Module 1

1.Name the three sectors of economy?

Primary sector, secondary sector and tertiary sector.

2.what is new economic policy?

New Economic Policy refers to economic liberalisation or relaxation in the import tariffs,
deregulation of markets or opening the markets for private and foreign players, and reduction of
taxes to expand the economic wings of the country.started in the year 1991

3.state the objectives of new economic policy.

1. The main objective was to plunge Indian Economy in to the arena of ‘Globalization and to give it a
new thrust on market orientation.

2. The NEP intended to bring down the rate of inflation

Liberalisation , privatization ,globalization.

5. state general feature of LPG

Removing the mandatory convertibility clause

Reducing the import tariffs

6.what is liberalization?

Removal of Industrial Licensing and Registration:

Previously private sector had to obtain license from Govt. for starting a new venture. In this policy
private sector has been freed from licensing and other restrictions

7. mention measures taken under liberalisation?

Free determination of interest rate by the commercial Banks

Increase in the investment limit for the Small Scale Industries (SSIs)

8.what is privatization?

privatization means permitting the private sector to set up industries which were previously
reserved for the public sector. Under this policy many PSU’s were sold to private sector. It means
privatisation is the process of involving the private sector-in the ownership of Public Sector Units
(PSU’s).

9. mention measures taken under privatization

Sale of shares of PSUs

Disinvestment in PSU’s

10. what is globalization?

Globalization means to make Global or worldwide, world wide production and distribution.Broadly
speaking, Globalisation means the interaction of the domestic economy with the rest of the world
with regard to foreign investment, trade, production and financial matters.

11.what are the steps taken under globalization

Reduction in tariffs

Long term Trade Policy

12.state 2 pre-LPG reforms?

After Independence and pre-LPG reforms, India ran on the principle of state interference in labour
and financial markets.

Moreover, industrialisation was under State monitoring. There was also central planning, business
regulation and a large public sector.

13.state factors that led to LPG reform

Price Increases: Inflation soared from 6.7% to 16.7%, worsening the country's economic situation.

Increased Fiscal Deficit: The government's fiscal deficit increased as non-development spending
increased. The national debt and interest rates have risen as a result of the increased budget
imbalance. Interest liabilities accounted for 36.4% of overall government spending in 1991.

Increase in the Unfavorable Balance of Payments (BOP): It was Rs. 2214 crore in 1980-81 and Rs.
17,367 crores in 1990-91. To finance the deficit, a considerable number of foreign loans were
needed, and the interest rate had to be raised.

14. state features of LPG.

Some of the important policies of LPG reforms are –

Removal of the industrial raj

Dilution of the role of the public sector

Start of privatisation

Reduction in import tariffs

15. Mention 2 positive outcomes of LPG

India’s GDP growth rate increased. During 1990-91 India’s GDP growth rate was only 1.1% but after
1991 reforms GDP growth rate increased year by year and in 2015-16 it was estimated to be 7.5% by
IMF.

Since 1991, India has firmly established itself as a lucrative foreign investment destination and FDI
equity inflows in India in 2019-20 (till August) stood at US$ 19.33 billion.

16. mention 2 negative outcomes of LPG reform

In 1991, agriculture provided employment to 72 percent of the population and contributed 29.02
percent of the GDP. Now the share of agriculture in the GDP has gone down drastically to 18
percent. This has resulted in a lowering the per capita income of the farmers and increasing the rural
indebtedness.

Due to opening up of the Indian economy to foreign competition, more MNCs are competing local
businesses and companies which are facing problems due to financial constraints, lack of advanced
technology and production inefficiencies.

17.What is Indian population policy?

A population policy is a set of measures taken by a State to modify the way its population is
changing, either by promoting large families or immigration to increase its size, or by encouraging
limitation of births to decrease

18. what is the basic of population policy?

The basic aim of this policy is to cover various issues of maternal health, child survival and
contraception and to make reproductive health care accessible and affordable for all.

19.mention 2 objectives of Population policy?

