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1. Profile of India (Key indicators)
• India is a diverse and populous country
located in South Asia. It is known for its rich
history, culture, and economic diversity. Here
are some key indicators and information
about India:

2. • Population: As of my last knowledge update in
September 2021, India was the second-most
populous country in the world, with over 1.3
billion people. However, please note that
population figures can change over time.
• Area: India is the seventh-largest country in
the world by land area, covering
approximately 3.287 million square kilometers
(1.269 million square miles).
• Capital: New Delhi is the capital of India, while
Mumbai is its largest city.

3. • Government: India is a federal parliamentary
democratic republic. It has a President as the
head of state and a Prime Minister as the head of
government.
• Economy:
– India has a mixed economy with agriculture,
manufacturing, and services sectors.
– It is one of the world's fastest-growing major
economies.
– Key industries include information technology,
telecommunications, textiles, pharmaceuticals,
agriculture, and automotive manufacturing.
• GDP: India's Gross Domestic Product (GDP) is
significant. It was one of the largest economies in
the world, with a GDP exceeding $2.9 trillion in
nominal terms.

4. • Currency: The currency used in India is the Indian
Rupee (INR).
• Languages: India is a linguistically diverse country
with hundreds of languages spoken across its
regions. Hindi and English are the official
languages, with 21 other officially recognized
languages.
• Religions: India is known for its religious diversity.
Major religions include Hinduism, Islam,
Christianity, Sikhism, Buddhism, and Jainism.
• Culture: India has a rich and diverse cultural
heritage with a long history of art, music, dance,
literature, and cuisine. It is also famous for its
traditional clothing, including sarees and turbans.

5. • Education: India has a large and complex
education system. It is home to several
prestigious institutions like the Indian Institutes
of Technology (IITs) and Indian Institutes of
Management (IIMs).
• Healthcare: The healthcare system in India varies
from basic facilities in rural areas to world-class
medical facilities in major cities. Medical tourism
is also significant.
• Transportation: India has an extensive
transportation network that includes railways,
roadways, air travel, and waterways. Major cities
are well-connected by airports.

6. • Natural Resources: India is rich in natural
resources, including coal, iron ore, bauxite,
and arable land. It is also known for its diverse
geography, including the Himalayan mountain
range in the north and the Indian Ocean
coastline in the south.
• Environmental Concerns: India faces
environmental challenges, including air and
water pollution, deforestation, and issues
related to climate change and sustainable
development.

7. Features of Indian Economy
• The Indian economy is diverse and complex, featuring a
mix of agriculture, manufacturing, and services sectors.
Some key features of the Indian economy:
• Mixed Economy: India follows a mixed economic
system, where both the public and private sectors
coexist. The government plays a significant role in
certain strategic sectors, while private enterprise is
dominant in others.
• Agriculture: Agriculture is a vital component of the
Indian economy, employing a large portion of the
population. It contributes significantly to GDP and
includes the cultivation of crops like rice, wheat,
sugarcane, cotton, and various fruits and vegetables.

8. • Manufacturing: India has a growing manufacturing
sector, with industries ranging from textiles, steel,
automotive, electronics, and pharmaceuticals. "Make
in India" is a government initiative aimed at promoting
manufacturing and boosting economic growth.
• Services: The services sector has become a key driver
of India's economic growth. It includes information
technology, business process outsourcing (BPO),
software services, finance, telecommunications, and
tourism. Cities like Bengaluru and Hyderabad are
known as technology hubs.
• Information Technology (IT): India is a global IT
services hub, providing software development, IT
consulting, and outsourcing services to companies
worldwide. The country is also known for its software
exports and software parks.

9. • Start-up Ecosystem: India has a burgeoning start-up
ecosystem, with a growing number of tech start-ups in
various sectors, including e-commerce, fintech,
healthtech, and agritech. Cities like Bengaluru and
Pune are prominent start-up hubs.
• Foreign Direct Investment (FDI): India has been
actively seeking foreign investments to boost its
economy. Policies have been liberalized to attract FDI
across various sectors.
• Demographic Dividend: India has a large and youthful
population, which can be a significant asset for
economic growth if the workforce is effectively skilled
and employed. This demographic dividend presents
both opportunities and challenges.

