Indian Economy Short Notes | Complete GK for Competitive Exams

November 21, 2025

INDIAN ECONOMY – SHORT NOTES 

(SSC / RRB / Banking / PSC — High-Scoring Format)

INDIAN ECONOMY – SHORT NOTES

1. INTRODUCTION TO INDIAN ECONOMY

The Indian economy is the 5th largest economy in the world (Nominal GDP) and 3rd largest in PPP terms.
It is a mixed economy — meaning both public sector + private sector play major roles.

Key Characteristics

  • Mixed economy

  • Fast-growing service sector

  • Large population → large labour force

  • Agriculture still supports ~45% population

  • Developing economy but rapidly industrializing

Sectors of Indian Economy

  1. Primary Sector

    • Agriculture, mining, fishing

    • Largest employment share

  2. Secondary Sector

    • Manufacturing, construction

    • Major contributor to industrialization

  3. Tertiary Sector

    • Services: IT, banking, telecom

    • Largest contributor to GDP

2. ECONOMIC SYSTEMS

India follows a Mixed Economic System combining:

  • Capitalism (market forces)

  • Socialism (state welfare)

Why Mixed Economy?

  • Ensures private sector growth

  • Government safeguards vulnerable sections

  • Balanced development

3. NATIONAL INCOME

National Income measures the value of goods & services produced in a country.

Methods of Calculating National Income

  1. Production Method

  2. Income Method

  3. Expenditure Method

Important Terms

  • GDP – Value of goods/services produced inside country

  • GNP – GDP + Income from abroad – Income to foreigners

  • NDP – GDP – Depreciation

  • Per Capita Income – National Income ÷ Population

  • Real GDP – Adjusted for inflation

  • Nominal GDP – Not adjusted for inflation

GDP Formula

GDP = C + I + G + (X – M)
where
C = Consumption, I = Investment, G = Government Expenditure, X-M = Net Exports.

4. ECONOMIC PLANNING IN INDIA

India started planning in 1951 with the First Five-Year Plan.

Planning Organization Evolution

  • 1950–2014 → Planning Commission

  • 2015 onwards → NITI Aayog

NITI Aayog

(National Institution for Transforming India)

Key Functions:

  • Policy think-tank

  • Cooperative federalism

  • Monitoring schemes

  • Promoting innovation

Heads

  • Chairperson → Prime Minister

  • Vice Chairperson → Appointed by Govt.

5. INFLATION

Inflation = Rise in general price levels.

Types of Inflation

  • Demand-Pull Inflation → Excess demand

  • Cost-Push Inflation → Increased production cost

  • Imported Inflation → Due to costly imports

  • Hyperinflation → Extreme inflation

Measurement

  • CPI (Consumer Price Index) → Measures retail inflation

  • WPI (Wholesale Price Index) → Measures wholesale inflation

CPI is used for inflation targeting in India.

6. MONETARY POLICY

Monetary policy = Controls money supply and credit in economy.
Managed by RBI.

Tools of Monetary Policy

Quantitative Tools:

  • Bank Rate

  • Repo Rate (short-term lending to banks)

  • Reverse Repo Rate

  • CRR (Cash Reserve Ratio)

  • SLR (Statutory Liquidity Ratio)

Qualitative Tools:

  • Moral suasion

  • Selective credit control

Monetary Policy Committee (MPC)

  • 6 members

  • Controls interest rate decisions

  • Inflation target = 4% ± 2%

7. BANKING SYSTEM IN INDIA

The Indian banking system includes:

  • RBI

  • Public Sector Banks

  • Private Banks

  • Regional Rural Banks

  • Cooperative Banks

  • Payment Banks & Small Finance Banks

Reserve Bank of India (RBI)

Established: 1935
Nationalized: 1949

Functions:

  • Currency issuance

  • Banker’s bank

  • Controls monetary policy

  • Regulates banking system

8. FINANCIAL MARKET

Includes:

1. Money Market (short-term funds)

Instruments:

  • Treasury Bills

  • Commercial Paper

  • Certificates of Deposit

2. Capital Market (long-term funds)

Includes:

  • Equity Market

  • Debt Market

  • Mutual Funds

Regulator: SEBI

9. STOCK EXCHANGES

Major stock exchanges:

  • BSE (Asia's oldest)

  • NSE (largest exchange in India)

Important indices:

  • Sensex – top 30 BSE companies

  • Nifty – top 50 NSE companies

10. UNION BUDGET

Budget = Annual financial statement.

