WHAT SHOULD BE READ FROM THE ECONOMIC SURVEY?
The answer is really simple. Go through your ESI and FM syllabus and identify the topics which have a current/factual/data orientation and date pertaining to which can be found in the Survey.
The list of such topics is as follows:
Measurement of growth: National Income and per capita income Poverty Alleviation and Employment Generation in India Sustainable Development and Environmental issues Industrial and Labour Policy Monetary and Fiscal Policy Balance of Payments Export-Import Policy WTO Demographic Trends Urbanization and Migration Gender Issues Social Justice : Positive Discrimination in favor of the under privileged Human Development Social Sectors in India Health and Education The Union Budget – Direct and Indirect taxes; Non-tax sources of Revenue GST Thirteenth Finance Commission and GST, Finance Commission Fiscal Policy Fiscal Responsibility and Budget Management Act (FRBM), Inflation: Definition, trends, estimates, consequences, and remedies (control): WPI, CPI – components and trends. Latest trends, latest data, latest committees, latest terms and phrases, etc related to all the above topics can be found in the Survey.
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Purchasing Power Parity (PPP)
It states that the exchange rate of a currency with another (currency) is in equilibrium when their domestic purchasing power are equivalent at that exchange rate.
It means that a good should cost same in India and USA after considering the exchange rate of Indian Rupee (INR) and US Dollar (USD).
Suppose, the current exchange rate of Indian rupee to US Dollar is Rs. 60 perUSD (i.e., 1 USD = Rs. 60). Now suppose a laptop costs Rs. 60,000 in India.
According to the PPP theory, the laptop should cost USD (60,000 / 60) = USD 1,000 (considering the current exchange rate of these two currencies) to maintain parity in purchasing power of these two currencies.
But, it may happen that the actual market price of the laptop in USA is USD 800 (say) (equivalent to Rs. 48,000 in India). Therefore, there is an advantage of buying the laptop in USA at much less price than India (Rs. 12,000 less) (it means that the purchasing power is not in parity between these two currencies)
Indian consumers will go to the exchange office and sell their INR and buy USD, and then buy the laptop from USA. It will cause the Indian currency less valuablethan the US dollar.
The demand of laptop sold in India will decrease (since high price), and the priceof laptop will go down. In contrast, the demand of laptop in USA will increase, and the price will rise accordingly.
These factors will cause the exchange rate (of the currencies) and the prices (of laptops) to change such that there is purchasing power parity in both the currencies.
PPP theory tells us that the price differences between countries are not sustainable in the long run, as market forces will equalize prices between the countries and change the exchange rates accordingly.
(Relate the above example with companies that can buy goods in much less price from foreign countries and sell in much less price in India than its counterparts. For this reason, there are several laws or restrictions on imports and a provision of levying customs duty, etc.)
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::IMPORTANT MANAGEMENT TOPIC FOR RBI 2019 MAINS EXAM::Roles of a Manager in an Organisation
A manager occupies different positions in an organisation. He plays different roles depending upon the situation. The Henry Mintzberg in his book ‘The Nature of Managerial Work’ describes the ten roles of a manager in an organisation which are broadly divided into three categories:
In their interpersonal roles, manager act as figurehead, lead, and interact with members of the organisation, within the department or outside the department.
A manager is the symbolic head of a firm. Every manager has to perform various regular duties which are of legal or social nature.
In the leader role, every manager must motivate and encourage his employees. He must try to align the needs of individuals with the goals of organisation
Every manager must maintain a network of outside contacts that can provide information useful for the organisation
In their informational roles, managers seek information from others, provide information to others, and provide information to people outside the organisation, in the capacity of representative of the organisation
A manager receives a wide variety of information and utilizes such information appropriately.
A manager transmits some of the privileged information directly to the members of the organisation who otherwise has no access to it. Through meeting, e-mail, circular, notice, office order etc. a manager acts as disseminator of information particularly to subordinates.
A manager transmits information about the organisation to various outside stakeholders. These stakeholders can be government officials, labour unions, customers, suppliers etc. The information can be organization’s plans, policies, actions, and results; serves as expert on organization’s industry.
