NIA

GDP- monetary value of all final goods and services produced in domestic territory in 1 fin yr
Production method:
𝐺𝑉𝐴𝐵𝑎𝑠𝑖𝑐 𝑃𝑟𝑖𝑐𝑒𝑠 = 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐺𝑟𝑜𝑠𝑠 𝑂𝑢𝑡𝑝𝑢𝑡 − 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐼𝐺
Income method:
𝐺𝑉𝐴𝐵𝑎𝑠𝑖𝑐 𝑃𝑟𝑖𝑐𝑒𝑠 = 𝐶𝑂𝐸 + 𝑂𝑆 + 𝑀𝐼𝑆𝐸 + 𝑑𝑒𝑝𝑛 𝑜𝑓 𝑓𝑖𝑥𝑒𝑑 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 + (𝑃𝑟𝑜𝑑𝑛 𝑡𝑎𝑥 − 𝑠𝑢𝑏𝑠𝑖𝑑𝑦)
Expenditure method:
𝐺𝐷𝑃𝑀𝑃 = 𝐶 + 𝐼 + 𝐺 + 𝑁𝑋

𝐺𝐷𝑃𝑀𝑃 = 𝐶𝑂𝐸 + 𝑂𝑆 + 𝑀𝐼𝑆𝐸 + 𝑑𝑒𝑝 + (𝑃𝑟𝑜𝑑𝑛 𝑇𝑎𝑥 − 𝑠𝑢𝑏𝑠) + (𝑃𝑟𝑜𝑑 𝑡𝑎𝑥 − 𝑠𝑢𝑏𝑠)
𝐺𝐷𝑃𝑀𝑃 = 𝐺𝐷𝑃𝐹𝐶 + 𝑑𝑒𝑝 + (𝑃𝑟𝑜𝑑𝑛 𝑇𝑎𝑥 − 𝑠𝑢𝑏𝑠) + (𝑃𝑟𝑜𝑑 𝑡𝑎𝑥 − 𝑠𝑢𝑏𝑠)
𝐺𝐷𝑃𝑀𝑃 = 𝐺𝐷𝑃𝐵𝑎𝑠𝑖𝑐 𝑃𝑟𝑖𝑐𝑒𝑠 + (𝑃𝑟𝑜𝑑 𝑡𝑎𝑥 − 𝑠𝑢𝑏𝑠)

Prodn tax: related to prodn but indep. of volm. e.g. land revenue, stamp duty
Product subsidy: dep on per unit actual value of output e.g. GST

Changes since 2015:

a. From GDP-FC to GDP-MC
b. Production tax/ subs included
c. Base year from 2004-5 to 2011-2

NP= DP+ NFIA (India’s NFIA is -ve i.e. GNP< GDP)

Net= Gross- dep. of fixed capital

Gross Capital Formation= GFCF+ New Acquisition of Valuable Metals+ stock

GFCF ’13-14 ’14-15 ’15-16 ’16-17 ’17-18 ’18-19 ’19-20 ’20-21
31.3 30.1 28.5 28.5 28.5 29.3 27.0 24.2

GDP ’13-14 ’14-15 ’15-16 ’16-17 ’17-18 ’18-19 ’19-20 ’20-21

6.6 7.2 8.2 7.0 6.5 6.8 4.2 -7.7

NER P of burger in US
REER = = x NER
PPP x ER P of burger in India
RER>1  India exports
RER=1  No EX/ IM
RER<1  India imports

REER (R Effective ER)= weighted average (wrt trade value) of RERs of trade partners
NEER
REER and NEER trends:
a. Dec ’17- Oct ’18: ₹ depreciates
b. Oct ’18- Jan ’19: ₹ appreciates

Green GDP: Partha Dasgupta Committee; old concept (2009); yet to be done

WB classification: GNI/ capita:

a. High (> USD12535)
 b. Middle- Upper (USD 4045-12535)
c. Middle – Lower (USD 1036-4045)
d. Low (< USD 1036)

IMF (World Economic Outlook): based on per capita income (PPP), EX Classification, degree
of integration with global fin system: Advanced economies and Emerging mkt+ devpg
economies

5 recessions:
‘57-8 -1.2% Drought
 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 %𝐼 𝑖𝑛 𝐺𝐷𝑃
‘65-6 -3.66% Drought+ war 𝐼𝐶𝑂𝑅 = = ; lower is better
 𝑂𝑢𝑡𝑝𝑢𝑡 % 𝐺𝐷𝑃
‘72-3 -0.32% Drought/ oil crisis
‘79-80 -5.2% Drought/ pol instab
‘20-1 -7.7% COVID

Balance of Payments
Reflects the economic transactions between an economy and row.
Current Net X of goods
Account Net invisibles Net X of services
Net investment income Rent, interest, profits
Net CoE wages
Net transfers
Capital Net external assistance
account Net external commercial
borrowings
Net NRI deposits
Net foreign investments FDI
FPI
Forex FCA
reserves Gold
SDRs
RTP/ Gold TP
Net investment income+ net COE= NFIA
Full capital account convertibility= when domestic currency can be converted to foreign
currency at market ER for capital account convertibility.
India—does NOT have capital account convertibility; India has current account convertibility
Trade deficit; Current account deficit; BoP deficit
Currency devaluation and revaluation/ depn and appreciation
Money and Banking
Money supply= amount of money with public
Money  currency+ DD
Public  any entity except govt or bank

Instruments of monetary policy

1. CRR, SLR
2. RR, RRR, MSF, OMO
LAF (Liquidity Adjustment Facility)- overnight borrowing

Monetary Policy Transmission

a. BPLR Benchmark Prime Lending Rate- lowest rate at which banks can lend, even to
prime borrowers; introduced in 2004-5
b. Base Year: similar to BPLR; Based on short term cost of funds
c. MCLR Marginal Cost of Funds based on lending Rates (2016)- dep on repo rates
d. EBR External Benchmark Rate: banks can choose between: RR, Certificate of Deposit
rate, T-Bills rate
Public
Money Market- short term loan’s market; Tools: CoD Comm. Papers
a. Repo Bank Corporate
b. T-Bills Call Money Comm. Bills
c. Certificate of Deposits: Banks take loan from public
d. Commercial Papers: corporates take loan from public Bank Corporate
e. Commercial Bills: between corporates
f. Call Money: between banks

Banking Sector:
1969: Nationalisation of Banks

PSL introd+ Lead Bank Sch (1969) + Service Area Approach
25 PSBs+ 1 pvt sector bank = Lead Bank in all 706 distts.

