CSCARTINDIA One Stop Solution for CS Students

Economics
Booster
One Liner Master Revision

by
CS Praveen Choudhary

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Chapter 1 – Basics of Demand & Supply and Forms of Market Competition

✓ The term Economics derived from a Greek word.
✓ Oikou means Household
✓ Nomos means Rules
✓ Nomia means Management.
✓ Adam Smith is called as Father of Economics.
✓ As per Adam Smith, Economics is Science of Wealth.
✓ Adam Smith wrote the book in 1776
✓ Name of the book was “The Nature and causes of wealth of Nation”
✓ Alfered Marshall is called as Father of “Modern Economics”.
✓ Alfered Marshall wrote the book in 1890 and the name of book was Principles of
Economics.
✓ As per Alfered Marshall, Economics is “Science of Social welfare”
✓ Lionel Robins wrote “Essay on Nature and significant of Economic Science” in 1932.
✓ As per Lionel Robbins, Economics is “Science of Scarcity” or “Science of Choice Making”.
✓ Paul A. Samuelson wrote the book “Economics” in 1948.
✓ As per Paul A. Samuelson, Economics is Science of growth and development.
✓ Human wants are unlimited.
✓ Resources are scarce and they have alternative uses.
✓ Central Economic Problem is “Optimise utilization of Resources” or “to satisfy maximum
needs by using least of resources”
✓ Resources are also called as Factor of Production.
✓ Factor of Production can be of 4 types 1) Land, 2) Labour, 3) Capital and 4) Entrepreneurs.
✓ Resources are of 2 types – 1) Natural Resources or Non – Financial Resources, 2) Man
made Resources or Financial Resources.
✓ Natural Resources are of 2 types a) Land, b) Labour.
✓ Land is a passive factor of Production.
✓ Reward for Land is Rent.
✓ Properties of land can-not be changed.
✓ Land means anything on, above and below the surface of Earth.
✓ Fertility of Land can be increased.
✓ Supply of Land is Perfectly Inelastic.
✓ Labour is an active factor of Production.
✓ Labour means any physical or mental exertion to earn the livelihood.
✓ The person who does the physical or mental exertion is called as Labourer.
✓ Reward for Labour is Wages.
✓ Supply curve of labour is backward bending.
✓ Labour is highly immobile.
✓ Capital is a man-made resource.
✓ All capital is wealth, but all the wealth need not be capital.
✓ Capital is Produced means of Production.
✓ Reward for Capital is Interest.
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✓ Capital is a passive Factor of Production.

✓ Entrepreneurs is most active FOP.
✓ Entrepreneurs conceive the idea, innovation
✓ Entrepreneur combine all the other resources of FOP.
✓ Entrepreneur share maximum Risk
✓ Reward for Entrepreneur is Profit.
✓ Economics can be divided in to 2 parts viz Microeconomics and Macroeconomics.
✓ In Microeconomics, we Study a Single Economic Unit like individual firm, Demand of one
commodity, supply of one commodity etc.
✓ In Microeconomics, Study is based on Assumption or hypothesis.
✓ Macro Economics is study of Aggregates
✓ Study of macroeconomics is mainly based on Facts and Statistics.
✓ Economics is an Art as it need application of systematic knowledge.
✓ Economics can be referred as science.
✓ Some economist considers Economics as Positive Science rather some refer it as
Normative Science.
✓ Positive Science talks about “What is?”
✓ It talks about “Cause and Effect relation”
✓ Normative Science is “What ought to be” or “What should be”
✓ Normative science passes value Judgement.
✓ Demand is an economic principle referring to a consumer's desire to purchase goods and
services and willingness to pay a price for a specific good or service.
✓ Quantity Demanded means “No. of units demanded at a particular time and at particular
price”
✓ Demand is a relation between Various prices and various quantity demanded in a
particular period of time.
✓ Demand function is also called as factors which influence demand or the determinants of
demand.
✓ Law of demand is also called as theory of demand.
✓ Cetaris Paribus means remaining all the other things remaining constant.
✓ As per Law of Demand, if there is increase in price of commodity, then there will be
decrease in demand of that commodity.
✓ Demand curve is a downward slopping.
✓ Demand curve may be a straight Line or a free hand curve.
✓ Demand curve never touches X-axis or Y-axis.
✓ Demand curve never becomes negative.
✓ There is an inverse relationship between the price and quantity demanded of a
commodity.
✓ Relation between QD of Goods and Price of complimentary goods will be inverse
✓ If commodities A & B are complementary goods and price of A decreases, then quantity
demand for both A & B will increase.
✓ Relation between QD of Goods and Price of substitue goods will be Positive or Direct.

