A brief economic overview

India is the world’s second-fastest growing major economy, having clocked growth rates averaging 8.9% in the four years prior to the global financial crisis that began in September 2008. The Indian economy is now poised to resume its fast pace of growth, recovering double-quick from the crisis-induced slowdown. Population growth having come down to 1.5% a year, India’s per capita income is growing at close to 7.5% a year, a rate that will allow it to more than double in ten years. This is a remarkable achievement in human history, with China’s example as the only precedent.

India’s emergence as a fast-growing trillion plus dollar economy has enormous significance for the rest of the world. The remarkable thing about India’s rise is that it is mostly benign and perceived as such by much of the world. It is also true that India faces numerous economic challenges. But India’s new prosperity is indeed trickling down to the bottom of the pyramid. The government’s redistributive policies play a major role - direct tax collections (essentially, tax on personal and corporate incomes) have been growing at close to 30% a year, thanks to lower rates and better tax administration and the government has initiated sizeable rural development and employment schemes.

Considerable emphasis is being given on infrastructure development and urban renewal. New national highways are being built across India, and this road building activity also drives growth in the rural areas. Indeed, highway projects have been a trigger for a state like Bihar, (one of India’s 28 states), to register growth in excess of 11% a year for five recent years.

( Mumbai-Worli sea link)

The Planning Commission pegs investment in physical infrastructure to be a cumulative $542 billion during the Eleventh Five Year Plan period of 2007/08-2011/12. And this is expected to go up further to $1,000 billion over the 12th Five Year Plan 2012/13-2016/17. A steady rise in infrastructure investment is already visible. Infrastructure investment has moved up from 5.4% of GDP in 2005/06 to 7.5% of GDP in 2009/10. The Planning Commission forecasts this figure to climb up to 8.4% of GDP in 2011/12. What is of special interest to foreign investors is the ever more significant role of private investment in building India’s infrastructure. The share of the private structure in infrastructure investment has moved up from 2.2% of GDP in 2007/08 to 2.6% of GDP in 2009/10 and is expected to touch 3.3% of GDP by 2011/12.

( Mumbai stock exchange)

No economy can sustain fast growth without undergoing accelerated urbanisation. The 2001 Census put India’s urban population at 28% of the total. It probably has already moved past 31%. It is a safe bet to expect half of India to live in towns by 2030, which means that over 230 million additional town dwellers. The urban space that is required to accommodate these many additional people would be upwards of 20,000 sq km. While this is a great policy challenge, there is little alternative but to build this required space, to house the fast growing sectors of industry and services. Building new towns as energy efficient, climate-friendly habitats, using mixed land use to minimise commute, extensive public transport, green building codes and green energy would be a policy challenge and a great investment opportunity. India allows 100% FDI in building new townships.

( High rise buildings)

The UN estimates that India would contribute fully a quarter of the addition to the world’s workforce over the next 10 years. India would produce 136 million workers, while China would contribute just 23 million. The main challenge for India would be to ensure that these young people are educated, skilled and productively employed. While school retention rates have gone up over the last five years, raising the quality of education and increasing the proportion of students to who go on to college would be major challenges. India’s education sector offers huge opportunities.

The government has been extremely keen to use public-private-partnership (PPP) to build infrastructure. Thus, national highways, power plants and airports are being built under PPP at great speed. New Delhi’s latest international airport terminal, T3, one of the largest in the world and the fastest built, stands as gleaming testimony to the efficacy of the PPP framework. A national skill development programme is underway, with extensive collaboration between the government and the private sector.

( Public-Private partnership- T3 arrival lounge- IGIA airport)

Thanks essentially to a sustained rise in the demand for food, especially for superior food from rural households due to their additional purchasing power arising from enhanced transfers and new economic activity, India is also facing the challenge of food inflation, in recent times. This is both a problem and an opportunity to raise farm output and boost farmer incomes. While agriculture now contributes less than 18% of gross domestic output, it still employs a little more than half the workforce.

( India’s booming retail)

But is this growth sustainable? Such scepticism is commonplace, given the infrastructure deficits and shortages. But every such shortage is also a growth opportunity and India is putting in place a robust policy and regulatory framework that will allow each infrastructure sector to grow, as the spectacular growth of telecom has shown. India’s tele-density now stands at over 50%, with the 127-fold increase in the number of mobile phone connections from roughly 5 million in 2001 to 635 million by mid-2010 leading the way. It is entirely feasible that other sectors would replicate telecom’s success story.

There is an under-appreciated side to India’s growth story. India saves a little more than one-third its output and invests that much and little bit more, drawing on global savings, to squeeze out 9% growth. Per unit of capital, India produces far more output, thanks to two things: capital is unsubsidised and costly and this forces Indian companies to constantly innovate production processes and business models. India’s pharmaceutical industry’s cost efficiency might have its origins in the erstwhile process patent regime (now superceded by a TRIPS-compliant product patent regime), but its culture of constantly improving its own process continues to pay dividends. Bharti Airtel created a new paradigm in the telecom industry by outsourcing its networks, customer service and much else, focusing on brand building and customer acquisition. Companies around the world have adopted the model now, including Sprint in the US.

( India’s indigenous and world’s cheapest car- Nano)

India’s exports are less than a quarter of its GDP and net exports (exports less imports) are negative. This means that Indian producers depend mostly on the domestic market, making them, for the most part, less vulnerable to economic trouble abroad. The information technology sector, of course, is a major exception.

India depends, again, for the most part on domestic savings for capital formation. Yet foreign capital inflows do play a significant role in the Indian economy: it stimulates the stock market, reduces the cost of debt for large firms with access to global sources, feeds a veritable frenzy of entrepreneurship taking good advantage of venture capital and private equity and, in general, meets the gap between investment and domestic financial savings (a large part of domestic household savings are in a physical form and not available for investment by anyone other than the saver concerned). India’s fast growth attracts a lot of foreign capital. As significantly Indian industry’s outward investment, is also growing proportionately, with India for example, emerging as the second largest foreign investor in London.

India maintains control on foreign debt (total debt stock is roughly equal to total foreign currency assets), its debt service ratio is low (a healthy 5%), the share of short term debt in total debt is about 18%, even as the share of concessional debt in the total has come down by half to about 18% from the early years of the decade. So, foreign creditors have little reason to be concerned by the recent widening of India’s current account deficit, stubbornly below 2% of GDP and even negative in the early part of the decade.

India also regulates foreign investment in some crucial sectors of the economy - banking, insurance, retail, the media, telecom, and so on. The historic record is that most such caps are gradually raised and finally abandoned, over time. Such caution has served India well and it is unlikely that India would be rushed off its feet by any foreign wooer of its domestic opportunities.

