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- Fiscal policies:
- Revenue and Capital receipts
- Revenue and Capital expenditure
- Tax structure/Tax policy
- Tax reforms- Direct Tax code and Goods and services Tax
- Planned and Non Planned expenditure
- Subsidies (and DBT)
- Fiscal deficit
- Fiscal Responsibility and budget management Act,2003
- Deficit Financing
- Role of Finance Commission
- Centre State Financial relations
Monetary and credit policy
- Monetary Tools
- Bank Rate
- Cash Reserve Ratio
- Statutory Reserve Ratio
- Open Market Operation
- Repo rate, Reverse Repo rate and Marginal Standing Facility
- Qualitative Measures.
- Reforms: Urjith Patel Committee
Banking system in India
- Scheduled Bank of India
- Banking Concept:
- Prime lending rate, Base Rate and Bench Mark Prime lending Rate
- Universal Banking and Narrow Banking
- Asset Liability Management
- Non Performing Assets
- Wilful Default
- Priority Sector Lending
- Regional Rural Banks
- Financial Inclusion (Nachiket Mor Committee)
- Pradhan Mantri Jan Dhan Yojanna
- Rural Credit in India
- Micro Finance
- Bharatiya Mahila Bank
Money market and capital market in India; Stock Market in India
- Measurement of inflation
- Measure to contain Inflation
- Manufacturing sector: Make in India initiative
- Labour reforms
- MSME sector
Poverty and unemployment
- Poverty Line/Rangarajan Committee Recommendation
- National food security act
- National Rural Livelihood Mission
- National Urban Livelihood Mission
- Farming system in India and associated Problems
- Agricultural Marketing
- Food Processing
- Government Programmes- National and Karnataka
India’s economic interaction with the world.
- Foreign investments- FDI FII FPI etc
- International organisations- WTO, IMF, WB
- Tax Haven, DTAA, GAAR, Transfer Pricing
- Planning in India
- Measurement of Growth ( GDP, GNP, National Income, HDI, Green GDP etc)
SOME TOPICS EXPLAINED
1. PLANNING IN INDIA
|Timeline of planning in India|
|1934||Visvesvaraya plan in this book “The planned economy of India”. He was an Engineer, Ex-Diwan of Mysore and Bharat Ratna recipient.|
|1938||Nehru’s Congress plan. But not implemented due to WW2.|
|1944||Bombay plan by noted industrialists such as JRD Tata, GD Birla, Kasturbhai Lalbhai etc|
|1944||Sriman Narayan Agrawal’s Gandhian plan.|
|1945||MN Roy’s “people’s plan” – with socialist leanings.|
|1950||Jayprakash Narayan’s Sarvodaya Plan based on Vinoba Bhave’s philosophy|
|1950,March 15||Cabinet resolution to form Planning commission.|
|1952,Aug.||National Development council (NDC) made by Cabinet resolution.|
|2014,Aug.||Modi shuts down planning commission.|
|2015, Jan||Government notified the formation of Niti Aayog- National Institution for Transforming India.|
Five Year plans in India
|2 Annual plans||89-91||
Niti Aayog: Structure, Membership
|Position||Planning Commission||NITI Aayog|
|Vice Chairman||Last Dy.Chairman was Montek Singh Ahluwalia (Cabinet minister rank).||
||PM can nominate four-Union ministers. PM has nominated following:|
Full time members4-7 full time members, who enjoy “Minister of State” rank.
- Bibek Debroy (Free market economist)
- Dr. V.K. Saraswat (technocrat, missile scientist and Ex-DRDO chief.)
Special Invitees Union ministers for
- Social Justice
+PM can invite other experts as and when needed.
part-time members Tech experts from research institutes. Currently none declared. Rotational posts.Governing Council
- Chairman: Prime minister
- Chief ministers of all states
- Lieutenant governors of all Union territories.
ad hoc Regional Councils Will have CMs of states that fall in the region. They’ll be dealing with specific issue concerning a group of states for example irrigation, naxal-problem, infrastructure etc.
NITI Aayog: functions, Mandates
- Think tank for Government policy formulation.
- Find best practices from other countries, partner with other planning bodies to help their adoption in India.
- Cooperative Federalism: Involve state governments and even villages in planning process.
- Sustainable development: + Modi’s Zero defect-zero effect (on environment) manufacturing mantra.
- Urban Development: to ensure cities can remain habitable and provide economic venues to everyone.
- Participatory Development: with help of private sector and citizens.
- Inclusive Development or Antyodaya. Ensure SC, ST and Women too enjoy the fruits of Development.
- Poverty elimination to ensure dignity and self-respect.
- Focus on 5 crore Small enterprises– to generate more employment for weaker sections.
- Monitoring and feedback. Midway course correction, if needed.
- Make policies to reap demographic dividend and social capital.
- Regional Councils will address specific “issues” for a group of states. Example: Regional Council for drought, Left-wing extremism, Tribal welfare and so on.
- Extract maximum benefit from NRI’s geo-economic and Geo-political strength for India’s Development.
- Use Social media and ICT tools to ensure transparency, accountability and good governance.
- Help sorting inter-departmental conflicts.etc
|Functional Comparison: Niti vs PC|
|Planning commission||NITI Aayog|
|Design FYP-Five year plans||Design national agenda, and cooperative federalism.|
|Decide two “money” matters:
|One size fits all, top-down socialist planning by Armchair Nehruvian economists and IES cadre officers (Indian Economic Service).||
Niti Aayog: Criticism/Anti-Arguments
- Its functions and jurisdiction is not clear.
- Arbitrary decision to dismantle the Planning Commission, without taking NDC or states into confidence- this undermines cooperative federalism.
- From union territory only Lieutenant Governors invited. CM of Delhi and Puducherry can’t participate in Governing council.
