Relationship Between GVA and GDP (Basic Prices/ Market Prices/ Factor Costs)

Economy

1. Relationship between GVA and GDP (basic prices/ market prices/ factor costs)
2. Competitive devaluation- effects
3. PSU mahanavratnas and navratnas
4. Power Sector in India
5. Banking licenses
6. Industrial Relations Bill
7. Marginal Oil Field Policy
8. Bank Boards Bureau
9. CDMA band spectrum meaning
10. The government's move to increase import duty on steel may improve the bottomline of domestic steel manufacturers, but is likely to hit downstream manufacturers
11. Atkinson's inequality measure
12. ANGUS DEATON- for optional
13. Why has poverty estimate by world bank dipped to 12%?
14. Inequality in India- prepare short notes from Jayati Ghosh's paper
15. India has not achieved the MDG targets of universal primary school enrolment, women empowerment, reducing child and infant mortality, and improving sanitation to end open defecation
16. Govind rao decentralisation article Nov. 02
17. India is number 1 in FDI
18. It seems India is a victim of its own size. It imagines that the vastness of its internal market is sufficient to allow for the expansion of a manufacturing sector. It is extraordinary that this delusion has persisted so long, in spite of 70 years of our economic history serving as evidence to the contrary
19. The system of conclusive land titles is based on four basic principles: One, a single agency to handle land records (including the maintenance and updating of the textual records, maps, survey and settlement operations, registration of immovable property mutations, etc); second, the “mirror” principle, which states that, at any given moment, the land records mirror the ground reality; three, the “curtain” principle, which refers to the fact that the record of title is a true depiction of the ownership status, mutation is automatic following registration, there is no need of probing into past title transactions, and title is a conclusive proof of ownership; and four, title insurance, which refers to the fact that the title is guaranteed for its correctness and the party concerned is indemnified against any loss arising because of inaccuracy in this regard. At the moment, land records in India don’t reflect any of these principles
20. There are still some segments of the industry which are subject to a number of controls of the pre-1991 type. A typical example is the sugar industry. Molasses are subject to a type of control which results in a subsidisation of the liquor industry. The basic principle underlying liberalisation is of the need to create competitive markets with minimal barriers to entry and should be extended to all sectors. Pricing of natural resources has become an issue. In the absence of competition, transparent mechanisms for fixing the prices must be followed which will be fair to both the producers and the end users

1. The annual rate of growth of per capita income in the period between 1993-94 and 2004-05 was 4.3 per cent and the growth rate for the period between 2004-05 and 2011-12 was 6.7 per cent. The annual decline in the poverty ratio in percentage points (according to the Suresh Tendulkar committee’s methodology) was 0.74 in the first period and 2.18 in the second period. In fact, the finding that the decline in poverty was much faster in the latter period is valid irrespective of where the poverty line is drawn. Between 2009-10 and 2011-12, according to the Tendulkar Committee’s methodology, the reduction in poverty ratio was 7.9 points. According to the Rangarajan Committee’s methodology, it was 8.7 points

1. Learn GDP growth rates: In the post reform period beginning 1992-93, the economy has grown at an average rate of 6.8 per cent. In the more recent period, the growth rate has been even higher. Over the decade beginning 2004-05, the average annual growth rate has been 7.6 per cent. Between 2005-06 and 2010-11, the growth rate was 8.7 per cent. Contrast this with the annual growth rate of 3.5 per cent between 1952 and 1980

1. Urea is sold at one-fourth the price of table salt today. But the excessive use of cheap urea destroys the soil and leads to more plant vegetative growth. An explosion of insect and pest populations is then inevitable. Indiscriminate, unregulated sale of pesticides and spurious products is leading to an ecological disaster

1. Food processing, essential for agricultural prosperity, never bloomed — for instance, Punjab exports wheat but imports wheat flour

1. Capital goods policy:

1. Jayanta Roy: Diversify services to boost exports:

1. OECD BEPS

1. What is being crafted as a key intervention appears essentially to be another round of financial repackaging. The discoms' debts are proposed to be transferred to the state governments concerned, which will issue bonds against these. The Union Cabinet is shortly expected to endorse this. If the state defaults on servicing these bonds, the Centre would step in and commandeer parts of financial grants/devolutions to the state. It is hoped that this additional pressure on the finances of the states will force them to implement tough distribution sector reforms

1. The thermal power sector is operating at a decadal low of 59 per cent plant load factor because discoms do not have the money to pay for buying more power

1. India's overall population growth rate (at about 1.4 per cent now) is falling more dramatically than anticipated

1. There are of course two classical shortcomings preventing India from becoming a manufacturing power - regulatory cost and inadequate infrastructure

1. EU migrant crisis could easily affect the flow of Indian workers to the region

1. NSDC: The corporation is, after all, the only one of its kind - a public-private partnership (PPP) set up to promote skill development by catalysing the creation of large and quality for-profit institutions.