Post ’91 Banking Reforms

a. CRR, SLR
b. Liberalising interest rate
c. Pvt+ foreign banks allowed
d. CAR Capital Adequacy Ratio
e. NPA Resoln: SARFESI Act+ IBC+ Bad banks
f. Public Sector Banks reforms: capitalization, gov.ce reforms, BBB (Bank Board Bureau)
g. Fin. Incl.: Jan Dhan+ Payment Banks

Seigniorage: profit from money creation ( gov rev without  conventional taxes). It has 3
was of accruing:
a. While issuing currency, RBI reserves give interest income on CiC (-) cost of printing
b. CRR
c. Inflation tax
G-sec
a. Tradable; issued by GoI/ GoSs
b. Risk free gilt edged
c. Issued through auctions by RBI on e- platform (called e-kuber), the CBS (Core
Banking Soln) platform;
Participants= comm. Banks, UCBs, PDs Primary Dealers, Insurance Co.s, FPIs and
Indiv (retail investors)
d. G-sec mkt (Prim mkt) is regulated+ managed by RBI
 Types of G-secs
Money Market Capital Market
T-Bills Cash Managt Bills Dated Securities State Devpt Loans
Short term, Short term Tenor= 1 to 40 yrs Maturity> 1yr
Debt instr. Debt instrument Categories: Issued by state
Issued by GoI To meet a) Fixed rate bond (r fixed till maturity) Qualify as SLR
Maturity < 1 yr temporary b) Floating r bond (r linked to T-Bill)
Zero coupon mismatches in c) Infl Indexed bonds (P+I protected ag. infl linked
secs (issued at cash flows to GoI with CPI, WPI)
discount) Intro in 2010 d) Spl. Secs: to PSUs, as compensation in lieu of
In money Like T-Bills but cash subsidies
market Maturity <91 e) Bank recap.sn bond: to specific PSBs in 2018
days f) Sov Au Bond (SGB): P linked to Au; budgeted in
lieu of mkt borrowing

Minted/ Printed by Issued by Signature

Coins, ₹1 note, subsidiary coin GoI RBI Fin Secy
 Others RBI RBI RBI Gov

All bank notes (except ₹1 note) issued by RBI are backed by assets such as Au, G-secs and
FCA as defd in Section 33 of RBI Act, 1934

Monetary Base= Total Liability of RBI

CiC= Currency with public+ currency with banks
M1= Currency with Public+ DD of public with public
M2= M1+ Savings Deposit with Post Office Savings Bank
M3= M1+ Time Deposits of public with banks
M4= M3+ Total Deposits with Public Office Savings Bank

M3= most common; aka aggregate monetary resource

M1, M2= narrow; M3, M4= broad
Cash reserves of RBI, GoI and Bank are not part of the money supply.

Currency held by public

Currency Deposit Ratio cdr = Deposits of public in bank;
Bank reserves
Reserve Deposit Ratio rdr = ; RDR= 22% (4%with RBI; 18% SLR)
Deposits of public in India

“Monetary Policy Framework”- signed between GoI and RBI in 2015

a. Objective: price stability (keeping growth in mind)
b. Inflation target= 4+2% for {5 Aug ’16 to 31 Mar ’21)
c. Op.d by RBI; RBI= fail if inflation target failed for 3 consecutive Qs report to GoI
d. Inflation target decided by GoI every 5 year(in consultation with RBI) (as per RBI
Act 1934). Target= CPI-C by MoSPI (NSO)

Sept 2016 Monetary Policy Committee

a. Determines Policy (Repo) Rate NOT CRR, SLR
b. 6 members= 3 RBI+ 3 by GoI  casting vote with RBI governor (majority= 50%)
c. Decision binding on RBI

Tools
a. Repo Rates: fixed rates; overnight liquidity up to 0.25% of NDTL ag collateral of govt+
other secs under LAF
b. RRR= RR-0.65%
c. LAF
i. Intro in 2010
ii. Incl RR, RRR
iii. Consists of overnight awa term repo auctions. Progressively, RBI increased
proportion of liquidity injected under fine-tuning variable rate repo auctions
of range of tenors.
iv. The aim of term repo is to help develop inter-bank term money mkt, which in
turn can set mkt-based benchmarks for pricing of loans and deposits, and
hence improve transmission of monetary policy
v. RBI also conducts variable interest rate reverse repo auction, as necessitated
under the mkt condns.
 vi. LTRO: RBI lends up to 0.75% of NDTL in banking system but rate is decided by
auction. Rate is ALWAYS > repo rate. Some G-sec collateral wld be reqd.
vii. Variable LT Reverse repo auction: similar; rate< repo
d. MSF: Introduced in 2011; SCBs borrow overnight money above repo rate amt by
dipping into their SLR portfolio up to a limit at a penal rate of interest.
MSF= RR+ 0.25%
e. Corridor
f. Bank Rate:
i. Std rate at which RBI is prepared to buy debt instrument
ii. Discontinued by RBI on the intro of LAF
iii. Now aligned to MSF and used to calc the penalty for default on CRR, SLR
g. Reserve requirements (Fractional Reserve Banking)
i. CRR- no ceiling/ floor
ii. SLR: incl. excess CRR; Max.= 40%
Who SLR CRR
governs Sch Bank Banking Regn ‘49 RBI Act ‘34
what Non-sch banks Banking Regn ‘49 Banking Regn ‘49
h. OMO- on e-Kuber platform
i. MSS Market Stabilisation Scheme/ Sterilisation- done
Condns for Sch banks:
a. Be a corporation
b. > ₹500 cr paid up capital
Sch Bank Non-Sch Bank
More op.s allowed Ltd op.s allowed—e.g. Forex dealing not allowed
Maintain reserve reqt with RBI Maintain reserve reqt but not necessarily in RBI,
as per RBI Act as per Banking Regn Act ‘49

