GLOSSARY

1
GLOSSARY
2
Gross Domestic Product

• Total money value of all final goods services
  manufactured within the country in one year.
• Annual value of goods sold and services
• paid for inside a country

3
Nominal Real GDP

• Nominal GDP measures the value of all the
  goods and services produced and expressed at
  current prices.
• Real GDP measures the value of all the goods
  and services produced expressed at the prices
  of some base year

4
Different ways of arriving _at_ GDP

• GDP at Constant Prices
• GDP at Current Prices
• Calculated at constant prices to know
  real growth

5
Gross National Product (GNP)

• GNP GDP Income accruing to domestic
  residents from investments abroad income
  earned by foreigners in the country.
• Annual value of goods and services in a country
  including income from other countries

6
National Income

• Sum of total incomes of normal residents of a
• country before deduction of direct taxes.
• To calculate total income, add all payments
  for
• the use of factors of production , like
  wages, salaries, profits net income from
  abroad.

7
Per Capita Income

• Income per head

• Average income of one person.

8
Inflation

• Excess Demand in the economy
• High costs
• Increase in money supply
• More money chasing fewer goods
• Rise in prices, purchasing power of money
• decreases
• High interest rates tend to increase inflation
• Zimbabwe classic case of gallopping inflation
• currency scrapped

9
INDICATORS OF ECONOMY

• Poverty Line
• Consumption expenditure required for getting
• 2100 calories per person in urban area and
  
• 2400 calories in rural areas.
• Key parameters
• No. of people BPL
• of population BPL

(Conti)
10

• Orissa highest percentage of BPL population
• Some poverty zones are BIMARU and the KBK
• belt in Orissa.
• The BPL percentage in India differs according
  to
• the methodology adopted.

11
INDICATORS OF ECONOMYHDI - HUMAN DEVELOPMENT
INDEX

• Developed by UNDP in 1996.
• Measures physical quality of life in a country
  along with 3 key parameters
• Life expectancy at birth
• No. of years in school
• Per capita income
• HDI 2009 India at 134 (182 countries ranked)
• HDI 2009 No. 1 is Norway
• Niger ranked at 182

12
INDICATORS OF ECONOMY

• WPI - WHOLESALE PRICE INDEX

• Measures increase/decrease in industrial,
• commercial prices of commodities under
  3 broad categories.
• Primary articles 98 items
• Fuel, power etc., 19 items
• Manufactured products 318 items
• Certain weightage to each category of
• commodities

13

• WPI II

• Base year 1993 94
• Used for calculating INFLATION.
• WPI no longer a true indicator of inflation as
  it may
• not reflect ground reality
• The basket of commodities may be outdated
• New series introduced from April 1st, 2000
• 435 commodities in the new series as against
  447
• in the old series.

14
INDICATORS OF ECONOMY

• CPI CONSUMER PRICE INDEX
• Calculates increase/decrease in retail price
• Direct bearing on consumers
• Different types of CPIs for
• agricultural laborers
• industrial workers
• urban non-manual employee

15
FOREIGN DIRECT INVESTMENT (FDI)

• FDI supplements domestic investment
• The investment made to acquire long term benefits
  
• in enterprises operating outside the economy
  of
• the investor
• The FDI relationship consists of a parent
  enterprise and a foreign affiliate which together
  form a transnational corporation
• Mauritius, Singapore and USA are the three
  biggest sources of FDI

(Conti)
16

• FDI involves bringing scarce capital,
  technology
• and managerial expertise
• FDI creates jobs
• FDI barred at present in retail trading except
  single
• brand product retailing
• FDI restricted to 26 in print media relating
  to
• news and current affairs
• FDI restricted to 26 in insurance and defence

17
Foreign Institutional Investor (FII)

• FII means an entity established or
• incorporated outside India which proposes
  to make investment in the financial markets
  in India
• FII is not stable money
• Unlike FDI the focus of FII is on making
• quick profits.

18
Real Nominal Interest Rates

• Real interest rate Nominal interest rate rate
  of inflation

19
Key indicators of banking sector

• CRR Minimum 3 Maximum 20
• SLR Minimum 24 Maximum 40
• Cash Reserve Ratio (CRR) 5
• Statutory Liquidity Ratio (SLR) 25
• Bank Rate 6
• Repo Rate 4.75
• Reverse Repo Rate 3.25

(Conti)
20

• Bank Rate is for a longer period say 6 months
• to one year
• Repo and reverse repo rates are for the short
• term. They are used to either increase
  money
• supply or mop up excess liquidity
• Repo and reverse repo have now assumed
• more importance than BR
• PLR is benchmark rate
• Concept of BPLR under scrutiny
• Majority of Banks lending is under BPLR

