INDEX

1. Economic planning in india

2. International Organisations

3. Banking In India

4. Agriculture

5. Demographic Profile Of India

6. Meaning, Type & Field Of Economy

7. Economic Growth & Development

8. Poverty

9. Industrial Sector

10. Money Market

11. Indian Fiscal Policy

12. Financial Sector

13. National Income Of India

14. Important Committies

15. Demand & Supply

 ECONOMIC PLANNING IN INDIA
Economic planning is the process in which the limited natural resources are used skillfully to
achieve the desired goals.
The basic aim of economic planning in India is to bring rapid economic growth through
development of agriculture, industry, power, transport, communication & all other sectors of the
economy.
Planning Commission Structure and Function :
 Planning commission was constituted on 15th March 1950.
 The prime-minister is the ex-office chairman of the commission.
 It is a central body for making plans in India.
 It is a non-statutory, extra-constitutional and advisory body & finds no-mention in the
constitution of India.
 The deputy-chairman of the planning commission enjoys the status of cabinet Rank minister
& its members are appointed by the government.
 The tenure of its members, deputy chairman & composition of the planning commission is not
fixed.
HITORY OF PLANNING
 First attempt was made by Sir M. Visvesvarayya through his book "planned economy for
India" in 1934. In his book he gave the plann for 10 years.
 1944 - Bombay plan (A plan of economic development) by eight industrialists.
 1944- Gandhian plan by SN Aggarwal.
 1945 - Peoples plan by M.N. Roy.
 1950 - Sarvodaya plan by Jai Prakash Narayan.
 Just after attachment of independence the government of India set up the planning
commission.
 The first chairman of the commission was Jawaharlal Nehru.
 First deputy chairmen was Gulzarilal Nanda.
National Development Council (NDC) :
 N.D.C. was constituted on 6th Aug. 1952.
 The prime-minister is the ex-office chairman & the secretary of planning commission is the ex-
office secretary of this council chief minister of all the states & the members of planning
commission are the members of N.D.C.
 The main functions of NDC are -
1. To make co-operative enviroment for economic planning between states & planning
commission.
2. To evaluate the management of plans form time to time.
3. To analyze the policies affecting development.
4. To give suggestions to achieve the aim fixed in the plan.
5. It give the final apporval to five year plans.
Present Composition of Planning Commission
Chairman - Dr. Manmohan Singh
Deputy -
Chairman - Montek Singh Ahluwalia
Members - Shri. Soumitra choudhary
Shri. Mihir Shah
Shri. K. Kasturirangan
Shri. Aman maira
Shri. Abhijit Sen
Shri. Syeda hameed
Shri. Narendra Jadhav
Shri. B.K. Chaturvedi

1
 FIVE YEAR PLANS - AT A GLANCE
Five year Target Achievement Model Theme Assessment
Plans
1st plan 2.1% 3.6% Herold-Domor Model Agriculture  Community development
1951-56 development programme was started in
1952.
 National broadcasting
services in 1953.
 Bhakra Nagal dam
(Satluj-M.P.) & damodar
valley (Mahandi) & Heera
Kund get inaugurated.
2nd plan 4.5% 4.27% P.C. Mahalanobis Focus on  Durgapur (UK), Bhillai
1956-61 heavy (USSR) & Rourkela
industry (W. germany) steel plant
were established.
 Atomic energy commission
came into being & TIFR
was set up.
3rd plan 5.6% 2.84% Sukhmoy Economic  In 1964, BOKARO STEEL
1961-66 Chakraborty and Sufficiency plant established.
prof. Saddy  In 1964, "United trust of
India" was established.
 First mutual-fund by
govermend of Indian "US-
64" was launched.
 IDBI established in 1964
 In 1965, FCI & Agriculture
pricing commission was
established.
 In 1966, the rupee was
devaluated first time.
Planning holiday 1966-69 - Due to drain of resources with war of Reason of failure of plan
Pakistan, & China goverment was not able to execute next 5 year plan  Indo-China confict - (1962)
that's why 3rd annual plan where implemented from 1966-69. How  Indo-Pak confict (1965)
ever, there was no 5 year plan during this time-span that's why, this  Diverted the resource from
time spain is known as "Planing-holding". development to defence,
4rd plan 5.7% 3.3% Ashok Rudra & Alon Growth with  In 1969, 14 banks were
1969-74 S. Manney stability & nationalized.
Progress  India conducted
underground nuclear test
at Pokharan (Rajasthan) &
code name was "Budha
Smiled".
 The allocations to state for
planning provided through
"Gadgil formula".
5th plan 4.4% 3.8% Alike fourth-five year Poverty  RRB were established in
1974-79 plane which is called eradication & 17th oct 1975.
"Investment model of attainment of  This was only plan which was
planning commission" selfreliance not able to complete its 5 year.
Rolling plan (1978-80)- It was boughtout by Janta party gov. under  Plan because this plan was
morarji desai in 1978. The focus of the plan was enlargement of the ended by "Janta goverment
emloyment potential in agriculture & allied activities to raise the income in 1978."
of the lowest income class through minimum need programmes.
2
Five year Target Achievement Model Theme Assessment
Plans
6th plan 5.2% 5.7% Based on investment Food & fuel  First time poverty index
1980-85 yojana infrastructural security was introduced by
changing & trend to planning commission.
growth model  This plan was based "On
D.T. Lakadwala model."
 In 1980, 6 banks were
nationalised.
 12 July 1982, NABARD
was established.
 1982, EXIM bank was
established.
 6th plan was only plan
which was started twice by
janta-goverment & then by
congres goverment.
 Important programmes
like, integrated Rural
development programme
(IRDP), minimum need
programme (MNP) were
started.
7th plan 5% 6.02% Alike sixth five year H u m a n  1986, speed - post was
1985-90 plan pre pared © R e s o u r c e established.
pranav mukherjee development  In 1988, SEBI was
established
 Prof. Raj Kirshna define,
7th plan as "hindu growth
rate."
 In this plan, for the first
time private sector was
given priority in
comparision t o public
sector.
 Employment generated
programmes like Jawahar
Rozgar Yojana were
started.
The eight plan could not take off due to fast changing political situations
at the centre. Therefore, from 1990-92, Annual plans were formulated.
8th plan 5.6% 6.68% John W. miller model Libralization  In 1993, pradhan Mantri
1992-97 privatization, Rozgar yojana (PMRY) was
globlization started.
 In, 1995, India become a
member of WTO, as the
early organization GATT
formally converted into
world trade organization at
same date.
9th plan 6.5% 5.35% Created by planning Growth with  Priority given to agriculture
1997-2002 commission social justice & rural development.
& equality  Recession in international
economy was held
responsible for the failure
of 9th plan.

3
Five year Target Achievement Model Theme Assessment
Plans
10th plan 8.0% 7.2% —do— Growth with  It was expected to follow a
2002-2007 social justice regional approach rather
& equality than sectoral approach to
bring down regional
inequalities.
11th plan 9% 8% Prof. C Rangarajan Fast, broad -  During this plan higest
2007-2012 base & growth observed during
inclusive finnancial year of 2007-08
growth and 2010-2011.
12th plan Faster,  Agriculture growth rate
2013-17 sustainable targeted 4% investment
and more rate with respect to GDP
inclusive 38.7%
growth  They have targeted average
fiscal deficit of 3.25%
 Average current deficit for
12th plan is 2.5%
 Targeted to speed 1 trillion
dollar during this plan in
infrastructure.

National Target of the 11the Plan
(2007-12)
Income & Poverty : -
 GDP growth rate target of 9% p.a.
 Increase agricultural GDP growth rate of 4%
per year.
 To enhance domestic investment from 35.9%
of GDP in 2006-07 to an average of 36.7%
of GDP in plan period.
 To raise industrial growth rate from 9.2%
in the 10th plan to between 10% & 11%.
 Manufacturing sector is target to grow at
12% p.a.
 Create 58 million new work apportunities.
 Reduce educated unemployment to below
5%
 Raise real wage rate of unsiklled workers by
20%.
 Reduce the headcount ratio of consumption
poverty by 10% points.
Education : -
 Reduce droput of children from elementary
from 20% by 2011-12.
 Increase literacy rate for persons of age 7
years or more to 85%.
 Lower gender gap in literacy to 10% points.
Health : -
 To raise public health spending to 2% of GDP
during plan period.
 Reduce infant mortality rate to 28 & mater-
nal mortality ratio to 1 per 1000 live births.
 Reduce total fertility rate to 2.1 by the end
of the plan.
 Provide clean drinking water for all by 2009
& ensure that there are no slip-backs by
end of the 11 plan.
 Reduce malnutrition among children of age
group 0-3 to half its present level.
Women & Children : -
 Raise the sex ratio for age group 0-6 to 935
by 2011-12 & to 950 by 2016-17.
 Ensure that atleast 33% of the direct & in-
direct beneficiaries of all govt. schemes are
woman & children.
Infrastructure : -
 To achieve telecom subscriber base of 600
million & a rural teledensity of 25%.
 Ensure electricity connection to all villages
& BPL families.
Environment : -
 Increase forest & tree cover by 5%
 Attain WHO standards of air quality in all
major cities by 2011-12.
 Treat all urban waste water by 2011-12 to
clean river water.
 Increase energy efficieny by 20% points by
2016-17.
Vision of 12th Five year Plan
(2012-17)
Economic Growth : -
1. Real GDP growth Rate - 8.0%
2. Agriculture growth Rate - 4.0%

4
3. Manufacturing growth Rate - 7.1%
4. Industrial sector growth Rate - 7.6%
5. Service sector growth Rate - 9.0%
6. Every state must have a higher average
growth rate in the twelfth plan than that
achieved in the 11th plan.
Poverty & Employment -
1. Head-count ratio of consumption poverty to
be reduced by 10% points over the preceding
estimates by the end of 12th five year plan.
2. Generate 50 milion new work opportunities
in the non-farms sector & provide skill
certification to equivalent numbers.
Education : -
1. Mean years of schooling to increase to 7 year
by end of this plan.
2. Enhance access to higher education by
creating two million additional seats for each
age cohort aligned to the skill needs of the
economy.
3. Eliminate gender & social gap in school
enrolment (that is between girls & boys &
between SCs, STs, muslims & the rest of the
population) by the end of the plan.

