Basic Terms- 2 Economy


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

(46) Growth and Development
Economic growth is the increase in goods & Services produced by an economy or nation, considered for a specific period of time. The rise in the country’s output of goods and services is steady and constant and may be caused by an improvement in the quality of education, improvements in technology or in any way if there is a value addition in goods and services which is produced by every sector of the economy.
It can be measured as a percentage increase in real gross domestic product. Where a gross domestic product (GDP) is adjusted by inflation.
Economic Development is the process focusing on both qualitative and quantitative growth of the economy. It measures all the aspects which include people in a country become wealthier, healthier, better educated, and have greater access to good quality housing. Economic Development can create more opportunities in the sectors of education, healthcare, employment and the conservation of the environment. It indicates an increase in the per capita income of every citizen. The standard of living includes various things like safe drinking water, improve sanitation systems, medical facilities, the spread of primary education to improve literacy rate, eradication of poverty, balanced transport networks, increase in employment opportunities etc. Quality of living standard is the major indicator of economic development. Therefore, an increase in economic development is more necessary for an economy to achieve the status of a Developed Nation.

47. Sectors of Economy
Human activities which generate income are known as economic activities. Economic activities are broadly grouped into primary, secondary, tertiary activities.
1. Primary activities are directly dependent on environment as these refer to utilisation of earth’s resources such as land, water, vegetation, building materials and minerals. It, thus includes, hunting and gathering, pastoral activities, fishing, forestry, agriculture, and mining and quarrying.
The primary sector of the economy can be classified as the "extractive" industry. These include the industries that produce or extract raw materials.
2. Secondary activities add value to natural resources by transforming raw materials into valuable products. Secondary activities, therefore, are concerned with manufacturing, processing and construction (infrastructure) industries. The secondary sector is usually strongest in so-called "transitional" economies that are changing from traditional to market economies.
3. The tertiary sector of the economy is the service industry. Service companies do not provide a physical good like the primary or secondary sectors, but they still provide value. For example, banks, insurance and the police all are examples of the service industry. The tertiary sector is usually strongest in advanced market economies.
Higher services under tertiary activities are again classified into quaternary and quinary activities.
The quaternary sector is said to the intellectual aspect of the economy. It includes education, training, the development of technology, and research and development. It is the process which enables entrepreneurs to innovate better manufacturing processes and improve the quality of services offered in the economy. Without this growth of technology and information, economic development would be slow or non-existent.
It is also known as the knowledge economy – this is the component of the economy based on human capital – IT, knowledge, education. It is primarily related to the service sector, but also is related to the high tech component of manufacturing.
The quinary sector is the part of the economy where the top-level decisions are made. This includes the government which passes legislation. It also comprises the top decision-makers in industry, commerce and also the education sector.
 
48. Trade Deficit
Excess of a nation's imports of goods (tangibles) over its export of goods during a financial year, resulting in a negative balance of trade. Opposite of trade surplus.
When a country persistently experiences a trade deficit there are predictable negative consequences that can affect economic growth and stability. 
Trade deficit is not necessarily a bad thing. It can raise a country's standard of living because its residents gain access to a wider variety of goods and services for a more competitive price. It can also reduce the threat of inflation since it creates lower prices.

49. Ease of Doing business
Ease of doing business is an index published by the World Bank. It is an aggregate figure that includes different parameters which define the ease of doing business in a country. 

It is computed by aggregating the distance to frontier scores of different economies. The distance to frontier score uses the ‘regulatory best practices’ for doing business as the parameter and benchmark economies according to that parameter. 
A nation's ranking on the index is based on the average of 10 subindices:
1. Starting a business – Procedures, time, cost, and minimum capital to open a new business
2. Dealing with construction permits – Procedures, time, and cost to build a warehouse
3. Getting electricity – procedures, time, and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse
4. Registering property – Procedures, time, and cost to register commercial real estate
5. Getting credit – Strength of legal rights index, depth of credit information index
6. Protecting investors – Indices on the extent of disclosure, extent of director liability, and ease of shareholder suits
7. Paying taxes – Number of taxes paid, hours per year spent preparing tax returns, and total tax payable as share of gross profit
8. Trading across borders – Number of documents, cost, and time necessary to export and import
9. Enforcing contracts – Procedures, time, and cost to enforce a debt contract
10. Resolving insolvency – The time, cost, and recovery rate (%) under bankruptcy proceeding
 
50. Forex Reserve
Foreign exchange reserves are assets held on reserve by a central bank in foreign currencies. These reserves are used to back liabilities and influence monetary policy.
Use foreign exchange reserves:
First, countries use their foreign exchange reserves to keep the value of their currencies at a fixed rate. A good example is China, which pegs the value of its currency, the yuan, to the dollar.
Second, those with a floating exchange rate system use reserves to keep the value of their currency lower than the dollar. They do this for the same reasons as those with fixed-rate systems. Even though Japan's currency, the yen, is a floating system, the Central Bank of Japan buys U.S. Treasurys to keep its value lower than the dollar.
A third and critical function is to maintain liquidity in case of an economic crisis. For example, a flood or volcano might temporarily suspend local exporters' ability to produce goods.
Similarly, foreign investors will get spooked if a country has a war, military coup, or other blow to confidence.
The central bank supplies foreign currency to keep markets steady. It also buys the local currency to support its value and prevent inflation. This reassures foreign investors, who return to the economy. 
 A fourth reason is to provide confidence. The central bank assures foreign investors that it's ready to take action to protect their investments.
Fifth, reserves are always needed to make sure a country will meet its external obligations.
Sixth, some countries use their reserves to fund sectors, such as infrastructure. China, for instance, has used part of its forex reserves for recapitalizing some of its state-owned banks. 
Seventh, most central banks want to boost returns without compromising safety. They know the best way to do that is to diversify their portfolios.
 