In their decisional roles, managers take proactive actions, sort out differences in opinion amicably, allocate resources to various departments in optimum way, and negotiate implementation of new projects.
In this role the manager searches for innovative opportunities to bring about positive change in organisation.
In this role, the manager works to seek solutions of various unanticipated problems. He is responsible for corrective action when organization faces important, unexpected disturbances
In this role, the manager divides the work and delegate authority among his subordinates.
A manager is responsible for representing the organization at major negotiations. He may have to negotiate with union leaders for a strike issue, negotiate with workers for addressing their grievances and so on.
IMPORTANT ESSAY TOPIC:
Is Farm loan waiver good for the country?
Indian agriculture is often compared to the act of gambling in the monsoon. With the prevailing drought conditions and falling agricultural outputs in certain areas has fuelled the farmer suicides throughout the country. However, the loan waiver scheme provides relief for many families thereby encouraging them to invest in the next crop. But these benefits don’t offer long term economic gain for farmers. Many economic experts feel that the money waived could be used for investing in infrastructure projects which help to eliminate middlemen and help them to reap maximum benefits of their products.
History of farm loan waivers
In 1990, first ever nation wide farm loan waiver was announced and it cost around Rs 10,000 crore. In 2008, Rs 52,000 crore was released by the Indian government as part of the Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) which was mainly done to remove the financial indebtedness of the farmers. But it was done before the 2009 general election. In 2014, the Andhra Pradesh government announced a farm loan waiver of Rs 40,000 crore and Rs 20,000 crore farm loan waiver was announced in Telangana region. In 2017, Uttar Pradesh announced a farm loan waiver of Rs 36,000 crore. With state government’s move, Maharashtra followed the scheme with a Rs 35,000 crore waiver
Are farm loan waivers really effective?
According to a report, the loan waiver scheme (1990) proved a costly affair for the banks and economy. It was stated after the years after the waiver witnessed a decline in the recovery rates from financial institutions, since it installed belief among farmers believed that they could default with freedom, leading to defaults of such a high scale that it took the banks several years to recover from its impact. In 2008, the CAG audit revealed lapses and errors. It included fake claims, an inclusion of ineligible beneficiaries, huge reimbursement from a lending institution without proper verification. Many occasions, the farmers entitled to receive the benefits were not included in the list of beneficiaries by the lending institutions. Many farmers tend to use the loans for non-agricultural purposes. Besides, loan application receipts or acknowledgements from farmers weren’t properly maintained. Lending institutions like banks were responsible for implementing the scheme and also monitoring of their own work – which is a clear case of conflict of interest. No nodal agencies where appointed for the monitoring the work. Debt waiver/relief certificates were not issued in many cases for eligible beneficiaries.
In 2014, when another loan waiver of a large magnitude called “Runa Mafi”, in 2014 in Andhra Pradesh and the newly formed state of Telangana. This announcement invited several warnings and criticism from the Reserve Bank of India and the several financial experts. While it cost Rs.40,000 crore in Andhra Pradesh, it is expected to cost Rs. 20,000 crore in Telangana was aimed at helping farmers, who suffered in the cyclone Phailin, that severely damaged crops, the complete details of the waiver schemes in the two states are not available. Besides, there isn’t any clarity about the eligibility conditions , extent of crop loss due to the natural calamity. However, neither loan waiver curbed the rising farmer suicides in both the states. The National Crime Records Bureau (NCRB) data shows that while 160 farmers were reported to commit suicide in 2014 in Andhra Pradesh, the number went up to 516 in 2015. Similarly, in Telangana, farmer suicides recorded an increase of 50% in 2015 compared to 2014.
Why farm loans are waived?
