WTO Definition of Developing country By: Basava Uppin

World Bank Categorization

Note:
1.With a per-capita Income of $1928, India is categorised as Lower-middle income country.
2.With a per-capita income of $10435, China is categorised as Upper-middle income country.

WTO Classification of Countries: There are no WTO definitions of “developed” and “developing” countries. Members announce
for themselves whether they are “developed” or “developing” countries. However, it can be challenges by other members.
About two thirds of the WTO’s around 164 members are developing countries
 WTO Definition of Developing country By: Basava Uppin

Benefits for the Developing countries in WTO

“Special and differential treatment”.
• Extra time for developing countries to fulfil their commitments in many of the WTO agreements.
• Non-Reciprocity: Under concept of Non-Reciprocity, when developed countries grant trade concessions to developing countries,
they should not expect the developing countries to make matching offers in return.
• Provisions designed to increase developing countries’ trading opportunities through greater market access
• Legal assistance: The WTO Secretariat has special legal advisers for assisting developing countries in any WTO dispute and for
giving them legal counsel.
 By: Basava Uppin
WTO Agreement on Agriculture

Domestic Support Market Access Export Subsidies

Green Box Tariffication- Reduction in

Convert Non-Tariff Export Subsidies
Blue Box
barriers into Tariff Prohibition on
Amber Box Barriers new Export
Development Box Reduction in Subsidies
Tariffs

Special and Differential Treatment

 By: Basava Uppin
Green Box ( No Limit)
Blue Box ( No Limit)
R&D
Production Limiting Subsidies
Irrigation
Given only by few countries
Income Support to Farmers (Non-
Product Specific)

Domestic
Support

Development Box: Special and Amber Box ( Trade Distorting Subsidies)

Differential provision
Investment subsidies
Input Subsidies to poor farmers
Subsidies to encourage diversification
from illicit narcotic crops
Fertilisers, Water, MSP, Electricity, Seeds
etc.
Developing countries: 10% of the domestic
agricultural value production in 1986-88.
Developed countries: 5% of the domestic
agricultural value production in 1986-88
 By: Basava Uppin

Provide Food Security to

67% of India’s Population. NFSA

Challenged by
Advanced Economies
WTO led by USA

Temporary Solution. Peace

Advanced Economies not Clause
to act against India (2013)
India demands
Present permanent solution to
Scenario the Problem
 By: Basava Uppin

