A T A BOUT HE UTHOR Ramesh Singh, a Delhi School of Economics alumnus is an Educational Consultant with over two decades of experience in providing guidance for an array of competitive and professional examinations. He has authored books in Hindi and English with McGraw Hill Education, India, the popular ones being Indian Economy, Bharatiya Arthavyavastha, Bharat ka Bhugol, Bhaugolik Models, 1000 Plus Questions on Economic and Social Development, 1000 Plus Questions on General Science. Contemporary Essays is another of his forthcoming title. To my parents for whom educated children were better than hefty bank deposits—they really are visionaries in human resource management and pure applied economics Preface to the Fifth Edition The comprehensive revision of this book is in the light of the growing sales and encouraging feedback from the readers. I am indebted to all those who have sent mails, some appreciative, some critical, some constructive. Based on all the suggestions and feedback, I am delighted to place before you the Fifth Edition of the book, fully revised and with three new chapters that address the concerns of government policy-making. The Doha Round of the WTO lapsed in December 2012, ending the first and ‘most ambitious’ organised attempt towards making a ‘multilateral’ world economic system possible. But the optimists are still hopeful – that the Round may get ‘revived’ at the next Conference in Bali, December 2014. President Obama’s re-election and his focus to revive the US economy, the situation of countries like Greece, France, Ireland, in the Euro zone are some of the other major global economic concerns. Meanwhile, India is beset with its own economic woes, much of it due to policy paralysis, weak governance and lack of transparent laws and favourable investment climate. It recorded the lowest growth rate of the decade, due to a combination of national and international factors, including a poor monsoon. The new edition has focused on these areas and attempts to provide an analysis of these issues in a lucid manner. The Three new Chapters included are (i) Technology-Environment Dilemma; (ii) Sustainability and Climate Change, and (iii) Preparing for the Demographic Dividend. These address contemporary concerns of the economic situation. The Chapter Model Answers to Selected Questions has been revised and updated with 20 more Model Answers included. This follows long pending demand from our readers. Chapters like Inflation & Business Cycle, Financial Market, Banking, Security Market , Tax Structure and Public Finance etc have been revamped. Some new issues have been included some of which are listed below: Basel III & Public Sector Banks; Non-Operating Financial Holding Company; Direct Benefit Transfer; Socio-Economic and Caste Census; 12th Plan Monitorable Targets; Base Effect; Sugar Sector Reforms; Energy Pricing; Edible Oil Economy; DMIC Project; e-Biz Project; 14th Finance Commission; Special Category States; ASER-2012; Effective Revenue Deficit; Result-Framework Document; HDR-2012; Chit Fund; Nidhi; VCES; Commodities Transaction Tax; Capital Gains Tax; Investment Allowance; BSESME and EMERGE; Participatory Notes; Angel Investor; RGESS; Corporate Bond; Inflation-Indexed Bond; Gold Exchange Traded Funds; Broad Based Fund; Escrow Account; e-Gold; Menace of Gold Imports; Retrocession; Mezzanine Financing; NORKA; Looking Beyond Doha; The Economy Today: 2013-14; etc. The book is updated with statistics and data from latest government documents – India 2013, Economic Survey 2012-13, Union Budget 2013-14 and the Railway Budget 2013-14. As readers may be aware, the new syllabus and pattern for the Civil Services Main Examination was announced in February, 2013. As per the new guidelines, the existing Indian Economy becomes ‘Paper- VI’ in the Examination Scheme while it becomes ‘GS- III’ in the General Studies (GS), carrying 250 marks. Also, Indian Economy has been ‘prefixed’ by Technology and ‘suffixed’ by Biodiversity, Environment, Security and Disaster Management. Looking at GS- III, at the outset, it looks to be a major change. But looking carefully, many questions falling into this new ‘domain’ have been already asked in the last one decade. The only change is that now there is a pronounced emphasis on the applications of the basic doctrines and principles of economy. The aspirants should therefore link the syllabus topics with the way it is to be applied on economic situations and issues. This strategy is to be followed while attempting the Main exam from this year onwards. A similar approach applies to the Essay Paper as well. The connection between ‘technology’ and ‘environment’ need to be explained here. Technology is the tool to economic development, prosperity and creation of wealth. But mindless use of technology puts pressure on the environment and in turn creates concerns on biodiversity, sustainable development etc. Therefore, there arises the need to evolve methods of ‘disaster management’ to minimize the repercussions. Hence there is a definite link between technology, economy, environment, disaster