Export

• Definition: Selling goods or services to another country.
• Example: India exports software services to the USA.

Import

• Definition: Buying goods or services from another country.
• Example: India imports crude oil from the Middle East.

Trade Balance

• Definition: The difference between a country’s exports and imports.
• Example: A trade surplus occurs when exports exceed imports.

Tariff

• Definition: A tax imposed on imported or exported goods.
• Example: High tariffs on Chinese goods to protect domestic industries.

Customs Duty

• Definition: A tax on goods transported across international borders.
• Example: Paying customs duty for imported electronics.

Free Trade Agreement (FTA)

• Definition: A pact between countries to reduce trade barriers like tariffs.
• Example: India-Sri Lanka Free Trade Agreement.

Dumping

Definition: Selling goods in another country at very low prices.

Example: A country sells steel below production cost to dominate the market.

Trade Deficit

• Definition: When a country imports more than it exports.
• Example: India has a trade deficit with China.

Trade Surplus

• Definition: When a country exports more than it imports.
• Example: Japan has a trade surplus due to strong exports.

Capital Expenditure (CapEx)

• Definition: Money spent by the government or businesses on long-term assets.
• Example: Building roads, airports, or factories

Credit Rating

• Definition: A score that indicates the creditworthiness of a borrower.
• Example: India’s sovereign credit rating by agencies like Moody’s.

Capital Account

• Definition: Part of a country’s BOP that records capital inflows and outflows.
• Example: Foreign investments in Indian industries.

Currency Depreciation

• Definition: A fall in the value of a currency compared to others.
• Example: ₹1 depreciating against $1 from ₹70 to ₹75.

Monopoly

• Definition: A market where one company dominates the supply of a product.
• Example: Indian Railways for train transport in India.

Oligopoly

• Definition: A market dominated by a few large companies.
• Example: The telecom industry with Airtel, Jio, and Vodafone.

Exchange Rate

• Definition: The value of one currency compared to another.
• Example: ₹1 = $0.013.

Trade Barrier

• Definition: Any restriction on the flow of goods between countries.
• Example: Tariffs or quotas to limit imports.

Opportunity Cost

• Definition: The benefit lost when choosing one option over another.
• Example: Spending money on a vacation instead of investing it in a fixed deposit.

Subsidy

• Definition: Financial help from the government to reduce the cost of goods or services.
• Example: Subsidized LPG cylinders in India.

Public Debt

• Definition: The total amount of money owed by the government to creditors.
• Example: Borrowing by issuing government bonds.

Budget Deficit

• Definition: When government expenses exceed revenue.
• Example: Spending ₹100 crore with revenue of ₹80 crore.

Foreign Direct Investment (FDI)

• Definition: Investment made by a company or individual in another country.
• Example: A foreign company opening a factory in India.

Fiscal Responsibility and Budget Management (FRBM) Act

• Definition: A law to ensure the government manages its finances responsibly.
• Example: Keeping fiscal deficits within a certain limit.

Cashless Economy

• Definition: An economy where digital transactions replace cash transactions.
• Example: Payments made using UPI or credit cards.

Key Economic Metrics-India 

• GDP: 6.3% growth (FY24). GDP close to 4 trillion dollar (Third largest Economy) 
• Exports: Goods exports $450 billion; services exports $375 billion (7th globally).
• Imports: $620 billion.
• Infrastructure Investment: ₹10 lakh crore allocated for FY24.
• Wholesale Price Index

- Inflation measure that tracks average price of goods sold at whole sale market.

(year on Year inflation Oct 2024 WPI : 2.36%)

• Consumer Price Index

- Inflation measure that tracks average price of goods and services purchased at household levels  (Year on Year inflation CPI 6.21% in Oct 2024) 

Basic Economic Indicators 

• Balance of Payment (current account deficit/surplus)
  • Foreign exchange reserves net of export and import bills  
• Unemployment rate (Urban and Rural) 
  • No of unemployed people divided by the total number of labour force 
  • For urban UER is 5.1% (yr23-24)
  • Rural UER is 2.5% (Yr 23-24) 
  • Only people above age of 15 years are taken 

-Source of data is National Sample survey Office (NSSO) 

• Poverty Rate
  • Poverty rate is calculated on the basis household consumption data. 
  • Poverty rate declined by 4.5-8.5%. 
• Human Development Index 
  • Statistical Index on three dimensions viz- Education, Income and Health. 
  • Education (Literacy rate ); Income (Gross national Income /population); Health (Life expectancy)
  • Human Development Index 0.647

Key Contributors of Indian Economy  

• Contributors of GDP
  • Agriculture 18%
  • Manufacturing 22%
  • Services 55%
• Sectors of Economy 
  • Primary sector - Agriculture, Forestry, Fishing 
  • Secondary Sector- Mfg and Construction 
  • Tertiary Sector – Services 

 Key Economic Policies 

• Fiscal Policy 
  • Policy dealing with govt spending and taxation matters  
  • Mainly done through annual budgeting exercise.
  • To promote economic growth, reduce poverty and maintain a balance of payment 
  • Taken up by the government  
• Monetary Policy
  • Policy targets money supply by way of controlling REPO rates and other parameters 
  • Objectives are employment and price stability
  • Policy is driven by The Reserve Bank of India 
• Way and Means Policy 
  • To support liquidity to centre and state goverments by way of temporary loans by RBI.  
  • Loans by RBI to state and central Govt for 90 days period at REPO rate 
  • In case of default 2% above REPO rate is charged as overdraft 
  • Overdraft to be paid within maximum 10 day in case of centre govt and 21 days in case of state govt. 

 Key Initiative of Govt Of India 

• Make in India 
• Digital India 
• Skill India 
• Start Up India 
• PMJDY 
• GST 
• Ease of doing Business