General Economics - Indian Economy Notes for All Competitive Exams - Part I

Important Committees

Ghosh Committee: Bank Frauds

Omkar Gosami Committee: Industrial Sickness and Corporate restructuring

Jhanakiraman Committee: To enquire into the Securities and transaction of the banks and
financial institutions

Jilani Committee: Loan System

Goiporia Committee: Customer Service

Malhothra Committee: Insurance Sector Reforms

Dr. Mehta Committee: Integrated rural Development Programme

Narasimham Committee: Financial Sector Reforms

Nayak Committee: Credit to SSS Sector

Rangarajan Committee: Public Sector disinvestment

Raj Committee: Agricultural holding tax

Khusro Committee: Agricultural Credit

Ram Nivas Mirdha Committee: To enquire into the Securities Scam.

Bhagawati Committee: Public Welfare

Raja Chellaiah Committee: Tax reforms

Economics Notes

The Gross National Product (GNP) is the money value of all the final goods and services
produced annually in the economy.

The difference between GNP at market prices and GNP at factor cost is equal to net indirect
taxes.

The term 'National Income' commonly refers to NNP at factor cost.

National income doesnt include interest on unproductive national debt

The national income of India is estimated mainly through production and income methods.

The expenditure method is used to estimate the government's final consumption expenditure,
exports & imports of goods and service and change in inventories.

In India, the national income is estimated by the Central Statistical Organisation (CSO)

The 'Primary Sector' of Indian economy includes agriculture, livestock and allied activities,
forestry, logging, fishing, mining and quarrying.

The 'Secondary Sector' includes manufacturing, Building construction, electricity, gas and
drinking water supply.

The 'tertiary sector' of an economy refers to the service sector.

Indian economy is the ideal model of a 'mixed economy'.

For the mixed economy Hansen used the term 'dual economy' and Lerner 'controlled economy'.

The 1st effort to initiate economic planning in India was made by M. Visvesvarya in 1934
through his book entitled 'Planned Economy for India'.

The 'garibi hatao (eradicate poverty) slogan was coined during the Fourth Plan.

In 1938, the Indian National Congress set up the National Planning Committee (NPC) chaired
by

Jawaharlal Nehru.

'Gandhian Plan' which was prepared by Sriman Narayan.

The people's plan was formulated by M.N. Roy, almost at the same time.

Planning Commission was set up in 1950 under the Chairmanship of Prime Minister.

Dadabhai Naoroji wrote the book 'Poverty and Un-British Rule in India.

The Planning Commission of India: An advisory body.

The Prime Minister of India is the Ex-officio Chairman of the Planning Commission.

The second plan saw the setting up of the three steel plants at Durgapur, Bhilai and Rourkela
and the expansion of the Chitteranjan Locomotive Works etc.,

Maharashtra Government introduced the Employment Guarantee Scheme (EGS) in 1972-73.

The scheme was the first of its kind to give recognition to the 'right to work' enshrined in the
constitution.

The food for work programme was launched in 1977 with the objective of generating
employment opportunities, improving the level of income and consumption and strengthening
the rural infrastructure.

National Rural Employment Programme (NREP) from October 1980

The Integrated Rural Development Programme (IRDP) was initiated on October 2nd of 1980.

The Rural Landless Employment Guarantee Programme (RLEGP) was launched on the 15th
August 1983.

Training of Rural Youth for Self-Employment (TRYSEM) was started in 1979.

28th April. 1989 the Jawahar Rozgar Yojana (JRY) was launched by the then Prime Minister
RajivGandhi.

The poverty line has been defined by the Planning Commission on the basis of an average daily
intake of 2400 calories per person in rural areas and 2100 calories in Urban areas.

Inflation is caused by increase in money supply, decrease in production.

The main problem in India is the high level of birth rate coupled with a declining death rate.

First the Reserve Bank was nationalised in 1949.

Thereafter in 1955 the Imperial Bank of India, a top Commercial Bank of that time, was
nationalised and renamed the State Bank of India.

In 1969 fourteen big commercial banks were nationalised.

The fifth plan was prepared and launched by D.O . Dhar.

The three main harvesting seasons are kharif, rabi and summer.

Agriculture is-the backbone of Indian Economy.

1969. Commercial Banks are broadly classified into nationalised or public sector banks and
private sector banks. The SBI and its associate banks along with another 20 banks are the
public sector banks.

April 15, 1980 six more commercial banks were nationalised.

