BASICS PART -2
PUBLIC FINANCE
Non Tax Receipts: It is revenue
receipts of government of India from social services and taxes like dividend
from PSU’s, interest on loan given to states and other agencies, fees provided
for services etc.
Capital Receipts: Receipts on
which the government has repayment obligations: e.g. government borrowing,
disinvestment proceeds etc.
Non Debt Capital Receipts: The
capital receipts of Government of India agencies which are non debt in nature
like selling of PSU’s and foreign aids.
Social Overhead Capital: The
capital where the emphasis is on the capital assets that provide the services:
house, bridges, roads, railways, school etc.
Primary Deficit: Primary
deficit = Fiscal deficit – interest payment. Fiscal deficit is budgetary
deficit + market borrowings and other liabilities of the government of India.
Monetized Deficit: The budget
deficit can be financed in two ways either borrowing from the public or by
borrowing from the RBI. When it is financed through borrowing from the RBI, it
is called monetized deficit. In other word, it is increase in the net RBI
credit to the Government.
Zero Base Budget: A technique
where the budget of each ministry is prepared assuming that there was no budget
in the previous years.
Outcome Budget: As par the
promise of the annual budget 2005-06 Finance Ministry has come out with an
outcome Budget. This will ensure good governance. In simple words, it provides
outcome for expenditure provides for in the Budges for a fiscal.
Performance Budget: It
emphasizes on the purpose at expenditure rather than the expenditure itself. It
presents budget in terms of functions, programmes, activities and projects.
Dalit Budgeting: It is like
that of gender budgeting wherein an analysis made on how much resources are
allocated for the deprived section in planning, implementation and
post-implementation analysis.
Tax Base: The quantity or
coverage of what is taxed.
Tax Avoidance: Arranging one's
financial affairs within the law so as to minimize taxation liabilities as
opposed to tax evasion, which is failing to meet actual tax liabilities
through, for example not declaring income or profit.
Specific Tax: It is a tax
imposed on the basis of quantity i.e. volume or weight etc. of a commodity.
Advalorem: In this case the
duty is imposed on the basis of value of the product.
VAT: Value Added Tax is a
multi-point destination based system of taxation, with tax being levied on
value addition in each stage of transaction in the production chain.
Turnover Tax: A tax levied as a
proportion of the price of a commodity on each sale in the production and
distribution chain all so called as cascade tax. Such a tax encourages vertical
integration.
Fringe Benefit: Fringe benefits
are the low or no tax benefits that companies offer to attract employees in
addition to the normally taxed salaries, such as free transportation, health
cover etc.
Goods and Services Tax: Goods
and Services Tax (GST) is a part of the proposed tax reforms that center round
evolving an efficient and harmonized consumption tax system in the country.
Presently there are parallel systems of indirect taxation at central and state
levels. Each of the systems needs to be reformed to eventually harmonize team.
CENVAT: In Union Budget 200-01
major overhaul at the central excise system was undertaken with innovation of a
uniform 16% basic Central Value Added Tax (CENVAT) at production stage.
MODVAT: Tax is levied on final
goods and tax on inputs and intermediate goods was abolished. This amended
system excluded the possibilities of Double Taxation. It was introduced on the
recommendation of L.J. Jha Committee in 1976.
MAT (Minimum Alternative Tax):
Normally a company is liable to pay tax on income computed in accordance with
the provisions of the IT Act but the profit and loss account of the company is
prepared as per provisions of the Company Act. It is called MAT.
Exempt-Exempt Tax: The
contributors will be excluded from income for tax purpose; the accruals will
also be exempted from tax; and only the terminal benefits will be at the
applicable rare in year or receipt.
Presumptive Tax: It refers to
the use of appropriate indicators of income, wealth, etc. Instead of actual
records of the tax bases. In case of income tax, a presumptive tax is imposed
on the basis of an estimated taxable income.
Wind Fall Tax/ Super Profit
Tax: Tax on sudden profit or high profit i.e. petroleum industry etc.
Laffer Curve: This curve is
given by American economist Prof. Arthur Laffer. It represents relationship
between total tax revenue and corresponding tax rate.
External Commercial Borrowings
(ECB): It is an additional source of funds to Indian corporate and PSU’s for
financing expansion of existing capacity as well as for fresh investment,
augmenting the resources available domestically.
Cross Subsidy: The government
purchases at a lesser cost and sells at a higher cost, like petrol. In this
system government is the sole purchaser of the goods.
Oil Bonds: The bonds issued by
Government of India to oil marketing companies to overcome their losses. It is
a way of transferring burden of subsidy on the future generations.
Oil Pool Account: It is account
through which Government of India issue bonds to oil making companies to cover
for the losses because of Administer Price system. It was abolished few years
back. Now it has been charged on Consolidated Fund of India.