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✓ Assuming that tea and coffee are perfect substitutes for the consumer, if there is an
increase in the price of coffee, all other things remaining constant it is expected that
demand curve of tea will shift leftward
✓ Relation between QD of Goods and Income of consumer will be Positive or Direct.
✓ If Population increases, demand will also increase.
✓ In rainy season demand for Raincoat will increase.
✓ Exception to law of demand is when change in price of commodity doesn’t have inverse
effect on demand of that commodity.
✓ There are few exceptional cases where the law of demand is not applicable, which may be
categorized as follows: Giffen Goods, Articles of Snob appeal, speculation and consumer’s
psychological bias or illusion.
✓ Giffen goods are the Inferior Goods, in which Increase in the price does not decrease in
demand or vice versa.
✓ All Giffen goods are inferior goods but all the inferior goods need not be Giffen goods.
✓ Variation of demand is when quantity demanded changes because of change in price of
the commodity.
✓ In variation of demand, there will be movement along the same the demand curve.
✓ Variation of demand can be of two types viz Extension or expansion of demand and
Contraction of demand.
✓ Extension or Expansion of demand is when QD increase because of decrease in Price of
commodity.
✓ In extension, the movement will be left to right and downward along the same demand
curve.
✓ Contraction of demand is when QD decreases because of increase in price of commodity.
✓ In Contraction, Movement will be right to left and upward along the same demand curve.
✓ Law of demand is a Qualitative Concept.
✓ Elasticity of demand is a Quantitative concept.
✓ Elasticity of demand can be of 3 types viz Price Elasticity, Income Elasticity and Cross
Elasticity.
✓ Elasticity of demand is the responsiveness of the quantity demanded of a commodity to
changes in one of the variables on which demand depends.
✓ In other words, it is the percentage change in quantity demanded divided by the
percentage in one of the variables on which demand depends.
✓ If potato chips and popcorns are substitute then increase in price of potato chips will
increase the demand for popcorns and hence demand curve of popcorn will shift to the
right.
✓ During Diwali festive season, when airlines in India raise prices, if the Indian Railways
were to reduce their ticket prices and run additional passenger trains, The demand curve
for airline tickets should shift leftward as the price of the airlines tickets has been
increased and on the other side the price of the rail tickets decreases.
✓ The price elasticity of demand is the response of the quantity demanded to change in the
price of a commodity.

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✓ The various forms of price elasticity of demand are – Perfectly elastic demand, Perfectly
inelastic demand, Relatively Elastic demand, Relatively inelastic demand, Unitary Elastic
Demand
✓ Income elasticity of demand is the degree of responsiveness of demand to the change in
income.
✓ In Perfectly Elasticity of demand, Elasticity will be infinite.
✓ In Perfectly Elasticity of demand, Slope will be zero.
✓ In Perfectly Elasticity of demand, demand curve will be horizontal Straight Line Parallel
to x Axis.
✓ Relatively Elastic demand is also called as More Elastic Demand or Elastic Demand.
✓ In Relatively Elastic demand, Elasticity will be more than 1.
✓ In Relatively Elastic demand, Demand curve will be downward slopped.
✓ In Unitary Elastic Demand, the Elasticity will be 1.
✓ In Unitary Elastic Demand, the Demand curve is Rectangular Hyper bola.
✓ Relatively Inelastic demand is also called as Less Elastic Demand or Inelastic Demand.
✓ In Relatively Inelastic demand, the Elasticity will be less than one.
✓ In perfectly in elastic demand, the Elasticity will be Zero and the demand curve will be
vertical straight line parallel to Y Axis.
✓ In Price Elasticity, Ignore the negative sign which calculating the Elasticity.
✓ In general, if the market demand for a good is said to be inelastic at a given price, then at
that price the price elasticity of demand for that good is Less than 1.
✓ The responsiveness of demand to changes in Income of consumer is called Income
elasticity of demand.
✓ In Income Elasticity, Elasticity for Inferior Goods will be Negative.
✓ In Income Elasticity, Elasticity for essential Goods will be Zero.
✓ In Income Elasticity, Elasticity for other goods may be more than zero.
✓ The responsiveness of demand to changes in prices of related commodities is called cross
elasticity of demand.
✓ In Cross Elasticity, Elasticity for Perfect Complimentary Goods will be Negatively infinite.
✓ In Cross Elasticity, Elasticity for Complimentary Goods will be Negative.
✓ In cross Elasticity, Elasticity for unrelated Goods will be Zero.
✓ In cross Elasticity, Elasticity for Perfect substitute Goods will be positively infinite.
✓ In cross Elasticity, Elasticity for Substitute Goods will be Positive.
✓ Supply does not mean sales rather offer for Sale
✓ Supply can never be more than Stock.
✓ Quantity Supplied means, no. of units supplied by producer or supplier at a particular
price and at particular point of time.
✓ Supply is relation between various prices and various quantity in a particular period of
time.
✓ The supply of a good or service refers to the quantities of that good or service that
producers are prepared to offer for sale at a set of prices over a period of time.
✓ There is a direct relation between price of the commodity and Supply of same.

