Economics Prelims Notes Gen

Economics Prelims Notes Gen
Sovereign Gold Bonds

Govt securities denominated in grams of gold - substitutes for holding physical gold
RBI issues these bonds on the strength of its gold reserves on behalf of GoI
Interest similar to international rates of borrowing gold
Can be used as collateral
Per Fiscal (April-March) : Max = 4kg gold (for Individual and HUF), 20kg (for trusts
and similar entities); Min = 1g gold
Time Period - 8 years. Exit option at 5th, 6th and 7th year
Bonds will be tradeable on stock exchange
Interest is taxable => not at source tho
Gold Monetization Scheme, 2015
Bureau of Indian Standards (BIS) certified Collection and Purity Testing Centers
(CPTC) collect gold from customer on behalf of all scheduled commercial banks
(excluding RRBs).
Min - 30g gold, Max - no limit
Objective - to bring in idle gold lying with indian households into economy and
reduce imports
Even Central & State govt can deposit gold
Gold ETF
Passive Investment instrument that aims to track domestic gold price
Since Gold monetisation scheme and Sovereign Gold bonds weren't as successful to
reduce demand of physical gold
1 Gold ETF = 1 gram of gold
Exempted from Securities Transaction Tax, Wealth Tax, VAT, Sales Tax
CRR, SLR, DICGC, PCA
CRR not on NBFCs
Lower SLR (15%) applies on Deposit taking NBFCs & Non Deposit taking
NBFCs with assets > 10k cr
UCBs need to maintain CRR & SLR
RRB need to maintain CRR & SLR
Payment Banks & SFB need to maintain CRR & SLR
DICGC for -
All commercial banks
RRBs
Urban Cooperative Banks
Only 2 types of short term Rural Cooperatives - State Cooperative Banks,
Distt Central Cooperative Banks
DICGC not for -
NBFCs
Long term Cooperatives (PCARDB, SCARDB)
PACS (Primary Agri Cooperative Society)
Rishabh Kumar Rewar – AIR 104, CSE 2020

Jayant & Rishabh UPSC CSE Notes and Strategy - https://t.me/jayantrishabh
PSL
PSL norms apply to -
All commercial banks (foreign also)
RRBs
SFBs
Not Payment Banks (since no lending by them)
UCBs
LABs
NOT NBFCs
9 categories-
Agriculture
MSME
Housing
Social infra
Renewable energy
Education
Export credit
Others like Overdrafts upto ₹5,000 under PM Jan Dhan Yojana
Startups (loans upto Rs 50cr)
Weaker Sections - SMF, Artisans, SC/ST, SHG, women, PwD etc
If any shortfall in achieving PSL targets, banks may invest in -
Funds with NABARD, NHB, SIDBI such as RIDF(Rural Infra Dev Fund)

Rural Infra Dev Fund (maintained by NABARD) - provide loans to
state govts and state owned corporations to enable them to
complete rural infra projects
MUDRA
PSL Certificates
PSL norms prepared by RBI
Assessment of PSL norms done every year on quarterly basis

National Economy measures
Savings India
Household Savings - largest portion (59%)
Most in form of physical assets, followed by financial assets and gold
GDP
GCF = GFCF (machinery+equipment+building+cultivated biological
resources+Intellectual Property) + Valuable Metals + Change in stock/inventory
GFCF = 30% roughly
ICOR = Change in Capital/Change in Output
Higher ICOR means lower Productivity
Investment = Production Of Capital Goods
5 Year Plans
1st (1951-56)
Harrod Domar Model
Agriculture
Successful
2nd (1956-61)
Mahalanobis Plan
Agri given lower priority
Heavy & basic industries
Industrial Policy, 1956 - socialistic pattern of society
3rd (1961-66)
Felt that India has entered "Take-off stage" => aim was to make india self
reliant + Self generating economy
Agri given priority
Failure => 2 wars
Later, focus on defence development
Annual Plans (1966-69) - PLAN HOLIDAY
Due to Agri crisis + inflationary recession + rupee devaluation
Green Revolution
Paved way for 4th plan
4th (1969-74)
Growth with stability + Progressive achievement of self reliance

Family Planning Programme
Failure
5th (1974-78)
Garibi Hatao + Self reliance
Launched by DP Dhar
High growth rate + income distribution + domestic savings
Rolling Plan (1978-80)
Emphasis on employment
Govt changed after 2 years -> plan changed
6th (1980-85)
Increasing national income
Decrese poverty & unemployment
Schemes - TRYSEM (training rural youth for self employment), IRDP, NREP
Success
7th (1985-90)
Focus on food, work, productivity
Very Successful => Hindu Growth rate overcome
8th (1992-97)
Worsening BoP
Liberalisation
High eco growth + declining share of public sector in total investment to
34%
9th (1997-02)
Social Justice & Equality
Depend on Private Sector - Domestic + FDI
State as facilitator
State priority to - Agri + Rural Development
10th (2002-07)
8% growth target
11th (2007-12)
Towards Faster & More Inclusive Growth
NREGA, envt sustainability, reducing gender equality
Tendulkar Formula for poverty
12th (2012-17)
Faster, Sustainable, And More Inclusive Growth
DIFFERENTIATED BANKS
Aka niche banks
Mooted by Nachiket Mor Comm, 2014 for financial inclusion
Eg-> payment banks, RRBs, Small Finance Banks, Local Area Banks, Wholesale and
long-term finance banks etc
Payment Banks
Can accept Demand Deposits (NBFCs CANNOT). No credit lending
NBFCs cannot accept demand deposits (can accept time deposits like FD)
Functions -
Provide small savings/current accounts below ₹1L
Distribution of MFs, insurance products
Payments/financial services

Cannot accept deposits from NRIs
RBI reserve requirements (CRR/SLR) - yes
Have to invest 75% of its demand deposit balances in SLR eligible govt
securities
7 payment banks as of now
Can offer payment and remittance services, internet banking
Objective - to increase financial inclusion
"differentiated banks" as comapred to commercial banks

Small Finance Banks
Objective - financial inclusion
Undertake basic lending and deposit activities to small farmers, businessmen, micro
and small industries, and unorganised sector
Registered as a public ltd company under Companies Act, 2013
Can be setup by -
Resident individuals with 10yrs experience in banking and finance
Companies and Societies owned by residents
Existing NBFC, MFIs, Local Area Banks owned by residents => can opt for
conversion into SFB
Minimum paid up capital = ₹200cr (recently increased by RBI from 100cr earlier)
Payment Bank with ₹200cr => can become SFB
UCB with min worth ₹500cr and CAR>9%=> can become SFB
Foreign investment permitted as in case of other pvt sector commercial banks

Are full-fledged banks (can do all bank functions eg- Mutual funds, pension
accounts, forex business etc.) in contrast to payments banks - all RBI norms
apply (Eg. CRR, SLR) + :
Required to extend 75% of its credit to PSL sectors
Atleast 50% of loans <₹25L
Atleast 25% branches in unbanked rural centers
Local Area Banks (LABs)
Introduced in Aug 1996 => to set up new private local banks - Jurisdiction over 2-3
districts
Promoters can be individuals, corporates, societies => NRI promoters < 20% of total
promoters
Existing NBFCs, MFIs and LABs (owned by residents) => can convert to SFBs
PSL norms apply
Regional Rural Banks
Setup on recco of Narsimham Working Group, 1975 => Regional Rural Banks Act,
1976
75% of credit to PSL sectors
Regulated by RBI, supervised by NABARD
Funds by Govt of India, State Govt, Sponsoring Nationalised Bank (50%,15%,35%)
COOPERATIVE BANKING SECTOR
Rural Cooperatives
Short Term (regulated by RBI + State govt)
State Cooperative Bank (SCB) - DICGC covered
District Central Cooperative Bank (DCCB) - DICGC covered
Primary Agricultural Credit Societies (PACS)
Long Term (not regulated by RBI)
State Cooperative Agri & Rural Dev Bank (SCARDB)
Primary Cooperative Agri & Rural Dev Bank (PCARDB) - distt level
Urban
Scheduled
Non-Scheduled

Cooperative Banks
Members are owners => one member one vote (i.e. borrower can be shareholder)
2 types - Urban Cooperative & Rural Cooperative Banks
Outside prompt corrective action framework of RBI - deems banks risky with weak
financial metrics. 3 parameters -
Capital Ratio
Asset Quality
Profitability
PCA only for commercial banks (NBFCs, FMIs, Cooperative Banks =>
excluded)
For RRBs => PCA by NABARD (not RBI)
Supervisory action plan of RBI for UCBs
SAF is in line with PCA (imposed on commercial banks)
UCBs will face restrictions for worsening of 3 parameters-
Net NPAs > 6% of net advances
Incur losses for 2 consecutive financial years or
accumulated losses on balance sheets
CAR < 9%
However, RBI can also take actions if serious governance
issues
Deposits in UCBs are covered by Deposit Insurance & Credit Guarantee Corporation
of India => upto ₹5L (unlike NBFCs)
Dual Regulation
Financial => RBI
Management => Registrar of Cooperative Societies under Central Govt or
State Govt
Cooperative Credit Societies
Under Banking Regulation Act, 1949 => Cooperative credit society is defined as a
cooperative society whose primary objective is to provide finance to its
members

Confine activities to members alone
DO NOT perform banking functions
Acc to RBI => may be allowed to convert to UCBs if they amend their primary
objective
G-Secs
INDIVIDUALS can also invets in G-secs
States can only issue SDLs (T-bills, CMBs & Dated Securities => by Central govt)
SDLs => counted in SLR
Dated Securities - have tenor of 1-40yrs
MONEY MARKET INSTRUMENTS - highly liquid short-term financial assets traded (<1 year).
Characteristics - liquidity, Safety, Discount Pricing
Treasury Bills (T-Bills)
Safest money market instrument
Short term liquidity instrument - upto 364 days. Govt issues bonds when it
needs long term money (eg 5 yrs)
Credit to Consolidated Fund of India (NOT Public Account)
Issued by Central govt to FIs
Issued by RBI on behalf of Govt
Bought at discount price from face value (i.e. NO interest payment)
Central Govt issues - State Govt issues - only bonds (aka State
TBs and Bonds Development Loans - SDLs) => counted in SLR
3 types of TBs -
14 day (intermediate TBs) - discontinued
14 day (Auctionable TBs) - discontinued
91 day
182 day
364 day
Dated Securities - long term instrument issued by govt (to
public or FIs) for borrowing, having interest payment - %
of face value and interest paid at regular intervals.
Tenor can be upto 30 years (unlike T-bills, which are
bought at discount from face value)
Certificate Of Deposits
After Treasury Bills, it is the lowest risk category investment option issued
by commercial banks (excluding RRBs and LABs) and selected FIs
Different from FD -

CD only issued for larger sum of money - generally used as
investment option by organisations for short term surplus (can
be issued to individuals and NRIs also though)
CD is freely negotiable and tradeable in money market (unlike FD)
Tenure : 7 days to 1 year
Min. Value = ₹1L
Issued in format of a usance promissory note
CDs are issued in lieu of the funds deposited at a bank for a specified time
period
Similar to savings accounts and virtually risk free
Commercial Paper
Issued by large corporates to obtain funds to meet short-term obligations
Backed by issuing bank or company promise to pay the face amount on
maturity date specified on note
Unsecured. And issued at discount from face value. Maturity < 270 days
generally
Commercial Bill
Bonds issued by firm to another against a credit transaction
Can be discounted by banks
Aka "Bills of exchange"
CAPITAL MARKET INSTRUMENTS - long term securities => Equity market & Debt market -
equity shares, bonds, preference shares, debentures etc
More riskier than money market (since less liquid and long maturity)
Primary market

Secondary market
Debentures - issued by corporates or govt to public against long term
loans (20-30yrs)
Not secured by collateral, backed only by creditworthiness and
reputation of issuer
Get regular interest payments(coupon payments)
Convertible Debenture hybrid instrument where investor has
option to turn it into equity
Financial Sector Development Council (FSDC)

Non statutory body => on recc of Raghuram Rajan Comm (2008) on financial
sector reforms
Responsibilities -
Inter-regulatory coordination and resolving their disputes
Strengthen and institutionalise mechanism for maintaining financial stability
Financial sector dev along with monitoring macro regulations of economy
Chairman - Finance Minister
Members -
Head of Financial regulators (RBI, SEBI, PFRDA, IRDA)
Finance Secy, Dept of EcoAffairs
Secy, Dept of Financial Services
CEA
Chairman of Insolvency and Bankruptcy Board
IBC, 2016
Can be initiated when minimum amount of default is ₹1cr (amended in Atmanirbhar
Package, earlier was ₹1L => shields MSMEs)
Insolvency -> economic status; Bankruptcy -> declared by court
Not applicable to willful defaulters => they come under SARFAESI
Completed within
For startups - 90 days (extended by 45 days)
For companies - 180 days (can be extended by 90 days) => now extended to
330 days
4 pillars -
Insolvency and Bankruptcy Board of India (IBBI) - regulator
NCLT - adjudicating authority for companies and limited liability partnership
firms
Constituted under Companies Act, 2013
All proceedings under Companies Act, 2013 shall be disposed by
NCLT
NCLAT - appellate authority
DRT (debt recovery tribunal) - for individual firms and unlimited partnership
firms
Private industry of Insolvency Professionals
NCLAT
Constituted under Companies Act, 2013 => for hearing appeals against NCLT orders
Chairperson - Judge of SC or Chief Justice of HC
Max 11 members
NCLAT appellate tribunal for -

NCLT
CCI (competition Commisison of India)
Under MoCorporateAffairs
Estd by Competition Act, 2002
Insolvency and Bankruptcy Board of India under IBC act
Aggrieved from NCLAT to Appeal at SC
Government-e-Marketplace (GeM)
100% govt owned company setup in 2016 under MoCommerce&Industry
For procurement of common use goods and services by Govt ministries,
departments and CPSEs
Paperless, cashless, and system driven e-market => minimum human interface
Womaniya on GeM -
Initiative to enable women entrepreneurs and women SHGs to sell
handicrafts and handlooms, accessories etc. directly to various govt
ministries, depts, CPSEs
NBFCs
Cannot accept Demand Deposit
Do not form part of Payment and settlement system => cannot issue cheques
DICGC => Not applicable
PCA => not applicable
Categorised as -
Asset Finance Company - principal business is financing of physical assets
supporting productive/economic activity (eg. Automobiles, tractors etc.)
Investment Company - acquisition of securities
Loan Company - loans or advances etc
Infrastructure Finance Company -
Minimum credit rating of A
CRAR of 15%
Systematically Important Core Investment Company (CIC-ND-SI) {ND= Non
deposit taking} => acquisition of securities which follow -
Holds >90% of its total assets in form of equity shares, pref shares,
debts or loans in group companies
Asset size > ₹100cr
Accepts public funds
Regulated/registered by RBI
Infrastructure Debt Fund
Investment vehicles to accelerate flow of long term debt to sector
Bonds floated by IDF can be subscribed in $ or ₹
IDF income is exempt from Income tax
NBFC-MFI
NBFC-Factors
Mortgage Guarantee Companies
Non Operative Financial Holding Company
P2P Lending Platforms - enables individuals to borrow and lend money
without any financial institution as intermediary => regulated by RBI
Regulators of NBFCs-
RBI - P2P Lending platforms, HFCs (since 2019), CIC-ND-SI
National Housing Board - Earlier used to regulate HFCs (NOT ANYMORE)