Percentage Limit on Limit on Subsidies does not

Subsidies Deceptive factor Inflation

Concerns
raised by India

Direct Income Support ( Part Procurement of

of Green Box Subsidies) Commodities for Food
misused by developed Security should not be
Economies included in the Amber Box
 By: Basava Uppin
TRIPS Agreement: Prelims Pointers
• Protection of IPRs under different treaties- Paris Convention ( Industrial Property); Berne Convention
Background (Copyrights)
• TRIPS Agreement – Certain Minimum standards for IPRs and applicable to all the member countries.
IPRs covered under TRIPS • Patents; Copyrights; Trademarks; GI Tags; Industrial Designs; Layout design of Integrated Circuits; Trade
agreement Secrets
• 3 Criteria for issuing Patents: Novel; Inventive Step; Capable of Industrial Application.
When can Patent be • What cannot be patented?: Frivolous Invention; Invention that harms public order/Morality/ health of
issued? animals, plants and humans; a method of agriculture or horticulture; Traditional Knowledge; Computer
Program; Inventions related to Atomic Energy; Plants and Animals; mere discovery of scientific principle.
Are Patents filed in India • Patent filed in India effective only within India
Internationally accepted? • Patent Cooperation Treaty: Single International patent application applicable in all member countries.
• Product Patent: Exclusive monopoly to manufacture the Product.
Types of Patents • Process Patent: Exclusive monopoly over the process to manufacture the product. Possibility of multiple
manufacturers of same product using different processes.
• Prior to 2005: Process Patent on Pharmaceutical drugs--> Enabled Indian Pharma Companies to
Patents Amendment Act, manufacture Generic Drugs at lower prices→ More profits for Indian Companies
2005 • Patents Amendment Act 2005 ( After adoption of TRIPS agreement): Adoption of Product Patent on
Pharmaceutical drugs→ No Scope for Manufacturing Patented Drugs
 TRIPS Agreement: Prelims Pointers By: Basava Uppin
• Compulsory Licensing: Compulsory licence would be granted only if the use of the patented product is not
Exceptions provided satisfying public requirements, or the patented product is not accessible to the public at a reasonable price.
under TRIPS Agreement • Parallel or Grey Imports
• Bolar Exception: Allows making of Patented invention solely for research and development purposes
• What is it?: Protection of literary, dramatic, musical and artistic works and producers of cinematograph
films and sound recordings.
• Rights include?: Right of Copy, translate and adaptation.
• Copyright comes into existence as soon as a work is created and no formality is required to be completed
for acquiring copyright
Copyrights
• Computer Software or programme registered as a ‘literary work’ under Copyrights act.
• Duration: original literary, dramatic, musical and artistic works ( Lifetime of author + 60 years);
Cinematograph films and sound recordings ( 60 years after Publication)
• Copyrights were earlier administered by the Ministry of Human Resource Development. In 2016, it was
transferred to Department for Promotion of Industry and Internal Trade under Ministry of Commerce and
Industry
• Word, phrase, symbol or design to distinguish products of one company from that of another
Trademarks • Trademark, Service Mark and Collective Mark
• Valid for a period of 10 years and can be renewed.
• An industrial design may consist of three-dimensional features, such as the shape of an article, or two-
Industrial Design dimensional features, such as patterns, lines or colour.
• Protected under Design Act, 2000.
Trade secrets are IPRs on confidential information.
Trade Secrets Criteria: (a) Commercially valuable because it is secret (b) be known only to a limited group of persons (c)
reasonable steps taken by the rightful holder of the information to keep it secret.
 By: Basava Uppin
GI Tag

Prelims 2015
Which of the following has/have been accorded ‘Geographical
Indication’ status?
1. Banaras Brocades and Sarees
2. Rajasthani Daal-Bati-Churma
3. Tirupati Laddu

Select the correct answer using the code given below:

(a) 1 only
(b) 2 and 3 only
(c) 1 only 3 only
(d) 1, 2 and 3
 By: Basava Uppin
Geographical Indication Tag: Prelims Pointers
• An agricultural, natural or a manufactured product (handicrafts and industrial goods) originating
from a definite geographical territory.
What is GI Tag?
• Example: Darjeeling tea; Kanchipuram Silk saree; Agra Petha; Kolhapuri Chappal; Tirupati Laddus
etc
• WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Covered under? • India has enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999
to promote and protect GI tags in India.
• Right to use the indication to prevent its use by a third party
Benefits • It provides legal protection to Indian Geographical Indications which in turn boost exports.
• It promotes economic prosperity of producers of goods produced in a geographical territory.
Term of Protection • Valid for 10 years and can be renewed.
• GI Tag: Originating from a particular place; Trademark: Originating from particular company
How is GI tag different
• GI tag: Linked to specific place; Trademark: Not linked to specific place, Can be registered by
from Trademark?
anyone
Who issues GI tags in • Controller-General of Patents, Designs and Trade Marks
India? • Geographical Indications registry maintain the registry of all GI tags issued in India
SL. GI Product in India Country of Origin By: Basava Uppin
No
1 Irish Whiskey Ireland
2 Tequila Mexico
3 Champagne France
4 Scotch whiskey United Kingdom
5 Cognac France
6 Porto Portugal
7 Napa Valley Wine USA
8 Douro Portugal
9 Prosecco Italy
10 Asiago Italy
11 Lamphun Brocade Thailand
Thai Silk
12 Grana Padano Italy
13 Parmigiano Italy
Reggiano
14 Prosciutto di Parma Italy
15 Peruvian Pisco Peru
Brandy
By: Basava Uppin
 By: Basava Uppin
INFORMATION TECHNOLOGY AGREEMENT (ITA)

1997: INFORMATION TECHNOLOGY AGREEMENT (ITA-1)

PLURILATERAL AGREEMENT SIGNED BY AROUND Eliminate Tariffs on certain selected ict products
80 MEMBER COUNTRIES

Impact of ITA-1 on Indian Economy

Inverted Duty structure has affected electronics
Eliminated Customs duty on 217 IT products
manufacturing

