Economy Mind Maps PDF

Also known as service sector Focused on the action of govt./countries take...

Also known as service sector Focused on the action of govt./countries take to influence broader economies It is that part of economy where business produce services Macroeconomics GDP, NI, Inflation Activities - teaching, transport, advertising, retail Tertiary Sector Sectors Father - J. M. Keynes (England) It is always intangible in nature Focused with the action of White collar jobs individuals/businesses Also called manufacturing sector These add value to natural resources by Microeconomics Individuals, firm transforming raw materials into valuable products Father - Adam Smith (The wealth of nation) Blue collar jobs Secondary Sector Activities - Manufacturing, Processing, Building/Construction work Directly dependent on environment Indian Economy Secondary sector is called backbone of a country, helps in industrialisation of a country also called agriculture sector eg: China types of In India primary sector seen mostly in agriculture Primary Sector economic systems red collar jobs Activities - Agriculture, Fishing, Hunting & gathering, Forestry & Mining  the total of money earned within a country growth within various countries such as India, Intercountry US, China, etc within the country what is growth in National Income Intracountry comparison to previous year Gross Domestic Product Total value of all final goods and services produced within the territory of a country developed by American Economist “Simon Kuznetsk” in 1934 GDP second hand goods are never counted total income of an individual earned from all the sources before taxes Personal Income eg: subsidy by govt. A common basket of goods National Income Purchasing Power Parity Gross National Product GDP Calculation by National Statistical Office under MOSPLI (Ministry of Statistics & Total value of all final goods and services Program Implementation) Measures & Aggregates GNP produced by the nationals of the country Also known as Production Method Value Added Method Compensation to employees Operating surplus Income Method Methods to Net Domestic Product calculate GDP Mixed income NDP Expenditure Method Financial year 1 April to 31st March Net National Products NNP  Tax pe Tax (on rich people) Surcharge Tax an approximation of revenue and expenses over a specified period of time for a definite purpose (charged on everyone) Cess Tax Annual Fiscal Statement (Art. 112) to lower the negative externalities Pigouvian Tax 101 CA Department of Economic Affairs Prepared by (Ministry of Finance) Operational by: 1st July 2017 Presented by Finance Minister Assam was the first state to ratify it Directly payable to govt. 1st budget presented by R. K. Shanmukham GST council is a constitutional body: Art 279A GST It cannot be passed to someone else 33 members (2 from Centre+31 from Budget 2nd budget by John Mathai Progressive tax Direct Tax States/UTs) Morarji Desai (10 times) eg: Income tax, Wealth tax, Gift tax, Chairman: Finance Minister capital gain tax Most no. of budget P Chidambaram (9 times) Pranab Mukherjee (8 times) Corporate tax Taxation System Indirectly payable to govt. Receipt > Expenditure Surplus budget It can be passed to someone else Expenditure > Receipt Deficit Budget Indirect Tax Regressive tax Expenditure = Receipt Balanced Budget A propert owned by a person (Something that economical value) eg: GST, Excise duty, Custom duty Asset Eg: Gold, Property Budgetary Deficit Budget & Taxation Something that someone is responsible for Revenue Expenditure - Revenue Receipt Revenue Deficit (Debt/obligation) Liability accurate measure of govt. deficit/govt. Eg: payment of Loan borrowing Fiscal Deficit Deficits Total Expenditure - Total Receipts - Borrowings Fiscal Deficit - Interest Payment Primary Deficit Revenue Deficit - Grant given for Salary/Pension Effective Revenue Deficit developmental purpose Subsidy/Grant Revenue Expenditure Interest Payment Maintenance of Infrastructure