General Awareness for

SNAP
GLOSSARY
 Gross Domestic Product

 Total money value of all final goods & services

manufactured within the country in one year.
 Annual value of goods sold and services paid for inside a
country.
 Nominal & Real GDP

 Nominal GDP measures the value of all the goods and

services produced and expressed at current prices.
 Real GDP measures the value of all the goods and
services produced expressed at the prices of some base
year.
Different ways of arriving @ GDP

 GDP at Constant Prices

 GDP at Current Prices

 Calculated at constant prices to know “real growth”

Gross National Product (GNP)

 GNP = GDP + Income accruing to domestic residents

from investments abroad – income earned by foreigners
in the country.
 Annual value of goods and services in a country including
income from other countries.
 National Income

 Sum of total incomes of normal residents of a country

before deduction of direct taxes.
 To calculate total income, add all payments for the use of
factors of production, like wages, salaries, profits & net
income from abroad.
 Per Capita Income

National Income
 Income per head =
Population

 Average income of one person

 Inflation
 Excess Demand in the economy
 High costs
 Increase in money supply
 More money chasing fewer goods
 Rise in prices, purchasing power of money decreases
 High interest rates tend to increase inflation
 Zimbabwe classic case of gallopping inflation currency
scrapped
 Indicators of Economy-1
Poverty Line
 Consumption expenditure required for getting 2100
calories per person in urban area and 2400 calories in
rural areas.
 Arjun Sen Gupta panel estimates poverty to be 70%+
 Key parameters
 No. of people BPL
 % of population BPL

 Orissa highest percentage of BPL population

 Some poverty zones are BIMARU and the KBK belt in
Orissa.
 Indicators of Economy-2
Poverty Line
 The BPL percentage in India differs according to the
methodology adopted
 Latest estimate of Tendulkar panel is that 8.03 crore
families and 37.2% of the population are BPL
 New poverty index Multi-Dimensional Index (MDI)
developed by Oxford HDI Group
 To sum up poverty estimates show wide variation
from about 21% to 70% plus
 Indicators of Economy-3
HDI – Human Development Index
 Developed by UNDP in 1996
 Measures physical quality of life in a country along
with 3 key parameters
 Life expectancy at birth
 No. of years in school
 Per capita income
 HDI 2009 – India at 134 (182 countries ranked)
 HDI 2009 No.1 is Norway
 Niger ranked at 182
 Indicators of Economy-4
WPI – Wholesale Price Index
 Measures increase/decrease in industrial, commercial
prices of commodities under 3 broad categories
 Primary articles – 98 items
 Fuel, power etc. – 19 items
 Manufactured products – 318 items
 Certain weightage to each category of commodities
 Indicators of Economy-5
WPI – II
 Base year – 1993-94
 Used for calculating INFLATION
 WPI no longer a true indicator of inflation as it may not
reflect ground reality
 The basket of commodities may be outdated
 New series introduced from April 01, 2000
 435 commodities in the new series; as against 447 in
the old series
 Indicators of Economy-6
CPI – Consumer Price Index
 Calculates increase / decrease in retail price
 Direct bearing on consumers
 Different types of CPIs for
 agricultural laborers
 industrial workers
 urban non-manual employee
Foreign Direct Investment (FDI)-1
 FDI supplements domestic investment

 The investment made to acquire long term benefits in

enterprises operating outside the economy of the investor

 The FDI relationship consists of a parent enterprise and a

foreign affiliate which together form a transnational
corporation

 Mauritius, Singapore and USA are the three biggest

sources of FDI

 FDI involves bringing scarce capital, technology and

managerial expertise
Foreign Direct Investment (FDI)-2
 FDI creates jobs
 FDI barred at present in retail trading except single brand
product retailing
 FDI restricted to 26% in print media relating to news and
current affairs
 FDI restricted to 26% in insurance and defence
 FDI 74% in banking
Foreign Institutional Investor (FII)
 FII means an entity established or incorporated outside
India which proposes to make investment in the financial
markets in India

