Indian Economy and Current Affairs
What this domain tests
This domain tests macroeconomics and current economic governance: national income, inflation, monetary and fiscal policy, banking, the budget, external trade, government schemes, and recent developments. Current-affairs items are dynamic, so verify names, institutions, and figures rather than relying on memory alone.
Core rules
- GDP is the market value of final goods and services produced domestically in a period. Nominal GDP uses current prices; real GDP adjusts for inflation. GNP adds net factor income from abroad.
- Inflation is usually tracked through CPI and WPI. Under flexible inflation targeting, the RBI’s CPI target is 4 percent with a tolerance band of plus or minus 2 percentage points.
- Monetary policy tools include the repo rate, reverse repo, CRR, SLR, and open market operations. A repo hike generally tightens credit.
- Fiscal policy uses government spending and taxation. Distinguish revenue deficit, fiscal deficit, and primary deficit.
- External accounts separate the current account from the capital account; FDI and FPI are different forms of capital inflow.
Worked example
Question: If the RBI raises the repo rate, what is the likely short-run effect? Reasoning: The repo rate is the rate at which banks borrow from the RBI against securities. A hike raises banks’ cost of funds, so lending rates tend to rise, credit growth cools, aggregate demand weakens, and inflation pressure eases; growth may slow. This is monetary policy, not fiscal policy.
Traps
Do not confuse repo with reverse repo, or CPI with WPI. Do not mix fiscal deficit with revenue deficit. In current affairs, check whether a scheme is central, state, or jointly funded, and whether a body is regulatory or advisory.