51. Labour Reform
Labour reforms essentially mean taking steps in increasing production, productivity, and employment opportunities in the economy in such a manner that the interests of the workers are not compromised.
“Essen­tially, it means skill development, retraining, redeployment, updating knowledge base of workers-teachers, promotion of leadership qualities, etc. Labour reforms also include la­bour law reforms”. Labour laws are con­cerned with the trade union rights of the work­ers, industrial relations and job security and policies relating to wages, bonus and other in­centive schemes.
Changes needed in labour laws are labour to be shifted to ‘State List’ from concurrent list, and multiplicity of labour laws.
Contentious labour reform proposals are-
- Membership and composition of trade unions
- Hire and fire
- Ban on strikes
- Single social security authority
- Redefining factories
 
52. Trade War
A trade war is an economic conflict resulting from extreme protectionism in which states raise or create tariffs or other trade barriers against each other in response to trade barriers created by the other party.
A trade war starts when a nation attempts to protect its domestic industry and create jobs. In the short run, it may work. Tariffs are supposed to give a competitive advantage to domestic producers of that product. Their prices would be lower by comparison. As a result, they would receive more orders from local customers. As their businesses grow, they would add jobs.
But in the long run, a trade war costs jobs. It depresses economic growth for all countries involved. It also triggers inflation when tariffs increase the prices of imports.
The 1930 Smoot-Hawley Tariff was a trade war that worsened the Great Depression. It increased 900 import tariffs by an average of 40% to 48%.
53. Social Security
In general sense, social security refers to protection provided by the society to its members against providential mishaps over which a person has no control.
The underlying philosophy of social security is that the State shall make itself responsible for ensuring a minimum standard of material welfare to all its citizens on a basis wide enough to cover all the main contingencies of life.
In other sense, social security is primarily an instrument of social and economic justice.
India’s social security system is composed of a number of schemes and programs spread throughout a variety of laws and regulations. Keep in mind, however, that the government-controlled social security system in India applies to only a small portion of the population.
Furthermore, the social security system in India includes not just an insurance payment of premiums into government funds (like in China), but also lump sum employer obligations.
Generally, India’s social security schemes cover the following types of social insurances: Pension; Health Insurance and Medical Benefit; Disability Benefit Maternity Benefit; and Gratuity
54. Asset
An asset is anything of value or a resource of value that can be converted into cash. Individuals, companies, and governments own assets. For a company, an asset might generate revenue, or a company might benefit in some way from owning or using the asset. 

In accounting asset is something that an entity has acquired or purchased, and that has money value (its cost, book value, market value, or residual value). An asset can be (1) something physical, such as cash, machinery, inventory, land and building, (2) an enforceable claim against others, such as accounts receivable, (3) right, such as copyright, patent, trademark, or (4) an assumption, such as goodwill. Assets shown on their owner's balance sheet are usually classified according to the ease with which they can be converted into cash.
Current Assets Include: (i) Cash and cash equivalents: Treasury bills, certificates of deposit, and cash; (ii) Marketable securities: debt securities or equity that is liquid; (iii) Accounts; (iv) receivables: money owed by customers to be paid in the short-term; and (v) Inventory: goods available for sale or raw materials
Fixed assets include: Vehicles (such as company trucks); Office Furniture; Machinery; Buildings; and Land.


55. Liability
Liability is a claim against the assets, or legal obligations of a person or organization, arising out of past or current transactions or actions. Liabilities require mandatory transfer of assets, or provision of services, at specified dates or in determinable future.
In accounting, recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, and accrued expenses.
Liabilities are also known as current or non-current depending on the context. 


56. General Budget
A general budget of a government is an annual financial statement showing item wise estimates of expected revenue and anticipated expenditure during a fiscal year.
The Finance Minister’s Budget presentation speech in the Lok Sabha comprises the following parts: Annual Financial Statement (AFS); Demand for Grants (DG); Appropriation Bill; Finance Bill; Macro-economic framework for the relevant financial year; Medium Term Fiscal Policy cum Fiscal Policy Strategy Statement; Expenditure Profile; Expenditure Budget; and Receipts Budget.
Objectives of a Government Budget are: Economic growth; Reduction of poverty and unemployment; Reduction of inequalities/Redistribution of income; Reallocation of resources; Price stability/Economic stability; and Financing and management of public enterprises.
 
67. Economic Survey
The Economic Survey is nothing but an annual document prepared by advisers to the finance minister and tabled in the Parliament a day before the Union budget. This year the Economic Survey has been prepared by the new Chief Economic Advisor Krishnamurthy Subramanian 
The survey is essentially a summary of the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.
The Economic Survey also recommends policy changes to the government, which are, however, not binding but only act as a guide in framing national policies. It contains forecasts about the economic growth of the country and the reasons outlining the projection.
 It is nowhere mentioned in the constitution. However, it is now part of the Government Practice to present Economic Survey every year before the budget.
58. Custom Duty
Customs Duty is a tax imposed on imports and exports of goods. The rates of customs duties are either specific or on ad valorem basis, that is, it is based on the value of goods.
he objective behind levying customs duty is to safeguard each nation’s economy, jobs, environment, residents, etc., by regulating the movement of goods, especially prohibited and restrictive goods, in and out of any country.
Customs duties are charged almost universally on every good which are imported into a country. These  are divided into:
  - Basic Customs Duty (BCD)
 - Countervailing Duty (CVD)
 - Additional Customs Duty or Special CVD
- Protective Duty,
 - Anti-dumping Duty
 - Education Cess on Custom Duty
 
