# Current affairs

-> Ashok Dalwai committe -> doubling farmers income (demand for keeping agriculture
marketing in concurrent list -> MS swaminathan

-> A2 -> A2 + FL -> C2

-> role of FPO /VPO

-> APLM -> reform in APMC -> agri produce and Levilhood markeitng

-> NWR -> Negotiatible warehouse receipts -> through web portal -> 2011 direct not
thuru Web portal -> further auctionable or used for collateral
elasticity supply and price volatility reduced

-> National HEalth policy 2017 -> public expenditure -> 2.5% of GDP

-> PJ Nayak committee -> role of chairman and MD to be separated for banks
Uday kotak committee -> similar provision for listed companies

-> Headwinds mentioned by the economic survey are the backlash against
globalization which reduces exporting opportunities, the difficulties of
transferring resources from low productivity to higher productivity sectors
(structural transformation), the challenge of upgrading human capital to the
demands of a technology-intensive workplace, and coping with climate change-induced
agricultural stress.

-> The Global Innovation Index (GII) is an annual ranking of countries by their
capacity for, and success in, innovation.
It is published by Cornell University, INSEAD, and the WIPO, in partnership
with other organisations and institutions, and is based on both subjective
and objective data derived from several sources, including the International
Telecommunication Union, WB, WEF
The index was started in 2007 by INSEAD and World Business, a British magazine.
The GII is commonly used by corporate and government officials to compare
countries by their level of innovation.

-> Nature Index tracks the affiliations of high-quality scientific articles.

Updated monthly, the Nature Index presents research outputs by institution and
country.

-> India has been ranked 132nd among 152 nations in a new index tracking commitment
to reducing income inequality, Sweden led the index while Nigeria remained the
worst performer
The index and the inequality report was released by the international NGO Oxfam
and Development Finance International.
It measures the efforts of governments that had pledged to reduce inequality as
part of the SDG
The index mainly focuses on redistributive actions governments can take, rather
than those that would prevent rising inequality in the first
place

-> The New International Economic Order (NIEO) was a set of proposals put forward
during the 1970s by some developing countries through the United Nations
Conference on Trade and Development (UNCTAD) to promote their interests by
improving their terms of trade, increasing development assistance, developed-
country tariff reductions
-> 1. Drain of wealth is a concept before independence.
2. Western paradigm model shows dependence on foreign nations for everything
from teachers, science and Machines.
3. Population explosion reduced availability of resources per capita and
agriculture could not sustain demand due to its low elasticity of income
demand

-> Capital gains tax will boost consumption in present as savings will be taxed
later and also slow down investments.
1. Y=C+S. therefore, if consumption increases saving would fall.
2. Also S=I so investments would also reduce.

Economic theory has an unambiguous conclusion. The principles of optimal taxation

tell us that capital incomes should not be taxed. This result is evident in such
landmark articles as the one written by Joseph Stiglitz and Anthony Atkinson in
1976, two economists who by no stretch of the imagination can be accused of turning
a blind eye to income inequality.

The intuition behind the idea that capital incomes should not be taxed is a simple
one. There are two main insights. First, taxes on capital incomes will encourage
people to switch from future consumption to current consumption. The savings rate
will fall as a result�and so will the economic growth needed to create jobs. After
all, savings are nothing but future consumption.

Second, taxes on capital income are actually a form of double taxation.

Shareholders who have already paid taxes on the profits of the companies they own
should ideally not be expected to pay a further round of taxes on the dividends
they get or the capital gains they book (the latter being the net present value of
future profits after tax). There is also the question of whether companies will use
taxes on capital incomes to switch from equity to debt as a source of funds.

-> zero-based budgeting ( other types ->Participatory budgeting, Personal budget,

Programme budgeting, Zero deficit budget)
1. Low priority programs can be eliminated or reduced.
2. Effectiveness of programmes can be dramatically improved.
3. Programmes of high priority can obtain increased funding by shifting
resources within an agency.
4. The government need not increase the tax revenue as ZBB can to do a more
effective job with existing revenues.

-> On the financial front, there has been divergence on both income and
consumption.
There is convergence i.e. that IMR and life expectancy are trending towards
similar goals in various states in India.
This is due to catching up of education and health parameters in various
states.

-> Gender parity index -> in term of education

Gender inequality index (UNDP) -> UNESCO
(GII) is an index for measurement of gender disparity that was introduced in
the 2010 Human Development Report
this index is a composite measure to quantify the loss of achievement within a
country due to gender inequality.
It uses 3 dimensions to measure opportunity cost: reproductive health,
empowerment, and labor market participation.
Gender Development Index (GDI) and the Gender Empowerment Measure (GEM)

-> NBFC
1. cannot outsource core management functions only. But they are allowed to
outsource other aspects
2. NBFCs can outsource various functions such as treasury, cash management etc
3. NBFCs do not form part of the payment and settlement system and cannot issue
cheques drawn on itself
4. Deposit insurance facility of Deposit Insurance and Credit Guarantee
Corporation is not available to depositors of NBFCs, unlike in case of
banks

-> What is the Graded Surveillance Measure?

SEBI introduced the measure to keep a tab on securities that witness an abnormal
price rise that is not commensurate with financial health and fundamentals of the
company such as earnings, book value, price to earnings ratio among others.
It was introduced by SEBI to check for fraudulent practices.
issued a notification that if such price movements were found the companies would
be classified as shell companies and money laundering provisions could be initiated
against such companies

-> mutual funds part of short term -> Money market

-> RR -> only interest payment while CR (assests creation and loss)-> repayment of
loans
Disinvestment -> CR

-> Tarapore committee precondition for CAC

1. inflation stablity/ FD/ REER in band of (+-5%)/ reduce CRR/ reduce NPA

-> green back -> dollar

dollar index -> against 6 major currency value of dollar

-> G-Sec have coupon (earlier fixed coupon and now even flexible)
T-bill no coupons -> redeem at par
Way and other means -> RBI lends to govt

-> NBFC (deposit and non-deposit) -> under companies act

1. no demand deposite
2. not part of payment and settlement system -> non checkable system
3. no insurance cover unlike deposit banks

-> Wholesale and long-term finance banks

1. focused primarily on lending to infrastructure sector and small, medium and
corporate businesses

-> MCLR -> benchmark system based upon formula decided by RBI (92%* Cost of lending
funds + 8% return on Assests)
1. no lending below this rate -> revised every 3 months
2. earlier system was discretionary -> internal benchmark and no lending below
it with few exceptions

-> D-SIBS -> domestic systematic important banks ( teir 1 capital -> share
capital )
1. assests >= 2% of GDP
2. categorisied under 5 bucket list -> Additional Common Equity Teir 1 as a
percentage of Risk Weighted Assets (RWAs)
3. domestically identified by Central Banks of a country and globally by BASEL
committee on banking supervision

-> PSL norms for MSME

 1. Domestic scheduled commercial banks and Foreign banks with 20 branches and
above -> 40 % of Adjusted Net Bank Credit or Credit
Equivalent Amount of Off- Balance Sheet Exposure, whichever is higher.
ANBC -> difference between starting of year and ending of year bank credit
OBE -> off -balance sheet exposure -> probable risk assest which may
presently not be reflected in balance sheet but if one default for which
bank provided gurantee -> LoU -> letter of understanding for export
2. Agriculture -> MSME -> Export Credit -> Education -> Housing -> Social
Infrastructure -> Renewable Energy -> Others

-> PSLCs -> priority sector lending certificate

1. tradable certificates issued against priority sector loans of banks so as to
enable banks to achieve their specified target and sub-targets for PSL in
the event of a shortfall.
2. All Scheduled Commercial Banks (including RRB), Urban Co-operative Banks,
SFB (when they become operational) and Local Area Banks
are eligible for PSLC trading.

-> Public credit registry -> credit information -> managed by RBI
1. database of credit information which is accessible by all the stakeholders.
2. It generally captures all the relevant information in one large database on
the borrower.
3. It will be managed by a public authority as RBI and the lenders will have to
mandatorily report the loan details.

-> Types of ATM

1. White-label ATMs: owned and operated to increase the geographical spread of
ATMs and enhance financial inclusion.
2. Bank ATM: owned and operated by the respective bank.
3. Brown Label ATM: banks outsource the ATM operations to a third party. They
have logo of the bank.

-> Ombudsman scheme for NBFC

1. cost-free and expeditious complaint redressal mechanism relating to
deficiency in the services by NBFCs covered
2. Deposit taking NBPF > 1 billion rs and consumer interface
3. GM of RBI -> ombudsman -> power to pay compensation and punish bank

-> NBFC -> deposits and non deposits type -> no demand deposit
1. company registered under the Companies Act, 1956 engaged in the business of
loans and advances, acquisition of securities issued by
Government, insurance business, chit business etc. but does notinclude any
institution whose principal business is that of agriculture activity,
industrial activity, purchase or sale of any goods (other than securities)
or providing any services and sale/purchase/construction of
immovable property.
2. They are regulated by and are registered with RBI under Section 45-IA of the
RBI Act, 1934.