components Construction of any infrastructure of budget Purchase of land/machinery Investment Capital Expenditure Loan Repayment of Loan  only 1 seller Satisfaction - Utility pure monopoly is rare Demand Affordibility Monopoly Entry barrier Eagerness to buy something eg: Indian railways the addition satisfaction or benefit that a Few dominant sellers Marginal Utility consumer derived from buying an additional unit of a commodity/service Consumer’s side - Affordability Many buyers Oligopoly No easy entry eg: Telecom sector, laptop market Demand Curve Types of Market Many sellers from producer’s side/profitability Many buyers Monopolistic Competition Similar but slightly different products eg: Toothpaste Many sellers selling homogenous products Supply Curve Many buyers Transaction motive Perfect Competition future Free entry and exit Precautionary motive People hold money eg: Agricultural products Receipt expenditure for three purposes by J M Keynes (Father of Economics) Speculative motive Father of Modern Economics - Adam Smith Things exists in equilibrium non-luxurious goods Giffen goods Perfectly Inelastic Demand eg: increase in price of wheat Exceptions luxurious goods Veblen goods Demand is perfectly inelastic Changes in price (usually -ve) affect the Demand & Supply changes of demand eg: iPhone, Mercedes Relatively Inelastic Demand Price Elasticity Price Elasticity Perfectly Elastic Demand Relationship between change in income and demand for certain goods Income Elasticity Relatively Elastic Demand Cross Price Elasticity  Increase in general level of prices of goods & services a mismatch between worker’s skill & availability of job Purchasing power decreases in case of inflation Structural unemployment eg: technology advancement, like machinery Money illusion concept replacing farmer labour Inflation Irwin Fisher MV = PT degree - unemployment, seen in Urban part of Educated unemployment India During inflation the debtor/borrower benefits more than the lender Demand side inflation type of unemployment while searching for a Demand Pull new job “Too many dollars chasing too few goods” Frictional unemployment Cause of Inflation eg: an employee leaving current job to move to Supply side inflation a better one (seen in Urban) Types of Cost Pull Wholesale Price Index Increase in cost of any factors of production & when some people seem to be employed but Unemployment input cost are not, marginal productivity is zero More weightage to manufactured goods Disguised/Hidden unemployment eg: Agriculture sector does not capture the changes in the prices of WPI services Recession in economy (upturn & downturn) Base Year - 2011-12 When economy revives, there is opportunity to employment, seen in Urban Published by: Office of Economic Advisor (OEA) Ministry of Commerce & Industry eg: Great Recession Cyclical unemployment Measurement Consumer Price Index Employment based on the seasonal basis of Inflation More weightage to food items Seen more rural part of India Seasonal Unemployment Inflation (inc.) & Unemployment (inc.) Checked from consumers perspective eg: Light or fireworks sellers during Diwali No economic activity Stagflation Base Year - 2011-12 Great Depression - 1929-1939 Inflation (inc.) & Unemployment (dec.) have Published by: National Statistic Office (NSO) inverse relationship Great Recession - 2007-2009 CPI Ministry of Statistics & Program Implementation (MoSPI) RBI uses CPI (combined) to target inflation Philips Curve Inflation & Index of Industrial Production Unemployment Base Year: 2011-12 Published by - NSO (MoSP) Refinery products IIP Creeping 3-4% Electricity Walking 4-10% Steel Types of Inflation Running 10-20% Crude oil 8 core industries have Galloping 20-100% 40% contributions Natural gas Disinflation Rate of inflation is decreasing Hyper 100% Cement opposite of disflation Fertilizer Deflation Fall in the general level of prices Crude Oil Purchasing power increases  Provides micro loans/micro financial services Reserve