59. Corporate Sector
Corporate Sector is the part of a country's economic activity that involves private companies (corporations). A corporation is a form of organization that has an existence independent of its owners.
Corporations can be organized for many purposes and can come in many types. For example, a municipal corporation is a city, county, or town operating under a corporate charter granted by the state, while a public corporation is owned and operated by the government.
There are corporations that are engaged in business. They are the most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as an ongoing enterprise.
60. HNI (Super rich)
HNI means High networth Individual. HNI is a person with more than Rs.5 crore in investable surplus, while those with more than Rs.25 crore investable surplus fall in the bracket of ultra HNIs.
In the financial sector, this categorization is very important as high net worth individuals have a separately managed investment accounts, as HNIs clients usually demand extremely personalized services for banking and investment. Even in the IPO application, HNIs are required to apply in a separate category dedicated to them.
HNIs needs vary because of the complexity in terms of their financial background, risk taking ability and willingness, market views and investment objectives.
As the number of billionaires in India is increasing, and these billionaires are coming from various backgrounds, simply they can be categorized into two broad categories: Self-Made HNIs & Inherited HNIs.
 
61. e-commerce
E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either as business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer or consumer-to-business. The terms e-commerce and e-business are often used interchangeably. The term e-tail is also sometimes used in reference to the transactional processes for online shopping.
M-commerce is a type of e-commerce on the rise that features online sales transactions made via mobile devices, such as smartphones and tablets. M-commerce includes mobile shopping, mobile banking and mobile payments. Mobile chatbots also provide e-commerce opportunities to businesses, allowing consumers to complete transactions with companies via voice or text conversations.
The benefits of e-commerce include its around-the-clock availability, the speed of access, the wide availability of goods and services for the consumer, easy accessibility and international reach.
62. Real GDP Vs Nominal GDP
Real gross domestic product (GDP) is an inflation / deflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year, expressed in base-year prices, and is often referred to as "constant-price," "inflation-corrected" GDP or "constant dollar GDP."
Unlike nominal GDP, real GDP can account for changes in price level and provide a more accurate figure of economic growth. While the two indices measure the same output, they are used for very different purposes: changes in value versus changes in volume.
When comparing GDP to other economic data that are not adjusted for inflation, nominal GDP is the preferred figure. Real GDP provides a more precise picture of a nation’s rate of economic growth. The GDP deflator is utilized to adjust the data for inflation. GDP deflator is calculated by computing the ratio of nominal GDP to the real measure of GDP.
 
When calculating real GDP, a base year is selected to control for inflation; the real GDP figures capture the quantities of goods produced in different years using the prices from the same base year. The different real GDP figures from various years reflect changes in volume rather than value.
63. Per capita income
Per capita income is a measure of the amount of money earned per person in a nation or geographic region. Per capita income can be used to determine the average per-person income for an area and to evaluate the standard of living and quality of life of the population. Per capita income for a nation is calculated by dividing the country's national income by its population. Per capita income counts each man, woman, and child, even newborn babies, as a member of the population. It serves as an indicator of a country's living standards.

In 2018 India’s PCI is 2,036 at 142nd position, China holds 67th, Barzil 73rd, and Sri Lanka 112nd.
 
64. Poverty
Condition where people's basic needs for food, clothing, and shelter are not being met.
World Bank defines the extreme poor as those living on less than $1.90 a day. But the World Bank goes beyond the amount of money a person or family earns to expand the definition of poverty.
"Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation and freedom."
Poverty is generally of two types:
(1) Absolute poverty is synonymous with destitution and occurs when people cannot obtain adequate resources (measured in terms of calories or nutrition) to support a minimum level of physical health. Absolute poverty means about the same everywhere, and can be eradicated as demonstrated by some countries.
(2) Relative poverty occurs when people do not enjoy a certain minimum level of living standards as determined by a government (and enjoyed by the bulk of the population) that vary from country to country, sometimes within the same country. Relative poverty occurs everywhere, is said to be increasing, and may never be eradicated.

65. Sustainable development
Sustainable development is development that meets the needs of the present, without compromising the ability of future generations to meet their own needs.
Economists have also provided a definition of sustainable development as being an economic process in which the quantity and quality of our stocks of natural resources (like forests) and the integrity of biogeochemical cycles (like climate) are sustained and passed on to the future generations unimpaired. In other words, there is no depreciation in the world's "natural capital", to borrow a concept from financial accounting. 
In 2012, the United Nations Conference on Sustainable Developmentmet to discuss and develop a set of goals to work toward; they grew out of the Millennium Development Goals that claimed success in reducing global poverty while acknowledging there was still much more to do. The Sustainable Development Goals (SDG) eventually came up with a list of 17 items that included amongst other things:
- the end of poverty and hunger
- better standards of education and healthcare, particularly as it pertains to water quality and better sanitation
- to achieve gender equality
- sustainable economic growth while promoting jobs and stronger economies
- sustainability to include health of the land, air, and sea
 
