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

CHAPTER-1
INTRODUCTION TO MICRO ECONOMICS
Unlimited wants
Basic Economic problems
Scarce resources
ECONOMICS owes its origin to the Greek word OIKONOMIA which 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 allocation and pricing is central
theme of micro economics
Maximising of National Income
It studies individual economic units It studies aggregate economic units
Examples :
a. Individual demand
b. Price of a product

Examples :
a) aggregate demand
b) 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 general to particular Inductiveparticular to 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 whom
4. 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.
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 goods eg: 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 Reason
If 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(E
p
) or
elasticity of demand
If variable is income-income
elasticity of demand (E
y
)

If variable is price of related
goods-cross elasticity of
demand(E
c
)

%Q>%P ELASTIC
%Q<%P INELASTIC
%Q=%P UNITARY
%Q=0 PERFECTLY INELASTIC
%Q= PERFECTLY ELASTIC

Ey=1
Ey>1
Ey<1
Ey<0 tive for cheap goods
Ey=0 for necessaries

+tive for substitutes
-tive for complimentary
goods
Determinants of elasticity of demand:
1. Higher the substitutes higher the elasticity
2. Higher the proportion of budget higher the elasticity
3. More the number of users more the elasticity
4. For luxury and normal goods demand is elastic and for necessities inelastic
5. In short run demand is inelastic, long run elastic
6. In case of habits/addictions demand is perfectly inelastic(consumption of liquor)
7. For high and low price range goods demand is elastic, medium range elastic
Measures of elasticity of demand: There are three methods
1. % method or point method: % change in quantity demanded % change in price
(Q-Q1/P-P1)*(P/Q)------- FOR RELATIVELY SMALL CHANGES IN PRICES
IN GRAPHICAL METHOD= Lower segment/ upper segment
2. ARC method: For large change in prices
(Q-Q1)*(P+P1)
(P-P1)*(Q+Q1)
3. OUTLAY METHOD
TYPES PRICE CHANGE TOTAL EXPENDITURE RELATION
E=1 NO CHANGE NO RELATION
E<1

POSITIVE
E>1

NEGETIVE
******Price Elasticity of demand we will be taken in absolute value by applying mod function.
(i) Law of supply: Supply refers to what firms offer for sale, not necessarily to what they
succeed in selling. What is offered may not get sold.
(ii) Supply is a flow. The quantity supplied is so much per unit of time, per day,or per year.
Determinants of supply: S=f(P, Pr, Pf, T,G,E,O)
P= Price( positive relationship) this is the reason supply curve slopes upwards.
Pr= (negatively related) if price of substitutes increases supply of substitutes increases.
Pf= cost of production (negatively related) if Pf increases supply decreases as profit reduces.
T=technology(improvements in T leads to increase in supply)
G= Govt policies(if favourable supply increases vice versa)
Movement VS shift in supply curve and elasticity is similar to elasticity of demand(i.e. only
change in price causes movement in any other case shift occurs.)
Positive for
normal/luxury

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 utility.

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 (1
st
,2
nd
,3
rd
...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 good
x
and good
y
)
2.Ic curve is always convex to the origin because diminishing MRS
XY
(marginal rate of substitution). If MRS
XY
is increasing IC will be concave, MRS
XY
constant 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 = MRS
xy

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



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 3rd poor 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 cotton textile, 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 insurance
schemes 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 crops wheat,
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. NNP
FC
i.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 India
in 2009-2010 was Rs 38,057 in 2011-
12. Whereas Rs.7114 in 1950-51.



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 x
th
plan-actual growth rate of 2% , Agriculture under xi
th
plan
target growth rate of 4%. Agriculture under xii
th
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 than
1/3rd 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 <=25 lakhs
<=10
lakhs
small >25L- 5 CR
>10l -
2CR
medium >5CR to 10 CR
>2CR-
5CR
8. The industrial production has grown at a rate 62%over planning period
9. 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 cumulative
investment 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 consumption both household governmental sectors.
17. Demand for intermediate consumption all producing sector economy.

