Economy

There is about accumulated debt of 1 lakh crore on state electricity boards. The reasons being free power is a political issues and different political parties offer it as dole to influence the voter. This subsidy has done more damage than good. 83% of the Punjab farmers have small or marginal land holdings and they … Read more

Financial inclusion is described as the method of offering banking and financial solutions and services to every individual in the society without any form of discrimination. It is done to bring majority of stakeholders under the net of financial security. Benefits of Financial inclusion: Access to Financial services enables the poorest and most vulnerable in … Read more

The process started instantly after Independence, with the setting up of the Industrial Finance Corporation (IFCI) in 1948 to embark on long term term-financing for industries. State Financial Corporations (SFCs) were formed under an Act that came into effect from August 1952 to endorse state-level, small and medium-sized industries with industrial finance. In January 1955, … Read more

  Tax avoidance Tax evasion Legal way of saving taxes. Illegal in a financial system Recording of income Not recording of income. Help in saving, at the same time money can be channelized for economic growth Help in saving, but since money is not accounted. Money cannot be channelized for economic growth.   Positive extrenalities … Read more

Fiscal Consolidation refers to the policies undertaken by Governments (national and sub-national levels) to reduce their deficits and accumulation of debt stock. Fiscal Consolidation refers to the treatment of a group of entities as one entity for taxation purposes. Simply put, the parent entity would be accountable for the entire group’s tax liabilities. Thus in simple … Read more

According to SEBI, Junk bonds are high yield bonds issued by low rated companies.   Junk bonds are a high-yielding debt instrument without an investment grade (noninvestment-grade bond).  These bonds carry a credit rating of BB and lower, because they have a higher risk of default. Typically, these bonds also give higher returns as opposed to … Read more

Disinvestment is the practice of selling of shares by an organisation ( generally used for government) to the private sector. Disinvestment is de-nationalization of lessthan 100 per cent ownership transfer from the state to the private sector. The objective of disinvestment is to mobilise the resources, To use the resources for productive purposes like social … Read more

The government does not perform any business so it cannot earn money to spend. Hence,  the government has to raise the money from the economy to enable it to spend that  money in terms of requirements and national priorities. The government raises money  primarily through ‘taxes’ and the spending known as ‘public expenditure’. A policy … Read more

Foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company’s assets and is relatively liquid depending on the volatility of the market. Along with foreign direct investment (FDI), FPI is one of the common ways to … Read more

Transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Transfer pricing can be exploited for tax avoidance and tax evasion through Base erosion and profit shifting strategies. Base erosion and profit shifting refer to corporate tax planning strategies used by multinationals to “shift” profits … Read more

Objective It aims to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart’ Solutions. It aims to focus on sustainable and inclusive development and to set examples that can be replicated both within and outside the Smart City, catalysing … Read more

Demonetisation  was part of the move to curb corruption. It was one of the step to curb the system of black money. The major reasons for demonetisation were:   India’s currency to GDP ratio was 12%. The value of the high currency notes also increased after increase in the standard of living. India’s economy is … Read more

There are no magic bullets to revive the economy as this time situation is quite different. The  macro indicators are fine but overall economy is not doing good. Last quarter growth was pegged at 4.5%, IIP was in negative territory, Exports are not growing, Private investment is low, Twin balance sheet problem, IL&F crisis etc. … Read more

Possible solutions are: Expand the outreach of the formal credit system to reach the really poor and needy. Reduce rate of interest for crop loans to 4 per cent simple, with government support. Moratorium on debt recovery, including loans from non-institutional sources, and waiver of interest on loans in distress hotspots and during calamities, till … Read more

. The main flaw in the system that a large chunk of those who are eligible for subsidized  food grains under BPL category have been left out leading to critically question  comprehensiveness of TPDS. The criteria for inclusion in the BPL list are solely economical which is often understated  or under reported because lack of … Read more

  Make in India : This programme was launched on 25th September which aims at making India a global hub for manufacturing, research and innovation and integral part of the global chain. The GoI has identified 10 ‘Champion sectors’ that have potential to become global champion, drive double digit growth in manufacturing and generate significant … Read more