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✓ Relation between QS of Goods and Price of complimentary goods will be Direct.

✓ Relation between QS of Goods and Price of substitute goods will be Negative or Inverse.
✓ Relation between QS of Goods and Cost of Product will be Negative or Inverse.
✓ Relation between QS of Goods and Tax will be Negative or Inverse.
✓ Supply increases if the profit increases.
✓ The law of supply states that a firm will produce and offer to sell greater quantities of a
product or service as the price of that product or service rises, other things being equal.
✓ Supply curve always slope upward from left to right.
✓ Supply curve can be a straight line or a free hand curve.
✓ Supply curve never touches X axis or Y axis.
✓ Law of supply is a qualitative concept
✓ Elasticity of Supply is a Quantitative Concept.
✓ If Supply curve shoots from y axis the elasticity will be greater than 1.
✓ If Supply curve shoots from x axis the elasticity will be Less than 1.
✓ If Supply curve is horizontal straight line parallel to x-axis, then elasticity will be infinite.
✓ If Supply curve is vertical straight line parallel to y-axis, then elasticity will be infinite.
✓ If Supply curve shoots from the point of origin, the elasticity will be Less than 1.
✓ When quantity supplied of a commodity is more than its quantity demanded, the most
common outcome is competition among sellers leading to fall in Price.
✓ When there is a 10% increase in price of movie tickets, aggregate supply increases by 8%
then supply is price elastic.
✓ The equilibrium price is the market price where the quantity of goods supplied is equal to
the quantity of goods demanded.
✓ Studies of market equilibrium show that for fixed number of firms. If the supply curve
shifts rightward and if simultaneously the demand curve shifts leftward, then equilibrium
quantity may increase, or decrease or may remain unchanged and equilibrium price
decrease.
✓ Studies of market equilibrium show that for fixed number of times, if the supply curve
shifts leftwards and if simultaneously the demand curve also shifts leftward, then
equilibrium quantity decreases, and equilibrium price may increase or decrease or remain
unchanged.
✓ With a fixed number of firms, when quantity demanded as a commodity is more than
quantity supplied, this results in competition among buyers leading to rise in price.
✓ In a perfect competition market, there are a large number of buyers and sellers.
✓ In a perfect competition market, All the firms in such a market are price takers.
✓ In a perfect competition market, price of a commodity shall be uniform.
✓ In a perfect competition market, there will be Free entry and free Exit.
✓ In a perfect competition market, Demand curve will be horiziotal to X Axis.
✓ a Firm operating under perfect competition, Marginal Revenue = Average Revenue =
Market Price
✓ In the long run, a firm in a perfectly competitive industry earns normal profit because,
there is freedom of entry and exit of firms so all firms can earn only normal profits.

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✓ In monopolistic competition, there are still a large number of buyers as well as sellers.
✓ Product Differentiation is Process of making the product different based on colour, taste,
packaging, size & shape to make it more attractable to a particular target market.
✓ In monopolistic competition, there will be product differentiation.
✓ For a firm under monopolistic competition, the Average Revenue curve is Downward
Slopping.
✓ In an oligopoly, there are only a few Big firms in the market.
✓ In a monopoly, there is only one seller, so a single firm will control the entire market.
✓ In a monopoly, there will be price discrimination.
✓ In the case of a duopoly, a particular market or industry is dominated by just 2 firms.
✓ A service or commodity has a perfectly inelastic supply if a given quantity of it can be
supplied whatever might be the price.
✓ When the change in supply is relatively less when compared to the change in price, we say
that the commodity has a relatively-less elastic supply.
✓ When the change in supply is relatively more when compared to the change in price, we
say that the commodity has a relatively greater-elastic supply.
✓ For a commodity with a unitary elasticity of supply, the change in quantity supplied of a
commodity is exactly equal to the change in its price.
✓ A unit tax is a tax that the government imposes per unit sale, of output for manufacturing
firm operating under perfect competition.
✓ In a perfectly competitive market with a fixed number of firms, with market supply curve
remaining unchanged when market demand curved shift left ward Both equilibrium
quantity and equilibrium price decrease.
✓ Commodities X and Y are complementary goods. If price of X increases, it is likely that
Quantity demanded for both X and Y will decrease.
✓ In general, if market demand for a commodity is price inelastic then the price elasticity of
demand for that commodity is Less than 1.

