Sreedhar’s C C E ECONOMICS

MONEY AND BANKING

According to banking regulation act 1949 bank means
 Accept the deposits on a condition when the customer demand disburse
immediately
 Withdraws on working timings
Accept and Issuance of cheques
Bank the word derived from bankoo it means
 INTRODUCTION
Banking in India has a very long history starting from the late 18 th century.
 The origin of modern banking started from 1770 in the name of “Bank of
Hindustan” by English agency ‘House of Alexander & Co’ in Kolkatta however it
was closed in 1832.
Further in 1786 “General Bank of India” was started and it failed in 1791.
 PRESIDENCY BANKS
 These banks were funded by the presidency government at that time.
The 3 presidency banks were
Bank of Bengal- Established in 1806
Bank of Bombay - Established in 1840
Bank of Madras - Established in 1843
 These three presidency banks were re-organized and amalgamated to form a
single entity named “Imperial Bank Of India” on 27 th January, 1927. It was later
transformed into “State Bank Of India” in 1955.
 SOME OF THE OLD BANKS:
Allahabad Bank was established in 1865 at Allahabad (Uttar Pradesh). It is the
oldest joint stock bank of our country functioning till today.
Oudh Commercial Bank was established in 1881 at Faizabad(Uttar Pradesh).It
is the First limited liability Bank in India and also first joint stock bank by
Indians.However it failed in 1958.
Punjab National Bank was established in 1895 at Lahore(pakistan) and it was
also the first bank to be managed solely by Indians.
 IMPACT OF “SWADESHI” MOVEMENT
Due to the “Swadeshi” movement many banks were established between 1906 to
1911. Many local bussinessmen and strong political figures of India funded the
banks for Indian community. Some of the banks that were established are as
follows:

1
Sreedhar’s C C E ECONOMICS

S Anchor Bank Estd Merged Bank Head quarters

1 Bank of Baroda
2 Bank of India
3 Bank of Maharastra
4 Canara Bank
5 Central Bank of India
6 Indian Bank
7 Indian Overseas Bank
8 Punjab and sind Bank
9 Punjab National Bank
10 State Bank of India
11 UCO Bank
12 Union Bank of India
1908 Dena Bank, Vijaya Bank Vadodara, Gujarat
1906 Mumbai, Maharashtra
1935 Pune, Maharastra
1906 Syndicate Bank Bengaluru, Karnataka
1911 Mumbai, Maharastra
1907 Allahabad Bank Chennai, Tamil Naidu
1937 Chennai, Tamil Naidu
1908 New Delhi, Delhi
1894 Oriental Bank of New Delhi, Delhi
Commerce, united Bank of
India
1955 State Bank of Bikaner & Mumbai, Maharashta
Jaipur, State Bank of
Hyderabad, State Bank of
Indore, State Bank of
Mysore, State Bank of
Patiala, State Bank of
Saurashtra, State Bank of
Travancore, Bhartiya
Mahila Bank
1943 Kolkata, West Bengal
1919 Andhra Bank, Corporation Mumbai, Maharashta
Bank

Name of Establishment Year

the Bank
Canara 1906
Bank
Bank Of 1906
India
Corporation 1906
Bank
Indian Bank 1907
Bank Of 1908
Baroda

 “The Reserve Bank Of India”

RBI was established on 1st April, 1935 in accordance with the provisions of the
RBI act,1934.
It was established under the recommendations of the “Hilton Young Commission
“also known as “Royal Commission on Indian Currency and Finance”.
Initially it was setup in Calcutta and permanently moved to Mumbai in 1937.
Initially the RBI was started with private share holder’s fully paid up capital of
Rs.5 crores.
It also acted as central banking institute for Myanmar till 1948 and till 1947 for
Pakistan.
 The RBI was nationalized on 1st January, 1949 in accordance with the

2
Sreedhar’s C C E ECONOMICS

RBI(Transfer to Public Ownership)act,1948.

 It empowered RBI to act as central banking institution to control monetary
policy of Indian Rupee and to control, regulate, monitor, inspect banks in the
country as mentioned in the 2nd schedule of RBI act1934.
 Functions of RBI:-
 To control the inflation
Increase the economy of our country
 Creating the employment
Inspection on banks
 Controlling and regulating the health of banks
Guardian of FOREX
SCHEDULED AND NON-SCHEDULED BANKS
 The scheduled banks are those which are entered in the second schedule of
the RBI Act, 1934. These banks have a paid-up capital and reserves of an aggregate
value of not less than Rs. 5 lakhs and satisfy the RBI that their affairs are carried
out in the interest of their depositors.
 All commercial banks (Indian and foreign), regional rural banks and state co-
operative banks are scheduled banks. Non-scheduled banks are those which are
not included in the second schedule of the RBI Act 1934. At present there is only
one such bank in the country
 STATE BANK OF INDIA
The State Bank Of India was formerly known as “Imperial Bank Of India” during
the British rule.
 It was established on 1st July,1955 under the recommendations of “Gorwala
committee”.
 It was nationalized on 2nd June,1956 with majority of its share taken by the
Government of India.
 The SBI acts as an agent where the Reserve Bank Of India has no branch
offices.
It has 5 associate banks,State Bank of Bikaner & Jaipur, Hyderabad, Mysore,
Patiala and Travancore.
Commercial Bank of India.
• Imperial Bank was established in the year 1921 by merging three main Presidency
Banks.
• The largest bank—Imperial Bank was nationalised in 1955 on recommendation
of Gorewala Committee and rechristened as State Bank of India.
• In 1959, 7 regional banks were nationalised and given the status of Associate
Banks of State Bank of India.
• On 19th July, 1969,14 big commercial banks with deposits worth Rs. 50 crores or
more and on 15th April, 1980, six other scheduled banks were nationalised, bringing
total number of nationalised banks to 27 (19 + SBI + 7 SBI Associates).
• Before the merger of New Bank of India in Punjab National Bank (in 1993) the
total number of nationalised banks was 28 (8* SBI and Associates + 14 + 6).
• After the merger of ‘State Bank of Saurashtra’ (in2008) and ‘State Bank of
Indore’ (in 2010) in the State Bank of India, the number of Associates of SBI has
come to 5. But now after the merger of State Bank ofBikaner and Jaipur, State
Bank of Mysore, State Bank of Travancore, State Bank of Patiala and State Bank
of Hyderabad with SBI, the numbers of SBI Associates have become zero.
Merger of SBI Associates
The 5 associate banks of SBI—State Bank of Bikaner & Jaipur (SBBJ), State Bank
of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Patiala and State
Bank of Hyderabad and Bhartiya Mahila Bank (BMB) have been merged with
State Bank of India since April 1, 2017.

3
Sreedhar’s C C E ECONOMICS

 (RRBs) were established in 1975 under the provisions of the Ordinance

promulgated on the 26th September 1975 and followed by Regional Rural Banks
Act, 1976 with the aim of developing rural economy in all areas like agriculture,
trade, commerce, industry and other productive activities in the rural areas,
credit and other facilities, particularly to small and marginal farmers, agricultural
labourers, artisans and small entrepreneurs, etc.
 Some Facts about RRBs:
RRBs were set up on the recommendations of the Narasimham Working Group.
 The first RRB to be set up was the Prathama Bank, sponsored by Syndicate
Bank on October 2, 1975 in Uttar Pradesh. The head office is at Moradabad, UP.
At that time, Mrs Indira Gandhi was the Prime Minister of India.
 The regulatory authority of these RRBs is NABARD.
All the RRBs are on Core Banking platform like other commercial banks.
The area of operation of the RRBs is limited to few districts in a State.
 The percentage shares of the Government of India, the concerned State
Government and the bank, which had sponsored the RRB is in the proportion of
50%, 15% and 35%.
Sponsor bank can be any Nationalized Commercial Bank.
 The sources of funds of RRBs comprise of owned fund, deposits, borrowings
from NABARD, Sponsor Banks and other sources including SIDBI and National
Housing Bank.
 RBI has allowed the RRBs to maintain a lower level of SLR than commercial
banks.
The Chakrabarty Committee reviewed the financial position of all RRBs in 2010
and recommended for recapitalization.
 Under the Dr Vyas Committee Recommendations, amalgamation of RRBs took
place in 2013.
As a result of amalgamation, number of the RRBs reduced from 196 to 64 as on
31 March 2013.
All states in India have RRBs, except Sikkim and Goa.
 NABARD:-

 Introduction
 "NABARD" means 'National Bank for Agriculture and Rural Development'.
 NABARD is an apex level bank set up by GOI(Government of India) with an
instruction of providing credit flow for the promotion and development of agriculture,
cottage, village and other small scale industries in the country.
It is not a wholly own subsidiary of RBI now because RBI sold 99% of its stake to
GOI.
Its headquarter is in Mumbai, India.
It has 336 district offices across the country.
Chairman of NABARD is Dr. Harsh Kumar Bhanwala.