SEBI - Merchant Banker, Venture Capital Fund, stock exchange, stock
brokers
IRDAI - Insurance companies
State Govts - chit funds
MoCorporateAffairs - Nidhi Companies
Chit Funds and Nidhis
Come under NBFCs
No FDI allowed
Nidhis -regulated by MoCorporateAffairs under Companies Act, 1956
Created mainly for cultivating habit of savings amongst members
aka "mutual benefit funds"
Localized offices. In South India more. Contributions by members. Give
loans at reasonable rates for house construction etc.
Chit Funds - regulated by State Govts under Chit Funds Act => NOT regulated by
SEBI or RBI
Come under Concurrent List
GST is levied on Chit funds
NRIs can invest (no upper limit) on a non-repatriation basis
AIF - any privately pooled investment fund (indian or foreign sources)
under jurisdiction of SEBI (SEBI(AIF) Regulations, 2012)
Investments do not happen via traditional modes of investment such as stocks,
bonds, cash, property etc
Includes -
Venture Capital Funds
Hedge Funds
Private equity funds
Commodity funds, etc.
Excludes -
MFs
Collective Investment Schemes
Family trusts
ESOPs
3 categories- (on basis of their impact on economy and regulations)
Category I - have positive spillover effects. SEBI or GoI can consider some
concessions.
Generally invest in startups, social ventures, SMEs => which govt
considers socially or economically desirable
Eg. Venture Capital Funds, Angel Investors
Category II - no specific concessions are given
Eg. Private equity, debt fund, real estate funds
Category III - have potential negative externalities and undertake leverage
to a great extent
Eg. Hedge funds - unregistered pvt investment partnership
Not necessary to register with SEBI
unregulated
Angel Investor
Often among family and friends
Provide technical advice and help startups

Focussed on helping business succeed, rather than reaping huge benefit
Category 1 AIF venture capital fund
Angel Tax - levied on angel investments more than the fair market valuation of the
company - to check money laundering
Exemptions - startups/companies < ₹100cr turnover + < 10 yo
Partial Credit Guarantee Scheme

To address liquidity crisis of NBFCs
PSBs (NOT pvt banks) can purchase securities (minimum AA rating) of financially
sound NBFCs => to temporarily address asset-liability mismatch of otherwise
solvent NBFCs/HFCs without having to resort to distress sale
Payment and Settlement System Act, 2007
Regulation and supervision of payment systems under RBI
RBI constitutes Board for Regulation and Supervision of Payment and Settlement
Systems (BPSS)
No restriction on types of payment services/systems foreign entity can provide
No special courts for adjudication of disputes
Derivatives
Security with price dependent upon or derived from one or more underlying assets
=> contract btw 2 or more parties based upon assets => value determined by
fluctuations in underlying assets (eg. stocks, bonds, commodities, currencies,
interest rates and market indexes)
Can be traded over-the-counter or on an exchange
Future contracts - most common type of derivative - agreement btw 2 parties for
sale of assets at an agreed upon price
Derivatives are regulated by SEBI, RBI, earlier also -> Forward Markets Commision
(FMC) -> {merged with SEBI in 2015}
Govt Debt

Roll Over Risk -risk associated with refinancing of debt => interest charged for new
loan will be > on old
Shorter term debt => greater's borrower's rollover risk
Thus, Govt has consciously issued 70% of total securities during 2018-19 in
maturity bracket of >10 years since elongating maturity reduces rollover
risk
International Center for Settlement of Investment Disputes (ICSID), 1966

By World Bank => for legal dispute resolution between international investors
Binding decisions
India not member
Taxation Types
Progressive - taxes based on taxable income of individual. Increasing
Regressive - low income individuals pay higher amount of their incomes compared
to high income earners
Govt assesses tax as a % of the value of the asset that taxpayer owns
Tax rate itself doesn’t decrease for low income guy
Tax has no correlation with individual's income
Proportional - flat tax system
Same tax rate on everyone regardless of income or wealth
Impact of Tax => original imposition point of tax. On whom it is first imposed
Incidence of Tax => where the tax finally settles. On the one who bears it
For a Resident Indian Citizen => Income tax applies to worldwide income
For NRI => Income tax applies only to income earned from within India
Budget Expenditure

Interest Payment - Highest share
Budget Receipts
In descending order -
Borrowings & Other liabilities
Corporate Income Tax
GST
Personal Income Tax

Tax Revenue Of India

Direct Tax > Indirect Tax
Corporate Income Tax (CIT) => Largest source of revenue
GST
GST is destination based tax => states that mfg will lose, and states that consume
will gain (in interstate transactions)
Taxes not subsumed under GST -
Custom Duty
Anti-dumping duty
Central excise on Petroleum products
VAT on alcohsol (state still levy this)
Real Estate
Electricity
Stamp duty
Property tax (levied by local bodies)
Etc
So now, After GST taxes are-

GST levied on every product (except petroleum products, alcohol, real estate and
electricity) in 4 slabs - 5, 12, 18, 28%
NO GST on exports (thus called zero rated)
First taxes are imposed, and then govt credits back all taxes
Exports, Imports & Interstate supplies => IGST is levied
Custom Duty => still levied on imports => Some cascading effect present
Since, first customs duty imposed, then IGST imposed on top of it
Compensation Cess
Collected on "sin" & luxury goods
To provide relief to states for loss of revenue (2015-16 as base year) from
promised 14% growth
Flows in Consolidated Fund Of India and then transferred to Public Account

Of India, where a separate GST compensation cess account has been
created
States are compensated bi-monthly from the funds
GST Council
Constitutional body (Article 279A) => to make recc to union and state govt
on GST issues
Chairman - Finance Minister
Decision taken by 75% majority (weightage : center 1/3rd, states 2/3rd)
E-Way Bill - document required to be carried during conveyance of goods >₹50,000
for sales beyond 10km in GST regime
National Anti-profiteering Authority (NAPA)

Reverse Charge Mechanism => to widen scope of levy of taxes on unorganised
sectors
Liability to pay tax is on receiver (not supplier) in certain category of goods
GST Network (GSTN)
Restructured to 100% govt owned entity (50% center, 50% state)
Earlier it was non-govt entity
National Bench of the GST Appellate Tribunal (GSTAT)
Will expedite resolutions of disputes under GST laws
Prevent unwarranted delays in future
Forum for 2nd appeal in GST laws and first common forum for center and
states
Situated in New Delhi
Composition Scheme
Those with turnover < 1.5cr => can directly pay GST on turnonver (won't get
ITC tho)=> less paperwork etc.
TAXES (Before GST)
Center
Excise Duty - on mfg goods (not on services)
Production based tax (not destination) -> i.e. as good moves out
from industrial region, excise duty is paid whether or not it is
sold

Customs Duty - on imports and exports (exempted for exports mostly)
Service Tax - on services
Central Sales Tax - on interstate transaction (collected by origin state)
State
VAT (replaced Sales Tax in 2005)
Sales tax was levied on intrastate transactions
Sales Tax was repealed because it created cascading effect of taxes
(effective tax rate was higher than official tax rate) => since tax
levied on selling price of each seller
VAT is levied on value addition of each seller => NO cascading effect
at state level
But even after VAT -> Problems -> Since still Center is also levying excise and customs duty
(at production stage) & VAT by states(levied at destination stage) => Cascading effect =>
So GST was brought to harmonise

Luxury Tax
Entertainment Tax
Entry Tax
Stamp Duty
Property Tax - while holding real estate - levied by local bodies
Capital Gains Tax - when real estate sold
2 Challenges were present before GST implemented
Center imposes own taxes (excise, servise tax, Central sales tax) & State imposes
VAT => created Cascading Effect
Interstate transactions => VAT was not creditable across states
So GST brought in - it is a Value Added Tax only => Just levied at once and later split
between center & state => NO Cascading Effect
EASE Index
"Enhanced Access and Service Excellence" - measures performance of each PSB
Prepared by IBA and BCG
Released by MoFinance
Report notes
Strengthening of bank-loan recovery process -: success of IBC

Improvement of PSU due to Govt's 4R strategy - Recognition, Recovery,
Recapitalization and Reforms
Tracked multiple steps taken by PSBs to institutionalize Clean Banking and
avoid recurrence of NPA problem in future
ATMs
White Label - owned and operated by NBFC and cash provided by sponsored bank
Non-bank entitites can set these up after obtaining authorisation from RBI
Cash Deposit facility not present
Govt permitted 100% FDI through automatic route in White Label ATMs
Green Label - agricultural transactions
Brown Label - owned by bank but its operations done by third party
Orange Label - for share transactions
Yellow Label - for E-commerce
Pink Label - only for women. To mitigate problem of women standing in long queues
of ATM
Biometric ATM - use fingerprint scanner and eye scanner to access bank details of
customer
On-site ATM - inside bank
Off-site ATM - outside bank premises
WIPO Agreements
Others also
Nice Agreement - trademarks
Vienna Agreement - for marks that consist of figurative elements
Locarno Agreements - for industrial designs
Participatory Notes
PN is popular among foreign investors to invest in Indian security market because-
Restrictions on foreign investments
Exposure to local shares without incurring time and costs involved in
investing directly
Provide customized tools to manage risks
Important hedging tool to a foreign investor
Safe and lucrative route to invest unaccounted/illegal money
Disability Adjusted Life Years (DALY)
Expresses premature mortality and disability
Made up of-
Years of Life Lost (YLL) => premature death before avg life expectancy
Years of Life Lived with Disability (YLD)
DALY = YLL+YLD :- portrays total health loss a person experiences during their life
1DALY = loss of 1 year of full health
Disinvestment
Minority stake disinvestment can be done through-
IPO
FPO (Follow-on Public Offering)
Offer for Sale
CPSE Exchange Traded Fund (ETF) - govt can divest its stake in various PSUs
across diverse sectors through a single offering
Cross Holdings - one listed PSU takes up govt stake in another listed PSU
Majority stake disinvestment through -

Strategic Sale - sale of substantial portion of govt holding + mgmt control -
strategic disinvestment - PSUs identified by DIPAM & NITI Aayog
jointly => proceeds go into NIF => professionally managed to provide
sustainable returns to govt without depleting the corpus
Alternative Mechanism - panel headed by Finance Minister => to
speed up strategic disinvestment process
National Investment Fund (NIF)
Estd in 2005 => all disinvestment funds go here
Fund of permanent nature -
Professionally managed by some public sector MFs
=> to provide sustainable returns to govt
Corpus should not be depleted
Maintained outside CFI => in Public Account
Earlier -
75% - used for social sector schemes
25% - capital investment requirement of revivable
PSUs
Now -
Privatization - entire shareholding divested to private entity + mgmt control

NITI Aayog identifies PSUs for strategic disinvestment. NITI Aayog has classified PSUs
into high priority and low priority (disinvestment of these) based on-
National Security
Sovereign Function at Arm's length
Market imperfections and public purpose
Women's Livelihood Bonds (WLBs)
World Bank + UN Women + SIDBI => exclusively for women
Will enable individual women entrepreneurs in sectors like food processing, agri,
services, and small units
Initial corpus = ₹300cr
Budget Types
Outcome Budget -
presented by diff depts of a ministry or govt
Micro level process, related to separate departments and ministries
Many outcome budgets in one performance budget

Performance Budget -
Presented by MoFinance on behalf of govt
Macro level process, involves whole govt machinery
Zero Based Budgeting -
All expenses are evaluated each time a budget is made and expenses must
be justified for each new period
Starts from zero base =>Then, every function is analysed on its needs and
cost
Gender Budgeting, 2005
Budgeting for gender equity
BUDGET
Foreign Exhange Swap

RBI buys dollars from banks. Banks buys dollars back at end of swap period
To improve domestic liquidity conditions
Done by RBI after IL&FS breakdown induced liquidity crunch
Currency Swap Agreement

2 parties exchnage principal and interest of loan in one currency for principal and
interest in another currency
Used to obtain foreign currency loans at a better interest rate
National Policy on Electronics, 2019
Aim-
Electronics System Design and Mfg (ESDM) sector => turnover of $400 Bn
by 2025
Generate 1 crore jobs in India
Objective -
Domestic mfg
Promote industry led R&D and innovation
Create Sovereign Patent Fund (SPF)
Improve national cyber security profile
Special thrust on -
Fabless Chip Design Industry
Medical electronics devices industry
Automotive electronics industry
Power electronics for mobility and strategic electronics industry
National Common Mobility Card (NCMC)
India's first indigenously developed Payment Platform
Users can use this card to pay for all segments of transportation such as metro, rail,
toll, parking, smart city and retail
Supports online and offline transactions
NPCI has prepared standards for NCMC
RBI Monetary Policy Measures
Open Market Operations (OMO)
RBI => buys/sells G-secs to influence money supply
Bank Rate / Discount Rate
Rate of interest at which RBI lends to banks against corporate bonds (NOT
G-secs => that’s Repo)
Rate of interest at which RBI provides rediscounting facility to commercial
banks against their first class securities (Eg. Commercial Paper,
Commercial Bill)
Liquidity Adjustment Facility (LAF)

RBI seeks to reduce short-term fluctuations of liquidity through Repo &
Reverse Repo operations
Repo => RBI purchases short term G-secs => infuses liquidity
Marginal Standing Facility (MSF)

RBI provides banks upto certain % of their NDTL on overnight basis
Banks have to pledge G-secs (exempted from SLR)
If no G-sec => can still borrow under MSF
Market Stabilisation Scheme (MSS)/Sterilization
Monetary policy intervention by RBI to withdraw excess liquidity by selling
G-secs => to sterilize the inflationary impact of increase in Forex
Devaluation followed by Open Market Operation by RBI to control
inflation
Since in Devaluation, RBI buys dollars from exchange banks => dollar
demand increases, Rupee value depreciates
This leads to increased rupees in market (increased money supply)
=> can lead to inflation
This is balanced by OMOs (RBI sells special G-secs and absorbs
excess money supply) to control inflation (maybe caused due to
increased forex reserves)
Amount raised under MSS does not get credited to Govt account.
It is maintained in a separate cash account with RBI - used only for buyback
of T-bills/ dated securities issued under the scheme
Standing Deposit Facility
RBI absorbs liquidity from commercial banks without giving G-Secs in return
to the banks (unlike Reverse Repo)
Introduced in 2018 by amending RBI Act, 1934
Quantitative Easing (QE)