 
66. Inclusive growth
The agenda for inclusive growth was envisaged in the Eleventh Plan document which intended to achieve not only faster growth but a growth process which ensures broad-based improvement in the quality of life of the people, especially the poor, SCs/STs, other backward castes (OBCs), minorities and women and which seeks to provide equality of opportunity to all. Bringing these excluded sections of the society into the mainstream of the society so that they are able to reap the benefits of faster economic growth is the kind of ‘inclusion’ which is being envisioned in the concept of inclusive growth.
Inclusive growth means economic growth that creates employment opportunities and helps in reducing poverty. It means having access to essential services in health and education by the poor. It includes providing equality of opportunity, empowering people through education and skill development. It also encompasses a growth process that is environment friendly growth, aims for good governance and a helps in creation of a gender sensitive society. Special efforts to increase employment opportunities are essential as it is a necessary condition for bringing about an improvement in the standard of living of the people.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), one of the largest social safety network in India, has improved the standard of living of people and has been able to check migration to a great extent. Apart from this, the Government has launched various flagship programmes like Sarva Siksha Abhiyan (SSA), National Rural Health Mission (NRHM), Bharat Nirman etc. to bring about improvement in the area of education, health and infrastructure thereby making growth more inclusive.
 
67. Financial inclusion
Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost (The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan).
Financial Inclusion, broadly defined, refers to universal access to a wide range of financial services at a reasonable cost. These include not only banking products but also other financial services such as insurance and equity products
The essence of financial inclusion is to ensure delivery of financial services which include - bank accounts for savings and transactional purposes, low cost credit for productive, personal and other purposes, financial advisory services, insurance facilities (life and non-life) etc.
Financial inclusion broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays its own role in the process of economic development. Further, by bringing low income groups within the perimeter of formal banking sector; financial inclusion protects their financial wealth and other resources in exigent circumstances. Financial inclusion also mitigates the exploitation of vulnerable sections by the usurious money lenders by facilitating easy access to formal credit.
 
68. Micro-finance
Microfinance, also called microcredit​, is a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. While institutions participating in the area of microfinance most often provide lending—microloans can range from as small as $100 to as large as $25,000—many banks offer additional services such as checking and savings accounts as well as micro-insurance products, and some even provide financial and business education.
The goal of microfinance is to ultimately give impoverished people an opportunity to become self-sufficient.
The first organization to receive attention was the Grameen Bank, which was started in 1976 by Muhammad Yunus in Bangladesh. In addition to providing loans to its clients, the Grameen Bank also suggests that its customers subscribe to its "16 Decisions," a basic list of ways that the poor can improve their lives.
69. Land Reform
Land reforms in India usually refer to redistribution of land from the rich to the poor. Land reforms are often connected with re-distribution of agricultural land and hence it is related to agrarian reforms too.
 
Land reforms include regulation of ownership, operation, leasing, sales, and inheritance of land (indeed, the redistribution of the land itself requires legal changes).
It aims at the redis­tribution of land-ownership in favour of the culti­vating class, regulation and rationalisa­tion of rent, improving the size of farms and pro­viding security of tenure in order to transfer in traditional agriculture and raise cultivators to new heights. Land reform also helps landless agricul­tural tenants.
Thus, two main objectives of land reform are:
(i) to change the agrarian structure in a way as not to obstruct but promote the growth of agriculture; and
(ii) to replace the old land system by a new one, free from the exploitative features which characterised the former.
 
70. Disinvestment
Disinvestment is the process by which the Union government either sells its stakes in a PSU–fully or partially–or lists it on the stock market.
Thus, the government continues to disinvest in sectors where private companies are already the dominant players.
Through disinvestment, the government of the day can spend the proceeds for better purposes. The proceeds of the sale are channelised to the National Investment Fund, which was set up in 2005 as a corpus of permanent nature to help the government.
The fund helps the government to recapitalise public sector banks and public sector insurance companies to strengthen them and subscribe to shares being issued by the central PSUs on rights basis in order to ensure that majority ownership in these undertakings does not dilute.
According to the Department of Investment and Public Asset Management, this fund is managed by UTI Asset Management Company Ltd., SBI Funds Management Private Ltd. and LIC Mutual Fund Asset Management Company Ltd.
Centre sets ₹1.05 trillion disinvestment target for 2019-20 fiscal year
 
71. Public Sector
The public sector consists of governments and all publicly controlled or publicly funded agencies, enterprises, and other entities that deliver public programs, goods, or services.
So, Public sector refers to:
(i) government-owned organizations, and
(ii) government-provided services
Public sector organizations are formed in three different forms:
Departmental undertakings
Public corporations/statutory corporations
Government company
 
72. Private Sector
Private sector companies are companies which are not run by the government. They are the part of a country’s economic system and is run by individual and companies with the intention to earn the profit. It includes the personal sector (households) and corporate sector (companies), and is responsible for allocating most of the resources within an economy.
The resources of production owned by the private sector are owned in the form of private property. The private sector includes entities such as households and individuals, for-profit enterprises, sole traders, partnerships, corporations, nonprofit-making organizations, charities, and nongovernmental organizations (NGOs). 

73. Exit policy
The term 'exit' is the obverse of the term 'entry' into industry. It refers to the right or ability of an industrial unit to withdraw from or leave an industry or in other words to close down.
The proposal to introduce an exit policy was first mooted in 1991 when it was felt that without labour market flexibility, efficient industrialisation would be difficult to achieve.
The need for such a policy arises as a result of modernisation, technology upgradation,restructuring as well as closure of industrial units. Such a policy will allow employers to shift workers from one unit to another and also retrench excess labour.
The Economic Survey 2015-16 analyses the exit problem with the help of the three I’s:
(i) Interests: The power of vested interests confers greater power on concentrated producer interests in relation to diffused consumer interests. As a result it becomes difficult to phase out schemes and they become instruments of granting favors.
(ii)   Institutions: Weak institutions increase the time and financial costs of exit. For example, with rising non-performing assets, recourse to debt recovery tribunals (DRTs) has increased.
On the other hand, strong but inflexible institutions are unable to make risky decisions when departures from strict principles may be necessary for the economy.
(iii) Ideas/Ideology: The founding ideology of state-led development and socialism makes it difficult to phase out entitlements even as those intended for the poor end up accruing to the relatively better off.
 
