UPSC NCERT Notes – Indian Economy – Indian Economy

The Union Public Service Commission (UPSC) plays a pivotal role in selecting candidates for key administrative positions within the Indian government. Aspirants preparing for the UPSC examinations delve into a vast array of subjects, with a particular focus on a comprehensive understanding of the Indian economy. The National Council of Educational Research and Training (NCERT) notes on the Indian Economy serve as an invaluable resource in this pursuit, offering a structured and insightful introduction to the economic landscape of India. These notes provide a foundation for aspirants to comprehend the intricacies of economic policies, developmental challenges, and the dynamic factors that shape India’s economic trajectory. In this context, the UPSC NCERT notes on the Indian Economy serve as an essential guide for candidates aspiring to navigate the complexities of economic issues and contribute meaningfully to the nation’s governance.

Economics, a social science, seeks to explore the optimal ways of attaining maximum benefits within the constraints of limited resources. A comprehension of economics is crucial for ensuring the highest welfare of society through the effective utilization of available resources.

Economics Defined

• The economy is basically about everything that happens with money in our country. It includes how things are made, how they’re shared, how people buy and use them, and how we all get jobs. So, it’s like the big picture of money stuff in our society and country.
• Within an economy, activity is instigated by production, utilizing natural resources, labor, and capital. The methods of production evolve in tandem with the technology employed. Economics directs its focus toward the actions and interactions of economic agents.
• The term “economics” originates from the Greek term “Oikonomos,” derived from “oikos” (house) and “nomos” (management), signifying the rules of household management. Economics, as a social science, delves into the study of economic activities to gain insights into the processes governing the production, distribution, and consumption of goods and services within an economy.
• Renowned economist Adam Smith, often referred to as the father of economics, labeled economics as the science of money in his seminal work “The Wealth of Nations,” published in AD 1776, marking the inception of classical economics.
• According to Alfred Marshall, “Economics is the study of human behavior as a relationship between ends and scarce means with alternative uses.” His influential book, “Principles of Economics” (AD 1890), further expounds on this perspective.
• Lionel Robbins asserts that “Economics is a science in which human behavior, its needs, desires, and the relations of alternative use of available resources are studied.” His principal work, “Nature and Significance of Economic Sciences” (1932), elucidates the scientific nature of economics.

Economic Branches

• Traditionally, economics has been categorized into two primary branches:

Microeconomics

• Microeconomics delves into the study of individuals, households, and factors influencing decision-making and resource allocation.
• It focuses on the intricate dynamics of supply and demand within individual markets, determining the price levels of goods and services. Microeconomics dissects the economy into distinct units, conducting detailed analyses of each unit.
• The goal of microeconomics is to uphold the equilibrium of demand and supply in the market while identifying elements such as consumption in the overall demand framework.
• Commodity determination theory (price theory), distribution theory (means price determination theory), and economic welfare theory are integral aspects studied under microeconomics, encompassing principles related to demand, production, and price determination.

Macroeconomics

• Macroeconomics explores the interdependence of regional, national, and international economies.
• It takes a holistic approach, scrutinizing the entire economy and its facets, including national income, employment, poverty, balance of payments, and inflation.
• Macroeconomics is concerned with understanding the functioning of the overall economy, examining aspects like employment, Gross Domestic Product (GDP), and inflation.
• Principles related to national income, employment, currency, general price levels, economic development, and international trade are exclusive to macroeconomics.
• The credit for establishing macroeconomics as a distinct branch goes to the British economist John Maynard Keynes.
• In his seminal work, “The General Theory of Employment, Interest, and Money,” Keynes proposed a solution to the recession of the 1930s, asserting that the resolution lies within the macroeconomy.

Difference between Microeconomics and Macroeconomics

Microeconomics	Macroeconomics
Studies the behavior of an individual (single units).	Studies the behavior of the whole economy.
Discusses the ups and downs of a firm, industry, and unit.	Discusses and explains the entire economic recession.
Deals with individual economic variables.	Deals with aggregate economic variables.
Useful for a particular place.	Deals with the whole economy (both national and international).
Helpful in determining the price of a product alone.	Maintains stability in the general price level and overall production.
Deals with factors of production like land, labor, capital, and entrepreneurs within the economy.	Resolves major economic problems like inflation, deflation, reflation, unemployment, and poverty as a whole.

