Economics Notes -III

By
Aman Srivastava
Industrialisation in India

● Industrialisation
:- It is a process wherein there is development of
industries such that manual labour is replaced by
machinery.
:- For upliftment and development of a country,
industrialisation is necessary.

● Classification of Indian Industries.

A. On the basis of the nature of Products.
1. Consumer Industry :- Sugar, Paper, Dairy etc.
2. Basic Industry :- Steel industry, heavy industry etc.
B. On the basis of ownership
1. Private :- Reliance, Tata etc.
2. Public :- DRDO, SAIL, BHEL etc.
3. Joint :- Indian Oil Petronas Pvt. Ltd, Petronet LNG Limited
etc.
C. On the basis of Raw material.
1. Agro-Based :- Cotton, Dairy, Sugar etc.
2. Forest-Based :- Timber, Ayurveda Medicine etc.
3. Mineral-Based :- Steel industry etc.

● Economic Reform 1991 :

★ In 1991, India met with an economic crisis relating to its
external debt. The government was not able to make
 repayments on its borrowings from abroad; foreign exchange
reserves, which we generally maintain to import petrol and
other important items, dropped to levels that were not sufficient
for even a fortnight.
★ The crisis was further compounded by rising prices of essential
goods. All these led to introducing a new set of policy measures
which changed the direction of our developmental strategies.
★ Three main steps taken under the Economic Policy 1991 were:
(i) Liberalisation (ii) Privatisation (iii) Globalisation

★ Steps taken under Liberalisation

→ Under this policy, industrial licensing was abolished for

industries except for a list of 18 industries which was later

reduced to six industries.

→ These six industries are :

(i) Liquor
(ii) Cigarette
(iii) Defence Equipment
(iv) Industrial Chemicals
(v) Drugs
(vi) Hazardous Chemicals

★ Steps taken under privatisation

➔ Sales of shares of PSU’s :- Indian Government started selling
shares of PSU’s to public and financial institutions e.g.
government sold shares of Maruti Udyog Ltd. Now the private
sector will acquire ownership of these PSUs. The share of the
private sector has increased from 45% to 55%.
➔ Disinvestment in PSUs :- The government has started the
process of disinvestment in those PSUs which had been
running into loss. It means that the government has been
 selling out these industries to the private sector. Government
has sold enterprises worth Rs.30,000 crores to the private
sector.
➔ Minimisation of Public Sector :
❖ Previously the Public Sector was given importance with a
view to help in industrialization and removal of poverty.
But these PSUs were not able to achieve this objective
and policy of contraction of PSU’s was followed under
new economic reforms. Number of industries reserved for
the public sector was reduced from 17 to 2.
(a) Railways
(b) Atomic Energy

★ Steps taken under globalization:

→ Reduction in tariffs :- Custom duties and tariffs imposed on imports

and exports are reduced gradually just to make Indian Economy

attractive to the global investors.

→ Long term trade policy :- Foreign trade policy was enforced for

longer duration. Here policies were made liberal. All controls on

foreign trade have been removed, open competition has been

encouraged.

→ Partial Convertibility of Indian currency :- Indian currency was

allowed to convert in the currency of other countries to encourage

flow of foreign investment in terms of Foreign Institutional Investment

(FII) and Foreign Direct Investment (FDI).

 → Increase in Equity limit of Foreign Investment :- Equity limit of

foreign capital investment has been raised from 40% to 100%. In 47

high priority industries FDI had been allowed to an extent of 100%.

Further, in order to keep a watch over flows of FDI, Foreign
Exchange Management Act (FEMA) was enforced. FEMA replaced
the earlier Foreign Exchange Regulation Act (FERA) (1973).

Index of Industrial Production

● The Index of Industrial Production (IIP) is an index that indicates the
performance of various industrial sectors of the Indian economy.
● It is calculated and published by the Central Statistical Organisation
(CSO) every month.
● This index gives the growth rates of different industry groups of the
economy over a specified time period.
● The industry groups that it measures are classified under the
following:
○ Broad sectors like manufacturing, mining, and electricity.
○ Use-based sectors like capital goods, basic goods,
intermediate goods, infrastructure goods, consumer durables,
and consumer non-durables.
● There are eight core industries of India representing about 40% of the
weight of items that are included in the IIP. The Eight Core
Sectors/Industries are:
○ Electricity
○ Steel
○ Refinery products
○ Crude oil
○ Coal
○ Cement
○ Natural gas
○ Fertilizers
Ratna Industries in India

In our country, a Public Sector Undertaking (PSU) is a government-owned

corporation. These companies are owned and operated by the Union
Government of India, or a state government, or both. This company’s
equity is majorly owned by the government, hence the named PSU.

The Public Sector Enterprises are run by the Government under the
Department of Public Enterprises of Ministry of Heavy Industries and
Public Enterprises.

The need for setting up of PSUs arises because industrial development of

any country requires a strong foundation supported by reliable
infrastructure.
And infrastructure development is fundamentally a capital-intensive
industry, which may not be lucrative for the private sector. Therefore, the
Government runs the Public Sector Enterprises.

After economic reforms, various PSUs have been awarded additional

financial autonomy by the Government.
Which means that the Government has given them greater autonomy in
their functioning to compete in the global market in order to support these
enterprises in becoming global players.

Currently, this level of financial autonomy is divided into the following three
categories:
● Maharatna
● Navratna
● Miniratna Category -I and II

The criteria for giving Maharatna Status:

● The company already holds Navratna status.
● It is listed on the Indian stock exchange fulfilling the minimum
prescribed public shareholding according to the SEBI regulations.
 ● The Average annual turnover of the company during the last 3 years
is more than Rs. 25,000 crore.
● The Average annual net worth during the last 3 years is more than
Rs. 15,000 crore.
● The Average annual net profit after tax during the last 3 years is more
than Rs. 5,000 crore.
● The company should have a significant global presence or
international operations.

List of Maharatna Companies in India

1. Bharat Heavy Electricals Limited
2. Bharat Petroleum Corporation Limited
3. Coal India Limited
4. GAIL (India) Limited
5. Hindustan Petroleum Corporation Limited
6. Indian Oil Corporation Limited
7. NTPC Limited
8. Oil & Natural Gas Corporation Limited
9. Power Grid Corporation of India Limited
10. Steel Authority of India Limited

The criteria for giving Navaratna Status:

The company already holds the Miniratna Category – I, which have
obtained ‘excellent’ or ‘very good’ rating under the Memorandum of
Understanding system in three of the last five years, and have composite
score of 60 or above in the six selected performance parameters, namely,
1. net profit to net worth.
2. manpower cost to total cost of production/services.
3. profit before depreciation, interest and taxes to capital employed.
4. profit before interest and taxes to turnover.
5. earning per share.
6. inter-sectoral performance.
List of Navratna Companies in India
1.Bharat Electronics Limited
2. Container Corporation of India Limited
3. Engineers India Limited
4. Hindustan Aeronautics Limited
5. Mahanagar Telephone Nigam Limited
6. National Aluminium Company Limited
7. NBCC (India) Limited
8. NMDC Limited
9. NLC India Limited
10. Oil India Limited
11. Power Finance Corporation Limited
12. Rashtriya Ispat Nigam Limited
13. Rural Electrification Corporation Limited
14. Shipping Corporation of India Limited

Criteria for giving Miniratna Status:

Those PSUs that have shown profits in the last continuous three years and
have positive net worth, can be considered eligible for grant of Miniratna
status. Presently, there are 75 Miniratnas in total.