74. Environmental Issues
Environmental issues are defined as problems with the planet's systems (air, water, soil, etc.) that have developed as a result of human interference or mistreatment of the planet.
Major environmental Problems are - Global warming; Deforestation; Air and  water pollution; Overpopulation; Soil erosion; Other climate change issues; Destruction of biodiversity; Littering; Destruction of natural habitats; Destruction of natural resources; Attack of marine life; Oil spills;Nuclear issues; Acid deposition; Environmental disasters;Volcanic eruption; Greenhouse effect; Heavy metals; Sea level rise; Burning of fossil fuels; Species extinction; and Soil contamination.
 
75. Global Warming
Global warming is the phenomenon of gradual increase in temperature near the Earth’s surface. This phenomenon has been observed over the past one or two centuries. This change has disturbed the climatic pattern of the earth. However, the concept of global warming is quite controversial. But, the scientists have provided relevant data in support of the fact that the temperature of the Earth is rising constantly.
Global warming is the result of many human activities. These are:
Deforestation: Plants are the main source of oxygen. They take in carbon dioxide and release oxygen thereby maintaining environmental balance. The forests are being depleted for many domestic and commercial purposes. This has led to an environmental imbalance thereby giving rise to global warming.
Use of Vehicles: The use of vehicles even for very short distances results into various gaseous emissions. Vehicles burn fossil fuels which emit a large amount of carbon dioxide and other toxins into the atmosphere resulting in a temperature increase.
Chlorofluorocarbon: With the excessive use of air conditioners and refrigerators, humans have been adding CFCs into the environment which affects the atmospheric ozone layer. The ozone layer protects the earth surface from the harmful ultraviolet rays emitted by the sun. The CFCs has led to ozone layer depletion making way for the ultraviolet rays, thereby increasing the temperature of the earth.
Industrial Development: With the advent of industrialization, the temperature of the earth has been increasing rapidly. The harmful emissions from the factories add to the increasing temperature of the earth.

76. Dedicated Fright Corridor
The Ministry of Railways, under the direction of the Indian Government, has taken up the dedicated freight corridor (DFC) project. The project involves the construction of six freight corridors traversing the entire country. The purpose of the project is to provide a safe and efficient freight transportation system.
Initially, the construction of two freight corridors – the Western DFC connecting the states of Haryana and Maharashtra, and Eastern DFC connecting the states Punjab and West Bengal – is being undertaken. The combined length of the Western and Eastern DFCs will be about 2,800km. The total cost of the project, which is expected to be completed by 2017, is estimated at $10bn.
The other four corridors include North-South (Delhi-Tamil Nadu), East-West (West Bengal-Maharashtra), East-South (West Bengal-Andhra Pradesh) and South-South (Tamil Nadu-Goa). These four corridors are still in the planning stage.
77. Structural Bottleneck
Food processing is any method used to turn fresh foods into food products.
1This can involve one or a combination of various processes including washing, chopping, pasteurising, freezing, fermenting, packaging, cooking and many more. Food processing also includes adding ingredients to food, for example to extend shelf life.
Food processing includes traditional (heat treatment, fermentation, pickling, smoking, drying, curing) and modern methods (pasteurisation, ultra-heat treatment, high pressure processing, or modified atmosphere packaging).
Some of the common methods are :Canning; Fermentation; Freezing; Modified atmosphere packaging; Pasteurisation; Smoking; and Additives.
78. Tax Reform
Tax reform is generally undertaken to improve the efficiency of tax administration and to maximise the economic and social benefits that can be achieved through the tax system. A tax itself can be defined as ‘a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state, or the functional equivalent of a state’. Taxes can include direct taxes and indirect taxes.
The Government appointed a Tax Reforms Committee under Prof Raja Chelliah to lay out agenda for reforming India’s tax system.
This TRC came up with three reports in 1991, 1992 and 1993 with several measures, which can be summarized in these points:
- Reforming the personal taxation system by reducing the marginal tax rates
- Reduction in the corporate tax rates
- Reducing the cost of imported inputs
-  By lowering the customs duties
- Reduction in the number of Customs tariff rates and its rationalization
- Simplifying the excise duties and its integration with a Value Added Tax (VAT) system
- Bringing the services sector in the tax net within a VAT system
- Broadening of the tax base
- Building a tax information and computerization system
- Improving the quality of tax administration system
79. Planning (Directive & Indicative)
Economic planning, the process by which key economic decisions are made or influenced by central governments.
In the words of H. D. Dikinson, “Economic planning is the making of major economic decisions— by the conscious decision of a determinate authority, on the basis of a comprehensive survey of a country’s existing and potential resources and a careful study of the needs of the people.”
The basic objective of planning is to exercise control over the private sector of an economy. Controls are exercised over economic resources which are scarce. When the economic resources of the country are rationally arranged with a predetermined purpose, it is called economic planning.
Indicative planning is a form of national economic planning in which a target is set for the growth of national output over a series of years, usually about five. Quantitative estimates are made of what might happen to particular industries and sectors of the economy (e.g. private consumption, public consumption, investment) if the global expansion is achieved.
Directive / comprehensive planning refers to that planning under which demand and supply forces are directed in such a way that there is stability in the economy. In comprehensive planning, government itself participates in the process of growth and development of an economy.
 