-> Difference between banks & NBFCs

1. NBFCs cannot accept demand deposits;
2. NBFCs do not form part of the payment and settlement system and cannot issue
cheques drawn on itself;
3. Deposit insurance facility of Deposit Insurance and Credit Guarantee
Corporation is not available to depositors of NBFCs, unlike in case of
banks.

-> P2P under NBFC ( earlier unders companies act)

1. P2P lending refers to a crowdfunding platform (mostly online) where people
looking to invest and people in need of borrowing come together.
2. a reverse auction process that lenders bid for borrower�s proposal and the
borrower is free to choose whether or not to borrow.

-> WPI and CPI -> calculated on Geometric mean

Indirect Taxes have been left out of WPI in order to remove the impact of
fiscal policy.

-> Producer Price Index (PPI)

1. measures the average change in the prices of both goods and services, either
as they leave the place of production called
Output PPI or as they enter the production process called Input PPI.
2. It contrasts with other measures such as CPI which measures changes in
prices from buyers or consumers perspective.

-> IIP (manufacturing > mining > electricity)

-> 8 core sector

Refinery Products (28.04%) > Electricity (19.85%) > Steel (17.92%) > Coal
(10.33%) > Crude Oil (8.98 %) > Natural Gas (6.88 %) >Cement (5.37%)
> Fertilizer (2.63 %)

-> MDR -> Merchant discount rate

1. It is a charge which the merchants pay -> bank for accepting payments from
customers through debit card in their establishment.
2. It compensates the card issuing bank for facilitating for PoS transactions
and payment gateway such as Mastercard and Visa.
3. RBI specifies the Maximum MDR charges that can be levied on every card
transaction

-> Chit funds -> concurrent -> RBI (just guidance to states)/SEBI ( CIS only) no
regulation for Chit funds
1. RBI does not regulate the chit fund business. However, RBI can provide
guidance to state governments on regulatory aspects like creating
rules or exempting certain chit funds.
2. SEBI regulates collective investment schemes. However, the SEBI Act
specifically excludes chit funds

-> QIP (listed companies -> shares , debentures, security)

1. capital raising tool wherein a listed company can issue equity shares, fully
and partly convertible debentures, or any security (other than
warrants) that is convertible to equity shares.
2. QIP can be classified as a method of private placement, apart from Public
issue, Rights issue, and Bonus Placement.
3. Components of QIP: mutual funds, domestic financial institutions such as
banks and insurance companies, VCF, FII
4. SEBI suggested that there should be at least 2 QIPs if the issue size <
Rs.250 cr and at least 5 investors if the size > Rs.250 cr.
A single investor cannot be allotted more than 50% of the issue.

-> means of raising capital from market ->

1. IPO and FPO (further portfolio offering)
2. Right Issue: when the issue of share is only to existing shareholders in
proportion to shares held by them.
3. Composite Issue: wherein the allotment in both public issue and rights issue
is proposed to be made simultaneously
4. Bonus Issue: It is issued without any consideration based on the number of
shares already held by shareholders.
5. Private Placement: When securities are issued to a select group of persons <
49, and which is neither a rights issue nor a public issue.
It is of 3 types:
1. Preferential allotment: when allotment of securities/shares is done on a
preferential basis to a select group of investors.
2. Institutional Placement Programme (IPP)
in which the offer, allocation and allotment of such securities is made
only to qualified institutional buyers.
3. Qualified Institutional Placement

-> Maharaja Bond (read for reason of masala bonds-> way to transfer risk of holding
forex to investor from RBI) both maharaja and masala bonds
1. It is rupee-denominated bond launched by IFC for issuances in India�s
domestic capital markets
2. NHAI masala bonds -> LSE
3. NBFCs -> RBI allowed NBFCs to sell masala bonds to FII abroad
4. They are rupee-denominated bonds issued by Indian entities in the overseas
market to raise funds.
5. As of now, it is being traded only at the LSE
6. Masala bonds -> named so by the IFC an investment arm of the WB which issued
these bonds to raise money for infrastructure projects in India.
7. They protect investors from exchange rate fluctuations as opposed to ECB
that have to be raised and repaid in dollar. ( check it seems wrong)
as per my understanding it protect reserves of RBI as well as risk of
holding currency as ruppee may depreciate when outflow of loan repay
loans in dollar and thereafter payment through ECB increases dollar
denominated loans -> if ER fluctuations will affects this ( risk on investor)
can reduce money supply in economy on payment of loans
RBI will find difficult to maintain ER for exporters competitiveness and
import -> inflation

-> Green bonds (1st issued by European Investment bank and WB -> 2007 and 1st green
bond issued by Yes bank 2015 and masala green bond)
1. debt instrument issued by an entity for raising funds from investors for
financing �green� projects, such as renewable energy, low carbon
transport, sustainable water management, climate change adaptation, energy
efficiency, sustainable waste management, BD conservation
2. Help in achieving INDC by 2030

-> India�s International Stock Exchange (India INX)

1. subsidiary of BSE -> India�s 1st international exchange at the
International Financial Service Centre (IFSC) of GIFT City.
2. India INXs Global Securities Market (GSM) is India�s first debt listing
platform which allows fund raising in any currency.

-> IRFC -> non deposit NBFC and infrastructure finance company
1. dedicated financing arm of the Indian Railways for mobilizing funds from
domestic as well as overseas Capital Markets.
2. It is a Schedule �A� Public Sector Enterprise and registered as Systemically
Important Non�Deposit taking NBFC and Infrastructure Finance
Company with RBI

-> Rural Electrification Corporation�s first green bond has opened for trading at
the London Stock Exchange.
1. It is a Climate Bonds Initiative certified green bond (a non-profit
international organisation that mobilizes debt capital markets for climate
friendly projects and initiatives)

-> Rural Electrification Corporation

1. Established in 1969, it is a Navratna company under the Ministry of Power.
 2. A navratna company is one which can invest up to Rs. 1000 crore without
prior government approval.
3. It is also the nodal agency for the implementation of DDUGJY ( and
contributing agency for rolling out UDAY

-> Indian Green Bonds Council ( 2017)

1. joint project of the FICCI and the Climate Bonds Initiative, to build the
country�s green debt markets.
2. Green Infrastructure Investment Coalition (GIIC) launched at COP-21 of UN
Climate Conference, aims to provide a platform for investors,
development banks and advisors for countries to be able to tap when seeking finance
for green infrastructure.

-> ETF -> Index Funds attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE Nifty.
1. Exchange Traded Funds are index funds that offer the security of a fund and
liquidity of stock.
2. Much like index funds they mirror the index, commodity, bonds or basket of
assets.
3. Their price changes daily as they are traded throughout the day

-> Bharat 22
1. comprise 22 stocks including those of CPSEs, PSB and GOI�s holdings under
the Specified Undertaking of Unit Trust of India (SUUTI).
2. ETF -> disinvestment to raise funds from markets -> 72500 cr
3. The sector wise weightage in the Bharat 22 Index is basic materials (4.4%),
energy (17.5%), finance (20.3%), FMCG (15.2%), industrials (22.6%), and utilities
(20%).

-> Commodity options ( read options -> call(gives owner rights) and put
option(Seller)/ in futures obligations while in options no such restraints)
gold -> 1st commodity and guar -> 1st agricommodity
1. Gold options -> 1st time in India on Multi Commodity Exchange (MCX) becoming
the 1st commodity that the SEBI has approved for options trading
in 14 years.
2. National Commodity and Derivatives Exchange Ltd. unveiled India�s first
agricommodity option in guar seed designed as a hedge for farmers to
safeguard their price risk

-> Sovereign gold bank -> sovereign backing with 2.5% fixed interest rate / part of
SLR / gold denominated tradable

-> P-notes or overseas derivative instrument(regulated by SEBI-> e-KYC and

transferrablity) -> 6% of Foregin investment -> stocks and equity ->
1. P-Notes or Participatory Notes are Overseas Derivative Instruments that have
Indian stocks as their underlying assets.
2. They allow foreign investors to buy stocks listed on Indian exchanges
without being registered.

-> Market Infrastructure Institutions (MII)

1. systemically important for the country�s financial development and serve as
the infrastructure necessary for the securities market. They
include stock exchanges, depositories and clearing corporations

-> Insider trading (T Vishwanathan committe RBI -> for regulation and prevention)
1. It is the buying or selling of a security by someone who has access to
material nonpublic information about the security.
2. Insider trading can be illegal or legal depending on when the insider makes
the trade. It is illegal when the material information is still
nonpublic.

