Economy Key Terminologies — Planning and Economic Reforms in India
1. Previous Year Questions (UPSC)
Context: Understanding key economic terminologies related to planning and economic reforms is crucial for UPSC preparation. The following terms have been asked in previous years' examinations.
| Year | Term | Explanation |
|---|---|---|
| 2020 | Rural Employment | Rural employment refers to the work or jobs available in the countryside or rural areas. It includes a variety of occupations and industries such as farming, forestry, fishing, mining, construction, manufacturing, and service sector jobs such as healthcare, education, and retail. Rural employment can be both formal and informal, and may include self-employment, wage employment, or a combination of both. |
| 2019 | Five-Year Plan | Five-Year Plans are a series of centralized economic planning initiatives that were introduced in the former Soviet Union and later adopted by India. They are essentially a set of guidelines that establish specific economic and social targets, goals, and policies for a period of five years, and serve as a blueprint for the government's economic development programs. |
| 2017 | FDI Inflows | FDI inflows refer to the investment made by foreign companies or individuals in the domestic economy of a country. FDI stands for Foreign Direct Investment, and it is the process by which a company or investor acquires a controlling interest in an existing company or establishes a new business in a foreign country. |
| 2017 | Foreign Exchange Reserves | Foreign exchange reserves refer to the assets that a country's central bank holds in foreign currencies, such as US dollars, Euros, and Japanese Yen. These reserves are used to ensure that a country can meet its international obligations, including trade and debt payments, and to maintain stability in the foreign exchange market. |
| 2014 | Inclusive Growth | Inclusive growth is a concept that refers to the process of economic growth that is broad-based and benefits all segments of society, including the most vulnerable and marginalized groups. |
| 2014 | Sustainable Growth | Sustainable growth refers to a type of economic development that can be maintained over the long term without degrading the natural environment, exploiting resources unsustainably, or compromising the well-being of future generations. Sustainable growth aims to meet the needs of the present generation without compromising the ability of future generations to meet their own needs. |
| 2012 | District Planning Committees (DPCs) | District Planning Committees are committees set up under the 73rd Amendment to the Constitution of India, which aims to strengthen the Panchayati Raj system in the country. DPCs are responsible for preparing and coordinating the district plans for economic development and social justice. |
| 2012 | Government Spending | Government spending refers to the use of public funds by the government to finance various programs, projects, and services for improving public infrastructure, providing public goods and services, promoting economic growth, reducing poverty, and ensuring social welfare. |
2. Important Terms in News
Context: These economic terms frequently appear in news and policy discussions related to planning and economic reforms, making them essential for UPSC aspirants to understand.
Factors of Production
- These are basic productive resources (labour, capital, and natural resources) that are essential inputs to every economic activity.
Liberalization
- It is the process of reducing or removing governmental controls over economic activities like business, commerce etc.
- It provides a greater autonomy to the business enterprises in decision-making and eliminates government interference.
Globalization
- It is a scenario in which nations allow free flow of goods, services, labor, capital, investment, technology, ideas and innovations.
- It describes the growing interdependence of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information.
Privatisation
- It refers to allowing private sectors to enter into sectors which were reserved for public sector companies only.
- It involves converting PSUs to private sector companies by reducing government holding below 50%.
Circular Economy
- The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible.
- In a circular economy, resources are kept in use as long as possible and maximum value is extracted out of it.
Unicorn Club
- These are start-up companies whose valuation is $1 billion or more. It is commonly used in the venture capital industry.
Sick Industries
- It is an entity that has accumulated more losses than its capital.
- As per RBI, a small scale unit should be considered as sick if it has at the end of any accounting year, accumulated losses equal to or exceeding 50% of its peak net worth in the immediately preceding 5 accounting years.
Intellectual Property Rights (IPR)
- Intellectual property rights are the rights given to persons over the creations of their minds which includes inventions, literary and artistic works, and symbols, names and images used in commerce.
Compulsory Licensing
- It is a mechanism permitted under WTO's TRIPS in which the government can use, manufacture, import, or sell a patented invention without the patent owner's consent for larger public interest.
Evergreening of Patent
- It is an unethical practice of obtaining a patent by slightly modifying the original formula to create a new product.
- The Indian patent act prohibits evergreening.