80. Bond
A bond is a debt instrument with which an entity raises money from investors. The bond issuer gets capital while the investors receive fixed income in the form of interest.
Bonds are of following kinds -
1.corporate bonds
Corporate bonds are issued by private and public corporations to raise money for a variety of purposes, like building a new plant, purchasing equipment, or growing the business. Until the date of maturity, the company usually pays a stated rate of interest, generally semi-annually.
2. Government bonds
These bonds are issued by a government to support government spending, most often issued in the country's domestic currency. Government debt is money owed by any level of government. Before investing in government bonds, investors need to assess several risks associated with the country such as: country risk, political risk, inflation risk, and interest rate risk.
3. Zero coupon bonds
Most municipal bonds provide semi-annual interest payments, but zero coupon bonds have no "coupon," or periodic interest payments. The investor receives one payment—at maturity — that is equal to the principal invested plus the interest earned, compounded semi-annually, at a stated yield.
4. Inflation-indexed bonds
Inflation-indexed bonds are openended debt funds designed to protect savings from rising prices (inflation). The objective is to generate capital appreciation and income through investment in inflation-indexed securities. However, there is no assurance that the investment objective will be achieved.
5. Foreign currency convertible bonds (FCCBs)
FCCBs are issued by an Indianlisted company in an overseas market and, hence, in a currency different from that of the issuer. The highlight, however, is the option of converting the bonds into equity at a price determined at the time the bond is issued.
81. Fourth Industrial Revolution
The Fourth Industrial Revolution is a way of describing the blurring of boundaries between the physical, digital, and biological worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing, and other technologies. It’s the collective force behind many products and services that are fast becoming indispensable to modern life.
The fourth industrial revolution is the current  and developing environment in which new technologies are changing the way we live and work.

One of the greatest promises of the Fourth Industrial Revolution is to potential is to improve the quality of life for the world's population and raise income levels.
The First Industrial Revolution started in Britain around 1760. It was powered by a major invention: the steam engine. The steam engine enabled new manufacturing processes, leading to the creation of factories.

The Second Industrial Revolution came roughly one century later and was characterized by mass production in new industries like steel, oil and electricity. The light bulb, telephone and internal combustion engine were some of the key inventions of this era.

The inventions of the semiconductor, personal computer and the internet marked the Third Industrial Revolution starting in the 1960s. This is also referred to as the "Digital Revolution."

The Fourth Industrial Revolution is different from the third for two reasons: the gap between the digital, physical and biological worlds is shrinking, and technology is changing faster than ever.
82. Closed Economy and Open Economy
Closed economy is an economy, which does not have any sort of economic relation with rest of the world but is confined to itself only. A closed economy does not enter into any one of the following activities.
(i) It neither exports goods and services to the foreign countries nor imports goods and services from the foreign countries.
(ii) It neither buys shares, debentures, bonds etc. from foreign countries nor sells shares, debentures, bonds etc. to foreign countries.
(iii) It neither borrows from the foreign countries nor lends to the foreign countries.
(iv) It neither receives gifts from foreigners nor sends gifts to foreigners.
(v) Normal residents of a closed economy cannot go to other countries to work in their domestic territory. No foreigner is allowed to work in the domestic territory of a closed economy.
On the other hand, an open economy is one, which is not only involved in the process of production within its domestic territory but also can participate in production anywhere in the rest of the world. An open economy involves itself in the following activities.
It buys shares, debentures, bonds etc. from foreign countries and sells shares, debentures, bonds etc. to foreign countries.
It borrows from foreign countries and lends to foreign countries.
It can send gifts and remittances to foreigners and can receive the same from them.
Normal residents of an open economy can move or be employed and are allowed to work in the domestic territory of other economies.
83. NBFCs
Non-Banking Financial Companies (NBFC) are establishments that provide financial services and banking facilities without meeting the legal definition of a Bank. They are covered under the Banking regulations laid down by the Reserve Bank of India and provide banking services like loans, credit facilities, TFCs, retirement planning, investing and stocking in money market. However they are restricted from taking any form of deposits from the general public. These organizations play a crucial role in the economy. NBFC is registered under the Companies Act.
There are a huge number of NBFCs operating in our country but here’s a look at the current top 10 NBFCs in India.
For example, Finance Corporation Limited was founded in 1986 and is a Navratna Status company; Shriram Transport Finance Company Limited focuses on funding commercial and business vehicles, besides others; Mahindra & Mahindra Financial Services Limited; Muthoot Finance Ltd; HDB Finance Services;  Tata Capital Financial Services Ltd; Cholamandalam, etc.



84. Make in India


Prime Minister Narendra Modi launched “Make in India” initiative on 25th September 2014 in New Delhi. The launch was at both national level, state level and in Missions abroad. The ‘Make in India’ initiative is based on call to ‘Make in India’ and ‘Zero Defect; Zero Effect’ policy. 
The Government has identified 25 key sectors in which our country has the potential of becoming a world leader.
Sectors covered include automobiles, chemicals, IT, pharmaceuticals, textiles, ports, aviation, leather, tourism and hospitality, wellness, railways among others will provide details of growth drivers, investment opportunities, sector specific FDI and other policies and related agencies.

