Indian Economy Quiz: Revision |21 Feb, 2021

Economic development in the sense of rise in real GNP and per capita real income is by itself of not much significance in India unless we remove unemployment and underemployment also.

The employment strategy of planned development will have to be directed

· To adopt an employment intensive sectoral planning

· To regulate technological change to protect and enhance employment.

· To promote area planning for full employment.

The focus should be to expand employment through labour absorbing technologies.

The expansion of infrastructural and social services i.e., road construction, rural electrification, water supply, rural schools and community health schemes besides irrigation and housing programmes will help to generate massive employment opportunities.

Source: TMH Ramesh Singh

National Income refers to the money value of all the goods and services produced in a country during a financial year.

In other words, the final outcome of all the economic activities of the nation during a period of one year, valued in terms of money is called as a National income.

Source: TMH Ramesh Singh

There are two main set of inflation indices for measuring price level changes in India – the Wholesale Price Index (WPI) and the Consumer Price Index (CPI).

· The WPI, where prices are quoted from wholesalers, is constructed by Office of Economic Affairs, Ministry of Commerce and Industries.

· In the case of CPI (prices quoted from retailers), there are several indices to measure it: CPI for industrial laborer’s (CPI-IL), agricultural laborer’s (CPI-AL) and rural laborer’s (CPI-RL) besides an all India CPI.

· In addition, Gross Domestic Product (GDP) deflator and Private Final Consumption Expenditure (PFCE) deflator from the National Accounts Statistics (NAS) provide an implicit economy-wide inflation estimate.

Source: TMH Ramesh Singh

The governments resort to the following options to check rising inflation:

· As a supply side measure, the government may go for import of goods which are in short-supply. As a long-term measure, governments go on to increase the production to matching the level of demand. Storage, transportation, distribution, hoarding are the other aspects of price management of this category.

· As a cost side measure, governments may try to cool down the price by cutting down the production cost of goods showing price rise with the help of tax breaks—cuts in the excise and custom duties.

· The governments may take recourse to tighter monetary policy to cool down either the demand-pull or the cost-push inflations. This is basically intended to cut down the money supply in the economy by siphoning out the extra money.

Source: TMH Ramesh Singh

The organized form of money market in India is just close to three decades old. However, its presence has been there, but restricted to the government only.

It was the Chakravarthy Committee (1985) which, for the first time, underlined the need of an organized money market in the country and the Vahul Committee (1987) laid the blue print for its development.

Source: TMH Ramesh Singh

After successful experimentation in the partial nationalizations the government decided to go for complete nationalization.

· With the help of the Banking Nationalization Act, 1969, the government nationalized a total number of 20 private banks:

· 14 banks with deposits were more than Rs. 50 crores of nationalized in July 1969, and

· 6 banks with deposits were more than Rs. 200 crores of nationalized in April 1980.

· After the merger of the loss-making New Bank of India with the Punjab National Bank (PNB) in September 1993, the total number of nationalized banks came down to 19.

· Today, there are 27 public sector banks in India out of which 19 are nationalized (though none of the so-called nationalized banks have 100 per cent ownership of the Government of India).

Source: TMH Ramesh Singh

Monetary transmission is the pass-through of the RBI’s rate actions to the economy at large.

· As you know, the RBI’s most important task is to keep tabs on inflation by adjusting money supply.

· It also monitors the exchange rate. To control all this, the RBI uses many monetary tools.

· The repo rate, reverse repo rate and cash reserve requirement are being the key instruments.

· Let us take the repo rate, for instance. This is the rate at which the RBI lends short-term funds to banks to manage their day-to-day operations.

· When the RBI wants to stimulate growth, it cuts the repo rate to reduce the cost of borrowings.

· Banks get money at a cheaper rate. If this is passed on to borrowers, then monetary transmission is said to have happened smoothly.

Source: The Hindu

All Indian banks have to follow the compulsory target of priority sector lending (PSL).

The priority sector in India is at present the sectors-agriculture, small and medium enterprises (SMEs), road and water transport, retail trade, small business, small housing loans (not more than Rs. 10lakhs), software industries, self-help groups (SHGs), agro-processing, small and marginal

farmers, artisans, distressed urban poor and indebted non-institutional debtors besides the SCs, STs and other weaker sections of society.

The PSL target must be met by the banks operating in India in the following way:

· Indian Banks need to lend 40 per cent to the priority sector every year (public sector as well as private sector banks, both) of their total lending.

· Foreign Banks (having less than 20 branches) have to fulfill only 32 per cent PSL target which has sub-targets for the exports (12 per cent) and small and medium enterprises (10 per cent).

Source: TMH Ramesh Singh

The Service Area Approach (SAA) introduced in April 1989 for planned and orderly development of rural and semi-urban areas was applicable to all scheduled commercial banks including Regional Rural Banks.

· Under SAA, each bank branch in rural and semi-urban area was designated to serve an area of 15 to 25 villages and the branch was responsible for meeting the needs of bank credit of its service area.

· The primary objective of SAA was to increase productive lending and forge effective linkages between bank credit, production, productivity and increase in income levels.

· The SAA scheme was reviewed from time to time and appropriate changes were made in the scheme to make it more effective.

Source: TMH Ramesh Singh

Indian Accounting Standard (abbreviated as Ind-AS) is the Accounting standard adopted by companies in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977.

Presently, the Institute of Chartered Accountants of India (ICAI) has issued 39 Indian Accounting Standards (Ind AS) which have been notified under the Companies (Indian Accounting Standards) Rules, 2015 (‘Ind AS Rules’), of the Companies Act, 2013.

Source: The Hindu