficit |
| 12th Plan growth target | 8% |
| Inflation target midpoint | 4% |
| Largest GDP contributor | Service Sector (54%) |
| Fiscal deficit formula | Total Expenditure - Total Revenue (excluding borrowings) |
| First Five Year Plan year | 1951 |
Topic Connections
Direct Link:
- Indian Economy connects to Current Affairs through budget announcements, RBI policy changes, and economic reforms
- Railway budget merged with general budget in 2017
Combined Questions:
- Economy + Geography (regional development plans)
- Economy + Polity (parliamentary approval for budget)
- Economy + General Science (inflation’s effect on materials)
Foundation For:
- Understanding railway finances and budget allocation
- Analyzing ticket pricing policies
- Comprehending PPP projects in railways
BETA
