rrN oN IENERAL ffiins, 20 I 3 (3)

. GENER{L STUDIES
ECONOMY
ECONOMG TERMS

Administered Price: Prices which are set consciously by a single decision-taking body, eg. A rnonopoly firm, a cartel
or a govemment agency rather than being determined by the free play of market forces.
Balance <if Payirients: A tabulation of the credit and debit transactions of a.country wtth fore@n countries and
international institutions, drawn up and published in a similar form to the Income and Er<pendifure Accounts of
companies.
Budgetary deficit and Fiscal deficit: The difference between all the receipts-(revenue as well as capital receipts)
and the total expenditure (both revenue eteenditure plus capital expenditure) is called budgetarydefcit.
The fiscal deficit refers to the difference between (or excess of) total expenditure of the govemment over its
revenud receipts ineluding grants. Thus total ependiture (r.e. plus c.e.) minus revenue receipts (tax revenue plus non-
revenue incfuding fore(gn.grants) giues ffre m4nitude of l?scal deiicit. Fiscal deiicit (Tnores capthl receipts such as
' taxmarket borrowings and external assistance because they only represent growing indebtedness of the government.
Reducing the fiscal deficit means that the govemment expenditure should be largely met by its normal revenue
receipts. Continued recourse to bonowing for meeting fiscal deficit only adds to national debt, encourages fiscal
indiscipline and drives the country into debt trap where a new debt has to be raised for payment of interest and
repayment of instalments of the loans taken in the past.
Capital: The stock of goods which are used in production and which have themselves been produced. Fixed Capital
consists of durable good such as buitdings, plant and machinery, goods such as buildings, pant and machinery,
circulating capital consists of raw materials, semi-finished goods,-components, etc.
Glosed economy and open economy: A closed economy is one which does nct have any external economic
relationship. lt does not export anghing nor does it import. Such an economy is largely self-sufficient and hence
indulges in no foreign trade. On he ofter hand, an economy that has trade relationship with other countries is called
an open economy. lt exports and importsthings as a normal part of its activity.
Gonsumer Credit: Short-term loans to the public for the purchase of specific goods. Consumer credit takes the form
of credit by shop-keepers and other suppliers, credit accounts, pbrsonal loans and hire purchase.
Gonvbrtibility: A cunency is said to be convertible when ii may bb freely exchanged foranothercurency or gold.
, Deficit Financing: lt refers to the method by which govemment meets the excess of elpenditure over income in its
budget. Deficit financing could be ihrough bonowing from the market, borrowing from RBI or drawing from the
government's cash balance with RBl. Revenue tleficit means the excess of current revenue expenCiture over current
revenue receipts. Revenue deficit indicaies trat the government cannot meet its cunent expenditure from ins current
revenue. Budget Deficit rneans overall deficit, i.e. the excess of total expenditure over total revenues. lt includes both
. capital and revenue items in receipb and expenditure. Traditionally, deficit financing in Indian budgets had meant
filling tris gap. Fiscal deficit is budget deficit plus borowings and other liabilities. Previously, when budgetary deficit
was the prime consideration borrowings from the market and receipts from national savings, provident funds, etc. were
being treated as capital receipts. To this extent, government's actual deficit was being understated. ln other words,
fiscal deficit indicates the total bonowing requirements of the government from all surces, whereas budgetary deficit
only indicated government's borrowing from RBl.
Deflation: lt is the opposite of inflation. lt is a period of generally falling prices of goods and services. While a
continuous fall in prices may be welcome for fie common people it is disastrous for the business men and industrialists
who suffer perpefual fosses. Consequenfy, level of industriaf and economfc activfty is adversely affected during
deflation.
Developing Country: A county that has not yet reached the stage of economic development characterised by the
growth of industrialisation, nor a level of national income sufficieni to yield the domestic savings required to finance the
investment necessary for further growth.
EPCG : The finance Ministry has operationalised on 23'd April, 2002, the Export Promotion Capital Goods (EPCG)
scheme that has been announced as part of the Export;lmport Policy 2OO247. This scheme allows import of new
capital goods including those in completely knocked down (CKD/Semi-knocked down (SKD) condition at 5 percent
customs duty subject to an export obligation equivalent to 5 times cost, Insurance and Freight (ClF) value of Capital
goods fulfilled over a period of eighg yearc. However, in aspect of EPCG licences forRs.100 crore or more, the same
export obligation would have to be fulfilled over a period of 12 years.
EQUITY: Equity is a share in the capital stock of a company. The holder of an equity is a shareholder, unlike debt
securities, which typically require regular payments fnterest) to the holdens, equity securities are not entitled to any
payment. In bankruptcy, they share only in the residual interest of the issuer after all obligalions have been paid out to
creditors- However, eguity generally enlifles the holder to a prorate portion of conboJ of the company. lt also enjoys
ihe right to profit and capital gain. Furfrrermore, debt securities do not have voting rights outside of bankruptcy.
GATT: The GeneralAgreementon Tariffs and Tnade (GA'IT) is an intemational forum fordiscussions and negotiations
on issues conceming intemationaltrade. lt was established as a multinational treaty in 1948. lt prescribes rules for
 new agencv u't'^fhg.Y:rl! Tnaoe.opgnislqol g\frol r,"J G.n set up ro reptace the GATT.
.rrK-:TX:;::,::;:,':
Inflation: Inflalion refers to a periooiipersisterit
ano ,l genenlpfice tevel. Tnb rise in price levetis
almost continuous-rathe.rtr-an sporaaid; "[prl"i"ol".l""
good3 and seruices sold in
t,e qrit" ui"i[r!'i"tr,", than imperceptible ard itcovers most or all of the
tne rira*et l{aridn i" ;
country-may have atained equilibti'um p fi;";;ena that relates tb rising prices and not htgh prices. A
' ' of inflation' Inflation is said t"-;A;de"
at rrbh iev;i or pricr" wrricrr Jo noi ,i"" any further.- This
pnces.are:rising ;nd
is not a state -

' when inflation occurs due to oio"runo in tne mJGi, it"r"