Withholding tax: A tax imposed on the income on a foreign portfolio (investments). This tax is imposed to discourage foreign investments, to encourage domestic investment, and to raise money for the government.   Venture capital: Generally, a private equity capital which lends capital to the entrepreneurs who are innovative and cannot get the required fund … Read more

Industrial sector is a crucial sector for sustainable growth of India. The sector growth rate and its contribution to overall growth is not sufficient enough for achieving double digit growth. The benefit of achieving industrial growth is that it is employment friendly and it is a self priming system. The constraints in the development of … Read more

India is largely a informal economy where various MSME units are there. But these units find hard to access to the formal systems of credit. Before the inception of MUDRA, this sector gets only 4% of its credit needs from banks. The sector used to borrows unspurious rates of interest of 120% and beyond. MUDRA … Read more

GST council is a constitutional body which consists of Finance minister as chairman, Union minister of state in charge of revenue of finance, Minister of finance or any other minister nominated by each state government to GST council.  It make recommendations on following issues: Taxes, cesses, and surcharges to be included under the GST Goods … Read more

Even though India has experienced a high growth period in the last 15 years but its employment elasticity has remained on lower side. The period is sometimes termed as Jobless growth period. Following are the reasons for unemployment in India: Low productivity in agriculture. Disguised unemployment in agriculture is a serious issue. More than 48% … Read more

Under the Monetary Policy Framework Agreement, the RBI will be responsible for containing inflation targets at 4% (with a standard deviation of 2%) in the medium term. Under Section 45ZA(1) of the RBI Act, 1934, the Central Government determines the inflation target in terms of the Consumer Price Index, once in every five years in … Read more

NITI Aayog as guided by the central government has come up with a unique and promising idea of ‘Aspirational Districts Programme’ based on mass movement approach. The uniqueness of the programme lies in its approach and implementation based on creating a competitive environment and empowering State Governments (mains driver) diving respective districts as competitors. (total … Read more

The fund was established with to mitigate volatility in the prices of agriculture produce. It was established with a corpus of 500 Crore which aims at price stability.  The fund will be utilised for  following purpose:   Direct purchase from farmers at farm gate Maintaining a strategic buffer stock that would discouraged hoarding and unscrupulous … Read more

The GDP deflator, also called implicit price deflator, is a measure of inflation. It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year. This ratio helps show the extent to which the increase in … Read more

In recent times, there has been an increased preference of mutual fund companies as well  as insurance companies to combine the investments in stock markets with life insurance  plans, known as ULIPs. This need has arisen as there is very low penetration of life  insurance in India or lack of awareness of the need for … Read more

Physical Quality of Life Index (P.Q.L.I) was developed by famous economist Morris David in 1979 for 23 developed and developing countries. Morris David used the following three indicators to prepare a composite index known as Physical Quality of Life Index: Life Expectant Rate (L.E.I) Infant Mortality Rate (I.M.I) Basic Literacy Rate (B.L.I) Life Expectant Rate … Read more

The period 2000-2010 was a golden period for growth of services in India, one of rapid services-led economic growth in India; the economy grew at an average annual rate of 7.2 per cent, and around 63 per cent of this growth came from growth of services. Such growth leads to a belief that India is … Read more

Inflation is the general increase in the price level. This increase in the price level reduce the purchasing power and the disposable income. This decrease hurts the poor most. There are various ways to control inflation. Some of them are as follows:   Credit Control: Central bank (RBI in India) can control the money flow … Read more

The Tobin Tax, named after Nobel Prize-winning US economist James Tobin, was proposed in 1971 for the first time with the intention to levy it on short-term capital currency transactions. whenever currency crises have erupted, the proposal for a levy on international currency transactions has been debated. Tobin tax as a tool to discourage speculative … Read more

The fourteenth finance commission is of the view that tax tax devolution should be the primary route of resources to the states. The commission recommends to increase the tax devolution of the divisible pool to states to 42% for years 2015 to 2020. This is 10% more compared to 32% target set by 13th financial … Read more

