In the older JAIIB pattern (2016 era) this material sat inside Principles & Practices of Banking, Module A — Indian Financial System. In the revised pattern it forms Paper 1: Indian Economy & Indian Financial System (IE&IFS), Module A — Indian Economic Architecture. The content tested is broadly the same.

Mostly single-line recall: “Which committee…”, “In which year…”, “What is the base year of…”. Expect 4–8 questions from the wider Indian-economy block in a typical paper, plus indirect questions in banking-regulation units.

Do not read it like a story. Build a fact sheet: years, committees, base years, percentages, full forms. Revise the sheet, then attempt MCQs. The section below is arranged exactly in that order.

Measured at current prices. It rises when either output rises or prices rise, so it overstates real growth during inflation.

Measured at constant prices of a chosen base year. It shows the genuine change in output. Growth rate quoted in news is real GDP growth.

(Nominal GDP ÷ Real GDP) × 100. The broadest measure of inflation because it covers every good and service in GDP, not a fixed basket.

Private ownership, profit motive, market decides what is produced. Examples: USA, UK.

State owns the means of production and plans output centrally. Example: erstwhile USSR.

Public and private sectors coexist. India adopted this from the Industrial Policy Resolution, 1948 and confirmed it in 1956. India is a mixed, developing economy.

• Still the largest employer and the backbone of rural demand.
• Heavily monsoon-dependent; roughly half the net sown area is irrigated.
• Green Revolution (mid-1960s, M.S. Swaminathan; Norman Borlaug globally) — wheat and rice self-sufficiency.
• White Revolution / Operation Flood (1970, Verghese Kurien) — milk. India is the world’s largest milk producer.
• Also learn: Blue = fisheries, Yellow = oilseeds, Pink = prawn/meat, Silver = eggs/poultry.

• Measured monthly by the Index of Industrial Production (IIP), base year 2011-12.
• IIP has three sectors: Mining, Manufacturing (largest weight, ~77.6%), Electricity.
• Eight Core Industries carry ~40% weight in IIP: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, electricity.
• MSMEs are the second-largest employer after agriculture.
• Flagships: Make in India (2014), Startup India (2016), PLI schemes (2020 onwards).

• Largest contributor to GVA and to India’s exports of services.
• IT-BPM, banking, insurance, telecom, tourism, transport, real estate.
• India is among the world’s top exporters of commercial services.
• Largest recipient of global remittances — over USD 100 billion a year.

• Large and persistent fiscal and current-account deficits through the 1980s.
• Gulf War of 1990 pushed oil prices up and cut remittances from West Asia.
• Foreign exchange reserves fell to roughly two weeks of imports.
• India pledged gold with the Bank of England and Union Bank of Switzerland and took an IMF loan.

• Prime Minister: P.V. Narasimha Rao.
• Finance Minister: Dr. Manmohan Singh.
• New Industrial Policy, 24 July 1991 — the formal launch document.
• Industrial licensing abolished for most industries; sectors reserved for the public sector cut sharply.

Removing licence-permit controls: end of the “Licence Raj”, freer interest rates, easier industrial approvals, MRTP restrictions relaxed.

Disinvestment of government stake in PSUs, opening reserved sectors to private players. Today handled by DIPAM.

Integrating with the world economy: lower tariffs, convertibility of the rupee on the current account (1994), liberal FDI policy, WTO membership on 1 January 1995.

• Established under the RBI Act, 1934; operations from 1 April 1935; nationalised 1 January 1949.
• Headquarters shifted from Kolkata to Mumbai in 1937.
• First Governor: Sir Osborne Smith. First Indian Governor: C.D. Deshmukh.
• Issues all currency notes except the ₹1 note, which is issued by the Government of India.
• Note issue follows the Minimum Reserve System since 1957 — minimum ₹200 crore of reserves, of which ₹115 crore in gold.

• Monetary authority and issuer of currency.
• Banker to the Government and banker to banks; lender of last resort.
• Regulator and supervisor of the banking and payment systems.
• Manager of foreign exchange under FEMA, 1999.
• Developmental role — financial inclusion, priority sector, customer protection.

• Statutory basis: Section 45ZB of the RBI Act, inserted by the Finance Act 2016.
• Six members — Governor (Chairperson), a Deputy Governor in charge of monetary policy, one RBI officer, and three external members appointed by the Central Government for four years.
• Decisions by majority; the Governor has the casting vote in a tie. Quorum is four.
• Inflation target: 4% CPI, with a tolerance band of ±2% (i.e. 2%–6%).
• A failure is deemed if average inflation stays outside the band for three consecutive quarters; RBI must then report to the Government.