10. • Infrastructure Development: India has been
investing in infrastructure development, including
transportation (roads, railways, airports, and
ports), energy, and urban development to
support economic growth.
• Financial Inclusion: Efforts have been made to
improve financial inclusion, with the expansion of
banking services to rural areas and the promotion
of digital payments.
• Economic Inequality: India faces significant
income and wealth inequality, with a wide gap
between the rich and the poor. Efforts have been
made to address this issue through various social
welfare programs.

11. • Macroeconomic Challenges: India faces
challenges such as inflation, fiscal deficits, and a
complex tax system. Managing these
macroeconomic issues is crucial for stable
economic growth.
• Environmental Concerns: India faces
environmental challenges, including air and water
pollution, deforestation, and climate change.
Sustainable development is a growing priority.
• Global Trade: India is an active participant in
global trade and is a member of organizations like
the World Trade Organization (WTO). The country
has bilateral and multilateral trade agreements
with various nations.

12. • Economic Reforms: India has implemented
economic reforms over the years to liberalize
its economy, including the introduction of the
Goods and Services Tax (GST) and initiatives
like "Make in India" and "Digital India."

13. GDP: Growth & Sectoral Contribution
• What is GDP growth rate
• GDP growth rate refers to the pace at which a country's Gross
Domestic Product (GDP) expands or increases over a specific
period, usually measured annually or quarterly.
• Gross Domestic Product (GDP) is the market worth of all final
services and products produced within its boundaries over a
certain period.
• The GDP growth rate is calculated by comparing the GDP of
one period with the GDP of a previous period.
• It is expressed as a percentage and provides a measure of the
country's economic performance and overall economic health.
• If the GDP growth rate is positive, the economy is growing; if it
is negative, the economy is contracting or in recession.

14. Contribution of Different Sectors in GDP of India 2022
• India’s Gross Domestic Product (GDP) is a
measure of the country’s economic performance.
• It is the sum of the total value of goods and
services produced in the country.
• The contribution of different sectors to
the GDP of India in 2022 was as follows:
• The Primary sector was estimated as 21.82
percent, the secondary was estimated as 24.29
percent, and the tertiary sector contributed 53.89
percent to the GDP of India in 2022.

15. THE FISCAL POLICY
• “Fiscal policy refers to the policy of the government as regards
taxation, public borrowing and public expenditure with specific
objectives in view. These objective are to produce desirable effects
and avoid undesirable effects on the national income,
production,empoyment, and general price level.”
• Fiscal policy has to decide on the size and pattern of flow of
expenditure from the government to the economy and from the
economy back to the government. So, in broad term fiscal policy
refers to "that segment of national economic policy which is
primarily concerned with the receipts and expenditure of central
government." In other words, fiscal policy refers to the policy of the
government with regard to taxation, public expenditure and public
borrowings.

16. Objectives
• Development by effective Mobilization of Resources
The principal objective of fiscal policy is to ensure rapid economic growth and
development. This objective of economic growth and development can be achieved
by Mobilization of Financial Resources.
The central and the state governments in India have used fiscal policy to mobilize
resources.
The financial resources can be mobilized by :-
1. Taxation : Through effective fiscal policies, the government aims to mobilize
resources by way of direct taxes as well as indirect taxes because most important
source of resource mobilization in India is taxation.
2. Public Savings : The resources can be mobilized through public savings by reducing
government expenditure and increasing surpluses of public sector enterprises.
3. Private Savings : Through effective fiscal measures such as tax benefits, the
government can raise resources from private sector and households. Resources
can be mobilized through government borrowings by ways of treasury bills, issue
of government bonds, etc., loans from domestic and foreign parties and by deficit
financing.

17. • Efficient allocation of Financial Resources
The central and state governments have tried to make efficient allocation of
financial resources. These resources are allocated for Development Activities
which includes expenditure on railways, infrastructure, etc. While Non-
development Activities includes expenditure on defense, interest payments,
subsidies, etc.But generally the fiscal policy should ensure that the resources
are allocated for generation of goods and services which are socially desirable.
Therefore, India's fiscal policy is designed in such a manner so as to encourage
production of desirable goods and discourage those goods which are socially
undesirable.
• Reduction in inequalities of Income and Wealth
Fiscal policy aims at achieving equity or social justice by reducing income
inequalities among different sections of the society. The direct taxes such as
income tax are charged more on the rich people as compared to lower income
groups. Indirect taxes are also more in the case of semi-luxury and luxury items,
which are mostly consumed by the upper middle class and the upper class. The
government invests a significant proportion of its tax revenue in the
implementation of Poverty Alleviation Programs to improve the conditions of
poor people in society.