ICICI - The Industrial Credit & Investment Corporation of India was setup in 1955 as a private
sector development bank.

The Export Import (EXIM) Bank of India was established on January 1st 1982.

The National Bank for Agricultural and Rural Development (NABARD) was established in July
1982 to oversee and develop the entire rural credit system including agricultural credit.

The Life Insurance sector was nationalised in 1956 into Life Insurance Corporation (LIC); and
the non-life sector was nationalised in 1972 as the General Insurance Corporation (GIC).

The RBI was inaugurated in April 1935 with a share of capital of Rs.5 crore. It was nationalised
in 1949.

SEBI was accorded statutory status by an act of Parliament effective from Mar 31st, 1992.

Inflation in India has been both a demand pull and a cost push type.

GNP - Gross National Product refers to the money value of total output or production of final
goods and services produced by the nationals of a country during a given period of time.

GDP - Gross Domestic Product is the total money value of all final goods and services produced
within the geographical boundaries of the country during a given period of time,

NNP: Net National Product. (NNP = GNP Depreciation)

NDP: Net Domestic Product. (NDP = GDP Depreciation)

National Income calculated by National Product at factor cost.

In India combination of production method and income method is used for estimating national
income.

CSO - Central Statistical Organisation.

CSO regularly publishes national income data .

World population has touched the level of 6 billion on day of October 12th 1999.

UNO has declared October 12 as 'Day of 6 billion'.

Inflation is that state in which the prices of goods and service rise on the one hand and value of
money falls on the other.

Demand pull inflation is that inflation when prices rise due to higher demand for goods and
services over the available supply.

Cost push inflation is another type of inflation in which prices rise due to increased input costs.

Deflation is the state in which the prices of goods and services fall and the value of money rises.

Deflation takes place when increase in money circulation loss behind the increase in production.

Indian Economy - Economics Notes for All Competitive Exam - Part II

Call Money: Is a loan that is made for a very short period of a few days only or for a week. It sanctions
with a low rate of interest. In case of stock exchange, the duration length of the call money may be for a
fortnight.
.
Elasticity: The degree of responsiveness of quantity demanded or supplied to a change in price.
Excise Tax: Tax imposed on the manufacture, sale or the consumption of different commodities, such as
taxes on textiles, fabric, cloth, liquor etc.
Fiscal policy: Government's expenditure and tax policy, an important means of moderating the upswings
and downswings of the business cycle.

Laissez faire: The principle of non-intervention of government in economic affairs.

Tariff (ad valorem): A fixed percentage tax on the value of an imported product, tax levied at the point of
entry into the importing country .
Tobin tax: Named after James Tobin, the Nobel prize winner for economics in 1981, a global tax on
capital transfers, which could raise possibly $250 billion from financial markets worldwide. And this huge
sum could be used to support the developing economies of the third world. The revenue from the Tobin
tax can also be used to write off the third world countries debts.

Zero Based Budgeting: The practice of justifying the utility in cost benefit terms of each government
expenditure on projects. The ZBB technique, involves a serious review of every scheme before a
budgetary provision is made in its favour. This form of financial planning is with an objective to ensure that
every rupee spent is result oriented. If ZBB is properly implemented it could help to reverse the trend of
large deficits on the revenue account of the Union Government.

Formation years of Major Financial Institutions in India

Imperial Bank of India - 1921

Reserve Bank of India (Nationalisation of RBI took place on Jan 1, 1949) - 1935

Industrial Finance Corporation of India - 1948

I CI CI - 1955

State Bank of India - 1955

Unit Trust of India - 1964

lOBI - 1964

NABARD 1982

IRBI (Now it has been renamed as IIBIL since 1997) - 1985

SIDBI - 199O

EXIM BANK - 1982

National Housing Bank -1988

Life Insurance Corporation (LIC) - 1956

General Insurance Corporation (GIC) - 1972

Regional Rural Banks -1975

RCTF - Risk Capital and Technology Finance Corporation Ltd - 1975

Technology-Development & Information Co. of India Ltd - 1989

IL & FS - Infrastructure Leasing and Financial Services Ltd - 1988

HDFC - Housing Development Finance Corporation Ltd - 1977

Registered Office

Established

UTI Bank Ltd

Ahmedabad

1994

Indus Ind. Bank Ltd

Pune

1994

ICICI Bank Ltd

Vadodara

1994

Global Trust Ltd

Secunderabad

1994

HDFC Bank Ltd

Mumbai

1995

Centurian Bank Ltd

Panaji (Goa)

