ECONOMICS FOR CA-CPT - QUICK REVISION VERSION

8/12/2019 ECONOMICS FOR CA-CPT - QUICK REVISION VERSION

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SCHOLAR for CA-CMA-CS, KAKINADA, 8977313131, 08846583131

CHAPTER-1

INTRODUCTION TO MICRO ECONOMICS

Unlimited wants

Basic Economic problems

Scarce resources

ECONOMICSowes its origin to the Greek word OIKONOMIAwhich means household.

DEFINITION PROPOSED IMPORTANT PHRASE

WEALTH

+ve

science

Adam

Smith(1776)

JB.SAY

Wealth of nations (The Nature and Causes of Wealth of

Nations)

Science deals with wealth

WELFARE

Normative

science

Alfred Marshall

A.C.Pigou

Study of mankind in the ordinary business of life.

(MAN>WEALTH)

Measuring rod of money.

CHOICE

MAKING

ROBBINS(1931) Relationship between ends and scarce means which

have alternative uses.

ENDS-WANTS ARE UNLIMITED

MEANS RESOURCES are scarce and have alternative

uses

DYNAMIC

GROWTH

Paul.A.Samuelson

Henry Smith

Jacob Viner

Distribute them for consumption now and in the future

amongst various people and groups of society.

Share of what other people have produced

Economics is what economists do.

Micro and Macro Economics

Micro Macro

Greek word micros = small Greek makros = large

Resource allocationand pricing is central

theme of micro economics

Maximising of National Income

It studies individual economic units It studies aggregate economic units

Examples :

a. Individual demandb. Price of a product

Examples :

a) aggregate demandb) general price level

c) national income

Economics is both SCIENCE &ART

Economics may be treated as pure and positive Economics, but as a tool of practical

application, it must have some normative goals in view.

Positive statement: just a statement and no judgement or suggestion will be provided.

Eg: Economics deals with wealth

Normative statement:it involves judgements & suggestions.

Eg: Wealth should be used for welfare of people.

Methods of study: Inductive and Deductive

Deductive generalto particular Inductiveparticularto general

Marshall rightly pointed out, induction and deduction are both needed for scientific thought

as the right and left foot are both needed for walking.

CENTRAL ECONOMIC PROBLEMS:

1. What

2. How

3. For whom4. What provision are to be made for economic growth.(consumption of resources and future

growth are inversely related)

*****WHEN to produce is not a economic problem.

Production Possibility curve or transformation curve or production possibility frontier:

Assumptions: (1) There is a given amount of productive resources and they remain fixed;

(2) Resources are neither unemployed nor underemployed; and

(3) Technology does not change. (4) Two product economy

**A rightward shift in PPF represents improved technology or addition of resources.

A leftward shift in PPF represents destruction of resources due to war, natural calamities

** If point moved from inside the curve to on the curve it represents effective use of

resources, Eg: reduction of unemployment etc.,

HOW DO DIFFERENT ECONOMIES SOLVE THEIR CENTRAL ECONOMIC PROBLEMS?

CAPITALISTIC SOCIALISTIC MIXED

Also known as free market

or laissez-faire economy

Command Economy or a

Centrally Planned Economy.

Capitalism in the oxygen tent

Characteristics: (1)The right

of private property

(2)Freedom of enterprise

(3)Freedom to choice by the

consumers

(4)Profit motive

(5)Competition

(6)Inequalities of incomes

1.Collective Ownership

2.Central Planning Authority

3.Absence of Consumer

Choice 4.Relatively Equal

Income Distribution

5.Minimum role of Price

Mechanism or Market forces

1.Co-existence of private and

public sector

2.Existence of Economic

Planning

3.Positive role of the

government

4.Administered Price

Consumer is un crowned

king, resource allocation is

decided by price mechanism

resources are allocated

according to the commands

of a central planning

authority

include the best features of

both the controlled economy

and the market economy

while excluding the demerits

of both

TO PRODUCE

1.PPF is downward sloping because scarcity of resources ,

2.PPF is concave because increasing opportunity cost.

3.A point inside PPF represents inefficient use of resources, outside

point represents unachievable combination.


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CHAPTER-2 * THEORY OF DEMAND AND SUPPLY*

Desire + ability & willingness to pay +certain price + certain period= DEMAND

Determinants of demand D= (P, Pr, Y, T, E, O)

P= Price---- according to LAW OF DEMAND, remaining other things constant (Pr, Y, T, E, O)

Price and demand are inversely (negatively) related

Substitute goods (Coke and Pepsi)- positively related

Pr= Price of related goods

Complimentary goods (milk and sugar)- negatively related

Y=incomeNormal and Luxury goods(positive),Inferior goods(negative), Necessaries( inelastic)

E= future expectation of prices (if future prices are expected to rise current period demand will

increase and vice versa)

T= Tastes and preference (if favourable demand will increase)

O= others

Population composition of population Distribution of income

Higher the population higher

the demand

If number of children is large

demand for toys and biscuits

will be high.

If gini index is 1 demand will

be low, if gini index is 0

demand will be higher.

Why demand curve slope downwards?

PRICE EFFECT= SUBSTITUTION EFFECT+INCOME EFFECT (PE=SE+IE)

Law of Diminishing Marginal Utility.

Exceptions to law of Demand(in this case demand curve slopes upward)

1. Conspicuous goods or Veblen goods or snob goodseg: gold, diamond

2. Conspicuous necessities: Goods which became necessities due to demonstration effect(eg:

mobile phones)

3. Giffen goods or inferior goods: These goods are affordable when compared to superior

goods (Eg: basmati rice and normal rice)

4. Future expectations about prices, 5. Irrational and impulsive purchases 6.demand for

necessaries, 7. Speculative goods, 8. Ignorance effect.

Expansion and Contraction in demand

/movement along the curve

Increase and Decrease or shift or change in

demand curve(price is constant)

Price is the only ReasonIf price increase contraction

If price decreases expansion

D= (P, Pr, Y, T, E, O)

Increase (rightward shift)

Reasons: increase in price of substitutes,

decrease in price of complimentary,

demand increases without change in

price

Decrease(leftward shift)

Decrease in price of substitutes, Increase

in price of complimentary, demand

decreases without change in price

ELASTICITY OF DEMAND: It is the % change in quantity demanded % change in variable

If variable is price-

Price elasticity(Ep) or

elasticity of demand

If variable is income-income

elasticity of demand (Ey)

If variable is price of related

goods-cross elasticity of

demand(Ec)

%Q>%P ELASTIC

%Q1

Ey


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Elasticity of supply or elasticity of demand if curve is parallel to x axis then elasticity is (infinite), if parallel to y axis elasticity is 0(zero).

