Rapid Revision Book Indian Economy UPSC Prelims 2024

https://upscpdf.com/ https://upscpdf.
com/
100% Reliable and Trustworthy
UPSC PRELIMS
2024 special edition
The benefits and impacts of ‘RAPID REVISION

BOOKS’ will multiply if you study them according to
MONTHLY ‘REVISION AND PRACTICE’ TIMETABLE
released by SHIELD IAS.
https://upscpdf.com/ https://upscpdf.com/
UPSC PRELIMS 2024

The ‘HIGH QUALITY’ of
‘THE HINDU’ Monthly Current Affairs Quiz
by SHIELD IAS
now comes in the form of…
Current Affairs Revision classes

starting
from 1stApril 2024
Get confidence with the
highest quality coverage of
most relevant current affairs
Duration: One month

Daily classes: 6pm to 8pm (Monday to Saturday)
Mode: Online
Complete coverage for students in the classes
Simplified Class explanations
Class backup and crisp handouts
@Very Affordable Charges/-
REGISTER
NOW
+91-7037272363
www.shieldias.in
UPSC PRELIMININARY EXAMINATION 2024

RAPID REVISION BOOKS
‘Perfect’ your revision for 26th May, 2024
PURPOSE: To provide a HIGH QUALITY, PRECISE, CONCISE and CONFIDENCE BUILDING

revision books for fulfilling the needs of UPSC aspirants for the ‘SUCCESS’ in the Preliminary
Examination 2024.
With respect to the scheduled Civil Services (Preliminary) Examination, 2024, which is to be conducted
on 26th May, 2024, the most important need is a ‘UPSC Standard Fast Revision Material’.
This requirement of students is fulfilled by SHIELD IAS ‘RAPID REVISION BOOKS’.
‘RAPID REVISION BOOKS’ are the series of NINE BOOKLETS covering the most important scoring
portions of the General Studies (Preliminary) examination to provide confidence boosting edge in the final
preparation.
Note: The benefits and impacts of ‘RAPID REVISION BOOKS’ will multiply if you study them according to
*MONTHLY ‘REVISION AND PRACTICE’ TIMETABLE released by SHIELD IAS.
* SHIELD IAS has launched for students ‘MONTHLY REVISION AND PRACTICE TIMETABLE’.
This timetable is made available for the 5 MONTH PERIOD starting from January 2024 till May
2024, hence leading students to 26th May, 2024 through a proper ‘DAILY TIME MANAGEMENT
SCHEDULE’. {Refer to the timetable: Visit website: www.shieldias.in (resources section) }
RAPID BOOK 7
ECONOMY and SOCIAL DEVELOPMENT
Highlights of this book:

o One stop solution for the standard study material.
o Research and curation of content as per relevance of the examination.
o Covers the content comprehensively.
o Content combined with suitable images.
o Lucid presentation for speed reading and memorisation.
o Builds confidence for handling both MCQs and Essay type questions.
Hence, this revision book takes care of detailed knowledge of subject, and relevant facts, alongwith sound
mix of relational understanding.
The overall emphasis is on making students supremely confident for the examination.
Start your journey of sound preparation with SHIELD IAS revision material to emerge ahead in the journey of
Civil Services Examination preparation.
Relish the revision material.
Best of Efforts and Sound Luck!
From
Ritesh Kumar Singh (Academic Director, Shield IAS)
Ex- Civil Servant
Ex-Sr. Faculty & Head Content and Quality Management, Rau’s IAS Study Circle
The Quality is Here Now!
TABLE OF CONTENTS
ECONOMY & SOCIAL CURRENCY SWAP 21
DEVELOPMENT CAPITALISM, COMMUNISM, AND 22

SOCIALISM
THINGS TO KNOW CESS 23
ALGORITHMIC TRADING 01 DIGITAL PAYMENT INDEX 24
ANTI-DUMPING DUTY 02 DEMAT ACCOUNT 25
ANIMAL HUSBANDRY 03 DEBT-TO-GDP RATIO 26
ASIAN DEVELOPMENT BANK 04 DEVELOPMENT BANKS 26
ASSOCHAM 04 DIRECT TAX 28
ALTERNATIVE INVESTMENT 05 DISINVESTMENT 29
FUNDS
DIRECT FOREIGN LISTING 30
ANGEL TAX 06
EXCHANGE TRADED FUND (ETF) 31
ANARCHO-CAPITALISM 06
GOLD ETF 31
BILATERAL INVESTMENT 07
e-RUPI 32
TREATIES
EQUITY MARKET 32
BUREAU OF INDIAN STANDARDS 08
EVERGREENING OF LOANS 33
(BIS)
FISCAL POLICY 34
BUYBACK OF SHARES 08
FISCAL DEFICIT 35
BASE EROSION AND PROFIT 09
SHIFTING (BEPS) FICCI 36
BALTIC DRY INDEX 09 FLOATING RATE LOANS 36
CAPITAL EXPENDITURE IN INDIA 10 FDI IN INDIA 37
CAPITAL ADEQUACY RATIO 10 FOREIGN PORTFOLIO 39

(CAR) INVESTMENT (FPI)
CARBON BORDER ADJUSTMENT 10 FRICTIONLESS CREDIT 39

MECHANISM FREE TRADE AGREEMENTS 41
CURRENT ACCOUNT DEFICIT 11 FUTURES TRADING 43
CURRENCY SWAP 12 FINANCIAL STABILITY AND 44
COUNTERVAILING DUTY (CVD) 13 DEVELOPMENT COUNCIL
CRITICAL MINERALS 14 GIG ECONOMY 45
CREDIT RATING AGENCIES 16 GI TAGS 46
CONSUMPTION BASED POVERTY 18 GLOBAL MINIMUM TAX 47

ESTIMATES GLOBAL ECONOMIC PROSPECTS 48
CPTPP 19 REPORT
GLOBAL RISK REPORT 2024 49
CRYPTO ASSET 20
INTERMEDIARIES (CAI)
SHIELD IAS RAPID REVISION BOOK (ECONOMY & SOCIAL DEVELOPMENT)

SPECIAL EDITION FOR PRELIMS 2024
GLOBALISATION VS. 51 MICROFINANCE INSTITUTIONS 76

LIBERALISATION (MFIs)
GREEN CONTRACTS 52 MCA 21 VERSION 3.0 77
GREENWASHING 53 NON-FOOD BANK CREDIT 77
G-SECs 53 MUTUAL FUNDS 78
RBI’s RETAIL DIRECT 55 MERCHANT DISCOUNT RATE 78
GST COUNCIL 55 (MDR)
HUMAN CAPITAL 56 NOBEL PRIZE 2023- ECONOMICS

NATIONAL COMPANY LAW 80
INFLATION 58
TRIBUNAL
HEADLINE INFLATION AND 58
NON-PERFORMING ASSETS 80
CORE INFLATION
NON-BANKING FINANCIAL 82
INDEX OF INDUSTRIAL 60
PRODUCTION (IIP) COMPANY (NBFC)
NASSCOM 83
INDEX OF EIGHT CORE 60
INDUSTRIES NICDP 84
INTERIM AND ANNUAL BUDGETS 61 OIML 85
IMF AND CRYPTOCURRENCY 61 PROTECTIONISM 85
INTERNATIONALISATION OF 62 PURCHASING MANAGERS INDEX 86

RUPEE PCA FRAMEWORK 88
INITIAL PUBLIC OFFERING 64 PCA EXTENDED TO NBFCs 89
IRRA PLATFORM 64 PUBLIC DEBT 90
LAB GROWN DIAMONDS (LGD) 65 PRODUCTION-LINKED 91
LIGHT WEIGHT PAYMENTS AND 66 INCENTIVE (PLI) SCHEME
SETTLEMENT SYSTEM PAYMENT AND SETTLEMENT 92
LONG TERM REPO OPERATIONS 67 SYSTEM
LEADS 68 RECESSION 92
MONETARY POLICY COMMITTEE 69 RBI SURPLUS 93
INSTRUMENTS OF MONETARY 70 REGRESSION THEOREM 94

POLICY RoDTEP 95
MONETARY POLICY DECISIONS 71 RENEWABLE PURCHASE 95
UNCONVENTIONAL MONETARY 72 OBLIGATION (RPO)
POLICIES RECEIC 96
MONETARY POLICY 73 SEBI 97
TRANSMISSION
SMALL FINANCE BANKS 98
MULTIDIMENSIONAL POVERTY 73
STATES’ STARTUP RANKING 99
INDEX
SPECIAL PURPOSE VEHICLE 101
MARKET MONOPOLY 74
(SPV)

SHG BANK LINKAGE 102

AGRICULTURE RELATED
SOVEREIGN RIGHT TO TAX 102
M.S. SWAMINATHAN 119
SOVEREIGN CREDIT RATING 103
MINIMUM SUPPORT PRICE 121
SUGAM REC 104
FOOD CORPORATION OF INDIA 122
SURCHARGE 104
(FCI)
TRIPS AGREEMENT 105
FOOD MANAGEMENT POLICY 123
UNNATI on SSE 106
NCDEX 126
URBAN COOPERATIVE BANKS 108
NABARD 127
VALUE INVESTING 109
FARMER PRODUCER 128
WHOLESALE PRICE INDEX 109 ORGANISATIONS (FPOs)
WORKER PRODUCTIVITY 110 FOOD PRIZE INDEX (FPI) 129
WORLD ECONOMIC FORUM 111 SUSTAINABLE AGRI FOOD 130
WORLD BANK GROUP 112 SYSTEMS
WTO: DISPUTE SETTLEMENT 116 RUBBER BOARD 131
MECHANISM DECLINE IN SAFFRON 131
WORLD EMPLOYMENT AND 116 PRODUCTION
SOCIAL OUTLOOK LENTIL PRODUCTION 133
YIELD CURVE 117 GM MUSTARD 134
WAYS AND MEANS ADVANCES 118 GLOBAL ALLIANCE FOR GLOBAL 135
GOOD
ADVANCING CLIMATE 135
RESILIENT AGRIFOOD SYSTEMS
BALE IDENTIFICATION AND 136
TRACEABILITY SYSTEM (BITS)
SILK INDUSTRY IN INDIA 137

ECONOMY & SOCIAL

DEVELOPMENT
(SPECIAL EDITION FOR PRELIMS 2024)
THINGS TO KNOW
 ALGORITHMIC TRADING
o An algorithm is a specific set of clearly defined instructions aimed to carry out a task
or process. And there are instances when a human trader isn’t able to handle enormous
numbers of trading, and that’s when you need intervention of an intelligent algorithm.
o Algorithms have gained popularity in the online trading landscape and many big clients
demand it.
o These mathematical algorithms analyse every quote and trade in the stock market,
identify liquidity opportunities, and turn the information into intelligent trading decisions.
Algorithmic trading, or computer-directed trading, cuts down transaction costs, and allows
investment managers to take control of their own trading processes.
o Algorithm innovation continues to offer returns for firms with the scale to absorb the costs and
to reap the benefits.
o In short, Algorithmic trading (automated trading, black-box trading, or simply algo-
trading) is the process of using computers programmed to follow a defined set of instructions
for placing a trade in order to generate profits at a speed and frequency that is impossible for
a human trader.
o Any strategy for algorithmic trading requires an identified opportunity, which is profitable in
terms of improved earnings or cost reduction. The algorithmic trading strategies follow defined
sets of rules, and are based on timing, price, quantity or any mathematical model. Apart from
profit opportunities for the trader, algorithmic-trading makes markets more liquid and makes
trading more systematic by ruling out emotional human impacts on trading activities.
Algorithmic-trading has many benefits.

1. Trades are executed at the best possible prices
2. Instant and accurate trade order placement
3. Trades timed correctly and instantly. This avoids significant price changes
4. Reduced transaction costs due to lack of human intervention
5. Simultaneous automated checks on multiple market conditions
6. Reduced risk of manual errors in placing the trades
7. Reduced possibility of mistakes by human traders based on emotional and psychological
factors
8. The greatest portion of present day algorithmic-trading is high frequency trading (HFT). This
trading method attempts to capitalize on placing a large number of orders at very fast speeds,
www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 1
ECONOMY & SOCIAL DEVELOPMENT
across multiple markets, and multiple decision parameters, based on per-programmed

instructions.
Algorithmic-trading can be applied in many forms of trading and investment

activities:
o Mid to long term investors or buy side firms (pension funds, mutual funds, insurance
companies) who purchase stocks in large quantities but do not want to influence stocks prices
with discrete, large-volume investments.
o Short term traders and sell side participants (market makers, speculators, and
arbitrageurs)benefit from automated trade execution; in addition, algorithmic-trading aids in
creating sufficient liquidity for sellers in the market.
o Systematic traders (trend followers, pairs traders, hedge funds, etc.) find it much more
efficient to program their trading rules and let the program trade automatically.
 ANTI-DUMPING DUTY
o An anti-dumping duty is a protectionist tariff that a domestic government imposes on
foreign imports that it believes are priced below fair market value.
o In order to protect their respective economy, many countries impose duties on products they
believe are being dumped in their national market; this is done with the rationale that these
products have the potential to undercut local businesses and the local economy.
o While the intention of anti-dumping duties is to save domestic jobs, these tariffs can
also lead to higher prices for domestic consumers.
o In the long-term, anti-dumping duties can reduce the international competition of domestic
companies producing similar goods.
o The World Trade Organization (WTO) that deals with the rules of trade between nations also
operates a set of international trade rules, including the international regulation of anti-
dumping measures.
Role of the WTO in Regulating Anti-Dumping Measures

o The World Trade Organization (WTO) plays a critical role in the regulation of anti-dumping
measures. As an international organization, the WTO does not regulate firms accused of
engaging in dumping activities, but it possesses the power to regulate how
governments react to dumping activities in their territories.
o Some government sometimes react harshly to foreign companies engaging in dumping
activities by introducing punitive anti-dumping duties on foreign imports, and the WTO may
come in to determine if the actions are genuine, or if they go against the WTO free-market
principle.
o According to the WTO Anti-Dumping Agreement, dumping is legal unless it threatens to
cause material injury in the importing country domestic market. Also, the
organization prohibits dumping when the action causes material retardation in the domestic
market.
o Where dumping occurs, the WTO allows the government of the affected country to take legal
action against the dumping country as long as there is evidence of genuine material injury to
industries in the domestic market. The government must show that dumping took place, the
extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic
market.
 ANIMAL HUSBANDRY
o Animal husbandry refers to livestock raising and selective breeding. It is the
management and care of animals in which the genetic qualities and behaviour of animals are
further developed for profit. A large number of farmers depend upon animal husbandry for
their livelihood.
o Animals provide us with a variety of food products which have high nutritional values.
Therefore, they require a lot of care and attention.
o Animals are bred commercially in order to meet the high demand for food. Dairy products from
animals like cows, buffaloes, goats, are rich sources of protein. These animals are called milch
animals as they provide us with milk.
o Another set of animals that provide nutrient-rich food are hen, ducks, goose, etc. They provide
us with eggs, which again are rich sources of protein.
o Animals like chicken, duck, ox, goat, pigs, etc. are bred for meat. Other than these domestic
animals we have other sources of nutrients as well; they are marine animals. The seafood we
eat has very high nutrient values. They are sources of a variety of nutrients like fat, proteins,
vitamins and minerals.
o The care, breeding, management, etc. of animals are particularly monitored under the
department of animal husbandry. Animal husbandry is a large scale business. The animals are
bred, cared, reared and sheltered in a farm or region, which are specially built for them. Animal
husbandry involves poultry, milk-farms, apiculture (bee agriculture), aquaculture, etc.
Types of Animal Husbandry
Dairy Farming
o Dairy farming is the agricultural technique concerned with the long term production of milk,
which is then processed to obtain dairy products such as curd, cheese, yoghurt, butter, cream,
etc. It involves the management of dairy animals such as cows, buffaloes, sheep, goat, etc.
o The animals are taken care of against diseases and are inspected regularly by veterinary
doctors. A healthy animal is physically, mentally and socially sound.
o These animals are milked by hand or by machines. The milk is preserved and converted into
dairy products industrially, which are then used for commercial purposes.
Poultry Farming
o Poultry farming is concerned with raising and breeding of birds for commercial purposes. Birds
like ducks, chickens, geese, pigeons, turkeys, etc. are domesticated for eggs and meat.
o It is very important to take care of the animals and maintain them in a disease-free
environment to obtain healthy food from them. The eggs and meat are a rich source of protein.
o Sanitation and hygienic conditions need to be maintained. The faeces of birds are used as
manure to improve soil fertility. Poultry farming provides employment to a large number of
people and helps in improving the economy of the farmers.
Fish Farming
o Fish farming is the process of raising fish in closed tanks or ponds for commercial purposes.
There is an increasing demand for fish and fish protein. Fish species such as salmon, catfish,
cod, and tilapia are raised in fish farms.
Bee Farming
o Bee farming or apiculture is the practice of maintaining bee colonies by humans in man-made
hives. Honey bees are reared on a large scale. The bees are domesticated for honey, wax, and
to pollinate flowers. They are also used by other beekeepers for the same purposes. The place
where bees are kept is known as an apiary or a bee yard.
 ASIAN DEVELOPMENT BANK

• Asian Development Bank(ADB) is a regional development bank, established in
December 1966. It is headquartered in Manila, Philippines.
• Asian Development Bank aims to promote social and economic development in Asia and the
Pacific.
• India is one of the founding members of the ADB. At present, Asian Development Bank
has 68 members, 49 are from within Asia and the Pacific and 19 are from outside.
• It releases an annual report called Asian Development Outlook that summarizes its
operations, budget, and other materials for review by the public.
• It is an official United Nations Observer.
• The top five shareholders of the Asian Development Bank are Japan and the United States
(each with 15.6% of total shares), followed by the People’s Republic of China (6.4%), India
(6.3%), and Australia (5.8%).
• Current President: Masatsugu Asakawa is the President of the Asian Development Bank.
Roles: The Asian Development Bank was modelled closely on the World Bank and has a
similar weighted voting system where votes are distributed in proportion to
members’ capital subscriptions. The roles and functions of the Asian Development Bank are:
1. Reducing poverty in Asia and the Pacific through inclusive growth, environmentally
sustainable growth, and regional integration.
2. Carry out investments in the form of loans, grants, and information sharing – in
infrastructure, health care services, and financial and public administration systems, helping
nations prepare for the impact of climate change or better manage their natural resources, as
well as other areas.
 ASSOCHAM
o The Associated Chambers of Commerce and Industry of India (ASSOCHAM) is a non-
governmental trade association and advocacy group based in New Delhi, India.
o The organisation represents the interests of trade and commerce in India, and acts
as an interface between issues and initiatives.
o The goal of this organisation is to promote both domestic and international trade, and reduce
trade barriers while fostering conducive environment for the growth of trade and industry of
India.
o ASSOCHAM was established in 1920 by promoter chambers, representing all regions of
India.
o It has completed 100 years of existence.
o The association has a special role in promoting international trade, and often hosts
international trade delegates to India, along with sending delegations of Indian business
groups to foreign locations. It also interacts with international counterpart organisations to
promote bilateral economic issues.
o ASSOCHAM is a member of the International Chamber of Commerce, the World Business
Organisation, through ICC, India.
o ASSOCHAM is authorised by the Government of India to issue Certificates of Origin,
certify commercial invoices, and recommend business visa.
 ALTERNATIVE INVESTMENT FUNDS

• AIFs are any privately pooled investment fund (whether from Indian or foreign sources)
in the form of a trust, a company, a body corporate, or a Limited Liability Partnership, as
defined by the Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012.
• As a result, venture capital funds, hedge funds, private equity funds, commodity
funds, debt funds, infrastructure funds, and other AIFs are included in the definition.
• It is an investment option for high rollers, including domestic and foreign investors in India.
• Generally, institutions and high net worth individuals invest in AIF as it needs a high
investment amount.
Categories Of AIF
Category I AIFs
• They can invest in start-ups, early stage ventures, social ventures, SMEs and sectors
which the government or regulators consider as socially or economically desirable.
• They include venture capital funds like angel funds, SME Funds, social venture funds,
infrastructure funds and such other AIFs as may be specified.
Category II AIFs
• They are those which are not classified under Category I or Category III.
• They do not undertake leverage or borrowing other than to meet day-to-day
operational requirements and as permitted in the regulations.
• Various types of funds such as real estate funds, debt funds, private equity funds,
funds for distressed assets, etc. are registered as Category II AIFs.
Category III AIFs

• They are funds which employ complex or diverse trading strategies and may employ
leverage including through investment in listed or unlisted derivatives hedge funds, Private
investment in public equity (PIPE) Funds, etc. are registered as Category III AIFs.
• Category I and II AIFs are required to be close ended and have a minimum tenure of
three years. Category III AIFs may be open ended or close ended.
 ANGEL TAX
• The angel tax is a 30% tax on any excess funds raised by an unlisted firm through the
issuance of shares over and above the shares' fair market value.
• It typically impacts start-ups and their ‘angel’ investors and is taxed because it is viewed
as corporate income.
• The angel tax was implemented in 2012 under section 56(2)VII B of the Income Tax
Act,1961.
• Earlier, it was imposed only on investments made by a resident investor, but
Budget 2023-24 proposed to extend angel tax even to non-resident investors from
April 1, 2024.
• The government introduced the Angel Tax to curb money laundering and make it easier
for businesses to comply with the tax norms.
• The angel tax is levied on unlisted businesses or startups on the funding they get from
the angel investors.
• An angel investor is an individual with a high net worth willing to provide financial backing for
small startups and entrepreneurs.
• Angel investors give financial assistance in exchange for ownership equity in the
company.
 ANARCHO-CAPITALISM
The term "anarcho-capitalism" has gained attention, particularly with the recent electoral
victory of Javier Milei, a self-proclaimed anarcho-capitalist, in the presidential race in
Argentina.
This political philosophy advocates for the abolition of the state, proposing that
private companies manage law and order in a free market.
• Anarcho-capitalism is political philosophy and political-economic theory that advocates the
voluntary exchange of goods and services in a society broadly regulated by the
market rather than by the state.
• The term anarcho-capitalism was coined by Murray Rothbard, a leading figure in the
American libertarian movement from the 1950s.
• Anarcho-capitalists assert that private companies in a free market can efficiently
provide policing and legal services.
• The philosophy contends that similar to private sectors offering superior products and services,
private policing and legal systems can outperform state-monopolized counterparts.
• In an anarcho-capitalist society, individuals pay private police and courts for protection and
dispute resolution.
• Private companies, driven by customer patronage, are argued to be more accountable, as
dissatisfied customers can switch to competing services.
• Anarcho-capitalists advocate for competitive markets, asserting that they guarantee top-tier
and cost-effective police and legal services. This contrasts with state-funded systems, providing
customers the freedom to select services aligned with their preferences and needs.
Concerns
• Multiple private firms offering police and judiciary services in a single region may lead to
armed conflicts and chaos.
• Skepticism arises about a market-based system favoring the wealthy, allowing them
to escape justice by paying more to private firms.
• Apprehensions exist that a profit-driven system could marginalize the poor, limiting
their access to justice.
• Critics worry that without a centralized authority, private firms may not be
accountable to the broader public, influencing justice based on financial interests, and
potentially compromising the integrity of justice.
• The absence of a centralized authority may increase the risk of vigilantism, where
individuals or groups take the law into their own hands.
• Anarcho-capitalism could worsen societal inequalities, providing better legal protection
for those who can afford premium services.
• The absence of a standardized legal framework may result in varying standards of
justice, creating uncertainty and inconsistency in legal outcomes.
 BILATERAL INVESTMENT TREATIES

o Bilateral investment Treaties (BITs) are agreements between two countries for the reciprocal
promotion and protection of investments in each other's territories by individuals and
companies situated in either State. BITs encourage foreign investors to invest in a State and
there by contributing towards overall developments and advancements of the economy.
Important features of BIT:

▪ Fair and Equitable Treatment (FET): Mandates States to have a stable and predictable
legal framework regulating investments which meets the reasonable expectations of the
investors.
▪ Full Protection and Security (FPS): Mandates States to provide full protection and safety
to foreign investments.
▪ National Treatment: The foreign investors should be treated at par with the domestic
investors.
▪ Most Favourable Nation Treatment (MFN): Concession extended to foreign investor of
a particular country would be extended to foreign investors of other countries.
▪ Expropriation (Taking over property): Bars the state from expropriating the foreign
investments except under exceptional circumstances.
▪ Repatriation of Investment and Returns: Mandates the states to provide unrestricted
power to the foreign investors to repatriate their investments and returns.
▪ Investor State Dispute Resolution (ISDS): Foreign investors can directly initiate
arbitration proceeding against a State without approaching its own government. To handle
such a dispute, an ad-hoc tribunal may be set up in accordance with the Arbitration rules of
the United Nations Commission on International Trade Law
 BUREAU OF INDIAN STANDARDS (BIS)

The Bureau of Indian Standards (BIS) is a body under the Ministry of Consumer Affairs,
Food, and Public Distribution, Government of India. It celebrated its 77th Foundation Day.
• BIS is the National Standard Body of India established under the BIS Act 2016 for the
harmonious development of the activities of standardization, marking and quality certification
of goods. BIS has its headquarters at New Delhi.
• It operates various schemes like Product Certification (ISI mark), Hallmarking of
Gold and Silver Jeweller, ECO Mark Scheme (for labeling of environment friendly
products).
The BIS Act, 2016: The major highlights of the act are:
• Enables the government to authorize any agency apart from BIS to certify and enforce
conformity to a standard.
• Provides consumer protection measures like recall of non-conforming standard marked
products, compensation to the consumer and more stringent penal provisions.
 BUYBACK OF SHARES
▪ Meaning of Buyback: Buy-back is a procedure that enables a company to purchase its shares
from its existing shareholders, usually at a price near to or higher than the prevailing market
price. When a company buys back, it reduces its outstanding shares in the market, which
increases the percentage shareholding for the remaining shareholders.
▪ Mechanism for Buy back of Shares: In a buy-back, the company generally offers its
shareholders an option to tender a portion of their shares within a certain time frame and at a
specified price. This price compensates the shareholders for tendering their shares rather than
holding on to them.
▪ Reasons for the buyback of the shares:
o To enable the promoters to increase their stakes in the company.

o To improve earnings per share;
o To provide an additional exit route to shareholders when shares are undervalued or are thinly
traded;
o To enhance consolidation of stake in the company;
o To return surplus cash to shareholders;
o To support share price during periods of sluggish market conditions
▪ Why has the Government asked the PSUs to go for buyback of shares?
o Buyback of shares can be considered as mechanism for undertaking disinvestment of
Government's ownership in PSUs. For example, let's say, a particular PSU has total share
capital of Rs 100 crores (10 crore shares of Rs 10 each). Out of total 10 crore shares, 6 crore
shares are held by Government and remaining 4 crore shares are held by Public. This translates
into 60% ownership for the Government and 40% ownership of the Public.
o If the PSU buys back 2 crore shares from the Government, then the total shares of the company
would be reduced to 8 crores. Out of which, 4 crore shares would be with Government and
remaining 4 crore shares with Public. This translates into 50% ownership for the Government
and 50% ownership of the Public.
▪ How will it help the Government?

1. The Government has set an ambitious disinvestment target of Rs 2.1 lakh crores for the present
financial year. However, the economic slowdown would make it difficult for the Government
to meet its disinvestment target. In this regard, to a certain extent, buyback of shares would
help the Government to raise revenue by undertaking disinvestment.
2. Some of these PSUs are sitting on cash surpluses, but unable to undertake capital expenditure
due to the prevailing economic slowdown. The Government wants to use this surplus cash to
boost demand.
 BASE EROSION AND PROFIT SHIFTING

(BEPS)
o It refers to tax avoidance strategy wherein the companies take undue advantage of the tax
exemptions in order to pay less tax.
o As part of tax avoidance strategy, the Multinational companies shift their profits from high
tax jurisdictions to low tax jurisdictions (tax havens) in order to pay less tax.
o This leads to erosion of the tax base of the high tax jurisdictions. This causes significant revenue
losses for the high tax jurisdictions.
o A report published by OECD in 2017 has stated that BEPS is responsible for tax losses of
around $200bn globally. Some of the tools of the BEPS are misuse of DTAA, Round Tripping,
Treaty Shopping.
DTAA
o A DTAA is a tax treaty signed between two or more countries. Its key objective is that tax-
payers in these countries can avoid being taxed twice for the same income.
o A DTAA applies in cases where a tax-payer resides in one country and earns income in another.
DTAAs are intended to make a country an attractive investment destination by providing relief
on dual taxation.
o Such relief is provided by exempting income earned abroad from tax in the resident
country. India has signed DTAA with more than 80 countries.
 BALTIC DRY INDEX

▪ The Baltic Dry Index (BDI) is an economic indicator issued daily by the London- based Baltic
Exchange. The index provides an assessment of the price of moving the major raw materials
by sea. The Baltic Dry Index takes into account the freight rates for bulk commodities such as
coal, iron ore and grain.
▪ Importance of Baltic Dry Index: Changes in the Baltic Dry Index can provide investors
with important clues related to global supply and demand trends.
o It is often considered a leading indicator of future economic growth.
o If the Index increases, it means that the freight rates have increased which indicate higher
demand for raw materials such as Coal, Iron-ore etc. Hence, an increase in the index value
would point to increased economic activity and hence higher economic growth.
o Similarly, if the index decreased, it would point to decreased economic activity and hence lower
economic growth in future.
Other Indices for tracking Freight rates: The Baltic Dirty Tanker Index tracks freight
rates for crude oil and the Baltic Clean Tanker Index tracks freight rates for petroleum
products.
‘SUCCEED IN’ UPSC EXAMINATION 2025

through
ACHIEVE ‘RANK’ IN UPSC
‘COMPLETE REVISION AND PRACTICE PROGRAM’

Suitable for all students:
✓ Completed GS ‘Foundation’ Coaching but still struggling with lack of confidence
✓ Doing self-study but are clueless about right approach
✓ College students not having regular studies
✓ Working professionals having lack of time for regular studies
BASED ON: DAILY, WEEKLY AND MONTHLY TIMETABLE

Covers all stages- Preliminary, Main Examination and Interview
1. Daily guided revision by UPSC expert: Monday to Friday revision classes (2

hours/day).
2. Revision Material: Daily Class Handouts and Monthly ‘ACHIEVE’ Revision Books
3. Preliminary Examination: Revision classes comprise of - General Studies and CSAT.
4. Main Examination: Revision classes comprise of - Essay Paper, General Studies Papers-
1,2,3 and 4.
5. Planned Completion: Monthly timetable based coverage of subjects
6. Multiple Choice Questions (MCQs): Weekly with Answer Keys and explanations;
Monthly Full Length Tests (FLTs)
7. General Studies Main Answers: Writing practice with discussions in class and Tests
8. Essay Paper: Writing Practice with discussions in class and Tests
9. Case studies: Writing Practice with discussions in class and Tests
10. Current Affairs: Monthly Current Affairs Magazine; ; Monthly Current Affairs Quiz;
Current affairs revision classes
11. Performance Improvement: One to one discussion; performance tracker- daily, weekly
and monthly.
12. Prelims build up: ‘Thematic’ and complete ‘General Studies’ FLTs
13. Main examination build up: Fast revision classes, Topic tests, ‘General Studies’ FLTs,
Essay Paper Test.
14. Sessions by Officers
15. Interview Guidance
To know more about: ACHIEVE Program 2025, Detailed Timetable, and the UPSC
Expert (visit the website: www.shieldias.in; Contact: 7037272363)
 CAPITAL EXPENDITURE IN INDIA

• It refers to the funds allocated by the government for the acquisition, construction,
or improvement of physical assets such as infrastructure, buildings, machinery, and
equipment.
• It is considered to be productive and growth enhancing as it adds to the productive
capacity of the economy and generates income and employment in the future.
• The Indian government allocates capital expenditure through its annual budget,
which is presented by the finance minister.
• The capital investment outlay has experienced a consecutive three-year increase, reaching Rs
10 lakh crore, which accounts for 3.3% of the GDP, marking a significant growth of 33% (
Union Budget 2023-24).
Effective Capital Expenditure

• The capital expenditure presented in the budget does not include the spending by the
government on creating capital assets through grants-in-aid to states and other agencies.
• These grants are classified as revenue expenditure in the budget, but they also
contribute to the creation of fixed assets such as roads, bridges, schools, hospitals, etc.
• Therefore, to capture the true extent of public investment by the central government, a
concept of ‘effective capital expenditure’ has been introduced.
• Effective capital expenditure is defined as the sum of capital expenditure and
grants for creation of capital assets.
• It is budgeted at Rs 13.7 lakh crore or 4.5% of GDP (Union Budget 2023-24).
 CAPITAL ADEQUACY RATIO (CAR)

o The CAR has been laid down by the BASEL committee on banking supervision under Bank of
International Settlement located in Basel, Switzerland.
o It has been laid down to ensure financial stability and to prevent failure of banks.
o So far, 3 BASEL Norms have been laid down: Basel I (1998), Basel II (2004), Basel III (2009).
o CAR = (Tier-1 Capital + Tier-2 Capital)/ RWAs * 100.
o The Banks in India are required to maintain CAR of 9% (Tier-1 capital: 7% + Tier-2 Capital:
2%) along with Capital Conservation buffer (CCB) of 2.5%.
o Unlike the BASEL III norms, which stipulate capital adequacy of 10.5% (8%-CAR + 2.5% CCB)
, the RBI has mandated to maintain capital adequacy of 11.5% (9%-CAR + 2.5%-CCB).
 CARBON BORDER ADJUSTMENT

MECHANISM
The European Union (EU) has announced that its Carbon Border Adjustment Mechanism
(CBAM) will be introduced in its transitional phase from October 2023, which will levy a carbon
tax on imports of products made from the processes which are not Environmentally sustainable
or non-Green.
CBAM will translate into a 20-35 % tax on select imports into the EU starting 1st January 2026.
• CBAM is part of the “Fit for 55 in 2030 package", which is the EU’s plan to reduce
greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in line with the
European Climate Law.
• The CBAM is a policy tool aimed at reducing Carbon Emissions by ensuring that imported
goods are subject to the same carbon costs as products produced within the EU.
• The CBAM will be implemented by requiring importers to declare the quantity of
goods imported into the EU and their embedded Greenhouse Gas (GHG) emissions
on an annual basis.
• To offset these emissions, importers will need to surrender a corresponding number of
CBAM certificates, the price of which will be based on the weekly average auction price of
EU Emission Trading System (ETS) allowances in €/tonne of CO2 emitted.
Objectives
• CBAM will ensure its climate objectives are not undermined by carbon-intensive imports and
spur cleaner production in the rest of the world.
• It can encourage non-EU countries to adopt more stringent environmental
regulations, which would reduce global carbon emissions.
• It can prevent carbon leakage by discouraging companies from relocating to countries
with weaker environmental regulations.
• The revenue generated from CBAM will be used to support EU climate policies, which can be
learned by other countries to support Green Energy.
 CURRENT ACCOUNT DEFICIT

o The current account measures the flow of goods, services and investments into and out
of the country. The country runs into a deficit if the value of goods and services import
exceeds the value of the export. The current account includes net income, including interest
and dividends, and transfers, like foreign aid.
o A nation’s current account maintains a record of the country’s transactions with other nations,
it comprises of following components:
▪ Trade of goods,
▪ Services, and
▪ Net earnings on overseas investments and net transfer of payments over a period of time, such
as remittances
o A country with rising CAD shows that it has become uncompetitive, and investors may not be
willing to invest there.
o In India, the Current Account Deficit could be reduced by boosting exports and curbing
non-essential imports such as gold, mobiles, and electronics.
o A current account deficit is not always a problem. The Pitchford thesis states that a current
account deficit does not matter if it is driven by the private sector. It is also known as the
“consenting adults” view of the current account, as it holds that deficits are not a problem
if they result from private sector agents engaging in mutually beneficial trade.
o The formula to calculate CAD is:
Current Account = Trade gap + Net current transfers + Net income abroad
(Trade gap = Exports – Imports)
Why does CAD matter?

o The current account deficit is an important signal of competitiveness and the level of imports
and exports. A large current account deficit usually implies some kind of disbalance in the
economy, which needs correcting with the depreciation in the exchange rate and/or improved
competitiveness over time.
o A current account deficit is financed by attracted capital inflows, for example, foreigners
buying domestic assets. This means foreigners hold a greater claim on assets and dividends.
The benefit of a CAD is that it allows higher levels of domestic consumption because we are
buying from abroad.
o If an economy is running a current account deficit, it is absorbing (absorption = domestic
consumption + investment + government spending) more than that it is producing.
o This can only happen if some other economies are lending their savings to it (in the form of
debt to or direct/ portfolio investment in the economy) or the economy is running down its
foreign assets such as official foreign currency reserve.
Trade Deficit
o A trade deficit is an amount by which the cost of a country's imports exceeds its exports.
o The trade deficit in goods shows a rise of demand in the economy.
o It is a part of the Current Account Deficit.
Current Account Deficit

o The current account records exports and imports in goods and services and transfer
payments.
o It represents a country’s transactions with the rest of the world and, like the capital
account, is a component of a country’s Balance of Payments (BOP).
o There is a deficit in Current Account if the value of the goods and services imported exceeds
the value of those exported.
o Major components are:
▪ Goods,
▪ Services, and
▪ Net earnings on overseas investments (such as interests and dividend) and net transfer of
payments over a period of time, such as remittances.
o It is measured as a percentage of Gross Domestic Product (GDP). The formulae for calculating
Current Account Balance is:
o Current Account Balance = Trade gap + Net current transfers + Net income abroad.
o Trade gap = Exports – Imports
 CURRENCY SWAP
o A currency swap contract (also known as a cross-currency swap contract) is a derivative
contract between two parties that involves the exchange of interest payments, as
well as the exchange of principal amounts in certain cases, that are denominated
in different currencies.
o Although currency swap contracts generally imply the exchange of principal amounts, some
swaps may require only the transfer of the interest payments.
o A currency swap consists of two streams (legs) of fixed or floating interest payments
denominated in two currencies. The transfer of interest payments occurs on
predetermined dates. In addition, if the swap counterparties previously agreed to exchange
principal amounts, those amounts must also be exchanged on the maturity date at the same
exchange rate.
o Currency swaps are primarily used to hedge potential risks associated with
fluctuations in currency exchange rates or to obtain lower interest rates on loans
in a foreign currency. The swaps are commonly used by companies that operate in different
countries. For example, if a company is conducting business abroad, it would often use
currency swaps to retrieve more favorable loan rates in their local currency, as opposed to
borrowing money from a foreign bank.
o For example, a company may take a loan in the domestic currency and enter a swap contract
with a foreign company to obtain a more favorable interest rate on the foreign currency that is
otherwise is unavailable.
Types of Currency Swap Contracts

