Economy (Sk)

Front 1

First phase(1951-66)

Back 1

-Nehruvian Era of Planning.

Model: Harrod Domar

(Eco growth increases with increase in savings and investments.)

Features:

1. High govt presence(Imperative Planning)

2. Mahalanobis Startegy

3. Inward Oriented Policy

Front 2

Second phase (67-90)

Back 2

Important features:

1. Green Revolution

2. Social welfare policies.

3. Infrastructure Development & higher industrial growth(post 1980)

4. Outward oriented policy, gradual liberalisation (post 1980)

Front 3

Third phase(91-present)

Back 3

Policy features:

LPG(l, g introduced earlier, p- new)

1. Industrial Reforms

2. Financial Sector Reforms

3. External Sector Reforms

4. Fiscal Reforms

5. Indicative Planning

Front 4

4th FYP(1969-74)

Back 4

- Stagflation

- first talk of socio - economic reforms.

Front 5

Plan holiday

Back 5

Between 1966-69

-first green revolution.

Front 6

5th FYP(1974-79)

Back 6

- official rejection to trickle down effect

- socio-economic reforms introduced for first time.

1978,1979- Rolling plans by Janata party (not successful)

Front 7

6th FYP(1980-85)

Back 7

- implementation of SER (first wage employment and self employment)

- First infrastructure Development concentration

-officially done away with mahalanobis Startegy

- higher industrial growth

Front 8

7th FYP(1985-1990)

Back 8

Start of Indicative Planning

-Outward oriented policy

-Focus on modern services sector

-Gradual liberalisation

Front 9

Reasons for 1991 BoP crisis

Back 9

1. Deficit Financing

2. Gulf war(lower remittances & higher import bill)

3. Rising external debt & borrowings due to SER and infrastructure

Front 10

8th FYP(1992-1997)

Back 10

-Jobless growth (6.8%)

-FD and CAD decreased due to higher industrial growth and tax reforms.

Front 11

11th FYP

Back 11

- US Subprime Crisis

- slowdown in India(however not much affected, the economy)

- decrease in trade and foreign capital movement.

*first time the concept of inclusive growth and monitor able targets for Centre and states.

Front 12

10th FYP

Back 12

- foreign capital inflows increased. (FPI introduced, stocks doing well)

(foreign financial institutions doing well, in terms of returns)

*lowest FD and CAD EVER

Only Negative: Neglected Agriculture Sector.

Front 13

Tarapore Committee

Back 13

For: Capital Account convertibility

Front 14

9th FYP(1997-2002)

Back 14

FD and CAD increased

-resaons( East Asia Crisis)

- Service Sector share increased

Front 15

Recommendations of Tarapore Committee

Back 15

1. Low FD to GDP

2. Low CAD to to GDP

3. Stable Financial Sector

4. Lower Inflation Rate.

Front 16

What are money markets?

Back 16

- Short term money markets

- three types :

1) overnight market

2) notice money market

3) term money market

Front 17

Instruments of Money Markets

Back 17

1. Call Money Markets

2. Commercial Bills

3. Certificate of Deposits

4. Treasury Bills

5. Repo Market

6. Reverse Repo Market

7. Commercial Papers.

Front 18

Call Money Markets

Back 18

- Short term loans

- show day to day status of banks

- interest rate (inter bank offer rate-IBOR) : usually in sync with LIBOR or MIBOR)

Front 19

Commercial Bills

Back 19

- given by buyer to seller after affirmation from a bank.

- Sent to a commercial bank by buyer (receives funds - discount rate)

- C banks can send CBs to RBI and get funds- Bank Rate(rediscounting rate)

Front 20

Certificate of Deposits

Back 20

- Short term loan raised by a commercial bank or financial institution

- tradeable.

Front 21

Commercial Papers

Back 21

-loans raised by corporate entities from public

Front 22

Money multiplier

Back 22

- for each rupee increase in reserve money resulting increase in money supply is called money multiplier.

Front 23

Money aggregates

Back 23

Front 24

Monetary Policy Instruments

Back 24

1. Quantitative- uniform for all banks and borrowers

2. Qualitative - RBI has discretionary power.

Front 25

Quantitative Instruments are

Back 25

1. CRR

2. SLR

3. OMOs(eg quantitative easing)

4. RR & Bank Rate

5. Market Stabilisation Scheme. (to control sudden increase in liquidity)

6. Liquidity Adjustment Facility (for short term adjustments) (eg a combination of RR and RRR changes)

Front 26

Quantitative Easing

Back 26

- Expansionary OMO

- usually taken up in case of liquidity trap and slowdown/recession

- central bank of country buys govt securities and no. Of other securities.(usually long term)

Front 27

Qualitative Instruments

Back 27

1. Marginal Standing Facility (MSF)

2.Marginal Requirements for Secured loan

3. Selective Credit Control

4. Moral Suasion.

Front 28

Marginal Standing Facility

Back 28

- overnight loans

- strict, usually high rate of interest

- only for Scheduled Commercial Banks

Front 29

Marginal Requirements on Secured loands

Back 29

Marginal Requirements implies a particular limit to which a sector/industry can take a loan to the value of their securities.