Highlights
(i) The campaign targets top companies across sectors in identified countries. It will also identify select domestic companies having leadership in innovation and new technology for turning them into global champions.
(ii) Business entities will be extended a red carpet welcome. The "Invest India" unit in the Commerce Ministry will act as the first reference point for guiding foreign investors on all aspects of regulatory and policy issues and to assist them in obtaining regulatory clearances.
(iii) The government is also closely looking into all regulatory processes with a view to making them simple and reducing the burden of compliance on investors.
(iv) A dedicated cell has been created to answer queries from business entities through a newly created web portal.
 (iv) The back-end support team of the cell would be answering specific queries within 72 hours.
(v) The campaign is aimed to transform the economy from the services-driven growth model to labour-intensive manufacturing-driven growth. This will help in creating jobs for over 10 million people, who join the workforce every year.
(vi) It aims to attract foreign companies to set up factories in India and invest in the country's infrastructure. The new government has liberalised defense manufacturing and insurance sectors to attract FDI, but analysts say the government needs to do much more to attract foreign capital.
85. Technology Park
Technology parks are models to capitalize on knowledge in national and regional development, are effective instruments in the transfer of technology, creation and attraction of companies with high added value. In order to accommodate small and medium-sized enterprises developed technologies and promote innovation and technological development by SMEs, the secretariats of economy of States in coordination with the private agencies, civil associations, the technology parks program was created.
Software Technology Parks of India (STPI) was set up in 1991 as an autonomous society under the Ministry of Electronics and Information Technology (MeitY). STPI’s main objective has been the promotion of software exports from the country. STPI has been implementing the Software Technology Park (STP) scheme and the Electronics Hardware Technology Park (EHTP) scheme for the promotion of IT/ITES industry.
86. Food Park
Food Parks provide high quality food processing infrastructure near the farms. Food Park is a concept that aims at establishing the direct linkages from the farm to processing to consumer markets. It comprises Collection Centres (CCs) and Primary Processing Centres (PPCs) linked to a Central Processing Centre.
Mega Food Parks Scheme launched by the government in 2008 provides financial assistance upto 50 crores to setup modern infrastructure facilities for food processing called Mega Food Parks. It establishes a mechanism to bring together farmers, processors and retailers and link agriculture production to the market so as to ensure maximization of value addition, minimization of wastage and improving farmers’ income.
The primary objective of the Scheme is to provide modern infrastructure facilities for the food processing along the value chain from the farm to the market with a cluster based approach based on a hub and spokes model.  It includes the creation of infrastructure for primary processing and storage near the farm in the form of Primary Processing Centres (PPCs) and Collection Centres (CCs) and common facilities and enabling infrastructure like roads, electricity, water, ETP facilities etc. at Central Processing Centre (CPC). These PPCs and CCs act as aggregation and storage points to feed raw material to the food processing units located in the CPC. 
87. AEZs
With the primary objective of boosting agricultural exports from India, in March 2001, Government of India announced a policy of setting up of Agri Export Zones (AEZs) across the country. The Central Government has sanctioned 60 AEZs comprising about 40 agricultural commodities .AEZs is spread across 20 states in the country.
Objectives :
The objective of setting up AEZs is to converge the efforts made, hitherto, by various central and state government departments for increasing exports of agricultural commodities from India. The AEZ takes a comprehensive view of a particular produce/ product located in a geographically contiguous area for the purpose of developing and sourcing raw materials, their processing/packaging, and leading to final exports.
The major components of this comprehensive concept are :
Cluster approach of identifying the potential products and geographical region in which these products are grown.
Adopting an end-to-end approach of integrating the entire process, right from the stage of production till it reaches the consumption stage.
Integration of the activities of various agencies connected with the department of the product.
88. Foreign Trade Policy
The Foreign Trade Policy (FTP) was introduced by the Government to grow the Indian export of goods and services, generating employment and increasing value addition in the country. The Government, through the implementation of the policy, seeks to develop the manufacturing and service sectors
The Government, through the policy, primarily focuses on adopting a twin strategy of promoting traditional and sunrise sectors of exports including services. Further, it intends to simplify the process of doing business.
Objectives are –
- To facilitate sustained growth in exports from India and import in India.
- To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods scheme required for augmenting production and providing services.
89. External Commercial Borrowings (ECBs)
ECB is basically a loan availed by an Indian entity from a nonresident lender. Most of these loans are provided by foreign commercial banks and other institutions. It is a loan availed of from non-resident lenders with a minimum average maturity of 3 years.
The significance of ECBs their size in India’s balance of payment account. In the post reform period, ECBs have emerged a major form of foreign capital like FDI and FII.
Advantages of ECBs 
- ECBs provide opportunity to borrow large volume of funds
- The funds are available for relatively long term
- Interest rate are also lower compared to domestic funds
- ECBs are in the form of foreign currencies. Hence, they enable the corporate to have foreign currency to meet the import of machineries etc.
- Corporate can raise ECBs from internationally recognised sources such as banks, export credit agencies, international capital markets etc.
90. Regional Trading agreements (RTAs)
Regional trade agreements (RTAs) are treaties among two or more governments that agree to offer more favorable treatment to trade between themselves than they do to goods imported from outside the region.
This preferential treatment usually takes the form of the removal or reduction of tariffs on imports from regional partners, thereby creating a free trade area. RTAs are typically classified in a hierarchy that ranges from this most basic form, the free trade area, to customs union, to common market,and ultimately to economic union. 
A customs union goes beyond the removal of internal tariffs that occurs within a free trade area to specify common tariffs that all member states impose on imports from outside the region.
Common markets are customs unions that also remove barriers to the flow of factors—capital and labor—within the region. Finally, economic unions are common markets that also adopt a common currency.
Examples of regional trade agreements include the North American Free Trade Agreement (NAFTA), Central American-Dominican Republic Free Trade Agreement (CAFTA-DR), the European Union (EU) and Asia-Pacific Economic Cooperation (APEC).
WTO members agreed in 2006 to implement a provisional mechanism to enhance the transparency of RTAs and understand their effects on the multilateral system. 
91. WTO Agriculture Agreement
The WTO Agriculture Agreement provides a framework for the long-term reform of agricultural trade and domestic policies, with the aim of leading to fairer competition and a less distorted sector.
The Agreement covers:
(i) Market access — the use of trade restrictions, such as tariffs on imports
Under the reform programme, members have converted their non-tariff measures to equivalent bound tariffs. Some additional market access is provided through tariff rate quotas, and the tariffs are being reduced. Contingency protection is provided through special safeguards, and transparency works through notifications.
(ii) Domestic support — the use of subsidies and other support programmes that directly stimulate production and distort trade
The present rules and commitments on agriculture are often called the “Uruguay Round reform programme” — they were negotiated in the Uruguay Round and they include reductions in subsidies and protection as well as other disciplines on the trade.
(iii) Export competition — the use of export subsidies and other government support programmes that subsidize exports.
The core of the reform programme on export subsidies are the commitments to reduce subsidized export quantities, and the amount of money spent subsidizing exports. The Agriculture Agreement also looks at anti-circumvention questions.
92. Purchasing power parity (PPP) 
Purchasing power parity (PPP) is an economic theory that compares different countries' currencies through a "basket of goods" approach. According to this concept, two currencies are in equilibrium or at par when a basket of goods (taking into account the exchange rate) is priced the same in both countries. Purchasing power parity (PPP) is used worldwide to compare the income levels in different countries. PPP thus makes it easy to understand and interpret the data of each country.

