Complete Economic Eng PDF by Sachin Sir (RBE)

RBE (REVOLUTION BY EDUCATION) INDIAN ECONOMY FOR ALL SSC EXAMS USEFUL FOR: SSC : CGL, CHSL, CPO, MTS, Steno, Selection Post etc. RRB, DSSSB, UP Police, HSSSC, UPSSSC, UKSSSC,...

RBE (REVOLUTION BY EDUCATION) INDIAN ECONOMY FOR ALL SSC EXAMS USEFUL FOR: SSC : CGL, CHSL, CPO, MTS, Steno, Selection Post etc. RRB, DSSSB, UP Police, HSSSC, UPSSSC, UKSSSC, UP SI etc. Shubham Jain Sir (EX. gst inspector) By:- SACHIN SIR  Download RBE Application now- https://play.google.com/store/apps/details?id=com.revolution.education For SSC Exams Complete Preparation (Download RBE Application) (Learn from those who have cleared the exam themselves) https://play.google.com/store/apps/details?id=com.revolution.education  Download RBE application for SSC Exams complete preparation Complete Economics by Sachin Sir (RBE) Contents 1. (GDP/GNP/ National Income)..................................................................................................................................... 2 2. (Banking Sector)......................................................................................................................................................... 13 3. Capital Market (Share/Stock/Security Market)........................................................................................................ 20 4. (Various Sectors of Economy)................................................................................................................................... 24 5. (Classification of Economies)..................................................................................................................................... 26 6. Planning In India/Five Year Plans.............................................................................................................................. 29 7. External Sector of India/Foreign Trade..................................................................................................................... 34 8. International Financial Institutions........................................................................................................................... 39 9. (Taxation)................................................................................................................................................................... 41 10. (Budget)................................................................................................................................................................... 45 11. (Types of Inflation).................................................................................................................................................. 49 12. (Unemployment)..................................................................................................................................................... 52 13. (Poverty).................................................................................................................................................................. 53 14. (Agriculture in India)................................................................................................................................................ 55 Complete Course Video link:- https://youtu.be/sZc2f6U8IIA Course Enquiry 1  Download RBE application for SSC Exams complete preparation 1. (GDP/GNP/ National Income) GDP (Gross Domestic Product) Total/sum of Final values of Goods & Services Produced by the producers [Indian or foreigner] with in the domestic Boundary in a financial year is called GDP. Ø Financial year (1st April - 31st March) G D P Gross Domestic Product Total/Sum of All Goods Services Final Monetary Value Within Indian Domestic Boundary Goods Production Services By Indian Producers By Foreign Producers Companies Individuals Companies Individuals Examples:- (1) India’s GDP Indian Domestic Boundary will be considered. (2) China’s GDP Chinese Domestic Boundary will be considered (3) USA’ GDP USA’s Domestic Boundary will be considered Ø If we talk about GDP of various Indian States. MH > TN > GJ > KR > UP GDP of various States is called as GSDP (Gross state Domestic Product) Production within this India’s Domestic Boundary Boundary will be counted in India’s GDP. Course Enquiry 2  Download RBE application for SSC Exams complete preparation (1) Land Boundary (28 States + 8 UT) 1982 (2) Water Boundary [According to UNCLOS] Geograp- 12 Nautical Miles from hical or the coastline political boundary (3) Air Boundary [Karman line] of any country 100 km above the earth surface (4) EEZ (exclusive Economic Zone) (200 N-M from the Baseline) It is an Economic Boundary of any country. (5) Diplomatic Missions of India in foreign Embassies/Consulates/High commissions (6) India’s Foreign Assets Ø Ex:- Military establishments in foreign, Assets on lease (like Chabahar port in Iran) Karman Line:- Ø It is an imaginary line which separates earth Atmosphere from space. If we talk about GDP’s Comparison of Top-5 Countries. USA > China > Germany > Japan > India Largest GDP/Eco. 5th Largest Of the World. GDP/Economy GNP (Gross National Product) Total/sum of final values of Goods & Services Produced by Indian Producers (Individuals and companies) in India or foreign in a financial year is called GNP. G N P Gross National Product Total/Sum of All Goods Services In a Financial year Final Monetary Value Indian National Producer (Company or Individual) Production In India In Abroad Course Enquiry 3  Download RBE application for SSC Exams complete preparation So, We can Say Ø GDP Defined by domestic Boundary of any country Ø GNP Defined by Producer’s Nationality Examples:- (1) Air India working at USA’s Airport. GDP GNP Production in USA’s domestic boundary Production by Indian company It will be counted It will be counted in USA’s GDP in India’s GNP (2) Google/FB – India GDP GNP Production in Production by India’s domestic American company boundary It will be counted It will be counted in USA’s GNP in India’s GDP (3) India citizen “Rahul” – Working in UK GDP GNP Production in UK’s Production by domestic boundary Indian Citizen It will be counted It will be counted in UK’s GDP in India’s GNP Course Enquiry 4  Download RBE application for SSC Exams complete preparation (4) Vivo/Oppo – India GDP GNP Production in Production by India’s domestic China’s Companies boundary It will be counted It will be counted in China’s GNP in India’s GDP GNP = GDP + Income inflow from aboard to India Income out flow from India to aboard Company Company By Indian Producer By Foreign Producers Individual Individual Production/Working Production /Working in abroad in India