Economic Terms – Study Notes
(West Bengal Patwari / Lekhpal – General Awareness & Current Affairs)
Goal: Understand the basic economic terms you may encounter in exams or daily work, how they are calculated, and why they matter.
1. Simple Explanation
| Term | What It Means (in Plain Language) |
|---|---|
| GDP (Gross Domestic Product) | Total value of all goods & services produced inside a country in a year. |
| GNP (Gross National Product) | GDP + income earned by residents abroad – GDP – income earned by foreigners at home. |
| Inflation | General rise in price level over time. |
| CPI (Consumer Price Index) | A basket‑price measure of goods & services bought by households. |
| PPI (Producer Price Index) | Price changes at the wholesale or production level. |
| LPI (Logistics Performance Index) | Global ranking of how well a country’s logistics (transport, customs, etc.) work. |
| FDI (Foreign Direct Investment) | Investment in a company that gives the investor control (e.g., 10 %+ equity). |
| FII (Foreign Institutional Investor) | Investment by foreign institutional funds (mutual funds, pension funds). |
| RBI (Reserve Bank of India) | India’s central bank: controls money supply, interest rates, and banking regulation. |
| Repo & Reverse Repo Rates | Short‑term borrowing rates used by RBI to control liquidity. |
| Monetary Policy | RBI’s actions to manage money supply & interest rates. |
| Fiscal Policy | Government’s decisions on spending & taxation. |
| Budget Deficit | When government spending > revenue in a year (excludes borrowing). |
| Primary Surplus/Deficit | Budget deficit + interest payments (i.e., total debt servicing). |
| Liquidity | How easily an asset can be turned into cash without losing value. |
| Liquidity Ratio | Measure of a bank’s ability to meet short‑term obligations. |
| Credit Rating | Assessment of a borrower’s (country, company) creditworthiness. |
2. Key Points
| Term | Why It Matters to Patwari / Lekhpal |
|---|---|
| GDP/GNP | Reflects economic health; informs land taxation policy and regional development. |
| Inflation & CPI | Affects land value, lease rates, and farmers’ purchasing power. |
| PPI | Indicates the cost changes farmers face at the wholesale level. |
| FDI & FII | Drives investment in rural infrastructure – roads, irrigation, etc. |
| RBI Rates | Influence the cost of credit for farmers and agribusiness. |
| Fiscal Policy & Budget | Determines allocations to state agriculture schemes, subsidies. |
| Liquidity | Determines banks’ willingness to grant loans for land purchase. |
| Credit Rating | Affects interest rates on government bonds that fund rural development. |
Current Affairs Highlights (2023‑24) – Quick Reference
- RBI’s latest repo rate change (e.g., 5.75 % in Q2‑24).
- 2023‑24 fiscal deficit target (≈ 5.2 % of GDP).
- GDP growth rate 6.3 % (FY 2023‑24).
- CPI inflation 4.7 % (March 2024) – above the RBI’s target 4 % ±2 %.
- FDI inflow record: ₹12 trn in FY 2023‑24 (mainly in agriculture, renewable energy).
- India’s LPI rank improved to 12th (2023).
3. Worked Example
Calculating the CPI (March 2024)
Assume a simplified basket of 3 items:
| Item | Weight (in %) | Price Jan‑24 | Price Mar‑24 |
|---|---|---|---|
| Rice | 40 | ₹45 | ₹48 |
| Wheat | 30 | ₹35 | ₹37 |
| Cooking Oil | 30 | ₹210 | ₹216 |
Step 1 – Compute index for each item
[ \text{Index}i = \frac{\text{Price}{\text{Mar}}}{\text{Price}_{\text{Jan}}} \times 100 ]
| Item | Index |
|---|---|
| Rice | ( \frac{48}{45}\times100 = 106.67 ) |
| Wheat | ( \frac{37}{35}\times100 = 105.71 ) |
| Oil | ( \frac{216}{210}\times100 = 102.86 ) |
Step 2 – Weight the indices
[ \text{CPI} = \sum (\text{Weight}_i \times \text{Index}_i) ]
[ \text{CPI} = 0.40\times106.67 + 0.30\times105.71 + 0.30\times102.86 ] [ \text{CPI} = 42.67 + 31.71 + 30.86 = 105.24 ]
Interpretation:
CPI increased from 100 (base Jan‑24) to 105.24 in March‑24 → 5.24 % inflation over two months.
4. Quick Revision Summary
| Concept | One‑Line Recap |
|---|---|
| GDP | Total value of domestic production. |
| GNP | GDP + foreign income – foreign income at home. |
| Inflation | General price rise; measured |