not stable at any level.
is called demandaull inflation.''Hbwever, wh'en prices
dse due to increase in_cost of "*."o
produ"ton, it s cateJ co-t+;;h inflation.
Net National Produ.ct (NNP);i;;-ft; prces
is minus depreciation. since depreciaron represents the
value of fixed capital consumed or useo "qr"iiJerlp
up lng"d;;ur; dcess
' of cost of producing the national ptouit.'NNF, dudng tre year,.this is, tfterefure, treated as an item
since it di"rlo"" vvP'ewrquvrr
aeprlciatr:on drru
e.conomyduring the year. the.net achievement oi the
"nJsrrora,=
National income or t'tlp at factor cost is-
equal to the factoi incomes, i.e., rent+ vlrages + interest + prgffis
year' This is therefore, the sum totaior in a giiren
in"it"" production nrougtr their production activity. To
mst, from""i,;;-&
arrive at national income or NNP aiiactlr
the NNi at market pricls "b"nG we Jeauct indirect taxes (since that part
of price which represents. indirect * g;r
1o-ihe government and not td proJ*ton-r""too1 and add subsidies (which
as income to tuctors of produ"ction). rtr"'o='on"i in"ime
;fffr: is rougii intr-:cation of progress and prosperiiy of a
Procurement PT:: For each agriculfural
"
guarantees to procure wtreat TTkeling season, the govemment announces a set of prices at which
and-tice if market pntei rarioerow t"-innoun""J pri*. it
cosb and Prices (cAcP) tTko ptit"'t*o*tendations n commfssion for Agricuftural
production of various crops, in to the government on ihe basis "of long-run average costs
a manner that covers of
are meant to privent distress sales in years or *oJt hrmers ano rewaros efficient farmers. These prices
glu! "oit"
stasflation: stagflation is a term"ui"J.torofo"ritini"g 310 r<eep prices for cansumers at an affordable levet.
economic activitv exist together. Generatly perioo "-sitlution
;h;ffi;;;;"d dse in prices and stagnation in
a oT inn"iiln, if it is mild, is good for business and industrial units
which expands due to-euEt in"t*"ing'irdnt"6iritv
inflatdon robs the oegolg or flreir p*iirfis,ng tn" should, therefore, be looking up. But the same
recession in the market' Thus, a'situation ,nd ;;""onomy
po*ri"nJ resufts in less buying of goods and the consequent
wlqere prices rn-v o" rising anJ6;.#;; nolooking
stagflation. up is a situation of
subsidy: Economists point out that subsidies
leakages in subsidies'ano muctt'oiiiio"" constitute.a major burden on the national budget. There are inevitable
not reach the intLnded beneficiaries. ln many cases, the
comered by the undeserving' In orderto benefits are
asist propeiilrg"ti"g'"rsuusloies, gooos'are classified into three
Public goods: National d;fed; categories:
employment bv one-is not atfte expdnse ilc;, general aoministiation. These-."ri."" are available to ail and the
oranother- Nor can a pncebe put on hese seryices-
Merit goods: Primary-ecucation, i[rmunit"ton,
puliiliir."iiiprogrammes, etc. Not oniy individuat beneficiaries
society at large b,":,:Tt-
lt.fqkil.g
iustification for providing suUiiOy
tt*" gooil= available. Thus merit goods contain "externalities". Therebut
is
to these goods.
Non*nerit goods: HerE, tilGn;fri;;;"'Jii"Jry
problem is that in many cases the to the individuar.whire the cosb are borne by the society.
b;nefits are fornered by i;r rich and influential, as The real
Most of our agricurturarind f""d ;t"idies it is difficult to exclude them.
suffer from this drawback.
Bullion Market: Bullion markei i" ; il;kd
enga-ged in the buying.and_se.tfing precious materiats such as gotd and
silver coins such as 'trudriindJ;il"€";;;i"s;;i" 9f
transactions. riJ%"oon Builioi *;,k; is a reading centre for such
Foreign Direct Investment tnvesbnent
markeling facilities abroad' sd;e
by a multinational company in establishing production, .distribution
ud; io."ign di.ect in;;;trnent takes the form of greenfield or
factories' ware house" of omce neing--;nstructed investment with new
investment can take the form or taleovlr overseas and new sun recruitei. Altematively, foreign
and merger wittr oftrlr companies located inroao. direct
Foreign direct investment
which g"n"i"ry inoorves the purpose or smal
l[Ert:,#"r"#^:iff"ffi#:Str#:lltv"n""X"'"ilj'1n'Yffion",
ulslnvestment: Disinvestnent is the
ciosure orsale by a firm of one or more of
division' In the former case, divestnent its operaung units or a whole business
firm's output in a more.tgqon ptani- -ln usuatly occurs in oroer to rationalbe production and or to concentrate the
fundamental strateoic d""is# riil" pii
tte contrast the-nlr*il""itt
divestment of a whole business division represents
lr the firm. a more
incruding a desire tJ put out oi"n in this case may reflect ect a number of consideration
cons
,n-pifrJre, ross making activity, etc.
Hedging: Hedgins
aboui n-rture (unrno.wn)-price
':l!l:tJiililil;;*rtaintv
rea etc') Financial secunty (share, stocf,, etc.; or rbnEtcr,t-Cunnervcy. 'f,;;;;movement in a commodty (rubber,
sales or purchases or ne cdmmo<it' done by undertaking forward
;;.d in tiJ'nurunE MARKET, or by taking out an oproN
lim its th e oprio n-h orde, "r "uir*v
pillluctuatio ns. that
" "rd;;;;
 / elrrur' when the sale irrice is more than ..the purchase prlcil it-is known 'as a
^,,/.caprral
qapitat gain. Capital is of two types fiist like"Equity shares & stocks and the oltre.r is like 'real
esta.te. Two types of capital gainsarethere one is for shortterm capital gain ahd the other ls'long
..term capitbt gain. In Equityind sbeks if sold in less than 1 year is known as.short term.capital
year
. gain anil capital gain tax is charged, Sr€re is no'capital gain tax if it is of more than one
. hotding.' In Real Estate; if pmperty issdld witfrin 3 ydars then it would be i short t9,,T4,c,;ntal"gain
and if sold after 3 years then it is catftida tbgrS term capitat.gain and tax is drarged on both'Short
and long term capital gain. Therewdt be no iapital gain tax if the sale'proceed is de.posited in the
Capital Gain Acount and the repurdlase is done w.ithin 2 years of the sale, in case of constructftcn'

LAF fltOUrOrw anrUstr,rtilt FECrLrrJfl: It was intr'oduced during June 20O0-in this Z s(
tnlr". Under the scheme (i) Repo Actions.(is used for absoiption of li.quidity) means 3hort term borrowing
'(ii)Reverse Repo actions 6ior injectioir of liquidity) are conducted on daily basis except Saturday' All'
commercial banks have current ac@untand SGL (Subsidiary General-Ledger) accotint with RBI. The size of
bid is 5 cr and multipte thereof. The Eligible seGJrities are transferable Cenkal Government dated securiues &
Treasury Bills. i:

REpO RATEfRR): Meansapurchase&saleagreement. ltisacontracttobuysecuriUesandthensellthem

back at an agreed future date and price. It is thus an avenue for short term investment of surplus funds' From
Reserve Bank point of vieW it is called d short term tending and fiom Banks point of view it is called a short
term borrowing. (Repo rates are slighdy lower then call money)

W}:AnRRRisaninstrumentofborrowin9fundsforashortperiodandinvo|ves
selling a securiiy & simuitaneousty agreeing to repurchase it at a staied future date for slightly higher price'
from Reserve Bank point of view it:iscalled a short term borrowing and from Banks point of view it is called a
short term len.ding.

CBLO {Coltqteralized Borrowino Lia-bititv Obliqation) : It was introduced on Jan2O,2003, It is

an obligation by the borrower to retuin the borrowed money, at .a specified fuiure date and an
authority to the lender to receive money lent, at a specified future date with an option/privilege to '
' transfer the authority to another irerson'for value received. 'The eligible securities are central
government securities induding treasury bills- with a residual maturity period of more than 6
months.

no access to interbank call money market cir have restricted

It is for the entities that have either
access in terms of ceilin-g on call borrbwing & lending transactions. For borrowing and lending of
funds CCIL (Ctearing Corporations of India Ltd) provides Deating System thru Indian Financial
Network(INFINET). Members have to.deposit etigible sectrrities'with CCIL. The maturity period
ranging 1 day to 90 days(upto 1 year is per RBI guidelines). CBLO is a tripartite repo transaction
involving CCIL as 3'd party as a cotnmon counter. SGL account is opened with CCIL'& is not be
transferred to lender.

TNFLATION INDEXED BONDS: IiB will protect savings of poor & middle classes ftom
'inflation & incentives household sector to save in financial instruments rather than to buy gold. As
the Gold Import Bitl increased by L38o/o tothe last year and nowto disourage investment in gold'
The IIB will be issued w1h a feature - coupon i:ate will remain fixed, the principal amount invested
in the bonds wilt be linked to inflation based on WPI, at maturity the adjusted principal or the face
value whichever is higher will be paid. This would be started fi-om 4h June Ist will be issued to the
institutions and banks then to the retail customers. INVESJMENT LIMIT: FII can invest up to
g25bn, RETAIL fNVESTOR can invest minimum Rs.10O00 to Rs.2cr, BANKS can invest upto the
limit of SLR i.e.23olo
.FUNGIBILFTY:II is,a property of goods or cornmodity whose individual units are-capable of

3
 substitution like b'arter Sptein. .Examples .

precious meta.l and currenchi. of high fungible cohmodiff'are' crude oif, wheat,

rPo{rNrrrAt PUBtrcoFFERli Ist sale'of stock

by.g 'company to.the pubtid rpos offec.
voung*-.olseekins the capitai io o.i"na. ri-ci;r-"rro be done ov-rl*1''
:"#il"il'smaller
FPorFoLtowo{'PuBirgQFFEhr: A public .coinpany alreadr tisted' on an excfiange, a
supplementarit:shar+ ov .o*pany that. is already.pubticly listed.& has gone
process' it is also olteddta" "
as econdary public offering subsequent to th€ co,s lpo.
thru thd.Ipo