Single State UCBs Multi-State UCBs

Regd under State Gov Coop Societies Act Regd under MSCS Act 2002
Regulated by Registrar of coop.ve of Regulated by Central Registrar of
societies of the state Coop.ve Societies
Same: - come under RBI supervision
Since Banking Regn (Amendt) 1966 cooperative societies were subjected to banking laws.
Since then, there is a “DUALITY OF CONTROL” (State/ Central registrar of CS and RBI):
RBI Regulates+ Banking fns+ of UCBs, StCBs, through BR Act ‘49
supervises amalgamation+ DCCB
liquidation
GoI/ GoS Non-banking aspects (regn, managt, etc.)
In public interest, RBI can supersede Board of Directors of UCBs/ StCB/ DCCBs
PACs+ long-term credit coops (SCARDB, PCARDB) = outside BRA ’49  not regulated by RBI
NABARD conducts voluntary inspection of SCARDB, apex-level C. societies and federations

Recent changes in UCBs

a. Normal co.s/ banks: Board of Directors= rep of shareholders (not shareholders)
Coop.ve banks: BoD= selected from shareholders  lack professionalism (--frauds)
b. MALEGAM COMMITTEE 2011: suggested Bo Managt in addn to BoD
c. RBI guidelines (31.12.19): UCB’s deposit size > 100 cr
i. Then BoM to be constant report to BoD; oversight fn; assist BoD
ii. Permission for expansion of area of op/ branches
iii. RBI approval for CEO appt
iv. BoD—still apex-policy body

Banking Regulation (Amendt) Act 2020

a. With RBI approval, coop.ve banks can issue shares, bonds, oth security with > 10 yr
maturity – by public placement or private placement
b. No moratorium reqd by RBI
c. RBI can supersede managt of UCB, StCB, DCCB, (earlier, only UCB)

All India Financial Instns (AIPIs)/ Development Financial Instns (DFIs)

1. NABARD National Bank for Agri+ Rural Devpt
a. Estd 1982; statutory
b. Credit to agri, small scale industries, cottage+ village industries, craft, rural allied
activities
c. Coord+ supervise rural credit instn like RRB, RCB RBI delegated supervisory
power of rural sector to NABARD but retained regulatory power
d. Assist RBI+ GoI, etc
 e. Train banks, cooperatives, etc.
f. DOES NOT extend credit at indiv level
BUT extend indirect financial assistance by re-finance
2. NHB National Housing Bank
a. Estd 1988; statutory
b. Promote housing financial instn—local+ regional
+ fin+ other support to such instn
c. DOES NOT extend credit at indiv level
BUT extend indirect financial assistance by re-finance
3. EXIM Bank Export-Import Bank
a. Estd 1982; statutory
b. Direct awa indirect Fin. Assistance to exporter and importer…….
Loans to Oversee devpt banks By bank itself/ To enable EX from India
Regional devpt banks; order by GoI
Sov govts, etc.
4. SIDBI Small Industries Development Bank of India
a. Estd. in 1990; statutory
b. Principal fin instn (by refinance) to fin instn for ONWARD lending to MSMEs
c. Direct lending+ indirect lending+ Fund-of-Funds_+ facilitate+ promotion
5. MUDRA Banks Micro-units Devpt and Re-finance Agency Ltd.
a. A fin instn set up by GoI
b. For devpt+ refinancing of Micro Unit enterprise
SHISHU < ₹ 50k c. Pending enactment of an Act, a NBFC MUDRA ltd. has been set up as
subsidiary of SIDBI
KISHOR ₹50k-5L
d. Objective: funding to NON-CORPORATE (INFORMAL SECTOR) small business
TARUN ₹5L- ₹10L
sector with fin reqt < ₹10L
e. Refinancing all last mile financiers e.g. NBFC, MFI, Soc.es, Trust, Co.s, Coop Soc

NBFCs
a. Reqd under Co.s Act 1956/’13
b. Not include instn whose primary business is:
i. Agri activity
ii. Industrial actions
iii. Goods purchase/ sale
iv. Service providing
v. Sale/ purchase/ construction of immovable property
c. RBI Act ’36  regn certificate from RBI
- Exception (to prevent dual regulations)
i. Venture Capital Fund : SEBI
ii. Marchant Banking Co. : SEBI
iii. Stock Broking Co. :SEBI
iv. Insurance Co. :IRDA
v. Nidhi Co. : Co.s Act (MCA)
vi. Chit Co. : Chit Funds Act ’82 (GoSs)
d. MFI= kind of NBFC but limit on amount of credit
(rural= ₹1.25L; urban/ semi-urban= ₹2L)
e. P2P (Peer-to-Peer Lender)—new class of NBFCs aka Social Lending/ Crowd Lending
 i. Pairs borrowers and indiv investors to agreed r
ii. RBI guidelines ‘17
- Fund transfer thro’ escrow account op by NBFC-P2P
- NO CASH- only through banks
- Net owned fund > ₹2 crore
- Can’t lend on its own; can’t raise deposits
- Exposure of single lender to same borrower must not be >₹50k
- NBFC-P2P shall
 Act as intermed.; not raise deposit/ lend on own
 Not provide credit guarantee
 Not facilitate secured lending
 Do due diligence on participants—credit asst, risk profiling, etc.
 Render recovery services on loans orig on its platform
- NBFC-P2P shall disclose ________ except the personal details
- Maintain leverage ratio= 2

