Active and passive voice: rules for every tense
How the verb changes in each tense, pronoun changes, modals and imperative sentences, with SSC examples.
Study notes
Indian Economy: GDP, inflation, RBI tools and budget terms
National income concepts, types of inflation, fiscal vs monetary policy, repo, CRR and SLR, five-year plans and budget deficits explained.
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National income concepts
- GDP (Gross Domestic Product): market value of all final goods and services produced within a country’s borders in a year.
- GNP: GDP + net factor income from abroad (income earned by residents abroad minus income earned by foreigners here).
- NNP: GNP − depreciation. NNP at factor cost is called national income.
- Per capita income = national income ÷ population.
- Market price = factor cost + indirect taxes − subsidies.
- Nominal GDP uses current prices; real GDP uses constant (base-year) prices. GDP deflator = nominal ÷ real × 100.
Remember: “Domestic” = inside the borders; “National” = by the country’s residents, wherever they are.
Inflation and its types
| Term | Meaning |
|---|---|
| Inflation | Sustained rise in the general price level; money buys less |
| Demand-pull | Too much money chasing too few goods |
| Cost-push | Rising input costs (wages, fuel, raw materials) push prices up |
| Stagflation | High inflation together with stagnant growth and unemployment |
| Deflation | Fall in the general price level |
| Disinflation | Inflation is still positive but its rate is falling |
| Hyperinflation | Extremely rapid, out-of-control price rise |
| Core inflation | Inflation excluding volatile food and fuel prices |
India measures inflation with the Wholesale Price Index (WPI) and the Consumer Price Index (CPI). The RBI’s inflation target is set in terms of CPI.
Fiscal policy vs monetary policy
- Fiscal policy – government taxation, spending and borrowing; run by the Ministry of Finance through the Budget.
- Monetary policy – control of money supply and interest rates; run by the Reserve Bank of India. Rates are set by a six-member Monetary Policy Committee chaired by the RBI Governor.
Reserve Bank of India
Set up on 1 April 1935 under the RBI Act, 1934; nationalised in 1949; headquarters in Mumbai. It issues currency notes (except the one-rupee note, which is issued by the government), acts as banker to the government and the “bank of banks”.
RBI’s monetary tools
| Tool | What it is |
|---|---|
| Repo rate | Rate at which the RBI lends short-term money to banks against government securities |
| Reverse repo rate | Rate at which the RBI borrows from (absorbs money from) banks |
| CRR (Cash Reserve Ratio) | Share of a bank’s deposits (net demand and time liabilities) that must be kept as cash with the RBI; earns no interest |
| SLR (Statutory Liquidity Ratio) | Share of deposits a bank must keep with itself in liquid assets – cash, gold, approved government securities |
| Bank rate | Rate for longer-term RBI lending to banks without buying securities |
| MSF (Marginal Standing Facility) | Emergency overnight borrowing for banks at a rate above repo |
| Open Market Operations | RBI buying or selling government securities to add or remove money |
Remember: to fight inflation the RBI raises repo, CRR or SLR, or sells securities (tight money). To boost growth it cuts them, or buys securities (easy money).
Qualitative tools include margin requirements, credit rationing, selective credit control and moral suasion.
Five-year plans: highlights
| Plan | Years | Highlight |
|---|---|---|
| First | 1951–56 | Agriculture and irrigation; Harrod–Domar model |
| Second | 1956–61 | Heavy industry; Mahalanobis model |
| Third | 1961–66 | Self-reliance; hit by 1962 and 1965 wars and drought |
| Plan holiday | 1966–69 | Three annual plans |
| Fourth | 1969–74 | Growth with stability |
| Fifth | 1974–79 | Garibi Hatao (poverty removal); ended early in 1978 |
| Rolling plan | 1978–80 | Introduced by the Janata government |
| Eighth | 1992–97 | First plan after the 1991 reforms; human resource development |
| Eleventh | 2007–12 | Faster and more inclusive growth |
| Twelfth | 2012–17 | Faster, more inclusive and sustainable growth – the last plan |
The Planning Commission (1950) was replaced by NITI Aayog on 1 January 2015. The Prime Minister chairs both.
Budget terms
- Union Budget = Annual Financial Statement (Article 112). Financial year: 1 April to 31 March.
- Revenue deficit = revenue expenditure − revenue receipts.
- Fiscal deficit = total expenditure − (revenue receipts + non-debt capital receipts). It equals the government’s total borrowing.
- Primary deficit = fiscal deficit − interest payments.
- Direct taxes (income tax, corporation tax) fall on the person who pays them; indirect taxes (GST, customs) are passed on to consumers.
- Vote on account – Parliament’s approval for spending for part of the year until the full budget is passed.
- Finance Bill carries tax proposals; the Appropriation Bill authorises withdrawals from the Consolidated Fund.
- The Railway Budget was merged with the Union Budget in 2017; GST began on 1 July 2017.
Quick check
- The rate at which the RBI lends short-term funds to commercial banks is called?
Repo rate. - Fiscal deficit minus interest payments equals?
Primary deficit. - Which five-year plan was based on the Mahalanobis model?
The Second Five-Year Plan (1956–61).
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