Welfare Economics

• Welfare Economics is the branch of economics dedicated to studying the interrelationship between economic activities and social welfare. It employs microeconomics techniques to assess human welfare on a comprehensive scale. 
• The primary focus lies in achieving the optimal allocation of resources and goods among individuals, emphasizing maximum allocation to meet societal welfare goals.
• This economic discipline places special emphasis on income distribution and the well-being of individuals. 
• It goes beyond that to stress the efficient distribution of resources among producers, consumers, and employers, all geared towards achieving broader social welfare objectives.

Economy

• The economy represents the practical manifestation of economics.
• It serves as the system or arrangement by which people in a specific area or country make a living through economic activities.
• In economics, the principles and rules governing economic activities are delineated, while in Welfare Economics, the emphasis is on evaluating the impact of these activities on social well-being.
• In the application of economic principles, the true test occurs within the economy itself. The classification of an economy is often based on the various economic activities it encompasses. 
• The fundamental question of how to optimize the utilization of a country’s resources for the well-being of its people traces back to the controversial discussions initiated by Adam Smith in his book “The Wealth of Nations” (1776).

Types of Economy Based on the Role of the Government:

• Liberal/Capitalist Economy: In a liberal economy, the state minimally controls economic activities, such as capital investment, means of production, and monetary exchange. 
• The private sector is more influential and independent, operating on the principles of laissez-faire or non-intervention, as advocated by Adam Smith. Examples include the economies of the USA, UK, and France.
• State/Socialist Economy: In a socialist economy, the government controls and directs all economic activities, including production, supply, and pricing. 
• Market forces are regulated, and the goal is public welfare with equal distribution of goods and services to all citizens. This system, often associated with Karl Marx’s ideas, is also known as a centrally planned economy. Examples include Cuba and North Korea.
• Mixed Economy: Proposed by economist John Maynard Keynes in response to the Great Depression of 1929, the mixed economy incorporates features of both socialist and liberal economies. In this system, both private and public sectors contribute, with the private sector operating under the umbrella of the public sector.
• Countries like India adopt a mixed economy, where the government balances individual business freedom and the welfare of deprived and backward sections of society.

Reasons for Adopting Mixed Economy in India:

• Utilizing capital, technical expertise, and management capabilities from the private sector.
• Reducing the burden on the public sector, enabling governments to develop infrastructure and implement social welfare programs.
• Providing quality goods and services to citizens.
• Accelerating economic development.
• Addressing issues such as poverty and unemployment.
• Aligning the Indian economy with global competition.

Difference between Capitalist and Mixed Economy

Aspect	Centrally Planned Economy/State Economy/Socialist Economy	Capitalist Economy/Market Economy	Mixed Economy
Control of Economic Activities	The government controls production, consumption, investment, and exchange	Market forces control economic activities	Market forces generally control activities, but the government regulates and intervenes
Economic Decision-Making	The government makes decisions for social welfare	Decisions made to maximize profit	Decisions for both maximum profit and social welfare
Ownership of Resources	The government controls or owns most resources	The private sector controls most resources	Both public and private sectors have control over resources
Price Determination	The government sets the selling price of goods	The market determines prices based on demand and supply	The market determines prices, but the government regulates essential goods’ prices
Consumer Dominance	Supremacy of the consumer is obstructed as the government decides what goods to produce	Production is based on consumer choice	Consumer dominates, but the government ensures essential goods’ supply through regulation
Economic Activities in Sectors	Active in the public sector	Active in the private sector and public sector	Active in both private and public sectors
The objective of Economic Decisions	Aimed at social welfare	Aimed at maximizing profit	Aimed at both maximizing profit and social welfare
Role of Government	A central role in decision-making and resource ownership	Limited role in decision-making, focuses on maintaining competition and enforcing laws	Regulates and intervenes to ensure a balance between market forces and social welfare

Based on Different Stages of Development

• Countries are classified into different economies based on various stages of development.

