Expected Questions in Economy 2019 IAS/NET (Part-1) (Set-3)

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Please find below the most important expected topics for the upcoming UPSC Prelims exam 2019. Subscribe@Examrace YouTube Channel to get the complete series of expected questions. For practice and solutions visit - doorsteptutor. com. You can download the pdf by clicking the option “Download PDF” .

Expected Questions on Economy 2019 (UPSC CSE/SSC/IBPS)

Ease of Living Index

  • Andhra Pradesh has achieved number one rank in country w/average growth of 10.5 % during last 4 years.
  • It has surpassed many developed States like Maharashtra & Gujarat following “focused approach” & setting high targets for itself.
  • Andhra Pradesh is only State to clock double-digit growth rate.
  • Telangana has slipped to 2nd place, Maharashtra is ranked 6th. Punjab is placed 14th & Karnataka 3rd. Telangana, which registered 6.8 % growth in 2014 - 15 could achieve 10.4 % in 2017 - 18.
  • 3 states were awarded best-performing states at National Dissemination Workshop on Ease of Living Index, 2018 held in New Delhi.

Ease of Living Index

  • Aims to help cities assess their live ability vis-a-vis global & national benchmarks & encourage them to move towards ‘outcome-based’ approach to urban planning & mgmt. 1st edition of index released in January 2018 had ranked 111 Indian cities & was topped by Pune.
  • It captures quality of life based on data collected from urban local bodies on 4 parameters, which were further broken down into 15 categories.

Public Credit Registry

RBI Deputy Governor made a case for setting up a Public Credit Registry (PCR) , incorporating unique identifiers: Aadhaar for individual borrowers & Corporate Identification Number for firms.


  • Public credit registry is information repository that collates all loan information of individuals & corporate borrowers.
  • Credit repository helps banks distinguish b/w a bad & a good borrower & accordingly offer attractive interest rates to good borrowers.
  • PCR will address issues such as information asymmetry, improve access to credit & strengthen credit culture among consumers. A PCR may help raise India՚s rank in global ease of doing business index.

PCR is necessary

  • Credit information is available across multiple systems in bits & pieces.
  • PCR will help capture all relevant information about a borrower, across different borrowing products.
  • It can flag early warnings on asset quality by tracking performance on other credits.

Human Development Index (HDI)

HDI was released by UN Development Programme w/findings indicating glaring inequality in country though “millions are lifted out of poverty” .

HDI is composite measure of every country՚s attainment in 3 basic dimensions:

  • Standard Of Living measured by gross national income (GNI) per capita
  • Health measured by life expectancy at birth
  • Education levels calculated by mean years of education among adult population & expected years of schooling for children.

Reference to India

  • India ranks a low 130 out of 189 countries
  • UNDP report stated that w/HDI value of 0.64 compared to 2017՚s 0.636, India is categorised as a medium human development & that its rank rose one spot compared to 2017 HDI.
  • According to 2018 findings, b/w 1990 & 2017, India՚s HDI value increased from 0.427 to 0.640, almost 50 % increase, which is indicator that millions are lifted out of poverty.
  • Value of India՚s Inequality-adjusted HDI (IHDI) falls to 0.468, a 26.8 % decrease, far worse than global average decrease in global HDI value due to inequality at 20 % .

“The Future of Jobs 2018” report by WEF

“The Future of Jobs 2018” report by WEF predicts that rise of robotics will result in machines performing more tasks on job than humans by 2025.

Trend could displace 75 million jobs globally by 2022.

Report surveyed executives from diff. industries around world, aiming to get a look at how new technologies, like artificial intelligence, will affect global labor force.

Details of report

  • In 2018, humans performed an average of 71 % of total task hours across 12 industries spanning manufacturing, services & high tech.
  • By 2025, that will drop to just 48 % , according to WEF. Machines will perform remaining 52 % .
  • Globally, half of all companies expect automation to cut their full-time workforce in next 4 years. New jobs will still lead to a net gain in employment opportunities if sufficient reskilling is done.
  • In India, 54 % of employees in these sectors will need reskilling by 2022. Of this 35 % would need at least 6 months՚ worth of reskilling,
  • 10 % would need more than a year of training in order to meet demands of new economy.