Primary Dealers PDs

a. Regd with RBI
b. Purchase/ sell G-secs directly from Govt (RBI)
c. Till 30.06.15: 7 standalone PDs+ 13 banks to do PD business depttly
d. Then buy/ sell in secondary mkt
RBI -------PD------- Secondary Mkt

Credit Info Co. CIC

Payt Banks
Reserve Bank of India
RBI set up on recommendation of Hilton Young Commn

RBI- power over commercial banks

- A license is reqd from RBI to commence banking operations, opening of new bank
branches and closing of branches or  in location of existing branches
- RBI regulates merger, amalgamation, winding up of banks
- NOW, NO APPROVAL reqd for shifting, merger and closure of urban branches
- RBI issues various guidelines for director of banks and can also appt addnal directors
on the board of a banking company
- Commercial Banks (except PSBs) need prior approval of RBI for appt/ re-appt/
termination of chair, whole-time director, MD, CEO
- RBI (with GoI consultation) can supersede Board of Directors
- PSBs are under the direct regulation of GoI and RBI
- DICGC: RBI set up 100% subsidiary DICGC (Deposit Insurance and Credit Guarantee
Corp) to protect small depositors in case of bank failures (up to 5L)- in news IE Expld

RBI- power over cooperative banks: Under dual control of RBI (banking fns)+ GoI/GoS
(managt related fns)

Other instns under RBI regns:

a. The 4 All India Fin.l Instns: NABARD, NHB, EXIM Bank, SIDBI
 b. Primary Dealers
c. CICs
d. NBFCs:
i. Till July 2019: RBI had powers to supersede Board of Banks only (for
mismanagement/ default) and not NBFCs
ii. July 2019: RBI Act 2019 amended RBI can supersede Board of NBFCs in
public intent
Thus, RBI now regulated both

RBI’s management of Forex

a. Forex= FCA+ SDRs+ Au+ RTP
b. RBI Act permits forex to be invested in the following:
i. Deposits with BIS+ other central banks
ii. Deposits with foreign commercial banks
iii. Debt instrument rep.g sov/ sov guaranteed liability
iv. Other instrument approved by Central board of RBI
c. Basic parameters of RBI’s forex policy  Safety, Liquidity, Returns

Some other Functions

a. Banker to GoI+ GoS
b. Advises govt
c. Portfolio managt of portfolio
d. Appoint other banks to act as its agents for undertaking banking business on behalf
of govts
e. Maintain CFI, Contingeny FI, Public Account, etc.
f. Provides WMA
i. Temporary loan facility to GoI/ GoS/ GoUT
ii. R= repo rate
iii. Limits: decided by GoI and RBI
iv. NOT tradable
v. NOT used to fund FD
vi. Managed public debt

Oversight of payt and settlement systems

a. Payts and Settlements System Act ’07  payt system authorized by RBI
b. RBI has created Negotiated Dealing System, a screen-based trading platform, to
facilitate settlement of G-sec transactions
c. RBI has set up CCIL (Clearing Corp of India Ltd)  settlement of trade in forex, G-sec
and other DEBT instruments

NPCI- National Payts Corporation of India

a. Non-bank payt system operator authorized by RBI to operate under PSS Act the
following:
i. National Financial Switch v. IMPS- Immed Payt System
ii. UPI- Unified Payts Interface vi. AEPS- Aadhar enabled payt
iii. Rupay cards system
iv. Linking ATMS across India
 vii. ACH- National Automatic viii. Nat Electronic Toll collectin
Clearing House
b. Not-for-profit; 51% stake with PSBs
c. Aug 2020—RBI released a framework to give permission to other private entities to
operate Retail Payt System in India like NPCI under PSS Act 2007, so as to create
competition for NPCI
d. June 2020:
i. RBI created PIDF (Payts Infra Devpt Fund)—managed+ admin by RBI and
governed by a Advisory Council
ii. 500 cr – RBI + Card Issuing Banks and Card Networks
iii. PIDF will also receive recurring contri to cover operational exp from card
issuing banks and card network AND if there is any shortfall, RBI may contri
iv. Objective: Encourage retailors to use PoS infra in underserved areas like tier
3-6 cities and eastern states.

Reports, etc. by RBI

a. The Annual Report – mandatory under RBI Act
b. Report on Trend + Progress of Banking in India – mandatory under RBI Act
c. Consumer Confidence Survey: Quarterly; Household perception+ expectation of gen
economic situation, emplt, prices, income, spending
d. Inflation Expecting Survey: Quarterly; Household exp.  3mth ahead and 1 yr ahead

RBI’s Economic Capital Framework

a. Economic Capital: Amount of capital that financial services co. needs to ensure
solvency given its risk profile
b. 2 objectives of ECF (Sec 47, RBI Act)
i. Fight fin. Sys. crisis + have enough funds to handle crisis (to capital reserves)
ii. Transfer remaining part as net income to government as profit/ dividends to
GoI (yearly process; RBI= 100% subsidiary of GoI)
c. BIMAL JALAN Committee (2019)
i. 5.5% to 6.5% of RBI’s balance sheet must be contingency Risk Buffer
ii. Harmony in objectives of GoI+ RBI