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Chapter 2 – National Income Accounting & Related Concepts

✓ In common parlance, Domestic income means the total value of goods and services
produced annually in a country (Domestic Territory) by any person.
✓ Domestic Territory includes Territorial water.
✓ Territorial Water is up-to 12 NM.
✓ National income means the total value of goods and services produced annually by Indian
National anywhere in the world.
✓ The person whose center of Economic interest lies in India is called as National of India.
✓ National Income means NNPFC.
✓ Factor income means the income earned by providing factor of production.
✓ Factor Income can also be called as Factor payment.
✓ Transfer income is the income received without any efforts or without providing any
factor of production.
✓ Transfer Income can also be called as Transfer Payment.
✓ Transfer Income is not part of Domestic Income or National Income.
✓ National Income or Net National Income is Gross National Income or Gross National
Product less depreciation. (NDP = GDP-dep)
✓ GDP = NDP + Dep
✓ NDPFC = NDPMP- Net IDT
✓ DP + NFIA = NP
✓ NFIA = Net Factor Income from Abroad
✓ NDPFC is the income earned by both public and private sector.
✓ Public Sector is also called as Govt. Sector Which includes Govt. Dept and Govt companies.
✓ Private Sector includes Household and Producer.
✓ NDPfc accruing to Pvt. Sector = NDPfc – Income by Govt. Dept – Saving of Govt. co.
✓ Private Income = NDPfc accruing to Pvt. Sector + Trf Income.
✓ The product method is also called as Value added method or Industry output method or
Net output method.
✓ The Product method measures the contribution of each producing enterprise in the
domestic territory of the country.
✓ The answer of Product method will be GDPmp or GAVmp.
✓ In Product Method, GDPmp = Value of Output – Intermediate Consumption.
✓ Value of output = Sales (if all units produced in the FY are sold in the same FY)
✓ Value of Output = Sales +  Stock (If all units are not sold in same FY).
✓ Intermediate Goods are used as raw material or inputs for production of other goods.
✓  Stock = Closing stock – opening Stock.
✓ In Product Method, Avoid double counting.
✓ In Product Method, ignore stock appreciation
✓ In Product Method, Goods for self-consumption shall be considered.
✓ Expenditure method is also called as Income disposal method.
✓ In Expenditure method, Answer will be GDPmp.

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✓ In Expenditure method, Final Expenditure in an economy in one FY shall be taken in

account.
✓ In Expenditure method, GDPmp = C+I+G+(X+M).
✓ Consumption Expenditure means Final Expenditure made to purchase the final goods and
service.
✓ Investment expenditure is Final expenditure made on final goods which will be durable in
nature and may also be used for further production.
✓ Govt. Exp = consumption expenditure and Investment expenditure made by govt.
✓ The expenditure approach measures national income as total spending on final goods and
services produced within nation during a year.
✓ In Income Method, national income is the sum of all income, wages, rents, interest and
profit paid to the 4 factors of production.
✓ In Income method, we measure the aggregate value of Factor income i.e. all types of
incomes which are incurred from all factors across the nation.
✓ GDP is the total value of goods and services produced within the country during a year.
✓ GDPfc is the sum of net value added by all producers within the country.
✓ NDP is the value of net output of the economy during the year.
✓ When GDP is measured on the basis of current price, it is called GDP at current prices or
nominal GDP. On the other hand, when GDP is calculated on the basis of fixed prices in
some year, it is called GDP at constant prices or real GDP.
✓ Real GDP = GDP for the Current Year x Base Year (100) / Current Year Index
✓ GDP deflator is an index of price changes of goods and services included in GDP.
✓ Change in volume of production is the factor which changes Real GDP as prices are
Constant.
✓ Real GDP = Constant Prices x Volume of Production
✓ The GDP deflator is a measure of price inflation. It is calculated by dividing nominal GDP
by Real GDP and then multiplying by 100.
✓ GNP is the total measure of the flow of goods and services at market value resulting from
current production during a year in a country, including net income from abroad.
✓ In estimating GNP of the economy, the market price of only the final products should be
taken into account.
✓ The profits earned or losses incurred on account of changes in capital assets as a result of
fluctuations in market prices are not included in the GNP if they are not responsible for
current production or economic activity.
✓ The income method to GNP consists of the remuneration paid in terms of money to the
factors of production annually in a country
✓ In calculating GNP, the money value of final goods and services produced at current prices
during a year is taken into account.
✓ GNPMP = GDPMP + NFIA.
✓ GNPFC is the sum of the money value of the income produced by and accruing to the
various factors of production in one year in a country.