2015: INFORMATION TECHNOLOGY AGREEMENT (ITA-2)

covers new generation semi-
Eliminating tariff on an
conductors, optical lenses, GPS India has not signed ITA-2
additional list of 201 products.
navigation equipment etc
 By: Basava Uppin
Trade Related Investment Measures (TRIMS)

Prelims Pointers
• Countries can impose certain restrictions on the foreign investment which can distort trade. For
example, obligations such as local content requirements and export obligations might be imposed
Basic Philosophy
on foreign companies.
• Such restrictions violate principle of National Treatment.
Agreement under WTO that gives protection to foreign investment in host countries from
Purpose
discrimination.
WTO gives a list of prohibited investment measures or TRIMs like local content requirement, export
Working mechanism obligation, technology transfer requirement etc. that violates trade.
Few exemptions to developing countries are also provided under TRIMs.
 BREAKDOWN IN THE WTO DISPUTE SETTLEMENT By: Basava Uppin

First • Consultations between Parties ( up to 60

Days)
Stage

Second • Appointment of Dispute Panel

• Can Appeal against the decisions
Stage of Dispute Panel.

Third • 7 Member Appellate Body

• Quorum of Judges: 3
Stage
WTO has no enforcement powers.
In case of failure of a country to comply with the WTO ruling, the complainant country can take retaliatory actions.
 By: Basava Uppin
Circular flow of National Income

Prelims 2022
Which of the following activities constitute real sector in the economy?
1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds

Select the correct answer using the code given below:

(a) 1 and 2 only
(b) 2, 3 and 4 only
(c ) 1, 3 and 4 only
(d) 1, 2, 3 and 4overseas.
 By: Basava Uppin
NATIONAL INCOME

Practice MCQ Practice MCQ

Which among the following sectors are considered in Which among the following is/are considered to be injections in the
the model of Circular Flow of National Income in a Two model of circular flow of National Income?
Sector Economy? 1. Savings
1. Government 2. Investment
2. Households 3. Government Expenditure
3. Business Firms 4. Imports
4. Foreign Sector 5. Exports

Select the correct answer using the code given below: Select the correct answer using the code given below:
(a) 1 and 2 only (a) 1 and 2 only
(b) 2 and 3 only (b) 1, 2 and 3 only
(c) 3 and 4 only (c) 2, 3 and 5 only
(d) 1 and 4 only (d) 2, 3 and 4 only
 By: Basava Uppin
NATIONAL INCOME

Practice MCQ Practice MCQ

Which among the following is the likely effect of total
leakages being higher than the total Injections in the
circular flow of National Income?
1. Decrease in GDP growth rate
2. Improvement in Trade Balance
3. Decrease in Credit Creation
Select the correct answer using the code given below:
(a) 1 only
(b) 1 and 2 only
(c ) 1 and 3 only
(d) 1, 2 and 3
Which of the following constitute Real Flows in an economy?
1. The provision of factor services, such as land, labour and capital
by the households to the producers.
2. The expenditure on the purchase of goods by the households.
3. The payment for the factor services by the producers to the
households.
4. Goods produced and sold by the firms.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 and 4 only
(d) 1 and 4 only
 By: Basava Uppin
NATIONAL INCOME

Practice MCQ Practice MCQ

Which among the following is/are considered to be Which among the following best describes the concept
leakages in the model of circular flow of National “Technical Recession”, sometimes seen in news?
Income? (a) Decline in the GDP growth rate
1. Savings (b) Contraction in the GDP for 2 consecutive quarters
2. Taxes paid to Government (c) Contraction in the GDP in a particular year
3. Investment (d) Contraction in the GDP in a particular quarter of the
4. Exports financial year

Select the correct answer using the code given below:

(a) 1 and 2 only
(b) 2 and 3 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4
By: Basava Uppin
 Basics to understand GDP Calculation By: Basava Uppin

• Geographical territory administered by a government within which persons, goods and capital
Scope of circulate freely
territory: • Political frontiers including territorial waters and air space.
Economic • Embassies, consulates, military bases, etc located abroad. (Excluding those located within the
Territory political frontiers
• Ships, aircrafts etc, operated by the residents between two or more countries