-> Shell companies ( disqualified by Ministry of Corporate Affairs/ not defined

under act/ different from dormant companies)
1. SEBI and exchanges -> graded survelliance measures
2. SEBI may put shares of companies under the measure for suspected price
rigging or under the ambit of �shell companies
3. These are companies without active business operations with significant
assets. ( both legitimate and illegitimate purposes)
Legitimate purpose -> start-up by raising funds and Illegitimate purpose ->
hiding ownership from the law enforcement, laundering
unaccounted money and avoiding tax

-> Financial Sector Assessment Programme (FSAP) (read about WB and IMF from Vision
365 good info)
1. IMF and WB -> Financial System Stability Assessment (FSSA) and Financial
Sector Assessment (FSA) for the Indian financial system
2. Comprehensive and indepth analysis of indian financial system ( in 1999
launched -> in response to Asian finacial crisis )

-> SDR -> interest bearing -> international reserve assets

1. It is an interest bearing - international reserve asset, which can be
exchanged for freely usable currencies.
2. The value of the SDR is based on a basket of 5 major currencies�the US
dollar, the euro, the Chinese renminbi (RMB), the Japanese yen,
and the British pound sterling.
3. SDR is an important component of India�s foreign reserves along with gold,
foreign currency and reserve tranche.
4. The reserve tranche is portion of the required quota of currency that each
(IMF) member country must provide to the IMF that can be utilized
for its own purposes without a service fee

-> FRBM ( Target RD/FD/ Tax to gdp ratio/Total public liablities reduction -> 2008-
9 target for RD -> zero)
1. revenue expenditure (education and health) is as important as capital
expenditure -> same contribution to productivity
Human capital and phyical infrastructure
2. the Medium-term Fiscal Policy Statement
The Fiscal Policy Strategy Statement
The Macroeconomic Framework Statement

-> 1. Effective revenue deficit = RD - grants to states for creation of capital

assets.
2. Fiscal Deficit = total expenditure - revenue receipts + non-debt capital
receipts.
It indicates the amount the Government has to borrow to meet its annual
targets.
3. Primary Deficit = FD - interest payments.
It shows what the FD would�ve been for this particular year if no interests
were to be paid. It ignores the loans taken by the previous
Governments in previous financial years.
Note -> capital expenditure and receipts involve creation and disinvestment of
assests and not in RE/RR

-> N K singh FRBM review (public debt to gdp / FD /RD targets)

1. Public debt to GDP ratio should be considered as a medium-term anchor for
fiscal policy in India.
2. combined debt-to-GDP ratio of the centre + states should be brought down to
60% by 2023 (comprising of 40% for the Centre & 20% for
 states) as against the existing 49.4%, and 21% respectively.
3. centre should reduce its FD from the current 3.5% (2017) to 2.5% by 2023.
The Committee set 0.5% as escape clause for FD target to adjust with
cyclical fluctuations
4. central government should reduce its RD steadily by 0.25 percentage (of GDP)
points each year, to reach 0.8% by 2023, from a projected value of 2.3% in
2017.
5. setting �fiscal council�, an independent body which will be tasked with
monitoring the government�s fiscal announcements for any given year

-> MTEF MEDIUM-TERM EXPENDITURE FRAMEWORK STATEMENT (MTEF)

1. breaching of consolidated states FD of target 3 % due to UDAY

-> Alternative mechanism ( Disinvestment targets -> DIPAM (under MoF))

1. CCEA proposed an Alternative Mechanism (AM) consisting of the FM, Minister
for Road Transport & Highways and Minister of Administrative
Department to decide on the sale from the stage of inviting of Express of Interests
(Eols) till inviting of financial bid.
2. Strategic Disinvestment is the sale of substantial portion of the Government
shareholding of a central public sector enterprise (CPSE) of up to 50%, or
such higher percentage along with transfer of management control
3. It can be carried out by IPO /FPO/ Offer for sale (OFS)/ institutional
Placement Program (IPP) and CPSE Exchange Traded Fund.

-> National investment fund (2005 -> disinvestment proceedings -> NIF / 75% for
social sector scheme and 25% for Capital investment )
1. �Public Account� under the Government Accounts and the funds would remain
there until withdrawn/invested for the approved purposes.
2. The corpus of NIF was to be of a permanent nature and NIF was to be
professionally managed to provide sustainable returns to the
Government, without depleting the corpus.
3. Selected Public Sector Mutual Funds were entrusted with the management of
the NIF corpus.
4. 75% of the annual income of the NIF was to be used for financing selected
social sector schemes which promote education, health and
employment. The residual 25% of the annual income of NIF was to be used to
meet the capital investment requirements of profitable
and revivable PSUs.
5. equity infusion or recapitalization

-> Economic council PM

-> FSDC and FDMC ( amendment required in RBI act and payment act for sharing
information)

-> Reverse Charge Mechanism ( liablity on recipient rather than supplier -> as
supplier is unregistered party)
1. Under this mechanism the liability to pay tax is of the recipient of goods &
services rather than the supplier when the goods or services have been
received from an unregistered person.
2. Usually, the supplier is liable to pay tax and avail input tax credit, if
applicable, but in this case the mechanism is reversed.
3. Also, the GST Council has specified 12 categories of services for reverse
charge that include radio taxi, services provided by an individual advocate
or firm of advocates etc.
4. Also A four-slab structure of GST - 5% (on basic necessities), 12%, 18% and
28% (on luxury goods) has been decided.

-> GST council

 1. a constitutional body set up as per Article 279A to decide issues relating to
GST .
2. It consists of following members:
1. Union Finance Minister - Chairperson
2. Union Minister of State, in-charge of Revenue of finance.
3. Minister In-charge of finance or taxation or any other Minister nominated
by each State Government.

-> GSTN (GST Network)

1. It is a not for profit, non-Government, private limited company set up
primarily to provide IT infrastructure and services to the Central &
State Governments, tax payers & other stakeholders for GST implementation.

-> GST suvidha providers (GSP):

They are third party service provider for innovative and convenient methods to
taxpayers and other stakeholders seeking to interact with the
system.

-> GST
1. tax buoyancy
2. no cascading effect
3. reduce tax evasion -> self policing feature
4. gdp will increase and impact on consumer
issues
Issue of Parliamentary and Legislative autonomy:
GST Council (an executive body) will finalize a vote by a majority of not less
than three-fourths of weighted votes of members present and voting
(Centre to have 33% and states to have 66% weight of the total votes cast).
Urban local bodies will have to deal with a huge fiscal gap once local body
tax, octroi and other entry taxes are scrapped for GST system.
List of Exclusions & different rates � Many exclusions like petroleum products,
diesel, petrol, aviation turbine fuel, alcohol & different rates are
undermining the principle of One Country, One Tax.

-> NAA
1. Standing Committee, Screening Committees in every State and the Directorate
General of Safeguards in the CBEC have also been instituted under
antiprofiteering measures.
2. If the undue benefit cannot be passed on to the recipient, it can be ordered
to be deposited in the Consumer Welfare Fund.
3. In extreme cases, the NAA can impose a penalty on the defaulting business
entity and even order the cancellation of its registration
under GST.

->Consumer Welfare Fund -> under dept of reveneu but operated by ministry of
consumer affairs
1. It has been set up by the Department of Revenue and, is being operated by the
Ministry of Consumer Affairs, Food & Public Distribution,
and Department of Consumer Affairs.
2. Its objective is to provide financial assistance to promote and protect the
welfare of the consumers and strengthen the consumer
movement in the country.

-> E-way bill (10 KM -> currently increased to 50 KM and monetary value > 50000 ;
self generated with time duration
1. document required to be carried by a person in charge of the conveyance
carrying any consignment of goods of value exceeding Rs. 50,000 for sales
beyond 10 km in the new GST regime.
2. It will eliminate the need of a separate transit pass in each state for
movement of good.
3. generated from the GST Common Portal by registered persons or transporters
before commencement of movement of goods of consignment.

-> DGGSTI -> specialize for gems and jewelary

1. DGGSTI is the new name given to the Directorate General of Central Excise
Intelligence (DGCEI) which is the apex intelligence organisation
functioning under CBEC, Dept of Revenue
2. Directorate General of Goods and Service Tax Intelligence (DGGSTI) as the
regulator with respect to money laundering cases in the gems and jewellery
sector

-> PMLA puts obligation on Finanical institution to verify identity of clients,

maintain records and furnish information in prescribed form
to Financial Intelligence Unit � India (FIUIND).

-> read economic offender bills

-> Financial intelligence unit(FIU) -> Economic intelligence council headed by FM

1. It is an independent body reporting directly to the Economic Intelligence
Council (EIC) headed by the Finance Minister.
2. It is a multidisciplinary body with members from CBDT, CBEC, RBI, SEBI,
Department of Legal Affairs and Intelligence agencies

-> Enforcement Directorate (dept of revenue under MoFinance)

1. It is a specialized financial investigation agency under the Department of
Revenue, Ministry of Finance.
2. It is responsible for enforcement of the FEMA and certain provisions under
the PMLA
3. It has the power to undertake survey, search, seizure, arrest, and
prosecution action etc. against offender of PMLA offence.