1995

Bank of Punjab Limited

Chandigarh

1995

Times Bank Limited

Faridabad

1995

lOBI Bank Ltd

Indore

1995

Development Credit Bank Ltd

Mumbai

1995

Important Private Banks

Dictionary of Banking and Economic Terms:

.
Administered Price: The administrative body e.g., the government a marketing board or a trading group
determines this price. The competitive market force are not entitled to determine this price. The government fixes a
price in accordance with demand supply portion in the market.
Ad-valorem Tax: Ad-valorem tax is a kind of indirect tax in which goods are taxed by their values. In the case
of ad-volorem tax, the tax amount is calculated as the proportion of the price of the goods. Value added Tax (VAT) is
an ad-volorem Tax.

Amalgamation: It means merger. As and when necessity arises two or more companies are merged into a
large organisation. This merger takes place in order to effect economies, reduce competition and capture market. The
old firms completely lose their identity when the merger takes place.

Arbitration: Where there is an industrial dispute, the Arbitration comes to the force. The judgement is given by
the Arbitrator. Both the parties have to accept and honour the Arbitration. Arbitration is the settlement of labour
disputes that takes place between employer and the employees.

Auction: When a commodity is sold by auction, the bids are made by the buyers. Whose ever makes the highest
bid, gets the commodity which is being sold. The buyers make the bid taking into consideration the quality and
quantity of the commodity.

Autarchy: If a country is self-sufficient, it does not require the imports for the country. Autarchy is an indicator
of self-sufficiency. It means that the country itself can satisfy the needs of its population without making imports
from other countries.
Automation: Automation means the use of machinery & technology to replace the labours work. Automation
increases the demand of skilled workers. Unskilled and semiskilled workers are reduced as a result of automation.

Balanced Budget: When the total revenue of the government exactly equals the total expenditure incurred by
the government, the budget becomes a balanced budget. But it is a conservative view point. In present days, the
welfare government has to regulate a number of economic and social activities which increase the expenditure
burden on the government and results in deficit budget.
Balance of Payment: Balance of payment of a country is a systematic record of all economic transactions
completed between its residents and the residents of remaining world during a year. In other words, the balance of
payment shows the relationship between the one countrys total payment to all other countries and its total receipts
from them. Balance of payment is a comprehensive term which includes both visible and invisible items.
Balance Sheet: Balance sheet is a statement showing the assets and liabilities of a business at a certain date.
Balance sheet helps in estimating the real financial situation of a firm.
Bank: Bank is a financial institution. It accepts funds on current and deposit accounts. It also lends money. The
bank pays the cheques drawn by customers against current and deposits accounts. The bank is a trader that deals in
money and credit.

Bank Draft: Bankers draft is a negotiable claim drawn upon a bank. Drafts are as good as cash. The drafts
cannot be returned and unpaid. Draft is issued when a customer shows his unwillingness to accept cheque in
payment for his services or mercantile goods. Bank Draft is safer than a cheque.

Bilateralism: It implies an agreement between two countries to extend to each other specific privileges in their
international trade which are not extended to others.

Blue Chip: It is concerned with such equity shares whose purchase is extremely safe. It is a safe investment. It
does not involve any risk.

Buoyancy: When the government fails to check inflation, it raises income tax and the corporate tax. Such a tax is
called Buoyancy. It concerns with the revenue from taxation in the period of inflation.
Business Cycle: Business cycle (also known as trade cycle) are species of fluctuations in the economic activity
of organised communities. It is composed of period of good trade characterised
by rising prices and low unemployment, alternating with period of bad trade characterised by falling prices and high
unemployment. Every trade cycle have five different subphasesdepression, recovery, full employment, prosperity
(boom) and recession.

Call Money: Call money is in the form of loans and advances which are payable on demand or within the
number of days specified for the purpose.
Capital Budgeting: Capital budgeting represents the process of preparing budget for a period of a year or
even for several years allocating capital outlays for the various investment projects. In other words, it is the process
of budgeting capital expenditure by means of an annual or longer period capital budget.

Capital-labour Ratio: Latest models of machinery and equipment raise the labour efficiency and the output is
maximized. Capitallabour ratio is the amount of capital against the given labours that a firm employs. Capital-labour
ratio is the ratio of capital to labour.
Capital Market: Capital market is the market which gives medium term and long term loans. It is different
from money market which deals only in short term loans.