Similar to interest rate swaps, currency swaps can be classified based on the types of legs involved
in the contract. The most commonly encountered types of currency swaps include the following:
o Fixed vs. Float: One leg of the currency swap represents a stream of fixed interest rate
payments while another leg is a stream of floating interest rate payments.
o Float vs. Float (Basis Swap): The float vs. float swap is commonly referred to as basis swap.
In a basis swap, both swaps’ legs both represent floating interest rate payments.
o Fixed vs. Fixed: Both streams of currency swap contracts involve fixed interest rate
payments.
 COUNTERVAILING DUTY (CVD)

• CVD are tariffs levied on imported goods to offset subsidies made to producers of
these goods in the exporting country.
• CVDs are meant to level the playing field between domestic producers of a product
and foreign producers of the same product who can afford to sell it at a lower price because
of the subsidy they receive from their government.
• The World Trade Organization (WTO) permits the imposition of countervailing duty
by its member countries.
• The WTO’s Agreement on Subsidies and Countervailing Measures (SCM
Agreement) addresses two main aspects: multilateral regulations regarding subsidies and
the use of countervailing measures against injury from subsidized imports.
• Multilateral disciplines set rules on subsidy provisions and are enforced through the
WTO dispute settlement mechanism.
• Countervailing duties are imposed unilaterally by a member after investigating and
satisfying criteria under the SCM Agreement.
Defining Subsidies
• "Subsidy" is defined in the SCM Agreement as a financial contribution by a government
conferring a benefit.
• Specificity determines whether a subsidy applies to a particular enterprise, industry, or

region.
• Subsidies are categorized as prohibited (e.g., export subsidies, local content subsidies) and
actionable (subject to challenge or countervailing measures).
• Actionable subsidies can cause injury, prejudice, or nullification of benefits.
• However, transition rules provide exemptions or extended periods for developing countries
and those transitioning to market economies to phase out certain subsidies.
Countervailing Measures in India

• Directorate General of Trade Remedies (DGTR) under Ministry of Commerce &
Industry, is the single national authority for administering all trade remedial measures.
• The Directorate General of Anti-Dumping & Allied Duties (DGAD) which was
formed in 1997 has been restructured as DGTR in May 2018 by restructuring and re-
designing DGAD into DGTR by incorporating all the trade remedial functions i.e. Anti-
Dumping Duty (ADD), Countervailing Duty, Safeguards Duty (SGD), Safeguards Measures
(QRs) under a single window framework.
• It is a quasi-judicial body that independently undertakes investigations before making its
recommendations to the Central Government.
 CRITICAL MINERALS
The Government of India has made a significant move in the Mining Sector by launching the
first-ever auction of critical minerals, offering 20 blocks for sale to Private Sectors.
The mineral blocks are spread across eight states, with Tamil Nadu having the most blocks
(seven).
Licenses
• Rights for these blocks vary; four
blocks are auctioned for Mining
Licenses (ML), enabling immediate
mining operations,
• While the remaining 16 blocks are
auctioned for Composite Licenses
(CL), allowing geological exploration
before mining.
Critical Minerals
• Critical minerals are those minerals that
are essential for economic
development and national security,
the lack of availability of these minerals or concentration of extraction or processing in a few
geographical locations may lead to supply chain vulnerabilities and even disruption of supplies.
Declaration of Critical Minerals:

• It is a dynamic process, and it can evolve over time as new technologies, market dynamics,
and geopolitical considerations emerge.
• Different countries may have their own unique lists of critical minerals based on their specific
circumstances and priorities.
• The US has declared 50 minerals critical in light of their role in national security or economic
development.
• Japan has identified a set of 31 minerals as critical for their economy.
• The UK considers 18 minerals critical, EU (34) and Canada (31).
India
• In July 2023, the government identified 30 minerals as Critical Minerals by amending
the Mines and Minerals (Development and Regulation) Act, 1957, through the
MMDR Amendment Act, 2023, empowering the Central Government to auction blocks of
these minerals.
• The 30 critical minerals are Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium,
Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE,
Phosphorous, Potash, REE, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium,
Tungsten, Vanadium, Zirconium, Selenium and Cadmium.
Significance of Critical Minerals
• Industries such as high-tech electronics, telecommunications,

transport, and defense heavily rely on these minerals.
Economic • Additionally, critical minerals are essential for green technologies
Development: like solar panels, wind turbines, batteries, and electric vehicles.
• Given India's significant domestic demand and potential in these
sectors, their growth can lead to job creation, income generation,
and innovation.
• These minerals are vital for defense, aerospace, nuclear, and
National
space applications, necessitating the use of high-quality and reliable
Security:
materials capable of withstanding extreme conditions and performing
complex functions.
• They are integral to the transition toward clean energy and a
low-carbon economy, enabling the reduction of India's reliance on
Environmental fossil fuels and greenhouse gas emissions.
Sustainability:
• With a commitment to attaining 450 GW of renewable energy capacity
by 2030, these minerals are essential for achieving India's green
objectives.
 CREDIT RATING AGENCIES

• A credit rating agency is an agency that assess the creditworthiness of country,
organisation, individual or entity and assign ratings to it.
• In India, CRAs are regulated by SEBI (Credit Rating Agencies) Regulations, 1999 of
the Securities and Exchange Board of India Act, 1992.
• The global credit rating industry is highly concentrated, with 3 agencies - Moody's, Standard
& Poor's, and Fitch.
Sovereign credit rating

• A sovereign credit rating is an independent
assessment of the creditworthiness of a
country or sovereign entity.
• By allowing external credit rating agencies to
review its economy, a country shows that it is
willing to make its financial information
public to investors.
• The factors that determine the sovereign
credit rating of a country include: Per capita
income; GDP growth; Rate of inflation;
External debt; Economic development;
History of defaults
• A country with high credit ratings can access
funds easily from the international bond
market and also secure foreign direct
investment.
Top Credit Rating Agencies in India
1. CRISIL (Credit Rating Information Services of India Limited): CRISIL was established in
1987. It is India’s first and major Credit Rating Agency. Standard and Poor’s International is
the parent company of CRISIL.
2. CARE (Credit Analysis and Research Limited): CARE was established in 1993.
3. ICRA (Investment Information and Credit Rating Agency): It’s an associate of Moody’s
Investors Service.
4. Brickwork Ratings India Private Limited: It was established in 2007.
5. SMERA (Small and Medium Enterprises Rating Agency of India Limited): This is one of the
Credit Rating Agencies in India that was set up in 2005 exclusively for Micro, small and
medium enterprises by SIDBI.
6. India Ratings and Research Pvt Ltd: It is a wholly-owned subsidiary of Fitch Group and
provides accurate and timely credit opinions on the country’s credit market.
o Ratings are based on a comprehensive evaluation of the strengths and weaknesses of the
company fundamentals including financials along with an in-depth study of the industry as
well as macro-economic, regulatory, and political environment.
Issuer Pay Model

o Under this Model, the Issuer i.e. the company pays the money to the Credit rating agencies
(CRAs) in order to get credit rating for the instruments issued by it.
o In order to enable the CRAs to give the credit rating, the company provides all the necessary
details such as company’s balance sheet and business details. Based upon a thorough and
detailed analysis of such details, the CRA issues credit rating to the instrument issued by the
company.
Investor Pay Model

o Under this Model, the investor is required to pay the money to the CRA in order to know the
credit rating.
o Hence, only those investors who are ready to pay for a rating can access the credit rating of the
instrument. The credit rating issued by the CRA is not commonly available to all the investors
free of cost.
Regulator pay Model

o Under this model, the money is paid by the regulator in the country in order to get the credit
rating.
o Either the company or the investor need not pay for the credit rating. The credit ratings would
be made available to all the investors.
Issuer Pay Model Investor pays model Regulator pays

model
Advantages Advantages Advantages

• Ratings are available to the • It would avoid the serious It eliminates the
entire market free of charge conflict of interest of the CRAs. conflict of interest as
and will highly aid the small • This would enable the investors seen in both Issuer
investors. to get the credit rating based on Pay Model and
• It gives the rating agencies Investor Pay Model.
the true and actual financial
access to high-quality condition of the company.
information that enhances Disadvantages
the quality of analysis. Disadvantages • The problem with
• Ratings would be available only this model lies in the
Disadvantages choosing the CRA
to those investors who can pay
• It can lead to serious conflict for them and takes ratings out and payment to be
fixed.
of interest since the CRAs are of the public domain and thus
paid by the company to get affects the small investors. • The CRA chosen by
the rating. The CRAs may • The company may not always the regulator may
inflate the rating to satisfy share all the necessary not be able to
the company. information with the CRAs provide the best
• It may lead to ‘Rating credit rating.
which then can have an adverse
Shopping’ which refers to impact on the quality of the Further, if the
regulator pays less
the situations where an ratings.
issuer approaches different • It can pose serious conflict of amount of money to
rating agencies for the the CRA, the CRA
interest involving the investors may find it difficult
ratings and then choose to themselves. If investors are the
publish the most favourable to continue with its
payees, they can influence business and could
ratings to disclose it to the CRAs to give lower-than-
public via media while have an adverse
warranted ratings to help them impact on the
concealing the lower ratings. negotiate higher interest rates. quality of the ratings
issued.
 CONSUMPTION BASED POVERTY ESTIMATES

• Consumption-based poverty estimates are a widely used approach to measure poverty
and well-being.
• This method focuses on individuals' or households' consumption patterns as an
indicator of their economic welfare.
• By analyzing consumption patterns, policymakers and researchers can gain valuable

insights into the material conditions of people's lives, enabling them to make
informed decisions to address poverty and inequality effectively.
• This approach provides a comprehensive view of people's access to goods and
services, which is essential for shaping targeted policies and interventions. It's an integral
part of understanding the socioeconomic dynamics and devising strategies to uplift those in
need.
Features
Income vs. Consumption

• While income is the amount of money an individual or household earns over a given period,
consumption reflects the actual spending on goods and services during that same period.
• Consumption provides a more accurate representation of a person's well-being
because it directly indicates what they can afford and utilize.
• For instance, a person might have a high income but choose to save a significant portion,
resulting in a lower consumption level
Direct Measure
• Consumption data is collected through surveys and questionnaires that ask individuals
about their spending habits.
• These surveys typically cover various categories of expenditures, such as food, housing,
transportation, healthcare, entertainment, and more.
• By directly asking individuals about their expenditures, consumption data can provide a
comprehensive view of how people allocate their resources.
Indirect Indicators
• Consumption-based estimates can indirectly indicate the level of access individuals
have to essential services.
• For instance, higher spending on education, healthcare, and nutrition can be indicative of
better access to these services.
• Conversely, lower spending in these areas might suggest limited access to essential
services. Thus, consumption data can serve as a proxy for assessing the quality of life and access
to basic needs.
Poverty Lines
• Poverty lines are thresholds used to define the minimum level of consumption required
to maintain a basic standard of living.
• By establishing these lines, policymakers can identify individuals or households living below
the poverty line and target interventions to improve their living conditions.
• Consumption-based poverty measures help to focus on the actual living
standards of individuals rather than just their income.
 CPTPP
Britain formally signed the treaty to join a major Trans-Pacific Trade Pact, becoming the first
new country to take part since its inception in 2018.
The signing was part of the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) commission meeting held in New Zealand.
• The CPTPP is a landmark pact agreed upon in 2018 that cuts trade barriers among 11
countries, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore and Vietnam.
• The pact requires countries to eliminate or significantly reduce tariffs and make
strong commitments to opening services and investment markets.
• It also has rules addressing competition, intellectual property rights, and protections for
foreign companies.
• CPTPP is seen as a bulwark against China’s dominance in the region, although Beijing
has applied to join, along with Taiwan, Ukraine, Costa Rica, Uruguay, and Ecuador.
• Politicians in several countries, including the UK and Australia, are lobbying to keep China out,
while Beijing is trying to prevent Taiwan from joining.
• Britain will become the 12th member of the pact that cuts trade barriers, as it looks
to deepen ties in the Pacific after its exit from the European Union in 2020.
 CRYPTO ASSET INTERMEDIARIES (CAI)

The Financial Stability Board (FSB)’s report on crypto-asset intermediaries sought
measures to enhance cross-border cooperation and information sharing among local
authorities.
This is to effectively regulate and address gaps in Multi-function Crypto-asset
Intermediaries (MCIs) operating globally.
Financial Stability Board (FSB)

• The FSB is an international body that monitors and makes recommendations about
the global financial system.
• FSB was established in 2009 under the aegis of G20.
• India is an active Member of the FSB having three seats in its Plenary represented by
Secretary of Economic Affairs, Ministry of Finance, Deputy Governor of Reserve Bank of India
(RBI), Chairperson of Securities and Exchange Board of India (SEBI).
Crypto Assets
• Crypto assets are a digital representation of value that can transfer, store, or trade
electronically. This also includes non-fungible tokens (NFTs).
• NFTs are blockchain-based tokens that each represent a unique asset like a piece of
art, digital content, or media.
• An NFT can be thought of as an irrevocable digital certificate of ownership and
authenticity for a given asset, whether digital or physical.
• Crypto assets are a subset of digital assets that use cryptography to protect digital data
and distributed ledger technology to record transactions.
Multi-function Crypto-asset Intermediaries (MCIs)

• MCIs is an individual firm, or groups of affiliated firms that offer a range of crypto-
based services, products and functions which primarily revolve around operating the trading
platform. Examples include Binance, Bitfinex and Coinbase.
• The primary source of revenue for these platforms are the transaction fees generated
from trading-related activities.
• These MCIs may also derive revenue from operating a blockchain infrastructure for
which they may collect transaction validation fees.
 CURRENCY SWAP
• A currency swap contract (also known as a cross-currency swap contract) is a derivative
contract between two parties that involves the exchange of interest payments, as
well as the exchange of principal amounts in certain cases, that are denominated
in different currencies.
• Although currency swap contracts generally imply the exchange of principal amounts, some
swaps may require only the transfer of the interest payments.
• A currency swap consists of two streams (legs) of fixed or floating interest payments
denominated in two currencies. The transfer of interest payments occurs on
predetermined dates. In addition, if the swap counterparties previously agreed to exchange
principal amounts, those amounts must also be exchanged on the maturity date at the same
exchange rate.
• Currency swaps are primarily used to hedge potential risks associated with
fluctuations in currency exchange rates or to obtain lower interest rates on loans
in a foreign currency. The swaps are commonly used by companies that operate in different
countries. For example, if a company is conducting business abroad, it would often use
currency swaps to retrieve more favorable loan rates in their local currency, as opposed to
borrowing money from a foreign bank.
• For example, a company may take a loan in the domestic currency and enter a swap contract
with a foreign company to obtain a more favorable interest rate on the foreign currency that is
otherwise is unavailable.
Types of Currency Swap Contracts

Similar to interest rate swaps, currency swaps can be classified based on the types of legs involved
in the contract. The most commonly encountered types of currency swaps include the following:
o Fixed vs. Float: One leg of the currency swap represents a stream of fixed interest rate
payments while another leg is a stream of floating interest rate payments.
o Float vs. Float (Basis Swap): The float vs. float swap is commonly referred to as basis swap.
In a basis swap, both swaps’ legs both represent floating interest rate payments.
o Fixed vs. Fixed: Both streams of currency swap contracts involve fixed interest rate
payments.
 CAPITALISM, COMMUNISM, AND SOCIALISM
Capitalism Communism Socialism
Maximisation of profit From each according From each according

by any means to his ability, to each to his ability, to each
necessary. according to his needs according to his
It also believes in contribution
Laissez-Faire, a
Ideology philosophy that
emphasizes on leaving
circumstances to run
their natural course
without any external
intervention
In capitalist societies, The economy is The economy is
Economy the economy is planned planned by the planned by the
Planning as per the functioning of Central Government central government
the free-markets
Private ownership of All economic Individuals can
economic resources and resources are own personal
property is actively publicly owned and property but all
Ownership encouraged with little to controlled by the industrial and
of no government government. production capacity
Economic intervention Individuals hold no is communally
Resources personal property or owned and managed
assets. by a democratically
elected government.
There exists a distinct Class is abolished. Classes exist but the

class whose standing in The chances of one differences between
society is measured by worker earning more them are greatly
Class the material wealth in than the other are reduced. It is
distinction their possession nonexistent possible for some
people to earn more
than others.
As per the ideology, it is Religion is Freedom of religion

Religion indifferent towards effectively abolished is allowed
religion, but bias thus

exist towards religious
groups who are well-off
or as rich as another
religious group
The welfare system is Supports widespread The state will be for
available only to those universal social the welfare of
Welfare who have the wealth to welfare with an everyone in the
pay for their services. emphasis on public society without any
health and education discrimination
The modern form of Although the concept of The economy of the

capitalism can be traced egalitarian societies 3rd century BC
to the early existed since the time of Mauryan Empire
Renaissance period Ancient Greece, the was described by
in the 15th -16th foundations of modern- economists as “a
Centuries. day communism were socialized
The wealthy merchants established in 1848 by monarchy” and “a
Origins of Italian city-states the German sort of state
engaged in small Philosopher, Karl socialism”.
industry and wage- Marx (May 5th, 1818 – It became more
labour practices at the 14 March 1883). prominent towards
time. the end of the 18th
century and after
1848
 CESS
o Cess is a tax levied for a specific purpose and ought to be used for the same only.
o The process of cess levying occurs after Parliament has authorised its creation through
an enabling legislation that specifies the purpose for which the funds are being raised.
o However, the proceeds collected from cess levies and other charges are not being used lately
for the purpose they were introduced.
o The latest audit of the Union Government’s accounts tabled in Parliament has revealed that
about 40% of all the cess collections in 2018-19 have been retained in the Consolidated Fund
of India (CFI).
What Is A Cess?
o Different from the usual taxes and duties like excise and personal income tax, a Cess is
imposed as an additional tax besides the existing tax (tax on tax) with a purpose
of raising funds for a specific task.
o For example, the Swachh Bharat cess is levied by the government for cleanliness activities that
it is undertaking across India.
o The Union government is empowered to raise revenue through a gamut of levies, including
taxes (both direct and indirect), surcharges, fees and cess.
o A cess, generally paid by everyday public, is added to their basic tax liability paid as part of
total tax paid.
o Article 270 of the Constitution allows cess to be excluded from the purview of the
divisible pool of taxes that the Union government must share with the States.
Divisible Pool
o A divisible pool is a portion of Gross Tax Revenue (GTR) that is distributed between the Centre
and the States.
o It consists of all taxes, except surcharges and cess levied for specific purpose, net
of collection charges.
o Post-Independence, the cess taxes were linked initially to the development of a particular
industry, including a salt cess and a tea cess in 1953.
o Subsequently, the introduction of a cess was motivated by the aim of ensuring labour welfare.
o Some cess that exemplified this thrust were the iron ore mines labour welfare cess in 1961, the
limestone and dolomite mines labour welfare cess of 1972 and the cine workers welfare cess
introduced in 1981.
Types of Cess
o The introduction of the The Goods and Services tax (GST) in 2017 led to most cess being
done away with and as of August 2018, there were only few cess that continued to be levied.
These were:
o Cess on Exports
o Cess on Crude Oil
o Health and Education Cess
o Road and Infrastructure Cess,
o Other Construction Workers Welfare Cess,
o National Calamity Contingent Duty
o Duty on Tobacco and Tobacco Products
o The GST Compensation Cess.
o The Finance Minister Nirmala Sitharaman introduced a new cess — a Health Cess of 5% on
imported medical devices — in the Finance Bill for 2020-2021.
 DIGITAL PAYMENT INDEX

The RBI’s Digital Payment Index (DPI) comprises five broad parameters that enable
measurement of deepening and penetration of digital payments in the country over different time
periods:
1. Payment enablers (with 25 per cent weight)
2. Payment infrastructure—demand-side factors (10 per cent)
3. Payment infrastructure—supply-side factors (15 per cent)
4. Payment performance (45 per cent) and
5. Consumer centricity (5 per cent).
 DEMAT ACCOUNT
• A Demat Account is a bit like a bank account for your share certificates and other
securities that are held in an electronic format.
• Demat Account is short for dematerialisation account and makes the process of holding
investments like shares, bonds, government securities, Mutual Funds, Insurance and ETFs
easier, doing away the hassles of physical handling and maintenance of paper shares and
related documents.
To understand Demat Account meaning, let’s use an example.

• Let’s say you want to purchase the shares of Company X.
• When you buy those shares, they will have to be transferred in your name.
• In earlier times, you got physical shares certificates from the exchange with your name
on it. This, as you can imagine, involved tonnes of paperwork.
• Each time a share was bought and sold, a certificate had to be created. To do away with
this paperwork, India introduced the Demat Account system in 1996 for trades on NSE.
Types of Demat Accounts

1. Regular Demat Account: This is for Indian citizens who reside in the country.
2. Repatriable Demat Account: This kind of Demat Account is for non-resident Indians
(NRIs), which enables money to be transferred abroad. However, this type of Demat Account
needs to be linked to a NRE bank account.
3. Non-Repatriable Demat Account: This again is for the NRIs, but with this type of Demat
Account, fund transfer abroad is not possible. Also, it has to be linked to an NRO bank account.
Benefits of a Demat Account
• Prior to the existence of Demat Accounts, share used to exist as physical

paper certificates.
• Once you purchased shares, you had to store several paper certificates for
No paper
the same. Such copies were vulnerable to loss and damage, and also come
certificates
attached with lengthy transfer processes.
• Demat Account turned all of it electronic, saving you much hassle.
• With a Demat Account you can store as many shares as you need
to. This way, you can trade in volumes and keep track of the shares in your
Ease of
account.
Storage
• You can also rely on your Demat Account to execute quick transfer of
shares.
• Apart from stock market shares, you can also use your Demat Account to
hold multiple assets including mutual funds, Exchange Traded
Variety of Funds (ETFs), government securities, etc.
Instruments • Thus, with a Demat Account, you can approach your investment plans
more holistically and easily build a diverse portfolio.
Easy Access • Accessing your Demat Account is super easy.

• A Demat Account also comes with a nomination facility.
• In case the investor passes away, the appointed nominee receives the
Nomination shareholding in the account.
• This feature enables you to make plans for future eventualities and avoid
legal disputes.
 DEBT-TO-GDP RATIO
o The debt-to-GDP ratio compares a country's sovereign debt to its total economic
output for the year. Its output is measured by gross domestic product (GDP).
o Learn how to calculate this figure and what it can tell you about a country's financial footing.
What Is the Debt-to-GDP Ratio?

o The debt-to-GDP ratio is a simple way of comparing a nation's economic output (as measured
by gross domestic output) to its debt levels.
o In other words, this ratio tells analysts how
much money the country earns every year and
how that compares to the money that country
owes. The debt is expressed as a percentage of
GDP.
o The formula for debt-to-GDP is simple: you
divide a nation's debt by its GDP.
How Does the Debt-to-GDP Ratio Work?

o The debt-to-GDP ratio indicates how strong a country's economy is and the likelihood
of paying off its debt. It's used to compare debt between countries and determine whether
a country is headed for economic turmoil.
o The debt-to-GDP ratio is a useful tool for investors, leaders, and economists. It
allows them to gauge a country's ability to pay off its debt. A high ratio means a country isn't
producing enough to pay off its debt.
o A low ratio means there is plenty of economic output to make the payments.
o If a country were a household, GDP is like its income. Banks will give you a bigger loan if you
make more money. In the same way, investors will be happy to take on a country's debt if it has
a relatively higher level of economic output. Once investors begin to worry about repayment,
they will perceive a higher risk of default, which means they will demand a higher interest rate
for their investment. That increases the country's cost of debt. When the cost of debt gets out
of hand, it can quickly become a debt crisis.
 DEVELOPMENT BANKS
o As the name suggests, these banks are specialised financial institutions that are set up so as to
promote the socio-economic development in a country. These Banks provide long term credit
at concessional rates to certain critical sectors such as Agricultural, Infrastructure, Industries
etc.
o Most of the advanced economies such as USA, UK, Japan etc. had set up development banks
in the past which enabled them to attain higher growth momentum. On similar lines, China
has also set up development banks in the field of agriculture and Trade so as to promote growth
and development.
o Some of the development Banks in India include NABARD (Agriculture and Rural
Development), Industrial Finance Corporation of India (Industrial Development), SIDBI and
MUDRA (MSME Development), EXIM Bank (Trade Development), National Housing Bank
(Housing Infrastructure).
Difference between development banks and commercial banks

o Source of Funds: The Commercial Banks are majorly dependant on the depositors' money
for extending funds while the development Banks are dependent on the Government's financial
support.
o Nature of Loans: The Commercial Banks extend short-term loans while the development
Banks extend long-term loans.
o Nature of Role: The role of the commercial banks is confined to the extension of loans while
the role of development banks is much more multidimensional. The Development Banks also
offer various kinds of assistance to the companies such as identification of projects for
undertaking investment, ensuring that the companies invest in financially viable projects,
offering managerial assistance for the execution of projects etc.
Nature of Assistance provided by the Development Banks: The Development Banks may offer the
following kinds of assistance to the companies:
o Extend long term finance at concessional rates to the companies.
o Subscribe/buy the shares of the companies which are involved in financing of infrastructure,
industrial or housing projects
o Partial Credit Guarantee on the repayment of the bonds issued by the companies. This means
that if the company issuing the bond defaults on its payment, the Development Bank would
repay back a certain amount of money to the investors. This is known as Credit
Enhancement. Such kind of guarantee on the repayment of loans reduces the risk enabling
the companies to borrow money at lower rates of interest.
Benefits of Development Banks

o Meet Investment Needs: The Government has set a vision to realise $ 5 trillion by the end
of 2024-25. In this regard, the Economic Survey has recommended that Indian economy has
to shift gears from consumption expenditure to Investment, wherein the private sector
investment should become the main engine of growth of Indian Economy. The setting up of
the development Banks would boost the credit creation in the economy leading to higher
investment by the private sector.
o Reduce Pressure on Commercial Banks: The Financial System in India is not diversified
and it is basically dominated by the Indian Banks. The Banks have mainly relied on short-term
deposits for lending to long term infrastructural projects leading to Asset-Liability Mismatch
and higher NPAs. The developed economies have diversified financial market consisting of
Banks (for meeting short-term credit requirements) and bond market (for meeting long term
credit requirements). The setting up of development Banks would deepen the bond market
(through credit enhancement) and reduce pressure on the commercial banks leading to
diversified financial market.
o Lower Cost of Capital: As stated before, the credit enhancement provided by the
development Banks would enable the companies to raise loans at lower rates of interest leading
to decrease in the cost of capital.
o Reduce Foreign Currency Exposures: Presently, some of the Infrastructural and housing
finance companies borrow loans from overseas market. The depreciation in the value of Rupee
may put additional burden on them and expose them to fluctuations in the exchange rate. The
development banks would enable these companies to raise loans in the domestic market and
reduce the foreign currency exposure.
 DIRECT TAX
o Direct taxes are type taxes that are paid straight or directly to the government, such as income
tax, poll tax, land tax, and personal property tax. Such direct taxes are computed based
on the ability of the taxpayer to pay, which means that the higher their capability of paying is,
the higher their taxes are.
Types of Direct Taxes in India

o Income Tax: Depending on an individual’s age and earnings, income tax must be paid.
Various tax slabs are determined by the Government of India which determines the amount of
Income Tax that must be paid. The taxpayer must file Income Tax Returns (ITR) on a yearly
basis. Individuals may receive a refund or might have to pay a tax depending on their ITR.
Huge penalties are levied in case individuals do not file ITR.
o Wealth Tax: The tax must be paid on a yearly basis and depends on the ownership of
properties and the market value of the property. In case an individual owns a property, wealth
tax must be paid and does not depend on whether the property generates an income or not.
Corporate taxpayers, Hindu Undivided Families (HUFs), and individuals must pay wealth tax
depending on their residential status. Payment of wealth tax is exempt for assets like gold
deposit bonds, stock holdings, house property, commercial property that have been rented for
more than 300 days, and if the house property is owned for business and professional use.
o Estate Tax: It is also called as Inheritance Tax and is paid based on the value of the estate or
the money that an individual has left after his/her death.
o Corporate Tax: Domestic companies, apart from shareholders, will have to pay corporate tax.
Foreign corporations who make an income in India will also have to pay corporate tax. Income
earned via selling assets, technical service fees, dividends, royalties, or interest that is based in
India are taxable. The below-mentioned taxes are also included under Corporate Tax:
▪ Securities Transaction Tax (STT): The tax must be paid for any income that is earned via
security transactions that are taxable.
▪ Dividend Distribution Tax (DDT): The Dividend Distribution Tax is a tax levied on
dividends that a company pays to its shareholders out of its profits. The Dividend Distribution
Tax, or DDT, is taxable at source, and is deducted at the time of the company distributing
dividends. The dividend is the part of profits that the company shares with its shareholders.
The law provides for the Dividend Distribution Tax to be levied at the hands of the company,
and not at the hands of the receiving shareholder. However, an additional tax is imposed on
the shareholder, who receives over Rs. 10 lakhs in dividend income in a financial year.
▪ Fringe Benefits Tax: Companies that provide fringe benefits for maids, drivers, etc., Fringe
Benefits Tax is levied on them.
▪ Minimum Alternate Tax (MAT): For zero tax companies that have accounts prepared
according to the Companies Act, MAT is levied on them.
o Capital Gains Tax: It is a form of direct tax that is paid due to the income that is earned from
the sale of assets or investments. Investments in farms, bonds, shares, businesses, art, and
home come under capital assets. Based on its holding period, tax can be classified into long-
term and short-term.
Any assets, apart from securities, that are sold within 36 months from the time they were
acquired come under short-term gains. Long-term assets are levied if any income is generated
from the sale of properties that have been held for a duration of more than 36 months.
Advantages of Direct Taxes

o Economic and Social balance: The Government of India has launched well-balanced tax
slabs depending on an individual’s earnings and age. The tax slabs are also determined based
on the economic situation of the country. Exemptions are also put in place so that all income
inequalities are balanced out.
o Productivity: As there is a growth in the number of people who work, the returns from direct
taxes also increases. Therefore, direct taxes are considered to be very productive.
o Inflation is curbed: Tax is increased by the government during inflation. The increase in
taxes reduces the necessity for goods and services, which leads to inflation to compress.
o Certainty: Due to the presence of direct taxes, there is a sense of certainty from the
government and the taxpayer. The amount that must be paid and the amount that must be
collected is known by the taxpayer and the government, respectively.
o Distribution of wealth is equal: Higher taxes are charged by the government to the
individuals or organisations that can afford them. This extra money is used to help the poor in
India.
Direct Taxes vs. Indirect Taxes

o Direct taxes refer to taxes that are filed and paid by an individual directly to the government.
Indirect taxes, on the other hand, are taxes that can be transferred to another entity. Therefore,
the burden of paying them can be put on another person’s shoulders.
o Direct taxes can be evaded in the absence of proper collection administration. Indirect taxes
cannot be escaped from because these are charged automatically on goods and services.
o Direct taxes can help address inflation while indirect taxes can lead to inflation.
o Direct taxes lessen the savings of earners, but indirect taxes encourage the opposite because
they make products and services more expensive and unaffordable.
o Direct taxes are imposed only on people that belong to various income brackets. Indirect taxes,
on the other, can be felt by everyone who buys goods and avails services.
 DISINVESTMENT
o Disinvestment refers to the mechanism in which the Government loses a part of its ownership
of the PSUs through the sale of shares.
o The Disinvestment as a policy was adopted by the Government post 1991 LPG Reforms.
o The Department of Investment and Public Asset Management under the Ministry of Finance
acts as the nodal agency for the Disinvestment in India.
Strategic Disinvestment
o According to the Department, strategic sale of a company has two elements:
▪ Transfer of a block of shares to a Strategic Partner; and
▪ Transfer of management control to the Strategic Partner.
o The strategic sale takes place when more than 51% of shares go to the private sector strategic
partner. At the same time, it is not necessary that more than 51% of the total equity goes to the
Strategic Partner for the transfer of management to take place. In other words, strategic sale
can take place even if the private sector partner gets less than 51% shares.
o According to the strategic sale guidelines issued by DIPAM, after the transaction, the Strategic
Partner may hold less percentage of shares than the Government but the control of
management would be with partner.
o For instance, if in a PSU the shareholding of Government is 51% and the balance is dispersed
in public holdings, then Government may go in for a 25% strategic sale and pass on
management control, though the Government would post-transfer have a larger share holding
(26%) than the Strategic Partner (25%).
o But the necessary condition is that the control of the firms should be with the strategic partner.
o NITI Aayog: Identifies CPSEs for Strategic Disinvestment; NITI Aayog advises on the mode
of sale and percentage of shares to be sold; Core Group of Secretaries on Disinvestment (CGD)
headed by Cabinet Secretary considers the recommendations of NITI Aayog; Decision by the
Cabinet Committee on Economic Affairs (CCEA) on strategic disinvestment.
 DIRECT FOREIGN LISTING

The Indian government has permitted certain Indian companies to directly list on foreign
stock exchanges to access global capital.
This provision, effective since 30th October 2023, was introduced through the Companies
(Amendment) Act, 2020.
About Direct Listing
• Direct listing is a process by which a company can list its shares on a foreign stock
exchange without issuing new shares or raising capital from investors.
• Direct listing is different from the traditional initial public offering (IPO), where a
company sells a portion of its shares to the public and raises funds from investors.
• Direct listing is also different from the depository receipt (DR) route, where a
company issues its shares to a custodian bank, which then issues DRs to foreign investors.
• DRs are negotiable certificates that represent the underlying shares of the company and
trade on a foreign exchange.
• Direct listing allows a company to access a larger and more diverse pool of investors, enhance
its visibility and brand value, and improve its corporate governance and compliance standards.
How do Indian Companies Currently List on Foreign Exchanges?