To chek bxcesive dependence on foreign

tr?H':::*:?li::"1^"?@oaJrffiil;;;J;ljiJij1"ilil:J:,ff
f";J;l*f""
on i"ci;;#;;il;;.?";,1',iff'liil;:,T#'ffi:S-::r?;;
May B, 2d06.":1,:.,,:_':,.y."_F
It is iap6J r t6oi, primarity useit in fridia, whereby ,;;;;;;,
* :::,19;
oth er than wa rranrs whi,ch
; ;#",oi
;ltJi;; "il ffi
a;lail;r""T :ff # ;..;r;
ffi #
;:::?f
Buyer)..:
"
NRo(NoN RESTDFNTORDTNARYT, r: ' Jn this acount, a person cannot repatriate
income without RBI approvar oriEnEft rnterlst ,i'u.*r. . i.,

permissibte to repatriare but intEffiE U;rder nt Pi-incipal amount in not

.::.i,.. . ,TET
. ...;.: iiiil;;,iaffi";:'-
NREfNoN RESIDENTEXTER.{AL}: :,',.''."
tn'this account r;i'aii!-il]Fqlterest both can be remitted without
on NRE o.poilE"trn;*irnu;-;.r:urn-i, i,oor
l,?j.j}:t:.^i,":
sucH CEILING). ..:.:
rafr.i{,.$f;!,;basis rNow THERE
ooints (Now
iCt-el#;g:zs,basis points rq No
rHFRF Is Nn
a .-. , '- :!i:1.::i::i:
FcNR(B) A/c:
Foreisn *q**r,,**i Resident
r""o,rnt,
l;tjffiif,gqtir, '..:j!: ir

foreisn exchanse b also p"fiici.i" maintain;;;cr;-"7c rndia,.1y6o is earnins

to the in r-fif.fi'&,iitircn,authorized dearer bank
extent or 5oo/o or srith.,F.qraisii,exchanse earninrr,
currenits"iiJ,i.ripounds stertins, us!,"i.i<tuF]*:5ft'jfi;".,r"n Foreisn Gurrcncy
l'::1-::l.I1tt:'
it was r.,,*ei*:;J::T:"F--,.? Doili,i3;laoans yen and Errn6 ,rla, ,.,nc
lffi:; i'ilLlkl'"1",$_i$iiffi';tr::"*r. ::,*:jj;
depss'its alc ar6 maintained r"i*h!t,"-
be opened. Maximum ceitiiig,r r"**i"l r y-"." ""1 *t.t ,Yg$ffiiarrent a,/c or savings a,/c can
o"po"it l, lii*':*.a-6ffi;;;: more thin 3 years.
1t i, a,r"nk suarante" ,r. r"oii.'iiF;..l'-il rost or sroren you may not be
responsible for unauthorized purthiies
protection facility is free & automaticallymade *,arin";r'""J iryou. report the,'theft promptry. The Zero riabarity
avaifable on all bank conssmer credit €ards-
'/cuReeatcv r'utuRg: A transferable futures contract that specifies
'currency can be bought the price at which a specified
or sold at a future datei :rt helps participants
currencies' Exporterc, companies and retail hedge their risks in morc
investor can benefit from it. From Feb l" 2.o1o, sEBr
n=|J;:Tj:;:o".uttt""vtuturelnir.o, Yen & Poqnd stertins beforc this onry Dofi.ar Rupee contract
vott*o ot"ount'.- (in laun means yours) when a foreign
currency is known bank is opened in the India with Indian
as lrostro alc e.g, ilnoa.a chartered Bank in India.
f
r' SWAPs: rt is a transaction where
maturities' say purchases of spot the bank purchases or sells the foreign currency simultaneoqsly, for.different
sale of 3 months forward(whic; and sale of forward or vice versa e.g. purchas e of 2months forward and
Swap or exchange certain cash ;;teo;;;.a ;;;;;#.o" r*up1. swap conrracts obrieatb 2 parties to
flows'at certaan specified intervats. swaps are
funds rather they altow o*,"r..n"g;"l'ent not the instruments for raising
or existing funds.
-" rEr\'t>l I<ATEswAPs:
counterparties of theirrespective An lnterest rate swap is the kansferof contractualy agreed between two
of converting fixed mteto floadng tnterest rate obligation. rnterest rate swaps are commonry used as a means
rate debt and vice vetsa.
'e
gPERATIITG RATIO: ratio that shows the efficiency of a companyrs
operating expense to netsales. management by comparing
Calculated as:

t
t-t
 opdnerrni RATIo=opERATTNG ExpENsEs/t{Et sAtEs - ."
TEASER RATE'OF TNTEREST: This rate is typical'iow then the'prevalent rate in the mirket. This is Just to
allure the customer.' This rate is charged only for a litde time. and aft€r that lt gradually toudr the Index raE
or even more than that. This is a techniqoe to attractd cubtomer.-

Aooroorirtion Bill: ti is preseirtdd to ParJiament for its approvat, so'ttrat the government can withdraw frrorn
tre Consolidated Fund the amourits required for meeting the ocpenditure charged on the €onsolidated fund.
No amount.ca,n be widldrawn fro.m the Consotidated Fund'tilt the Apprbpriauon Bill is voted is enacbd. :: ,

CALI l,lOlfEY: fnter bank call market. is part of the doniestic- money market frorit"wherc b-anks
borrow qnd tend on daily basis, ftrnds are borrowed and'lent'forone day called as l,loneyatcailbnd
. fo.r a geJio{ mqre tha.n 1 day & upto t.4.days is called Short Notice_.or Notice itoriey r-ulthgst.any
.c5ltateral seanrity. Moniy- tend for fs days or more is calted Term Mon.ey worm3l$'.funhs'are.
borro'wed for 1 day.dna upto S days on weekiindsiust to'balance the Cash ieserve Radio.
:

NOSTRO AgOUt{T: (In-iatin.means ours) whep national .bank is opened in .foreign vqith foreign cunency
is known b_s Nostro a/c e.g..State bank of India branch in UgA.

exchange ol
\
A

t.ransactions in the Rrblic

BLUE CHIP COMPANY: be e5tremely safe & profitable

without any risk. The price

improve margin on return on

( -/ Capital Exoenditure: It onsists of payments for acquisiUon of assets like land, buildings, machinery,
equipment, as also investrnenG in shares etc, a,nd loans and advances granted by the Central gov-ernpentto
state and union territory governments, government companies, corporations and other parties.
.,/ Caoital Receiot: The main items of capitat receipts are loans raised by the government from public which are
calledmarketloans, borrowings by the governmentfrom the Reserve Bank of India and other parties.thipugh
sale of Treasury Bills, loans received from foreign governrnents and bodies and recoveries of loans granted by
the Central government to state and union territory governments and other parties. It also inctuiles proeeds
from disinvestment of governme{rt equity in public enterprises.

I -/ ornect rAxes: A tax that cannot be shifted onto others. e.g. Income Tax, Weatth Tax, Corporate
Tax. In GDP the more contribution is from Direct Taxet A tax on Incom e is known as-OirfftTax. ,

./
- TROtRECt-tAXeSt .. A tax that increases the price of a good so that consumers are actually
paying the tax by paying more for the products. e.g. Fuel, liquor and cigarette taxes, Custorns,
Excise, Service taxes, A tax on transactions is known as Indirect Tax.

5
 cRB ('CASH RESERVE RATrol: Banks have to maintain a minimirm resrve of cash. with RBI. In thb RBr ls
€mpowered to irnpoie stautory j"r.
cash reserve.ratio anywhere-betwe""
Time liabilityof the bankas.on
last Friday. - '- -l':
""* riozo or the Net Dimand and-
.:-.' :.
"tM ill'4Nf
lttT ritT
DqosttS (lD); Recurring' oeposits(Ro[ cas*r
Ceftificate{CC),Letterorc'u@onaii*a,l6ositheli'assecuritiesforadvancesaria[ed
..Fe.d
Time Uabilitv. Whereas.Gtrreit.beposii, .portion of Savirng deposits,
margins-hetd agaiftst Lc & L€tbr of
Guaranbe, Batance in overdue ro;. cl,iiD ae cated asoemand Liabiritv
TREAsu4'yhrlrs: ' A promissory Ngtes issued.bysre centrial GiVdinriient
upto 1 vear as
'
a'device raisins short br.a..fixed period oteruoE
teim funds. rt isure iooi"Jlt;;;;.5=o;u'io," Liquidity Ratb.

It is'an acbunt maintained in

;J# iffi jil'f 'ffi
Exchange. It
;;;; :;;=i"; facilty is a .

- aCOunt - so
accoun!., sn fhrf 2Fc^..^+ hcitders
that account t-:rr^-,-
do not "'*ffi;#;;
iotoni
traVe pn\rert {oreign exchange. intc Rupees & Vie

-"'"p;##;;L;".. =".:t':;"T:F":;H
individ.uats, nnrrrn-^i..
as individtlalq companies etc
^&^ ---L- -
who are
/
./ '*ia"ntln 1!iroi,
GRoss DoMESTTC PRoD ucTCG
PP )i GDp is m" fiaoir*a natue of alt goods & se rvices -prodr:ed in a ourrry
;j[il[T]:n:"::::11;il,:,.*'_"*,:*.f$l:*o:,r= nJ;;.orgoods&seruicespoduerrby
For example total r,ralue of goods & servies
in a
1er3:imorking in thirt country, besides the mrrrd
iq worttr SsOmn-ln this case GDp=SSOmn,

'. '.:|
:.... :

.A9 perGovt of tndia these are &firedasper

theinvestnent limit in ptant and
M;i;mT
. Itranufacturinq
Manufacturinq sector-
Sector A Micro Enterprises rlr*rinkffi#r,u".

€r.
. ri,.i,,
;i'
rn service sector- A Micro Enterprises
where investmeil aoes not exceed Rs.lolacs, gnall
than Rsl0lac but does not exceed enterprises wftere mre.
Rs.2 cr, Medium Enterpriseswhee more than
Rs.2 cr but does not exceed Rs.5 cr.