Priority Sector Lending

a. Sectors:
i. Agri
- Loans to indiv farmers+ FPOs
- Incl crop loans, mach loans, and all kinds of agri+ allied loans
- Loans to install of solar plants+ solarization of grid connected pumps
- Setting up compressed biogas plants
ii. MSME
 iii. EX Comm Banks 40%
iv. EDU (loans till a certain limit) Foreign banks 40%
v. Renewable energy RRBs 75%
vi. Scoial Infra SFBs 75%
vii. Housing (loans till a certain Payt Banks No credit
limit) UCB (prim) 40% (inc to 75% by ’24)
viii. Weaker section RCB N/A
ix. Other:
- Startup (< 50cr loans)
- Distressed persons for pre-payt of loans borr. from moneylenders
b. Recent changes in PSL
i. On-lending model (up to 5% of bank’s PSL on ongoing basis) by regd. NBFCs
(incl. MFI) will be considered PSL
ii. Higher wts for incremental PSL in “identified distt”
- 125% wt -- identified distt. – per capita PSL <6000 Rs.)
- 90% wt -- per capita PSL >25000 Rs)
iii. Co-lending (or co-origination) by banks+ NBFCs (regd.)
- RBI issued guidelines
 Unique opportunity for formal lenders to share synergies and
share risks+ rewards
 Solves the problem:
Bank difficult to reach certain location
NBFCs  diff to get cheap funds (r)
 Empower multiple stakeholders of lending ecosystem
 Other adv.: comm banks can utilize NBFC’s capacity to assess
the credit-worthiness of certain niche customer segments
- Banks can claim PS status in respect of their status of credit
- Banks and regd NBFC  give loan together but can set rate different
(pre-decided)
- NBFCs reqd to retain min. 20% share of indiv loans on their books
Kisan Credit Card KCC
a. Introduced 1998-9
b. Enable farmers to purchase agri input+ draw cash for production needs
+ LR loan cover
+ working capital loan for agri+ allied activities
+ consumption needs
c. r  decided by RBI
d. Elig.:
i. All farmers (indiv./ jt. – owner cultivators)
ii. Tenant farmers, old lessees and sharecroppers
iii. SHGs and Jt. Liability Groups
e. Agri Credit (incl. KCC loan):
r= 9%
(-)2%. ISS for short term crop loan up to ₹3L
Impl. —Banks; reimbursed thro’ RBI (for coop.ves+ RRBs NABARD)
(-)3% if prompt repayment
4%
 The benefit of ISS is extended for pd up to 6 months (post-harvest) to small+
marginal farmer with KCC on loan ag. negotiable warehouse receipts with purpose of
preventing distress sale of produce
KCC RBI implements
ISS  GoI’s scheme (Mo Agri)
Employment
Indicators: LF, LF Participation Rate (LF/ Popn), Worker Popn= Empld/ Popn; Unemp rate
Types: Frictional, structural. Cyclical, seasonal, disguised
In India: jobless growth (1991-2000); Labour codes (news)

Inequality: Lorenz Curve, Gini Coefficient; Poverty: est.; MPI; Malnutrition: NFHS-5 (news)
WTO: TRIPS, TRIMS. GATS (General Agt on Trade + Services)
Agt on Agri= Liberalising agri trade+ domestic subsidy (green box- not decrease; blue box-
not dec to a limit; amber box- to decrease)
PPP Model
Meaning; PPP v Privatisation; Types:
a. BOT Build Operate Transfer (BOT-Toll/ BOT- Annuity)
b. BOOT Build Own Operate Transfer
c. BOO Build own Operate
d. EPC Engg Procurement Construction
e. TOT Toll Operate Transfer
f. HAM Hybrid Annuity Model
V. Kelkar Committee
Report on Committee on Revisiting+ Revitaising PPP Model of Infra Development
Problems of PPP in India:
a. Rigid
b. PPP Institute needs to be revived
c. Risk allocation is to pvt sector  we need to share it
d. NPA
Suggestion: VGF Model
SEZ Special Economic Zones

EPZ 1965  SEZ policy 2000  SEZ Act 2005

Problems: Features:
a. Labour laws a. Tax incentives
b. MAT, DDT b. Sunset clause
c. Sunset clause c. MAT, DDT
d. No custom duties
Types:
a. Multi-sector SEZ
b. Sector specific SEZ
c. Free trade and warehousing zone
d. IT/ ITeS/ handicraft biotech/ non-conventional energy/ gems and jewelry SEZ

Assessment
a. Tax: MAT, DDT, not liked by industry, lack of clarity after April/ June
 b. Emplt: not a lot
c. Rehab+ resettlement: is an issue
d. Shortfall in investment: less than expected
e. Neglect of manufacturing
Critical Evaluation: Extra topics:
a. Very small size a. India v. CHN SEZs
b. Inadequate infra b. Baba Kalyan Committee 2018
c. Lengthy procedure i. EX- Emplt centre
d. Locational disadvantage ii. Use vacant SEZ plots
e. Stringent labour laws iii. Extend sunset clause
f. Issues with taxation c. WTO and SEZs
d. CEZ Coastal Economic Zone

Trade
𝑃𝐸𝑋 𝐸𝑋+𝐼𝑀
𝑇𝑜𝑇 = ; 𝑇𝑟𝑎𝑑𝑒 𝑂𝑝𝑒𝑛𝑛𝑒𝑠 = ;
𝑃𝐼𝑀 𝐺𝐷𝑃
Trade Agreements
PTA Preferential Trade Agt Basic goods
FTA Free Trade Agt Goods+ service
CECA Comprehensive Economic Coopn Agt G+ S+ Invst (not deep)
CEPA Comprehensive Economic Partnership Agt G+ S+ I+ Tech (deep)
CU Custom Union CD=0; similar customs on others
Single Market 4 degrees freed; G+S+I+ people
Economic Union All one
Examples:
a. India Mercosur PTA (Argentina, Brazil, Paraguay, Uruguay, Venezuela)
b. India-SL (1998: Discussion about PTA; 2005: Discussion on CEPA; Now: talks about
Eco+ Tech Coopn Agt)
c. NAFTA, US MCA (New Deal)
d. SAFTA
e. India- Korea CEPA- News in 2018
f. EU- Monetary Policy (identical); Fiscal Policy (Coordinated)

