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1. Introduction
2. Why Economic Survey = Boring?
3. Timeframe
4. Link between GDP FC/MC?
5. Why India cant bounce back easily?
6. Crude oil prices
7. Forex Reserve
8. Mock questions
Introduction
Finally economic survey is released. (free download English click me for Hindi
click me)
For UPSC, economic survey is important, because just like yearbook, this one
also provides you with truckload of facts for MCQs, and fodder for
descriptive/essay/interview.
Even for SBI PO, this is important, because lot of MCQs come from current
based economy + fodder necessary for GDPI stage.
consolidation consolidation-kelkar.html
http://mrunal.org/2011/04/economy-q-fiscal-stimulus-
Fiscal stimulus
package.html
Fiscal cliff, Sub http://mrunal.org/2012/11/economy-fiscal-cliff-meaning-
prime crisis reasons-implications-on-us-and-indian-economy-explained.html
http://mrunal.org/2012/02/economy-iip-index-of-
GDP calculation
industrial.html
GDP @market
http://mrunal.org/2011/04/economy-q-gdp-at-factor-cost-and-
price and Factor
market.html
cost
Inflation http://mrunal.org/2012/08/economy-inflation-demand-pull.html
Now lets start with the gist of first chapter from Economic Survey. (Ive further
subdivided it into three articles, else itll lead to information overload= boredom +
frustration.)
Timeframe
2007 Sub prime crisis in USA. Impact felt across the globe.
Feb
Economic survey is released.
2013
When there was global financial crisis, Government of India and RBI gave
monetary and fiscal stimulus (e.g. giving tax-soaps to industries, higher
depreciation on commercial vehicles, lowered interest on loans etc.)
This lead to increase in consumption. => later inflation.
Now to curb the inflation, RBI sharply raised the borrowing rates = again
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Rupee weakening?
Suppose on Jan 2012: $1= Rs.50 And on Feb 2012: $1=Rs.60
That means rupee has weakened and dollar has strengthened. But is it good or bad? Theoretically,
for Importers = bad. Because now theyve to pay more money to import same quantity of goods. And
for Exporters, call centers= good. Because they get more rupee.(even if theyre paid same amount of dollars.)
Ok so Rupee weakens = good for exporters. But here is the problem: US, EU still not fully recovered from
slowdown, so the demand of Indian goods and services, is not as high as it was few years back.
So export sector isnt really doing great. On the other hand, imports are getting more and more expensive,
especially crude oil => petrol diesel become expensive= inflation.
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1. The demand of petroleum has increased globally. In a way this is good, because it
shows the economy of USA/EU etc slowly getting better. (otherwise they
wouldnot be importing so much). So in a few months, the demand of indian
exports should increase. = this is a good Development.
2. The crude oil price has increased due to geopolitical reasons (Iran blockade,
Libya crisis etc.) If this is the main reason for rise in crude oil price= this is a
bad Development.
Bottomline is that India cannot take the external environment (recovery of US/EU
economies, crude oil politics of middle east) for granted.
Forex Reserve
Indias foreign exchange reserve, is made up of following components
As you can see, there is hardly any increase in Forex reserve during this time.
Why?
One reason is current account deficit (esp. gold+petroleum)
second is that foreign investors are not pumping enough money due to policy
bottlenecks.
Mock questions
Q1. Which of the following is correct formula?
1. In the period of high growth, GDP (Market Price) is greater than GDP (Factor
Cost)
2. During economic slowdown, GDP (Market Price) is less than GDP (Factor
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Cost)
Choice
a. Only 1
b. Only 2
c. Both
d. None
Q3. Which of the following is/are not a component of Foreign Exchange reserve of
India?
1. Gold
2. Foreign currency assets
3. Special drawing rights in IMF
4. Diamonds
Choice
a. Only 1 and 3
b. Only 2 and 2
c. Only 3 and 4
d. Only 4
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