-> capital gains tax (36 month for listed and 24 months for not listed)
Profits or gains arising from transfer of a capital asset are called �Capital
Gains� and are charged to tax under the head �Capital Gains�.
1. direct tax levied on capital gains, profits an investor realizes when he
sells a capital asset for a price that is higher than the purchase price.
2. Capital gains taxes are only triggered when an asset is realized, not while it
is held by an investor.
3. India classifies this tax into short term (capital gains made within 36
months) and long-term capital gains (made beyond 36 months).
4. Finance minister in his Budget 2018 speech has proposed to re-introduce
long-term capital gains tax on gains arising from the transfer of
listed equity shares.
5. STT is a type of direct tax payable on thevalue of taxable securities
transaction done through a recognized stock exchange in the country.
6. The securities on which STT is applicable are shares, bonds, debentures,
derivatives, units issued by any collective investment scheme, equity based
government rights or interests in securities and equity mutual funds.
7. Off-market share transactions are not covered under STT.

-> MAT and AMT -> minimum alternative tax ( any companies (domestic or foreign with
profits) -> MAT) read arthapedia
1. exemption of few companies retrospective from ambit of MAT

-> Project insight -> widen and deepen tax base through data mining
technical infrastructure will also be leveraged for implementation of Foreign
Account Tax Compliance Act (FATCA) and
Common Reporting Standard (CRS).
-> APAs and MAP are alternative tax dispute mechanism in matters involving transfer
pricing.

-> APA (bilateral or unilateral) -> mutually agreed

1. contract between a taxpayer and at least one tax authority (one of the two
countries that have signed the bilateral treaty) specifying the
pricing method that the taxpayer will apply to its related-company transactions. It
is signed prior to the transaction taking place.

-> MAP
1. way by which taxpayer can seek relief in his country of residence when he
feels that he is not being taxed according to the terms of the bilateral
treaty between the two countries.
2. Prior to the recent relaxation, Income Tax Department was open to receiving
bilateral APAs and MAP only in case of existence of
�corresponding adjustment� clause in the double tax avoidance agreement
(DTAA) with the concerned countries.
3. The �corresponding adjustment� clause in transfer pricing matters provides
that if tax demand is raised on a company by a DTAAsignatory
country, the revenue authorities in India would reduce the tax liability of
the parent company based in India.

-> WTO (read scheme notes well explained + these below pt as additional things
mentioned)
1. Public stock holding
2. Agreement on Agriculture -> India want to extend limit as unable to provide
domestic support ( MSP - international price)
Under Agreement on Agriculture (AoA), developing countries can give
agricultural subsidies or aggregate measurement support
(AMS) up to 10% of the value of agricultural production and developed
countries give up to 5% (production taking 1986-88 as base year).
3. Peace clause -> 2013 WTO members agreed to refrain from challenging any
breach in prescribed ceiling by a developing nation at the dispute
settlement forum of the WTO. This clause will be there till a permanent
solution is found to the food stockpiling issue
4. WTO Nairobi Ministerial Conference, 2015 (Nairobi package) concluded that
export subsidies will be eliminated by developed countries immediately,
except for a handful of agriculture products, while developing countries have no
time period to do so.
5. No agreement was reached on the work programme on special safeguard
mechanism (SSM): a tool agreed in Doha round that
allows developing countries to raise tariffs temporarily to deal with
import surges or price falls.

-> BEFS Multilateral Convention to Implement Tax Treaty Related Measures

1. G-20 initiatives -> OECD

-> GAAR (2012-13)

1. GAAR aims to check tax evasion and tax avoidance and they come under the
Income Tax Act, 1961
2. Government subsequently set up a panel under Parthasarathy Shome to review
the proposals which suggested their deferment and they came
into force from 1 April 2017.
3. As per the rules tax benefits of more than 3 crores and which are made on or
after 1 April 2017 only will invite GAAR provisions

-> IIA and ISDS ->

-> FDI and FIPB abolistion and delegation of duty and guidelines work to DIPP
( implement trade and intellectual property)
1. CCEA nod for FDI> 5k cr
2. MHA will validate -> communication, satellite, broadcasting and security
( from Pak and Bangladesh) and in J K and NE
3. DIPP concurrence will be required in case of FDI rejection by concerned dept
or ministry

-> FDI routes

In India FDI is approved through Automatic route, Government route and through
the combination of both routes (especially for FDI beyond 49% and up to 74%
or 100%).
1. Automatic Route: there is no need to get prior approval from Government or
RBI. The investors just have to notify the relevant regional office
of RBI about the inward remittances and issuance of shares, within 30 days of
occurrence of each of these activities.
2. Government Route: Currently 91-95% of the FDI flow through Automatic route.
Only 11 sectors (including Defense and Retail) need Government
approval.
3. 100% FDI under automatic route for Single Brand Retail Trading (SBRT) has
been allowed
4.

-> Global Foreign Exchange Committee

1. It is forum of central bankers and experts working towards promotion of a
robust and transparent forex market.
2. It has been established under the aegis of BIS.
3. It comprises of public and private sector representatives from the foreign
exchange committees of 16 international forex trading
centres.
4. One of its major tasks is to maintain and update the �Global Code of Conduct
for the Foreign Exchange Markets
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# March april

1. GVA at factor cost + (Production taxes � Production subsidies) = GVA at basic

prices
GDP at market prices = GVA at basic prices + Product taxes �Product subsidies
GVA gives a picture of the state of economic activity from the producers' side
or the supply side. GDP gives the picture from the consumers' side or the
demand perspectives
CSO + RBI -> GDP instead of GVA for cross country comparison + international
standard

2. Credit-to-GDP gap (credit gap) is difference between credit-to-GDP ratio and the
long term trend value of credit-to-GDP ratio at any point in time ->
countercyclical capital buffer (CCCB)

3. IndAS are recommended by National Advisory Committee on Accounting Standards

(NACAS) to the Ministry of Corporate Affairs, which then issues them. These
standards on an par with International Financial Reporting Standards (IFRS).
Corporate entities started complying with IndAS with effect from 2016

4. Banning Virtual currency dealing + revamping of Lead bank scheme

5. RRBs-> NABARD -> PCA for RRBs (SCB -> 50% centre + 15 % state + 35% banks) ->
prudential requirements relating to capital adequacy, net non- performing
assets (NNPAs) and return on assets (ROA) through self-corrective actions
Capital to Risk-Weighted Asset Ratio (CRAR): between 6-9%, between 3-6% and
less than 3%
NPAs:-> NNPAs between 10-15% (for RRBs having retained profit) or Gross NPAs
(GNPAs) between 10-15% (for RRBs having accumulated losses)
NNPAs of 15% and above (for RRBs having retained profit) or GNPAs of 15% (for
RRBs having accumulated losses).
ROA: falls below 0.25%

6. The Liberalized Remittance Scheme (LRS)

It�s a facility provided by the RBI for all resident individuals including
minors to freely remit upto $ 250,000 per person per year for current and
capital account purposes or a combination of both.
Regulations for the scheme are provided under the FEMA Act 1999.

7. From FY 2018-19 the foreign banks with 20 branches and above will have to ensure
that:
1. minimum 8% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of
Off-Balance Sheet Exposure (CEOBE), whichever is higher, is earmarked for
lending to the small and marginal farmers.
2. minimum 7.5 per cent of ANBC or CEOBE, whichever is higher, is earmarked for
lending to micro-enterprises.
3. The loan limits per borrower for Micro/ Small and Medium Enterprises
(Services) has been removed for classification under priority sector.

8. FPI relaxation of norms due to poor bond market health -> read must

9. G-Secs or Government Securities: These are debt obligations issued by Central or

State Governments for short (Treasury Bills) or long terms (Bond or dated
securities). In India, the Central Government issues both, treasury bills and bonds
or dated securities while the State Governments issue only bonds or dated
securities, which are called the State Development Loans (SDLs). G-Secs carry
practically no risk of default and, hence, are called risk-free gilt-edged
instruments.

10. Bond Yield: As investors sell bonds, prices drop and yields increase (inversely
proportional). A higher bond yield indicates greater risk. If the yield
offered by a bond is much higher than what it was when issued there is a chance
that the company or government that issued it is financially stressed and may
not be able to repay the capital

11. National Financial Reporting Authority (NFRA) -> read must

It will be established as an independent regulator to oversee the auditing
profession and accounting standards with jurisdiction extending to all listed
companies and large unlisted companies.
ICAI under the Chartered Accountants Act, 1949 shall continue to audit
smaller unlisted companies.
Quality Review Board will also continue quality audit in respect of private
limited companies, public unlisted companies and also with respect to audit
of those companies delegated by NFRA.
It will have the power to investigate Chartered Accountants and their
companies either suo motu or on a reference for any misconduct.
NFRA will have the same powers as of a Civil Court while trying a suit.

12. Angel tax

13. Niti Aayog MSP model (read market assurance scheme)

The market assurance scheme: It proposes procurement by States and
compensation of losses up to certain extent of MSP after the procurement and
price realisation out of sale of the procured produce.
The price deficiency procurement scheme
Private procurement and stockist scheme: Under this, procurement would be
done by private entrepreneurs at MSP. The government would provide some
policy and tax incentives to these entrepreneurs

14. Nutrient based subsidy scheme

15. Integrated management of PDS

16. City compost scheme

17. Paramparagat krishi vikas yojana

18. North East Industrial Development Scheme (NEIDS)

19. Read Deen dayal upadhadhy gram jyoti yojana

20. unnati project -> Ministry of shipping

21. Coal bed methane

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----------------------
The Finance Ministry may come out with a Rs. 10,000-crore follow-on fund offer of
the Bharat-22 exchange traded fund (ETF) as it looks to dilute stake in Coal India
to meet the minimum public holding norm.