For quite some time, it was fashionable to see India as a nation specialising in high-end services, particularly those related to information technology. No more. There is a new confidence in Indian manufacturing - only about 15% of outward investment from India are related to information technology. The world’s lowest cost car was conceptualised, engineered and manufactured in India, not any everywhere else. So, while services still grow faster than industry and account for about 54% of the output, manufacturing is getting only better - in volume and in sophistication.

( ITC Green building, Gurgoan)

Like any other fast developing major economy, India has to further accelerate its growth rate while being conscious of environmental aspect. India’s carbon footprint is small, per capita. The country has also committed to reduce the emission intensity of its growth - units of emissions per unit of additional output - by more than a fifth over the next one and a half decades. Green energy, green buildings, green habitats, greater energy efficient factories, offices and commercial places - these are daunting challenges and, simultaneously, goldmines of opportunity for high-tech firms around the world.

As India grows in size and clout, it will inevitably have an impact on the correlation of forces in the world. While India has no aggressive designs on foreign lands, it is inevitable that India’s defence forces should become stronger and more sophisticated. Larger procurement of advanced equipment leads on to offsets, joint ventures, domestic manufacture and eventually, India-based research and development, drawing on the tens of thousands of engineers who come out of India’s colleges every year, the best among them being world class.

Visitors to India are astounded at the manner in which the physical landscape keeps changing, from one visit to the next. The change that is even more striking than the new airports, roads, metro rail and high-rises that keep getting added is the new mood of optimism that India’s young people, the largest pool of youth in the world, have about themselves and the future.

Important Points Of Food Security

For increasing the availability of food several steps have been taken such as the following:

• Rashtriya Krishi Vikas Yojana with an outlay of Rs. 25000 crore.
• Naitonal Food Security Mission with an outlay of about Rs. 6,000 crore.
• National Horticulture Mission with an outlay of Rs 10,363.46 crore during the 11 the Five-Year Plan period.
• There are many other schemes dealing with different areas of production, such as soil healthcare, crop protection, and irrigation. Inspite of all these schemes our agriculture is still very vulnerable to the behaviour of the monsoon.
• Our country faces the challenge of producing food not only for 1.2 billion people, but also for about a billion farm animals.
• Nearly seventy per cent of our population lives in villages and their main sources of livelihood are crop and animal husbandry, fisheries, agro-forestry, agro-processing and agri-business
• The National Commission on Farmers (2004-06) has provided a detailed strategy for the agricultural progress of India.
• Food is the first among the hierarchical needs of a human being. Therefore, food security should have the first charge on the available financial resources.
• A National Food Security Act giving legal rights to food can be implemented only by attending to the safe storage of both grains and perishable commodities like fruits, vegetables and milk.

Indian Agri-Business:

Facts and Figure:-

1. 2nd largest arable land (184 million hectares) in the world
2. Largest irrigated land (55 million hectares) in the world
3. Largest producer of wheat (72 million tones), accounting for nearly 15% of global wheat production
4. Largest producer of pulses (15 million tones), accounting for nearly 21 % of global pulse production
5. Largest producer of milk (90 million tones)
6. Largest producer and exporter of spices
7. Largest producer of tea, accounting for nearly 28% of the global tea production
8. 2nd largest producer of rice (92 million tones), accounting for nearly 22% of global rice production.
9. Largest producer of world's best basmati rice
10. 2nd largest producer of fruits (50 million tones) and vegetables (100 million tones)
11. 2nd largest producer of sugarcane (296 million tones), accounting for nearly 21 % of the global sugarcane production
12. 3rd largest producer of coarse grains (31 million tones), including maize, accounting for nearly 4% of the global coarse grain production
13. 3rd largest producer of edible oilseeds (25 million tones), accounting for nearly 7% of the global oilseed production
14. Largest livestock population
15. India produces 6.3 million tones offish (3rd largest in the world) Meat production is estimated at 2.3 million tones.

Progress under the national horticulture Mission:

• Between 2005-06 to 2009-10, 2199 new nurseries were setup, additional area of about 16.56 lakh hectares was brought under new gardens of various horticultural crops and 2.78 lakh hectare of old and senile orchards was rejuvenated under the national Horticulture Mission. An area of 1.37 lakh hectare was covered under organic farming. Integrated Nutrient Management (INM) and Integrated Pest Management (IPM) were adopted in an area of 7.48 lakh hectares apart from setting up of 307 INM/IPM infrastructure which include 66 disease forecasting units, 78 bio control labs, 95 plant health clinics and 68 leaf/tissue analysis labs. Under Post Harvest Management Component, funds have been provided for setting up of 1328 pack houses, 343 cold storage units, 5 CA storage, 30 refrigerated vans, and 346 mobile/primary processing units. To ensure proper handling and marketing of horticulture produce, funds have been provided for setting up 32 whole sale markets and 298 rural markets. 7.74lakh farmers have been trained under various horticultural activities.
• A web enabled progress monitoring system has been put in place to monitor progress under NHM on monthly basis. The system enables online uploading of physical and financial progress for each of the activities approved for implementation as per the Annual Action Plan at the state level as well as at the district level on the NHM web site. The System also facilitates the generation of different types of reports at national, state and district levels for the purpose of analysis and review.
• AGRICULTURE in India still accounts for 52% of employment .12 % of national export and 17.8% of GDP.

Important Points Of Inflation

The causative factors at the initial stages were the sudden boom in global commodity--12rices which transmitted to the Indian economy.

• The gradual accumulation of steam in inflation was now again led by commodity prices, but this time the push came from domestic causes. The government to its credit over the last few years has pumped in additional purchasing power in rural India through the NREGA and other better directed schemes. So the impoverished ends of villages are now demanding a better life chance, meaning more food. This is one of the reasons why food inflation refuses to go away.

Inflation Basics:

Inflation may be caused due to several economic factors:

• When the government of a country prints money in excess, prices increase as there is too much money in circulation chasing too few goods.
• Increase in production and labor costs have a direct impact on the price of the final product, resulting in inflation.
• When countries borrow money they have to cope with the interest burden. This interest burden may result in inflation.
• High taxes on consumer products can also lead to inflation.
• Demand pull inflation is when the economy demands more goods and services than what is produced.
• Cost push inflation or supply shock inflation is when non availability of a commodity would lead to increase in prices.

The problems due to inflation would be:

• When the balance between supply and demand goes out of control, consumers could change their buying habits forcing manufacturers to cut down production.
• Inflation can create major problems in the economy. Price increase can worsen poverty, affecting low income household,
• Inflation creates economic uncertainty and is a dampener to the investment climate, slowing growth and finally reducing savings and thereby cutting consumption.
• The producers would not be able to control the cost of raw material and labor and hence the price of the final product. This could result in less profit or in some extreme case no profit, forcing them out of business.
• Manufacturers would not have an incentive to invest in new equipment and new technology.
• Uncertainty would force people to withdraw money from the bank and convert it into product with long lasting value like gold, artifacts.

