Economy (PRELIMS WriteToBeIAS.com By CA RAHUL KUMAR ......Tariff and Non-Tariff Barriers Inward...

Economy (PRELIMS

EXCLUSIVE) 2020-21

WriteToBeIAS.com By CA RAHUL KUMAR

www.writetobeias.com Email : [email protected] 011-41561002 ONLINE CLASSES Economy (Prelims Exclusive) 2020-21

ECONOMY (PRELIMS EXCLUSIVE)

by CA Rahul Kumar

“Solve 90% Prelims (Economy) with 100% accuracy with minimum efforts”

INDEX OF THIS BROUCHER

Sr No Particulars Page No

1 Course deliverables 01

2 Classroom approach 01

3 Sources Covered 02

4 Course logistics 02

5 Admission procedure & Fee Information 02

6 About the Faculty 03

7 500+ prelims topics list 03

8 Prelims Sample Notes 19

Dear Aspirants, We are launching “Economy – Prelims Exclusive” for IAS 2020 & 2021

1) WHAT WILL BE THE DELIVERABLES ?

• Weekly four to five Online recorded Video classes on your personal computer dashboard and

Android and Iphone app

• Colour coded notes for fast revision

• One to one & live doubt discussion with faculty over phone /whatsapp (Pre defined Regular Time

slots will be given for one to one and conference calls). Separate doubt sessions will also be

conducted live for all

• Pre-defined topic wise lecture plan

• Complete, relevant and effective printed & soft copy study material

• Mindmaps

• 5 practice section wise tests and 2 comprehensive tests at par with UPSC level – THROUGH

ONLINE PRACTICE PLATFORM

• Previous year question analysis

• Additional sessions may be held, if needed

2) APPROACH DURING CLASSROOM

• Concepts evolution from basic to applied level for every topic

• Maximum discussion and negligible dictation

http://www.writetobeias.com/

mailto:[email protected]

Economy (PRELIMS

EXCLUSIVE) 2020-21



• Conceptual Interlinking of topics

• Answer to most probable MCQs for Prelims exam

• From conventional till recent updates on the topic

• No need to refer any other reference book

• You will remember lots of things from the lecture itself and will be able to deliver in the exam

3) SOURCES COVERED IN THE COURSE:

• NCERTs – 11th & 12th

• Ramesh Singh, Sanjeev Verma, Shankar Ganesh

• Kaushik Basu, NCERTs , Uma Kapila, Mishra & Puri

• Updated current affairs since the last 3 years ( from the Hindu Indian Express, Business Standard and

PIB)

• Coverage of 2 years economic survey and budget, Yojana & Kurukshetra

• Economic Survey 2020 and Budget will be covered as and when they are released

• The Hindu, Indian Express, PIB, Business Standard

4) COURSE LOGISTICS :

COURSE

NAME

DETAILS

Deliverables 500+ Prelims Topics from entire syllabus

No of

lectures

80+ Sessions of 1 Hr each

Weekly

lectures

4 to 6 sessions a week

Target

Aspirants

Appearing in IAS 2020 and IAS 2021 (Updations till Prelims

2021 will be provided for students even after completion of the

course)

Relevant for Who want to be 100% confident in Economy - Both fresher and

Senior players

Fee Rs 3100 (GST @ 18% is included in above)

NOTE – PRICE HAS BEEN KEPT LOW TO REACH OUT TO MAXIMUM STUDENTS. NO COMPROMISE IN THE QUALITY OF THE COURSE. REAL WORTH OF THE COURSE IS Rs 15,000



Economy (PRELIMS

EXCLUSIVE) 2020-21



5) ADMISSION PROCEDURE

Click on the link given below and pay.

https://www.writetobeias.com/coursesdetails/129

You will get course option here.

Click on “Enroll Now”

Once you pay, within 24 Hrs you will get your e-learning platform login password separately

You will get recorded lectures and soft copy materials in your dashboard as per lecture plan

Video lectures will also be available on android app/iphone app (Link of such apps we will send to your

after admission)

For any problem Please drop an email at [email protected] or Whatsapp/Call at 9811599537

6) About the faculty – CA RAHUL KUMAR

Mr Rahul Kumar is a Chartered Accountant. He appeared in UPSC Interviews thrice. He has been a faculty

in Economy (Prelims-cum-Mains) and GS 3 Mains in famous Delhi civil Institutes for many years. Lecture

discussion and study material will reflect his experience. He has experience of working in government

organisations for more than 8 years.

He has deep interest & expertise in Indian economy, agriculture development and environmental & internal

security issues.

You can connect with him over WhatsApp at 9045716803 or drop an email at [email protected]

for any query/clarification regarding the course.

7) 500+ PRELIMS TOPICS LIST – TO BE COEVERD IN CLASS

LIST OF 500 PRELIMS EXCLUSIVE TOPICS TO BE COVERED In addition to these topics, we will cover followings along with relevant chapters

1) Previous Year Questions

2) Practice Mock MCQs

3) Economic Survey of 3 latest Years

4) Current Affairs till Mains 2021

(Ch-1) Basic concepts in Economy

STATIC/CONECPTUEL CURRENT AFFAIRS



https://www.writetobeias.com/coursesdetails/129



Economy (PRELIMS

EXCLUSIVE) 2020-21



Meaning of economy Middle Income Trap

Economy vs Economics Circular Economy

Macro Vs Micro Economy Nobel Prize Winners Work

Sectors of economy Cyclic & Structural slowdown

Basic Activities in an economy—Production,

Consumption, and Capital Formation

Keynesian theory of Macro Economics

Five Important Types of Economy

Open vs Closed economy

Types of Goods

Central Problems of an economy

(Ch-2) ECONOMIC GROWTH & DEVELOPMENT


Economic Growth – Meaning, Aims,

Calculation, Real vs Nominal

Better measure of eco growth – GDP or per

capita income

Capital formation and ICOR

Savings Rate – meaning, factors, calculation

Investment Rate

Savings vs Investment slowdown

Economic Development

Growth vs Development

Business Cycles and trend growth

Various indicators of growth

Various indicators of development

Human Development

HDI Index

Purchasing Power Parity

Five Year Plans- Basic Objectives and Aims

(Ch-3) National Income

Three Methods of National Income Changes made in Indian GDP Series

GVA GDP NDP GNP NNP Economic Survey Chapter 1

Market Price and Factor Cost National Statistical Office (NSO), MoSPI

Nominal GDP and Real GDP National Statistical Commission (NSC)

Per Capita Income Economic Survey

Lorenz Curve

Gini Coefficient



Economy (PRELIMS

EXCLUSIVE) 2020-21



GDP Deflator

Green GDP

Economic Territory

Depreciation

Resident vs Citizen

(Ch-4) MONEY & BANKING


History of Development of Banking System in

India

CONTEMPORARY

Money - Functions, Demand, Supply, Types Digital Money, Cryptocurrency

Types of Bank Accounts Micro ATM

Classification of Banking Sector Types of ATM

Small Finance Banks UPI, NPCI

Board for Regulation and Supervision of

Payment and Settlement Systems

White Label ATMs, Brown label ATMs

Shadow Banking System Digital modes of payment settlement- NEFT,

RTGS, IMPS

India Post Payments Bank (IPPB) Microcredit

SIDBI COMMITTEES - Nachiket Mor, Bimal Jalan,

Urjit Patel etc

National Housing Bank Transition of Urban Co-Operative Banks into

Small Finance Banks

Payments Bank Amalgamation vs Merger of Banks

Small Finance Banks Development bank

Regional Rural Banks (RRB) Financial Benchmarks India Pvt Ltd

Reserve Bank and its Functions Utkarsh 2022

Monetary Policy SWIFT

Monetary Policy Committee

Instruments of Monetary Policy

(a) Quantitative Schemes, Portals, Apps

(b) Qualitative UPI 2.0, NPCI

Monetary & Liquidity Aggregates

Pradhan Mantri Jan Dhan Yojana (PMJDY)