The Miniratnas are divided in two categories – I and II.

Category I: These have made profits for the last three years continuously
or earned a net profit of Rs. 30 crores or more in one of these three years.
There are 60 such companies.

Category II : These companies have made profits continuously for the last
three years and must have a positive net worth. There are 15 such
companies in this category.

Agriculture in India
Major cropping patterns
The Indian agriculture is decided by the soil types and climatic parameters
which determine the overall agro-ecological setting for nourishment and
appropriateness of a crop or set of crops for cultivation.

There are three distinct crop seasons in India:

1. Kharif: The Kharif season started with Southwest Monsoon

(May-June) under which the cultivation of tropical crops such as rice,
cotton, jute, jowar, bajra and tur are cultivated.
2. Rabi : The Rabi season starts with the onset of winter in October-
November and ends in March-April.
3. Zaid. Zaid is a short duration summer cropping season beginning
after harvesting of Rabi crops.

There are four cropping systems in India which is discussed below:

1. Rainy Season Cropping Systems: In this system of cropping, Rice,

Sorghum, Pearl Millet (Bajra), Maize, Groundnut and Cotton are grown.

2. Winter Cropping Systems: In this system, wheat, barley and oats,

sorghum and chickpea are grown.

3. Plantation and other commercial crops: Sugarcane, Tobacco, Potato,

Jute, Tea, Coffee, Coconut, Rubber, Spices and condiments are important
crops grown in this system.

4. Mixed Cropping: In this system, pulses and some oilseeds are grown
with maize, sorghum and pearl millet.

Types of Cropping System in India

There are three types of cropping system followed in India which is below:

1. Mono-Cropping or Monoculture: In this system, only one crop is grown

on farmland year after year.
2. Multiple-Cropping: In this system, farmers grow two or more crops on
farm land in one calendar year with intensive input management practices.

It includes mixed-cropping and sequence cropping.

3. Inter-cropping: In this system, farmers grow two or more crops

simultaneously on the same field in one calendar year.

Different types of irrigation

Irrigation is the process of applying water to the crops artificially to fulfil
their water requirements. The various sources of water for irrigation are
wells, ponds, lakes, canals, tube-wells and even dams.
The frequency, rate, amount and time of irrigation are different for different
crops and also vary according to the types of soil and seasons.
For example, summer crops require a higher amount of water as compared
to winter crops.

Types of Irrigation
There are different types of irrigation practised for different types of soil
and terrestrial features for improving crop yield.

Methods of Irrigation
Irrigation can be carried out by two different methods:
● Traditional Methods
● Modern Methods

Traditional Methods of Irrigation

In this method, irrigation is done manually. Here, a farmer pulls out water
from wells or canals by himself or using cattle and carries them to farming
fields. This method can vary in different regions.
The main advantage of this method is that it is cheap.
But its efficiency is poor because of the uneven distribution of water. Also,
the chances of water loss are very high.
Some examples of the traditional system are pulley system, lever system,
chain pump. Among these, the pump system is the most common and used
widely.

Manual Irrigation
This is a labour intensive and time-consuming system of irrigation. Here,
the water is distributed through watering cans by manual labour.

Modern Methods of Irrigation

The modern method compensates the disadvantages of traditional
methods and thus helps in the proper way of water usage.
The modern method involves two systems:
● Sprinkler system
● Drip system

Sprinkler System
A sprinkler system, as its name suggests, sprinkles water over the crop and
helps in an even distribution of water. This method is much advisable in
areas facing water scarcity.
Here a pump is connected to pipes which generate pressure and water is
sprinkled through nozzles of pipes.
Drip System
In the drip system, water supply is done drop by drop exactly at roots using
a hose or pipe. This method can also be used in regions where water
availability is less.

Surface Irrigation
In this system, no irrigation pump is involved. Here, water is distributed
across the land by gravity.
Localized Irrigation
In this system, water is applied to each plant through a network of pipes
under low pressure.

Sprinkler Irrigation
Water is distributed from a central location by overhead high-pressure
sprinklers or from sprinklers from the moving platform.

Drip Irrigation
In this type, drops of water are delivered near the roots of the plants. This
type of irrigation is rarely used as it requires more maintenance.

Centre Pivot Irrigation

In this, the water is distributed by a sprinkler system moving in a circular
pattern.

Sub Irrigation
Water is distributed through a system of pumping stations gates, ditches
and canals by raising the water table.

Minimum Support Price (MSP)

MSP is the minimum price which the government pays for the farmers’
produce at the time of procurement by the Government Authority.

It is aimed at saving the farmers from price fluctuations in the market and
ensuring farmers a better income for them.

The MSP fixed by the government is considered as being remunerative for

farmers. But the point to be noted is that MSPs do not have legal
backing.
MSPs were first introduced in 1966-67 when the country adopted Green
Revolution technologies.

To boost domestic production and encourage farmers to plant the high

yielding varieties, the government resorted to MSP. A minimum support
price was guaranteed to them.

It is fixed by the centre based on the recommendations of the Commission

for Agricultural Costs and Prices (CACP) which is a statutory body. CACP
submits two separate reports for Kharif and rabi seasons and based on
these, centre fixes MSPs twice a year.

23 crops are being supported by the centre by fixing of MSP. They belong
to the family of cereals (7), pulses (5), oilseeds (7) and commercial crops
(4).

The crops are:

1. Paddy
2. Jowar
3. Bajra
4. Maize
5. Ragi
6. Tur (Arhar)
7. Moong
8. Urad
9. Cotton
10. Groundnut
11. Sunflower seed
12. Soya bean
13. Sesamum
14. Niger seed
15. Wheat
16. Barley
17. Gram
 18. Masur (Lentil)
19. Rapeseed and Mustard
20. Safflower
21. Toria
22. Jute
23. Coconut – Copra and De-Husked Coconut

Public Distribution System (PDS)

The public distribution system means the system of management of the
food economy and distribution of food grains at an affordable price.
This scheme provides staple food grains, such as wheat rice, sugar &
kerosene through a network of public distribution shops in the whole
country.
This scheme is run by the ministry of consumer affairs, food and public
distribution.
Basic motive behind this scheme is to provide food to the weaker section of
the country at cheaper/affordable rates.This is done to ensure food security
for vulnerable sections of society.