Migration Food Inflation

• Food commodity driven inflation has become a persistent phenomenon and the corrective measures involve concerted efforts over in extended period of time with public investments already hiked substantially in the recent years, there is now a need to pay attention to improve efficiency of such investment As area available agriculture and food production is going to shrink.
• Focus should be given enhancing the productivity of crops to keep pace with growing demand for food.

1. Focus should be given on enhancing the productivity of crops to keep pace with growing demand for food.
2. Overhaulting the PDS is another corrective measure which can be undertaken in the medium term.
3. Piling up of food grains in the granary beyond the stipulated levels is an avoidable proposition. Resorting to open market sales at specific intervals would help in both relieving the granary of excess stocks and checking the build up of rices in the domestic market simmultaneously.
4. It is also logical to widen the scope of PDS by including more essential commodities like pulses, edible oils and sugar, to provide some protection to the poor against food inflation.
5. However, it is not clear wheather expansion in PDS coverage to inflation or it is adding to food inflation because of rising in subsidies and leakages in our delivery system.
6. Resorting to food imports can help in checking domestic prices to make up the supply shortfalls, provided imports are plannes on time. Our past experiences with wheat imports turning costlier with international prices moving up with India's decision to go for import. We need to develop a system for getting advance information on demand and supply imbalances and tune our trade policy accordingly.
7. As an immediate remedy, all steps to prevent hoarding and speculation in food commodities have to be expedited.
8. The States should be proactive to forego some taxes on account of interstate transport of commodities at least for the time being till the prices of inputs used in agriculture.

Trade Negotiators given Guidelines

The Trade and Economic Relations Committee held its 17th meeting on the 29th April 2011 under the chairmanship of the Prime Minister.

The committee reviewed the status of the India-European Union Bilateral Trade and Investment Agreement and discussed the various issues involved in the negotiations. It was observed that concern has been raised by various quarters about the Indian stand on issues on Intellectual Property Rights, especially in the context of the Indian Pharma products. The Prime Minister firmly directed that the Indian side shall not take on any obligation beyond TRIPS/ Domestic Law.

The Committee discussed proposals for two new economic engagements through the mechanism of Free Trade Agreements with Australia and with the Common Market of Eastern and Southern Africa (COMESA). It was apprised that the Joint Study Group constituted for studying the feasibility of a FTA with Australia has observed that India and Australia produce highly competitive and largely complementary goods for export to international markets. While economic activity in each country has led to substantial growth in bilateral goods trade, tariffs and non-tariff barriers continue to raise the cost of imports, imposing implicit taxes on businesses and consumers alike. A comprehensive FT A between Australia and India would benefit both countries and such liberalization would provide impetus to economic activity and economic welfare in each economy. The Committee accorded approval to the launch of the FTA negotiations with Australia.

The TERC also considered the proposal for establishing a Joint Study Group to examine the policy framework for enhancing the bilateral economic relationship between India and COMESA and assessing the feasibility of a comprehensive FTA/PTA covering trade in goods, services and investment and accorded its approval for the same. It was observed that bilateral trade between India and COMESA has shown very good growth during the last five years and the trade balance continues to be in our favour.

Electronic Fund Transfer

Meaning of Electronic Fund Transfer

You would surely buy anything online. At that time, you pay with your credit or debit card. Actually, at that time, you are doing electronic funds transfer. In simple words, electronic funds transfer means the online and computer transfer of money from one bank account to other bank account. According to EFT Act of USA, bank is not responsible for unauthorized withdrawals, if EFT card is lost or stolen by customer. But if financial institution fails to transfer fund correctly as per the term and conditions of consumer, that financial institution is responsible for paying  penalty plus that short amount.

Advantage of Electronic Funds Transfer


 Main benefit of EFT is to pay or get payment fastly. Multiple financial institution may deal with the help of EFT. Use of every bank's ATM can be possible due to EFT system. Direct deposit, direct debit, wire transfer and online banking are the main methods of electronic fund transfer. One of the largest companies that offer EFT service is  Western Union.

Disadvantage of Electronic Funds Transfer

Western Union. $100 billion of which goes anonymously to families in developing countries. Although Western Union keeps information about senders and receivers, some transactions can be done essentially anonymously, for the receiver is not always required to show identification.

Financial Inclusion

Financial inclusion is finance term. This term is used in banking sector. If any bank provides his banking services at very low cost to the poor people of any country. Then these financial services are called financial inclusion. This finance term is becoming so popular because every bank is doing some activities of financial inclusion.

We can include following banking services as financial inclusion:-

• Provide the facility to open free saving account to rural customers.
• Provide loan at very low rate to poor rural peoples of India.

Financial inclusion term is also used in govt. social work. Providing facilities free of cost to the poor section for upgrading them . Govt. of India is doing financial inclusion activities by operating Sarva Shiksha Abhiyan, Rural Employment Guarantee Scheme.

Objectives of Financial inclusion

According to UN the main objectives of financial inclusion are as follows:
Financial products like saving, short and long term credit, leasing and factoring, mortgages, insurance, pensions should provide to poor people at lower cost.

  Importance of Financial Inclusion:

1. For Reaching every Customer of Rural Sector : With the help of financial inclusion movement, RBI wants that every bank should reach to every customer at rural area.

2. Micro credit during emergency : At the time of emergency, bank should open their doors for micro credit, It can be only possible, if bank will use financial inclusion practically. Otherwise, bank will just become a middle man whose sole aim is to earn interest. But today, with financial inclusion, it can become just like NGO and can work with 3.3 millions NGO of India for progress of India.

3. Electronic fund transfer at Village Level : Now, revolution of mobile has reach up to village. With financial inclusion movement, banks has to start all ATM services and e-banking services at village level. So, better understanding of financial inclusion is must.

ECONOMY RELATED TERMS

Union Budget
Under Article 112 of the constitution, a statement of estimated receipts and expenditure, called the ‘Annual Financial Statement’, has to be placed before Parliament for each financial year.

This Statement is the main budget document. It is an estimate of the Government’s revenue and expenditure at the end of a fiscal year, which runs from April 1 to March 31.

A Union Budget is the most comprehensive report of the Government’s finances, in which revenues from all sources and outlays to all activities are consolidated. The budget also contains estimates of the Government’s accounts for the next fiscal, called budgeted
estimates.