5
 INTERNATIONAL ORGANISATIONS

International Monetary fund (IMF) World Bank Group

 IMF is an intern ational monetary IBRD —1945 Dec. (188 members)
organization. IFC —1956 July (184 members)
 It was established on the recommendations IDA —1960 Sep. 24 (188 members)
of "Bretton woods conference." MIGA —188 Apr, 12 (155 developing 25
developed)
Objectives of IMF : - H.Q. — Washington D.C.
(i) To promote international monetary co- President — Jim yong kim (12th) (on July 1,
operation. 2012)
(ii) To ensure balanced international trade.
(iii) To ensure exchange rate stability. Objectives of world bank : -
(iv) To g rant e conomic assi stance to 1. To provide long-run capital to member
member countries for eliminating the countries for economic reconstruction &
adve rse im balanc e in balance of development. World bank provides capital
payments. mainley for following purpose.
(a) To rehabilitate was ruined economies.
IMF (b) To finance productive efforts according
Estd. — Dec. 27, 1943 to peace time requirements.
H.Q. — Washington D.C. (U.S.A.) (c) To develop resources & production
Membership — 188 facilities in underdeveloped countries.
Director — Christine Lagard 2. To induce long-run capital investment for
IMF is controlled and managed by a board assuring BOP equilibrium & balanced
of governers. Each member governors make the development of international trade. (This
board of governors. Each country also nominates objective was adopted to increase the
an alternative governor who casts his vote in the productivity of member countries & to
absence of the governor. Each governor is allotted improve economic conditions & standard of
a number of votes which is determined by the living among them).
quota allotted to the respective country in the 3. To promote capital investment in member
countries.
capital of IMF.
4. To provide guarantee for loans granted to
Rank Country Quota% small and large units & others projects of
1. USA 17.69 member countries.
2. Japan 6.56 5. To ensure the implemention of development
projects so as to bring about a smooth
3. Germany 6.12
transference from a war time to peace
4. U.K. 4.51
economy.
5. France 4.51
6. China 4.00
Membership of the world bank & the
7. Italy 3.31 voting right -
8. India 2.44 Generally every member country of the IMF
9. Saudi-Arabia 2.93 automatically becomes the members of the world
10. Canada 2.67 bank. Similarly, any country which quits IMF is
automatically expelled from the world bank's
11. Russia 2.50
membership. But under a certain provision a
 India is set to become 8th largest share country leaving the membership of IMF can
holder in IMF from its present 11th position. countinue its membership with world bank if 75%
International bank for reconstruction & members of the bank give their vote in its favour.
development (IBRD) International development Association
(IDA)
 IBRD and its associate institutes as a group
are known as the "world bank."
 IDA is an Associate institution of world-bank
known as soft loan window of world-bank.
 Established on the recommendation of
 IDA was established on sept 24, 1960. It kept
"Bretton wood conference". That is why IMF
its membership open to all members of world
& IBRD are called "Bretton wood twins."
bank.
6
 At present 188 countries are its members.
 IDA provides loan to its member countries
and no interest is charged on these long-
term loans. These soft loans are provided to
the poor countries of the world.
International finance corporation (IFC)
 Established in July 1956.
 This corporation provides loan to private.
 Industries of developing nations without any
government guarantee and also promotes &
additional capital investment in these
countries.
Objectivies : -
(i) To provide loans to private sector.
(ii) To co-ordinate capital & management.
(iii) To induce capitalist countries to invest in
developing countries.
Multilatera l inve stment guarantee
Agency (MIGA)
 Established in April 1988.
 Its mission is to promote foreign direct
investment (FDI) into developing countries
to help support economic growth, reduce
poverty & improve peoples lives.
 MIGA's operational strategy plays to its
foremost strength in the market place-
attracting investors & private insurers into
difficult operating environments.
 MIGA's membership is 155 developing
countries & 25 developed countries.
General Agreement on Tariffs and trade
(GATT)
 During great depression of 1930s the
international trade was badly affected &
v ari ous co untrie s imposed import
restricti ons for safe guarding th eir
economies.
 This resulted in a sharp decline in the world
trade.
 In 1945, USA put forward many proposals
for extending intern ational trade &
employment.
 On October 30, 1947, 23 countries at
Geneva, signed an agreement related to
tariffs imposed on trade.
 This agreement is known as gener al
Agreement on tariffs & trade (GATT).
 It came into force on Jan. 1, 1948.
 Initially GATT was established in the form
of a temporary arrangement but later on its
look the shape of a permanent agreement.
 GATT's headquarter was in geneva.
 On december, 12, 1995, GATT was abolished
& replaced by world trade organisation
(WTO) which came into existence on Jan 1,
1995.
GATT Rounds : -
 Between 1947 & last year of GATT there were
8 rounds of negotiations.
 The first six rounds were related to curtailing
tariff rates. The seventh round was related
to the non-tariff obstacles.
 The eight round was entirely different from
all the previous round because it included a
number of new subjects for consideration.
 The eight round is known as the uruguay
round which was the most controversial one.
 The discussions in this round gave birth to
world trade organisation (WTO).
Uruguary Round Agreement : -
 The uruguay round began in december 1986
at "punta-del- Este" (Uruguay) & was
supposed to have concluded at brussels in
1990. The talks failed & were resumed in
geneva in Jan. 1991 & finially ended on
december 15, 1993. The round originally
involved 105 participants but 117 countries
were in the end.
 The urugvay round was special because it
resulted in pacts in two sectors that were
completely new to GATT.
(a) Services
(b) Intellectual property right.
 There were differences among participating
countries on certain critical area; no
agreement could be reached.
 To break this deadlock Mr. Arthur Dunkel
director general of GATT, compilied a very
detailed document known as Dunkel
proposals.
 India signed this proposal in Marrakesh
Morocco in Apr. 1994.
Uruguay round contained the mandate to
have negotiations ins the following areas.
Part I of the declaration include the 17
areas, as given below :
1. Tariffs
2. Non-tariff measures
3. Agriculture
4. Textiles and clothing trade.
5. GATT-articles
6. Subsidies
7. National resources based products
8. Tropical products
9. Safeguards
7
 10. Trade related aspects of intellectual
property rights (TRIPS)
11. Trade related investment measures
(TRIMS).
12. Dispute settlement.
13. Functioning of GATT system.
14. Mul tilate ral tr ade ag reemen t &
arrangements.
Part-II of the declaration included trade
in services & re-classified the part-I of
the declarition as follows.
1. Market Access
2. TRIPs
3. TRIMs
4. Agriculture
5. Textiles
6. Trade in services
7. Institutional matters.
World trade organisation (WTO)
 The uruguay round of GATT gave birth to
WTO. The members of the GATT signed on
an agreement of uruguay round in Apr. 1994
in m orocco for es tablis hing a new
organisation named WTO.
 It was officially constitued on January 1,
1995 which took the place of GATT as an
effective formal organisation.
 The headquarter of WTO is in Geneva.
 Contrary to the temporary nature of GATT,
WTO is a permanent organisation which has
been esta blished on the ba sis of an
int ernat ional tr eaty a pprov ed by
participating countries.
 WTO is not an agency of the UNO
 WTO has a general counc il for its
adm inistr at ion, whic h inc ludes one
permanent representative of each member
nation Generally it has one meeting per
month which is held at Geneva.
 The present strength of WTO membership
is 159.
Objectives of WTO :
1. To improve standard of living of people in
the member countries.
2. To ensure full employment & broad increase
in effective demand.
3. To enlarge production & trade of goods.
The above 3 objectives were also included in
GATT, but WTO also included some other
objectives which are -
4. To enlarge production and trade of services.
5. To ensure optimum utilisation of world
resources.
6. To accept the concept of sustainable
development.
7. To protect environment.
Functions of WTO : -
1. To provide facilities for implemention,
administration & operation of multilateral &
bilateral agreement of the world trade.
2. To provide a platform to member countries
to decide future strategies related to trade &
tariff.
3. To administer the rules & processes related
to dispute settlement.
4. To implement rules and provisions related
to trade policy review mechanism.
5. To assist IMF and IBRD for establishing
coherence in universal economic policy
determination.
6. To ensure the optimum use of world
resources.
United Nations conference on trade and
Development (UNCTAD)
 UNO declared 1960-70 as development
decade. In 1961, UNO attempted to increase
the income of developing countries with a
growth r ate of 5% p. a. during t hat
development decade.
 In July 1962, a conference of developing
countries was held at cairo which resolved
to convence a world conference for this
purpose.
 Economic & social council of the UNO
organized a world trade & development
conference from March 31, 1964 to June 16,
1964.
Objectives of UNCTAD : -
1. To promote international trade especially
with a view to accelerating the economic
development of underdeveloped countries.
2. To determine policies and principles for
international t rade and economic
development.
3. To propose the strategy for implementing
pre-approved principles and policies.
4. To assist economic & social council of the
UNO.
5. To provide a suitable platform for trade
dialogues.
Asian development Bank (ADB) : -
 ADB was established on the
recommendations of ECAFE (Economic
commission for Asian & for East).
 The aim of this bank is to acclerate economic
& social development of in Asia & pacific
region.
 The bank started its functioning on Jan. 1,
1967. The head office of the bank is located
at Manila, philippiness.
8
South Asian Free trade area : (SAFTA) -
 The most significant aspect of the 12th
SAAR C summ it (Jan . 4-6 - 2004 ) at
Islamabad, the capital city of Pakistan was
the signing of a historic Agreement on free
trade.
 The leaders of India, Pakistan & Sri-lanka
have agreed upon to create a "south Asian
free trade area" (SAFTA).
 SAFTA has come into force since Jan. 1,
2006 replacing South Asian preferential
trade agreement ( SAPTA) which was
operative among SAARC countries, since
December 7, 1995.
South Asian Association for Regional
co-operation (SAARC)
 India, Maldives, Pakistan, Bangladesh, Sri-
Lanka, Bhutan, Nepal and Afghanistan
constituted an organisation known as
SAARC on the recommendations of Dhaka
conference on Dec. 7-8, 1985.
 Its head quarter has been established at
Kathmandu.
 A conference of heads of the countries is held
every year but conferences were generally
delayed for one reason or the other.
Association of South-East Asian Nations
(ASEAN) -
 ASEAN is a union of southeast Asian
Nations. Indonesia, philippines, Malaysia,
Singapore & Thailand & constituted this
association on August 8, 1967.
 Brunei also joined ASEAN in 1984. In July
1995, v iet nam was also given its
membership in 1997. Cambodia also became
its member in 1999. Its headquarter is in
Jakarta.
Organisation of the petroleum exporting
countries (OPEC) -
 OPEC was constituted in baghdad in 1960.
Iran, Iraq, Kuwait, Saudi Arabia and
venezuela were its founder member.
 The objective of OPEC was to control
production & price of petroleum so as to
safeguard the interests of oil exporting
countries.
 OPEC also attempts not only to stabilize oil
prices but also to seek the maximum oil
prices from the oil importing countries.
 At present 12 countries are the members of
OPEC. Iran, Iraq, Kuwait, Saudi Arabia,
v enezuela, Quator, Libya, I ndonesia,
Ecuador, UAE, Algeria, Nigeria and Angola.
 Angola was last one to join OPEC on Jan. 1,
2007.
 Its headquarter is in vienna (Austria).
G-8 (Formerly G-7) -
 G-7 was an organization of seven non-
socialist count ries w hich are highly
industrialized in the world.
 G-7 included USA, canada, Germany,
Britain, france, Italy and Japan.
 After adopting free market policies in the
economy, Russia was also made a member
of the organisation on June 21, 1997.
 At present it is known as G-8.
G-15
 G-15 is an organisation of 19 non-alligned
developing countries.
 It was established in Sep. 1989 in non-
alligned summit (NAM).
 The secretariat of G-15 is in geneva.
European Economic Community (EEC) or
European Common Market (ECM)-
 European countries known as "Inner Six"
(france, belgium, Netherland, Luxemberg,
west germany and Italy). Constituted EEC
on the basis of Rome Treaty (1957).
 The success of OECD played an important
role in inducing these countries to establish
EEC.
 The aim of EEC was to ensure complete free
trade among member countries. Jan. 1,
1973, britain denmark & Ireland got its
membership.
 Greece, spain and portugal also became its
members. Thus, the total membership EEC
went upto 15 on Jan. 1, 1995 after the
induction of Austria, finland & sweden to
this organisation.
 The 10th Nations in eastern europe officially
joined world's largest regional economic
community european union on May 1, 2004.
They are poland, Hungary, the czech
republic, slovakia, slovenia, Lithuania,
latvia, estonia, cyprus and Malta. Out of
these Lithuania, Latvia and estonia are new
states created by disintegration of USSR;
poland & hungary.
 After the joining of total 12 new-nations the
present membership of european union has
become 27.
North American free trade Agreement
(NAFTA) :
 On August 12, 1992, a trilateral agreement
between USA. Canada & Mexico took place
which declared North American region as
free trade Area. This agreement is known
as NAFTA.
9
Asian pacific economic co-operation (APEC) :
 APEC was founded in Nov. 1989 to devise programmes of co-operation between member nations
through the establishment of meeting of economic leaders trade & foreign ministers. It was
institutionalized in Bangkok and agreed to set up a secretariat in Singapore.
IMPORTANT INTERNATIONAL ORGANISATIONS
d Organisation Year Head Quarter Membership