Besides, the Ministry is keen to take the ETF route to sell off government shares
held through SUUTI in private firms � ITC, Axis Bank and L&T, an official said. The
government, in November, introduced Bharat-22 ETF comprising shares of 22 firms,
including PSUs, public sector banks, ITC, Axis Bank and L&T. The fund had garnered
bids to the tune of Rs. 32,000 crore, although the government retained only Rs.
14,500 crore.

IMF report
1) World economic outlook

WB rport
1) global economic prospects
2) world financial development report
3) World development report
-----------------------------------------------------------------------------------
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# Economics Survey Vol 1

Chap-1
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-------------------------
Chap -3

1. Declining trend of GDS (Gross domestic saving) and GFCF(GDP climed to 10 % real
in 2007) in india from 2007
2003 -> 2007(boom) -> 2017(Bust) -> no other economy observed such a swing
except Brazil and India during same period
Not even in BoP crisis 1991 or Asian Financial crisis 1997
Note -> 1. World bank published World Development Indicators
 2. CSO publishes data of Saving and Investment and data from
National Account Statisitcs

2. Sectors responsible of fall in savings and investment

Investment (2007-17) -> private (- 5 % -> private corporate(-4.4%) and
household(-0.6%) + public (-1.3%) = -6.3 % overall decline
saving (2007-17) -> private (- 3.8 % -> private corporate(+1.4% )and household
(-5.2%) + public (-4%) = -7.7 % overall decline
HH saving decline was partly offset by financial savings -> shift from physical
savings to financial savings (shares and debentures)

3. Way to examine saving and investment slowdown cycle and its impact and reversal
1. standard determinant of economic growth -> greater investment, export and
competitive Exchange rate
2. Rodrik conclusion -> economic growth driven by providing incentives for
investment and production rather than savings
3. Counting incidence of investment and saving slowdown (based upon threshold
difference in last 5 years average and subsequent 2 years
within bracket of 2%, 3% and 4%)
4. incidence are more for investment than saving ; slowdown in both unusual
5. magnitude and time duration of slowdown higher for investment than savings
6. but drag in low savings for duration is higher if event occur than
investment

4. 1. China, Singapore, Mauritius, Tunisia, Egypt all affected in 2% bracket while

only Bangladesh unaffected
2. Lost decade of Latin american in 1980s and early 1990s
1. Debt crisis of Mexico 2. weakness of Brazilian economy
3. Asian financial crisis brought slowdown in Malayisa, Thailand , Korea and
Indonesia
4. even Turkey and Argentina faced slowed investment phase

5. Post 2008 GFC effects on Savings and investment

1. More countries affected by savings declines
2. countries affected by investment declines increased but limited
3. till 2007, divergence between countries affected by both investment and
savings existed , investment slowdown incident more than saving
slowdown; slowdown events in both investment and saving equalisied by 2007
1975-2007 difference between count of slowdown incidence exist between
investment and saving which changed now
2007-2017 difference reduced as slowdown incidence of saving too increased
4. Savings are less prone to cycles -> savings influenced by long term trends
viz demographics

6. Effect on India
1. 1st time in history such incident occur India as India escaped slowdown
during Lost decade 90s, AFC 97, BoP 91 crisis
2. Investment slowdown : duration -> 5 years till 2016 and magnitude reduced by
21%
3. saving slowdown -> 2010

7. Consequence
1. deciding priorities and policies to boost investment (physical
infrastructure/ MII) or savings (in LR both are important)
2. Rodrik argument -> 1. Higher savings or higher saving transition does not
gurantee sustained high growth
2. Higher sustained growth transitions
gurantee higher savings transition
Argues for more emphasis on investment than savings(corporates profit or
HH savings)
g = s/ Cr => profit is important for sustained investment -> investment is
based upon profit expectation or savings (Harrod Domar model
somewhat confusing as against Rodrik argument)
3. investment slowdown has more pronounced effect on growth rate than savings
-> govt to focus on investment incentives
conclusion derived from East Asian Crisis; ambiguous effect of savings on
growth rates from slowdown incidents
4. India less affect by investment slowdown comparing other countries (India
above line from regression)
5. existence of episode of investment slowdown followed by saving slowdown and
without savings slowdown
6. 60% of episode of slowdown due to private investment slowdown in investment

7. significant impact of private investment on growth

8. Recovery
1. investment slowdown -> 1. higher duration, lower in magnitude and from
higher initial boom value
2. balance sheet related slowdown ->
stressed finance and unable to service debt due to economic downturn
2. Balance sheet slowdowns
1. Balance sheet slowdowns has more effect on investment in terms of
duration and magnitude -> difficult to reverse them
2. Investment decline larger in magnitude in India comparing other
countries
3. Countries with similar declines ( fall of 8.5% in 9 years for T+11, T+14,
T+17)
reversal of about 2.5% possible in median and if upper quartile than 4%
which is unlikely as India below it
4. per capita GDP fall is less comparing other countries

9. Conclusion
1. Balance growth theory seems wrong for higher savings required for higher
growth (growth constrained by savings)
indivisiblity of production, savings and demand (big push model) -> Ragnar
Nurkse, Arthur Lewis and Roseinstein and Rodan
vicious cycle of poverty or low equilibrium trap
2. reviving investment >>> savings( anti-corruption and unearthing black
money; financial savings, shift to market instrument)
3. Balance sheet induced slowdown -> long duration and higher magnitude -> no
automatic correction/ bouncebacks with few exception
4. raising public investment + Cost of doing business to be reduced + stable
tax and regulatory environment
5. incentiving small industries to revive private investment
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Chap-5 Late convergence

1. economic convergence
-> faster growth rate in low income countries >> than higher income ->
(diminishing return to capital)
this pit the gap of rich and poor -> capital accumulation -> rise in
productivity and rise in output but population rise and depreciation reduce
rate of growth as existing and augmenting capital is not sufficient to keep
capital/labour ratio constant reducing productivity of capital
Technology factor leds to differences in production function for two countries
 Broadening -> % of countries growing faster than US -> frontier countries
acceleration -> average excess growth rate over the US
both factor more in 1980-2017 than 1960-1980

2. spread and backlash effect -> affecting the convergence and trap

3. Middle income trap /Low income trap

Low income trap
Low income countries -> low saving -> low investment -> require big push to
come of out this vicous cycle -> therefore a trap
But high growth in China and Korea busted this notion
but countries like india joining the middle income pool have slowed growth ->
Late convergence stall

4. Backlash reason
1. end to hyperglobalisation -> reduced export opportunities
2. difficult to transfer resources from low productivity to higher productivity
(transfer of capital) and structural reforms
3. challenge in upgrading human capital to the demand fo technology intensive
workplace
4. coping with the climate-induced agricultural stress

5. Case India
1. Low income country in 1960 (6% of US PCY) -> low middle income in 2008 ( 12%
US PCY) -> upper middle income in 2020s (if 6.5% growth)

6. Low income trap

1. low growth in low income countries (poor cotunries) than rich countries ->
divergence big time

7. Middle income trap

-> middle income countries grow slowly than richer countries
1. squeezed out of manufacturing and other dynamic sectors by poorer, lower
cost competitiors
2. lack of institutional, human and technological capital to carve out niches
higher up the value added chain
Theory repudiated and insignificant in practicality
1. middle income countries continue to grow faster than standard convergence
standard demanded
2. Korea, Portugal, Poland and Latvia -> middle -> upper

8. 1980 to 1997 -> the era of (divergence) in which low-income countries fell
further behind
1998 to 2007 -> an early period of (convergence) running from the East Asian
financial crisis until the Global Financial Crisis
poorest grown faster than lower middle countries
faster than upper middle income countries
2008 to 2017 -> the most recent period of �late convergence.�

9. Low-income- Real Per Capita Income less than 5% of the US.

Lower middle income- Real Per Capita Income of about 5-15% of the US
Upper Middle Income- Real Per Capita Income of about 15-35% of the US.
High Income- All those above that line- including some above US� level.