Non-Performing Assets (NPA)

Ombudsman Scheme for Digital Transactions by

RBI

Capital Adequacy Ratio

Capital to Risk Assets Ratio (CRAR) Laws, Policy

Capital Conservation Buffer (CCB) IBC Features

Provisioning requirement Project Sashakt

Basel III (Third Basel Accord) Features of Payment and Settlement System Bill,

2018



Economy (PRELIMS

EXCLUSIVE) 2020-21



Marginal Cost of Funds Based Lending Rate

(MCLR) System

RBI ‘Payment and Settlement Systems in India:

Vision 2019 - 2021'

Base rate Banning of Unregulated Deposit Schemes Act,

2019

Securitization Chit Funds (Amendment) Bill, 2019

Steps Taken to Tackle NPAs

DRT

(SARFAESI) Act, 2002

Asset Reconstruction Company

Bad Banks

Emphasis on Debt Restructuring

Mission Indradhanush for Public-Sector Banks

Banks Board Bureau

Bank Merger 237

Insolvency and Bankruptcy Code, 2016

Economic Survey

LATEST CURRENT

Retail, SME loans to be linked to external

benchmarks

2. Financial Benchmarks India Pvt Ltd

3. Urban Cooperative Banks to transition into

Small Finance Banks

4. Issues related to RBI

(i) Transfer of funds from RBI to Central

Government-

(ii) RBI’s Banking Ombudsman-

(iii) Section 7 of RBI Act, 1935

5. Steps taken by RBI for NPA Resolution

(i) Classification of stress into SMA

(Special Mention Account)-

(ii) Insolvency And Bankruptcy Code

(Amendment) Ordinance 2018

(iii) Cross-border Insolvency

(iv) Public Credit Registry (PCR)

(v) Prompt Corrective Action (PCA)

(vi) Project Sashakt

6. Previous Schemes for NPA Resolution

(i) Private Asset Reconstruction

Companies (ARC)

(ii) Strategic Debt Restructuring

(iii) Asset Quality Review

7. Banking Regulation

(i) Bank Recapitalization Package



Economy (PRELIMS

EXCLUSIVE) 2020-21



(ii) Indradhanush-

(iii) Merger Of Dena Bank, Vijaya Bank

And Bank Of Baroda

8. Schemes for Financial Inclusion

(I) Pradhan Mantri Jan-dhan Yojana

(Pmjdy)

(Ii) Pradhan Mantri Mudra Yojana

(Iii) Unified Payments Interface (Upi)

(Iv) National Payments Corporation Of

India (Npci)

(V) Jan Dhan Darshak App

(Vi) Reduction In Merchant Discount Rate

(Vii) Different Types Of Atms

(Viii) India Post Payments Bank (Ippb)

(Ix) Qr Card In Ippb

(X) Business Correspondents (Bc)

(Xi) Common Service Centres (Csc) As

B.C.

(Ch-5) EXTERNAL SECTOR


Foreign Exchange Rate Protectionism

Types of Exchange Rate, NEER and REER,

Nominal and Real Value, Safeguard duty

Balance of Payments Non-violation Complaint

Current account transactions, Capital account

transactions, Sunset clause

India’s Foreign Reserves, SDR Double Taxation Avoidance Agreement

Current Account Convertibility, Capital

Account Convertibility Shell company

Tariff and Non-Tariff Barriers Inward Remittances, RDA and MTSS

Economic Integration FTA, Types- PTA,

FTA ,Customs Union ,Common Market

,Economic Union, Economic Integration

Exim Bank

Currency Swap Facility ECGC

Depreciation, Appreciation World Customs Organization

Hard currency, Soft currency, Cheap currency,

Dear currency Hawala system

FDI, FPI Legal Entity Identifier (LEI) code

Contingency Reserve Arrangement Concession Financing Scheme

WTO, Agreements, Boxes, TRIPS Economic Survey



Economy (PRELIMS

EXCLUSIVE) 2020-21



(Ch-6) Financial Markets - Money & Capital Markets


Money Market Exchange Traded Funds & Bharat 22

Capital Market Infrastructure Investment Trusts (InvITs)

Primary Market and Secondary Market Real Estate Investment Trust (REIT)

Regulation of Stock Exchanges in India &

SEBI

BONDI- blockchain bond

Derivatives Sovereign Blue Bond

Govt Securities (T-Bills, CMBs, SDLs. PDs Women’s Livelihood Bonds (WLBs)

Debentures vs Shares Elephant Bonds

Mutual Fund National Financial Reporting Authority (NFRA)

NBFCs & IL&FS Crises Ind AS

Limited Liability Partnerships International Financial Services Centres (IFSC)

Authority Bill, 2019

Systematically Important Non- Deposit Core

Investment Company

Municipal Bonds

LIBOR SEBI bond market framework

Share swap SEBI integration of surveillance and investigation

department

Insider Trading Masala Bonds, Offshore Rupee Markets

Credit Rating Agencies Fintech

Share-pledging Development Impact Bond (DIB)

Alternative Investment Fund Green Bonds

Sovereign wealth fund Municipal Bonds

Government Securities Floating Rate Bonds

Bond Yield Inversion CPI Linked Bonds

Financial Sector Regulators

CCI, IRDA, PFRDA, FSDC

Anchor Investors

ADR, GDR, IDR Venture Capital

Angel Investor

Angel Tax

Value Capture Finance Policy Framework

Total Expense Ratio (TER)

Participatory Notes

Sovereign Gold Bonds (SGBs)

Peer To Peer (P2P) Lending



Economy (PRELIMS

EXCLUSIVE) 2020-21



Economic Survey

(Ch-7) PUBLIC FINANCE


Fiscal Policy N K SINGH Committee

Fiscal drag, Slippage Independent ‘Fiscal Council’

FRBM Act, 2003 DTAA

Budget & its components

Receipts and expenditure Economic Survey

Capital vs Revenue

Plan and Non-plan expenditure

Deficits and its types

Deficit financing

Government Debt

Disinvestment

(Ch-8) TAXATION IN INDIA


Division of taxation powers between centre and

states

Base Erosion and Profit Shifting

Methods of Taxation – Progressive ,

Regressive and Proportional

Goods and Services Tax Network (GSTN)

Tax Types- Proportional Taxes, Progressive

Taxes, Regressive Taxes

Direct Tax Code

Types- Direct and Indirect Taxes E-way bill

DTC – Direct Tax Code Sabka Vishwas-Legacy Dispute Resolution

Scheme, 2019

Minimum Alternate Tax Forest Villages and Revenue Villages

Important Taxes in India-

Income Tax

Excise Duty

Customs Duty

Service Tax

Sales Tax or VAT

Withholding Tax



Economy (PRELIMS

EXCLUSIVE) 2020-21



Goods and Services Tax (GST)

Components of GST: SGST, CGST and IGST

Composition of the GST Council

GST Rate

Commodities Outside GST

Compensation to States

Implications of Introducing GST

Administration of GST

Input Credit Under GST

Conditions for Claiming Input Credit

Challenges in Introduction of GST

Angel Tax

Tax-to-GDP Ratio Long Term Capital Gains Tax

Laffer Curve FATF

Tax Havens Tax Information Exchange Agreement (TIEA)

General Anti-Avoidance Rules (GAAR)

