Economy is the backbone of the RBI Grade B ESI paper, NABARD Grade A, SEBI Grade A and the financial awareness section of bank exams. This guide explains the core terms in simple words and gives the latest 2026 numbers you are expected to know.
Latest numbers at a glance (2026)
| Indicator | Latest figure |
|---|---|
| Real GDP growth, FY 2025-26 | 7.7% (provisional) |
| Nominal GDP, FY 2025-26 | about ₹346 lakh crore |
| Real GDP growth, Q1 FY 2026-27 (Apr–Jun 2026) | 7.8% |
| GDP base year | 2022-23 (revised in 2026; earlier 2011-12) |
| CPI inflation, September 2026 | 5.54% (food inflation 7.74%) |
| CPI base year | 2024 (from January 2026 data; earlier 2012) |
| WPI base year | 2022-23 (from June 2026; earlier 2011-12) |
| Fiscal deficit target, 2026-27 | 4.3% of GDP |
| Repo rate | 5.50% (after the October 2026 hike) |
Figures are provisional and get revised. Check the latest MoSPI and RBI releases before your exam.
GDP, GVA and GNP
| Term | Meaning |
|---|---|
| GDP (Gross Domestic Product) | Value of all final goods and services produced within India in a year |
| GVA (Gross Value Added) | Value of output minus intermediate consumption; measures output by sector |
| GDP = GVA + product taxes − product subsidies | The link between the two |
| GNP / GNI | GDP + net factor income from abroad (what Indians earn worldwide) |
| NDP | GDP − depreciation |
| Nominal GDP | At current prices (includes inflation) |
| Real GDP | At constant (base-year) prices; shows true growth |
| GDP deflator | Nominal GDP ÷ Real GDP × 100; the broadest price measure |
| Per capita income | National income ÷ population |
Who releases GDP data? The National Statistics Office (NSO) under MoSPI. Quarterly estimates come about two months after each quarter ends.
Three ways to measure GDP
- Production (value added) method: add GVA of all sectors.
- Income method: wages + rent + interest + profits.
- Expenditure method: C + I + G + (X − M): consumption + investment + government spending + net exports.
Inflation
| Term | Meaning |
|---|---|
| CPI (Consumer Price Index) | Retail prices paid by households; compiled by NSO (MoSPI); RBI targets CPI inflation |
| WPI (Wholesale Price Index) | Wholesale prices; compiled by the Office of the Economic Adviser, DPIIT (Ministry of Commerce) |
| PPI (Producer Price Index) | Launched with the new WPI series in 2026 (approx) |
| Core inflation | CPI excluding food and fuel |
| Headline inflation | Overall CPI inflation |
| Deflation | Prices fall (negative inflation) |
| Disinflation | Inflation falls but stays positive |
| Stagflation | High inflation + low growth + high unemployment |
| Inflation target | 4% ± 2% (CPI), for April 2026 to March 2031 |
New CPI series (base 2024): about 358 items (up from 299); the weight of food and beverages fell to about 36.75% (from about 45.86%), so food prices now move headline inflation slightly less.
Deficits
| Deficit | Formula | Meaning |
|---|---|---|
| Fiscal deficit | Total expenditure − (revenue receipts + non-debt capital receipts) | Total borrowing the government needs |
| Revenue deficit | Revenue expenditure − revenue receipts | Borrowing to meet day-to-day expenses |
| Effective revenue deficit | Revenue deficit − grants for creation of capital assets | – |
| Primary deficit | Fiscal deficit − interest payments | Borrowing excluding past interest |
| Current account deficit (CAD) | Imports of goods and services − exports + net income and transfers | External sector gap |
Union Budget basics
| Point | Detail |
|---|---|
| Constitutional name | Annual Financial Statement (Article 112) |
| Presented on | 1 February (since 2017) |
| Railway budget | Merged with the Union Budget in 2017 (separate since 1924) |
| Money bill | Budget-related bills are money bills (Article 110) |
| Prepared by | Budget Division, Department of Economic Affairs, Ministry of Finance |
| Budget 2026-27 | Fiscal deficit target 4.3% of GDP; Centre’s debt-to-GDP target about 55.6% |
| FRBM Act | 2003: law for fiscal discipline |
16th Finance Commission (2026–31)
| Point | Detail |
|---|---|
| Constitutional basis | Article 280 (set up every 5 years by the President) |
| Chairman | Dr Arvind Panagariya |
| Report submitted | 17 November 2025 |
| Award period | 2026-27 to 2030-31 |
| States’ share of divisible pool (vertical devolution) | 41% (same as the 15th FC); accepted by the government |
| Grants (5 years) | About ₹9.47 lakh crore, mostly for local bodies (about ₹8 lakh crore) and disaster management |
| Revenue deficit grants | Discontinued |
| Fiscal path | Centre’s fiscal deficit to 3.5% of GDP by 2030-31; states capped at 3% of GSDP |
Horizontal devolution criteria (how the 41% is shared among states)
| Criterion | Weight |
|---|---|
| Income distance | 42.5% |
| Population (2011) | 17.5% |
| Demographic performance | 10% |
| Area | 10% |
| Forest and ecology | 10% |
| Contribution to GDP (new) | 10% |
The tax and fiscal effort criterion of the 15th FC was dropped and contribution to GDP was added.
Other key terms for ESI
| Term | Meaning |
|---|---|
| Fiscal policy | Government’s taxes and spending (Ministry of Finance) |
| Monetary policy | Interest rates and money supply (RBI) |
| Direct tax | Income tax, corporate tax; the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 (approx) |
| Indirect tax | GST (2017), customs duty |
| Disinvestment | Selling government stake in PSUs (DIPAM) |
| Twin balance sheet problem | Stressed corporate and bank balance sheets together |
| Crowding out | Heavy government borrowing pushes up rates and reduces private investment |
| Laffer curve | Higher tax rates beyond a point reduce tax revenue |
| Phillips curve | Short-run trade-off between inflation and unemployment |
Exam-ready one-liners
- India’s GDP grew 7.7% in FY 2025-26 and 7.8% in Q1 FY 2026-27.
- The GDP base year is now 2022-23; CPI base is 2024; WPI base is 2022-23.
- GDP = GVA + product taxes − product subsidies.
- Fiscal deficit = total expenditure − (revenue receipts + non-debt capital receipts).
- Primary deficit = fiscal deficit − interest payments.
- Fiscal deficit target for 2026-27: 4.3% of GDP.
- 16th Finance Commission: chairman Arvind Panagariya; states’ share 41%.
- “Contribution to GDP” (10%) is a new devolution criterion of the 16th FC.
Related reading
Quiz: test yourself
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Based on MoSPI, Budget 2026-27 and the 16th Finance Commission report as reported. Data are revised often; check mospi.gov.in and indiabudget.gov.in.
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