Indian Economy for CA Foundation
The Indian economy: its colonial past, planning, the 1991 reforms, sector structure, major policies and current features.
Business EconomicsPaper 412 MCQs2 lessons2 flashcards3 memory tricks
What you'll learn
- From colonial rule to planning
Trace the main phases of India's economic history. - Structure and policies today
Describe the sector structure and major schemes.
Concepts explained
India's economic history
From colonial drain and stagnation, India moved to planned development (1951–2017) and then market-oriented reforms after 1991.
What it means
- Colonial era: de-industrialisation, drain of wealth (Dadabhai Naoroji).
- Five-Year Plans from 1951; public sector and import substitution.
- Green Revolution (1960s): HYV seeds, wheat in Punjab and Haryana.
- Planning Commission replaced by NITI Aayog in 2015.
- 1951–56
Answer: Focus on agriculture and irrigation
- HYV wheat
Answer: Food self-sufficiency
Related terms
- Mahalanobis model: Second Plan's heavy-industry strategy
- Licence Raj: permits needed for industry before 1991
Exam tip: Learn one fact per decade: 1950s plans, 1960s Green Revolution, 1990s reforms.
1991 reforms and recent policies
A balance of payments crisis in 1991 led to LPG reforms. Later milestones include MGNREGA (2005), Make in India (2014), demonetisation (2016) and GST (2017).
What it means
- 1991: forex reserves for about two weeks of imports; IMF support.
- LPG: delicensing, disinvestment, lower tariffs, FDI allowed.
- MGNREGA: 100 days of rural work; GST from 1 July 2017.
- Demonetisation of ₹500 and ₹1,000 notes on 8 November 2016.
- 1991
Answer: Balance of payments crisis
- Many indirect taxes merged
Answer: GST, July 2017
Related terms
- Disinvestment: selling government stakes in PSUs
- FDI: foreign direct investment allowed in more sectors
Exam tip: Remember: crisis 1991, rural jobs 2005, manufacturing 2014, notes 2016, GST 2017.
Sector structure of the Indian economy
Services produce over half of GDP, while agriculture still employs the largest share of workers, showing low farm productivity.
What it means
- Primary: agriculture, forestry, fishing, mining.
- Secondary: manufacturing, construction, utilities.
- Tertiary: trade, transport, IT, finance, public services.
- Disguised unemployment in agriculture: more workers than needed.
- Largest sector
Answer: Services
- Largest employer
Answer: Agriculture
Related terms
- Structural change: shift of workers from farms to industry and services
- Informal sector: employs most Indian workers
Exam tip: GDP → services; jobs → agriculture.
Memory tricks
1951 First Plan; 1991 reforms; 2016 demonetisation; 2017 GST.
Services largest GDP share; agriculture largest employment share.
1991 reforms: liberalisation, privatisation, globalisation.
Try 3 CA Foundation-style questions
Q1. The economic reforms of 1991 are known by the abbreviation
- GDP
- MSP
- LPG: liberalisation, privatisation and globalisation
- FDI
Show answer
Answer: (3) LPG: liberalisation, privatisation and globalisation
In 1991 India opened up: removing licences (liberalisation), reducing the public sector's role (privatisation) and integrating with the world economy (globalisation).
Q2. The Goods and Services Tax (GST) was introduced in India in
- April 2010
- November 2016
- January 2015
- July 2017
Show answer
Answer: (4) July 2017
GST came into force on 1 July 2017, replacing many indirect taxes with one tax on supply.
Q3. The 'drain of wealth' theory about British rule in India was put forward by
- Dadabhai Naoroji
- Mahatma Gandhi
- Jawaharlal Nehru
- B.R. Ambedkar
Show answer
Answer: (1) Dadabhai Naoroji
Dadabhai Naoroji, in 'Poverty and Un-British Rule in India', argued that Britain drained India's wealth through home charges, salaries and trade.
Practise all 12 questions Free · explanations for every option · see where you go wrong