So, GNP = GDP + Net Inflow Income in India From abroad NDP (Net Domestic Product) Ø NDP = GDP – Depreciation NNP (Net National Product) Ø NNP = GNP – Depreciation National Income N.I. = (NNP)FC FC = Ø Factor cost Ø Cost of the factors involve in Production (Ex:- Land, Labour, Capital, M/C, Tech, Raw material, Producer’s Profit etc.) Ø Or we can say ‘Cost of the Product before Tax’ Relation between market price (MP) and factor cost (FC) (MP) = FC + Indirect Tax – Subsidy So, (GDP)MP = (GDP)FC + Indirect Tax – Subsidy So, (GNP)MP = (GNP)FC + Indirect Tax – Subsidy So, (NDP)MP = (NDP)FC + Indirect Tax – Subsidy So, (NNP)MP = (NNP)FC + Indirect Tax – Subsidy N.I. = (NNP)FC Or we can say, N.I = (GNP)FC – Depreciation (because, NNP = GNP – Depreciation) (because, GNP = GDP + or we can say, N.I = (GDP)FC + Net Inflow Income from abroad to India – Depreciation Net inflow income from abroad Course to India) Enquiry 5  Download RBE application for SSC Exams complete preparation or, N.I. = (NNP)MP – Indirect + Subsidy (because, NNPMP = NNPFC + Indirect tax – Subsidy) or, N.I. = (GNP)MP – I.T + Subsidy – Depreciation (because, GNPMP = GNPFC + Indirect tax – Subsidy) or, N.I = (GDP)MP + Net inflow income from abroad to India - I.T. + Subsidy - Depreciation (because, GDPMP = GDPFC + Indirect tax – Subsidy) Nominal GDP = (GDP)MP Ø Impact of inflation is included Real GDP = (GDP)BP Ø Impact of inflation is excluded BP = Base Price Ø decide on base year Ø base year of Indian economy (2011-12) Per Capita Income 𝐆𝐃𝐏 Ø P.C.I. = 𝐏𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝐍𝐨𝐦𝐢𝐧𝐚𝐥 𝐆𝐃𝐏 𝐆𝐃𝐏 𝐚𝐭 𝐌𝐏 Ø Nominal P.C.I. = = 𝐏𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏 𝐑𝐞𝐚𝐥 𝐆𝐃𝐏 𝐆𝐃𝐏 𝐚𝐭 𝐁𝐏 Ø Real P.C.I. = = 𝐏𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏 Methods of counting national Income 1. Production Method 2. Income Method 3. Expenditure Method Formula = C + G + I + X – M C = Pvt. Expenditure Expenditures Expenditures by by Individuals Pvt. Sector G = Govt. Consumption/Expenditure I = Investment Ø Pvt. Sector Investment Ø Public Sector Investment X= Export Goods Services M= Import Goods Services Course Enquiry 6  Download RBE application for SSC Exams complete preparation Micro Economics Macro Economics v Individual Person/Company/Small Unit Ø National level Production/ Economic Activities Production/ Economic Activities Study Study v Pillars/Principles/Factors of Micro Economics Ø Pillars/Principles/Factors of Macro Economic v Producer Behaviour Theory v Fiscal Polity o It Shows Producer’s point of view v Budget Taxation o Law of supply v Monetary Policy o Supply ∝ Price) v Banking Sector v Consumer Behaviour Theory v Unemployment/Poverty o It shows consumer’s point of view. v Inflation/deflation/Economic recession o Law of Demand v BoP A/c 𝟏 v Current A/c o Price ∝ 𝑫𝒆𝒎𝒂𝒏𝒅 v Cost Theory v Capital A/c v CAD [Current A/c Deficit] o Optimum cost of product v Currency Exchange Rate v Foreign Trade v GDP/GNP/NDP/NNP/N.I./P.C.I. Growth Rate of GDP 2022-23 2023-24 GDP = 100 Rs. GDP = 110/105/102/95 GDP’s G.R = 10 % GDP’s G.R = 5 % Growth rate = +ve GDP’s G.R = 2 % GDP’s G.R = -5 % (G.R. = -ve) Ø So, If Growth rate is positive. It Means that GDP is increasing. It can increase with High Growth Rate (6- 10%) or Average Growth Rate (4-5%) or Low Growth Rate (0-3%). Ø If Growth Rate is –ve. It means that GDP is decreasing. Ø For Developed Countries:- o They used their Economic potential o Rich countries o World class infra. Development Maximum potential of Growth Rate (0-3%) o At the stage of saturation o Population Growth = -ve o Poverty (no) Ø For, Developing Countries/LDCs (Least or under developed countries) o Middle Income/Poor Countries o Have the potential to Grow faster o Lack of Infra. Development o High rate of Poverty/Unemployment o They are not at the stage of saturation o High rate of Population Growth Course Enquiry 7  Download RBE application for SSC Exams complete preparation So, for developing/LDCs countries, It is mandatory to achieve Higher GDP’s Growth Rate. GDP’s Growth rate > 5% Developing/LDC Nations If, GDP Growth rate < 5% If, GDP Growth rate = -ve Low Growth Rate of GDP New industry development (no) Industrialisation Old industry Production Unemp./Poverty = Peak Unemployment/Poverty Tax Income of Govt. Tax Income of Govt. Expenditure on infra. dev. Expenditure in infra. dev. Situation of Infrastructure Deficit Infra. dev. This problem is called as This problem is called as “Economic Slowdown” Economic Recession Deflation Note:- So, Low Growth Rate of GDP (0-5%) is called as Deflation Problem in Economy & -ve Growth Rate of GDP is Called as Economic Recession Problem in Economy. (RBI & Govt.) Inflation Price of G/S Maximum Profit By Economic Policies G Inflation (Problem) Producer Supply Satisfaction S Inf. Rate > 4% 4% G Inf. Rate < 4% Consumer Demand Satisfaction S Deflation/Eco. Inflation Price of G/S Recession (Problem) (High Purchasing Power) Optimum Inflation Rate (4%) Course Enquiry 8  Download RBE application for SSC Exams complete preparation Optimum Inflation Rate:- On which neither the consumer will feel inflation nor the producer will feel the low price of goods and services (that means producer will get optimum profit). Hence, both the pillars of economy (consumer and producer) will be satisfied. There are two types of Problems in Economy:- Inflation Deflation/Economic If, (Inflation Rate > 4%) Recession GDP of G.R. / -ve & Unemp./Poverty = Peak Reasons Behind inflation Problem in Economy:- Inflation (Inflation Rate > 4%) Price of G/S 1. Increase in Demand ( ) 2. Decrease in Supply ( ) 3. Money Supply By RBI By Govt. 4. Interest Rate 5. Public Expenditure 6. Tax Rate 7. Subsidy 8. Expenditure In 9. Expenditure In welfare Scheme Infrastructure Development Course Enquiry 9  Download RBE application for SSC Exams complete preparation Steps taken by RBI & Govt. to counter inflation problem (inflation rate > 4%) in Economy. Optimum Inflation Rate (4%) Inflation Price of G/S 1. Decrease in Demand 2. Increase in Supply/Production 3. Money Supply By RBI By Govt. 4. Interest Rate 5. Public Expenditure 6. Tax Rate 7. Subsidy 8. Exp. In welfare 9. Exp. In Infra. Scheme Dev. Reasons Behind deflation/Economic Recession Problem in Economy. Deflation/Economic Recession GDP’s Growth Rate /-ve Unemployment/Poverty = Peak 1. Demand 2. Supply 3. Money Supply By RBI By Govt. 4. Interest Rate 5. Public Expenditure Course Enquiry 10  Download RBE application for SSC Exams complete preparation Steps taken by RBI/Govt. to counter deflation/Economic Recession Problem:- Deflation/Eco. Recession Solution 1. Demand 2. Supply/Production 3. Money Supply By RBI By Govt. 