Financial Inclusion: Delivering
financial services (savings, insurance, credit) to the deprived section at an
affordable cost. Microfinance, SHG and post office schemes are all examples for
financial inclusion.
Industrial Finance Corporation
of India: It was set up by Government of India in 1948 July under a special
act. The scheduled banks, insurance companies, investment and cooperative banks
are share holder of IFCI, to provide medium and long term credit to industry.
FOREIGN TRADE & WTO
Free on Board: A term given to
the system of paying for goods shipped from or to another country when the
amount is sufficient only to cover the value of the good and excludes insurance
and frights.
Quantitative Restrictions: The
quantitative limits placed on the importation of specified commodities. For
protection, the quota is more certain then a tariff in its effects on the
quantity of imports.
Counter Trade: It is exchange
in goods and services that are paid for other goods and service. i.e. Barter
System, Switch Trading, Buy Bank, Off set.
Social Dumping: It is a
practice of exporting goods form a country where the labours are suppressed and
labour court is low in order to compete international market.
Appreciation: When the value of
currency rises with respect to another currency is said to have appreciated. It
also indicates the increase in value of an asset.
Countervailing Tax: It is the
duty imposed to raise the price of imported c commodity so that it becomes
higher than the price of domestic goods. It is also known as outervailing
measure.
Debt Service Ratio: The Ratio
of interest and principal payments on debt as a proportion of the country’s
total export for a particular year in called debt service ratio. DSR = Interest
+ Principal/Export.
Visible Balance: The balance of
payments in visible trade (imports and exports).
Current Account Deficit: It is
the difference between exports and imports of goods and services as well as the
transfer on invisibles. It signifies saving investment gap.
FEMA: Foreign Exchange
Management Act was introduced in July 1998 in the Parliament to repeal FERA
1973. Under FEMA, 1999 provisions related to foreign exchange have been
modified and liberalized so as to simplify foreign trend and payments.
Crawling Peg: When small
exchange adjustments in external value of currency of a country is made to
rectify and under or over valuation of the home currency in terms of a given
foreign currency, it may be called crawling peg.
Currency Board: The exchange
rate is fixed, with institutional constraints on monetary policy. The monetary
authority can only issue domestic money when it is fully backed by inflows on
foreign exchange.
Devaluation: In a fixed
exchange rate system, when the country has decided to reduce the value of its
currency in comparison with foreign currency. India devalued its currency in
the past. It increase exports and reduces imports.
Hard Currency: It refers to the
currency of an industrialized country which has general convertibility.
Soft Currency: A currency with
limited convertibility into gold and other currencies either because it is of
depreciating due to balance of payment, deficit or because cannot have been
placed on it.
Exim Bank: It is established
for financing, facilitating and promoting foreign trade in India.
Duty Drawback Scheme: It is a scheme
in which exporter are allowed to drawback the duties (customs duty, service
tax. etc) as a part of an incentive to increase exports.
EPCG Scheme: It is Export
Promotion Capital Goods (EPCG) scheme, where in capital goods is imposed 5%
rate for export purpose. If the capital is imported for agriculture exports
then it is zero percent (0%).
Agri Export Zone: It was setup
in EXIM policy 2001-02 for encouraging exports of specific agriculture products
from geographically identified areas.
Custom Union: More advanced
level of economic integration than the free trade area. It not only eliminates
all restrictions on trade among members but also adopts a uniform commercial
policy against the non-members.
Mercosur: A customs union of
Argentina, Brazil, Paraguay and Uruguay. In 1996, Bolivia and Chile became
associate members.
de minimis support under WTO:
It is a support given by government, which does not fall under green, blue,
amber box subsidies. They are subject to reduction under WTO.
Amber Box: It comprises all
forms of domestic support deemed to be trade distorting, primarily by
encouraging excessive production. A market price support mechanism that set no
product limit.
GATS: General Agreement of
Trade in Services
TRIPS: Trade Related
Intellectual Property Rights
TRIMS: Trade Related Investment
Measures
MIGA: It is set up in 1988 as
an agency of the World Bank whose purpose/ objective is to protect the interest
of the foreign investors operating in a country against non – commercial risks
(communal riots, natural calamities, etc) due to which property of foreign
investors may be destroyed.
Tariff Binding and WTO: The
maximum Tariff, which country can impose on imports. Indian tariff rates are
much below then the binding rates which are prescribed for developing
countries.
Special Safeguard Measure under
WTO: It is a mechanism which allows developing countries to impose tariff, when
the price of agricultural commodities falls by a certain percentage. The amount
of percentage is bone of contention in WTO, between India and western
countries. India says 10% fall and West says 40% fall.
Multi fiber Agreement:
Agreement between developed and developing countries. Where by developed
countries imposed a fixed quota on textile exports from developing countries.