IMF & IBRD 1945 Washington D.C. 188

European union 1958 Brussels 27

OPEC 1960 Vienna 12

OECD 1961 Paris 34

ADB 1966 Manila 67

ASEAN 1967 Jakarta 10

ACU 1975 Tehran 9

SAARC 1985 Kathmandu 8

G-15 1989 Geneva 17

APEC 1989 — 21

NAFTA 1992 — 3

WTO 1995 Geneva 159

MERCOSUR 1995 — 5

ASEM 1996 — 51



10
 BANKING IN INDIA
Historical Background : -
 Alexander & company established first bank
on european system "Bank of Hindustan"
in 1770 at Kolkata.
 After this, "General bank of India" came in
existance in 1786 but both of these 2 banks
proved unsuccessful.
 Three presidency bank were established in
India which was based on private equity
based on the "Act of 1830".
1st presidency bank — Established in 1806.
— Bank of Kolkata or
Pre sidency bank of
Kolkata.
2nd presidency bank — Established in 1840.
— Presidency bank of
Bombay.
3rd presidency bank — Established in 1843.
— Presidency bank of
Madras.
 British East India Company passed Join
Company Act. 1860, Acc to it Now Bank
could be established on the basis of Limited
libility & this Act of British gov. is known
as formtion of banking in Indian.
 In 1865, Allahabad Bank, it was the first
bank with total Indian ownership.
 In 1881, Awadh commercial Bank, first bank
to be established under Indian system & also
first bank to be established on the concept
of limited libility.
 In 1894, Punjab National Bank.
 In 1901, People's Bank.
 In 1906, Bank of India.
 In 1907, Indian Bank.
 In 1908, Bank of Baroda.
 In 1911, Central Bank of India.
 In 1921, Imperial Bank of India.
By mearging 3 presidency Bank.
Reserve Bank of India (RBI)
 RBI was established under the
recommendation of "Hilt ton - Young
committee."
 RBI was established under the Reserve Bank
of Indian Act 1934 on 1st April 1935.
 It was nationalized on 1st Jan. 1949. RBI is
the central bank of the coutnry.
Functions of RBI : -
1. It is the soul authority to issue currency in
India. It issues two rupee notes & above while
one rupee notes & subsidiary coines are
issued by the ministery of finance but
distributed by the RBI on behalf of the
government.
 It issues currency under minimum re-
serve system under which it keeps a mini-
mum backing of 2100 crores out of which
115 crore worth of gold & 85 crores worth
of foreign securities i.e. bounds of U.S.
govt. and some other advanced countries
of Europe.
 Against this backing, RBI can issue un-
limited amount of currency in the coun-
try it issues currencies acc to the projec-
tion of GDP.
More About RBI
 Head office of RBI is in Mumbai & other
offices are in : -
(i) Delhi
(ii) Mumbai
(iii) Chennai
(iv) Kolkata
 It is also having its office in London.
 The governer of RBI is the head of RBI.
 SIR, OSBORN ADAM SMITH was the first
governer of RBI.
 C.D. deshmukh was the first Indian
governer of RBI.
 D. Subba Rao is the present governer of
RBI.
 It consists total 20 members governer —1
Deputy governer — 4
Regional director — 4
No. of person from finance ministery — 1
No. of members or Economist (Nominated)
—1
 RBI consists the symbol of coconut tree &
tiger.
2. RBI is government bank.
3. RBi is bankers bank.
4. RBI acts as an agent to the Indian govt. as a
member to the IMF.
5. RBI acts as the central clearing house for
inter bank transactions.
11
6. RBI is custodian of Indian's foreign exchange
reserves.
7. RBI is the lender of the cast resort. In other
words, when a banks fails to get funds from
any other source it can always depend on
the RBI.
8. RBI is the controller of credit given by bank
to various sectors of the economy. It controls
credit by adopting the following set of
measures.
(i) Quantitative measures.
(ii) Qualitative measures are also called
selective measures.
 Quantitative measures are measures armed
at controlling & regulating the over all
quantum/volume of credit (i.e.-Loans) given
by commercial banks to various sectors of
the economy.
Quantitative measures are —
1. Bank Rate (BR)
2. Cash Reserve Ratio (CRR)
3. Open market operations (OMO)
4. Statutory Liquidity Ratio (SLR)
5. Repo/Reverse Repo.
Bank Rate : Bank Rate is the rate of interest
at w hich the RBI provides a ssistanc e to
commercial banks. When this rate is raised it is
called "Dear money policy". Generally this rate
may be raised during a period of inflation may
be lowered during a period of recession.
Cash Reserve Ratio : - It is that ratio of the
total deposit of a bank which it has to necessarily
keep with the central bank of a country at any
given point of time the ratio generally may be
raised at the time of inflation & lowered at the
time of recession.
Statutotry Liquidity Ratio : SLR is that
Ratio of the total deposits of a bank which it has
to maintain & keep with itself in the form of liquid
funds i.e. in the form of —
(a) Cash in hand
(b) Governments securities.
Open Market Operations (OMO) : OMO are
operations conducted by the central bank of any
country under which of may buy government
securities from commercial bank or sell securities
to commercial bank.
Repos — Repo means repurchase options
exercised by the RBI since 1992 under which RBI
buys govt. Securities from banks repos are
essentially short term operations conducted to
manage the supply & demand of liquidity. In a
short period. Thus repo means injection of
liquidity by the RBI.
Reverse Repo — Reserve repo-operation
started by the RBI since 1946 implies that it is
banks which lend to the RBI by buying govt.
securities from the RBI for a short period with a
promise to sell them back to the RBI on a specified
date at a certain price.
Thus reverse repo imply absorption of
liquidity under which banks give loans to RBI
against govt. security for a a short period.
Qualitative measures are those aimed at
controlling not only the quantum but also the
purpose for which the loans are given by banks
to various sectors of the economy e.g. wine
making or wheat production.
 Qualitative measures are —
1. Rationing of credit.
2. Regulation of credit for consumption
purpose.
3. Variation of margin requirements.
4. Moral control.
5. Direct action.
Rationing of Credit — Under this method
the RBI directs banks to give credit in accordance
with the importance of various sectors in economy
from time to time eg. It has directed banks that
they must give 40% of their total credit at any
given point of time to priority sector as identified
by the RBI which consists of sectors like
agriculture, small scale industries. Road & water
transport, retail trade, low cost housing, poverty
alleviation, employment generation etc.
Regulation of credit for consumption
purpose — RBI directs banks to restrict credit
for purchase of consumer durable like TV, fridge
etc. & instead give more credit for productive
purpose.
Variation of margin requirements — The
RBI directs bank from time to time to vary (raise
or lower) margins on loans given by banks
particulary for sensitive & essential commodities
eg - when a person required to take loan for a car
then bank will give 85% loan & ask 15% for
paying on his own (down payment).
Moral control — When banks defy from the
instruction & regulation of RBI, the RBI gives
moral pressure or advice from time to time to
restrain from doing it & when the banks do not
obey, it allows the public to know about it.
Direct Action —
(a) Charge penalty interest rate.
(b) Stop lending.
(c) Moratorium for few months.
(d) Cancel the license of the bank.
12
Commercial banking in India —
Schedule Banks (167)
Scheduled Commercial
Bank (163)
Public sector Private sector
bank (26) bank (21)
Nationalized banks (26)
SBI of India & Associates (6)
Commercial Banking — Commercial banks
are the institutions that ordinarily accept, deposits
from the people & advances loans. Commercial
banks also create credit. In India such banks alone
are called commercial banks which have been
established in accordance with the provisions of
the banking regulation Act, 1949.
Scheduled Commercial Banks — Banks
that we deal with on a day to day basis are called
scheduled commercial banks. A scheduled
commercial bank is a bank listed in the second
schedule of the RBI act 1934 acc. to which such
a bank must satisfy the following 2 conditions —
(i) Paid up capital of 5 lakhs & above.
(ii) Such a bank must function in the
interest of the depositors.
 A scheduled commercial bank enjoys
patronage refinancing of RBI while a non-
scheduled bank does not.
 Present structure of schedule commercial
banks in India can be classified into 3
types—
1. Public sector banks —There are 107 public
sector banks. Out of these, 1 state bank + 5
subsidardy banks + 19 nationalised banks +
82 regional rural banks.
2. Private sector banks — There are 21 private
sector banks. Out of which & are new + 14
are old private sector bank.
3. Foreign banks — There are 32 foreign banks
operating in India.
State Bank of India (SBI) & ITS Associate
Banks :
 On t he r ecomenda tion of gorewala
committee, imperial bank was nationalised
to become SBI on July 1, 1995.
RBI
Scheduled Co-operative
Bank (69)
Foreign Regional Rural
bank (34) bank (82)
Old Private Sector Bank (14)
New Private Sector Bank (7)
 Imperial bank of India was established in
1921 by mearging 3 presidency bank that
is —
(i) Presidency bank of Kolkata.
(ii) Presidency bank of Bombay.
(iii) Presidency bank of Madras.
Management : -
 SBI is managed by a central board of
directors. It can have maximum of 21
members.
 Head office of this bank is located in
mumbai.
Associate banks of SBI —
 These associates banks were nationalized in
1959 however these banks refused their
merger with SBI.
 The associate banks which are at present
in no are —
(i) State bank of Patiala.
(ii) State bank of Hyderabad.
(iii) State bank of Travancore.
(iv) State bank of Bikaner & Jaipur.
(v) State bank of Mysore.
 At the time of nationalization they were 7 in
numbers but state bank of sarashtra &
state bank of Indore were merged in 2008
& 2009 respectively.
Private Sector Banks - Private sector banks
are those banks which are owned by the private
sector.
13
 Old private sector banks - At present there
are 14 old private sector bank. The names are as
follows.
1. City union bank Ltd.
2. Tamil Nadu mercantile bank Ltd.
3. SBI commercial & international bank
Ltd.
4. The catholic syrian bank Ltd.
5. The dhana Lakshmi bank Ltd.
6. The federal bank Ltd.
7. The Jammu & Kashmir bank Ltd.
8. The Karnataka bank Ltd.
9. The Kasur vysya bank Ltd.
10. The Laksmi Vilas bank Ltd.
11. The Nainital Bank Ltd.
12. The Ratnakar Bank Ltd.
13. The South Indian Bank Ltd.
14. ING Vysya Bank Ltd.
New Private sector Banks - According to
Narsimham Rao committee private sector banks
should be allowed to be established in India.
 The minimum capital of new private sector
banks should be Rs. 100 crore.
 The total no. of new private sector banks
are 8.
1. Axis Bank.
2. ICICI Bank.
3. Global trust Bank.
4. Times Bank.
5. Centurian Bank.
6. Bank of Punjab.
7. HDFC Bank.
8. IDBI Bank.
Foreign Banks - Foreign bank is that bank
whose head office is located in a foreign coutnry.
It is regulated acc. to the rules of its own country.
 Minimum capital requirement for foreign
bank should be us $ 25 million.
 Functions of foreign banks -
1. Financing of export trade.
2. Financing of import trade.
3. Financing of internal trade.
4. General banking functions.
 At present, there are 32 foreign banks with
31 branches.
Regional Rural Banks (RRB's)
 RRB's, the newest form of banks, have come
int o existence with t he objective of
developing rural & other productive activities
of all kinds in rural areas.
 The emphasis is on providing such facilities
to small & marginal formens, agriculture
labourers, rural artisans & other small
entrepreneurs in rural area.
 First RRB was established on 2nd Oct. 1975.
Development Banks
Industrial Development Bank of India
(IDBI) —
 Established in 1964.
 Main functions - providing finance to large
& medium scale industrial units.
Industrial finance co-operation of India
(IFCI)
 Established in 1948.
 Main function -
(a) Project finance.
(b) Promotional services.
Industrial credit & investment co-
operation of India limited (ICICI)
 Established in 1991.
 Main functions - Providing term loans in
Indian & foreign currencies under writings
of issues of shares & debentures.
Small Industries development bank of
India (SIDBI) —
 Established in 1989.
 Main functions : providing assistance to
small scale industries through state finance
corporations, state industrial development
corporations, commerical banks etc.
Expert - Import Bank of India (Exim.
Bank)
 Established in 1982
 Main functions : co-ordinating the working
of institutions engaged in financing export
& import trade, financing export & imports.
 National housing bank (NHB) started
operations in 1988.
 Main functions : development of housing
finance in the country.
NABARD - (National Bank for Agriculture
& Rural development) —
 Established in 1982.
 The paid - up capital of NABARD stood at
Rs. 2000 crore as on 31 March 2010
Main function : To serve as an apex
refinancing agency for institutions engaged in
providing agricultural finance to develop credit
delivery system to co-ordinate rural financing
activities.
Various committees related to
development in the field of banking -
1. Narasimham - I : The purpose of the
narasimham - I committee was to study all
aspects relating to the structure,
organisation, function as & procedures of the
financial system & to recommend
improvements in their efficiency &
productivity.
14
 The committee submit its report to the
finance minister in 1991.
2. Narasimham - II -The narasimham - II
committee was tasked with the progress
review of the implementation of the banking
reforms since, 1992 with the aim of further
strenghtening the financial institutions of
India.
 It focussed on issue like size of banks &
capital adequacy ratio among other things.
 The committee submit its report of the
committee on "Banking sector Reforms." to
finance minister Yashwant Sinha in April
1998.
3. Damodaran committee -
4. Khandelwal committee report -
BASEL NORMS -
 Basel norm s are set by banks of
international settlement (BIS) in basel
switzerland.
 55 countries central bank are member of
the BIS.
Basel I norms - Basel I prescribing for a
set of minimal capital requirements for banks was
introduced in 1988.
Basel - II norms - Basel II takes 3 pillar
approach. These are -
1. Pillar I (minimum capital requirements)
2. Pillar II (Supervisory oversight)
3. Pill ar I II (Market dis ciplin e &
disclosures)
 The RBI has adopted a gradual approach to
implement the basel II norms.
 Foreign banks in Indian & Indian banks
aperating abroad to meet basel II norms by
march 31, 2008.
 Other scheduled commercial bank to meet
basel II norms by march 31, 2009.
 RRB's & local area banks to meet the norms
by march 31, 2010.
Basel - III norms - It will become operational
from Jan 1, 2013 in phased manner.
Rules for basel III - RBI released its
guideline on basel - III capital regulation on may
2, 2012.
Guidelines for basel III -
1. Indian bank have to maintain Teir-I capital
or crore capital atleast 7% of their risk
weighted assests or on going basis.
2. The total capital ratio including Tier- 1 & tier-
II must be atleast 9%.
3. For tousle year ending march 31, 2013 bank
will have to disclose capital ratio computed
under existing guidelines.