management etc. The new syllabus has integrated these topics in a ‘holistic manner’ and the UPSC expects the aspirants to write answers to questions with this perspective. On my part, I have added two new chapters to address this issue namely ‘technology-environment dilemma’ of the contemporary times and ‘sustainability and climate change’. Hopefully, these chapters will give the readers deeper insight into the issue involved and empower them to create their own style of writing answers. In the new scheme of things, I would always advise the readers to keep writing your own answers on a variety of questions and link them to the everyday issues of policy making. There is no other short- cut to get a good score in the main examination. I am glad to tell that in this edition, I have added 20 more Model Answers to selected questions to serve the above mentioned need. We hope you find this new edition useful and valuable for your preparation. Wishing all my readers and the students ‘Best of Luck!’ for their forthcoming examinations ! www.facebook.com/IndianEconomyMHE Ramesh Singh [email protected] Preface to the First Edition I felt my first serious inclination towards writing when my first article was published in the journal Mainstream way back in 1988 while pursuing my post graduation studies at the Delhi School of Economics. My interaction with students inside and outside the classroom in 1990–91, when India faced a serious financial crisis, made me realise that there was an immediate need of a book on Indian economy, which could educate the students about the various aspects and challenges of the Indian economy in a simple and lucid manner. It took nearly two decades to fulfil this dream of mine. The book has been designed to cater to the requirements of the General Studies paper for various Civil Services Examinations (Union as well as the States), and the optional Economics. It would also be useful for graduate and postgraduate courses in Economics of various universities. Adequate and required notes and references have been given after consulting and referring to an array of sources. I have taken care of both the objective as well as the subjective aspects based on my classroom experience of interacting with the students. I am grateful to Prof. Majid Husain for the inspiration and motivation I got from him to complete this work. I have especially learnt the art and importance of work, punctuality and honesty in a very practical way from him. Thanks are also due to Mr. Rajesh Kumar Baghel, Mr. Rakesh Kumar, Md. Ishtiaq, and Mr Vikash. I am indebted to my wife, Mrs Ila Singh, for her full support and my two little daughters, Medha and Smiti, for providing the sparkle in an otherwise monotonous work. Finally, my special thanks to the team from McGraw-Hill, Mr. Biju Kumar: General Manager— Publishing, Mr. Kannath Prakash—Sponsoring Editor, Mr. Abhishek Sharma—Sponsoring Editor, Ms. Anupma Rai—Senior Copy Editor, and Ms. Medha Arora—Junior Manager—Production, who took great pains to finalise the project and complete it in a record time with all the possible expertise. I welcome from the readers constructive advice, and comments, which could guide me in further revision of this book. RAMESH SINGH ABOUT THE CIVIL SERVICES EXAMINATION The Civil Services examination comprises two successive stages: (i) Civil Services (Preliminary) Examination (Objective Type) for the selection of candidates for Main Examination; and (ii) Civil Services (Main) Examination (Written and Interview) for the selection of candidates for the various services and posts. Scheme and subjects for the Preliminary and Main Examination. A. PRELIMINARY EXAMINATION The Examination shall comprise of two compulsory Papers of 200 marks each. Note : (i) Both the question papers will be of the objective type (multiple choice questions). (ii) The question papers will be set both in Hindi and English. However, questions relating to English Language Comprehension skills of Class X level will be tested through passages from English language only without providing Hindi translation thereof in the question paper. B. MAIN EXAMINATION The written examination will consist of the following papers: Qualifying Papers: Paper A: (One of the Indian Language to be selected by the candidate from the Languages included in the Eighth Schedule to the Constitution). 300 Marks Paper B : English 300 Marks The papers on Indian Languages and English (Paper A and Paper B) will be of Matriculation or equivalent standard and will be of qualifying nature. The marks obtained in these papers will not be counted for ranking. Papers to be counted for merit Paper I: Essay 250 Marks Paper II: General Studies–I 250Marks (Indian Heritage and Culture, History and Geography of the World and Society) Paper III: General Studies –II 250 Marks (Governance, Constitution, Polity, Social Justice and International relations) Paper IV: General Studies –III 250 Marks (Technology, Economic Development, Bio-diversity, Environment, Security and Disaster Management) Paper V: General Studies –IV 250 Marks