Secured loans - any loan taken by keeping financial security or collateral.

Front 30

Monetary policy transmission

Back 30

Refers to the process through which changes in monetary policy can effectively be passed onto general public.

Front 31

Benchmark Prime lending rate

Back 31

- it's the minimum interest rate at which banks give loans to prime borrowers

- Calculated on the basis of: a) Cost of Deposits

b) Administration expenses.

c) Operating expenses.

*2010: BPLR replaced by Base Rate.

(statutory expenses added)

(cost of Deposits to be calculated for 1 year maturity deposits)

Front 32

Marginal Cost of Funds based lending rates

Back 32

Front 33

Scheduled banks

Back 33

- registered under RBI Act 1934

-They are (came into existence in)

Before 1991: 1. SBI and associates

2. Nationalised Banks

3. Regional Rural Banks

After 1991:

1. IBRD & BMBs

2. Private Sector Banks

3. Foreign Banks.

Front 34

Priority Sector lending

Back 34

- Started in 1969(Coincides with GR)

- every bank needs to give 40% loans to priority sectors

Priority sectors since before 1991:

1. Agriculture

2. Small enterprises

Since after 1991:

1. Education (not all)

2. Housing for Poor

3. Exports.

*foreign Banks 32% PSL and no need to for agriculture

Front 35

Narsimhan Rao Committee

Back 35

-Banking Reforms.

Front 36

Major reforms of Narsimhan Rao Committee that were accepted

Back 36

1. Lower CRR and SLR

2. Interest rate deregulation

3. Public sector banks could raise money from share markets

4. Private and foreign banks allowerd

5. Capital adequacy reforms

6. Prudential norms related reforms

Front 37

What does double financial repression mean?

Back 37

- it refers to problems on liabilities( eg demonetization) & problems on assets side. (eg NPAs)

Front 38

Basel Norms.

Back 38

They are capital adequacy norms

HQ: Bureau of Intl Settlements

Front 39

Basel 1 norms (1988)

Back 39

- any banks should have adequate capital for handling credit risk

Front 40

Basel 2 norms(2004)

Back 40

3 Requirements:

a) minimum capital requirements

b) Supervisory Review(risk management department in every bank)

c) Market Discipline (showing balance sheet to public, declaring NPAs etc)

Talks of 3 risks:

1) market risk

2) credit risk

3) operational risks

Gives a Capital adequacy ratio

Front 41

Capital adequacy ratio

Back 41

Higher CAR, better for the bank.

Front 42

Basel 3 norms

Back 42

Introduces Leverage ratio

Front 43

Categorisation of Assets

Back 43

1. Standard assets

2. Substandard assets(NPAs for under 12 months)

3. Doubtful assets( NPAs after 12 months)

4. Loss assets (when loan cannot be recovered according to auditor)

*after declaring loss asset the loans are written off (removed from balance sheet)

Front 44

Scheme for sustainable structuring of stressed assets(S4A) - 2016

Back 44

Divide NPAs into 2 parts

1. Sustainable Debt: has to be paid by company

2. Unsustainable Debt: Converted into Equity

Front 45

SARFAESI Act 2002

Back 45

- enables bank to take possession of securities if loan hasn't been repaid in 60days of notice (without intervention of courts)

- banks allowed to take services of ARCs

Front 46

Strategic Debt restructuring (SDR)

Back 46

- group of banks come together to convert part of NPA to equity

Front 47

PJ Nayak Committee (Indradhanush Committee)

Back 47

Reforms related to Public Sector Banks

Front 48

PMJDY

Back 48

- launched :2014

- under : Ministry of Finance

-incentives :

=zero balance accounts.

=can be opened in both public and private banks

=easier kyc norms(no reqt of PAN card)

=Rupay Debit Cards, mobile services free of cost

=life cover and accident insurance

Front 49

Types of Unemployment

Back 49

1. Frictional (or Voluntary) unemployment

2. Structural Unemployment (eg due to tech advancements)

3. Cyclical Unemployment (due to slowdowns/recession)

4. Seasonal Unemployment

5. Disguised/ Hidden Unemployment

Front 50

Natural rate of Unemployment

Back 50

= (Frictional + Structural) unemployment rate

-unavoidable type of Unemployment

-government can not completely take care of this problem

Front 51

Labour force

Back 51

- part of population which is willing and able to work (not necessarily employed)

-age: 15-64

Front 52

Rates of employment related things

Back 52

Front 53

Methods to estimate employment and unemployment

Back 53

- given by NSSO

1. Usual Status

Reference Period- 1 year

Activity Status - 30+ days (considered employed)

*used to calculate Chronic Unemployment

2. Current weekly status

Reference period : 7 days

Activity status - 1 hour+

*used to calculate Seasonal Unemployment

3. Current Daily status

Reference period : 7 days

Activity status: looks into each day, if 1-4 hrs work 1/2 day employment, if 4-8 hrs work 1 day employment, this is summed up for 7 days

3.

