The Contingency Fund of India established under Article 267 (1) of the Constitution is in the nature of an imprest (money maintained for a specific purpose) which is placed at the disposal of the President to enable him/her to make advances to meet urgent unforeseen expenditure, pending authorization by the Parliament.
Approval of the legislature for such expenditure and for withdrawal of an equivalent amount from the Consolidated Fund is subsequently obtained to ensure that the corpus of the Contingency Fund remains intact. The corpus for Union Government at present is Rs 500 crore (Rs 5 billion) and is enhanced from time to time by the Union Legislature. The Ministry of Finance operates this Fund on behalf of the President of India.
Base rate is the minimum interest rate of a bank below which it is not viable to lend.It replaces the benchmark prime lending rate (BPLR) ,the interest rate which commercial banks charged their most credit worthy customer.
A working group was constituted under the chairmanship of Shri Deepak Mohanty to review the benchmark prime lending rate. It was observed that the benchmark prime lending rate, which was introduced in 2003, had failed in its objective. The banks were lending below BPLR rates due to competitive pressures. Hence a need was felt for transition to a more transparent and effective interest rate mechanism.
Skewflation: When there is a price rise of one or a small group of commodities over a sustained period of time it is called Skewflation. ‘Skewflation’ is a relatively new term.
Demographic dividend: Demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to growth of the economy.
Methodology for estimating BPL: The methodology of estimating poverty and the identification of BPL households have been a matter of debate. Two committees under the chairmanship of Prof. Suresh D. Tendulkar and Dr. N.C. Saxena have submitted their reports on methodology for estimation of poverty and methodology for conducting BPL census in rural areas, respectively. Further, an Expert Group under the chairmanship of Prof. S.R. Hasim has been set up to recommend methodology for identification of BPL families in urban areas.
Headline inflation reflects the rate of change in prices of all goods and services in an economy over a period of time.
In India, headline inflation is measured through the Wholesale Price Index (WPI) – which consists of 676 commodities. We do not include services in the WPI in India. It is measured on year-on-year basis i.e., rate of change in price level in a given month vis a vis corresponding month of last year. This is also known as point to point inflation.
Rupee denominated debt refers to that part of India’s total external debt that is denominated in the Rupee.
In contrast to foreign currency denominated external debt, in case of rupee denominated debt the currency risk (the risk arising from appreciation or depreciation of the nominal exchange rate) is borne by the creditor and not by the borrower. The contractual liability is settled in foreign currency. Accordingly, the borrower always pays back the foreign currency equivalent of the rupee denomination valued at the spot exchange rate prevailing at that point in time. Thus, if the domestic currency appreciates vis-à-vis the foreign currency, the creditor stands to gain vis-à-vis the borrower since he receives more dollars per unit of Rupee.
The Statutory Liquidity Ratio (SLR) is a measure under which all Scheduled Commercial Banks in India must maintain an amount in one of the following forms as a percentage of their total Net Demand and Time Liabilities (NDTL)
[i] Cash. [ii] Gold; or [iii] Investments in un-encumbered Instruments that include;
(a) Treasury-Bills of the Government of India. (b) Dated securities including those issued by the Government of India from time to time under the market borrowings programme and the Market Stabilization Scheme (MSS). (c) State Development Loans (SDLs) issued by State Governments under their market borrowings programme. (d) Other instruments as notified by the RBI.
Traditionally the amount to be held thus was stipulated to be no lower than 25 percent and not exceeding 40 percent of the bank’s total DTL. However, effective from January, 2007 the floor of 25 percent on the SLR was removed following an amendment of the Banking Regulation Act, 1949.
Burgernomics is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.
THE Big Mac index "invented" by The Economist in 1986 is a fun way of checking whether currencies are at their “correct” level and is a tool to make exchange-rate theory more digestible.
For the first time, they have included India in their survey. Since McDonald’s does not sell Big Macs here in India, The Economist has taken the price of a Maharaja Mac for its calculation. It indicates that the rupee is 53% undervalued and therefore the Implied PPP of the US dollar would be Rs 20.70 only.