• Currently, Indian companies list on foreign bourses using depository receipts, including
American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).
• To list on foreign stock exchanges, Indian companies entrust their shares to an Indian
custodian, who then issues depository receipts (DRs) to foreign investors.
• Between 2008 and 2018, 109 companies raised over Rs 51,000 crore through ADRs/GDRs.
• However, after 2018, no Indian companies pursued overseas listings through this route.
Benefits of Direct Foreign Listing

• Access to a larger and more liquid market, which can increase the demand and valuation
of their shares.
• Ability to reach out to a wider and more sophisticated investor base, which can enhance their
reputation and credibility.
• Startups and unicorns may benefit from this avenue of raising funds and increasing their
global profile.
• Savings on the costs and time involved in the IPO or DR process, such as underwriting fees,
listing fees, legal fees, etc.
• Avoidance of the dilution of ownership and control that comes with issuing new shares
or DRs.
• Exposure to the best practices and regulations of the foreign jurisdiction can improve
their governance and transparency.
Challenges Involved in Direct Foreign Listing

• Compliance with the laws and rules of the foreign jurisdiction, which may be
different from or more stringent than those in India.
• Challenges in direct foreign listings include valuation issues, as global investors may not
offer the same valuations as in India, potentially impacting the company's market perception
and pricing.
• Exposure to the currency fluctuations and market volatility of the foreign exchange
can affect their share price and returns.
• Potential conflicts or disputes with the existing shareholders, regulators, or tax
authorities in India or abroad.
• Clarity is needed on which classes of public companies can use this route, the classes of
securities that can be listed, the foreign jurisdictions and permitted stock exchanges for listing,
and the exemptions offered to such companies in terms of procedural compliances.
 EXCHANGE TRADED FUND (ETF)

• An Exchange-Traded Fund (ETF) is a basket of securities that trade on an exchange, just
like a stock.
• ETF reflects the composition of an Index, like BSE Sensex.
• Its trading value is based on the Net Asset Value (NAV) of the underlying stocks (such
as shares) that it represents.
• ETF share prices fluctuate all day as it is bought and sold. This is different from Mutual
Funds that only trade once a day after the market closes.
• An ETF can own hundreds or thousands of stocks across various industries, or it could
be isolated to one particular industry or sector.
• Bond ETFs are a type of ETFs which may include government bonds, corporate bonds,
and state and local bonds—called municipal bonds.
• A bond is an instrument that represents a loan made by an investor to a borrower
(typically corporate or governmental).
• Besides being cost efficient, ETFs offer a diversified investment portfolio to investors.
 GOLD ETF
• Gold ETF, which aims to track the domestic physical gold price, are passive investment
instruments that are based on gold prices and invest in gold bullion.
• Gold ETFs are units representing physical gold which may be in paper or dematerialised
form.
• One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very
high purity.
• They combine the flexibility of stock investment and the simplicity of gold investments.
Advantages
• There is complete transparency on the holdings of an ETF.
• Gold ETFs have much lower expenses as compared to physical gold investments.
• No wealth tax, no security transaction tax, no VAT and no sales tax is levied on ETFs.
• There is no fear of theft as ETFs are safe and secure as units held in the Demat Account of
the holder.
• The Shift to Digital Gold: The number of investors in Gold ETFs has increased from close
to 4.61 lakh in January 2020 to 48.06 lakh in September 2023.
 e-RUPI
o e-RUPI is basically a digital voucher which a beneficiary gets on his phone in the
form of an SMS or QR code. It is a pre-paid voucher, which he/she can go and redeem
it at any centre that accepts its.
o For example, if the Government wants to cover a particular treatment of an employee in a
specified hospital, it can issue an e-RUPI voucher for the determined amount through a partner
bank. The employee will receive an SMS or a QR Code on his feature phone / smart phone.
He/she can go to the specified hospital, avail of the services and pay through the e-RUPI
voucher received on his phone.
o Thus e-RUPI is a one-time contactless, cashless voucher-based mode of payment
that helps users redeem the voucher without a card, digital payments app, or
internet banking access.
o e-RUPI should not be confused with Digital Currency which the Reserve Bank of India is
contemplating. Instead e-RUPI is a person specific, even purpose specific digital
voucher.
o The National Payments Corporation of India (NPCI), which oversees the digital payments
ecosystem in India, has launched e-RUPI, a voucher-based payments system to promote
cashless transactions.
o It has been developed in collaboration with the Department of Financial Services,
Ministry of Health & Family Welfare and National Health Authority.
 EQUITY MARKET
o Equity market is a place where stocks and shares of companies are traded. The equities
that are traded in an equity market are either over the counter or at stock exchanges.
o Often called as stock market or share market, an equity market allows sellers and buyers to
deal in equity or shares in the same platform.
o Equity market, often called as stock market or share market, is a place where shares of
companies or entities are traded. The market allows sellers and buyers to deal in equity
or shares in the same platform.
o In the global context, equities are traded either over the counter or at stock exchanges. There
are multiple buyers and sellers of the same equity/share.
o There is virtually no difference between stock and equity. These two words are commonly used
to mean shares. Stock and equity are just synonyms.
How Is Equity Market In India ?

o Equities are mostly traded on the stock exchanges in India. In the Indian stock market, equities
are available for trading at the National Stock Exchange (NSE) , the Bombay Stock
Exchange (BSE) and the latest entrant, Metropolitan Stock Exchange of India
(MSE). Shares of stock market listed companies are bought/sold.
o Equity share trading is roughly in two forms - spot/cash market and futures market.
These are the different types of equity market in India. The spot market or cash market is a
public financial market in which stocks are traded for immediate delivery. The futures market
is a place where the shares' delivery is due at a later date.
o Shares/stocks traded in the equity market belong to companies that show growth. Investors
typically invest in 'growth' stocks, which belong to small companies showing potential for high
growth rates. The growth stocks are those where investors are ready to make big bids in the
live equity market, be it in India or global equity market.
How Do Equity Markets Work ?

o The concept behind how the stock market works is simple. Think of an auction house where
buyers and sellers negotiate prices and make trades. Now, substitute the auction house and
items with equity market and shares. Companies list their shares on an exchange. Investors
can buy shares in the primary market i.e. IPOs, and secondary market.
o The stock market is regulated by a financial watchdog. The equity market is maintained by
stock exchanges, and various stakeholders like brokers, dealers, clearing corporations etc. It is
an extended family of institutions and this is the true equity market meaning.
 EVERGREENING OF LOANS
Reserve Bank of India (RBI) Governor raised concerns over banks adopting innovative methods
for evergreening of loans that is covering up the real status of stressed loans of corporates to
project an artificial clean image in understanding with corporates.
EVERGREENING
• Evergreening loans is a practice of extending new or additional loans to a borrower
who is unable to repay the existing loans. It is a form of zombie lending thereby banks
concealing the true status of the non-performing assets (NPAs) or bad loans.
• Banks delay the recognition of losses due to loan defaults and engage in
evergreening. This is purely misgovernance. Some banks have even extended such loans to
wilful defaulters to keep them out of the defaulters’ books.
• Evergreening loans can create a false impression of the asset quality and profitability
of banks and delay the recognition and resolution of stressed assets.
• Evergreening loans can also undermine credit discipline and moral hazard among
borrowers, and erode the trust and confidence of depositors, investors and regulators.
THE APPROACHES USED BY BANKS ARE: -

a) bringing two lenders together to evergreen each other’s loans by sale and buyback of loans
or debt instrument,
b) good borrowers being persuaded to enter into structured deals with a stressed
borrower to conceal the stress,
c) use of internal or office accounts to adjust borrower’s repayment obligations, and
d) renewal of loans or disbursement of new/additional loans to the stressed borrower
or related entities closer to the repayment date of the earlier loans.
LOAN WRITE OFF

• Loan write-offs are a process of removing bad loans from the books of banks after
making adequate provisions for them.
• Loans written off by the banks are removed from the NPA books and reflect banks true
financial position.
• Evergreening of loans, on the other hand, is a practice of extending new or additional loans.
P.J. NAYAK COMMITTEE SUGGESTED: -

a) levying penalties through cancellations of unvested stock options,
b) claw-back of monetary bonuses on officers concerned, and
c) All whole-time directors, and the Chairman of the audit committee should be asked to step
down from the board.
 FISCAL POLICY
• Fiscal policy in India is the guiding force that helps the government decide how much money
it should spend to support the economic activity, and how much revenue it must earn from the
system, to keep the wheels of the economy running smoothly.
• In recent times, the importance of fiscal policy has been increasing to achieve economic growth
swiftly, both in India and across the world. Attaining rapid economic growth is one of the key
goals of fiscal policy formulated by the Government of India. Fiscal policy, along with monetary
policy, plays a crucial role in managing a country’s economy.
• Through the fiscal policy, the government of a country controls the flow of tax revenues and
public expenditure to navigate the economy. If the government receives more revenue than it
spends, it runs a surplus, while if it spends more than the tax and non-tax receipts, it runs a
deficit. To meet additional expenditures, the government needs to borrow domestically or from
overseas. Alternatively, the government may also choose to draw upon its foreign exchange
reserves or print additional money.
• For example, during an economic downturn, the government may decide to open up its coffers
to spend more on building projects, welfare schemes, providing business incentives, etc. The
aim is to help make more of productive money available to the people, free up some cash with
the people so that they can spend it elsewhere, and encourage businesses to make investments.
At the same time, the government may also decide to tax businesses and people a little less,
thereby earning lesser revenue itself.
Main objectives of Fiscal Policy in India:

o Economic growth: Fiscal policy helps maintain the economy’s growth rate so that certain
economic goals can be achieved.
o Price stability: It controls the price level of the country so that when the inflation is too high,
prices can be regulated.
o Full employment: It aims to achieve full employment, or near full employment, as a tool to
recover from low economic activity
What is the difference between fiscal policy and monetary policy?
o The government uses both monetary and fiscal policy to meet the county’s economic objectives.
The central bank of a country mainly administers monetary policy. In India, the Monetary
Policy is under the Reserve Bank of India or RBI. Monetary policy majorly deals with money,
currency, and interest rates. On the other hand, under the fiscal policy, the government deals
with taxation and spending by the Centre.
Importance of Fiscal Policy in India:

1. In a country like India, fiscal policy plays a key role in elevating the rate of capital
formation both in the public and private sectors.
2. Through taxation, the fiscal policy helps mobilise considerable amount of resources
for financing its numerous projects.
3. Fiscal policy also helps in providing stimulus to elevate the savings rate.
4. The fiscal policy gives adequate incentives to the private sector to expand its activities.
5. Fiscal policy aims to minimise the imbalance in the dispersal of income and wealth.
 FISCAL DEFICIT
The Government is said to incur deficit if its expenditure is higher than its revenue. The
Government deficit is mainly measured in 3 different ways:
o Revenue Deficit (RD): It is calculated as (Revenue Expenditure- Revenue Receipts) i.e. it
highlights the deficit in the revenue account.
o Fiscal Deficit (FD): It denotes the total borrowings of the Government for the entire
financial year. The borrowed money may be used for meeting revenue expenditure
(maintenance related expenses) as well as Capital expenditure (Creation of new assets).
o Primary Deficit (PD): It is calculated as Fiscal Deficit- Interest payments.
Relationship between Fiscal Deficit and Economic Growth

• The developing countries such as India usually generate less amount of tax revenue. However,
they are required to undertake higher amount of expenditure for the social sector (such as
Education, health etc.) as well as for creating new assets and infrastructure.
• Hence, they would be required to borrow money in order to meet their expenditure
requirements. However, a higher amount of borrowings can increase the rate of inflation in the
economy and can hence pose an adverse risk. Thus, there should be a limit on the
Government's borrowings so that it does not lead to Inflation in future.
• At the same time, the borrowed money should be ideally used for creating new assets and
infrastructure (Capital Expenditure) rather than meeting its day-to-day maintenance related
expenditure (revenue expenditure). This is because the money spent on the Capital
expenditure has much higher returns unlike the maintenance related expenditure. For
instance, higher investment in development of ports and airports can have a number of benefits
such as creation of employment opportunities, development of infrastructure, boosting of
exports etc. which in turn enhances the ability of the government to repay the borrowed money.
• Thus, the Fiscal Deficit is said to be desirable in a country like India if it fulfills 2
conditions:
1. There must be limit on the fiscal deficit so that higher fiscal deficit does not lead to increase in
Inflation.
2. The Fiscal Deficit must ideally be used for financing the creation of assets.
 FICCI
o The Federation of Indian Chambers of Commerce & Industry (FICCI) is a non-governmental
trade association and advocacy group based in India.
o Established in 1927, on the advice of Mahatma Gandhi by GD Birla and
Purshottamdas Thakurdas, it is the largest, oldest and the apex business organisation in
India.
o It is a non-government, not-for-profit organisation.
o FICCI draws its membership from the corporate sector, both private and public, including
SMEs and MNCs. The chamber has an indirect membership of over 250,000 companies from
various regional chambers of commerce.
o It is involved in sector-specific business building, business promotion and
networking.
o It is headquartered in New Delhi.
 FLOATING RATE LOANS

The Reserve Bank of India (RBI) will introduce a comprehensive framework to enhance
transparency and establish proper rules for resetting Equated Monthly Installments (EMIs) for
floating rate loans.
This move aims to address borrower concerns and ensure fair practices by financial
institutions.
Floating Rate Loans
• Floating rate loans are loans that have an interest rate that changes periodically,
depending on a benchmark rate or the base rate.
• This base rate, such as the repo rate - rate at which RBI lends money to financial institutions -
is influenced by market forces.
• Floating-rate loans are also known as variable or adjustable-rate loans, as they can vary
over the term of the loan.
• Floating rate loans are common for credit cards, mortgages, and other consumer
loans.
• Floating rate loans are beneficial to borrowers when interest rates are expected to drop in the
future.
• In contrast, a fixed interest rate loan requires a borrower to pay set installments during the
loan tenure. It offers a greater sense of security and stability in times of fluctuations in the
economy.
Need for the New Transparent Framework

• Until recently, the RBI had been raising the repo rates in order to contain inflation. With a rise
in repo rates, the floating rates too increase. This translates into higher EMIs for
borrowers.
• But it has been found that instead of asking for higher EMIs, some banks are simply
increasing the tenure of the loan without informing the borrower.
• This is making loan repayments unreasonably long and without proper consent
from borrowers.
• Prevent borrowers from being harmed by changes in the internal benchmark rate and
the spread during the term of the loan.
• Address issues faced by borrowers such as lack of information about foreclosure charges,
switching options, and key terms and conditions.
Features of the Framework Proposed by RBI

• Lenders should communicate clearly with borrowers on resetting the tenor and/or
EMI.
• RBI has asked lenders to offer borrowers an option to switch to fixed-rate home loans
or foreclosure of loans whenever they want.
• Banks would also need to disclose various charges incidental to the exercise of these
options beforehand to borrowers and properly communicate key information to borrowers.
• This would result in borrowers taking a more informed and calculated decision while
repaying their home loans.
• Lenders should not engage in unethical or coercive loan recovery practices, such
as harassment, intimidation, or violation of privacy.
 FDI IN INDIA
o Foreign direct investment (FDI) is when a company takes controlling ownership in a
business entity in another country. With FDI, foreign companies are directly involved
with day-to-day operations in the other country. This means they aren’t just bringing money
with them, but also knowledge, skills and technology.
o Generally, FDI takes place when an investor establishes foreign business operations or
acquires foreign business assets, including establishing ownership or controlling interest in a
foreign company.
o FDI is an important monetary source for India's economic development. Economic
liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily
increased in the country.
Routes through which India gets FDI

o Automatic route: The non-resident or Indian company does not require prior nod of the RBI
or government of India for FDI.
o Govt route: The government's approval is mandatory. The company will have to file an
application through Foreign Investment Facilitation Portal, which facilitates single-window
clearance. The application is then forwarded to the respective ministry, which will
approve/reject the application in consultation with the Department for Promotion of Industry
and Internal Trade (DPIIT), Ministry of Commerce. DPIIT will issue the Standard Operating
Procedure (SOP) for processing of applications under the existing FDI policy.
Sectors which come under the ' 100% Automatic Route' category are:
Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other services
under civil aviation sector), Airports (Greenfield + Brownfield), Asset Reconstruction Companies,
Auto-components, Automobiles, Biotechnology (Greenfield), Broadcast Content Services (Up-
linking & down-linking of TV channels, Broadcasting Carriage Services, Capital Goods, Cash &
Carry Wholesale Trading (including sourcing from MSEs), Chemicals, Coal & Lignite,
Construction Development, Construction of Hospitals, Credit Information Companies, Duty Free
Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems & Jewellery,
Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining & Exploration of metals
& non-metal ores, Other Financial Services, Services under Civil Aviation Services such as
Maintenance & Repair Organizations, Petroleum & Natural gas, Pharmaceuticals, Plantation
sector, Ports & Shipping, Railway Infrastructure, Renewable Energy, Roads & Highways, Single
Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality and White
Label ATM Operations.
Government route
Sectors which come under the 'up to 100% Government Route' category are
o Banking & Public sector: 20%
o Broadcasting Content Services: 49%
o Core Investment Company: 100%
o Food Products Retail Trading: 100%
o Mining & Minerals separations of titanium bearing minerals and ores: 100%
o Multi-Brand Retail Trading: 51%
o Print Media (publications/ printing of scientific and technical magazines/ specialty journals/
periodicals and facsimile edition of foreign newspapers): 100%
o Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines
dealing with news & current affairs): 26%
o Satellite (Establishment and operations): 100%
FDI prohibition: There are a few industries where FDI is strictly prohibited under any route.
These industries are
o Atomic Energy Generation
o Any Gambling or Betting businesses
o Lotteries (online, private, government, etc)
o Investment in Chit Funds
o Nidhi Company
o Agricultural or Plantation Activities (although there are many exceptions like horticulture,
fisheries, tea plantations, Pisciculture, animal husbandry, etc)
o Housing and Real Estate (except townships, commercial projects, etc.)
o Cigars, Cigarettes, or any related tobacco industry
 FOREIGN PORTFOLIO INVESTMENT (FPI)

• Foreign portfolio investment (FPI) consists of securities and other financial assets
passively held by foreign investors.
• It does not provide the investor with direct ownership of financial assets and is
relatively liquid depending on the volatility of the market.
• Examples of FPIs include stocks, bonds, mutual funds, exchange-traded funds,
American Depositary Receipts (ADRs), and Global Depositary Receipts (GDRs).
• FPI is part of a country’s capital account and is shown on its Balance of Payments
(BOP).
• The BOP measures the amount of money flowing from one country to other
countries over one monetary year.
• The Securities and Exchange Board of India (SEBI) brought new FPI Regulations,
2019, replacing the erstwhile FPI Regulations of 2014.
• FPI is often referred to as “hot money” because of its tendency to flee at the first signs
of trouble in an economy.
• FPI is more liquid, volatile, and therefore riskier than FDI.
Advantages
• FPI brings key advantages to India, including increased liquidity, higher stock market
valuations and global market integration.
• The influx of foreign capital contributes to economic growth and competitiveness, particularly
in technology-oriented sectors.
Concerns
• FPI entails risks, with market volatility influenced by global economic factors
potentially causing instability and currency fluctuations.
• The intricate nature of FPI structures presents challenges in determining beneficial
owners, raising concerns about potential fund misuse and tax evasion.
• Regulatory risks, shifts in global economic conditions, and reliance on foreign investment
trends contribute to additional challenges in the FPI landscape.
 FRICTIONLESS CREDIT
The Reserve Bank of India (RBI) has initiated a pilot programme aimed at evaluating the
feasibility of a 'Public Tech Platform for Frictionless Credit', seeking to facilitate seamless
and efficient credit delivery by lenders for Credit Appraisal, and therefore boosting Financial
Inclusion in India.
• Frictionless credit is a borrowing approach that seeks to streamline the lending process
for consumers.
• Unlike the traditional credit systems, where individuals need to go through extensive
paperwork, credit checks, and lengthy approval procedures, frictionless credit promises a
smoother and faster experience.
Public Tech Platform for Frictionless Credit

• It is developed by the Reserve Bank Innovation Hub (RBIH).
• It is an end-to-end digital platform that will have an open architecture, open Application
Programming Interfaces (APIs), and standards to which all banks can connect in a "Plug
and Play" Model.
• The public tech platform seeks to make this process seamless by providing all the required
information in one place to facilitate credit.
Process
• The process of delivering credit through digital means involves Credit Appraisal, which
evaluates the borrower's ability to repay the loan and adhere to the credit agreement.
• This process rests on three pillars:
1. Adverse selection (information asymmetry between borrowers and lenders)
2. Exposure risk measurement
3. Default risk assessment.
Key Data Sources

• The platform would integrate data from central and state governments, Account
Aggregators (AA), banks, credit information companies, and digital identity authorities.
• This consolidation would eliminate hindrances and streamline rule-based lending processes.
Scope and Coverage

• Diverse Loan Types: The platform's scope encompasses digital loans beyond KCC
(Kisan Credit Card), including dairy loans, MSME loans without collateral, personal loans, and
home loans.
• Data Integration: It will link with various services like Aadhar e-KYC, Aadhar e-signing,
land records, satellite data, PAN validation, transliteration, account aggregation by account
aggregators (AAs), and more.
Benefits and Outcomes
Enhanced • The platform's data consolidation will enable improved credit risk
Credit assessment and efficient credit portfolio management.
Portfolio
Management
• Access to accurate information supports informed and swift credit
Improved
assessments.
Access to
Credit • This expansion of credit availability benefits borrowers by lowering the
cost of capital access.
• The platform addresses operational challenges such as multiple

Reduced visits and documentation requirements, leading to cost reduction for
Operational both lenders and borrowers.
Costs • RBI’s survey indicated that processing of farm loans took two to
four weeks and cost about 6% of the loan’s total value.
Efficiency and • The platform's streamlined processes lead to quicker
Scalability disbursement and scalability, resulting in a more efficient credit
ecosystem.
 FREE TRADE AGREEMENTS

o A Free Trade Agreement (FTA) is an agreement between two or more countries to
reduce trade barriers in imports and exports among them.
o These agreements deal with the determination of the tariffs and duties that are imposed
by the countries on imports and to reduce trade barriers and thereby strengthen the bilateral
or multilateral trade relations.
o With FTA, goods and services can be exchanged across international borders with
limited or no government tariffs, quotas, or subsidies.
o A free-trade policy may simply be the absence of any trade restrictions.
o The idea of FTA is the opposite of the concept of trade protectionism or economic
isolationism.
o In the current world, free trade policy is often implemented through a formal and mutual
agreement of the nations involved.
Classification of Trade Agreements

Preferential o Two or more countries agree upon a preferential right of entry to
Trade certain products facilitated by reducing duties.
Agreement o A positive list is maintained i.e. the list of the products to which
(PTA) preferential access is provided.
o Examples: India – MERCOSUR PTA and India – SAARC Preferential
Trading Arrangement (SAPTA)
Free Trade o Multiple countries agree to eliminate tariffs on items covering

Agreement substantial bilateral trade.
(FTA)
o A negative list of products and services is maintained by the
negotiating countries on which the terms of FTA are not applicable.
Hence compared to PTAs, FTAs are more comprehensive.
o Examples: India – South Asia Free Trade Area (SAFTA) and India Sri
Lanka FTA
Comprehensive o These involve a comprehensive package of agreements on
Economic goods/services, investment, mutual recognition, e-commerce,
Cooperation intellectual property, etc.
Agreement
o Examples: India Singapore CECA and India Malaysia CECA
(CECA)
Customs Union o Members of the CU may agree to trade at zero duty among
(CU) themselves, maintain common tariffs against the rest of the world.
o Examples: European Union Customs Union and Southern African

Customs Union
Common o In a common market, countries also allow free trade and free
Market movement of labour and capital among the members of the
group.
o Example: European Common Market
Economic o It is a Common Market extended through further harmonisation
Union of fiscal/monetary policies and shared executive, judicial &
legislative institutions.
o Example: European Union (EU)
Significance of FTAs
o FTAs encourage businesses in member countries to focus on producing and selling the
goods that best use their resources while other businesses import goods that are scarce or
unavailable domestically.
o FTAs increase the production and consumption of internationally traded goods as
selected goods are produced by every country at lower costs.
o FTAs facilitate the mix of local production and foreign trade which in turn helps
economies to boost growth.
o FTAs help diversify supply chains by making it easier and cheaper for more businesses to
do business across borders.
o Reducing the trade barriers will help small and medium-sized enterprises in the export of
their goods and services.
o Also gives them access to new and emerging technologies.
o From the consumer’s point of view, FTAs would help the consumers of both countries see
improvements in the variety and affordability of products.
o FTAs play an important role in strengthening the bond between the countries.
o FTAs encourage Foreign Direct Investments (FDI) which helps in capital flow and employment
creation.
o FTAs help in eliminating monopolies.
Concerns about FTA

o The overall success of trade agreements depends on the extent of new trade created based on
comparative advantage, which will boost both trade and economic growth.
o However, if the FTA causes large diversions of the trade from more competitive nations to the
FTA members, then the overall impact of the FTA will be negative.
o Threat to Intellectual property rights, as the products of domestic producers, can be easily
replicated by big corporations.
o Loss of revenue which was levied in the form of import duties and tariffs.
o The exploitation of domestic resources and labourers due to the expansion of foreign
corporations.
o It increases the dependence of trade in goods and services on other countries.
o The free movement of foreign goods affects the domestic goods, leading to losses for the
indigenous industries.
 FUTURES TRADING
o In order to understand futures trading, you should know what derivatives trading is.
Derivatives are financial contracts that derive their value from the price movement of another
financial item. The price of a derivative tracks the price of another (i.e. underlying) from which
it gets its value.
Key Points
o Derivatives are financial contracts that derive their value from the price movement
of another financial item.
o Futures are primarily used for hedging commodity price-fluctuation risks or for
taking advantage of price movements.
o When such a contract is initiated, the investor need not pay the full amount for a contract, only
a small upfront payment is required.
o Futures contract is one such financial instrument wherein a contract or agreement is
formed between a buyer (the one with the long position) and seller (the one with
the short position) and the buyer agrees to purchase a derivative or index at a specified time
in the future for a fixed price.
o As time passes, the contract’s price changes relative to the fixed price at which the
trade was done and this creates profit or loss for the trader.
o Every contract is monitored by the stock exchanges who settle this trade and stock
exchanges.
How do you trade a futures contract?

o Futures are primarily used for hedging commodity price-fluctuation risks or for
taking advantage of price movements rather than buying or selling of the actual
cash commodity which is done with a stock.
o Futures contracts are available on four different assets - Stocks, Indices, Currency pairs and
Commodities.
o There are two primary participants in futures trading - the Hedgers and Speculators.
Hedgers use futures for protection against irrational or rapid future price movements in the
underlying cash commodity.
o Hedgers are usually businesses, or individuals, who at one point or another deal in the
underlying cash commodity.
o Speculators are the second major group of futures players. These participants include
independent floor traders and investors. Independent floor traders, also called "locals", trade
for their own accounts. Floor brokers handle trades for their personal clients or brokerage
firms.
How futures trading differs from other financial instruments

o Firstly, the value of futures depends on that of another derivative, so it has no
inherent value in itself. The contract lasts only for a particular time period and has an
expiration date, unlike other financial instruments.
o When you buy a stock, it represents equity in a company and can be held for a long time,
whereas futures contracts have a fixed time period. This is why the market direction and timing
are vital while considering futures trading. Perhaps the most important difference between
futures trading and other financial instruments would be in the use of leverage.
In-short
o Futures trading is a contract between a buyer looking to invest and a seller and
where the contract is made for the future and has an expiration date.
o There are two participants- Hedgers and Speculators. Hedgers protect their assets from
risks and speculators are usually floor traders.
o Futures trading have no inherent value and are compared with the value of other
underlying assets.
o One important aspect is leverage. The buyer only pays a small margin value at the time of
initiating the contract.
o It is possible to trade commodities online with prior preparations.
 FINANCIAL STABILITY AND DEVELOPMENT

COUNCIL
o The Financial Stability and Development Council (FSDC) was constituted by an
Executive Order of the Union Government as a non-statutory apex body under the
Ministry of Finance in 2010.
o The Raghuram Rajan Committee (2008) on financial sector reforms first proposed the
creation of FSDC.
FSDC – Council Members

o The Finance Minister is the Chairman of the FSDC.
o Members of FSDC include Heads of the Financial Sector Regulators listed below:
▪ Reserve Bank of India (RBI)
▪ Insurance Regulatory and Development Authority (IRDA)
▪ Securities and Exchange Board of India (SEBI)
▪ Pension Fund Regulatory and Development Authority (PFRDA)
▪ Other members are Finance Secretary, Chief Economics Advisor and Secretary of the
Department of Financial Services.
FSDC Member Reforms

The government reconstituted the FSDC to include the following Members in the Council:
o Minister of State responsible for the Department of Economic Affairs (DEA)
o Secretary of the Department of Electronics and Information Technology
o Revenue Secretary
o Chairman of the Insolvency and Bankruptcy Board of India (IBBI)
o The reconstitution would make FSDC more broad-based to incorporate changes in the
economic regulatory framework of the country.
Functions of FSDC
o The Financial Stability and Development Council was established as an autonomous body
dealing with macroprudential and financial regularities in the entire financial sector of
India.
o The body envisages to strengthen and institutionalize the mechanism of maintaining financial
stability, financial sector development, inter-regulatory coordination along with monitoring
macro-prudential regulation of the economy.
o It must be noted that no funds are separately allocated to the council for undertaking its
activities.
o Coordinating India’s international interface with financial sector bodies like the Financial
Action Task Force (FATF), Financial Stability Board (FSB) and any such body as may be
decided by the Finance Minister from time to time.
 GIG ECONOMY
o It refers to the form of economy in which the organizations employ contractual, non-
permanent employees instead of permanent employees. The Gig-economy workers range
across the spectrum of professions, from the highly paid to below-minimum-wage. This trend
is very strong in advanced economies like the US wherein a large number of firms hire
contractual workers on a short-term basis.
o Note: Gig workers as workers outside the traditional employer-employee relationship. On
the other hand, Platform workers are defined as those who access organisations or individuals
through an online platform and provide services or solve specific problems. Hence, there is a
considerable amount of overlapping between the Gig workers and Platform workers. For
example, Ola Cab Driver can be considered to be belonging to both these categories of workers.
o Difference between Normal Employees and Gig/Platform workers: In the case of an
ordinary employer-employee relationship, the employer dictates when, where, and how the
work is carried out. Whereas Gig/Platform workers have complete control over those aspects
subject to the terms of the contract. They are only responsible for ensuring that the expected
result is met.
▪ Reasons for the development of Gig Economy

o Rapid growth of the digital communication wherein the workforce is highly mobile and work
can be done from anywhere without any geographical barriers.
o Adoption of Gig Economy reduces the operating costs of the firms since the companies would
not be liable to pay pension and other social security benefits.
o Flexibility to the workers wherein they can switch jobs frequently and choose work which suits
their area of interest.
o Recent slowdown in the formal employment creation has also boosted the development of Gig
Economy.
▪ Protection provided to Gig/Platform Workers under Social Security Code 2020:

The Code on Social Security, 2020 provides for the registration of all the Gig workers and
Platform workers. It calls upon the Central and State Governments to formulate schemes to
ensure social security benefits such as Insurance for the Gig workers. It also empowers the
Government to set up Social Security Funds for their benefit. The contribution to these funds
may be funded from contributions of Centre, State and aggregator platforms such as Uber,
Zomato etc.
▪ Concerns/ Challenges
o Lack of Labour Rights: Platform workers often have limited control over their work (for
instance, in some cases they cannot set prices, they are required to wear uniforms, they cannot
choose the order of their tasks, etc.). This in turn makes them prone to the exploitation of the
platform-based companies.
o Greater control by Employees: It is being said that the Gig/Platform workers enjoy higher
level of freedom and flexibility in their work. However, these advantages get over-shadowed by
their higher dependence on the platforms. Take for instance, if a person wants to work a cab
driver or food delivery agent, he needs to own vehicle. Since, poor people do not have access to
loans, they come to be dependent on the platforms for the loans provided by them. This in turn
reduces the flexibility associated with the Gig Economy. The Workers would have to work
according to the needs and requirements of the Platform companies.
o No Guaranteed Benefits: The Industrial workers are automatically guaranteed social
security benefits such as Provident Funds, Insurance, Maternity benefits etc. However, such
benefits are not automatically extended to Gig Workers. The Central and State Governments
are required to come up with schemes to provide these benefits. So, the social security benefits
for the Gig Workers depend upon the political will of the Government.
o No Guaranteed Contribution by Aggregator Platforms: The Code on Social security
mandates the Industries employing workers above a certain threshold level to compulsorily
contribute towards social security benefits such as Provident Fund and Insurance. However,
as far as Gig Workers is concerned, the language in the code does not provide for compulsory
contribution by the aggregator platforms. Hence, it is left open to the Government whether to
seek contribution from the aggregator platforms or not.
o No legal Rights for Gig Workers: The Industrial workers are given legal rights over the
various aspects of work such as Payment of Minimum wages, safe working conditions, right to
strike, right to form trade Unions etc. However, such rights have not been recognised in case
of Gig workers.
 GI TAGS
Seven products from different regions in India were given the Geographical Indication (GI) tag
by the Geographical Indications Registry in Chennai.
Geographical Indication (GI) Tag

• It is an indication used to identify goods having special characteristics originating from a
definite geographical territory.
• The Geographical Indications of Goods (Registration and Protection) Act, 1999
seeks to provide for the registration and better protection of geographical indications relating
to goods in India.
• It is governed and directed by the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS).
• It is primarily an agricultural, natural or a manufactured product (handicrafts and
industrial goods).
• Validity: 10 years following which it can be renewed.
Seven Products
Product Category State
metal craft • At Jalesar in Uttar Pradesh, (the capital of
Magadha king Jarasandha), over 1,200 small units
are engaged in making ‘Jalesar Dhatu Shilp’
Jalesar Dhatu
Shilp • It included ghungrus (anklets), ghantis (bells)
and other decorative metal craft and brassware.
• The Thatheras community, which resides in a
locality named Hathuras, makes these products.
Fruit • This variety of mango is also known as malcorada,

cardozo mankurad, corado and Goa mankur.
The
mankurad • The Portuguese named the fruit malcorada, which
mango means ‘poor coloured’
• With time, it became mankurad aamo (mango) in
Konkani.
The Goan Dessert • Bebinca, also known as the ‘queen of Goan
bebinca desserts’, is a traditional Indo-Portuguese pudding.
metal craft • These weapons from Rajasthan are exquisitely
Udaipur ornamented by a complicated process of etching
Koftgari designs, heating, and then cooling.
Metal Craft • Intertwined with embedding gold and silver wire into
the metal
Cloth • Traditionally created on cotton, silk or velvet with a
variety of fine stitches and mirror-work, mainly for
objects associated with marriage, especially gift items
Bikaner from Rajasthan.
Kashidakari • The mirrors are believed to repel the ‘evil eye’ with
Craft their reflective surfaces.
• The weaving of fabrics by hand was done by the
Meghwal community in Bikaner and nearby
districts.
Cloth dyeing • It is the Rajasthani art of tying and dyeing.
Jodhpur • Bandhej is one of the most famous textile art forms of
Bandhej Craft Rajasthan.
• Fabrics used: muslin, silk and voile. Cotton thread
is used for tying the fabric.
Gold designing • Also known as gold nakashi or gold manauti
Bikaner Usta work due to the prominence of its long-lasting golden
Kala Craft colour.
• Belongs to Rajasthan
 GLOBAL MINIMUM TAX

Global minimum tax of 15 per cent will come into effect from next year and by 2025 almost 90
per cent of MNCs having revenues of more 750 million euros will be subject to the levy in every
country of operation, stated by OECD.
NEED
• Major economies are aiming to discourage multinationals from shifting profits — and tax
revenues — to low-tax countries regardless of where their sales are made.
• Increasingly, income from intangible sources such as drug patents, software and royalties
on intellectual property has migrated to these jurisdictions, allowing companies to avoid
paying higher taxes in their traditional home countries.
• With its proposal for a minimum 15% tax rate, the hope is to reduce such tax base erosion.
• It aims to ensure that big businesses with global operations do not benefit by domiciling
themselves in tax havens in order to save on taxes.
• The minimum tax and other provisions aim to put an end to decades of tax
competition between governments to attract foreign investment.
WORKING
• The global minimum tax rate would apply to overseas profits. Governments could still set
whatever local corporate tax rate they want, but if companies pay lower rates in a
particular country, their home governments could “top-up” their taxes to the
minimum rate, eliminating the advantage of shifting profits.
• The OECD said that governments broadly agreed on the basic design of the minimum tax.
Other items still to be negotiated include whether investment funds and real estate investment
trusts should be covered.
 GLOBAL ECONOMIC PROSPECTS REPORT

The World Bank (WB) has released its Global Economic Prospects Report, which shows that
the global economy may witness a poor performance by the end of 2024, the slowest half-decade
of GDP (Gross Domestic Product) growth in 30 years.
Key Highlights of the Report
Slowest Half- • The global economy is projected to experience the slowest half-decade
Decade of of GDP growth in three decades, with a growth rate of 2.4% in 2024.
GDP Growth
in 30 Years
Improved • The risk of a global Recession has receded, attributed to the
Outlook strength of the US economy, resulting in a better global economic position
Compared to than the previous year.
Previous • But mounting geopolitical tensions could create fresh near-term hazards
Year for the world economy.
Deteriorating • While the global economy is in a better place than a year ago, the medium-
Medium- term outlook has worsened for many developing economies.
Term • Factors include slowing growth, sluggish Global Trade, and tight financial
Outlook for conditions.
Developing
Economies
Challenges in • Global trade growth in 2024 is expected to be only half the average in the
Global Trade decade preceding the Pandemic.
and • Borrowing costs for developing economies, especially those with
Borrowing low credit ratings, are expected to remain high.
Costs
• Global growth is projected to slow for the third consecutive
year, dropping from 2.6% in 2023 to 2.4% in 2024.
Global • Developing economies are projected to grow just 3.9%, more than one
Growth percentage point below the average of the previous decade.
• Low-income countries are projected to grow by 5.5%, lower than initially
expected.
Weak Near- • There will be weak near-term growth, particularly in developing

Term Growth countries, leading to high levels of Debt and limited access to food. That
and High would obstruct progress on many global priorities.
Debt Levels
 GLOBAL RISK REPORT 2024

The World Economic Forum (WEF) has released the Global Risk Report 2024, highlighting some
of the most severe risks we may face over the next decade, against a backdrop of rapid
technological change, economic uncertainty, a warming planet, and conflict.
Global Risk
• Global risk is defined as the possibility of the occurrence of an event or condition which, if it
occurs, would negatively impact a significant proportion of global gross domestic product,
population, or natural resources.
• The Global Risks Report is an annual study published by the World Economic Forum
ahead of the Forum’s Annual Meeting in Davos, Switzerland.
Highlights of the Global Risk Report 2024

• Various global events in 2023, including lethal conflicts, Extreme
Deteriorating Weather Conditions, and societal discontent, have contributed to a
Global Outlook predominantly negative outlook.
AI Powered • Misinformation and disinformation are listed as the most

Misinformation severe risks, highlighting how rapid advances in technology also are
and creating new problems or making existing ones worse.
Disinformation
• There are four structural forces shaping global risks over the next
decade: Climate change, Demographic Bifurcation,
Structural Technological Acceleration, and Geostrategic shifts.
Forces Shaping
Global Risks • These forces represent longer-term shifts in the global landscape, and
their interactions will contribute to uncertainty and volatility.
• Environmental risks, particularly extreme weather,

Environmental dominate the risk landscape over all time frames.
Risks at the
Forefront • Concerns about climate change, biodiversity loss, and critical changes
to Earth systems are evident, with potential irreversible consequences.
Economic • The cost-of-living crisis and economic risks such as Inflation and
Strains and economic downturn are significant concerns for 2024.
Inequality • Economic uncertainty will disproportionately affect low- and middle-
income countries, leading to potential digital isolation and worsening
societal and environmental impacts.
• Interstate armed conflict is identified as a new entrant into the top risk
Security Risks rankings over the next two years.
and • Technological advances, especially in artificial intelligence, pose
Technological security risks as they enable non-state actors to access disruptive tools,
Advances potentially leading to increased conflict and crime.
• A deeper divide between global powers, especially between the Global

Geopolitical North and South, may lead to challenges in international governance.
Shifts and
• The growing influence of states in the Global South, combined with
Governance
Challenges geopolitical tensions, could reshape security dynamics and impact
global risks.
Major reports published by WEF are:

• Energy Transition Index.
• Global Competitiveness Report.