Capitalism: Capitalism is an economic system in which all means of production are owned by private
individuals Selfprofit motive is the guiding feature for all the economic activates under capitalism. Under pure
capitalism system economic conditions are regulated solely by free market forces. This system is based on Laissezfaire system i.e., no state intervention. Sovereignty of consumer prevails in this system. Consumer behaves like a
king under capitalism.

Census: Census gives us estimates of population. Census is of great economic importance for the country. It tells
us the rate at which the total population is increasing among different age groups. In India census is done after every
10 years. The latest census in India has been done in 2001.

Clearing Bank: Clearing bank is one which settles the debits and credits of the commercial banks. Even of the
cash balances are lesser, clearing bank facilitates banking operation of the commercial bank.
Clearing House: Clearing house is an institution which helps to settle the mutual indebtedness that occurs
among the members of its organization.

Closed Economy: Closed economy refers to the economy having no foreign trade (i.e., export and import).
Such economies depend exclusively on their own internal domestic resources and have
no dependence on outside world.
Collusion: Producers of an industry reduce competition among themselves to raise their profits. They fix the
price themselves with a clear understanding in this regard. This understanding among different firms is called
collusion.

Collectivism: Collectivism is a belief that nations interest is superior to individual interest. This is the collective
thinking of the society and polity national leaders and also communist opine the theory of collection.
Communism: Communism is a political and economic system in which the state makes the major economic
decision State owns the bulk of capital assets. Responsibility for production and distribution lies with the state in this
system.

Corporation Tax: It is a tax on companys profit. It is a direct tax which is calculated on profits after interest
payments and allowance (i.e., Capital allowance) have been deducted but before dividends are allowed for.

Credit Rationing: Credit rationing takes place when the banks discriminates between the borrowers. Credit
rationing empowers the bank to lend to some and to refuse to lend to others. In this way credit rationing restricts
lending on the part of bank.
Credit Squeeze: Monetary authorities restrict credit as and when required. This credit restriction is called
credit squeeze. Monetary authorities adopt the policy of credit squeeze to control inflationary pressure in the
economy.

Custom Duty: Custom duty is a duty that is imposed on the products received from exporting nations of the
world. It is also called protective duty as it protects the home industries.

Death Duty: It is a direct tax which is imposed on the estate of deceased person. Death duty or Death Tax is a
form of personal tax on property which is levied when property passes from one person to other at the time of death
of the former.
Decentralisation: Decentralisation means the establishment of various unit of the same industry at different
places. Large scale organisation or industry can not be run at one particular place or territory. In order to increase the
efficiency of the industry, various units at different places are located.
Debt Service (Total): The sum of principal repayments and interest actually paid in foreign currency, goods
and services on longterm debt (having maturity of more than one year), interest paid on shortterm debt and
repayments to IMF.
Deficit Financing: It is a practice resorted to by modern government of spending more money than it receives
in revenue. It is a policy of bridging a deficit between governments expenditure and revenue. Deliberately budgeting
for a deficit is called deficit financing. This practice was popularised by Prof. J. M. Keynes to deal with the
depression and unemployment situations and to stimulate economic activity. Deficit financing, though having
inflationary effects, has now become a common practice in all countries.
Deflation: Deflation is the reverse case of inflation. Deflation is that state of falling prices which occurs at that
time when the output of goods and services increases more rapidly than the volume of money in the economy. In the
deflation the general price level falls and the value of money rises.
Devaluation: The loss of value of currency of a country relative to other foreign currency is known as
devaluation. Devaluation is a process in which the government deliberately cheapens the exchange value of its own
currency in terms of other currency by giving it a lower exchange value. Devaluation is used for improving, the
balance of payment situation in the country.

Disinflation: It refers to a process of bringing down prices moderately from their high level without any adverse
impact on production and employment. Thus, disinflation is an anti-inflationary measure.

Dissaving: Dissaving occurs when expenditure exceeds income. Raising of loans or utilization of past
accumulated savings takes place in such eventuality.

Economic Integration: Economic integration appears when two or more nations coordinate themselves and
their economies are linked up. It may exhibit itself in the form of free trade area or a full economic union. EEC is an
example of economic integration.