Shell Companies Economic Survey

(Ch-9) Inflation

Static Current

Meaning & Types of Inflation Economic Survey

Effects of Inflation

Factors Affecting Inflation

Role of RBI in Curtailing Inflation

Measurement of Inflation

Inflation Indices

Measures to Control inflation

Depression, Recovery, Boom, Recession,

Growth recession, Double-Dip recession,

Abenomics

(Ch-10) INDUSTRY

Static Current

Industrial Policy prior to 1991 Department for Promotion of Industry and Internal

Trade (DPIIT)

Economic Reforms: Liberalization,

Privatization, and Globalization

Udyam Abhilasha

Industrial Policy Since 1991 Pariwartan Scheme



Economy (PRELIMS

EXCLUSIVE) 2020-21



NIMZs ‘Make in India’ in Defence Procurement

Procedure

Make In India Solar Charkha mission, Sampark portal- MSMEs

Fourth Industrial Revolution EODB

Special Economic Zone (SEZ) SWAYATT, GeM Start-up Runway

MSME Samadhan Portal

Maharatna, Navratna, Miniratna Government e-Marketplace (GeM)

Models of E-Commerce Project SURE

Technical textiles Samarth scheme

Corporate Social Responsibility Draft e-commerce policy

Corporate Governance

Features of National Digital Communications

Policy-2018

National Policy on Electronics 2019

National Mineral Policy 2019

National Policy for Software Products 2019

Regulatory sandboxes

(Ch-11) AGRICULTURE

Static Current

Agri Policy Since Independence International Organisations

Operation Flood Food and Agriculture Organisation

Mariculture International Rice Research Institute

Blue Economy International Crops Research Institute for the

Semi-Arid-Tropics (ICRISAT)

APMCs Asian Tea Alliance

Rainfed Agriculture Schemes, Portals, Apps

Tea Board Krishi Kalyan Abhiyan

Livestock Census Coal Mine Surveillance & Management System

(CMSMS) and ‘Khan Prahari’ mobile application.

Food Corporation of India (FCI) Pradhan Mantri Annadata Aay SanraksHan

Abhiyan (PM-AASHA)

Sugarcane Pricing mechanism in India Pradhan Mantri Fasal Bima Yojna (PMFBY)

MSP Gramin Agriculture Markets (GrAM) programme

Operation Greens

Pradhan Mantri Kisan Samman Nidhi (PM-

KISAN)

ENSURE portal



Economy (PRELIMS

EXCLUSIVE) 2020-21



Rashtriya Kamdhenu Aayog

Honey Mission' initiative

MEGHDOOT App

MISC CURRENT

10th Agriculture Census 2015-16

MSP for MFP

United Nations’ Decade of Family Farming

(2019-2028)

Agriculture Export Policy, 2018

Marine Fisheries Regulation and Management

(MFRM) Bill 2019

(Ch-12) INFRASTRUCTURE & ENERGY

Static Current

Transportation Freight Village

Railways Water aerodrome

Road Network Draft National Logistics Policy

Indian Shipping Train-18

Civil Aviation National Rail and Transportation Institute (NRTI)

Power Mission Satyanishtha

Public–Private Partnerships Bidder Information Management System (BIMS)

and Bhoomi Rashi

Coal Sector Pradhan Mantri Surakshit Sadak Yojana

Renewable Energy Pradhan Mantri Awaas Yojana

Multi-modal terminal Smart Cities Mission

Jal Marg Vikas project

UDAN 3.0

ENERGY - Current Affairs Laws, Policy

Petroleum and Explosives Safety Organisation

(PESO)

Motor Vehicle (Amendment) Act, 2019

New Definition for Petroleum under Petroleum

and Natural Gas Rules, 1959

Consumer Protection Act, 2019

Unconventional hydrocarbons RERA, 2016

Petroleum and Natural Gas Regulatory Board

(PNGRB)

Draft National Urban Policy Framework (NUFP),

2018.

Petroleum, Chemicals and Petrochemical

Investment Regions (PCPIRs)

Draft Model Tenancy Act, 2019

Strategic Petroleum Reserve (SPR) Schemes, Portals, Apps



Economy (PRELIMS

EXCLUSIVE) 2020-21



Coal Swapping Scheme, Scheme to Harness

and Allocate Koyla (Coal) Transparently in

India (SHAKTI) Policy

Aapoorti App

Saubhagya Scheme

Deendayal Upadhyaya Gram Jyoti Yojana

(DDUGJY)

Power System Flexibility

Smart Meters

Atal Jyoti Yojana

e-Dharti app and e-Dharti Geo Portal

Ujwal Discom Assurance Yojana (UDAY)

National Policy on BioFuels 2018

National Gas Grid

Pradhan Mantri Ujjwala Yojana (PMUY)

International Organisations

International Civil Aviation Organization (ICAO)

IEA

(Ch-13) Unemployment & Poverty

Static Current

Types of Unemployment National Minimum Wage

Tendulkar Committee Periodic Labor Force Survey by NSSO

Rangarajan Committee Fixed-Term Employment

Phillips Curve

Human Resource Development

HDI,MPI

(Ch-14) Social Sector

Static Current

District Mineral Foundation National Council for Vocational Education and

Training (NCVET)

Public Utility Service Institutions of Eminence (IOEs)

Drug Pricing in India Social Stock Exchange (SSE)

National Pension System

Schemes, Portals, Apps

Pradhan Mantri Vidya Lakshmi Karyakram,

VidyaLakshmi Portal



Economy (PRELIMS

EXCLUSIVE) 2020-21



Indian Institute of Skills, Global Skills Park

Aspirational Districts Programme

Pradhan Mantri Jeevan Jyoti Bima Yojana

(PMJJBY) and Pradhan Mantri Suraksha Bima

Yojana (PMSBY)

Deendayan Antyodaya Yojana-National Urban

Livelihoods Mission (DAY-NULM), PAiSA-

Portal for Affordable Credit and Interest

Subvention Access

National Agricultural Higher Education Project

(NAHEP)

Deedayal Disabled Rehabilitation Scheme

(DDRS)

PM Shram-Yogi Maandhan Yojana

e-AUSHADHI portal

Employees State Insurance Scheme

Pradhan Mantri Laghu Vyapari Maan-Dhan

Yojana

(Ch-15) Sustainable Development

Static Current

Shared prosperity, Societal Poverty Line (SPL) Angikaar Campaign

Pradhan Mantri Khanij Kshetra Kalyan Yojana

(PMKKKY)

Draft National Voluntary Guidelines on Social,

Environmental and Economic Responsibilities of

Business

FAME-India Phase II Eco Nivas Samhita, 2018

(Ch-16) International Organisations

United Nations, Food and Agriculture

Organization (FAO), World Trade Organization (WTO)

International Civil Aviation Organization

(ICAO), Asian Development Bank

International Fund for Agricultural

Development (IFAD), Asian Infrastructure Investment Bank (AIIB)

International Labour Organization (ILO) New Development Bank

International Maritime Organization (IMO) African Development Bank

International Monetary Fund (IMF) OECD



Economy (PRELIMS

EXCLUSIVE) 2020-21



International Telecommunication Union (ITU) World Customs Organization

United Nations Educational, Scientific and

Cultural Organization (UNESCO)

World Bank

United Nations Industrial Development

Organization (UNIDO)

IMF

Universal Postal Union (UPU) World Economic Forum

World Bank Group (WBG)- (IBRD) UNHRC

International Finance Corporation (IFC) WHO

International Development Association (IDA)

Trade Agreements- RCEP, TPP, NAFTA,

MERCOSUR, Southern African Development

Community (SADC), ASEAN, SAFTA

World Health Organization (WHO) UNEP

World Intellectual Property Organization

(WIPO)