18. • Price Stability and Control of Inflation
One of the main objective of fiscal policy is to control inflation and
stabilize price. Therefore, the government always aims to control the
inflation by Reducing fiscal deficits, introducing tax savings schemes,
Productive use of financial resources, etc.
• Employment Generation
The government is making every possible effort to increase employment
in the country through effective fiscal measure. Investment in
infrastructure has resulted in direct and indirect employment. Lower
taxes and duties on small-scale industrial (SSI) units encourage more
investment and consequently generates more employment. Various
rural employment programmes have been undertaken by the
Government of India to solve problems in rural areas. Similarly, self
employment scheme is taken to provide employment to technically
qualified persons in the urban areas.

19. • Balanced Regional Development
Another main objective of the fiscal policy is to bring about a balanced
regional development. There are various incentives from the
government for setting up projects in backward areas such as Cash
subsidy, Concession in taxes and duties in the form of tax holidays,
Finance at concessional interest rates, etc.
• Reducing the Deficit in the Balance of Payment
Fiscal policy attempts to encourage more exports by way of fiscal
measures like Exemption of income tax on export earnings, Exemption
of central excise duties and customs, Exemption of sales tax and octroi,
etc.
The foreign exchange is also conserved by Providing fiscal benefits to
import substitute industries, Imposing customs duties on imports, etc.
The foreign exchange earned by way of exports and saved by way of
import substitutes helps to solve balance of payments problem. In this
way adverse balance of payment can be corrected either by imposing
duties on imports or by giving subsidies to export.

20. • Capital Formation
The objective of fiscal policy in India is also to increase the rate of capital
formation so as to accelerate the rate of economic growth. An underdeveloped
country is trapped in vicious (danger) circle of poverty mainly on account of
capital deficiency. In order to increase the rate of capital formation, the fiscal
policy must be efficiently designed to encourage savings and discourage and
reduce spending.
• Increasing National Income
The fiscal policy aims to increase the national income of a country. This is
because fiscal policy facilitates the capital formation. This results in economic
growth, which in turn increases the GDP, per capita income and national
income of the country.

21. • Development of Infrastructure
Government has placed emphasis on the infrastructure development for
the purpose of achieving economic growth. The fiscal policy measure
such as taxation generates revenue to the government. A part of the
government's revenue is invested in the infrastructure development. Due
to this, all sectors of the economy get a boost.
• Foreign Exchange Earnings
Fiscal policy attempts to encourage more exports by way of Fiscal
Measures like, exemption of income tax on export earnings, exemption
of sales tax and octroi, etc. Foreign exchange provides fiscal benefits to
import substitute industries. The foreign exchange earned by way of
exports and saved by way of import substitutes helps to solve balance of
payments problem.

22. BUDGET
• A budget is a quantitative expression of a plan for a defined period of time. It
may include planned sales volumes and revenues, resource quantities, costs and
expenses, assets, liabilities and cash flows. It expresses strategic plans of
business units, organizations, activities or events in measurable terms.
• A budget is an important concept in microeconomics, which uses a budget line
to illustrate the trade-offs between two or more goods. In other terms, a budget
is an organizational plan stated in monetary terms.
• The budget of a government is a summary or plan of the intended revenues and
expenditures of that government.

23. • The Budget of the Government of India, for any year, gives a complete picture of
the estimated receipts and expenditures of the Government for that year on the
basis of the budget figures of the two previous years.
• Every budget, for instance gives three sets of figures:
a) Budget and revised figures for the current year
b) Budget estimates for the following year.
c) actual figures for the preceding year.
• The budget in India is divided into two parts, viz., revenue budget or revenue
account and capital budget or capital account.