4. Interest Rate 5. Public Expenditure 6. Tax Rate 7. Subsidy 8. Exp. In welfare 9. Exp. In Infra. Scheme Dev. Problems of Economy Inflation Deflation/Eco. Recession Interest Rate > 4% G.R. of GDP /-ve Unemployment/Poverty Solution by (Govt. and RBI) Economic Policies Monetary Policy Fiscal Policy Ø Formed By RBI Ø Formed By Govt. (Central Ø Based on Banking Sector Govt. and State Govts.) (Components of Monetary Ø Based on (Components of Policy) Fiscal Policy) o Taxation o Budget Course Enquiry 11  Download RBE application for SSC Exams complete preparation Monetary Policy (By RBI) Interest Rate Interest Rate Money Supply Money Supply Demand Demand Inflation Production Contractionary MP/Dear MP/Tight MP Deflation/Eco. Recession (Problem Solved) Or Hawkish MP Expansionary MP/Cheap MP/Easy MP Or Dovish MP Fiscal Policy (By Govt.) Public Expenditure Public Expenditure Money Supply Money Supply Demand Demand Production Inflation Deflation/Economic Recession (Problem Solved) Fiscal Discipline/ Fiscal Consolidation Policy Fiscal Stimulus Policy Note: All the Economic data (GDP/GNP/NDP/NNP/N.I./PCI etc.). Is released by NSO on Quarterly Basis. NSO (Ministry of statistics and Programme implementation) Ø National Statistics Office Ø Founded in 2019 Ø NSO formed by merging (NSSO & CSO) o NSSO (National Sample Survey Org.) o CSO (Central Statistics Office) Financial year (1 April – 31 March) divided into 4 Quarters:- Ø April – June = 1st Quarter Ø July – September = 2nd Quarter Ø October – December = 3rd Quarter Ø January – March = 4th Quarter Course Enquiry 12  Download RBE application for SSC Exams complete preparation 2. (Banking Sector) Ø Banking Sector is a part of Monetary Policy. Deposit Public Bank Loan distribution/Lending/Asset Creation @Interest Rate 5-6% @ Interest Rate 9-10% Creation Liability/Borrowings of Banks Assets of Banks Operational Corporate Margin of Banks Gross Profit Tax Net Profit Cost (divided into share holders according to their share holding) NPA (Non – Performing Assets) Ø Problem related to banking sector Assets of Banks Ø Distributed loans by banks. Performing Timely Received by the Principle Amount + Interest Rate Installment bank Assets (Loans) Timely Not Received by Non-Performing P.A. + I.R. Installment the bank After 90 days the loan is NPA of Banks declared as NPA by Bank Bank will wait for 90 days This Situation is Profit of Banks Balance sheet of Banks = -ve called as Bank run/Bankrupt/Liq uidity crisis NPAs Bad Loans/Bad Assets Bad Banks Are the Banks which deal with NPAs NPAs buy by bad bank Bad Bank Ex:- 100 cr.NPA Banks Ø NPAs Ø Profit Ø Balance Sheet = +ve Will Recover Ø New Asset Creation (Loan distri.) 90 cr. (Money) the NPAs By using Recovery laws. Course Enquiry 13  Download RBE application for SSC Exams complete preparation India’s latest Recovery Law Ø IBC 2016 (Insolvency & Bankruptcy code) Ø Insolvency Means out of the court settlement. Insolvency & Mediator for insolvency process between creditor and debtor Bankruptcy Board of India (IBBI) Formed in 2017 Bankruptcy Means dispute settled by court/Tribunal NCLT/NCLAT DRT/DRAT (Related to (Related to Company affairs) Individual Affairs) NCLT Ø National Company Law Tribunal NCLAT Ø National Company Law Appellate Tribunal DRT Ø Debt Recovery Tribunal DRAT Ø Debt Recovery Appellate Tribunal India’s Ist Public Sector (Govt.) Bad Bank licensed by RBI in April 2022 Ø NARCL (National Asset Reconstruction company limited) Ø 51% Share Holding = Public Sector Banks Ø 49% Share Holding = Private Sector Banks India’s Ist Private Sector Bad Bank licensed by RBI in April 2022 Ø IDRCL (Indian Debt Resolution Company Limited) Ø 51% Share Holding = Private Sector Banks Ø 49% Share Holding = Public Sector Banks RBI Central Bank of India Regulator of Banking Sector (by Banking Regulation Act 1949) By RBI Act 1934 Pvt. Banks Public Sector Banks Ø Makes Rules/Regulations/Guidelines for banks Ø Issue/Cancel license of banks Course Enquiry 14  Download RBE application for SSC Exams complete preparation Facts Related to RBI Ø Hilton young commission (1926) On the Recommendation of this commission Parliament passed Established RBI Act 1934 RBI = 1 April 1935 HQ = Calcutta Ø RBI was private bank at that time In 1937 HQ = Mumbai Ø 1949 – Nationalisation of RBI (Now RBI is Govt. Bank) Ø Banking Regulation Act 1949 passed by parliament Ø First governor of RBI – Osborne Smith Ø First Indian governor of RBI – C.D. Deshmukh (in 1943) Ø 4 regional offices of RBI (Delhi, Mumbai, Kolkata, Chennai) 4 deputy governors RBI Act. 1934 As a central Bank. RBI Banking Regulation Act 1949 As a Regulator of Banking Sector. Functions of RBI as a Central Bank RBI Act 1934 (A) Formation & Implementation of Monetary Policy:- Tools/Instruments of MP Quantitative Qualitative Tools Tools Quantitative Tools of MP (1) Bank Rate (BR):- Interest Rate Provides For long term RBI To Banks Loans/Lending Period (> 1 year) (2) Repo Rate (RR):- Interest Rate Provides For short term RBI To Banks Loans/Lending Period (≤ 1 year) Course Enquiry 15  Download RBE application for SSC Exams complete preparation (3) Reverse Repo Rate (RRR):- Interest Rate Provides For short term Banks To RBI Loans/Lending Period (≤ 1 year) BR/RR/RRR Interest Rate Interest Rate Interest Rate BR/RR/RRR BR/RR/RRR Loans became expensive Loans became Cheaper Money supply in economy Money supply in economy Demand in Economy Demand in Economy Price of G/S Production/Industrialisation Inflation GDP’s Growth Rate To solve the problem of Unemployment/Poverty Inflation To solve the problem of Deflation/ economic recession (4) CRR (Cash Reserve Ratio):- Liquidity/Money Emergency Ratio of Fund Amount Decided by RBI Ratio of Amount It is mandatory for every bank (Private banks and public sector banks) to keep this reserve amount in RBI Objective:- Ø To Counter Banking Crisis OR To Protect Banks from Bankrun/Bankruptcy/Liquidity Crisis situation. Ø This CRR will be hold in terms of cash/gold (HQLA-High Quality Liquid Assets). Ø No Interest Rate will be paid by RBI to banks on this amount because it is an emergency fund (inactive assets). Course Enquiry 16  Download RBE application for SSC Exams complete preparation CRR (Amount of CRR increased by RBI) Ø Liquidity flow/Money Supply in Economy Ø Demand Price of G/S Inflation Ø Solution of inflation problem CRR (Amount of CRR decreased by RBI) Ø Liquidity flow/Money Supply Ø Demand Production/investment flow GDP’s G.R. Unemployment/Poverty Ø Solution of deflation/Economic Recession problem (5) SLR (Statutory Liquidity Ratio):- Legal (means related to Money Ratio of Govt.) Amount Decided by RBI Ratio of Amount Requires to hold By Every Bank