Escolar Documentos
Profissional Documentos
Cultura Documentos
Economy
What is Economics-?
Economics is a branch of social science. In simple words we can say that Economics is the study
of how people choose to use their available resources in most efficient way. Please note down
that Economics is not only about managing money and finance. It is much more than that in
contemporary context. There is no universal definition of Economics because it is really difficult
to cover all aspects of economics into a water tight boundary. Yet some scholars tried to defined
Economics in their words as given below-
“Economics is the study of how individuals and groups make decisions with limited resources as
to best satisfy their wants, needs, and desires”
“Economics is the social science that examines how people choose to use limited or scarce
resources in attempting to satisfy their unlimited wants”
A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay-
“the science which studies human behavior as a relationship between ends and scarce means
which have alternative uses
Economics aims to explain how economies work and how economic agents interact. Economic
analysis is applied throughout society, in business, finance and government, but also in crime,
education, family, health, law, politics, religion, social institutions, war, and even to science
Over all we can say that Economics is the branch of social science that studies the production,
distribution, and consumption of goods and services in a society
On the basis of above definition, we can break down the study of economics into two broad
categories
1. Microeconomics
2. Macroeconomics
What is Microeconomics-?
This is a sub branch of economics that deals with economics decisions made at a low, or micro,
level. How does the change of a price of good influence a family’s purchasing decisions-? If my
wages rise, will I be inclined to work more hours or less hours-?
What is Macroeconomics-?
This is a sub branch of Economics which deals with a larger/broader level of economy. It relates
to issues such as determination of national income, savings, investment, employment at
aggregate levels, tax collection, government expenditure, foreign trade, money supply and price
level etc
Notable Points-
Adam smith is considered as father of Modern Economics. He wrote “The nature &
causes of wealth of the Nations” in 1776. He stressed upon wealth aspect of economy
After that Professor Marshall wrote “Principles of Economics” in 1890. He stressed upon
welfare aspect of economy
The economy of India is the 12th largest economy in the world by market exchange rates and 4 th
largest economy of world by purchasing power parity (PPP) as per the latest report of World
Bank. Despite recent global economic recession, Indian Economy is growing at a healthy rate of
6% and considered as one of the fast emerging economy in world along with China, Brazil,
South Africa and Mexico. In the 21st century, India is an emerging economic power with vast
human and natural resources, and a huge knowledge base. Economists predict that by 2020, India
will be among the leading economies of the world. However, Indian Economy is still lagging
behind in many spheres like more than 60% of India’s total working population is still engaged
into agricultural activates, while its contribution into GDP is only around 18%. India is a labor
surplus country and problem of sectional unemployment still a matter of concern for GOI.
India was under social democratic-based policies from 1947 to 1991. The economy was
characterized by extensive regulation, protectionism, and public ownership, leading to pervasive
corruption and slow growth. Since 1991, continuing economic liberalization has moved the
economy towards a market-based system. A revival of economic reforms and better economic
policy in 2000s accelerated India’s economic growth rate. By 2008, India had established itself
as the world’s second-fastest growing major economy after China. India’s large service industry
accounts for 54% of the country’s GDP while the industrial and agricultural sector contribute
29% and 17% respectively. Agriculture is the predominant occupation in India, accounting for
about 60% of employment. The service sector makes up a further 28% and Industrial sector
around 12%.The labor force totals half a billion workers. India ranked 31 st in Financial
development index-2009 produced by World Economic Forum
Meeting the needs of the present without compromising the ability of future generations to meet
their needs is called sustainable development. This concept is popular in present context of
development
In common meaning Micro credit is “Loan of very small amount”. It can be defined as provision
of parsimony, credit and other financial services and products of very small amount to the poor
in rural, semi-urban and urban areas for enabling them to raise their income levels and improve
living standards. The institutions that provide Micro Credit are called Micro Credit Institutions.
Micro Credit is provided to those individuals that lack collateral, steady employment and a
verifiable credit history and therefore cannot meet even the most minimal qualifications to gain
access to traditional credit. This group of individuals includes artisans, tiny and small industries,
grocers, vegetable vendors, rickshaw pullers, roadside retailers and the like. Other activities
include farming, poultry, cattle rearing, piggery, fishery etc.