International Whaling Commission (IWC)

World Meteorological Organization (WMO)

World Tourism Organization (UNWTO)

8) MAINS ECONOMY TOPICS LIST

Themes & Topics

1 Indian Economy during britishers time and at the time of independence

Economic Planning - Five Year Plan Journey & various issues in planning system of

India

Liberalisation, Privatisation and Globalisation in India

NITI AAYOG vs Planning Commission

2 India's recent growth story

India vs China's growth story

Green Economy

India's direct shift from agriculture to Industry

3

Inclusive Growth – Meaning, Concept and Elements, Challenges & Issues arising from

it

Poverty : Policies and Analysis

Poverty line controversy

4 Unemployement : Policies and Analysis

Underemployement, Informal sector employement, Fixed Term employment

Demographic Dividend



Economy (PRELIMS

EXCLUSIVE) 2020-21



Inequality in India

Universal Basic Income

Financial Inclusion : Evolution since independence

Pradhan Mantri Jan-Dhan Yojana (PMJDY) : Provisions, Progress till now, Challenges,

Way forward

SDGs

Low Female Labour Force Participation Rate

5 Investment Model & Resource Mobilisation

PPP, Hybrid Annuity Model, Swiss Challenge Model

FDI & FII

Crowdfunding,

Recent Savings and Investment Trends

Municipal Bonds, Masala Bonds

Green Finance

Disinvestments, Problems & Reforms in Public Sector

6 Industrial Policy In India : Evolution since independence

Make in India, Industrial Revolution 4.0, E-Commerce,

Skill India, Start up India, SANKALP, STRIVE, SAATHI

7

Labour Reforms, Ease of doing business, MSME Reforms, NIMZ, NFRA, New IPR

Policy, 2016

Textile industry

Footwear industry

8 Infrastructure – Features, Types, financing issues

Challenges of infra sector, Infra Financing issues

TRANSPORT INFRA

9 Infrastructure - Rail & Road

High Speed Rail Project, National Rail Plan 2030, Bibek Debroy Committee,

Bharatmala

New Metro Policy 2017, National Electric Mobility Mission Plan 2020, National Auto

Policy 2018

E-Vehicle

10 Infrastructure - Water and Air Transport;

UDAN Scheme, Jal Marg Vikas Project, Sagar Mala; Costal employement Zones,

Civil aviation Policy 2016, Multi Modal Logistics Park

Logistics Sector

ENERGY INFRA

11 Energy Security - Status,Policies, Challenges

Oil and Gas: issues and Polcies; New Hydrocarbon & Exploration Policy

Power Sector : issues and Polcies ; UDAY Scheme

12 DDU Gram Jyoti Yojna, Saubhagya scheme, KUSUM Yojna,



Economy (PRELIMS

EXCLUSIVE) 2020-21



13 Renewable Energy : Policies and Challenges

Solar, Wind, Nuclear, Shale Gas

Draft National Energy Policy, National Biofuel Policy

REGIONAL INFRA

14 Urban Development in India & Smart Cities

Telecom sector challenges , National Digital Communications Policy – 2018

Electronics Industry in India

15 Digital India, , Cashless economy,

Housing Sector & RERA Act, 2017

16 Rural electrification, Affordable Housing & Real Estate Sector

Rural Development

Bharat Nirmaan, Smart Villages, PURA Scheme

Balanced Regional Development

17 World Trade Organisation

Doha Round, India's Stand of different issues

Rupee depreciation,

Trade & Currency Wars, Protectionism

GPS issue, MFN issue

18,

19 IMPORTANT MACRO ECONOMY TOPICS (TO BE COVERED SIMULTANEOUSLY WITH

MAIN SCHEDULE)

Current issues in Banking Sector

Payments Banks

Twin Balance Sheet crises, Project SHASHAKT, Recapitalisation, Banking Crises &

Reforms , Mission Indradhanush,

Banks merger, Banks privatisation

Fugutive Economic Offenders Bill, PARA, Insolvency code,

Demonetisation analysis

Bitcoins

RBI vs Government Tussle

Food inflation

Current issues in Taxation Sector

LTCG on equity, Arvind Modi task force on Direct Tax Code, Increasing tax to GDP

Ratio, GAAR

GST , E Way Bill, Anti profiteering

Current issues in Fiscal Sector

New FRBM Act, State's Fiscal Consolidation

Gender Budgeting, Union Budget 2018 and 2019

15th FC Terms of reference controvesry

Other Issues

Issues related to growth & development in India

Late Converger's Stall



Economy (PRELIMS

EXCLUSIVE) 2020-21



AGRICULTURE

21 Agriculture during planning process ; Role of agriculture

Doubling Farmer's Income, Ashik Dalwai Committee,

Toxic Farming, Organic Farming, Evergreen Revolution

22 Land Reforms in India – Objectives, Phases, Success and failures

Land leasing law,2016; National Land records Modernisation Program, Land

acquisition Act 2013

23 Major crops cropping patterns in various parts of the country,

National Year of Millets 2018, National Bamboo Mission

Different types of irrigation and irrigation systems;

PM Krishi Sinchayi Yojna Analysis , Micro Irrigation , Soil Health Card Scheme

24 Agricultural Credit – Banks/ RRB/ NABARD/ KCC & other angles

Agricultural Finance – Features/ Criteria & Need, Sources/ Problems & Measures

Agriculture – Crop Insurance in India – Features & Schemes

PM Fasal Bima Yojna

25 E-technology in the aid of farmers

Technology missions; Agri R&D,

26

Storage, transport and marketing of agricultural produce and issues and

related constraints

APMC and E-NAM

Contract farming

Model Agricultural Produce and Livestock Marketing Act 2018

27 Minimum support prices & Price deficiency payment system

28 Economics of animal-rearing : Rastriya Gokul Missiom

Dairy, Fisheries, Sweet Revolution

29 Issues related to direct and indirect farm subsidies and

Fertiliser sector reforms

PM KISAN Scheme

30 Public Distribution System- objectives, functioning, limitations, revamping;

PDS and Aadhar, National Food Security Act,2013

Issues of buffer stocks and food security;

Global Hunger Index and Nutritional Security; POSHAN Abhiyaan

31 Food processing and related industries in India- scope and significance, location

Upstream and downstream requirements, supply chain management.

PM Kisan Sampada Yojna



Economy (PRELIMS

EXCLUSIVE) 2020-21



32 Other current issues in agriculture

Pepsi Co issue

Farmer's Suicides & Loan Waivers

GM Crops and GM Mustard

Agricultural Income Tax

Sustainable Agriculture

Opeartion Greens

GOBARDHAN Scheme

Sugar Industry

Farmer Producer organisations

Draft Pesticide Management Bill 2017

Agriculture Futures

PRELIMS SAMPLE NOTES (COLOUR CODED FOR FAST REVISION)

Chapter Name - INFLATION IN INDIA - Complete Analysis

Chapter Index 1. What is Inflation?

2. Index

3. Price Index

4. Measurement of Inflation

5. Year-on-Year Inflation

6. Weighted Indices

a. Wholesale Price Index (WPI)

b. Consumer Price Index for Industrial Workers (CPI – IW)

c. Consumer Price Index for Urban Non – Manual Employees (CPI – UNME)

d. Consumer Price Index for Agriculture Labourers (CPI – AL)

e. Consumer Price Index for Rural Labourers (CPI – RL)

f. CPI (Rural)

g. CPI (Urban)

h. CPI (Combined)

7. Types of Inflation

a. Based on Rate of Rise in Prices

b. Based on volatility

c. Based on Causes

● Factors Affecting Demand ● Factors Affecting Supply

8. Effects Of Inflation



Economy (PRELIMS

EXCLUSIVE) 2020-21



a. Redistribution of Income of Wealth

b. Effects on Production and Consumption

c. Other Effects

9. Measures to control Inflation

a. Monetary Measures

b. Fiscal Measures

c. Trade Measures

d. Administrative Measures

10. Associated Terms

a. Deflation

b. Reflation

c. Disinflation

d. Stagflation

e. Base Effect

f. Phillips Curve

g. Producer Price Index

h. Inflation Targeting

11. Economic Survey 2018-19 on Inflation

12. Previous Year UPSC Question

What is Inflation ?