10. Conditional Convergence:

A country's income per worker converges to a country-specific long-run level
as determined by the structural characteristics of that country. The
implication is that structural characteristics, and not initial national income,
determine the long-run level of GDP per worker. Thus, foreign aid
should focus on structure (infrastructure, education, financial system etc.) and
there is no need for an income transfer from richer to poorer nations

11. Convergence seems to be stalled by GFC in india

1. declining world growth rate for every income growth (low -> middle ->
high)
2. short as well as long term implication

13. Reasons
1. hyper-globalization repudiation
2. thwarted/impeded structural transformation
3. human capital regression induced by technological progress
4. climate change-induced agricultural stress

14. hyper-globalization repudiation

1. higher growth rate for export oriented economy Korea, japan, China
2. gravity model supports for higher flow of trade when same economic mass
economy trade
if convergence occurs -> higher trade to gdp ratio (since post 1997
growth rate have been high in developing countries -> convergence ->
trade must increase)
3. observed in 1990s onwards -> trade to gdp ratio rising with 7.5 equivalent
countries to 9 equivalent countries
4. political impact will hurt the economy

15. thwarted/impeded structural transformation

1. transformation from low productivity to high productivity sector (lewis)
resource transferred to sector with higher productivity growth potential
2. but transition to marginal productivity increment sector
3. manufacturing important for unconditional convergence -> (manufacturing
and service have higher productivity)
but pre-mature deindustrialization in late convergers peak at low income
level -> concern
as income rises -> share of manufacturing sector in economy must rise but
a paradox for late convergers and it starts to fall after low peak
4. structural transformation or shift-share analysis and decompose overall
productivity growth into
1. �good� (i.e., involving desirable structural transformation)
2. �less good� growth (e.g., in hotels, restaurants, transport, etc.)
Therefore, good growth comprises growth accounted for by labor share
shifts into these good sectors and their productivity growth
good growth rate falling after GFC for China and India
Share of good growth falling reflected in figure/graph as leftward shift or
decreasing share of good growth sector in economy

16. Human capital regression

1. growth based upon absolute human capital attainment rather than
comparative advantage
2. early converger -> good education of manufacturing China 8 years of
schooling for assembling
late converger -> poor schooling (learning poverty count and gap) high in
era of AI, Big data and automation requireing high end skill

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-------------------------
# Explanation for important topics

(i) Unconditional convergence:

unconditional convergence we mean that LDCs will ultimately catch up with the
industrially advanced countries so that, in the long run, the standards of living
throughout the world become more or less the same. The Solow model predicts
unconditional convergence under certain special conditions. For example, let us
suppose that different countries of the world differed mainly in their capital-
labour ratios.

Normally, rich countries have high capital-labour ratio and high levels of output
per worker. By contrast, low income countries have low capital-labour ratios and
low levels of output per worker. We also assume that two groups of countries are
the same in all other respects such as saving rates, population growth rates and
the production function.

If this is true then the Solow model predicts that, in spite of any differences in
initial capital-labour ratios, all these countries will ultimately attain the same
steady state. Differently put, if countries have the same fundamental
characteristics, capital-labour ratios and living standards will uncon�ditionally
converge, even though some countries may start from way behind.

(ii) Conditional convergence:

Even if countries differ in their saving rates, population growth rates and
production functions (due to unequal access to technology) they will converge to
different steady state with different capital-labour ratios and different standards
of living in the long run. If countries differ in the fundamental characteristics,
the Solow model predicts conditional convergence.

This means that standards of living will converge only within groups of countries
having similar characteristics. For example, if there is conditional convergence, a
low income country with a low saving rate may catch up, one day or the other, a
richer country that also has a low saving rate, but it will never catch up a rich
country that has a high saving rate.

One reason for this is that poor countries have less capital per worker and thus
higher marginal products of capital than do rich countries. So savers in all
countries will be able to earn the highest return by investing in poor countries.
Eventually, borrowing abroad will allow initially poor countries� capital-labour
ratios and output per worker to be the same as in initially rich countries.
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# Economic Survey Vol-II
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# Chap-5

-> UN SDG (17 SDG with 169 targets to be acheieved by 2030) inclusive of
elimination of extreme poverty

-> Voluntary National Review (VNRs) 2017 on SDG implementation at High level
Political Forum at UN, New york
1. report based upon programmes and initatives analysis
2. 7 SDG in focus -> 1. No poverty
2. Zero Hunger
3. Good health and well being
 4. Gender equality
5. Industry, innovation and infrastructure
6. Life below water
7. Partnership for goals
3. MOSPI -> National draft for SDG as per UN statistical commission
inputs from various ministries and NITI aagog collect, validate and
document best practices
4.

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-------------------------

# 1)FINANCIAL RESOLUTION AND DEPOSIT INSURANCE(FRDI) BILL 2017

*Will est--Resolution Corporation--that will replace existing Deposit Insurance &
Credit Guarantee Corp.
*RC will --
?monitor financial firm like= banks+insurance companies
?anticipate their risk of failure
?take corrective action
?resolve them in case of failure
? provide deposit insurance upto a limit.
?will classify financial firms on their risk of failure- low, moderate, material,
imminent or critical .
*Provides clawback performance incentives--paid to senior management of a failed
bank.
*Provides various resolution instruments like --bail in, bridge institution, run
off entity for insurance.
*Bill applies to-- banks+insurance companies+ stock exchanges+ depositories +
payment systems+ NBFCs.

# Central Issue price

1. price at which centre issue grains to state govt and UT

# Buyer's credit (LoU) between importer bank and exporter bank) is cheap but ban by
RBI lead to costly alternative bank gurantees and letters of credit)
---------------------------------------------------
# debate of job calculation through EPFO data using big data analytics by Pulak
ghosh
---------------------------------------------------
# Dec, 2017

-> Indian Resource Efficiency Programme ( NITI aayog with UNEP, launched by MoEFCC
and Indian Resource Panel (Internation RP too))
1. IREP recommended the development of Strategy on Resource Efficiency for
enhancing resource-use efficiency in Indian economy and industry.
2. The strategy focuses on abiotic material resources, excluding fossil fuels,
of two strategic sectors- Construction & Mobility (these sectors
have witnessed high growth rate, are biggest consumers of materials, contribute
significantly to GDP and employment in the country).

-> WTO Ministerial conference 11

1. Issues deliberated over
1) Fisheries subsidies ( SDG goal fulfilling by 2020 to curb down illegal
and unsustainable and environmental unfriendly practices)
2) Public Stockholding (Peace clause retained subsidies 10% of the
produces for developing countries since no consensus,
WTO enquires India about foods subsidy bill)
Aggregrate Measurement of Subsidies = ( Internvention
price(Administered price /Procurement price or MSP) - World price(fixed reference
price))*total production = AMS 1
if AMS < de-minimus level than no addition in aggregrate level)
3) E-commerce
4) Non-trade Issues (Small and medium enterprise issues and gender issues,
India no endorsement for gender empowerment in trade )
2. Un-resolved issues
1) Special safeguard mechanism to curb unforeseen surge of imports of
agricultural product(contigent or emergency to protect interest of
farmers for development and a cause for discord)
2) Special and differential treatment of developing countries
3) elimination of subsidies on cotton
3. WTO+ stricter norms patent through bilateral and regional trade blocks

-> Foreign trade policy review

FTP 2015-20
1. Target: doubling the export (both Merchandise and Service) to $900 million
and achieve 3.5% share of world export by 2019-20.
2. It provides a framework for increasing exports of goods and services as well
as generation of employment and increasing value addition in the country,
in line with the �Make in India� programme.
3. It introduces two new schemes, namely �Merchandise Exports from India Scheme
(MEIS)� for export of specified goods to specified markets and �Services
Exports from India Scheme (SEIS)� for increasing exports of notified services.
4. Effort of FTP will be drawn towards manufacturer exporters by facilitating
them for fast access to international markets through Approved Exporter
System.
5. It promoted simplification of Procedure such as simplifying Aayat Niryat
form, self-certification by status holder manufacturer in matter of
bilateral and regional trade.
Impact (Read in depth)

-> FDRI (bank and insurance companies and other financial corporation)
1. establish resolution corporation replacing existing deposit insurance and
credit guarantee Corporation
2. Resolution Corporation will monitor the financial firms such as banks and
insurance companies, anticipate their risk of failure, take
corrective action, and resolve them in case of such failure. The
Corporation will also provide deposit insurance up to a certain limit, in case
of bank failure.
3. The Corporation will also classify financial firms on their risk of failure
�
low, moderate, material, imminent, or critical and take over the
management of a company once it is deemed critical and resolve the firm
within one year (may be extended by another year).
4. Resolution may be undertaken using methods including:
i) merger or acquisition
ii) transferring the assets, liabilities and management to a temporary
firm
iii) liquidation
If resolution is not completed within a maximum period of two years, the
firm will be liquidated.
The Bill also specifies the order of distributing liquidation proceeds.
5. It provides for a wide range of resolution instruments such as bail-in,
bridge institution, and run-off entity for insurance.
These are in addition to the existing tools used such as merger and sale.
Bridge institution � It is a bridge service provider, a company limited by
shares, created by the corporation for the purpose of resolving a
specified service provider.
Run-off entity � An insurance entity under resolution is classified as
run-off entity to allow the present insurance policies to run to their
expiration dates.
6. It further provides for the designation of certain financial service
providers as �systemically important financial institutions� (SIFIs) by the
central government, the failure of which may disrupt the entire financial system,
given their size, complexity, and inter-connectedness with other
financial entities
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# National Anti-profiteering authority

