- Introduction
- Why Economic Survey = Boring?
- Timeframe
- Link between GDP FC/MC?
- Why India can’t bounce back easily?
- Crude oil prices
- Forex Reserve
- Mock questions
Introduction
- Finally economic survey is released.
- 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.
Why Economic Survey = Boring?
- On HBO, Star movies, they show movie for 15-20 minutes and advertisement for 5 minutes.
- But on Zee Cinema, 9x etc. channels, they show advertisements for 20 minutes and movie for 5 minutes.= movie is shown in between advertizements. (advertisements are not shown in between movies.)
- That’s the first reason why economic survey is boring, because it gives facts/fodder in between useless numbers and data.
- Second reason why economic survey is boring, because the authors assume that you’re already aware of the basic economic terms, concepts and the connections in between.
- Therefore, to enjoy the first chapter, make sure you already know following terms and concepts, if not visit Mrunal.org/economy
Now let’s start with the gist of first chapter from Economic Survey. (I’ve further subdivided it into three articles, else it’ll lead to information overload= boredom + frustration.)
Timeframe
2007 |
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2008-10 |
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2010-11 |
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2011-12 |
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Feb 2013 | Economic survey is released. |
- 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 problem, it slowed down the demand.
Link between GDP FC/MC?
- GDP at factor cost (FC)= GDP at market prices MINUS indirect taxes PLUS subsidies.
- GDP (FC)=GDP(MP) – indirect taxes + subsidies.
- in years of sharply higher growth, GDP growth @MP >> GDP at FC.
- In the years of slowdown, GDP @MP << GDP @FC.
- Why? Because when there is slowdown, indirect taxes falldown and subsidy burden on Government increases.
Why India can’t bounce back easily?
- Few years back, America faced the sub-prime crisis and recession. But now it seems to be slowly getting back on track.
- But if we look @India, it seems as if inflation and slowdown is going to continue forever!
- Why can’t India bounce back quickly? Reasons are following
- First, International investors and their risk taking. Compared to American Economy, the Indian economy is more exposed this “shifts” of foreign investors. (the whole GAAR, Vodafone controversy, retrospective taxation, policy paralysis, environmental clearances ruined the mood of foreign investors.)
- If they pump in money, Indian economy quickly improves, when they pull out money suddenly, our rupee weakens against dollar = crude oil becomes costly.
- Second, India’s import bill is strongly tied to the price of oil.
- Third, because of ongoing inflation, people prefer to invest in gold. Gold import= CAD = rupee weakens = crude oil import becomes expensive =even more problems.
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 they’ve to pay more money to import same quantity of goods. And for Exporters, call centers= good. Because they get more rupee.(even if they’re 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 isn’t really doing great. On the other hand, imports are getting more and more expensive, especially crude oil => petrol diesel become expensive= inflation.
Crude oil prices
In the global market, the price of crude oil have increased last year.
It could be because of two things
- 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.
- 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
India’s foreign exchange reserve, is made up of following components
- Foreign currency assets
- Gold
- SDR and RTP in IMF.
As per Economic Survey, Forex reserve is:
March 2012 | $294.4 |
January 2013 | $295.5 |
- 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?
- GDP (Market Price)=GDP(Factor Cost) + indirect taxes + subsidies.
- GDP (Market Price)=GDP(Factor Cost) – indirect taxes – subsidies.
- GDP (Factor Cost)=GDP(Market Price) + indirect taxes – subsidies.
- GDP (Factor Cost)=GDP(Market Price) – indirect taxes + subsidies.
Q2. Which of the following is correct statement?
- In the period of high growth, GDP (Market Price) is greater than GDP (Factor Cost)
- During economic slowdown, GDP (Market Price) is less than GDP (Factor Cost)
Choice
- Only 1
- Only 2
- Both
- None
Q3. Which of the following is/are not a component of Foreign Exchange reserve of India?
- Gold
- Foreign currency assets
- Special drawing rights in IMF
- Diamonds
Choice
- Only 1 and 3
- Only 2 and 2
- Only 3 and 4
- Only 4
thanks for all these effort sir. sir hv u published book on economic survey,
Sir, how exactly should one read the economic survey? Considering that I will be appearing in 2014 prelims, should I read the 2012-2013 economic survey or 2013-2014? Kindly elaborate on the areas of the economic survey that are important and how to read it in general.
Thanks in advance.
https://mrunalmanage.wpcomstaging.com/2011/04/economy-q-fiscal-stimulus-package.html
sir, above mentioned link(related to fiscal stimulus) is not working…..plz fix it soon…
other links are also not working:(
i had saved the ‘now missing’ articles for future reading.
let me know if you want them.
p.s- i hope Mrunal sir doesn’t mind me saving his articles.
@at your beck and call,
do you still have the articles? would appreciate you sending them in if you do.
@ at your beck and call ……would you pls send me missing all old articles to vijar.ias@gmail.com
where are those older topics gone? sir please see to it
i had saved the ‘now missing’ articles for future reading.
let me know if you want them.
p.s- i hope Mrunal sir doesn’t mind me saving his articles.
@at your beck and call,
do you still have the articles? would appreciate you sending them in if you do.
Sir why this link is not opening ?
https://mrunalmanage.wpcomstaging.com/2012/02/economy-iip-index-of-industrial.html….Even all links related with GDP and GNP.
sir ur old links are nt getting open
pls help me sir
sir , your above links are unavailable .please help.
mrunal sir, i am appearing for prelims2014……should i read 2013-2014 economy survey or the one you have summarised that is of 2012- 2013……if 2013-2014 how to read it????
mrunal sir, i am appearing for prelims2014……should i read 2013-2014 economy survey or the one you have summarised that is of 2012- 2013……if 2013-2014 how to read it????
hi mrunal,i am appearing in upsc prelims this august.can we read the articles on economic survey written by you or do we have to read the new 2013-14 economic survey?i sup[pose your articles have taken the economic survey of 2012-2013 as the reference?please solve this query…will b helpful..
when will economic survey for 2013-14 come?
10th of july …..halwa ceremony ho gyi
By which date will the complete economic survey br available on the mrunal.org ?
When will the complete economic survey br available on the mrunal.org ?
And what weightage does it usually carry in prelims and mains?
sir, from where we can download economic survey 2013-14???. I tried searching but unable to find it..
My dear Mrunal sir, we are eagerly awaiting for your NOTES on Indian Budget 2014-15 (submitted by Hon’ble FM Jaitley) and ECONOMIC SURVEY 2013-14. When it is likely to be uploaded in your Blog? Are you preparing Notes on the INDIAN BUDGET AND ECONOMIC SURVEY like last year. RBI Exam is fast approaching. Kindly expedite.
Not able to download lectures bcz of slow internet connection in jk….i will be pleased if someone kindly mail me the downloaded lectures….my email id is anshusharma_ahto@rediffmail.com
Hi sir
U r really doing a great job. sir I applied for ibps 2014. sir which articles should I cover for my exam. kindly guide me.