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✓ GNPMP always includes indirect taxes levied by the government on goods which raise their
prices.
✓ GNPMP is always higher than GNPMP.
✓ GNPFC = GNPMP – Indirect Taxes + Subsidies.
✓ NNP includes the value of total output of consumption goods and investment goods.
✓ NNPMP is the net value of final goods and services evaluated at market prices in the course
of one year in a country
✓ NNPMP= GNPMP—Depreciation.
✓ NNPFC is the net output evaluated at factor prices.
✓ NNPFC= NNPMP – Indirect taxes + Subsidies = GNPMP – Depreciation – Indirect taxes +
Subsidies = National Income.
✓ Income generated (or earned) by factors of production within the country from its own
resources is called domestic income or domestic product.
✓ Private income is income obtained by private individuals from any source, productive or
otherwise, and the retained income of corporations.
✓ Private Income = National Income (or NNPFC) + Transfer Payments + Interest on Public
Debt — Social Security — Profits and Surpluses of Public Undertakings.
✓ Personal income is the total income received by the individuals of a country from all
sources before payment of direct taxes in one year.
✓ Personal income is never equal to the national income, because the former includes the
transfer payments whereas they are not included in national income.
✓ Personal Income = National Income – Undistributed Corporate Profits – Profit Taxes –
Social Security Contribution + Transfer Payments + Interest on Public Debt.
✓ Personal Income = Private Income – Undistributed Corporate Profits – Profit Taxes
✓ Disposable income or personal disposable income means the actual income which can be
spent on consumption by individuals and families.
✓ Disposable Income = Consumption Expenditure + Savings.
✓ Real income is national income expressed in terms of a general level of prices of a
particular Base year.
✓ Real NNP = NNP for the Current Year x Base Year Index (=100) / Current Year Index
✓ The average income of the people of a country in a particular year is called Per Capita
Income for that year.
✓ In Product method, national income accounting is based on the principle that Gross
Domestic Product (GDP) is equal to the sum total of gross value added of all the firms in
the country's economy.
✓ India took appropriate measures of import substitution and enhanced domestic
production in identified manufactured product. It will cause Balance of Payments Surplus
for India.

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Chapter 3 – Indian Union Budget

✓ The first Indian Budget was presented by Mr James Wilson on February 18,1869 after
Indian Budget was introduced on April 7, 1860 by the East India Company
✓ The first Budget of Independent India was presented by the then Finance Minister, Mr RK
Shanmukham Chetty on November 26, 1947.
✓ Mr KC Neogy and Mr HN Bahuguna were the only two Finance Ministers who did not
present any Indian Budget.
✓ The record of presenting maximum number of Budgets is held by Shri Morarji Desai for
presenting 10 Budgets.
✓ As mandated by the Constitution of India, the FINANCE BILL is presented in Lok Sabha
after the presentation of the Union Budget, it provides details on the imposition, abolition,
remission, alteration or regulation of taxes proposed in the Budget.
✓ All revenues raised by the government, money borrowed and receipts from loans given by
the government flow into the CFI and no money can be withdrawn from this fund without
the Parliament's approval.
✓ The demand for grants includes provisions with respect to revenue expenditure, capital
expenditure, grants to State and Union Territory governments together with loans and
advances.
✓ Loans received by the Government of India from International Monetary Fund are an
example of Capital expenditure.
✓ Appropriation Bill gives power to the government to withdraw funds from the CFI for
meeting the expenditure during the financial year.
✓ (Total expenditure) - (Revenue receipts) - (Non debt creating capital receipts) = Gross
Fiscal Deficit.
✓ One of the goals of the government budget is to raise aggregate demand during periods of
low employment. During phases of high employment, the goals is to reduce aggregate
demand. This government intervention either to expand demand or to reduce demand
constitutes the stabilisaiton function.
✓ Dividends and profits received on investments made by the government of India is an
example of Non-tax receipt.
✓ The CFI includes revenues, which are received by the government through taxes and
expenses incurred in the form of borrowings and loans.
✓ The proposals of the government for levy of new taxes, modification of the existing tax
structure or continuance of the existing tax structure beyond the period approved by
Parliament are submitted to Parliament through Finance bill.
✓ A finance bill provides the details of imposition, abolition and alteration of proposed taxes.
✓ Public Account is to account for flows for those transactions where the government is
merely acting as a banker. These funds do not belong to the government.
✓ If the revenue expense is more than that of receipts, it indicates that there is a revenue
deficit.