It has been dismantled.
Asian Development Bank: Set up
in 1966 under the recommendation of United Nation Economic Commission for Asia
and Pacific. The bank was formed with two fold objectives:
· To inculcate cooperation in
the Asia Pacific.
· To accelerate the pace of
economic development of the region’s developing countries.
Special Drawing Rights (SDR):
The Special Drawing Rights is an international financial assets created by IMF
and serves as an international unit of account. A means of payment amount
certain eligible official entities.
Double Taxation Avoiding
Agreement: When two countries have an agreement to avoid the tax on same goods
is called Double Taxation Avoiding Agreement. At present India having this
agreement with Mauritius.
Soft Loan: It is given by IDA
to under developed country for long duration and zero interest.
HUMAN DEVELOPMENT
Physical Quality of Life Index:
Given by Morris, which means 1/3 of life expectancy index + infant mortality
index + Basic literary index.
PQLI = 1/3 (LQI + IMI + BLI)
Human Poverty Index: Human
Development Report 1997 introduced the concept of Human Poverty Index, which
concentrates on deprivation in three essential elements of human life already
reflected in HDI. (i) Longivity, (ii) Knowledge, (iii) Living Standard. It is
released by UNDP.
GDI: Gender Related Development
Index: It is a composite index measuring average achievement in the three
dimensions captured in the Human Development Index.
· A long and healthy life.
· Knowledge and decent standard
of living.
· Adjusted to account for
inequalities between men and women.
GEM (Gender Empowerment
Measure): Composite index measuring gender inequalities in three basic
dimensions of empowerment – economic participation and decision making,
political participation and decision making and power over economic resources.
Technology Index: Based on
observed data and survey results, the index measures the value of technology in
a country. It takes into account country’s involvement in innovation and import
of technology from abroad.
Green Index: A measure of
nation’s wealth by using produced assets, natural resources and human resources
each being allocated specific value to see whether the development is
sustainable or not.
Millennium Development Goods:
Adopted by U.N. General Assembly in 2000; it prescribes the goals to achieve by
year 2015. It has 8 goods to be achieved.
POVERTY & UNEMPLOYMENT
Poverty Line: The per capital
expenditure on certain minimum needs of a person including food intake of a
daily average of 2400 calories in rural areas and 2100 calories in urban areas.
Poverty Gap: It is calculated
as the total shortfall of consumption below the poverty line, divided by the
total population. This per capital shortfall in consumption below the poverty
line is then expressed on a percentage of the poverty line.
Poverty Gap Index: Poverty
ratio × (Poverty line = per capita conception of the poor) / poverty link ×
100.
Relative Poverty: It indicates
inequality in the income of the people. May not be absolutely poor in terms of
calories but income wise.
Lorenz Curve: Cumulative
frequency curve showing the distribution of a variable such as population
against an independent variable such as income. In cumulative % of income less
than a given value are plotted against the cumulative % of persons.
Gini-coefficient: It represents
the measurement of inequality derived from the “Lorenz curve”. With every
increase in the degree of inequality, the curvature of the Lorenz curve also
increase and the area between the curve and 450 line becomes larger. The Gini –
coefficient is measured as:
G = Area between Lorenz-curve
& 450 line / Area above the 450 line.
Frictional Employment:
Temporary unemployment caused by incessant changes in the economy. It takes
time, for example for new workers to search among different job possibilities,
even experienced workers often spend a minimum period of unemployment time
moving from one job to another.
Unemployment trap: The
existence of social security benefits for the out of work that erode an
incentive for the unemployed to take a job.
Current Daily Status of
Unemployment: It considers the activity status of a person for each day of the
preceding seven days. A person who works for one hour but less than 4 hours is
considered having worked for half a day. If he works for 4 hours or more during
a day, it is considered whole day.
Demographic Divided: It is
being enjoyed by India and if it is not managed properly it become demographic
nightmare. It occurs when the countries working population (16-64year of age)
is very large when compared to rest of the population.
Misery Index: Index combining
unemployment rate and inflation rate: It is measured for practical significance
of condition of economy, as well as consumer confidence.
CAPART: The Council for
Advancement of People’s Action and Rural Technology. It is autonomous
organization under the Ministry of Rural Development set up in 1986 as a
supporting and funding agency to the voluntary organization.
TRYSEM: Training to Rural Youth
for Self Employment is an integral part of Integrated Rural Development Programme.
Since April 1, 1999, TRYSEM has been merged with newly introduced programme
namely, Swarna Jayanti Gram Swarozgar Yojana. Since the launching of MGNREGA,
it has become a part of it.
AGRICULTURE & INDUSTRY
Second Green Revolution: It
aims at efficient use of resources and conservation of soil, water and ecology
on sustainable basis and in a holistic framework.