"uno,",*
G; ;;;il
u..,,til: iil:r["ff;H"ffi,"T:1XlffJT,
features on cfiequesform srch as qualitv
Y,11'Tf11im-um-slurity
b.an Ks ;
"
cheques' this bencfimark
; l;T:
fr ' #"ffi:::;i
prescriptions is known as crs-2010 ouu
T:.##,:n:y #of !,:?."
'anaF rzrrarmrrrr
?,::,il[*
and ilre
are to be
f,o oe implemented
fmplemented W
by Dec

Means reorganizing of company.s outstandirg

P"btt' company is in crise or pressure or
when a
burden of debts Or- even going towards bankruptql, to reduce
the
started byRBl in 2oo1
d;.lp th;companies. As on sept 3o, zotz out of It wa
referred since its inception -
only 327 cises have been approved and total amount total 466cDRs
Rs'1'88cmre' RBI has iaised omes at
ttre-prJvisicn forrestructured assets to z.7sa/o
from 2o/o.

6
 clrr EDGED SECURTTIES: Fixed Interet .Government 'securities trad€id on sbck
Exihanges do rlot'includes Treasury bilb'.
'
dA$XcF of peYueryr: An acounting.rcgord d;;ell nlonetary'transac{iors befireen
a c6untry and,;the rest of the wor6.. Thesi traniactions'iJrclude counirys. E:goils &
Impofts of goods, serrries and.financial capitat as well as financial transfss. Balanoe
of Payment is a comprehensive term which includes both visible and invisibfe iEl$+ ilot
only include visible'exports & impcts but also invisible lrade like shippi,ngr hil*rg'
insuraicq tourism, royaltyT paymbnts df interest on for'eign debts. . ' i
gAtANiE OFIRADE:-It incluCes only.thi visible items. It is the-difference between natbn'i;
exports oi gooCs & seiVicbs and ib imports-of'goods & services. If all'iinancial Uansfes'
investment & other components are ignored. A nation is said to have trade deficitif lt is inporting
more than it exports. A positive net sale abroad generally contributes to a Current A@t nE
Sumtus,'hegative net sales CURRENT ACOUNT:It',|s a sum of balancb traCe (expcrG minus inports
of goods & services), net factor incorne (such as Interest and bividends) and net transfer of
payment (such as foreign aid). Currcnt'acount= Glance of trade net fiactor inome fmm abrmd
net unilateral transfers from abroad. ..

ESCROW ACCOUNT: An account in whidr funG are accumulated for specific disbursnent, in
this aeount the arcount holder makeg a lump sum payment or other_ periodic depodts and
authorize the bank to withdraw funG to..pay for ce.rtain fixed obligations such as'taxeq rent'
insurance premium and third party payments.
:.

NO FRILL ACCOUNTS: Frills mean ofia omforb or luxury, a zero balance account can be offerd b under
pdvileged people. Azero batance witft no additional/ortra features attached to it (tike no onlineacoun(, sanrclfoireno

SCHEDULED BANK: A Bank whidr is inqluded in the 2nd sdredule of RBI Ad 1934, and has a
Paid up capital not less than 5 lac. Eligible.'forBank DebVloan bn Bank Rate from RBl.t'len6ers of
Clearing House, can discount Bills of Fxdrange of Ist class.

NON SCHEDUI-ED BANK: ' A bank rrvhich is not included in 2nd Sdredule and is n$ efigble for
loan from RBI(only in emergenq/ can take loanfrom RBI)
/ cnror cnRo, A credit card is one of the systems of payment. In this a smatt plctic card
is issued to users of the system. It is a card entitling its holder to buy goods & services based on
the holder's promise to pay for these goods & seryices.

./ DEBIT CARD: Debit card'allows for direct withdrawal of funds from customers bank accounts.
The spending limit is determined by the available balance in the account.

LrBOR(LONDON TNTERBANKOFFEREDMTEI: An interest rate at whiCh banrc Can'borrowfunds,

in marketable size, from other banks in the London interbank market. The LIBOR is ftxd m a
dailybasis by the Briiish Bankers'Association. The LIBOR is derived fi-orn a filtered aver€e of the
world's most crditworthy banks interbank deposit rates'for larger loans with maturities betneen
ovemight and one full year. For example, a mu.ltinational mrporation with a very good credit
rating maybe able to bgrrrow money for one year at LIBOR plus four or five points. Mosf loans in
the overseas capital markeis are priced at Libor plus a risk premium, known as the creditspred.

7
 :r_s^N I r I ATf VE qAs_fflq(OEl: It may
be desci-ibed as

Ii.iT,:J;[1"fflfr"?;m:flL1*i,,'.'.'#::i: gl*.,*,1',^iil'5;"l"i,i; q$H,:;,'+;fi:

;:::T.l'ff? lJ':',:,_d;;ilil1X**::::::Ji?:i:,+:-{::,?'giJ"i;::;T$'d;:i:l*;
account with qoney it'cr.eates
bonrfiruorts1q3s.._*u,iboit;#Tilffi:f'";,?:lrol[lT,T"*ll:lA;:",t,:r[:.::H:?#
bohub, Marla-^^^ -wn nrmhrca .n,--__!_,
-. ;";
to as open market-rn tt't pt*ot'.Inarin
first us ,*r..",
;:,:::t il,"'i.:,"iffTf.T;#i;*ifff*Tt"T decrared ?"1n, """t *r"o"n, and Europea' Banks first of
to buy g600bo orbnir ."* oo'"rnment

.,orrr,'
*rat are- not tgEt"'tidf:ti:u*::r ;11y.1,1,11";o ;*i u;;;;** o, n.og. l
"o*ttc*oto*"
tunds
invest in rndian tt"liti,t-ir]] rftl-tl" siei lsecuriti"" a eGange Board of rndia)
p-artlcipato[- n*otes
inv'estments'intrt" stict;;-"t" are iiJ*i"ae. used for miking to
are used sutside rndia iot 1"*"rL"' ;.y are not used within ttre couitry. They.
tti"rang it*Jii#"
' why thev are also t"r[i i*ilore derivative i., "rrr.." ilriJ in that iountry. That is . .

' rndian-based anc ttren pxs

iist.";;;; ;;;;" based u-,ore""ges buy. .

'sains. cottectedlgc.uiiues issue i.o io"_.ien inrr"toolAny dividena=

rdrm ,n" oi capital
"il"irr"i*=Jff".3;.back to the invesrors.
: The budget
receipts (current revenue:;";;, deficiJ is the oiir"r"151 o9a*"* *n-ro, expendture and
irtil; a.nl ffi", capitar regintsi oithe government toral
thus
E u D G ET o erfqFrora!
Fxp e o rr_0 F r _rore,. REcErprs
r11

i*r,iiil,..1#
and Totaf Capilal Expenditure)
and capitiirili

the total expenditure of the

not in the nature or
:f,i+:1,:

RECETPTS+CAPTTAL
In-simple
Fiscat Deficit-: Budget

receipts. "expenditure oveir revenue

REVENUE DEFTCTT :
REVENUE EXPENDTTURE
- REVENUE RECEIPTS
PRTFfARY DEFTQT'T:
FrscAt DEFrcrr-rNTEREsr
{primary deficit indicates, how
me"t expenses'A'MENT
orher uran interesi payments.l
;r::::T:t_0"-t*i"gl'i;''"s'to
'offi
L9 Banks(14 were nationatized
o*n*'i'{i:il#';:,JTei:$d,lT".:rj"JJ1,"#;g,"or"#i
vith PNB)' sBI & 5 Eanks un in'ig' uin rgeo uno' 1 (NewBankof inaiu*u,
in" merged rateron
"L il ,rosidia_ry
r;*
or seiiz. subsirJiary *ur"lihu*
ff[;::il::T!i;fi#"'*; and state elnr or rndore out of which stare
*., iu,s"d in 2011). one is
:ARRow HONEY
R-OAD ifoIVEY:
ronev like coins una.tuilffing A category of money suppty
that rncrudes a[ physical
:ntral bank' rn the united rvith oema.i J.o"r* and other riquiJassets
is dassified ur-oi,illemana hetd by the
*
hile in the U.K. M0 is "*r"i'n'"tw money
,.f"*".JuJnu..o* money. The name cornes from accounts),
.:,1$#;?ffift'#*:T.";'Ji li"u, o, money that are the basis the fact that MU'4o
ror rhe medium or

E
 ' . This category of:rnoney is conslderedto be.the mgst . padily available for .transactions and
commerce. Broad.monev is the wldest mea'surernint of the money supply. It, is genemlly
"One measure of the moneysupply'that indudes Ml,plussavi,ngs and small Ume deposits,
ovemight repgs at commercid bank, and non-institutional money niarkei accounts. This b A key
elonoriric indicator used to forecast inflbtiori, sine it is.not as naffow.ai m1 and still relatively
easy to track. All the ornpogreqb o5l,tZ are very liquid, and the non-cash oonp.gl,qnts can be.
' 'rconverted
into cesh''n6it g*ii. : , l, - ,r '
- ./v' WHOLESALE PRfCE filDEX(WPD: WPI is taken into-consideration while calculating the inflation. A
T.--._--
'change has recently been'made in the WPI: Its present base year will be taken as 2004{5.eqr1ier it was 1993-
' 94. Ease year m€a.n (2004{5=1OO). Total articies taken into consideration will be 676 earlier these'were 435.'
676'include 102 Prfmary.Articles, & Power, and 555 d Manufacturing' Produds. . Eirlier WPI was
' ca{culaled on Weekly Basis.but norar19itFuet
is calcula@d on M-onthly basis.-Rrsi time inflation was'calculated in
i August 2010(on nevrr sptem).