Used to stimulate economic growth in developed countries
Central Bank keeps on purchasing bonds from banks over a period -
Money Supply increases => Aggregate demand increases
Bond Price increases => interest rate decreases => investment increases
As economic growth increases in developed countries => their central bank
gradually withdraws QE aka Tapering of QE
Leads to instability in India's financial market
Investor Education and Protection Fund Authority (IEPF)
Statutory body under MoCorporateAffairs under Companies Act 2013

Administer investor education, awareness and protection by -
Investor awareness programmes
Various mediums like print, electronic, social media etc
Fund where unclaimed dividednd, refunded money application money, matured
company deposites etc => not claimed within 7 years
Investor Protection and Education Fund
By SEBI => houses its own contribution and donations from center and states for
investor awareness
Depositor Education and Awareness Fund (DEAF)
By RBI - banks must transfer money from accounts that have not been operated for
over 10 years
Telecommunication Consumers Education and Protection Fund (TCEPF), 2007
TRAI has directed telecom service providers to put all unclaimed subscriber money
in consumer protection fund
Farm Subsidies
Direct Subsidies - direct cash incentives paid to farmer to make product more
competitive in global markets => provide right amount of purchasing power to
farmer
Indirect Subsidies - provided in form of cheap credit facilities, farm loan waivers,
fertilizer, seeds subsidy, reduction in electricity bills etc
Bombay Plan, 1944-45
8 capitalists of India after WW2, came up with plan to improve economy of country
Advocated state to play imp role in economy through planning, controlling and
overseeing
Rapid industrialisation and emphasis on heavy capital goods and basic industries
Significance of social services & Reforms-
Education
Land Reform
Cooperatives in finance, marketing, production
CSS
Centrally Sponsored Schemes
Finance by center and states in fixed ratio (50:50, 70:30, 75:25, 90:10)
Implementation by states
Formulated on subjects of state list
Shivraj Singh Chauhan Panel reccs => 28 umbrella CSS schemes now
Core of the core schemes (6) - for social protection and social
inclusion
National Social Assistance Programme (Dept of Rural Dev)
MGNREGA (Dept of Rural Dev)
Umbrella Scheme for Dev of SC (Dept of Social Justice and
Empowerment)
Umbrella Programme for Dev of ST (MoTribalAffairs)
Umbrella Programme for Minorities
Umbrella Programme for Dev of Other Vulnerable Groups
Core Schemes (20) - for National Dev Agenda where Center and
States have to Work Together in spirit of Team India
Optional Schemes (2) - states free to choose if they wish to
implement. Funds allocated as lump sum

Border Area Dev Programme
SP Mukherjee Rurban Mission
Central Sector Schemes
Finance by Center completely
Implementation by Center
Based on subjects of Union list
Some programmes directly implemented by central ministry in states and
UTs
Examples - BharatNet, Namami Gange, LPG connection to poor, Crop
Insurance scheme, Metro projects etc
Planning Types
Systems Planning - less emphasis on social and institutional dimensions. Target is
best possible results for established goals giving less imp to caste, creed, family
etc
Normative Planning - gives due imp to socio-institutional factors. Suitable for
countries with lesser degree of social diversity
Imperative Planning - Central Command planning like communist Russia
Indicative Planning - work through market system rather than replacing it. Setting
quantitative targets side by side a set of economic policies indicative in nature.
Done by Mixed Economies
Sectoral - emphasize on sectors of eco i.e. agri, industry, or services
Spatial - spatial dimensions defined by pressure and requirements of national
economic development
FCI - under MoConsumerAffairs
Procures food grains @ MSP on open ended basis (provided grains meet quality
standards)
Open Market Sales Scheme (OMSS) - selling food grains at predetermined prices in
open market from time to time to moderate prices
Economic Cost =
Acquisition cost @MSP +
Procurement incidentals (labour and transport, godown rentals etc) +
Distribution cost (freight handling, storage and interest charges, losses
during storage etc)
Operational Loss of FCI = (Economic Cost) - (Central Issue Price under various
schemes like NFSA) => reimbursed by GoI as food subsidy
MSP
Calculated as 50% over A2+FL (A2= cost actually paid by farmer out of pocket for
inputs, hired labour etc; FL = family labour)
MS Swaminathan Comm recc MSP as 50% over C2 (C2 = Comprehensive cost = A2
+ rent of owned land + interest on owned capital)
MSP for MFP => recc by TRIFED (not CACP)
CCI (Cotton Corporation of India) under MoTextiles => undertakes MSP operations
in event of prevailing seed cotton (kapas) price touching MSP level

MSP announced for 22 crops + 2 + FRP for Sugarcane = 25 crops
14 Kharif + 7 rabi + Jute + Dehusked Coconut (on basis of MSP of Copra) +
Toria (on basis of MSP of Rapeseed/Mustard)
Sugarcane
FRP recc by CACP => approved by CCEA => recc to State Govts by
MoConsumerAffairs
Sugar mills have to purchase sugarcane from farmers at FRP/SAP as per ECA,
1955
SAP (State Advised Price) => announced by State govt -> usually more than
FRP
Decentralised Procurement
Procurement at MSP to central govt stock through state agencies, not FCI
Helps cover more farmers under MSP
Improves PDS efficiency
Provides varieties of food grains more suited to local taste

Reduced transportation cost of FCI
Diff btw economic cost of states and Central Issue Price is passed to states by GoI as
subsidy
Central Issues Price - Price at which central govt issues food grains to state and UT
govts @rates fixed by GoI => Less than Economic Cost
Economic Cost - CIP = Consumer Subsidy (borne by Central Govt)
CIP of wheat and rice Fixed by MoConsumerAffairs => uniform throughout
the country
FPO (farmer producer organisation)
FPO is a producer organisation of farmers registered under Companies Act, 1956
Started in 2011-12 as a pilot project
Currently there are >5000 FPOs
Target to have 10k FPOs by 2024
SFAC
Autonomous society promoted by MoAgri
Governed by Board of Management => chaired by Minister of Agri + Vice President
is Secy, Dept of Agri
Organising small and Marginal farmers as FPOs, Farmer Interest groups & Farmer
Producer Companies (FPCs) => bargaining power and economies of scale
Schemes -
Equity Grant & Credit Guarantee Fund (EGCGF) for FPOs => to improve
availability of working capital
VCA (Venture Capital Assistance) scheme
Financial support in form of interest free loans to qualifying projects
to meet shortfall in capital requirement for implementation of
project
Project should provide market to farmers/producer groups
VCA available to eligible projects all over India => North east and
hilly states are given relaxation in cost and eligibility norms
National Agriculture Market Electronic Trading (e-NAM) - single unified market for
agri products
Agricultural and Processed Foods Export Promotion Authority (APEDA)

Estd under Agricultural and Processed Food Products Export Development
Authority Act, 1985
Under MoCommerce&Industry
Responsibility of export promotion and development of products - fruits, veggies,
meat, dairy, alcoholic & non-alcoholic beverages, biscuits etc
Govt recently set up Rice Export Promotion Forum (REPF) - increase rice export by
recc measures to improve supply chain etc
India is 2nd largest rice producer and largest exporter
Contract Farming
Under concurrent list (Agriculture under state list tho)
Firms engaged in contract farming exempted from licensing and trade restrictions
on stock limit and movement of foodstuff under Essential commodities Act,
1955
SC judgement -> farmer who farms under a contract of a company is a consumer =>
gets protections under Consumer Protection Act, 1986

Tamil Nadu - first state to enact law on lines of Model Contract Farming Act, 2018
PM-AASHA
Ensuring remun erative prices to farmers for their produce
Address gaps in MSP system
3 components -
Price Support Scheme (PSS) - physical procurement of pulses, oilseeds,
copra
Price Deficiency Payment System (PDPS) - cover all oilseeds and pay farmer
difference btw MSP and actual selling price
Pilot of Private Procurement & Stockist Scheme (PPPS) - in case of oilseeds
=> private player can procure crops at MSP when market prices<MSP =>
he will be compensated (max 15% of MSP)
MIEWS (market intelligence and EWS)
By MoFPI
Realtime monitoring of prices of TOP (tomato, onion, potato) and simultaneously
generating alerts for intervention under terms of Operation Greens scheme
Operation Greens - by MoFPI to stabilize supply of TOP (In Aatmanirbhar,
TOP to TOTAL -> others also added)
Developed by NAFED
Cobweb Phenomenon - production responds to prices with a lag => causing
recurring cycle of rise and fall in output and prices
NAFED
Estd in 1958 as a multi-state cooperative society Under MoAgri
To promote co-operative marketing of agri produce to benefit farmers
NCCF (National Cooperative Consumers Federation of India Ltd)
Estd in 1965 as a multi-state cooperative society under
MoConsumerAffaris,Food&PublicDistribution
To provide supply support to consumer cooperatives for distribution of consumer
goods at affordable rates
NCDC (National Cooperative Dev Corporation) - under MoAgri
Ricardian Equivalenve
In face of high deficits, people save more
Argues that taxation and borrowing are equivalent means of financing expenditure
Govt borrows today => will be repaid by taxes tomorrow; same as
Govt expenditure financed by tax increase today
Invest India
India's official agency dedicated to investment promotion and facilitation
Not-for-profit single window facilitator for overseas investors & indian investors
aspiring to invest in foreign locations
Formed under DPITT
Govt - 49%(DPIIT - 43.5% + 19 states - 5.5%). Rest divided between - CII, FICCI,
NASSCOM => therefore, Invest India is a private body
India Investment Grid
Under DPIIT
Single window platform for investment opportunities in India
Escrow Agent
Third party bank account for safeguarding the seller against its buyer from payment
risk

Control over cash flows is given to an independent agent (instead of the buyer)
Independent agent would ensure money is given asper agreed terms after
transaction
Widely used in PPP
Financial Market Infrastructure (FMI)
Multilateral system among institutions for clearing, settling, or recording payments
etc
Refers to -
Systematically Important Payment Systems (SIPS)- eg. RTGS
For transfer of funds among participants
Clearing Corporation of India Ltd
Central Securities Depositories (CSD) - 2: - National Securities Depository
Ltd (NSDL), Central Securities Depository Ltd (CSDL)
Central safe keeping services, asset services - administration of
corporate actions, record of legal ownership of security etc
Securities Settlement Systems (SSS) - enables securities to be transferred
and settled by book entry
Central Counterparties (CCP) - interposes itself between counterparties to a
contract and ensures performance of open contracts
Trade Repositories (TR) - maintains centralised electronic database of
transaction data
Depository
Institutions which hold secutities in dematerialised (demat) form
2 depositories in India -
National Securities Depository Limited (NSDL) - by NSE, IDBI, Unit Trust of
India etc
Central Depository Services Limited (CDSL) - by BSE, SBI, Bank of India etc
Regulated by SEBI
GDP Deflator
Covers entire range of G&S produced in economy
Available on a quarterly basis (when GDP data released)
Nominal/Real
GDP
Calculated by CSO
PLFS (periodic Labour force survey)
by NSO, MoSPI
India's 1st computer based survey
Launched in 2017
WPI
Calculates price changes at the point of bulk transactions and may include some
taxes and distribution costs
WPI calculated with 2011-12 base year doesn't include taxes in order to remove
impact of fiscal policy => present WPI ~ PPI (as practised globally)
Covers commodities of 3 major groups -
Primary Articles
Fuel and Power
Manufactured Goods

Does not cover services
Base year : -2011-12
Was Earlier used for Headline Inflation (now CPI used)
Calculated by Office of Economic Advisor (OEA), DPIIT of MoCommerce&Industry
CPI
Measures changes in price level of a basket of consumer goods and services bought
by households
Base year : 2011-12
6 types -
CPI-IW : by Labouor Bureau in MoLabour&Employment - base year revised
to 2016 now (form 2001)
CPI-AL : " " " => MGNREGA wages linked to this
CPI-RL(rural labourers) : " " "
CPI (Rural) - by CSO in MoSPI
CPI (Urban) - " " "
CPI (Combined) - " " "
Weight of items in CPI from Consumer Expenditure Survey (by NSSO every 5 years)
PPI
Calculates avg change in prices received by producer
Excludes indirect taxes
Removes multiple counting bias inherent in WPI
Includes goods as well as services
Weight of items in PPI derives from Supply Use Tables
Index of Industrial Production (IIP)
Indicates performance of various industrial sectors of economy
Base year : 2011-12
Manufacturing (77%) > Mining (14%) > Electricity (8%)
Calculated by NSO (earlier CSO, but now by NSO after merger of CSO and NSSO)
every month, released at 12-13th of month
Index of Eight Core Industries - (40% of the weight of items in IIP) => - production
volume index => advance indication released before IIP =>
released Monthly by By OEA, DPIIT, MoCommerce&Industry
Refinery Products (28%)
Electricity (20%)
Steel (18%)
Coal (10%)
Crude Oil (9%)
Natural Gas (7%)
Cement (5%)
Fertilizers (2.6%)
Recently, tobacco removed and palm oil added in list
Annual Survey of Industries
by CSO
Only Organized sector industries surveyed
Purchasing Manager's Index (PMI)
Indicator of business activity in the manufacturing and services sector
By Japanese Firm Nikkei and Markit Economics

Survey based measure => asks respondents about changes in their perception about
key business variables
Released at start of every month => good leading indicator of economic activity
Curves
PHILIPS CURVE - inflation and unemployment have stable and inverse relationship -
fails in long run in stagflation (high unemployment + high inflation) => vertical
line
KUZNETS CURVE - Inequality vs Income per capita.
*Environmental Kuznets Curve
LAFFER CURVE - Taxation vs Revenue

LORENZ CURVE -
*GINI Coefficinet = A1/(A1+A2) => India = 35.1 in 2011 acc to WB
J - CURVE - trade deficit will initially worsen after depreciation of currency :

because higher prices on imports will be greater than the reduced volume of the
imports initially
Later export levels begin to dramatically increase => domestic consumers buy less
imported products due to their higher prices
Impossible Trinity - Impossible to have all 3 of the following at the same time -

Triffin Dilemma
Conflict of economic interests that arises btw short-term domestic vs long-term
international objectives for countries whose currencies serve as global reserve
currencies
Tobin Tax/Robinhood Tax
Tax on international flow on short term capital => to discourage volatile short term
capital inflows or hot money -> which is very speculative
Shorter the transaction period => heavier burden of tax
Pigouvian Tax
Imposed to counter the impact of negative externalities/spillovers
Eg. Carbon tax
Tax Elasticity
Change in revenue to change in tax rate
Tax Bouyancy
Change in revenue to change in GDP
Tax Expenditure
Opportunity cost of taxing at concessional rates
MIBID and MIBOR
MIBID : Mumbai Inter Bank Bid Rate - benchmark rate at which banks would like to
borrow money from each other
Used as a benchmark rate for majority of deals struck for Interest Rate
Swaps, Forward Rate Agreements, Term Deposits etc
MIBOR : Mumbai Inter Bank Offer Rate - benchmark rate at which banks would like
to lend to each other
Indian Version of LIBOR (London)