This is contrast to your knowledge that slope of the line parallel to x axis is 0 and slope of the line parallel to y axis is (infinite).

In Mathematics you calculate change in y axis change in x axis to calculate slope (m) but to calculate elasticity you are doing the opposite.

Slope(m)=change in y axis =y2-y1

Change in x axis x2-x1

Elasticity= change in X axis(quantity)

change in Y axis(price)

Theory of consumer behaviour:The existence of human wants is the basis for all economic activities in the society. All desires, tastes and motives of human beings are called wants in Economics.

In Economics wants are classified in to necessaries, comforts and luxuries. Utility refers to the want satisfying power of goods and services. It is not absolute but relative. It is a subjective concept

and it depends upon the mental attitude of people. There are two important theories of utility, the cardinal utility analysis and ordinal util ity.

Cardinal(1,2,3,...)/given by Marshall----Law of Diminishing Marginal Utility(TU is maximum when MU is 0), MU is nothing but what consumer is ready to pay. The difference

Between price and MU is consumer surplus. Where MU is 0 consumers will not buy the product unless any decrease in price.

Utility assumptions:1. Utility can be measured in terms of money, 2. Marginal utility of money is constant(satisfaction derived from spending money is same for rich and poor which

in real not possible) 3. No time gap, 4. Homogeneous goods. 5. Independent utility.

Ordinal(1st

,2nd

,3rd

...etc)/Given Hicks and Allen --Law of Equi Marginal utility(muxmuy=pxpy)---indifference curve--budget line-consumer equilibrium

Indifference curve: the level of satisfaction at any point on the curve is constant. i.e. satisfaction level is indifferent.

Assumptions: 1. If consumer preference must be consistent(if A>B , B>C then A>C) 2. More is preferable. 3. Rationality of consumer is common assumption for any economic theory.

Properties of Indifference Curves: 1. IC curve slopes downward because to increase no.of units of good x, good y should be sacrificed(i.e

negative relationship between goodxand goody)

2.Ic curve is always convex to the origin because diminishing MRS XY(marginal rate of substitution). If MRSXY is increasing IC will be concave, MRSXYconstant IC will be linear (substitutes)

For complimentary goods IC curve will be L shaped or right angle line.

3.IC curves will never intersect. 4. Higher IC curve represents higher level of satisfaction 5. IC curves will never touch X or Y Axis.

Budget line or price line: n*px + n*py=income of the consumer

n= no.of units , px= price of good x, py= price of good y. Consumer will spend his entire income.

A consumer is said to be in equilibrium when he is deriving maximum possible satisfaction from the goods and is in no position to rearrange his

purchase of goods.

The consumer attains equilibrium at the point where the budget line is tangent to the indifference curve and MUx / Px =MUy /Py = MRSxy

At point Q slope of IC3 = slope of budget line and MUx / Px =MUy /Py = MRSxy


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CHAPTER 5

Composition of GDP

Occupation 1950-51 2000-01 11-12

Primary 53.1 22.3 14.1

Secondary 16.6 27.3 30.2

Tertiary 30.3 50.4 55.7

Occupational Distribution

occupation 1950-51 2000-01 11-12

Primary 72.1 56.7 53.2

Secondary 10.6 18.2 21.5

Tertiary 17.3 25.2 25.3

Features of under

developed economy India's case

1.Agriculture is main

occupation 72% in 1950-51 and 53.1% in 2011-12

2.Poverty is wide spread

Every 3rdpoor person in the world is an Indian. In 2009-10

29.8% is below poverty line.

3.High rate of Population

growth

average population growth is 2%, dependency ration is

42.5%(people below 15 and above 64 years)

4.Standard of living is low

Low income low standard of living. Percapita Income of

Indians is $1420 in 2011.

5.Low rate of savings Rate of savings in India,1950-90:-below 20%,1990-91:-23

%( point of increase in savings),2011-12:-30.8%.

6.Low rate of capital

formatin

The rate of gross domestic capital formation in India in

2011-12 was 36.8%.

7.Unemployment is quite

high

According to 66th round of survey by NSSO unemployment

rate is 6.6 %( based on CDS)

8.Low Human well-being Human welfare being measured by human development

index (HDI),. HDI was constructed by United Nation

Development Program (UNDP) ,. HDI has 3 basic indicators

namely longetivity, knowledge & standards of living. Indias

rank as per latest UNDP report, 2010 on HDI is 119 among

169 countries, In 2013 is 136 among 187 countries. HDI

index in 2010-0.547 in 2012 0.554

9. Unequal distribution of

income

Gini index is used for measuring inequality of income &

wealth, range of gini index is 0 to1.( 0 represents perfect

equality &that of 1 represent perfect inequality). 1994-

0.297, 2000-10-0.368

Role of Agriculture: 1.the agro products which were exported at the time of independence

were cottontextile, jute & tea. They accounted for more than 50% of the total export

earnings.

2. Percentage of people working in agricultural sector came down to 53.21% in 2009-10

3. Share of agriculture in GDP came down to 14 % in 2011-12

4. In 2009-10 agriculture exports formed about 10% of national export.

5. Major agricultural exports are: jute, tea, tobacco & coffee.

6. Special agricultural product scheme was started to promote export of fruits, vegetables,

dairy products, forest products, etc.

7. The agricultural insurance company is the implementing agency for new insuranceschemes related to agriculture. 8. Agro imports constitute 3% of national imports in 2010-

11.

9. Agriculture has low capital output ratio. 10. green revolution was started in 1966 & is also

, known as wheat revolution. 11. The adoption of high yield variety programme (HYVP) led

to an increase in production of food grains. 12. HYV was restricted to five cropswheat,

rice, jowar, bajra & maize.

13. The production of wheat was 2938 kg per hectare in 2009-10. 14. Production of food

grains increased to 244.8KG in 2009-10. 15. Productivity of food grains is 2.91 % in 2010.

16. Per capita availability of food grains in 2010 was 439 gms.

17. Green revolution stressed on (A) use of HYV seeds (b) proper irrigation facilities (c)

Extensive use of fertilizers. 18. Agricultural productivity is measured in terms of yield per

hectare of land.

19. Rain water Harvesting is an example of scientific water management. 20. The land

tenure systems or the agrarian systems prevailing in the country at the time of

independence were zamindari system, mahalwari system and ryotwari system. 21. The

objectives of these land reforms were: (a) abolition of intermediaries (b) tenancy Reforms

(c) Re-origination of agriculture.

22. Agriculture productivity has increased at a rate of 2.06%.

23. Measures taken under the tenancy reforms were: (A) Regulation of rent (B) security of

tenure (C) Conferment of ownership rights on tenants.