The Immediate Objective: The immediate objective is to address the unmet needs for
contraception, health care infrastructure and health personnel and to provide integrated service
delivery for basic reproductive and child health care.

The Medium-Term Objective: The medium-term objective is to bring the Total Fertility Rate (TFR) to
replacement level by 2010 through vigorous implementation in inter-sectorial operational strategies.
20. what are the targets of population policy?

1. Achieve zero growth rate of population by 2045.

2. Reduce infant mortality rate of below 30 per thousand live births.

3. Reduce maternal mortality ratio of below 100 per 1, 00,000 live births.

4. Reduce birth rate to 21 per 1000 by 2010.

21.what is infant mortality?

Infant mortality rate is the probability of a child born in a specific year or period dying before
reaching the age of one, if subject to age-specific mortality rates of that period.

22. what is maternal mortality ?

Maternal Mortality Rate (MMR) is defined as the number of maternal deaths per 100,000 live births
due to pregnancy or termination of pregnancy, regardless of the site or duration of pregnancy. The
maternal mortality rate is used to represent the risk associated with pregnancy among women.

23. what is crude birth/death rate?

Birth Rate (or crude birth rate) The number of live births per 1,000 population in a given year. Not to
be confused with the growth rate. Death Rate (or crude death rate) The number of deaths per 1,000
population in a given year.30 per 1000

24. mention 2 features of national population policy?

The NPP reinforces the vision of the government to encourage voluntary and informed choices and
citizens’ agreeability in order to achieve maximum benefits from reproductive health services.

Making school education free and compulsory up to the age of 14 years and also reducing the
dropout rates of both boys and girls.

25. what is human development index?

Human Development Index (HDI) is a statistic developed and compiled to measure various countries’
social and economic development levels by the United Nations.

The Human Development Index is a statistical composite index combining factors such as life
expectancy, education, and per capita income that is used to categorize nations into four tiers of
human development. The HDI uses average annual income and educational expectations to rank and
compare countries, and evaluate the level of individual human development in each country.

26.what is HDI is composed of?

Life expectancy at birth

Knowledge (Mean years of schooling and Expected years of schooling)

Gross National Income (GNI) per capita.

27. what is gross national income?

Gross national income (GNI) is defined as gross domestic product, plus net receipts from abroad of
compensation of employees, property income and net taxes less subsidies on production.

28. what is urbanization?

Urbanization is the increase in the proportion of people living in towns and cities. Urbanisation
occurs because people move from rural areas (countryside) to urban areas (towns and cities). This
usually occurs when a country is still developing.

29. what are problems of urbanization?

Overcrowding or Overpopulation

Unemployment

30. what are housing problems arising out of urbanization?

Housing problems tend to develop when people move to cities and overcrowd in them. If the cities
were not well prepared for the numbers, the houses become more scarce. It is even harder to settle
people who come to cities and don’t end up getting employed or those who settle in as immigrants.
Some of these people are unable to afford to build own homes.

31. what are the sanitary problems arising out of urbaniuzation?

Sanitation problems are rampant in urban areas due to the overpopulation that is seen in many of
the areas people settle. The local governments find it hard to properly set up and proper sewage
systemsdue to the rampant bulge of the human population. The fast increase in people’s population
sometimes overwhelms the local government’s resource capacity to construct the required
sanitation and sewage systems.

32.what is smart city ?

‘Smart city’ is a city equipped with basic infrastructure to give a decent quality of life, a clean and
sustainable environment through application of some smart solutions.

It includes basic infrastructure like adequate water supply, electricity supply, sustainable sanitation
and solid waste management, efficient urban mobility, affordable housing and ensuring robust IT
connectivity and e-governance.
33. what is the purpose of smart city?

The purpose of the Smart Cities Mission is to drive economic growth and improve the quality of life
of people by enabling local area development and harnessing technology, especially technology that
leads to Smart .

34. what are the objectives of smart city mission?

In the approach to the Smart Cities Mission, the objective is to promote cities that provide core
infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment
and application of ‘Smart’ Solutions.