• Resident: Economic concept; Person or an institution whose centre of economic interest lies in the
economic territory of the country in which he lives.
Scope of • Citizens: Legal Concept
People covered • GDP calculation: All the Residents ( Includes foreign Residents within India and excludes Indian
Citizens outside India
• GNP Calculation: All the citizens ( Includes all Indian Citizens both inside as well as outside India)

• Covers all the Final Goods; does not cover the Intermediate Goods since it leads to double
accounting
Scope of Goods
• Does not include the sale of secondhand Goods; but services offered on such sales considered
Covered
• Includes even those Goods that are not marketed, but produced for self-consumption
• Includes even those Goods that remain unsold; considered as addition to Inventories/ Investment
 Basics to understand GDP Calculation By: Basava Uppin

• Covers all the Services which are produced within the Country.
Scope of
• Does not include non-marketable services such as household chores, care for the elderly etc.
Services
Covered

• National Income should consider only the factor incomes i.e., income earned through the provision
Transfer of factors of production.
Payments • Hence, transfer payments i.e. old age pensions, education grants, unemployment benefits, gifts not
included in the GDP Calculation.
• Similarly, remittances also not accounted.

• Production Taxes: Taxes paid on land, labour, assets such as Land revenue, stamp duty, Registration
Production Vs fee, Professional tax. Not taxed on per unit of product.
Product Taxes • Product Taxes: Taxes paid on per unit of product such as GST, Excise Duty, Customs duty etc.

Production Vs • Production Subsidies: Subsidies to the entire enterprise and not specific to product. Examples
Product include Subsidies to Railways, Farmers, Small scale Industries etc.
Subsidies • Product Subsidies: Product specific subsidies such as Food, LPG, Kerosene, Fertilisers etc.
 By: Basava Uppin
NATIONAL INCOME
 Practice MCQ
Which among the following constitute Economic
Territory of Country 'X' for the calculation of National
Income?
1. Political Frontiers of Country 'X’
2. Territorial waters and Airspace of Country 'X’
3. Consulates and military bases of Country 'X' located
abroad
4. Consulates and military bases of other countries
located in Country 'X'
Practice MCQ
By: Basava Uppin
Which of the following economic activities is/are included in
the calculation of the Gross Domestic Product (GDP)?
1. A Chinese company manufacturing mobiles in India.
2. An American company, based in India, exporting software
services.
3. An Indian airlines company offering international flights.
4. The income of an Indian software professional based in the
USA.

Select the correct answer using the code given below: Select the correct answer using the code given below:
(a) 1 only (a) 1 only
(b) 1 and 2 only (b) 1 and 2 only
(c) 1, 2 and 3 only (c) 1, 2 and 3 only
(d) 1, 2, 3 and 4 (d) 1, 2, 3 and 4
 Practice MCQ
Which among the following categories of Goods and
Services are taken into consideration for the
calculation of Gross Domestic Product (GDP)?
1. Services offered on sale of Second hand Cars
2. New Cars which remain unsold in a particular year.
3. Fruits and Vegetables grown by Agricultural
household for self-consumption.
Practice MCQ
By: Basava Uppin
With reference to GDP Calculation, consider the following
statements:
1. The transfer payments such as old age pensions,
unemployment benefits, gifts etc. are not included in the
GDP Calculation.
2. The foreign remittances into India are directly taken into
consideration for the GDP Calculation.

Select the correct answer using the code given below: Which of the statements given above is/are correct?
(a) 1 only (a) 1 only
(b) 2 only (b) 2 only
(c) 1 and 2 only (c ) Both 1 and 2
(d) 1, 2 and 3 (d) Neither 1 nor 2
 Practice MCQ Practice MCQ By: Basava Uppin
Consider the following statements: Consider an example. A particular country produces only
1. The Nominal GDP is referred to as Inflation- Apples. If the number of Apples produced in a year increase by
adjusted GDP. 10 percent and prices fall by 10 percent, which of the following
2. The higher Nominal GDP as compared to Real GDP would occurs?
denotes Inflation within Economy. (a) Real GDP would increase, while nominal GDP would
decrease.
Which of the statements given above is/are correct? (b) Real GDP would increase, while nominal GDP remains
(a) 1 only unchanged.
(b) 2 only (c) Real GDP would remain unchanged, while nominal GDP
(c ) Both 1 and 2 would increase.
(d) Neither 1 nor 2 (d) Real GDP would decrease, while nominal GDP would
increase.
Practice MCQ
Which of the following is/are not measured in the
GDP?
1. Unpaid household work
2. Underground economy
3. Externalities