 FII is not stable money

 Unlike FDI the focus of FII is on making quick profits

 Rapid inflows and outflows of FII can create instability in

financial markets
 Real & Nominal
Interest Rates

Real interest rate =

Nominal interest rate – rate of inflation
Key Indicators of Banking Sector-1
 CRR Minimum 3%, Maximum 15%
 SLR Minimum 24%, Maximum 40%
 Cash Reserve Ratio (CRR) - 6%
 Statutory Liquidity Ratio (SLR) - 25%
 Bank Rate - 6%
 Repo Rate - 6%
 Reverse Repo Rate - 5%
 Bank Rate is for a longer period say 6 months to one year
Key Indicators of Banking Sector-2
 Repo and reverse repo rates are for the short term. They
are used to either increase money supply or mop up
excess liquidity
 Repo and reverse repo have now assumed more
importance than BR
 PLR is benchmark rate
 Concept of BPLR (below PLR) under scrutiny
 Under BPLR banks lent to corporates at very low rates that
is below PLR while charging priority sector borrowers
above PLR. An element of cross subsidy by the poor /
middleclass of the rich
Key Indicators of Banking Sector-3
 Majority of Banks lending was under BPLR
 Base rate concept introduced from July 01, 2010
 Base rate system to ensure more transparency
 No lending below base rate except certain schemes like
DIR
 Capital adequacy ratio - minimum 9%
 CAR is creating a capital buffer against different types of
risks like loans
 Forex
 Exchange control
 Fixed Exchange rates
 Free / Floating exchange rates
 Depreciation / appreciation
 Devaluation
 India’s forex reserves more than $283.46 billion invested
mostly in low yielding U.S. securities
 Countries like China and India are financing consumption
in the U.S.
 China – largest forex reserves in the world more than
$1 trillion
 Sovereign Wealth Funds are managing forex reserves like
Temasek of Singapore
Purchasing Power Parity (PPP)
 An exchange rate between two currencies such that the
same basket of goods and services could be bought in
each country if the cost were converted at that exchange
rate.

 It is often used to compare the standards of living between

countries.