Developed Economy:

• Characterized by high levels of industrialization and a predominant tertiary sector.
• Exhibits high national income, per capita income, and living standards.
• Abundance of natural, human, and physical resources optimized and utilized.
• The World Bank defines a developed economy as one with a per capita gross national income of $13,205 or more, including countries like America, Britain, Switzerland, and Japan.

Developing Economy:

• Countries striving for higher economic growth.
• Faces challenges in industrialization, social development, and human rights.
• Encourages efforts to achieve a higher level of economic growth.
• Examples include Brazil, China, India, and South Africa.

Underdeveloped Economy:

• Characterized by underutilized human resources and limited natural resources.
• Low levels of income, savings, and capital formation due to various limitations.
• Countries with low economic development and living standards fall into this category.
• Per capita Gross National Income is $1,086 or less.
• Examples include Somalia, Burundi, Chad, and Niger.

Least Developed Economy:

Countries meeting specific criteria, including:

• Per capita Gross National Income less than US $1,025 for three consecutive years.

High levels of poverty.

• This category includes nations like Somalia, Burundi, Chad, and Niger, based on the United Nations’ Development Index.
• Addressing Weak Human Resources involves prioritizing nutrition, health, education, and adult education.
• Economic Vulnerability is characterized by instability in agricultural production, fluctuations in the export of goods and services, reliance on non-traditional activities, low levels of exports, and population displacement due to natural calamities.

As of the Classification of the World’s Economy in 2022:

• The World Bank annually ranks economies in July based on Per Capita Gross National Income.
• The World Development Report for 2023 classifies the global economy into the following groups:
  • Low-Income Group: $1,085 or less
  • Lower Middle-Income Group: $1,086-$4,255
  • Upper Middle-Income Group: $4,256-$13,205
  • High-Income Group: $13,205 and above
• Notable changes in country classifications include:
  • Nepal moving from the low-income group to the lower-middle-income group.
  • Mauritius transitioning from the upper-middle-income group to the high-income group.
  • Sri Lanka shifting from the upper-middle class to the lower-middle-income group.
  • Indonesia progressing from the lower-middle-income group to the upper-middle-income group.

Difference between Developed Countries and Developing Countries

Basis for Comparison	Developed Countries	Developing Countries
Meaning	A country with high industrialization and a high per capita income.	A country with slow industrialization and a low per capita income.
Unemployment and Poverty Rates	Comparatively lower unemployment and poverty rates.	Generally higher unemployment and poverty rates.
Infant Mortality Rate	Generally lower infant mortality rate, with low death and birth rates and high life expectancy.	Higher infant mortality rate, with high death and birth rates and low life expectancy.
Living Conditions	Good living conditions.	Moderate living conditions.
Revenue from Growth	Generates more revenue from the industrial sector.	Relies on the service sector for revenue.
Standard of Living	High standard of living.	Lower standard of living.
Distribution of Income	Equal distribution of income.	Unequal distribution of income.
Factors of Production	Effectively utilized factors of production.	Ineffectively utilized factors of production.
Growth	High industrial growth.	Relies on developed countries for growth.

Classification Based on the Role of Different Sectors

• Economies can be classified based on the role of different sectors:

Agricultural Economy:

• When the contribution of the primary sector (agriculture and allied sectors) is 50% or more in the Gross Domestic Product (GDP).
• People in the same proportion depend on the primary sector for their livelihood.
• If adopted in this form, it is called an agrarian economy. India was identified as an agricultural economy at the time of independence.

Industrial Economy:

• When the contribution of the industrial sector in the GDP is 50% or more.
• People depend on this sector for their livelihood in the same proportion.
• China is a notable example of an industrial economy.