According to Economic Survey of 2008-09 inflations is “an upward movement in the general prices of

goods and services and is estimated as the percentage rate of change in a price index over the reference time

period”. Index

An Index number may be described as a specialized average designed to measure the relative change in

the level of a phenomenon from time to time.

Price Index Price index is a specialized average that measures the changes in prices over a period of

time. It can be of two types

General Price Index (GPI) Consumer Price Index (CPI)

General Price Index measures the changes in

average prices of goods and services.

Consumer Price Index measures the average change

in the prices paid by ultimate consumers for a

particular basket of goods and services over a

period of time.

A base year is selected and its index is assumed as

100 and on this basis, the price index for further

period is calculated.

CPI actually measures the increase in prices, a

consumer will have to pay for the designated

commodity basket (which may be revised every

four-five years to factor in changes in consumption

pattern)

Construction of Price Index

Price index is calculated by measuring the rise in the price of the current year over price of base year.

Price Index = (Current year’s price / Base year’s Price) x 100



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= P1/P0 X 100

Example:

Take 2004-05 as base year.

Price of rice in 2004-05, Rs 2/kg

Price of rice in 2005-06, Rs 3/kg

Price of rice in 2006-07, Rs 3.50/kg

Price Index for 2005-06= Price of rice in 2005-06/Price of rice in 2004-05 x 100

= 3/2 x 100

= 150

Price index for 2006-07= Price of rice in 2006-07/Price of rice in 2004-05 x 100

= 3.50/2 x 100

= 175

Measurement of Inflation ● Inflation is measured with the help of Wholesale or Consumer Price Index in India.

● The percentage of rise in the price index of a particular period from previous period price index is

the rate of inflation.

● Inflation = (current period price index – last period price index) / last period price index x 100

● Example- Inflation= 175-150/ 150 x 100

= 25/150 x 100

= 16.6%

● Inflation is calculated on the basis of weighted index numbers.

● Note: Base year is used only to calculate the index number. The inflation is calculated as a

percentage of rise in index number over last year.

Year-on-Year Inflation ● Year-on-year inflation means rate of change of inflation over the corresponding period (week or

month or quarter in relation to the frequency of the data) of the previous year.

● For example, the inflation on the second week of January 2010 is computed by calculating the rise in

index number over index number of January 2009.

Weighted Indices In India various weighted price indexes are calculated. They are

1. Wholesale Price Index (WPI)

2. Consumer Price Index for Industrial Workers (CPI – IW)

3. Consumer Price Index for Urban Non – Manual Employees (CPI – UNME)

4. Consumer Price Index for Agriculture Labourers (CPI – AL)

5. Consumer Price Index for Rural Labourers (CPI – RL)

● Among the above indices until October 2009, only the WPI was used to calculate inflation and

made public through the newspapers. The other index numbers are published as index numbers

and not as inflation. But now the inflation is also calculated based on new CPI indices. So, these

two are called the headline inflation.

● The weights at WPI are assigned on the basis of value of production of respective commodity

groups for WPI. For other indices, the weights are assigned on the basis of consumer expenditure

survey.

What is the reason for assigning weights ?



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Weights are assigned to arrive at a realistic inflation rate.

Wholesale Price Index (WPI)

● This index measures the change in the price of commodities supplied to wholesale market.

● It is based on the value of production adjusted for net imports.

● The price for manufacture products us taken at ex-factory price and for minerals at ex-mines and for

agricultural products at mandi price. Ex-factory and ex-mines price means prices exclusive of

transport and other charges like insurance.

● Indirect taxes are excluded from the price.

● The Authority responsible for Compilation and Release: Office of the Economic Advisor,

Department for Promotion of Industry and Internal Trade

WPI gets revised Base Year, New Food Index

● The government revised the wholesale price index (WPI) by shifting to a new base year to 2011-12

from 2004-05 and added a new WPI food index to capture the rate of inflation in food items.

● Apart from a new base year, the revision also includes change in the basket of commodities and

assigning of new weights.

● Under the revamped data series, the number of items have gone up to 697 from 676.The data now

has 199 new items and 146 items have been deleted and has quotations from 8,331 sources

compared with 5,482 in the old series.

● Seasonality of fruits and vegetables has been updated to account for more months as these are now

available for longer duration.

● The Government has also set up a technical review committee, which will ensure that the product

mix keeps pace with changing structure of the economy.



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Old Consumer Price Indices Before February 2011, India had four consumer price indices viz. Consumer price Index for Industrial

Workers (CPI-IW), Consumer Price Index for Urban Non–Manual Employees (CPI–UNME), Consumer

Price Index for Agriculture Labourers (CPI–AL) and Consumer Price Index for Rural Labourers (CPI – RL).

(i) CPI for Industrial Worker - CPI (IW) This index measures the change in the price of commodity

basket consumed by the industrial workers.

Product groups and weightage of CPI (IW)

S.No Groups Weights

1 Food 46.19

2 Pan,Supari, Tobacco & Intoxicants 2.27

3 Fuel and Light 6.43

4 Housing 15.47

5 Clothing, Bedding & Footwear 6.58

6 Miscellaneous (Medical care, education, transports & communications,

recreation & amusement personal care & effects, laundry, domestic

services etc

23.26

Authority for Compilation & Release: Labour Bureau, Shimla, Ministry of Labour.

Use: Used for wage indexation in Government and organized sector.

(ii) CPI for Urban Non-Manual Employees (CPI – UNME) This index measures the change in the

price of commodity basket consumed by the non-manual employees like office goers. CPI-UNME earlier

compiled by the Central Statistical Organization as an independent index has since been discontinued and is

currently linked to the CPI-IW.

Authority for Compilation & Release: CSO - Central Statistical Organisation, Ministry of Statistics and

Programme Implementation.

Use:

● Used for determining dearness allowances of employees ● Used under the Income Tax Act to determine the capital gains ● Used by CSO for deflating selected service sectors contribution to GDP

(iii), (iv) CPI for Rural Labourers and Agricultural Labourers (CPI-AL) and (CPI-RL)

Consumer Price Index for Rural labourers measures the change in the price of commodity basket

consumed by rural labourers like agriculture labourers, labourers of village and cottage industries etc.

Consumer Price Index for Agricultural Labourers (CPI-AL) is a subset of Consumer Price Index for Rural

Labourers (CPI-RL). It is basically used for revising minimum wages for agricultural labour in different

States.



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Authority for Compilation & Release of both indices: Labour Bureau, Shimla, Ministry of Labour.

New Consumer Price Indices ● The above consumer price indices cover only a segment of the population like Agriculture Labour,

Industrial worker etc., and do not give a nationwide picture.

● Therefore, three new indices are introduced with base year of 2010 (January – December) which

cover all segments of the population on all India basis. They are as follows:

○ CPI (Rural)

○ CPI (Urban)

○ CPI (Combined)

● These indices are published for all India as well as State / Union Territory level. These indices

are released with a one-month time lag.

● The CPI (Combined) is computed by combining Rural and Urban index. From January 2012,

these new indices are released.