FCI
The main agency providing food grains to the PDS is the Food Corporation
of India (FCI) set up in 1965.
The primary duty of the Corporation is to undertake the purchase, storage,
movement, transport, distribution and sale of food grains and other
foodstuffs.
It ensures on the one hand that the farmers get remunerative prices for
their produce and on the other hand, the consumers get food grains from
the central pool at uniform prices fixed by the Government of India.

PDS to TPDS
❖ Till 1992, PDS was a general entitlement scheme for all
consumers without any specific target.
 ❖ But in 1992, PDS became RPDS (Revamped PDS) focussing
the poor families, especially in the far-flung, hilly, remote and
inaccessible areas.
❖ In 1997 RPDS became TPDS (Targeted PDS) which
established Fair Price Shops for the distribution of food grains
at subsidized rates.

TPDS

Targeted Public Distribution System (TPDS) is jointly operated by Central

and State Governments.

Under the operations of TPDS, the beneficiaries were divided into two
categories:

1. Households Below the poverty line (BPL)

2. Households Above the poverty line (APL)
Central Government is responsible for
1. Procurement of food grains
2. Allocation of food grains
3. Transportation of food grains to designated depots of Food
Corporation of India (FCI).
State Government is responsible for
1. Allocation and Distribution of foodgrains within the state.
2. Identification of eligible beneficiaries.
3. Issuance of ration cards.
Food processing and related industries
Food processing is the transformation of raw ingredients into food, or of
food into other forms. In simple terms, Food processing is the process of
value addition on existing food items to enhance its taste, quality, and
shelf-life.

There are two types of processes in the food processing industry :

1. Manufacturing: Raw materials → Food.

For Ex. :- Bread from Flours, Curd from milk etc.

2. Value Addition: Increase shelf life and value of manufactured
food.
For Ex. :- Pickles, Jams, Processed meat food in MNCs shops
etc

Benefits of Food processing

The important benefits of food processing include:
1. Food processing reduces the number of harmful bacteria in food that
can cause diseases. For eg., drying, pickling dehydrates the food
product and alters the pH that prevents the growth of harmful
microorganisms.
2. It also improves the shelf-life of food products.
3. It reduces health inequalities and major health concerns.

Drawbacks of Food Processing

The important drawbacks of food processing include:
● Processed food contains artificial ingredients.
● A large number of resources are spent in making the food pleasant to
the brain that leads to overconsumption.
● Processed foods are the biggest source of added sugar that is very
unhealthy.
Objectives of Food Processing
Food technology is a very vast domain concerning the production and
processing of food. Food processing has certain objectives, such as:
● It boosts the shelf life of food products.
● Prevent food-contamination.
● Food storage and Transportation.
● Turns raw food materials into attractive, marketable products.
● Provide employment to a large population.

Employment and Unemployment

❏ Employment :- An agreement between an individual and an

entity or organization according to which the individual one is
engaged with a responsibility in interest of the entity according
to his/her qualification, for which a just wages/remuneration
along with other allowances is paid to him/her.
❏ The individual one is called an employee and the organization
is called an employer.
❏ The state of the person is called employed.
❏ Unemployment :- It is a situation in which all those who, owing
to lack of work, are not working but either seek work through
employment exchanges, intermediaries, friends or relatives by
making applications to prospective employers or express their
willingness or availability for work under the prevailing condition
of work and remuneration.
❏ Economists define an unemployed person as one who is not
able to get employment for even one hour in half a day.

Types of Unemployment
(A) Disguised unemployment :- It is a type of
unemployment where the number of people employed
are more than needed.
 Ex.: family members of a farmer employed in his
agriculture field.
(B) Structural unemployment :- This unemployment
arises when there is a mismatch between the worker’s
skills and availability of jobs in the market.
:- In fact, many people in India do not get a job matching
their skills due to lack of required skills and because of
poor education level.
For Ex.: A master-degree holder working as a peon.
:- A B.tech holder working in call-centres.
(C) Seasonal Unemployment :- This situation of
unemployment when people do not have work during
certain seasons of the year.
For Ex.: Agricultural labourers, Casual labourers.
(D) Cyclical unemployment :-This type of
unemployment is caused due to the business cycle.
:- This unemployment can be seen in both the formal and
informal sector.
For Eg.: During recession the number of unemployed
rises while during growth of the economy the number of
unemployed decreases.
Similarly there is more demand for labourers and staff in
the unorganised sector during festive season while they
are laid off during off seasons.
(E) Frictional Unemployment :- This is a situation when
people are unemployed for a short span of time.
For Ex.: When one switches from one job to another one
then the time period of unemployment during searching
for another job is frictional unemployment.
(F) Vulnerable Unemployment :- This is one of the main
types of unemployment in India. Here people are
employed but without proper job contracts.
For Ex.: Unorganised sector workers.
 (G) Technological unemployment :- Here people lose
their jobs due advancement in technologies.

Micro-Economics :

❏ Utility :- Utility of a commodity is its want-satisfying capacity. The

more the need of a commodity or the stronger the desire to have it,
the greater is the ability of that commodity.
❏ Marginal Utility :- Marginal utility is the change in total utility due to
consumption of one additional unit of a commodity.
For Ex.: Let 4 bananas give us 28 units of utility and 5 bananas give
us 30 units of total utility.
Then marginal utility of the 5th banana or 2 units.

❏ Law of Diminishing Marginal utility

:- This law states that marginal utility from consuming each additional
unit of a commodity declines as its consumption increases.
Demand

Demand :- The quantity of a commodity that a consumer is willing to buy

and is able to afford, at a given price of goods, is called demand.
Desire : It is wish for a commodity
: A desire of a commodity even if a buyer does not have the capacity
to buy it from the market whereas demand is desire backed by purchasing
power of the buyer.

Factors affecting demand:

1. Price of the commodity

Law of Demand :- This law states that Demand depends on the price of a
commodity. According to this law when other things remain constant, there
is a negative relation between demand for a commodity and its price. I.e.
when the price of a commodity increases, demand for it falls and when the
price of the commodity decreases, demand for it rises.
1
Demand 𝛼 𝑝𝑟𝑖𝑐𝑒

2. Price of related goods:

It may be of two types:

Substitute goods :- Substitute goods are those goods which can be

used in place of another goods and give the same satisfaction to a
consumer.
 It means with an increase in price of substitute
goods, the demand for a given commodity also rises and
vice-versa. For example, Pepsi and Coke.

Complementary goods:- Complementary goods are those which

are useless in the absence of other goods and which are demanded jointly.
It means, with a rise in price of complementary
goods, the demand for a given commodity falls and
vice-versa. It is also called Derived demand. For
example pen and refill.