Bank of India was established as Independent body Minimum requirement of Micro Finance Loans: 75% of total assets on recommendation of Hilton Young Commission, 1926 Estd. through recommendation of a NBFC-MFI Eg: Bajaj Finance, Muthoot Finance, Mahindra committee: Malegam Committee, 2010 (also 1st setup of RBI Headquarter and Mahindra 1st April 1935 sees issues of MFIs) - Calcutta, At present RBI Act of 1934 They are registered under Companies Act of To qualify for NBFC MFI license they should Headquarter - Mumbai in 1937 1956 have at least 75% of assets in Microfinance Banking Regulation Act, 1949 1st RBI Governor - Osborne Smith Gives loans and advances on gold They cannot accept Demand Deposits Non-Banking Financial License 1st Indian RBI Governor - CD Deshmukh its regulates Banks Companies (NBFC) CRR/SLR RBI was nationalised on 1st Jan 1949 Deposits not guaranteed Regulate ban They are regulated by RBI except Rs.1 note (under Ministry of Finance) They need not maintain CRR and SLR Micro Finance, collateral free loans legal tender - FIAT Money They offer financial services to low income Micro Units Development and Refinance population Agency, launched in 2015 MUDRA scheme Plastic Money - Credit card, debit card, etc. eg: Loan, Savings, Insurance loans upto 50,000 Sishu Hot Money - Assets such as stocks, deposits, Functions of RBI Currency printing bonds, etc Microfinance loans is given to households loans upto 50,000-5 lakhs Kishore 3 types loan having income less than Rs.1.25 lakhs/annum loans upto 5 lakhs-10 lakhs Tarun gave concept of Grameen Model Banks, 1970 Father of Micro Finance system and was given Nobel Prize - Muhammed Yunus (Bangladesh) 1st Micro Finance institution in India Micro Finance - SEWA Bank (1974) Institution Monetary Policy group of 10-20 people come together to find ways to improve their living Lender of last resort and Bank of Banks National Bank for Agriculture and Rural conditions Development Group of below poverty line (BPL) Self Help Groups (SHG) Set up - 12 July 1982, on recommendation of B. Classification of Informal banking system groups Usually in rural areas Business Model Sivaramman Committee (1979) Money & Banking group of 4-10 people Through NABARD Act 1981 NABARD Joint Liability Group Could be a small business Headquarter - Mumbai venture for profit Provide finance for agriculture and rural development Regulate - RBI 1st bank - 1770 (Bank of Hindustan) Supervises cooperative banks and RRBs Functions Supervise - NABARD 1806 - Imperial Bank of Calcutta Does not deal directly with people Merged 1840 - Imperial Bank of Bombay 1921 - Imperial Bank of India Provides financing through PMAY, KCC, Ru Pay Kisan Cards 1955 - State Bank of India 1843 - Imperial Bank of Madras 1988, through Act of 1987 National Housing Bank Other Financial 1st Indian owned bank - Allahabad Bank, in 1865 Securities and Exchange Board of India Institutions RRB Act 1976 through SEBI Act of 1992, established on 12 April 1988 to enhance financial activities in rural areas Statutory body History of Banking SEBI Regional Rural Banks (RRBs) eg: Grameen Banks Headquarter - Mumbai 1st - Pratham Grameen Bank (2nd Oct 1975, To protect the interests of investors Function Moradabad, UP) Chairman - Madhabi Puri Buch (1st women, 1st non IAS chairman) Insurance Regulatory and Development Authority of India Estd. through IRDAI Act of 1999 IRDAI 2nd April 1990 as a statutory body April 2000 SIDBI Headquarter: Lucknow  RBI provides loan to Commercial Banks (without keeping any securities) Net Demand and Time Liability 6.75% Bank Rate (RBI keeps a part of your NDTL as a reserve) NDTL Cash Reserve Ratio Reserve in the form of - Cash Banks do not earn any interest rate on CRR Outright purchase Reserve Reserve in the form of - Cash, Gold, G-Sec Selling and buying of G-sec for shot term Statutory Liquid Ratio Banks earn interest rate on SLR, profit is obtained Open Market Operations Fiscal Policy Repurchase agreement Quantitative tools Repo means