We usually use market exchange rate to compare GDP of two economies. Using market exchange rates creates two main difficulties: Firstly, market exchange rates can quickly change, which artificially changes the value of the variable in question, such as GDP. Secondly, market exchange rates are determined by demand and supply of currencies, which reflect changes in imports and exports of traded goods and services. However, not all countries trade the same proportion of their income and output, so currency values are not determined on a consistent basis.
When making comparisons between countries which use different currencies it is necessary to convert values, such as national income (GDP), to a common currency. Let's say that a pair of shoes costs Rs 2500 in India. Then it should cost $50 in America when the exchange rate is 50 between the dollar and the rupee.
Every three years, the World Bank constructs and releases a report comparing various countries in terms of PPP and U.S. dollars. Both the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) use weights based on PPP metrics to make predictions and recommend economic policy.
Example -
Suppose the market exchange rate between Dollar and Rupee is 60. One Dollar in the US will buy one liter of milk there. Corresponding money in terms of Rupee i.e., Rs 60 can buy three liters of milk in India.
Suppose, India’s GDP is Rs 600. This will become $10 in market exchange rate terms. If milk is the only commodity produced in the world (imagine it for simplicity sake), one will think that India is producing 10 liters of milk, if we use the market exchange rate.
But in reality, India produces 30 liters of milk. This higher volume of production in India is not expressed if we use the market exchange rate to measure GDP.
To overcome this defect and to accurately measure the GDP, we can use the Purchasing Power Parity exchange rate.
Under PPP, we measure the GDP of India by measuring how much milk that Rupees 60 can purchase in India and One Dollar can purchase in the US.
Here, one dollar in the US can purchase one liter of milk whereas Rs 20 can purchase one liter of milk in India.
 $ 1    =        Rs 20
This is the purchasing power parity exchange rate we obtained. Using this exchange rate we can calculate that India’s GDP of Rs 600 will become $30.  
In this way, in terms of PPP, India’s GDP is $30 in contrast to the $10 we estimated by using market exchange rate.
Thus, the PPP exchange rates help to minimize misleading international comparisons that can arise with the use of market exchange rates.
93. Unit Trust of India (UTI)
Unit Trust of India (UTI) was established in 1964 by an Act of Parliament under the Unit Trust of India Act, 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management.

Objectives of the UTI 
(i) To encourage and pool the savings of the middle and low income groups.
(ii) To enable them to share the benefits and prosperity of the industrial development in the country.
Functions of UTI
(i) To accept discount, purchase or sell bills of exchange, promissory note, bill of lading, warehouse receipt, documents of title to goods etc.,
(ii) To grant loans and advances.
(iii) To provide merchant banking and investment advisory service.
(iv) To provide leasing and hire purchase business.
(v) To extend portfolio management service to persons residing outside India.
(vi) To buy or sell or deal in foreign exchange dealings.
(vii) To formulate unit scheme or insurance plan in association with or as agent of GIC.
(viii) To invest in any security floated by the Central Government, RBI or foreign bank.
94. Global Financial Crisis 2007
A worldwide period of economic difficulty experienced by markets and consumers. A global financial crisis is a difficult business environment to succeed in since potential consumers tend to reduce their purchases of goods and services until the economic situation improves.
The global economic crisis started in summer 2007, though the full impact was not felt till the bankruptcy of the investment bank, Lehmann Brothers in September 2008. The next couple of years witnessed heavy job losses and contraction in the GDP (Gross Domestic Product) of many countries in the West as well as in the developing world.
The global economic crisis was caused by the coming together of several structural as well as business cycle factors that conspired to produce a “perfect storm” of epic proportions. These factors ranged from the collapse of the housing market in the United States, imbalances between the West and the East in terms of trade deficits, reckless and risky speculation and finally, the sovereign debt crisis that was a culmination of years of fiscal profligacy and loose monetary policies.&a

Monday, 05th Aug 2019, 05:29:17 PM

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