UPHESC Assistant Professor Economics 2025 PYQs

Concept: In the Indian sense, deficit financing means financing the budget gap by borrowing from the central bank (creation of new money).

1. RBI credit to government expands reserve money and hence money supply.
2. Excess money supply can cause inflation if output does not rise.
3. It does not directly reduce taxes or money supply.

Short trick: Deficit financing = printing new money → ↑ money supply → risk of inflation.

Concept: Goods with high income elasticity of demand (luxuries) are bought mainly by the rich, so they can be taxed at higher rates.

1. Higher rates on such goods make the tax system progressive (ability-to-pay principle).
2. Demand and tax revenue from them grow faster than income – revenue is buoyant/elastic.
3. Necessities (low income elasticity) should be taxed lightly to protect the poor.

Short trick: High income elasticity = luxury = tax it more.

Concept: The services (tertiary) sector has had the largest and fastest-growing share in India's GVA – about 55% now, up from about 30% in 1950-51.

1. Agriculture's share has fallen to about 17–18%.
2. Manufacturing has stayed roughly 15–17% of GVA.
3. IT, finance, trade, transport and communication drove the services boom after 1991.

Short trick: India = service-led growth (skipped the manufacturing stage).

Concept: A tariff is a tax on internationally traded goods – customs duty levied on imports and/or exports.

1. Import duties protect domestic industry and raise revenue.
2. Export duties are also tariffs (e.g., on raw materials to discourage their export).
3. Customs duty is the general name for both.

Short trick: Tariff = customs duty on imports and exports.

Concept: Forestalling (hedging/forward cover) means fixing the exchange rate in advance (e.g., by a forward contract or leads and lags in payment) so that future exchange-rate changes cannot cause loss.

1. An importer due to pay dollars later buys dollars forward to guard against depreciation of the rupee.
2. Its aim is to cover (protect against) foreign-exchange risk, not to accept or profit from it.
3. Speculation is the opposite – deliberately taking an open position to profit from rate changes.

Short trick: Hedging/forestalling = cover the risk; speculation = take the risk.

Concept: Under flexible rates, a BoP deficit causes the domestic currency to depreciate, making exports cheaper and imports dearer until the deficit disappears.

1. Gold standard/fixed rates: adjustment via price level (Hume's price–specie flow) or income (Keynesian).
2. Flexible rates: adjustment via the exchange rate itself (elasticity approach, Marshall–Lerner condition).

Short trick: Fixed rate → prices/income adjust; flexible rate → exchange rate adjusts.

Concept: Protection = measures that shield domestic producers from foreign competition.

1. Tariffs, import quotas and exchange control all restrict imports.
2. Excise duty is a tax on goods produced within the country; it falls on domestic goods and so does not protect them from imports.

Short trick: Excise = domestic production tax → not protection.

Concept: The Doha Development Round (launched 2001) had agriculture as its central and most contentious issue.

1. Disputes: farm subsidies of the US/EU, market access, special safeguard mechanism for developing countries.
2. Talks collapsed in 2008 (Geneva) mainly over agricultural SSM between India/China and the US.
3. TRIPS and services (GATS) came from the earlier Uruguay Round.

Short trick: Doha = 'Development Round' stuck on agriculture.

Concept: The Human Development Report (with HDI) is published annually by the UNDP since 1990.

1. It was conceived by Mahbub ul Haq with Amartya Sen's capability approach.
2. World Bank – World Development Report; IMF – World Economic Outlook; UNICEF – State of the World's Children.

Short trick: HDR/HDI → UNDP (1990, Mahbub ul Haq).

Concept: Since 2014 (Urjit Patel Committee) India measures headline inflation by the all-India Consumer Price Index (Combined), which RBI targets at 4% ± 2% under flexible inflation targeting.

1. CPI (Combined: rural + urban) is compiled monthly by NSO/MoSPI.
2. WPI (Office of Economic Adviser, DPIIT) is still published as ‘WPI inflation’, but since 2014 it is no longer the headline/policy measure – so the official headline method is CPI.
3. Fisher's ideal index is a formula, not India's official measure; CPI-IW is used for DA of workers.

Short trick: Old headline = WPI; since 2014 headline/RBI target = CPI-Combined.