15
 AGRICULTURE
 Agriculture is the mainstay of the Indian
economy despite concerted in
industrialisation in the last six decades.
Contribution of Agriculture in Indian
Economy —
1. Contribution in GDP - on the eve of
planning, agriculture generated as much as
50% of the country's national income.
2. Largest employment providing sector -
Agriculture in India, is the most important
source of employment. In 1991 nearley 60%
of the country's working population was
employed in agricultural sector.
3. Basis for Industri al development -
Agriculture offers raw material including for
industries like textiles, sugar & oil-
processing, etc. Besides, it also offer market
for expanding industrial sector of the
economy.
4. Development of Tertiary sector - Tertiary
sector provides helpful services to the
industries & agriculture like banking,
warehousing etc. internal trade is mostly
done in agricultural produce eg - various
means of transport get bulk of their business
by the movement of agricultural goods.
5. Contribution in foreign trade - Agriculture
plays an important role in the international
trade, Jute, tea, coffee & spices are the
country's well known conventional exports.
Presently agriculture and allied sector
contributes nearly 9.08% (2011-12) to the
total export trade of the country, against
6.9% during 2010-11.
6. International Importance - India is largest
producer of coconuts, mangoes, bananas,
milk & dairy products, cashew nuts, pulses,
ginger, turmeric & black pepper. It is also
the second largest producer of rice, wheat,
sugar, cotton fruit & vegetables.
Green Revolution
 The introduction of high-yielding varities of
seeds after 1965 & the increased use of
fertitlizers & irrigation are known collectively
as the green Revolution, which provided the
increase in production needed to make India
self-sufficient in foodgrains.
 It was launched in the year 1966 & was the
brainchild of Norman Borlaug.
 In India it was made successful by Dr. Ms.
Swaminathan.
 The term green revolution was coined by Dr.
William Gade.
 A national commission on farmers was
appointed in 2004 under the chairmanship
of Dr. M.S. Swaminathan which inter - alia
suggested an agricultural Renewal Action
Plan (ARAP).
 ARAP comprised of soil health
enhancement, irrigation water supply
augmentation & demand management
credit & insurance, technological reforms
& assured & remmunerative marketing.
Achievement of Green Revolution :
1. Increase in production.
2. Prosperity of farmers
3. Reduction in import of food grains.
4. Development of industries.
5. Overall growth of the economy.
6. Food security.
Weakness of Green Revolution -
1. Growth in capitalistic farming.
2. Side tracked land reforms.
3. Widened income.
4. Regional disparities.
5. Environmental degradation.
 Co mme rci al cr ops are t hose cr ops
which are produced for trade purpose &
not for self consumption by farmers. It
include - oilseeds crops, sugar crops,
Fiber crop, Narcotic crops, Beverage
crops.
Second Green Revolution -
 The call for second green revolution was
given by P.M. "Dr. Manmohan Singh" at the
93rd science conference in 2006".
 It seeks to build up on the achievements of
Ist green revolution & bridge the regional &
crop imblance which were not addressed by
first green revolution.
 It seeks to cover dr yland farming &
concentrate on the small & marginal
farmers.
 It seeks to raise the food grains production
to 400 milion tonnes by 2020.
Evergreen Revolution -
 Concept given by renowned agricultural
scientist Dr. M.S. swaminathan.
 The concept emphasises on "or ganic
agriculture" & "green agriculture" with the
help of integrated nutrient supply &
integrated natural resource nutrient supply
& integrated natural resource management.
16
  India holds first position in the world in the
To encourage the agricultural products, the
production of sugar - cane & sugar.
govt. announces to minimum support price
 India is the third largest producer of fish.
on behalf of the government.
 India is 4th largest producer of natural
rubber with a share of 8.2% in world
 The cause of the evergreen revolution is
production.
"Sustainability".
 India is second largest consumer of natural
Major Agricultural Revolutions rubber in world consumer.
Food Security in India -
Revolution Production
 Black Petroleum Green Revolution did not cover barley, ragi
Revolution Production & minor - millets.
 Blue Revolution Fish production
 The need for food self-sufficiency was borne
 Brown Revolution Leather/non- out on account of the experience againsed
conventional from the PL - 480 programme of the USA in
 Golden fibre Jute production the year 1966. The American president
Revolution Lundon Johnson restricted food aid to force
 Golden Revolution Food grain production India not to condemn the vietnam war.
 Grey Revolution Fretilizer Revolution  Food security implies access by all people
at all times to sufficient quantities of food
 Pink Revolution Onion production
to lead an active & healthy life it involves.
 Rainbow Holistic development of 1. Quantitative dimension in terms of food
Revolution agriculture sector self-sufficiency.
 Red Revolution Meat & Tomato 2. Quantitative dimension in form of
production nutritional requirement.
 Round Revolution Potato Revolution 3. Purchasing power dimension so as to
 Silver Fiber Cotton Revolution ensure access to all t hr ough
employment generation programmes.
Revolution
Public Distribution System (PDS) -
 Silver Revolution Egg/poultry production
 PDS was envisaged in 1967 to act as a price
 White Revolution Milk support programme for the consumer during
 Yellow Revolution Oil seeds production the periods of food shortage of the 1960's
 Evergreen Increase in productivity  The basic aim was to provide essent
Revolution & prosperity without commodities such as rice, wheat, sugar,
ecological harm. edible oil, soft coke & kerosene at subsidised
prices.
Major Producing States  PDS is the largest distribution network of
1. Foodgrains - U.P., Punjab, M.P. and west its kinds in the world.
Bengal. Targeted public distribution system
2. Wheat - U.P., Punjab haryana & M.P. (TPDS) -
3. Rice - West Bengal, U.P., Punjab & M.P.  Fol lowing the criticism of PDS, the
4. Coarse cereals - Maharashtra, Karnataka, government in June 1997 replaced the PDS
Rajasthan & U.P. with TPDS. The system envisaged issuing
5. Puls es - M.P., U. P., Ma harast ra & special cards to BPL families & selling
Rajasthan. foodgrains to them at subsidised prices with
effect from July 2001.
Crop Production : Kisan Credit Card scheme (KCCS) -
 Assam is the biggest tea producer in the  KCCS was started by the govt. of India, RBI
country. & NABARD in Aug. 1998, to help the farmers
 India Ran ks 6th in t he wor ld cof fee access timely & adequate credit.
production & contributes only 4% of world  The scheme includes reasonable component
coffee production. of consumption credit & investment credit
 Cuba is known as the sugar bowl of the within a' the overal credit limit sanctioned
world. Sugar is made of beetroot. to the brrowers, to provide adequate & timely
credit support to the farmers for their
cultivation needs.
17
Agricultural price policy (APP) -
 APP of the government seeks to ensure
remunerative prices to the producers so as
to encourage higher interest & production
on the onehand, on the other it safeguards
the consumers interest by making food
available at reasonable prices.
 To achieve this govt. announces minimum
support prices (MSPs) for 25 agricultural
crops taking in to acc ount s the
recommendation of the commission for
agricultural cost & price (CACP). MSP is that
price at which govt. is ready to purchase
the crop from the farmers directly, if crop
price falls below the MSP.
 Commission for Agricultural costs & price
(CACPs) was set up in 1965 with the name
agricultural price commission & was
renamed as CACP in 1985.
 Market intervention scheme (MIS) is
implemented for horticultural & agricultural
commodities, generally perishable in nature
& not covered under the price support
scheme (PSS).
 Economic cost is composed of th ree
components - viz, MSP pr ocure ment
incidental & cost of distributing foodgrains.
National Food Security Mission -
 It was launched in rabi 2007 with a view to
enhance the production of rice, wheat &
pulses by 10 million tonnes (MT), 8 MT & 2
MT respectively by the end of the eleventh
plan -
1. The mission aims to increase production
through area expansion & productivity ;
create employment opportunities & enhance
the farm - level economy to restore confidence
of farmers.
2. The NFSM is being implemented in 476
districts of 17 states.
3. To intensify the pulses production
programme, since 2010-11, two additional
programmes have been adopted under NFSM
these are -
(i) Merging of the pulse component of the
integrated scheme of oilseeds, pulses,
oil palm & Maize with NFSM.
(ii) Acc elerat ed pul se pr oducti ons
programme (APPP) was initiated to boost
the production of pulses by active
promotion of technologies in 1000
clusters of 100 hectare each.
Land Reforms -
 Land reforms programmes in India include
 Elimination of intermediaries.
 Tenancy Reforms.
 Determination of ceiling of holdings per
family.
 Distribution of surplus land among land-
less peoples.
 Consolidation of holdings (Chakbandi)
 The following measures were made effective
for the betterment of farmers.
(i) Regulation of tax.
(ii) Security for the rights of farmers.
(iii) Right of land ownership for the farmers.
 For the organisation of Agriculture land
holding mainley two measures were taken -
1. Land celing.
2. Chakbandi.
 The land within area less than 1 hectare is
called marginal land holding, 1 to 4 hectare
area is called small land holding & the land
within are more than 4 hectare is called large
land holding.
 Chakbandi was implemented first time in
India in the year 1920 in baroda.
 Co-operative credit organisation started first
time in 1904.
 Primary co-operative committees provide
credit for short period.
 State co-operative Agriculture & Rural
development banks provide credit for long
period.
 Land development bank provides long-term
loans.
 Land development bank was established in
the year 1919 in the form of land Mortgage
Bank.

18
 DEMOGRAPHIC PROFILE OF INDIA
 Demography is a statistical study of human
population.
 It studies a variety of variables related to
population like size, growth, distribution,
density, composition & their spatial &
temporal variations.
Theory of demographic transition -
 Theory of demographic transition is credited
to Frank W. Notestein, who gave his theory
in 1945.
 The four stages have been described below.
First stage (high stationary stage) - Stage
of high birth rate & High death Rate.
 Birth & death rates are both high population
growth is slow & fluctuating.
Second stage (Early expending stage)-
Stage of high birth rate & low death Rate.
 Birth rate remains high; death rate falls.
Population begins to rise rapidly.
Third stage (Late expending stage)- Stage
of decling birth rate & low death rate.
 This stage is characterised by decline in
birth rate, low death rate & low population
growth.
 Birth rate starts to fall ; death rate continues
to fall population continues to rise.
Fourth stage (Low stationary stage)- Stage
of low birth rate & low death rate.
 In the four th stage of de mograp hic
transition, a low birth rate & low death rate
lead to a stationary or decling population.
 It is called a stage of stationary population.
 Birth & dead rate both are low.
Classification of growth of population -
 The growth of Indian's population can be
divided into four periods of time.
1. 1891 to 1921 - It is the period of stable
population.
 Between 1891 & 1921, rate of growth of
population in India was low.
2. 1921 to 1951 - It is the period of growth of
population.
 During this time population has been
increasing at a rapid rate.
 The trend of growth of population in India,
since 1921, has been consistently on the
rise. That is why, census commmioner has
reffered the year 1921 as "year of great
divide".
3. 1951 to 1981 - It is the period of population
explosion.
 In this period population increased at a very
fast rate. Thus this period is called "period
of population explosion."
4. 1981 - 2001 - It is the period of high growth
with definite signs of slowing down.
Birth & Death Rates -
 Birth & death rates in India, are high
compared to most countries in the world.
 Birth rate refers to number of children born
per thousand persons in a year.
 Death rate refers to number of people dying
per thousand persons in a year.
 When it is said that birth rate in India is
23, it means every year 23 children are born
per thousand persons, on an average.
Density of Population -
 Density of population refers to average
num ber of people liv ing p er square
kilometre. Density of population in a country
is measured by dividing its total population
by total land area.
National Population policy -
 Population policy r efers to all le gal,
admi nistrat iv e pr ogrammes & other
goverment efforts, which aim at reducing
birth rate & improving the quality of life.
 After, independence, the govt. of India
adopted a national policy on population with
the objective to check the increase of living
of people.
 This policy has been revised from time to
time & its scope has been widened.
 It has been very effective in initiating
measures for population control.
 Till now, there has been 3 policy -
1. Population policy of 1976.
2. Revised population policy of 1977.
3. New national population policy 2000.
 The govt. of India announced its new
national population policy on feb, 2000.
 The new national population policy provides
a policy framework to meet the reproductive
& child health needs of the people of India
for the next ten years.
National population policy 2000 - This
policy outlined the following objectives to be
achieved.
1. To lower down the total fertility rate (TFR) to
achieve replacement level by 2010.
19
2. Population stabilisation by 2045. Smallest State's/UT's in population
3. Reduce MMR (Maternal Mortality Rate) to Sikkim - 607688
below 100 per 100000 births. Andaman and Nicobar Island - 379944
4. Reduce IMR (Infant Mortality Rate) to below Arunachal Pradesh - 1382611
30 per thousand live birth. Mizoram - 1091014
 Making school education compulsory. Smallest State's Population Density in k.m.
 Promote delayed marriage of girls. Bihar - 1102
 Promote & control communicable disease. Paschim Bengal - 1.029
Demographics - Kerela - 8.59
 First synochronized census in India took Uttar Pradesh - 828
place in 1881. Since 1901, it has been taking Smallest State's Population density in k.m.
place after every decade. Arunachal Pradesh - 17
 Census 2011 is the 15th census & 7th after Mizoram - 52
independence. Sikkim - 86
 The slogan of census 2011 is "our census, Nagaland - 119
our future." Maximum Leatrecy in state's in Persentage
 India was the first country to adopt family Kerala - 93.91%
planning in world. Mizoram - 91.58%
 According to the census 2011, there are 50 Tripura - 87.75%
milion plus cities in India as compared to Goa - 87.40%
35 in census 2001. Minimum Leatracy in state's Persentage
 "Cafeteria approach" to family planning was Bihar - 63.82%
adopted during Janta Party government rule Arunachal Pradesh - 66.95
in 1978. Rajasthan - 67.00%
India compared t o a others most Jharkhand - 67.63%
popularc countries in the the world. Maximum Sex Ratio (female Per 1000 males)
Kerela - 1084
Tamil Nadu - 995
Andhra Pradesh - 992
Chhattisgarh - 991
Minimum sex Ratio (female Per 1000 males)
Haryana - 877
Jammu & Kashmir - 883
Sikkim - 889
Uttar Pradesh - 908
Maximum female leatracy (in Percentage)
Kerala - 91.98
Mizoram - 89.40
Tripura - 83.15
Goa - 81.84
Minimum female leatracy (in percentage)
Population
Rajasthan - 52.66
All figures based on census ; 2011
Total population - 1210193422 Bihar - 53.33
Male - 62372428 Jharkhand - 56.21
Female - 586469174 Jammu & Kashmir - 58.01
Density - 382 Per sq. km. Decressing Order of Union Territary in
Adult sex ratio - 940 (female per 1000 males) Population
Child sex Ratio - 914 (girl's per 1000 boys) Delhi - 16753235
Largest State's/UT's in population Puduchari - 1.744 464
Uttar Pradesh - 199581477 Chandigarh - 1054 668
Maharashtra - 112372972 Andaman & Nicobar - 379 944
Bihar - 103804637
Dadra Nagar Naveri - 242 911
Paschim Bangal - 91347736
Lakshadweep - 64.42
Andhra Pradesh - 84665533
20
 Order of sex Ratio in union territory Litracy Order in union territory
Puduchari - 1038 (in Percentage)
Lakshadweep - 946 Lak Shadweep - 92.28
Andaman & Nicobar - 878 Daman & Div. - 8707
Delhi - 866 Puduchari - 86.55
Chandigarh - 818 Chandigarh - 86.43
Dadra Nagar Navezi - 775 Delhi - 86.34
Daman & Div - 618 Andaman & Nicobar - 86.27
Dadra Nagar Navali - 77.65



21
 MEANING TYPE & FIELD OF ECONOMY
Economics is a system in which we analyze
the production, distribution and consumption of
goods and services. Economics also concerns
about inflation, unemployment, industrial
production and role of government.
Types of Economy -
1. Capitalistic Economy - This type of economy
is characterized by existence of private
enterprise and ownership of all important
sectors of production. This is also known as
market economy.
2. Socialist Economy - This type of economy
is deals with the principles of Carl Macs. In
this all the production system are in control
of state ownership. For eg. - Russia
3. Mixed Economy - Mixed economy is
combination of capitalistic economy and
socialists economy. In this government will
provide essential goods and service. For e.g.
- India.
4. Open Economy - This economy encourages
competition. In Industrialisation all countries
are works on open economy.
5. Closed Economy - In this types of economy
all the activities are in process with in country
boundary. That country not deals with any
other country.
6. Developed Economy - This types of economy
is exists in developed country. Income and
life style of peoples of these types of country
is high. USA, Japan are comes in this
category.
7. Developing Economy - In this type of
economy those countries are come which are
neither developed nor back. These countries
are always goals towards developed economy.
Sectors of Economy -
1. Primary Sector - In this types of economy
direct use of national resources are done. this
includes agriculture, roaster, fishing, mining
and oil and gas extraction.
2. Secondary Sector - This sector generally
takes output of primary sectors and
manufactures finished goods. for e.g.
formation of sugar from sugarcane. This is
also called industrial sector.
3. Tertiary Sector - It involves providing
intangible goods like services. Study,
Transport, Hotels, consultancy etc.
4. Foreign Sector - Foreign business.
5. Finance and real Estate - Business services,
ownership of buildings, Banking etc.
6. Community and Personal Services - Public
security adn management etc.