24. Rent charged by zamindars before independence was 30% to 75% (After independence

it was 25% -50%) 25. The maximum limit of land that a family could hold was 18 acres of

wetland or 54 acres of unirrigated land. 26. About 60% of the net sown area is rain fed i.e.

40% of area is covered by irrigation.

27. 44% of the gross cropped area is covered by HYVP. 28. Only 40% of the gross cropped

area has irrigation facilities.

29. Regional Rural banks were established in 1975

30. NABARD set up in 1982, is known as the apex bank for agriculture.

31. Food corporation of India provides storage facilities to farmers.

32. Above 10 Lacs of proper storage facilities are there. However, 10-15% of agricultural

produce gets spoiled or eaten by rats.

33. National policy of farmers was adopted by government in 2007. 34. NFSM stands

national food security mission was launched in 2007-08.

35. Accelerated pulses programme (APP) was launched as a part of NFSM.

India as Developing economy:- . Over

period of SIX decades, GDP of India

has increased by 17 times. NNPFCi.e.

national income rose from 2,55,000

crores in 195051to 45,72,000crores

in 2011-12. NNP increased by 6.6% in

last three decades & 3.3% over 60

years. The per capita income of Indiain 2009-2010 was Rs 38,057 in 2011-

12. Whereas Rs.7114 in 1950-51.


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36. Kisan credit scheme was started in 1998 more 11 crore credit cards have been issued till

date.

37 .farm credit package was in produced in 2004.

38. In 2008-09 the govt. Announced agriculture debt waiver & debt relief scheme, 2008.

39. Agriculture under xth

plan-actual growth rate of 2% , Agriculture under xith

plan

target growth rate of 4%. Agriculture under xiith

plan- target growth rate of4%.

40. AGMARK i.e. agriculture marketing is related to agriculture production. 41.area under

commercial crop like sugar cotton oil seeds etc .is increasing.

42. Food grain production fell down to 209million tones in 2006-07.

43. Our rice production is less than 1/3rd of Egypt. 44. Our wheat production is less than1/3rd of UK.

45. In 2004-05 wheat accounted for 12%of global production. 46. APMC agriculture

produces market committee act.

47. ACABC agri clinics and agric business centre. 48. Indian council of agriculture research

and development -1929. 49. The area under irrigation has increased over the year in India.

50. Nearly 40%of amount financed to agriculture does not come back. 51. ERFS stands for

extended rage forecasting system.

INDUSTRIAL SECTOR:

1. Industrial sector faced the process of retrogression & deceleration during 1965-

1980.(4.1%)

2. Industries engage 22% of labour force in India in 2009-10.

3. Industrial sector contributes more than two third of national export.

4. Industrial growth helps the economy to attain self sustaining growth.

5. Micro small& small enterprises development Act 2006

Classification

of Industries manufacturing service

micro 10l -

2CR

medium >5CR to 10 CR

>2CR-

5CR

8. The industrial production has grown at a rate 62%over planning period9. The 10th plan aimed at the growth rate of 10% in industrial sector.

11. MRTP stands for Monopolies Restrictive Trade Practices .it is also known as competition

act.

12. Mahalonobis model (in the second plan) stressed upon the establishment of capital &

basic good industries. 13. FMCG stands for fast moving consumer goods.

14. The growth rate of industrial goods in 2009-10 was (a) basic good -72% (b) capital goods

-19.3% (c) intermediate goods-13.6%. The rate of consumer durable goods 7.3%.

15. In the second plan public sector steel plant were sat up in Bhilai, Rourkela & Durgapur.

16. Under scientific & industrial research council research laboratories were set up.

17. Several research laboratories were set up under the leadership of council of scientific

and industrial research. 19. No of registered & unregistered units in 2009 -10 was 30

million.

20. The production in small &cottage industries have been increased to more then 585000,

crores in 2006-07 . They contribute 39% of the value of output in the manufacturing sector.

21. The small sector employed nearly 60 million people in 2006-07.

22.exports from the small scale sector increased to more than 150000 Crores in 2005-06 .it

contribute about 40% of the , Manufacturing exports & 33% of the total exports

23. The average under utilisation of capacity in the industrial sector is 40% to 50% .

24. in march 2012 ,no of public sector industries increased to 248 with cumulativeinvestment of about 580000 crores out of 248 central public enterprises 158 are profit

making 62 incurred losses.

27. ICRO stands for incremental capital output ratio presently it is 4%.

28. There were more than 2lakhs sick units in India with an outstanding bank credit of 7000

crores.

29. The net loss of loss making enterprises was 22,000.croresin 2010-11.

30. Maharashtra, west Bengal, Gujarat & Tamilnadu account for 50%of total export&50%of

productive capital.

31. Industrial sector act as catalyst in the development of other sectors.

32. More than 25%of the produce was taken away by the intermediaries.

Service sector

1. Tertiary sector accounts for the largest share in GDP. 2. Indias share in worlds total

export services is 2.3%as compared to 1.9%in 2004 &0.57%in 1990. 3. Share of service

sector in GDP in 2011-2012 was 59%. 4. in the first half of 2010-2011, service sector has

rapid growth of 27%.

5. BPO stands for (business process out sourcing) ,KPO (knowledge process out sources) &

lpo ( legal process out sourcing). 6. Service accounted for 45%of total exports in

indiain2007-08.

7. India is ranked 12th among the list of exports of commercial services.

8. The average growth rate service sector during the 10th plan turns out to be around 9%p.a

the 11th plan aims at an Annual average growth rate of 9.4%for the service sector but

actual rate id 10%.

9. India has the third largest scientific & technical manpower in the world.

10. Banglore, the siliconcity of India, is facing problem of traffic congestion.

11. Has broadly classified the enterprises . In those engaged in (i) manufacturing, (ii)

providing of services 12. There were 26 million micro small & medium enterprises in

country in2006-2007.

13.under the export import policy (2002-07)service sector increased by around 10%in

2004-05 and 2005-06 financial service grew, By 9.2%in 4-05and 9.7%in 2005-06 . 14. Indias

medicine system- ayurveda , unani ,nature care. 15. IT enabled services such as BPO

(business process out sourcing) have been growing rapidly@60-70%.

16. Demand for final consumptionboth household governmental sectors.

17. Demand for intermediate consumption all producing sector economy.


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18. Public sectorONGC, HMT, HAL, BEL, INDIAN IOL COR, COAL India, steel authority of

India.

19. Industrial financial institutions:-LIC, IDBI, ICICI.

UNIT 3

1.GDPFC-S+T=GDPMP+NFIA=GNPMP-D=NNPMP-T+S=NNPFC=NI

FC= FACTOR COST, MP= MARKET PRICE, D= DEPRECIATION, T= TAX, S= SUBSIDY

2.NNP=NDP when NFIA=0

3. The real national income in India has increased at an annual average rate of 4.5%during

six decades of economic growth

4.the most important problem in calculating national income is double counting.5. Eleventh plan kept a target rate of 9% p.a growth rate, however the actual growth rate

was 7.7%.