Select the correct answer using the code given below:

(a) 2 only (b) 2 and 3 only
(c) 1 and 3 only (d) 1, 2 and 3
 By: Basava Uppin
Features of Capital Goods
• Capital Goods are the goods which are used as
fixed assets like plant and machinery for the
production of other goods.
• The Capital Goods are not consumed by
households.
• Instead, they are bought by the producers for
further production.
• Expenditure on Capital Goods is considered as
Investment expenditure.

Note: All the machineries are not capital Goods. For

example, Sewing machine bought by a Tailor can be
considered as Capital Goods. However, Sewing
Machine bought by a household is not capital
goods, rather consumer Goods.

Hence, while identifying Goods as capital goods, we

must be sure about the end user. If the end user
happens to be household, then it is simply treated
as consumer Goods. On the other hand, if the end
user happens to be manufacturer, then it is treated
as Capital Goods.
 Practice MCQ
By: Basava Uppin
Practice MCQ
Which among the following is/are likely to be Which among the following best describes the concept of
considered as final goods in an economy? "Producer Goods"?
1. Shirts sold by the manufacturer to the wholesaler. (a) Goods which are used as raw materials for the production.
2. Tractors bought by the farmers. (b) Goods which are used as fixed assets for the production of
3. Car purchased by the dealer for the purpose of other goods.
resale. (c) Goods which are either used as raw materials or as fixed
4. New Tyres bought by the consumers to replace old assets for the production of other goods.
ones. (d) The Final goods produced by the manufacturers.
Select the correct answer using the code given below:
(a) 1, 2 and 3 only Practice MCQ
(b) 1, 2 and 4 only Which among the following is/are features of Capital Goods in
(c) 2 and 4 only an economy?
(d) 4 only 1. These Goods may be generally bought either by
households or manufacturers.
2. Expenditure on Capital Goods is considered as Investment
expenditure.
3. All the machineries are considered as Capital Goods.

Select the correct answer using the code given below:

(a) 1 and 2 only (b) 2 only
(c) 2 and 3 only (d) 1, 2 and 3
 Factor Cost Vs Basic Price Vs Market Price
By: Basava Uppin

Labour
Capital Factor Cost: Cost of factors of
Land Production

Basic Price: Price expected to be

received by Producer
Production Enterprise Production
Factor Cost + Production Taxes-
Subsidies
Taxes Production Subsidies

Market Price: Price expected to be

Product Product paid by consumer
Product sold in the Market
Taxes Subsidies Basic Price+ Product Taxes- Product
Subsidies

• GDP at Basic Price= GDP at factor cost+ Production Taxes- Production Subsidies
• GDP at Market Price= GDP at Basic price + Product Taxes – Product Subsidies
 Practice MCQ Practice MCQ
By: Basava Uppin
Which among the following can be considered either as Which among the following accurately depicts the
Production Taxes or Production Subsidies? relationship between GDP at Basic Price and GDP at
1. Stamp Duty Factor cost?
2. GST (a) GDP at Basic Price= GDP at Factor cost + Indirect Taxes
3. Subsidies on Food and kerosene - Subsidies.
(b) GDP at Basic Price = GDP at Factor cost + Subsidies -
Select the correct answer using the code given below: Indirect Taxes
(a) 1 only (c) GDP at Basic Price = GDP at Factor cost + Product Taxes
(b) 1 and 2 only - Product Subsidies
(c) 1 and 3 only (d) GDP at Basic Price = GDP at Factor cost + Production
(d) 1, 2 and 3 Taxes - Production Subsidies

Practice MCQ
If the Gap between Gross Value added (GVA) at basic
prices and Gross Domestic Product (GDP) at market prices
increases, what does it necessarily denote?
(a) Negative Rate of Inflation
(b) Increase in cost of raw materials
(c) Increase in Net Indirect Taxes
(d) Increase in Subsidies
 GDP by Expenditure Method: PFCE+ GFCE + GCF + (X-M)
By: Basava Uppin