The focus is on sustainable and inclusive development and the idea is to look at compact areas,
create a replicable model which will act like a light house to other aspiring cities.

35. mention elements that make a city smart?

Adequate water supply,

Assured electricity supply,

Sanitation, including solid waste management,

Efficient urban mobility and public transport

36. how is the smarty city plan financed?

The Smart City Mission will be operated as a Centrally Sponsored Scheme (CSS) and the Central
Government proposes to give financial support to the Mission to the extent of Rs. 48,000 crores over
five years i.e. on an average Rs. 100 crore per city per year.

An equal amount, on a matching basis, will have to be contributed by the State/ULB; therefore,
nearly Rupees one lakh crore of Government/ULB funds will be available for Smart Cities
development.

37.what are the key component of smart city?

Core infrastructure

High quality of life

Smart solution overlying basic amentities

Clean and sustainable environment.

38. what is Agricultural price policy?

Agricultural prices cover prices of agricultural products (output prices) and prices of requisites for
agricultural production (input prices) at various stages of marketing

39. what are the features of Agricultural price policy?

Setting up insts like food corporation on India for the necessary procure, storage and distribution
of food grains. The corporation organises the price of food grains at the govt determined prices and
sale these food stocks through the net distribute system.The govt fixes the minimum support price
of agri products like wheat, rice, The FCI also make these purchases of food grains at the
procurement prices so as the maintain a rational price of food grains

40 what are the effects of Agricultural price policy?

Incentives to increase production

Increase in the level of income of farmers

Change in cropping pattern

Benefit to consumers, industries

41. what is public distribution system ?

The network of PDS was introduced to supply essential commodities at the subsidised price and it
was considered as an essential element of govt safety net to the poor after the Bengal famine. In
order to distribute essential food items, fair price shops were opened in all states.

42. what are the Advantages of Public Distribution System are ?

• It provides food security to poor people of India.

• It helps in alleviating the poverty level of India.

• It ensures that no person dies because of hunger.

• It helps in stabilizing food prices.• It ensures the availability of food at affordable and subsidized
rates.

43.what are the disadvantages of Public Distribution System ?

The food grains supplied by the ration shops are not enough to meet the consumption Need of
food. Quality of the food grains is very low

44.what is green revolution ?

Is the Intensive agricultural development programme initiated by the govt in five dts which brought
about high yield in wheat production

45.what are the Features of green revolution ?

Introduced High Yielding Variety seeds in Indian agriculture.The HYV seeds were highly effective in
regions that had rich irrigation facilities and were more successful with the wheat crop. Therefore,
the Green Revolution at first focused on states with better infrastructure such as Tamil Nadu and
Punjab.

46.state the impacts of green revolution in india

Green Revolution has remarkably increased Agricultural Production. Foodgrains in India saw a great
rise in output. The biggest beneficiary of the revolution was the Wheat Grain. The production
increased to 55 million tonnes in the early stage of the plan itself. Not just limited to agricultural
output the revolution also increased per Acre yield. Green Revolution increased the per hectare yield
in the case of wheat from 850 kg per hectare to an incredible 2281 kg/hectare in its early stage.

47.what are the features of MGNREGA ?

guarantees hundred days of wage employment in a financial year, to a rural household whose adult
members volunteer to do unskilled manual work.

Individual beneficiary oriented works can be taken up on the cards of Scheduled Castes and
Scheduled Tribes, small or marginal farmers or beneficiaries of land reforms or beneficiaries under
the Indira Awaas Yojana of the Government of India.

48.how many states and union territories are there in india?

The system of government in states closely resembles that of the Union. There are 28 states and 8
Union territories in the country. Union Territories are administered by the President through an
Administrator appointed by him/her.

49.who is the chairman of finance commission?

Chairman Sh N K Singh

50.what is deflation?

When the overall price level decreases so that inflation rate becomes negative, it is called deflation.
It is the opposite of the often-encountered inflation.

51. what is inflation?