Service Economy:

• When the contribution of the service or tertiary sector in the GDP is 50% or more.
• People in the same proportion adopt this sector for employment and livelihood.
• Developed countries like America, Britain, and Japan are prime examples of service economies.
• Classification based on Global Interrelationships

Economies can also be classified based on global interrelationships:

• Based on global interrelationships, the economies are as follows:
• Open Economy: Characterized by the influence of liberal and private economic elements.
  • Minimum restrictions on import-export.
  • Examples include Hong Kong and Singapore, where countries are free to trade and invest in goods and services with the rest of the world.
  • This economy maintains robust economic ties with other global economies, wherein external transactions impact production, consumption, and capital formation. Open economies, characterized by minimal restrictions on import and export, are prevalent in the modern world.
• On the contrary, a closed economy lacks any connection with the external economy, resulting in zero import-export activities and a negligible role for the private sector. Examples include North Korea. In such economies, trade in goods with other countries occurs, but freedom to engage in services trade and investment is restricted.

Difference between Closed and Open Economy

Aspect	Closed Economy	Open Economy
Economic Relations with the Rest of the World	Does not have economic relations with other countries.	Has economic relations with other countries.
Impact of International Fluctuations	Activities outside the territory do not affect economic activities.	Economic activities are affected by international fluctuations.
National Income vs. Domestic Income	No difference between national income and domestic income.	Size of national income may be greater or smaller than domestic income.
Nature of the Economy	Imaginary economy.	Realistic economy.

Classification Based on Planning:

Based on planning, economies are as follows:

Planned Economy:

• Countries with a planned economy formulate plans and strategies for achieving economic growth and development.
• Planning is conducted to define goals, and strategies are devised to accomplish them.
• Example: In India, the Planning Commission’s five-year plans, the NITI Aayog’s 15-year vision, and the current 7-year strategy with a 3-year agenda exemplify planned economy features.

Unplanned Economy:

• No long-term strategies are adopted for economic development.
• Goals for economic growth and development are not pre-determined.

Classification Based on Dependency:

Dependent Economy:

• An economy relying on another for its needs is termed a dependent economy.
• Typically lacks capital, resources, and advanced production technology.

Interdependent Economy:

• Combines self-sufficiency in some aspects with dependency on other countries in other aspects.
• Countries in this category possess resources but depend on external sources for efficient resource utilization and advanced technology.

Self-sufficient Economy:

• An economy capable of producing goods and services for its own needs.
• Rich in terms of capital and resources, capable of meeting the majority of citizen needs.

Circular Economy

• This economic model operates on an alternative system, diverging from the linear economy, where resources are used with maximum efficiency.
• Resource efficiency, defined as the effective utilization of resources amid scarcity, is a focal point. The approach emphasizes resource efficiency through methods such as reuse, recycling, reconstruction, and renewal.
• With the current surge in population, urbanization, and consumerist culture, natural resources are under heightened pressure. In this context, the circular economy becomes pivotal, playing a crucial role in enhancing economic growth.
• Achieving the most efficient use of resources is a key aspect of sustainable development, contributing to economic, social, and environmental friendliness.

Gig Economy Model

• The gig economy is a distinctive economic model that replaces traditional permanent employment with freelancers, non-permanent staff, and contract-based temporary jobs. 
• In this dynamic system, individuals’ income is determined by the quantity and quality of their work, with companies hiring qualified personnel as per their specific needs. 
• The gig economy operates as an open system, offering temporary employment options instead of permanent positions and contracting individuals with specific expertise for a defined period.
• In the Indian context, the gig economy extends from the informal sector, lacking social security and insurance benefits for its workforce. Success, favorable work opportunities, and decent salaries in this economy hinge on individual quality and performance. 
• In the era of digitalization, changes like employment have propelled the significance of the gig economy.

Growth of the Gig Economy in India

• The rapid digitalization in India is a primary driver behind the expansion of the gig economy, introducing flexibility in employment and enabling work without geographical constraints. 
• Companies now offer fixed-term or temporary employment options, providing opportunities for professionals to choose employment that aligns with their qualifications.
• Seen as an alternative to traditional permanent employment, the gig economy has gained momentum due to the persistent scarcity of jobs in the formal sector. Rising unemployment rates and a decline in government jobs have further fueled the demand for incremental jobs such as part-time or freelance positions, contributing to the gig economy’s growth.
• NITI Aayog’s report titled “India’s Booming Gig and Platform Economy” indicates the substantial rise in gig workers, estimating 7.7 million in the present and projecting an increase to 23.5 million by 2029-30, constituting 1.5% of the total workforce in India.