By itself Pvt. Bank Public Sector Bank Objective:- Central Government Ø This amount is used to provide loans to Govt. State Govts. SLR (Amount of SLR increased by RBI) Ø Liquidity flow Ø Demand Inflation Ø Solution of inflation problem SLR (Amount of SLR decreased by RBI) Ø Liquidity flow Ø Demand Production/investment flow GDP’s G.R. Unemployment/Poverty Ø Solution of deflation/Economic Recession problem Course Enquiry 17  Download RBE application for SSC Exams complete preparation (6) OMO (Open Market Operations) RBI Govt. Securities (G-Sec.) Sale Purchase Money Supply Money Supply Demand Demand Inflation Deflation/Eco. Recession (problem solved) Other Quantitative Tools:- (7) LAF (Liquidity Adjustment Facility) Ø Adopted in 2000. Ø Background:- LPG Reforms 1991 (New industrial/Economic policy 1991) Ø LAF is the Additional Liquidity Facility of RBI to Banks Ø For a very short term period (15 days, 1/2/3/4/5……months) Ø @ RR/RRR (Interest rate) (8) MSS (Market Stabilisation Scheme):- Ø Adopted in 2004 Ø Objective:- To counter foreign currency/Investment induced inflation in economy Ø CRR/SLR Liquidity flow Demand Inflation (9) MSF (Marginal Standing Facility):- Ø Adopted in 2011. Ø Background:- Global Economic Recession (2007-08) Soln. Money supply will have to Demand increased Ø MSF is an additional liquidity facility of RBI to Banks For an overnight period (Overnight lending facility; 1-7 days) @RR/RRR (interest rate) Qualitative Tools:- (1) MR (Marginal Requirement) Ø For Producer Ø Minimum Required value of Assets to take loans as a producer. Course Enquiry 18  Download RBE application for SSC Exams complete preparation (2) CR (Collateral Requirement)/Control of consumer credit Ø For Consumers Ø Minimum Required value of Assets to take loans as a consumers. (3) Rationing of Credit (4) Direct Actions (5) Moral Suasions MPC (Monetary Policy Committee) Ø Formed in 2016 (on the recommendation of Urjit R. Patel committee) by RBI amendment act 2016. Ø MPC is a statutory body. Before 2016 Monetary Policy Formation or Implementation By RBI Governor According to RBI Act 1934 After 2016 Monetary Policy Formation or By MPC According to RBI Implementation (Amend.) Act 2016 Structure of MPC 6 Members 3 From RBI 3 From Central Government Ø RBI Governor (Chairperson of MPC) Ø Appointed by Central Government Ø Deputy Governor Ø RBI Officer Ø Decision of MPC Majority (4 – 2) Ø Target for MPC o FIT (Flexible inflation Target) = 4% ∓ 2% o 4% (Optimum inflation rate) Max. 6% Min. 2% Other Functions of RBI (B) Bank of Banks RBI is called as lender of last resort. (C) Bank of Govt./Banker or Agent or Advisor or Representative of Govt. (D) Currency Printing/Issue/Mgmt. (E) Forex Reserve Hold/Mgmt./Regulation Course Enquiry 19  Download RBE application for SSC Exams complete preparation (F) Currency Exchange Rate Mgmt./Regulation (G) Overall RBI Plays important role in Economic/GDP Growth and Economic development of the nation. Call Money Rate/Call Money Mkt. Ø Inter-Bank Interest Rate/Lending Rate is called as call money rate. Ø The Place Where transaction between two banks take place is called as call money market. Ø It is the overnight Lending Rate (1 – 7 days) Earlier this rate was determined by LIBOR (London Interbank offered rate) but now by MIBOR (Mumbai inter-Bank offered rate). 3. Capital Market (Share/Stock/Security Market) Financial Market Money Market Capital Market Ø Example: Banking Sector Ø Example: Share/Stock/Security Ø Regulator: RBI Mkt. Ø Short Terms financial Mkt. (≤ 1 Ø Regulator: SEBI year) Ø Long Terms financial market (> 1 Ø Small amount of money transacts year) in this type of market Ø Huge amount of money transacts in this type of market SEBI Ø Ø Securities Exchange Board of India Ø Established: 1988 Ø Regulated by SEBI Act 1992 Ø Head Quarter: Mumbai Ø Chairperson: Madhabi Puri Buch Course Enquiry 20 Download RBE application for SSC Exams complete preparation Security Share Security Debt Security Money Money Company Investor Company Investor Share Sec. Debt Sec. Transfer of Ownership Rights Fixed Interest Rate = Return Or (Company borrows money from investor) Share Holdings Risk ∝ Profit / Loss Risk ∝ Profit / Loss Share Security Preferential Share Equity Share Ø Shares hold by Promoters Ø Share hold by common/Retail of Company Investors or other than Ø They have Primary Right promoters in dividend (Net Profit) Ø Secondary Right in dividend Ø No voting rights for Ø All Voting Rights are reserved preferential share holders for equity share holder Nominated BODs by Promoters Decision Making Company Board of Directors Body Elected BODs by Equity Share Holders Course Enquiry 21  Download RBE application for SSC Exams complete preparation Debt Security Bond/Debenture Bills/Commercial Paper Ø Long term debt Sec. (> 1 year) Ø Short term debt Sec. (< 1 year) Ø Commercial Papers for 35 days. Note:- T-Bill Short term debt Sec. Issued by Govt. Entity (G-Sec.) Treasury Bill Investors Bull Bear Investors Investors They think, in Near Future share Mkt. will rise They think, in Near Future share Mkt. will down fall Demand of Share Value of Share Value of share/Demand of share Share market Share market Bombay Stock Exchange (BSE) National Stock Exchange (NSE) Ø Established in 1875. Ø Established in 1992. Ø Asia’s/India’s first stock Exchange Index:- NIFTY Index:- SENSEX o Index of Top-50 Listed Companies o Index of Top-30 Listed Companies SENSEX NIFTY Up Down Up Down Same as Same as Effe Effe Bull type c tiv Bear e type Bear type c tiv Bull e type SENSEX SENSEX Investors Investors Investors Investors Course Enquiry 22  Download RBE application for SSC Exams complete preparation Security Market Primary Mkt. Secondary Mkt. Money Money Company Investor Investor ‘A’ Investor ‘B’ Security (Share/debt) Security (Share/debt) After Maturity After Maturity Money + Return Company Security (Share/Debt) Security (Share/Debt) Money + Return Types of Investment 1. Private Placements Ø Placement of Shares Ø For Limited Investors Ø Ex:- Big investors, Investment companies, Mutual Fund etc.) – They have Market Expertise. 2. IPO (Initial Public Offering/Offer) Company First Time (For Common/Retail Offer of Shares Investors) Ex:- LIC, JIO, Paytm etc. 3. FPO (Follow on Public Offer/Offering) Company (2nd , 3rd , (For Common/Retail Offer of Shares 4th , 5th , --- Investors) ------) Course Enquiry 23  Download RBE application for SSC Exams complete preparation Other Important Terms Angel Investors Ø Invest in Start-ups/New companies. Ø Long Term Investment. Ø Risk ∝ Profit /Loss Venture Capitalist/Venture Capital Investor Ø Invest in well-established/profitable companies. Ø They are opportunistic Investor. Ø Short Term Investment. 