3. Income of a Consumer :

There are three types of goods:

1. Normal Commodity: For normal commodities, with a rise in income,
the demand of the commodity also rises and vice-versa. Shortly, a
direct relationship exists between income of a consumer and demand
of normal commodities.
2. Inferior Goods: For inferior goods, with a rise in income, the demand
of the commodity falls and vice-versa.
In Short, an inverse relationship exists between the income of a
consumer and demand of inferior goods.
3. Necessity Goods: For necessity goods, whether income increases
or decreases, quantity demanded remains constant

Demand function
It is the relationship between quantity demanded for a particular
commodity and the factors that are influencing it.

Individual demand function refers to the functional relationship

between individual demand and the factors affecting the individual demand.

Market demand function refers to the functional relationship

between market demand and the factors affecting the market demand.
Movement Along The Demand Curve

It is based on the Law of Demand which states that quantity demanded of

the commodity changes due to the changes in price of the commodity.

The change in quantity demanded due to the change in price of the

commodity is known as movement along the demand curve.

It may be of two types:

(A) Expansion in Demand (Increase in quantity demanded)

(a) It is based on the Law of demand which states that quantity
demanded of the commodity rises due to the fall in price of the
commodity.
(b) The rise in quantity demanded due to the fall in price of the
commodity, is known as expansion in demand.

(B) Contraction in Demand (Decrease in quantity demanded)

(a) It is based on the Law of Demand which states that quantity
demanded for the commodity falls due to the rise in price of the
commodity.
 (b) The fall in quantity demanded due to the rise in price of the
commodity is known as contraction in demand.

Shift In Demand Curve

If demand changes due to the change in factors other than price, it is

known as shift in demand curve.

It may be of two types,

(a) Increase in Demand

• Price of substitute goods rises.
• Price of complementary goods falls.
• Income of a consumer rises in case of normal goods.
• Income of a consumer falls in case of inferior goods.
• When preferences are favourable.
(b) Decrease in Demand
• Price of substitute goods falls.
• Price of complementary goods rises.
• Income of a consumer falls in case of normal goods.
• Income of a consumer rises in case of inferior goods.
• When a preference becomes unfavourable.

Giffen goods:
 Giffen goods are a special category of inferior goods in which
demand for a commodity falls with a fall in its price.
In case of certain inferior goods when their prices fall, their demand
may not rise because extra purchasing power (caused by fall in
prices) is diverted on purchase of superior goods.

Elasticity of Demand (eD) - Elasticity of demand is a measure of

responsiveness of the demand for a good to changes in its prices.
eD = %% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑔𝑜𝑜𝑑
𝑐ℎ𝑎𝑟𝑔𝑒 𝑖𝑛 𝑡ℎ𝑒 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑔𝑜𝑜𝑑

Production
The output of an economical activity is called Production. It depends on
various inputs. These inputs are called Factors of production.

Production function: The relationship between physical input and

physical output of a firm is generally referred to as production function.
The general form of production function is,
q = f ( x1 ,x2)
where, q = output, x1 = 1 input like labour, x2 = another input like
machinery

Variable factors: It refers to those factors, which can be changed in the

short run. They vary directly with the output. For example, Labour, raw
material, etc

Fixed factors: It refers to those factors which cannot be changed in the

short run. They do not vary directly with the output. For example, Capital,
land, plant and machinery, etc.
Short period: It refers to the period of time in which a firm cannot change
some of its factors like plant, machinery, building, etc. due to insufficiency
of time but can change any variable factor like labour, raw material, etc.

Long period: It refers to a time period during which a firm can change all
its factors of production including machines, building, organization, etc.

Total product: It refers to the total volume of goods and services produced
by a firm with the given input during a specified period of time.

Average product: It is per unit product of variable factors. It is calculated

by dividing the total Product by the units of variable factor.
Average Product=Total Product/Unit of Variable Factor

Marginal Product: It is an addition to the total product when an additional

unit of a variable factor is employed.
MP=Change in output /Change in input =Δq/ΔL

Return to a factor: It states that change in the total output of a good when
only the quantity of one input is increased, while that of other input is kept
constant

Law of variable proportion: It states that as we increase the quantity of

only one input, keeping other inputs fixed, the total product increases at an
increasing rate in the beginning, then increases at a diminishing rate and
after a level of output ultimately falls.

Law of diminishing marginal return: It states that when we apply more

and more units of variable factor to a given quantity of fixed factor, total
product increases at a diminishing rate and marginal product falls.
Cost

It is the sum total of all the expenditures in the production.

Explicit Cost: It refers to the actual money expenditure of a firm on

purchasing goods or hiring factor services and non-factor inputs (like raw
material, electricity, fuel, etc.)
In other words, “explicit costs are those cash payments which the firm
makes to outsiders for their goods and services.”
For example—the explicit cost of a biscuit factory consists of flour,
milk, sugar etc. purchased from outside and rent, electricity, wages, interest
etc paid to factor of production.

Implicit Cost: Implicit cost is the estimated value of inputs supplied by the
owner of the firm himself.
It is also called “Opportunity cost”.
These costs are not managed in the account’s books.
For example- if the owner of a biscuit factory has established a
factory on his own property then rent of that property, the owner acting as
manager himself.
Cost function: It shows functional relationship between output and cost of
production. It gives the least cost combination of inputs corresponding to
different levels of output.

Short Run Cost: Short run costs are those in which some factors of
production are fixed and others are variable.

Total Fixed Costs: Total Fixed costs are those costs of production which
do not change with a change in output.
These are the costs incurred on fixed factors, like rent of land and
building, interest, etc. These are unavoidable contractual costs.

Total Variable Cost: The cost incurred on variable factors of production is

known as TVC
TVC is very much related with the production and fluctuates with the
fluctuation in production. In case of zero level of production, TVC would
also be zero.
For example, Wages of casual labour, payment for raw material, etc.

Total Cost: During production, the expenditure incurred on various factors

of production is known as total cost.
In other words, it is a sum of total fixed cost and total variable cost.
TC = TFC + TVC

Average Fixed Cost: The per unit cost incurred on fixed factors of
production is known as average fixed cost.
The shape of the AFC curve is a rectangular hyperbola as the area under
the AFC curve (i.e. total fixed cost) remains the same at different levels of
output.

Average Variable Cost: The per unit cost incurred on variable factors of
production is known as AVC.

Average Total Cost/Average Cost (ATC): The per unit cost incurred on
various factors of production is known as average cost. In other words, it is
the sum total of average variable cost and average fixed cost.
Marginal Cost: The cost incurred on additional units of output is known as
Marginal cost.

Supply
Stock refers to the total quantity of a particular commodity that is available
with the firm at a particular point of time.