Components

  • Revenue Budget

  • Capital Budget

Deficits

  • Fiscal Deficit = Total Expenditure – Total Revenue

  • Revenue Deficit = Revenue Exp. – Revenue Receipts

  • Primary Deficit = Fiscal Deficit – Interest Payments

11. TAXATION SYSTEM

Types of Taxes

  1. Direct Taxes

    • Income Tax

    • Corporate Tax

  2. Indirect Taxes

    • GST (Goods and Services Tax)

      • CGST

      • SGST

      • IGST

GST Council

  • Chairperson → Union Finance Minister

  • Decisions by 3/4 majority

12. POVERTY

Poverty line = minimum income to meet basic needs.

Committees on Poverty

  • Alagh Committee

  • Lakdawala Committee

  • Tendulkar Committee

  • Rangarajan Committee

Tendulkar Committee is commonly used.

13. UNEMPLOYMENT

Types of unemployment:

  • Seasonal

  • Frictional

  • Cyclical

  • Structural

  • Disguised (common in agriculture)

  • Educated unemployment

14. AGRICULTURE

Agriculture contributes ~18% to GDP.

Major Features

  • Monsoon dependent

  • Low productivity

  • Dominance of food grains

Crops

Kharif: Paddy, Maize, Cotton
Rabi: Wheat, Mustard
Zaid: Watermelon, Cucumber

Green Revolution

  • Introduced HYV seeds

  • Focus on wheat

  • States: Punjab, Haryana, UP

White Revolution

  • Dairy development

  • Led by Verghese Kurien

15. INDUSTRIES

Major Industries

  • Iron & Steel → Jamshedpur, Bhilai

  • Cotton Textiles → Mumbai, Ahmedabad

  • Automobiles → Chennai, Pune

  • IT Industry → Bengaluru, Hyderabad

Industrial Policies

Industrial Policy 1991 – Liberalization, Privatization, Globalization (LPG).

16. INFRASTRUCTURE

Includes:

  • Power

  • Transport

  • Communications

  • Ports

  • Highways

Major Programs

  • Bharatmala

  • Sagarmala

  • UDAN

  • Digital India

17. EXTERNAL SECTOR

Balance of Payments (BoP)

Records all international transactions.

Foreign Exchange

Managed by RBI.

Exports & Imports

India imports:

  • Oil

  • Gold

  • Machinery

India exports:

  • Petroleum products

  • Gems & jewellery

  • IT services

18. FOREIGN DIRECT INVESTMENT (FDI)

FDI = investment from foreign companies.

Routes

  1. Automatic Route

  2. Government Route

Sectors with highest FDI

  • Services

  • Telecom

  • Computer software

  • Construction

19. GOVERNMENT SCHEMES (High-Yield for Exams)

Poverty & Employment

  • MGNREGA – 100 days work guarantee

  • PMAY – Housing for all

  • Deen Dayal Upadhyaya Grameen Kaushalya Yojana

Agriculture

  • PM Kisan

  • PM Fasal Bima Yojana

  • Soil Health Card

Financial Inclusion

  • Jan Dhan Yojana

  • Mudra Yojana

Social Welfare

  • Ayushman Bharat

  • National Health Mission

20. FIVE-YEAR PLANS (SUMMARY)

  1. 1st Plan (1951–56) → Agriculture focus

  2. 2nd Plan (1956–61) → Industrialization (Mahalanobis model)

  3. 3rd Plan (1961–66) → Self-reliance

  4. 4th Plan (1969–74) → Growth with stability

  5. 5th Plan (1974–79) → Poverty removal (Garibi Hatao)

  6. 6th Plan (1980–85) → Infrastructure

  7. 8th Plan (1992–97) → LPG reforms

  8. 10th Plan (2002–07) → Reduce poverty

  9. 12th Plan (2012–17) → Inclusive growth

After 2017 → No more 5-year plans; NITI Aayog introduced 3-year & 15-year plans.

21. HIGH-YIELD FACTS FOR EXAMS

  • India = Mixed Economy

  • GDP calculated by NSO

  • RBI was nationalized in 1949

  • SEBI regulates capital market

  • Sensex = 30 companies

  • Nifty = 50 companies

  • GST launched on 1 July 2017

  • Inflation measured by CPI

  • Highest employment sector = Agriculture

  • Largest GDP contributor = Services

  • Planning Commission replaced by NITI Aayog (2015)

  • Repo Rate controls short-term money supply

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