18. Public sector ONGC, HMT, HAL, BEL, INDIAN IOL COR, COAL India, steel authority of
India.
19. Industrial financial institutions:-LIC, IDBI, ICICI.
UNIT 3
1.GDP
FC
-S+T=GDP
MP
+NFIA=GNP
MP
-D=NNP
MP
-T+S=NNP
FC=
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 &re- introduced 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
1
st
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 1
st
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 revenue exercise -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 2006
2. 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

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. II
nd
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 period 30 day recall, Mixed
recall period 365 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.
CHAPTER 6 UNIT 2
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 rural
areas 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 total
length of 300000 km of road work has been completed.
Indira Awas Yojna (IAY) 1985 will 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 assurance
scheme (EAS) + Jawhar Gram samridhi Yojna(JGSY) (2002).
National Food for work programme (NFFWP) Nov, 2004. Till Jan 2007, 3.47 core job
cards 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 septemer
05 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 rozgar
Yojana + 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.


CHAPTER 6 UNIT 3
1. In India most of the unemployment is of structural & cyclical type.
2. About 1/3
rd
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.

7.The Current unemployment rate according to the above statuss are : US- 2% (Rural) & 4%
(urban), CWS 4% (rural) & 5 (urban), CDS- 8% (rural) & 7% (urban)
8. MTA stands for Mid Term Appraisal
9. Unemployment problem gained attention after the 5
th
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 10
th
plan has repeated that
employment growth should exceed growth of labour force to reduce backlog of
unemployment.

CHAPTER 6 UNIT 4
1. India ranked 5
th
Largest energy producer & 3
rd
Largest energy consumer.
2. India accounts for 4% of total energy production of the world
3. 11
th
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 sector 66 %, hydel sector 19%, 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. XI
th
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 sector 80
%; Private sector 78 %
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 20
th
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.

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 1
st
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 1
st
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. XI
th
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. OECD Organization for economic co-operation & development.
chapter 6 unit 5
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 (April Dec. 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 9
th
, 10
th
, 11
th
plan was zero

Chapter 6 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. FRBM Fisical 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% FDI Distillation and brewing up of portable alcohol, manufacture of industrial
explosives, manufacture of Hazardous chemicals, laying of natural gas lines.

10. FDI is restricted retail trading, atomic energy, lottery, gambling, betting, business of
chit fund, nidhi co., trading in transferable development rights.

Chapter 6 units 7
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 billion.
9. The year 2001-2004 witnessed the surplus in the current account.
10. during the first year of the XI
th
plan, exports increased by 20% & imports increased by
23%. Current account balance was -1.3 % & trade balance was 7.4% 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)
CHAPTER 6 UNIT 8
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 5
th
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. EOU Export Oriented Units.
EPZ Exports processing Zones.
EHTP Export & Hardware Technology park.
STP software 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.

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 Domestic 30% & foreign 40%, 50% on royalty.
48. Dematerialization of TDS certificate will take place from 1
st
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 crisis august 2007.
56. FDI limit in air transport services is 49%
57. Drug policy in sep 1994 amended in 1999.
CHAPTER UNIT 2
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 but 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. ADR American Depository Receipts
GDR Global Depository Receipts
CAC Capital account convertibility
5. TRIPs Trade related intellectual property rights.
6. FII Foreign 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.

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. PTA Plurilateral trade agreements
MTA- Multi lateral trade agreements Issures to WTO
GATT general 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
rd
working 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 <2lakhs
4. ECS-Electronic Clearing Service (for settlement of transactions between banks)
5. IFSC- Indian Financial System Code to facilitate NEFT & RTGS.
6. IMPS-Immediate Payment Service
7. CTS-Cheque Truncation System (for electronic clearance of cheques)
causes of nationalisation Objectives of nationalisation
(i) removal of control by a few; (i) removal of control by a few;
(ii) provision of adequate credit for
agriculture and small industry and
export;
(ii) provision of adequate credit for
agriculture and small industry and export;
(iii) giving a professional bent to
management;
(iii) giving a professional bent to
management;
(iv) encouragement of a new class of
entrepreneurs; and
(iv) encouragement of a new class of
entrepreneurs; and
(v) the provision of adequate training
as well as terms of services for bank
staff.
(v) the provision of adequate training as
well as terms of services for bank staff.
Progress of commercial banks after nationalisation:
1. Expansion of branches: 8262 branch offices in 1969, 2012 has increased to
98,591, population per bank office has reduced from 55,000 in 1969 to around 12,500 in
2012.
2. Branch opening in rural and unbanked areas: just 22 per cent commercial bank offices in
rural areas in 1969, the percentage of rural branches bank improved to about 37 per cent in
June, 2012.

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