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✓ Revenue expenditure is for the normal running of government departments and various
services, interest payments on debt, subsidies, etc. Revenue receipts are divided into tax
and non-tax revenue.
✓ Cash grants-in-aid from foreign countries and international organizations received by the
Government of India are classified as Non tax Revenue Receipts.
✓ Dividend receipts by the Government of India from Central Public Sector Enterprises
forms part of Revenue Budget.
✓ The Capital Budget part of the Union Budget has accounts for capital payment and receipts
of the government.
✓ Recoveries of loans by the Govt. of India from the State Government is example of Capital
Receipts.
✓ Basic custom duties levied on imported goods is an example of Revenue receipt.
✓ Borrowings by the government of India from the World Bank is example of Capital
Receipts.
✓ Receipts of Disinvestment of Government of India's stake in Public Sector Banks is
example of Capital Receipts.
✓ Capital receipts are loans raised by the government from the public (which are called
market loans), borrowings by the government from the RBI and other parties through sale
of treasury bills, loans received from foreign bodies and governments, and recoveries of
loans granted by the Central government to state and Union Territory governments and
other parties.
✓ External debt raised by the Government of India from Asian Development Bank is an
example of Capital Receipt.
✓ Loan taken by the power plant will be taken as a capital receipt as it is not a regular receipt
on a regular basis or in the ordinary course of business.
✓ Loans and advances disbursed by the Central Governments, Union Territory Governments
and Foreign Governments are an example of capital Receipt because it create liabilities or
reduces financial assets and this loan is received from Government agencies.
✓ Government receipts which neither create asset nor reduce any liability are called
Revenue Receipts.
✓ Revenue Expenditure is also called income statement expenditure. It denotes short-term
cost-related assets that are not capitalised.
✓ Revenue Expenditure does not create an asset for the government.
✓ Receipt and expenditure of the Government of India related to the current financial year
are booked under fiscal account and it also includes taxes.
✓ The difference between Revenue Receipt and Revenue Expenditure is known as Revenue
Deficit.
✓ Capital budget consists of capital receipts and payments.
✓ Expenditure on salaries of Cabinet Ministers is revenue expenditure.
✓ Expenditure on acquisition of land and building for the purpose of Central Sector Schemes
is capital expenditure

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✓ Interest payments on market loans borrowed by Government of India is revenue

expenditure
✓ Payment of interest subsidy for short term credit to farmers is revenue expenditure.
✓ A Revenue Deficit does not denote an actual loss of revenue for the Government, but it
only means a shortfall in revenue from what was expected by the government.
✓ A fiscal deficit is a shortfall in a government's income compared with its spending. The
government that has a fiscal deficit is spending beyond its means.
✓ Fiscal deficit of a government must be financial by the Government through its borrowings
or by printing of new currency notes.
✓ The government describes fiscal deficit of India as “the excess of total disbursements from
the CFI, excluding repayment of the debt, over total receipts into the Fund (excluding the
debt receipts) during a financial year”.
✓ Total expenditure – Total Receipt = Fiscal Deficit.
✓ Primary deficit = Total revenue - Total expenditure excluding interest payments on its
debt.
✓ Primary deficit = Fiscal deficit - Interest payment
✓ Revenue Deficit = Revenue Expenditure – Revenue Receipt
✓ Capital Deficit = Capital Expenditure – Capital Receipt.
✓ Capital Receipt either reduce Assets or Create Liabilities.
✓ Capital Expenditure either increase Assets or reduces Liabilities.
✓ Revenue Receipt or Revenue Expenditure does not have impact on Assets or Liabilities.

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Chapter 4 – Indian Financial Markets

✓ Financial services sector consists of the Money Market, capital markets, insurance sector
and NBFCs, banks and Mutual Fund.
✓ The banking industry handles finances in a country including cash and credit.
✓ In India financial sector reforms led to the establishment of private sector banks, both
Indian and foreign.
✓ Commercial Banks can be further classified into public sector banks, private sector banks,
foreign banks and Regional Rural Banks (RRB).
✓ Financial sector reform policies introduced in India in 1991 led to establishment of Private
sector Banks.
✓ A foreign bank is one that has its headquarters in a foreign country but operates in India
as a private entity.
✓ The control of Public sector bank is in hands of Central Govt.
✓ Limit to accept deposits for Payment banks is Rs. 2,00,000.
✓ Regional Rural Banks (RRBs) are also scheduled commercial banks but they are
established with the main objective of providing credit to weaker sections of the society
like agricultural labourers, marginal farmers and small enterprises.
✓ A mutual fund is an investment security that enables investors to pool their money
together into one professionally managed investment.
✓ NAV = Net Asset Value which is value of units of Mutual Fund.
✓ ULIP = Unit Linked Insurance Plan.
✓ To investigate corporate fraud resulting in huge financial loss to the public, the SFIO was
established in 2003 under the Ministry of Corporate Affairs Government of India.
✓ AUM = Asset Under Management of Mutual Fund Company.
✓ Mutual Fund Company can also be called as Asset Management Company.
✓ Equity shares is an instrument of capital Market.
✓ Certificate of Deposit, Commercial Paper, Treasury bill are example of Money Market
Instrument.
✓ The Insurance Industry of India consists of 57 insurance companies of which 24 are in life
insurance business and 33 are non-life insurers.
✓ Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector
company.
✓ The largest of the mergers announced is that of Punjab National Bank with Oriental Bank
of Commerce and United Bank.
✓ Small private banks are financial institutions that have the license to offer fundamental
banking services by accepting deposits and lending.
✓ Global Trust Bank, was the 1st one to blow up among the new-age banks in the midst of a
scandal.
✓ IFCI was the first Development Financial Institution of India set up to propel economic
growth through development of infrastructure and industry.
✓ IFCI Introduced by IFC Act 1948.