• Global IT Report: WEF along with INSEAD, and Cornell University publish this report.
• Global Gender Gap Report.
• Global Travel and Tourism Report.
 GLOBALISATION VS. LIBERALISATION

o Globalization is where an economy of scale is created through the interaction and
integration among people, companies, and governments worldwide.
o It is a complex and multifaceted phenomenon, which is considered by some as a form of
capitalist expansion which entails the integration of local and national economies into
a global, unregulated market economy.
o Liberalization is the process where a state lifts restrictions on some private
individual activities. It is a situation in which government regulations and restrictions are
relaxed to make room for economic expansion.
o Globalization means the speedup of movements and exchanges (of human beings,
goods, and services, capital, technologies or cultural practices) all over the planet. One of the
effects of globalization is that it promotes and increases interactions between different regions
and populations around the globe.
How does liberalization support globalization?

o Proponents of trade liberalization, however, claim that it ultimately lowers consumer costs,
increases efficiency, and fosters economic growth.
o The outcome of trade liberalization and the resulting integration among countries is known as
globalization.
Globalisation Liberalisation
o Globalization is closely related to the scale of o Liberalization is mainly

economic activities across nations concentrated on economic activities
as a result of modernization and
development
o In a globalized setup, localities develop direct o Liberalization also often involves

economic and cultural relationships to the global reductions in taxes, social security,
system through information technologies, and unemployment benefits.
bypassing and subverting traditional power
hierarchies like national governments and
markets.
o Access to New Culture o Inward Investments
o Lower Costs for Products o Increased competition will lead to a
o Access to New Talent rise in quality goods for the
consumer
o There are chances of developing nations will be o Loss of domestic units due to the
open to exploitation by advanced economies inflow of foreign goods
o Adverse effects on local economies o Unbalanced economic development
o Cultural Homogenization
o Increased dependency on foreign

assistance
 GREEN CONTRACTS
o As both consumers and corporations reap the benefits of large-scale manufacturing and
services, they must equally share the responsibilities relating to the loss of resources and
reduce greenhouse gas emissions.
o Some corporations contribute a fair share to building a clean and sustainable future. But they
can contribute in cutting down emissions through the process of green contracting.
Green contracts:
o ‘Green contracts’ refer to commercial contracts which mandate that contracting
parties cut down greenhouse gas emissions at different stages of delivery of
goods/services, including design, manufacturing, transportation, operations and waste
disposal, as applicable to the industry.
o The process of implementing a green contract may commence at the bidding stage itself,
when various interested companies participate in the tender process.
o In such a scenario, a ‘green tender’ may prescribe necessary ‘green qualifications’, which can
be considered when awarding the contract to a bidder. These green qualifications can range
from using a pre-defined percentage of ‘green energy’ in service delivery to adequate on-site
waste management, reducing carbon emissions by a certain level over period of time, etc.
o Once such a bidder is chosen, the contracting agreement between the parties can prescribe the
‘green obligations’ in detail, thus making the obligations binding and enforceable in the
eyes of the law. It is this obligatory nature of green contracts which sets the tone for the parties
to cut down emissions.
o This can be achieved by contractual clauses providing for the use of good quality and energy-
efficient infrastructure for production of goods/services, efforts in day-to-day operations such
as reducing noise, air and water pollution and ensuring eco-friendly means of transportation
like bicycles on site, establishing and maintaining a sustainable waste management system,
and so on.
o One effective way to make sure that the service providers adhere to these contractual
obligations would be to provide for measurement criteria and audit of the performance of the
contractor with regard to these obligations. An organisation may also choose to contractually
highlight non-performance of such obligations as a ground of contractual breach, with penalty
prescriptions.
o Another way to make sure that these obligations under the green contracts resonate far is to
make sure that they flow down to all levels of the supply chain engaged in the delivery of goods
and services.
o Lastly, the economic cost of executing green contracts may be greater than a normal brown
contract, but global entities operating in a changing environment need to take into
consideration the greater environment costs at stake.
al ity S/92-N2/324
u
iu mQ
P rem
MONTHLY CURRENT AFFAIRS ANALYSIS

MARCH 2024
FOCUS
on
Current Affairs
FOCUS
90 /-
FOCUS
CALL US : 011-46512150, 7037272363
 GREENWASHING
• Greenwashing is an act by a country or a company projecting its efforts or its
products as climate-friendly without any verifiable and justifiable data to support its
claim.
• These efforts help the companies to boost their image in the market and thus accrue
profits in the long run. But, these efforts do not guarantee any climate benefits.
• Greenwashing depicts a false picture of companies and rewards them for the
initiative. In reality, these efforts are pushing the countries to the brink of climate disaster.
WHY IS GREENWASHING EASILY PRACTISED?

• There is a plethora of products and processes that have huge potential to cut down emissions,
thus monitoring mechanisms become very tough and cumbersome.
• The regulatory framework is very complex and cumbersome. At the same time, there
is a lack of standardisation of most of these products.
• The processes, methodologies and institutions to measure, report, create standards,
verify claims and grant certifications are still being set up.
• There is a flood of enterprises in this field offering their service of transitioning to
green energy, but most of these enterprises lack integrity and ethics, but their services are
still availed by corporations because it makes them look good.
• Additionally, there is less number of companies that are accredited by credible
institutions and have robust business ethics.
• The regime of carbon trade and carbon offsetting is often seen as an instrument to promote the
incidence of greenwashing.
• There is a lot of overlapping and double counting in the process of ascertaining carbon
offsetting, resulting in whitewashing.
EFFECT OF GREENWASHING
• It will create a huge impediment in the process of transitioning to net zero
emissions. Most of the developed countries have promised to become net zero by 2050. China
has a net zero target for 2060 while India has pledged to become net zero by 2070.
• It will further lead to a sharp rise in the temperature and thus fail us in achieving the
target of the Paris Climate Agreement.
• Many coastal and island nations would stand in a more disadvantageous position resulting in
submergence and climate-induced migration.
• Incidences of climate refugees would rise in the long term which would result in a shortage of
food and conflagration over limited resources.
 G-SECs
o A Government Security (G-Sec) is a tradeable instrument issued by the Central
Government or the State Governments. It acknowledges the Government’s debt
obligation.
o Such securities are short term (usually called treasury bills, with original maturities of less
than one year) or long term (usually called Government bonds or dated securities with
original maturity of one year or more).
o In India, the Central Government issues both, treasury bills and bonds or dated
securities while the State Governments issue only bonds or dated securities, which
are called the State Development Loans (SDLs).
o G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged
instruments.
Treasury Bills (T-bills)

o Treasury bills or T-bills, which are money market instruments, are short term debt
instruments issued by the Government of India and are presently issued in three tenors,
namely, 91 day, 182 day and 364 day.
o Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at
a discount and redeemed at the face value at maturity. For example, a 91 day Treasury bill of
₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would
be redeemed at the face value of ₹100/-.
o The return to the investors is the difference between the maturity value or the face value (that
is ₹100) and the issue price.
Cash Management Bills (CMBs)

o In 2010, Government of India, in consultation with RBI introduced a new short-term
instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in
the cash flow of the Government of India.
o The CMBs have the generic character of T-bills but are issued for maturities less
than 91 days.
Dated G-Secs
o Dated G-Secs are securities which carry a fixed or floating coupon (interest rate) which is
paid on the face value, on half-yearly basis.
o Generally, the tenor of dated securities ranges from 5 years to 40 years.
Advantages of G-Secs
o Besides providing a return in the form of coupons (interest), G-Secs offer the maximum safety
as they carry the Sovereign’s commitment for payment of interest and repayment of principal.
o They can be held in book entry, i.e., dematerialized/ scripless form, thus, obviating the
need for safekeeping. They can also be held in physical form.
o G-Secs are available in a wide range of maturities from 91 days to as long as 40 years to
suit the duration of varied liability structure of various institutions.
o G-Secs can be sold easily in the secondary market to meet cash requirements.
o G-Secs can also be used as collateral to borrow funds in the repo market.
o Securities such as State Development Loans (SDLs) and Special Securities (Oil
bonds, UDAY bonds etc) provide attractive yields.
o The settlement system for trading in G-Secs, which is based on Delivery versus Payment
(DvP), is a very simple, safe and efficient system of settlement. The DvP mechanism ensures
transfer of securities by the seller of securities simultaneously with transfer of funds from the
buyer of the securities, thereby mitigating the settlement risk.
o G-Sec prices are readily available due to a liquid and active secondary market and a transparent
price dissemination mechanism.
o Besides banks, insurance companies and other large investors, smaller investors like Co-
operative banks, Regional Rural Banks, Provident Funds are also required to statutory hold G-
Secs.
 RBI’s RETAIL DIRECT

Retail Direct Scheme is a one-stop solution to facilitate investment in Government Securities by
individual investors. Under this scheme individual retail investors can open a Gilt Securities
Account – “Retail Direct Gilt (RDG)” account with RBI. Using this account, retail investors can
buy and sell government securities through the online portal – https://rbiretaildirect.org.in
Benefits
o G-sec are risk free: G-sec in the domestic market context are risk free and carry no credit
risk.
o G-sec offer decent yields for longer duration. G-sec yield curve extends up to 40 years.
With Government issuing securities at different points on the yield curve, G-sec offer an
attractive option for savers who need low risk investment options for longer durations.
o G-sec offer prospect of capital gains: As there is an inverse relationship between bond
price and interest rate, there is a prospect of capital gains when the interest rates moderate.
One, however, must be conscious of market risks that could result in losses in case the interest
rate cycle reverses.
o G-sec have reasonable liquidity: G-sec have reasonable liquidity and can be transacted on
NDS-OM. With the introduction of Retail Direct Portal, retail investors can now participate
easily in primary and secondary market.
o G-sec help to diversify portfolio: Investments in government securities would help in
portfolio diversification and consequently reduce risk for retail investors.
o Zero charges under Retail Direct Scheme: Retail Direct Account is completely free of
charge and does not involve any intermediary. It would reduce overall transaction charges for
individual investors in terms of the charges which they are otherwise required to pay for
investing through aggregators or taking indirect exposure through mutual funds.
 GST COUNCIL
o The Goods & Services Tax Council is a constitutional body for making recommendations to
the Union and State Government on issues related to Goods and Service Tax.
o The GST Council is chaired by the Union Finance Minister and other members are the
Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of
all the States.
o The Constitution (One Hundred and First Amendment) Act, 2016 introduced a
national Goods and Services Tax (GST) in India from 1 July 2017.
o As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted
by the President within 60 days of the commencement of Article 279A. The notification for
bringing into force Article 279A with effect from 12th September, 2016 was issued on
10thSeptember, 2016.
o As per Article 279A (4), the Council will make recommendations to the Union and the States
on important issues related to GST, like the goods and services that may be subjected or
exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits,
GST rates including the floor rates with bands, special rates for raising additional resources
during natural calamities/disasters, special provisions for certain States, etc.
The Goods and Services Tax Council shall make recommendations to the Union and the States
on
a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may
be subsumed in the goods and services tax;
b) the goods and services that may be subjected to, or exempted from the goods and services tax;
c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services
Tax levied on supplies in the course of inter-State trade or commerce under article 269A and
the principles that govern the place of supply;
d) the threshold limit of turnover below which goods and services may be exempted from goods
and services tax;
e) the rates including floor rates with bands of goods and services tax;
f) any special rate or rates for a specified period, to raise additional resources during any natural
calamity or disaster;
g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakhand; and
h) any other matter relating to the goods and services tax, as the Council may decide.
o The Goods and Services Tax Council shall recommend the date on which the goods and
services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly
known as petrol), natural gas and aviation turbine fuel.
o One-half of the total number of Members of the Goods and Services Tax Council shall
constitute the quorum at its meetings.
o Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a
majority of not less than three-fourths of the weighted votes of the members present
and voting, in accordance with the following principles, namely: —
▪ the vote of the Central Government shall have a weightage of one third of the total votes cast,
and
▪ the votes of all the State Governments taken together shall have a weightage of two-thirds of
the total votes cast, in that meeting.
o The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute
▪ between the Government of India and one or more States; or
▪ between the Government of India and any State or States on one side and one or more other
States on the other side; or
▪ between two or more States, arising out of the recommendations of the Council or
implementation thereof.
 HUMAN CAPITAL
o Human capital is an intangible asset or quality not listed on a company's balance
sheet.
o It can be classified as the economic value of a worker's experience and skills. This
includes assets like education, training, intelligence, skills, health, and other things employers
value such as loyalty and punctuality.
o The concept of human capital recognizes that not all labor is equal. But employers can improve
the quality of that capital by investing in employees—the education, experience, and abilities
of employees all have economic value for employers and for the economy as a whole.
o Human capital is important because it is perceived to increase productivity and thus
profitability. So the more a company invests in its employees (i.e., in their education and
training), the more productive and profitable it could be.
o Human capital is typically managed by an organization's human resources (HR) department.
This department oversees workforce acquisition, management, and optimization. Its other
directives include workforce planning and strategy, recruitment, employee training and
development, and reporting and analytics.
A Brief History of Human Capital

o The idea of human capital can be traced back to the 18th century. Adam Smith referred to
the concept in his book "An Inquiry into the Nature and Causes of the Wealth of Nations," in
which he explored the wealth, knowledge, training, talents, and experiences for a nation.
o Adams suggests that improving human capital through training and education leads to a more
profitable enterprise, which adds to the collective wealth of society. According to Smith, that
makes it a win for everyone.
o In more recent times, the term was used to describe the labor required to produce
manufactured goods. But the most modern theory was used by several different economists
including Gary Becker and Theodore Schultz, who invented the term in the 1960s to
reflect the value of human capacities.
o Schultz believed human capital was like any other form of capital to improve the quality and
level of production. This would require an investment in the education, training and enhanced
benefits of an organization's employees.
o But not all economists agree. According to Harvard economist Richard Freeman, human
capital was a signal of talent and ability. In order for a business to really become productive,
he said it needed to train and motivate its employees as well as invest in capital equipment. His
conclusion was that human capital was not a production factor.
Calculating Human Capital

o Since human capital is based on the investment of employee skills and knowledge through
education, these investments in human capital can be easily calculated. HR managers can
calculate the total profits before and after any investments are made.
o Any return on investment (ROI) of human capital can be calculated by dividing the
company’s total profits by its overall investments in human capital.
Human Capital and Economic Growth
o There is a strong relationship between human capital and economic growth. Because people
come with a diverse set of skills and knowledge, human capital can certainly help boost the
economy. This relationship can be measured by how much investment goes into people’s
education.
o Some governments recognize that this relationship between human capital and the economy
exists, and so they provide higher education at little or no cost. People who participate in the
workforce who have higher education will often have larger salaries, which means they will be
able to spend more.
Does Human Capital Depreciate?

o Like anything else, human capital is not immune to depreciation. This is often measured in
wages or the ability to stay in the workforce. The most common ways human capital can
depreciate are through unemployment, injury, mental decline, or the inability to keep up with
innovation.
o Consider an employee who has a specialized skill. If he goes through a long period of
unemployment, he may be unable to keep these levels of specialization. That's because his skills
may no longer be in demand when he finally reenters the workforce.
o Similarly, the human capital of someone may depreciate if he can't or won't adopt new
technology or techniques. Conversely, the human capital of someone who does adopt them will.
 INFLATION
• It refers to the sustained increase in the general price level of goods and services in
an economy over a period of time, leading to a decrease in the purchasing power of
money.
• Headline Inflation: It is the total inflation for the period, comprising a basket of
commodities.
• The food and fuel inflation form one of the components of headline inflation in India.
• Core Inflation: It excludes volatile goods from the basket of commodities tracking
Headline Inflation.
• These volatile commodities mainly comprise food and beverages (including vegetables) and
fuel and light (crude oil).
• Core inflation = Headline inflation – (Food and Fuel) inflation.
• Inflation Targeting: It is a monetary policy framework aimed at maintaining a specific

target range for inflation.
• The Urjit Patel Committee recommended CPI (Consumer Price Index) over WPI
(Wholesale Price Index) as a measure for inflation targeting.
• The current inflation target also aligns with the committee's recommendation to establish a
target inflation rate of 4%, accompanied by an acceptable range of deviation of +/-
2%.
• The central government, in consultation with the RBI, sets an inflation target, and an
upper and lower tolerance level for retail inflation.
 HEADLINE INFLATION AND CORE

INFLATION
o Headline inflation refers to the change in value of all goods in the basket.
o Core inflation excludes food and fuel items from headline inflation.
o Since the prices of fuel and food items tend to fluctuate and create ‘noise’ in inflation
computation, core inflation is less volatile than headline inflation.
o In a developed economy, food & fuel account for 10-15% of the household consumption basket
and in developing economies it forms 30-40% of the basket.
o Headline inflation is more relevant for developing economies than developed
economies.
o Of the two new benches approved to be set up, one each in Indore and Amaravathi, the Indore
bench is yet to be notified. Except the Bench at Amaravathi, all the benches have been notified
as division benches. Justice M.M. Kumar, a retired Chief Justice of the Jammu & Kashmir High
Court has been appointed president of the tribunal.
o The National Company Law Tribunal has the power under the Companies Act to adjudicate
proceedings:
▪ Initiated before the Company Law Board under the previous act (the Companies Act 1956);
▪ Pending before the Board for Industrial and Financial Reconstruction, including those pending
under the Sick Industrial Companies (Special Provisions) Act, 1985;
▪ Pending before the Appellate Authority for Industrial and Financial Reconstruction; and
▪ Pertaining to claims of oppression and mismanagement of a company, winding up of
companies and all other powers prescribed under the Companies Act.
o Decisions of the tribunal may be appealed to the National Company Law Appellate Tribunal,
the decisions of which may further be appealed to the Supreme Court of India on a point of
law. The Supreme Court of India has upheld the Insolvency and Bankruptcy Code in its
entirety.
 INDEX OF INDUSTRIAL PRODUCTION (IIP)

o Index of Industrial Production data or IIP as it is commonly called is an index that tracks
manufacturing activity in different sectors of an economy.
o The IIP number measures the industrial production for the period under review, usually a
month, as against the reference period.
o IIP is a key economic indicator of the manufacturing sector of the economy. There is
a lag of six weeks in the publication of the IIP index data after the reference month ends.
o IIP index is currently calculated using 2011-2012 as the base year.
IIP Index Components:

o Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilisers are the
eight core industries that comprise about 40 percent of the weight of items included
in the Index of Industrial Production.
o Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents
fall.
Who releases Index of Industrial Production or IIP data?

o In the case of Index of Industrial Production India, IIP data is compiled and published
by CSO every month. CSO or Central Statistical Organisation operates under the Ministry
of Statistics and Programme Implementation (MoSPI).
o The IIP index data, once released, is also available on the PIB website.
Who uses IIP data?

o The factory production data (IIP) is used by various government agencies such as the Ministry
of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for
analytical purposes.
o The data is also used to compile the Gross Value Added (GVA) of the manufacturing
sector in the Gross Domestic Product (GDP) on a quarterly basis.
Where is IIP data sourced from?

o The CSO uses secondary data to reach the monthly IIP number. The data is sourced from
various agencies in different ministries or departments of the government.
o The Department of Industrial Policy and Promotion (DIPP) is the source for the major chunk
of data for the calculation.
IIP vs ASI
o While the IIP is a monthly indicator, the Annual Survey of Industries (ASI) is the prime source
of long-term industrial statistics.
o The ASI is used to track the health of the industrial activity in the economy over a longer period.
The index is compiled out of a much larger sample of industries compared to IIP.
 INDEX OF EIGHT CORE INDUSTRIES

o It is released 12 days before the IIP is released.
o The objective of the Index of Eight Core Industries is to give an advance indication on
the production performance of the industries which are of ‘core’ nature before the
release of the IIP.
o The ICI measures the individual and collective performances of the production in these eight
core industries.
o The ICI is used by policymakers including the Ministry of Finance, other Ministries, and
Departments.
o It is also used by banks for financing infrastructure projects and the Reserve Bank of India
(RBI).
o To calculate the ICI, the components covered under the eight core sectors are mentioned in the
table below:
▪ Coal – Coal Production excluding Coking coal.
▪ Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.
▪ Crude Oil – Total Crude Oil Production.
▪ Cement – Production of Large Plants and Mini Plants.
▪ Natural Gas – Total Natural Gas Production.
▪ Steel – Production of Alloy and Non-Alloy Steel only.
▪ Refinery Products – Total Refinery Production (in terms of Crude Throughput).
▪ Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN),
Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and
Single superphosphate (SSP).
o The ICI is released every month.
o The index is calculated by using the Laspeyres formula of the weighted arithmetic mean
of quantity relatives.
Industry Weight
01 Coal 10.33
02 Electricity 19.85
03 Crude oil 8.98
04 Cement 5.37
05 Natural gas 6.88
06 Steel 17.92
07 Refinery products 28.04
08 Fertilizers 2.63
Total 100
 INTERIM AND ANNUAL BUDGETS

Interim Budget Union Budget
o Interim Budget is a budget presented o Union Budget is an annual budget presented by

by the Central Government just the Central Government in the Parliament.
before the General elections.
o Vote on the account is passed o Union Budget is passed after complete
without discussion in Lok Sabha discussions in Lok Sabha
o In the Interim Budget, the income o The Union Budget has 2 different parts, one part
and expenses of the previous year will is related to the expenses and income of the
be mentioned. previous year and the other part is the plan of the
o It also mentions the expenses for a Government to raise funds through taking
few months till the charge is taken various measures and how it would be utilised
over by the next Government. for the development of the nation.
o However, most importantly the
sources of income will not be
detailed in the Interim Budget.
o Interim Budget is during the election o Union Budget is for the entire fiscal year.
year, for a duration of approximately
2 to 4 months of the fiscal year
o The Interim Budget has only a o Union Budget will have income and expenses of
summary of the expenses and income the previous year would be provided in detail.
of the previous year.
o The Interim Budget will not have the o The Union Budget will have a component on
component of income through the spending funds for various social welfare
collection of taxes. measures for the development of a country and
describe the ways of raising funds through taxes.
 IMF AND CRYPTOCURRENCY

International Monetary Fund (IMF) made a significant announcement regarding the utilization
of cryptocurrency within the Latin America and Caribbean market, as well as the growing
enthusiasm for blockchain-based central bank digital currencies (CBDCs).
The IMF stated that a ban on crypto “may not be effective in the long run” in the region.
CRYPTO EXPANSION IN SOUTH AMERICA

• El Salvador is the first country in the world to adopt Bitcoin in 2021, the largest cryptocurrency
by market capitalization as its legal tender. El Salvador uses a digital wallet known as
Chivo to regulate users’ crypto transactions.
• Other countries like Argentina, Chile, and Columbia have experienced devaluation of their
currency against the U.S. dollar.
• To preserve the value of their savings, some residents have explored converting their funds to
U.S. dollars. However, there are legal restrictions controlling this.
• Others have chosen to convert their assets to stablecoins - cryptocurrencies designed to
reflect the value of fiat currencies such as the U.S dollar.
• A number of central banks in the Latin American market are also considering CBDCs,
meaning that more people could soon be exposed to blockchain-based infrastructure.
CRYPTOCURRENCY
• Cryptocurrencies are digital or virtual currencies in which encryption techniques are used
to regulate the generation of their units and verify the transfer of funds.
• These currencies operate independently of a central bank.
• Benefits: The benefits of cryptocurrencies include cheaper and faster money transfers, as well
as decentralised systems that do not fail at a single point.
• Disadvantages: Cryptocurrency disadvantages include price volatility, high energy
consumption for mining activities, and use in criminal activities. Cryptocurrencies are not
widely accepted as money due to their lack of legal tender status.
CENTRAL BANK DIGITAL CURRENCY (CBDC)

• CBDC is the digital form of fiat currency that may be exchanged through blockchain-
based wallets and is regulated by the central bank.
• It is a digital form of legal tender issued by the central bank.
• Fiat money is a government-issued currency that isn't backed by a commodity like
gold. Because central banks can manage how much money is printed with fiat money, they
have more power over the economy.
• Despite the fact that CBDCs was inspired by bitcoin, they are distinct from the decentralized
virtual currencies and crypto assets, which are not issued by the government and lack the status
of "legal tender."
 INTERNATIONALISATION OF RUPEE
The Reserve Bank of India (RBI) has put in place the mechanism for rupee trade settlement with
as many as 18 countries.
• Internationalization of the Rupee is the process of increased cross-border transactions
involving the Indian currency.
• It corresponds to trade especially in import-export, current account transactions,
and certain capital account transactions.
• This would enable the international settlement of trade in Indian rupees in foreign trades, as
opposed to other currency including US dollars.
• The goal of internationalizing the rupee is to make it a more widely accepted currency in
international trade and investment.
POSSIBLE BENEFITS
• Mitigate exchange rate risk - Internationalization of the INR can lower transaction costs
of cross-border trade and investment operations by mitigating exchange rate risk.
• Reduce risk – Eliminates the risk of exposure to currency volatility faced by Indian
businesses.
• Exports becoming competitive - Reducing currency risk can reduce the cost of doing
business and can hence help in making exports more competitive in the global market.
• Increased financial integration - Help to integrate the Indian financial system with the
global financial system. This could lead to increased investment and economic growth.
• Reduced need for foreign exchange reserves - The need to maintain foreign exchange
reserves can reduce if a sizeable share of India’s trade can be settled in terms of the domestic
currency.
• It leads in lowering the impact of sudden stops and reversals of capital flows and
enhances the ability to repay external sovereign debt.
POSSIBLE CHALLENGES
• Process being complex - Rupee-trade arrangements have not been easy to implement. The
rupee is not fully convertible in the capital account. Countries with rupee balances,
would have to find a way to use or invest.
• Small market - The Indian economy is not as large as some other economies, so there is less
demand for the rupee in the global financial markets.
• Too much regulation - The Indian government has a number of controls on the rupee and
these controls make it difficult for the rupee to be used as a global currency.
• Lack of liquidity - The Indian rupee is not as liquid as some other currencies, so it can be
difficult to buy and sell large amounts of rupees.
INITIATIVES TAKEN
Indo-Nepal • This Scheme was launched by the RBI in May 2008 as an option for
Remittance cross-border remittances from India to Nepal.
Facility Scheme • The Scheme leverages the NEFT ecosystem.
• India currently has a BSA with Japan as a line of support in case of any
Bilateral Swap balance of payments issue.
Arrangements • Under the South Asian Association for Regional Cooperation (SAARC)
(BSA) swap agreement, the requesting central bank can make withdrawals
in dollar, Euro and also in rupee.
• Gujarat International Finance Tec-City (GIFT City) was set up as
India’s first International Financial Service Centre (IFSC).
Developments • It has the potential to develop as an international financial
in the GIFT City centre for Rupee products and more specifically Rupee
derivatives, given the fact that the Rupee derivatives are among the
most traded contracts globally.
Indo-Iran • An agreement was signed between India and Iran for undertaking
Agreement eligible trade transactions using rupee.
Asian Clearing • RBI had proposed the use of local currencies of members for
Union (ACU) settlement of ACU transactions and inclusion of rupee as one of the
settlement currencies under the ACU.
Rupee as a Designated • This have paved the way for rupee-based bilateral trade
Foreign Currency in Sri between Sri Lanka and India.
Lanka
• RBI making efforts to increase the global outreach of the UPI system
Use of Indian to facilitate cross-border transactions.
Payment • Various other initiatives have also been undertaken to facilitate cross-
Infrastructure border payments, especially personal remittances like the Money
Transfer Service Scheme (MTSS).
Other initiatives • RBI has enabled external commercial borrowings in rupees.
• The recent Foreign Trade Policy (FTP) 2023, proposes invoicing,

payment, and settlement of trade in Indian rupees.
• RBI has permitted rupee settlement of external trade through Special
Rupee Vostro Accounts (SRVAs). A total of 18 countries have been
allowed to open SRVAs.
• A vostro account is held by a bank on behalf of a bank in another
country).
 INITIAL PUBLIC OFFERING

o An Initial Public Offering (IPO) is the first sale of stocks issued by a company to the
public. Before an IPO, a company is considered a private company, usually with a small
number of investors (founders, friends, family, and business investors such as venture
capitalists or angel investors).
o When a company goes through an IPO, the general public is able to buy shares and own
a portion of the company for the first time. An IPO is often referred to as “going public,” and
the underwriting process is typically led by an investment bank.
Reasons
o Companies that are looking to grow often use an Initial Public Offering to raise capital. The
biggest advantage of an IPO is the additional capital raised.
o The capital raised can be used to buy additional property, plant, and equipment (PPE),
fund research and development (R&D), expand, or pay off existing debt. There is
also an increased awareness of a company through an IPO, which typically generates a wave of
potential new customers.
Types of IPO: There are two common types of IPO. They are:
Fixed Price Offering

o Fixed Price IPO can be referred to as the issue price that some companies set for the initial sale
of their shares. The investors come to know about the price of the stocks that the company
decides to make public.
Book Building Offering

o In the case of book building, the company initiating an IPO offers a 20% price band on the
stocks to the investors. The interested investors bid on the shares before the final price is
decided. Here, the investors need to specify the number of shares they intend to buy and the
amount they are willing to pay per share.
o The lowest share price is referred to as floor price and the highest stock price is known as cap
price. The ultimate decision regarding the price of the shares is determined by investors’ bids.
 IRRA PLATFORM
About Investor Risk Reduction Access (IRRA)
• The IRRA platform has been developed to reduce risks faced by investors in the
eventuality of technical glitches at the trading member’s end at both the primary site
and disaster recovery site.
• Its purpose is to provide investors with an opportunity to square off/close their open
positions and cancel pending orders using the IRRA platform in case of technical glitches
or unforeseen outages that render the trading member’s site inaccessible.
• It is not meant for taking fresh positions or orders, but only to cancel the pending orders.
• IRRA has been jointly developed by all the stock exchanges – BSE (Bombay Stock
Exchange), NSE (National Stock Exchange), NCDEX (National Commodity and Derivatives
Exchange), MCX (Multi Commodity Exchange) and Metropolitan Stock Exchange of India
(MSE)
Mechanism of Working
• IRRA can be invoked by trading members when they are faced with a technical glitch at their
end impacting their ability to service clients across exchanges from both – the primary site and
disaster recovery site, where relevant.
• Even stock exchanges can also monitor parameters like connectivity, order flow and
social media posts, and suo moto initiate the enablement of the IRRA service, if needed,
irrespective of any such request by the trading member.
• This service shall be enabled by the exchanges, suo moto, only in case of disruption of trading
services of trading members across all the exchanges, where the trading member is a member.
Need
• With technology glitches increasingly disrupting trading services, investors face risks,
especially in volatile markets, with no means to close positions.
• Despite business continuity plans, certain disruptions like delayed recovery sites or Cyber-
Attacks persist.
• This initiative ensures contingency services by stock exchanges during such crises.
 LAB GROWN DIAMONDS (LGD)

• Lab-grown diamonds (LGDs) are diamonds that are grown in a laboratory using advanced
technology.
• They are also known as cultured, synthetic, man-made, or artisan-created
diamonds.
• Natural diamonds form deep within the Earth over an extensive period, often up to three billion
years, under extreme pressure and high temperatures.
• LGDs have essentially the same chemical, optical and physical properties and
crystal structure as natural diamonds.
Benefits
• Unlike mined diamonds, lab-grown diamonds do not involve the social and
environmental ramifications associated with mining activities.
• Consequently, all LGDs are considered eco-friendly and contribute positively to
environmental preservation.
Production Methods
• LGDs are synthesized in laboratories via two primary methods: chemical vapor deposition
(CVD) or high pressure, high temperature (HPHT).
• Both HPHT and CVD methods of growing diamonds artificially begin with a seed, a slice of
another diamond.
CVD
• CVD is a process where a solid
material is deposited from a vapor by a
chemical reaction occurring on or in the
vicinity of a normally heated substrate
surface.
• The resulting solid material is in the
form of a thin film, powder, or single
crystal.
HPHT Process
• The HPHT diamond formation process
begins with a small diamond seed that is
placed into pure carbon.
• The diamond seed is exposed to intense
pressure and heat.
• The carbon melts and a diamond begins to
form around the seed.
• The substance is carefully cooled to form a diamond.
• The rough diamond is then ready to be cut, polished, and set into jewelry like a naturally grown
rough diamond.
 LIGHT WEIGHT PAYMENTS AND

SETTLEMENT SYSTEM
• LPSS aims to provide resilience and continuity of payment and settlement systems while
ensuring efficiency during emergencies.
• LPSS is independent of conventional technologies and wired networks that underlie
existing payment systems such as UPI, NEFT, and RTGS.
• Conventional payment systems like UPI, NEFT, and RTGS are vulnerable to disruptions
caused by natural calamities or war due to their dependence on complex wired networks and
advanced IT infrastructure.
• Lightweight system provides a portable and easily activated solution that can be
operated remotely with minimal resources.
• It serves as a backup option for critical transactions, maintaining stability and
ensuring the availability of essential payment services.
• The system will process only those transactions that are crucial for maintaining the
stability of the economy, such as government and market-related transactions.
• Retail or individual transactions that can be deferred or conducted through alternative modes
will not be handled.
• It will also maintain transaction records for reconciliation and audit purposes.
• Facilitates uninterrupted functioning of essential payment services, including bulk

payments, interbank payments, and provision of cash to participant institutions.
 LONG TERM REPO OPERATIONS

o The Repo rate is the rate at which the banks borrow mainly short term loans from the RBI.
Under Repo mechanism, the banks sell their G-Secs to the RBI with an agreement to
repurchase the G-Sec at a future date and at fixed price. The rate at which the banks repurchase
the G-Secs from the RBI is known as the Repo rate.
o Depending upon the maturity period of the loans, there are different types of Repos in India.
These are:
Overnight Repos: (Maturity period of 1 day);
Term Repos: There are different types of term repos depending upon the maturity period. Some
of the term repos include 7-day, 14-day, 21 day, 28-day, 56-day.
o The overnight repos are available to the Banks from the RBI from Monday to Friday. However,
the term repos are available to the Banks only when the RBI notifies about the Term Repos
(Usually 2-3 days in a week). Further, the interest rate on the term repos is not same as the
Repo rate. The Interest rate on the Term repos is determined through auction and hence is
usually higher than the Repo rate.
▪ Long Term Repo Operations (LTRO)

o It is a new policy tool used by the RBI to inject more liquidity into the Economy. It is considered
to be similar to the term repos, but with a longer maturity period of 1 year and 3 years. Through
the LTRO, the RBI seeks to inject long term liquidity into the economy at a lower interest rate.
This is so because the interest rate on the LTRO is fixed at the Repo rate (which is considered
to be much lower than the rate of interest on the 1 year or 3 year loans).
o Some of the basic features of the LTRO include:
Total Funds to be injected: Up to Rs 1 Lakh crores.
Interest Rate: Repo Rate.
Method of Operations: The LTROs would be carried out through e-Kuber (The e-Kuber is the
Core Banking Solution of the RBI which enables each bank to connect their single current
account across the country. The e-Kuber is also used by RBI to execute various transactions with
banks such as carrying out overnight and term repos, reverse repos etc.)
▪ Need for LTROs

The RBI has consistently been reducing the Repo rates to inject liquidity into the economy.
However, the Banks have not reduced the rate of interest on loans commensurately due to the
poor monetary policy transmission. Further, the rate of interest on the long-term loans has
remained much higher and has hindered the investment rates within India. Hence, the RBI has
carried out the LTROs for the following purposes:
1. Reduce rate of Interest on the long term loans.
2. The reduction in the long term rate of interest would force the banks to reduce the rate of
interest on short term loans. (The rate of interest on long term loans is usually higher than that
on short term loans).
3. Incentivise the Banks to reduce their overall lending rates and improve the monetary policy
transmission.
 LEADS
The Ministry of Commerce & Industry has released the 5th edition of “Logistics Ease Across
Different State (LEADS) 2023” report, which serves as a guide for stakeholders in the Logistics
Sector by providing strategic insights.
Logistics Ease Across Different States (LEADS)

• The LEADS is an indigenous data-driven index to assess logistics infrastructure,
services, and human resources across all 36 States and UTs.
• LEADS continues to act as a guiding & bridging mechanism for the identification of
interventions enhancing logistics efficiency at State/UTs. It reflects positively on international
indices, like the Logistics Performance Index.
• LEADS aims to guide stakeholders in the logistics sector by offering strategic
insights and fostering healthy competition among states and union territories to
improve their logistics performance.
• LEADS was conceived on the lines of the Logistics Performance Index of World
Bank in 2018 and has evolved over time.
Evaluation Criteria: The report evaluates logistics performance based on three key pillars:
• Logistics Infrastructure
• Logistics Services
• Operating and Regulatory Environment
Key Highlights of the LEADS 2023
Achievers
• Thirteen states and Union Territories, including Andhra Pradesh, Karnataka, Tamil Nadu,
Chandigarh, and Gujarat, are categorized as achievers in the logistics index chart 2023.
• These regions have shown efficient logistical services that contribute to export promotion and
economic growth.
Fast Movers
• Kerala, Maharashtra, Madhya Pradesh, Rajasthan, Uttarakhand, Arunachal Pradesh, and
Nagaland are recognized as fast movers in the logistics index.
• These areas have shown significant progress and improvements in their logistical services.
Aspirers
• States and UTs in the aspirers category, such as Goa, Odisha, West Bengal, Bihar, Chhattisgarh,
Himachal Pradesh, and Jharkhand, are identified as regions with potential for growth in their
logistics ecosystem. These areas are striving to enhance their logistical capabilities.
Policy Reforms: The report emphasizes the significance of policy reforms such as-
• Industry status for logistics,
• digital initiatives (PM GatiShakti),
• Logistics Data Bank,
• Unified Logistics Interface Platform (ULIP), and
• the alignment of State Logistics Policies with the National Logistics Policy.
Initiatives Related to Logistics

✓ Multimodal Transportation of Goods Act, 1993.
✓ PM Gati Shakti Scheme
✓ Multi Modal Logistics Parks
✓ LEADS Report
✓ Dedicated Freight Corridor
✓ Sagarmala Projects
✓ Bharatmala Project
Related information: Logistics Performance Index

• The Logistics Performance Index (LPI), developed by the World Bank Group, is an
interactive benchmarking tool created to help countries identify the challenges and
opportunities they face in their performance on trade logistics and what they can do to improve
their performance.
• LPI is the weighted average of the country's scores on the six key dimensions:
1. Customs performance
2. Infrastructure quality
3. Ease of arranging shipments
4. Logistics services quality
5. Consignment tracking and tracing
6. Timeliness of shipments
• India ranked 38th out of 139 countries in LPI 2023.
 MONETARY POLICY COMMITTEE

• The Monetary Policy Committee is a statutory body established under section 45ZB of the
Reserve Bank of India Act 1934.
• It is an institutionalised framework for maintaining price stability while pursuing the goal
of growth.
• It is set up based on the recommendation of the Urjit Patel Committee.
Objectives
• The monetary policy Committee is concerned with setting policy rates and other monetary
policy decisions in order to achieve:
o Price stability
o Accelerating the growth of the economy
o Exchange rate stabilization
o Balancing savings and investment
o Generating employment
o Financial stability
• The primary goal of the monetary policy committee is to maintain price stability while
keeping growth in mind as per the monetary policy framework agreement.
• Price stability is a prerequisite for long-term growth.
• In order to maintain price stability, inflation must be kept under control.