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad
measure, such as the overall increase in prices or the increase in the cost of living in a country.

52.what does devaluation stand for?

Devaluation is the deliberate downward adjustment of the value of a country's money relative to
another currency, group of currencies, or currency standard. Countries that have a fixed exchange
rate or semi-fixed exchange rate use this monetary policy tool.

53. when was new economic policy introduced?

The New Economic Policy was initiated in 1991 by the government of India.

54.why and when was green revolution formed?

The Green Revolution in India was initiated in the 1965 by introducing high-yielding varieties of rice
and wheat to increase food production in order to alleviate hunger and poverty.

MODULE 2 INDUSTRIAL BUSINESS AND FISCAL POLICY

1.What is Industrial policy?

Industrial Policy is the set of standards and measures set by the Government to evaluate the
progress of the manufacturing sector to enhance economic growth and development of the country.

The government takes measures to encourage and improve the competitiveness and capabilities of
various firms.

2. mention objectives of industrial policy?

To maintain steady growth in productivity.

To create more employment opportunities.

Utilize the available human resources better

To accelerate the progress of the country through different means

3. what were the resolutions/declaration of industrial policy 1977?

This policy was an extension of the 1956 policy.

The maina aim was to create employment to the poor and reduction in the concentration of wealth.

This policy majorly focused on Decentralisation

It gave priority to small scale Industries

It created a new unit called “Tiny Unit”

This policy imposed restrictions on Multinational Companies (MNC).

It declared the Indian economy as Mixed Economy

4. how were the industries divided according to industrial policy 1948?

Exclusive monopoly of central government(arms and ammunitions, production of atomic energy and
management of railways)

New undertaking undertaken only by state(coal, iron and steel, aircraft manufacturing, ship building,
telegraph, telephone etc.)

Industries to be regulated by the government(Industries of basic importance)

Open to private enterprise, individuals and cooperatives(remaining)

5. what was addressed in statement of industrial policy ,1980?

The Industrial Policy Statement of 1980 addressed the need for promoting competition in the
domestic market, modernization, selective Liberalization, and technological up-gradation.It
liberalised licensing and provided for the automatic expansion of capacity.

6.why and when was MRTP ACT formed ?

the MRTP Act (Monopolies Restrictive Trade Practices) and FERA Act (Foreign Exchange Regulation
Act, 1973) were introduced.The objective was to liberalize the industrial sector to increase industrial
productivity and competitiveness of the industrial sector.The policy laid the foundation for an
increasingly competitive export-based and for encouraging foreign investment in high-technology
areas.

7.mention objectives of New economics policy 1991?

The main objectives to launch new economic policy (NEP) in 1991 are as follows:

The main objective was to plunge Indian economy in to the field of ‘Globalization and to give it a
new drive on market orientation. The new economic policy intended to reduce the rate of inflation
and to remove imbalances in payment. It intended to move towards higher economic growth rate
and to build sufficient foreign exchange reserves.

8. mention features of New industrial policy 1991?

Reduction in Government’s Monopoly: Government monopoly was reduced by decreasing the

number of industries reserved for the public sector from 17 (as per 1956 policy) to 8 industries such
as arms and ammunition, atomic energy, coal, mineral oil, mining of iron ore, manganese ore, gold,
silver, mining of copper, lead, etc.

Abolition of Industrial Licensing: The Industrial Licensing Policy abolished the industrial licensing
given to all industries except for the 18 industries, which was further reduced to 6 industries in 1999.
These included drugs and pharmaceuticals, hazardous chemicals, explosives such as gunpowder and
detonating fuses, etc.

9. what are the impacts of industrial policy 1991 ?

Removal of Restrictions Regarding License, Permit, And Quota Raj: It removed the restrictions
experienced during the license, permit, and quota raj. It intended to liberalize the economy by
removing bureaucratic restrictions on industrial growth.

Public Sector’s Role And Disinvestment: The role of the public sector was decreased and two sectors
were reserved for the public. The process of disinvestment was started in PSUs.