● The weightage for the new CPI series was derived on the basis of average monthly consumer

expenditure of an urban/rural household obtained from the Consumer Expenditure Survey data

(2004-05) 61st Round of the National Sample Survey (NSS).

● The CSO has revised the base year of the Consumer Price Index from 2010=100 to 2012=100 and

the revised index numbers were released on 12 February 2015.

● Consumer Food Price Indices (CFPI) for three categories- rural, urban, and combined are

calculated separately on an all India basis with effect from May 2014.

No Groups Rural Urban Combined

1 Food and beverages 54.18 36.29 45.86

2 Pan, tobacco and intoxicants 3.26 1.36 2.38

3 Clothing and footwear 7.36 5.57 0.95

4 Housing - 21.67 6.53

5 Fuel and light 7.94 5.58 6.84

6 Miscellaneous 27.26 29.53 28.32

7 Total 100.00 100.00 100.00



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Difference between WPI and CPI is as follows

Basis For

Comparison

Wholesale Price Index (WPI) Consumer Price Index (CPI)

Meaning WPI, amounts to the average change

in prices of commodities at wholesale

level

CPI, indicates the average change in the prices

of commodities, at the retail level.

Published

by

Office of Economic Advisor (Ministry

of Commerce & Industry)

Central Statistics Office (Ministry of Statistics

and Programme Implementation)

Measures

prices of

Goods only Goods and Services both

Measureme

nt of

Inflation

First & subsequent wholesale stages

of transaction

Final stage of transaction

Prices paid

by

Manufacturers and wholesalers Consumers

How many

items

covered

697 (Primary, fuel & power and

manufactured products)

448(Rural Basket)

460 (Urban Basket)

What type

of items

covered

Manufacturing inputs and intermediate

goods like minerals, machinery basic

metals etc.

Education, communication, transportation,

recreation, apparel, foods and beverages, housing

and medical care

Base year 2011-12 2012

Weightage

for food

products

Lesser weightage (less than ~ 22 %) Greater weightage (~ 45.9 %)

Time lag Lower time lag, data is available

relatively quicker.

Greater time lag

Used by Only a few countries including India 157 countries

Data

released on

Primary articles, fuel and power

(Weekly basis) & overall (monthly

basis since 2012)

Monthly basis

Types of Inflation

Inflation can be classified on the basis of rate of rise in prices and on the basis of causes.

Different Inflation Based on Rate of Rise in Prices

1. Creeping

Inflation

Price rise at a very slow rate (less than 3%) like that of a snail or creeper is called

Creeping inflation. It is regarded safe and essential for economic growth.

2. Walking Or

Trotting Inflation

● Price rise moderately at the rate of 3 to 7% (or) less than 10% is called

Walking or trotting inflation.

● It is a warning signal to the government to be prepared to control inflation.

● If the inflation crosses this range, it will have serious implications on the

economy and individuals.



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3. Running

Inflation

Running inflation means prices rise rapidly like the running of a horse at a rate of

10-20%. It affects the economy adversely.

4. Hyperinflation

(or) Runway (or)

Galloping

Inflation

The price rise at very fast at double or triple digit rate from 20 to 100% or more is

called Hyperinflation (or) Runaway (or) galloping inflation. Such a situation brings

total collapse of the monetary system because of the continuous fall in the

purchasing power of money.

Different Inflation Based on Volatility

1. Headline

Inflation

Discussed in class

1. Core Inflation Core inflation is a measure of inflation that excludes certain items that face

volatile price movements because these shocks can diverge from the overall trend of

inflation and give a false measure of inflation.

Different Inflation Based on Causes

1. Demand Pull Inflation Demand pull inflation arises due to higher demand for goods and services

over the available supply. Higher demand for goods and services arises

due to increase in income of the people, increase in money supply and

change in the taste and preference of people etc. In other words, demand

pull inflation takes place when increase in production lags behind the

increase in money supply.

2. Cost Push Inflation Price rise due to increased input costs like raw material, wages, profit

margin etc. is called Cost push inflation. Both demand pull inflation and

cost push inflation are affected by the forces of demand and supply.

Factors Affecting Demand

1. Increase in Money

Supply

Increase in money supply leads to price rise. More money available with people

induces people to purchase more goods and services. It means there is an

increase in demand. So, prices move upward.

2. Increase in

Disposable Income

The increase in disposable income leads to higher spending on the part of

households. It hikes the level of price.

3. Cheap Monetary

Policy

Cheap monetary policy means loan availability at very low interest rate and

at easy terms. It leads to more investment by investors with loaned money. It

pushes up the demand for capital goods and rise in the price of the same.

4. Increase in Public

Expenditure

Increase in government expenditure over its income, leads to deficit budget.

Increase in government spending increases the demand for consumption and

capital goods and services. It increases the price of both goods and services.

5. Repayment of

Public Debt

The repayment of public debt borrowed by government to public leaves people

with more money. It induces people to spend more. It ultimately leads to an



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increase in the price of goods and services.

Factors Affecting Supply

1. Shortage of Factors

of production

The shortage in the factors of production viz., land, labour, and capital increases

the cost of production. For example, shortage in the labour leads to higher

wages. It increases the cost of production and price of goods and services.

2. Industrial Disputes Industrial disputes lead to strike or lay off. It affects the production and supply

of goods. It results in increased prices.

3. Natural Calamities Natural calamities like earthquake, landslide and tsunami, affect production and

supply of goods and services. The end result is price rise.

4. Artificial Scarcities Artificial scarcities created by activities like hoarding and speculative trading

in commodities in the commodities futures market, resulting in price hike.

5. Increase in Exports Increase in exports of a particular commodity leads to shortage of goods in the

domestic market. It pushes up prices.

6. International

Factors

International factors like oil price hike, shortage in production of certain

commodities leads to higher import prices.

Effects Of Inflation

Inflation has an impact on all the economic units. It has favorable impact on some and unfavorable impact

on others. The effects are discussed under three different heads:

1. Redistribution of Income of Wealth It redistributes income from one hand to another. It leads to loss

to some group of people and gain to another group of people.

a) Debtors vs

Creditors

In the case of debtor and creditor, debtor is gainer and creditor is the loser.

b) Producers vs

Consumers

In inflationary situation, the producers stand to gain and consumers stand to lose.

The producer’s profit will increase as a result of inflation. The purchasing power

of money held by consumer declines. So, they have to pay more money to

purchase the same amount of goods and services what they bought before inflation.

c) Flexible Income

Group vs Fixed

Income Group

The flexible income groups like sellers, self employed, and employees of private

concerns whose salary is adjusted according to inflation do not get affected, but

fixed income groups like daily wage earners lose as the purchasing power of their

income diminishes.

d) Debentures or

Bond Holders and

Savers Vs Equity

Holders

The Debentures or Bond holders and Savers receive fixed periodical income from

their financial assets. The purchasing power of their assets remains intact only if

the interest rate is more than the rate of inflation.

The security holder’s income depends on the profit of the company. In inflationary



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situation, the companies earn more profit. So, the equity holders also earn more

income.

2. Effects on Production and Consumption

● The inflation may lead to fall in the demand for goods and services.

● It may curtail the amount of production.

● Inflation also leads to reallocation of resources.

● Sometimes, only few goods may experience price rise. In that case, the investment from other

sectors may shift to these sectors.

● In packaged items, in order to maintain the same price per package, the producers reduce the

quantity or quality or both instead of raising the price. It means, less production and consumption.