22
 ECONOMIC GROWTH & DEVELOPMENT
Economic growth : Economic growth may
be defined as a rate of expansion that can move
an under dev eloped coun t ry fr om a n ear
subsistence mode of living to substantially higher
levels over a period of time.
 Economic g rowth i s conv ention ally
measured as the percentage increase in GDP
(Gross domestic product) or GNP (gross
national product) or NDP (per capital Net
domestic product) during one year.
 Per capital NDP is the most appropriate
measure of economic growth.
 Economic growth comes in two forms, an
economy can either grow extensively by
using more resources (such as physical,
human or natural capital) or intensively by
using the same amount of resources more
efficiently. (productively)
Economic Development - Till 1960s,
economic development was often used as a
synonym of economic growth. It is no longer
viewed identical with economic growth. It is now
taken to mean economic growth plus change.
 The term change refers to the qualitative
changes in the economy. These changes are
in the form of improvement in technology,
positive changes in attitudes & so or on.
 Essentially, economic development in all
socities must have atleast the following
objectives.
1. To increase the availability & widen the
distribution of basic life sustaining
goods.
2. To raise levels of living by ensuring
higher incomes, more jobs & greater
attention to culture.
3. To expand the range of economic &
soci al choices av ailable t o both
individuals & nations.
Human Development Index -
 The united nations development programme
(UNDP) introduced the HDI in its first
human development report (HDR). Prepared
under the stewarship of mahbub-ul- Haq in
1990.
 HDR, 1990, defined human development as
the process of widening people's choices as
well as raising the level of well-being
achieved.
 Essential components of human
development are equity, sustainability,
productivity & empowerment.
 HDI measures the average achievements in
a country in three basic dimensions of the
human development ;
1. A long & A healthy life.
2. Access to knowledge
3. Decent standard of living.
 HDR 2010, adopting a new approach,
defines HDI as the geometric means of
normalised indices measuring achievements
in each dimension.
 In HDR, 2010 some new measures of
economic development has given.
1. Inequality adjusted human development
index (IHDI)
2. Gender inequality index (GII)
3. Multidimensional poverty index (MPI)
Inequality adjusted human development
index (IHDI) -
 THE IHDI accounts for inequalities in HDI
dimensions by "discounting" each
dimension's average value according to its
level of inequalities.
 The IHDI equals the HDI, when there is no
inequality across people but if it is less than
the HDI as inequality rises.
 In this sense, the IHDI is the actual level of
human development (accounting for this
inequality), while the HDI can be viewed as
an index of "potential" human development
(or the max. level of HDI) that could be
achieved, if there was no inequality.
Tender Inequality Index (G11) - Human
development report 1995 includes two gender
index.
 Gender related progress index and gender
empowerment measure.
 Gender progress index and human progress
index shows indifference between male and
female.
 GII reflects women's disadvantage in 3
dimensions -
1. Reproductive health
2. Empowerment
3. Labour market.
 The index shows t he loss in human
development due to inequality between
female & male achievements in these
dimensions.
23
 If it ranges from o, which indicates that
women & men fare equally to 1. Which
indicates that women fare as poorly as
possible in all measured dimension.
Multidimensional Poverty Index (MPI) -
 in 1997 human development report first time
included human poverty index.
 The multidimential poverty index was
developed in 2010 or ford poverty & HDI &
UNDP & different factors of determine
poverty beyond income based list were used.
 The index uses same 3 dimensions as the
human development index such as -
1. Health
2. Education.
3. Standard of living.
These are measured using 10 indicators.
Green Gross domestic product (Green
GDP)-
 The green gross domestic product (green
GDP) is an index economic growth with the
enviromental consequences of the growth
factored in.
 Green GDP monest ises t he loss of
biodiversity & accounts for costs caused by
climate change.
 Some environmental experts prefer physical
indicators. (uch as "water per capital") which
may be aggregated to indices such as the
"sustainable development index."
 In this green GDP 192 country are the
members of it.

24
 POVERTY
 Poverty is a social phenomenon where in
section of society is unable to fullfill even
its basic necessities of life.
 The poverty has been divided in two parts.
1. Absolute poverty - When people do not have
enough money to meet the basic threshold
to buy food, shetter, clothing etc. that is
needed for survival it is known as Relative
poverty.
 It is also defined in terms of insufficiency of
basic needs.
2. Relative poverty - This concept is related
to the general standard of living in a society.
When people are poor in comparison to
others around them, but may still have
enough money to survive.
 Relative poverty relates to inequalities in a
society.
 Planning commission is the authority which
publishes the poverty estimates based on
various rounds of "national sample survey
organisation" (NSSO) on monthly per capital
consumption expediture.
 In India, the poverty line is defined on the
basis of calorie intake According to this,
2100 calories a day has been fixed for urban
areas & 2400 calories in rural areas.
 Since, NSSO 55th round (1999) planning
commission gives two poverty estimates
based on mixed recall period (MRR) &
universal recall period (URP)
 Mixed Recall Period - It gives consumer
expenditure data for five non - food items,
namely clothing, footwear, durable goods,
education & institutional medical expenses
for 365 days & consumption data for
remaining items are collected for 30 days
period.
 Universal Recall Period - Consumption
data for all items are collected for a 30 days
recall period.
Causes of Rural Poverty -
 Rapid population growth.
 Lack of capital.
 Lack of alternate employment opportunities
other than agriculture.
 Excessive popula tion p ressur e on
agriculture
 Illiteracy
 Regional disparities.
 Joint family system.
 Child marriage.
 Lack of proper implementations of PDS.
Causes of Urban Poverty -
 Migration from rural areas.
 Lack of skilled labour.
 Lack of housing facilities.
 Limited job opportunities in cities.
 Lack of vocational education / training.
Trickledown effect -
 Among various factors contributing to
poverty alleviation, Economic growth in
terms of its trickledown effect has always
been regarded as an important factor.
However is not economic growth but also
the sectoral composition of growth.
Human Pover ty Index - Human
development report (1997) first time included
human poverty index.
 HPI has focused on the 3 dimensions of the
life.
1. Living standard.
2. Health.
3. Education.
 Human development report (2010) has
introduced the new "multi-demensional
poverty index." first time
Anti- poverty strategy -
 It includes the 3 broad components.
1. Promotion of economic growth.
2. Promotion of human development &
tar g et programmes of pov ert y
alleviation.
3. Employment generation to address
multidimensional nature of poverty.
UNEMPLOYMENT
 Unemployment can be defined as a situation
when person able & willing to work are
seeking jobs at the prevailing wage level but
they are unable to get the same.
 B. Bhagwati committee on unemployment
estimates (1973) set up by the planning
com mission gave 3 est imates of
unemployment these are -
1. Us ual pri nci pal statu s (UPS)
employment - Persons who remained
unemployed for a major part of the year.
This is also cal led "open
unemployment".
25
 2. Cur rent weekly s ta tus (CW S)
unemployment - Person who did not
find even an hour of work during the
survey week.
3. Cur rent dail y sta tus (CD S)
unemployment - person who did not
find work on a day or some days during
the sur vey week. This is the
com prehensive measure of
unemployment, including chronic as
was as under - employment.
Types of unemployment -
1. Cyclical unemployment - It is the
result of depression in any economy.
2. Seasonal unemployment - periodic
unemployment created by seasonal
variation in particular industries. eg -
in the period between past harvest &
next sowing, agricultural laboures are
unemployed.
3. Educated unemployment - This is
mainley found in urban areas. Those
educated persons who are unable to get
work come under this category.
4. Under unemployment - It results when
a person contributes to less production
than what he/ she is capable eg. an
engineer working as a clerk is under
employed.
5. St r uctural unemp loy ment -
Unemploym ent r esulti ng from a
mistmatch between demand in the
labour market & the skills & locations
of the workers seeking employment e.g.
- when computer were introduced there
were jobs but people could not match
the skills required to operate the
computer resulting in unemployment.
6. Frictional unemployment - Frictional
unem ployment is t ransitional
unemployment due to poeple moving
between jobs. It refers to a transition
period of looking for a new job for
different reasons such as seeking a
better job being fired from a current job
or having voluntarily quit a current job.
7. Seasonal unemployment - It is a type
of frictional unemployment that occurs
in specific activities or occupations
which are characterized by seasonal
work. An example of seasonal
unemployment is the job lessness
during non-cultivation in rual areas.
8. Natural Rate of unemployment - The
tota l of f rictional & struct ural
unemployment is referred as the natural
rate of unemployment.
9. Op en unem pl oym ent - Open
unemployment arises when a person
voluntarily or involuntarily keeps
himself/herself out of consideration for
certain jobs.
 It is important to note that the type & nature
of unemployment differs significantly in
developing & developed countries.
 Unemployment in developed countries arises
due to the lack of effective demand or
econ omic s low dow n, rec ession , or
depression.
 It developing countries, unemployment
occurs largerly due to a lower demand for
labour or inadequate employm ent
opportunities in the economy. Such a
situations occurs due to the subsistence
nature of agriculture, A low industrial base
& the small size of the tertiary sector.
 All developing countries including India
suffer from structural unemployment which
exists both in open & disguised forms.

26
 INDUSTRIAL SECTOR
Defination - Industry refers to an economic
activity concerned with the processing of raw
materials & manufacture of goods in factories.
Industrial Policies -
 Industrial policies were launched in 1948,
1956, 1977, 1980 & 1991.
Industrial policy of 1948 -
 The industrial policy resolution of 1948
marked the begining of the evolution of India
industrial policy.
Salient features of (IPR 1948) -
 Development of mixed economy.
 State programmes, for the development of
industries.
 Promotion of small scale & cott age
industries.
 Foreign investment was allowed, but
effective control should be with indians.
 Classified industries into 4 categories.
(a) Public sector.
(b) Mixed sector.
(c) Controlled private sector.
(d) Private & co-operative sector.
 The IPR 1956 call ed t he "econ omic
constitution" of India, gave the public sector
a strategic role in the economy.
 The object iv e of the IPR 1956 was
establishment of socialistic pattern of the
society in the country.
 Presently there are two areas which are
reserved for public sector.
1. Atomic energy.
2. Railway transport.
New Industrial Policy, 1991 -
 Formed the basis for the economic reforms
in India which proved to be a watershed in
the history of Indian economy.
 The main aim of the new industrial policy
1991 was -
1. To unshackle the Indian industries from
the cobweb of unnecessary bureaucratic
control.
2. To introduce liberalisation with a view
to integrate Indian economy with the
world economy.
3. To remove restrictions on FDI & to
abolish MRTP Act. 1969.
4. To shed t he loa d of t he public
enterprises.
Public Sector -
 In terms of ownershi p public sec tor
enterprise (PSE) comprises, all undertakings
that are owned by the government, or the
public, whereas private sector comprises
enterprises that are owned by private
persons.
The main objectives of Public Sector -
 To promote rapid economic development
through cr eation & exp ansion of
infrastruture.
 To generate fi nancial resource for
development.
 To promote redistribution of income &
wealth.
 To create employment opportunities.
 To encourage the development of small scale
ancillary industries.
 To promote exports on the new side & import
substitution on the other.
 To promote balanced regional development.
Disinvestment & privatisation -
 There is a difference between privatisation
& disinvestment. Privatisation implies a
change in ownership resulting in a change
in managment. Disinvestment is a wider
term extending from dilution for the stake
of government to the transfer of ownership.
 The govt. of I ndia c onsti tuted the
"disinvestment commission with Mr. G.V.
Ramakrishna as the chairman in August
1996 to aduise it on disi nvestm ent
programme of public sector enterprises. It
has suggested classification of PSE into core
& non core. In core sector maximum of 49%
disinvestment would be allowed while in non
core disinvestment would be upto 74% PSEs
shares will given to small investors and
employees to ensure wide dispossal of shares
thus introduce mass ownership workers
shareholding. It has also suggested greater
autonomy to PSEs.
 To minimize the financial burden on the PSE
the govt. has started voluntary Retirement
scheme (VRS) for the employees. This is
called "Golden handshake scheme."
 Privatisation refers to a general process of
involving the private sector in the ownership,
or operation of a state owned enterprise.
Thus it refers to private purchase of all or
part of a company.
27
 Component of New Economic Policy /
Economic Reforms (LPG) - Main components of
new economic policy are liber alisati on,
privatisation & globalisation of the economy.
Liberalisation - Liberalisation of the
economy means freedom of the producing units
from direct or physi cal contro ls by the
government.
Privatisation - "Privatisation in the general
process of involving the private sector in the
ownership or operation of a state owned
enterprise. It implies parting with government
ownership or management of the public sector
enterprises.
Globalisation - Globalisation means
integrating the economy of a country with the
economies of other countries in an environment
of free frlow of goods & services across the border.
Policy of Navratnas - Navratna was the title
given originally to nine public sector enterprises
(PSEs), identified by the government of India in
1997, as it most prestigious which allowed them
greater autonomy to complete in the global
market.
Criteria for Navratna status for PSUs -
 The company must obtain a score of 60 (of
the total 100).
 The score is based on six parameters which
included net profit to net worth, total
manpower cost to total cost of production,
profit before depreciation, interest & Taxes
(PBDIT) to capital employed, PBDIT to
turnover, earning per share & inter-sectoral
performance.
 The company must first be a miniratna - 1
& must have four independent directors on
its boards.
 The navratna status empowers a company
to invest upto Rs. 1000 crore on 15% of their
net worth overseas without government
approval.
 At present there are 16 Navratnas.
List of Navratnas -
1. Bharat electronics limited.
2. Bharat heavy electrical limited.
3. Bharat petroleum corporation limited.
4. GAIL (India) Limited.
5. Hindustan Aeronautics Limited.
6. Hindustan petroleum corporation Limited.
7. Mahanagar Telephone nigam limited.
8. National Aluminium company limited.
9. National mineral development corporation.
10. Nevyeli lignite corporation limited.
11. Oil India Limited.
12. Power finance corporation limited.
13. Power grid corporation of India limited.
14. Rashtriya ispat nigam limited.
15. rural elecrification corporation limited.
16. Shipping corporation of India limited.
Policy of Miniratnas -
The govt. has also accorded the satus of
miniratna to some profit making PSEs. There are
two types of miniratnas - category. I and category
- II.
Category Miniratna - I
Public sector enterprises (PSEs) that have
made profit continusouly for the last 3 years or
earned a net profit of Rs. 30 crores ore more in
one of 3 years.
 At present there are 51 miniratna - I
Category Miniratna - II
 PSEs that have made profit for the Ist 3 years
& should have a positive net worth.
 At present there are 14 miniratna-II.
Policy of Maharatnas -
 In 2009, the government established the
maharatnas status, which raised the PSEs
investment ceiling from Rs. 100 crore to Rs.
5000 crore.
 The maharatnas firm can now decide on
investments of UP to 15% of their net worth.
Criteria of Maharatna - There are 6 criteria
for eligibility of Maharatna are -
1. Having navratna status.
2. Listed on Indian stock exchange.
3. An average annual turnover of more than Rs.
20000 crore during the last three years.
 An average annul net worth of more than
Rs. 10000 crore during the last 3 years.
 An average annual net profit after tax of
more than Rs. 2500 crore during the last 3
years.
 And should have significant global presence.
Li st o f M ahar atnas - Ther e ar e 5
maharatnas in India.
1. Oil & natural gas corporation (ONGC).
2. Steel Authority India limited (SAIL).
3. Indian oil corporation (IOC).
4. National thermal power corporation (NTPC).
5. Coal Indian Limited (CIL).
Monopodies & Restrictive trade practices
Act, 1969 -
 MRTP act was enacted in 1969 & MRTP
commission was constituted in 1970, to
prevent the concentration of economic power
& to prohibit restrictive or unfair trade
pratices.
28
 Under the act, companies having assests
beyond the threshould limit (i.e. Rs. 20
crores in 1985) were placed under the
preview of the act.
 Certain restrictions are imposed on such
companies like prior approval of the MRTP
commission for establishment of new
undertakings, expansion of undertaking,
mergers & acquisitions.
Competition Act, 2002 -
 The competition Act was enacted by the
government in 2002. On the
recommendation of the SVS Raghavan
committee. It replaced the MRTP act & the
MRTP commission was replaced by the
competition commission of India (CCI).
 The objectives of the act are to encourage
competition, prevent abuse of dominance &
to ensure a level playing field for all the
enterprises in the Indian economy.
Competition Amendment Bill 2007 -
 Parliament on Sept. 10, 2007 finally passed
the long pending competition amendment
bill 2007 that empowers the competition
commission of India (CCI) to act as the
competition regulator & to deal with a host
of contemporary economic issues including
monopolies & taking overs of corporate
firms.
 According to the bills provision, the CCA will
replace monopolies & restricitive trade
practice commission (MRTPC). The CCA was
established in 2003.
 Under new provisions, the MRTPC will
continue till two years after the constitution
of CCA for dealing with pending case but
after two years MRTP will be disolved.
 However, MRTPC would not entertain any
new cases after the CCI is constituted. Cases
pending with MRTP after two years of setting
UP of CCI will be transfered to the latter.
Industrial Finance -
 Indian industries need 3 types of finance.
1. Long term.
2. Medium term.
3. Short term.
Long term - It is requires to purchase
permanent assests like land, building machinery
etc.
 Industrial unit also need this finance for
their extension & re-establishment.
Medium term - It is generally a part of long
term finance.
 Besides industrial unit has to arrange raw
material, intermediate goods & to meet our
daily expenses -
Short - term - It required for all these
purpose.
 Industrial finance in India include the major
sources like shares & debentures deposits
from public, credit from bank & industrial
finance institutions. The major industrial
finance institution are -
1. Industrial development bank of India
(IDBI).
2. Industrial finance corporation of India
(IFCI).
3. ICICI (on the recommendation given by
mumbai high court on April 3, 1997,
SCICI has been merged with ICICI w.e.f.
April 1, 1996).
4. Small industrial development bank of
India (SIDBI).
5. UTI.
6. IIBIL.
7. NABARD.
8. EXIM bank.
9. SFCs.
10. LIC.
11. GIC.
 All the above mentioned financial institution
arrange medium & long term finances for
industrial units.
 Schedule commercial banks play t he
important role in providing short term
finance to industrial units.
 Deposits from public & indegenous bankers
are also the important sources of short term
finance.