Sectors of Indian Economy

• Traditionally, economies are categorized into three sectors based on the nature of the job, working conditions, and ownership:

(i) Primary Sector:

• This sector involves the extraction or harvesting of products from the Earth, including agriculture, mining, forestry, fishing, and quarrying.
• The primary sector, also known as the agriculture-related sector, encompasses the production of raw materials and basic foods.

(ii) Secondary Sector:

• The secondary sector focuses on the production of finished goods, incorporating manufacturing, processing, and construction activities.
• Activities such as metalworking, automobile manufacturing, textile production, and shipbuilding fall under this sector.
• In the course of development, economies often experience a phase where the secondary sector becomes the largest contributor to production and employment, overshadowing the primary sector’s significance.
• India stands out as an anomaly, bypassing the conventional trajectory of enhancing manufacturing capabilities before delving into services sector development.

(iii) Tertiary Sector

• Termed the services sector, the tertiary sector furnishes services to the general populace and businesses. In advanced developed economies, the tertiary sector takes precedence as the largest contributor to both production and employment. 
• While sometimes the quaternary and quinary sectors are identified separately, they can also be considered integral parts of the services sector. 
• Activities encompassed by the tertiary sector include transportation, storage, communication, banking, and retail, earning it the moniker of the service sector.

Other Sectors of the Economy

• Two additional sectors round out the economic landscape:

Quaternary Sector

• Encompassing companies engaged in intellectual pursuits, the quaternary sector centers around intellectual services such as technological advancement and innovation. 
• Notable activities within this sector involve research and development, culture, information technology, consulting, financial planning, and education.

Quinary Sector

• The quinary sector focuses on businesses and non-profit organizations providing essential services like public services, education, and healthcare.
• Occupied by top officials in government, media, and universities, the quinary sector is a service-based extension of the tertiary sector. 
• Job roles in the quinary sector include positions in federal, state, and local governments.

Classification of Sector of Economy based on Working Conditions

Classification of Sector of Economy based on Working Conditions

Organized Sector

– Symmetrical terms are fixed.

– Regular employees have assured work.

– Registered by the government.

– Regular, fixed working hours; overtime paid by the employer.

– Job security and employee benefits, including medical benefits.

– Examples: Government employees, registered industrial workers, etc.

Unorganized Sector

– Small and scattered units, largely outside government control.

– Not registered by the government.

– Low-paid, often irregular jobs.

– Employment not secure; can be terminated without reason.

– No worker benefits available.

– Examples: Shopkeeping, farming, domestic work, etc.

Classification of Sectors of Economy on the Basis of Ownership

Public Sectors

– Owned, controlled, and managed by the government or state-run bodies.

– Aims for a balance between wealth and economy.

– Funding from public revenue (tax, duty, fine, etc.).

– Examples: Army, police, healthcare, banking, etc.

Private Sectors

– Major objective: Profit generation.

– Funded by loans, debentures, and shares issuance.

– Examples: Information technology, manufacturing, pharmaceuticals, etc.

Market

• Market, in essence, denotes a system where buyers and sellers interact. The pricing and production scale of goods is contingent upon the specific market structure within which they are manufactured, purchased, and sold.
• This organized structure plays a pivotal role in shaping price levels. Market classification is undertaken based on distinct conditions, each condition contributing to varying pricing dynamics.

Various Forms/Types of Market

• Different forms or different types of markets are found, whose details are as follows

Monopoly Market

• Derived from the Greek words “monos” and “polus,” meaning alone and seller, respectively, a monopoly market exists when an individual or organization has significant control over a product or service, dictating terms and prices according to their preferences.

Main Features of Monopoly Market

• Single seller, multiple buyers, establishing the seller’s monopoly.
• Lack of substitutes or alternatives due to the sole seller.
• Monopolist determines prices with restricted entry for new firms, aiming for maximum profit.
• Generally high prices leading to a negative slope in demand and average income curves.
• To boost sales, the monopolist may need to reduce prices, resulting in a negative slope of the marginal revenue curve.