Supply: It refers to the quantity of a commodity that a firm is willing and

able to offer for sale, at each possible price during a given period of time.
In other words, supply is that part of stock which is actually brought
into the market for sale. Stock can never be less than supply.
For example, a seller has a stock of 50 tonnes of sugar in the
godown. If the seller is willing to sell 30 tonnes at a price of Rs. 37 per kg,
then supply of 30 tonnes is a part of total stock of 50 tonnes.

Market supply: It refers to the quantity of a commodity that all firms are
willing and able to offer for sale at each possible price during a given period
of time.

Factors affecting Market supply:

1. Price of the commodity : Positive relationship exists between price

of the commodity and supply of that commodity.
2. Price of the factors of production: An increase in the price of a
factor of production may lead to fall in production of a commodity
hence leads to less supply.
3. State of technology: When there is technological progress in the
firm, then cost of production will decrease, which leads to increase in
the profit margin of the firm and the supply increases.
4. Unit tax: A unit tax is a tax that the government imposes per unit
sale of output.
 : There is a negative relationship between the supply and Unit
tax.
: If the unit tax increases, the firm’s cost of production
increases which will shift the supply curve leftward. Similarly, if the unit tax
decreases, the firm’s cost of production decreases, which will shift the
supply curve rightward.
5. Price of other goods: An increase in the price of other goods
induces the firm to produce more of other goods to earn more profit
and less of goods whose prices remained unchanged.
6. Number of firms in the market: When the number of firms in the
industry increases, market supply also increases due to the large
number of producers producing that commodity.

Supply function: It shows the relationship between quantity supplied for a

particular commodity and the factor influencing it.

Supply curve: It refers to a graphical representation of supply schedule. It

shows a direct relationship between price and quantity supplied, keeping
other factors constant.

Law of Supply: It states that price of the commodity and quantity supplied
are positively related to each other when other factors remain constant.
 Movement along the supply curve: The change in quantity supply due to
the change in the price of the commodity is known as Movement along the
supply curve.

Expansion in supply: The rise in quantity supplied due to the rise in

price of the commodity is known as expansion in supply.
(a) It is based on the law of supply which states that the quantity
supplied of a commodity rises due to the rise in price of the commodity.
(b) The rise in quantity supplied due to the rise in price of the
commodity is known as expansion in supply

Contraction in supply: The fall in the quantity supplied due to the

fall in price of the commodity is known as contraction in supply.
 (a) It is based on the law of supply which states that the quantity
supplied of a commodity falls to the fall in the price of the commodity.
(b) The fall in the quantity supplied due to the fall in price of the
commodity is known as contraction in supply.

Shift in supply curve: If supply changes due to the change in the factors
other than price, then it is known as shift in supply curve.

Increase in Supply: An increase in supply means that producers

now supply more at a given level of price of a commodity.
 Decrease in supply: A decrease in supply means that producers
now supply less at a given level of price of a commodity.

Elasticity of supply: The degree of responsiveness of quantity supplied

due to the changes in determinants of supply (price of other commodity,
price of factors of production, technology, etc) is known as elasticity of
supply.

Price elasticity of supply: The degree of responsiveness of quantity

supplied due to the changes in price of the commodity is known as price
elasticity of supply

Revenue
The total money receipt of a firm from the sale of a given amount of output is known as Total
Revenue.
Total Revenue = Price x Quantity
For example,
If a firm sells 100 chairs at a price of Rs. 200 per chair, the total revenue will be 100
Chairs x Rs. 200 = Rs. 20,000
Average Revenue: The per unit revenue received from the sale of a given amount of output is
known as Average Revenue.

Marginal Revenue: Marginal revenue is the additional revenue when an additional unit of
output is sold.

Equilibrium

Market Equilibrium

In a market, Equilibrium is the condition at which market supply

equals market demand.
:- The price at which Equilibrium is reached, called Equilibrium
price.
:- The quantity of goods sold and bought at equilibrium prices is
called equilibrium quantity.

Equilibrium price: The price at which equilibrium is reached is called

equilibrium price.

Equilibrium quantity: The quantity bought and sold at the equilibrium

price is called equilibrium quantity.

Equilibrium point: Equilibrium point is the point of intersection of the

demand curve and supply of commodities.
 Producer’s equilibrium:
A producer is said to be in equilibrium when he produces that level of
output at which his profits are maximum. Producer’s equilibrium is also
known as profit maximisation situation

Price Ceiling :- Government-imposed upper limit on the price of a

good or service is called price ceiling.
:- Price ceiling is generally imposed on necessary items like
wheat, rice, Kerosene, sugar etc and price is fixed, below the
market fixed price since at market-fixed price some-section of
the population is not able to afford these goods.

Price floor: When the government imposed a lower limit on the price
(minimum price) that may be charged for a good or service which is higher
than equilibrium price is called price floor.

Black market: It is a market under which the commodity is bought

and sold at a price higher than the maximum price fixed by the government.
Budget Line

Indifference Curve :An indifference curve is a line showing all the

combinations of two goods which give a consumer equal utility.
: In other words, the consumer would be indifferent
to these different combinations.
Example :- The given table shows the different pairs of numbers of
Apples and Bananas which will give him/her equal utility.

So Graphical Representation for this will be :

The indifference curve is convex because of diminishing marginal utility.
When you have a certain number of bananas – that is all you want to eat in
a week. Extra bananas give very little utility, so you would give up a lot of
bananas to get something else.

Budget Line :
The budget line is a graphical delineation of all possible combinations
of the two commodities that can be bought with provided income and cost
so that the price of each of these combinations is equivalent to the
monetary earnings of the customer.

The two basic elements of a budget line are as follows:

● The consumer’s purchasing power (his/her income)
● The market value of both the products
Features of Budget Line

Negative slope: If the line is downward, it shows a reverse correlation

between the two products.
Straight line: It indicates a continuous market rate of exchange in
individual combinations.
Real income line: It denotes the income and the spending size of a
customer.
Tangent to indifference curve: It is the point when the indifference curve
meets the budget line. This point is known as the consumer’s equilibrium.

A shift in Budget Line

A budget line includes a consumer’s earnings and the rate of a commodity.
These are the two important factors that shift the budget line.
Shift due to change in price:
The amount of the product either increases or decreases from time
to time.
For instance, if the price and income of product A remains constant
and the price of product B decreases, then the buying potential of product
B automatically increases.
Similarly, if the price of B increases and the other factors remain
steady, the demand for product B automatically decreases.
Shift due to change in income:
Change in income makes a huge difference that leads to a change in
the budget line.
High income means high purchasing possibility and low income
means low purchasing potential, making the budget line to shift.

● Types of Market:
1. Perfect Competition
:- In a perfect competition market structure, there are a large
number of buyers and sellers.
:- In a perfectly competitive market.
● The products on the market are homogeneous i.e. they
are completely identical.
● All firms only have the motive of profit maximization.
● There is free entry and exit from the market, i.e. these are
no barriers.
Example :- Textile market, Home appliances market etc.

