Part I Indian Economy

Economic reforms in india New Industrial Policy Under Industrial Policy, keeping in view the priorities of the country and its economic development, the roles of the public and private sectors are clearly decided. Under the New Industrial Policy, the industries have been freed to a large extent from the licenses and other controls. In order to encourage modernisation, stress has been laid upon the use of latest technology. A great reduction has been effected in the role of the public sector.  Efforts have been made to encourage foreign investment. Investment decision by companies has been facilitated by ending restrictions imposed ... Read more

Structural changes in the Indian Economy Change in composition of domestic product or change in national income by industry of origin refers to change in relative significance (share) of different sectors of the economy. Generally, an economy is divided into three major sectors viz. primary, secondary and tertiary sectors. Primary sector includes agricultural and allied activities, secondary sector includes manufacturing industries and tertiary sector includes services. With the development process, significance of primary sector declines while that of secondary and tertiary sectors increases. After independence, Indian economy has also experienced such changes. The share of primary sector in GDP at ... Read more

Pattern of Revenue Expenditure In India, government expenditure – as per the provision in the Constitution – is divided into revenue expenditure and capital expenditure. However, the adoption of economic planning shifted emphasize on the division of expenditure into Plan and Non-Plan. The share of Non-Plan expenditure has remained close to 70% and that of Plan at 30% all these years. The Planning Commission, in the 11th Plan (2007-12) document prepared in 2007, had proposed abolition of this “illogical and dysfunctional” distinction citing several issues (mentioned later in the article). A high-level committee on Efficient Management of Public Expenditure, was ... Read more

Non-banking financial institutions and their reforms in them since 1990s A Non Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 of India, engaged in the business of loans and advances, acquisition of shares, stock, bonds hire-purchase insurance business or chit business but does not include any institution whose principal business includes agriculture, industrial activity or the sale, purchase or construction of immovable property.  The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the [Reserve Bank of India Act, 1934] (Chapter III-B) and the directions issued ... Read more

Budgetary Deficit Budgetary Deficit is the difference between all receipts and expenditure of the government, both revenue and capital. This difference is met by the net addition of the treasury bills issued by the RBI and drawing down of cash balances kept with the RBI. The budgetary deficit was called deficit financing by the government of India. This deficit adds to money supply in the economy and, therefore, it can be a major cause of inflationary rise in prices. Budgetary Deficit of central government of India was Rs. 2,576 crores in 1980-81, it went up to Rs. 11,347 crores in 1990-91 ... Read more

When a government spends more than it collects in taxes, it borrows from the private sector to finance the budget deficit. The accumulation of past borrowing is the government debt. A tax cut stimulates consumer spending and reduces national saving. The reduction in saving raises the interest rate, which crowds out investment. As per Solow’s model, lower investment leads to a lower steady-state capital stock and a lower level of output. The traditional view of government debt suggests that when the government cuts taxes and runs a budget-deficit, consumers respond to their higher after-tax income by spending more. However, according ... Read more

Public sector has played an important role in achieving industrial self reliance. Iron and steel, railway equipment, petroleum, coal and fertilizer industries, have been developed in this sector. These industries were established in industrially backward regions. During the seventh five year plan an emphasis was laid on high technology, high value addition and knowledge based industries like electronics, advanced machine tools and telecommunications. After independence, systematic industrial planning under different five year plans helped in establishing a large number of heavy and medium industries. The main thrust of the industrial policy was to remove regional imbalances and to introduce diversification ... Read more

National Income The study of National Income is important because of the following reasons: To see the economic development of the country. To assess the developmental objectives. To know the contribution of the various sectors to National Income. Internationally some countries are wealthy, some countries are not wealthy and some countries are in-between. Under such circumstances, it would be difficult to evaluate the performance of an economy. Performance of an economy is directly proportionate to the amount of goods and services produced in an economy. Measuring national income is also important to chalk out the future course of the economy. ... Read more

Table of Content:- Public Finance Monetary Policies Inflation & Control Mechanism, Repo Rate Reverse Repo Rate CRR SLR. Public Finance Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. It includes the study of :- Fiscal Policy Deficits and Deficit Financing Fiscal Consolidation Public Debt- Internal and External debt Fiscal policy relates to raising and expenditure of money in quantitative and ... Read more

Table of Content:- Role of Commercial Banks Issue of NPA Financial Inclusion Role of Commercial Banks A Commercial bank is a type of financial institution that provides services such as accepting deposits, making business loans, and offering basic investment products There is acute shortage of capital. People lack initiative and enterprise. Means of transport are undeveloped. Industry is depressed. The commercial banks help in overcoming these obstacles and promoting economic development. The role of a commercial bank in a developing country is discussed as under. Mobilising Saving for Capital Formation: The commercial banks help in mobilising savings through network of branch banking. ... Read more