21
FOREX

• Exchange control
• Fixed Exchange rates
• Free/Floating exchange rates
• Depreciation/appreciation
• Devaluation
• Indias forex reserves more than 120 billion
• invested mostly in low yielding US
  securities
• Countries like China and India are financing
• consumption in the USA
• Chinalargest forex reserves in the world more
• than 1 trillion

22
Purchasing Power Parity (PPP)

• An exchange rate between two currencies such
• that the same basket of goods and services
  could
• be bought in each country if the cost were
  
• converted at that exchange rate.
• It is often used to compare the standards of
• living between countries.
• Rate of exchange between two countries
• determined by comparing respective
  internal
• price levels

23
Current A/c Convertibility

• Free flow for purposes other than for capital
• purchases and loans
• Exports
• Imports
• Travel
• Study abroad
• Medical treatment
• Employment abroad
• Gifts
• Consultancy
• Intl. credit cards

24
Capital A/c Convertibility

• The freedom to convert local financial assets
  into foreign financial assets vice versa
  at market determined rates of exchange
• Indicator of a developed economy
• Gives confidence to investors
• However, leaves the country at risk
• Tarapore Committee 1997
• Fiscal consolidation low inflation
• Financial sector reforms

25
TAXES

• DIRECT TAXES
• Direct incidence of tax on the person who
  pays the tax. liability to pay tax is NOT
  passed on to someone else. e.g. INCOME TAX,
  CORPORATION TAX, WEALTH TAX, LAND REVENUE,
  GIFT TAX etc.
• INDIRECT TAXES
• Levied on goods and services.
  Traders/producers pay it. Liability passed on
  to end customer. e.g. VAT, EXCISE TAX, CUSTOMS
  DUTY, SERVICE TAX
• New Tax on Goods and Services TGS to be
  implemented from April 1st 2010
• New Tax code proposed to replace Income Tax
  Act 1961.

26
SUBSIDIES

• Grants to suppliers of goods and services
• Used to keep consumer prices down (LPG
  Kerosine, PDS to BPL)
• To prop up production (farm and fertilizer
  subsidies)
• To boost exports
• To lower cost (tax subsidies)
• To improve infrastructure
• Meet social obligations (subsidy on food,
  education)
• Cross subsidies (petroleum products)
• Cross subsidies in Banking through concept of
  Below PLR loans

27
SUBSIDIES IN 2008-09

• Food subsidy Rs.32,667 cr.
• Fertilizer subsidy Rs.30,986cr.
• Kerosine LPG Rs.30,000 cr.
• Politically and socially sensitive issue.
• LPG subsidy aimed at the middle class

28
CORE SECTORS

• Coal
• Cement
• Power
• Steel
• Petroleum
• Petroleum refinery products

29
DISINVESTMENT

• 1991-92 to July 2007
• Target Rs.96,800 crore
• Achievement Rs.51,608 crore
• (14 companies privatised)
• Issues
• Loss making units
• Social responsibility
• Method Public issue, strategic sale
• Valuation
• Creating monopolies (IPCL, VSNL)
• Job loss
• Loss of govt. control

(Conti)
30

• Ministry of Disinvestment formed by NDA
  Govt Abolished by UPA Govt
• Present policy is to opt for the IPO model
  of disinvestment rather than outright sale
• Minimum Govt stake in PSUs to be 51
• National Investment Fund created to pool
  disinvestment proceeds
• Focus on Investment rather than
  disinvestment
• Investment Commission formed.
• Some prominent disinvestments are BALCO
  in 2001 and Hindustan Zinc Ltd in 2001-02 and
  VSL in 2001
• Current polices Disinvestment to be used
  sparingly
• Global financial trends do not favour
  disinvestment

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INFRASTRUCTURE

• Transport Railways, roads, shipping , civil
  aviation
• Communication Telecom, P T
• Energy Electricity, Oil, coal,
  non-conventional sources
• Science Technology
• Banking, finance and insurance
• Social education, health
• India lags behind China in development of
  infrastructure

(Conti)
32

• Top priority to creation of infrastructure
• Amartya Sens analysis that India has
  neglected social infrastructure
• Delhi Mumbai Industrial corridor DMIC in
  2008 with Japans assistance
• Aim is to create state-of-the art
  infrastructure to activate local commerce
• Petroleum Chemical Petrochemical Investment
  Regions PCPIR proposed in 2007

33
PATENTS

• Product patents
• Process patents
• Patents Act 1970
• Generic Drugs 80 bn worth
• Reverse Engg
• Huge opportunity
• Compulsory Licensing
• India has created a digital data base of
  traditional knowledge of healing systems like
  Yoga, Ayurveda, Unani and Siddha and
  registered with European Patent Office EPO

