You just stepped out of 12th grade, looking for courses after 12th grade, and you’re starting to see terms like GDP, inflation, and GST everywhere: the news, conversations, or your textbooks. “Economics” may seem intimidating, but it is for everyone! Whether you are buying a phone, ordering food, planning your career, or at any stage in life the Indian economy and understanding the economy is important and will help you make better decisions.
In Part 1 of our blog - “ Understanding Inflation Through Economics”, we gave you a quick tour of what GST, GDP, and inflation actually are, and what they mean for you as you transition into the world of economics. If you haven’t yet read it, we encourage you to do so now. It can be a perfect start for you to become fully acquainted with how these terms relate to your everyday life.
If you are exploring courses after 12th that will provide you with actual career opportunities and give you a leg-up in understanding how the world works, it’s a great start to know the basics of the Indian economy.
In this blog, we will talk about GST, inflation, and GDP in the most relatable way possible. No jargon, no boring theory - just honest and useful information to help you be smarter with money, smarter with decisions, and smarter about your future strategy.
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What is Inflation and Why Should You Care?
What is Inflation in Economics?
Inflation simply refers to the general level of price increases of goods and services over time. In other words, your money does not go as far as it did before. A great example is if you purchased a chocolate bar for ₹10 last year, and now that chocolate bar costs ₹15. The price increase is inflation.
What causes inflation?
There are two reasons for inflation:
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Demand-pull inflation - Imagine when a new video game becomes super popular and there is only a limited amount of copies available. In this case, many people want it, so sellers raise the price because the demand is greater than the supply.
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Cost-push inflation - An example of this would be if the price of petrol goes up significantly. The cost of transporting fruits and vegetables, and other goods, goes up, so sellers transfer that cost onto you via a price increase.
Daily Life Example - Think of your phone bill every month. If your internet or mobile service provider raises their rates every year, that is inflation. Even though you are using the same amount of data or calls, you will pay more money for the same usage.
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GST full form: Goods and Services Tax
Before the implementation of GST in 2017, the taxation processes in India were complicated. Different states and the central government were each charging their own taxes, resulting in multiple taxes to be paid by businesses on the same product or the same service.
To alleviate these tensions and confusion, the nation adopted a system of GST - a single tax imposed to facilitate trade as a single country. So, whether you bought the same phone in Delhi or Bangalore, the same taxes would be applied to you as a consumer. This tectonically improved the flow of the trading of goods and services while helping to reduce the overall fuzzy tax burden.
What is GST?
GST simplified and was imposed to replace many previous indirect taxes ( VAT - Value Added Tax, service tax, excise duty, and so on), so it is payable on almost all goods and services sold in India.
There are five main GST slabs:
- 0% (on essential goods like fresh vegetables, fresh milk)
- 5% (on items like packaged food)
- 12% (on most processed foods and smartphones)
- 18% (most services such as restaurants and telecoms)
- 28 % (luxury items, like cars, tobacco)
GST Variations:
- CGST (Central GST) - Paid to the central government by the seller for intra-state sale (within a state).
- SGST (State GST) - Paid to the state government by the seller for an intra-state sale.
- IGST (Integrated GST) - Paid to the government by the seller for inter-state sale (between states).
Daily Life Example - So, the next time you order a pizza or purchase clothing, look at your bill. CGST and SGST both will be listed on your ticket - that's GST for you, creating transparency and equity with taxes!
If you want to learn more about economics and intend to major in economics, consider admission into the top BA economics colleges in Bangalore, as they offer courses on GST, inflation, and GDP with great depth.
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What is GDP and Why Does It Matter?
GDP full form is Gross Domestic Product, which is basically the total value of goods and services produced in a country in a particular period of time.
Consider all the chai sold, cars made, software developed, and movies released in India in a year, and have all that money value summed up together - Yes! That’s India’s GDP.
GDP Definition
It’s an indication of how well the economy is doing in a country, so if the GDP is growing, then businesses are producing more, people have more jobs, and income is rising.
What is the GDP of India Currently?
According to various reports, India’s GDP growth rate is one of the highest (alongside other major economies), at around 7% so we are one of the fastest growing nations.
Daily Life Example:
If your neighbourhood is seeing new malls, tech parks, and startups flourishing, that means the GDP in your neighbourhood is growing as well. More production means more GDP.
Did you know Fact - Who is the Father of Economics?
Adam Smith was a Scottish economist and is known as the Father of Economics. He developed the concept and phrase of the “invisible hand” and was the first to write about classical economics.
So, for those of you beginning to study the BA Economics subjects, you will meet Adam Smith in your textbooks!
Why Students Should Understand These Terms
So, if you’re thinking about doing a BA in Economics, B.Com or any Commerce or Arts course after 12th class, these concepts will lay the groundwork for your work. And even if you’re headed into engineering or law, knowing strong economics terms could help you make better choices, whether it be with your own money management practices, your policies, or your decision whether or not you want to start your own business.
Final Thoughts
Economics is not solely for the intelligent ones. Economics is everywhere - from the price of your candy bar to the taxes on your online shopping, the job market, and your car-buying dream.
So, whether you are pursuing a BA Economics, diving deep into MA Economics, or just trying to be a smart citizen, learning the words inflation, GST, and GDP is a great place to begin.
And, economics is not about complicating your life. Economics is all about the sensibility of how the world works, in your wallet, your city, and your country.