3. Other Effects

a) Balance of Payment

(BOP)

High price reduces the amount of exports and increases imports from other

countries where goods are available at a cheaper rate. It results in

unfavourable balance of payments.

b) Exchange Rate High import and low export means high demand for foreign currencies

compared to domestic currency. This depreciates domestic currency.

c) Social and Political Higher rate of inflation leads to social and political tension. The political

parties and organized group of people call for strikes, hartals and stage

dharnas.

d) Fiscal impact Government deficit increased due to higher subsidies given to poor citizens

Measures to control Inflation The control of inflation needs a multi-pronged strategy. All the strategies need cooperation and harmony

among them.

1. Monetary Measures

a) Credit Control It is performed by the Reserve Bank of India.

b) Demonetization of Currency Demonetization of currency means declaring that hereafter currencies

of particular denominations are invalid. It suddenly reduces the

money to the extent of money kept in those particular denominations.

It is resorted to only in extreme cases.

2. Fiscal Measures

a) Reduction In

Unnecessary

Expenditure

Reduction of unnecessary government expenditure means less demand from

government side. It brings down the price level.

b) Increase in Direct

Taxes

Increase in direct taxes like income tax reduces the disposable income available

with people. It means low demand from households. Less demand leads to lower



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price.

c) Decrease in

Indirect Taxes

Decrease in indirect taxes like excise duty, sales tax brings the prices down.

d) Surplus Budget Surplus budget means less expenditure than receipts. It reduces the money

supply and government demand for goods and services. The price level is

brought down due to this.

3. Trade Measures

Trade measures refer to export and import of goods and services. In case of shortage of goods in the

domestic market the supply can be increased through import of goods from foreign countries at low or nil

import duty. The restriction in the form of import licenses has to be eased to increase import. The higher

supply helps to bring down the price.

4. Administrative Measures

a) Rational Wage

Policy

Rational wage policy helps to keep the cost of production under control.

The cost control means price control.

b) Price Control Direct price control also helps in inflation control. Price can be controlled by

fixing maximum price limits through administered price system and subsidy

from the government.

c) Rationing Rationing of goods in short supply keeps the demand under control so that

price comes under control.

Different Associated Terms

1. Deflation Deflation is opposite to that of inflation. The persistent and appreciable fall in

the general level of prices is called deflation. The rate of change of price index is

negative. The effects cause and measures are also in the opposite direction.

2. Reflation Reflation means deliberate action of government to increase the rate of inflation

to stimulate the economy. It is usually done to redeem the economy from

deflationary situation.

3. Disinflation The rate of inflation at a slower rate is called disinflation. For example, if the

inflation of last month was 6% and rate of inflation in the current month is 5% it is

termed as disinflation.

4. Stagflation Stagflation refers to the situation of coexistence of stagnation and inflation in the

economy. Stagnation means low National Income growth and high

unemployment. Stagflation is the contrary to Phillips curve.



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The figure depicts the various rates of price changes in the economy.

● From the month of April to the end of May, the economy is experiencing negative rate of price

range. It is called deflation. ● From the end of May to the middle of July, the price rate is recovering from negative zone. It is

called reflation. ● From the mid of July to the end of August, the price rate is moving upward in the positive territory. It

is called Inflation. ● From September to the middle of October, the rate of price change is declining but still in the

positive territory. It is called disinflation.

4. Base Effect & Base Year

Base effect refers to the phenomenon of current year index being influenced by, very low or high

previous year index.

Case 1 Case 2

Price index on January, 2017 = 110

Price index on January, 2018 = 120

Rate of inflation on January, 2018 = 120-

110/110*100 = 9.09 %

Price index on March, 2018 = 180

Price index on March, 2019 = 190

Rate of inflation in March, 2019 = 190 –

180/180*100 = 5.55%

In both the cases the index number increased by 10, but the rate of inflation is different. The rate of

inflation is low in second case compared to first case. This is because of the difference in previous year

index.

Base Year

Base Year is the year on the “basis” on which we compute inflation of an economy, i.e., percentage change

in prices.

Criteria for deciding a particular Financial Year as Base Year:

• Year with less monsoon deficit. • Year with no major natural calamity, drought or famine. • That year should not have inflation at alarming rates. • Unstable years in terms of economic activity are not considered as base year. • There should not be much gap between base year chosen and current year.



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5. Phillips Curve

● Phillips curve shows the relationship between the rate of inflation and rate of unemployment. ● It shows that the relationship is negative. That is at a high rate of inflation the unemployment rate is

low as shown in figure below.

6. Producer Price Index :

● PPI measures price changes from the perspective of producers (whereas CPI measures Price

changes from consumers/buyers perspective).

● PPI measures the average change in prices that the producer receives for his goods/services sold

in the domestic market/exports and thus excludes the effect of indirect taxes on inflation.

● PPI takes into account both goods and services. (unlike WPI).

● There is a bias of double/multiple counting inherent under WPI which can be avoided through by

using PPI.

● GOI in 2014 appointed B.N.Goldar Committee to examine whether PPI should replace WPI or not

and suggest a methodology.

● The Committee majorly recommended that :

○ To shift from WPI to PPI on experimental basis to measure inflation.

○ Data from “Supply Use Tables” to be used to compute experimental PPI.

○ Base year for experimental PPI should be 2011-12.

○ To include services price in the PPI basket.

○ To include major export and import items while calculating experimental PPI.

● A number of advanced economies and emerging economies have already switched to using PPI

instead of WPI.

● IMF has also recommended the use of PPI instead of WPI for measuring inflation.

7. Housing Price Index

● The Housing Price Indices (HPIs) are a broad measure of movement of residential property

prices observed within a geographic boundary.

● The first official housing price index for the country named ‘NHB RESIDEX’ was launched in

July, 2007 by the National Housing Bank (NHB).

● Overtime, the base year has been revised to FY 2012-13 to ensure capturing the latest information

and accurately reflect the current economic situation in the country.

● Currently, National Housing Bank is publishing NHB RESIDEX for 50 cities on quarterly basis

with FY 2012-13 as base year. Among 50 cities covered are 18 State/UT capitals and 37 Smart

Cities.



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8. Inflation Targeting

Urjit Patel Committee was appointed by RBI in 2013 :

1. To revise & strengthen Monetary Policy Framework, and

2. To recommend an appropriate nominal anchor for the conduct of monetary policy

The Committee (in its report in 2014) recommended for focusing on only one objective, i.e., Inflation

Targeting.

Why Inflation Targeting is needed in India –

As per the report, it is required because:

● Real interest rates have remained negative during most of the post global crisis period.

● External competitiveness is getting eroded due to continuous higher levels of inflation.

● Due to inflation, there has been a large import of Gold due to its increasing demand and it has

resulted in widening of the Current Account Deficit.

● Continuous weakening of exchange rate has occurred due to persisting high inflation.

● Rise in inequality in the Indian economy due to increased rates of inflation.

CPI or WPI as the nominal anchor for inflation targeting -

Committee recommended to adopt CPI (Rural + Urban) [instead of WPI (minus food & fuel) based

inflation targeting] in order to anchor Monetary Policy. The reasons were that:

● WPI ignores the effect of service sector which contributes almost 60 % to the overall GDP and

● CPI is based on retail prices which may depicts a broader picture of the effect of inflation.

Numerical Target of CPI based inflation –

Committee recommended inflation target of 4 % (+/- 2 %).

Based on the recommendations, RBI in 2015 signed an agreement with the Government of India, agreeing

on the following points –

● Flexible inflation targeting as the official goal of RBI.

● Flexible Inflation target to be set by GOI once every 05 years in consultation with RBI.

● CPI (rural + urban) to be used as a measure of nominal anchor for policy decisions.

Thus from 2015 onwards, above agreed points are being implemented.