• Quantitative: Repo rate, Standing Deposit Facility (SDF, introduced April 2022), Marginal Standing Facility (MSF), Bank Rate, CRR, SLR, Open Market Operations.
• Qualitative: margin requirements, moral suasion, direct action, consumer-credit regulation, rationing of credit.
• CRR is on Net Demand and Time Liabilities and earns no interest; SLR is held in cash, gold or approved securities. Statutory ceiling on SLR is 40%.
• The Liquidity Adjustment Facility (LAF) corridor: MSF at the top, repo in the middle, SDF at the floor.

• Demand-pull: too much money chasing too few goods.
• Cost-push: rising input costs — wages, fuel, imported raw material.
• Imported inflation: caused by costlier imports such as crude oil.
• Structural: supply bottlenecks in a developing economy.

• Creeping: mild, up to about 3% a year — generally considered healthy.
• Walking / trotting: roughly 3–10%.
• Running: roughly 10–20%.
• Galloping / hyperinflation: very high, often three-digit; classic example Zimbabwe.

• The Union Budget is the Annual Financial Statement under Article 112 of the Constitution.
• Presented on 1 February since 2017; the railway budget was merged with it the same year.
• Financial year runs 1 April to 31 March.
• Two parts: Revenue Budget and Capital Budget.
• First Union Budget of independent India: R.K. Shanmukham Chetty, 26 November 1947.

• Revenue Deficit = Revenue Expenditure − Revenue Receipts.
• Fiscal Deficit = Total Expenditure − Total Receipts excluding borrowings. It shows total borrowing need.
• Primary Deficit = Fiscal Deficit − Interest Payments.
• Effective Revenue Deficit = Revenue Deficit − Grants for creation of capital assets.

Burden cannot be shifted. Examples: Income Tax, Corporate Tax. Administered by the CBDT. Direct taxes are progressive.

Burden is shifted to the consumer. Examples: GST, Customs Duty. Administered by the CBIC. Indirect taxes are generally regressive.

• A record of all economic transactions between residents of India and the rest of the world in a year.
• Current Account = merchandise trade + services + primary income + secondary income (remittances).
• Capital Account = FDI, portfolio investment, loans, banking capital.
• Balance of Trade covers only visible goods; BoP is much wider.
• India typically runs a merchandise trade deficit offset partly by a services surplus and remittances.

• FDI — long-term investment with management control; considered stable.
• FPI — investment in shares and bonds without control; volatile, called “hot money”.
• Routes for FDI: Automatic (no prior approval) and Government (approval needed).
• FDI policy is framed by DPIIT; the rupee’s external transactions are governed by FEMA, 1999.

• Definition: delivering financial services at an affordable cost to vulnerable and low-income groups.
• The term entered Indian policy through the Rangarajan Committee on Financial Inclusion (2008); “no-frills accounts” were introduced by RBI in 2005.
• PMJDY — launched 28 August 2014, world’s largest financial inclusion programme; RuPay card, overdraft facility and accident insurance cover.
• Social security trio launched 9 May 2015: PMJJBY (life), PMSBY (accident), Atal Pension Yojana (pension).
• JAM trinity = Jan Dhan + Aadhaar + Mobile, the backbone of Direct Benefit Transfer.
• Enablers: Business Correspondents, Small Finance Banks and Payments Banks (both recommended by the Nachiket Mor Committee, 2013), and the Financial Inclusion Index published by RBI since 2021.

• Overall target for domestic scheduled commercial banks: 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure, whichever is higher.
• Agriculture: 18%, within which small and marginal farmers get a sub-target.
• Micro enterprises: 7.5%. Weaker sections: 12%.
• Regional Rural Banks and Small Finance Banks have a higher overall target of 75%.
• Eight broad categories include agriculture, MSME, export credit, education, housing, social infrastructure, renewable energy and “others”.
• Shortfall is parked in RIDF with NABARD and similar funds. PSLCs allow banks to trade priority-sector obligations.

• Census 2011 — the last completed census. Population 121.08 crore.
• Literacy rate 74.04%; sex ratio 943 females per 1,000 males; density 382 per sq. km.
• Most populous state: Uttar Pradesh. Highest literacy: Kerala. Highest sex ratio: Kerala.
• India is now the world’s most populous country, having overtaken China.
• Demographic dividend — a large share of working-age population (15–59/64) relative to dependants; India’s window runs to roughly 2040s.

• Poverty is measured against a poverty line based on calorie norms and consumption expenditure.
• Key committees: Lakdawala (1993), Tendulkar (2009), Rangarajan (2014).
• The Lorenz curve shows income distribution; the Gini coefficient measures inequality on a 0 (perfect equality) to 1 (perfect inequality) scale.
• MPI — Multidimensional Poverty Index uses health, education and standard of living. NITI Aayog publishes India’s national MPI.
• HDI — published by UNDP in the Human Development Report since 1990; devised by Mahbub-ul-Haq with Amartya Sen. It combines life expectancy, education and Gross National Income per capita (PPP).