29
 MONEY MARKET
Micro credit & Micro finance - Micro credit
& micro finance are relatively new terms in the
fields of development. In the literature, the term
micro-credit & micro finance are after used
interchangeably, but it is important to highlight
the difference between both the terms.
Micro-credit - as defined by grameen bank,
symbolizes small loans extended to the poor for
undertaking the self-employment projects that
would generate income & enable them to provide
employemnt for themselves & their families.
Micro finance - Is a financial service of
small quantity provided by entrepreneur from low
income house-holds. These financial services may
include saving, credit, insurance, leasing, money
transfer, equity transfer etc. i.e., & type of
financial services provided to customer to meet
their financial needs with the requirement that -
1. Transaction value is less.
2. Customers belong to the poor strata of
society.
Self Help Groups (SHGs) : In recent years,
SHGs have emerged as a major strategy for the
promotion of informal credit to the rural poor. In
1992, RBI/NABARD have launched a "pilot
project" & issued necessary guidelines to the
banking system for lending to the SHGs. After
careful thought & study, both the RBI & NABARD,
assiting the SHGs become "normal lending
programme" under priority sector & service area
approach in 1996.
Meaning of SHGs - A self help group is a
voluntary association of the poor people
(Specially women) who belong to the same socio-
economic background. Th SHG promotes small
savings among its members, which are then kept
with a bank.
Objectives of SHGs -
1. To build mutual trust & confidence
between the bankers & the rural poor
people.
2. To encourage banking activities, both
on the thrift as well as credit sides, in a
segment of the population that the
formal financial institutions usually find
difficult to cover.
3. To meet the needs of the poor by
combing the flexibility, sensitivity &
responsiveness of the informal credit
system with the strength of technical &
administrative capabilities & financial
res ources of the form al cre dit
institutions.
SGH Bank Linkage - THe SHG bank linkage
programme, initially launched by NABARD with
500 SHGs on a "Pilot Prject" basis in 1992.
 The linkage of SHGs with banks aims at
using the intermediations of SHG between
bank & rural poor for cutting down the
transcation costs for the both banks & their
rural clients.
Measures of Money Supply -
 Money supply is the stock of liquid assests
held by the public which can be freely
exchanged for goods & services. RBI
calculates four concepts of money supply.
These are known as measures of monetary
aggregrates or money stock measures.
M1 = currency with the public + Demand
deposits with the banking system + other
deposits with the RBI
M2 = M1 + saving deposits with post office
saving of public.
M3 = M 1 + Time deposits of public with
banking system.
M4 = M3 + All deposits with post office saving
banks (excluding national certificates).
 RBI working group on money supply headed
by Y.V. Reddy recommended for dropping
of post office saving aggregates vi2, M1, M2
and M3
 The symbol of Indian rupee came into use
on 15th july 2010, Indian is the 5th country
to accept a unique currency symbol.
 The new symbol designed by dudaya kumar,
a post graduate of IIT Bombay was finally
selected by the union cabinet on 15th July
2010, the new symbol is an amalgamation
of devanagri "Ra' & Roman "R" without the
stem.
 Coins are minted at four places viz, mumbai,
kolkata, hyderabad & Noida.
30
 Printing of securities & minting in India
Security press Station Related by
 Currency notes press (1928) Nasik Bank notes from Rs. 1 to 100.
 Security paper (Est. 1967 - 68) Hoshangabad Bank & currency notes paper
 Bank notes press (1974) Dewas Bank notes of Rs. 20, 50, 100, & 500.
 Security notes printing press Hyderabad Union exercise duty stamps
(Estd - 1982)
 Indian security press (1922) Nasik Postal material postal stamps etc.
 Modernised currency notes Mysore (Karnataka)
press (1995)

Reserve Money - Reserve money in the cash 3. Rise in indirect taxes.

held by the public & the banks. In other words, 4. Import cost push factors.
it is the total money issued by the central bank
& RBI in India. 5. Rise in wages & salaries.
 It is composed of 6. Uncertainties of weather.
 Currency in circulations in public (c) Measure to check rising prices - There
 Other deposist with the RBI (OD) & cash are 3 set of measures -
reserves of the bank with themselves & with 1. Monetary policy.
the RBI (CR) thus, reserve money = C + OD 2. Fiscal policy - government can reduce
+ CR the rate of indirect taxes.
Liquidity Aggregates - 3. Other measures.
 L1 = M2 + All deposits with the post office
The latter has a limited role to control
savings banks (excluding national saving
inflation in a country like India particulary
certificates) because the govt. may not be able to reduce its
 L2 = L1 + term deposits with term lending non - planned expenditure although it can cut
institutions & Refinancing institutions (Fls) indirect taxes.
+ Term borrowing by FIs + certificates of
deposits issued by FIs.  Monetary policy can play a very important
role. For eg. not only through Qualitative &
 L3 = L2 + Public deposits of non - banking
Quantitative measures, but also through a
finacial.
measures like market stabilization scheme.
Inflation - It is a sustained increase in
general price level over a particular period of time.  In a country like India other measures has
It reduces the purchasing power of money. a predominent role in controlling inflation.
Causes of Inflation - Throughout 2008, inflation rate was very
high govt. adopted the following measures.
 Rise in demand / fall in supply.
1. Inc reasing import of essent ial
 Inflation is the result of 2 sets of factors-
commodities
2. Strengthening PDS.
3. Banning expor ts of essent ial
 In India demand pull factors are as follow - commodities.
1. Rise in population 4. Invoking ESMA to prevent disruption of
2. Rise in govt. expenditure particulary essential services.
non- planned. 5. Preventing hoarding & black marketing
3. Rise in black money. like it did against cement production.
4. Ris e in m oney supply & defi cit 6. Thus a mix of monetary policies & fiscal
financing. policy has enabled govt to moderate
5. Rise in wage & salary. inflations.
6. Rise in consumerism.
Inflation in India is measured by using
7. Rise in fore reserves.
2 indicies -
Factors on supply & cost side-
1. WPI (whole sale price index)
1. Speculation hoarding & black money.
2. Rise in administered prices. 2. CPI (cost price index)

31
 WPI - It is used to measure the rate of
inflation in the country on a point to point basis
which implies rate of inflation during a certain
week ending this year to the corresponding week
ending last year. This is done on the basis of
wholesale price of 435 commodities collected from
major wholesale market in the country on a
weekley basis. The base year for WPI is 2000-01.
CPI - It is used to measure the cost of living
of a common man on the basis of retail prices
collected every month for 260 commodities which
also includes some services. Thus CPI (IW) is used
to grant clearness Allowance (DA).
 Significantly WPI has weight of 63% given
to manufactured goods, 23% of food primary
commodities & 14% to fuel like labricants.
 On the other hand CPI (IW) gives 57% to
food & primary commodities. This divergence
in the two indicies is not only due to number
of commodities or weight given but also due
to wholesale & retail prices difference.
Pr oducers Price I ndex (PPI) - M ost
developed countries are using it by not taking 3
things into account.
1. Indirect taxes.
2. Transportation costs.
3. Profit margin.
Thus before a commodity reaches the
consumer, rate of inflation is worked out at the
producers level so that corrective measures can
be taken at that level before inflation.
 A committee was set up in India to study
PPI.
Demand pull inflation - Inflation brought
about by an increases in demand is called
"Demand pull inflation".
Cost push inflation - Inflation brought
about by an increase in the cost of the factors of
production is called "cost push inflation."

32
 INDIAN FISICAL POLICY
Fiscal System - It refers to the management 2. Influencing the efficiency of resource
of revenue & capital expenditure financer by the allocation.
state. Hence fiscal system includes budgetary There are 3 parts of the fiscal policy -
activities, of the govt. that is revenue raising, 1. Public Revenue.
borrowing & spending activities. 2. Public expenditure.
Fiscal Policy - Fiscal policy refers to the 3. Public debt.
use of taxation, public expenditure & the
Public Revenue - Public revenue, an
management of public debt in order to acheive
indispensable organ of public finance operation
certain specific objectivies. include all income & receipts of the govt. through
Sources of revenue for centre - The various sources.
revenue of the following elemets. Sources of public Revenue - Govt. spends
1. Tax revenue. money for development & welfare activities. The
2. Non-tax revenue. exp enditure on food, education, heal th,
Sources for revenue for state infrastructure etc. are increasing day by day. To
1. State tax revenue. meet these expenses the govt. mobilizes income
from various sources. This income is called public
2. Share in central taxes.
revenue.
3. Income fro m soci al, commerci al &
economic ser vi ce & profit s of state run The different sources of income are -
enterprises. State tax revenue includes among 1. Tax
other land revenue, stamp, registration & estate 2. Income from public
duty etc. Tax Revenue - Tax is compulsory payment
Expenditure of the centre - The central by the citizens to the govt. to meet the public
government makes expenditures broadly under expenditure.
two heads -  There are 3 types of taxes -
1. Plan expenditure. 1. Direct & indirect tax.
2. Non-plan expenditure. 2. Progressive & regressive tax.
Plan expenditure - Under this comes autlay 3. Advatorem & specific tax.
for agriculture, rural development, irrigation & Direct tax - A direct tax is one whose burden
flood control, energy, industry & minerals, falls on the same person on whom it is levied i.e.
transport communication, science & technology, he cannot shift his burden to somebody else.
enviroment & economic service etc.  Personal income tax.
Non-plan expenditure - The major non-plan  Corporate tax.
expenditure are interest payment, defence,  Wealth tax.
subsidies & general services.
 Gift tax.
 Public debt of the govt. of India is of 2 kinds  Land Revenue.
- internal & external.
 Professional tax.
 Internal debt - It comprises loans raised
 Entertainment tax.
from the open market, compensation bonds,
treasury bills issued to the RBI, commercial Indirect tax - An indirect tax is one which
is imposed to someone but whose burden is
banks etc.
shifted to some one else.
Objective of fiscal policy in India - Fiscal
policy essentially has a multidimensional role.  Exercise debt.
However, in India in the context of indicative  Custom duty.
planning it has two major objectives -  Sales tax.
1. Improving the growth performance of  Service tax.
the economy.  Value added tax.
2. Ensuring social justice to the people.
 Passenger tax.
Fisca l Policy inf luences growth Progressive tax - A tax that takes away a
performance of an economy mainly in two higher proportion of income as the income rises
ways - is known as progressive tax. Indian income tax
1. Influencing the resource mobilization. is progressive tax.