4
Sreedhar’s C C E ECONOMICS

 History of NABARD
 On 30th march 1979, GOI and RBI constituted a committee under the
Chairmanship of Shri B.Sivaraman to review the arrangements for institutional
credit for agriculture and rural development (CRAFICARD).
 The Sivaraman committee submitted a report on 28th november 1979 stated
that there is a need for a new institution which will cater the supply of credit flow
for the development of rural area.
 Through Act,61 of 1981, The Parliament approved the setting up of NABARD
and NABARD came into the existence on 12th July 1982.
NABARD was initially started with an amount of Rs100 crore.
 Mission
 Promote sustainable and equitable agriculture and rural prosperity through
effective credit support, related services, institution development and other
innovative initiatives
 Role
 The main role of NABARD is to provide and manage credit flow for the
development of the rural area.
 Types of loans provided by NABARD
 Short term loans
 These types of loans are provided for production purposes at reduced rate of
interest to the RRBs(Regional Rural Banks) and SCBs(State Cooperative Banks).
Then RRBs and SCBs provide the credit as loans to the needy ones for different
purposes such as:
 Seasonal agricultural operations
Marketing of crops
 Fisheries Sectors
 Industrial Cooperative Societies (other than weavers)
 Purchases, Stocking and Distribution of Chemical Fertilisers and other
Agricultural Inputs.
 Medium term loans
 These types of loans are generally the extended period of short term loans.
When crops are damaged, the banks give them extra period of time for re-payment
of loans.
 Long term loans
These types of loans are generally for the period of 3-15 years. These loans are
generally taken by small scale industries, non farm sector, handicrafts, handlooms,
powerlooms etc.
Development Banks
 Industrial Development Bank of India (IDBI), established in 1964.
Main functions : Providing finance to large arc medium scale industrial units.
 Industrial Finance Corporation of India (IFCI), established in 1948.
Main functions: (a) Project finana (b) Promotional services.
 Industrial Credit and Investment Corporation of Inda Limited (ICICI), formed
in 1955.
Main functions : Providing term loans in Indian ax. foreign currencies;
Underwriting of issues of shaaa and debentures.
 Small Industries Development Bank of India (SIDBI) established in 1989.
Main functions : Providing assistance to small scale industries through state
finance corporations, state industrial developing corporations, commercial banks
etc.
 EXIM BANK (Export Import Bank of India), established in 1982 is a specialised
financial institution, wholly owned by Government of India, set up for financrrc
facilitating and providing foreign trade of India
Important Banking Terminology
1. Bank Rate : Bank Rate is the rate at which central bank of the country (e.g.
RBI in India) allows finance to commercial banks. Bank Rate is a tool, which
central bank uses for short-term purposes. Any upward revision in Bank Rate by

5
Sreedhar’s C C E ECONOMICS

central bank is an indication that banks should also increase deposit rates as
well as Base Rate/Benchmark Prime Lending Rate. Thus any revision in the
Bank rate indicates that it is likely that interest rates on customer’s deposits are
likely to either go up or go down, and it can also indicate an increase or decrease
in customer’s EMI
2. Basis points : It is the increase in interest rates in percentage terms. For
instance, if the interest rate increases by 50 basis points (bsp), then it means
that interest rate has been increased by 0.50%. One percentage point is broken
down into 100 basis points. Therefore, an increase from 2 to 3% is an increase of
one percentage point or 100 basis points.
3. LRR (Legal Reserve Ratio) includes CRR and SLR.
CRR (Cash Reserve Ratio): CRR is the amount of funds that the banks have to
keep with RBI. If RBI increases CRR, the available amount with the banks comes
down. RBI is using this method (increase of CRR), to drain out the excessive
money from the banks.
4. SLR (Statutory Liquidity Ratio): SLR is the amount a commercial bank needs
to maintain in the form of cash or gold or govt, approved securities (Bonds) before
providing credit to its customers. SLR rate is determined and maintained by RBI
in order to control the expansion of the bank credit. With the SLR, the RBI can
ensure the solvency of a commercial bank. SLR is used to control inflation and
propel growth. Through SLR rate the money supply in the system can be controlled
effectively
5. Repo Rate : Repo rate is the rate at which commercial banks borrows rupees
from RBI. A reduction in the repo rate will help banks to get money at cheaper
rate. When the repo rate increases borrowing from RBI becomes more expensive
6. Reverse Repo Rate: Reverse Repo rate is the rate at which RBI borrows money
from commercial banks. Banks are always happy to lend money to RBI since their
money is in the safe hands with a good interest. An increase in reverse repo rate
can cause the banks to transfer more funds to RBI due to this attractive interest
rates. Reverse Repo Rate is always 1 percent less than the Repo Rate.
7. NEFT (National Electronic Fund Transfer) : NEFT enables funds transfer from
one bank to another but works a bit differently than RTGS. NEFT is slower than
RTGS. The transfer is not direct and RBI acts as the service provider to transfer
the money from one account to another. You can transfer any amount through
NEFT, even a rupee.
8. RTGS (Real Time Gross Settlement) : RTGS system is funds transfer system
where transfer of money or securities takes place from one bank to another on a
‘real time’ and on ‘gross’ basis. Settlement in ‘real time’ means payment transaction
is not subjected to any waiting period. The transactions are settled as soon as
they are processed. Minimum & Maximum Limit of RTGS : 2 lakh and no upper
limit.
9. Liquidity Adjustment Facility (LAF) : is a monetary policy tool which allows
banks to borrow money through repurchase agreements. LAF is used to aid banks
in adjusting the day to day mismatches in liquidity. LAF consists of repo and
reverse repo operations.
10. Marginal Standing Facility (MSF): MSF rate is the rate at which banks
borrow funds overnight from the Reserve Bank of India (RBI) against approved
government securities. MSF is always 1 percent more than the Repo Rate.

6
Sreedhar’s C C E INFLATION

INFLATION
 Inflation can be defined as :
 A rise in Price level
The general level of prices of goods and services
In an economic over a period of time
 Definition -
 “Inflation is State in which the Value of Money is Falling and the Prices are
rising.”
 In Economics, the Word inflation Refers to General rise in Prices Measured
against a Standard Level of Purchasing Power.
 Types of Inflation –

 Explanation -
 Demand Pull Inflation – Inflation created and sustained by excess of aggregate
demand for goods and services over the aggregate supply . In other words , demand
pull inflation takes place when increase in production lags behind the increase
in money supply
 Cost Pull Inflation – Inflation which is created and sustained by increase in cost
of production which is independent of the state of demand (e.g. Trade unions can
bargain for higher wages and hence contributes to inflation)
 Stagflation – In this types there is fall in the output and employment levels . Due
to various pressure , the entrepreneurs have to raise price to maintain their
margin of profits . But as they only partially succeed in raising the prices , they

1
Sreedhar’s C C E INFLATION

are faced with a situation of declining output and investment . Thus on one side
there is a rise in the general price level and on the other side there is a fall in
the output and employment .
 Open Inflation - The rate where Costs rise due to Economic trends of Spending
Products and Services.
Suppressed Inflation - Existing inflation disguised by government Price controls
or other interference in the economy such as subsidies. Such suppression,
nevertheless, can only be temporary because no governmental measure can
completely contain accelerating inflation in the long run. It is Also Called Repressed
Inflation.
 Galloping Inflation - Very Rapid Inflation which is almost impossible to reduce.
 Creeping Inflation - Circumstance where the inflation of a nation increases
gradually, but continually, over time. This tends to be a typically pattern for many
nations. Although the increase is relatively small in the short-term, as it continues
over time the effect will become greater and greater.
 Hyper Inflation - Hyperinflation is caused mainly by excessive deficit spending
(financed by printing more money) by a government, some economists believe
that social breakdown leads to hyperinflation (not vice versa), and that its roots
lie in political rather than economic causes.
 Causes of Inflation -
 1) Factors on Demand Sides –
Increase in money supply
Increase in Export
 Increase in disposable income
 Deficit financing
 Foreign exchange reserves
 2) Factors on Supply Side –
 Rise in administered prices
 Erratic agriculture growth
 Agricultural price policy
 Inadequate industrial growth
3) Black money (fake currency)
4) Increase in public expenditure
5) Decrease in the aggregate supply of goods and services
 Effect of Inflation –
 They add inefficiencies in the market, and make it difficult for companies to
budget or plan long-term.
Uncertainty about the future purchasing power of money discourages investment
and saving.
 There can also be negative impacts to trade from an increased instability in
currency exchange prices caused by unpredictable inflation.
 Higher income tax rates.
 Inflation rate in the economy is higher than rates in other countries; this will
increase imports and reduce exports, leading to a deficit in the balance of trade.
 Measurement of Inflation –
The 2 ways of Measuring Inflation are –
1. CPI
2. PPI
 Inflation is measured by general prices index . General price index measures
the changes in average prices of goods and services . A base year is selected and