Engels Law: This law was formulated by Ernst Engel. This law states that, with given taste and preference, the
portion of income spend on food diminishes as income increases. According to this law, smaller a persons income,
the greater the proportion of it that he will spend on food and vice versa.
Estate Duty: It is a tax which is levied on the estate of a decreased person. It is also known as death duty. The
ownership of state changes hands only after the payments of the estate duty. It is an progressive tax in nature.

Excise Duty: It is a tax which is imposed on certain indigenous production (e.g., petroleum products, cigarettes
etc.) of the country. Excise duty may be imposed either to raise revenue or to check the consumption of the
commodities on which they are imposed. Excise duty is progressive in nature.

Face Value: It refers to that normal value of coin at which the coin circulates and is accepted in the discharge of
debit or obligation. Broadly speaking, the face value refers to domination stamped on a coin / or documents when it
is issued. In securities, it refers to par value.

Fascism: It is a form of political system. In it every economic consideration rests on one criterionthe increase
in the peoples standard of living. It also lays emphasis on military
strength and prestige of the country. It is the extreme nationalism and the ultimate goal is self-sufficiency.
Federal Economy: It refers to a federation which is an association of two and more states. A federal state is a
union of state in which authority is divided between the federal (or central) government and the state governments.
In a federal economy both the centre and the states are independent in the exercise of this authority.

Fiduciary Issue: Generally bank-note are backed by gold. But when they are not backed by gold and
government securities replace gold, it is called fiduciary issue. Such fiduciary issue results in inflation.

Fertility Rate: The term fertility refers to the actual bearing of children or occurrence of births. Fertility rate
measures the average number of the live births per 1000 women. This rate is one of the most important and useful
aids to population projection. It helps in assessing population trends in the economy.
Fiscal Policy: Fiscal policy is that part of government economic policy which deals with taxation, expenditure,
borrowing, and the management of public debt in the economy. Fiscal policy primarily concerns itself with the flow
of funds in the economy. Fiscal policy primarily concerns itself with the flow of funds in the economy. It exerts a
very powerful influence on the working of economy as a whole.

GEM: GEM (Gender Empowerment Measure) is a composite index measuring gender inequality in three basic
dimensions of empowermenteconomic participation and decision making, political participation and decision
making, and power over economic resources.
GDI: GDI (Gender Related Development Index) is a composite index measuring average achievement in the three
basic dimensions captured in the human development indexa long and healthy life, knowledge and a decent
standard of livingadjusted to account for inequalities between men and women.

Gini-coefficient: It represents the measurement of inequality derived from the Lorenz Curve, with every
increase in the degree of inequality, the curvature of the Lorenz Curve also increases and
the area between the curve and 45 line becomes larger.
The Gini-coefficient is measured as
G =Area between Lorenz Curve & 45 Line/Area above the 45 Line
Giffin Goods: Giffin goods have the positive relationship between price and quantity demanded and as a result
demand curve of Giffin goods slopes upward from left to right. This phenomenon was first observed by Sir Robert
Giffin in relation to the demand for bread by poor labours.
Greshams Law: Bad money (if not limited in quantity) drives good money out of circulationThis
statement was given by Sir Thomas Gresham, the economic Adviser of Queen Elizabeth. This law states that people
always want to hoard good money and spend bad money when two forms of money are in circulation at the same
time.

Gross National Product Deflator: It is a Price Index Number used to correct the money value of Gross
National Product (GNP) for price changes so as to isolate the changes which have taken place in the physical output
of goods and services.

Guild Socialism: This form of socialism accepts the leadership of artisans. The operation of the whole
economy specially the management and control of industries lies in the hands of artisans Socialism established by
artisans is termed a Guild Socialism.

Joint Demand: Joint demand appears in case of complementary goods. When two commodities are
complementary to one another and cannot be used separately, they have joint demand. Bread and butter, sugar and
tea, pen and ink are a few examples of joint demand. In joint demand a change in demand of one commodity bring
about the proportionate change in demand for the other.
Joint Sector: When a sector is jointly owned, managed and run by both public and private sector, it is called
joint sector. This sector indicates the partnership between the two i.e., public and private sector.

Labour Union: Labour union represents that organisation of workers which works for improving working
condition of labours and also for raising their wage by adopting collective bargaining measures with the
management of the
industry in particular.
Laffer Curve: This curve is given by American economist Prof. Arthur Laffer. It represents relationship between
total tax revenue and corresponding tax rates.
Laissez Faire: It is a French word meaning non-interference. This doctrine was popularised by classical
economists who gave the view that government should interfere as little as possible in the economic activities of the
individuals.