Used for Overnight Index Swaps
Patent Prosecution Highway (PPH)
Programme by Indian Patent Office with patent officers of other countries =>
providing accelerated patent prosecution procedures by sharing info
Initially with Japan for 3 year period
Bondi Bond
Blockchain bond by WB
Deemed Export
Those transactions in which goods supplied do not leave the country, and payment
for such supplies is received in either ₹ or forex($ etc.)
Deemed Exports Benefit Schemes
Aims to create a level playing field for domestic industry vis-a-vis direct
import by providing duty free inputs or exemptions/refund of duty
paid on goods mfg in India
i.e. it is an instrument of import substitution
Helps in creating mfg capability, value addition and employment
opportunities
DEB schemes availed by units of -
Power
Petroleum refinery
Fertilizer
Nuclear power
FC + Net Production Taxes = Basic Prices

Basic Prices + Net Product Taxes = Market Prices
DEMAND FOR MONEY - affected by level of income, interest rates, inflation, uncertainty
about future. 3 motives -
Speculative Demand for Money
Money as a store of wealth => investment. i.e. when money holding is
perceived to be less risky than lending or investing it. For Eg. When
stock market crash seems imminent
Demand for highly liquid financial assets => not dictated by real transactions
such as trade
Eg. If current interest rates are high => encourages bond holding but
discourage money holding => because high opportunity cost of holding
money in terms of interest forgone
Transactions Demand
Involve exchange of money
As GDP (income) rises => transaction demand for money also rises
Precautionary Demand
Demand for money as a precaution against an uncertain future that may
require immediate payment
Velocity Of Money -
Number of times money changes hands during a unit period
Higher velocity => higher will be the total nominal value of transactions in the
economy
SLR Default

Banks can't pledge SLR securities in OMO (& Liquidity Adjustment Facility tool of RBI
- Repo and Reverse Repo)
SLR securities can only be pledged when banks do not have enough securities to
borrow funds from RBI under LAF through OMO => called MSF
SLR/CRR default leads to additional interest rate of 0.25% higher than repo
ECB -
Can be in rupee, dollar, or any other freely convertible foreign currency
RBI has eased norms for ECB => to address liquidity conditions in economy
Hedging norms eased => mandatory hedging coverage reduced from 100%
to 70%
Masala Bonds
Rupee denominated offshore bonds => funds raised from overseas market
Currency risk is on foreign investor => since Conversion of such bonds happens at
market rate on the date of settlement of transactions (NOT predecided
exchange rate)
RBI mandates -
Any Indian bank or corporate is eligible to issue masala bonds
Money raised through this cannot be used for real estate activities (except -
dev of township or affordable housing)
Can't be used for investing in capital markets (eg. Purchase of land - NO)
Minimum Maturity-
Upto $50Mn - 3 years
> $50Mn - 5 yrs
Can be issued only in a country that is member of FATF and whose securities
market regulator is a member of International Organisation Of
Securities Commission
Kerala became first state to issue Masala Bonds - to rebuild after floods of 2019
Maharaja Bond => Rupee denominated onshore bond
Depository Receipts
Financial instrument (securities) issued by a company in a foreign jurisdiction
Negotiable security that can be traded on stock exchange
Issuers can raise funds outside their country
Depository Receipt => issued abroad which can be bought by foreign investor
Indian Depository Receipt (IDR) => Rupee denominated -> enables Foreign
companies (NOT Indian company) to raise funds from Indian securities market
ADR/GDR => Dollar denominated => Allows Indian Company to raise funds from
Foreign security market
Eg. ADR (American DR - if issued in US on the basis of securities of Indian company),
GDR (global DR)
NEER and REER

Effective Exchange Rate - index that talks about strength of a currency relative to a
group of other currencies
NEER - multilateral rate weighted avg of bilateral exchange rates of rupee in terms
of a basket of foreign currencies => weighted acc to trade with each country .
Eg. 1$=60Rs

NEER index increase => Appreciation in Rupee's value => India's export
competitiveness decreasing
REER - weighted avg of NEERs, adjusted for inflation => captures inflation
differentials btw India and its major trading partners
If REER appreciates (i.e. goes from 100 to 150) => like Rupee Appreciating
(1$=75 to 1$=60) => Export Competitiveness of Indian Goods decreases
REER appreciate/Increase in REER => Exports become more expensive
and imports become cheaper => loss in trade competitiveness.
Therefore, LOW REER => Exports Rise
LIKE Normal Rupee-Dollar exchange rate
Base =100 (year - 2015)
Quantity of domestic goods required to buy one unit of given basket of
foreign good
Difference btw REER and NEER due to domestic inflation of India relative to other 36
countries (major trading partners of India)

Real Exchange Rate
When NER=PPPexchangerate => RER=1

The 2 countries are at Purchasing Power Parity => No Trade
PPP
Estimated by WB's ICB (International Comparision Programme)
Indian agency - MoSPI
National Infrastructure Investment Fund (NIIF)
India's First Sovereign Wealth Fund (investment pool of foreign currency resereves
owned by govt)
Considered as an AIF under SEBI regulation
Raises debt to invest in equity of infrastructure finance companies
Govt owns 49%

3 funds -
Master Fund - for infra
Fund of Funds - housing, green infra => to those fund managers who have a
good record in infra projects
Strategic Fund - greenfield & brownfield investments
Fugitive Economic Offender
FEO Act, 2018
FEO is any individual who -
Has left India to avoid criminal prosecution
Being abroad, refuses to return to India to face criminal prosecution
Offense should be > ₹100cr
Person declared FEO by an application filed in a special court under PMLA, 2002
Properties of the person can be confiscated
Serious Fraud Investigation Office (SFIO)
Statutory Body under Companies Act, 2013 under MoCorporate Affairs
Investigate corporate frauds of very serious and complex nature
Mandated to investigating frauds relating to a company under Companies Act
Central Fraud Registry
Maintaines by RBI
Banks report all frauds > ₹1Lakh to RBI
Advisory Board for Banking and Financial Fraud
Set up by CVC
First Level Examination in cases of banking and financial frauds > ₹50cr in state run
banks and FIs
Secretarial services to ABBF provided by RBI
4 members including chairman => 2 year term
Financial Intelligence Unit (FIU)
Set up in 2004
FIU - receives cash/suspicious transaction reports, analyse them etc
Reports to Economic Intelligence Council (headed by FM)
EGMONT - global association of FIUs
Data Lake Project
By SEBI => improving surveillance to monitor and analyse social media posts to keep
tab on market manipulations
Money Aggregates
M0 = Currency in circulation + Banks' cash deposits with RBI + other deposits with
RBI

Inflation Indexed Bonds (IIBs)
Inflation protection to both principal and interest payments => provides investor
with constant return irrespective of inflation levels
Eligible for SLR status
WPI is used for IIBs
Talks of releasing IIBs indexed to CPI
Debt Service Ratio
Ratio of debt service payments (principal+interest) to export earnings
Leverage Ratio
Ratio of bank's core capital/equity (CET-1) to its assets (debt)
Higher leverage ratio => bank more safe
MFN status
Under GATT of WTO, if a country favours one country, it has to extend that
concession/favour to all other WTO members
3 main WTO AGREEMENTS -
GATT (tariffs and trade)
GATS (trade in services)
TRIPS
4 GATS Modes Of Supply -
Mode 1 - cross border delivery - Distance learning, tele-learning
Mode 2 - Consumption abroad - chinese students studying in US
Mode 3 - Commercial Presence - local unit estd in country (branch
campus of US univ in China)
Mode 4 - Presence of Natural Persons - Teacher Exchange
programme
Consequently, India extended MFN status to all WTO members from 1994
(marrakesh agreement - estd WTO)
Pakistan did not reciprocate citing non-tariff barriers & huge trade
imbalance
India withdrew Pakistan's MFN status last year
Exception:-
FTA - applies only to goods traded within the group (discriminating against
goods from outside)
Can give developing countries special access to their markets
Country can raise barriers against products that are considered to be traded
unfairly from specific countries
Security exceptions

To safeguard BoP position
In services, limited discrimination is allowed
Indradhanush 2.0
Comprehensive plan to recapitalise PSBs
₹70,000cr by govt
₹1.1Lcr to be raised from markets
Inverted Duty Structure
Import duty on finished goods is low compared to import duty on raw materials
Industry wants the govt to remove this anomaly
Beggar-thy-Neighbour Policy
Policy through which country attempts to remedy its economic problems by means
that tend to worsen the economic problems of other countries
ECA for Onions => Bangladesh onion woes
Pareto Efficiency
Economic situation when the circumstances of one individual cannot be made
better without making situation of other individual worse
Takes place when resources are most optimally used
Paradox of Thrift
Individuals try to save more during recession => fall in demand => more recession
Codex Alimentarius Commission (CAC)
International food standards body
Jointly by WHO & FAO => to protect consumer health and ensure fair practices in
free trade
India => became member in 1964
Eco-Mark
Voluntary labelling service by BIS (MoConsumerAffairs) - for quickly identifying
envt-friendly products
EXIM Bank
Wholly owned by GoI – Export-Import Bank of India Act, 1981
Extends LOCs to overseas financial institutions, regional dev banks, sovereign govts
and other entities overseas.
Facilitates 2 way tech transfer by financing import technology into India, and
investment abroad by Indian companies for setting up joint ventures or
undertaking overseas operations.
India recently extended $75 mn LOC via EXIM bank for solar parks in Cuba
National Economic Census
Complete count of all establishments located in geog boundary of India
By MoSPI (7th edition in 2019), first in 1977 (not at regular intervals)
Conducted under Collection of Statistics Act, 2008
All households/establishments engaged in agri (excluding crop production and
plantations) as well as non-agri economic activities including construction
(except public admin, defense)
For 7th census, MoSPI partnered with CSC e-governance services => an SPV under
MeitY as implementing agency => for the first time entire census was conducted
on digital platform by using app
CSC - under MeITY

CSR
Under Companies Act, 2013
For BOTH private & public companies with -
Net worth > ₹500cr
Annual turnover > ₹1000cr
Net profit > ₹5cr
Spend 2% of average net profits of last 3 years on CSR
Act lists CSR activities - 5 categories
NOT tax exempted (some exceptions like PM-NRF)
NOT coverered under CSR-
Activites outside India
Projects that benefit only the employees
Contri to political party
One-off events like marathon, awards, charitable contri etc
Injeti Srinivas Committee on CSR - submitted to MoCorporateAffairs
Municipal Bonds
Marketable debt instruments issued by ULBs => to on-lend towards project
implementation by ULB
Regulated by SEBI
Bangalore Municipal Corp => 1st ULB to issue in 1997
Pension Fund Regulatory and Development Authority (PFRDA)
Interim PFRDA estb in 2003 - through govt resolution
Later made statutory body by PFRD Act, 2013
Regulates NPS and other pension schemes subscribes by employees of pvt and
public sector
NPS
Under MoFinance
Govt sponsored pension scheme launched in 2004, for govt employees => In 2009 -
opened for all
Eligible -
All citizens (Resident or NRI) & OCIs till the age of 65 years
All new Central govt & central autonomous body employees (joining after
2004) except Armed forces
All employees of state govt and bodies joining after date of notification by
state govts
Any other govt employee
All citizens - pvt employees, unorganized workers
NRIs/OCIs with bank accounts in India
OCIs now equivalent to NRIs in NPS scheme -> both can invest in
NPS-Tier 1 accounts
Govt will NOT CONTRIBUTE anything
Funds managed by PFRDA
Employees' State Insurance Scheme
Under MoLabour
Social Security + Health Insurance => Insurance against sickness, death, disability
etc => provide medical care

Funded by - both employer and employee
Regulated by ESI Act, 1948
Administered by ESIC (under MoLabour&Employment)
Not applicable to seasonal factories etc
FATF
Intergovernmental body estd in 1989
Policy making body
Initially aimed at countering money laundering, later in 2001, its mandate expanded
to include terror financing also
39 members including 2 regional councils - European Commission and Gulf
Cooperation Council => Members of Asia - India, China, Russia, Japan, South
Korea, Malaysia (Pakistan not part)
Secretariat - at OECD HQ in Paris
WORLD BANK GROUP - 5 institutions
International Bank for Reconstruction and Development (IBRD)
International Development Association
Lends to poorest countries to boost eco growth, reduce inequalities and
improve people's conditions
International Finance Cooperation
To lend pvt companies and FIs of developing countries
Multilateral Investment Guarantee Agency (MIGA) - protects against non-
commercial risks only - India became member in 1994
International Center for Settlement of Investment Disputes (India NOT member)
To become member of WB, first need to be member of IMF
IMF
QUOTA -
SDR => Quota denominated by SDR

SDR is a basket of currencies : Dollar> Euro>Renminbi/Chinese Yuan (added
in 2016)>Yen> Pound Sterling
More Quota => More SDR
Country can use SDR in emergency situations => low interest(SDR included
in Forex reserves of RBI)
Can borrow 200% of SDR at a time
Part of Capital Account in BoP

Multiple Roles of Quotas -
Resource contribution - max amount member is obliged to provide to IMF
Voting power - Votes = Basic Votes (same for all members) + 1 vote per
SDR100,000 of quota
Access to Financing
SDR allocations
Reserve Tranche Position - difference between IMF's holding of that country's
currency and country's IMF-designated quota => i.e. required quota of currency
each member must provide to IMF that can be utilized for its own purposes
without service fee or economic reform conditions
Facilities of first resort for the countries
After collapse of Bretton Woods System (fixed exchange rates system, US $ as
official reserve instead of Gold) in 1971 => IMF has promoted system of floating
exchange rates
Quarter External Debt Statistics (QEDS)
Online debt database launched by WB + IMF of countries that subscribe to IMFs
Special Data Dissemination Standards and a selected number of countries that
participate in IMF's General Data Dissemination System
To facilitate macro-economic analysis and cross country data comparision
External Debt Management Unit (EDMU) in MoFinance has joined QEDS => supplies
India's external debt data on quarterly basis to QEDS
External Debt India
$550Bn - 20% of GDP
Soveriegn Debt = $100Bn = 3.7% of GDP
Currency denomination of bonds - US $(53%), Rupees (31%), Yen (5%), SDR (4%),
Euro (3%)
Share -
Commercial Borrowings (40%)
Non-resident deposits (23%)
Debt from Multilateral agencies
National Mineral Policy, 2019