The innovative idea of Microcredit originated with the Grameen Bank in Bangladesh. In 1976
Professor Muhammad Yunus launched a research project to examine the possibility of designing
a credit delivery system to provide banking services targeted to the rural poor. The Grameen
Bank is a microfinance organization and community development bank started in Bangladesh
that makes small loans known as microcredit. The organization and its founder, Muhammad
Yunus, were jointly awarded the Nobel Peace Prize in 2006; the organization’s Low-cost
Housing Programme won a World Habitat Award in 1998. The United Nations declared 2005
the International Year of Microcredit.
Before the nationalization of banks in India in 1969, co-operative banks were the main
dispensers of small loans in the organized sector. Commercial banks were not easily accessible
to small borrowers. Those were the days of security-oriented approach. Nobody could think of a
loan, big or small, without a guarantor or mortgage of immovable property. Profit was the only
motive of the banking. However Nationalization changed the picture and the nationalized banks
opened branches in the remotest corners of the country. They were to implement various
government schemes like the Twenty Point Program, Antyodaya Program, subsidized
Differentiated Rate of Interest loan etc. which aimed at uplifting the poorest of the poor with the
help of micro credit.
Gradually there was establishment of Regional Rural Banks (RRBs), Deposit Insurance and
Credit Guarantee Corporation (DICGC), National Bank for Rural and Agricultural Development
(NABARD), Small Industrial Development Bank of India (SIDBI), Export Credit Guarantee
Corporation (ECGC) and the latest Credit Guarantee Fund Trust for Micro & Small Enterprises
(CGTMSE). The CGTMSE covers collateral-free credit up to Rs. 50 lakhs. These institutions
play supportive roles to ensure uninterrupted flow of credit to small time borrowers. Under the
present directive of the RBI, the priority sectors must get a minimum of 40% share of a
commercial banks’ total lending. This includes 16% for the agriculture sector.
Some Issues-
In spite of all these measures the performance of micro finance in India has neither been
quite satisfactory quantitatively nor qualitatively.
The money disbursed has not been adequate, nor has it yielded the desired results.
Instead of being recycled, the major portions of loans have been lost as bad debt.
With a view to facilitating smoother and more meaningful banking with the poor, A pilot project
for purveying micro credit by linking Self-Help Groups (SHGs) with banks was launched by
NABARD in 1991-92. The aim was to make it possible facilitating smoother and more
meaningful banking with the poor. RBI had then advised commercial banks to actively
participate in this linkage programme. The scheme has since been extended to RRBs and co-
operative banks. More than 90 per cent of the groups linked with banks are exclusive women
groups. SHG-bank linkage programme has surely emerged as the dominant micro finance
dispensation model in India; other models too have evolved as significant micro finance
purveying channels.
There was a time when India considered as “Sparrow of Gold.” It was the wealth of India, which
attracted so many invaders and foreign rulers towards the country at that time. During ancient
time when other countries had limited trade activities, India enjoyed a very well developed trade
and commerce. The famous silk route of India is very well known even today. After the advent
of British East India Company in 1600, the trade activities were in favor of India till 1757. But
in the beginning of 18th Century when industrial revolution emerged in England, British used
India as producer of raw material for their industries on one hand and exploited the country as
potential mark for various goods produced into factories of England. Gradually till 1813
handloom and craft business of India totally ruined by British for their personal advantages.
Dada Bhai Narojee exposed the “drain of wealth” from India in his famous work
After Independence-
Independence came with pain of partition to India. Hence it was not easy to put the country on
path of rapid development. Indian Government opted for planned economy [a type of economy
where economic planning plays very crucial role in the socio-economic development of country].
To achieve the desired and consistent growth in Indian Economy, GOI came up with idea of
“Five Year Plans.” To implement this idea Planning Commission was constituted in 1950 and 1 st
Five year plan was formulated for period from 1951 to 1956. At present 11 th Five year plan is
going on and Indian economy is growing with a healthy rate of 8% since last on decade
The initial idea of planned economy did not work as well as it was expected. It resulted into
heavy burden of external debt on India. Hence GOI came with new economic policy in 1991.