33
 Regressive tax - Regressive tax is one in
which the rate goes down as the income of a
person goes up.
Budget - The budget of the govt. of India for
any year gives a complete piture of the estimated
receipts & expenditure of the govt. for that year
on the basis of the budget figures of the two
previous years. The budget consists of two parts
- (RBI) makes this meany against the govt. treasury
1. Revenue budget.
2. Capital budget.
Revenue budget - All current receipts such
as taxation, surplus of public enterprises &
expenditures of the govt.
Capital budget - All capital receipts &
expenditure such as domestic & foreign loans,
loan repayments, foreign aid etc.
Types of budgeting -
1. Zero - based budgetting - It is a method of
budgetting in which all budgetary allocations
are set up to nil at the beginning of a financial
year.
2. Out come budgetti ng - This type of
budgetting tries to ensure that budget outlays
translate into concrete outcomes.
3. Gender budgetting - It came into being in
2004-05. To contribute towards the women
empowerment & removal of inequally based
on gender, role of budgetting has been
accepted through this step.
Deficits - A budget can be balance budget,
surplus budget or a deficit budget. In a budget
statement, there is a mention of four types of
deficits.
(a) Revenue Deficit - Revenue deficit refers to
the excess of revenue expenditure over
revenue receipts.
1. Revenue Deficit - Total Revenue -
expenditure - Total revenue receipt =
Non plan expen ditur e + plan
expenditure - (net tax revenue + non tax
revenue).
2. Budget deficit - Total expenditure -
total receipts.
3. Fiscal Deficit - Revenue receipts Total
receipts -
Primary deficit - Primary deficit refers to
fiscal deficit minus interest payment.
Primary deficit - Revenue deficit interest
payments.
Revenue D ef ici ts (RD) - Rev enue
expenditure - revenue receipts.
 Gov t. can not balance its day-to-day
expenditure & day to day income. It is
dangerous.
Fiscal deficit (FD) = borrowings
Total expenditure - [RR + non - debt creating
capital receipts].
Primary deficit = Fiscal deficit - interest
bearings.
Monetized Deficit - It means net addition of
RBI credit to the government during the year
which leads to creation of new notes by the RBI
& thus brings about monetization of the economy.
bills) FD can also be expressed in the form of the
following equation.
FD = Budget deficit + Borrowings (wrong way
of calculation).
From 1997 govt. abolished BD as a concept
as it includes borrowings.
Various taxes Prevailing in India -
1. Corporate Tax - Tax on companies profit on
foreign companies
2. Customs Duty.
3. Excise duty.
4. Income tax.
5. Service tax.
6. Mat - Minimum alternative tax.
7. STT - securities transaction tax.
8. FBT - Fringe benefit tax.
9. BCTT - Banking cash transcation tax BCTT
is also called CWT - (Cash withdrawal tax)
10. Tonnage tax.
11. EET - Exempt exempt tax.
12. MODAT.
13. Cenvat.
14. State level VAT.
15. CST - central sales tax.
Corporate Tax - Tax on companies profit
on domestic companies on foreign companies.
Surcharge - Tax on tax. - to reduce
inequalities (max. limit is 1 crore)
Indirect cess - It is a temporary levey
imposed to achieve a specific objective.
Custom duty - It includes export & import
duty. Since there is no export duties in India for
many years, for all purposes it means import
duty.
 PEARATE of custom duty means the highest
average rate of import duty on non-
agriculture goods i.e. on manufactured
products.
 There is also a duty called counter vailing
duty (CVD) which is a duty imposed over &
above basic custom duty on such imported
products whose price happens to be lower
than the price happens to be lower than the
price of similar domestic product so than in
order to pr5ovide a competitive edge to the
domestic product, a CVD is imposed in such
a way that it makes the price of imported
products equal to/higher than domestic
product prices.
34
 The is also an import duty called "Anti
dumping duty" which can be imposed by a
nation on such imported products which are
deliberately sold by an exporting country at a
prices lower than the prices at which it may be
sold in the home market. On such products, WTO
permits imposition of Addities.
Eg = China started dumping batteries in
India.
Excise Duty - It means duty on products
manufacture within the country. Excise is
imposed by the centre on most of the
commodities.
Service Tax - Tax on Service.
Mat - (Minimum alternative tax) - It is the
tax imposed on companies which show high
profits, pay high dividents to share holders & yet
manipulate their accounts legally that they end
up paying zero tax to the gov t. On such
companies, govt. imposes MAT at the rate of
certain percentage of their booked profit i.e. profit
on the basis of which they declare dividends.
STT - (Securities Transaction Tax) - It is
a tax imposed on transaction in the stock market
i.e. on the total value of share bought & sold in
the stock market. The tax is share equally
between the year & the seller.
FBT - (Fringe benefit Tax) - FBT is a tax
imposed on fringe benefits provided by an
employer to his employers by way of conveyance,
entertainment, telephone, children education,
club membership pensioner benefit etc.
Tonnage Tax - It is a tax imposed on
shipping company on the basis of tonnage carried
by them & the number of days the ship has been
in operation. On this basis a national income is
worked out & subjected to tax at prevailing
corporate tax rate.
Capital Gains Tax - It is imposed on such
gains made by an individual/company which
arise due to increase in the value of a property
over a period of time.
MODVAT - It was introduced by Jha
committee in 1986. It means modified value
added tax which implies 2 things in respect of
central excise duty.
1. Removal of cascading burden
2. Rationalization under MODVAT.
 MODVAT was renamed as CENVAT under
which there was further rationalisation in
the sense that rate of excise duty was the
same with both on input & output.
State Level VAT - It is the VAT introduced
from 1st April, 2005 to replace sales tax, Turnover
tax, surcharge on sales tax etc. It was introduced
on the recommendation of Asim Das Gupta
committee which proposed a white pare as a
consensus among state govt . about the
introduction of VAT to there are 2 standard rate
of VAT 12.5% & 4%.
 The former generally on final products & the
later on input including some essential
commodities like drugs.
 There is also rate of VAT on gold & silver
ornaments.
 Thus from 1st April, 2005 most state govt.
have introduced VAT to replace state sale
tax.
 The biggest virtue of VAT is that is minimizes
evasion because a seller pays VAT on his
sales but gets refands of VAT paid by him
on previous purchase.
 A retailer pays VAT but is refunded VAT paid
by him on good purchased by him on
wholesales. He cannot claim this refund
unless he shows receipt.
 Thus VAT minimizes evasion & this is the
reason that revenues of state govt. have gone
up substantially after the introduction of
VAT.
Centeral Sales Tax - It is collected by the
selling states from buying state. Thus it is an
interstate tax. The rate is 3% it is abolished after
GST was introduced.
FRBM Act. - Fiscal responsibility & budget
management Act was passed in 2003 for which
rules were laid in 2004.
According to this Act. the governments bring
down its revenue deficit to zero & FD to 3% by
2008-09.
The Act. aims act ensuring stability,
accountability & transparency on central govt.
finances. It is binding on states to implement
similar legislation on their own level.

35
 FINANCIAL SECTOR
Finance Market - Finance market is important part of finance sector. Financial market is that
market, where financial transactions take place.
 On the basis of short term & long term transactions, such markets are classified as into money
market & capital market.
Money Market - The cluster of financial
institutions that deal in short term securities &
loans, gold & foreign exchange are termed as
money market.
 Ordinarily, the Indian money market is
divided into parts.
1. The organised sector.
2. The unorganised sector.
Organised sector - It includes the SBI &
associates banks, 19 nationalised banks, RRB's,
co-operative banks, Non-govermental sectors &
other banks.
Unorganised Sector - It includes the money
lenders & indigenous bankers.
Functions of Money Market - The money
market performs 3 broad functions.
1. It provides an equilibrating mechanism for
demand & supply of short term funds.
2. It enables borrowers & lenders of short term
funds to fulfill their borrowing & investment
requirements at an efficient market clearing
price.
3. It provides an avenue for central bank
intervention in influencing both quantum &
coast of liquidity in the financial system,
thereby transmitting monetary policy
impulses to the real economy.
Organisation of Indian Money Market -
Ind ian money include s the follow ing
organisations.
1. Call Money Market - The call / Notice money
market forms an important segment of the
Indian money market.
 Under the call money market, funds are
transacted on overnight basis & under
notice.
 Money market funds are transacted for the
period between 2 to 14 days.
2. Banker's Acceptance Market - A banker's
is a short - term credit investment created
by a non-financial firm & guarantee by a
bank to make a payment. Acceptances are
traded at discounts from face value in the
secondary market one advantage of a
banker's acceptance is that it does not need
to be held untill maturity & can be sold off
in the secondary markets, where investors
& institutions constantly trade BAS.
Collateral loan Market - In this market,
loan is often secured against collateral security,
security may be in any form viz pledge mortgages
etc. Thus, the market for loans secured by
collateral security is called the collateral loan
market.
Treasury Bill Market - Treasury bill are
money market instruments to finance the short-
term requirements of the govt. of India. These
are discounted securities & thus are issued at a
discount to face value. The return to the investor
is the difference between the maturity value &
issue price.
 These bills are issued by the central govt. to
secure short-term loans. These bills are sold
by the RBI on behalf of the govt.
 These are most liquid, because RBI is always
ready to buy & discount them.
Commercial Bill Market - It is the market
that deals in bills. Commercial bill is a short term,
negotiable & self-liquidating instrument with low
risk. It enhances the liability to make payment
in a fixed date when goods are bought on credit.
 The maturity period of the bills varies from
30 days, 60 days & 90 days, depending on
the credit extended in the industry.
Capital Market -
 Capital market is one of the most important
segment of the Indian financial system. It is
the market available to the companies for
meeting their requirements of the long term
funds. It refers to all the facilities & the
institutional arrangement for borrowing &
len ding f unds. In other wor ds, it is
concerned with the raising of money capital
for purpose of making long-term investment.
36
 The market consists of a number of
individuals & institutions. That canalise the
supply & demand for long-term capital &
claims on it. The demand for long term
capital comes predominantely from private
sector manufacturing industries, agriculture
sector, trade & the govt. agencies. while, the
supply of funds for the capital market comes
largely from individual savers, corporate
savings, banks, insurance, companies,
specialised financing agencies & the surplus
of govt.
Development of capital Market in India -
 The ratio of the transaction was increased
with the share ratio & deposit system.
 The removal of the pliable but illused forward
trading mechanism.
 The introduction of infotech systems in the
National stock exchange (NSE) in order to
cater to the various investors in different
locations.
 Privatization of stock exchanges.
Stock Markets - Stock markets refers to a
market place where investors can buy & sell
stocks. The price at which each buying & selling
transaction takes place is determined by the
market focus. (i.e., demand & suplly for a
particular stock).
 Presently, there are 23 stock exchanges in
India.
 Bombay stock exchange (BSE) the oldest
stock exchange in Asia, was established in
1875. It is synonomous with Dalal street.
 BSE was corporatised & renamed BSE
limited in 2005.
 In 1894, the Ahmedabad stock exchange was
started to faciliate dealing in the shares of
textile mills.
 In 1908, calcutta stock exchange was started
to faciliate market for shares of plantations
& jute mills.
National stock exchange (NSE) - On the
basis of the recommendation of high powered
pherwani committee, the National stock exchange
was incorpor ated in 1992. By indust rial
development bank of India, Industrial credit &
investment corporation of India, Industrial
finance corporation of India, all insurance
corporations, selected commercial banks &
others.
NSE provides exposure to investors in two
types of market, namely.
1. Wholesale debt market.
2. Capital market.
Bombay stock exchange (BSE) -
 Established in 1875.
 BSE limited is Asia's first stock exchange &
one of India's leading exchange groups.
 Around 5000 companies are listed on BSE
making it worlds number one exchange in
terms of listed members.
 BSE is the first exchange in India & second
in the world to obtain an ISO 9001 : 2000
certification.
 It is also 1st in the country & 2nd in world
to receive information security management
sys tem st andard Bs 7799-2-2002
certification for its online trading system
(BOLT).
 BSE's popular equity index the SENSEX is
India's most widely tracked stock market
ban chmark index. It is tr aded
internationally on the EUREX as well as
leading exchanges of BRCS nations.
SENSEX -
 BSE sensitive index also referred to as BSE
- 30 is a free float market index of 30 well
established & financially sound companies
listed in Bombay stock exchange.
Advantages of Sensex -
 Gre ater l iquidity & lesser risk of
intermeditary charges due to widely spread
trading mechanism across India.
 The screen-based scripless trading ensures
transparency & accuracy of prices.
 Faster settlement & transfer process as
compared to other exchanges.
 Shorter allotment procedure than other
exchanges.
Securities & exchange board of India
(SEBI) -
 It is the regulatory authority established
under the SEBI Act, 1992, in order to protect
the interests of the investors in securities
as well as promote the development of the
capital market. It involves regulating the
bussiness in stock exchanges supervising
the working of stock brokers, share transfer
agents, merchant bankers, underwriters etc,
as well as prohibiting unfair trade practices
in the securities market.
Main function of SEBI -
1. To regulate the bussiness of the stock market
& other securities market.
2. To promote & regulate the self-regulatory
organisation.
3. To prohibit fraudulent & unfair trade practise
in securities market.
37
4. To promote awareness among investors &
training of intermediaries about safety of
market.
5. To prohibit insider trading in securities
market.
6. To regulate huge acquisition of shares &
takeover of companies.
Some important share price Index of
India -
1. BSE SENSEX - This is the most senstive
share index of the mumbai stock exchange.
This is the representative index of 30 main
shares. Its base year is 1978-79. BSE is the
oldest stock exchange of India, founded in
1875.
2. BSE 200 - This represents 200 shares of
mumbair stock exchange. It base year is
1989-90.
3. Dollex - Index of 200 BSE dollar value index
is called DOLLEX. It base year is 1989-90.
4. NSE - 50 -National stock exchange has
launched a new share price Index, NSE-50
in place of NSE - 100 in April 1996. NSE-50
includes 50 companies shares. This stock
exchange was founded on "Ferwani
committee recommendation" in 1994.
Credit Rating
(i) CRISIL - It is set up in 1988. It is a
credit rating agency. It undertakes the
rating, fixed deposit programmes,
con vertible & non-conv erti ble
debentures & also credit assessment of
companies.
(ii) CRISIL - 500 - It is new share price
index introduced by credit Rating
Agency the "credit rating information
services of India Limited" (CRISIL) on
January 18, 1996.
 Apart from CRISIL, there is another credit
rating agency called "investment information
& credit Rating agency of India limited
(ICRA). It rates debt instruments of both
financial & manufacturing companies.
 The national stock exchange (NSE) has
launched a new version of its online trading
software called "National exchange for
Automatic trading " (NEAT).