Ease of Doing Business Index

  • Index is aggregate figure that includes different parameters which define ease of doing business in a country.
  • Index ranks 190 countries based on 10 indicators across life-cycle of a business, from “starting a business” to “resolving insolvency.”
  • 10 indicators are: Starting business, Dealing w/construction permits, Getting electricity, Registering property, Getting credit, Protecting investors, Paying taxes, Trading across borders, Enforcing contracts & Resolving insolvency.
  • Each one of these indicators carry equal weightage.
  • India jumped 23 ranks in World Bank՚s Ease of Doing Business Index 2019 to 77 (for 2018) . In 2018 report, country was ranked 100 (for 2017) .
  • India became top ranked country in South Asia for 1st time & 3rd among BRICS.
  • In last 2 years country has climbed 53 notches, a performance matched in past only by Bhutan.
  • Biggest gain was in construction permit where India climbed 129 ranks to 52nd place on back of targeted govt. effort to remove hurdles.

On Angel Tax

Govt. has decided to set up a 5-member working committee to look into angel tax issue & come up w/guidelines in one week. It agreed to implement some key changes requested by start-ups regarding issue.

Angel Tax

  • A 30 % tax that is levied on funding received by startups from external investor. This 30 % tax is levied when startups receive angel funding at a valuation higher than its ‘fair market value’ . It is counted as income to company & is taxed.
  • Tax, under section 56 (2) (viib) , was introduced by in 2012 to fight money laundering. Bribes & commissions could be disguised as angel investments to escape taxes.

Proposed reforms:

  • Start-ups whose aggregate amount of paid-up share capital & share premium after proposed issue of share does not exceed ₹ 10 cr. are eligible for exemption from tax. Govt. is planning to raise this limit to ₹ 25 crore.
  • It is planning to amend definition of a start-up to include companies that are in operation for up to 10 years rather than previous limit of 7 years.

Labour Bureau files MUDRA job report

Labour Bureau has completed its survey on employment generated by MUDRA loan scheme, giving Centre potential data tool to combat other reports showing dismal scenario on jobs.

About MUDRA Scheme

  • Pradhan Mantri Mudra Yojana was introduced in April 2015 as effort to extend affordable credit to micro & small enterprises.
  • Loans up to ₹ 10 lakh are extended to these non-corporate, non-farm enterprises by Micro Units Development & Refinance Agency (MUDRA) thru last-mile financial institutions.
  • 15.56 cr. loans worth a total of ₹ 7.23 lakh crore are disbursed.
  • In December 2017, faced w/mounting criticism on failure to create job opportunities, Labour Ministry had asked Labour Bureau to initiate survey on jobs created thru MUDRA scheme.

Adam Smith and Laissez-faire

  • Adam smith is considered as father of Modern Economics. In his book ″ The nature & causes of wealth of the Nation՚s 1776, he has described economics as science of wealth.
  • Economy is study of wealth only & it deals w/its production & consumption.
  • Laissez faire refers to economic policy of letting owners of industry & business set working conditions w/o interference. Policy favours a free market unregulated by govt. Term comes from a French phrase that means “let do” .
  • Theory of Free Market or Free economy was defended by Adam Smith in his 1776 book Wealth of Nations.
  • He argued that economic liberty guaranteed economic progress. He claimed that govt. need not interfere in economy. His famous “The Invisible Hand” metaphor supported this idea.
  • Basic ideas of Adam Smith were supported by Thomas Malthus & David Ricardo. They believed that natural laws governed economic life. Their important ideas were foundation of laissez-faire capitalism.
  • In Capitalism, money is invested in business ventures w/goal of making a profit. Ideas of Malthus & Ricardo helped bring about Industrial Revolution.

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