Capital BudgetThe capital budget consists of capital receipts and payments. Capital receipts are Government loans raised from the public, Government borrowings from the Reserve Bank and treasury bills, divestment of equity holding in public sector enterprises, loans received from foreign Governments and bodies, securities against small savings, State provident funds, and special deposits.

Capital payments refer to capital expenditures on construction of capital projects and acquisition of assets like land, buildings machinery and equipment.

It also includes investments in shares, and loans and advances granted by the Central Government to State Governments, Government companies, corporations and other parties.

Revenue Budget
The revenue budget consists of revenue receipts of the Government and its expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the Government levies.

The non-tax revenue sources include interest on loans, dividend on investments etc.

Revenue expenditure is the expenditure incurred on the day-to-day running of the Government and its various departments, and for services that it provides.

It also includes interest on its borrowings, subsidies and grants given to State Governments and other parties.

This expenditure does not result in the creation of assets. In case the difference between revenue receipts and revenue expenditure is negative, there is a revenue deficit.

It shows the shortfall of the Government’s current receipts over current expenditure. If the capital expenditure and capital receipts are taken into account too, there will be a gap between the receipts and expenditure in a year. This gap constitutes the overall budgetary deficit, and it is covered by issuing 91-day Treasury Bills, mostly held by the Reserve Bank.

Revenue surplus is the excess of revenue receipts over revenue expenditure.

Fiscal Deficit
This is the gap between the Government’s total spending and the sum of its revenue receipts and non-debt capital receipts.

It represents the total amount of borrowed funds required by the Government to completely meet its expenditure. The gap is bridged through additional borrowing from the Reserve Bank of India, issuing Government securities etc. Fiscal deficit is one of the major contributors to inflation.

Primary Deficit
The primary deficit is the fiscal deficit minus interest payments. It tells how much of the Government’s borrowings are going towards meeting expenses other than interest payments.

Finance Bill
The Government proposals for the levy of new taxes, alterations in the present tax structure, or continuance of the current tax structure are placed before the Parliament in this bill. The bill contains amendments proposed to direct and indirect taxes.

Direct and Indirect Taxes
Direct taxes are levied on the incomes of individuals and corporates. For example, income tax, corporate tax etc. Indirect taxes are paid by consumers when they buy goods and services. These include excise duty, customs duty etc.

Central plan outlay : 

It refers to the allocation of monetary resources among the different sectors in the economy and the ministries of the Government.

Public account : 

The Government acts like a banker for transactions relating to provident funds, small savings collection etc.

The funds that the Government thus receives from its bank like operations are kept in the public account, from which the related disbursements are made.

These funds do not belong to the Government and have to be paid back to the persons and authorities who have deposited them.

Ad-valorem duties : 

These are the duties determined as a certain percentage of the price of products.

Balance of payments : 

Balance of payments is the difference between the demand for, and supply of, a country’s currency on the foreign exchange market.

Budget estimates : 

It is an estimate of fiscal and revenue deficits for the year. The term is associated with the estimates of the Centre’s spending during the financial year and the income received through taxes.

Capital receipt : 

Loans raised by the Centre from the market. Government borrowings from the Reserve Bank and other parties, sale of Treasury Bills, and loans received from foreign governments form a part of capital receipt.

Other items that also fall under this category include recovery of loans granted by the Centre to State Governments and proceeds from disinvestments of Government stake in public sector undertakings.

Consolidated fund : 

Under this, the Government pools all its funds together.

It includes all Government revenues, loans raised, and recoveries of loans granted.

All expenditure of the Government is incurred from the consolidated fund and no amount can be withdrawn from the fund without authorisation of the Parliament.

Contingency fund : 

This is a fund used for meeting emergencies where the Government cannot wait for an authorisation of the Parliament. The Government subsequently obtains Parliamentary approval for the expenditure. The amount spent from the contingency fund is returned to the fund later.

Monetary policy : 

This comprises actions taken by the central bank to regulate the level of money or liquidity in the economy, or change the interest rates.

Active MarketThis is a term used by stock exchange which specifies the particular stock or share which deals in frequent and regular transactions. It helps the buyers to obtain reasonably large amounts at any time.

Administered Price
The administrative body e.g., the government a marketing board or a trading group determines this price. The competitive market force are not entitled to determine this price. The government fixes a price in accordance with demand supply portion in the market.

Ad-valorem Tax
Ad-valorem tax is a kind of indirect tax in which goods are taxed by their values. In the case of ad-volorem tax, the tax amount is calculated as the proportion of the price of the goods. Value added Tax (VAT) is an ad-volorem Tax.

Advanced Countries
Advanced countries are countries which are industrially advanced, having high national and per capita income and ensure high rate of capital formation. These countries possess highly developed infrastructure and apply most updated and advanced technical know-how in their productive activities. A strong and well organised financial structure is found in these advanced countries.

Amalgamation
It means ‘merger’. As and when necessity arises two or more companies are merged into a large organisation. This merger takes place in order to effect economies, reduce competition and capture market. The old firms completely lose their identity when the merger takes place.

Appreciation
Appreciation means an increase in the value of something e.g., stock of raw materials or manufactured goods. It also includes an increase in the traded value of a currency. It is the antonym of Depreciation. When the prices rise due to inflation, appreciation may occur. It causes scarcity or increase in earning power.

Arbitrage
When a person performs functions of middle man and buys and sells goods at a particular time to cash the price differences of two markets, this action is termed as arbitrage. Purchases are made in the market where price is low and at the same time, goods are sold in other market where the price are high. Thus the middleman earns profit due to price difference in two markets.

Arbitration
Where there is an industrial dispute, the Arbitration comes to the force. The judgement is given by the Arbitrator. Both the parties have to accept and honour the Arbitration. Arbitration is the settlement of labour disputes that takes place between employer and the employees.

Auction
When a commodity is sold by auction, the bids are made by the buyers. Whose ever makes the highest bid, gets the commodity which is being sold. The buyers make the bid
taking into consideration the quality and quantity of the commodity.

Autarchy
If a country is self-sufficient, it does not require the imports for the country. Autarchy is an indicator of self-sufficiency. It means that the country itself can satisfy the needs of its population without making imports from other countries.

Automation
Automation means the use of machinery & technology to replace the labour’s work. Automation increases the demand of skilled workers. Unskilled and semiskilled workers are reduced as a result of automation.

Balanced Budget
When the total revenue of the government exactly equals the total expenditure incurred by the government, the budget becomes a balanced budget. But it is a conservative view point. In present days, the welfare government has to regulate a number of economic and social activities which increase the expenditure burden on the government and results in deficit budget.