J
r GoNSUMFR pRrcE rilDEX(cprl:

RBIS INSPECTION: ON SfiF :In RBI on site inspection to ieh,gqk the standards or working of a
bank these elements are ch#ked, CAMELS: C-Capital Adeguacy Ratio., A-Assets quality, M-
Managernent .effectiveness, E-Eamings(prgfitability){,.,L:UqEidfW off Srre: OSMOS: offsite
surveillane and Monitoring syster,n-;,, ,'' l, ,-....i'.'..'..
',:,
"..;.r.,,,,.::,:;...-
period
of more than 9O days ih respect of a Teffi loa

PCR(PROVISIONING COVER RATIo):This is aprovisioning against NPA.. As per the RBI latest
instructiohs. It would be mandatory for all banks to have a PCR for all NPA @7oolo from
Sept.1,2011.
/ WMA (WAYS
*r,z AND MEANS ADVANCES): To bridge the interval between expenditure and
receipts. It is not a'eurce of finance h,rt is meant to provide support, for p.rrely temporary
difficultie that arise on acount of mismatch/shortfiall in revenue or other reeipts foi meeting the
govt. liabiliti'es WURs have to be periodically adjusted to enable use of sudr financing for future
mis-matcftes. 'Duration 1O consecutive working days .for €entr:al Govt. and 14 ddys for State Gov

{1)
 ITN ON GN,IEML STUDIN, 20 I 3 O)

ZERO-BASED BUDGETTNG (ZBB)

Zero-based budgeting involves fresh evaluation of every item of expenditure whether on the ongoin$ schemes
' or the new projects. Of course, the new schemes
are subjected to comprehensive evaluation, but even in case of old
ongoing schemes, where some expenditure has alrady been incurred, the scheme has to be justifred afresh in the
fight of current'priorities. This means that even the ongoing projects are to be treated as fresh p-.j""t" on which zero
expenditureispresumedtohavebeenmade(thoughmuchmoneyhasa|readybeensperrt)and,therefore,fre5h,.
justification for the project has to be. provided at the time of budgetary exercise..,Thus, under the-ZBB--the enti-furr' : ' -:
expenditure on the project, including the expenditure already made, is reviewed to justify the continuation of the i

project.
FOREIGN TRADE POLICY 2OO9-14
Foreign Trade Policy for the period 200$14was released by the'Union Government on 2ThAugusl 2009. The.
short term objective is to arrest and reverse the declining trend. of bxports and to provide'additional sufiport to sectors
hit badly by recession in the developed world. This policy aims at achieving an annual export growilr oi tSo/o annually
with an annual target of 2OO billion dollars by March.2011. The long term objective foi the govemmentis to double
Indias share in globdl trade by 2020, which stood at 1.64 per ceniln 2008, iccording to WTO estimates. The new
Trade policy relaxed and extended two flagship schemes for exporters, the Export Promotion Capital Goods Scheme
(EPCGS) and the Duty Entitlement Passbook Scheme (DEPS) and extended other stimulus. measures in a bid to
reserve the decline in exports and double outbound sales of goods and services in next five years.
FORE|GN DTRECT TNVESTMENTS (FDt)
Foreign Direct Investment(FDl) is considered to be the most aftractive type of capital inflow for emerging
economies as it is expected to bring tatest technology and enhance production Capabilities of the economy. fOf
inflows are spread across a range of economic activities like financiat services, manufacturing, banking services,
information technology services and construction. Apart from financial and non-fina,ncial services, ielecommunications,
housing and real estate and construction have emerged as the most significant recipients of FDI inflows. High lnflow
indicates as an attractive investment destination as a consequence of its liberalized investment climate stabte and
sound economic and political base, opportunities for economic growth, white capital investment abroad reflects the
growing competitiveness of the lndian corporate sector. The two way flow of FDl, therefore, means that while the wortd
is taking note of India's market potential, Indian companies are also constantly looking for synergistic acquisitions'
abroad. Further, the Government has liberalized the FDI norms for the Micro & Small EnterpriseiltUdesl repfacing the
cunent 24% ceiling on foreign holding. MSEs will now be guided like other large entgrprises as far as FDI is
concerned. The Government has finalized drastic changes in the country's foreign direct investnren(FDl) pollry in
order to take cognizance of increasing concems raised by security agencies.FDl provides opportunities to lndian
industry for technology upgradation, gaining aocess to global managerial skills and practitis. lt is also highly
conducive for optimum utilization of human and natural resources and competing globally with higher etrciency- FO1
has a significant role in integration of Indian economy with global production thains, which involve production by
multinational corporations spread across locations all the world over.The Government of India have undertaken a
comprehensive review of the FDI policy and associated procedures- As a consequence, FDf upto 100 per_cent is
allowed under the automatic route, in most sectors/activites. FDI under the automate route. does not require prior
approval either by the Government of India or'the
-RBl- Investors are only required to notify the concerned Regional
office of RBI within 3O days of receipt of inward reniittances and file required documents wiih ttrat office withr'n SO days
of issue of shares to foreign investors.
under the Government approval route, applications for FDI proposals, other than by Non-Resident Indians,
and proposals for FDI in 'Single Brand' product retailing, are received in the Department of Emnomic Affairs, lvl/o.
Finance, Proposals for FDI in 'Single Brand' product retailing and the NRI's are received in the Department of Indusfial
Policy and Promotion, M/o Commerce and Industry.
At present;..FDl is prohibited for the_following sectors: (i) Retait trading (except Single Brand Product retailing),
. (ii) Atomic energy (iii) Lottery business (iv) Gambling bnd. Betting. Govenimeni approval fo#Ot is requir€d where
more
than 24 per cent foreign equity is proposed to be indticted for manufacture of items reserved for the Small Scate
Sector.
One of the most liberal policy frameworks for FDI is pursued by India, as also for foreign technology transfer.
FDI inflows in India have increased over the years.
SPECTAL EGONOMTC ZONE (SEZ)
The Special Economic Zones is an important component in the export-led industriallzation strategg.playing a
crucial role in prbmoting the manufacturing sector, including providing an enabting investment climate for SMEs and
offer platform for attracting export oriented Foreign Direct Investment. The effects of SEZs, particularly the new
generation ones, are creation of emptoyment, developmbnt of infrastructure and additional economic growdactivity
in
the hinterland. The SEZs Policy supported by SEZAct2005 and SEZ Rules 2006 intends to make S*an enginefor
economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at Cenfid and
Stiate levels'and with singile wlndow clearance mechanism. The process of gtob'alization has enhanced the retevance
of SEZ
'10
 WNONGENERALffmIEJ,nLI-|
f_r!- .--_
Inola was one of the first in Asia-to recognize
(.1)