Repurchase Obligation 2% NDTL is a limit overnight loan CRR and SLR is not maintained Balance Sheet Penalty + loan Can use SLE Quota G-Sec as collatera Monetary Policy Marginal Standing Facility Monetary Policy Tools RBI Regulates money supply in the economy with the help of Monetary Policy Tools in case of Inflation/Deflation On recommendation of Urjit Patel Committee Monetary Policy RBI Governor Committee 3 RBI Deputy Governor 6 members Executive 3 Govt. a maximum amount of new money created by Qualitative tools banks for every dollar of reserves Money Multiplier  Currency with public Currency in circulation Securitisation And Reconstruction of Financial Currency with bank Assets &Enforcement of Security Interest Act Saving Account Provides power to the bank/any financial Demand Deposit institution to seize the property of a Current Account defaulting borrower Deposits with Bank SARFAESI Act 2002 Fixed Deposit Term Deposit who would not pay to banks even it he has the Wilful Defaulter Types of Money Recurring Deposit ablity to do so Bank Deposits with RBI Consolidates the existing laws on bankruptcy Insolvency & Bankruptcy Code, 2016 Deposits with RBI Other deposits with RBI Demand Deposit Financial entity setup to buy NPAs Postal Deposit same as bank Term Deposit Recovery of NPAs 2 bad banks to be established Bad Banks the ease with which an asset or security can be converted into ready cash without National Asset Reconstruction Company Ltd. affecting its market price Monetary Base/High Powered Money/Reserve 2021 budget Money (NARCL) Non Performing Assets Demand Deposit is more liquid than Term India Debt Resolution Company Ltd. (IDRCL) (NPA) Liquidity Deposit Currency in circulation Cash > Cheque > Bonds M0 Bankers deposit with RBI A situation in economy where people love to components hold their money despite of any changes in Delay is more than 90 days interest rates which renders any Monetary Mutual agreement Other deposits with RBI Policy ineffective Fiduciary money eg: deposits of Governmental/Quasi-Judicial Eg: checks, bitcoins authority No spending Liquidity Trap Currency with public happens when rates will increase M1 Demand Deposits Narrow Money Speculative Demand: perfectly elastic Monetary Other deposits with RBI Short-term loans Aggregates M2 M1 + Saving deposits with Post Offic to be paid within a day Call Money Money Market M1 + Time deposits with Bank Liquidity Adjustment Facility to be paid within 2-14 days Notice Money LAF Banking M3 Actual Money Supply Broad Money (M3 - priority) Long-term loans Capital Market M4 M3 + All deposits with Post Office issued by RBI Treasury Bills Liquidity Order - less than 1 year Basel is a place in Switzerland by Irving Fisher M1 > M2 > M3 > M4 91 days Headquarter of Bank of International Settlements (BIS) - Basel, Switzerland 182 days types Maturity Bills 364 days Basel Committee, 1974 by G10 They are always listed on discount rate Focused on Credit Risk Min. capital requirement at 8% of Risk Basel Norms No rate of interest Weighted Assets (RWA) BASEL I - 1988 Capital Adequacy Ratio Capital Adequacy Ratio: 15% of RWA Non-banking Financial Companies-MFI NBFC cannot accept Demand Deposits (NBFC-MFI) CRR/SLR maintenance: No 3 norms BASEL II - 2004 Quantity theory of money BASEL III - 2008  12 indicators - National Multidimensional Poverty Index Multidimensional Poverty in India since 2005-06 NITI AAYOG Poverty 24.82 Cr people have escaped poverty Absolute Poverty severe deprivation of Basic Human needs In Uttar Pradesh max people wealth distribution, talks have escaped poverty about income inequality Household income lower than the median Relative Poverty income Gini Coefficient: - 0 to 1 0 - perfect equality Subjective Poverty 1 - perfect inequality Headquarter - Washington D.C Lorenz Curve 1st done by - Dadabhai Naroji, MPI gave unofficial poverty line through his book - Poverty and UnBritish Rule in India He made the earliest estimation of poverty Pre Independence Own account/money