38
 NATIONAL INCOME OF INDIA
 National income is the net value of all the
final goods. & services produced in a country
during a financial year. It is a flow concept.
In India the financial year is from April 1st
to March 31st. The national income is
calculated annually.
 According to National income committe
(1949) "A nati onal i ncome estim ate
measures the valume of commodities &
service turned out during a given period
counted without duplication."
National Income - It is the measurment of the
production power of an economic system in a
given time period.
National wealth - Is the measurment of the
present assests available at a given time. It is a
stock concept.
National Income Agregates
1. Gross National Product (GNP) -GNP refers
to the money value of total output of
production of final goods & serv ices
produced by the nationals of a country
during a given period of time, generally a
year.
 Symbolically,
GNP = C + G + I + (x - M) + (R - P)
Where,
C = Consumption expenditure.
G = Government expenditure.
I = Investment expenditure.
(x - M) = Net exports.
(R - P) = Net factors income from abroad.
2. Gross Domestic Product (GDP) - It is the
total money value of all final goods & services
produced w ithin the geograph ical
boundaries of the country during a given
period of time.
 Symbolically,
GDp = GNP - (R- P)
When R - P = O then GDP = GNP
3. Net National Product (NNP) - NNP is
obtained by subtracting depreciation value
(i.e, capital stock consumption) from GNP
 Symbolically, GNP - Depreciation = NNP
4. Personal Income (PT) - It is that income
which is actually obtained by the individual
or nationals.
Symbolically,
Personal Income = National income -
undistributed profits of corporations.
Payment for social security provisions -
corporates taxes + Transfer payment + Net
interest paid by the government.
5. Personal disposable Income (PDI) - When
personal direct taxes are subtracted from
personnal income, the obtained value is
called personal disposable income.
 Symbollically,
PDI = PI - Direct taxes
PDI = Consumption + Saving.
6. National Income (NI) - When NNP is
calculated at factor cost (FC) it is called
National income this meaure is calculated
by deducting direct taxes & adding subsidies
in NNP at market price (MP).
NNPFC = NNPMP - Indirect taxes + subsidies.
or NNPFC = GNPMP - Depreciation - Indirect
tax + Subsidies.
 When the national income is measured at
the current year price, it is called National
income at constant prices.
 When the national income is measured at
the current year price, it is called National
income at current prices.
 The distinction between the two is essential
if one has to gauge the "real" progress of the
economy.
 In India, WPI (Wholesale price Index) is the
weighted average of prices of 676 items with
the base year 2004-2005. Out of 676 items,
102 are pr imary articles, 555 are
manufactured & 19 are services items.
Methods of measuring National Income -
1. Product Method - In this method, net value
of final goods & services produced in a
country during a year is obtained, which is
called total final product.
 This respresents gross domestic product
(GDP). Net income earned in foreign
boundar ies by nationals is added &
depreciation is subtracted from GDP.
2. Income method - In this method, a total of
net income earned by working people in
different sectors & commercial enterprises
is obtained. Income of both categories of
peoples -
1. Paying tax.
2. Non-paying tax both are added to obtain
national income.
 By income method national income is
obtained by adding receipts as total rent,
total wages, total interest & total profit.
39
3. Co nsumpti on Metho d - I t is cal led
expenditure method. Income is either spend
on consumption or saved. Hence, national
income is the addition of total consumption
& total savings.
 In India, a combination of production
method & income method is used for
estimating national income.
Estimates of National Income in India -
 In 1868, the first attempt was made by
Dadabhai Naoroji in his book "Poverty &
un-british rule in India". He estimated the
per capital annul income to be Rs. 20.
 The first scientific attempt to measure
national income in India was made by prof
VKRV Rao in 1931-32. He divided the Indian
economy into 13 sectors.
 In 1949, national income committee under
the chairmanship of Prof PC mahalanobis
was constituted the other members being
prof VKRV Rao & prof DR Gadgil.
 National statistical organisation (NSO) was
set up on June 1, 2005 for promoting
statistical network in the country. It was
then headed by prof SD Tendulkar.
CSO and NSSO
 In 1949, central statistical organization
(CSO) was constituted to publish national
income data.
 NSSO (National Sample Su rvey
organisation) was set up in 1950 for
conducting large scale sample survey to
meet the data needs of the country for the
estimation of national income & other
aggregates.

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 IMPORTANT COMMITTEES
1. State Commitee Farms
2. Bhagwati Committee Unemployment
3. Wanchu Committee Direct tax
4. L. K. Jha Committee Indirect tax
5. Swaminathan Committee Population stategies
6. Bhutlingam Commitee Labour income & cost
7. Dentewala Committee Asumption of unemployment
8. Veddnathan Committee Irrigation water
9. Hazari Committee Industrial strategies
10. Dutt Committee Industrial Licencing
11. Mahanobis Committee National Income
12. King Chalaya Committee Tax Reforms
13. Bhanu Pratap Committee Farming
14. Chalaya Committee Eradicating Black Money
15. G.V. Ramkrishna Committee Investment of Public Sector shares
16. Naresh Chand Committee Corporate governance
17. Jyoti Bashu Committee Report on end of Octroy
18. Khushro Committee Agriculture friendly Referms
19. Goiporia Committee Customer Serive reforms in bani
20. Narsimham Committee Banking reforms
21. Rekhi Committee Indirect tax
22. Goswami Committee (1993) Industrial deficiency
23. Tiwari Committee (1984) Industrial deficiency
24. Dr. Mehta Committee Rethinking on the progress of IRDP
25. Rangrajan Committee (1991) Balance Payment
26. Vaghul Committee Mutual fund scheme
27. Nadhkarni Committee Public Sector
28. Malhotra Committee Reforms in Insurance Sector
29. Sen Gupta Committee Literate unemployment
30. Dr. Vijay Kelkar Committee Natural gas cost
31. B.n. Yagandhar Committee (1995) National social help scheme
32. Namdujhapa Committee Raikway fare
33. Bhandari Committee Redevelopment of Local rural Ranks
34. Sundar Rajan Committee Reforms in Mineral sector
35. D.K. Gupta Committee Redevelopment of telephonic sector
36. M.G. Joshi Committee (1994) Instruction regarding privitization of
telecommunication
37. Rakesh Mohan Committee (1995) Financing of Basic structure
38. Gyan Prakash Committee Sugar Scam
39. Malegaon Committee Primary Capital Market
40. Sodhani Committe Foreign currency Market
41. K.N. Kabra Committee Future trading
42. U.K. Sharma Committee (1988) Working of local rural Banks under NABARD
43. Ajit Kumar Committee Flows in salaries of armed forces
44. C.B. Bhavya Committee Presentation of Information by companies
45. Deve Committeee Request of pension for unorganized sector
46. Chakarvarti Committee-2 Reforms in Banking Sector
47. O.P. Sodhani specialist Committee (1995) Development of foreign investment market
48. S.S. Tarapore Committee (1997) Changing aspects of saving account
49. P.C. Alexzender Committee (1978) Simplyfying Export Import Strategies
50. Mahajan Committee (March 1997) Sugar Industry
51. R.V. Gupta Committe (December 1997) Agriculture friendly reforms
52. Tarapore Committee (July 2001) Investigation of share transaction of UTI
53. Machelkar Committee (January 2002) Auto fuel strategy

41
54. Machelkar Committee (Report in 2003) Production of Fake Medicine
55. S.N. Khan Committee (1998) Friendship of working of financial
institutions & Banks
56. N.S. Verma Committee (1999) Resettlement of commmercial banks
57. Parth Sarthi Som Committee Investigation of Tax Schemes
58. N.K. Singh Committee Investigation of income tax rebate
59. Bhurelal Committee Increase in vehicle loans
60. Suptrishi Committee (July 2002) Development of National tea Industry
61. Abhijeet Sen Committee (July 2002) Long term food scheme
62. N.R. Naryan Murti Committee (2003) Corporate governance
63. N.K. Singh Committee Progress in electrical sector
64. Kelkar Committee - 2 Direct & Indirect taxation
65. Committee 3 Vijay Kelkar (2004) Three monthly investigation of economy
according to physical responsible & Budget Management act
66. Lahri Committee (2005) Regarding about prices of Edible oil
67. Rajinder Sacchar Committee - 1 Companies and MRPT act
68. Sacchar Committtee - 2 (2005) Minorities
69. Nayar Committee (2006) Foreign investment in petroleum sector
70. Rangrajan Committee - 2 (2006) Tax structure for petroleum products
71. Rangrajan Committee - 3 Development in Private sector
72. Sungulu Committee (2006) Re establishment of Victims of sardar
Sarover Bandh scheme
73. Pathak Committee (2006) For investigation of UNO food in exchange of
oil program
74. Mistri committee (2007) Progress in financial movement
75. Deepak Parik Committee (2007) Progress in financial matters of Basic
structures
76. Tendulkar Committee (2008) Investigation of the line below the poverty
line
77. B.K. Chutarvedi Committee (2008) Investigation of oil financial condition of oil
companies
78. Kelkar Committee First committee on Backward Caste
79. Mandal Committee Reservation for Backward caste
80. Kothri Committee Educational Reforms
81. Aabid Hussain Committee Small Scale Industry
82. Narsinham Committee Banking Reforms
83. Tendulkar Committee Assessment of Poverty line
84. Rakesh Mohan Committee Committee on financial sector assessment
85. C. Rang Rajan Committee Investigation of savings & investment
86. Abhijeet Sen Committee Future trading on prices of whole sale &
Retail prices of agricultural products
87. Subbarao Committee (July 2009) Technical advices on monetrary schemes
88. Dr. Kirti S. Parik Committee (August 2009) On Petroleum Product Prices
89. Dr. C. Rang Rajan Committee (April 2010) Management of Public Expenses
90. M.C. Joshi Committee (May 2011) Factors related to black money



42
 DEMAND AND SUPPLY
Microeconomics - In economics when
economic activity studied from down to up way
is called microeconomics.
Macroeconomics - In economics when
economic activity studied from up to down way
is called macroeconomics.
Positive economy - This economy also
known as science. We study things as they are.
Normative Economy - In this we don't
study as they are but also as they should be.
Production Possibility - The central
problem of any economy is called problem of
choice.
Production possibility is a group of two
things by which any company by means of its
available resources can produce.
Types of Goods -
Normal Goods - Normal goods are those
goods whose demand increases with income.
Inferior goods - Inferior goods are those
goods whose demand fall with income.
Substitute goods - A group of things which
can be substituted in place of another.
Complimentary goods - Things which can
be used with one another not used seperately.
Law of demand - Law of demand states with
the price of goods increases and other factors
remaining constant the demand falls.
Factors affecting demand -
1. Income of Consumer - When the income of
consumer increases the demand increases.
2. Cost of product - When the cost of product
increases the demand decreases.
3 Season & fashion - Season & fashion also
effect the demand of a product. The demand
out of fashion and off season products
decreases.
4. Cost of subsidiary product - When the rise
in the cost of one product diminishes the
Law of Supply - Increase in the cost of
product increases in the supply.
Factors affecting supply -
1. Cost of the product.
2. Change in the technology.
3. Price of inputs.
4. Change in tax slabs.
5. Fortelling of future prices.
Production function -
Source of production - Land, Labour,
Capital are the sources of production.
The Biggest problem of production -
Extracting the most out of given resources is the
biggest problem of production. Technology plays
an important role in todays time. It plays
important role in production of commodity.
Production function - Production function
means transformation of input into output the
demand it increases the demand of the subsidiary
product.
5. Complimentary goods - Increase in the cost
of one product decreases the demand of the
other product.
Percentage change in demand
ed =
Percentage Change in price
1.
0
 0, Ed  0
 20
2.
 30
 0, Ed  
0
Supply - Supply is the total volume of the
product which is ready to be delievered by the
supplier at a particular time and for a particular
prize while other factors remain constant.
Short period and Long period - Short
period is that period of time in which any farm
can not changes some of its factors.
ex. Land, Machine, Building etc.
But it can change other variable factors.
ex. Capital & labour.
Long Period - Long period is that period of
time in which a farm can change all its factors
and this increases its efficiency.
43