4. (Various Sectors of Economy) There are 3 Sectors of Economy on the Basic of Nature of Industry. Primary Sector Secondary Sector Tertiary Sector It is also called as “Service Sector Sectors Related to Production of Goods Sectors Related to Production of Services Tertiary Sector Ø Services Sector Ø Example:- Transportation/Distribution/Logistics, Human Resources/Labors, Education, Health, Capital/Financial Services, Science & Tech, Telecom Sector, Internet/Media/Social Media/T.V. Media, ICT (Information and communication technology)/ Software Industry, Tourism, Hospitality (Hotel/Restaurant. Etc.) Capital/Financial Services Banking Sector Insurance Sector Pension/Social Security Sector On the basic of skill/standard of Human Resources. Service Sector Tertiary Sector Quaternary Sector Quinery Sector Course Enquiry 24  Download RBE application for SSC Exams complete preparation Tertiary Sector Ø Lower level of skill Ø Unskilled/semiskilled Human Resources Ø Blue collar jobs Ø Low menial jobs Ø Lower level of expertise Ø Field jobs Ex:- District/session court lawyers or Judges, district level Admin/Police, Labour/Technician/Junior engineer, Primary Teachers, Zomato/Swiggy delivery Boy Etc. Quaternary Sector Ø Medium level of skill/expertise Ø Skilled labour Ø White collar jobs Ø Middle Menial jobs Ø A.C. rooms jobs or office jobs Ex:- HC level lawyers or Judges, commissioner level admin./Police, Engineers, MBA professionals, Banking professionals, Secondary education Teachers. Quinery Sector Ø High level of skill/expertise Ø Very high skilled labour Ø Gold collar jobs Ø High Menial jobs Ex:- SC level lawyers or judges, secretary level, Admin./Police, Professors, Company’s CEOs/MDs/VPs/MP/MLA/Ministers, Scientists, Economists. Primary Sector Secondary Sector Ø Production of Goods Ø Production of Goods Ø We use Natural Resources as an Ø We use Natural Resources/output of primary output/Product sector as an input/raw material Ex:- (1) Agriculture & allied Sector Ø Crop Production We get Artificial/Manmade products Ø Animal Husbandary Ø Agro-Forestry Ø Cotton/Jute/Sugarcane production Ø Ex:- Manufacturing Industry Ø Raw meat Industry (1) Textile Industry (2) Mining & Minerals Industries. (Coal, Metal/Non- (2) Leather Industry metal etc. (3) Food Processing Industry (3) Exploration/Excavation Industry (4) Dairy Industry Ø Crude oil (5) Sugar Industry Ø Natural Gas (6) Automobile Industry Note:- Primary Sector is also called as ‘Agriculture (7) Heavy Metal Industry Sector’ (8) Furniture Industry Ø Construction Industry Ø Cement/Bricks Industry Ø Electricity/Power Production Industry Ø Water supply Industry Ø Refinery Industry Note:- Secondary sector is also called as “Industrial Sector” Course Enquiry 25  Download RBE application for SSC Exams complete preparation 5. (Classification of Economies) On the Basic of Govt. Intervention/control in Economy: Capitalist Socialist Mixed Economy Economy Economy Capitalist Economy/Capitalism Example:- USA, Western Europe, Canada, Aus. Etc. Ø Father of Capitalism/ Economics:- Adam Smith Book “Laissez Faire “Wealth of the Nation” Policy” Non – intervention No Intervention of Policy Govt. in Economy “Free Economy” Ø 100% Private Sector (Privatisation) Not under Govt. control Ø Resources Free to use Supply Ø Mkt. Factor Free from Govt. control Demand Ø Concept of private property. Ø 100% Economic freedom v Economic Activities GDP’s Growth Rate unemp./Poverty v Innovation/Startup culture v Monopoly (Not present) v Healthy Competition between producers o Quality of G&S o Price of G&S Ø Economic/Income inequality o Rich – Poor divide Socialist Economy/Socialism Example:- USSR (Soviet Union) Ø Father of socialism/socialist Economy – Karl Marx Ø 100% Public sector (100% Govt. controlled Economy) Course Enquiry 26  Download RBE application for SSC Exams complete preparation o No Pvt. Sector Ø Resources Under Govt. Control. Supply Ø Mkt. Factor Demand Ø No concept of pvt. Property Ø Concept of Public/Collective property Ø No Economy Freedom Economic Activities GDP’s Growth Rate Unemploy/Poverty Ø Innovation/Startup culture Quality of G/S Ø Monopoly Price of G/S Ø Healthy Competition (Not present) Ø Economic/Income Equality o Rich – Poor divide (Not present) Mixed Economy Example:- India Ø Father of Mixed Economy:- John Maynard Keynes “Pump Priming Theory” Indirect Intervention of Govt. in Economy Ø Pvt. Sector + Public (Govt.) Sector Ø Resources- o Under indirect control of Govt. o “Invisible Hand of Govt. in Economy” o For the Welfare/Betterment of depressed class or sections of Society. Supply Ø Mkt. Factor Free Demand Ø Concept of Pvt. Property Ø Economic freedom o Economic Activities GDP’s Growth Rate Unemp./Pov. Course Enquiry 27  Download RBE application for SSC Exams complete preparation Ø Innovation/Startup Culture Ø Monopoly (Not present) Quality of G/S Ø Healthy Competition q Price of G/S q Ø Economic/Income inequality o Rich – Poor divide On the Basic of contribution of various Sectors in Economy:- Agri. Economy Industrial/ Service Economy Manufacturing Economy Contribution in GDP + Contribution in employment Structure Agri. Economy Agri. Sector > Industrial Sector > Service Sector Industrial Economy Industrial Sector > Service Sector > Agri. Sector Service Economy Service Sector > Industrial Sector > Agri. Sector Indian Economy On the Basic of On the Basic of Contribution in GDP Contribution in Employment Structure Service Sector > Industrial Sector > Agri. Sector Agri. Sector > Industrial Sector > Service Sector (55-57%) (26-28%) (15-17%) India is a Agri. Economy India is a Service Economy Course Enquiry 28  Download RBE application for SSC Exams complete preparation On the Basic of Stage of Development. Developed Economy Developing Economy Least/under developed country (LDCs) High per capita income/Rich Country P.C.I > 12236 USD Middle P.C.I. Countries Low P.C.I. Countries Lower Middle Income Poor Countries Upper Middle Income Countries Countries P.C.I. < 1005 USD P.C.I. = 3956 - 12235 P.C.I. = 1006 - 3955 USD USD Note:- World Bank Decides Weather a country/economy is developed/developing/LDCs on the basic of Per Capita Income (P.C.I) 6. Planning In India/Five Year Plans Planning in India before Independence Indian National Congress formed this National Planning Committee committee (1938) Subhash Chandra Bose was Congress president and was chaired by Jawaharlal Nehru Aim was to release detailed blueprint of an economic plan for independent India. Industrialists of Bombay including Mr. JRD Tata, GD Birla, Purshot tamdas Thakurdas, Lala Shriram, Kasturbhai Lalbhai, AD Shroff, Bombay Plan Ardeshir Dala, & John