Monopolistic Competition Market

• In monopolistic competition, sellers offer differentiated goods that aren’t perfect substitutes for each other.
• Each seller has a monopoly on their product but faces competition with imperfect substitutes, creating a quasi-monopoly situation.

Characteristics of a Monopolistic Competitive Market

• Numerous vendors with differentiated, close substitute goods.
• Free entry and exit of firms.
• Presence of advertising and selling costs.
• Downward-sloping demand curve due to price adjustments for increased sales.
• Negative slopes in average revenue and marginal revenue curves.

Oligopoly Market

• An oligopoly is a form of imperfect competition with fewer firms producing or selling a commodity. When the number of producers or sellers ranges from two to ten, it is termed oligopoly.
• If the goods are identical, it is a perfect oligopoly, and if they are differentiated but close substitutes, it is an imperfect oligopoly.

Salient Features of the Oligopoly Market

• Interdependence among sellers.
• Importance of advertising and selling costs.
• Limited cost control by firms.
• Natural uncertainty in the demand curve.
• A small number of vendors with interdependence in decision-making.

Duopoly Market

• In a duopoly market, only two firms operate.
• Decisions to change prices or output quantities require careful consideration due to mutual dependence.
• The main features include only two firms, mutual dependence, and the presence of price stability.
• Both firms typically produce the same product, with negative slopes in demand, average cost, and marginal cost curves.

Perfectly Competitive Market

• A part of the competitive market, where competition refers to the market structure’s competitive nature.
• Market structure is determined by a firm’s power to influence prices; less power means a more competitive market.
• Perfect competition occurs when firms have zero power to influence market prices.
• Price is determined by demand and supply.

Salient Features of a Perfectly Competitive Market

• A large number of buyers and sellers.
• Complete information for buyers and sellers.
• Uniform pricing for similar items.
• Free entry and exit of firms.
• Zero transportation and production costs.
• Complete mobility of goods and factors of production.
• Perfectly elastic demand for the product.

Indian Economy: Size and Trends

• India is the fifth-largest economy globally, following the USA, China, Japan, and Germany based on GDP.
• India is poised to become the third-largest economy globally by 2029, considering Purchasing Power Parity.
• India was the world’s largest FDI recipient in 2021, receiving the highest-ever annual FDI of US$ 84,835 million in FY 2021-22.
• Major investors in FDI include Singapore, America, Mauritius, UAE, Netherlands, and Switzerland.

Characteristics of the Indian Economy

• India is a lower-middle-income developing economy, expected to enter the middle-income category due to rapid GDP growth.
• Low per capita income, recorded at $70 in 2021, with a majority engaged in the primary sector.
• The majority of the population, 48.9%, is engaged in agriculture, contributing 18.8% to national income.

Employment Challenge:

• The issue of unemployment and underemployment in India encompasses both quantitative and qualitative employment deficiencies. 
• The per capita availability of capital is notably low, hindering economic development. This scarcity is exacerbated by excessive expenditures on health, education, social security, and welfare, diverting resources away from economic growth.

Low Standard of Living:

• A substantial portion of the population struggles to maintain a decent standard of living, lacking access to balanced daily meals.
• Approximately 29.5% of the population still lives below the poverty line.

Economic Slowdown:

• While India’s economy experienced rapid growth, surpassing China at one point, the years 2018-19, 2019-20, and 2020-21 witnessed a slowdown.
• GDP and Per Capita Income: As per the National Statistical Office (NSO) report, India’s GDP at constant prices during the financial year 2021-22 was estimated at $92,583, slightly increasing to $98,118 in 2022-23.
• Micro-economic Stability: Micro-economic stability indicators suggest that the Indian economy is well-positioned to tackle challenges in 2022-23, indicating continuous growth.
• Infrastructure Development: Recognizing the need for sustained growth, India has initiated the Infrastructure Pipeline 2020-2025, focusing on comprehensive infrastructure development.