2. Monopolistic Competition :-
:- In monopolistic competition, there are a large number of
buyers as well as sellers, but they all do not sell homogeneous
products. The products are similar but all sellers sell slightly
different products.
 For Example :- Market for Cereals is a monopolistic
competition. Here products are similar but slightly different in
terms of taste and flavour.

3. Oligopoly :- In oligopoly, there are only a few firms / sellers in

the market and buyers are for greater than the number of
sellers.
:- In oligopoly the few firms collaborate together and use their
market influence to set the price and in turn maximize their
profit.
:- There are various barriers to entry in the market, and new
firms find it difficult to establish themselves.
Example :- Telecommunication Market

4. Monopoly :- In a monopoly market there is only one seller who

controls the entire market. Pure monopoly is rare in reality.
Ex.: Debit Card by Maestro Rupay Card by NPCI.

Inflation :
Inflation is defined as a situation where there is sustained, unchecked
increase in the general price level and a fall in the purchasing power of
money. Thus, inflation is a condition of price rise.
Consider an Example, Suppose for Rs.100, last month you bought 5 Kg. of
rice. This means that the cost of 1Kg of rice was Rs. 20. Next time when
you approached the same shop-keeper and paid Rs.100 to get rice, he
gave only 4 Kg of rice. He also explained that the price of rice has
increased, and now it is Rs.25 per Kg.
If the price of rice, which was Rs.20 per Kg increased to Rs.25, this
corresponds to Rs.5 increase on Rs.20, ie. 25% increase. So the inflation
rate is 25%.

The reason for price rise can be classified under two main categories :
 (1) Increase in demand
(2) Reduced supply.

Types of Inflation:

Demand Pull Inflation

❖ Demand Pull Inflation is mainly due to increase in Aggregate
demand.
❖ The increase in Aggregate demand mainly comes from either
increase in Government Expenditure (Expansionary Fiscal
Policy) or by an increase in expenditure from Households and
Firms.
❖ Taking into consideration the outbreak of the corona epidemic,
the government issued a warning that people should wear
Breathing Masks to protect them from the infection. As a result,
the demand for masks had risen to a very high level, but the
supply was limited as the producers of the mask had no
anticipation of the epidemic. Due to the high demand and
limited supply of masks, the prices had risen manifold. This
case exemplify the demand pull inflation

Cost Push Inflation

❖ There exists a situation in an economy where inflation is fuelled up,

not because of increase in Aggregate Demand but mainly due to
increase in the cost of producing goods and services.
❖ Followings are the possible causes for Cost Push Inflation:
 ➢ Increase in price of inputs i.e. increase in wages, price of raw
materials etc.
➢ Hoarding of commodities
➢ Defective Supply chain
➢ Increase in indirect taxes
➢ Crude oil price fluctuation
➢ Low growth of Agricultural sector
➢ Interest rates increased by RBI

Stagflation

The most important difference between the Demand Pull and Cost
Push Inflation is that while in the case of Demand Pull Inflation the
overall output in the economy does not fall. Whereas, in case of
Cost Push Inflation, along with an increase in prices the output level
of the economy also falls.

The fall in output will cause employment to fall in the economy

along with fall in growth. The falling growth along with rising prices
makes cost push inflation more dangerous than the demand-pull
inflation. The situation of rising prices along with falling growth and
employment is called stagflation.

Hyperinflation

Hyperinflation is a situation when inflation rises at an extremely

faster rate. The rate of inflation can increase from 50 times to 300
times.
 The effects of hyperinflation can be devastating for the economy.
The situation can lead to total collapse of the value of the currency
of the economy along with economic crisis and rising external debt
and fall in purchasing power of money.

The major causes of the hyperinflation are; the government issuing

too much currency to finance its deficits; wars and political
instabilities and unexpected increase in people’s anticipation of
future inflation.

Structural Inflation

❖ Structuralist Inflation is another form of Inflation mostly prevalent in

the Developing and Low-Income Countries.
❖ This inflation is prevalent in the developing countries mainly due to
the weak structure of their economies.
❖ As a result of imperfections, some sectors of the economy like
agriculture will witness shortages of supply, whereas some sectors
like consumer goods will witness excessive demand. Such
economies face the problem of both shortages of supply, under
utilisation of resources as well as excessive demand in some sectors.
❖ Example: In India, let’s assume that the farmer produces fruits and
vegetables at 10000 per quintal. But the final consumer gets the
same at 20000 per quintal. The huge disparity between what farmers
receive and consumer pays is due to infrastructure and agriculture
bottlenecks. The bottleneck arises mainly due to lack of roads,
highways, cold chains and underdeveloped agriculture markets. All
 these increase the cost of transporting goods from farmers to
consumers leading to inflation.

Deflation:

Deflation is when the overall price level in the economy falls for a
period of time.

Disinflation:

Disinflation is a situation in which the rate of inflation falls over a

period of time.

Remember the difference; disinflation is when the inflation rate is

falling from say 5% to 3%.

Deflation is when, for instance, the price of a basket of goods has

fallen from Rs 100 to Rs 80. It’s the reduction in overall prices of
goods.

Reflation :

Price level increases when the economy recovers from recession

based on value of inflation

Creeping inflation

If the rate of inflation is low (upto 3%)

 Walking/Trotting inflation –

Rate of inflation is moderate (3-7%)

Running/Galloping inflation

Rate of inflation is high (>10%)

Runaway/Hyper Inflation

Rate of inflation is extreme

Measurement of Inflation
❖ Wholesale Price Index (WPI) – It is estimated by the Ministry of
Commerce & Industry and measured on a monthly basis.
❖ Consumer Price Index (CPI) – It is calculated by taking price changes
for each item and averaging them.
❖ Producer Price Index – It is a measure of the average change in the
selling prices over time received by domestic producers for their
output.
❖ Commodity Price Indices – It is a fixed-weight index or (weighted)
average of selected commodity prices, which may be based on spot
or futures price
❖ Core Price Index – It measures the prices paid by consumers for
goods and services without the volatility caused by movements in
food and energy prices. It is a way to measure the underlying inflation
trends.
❖ GDP deflator – It is a measure of general price inflation.

How to combat inflation

 (1) Central Bank (in India RBI)
Follows a strict monetary policy
i.e. loans became expensive → decrease in money supply

(2) Tax deduction & subsidy to producers in order to decrease cost of

production.
(3) Curtailing schemes & subsidies that increase money in the hands of
people
(4) Increase contribution to provident funds etc. → so people have less in

hand to spend.

National Organizations

National Agricultural Cooperative Marketing Federation of India Ltd.

(NAFED)
● NAFED was established on October 2, 1958 (Gandhi Jayanti), with
the objective of promoting cooperative marketing of agricultural
produce for the benefit of the farmers.
● It is a national level marketing agency in the cooperative sector for
agricultural products.

