RRP 2021 - Economy Ready Reckoner

Interrelations
Increase in repo rate When inflation is high
Decrease in repo rate When inflation is low
Increase in reverse repo rate When inflation is high
Decrease in reverse repo rate When inflation is low
Increase in CRR When inflation is very high and needs extreme measures to
control it
Decrease in CRR When inflation is very low and needs extreme measures to bring It
to healthy levels
Bond yields increase As bond prices fall
Bond prices rise When interest rates fall
Increase in taxes Leads to lower aggregate demand and inflation
Decrease in taxes Leads to higher aggregate demand and inflation
Increase in government spending Leads to higher aggregate demand and inflation
Decrease in govt. spending Leads to Lower aggregate demand and inflation
Increased government spending Leads to Crowding out effect
Reduced government spending Leads to crowding in effect
Increase in inflation  Leads to lower disposable income
 Leads to higher tax collections
 Is correlated with reduced unemployment
 Real debt levels fall
 Competitiveness in external market suffers
 Consequences of depreciation
Increased fiscal deficit  Indicates increased borrowings
 May lead to higher inflation
 Correlated with higher interest rates
 Lower sovereign rating of a country
Increased external debt Leads to loss of sovereignty
Increased overall debt Leads to higher interest burden for the future
Increased share of indirect taxes among Indicator of regressive tax regime
tax revenue
Increased share of direct taxes among tax Indicator of progressive tax regime
revenue
Rupee depreciation  exports increase as the goods price is less
 inessential imports will reduce
 more FII
 remittances will increase
 debt servicing would be costly
 fiscal deficit increases
 inflation increases
Rupee appreciation  Booming economy
 Huge FII
 Less cost of imports
 Export suffers
 Manage inflation
 Brings in competition
Current account deficit  Net outflow of foreign currency
 Depletion of forex reserves
Large Fiscal deficit  Macro-economic instability
 Increase in debt
 Increase in interest payments
 BOP crisis
 Downgrading rating

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