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✓ (SIDBI) set up on 2nd April 1990 under an Act of Indian Parliament, acts as the Principal
Financial Institution for Promotion, Financing and Development of the MSME sector as
well as for coordination of functions of institutions engaged in similar activities.
✓ SIDBI makes in India Soft Loan Fund for Micro Small and Medium Enterprises.
✓ SIDBI led a consortium of Indian banks in jointly creating Online PSB Loans Limited.
✓ In India's industrial Development, small sector industries have significantly contributed
in areas of production, employment and exports.
✓ In 2018, the following financial institution led a Consortium of Indian banks in developing
"PSB Loans in 59 minutes" an advanced digital platform. The platform aims to reduce time
for granting in principle approval of business loan applications from MSMES from SIDBI.
✓ National Bank for Agriculture and Rural Development performs inspection, supervision
and institutional development of RRBs.
✓ Mudra:
Micro Units development and Refinance Agency bank (Ltd.)
✓ MUDRA a public sector financial institutions in India to provide loans at low rates to micro
financial institutions.
✓ Cooperative bank is an institution established on the cooperative basis and dealing in
ordinary banking business.
✓ Cooperative banking in India is federal in structure.
✓ National Bank for Agriculture and Rural Development (NABARD) is responsible for
regulating and supervising aspects of banking activities of rural co- operative banks.
✓ The short-term agricultural credit institutions which cater to the short-term financial
needs of agriculturists have 3-tier federal structure-
(a) at the apex, there is the state cooperative bank in each state;
(b) at the district level, there are central cooperative banks;
(c) at the village level, there are primary agricultural credit societies. Long-term
agricultural credit is provided by the land development banks.

✓ primary agricultural credit societies is the grassroots level arm of short-term co-
operative credit.
✓ primary agricultural credit societies mediate directly with individual borrowers
and grant short-term to medium-term loans and also undertake distribution and
marketing functions.
✓ A NBFC is a company registered under the Companies Act, 2013 engaged in the business
of loans and advances, acquisition of shares/stocks/bonds/debentures/ securities issued
by Government or local authority or other marketable securities of a like nature, leasing,
hire-purchase, insurance business, chit business but does not include any institution
whose principal business is that of agriculture activity, industrial activity, purchase or sale
of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property.
✓ The RBI regulates interest rates to be charged to borrowers by a NBFC.

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✓ Advancing loan to Individual consumers businesses is not one of the given functions to be
performed by RBI.
✓ It acts as Banker's Bank, Government's Bank, Custodian of Indian foreign Exchange
Reserve.
✓ An Asset Finance Company is a company which is a financial institution carrying on as its
principal business the financing of physical assets supporting productive/economic
activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and
material handling equipment’s, moving on own power and general purpose industrial
machines.
✓ IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into
infrastructure projects.
✓ Mortgage Guarantee Companies are financial institutions for which at least 90% of the
business turnover is mortgage guarantee business or at least 90% of the gross income is
from mortgage guarantee business and net owned fund is Rs. 100 Cr.
✓ Equity shares, also known as ordinary shares or common shares represent the owners’
capital in a company.
✓ Sweat equity shares are issued to exceptional employees or directors of the company for
their exceptional job in terms of providing know-how or intellectual property rights to the
company.
✓ Preference shares, more commonly referred to as preferred stock, are shares of a
company’s stock with dividends that are paid out to shareholders before common stock
dividends are issued.
✓ Participating preference shareholders are entitled to share the surplus profit and surplus
assets of the company in addition to preference dividend.
✓ A debenture is a document under the company’s seal which provides for the payment of
principal sum and interest thereon at regular intervals, which is usually secured by a fixed
or floating charge on the company’s property or undertaking and which acknowledges a
loan to the company”.
✓ Bearer Debentures are those which are payable to the bearer thereof. These can be
transferred merely by delivery.
✓ Government Promissory Notes are an example of Govt Securities.
✓ A GPN is a bearer bond payable to a bearer, sometimes referred to as note payable. It is a
legal instrument.
✓ Cash Reserve Ratio:
This is the RBI's way of controlling the excess flow of money in the economy.
It is the amount of funds that banks have to maintain with the RBI at all times.
✓ Rural small Business Development Centre (RSBDC) was formed to supply indigenous and
imported machines on Easy Hire purchase terms.

✓ The Atal Innovation Mission (AIM) is a flagship initiative setup by the Nit Aayog to
promote innovation and entrepreneurship across the length and breadth of the country.