(Conti)
34

• Frivolous patents granted in Western countries
  for traditional Indian products like neem,
  turmeric and even for Yoga
• Geographical Indication (GI) is a patent
  associated with a region
• Ex Kalamkari art, Darjeeling Tea, Coorg
  coffee latest Tirupati Laddu
• Mashelkar committee on patents
• The patent regime of WTO can be overlooked in
  times of medical emergencies like Swine Flu

35
SSI

• Manufacturing Services
• Micro 25 lakhs 10 lakhs
• Small 25 lac - 5 crores 10 lac 2 cr
• Medium 5 10 crores
  2 - 5 cr
• 128.44 lakh units
• Turnover Rs.4,97,842 cr
• Employs 312.52 lakh people
• Exports worth Rs.86,013 cr

36
IMPORT RESTRICTIONS

• Tariff Barriers
• Non-Tariff Barriers

37
TARIFF BARRIERS

• Customs Duty
• Countervailing Duty
• Anti-dumping duty
• Transit duty
• Cess
• Additional duties or surcharges

38
Non-Tariff Barriers

• Health, Safety regulations
• Quality norms (ISO EN standards , FDA,
  CE mark)
• Quarantine laws
• Local subsidies
• Channelised imports through governmental
  agencies (eg sugar imports through STC)
• Licencing policy
• Quota restrictions
• Import bans
• Cumbersome Customs procedures

39
Fiscal Policy

• The governments policy of achieving economic
  objectives (employment, per capita income)
• through government earning and spending related
  to increase or decrease in taxes.
• Government sources of funds Taxes and
  duties, government businesses,
  fines, borrowing from public,
  investments
• Government uses of funds
  Infrastructure, mining, public welfare,
  defense, power generation, research and
  development

Fiscal policy intimately linked to the Union
Budget
40
Monetary Policy

• The governments policy of achieving economic
  objectives (employment, per capita income,
  balance of trade, economic parity)
• by controlling money supply through instrument
  like interest rates
• Decrease in supply Deflation or decrease
  in prices
• Increase in supply Inflation or increase in
  prices
• Monetary policy intimately connected to RBIs
  policies

41

• Hyper Inflation
• Stagflation
• Deflation
• Reflation
• Highest inflation in world is in Zimbabwe
• Currency made worthless due to inflation

42
Appreciation of the Rupee

• Indication of economy doing well
• Importers borrowers in forex are happy
• Domestic consumers are happy
• Interest on government borrowings come down
• Companies with forex loans will gain
• Debt of the government decreases
• Lowers inflation rate
• Exporters are hit
• Margins erode
• Producers have to cut costs

43
Agriculture

• Contributes about 22 to GDP
• 60 of area sown dependent on rainfall
• 65 to 70 of population dependent on
  agriculture
• 230.67 mt foodgrain production in 2007 08
• National Food Security Mission launched to
  enhance production of rice wheat and pulses
• India second highest producer of fruits and
  vegetables in world
• Largest producer of milk in the world

(Conti)
44

• India is home of spices-largest producer,
  consumer and exporter of spices
• India largest producer of cashewnuts and
  basmati rice
• National Horticultural Mission 2005
• National Project for Organic Farming 2004
• India has largest livestock population in
  world
• National Fisheries Development Board set up
  in Hyderabad

45
Energy

• Coal main source of energy 67
• Installed power capacity is 149,391.91 MW as
  of 31st May, 2009.
• Electricity Act 2003 - SERCs formed
• Coal based Ultra Mega Power Projects
• UMPP of 4000 MW each
• National Solar Mission to be launched on
  November 14th 2009
• Nuclear energy to be key for Indias quest for
  energy security. Hence 123 pact.
• Nuclear energy at present contributes 3 to 4
  to total energy pie

46
Miscellaneous

• India a services sector led economy defies
  conventional logic
• Conventional model is transition from
  manufacturing to services
• India is services sector led but still
  predominantly rural
• Manufacturing and infrastructure are top
  priorities of the Government
• Among infrastructure, social infrastructure is
  a very vital area

(Conti)
47

• Disinvestment of sick PSUs and profit making
  PSUs is needed to generate huge funds for
  infrastructure, specially social infrastructure
• Second generation economic reforms needed in
  power, agriculture, legal sector and financial
  sector
• Massive transfer of population away from
  unproductive agriculture to other sectors like
  services and manufacturing

48
Polity ?

• UPA ?? in May 2009. Congress 206 seats
• TMC second largest component of UPA
• Verdict 2009 is the defeat of the Third and
  Fourth Front primarily rather than of the NDA
• Highest tally contributed to NDA by Karnataka
• Left Front humbled in West Bengal
• Agatha Sangma-youngest Union Cabinet
  Minister, Age 28 years

(Conti)
49

• Shashi Tharoor is MOS External affairs
• Meira Kumar first woman to be the Lok Sabha
  Speaker
• LK Advani and Arun Jaitley leaders of
  opposition in Lok Sabha and Rajya Sabha
• Oldest Cabinet Minister SM Krishna age 77
  years

50
Polity ??

• Ramesh Pokhariyal new Chief Minister of
  Uttarakhand
• K. Rosaiah new Chief Minister of Andhra
  Pradesh
• Sikkim creates history-all MLAs belong to the
  ruling party
• Ashok Gehlot new Chief Minister of Rajasthan
• Navin Chawla is the new chief Election
  Commissioner
• Mohan Bhagwat new RSS Chief
• Congress retains power in Maharashtra, Haryana
  and Arunachal Pradesh in October 2009.