The partnership model followed by NSDC has put the responsibility of delivering skilled population essentially at the doors of the private companies that are funded. A task of such magnitude cannot be performed by the government or the private sector working in separate silos. In that sense, NSDC provided a wonderful opportunity for industry to play a leadership role in training and employing people - whether it is through imparting vocational education, vetting the curriculum, or assessing and certifying training programmes. All of this is also, of course, in their own interest. If Indian companies continue to be lukewarm in their response, questions will be asked whether they are treating skill training as a cosmetic exercise in corporate social responsibility

1. The TPP and other mega trade agreements under negotiation such as the Transatlantic Trade and f Partnership and the Regional Comprehensive Economic Partnership (RCEP) are bound to challenge India's businesses in many ways, says our commerce ministry. First, they will erode existing preferences for Indian products in established traditional markets such as the US and the European Union (EU), benefiting the partners to these agreements. Second, they are likely to develop a rules architecture which will place greater burden of compliance on India's manufacturing and services standards for access to the markets of the participating countries.

1. TN Ninan's BS article on October 10: effects of deflation on India

1. Banking Regulations Act, enables RBI to supersede the board of directors of a bank for upto 12 months if it feels that the board is not working in the interest of shareholders and depositors. If such a step is taken, RBI could run the bank by appointing an administrator till a new board is appointed. In such a scenario, while shareholders wealth decline, depositors money stay safe. More importantly, RBI watchers indicate the central bank can supersede the board if the top management fails to deliver

1. Subsidies account for 1.6% of the total GDP, as against 2.5% in 2012

1. A key TPP agenda is to counter the might of China in the Pacific region; TPP countries account for 40℅ of total world trade

1. World bank has revised the poverty line from $1.25 to $1.90

1. India's natural gas pricing policy

1. Integrated Power Development Scheme

1. Challenges to payment banks and SFBs might come also from PMJDY and exisiting priority sector lending norms for existing banks

1. 2015 NPT RevCon

1. In 2014-15, subsidies accounted for 2.1% of the GDP, 2.64 times the entire capex of the central government, and accounted for about 23% of the central government's revenue receipts

1. Many of the new small banks will be run by MFIs, which is good because MFIs have deep penetration and know their customers (Subir gokarn, business standard, Sep 23)

1. Key features: National Skills Policy

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1. India now ranks130out of 189 countries in theease of doing business 2016,according to aWorld Bank report. The improvement in two indicators, ‘starting a business’ and ‘getting electricity,’ pushed India up the ladder

1. Data shows that although the inflation has been slowing both in rural and urban areas of the country, there is a widening difference between the two as rural inflation is decelerating at a much slower pace. The difference between rural and urban inflation is most stark for fuel and transportation, followed by core and to a lesser extent food.Rural India has some structural disadvantages vis-a-vis urban India. Urban India is benefitting from lower global prices while rural India, partly because of its structural ailments, is not being able to partake with equal vigour

1. Structural bottlenecks in rural India are harsher. Transport networks are also sparser and distribution channels are insufficient.