• Every five years, the Indian government sets an inflation target.
• The Reserve Bank of India (RBI) plays an important role in the consultation process for
inflation targeting. The current inflation-targeting framework in India is flexible with a target
of 4% with a band of +/-2%.
Composition of MPC
• Chairman: The Governor of the Reserve Bank of India serves as the committee's ex-
officio Chairman.
• Members: The committee consists of six members (including the Chairman): three
RBI officials and three government-nominated external members.
• The RBI officials are:
o Governor of the Reserve Bank of India
o Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy – Member, ex
officio;
o One officer of the Reserve Bank of India to be nominated by the Central Board – Member, ex
officio;
Functioning of the MPC

• The policy interest rate required to meet the inflation target is determined by the committee.
• The MPC is obligated to meet at least 4 times a year.
• The MPC meeting requires a quorum of four members.
• Each member of the MPC has one vote, with the Governor having a second or
casting vote in the event of a tie.
• The Reserve Bank is obligated to issue a document called the Monetary Policy Report
every six months to explain the origins of inflation and inflation estimates for the next six
to eight months.
 INSTRUMENTS OF MONETARY POLICY

• It is the rate at which the Reserve Bank is willing to purchase or
rediscount bills of exchange or other commercial papers.
Bank Rate • Section 49 of the Reserve Bank of India Act, 1934 mandates the
publication of the Bank Rate.
• This rate has been aligned with the MSF rate and, as a result, changes
automatically when the MSF rate and the policy repo rate change.
• The percentage of Net demand and time liabilities (NDTL) that a bank must
Statutory keep in safe and liquid assets such as unencumbered government
Liquidity securities, cash, and gold.
Ratio (SLR) • SLR changes frequently have an impact on the availability of resources in
the banking system for lending to the private sector.
Cash • The average daily balance that a bank is required to maintain with
Reserve the Reserve Bank as a share of such percentage of its Net demand and
Ratio (CRR) time liabilities (NDTL) as specified by the Reserve Bank in the Gazette of
India from time to time.
Repo rate • The (fixed) interest rate at which the Reserve Bank provides
overnight liquidity to banks in exchange for the government and other
approved securities as collateral under the liquidity adjustment facility
(LAF).
Reverse • The (fixed) interest rate at which the Reserve Bank absorbs
Repo Rate liquidity from banks on an overnight basis in exchange for eligible
government securities under the LAF.
• The LAF consists of overnight as well as term repo auctions.
Liquidity • The aim of term repo is to help develop the interbank term money
Adjustment market, which in turn can set market-based benchmarks for pricing
Facility of loans and deposits, and hence improve transmission of monetary policy.
(LAF)
• The RBI also conducts variable interest rate reverse repo auctions, as
necessitated under the market conditions.
• A facility through which scheduled commercial banks can borrow an
Marginal additional amount of overnight money from the Reserve Bank by
Standing dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a certain
Deposit limit at a penal rate of interest.
Facility
(MSF) • This acts as a safety valve for the banking system in the event of
unexpected liquidity shocks.
• The repo rate is used to provide funds through the LTRO.
Long-Term • Banks can take out one-year and three-year loans at the same one-day
Repo repo interest rate.
Operation
• However, compared to short-term (repo) loans, loans with a longer
(LTRO)
maturity time (such as one year or three years) normally have a
higher interest rate.
Open • These include the outright purchase and sale of government
Market securities for the purpose of injecting and absorbing long-term liquidity,
Operation respectively.
(OMO)
• This monetary management tool was introduced in 2004.
Market
Stabilisation • Short-term government securities and treasury bills are sold to
Scheme absorb longer-term surplus liquidity resulting from large capital inflows.
(MSS) • The money raised in this manner is kept in a separate government account
of the Reserve Bank.
 MONETARY POLICY DECISIONS

The Reserve Bank of India (RBI) in its bimonthly Monetary Policy Committee (MPC) Meeting
has retained benchmark interest rates unchanged for the 5th time in a row.
Policy rates
Repo rate 6.5%
• Repo rate is the rate at which the central bank of a country (RBI) lends
money to commercial banks in the event of any shortfall of funds.
• Here, the central bank purchases the security.
6.25 %
• The SDF is a liquidity window through which the RBI will give
Standing banks an option to park excess liquidity with it.
Deposit
• It is different from the reverse repo facility in that it does not require
Facility (SDF)
banks to provide collateral while parking funds.
6.75%
• MSF is a window for scheduled banks to borrow overnight
Marginal from the RBI in an emergency situation when interbank liquidity
Standing dries up completely.
Facility Rate • Under interbank lending, banks lend funds to one another for
a specified term.
4.50%
• Under CRR, the commercial banks have to hold a certain minimum
amount of deposit (Net Demand and Time Liabilities) NDTL
as reserves with the central bank.
Cash Reserve
Ratio (CRR) • The amount of money available to the bank for providing
loans is called its Net Demand and Time Liabilities (NDTL), which is
basically, the sum of all the deposits made to the bank by people like
you, less the amount that the bank has invested in other banks.
Statutory 18.00%
Liquidity Ratio • SLR is the minimum percentage of deposits that a commercial bank has
(SLR) to maintain in the form of liquid cash, gold, or other securities.
 UNCONVENTIONAL MONETARY POLICIES

Zero Interest Rate Negative Interest Rate Helicopter Money
Policy (ZIRP) Policy (NIRP)
• This policy was • This policy was followed • The adoption of Helicopter
followed in USA in developed economies money was contemplated by
from 2008 in the wake such as Japan, Denmark, Japan in order to overcome the
of financial crisis in Sweden, Switzerland etc. 2008 financial crisis.
order to inject money • Usually, the banks park • It is a hypothetical concept put
into the economy to their surplus reserves forward by the economist,
promote economic with the Central Bank and Milton Friedman.
growth. earn interest. • This involves the central bank of
• Under this policy, the • However, under the the country printing currency
US Fed Bank provided NIRP, the banks would be notes and distributing it to the
loans to the banks at required to pay interest to people free of cost. The idea here
almost 0.25% rate of the central bank if they is to promote demand in the
interest. The idea was to park their surplus economy during recession.
transmit lower rate of reserves.
interest to the • The idea here is that the • It is different form ZIRP and
corporates and banks should provide NIRP, as under these two the
borrowers in order to loans to the people get loans at cheaper rate
spur demand. borrowers at cheaper which increases the debt liability.
• This was also known as rates instead of parking • But in helicopter money since
Quantitative Easing. their surplus reserves people receive money free of cost,
with the Central Bank. it does not lead to increase in debt
liability.
 MONETARY POLICY TRANSMISSION

• Monetary policy transmission refers to the process through which changes in the policy rates
(such as Repo) by the RBI leads to commensurate changes in the rates of Interest of the
Banks. As the Repo rate increases, the rate of Interest on the deposits and loans also increases.
Similarly, as the repo rate decreases, the rate of interest decreases.
• In case of India, while increase in Policy rates get transmitted immediately, the rate cuts get
transmitted with a significant amount of lag. So, even when the RBI reduces the Repo rate, the
Banks may continue to maintain higher rates of Interest on loans. As seen recently, this
inefficiency in the monetary policy transmission hinders the credit creation in the economy
during the economic slowdown.
▪ Reasons for poor Monetary Policy Transmission:

o Over-dependence on Deposits: The Banks rely more on Public deposits rather than on RBI
for raising money to give loans. Had the Banks been more dependent on the RBI for the raising
money, then changes in the Repo rate would have been easily transmitted into changes in the
rate of Interest on loans.
o Deposits with higher maturity period: Deposits with maturity of one year and above
constitute more than 50% of total deposits. Most of these deposits are fixed-Interest rate
deposits (and not floating rate) and hence it becomes difficult for the banks to reduce the rate
of Interest on the loans without undertaking losses.
o Small savings Schemes: The Government is operating a number of small savings schemes
such as PPF, National Savings Certificate (NSC), Kisan Vikas Patra etc. Usually, the interest
rates on these savings schemes tend to be higher as compared to rate of Interest on Banks'
deposits.
o Higher NPAs: The higher NPAs of the Banks accompanied by higher provisioning
requirements would reduce the ability of the Banks to offer loans at lower rates of Interest and
thus hinders monetary policy transmission.
o Opaqueness in calculation of Marginal Cost of Lending rate (MCLR) : The MCLR is
the minimum rate of interest below which the Banks are not allowed to give loans. The MCLR,
which replaced the earlier Base rate regime was introduced in 2016.
 MULTIDIMENSIONAL POVERTY INDEX

The NITI Aayog has released a Discussion Paper titled-‘Multidimensional Poverty in India since
2005-06’, stating that 24.82 crore people escaped Multidimensional Poverty in the last nine
years.
The discussion paper utilizes data from National Family Health Surveys (NFHS) conducted in
2005-06, 2015-16, and 2019-21 to understand long-term poverty trends.
National Multidimensional Poverty Index

• The National Multidimensional Poverty measures simultaneous deprivations across
three equally weighted dimensions of Health, Education, and Standard of Living
that are represented by 12 Sustainable Development Goals-aligned indicators.
• These include Nutrition, Child and Adolescent mortality, Maternal Health, Years of schooling,
School Attendance, Cooking fuel, Sanitation, Drinking water, Electricity, Housing, Assets, and
Bank Accounts.
• MPI’s global methodology is based on the robust Alkire and Foster (AF) method that
identifies people as poor based on universally acknowledged metrics designed to assess acute
poverty, providing a complementary perspective to conventional monetary poverty measures.
Global MPI
 MARKET MONOPOLY
The Competition Commission of India (CCI) has dismissed a complaint against PVR, a leading
multiplex chain, for allegedly abusing its Dominant Market Position, raising the Concern of
Market Monopoly.
About Market Monopoly
• Market monopoly refers to a situation in which a single company or a group of
companies dominates and controls a significant share of a particular market or
industry.
• In a monopoly, there is only one seller or producer that provides a specific product or
service, and there are no close substitutes available to consumers.
• This gives the monopolistic entity substantial market power, allowing it to influence the market
conditions, set prices, and control the supply of goods or services.
Features of Market Monopoly
Single Seller or • In a monopoly, there is only one entity that dominates the entire
Producer market. This company is the exclusive provider of a particular product
or service.
High Barriers • Monopolies often arise when there are significant barriers
to Entry preventing new competitors from entering the market.
• Barriers may include high startup costs, exclusive access to
resources, government regulations, or strong brand loyalty.
No Substitutes • Consumers have limited or no alternative options for the product

or service offered by the monopolistic company. There are no close
substitutes available in the market.
• The monopoly has considerable market power, allowing it to control
Market Power
prices without significant fear of competition.
and Pricing
Control • This can lead to higher prices for consumers and potentially
reduced output.
Influence Over • The monopoly has control over the supply of the product or
Supply service.
• It can determine the quantity produced and adjust supply to
impact market conditions.
• Due to the absence of competitors, monopolies operate in an
Lack of environment where there is no direct competition for their specific
Competition product or service.
• This lack of competition can result in reduced incentives for innovation
and efficiency.
Key Terms Related to Anti-Competitive Practices
• Predatory pricing occurs when a company intentionally sets its

prices below cost in order to drive competitors out of the
Predatory
market.
Pricing
• Once competitors are eliminated, the company can raise prices to
recoup losses and enjoy a monopolistic position.
• Cartels are associations of independent businesses or
countries formed to regulate production, pricing, and
Cartels marketing of goods or services.
• Cartels are typically illegal and are known for fostering anti-competitive
behaviour.
• Collusion is an agreement between two or more parties to limit
Collusion competition by misleading, deceiving, or defrauding others.
• It often involves secret cooperation to gain an unfair advantage.
• Mergers involve the combination of two or more companies
into a single entity.
Mergers
• While not all mergers are anti-competitive, some may reduce
competition in a particular market, leading to regulatory scrutiny.
• Price discrimination occurs when a seller charges different
Price prices to different customers for the same product or service.
Discrimination • While not always illegal, it can be considered anti-competitive if it
harms competition.
Price Fixing • Price fixing involves an agreement between competitors to set a

Agreements specific price for their products or services. This eliminates
competition and artificially inflates prices, violating antitrust laws.
 MICROFINANCE INSTITUTIONS (MFIs)

o MFI is an organization that offers financial services to low income populations.
o These services include microloans, micro-savings and microinsurance.
o MFIs are financial companies that provide small loans to people who do not have any access to
banking facilities.
o The definition of “small loans” varies between countries. In India, all loans that are below Rs.1
lakh can be considered as microloans.
o Microfinance sector has grown rapidly over the past few decades and currently it is serving
around 102 million accounts (including banks and small finance banks) of the poor population
of India.
o Different types of financial services providers for poor people have emerged - non-government
organizations (NGOs); cooperatives; community-based development institutions like self-
help groups and credit unions; commercial and state banks; insurance and credit card
companies; telecommunications and wire services; post offices; and other points of sale -
offering new possibilities.
o Non-Banking Finance Company (NBFC)-MFIs in India are regulated by The Non-
Banking Financial Company -Micro Finance Institutions (Reserve Bank)
Directions, 2011 of the Reserve Bank of India (RBI).
Major Business Models:

Joint Liability Group:
o This is usually an informal group that consists of 4-10 individuals who seek loans against
mutual guarantee.
o The loans are usually taken for agricultural purposes or associated activities.
Self Help Group:

o It is a group of individuals with similar socio-economic backgrounds.
o These small entrepreneurs come together for a short duration and create a common fund for
their business needs. These groups are classified as non-profit organisations.
o The National Bank for Agriculture and Rural Development (NABARD) SHG linkage
programme is noteworthy in this regard, as several Self Help Groups are able to borrow money
from banks if they are able to present a track record of diligent repayments.
Grameen Model Bank:

o It was the brainchild of Nobel Laureate Prof. Muhammad Yunus in Bangladesh in the 1970s.
o It has inspired the creation of Regional Rural Banks (RRBs) in India. The primary motive of
this system is the end-to-end development of the rural economy.
Rural Cooperatives:
o They were established in India at the time of Indian independence.
o However, this system had complex monitoring structures and was beneficial only to the
creditworthy borrowers in rural India. Hence, this system did not find the success that it sought
initially.
Benefits:
o They provide easy credit and offer small loans to customers, without any collateral.
o It makes more money available to the poor sections of the economy, leading to
increased income and employment of poor households.
o Serving the under-financed section such as women, unemployed people and those with
disabilities.
o It helps the poor and marginalised section of the society by making them aware of the
financial instruments available for their help and also helps in developing a culture of saving.
o Families benefiting from microloans are more likely to provide better and continued education
for their children.
 MCA 21 VERSION 3.0

The government launched the first phase of the latest update to its digital corporate
compliance portal, Ministry of Corporate Affairs (MCA) 21 Version 3.0.
• MCA21 is the online portal of the Ministry of Corporate Affairs (MCA) that has made all
company-related information accessible to various stakeholders and the general
public.
• It was launched in 2006.
VERSION 3.0
• It is designed to fully automate all processes related to the proactive enforcement and
compliance of the legal requirements under the Companies Act, 1956, New Companies
Act, 2013 and Limited Liability Partnership Act, 2008. This will help the business
community to meet their statutory obligations.
• MCA 21 has been part of Mission Mode projects of the Government of India.
• MCA21 Version 3.0 is part of the 2021 Budget announcement.
• The MCA21 V3.0 in its entirety will not only improve the existing services and modules, but
will also create new functionalities like e-adjudication, compliance management system,
advanced helpdesk, feedback services, user dashboards, self-reporting tools and revamped
master data services.
• It comprises a revamped website, new email services for MCA Officers and two new modules,
namely, e. Book and e. Consultation.
 NON-FOOD BANK CREDIT

o The Bank credit in India refers to credit lending by various scheduled commercial
banks (SCBs) to various sectors of the economy.
o The bank credit is categorized into food credit and non-food credit.
o The food credit indicates the lending made by banks to the Food Corporation of India
(FCI) mainly for procuring foodgrains. It is a small share of the total bank credit.
o The major portion of the bank credit is the non-food credit which comprises of credit
to various sectors of the economy (Agriculture, Industry, and Services) and also in the form of
personal loans.
o The data on bank credit is collected on a monthly basis by the Reserve Bank of India (RBI).
The data is sourced from 46 commercial banks, accounting for about 95% of the total non-food
credit deployed by all scheduled commercial banks (SCBs).
 MUTUAL FUNDS
o Mutual Fund Company pools money from the investors which in turn is invested in different
financial instruments such as shares, bonds, debentures, commercial paper etc.
o A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI)
before it can collect funds from the public.
Types of Mutual Fund Schemes

o A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.
o An open-ended scheme is one that is available for subscription and repurchase on a continuous
basis. These schemes do not have a fixed maturity period.
o On the other hand, a close-ended scheme has a stipulated maturity period e.g. 3-5 years. The
fund is open for subscription only during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the new fund offer and thereafter they can buy
or sell the units of the scheme on the stock exchanges where the units are listed.
What are Fixed Maturity Plans (FMPs)?

o FMPs are close-ended mutual funds that one can invest in only during a new fund offer (NFO).
o The FMPs typically invest in debt instruments such as Bonds, commercial papers etc. that have
the same maturity as that of the FMP. For example, if the duration of FMP is of 2 years, it would
invest in only those debt instruments that have maturity period of 2 years.
o Because of such a nature of investment, the FMPs do not face interest rate risks. However, they
face credit risks as there could be default on the payment by the company which issues the debt
instrument.
 MERCHANT DISCOUNT RATE (MDR)

▪ MDR is a fee charged for the merchants by the bank for accepting payments from customers
through credit/debit cards/QR Code in their establishments. The merchant discount rate is
expressed in percentage. This charge is in turn distributed among three stakeholders—
customer's bank, merchant's bank and payment system operator (Visa,
Mastercard, NPCI- RuPay or BharatQR).
▪ Government's Initiative: In December 2019, the Government decided to waive off MDR
charges on transactions done through RuPay and BHIM-UPI payments in order to push digital
payments. This came into effect from Jan 1, 2020. The government has indicated that the
Reserve Bank of India will absorb these costs from the savings that will accrue on account of
handling less cash as people move to these digital modes of payment.
▪ Critical Analysis of Government's Initiative:

Positives: Bring down cost of digital payments done through RuPay and BHIM-UPI;
Encourage adoption of indigenously developed payment tools; Promote Cashless economy;
Nudge other payment operators such as Visa, Mastercard to bringdown their commission etc.
Negatives:
o Financial burden on the RBI: Rs 1800 crores.
o Loss to NPCI
o Banks have shifted to other payment service providers such as Visa, Mastercard to earn
commission on digital payments.
o Number of fintech companies such as PayTM, Googlepay etc. have integrated UPI into their
apps for facilitating digital payments. The waiver on MDR charges through UPI would lead to
reduced profits, discourage innovation, and hurt the fintech sector. Zero MDR charges would
thus prevent growth of Fintech companies which in the long run could hurt the digital
payments ecosystem.
▪ What needs to be done?

o Committee on Digital Payments under the chairmanship of Ratan P Watal: MDR
should be high enough for new players to be incentivized to enter the digital payments
ecosystem and low enough that merchants are encouraged to adopt digital payments.
o Nandan Nilekani Committee on deepening digital payments: Let the MDR be
market-determined.
Further step: Government should provide for a lower MDR on QR code / UPI/ RuPay Debit
card transactions. This should be accompanied by tax incentives to merchants who accept
electronic transactions and promote incentive schemes to improve popularity of QR code
transactions in the country.
 NOBEL PRIZE 2023- ECONOMICS

Research: The Nobel Prize in Economics for 2023 has been awarded to Claudia Goldin, a
Harvard University professor, for research that has advanced the understanding of the Gender
Gap in the Labor Market.
The research has given new insights into women’s historical and contemporary roles
in the labor market and reveals new patterns, identifies causes of change, and speaks to the
main sources of why gender gaps remain.
 NATIONAL COMPANY LAW TRIBUNAL

o The National Company Law Tribunal is a quasi-judicial body in India that adjudicates issues
relating to Indian companies.
o The tribunal was established under the Companies Act 2013 and was constituted on 1 June
2016 by the government of India and is based on the recommendation of the V. Balakrishna
Eradi committee on law relating to the insolvency and the winding up of companies.
o All proceedings under the Companies Act, including proceedings relating to arbitration,
compromise, arrangements, reconstructions and the winding up of companies shall be
disposed off by the National Company Law Tribunal.
o The NCLT bench is chaired by a Judicial member who is supposed to be a retired or a serving
High Court Judge and a Technical member who must be from the Indian Corporate Law
Service, ICLS Cadre.
o The National Company Law Tribunal is the adjudicating authority for the insolvency resolution
process of companies and limited liability partnerships under the Insolvency and Bankruptcy
Code, 2016.
o No criminal court shall have jurisdiction to entertain any suit or proceeding in
respect of any matter which the Tribunal or the Appellate Tribunal is empowered
to determine by or under this Act or any other law for the time being in force and no
injunction shall be granted by any court or other authority in respect of any action taken or to
be taken in pursuance of any power conferred by or under this Act or any other law for the time
being in force, by the Tribunal or the Appellate Tribunal.
o The tribunal has sixteen benches, six at New Delhi (one being the principal bench) and
two at Ahmedabad, one at Allahabad, one at Bengaluru, one at Chandigarh, two at Chennai,
one at Cuttack, one at Guwahati, three at Hyderabad of which one is at Amaravathi, one at
Jaipur, one at Kochi, two at Kolkata and five at Mumbai.
 NON PERFORMING ASSETS

The gross non-performing asset (GNPA) ratio for Scheduled commercial banks (SCBs)
witnessed a significant decline, falling from 3.9% at the end of March 2023 to 3.2% by the end
of September 2023, as per the recent report of Reserve Bank of India (RBI).
Non-Performing Asset
• As per RBI, an asset becomes non-performing when it ceases to generate income for the
bank.
• NPA is usually a loan or advance for which the principal or interest payment remained
overdue for a certain period of time.
• In most cases, debt is classified as non-performing, when the loan payments have not
been made for a minimum period of 90 days.
• For agriculture, if principle and interest is not paid for 2 cropping seasons, the
loan is classified as NPA.
Types
• Banks are required to classify NPAs further into the following three categories based on the
period for which the asset has remained non-performing and the realizability of the dues:
• Sub-standard Assets: A substandard asset is an asset classified as an NPA for a period less
than or equal to 12 months.
• Doubtful Assets: A doubtful asset is an asset that has been non-performing for a period
exceeding 12 months.
• Loss Assets: Assets that are uncollectible and where there is little, or no hope of recovery
and that needs to be fully written off.
Gross NPA(GNPA) and Net NPA

• GNPA: This is the total amount of NPAs without deducting the provisional amount.
• Net NPA: This is the gross NPA minus the provision.
• Provision refers to funds left aside by banks to cover potential losses arising from bad loans
or NPAs.
Provisions to Deal with NPAs in India

• The Recovery of Debts due to Banks and Financial Institutions Act (RDB Act),
1993: It established Debt Recovery Tribunals (DRTs) and Debts Recovery Appellate
Tribunals (DRATs) to quickly adjudicate and recover debts owed to banks and financial
institutions.
• The Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act (SARFAESI Act), 2002: Empowers banks and financial institutions
to take possession and sell secured assets of defaulting borrowers without court intervention.
• The Insolvency and Bankruptcy Code (IBC), 2016: Provides a fast-track corporate
insolvency resolution process for stressed assets, including NPAs.
Terms
• Write-offs refer to the removal of a non-performing loan or asset
from the bank's books as an acknowledgment that the debt is unlikely to
Write-offs be recovered.
• This action does not absolve the borrower from the obligation to
repay but acknowledges the unlikelihood of recovery.
• It refers to the process of reclassifying a loan account from NPA back
Upgrades to a "standard" asset category, if certain conditions are satisfied
including arrears of interest and principal are paid by the borrower.
• Recoveries represent the funds or assets regained by the bank after
taking actions to collect on defaulted loans or NPAs.
Recoveries
• These can include repayments, collateral liquidation, or settlements after
pursuing recovery mechanisms.
 NON-BANKING FINANCIAL COMPANY

(NBFC)
o A Non-Banking Financial Company (NBFC) is a company registered under the Companies
Act, 1956 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local authority or other
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business
but does not include any institution whose principal business is that of agriculture activity,
industrial activity, purchase or sale of any goods (other than securities) or providing any
services and sale/purchase/construction of immovable property.
o A non-banking institution which is a company and has principal business of receiving deposits
under any scheme or arrangement in one lump sum or in installments by way of contributions
or in any other manner, is also a non-banking financial company (Residuary non-banking
company).
o NBFCs lend and make investments and hence their activities are akin to that of banks;
however, there are a few differences as given below:
1. NBFC cannot accept demand deposits;
2. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn
on itself;
3. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available to depositors of NBFCs, unlike in case of banks.
o NBFCs whose asset size is of ₹ 500 cr. or more as per last audited balance sheet are considered
as systemically important NBFCs. The rationale for such classification is that the activities of
such NBFCs will have a bearing on the financial stability of the overall economy.
o NBFCs are categorized a) in terms of the type of liabilities into Deposit and Non-
Deposit accepting NBFCs, b) non deposit taking NBFCs by their size into
systemically important and other non-deposit holding companies (NBFC-NDSI
and NBFC-ND) and c) by the kind of activity they conduct. Within this broad
categorization the different types of NBFCs are as follows:
1. Asset Finance Company (AFC) : An AFC is a company which is a financial institution
carrying on as its principal business the financing of physical assets supporting
productive/economic activity, such as automobiles, tractors, lathe machines, generator sets,
earth moving and material handling equipments, moving on own power and general purpose
industrial machines. Principal business for this purpose is defined as aggregate of financing
real/physical assets supporting economic activity and income arising therefrom is
not less than 60% of its total assets and total income respectively.
2. Investment Company (IC) : IC means any company which is a financial institution carrying
on as its principal business the acquisition of securities.
3. Loan Company (LC): LC means any company which is a financial institution carrying on as
its principal business the providing of finance whether by making loans or advances or
otherwise for any activity other than its own but does not include an Asset Finance Company.
4. Infrastructure Finance Company (IFC): IFC is a non-banking finance company a) which
deploys at least 75 per cent of its total assets in infrastructure loans, b) has a minimum Net
Owned Funds of ₹ 300 crore, c) has a minimum credit rating of ‘A ‘or equivalent d) and a CRAR
of 15%.
5. Systemically Important Core Investment Company (CIC-ND-SI): It is an NBFC
carrying on the business of acquisition of shares and securities.
6. Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC) : IDF-NBFC is
a company registered as NBFC to facilitate the flow of long term debt into infrastructure
projects. IDF-NBFC raise resources through issue of Rupee or Dollar denominated bonds of
minimum 5-year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-
NBFCs.
7. Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI): NBFC-MFI
is a non-deposit taking NBFC having not less than 85% of its assets in the nature of qualifying
assets which satisfy the following criteria:
a) loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not
exceeding ₹ 1,00,000 or urban and semi-urban household income not exceeding ₹ 1,60,000;
b) loan amount does not exceed ₹ 50,000 in the first cycle and ₹ 1,00,000 in subsequent cycles;
c) total indebtedness of the borrower does not exceed ₹ 1,00,000;
d) tenure of the loan not to be less than 24 months for loan amount in excess of ₹ 15,000 with
prepayment without penalty;
e) loan to be extended without collateral;
f) aggregate amount of loans, given for income generation, is not less than 50 per cent of the total
loans given by the MFIs;
g) loan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower
8. Non-Banking Financial Company – Factors (NBFC-Factors): NBFC-Factor is a non-
deposit taking NBFC engaged in the principal business of factoring. The financial assets in the
factoring business should constitute at least 50 percent of its total assets and its income derived
from factoring business should not be less than 50 percent of its gross income.
9. Mortgage Guarantee Companies (MGC) - MGC are financial institutions for which at
least 90% of the business turnover is mortgage guarantee business or at least 90% of the gross
income is from mortgage guarantee business and net owned fund is ₹ 100 crore.
10. NBFC- Non-Operative Financial Holding Company (NOFHC) is financial
institution through which promoter / promoter groups will be permitted to set up a new bank.
It’s a wholly-owned Non-Operative Financial Holding Company (NOFHC) which will hold the
bank as well as all other financial services companies regulated by RBI or other financial sector
regulators, to the extent permissible under the applicable regulatory prescriptions.
 NASSCOM
o NASSCOM, a not-for-profit industry association, is the apex body for the 194 billion
dollar IT BPM industry in India, an industry that had made a phenomenal contribution to
India's GDP, exports, employment, infrastructure and global visibility.
o In India, this industry provides the highest employment in the private sector.
o Established in 1988 and ever since, NASSCOM’s relentless pursuit has been to constantly
support the IT BPM industry, in the latter’s continued journey towards seeking trust and
respect from varied stakeholders, even as it reorients itself time and again to remain
innovative, without ever losing its humane and friendly touch.
o NASSCOM is focused on building the architecture integral to the development of the IT BPM
sector through policy advocacy, and help in setting up the strategic direction for the sector to
unleash its potential and dominate newer frontiers.
o NASSCOM’s members, 3000+, constitute 90% of the industry’s revenue and have enabled the
association to spearhead initiatives at local, national and global levels. In turn, the IT BPM
industry has gained recognition as a global powerhouse.
Strategic Imperative includes building the tech ecosystem and industry narrative with focus
on:
o Nurture India’s Innovation Quotient
o Grow New Opportunities for Business
o Build Tech Capability and Ecosystem
o Champion Equal Opportunity and Diversity
o Drive Policy Advocacy
 NICDP
The Government of India and Asian Development Bank (ADB) signed a USD 250 million policy-
based loan that will continue support to industrial corridor development to make
manufacturing more competitive, strengthen national supply chains and links with regional
and global value chains.
This will help to strengthen policy frameworks for the Government of India’s National Industrial
Corridor Development Programme (NICDP) and develop 11 industrial corridors.
National Industrial Corridor Development Programme

• National Industrial Corridor Development Programme is India's most ambitious
infrastructure programme aiming to develop new industrial cities as "Smart Cities"
and converging next generation technologies across infrastructure sectors.
• India is developing various industrial corridor projects as part of the National
Industrial Corridor Programme which is aimed at development of futuristic industrial
cities in India which can compete with the best manufacturing and investment
destinations in the world.
• The same will create employment opportunities and economic growth leading to overall socio-
economic development.
11 industrial Corridors
Delhi Mumbai Industrial Corridor (DMIC)

• It is the first industrial corridor which is being implemented in the country wherein substantial
progress has been made.
Others:
• Chennai Bengaluru Industrial Corridor (CBIC)
• Amritsar Kolkata Industrial Corridor (AKIC)
• East Coast Industrial Corridor (ECIC) with Vizag Chennai Industrial Corridor (VCIC) as Phase
1
• Bengaluru Mumbai Industrial Corridor (BMIC)
• Extension of CBIC to Kochi via Coimbatore
• Hyderabad Nagpur Industrial Corridor (HNIC)
• Hyderabad Warangal Industrial Corridor (HWIC)
• Hyderabad Bengaluru Industrial Corridor (HBIC)
• Odisha Economic Corridor (OEC)
• Delhi Nagpur Industrial Corridor (DNIC)
Monitoring and Review Mechanism

• The National Industrial Corridor Development and Implementation Trust
(NICDIT).
• In 2016, the government approved the expansion of the scope of existing DMIC-Project
Implementation Trust Fund (PITF) and re-designated it as NICDIT.
• NICDIT comes under the administrative control of the Department of Promotion of
Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
• An Apex Monitoring Authority under the chairmanship of the Finance Minister periodically
reviews the activities of NICDIT and progress of the projects.
 OIML
• The OIML stands for International Organisation of Legal Metrology which was
established in 1955 and headquartered in Paris.
• The OIML is an international standard-setting body. It develops model regulations, standards
and related documents for use by legal metrology authorities and industry.
• It plays a crucial role in harmonising national laws and regulations on the performance
of measuring instruments like clinical thermometers, alcohol breath analysers, radar speed
measuring instruments, ship tanks found at ports, and petrol dispensing units.
• India became a member of the OIML in 1956. In the same year, India signed the metric
convention.
• Recently, India has become an OIML certificate-issuing authority.
• The OIML-CS is a system for issuing, registering and using OIML certificates, and
their associated OIML-type evaluation/test reports, for instruments like digital balance,
clinical thermometers, etc.
 PROTECTIONISM
o Protectionism refers to government policies that restrict international trade to help domestic
industries and encourage domestic investment in a specific industry.
o Protectionist policies are usually implemented with the goal to improve economic activity
within a domestic economy but can also be implemented for safety or quality concerns.
Various protectionist measures include:

Tariffs A tariff is a tax imposed by one country on the goods and
services imported from another country.
Tariffs increase the price of imported goods in the
domestic market, which, consequently, reduces the demand for
them.
Quotas Quotas are restrictions on the volume of imports for a particular
good or service over a period of time.
Quotas are known as a “non-tariff trade barrier.”
A constraint on the supply causes an increase in the prices of imported
goods, reducing the demand in the domestic market.
Subsidies Subsidies are negative taxes or tax credits that are given to
domestic producers by the government.
They create a discrepancy between the price faced by
consumers and the price faced by producers.
Standardisation The government of a country may require all foreign products to
adhere to certain guidelines.
Standardisation measures tend to reduce foreign products in the market.
Anti-dumping These are typically levied when a foreign company is selling an
duties item significantly below the price at which it is being produced.
The intention of anti-dumping duties is to save domestic jobs, however,
these tariffs can also lead to higher prices for domestic consumers.
Advantages of Protectionism:
o More growth opportunities: Protectionism provides local industries with growth
opportunities until they can compete against more experienced firms in the international
market
o Lower imports: Protectionist policies help reduce import levels and allow the country to
increase its trade balance.
o More jobs: Higher employment rates result when domestic firms boost their workforce
o Higher GDP: Protectionist policies tend to boost the economy’s GDP due to a rise in domestic
production
Disadvantages of Protectionism
o Stagnation of technological advancements: As domestic producers don’t need to worry
about foreign competition, they have no incentive to innovate or spend resources on research
and development (R&D) of new products.
o Limited choices for consumers: Consumers have access to fewer goods in the market as a
result of limitations on foreign goods.
o Increase in prices (due to lack of competition): Consumers will need to pay more
without seeing any significant improvement in the product.
o Economic isolation: It often leads to political and cultural isolation, which, in turn, leads to
even more economic isolation.
 PURCHASING MANAGERS INDEX

• The purchasing managers’ index (PMI) is an economic indicator based on surveys of
businesses in a given sector. The most common PMI surveys are the manufacturing
PMI and the services PMI.
• Understanding the PMI can provide insight into recent market conditions and identify
potential economic slowdowns.
About PMI
• The purchasing managers’ index consists of several different surveys of purchasing
managers at businesses in manufacturing or services.
• These surveys are compiled into a single numerical result depending on one of several
possible answers to each question.
• The most common elements include:

✓ New orders
✓ Factory output
✓ Employment
✓ Suppliers’ delivery times
✓ Stocks of purchases
• Investors use PMI surveys as leading indicators of economic health, given their insight into
sales, employment, inventory, and pricing.
• Manufacturing sector purchases tend to react to consumer demand and are often among
the first visible signs of a slowdown.
How Does the PMI Work?

