Economics: Sectors, Money, Budget and the Rajasthan Economy
Economics in this paper is classification plus simple calculation: sectors of the economy, the role of money and banking, the government budget and taxes, and the resource base of Rajasthan.
Sectors and national income
- Primary (agriculture, mining), secondary (manufacturing), tertiary (services). Services contribute the largest share of India's GDP.
- GDP is the market value of final goods and services produced within a country's territory in a year; GNP adds net factor income from abroad.
- Mining is a primary activity - a frequent classification question.
Money and banking
- The Reserve Bank of India (1935; nationalised 1949; headquarters Mumbai) issues currency notes, acts as banker to the government, controls credit and is the lender of last resort.
- One-rupee notes and all coins are issued by the Government of India, not the RBI.
- Commercial banks create credit; the repo rate is the rate at which the RBI lends to banks.
Budget and taxes
- Revenue receipts versus capital receipts; fiscal deficit = total expenditure − total receipts excluding borrowings.
- Direct taxes (income tax, corporate tax) cannot be shifted; indirect taxes (GST, customs) can be passed on. GST took effect on 1 July 2017, with rates set by the GST Council.
Rajasthan's economy
- Leading producer of mustard, bajra, coriander, cumin and wool.
- Minerals: zinc-lead at Zawar, copper at Khetri, marble at Makrana, sandstone; crude oil from the Mangala field, Barmer; solar parks at Bhadla and in Jaisalmer.
Worked example
Total expenditure ₹1,200 crore, revenue receipts ₹700 crore, non-debt capital receipts ₹100 crore. Fiscal deficit = 1,200 − (700 + 100) = ₹400 crore. Borrowings are excluded because the deficit measures exactly what must be borrowed.
Traps
Do not swap GDP for GNP. States cannot print currency. GST is indirect, not direct. Mining is primary, not secondary. Fiscal deficit excludes borrowing from its receipt side.