10. what is competition act 2002?

The Competition Act, 2002 was enacted by the Parliament of India and governs Indian competition
law. It replaced the archaic The Monopolies and Restrictive Trade Practices Act, 1969. Under this
legislation, the Competition Commission of India was established to prevent the activities that have
an adverse effect on competition in India.This act extends to whole of India. The Competition Act,
2002 was amended by the Competition (Amendment) Act, 2007 and again by the Competition
(Amendment) Act, 2009

11. what are the duties of competition act ?

To prohibit the agreements or practices that have or are likely to have an appreciable adverse effect
on competition in a market in India, (horizontal and vertical agreements / conduct);

To prohibit the abuse of dominance in a market.

12. mention function of competition act?

To eliminate practices having adverse effects on competition, protect the interests of consumers and
ensure freedom of trade in the markets of India.

To give opinion on competition issues on a reference received from a statutory authority

To undertake competition advocacy, create public awareness and impart training on competition
issues.

Consumer Welfare: To make the markets work for the benefit and welfare of consumers.

13. Mention achievements of Competition act?

Achievements of CCI The Commission has adjudicated more than 1,200 antitrust cases i.e., case
disposal rate is 89 % in antitrust cases.

It has also reviewed more than 900 mergers and acquisitions till date, cleared most of them, within a
record average time of 30 days.

The Commission has also come up with several innovations like the ‘Green Channel’ provision for
automated approval on combinations/transactions and cleared more than 50 of such transactions.

14. explain MSME ?

MSME act was enacted in 2006 which provides the legal framework of the concept of enterprise and
integrating the three tiers i.e micro, small and medium enterprises. The act provides a mechanism
where there is a wide representation of all sections of stakeholders of the three classes of
enterprises with advisory functions. MSMEs are micro, small and medium enterprises that engage in
the service sector or the manufacturing, processing, production and preservation of goods

15. Mention some essential elements of MSME’S?

MSMEs work for the welfare of the workers and artisans. They help them by giving employment and
by providing loans and other services.

MSMEs provide credit limit or funding support to banks.

They promote the development of entrepreneurship as well as up-gradation of skills by launching

specialized training centers for the same.

They support the up-grading of developmental technology, infrastructure development, and the
modernization of the sector as a whole.

16. mention features of MSME’S?

Establishment of funds for the promotion, development and enhancement of competitiveness of

these firms

Notification of the available schemes

progressive credit policies and practices

Govt procurement of products produced by msmes

17. state the progress of MSME’s?

Msmes are contributing to 8% of the Indian economy. Bank lending to msmes is around rs 5.4
trillions.

Contributes to nearly 40% of total exports.

According to the latest reports of the govt of India there are around 30 million msmes in India which
provide employment to 60 million people in the 28 % is in manufacturing sector and 72% in the
service sector.

Pne of the important aspects of the msmes in that it mobilizes major portion of its capital from the
lower middle class of the society in order to invest the same in productive economic activities.

18. explain any 2 salient features of MSME’S?

1. Anti Agreements: Any individual or enterprises shall not deal in production supply or distribution
that may cause a negative impact regarding competition in India. Any existence of such agreements
is considered illegal.
2. Abuse of dominant position: In the event, an enterprise or an associated individual, it is found to
indulge in practices that are unfair or discriminatory in nature shall be considered an abuse of
dominant position. If a party is found to be in abuse of its position, then they will be subjected to an
investigation from the concerned authorities

19. what are the roles of MSME’S in Indian economy?

MSMEs have played an essential role in providing employment opportunities in rural areas. They
have helped in the industrialization of these areas with a low capital cost compared to the large
industries. Acting as a complementary unit to large sectors, the MSME sector has enormously
contributed to its socio-economic development.

MSMEs also contribute and play an essential role in the country’s development in different areas like
the requirement of low investment, flexibility in operations, mobility through the locations, low rate
of imports, and a high contribution to domestic production.

20. what is infrastructure?