24. • Current expenditure or revenue expenditure is met out of current revenues.
• Revenue expenditure is on
a. Such general services as general administration including police, judiciary,
defense, collection of taxes
b. Social and community services such as education, medical and public health,
labour and employment
c. Economic services, like agriculture, industries, transportation, trade,etc.

26. Revenue Budget
This financial statement includes the revenue receipts of the government i.e. revenue
collected by way of taxes & other receipts. It also contains the items of expenditure met
from such revenue.
(a) Revenue Receipts : These are the incomes which are received by the government
from all sources in its ordinary course of governance. These receipts do not create a
liability or lead to a reduction in assets. Revenue receipts are further classified as tax
revenue and non-tax revenue.
i. Tax Revenue :-
• Tax revenue consists of the income received from different taxes and other duties levied
by the government. It is a major source of public revenue. Every citizen, by law is bound
to pay them and non-payment is punishable.
• Taxes are of two types, viz., Direct Taxes and Indirect Taxes.
• Direct taxes are those taxes which have to be paid by the person on whom they are
levied. Its burden can not be shifted to some one else. E.g. Income tax, property tax,
corporation tax, estate duty, etc. are direct taxes. There is no direct benefit to the tax
payer.
• Indirect taxes are those taxes which are levied on commodities and services and affect
the income of a person through their consumption expenditure. Here the burden can be
shifted to some other person. E.g. Custom duties, sales tax, services tax, excise duties,
etc. are indirect taxes.

27. ii. Non-Tax Revenue :-
Apart from taxes, governments also receive revenue from other non-tax sources.
The non-tax sources of public revenue are as follows :-
• Fees : The government provides variety of services for which fees have to be paid. E.g.
fees paid for registration of property, births, deaths, etc.
• Fines and penalties : Fines and penalties are imposed by the government for not
following (violating) the rules and regulations.
• Profits from public sector enterprises : Many enterprises are owned and managed by the
government. The profits receives from them is an important source of non-tax revenue.
For example in India, the Indian Railways, Oil and Natural Gas Commission, Air India,
Indian Airlines, etc. are owned by the Government of India. The profit generated by them
is a source of revenue to the government.
• Gifts and grants : Gifts and grants are received by the government when there are
natural calamities like earthquake, floods, famines, etc. Citizens of the country, foreign
governments and international organizations like the UNICEF, UNESCO, etc. donate during
times of natural calamities.
• Special assessment duty : It is a type of levy imposed by the government on the people
for getting some special benefit. For example, in a particular locality, if roads are
improved, property prices will rise. The Property owners in that locality will benefit due
to the appreciation in the value of property. Therefore the government imposes a levy on
them which is known as special assessment duties.
iii. India's Revenue Receipts :-
The tax revenue provides major share of revenue receipts to the central government of India.

28. (b) Revenue Expenditure
What is Revenue Expenditure ?
Revenue expenditure is the expenditure incurred for the routine, usual and
normal day to day running of government departments and provision of
various services to citizens. It includes both development and non-
development expenditure of the Central government. Usually expenditures
that do not result in the creations of assets are considered revenue
expenditure.
Expenses included in Revenue Expenditure :-
• In general revenue expenditure includes following :-
• Expenditure by the government on consumption of goods and services.
• Expenditure on agricultural and industrial development, scientific research,
education, health and social services.
• Expenditure on defence and civil administration.
• Expenditure on exports and external affairs.
• Grants given to State governments even if some of them may be used for
creation of assets.
• Payment of interest on loans taken in the previous year.
• Expenditure on subsidies.
India's Defense Expenditure

29. • Capital Budget
Capital budget of the Government of India, also known as the capital account
consists of capital receipts and capital expenditure. The capital receipts of
the Central Government are composed of :
a. Net recoveries of loans and advances made previously to State
Governments, Union Territories and public sector undertakings.
b. Net market borrowings(i.e., gross borrowings from the market less
repayments of public debt)
c. Net small savings collections (gross collections less share of the States)
d. Other capital receipts such as provident funds, special deposits , etc

30. Capital expenditure
• Loans to states and Union territories for financing Plan
projects, and loans to foreign governments.
• Capital expenditure on economic development;
• Capital expenditure on social and community development;
• Capital expenditure on defence; and
• Capital expenditure on general services.