6.in third plan percapita income grew at almost zero.

7. value added method is also known as product method.

8. trasfer payment are not included while computing national income.

9. Indias per capita income has increased @4.5%p.a.

10 .XI plan kept a target of 9%p.a growth rate in national income.

11. Percapita income to a large extent depends up on the agriculture growth rate.

12. Growth in GDP is 5.8 %( 1991-2010).

13. NNP-factor cost =national income.

14. Net value added method is also known as net output method, industry of origin method,

production method.

Unit 4

1. Most direct taxes are progressive in nature and indirect tax are regressive are

differentiating nature.

2. Income tax was introduced in 1860 abolished in 1873 and reintroduced in 1886.

3. Corporate tax is levied on the income registered companies &corporations.

4. Estate duty was introduced in 1957 and abolished in 1985.

5. Wealth tax was introduced in 1957 and abolished w.e.f 01-04-1993.

6. Gift tax was introduced in 1958and abolished in 1998 &reintroduced in April 2005 for

gift received without consideration, If value of gift is more then 50,000.

7. The maximum rate of custom duty is 10%in 2007-08.

8. MODVAT was introduced in 1986-87. VAT was introduced in 1999and implemented from

1st

April 2005. 9. CENVAT WAS introduced in 2000-01. 10. At present, the ratio of direct

taxes to indirect taxes is 41:59. 11. Agriculture income is wholly exempted income tax. 12.

in India 2010 -11 the % of direct taxes in GNP is 7%. 13.the rate at which black money is

generated is 50%of country s GDP. 14. MODVAT was replaced by CENVAT. 15. tax revenue

from about 16%of total national income of India in 2010-11.

16. tax revenues collected by the centre &state have been more than 11,60,000croresin

2010-11.

17. one of the largest sources of tax revenue is union excise duty. 18. At present central

sales tax is 2%.

19. Service tax is form of indirect tax imposed on specific services called taxable services it

was introduced in the year 1994-95. 20.goods and services tax is likely to be implemented

from 2015.

21. The cost of tax collection has increased to more than 6500 crores in 2010-11but is still

lowest in world at the rate of 60paise. For every 100 rs. 22. Annual tax on wealth was

introduced in 1957 and abolished on 1.4.1993. 23. Import duties are generally levied on the

basis of ad valorem (as a % of the price of the commodity). 24.VAT (value added tax ) was

introduced in 1999 and implemented in April 2005. At present all states have implemented

vat. 25.VAT is multi stage sales tax with credit for taxes paid in business purchases. 26. Sales

tax is more in case of luxury items.27. Direct taxes: indirect taxes =41:59 in gross tax revenue. 28. services tax is based on

negative list (those which are included in list will not be taxed)

29. Services tax accounts for only 1.3%of GDP. it contributes 10%towards tax revenue .

30. Presently the rate of services tax is 12%.

31.direct tax code bill was introduced in the parliament in 2010it likely to be introduced in

2012for direct taxes and indirect taxes

(goods and services)

32.excies duty is levied on production and has absolutely no connection with its actual sale.

33.VAT was introduced in 1999 and implemented from 1st

April 2005.

34.the goods should be produced in India to attract CENVAT.

35.GST &DTC are both produced by lingam committee & Chelliah committee.

36. Tax revenueexercise -37%, income -19, and custom-18%.

37. In India, less then 3%population is liable to pay INCOME TAX.

Chapter -6 unit-1

1. Kerala has the highest life expectancy at birth at 71.4 & Madhya Pradesh Has the

lowest life expectancy at birth at 58 in 20062. Kerala has the lowest birth rate of 14.7 (2007) & UP has the highest birth rate of 29.5

(2007)

3. West Bengal has the lowest death rate of 6.3 & Orissa has the highest death rate of 9.2

(2007)

4. Harayana has the lowest female sex ratio of 877 (2011)

5. The population of india in 2010 was more than 117 crores. Presently, it is more than

121.2 crores.

6. india covers about 2.4 % of worlds area & less than 1.2% of the worlds income.

7. In size of population india ranks second in the world.

8. China has the highest population in the world.

9. India accommodates about 17.5% of the worlds population

10. Every six person in the world is an Indian and every third poor person in the world is an

Indian.

11. Year 1921 is known as the year of great divide for indias population.

12. Birth rate & Death rate is measured in per thousand of population.

13. Birth rate in 2009 was 22.1 and death rate in 2009 was 7.2


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14. The growth rate of population became negative in india in 1911-1921

15. West Bengal is the most densely populated state in the country where about 880

persons are living per square km. west Bengal is followed by bihar with 1102 persons living

per square km.

16. Density is measured in terms of numbers of persons living per square kilometer

17. in 2010, Density of population was 382 persons per square kilometer.

18. Kerala, west Bengal, bihar & U.P have density higher than average density.

19. Sex ratio is measured in terms of females per thousand males.

20. In Kerela, the sex ratio for females is favourable. i.e.1084 in 2011

21. If death rate is high, life expectancy will below.22. Sex ratio in 2011 was 940

23. In 2001, Life expectancy rate was 68.8 & in 2010 it was 64.4 & in 2011 it was 63.5

24. Overall literacy rate in 2011 was 74(male 85%, female 65%)

25. Kerala has the highest literacy rate in India i.e., 93.91% and Bihar has lowest literacy rate

of 63.82%

26. Causes of rapid growth of population are (A) high birth rate (b) relatively lower death

rate (c) immigration

27. Population Explosion is a transitory phase according to the theory of Demographic

transition. India is passing through the phase of population explosion i.e. IInd

stage.

28. In India, around 63% of the population is in the age group of 15-64 years and 37% of

population is below 15 or above 64 years.

29. About 10% of the population is unemployed.

30. Cafeteria approach is a approach in which various contraceptive methods were offered

and the acceptors had the freedom to choose any of the methods.

31. NPP stands for National Population policy which started in 2000

32. ISM stands for Indian System of Medicines.

33. Infant Mortality rate in India is highest for Madhya Pradesh & lowest for Kerala.

34. Tenth plan aims to reduce infant mortality rate to 45 per thousand by 2007 and 28 per

thousand by 2012 {actual: IMR-47, MMR-2.12(2010)}

35. Tenth Plan aims to reduce maternal mortality rate to 2 per thousand live births by 2007

and 1 per 1000 live births by 2012

36. The Eight plan aimed at complete eradication of illiteracy in the age group of 15-35.

37. Ratio between growth of population and growth of capital formation to maintain

existing standard of living is 4:1

38. Family planning was organized in 1966.

39. Emergency period was declared in 1975-77

40. National population policy 2000 was adopted to encourage two child norm and

stabilizing population by 2046 A.D

41. Arunachal Pradesh is least densely populated state with 17% persons S.km.

42.NSSO uses 2 types of recall periods - uniform recall period30 day recall, Mixed

recall period365 day recall

43. Human Development Report (HRD) 2010 measures poverty in terms of a new parameter

multidimensional poverty line(MPL), According to this Indias poverty index is 0.296.