Infrastructure means those basic facilities and services which facilitates different economic activities
and thereby help in economic development of the country, Education, Health, Transport and
Communication, banking and insurance, irrigation and power and science and technology etc. are
the examples of infrastructure.

21. what are the types of Infrastructrure?

Broadly speaking infrastructure can be divided in two categories:

(a) Economic Infrastructure

(b) Social Infrastructure

22. what is social infrastructure?

Social infrastructure is comprised of the facilities, spaces, services and networks that support the
quality of life and wellbeing of our communities. The Social Infrastructure in India includes the
education system in India, health care, the management of the education and health services in
India that form the basic social infrastructure definition.

23 what does social infrastructure consists of explain any 2 ?

Education

Education in India follows the 10+2 pattern. For higher education there are various state run as well
as private institutions and universities providing a variety of courses and subjects. The accreditation
of the universities is decided under the universities grant commission act that has formed
autonomous institutions that have the right to provide accreditation to universities and
'vishwvidyalayas'. The education department consists of various schools, colleges and universities
imparting education on fair means and education for all sections of the society.

Health

Health in India is a state government responsibility with the national health policy laying down the
necessary health policy in India. The central council of health and welfare formulates the various
health care projects and health department reform policies. The administration of health industry in
India as well as the technical needs of the health sector are the responsibility of the ministry of
health and welfare India.

24. explain education system in india?

Education in India until 1976 was the responsibility of the state governments; it was then made a
joint responsibility of both centre and state. The centre is represented by the Education Ministry a
subsidiary of the Ministry of Human Resource Development India. The Education Ministry India
decides the India education budget allocating education grants for projects to upgrade the education
levels in India.

25. explain problems and reforms of education in india?

The education reforms taken up include a compulsory and free education for all children below the
age of 14 years, subsidized higher education and various scholarship and education programs to
achieve the literacy targets. The main problem of the education system in India is that the targets set
by the centre or the ministry of education to achieve a 100% literacy rate has never been achieved
except for Kerala state. Also the unorganized education sector with many state and national level
education boards operating like the SSLC, ICSE, CBSE, IB and IGCSE having different curriculum and
study patterns provides a non-uniformity to the India education system

26. explain responsibility of heath under social infrstructure?

Health Department in India

The health ministry in India takes care of the health department. The main responsibility of the
health ministry India is to provide hygienic health care solutions for all, supervision of the basic
health infrastructure development in India by construction of hospitals, nursing homes and
dispensaries as per the needs of the area.

27.what is economic infrastructure?

Economic infrastructure can be defined as "internal facilities of a country that make business activity
possible, such as communication, transportation and distribution networks, financial institutions and
markets, and energy supply systems". Infrastructure provides the most basic facilities that help serve
different economic activities and thereby help in the facilitation of the growth of the country,
development of the country, education, communication, transport, banking and insurance, health,
technology.
28. mention tax and non tax revenue?

tax rev includes taxes on income

Tax on property and capital transactions and taxes on commodities and services

Non tax rev of the govt include

Revenue from fees and other services

Interest receipts

Dividends and profits from public enterprises

29. what is deficit financing ?

Is practised when revenue receipts from tax and non tax sources and borrowing are not sufficient
enough to meet the expenditure it is defined as the amount which is equal to the net increase in the
purchasing power r of the economy arising through budgetary operations of the govt.

30. what is revenues expenditure ?

Rev expenditure- Revenue expenditures are short-term expenses used in the current period or
typically within one year. Revenue expenditures include the expenses required to meet the ongoing
operational costs

31. what is capital expenditure?

Capital exp- Capital expenditure is the money spent by the government on the development of
machinery, equipment, building, health facilities, education, etc. It also includes the expenditure
incurred on acquiring fixed assets like land and investment by the government that gives profits or
dividend in future. Capital spending is associated with investment or development spending, where
expenditure has benefits extending years into the future.

32. what is budgetary deficit?