• The PMI is a diffusion index, meaning that it measures change across multiple
indicators.
• A diffusion index is particularly useful for identifying economic turning points, such as
unemployment reporting from the Bureau of Labour Statistics.
• The purchasing managers’ index is a diffusion index that indicates whether economic
conditions are better or worse at the companies surveyed.
• The formula used to calculate the PMI assigns weights to each common element and then
multiplies them by 1 for improvement, 0.5 for no change, and 0 for deterioration.
• Here is how the formula appears:
• PMI = (P1*1) + (P2*0.5) + (P3*0)
• P1 = Percentage of answers reporting improvement
• P2 = Percentage of answers reporting no change
• P3 = Percentage of answers reporting deterioration
• A figure above 50 denotes an expansion while anything below 50 denotes a

contraction in activity. The higher the difference from this mid-point of 50, greater the
expansion or contraction.
• Also, the rate of expansion can be judged by comparing the PMI with that of the
previous month reading.
• If the latest figure is higher than previous month’s, then manufacturing or services is
expanding at a faster rate. If it is lower than previous month, then it is growing at lower rate.
Why is it important?
• The PMI is becoming one of the most tracked indicators of business activity across
the world. It provides a reliable expectation of how an economy is doing as a whole — and
manufacturing in particular.
• It is a good gauge of boom and bust cycles in the economy and closely watched by
investors, business, traders and financial professionals besides economists.
• Also, the PMI, which is usually released at the start of the month, serves as a leading
indicator of economic activity. It comes before the official data on industrial output, core
sector manufacturing and GDP growth.
• Even central banks use the PMI to take decisions on interest rates. Besides
influencing equity market movements, PMI releases also impact bond and currency markets.
• Since manufacturing sector is often where recessions begin and end, PMI manufacturing is
always closely watched. A good reading of PMI enhances the attractiveness of an economy vis-
à-vis other competing economies. Suppliers can decide on prices depending on PMI
movements.
 PCA FRAMEWORK
o Reserve Bank of India PCA Framework for commercial banks.
o The Reserve Bank has specified certain regulatory trigger points, as a part of prompt corrective
action (PCA) Framework, in terms of three parameters, i.e. capital to risk weighted assets
ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA), for
initiation of certain structured and discretionary actions in respect of banks hitting such trigger
points. The PCA framework is applicable only to commercial banks and not extended to co-
operative banks, non-banking financial companies (NBFCs) and FMIs.
o The trigger points along with structured and discretionary actions that could be taken by the
Reserve Bank are described below:
CRAR
1. CRAR less than 9%, but equal or more than 6% - bank to submit capital restoration plan;
restrictions on RWA expansion, entering into new lines of business, accessing/renewing costly
deposits and CDs, and making dividend payments; order recapitalisation; restrictions on
borrowing from inter-bank market, reduction of stake in subsidiaries, reducing its exposure to
sensitive sectors like capital market, real estate or investment in non-SLR securities, etc.
2. CRAR less than 6%, but equal or more than 3% - in addition to actions in hitting the first trigger
point, RBI could take steps to bring in new Management/ Board, appoint consultants for
business/ organizational restructuring, take steps to change ownership, and also take steps to
merge the bank if it fails to submit recapitalization plan.
3. CRAR less than 3% - in addition to actions in hitting the first and second trigger points, more
close monitoring; steps to merge/amalgamate/liquidate the bank or impose moratorium on
the bank if its CRAR does not improve beyond 3% within one year or within such extended
period as agreed to.
Net NPAs
1. Net NPAs over 10% but less than 15% - special drive to reduce NPAs and contain generation
of fresh NPAs; review loan policy and take steps to strengthen credit appraisal skills, follow-up
of advances and suit-filed/decreed debts, put in place proper credit-risk management policies;
reduce loan concentration; restrictions in entering new lines of business, making dividend
payments and increasing its stake in subsidiaries.
2. Net NPAs 15% and above – In addition to actions on hitting the above trigger point, bank’s
Board is called for discussion on corrective plan of action.
ROA less than 0.25% - restrictions on accessing/renewing costly deposits and CDs, entering
into new lines of business, bank’s borrowings from inter-bank market, making dividend payments
and expanding its staff; steps to increase fee-based income; contain administrative expenses;
special drive to reduce NPAs and contain generation of fresh NPAs; and restrictions on incurring
any capital expenditure other than for technological upgradation and for some emergency
situations.
 PCA EXTENDED TO NBFCs

The RBI has announced the extension of the Prompt Corrective Action (PCA) framework to
Government Non-Banking Financial Companies (NBFCs) starting from October 1,
2024.
Government-owned NBFCs, such as Power Finance Corporation (PFC), REC Limited, Indian
Railway Finance Corporation (IRFC), and IFCI, will now fall under the PCA framework.
Prompt Corrective Action (PCA) Framework

• The PCA Framework is a watchlist of banks identified as financially weak by the central
bank.
• Regulatory Measures: When a bank falls under PCA, the regulator imposes
restrictions on its operations, such as curbs on lending activities.
• Coverage: The PCA Framework applies exclusively to commercial banks and does not
extend to cooperative banks or non-banking financial companies (NBFCs).
• History: The RBI introduced the PCA Framework in December 2002 as an early intervention
mechanism, inspired by the US Federal Deposit Insurance Corporation’s PCA framework.
• Monitoring Areas: The revised framework places a heightened focus on capital adequacy,
asset quality, and leverage.
• Risk Threshold: The RBI has updated the level of capital adequacy ratio shortfall that
triggers classification into the “risk threshold three” category.
Trigger Points for PCA Inclusion

• CRAR measures a bank’s capital in relation to risk-weighted assets.
Capital-to-Risk • If CRAR falls below 9 percent, the RBI takes action, including the
Weighted submission of a capital restoration plan, restrictions on business
Assets Ratio activities, and dividend payments.
(CRAR) • Additional steps may follow if CRAR is below 6 percent but equal to or
above 3 percent.
Net Non- • If net NPAs exceed 10 percent but remain below 15 percent, the
Performing RBI initiates measures to reduce bad loans and strengthen credit
Assets (NPA) appraisal skills.
Return on • If RoA drops below 0.25 percent, restrictions are imposed on

Assets (RoA) deposit renewal, access to costly deposits and CDs, and the bank’s entry
into new lines of business.
Rationale for Expansion to NBFCs

• Growing Significance: NBFCs have witnessed substantial growth and have strong linkages
with various financial segments.
• Supervisory Enhancement: In 2022, the RBI introduced the PCA framework for NBFCs to
strengthen supervisory tools. The objective is to facilitate timely supervisory intervention and
mandate corrective actions to restore financial health.
• Market Discipline: The framework serves as a mechanism for effective market discipline,
ensuring that NBFCs adhere to financial prudence.
Impact
• These NBFCs will face restrictions on dividend distribution and profit remittances.
• Promoters and shareholders will have limitations on equity infusion, and leverage reduction
will be required.
• Issuing guarantees or taking contingent liabilities on behalf of group companies will also be
restricted.
 PUBLIC DEBT
▪ The Fiscal deficit represents the Government's borrowings for a single financial year.
▪ However, the Public Debt represents the total accumulated borrowings which have
not been repaid back so far.
▪ The Debt position of the central Government can be analyzed by looking at the total
liabilities of the Central Government.
▪ The Total liabilities of the Central Government include debt contracted against the
Consolidated Fund of India, technically defined as Public Debt, as well as liabilities
in the Public Account.
▪ Finance Minister said
that the total amount
of the Central
Government debt or
liabilities is estimated
at about 155.8 lakh
crore rupees as on
31st March 2023. It
is 57.3 percent of
GDP.
▪ Depending upon the
source of
Government's
borrowings, the Public
Debt is categorized
into Internal and
External Debt.
▪ External debt
obtained from foreign commercial banks, international financial institutions like IMF, World
Bank, ADB etc. and from the government of foreign nations.
▪ Some of the major sources of Internal Debt are:
o Treasury Bills: Instruments to raise short-term loans

o Dated Securities: Used for raising long term loans
o Ways and means advances (WMA): Borrowings from the RBI to meet immediate cash
requirements which can arise due to temporary mismatches in receipts and expenditure.
o Sovereign Gold Bonds: Government securities denominated in terms of Gold.
o Bank Recapitalization Bonds: Bonds issued by the Government to raise loans for
undertaking recapitalization of Public Sector Banks (PSBs)
o Securities issued against NSSF: The money collected under various small savings schemes
such as Post office Deposits, National Savings Certificate, PPF etc. is deposited under National
Small Savings Fund (NSSF) which is maintained as part of Public Account of India. Certain
percentage of funds under the NSSF is used to investment in special G-Secs and hence
considered to be Government's borrowings.
Important Note: Presently, major part of Internal debt is dominated by market borrowings i.e.,
Treasury Bills and Dated Securities. It is followed by Securities issued against NSSF.
 PRODUCTION-LINKED INCENTIVE (PLI)

SCHEME
o In order to boost domestic manufacturing and cut down on import bills, the central
government introduced a scheme that aims to give companies incentives on incremental
sales from products manufactured in domestic units.
o Apart from inviting foreign companies to set shop in India, the scheme also aims to encourage
local companies to set up or expand existing manufacturing units.
o So far, the scheme has been rolled out for mobile and allied equipment as well as
pharmaceutical ingredients and medical devices manufacturing. These sectors are labour
intensive and are likely, and the hope is that they would create new jobs for the ballooning
employable workforce of India.
o The objective is really to make India more compliant with our WTO (World Trade
Organisation) commitments and also make it non-discriminatory and neutral with respect to
domestic sales and exports.
o The PLI scheme is designed with four objectives:
1. Target specific product areas;
2. Introduce non-tariff measures in order to compete more effectively with cheap imports;
3. Blend domestic and export sales to make manufacturing competitive and sustainable;
and
4. Promote manufacturing at home while encouraging investment from within and outside
India.
o The reason it has caught on is that the application process is not complicated, and the incentive
offered is very simple and tied to conditions that are specific and easy to calculate. The
incentive is 4-6% of incremental sales with a defined base year.
Need
o According to experts, the idea of PLI is important as the government cannot continue making
investments in these capital intensive sectors as they need longer times for start giving the
returns. Instead, what it can do is to invite global companies with adequate capital to set up
capacities in India.
Sectors currently have the PLI scheme

o The central government introduced the PLI scheme for mobile manufacturing as well as
pharmaceutical ingredients and medical devices.
o As a part of the PLI scheme for mobile and electronic equipment manufacturing, an incentive
of 4-6 per cent is planned for electronics companies which manufacture mobile phones and
other electronic components such as transistors, diodes, thyristors, resistors, capacitors and
nano-electronic components such as micro electromechanical systems.
o Similarly, the PLI scheme for pharmaceutical ingredients and medical devices seeks that
applicants will commit a certain amount prescribed by the government as investment to build
capacities in these areas.
 PAYMENT AND SETTLEMENT SYSTEM

It is a system that facilitates transfer of money from a payer to the beneficiary. It includes both
paper-based payments such as cheques, drafts as well as electronic payments such as Real Time
Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), Immediate payment
Service (IMPS), UPI etc.
▪ Payment systems under RBI: Real Time Gross Settlement (RTGS) and National
Electronics Fund Transfer (NEFT). The RTGS system is used for high-value transactions
wherein minimum transaction amount should be Rs 2 lakhs and above.
▪ Payment systems under National Payments Corporation of India (NPCI):
Umbrella organization for operating retail payments and settlement systems. It is an initiative
of RBI and Indian Banks’ Association (IBA).
o RuPay Contactless: Allows cardholders to wave their card in front of contactless payment
terminals without the need to physically swipe or insert the card into a point-of-sale device.
o Unified Payments Interface: Real-time interbank payment system for sending or receiving
money.
o BHIM App: BHIM is a mobile app for Unified Payments Interface. The BHIM apps has 3
levels of authentication.
o Bharat BillPay: One-stop ecosystem for payment of all bills
o Immediate Payment Service: Real time interbank payment system
o National Financial Switch: Network of ATMs in India.
o BharatQR: A common QR code built for ease of payments
▪ Card Networks operated by Non-Banks: Visa, MasterCard, American Express etc.
 RECESSION
o A recession is when the GDP growth rate of a country is negative for two consecutive
quarters or more. But a recession can be gauged even before the quarterly gross domestic
product reports are out based on key economic indicators like manufacturing data, decline in
incomes, employment levels etc.
o Although an economy can show signs of weakening months before a recession begins, the
process of determining whether a country is in a true recession (or not) often takes time. A
recession is short, but its impact can be long-lasting.
Why does recession occur?

o Understanding the sources of recessions has been one of the enduring areas of research in
economics. There are a variety of reasons recessions occur. Some are associated with sharp
changes in the prices, which lead to steep drop in spending by both the private and public
sectors.
o Some recessions, like the 2008 global financial meltdown, are rooted in financial market
problems. Sharp increases in asset prices and a rapid expansion of credit often coincide with
accumulation of debt. As corporations and households get over-extended and face difficulties
in meeting their debt obligations, they reduce investment and consumption, which in turn
leads to a decrease in economic activity. Not all such credit booms end up in recessions, but
when they do, these recessions are often costlier than others. In some countries with strong
export sectors, recessions can be the result of a decline in external demand. Adverse effects of
recessions in large countries—such as Germany, Japan, and the United States—are rapidly felt
by their regional trading partners, especially during globally synchronized recessions.
o Some recessions are also a result of global shocks like the current coronavirus-triggered
lockdowns, which shut down economic activity in many countries.
Impact of a recession
o One of the consequences of recession is unemployment, which tends to increase, especially
among the low-skilled workers, due to companies and even government agencies laying off
staff as a way of curtailing expenses.
o Another result of recession is drop in output and business closures. Fall in output tends
to last until weaker companies are driven out of the market, then output picks up again among
the surviving firms. With more people out of work, and families increasingly unable to make
ends meet, there will be demands for increased government-funded social schemes. With drop
in government revenues during recession, it becomes difficult to meet the increased demands
on the social sector.
o The most popular, or most recommended, policy for any country to dig itself out of recession
is expansionary fiscal policy, or fiscal stimulus. This can be usually a two-pronged approach –
tax sops and increased government spending.
 RBI SURPLUS
o RBI surplus is the amount it transfers to the government every year. This surplus is
the amount left over after meeting all its expenses. As RBI is not required to pay income tax, it
transfers the surplus amount to the government.
How does a central bank like the RBI make profits?

o The RBI is a “full service” central bank— not only is it mandated to keep inflation or prices
in check, it is also supposed to manage the borrowings of the Government of India and of state
governments; supervise or regulate banks and non-banking finance companies; and manage
the currency and payment systems.
o While carrying out these functions or operations, it makes profits. Typically, the central bank’s
income comes from the returns it earns on its foreign currency assets, which could be in the
form of bonds and treasury bills of other central banks or top-rated securities, and deposits
with other central banks.
o It also earns interest on its holdings of local rupee-denominated government
bonds or securities, and while lending to banks for very short tenures, such as overnight. It
claims a management commission on handling the borrowings of state governments and the
central government.
o Its expenditure is mainly on the printing of currency notes and on staff, besides the
commission it gives to banks for undertaking transactions on behalf of the government across
the country, and to primary dealers, including banks, for underwriting some of these
borrowings.
What is the nature of the arrangement between the government and RBI on the
transfer of surplus or profits?
o The RBI isn’t a commercial organisation like the banks or other companies that are owned or
controlled by the government – it does not, as such, pay a “dividend” to the owner out of the
profits it generates.
o Although RBI was promoted as a private shareholders’ bank in 1935 with a paid up capital of
Rs 5 crore, the government nationalised it in January 1949, making the sovereign its
“owner”.
o What the central bank does, therefore, is transfer the “surplus” – that is, the excess of income
over expenditure – to the government, in accordance with Section 47 (Allocation of
Surplus Profits) of the Reserve Bank of India Act, 1934: “After making provision for
bad and doubtful debts, depreciation in assets, contributions to staff and superannuation
fund [and for all other matters for which] provision is to be made by or under this Act or
which are usually provided for by bankers, the balance, of the profits shall be paid to the
Central Government.”
o The Central Board of the RBI does this in early August, after the July-June accounting year is
over.
Is there an explicit policy on the distribution of surplus?
o No. But a Technical Committee of the RBI Board headed by Y H Malegam, which reviewed
the adequacy of reserves and a surplus distribution policy, recommended, in 2013, a higher
transfer to the government.
o Earlier, the RBI transferred part of the surplus to the Contingency Fund, to meet unexpected
and unforeseen contingencies, and to the Asset Development Fund, to meet internal capital
expenditure and investments in its subsidiaries in keeping with the recommendation of a
committee to build contingency reserves of 12% of its balance sheet.
o But after the Malegam committee made its recommendation, in 2013-14, the RBI’s transfer of
surplus to the government as a percentage of gross income (less expenditure) shot up to
99.99% from 53.40% in 2012-13.
 REGRESSION THEOREM
o The regression theorem refers to a theory of the origin of money.
o It states that money must have originated as a commodity with intrinsic value in the
marketplace.
o The idea was first proposed by Austrian economist Carl Menger in his 1892 work “On the
Origins of Money.”
o This theory is offered as an alternative to the state theory of money which states that
money (fiat money) can come into existence only when it is backed by the
government.
Evolution of Money
o The regression theory argues that money comes into existence through a gradual
process of evolution in the marketplace, without the need for any government sanction.
o Economists who try to explain the regression theory generally start with the question of why
money, particularly fiat money which is simply just a piece of paper, has any value at all in the
marketplace.
o The most common answer to this question is that fiat money can be used to buy other useful
goods such as houses, cars etc.
o But this answer is insufficient —it tries to tackle the question of why fiat money can buy other
useful goods by simply saying that it can buy other useful goods.
o In real life, people accept money in exchange for goods in the present because they are aware
that money was accepted as a medium in exchange for other goods in the past.
o For example, people accept wages in the US dollar today because they are aware that the dollar
was used to buy cars, groceries and other goods in the market yesterday.
o This gives them confidence in the value of their money.
 RoDTEP
o The government notified the rates and norms for the Remission of Duties and Taxes on
Exported Products (RoDTEP) scheme.
o The RoDTEP scheme had kicked in after the earlier Merchandise and Services Export Incentive
Schemes (MEIS and SEIS) were scrapped as they were found to be impermissible under the
World Trade Organisation norms.
o Export centric industries are being reformed and introduced to better mechanisms so as to
increase their competitiveness, boost exports, generate employment and contribute to the
overall economy. This will go a long way in achieving our vision of building an Aatmanirbhar
Bharat.
o Remission of Duties and Taxes on Exported Products (RoDTEP) is one such
reform, based on the globally accepted principle that taxes and duties should not
be exported, and taxes and levies borne on the exported products should be either
exempted or remitted to exporters.
Scheme’s objective is to refund, currently un-refunded:

▪ Duties/ taxes/ levies, at the Central, State & local level, borne on the exported product,
including prior stage cumulative indirect taxes on goods & services used in production of the
exported product, and
▪ Such indirect Duties/ taxes/ levies in respect of distribution of exported products.
o It may be noted that rebate under the Scheme shall not be available in respect of duties and
taxes already exempted or remitted or credited.
o RoDTEP is going to give a boost to Indian exports by providing a level playing field to
domestic industry abroad.
o RoDTEP support will be available to eligible exporters at a notified rate as a percentage of
Freight On Board (FOB) value. Rebate on certain export products will also be subject to value
cap per unit of the exported product.
o Scheme is to be implemented by Customs through a simplified IT System. Rebate
will be issued in the form of a transferable duty credit/ electronic scrip (e-scrip) which will be
maintained in an electronic ledger by the Central Board of Indirect Taxes & Customs (CBIC).
o Identified export sectors and rates under RoDTEP cover 8555 tariff lines in addition to similar
support being extended to apparel and made-ups exports under RoSCTL scheme of Ministry
of Textiles.
o Employment Oriented Sectors like Marine, Agriculture, Leather, Gems & Jewellery etc. are
covered under the Scheme. Other sectors like Automobile, Plastics, Electrical / Electronics,
Machinery etc. also get support. The entire value chain of textiles also gets covered through
RoDTEP & RoSCTL.
 RENEWABLE PURCHASE OBLIGATION (RPO)

o DISCOMs are required to purchase certain percentage of electricity from various renewable
energy sources.
o RPO is laid down under Electricity Act, 2003 and National Tariff Policy 2016.
o Types of RPOs: Solar RPO and Non-Solar RPO. Recently, Government declared that
procurement of power from large Hydropower Projects (more than 25 MW) and Ocean Energy
would be considered as Non-Solar RPO.
o Annual Targets for RPO are laid down by State Electricity Regulatory Commissions (SERCs).
Long term targets laid down by Ministry of Power.
o Present Targets: Long Term target to be met by 2022. Total RPO: 21% (Solar RPO: 10.5%
+ Non-Solar RPO: 10.5%)
Renewable Energy Certificates (RECs): DISCOMs that exceed their RPO obligations can
sell RECs to other DISCOMs that fail to meet RPO target. 1 REC is equal to 1 Mwh.
 RECEIC
The Union Minister of Environment, Forest, and Climate Change launched the Resource
Efficiency Circular Economy Industry Coalition (RECEIC).
As many as 39 multinational corporations (MNCs) from various sectors came together to
pledge to adopt resource efficiency and circular economy principles.
• The Resource Efficiency Circular Economy Industry Coalition is a grouping of 39 MNCs.
• They pledged to adopt the principles of resource efficiency and circular economy
to address environmental challenges related to waste from plastics, microplastics, e-waste,
chemical waste, etc.
• The RECEIC was conceptualized by India’s G20 Presidency and is industry-driven
and self-sustaining with the government only playing a supporting role.
• Businesses are ideal for the on-ground implementation of resource efficiency and circular
economy principles.
• The three pillars of the Coalition are: Partnerships for impact; Cooperation in
technology; Finance for scale.
• The RECEIC will work towards achieving global commitments such as the Sustainable
Development Goals, and Paris Climate Targets and other goals established by global
organizations such as the G-20.
MISSION OF RECEIC IS TO: -

• facilitate and foster greater company-to-company collaboration,
• build advanced capabilities across sectors and value chains,
• bring learnings from diverse and global experiences of the coalition members,
• unlock on-ground private sector action to enhance resource efficiency and
• accelerate circular economy transition.
CIRCULAR ECONOMY
• It is a restorative or regenerative model of production and consumption involving
sharing, leasing, reusing, repairing, refurbishing, and recycling existing. In this way, the life
cycle of products is extended.
• It is a closed-loop system that minimizes new resource use, waste generation, pollution, and
emissions.
• In practice, it implies reducing waste to a minimum. When a product reaches the end of
its life, its materials are kept within the economy wherever possible thanks to recycling. These
can be productively used again and again, thereby creating further value.
• This is a departure from the traditional, linear economic model, which is based on a take-make-
consume-throw away pattern. This model relies on large quantities of cheap, easily accessible
materials and energy.
 SEBI
o The Securities and Exchange Board of India was established on April 12, 1992 in accordance
with the provisions of the Securities and Exchange Board of India Act, 1992.
o The Preamble of the Securities and Exchange Board of India describes the basic functions of
the Securities and Exchange Board of India as "...to protect the interests of investors in
securities and to promote the development of, and to regulate the securities market and for
matters connected therewith or incidental thereto".
o SEBI India follows a corporate structure. It has a Board of Directors, senior management,
department heads and several crucial departments.
o To be precise, it comprises of over 20 departments, all of which are supervised by their
respective department heads, who in turn are administered by a hierarchy in general.
o The SEBI’s hierarchical structure comprises of the following 9 designated officers –
▪ The Chairman – Nominated by the Indian Union Government.
▪ Two members belonging to the Union Finance Ministry of India.
▪ One member belonging to the Reserve Bank of India or RBI.
▪ Other five members – Nominated by the Union Government of India.
The below-mentioned list highlights some of the most important departments of SEBI –
▪ The Information Technology Department.
▪ The Foreign Portfolio Investors and Custodians.
▪ Office of International Affairs.
▪ National Institute of Securities Market.
▪ Investment Management Department.
▪ Commodity and Derivative Market Regulation Department.
▪ Human Resource Department.
Functions
o To protect the interests of Indian investors in the securities market.
o To promote the development and hassle-free functioning of the securities market.
o To regulate the business operations of the securities market.
o To serve as a platform for portfolio managers, bankers, stockbrokers, investment advisers,
merchant bankers, registrars, share transfer agents and other people.
o To regulate the tasks entrusted on depositors, credit rating agencies, custodians of
securities, foreign portfolio investors and other participants.
o To educate investors about securities markets and their intermediaries.
o To prohibit fraudulent and unfair trade practices within the securities market and
related to it.
o To monitor company take-overs and acquisition of shares.
o To keep the securities market efficient and up to date all the time through proper
research and developmental tactics.
Powers
o Quasi-judicial powers: In cases of frauds and unethical practices pertaining to the securities
market, SEBI India has the power to pass judgements.
The said power facilitates to maintain transparency, accountability and fairness in the
securities market.
o Quasi-executive powers: SEBI has the power to examine the Book of Accounts and
other vital documents to identify or gather evidence against violations. If it finds one
violating the regulations, the regulatory body has the power to impose rules, pass judgements
and take legal actions against violators.
o Quasi-Legislative powers: To protect the interest of investors, the authoritative body has
been entrusted with the power to formulate suitable rules and regulations. Such rules tend to
encompass the listing obligations, insider trading regulations and essential disclosure
requirements. The body formulates such rules and regulation to get rid of malpractices that are
prevalent in the securities market.
o The Supreme Court of India and the Securities Appellate Tribunal tend to have an upper hand
when it comes to the powers and functions of SEBI. All its functions and related decisions have
to go through the two apex bodies first.
 SMALL FINANCE BANKS

o Small Finance Banks are the financial institutions which provide financial services to the
unserved and unbanked region of the country.
o They are registered as a public limited company under the Companies Act, 2013.
Objective
o Access to financial services: The main purpose behind having small finance banks is to
expand access to financial services in rural and semi-urban areas. These banks can do almost
everything that a normal commercial bank can do but at a much smaller scale.
o Basic banking services: It offer basic banking services, accept deposits and lend to
underserved sections of customers, including small business units, small and marginal
farmers, micro and small industries, and even entities in the unorganised sector.
o Alternative institution: Small finance banks have the potential to provide an alternative to
some of the existing institutions with their mandated focus on small and medium businesses,
the informal sector, small and marginal farmers and thus on increasing financial inclusion and
serving a variety of unserved clients in the hinterland and tier three and four cities and towns.
Activities
o The small finance bank shall primarily undertake basic banking activities of
acceptance of deposits and lending to unserved and underserved sections
including small business units, small and marginal farmers, micro and small industries and
unorganised sector entities.
o It can also undertake other non-risk sharing simple financial services activities, not requiring
any commitment of own funds, such as the distribution of mutual fund units, insurance
products, pension products, etc.
o The small finance bank can also become an Authorised Dealer in foreign exchange
business for its clients’ requirements.
o Open banking outlets: Small finance banks will have general permission to open banking
outlets from the date of commencement of business subject to the condition that the
requirement of opening at least 25 percent of its banking outlets in unbanked
rural centres.
o Restriction in the area of operations: There will not be any restriction in the area of
operations of small finance banks; however, preference will be given to those applicants who,
in the initial phase, set up the bank in a cluster of under-banked States/districts, such as in the
North-East, East and Central regions of the country.
o These applicants will not have any hindrance to expand to other regions in due course.
o It is expected that the small finance bank should primarily be responsive to local needs. After
the initial stabilization period of five years, and after a review, RBI may liberalize the scope of
activities of the small finance banks.
o The other financial and non-financial services activities of the promoters, if any, should be kept
distinctly ring-fenced and not commingled with the banking business.
Capital Requirement
o The minimum paid-up voting equity capital for small finance banks shall be
Rs.200 crore, except for such small finance banks which are converted from UCBs.
o In view of the inherent risk of a small finance bank, it shall be required to maintain a minimum
capital adequacy ratio of 15 percent of its risk-weighted assets (RWA) on a continuous basis,
subject to any higher percentage as may be prescribed by RBI from time to time.
Foreign Shareholding
o The foreign shareholding in SFBs would be as per the Foreign Direct Investment (FDI) policy
for private sector banks as amended from time to time.
o Currently, the aggregate FDI in a private sector bank from all sources will be allowed up to a
maximum of 74% of the paid-up capital of the bank.
o In the case of Foreign Institutional Investors (FIIs)/Foreign Portfolio Investors (FPIs),
individual FII/FPI holding is restricted to below 10% of the total paid-up capital.
o The aggregate limit for all FIIs/FPIs/Qualified Foreign Investors (QFIs) cannot exceed 24% of
the total paid-up capital. This can be raised to 49% of the total paid-up capital by the bank
concerned through a resolution by its Board of Directors followed by a special resolution to
that effect by its General Body.
Other Key Points

o SFBs need to maintain a Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio
(SLR).
o They are required to extend 75% of its Adjusted Net Bank Credit (ANBC) to the sectors
eligible for classification as priority sector lending by the Reserve Bank of India. At
least 50% of its loan portfolio should constitute loans and advances of up to Rs. 25 lakh.
o SFBs can also transit to a universal bank, subject to fulfilling minimum paid-up capital/net
worth requirements as applicable to universal banks.
o They cannot be a Business Correspondent (BC) for another bank. However, they can have their
own BC network.
 STATES’ STARTUP RANKING

• The Start-up India initiative of the Government of India envisages to build a robust
Start-up ecosystem in the country for nurturing innovation and providing opportunities to
budding entrepreneurs.
• The Department for Promotion of Industry and Internal Trade (DPIIT) under the
Ministry of Commerce and Industry has been conducting the States’ Start-up Ranking
Exercise since 2018.
• The exercise plays a crucial role in easing the business environment for start-ups in the
country.
Objectives
• Help bring to the fore progress made by the States/ UTs for promoting the Startup ecosystem.
• Foster competitiveness & propel the States/ UTs to work proactively.

• Facilitate States/ UTs to identify, learn and replicate good practices.
Classification: States and Union Territories are classified into 5 Categories:

1. Best Performers
2. Top Performers
3. Leaders
4. Aspiring Leaders
5. Emerging Start-up Ecosystems.
Findings of States’ Startup Ranking 2022

Category A (Population> 1 crore) and Category B (Population< 1 crore)
Initiatives Taken to Promote Startup

Funds of Funds • The FoF for Startups Scheme, established in June 2016 aims to boost
(FoF) Scheme the Indian Startup ecosystem by spreading contributions over the
14th and 15th Finance Commission cycles based on implementation

progress, facilitating access to domestic capital.
Startup India • SISF, approved for a four-year period from 2021-22, provides
Seed Fund financial aid to Startups for proof of concept, prototype
Scheme (SISF): development, product trials, market entry, and commercialisation.
Startup India • Startup India Investor Connect facilitates AI-based matchmaking to

Investor connect startups with investors, streamlining the process for
Connect entrepreneurs to pitch their ideas to multiple investors through a single
application.
Startup India’s • Startup20, established during G20 India Presidency 2023, is a
Multilateral dedicated global platform for startups.
Engagements: • As a dialogue forum, it engages with G20 leaders on macroeconomic
Startup20 issues, supported by G20 India Sherpa and the Startup20 secretariat.
• DPIIT organises Startup India Innovation week around the National
Startup India Startup Day, i.e., 16th January, with the primary goal to bring
Innovation together the country's key Startups, entrepreneurs, investors,
Week incubators, funding entities, banks, policymakers, and other
national/international stakeholders to celebrate entrepreneurship and
promote innovation.
Handholding • It is an initiative undertaken by Startup India to recognize and
support under reward Startups and ecosystem enablers who are building
National innovative products and scalable enterprises, with high potential of
Startup employment generation or wealth creation, demonstrating measurable
Awards (NSA) social impact.
• MAARG Portal by Startup India is a one-stop mentorship platform
MAARG Portal to facilitate mentorship for startups across diverse sectors,
functions, stages, geographies, and backgrounds.
 SPECIAL PURPOSE VEHICLE (SPV)

• A special purpose vehicle is a separate legal entity which has all the attributes of a
corporation such as owning assets, capacity to and get sued etc.
• A SPV, also known as a special purpose entity (SPE), is like a separate company created
by a main company to protect against financial risks.
• Even if the main company faces bankruptcy, the SPV's independent legal status ensures that
its obligations remain secure.
• This is why a SPV is often referred to as a bankruptcy-remote entity.
• A SPV can be employed to take on a risky project, lessening any potential financial harm
to the main company and its investors.
• Venture capitalists use SPVs to gather funds and invest in a startup.
 SHG BANK LINKAGE

• The SHG BL Project was launched by NABARD in 1992 and has blossomed into the
world’s largest microfinance project.
• Under this programme, banks were allowed to open savings accounts for SHGs.
Components
• Training and sensitization of Bank Branch Managers
• Training and positioning of Bank Sakhis at Rural Bank Branches
• Initiate Community Based Repayment Mechanism (CBRM) at Rural Bank Branches
• Credit Linkage of SHGs
Key Factors for SHG-BL’s Success

• Annual issuance of a Master Circular by RBI and NABARD.
• Specification of minimum loan amounts for each Self-Help Group (SHG) with
provisions being modified as needed to meet the scheme's requirements.
• Regular training of staff and community cadres under State Rural Livelihoods
Missions (SRLMs) to enhance their capacity.
• Financial education for Self Help Group (SHG) members through trained Financial
Literacy Community Resource Persons (FLCRPs) at the village level.
• Bank Sakhis, trained members from SHGs who act as intermediaries, aiding SHG
members in transactions and application processes.
• A web portal was created to overcome information asymmetry in SHG-Bank
Linkage, incorporating data directly from Banks' Core Banking Solution (CBS) database.
Status of Bank Loans:

• The Bank loans to the tune of Rs. 7.68 lakh Crore have been accessed by SHGs since FY 2013-
14.
 SOVEREIGN RIGHT TO TAX

o In India, the Constitution gives the government the right to levy taxes on individuals and
organisations, but makes it clear that no one has the right to levy or charge taxes except by the
authority of law.
o Any tax being charged has to be backed by a law passed by the legislature or
Parliament.
o A document on the Ministry of Statistics and Programme Implementation website quotes the
definition of tax as a “pecuniary burden laid upon individuals or property owners to support
the government, a payment exacted by legislative authority”, and that a tax “is not a voluntary
payment or donation, but an enforced contribution, exacted pursuant to legislative authority”.
o Taxes in India come under a three-tier system based on the Central, State and local
governments, and the Seventh Schedule of the Constitution puts separate heads of
taxation under the Union and State list.
o There is no separate head under the Concurrent list, meaning Union and the States have no
concurrent power of taxation, as per the document.
 SOVEREIGN CREDIT RATING