CHAPTER6 UNIT2

1. Poverty which is not related to the income or consumption expenditure or distribution is

called absolute poverty

2. Poverty which is related to the income or consumption expenditure or distribution is

called relative poverty

3. Absolute poverty is relevant for less developed countries whereas relative poverty is

relevant for developed countries.

4. In india, we use absolute poverty to measure poverty.

5. Gini index is of often used for measuring relative poverty

6. Percentage of population below poverty line is 27% in rural areas and 24% in urban areas.

7. The minimum daily consumption of calories in urban areas is 2100 calories and in ruralareas is 2400 calories

8. The tenth plan aims top reduce poverty to 19.3% by 2007 & 11% by 2012.

9. Agriculture contributes to above 12.3% of GDP.

10. The following programmes were started for poverty alleciation:

Pradhan mantra gram sadak yojna (PMGSY) - December, 2000. Up to Nov 2010, a totallength of 300000 km of road work has been completed.

Indira Awas Yojna (IAY) 1985will created 34 lakh houses by 2009-10 Only self employment programme Swarna jayanti Gram swarozgar yojna (SGSY0

April, 1999. SGSY = integrated Rural development programme (IRDP) + million wells

programme (MWS) + Allied programmes. Upto Sept. 2011; 168 lacs swarojgaries have

been assisted. Upto March, 9 ; 121 lakh swarojgars have been assisted.

Sampoorna Grammen Rozgar Yojna (SGRY)2001. SGRY = Employment assurancescheme (EAS) + Jawhar Gram samridhi Yojna(JGSY) (2002).

National Food for work programme (NFFWP)Nov, 2004. Till Jan 2007, 3.47 core jobcards have been issued and of 1.50 crores households who demanded employment,

1.47 crores have been provided with it.

National Rural Employment Guarantee act (NREG) The act was passed in septemer05 and the scheme was launched in Feb. 06. SGRY & NFFWP would be submerged in

it.

Swarn Jayanti shahkari rozgar yojana (SJSRY) December 1997. SJSRY = Nehru rozgarYojana + urban basic services programme + P.Ms integrated urban poverty

Eradication programme benefited 680000 till dec 2010

11. In 2004-05 about 22% of the people were below poverty line.

CHAPTER6 UNIT3

1. In India most of the unemployment is of structural & cyclical type.

2. About 1/3rd

portion of Indias workforce is disguisedly unemployed.

3. Tenth plan aims at creating 50 million jobs.

4. Labour Force Participation rate is defined as the number of persons in the labour force

per 1000 population.

5. Employment & unemployment can be measured through: (a) Current daily status (CDS)

(b) Current weekly status (CWS) (c) Usual status (US)

6. Usual status gives us the lowest measure of unemployment.


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7.The Current unemployment rate according to th e above statuss are : US- 2% (Rural) & 4%

(urban), CWS4% (rural) & 5 (urban), CDS- 8% (rural) & 7% (urban)

8. MTA stands for Mid Term Appraisal

9. Unemployment problem gained attention after the 5th

plan.

10. The highest rate of unemployment is in india i.e. 9.8

11. According to US 40% of the population belong to labour force & 40% of the population is

employed.

12. Labour Force Participation Rate(LFPR) is defined as the number of persons in the labour

force per 1000 persons.

13. Work force participation rate (WFPR) is defined as the number of persons /person days

employed per 1000 persons/ person days.

14. The latest round of NSSO was conducted during july 2009 june 2010 is 66.

15. Daily status >current weekly status > Usual status

16. 9% of the labour force is unemployed.

17. About 56% males and 33 % females of rural area and 57% males and 18% females of

urban area belong to labour force.

18. The approach paper to Mid Term appraisal (MTA) of 10th

plan has repeated that

employment growth should exceed growth of labour force to reduce backlog of

unemployment.

CHAPTER6 UNIT4

1. India ranked 5th

Largest energy producer & 3rd

Largest energy consumer.

2. India accounts for 4% of total energy production of the world

3. 11th

plan-net imports could reduce to 20% of the total demand for commercial energy

and consume only 6%

4. The important infrastructure services provided are

(a) Energy

(b) Transport

(c) Communication

(d) Education

(e) Health

5. 3% rise in industrial production in the world is accompanied by 2 % increase in energy

consumption.

6. Fire wood & Dung cakes are the most important non commercial traditional source of

energy

7. About 23 % of the energy consumed id obtained from non commercial sources.

8. The major users of commercial energy are the industries (37%)

9. In 2009 -10 the total installed capacity of generating power is 2,00,000 MW

10. There has been nearly 85 times increase in the installed capacity

11. We are roughly adding 4000-5000 MW per years

12. Of the present capacity of electricity, thermal sector66 %, hydel sector19%, nuclear

sector 2.3% & rest in others 12%

13. The demand for fuel has increased at the rate of 5.5%

14. OPEC stands for Organization of petroleum Exporting Countries (it is a perfect example

of oligopolistic market)

15. XIth

plan aims to reduce import by 20%

16. POL stands for petrol, oil & lubricants which contributes about one third of the import

bill.

17. National average of transmission & Distribution losses are 23%

18. Plant load factor measures the operational efficiency of a thermal plant

19. PLF in 2008-09 is lowest in eastern region (62%) and highest in southern region(80%)

20. The percentage of PFL (in 2011-12) in various sectors are: SEB- 66%; Central sector80

%; Private sector78 %

21. Till date nearly 19% of the villages are not electrified.

22. Electricity act was passed in 2003 and electricity amendment bills was passed in 2005

23. Partnership in excellence programme was launched by ministry of power to improve

generation of power.

24. Power sector in delhi was privatized in 2002

25. All india power grid is also known as the national gird.

26. The estimated inter-regional transmission capacity by 2012 will be 37,700 MW

27. Nine sites with a capacity of 4000 MW each, was identified for the development of ultra

mega power plants (UMPPs)

28. Total route length of railways is 64 thousand Kms out of which 19,000 Kms. Were

electrified. It carried 7200 million of passengers and 890 million tons of freight traffic in

2009-10.

Some of the steps taken by the government to improve railways performance are rational

price policy, increased wagon load, faster turnaround time, public private partnerships

(PPS), double line freight corridor, etc.