Pertains to non-coal & non-fuel minerals

To increase the production of major minerals by 200% in 7 years => tied to Make in
India
Proposals
Exclusive Mining Zones => in principle statutory clearances for granting
mining lease
Incentivises private investments=> Right of First Refusal at auction
Identify critical fragile ecosystems => inviolate areas
Encourage merger and acquisition of mining entities
Long term export-import policy for mineral sector
Harmonising mining royalty/taxes with rest of world
Welfare/rehabilitation of mining-affected people
Inter-generational equity in mineral resource exploitation
National Data and Analytics Platform (NDAP)
By NITI Aayog => to make all govt data accessible to stakeholders in a user-friendly
manner
TOURISM
India ranked 22nd in world in terms of international tourist arrivals in 2018 =>
1.24% of world's international tourists
Top 5 international tourist arrival states - TN, MH, UP, Delhi Raj
Top 5 domestic tourist arrival states - TN, UP, Karnataka, Andhra, MH
Most Foreign tourists from Bangladesh (20%) in last 2 years
Medical Tourism
India => 18% of global medical tourism market
MoTourism => recognized it as niche tourism
E-tourist visa for medical tourism
National Medical and Wellness Tourism Board under MoTourism
Hindustan Urvarak and Rasayan Limited (HURL)
Joint venture of Coal India Ltd + NTPC + IOCL
Revival of 3 sick urea units
Will establish state of the art envt friendly and energy efficient natural gas based
new fertiliser complexes
FOREX, EXCHANGE RATE misc fundae
If interest rate (interest on Govt bonds) higher => international investment
banks/funds/MNCs will buy bonds more => demand currency more => currency
appreciates
But, with higher interest rate, domestically people will borrow less from banks =>
lower consumer spending

Corona scare => FPIs withdraw ₹36kcr from Indian market by selling => convert
rupee to dollar => more demand of dollar => rupee depreciates => RBI releases
dollars from its forex Reserve (6 month Dollar-rupee currency Swap) to provide
liquidity to forex market (banks buy dollars from RBI and return after 6 months)
FPI inflow => More dollars in Indian economy => so less value of dollars =>
rupee appreciates
DPIIT (Dept of Promotion of Industry and Internal Trade)
New name of DIPP
Under MoCommerce&Industry
Functions -
Formulation of industrial policy
Monitoring industrial growth
Formulation and regulation of FDI policy
Formulation of IPR policies
Coordinate with UN Industrial Development Org
Administers Laws => Explosives Act, 1884 ; Salt Cess Act, 1953; The Patent
Act, 1970; The Boilers Act, 1923,;GI Act, 1999; Inflammable Substances
Act, 1952 etc
IPR related laws, Quality Council of India, Trademarks, Copyrights etc
Invaluable Treasures and Incredible India -> tagline for branding of GIs
FDI

Investment through capital instruments by person resident outside India -
In unlisted company -> i.e. any investment in unlisted company is FDI (since
FDI is done through primary markets)
In >10% of post-paidup capital of listed Company
Once investment classified as FDI -> if FDI holding comes back to <10% => still
classified as FDI
FDI regulated by FEMA Act, and also by RBI & DPIIT
FDI rules made by DPIIT
FDI Flows into India in 2018-19 - Singapore>Mauritius>US>Japan
Maharashtra => received highest FDI

100% automatic route FDI in -
Insurance Intermediaries
Coal and mining associated infra
Market place model of e-commerce
FDI in e-commerce under MoCI
Renewable energy projects
Food processing industries
Dev & Production of seeds
Plantation sector
Air transport
Railway Infra (not operations)
Other FDI
Defence Mfg - 74% under automatic route
Insurance - 74%
FDI Prohibited in -
Lottery
Chit Funds & Nidhi company
Trading in transferable development rights (TDR)
Real Estate Business
Construction of farmhouses, tobacco etc
No Private investment in - Atomic & Railway

FPI
Investment through capital instruments by person resident outside India -
<10% capital of listed company
QFI -> Qualified Foreign Investor is a sub category of FPI => any foreign individuals,
groups, or resident from a country that is member of FATF and signatory to
International Organisation of Securities Commission's (IOSCO) Multilateral
Memorandum of Understanding (MMOU)
3 Mechanism for FPIs
VRR (voluntary retention route) => separate channel which enables
investors (also FPIs) to invest in debt markets in India through easier
rules in return for a longer commitment period
Under VRR => investments are free of regulatory norms applicable
to FPI investments, provided FPIs voluntarily commit to retain
minimum % of their investments for atleast 3 years.
(investment cap through VRR doubled to ₹1.5L crore)

Allows to participate in Repo transactions & ETFs (NOT P-notes)
Fully Accessible Route (FAR) - to enable Non resident investors to invest in
specified G-secs
No FPI Limit (in other G-Secs 6% limit)
Domestic investors can also use this
Medium-Term Framework
FPI limit on G-sec is 6%, SDLs (State Dev Loans) is 2%, and Corporate
bonds is 9% of total outstanding securities
National Skill Development Council (NSDC)
Not-for-profit company => PPP under MoSkillDev&Entre
Aims to promote skill dev by catalyzing the creation of large, quality, for-profit
vocational institutions
National Startup Advisory Council

Suggest measures to promote innovation in all sectors of economy
Chaired by Minister of Commerce and Industry
E-Kuber => Core Banking Solution of RBI

A single current account for each bank across the country
Enables ease of operations
Eg. Banks can buy PSL Certis from here etc
SWIFT (Society for Worldwide Interbank Financial Telecommunications) - messaging
network that financial institutions use to securely transmit info through standardized
system of codes
Natural Rate of Interest / Neutral Real Interest rate => theoretical interest rate that
supports economy at full employment GDP while keeping inflation stable
Economic Capital Framework - methodology for determining appropriate level of risk
provisions and distribution of profits btw RBI and GoI
Bimal Jalan Comm to review Economic Capital Framework, 2018 => RBI increased
net transfer to govt
Additional Tier-1 Bonds (Yes Bank crisis)

Lowest priority - even lower than shareholder's money
RBI said that it will be written off in yes bank crisis case => AT-1 bond holders will
lose money
AT-1 Bonds => perpetual bonds with fixed annual coupon price associated => used
to fullfill Basel-III criteria of 9.5% Tier-1 capital
Unsecured Bond and no maturity date
Higher rate of interest than other secured bonds
Listed and traded on stock exchange
Basel-III
3 mutually reinforcing pillars-
Minimum Capital Requirements
Supervisory Review Process
Market Discipline
Focus on 4 banking parameters-
Minimum Capital Requirements - 4.5% of common equity as a % of bank's
risk-weighted assets
Leverage Ratio - ratio of Tier 1 capital by average total consolidated assets
of banks - min 3%
Liquidity Coverage Ratio - banks should hold sufficiently liquid assets that
can withstand a 30-day stressed funding scenario
Net Stable Funding Ratio (NSFR) -requires bank to maintain stable funding
above required amount of stable funding for 1 year of extended stress
Bharat Bond ETF
India's first corporate bond - approved by CCEA
Will be managed by Edelwiess AMC
Basket of bonds issued by CPSEs, CPSUs, CPFIs and other govt org
Small Unit size of ₹1000
Fixed maturity date - launched in 2 series : -3 years and 10 years

Separate index for both series by NSE
ETF- basket of securities (index funds) that trade on an exchange (like a
stock)
ETF share prices fluctuate all day as it is bought and sold - diff from
MF - traded once a day after market closes
CPSE ETF - 1st ETF of GoI, 2014=> investors can buy shares in 10 PSUs
(energy heavy portfolio)
Bharat-22 ETF => shares and bonds of CPSEs, PSBs and strategic holdings of
SUUTI (Specified Undertaking of the Unit Trust of India) => managed by
ICICI Prudential AMC
Debt ETF
CCEA has approved creation and launch of India's first corporate Debt ETF
=> would create an additional source of funding for CPSEs, CPFIs and
other govt org and increase retail participation in Indian corporate bond
market
ETF is like MF (basket of different shares/bonds) except one difference i.e.
MF is traded once market closes, ETF is traded real-time => Debt ETF is a
basket of bonds only
Bharat Bond ETF -> debt ETF of Govt
Bharat Bond ETF => strong response from investors and was oversubscribed
by 1.7 times
Kisan Credit Card (KCC)
Launched in 1998 all over India
By NABARD and RBI
Reduce farmer's dependency on informal banks for credit
KCC offered by - cooperative banks, RRBs, PSBs
KCC extended to fishermen also
Nutrient Based Subsidy
Fixed rate of subsidy (₹ per kg) on each nutrient of subsidized P&K fertilizers =>
applicable to 22 fertilizers (NOT Urea) for which MRP decided taking into
account-
International and domestic prices of P&K fertilizers
Exchange rate
Inventory level in the country
Urea is the only fertilizer who's import is still cannalized and restricted => statutorily
controlled price
Fertilizer subsidy is 2nd largest subsidy after food => started in 1977 (no fertiliser
subsidy before 1977)
Subsidy - Food > Fertiliser > Fuel
Paris Club => informal group of creditor nations with objective to find workable solutions to
payment problems faced by debtor nations
Indian Banks' Association
Association of Indian banks and FIs based in Mumbai
Voluntary association of banks of Public sector, pvt sector, Foreign and Cooperative
banks
CII-IBA-Financial Conditions Index (FCI) - based on a quarterly survey of major banks
and FIs on their expectations of key financial and economic variables
determining financial conditions in Indian Economy

4 Sub Indices of CII-IBA-FCI
Cost of Funds Index
Funding Liquidity Index
External Financial Linkages Index
Economic Activity index
Provision Coverage Ratio
PCR refers to the prescribed % of funds to be set aside by banks for covering the
prospective losses due to bad loans
Ratio of Total provision balances of banks as on a particular date to Gross NPAs
Net NPAs = Gross NPAs - Provisions
Liquidity Coverage Ratio
Highly liquid assets (cash, Gsecs) to be maintained by banks to survive acute stress
scenario lasting for 30 days
LCR = (High quality liquid assets)/(Banks Net cash outflow for 30 day period)
LCR should be >=100%
Brought down to 80% by RBI (in April 2020) => Corona crisis
Buffers under Basel
Capital Conservation Buffer - 2.5% of RWA(Risk weighted assets) in the form of CET-
1
Counter Cyclical Buffer imposed during times of hight credit growth <= may be
imposed
Capital Adequacy Ratio : CAR = (Tier I + Tier II)/Risk Weighted assets - 9% (more than Basel
recc 8%)
Fiscal Drag => inflation pushes income into higher tax bracket
Bond-i => WB launched blockchain operated bond
NAFED
Nodal agency for implementing price stabilisation measures under "Operation
Greens"
Formed in 1958 => under MoAFW
To promote Co-operative marketing of Agricultural Produce to benefit the farmers.
NAFED procures
Pulses
Oilseeds
Cotton
EXIM Bank
Estd in (Jan 1) 1982
100% govt owned
Promoting, financing, facilitating foreign trade
Extends LoC overseas
NABARD
Statutory org Estd in (July) 1982 by transferring agri credit functions of RBI and
refinance functions also
HQ - Mumbai
100% owned by GoI
Both Direct Financing (to schemes) and Refinancing (SCBs, RRBs etc)
Schemes -
SHG Bank Linkage Scheme
Kisan Credit Card

Funds of NABARD
Rural Innovation Fund
Rural Infrastructure Dev Fund
Long Term Irrigation Fund
Micro Irrigation Fund
Climate Change Fund
Green Climate Fund
Dairy Processing & Infra Fund
Financing for-
Refinance to Rural FIs for investment credit (long term) and marketing
credit (short term)
Loan to state Govts for developing rural infra and cooperative credit
structure - RIDF
Loans for food parks and FPIs
For warehouses and cold chain infra - to individuals also
Credit facilities to marketing federations etc
NHB (National housing Bank)
Estd in 1988
100% owned by GoI now - 2019
Setup on recc of C. Rangarajan Comm
SIDBI
Estd in 1990 - through Act of Parliament
DFI headquarterd in Lucknow
Operated under Dept of Financial Services
Facilitate credit flow to MSMEs
Not fully owned by GoI => Major Shareholders -
Price Stabilisation Fund (PSF)

Constituted in 2014-15 for containing extreme volatility in prices of agri-
horticultural products like onion, potato and pulses
To maintain strategic buffer and discourage hoarding and unscrupulous speculation
Utility Patents => exclusive right granted for invention -> allows right holder to prevent
others from commercially using the protected invention without his authorisation for
some time - aka petty patent or innovation patent
Indian Patents Act, 1970 => denies patents for incremental innovations => india
DOES NOT offer protection under utility patents
Invest India
Not-for-profit estd in 2008 under DPIIT, MoCommerce&Industry
National Investment Promotion and Facilitation Agency
Business Immunity Platform (BIP)

Comprehensive resource to help businesses and investors get real-time
updates on India's response to COVID-19
By Invest India
Marks
Fruit Product Order/FPO Mark
Issued by MoFoodProcessing for processed food products since 1955
Mandatory for all processed food prodcuts
Follows Food Safety and Standards Act, 2006
Ecomark
Issued by BIS (MoConsumerAffairs) => products conforming to a set of
standards aimed at least impact on ecosystem since 1991
AGMARK
On agri products as per set of standards approved by Directorate of
Marketing and Inspection (attached office to Dept of Agriculture,
Cooperation and Farmers Welfare under MoAgri&FarmerWelfare)
Agricultural Produce (grading and marketing) Act, 1937 (amended in 1986)
NRI Deposit Accounts (as per FEMA regulations)
Foreign Currency (Non Resident) Account (Banks) (FCNRB)
only foreign currency permitted => Only time deposits (NOT demand
deposit)
Can be opened by NRIs, PIOs, OCBs (overseas corporate bodies)
Term : 1-5yrs
Repatriation of funds permitted
Non-Resident (External) Rupee Account Scheme (NRE Account)
Can be opened by NRIs, PIOs, OCBs with banks authorized by RBI
Repatriation permitted
Non-Resident Ordinary Rupee Account Scheme (NRO)
Can be opened by any person resident outside India (Pakistani and
Bangladeshi need prior RBI approval) with authorized bank
When resident becomes NRI => his existing rupee accounts become NRO
NRO account balances remittable upto $1Mn per financial year
FCNRB and NRE accounts -> repatriation allowed => their deposits included in
external debt outstanding
NRO principal non-repatriable, but Only current income (rent, interest, pension) is
repatriable => thus also included in India's external debt outstanding
Liberalised Remittance Scheme (LRS)
By RBI => allows residents to remit a certain amount of money during a financial
year to another country for investment and expenditure
Allows all residents (including minors) to freely remit up to $250,000 per financial
year (April-March) for any permissible current or capital account transaction
Only for Individuals, not companies
Regulated by FEMA
NOT available to - corporates, partnership firms, HUF, Trusts etc
Different Purposes including-
Private visit to any country (except Nepal and Bhutan)
Gift or donation
Going abroad for employment
Emigration