In India, agriculture is primarily dependent on monsoon rains. Since most of the farmers aren’t rich, they invest heavily on crops by taking loans. A good shower brings good yields and repayment of the loan. If there isn’t any rains or insufficient market demand, farmers are unable to pay the loan amount or interest. When there is a continuous monsoon failure, farmers are trapped, with no other option, the farmer are forced to commit suicides. So, farm loans waiver is a good step towards curbing the crisis. Besides, many farmers are force to flee from agriculture to find better career elsewhere, which could lead drop in agricultural yields. So in order to avoid such situations, farm loan waiver acts as a good initiative to attract and retain the farmers. Finally, most of the farmers borrow money from moneylenders who charge exorbitant interest rates and get trapped in a very problematic cycle of debt trap. Farm loan schemes and waivers will divert these farmers to borrow money from banks.
Why farm loan waivers are bad for economy?
Loan waiver schemes disturb loan and credit discipline for the any financial system. Though waivers can be an attractive tool for retaining farmer’s interest in agriculture and avoid fatal incidences, it could lead willful defaults among the farmers. If farm loan waivers are done more than twice, farmers will start to wait for the next loan waiver scheme, which is bad for the economy and agriculture. Besides, taxpayers are at a loss, because loans will be waived only with hard earned money of taxpayers. Rich farmers could take advantage of the situations and push to take loans even if there is no need, in the hope of the next loan waiver scheme. This will impact the poor farmers who are genuinely in need of loans for crops.
Loan waiver is not a permanent solution for agriculture until the fundamental problems are solved. Though it is instant temporary relief from debt preventing suicides, it largely failed on many occasions to contribute to farmers’ welfare in the long term. Besides, there is always a question that to what extent this relief measure can help bring farmers out of indebtedness and suffering always remains a question. Since waivers in India are filled with lack of accountability and lack of proper monitoring reduces the effectiveness of the loan waivers. This coupled with the fact that not all the debt is formal, reduces their effectiveness even more. Since most of the working population of India is dependent on agriculture, loan waiver cannot be avoided. But a proper system of accountability and transparency of waiver will alone ensure the effective working of waiver scheme.
:::Gross Fixed Capital Formation:::
Gross Fixed Capital Formation (GFCF) is a net investment concept within national account which measures the net increase in fixed capital. It measures private and public sector investment spent on formation of fixed capital which includes land improvement, construction of roads, railways, dwelling units, commercial buildings, new machinery etc. It must be noted that land purchases and depreciation are not part of GCF.
Significance of GFCF
An increase in gross fixed capital formation signifies increase in investment in fixed assets which further translated into higher rate of economic growth in long run. Generally developing countries devotes higher percentage of GDP to investment for fixed capital.
BIMSTECA regional economic cooperation of nations lying to adjacent areas of Bay of Bengal is known as Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). It came into existence on 6th June, 1997 after Bangkok Declaration. It represents 1.5 billion population (22% of global population). It constitutes GDP of 2.7 trillion economies.
It was started as (BIST-EC) Bangladesh, India, Sri Lanka and Thailand economic cooperation in 1997. With inclusion of Myanmar, the group was renamed to ‘BIMST-EC’ (Bangladesh, India, Myanmar, Sri Lanka and Thailand Economic Cooperation). The Nepal and Bhutan has joined in 2004, then the name of the grouping was changed to ‘Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation’ (BIMSTEC)
Members of BIMSTEC
There are seven member states of BIMSTEC, out of which five are South Asian countries and two are South East Asian countries. These seven countries are:
South Asian Countries
South East Asian Countries
Objective of BIMSTEC
The objective of BIMSTEC is to harness shared and accelerated growth through mutual cooperation. It started with co-operation in six sectors -including trade, technology, energy, transport, tourism and fisheries. Later it was expanded to take up specific cooperation projects in the sectors of trade, investment and industry, technology, human recourse development, tourism, agriculture, energy, and infrastructure and transportation ; through joint endeavours and active collaboration, provide mutual assistance in the form of training and research facilities, on matters of common interest in the economic, social, technical and scientific fields
Secretariat of BIMSTEC
The permanent secretariat is situated at Dhaka, Bangladesh. It was established in September, 2014. The present chair is Sri Lanka.
BIMSTEC Summit is the highest policy body making in the process. The Summit is held once every two years. The 4th summit was held in Kathmandu, Nepal in August, 2018.