#Day 52: BBA & HM Free Study Plan: Know about  the Basics of Economy

By Gaurav Mohanty|Updated : June 9th, 2021

#Day 52: BBA & HM Free Study Plan: Know about the Basics of Economy

Read here the Know the Basics of Economy for BBA & HM Entrance Exams.                                                                                                             

The economy of India is the sixth-largest economy in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP). The country is classified as a newly industrialised country, one of the G-20 major  Economy, a member of BRICS  and a developing with an average growth rate of approximately 7% over the last two decades.

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India did not wish to build a monopolistic economy either with no private players and hence, a mixed approach was followed.

Mixed Economy

“Mixed economy is that economy in which both government and private individuals exercise economic control.” –Murad.

Meaning:

It is a golden mixture of capitalism and socialism.

Under this system, there is freedom of economic activities and government interferences for social welfare, hence it is a blend of both economies.

Developing countries like India have adopted a mixed economy to accelerate the pace of economic development. Even the developed countries like UK, USA, etc. have also adopted the ‘Mixed Capitalist System’.

Nature of Indian Economy

  • To know and understand the nature of the Indian economy, it is very necessary to have a clear idea about the meaning of the Indian economy.
  • After Independence India launched its First Five Years Plan in 1950-51; then now the 5-Year Plan is going on.
  • Although India is an agro-based economy, a lot of emphases has been given to the development of industries (both consumer goods and capital goods), service sector (including construction, trade, commerce, banking system, etc.), and socio-economic infrastructure (like education, health, housing power, energy, transport, communication, etc.).
  • Both central and state governments in India join their hands in all the spheres leading to economic development.

On the basis of production:

(i) Primary or Agricultural Sector:

This sector consists of agriculture and its allied activities including dairy, poultry, cattle rearing, fishing, forestry, animal husbandry etc. In the primary sector, most of the goods are produced by using natural resources, since India is an overpopulated agro-based economy, therefore, this sector plays an important role in economic growth.

(ii) Secondary or Manufacturing Sector:

This sector is also known as the industrial sector. In this category, all types of manufacturing sectors like large-scale, small-scale, and tiny scale are included. Small and tiny scale industries include clothes, candles, poultry, matchbox, handloom, toys, etc. These units provide huge employment. On the other hand, large-scale industries like iron and steel, heavy engineering, chemicals, fertilizers, shipbuilding, etc. contribute a huge amount to our gross domestic product.

(iii) Service or Tertiary Sector:

This sector produces different services like transport, communication, banking, insurance, trade, and commerce, including both national and international trade. Moreover, all the professional services like doctors, engineers, teachers, lawyers, etc. come under the service sector. Again the services provided by the government itself for the welfare of citizens are also included in the tertiary sector.

On the basis of Ownership or Orga­nization

(i) Public Sector:

It consists of all the economic organizations which are controlled and managed by the government. All the government-owned production units come under this head. These units produce and distribute goods and services among the common mass with an objective of welfare motives.

(ii) Private Sector:

It consists of all the economic enterprises which are controlled and managed by the private enterprises. All the privately-owned production units come under this category. These units will produce and distribute goods and services to the people with an objective of the profit motive.

On the basis of Habitation

(i) Rural Sector:

According to M.K. Gandhi, “India lives in villages”. About three-fourths of the total population in India lived in the rural sector. The main occupations of this sector are agriculture and allied activities.

(ii) Urban Sector:

One-fourth of the total population in India lived in the urban sector. It consists of towns and cities. People living in this sector are mainly engaged in either the secondary sector or the tertiary sector.

Important Economic Terms for CLAT 2022 Aspirants

Following are the important economic terms that are frequently asked in the CLAT and Other law exams:

Topic

Explanation

Gross Domestic Product (GDP)

GDP is the value of total commodities/services produced within the territory of a country in a year. If any product is produced by any foreigner in your country, it too will be counted in GDP.

Gross National Product (GNP)

GNP is the value of total commodities/services produced by a country’s citizens irrespective of their location.

Depreciation

The decline in the value of a product/asset over time is termed as depreciation.

Net Domestic Product (NDP)

NDP = GDP – Depreciation

Net National Product (NNP)

NNP = GNP – Depreciation

Repurchasing Option (REPO) Rate

The rate at which RBI provides loans to other financial institutions is called the REPO rate.

Reverse REPO Rate

It is the rate at which other banks provide loans to RBI & is lesser than the REPO rate.

Cash Reserve Ratio (CRR)

It is the percentage of cash that other banks have to deposit to RBI as reserves.

Statutory Liquidity Ratio (SLR)

SLR is defined as the percentage of cash financial institutions have to keep with themselves as reserves.

Fiscal Policy

The tax rates & spending levels are adjusted by the government via fiscal policy. It helps in monitoring a nation’s economy.

Balance of Payment (BOP)

The difference value between the payment coming in a country & payment going from a country is called BOP.

Capital

It is the amount of money invested in a business/asset to gain profit.

Carbon Tax

Then environmental tax on carbon-based services/goods which pollute the environment is called Carbon Tax.

Inflation

It is the rate at which the prices of goods/commodities fall in a country. It is indirectly proportional to the purchasing power of a country.

Depression

When the economic activities of a nation suffer a downfall, depression occurs.

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