Agricultural and Processed Food Products Export Development

Authority (APEDA)
APEDA was established by the Government of India under the Agricultural
and Processed Food Products Export Development Authority Act passed
by the Parliament in December 1985.

Its main functions are as follows:

● Registration of persons as exporters
● Development of industries, by way of providing financial assistance,
relating to the scheduled products for exports.
 ● Carrying out inspection in places where products or food is stored for
the purpose of quality assurance.
● Improvement of packaging and marketing of the scheduled products
in and outside of India.
● Development of scheduled products and promotion of export-oriented
production

National Bank for Agriculture and Rural Development (NABARD)

● NABARD is an apex development bank in India, which was
established on June 12, 1982, with headquarters in Mumbai.
● The main focus of NABARD is to facilitate credit flow in agriculture,
cottage and village industries, handicrafts and small-scale industries
for the upliftment of rural India.
● It also promotes other allied economic activities in rural areas to
support the non-farm sector.

ROLE of NABARD
● It prepares rural credit plans annually, for all districts in the country.
● It also promotes research in rural banking,and the field of agriculture
and rural development.
Functions of NABARD
● It is making efforts to establish linkages between Self-Help Groups
(SHGs) that are organised by voluntary agencies for the poor and
needy in rural areas and other official credit agencies.
● It regulates, periodically supervises and inspects RRBs and
cooperative banks and to ensure the welfare of the farmers and
development of rural financing.

MGNREGA (Mahatma Gandhi - National Rural Employment Guarantee

Act)
● (MGNREGA is a job guarantee scheme enacted on August 25, 2005.
The scheme was initiated in 200 districts from February 2, 2006.
 ● Behind this project is Dr Jean Dreze, a Belgian born economist, at
the Delhi School of Economics.
● The primary objective of the programme is to provide 100 days of
unskilled wage employment to willing adults for the enhancement of
livelihood security of rural households.
● Earlier, it was named as National Rural Employment Guarantee Act,
but was later renamed as the "Mahatma Gandhi National Rural
Employment Guarantee Act” (MGNREGA)
● The scheme was termed as "a stellar example of rural development"
by the Achievements of MGNREGA World Bank.

Securities and Exchange Board of India (SEBI)

● The security market in India is regulated by The Securities and
Exchange Board of India (SEBI), which is similar to the U.S's
Securities and Exchange Commission (SEC)
● The establishment of SEBI took place in 1988, although statutory
powers to it were granted on April 12, 1992 under the SEBI 1 Act,
1992.
● It plays an essential role in maintaining efficient and stable
investment and financial markets through creation and enforcement
of effectives regulation in India's financial market place.
● The management of SEBI consists of its own members. The
management team consists of a chairman nominated by the
Government of India, two members who are officers from the Union
Finance Ministry, one member from the Reserve Bank of India and
five other members who are also nominated by the Government of
India.

Finance Commission of India

❖ The Finance Commission is a constitutional body formed by the
President of India to deal with the issue of share of states in the
centre’s taxes.
 ❖ Article 280 of the Indian constitution envisages the formation of the
Finance Commission by the President for the period of the 5 years.
❖ It works under the Department of Economic Affairs, Ministry of
Finance.

❖ Current Finance Commission :

➢ The Current Finance Commission is the 15th Finance
Commission for the period 2021 to 2026.
➢ It was formed on 27 November 2017
➢ Chairman of 15th Finance Commission is Nand Kishore Singh.
➢ The current 15th Finance Commission was required to submit
two reports. The first report has the recommendations for the
financial year 2020-21, and the second and final report with
recommendations for the 2021-26 period will be submitted by
October 30, 2020.
➢ The first report of the 15th Finance Commission was tabled in
Parliament on February 1, 2020:
■ For the period 2020-21, the share of states in the centre’s
taxes is to be 41% which is one percent less than the
previous commission’s recommendations
■ Uttar Pradesh has the largest share in the divisible pool
which is 17.93% of the total divisible pool.
❖ The earlier 14th Finance Commission was headed by the former RBI
governor Mr. Y.V. Reddy.

Demonetisation

● The act of stripping a currency unit of its status as a legal tender.

Demonetisation is necessary whenever there is a change of national
currency.
● The old unit of currency must be retired and replaced with a new
currency unit.
● Such a step is especially taken to curb the menace of counterfeiting,
black money and money laundering.
 ● A recent example is demonetisation of 500 and 1000 denomination
currency units in India.
● Another example of demonetisation is when the European Monetary
Union nations decide to adopt Euro as their currency.

Demonetisation in India
● For the first time in January 1946, ‘1,000' and '10,000' banknotes
were demonetised.
● These two denominations were reintroduced in 1954 along with
currency notes of ‘5,000’.
● But all these three denominations were again demonetised in
January 1978 by the Morarji Desai government.
● The RBI more recently in 2014 had demonetised all banknotes
printed before 2005.
● On 8 November 2016, the Prime Minister announced that Rs.500 and
Rs.1000 denomination notes will become invalid.
● He also added that new notes of Rs.2,000 and Rs.500 will be
introduced.
Important Economic Organisations

The World Trade Organization (WTO)

● The World Trade Organization (WTO) is the only global international
organisation dealing with the rules of trade between nations.
● Its headquarters is in Geneva, Switzerland.
● The WTO officially commenced on 1 January 1995 under the
Marrakesh Agreement, signed by 123 nations on 15 April 1994,
replacing the General Agreement on Tariffs and Trade (GATT).
● The primary purpose of the WTO is to open trade for the benefit of all.
● The WTO derives most of the income for its annual budget from
contributions by its members. These contributions are based on a
formula that takes into account each member's share of international
trade.

The International Monetary Fund (IMF)

● The IMF, also known as the Fund, was conceived at a UN conference
in Bretton Woods, New Hampshire, United States, in July 1944.
● Its headquarters is in Washington, D.C.
● The IMF is an organization of 190 countries, working to foster global
monetary cooperation, secure financial stability, facilitate international
trade, promote high employment and sustainable economic growth,
and reduce poverty around the world.

The World Bank

● The World Bank was founded in July 1945. Its headquarters is in
Washington, D.C.
● The World Bank was created at the 1944 Bretton Woods Conference
along with the International Monetary Fund (IMF).
● The World Bank and The IMF are called the Bretton Twins.
● The World Bank is an international financial institution that provides
loans to countries of the world for capital programmes.
 ● It comprises two institutions: the International Bank for
Reconstruction and Development (IBRD), and the International
Development Association (IDA).
● The World Bank is an extended family of five international
organisations:
1. International Bank for Reconstruction and Development (IBRD).
2. International Development Association (IDA).
3. Multilateral Investment Guarantee Agency (MIGA).
4. International Finance Corporation (IFC)
5. International Centre for Settlement of Investment Disputes.