Concept: The Purple (Lavender) Revolution was launched in 2016 under CSIR's Aroma Mission, promoting lavender cultivation in Jammu & Kashmir (Doda, Bhaderwah).

1. Lavender's purple flowers give the name; its oil is used in perfumes and medicines.
2. Other colours: Green – foodgrains; White – milk; Blue – fish; Yellow – oilseeds; Pink – onion/prawns; Golden – horticulture/honey.

Short trick: Purple = Lavender (J&K, Aroma Mission).

Concept: Gross → Net: subtract depreciation (consumption of fixed capital). NNP_MP = GNP_MP − Depreciation.

1. National → Domestic: subtract net factor income from abroad (option B gives GDP_MP).
2. Market price → factor cost: subtract net indirect taxes (indirect taxes − subsidies).
3. Transfer payments are never part of national product.

Short trick: Gross − Dep = Net; National − NFIA = Domestic; MP − NIT = FC.

Concept: Devaluation = official reduction of the external value of a currency under a fixed exchange rate; it is used mainly to correct a BoP deficit.

1. Exports become cheaper abroad and imports dearer at home, so the trade gap narrows (if the Marshall–Lerner condition holds).
2. India devalued the rupee in 1949, 1966 and 1991 – all in BoP crises.
3. Devaluation raises import prices, so it would worsen inflation; a surplus calls for revaluation.

Short trick: BoP deficit → devalue; BoP surplus → revalue.

Concept: Capital receipts either create a liability or reduce an asset of the government: borrowings, recovery of loans, disinvestment.

1. Borrowing from the public (market loans, small savings) creates a liability → capital receipt.
2. Income tax = tax revenue; dividends/profits of PSUs and interest receipts = non-tax revenue – all revenue receipts.

Short trick: Liability ↑ or asset ↓ → capital receipt.

Concept: Indian agriculture mainly suffers from seasonal and disguised unemployment.

1. Seasonal: farm work is available only in sowing/harvesting seasons; workers are idle for 4–6 months.
2. Disguised: more family members work on a small plot than needed (MP ≈ 0).
3. Frictional and cyclical unemployment are features of industrial/urban economies.

Short trick: Farm = Seasonal + Disguised; Factory/city = Frictional + Cyclical.

Concept: Under the Targeted Public Distribution System (1997), yellow ration cards are issued to Below Poverty Line (BPL) families for subsidised food grains.

1. APL families usually get white/saffron cards; the poorest get Antyodaya (AAY) cards.
2. Colours vary slightly by state, but yellow is the usual BPL card.

Short trick: Yellow card = BPL ration card.

Concept: Human Development Report 2020 (UNDP) gave India an HDI value of 0.645 for 2019, rank 131 of 189 countries (medium human development).

1. Life expectancy 69.7 years; expected schooling 12.2 years; mean schooling 6.5 years; GNI per capita about 6,681 PPP dollars.
2. Medium HD band is 0.550–0.699, so 0.6451 fits; 0.7646 would be high HD.

Short trick: HDR 2020: India 0.645, rank 131.

Concept: Rupee depreciation means excess demand for dollars. RBI can sell dollars from its forex reserves to raise their supply and support the rupee.

1. Selling dollars absorbs rupees, increasing demand for the rupee → rupee appreciates/stabilises.
2. Buying dollars or printing money would weaken the rupee further.
3. Raising tariffs is a government trade-policy measure, not an RBI forex operation.

Short trick: Rupee falling → RBI sells $;rupeerisingtoofast\to RBIbuys$.

Concept: The current account records exports and imports of goods (merchandise/visible trade) and services (invisibles), plus primary income and transfers.

1. Goods trade balance + services + income + current transfers (remittances) = current account balance.
2. Capital account records FDI, FPI, loans, banking capital etc.

Short trick: Current = goods + services + income + transfers (both exports and imports).

Concept: The balance of payments is the systematic record of all economic transactions (payments and receipts) of a country with the rest of the world during a year.

1. Payments for imports and receipts from exports are both entered in it.
2. The foreign trade multiplier concerns income effects of exports/imports, not payments.

Short trick: International payments ↔ Balance of Payments.