Life Expectancy at Birth: The number of years a newborn infant would live if prevailing pattern of age
specific mortality rates at the time of birth were to stay the same throughout the childs life.

Liquidation: It refers to the termination (or winding up) of a registered company. Liquidation takes place
because of companys insolvency. In liquidation, assets are turned into cash for settling outstanding debts and for
apportioning the balance, if any, amongst the owners.

Liquidity: Assets which can easily be converted into cash money are said to have liquidity. Land does not possess
liquidity at it takes longer time to get converted into cash.
Liquidity Ratio: The commercial banks under banking regulations have to maintain a certain specified
proportion of their total deposits of various categories in liquid assets. This maintainable proportion is called
liquidity ratio.
Lock-out: Lock-out refers to such a situation when the management does not permit the workers to work unless
they agree to accept the employers term. Lock-out is the closing of work by the management for an uncertain period
of time to put pressure on the labour union. It is an action by the employer equivalent to a strike by employees.

Lorentz Curve: This curve shows the degree of inequalities of a frequency distribution in a graphical manner. It
is a curve on a graph which shows the cumulative proportion of a statistical population against this cumulative share
of some characteristic. This curve is commonly used to depict income distribution showing the cumulative
percentage of people from the poorest up and their cumulative share of national income.

Lump Sum Tax: Lump sum tax is a fixed amount which has imperative nature irrespective of the income level.
This tax is not equitable in nature.
Merit Goods: Merit goods refer those goods that are very essential to the society as a whole and hence the
government ensures their availability to all consumers, regardless of their ability to pay to reasonable price.
Mixed Economy: It refers to that economic system in which both private and public sector co-exists. Indian
economy is an example of a mixed economy.

Monetary Reforms: When a new currency is introduced in a country due to hyperinflation or due to a
deliberate policy measure (such as decimalization) it is termed as monetary reform.
Monopoly: Monopoly refers to that market structure where there is only one seller in the market who controls the
entire market supply and no substitute of the product is available in the market.
Monopsony: Monopsony is that market situation in which there is only one single buyer of the product in the
market. In other word, buyers monopoly is termed as monopsony.

Multinational Company: It is a large scale company which has its production base in several countries and
the bulk of the production is produced in outside nations. This company produces more overseas
than they do in its parent country. Increased trade and economies of scale have encouraged such type of companies
in the recent years.

Oligopoly: Oligopoly is that form of imperfect competition in which there are only a few firms in the industry (or
group) producing either homogeneous products or may be having product differentiation in a given line of
production.
Open Economy: Open economy is that economy which is left free and the government imposes no restrictions
on trade with areas outside that economy.
Okuns Law: Arthur Okun presented an empirical relationship between cyclical movements in GNP and
unemployment. Okun found that an annual 25% increase in the rate of real growth above the trend growth results in
a 1% decrease in the rate of unemployment. This relationship is known as Okuns Law.

Perfect Competition: Perfect competition is the market in which there are many firms selling identical
products with no firm large enough relative to the entire market to be able to influence market price.

Poverty Line: Poverty line is a virtual line demarcating persons living below and above it. In India all those
persons are treated living below poverty line who are not able to earn that much of income which is not sufficient to
acquire food equivalent to 2100 calories per person per day in urban areas and 2400 calories per person per day in
rural areas. As per UNDP, one US dollar (1993 PPP US $) per person per day is treated as poverty line.

Price Mechanism: Price mechanism signifies the working of those market forces which establishes
equilibrium in the economy. Laissez faire policy is the basis for the working of price mechanism.
Price Ring: It is an unofficial syndicate by which the prices are controlled with the prior understanding among
the traders. These dealers under a price ring decide not to over-bid one another at the public auction to keep the
prices low. This price ring may discourage outsiders from coming to the auctions.

Public Debt: Public debt represents borrowing by the state and public authorities. All loans taken by the public
authorities constitute public debt.
Peril Point: It indicates that point beyond which tariff reductions would threaten the existence of domestic
industry.

Quick Asset: Those assets are quick assets which are liquid or nearly liquid in nature and easily be turned into
cash.
Quoted Company: That company is called quoted company whose share prices are quoted on a stock
exchange.