This post has been taken from a speech on Governance Institutions and Development by Avinash Dixit of Princeton University. The link is: http://www.rbi.org.in/content/Pub_Governance%20Institutions%20and%20Development.aspx
It is a looooong speech and therefore I am posting only a small section of the same. If you so desire you can read the speech at the link provided, maybe one section at a time.
Economic governance comprises many organizations and actions essential for good functioning of markets, most notably protection of property rights, enforcement of contracts, and provision of physical and informational infrastructure. In most modern economies, governments provide these services more or less efficiently, and modern economics used to take them for granted. But the difficulties encountered by market-oriented reforms in less-developed countries and former socialist countries have led economists to take a fresh look at the problems and institutions of governance. In this lecture I offer a brief and selective look at this research, and attempt to draw a couple of conclusions that may be relevant to India today.
The importance of secure property rights can hardly be overstated. Without them, people will not create or improve the assets, physical and intellectual, that are essential for economic progress. De Soto (2000) builds the argument and marshals the evidence in a thorough and compelling book. Security of rights improves the incentives to save and invest. Land and capital can be rented out to others if they can use it more efficiently, so inefficient internal uses are avoided. And the assets can be used as collateral to borrow and expand one’s business. Field (2006) has taken the case even further. Security of property rights not only increases the supply of capital and efficiency in its allocation; it also increases labor supply. When titles to land and capital are official and secure, people need not spend time and effort to guard their rights, so they can put the labor and time to productive uses. Field’s empirical research on the titling program in Peru finds large and significant effects: “For the average squatter household, property titles are associated with a 14% increase in household work hours, a 28% decrease in the probability of working inside the home, and a 7.5% reduction in the probability of child labor among single-parent households. Panel estimates … support the cross-section results: between 1997 and 2000 household labor supply increased an additional 13 hours per week for squatters in neighborhoods reached by the program.”
In the Indian context, security of land titles may be the most important issue of property rights. The controversy regarding land sales in the context of the Special Economic Zones (SEZ) is a case in point. The merits of the SEZ policy can and should be debated, but if the debaters raise fears of revocation of rights and benefits that have been granted through a proper policy process, this uncertainty will deter investors and merely ensure that the potential benefits will not materialize. At a more micro level, insecurity of land rights and fragmentation of land arising from disputes in extended families constitute serious constraints on agricultural growth.
The relevance of security of contracts may not seem so obvious, but it is equally important. In most economic transactions that can create economic gains for all parties, some or all of them can gain an extra private benefit while hurting the others, by violating the terms of their explicit or implicit agreement. The fear of such exploitation by the other party may deter each from entering into the agreement in the first place. This was brilliantly illustrated by Diego Gambetta in his ethnographic sociological study of the Sicilian Mafia (1993, p. 15). In the course of his interviews, a cattle breeder told him: “When the butcher comes to buy an animal, he knows that I want to cheat him [by supplying a low-quality animal]. But I know that he wants to cheat me [by reneging on payment]. Thus we need … Peppe [the Mafioso] to make us agree. And we both pay Peppe a commission.” By providing a mechanism of contract enforcement, Peppe makes it possible for the two to enter into a mutually beneficial transaction. And he does this with a profit motive, exactly as would any businessperson providing any service for which others are willing to pay.
This example also demonstrates something else that is an important theme for me: governance does not have to be provided by the government as a part of its public services; private parties may do so with other motives. In most countries, even advanced ones, we find a mixture of the formal legal system and a rich and complex array of informal social institutions of governance. These mixtures reflect the country’s level of economic development, and in turn help determine its economic prospects.
The issue is not the old-style one of “market versus government.” Rather, it is one of how different kinds of institutions (governmental and non-governmental, formal and informal, industry-based or community based, singly or in combination) provide the support that is required for successful economic activity (exchange, production, asset accumulation, innovation, and so on), and the activity may or may not take place in conventional markets. I cannot emphasize too strongly the need to get beyond the old sterile debates and on to issues that really matter.
What forces threaten property rights and contracts? And how can we design and reform institutions to counter these threat? Let us look at some theoretical concepts and examples.....