Some other concepts discussed in the class

1) Misery Index

2) Engel’s Law

3) GDP Deflator

4) GSP Deflator vs CPI



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Recent Trends In Inflation based on Economic Survey 2018-19

● Headline inflation based on the Consumer Price Index – Combined (CPI-C) has been declining

continuously for the last five years.

● Food inflation based on Consumer Food Price Index (CFPI) declined to a low of 0.1% during the

2018-19.

● Wholesale Price Index (WPI) stood at 4.3 % during 2018-19.

● Headline CPI-C inflation has remained below 4.0% for two consecutive years.The decline in

inflation in the FY 2018-19 was mainly due to low food inflation.

● Food inflation based on Wholesale Price Index too declined over the last two financial years.

● Food Inflation based on Consumer Food Price Index (CFPI) has been declining since 2014-15.

● Decline in Food inflation is mainly due to deflation in the prices of pulses, vegetables and sugar.

● CPI-C based core inflation has remained above 4% since the start of a new series of CPI-C.

Recent Efforts by the Government to Control Inflation

(i) General Measures

● Advisories to State Governments to take strict action against hoarding & black marketing by

enforcement of Essential Commodities Act, 1955 & the Prevention of Black-marketing and

Maintenance of Supplies of Essential Commodities Act, 1980.

● Higher Minimum Support Price (MSP) for pulses and other crops to enhance production.

● Regular review meetings on prices and availability of key commodities and recommend

appropriate policy intervention.

● Government has set up Price Stabilization Fund (PSF) for procurement of agri-horticultural

commodities for its release during lean period to improve availability and moderate their prices.

(ii) Specific measures

● To control the rise in onion prices, onions were released at reasonable prices from the stock

procured under PSF.

● Pulses from the buffer are utilized for strategic market intervention for price management and

meeting institutional requirements for Mid Day Meal Scheme, Integrated Child Development

Scheme, etc.

● Withdrawal of prohibition on export on all varieties of edible oils, except mustard oil.



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Previous Year Questions - UPSC IAS Prelims

1. With reference to inflation in India, which of the following statements is correct? (2015)

(a) Controlling the inflation in India is the responsibility of the Government of India only

(b) The Reserve Bank of India has no role in controlling the inflation

(c) Decreased money circulation helps in controlling the inflation

(d) Increased money circulation helps in controlling the inflation

2. Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers’? (2015)

(a) The Reserve Bank of India

(b) The Department of Economic Affairs

(c) The Labour Bureau

(d) The Department of Personnel and Training

3. Consider the following statements: (2013)

1. Inflation benefits the debtors.

2. Inflation benefits the bond-holders.

Which of the statements given above is /are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

4. A rise in the general level of prices may be caused by (2013)

1. an increase in the money supply

2. a decrease in the aggregate level of output

3. an increase in the effective demand

Select the correct answer using the codes given below:

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

5. Which one of the following is likely to be the most inflationary in its effect? (2013)

(a) Repayment of public debt

(b) Borrowing from the public to finance a budget deficit

(c) Borrowing from banks to finance a budget deficit

(d) Creating new money to finance a budget deficit

6. A rapid increase in the rate of inflation is sometimes attributed to the base effect. What is base effect?

(2011)

(a) It is the impact of drastic deficiency in supply due to the impact of crops

(b) It is the impact of the surge in demand due to rapid economic growth

(c) It is the impact of the price levels of previous year on the calculation of inflation rate.

(d) None of the statements (a), (b) and (c) given above is correct in this context.

7. Economic growth is usually coupled with (2011)

(a) Deflation

(b) Inflation



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(c) Stagflation

(d) Hyperinflation

8. India has experienced persistent and high food inflation in the recent past. What could be the reasons?

(2011)

1. Due to a gradual switchover to the cultivation of commercial crops, the area under cultivation of food

grains has steadily decreased in the last five years by about 30%.

2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a

significant change.

3. The food supply chain has structural constraints.

Which of the statements given above are correct?

a) 1 & 2 only

b) 2 & 3 only

c) 1 and 3 only

d) 1, 2 and 3

9. With reference to India, consider the following statements: (2010)

1. The Wholesale Price Index (WPI) in India is available on a monthly basis only.

2. As compared to Consumer Price Index for industrial workers [CPI(IW)], the WPI gives less weight to

food articles.

Which of the statements given above is / are correct?

a) 1 only b) 2 only c) Both 1 & 2 d) Neither 1 nor 2

10. Which of the following statements is an appropriate description of deflation? (2010)

a) It is a sudden fall in the value of a currency against other currencies

b) It is a persistent recession in both the financial and real sectors of economy

c) It is a persistent fall in the general price level of goods and services.

d) It is a fall in the rate of inflation over a period of time.



Economy (PRELIMS

EXCLUSIVE) 2020-21



Answers with Explanation

1. (c) Decreased money circulation helps in controlling the inflation

● RBI and government both play a role in controlling inflation, often termed as "inflation targeting" by

the RBI. Hence, a and b are incorrect.

● Increased money circulation leads to increased inflation as demand increases.

● RBI increases bank rates and SLR etc. to reduce money supply in the market which tames demand

and hence, inflation.

2. (c) The Labour Bureau

● CPI(IW) is released by Labour Bureau.

3. (a) 1 only

● For debtors, "real" interest rate goes down with inflation. Thus it benefits them.

● On the other hand, with inflation the yield of bonds goes down, thus a negative effect for bond-

holders.

4. (d) 1, 2 and 3

● It a direct application based question.

● 1st statement is correct as increase in money supply will cause inflation.

● 2nd and 3rd statement are obviously correct as they represent supply and demand side of products.

5. (d) Creating new money to finance a budget deficit

● B and C option will lead to a decrease in the money supply in the market.

● Between A and D, D will have more inflationary effect than A, as it will lead to an increase in total

money supply in the market.

6. (c) It is the impact of the price levels of previous year on the calculation of inflation rate.

● The Base effect refers to the tendency of a small change from a low initial amount to the current

amount which is translated into a large percentage and appears as large.

● It is usually used in the context of inflation.

● It indicates the change in the inflation rate in the current period with respect to the base period.

7. (b) Inflation

● Inflation and economic growth are parallel lines and can never meet.

● Inflation reduces the value of money and makes it difficult for the common people.

● Inflation and economic growth are incompatible because the former affects all sectors as indicated by

CPI or Consumer Price Index.

8. (b) 2 & 3 only

● Notwithstanding some moderation, food price inflation has remained persistently elevated for over a

year now, reflecting in part the structural demand- supply mismatches in several commodities.

● The trend of food inflation was pointing at not only structural demand-supply mismatches in

commodities comprises the essential consumption basket but also at changing consumption patterns.

9. (b) 2 only

● After the Abhijit Sen committee’s proposals in 2004-05, the government had approved the proposal

to release or wholesale price based inflation data on a monthly basis, instead of every week. The base

year was changed to 2004-05 from 1993-94.



Economy (PRELIMS

EXCLUSIVE) 2020-21



● However data on primary and fuel items was continued to release on a weekly basis. Consumer Price

Index food group has a weight of 39.1% as compared to the combined weight of 24.4% (food articles

and Manufactured food products) in Wholesale Price Index food basket.

10. (c) It is a persistent fall in the general price level of goods and services.

● Deflation is a decrease in the prices of goods and services.

● It occurs when the annual inflation rate falls below 0% which is a negative inflation rate.

● This is different from Disinflation which is a slow-down in the inflation rate.

● This is a situation when inflation declines to lower levels but prices continue to rise.



Economy (PRELIMS WriteToBeIAS.com By CA RAHUL KUMAR ......Tariff and Non-Tariff Barriers Inward...

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