Case Study
ASEAN= PMTIS+ LMBCV
A+3. = ASEAN+ {CHN+ S Korea+ Japan}.  FTA
A+6. = A+3 + {India+ Australia+ NZ}.  FTA
EAS. = A+6. + {Russia+ US}.  Discussion (No FTA)
RCEP= A+6 – India

Reasons for India’s withdrawal:

a. Trade deficit with CHN
b. Auto-trigger mechanism
c. RoO+ CHN factor
d. Agri
e. India’s Past experience with FTAs
f. Data Protection
where does IMF get its money:
a. membership fees- 1st line of defence
b. NBA New Arrangements to Borrow: 1997- 25 High income countries decide to that if IMF needs money, they can give it.
post 2008, 40 countries have become part of it (incl Middle income countries). It is activiated only when IMF needs it
c. BBA Bilateral Borrowing Arrangement- 3rd line of defence— 40 members; developed after 2008

GSP; Trade War

Multi-Development Banks
1. World Bank Group (WB= IBRD+ IDA)
IBRD International Bank for Devpt works of MIG+
Recons. and Development credit worthy LIG
IDA International Development Poor countries “credit” (low/ zero r loans with
Assn longer pd)
IFC International Financial Pvt sector works across world
Corporation e.g. Masala bonds in India
MIGA Multilateral Investment Help poor countries get fin by guaranteeing
Guarantee Agency
ICSID International Centre for India is not a member
Settlement of Invst Dispute
Voting allocation at the time of membership; subsequently for addnal subscription to capital

2. IMF
a. Primary Aims:
i. Promote international monetary cooperation
ii. Promote exchange stability
iii. Help members experiencing BoP difficulties
b. Types of non-concessional lending
RFI Rapid Financing Instrument Very short IMF Quota=
SBA Stand by arrangement Short GDP (50%) +
FCL Flexible Credit Line For rich Openness (30%) +
PLL Precautionary+ Liquidity Line Medium rich Eco variability (15%) +
EFF Extended Fund Facility Pak, Congo, etc. International reserves (5%)

Role of quota: Subscription+ voting power+ access to finance

Voting power: 1 vote per 1,00,000+ 250 Basic votes types of concessional lending: RCF, ECF, SCF
Borrowing: Rapid credit facility— urgent need
Stand by credit facility— short term
a. Concessional—no rate of interest Extened credit facility— medium term
Elig condns: a) Per capita income< threshold by IDA
b. Non-concessional – low rate of interest b) no accesss to global financial market on durable basis

Reports: c. Grants: a) HIPC Hghly indebted poor countries; b) CCRI CATASTROPHE AND CONTAINMENT RELIEF TRUST
a. World Economic Outlook Report
b. Global Fin. Stability Report
c. Fiscal Monitor also, External Sector Report (of top 30 economies)
d. Regional Economic Reports
SDR

3. ADB
a. Asian in nature
b. By Japan+ US
c. Foster economic growth in one of poorest regions of the world
d. Estd 1966
e. HQ= Manila, Philippines
f. 68 members= 49 Asia-Pacific + 19 Outsude
 g. India= founding members
CHN= Joined in 1986
h. Gives loans, tech assistance, grants
i. Voting
i. Resembles WB
ii. Voting right= % of money you gave in establishing the bank
iii. Max: Japan+ US= 15.6%
CHN= 6.4%
India= 6.3%
Australia= 5.8%
th
j. India= 4 largest shareholder+ largest borrower for energy projects from ‘07-15;
Founding member
4. NDB
a. Fortaleza Declaration 2014 by BRICS:
NDB CRA Contingency Reserve Arrangement b. Membership open to UN
100B$ 100B$ members; Membership
Equal for all CHN 41B; S Afr 5B; all others 18B open to borrowing and
Like WB Like IMF non-borrowing members
Devpt assistance For crisis situation c. VR of each founding
member= 20%
d. No single country has a veto
e. Strategy 2017-21 2/3rd financial commitment to sustainable infra devpt
f. Loan portfolio+ key areas of operation:
i. Clean Energy
ii. Transport Infra
iii. Irrigation. Water resources management, sanitation
iv. Sustainable Urban Development
v. Economic cooperation and integration among member countries

5. AIIB
i. Brainchild of CHN
ii. 1st major MDB where principal contributors are borrowing members themselves
iii. Aim: provide fin to infra projects in Asia-Pacific
iv. Estab.: Jan 16, 2016
v. Members= 106
vi. Voting rights dep on GDP (PPP)
vii. Largest shareholders:
i. CHN: 28.7% (veto)
ii. India: 8.3%
iii. Russia:6.55%
viii. India= biggest commitment country for AIIB
= AIIB focus on rural road, transmission lines, green project in India
= Largest borrower since beginning
ix. Diff than ADB: AIIB- fast loans; ADB- Takes a lot of time
Foreign Investment
Basics: FDI, FII, FPI, ECB, ADR, GDR
FDI: Long term, global managt practices, steady investment, emplt, tech, policies of firm
FII: Good weather friend/ opportunist money, fly by night/ exit at distress
Reforms: CA lectures
Inflation
Types:
a. WPI- 697 items CPI Base yr Who compile
b. WPI- Food Index IW 2016 Labour Bureau
c. CPI (6 components)- 448(rural)+ 460 (urban) AL 1986-7 in Mo Labour+
d. CPI- IW, AL, RL, R, U, C RL 1986-7 Emplt
e. CFPI Consumer Food Price Index R,U,C 2012 NSO, MoSPI