the effectiveness of the Export processing.Zone (EpZ) moclel

promoting exports' with Asia's
-the zones were not able
first EPZ tt
upin i"no" a"'ibos. seven ror"-=Jn""
were set up thereafter. Ho'ever,
i'
to il'ffi"inffir"",g
"t"tge or worto*lass lnl,'""ir"tur"
controls and clearances' the auserice for export pi"r"ii"" on account of the munipticity of
and an unstaule nscale regime. while oorrecting
9l tfu EPZ modet' new features r"i"r:n"orporated in the special.Ecolgmig zones (sEzs) policy
schortcomings the
- announced in 2000' This poticy intended to t.r" sEi"
roi""onoirl"'giorrtt. sarient features of spz.s are:
: ft"tFi"tfl1flr1?Yji?,? iffH:
t" u" t'""tJo *;;;"
"n'li6in"
teffitory onry ror iiade operat:ons and duries and tarirrs.
. Manufacturing or service activities allouied.
' sEZ units to be positive net foreign exchange earner within three years
' Domestic sates subject to fut customs duty and import poricy in force.
.. Full freedom ror.
No routine "ud_"ontr""iing.
by customs authorities oJ exporvimport
' The sEZ Act' 2005_examination cargo.
was'"n""t"d in FLbruary 2006. Incentives and facilitie-s
promotion of investment, inctuding offered to units in sEZs under th-e Act, for
foreign i;r.id;;i;;Lle; auv r.r"r;r-;;;;r"stic
development' operation and maintlnance procurement of goods for
or sEZ units, i:ooi.In19ge Tax exemption
on export income for sEZ units
cSr, exem;;;;?;"' servicer"i"no iogrewindow
|,jitql{:il,,flll,3l1:$,m:J;ru,mr;il#'-'
THTRTEENTH NANGE conr-n riSiior,r
Ft
commission submitted its report in Novembe
I'U$ilA;: r,2lolcovering a period of.five years commencing
on rtre
In pursuance of the provision of Article
280 of the constituti6n of India and of
Provisions) Act' 1951' the Thirteenth the Finance commissl.on (Misc.
Finance commission rras oeen
five years' with Dr'Vijay L' Ketkar'lo-"t t-he president of India, for a period
with three full time.mer9qP and one-part-time
union rinance-seJretary and "iq;i"i#;
Adviseito tr," Finance Minister as chairman
of
the diitribution of the oivisiole-pooloi,i"t pro..eds
membef- rne commission *"" t"rr,"o to make recommendations
of taxes bltween the unionlnJtu states on
the states of such-proceeds' and arocarion between
irinciptes govgming grants-in-aio of the oi ne states out of the consoridated
Fund of India and grants under Article
2t5 of the6";iiiil;,;nd the '.uunu." needed
Fund of a state to supplement the -"""u*
t""orrces or the P;;;;tats ano Municipalitils. to augment the consotidated
specifically laid down in the constitution, 'pinance Apart from the terms of reference
the Thirteentn commission was tasked to review the state
finances of the Union and the of
k;"ping in view ihr opeiation of the statls,
2005-2010 (DCRF) and suggest Debt consotidation & Refief Facifity
me;;;l'"t d mantaininlT siaue
'i;bt nscar environment consistent w*h
;U3?Frg:H:',ffi::gmm**:".f$ilH#rrtieo its"no "u"i"in"urJ
,"po,"ron in!'is'r"orua ry,z'1o(nveyears rrom
l. ptateg
2''
to get 32To of erlntral taies as against 3}.So/oi
Introduction of a Goods ano-dlrvices-rax.
i
inclusion of various indirect
n-moief GST structure with singre rate, zero rating of exports,
3. Revised road map for fiscal taxes at cenbar and staterever GSTI amolq
in \tD
er rtr ambit;
4' Merging of National.calalnityconsotidation;
'

contingency Fund with Nationat Disaster

Response Fund;
btai;-towards Lrct"nt"w e?ucation,
: r::ltii":ffiJffidtto
6' Govemment could mop up over Rs.3,81,000 crores through "nuironmJnt
rerared issues, maintenance or

the next five years; selting its stake In psus over

in listed and unlisted P
draw uP a pl.an for divestment and privatisation of state pSUs;
RqJiE:Ef"-wffi,T?Shr"Jsild
_ The symbol Indiah nup"" .typifies Ingt* _intemationil iden_tity for money tansactions and
strength' The symbot.of is an amalgafr? devanagari "Ra" and econornic.
running at the top representing tnl noman c"irit"r-"#-rif, tuo parallel horizontat otripes
.I[e
he Govemment of India on 1"5'i;Jri;;10. national flaglnd il;;;;uat to,sigri. ri," inii"n Ruoee sign was adopted
"G"
Tfre.vrotr,'"JnJeptuarizeo-;;d by
;;"'s;{ uv o. Udayb. Kumar, a posr
HIGH'vAtue-coltl
:l
ffffi'i|".,i?r!ff 3lT"1l;?:il,?ii;?il,#d;:ff#;#l'nT,""no"
- -"-'v!' sr"vrrY rsJruErIr' rrrqrans'
or
"onopt
Entriesieceivedii ri,t'ilini"t,.v or
(Rs.150)
For the first time in the country's history
marking the number of years or of mint, the gou.rnr"nt has issued coins
t"i"il",i in.tnoi.' r," of Rs.1s0 denonrinalion,
February' 20i1 are refeased uv iinanceuinister pr.anab Mukrrerjee
T:lt- or an arroy o/iitu"r, "p"ti"i "Jins., in
$ifll n' r"nt Jol #t'e J "opp"rl "i"t"i r"o zinc,
p''t'itiia#iu;nd has a.i"r*u"nal design with "sa{yanreva
fls;';$i{rfr a rotus wfth
"1., honeybee,on
the ieverse side.
The conbtitution (95th amendment) bill 2003
compensate any loss with ihe ir"p#;il;on aimed et.-eyq.r.nting the revenues of
of V3tue eaoeJiax
the eovemment to
rynb ttrl'union andttre states to tevy
"-JoL.o
n!
 fiIN ON GENERAL STUDIES, 2013 (3)

arid appropiate tAx on services. The bill was nebessitated to bring 'taxes on services in the Seventh Schedule. The
service sector accounted for 48.5 percent of the country's GDP bnO tre sector ofrred enoimous potential for revenue,
estim3ted at Rs.40,000 crore annually. The amendment would help in significant augmentation. of revenue of fte
states and pave $e way for eventual inclusion of services within the puruiew of lhe state level VAT. A separate. service
tax bill would have to be enacbd by Parliarnent to operationalbe the powens pf the Genbe to levy appropdate tax on
seruices and States on the remaining services- At present Uniongovemment done is lelying and c-ollecfing taxon 51
serviceS. The UnionF,inance Ministel brought out a White pap'er during January, 2005 announcing inter alia, the rate
of VATon various items.
cooDs AND SERVTCETAX (eST)
Goods and Servi-ce Tax(GST) is a part of the proposed tax reforms tM center round evolving an efficient and
'manufacture, consumpfion tax systern in the country..
harmbnized lt is proposed.to be a comprehensive indirect tax levy on
sale and consumption of go6ds as weli as services ata nationallevel. As we have parallel systerns of
indirect taxation at the central and state.levels, eabh of the systems needs to be reformed to evenfually harmonize
them. The central excise duty should be converted into a full fledged manpfacturing stage VAT on goods and seMces
and the states sales tax systems should'be transfonned into a retail stage destinalion based VAT, before thq two are
integrated. At the central level, beginning has been made by converging widely varying tax rates and extending input
tax credit to convert excise duties into a CENVAT. The first stgp towards inboducing GST is to progressively converge
the service tax rate and the CENVAT rate. The Government of India has the target of introducing GST by April, 2011 .
TAX TRIBUNALS
The Union cabinet has given (2004) approval to the proposal of Finance Ministry for setting up a national tax
tribunaf wtth 25 branches. East bencfr of the tribunal will have a Chairman and two judicial members. Tfte Chairman
will be a retired judge of the Supreme Court or a retired Chief Justice of a High Court and will hold office for.fwe years
or till 68 years. The retirement of other members will be 65 years.
The proposal is aimed at expediting adjudication of tax cases and liquidaiing arrears. Hereafter, appeals on substantal
question of law emanating from orders passed by lncome Tax Appellate Tribunal (ITAT) and Central Excise and Sales
Tax Appellate Tribunal (CESTAI) will lie in the National Tax Tribunal. At prasent, appeals are heard by respective
High Courb. The benches will have the jurisdiction of High Courts. The proposal is expected to result in fte speedy
disposal of tax cases running into ttrousands of crores of rupees in High Courts. At present, about 28,ON cases are
pending in various High Courb which have a disposal rate of 6,000 eases a year. A bill called 'The National Tax
Tribunal Bill, 2004'will be introduced in Parliament soon.

TAX HAVENS {BLACK MONEY}

Round Tripping: lt refers to routing of invesbnents by a resident of one country through the other country back to his
own country. E.g., An lndian resident investing directly in shares of an lndian company would have to pay capitalgains
taxes- However, if he routes his investments through an enlity incorporated in Mauritius, the taxes can be avoided
under a double taxation avoidance treaty(DTAA). These aie bilater:altreaties s$ned between govemments to prevent
companies from paying taxes both in their country of orQin as well as in the country where they are doing business.
Mauritius: Mauritius and other tax havens have almost negligible taxes. This is encouraging resident lndian entities to
route their investnents back to lndia through Mauritius and avoid paying taxes. Mauritius accounts tor 43o/o of total FDL
Investments from Cyprus, another tax haven, are also on the rise with FDI from the country increasing 10 times in the
last three years. Cyprus is now the eight largest FDI contributor to India ahead of Germany and France. SwiEerland,
Cayman lslands, British Virgin lslands, St.Kitts, lsle of Man, Liechtenstein, Mauritius are leading tax havens.