2
Sreedhar’s C C E INFLATION

its index is assumed as 100 and on this basis price index for the current year is
calculated . If the index of the current year is below 100 , it indicates the state of
deflation and , on the contrary , If the index of the current year is above 100 it
indicate the state of inflation
Inflation rate and the value of money (Or the purchasing power of money ) are
inversely correlated . Hence , the value of money can also be measured with the
help of price indices . The value of money declines when price index goes up and
Vice-Versa.
 Consequences of Inflation –
 Adverse effect on production
 Adverse effect on distribution of income
 Obstacle to development
 Changes in relative prices
 Adverse effect on the B.O.P (Balance of Payment)
 Inflation a threat to Indian economy -
Inflation has become a household name for millions of Indians who are finding
it extremely difficult to make both ends meet. Prices are growing faster than the
household income almost for all products and services including real estate, food,
transportation, luxuries.
 The global economic crisis saw many economies stumble but India rebounded
faster and was surging ahead with a growth rate of 9%. But the inflationary
pressure is forcing the government to adopt measures which are taking the steam
out of the Indian growth story
For the last two years India is witnessing double digit food inflation which had
reached a high of around 18% in December 2010 with prices of onions, garlic and
tomatoes skyrocketing. Lentils, milk and meat have witnessed a steady rise in
prices which is putting pressure on the home budget of millions of Indians.
Millions of poor people in India are struggling to arrange a two-square meal for
their family members. We are running the risk of having an entire generation of
malnourished children who are otherwise considered the future of India.
 The tightening of the economy may control inflation in the long run but it is
also slowing our economy and as predicted by the IMF India’s growth will be only
around 6-7% instead of 9%.
 Current status of inflation in India –
 Currently inflation rate is around 9.44% in India, much above the acceptable
rate of 5%.
The food price index is at 8.31% causing much discomfort to the policymakers.
which under the current scenario seems impossible.
 How to Control Inflation –
 Monetary Measures –
 Credit Control
 Issue of new currency
 Fiscal Measures –
 Reduction in Unnecessary Expenditure
 Increase in taxes
 Increase in savings
Surplus Budgets
Public Debts

3
Sreedhar’s C C E INFLATION

To increase in production

Rational wage policy
 Price control
 Rationing

4
Sreedhar’s C C E
Committee
Continuous Economy committee
YH Malegam committee
Revamps Expert Panel
Jaitley-led Panel
M Vinod Kumar Panel
Arbind Modi-led Panel
AK Bhuchar Committee
B Eradi Committee
Wanchoo Committee
YV Reddy Committee
B Sivaraman Committee
A Ghosh Committee
Abid Hussain Committee
Adhyarjuna Committee
G Sundaram Committee
Gadgil Committee (1969)
James Raj Committee
Jankiramanan Committee
JV Shetty Committee
K Madhav Das Committee
Kalyanasundaram Committee
Kamath Committee
Karve Committee
Godwala Committee
B Venkatappaiah Committee
BD Shah Committee
BD Thakar Committee
Bhagwati Committee
Bhagwati Committee
Bhave Committee
Bhide Committee
Bhootlingam Committee
C Rao Committee
CE Kamath Committee
INFLATION
Areas
Black Money and The Unaccounted Money
Monitor Bad Loans
Market Infrastructure Institutions
Inspect the merger proposals of state-owned
banks.
Review of GST laws
Simplify Income Tax Laws
Coordination Between Term Lending
Institutions And Commercial Banks
Insolvency And Wind Up Laws
Direct Taxes
Reforms In Small Savings
Institutional Credit For Agricultural & Rural
Development
Frauds & Malpractices In Banks
Development Of Capital Markets
Changes In NI Act And Stamp Act
Export Credit
Lead Banking System
Functioning Of Public Sector Banks
Securities Transactions Of Banks & Financial
Institutions
Consortium Advances
Urban Cooperative Banks
Introduction Of Factoring Services In India
Education Loan Scheme
Small Scale Industry
Rural Finance
All India Rural Credit Review
Stock Lending Scheme
Job Criteria In Bank Loans (Approach)
Unemployment
Public Welfare
Share Transfer Reforms
Coordination Between Commercial Banks
And SFC’s
Wage, Income & Prices
Agricultural Policy
Multi-Agency Approach In Agricultural
Finance
5
Sreedhar’s C C E
Chatalier Committee
Chesi Committee
Cook Committee (On Behalf Of
BIS – Under Basel Committee )
D R Mehta Committee
Damle Committee
WS Saraf Committee
Y H Malegam Committee
Dandekar Committee
Dantwala Committee
Dave Committee
Dharia Committee
A Ghosh Committee
DR Gadgil Committee
Goiporia Committee
GS Dahotre Committee
GS Patel Committee
Hathi Committee
Hazari Committee (1967)
SS Kohli Committee
SS Tarapore Committee
Dutta Committee
A C Shah Committee
A Ghosh Committee
G Lakshmi Narayan Committee
IT Vaz Committee
J Reddy Committee
KB Chore Committee
Khanna Committee
Khusrau Committee
KS Kri shnaswamy Committee
L K Jha Committee
LC Gupta Committee
Marathe Committee
INFLATION
Finance To Small Scale Industry
Direct Taxes
Capital Adequacy Of Banks
Review Progress And Recommend
Improvement Measures Of IRDP
MICR
Technology Issues In Banking
Industry
Disclosure Norms For Public Issues
Regional Imbalances
Estimation Of Employment
Mutual Funds (Functioning)
Public Distribution System
Final Accounts
Agricultural Finance
Customer Service In Banks
Credit Requirements Of Leasing
Industry
Carry Forward System On Stock
Exchanges
Soiled Banknotes
Industrial Policy
Rationalization Of Staff Strength In
Banks
Capital Account Convertibility
Industrial Licensing
NBFC
Modalities Of Implementation Of
New 20 Point Programme
Extension Of Credit Limits On Basis
Of Consortium
Working Capital Finance In Banks
Reforms In Insurance Sector
To Review The Symbol Of Cash
Credit Q
Non Performing Assets
Agricultural Credit
Role Of Banks In Priority Sector And
20 Point Economic Programme
Indirect Taxes
Financial Derivatives
Licensing Of New Banks
6
Sreedhar’s C C E
ML Dantwala Committee
Mrs. KS Shere Committee
P R Nayak Committee
P Selvam Committee
Pendarkar Committee
PC Luther Committee
PD Ojha Committee
Nadkarni Committee
Nariman Committee
Narsimham Committee
Omkar Goswami Committee
Pillai Committee
RK Talwar Committee
RK Talwar Committee
R Jilani Banks
Rajamannar Committee
Tandon Committee
Tandon Committee
Thakkar Committee
Mahadevan Committee
Mahalanobis Committee
Rakesh Mohan Committee
Shankar Lal Gauri Committee
SK Kalia Committee
SL Kapoor Committee
Ram Niwas Mirdha Committee (JPC)
Rangarajan Committee
RS Saria Committee
Raghavan Committee
Raja Chelliah Committee
Rajamannar Committee
Rangarajan Committee
PR Khanna Committee
INFLATION
Regional Rural Banks
Electronic Fund Transfer
Institutional Credit To SSI Sector
Non Performing Assets Of Banks
Review The System Of Inspection Of
Commercial, RRB And Urban Cooperative Banks
Productivity, Operational Efficiency &
Profitability Of Banks
Service Area Approach
Improved Procedures For Transactions In PSU
Bonds And Units
Branch Expansion Programme
Financial System
Industrial Sickness And Corporate Restructuring
Pay Scales Of Bank Officers
Customer Service
Enactment Having A Bearing On Agro Landings
By Commercial Banks
Inspection System Of Banks
Changes In Banking Laws , Bouncing Of Cheques
Etc.
Follow Up Of Bank Credit
Industrial Sickness
Credit Schemes To Self Employed
Single Window System
Income Distribution
Petro Chemical Sector
Agricultural Marketing
Role Of NGO And SHG In Credit
Institutional Credit To SSI
Securities Scam
Computerization Of Banking Industry
Agricultural Finance And Cooperative Societies
Competition Law
Tax Reforms
Centre-State Fiscal Relationships
Public Sector Disinvestment
Develop Appropriate Supervisory Framework
For NBFC
7
Sreedhar’s C C E INFLATION

Purshottam Das Agricultural Finance And Cooperative

Committee Societies
Rashid Jilani Committee Cash Credit System
Ray Committee Industrial Sickness
RG Saraiya Committee Banking Commission
(1972)
PL Tandon Committee Export Strategy
RH Khan Committee Harmonization Of Banks And SSIS
Vaghul Committee Mutual Fund Scheme
Varshney Committee Revised Methods For Loans (>2 Lakhs)
RK Hajare Committee Differential Interest Rates Scheme
S Padmanabhan Onsite Supervision Function Of Banks
Committee
S Padmanabhan Inspection Of Banks (By RBI)
Committee
Venketaiya Committee Review Of Rural Financing System
Samal Committee Rural Credit
SS Kohli Committee Willful Defaulters
SS Nadkarni Committee Trading In Public Sector Banks
SC Choksi Committee Direct Tax Law
RN Malhotra Committee Reforms In Insurance Sector
RN Mirdha Committee Cooperative Societies
RV Gupta Committee Agricultural Credit Delivery
Sodhani Committee Foreign Exchange Markets In NRI Investment
In India
SS Kohli Committee Rehabilitation Of Sick Industrial Units
Sukhmoy Chakravarty To Review The Working Of Monetary System
Committee
Tambe Committee Term Loans To SSI
Thingalaya Committee Restructuring Of RRB
Tiwari Committee Rehabilitation Of Sick Industrial Undertakings
UK Sharma Committee Lead Bank Scheme (Review)
Usha Thorat Panel Financial Inclusion
Vipin Malik Committee Consolidated Accounting By Banks
VT Dehejia Committee To Study Credit Needs Of Industry And Trade
Likely To Be Inflated
Vyas Committee Rural Credit