Categories of Key Vocabulary Related to the Economy

Terms	Description
Public Goods	Goods accessible to all, used collectively, with no decrease in use for one person when used by another (e.g., air, water).
Private Goods	Goods or services available only to those with purchasing power through the market (e.g., car, diamond necklace).
Local Goods	Items beneficial to local people, such as a village Dharamshala.
Substitute Goods	Goods are used in place of each other, with a positive or negative effect on the demand for one, when the price of the other changes (e.g., tea, coffee, sugar, and jaggery).
Merit Items	Essential personal items arranged by the government for a particular community or class through the budget, such as education, health, and housing for the poor.
Mixed Goods	Goods with characteristics of both public and private goods (e.g., roads, hospitals) are built on a Public-Private Partnership (PPP) model.
Complementary Goods	Goods are used together to fulfill a purpose; an increase in the price of one decreases the demand for the other or has the opposite effect (e.g., pen and ink, car and petrol).
Giffen Goods	Inferior goods on which consumers spend a significant part of their income; the law of demand does not apply, and an increase in price increases their demand (e.g., goods of inferior quality).
Inferior Goods	Goods with an inverse relationship between demand and consumer income; an increase in income decreases demand (e.g., goods whose demand decreases when consumer income increases).

Prelims Facts

• A fundamental feature of the capitalist economy is private/personal ownership of the means of production. [MPPSC (Pre) 2014]
• Unemployment in India: Mostly structural. [UKPSC (Pre) 2012]
• Ensures the interest of the State and Person. [UP UDA/LDA (Pre) 2013]
• Type of economy: Mixed economy. [JPSC (Pre) 2010, BPSC (Pre) 2015]
• The oldest large-scale industry in India is the cotton Industry. [UKPSC (Pre) 2003]
• Exchange rates are calculated by comparing prices of similar goods and services in different countries: Purchasing Power Parity (PPP) [IAS (Pre) 2073]
• Ratio by which the mean income of the poor falls below the Poverty Line: Total Poverty Gap (TPG) [MPSC (Pre) 2022]
• Economists defining and supporting the Net National Product: Adam Smith, Ricardo, J.K. Galbraith. [IAS (Pre) 199]
• The sector of the Indian economy that has seen significant development in the last decade: Tertiary Sector. [UKPSC (Pre) 2006]
• Value of the slope of a normal demand curve: Negative. [UKPSC (Pre) 2006]
• Transport and Communication sector: Falls under the Tertiary Sector. [UPPSC (Mains) 2004]
• The rate at which a consumer is ready to substitute one good with another without changing satisfaction: Marginal rate of substitution. [RAS/RTS (Pre) 2013]
• Sectors related to agriculture and services: Primary and tertiary sectors. [UP RO/ARO (Mains) 2016]
• Economists propounding the purely monetary theory of the business cycle: R.G. Hawtrey. [UKPSC (Pre) 2012]
• Transportation mode with the highest elasticity: Road transport. [BPSC (Pre) 2017]
• The market for soap as an example of: Monopolistic Competition. [MPPSC (Pre) 1994]

UPSC NCERT Practice Questions

1. Consider the following statements regarding macroeconomics.

1. It is concerned with how the overall economy works.

2. It studies employment, gross domestic product and inflation.

Which of the statements) given above is/are correct?

(a) Only 1

(b) Only 2

(c) Both 1 and 2

(d) Neither 1 nor 2

2. The Indian economy is characterized by

1. pre-dominance of agriculture

2. pre-dominance of industry

3. low per capita income

4. massive unemployment

(a 1 and 2

(b) 1, 2 and 3

(c) 2, 3 and 4

(d) 1, 3 and 4

3. Mixed economy means IAS (Mains) 2013

(a) where agriculture and industry are given equal importance.

(b) where public sector and private sector co-exist in the national economy.

(c) where the process of globalization is affected by a heavy dose of Swadeshi in the national economy.

(d) where the Centre and States are equal partners in economic planning and development.

4. Which of the following is a typical example of monopolistic competition?

(a) Retail Vegetable Market

(b) Market for Soap

(c) Indian Railway

(d) Labour Market for Software Engineers

5. Consider the following statements: IAS (Pre) 2013

1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of similar goods and services in different countries.

