Supply & Demand → GDP: Aggregate demand and supply are the micro foundations of macro. The AD-AS model in GDP analysis extends the individual market model to the entire economy.
Market Structures → Banking: India's banking sector operates under oligopolistic competition (SBI, HDFC, ICICI dominate). Understanding market structures explains why some banks have pricing power while others compete on margins.
GDP → Inflation: The Phillips curve shows the short-run trade-off between growth and inflation. India's experience with stagflation (low growth + high inflation) in 2013-14 broke this assumption.
Monetary Policy ↔ Fiscal Policy: Both manage aggregate demand but through different channels. Monetary policy works through interest rates and credit; fiscal policy through government spending and taxes. In India, RBI (monetary) and Finance Ministry (fiscal) sometimes pull in different directions.
Banking → Monetary Policy: RBI uses banks as transmission channels. Repo rate changes only affect the economy if banks pass them on to borrowers — the "monetary policy transmission" problem.
Liberalization → Capital Markets: The 1991 reforms created SEBI (1992), led to NSE (1994), and opened FDI/FII routes. Liberalization transformed India's capital markets from clubby broker-controlled systems to modern electronic exchanges.
Poverty → Fiscal Policy: India's welfare schemes (MGNREGA, PM-KISAN, free ration) are fiscal tools. Understanding poverty measurement (Tendulkar vs Rangarajan) helps evaluate whether these schemes work.
Foreign Trade → Sectors: India's export composition shifted from primary goods to services (IT, pharma) and manufacturing (automobiles, textiles). This sectoral shift is the story of India's integration with the global economy.
Important Data Points to Remember
These figures appear across multiple topics. Bookmark them:
GDP: India is ~5th largest by nominal GDP (~$3.7T), ~3rd by PPP. Growth target: ~7% for sustained development.
Inflation: RBI target: 4% ± 2% (CPI). WPI is no longer the primary measure.