8
Sreedhar’s C C E NAT IONAL INC OME

NATIONAL INCOME
 Definition:-
 The value of all final goods and services produced within the country in one
year period of time is called as National Income
Measurement of National Income:-
1. GDP (Gross Domestic Product)
2. GNP (Gross National Product)
3. NDP(Net Domestic Product)
4. NNP(Net National Product)
5. PCI(Per Capita Income)
6. PI(Personnel Income)
7. DPI(Disposable Personnel Income)
GNP(MP) = GDP(MP) + X - M
Where:
X = Income earned and received by nationals within the boundaries.
M = Income received by foreign nationals within the country.
NFI —> Net Foreign Income.
GNP —> Gross National Product
NNP —> Net National Product
NDP —> Net Domestic Product
GDP —> Gross Domestic Product
MP —> Market Price
FC —> Factor Cost
D —> Depreciation
INT —> Indirect Net Tax
NNP at Factor Cost = NNP at market prices-Indirect Taxes + Subsidies = GNP at
market prices - Indirect Taxes -Subsidies = National Incomes
• The base of one year is taken for calculating National income, as all the seasons
come in a year.
• The data of estimation of India’s National income are issued by Central Statistical
Organisation (CSO)
 GDP (Gross Domestic Product)
 The value of all final Goods and services produced within the geographical
boundaries of a country in one year period of time is called as GDP
 GDP=C+I+G+(X-M)
C=consumption
 I=Investment
 G=government Expenditure
X=exports
M=Imports
Estimates at Constant (2011-12) Prices
Gross Domestic Product

1
Sreedhar’s C C E NAT IONAL INC OME

• Real GDP or GDP at Constant Prices (2011-12) in the year 2019-20 is likely to
attain a level of Rs.147.79 lakr crore, as against the Provisional Estimate of GDP
for the year 2018-19 of Rs. 140.78 lakh crore, released it 31 st May 2019. The
growth in real GDP during 2019-21 is estimated at 5.0 % as compared to the
growth rate at 6.8 % in 2018-19
 GNP (Gross National Product):-
The value of all final Goods and services produced by the national of a country
in one year period of time is called as GNP
 GNP=GDP+(R-P)
R=inward receipts from abroad
P=outward receipts from India
GNP=GDP+NFIA (net factor Income from abroad)
 NDP (Net Domestice Product):-
Its derived subtraction of depreciation from GDP is called as NDP
 NDP=GDP-Depriciation
 NNP (Net National Product):-
Its derived subtraction of depreciation from GNP is called as NNP
 NNP=GNP-Depriciation
 PCI (Per Capita Income):-
It’s derived as national income shared among the population of a country
PCI= National Income
Total population of a country
 Personnel Income:-
 PI=National Income-[undistributed profits of the company social security
provisions] +Transfer payments
 Social security provisions=amount spend by the government for the cause of
social security
 EX:-Atal Pension Yojana, Pradhan Mantri Jeevan Jyothi Bhima Yojana
Transfer payments=also called as unilateral payments amount transferred from
government to public but in return government didn’t get anything
 DPI(Disposable Personnel Income):-
It means the value we derived from payment of indirect taxes from ppersonnel
income is called as disposable personnel income
DPI=PI-Indirect Taxes
 Relation between market price and factor cast:-
 MP-IT=FC-Subsidies
 MP=FC-subsidies +Indirect Taxes
 MP=FC+(Indirect taxes-subsidies)
MP=FC+Net IT
 MP=market prices
 FC=factors cost
 NOTE:-

2
Sreedhar’s C C E NAT IONAL INC OME

In India first time national income was calculated by dada bhai naoroji wrote a
book called
“poverty and unbritish rule in India”
 He calculated the national income in 1868
At that time national income was =340cr
Population was = 7cr
Per capita income =20/-
 In India 1st National income was calculated scientifically by VKRV Rao in
1931-32
According to him national income was 1680cr
After independence national income was calculated by national income estimate
committee appointed on 1949/august/4
 Chairman: PC mahalanobis
 Members: VKRV rao
DR Gadgil
It calculated the national income 1948-49,49-50,50-51
First report submitted on 1951
Final report submitted on 1954
 CSO:-
 Central stastical organization
Established in 1954
 Headquarters in delhi
 Comes under ministry of statistical and prograame implementation
 In 2006 NSSO is merged with CSO and forms a NSO national stastical
organization but not yet came into force
Every year CSO released the document in the name of National account statics
Year:-
In the years we have two types
1) constant year/base year
2) current year/nominal year:-at present this year is 201-/April/1 to 2020/March/
31
 Constant year:-
1. 1960-61
2. 1970-71
3. 1980-81
4. 1993-94
5. 1999-00
6. 2004-05
7. 2011-12
At present constant year changed from 2011-12 to 2015-16
 Prices:-

3
Sreedhar’s C C E NAT IONAL INC OME

To calculate the prices we have two types

1) The product multiplied with the prices of the constant year is called as constant
prices
2) The product multiplied with the prices of the current year is called as current
prices
 Sectors of economy:-

S.NO Primary Sector Secondary Sector Territory Sector

1 Agriculture Industries Services

2 Animal husbandry Constructions Transportation

3 Horticulture Power supply Storage

4 Fishries Gas supply Communication

5 Forest Water supply Information

6 Mininig and quaries Railways

7 Hotels

8 Trade

9 Tourism….

4
Sreedhar’s C C E T AX S YS TE M

TAX SYSTEM
 Tax System
• A compulsory contribution given by a citizen or organisation to the Government
is called Tax, which is used for meeting expenses on welfare work.
• Tax imposing and Tax collecting is at three levels in India- Central level, State
level and Local level.
• The distribution of tax between Centre and State has been clearly mentioned in
the provisions of Indian Constitution. For rationalising it from time to time, Finance
Commission has been constituted.
• The tax system has been divided into two parts :
Tax by Central Government: Custom Duty, Income Tax and Corporate Tax etc.
Tax by State Government : The state government has right to collect all the
taxes in this category and to spend them.
• There are two types of taxes :
1. Direct Taxes
2. Indirect Taxes.
• Direct Taxes : The taxes levied by the central government on incomes and
wealth are important direct taxes. The important taxes levied on incomes are—
corporation tax and income tax. Taxes levied on wealth are wealth tax, gift tax
etc.
• Indirect Taxes : This type of tax is not paid by someone to the authorities and it
is actually passed on to the other in the form of increased cost. They are levied on
goods and services produced or purchased. Excise Tax, Sales Tax, Vat,
Entertainment Tax are indirect taxes. The main forms of indirect taxes are
customs and excise duties and sales tax. The central government is empowered
to levy customs and excise duties (except on alcoholic liquors and narcotics) whereas
sales tax is the exclusive jurisdiction of the state governments.
• However, the union excise duties form the most significant part of central
taxes. The major tax revenue sources for states are their shares in union excise
duties and income tax, commercial taxes, land revenue, stamp duty, registration
fees, state excise duties on alcohol and narcotics etc. Sales tax forms the most
important component of commercial taxes,
• Progressive Tax : A tax that takes away a higher proportion of one’s income as
the income rises is known as progressive tax. Indian Income Tax is a progressive
and direct tax.
• R. Chelliah Committee was constituted in August, 1991 for suggesting reforms
in Tax Structure.
• Chelliah Committee recommended Income Tax for agricultural income of more
than Rs.25,000 p.a. Chelliah Committee also recommended for lowering down
the tax rates and reducing the tax slabs.
• K.L. Rekhi Committee was constituted in 1992 for suggesting uniform regulations
for indirect taxation (Custom Duty and Excise Duty).

1
Sreedhar’s C C E T AX S YS TE M

 Types of Taxes

Direct Tax Incom e Tax, Property Tax, Gi ft Tax etc.

Indirect Tax
Taxes i mposed by the Central
Government
Tax es imposed by the St ate Government
Sales Tax, Excise Duty, Custo m Duty
etc.
Income Ta x, Corporate Tax, Property
Central Government Tax , Successio n
Tax, W ealt h Tax , Gift Tax, CustomDuty,
Tax on agricultura l wealt h etc.
Land revenue tax, Agricultural inco me
tax , Agricultura l Lan d Revenue, State
Excise Duty, En tertainm ent Tax, Sta m
dut y, Ro ad
Tax, Mo tor Vehicle Tax etc.