Key Terms at a Glance:
- Liberalization: Reducing government controls on economic activities
- Globalization: Growing interdependence of world economies
- Privatisation: Reducing government holding below 50% in PSUs
- Circular Economy: Reuse, repair, recycle model
- Unicorn Club: Startups with $1 billion+ valuation
- Compulsory Licensing: WTO-TRIPS mechanism for public interest
- Evergreening: Unethical patent practice (prohibited in India)
- Liberalization: Reducing government controls on economic activities
- Globalization: Growing interdependence of world economies
- Privatisation: Reducing government holding below 50% in PSUs
- Circular Economy: Reuse, repair, recycle model
- Unicorn Club: Startups with $1 billion+ valuation
- Compulsory Licensing: WTO-TRIPS mechanism for public interest
- Evergreening: Unethical patent practice (prohibited in India)
3. Summary: Key Economic Terminologies
| Term | Key Definition |
|---|---|
| Rural Employment | Work available in rural areas including farming, forestry, fishing, construction, etc. |
| Five-Year Plan | Centralized economic planning for 5-year period with specific targets and goals. |
| FDI Inflows | Investment by foreign companies/individuals in domestic economy. |
| Foreign Exchange Reserves | Assets held by central bank in foreign currencies for international obligations. |
| Inclusive Growth | Economic growth that benefits all segments of society. |
| Sustainable Growth | Economic development that does not compromise future generations. |
| District Planning Committees | Committees under 73rd Amendment for district-level planning. |
| Liberalization | Reducing government controls over economic activities. |
| Globalization | Growing interdependence of world economies through cross-border trade. |
| Privatisation | Reducing government holding in PSUs below 50%. |
| Circular Economy | Model of production and consumption involving reuse, repair, and recycling. |
| Unicorn Club | Startups with valuation of $1 billion or more. |
| Sick Industries | Entities with accumulated losses exceeding capital. |
| IPR | Rights over creations of the mind (inventions, literary works, symbols). |
| Compulsory Licensing | WTO-TRIPS mechanism for using patented invention without consent for public interest. |
| Evergreening of Patent | Unethical practice of slightly modifying original formula (prohibited in India). |
Key Takeaways for UPSC
- FDI: Foreign Direct Investment - controlling interest in foreign company
- Foreign Exchange Reserves: Assets held in foreign currencies by central bank
- 73rd Amendment: Established District Planning Committees
- Liberalization: Reducing government controls on economic activities
- Privatisation: Reducing government holding in PSUs below 50%
- Compulsory Licensing: WTO-TRIPS mechanism for public interest
- Evergreening: Unethical patent practice (prohibited in India)
- Unicorn: Startup with $1 billion+ valuation
High-Yield Interactive UPSC Quiz (Chapter 2: Planning and Economic Reforms)
Q1. The District Planning Committees (DPCs) were established under which Constitutional Amendment?
Correct Answer: C. District Planning Committees are committees set up under the 73rd Amendment to the Constitution of India, which aims to strengthen the Panchayati Raj system in the country. (UPSC 2012)
Q2. Foreign exchange reserves are held by:
Correct Answer: B. Foreign exchange reserves refer to the assets that a country's central bank holds in foreign currencies. (UPSC 2017)
Q3. A startup company with a valuation of $1 billion or more is called:
Correct Answer: B. Unicorn Club refers to start-up companies whose valuation is $1 billion or more. It is commonly used in the venture capital industry.
Q4. The process of reducing or removing governmental controls over economic activities is called:
Correct Answer: B. Liberalization is the process of reducing or removing governmental controls over economic activities like business, commerce etc.
Q5. The practice of obtaining a patent by slightly modifying the original formula is called:
Correct Answer: B. Evergreening of patent is an unethical practice of obtaining a patent by slightly modifying the original formula to create a new product. The Indian patent act prohibits evergreening.
Q6. FDI stands for:
Correct Answer: B. FDI stands for Foreign Direct Investment. It is the process by which a company or investor acquires a controlling interest in an existing company or establishes a new business in a foreign country. (UPSC 2017)
Q7. Inclusive growth refers to economic growth that:
Correct Answer: B. Inclusive growth is a concept that refers to the process of economic growth that is broad-based and benefits all segments of society, including the most vulnerable and marginalized groups. (UPSC 2014)
Q8. Under WTO's TRIPS, the mechanism that allows government to use patented invention without consent for public interest is called:
Correct Answer: C. Compulsory licensing is a mechanism permitted under WTO's TRIPS in which the government can use, manufacture, import, or sell a patented invention without the patent owner's consent for larger public interest.
Q9. The Five-Year Plans in India were adopted from which country?
Correct Answer: C. Five-Year Plans are a series of centralized economic planning initiatives that were introduced in the former Soviet Union and later adopted by India. (UPSC 2019)
Q10. Sustainable growth aims to meet the needs of the present generation without:
Correct Answer: C. Sustainable growth refers to economic development that can be maintained over the long term without compromising the well-being of future generations. (UPSC 2014)