Wages of GoI employees- revision based on CPI-IW

MGNREGA - revision based on CPI-AL
India’s monetary policy. – based on CPI- Headline
From 2018: salary, allowance, pension of MPs inc every 5 years based on cost inflation
index (per IT Act 1961)
Deflation P
Causes: demand pull, cost push, structural Disinflation Slowdown in 
Effects:
Recession -ve growth in 2Q
a. -ve effect on production
Depression Extreme recess
b. -ve impact on distri of income
Stagflation , Y
c. -ve on asset+ wealth holders
d. -ve on creditors+ +ve for debtors Reflation P to boost economy
e. -ve impact on std of living Skewflation Only in selected item grps
Control: Imported inflation
a. Qtve: BR, CRR, SLR, OMO Creeping/ mild <3%
b. Qlve: Margin reqt, Credit Regn, Rationing Trotting/ medium 3-10%
of credit, Moral suasion, Direct Action Running 10-20%
GDP deflator= Nominal/ Real; published by NSO Hyperinflation huge
Other topics:
a. Monetary Policy+ inflation targeting
b. Policy dilemma (Phillips Curve)   1/ U
WPI
WPI CPI GDP defl.
Primary Article Food 14.3
(22.62%) No services No capital goods No IM gds
Non-Food 4.2
Mineral 0.6
Cons wt Cons wt ing wts
Crude Petrol+ Nat Gas 0.9 WPI does not include indirect taxes to
remove impact of fiscal policy
Fuel+ Power Coal 2
(13.15%) Mineral Oil 9.3
Inflation gap= current level of real GDP (-)
Electricity 3.4
GDP at full emplt
Manufacturing Food 9.9
Current> potential  inflationary
goods Textile+ Apparel 7.3
(64.23%) Beverage+ Tobacco 1.7
Etc (23 grps)
Financial Markets
Financial Market= Money Market+ Capital Market
Capital Market= Primary Market+ Secondary Market
 Prim/ Sec Mkt= Debt+ Equity
Debt= secured+ US (Jr+Sr)
Debt Market:
1. Fixed Interest Bond
2. Floating Rate Bonds
3. Zero Coupon Bonds
4. FCCB Foreign Currency Convertible Bonds (convertible convertible to shares)
5. Inflation Indexed Bonds
Debentures: like bonds, but not secured
Shares: Equity shares+ Preferential shares
Primary market: IPO, FPO, Private placement
Secondary Market: Stock Market, Stock exchange (regulated by SEBI), BSE/ NSE/ OTCEI
(Over-the-counter exchange of India)
BSE Sensex: 30 BSE (rep 45% of index’s free float m-cap)
NSE Fifty 50: 50 NSE (rep 62% -----------------||--------------)

SEBI:
a. Management
b. Functions: Quasi legislative; quasi-executive; quasi-legal
c. Powers

Derivatives: value derived from another commodity/ product

a. Forward (non-standard): quality of good not mentioned
b. Futures (standard): quality of good mentioned

Options: Type of derivative with a right to refuse

a. Call option: Buyer can refuse
b. Put option: Seller can refuse

Mutual Funds: Equity funds, Debt funds, Hybrid Funds

Expense Ratio= MF’s commission

ETFs Exchange Traded Funds (in Stock Exchange)

Connected to Stock Market Index (BSE/ NSE—SENSEX/ NIFTY). 2 types:
a. Bonds: e.g. Bharat Bonds
b. Shares: e.g. Bharat-22
EoDB

By: WB
Calculation: 12 indicators sets  41 indicators
190 economies
Normally 1 city data
Data for 2 cities in 11 economies (with >100M inhabitants)
Indicator sets:
a. Starting a business
b. Dealing with construction permits
c. Getting electricity
 d. Registering properly
e. Getting credit
f. Protecting minority investors
g. Paying taxes
h. Trading across borders
i. Enforcing contracts
j. Employing workers
k. Resolving solvency
l. Contracting with government

Survey based; Top 5 countries: ??; Rank of India: ??; Trend for India: ??
Note: High scorers used more electronic/ digital system

Steps by India
a. SPICe form: simplified digital form for incorporation
b. Protect minority investors
c. IBC

EoDB for states:

a. By DPIIT (Mo Commerce+ Industry) + WB
b. Done based on implementation of BRAP (Business Reform Action Plan) by states
i. 2015
ii. BRAP 2019 contains list of 80 reforms (187 reform action points) to be impl
by 19 state deptts.
iii. These reforms cover 12 business regulatory areas
Planning and NITI-A
Types of Planning: Direction, Inducement, Financial, Physical, perspective, annual,
indicative, totalitarian, rolling, fixed, decentralised, centralised, mixed, etc.
Indian Plans: Visvesvaraya Plan (1934), Gandhian Plan, Sarvodaya Plan (1950)
FYPs: do
NITI-A: polity

National Manufacturing Policy 2011:

Objectives:
a.  sectoral share of manuf sector
in GDP to > 25% by 2022
b.  100M addnal jobs by 2022
c.  global competitiveness,

domestic VA, technical depth

d.  envtal sustainability of growth

National Industrial Corridor Development Program (NICDP)

11 industrial corridors (ICs) sanctioned
1. DL-Mumbai IC 7. Hyderabad Nagpur IC
2. Chennai- Bengaluru IC 8. Hyderabad Warangal IC
3. Amritsar Kolkata IC 9. Hyderabad Bengaluru IC
4. E Coast IC with Vizag Chennai Ph I 10. Odisha Eco Corridor
5. Bengaluru Mumbai IC 11. DL Nagpur IC
6. Kochi Coimbatore IC
Startups
a. Defn: Registered in India not prior to 10 years, with annual turnover < ₹100 cr in any
preceding financial year.
b. 2 other conditions:
i. Emplt generation+ wealth creation
ii. Tech oriented/ innovation
c. Funds for startups
i. Funds for Startups (FFS) was envisaged through SIDBI
ii. ASPIRE- Funds (AF)- SIDBI- ₹ 10,000 cr; IAF (India Aspirational Fund)- ₹350 cr
d. Startup India
Institutional credit structure to reach out to the underserved sector of people
e.g. ST, women, entrepreneurs
3 pillars:
i. Handholding support
ii. Providing info on financing
iii. Credit Guarantee

Loan and Credit Guarantee Fund

a. Lloans are secured and backed by credit guarantee through a credit guarantee sch
b. Standup India scheme facilitate bank loans between 10L- 1cr to at least 1 SC/ST
borrower+ at least 1 woman per brank branch for setting up a greenfield enterprise
c. This enterprise may be in manuf, services or trading sector.

