Economy: Structure, Growth Drivers and Policy Challenges
Structural picture
A candidate must understand the shift from an agrarian to a manufacturing-and-services economy, the role of readymade garments in exports, remittances as a stabiliser, and the importance of agriculture for employment. Know the concepts of GDP versus GNP, nominal versus real growth, per capita income, and the distinction between growth and development.
Macroeconomic policy
Understand fiscal policy (taxation, public expenditure, deficit financing) and monetary policy (interest rate, money supply, exchange rate, inflation control by the central bank). Know the balance of payments, current account, trade deficit, and foreign exchange reserves. Understand the role of the banking sector, non-performing loans, and financial inclusion.
Development challenges
Master the concepts of inequality (Gini coefficient), poverty headcount, demographic dividend, structural transformation, and the middle-income trap. Understand export concentration risk, the need for diversification, and the importance of small and medium enterprises. Know the informal sector's size and its implications for taxation and social protection.
Traps
Do not equate GDP growth with welfare improvement. Do not treat remittances as export earnings. Distinguish the fiscal deficit from the trade deficit. Remember that inflation is a monetary phenomenon but also supply-driven.
Worked rule of thumb
For any economy question, apply the 'sources-sinks' method: identify the sources of growth (exports, remittances, investment, consumption) and the sinks of leakage (imports, capital flight, NPLs). Then assess sustainability by asking whether growth is broad-based and whether external balances are stable.
Exam technique
Use data cautiously; where exact figures are uncertain, describe trends. Always link a policy to its instrument and its outcome.