Balance of Payment
Balance of payment of a country is a systematic record of all economic transactions completed between its residents and the residents of remaining world during a year. In other words, the balance of payment shows the relationship between the one country's total payment to all other countries and its total receipts from them. Balance of payment is a comprehensive term which includes both visible and invisible items. Balance of payment not only include visible export and imports but also invisible trade like shipping, banking, insurance, tourism, royalty, payments of interest on foreign debts.

Balance of Trade
Balance of trade refers to the total value of a country's export commodities and total value of imports commodities. Thus balance of trade includes only visible trade i.e., movement of goods (exports and imports of goods). Balance of trade is a part of Balance of payment statement.

Balance Sheet
Balance sheet is a statement showing the assets and liabilities of a business at a certain date. Balance sheet helps in estimating the real financial situation of a firm.

Bank
Bank is a financial institution. It accepts funds on current and deposit accounts. It also lends money. The bank pays the cheques drawn by customers against current and deposits accounts. The bank is a trader that deals in money and credit.

Bank Draft
Banker's draft is a negotiable claim drawn upon a bank. Drafts are as good as cash. The drafts cannot be returned and unpaid. Draft is issued when a customer shows his unwillingness to accept cheque in payment for his services or mercantile goods. Bank Draft is safer than a cheque.

Bank Rate
Bank Rate is the rate of discount at which the central bank of the country discounts first class bills. It is the rate of interest at which the central bank lends money to the lower banking institutions. Bank rate is a direct quantitative method of credit control in the economy.

Bilateralism
It implies an agreement between two countries to extend to each other specific privileges in their international trade which are not extended to others.

Birth Rate
Birth Rate (or Crude Birth Rate) is number of the births per thousand of the population during a period, usually a year. Only live births are included in the calculation of birth rate.

Black Money
It is unaccounted money which is concealed from tax authorities. All illegal economic activities are dealt with this black Money. Hawala market has deep roots with this black money. Black money creates parallel economy. It puts an adverse pressure on equitable distribution of wealth and income in the economy.

Blue Chip
It is concerned with such equity shares whose purchase is extremely safe. It is a safe investment. It does not involve any risk.

Blue Collar Jobs
These Jobs are concerned with factory. Persons who are unskilled and depend upon manual jobs that require physical strain on human muscle are said to be engaged in Blue Collar Jobs. In the age of machinery, such Jobs are on the decline these days.

Brain-Drain
It means the drift of intellectuals of a country to another country. Scientists, doctors and technology experts generally go to other prominent countries of the world to better their lot and earn huge sums of money. This Brain-Drain deprives a country of its genius and capabilities.

Bridge Loan
A loan made by a bank for a short period to make up for a temporary shortage of cash. On the part of borrower, mostly the companies for example, a business organization wants to install a new company with new equipments etc. while his present installed company / equipments etc. are not yet disposed off. Bridge loan covers this period between the buying the new and disposing of the old one.

Budget
It is a document containing a preliminary approved plan of public revenue and public expenditure. It is a statement of the estimated receipt and expenses during a fixed period, it is a comparative table giving the accounts of the receipts to be realized and of the expenses to be incurred.

Budget Deficit
Budget may take a shape of deficit when the public revenue falls short to public expenditure. Budget deficit is the difference between the estimated public expenditure and public revenue. The government meets this deficit by way of printing new currency or by borrowing.

Bull
Bull is that type of speculator who gains with the rise in prices of shares and stocks. He buys share or commodities in anticipation of rising prices and sells them later at a profit.

Bull Market
It is a market where the speculators buy shares or commodities in anticipation of rising prices. This market enables the speculators to resale such shares and make a profit.

Buoyancy
When the government fails to check inflation, it raises income tax and the corporate tax. Such a tax is called Buoyancy. It concerns with the revenue from taxation in the period of inflation.

Business Cycle
Business cycle (also known as trade cycle) are species of fluctuations in the economic activity of organised communities. It is composed of period of good trade characterised
by rising prices and low unemployment, alternating with period of bad trade characterised by falling prices and high unemployment. Every trade cycle have five different subphases–depression, recovery, full employment, prosperity (boom) and recession.

Call Money
Call money is in the form of loans and advances which are payable on demand or within the number of days specified for the purpose.

Capital Budgeting
Capital budgeting represents the process of preparing budget for a period of a year or even for several years allocating capital outlays for the various investment projects. In other words, it is the process of budgeting capital expenditure by means of an annual or longer period capital budget.

Capital-labour Ratio
Latest models of machinery and equipment raise the labour efficiency and the output is maximized. Capitallabour ratio is the amount of capital against the given labours that a firm employs. Capital-labour ratio is the ratio of capital to labour.

Capital Market
Capital market is the market which gives medium term and long term loans. It is different from money market which deals only in short term loans.

Capitalism
Capitalism is an economic system in which all means of production are owned by private individuals Selfprofit motive is the guiding feature for all the economic activates under capitalism. Under pure capitalism system economic conditions are regulated solely by free market forces. This system is based on ‘Laissez-faire system’ i.e., no state intervention. Sovereignty of consumer prevails in this system. Consumer behaves like a king under capitalism.

Cash Reserve Ratio (CRR)
The commercial banks are required to keep a certain amount of cash reserves at the central bank. This percentage amount is called CRR. It influences the commercial bank’s volume of credit because variation in CRR affects the liquidity position of the banks and hence their ability to lend.

Census
Census gives us estimates of population. Census is of great economic importance for the country. It tells us the rate at which the total population is increasing among different age groups. In India census is done after every 10 years. The latest census in India has been done in 2001.

Central Bank
Central Bank may be defined as the apex barking and monetary institution whose main function is to control, regulate and stabilize the banking and the monetary system of the country in the national interest.

Cheque
Cheque is an order in writing issued by the drawer to a bank. If the customer has sufficient amount in his account, the cheque is paid by the bank. Cheques are used in place of cash money.

Clearing Bank
Clearing bank is one which settles the debits and credits of the commercial banks. Even of the cash balances are lesser, clearing bank facilitates banking operation of the commercial bank.

Clearing House
Clearing house is an institution which helps to settle the mutual indebtedness that occurs among the members of its organisation.

Closed Economy
Closed economy refers to the economy having no foreign trade (i.e., export and import). Such economies depend exclusively on their own internal domestic resources and have
no dependence on outside world.

Collusion
Producers of an industry reduce competition among themselves to raise their profits. They fix the price themselves with a clear understanding in this regard. This understanding among different firms is called collusion.

Coinage
Art and practice of making coins is called coinage. The metal is melted and moulded to shape into a coin. The coinage is a medium of exchange (money).

Collectivism
Collectivism is a belief that nation's interest is superior to individual interest. This is the collective thinking of the society and polity national leaders and also communist opine the theory of collection.