A sovereign credit rating is an assessment of a country’s creditworthiness. It shows the level of
risk associated with lending to a particular country since it is applied to all bonds issued by the
government.
o When evaluating the creditworthiness of a country, credit rating agencies consider various
factors such as the political environment, economic status, and its creditworthiness
to assign an appropriate credit rating.
o Obtaining a good credit rating is important for a country that wants to access funding for
development projects in the international bond market. Also, countries with a good credit
rating can attract foreign direct investments.
o The three influential rating agencies include Moody’s Services, Fitch Ratings, and
Standard & Poor’s.
o Sovereign credit ratings are important for countries that want to access funds in the
international bond market. Usually, a credit rating agency will evaluate a country’s economic
and political environment at the request of the government and assign a rating stretching from
AAA grade to grade D.
o By allowing external credit rating agencies to review its economy, a country shows that it is
willing to make its financial information public to investors. A country with high credit ratings
can access funds easily from the international bond market and also secure foreign direct
investment.
o A low sovereign credit rating means that a country faces a high risk of default and may have
experienced difficulties in paying back debts. The level of sovereign credit risk depends on
various factors, including a country’s debt service ratio, import ratio, growth of domestic
money supply, etc.
o Since sovereign credit ratings were introduced in the early 1900s, several countries have
defaulted on their international bonds. For example, during the great depression, 21 nations
defaulted on their debt obligations in the international bond market. Over the years, more than
70 nations have defaulted on either their domestic or foreign debts.
Determinants of Sovereign Credit Ratings

o Credit rating agencies use both qualitative and quantitative techniques to determine the
sovereign credit rating of a country. A 1996 paper published by Richard Cantor and Frank
Packer titled “Determinants and Impacts of Sovereign Credit Ratings” outlined various factors
that explain the difference in credit ratings assigned by the various rating agencies. The factors
include:
1. Per capita income

o Per capita income estimates the income earned per person in a specific area. It is calculated by
taking the total income earned by individuals in a given area divided by the number of people
residing in that area. A high per capita income increases the potential tax base of the
government, which subsequently increases the government’s ability to repay its debts.
2. GDP growth
o The GDP growth rate of a country refers to the percentage growth in the GDP of a country from
one quarter to another as the economy navigates a business cycle. Strong GDP growth means
that a country will be able to meet its debt obligations since the growth in GDP results in higher
tax revenues for the government.
o However, if the growth rate is negative, it means that the economy is experiencing a
contraction, and the country may fail to honour its debt obligation if the situation continues.
3. Rate of inflation
o Sovereign debts are susceptible to changes in the rate of inflation, and an increase in inflation
will affect a country’s ability to finance its debt. A high inflation rate points to structural
problems in a country’s finances, and it is likely to cause political instability as the public
becomes dissatisfied with the increasing inflation.
4. External debt
o Some countries rely heavily on external debts to finance their development and infrastructure
projects. Increasing debt levels translate to a higher risk of default, which may affect its ability
to access funding from international lenders. This burden increases if the foreign currency
debts exceed the foreign currency income earned by a country in the form of exports.
5. Economic development
o Credit rating agencies consider the level of development when determining the sovereign credit
rating of a country. Usually, once a country has reached a certain level of development or per
capita income, it is considered less likely to default on its debt obligations. For example,
economically developed nations are considered less likely to default compared to developing
countries.
6. History of defaults
o A country that defaulted on its debt obligations in the past is considered to have a high
sovereign credit risk by rating agencies. It means that countries with a record of defaults receive
low ratings, making them less attractive to investors looking for low-risk investments.
 SUGAM REC
• REC Limited, a Maharatna Central Public Sector Enterprise under the Ministry of Power,
has introduced a mobile application called 'SUGAM REC’.
• It is designed exclusively for current and prospective investors in REC's 54EC Capital Gain
Tax Exemption Bonds.
• This app offers comprehensive information about investments in REC 54EC Bonds, a type of
fixed income financial instrument that provides tax exemptions on capital gains
under Section 54EC of the Income Tax Act.
• The term capital gain refers to any profit or gain that is received from the sale of a capital
asset.
• REC Limited, established in 1969, operates as a non-banking finance company (NBFC)
with a focus on financing and developing the power sector across India.
 SURCHARGE
o ‘Surcharge’ is an additional charge or tax levied on an existing tax. Unlike a cess, which
is meant to raise revenue for a temporary need, surcharge is usually permanent in
nature. It is levied as a percentage on the income tax payable as per normal rates. In case no
tax is due for a financial year, then no surcharge is levied. The revenue earned via
surcharge is solely retained by the Centre and, unlike other tax revenues, is not shared
with States.
o Collections from surcharge flow into the Consolidated Fund of India.
o Currently, wealthy individuals and companies are liable to pay a surcharge on their tax outgo.
Individuals earning a taxable income of over ₹1 crore have to shell out a surcharge amounting
to 15 per cent of their tax outgo. So, if your taxable income is ₹1.2 crore, your income tax
payable works out to ₹34.25 lakh. The 15 per cent surcharge will be computed on this amount,
at ₹5.13 lakh. Thus, the total tax payable is ₹39.38 lakh without including cess.
o Partnership firms earning over ₹1 crore in taxable income pay a surcharge of 12 per cent.
Domestic firms earning ₹1 crore to ₹10 crore pay a 7 per cent surcharge and those earning over
₹10 crore pay 12 per cent.
Why is it important?
o Surcharges, in India, are used to make the taxation system more ‘progressive’. They are used
to ensure that the rich contribute more to the tax kitty than the poor. Traditionally, the
assumption has been that companies can pay higher taxes than individuals and corporate taxes
have been subject to surcharge.
Why should I care?

o Individuals are subject to highest levy of surcharge compared to other tax payers. So if your
total taxable income exceeds ₹1 crore, you must brace for much higher tax outgo. The surcharge
levied is not eligible for any deductions or exemptions. If you are a high income earner, you
must keep surcharge in mind when jumping jobs or negotiating for a pay rise. The moment
your income exceeds the magic number of ₹1 crore, your tax outgo will shoot up. Considering
the heavy burden, tax laws provide something called ‘marginal relief’ to super rich tax
payers. This provision is designed to make sure that the increase in income tax due to surcharge
is not higher than the actual increase in income. In such cases, the surcharge is restricted to
the increased income.
o To claim the marginal relief, your incremental tax should be greater than the income earned
beyond ₹1 crore. For instance, if your income is ₹1,01,00,000, your tax would be ₹28,55,000.
The surcharge on this works out to ₹4,28,250, taking your total outgo to ₹32,83,250. Here, the
extra tax (₹4.28 lakh) is greater than the extra income earned beyond ₹1 crore (₹1 lakh). Once
you claim marginal relief, your surcharge will be restricted to ₹1 lakh.
o The bottom-line: Levying surcharge on the wealthy is fine. But the concept mustn’t be
stretched so far that the super-rich find smart ways to skip taxes altogether.
 TRIPS AGREEMENT
The TRIPS Agreement, which came into effect on 1 January 1995, is to date the most
comprehensive multilateral agreement on intellectual property.
o The areas of intellectual property that it covers are: copyright and related rights (i.e. the
rights of performers, producers of sound recordings and broadcasting organizations);
trademarks including service marks; geographical indications including
appellations of origin; industrial designs; patents including the protection of new varieties
of plants; the layout-designs of integrated circuits; and undisclosed information including
trade secrets and test data.
The three main features of the Agreement are:

o Standards: In respect of each of the main areas of intellectual property covered by the TRIPS
Agreement, the Agreement sets out the minimum standards of protection to be provided by
each Member. Each of the main elements of protection is defined, namely the subject-matter
to be protected, the rights to be conferred and permissible exceptions to those rights, and the
minimum duration of protection.
▪ The Agreement sets these standards by requiring, first, that the substantive obligations of the
main conventions of the WIPO, the Paris Convention for the Protection of Industrial Property
(Paris Convention) and the Berne Convention for the Protection of Literary and Artistic
Works (Berne Convention) in their most recent versions, must be complied with.
▪ With the exception of the provisions of the Berne Convention on moral rights, all the main
substantive provisions of these conventions are incorporated by reference and thus become
obligations under the TRIPS Agreement between TRIPS Member countries. The relevant
provisions are to be found in Articles 2.1 and 9.1 of the TRIPS Agreement, which relate,
respectively, to the Paris Convention and to the Berne Convention.
▪ Secondly, the TRIPS Agreement adds a substantial number of additional obligations on
matters where the pre-existing conventions are silent or were seen as being inadequate. The
TRIPS Agreement is thus sometimes referred to as a Berne and Paris-plus agreement.
o Enforcement: The second main set of provisions deals with domestic procedures and
remedies for the enforcement of intellectual property rights. The Agreement lays
down certain general principles applicable to all IPR enforcement procedures. In addition, it
contains provisions on civil and administrative procedures and remedies, provisional
measures, special requirements related to border measures and criminal procedures, which
specify, in a certain amount of detail, the procedures and remedies that must be available so
that right holders can effectively enforce their rights.
o Dispute settlement. The Agreement makes disputes between WTO Members about the
respect of the TRIPS obligations subject to the WTO's dispute settlement procedures.
o In addition, the Agreement provides for certain basic principles, such as national and most-
favoured-nation treatment, and some general rules to ensure that procedural difficulties
in acquiring or maintaining IPRs do not nullify the substantive benefits that should flow from
the Agreement. The obligations under the Agreement will apply equally to all Member
countries, but developing countries will have a longer period to phase them in. Special
transition arrangements operate in the situation where a developing country does not presently
provide product patent protection in the area of pharmaceuticals.
o The TRIPS Agreement is a minimum standards agreement, which allows Members to provide
more extensive protection of intellectual property if they so wish. Members are left free to
determine the appropriate method of implementing the provisions of the Agreement within
their own legal system and practice.
 UNNATI on SSE
SGBS Unnati Foundation (SUF) became the first entity to list on the social stock exchange (SSE).
The Unnati program of the foundation provides vocational training for the underprivileged
and unemployed youth in the age group of 18 to 25 years.
• SUF, a not-for-profit organization (NPO), was incorporated in 2011.

• A Not-for-Profit organization after registering with Social Stock Exchange may raise
funds on SSE through issuance of Zero Coupon Zero Principal Instruments.
Social Stock Exchange (SSEs)

• The idea of the Social stock exchanges (SSEs) as a platform for listing social enterprise,
voluntary and welfare organizations so that they can raise capital was mooted in the Union
Budget 2019-20.
• Social enterprise can be defined as a non-loss; non-dividend paying company
created and designed to address a social problem.
• It works under the market regulator Security and Exchange Board of India (SEBI).
• The aim of the initiative is to help social and voluntary organizations which work for social
causes to raise capital as equity or debt or a unit of mutual fund.
• It provides new and cheaper sources of financing for social welfare projects, while
showcasing India’s independence from foreign aid.
• SEBI had permitted social enterprises registered on SSEs to raise funds through Zero Coupon
Zero Principal Bonds (ZCZP).
Zero Coupon Zero Principal (ZCZP)

• ZCZP – Zero Coupon Zero Principle are financial instrument that are included in the
list of securities under Securities Contracts (Regulation) Act, 1956.
• They do not give any interest, and investors will not get any money back on the
maturity of the bond.
• Eligibility criteria for issuance – Only by NPO that are registered with Social Stock Exchange
(SSE).
• ZCZP can only be issued for a specific project with specific tenure.
• The project must fall under the list of eligible activities under SEBI (ICDR) Regulations, 2018.
• Issuance - They are issued through private placement or public issuance.
• Minimum issue size – Rs. 50 Lakh (originally Rs.1 crore)
• Minimum application size – Rs.10, 000 (originally Rs.2 lakh)
• Minimum subscription required - 75% of the funds proposed
• Trade – They shall be issued in dematerialized form only.
• They are not available for trading in the secondary market, but they can be transferred to
legal heirs.
• Maturity – It will mature when the project for which they are raised terminate, or 12 months
from the date of allotment.
Benefits
• ZCZP is akin to a donation made to a charity. There is greater transparency about the
objective of the social enterprise.
• The end use of the funds can also be monitored since the enterprises have to disclose
details of money utilised and balance amount remaining to exchanges.
• The listing provides visibility to the social enterprises and helps them to approach the
public at regular intervals if they can show good outcomes.
 URBAN COOPERATIVE BANKS

o The term Urban Co-operative Banks (UCBs) refers to primary cooperative banks located in
urban and semi-urban areas.
o These banks, till 1996, were allowed to lend money only for non-agricultural
purposes. This distinction does not hold today.
o These banks were traditionally centred around communities, localities work place groups.
They essentially lent to small borrowers and businesses. Today, their scope of operations has
widened considerably.
o Cooperative societies are based on the principles of cooperation, - mutual help,
democratic decision making and open membership. Cooperatives represented a new
and alternative approach to organisation as against proprietary firms, partnership firms and
joint stock companies which represent the dominant form of commercial organisation.
o The first study of Urban Co-operative Banks was taken up by RBI in the year 1958-
59. The Report published in 1961 acknowledged the widespread and financially sound
framework of urban co-operative banks; emphasized the need to establish primary urban
cooperative banks in new centers and suggested that State Governments lend active support to
their development.
o In 1963, Varde Committee recommended that such banks should be organised at
all Urban Centres with a population of 1 lakh or more and not by any single
community or caste. The committee introduced the concept of minimum capital
requirement and the criteria of population for defining the urban centre where UCBs were
incorporated.
Problem- Duality of Control

o However, concerns regarding the professionalism of urban cooperative banks gave rise to the
view that they should be better regulated.
o Large cooperative banks with paid-up share capital and reserves of Rs.1 lakh were
brought under the purview of the Banking Regulation Act 1949 with effect from 1st
March, 1966 and within the ambit of the Reserve Bank’s supervision.
o This marked the beginning of an era of duality of control over these banks. Banking
related functions (viz. licensing, area of operations, interest rates etc.) were to be governed by
RBI and registration, management, audit and liquidation, etc. governed by State Governments
as per the provisions of respective State Acts. In 1968, UCBS were extended the benefits of
Deposit Insurance.
o Towards the late 1960s there was much debate regarding the promotion of the small scale
industries. UCBs came to be seen as important players in this context. The Working Group
on Industrial Financing through Co-operative Banks, (1968 known as Damry
Group) attempted to broaden the scope of activities of urban co-operative banks by
recommending that these banks should finance the small and cottage industries. This was
reiterated by the Banking Commission (1969).
o The Madhavdas Committee (1979) evaluated the role played by urban co-operative banks
in greater details and drew a roadmap for their future role recommending support from RBI
and Government in the establishment of such banks in backward areas and prescribing
viability standards.
o The Hate Working Group (1981) desired better utilisation of banks' surplus funds and
that the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio (SLR) of
these banks should be brought at par with commercial banks, in a phased manner.
o While the Marathe Committee (1992) redefined the viability norms and ushered in the era
of liberalization, the Madhava Rao Committee (1999) focused on consolidation, control
of sickness, better professional standards in urban co-operative banks and sought to align the
urban banking movement with commercial banks.
o A feature of the urban banking movement has been its heterogeneous character and its uneven
geographical spread with most banks concentrated in the states of Gujarat, Karnataka,
Maharashtra, and Tamil Nadu. While most banks are unit banks without any branch network,
some of the large banks have established their presence in many states when at their behest
multi-state banking was allowed in 1985. Some of these banks are also Authorised Dealers in
Foreign Exchange
o Recently the problems faced by a few large UCBs have highlighted some of the difficulties these
banks face and policy endeavours are geared to consolidating and strengthening this sector
and improving governance.
 VALUE INVESTING
• Value investing entails purchasing assets below their intrinsic value, anticipating
future appreciation.
• It was pioneered by Benjamin Graham and popularized by Warren Buffet on the
belief that an asset's price will eventually match its intrinsic value.
• It focuses on exploiting the gap between an asset's price and intrinsic value for
profitable returns, taking advantage of market fluctuations by buying during crises and
selling during booms.
• For example, if a company's stock has an intrinsic value of 100 rupees per share, but the market
price is only 60 rupees. A value investor seizes the opportunity, buying the undervalued stock.
• As the stock price rises toward its intrinsic value. The value investor then sells the stock at
a profit, having taken advantage of the initial undervaluation.
• This contrasts with efficient market theory, as value investors capitalize on disparities
between market prices and intrinsic worth, leveraging undervalued assets.
 WHOLESALE PRICE INDEX

o Wholesale Price Index, or WPI, measures the changes in the prices of goods sold and traded in
bulk by wholesale businesses to other businesses. WPI is unlike the Consumer Price Index
(CPI), which tracks the prices of goods and services purchased by consumers.
o To put it simply, the WPI tracks prices at the factory gate before the retail level.
o The numbers are released by the Economic Advisor in the Ministry of Commerce and
Industry. An upward surge in the WPI print indicates inflationary pressure in the economy
and vice versa. The quantum of rise in the WPI month-after-month is used to measure the level
of wholesale inflation in the economy.
What is the difference between WPI and CPI inflation?

o While WPI keeps track of the wholesale price of goods, the CPI measures the average price that
households pay for a basket of different goods and services. Even as the WPI is used as a key
measure of inflation in some economies, the RBI no longer uses it for policy purposes,
including setting repo rates.
o The central bank currently uses CPI or retail inflation as a key measure of
inflation to set the monetary and credit policy.
New series of WPI

o With an aim to align the index with the base year of other important economic indicators such
as GDP and IIP, the base year was updated to 2011-12 from 2004-05 for the new series of
Wholesale Price Index (WPI), effective from April 2017.
How do you calculate Wholesale Price Index?

o The monthly WPI number shows the average price changes of goods usually expressed in ratios
or percentages.
o The index is based on the wholesale prices of a few relevant commodities available.
o The commodities are chosen based on their significance in the region. These represent
different strata of the economy and are expected to provide a comprehensive WPI value.
o The advanced base year 2011-12 adopted recently uses 697 items.
Major components of WPI

o Primary articles are major components of WPI, further subdivided into Food Articles and
Non-Food Articles.
▪ Food Articles include items such as Cereals, Paddy, Wheat, Pulses, Vegetables, Fruits, Milk,
Eggs, Meat & Fish, etc.
▪ Non-Food Articles include Oil Seeds, Minerals and Crude Petroleum
o The next major basket in WPI is Fuel & Power, which tracks price movements in Petrol,
Diesel and LPG
o The biggest basket is Manufactured Goods. It spans across a variety of manufactured
products such as Textiles, Apparels, Paper, Chemicals, Plastic, Cement, Metals, and more.
o Manufactured Goods basket also includes manufactured food products such as Sugar, Tobacco
Products, Vegetable and Animal Oils, and Fats.
WPI Food Index

o WPI has a sub-index called WPI Food Index, which is a combination of the Food Articles
from the Primary Articles basket, and the food products from the Manufactured
Products basket.
 WORKER PRODUCTIVITY
• Productivity refers to the measure of how efficiently resources are used to achieve a particular
goal or outcome. It is often associated with the idea of getting more output or value from a
given input.
• It is the efficiency of using resources like labour and capital to produce goods and
services. It impacts a nation’s living standards and economic growth.
• Productivity can be applied to various contexts, such as individuals, organizations, industries,
or even entire economies.
• Productivity of an activity is usually measured as the quantum of output value per
unit of labour (time) cost at a micro level.
• At a macro level, it is measured in terms of the labour-output ratio or change in
Net Domestic Product (NDP) per worker in each sector.
• Worker Productivity vs. Labour Productivity: Worker productivity involves mental
activities, while labour productivity is associated with manual tasks.
Type of Productivity
• Labour Productivity: It measures output per hour of work, directly influencing wages, living
standards, and purchasing power.
• Capital Productivity: It evaluates output from physical assets like machinery and
buildings, impacting profitability and competitiveness.
• Total Factor Productivity: It accounts for output growth beyond labour and capital, are
often associated with innovation, efficiency, and technological progress.
Measuring Intellectual Worker Productivity

• In certain sectors, particularly those involving intellectual labour, evaluating the value of
output can be inherently challenging.
• As a result, worker productivity is often approximated based on worker income,
which can create complications when attempting to correlate increased working hours with
higher productivity, particularly if workers don't receive fair compensation for their additional
efforts.
Role of Skill in Productivity

• Productivity is not just about time, it's about skill.
• By investing in education, training, health, and other aspects of Human Capital,
workers can become more efficient and create more value in the same amount of time.
• So, working fewer hours doesn't necessarily reduce output; it can actually improve
workers' quality of life.
• The economy can still grow, even if nominal wages remain the same, as long as workers become
more skilled and productive.
 WORLD ECONOMIC FORUM

The World Economic Forum (WEF) is held its Annual Meeting in Davos, Switzerland.
About WEF
• WEF is the International Organization for Public-Private Cooperation. The Forum
engages the foremost political, business, cultural and other leaders of society to shape global,
regional and industry agendas.
• It is headquartered in Geneva, Switzerland.
• Foundation: Klaus Schwab, a German professor founded WEF in 1971, originally known as
the European Management Forum.
• The European Management Forum was the first non-governmental institution to
initiate a partnership with China’s economic development commissions, spurring economic
reform policies in China.
• Klaus Schwab introduced the concept of “stakeholder capitalism.”
• According to Schwab, “It is a form of capitalism in which companies do not only optimize short-
term profits for shareholders, but seek long term value creation, by taking into account the
needs of all their stakeholders, and society at large.”
Evolution
• Events in 1973, namely the collapse of the Bretton Woods fixed exchange rate
mechanism and the Arab-Israeli War, saw the Annual Meeting expand its focus from
management to economic and social issues.
• Two years later, the organization introduced a system of membership for ‘the 1,000
leading companies of the world.
• In 1987, the European Management Forum formally became the World Economic
Forum and sought to broaden its vision to include providing a platform for dialogue
• In 2015, the Forum was formally recognised as an international organization.
• Funding: Primarily supported by partnering corporations, typically with annual turnovers

exceeding USD 5 billion.
• Annual Meeting in Davos: Davos brings together (including paying members and select
invitees): investors, business leaders, political leaders, economists, celebrities, and others to
discuss global issues across 500 sessions.
Major Reports: WEF regularly publishes globally recognized reports, including:

• the Global Competitiveness Report
• the Global Gender Gap Report,
• Energy Transition Index,
• Global Risk Report,
• Global Travel and Tourism Report.
 WORLD BANK GROUP

o The United Nations Monetary and Financial Conference, also known as the Bretton Woods
Conference held in 1944 led to the formation of the International Monetary Fund
(IMF in 1945) and the International Bank for Reconstruction and Development
(IBRD in 1944).
o The original focus of the IBRD was the reconstruction of countries ravaged by the
Second World War through loans.
o Gradually, there was a shift from reconstruction to development with a particular emphasis on
infrastructure, power grids, roads and transportation, dams, etc.
o The other institutions such as the IDA, IFC, etc. were formed over the years and all five
institutions (IBRD, IDA, IFC, MIGA, and ICSID) came to be called the World Bank
Group.
o Currently, the group engages in multifarious activities through its institutions and funds.
o There is a special focus on developing and underdeveloped countries.
o The WBG is one of the world’s largest sources of funding and knowledge for developing
nations. Its five institutions share a commitment to decreasing poverty, enhancing shared
prosperity, and boosting sustainable development.
o The WBG is headquartered in Washington, D.C.
o The World Bank Group is a specialized agency of the United Nations.
International Bank for Reconstruction and Development (IBRD)

o The IBRD calls itself a global development cooperative. It has a membership of 189 countries.
o It is the world’s largest development bank.
o It provides loans, guarantees, advisory services, and risk management products to middle-
income and creditworthy low-income countries.
o Middle-income countries represent more than 60% of the IBRD’s portfolio.
o IBRD finances investments across all sectors and offers technical support and expertise at
every stage of a project.
o IBRD deals only with sovereign governments and not private players.
o It also assists governments in augmenting the investment climate of countries, removing
service delivery bottlenecks, and strengthening institutions and policies.
o IBRD sources most of its funds from the world’s financial markets.
IBRD and India

o India is a founding member of IBRD.
o It started lending to India in 1949, the first project being undertaken for the Indian Railways.
o Since the 1960s, the IBRD is an important source of long-term funding for India.
o India is the largest IBRD client of the World Bank.
o India is a blend country, which means it is transitioning from a lower-middle-income to a
middle-income country.
o India is eligible for loans from both the IBRD and the IDA.
International Development Association (IDA)

o The International Development Association (IDA) is a part of the World Bank Group that helps
the world’s poorest countries.
o The main objective of the IDA is to provide grants and concessional loans to the world’s
poorest countries.
o It lends to developing countries with the lowest Gross National Income (GNI),
having troubled creditworthiness, & having very low per capita income.
o The IDA seeks to complement the work done by the International Bank for Reconstruction and
Development.
o Collectively IBRD and IDA are known as the World Bank.
o IDA was established with the signing of agreements between 15 countries.
o 173 countries are its members.
o Around 52 nations are donor countries.
o IDA lends to 75 countries, out of which 39 countries are located in Africa.
o IDA replenishes its resources every 3 years.
o G-7 countries dominate donor contributions. Their contribution comprises 69% of the total
funds donated.
o 26% of the total funds are donated by 11 mid-sized traditional donor countries.
o 5% of the total funds are donated by 34 small-donor nations.
International Development Association – Financial Instruments

There are 3 financial instruments under the International Development Association (IDA) which
are given below.
Investment It is used to finance a wide range of physical and social infrastructure
Operations necessary to reduce poverty and create sustainable development.
Development This focuses on financial policies and institutional actions that are
Policy consistent with the country’s economic policies.
Operations
IDA This comes into picture when the default is caused by the Government
Guarantees failure. Here it mobilizes private sector finance.
IDA and India

o India is one of the founding members of the International Development Association.
o India got its first investment from IDA for a highway construction project in 1961.
o In the following decade, the IDA accounted for nearly three-fourths of all WB lending to India.
o By 1970, India was the largest recipient of IDA funds, accounting for more than two-
fifths of all its lending.
o India is also a donor to the IDA classified as a Part II Donor.
o In 1980, China joined the World Bank which significantly dropped India’s share in IDA.
o China’s claim to limiting the IDA resources also worsened Africa’s economic fortunes.
o Now, India is classified as a Blend Country and is creditworthy for funding from both
IBRD and IDA.
o Blend Country or Blend Borrower can be defined as one in the transition from lower-
middle-income to middle-income.
International Finance Corporation (IFC)

o The IFC is a sister organization of the World Bank (IDA + IBRD). It is the largest
international development institution focused on the private sector in developing countries.
o It functions as the private sector arm of the WBG.
o It works for economic development by investing in for-profit and commercial projects
for poverty reduction and augmenting development.
o It also engages in mobilizing third-party resources for projects.
o The IFC works with the private sector to boost entrepreneurship and create sustainable
businesses.
o The IFC provides investment, advice, and asset management offerings.
o It lends to businesses and private sector projects.
IFC and India

o India is a founding member of the IFC.
o Over the past few years, IFC has augmented its portfolio in India, improving profitability and
investing in high impact projects.
o It is expanding its activities in the LIS (the Low Income States and the NE States) in
India.
o Improving the investment climate for private sector development and inclusive growth.
o Financial inclusion by focusing on microfinance institutions.
o Focus on renewable energy and cleaner production methods.
o Developing PPP transactions with a focus on social services (health and education) and climate
change impact projects.
Multilateral Investment Guarantee Agency (MIGA)

o MIGA’s chief goal is to enhance cross-border investment in developing countries by
giving guarantees (political risk insurance and credit enhancement) to lenders and investors.
o The agency’s guarantees to protect investments against non-commercial risks.
o It emphasizes on Fragile and Conflict-affected States.
Political risk insurance products:

o Coverage against losses due to war, terrorism, and civil disturbance.
o Coverage against expropriation by governments.
o Coverage against breach of contract.
o Protection against losses arising from an inability to legally convert local currency into hard
currency.
o Credit enhancement – protection when governments fail to honour financial obligations.
o India became a member of the MIGA in 1994.
International Centre for Settlement of Investment Disputes (ICSID)

o ICSID engages in international investment dispute settlement.
o It settles disputes between investors and governments.
o It also settles state-state disputes under investment treaties and free trade agreements and acts
as an administrative registry.
o The Centre provides for settlement of disputes by arbitration, conciliation, or fact-finding.
o It also disseminates information on international law on foreign investment.
o India is not a member of the ICSID because it claims that the ICSID’s functioning and
structure are biased towards the developed countries.
o India set up the BRICS Arbitration Centre (BRICS Centre) to address and reinforce
international arbitrations with foreign investors. Although this is limited to the BRICS
countries, it will be available for all developing countries in the future.
 WTO: DISPUTE SETTLEMENT MECHANISM

Settling disputes is the responsibility of the Dispute Settlement Body which consists of all WTO
members. The Dispute Settlement Body has the sole authority to establish “panels” of experts to
consider the case, and to accept or reject the panels’ findings or the results of an appeal.
o First stage: Consultation (up to 60 days). Before taking any other actions the countries in
dispute have to talk to each other to see if they can settle their differences by themselves.
o Second stage: If consultations fail, the complaining country can ask for a panel to be
appointed. The panel’s final report should normally be given to the parties to the dispute within
six months. The report becomes the Dispute Settlement Body’s ruling or recommendation
unless a consensus rejects it. This entire process should be completed within 1 year.
o Appeal Stage: Either side can appeal a panel’s ruling. Each appeal is heard by three members
of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and
broadly representing the range of WTO membership. Members of the Appellate Body have
four-year terms. They have to be individuals with recognized standing in the field of law and
international trade, not affiliated with any government. The appeal can uphold, modify or
reverse the panel’s legal findings and conclusions. The Dispute Settlement Body has to accept
or reject the appeals report and rejection is only possible by consensus.
 WORLD EMPLOYMENT AND SOCIAL

OUTLOOK
The International Labour Organisation’s (ILO) has released the World Employment and
Social Outlook: Trends 2024 report, which highlighted that Global Unemployment rate is set to
increase in 2024 and growing inequalities and stagnant productivity are causes for concern.
Key Highlights of the Report
• The global unemployment rate stood at 5.1% in 2023, a modest

Global improvement from 2022.
Unemployment
Trends • However, the report projects a worsening Labor Market outlook raising
the global unemployment rate to 5.2%.
• The recovery from the pandemic is uneven, with new vulnerabilities and
multiple crises eroding prospects for greater social justice.
• Differences persist between higher and lower income countries, both in
Uneven terms of unemployment rates and jobs gap rates.
Recovery • While the jobs gap rate in 2023 was 8.2% in high-income
countries, it stood at 20.5% in the low-income group.
• Similarly, while the 2023 unemployment rate persisted at 4.5% in high-
income countries, it was 5.7% in low-income countries.
Income • Income inequality has widened, and Disposable Incomes have

Inequality declined in the majority of G20 countries.
Widening • Disposable income is net income. It's the amount left over after taxes.
• The erosion of real disposable income is seen as a negative factor for

aggregate demand and a more sustained economic recovery.
• Despite quickly declining after 2020, the number of workers living in
extreme poverty (earning less than USD 2.15 per person per day in
Working purchasing power parity terms) grew in 2023.
Poverty • The number of workers living in moderate poverty (earning less than
Persists USD3.65 per day per person in PPP terms) increased in 2023.
• Working poverty is likely to persist as a challenge.
Informal Work • Rates of Informal Work are expected to remain static, accounting for
Rates Remain around 58% of the global workforce in 2024.
High
• The return to pre-pandemic labor market participation rates has varied
between different groups.
• Women's participation has bounced back quickly, but a gender gap
Labor Market
still persists, especially in emerging and developing nations.
Imbalances
• Youth unemployment rates and the NEET (Not in
Employment, Education, or Training) category remain high,
posing challenges for long-term employment prospects.
• After a brief post-pandemic boost, labor productivity has returned to

the low levels seen in the previous decade.
Productivity
Growth Slowed • Productivity growth has continued to slow despite
technological advances and increased investment, with barriers
including skills shortages and the dominance of large digital
monopolies.
• The imbalances observed are not simply part of pandemic recovery but
may be structural.
Outlook
• Workforce challenges pose a threat to both individual livelihoods and
Uncertain and
businesses.
Structural
Concerns • Falling living standards, weak productivity, persistent
inflation, and greater inequality undermine efforts to achieve
Social Justice and sustainable recovery. The report emphasizes the need
to address these challenges effectively and quickly.
• Real wages in India and Turkey are "positive" compared to other G20
Positive Real countries, but the available data refer to 2022 relative to 2021.
Wages • The other G20 countries saw real wages fall; the declines were
particularly pronounced in Brazil (6.9%), Italy (5%) and Indonesia
(3.5%).
 YIELD CURVE
o A yield curve is a graph that depicts yields (Interest rates) on bonds ranging from short-term
debt such as one month to longer-term debt such as 30 years.
o Usually, in order to track the yield curve, the yields of the Government bonds are taken into
consideration. The Yield curve may provide important clues related to present and future
economic conditions in a country.
Types of Yield Curve and their interpretation
Normal Yield Curve

o The yields on the bonds depends upon the risk involved. Higher the risks, higher would be the
yields.
o Normally, the yields on short term maturity bonds is lower than that of long term maturity
bonds. The higher yields on the long term maturity bonds can be attributed to increased risk
in the longer term (say 30 years). Hence, under normal conditions, the yield curve is upwards
sloping.
o A normal yield curve indicates yields on longer-term bonds may continue to rise, responding
to periods of economic expansion.
Inverted Yield Curve
o When there are signs of slowdown in an economy, it would mean that the economy faces risk
in the short term. However, in the long term, the economy may come back to normalcy. Hence,
due to this, the yield on the short term bonds becomes higher than the yields of long term
bonds.
o This is because the risks associated with the short term bonds is higher than the risks
associated with long term bonds. Hence, an inverted yield curve points towards a probable
economic recession.
o The present development in the US bond market has raised concerns that the inverted yield
curve possibly points to global economic recession in future.
 WAYS AND MEANS ADVANCES

o The RBI acts as banker to the government i.e. it lends money to the Central and State
Government. Earlier, the government relied on ad-hoc Treasury bills to borrow money from
RBI. However, it was replaced by Ways and Means advances in 1997.
o Ways and Means advances acts as a loan facility to the central and state governments
to meet their cash requirements. This facility is availed by the Government due to the
temporary mismatches in their receipts and expenditure. The loan taken by the government
through ways and means advances need to be paid back in 90 days. The interest rate of WMA
currently is the repo rate. The limits for WMA are mutually decided by the RBI and
Government of India.
o When the WMA limit is crossed the government takes recourse to overdrafts, which are not
allowed beyond 10 consecutive working days. The interest rate on overdrafts would be 2
percent more than the repo rate.
Reasons for replacing Ad-Hoc T-Bills with WMAs

o Earlier, under an agreement between RBI and Government, the central government needed to
always hold certain amount of cash balances. The minimum cash limit was fixed in order to
ensure smooth conduct of Government business and to ensure that government has sufficient
cash to meet its operational requirements.
o However, if the cash balances reduced to below the threshold level fixed, the RBI provided the
cash through the creation of ad-hoc treasury bills. The ad hoc Treasury Bills, which were meant
to be temporary, gained a permanent as well as a cumulative character. Further, ad-hoc
treasury bills became an attractive source of financing Government expenditures since it was
available at an interest rate which was below the market rate of interest.
o Thus, the ad-hoc treasury bills led to increase in the government borrowings leading to poor
inancial discipline.
Differences between ad-hoc Treasury Bills and WMA

o WMA would not be a source of financing Budget Deficit. It is only a mechanism to cover day-
to-day mismatches in receipts and payments of the Government.WMA will also not be shown
as a source of financing in the Budget estimates.
o Secondly, limits on WMA will be fixed and any excess withdrawal by Government beyond the
limit will become permissible for not more than 10 consecutive working days.
o Thirdly, WMA will be charged at market related interest rate i.e. Repo rate.
AGRICULTURE RELATED
 M.S. SWAMINATHAN
Career
• IARI: MS Swaminathan joined the Indian Agricultural Research Institute (IARI) as a
faculty. He later served as the director of IARI from 1961 to 1972.
• ICAR: He was the Director-General of the Indian Council of Agricultural Research from
1972 to 1979, and the principal secretary of the Indian Ministry of Agriculture and
Irrigation from 1979 to 1980.
• Planning Commission: From 1980 to 1982, he was in charge of India's Planning
Commission's agriculture and rural development.
• IRRI: In 1982, Swaminathan was appointed as the Director-General of the
International Rice Research Institute (IRRI) in the Philippines and President of the
International Union for Conservation of Nature and Natural Resources from 1984 to 1990.
• MS Swaminathan Research Foundation: Established in 1988, aims to accelerate the use
of modern science and technology for agricultural and rural development to improve the lives
and livelihoods of communities.
• He served as a Member of Parliament in Rajya Sabha from 2007 to 2013.
• He chaired the Task Force (of the Ministry of External Affairs) to oversee agricultural
projects in Afghanistan and Myanmar.
Contributions
Green Revolution
• The Green Revolution (began in the mid-1960s) was a transformative period in Indian
agriculture characterised by the adoption of high-yielding crop varieties, and the use of
modern agricultural practices.
• MS Swaminathan was instrumental in his pivotal role in the Green Revolution in India during
the 1960s and 1970s.
• Development of high-yield varieties: MS Swaminathan invited Dr. Norman
Borlaug to India after learning about his newly developed Mexican dwarf wheat variety.
• Administering and Collaborating for Farmer Adoption of HYV: MS Swaminathan

established thousands of demonstration and test plots in northern India in 1965,
demonstrating to small-scale farmers that the new, genetically superior grain could thrive in
their own fields.
• Outcome: As a result of the introduction of these new high-yield varieties of wheat, India's
wheat production skyrocketed from 12 million tonnes to 23 million tonnes in four crop
seasons, reducing its reliance on grain imports.
Food Security and Farmer Welfare

• MS Swaminathan advocated for an effective public distribution system to ensure that
food grains reach poor consumers in order to end hunger.
• Due to the efforts of MS Swaminathan, India went from being drought-stricken and reliant on
US imports in the 1960s to being declared food self-sufficient in 1971.
• In 1987, he was awarded the World Food Prize for his notable contributions to agricultural
science and food security. From the proceeds of this prize, he established the MS
Swaminathan Research Foundation (MSSRF).
• National Commission on Farmers: As the chairman of the commission, MS Swaminathan
issued five reports recommending minimum crop support prices, faster and more
inclusive growth, and a comprehensive national policy to address farmer suicides.
• He played an instrumental role in developing the Protection of Plant Varieties and
Farmers' Rights Act of 2001.
Evergreen revolution
• Later in his career, MS Swaminathan shifted his focus and made significant contributions to
the promotion of sustainable agriculture and rural development using cutting-edge paradigms
like ecotechnology-based bio-villages and contemporary information and
communication-based Village Knowledge Centres (VKCs).
• He promoted the idea of an "evergreen revolution", which called for a continuous
improvement in agricultural productivity without harming the environment.
• He emphasised the importance of preserving biodiversity, protecting the environment, and
promoting organic farming practices.
Research
• Cryogenetics: MS Swaminathan pioneered his research with cryogenetics studies (study of
chromosomes) in potato crops.
• The meaning of CRYOGENICS is a branch of physics that deals with the production and
effects of very low temperatures.
• He was successful in preventing crop infestations and in making crops resistant to cold
weather.
• He also studied interspecific hybridization, induced radiation, chemical mutagenesis, and the
use of plant growth regulators.
• Hexaploid wheat: Swaminathan did basic research on the cytogenetics of hexaploid
wheat, one of the widely cultivated cereal crops.
• Through collaboration with Dr. Borlaug modified grains in laboratories to better suit Indian
soil, resulting in higher yield and free of infestation.
• C4 rice plant: During his tenure as Director General of the IRRI, research on the C4 rice
plant was started for photosynthesis more efficiently.
 MINIMUM SUPPORT PRICE

Minimum Support Price
• MSP is the guaranteed amount paid to farmers when the government buys their
produce.
• MSP is based on the recommendations of the Commission for Agricultural Costs and
Prices (CACP), which considers various factors such as cost of production, demand and
supply, market price trends, inter-crop price parity, etc.
• CACP is an attached office of the Ministry of Agriculture and Farmers Welfare. It came
into existence in January 1965.
• The Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister of
India takes the final decision (approve) on the level of MSPs.
• The MSP is aimed at ensuring remunerative prices to growers for their produce and
encouraging Crop Diversification.
• The CACP recommends MSPs for 22 mandated crops and fair and remunerative price
(FRP) for sugarcane.
 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley),
 5 pulses (chana, arhar/tur, urad, moong and masur),
 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and
nigerseed) and
 4 commercial crops (cotton, sugarcane, copra and raw jute).
• The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other
commercial crops.
Three Kinds of Production Cost

• The CACP projects three kinds of production cost for every crop, both at state and all-India
average levels.
1. ‘A2’: Covers all paid-out costs directly incurred by the farmer in cash and kind on seeds,
fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc.
2. ‘A2+FL’: Includes A2 plus an imputed value of unpaid family labour.
3. ‘C2’: It is a more comprehensive cost that factors in rentals and interest for owned land and
fixed capital assets, on top of A2+FL.
• CACP reckons only A2+FL cost for return.