• Important Taxes Imposed in India

• Tax on Income and Wealth : The central government imposes different types of
tax on income and wealth, viz. income tax, corporate tax, wealth tax and gift tax.
Out of them income tax and corporate tax are more important from the revenue
point of view.
• Personal Income Tax : Personal income tax is generally imposed on an individual,
combined Hindu families and total income of people of any other communities.
• In addition to tax, separate surcharges are also imposed some times.
• Agricultural income in India is free from income tax.
• Corporate Tax: Corporate Tax is imposed on Registered Companies and
Corporations.
• The rate of corporate tax on all companies is equal. However, various types of
rebates and exemptions have been provided.
• Custom Duties : As per the Constitutional provisions, the central government
imposes import duty and export duty both. Import and Export duties are not only
sources of income but with the help of it the central government regulates the
foreign trade.
• Import Duties: Generally import duties are ad-velorem in India. It means import
duties are imposed on the taxable item on percentage basis.
• Export Duties : Export Duties are more important, compared to Import Duties in
terms of revenue and regulation of foreign trade.
• Excise Duties : Excise duties are commodity tax as it is imposed on production
of an item and it has no relevance with its sale. This is the largest source of
revenue for the Central Government.
• Except liquor, opium and other drugs, production of all the other items is taxable
under Central Excise Duties
 Taxes being submerged into GST
Central level :
a. Central Excise Duty,
b. Additions Excise Duty,
c. Service Tax,
d. Additional Customs Duty commonly known as Countervailing Duty, and
e. Speda Additional Duty of Customs.
 State level :
(a) State Value Added Tax /Sales Tax

2
Sreedhar’s C C E T AX S YS TE M

(b) Entertainment Tax (other than the tax levied by the local bodies), Central
Sales Tax (levied by the Centre and collected by the States),
(c) Octroi and Entry tax,
(d) Purchase Tax
(e) Luxury tax and
(f) Taxes on lottery, betting and gambling
 March 29, 2011: Bill referred to Standing Committee on Finance.
 Nov 2012: Finance minister and statce ministers decide to resolve all issues
by Dec 31, 2012.
Feb 2013: Declaring government’s resolve to introduce GST, the finance minister
makes provisions for compensation to states in the Budget.
 Aug 2013: The standing committee submits a report to Parliament suggesting
improvements. But the bill lapsed as the 15th LokSabha was dissolved.
Dec 18, 2014: Cabinet approval for the Constitution Amendment Bill (122nd) to
GST.
Dec 19, 2014: The Amendment Bill (122nd) in the LokSabha
May 6, 2015: The Amendment Bill (122nd) passed by the LokSabha.
 May 12, 2015: The Amendment Bill presented in the RajyaSabha
 May 14, 2015: The Bill forwarded to joint committee of RajyaSabha and
LokSabha
Aug 2015: Government fails to win the support of Opposition to pass the bill in
the RajyaSabha where it lacks sufficient number.
 Aug 3, 2016: RajyaSabha passes the Constitution Amendment Bill by a two-
thirds majority. Note: GST constitutional amendment bill needs to passed by at
least 50% of state legislatures to be implemented. Assam is 1st State to pass GST
bill.
1 July 2017: GST to be applicable across India
 Benefits of GST
For Central and State Governments
 Simple and Easy to administer: Because multiple indirect taxes at the central
and state levels are being replaced by a single tax “GST”. Moreover, backed with a
robust end to end IT system, it would be easier to administer.
 Better control on leakage: Because of better tax compliance, reduction of rent
seeking, transparency in taxation due to IT use, an inbuilt mechanism in the
design of GST that would incentivize tax compliance by traders.
 Higher revenue efficiency: Since the cost of collection will decrease along with
an increase in the ease of compliance, it will lead to higher tax revenue.
 For the Consumer
The single and transparent tax will provide a lowering of inflation.
 Relief in overall tax burden.
Tax democracy that is luxury items will be taxed more and basic goods will be
tax-free.
 For the Business Class
Ease of doing business will increase due to easy tax compliance.
Uniformity of tax rate and structure, therefore, better future business decision
making and investments by the corporates.

3
Sreedhar’s C C E T AX S YS TE M

Removal of cascading effects of taxes.

 Reduction in transactional cost will lead to improved competitiveness.
 Gain to the manufacturer and exporters.
It is expected to raise the country GDP by 2% points.
Note: We have covered the 10 major benefits of Goods and Service Tax in a
separate article.
 GST Council
 It is the 1st Federal Institution of India, as per the Finance minister.
It will approve all decision related to taxation in the country.
 It consists of Centre, 29 states, Delhi and Puducherry.
Centre has 1/3rd voting rights and states have 2/3rd voting rights.
 Decisions are taken after a majority in the council.
 What is the Principle of GST?
 The Centre will levy and collect the Central GST.
 States will levy and collect the State GST on the supply of goods and services
within a state.
The Centre will levy the Integrated GST (IGST) on the interstate supply of goods
and services, and apportion the state’s share of tax to the state where the good or
service is consumed.
 The 2016 Act requires Parliament to compensate states for any revenue loss
owing to the implementation of GST.
 Issues Arisen OR Unresolved
 Not all items are covered: Decision criteria for the tax bracket
Multiple tax rates and brackets:
 Power to impose tax taken away by Central Government from the Parliament:
Confusion regarding the location of consumption:
 Anti-Profiteering Clause:
 Confusion regarding the control over taxatio
The issue of casual taxable person
 What is GSTN?
GSTN is registered as a not-for-profit company under the companies Act.
It has been formed to set up and operate the information technology backbone
of the GST.
While the Central (24.5%) and the state (24.5%) governments hold a combined
stake of 49% , the remaining 51% stake is divided among five financial
institutions—LIC Housing Finance with 11% stake and ICICI Bank, HDFC, HDFC
Bank and NSE Strategic Investment Corporation Ltd with 10% stake each.
GSTN had awarded Infosys Ltd the contract to develop the hardware and software
for GST.
The idea behind GSTN was to set up an entity that is equidistant from both the
Central government and the state governments, as it will advise both the Centre
and the states on the information technology network

4
Sreedhar’s CCE TRA DE POLICY

TRADE POLICY
Foreign Trade
• Before independence, the foreign trade of India was being operated on the
principles of colonialism. But after independence, there have been huge changes
in its state and direction.
• After independence, inward looking foreign trade policies were accepted and
the policy of import replacement was its base.
Volume of India’s Foreign Trade
• After independence, Indian foreign trade has made cumulative progress both
qualitatively and quantitatively. Though the size of foreign trade and its value
both have increased during post-independence era, this increase in foreign trade
cannot be said satisfactory because Indian share in total foreign trade of the
world has remained remarkable low.
• In 1950, the Indian share in the total world trade was 1.78%, which came down
to 0.6% in 1995. According to the Economic Survey 2001-02 this share percentage
of 0.6% continued in years 1997 and 1998. As per the current ranking for the
year 2018, India is the 19th largest exporter (with a share of 1.7%) and 10th largest
importer (with a share of 2.6%) of merchandise trade in the world.
India’s Balance of Payments
• India’s current account deficit (CAD) was 0.2 % of GDP (US$ 1.4 billion) in Q3 of
2019-20, as compared to 2.7 % of GDP (US$ 17.7 billion) in Q3 of 2018-19.
• Gross inflows/gross investments was US$ 69.9 billion in April-February 2019-
20; as compared to US$ 56.9 billion in the corresponding period of previous year.
There was net inflow of US$ 16.0 billion of net portfolio investment in April-
February 2019-20, as against outflow of US$ 9.2 billion in the corresponding
period of previous year.
Global and Domestic Economic Environment
• The estimate for growth in world merchandise trade volume in 2017 was raised
to 3.6%. The previous estimate for 2017 was 2.4%. For 2017 trade growth is
placed within a range from 3.2% to 3.9%, accompanied by global GDP growth of
2.8% at market exchange rates (WTO, 2017)
• For India, trade (Exports + Imports) growth in last four years has remained on
the negative side with a slight improvement in 2014, showing a growth of 0.7%.
This is despite the fact that India’s GDP growth numbers improved to 7.2% in
2014 and further to 7.9% in 2015 but again declined to 7.1% in 2016.
• India registered robust growth of 7.1% in 2016-17 thus becoming the fastest
growing major economy in the world.
• As per the estimates of the International Monetary Fund (IMF, October 2017),
the global upswing in economic activity is strengthening. Global growth, which in
2016 was the weakest since the global financial crisis at 3.2% is projected to rise
3.6% in 2017 and to 3.7% in 2018.
Global Trade Situation
• As per World Trade Organization (WTO), trade will continue to face strong
headwinds in 2019 and 2020 after growing more slowly than expected in 2018
due to rising trade tensions and increased economic uncertainty. WTO economists
expect merchandise trade volume growth to fall to 2.6% in 2019-down from 3.0%
in 2018.
1
Sreedhar’s CCE TRA DE POLICY