Commercial Bank
Commercial Bank is an institution of finance. It deals with the banking services through its branches in whole of the country. Operation of current accounts, deposits, granting of loans to individuals and companies etc. are various functions of the commercial bank.

Communism
Communism is a political and economic system in which the state makes the major economic decision State owns the bulk of capital assets. Responsibility for production and distribution lies with the state in this system.

Core Sector
Economy needs basic infrastructure for accelerating development. Development of infrastructure industries like cement, iron and steel, petroleum, heavy machinery etc. can only ensure the development of the economy as a whole. Such industries are core sector industries.

Corporation Tax
It is a tax on company's profit. It is a direct tax which is calculated on profits after interest payments and allowance (i.e., Capital allowance) have been deducted but before dividends are allowed for.

Cost-push Inflation
It arises due to an increase in production cost. Such type of inflation is caused by three factors : (i) an increase in wages, (ii) an increase in the profit margin and (iii) imposition of heavy taxation.

Credit Rationing
Credit rationing takes place when the banks discriminates between the borrowers. Credit rationing empowers the bank to lend to some and to refuse to lend to others. In this way credit rationing restricts lending on the part of bank.

Credit Squeeze
Monetary authorities restrict credit as and when required. This credit restriction is called credit squeeze. Monetary authorities adopt the policy of credit squeeze to control inflationary pressure in the economy.

Custom Duty
Custom duty is a duty that is imposed on the products received from exporting nations of the world. It is also called protective duty as it protects the home industries.

Cyclical Unemployment
It is that phase of unemployment which appears due to the occurrence of the downward phase of the trade cycle. Such an employment is reduced or eliminated when the business
cycle turns up again.

Dear Money
Dear money is that money which can only be borrowed at a high rate of interest. In dear money policy, bank rate and other rates of interest are high and as a result borrowing becomes expensive. Dear money policy is deliberate policy which is adopted by the monetary authorities to check inflation in the economy.

Death Duty
It is a direct tax which is imposed on the estate of deceased person. Death duty or Death Tax is a form of personal tax on property which is levied when property passes from one person to other at the time of death of the former.

Death Rate
Death rate signifies the number of deaths in a year per thousand of the population. It is mostly known as crude death rate. Life expectancy is important determinant of death rate.
A country having high life expectancy will have a high crude death rate.

Decentralisation
Decentralisation means the establishment of various unit of the same industry at different places. Large scale organisation or industry can not be run at one particular place or territory. In order to increase the efficiency of the industry, various units at different places are located.

Debt Service (Total)
The sum of principal repayments and interest actually paid in foreign currency, goods and services on longterm debt (having maturity of more than one year), interest paid on shortterm debt and repayments to IMF.

Deficit Financing
It is a practice resorted to by modern government of spending more money than it receives in revenue. It is a policy of bridging a deficit between governments expenditure and revenue. Deliberately budgeting for a deficit is called deficit financing. This practice was popularised by Prof. J. M. Keynes to deal with the depression and unemployment situations and to stimulate economic activity. Deficit financing, though having inflationary effects, has now become a common practice in all countries.

Deflation
Deflation is the reverse case of inflation. Deflation is that state of falling prices which occurs at that time when the output of goods and services increases more rapidly than the volume of money in the economy. In the deflation the general price level falls and the value of money rises.

Devaluation
The loss of value of currency of a country relative to other foreign currency is known as devaluation. Devaluation is a process in which the government deliberately cheapens the exchange value of its own currency in terms of other currency by giving it a lower exchange value. Devaluation is used for improving, the balance of payment situation in the country.

Direct Tax
A tax is said to be a direct tax when it is not intended to be shifted to anybody else. The person who pays it in the first instance is also excepted to bear it. Thus the impact and incidence of direct tax fall on the same person shifting of direct tax is not possible Income Tax is a example of direct tax.

Disinflation
It refers to a process of bringing down prices moderately from their high level without any adverse impact on production and employment. Thus, disinflation is an anti-inflationary measure.

Dissaving
Dissaving occurs when expenditure exceeds income. Raising of loans or utilization of past accumulated savings takes place in such eventuality.

Dividend
Dividend is the amount which the company distributes to shareholders when the profits of the company are calculated by the board of directors.

Economic Integration
Economic integration appears when two or more nations coordinate themselves and their economies are linked up. It may exhibit itself in the form of free trade area or a full economic union. EEC is an example of economic integration.

Engel's Law
This law was formulated by Ernst Engel. This law states that, with given taste and preference, the portion of income spend on food diminishes as income increases. According to this law, smaller a person's income, the greater the proportion of it that he will spend on food and vice versa.

Estate Duty
It is a tax which is levied on the estate of a decreased person. It is also known as death duty. The ownership of state changes hands only after the payments of the estate duty. It is an progressive tax in nature.

Excise Duty
It is a tax which is imposed on certain indigenous production (e.g., petroleum products, cigarettes etc.) of the country. Excise duty may be imposed either to raise revenue or to check the consumption of the commodities on which they are imposed. Excise duty is progressive in nature.

Face Value
It refers to that normal value of coin at which the coin circulates and is accepted in the discharge of debit or obligation. Broadly speaking, the face value refers to domination stamped on a coin / or documents when it is issued. In securities, it refers to par value.

Fascism
It is a form of political system. In it every economic consideration rests on one criterion—the increase in the people's standard of living. It also lays emphasis on military
strength and prestige of the country. It is the extreme nationalism and the ultimate goal is self-sufficiency.

Federal Economy
It refers to a federation which is an association of two and more states. A federal state is a union of state in which authority is divided between the federal (or central) government and the state governments. In a federal economy both the centre and the states are independent in the exercise of this authority.

Fiduciary Issue
Generally bank-note are backed by gold. But when they are not backed by gold and government securities replace gold, it is called fiduciary issue. Such fiduciary issue results in inflation.

Fertility Rate
The term fertility refers to the actual bearing of children or ‘occurrence of births’. Fertility rate measures the average number of the live births per 1000 women. This rate is one of the most important and useful aids to population projection. It helps in assessing population trends in the economy.

Fiscal Policy
Fiscal policy is that part of government economic policy which deals with taxation, expenditure, borrowing, and the management of public debt in the economy. Fiscal policy primarily concerns itself with the flow of funds in the economy. Fiscal policy primarily concerns itself with the flow of funds in the economy. It exerts a very powerful influence on the working of economy as a whole.

GEM
GEM (Gender Empowerment Measure) is a composite index measuring gender inequality in three basic dimensions of empowerment–economic participation and decision making, political participation and decision making, and power over economic resources.