Maintenance of relatives
Medical treatment expenses
Studies abroad etc
NOT available for -
Lottery tickets, proscribed magazines etc
Items restricted under Schedule 1 and 2 of FEMA Rules, 2000
Trading in forex abroad
Capital account remittaces to FATF "Non-cooperative countries"
Tax collected at source for -
Remittance >₹7L in a financial year
Sale of overseas tour package through tour operator
Supervisory action plan of RBI for UCBs
SAF is in line with PCA (imposed on commercial banks)
UCBs will face restrictions for worsening of 3 parameters-
Net NPAs > 6% of net advances
Incur losses for 2 consecutive financial years or accumulated losses on
balance sheets
CAR < 9%
GSP
Originated in UNCTAD II Conference in New Delhi, 1968 => generalized, non-
reciprocal, non-discriminatory system of preferences in favour of developing
countries
Under aegis of UNCTAD (NOT WTO)
Certain products originating in developing countries are granted reduced or 0 tariff
rates over the MFN rates
Currently 13 nations give GSP
US given duty free status of India has been discontinued in 2019
Exception to Law of Demand
Luxury Goods/Veblen Goods - higher price => higher demand
Giffen Goods - inferior good lacking close substitute and constitutes big fraction of
income of buyer - higher price => demand increases (cheaper variety like Bajra.
As price of bajra increases, person will still buy bajra because he can’t buy
costlier wheat)
Inferior Good - More income of consumer => less demand
Schedule Commercial Banks
In 2nd Schedule of RBI Act 1934
Includes -
PSBs
Pvt banks
Foreign Banks
RRBs
Scheduled Cooperative Banks
Ways and Means Advances
RBI gives temporary loan facilities to center and state govts under WMA
Introduced in 1997 (before that ad-hoc TBs were used)
Loan for 3 months - 90 days charged @Repo Rate => if extended >90days, will be
considered overdraft (interest rate 2% higher, and for max 10 consecutive days
only)

Limits for WMA are mutually decided by Govt and RBI (recently increased by 60%
due to COVID-19)
Cash Management Bills (CMBs)
Issued by govt to meet temporary cash flow mismatches of Govt
Similar function of Ways & Means Advances, but -
WMA is a loan facility (not CMB are bonds

tradeable) (tradeable)
WMA for both center + states CMB only for center
Non-standard, Discounted instruments with maturity <91 days => issued at a
discount and redeemed at face value on maturity
Eligible as G-sec for SLR purpose
Merchant Discount Rate (MDR)
Cost paid by merchant to bank for accepting digital payment from customers (a
percentage of transaction amouont)
Amount distributed btw -
Bank
Vendor that installs PoS machine
Card network provider (Visa, Mastercard, RuPay etc)
From 1 Jan, 2020 => businesses with annual turnover > ₹50cr => have to offer low
cost digital payment options to customers and MDR will not be levied on either
customers or merchants
RBI and Banks => will absorb these costs from savings on account of
handling less cash
Low cost digital payment modes -> BHIM, UPI, Aadhar Pay, p, RTGS, Debit
Cards etc
eBkray Platform =>e-auction platform to enable auction by banks of attached assets

National Medical Devices Promotion Council (NMDPC)
Setup under DPIIT in MoCI
Headed by secy of DPIIT
Will support domestic mfg, reduce dependence on imports to meet local demand
and boost exports
Unemployment Measurement
LFPR - Labour force (people in working age group willing to work)/Total Pop
WPR (worker pop ratio) = Workers (People employed) /Total Pop
Proportion unemployed = No. of unemployed/population
Unemployment Rate = No. of unemployed/Labour Force
Usual Status
Labour force = Available > 6months of survey year
Employed on principal basis - people who worked for majority time period
for which they were available for work
Employed on subsidiary basis - worked for atleast 30 days during survey
year, BUT considered unemployed under principal basis, or outside
labour force (eg. Available only for 5 months)
Measures Chronic Unemployment
Current Status

Employed = those who work for atleast 1 hour in a day of the survey week
Lenient criteria
Measures chronic unemployment
Current Daily Status
Takes into account activity status of labour force for each day of survey
week (Man-Days)
Unemployment Rate = Unemployed Man-days/Total man-days
Misery Index
Misery Index = unemployment rate + inflation rate => shows extent of Stagflation
Dwarf Firms
Firms that are both -
Small (less than 100 workers), &
Older than 10 years
Account for half of all organised mfg by number
But small share in net value added and employment
D-SIB
Banks whose assets > 2% of GDP
RBI declares banks designated as D-SIBs annually
Assessment methodology for assessing and Identifying D-SIBS will be reviewed
atleast once in 3 years
SBI, HDFC, ICICI
15th FC-
Reccs of FC implemented by Dept of Expenditure, MoFinance
Chairman – NK Singh
Divisible Pool excludes -
Cost of collecting taxes
Cess & surcharge (including GST compensation cess)
Tax revenue of UTs
Transfer from National Calamity Contingency Fund (NCCD) & NDRF
Tenure increased to 6 years. For 2020-21 => report in Feb. For 2021-26 => report in
oct 2020

Income Distance- 45% – gap btw per capita income of that state & highest per
capita income (HARYANA)
Pop (2011) - 15%
Area – 15%
Demographic Performance- 12.5%- (since 1971 pop is removed as criteria) - TFR of
state
Forest & Ecology- 10% – dense forest share of state
Tax Effort- 2.5% – higher tax collection efficiency => rewarded
6 types of Grants-In-Aid
Revenue Deficit Grants (if states didn't get the revenue they expected eg. GST
compensation)
Grant to Local Bodies - 4.31% of divisible pool (₹90,000cr) => rural:urban =
67.5:32.5

Disaster Management Grants
Mitigation (20%) & Response (80%)
National Disaster Risk Management Fund (NDRMF) - for disaster
response+Mitigation both
Sector Specific Grants
For 2020-21 => Nutrition - ₹7000cr
In final report, grants will be provided for - health, pre-primary, education,
judiciary, rural connectivity, housing, railways, statistics and police
training
Performance Grants
Will be present in final report
Agri reforms, development of Aspirational distts, Power sector reforms,
Education, Enhancing exports, Tourism etc
State Specific Grants
Karnataka, Mizoram and Telangana => 6000cr (since sum of devolution and
revenue deficit grant is estimated to decline in 2020-21 for these 3
states)
Enforcement Directorate
Multidisciplinary organisation mandated with the task of enforcing the provisions of
-
FEMA, 1999
Prevention of Money Laundering Act, 2002
Under administrative control of Department of Revenue, MoFinance
Google Tax/Equalization Levy
Under Finance Act, 2016 - 6% for B2B transactions
Under Finance Act, 2020 - new eq levy 2% on revenue of e-commerce operators
(who sold > ₹2cr of goods & services) & who don't have tangible presence in
India(B2C)
Foreign firm won't get tax credit in its home country for equalisation levy
paid in India => since that income won't be subjected to income tax
Will apply to payments for online ads made by Indian business entities to non-
residents (such as Google, Yahoo, Twitter, FB) where aggregate payment in a
financial year to a non-resident exceeds ₹1L => charged @ 6%
India became first country to impose equalisation levy -> aka Google Tax
Imposed on Revenue (NOT profit - as estimating profit for Amazon will be hard)
BEPS
India ratified Multilateral Convention to Implement Tax Treaty Related measures
to prevent base erosion and profit shifting (MLI) by OECD/G-20
Tax Information Exchange Agreement (TIEA)
India notified TIEA with Marshall Islands
TIEAs are non-binding agreements
Tax transparency & sharing of info twice a year
Can undertake tax examination in other country
Central Repository of Information on Large Credits (CRILC)
Set up by RBI in 2014-15 => to collect, store and disseminate credit data to lenders
=> for early recognition of financial distress

Banks, RRBs and UCBs (with assets >₹500cr) will have to furnish credit info to CRILC
on all their borrowers having aggregate exposure > ₹5cr
Remission of Duties or Taxes on Export Product (RoDTEP) scheme
To replace the existing Merchandise Exports from India scheme (MEIS) (was found
to violate WTO rules as it was export focussed) => to comply with WTO rules as
under RoDTEP indirect taxes on inputs are consumed in production process
Fully automated route for Input Tax Credit in GST to help increase exports => will
reiumburse all taxes and duties paid on inputs consumed in exports
Additional ₹10,000cr revenue will be forgone
RoDTEP scheme will be monitored by MoFinance
Earlier, GST was already exempted for exports => import/customs duty for
inputs required to mfg exported product was refuned back through MEIS
(by giving Duty Credit Scrips)
But, certain items out of GST (like VAT on fuel, Mandi tax, duty tax on
electricity etc) => so duty on them was still levied
Now, under RoDTEP => these will also be covered => exports will become
effectively zero-rated
MPC
Statutory body => Finance Act, 2016
Govt sets inflation target every 5 years
MPC has to meet atleast 4 times a year
Quorum for meeting = 4 members
Terms & conditions of appointment of members => by Central Govt
Twin Deficit
When nation has both - Current Account Deficit & Budget Deficit
Importing more than exporting + spending more than generating
In the long run => nation's currency devalues
Competition Commission of India (CCI)
Statutory body - Chairperson + 6 members => appointed by Central Govt
Under MoCA (Corporate Affairs)
CCI administers only Competition Act, 2002 (replaced MRTP Act, 1969)
BIS (Bureau of Indian Standards)
Statutory body - BIS Act
Under MoCAFPDS (Consumer Affairs)
Standardisation, marking & quality certification of goods
Buyback Tax
GoI proposed to tax buyback of shares by companies at 20%
Buyback - scheme by which company repurchases certain amount of its outstanding
shares => companies avoided paying DDT because of this
Capital Gains Tax
Direct tax that applies on sales of all assets if a profit has been made => i.e. tax on
gains one gets by selling assets
2 types -
Short Term Capital Gain - if asset sold within 36 months of owning it
Long Term Capital Gain - if sold after 36 months
BOP
Current Account - short term transactions

Invisible Account -
Service Exports and Imports (software exports, tourism revenue
etc)
Remittances
Income earned by MNCs from their investment in india
Merchandise Trade Account - goods import export
Capital Account - long term borrowings, lending, investments etc
Foreign Investment -
Non-Debt Liabilities => FDI, FPI (through FIIs), ADRs/GDRs
Debt Liabilities => Loans (ECBs, Trade credit, external assistance,
short term external debt), Banking Capital (NRI Deposists)
India's Capital Account has always remained POSITIVE (since destination for
investment) even before 1991 reforms (FPI and ECBs were introduced in
1991 reforms only)
Advance Ruling
Written interpretation of tax laws => issued by tax authorities to corporations and
individuals who request for clarification
Binding ruling given by Authority for Advance Ruling (AAR) and Appaellate AAR
(AAAR) => constituted under State GST Act => AAR and AAAR have powers of
Civil court
MSMEs
Definition changed under Atmanirbhar package -
No items reserved now for exclusive MSME Production
30% of GDP & 45% of total 25% Employment Only 8% MSMEs get formal
exports credit
Public Procurement Policy for MSMEs
Portals
MSME Samadhaan - delayed payment portal
MSME Sambandh - public procurement
MSME Sampark - connecting jobseekers and recruiters
Udyam Sakhi - for women entrepreneurs
Udyam Mitra - by SIDBI to provide improved accessibiity of credit to MSMEs
India Inclusive Innovation Fund

By MoMSME
To focus on India's poor => IIIF would back enterprises developing innovative
solutions for poor citizens
Balancing social and financial returns
Employment focus
Development Banks
1991 - Narsimham Committee => development banks disbanded and converted to
commercial banks
Industrial Finance Corporation of India (IFCI) => first Development bank of India ,
1948
Recently Finance minister announced setting up a new development banks
NEFT (national electronic funds transfer)- from any branch to any => not in real time => fund
transfer settles in 23 half hourly batches - available 24x7
No charges to savings bank account customers for online NEFT
Foreign remittance under NEFT => Only for Nepal
RTGS (real time gross settlement) - real time transfer => primarily for large transactions (min
₹2L) -> not 24x7 system
NPCI (National Payments Corporation of India)
Founded in 2008, registered under Companies Act, 2013, established by RBI and
IBA under provisions of Payment and Settlement Systems Act, 2007
Owned by consoritum of major banks
Services ->
IMPS (immediate mobile payment system) - real time instant inter-bank
transfer system managed by NPCI => available 24*7
BBPS(Bharat Bill Payment System) - RBI conceptualised system driven by
NPCI => one-stop payment platform for all bills -
Covers repetitive payments of bills
payment online or Cash also
No convenience fee for online transaction
NACH (national automated clearing house) - web based platform for
interbank, high volume, electronic transaction for
banks/FIs/corporates/govt
Digital Payment Modes

Data Security Council of India (DSCI)
Not for profit, industry body on data protection by NASSCOM
Digital Payment Abhiyaan - DSCI collab with MeitY and Google => nationwide
awareness campaign, 7 languages
TechSagar Platform
By National Cyber Security Council & Data Security Council of India (under
NASSCOM)
Online portal for India's cyber tech capability
Will list business and research entities from IT industry, startups, academia,
and individual researchers
Digitals Payment Index - by RBI

Fiscal Performance Index - by CII (confederation of Indian industries) => assess quality of
budgets presented by state and center
National Data and Analytical Platform (NDAP) - vision document of NITI Aayog => to
standardize data across multiple govt sources
Consortium Lending - when several banks finance a borrower based on common appraisal
and documentation, and conduct joint-supervision and follow-up exercises
Leads to delay in loan appraisal -> inability of banks to share data timely
Credit Rating Agencies
SEBI came up with set of wider disclorure norms for CRAs
Introduces "probability of default" mechanism => CRAs have to disclose probability
of default for issuers they rate
7 CRAs registered with SEBI - CRISIL, ICRA, CARE, India ratings and research, SMERA,
Informerics, Brickworks
Bond Yield Inversion
Face value - price fixed by issue
Coupon payment - annual interest on bond
Bond Yield - effective rate of return or profit that the bond earns. Calculated by
dividing coupon rate by face value
Bond yield is inversely proportional to bond prices
Interest Rate in Economy increases => Bond Prices decrease => Yield
increases
When economy slows, people prefer to invest in govt bonds => rise in demand and
prices => fall in yield
When economy grows => rise in inflation =>RBI will increase repo rate to control
=> increased rate of interest in other investment options (pvt) => more
demand of pvt bonds => less demand of govt bonds => fall in price of govt
bonds => increased yield
Therefore, bond yield is a useful parameter to assess economic health
YIELD CURVE
Graphical curve of yields for bonds over different time horizons
Growing economy => upward sloping
BOND YIELD INVERSION
Happens when yield on a longer tenure bond becomes less than
yield on shorter tenure bond
Signals a recession
Shows that investors expect future growth to fall sharply (i.e.
demand for money will be much lower than what it is today)
Operation Twist
Operation twist is an Open Market Operation -> part of RBI's monetary policy
RBI simultaneously sells short term securities to buy long term securities => lowers
long-term interest rates
RBI purchases long term debt papers => i.e. RBI is giving money in market
for long term => more funds available for long term => interest rate
decreases
Better monetary policy transmission
If RBI purchases Long term bonds => price of long term bonds increases => long
term yield decreases -> WANT