Rainbow Revolution
· Over 4% annual growth rate in
agriculture.
· Greater private sector
participation through farming
· Price protection for farmers
· National Agriculture
Insurance Scheme to be lowered for all farmers and all crops.
· Dismantling movement and
agriculture commodity throughout the country.
Accelerated Irrigation Benefit
Programme: It is started in 1995 by government of India to complete incomplete
projects of states in which central funds flow on.
Debt Swap Scheme: It is a
scheme through which farmers get loan from bank with minimum rate of interest
to pay back loan from local money center, PNB launched it first.
Social Forestry: Involving the
local community in preservation and rejuvenation of forest resources including
wild life and etc.
Contract Forming: It is a new
way of farming in which big corporates sign contract with farmers making
provision for the production of farm goods and delivery at a later date at a
price signed in the contract. This helps farmers get a fixed amount for the
goods. It stabilizes the farmer’s income.
Footloose Industry: These
industries are mobile industry which are not based in a particular area and can
be seen anywhere for performing their activities.
Sunrise Industries: Industries
in the forefront of development which have immense future potential. e.g. IT,
Biotechnology, Pharma.
Index of Industrial Production:
It is used to measure the growth rate of industry in India. It is the weighted
average of mining, manufacturing and electricity. The base year of IIP is
1993-94.
Green Field Investment: In
software engineering jargon Greenfield is a project which lacks any constraints
imposed by prior work. The image is that of construction on Greenfield land.
Where there is no need to remodel or demolish an existing structure.
Brown Field Investment: Those
facilities which are modified/ upgraded are called Brown Field Projects.
Cortel: An association of
producers in a given industry whose purpose is to restrict or bar competition
in the industry.
Special Economic Zone (SEZ):
Introduced in the EXIM policy of 2000-01 with a view to provide internationally
competitive and haste free environment for export. They are free from taxes and
duties. Such area is considered as foreign territory for the purpose of trade
operations and tariffs.
Special Purpose Vehicle: It is
introduced outside control and obligation of the government involved in setting
up of new firms like DMRC. SPV is used by government in order to enhance public
private partnership (PPP).
Golden Hand Shake: Voluntary
retirement scheme (VRS) in Industrial Policy Resolution 1991 for reducing the
pressure of employees on public sector enterprises.
Exit Policy: it is a part of
liberation policy adopted by the government. It was adopted in 1991 which aimed
at closing down the sick and inefficient industries and making handshakes with
excess employees so as to reduce the financial burden on the economy.
Capital Widening: It is a
phenomenon of growth in which capital to labour ratio is constant. When capital
ratio is constant then wage rate is also constant.
MISCELLANEOUS
Tournament theory: The piece of
economic thinking that suggests rewards can usefully be based upon the relative
performance of economic agents, rather than on their absolute performance.
Yield Curve: A graphical
representation of the relationship between the annual return on an asset and
the number of years the asset has to run before expiring. Long term assets
usually offer some premium over short-term ones and yield curves, thus
typically slop upwards.
Zero sum game: A game in which
one players gain is equal to other player's losses.
Window Dressing: Financial
adjustments made solely for the purpose of accounting presentation normally at
the time of auditing of company accounts.
Essential Commodities Act
(1955): This act was introduced for ensuring supply of essential commodities to
the consumers at fair prices and to save them from seller’s exploitation.
Book Building: This is the
first draft or preliminary prospects, which carries the information of company
and the project.
Micro Finance: Financial
services offered to rural and urban poor. Its include insurance, credits and
savings.
Swayam Sidha: it is centrally
sponsored scheme for holistic empowerment of women, through mobilization and
formation of women, into- Self Help Group (SHG).
Rural Infrastructure
Development Fund (RIDF): It was set up under NABARD in 1995-96. Its main function
is to improve rural roads and bridges, to remove inter regional, rural - urban
or inter-state disparities to help the new agriculture policy to release more
than 4% growth rate.
Carbon tax: it is tax on
emission. New Zeland introduced it first.
Reverse Mortgage: Scheme
started in 2007 wherein the older people are paid a pension by the bank till
their death. And after their death the banks takes hold of house and ask legal
heir to pay the amount or forbid the house. This is the way of ensuring constant
support to elders.
Procurement Price: It is final
price a company pays for procuring goods. It includes insurance transportation
in addition to the production cost.
Bandwagen Effect: It is an
observation of people to do and believe, what other people do.
Back Wash Effect: Where in
people move from poorer region to richer (Industrial) region, which will
undercut the industry and development of poorer region.
Pump Priming: The infection of
small amounts of government spending into a depressed economy with the aim of
boosting business confidence and encouraging large scale private sector
investment.
Amovtization:
It refers to repayment of loan principle.
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