• As per the current rankings for the year 2018, India is the 19'h largest exporter
(with a share of 1.7% ) and 10 th largest importer (with a share of 2.6%) of
merchandise trade in the world. China is the top ranked exporter and America is
the first largest importer of merchandise trade in the world.
• In Commercial Services, India is the 8th largest exporter (with a share of 3.5%)
and 10th largest importer (with a share of 3.2%). USA is the top exporter as well as
the top importer of commercial services trade in the world.
Special Economic Zones
• India was one of the first in Asia to recognize the effectiveness of the Export
Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in
Kandla in 1965.
• To overcome the shortcomings on account of multiplicity of controls and
clearances, absence of world-class infrastructure and an unstable fiscal regime
and with a view to attract larger foreign investments in India, the Special Economic
Zones (SEZs) policy was announced in April 2000.
• This policy intended to make SEZs an engine for economic growth supported by
quality infrastructure complemented by an attractive fiscal package, both at the
Centre and the state level, with minimum possible regulations.
• SEZs in India functioned from 2000 to 2006 under the provisions of the Foreign
Trade Policy and Fiscal incentives were made effective through the provisions of
relevant statutes.
• The SEZ Act, 2005, supported by SEZ Rules, came into effect in 2006, providing
simplification of procedures and single window clearance on matters relating to
central and state governments.
• The main objectives of the SEZ Act are: generation of additional economic activity;
promotion of exports of goods and services; promotion of investment from domestic
and foreign sources; creation of employment opportunities; and development of
infrastructure facilities. [Source: INDIA 2020]
Composition of India’s Foreign Trade
• Imports have been classified into Bulk imports and Non-bulk imports.
• Bulk imports are further sub-divided into Petroleum, Oil and Lubricants (POL)
and non-POL items such as consumption goods, fertilizers and iron and steel.
• Non-bulk items comprise capital goods (which include electrical and non-electrical
machinery), pearls, precious and semiprecious stones and other items.
• The structural changes in imports since 1951 show:
(a) rapid growth of industrialisation necessiating increasing imports of capital
goods and raw materials;
(b) growing imports of raw materials on the basis of liberalisation of imports for
export promotion; and
(c) declining imports of food grains and consumer goods due to the country becoming
self-sufficient in food grains and other consumer goods through agricultural and
industrial growth.
• Exports of India are broadly classified into four categories:
1. Agriculture and allied products which include coffee, tea, oil cakes, tobacco,
cashew kernels, spices, sugar, raw cotton, rice, fish and fish preparations, meat
and meat preparations, vegetable oils, fruits, vegetables and pulses;
2. Ores and minerals which include manganese ore, mica and iron ore;
3. Manufactured goods which include textiles and readymade garments jute
manufactures, leather and footwear handicrafts including pearls and precious
stones, chemicals engineering goods and iron steel and

2
Sreedhar’s CCE TRA DE POLICY

4. Mineral fuels and lubricants.

• Exports of India over the years show a clear decline in the importance of
agriculture and allied products and a substantial increase in the importance of
manufactured goods. This has been due to changing production structure of the
economy and the overall growth of the economy.
India’s Foreign Trade 2019-20
• India’s overall exports (Merchandise and Servicer combined) in April-March 2019-
20 are estimated : be USD 528.45 billion exhibiting a negative grow: of (-) 1.36%
over the same period last year. Over; imports in April-March 2019-20 are estimated
to be USD 598.61 billion exhibiting a negative growth of -6.33% over the same
period last year.
I. Merchandise Trade Exports (including re-exports)
• Cumulative value of exports for the period April-March 2019-20 was USD 314.31
billion (Rs. 22,26,566.71 crore) as against USD 330.08 billion (Rs. 23,07,726.19
crore) during the period April-March 2018-registering a negative growth of
(-) 4.78% in Dollar terms (negative growth of (-) 3.52% in Rupee terms.
Imports
• Cumulative value of imports for the period Apr-March 2019-20 was USD 467.19
billion (Rs.33,07,977.05 crore) as against USD 514.08 billion (Rs.35,94,674.61
crore) during the period April-March 2018-”_ registering a negative growth
of (-) 9.12% in Dollar terms (negative growth of (-) 7.98% in Rupee terms.
• Rise in import in March 2020 was witnessed only in Transport equipment which
registered a growth cc 11.94% over March 2019.
II. Trade In Services Exports (Receipts)
• As per the latest press release by RBI dated 15th Apr! 2020 exports in February
2020 were USD 17.73 billion: (Rs.1,26,713.37 crore) registering a positive growth
or 6.88% in dollar terms vis-a-vis February 2019. Thej estimated value of services
export for March 202C s USD 17.69 billion.
Imports (Payments)
• As per the latest press released by RBI dated 15th April, 2020, imports in February
2020 were USD 11.07 billion (Rs. 79,116.32 crore) registering a positive grown of
12.82% in dollar terms, vis-a-vis Frbruary 2019. The estimated value of Service
import for March 202C is USD 10.97 billion.
III. Trade Balance Overall Trade Balance
• Taking merchandise and services together overall traarfl deficit for April-March
2019-20 is estimated at USM 70.16 billion as compared to USD 103.32 billion jr.l
April-March 2018-19.
Revision of MSME Definition
• Cabinet Committee on Economic Affairs (CCEA), on June 1, 2020 approved the
upward revision of MSME defination.
• In the Atma Nirbhar Abhiyan package announcement (May 13, 2020) the
definition of micro manufacturing and services unit was increased to Rs. 1 crore
of investment and Rs. 5 crore of turnover.
• The limit of small unit was increased to Rs.10 crore of investment and Rs.50
crore of turnover.
• The limit of a medium unit was increased to Rs. 20 crore of investment and Rs.
100 crore of turnover.
• It may be noted that this revision was done after 14 years since the MSME
Development Act came into existence in 2006.
• After the package announcement on 13 th May, 2020, there were several

3
Sreedhar’s CCE TRA DE POLICY

representation. Keeping in mind these representations, it was decided to further

increase the limit for medium manufacturing and service units.
• Now it will be Rs.50 crore of investment and Rs.250 crore of turnover. It has also
been decided that the turnover with respect to exports will not be counted in the
limits of turnover for any category of MSME units whether micro, small or medium.
The following table provides the details of revised limits:

Old Capital New Capital

Old Turnover New Turnover
Category Investment Investment
norms norms
norms norms
Micro 25 Lakh 10 Lakh 1 Crore 5 Crore
Small 5 Crore 2 Crore 10 Crore 50 Crore
Medium 10 Crore 5 Crore 50 Crore 250 Crore

Ease of Doing Business and e-Governance

• Number of mandatory documents required for exports and imports have been
reduced to 3 each for export and import. Earlier 7 documents were required for
exports and 10 for imports.
• The New Foreign Trade Policy (2015-20) was launched in 2015 with a focus on
supporting both merchandise and services exports and improving the ‘Ease of
Doing Business’.
• Directorate General of Foreign Trade (DGFT) consolidated 5 different incentive
schemes under the earlier policy for rewarding merchandise exports into a single
scheme, namely the Merchandise Exports from India Scheme.
• The replaced schemes are : Focus Product Scheme (FPS), Focus Market Scheme
(FMS), Market Linked Focus Product Scrip (MLFPS), Vishesh Krishi and Gram
Udyog Yojna (VKGUY), Agri Infrastructure Incentive Scrip.
• The ‘Aayat Niryat’ forms used for making online application to DGFT, was
simplified bringing in clarity in different provisions, and enhancing electronic
governance.
• India’s ranking in Ease of doing business Index : India has moved 14 places to
be 63 among 190 nations in the World Bank’s Ease of Doing Business 2020 report.
India was 77 th among 190 countries in the previous ranking last year, an
improvement by 23 places. India put in place four new business reforms during
the past year and earned a place in among the world’s top ten improvers for the
third consecutive year.
NIRVIK
• Export Credit Guarantee Corporation of India (ECGC) has introduced ‘NIRVIK’
scheme to ease the lending process and enhance loan availability for exporters.
• ‘NIRVIK’ scheme, is called the Export Credit Insurance Scheme (ECIS)
• The insurance cover guaranteed will cover up to 90% of the principal and interest.
The insurance cover will include both pre and post-shipment credit.
• The main aim behind introducing the scheme was to enhance accessibility and
affordability of credit for exporters.
Foreign Exchange Reserves in India
• Foreign exchange reserves stood at US$ 474.7 billion as on 3rd April 2020, as
compared to US$ 412.9 billion at end-March 2019.
Exchange Rate
• The rupee depreciated against the US dollar, Japanese Yen and Euro by 3.85 %,
6.12 % and 5.18 % respectively in March 2020. However, it appreciated against
Pound sterling by 0.79 % in March 2020.