Budgetary deficit is the gap between total expenditure and receipts i.e both rev and capital. In india
deficit is mainly due to capital account deficitBudgetary deficit=total expenditure(rev+capital)-total
receipts(rev+capital).

33. what is Fiscal Federalism?

Fiscal federalism refers to the financial relations between the country’s federal government system
and other units of government. It is the study of how expenditure and revenue are allocated across
different vertical layers of the government administration. Article 246 and Seventh Schedule of the
Indian.
34. what are the three folds of fiscal federalism?

List I: The Union is responsible for functions of national importance, including but not limited to
communications, constitution, defence, elections, external affairs and organisation of the Supreme
Court and the High Courts.

List II: States are responsible for touching on the life and welfare of the people, for instance, through
public order, police force, agriculture, local government, public health, water land, etc.

List III: The Concurrent list includes the administration of justice, economic and social planning, and
more.

35. what if financial commission ?

the Finance Commission is constituted by the President under article 280 of the Constitution, it gives
recommendations on distribution of tax revenues between the Union and the States and amongst
the States themselves.

36. what is the role of finance commission?

The Finance Commission is a constitutional body formed every five years to give suggestions on
centre-state financial relations. Each Finance Commission is required to make recommendations on:
(i) sharing of central taxes with states, (ii) distribution of central grants to states, (iii) measures to
improve the finances of states to supplement the resources of panchayats and municipalities, and
(iv) any other matter referred to it.

37. state and explain any 2 criteria for share of revenue?

Income distanceis the difference between the per capita income of a state with the average per
capita income of all states. States with lower per capita income may be given a higher share to
maintain equity among states.

Forest cover indicates that states with large forest covers bear the cost of not having area available
for other economic activities. Therefore, the rationale is that these states may be given a higher
share.

Module 3

1. What is a monetary policy? What is its main aim?

Monetary Policy is the economic policy of the central bank to control the movement of money
supply. Its aims are to:

• Maintain the value and stability of Indian currency at the international market

• Maintain balance in the eco development of certain region

• Movement of credit
2.What are the 2 instruments of monetary policies?

The 2 instruments of monetary policy are quantitative and qualitative instruments. Quantitative
instruments include bank rate, open market operations, repo rate, reverse repo rate, cash reserve
ratio, and statutory liquidity ratio. The qualitative tools of monetary policy are Rationing of credit,
Consumer Credit Regulation, Guidelines, Margin requirements, Moral Suasion.

3.Differentiate between repo rate and reverse repo rate.

The repo rate is the rate the RBI levies when commercial banks borrow funds from it. Usually,
commercial banks borrow money from the RBI by using government securities like treasury bills and
bonds as collateral. It is the lending rate charged by the RBI. The reverse repo rate is the opposite of
the repo rate. It is applied to the interest paid by the RBI. When banks have surplus money, they
deposit funds with the RBI and earn interest.

4.What is a fiscal policy?

Fiscal policy is defined as the policy under which the government uses the instrument of taxation,
public spending and public borrowing to achieve various objectives of economic policy. Simply put, it
is the policy of government spending and taxation to achieve sustainable growth.

5.What are the causes for increased public expenditure?

The causes for increased public expenditure are:

• High population

• Social welfare

• Defense expenditure

• Infrastructure buildings

• Excess imports

• Imbalance in the economic development

6.What is a business cycle? Describe boom and recession.

A business cycle is the natural expansion and contraction of economic growth that happens in an
economy over a period. The rise and fall of an economy's gross domestic product (GDP) define the
start and end of a business cycle. It is also known as an economic cycle or a trade cycle. The boom
and bust (or recession) cycle is a key characteristic of capitalist economies and is sometimes
synonymous with the business cycle. During the boom the economy grows, jobs are plentiful, and
the market brings high returns to investors. In the subsequent bust the economy shrinks, people lose
their jobs and investors lose money.
7.When was the Narasimham Committee Reform introduced? On what was it introduced?

The first Narasimhan Committee was appointed on 14 August 1991, and the second one in
December 1997.