Since if Rs. 100 bond paper (face value) with interest rate 8% is available in
Rs. 110 in the market then the yield will be (Rs.8/Rs. 110)*100 = 7.27%
Liquidity Trap
RBI wants to increase money supply in case of recession => But fails to lower
interest rate as they are already almost zero
Makes monetary policy ineffective
Low interest rates but People still hold on to their cash (savings deposits in banks)
=> spend less
Bilateral Netting
2 counterparties in a financial contract determine a single net payment obligation
that is due from one party to another => i.e. payables and receiveables are
netted off
Introduced in budget 2020
Bilateral netting not allowed in india as of now => however multilateral netting is
allowed (parties can offset claims against each other through a central
counterparty)
FDI in Retail

E-Commerce
Marketplace Model (eg. Amazon) => 100% FDI under automatic route
Inventory model (eg. Grofers) => No FDI permmitted
But 100% FDI => all models of retail for food products sourced from Indian Farmers
or processed in India
Trade-to-GDP Ratio
(Export+Imports of Goods and Services)/GDP
Measures openness of country to international trade
Large countries tend to trade less than small => since small countries lack internal
market
But India trades far more for its size
India (53%) > China (38%) > US (28%)
ICE (India's Consumer Economy) 360-degree survey
By not-for-profit research center 'People research on India's consumer economy'
Focusses on Household Survey on India's Citizen Environment and Consumer
Economy
LEADS Index
By MoCommerce&Industry + Deloitte
Perception based assessment of international trade logistics across Indian states
and UTs
Advance Pricing Agreement
Agreement btw taxpayer and tax authority fixing transfer pricing methodology to
decide pricing of future international transactions of taxpayer
Provides tax-certainty to MNCs and in line with govt's commitment towards a non-
adversarial tax regime
Employment Elasticity
Rise in employment with economic growth
Eg. EE=0.4 means, for 1% increase in GDP, employment rises by 0.4%
Employment Elasticity increases => Employment increases
Falling in India in recent decade
Tax Elasticity
Change in revenue to change in tax rate
Tax Bouyancy

Change in revenue to change in GDP
Tax Expenditure
Opportunity cost of taxing at concessional rates
National Startup Advisory Council
To build a strong ecosystem for nurturing innovation and startups in country
Chairperson - Minister of Commerce and Industry
Pusa Yashasvi - new wheat by IARI (indian agri research insti)
Higher protein and gluten + Zinc
High resistance against major rust fungi
National Statistical Commission

MoSPI => planning to have NSC - to make data collection more transparent and
reliable
Was setup as an interim measure in 2005 by a notification (on recc of Rangarajan
Committee)
Advisory body. Not statutory
Features of 2019 Bill
Composition -
Chairman + 5 members
Deputy Governor of RBI
Chief Statistician of India
Chief Economic Advisor (MoFinance)
Statistical Audit
Independent secretariat for Commission
Powers and Functions of NSC
Advice of NSC for legislative measures to be undertaken for official statistics
matters
Identify and evolve national policies and priorities
Devising Code of Conduct
Statistical coordination btw ministries, dept, agencies etc
Warehouse of core statistics
National Statistical Office
By merging CSO and NSSO
Headed by Secretary of MoSPI
Prepaid Payment Instruments (PPI)

Instruments that facilitate the purchase of goods and services against value stored
on such instrument (i.e. the value stored on such instruments by cash, credit,
bank a/c). Eg. Paytm, Mobikwik
Incorporated under Companies Act, 1956/2013 => having minimum paid-up capital
of ₹5cr and minimum positive net worth of ₹1cr at all times => can issue PPIs in
India
Only Indian Rupees in wallet
3 types-
Closed System PPIs - only for their own facilities eg. Flipkart wallet, Myntra
wallet => RBI approval not required
Semi-Closed System PPIs - only for a selected services
Open System PPIs - issued only by Banks -> cash withdrawal etc.
No interest payable on PPI balances
Indian Pharma Industry
3rd worldwide in volume, 13th rank by value
71% market share of Genetic drugs
100% FDI under automatic route for greenfield pharma
74% FDI under automatic route for brownfield pharma, and thereafter through govt
approval
Sidepocketing Rule
Introduced by SEBI after IL&FS fiasco
Framework that allows MFs to segregate the bad assets in a separate portfolio
within their debt schemes
Advance Authorisation (AA)
Issued to allow duty free import of inputs, which are physically incorporated in
export products. (including fuel, oil, catalyst used in production of export
product)
Under purview of Directorate General of Foreign Trade (DGFT), attached office of
MoCommerce&Industry
Net International Investment Position (NIIP)
Gap btw nation's stock of foreign assets and foreigners' stock of nation's assets at
that time
i.e. external assets - external liabilities
Higher net FDI inflows => worse absolute NIIP level (since higher net foreign
ownership of domestic assets)
Prudential Framework for Resolution of Stressed Assets (by RBI)
Direction by RBI in 2019
Changes -
Voluntary for banks to go for insolvency procedures => lenders choice to go
for legal proceedings and insolvency or not, earlier had to report to
NCLT
30 day review period instead of launching resolution plan on first day of
default
Resolution of stressed asssets framework for -
SCBs (excluding RRBs)
All india term financial institutions (NABARD, NHB, EXIM, SIDBI)
SFBs

NBFC-ND-SI (systematially non deposit taking NBFCs) & NBFC-D
(deposit taking NBFCs)
Agreement by All lenders required (earlier only of 75% was required)
Stressed Assets = NPAs + Restructured Loans + Written Off Assets
Doesn’t include SMA
NPA
Interest/installment not paid for > 90 days
Agri loan -
Short duration crop (<1year) => if not paid for 2 seasons
Long duration crop (>1year) => if not paid for 1 season
NPA types -
Substandard Asset - NPA for <12 months
Doubtful Asset - Substandard for 12 months
Loss Asset -Loss identified by bank or auditors or RBI => but amount not
written off wholly (some salvage maybe later)
Underwriting Of loans => critical operation of Appraising credit worthiness of potential
customer => done before deciding whether loan should be granated or not
Terms Of Trade
Relative price of exports in terms of imports -> ratio of export prices to import prices
i.e. Ratio of export price index (to get single value of all export items) to import price
index
i.e. Amount of Import Goods an economy can purchase per unit of export goods
Adverse Movement in ToT => badly affects exporters, but decreases quantity of
imports => improves trade balance in BoP
Rise in price of export goods will increase TOT, Rise in price of import goods will
decrease TOT
Green Bond
Debt instruments/Bonds earmarked for green envt projects, released by financial
institutions like WB, IMF, commercial banks, govts, etc
National level Guidelines by SEBI in 2016
India is the 2nd largest market of green bonds after China
Categories of projects -
Renewable energy
Clean transportation
Sustainable water mgmt
CC adaptation
Energy efficiency
Waste mgmt
Sustainable land use
Biodiversity conservation
Listed on India INX
India International Exchange Limited (India INX)
India's first international exchange located at GIFT city (gujarat)
Launched in 2017 -> subsidiary of BSE Ltd
Elephant Bond
25-year sovereign bond => to bring back black money stashed outside India
Person will get immunity from prosecution if they invest 40% of their undisclosed
money in this bond and pay 15% tax

Money will be used exclusively to fund Infra sector
Recc by Surjit Bhalla Committee on Trade and Policy
Mathew Effect
Middle classes tend to be main beneficiary of social benefits and services targeted
for poor
Rich gets richer, poor gets poorer
FISHERIES SECTOR
India is 2nd largest fish producer
65% => inland - Katla, Rohu, Mrigals; 35% => marine - Oil sardines, Tunas, Crabs etc
10% of total exports and 20% of agri exports
Fisheries and Aquaculture Infrastructure Development Fund (FIDF)
Will be used by coastal states to invest in infra facilities for deep-sea fishing,
post-harvesting, cage culture and export promotion of fish and marine
products
Nodal Entity - NABARD + All scheduled banks + NCDC (National
Cooperatives Dev Council, under MoAFW)
Subsifized finance to eligible farmer collectives, coopratives and individuals
Fisheries => state subject
Ornamental Fisheries
Breeding of coloured fishes of marine and freshwater
NE India and Western Ghats
90% India's ornamental fisheries export from Kolkata
PMMSY (PM Matsya Sampada Yojana) - address critical gaps in value chain,
including infra, modernising, traceability etc
Sagar Mitra
Involve youth in fishery extension through Sagar Mitras
India is 2nd in fish production in world => 65% from inland
Fisheries
India 2nd largest producer after China
Inland (Andhra top) > Marine (Guj top)
West Coast > East Coast
Overall : - Andhra > WB > Guj
Marine Fisheries Regulation and Management Bill, 2019
Intended to nationalize EEZ
Prohibits foreign fishing vessels
Indian vessel (fishing in EEZ beyond territorial seas) needs permit
DAIRY SECTOR
India ranks 1st in milk production since 1998 (20% of world production)
Largest bovine population
Dairy Processing and Infrastructure Development Fund (DIDF) Scheme
Central Sector Scheme under NABARD
interest subvention (subsidy on loans) @2.5%
Repayment period till 2030-31
Intensify Quality Milk Programme
TELECOM SECTOR
India is 2nd largest telecom market

Tele-density = 90% (Urban=160%, Rural=60%)
AGR (adjusted gross revenue) issue
Acc to DoT, AGR calculations should incorporate all revenues (including
non-telecom sources such as deposit interests and sale of assets)
Rajiv Gauba Comm -> to help struggling telecom sector
Telecom sector liberalised under National Telecom Policy, 1994
BharatNet
To provide broadband at 100Mbps to around 2.5L gram panchayats, and to
rural households too (2-20Mbps) by Optical fibre network
Earlier named National Optical Fibre Network
Being implemented by Bharat Broadband Network Limited (BBNL) through
SPV
Under Ministry of Communications
Funded by Universal Service Obligation Fund (USOF) => charged from
telecom service providers as percentage of license fee
National Digital Communications Poicy, 2018
National Broadband Mission - Broadband for all
Broadband access to all villages by 2022
Develop Broadband Readiness Index (BRI) => measure availability
of digital communications infra within state/UT
Creation of Digital Fiber Map
Creating 4 mn additional jobs in Digital Communications sector
Increasing GDP share from current 6% to 8%
Enhancing India's contribution to GVCs
Ensuring Digital sovereignty
TEXTILE SECTOR
Harmonized System (HS Code) for Khadi
HS Code is a 6-digit ID code by World Customs Org
MoCI allocates HS code - (8 digit code in India - extra 2 digits for more
detailed classification)
Separate HS code for Khadi => will boost Khadi exports
National Technical Textile Mission
Approved by CCEA
Will be operational under MoTextiles => 4 components in 4 years
Aims to position country as global leader in technical textiles (market size of
$40Bn by 2024)
Currently $16Bn (6% of global $250Bn technical textiles market)
Technical textiles are functional fabrics having application across various
industries
12 segments - Agrotech, Meditechc, Buildtech, Mobiltech (seatbelts, airbags
etc.), Clothtech, Oekotechc, Geotech, Packtech, Hometech, Protechc,
Indutech, Sportech
Project SU.RE
By textile ministy + Clothing Mfg Association of India (CMAI) etc
Indian apparel industry's largest commitment to move towards sustainable
Fashion
L2Pro

Learn to Protect, Secure and Maximise Your Innovation => website and app
launched by DPIIT
E-learning platform to understand IPRs
TReDS
Launched by RBI in 2014
Addresses need for working capital of MSMEs
Companies with turnover >₹500cr => must be registered on TReDS platform
DICGC
Wholly owned subsidiary of RBI -> upto ₹5L
DICGC Act
Each depositor is insured in every bank separately (but if multiple a/c in one bank =>
will be treated as 1 for insurance purpose)
Insurance premium paid by insured bank itself
Commercial Banks, LABs, RRBs, UCBs covered (NBFCs not covered)
GVA
GVA is the value of output minus the value of intermediate consumption and is a
measure of contribution to GDP made by indivudual producer, industry ot
sector
It is the main entry on income side of nation's balance sheet => represents supply
side
GVA at FC => doesn't include any taxes
GVA at Basic Prices = GVA at FC + (Production taxes - Production Subsidies)
GVA at Market Prices = GVA at Basic Prices + (Product Taxes - Product Subsidies)
GNP
GNP = GDP + NFIA (net Factor income from abroad)
GNP is both a quantitaive & qualitative concept - since it also accounts for quality of
human resources of citizens
India's GNP is always lesser than GDP => since Indians abroad generate less income
compared to foreigners operating in India
GNP measured from April 1 to March 31
Bottleneck Inflation
When supply falls drastically, and demand remains at same level
Financial Sector Regulatory Appointments Search Committee (FSRASC)
Created on the recc of Financial Sector Legislative Reforms Commission, 2011
For Reccommending names of chairpersons and members of Financial Sector
Regulatory Bodies (including Governor and Deputy Governor of RBI)
Headed by - Cabinet Secretary
FSRASC reccs candidate (even those names which haven't applied) => sends it to
Appointments Committee of Cabinet (headed by PM)
Surcharge
Discussed in Art 270 & 271
An increase in any of the taxes or duties => i.e. Tax on Tax
Whole proceedings of surcharge form part of Consolidated Fund of India
Surcharge cannot ordinarily be imposed over and above GST
Unlike Cess => no need to stipulate purpose at time of levy => Union can utilize
whichever way it deems fit
Credit Rationing

Banks deny credit to borrowers even if they are willing to pay higher interest rate
Because of market imperfection => inspite of demand, credit not available
Big corporates capture large portion of credit and less credit left for PSL etc
West Texas Intermediate
Grade of crude oil used as benchmark in oil pricing
Price went negative recently
Low density (better since more gasoline yield) + Sweet oil (low sulphur -> better
since more envt friendly and need less processing to adhere to envt sulphur
norms)
Brent
From North Sea
India uses this as benchmark price
Light (low density) and sweet, low sulphur
Broad-Based Funds
Fund established outside India
No single individual holds more than 49% of shares
Merchanting Trade
When buyer is from one foreign country and seller from another foreign country,
and Intermediary is Indian
Exempt from GST
BANKING COMMITTEES

E-Currency
E-Renminbi/ Digital Yuan -> Digital currency launched by China
People's Bank of China will be the sole issuer
Provides alternative to dollar settlemenet system
Based on blockchain tech

Marshall Islands => first digital currency 'Sovereign'
2018 Venezuela launched Petro => 1st country to officially launch its own
crypto currency
Libra - by FB
GNH
4 Pillars
Good Governance
Sustainability
Cultural preservation
Environmental conservation
Coined by Jigme Singye Wangchuck (4th king of Bhutan) in 1970s
Constructed based upon a robust multidimensional methodology known as
the Alkire-Foster method (special technique for measuring poverty or
wellbeing)
UNSDSN's World Happiness Report, 2019 = 140/156
HDR Report - 5 indices
HDI
Inequality Adjusted HDI (IHDI)
Gender Development Female Uses same standards as HDI =>

