Economy - GS Paper 3

UPSC Indian Economy Module primarily focused on General Studies Paper III and Prelims. The module integrates core economic concepts with the dynamic realities of the Indian economy, emphasizing government policies, planning, and sector-specific challenges.

Phase I: Foundational Concepts & National Income 📊

Focus: Defining the basic terms and understanding how the economy is measured.

1. Basics of Economics

• Sectors of Economy: Primary, Secondary, Tertiary, Quaternary, and Quinary.

• Types of Economies: Capitalist, Socialist, Mixed Economy (India's Model).

• Micro vs. Macroeconomics: The distinction and focus areas.

• Capital, Stock & Flow: Understanding the difference (e.g., Wealth is a stock, Income is a flow).

2. National Income Accounting

• Key Concepts: GDP, GNP, NDP, NNP (at Factor Cost and Market Price).

• Methods of Calculation: Expenditure, Income, and Value-Added Method.

• New Base Year: Understanding the shift to Base Year 2011-12 and the use of Gross Value Added (GVA).

• Development Indicators: Economic Growth vs. Economic Development; HDI, GNH, and Green GDP.

Phase II: Macroeconomic Policy Tools 🏦

Focus: The instruments used by the government and RBI to manage the economy.

1. Inflation & Unemployment

• Inflation: Causes (Demand-Pull, Cost-Push), Types (Headline vs. Core, Stagflation, Skewflation), and effects.

• Measurement: WPI (Wholesale Price Index) vs. CPI (Consumer Price Index) and the GDP Deflator.

• Unemployment: Types (Cyclical, Frictional, Structural, Disguised, Open) and the Phillips Curve concept.

2. Monetary Policy (RBI)

• Monetary Policy Committee (MPC): Composition, mandate, and the Inflation Targeting framework.

• Tools: Quantitative (Repo Rate, Reverse Repo Rate, CRR, SLR, OMO, MSF) and Qualitative instruments.

• Money Supply: Measures of money supply (M1, M2, M3, M4); Money Multiplier.

3. Fiscal Policy (Government)

• Budgeting: Components (Revenue vs. Capital), Types (Gender Budget, Outcome Budget).

• Deficits: Revenue Deficit, Fiscal Deficit, Primary Deficit, and their implications.

• Taxation: Direct vs. Indirect Taxes; GST (Goods and Services Tax) structure and GST Council.

• FRBM Act (Fiscal Responsibility and Budget Management Act): Objectives and current status.

Phase III: Financial Sector & External Sector 💵

1. Banking and Finance

• Commercial Banking: Types of banks; Narasimham Committee Reforms (I & II).

• Non-Performing Assets (NPA): Causes, effects, and solutions (IBC, SARFAESI Act).

• Financial Inclusion: PMJDY (Jan Dhan Yojana), MUDRA, Payment Banks, Small Finance Banks.

• Financial Market: Money Market (Treasury Bills) vs. Capital Market (SEBI, Stock Exchanges).

2. External Sector

• Balance of Payments (BOP): Current Account vs. Capital Account; Deficit and Convertibility.

• Foreign Capital: FDI (Foreign Direct Investment) vs. FPI (Foreign Portfolio Investment); ECBs (External Commercial Borrowings).

• Exchange Rate: Fixed vs. Floating; NEER vs. REER; Role of FEMA (Foreign Exchange Management Act).

• Foreign Trade Policy: WTO negotiations (TRIPS, TRIMS, GATS); Regional Trade Agreements.

Phase IV: Sectoral Issues & Reforms 🌾

Focus: Understanding the structure, performance, and challenges of key sectors.

1. Agriculture and Food Management

• Subsidies: Direct and Indirect Farm Subsidies; WTO issues related to AMS (Aggregate Measurement of Support).

• MSP (Minimum Support Price): Calculation (A2+FL, C2); Procurement and PDS (Public Distribution System).

• Land Reforms: Zamindari Abolition, Tenancy Reforms, Land Ceiling.

• Marketing: e-NAM, Model APMC Act.

2. Industry and Infrastructure

• Industrial Policy: Evolution, especially post-LPG Reforms (1991).

• MSME Sector: Definition, challenges, and government support schemes.

• Disinvestment & Privatization: Current policy, objectives, and proceeds utilization.

• Infrastructure: National Infrastructure Pipeline (NIP), PPP Models, Core Sectors.

• Schemes: Make in India, PLI (Production Linked Incentive Scheme).

3. Services Sector

• Contribution: Growth drivers; role of IT/ITES, Tourism, and Logistics.

• Challenges: Skill development and job creation in high-value services.

Phase V: Development & Contemporary Challenges 📈

Focus: Addressing the Mains-centric themes of poverty, inclusion, and sustainability.

• Poverty & Inequality: Measurement of Poverty (Committees); Gini Coefficient and Lorenz Curve.

• Unemployment: Types, causes, and employment generation programs.

• Inclusive Growth: Definition, pillars, and issues arising from non-inclusive growth.

• Government Schemes: Detailed study of major schemes (PM-KISAN, Ayushman Bharat, PM SVANidhi, PM Vishwakarma) covering objective, features, and target groups.

• Sustainability: Green GDP, Climate Finance, and the concept of a Circular Economy.