# Public Debt management Cell

-------------------------------------------
# GST (destination based taxation system -> one market one nation; tax on supplies
of goods rather than sales or manufacture)
Earlier centre has power to levy taxes on manufacturing of goods and states on
sale of goods(read pdf of CBEC good points)
1. GST was expected to deliver an expansion in the indirect tax base, sweeping
more small and mid-sized businesses under its ambit, compared with the
excise duty regime.
2. It mandates registration for all entities with an annual turnover of Rs. 20
lakh or above.
composition scheme ( not available to inter state suppliers, service
provider(restaurant exemption) and specified manufactured )
3. To ensure better compliance, GST has
1) self-policing mechanism by way of invoice matching of supplies by every
registered assessee
2) reverse charge mechanism for unregistered suppliers (buyers pay the tax,
not the supplier, help to tax informal sector in economy) for
notified goods and service eg tendu leaves cashew nuts, tabacco
reverse charge mechansim for increasing tax revenue and reducing evasion
Government was unable to collect service tax from various unorganised
sectors but through Reverse charge mechanism compliance has gone
up
Reverse charge means the liability to pay tax is on the recipient of
supply of goods or services instead of the supplier of such goods or
services in respect of notified categories of supply
if goods and services are supplied by an unregistered supplier buyer of
such goods and services has to pay the taxes.
exemption if value of goods < Rs.5000 / per day
if buyers pays taxes and use supplies as input in final product -> can
claim input credit refund
3) e-way bills to check under-invoicing ( 10 KM distance and value more than
Rs. 50000)
4. GST subsumed (excise, service tax, VAT, sales et al) was estimated at 75-80
lakh -> realized prima facie 99 lacs
registration of new taxpayer within ambit of GST has increased but not payer
filling dues are stagnant
5. Neutral revenue rate
6. GST council decides tax rate, 5 slabs (more lobby for indirect tax cut by
industries)
7. GST ambit (alcohol, fuel and energy, land) offer scope for rate changes
central govt has power to levy excise duty (not GST as outside its ambit) on
tabacco and products
states on alcohol consumption, liquor and narcotics
8. National Antiprofiteering Authority
-----------------------------------------
# composition scheme

1. for small taxpayers (annual turnover < 1.5 cr)

2. reduced paper work and other complexity benefit small taxpayers ( 1 return
quaterly basis only)
3. pay fixed rates on their business turnover
4. cannot claim input tax credit
5. applies only to intra (not inter)state supplies
6. not supplying through e-commerce operator.
not a manufacturer of � ice cream, pan masala or tobacco (and its
substitutes).

1. Composition scheme is a convenient way for the small taxpayers in order to

escape from too many GST formalities and pay the tax at a fixed rate based
on their business turnover.

Under this scheme, a taxpayer will pay tax as a percentage of his/her turnover
during the financial year without the benefit of Input Tax Credit. The floor rate
of tax for CGST and SGST shall not be less than 1%. A taxpayer opting for
composition scheme will not collect any tax from his/her customers.

When the eligible taxpayer is opting for the Composition Scheme under GST, a
taxpayer has to file a summarized returns on a quarterly basis, instead of three
monthly returns (as is applicable for normal businesses).

Key Features
Eligibility: Turnover must be below Rs. 75 lakhs (Rs. 50 Lakhs for North-Eastern
States)composition scheme
Tax rate: Fixed tax rate on the total sales turnover
Input Tax Credit: Not eligible for Input Tax Credit
Place of supply: Applies only to the Intra-State supplies
Return: No monthly filing, only Quarterly returns
Billing: Issues Bill of Supply & not tax invoice
Who can avail composition scheme?
Only those persons who fulfill all the following are eligible to apply for
composition scheme:

deals only in the intra-state supply of goods (or service of only restaurant
sector).
does not supply goods not leviable to tax.
have an annual turnover below Rs. 75 Lakhs (Rs. 50 Lakhs for north-eastern states)
in preceding financial year.
he shall pay tax at normal rates in case he is liable under reverse charge
mechanism.
not supplying through e-commerce operator.
not a manufacturer of � ice cream, pan masala or tobacco (and its substitutes).
Why should you opt for composition scheme under GST?
No requirement to maintain records
Hassle free payments of tax at single rate
Filing monthly returns is a costly and cumbersome process that may just be asking
too much from a small dealer trying to grow a business
-------------------------------------------------------

# Recapitalization

1) Prompt Corrective Action norms/ non PCA ( for credit expansion/ (SBI,PNB like
banks)) based upon RBI guidelines
1. Capital, asset quality and profitability continue to be the key areas for
monitoring in the revised framework.
2. Indicators to be tracked for Capital, asset quality and profitability would
be CRAR/ Common Equity Tier I ratio, Net NPA ratio and Return on Assets
respectively.
3. Leverage would be monitored additionally as part of the PCA framework.
4. Breach of any risk threshold (as detailed under) would result in invocation
of PCA.
2) BAsel III
3) Provisioning
4) capital aquecacy ration
---------------------------------------------------
External Sector

-> Fixed Foreign Currency Market

-> Float Foreign Currency Market

# Balance Of Payments

-> Current Account

-> Capital Account

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# Foreign Portfolio Investment

-> Fll

-> FDI
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-------------------------
# Exchange Market

-> LERMS ( dual exchange rate partly managed or fixed and partly floating market
based mechanism)

-> NEER
-> REER (competitiveness of economy REER > 1 => competitiveness and high
productivity; else not)

-> EFF (extend fund facility by imf to correct BOP during macroeconomic instablity
or structural reforms which may take time to bear fruit)
stand by arrangement -> short term lending usually 3-4 years
while EFF is 3-4 years (dependent upon quota of member and EFF = 145% of quota
and can be extended upto 435% of quota)
1. When a country faces serious medium-term balance of payments problems
because of structural weaknesses that require time to address, the IMF
can assist with the adjustment process under an Extended Fund Facility (EFF).
2. Compared to assistance provided under the Stand-by Arrangement, assistance
under an extended arrangement features longer program
engagement�to help countries implement medium-term structural reforms�and a longer
repayment period.

-> Purchasing Power

-> Depreciation

-> Appreciation

-> Hard currency

-> Soft currency

-> Cheap currency

-> Dear currency

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-------------------------
-> SEZ

-> Convertibility of Currency

-> India�s Forex Reserves

-> GAAR

-> Foreign Trade Policy

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Rupee dominated bonds, popularly called Masala bonds are becoming more appetizing
for both issuers and investors, and India also stands at an advantageous position
with masala bond.
Briefly for the basics, masala bonds are issued by Indian corporates in offshore
markets such as LSE, NYSE via IFC (International Financial Corp.), the funding arm
of World Bank and are invested by the foreign investors. These are issued and
payable in INR but redemption and repayment will be linked to INRvs USD or other
foreign currency exchange rate. That means they are subjected to currency exchange
rate risks. But in INR dominated masala bonds contrary to USD dominated bonds
(ECB), FX risk is beared by the creditor i.e. the foreign investor.

Benefit to Corporates
1. They can borrow at low interest rates from offshore markets. Interests rates in
developed countries are much lower than prevalent in India.
2. Being issuer they are not subjected to FX risks. It will be fully borne by the
investors. Indian corporates have suffered considerable losses earlier on ECB which
are usually USD dominated due to continuous structural downtrend of INR against USD
since last 2-3 decades.
3. They can access wide investor base.
4. It will also help in diversification of portfolio.

Benefit to Investors

1. Masala bond, carrying relatively much higher interest rate, is a great

investment option for offshore investors.
2. They can bet on INR exchange rates. They can benefit when rupee appreciates
against the bond's redeemable/repayable currency.
3. Investors who are reluctant to venture into unknown markets can easily show
interest in masala bonds owing to the credibility of IFC.

Benefit to India

1. This will help in building up foreign investors confidence and knowledge about
about Indian economy.
2. This will contribute to capital account, thus balancing Balance of Payment.
3. Masala bond is a good way to tap foreign capital. India has envisioned few many
ambitious goals like Make in India, developing smart cities, digital India,
boosting infrastructure, climate INDC etc. For this India will require around $400
billion (INR26 lakh crores) in next five years. A big chunk of it will have to be
financed by foreign capital. India has to look for ways to tap foreign sovereign
wealth and attract foreign capital.
4. In India many long term debt stressed projects especially infra and power are
stalled due to capital shortage, long term masala bonds is lucrative for power,
road and infra companies.

5. INR has been falling in a structural downtrend since last few decades against
major hard currencies. Given that FX risk is borne by the creditor, during
repayment of bond coupon and maturity amount, if rupee depreciates, RBI will
realize marginal saving during repayment. INR is overvalued as of Dec'15, and is
expected to fall further.
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e-wallet scheme proposed for exporters whose cash flows have been affected by
delays in refunds on GST paid on domestic inputs has been
deferred till October 1.

The Gross Value Added (GVA) and Gross Domestic Product (GDP) give a picture of
economic activity from producers (supply side) and consumers (demand side)
perspectives respectively. Both GDP and GVA are independent measures. One from
demand side and other from supply side.