 Rate of exchange between two countries determined by

comparing respective internal price levels.
 Current A/C Convertibility
 Free flow for purposes other than for capital purchases and
loans
 Exports
 Imports
 Travel
 Study abroad
 Medical treatment
 Employment abroad
 Gifts
 Consultancy
 Intl. credit cards
 Capital A/C Convertibility
 The freedom to convert local financial assets into foreign
financial assets & vice versa at market determined rates of
exchange
 Indicator of a developed economy
 Gives confidence to investors
 However, leaves the country at risk
 Tarapore Committee 1997
 Fiscal consolidation – low inflation
 Financial sector reforms
 Taxes
 DIRECT TAXES
Direct incidence of tax on the person who pays the tax. liability
to pay tax is NOT passed on to someone else. e.g. Income Tax,
Corporation Tax, Wealth Tax, Land Revenue, Gift Tax etc….
 INDIRECT TAXES
Levied on goods and services. Traders / producers pay it.
Liability passed on to end customer. e.g. Vat, Excise Tax,
Customs Duty, Service Tax…
 New Tax on Goods and Services (TGS) proposed to be
implemented from April 01, 2011
 New Tax code proposed to replace Income Tax Act 1961.
Proposed to be implemented from April 01, 2011
 Tax reforms aim is to widen tax base and ensure more
compliance
 Subsidies-1
 Grants to suppliers of goods and services
 Used to keep consumer prices down (LPG & Kerosene, PDS
to BPL)
 To prop up production (farm and fertilizer subsidies)
 To boost exports
 To lower cost (tax subsidies)
 To improve infrastructure
 Meet social obligations (subsidy on food, education)
 Cross subsidies (petroleum products)
 Cross subsidies in Banking through concept of Below PLR
loans (BPLR)
 Now base rate concept to correct such distortions
 LPG subsidy aimed at middle class
 Subsidies-2
 Kerosene and PDS subsidy aimed at poor
 Rationalisation of subsidies needed like subsidies for solar
lamps instead of kerosene
 Food subsidy – `32,667 cr.
 Fertilizer subsidy – `30,986 cr.
 Kerosene & LPG – `30,000 cr.
 Politically and socially sensitive issue
 LPG subsidy aimed at the middle class
 Interest subsidy on crop loans
 Economic Survey 2010-11 favours “coupon rather than cash”
route for fertilizer and food subsidies
 Economic Survey 2010-11 asks Govt. to move to a system of
direct transfer of subsidies for a targeted population
 Core Sectors
 Coal
 Cement
 Power
 Steel
 Petroleum
 Petroleum refinery products
 Disinvestment-1
 1991-92 to July 2007
 Target – `96,800 cr.
 Achievement – `51,608 cr.
 Budget 2010-11 proposes to raise `40,000 cr. from
disinvestment
 Economic Survey 2008-09 talks of raising `25,000 cr. every
year from disinvestment
 Issues
 Loss making units
 Social responsibility
 Method – Public issue, strategic sale
 Valuation
 Creating monopolies – (IPCL, VSNL)
 Job loss
 Loss of govt. control
 Disinvestment-2
 Ministry of Disinvestment formed by NDA Govt Abolished by
UPA Govt
 Present policy is to opt for the IPO model of disinvestment
rather than outright sale
 Minimum Govt stake in PSU’s to be 51%
 National Investment Fund created to pool disinvestment
proceeds
 Focus on investment rather than disinvestment
 Investment Commission formed
 Some prominent disinvestments are BALCO in 2001 and
Hindustan Zinc Ltd in 2001-02 and VSL in 2001
 Current polices: Disinvestment to be used sparingly
 Global financial trends do not favour disinvestment
 Infrastructure-1
 Transport – Railways, roads, shipping, civil aviation
 Communication – Telecom, P&T Energy – Electricity, Oil,
coal, non-conventional sources
 Science & Technology
 Banking, finance and insurance
 Social infrastructure – education, health
 India lags behind China in development of infrastructure
 Top priority for creation of infrastructure
 Amartya Sen’s analysis is that India has neglected social
infrastructure
 Infrastructure-2
 Delhi Mumbai Industrial Corridor (DMIC) in 2008 with
Japan’s assistance
 Aim is to create state-of-the art infrastructure to activate
local commerce
 Petroleum Chemical Petrochemical Investment Regions
(PCPIR) proposed in 2007
 Patents-1
 Product patents
 Process patents
 Patents Act, 1970
 Generic Drugs – $80 bn worth
 Reverse Engg.
 Huge opportunity
 Compulsory Licensing in emergencies
 India has created a digital data base of traditional knowledge
of healing systems like Yoga, Ayurveda, Unani and Siddha
and registered with European Patent Office (EPO)
 Frivolous patents granted in Western countries for traditional
Indian products like neem, turmeric and even for Yoga
 Patents-2
 Geographical Indication (GI) is a patent associated with a
region
Ex: Kalamkari Art, Darjeeling Tea, Coorg Coffee latest
Tirupati Laddu
 Mashelkar committee on patents
 The patent regime of WTO can be overlooked in times of
medical emergencies like Swine Flu
 SSI
Manufacturing Services
Micro 25 lakhs 10 lakhs
Small 25 lac - 5 cr 10 lac - 2 cr
Medium 5-10 cr 2-5 cr

 128.44 lakh units

 Turnover – `4,97,842 cr.
 Employs 312.52 lakh people
 Exports worth `86,013 cr.
Import Restrictions