29. Rajeev Gandhi grameen vidhyutikaran was started in 2005 to provide access to

electricity including villages.

30. Indian rail network is the largest in asia & second largest in the world.

31. The ratio of revenue earned between freight & passengers are 70:30

32. Indian road network is the second largest in the world and is about 3.34 million kms.

33. The national Highway carry more than 40% of the total road traffic and a road length of

66590 kms.

34. The rural network connects 65% of all weather roads.

35. In india, there are 12 major & 200 minor ports (64% total traffic)

36. costal shipping is the cheapest mode of transport. Indias coastline is 7517 Kms.

37. india has 14500 km of navigable waterways.

38. GRT stands for Gross registered tonnage.

39. India ranks 20th

in the worlds shipping tonnage.

40. kandla is the top traffic handler port in india since last 5 years.

41. Domestic air services are provided by Indian airlines Ltd. And international air services

are provided by air india ltd.

42. In aviation, private operators account for 78% traffic.

43. pawan hans helicopter ltd. Provides helicopter support services.


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44. Airport authority of india manages 126 airports including 16 international & 26 civil

enclave.

45. Delhi, Mumbai, Kolkata, Chennai & thiruvanandpuram have international airports.

46. Green Field airports of international standards are constructed at Hyderabad, Banglore

& Goa. One such airport of kochi is already operational.

47. International services are governed by bilateral agreements.

48. In 2006 Domestic traffic grew up by 44 % and international traffic by 16%. Domestic &

international cargo recorded a growth of 12.6% & 12.8% respectively

49. India ranks second in the growth rate of international air services. The first is china.

50. India ranks 1st

in the Indian postal network. Out of a total of 1.55 lakhs post offices in

india, 1.4 lakhs are in rural area. More than 14000 post offices are computerized.

51. On an average one post office serves 7814 persons & 21.23 sq. km area.

52. VSAT stands for Very Small Aperture Terminals and these are 140 in india.

53.AMPC stands for Automobile Mail Processing centers.

54. There are 321 telephone exchanges in india & india ranks 1st

in telephone network

system.

The growth of telecommunications have been 943 million connections by March 2011.

About 5.6 lakh villages were connected using a village public telephone (VPT)

55. The telephone penetration rate is 16.8 phones per hundred populations. Up to march

2009, there were about 791 million subscribers of cellular phones.

56. The two PSUs in the telecom sector are : BSNL & MTNL (bharat sanchar nigam Ltd. &

Mahanagar telephone nigam Ltd.)

57. In india there are 100 million internet connections & 10.7 million Broadband subscribers

in March 2010.

58. The regulatory authority for telecom sector is telecom regulatory Authority of india

(TRAI)

59. NIXI stands for National Internet Exchange of india.

60. Indian telephone network is second largest in the world with a tele density of 76.86%

61. In 2006 number of telephone connections were 14.18 million (it was 1.2 million in

2005) & more than 2 lakh PCOs in Rural areas.

62. NPE stands for National policy on education. It was made in 1986 & further modified in

1992. India now has become one of the largest education systems in the world.

63. E post services were started in 2001 in some states.

64. Logistics posts & Retail post services are other new services.

65. Launched a project project Arrow

66. GER stands for Gross Enrollment Ratio. The GER has increased to 96.5 in 2010

67. The main Vehicle for providing elementary education to all children is Sarva Shiksha

Abhivan (SSA) Launched in 2001-02

68. NPEGEL stands for National Programme for Educational for girls at Elementary level

69. There are 8 IITs & 6 IIMs in India.

70. NLM aims to achieve literacy of 75% by 2007.

71. National Literacy Mission was launched in 1998 for adult education.\

72. Total Literacy campaign is the principle strategy of NLM.

73. The combined share of PSUs in Telecommunication has declined from 98.65 to 15% in

Dec. 2010

74. NPE (national Policy on Education) Aimed to spend 6% of GDP on education against

which only 3.49% has been spent.

75. Sarva Shiksha Abhivan = Education guarantee scheme + alternative & Innovative

education.

76. Secondary education is in the age group of 14-18 Years.

77. PIN (personal identification number) was started in 1972.

78. Right of children to Free & Compulsory education Act was passed in 2009.

79. XIth

Plan aims at 85% literacy rate.

80. Almost 95% of Indias global merchandise trade is carried through sea routes.

81. SEB = state electricity board.

82. National Rural Health Mission 2005.

83. OECDOrganization for economic co-operation & development.

chapter6 unit5

1. Inflation results in the decline in the purchasing power of money

2. There are three types of inflation - (a) demand pull inflation (b) cost push inflation (c)

stagflation

3. Public expenditure has been increased to 27% in 2009-10.

4. Approximately 42% of the government expenditure in India is on non developmental

activities.

5. Inflation occurring because of increased money expenditure is called demand pull

inflation.

6. The combined phenomena of demand pull inflation & cost push inflation is called

stagflation.

7. The rate of inflation was lowest in fifties (1.7%)

8. In the current year (AprilDec. 2010) average inflation was 9.4%.

9. Two ways of deficit financing are (a) Borrowings from bank (b) Printing more currency

10. The year 1966-67 has marked the maximum inflation at 14%

11. Fisical deficit as a proportion of GDP during 2006-07 was 3.6%

12. Deficit financing for 9th

, 10th

, 11th

plan was zero

Chapter6 unit-6.

1. Budget deficit is the difference between total receipts & total expenditure.

2. If borrowings & other liabilities are added to the budget deficit, we get fiscal deficit.

3. The practice of RBI lending to government through ad-hoc treasury bills was given up in

1997.

4. The government now tapes 91 days treasury bills from the market.

5. FRBMFisical Responsibility & Budget management.

6. FRBM bill was passed in 2000 & FRBM act was passed in 2003.

7. FRBM act aims at reducing gross fiscal deficit by 0.5% of GDP in each financial year.

8. In 2009-10 fiscal deficits as a proportion of GDP was 6.5%

9. 100% FDIDistillation and brewing up of portable alcohol, manufacture of industrial

explosives, manufacture of Hazardous chemicals, laying of natural gas lines.


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10. FDI is restrictedretail trading, atomic energy, lottery, gambling, betting, business of

chit fund, nidhi co., trading in transferable development rights.

Chapter6 units7

1. Balance of Payment refers to the balance of all economic transactions between two

countries whereas balance of trade refers to the balance of exports & imports between two

countries.

2. Balance of payments = Balance of current account + balance of capital account.

3. Balance of current account = Balance of trade + Balance of services + Balance of unilateral

transfers. It can be positive, negative or Zero.

4. India experienced surplus in the BOP in the fifth plan.

5. BOP is regarded as the statistical statement of any country

6. Fifth plan experienced surplus in BOP due to sharp increase in exports surplus on account

of invisible remittances.