The Asian Development Bank (ADB)

● The Asian Development Bank was conceived in the early 1960s as a
financial institution that would be Asian in character and foster
economic growth and cooperation in one of the poorest regions in the
world.
● ADB assists its members and partners, by providing loans, technical
assistance, grants, and equity investments to promote social and
economic development.
● ADB is composed of 67 members, 48 of which are from the Asia and
Pacific region
● Its headquarters is in Manila, Philippines.

SAARC
● The full form of SAARC is South Asian Association for Regional
Cooperation.
● It is an intergovernmental organization for the development of
economic and regional integration.
● SAARC Established on December 8 1985 , at Dhaka in Bangladesh.
● Member Countries : 8 Countries –
○ India, Bangladesh, Nepal, Sri Lanka
○ Maldives, Bhutan, Afghanistan, Pakistan.
■ : 9 Observers –
 ○ Australia, European Union (E.U), Iran
○ Japan, Mauritius, South Korea
○ United States of America (USA), China, Myanmar.
● 1st Secretary General of SAARC :- Abul Ahsan (Bangladesh)
● Current Secretary-General of SAARC :- Esala Ruwan Weerakoon
(Sri Lanka)
● Last Member to Join SAARC : Afghanistan

ASEAN
● ASEAN stands for Association of Southeast Asian Nations
● ASEAN was established on 8th August 1967 in Bangkok, Thailand
with the signing of the Bangkok Declaration (also known as ASEAN
Declaration) by the founding member countries of Indonesia,
Malaysia, Thailand, Singapore, and the Philippines.
● It is headquartered in Jakarta, Indonesia.
● Secretary-General: Dato Lim Jock Hoi

● Member Countries :
○ Thailand (founding member)
○ The Philippines (founding member)
○ Malaysia (founding member)
○ Singapore (founding member)
○ Indonesia (founding member)
○ Brunei (joined in 1984)
○ Vietnam (joined in 1995)
○ Lao PDR (joined in 1997)
○ Myanmar (joined in 1997)
○ Cambodia (joined in 1999)
● There are two observer States namely, Papua New Guinea and
Timor Leste (East Timor).
BIMSTEC
BIMSTEC : Bay of Bengal Initiative on Multi-Sectoral Technical and
Economic Cooperation
The BIMSTEC states are those which are on the shore or are adjacent to
the Bay of Bengal and are dependent on it.
It was formed on 6th of June 1997, through the Bangkok declaration.
Its headquarters is in Dhaka in Bangladesh.
There are seven nations in BIMSTEC
● Bangladesh
● Bhutan
● India
● Nepal
● Sri Lanka
● Myanmar
● Thailand

European Union
● European Union is an international organisation consisting of
European Countries, which was formed in 1993. It came into force
after the signing of the Maastricht Treaty by 28 countries.
●
● After World War II, European leaders realised that only large-scale
integration would be an option to overcome this tragedy's aftermath.
● In 1948 Hague Congress was a pivotal moment in European federal
history, as it led to the creation of the European Movement
International.
● The founding of the following two unions ultimately led to the
formation of European Union:
1. European Coal and Steel Community (ECSC) – Treaty of Paris
1951
2. European Economic Community (EEC) – Treaty of Rome 1957
 ● The original 6 members of European Communities were
1. France
2. Italy
3. Netherlands
4. Belgium
5. West Germany
6. Luxembourg
● Headquarters (Capital ) of the EU : Brussels, Belgium.
● Current EU Parliament President : David-Maria Sassoli
● Current European Council President : Charles Michel
● On January 31, 2020, the United Kingdom (U.K) formally left the
European Union. U.K is the first country to leave the E.U. This event
is globally called BREXIT.
● After this, at present there is 27 Member countries of EU
● European Union was awarded the Nobel Prize for Peace in 2012.

United Nations

❖ The United Nations (UN) is an international organization.

❖ It was founded to promote international co-operation in 1945.
❖ It currently has 193 Member States.
❖ The mission and work of the United Nations are guided by the purposes and principles
contained in its founding Charter.
❖ The name "United Nations", coined by United States President Franklin D. Roosevelt
was first used in the Declaration by the United Nations of 1 January 1942, during the
Second World War.

❖ The plan for a new world organization to replace the ineffective League of Nations
began under the support of the US State Department in 1939.
❖ In 1945, the United Nations Conference on International Organization at San Francisco
drew up the United Nations Charter by representatives of 50 countries.
❖ The Charter was signed on 26 June 1945 by the representatives of the 50 countries.
 ❖ The United Nations officially came into existence on 24 October 1945, when the Charter
had been ratified by China, France, the Soviet Union, the United Kingdom, and the
United States and by a majority of other signatories.
❖ India was also one of the founding members of the UN . On June 26, 1945, India was
among 50 countries to sign the UN charter. India joined the United Nations after
ratifying the UN Charter on October 30, 1945.

❖ United Nations Day is celebrated on 24 October each year.

Six main organs of UN

1. The General Assembly:
a. It is the main deliberative organ of the United Nations.
b. In the Assembly, each nation, large or small, has one vote and important
decisions are taken by a two-thirds majority vote.
c. It meets every year from September to December.
2. The Security Council:
a. It has primary responsibility under the Charter for maintaining peace and
security.
b. The Council has 15 members, including five permanent members: China, France,
the Russian Federation, the United Kingdom and the United States of America.
c. The other 10 are elected by the General Assembly on the basis of geographical
representation for two-year terms.
d. Any decisions to be finalised require nine votes.A decision cannot be taken if
there is a negative vote by a permanent member
3. The Economic and Social Council: It is the central body for coordinating the economic
and social work of the United Nations and the UN family of organizations. It has 54
member nations elected from all regions.
4. The Trusteeship Council
5. The International Court of Justice:
a. It is the UN’s main judicial organ.
b. Presiding over the ICJ, or “World Court”, are 15 judges, each from a different
nation, elected by the General Assembly and Security Council.
c. The seat of the International Court of Justice is at The Hague in the Netherlands
d. Dalveer Bhandari is an Indian member of the International Court of
Justice.
6. The Secretariat:
a. It consists of an international staff working at UN Headquarters in New York, as
well as UN offices in Geneva, Vienna, Nairobi and other locations.
b. The Secretariat is headed by the Secretary-General. He is appointed by the
General Assembly on the recommendation of the Security Council for a five-year
term.
 c. Present Secretary-General of UN :- António Guterres

Human Development Index (HDI)

● The Human Development Index is a comparative measure of life
expectancy, literacy, education, and standards of living for countries
worldwide.
● The HDI was developed by the Pakistani economist Mahbub ul Haq
working alongside Indian economist Amartya Sen.
● The results of the HDI are published in the Human Development
Report, which is commissioned by the United Nations Development
Program (UNDP).
● The United Nations has calculated the HDI for its member states
since 1975.

Copy protected with Online-PDF-No-Copy.com