2. India is the sixth largest economy in the world in terms of PPP dollars.

Which of the statement(s) given above is/are correct?

(b) Only 2

(a) Only 1

(c) Both 1 and 2

(d) Neither 1 nor 2

6. Which of the following sectors of the economy are related to the activities of agriculture and services?

(a) Primary and tertiary respectively

(b) Primary and secondary respectively

(c) Tertiary and secondary respectively

(d) Secondary and quartile respectively

Which one of the following types of economic activities pre-dominate in all rural settlements?

(a) Primary

(b) Secondary

(c) Tertiary

(d) Quartile

8. Consider the following statements regarding the secondary sector.

1. Most economies in their process of development go through the middle phase, where the secondary sector becomes the largest sector of the economy.

2. India is an exception, where we have directly moved to service sector development without first improving the manufacturing capabilities.

Which of the statements) given above is/are correct?

(a) Only 1

(b) Only 2

(c) Both 1 and 2

(d) Neither 1 nor 2

9. Which tertiary regions are included in India?

1. Trade and transport

2. Finance and real estate

3. Forestry and fisheries

Select the correct answer by using the codes given below,

(a) Only 1

(b) 1 and 2

(c) 2 and 3 

(d) Only3

10. Which sector of the Indian economy has had significant development during the last decade?

(a) Primary sector

(b) Secondary sector

(c) Tertiary sector

(d) Mining sector

11. Consider the following statements regarding the tertiary sector.

1. In the advanced developed economies, the tertiary sector is the largest in terms of production and employment.

2. Quaternary and quinary are not parts of the service sector.

Which of the statements) given above is/are correct?

(a) Only 1

(b) Only 2

(c) Both 1 and 2

(d) Neither 1 nor 2

12. Which of the following features indicates that the Indian economy is in a developing Fitefarns) 2017

1. Occupation is mainly agriculture

2. Disguised unemployment

3. Poor quality of human capital

4. High per capita intake of proteins

Select the correct answer by using the codes given below.

(a) 1 and 2

(b) 1 and 4

(c) 2 and 3

(d) 1,2 and 3

13. Indian model of development ensures the interest of

(a) the person

(b) the state

(c) Both state and person

(d) None of the above

14. Which of the following statements are correct concerning public sector work jp Ledire? 2019

1. Providing public utility resources.

2. To create social and economic overhead capital.

3. To ensure balanced regional and regional development.

4. Advancing egalitarian goals.

Codes

(a) 1, 2 and 3

(c) 1, 3 and 4

(b) 2, 3 and 4

(d) All of these

Know Right Answer

1. (c)

2. (d)

3. (b)

4. (b)

5. (a)

6. (a)

7. (a)

8. (c)

9. (b)

10. (c)
11. (a)

12.(d)

13. (c)

14. (d)

Frequently Asked Questions (FAQs)

Q1: Why is it important to study Indian Economy for the UPSC exam?

A1: Studying Indian Economy is crucial for the UPSC exam because it forms a significant portion of the General Studies Paper 3. A deep understanding of the Indian economic system, its challenges, and policies is essential for aspirants to analyze and respond effectively to questions related to economic development, planning, and various government initiatives.

Q2: How can NCERT notes on the Indian Economy serve as a valuable resource for UPSC preparation?

A2: NCERT notes on the Indian Economy provide a solid foundation for UPSC aspirants. The content is structured to cover the fundamental concepts, historical context, and key economic indicators. By studying these notes, aspirants can grasp the basics, which is essential for answering both conceptual and analytical questions in the UPSC examination. Moreover, the language used in NCERT books is reader-friendly, making complex economic concepts more accessible.

Q3: What are some key topics covered in the NCERT notes on Indian Economy: An Introduction?

A3: The NCERT notes on Indian Economy: An Introduction cover a range of crucial topics. Some of the key areas include:

• Economic Development and Planning in India
• Poverty and Unemployment
• Agriculture and Allied Sectors
• Industrial and Service Sectors
• Infrastructure and Economic Reforms
• Monetary and Fiscal Policies
• International Trade and Balance of Payments

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