GDP or Gross domestic product of a country is the final value of goods and services
for a given period, while gross value added is a metric capturing the value
generated by subtracting the input costs.
GVA or Gross value added is a productivity metric that measures the contribution to
an economy, producer, sector or region. Gross value added provides a dollar value
for the amount of goods and services that have been produced, less the cost of all
inputs and raw materials that are directly attributable to that production.
GVA provides better measure of economic activity. Because GDP can record a sharp
increase just on the account of increased tax collections due to better
compliance/coverage and not necessarily due to increase in output.
GVA is a better reflection of the productivity of the producers as it excludes the
indirect taxes which could distort the production process. However, it can also be
argued that GVA is distorted due to presence of subsidies.
A sector-wise breakdown provided by the GVA measure can better help the
policymakers to decide which sectors need incentives/ stimulus or vice versa.
Both of the measures need not match and there could be a sharp divergence due to
presence of Net Indirect Taxes ( NIT= indirect taxes-subsidies) which are accounted
in GDP calculations (GDP is sum of GVA and NIT).

There has been differences among economists regarding usefulness of these 2

metrics, and the recent change in methodology of GDP calculation has again stoked
debates. Some of the observations are:

GDP is more suitable when we went an overview of economy and for comparison
purposes, while GVA is more suitable for fishing sectoral performances
GDP could be increased by inflators pressures while GVA is relatively insulated
from it.
GVA can give insights about the structural bottlenecks of economy.
Thus, both metrics have their own utility and economists need to apply their
judgement in ascertaining suitability on case to case basis.

GVA carries significance as a better indicator of real economic activity,

reflective of productivity/ competitiveness and useful in sector specific
policymaking. GDP remains a key measure to make cross country analysis and
comparing the incomes of different economies.

After the global financial crisis of 2008 countries shifted towards GDP as
indicator and india towards GDP at factor cost. Develop countries calculate GDP at
market price because of lower tax rates. However, india shifted to GDP at market
price or GVA for growth estimation in 2015 as to comply global practices. Since a
decade india's indirect tax collection is growing and subsidies share going down so
to account for this increase to be felt in growth prospects india drifted towards
GVA.

As-> GVA=GDP+tax-subsidy, thus increasing the value of goods and services produced.
(wrong GVA = GDP + Subsidies - tax)

New GDP estimation was made to account for new products to be added like smart
phones etc. and change the base year or constant year to more

The U.S. complaint to the WTO against India�s export promotion schemes is a wake-up
call
India�s export promotion schemes face an uncertain future after the United States
Trade Representative (USTR) decided to challenge their legality in the World Trade
Organisation (WTO). The complaint of the USTR is that India is violating its
commitments under the Agreement on Subsidies and Countervailing Measures (SCM
Agreement) using five of the most used export promotion schemes, namely, the
export-oriented units scheme and sector-specific schemes, including electronics
hardware technology parks scheme, merchandise exports from India scheme, export
promotion capital goods scheme, special economic zones and duty-free import
authorisation scheme.

Terms and conditions

The main argument of the USTR is that India�s five export promotion schemes violate
Articles 3.1(a) and 3.2 of the SCM Agreement, since the two provisions prohibit
granting of export subsidies. Until 2015, India had the flexibility to use export
subsidies as it is among the 20 developing countries included in Annex VII of the
agreement that are allowed to use these subsidies as long as their per capita Gross
National Product (GNP) had not crossed $1,000, at constant 1990 dollars, for three
consecutive years. This provision applicable to the Annex VII countries was an
exception to the special provisions provided to the developing countries (the so-
called �special and differential treatment�) for phasing out export subsidies.
Except Annex VII countries, all other developing countries were allowed a period of
eight years from the entry into force of the WTO Agreement, i.e. 1995, to eliminate
export subsidies.

That India had crossed the $1,000 GNP per capita threshold in 2015 became known
when the WTO Secretariat produced its calculations in 2017. An interpretation
provided in a 2001 report of the Chairman of the Committee on Subsidies and
Countervailing Measures, which is also considered as the document providing the
methodology for implementing Annex VII of the agreement, says that countries like
India must eliminate export subsidies immediately upon crossing the above-mentioned
threshold. In the Doha negotiations, India and several other Annex VII countries
sought an amendment of the agreement so as to enable them to get a transition
period.

Extension sought

In a submission made in 2011, India, along with Bolivia, Egypt, Honduras, Nicaragua
and Sri Lanka, argued that the Annex VII countries should be eligible to enjoy the
provisions applicable to the other developing countries, namely, those that had GNP
per capita above the threshold. The latter set of countries was required to phase
out their export subsidies within eight years of joining the WTO. Additionally,
they were allowed to enter into consultations with the Committee on Subsidies and
Countervailing Measures, not later than one year before the expiry of the
transition period, to determine if there was a justification for the extension of
this period, after examining all of their relevant economic, financial and
development needs. But this proposal, like all other proposals made as a part of
the Doha Round negotiations, remains unaddressed.

What needs to be done

It needs to be pointed out that this is not the first time that the U.S. has put
India�s export promotion schemes under the scanner; although this is the first
instance when its Trade Administration has initiated a WTO dispute involving these
schemes. In 2010, the U.S. had questioned the export incentives provided to the
textiles and clothing sector as a whole, arguing that this sector had a share in
global trade exceeding 3.25% and had therefore become export competitive. The U.S.
pointed out that according to Article 27.5 of the SCM Agreement, any Annex VII
developing country which had reached export competitiveness in one or more products
must gradually phase out export subsidies on such products over a period of eight
years. There was, therefore, considerable pressure on the Department of Commerce to
consider its future strategies regarding export promotion schemes.

It was perhaps the pressure that spoke when the Foreign Trade Policy (FTP) of the
National Democratic Alliance government unveiled in 2015 did some serious
introspection about the future of export promotion schemes, the first time that any
government had done so. The policymakers recognised that the extant WTO rules and
those under negotiation were aimed at eventually phasing out export subsidies. The
FTP took this as a pointer to the direction which export promotion efforts in the
country must take in the future: a movement towards more fundamental systemic
measures and away from incentives and subsidies. A similar note was sounded in the
mid-term review of the FTP released in December 2017. This document was significant
also because the Indian government showed its awareness that the country was at the
verge of losing the benefits of being an Annex VII country.
Contrary to the pronouncements made in the FTP, the government has continued to
increase its outlays on export promotion schemes. In 2016-17, the total outlay on
export promotion schemes was Rs. 58,600 crore, an increase of more than 28% in
three years. During this period, the largest export promotion scheme in place
currently, the Merchandise Exports from India Scheme (MEIS), was introduced to
promote exports by offsetting the infrastructural inefficiencies faced by exports
of specified goods and to provide a level playing field. The scheme initially
covered 4,914 tariff lines and was subsequently increased to cover 7,914 tariff
lines. In recent months, there has been a two-fold expansion of the scheme: one, to
enhance the MEIS rates of ready-made garments from 2% to 4%; and two, to increase
the MEIS benefits for all labour-intensive and MSME sector products by 2%. These
expansions in the scope of MEIS increased the total outlay on the scheme to nearly
60% over the level in 2016-17.

The utility of export subsidies to promote exports has long been questioned. While
the real impact of these subsidies has never been clearly measured, what has been
quite evident is they have benefited the rent-seekers. There is, therefore, a
strong case for the government to invest in trade-related infrastructure and trade
facilitation measures, which can deliver tangible results on the export front. of
current year to account for inflationary tendencies i.e from 2004-05 to 2011-12
which in whole brought a wave of positivity in market which is required for
igniting investment and growth prospects.
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The eligibility criteria laid down by the Government for grant of Maharatna,
Navratna and Miniratna status to Central Public Sector Enterprises (CPSEs) are
following:

Criteria for grant of Maharatna status :-

-> The CPSEs fulfilling the following criteria are eligible to be considered for
grant of Maharatna status.

(i) Having Navratna status.

(ii) Listed on Indian stock exchange with minimum prescribed public shareholding
under SEBI regulations.

(iii) Average annual turnover of more than Rs. 25,000 crore, during the last 3
years.

(iv) Average annual net worth of more than Rs. 15,000 crore, during the last 3
years.

(v) Average annual net profit after tax of more than Rs. 5,000 crore, during the
last 3 years.

(vi) Should have significant global presence/international operations.

Criteria for grant of Navratna status :-

 The Miniratna Category � I and Schedule �A� CPSEs, which have obtained
�excellent� or �very good� rating under the Memorandum of Understanding system in
three of the last five years, and have composite score of 60 or above in the six
selected performance parameters, namely,

(i) net profit to net worth,

(ii) manpower cost to total cost of production/services,

(iii) profit before depreciation, interest and taxes to capital employed,

(iv) profit before interest and taxes to turnover,

(v) earning per share and

(vi) inter-sectoral performance.

Criteria for grant of Miniratna status :-

The CPSEs which have made profits in the last three years continuously
and have positive net worth are eligible to be considered for grant of Miniratna
status.

Presently, there are 7 Maharatna, 16 Navratna and 71 Miniratna CPSEs.