Mathai prepared this (1944) plan. It was neglected by the political parties and by the business class due to various reasons. By MN Roy. People’s Plan This plan gave greatest priority to Agriculture. (1944) This plan was for ten year. It recommended nationalization of all agriculture and production. By Sri Shriman Narayan who was principal of Gandhian Plan Wardha Commercial College. (1944) Plan emphasized economic decentralization with primacy to rural development by developing cottage industries. Course Enquiry 29  Download RBE application for SSC Exams complete preparation By Jaiprakash Narayan inspired by Gandhian Sarvodaya Plan plan as well as Sarvodaya Idea of Vinoba (1950) Bhave. It emphasized on small and cotton industries and agriculture as well. Plan also stressed upon land reforms and decentralized participatory planning. Post Independence Planning in India Planning Commission NITI Aayog (National Institute for Transforming India) 15 March (1950) – 13 August (2014) 1 January 2015 – Till Now Executive Body Executive Body Advisory in Nature Advisory in Nature Structure Structure Ø Chairperson – PM Ø Chairperson – PM Ø Vice Chairperson – Any Economist Ø Vice Chairperson – Any Economist Ø Secretary – Retd. IAS Ø CEO (Chief executive officer) – Retd. IAS Ø Members – Expert Members + Cabinet Min. of Ø Members of Governing Council of NITI Aayog – GoI CM of All States + CM of 3 UTs (J&K, Delhi, Puducherry) + L.G./Administrator of other 5 Uts + Expert Members + Central Cabinet Ministers Note:- Note:- Ø 1st Chairperson of Planning Commission – J.L. Ø 1st Chairperson of NITI Aayog – Narendra Modi Nehru Ø 1st Vice Chairperson of NITI Aayog – Arvind Ø Last Chairperson of Planning Commission – Pangaria Manmohan Singh Ø Current Vice Chairperson of NITI Aayog – Dr. Ø 1st Vice Chairperson of Planning Commission – Suman Beri Gulzari Lal Nanda Ø 1st CEO of NITI Aayog – Sindhu Shri Kullar Ø Last Vice Chairperson of Planning Commission Ø Current CEO of NITI Aayog – BVR – Montek Singh Ahluwalia Subramanyam Central Body (No Representation of States) Federal Body (Representation of Both State Govt. & Central Govt.) Five year Planning Ø 3 years action plan Ø 7 years Strategy Ø 15 years vision document Approach (Top to Bottom) Approach (Bottom up Approach) Financial Rights No Financial Rights Note:- Best example of cooperative/competitive federalism in India NITI Aayog Cooperative Federalism Ø Healthy friendly relation b/w states & centre. Competitive Federalism Ø To promote Healthy competition for progress & development among states. Ø Example:- Various Indexes released by NITI Aayog. Course Enquiry 30  Download RBE application for SSC Exams complete preparation Five Year Planning in India (1) 1st Five Year Plan (1951 – 56) Ø Model:- Harrod Domar Model Ø Focus:- Agriculture Sector Development Ø Growth rate of GDP o Target – 2.1% o Achieved – 3.6% Ø Prime Minister – J.L. Nehru (2) 2nd Five Year Plan (1956 – 61) Ø Model:- Mahalanobis Model Ø Focus:- Industrial Sector Development Ø Growth rate of GDP o Target – 4.5% o Achieved – 4.1% Ø Prime Minister – J.L. Nehru Note:- P.C. Mahalanobis Ø Architect of Indian Planning Ø Prepared 2nd Five Year Plane Ø Founder of Indian statistical Institute (Kolkata) in 1931. Ø Called as Father of Statisties in India. (3) 3rd Five Year Plan (1961 – 66) Ø Model:- Godgil Plan Ø Focus:- Agriculture & Industrial Sector Development Ø Prime Minister – J.L. Nehru Ø This FYP was completely failed Important Facts:- Ø 1962 = India – China war Ø 1965 = India – Pakistan war Economic & food crisis Ø 1964-65 = Severe drought/famine Ø 1964 = Death of J.L. Nehru Political crisis Ø 1966 = Death of L.B. Shastri Ø 1964/1966 = Gulzari lal Nanda appointed as “Acting PM of India” After the death of Nehru Ji & Shastri Ji. Ø 1965 = Tashkent Agree. (India –Pakistan Peace Agree.) Note:- 1st Planning Holiday (1966 – 69) Ø PM = India Gandhi Ø 3 Annual Plans were introduced o 1st Annual Plan (1966 – 67) v Op. Green Revolution was launched nd o 2 Annual Plan (1967 – 68) o 3rd Annual Plan (1968 – 69) Ø Focus of 3 Annual Plans Self-Reliance Course Enquiry 31  Download RBE application for SSC Exams complete preparation (4) 4th Five Year Plan (1969 – 74) Ø Focus:- Growth with stability & Self-Reliance Ø Growth rate of GDP o Targeted – 5.7% o Achieved – 3.3% Ø PM = Indira Gandhi Important Facts:- Ø 1969 = Nationalisation of 14 Pvt. Bank by Indira Gandhi Ø 1970 – 71 = Operation flood o Related to “White Revolution” o To Promote Milk Production o Father of white Revolution - Verghese Kurien Ø 1971 = India – USSR friendship treaty Ø 1971 = Ending of previ purse Ø 1971 = India – Pakistan war Ø 1972 = Shimla Agreement o India – Pakistan peace Agree. (5) 5th Five Year Plan (1974 – 79) Ø Focus:- Poverty Alleviation, Self-Reliance & Family Planning (Population Control) Ø Growth rate of GDP o Targeted – 4.4% o Achieved – 4.8% Ø PM – Indira Gandhi Important Facts:- Ø 1974 = Operation smiling/laughing Buddha o India’s 1st peaceful nuclear test Ø 1975 – 76 = Indira Gandhi imposed Article 352 (National Emergency) Note:- Ø 1977-78 = General elections (Lok Sabha) were held – Janta Party won this election Ø PM = Morar ji Desai Ø 5th FYP was terminated by Morar ji Desai in 1978 Rolling Plan (1978 – 83) Ø By PM Morar ji Desai Ø Terminated in 1980 (6) 6th Five Year Plan (1980 – 85) Ø Focus:- Poverty Eradication & employment generation Ø Growth rate of GDP o Targeted – 5.2% o Achieved – 5.7% Ø PM – Indira Gandhi (7) 7th Five Year Plan (1985 – 90) Ø Focus:- Rapid food grain production + employment creation Course Enquiry 32  Download RBE application for SSC Exams complete preparation Ø Growth rate of GDP o Targeted – 5% o Achieved – 6% Ø PM – Rajiv Gandhi Note:- Ø 1990 = BoP Crisis (USD Crisis) o Economic Crisis o LPG Reforms 1991/New industrial or economic policy was adopted. 