The 3 main objectives of this new economic policy was as follows-
Laissez Faire is a French term and it literally means no interference. It is a doctrine which states
that government generally should not intervene in the economic activities and economy should
be market oriented based upon demand and supply principle
The organized banking system of India can be divided into following 3 categories-
1. Central Bank of India [**RBI which is apex banking institution in the country and
control as well regulates the sheer money in India]
RBI’s 2nd Quarter review of monetary policy released on 28th October 2009
1. Commercial Banks [Public Banks like SBI + Private Banks like HDFC as well as
foreign banks]
2. Rural/ Co-operative Banks [Dedicated to Rural Banking and usually sponsored by
Public Banks]
**RBI is the supreme banking authority and all other banks of India works under guidelines
given by it. Notes and Coins of only Rupee 1 are released by Finance Ministry of India and all
other currency notes as well as coins are released by RBI. Even Currency printing press cannot
print notes without permission of RBI
The trade activity with other countries on globe is known as Foreign Trade. It is directly related
to export-import of a country with other countries. The foreign trade of India was very well
developed during ancient history. The orientation of foreign trade of India totally changed with
advent of British Empire in India. Immediately after independence GOI adopted inward looking
foreign trade policy to restrict global trade but picture has been changed with new economic
policy of the country which emphasized on globalization. In 1950, the Indian Share in total
world trade was just 1.78% which further decreased to 0.6% in 1995. The foreign trade of India
is going upwards and it is expected to be 2% of total world trade by 2009 [As per figure released
by WTO]. These figures clearly shows that India has failed to increase its share in the total world
trade
India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and
its successor, the WTO. While participating actively in its general council meetings, India has
been crucial in voicing the concerns of the developing world. For instance, India has continued
its opposition to the inclusion of such matters as labor and environment issues and other non-
tariff barriers into the WTO policies. Since liberalization India opened almost all sectors for FDI
[Foreign Direct Investment] and continuously signing pact with international economic
organizations like ASEAN and APEC to harness international trade potential. USA is top trade
partner of India followed by China. These days India is considered as one of the hottest
destination for FDI. Recently Ministry of Commerce and Trade came up with new Foreign Trade
Policy to boost its share in total world trade
1. To arrest and reverse declining trend of exports due to global recession is the main aim of
the policy. This aim will be reviewed after two years.
2. To double India’s exports of goods and services by 2014.
3. To double India’s share in global merchandise trade by 2020 as a long term aim of this
policy. India’s share in Global merchandise exports was 1.45% in 2008.
4. Simplification of the application procedure for availing various benefits
5. To set in motion the strategies and policy measures which catalyze the growth of exports
6. To encourage exports through a “mix of measures including fiscal incentives,
institutional changes, procedural rationalisation and efforts for enhance market access
across the world and diversification of export markets.
Aim in General: The policy aims at developing export potential, improving export performance,
boosting foreign trade and earning valuable foreign exchange. FTP assumes great significance
this year as India’s exports have been battered by the global recession. A fall in exports has led
to the closure of several small- and medium-scale export-oriented units, resulting in large-scale
unemployment.
Targets:
Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export
Obligation for a particular financial year in which there is decline in exports from the country,
has been extended for the 5 year Policy period 2009-14. Support for Green products and products
from North East extended.
Announcements for FPS [Focus Product Scheme], FMS [Focus Market Scheme], MLFPS
[Market Linked Focus Product Scheme]-
Higher allocation for Market Development Assistance (MDA) and Market Access Initiative
(MAI) has been announced.
The following cities have been recognized as towns of export excellence (TEE)
Scheme for Status Holders (Status Holders means star status holders)
1. Additional Duty Credit Scrip’s shall be given to Status Holders @ 1% of the FOB value
of past exports accelerate exports and encourage technological Upgrdation.
2. This facility shall be available for sectors of leather (excluding finished leather), textiles
and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in
primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts,
and ships, boats and floating structures), plastics and basic chemicals (excluding Pharma
products).
3. This facility shall be available up to 31 March, 2011.
4. Transferability for the Duty Credit scrip’s being issued to status holders under VKGUY
[Vishesh Krishi & Gram Upaj Yojana] Scheme permitted only for the procurement of
cold chain equipments.
Extension of Income Tax Exemption to EOU [Export Oriented Units] and STPI [Software
Technology Parks of India]-
Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income
Tax Act has been already extended for the financial year 2010-11 in the Budget 2009-10.
The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover
at 95%, to the adversely affected sectors, is continued till March, 2010.
1. Fisheries exempted from maintenance of average EO under EPCG Scheme (along with 7
sectors) however Fishing Trawlers, boats, ships and other similar items shall not be
allowed for this exemption.