GDI
GDI (Gender Related Development Index) is a composite index measuring average achievement in the three basic dimensions captured in the human development index–a long and healthy life, knowledge and a decent standard of living–adjusted to account for inequalities between men and women.

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 increases and
the area between the curve and 45line becomes larger.
The Gini-coefficient is measured as—
G =Area between Lorenz Curve & 45Line/Area above the 45Line

Giffin Goods
Giffin goods have the positive relationship between price and quantity demanded and as a result demand curve of Giffin goods slopes upward from left to right. This phenomenon was first observed by Sir Robert Giffin in relation to the demand for bread by poor labours.

Gresham's Law
“Bad money (if not limited in quantity) drives good money out of circulation”—This statement was given by Sir Thomas Gresham, the economic Adviser of Queen Elizabeth. This law states that people always want to hoard good money and spend bad money when two forms of money are in circulation at the same time.

Gross Domestic Product (GDP)
It is the money value of all final goods and services produced within the geographical boundaries of the country during a given period of time (usually a year). GDP can be calculated both at current prices and at constant prices. If we add net factor income from abroad to the GDP, we get ‘Gross National Product’ (GNP).

Gross National Product (GNP)
It refers to the money value of total output or production of final goods and services produced by the nationals of a country during a given period of time, generally a year.

Gross National Product Deflator
It is a Price Index Number used to correct the money value of Gross National Product (GNP) for price changes so as to isolate the changes which have taken place in the physical output of goods and services.

Guild Socialism
This form of socialism accepts the leadership of artisans. The operation of the whole economy specially the management and control of industries lies in the hands of artisans Socialism established by artisans is termed a Guild Socialism.

HDI
HDI (Human Development Index) is a composite index measuring average achievement in three basic dimensions of human life–a long and healthy life, knowledge and a decent standard of living.

Import Duty
Import duty is a tax on imports imposed on an ad-valorem basis i.e., fixed in the form of a percentage on the value of the commodity imported.

Indirect Tax
Indirect tax is that tax which is levied on goods or services produced or purchased. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense to another.

Inflation
A situation of a steady and sustained rise in general prices is usually known as inflation. Inflation is a state in which the value of money is falling i.e., prices are rising.

Joint Demand
Joint demand appears in case of complementary goods. When two commodities are complementary to one another and cannot be used separately, they have joint demand. Bread and butter, sugar and tea, pen and ink are a few examples of joint demand. In joint demand a change in demand of one commodity bring about the proportionate change in demand for the other.

Joint Sector
When a sector is jointly owned, managed and run by both public and private sector, it is called joint sector. This sector indicates the partnership between the two i.e., public and private sector.

Labour Union
Labour union represents that organisation of workers which works for improving working condition of labours and also for raising their wage by adopting ‘collective bargaining’ measures with the management of the industry in particular.

Laffer Curve
This curve is given by American economist Prof. Arthur Laffer. It represents relationship between total tax revenue and corresponding tax rates.

Laissez Faire
It is a French word meaning ‘non-interference’. This doctrine was popularised by classical economists who gave the view that government should interfere as little as possible in the economic activities of the individuals.

Life Expectancy at Birth
The number of years a newborn infant would live if prevailing pattern of age specific mortality rates at the time of birth were to stay the same throughout the child’s life.

Liquidation
It refers to the termination (or winding up) of a registered company. Liquidation takes place because of company's insolvency. In liquidation, assets are turned into cash for settling outstanding debts and for apportioning the balance, if any, amongst the owners.

Liquidity
Assets which can easily be converted into cash money are said to have liquidity. Land does not possess liquidity at it takes longer time to get converted into cash.

Liquidity Ratio
The commercial banks under banking regulations have to maintain a certain specified proportion of their total deposits of various categories in liquid assets. This maintainable proportion is called liquidity ratio.

Lock-out
Lock-out refers to such a situation when the management does not permit the workers to work unless they agree to accept the employer's term. Lock-out is the closing of work by the management for an uncertain period of time to put pressure on the labour union. It is an action by the employer equivalent to a strike by employees.

Lorentz Curve
This curve shows the degree of inequalities of a frequency distribution in a graphical manner. It is a curve on a graph which shows the cumulative proportion of a statistical population against this cumulative share of some characteristic. This curve is commonly used to depict income distribution showing the cumulative percentage of people from the poorest up and their cumulative share of national income.

Lump Sum Tax
Lump sum tax is a fixed amount which has imperative nature irrespective of the income level. This tax is not equitable in nature.

Merit Goods
Merit goods refer those goods that are very essential to the society as a whole and hence the government ensures their availability to all consumers, regardless of their ability to pay to reasonable price.

Mixed Economy
It refers to that economic system in which both private and public sector co-exists. Indian economy is an example of a mixed economy.

Monetary Policy
Monetary policy comprises all measures applied by the monetary authorities with a view to produce a deliberate impact on the nature and volume of money so as to achieve the objectives of general economic policy. It aims at regulating the flow of currency, credit and other money substitutes in an economy with a view to affect the total stock of such assets as well as to influence the demand of the community for such assets.

Monetary Reforms
When a new currency is introduced in a country due to hyperinflation or due to a deliberate policy measure (such as decimalization) it is termed as monetary reform.

Monopoly
Monopoly refers to that market structure where there is only one seller in the market who controls the entire market supply and no substitute of the product is available in the market.

Monopsony
Monopsony is that market situation in which there is only one single buyer of the product in the market. In other word, ‘buyer's monopoly’ is termed as monopsony.

Multinational Company
It is a large scale company which has its production base in several countries and the bulk of the production is produced in outside nations. This company produces more overseas
than they do in its parent country. Increased trade and economies of scale have encouraged such type of companies in the recent years.

National Income
In the simplest way it can be defined as ‘factor income accruing to the national residents of a country.’ It is the sum of domestic factor income and net factor income earned from abroad. Net national product at factor cost is called national income.

Net National Product (NNP)
When depreciation is deducted from GNP i.e., Gross National Product, we get Net National Product (NNP).

Oligopoly
Oligopoly is that form of imperfect competition in which there are only a few firms in the industry (or group) producing either homogeneous products or may be having product differentiation in a given line of production.

Open Economy
Open economy is that economy which is left free and the government imposes no restrictions on trade with areas outside that economy.

Okun’s Law
Arthur Okun presented an empirical relationship between cyclical movements in GNP and unemployment. Okun found that an annual 2•5% increase in the rate of real growth above the trend growth results in a 1% decrease in the rate of unemployment. This relationship is known as Okun’s Law.

Perfect Competition
Perfect competition is the market in which there are many firms selling identical products with no firm large enough relative to the entire market to be able to influence market price.