in your bank National Planning Committee, 1938 by Subash Chandra Bose NOSTRO 1st Chairman: J L Nehru Eg: Bank X has an account with Bank Y in Bank Y’s home currency Bombay Plan, 1944 Your account/money in our bank VOSTRO IMF (International Made the 1st systematic assessment of Poverty Eg: City Banks partners with HDFC Bank based in India and opens an account with the Monetary Fund) Dandekar & Rath Committee Used the data of NSSO (National Sample denoted currency INR 1971 Survey Office) Under MoSPI Foreign Exchange Regulation Act, 1973 FERA POVERTY Expenditure based poverty line replaced by Foreign Exchange Management Act, 1999 FEMA Nutrition based poverty line Alagh Committee Poverty 1979 Rural - 2400 Calories Urban - 2100 Calories Decreases of value of domestic currency Estimation Depreciation Due to market forces Poverty line based on Exporters will benefit in case of depreciation Floating Exchange Rates Lakdawala Committee CPI-IW (Rular), CPI-AW (Urban) 1993 Increase of value of domestic currency Appreciation 1991 - Balance of payment crisis in India State-wise poverty line it is Official Depreciation Devaluation Foreign currency assets Health and Education should also be taken Government interference under Basic Needs Fixed Exchange Rates it is Official Appreciation Revaluation Gold reserves Poverty line based on Purchasing Power Parity: Currencies - if someone is spending more than 33/day (not USA, Euro, Yen (Japan), Special Drawing Rights (SDR) Empty of FOREX Reserves poor), not more than 33/day (poor) Yuan (China) & Pound (Britain) Uniform Reference Period replaced by Mixed Reference Period (Health/education) Reserve Tranche Position: required quota to be Balance of Post Independence maintained within the IMF Payment Crisis Tendulkar Committee Poverty Line (2011-12) Rural - 816/month then PM - P V Narasimha Rao 2009 Urban - 1000/month then Finance Minister - Manmohan Singh % of people below poverty line Rural - 25.7% - 21.9% (2011-12) Urban - 13.7% Rural - 30.9% Poverty Ratio - 29.5% 1st - Argentina Urban - 26.4% Debaters in IMF 4th - Pakistan Proportion of Population BPL Head count Ratio Balance of Payment Calories 3.3% of GDP (currently) Created categories within Current Account Deficit (CAD) Protein nutritional requirements Value of imports > Value of Exports Rangarajan Committee Fat 2014 Twin Deficit = CAD + Fiscal Deficit Also, talked about Modified Mixed Reference Period  in place of Planning Commission Chairman - PM Setup on: 1st Jan 2015 Post Independence, 1947 launched on - 1st April 1951 It is a Think Tank of govt. NITI AAYOG Planning Taken from - USSR Based on Harrod-Domar Model Publishes reports Commission During Manmohan Singh During Jawaharlal Nehru Introduced in 1928 Vision Document by Joseph Stalin 2012-2017 Duration 12th FYP Duration 1951-56 During Manmohan Singh Towards faster, inclusive, & sustainable growth Key Focus 1st FYP Key Focus Primary Sector 2007-2012 Duration Target - 2.1% Towards faster & more Fully successful Achieved - 3.6% inclusive growth Key Focus 11th FYP Based on P.C. Mahalanobis Model During Jawaharlal Nehru Bhakra Nangal Dam Target - 9% Achieved - 8% During Atal Bihari Vajpayee & Manmohan Singh Setting up Dams to promote Duration 1956-61 Hirakud Dam growth of Agriculture 2002-2007 Duration Nagarjuna Sagar Dam 2nd FYP Key Focus Rapid Industrialisation Target - 8% Achieved - 7.6% 10th FYP Target - 4.5% Moderately successful Achieved - 4.27% During Atal Bihari Vajpayee National Horticulture Mission (NHM) was Industrial Policy Resolution, 1956 (2nd IPR) promoted by govt 1997-2002 Duration Rourkela Steel Plant - Odisha (Germany) Rapid Industrialisation Growth with social Durgapur Steel Plant - West Bengal (UK) justice and equality Key Focus 9th FYP Bhilai Steel Plant - Chattisgarh (USSR) Target - 6.5% Based on Gadgil Formula Achieved - 5.4% During P V Narasimha Rao During Jawaharlal Nehru & Lal Bahadur Shashtri 1992-97 Duration Duration 1961-66 New Indicative Policy Five Year Plans Key Focus