The purpose of the Narasimham-I Committee was to study all aspects relating to the structure,
organisation, functions, and procedures of the financial systems and to recommend improvements
in their efficiency and productivity.

The Narasimham-II Committee was tasked with the progress review of the implementation of the
banking reforms since 1992 with the aim of further strengthening the financial institutions of India. It
focussed on issues like size of banks and capital adequacy ratio among other things.

8.What is a capital market?

Capital market is a place where buyers and sellers indulge in trade (buying/selling) of financial
securities like bonds, stocks, etc. The trading is undertaken by participants such as individuals and
institutions.

9.Describe the expansion of SEBI.

SEBI stands for Securities and Exchange Board of India.

10.What is FDI?

Foreign direct investment (FDI) is an ownership stake in a foreign company or project made by an
investor, company, or government from another country. In India, it is the investment through
capital instruments by a person resident outside India (a) in an unlisted Indian company; or (b) in 10
percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian
company.

11.What is India’s composition of foreign trade?

India earns most of imports mainly refined petroleum, plastic materials, artificial resins, pearls and
precious and semi-precious stones, gold, and electronic goods. In recent years, India exported
mostly pearls, precious and semi-precious stones and jewellery, mineral fuels, oils and waxes and
bituminous substances, vehicles, parts and accessories, nuclear reactors, boilers, machinery and
mechanical appliances, pharmaceutical products, and organic chemicals.

12.Describe the New Economic Policy.

The New Economic Policy of 1991 was introduced for the following reasons:

o To plunge the Indian Economy in to the arena of ‘Globalization and to give it a new thrust on
market orientation.
o To bring down the rate of inflation

o To move towards higher economic growth rate and to build sufficient foreign exchange
reserves.

o To achieve economic stabilization and to convert the economy into a market economy by
removing all kinds of un-necessary restrictions.

o To permit the international flow of goods, services, capital, human resources and
technology, without many restrictions.

o To increase the participation of private players in the all sectors of the economy.

13.What is devaluation?

Devaluation happens when a government makes monetary policy to reduce a currency’s value; on
the other hand, depreciation happens as a result of supply and demand in a free foreign exchange
market. Devaluation is a decision that makes a currency lose value. It can be external, internal,
competitive, or fiscal.

14.Explain deficits in the Balance of Payments and Balance of Trade.

A BOP statement of a country indicates whether the country has a surplus or a deficit of funds, i.e.
when a country's export is more than its import, its BOP is said to be in surplus. On the other hand,
the BOP deficit indicates that its imports are more than its exports.

Balance of trade (BOT) is the difference between the value of a country's exports and the value of a
country's imports for a given period. Balance of trade is the largest component of a country's
balance of payments (BOP). A country that imports more goods and services than it exports in terms
of value has a trade deficit while a country that exports more goods and services than it imports has
a trade surplus.

15.What are the instruments traded in the money market?

The instruments traded in the money market include:

• Treasury Bills: A Treasury bill is basically an instrument of short-term borrowing by the

Government of India maturing in less than one year.

• Certificate of Deposits: se sources. 4. Certificate of Deposit: Certificates of deposit (CD) are

unsecured, negotiable, short-term instruments in bearer form, issued by commercial banks and
development financial institutions.

• Commercial Papers: Commercial paper is a short-term unsecured promissory note,

negotiable and transferable by endorsement and delivery with a fixed maturity period.

• Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital
requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which is
used to finance the credit sales of firms.
• Call Money: Call money is short term finance repayable on demand, with a maturity period
of one day to fifteen days, used for inter-bank transactions.

16.What is the role of SEBI in India?

• To the issuers, it aims to provide a market place in which they can confidently look forward
to raising finances they need in an easy, fair and efficient manner.

• To the investors, it should provide protection of their rights and interests through adequate,
accurate and authentic information and disclosure of information on a continuous basis.

• To the intermediaries, it should offer a competitive, professionalised and expanding market

with adequate and efficient infrastructure so that they are able to render better service to the
investors and issuers.