Poverty Line
Poverty line is a virtual line demarcating persons living below and above it. In India all those persons are treated living below poverty line who are not able to earn that much of income which is not sufficient to acquire food equivalent to 2100 calories per person per day in urban areas and 2400 calories per person per day in rural areas. As per UNDP, one US dollar (1993 PPP US $) per person per day is treated as poverty line.

PQLI
PQLI is known as Physical Quality of Life Index which is used to assess the level of social development. This index was developed by Jim Grant for The Overseas Development Council PQLI is calculated by using indices of (i) Adult literacy rate, (ii) IMR, (iii) Life Expectancy.

Price Mechanism
Price mechanism signifies the working of those market forces which establishes equilibrium in the economy. Laissez faire policy is the basis for the working of price mechanism.

Price Ring
It is an unofficial syndicate by which the prices are controlled with the prior understanding among the traders. These dealers under a price ring decide not to over-bid one another at the public auction to keep the prices low. This price ring may discourage outsiders from coming to the auctions.

Private Sector
Private Sector is that part of the economy which is not owned by the government and is under the hands of private enterprise. In other words, private sector is not under direct government control. Private sector includes the personal as well as the corporate sector.

Privatisation
Privatisation is the antithesis of nationalisation. When the government owned public industries are denationalised and the disinvestment process is initiated, it is called privatisation.

Public Debt
Public debt represents borrowing by the state and public authorities. All loans taken by the public authorities constitute public debt.

Public Goods
Public goods are those goods which belong to the entire community. None of the individual of the society can be made deprived of using these public goods. National defence, Police, Street lighting etc. are examples of public goods.

Public Sector
Public sector signifies those undertakings which are owned, managed and run by public authorities. Public sector includes direct government enterprise, the nationalized industries and public corporations. In this sector of the economy the government acts itself as an entrepreneur.

Peril Point
It indicates that point beyond which tariff reductions would threaten the existence of domestic industry.

Quick Asset
Those assets are quick assets which are liquid or nearly liquid in nature and easily be turned into cash.

Quoted Company
That company is called quoted company whose share prices are quoted on a stock exchange.

Reflation
It signifies general increase in the level of business activity in the economy. Reflation generally involves greater government expenditure and the easing of credit to encourage increased production.

Regressive Tax
It is a tax in which rate of taxation falls with an increase in income. In regressive taxation incidence falls more on people having lower incomes than that of those having higher incomes.

Repressed Inflation
It is a state in which aggregate demand is greater than the total supply of goods and services in an economy, but prices are prevented from rising to eliminate excess demand. The holding down of price is sometimes done by government as a means of suppressing inflation.

Reserve Asset Ratio
It is the ratio of a bank’s reserve assets to its eligible liabilities.

Revolving Credit
It is a bank credit that is renewed automatically until notice of cancellation is received. Revolving credits may be sanctioned for an unlimited amount in total but with a limit on
the amount that may be drawn at any one time or within a specified period, e.g., one month.

Seasonal Unemployment
It is that unemployment which is caused by seasonal variation in demand for labour by various industries, such as agriculture, construction and tourism. Seasonal unemployment
normally declines in spring as more outdoor work can be undertaken.

Security
Security refers to a share, bond or government stock that can be bought and sold, usually on the stock exchange or on a secondary market, and carries a right to some form of income, either in the form of a fixed rate of interest or dividends.

Shadow Price
It is an imputed value for a good based on the opportunity costs of the resources used to produce it such values are of particular significance in resolving problems of resource allocating with respect to the effect on welfare.

Share Capital
It is the amount of money raised by a company by issuing shares. The authorized share capital is the amount that a company is allowed to issue as laid down in its Articles of Association. The issued share capital is the amount actually issued i.e., the number of issued shares multiplied by their par value. Fully paid share capital is the amount raised by payment of the full par value of the issued shares.

Single Tax System
It is a system in which all tax revenues are raised from one form of taxation.

Socialism
The political doctrine that the means of production (machines, materials and output) should be owned by society and specifically either by the state, as in the case of nationalized industries or by the workers directly, as in the case of producer co-operatives.

Social Security
Provision by the state out of taxation of welfare assistance to those in need as a result of illness, unemployment, or old age compare national insurance refers to social security.

Soft Currency
A currency with limited convertibility into gold and other currencies, either because it is depreciating due to balance of payments difficulties or because controls have been placed on it to prevent the exchange rate falling.

Special Drawing Rights (SDRs)
It is a reserve asset (known as ‘Paper Gold’) created within the framework of the International Monetary Fund in an attempt to increase international liquidity, and now forming a part of countries official reserves along with gold, reserve positions in the IMF and convertible foreign currencies.

Special Tax (Unit Tax)
It is a tax imposed per unit of a commodity rather than on the value of the commodity compare ad-valorem.

Stabilization Policy
It is Government economic policy announced at reducing the cyclical and other fluctuations that take place in a market economy.

Stagflation
It is a state of the economy in which economic activity is slowing down, but wages and prices continue to rise. The term is a blend of the words stagnation and inflation.

Surplus Value
It is the difference between the amount paid to a factor and the revenue earned by selling the output it produced.

Tariff
It is a tax or a duty on imports, which can be levied either on physical units, e.g., per tonne (specific), or on value (ad-valorem). Tariffs may be imposed for a variety of reasons including; to raise government revenue, to protect domestic industry from subsidized or low-wage imports, to boost domestic employment, or to ease a deficit on the balance of payments.

Trade Gap
It signifies the size of the deficit (or surplus) in the balance of trade i.e., the difference in value between visible imports and exports.

Trade Union
It is an organisation of employees who join together to further their interests. Trade Unions negotiate on behalf of their members in collective bargaining with employers, and in the event of a dispute may put pressure on employers by withdrawing labour (i.e. strike) or by some less drastic form of action (i.e. go-slow, working to rule).

Transfer Payment
It is a payment made by public authority other than one made in exchange for goods or services produced. Transfer payments are not the part of National Income. Examples includes unemployment benefit and child benefits.

Vital Statistics
Vital statistics refers to those data which are associated with vital events of masses like birth, death, marriage divorce etc.

VAT (Value Added Tax)
VAT seeks to tax the value added at every stage of manufacturing and sale, with a provision of refunding the amount of VAT already paid at the earlier stages to avoid double taxation. In other words, the tax already paid can be claimed at the next stage of value addition.

Wealth Tax
Wealth tax is that tax which is imposed on the value of total assets but the wealth upto a certain limit is exempted from such tax.

Welfare State
It refers to a nation that provides to all at least the minimum standards in respect of education, health, housing, pensions and other social benefits.

Wholesale Price Index
Wholesale Price Index is that index which is calculated on the basis of wholesale prices. It is calculated in a similar way to the Retail Price Index.