MSME
a. New defn
b. Importance
i. >40% of indl. Production
ii. >48% of total EX
iii. 30% of GDP
iv. Emplt to 120M (direct+ indirect)
c. Schemes (do)- PM Mudra, MSME- Sambandh, SFURTI, ASPIRE, CHAMPIONS

Infrastructure (mostly do schemes only)

a. Power sector:
i. Sahaj Bijli Har Ghar Yojana (Saubhagya) 2017
ii. Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY) 2015
iii. National LED Program/ Unnat Jyoti by Affordable LEDs for All (UJALA)
iv. UDAY- Ujwal DISCOM Assurance Yojana 2015 very successful
v. TARANG Transmission App for Real Time Monitoring+ Growth
vi. Kusum Scheme 2019
b. Civil Aviation
i. Regional Connectivity Scheme (RCS- Udan)
ii. Green Aviation Policy 2019
iii. GPS Aided Geo-Augmented Navigation (GAGAN)
c. FDI Liberalisation: Up to 100% FDI under automatic route in-
i. Non-sch air transport services
 ii. Helicopter services+ seaplanes
iii. MRO for maintenance+ repair orgns;
iv. Flying training instns+ tech training institutes
v. Ground Handling Services s.t. sectoral regns and security clearance
d. Railways
i. Private trains: Tejas Express
ii. Running of SHRAMIK special: Trains of Hope in Adversity
iii. Swachchh Rail Swachchh Bharat and Green Railways
iv. Meri Saheli Initiative- Passenger security
e. Roads
i. PM Gram Sadak Yojana PMGSY
ii. Bharatmala
iii. HAM Hybrid Annuity Model
f. Telecom
i. Bharat Net Project
- NOFN National Optical Fibre Network 2011
- Renamed Bharat Net in 2015
- The entire project is funded by USOF (Universal Service Obligation Fund)
ii. IoT
g. Ports
i. Sagarmala (port-led industrialisation)
ii. Remember names of major and minor port
h. Petroleum and Natural Gas
i. PAHAL Pratyaksh Hanstantrit Labh—giving up LPG subsidy
ii. PM Ujjwala Yojana
iii. National Gas Grid—fins 1/2 newest pipelines
i. Urban India
i. Swachchh Bharat Mission
ii. AMRUT
iii. HRIDAY Heritage City devpt and Augmentation Yojana
iv. Smart Cities
v. Housing Sch: PM Awas Yojana
FISCAL POLICY
Types of Budget
a. Incremental Budgeting: small  to existing budget
b. Zero-based Budgeting: assumes no bal. carried forward/ no expenses re-committed
c. Performance-based Budgeting: accounting is imp+ not just compliance
d. Outcome Budgeting: Allocation = f(outcome)
e. Gender Budgeting: differential impact of resource allocation of gender.

Technical Questions from Budget

FRBM: FD, RD, PD, Debt-to-GDP; escape clause
Taxation
Tax Base
%TR
Tax Buoyancy%GDP
Tax Avoidance and Tax Avoidance
 Progressive, Regressive and Proportional Tax
Laffer Curve
Tax/ GDP ratio meaning
Taxes: Income Tax, Corporate tax, wealth tax, capital gains tax, security transactions tax,
fringe benefit tax, MAT, DDT, Prod tax, Prodn tax
GST
a. Article 246A, 269A, 279A
b. Aim: input credit, decrease cascading, decrease tax slabs
c. Features:
i. Slabs: 0, 5, 12, 18, 28
ii. Applicable to supply
iii. Destination based tax
iv. Dual tax
v. CGST, SGST, IGST
vi. Left out: Alcohol, petroleum, etc. (make list)
d. Taxes subsumed:
i. Central Taxes:
- Central Excise duty (incl addnal excise duty, excise duty under Med+
Toilet Prepns Act 1955)
- Service Tax
- Addnal Custom Duty (CVD)
- Spl. Addnal Duty of Customs (SAD)
- Central Sales Tax
- Central Surcharges+ cesses
ii. State taxes:
- State VAT/ sales VAT
- Entertainment tax (except those by local bodies)
- Central sales tax
- Octroi/ entry tax
- Purchase tax
- Luxury tax
- Taxes on lottery, betting and gambling
- Tax on inter-state sale
- Mandi-tax/ other state-specific local levies
e. Compensation to state: Economic Survey Volm 2 Part I
f. Other: Input-tax credit, GST Council, GSTN, Anti-Profiteering Measures, e-way Bill
g. Composition Scheme:
Business Type CGST SGST Total
Manuf+ trader (gds) 0.5% 0.5% 1%
Restaurant not serving alcohol 2.5% 2.5% 5%
Other service provider (new addn) 3.0% 3.0% 6%
RECENTLY CHANGED TO 2L
Base year of IIP: 2011-12
Base year of Core Industries also 2011-12
Toll-operate- transfer
UDAN Scheme
Getting the “hawaai chappal” to “hawai jahaj”