2. Additional flexibility under Target plus Scheme (TPS) / Duty Free Certificate of
Entitlement (DFCE) Scheme for the marine sector.
On the payment of 50 % applicable export duty, Leather sector shall be allowed re-export of
unsold imported raw hides and skins and semi finished leather from public bonded ware
houses.
1. Export Obligation Period for advance authorizations issued increased from existing 6
months to 36 months.
2. Pharmacy sector included under MLFPS for countries in Africa and Latin America &
some countries in Oceania and Far East.
The claims under Focus Product Scheme, the requirement of “Handloom mark” was required
earlier which has been removed.
1. EOUs have been allowed to sell products manufactured by them in DTA (Domestic
Tariff Area) up to a limit of 90% instead of existing 75%, without changing the criteria of
‘similar goods’, within the overall entitlement of 50% for DTA sale. (This means that
instead of 75% these units can sell up to 90 % of their products in the domestic markets)
2. EOU allowed procuring finished goods for consolidation along with their manufactured
goods, subject to certain safeguards.
3. Extension of block period by one year for calculation of Net Foreign Exchange earnings
of EOUs kept under consideration.
4. EOU allowed CENVAT Credit Facility.
To encourage Value Added Manufactured export, a minimum 15% value addition on imported
inputs under Advance Authorization Scheme.
Project Exports and a large number of manufactured goods covered under FPS and MLFPS.
Custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output
Norm included in factoring.
Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export
Promotion scheme to other scheme. Customs shall now permit this conversion within three
months, instead of the present limited period of only one month.
1. Dispatch of imported goods directly from the Port to the site has been allowed under
Advance Authorization scheme for deemed supplies. (Presently the duty free imported
goods could be taken only to the manufacturing unit of the authorization holder or its
supporting manufacturer.
2. Maximum applicable fee for 18 Authorizations/ license applications (except those
mentioned in Chapter 3 of FTP) has been reduced to Rs. 100,000 from the existing Rs
1,50,000 (for manual applications) and Rs. 50,000 from the existing Rs.75,000 (for EDI
applications).
3. No fee shall now be charged for grant of incentives under the Schemes in Chapter 3 of
FTP.
Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise
duty also before fulfillment of export obligation under Advance Authorization and EPCG
Scheme. Earlier it was allowed after fulfillment of export obligation.
Licenses for the import of sports weapon will be issued now by Regional Authorities provided a
NOC (No Objection Certificate) is issued by Ministry of Sports & Youth Affairs. (Earlier DGFT
[Directorate General of Foreign Trade] Headquarters had to be approached for this)
To solve the problem of medical device industry, the procedure for issue of Free Sale Certificate
has been simplified and the validity of the Certificate has been increased from 1 year to 2 years.
Those Automobile industries which have their R&D establishment will be allowed free import of
reference fuels (petrol and diesel), up to a maximum of 5 KL per annum, which are not
manufactured in India.
Mr. Anand Sharma announced that an Inter Ministerial Committee will be formed to redress/
resolve problems/issues of exporters.
A Directorate of Trade Remedy Measures shall be set up, which will enable support to Indian
industry and exporters, especially the Micro Small & medium Enterprises MSMEs in availing
their rights through trade remedy instruments,
Earlier the payment of customs duty for Export Obligation (EO) shortfall under Advance
Authorization, DFIA or EPCG Authorization was allowed in cash only. Now this payment can
be done in the way of debit of Duty Credit scrip’s.
Restricted Items can be imported now (as replenishment) against transferred DFIAs (Duty Free
Import Authorizations) as the present DFRC (Duty Free Replenishment Card) scheme.
Dollar Credits
1. WTO Agreement
2. Ministerial decisions and declarations
World Trade Organization (WTO) was founded to supervise and liberalize international trade.
The organization officially commenced on January 1, 1995 under the Marrakesh Agreement,
replacing the General Agreements on Tariffs and Trade (GATT). The WTO has 153 members
which represent more than 95% of total world trade and 30 observers, most seeking membership.
The WTO is governed by a ministerial conference, meeting every two years; a general council,
which implements the conference’s policy decisions and is responsible for day-to-day
administration; and a director-general, who is appointed by the ministerial conference. The
WTO’s headquarters is at the Centre William Rappard, Geneva, Switzerland.