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✓ SFURTI is scheme of fund for regeneration of traditional industries, Launched by ministry

of micro, small and medium Enterprises in the year 2005.

✓ Stand up India is the Government of India's principal financial support scheme for women,
Scheduled Caste (SC), and Scheduled Tribe (ST) entrepreneurs who want to set up a
greenfield enterprise.

✓ Stand up India scheme facilitates bank loans between Rs. 10 lakhs and Rs. 1 crore for
women, SC and ST entrepreneurs.

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Chapter 5 – Indian Economy

✓ Agriculture is the primary source of livelihood for about 58 % of India's population.
✓ Gross Value Added by agriculture, forestry and fishing is estimated at 5.2% in FY22.
✓ The Indian food and grocery market is the world's 6th largest, with retail contributing 70
% of the sales.
✓ The Indian food processing industry accounts for 32 % of the country's total food market,
one of the largest industries in India and is ranked 5th in terms of production,
consumption, export and expected growth.
✓ According to DPIIT, the Indian food processing industry has cumulatively attracted FDI
equity inflow of about US$ 10.43 billion between April 2000 and June 2021.
✓ Investments worth Rs 8,500 crore (US$ 1.19 billion) have been announced in India for
ethanol production.
✓ The first mega food park in Rajasthan was inaugurated in March 2018.
✓ India agrifoodtech saw $97 million deployed across 110 Seed stage deals in FY21, up
significantly from $35 million across 50 deals in FY20.
✓ In 2017, agriculture sector in India witnessed 18 M&A deals worth US$ 251 million.
✓ .India is currently the second largest telecommunication market and has the 2nd highest
number of internet users in the world.
✓ SEIS (Service Export From India) is aimed at promoting export of services from India by
providing duty scrip credit for eligible export
✓ Government has allowed 100 % FDI in the railway sector for approved list of projects
✓ In 2007, the Government of India launched the National Food Security Mission (NFSM)
initiative to improve the country’s overall crop production, especially that of rice, wheat
and pulses.
✓ Industrial policy is a statement of objectives to be achieved in the area of industrial
development and the measures to be adopted towards achieving these objectives.
✓ The balance of payments (BOP) is the method countries use to monitor all international
monetary transactions at a specific period.
✓ The New Industrial Policy 1991:
✓ It was announced on July 24,1991, with an aim to correct the distortion & weakness of the
Industrial structure of the country.
✓ Export of steel is a component of India's Current Account.
✓ India's imports of crude petroleum oil is a component of India's Current Account.
✓ India's exports of precious and semi-precious stones are a component of India's Current
Account.
✓ Unilateral transfers by resident Indians to their dependent children studying abroad is a
component of India's Current Account.
✓ Funds raised by Indian Companies through Global depository receipts is a component of
India's Current Account.
✓ When there is an excess of exports over imports, it is called favourable balance of trade.
✓ When there is excess of imports over exports, it is called an unfavourable balance of trade.

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✓ An example of India's Current Account balance rupee inflow is export of services because
due to export of services our country will receive rupee in monetary terms.
✓ Current Account deficit is not financed by any capital inflows from rest of the world.
✓ Balance of trade does not records assets transactions between residents and rest of the
world.
✓ Any investment that is made in India with the source of funding that is from outside of
India is a foreign investment.
✓ FDI is an investment made by a company or individual who us an entity in one country, in
the form of controlling ownership in business interests in another country.
✓ FPI is an investment by foreign entities and non-residents in Indian securities including
shares, government bonds, corporate bonds, convertible securities, infrastructure
securities etc.
✓ FPI is an investment by foreign entities in securities, real property and other investment
assets. Investors include mutual fund companies, hedge fund companies etc.
✓ An Indian steel exporting company purchased a warehouse in Vietnam is entered as Credit
to Capital Account.
✓ A rise in India’s inward remittance flows from overseas Indians for meeting consumption
needs of their families located in India commonly has effect of reducing current account
deficits.
✓ Right after India's independence, one the main objectives of India's development plans
was to become self-reliant and set up a strong industrial base with emphasis on heavy and
basic industries.
✓ NSIC was set up in 1955 to promote, aid and faster the growth of small business units in
India.
✓ With the aim of developing new programmes and policies for fostering innovation in
different sectors of the Indian economy, Atal Innovation Mission (AIM) is the Government
of India's flagship initiative to promote a culture of innovation and entrepreneurship in
India.
✓ Public Sector banks went through mergers resulting in reduction of their number from 27
in the year 2017 to the present 12 in 2020
✓ FDI equity inflows in Indian automobile industry is entered as credit to capital Account.
✓ For FDI, in Automatic Route, No Need to take approval of Govt. rather just need to intimate
the RBI after doing the transaction.
✓ For FDI, in Approval Route, prior approval of Govt. will be required.

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