1. World Bank report shows that between 2004-2009, 15% of India’s population, or 40% of the poor, moved above the poverty line (reducing poverty)

1. India joined the MCAA(Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information)

• 54 countries are a part of it
• Bulk taxpayer information will periodically be sent by the source country of income to the country of residence of the taxpayer
• This will help prevent international tax evasion
• AEOI (Automatic Exchange of Information) based on CRS (Common Reporting Standards), when fully implemented, would enable India to receive information from almost every country in the world including offshore financial centres and would be the key to prevent international tax evasion and avoidance and would be instrumental in getting information about assets of Indians held abroad including through entities in which Indians are beneficial owners
• This will help the Government to curb tax evasion and deal with the problem of black money

1. SEBI now allows urban local bodies to issue municipal bonds

• Currently, these depend on financing from central grants and to some extent form state governments
• These bodies are critical for urban infrastructural development

1. FMC and SEBI merger (see roles of both, what ministry they fall under etc.)

• Aim is to curb wild speculation and strengthen regulation of commodity forward market

1. With regards to domestic MFs managing offshore funds, the government has now done away with the 20-25 rule

• Rule: A minimum of 20 investors in an MF, and no single investor is allowed to buy more than 25% stake in a single scheme
• On an average, there are 7-8 plans under each scheme of a mutual fund. If the norm is applicable at the plan level, it effectively would have meant a closure of the entire scheme at the cost of other plans which would be in compliance with the criteria
• Previously, the applicability used to be at the plan level

1. In Indian investment jargon, what does ‘EEE’ stand for?

• EEE: Exempt, Exempt, Exempt

1. What is excise duty? Who usually bears the burden?

• Excise duty in India is a tax on products manufactured within India, for sale within India
• The manufacturer pays the burden
• Both the center and the state have excise duties

1. What is Octroi?

• Octroi is a local body imposed tax in India collected on goods crossing municipal borders
• Tax is to be paid by the trader to the civic body
• Maharashtra is the only state in India that still levies it

1. Arm’s Length Transactions and Transfer Pricing

• Thearm's length principle(ALP) is the condition or the fact that the parties to a transaction are independent and on an equal footing
• Transfer pricingis the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise
• An example that might violate transfer pricing is sale of a house from parents to their children (very likely to be below the market price)

1. Gold Monetization Scheme:

• India has huge amounts of gold – imports are one of the largest among the world (something to the order of a fourth of total global circulation)
• Before the government took measures to check the inflow, about 1000 tonnes of gold came into India annually
• In 2012/13, gold imports cost about $56 billion, the second largest item on the import bill after crude oil
• To reduce India’s import of gold (because large imports drain away precious foreign exchange reserves and worsen current account deficit), and to bring the already held large amounts of gold into circulation, the government has set up a sovereign gold bond that will carry a fixed rate of interest, and upon maturity, will give the owner the then current value of gold
• The returns will be completely tax free
• Physical gold won’t pass hands- think of this as a paper security you buy at the current price of gold; for the period you hold it, you get fixed interest, and upon maturity, you get the then market price of gold
• Two potential complications: many people buy gold with cash, and may not be able to prove ownership; and banks may not have the necessary infrastructure for testing the purity of gold
• Read for potential reasons for failure:

1. Micro Units Development and Refinance Agency (MUDRA) Bank:

• Set-up announced by Budget 2015
• Initially, this will be a subsidiary of the Small Industries Development Bank (SIDBI), and will later become and independent, full-fledged bank
• Important thing to note is that MUDRA bank will not be a lending bank, but will refinance MFIs who are in the business of lending to small entities
• It will also lay down rules and policy guidelines for micro enterprise financing businesses, registration, accreditation, and starting of MFIs
• This will be a bank to finance the setting up of small and micro-units and thereby encourage entrepreneurship among SC/STs and OBCs (lending will be preferentially given to these classes)
• It will regulate and refinance all MFIs that lend to micro/ small business entities engaged in manufacturing, trading, and services activities
• Logic is to bridge the funding gap that affects the ‘middle’ – top corporates are funded by the banking system, bottom of the ladder is funded by MFIs, but the middle rung of micro and small enterprises suffers funding problems
• According to government estimates, only 4% of 5.77% crore small business units have access to institutional finance, leaving many to rely on informal lender
• The bank will regulate MFIs, and lend to ‘last-mile lenders’ that will provide financing to the businesses being targeted
• Ajay Shah calls this a ‘bad idea’: `Mudra bank' is an old style socialist initiative, which is inconsistent with all the other modern elements of financial sector reforms

1. Broadband and telephone penetration numbers

Of the 1.25 billion people in India, only about 20% use internet (and about half of those use social media). About 900 million people have mobiles

1. National Common Agricultural Market (APMC reform):Online National Agricultural Market has recently been approved by the Cabinet; will provide more options to farmers for selling their produce