WTO deals with
WTO is currently endeavoring to persist with a trade negotiation called the Doha Development
Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of
poorer countries which represent a majority of the world’s population.
However, the negotiation has been dogged by “disagreement between exporters of agricultural
bulk commodities and countries with large numbers of subsistence farmers on the precise terms
of a ‘special safeguard measure’ to protect farmers from surges in imports. At this time, the
future of the Doha Round is uncertain.”
The inaugural ministerial conference was held in Singapore in 1996. Disagreements between
largely developed and developing economies emerged during this conference over four issues
initiated by this conference, which led to them being collectively referred to as the “Singapore
issues”.
The developing countries opposed these issues as they were not in their favors. The European
Union, Japan and Korea favored these issues and pushed them in successive conferences. US
said that it could accept some or all of them at various times, but preferring to focus on market
access.
The Doha Development Round was launched at the conference. The talks are stalled even today
and impetus is on reaching a final agreement. The major impediment is different interests of
developed and developing nations.
Fifth ministerial conference, Cancun Mexico 2003
This ministerial conference was called for to reach an agreement on the Doha round. However,
an alliance of 22 southern states, the G20 developing nations (led by India, China and Brazil),
demanded agreements on Singapore issues and called for an end to agricultural subsidies within
the EU and the US. There was no progress made in this round too.
The sixth WTO ministerial conference was held in Hong Kong from 13 December – 18
December 2005 with an aim to reach an agreement on Doha Round by 2006. In this meeting,
countries agreed to phase out all their agricultural export subsidies by the end of 2013, and
terminate any cotton export subsidies by the end of 2006. Further concessions to developing
countries included an agreement to introduce duty free, tariff free access for goods from the
Least Developed Countries, following the Everything But Arms initiative of the European Union
— but with up to 3% of tariff lines exempted. Other major issues were left for further negotiation
to be completed by the end of 2010
The Global Competitiveness Report is a report annually published by the World Economic
Forum since 1979. This report “assesses the ability of countries to provide high levels of
prosperity to their citizens. This in turn depends on how productively a country uses available
resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies,
and factors that set the sustainable current and medium-term levels of economic prosperity.
1. Switzerland 5.60
2. United States 5.59
3. Singapore 5.55
4. Sweden 5.51
5. Denmark 5.46
6. Finland 5.43
7. Germany 5.37
8. Japan 5.37
9. Canada 5.33
10. Netherlands 5.32
India has moved up one position to 49 (GCI 4.30) in the Global Competitiveness Report 2009-
2010.
Finance Ministers of the world’s 20 most powerful countries are gathering for a two-day meet
starting to discuss reforms to tackle black money and money laundering in London
Trade ministers from about 35 countries met in Delhi recently to give impetus to the Doha round
of trade talks. This article covers in a condensed form the background of the stalled Doha round
of Trade negotiations, understanding the issues of the developing countries and challenges ahead.
The objective of the Delhi meeting was neither to focus on negotiations on specific topics nor to
reach an agreement .The objective was to concentrate on working on a timetable for the talks.
India’s foreign trade minister, Anand Sharma had invited the leaders to get some momentum into
the negotiations.
The core issues were echoed in G20 summits in Washington in November and London in April
as well as the G8+ summit in L’Aquila in July apart from a meeting of farm exporters in June at
Bali and again at the Organisation for Economic Cooperation and Development (OPEC) in Paris
and in July at a meeting of the Asia-Pacific APEC grouping.
United States is key to any deal is expected by many other countries to start engaging in the
negotiations; however the key focus of Obama Administration seems to be upon economic crisis
and health care besides to be able to point to new opportunities for U.S. business.
Developed countries emphasize the big emerging countries like China, India and Brazil to open
their markets and not make excessive use of special arrangements for developing countries in a
Doha deal to shield their industries from competition.
There are gaps and unresolved issues on agriculture and non-agriculture market access (Nama).
The center point of talks involves efforts to open up trade in agriculture and industrial goods.
The involves rich countries to open their protected markets for agriculture produce and cutting
their heavy subsidies they provide to their farmers & agro exporters , as they are able to wipe out
the farmers in poor / developing countries out of the market.
The richer developing countries will also cut industrial tariffs in return so that it opens up their
markets for industrial goods to do business with both rich and poor countries.
Outcome-
There seems to be a more of a split between the developing and the developed nations