Reflation: It signifies general increase in the level of business activity in the economy. Reflation generally
involves greater government expenditure and the easing of credit to encourage increased production.
Regressive Tax: It is a tax in which rate of taxation falls with an increase in income. In regressive taxation
incidence falls more on people having lower incomes than that of those having higher incomes.
Repressed Inflation: It is a state in which aggregate demand is greater than the total supply of goods and
services in an economy, but prices are prevented from rising to eliminate excess demand. The holding down of price
is sometimes done by government as a means of suppressing inflation.

Reserve Asset Ratio: It is the ratio of a banks reserve assets to its eligible liabilities.
Revolving Credit: It is a bank credit that is renewed automatically until notice of cancellation is received.
Revolving credits may be sanctioned for an unlimited amount in total but with a limit on
the amount that may be drawn at any one time or within a specified period, e.g., one month.

Seasonal Unemployment: It is that unemployment which is caused by seasonal variation in demand for
labour by various industries, such as agriculture, construction and tourism. Seasonal unemployment
normally declines in spring as more outdoor work can be undertaken.

Security: Security refers to a share, bond or government stock that can be bought and sold, usually on the stock
exchange or on a secondary market, and carries a right to some form of income, either in the form of a fixed rate of
interest or dividends.

Shadow Price: It is an imputed value for a good based on the opportunity costs of the resources used to
produce it such values are of particular significance in resolving problems of resource allocating with respect to the
effect on welfare.
Share Capital: It is the amount of money raised by a company by issuing shares. The authorized share capital is
the amount that a company is allowed to issue as laid down in its Articles of Association. The issued share capital is
the amount actually issued i.e., the number of issued shares multiplied by their par value. Fully paid share capital is
the amount raised by payment of the full par value of the issued shares.

Single Tax System: It is a system in which all tax revenues are raised from one form of taxation.
Social Security: Provision by the state out of taxation of welfare assistance to those in need as a result of
illness, unemployment, or old age compare national insurance refers to social security.

Soft Currency: A currency with limited convertibility into gold and other currencies, either because it is
depreciating due to balance of payments difficulties or because controls have been placed on it to prevent the
exchange rate falling.

Special Drawing Rights (SDRs): It is a reserve asset (known as Paper Gold) created within the
framework of the International Monetary Fund in an attempt to increase international liquidity, and now forming a
part of countries official reserves along with gold, reserve positions in the IMF and convertible foreign currencies.
Special Tax (Unit Tax): It is a tax imposed per unit of a commodity rather than on the value of the
commodity compare ad-valorem.

Stabilization Policy: It is Government economic policy announced at reducing the cyclical and other
fluctuations that take place in a market economy.

Stagflation: It is a state of the economy in which economic activity is slowing down, but wages and prices
continue to rise. The term is a blend of the words stagnation and inflation.
Surplus Value: It is the difference between the amount paid to a factor and the revenue earned by selling the
output it produced.
Tariff: It is a tax or a duty on imports, which can be levied either on physical units, e.g., per tonne (specific), or on
value (ad-valorem). Tariffs may be imposed for a variety of reasons including; to raise government revenue, to
protect domestic industry from subsidized or low-wage imports, to boost domestic employment, or to ease a deficit
on the balance of payments.
Trade Gap: It signifies the size of the deficit (or surplus) in the balance of trade i.e., the difference in value
between visible imports and exports.
Trade Union: It is an organisation of employees who join together to further their interests. Trade Unions
negotiate on behalf of their members in collective bargaining with employers, and in the event of a dispute may put
pressure on employers by withdrawing labour (i.e. strike) or by some less drastic form of action (i.e. go-slow,
working to rule).

Transfer Payment: It is a payment made by public authority other than one made in exchange for goods or
services produced. Transfer payments are not the part of National Income. Examples includes unemployment benefit
and child benefits.

Vital Statistics: Vital statistics refers to those data which are associated with vital events of masses like birth,
death, marriage divorce etc.
VAT (Value Added Tax): VAT seeks to tax the value added at every stage of manufacturing and sale, with a
provision of refunding the amount of VAT already paid at the earlier stages to avoid double taxation. In other words,
the tax already paid can be claimed at the next stage of value addition.
Wealth Tax: Wealth tax is that tax which is imposed on the value of total assets but the wealth upto a certain
limit is exempted from such tax.
Welfare State: It refers to a nation that provides to all at least the minimum standards in respect of education,
health, housing, pensions and other social benefits.

Wholesale Price Index: Wholesale Price Index is that index which is calculated on the basis of wholesale
prices. It is calculated in a similar way to the Retail Price Index.