7. The sixth plan characterized the BOP acute

8. In 2008-09 FDI remained buoyant at US$ 18 b illion.

9. The year 2001-2004 witnessed the surplus in the current account.

10. during the first year of the XIth

plan, exports increased by 20% & imports increased by

23%. Current account balance was -1.3 % & trade balance was7.4% of GDP.

11. In 2008-09, Asia & ASEAN continued to be the major source of indias imports

accounting for more than 60% (2008-09)

12. UAE continued to be the top most destination of Indias export (13.4), USA (11.6), china

(6.5)

CHAPTER6 UNIT8

1. Forms of external assistance are grants & loan.

2. About 90% of external assistance received by india has been in the form of loans.

3. Amount of external debt in march 2011 stood at Rs 13,50,000 crores.

4. Indias external debt was 18% of GDP in March 2010

5. Concession on Loans is @ 25% and total concessional loans is 16% of total loans

6. According to the global development finance, 2008, india ranks 5th

among the top ten

debtors of the country

7. About 16.5% of GDP is constituted by exports of goods. (2009-10)

8. The most indebted country of the world is china.

9. Debt service ratio is 4.2

CHAPTER -7 unit -1

1. Recovery of debts due to banks & other financial institutions act, 1993 was passed

2. The securitization & reconstruction of financial assets & enforcement of security interest

act, was passed.

3. Debt service ratio is the ratio of gross debt services payments to external current

receipts. It was 4.2 in 2009-10.

4. Debt service ratio =

5. The available foreign exchange reserves were sufficient to finance for 3 weeks in 1991.

6. The sectors in which economic reforms were introduced were (a) industrial sector (b)

financing sector (c) external sector (d) fiscal policy

7. At present, there are 6 industries for which licensing is compulsory

8. At present, only three industries are reserved for public sector. These are (a) atomic

energy (b) atomic energy substances (c) rail transport

9. In 2001, the defense production was de reserved & opened to private participation.

10. In defense production, maximum limit for foreign investment is 26%

11. According to the new industrial policy, 1991, the mandatory convertibility clause is no

longer applicable for term loans, from the financial institutions for new projects.

12. DGTD stands for Director General of trade development.

13. OCB stands for Over the counter board

14. Direct foreign investment is allowed upto 51% equity in high priority industries. There

were 34 high priority industries.

15. 100% FDI was allowed in drugs & pharmaceuticals, etc.

16. In private sector banking & telecom sector 74% FDI was allowed.

17. MRTP of 1991 is also known as competition act.

18. Financial sector is comprised of (a) Banking sector (b) capital reforms (c) Insurance

sector reforms

19. Cash reserve ratio (CRR) in May 2011 was 4.5% at present 4%

20. Statutory liquidity ratio (SLR) is 24% in May 2011 & 25% in 2010. AT present it is 23%

21. Bank rate since April 2003 is 6% which lowered from 9%.

22. Rate of interest on saving deposits of commercial banks is 4% in April 2011.

23. PLR stands for Prime Lending Rates.

24. In 1993 RBI issued guidelines for licensing of new banks in the private sector.

25. Fresh Guidelines for licensing of new banks were issued in Jan, 2013.

26. Two new banking licenses issued to IDFC and BANDHAN in 2014,.

27. NPA stands for Non performing assets.

28. Derivative products are those products which derive their prices from underlying

securities. Ex- Forward rate agreements.

29. Basel II frame work (banking norms) came into operation from MARCH 2008.

30. Foreign Trade policy of india was made restrictive from second plan.

31. EOUExport Oriented Units.

EPZExports processing Zones.

EHTPExport & Hardware Technology park.

STPsoftware technology park.

32. Some schemes started to promote exports are duty drawback scheme, cash

compensatory scheme, 100% EOUs & EPZs

33. The rupee was devalued twice in july, 1991 with total devaluation of about 19%.

34. EXIM policy in 1992 gave a push to the process of liberalization

35. QR stands for quantative restrictions. It was removed from 714 items in EXIM policy of

2000-01 & on 715 items in EXIM policy of 2001-2002

36. Indias tariff rate in 2007-08 was 10%

37. Cash compensatory scheme was abolished in july 1991

38. EXIM script scheme was replaced by dual exchange rate scheme.


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39. Export promotion capital goods (EPCG), introduced in 1990 & liberalized in 1992 was

introduced to encourage import of capital goods.

40. To accelerate growth in exports of services, duty free export credit (DFEC) scheme was

revamped and recast into served from india scheme.

41. SDR stands for special drawing rights.

42. FERA stands for Foreign Exchange Regulation Act In 1973.

43. FERA was replaced by foreign exchange management Act (FEMA) in 2000.

44. Foreign exchange reserve of India consists of 305 US billion Dollar at the end of March

2011.

45. FTP stands for Foreign trade policy. It was started in 2004-09

46. Government of india constituted the tax reform committee in august 1991.

47. The tax rate for Domestic30% & foreign40%, 50% on royalty.

48. Dematerialization of TDS certificate will take place from 1st

April, 2008

49. Industrial licensing was abolished for all projects except for 18 industries related to

strategic and security concerns.

50. In august 1991 the government of India constituted the tax reform committee.

51. 100% FDI is now permitted in many products such as distillation and brewing up of

potable alcohol, manufacture of industrial explosives, manufacture of hazardous chemicals,

lying of natural gas lines/ LNG lines etc.

52. A five year plan frame work (2007-2011) has been given for full convertibility of capital

account

53. Special Economic Zones (SEZ) were announced in 2000. It came into force in 2006. Till

may 2009, 584 SEZs have been approved.

54. Foreign exchange regulation act, 1973.

55. Financial crisisaugust 2007.

56. FDI limit in air transport services is 49%

57. Drug policy in sep 1994 amended in 1999.

CHAPTERUNIT2

1. Essential pre-requisites for privatization are liberalization & Deregulation.

2. An exchequer is a person who collects taxes.

3. Liberalization refers to relaxing of previous government restrictions.

4. Privatization refers to the transfer of assets, functions, services from public to private

ownership.

5. Disinvestments means disposal of public sector units equity in the market or selling of a

public investment to private entrepreneur.

6. Disinvestments is a method of privatization.

7. Disinvestment of equity in public sector enterprises till 2010 11 is more than 1 lakh

crores.

8. 100% privatization has taken place in centaur hotel.

9. GDR stands for Global Depository Receipts.

10. Various methods of disinvestments are

(A) Domestic public issues (issuing equity to retail investors)

(B) Issue of global Depository receipts

(C) Cross Holding Method (selling part of its shares from one PSU to another)

(D) Warehousing (governments own financial institutions buying government stake)

(E) Retaining golden share (up to 26 %)

(F) Strategic sale method.