FOREX RESERVE
Foreign Exchange reserves Q.e.foreign currency assets heH by RBI). are an important component of the
Balance of Payments and an essential element in the analysis of an economy's extemal position. The Forei,gn
Exchange reserves of the coun-try include three important components- Foreign Exchange Assefis of RBl. Gold Stock of
RBl. SDR(Special Drawing rights) holdings of the Government and Reserve Tranche Position(RTP) in the International
Monetary Fund(lMF). The increase in Indian Foreign Exchange reserves, after 1991 are due to- Devaluation of Rupee.
Availability of loans frorn Intemational Institutions. Availability of fore(;n exchange from NRls under vadous
schemes.lncreased fore(gn investnent(both direct and indirect).Full convertibility of Rupee on current account.
Absoption of dollar supplies by Central Bank.Easy access to external commercial bonowing.
lndia's total foreign exchange reserve {including gold, specialdrawing rights(SDR) and reserve wtth the IMF
had increased from US $ 5.8 billion at the end of March 1991 to US $ 1 18.5 billion at the end of April, 2004. ft stands at
US $ 278.30 Billion as on 16h Augus! 2013, according to the RBl. Foreign cunency Assets (FCA) the biggest
component bf forex reserves stands at US $ 251 .56 billion. The spectacular rbe in reserves has drawn aftention to the
issue of what is an 'adequate' level of reserves for the country. There are certain common indicators for determining
the adequate level of reserves for an economy. These indicators airn &c determine the extent of external vulnerabilify
of a country and the capabilig of reserves in minimizing these vulnerabilities. There are : (r)lmport adequacy (iD Debt

l2
 H,!,t oN GENERu viues, 2oj3 (3)

adequacy and (iii) Monetary adequacy. The level of foreign exbhange reserves held by India at presint can be termed
co.mfortable in terms of all the commonly applied adequacy indicators.

SEBI - ITS POWERS AND FUNCTIONS

The Secudties and.Exchange Board of lndia(SEBI) was establbhed on April 12, 1998, through-an administrative
order. Lateron in 1992 on tfte recommendation of'the Pherwani Cqnmittee it became a statutory organizalion- The
SEBI is under fte overall conbol of the'Min'isty of .Finahce. lt b an autonomous, statr.rtory, integrated ofoanbalion that
ensures the smoot'r functioning of the Indian financial sect6r. SEB| as a body comprisej of 6 membersliz; chairmaq,
' two membes from amorgst the officials of tre ministries one rnember fiom RBI and two members who are
professionals and have e:gedence or special knowledge relating to securities market. All
these.members except for
the RBI memberare appointedbytfie govemment Por,vers and Funclirons of SEB| are as folfows:
(1) lt can fame or issue rules, regulations, directives, guidelines etc in respect of both the primary and secondary
markeb, intermediaries operating in these markeb ind cerbin financiaiinstitutions-
(2) lt b empowered to rqister any agency or intermediary who may be -associated with the secririties of the
. market.
(3) 'lt is empowered to si.lmmon all categories of market intermediaries, to investigate their working, to impose
penalty and to initiate prosecution againstthem
(4) ln January 1995, the Government oi lnd\ia prornu$ated an ordinance to amend SEBI Act, 1gg2 in order to arm
SEBI with additional powers for ensuring the orderly development of the capitai market and to enhance its
ability of protecting the interests of the investors.
Thus, to counter the short comings in stock exchange market like rigging and insider trading and to regulate the capital
market, SEB|was set up by Sre GOl. SEBI has its head office at lvtumOiiand regional offices at Calcu-tta, Chennai and
Delhi.
SECURMSATION ACT
Securitjsatjon and Reconstruclion of Financial Asseb and Enforcement of Security lnterest (SARFAESI) Act
empowerc the banks and tre financial institutions to take possession of the securitiei (coliateral) given by the
defaulters. The Act also empowers the banks to sell the collaterals so as to realize their dues.

crores.

lThe ltConstitution
has helped to inculcate a repayment discipfine among bonowers.
validity of the provisions of SARFnE$ Acl 2002 has been upheld by the Supreme Court, except sub-
section (2) of Section 17 . ln the wake of this ju{gement many banks have pointed oui practical difficulties likely to arise
in speeding- up the recovery of non-performing Jssets(NPA). There is a proposal to amend the provisions of t'he Act to
-bonowers.
appropriately address the supreme Courhs concems regarding a fair deai to
woRLD TRADE ORGANTSATTON (WTOI
After ffre second world war 23 non-communist counties signed in Geneva an agreement called Generat
Agreement on Tariffs and Tnade (GATT) in 1947. GATT came int6 being in January t948 and was the principal
ag-engyforPromoting nondbcrirrninatorytrade among membernations. By 1488, 96 nalions had joined GATT.
GATT achieved its objective of tariff reduction and removal of non-tariff barriers through rounds of negotiations.
Between 1947 and 1986 it held seven rounds. The eighth round began in Uruguay in tbao. The Uruguiy Round
which concluded in 1994 decided to transform GATT itself into a new world fade body called filonO fraOe
Org.anisation (VWO). WTO incorporates atl the originaltreaty provisions of GATT but includes new areas like seMces,
intellecfual properly and trade-related inveshneni. Artfrur bunkel, the Director General of GATT presented to the
Uruguay Round a set of proposals to remove the deadlock. These proposals, popularly called the Dunkel Draft, were
fnaffy.approved and formed the basic document called the Final Act wfrich was approved and signed by 11T nations
includinglndiaonl5*April1994,atMarrakesh. TheWTOcameintoforcefiomlo'january,1gg$.
Three main functions of WTO are
1. Make intemational trade as- free as possible by ensuring that the ground rules are made predictable and
transparent;
2. Act as a forum for trade negotiations;
3. Work as a neutral agency for setflement of trade disputes.
The imporhnt provisions of WTO and their implications for India are
-
' The level of tariff reduction and export subsidies agreed to are generally in consonance with the reforms accepted
by us as recommended in Chellaiah Commiftee reporl In faci lndia has already achieved these levels although
underWTO these levels are to be achieved only by 2001 AD.
' lffO has brought within its ambit the trade in textiles and clothing which was being govemed by Mutli-Fibre
Agreement (MFA). MFA is an elaborate system of quotas imposed by developeO counmes over exporb fiom

l3
 FI/N ON GENERALSTUDIES, 2A]1G]