 Tariff Barriers
 Non-Tariff Barriers
 Tariff Barriers
 Customs Duty
 Countervailing Duty
 Anti-dumping duty
 Transit duty
 Cess
 Additional duties or surcharges
 Non-tariff Barriers
 Health, Safety regulations
 Quality norms (ISO & EN standards, FDA, CE mark)
 Quarantine laws
 Local subsidies
 Channelised imports through governmental agencies
(eg: sugar imports through STC)
 Licencing policy
 Quota restrictions
 Import bans
 Cumbersome Customs procedures
 Fiscal Policy
The government’s policy of achieving economic objectives
(employment, per capita income…) through government
earning and spending related to increase or decrease in
taxes.
Government sources of funds : Taxes and duties,
government businesses,
fines, borrowing
from public, investments
Government uses of funds : Infrastructure, mining,
public welfare,
defense, power generation,
research &
development
 Monetary Policy
The government’s policy of achieving economic objectives
(employment, per capita income, balance of trade, economic
parity…) by controlling money supply through instrument like
interest rates
Decrease in supply : Deflation or decrease in prices
Increase in supply : Inflation or increase in prices
Monetary policy intimately connected to RBI’s policies
 Hyper Inflation
 Stagflation
 Deflation
 Reflation
 Highest inflation in world is in Zimbabwe
 Currency made worthless due to inflation
 Appreciation of the Rupee
 Indication of economy doing well
 Importers & borrowers in forex are happy
 Domestic consumers are happy
 Interest on government borrowings come down
 Companies with forex loans will gain
 Debt of the government decreases
 Lowers inflation rate
 Exporters are hit
 Margins erode
 Producers have to cut costs
 Indian rupee has now a symbol, joins select band of
dollar, pound, euro and yen
 Agriculture-1
 Contributes about 22% to GDP
 60% of area sown dependent on rainfall
 65 to 70% of population dependent on agriculture
 233.88 mt foodgrain production in 2008-09
 National Food Security Mission launched to enhance
production of rice wheat and pulses
 India second highest producer of fruits and vegetables in
world
 Largest producer of milk in the world
 India is home of spices-largest producer, consumer and
exporter of spices
 India largest producer of cashewnuts and basmati rice
 Agriculture-2
 National Horticultural Mission 2005
 National Project for Organic Farming 2004
 India has largest livestock population in world
 Govt. puts on hold the introduction of GM Brinjal
 Debate on GM crops – Are they safe – will it lead to a
monopoly by MNCs
 National Fisheries Development Board set up in
Hyderabad
 Focus now on contract farming, modern terminal markets,
growing of horticulture and medicinal / aromatic plants
 60,000 oilseeds and pulses villages in rail fed areas in
2010-11 – `300 crore allocation
 Energy
 Coal main source of energy (67%)
 Installed power capacity is 149,391.91 MW as of May 31,
2009.
 Electricity Act 2003 – SERC’s formed
 Coal based Ultra Mega Power Projects
 (UMPP) of 4000 MW each
 National Solar Mission launched on November 14, 2009
 Nuclear energy to be key for India’s quest for energy
security. Hence 123 pact.
 Nuclear energy at present contributes 3 to 4% to total
energy pie.
 India to emerge as a global solar power 20,000 MW by
2022.
 Miscellaneous-1
 India a services sector led economy defies conventional logic
 Conventional model is transition from manufacturing to
services
 India is services sector led but still predominantly rural
 Manufacturing and infrastructure are top priorities of the
Government
 Among infrastructure, social infrastructure is a very vital area
 India 2nd largest mobile network in world (about 525 million
users)
 Disinvestment of sick PSU’s and profit making PSU’s is
needed to generate huge funds for infrastructure, specially
social infrastructure
 Miscellaneous-2
 Second generation economic reforms needed in power,
agriculture, legal sector and financial sector
 Massive transfer of population needed away from
unproductive agriculture to other sectors like services and
manufacturing is conventional thinking
 PURA a programme aims at providing connectivities
without transfer of population
 Competition Commission of India an anti-monopoly body
becomes operational in May 2009
 Savings 32.5% and 34.9 investment of GDP – Gross Fiscal
deficit 6.5% of GDP
 Polity-1
 UPA-II in May 2009. Congress 206 seats
 Trinamul Congress second largest component of UPA
 Highest tally contributed to NDA by Karnataka – Gateway
of South
 Left Front humbled in West Bengal
 Agatha Sangma-youngest Union Cabinet Minister, Age 28
years
 Shashi Tharoor ws MOS External affairs – quits on IPL
issue and sweat equity
 Meira Kumar first woman to be the Lok Sabha Speaker