• Expenditure incurred by the households on Goods and Services ( only Marketable services)
• Expenditure incurred by Residents within India on Domestic Goods
Private Final
Consumption Expenditure incurred by Non-Residents within India on Domestic Goods : Considered as Exports
Expenditure (PFCE) Expenditure incurred by Residents within India on Imported Goods- Considered as Imports

• Compensation of employees (wages and salaries + pensions) +

Government Final
• Net purchase of goods and services +
Consumption
• Consumption of fixed capital (CFC)
Expenditure (GFCE)
Note: Excludes the transfer payment

• Gross Fixed Capital Formation (GFCF): Construction and Maintenance of fixed assets – (1) Infrastructure
such as Dwellings, Roads, Railways etc. (2) Machinery and Equipment (3) Intellectual Property Rights
Gross Capital such as R&D, Software etc. (4) Cultivated biological resources - Increment in Livestock and Plantation
Formation ( GCF) • Changes in stocks ( increase in stocks of inventories)
• Net acquisition of valuables

Exports (X) and • Imports need to be subtracted since National Income should take into account Goods and services
Imports (M) produced within the Economic territory.
By: Basava Uppin
 Practice MCQ Practice MCQ
By: Basava Uppin
The Private Final Consumption Expenditure (PFCE) in the Which among the following accounts for the lowest share
National Income includes the expenditure incurred by in India's Gross Domestic Product (GDP)?
which of the following? (a) Private Final Consumption Expenditure (PFCE)
1. Resident households (b) Government Final Consumption Expenditure (GFCE)
2. Government (c) Investment
3. Non-profit institutions, such as the NGOs (d) Net Exports

Select the correct answer using the code given below:

(a) 1 only
(b) 1 and 3 only
(c) 2 only
(d) 1, 2 and 3
 By: Basava Uppin
Gross Capital Formation (GCF)

Changes in Inventories
Gross Fixed Capital
Formation
Creation of assets Machinery and Equipment

Valuables

R&D Cultivated Biological Resources

 ECONOMIC SURVEY 2021-22 By: Basava Uppin

Trends in Gross Capital Formation (GCF)

Trends in Gross Capital Formation (GCF)
Components 2010-11 2015-16 2020-21

1. Gross Fixed Public: 8% Public: 7.5% Public: 7%

Capital Formation
Private: 25% Private: 21% Private: 20%

2. Change in Stocks 4.5% 2% 1%

3. Valuables 2.2% 1.5% 1%
Total (1+2+3) 40% 32% 29%

Prelims Pointers
1. GCF = GFCF + Change in Stocks + Valuables
2. GFCF Includes investment in Creation of new assets (Roads, Railways etc.) + Machinery, Equipment etc. + IPRs
such as R&D + Cultivated biological Resources (Increment in Livestock and Plantation)
3. Decline in GCF in the last decade from 40% to 29%.
4. Share of Private Investment is higher than Public Investment.
 ECONOMIC SURVEY 2021-22 By: Basava Uppin

Trends in Gross Domestic Savings

Trends in Gross Domestic Savings
Sector 2010-11 2015-16 2019-20

Household 24% 18% 22%

Private Corporate 10% 12% 10%

Sector
Public 3% 1% 1%
Total (1+2+3) 37% 31% 31%

Prelims Pointers
1. Gross Domestic Savings is contributed by Household sector, Private Corporate and Public Sector.
2. Decline in Gross Domestic Savings in the last decade from 37% to 31%.
3. Household Sector contributes for the largest share of Savings in India.
4. The Household Savings is categorized into:
1. Net Financial Savings
2. Physical Savings
Note: The Physical Savings of the household sector account for the larger share in comparison to Net Financial Savings)
 By: Basava Uppin
CORE CONCEPTS
GDP Vs GNP

Gross Domestic Product (GDP) Gross National Product (GNP)

Criteria: Economic Territory of India
Inclusion: Contribution of all Residents:
• Indian Citizens within India
• Foreign Citizens within India
Vs.
Exclusion: Contribution of Indian citizens
outside India
Criteria: Indian Nationals
Inclusion: Contribution of Indian Citizens:
• Indian Citizens within India
• Indian Citizens outside India
Exclusion: Contribution of Foreign Nationals
within India
 GDP Vs GNP By: Basava Uppin