Front 54

Why is India' LFPR decreasing?

Back 54

1. More girls going to educational institutions.

2. Changes in HHs income & female LFPR (especially seen in rural India)

- household income increase, has led to women staying at home and taking care of children etc

3. Mechanisation of agriculture

Front 55

Arjun Sengupta Committee

(National Commission for Enterprises in Unorganised Sector)

Back 55

- to look into definition of formal and informal sector.

Definition proposed for informal sector: no. Of informals in informal sector + no of formals in nature of being informal

Front 56

Poverty

Back 56

Front 57

Methods to measure relative poverty

Back 57

1. Lorenz Curve

2. Gini Coefficient (better since it helps compare between numerous countries)

Front 58

Gini Coefficient

Back 58

Front 59

Measures of absolute poverty

Back 59

1. Poverty Line

2. Head count ratio or incidence of poverty (total no. of BPL HHs/total HHs x 100)

3. Poverty Gap Ratio (poverty gap/per capita income)

1,2-> don't give depth of poverty

3-> does give depth of poverty

Front 60

Poverty Line estimation in India

Back 60

Step 1: Definition of Poverty Line (By Planning Commission)

Step 2: Data Collection ( by NSSO)

Step 3: Inflation Adjustment

Step 4: Comparison between Definition & adjusted consumption expenditure

Front 61

Methods to calculate consumption expenditure survey

Back 61

Front 62

Definitions of Poverty line

Back 62

1st - 1973-2005 : 2100/2400KCal per day

2nd - 2005 onwards : on recommendation of Tendulkar Committee

3rd - still not in place : Rangarajan committee's poverty line.

Front 63

Tendulkar Committee PL

Back 63

Front 64

Rangarajan committee's (2012-14)

Back 64

Front 65

Poverty lines

Back 65

Front 66

Alternate Poverty Estimates for India

Back 66

1. Socio-economic Caste Census

- 7 indicators on-nature of houses, land ownership, adult literacy

- has classification of SC/ST & other HHs

- needs updation, last census 2011

2. Multi dimension poverty index

- Calculated by UNDP

- 10 indicators - health, education standard of living

- multidimensional poor HH is one which is deprived in 3+ indicators.

Front 67

Shankar Guru Recommendations

Back 67

Agriculture Market Reforms

(Gave Model APMC)

Front 68

Model APMC Act 2003

Back 68

Key recommendations:

1. Deregulation of Agriculture Markets

2. Separate market for perishable goods.

3. Development & Management of Agricultural markets

4. Promoting Contract Farming (between farmer & buyer)

Front 69

ReMs- Rashtriya e-marketing services Ltd.

Back 69

By: Karnataka Government & NC-DEX e-markets Ltd

- to integrate all APMCs across Karnataka through an e- platform

Front 70

World Trade Organisation

Back 70

- Estb 1995

- Role: Management of Multilateral Trading System

- Predecessor to WTO: GATT, 1948(Bretton woods conference)

- Formed at end of Uruguay round of GATT(ended 1994)

Front 71

Principles of WTO: (NOT LEGALLY BINDING)

Back 71

1. Free Trade.

2. Fair Trade

3. Non-discriminatory Trade (MFN to all members of WTO and National Treatment, for domestic goods)

Front 72

Agreements on Agriculture, 1995

Back 72

About:

-reduction in domestic subsidies, export subsidies

-improving market access

Front 73

3 types of subsidies WTO talks of:

Back 73

1. Green box- non-trade distorting

2. Blue box - subsidies given under production limiting programmes

*1,2 need not be reduced

3. Amber Box- trade distorting subsidies. Need to be reduced (exception for deminimus level - I.e 5% of Agriculture GDP for developed countries and 10% of Agriculture GDP for developing countries)

Front 74

Box shifting

Back 74

Shifting from Amber Box to green or blue box (done by USA)

Front 75

In which WTO ministerial did India reject the peace clause given by DG of WTO?

Back 75

Bali Ministerial, 2013

Front 76

Nairobi Ministerial

Back 76

- concept of Special Safeguard Mechanism(SSM) is discussed here.

- available to mostly developed countries (India wants it but does not have it)

Front 77

Agreement on TRIPs(Trade related IPRs)

Back 77

- more stringent protection of IPRs

- doha ministerial- compulsory licensing under Trips for country to make patented medicines

- India fully TRIPs compliant.

- India filed for compulsory licence for Nexavar( cancer med)

Front 78

Nexavar

Back 78

-patented by Bayer

-USA rebutted, criticised India

- India got licence

- NATCO Made Nexavar at cheaper costs.

Front 79

Trips plus

Back 79

Not under WTO

- India not a member