- Like PC, NITI Aayog too is a non-Constitutional, non-statutory body formed by a cabinet resolution. It is not accountable to parliament, and if line-ministries fail to achieve targets, NITI Aayog cannot punish them.
- Niti Aayog should have been created through a legal/Constitutional amendment. There should be a perspective plan spanning for 15 to 20 years. Otherwise, what if another party comes into power and dismantles this?
- It’ll take minimum 6-8 months for Niti Aayog to set things in motion. In between that time, Development will be halted due to paucity of funds and ideas.
- Planning commission and NDC decided “special category states” and gave them additional funding to help the poor and backward regions. With advent of Niti Aayog, will those states lose their ‘status’ and extra-funding? Uncertainty prevails.
- Niti Aayog will conflict with Cabinet Secretariat (for inter-ministerial coordination) and constitutional body Inter State Council (for coordination with states).
- FinMin officials always try to squeeze budget to keep the fiscal deficit under FRBM targets. Niti Aayog and its free market economists will further reduce welfare schemes to help them.
- At present we’ve 60+ centrally sponsored schemes. Modi aims to combine them into just 10 schemes. Thus, poor and marginalized communities will suffer.
- Planning commission used to monitor of human development in the States, Sub-plans for women, SC and ST. Niti Aayog doesn’t say how they’ll do it.
- Modi distributed the planning-Expenditure function to FinMin and subject matters to respective ministries. This will result in loss of perspective and long-term view. Now State governments will have to lobby at ministries to get funds released.
- Planning Commission’s Nehruvian Economists advocated decentralized planning. Modi’s free market economists and technocrats will pursue centralized planning and e-monitoring.
- There is no need for any Planning commission or Niti Aayog. Good work can be done even without them- through line ministries and inter-state councils.
2. CREDIT RATING
- A credit rating evaluates the creditworthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government.
- It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are determined by credit ratings agencies. The credit rating represents the credit rating agency’s evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts.
- Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government.
- The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations.
- Credit scores are the output of mathematical algorithms that assign numerical values to information in an individual’s credit report. The credit report contains information regarding the financial history and current assets and liabilities of an individual.
- A bank or credit card company will use the credit score to estimate the probability that the individual will pay back loan or will pay back charges on a credit card.
- Credit scores have also been used to adjust insurance premiums, determine employment eligibility, as a factor considered in obtaining security clearances and establish the amount of a utility or leasing deposit.
- A poor credit rating indicates a credit rating agency’s opinion that the company or government has a high risk of defaulting, based on the agency’s analysis of the entity’s history and analysis of long term economic prospects. A poor credit score indicates that in the past, other individuals with similar credit reports defaulted on loans at a high rate. The credit score does not take into account future prospects or changed circumstances. For example, if an individual received a credit score of 400 on Monday because he had a history of defaults, and then won the lottery on Tuesday, his credit score would remain 400 on Tuesday because his credit report does not take into account his improved future prospects. An individual’s credit score, along with his credit report, affects his or her ability to borrow money through financial institutions such as banks.
The factors that may influence a person’s credit score are:
- ability to pay a loan
- amount of credit used
- saving patterns
- spending patterns
Different types of credit ratings
- Corporate credit rating
The credit rating of a corporation is a financial indicator to potential investors of debt securities such as bonds. Credit rating is usually of a financial instrument such as a bond, rather than the whole corporation. These are assigned by credit rating agencies and have letter designations such as A, B, C.
- Sovereign credit rating
A sovereign credit rating is the credit rating of a sovereign entity, i.e., a national government. The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors looking to invest abroad. It takes political risk into account.
What is the difference between Credit Bureaus & Credit Rating Agencies?
- Credit scores for individuals are assigned by credit bureaus ( UK: credit reference agencies). Credit ratings for corporations and sovereign debt are assigned by credit rating agencies. In India, commercial credit rating agencies include CRISIL,CARE, ICRA and Brickwork Ratings. The credit bureaus for individuals in Indiaare Credit Information Bureau (India) Limited (CIBIL) and Credit Registration Office (CRO).
- There is no universal credit score as such, rather each individual lender credit scores based on its own wish-list of a perfect customer.
- The largest credit rating agencies (which tend to operate worldwide) are Dun & Bradstreet, Moody’s, Standard & Poor’s and Fitch Ratings
- A Credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In some cases, the servicers of the underlying debt are also given ratings.
- In most cases, the issuers of securities are companies, special purpose entities, state and local governments, non-profit organizations, or national governments issuing debt-like securities (i.e., bonds) that can be traded on a secondary market. A credit rating for an issuer takes into consideration the issuer’s credit worthiness and affects the interest rate applied to the particular security being issued.
Uses of ratings
- Credit ratings are used by investors, issuers, investment banks, broker-dealers, and governments.
- For investors, credit rating agencies increase the range of investment alternatives and provide independent, easy-to-use measurements of relative credit risk;
- this generally increases the efficiency of the market,
- lowering costs for both borrowers and lenders.
- This in turn increases the total supply of risk capital in the economy, leading to stronger growth.
- It also opens the capital markets to categories of borrower who might otherwise be shut out altogether: small governments, startup companies, hospitals, and universities.
Comparative Rating Index of Sovereigns (CRIS)
- Comparative Rating Index of Sovereigns (CRIS) introduced by India, performance of one nation is compared with all other nations. Perhaps it was the first sovereign rating index by any country in the world. This solves the limitations of the existing credit rating system.
- The Ministry of Finance India calculated this new index and ranks 101 economies for the years 2007 to 2011. The computation of CRIS is based on Moody’s ratings and data on the GDPs (not adjusted for purchasing power parity (PPP)) of different nations as given by the IMF. It is a pure mathematical and statistical methods without interventions or interpretations.