Economic Territory of India Outside India

Foreigner within India
Sources of Income for Foreigners in India:
• Salaries and Wages
• Income from property- Interest, Dividend,
Profits
• Retained Earnings of Foreign Companies
Indian Citizens outside India
Sources of Income for Indians outside India:
• Salaries and Wages
• Income from property- Interest, Dividend,
Profits
• Retained Earnings of Indian Companies

• GNP = GDP + Income earned by Indians outside India – Income earned by Foreigners within
India
• GNP = GDP + Net Factor Income from abroad (NFIA)
 Practice MCQ By: Basava Uppin
Practice MCQ
Which among the following can necessarily be associated
If the Net Income from Abroad (NFIA) of a particular
with the Negative Net Factor Income from abroad (NFIA)?
country is positive, what would it denote?
1. GDP is higher than GNP
(a) GDP is higher than GNP
2. Closed Economic Model
(b) GNP higher than GDP
3. Higher Merchandise Trade Deficit
(c) Higher inflow of Remittances
(d) Higher External liabilities of a country
Select the correct answer using the code given below:
(a) 1 only
Practice MCQ (b) 1 and 2 only
Which of the following best describes the concept of (c ) 1 and 3 only
"Domestic Income" of a country? (d) 1, 2 and 3
(a) Sum total of factor incomes generated within the Practice MCQ
political territory of a country by the residents.
Consider the following statements:
(b) Sum total of factor incomes generated within the
1. An increase in the Domestic Income always leads to an
political territory of a country by the residents and the
non-residents. increase in the National Income.

(c) Sum total of factor incomes generated by citizens 2. Zero ‘Net Factor Income from Abroad (NFIA)’ is always
within a country as well as overseas. associated with a closed economic model.
(d) Sum total of factor incomes generated within the Which of the statements given above is/are correct?
economic territory of a country by the residents. (a) 1 only (b) 2 only
(c) Both 1 and 2 (d) Neither 1 nor 2
By: Basava Uppin
 By: Basava Uppin

Consider the following statements:

1. The current base year for GDP measurement in India is 2011-12.
2. The new GDP series uses MCA-21 data series to estimate for the
organised private sector.
3. GVA and GDP at factor cost is the primary measure of output in
the new series.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2 and 3
 Practice MCQ
By: Basava Uppin
Consider a scenario. In a particular country, agriculture has
become unviable due to rising input costs and lower yields
leading to decline in the income levels of the farmers. In
comparison, workers employed in the manufacturing sector
earn almost 3 times that of farmers. Which among the
following best describes the scenario in terms of
opportunity cost?
(a) Opportunity cost for the farmers is higher
(b) Opportunity cost for the farmers is lower.
(c) Opportunity cost of worker in manufacturing sector is
higher
(d) Opportunity cost is same for both farmers and workers.
 Types of Goods By: Basava Uppin

Factors affecting Demand for Goods

Demand
Desire Ability to Purchase

Price of Related
Price of Goods Income of the Buyer
Goods
By: Basava Uppin
 By: Basava Uppin
How changes in Prices impact the Demand?

% Change % Change in Price Elasticity Economic Term When does it Examples

in Prices Demand (% Change in happen?
Demand/
% Change in
Prices)
Increase by 0% ( Does not 0 Perfectly Theoretical Difficult to find real life examples
10% Change at all) Inelastic Concept
Increase by Decrease by 5% 0.5 Relatively No close substitute Petrol, Diesel, Salt
10% Inelastic for Product; Brand Apple iPhone
Value; Alcohol, Cigarettes etc.
Temptation Goods
Increase by Decrease by 1 Unitary Elastic Theoretical Difficult to find real life examples
10% 10% Concept