Subsidies are a major component of expenditure they are a form of transfer payment given by government to the People. Subsidies can be classified as food, petroleum and agriculture subsidies. Why rationalisation: Government expenditure power is limited and they cannot go beyond a point further the fiscal deficit should be solely utilised for the purpose … Read more

The Monetary Policy Committee of India is a committee of the Reserve Bank of India that is responsible for fixing the benchmark interest rate in India. The meetings of theMonetary Policy Committee are held at least 4 times a year and it publishes its decisionsafter each such meeting. The committee comprises six members – three … Read more

India Cash/GDP ratio is 12.24% which makes it one of the largest cash based economy. But there are certain problem for a cashless economy especially for India as : ‘ There is low penetration of internet. Last mile connectivity especially in rural sector is quite low which creates hurdle in digitisation of economy. Lack of … Read more

Sunrise Industry: Sunrise industry is a colloquial term for a burgeoning sector or business that is just in its infancy but shows promise of a rapid boom. A sunrise industry is typically characterized by high growth rates, numerous start-ups and an abundance of venture capital funding. Sunrise industries generally have plenty of “buzz” surrounding them as public … Read more

Economic growth is key to the overall development. The growth accompanied by regulatory environment for inclusive growth can be a booster for Indian economy. Further, all global agencies like world bank, IMF etc. have termed India to be bright spot in the light of low growth rate of global economy. But, the economic environment must … Read more

SHAKTI: Coal linkage policy named SHAKTI or the Scheme to Harness and Allocate Koyla (Coal) Transparently in India. Salient Features of the policy   This policy will award fuel supply agreements to coal plants already holding letters of assurance (LoAs). It is issued to new consumers on being approved by the appropriate authority, based on … Read more

CAATSA stands for countering American adversaries through trade  act. As the name suggest, it is an act passed by the US congress and it sanctions trade in the field of defence, energy etc. with Russia, Iran and North Korea. This act is going to affect India-Russia and India-Iran Relations. CAATSA, if implemented in its stringent … Read more

The decline in agriculture growth is attributed to two consecutive drought years; as 60% of Indian agriculture is rain-fed. A target of 4% growth has been envisaged for agriculture and allied sectors for twelfth plan period, however, the growth was (-) 0.2 per cent in 2014-15 & 1.1% in 2015-16. The depressing situation of agriculture … Read more

Current weekly status:  The Current Weekly Status (CWS) approach to measuring unemployment uses seven days preceding the date of survey as the reference period. A person is considered to be employed if he or she pursues any one or more of the gainful activities for at least one-hour on any day of the reference week. … Read more

It is a dedicated fund set up by Ministry of Finance,in 2013, for implementation of initiatives aimed atenhancing the safety and security for women inthe country. It is a non-lapsable corpus fund.Ministry of Women and Child Development is thenodal Ministry to appraise schemes under NirbhayaFund and also to review and monitor the progressof sanctioned Schemes … Read more

In 1991, India launched a process of economic reforms in response to a fiscal and balance-of-payments (BoP) crisis. The reforms and the related programmes are still going on with changing emphasis and dimensions. The economic reform programme, that India launched, consisted of two categories of measures: Macroeconomic Stabilisation Measures and Structural Reform Measures. POSITIVE IMPACTS … Read more

Liberal entry of private sector and foreign banks. It is as a part of the reforms that today there are big private banks such as ICICI, HDFC, Axis and foreign banks such  as the Citi group, HSBC, Barclays operating along with the public sector banks. Public sector were provided greater autonomy to function in a … Read more

Both disinvestment as well as privatization is the reverse of investment. For setting up  public sector, the government had to invest by subscribing in shares of the new public  sector from budgetary resources. Thus, disinvestment and privatization both imply ‘selling  of shares of public sector by the government’. We all know that shares are traded … Read more

According to the recent economic survey, the problems associated with logistics are the main concern for India trade and they are reducing the competitiveness by increasing the cost. Some key challenges are as follows:   High cost of logistics-impacting competitiveness in domestic and global market. The structure of modal mix is an inefficient one ( … Read more

  MONETARY POLICY TOOL:   There are several direct and indirect instruments that are used for implementing monetary policy. Repo Rate: The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF). Reverse Repo Rate: The (fixed) … Read more