4
Sreedhar’s CCE TRA DE POLICY

External Debt
• India’s external debt stood at US$ 563.9 billion at end-December 2019, recording
an increase of 1.2% over the level at end-September 2019. Long-term debt (with
original maturity of above one year) was placed at US$ 457.1 billion, recording an
increase of US$ 8.9 billion over its level at end-September 2019. Short-term
external debt (by original maturity) was US$ 106.8 billion at end-December 2019,
as compared to US$ 109.1billion at end-September 2019.
• FEMA (Foreign Exchange Management Act) came into force in July, 2000. This
FEMA has replaced Foreign Exchange Regulation Act, 1973 (FERA-1973).
• Under FEMA provisions related to foreign exchange have been modified and
liberalised so as to simplify foreign trade and payments. FEMA will make favourable
development in foreign Money Market.
Trade Organisations
• IMF : International Monetary Fund was established on 27th December, 1945 on
the basis of decision taken in the Bretton Woods Conference and it started
functioning w.e.f. 1st March, 1947.
• The total member countries of IMF in 2017 were 188.
• The function of IMF is to encourage financial and economic co-operation between
member countries and to extend world trade.
• IBRD : International Bank for Reconstruction and Development (IBRD) was
established in 1945.
• IBRD along with other institutions is also called World Bank. The other institutions
are International Finance Corporation, International Development Agency and
Multilateral Investment Guarantee Agency.
• Presently, it is helping member countries in capital investment and encouraging
long-term balanced development.
• GATT: General Agreement on Tariffs and Trade (GATT), came into being on 30th
October, 1947 and started functioning from 1st January, 1948.
• The principle of GATT was equal tariffs policy, to remove quantitative ban and
disposal of business dispute in a democratic way.
• WTO: On 1st January, 1995 the World Trade Organisation took over the place
and position of GATT.
• The Headquarter of WTO is in Geneva and the number of its member countries
in April 2018 was 164. India is a founder member of it.
• The India-ASEAN Trade in Goods Agreement has come into effect on Jan. 1,
2010, though it was signed on August 13, 2009.
• The signing of the India-ASEAN Trade in Goods Agreement paved the way for the
creation of one of the world’s largest Free Trade Areas (FTA)—market of almost
1.8 billion people with a combined GDP of US $ 2.75 trillion.
Global Gender Gap Report
• The Global Gender Gap Index is an index designed to measure gender equality.
• The Global Gender Gap Report was first published in 2006 by the World Economic
Forum. The 2020 report (published in 2019) covers 153 countries.
• Top 5 Countries :
1. Iceland (0.877)
2. Norway (0.842)
3. Finland (0.832)
4. Sweden (0.820)
5. Nicaragu; (0.804).
• India holds 112th position with the score of 0.668 in this index.

5
Sreedhar’s CCE TRA DE POLICY

• Bottom 5 Countries : 149. Congo (0.578), 150. Syria (0.567),151. Pakistan

(0.564), 152. Iraq (0.530 153. Yemen (0.494).
• India used to calculate National Income on the basis of Factor Cost. Since
January 2015. Central Statistics Office, India officially started calculating National
Income on the basis of Market Price. Service Tax is an Indirect Tax of Centre and
States.
• M.S.Swaminathan, Indian geneticist and international administrator, renowned
for his leading role in India’s “GreenRevolution,” while Norman E. Borlaug is
called.‘The Father of Green Revolution’ in the world.
World Happiness Report 2020 (As on March 20, 2020)
The World Happiness Report is a landmark survey the state of global happiness
that ranks 156 countries r how happy their citizens perceive themselves to be.
The 8th World Happiness Report 2020 for the first time ranlvs j cities around the
world by their subjective well-being arc digs more deeply into how the social,
urban and natura environments combine to affect our happiness.
• India is ranked 144, way lower than its neighbor: Nepal is ranked 15, Pakistan
is at the 29, Bangladesh ar 107 and Sri Lanka at 130.
• The countries at the bottom of the list were those I affected by violence and
extreme poverty. Zimbab South Sudan and Afghanistan were among th reclassified
as the least happy countries.
• The top ten happiest cities were clearly dominated by Scandinavian cities.
Helsinki (Finland) and Aarrns 1 (Denmark) are ranked first and second,
Copenhagen I (Denmark), Bergen (Norway), and Oslo (Norway 11 fifth, sixth and
seventh, Stockholm (Sweden) comes ccr 1 ninth. Two of the top ten cities are
located in Austr; and New Zealand, Wellington, the capital of : Zealand, is ranked
third and Brisbane (Australia s I ranked tenth.
Economic Freedom of the World Report, 2019
• The Economic Freedom of the World Report, 2019 based on economic freedom of
162 countries across the globe was released on September 13, 2019 by Fraser
Institute of Canada and Centre for Civil Society, India.
• It placed India on 79th position, pointing out India’s good improvement in economic
freedom since 2018 report in which India was placed on 96 th position. India’s rank
is much better than that of China position) which is a major economy of the
world, on the economic freedom report.
• Hong Kong and Singapore retained their first am: I second ranks respectively as
the most free economic
India Corruption survey 2019
• According to the ‘India Corruption Survey 2019’ conducted by independent
agencies Transparency International India (TII) and Local Circles the percentage
of people who had paid bribes fell from 5r 2018 to 51% this year.
• In 2017, the figure was 45%. The report states that rrrruption across 20 states
in India dropped by 10% m 2018 to 2019.
India Innovation Index, 2019
• Karnataka emerged on top of the first ever India Irmovation Index, 2019 in
major states category, released on October 17, 2019 by NITI Aayog in New Delhi.
• The Index, developed on the lines of Global Innovation Index (GII), looks into the
innovation ecosystem of Indian states and UTs and places them as per their .
rrormance. The Index has been prepared in three categories—Major States, ‘North
East and Hill States’ ind Union Territories and small states,
• A part from Karnataka as the top innovative state in major states, Sikkim topped

6
Sreedhar’s CCE TRA DE POLICY

the North-East states category while Delhi was adjudged the best among the UTs
section of the Index. Karnataka secured 35.65 points to grab the top position,
followed by Tamil Nadu with 32.98 in major states of the index.
Global Hunger Index, 2019
• India was placed on the 102nd rank on the 2019 Global H .rnger Index released
on October 2019, carrying total 117 countries in the index.
• The report, prepared jointly by Irish aid agency ‘Concern Worldwide’ and German
organisation ‘Welt Hunger Hilfe’ termed the level of hunger in India serious’.
‘Under nourishment’, ‘child mortality’, ‘child rsting’ and ‘child stunting’ were major
indicators to rrepare the list.
• In 2018, India was ranked 103rd out of 119 countries.
India’s Rank in Human Development Index
• India climbed one spot to 129 among 189 countries in the 2019 Human
Development Index, according to a report realeased by the United Nations
Development Programme (UNDP) on December 9, 2019.
• In 2018, India’s Human Development Index (HDI) alue of 0.647 had put it at 130
rank.
Top 10 Economies in the World

Nominal GDP in 2019

S Country
(Trillion$)
1 United states 21.4
2 China 14.3
3 Japan 5.08
4 Germany 3.8
5 India 2.8
6 United Kingdom 2.8
7 France 2.7
8 Italy 2.0
9 Brazil 1.8
10 canada 1.7

7
Sreedhar’s CCE PLA NN I N G COM M ISSI ON

PLANNING COMMISSION
 Economic Planning and Development
• Economic Planning is the process in which the limited natural resources are
used skillfully so as to achieve the desired goals. The concept of Economic Planning
in India, is derived from Russia (the then USSR).
• ‘Planning’ in India derives its objectives and social premises from the Directive
Principles of State Policy enshrined in the Constitution.
• In the year 1934, the proposal relating to economic planning came for the first
time in the book of Vishveshwaraiya titled ‘Planned Economy for India’. Thereafter
in 1938, the All India Congress Committee demanded for the same. In 1944
efforts were made by 8 industrialists under ‘Bombay Plan’.
 Annual Plans
• Between 1966 and 1969 three Annual Plans were formulated within the
framework of the draft outline of the fourth plan.
• The Eighth Five-Year Plan (1990-95) could not take off due to the fast changing
political situation at the Centre. The new government, which assumed power at
the Centre in June 1991, decided that the Eight Five-Year Plan would commence
on April 1, 1992 and that 1990-91 and 1991-92 should be treated as separate
Annual Plans. Formulated within the framework of the Approach to the Eighth
Five-Year Plan (1990-95), the basic thrust of these Annual Plans was on
maximisation of employment and social transformation.
 Types of planning
Imperative Planning : In this type of planning the Central Planning authority
decides upon every aspect of the economy and the targets set and the processes
delineated to achieve them are to be strictly followed. This type of planning is
mainly practised in the socialist economies.
• Thereafter, in the same year, ‘Gandhian Plan’ by Srimar Narayan, in April, 1944
the ‘People’s Plan’ by labo—: leader M.N. Roy and in January 30,1950 the’Sarvoda;
: Plan’ by Mr. Jai Prakash Narayan were presented.
• After independence, in 1947, the committee on economic planning was
constituted under chairmanship of Jawahar Lai Nehru. Thereafter, on the
recommendation of this committee, Planning Commission was constituted in
March, 1950 and the format of first Five Year Plan was prepared in 1951.
• The Planning Commission was constituted in India r 1950 as a non-constitutional
and advisory corporate : The Indian Constitution did not provide for tr formation of
Planning Commission.
• On I s’ January, 2015, the newly formed ‘NITI Aa has replaced the Planning
Commission.
• The basic aim of economic planning in India is to bring about rapid economic
growth through developmer of agriculture, industry, power, transport and
communications and all other sectors of the economy”
• In India, 12 th Five Year-Plans have been implemented so far. The target and
achievements of these plans are given below:
 THE PLANNING COMMISSION OF INDIA
The Planning Commission was set – up on March 15, 1950
under the chairmanship of JL Nehru, by a resolution of Union Cabinet.

1
Sreedhar’s CCE PLA NN I N G COM M ISSI ON

It is an extra – constitutional, non – statutory body.