Increase by Decrease by 1.5 Relatively Elastic Close Substitute for Air travel and Train, Pepsi and Coca Cola;
10% 15% Product available; Uber and Ola
Luxury Goods High-end Sports Cars
Increase by Decrease to 0 Infinity Perfectly Elastic Theoretical Difficult to find real life examples
10% (No demand for Concept
Goods at all)
 Practice MCQ Practice MCQ By: Basava Uppin
Consider a particular commodity “X”. The commodity “X” has no Consider a typical scenario:
close substitutes and hence cannot be easily replaced by other You need to travel to office. While checking the fares on different
Goods. In such case, price elasticity of commodity “X” is ride sharing platforms, you get to know that Uber Fares are
(a) Relatively Elastic much higher than fares on Ola. Hence, you decide to travel to
(b) Relatively Inelastic your office by booking an Ola Cab.
(c) Unitary Elastic
(d) Perfectly Elastic In the above scenario, the price elasticity of demand can be
considered as
Practice MCQ (a) Perfectly Elastic
If the price elasticity of demand (PED) for a particular commodity is (b) Perfectly Inelastic
zero, then what would it denote? (c) Relatively Elastic
(a) Percentage of Change in demand is same as Percentage of (d) Relatively Inelastic
change in price.
(b) Percentage of change in demand is more than the percentage
of change in price
(c) There is no change in the quantity demanded in response to
the change in price.
(d) Percentage of change in demand is less than the percentage of
change in price
 By: Basava Uppin
How demand for Goods is impacted by prices of
related Goods?

Complementary Goods
Demand for such a related commodity
Prices of Decreases
Demand for such
Particular Example: Petrol and Car, Sugar and
a commodity
Commodity Tea, Pen and Ink, Shoes and Socks
Decreases
Increases
Substitute Goods
Demand for such a related commodity
Increases
Example: Tea and Coffee, Domino Pizza
and Pizza Hut, Pepsi and Coca Cola
 By: Basava Uppin
Practice MCQ Practice MCQ
In which among the following cases the demand for a particular Goods 'X' and 'Y' are considered to be complementary Goods. If
commodity “X” likely to increase? the price of Goods 'X' increases, then what would happen to
1. Decrease in Prices of substitute Good “Y” demand for Goods 'Y'?
2. Increase in Prices of complementary Good “Z” (a) Increase in Demand
3. Increase in Income of the buyer (b) Decrease in Demand
(c) Demand for Goods 'Y' would remain unaffected
Select the correct answer using the code given below: (d) None of the above
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
 By: Basava Uppin
How demand for Goods is impacted by Income
levels?

Normal Goods
Demand for commodity Increases

Demand for a Example: Mobile Phones, AC, TV,

Income level
commodity Refrigerator etc.
Increases
Changes

Inferior Goods
Demand for commodity decreases

Example: Low-cost Cars, Feature

phones etc.
 Exceptions to the law of Demand By: Basava Uppin

Giffen Goods
Inferior Goods Veblen Goods (Category of Inferior Goods with no
substitutes)
Increase in Income Increase in prices Increase in prices Decrease in prices
levels leads to leads to increase in leads to increase in leads to Decrease in
decrease in Demand Demand Demand Demand
Example: Luxury
Example: Bicycles,
Goods such as
Low-cost Cars, Coarse
iPhone, Diamonds,
Cereals etc.
Shares etc.
 By: Basava Uppin
Practice MCQ Practice MCQ
Consider a particular commodity "X". The demand for this As the income of the consumer increases, the demand for
commodity reduces as the income level of the buyer increases. particular commodity 'X' reduces. Similarly, as the income
However, as the prices of this commodity increases, its demand decreases, the demand for commodity 'X' increases. In this case,
also increases. The commodity "X" belongs to which among the commodity 'X' can be considered as
following categories of Goods? (a) Inferior Goods
(a) Veblen Goods (b) Veblen Goods
(b) Inferior Goods (c) Giffen Goods
(c) Giffen Goods (d) Normal Goods
(d) Superior Goods

Practice MCQ Practice MCQ

With reference to Veblen Goods, consider the following statements: Consider the following statements:
1. The demand for these Goods increase with increase in their 1. All the Giffen Goods are Inferior Goods, but all Inferior
prices. Goods are not Giffen Goods.
2. These Goods are normally considered to be the inferior Goods. 2. The demand for Giffen Goods increases with the increase
in their prices.
Which of the statements given above is/are correct?
(a) 1 only Which of the statements given above is/are correct?
(b) 2 only (a) 1 only
(c) Both 1 and 2 (b) 2 only
(d) Neither 1 nor 2 (c) Both 1 and 2
(d) Neither 1 nor 2