2nd Planning Holiday = 1990 – 92 Ø 2 Annual Plans o 1990 – 91 o 1991 – 92 (8) 8th Five Year Plan (1992 – 97) Ø Focus:- Human Resources Development (Education, Public, Health, Employment & Skill Dev.) Ø Growth rate of GDP o Targeted – 5.6% o Achieved – 6.8% Ø PM – P.V. Narsimha Rao Important Facts:- Ø 1996 = Op. Pokhran – I o India’s Nuclear test to become Nuclear Powered o Unsuccessful o PM = Atal Bihari Vajpayee (9) 9th Five Year Plan (1997 – 2002) Ø Focus:- Growth with Justice and Equity Ø It was launched in the 50th year of Independence of India Ø Growth rate of GDP o Targeted – 7% o Achieved – 5.6% Ø PM – Atal Bihari Vajpayee Important Facts:- Ø 1998 = Op. Pokhran – II o India’s became a Nuclear powered country o PM = Atal Bihari Vajpayee (10) 10th Five Year Plan (2002 – 2007) Ø Focus:- Doubling per capita Income in next 10 yrs. Ø Growth rate of GDP o Targeted – 8% Ø PM – Atal Bihari Vajpayee Course Enquiry 33  Download RBE application for SSC Exams complete preparation Important Facts:- Ø 2005 = NREGA (National Rural Employment Guarantee Act.) o Scheme was launched by PM Manmohan Singh. o Ojective:- To reduce poverty in Rural Area & to counter migration related to employment from Rural India to Urban India. (11) 11th Five Year Plan (2007 – 2012) Ø Focus:- Faster and Inclusive Growth Ø PM = Manmohan Singh Important Facts:- Ø 2009 = NREGA scheme renamed as MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act.) (12) 12th Five Year Plan (2012 – 2017) Ø Last five year plan Ø Focus:- Faster, More Inclusive & Sustainable Growth Ø Growth rate of GDP o Target @ 9% Ø PM – Manmohan Singh 7. External Sector of India/Foreign Trade Economic Relation India’s with Rest World Economic Transaction BoP A/c Ø Balance of payment A/c Ø Forex reserves A/c Ø Foreign Currencies A/c Ø USD A/c Ø BoP A/c managed or hold by RBI Course Enquiry 34  Download RBE application for SSC Exams complete preparation Impact of BoP Crisis on Economy BoP Crisis Forex Reserve Crisis USD Crisis Import of Goods & Import of RAW Material and Foreign Debt/Loan Services Energy Ø Supply of Goods & Ø Crude Oil & Natural Gas Import Ø Government will fail to Services Decreases. Decreases. payment of loan Ø Inflation Increases Ø Domestic Production of Goods & Services Ø Situation of Decreases. Defaulter/Bankruptcy Ø GDP’s Growth Rate /-ve Ø Soverign Credit Rating of Ø Unemployment/Poverty Increases. that country or economy Ø Problem of Deflation/Economic will Decrease. Recession Occurred in Economy Ø Latest Example: Pakistan, Sri Lanka, Bangladesh etc. Faced BoP Crisis. Ø India Faced BoP crises Situation in 1990. Ø NOTE: BoP Crisis (USD Crisis) – Solution: - Done by IMF by issuing “Bailout Package (USD package)” Parts of Forex Reserve of any Country: Ø Gold Reserve o Under Government o Under RBI Ø Reserve of Foreign Currencies (Majorly in USD) Ø Foreign Assets of RBI & Govt. Ø Movable Assets: o External Debt o Share Holdings in various International Institutions o RBI’s Investment in foreign markets Ø Non-Movable Assets: o Embassy/India’s Diplomatic Mission or High Commission o Other Assets: Example- Lease Assets of India in foreign. Ø India’s Emergency Reserve in IMF SDR (Special Drawing Rights) USD Euro Pound Yen Yuan/Reminbi Course Enquiry 35  Download RBE application for SSC Exams complete preparation BoP A/c Inflow of USD Outflow of USD BoP A/c Current A/c or Trade A/c Capital A/c A/c of Import & Export Financial Transaction Of Goods & Services Current A/c or Trade A/c Inflow of USD Export Outflow of Goods & Services Inflow of Goods & services Import Outflow of USD Merchandise/visible items Export & Import of Goods Invisible Items Export & Import of Services Situations of Current A/c CAS (Current A/c Surplus) CAB (Current A/c Balance) CAD (Current A/c Deficit) Ø Inflow of USD > Outflow of USD Ø Inflow of USD = Outflow of USD Ø Inflow of USD < Outflow of USD Ø Export Bill > Import Bill Ø Export Bill = Import Bill Ø Export Bill < Import Bill Ø Export Economy Ø It is an ideal situation that Ø Import Economy Ø Ex: China can not be possible Ø Ex: India Note:- Ø India’s top-3 largest trade partners (Exports/Imports) o USA > China > UAE Ø India’s largest CAD with which country o China Ø India’s largest CAS with which country o USA Course Enquiry 36  Download RBE application for SSC Exams complete preparation Capital A/c Components Foreign Investment External/Foreign Debt or External Grant/Aid External Deposit loans Ø FDI (Foreign Direct Ø Govt. Debt/loans (Inflow Ø Govt. Grant/Aid Ø NRI Deposit. Investment). & Outflow of loans) (Inflow & Outflow) Ø FPI (Foreign Portfolio Ø Private Sector Debt/loans Ø Private Sector or Ø Remittance. Investment). (Inflow & Outflow of NGOs Grand/Aid loans) (Inflow & Outflow) Private sector external borrowings/loans are called as ECBs (external commercial borrowings) Difference Between FDI & FPI FDI (Foreign Direct Investment) FPI (Foreign Portfolio Investment) Ø Green Field Investment Ø Brown Field Investment Ø Investment used to develop new Ø Investment used to increase the production Industry/Infrastructure capacity of old/existing Industry or Infrastructure Ø Large Scale employment creation Ø Small Scale employment creation Ø Long-term Investment Ø Short-term Investment Currency Exchange Rate 1 Rupee = ? USD 1 Rupee = ? Euro 1 Rupee = ? Yen 1 Rupee = ? Pound Floating Exchange Rate Fixed/Rigid Exchange Rate Depend on Market Regulated by central Bank Devaluation Appreciation Depreciation Re-valuation Value of Currency Value of Currency Value of Currency Value of Currency Decreases Increases Decreases Increases Course Enquiry 37  Download RBE application for SSC Exams complete preparation Impact of Devaluation/Appreciation of Currency on Export-Import Devaluation Appreciation Export Increases Export Decreases Import Decreases Import Increases Example: 1 USD = 80 Rupees (Current Situation) 1 USD = 85 Rupees 1 USD = 75 Rupees (De-valuation of Rupee) (Appreciation of Rupee) Foreign/External Trade Ø Export – Import of Goods and Services Ø Regulated by DGFT (Ministry of Commerce & Industry) Trade Barriers Tariff Barrier Non-Tariff Barrier Custom Duty on Export & Import Barriers other than Tariff Example: Example: Production of Goods & Services Ø Child Labour. Ø Carbon Emission. Ø Sanitary/Phyto-Sanitary Surplus Deficit Standards. Export Import Export Import Custom Duty Custom Duty Custom Duty Custom Duty Decreases on Increases on Increases on Decreases on Export Import Export Import WTO (World Trade Organization) Objective: Ø To Promote Free Foreign Trade (Barrier Free Trade) Ø To Promote Globalisation Course Enquiry 38  Download RBE application for SSC Exams complete preparation 8. International Financial Institutions 1. IMF (International Monetary Fund). 