Economy Terms Explained - 4 for UPSC IAS Exam

There is a need to understand the Economic Terminology in order to successfully attempt the Questions of IAS Exam. Explanation of the Economic Terms is always the prime requirement of the candidates preparing for the Civil Services Exam.

Here are some of them

Created On: Oct 23, 2015 18:53 IST
Modified On: Nov 2, 2015 15:44 IST

Opportunity Cost

It is defined with respect to a particular value or action and is equal to the value of the foregone alternative choice or action.


A monthly payment to a worker who has retired from work. Per Capita Income: Total national income of a country divided by its population in a specific period.

Permit License Raj

A term used to denote the rules and regulations framed by the government to start, run and operate an enterprise for production of goods and services in India.

Planning Commission

This organisation was set up by the Government of India on 15 March 1950. It is responsible for making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

Poverty Line

The per capita expenditure on certain minimum needs of a person including food intake of a daily average of 2,400 calories in rural areas and 2,100 calories in urban areas.
Private Sector Establishments: All those establishments, which are owned and operated by individuals or group of individuals. Productivity: Output per unit of input employed. Increase in the efficiency on the part of capital or labour leads to increase in productivity. This term is generally used to refer to productivity increase in labour inputs.

Provident Fund

A savings fund in which both employer and employee contribute regularly in the interest of the employee. It is maintained by the government and given to the employee when he or she resigns or retires from work.
Public Sector Establishments: All those establishments which are owned and operated by the government. They may be run either by local government, state government or by central government independently or jointly.

Quantitative Restrictions

Restrictions in the form of total quantities or quotas imposed on imports to reduce balance of payments (BOP) deficit and protect domestic industry.

Regular Salaried/Wage Employee

Persons, who work in others’ farm or non-farm enterprises and, in return, receive salary or wages on a regular basis (i.e. not on the basis of daily or periodic renewal of work contract). They include not only persons getting time wage but also persons receiving piece wage or salary and paid apprentices, both full time and part-time.

Renewable Resources

Resources that can be renewed through natural processes if they are used wisely. Forests, animals and fishes, if not overexploited, get easily renewed. Water is also in that category.
South Asian Association for Regional Cooperation (SAARC): It is an association of eight countries of South Asia — Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan. SAARC provides a platform for the peoples of South Asia to work together in a spirit of friendship, trust and understanding. It aims to accelerate the process of economic and social development in member countries.


Those who operate their own farm or non-farm enterprises or are engaged independently in a profession or trade with one or a few partners. They have freedom to decide how, where and when to produce and sell or carry out their operation. Their earning is determined wholly or mainly by sales or profits from their enterprises.

Social Security

A government or privately established system of measures, which ensures material security for the elderly, disabled, destitute, widows and children. It includes pension, gratuity, provident fund, maternal benefits, health care etc.

Special Economic Zone (SEZ)

It is a geographical region that has economic laws different from a country’s typical economic laws. Usually the goal is to increase foreign investment. Special Economic Zones have been established in several countries, including the People’s Republic of China, India, Jordan, Poland, Kazakhstan, the Philippines and Russia.
Stabilisation Measures: Fiscal and monetary measures adopted to control fluctuations in the balance of payments and high rate of inflation.

State Electricity Boards (SEBs)

These are part of the state administration that generate, transmit and distribute electricity in different states.

Statutory Liquidity Ratio (SLR)

A minimum proportion of the total deposits and reserves to be maintained by the banks in liquid form as per the regulations of the central bank (RBI). Maintenance of SLR, in addition to the Cash Reserve Ratio (CRR), is an obligation of the banks.

Stock Exchange

A market in which the securities of governments and public companies are traded. It provides the facilities for stock brokers to trade company stocks and other securities.

Stock Market

An institution where stocks and shares are traded.
Structural Reform Policies: Long-term measures like liberalisation deregulation and privatisation aimed to improve the efficiency and competitiveness of the economy.


A tax on imports, which can be levied either on physical units, e.g. per tonne (specific) or on value. Tariffs may be imposed for a variety of reasons including: to raise government revenue, to protect domestic industry from subsidised or low-wage imports, to boost domestic employment, or to ease a deficit on the balance of payments. Apart from the revenue that they raise tariffs achieve little good—they reduce the volume of trade and increase the price of the imported commodity to consumers.

Tariff Barriers

All the restrictions on imports by a government in the form of taxes.

Trade Union

An organisation of workers formed for the purpose of addressing its members’ interests in respect of wages, benefits, and working conditions.


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 or by making applications to prospective employers or express their willingness or availability for work under the prevailing condition of work and remunerations.


Expansion of a metropolitan area, namely the proportion of total population or area in urban localities or areas (cities and towns), or the increase of this proportion over time. It can thus represent a level of urban population relative to total population of the area, or the rate at which the urban proportion is increasing. Both can be expressed in percentage terms, the rate of change expressed as a percentage per year, decade or period between censuses.

Worker-Population RATIO

Total number of workers divided by the population. It is expressed in percentage.

Economic Terms - I

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