 Polity-2
 Sushma Swaraj and Arun Jaitley leaders of opposition in
Lok Sabha and Rajya Sabha
 Oldest Cabinet Minister SM Krishna age 77 years
 DMK third largest component in UPA
 SP, BSP not part of UPA or NDA
 Justice Sirpurkar Panel on Justice Dinakaran
 India – China Ties
 8,3000 sq. km of India claimed by China
 China objects to ADB’s loan to Arunachal Pradesh
 Arunachal regarded by China as “Southern Tibet”
 China objects to Dalai Lama’s and Manmohan Singhs visits to
Tawang
 India bans Chinese mobiles, dairy products and toys
 China says Agni-V can target most of China
 The two fastest growing economies in the world are China and
India
 India is the world’s largest democracy and China is the world’s
largest “free-market” and politically regimented country
 After Arunachal China disputes Jammu and Kashmir’s
accession to India
 Awards
 Vandana Shiva Sydney Peace Prize in 2010
 Howard Jacobson wins 2010 Man Booker Prize
 Liu Xiaobo 2010 Nobel Peace Prize Chinese human
rights activist - in jail like Aung San Suu Kyi - associated
with Charter 2008 - charter of human rights
 Vargas Llosa 2010 Nobel Prize for Literature
 Peter Diamond, Dale Mortensen and Christopher
Pissarides, Nobel Prize Economics for 2010
 Venkatraman Ramakrishnan wins Nobel Prize for
Chemistry for 2009
 Robert Edwards, Nobel Medicine 2010
 D. Ramanaidu, Phalke Award 2009 - awarded in 2010
 Business / Economy-1
 Parthasarathi Shome to head Indian Council of Research
of International Economic Relations (ICRIER)
 According to World Steel Association report of August
2010 India is the 4th largest steel producer in the world
 According to Global Governance 2025 report of U.S.
National Intelligence Council and EU’s Institute for
Security Studies India 3rd most powerful nation in world
after U.S. and China
 Banker Magazine’s 2010 Innovation Award in Banking
Technology to SBI for project on Green ATM installation
 Jerome Kerviel a trader involved in the more than 4 billion
pounds scam in French bank Societe Generale convicted
 Business / Economy-2
 RBI to introduce Cheque Truncation System (CTS) for
clearing of cheques
 The Mahatma Gandhi National Rural Employment
Guarantee Scheme to be monitored by Central Employment
Guarantee Council and Ministry of Rural Development
 According to World Investment prospects 2010-2012 China,
India and U.S. top three FDI destinations
 HSBC Holdings Chairman Stephen Green to quit to join as
Minister of State for Trade and Investment in UK Cabinet
 International Financial Reporting Standards (IFRS) to be
introduced in India from April 2011
 Sports
 Rio De Janiero 2016 Olympics
 2014 FIFA World Cup in Brazil
 2011 World Cup Cricket; India, Sri Lanka and Bangladesh
 Australia win 74 Gold medals followed by India in 38 in
Commonwealth Games
 ICC Test Cricketer of Year 2010 is Virendra Sehwag
 Shunglu Committee to probe Commonwealth Games
scam
 ICC Cricketer of Year 2010 is Sachin Tendulkar
 Inaugural Youth Olympics in Singapore in 2010
 Miscellaneous-1
 Sovereign debt default crisis in Europe – PIGS countries
affected
 Pranab Mukherjee and P. Chaidambaram unveil proposal
for a new Tax Code
 Nandan Nilekani appointed chief of the Unique
Identification Authority
 C. Rangarajan is reappointed chairman of PM’s Economic
Advisory Council
 Barack Obama is youngest American president to win
Nobel Peace Prize
 Michelle Bachelet appointed Chief of UN Women
 Aafia Siddiqui Pakistan neuro-scientist convicted for
collaborating with Al-Qaeda
 Miscellaneous-1
 Michele Obama most powerful woman in the world,
according to Forbes
 ETA a terrorist organization working for Spanish
homeland declares ceasefire in September 2010
 P.J. Thomas new CVC – controversy over appointment
 Lee Kun Hee former head of Samsung given five year
suspended jail sentence and a fine of $110 million
imposed
 New CRPF Chief K. Vijay Kumar
 Anand Satyanand Governor General of New Zealand in
limelight
 Miscellaneous-2
 Environmental clearance for bauxite mining in Niyamgir Hills
Orissa for Vedanta Project cancelled
 Telecom rural penetration only 13% in India
 Swiss luxury goods giant Mont Blanc adopts Mahatma Gandhi
as brand ambassador for its `14 lakh pen later apologises
 SKS first MFI in India to issue IPO
 Current capacity of nuclear power in India is 4000 MW
 Pranab Sen Committee on slums suggests a new definition of a
slum
 Madhu Koda becomes first ex-chief minister to be charged
under PMLA
 UDI project launched at Tembhli village in Maharashtra
 Much acclaimed judicial verdict on Ayodhya – opens up a
window for reconciliation
T
The material given in the slides is indicative of where the focus of
preparation for the exam should be. The aspirant should use these
as probes for building knowledge base required for the exam.