Economy Basics and History

An economy is a system through which a society produces, distributes and consumes goods and services.

Scarcity is the basic economic problem caused by limited resources and unlimited wants.

Land, labour, capital and entrepreneurship are commonly identified as factors of production.

Gross Domestic Product measures the value of final goods and services produced within a country‘s domestic territory during a given period.

Intermediate goods are excluded when calculating final expenditure because their value is reflected in final goods.

Per capita income is national income divided by the population.

Growth focuses mainly on an increase in real output, while development also considers broader improvements in living standards and capabilities.

India introduced major liberalisation reforms in 1991 amid a balance-of-payments crisis.

India adopted planned development with a significant role for the public sector and industrialisation.

The Planning Commission prepared Five-Year Plans; it was replaced by NITI Aayog in 2015.

The Arthashastra discusses statecraft, revenue, trade and administration.

Agriculture was a major livelihood, alongside crafts, trade and other activities.

Agriculture was the main economic base, while textile production and internal and external trade were also important.

Colonial policies reshaped trade and production, including the expansion of raw-material exports and imports of British manufactured goods.

It reduced industrial licensing and opened more areas to competition and private investment.

Liberalisation reduces unnecessary controls and restrictions on economic activity.

Privatisation involves transferring ownership or management of an enterprise from the public sector to private hands, wholly or partly.

Globalisation is the growing integration of economies through trade, investment, technology and movement of information.

A pension paid by the government without a current good or service being produced in return is a transfer payment.

Real GDP adjusts nominal GDP for changes in prices.