(G) Differential pricing method.

11. In 13 profit making centers, government has decided to stake through strategic sale.

12. Government followed differential pricing method of disinvestments in 2005-06.

13. The Largest disinvestment was in the year 2003-04.

14. Disinvestment programme was started in 1991-92.

15. Disinvestment minister in 1991-92 was Mr. Arun shouri.

16. In 2010-11 there was target for 40,000 crores disinvestments in equity bu t still realized

more than 1 lakh crores.,

17. Privatization can be achieved through (a) Franchising (b) Leasing (c) contracting (d)

Divesture (most significant method)

18. There are total 39 PSUs chosen for disinvestment in which 3 PSUs i.e., Hindusthan

cables Ltd., Hindustan copper Ltd. Hindusthan photo films manufacturing co. Ltd. Are loss

making PSUs and remaining 36 are profit making.

19. Under strategic sale method, disinvestment price would be marked based and not pre

fixed.

20. The predecessor of WTO is GATT

21. India is a member of WTO since April 2001.

CHAPTER _ 7 UNIT_3

1. Globalization means integrating domestic economy with worlds economy.

2. The peak rate of custom duty was brought down to 10% in 2007-08.

3. India achieved full convertibility in current A/c in August, 1994.

4. ADRAmerican Depository Receipts

GDRGlobal Depository Receipts

CACCapital account convertibility

5. TRIPsTrade related intellectual property rights.

6. FIIForeign Institutional investor.

7. Agreement of trade related intellectual property tights patent amendment act 1999 was

passed for providing EMRs(Exclusive Marketing Rights)

8. Globalization got a real thrust from new economic policy 1991.

9. Dual Exchange Rate system was from 1992-93

10. In 2010, Indias share in world exports was 1.5%

11. Our foreign currency reserves are about 279 billion dollars in march 2010.

12. Export finance over 90% of imports as compared 60% in 1985 due to globalization.

13. International monetary fund was organized in 1946 & commenced its operation in

march 1947.

14. in 2009-10, IDI was US$ 19 billion.

15. IMF is affiliated to UNO

16. IMF, a short term credit institution, has 188 countries as its members.

17. World bank is also called international bank for reconstruction & Development (IBRD).

It was formed in 1945 in bretten woods & has 188 countries as its members.


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18. World bank consist of : (a) international development association 1960(IDA) (b)

International finance corporation (IFC) (c) Multilateral investment guarantee agency (1988)

(MIGA) (d) International centre for settlement of investment disputes 1966(ICSID)

19. WTO gave a real push to Globalization.

20. WTO came into existence on 1-1-1995. It has 157 countries as its members.

21. PTAPlurilateral trade agreements

MTA- Multi lateral trade agreements Issures to WTO

GATTgeneral agreement on trade & tariff ]predecessor of WTO

22. The three economic pillars of economic dimensions are IMF, World bank, WTO.

23. IDA is known as the soft loan window or soft linding arm ot world bank, WTO.

24. MIGA helps encourage foreign investment in developing countries by providing

guarantee to foreign investors against loss caused.

25. ICSID : settlement of dispute between foreign investor and host countries.

CHAPTER 8**MONEY AND BANKING**

Static functions of money.

Medium of

Exchange Is able to be used as an intermediary in trade.

Unit of Account Is able to be numbered and counted.

Durable Has a long usable life.

Divisible It can be divided equally into smaller units(You can make

change).

Portable It is easy to carry or transport.

Fungible

Each unit is capable of mutual substitution, meaning units

are of equal value($1 in my wallet is worth the same as $1

in your wallet)

Store of Value

Retains its purchasing power over long periods of time.

Only gold and silver have been money throughout history

Dynamic functions of money:

*Directs economic trends,

*As encouragement to decision of labour

*Smoothens transformation of savings into investments

Money stock in India.The RBI 3

rdworking group in 1998 redefined its parameters for measuring money supply

namely, New monetary (NM) aggregates.

NM1= Currency + demand deposits + other deposits with RBI

NM2 = NM1 + Time liabilities portion of saving deposits with banks *+ Certificates of

deposits issued by banks + Term deposits maturing within a year excluding FCNR (B)***

(Foreign Currency non Residential Bank) Deposits.

NM3 = NM2 + Term deposits with banks with maturity over one year + Call / term

borrowings of the banking system.

*Interest accrued on savings deposit payable half yearly / quarterly.

***FCNR a/c is an FD maintained in foreign currency by NRI, which are repatriable.

Tools of Modern Banking:-

1. ATM- Automatic Teller Machine- For cash withdrawals

a. Brown label ATM-maintained by Banks, b. White label ATM-maintained by NBFC.

2. RTGS-Real Time Gross Settlement Interbank funds transfer for amount >2lakhs

3. NEFT-National Electronic Fund Transfer- Interbank funds transfer for


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3. Deposit mobilisation: increased from Rs. 4,665 crore in 1969 to more than Rs. 60,00,000

crore in 2012 Maharashtra leads all other states and accounts for 23 per cent of the

aggregate deposits received by the banks

4. Bank lending has gone up from Rs.3,399 crore in June, 1969 to about Rs. 50,00,000 crore

in December, 2012.

Even after nationalization, there are many shortcomings likes inter-regional imbalances,

inter-sectoral imbalances, mounting bad and doubtful debts and poor quality of services

etc. These need to be addressed.

Quantitative or General Measures(will effect entire economy irrespective

particular industry)(a) Bank Rate Policy

(b) Open Market Operations (selling of securities-reduces liquidity, buying securities

increases liquidity)

(c) Variable Reserve Requirements. (SLR,CRR)

To control inflation is high i.e

money liquidity is high, to

reduce liquidity and control

inflation RBI will Increase all the

rates or some of the rates.when

liquidity is reduced demand for

products reduced so price

levels start falling which results

in control of inflation. In the

times of depression or recission

to increase demand RBI will

reduce rates to increase

liquidity.

Qualitative or Selective Measures (to control credit), will effect particular industry.

1. Securing loan regulation by fixation of margin requirements ,2. Consumer credit

regulation, 3.Issue of directives, 4.Rationing of credit 5. Moral suasion, 6.Direct Action

RATE %(latest) WEF

TEXT BOOK

RATES

Bank rate 9 28-01-2014

10.25%(july

-2013)

Repo 8 28-01-2014

7.25%(july

2013)

Reverse

Repo 7 28-01-2014

6.25%(july

2013)

SLR 23 11-08-2012 23%

CRR 4 09-02-2013 4%

MSF 9 28-01-2014


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ECONOMICS FOR CA-CPT - QUICK REVISION VERSION

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Transcript of ECONOMICS FOR CA-CPT - QUICK REVISION VERSION