2. World Bank. 3. Asian Development Bank. 4. NDB (New Development Bank)/BRICS Bank. 5. AIIB (Asian Infrastructure Investment Bank). After II world War (1939-1945) Cold War (1945-1989/1990/1991) Brettonwoods Conference (1944) Outcome IMF IBRD/World Bank GATT Ø General Agreement on Ø International Financial Institutions Tariffs & Trade Ø These are called as “Brettonwood Twins.” GATT Uruguay Round Dialogue Marrakesh Agreement (1986 – 1993) (1994) WTO (World Trade Organisation) Ø Establishment: 1 Jan 1995 Ø Head Quarter: Geneva (Switzerland) Ø Objective/Function: o To promote Free Trade. o To promote Globalisation. Course Enquiry 39  Download RBE application for SSC Exams complete preparation Difference Between IMF & World Bank/IBRD IMF World Bank/IBRD Ø 1944 (Brettonwoods Conference). Ø 1944 (Brettonwoods Conference). Ø HQ: Washington DC (USA). Ø HQ: Washington DC (USA). Ø Objective/Function: To provide financial Ø Objective/Function: To provide financial assistance/Loan to member countries during BoP assistance/Loan to developing and LDCs nations to crisis. eliminate Poverty (to promote Infrastructure o (BOP crisis: Balance of Payment crisis or Development). USD Crisis). Ø IMF Chief: Always from European Union. W.B. President: Always from USA. Ø Current Chief: Kristalina Georgieva. Current President: Ajay Banga. Ø India’s Quota in IMF: Ø Parts/Organs of W.B. o 2.76% (8th Largest Stake Holder). o IBRD (International Bank for o USA- 17% (Largest Stake Holder). Reconstruction & Development). o IFC (International Finance Corporation). o IDA (International Development Association). o MIGA (Multilateral Investment Guarantee Agency). o ICSID (International Centre for settlement of Investment disputes). Ø Currency of IMF: Ø Note: India is not the Member of ICSID. o SDR (Special Drawing Rights). o SDR is a Basket of five currencies o USD, Euro, Pound, Yen, Yuan or Renminbi. ADB (Asian Development Bank) Ø Established in 1966. Ø Head Quarter: Manila (Philippines) Ø Stake Holders: o Japan (15.6%) > USA (15.6%) > China (6.4%) > India (6.3%) 4th largest stakeholder in ADB NDB/BRICS Bank Ø Established on 2014 (Fortaleza Declaration) Ø Head Quarter: Shanghai (China) Ø Stake Holders: o Brazil = Russia = India = China = South Africa = 20% each Course Enquiry 40  Download RBE application for SSC Exams complete preparation AIIB Ø Established on 2015 Ø Head Quarter: Beijing (China) Ø Stake Holders: Ø China (26.6%) > India (7.6% 2nd Largest Stake holder) > Russia (6%) 9. (Taxation) Economic Policies Monetary Policy Fiscal Policy Ø Formed by RBI. Ø Formed by Government: (GOI & Ø Components: Banking Sector State Govts.) Ø Components: Taxation & Budget So, Taxation is a part of Fiscal Policy. Public/Govt. Authorities can only impose taxes GOI State Govt. Local Bodies PRIs (Panchayati Urbon Local Bodies Raj Institutions) Nagar Panchayat Nagar Palika Nagar Nigam Gram Panchayat Block Panchayat Zila Panchayat Course Enquiry 41  Download RBE application for SSC Exams complete preparation Tax Direct Tax Indirect Tax Tax Pay Tax Pay Tax Tax Govt. Govt. Payer Payer Burden Burden of Tax of Tax Note:- Min. of Finance Both are different entities. Dept. of Revenue Ex:- Govt. GST = 500 Rs. CBDT CBIC Tax Payer Central Board Central Board Producer of Direct Tax of Indirect Tax Or & Customs Company CBDT is responsible CBIC is Tax 6000 Rs. Involve in for all direct responsible Shift Production of tax affairs. for all indirect Goods/Services tax affairs. Whole sale distributer (Profit = 500 Rs.) Input Cost = 5000 Rs. Profit = 500 Rs. 6500 Rs. Tax Shift Consumer Retailer (Profit = 500 Rs.) 7000 Rs. Burden of Tax Shift Tax Course Enquiry 42  Download RBE application for SSC Exams complete preparation Note: Before 2016, CBIC was named CBEC (Central Board of Excise & Customs). Types of Direct Tax v Income Tax: o Tax on Individual’s personal annual Income. o TDS – Tax Deduction at Source o ITR – Income Tax Return v Corporate Tax: o Tax on Company’s annual Profit. ─ Input/Operational ─ Corporate Tax Turnover Gross Profit Net Profit Cost Long Term Capital Gain Tax (> 1 year) v Capital Gain Tax: Short Term Capital Gain Tax (≤ 1 year) o Tax on Return on Investment (ROI) o Ex: Investment in Shares/Bonds/Bank deposit/FD Etc. v STT (Securities Transaction Tax): o Tax on Transaction of Securities – Transactions related to DEMAT A/c o Ex: Shares/Bonds v MAT (Minimum Alternative Tax): o Tax on zero tax companies. v Professional Tax: o Tax on various professions like – lawyers, Teachers, Doctors, Engineers etc. o Note: It is the only Direct Tax which is imposed by State Govt. while as other direct taxes are imposed by income tax department (Govt. of India) v AMT (Alternate Minimum Tax): o It is same as MAT, But it is imposed on LLPs (Limited Liability Partnership). Other Direct Taxes: v Gift Tax: o Abolished in 1998. v Wealth Tax: o Repealed in 2015. v Fringe Benefit Tax: o Abolished in 2009. Types of Indirect Tax v GST (Goods & Service Tax) v Custom Duty on Export-Import Course Enquiry 43  Download RBE application for SSC Exams complete preparation Goods and Service Tax Ø Introduced in 2016 (101 constitutional amendment 2016) Ø One Nation One Indirect Tax Ø Nature: Consumption & Destination Based Tax Ø Enforcement Date: 1 July 2017 Ø GST Collection: Government of India (GOI) Ø Platform for GST-filing: GST-N (Network) Private Entity 51% Ownership 49% Ownership Hold by Private Entity Hold by Govt. 24.5% by 24.5% by GOI State Govt. Types of GST CGST (Central GST) GOI’s share in GST. SGST (State GST) State Govt. share in GST. IGST (Integrated GST) on Export – Import & Inter-state Trade Major Indirect Taxes merged/included in GST Central Excise Duty Additional Excise Duty Service Tax Central Sales Tax Additional Custom Duty (CVD/ADD) o CVD: Counter vailing duty o ADD: Anti-dumping Duty Special Custom Duty State VAT (Value Added Tax) Entry Tax Luxury Tax Entertainment Tax Taxes on Lottery, Botting, Gambling Octroi & Purchase Tax Items excluded from GST: Petroleum Products Alcohol Real Estate/Property Electricity Course Enquiry 44  Download RBE application for SSC Exams complete preparation GST Council Ø Formed in 2016 (101th Constitutional Amendment 2016) Ø Highest Decision-Making Body Related to GST Affairs. Ø Appointed by President of India. Ø Chairperson: Minister of Finance (Government of India) Ø Vice-Chairperson: Minister of Finance of Any State. Ø Member: o Minister of Finance of all states + Minister of Finance of 3 UTs (Delhi, Puducherry & Jammu & Kashmir) + MoS (Finance, Govt. of India) Ø Voting Rights: § 1/3 – Related to Govt. of India § 2/3 – Related to State Governments. Ø Decision Majority: 3/4 Ø GST Slabs: 0%, 5%, 12%, 18%, 28% 10. (Budget) Income Expenditure Govt. Article-112:- Govt. of India will propose “Annual financial Statement every year before Parliament. There is no use of ‘Budget’ word in the constitution. Budget Is a money bill. Article 110 related to money bill. Only Lok Sabha has the power on money bill. Money Bill Can only proposed in Lok Sabha Lok Sabha can only vote on Money Bill. Pre consent of President. Discussion on budget in both the house (Lok Sabha, Rajya Sabha) Course Enquiry 45  Download RBE application for SSC Exams complete preparation Note:- Ø First time in India, Budget was proposed by James Wilson on 7th April 1860 during the time period of viceroy Lord canning. Ø First time in Independent India, Budget was proposed by India’s first finance Minister R.K. Shanmukha