developing countries. This is one area where &e general philosophy of remoyal of non-tariff baniers has been
sacdficed to safeguard th'e interests of developed iounbies- Even items which under MFA were not urder quota
restrictions have been brought within lts ambit by changi,ng the definltion of textites.
Trade Related lnte_llectual Property R$hts ffRIPS) S anotrei area which has attracted atention ana 6xitici"rn in
' the country- TRIPS lays down norms and standards for seven tlpes of intellectual properg;,Copyrighi and rehted
rights; tade mglksi ggggraphical indications; induitial dedgir; patents; undisitoseb iritonirbton and hyout
' designs of integiditid"Ciibuits. Out of these seven ateas,'iRdian laws on most are already in consonane wffir the
WTO requirements. Where there was variance, as in the case of copyright, amendmen-ts were made in 1gg{ tro
the Copyright Act, 1957. In the area of geographical indications, we gie yet to amend our Trade and Mercfiandbe
Act' 1958 to prolect uniquefy lndian producis tite Oarleenng Tea or Dehiadun Basmati. This iS important since 1n
' terms of Arficle 249 af TRIPS, a.country is under no obl(ption to pmtect geographical indications whir:tr ae not
protected by the domestic taws of the country of origin.
The real coniroversy is'in respect of paients rihere the lndian Patents Act, 1970 vades widely wifrr tre
'' requirements of TRIPS. TRIPS requires patents to be rnade available for any invention whether product or
pro'cess in all fields of industrial tec'hnologies. Indian Patents Act permits bnly process patents in invenfions
relating to food,.pharmaceuticals, agriculfural chemicals and chemicals. Similaily, neittrer product nor process
patentis allowed in the.area olFatomic energy. Honever, arbarg fram adispute between Indi.a and the European
Union over patents of pharmaceuticals and agdcultural chemicals, India has now been forced to abitle by the
ruling of the Dispute Settlement Body (DSB) of WTO before April 19, 1999 to provide patent protection to these
articles also. The lndian Parliament passed the Patents(Aspendment)Bill in March, 1999 providing for Exdusiue
Marketing Rights (EMR) for pharmaceutical and agro+hemical products. A mail-box mechanism has also been
activated, as per stipulation of TRlpS.
r Trade related Investment Measures ffRIMS) require governrnents not to discriminate against foreign capital,
which should be given nalional treafnent Thjs takes aralay India's discrefion not to atlow cirtain typeJof fuie$ri
_ lnvegbnent (soft drinks, potato chips) and this infringes on fire country's econornic sovereignty
INDIA AND T'T'TO
The fourth ministerial conference of the World Trade Organisation (WfO) was held in November,2001 in the
capital city of the Gulf Kingdom of Qatar. lndian team was led by Indian Commerce Minister. Min'rsters trom 142
countries had reached a consensus in Doha to launch a new round bt taUe negotiations under WTO. The ne$, round-
covering a wide range_ of subjects, including opening up of trade in agriculfure, services, industrial producb and
environmental issues- is mandated to end latest by January 1, 2005. lndia blocked the boha cons6nsus on the
prcposals to slart negotiations on four new issues-rnullilateralinvestnent, global rules on competition, etc. Once
krdia
secured a two-year respite and a right to say 'no'on these issues, it agreed to Doha Declaration. The declaration said
that negotiations would take place bn tlre basis of a decision to be taken by explicit consensus".
India was stoutly opposed to negotiations on the new bsues as it does not consider them to be tade bsues.
Union Commerce & Industry Minister of India attended the WTO General Council meeting in Geneva in July 21104, the
developing countries ied by lndia registered substantial gains on he export of industrial goods and servics at these
negotiations. India can now choose the sectors and products rvftere zero-import duty regime can be put in phe.
These sectors, according to him, are gems, jewellery, leaftergoods, chemicals bnd bulli Oruls where India enjoys cost
and price advantage. Even the tariff cutts would be phased outon a longer time line as 'less than reciprocalapproac*r'
!T !991 agieed to as the loverning factor for the devetoping counties.
COMPETITION COMMISSION
The Competition Act, 2003 which faced legalwrangle over the skucture of the competition body urderwent a
major amendment to the Act in 2OO7 and put into operalion only wittr effect from Apr1 1, 2009. The Govt. of India has
appointed a Competition Commission with five members witr Shri Dhanendra Kumar as Chairman
ft tb imperative for a mafure capitalist economy to harre a proper competition Commission more ftan 1OO
countries already have competition Commission.
-
The Commission envisages a shift of regulatory focus ftom obsessive dismanfling of monopolies to compeffibn
promotion and prevention of abuse of market dominance. And the new body has its work cut out. Scores oi InOlan
markets presumably suffer from the adverse effects of anli-competitive agreements. The Commission is expected to
guard against predatory and collusive behaviour on the part of firms, and protect the interest of economic effciency
and he interests of consumers in the process.
INCLUSIVE.GROWTH
A growth strategy which considers and includes in its beneficiaries, the poorest of the poor, disadvant4ed
groups is known as inclusive growth. The Eleventh Plan Approach Paper according to which a key element of-the
strategy for inclusive growttr must be to provide the mass of our people access tJ basic facilities suctr as heaffir,
education, clean drinking water, etc., and that govemmenb al different levels have to ensure the provision of these
services". Growth in a competitive economy is and will alrrvays be inclusive. Inclusive growth by ib very definftbn
implies an equitable allocation of resources with benefts accruing to every section of locieg, wfrictr ls a utopiqn

l4
 linkages at large and notjust equitaote
Necessity for inclusive'grourtii -- - matremalicatly
' on
ie inoentea short and'"., ff]ffi Xffi:
regional and population criteria.
"o*"
For India' Human resource b always a great
became Independ.ent the poverty tevel gtrength. Healthy human resource is our wealth. when lndia
was y"['niqh. Tte growing economy of tndia in recent yeas.
govemment spend rnore and more n*,6e fte
in the social sectorl ft w"" thought tiat ir ne elonomy grows,
clown to the poor' when this did not the benefits.nill tiekle
happen,ften someone hagto take action for,the$evetopmentof
hence the state takes the responsioirity lhe poorand
oi o"*loping the stutu" of the poor. inaiG whlr.incluslng gmrvfir
been one of the objectives of thOianffining. hm drvays
Dimensions of inilusive g.orntt -'-'
' Inclusive growflr focuses on both the pace and patem <if growth. Inclusive groMh
' shategies mrrst be tailored
!o gountry_specific circumstances.
' Inclusive s'9ffi focuses on productive employment
rather than income redistributiori. Hence the foans b not
onty on em,4gnryltsrowth out,rio on
VI! pidu.inufty;iJwfll
EVERGREEN REVOLUT|ON- rIV.gVq"I' YIVI
The pioneer of Indian green revotution
Mr.M.s. swaminathan presenfly chairman of National commissbn
Farmers gave a new call.for 'Eo.t!r""n Revolufion'ror oouoring the present production on
million tonnes to 420 mitlion tonn6s. For.making level of foo@rains from 210
'evergreen'Revorution' dr""""", he stressed on adopting best
scientific techniques. and promoting organic
ranrilng. *"" "
,nfgo.ned rouipr.*"quisites for gefiing success: (i)
Fi|fr:X[';?iH?!IIS[:;"$JXitHbt' dJ;;niriiti*i "l*o cii) Makins rrirvesring d'mputo;; anc 6vi
'"id;;
YELLOW REVOLUTTON
Green revolution established many landmarks
in the production of foodgrains. The next step in the series
agriculture research.and development cime- of
revolution is associated w$ tne. oblective
in operation tiltn n"
name ydt-low Rrvolunoru. Thb yetow
of actrieunt sertepenoence in the production of oil-seeds.
technological mission was introduc"o oilseeds
technologv in ofJseed cPps. during t'"'F
qensufing offium utiiisrtion or p*Ju"fioi, processing and
management
Pitroda' lt was one of six'missions"
i** ;i";bd;hfp orllat Rajrv Gandhi by trfs scjentffic Advbor Mr.sam
i
oilseed production programme. Yellow "i"rt"o ,siyurgngollsivl et iir"",i"i a'iz
revolution in India ln*rJd remarkable
ilffiL
lr eg st t"" are associated with
and edible oils. in production of oil seeds
""ti"u"*.nb
SIXTH ECONOMIC CENSUS
The first Economic census was done in 19T7,followed
1990' 1998 and 2005 respectively. ai-th by.second, third, fourth and fifrfr in the years 1gg0,
industrial units and wfth thji .r"r"iJ"
Economic c"niu" *"" hetd during 2011. Economic census covered all
ii"19*1qr=jn";; i"g,"irr was made. AI the deraits of a[ industriat and
gommercial unitb were included " Nalional gusi;;R&iJ;r.0rfenl
in this ftris
the supervision of Ministry of statistics-"nd.Progr.rry" rconomlc exercbe rras done under
of National Populalions degister n *ni"r,
mpr",i""Ltion. This "*n"u" Register b in the lines
Nationai-eusiness
.rr ueiaits of lnoiin cNiens are registered.
ACHIEVEMENTS OF 11TH PLAN
The economY gr.9w at an average annual rate
of 7.9%, despite the global crbis in 2006 and the other
Poverty dectined' Rgricutture gt-* in 2011.
per year compared to 2.4o/o inTenth plan period.
"ig.57"
TARGETS OF 121{ PLAN (2012-171
The full meeting of t'tDc chaired by the PM
approved the s^trategy paper for the 12m F.y. plan.
Plan resources forthe 12h Five t#d; ispegged at ns.gz.ro nniciorb forthewholeptan period.
The aggregate
The stong
-
inclusive growth India!.""ono*1" gtl*ii
document also cautions that in
*iir ul".at,an average rate of g per cent in the coming frve years.
The
poticy togjam, tt"-6op grourrth ["irrc-i'il,E
document proposes to """nitio'ot down to 5 from s.5%. The
lring d.wn 6;,1v L1ri9 glr"#t"g6 poinis by the end of the 12r,ptan and generate five crore
new jobs in non-farm s,qcigr' As'regard ltre inirastuctrire it says that efforts should be made to increase
investment in this sector to g per ce"t?ih;
green cover bv one million hectare GDP by tn"-"no """tor, ean feriod. ili" o:tr,"rt"rgets incrude increasing
every year ano aooing 30,000'MW "]-tii" or ienewiutu ur,"rgy generation capacig in the
Plan period' lt also seeks to reduce
intensity Jr tn"-ebit in tine with the target of 20-25
over2005 levels' The strategy forthe"riiJ*i* reducdion by 2o2o
sec'tor growth to 10 per cent' -it also
tiipr"n woutciaim i"i"ing.rgricurtur; o"eilit" 4 percentmanufacturing
11' Five year plan.
wants al| tre to;;i"1 ;["h"r targets of growtr than what was achieved in the
"i"i*s

l5