• Currently, farmers are restricted to selling their produce at mandis or market committees that charge various taxes on producers
• State APMCs are seen as extortionist monopolistic places; even if trade is conducted outside an APMC and doesn’t utilize any APMC infrastructure, commission is still to be paid to the APMS
• Centre has been trying for a long time to convince the states to relax their APMC laws for over a decade, to no avail
• An online platform would be set up wherein farmers will be able to sell and buy fruits, vegetables and other produce from across the country
• An agency would be set up to oversee online trading and to ensure that transactions take place smoothly
• It will also focus on creating godowns and facilitating transportation of the farm produce after the online trade

1. GDR (GDRs and black money/ extent of RBI regulation)

• GDRs are financial instruments used by domestic companies to raise funds from abroad
• Usually denominated in foreign currency (thus, Indian companies raise funds in $ or £ etc. via GDRs)
• SEBI has come across quite a few cases where GDRs have been used for round-tripping of funds in the name of capital-raising of listed companies from abroad (an investor ‘invests’ his money in a tax-haven company; a domestic company then raises funds from this tax-haven by issuing GDRs => investor’s money is now clean and back in India)

1. India-USA standoff about DCRs for solar cell production

• The case was filed by US along with the launch of both phases of Jawaharlal Nehru National Solar Mission (NSM), which aims at producing 20,000 mW of solar power by 2022
• The US was miffed at the Indian government urging developers of photovoltaic projects to procure solar cells and solar modules from domestic manufacturers only
• The US alleged that Indian authorities were asked for mandatory usage of domestically produced solar power panels, which restricted the entry of American imports
• The US, in its submission to the WTO, stated that India has violated GATT by not giving national treatment to imported products, and TRIMs, which prohibits the imposition of local content requirements

1. UPSI: Unpublished Price Sensitive Information, used in insider trading legislation

1. Shanta Kumar Committee recommendations

• Note that the government didn’t eventually accept the recommendation regarding cutting the % of population covered under the act

1. What is the ratio of government revenue to GDP in India?

• Gross Tax Revenue to GDP ratio: 10.7% (2012, World Bank estimate)
• Total revenue to GDP ratio: 12.8%

1. Change in GDP measurement method

• GDP calculation: factor cost v/s market price:
• India has recently moved towards calculating GDP at market prices, and these numbers show that the Indian economy had been doing much better in the last few years
• Internationally, GDP (MP) is the usual norm, so India has made a move in the right direction
• GDP (MP) = C +I +G +(X-M)
• Calculation at factor cost calculate all the above quantities at prices that the producers receive, while GDP at market prices calculates the above quantities at prices paid by the consumers
• Because of the existence of indirect taxes and subsidies on products, there can exist a wedge between prices paid by the consumers and those received by the producers
• Thus, GDP (FC) = GDP (MP) – Indirect Taxes + Producer Subsidies

1. Headline inflation- measure of total inflation within an economy, including commodities such as food and energy prices

1. Minimum Alternative Tax:

• MAT is a way to make companies pay at least a minimum amount of tax (18.5%)
• It is applicable to all companies (including foreign companies with income sources in India) except those engaged in infrastructure and power sectors
• Reasons for MAT: The Indian Income Tax Act allows a large number of exemptions from total income. Besides exemptions, there are several deductions permitted from the gross total income. As a result, a lot of companies used to show considerable book profits, and distribute large dividends, but were able to use these exemptions to pay close to zero tax. These came to be known as ‘zero-tax’ companies. MAT was introduced to counter this
• Tax incentives practically bring down the corporate tax rate, and the average effective rate is around 23%, while many large corporates that are investing heavily find the actual rate falls to much lower levels. This is the reason why the government levies MAT on the book profits of companies at 18.5%, as the threshold below which the rate can’t fall
• There are rumors that the present government might scrap MAT. They claim that the government is looking at gradually weeding out tax exemptions and concurrently reducing the corporate tax rate, such that MAT will become redundant

1. FFC recommendations

1. 42% of total tax revenue to be devolved to the states:

Factors for determining which state gets what share of tax revenue: Population (1971- 17.5% weight; 2011- 10% weight), Area (15%), Forest Cover (7.5%), (Fiscal Capacity, measured as income distance, which is the difference between the state’s per-capita income and the per-capita income of the highest earning state in India (50%))