Index HDI/Male HDI Health, Education, Living Standards
Multidimensional Poverty Index (MPI)

GII (gender Inequality Index)

LABOUR CODE BILLS
Labour Code on Wages
Labour Code on Industrial relations
Labour Code on Social Security and Welfare
Labour Code on Occupational Safety, Health and Working Conditions
Labour Code on Wages

Fixes a floor wage that would then undergrid minimum wages for different
categories of workers -
Unskilled
Semi-skilled
Skilled
Highly-skilled
New code will amalgamate 4 acts - Payment of Wages Act 1936, Minimum
Wages Act 1948, Payment of Bonus Act 1965, and Equal Renumeration
Act 1976
Need - national minimum wage to ensure uniform standard of living across
the country
Constitutional Provisions -
Art 43 DPSP - state shall provide workers a living wage, conditions of
work ensuring a decent standard of life
Labour is subject of Concurrent List
Features -

Coverage - all employees. Central govt will make decisions for=>
railways, mines, oil fields. State govt => other employments
Wages include - salary, allowance. Does not include bonus, travelling
allowance
Floor Wage - Central govt will fix floor wage. May vary with
geographical areas
Minimum wages ( > Floor wages) - decided by state or central govt
Deductions - wages may be deducted on grounds of - fines, absence
from duty etc. not greater than 50% of employee's total wage
Gender discrimination prohibited
Overtime - normal working hours fixed by central or state govt.
Overtime wage must be atleast twice the normal rate
Advisory boards - Center and State Advisory Board => will consist of
Employees
Employers (same number as employees)
Independent persons
1/3rd will be women
Board will advise on -
Fixing minimum wages
Increasing employment opportunities for
women
Significance
Will reduce number of minimum wage rates from 2500 to 300 across
the country
Remove multiplicity of definitions and authorities => ease of
compliance
Provide for an appallate authority between claim authority and
judicial forum => speedy, cheap and efficient redressal of
grievances and settlement
Fair Wage is mean between 'living wage' and 'minimum wage'
Labour Code on Industrial Relations

Combines 3 acts- Industrial Disputes Act 1947, Trade Unions Act 1926,
Industrial Employment Act 1946
Features
To allow companies to hire workers on fixed term contract of any
duration on pan-India basis => making it easier to hire and fire
Provision of setting up a 2 member tribunal => speedier disposal of
cases
Vests powers with govt officials for adjudication of disputes involving
penalty as fines
Govt permission for retrenchment kept at 100 employees
Registration of trade unions (with atleast 10% membership or 100
members)

Factories, Mines or plantations (with >100 workers) => need govt
permission before laying off workers
Implications - workers (even if hired for 6months) => all workers will be
treated at par with regular workers for benefits
In sync with global standards
Speedier disposal of cases => 2 member tribunal (instead of 1
member)
Criticism
Uncertainty => since discretion by center and state, flexibility for
applicability
Labour Code on Social Security and Welfare

Social security refers to measures to ensure access to health care and
provision of income secucrity to workers
Objectives - universal social security for unorganized sector workers,
insurance and health benefits for gig workers
To corporatise existing org like EPFO and ESIC (employee state
insurance corp)
Features
Insurance, PF and life cover for unorganizded sector employees
Corporatization of EPFO and ESIC - labour Minister, labour secretaray
may not be direct head of these orgs. CEOs will be appointed
Benefit to Gig Workers - Central govt will notify schemes from time
to time
Maternity Benefit
Will merge 8 existing labour laws

Labour Code on Occupational Safety, Health and Working Conditions
Objective - to regulate employment of workers, including those engaged by
contractors, and their working conditions across sectors
Subsumes 13 laws - Interstate migrant workers Act, 1979; Mines act, 1952;
Dock workers act, etc
Features
Replaces 13 labour laws related to OSH
Applicable to
Establishments employing atleast 10 workers
All mines and docks
Special provisons for factories, construction workers etc.
National Occupational Safety and Health Advisory Board - in place of
many committees
Board will have tripartite representation from Trade Unions,
Employer associations and State Govts
Will advise the govt on standards, rules and regulations
Licensing Requirements - 1 reg, 1 license and 1 tax return instead of
multiple
Formalisation of Employment - have to issue appointment letter to
every employee
Safety and Welfare Provisions -
Employer has to provide hygienic work envt (ventilation,
comfortable temp, humidity, sufficient space, clean
drinking water etc.)
Uniform threshold for welfare provisions for all
establishments (creche, canteen, welfare officer etc.)
Duties of employees - taking care of own health etc
Working hours for women - permitted to work in night shifts after
their consent
Penalty for violations
National Migrant Information System

Online dashboard developed by NDMA

Will maintain central repository of migrant workers and help in speedy inter-
state communication to facilitate smooth movt of migrant workers to
their native places
Help in contact tracing during COVID-19
Total Factor Productivity
GDP divided by weighted avg of labour and capital input
Gives real output growth
Consumer Protection Act, 2019
Replaces Consumer Protection Act, 1986
defines consumer (doesn’t include a person who obtains a good for resale or
a good/service for commercial purpose)
6 Consumer rights -
To be protected against marketing of goods hazardous to life and
property
Informed of quality, quantity, potency, standard and price of G&S
Assured access to variety of G&S at competitive proces
Right to be heard
Redressal against unfair or restrictive trade practices
Right to consumer awareness
Provisions -
Central Consumer Protection Authority (CCPA) to promote, protect
and enforce rights of consumers
Will have an investigation wing - Director General of
Investigation
Consumer Disputes Redressal Commission (CDRC) - will be set up at
distt, state and national levels. Final appeal lies with SC
Distt CDRC will entertain complaints where value of G&S : <
₹1cr
State CDRC : ₹1cr-10cr
National CDRC : > ₹10cr
Central Consumer Protection Council - advisory body on consumer
issues
Headed by Union Minister on Consumer Affairs, Food & PDS
Will also have State Minister of consumer affairs from 2 states
from each region
E-Commerce companies -
Have to provide info about return, refund, etc and country of origin
Appoint grievance redressal officer => acknowledge complaint within
48 hrs
Cannot manipulate prices

RBI Surveys
OBICUS
Quarterly Survey by RBI -> of manufacturing sector
Provides insight into demand conditions faced by mfg sector =>
covers 2500 public and pvt ltd companies in mfg sector
Company level data is never disclosed => confidential
Consumer confidence Survey
Inflation Expectation Survey
Payments Infrastructure Development Fund (PIDF)

Created by RBI - ₹500cr (RBI gave half of initial corpus - 250cr, rest by card
issuing banks)
Encourage acquirers to deploy Points of Sale (PoS) infra for both physical
and digital modes in tier 3 to tier 6 centers & NE states
Similarly RBI set up Acceptance Development Fund => to improve last mile
payments network in rural India
To increase acceptance of credit & debit cards in tier 3-6 cities
NABARD contribution from Financial Inclusion Fund
RBI contri from Depositors Awareness & Education Fund
To cover operational expenses from card-issuing banks and card networks

In line with Nandan Nilekani Comm on Deepening of Digital Payments
Inter-state Migrant Workmen Act, 1979
Seeks to regulate employment of inter-state migrants and their conditions of
service
Principal employer prohibited to employ interstate workmen without a
certificate of registration from state authorities
Applicable to every establishment with > 5 migrant workmen
Establishment cannot discriminate against migrant workers wrt holidays,
working hours, wages etc
Public Utility Service
Those business undestakings engaged in supplying essential goods/services
of daily necessity to general public => can't go on strike
Under Industrial Disputes Act, 1947
MoLabour&Employment declared Banking as a 'public utility' for 6 months
Railways, Water, Sanitation, Power, Ports, Post and Telephone etc are
PUS
No person employed in Public Utility Service shall go on strike without 6
weeks prior notice
Characteristics
Indispensability
Monopoly position - to avoid duplication
Large investments
Public Regulations
Pricing Policies - guided by govt
SARFAESI Act, 2002
Recently Consti Bench of SC held that => Cooperative Banks can use
SARFAESI for recovery of debts from defaulters
So Banks, FIs (NBFCs), Cooperative Banks can use SARFAESI
Only secured creditors (i.e. loans backed by security such as mortgage) {IBC
covers both secured and unsecured creditors} can take possession
through ARC for -
Asset Reconstruction - converting NPAs into performing assets by -
Proper management of business of borrower
Sell/lease part/whole of business
Rescheduling of debts payable
Securitization - conversion of existing loans into marketable security
by ARCs through issue of security receipts
Creation of central registry
Applications against measures to recover secured debts can be filed by
borrowers/lenders at with Debt recovery Tribunals
NOT APPLICABLE TO-
Agricultural land
Amount due <20% of principal and interest
Financial asset < ₹1L

Consolidated Sinking Fund
Setup in 1999-2000 by RBI to meet redemption of market loans of state
Maintained in Public Account of state (outside Consolidated fund of state) =>
NOT used for any other purpose
State govt contributes 1-3% of outstanding market loans to CSF each year
Poverty Lines
Dandekar & Rath Committee, 1970-71 - used calories only (assumed health,
education provided by State)
Alagh Committee, 1978-79 - used calories only
Lakdawala Committee, 1993-94 - used calories only
Tendulkar Committee, 2009
Only calorific value used for food expenditure
First to use non-food expenditure like Health, Education, Clothing
Still used for Official Poverty estimation
C. Rangarajan Committee, 2014 =>
Used Calorie+Protein+fat
Non food items such as Health, rent, clothing, education, transport
Economic Integration Types
PTA (preferential trade agreement) - tariff reduction in some goods
FTA - PTA with tariff abolition on most goods
India FTAs with 10 countrie-
SL
Afg
Bhutan
Nepal
Thailand
Singapore
Malaysia
South Korea
Japan
Chile (only country outside Asia)
3 regional FTAs with -
SAFTA, 2004
India-ASEAN Agreement, 2010
MERCOSUR (Brazil, Argentina, Paraguay, Uruguay, Venezuela-
suspended since 2016)
Customs Union - FTA with common external tariff for non-members
Common Market - Customs Union where Free movt of labour & capital
Economic & Monetary Union - common market where members coordinate
macro-economic & exchange rate policies
Samarth Udyog Bharat 4.0
By MoHeavyIndustry&PublicEnterprises
Industry 4.0 initiative => 4th industrial revolution

Tech solutions to make Indian mfg units ready for Industry 4.0 by 2025
Investment Models
BOT
Developer constructs road => collects toll
No Govt payment to developer
BOT Annuity
Developer constructs road => operates for few years => transfers
back to govt
Govt starts payment to developer after launch of commercial
operations of project
EPC
Cost is completely borne by govt => govt invites bids for engg
knowledge from players
Raw material + construction costs etc => by govt
Pvt sector participation minimum (only engg)
HAM
BOT Annuity + EPC
Govt:Pvt = 40:60
Govt => 40% project cost in first 5 years through annual
payments (annuity)
Remaining payment made on basis of assets created and
performance of developer
Developer responsible for construction, NOT maintenance
IFAD (Int Fund for Agri Development)

International FI => poverty eradication in rural areas
UN specialized agency formed in 1977 => grants & loans to projects
Rural Development Report
Adaptation Fund for Smallholder Agriculture Programme (ASAP)
Climate change adaptation in rural dev programme + Climate Smart
Agriculture
Insurance

INDIA
Life Insurance Penetration = 3.76%
Life Insurance Density = $78
Banking Regulation Act, 1949

RBI (in consultation with govt) supersedes Bank's Board
RBI Act, 1934
Recently amended => allows RBI to supersede NBFC's Board of directors
Central govt can supersede RBI's Board
FRBM, 2003
Term 'escape clause' NOT mentioned in FRBM Act
FRBM Act provides 4 grounds for Center triggering escape clause -
National security
National calamity
Collapse of Agri
Structural reforms
States can also use Escape Clause
FRBM has not well defined escape clause for states
Bouyancy Clause - to be invoked if sharp decline in real output growth of 3%
points below avg of previous 4 quarters => Govt can exceed FD targets
GAVI (Global Alliance for Vaccines and Immunization)
Public-private global health partnershsip committed to increasing access to
immunization in poor countries
FCRA 2010
Implemented by MHA
If NGO substantially funded by GoI => under RTI
Positive Pay Mechanism
Fraud detection tool by banks against counterfeit cheques
For cheques > 50k
National Financial Reporting Authority (NFRA)

Estd in 2018 under Companies Act, 2013
Responsible for audit policies & standards in country
Impose sanctions against defaulting auditors
Audit companies listed in stock echange & those that function outside India
National Productivity Council (NPC)
Autonomous body under DPIIT, MoCI => founded in 1958 registered as a
non-profit Society under Societies Registration Act, 1860
Part of Tokyo Based Asian Productivity Council (APC)
Promote productivity culture in India
Types of Currency
Hard Currency - strong, highly demanded by every economy => scarce
availability

Soft Currency - opposite of hard, low demand => easily available in forex
market
Eg. Domestic currency in forex market
Hot Currency - when Hard currency is exiting economy at faster pace
Heated Currency - when Hard currency becomes Hot & exits economy fatafat
=> Domestic currency undergoes rapid depreciation => called Heated
currency
Financial Intelligence Unit, India (FIU-Ind)
Setup in 2004
Independent body reporting to Economic Intelligence Council (Headed by
Finance Minister) - Not MoFInance
EGMONT Group - grouping of FIUs of countries


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Sovereign Gold Bonds

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Financial Sector Development Council (FSDC)

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Partial Credit Guarantee Scheme

Rishabh Kumar Rewar – AIR 104, CSE 2020

International Center for Settlement of Investment Disputes (ICSID), 1966

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Flows in Consolidated Fund Of India and then transferred to Public Account

Rishabh Kumar Rewar – AIR 104, CSE 2020

TAXES (Before GST)

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Privatization - entire shareholding divested to private entity + mgmt control

Rishabh Kumar Rewar – AIR 104, CSE 2020

Foreign Exhange Swap

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Marginal Standing Facility (MSF)

Quantitative Easing (QE)

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Agricultural and Processed Foods Export Promotion Authority (APEDA)

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

KUZNETS CURVE - Inequality vs Income per capita.

*Environmental Kuznets Curve

LAFFER CURVE - Taxation vs Revenue

Rishabh Kumar Rewar – AIR 104, CSE 2020

*GINI Coefficinet = A1/(A1+A2) => India = 35.1 in 2011 acc to WB

J - CURVE - trade deficit will initially worsen after depreciation of currency :

Rishabh Kumar Rewar – AIR 104, CSE 2020

Rishabh Kumar Rewar – AIR 104, CSE 2020

FC + Net Production Taxes = Basic Prices

Rishabh Kumar Rewar – AIR 104, CSE 2020

NEER and REER

Rishabh Kumar Rewar – AIR 104, CSE 2020