It consists of Prime Minister as the ex – officio Chairman,
one Deputy – Chairman appointed by the PM and some full time members.
The tenure of its members and deputy chairman is not fixed.
 There is no definite definition of its members also.
They are appointed by the Government on its own discretion.
 The number of members can also change according to the wishes of the
Government.
 Officail magazine is yojana
 Headquarters are located at Delhi
It was abolished on 2017/August/17
 Functions:-
1) Preparing the plans for the country
2) Develop the country quantitative as well as qualitative
3) Increase the literacy rate in India
4) Increase the Employment in India
5) Increase the infrastructure in India
6) Decrease the Poverty in India
7) Decrease the IMR (Infant Mortality Rate)
8) Decrease the MMR (Maternal Mortality Rate)
9) Increase the CSR (Child Sex Ratio)
10) Increase the sound knowledge of economy in India
 NATIONAL DEVELOPMENT COUNCIL INDIA
All the plans made by the Planning Commission have to be approved by National
Development Council first.
It was constituted to build co – operation between the States and the Planning
Commission for economic planning.
It is an extra – constitutional and extra – legal body.
It was set – up on August 6, 1952, by a proposal of the Government.
The PM is the ex – officio chairman of NDC.
 Other members are Union Cabinet Ministers, Chief Ministers and Finance
Ministers of all States, Lt. Governors of Union Territories and Governors of
Centrally – ruled States.
 NITI Aayog:-
 National Institute Of Transforming India
 It was established by central Government in the place of Planning Commission
 Came into force on 2015/January/1st
 1st governing council held at new Delhi on 2015/February/8th
 Composition:-
 Chairperson:- Prime Minister
Vice chairperson:- Appointed by the prime minister
 Members:-Full time members
 Ex-officio members
 Governing council:-All state chief Ministers
 All state Governors
 Union territories Lieutenant Governor
 First Five Year Plan:
It was made for the duration of 1951 to 1956.
It was based on the Harrod-Domar model.
Its main focus was on the agricultural development of the country.

2
Sreedhar’s CCE PLA NN I N G COM M ISSI ON

 This plan was successful and achieved growth rate of 3.6% (more than its
target)
 Plan architecture done by mokshagundam visvesvaraya
 Targeted growth rate was 2.1%
 Industries/Projects:-
 Bhakranangal
 Damodar Valley corporation
 Heerakud Project
 Nagarjuna sagar project
 Sindri fertilizers factory
 Chittaranjan Railway Locomotive Factory
 Hindusthan Machine Tools Limited
Visakapatnam Hindusthan ship yard
 Second Five Year Plan:
It was made for the duration of 1956 to 1961.
It was based on the P.C. Mahalanobis Model.
Its main focus was on the industrial development of the country.
 Targetted Growth rate was 4.5%
This plan was successful and achieved growth rate of 4.1%
Also called as “Bold Decision plan”
 Industries/Projects:-
Rurkela Iron and Steel Industry Supported by West Germany located in Orissa
 Bhilai Iron and Steel Industry Supported by USSR located in MadhyaPradesh
(Chattisgarh)
Durgapur Iron and Steel Industry Supported by UK located in West Bengal
 Naiveli Lignite corporation-Tamil Nadu
 Heavy Engineering plant in Ranchi
 3. Third Five Year Plan:
It was made for the duration of 1961 to 1966.
This model desighned by Ashok mehta
 Architecture done by peethambaram seth and Ashoj Mehta
 Importance was given to self sufficiency and economic reliance
 Targetted Growth Rate 5.6%
Acvhieved Growth Rate 2.8%
Bokaro Iron and Steel Industry Supported by USSR and located in Jharkhand
It’s a Heavy Failure Plan
 Reasons For The Failure:-
1962-Indo-China War
1965-indo pakisthan war
 Famines
 Plan Holiday:-
The duration of plan holiday was from 1966 to 1969.
The main reason behind the plan holiday was the Indo-Pakistan war & failure
of third plan.
 During this plan annual plans were made and equal priority was given to
agriculture its allied sectors and the industry sector.
 Green Revolution started in this plan
 Father of green revolution in India MS SwamyNathan
These plans are also called as annual plans in India

3
Sreedhar’s CCE PLA NN I N G COM M ISSI ON

 Fourth Five Year Plan:

Its duration was from 1969 to 1974.
 There were two main objective of this plan i.e. growth with stability and
progressive achievement of self reliance.
During this plan the slogan of “Garibi Hatao” is given during the 1971 elections
by Indira Gandhi.
 Targetted growth rate is 5.7
Achieved Growtgh rate is 3.3
 Planning commission deputy cjairman is D.R.Gadgil
Model desighned by ashok rudra and manne
1969/june/19 14 banks are nationalized each bank turn over capacity is 50cr
 Fifth Five Year Plan:
Its duration was 1974 to 1979.
 In this plan top priority was given to agriculture, next came to industry and
mines.
 Overall this plan was successful which achieved the growth of 4.8% against
the target of 4.4%.
The draft of this plan was prepared and launched by the D.P. Dhar. This plan
was terminated in 1978.
In 1975 RRB are established under the 20points formula
 Rolling Plan:
This plan was started with an annual plan for 1978-79 and as a continuation of
the terminated fifth year plan.
 Continous plans are started by lakdawala in india introduced by janataparty
 The idea was formulated by gunnar mirdal belongs to sweedan,first
implemented in neterland
 Sixth Five Year Plan:
Its duration was from 1980 to 1985.
The basic objective of this plan was poverty eradication and unemployment and
technological self reliance.
It was based on investment yojna, infrastructural changing and trend to growth
model.
Its growth target was 5.2% but it achieved 5.7%.
Planning commission deputy chairman ND Tiwari and SB Chawan
 DWACRS was Started in this year Development of women and children in
Rural areas
 Seventh Five Year Plan:
Its duration was from 1985 to 1990.
Objectives of this plan include the establishment of the self sufficient economy,
opportunities for productive employment and food.
For the first time the private sector got the priority over public sector.
Its growth target was 5.0% but it achieved 6.0%.
 Planning commission deputy chairman was manmohan singh
 Annual Plans:

4
Sreedhar’s CCE PLA NN I N G COM M ISSI ON

 Eighth five Plan could not take place due to volatile political situation at the
centre.
So two annual programmes are formed in 1990-91& 1991-92.
 Eighth Five Year Plan:
Its duration was from 1992 to 1997.
In this plan the top priority was given to development of the human resources
i.e. employment, education, and public health.
Duing this plan Narasimha Rao Govt. launched New Economic Policy of India.
 This plan was successful and got annual growth rate of 6.68% against the
target of 5.6%.
 Indicative planning was introduced
Model was LPG or Rao-singh Model
 Planning commission deputy chairman was manmohan singh
 Ninth Five Year Plan:
Its duration was from 1997 to 2002.
Planning commission deputy chairman was madhu dandavate
The main focus of this plan was “growth with justice and equity”.
 It was launched in the 50th year of independence of India.
This plan failed to achieve the growth target of 6.5% and grow only at the rate
of 5.4%.
 Tenth Five Year Plan:
Its duration was from 2002 to 2007.
 Planning commission deputy chairman was K.C.Panth
 The importance of this plan is to achieve equality ,social justice and reducing
the income inequalities in the society
This plan aims to double the per capita income of India in the next 10 years.
It aims to reduce the poverty ratio 15% by 2012.
Its growth target was 8.0% but it achieved only 7.8%.
 Eleventh Five Year Plan:
Its duration was from 2007 to 2012.
It was prepared by the C. Rangarajan.
 Planning commission deputy chairman was monteksingh ahluwalia
 Its main theme was “faster and more inclusive growth”
Its growth rate target was 8.1% but it achieved only 7.9%
 Twelfth Five Year Plan:
Its duration is from 2012 to 2017.
Its main theme is “Faster, More Inclusive and Sustainable Growth”.
Its growth rate target is 8%.
This was abolished by prime minister

5
Sreedhar’s CCE PLA NN I N G COM M ISSI ON

Target growth
Five Year Achievement
Period rate of GDP (In Model
Plan (In %)
%)
First Plan 1951-56 2.1 3.6 Harrod-Domar Model
Second Plan 1956-61 4.5 4.21 Prof. P.C.Mahalanobis
Sukhmoy Chakraborty
Third Plan 1961-66 5.6 2.72
and Prof. Saddy
Ashok Rudra and Alon
Fourth Plan 1969-74 5.7 2.05
S. Manney
Alike Fourth
Five-Year Plan,
which is called
Fifth Plan 1974-79 4.4 4.83
‘Investment
Model of
PlanningCommission’.
Based on Investment
Yojana, Infrastructural
Sixth Plan 1980-85 5.2 5.54
changing and trend to
growth model
Alike Sixth Five-Year
Seventh
1985-90 5.0 6.02 Plan prepared (Pranab
Plan
Mukherjee)
Eighth Plan 1992-97 5.6 6.68 John W. Miller Model
Created by’Planning
Ninth Plan 1997-02 6.5 5.5
Commission’
Tenth Plan 2002-07 8.0 7.7 -do-
Eleventh Prepared by Prof.C.
2007-12 9.0 -
Plan Rangarajan
Prepared by the
Twelfth Plan 2012-17 9.0 -
Planning Commission

Sources : Planning Commission, Ninth Five Year Plan (1997-2002), Vol, land Tenth
Five Year Plan (2002-07), INDIA 2016 etc.