51
INDIA CHINA TIES

• 8,3000 sq. km of India claimed by China
• China objects to ADBs loan to Arunachal
  Pradesh
• Arunachal regarded by China as Southern
  Tibet
• China objects to Dalai Lamas and Manmohan
  Singhs visits to Tawang
• India bans Chinese mobiles, dairy products and
  toys
• China says Agni - V can target most of China
• China reveals a plan on its semi-official
  website to balkanise India into 15 to 20
  pieces by using Pakistan, Bangladesh and
  taking the assistance of various terrorist
  organizations like ULFA etc
• The two fastest growing economies in the world
  are China and India
• India is the worlds largest democracy and
  China is the worlds largest free-market and
  politically regimented country

52
JASWANT SINGH

• Author of Jinnah India Partition
  Independence
• Former Defence and External Affairs Minister
  in NDA Govt
• Expelled from BJP for sympathetic portrayal of
  Jinnah and criticism of Sardar Patel Gandhiji
  and Jawaharlal Nehru.
• He is chairman of Public Accounts Committee
  PAC in Lok Sabha.
• Involved in controversy during NDA Govt for
  escorting terrorists to Kandahar

53
AWARDS

• Deep Joshi awarded Magsaysay award for
  social service
• Alice Munro wins 2009 Man Booker
  International Prize
• President Barack Obama is surprise choice
  for 2009 Nobel Peace Prize
• Hilary Mantel wins 2009 Man Booker Prize
• Herta Muller 2009 Nobel Prize for Literature
• Elinor Ostrom and Oliver Williamson, Nobel
  Prize Economics
• Venkatraman Ramakrishnan wins Nobel Prize
  for Chemistry

54
Business related awards ET Awards

• Business Leader of Year-Anand Mahindra
• Global Indian-Ram Charan
• Businesswoman of Year-Vinita Bali
• Corporate Excellence, Company of the Year- Hero
  Honda
• Entrepreneur of the Year-G V Krishna Reddy
• Corporate Citizen of the Year-TERI,
• Reformer of the Year-Nitish Kumar
• Life Time Achievement award-Keshub Mahindra

55
SPORTS

• Rio De Janiero 2016 Olympics
• 2010 FIFA World Cup venue is South Africa
• 2010 Commonwealth Games venue Delhi
• 2010 World Cup Hockey venue Delhi
• 2011 World Cup Cricket India, Sri Lanka and
  Bangladesh
• 2009 Castrol Award Player of the Year, Gautam
  Gambhir
• ICC Test Cricketer of Year 2009 is Gautam
  Gambhir
• ICC, ODI player of Year 2009 is MS Dhoni
• Union Minister for Sports, MS Gill

56
MISCELLANEOUS

• Mamta Banerjee coins slogan of Ma Maati
  Manush
• Pranab Mukherjee and P. Chaidambaram unveil
  proposal for a new Tax Code
• Nandan Nilekani appointed chief of the Unique
  Identification Authority
• C. Ranagarajan is reappointed chairman of PMs
  Economic Advisory Council
• Barack Obama is youngest American president to
  win Nobel Peace Prize

(Conti)
57

• Former President Pervez Musharraf indicted
  for murder of Baluch nationalist leader Nawab
  Akbar Bugti
• Centenary of eminent Defence Scientist, Suri
  Bhagwantam, observed
• Angela Merkel most powerful woman in the
  world, according to Forbes
• Jean Dreze, Belgian economist is ETs Policy
  Change Agent of Year
• Nandita Das is chairperson of the Childrens
  Film Society of India
• Lee Kun Hee former head of Samsung given five
  year suspended jail sentence and a fine of
  110 million imposed

58
MISCELLANEOUS ??

• Fortis acquires Wockhardt Hospitals
• Telecom rural penetration only 13 in India
• Swiss luxury goods giant Mont Blanc adopts
  Mahatma Gandhi as brand ambassador for its
  Rs.14 lakh pen
• Swati Piramal is new president of Assocham
• Current capacity of nuclear power in India is
  4000 MW
• Lunar Crater Observation and Sensing Satellite
  LCROSS of NASA crashlands on moon to search
  for water
• Madhu Koda becomes first ex-chief minister to
  be charged under PMLA