• However, C2 costs are used by CACP primarily as benchmark reference costs (opportunity
costs) to see if the MSPs recommended by them at least cover these costs in some of the major
producing States.
Need for MSP

• Higher input prices for diesel, electricity and fertilisers.
• It ensures that farmers receive a fair price for their crops, which helps in reducing farm distress
and poverty. This is particularly crucial in states where agriculture is a major source of
livelihood.
Various Committees on Minimum Support Price (MSP)

• The Agricultural Prices Commission (APC) was founded in 1965 with the purpose of
recommending MSPs for agricultural commodities. The Commission for Agricultural Costs
and Prices (CACP) was later given its new name. For 23 different crops, including wheat, rice,
pulses, oilseeds, and cotton, the CACP suggests MSPs.
• National Commission on Farmers (NCF): The NCF was established in 2004 under the
leadership of M.S Swaminathan, to address the problems of farmers and recommend policies
for their welfare. The NCF recommended a minimum of 50% profit over the cost of
production as MSP.
• Shanta Kumar Committee: The Shanta Kumar Committee was set up in 2014 to review the
Food Corporation of India (FCI) and suggest reforms. The committee recommended a shift
from price-based to income-based support for farmers.
 FOOD CORPORATION OF INDIA (FCI)

o The Food Corporation of India is a statutory body created and run by the Government of
India.
o It is under the ownership of Ministry of Consumer Affairs, Food and Public
Distribution, Government of India formed by the enactment of Food Corporation Act,
1964.
o Its top official is designated as Chairman who is a civil servant of the IAS cadre.
o It was set up in 1965 with its initial headquarters at Chennai. Later this was moved to New
Delhi.
Mandate:
o Effective price support operations for safeguarding the interests of the poor farmers.
o Distribution of foodgrains throughout the country for Public Distribution System (PDS).
o Maintaining a satisfactory level of operational and buffer stocks of foodgrains to ensure
National Food Security.
o Regulate market price to provide foodgrains to consumers at a reliable price.
Operations
o The Food Corporation of India procures rice and wheat from farmers through many routes like
paddy purchase centres/mill levy/custom milling and stores them in depots. FCI maintains
many types of depots like food storage depots and buffer storage complexes and private equity
godowns and also implemented latest storage methods of silo storage facilities which are
located at Hapur in Uttar Pradesh, Malur in Karnataka and Elavur in Tamil Nadu.
o The stocks are transported throughout India by means of railways, roadways and waterways
and issued to the state government nominees at the rates declared by the
Government of India for further distribution under the Public Distribution
System (PDS) for the consumption of the ration card holders. (FCI itself does not directly
distribute any stock under PDS, and its operations end at the exit of the stock from its depots).
o The difference between the purchase price and sale price, along with internal
costs, are reimbursed by the Union Government in the form of food subsidy. At
present the annual subsidy is around $10 billion.
o FCI by itself is not a decision-making authority; it does not decide anything about the MSP,
imports or exports. It just implements the decisions made by the Ministry of Consumer Affairs,
Food and Public Distribution and Ministry of Agriculture.
o Food Corporation of India recently ventured into procurement of pulses in various regions
from the crop year 2015–16, and pulses are procured at market rate, which is a sharp deviation
from its traditional minimum support price-based procurement system.
o In 2014, Government of India set up a high-level committee under the chairmanship of
Hon'ble Member of Parliament and former Minister of Food and Consumer Affairs and Public
Distribution Shri Shanthakumar to recommend viable solutions regarding restructuring and
reorienting the role of Food Corporation of India, and the committee submitted its report to
the government. Many of the committee recommendations are under various stages of
implementation.
o On 27 November 2019, Cabinet Committee on Economic Affairs (CCEA) approved to increase
the authorized capital of Food Corporation of India (FCI) from existing Rs. 3,500 crores to Rs.
10,000 crores.
 FOOD MANAGEMENT POLICY

o The main elements of the Government’s food management policy are procurement, storage
and movement of foodgrains, public distribution and maintenance of buffer
stocks.
o The foodgrain management policy in India is detailed in the Targeted Public Distribution
System (TPDS) (Control) Order, 2015.
o Procurement operations are seasonal –
▪ Kharif Marketing Season (KMS) starts from 1st October and lasts upto 30
September next year. Paddy/ Rice and coarse grains like jowar, bajra, ragi & maize are
procured during the KMS.
▪ The Rabi Marketing Season (RMS) starts from 1 April and lasts upto 31 March
next year. Mostly, wheat and sometimes barley is procured during RMS. [The kharif cropping
season is from July –October during the south-west monsoon and the Rabi cropping season is
from October-March (winter).]
o Before the start of every marketing season, Department of Food and Public Distribution
convenes a meeting of State Food Secretaries to make advance arrangements for
procurement of foodgrains/coarse grains.
o In this meeting, issues like procurement centres to be opened by Food Corporation
of India (FCI) /State Agencies, arrangement of storage space, evacuation plan for
foodgrains and arrangement of packaging material are discussed. Based on the
estimates given by the State Food Secretaries, the targets of total procurement for the Central
Pool are worked out in the meeting.
o Under the existing procurement policy of the Government of India (GOI), foodgrains for the
Central Pool are procured by various agencies such as FCI, State Government Agencies
(SGAs) and private rice millers.
o Before the start of each procurement season, Govt. of India announces uniform
specification for quality of wheat, paddy, rice and coarse grains.
o Quality Control Division of FCI ensures procurement of foodgrains from procurement
centres strictly in accordance with Govt. of India's uniform quality specifications.
o Procurement of wheat and paddy for the Central Pool is carried out on open ended basis
(i.e., accepting all the grains that are sold to it by farmers) at the declared Minimum Support
Price (MSP) fixed by the GOI.
o In addition, States/ Union Territories (UTs) which are presently under Decentralised
Procurement (DCP) scheme also procure foodgrains for the Central Pool, but directly store and
distribute them under Targeted Public Distribution System [TPDS] and Other
Welfare Schemes (OWS) based on the allocation made by the GOI. Any surplus stock over
their requirement is taken over by FCI and in case of any shortfall in procurement against
allocation made by the GOI, FCI meets the deficit out of the Central Pool.
o In order to give relief to the farmers affected by the unprecedented rains & hailstorms, Central
Government may (This was done, for instance, in 2015 for wheat procurement) relax quality
norms for the procurement and also reimburse the amount of value cut on such relaxation to
the States so that farmers get full Minimum Support Price (MSP).
o The procured food grains are taken over from State Government Agencies (SGAs) and
private rice millers into the Central Pool by FCI and are moved from the procuring
states to the consuming states for distribution to the consumers and for creation of buffer stock
in various states. Food grains of the Central Pool are stored by FCI in both its own godowns
and at hired godowns in different parts of the country. FCI, if so required, may use warehouse
receipts as collateral for financing its operations.
Allocation, Off-take of Foodgrains and Central Issue Prices

o The function of distribution of foodgrains to the consumers is carried out by the State
Governments through Targeted Public Distribution Scheme [TPDS] and Other Welfare
Schemes (OWS).
o The foodgrains are also disposed off by FCI and State Governments, based on allocation of the
GOI through sale under Open Market Sales Scheme (OMSS) [i.e., selling foodgrains at
predetermined prices in the open market from time to time to enhance the supply of grains
especially during the lean season and thereby to moderate the open market prices especially in
the deficit regions. Wheat and Rice are also allocated to State Governments for retail sale
through non-PDS Channels under OMSS.].
o Based on the allocation made by the GOI, State Governments lift (off-take) the food grains
from the Central Pool for distribution to the consumers through TPDS and OWS. Distribution
of food grains for BPL, AAY and APL is carried out by the State Governments through TPDS,
with a network of many Fair Price Shops (FPS) spread throughout the country. The State
Governments are responsible for identification of beneficiaries and issue of ration cards.
o Food grains from the Central Pool are issued to States at Central Issue Price (CIP) for
distribution under TPDS to serve families of BPL, APL and AAY at rates fixed by the GOI.
Ministry of Consumer Affairs, Food &Public Distribution Government of India, fixes the
Central Issue Prices (CIP) of wheat and rice which is uniform throughout the
country.
Movement of Food Grains

o In order to ensure availability of foodgrains for TPDS and OWS, and to maintain reasonable
levels of buffer stocks at various strategic locations throughout the country, FCI undertakes
transportation of foodgrain (wheat and rice) from surplus States to the deficit States and also
within the States by rail, road and riverine modes. About 90% of all India movement is
undertaken by railways and rest by road and waterways.
o On an average of 25 lakh bags (each one is 50 KG) of foodgrains are transported every day from
the procuring areas to the consuming areas, covering an average distance of 1500 Kilometre.
o All India Movement Plan is prepared on monthly basis at FCI headquarters keeping in view
the quantity available in surplus States, quantity required by consuming States, likely
procurement in procuring States, vacant storage capacity both in consuming and procuring
States, and monthly allocation/off-take.
o An online tracking system for movement of foodgrains and depot management was launched
in March 2016. The system would provide various types of data regarding stock position,
movement, quality and quantity on line. It would also generate SMS alerts to depot officials,
area manager and other decision making authorities. All the data are available on dashboard
also for top management to monitor centrally so as to help in automatic reconciliation and
generation of MIS reports about foodgrain management.
Buffer Stock Policy of the GOI

o The concept of buffer stock was first introduced during the IV Five Year Plan (1969-74).
o Buffer stock of food grains in the Central Pool is maintained by the GOI for
1. meeting the prescribed minimum buffer stock norms for food security,
2. monthly release of food grains for supply through TPDS and Other Welfare Schemes,
3. meeting emergency situations arising out of unexpected crop failure, natural disasters, etc.
and
4. price stabilisation or market intervention to augment supply so as to help moderate the
open market prices.
o While four months requirement of food grains for issue under TPDS and OWS are earmarked
as operational stocks, the surplus over that is treated as buffer stock and physically both
buffer and operational stocks are merged into one and are not distinguishable.
o According to the present practice, the GOI treats the food stock over and above the minimum
norms as excess stock and liquidates them from time to time through exports, open market
sales or additional allocations to states. The buffer stock figures are normally reviewed after
every five years.
o The total annual stock of foodgrains in the Central Pool is distributed over different quarters
of the year depending upon offtake and procurement patterns. The seasonality of production
and procurement is thus a decisive factor in determining the minimum norm of food grains
stocks required in a particular quarter of the year.
Open Market Sale Scheme (Domestic)

o In addition to maintaining buffer stocks and making a provision for meeting the requirement
of the Targeted Public Distribution Scheme and Other Welfare Schemes (OWS), FCI on the
instructions from the Government, sells wheat and rice in the open market from time to time
to enhance the supply of wheat and rice especially during the lean season and to moderate the
open market prices especially in the deficit regions.
o For transparency in operations, the Corporation has switched over to e- auction for sale
under Open Market Sale Scheme (Domestic). The FCI conducts a weekly auction to
conduct this scheme in the open market using the platform of commodity bourse NCDEX
(National Commodity and Derivatives Exchange Limited). The State Governments/
Union Territory Administrations are also allowed to participate in the e-auction, if they require
wheat and rice outside TPDS & OWS.
o The present form of OMSS comprises 3 schemes as under:
1. Sale of wheat to bulk consumers/private traders through e-auction.
2. Sale of wheat to bulk consumers/private traders through e-auction by dedicated movement.
3. Sale of Raw Rice Grade ‘A’ to bulk consumers/private traders through e-auction.
 NCDEX
o National Commodity & Derivatives Exchange Limited (NCDEX) (NCDEX/the Exchange) is a
leading agricultural commodity exchange in India, with a market share of 78.0% in the
agricultural commodity segments, based on average daily turnover (by value).
o The Exchange has maintained its leadership position since 2005, in the agricultural commodity
derivatives market. Further, the Exchange is a professionally managed company, which is
driven by technology.
Current Shareholders
o Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural
Development (NABARD), National Stock Exchange of India Limited (NSE), Canara Bank,
Punjab National Bank (PNB), CRISIL Limited, Indian Farmers Fertiliser Cooperative Limited
(IFFCO), Shree Renuka Sugars Limited, Jaypee Capital Services Limited, Build India Capital
Advisors LLP, Oman India Joint Investment Fund, Investcorp Private Equity Fund I (formerly
known as IDFC Private Equity Fund III), Star Agriwarehousing and Collateral Management
Limited and shareholding by individuals.
o The Exchange has a broad based bouquet of permitted commodities aggregating to a total of
23 (which is also the highest), and includes commodities such as pulses, spices and guar, which
are not traded on any platforms in the global scenario, and are economically relevant to India,
forming an important component of India’s global trade.
o The Exchange was incorporated as a public limited company on April 23, 2003,
pursuant to a certificate of incorporation and commenced its business pursuant to a certificate
for commencement of business dated May 9, 2003, each granted by the Registrar of
Companies, Maharashtra at Mumbai.
o The Exchange was registered with the Forward Markets Commission as a recognised
association under The Forward Contracts (Regulation) Act, 1952.
o With effect from September 28, 2015, the Exchange became a deemed recognized
stock exchange under the Securities Contracts (Regulation) Act, 1956.
o NCDEX is regulated by Securities and Exchange Board of India (SEBI). NCDEX is
subjected to various laws of the land like the Securities Contracts (Regulation) Act, 1956,
Companies Act, Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, SEBI (Listing Obligations and Disclosure Requirements)
Regulations, Stamp Act, Contract Act and various other legislations.
o NCDEX headquarters are located in Mumbai and offers facilities to its members from the
centres located throughout India.
o As of March 31, 2021, NCDEX offered future contracts for 23 agricultural commodities and 1
non-agricultural commodity, 1 Indices contract and options contracts for 7 agricultural
commodities, on the Exchange platform.
 NABARD
o National Bank for Agriculture and Rural Development (NABARD) is an apex regulatory
body for overall regulation and licensing of regional rural banks and apex
cooperative banks in India.
o It is under the jurisdiction of Ministry of Finance.
o The bank has been entrusted with "matters concerning policy, planning, and operations in the
field of credit for agriculture and other economic activities in rural areas in India".
o NABARD is active in developing & implementing Financial Inclusion.
o NABARD was established on the recommendations of B. Sivaramman Committee (by Act
61, 1981 of Parliament) on 12 July 1982 to implement the National Bank for Agriculture
and Rural Development Act 1981.
o It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell
(RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation
(ARDC). It is one of the premier agencies providing developmental credit in rural areas.
o NABARD is India's specialised bank for Agriculture and Rural Development in
India.
o International associates of NABARD include World Bank-affiliated organisations and global
developmental agencies working in the field of agriculture and rural development. These
organisations help NABARD by advising and giving monetary aid for the upliftment of the
people in the rural areas and optimising the agricultural process.
Roles
o Serves as an apex financing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural areas
o Takes measures towards institution building for improving absorptive capacity of the credit
delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of
credit institutions, training of personnel, etc.
o Co-ordinates the rural financing activities of all institutions engaged in developmental
work at the field level and maintains liaison with Government of India, state governments,
Reserve Bank of India (RBI) and other national level institutions concerned with policy
formulation.
o Undertakes monitoring and evaluation of projects refinanced by it.

o NABARD refinances the financial institutions which finances the rural sector.
o NABARD partakes in development of institutions which help the rural economy.
o NABARD also keeps a check on its client institutes.
o It regulates the institutions which provide financial help to the rural economy.
o It provides training facilities to the institutions working in the field of rural upliftment.
o It regulates and supervise the cooperative banks and the RRB's, through out entire India.
o NABARD supervises State Cooperative Banks (StCBs), District Cooperative Central Banks
(DCCBs), and Regional Rural Banks (RRBs) and conducts statutory inspections of these banks.
o NABARD's refinance fund from World Bank and Asian Development Bank to state co-
operative agriculture and rural development banks (SCARDBs), state co-operative banks
(SCBs), regional rural banks (RRBs), commercial banks (CBs) and other financial institutions
approved by RBI. While the ultimate beneficiaries of investment credit can be individuals,
partnership concerns, companies, State-owned corporations or co-operative societies,
production credit is generally given to individuals.
o Through assistance of Swiss Agency for Development and Cooperation, NABARD set
up the Rural Innovation Fund.
o Rural Innovation Fund is a fund designed to support innovative, risk friendly, unconventional
experiments in these sectors that would have the potential to promote livelihood opportunities
and employment in rural areas. The assistance is extended to Individuals, NGOs, Cooperatives,
Self Help Group, and Panchayati Raj Institutions who have the expertise and willingness to
implement innovative ideas for improving the quality of life in rural areas.
o NABARD also started direct lending facility under 'Umbrella Programme for Natural
Resource Management' (UPNRM). Under this facility financial support for natural
resource management activities can be provided as a loan at reasonable rate of interest.
 FARMER PRODUCER ORGANISATIONS

(FPOs)
o Farmer producer organisations (FPOs) are agricultural cooperatives that are emerging as a
practical approach towards empowering a great number of smallholder farmers and ensuring
their prosperity. In countries where agriculture is the primary source of income for millions of
farmers, they play a significant role in improving marginalised farmers’ access to resources,
which further helps boost their agri-productivity and their incomes.
o Over the past decade, the Government of India has introduced various initiatives through
agencies including Small Farmers’ Agri-Business Consortium (SFAC) and National
Bank for Agriculture and Rural Development (NABARD), National Commodity
and Derivatives Exchange (NCDEX), and the various State Governments and NGOs.
o Presently, these agencies have established over 5,000 FPOs across the country with up to a
thousand members in each of these organisations. Several of these FPOs have been successful
in making agriculture profitable for thousands of farmers. Besides, the Indian Government
introduced a new Central Sector Scheme that aims to create and promote 10,000 FPOs. Under
the new scheme, the members of FPOs can avail relevant benefits such as Credit Guarantee
Fund and advisory services from Cluster Based Business Organization (CBBO) and the
National Project Management Agency (NPMA).
Finding strength in numbers

o Small farmers as individuals face diverse challenges such as poor income, limited or no access
to the right inputs, inadequate knowledge of modern farming techniques, and a lack of direct
market access, among several others. In many underdeveloped or developing countries, several
small farmers primarily produce for their subsistence and sell small quantities of the harvest
when they face a need. These farmers often approach farming as a way of life rather than a
business opportunity, which severely limits them from achieving the full potential of their
farms. However, with the right support and guidance, they can bring about a tremendous
transformation in the agriculture and food sector. This is made possible by farmer producer
organisations that mobilise farmers in large numbers, build their capacity, and leverage their
collective strength to enhance production capabilities and marketing opportunities.
o For both governmental and non-governmental entities alike, an FPO is a means of actively
engaging farmers in the development process. It provides an organised system to transfer
modern-day technology, absorb them efficiently into rural development programs, and
monitor their socio-economic progress. It also plays a critical role in creating sustainable
employment for youth and women, and progress towards reducing poverty for millions of
people.
o The collective strength of this producer-led organisation offers several advantages: -
Firstly, it considerably improves their bargaining power by creating forward and backward
linkages in the supply chain and enables them to benefit from economies of scale. By aggregating
both their demand and supply, the members will now be able to purchase agri-inputs and sell
their commodities at competitive prices.
Secondly, farmer producer organisations can facilitate linkage with various stakeholders, which
allows members to gain better access to technical, technological, and financial support. As a result,
the members of FPOs can adopt better agricultural practices, enjoy hassle-free financial support
from banks, and leverage the infrastructure that is made available to them through the
organisation. All of this combined makes it possible for them to significantly enhance their
productivity and, therefore, the income too. The FPOs also empower them to hedge against
potential commodity price fluctuations during harvest by leveraging available platforms.
Thirdly, organising producers into collectives makes it convenient for governments to bring
them into the folds of digitisation and empower them with the benefits of various developmental
policies. In the last few years, the Indian government has introduced several measures, such as
the Equity Grant Fund Scheme, the Scheme for Creation of Backward and Forward
Linkages, the Credit Guarantee Fund Scheme, and the National Rural Livelihoods
Mission (NLRM) to promote and strengthen the FPOs. The objective of these measures is to
make the agriculture sector more sustainable and prosperous by making effective use of the
available resources.
The role of the private sector

o The last decade witnessed the launch of thousands of startups in the agriculture space. From
delivering technological solutions that improve agri-productivity to ensuring superior market
linkage, these organisations have been adding immense value to smallholder farmers in
numerous developing nations.
o With farmer producer organisations being recognised as pathways to alleviate poverty and to
encourage small farmers to adopt sustainable, climate-smart farming practices, several
agritech startups are working towards effectively providing these farmers with as much
assistance as possible.
o The structure of FPOs is such that it facilitates faster adoption of technology by its members,
which goes a long way in transforming agri-food production within a comparably shorter
period of time. The use of digital technologies helps the producer organisations achieve supply
chain efficiency and provide the buyers of the produce with adequate quality and food safety
assurances.
The road ahead for farmer producer organisations

o While FPOs continue to face several setbacks and are struggling to operate viably in many
countries, continued support from governments and other organisations can ensure their
sustainability in the long run. Their survival and prosperity are also highly crucial to bring
about transformation in the food and agriculture sector in developing and underdeveloped
countries, which is imperative to guarantee food security for future generations. With the
implementation of the right policies, and with the support of all actors in the ecosystem, FPOs
will soon be able to achieve sustainability and reap optimal benefits for its shareholders.
 FOOD PRIZE INDEX (FPI)

o The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices
of a basket of food commodities. Hence, in a way, it could be considered to be similar to
Consumer Price Index (CPI) or Wholesale Price Index (WPI) which are used for the
measurement of Inflation within Indian Economy. However, FFPI tracks the international
prices of the most commonly traded food commodities.
o Commodity Groups Covered: 5 commodity groups which include Meat, Dairy, Cereals,
Vegetable oil and Sugar. These commodities represent about 40 percent of gross agricultural
food commodity trade. They are chosen for their high and strategic importance in global food
security and trade.
o Weightage Assigned: Each of the Commodity groups is assigned a weightage in proportion

to its share in the global trade in agricultural commodities.
Base Year: A three-year period is chosen to minimize the impact of variation in both
internationally traded prices and quantities. Earlier, the Base year was 2002-04, but now it has
been changed to 2014-16. The base period 2014–16 was chosen as the new base as it was
considered the most representative period for most markets in the past ten years.
 SUSTAINABLE AGRI FOOD SYSTEMS

• Sustainable agri-food systems encompass a holistic approach to agricultural
production, distribution, consumption, and waste management that is
environmentally sound, socially equitable, and economically viable.
• These systems aim to meet current food needs while ensuring long-term
sustainability, minimizing negative impacts on the environment, improving livelihoods, and
promoting social well-being.
Need for Adopting Sustainability in Agri Food Systems:
Rising • The increasing global demand for food necessitates sustainable agri-
Demand for food systems to ensure sufficient and consistent food production to
Food meet the needs of a growing population.
Environmental • Widespread environmental degradation caused by unsustainable

Degradation agricultural practices underlines the urgency to transition to sustainable
methods to mitigate further harm to the environment.
• Climate change poses a significant threat to agriculture. Sustainable
practices are essential to adapt to these challenges and reduce the
Climate sector's contribution to climate change.
Change • There are several sustainable and climate resistant agricultural practices
Challenges in India which are recognised by the GIAHS (Globally Important
Agricultural Heritage Systems), like Pokkali rice, Kuttanad
below Sea Level Farming System of Kerala etc.
How can Sustainability be Adopted in Agri Food Systems?
Enhanced • Scientific innovations and advanced technological interventions are

Technological pivotal for sustainable agricultural practices, aiding in efficient resource
Interventions use and reducing negative environmental impacts.
Genome • Genome editing and other modern technologies are highlighted as core
Editing and tools for technological breakthroughs in agriculture, addressing
Modern limitations of traditional breeding methods.
Technologies
Carbon- • Transitioning to carbon-neutral agricultural practices can be adopted to
Neutral mitigate climate impacts, promote environmental sustainability, and
Agricultural contribute to global efforts to reduce carbon emissions.
Practices
Initiatives taken by India

• India has created a dedicated Agriculture Infrastructure Fund which aims to create farm
gate and agriculture marketing infrastructure in rural areas by providing interest
subsidies and credit guarantee to entrepreneurs which will greatly help in reducing the post-
harvest losses.
• To conserve precious water resources, the Government has launched a scheme to
increase water use efficiency at the farm level by using micro-irrigation technologies for
which a dedicated micro-irrigation fund has been set up.
• India has developed 262 abiotic stress-tolerant varieties of different crops.
• To address the issues of under-nutrition and malnutrition, India is running the world's
largest food-based safety net programmes which include the Targeted Public Distribution
System (TPDS) that will serve about 800 million people in 2020.
• The UN recognised India's proposal of celebrating the year 2023 as the 'International
Year of Millets'.
 RUBBER BOARD
• The Rubber Board is a statutory organization constituted under Section (4) of the
Rubber Act, 1947 and functions under the administrative control of Ministry of
Commerce and Industry. The Board is headed by a Chairman appointed by the
Central Government and has 28 members representing various interests of natural rubber
industry.
• The Board’s headquarters is located at Kottayam in Kerala.
• The Board is responsible for the development of the rubber industry in the country by
way of assisting and encouraging research, development, extension and training activities
related to rubber.
• It also maintains statistical data of rubber, takes steps to promote marketing of rubber
and undertake labour welfare activities.
• Indian Natural Rubber is the brand owned and promoted by the Rubber Board and
registered under section 30 of Indian Trade Mark Act.
 DECLINE IN SAFFRON PRODUCTION

The Saffron fields of Kashmir are facing a severe crisis due to the encroachment of cement
factories. Cement factories in close proximity to saffron fields emit large volumes of dust,
damaging both quality and quantity of saffron yield.
• Large volumes of cement dust also results in decreased chlorophyll, clogged stomata
(tiny pores in plant tissue that allow for gas exchange) in leaves, interrupted light
absorption and gas diffusion, inducing early leaf fall, and resulting in stunted growth.
• Cement dust negatively impacts crocin responsible for the color of saffron) content, affecting
color, medicinal properties, and cosmetic benefits of Kashmiri saffron.
About the Kashmiri Saffron
Saffron Production and Price

• Saffron production has long been restricted to a limited geographical area in the Union
territory of Jammu & Kashmir.
• Pampore region commonly known as Saffron bowl of Kashmir, is the main contributor
to saffron production.
• The saffron spice, extracted from the stigma of the saffron flower is known as Kong in
Kashmiri, Zaffran in Urdu, and Kesar in Hindi.
• Kashmiri kesar is highly valued, selling at Rs 3 lakhs per kilogram.
• A gram of kesar is obtained from approximately 160-180 flowers, requiring extensive labor.
Season
• In India, saffron Corms (seeds) are cultivated during the months of June and July and at some
places in August and September.
• It starts flowering in October.
Cultivation Conditions
• Altitude: Saffron grows well at an altitude of 2000 meters above sea level. It needs a
photoperiod (sunlight) of 12 hours.
• Soil: It grows in many different soil types but thrives best in calcareous soil (that has
calcium carbonate in abundance), humus-rich and well-drained soil with a pH between 6
and 8.
• Climate: For saffron cultivation, we need an explicit climatological summer and winter with
temperatures ranging from no more than 35 or 40C in summer to about –15 or –20oC in
winter.
• Rainfall: It also requires adequate rainfall that is 1000-1500 mm per annum.
Crocin Content and Color

• Kashmiri kesar contains 8% of crocin, while the rest of the varieties contain 5-6% of the
element.
Benefits of Kashmiri Saffron

• It is known for medicinal properties such as lowering blood pressure, treating anemia,
migraines, and aiding insomnia.
• Possesses cosmetic benefits, enhancing skin quality, reducing pigmentation, and minimizing
spots.
• Integral part of traditional dishes and it is widely used in beverages, confectionery, dairy
products, and food coloring.
Recognition
• In 2020, the central government granted a Geographical Indication (GI) certification to saffron
grown in the Kashmir Valley.
• Saffron Heritage of Kashmir is one of the Globally Important Agricultural
Heritage systems (GIAHS).
• GIAHS are agroecosystems where communities maintain a close relationship with
their territories.
• These resilient sites, marked by agrobiodiversity, traditional knowledge, and sustainable

management, involve farmers, herders, fisherfolk, and forest people, contributing to
livelihoods and food security.
• The Food and Agriculture Organization of the United Nations has recognized over 60 such sites
worldwide through its GIAHS Programme.
 LENTIL PRODUCTION
As per the Ministry of Consumer Affairs, India is set to become the world’s largest producer of
lentils (masoor) during the 2023-24 crop year on account of higher acreage.
The country's lentil production is estimated to touch an all-time high of 1.6 million tonnes in the
2023-24 rabi season on higher acreage.
About Lentil
• Lentil is a bushy annual herbaceous plant of the legume family.
• These are edible legumes, known for their lens-shaped, flat disced seed.
• Lentil plants are typically short, and bear self-pollinated flowers.
• Lentil grains are excellent sources of energy, carbohydrates, protein, fat, fibers,
phosphorus, iron, zinc, carotene, vitamins, and antioxidants.
Climatic Condition
• Lentil is primarily grown as a rainfed crop.
• It requires cold temperature during its vegetative growth and warm temperature at the
time of maturity.
• Lentil is grown during rabi season.
Soil Types
• Lentils can grow on various soil types, from sand to clay loam, growing best in deep sandy
loam soils with moderate fertility.
• A soil pH around 7 would be the best. Lentils do not tolerate flooding or water-logged
conditions.
Lentil Growing Region

• It is mainly cultivated in Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal,
Chhattisgarh and Jharkhand.
• The Bundelkhand region of Uttar Pradesh and Madhya Pradesh is considered as
lentil bowl which contributes nearly 25% to the total lentil production in the country.
• According to the Food and Agriculture Organization (FAO), the world top lentil growers in
2022 were Canada, India, Australia, Turkey, and Russia.
• Despite being the second largest producer of lentil, India has so far been relying on imports to
meet its domestic requirements, buying mainly from Australia, Canada, Russia, Singapore, and
Turkey.
Status of Pulse Production in India

• India is the largest producer (25% of global production), consumer (27% of world
consumption) and importer (14%) of pulses in the world.
• Pulses account for around 20% of the area under food grains and contribute around 7-
10% of the total food grains production in the country.
• Gram is the most dominant pulse having a share of around 40 % in the total production
followed by Tur/Arhar at 15 to 20 % and Urad/Black Matpe and Moong at around 8-10
% each.
• Though pulses are grown in both Kharif and Rabi seasons, Rabi pulses contribute more
than 60% of the total production.
• Madhya Pradesh, Maharashtra, Rajasthan, Uttar Pradesh and Karnataka are the
top five pulses-producing states.
 GM MUSTARD
The Government of India told the Supreme Court that Genetically Modified (GM) crops such as
mustard will make quality edible oil cheaper for the common man and benefit national interest
by reducing foreign dependency.
• The Genetic Engineering Appraisal Committee (GEAC) has approved the
environmental release of Dhara Mustard Hybrid-11 (DMH-11), a genetically engineered
variant of mustard.
• If approved for commercial cultivation it would be the first genetically modified food crop
available to Indian farmers.
Genetically Modified (GM) Crops

• GM crops are derived from plants whose genes are artificially modified, usually by inserting
genetic material from another organism, in order to give it new properties, such as
increased yield, tolerance to herbicide, resistance to disease or drought, or improved
nutritional value.
• Earlier, India approved the commercial cultivation of only one GM crop, Bt cotton, but
Genetic Engineering Appraisal Committee (GEAC) has recommended GM Mustard for
commercial use.
GM Mustard
• Dhara Mustard Hybrid-11 (DMH-11) is an indigenously developed transgenic
mustard. It is a genetically modified variant of Herbicide Tolerant (HT) mustard.
• DMH-11 is a result of a cross between Indian mustard variety ‘Varuna’ and East
European ‘Early Heera-2’ mustard.
• It contains two alien genes (‘barnase’ and ‘barstar’) isolated from a soil bacterium called
Bacillus amyloliquefaciens that enable breeding of high-yielding commercial mustard
hybrids.
• “Bar gene” maintains the genetic purity of hybrid seed.
Genetic Engineering Appraisal Committee (GEAC)
• The Genetic Engineering Appraisal Committee (GEAC) functions in the Ministry of

Environment, Forest, and Climate Change (MoEF&CC).
• It is responsible for appraisal of activities involving large scale use of hazardous
microorganisms and recombinants in research and industrial production from the
environmental angle.
• The committee is also responsible for appraisal of proposals relating to release of
genetically engineered (GE) organisms and products into the environment including
experimental field trials.
• GEAC is chaired by the Special Secretary/Additional Secretary of MoEF&CC and co-
chaired by a representative from the Department of Biotechnology (DBT).
• Presently, it has 24 members and meets every month to review the applications in the areas
indicated above.
 GLOBAL ALLIANCE FOR GLOBAL GOOD

India established the "Global Alliance for Global Good - Gender Equity and Equality"
at the 54th annual World Economic Forum (WEF) in Davos, gaining full support from WEF for
promoting women's empowerment and gender equality.
Key Highlights of the Alliance

• The alliance is a response to the G20 Summit 2023 Leaders' Declaration and India's
commitment to women-led development.
• It seeks to build on the initiatives of the Engagement Group and frameworks like
Business 20, Women 20, and G20 EMPOWER.
• The G20 Alliance for the Empowerment and Progression of Women's Economic
Representation (G20 EMPOWER) is an initiative that aims to increase women's
leadership and empowerment in the private sector.
• The primary objective of this new Alliance is to bring together global best practices,
knowledge sharing and investments in the identified areas of women’s health, education, and
enterprise.
• Supported by the Bill and Melinda Gates Foundation, the alliance will be housed and
anchored by the Confederation of Indian Industry (CII) Centre for Women Leadership.
• The alliance aims to champion women-led development, leveraging India’s philosophy of
“Sabka Saath, Sabka Vikas and Sabka Prayas” (Together with all, Development for all and
Effort for all).
 ADVANCING CLIMATE RESILIENT AGRIFOOD

SYSTEMS
The National Institution for Transforming India (NITI Aayog), the Ministry of Agriculture
and Farmers’ Welfare (MoA&FW) of the Government of India, and the Food and
Agriculture Organization (FAO) of the United Nations jointly launched the ‘Investment Forum
for Advancing Climate Resilient Agrifood Systems in India’ in New Delhi.
About Advancing Climate Resilient Agrifood Systems in India

• The initiative aims to create an investment and partnership strategy fostering climate
resilient agrifood systems among various stakeholders in India.
• The Forum facilitated discussions and deliberations on six key areas namely,
1. Climate resilient agriculture (experiences and pathways).
2. Digital infrastructure and solutions.
3. Financing climate resilient agrifood systems (domestic and global).
4. Climate resilient value chains.
5. Production practices and inputs for climate resilience.
6. Gender mainstreaming and social inclusion for climate resilience.
Importance of Investing in Climate-Resilient Agrifood Systems

• Climate change has profound implications for India, particularly affecting its
economically vulnerable rural population, largely dependent on climate-sensitive agricultural
livelihoods.
• Agriculture contributes to about 13% of total greenhouse gas emissions in India and is
vulnerable to the impacts of climate change.
• Indian agriculture is susceptible to extreme temperatures, droughts, floods, cyclones, and
soil salinity.
• Climate change can affect crop yields, water availability, soil health, pest and disease
outbreaks, and food security.
• Climate resilient agrifood systems can help mitigate and adapt to climate change, enhance
food production, reduce poverty, and improve livelihoods.
• Climate mainstreaming into agrifood systems necessitates larger investments from global
climate finance, domestic budgets, and the private sector.
 BALE IDENTIFICATION AND TRACEABILITY

SYSTEM (BITS)
The Ministry of Textiles hosted a conference for World Cotton Day (7th October 2023)
in collaboration with Cotton Corporation of India (CCI) and EU-Resource Efficiency
Initiative which discussed best practices and sustainable methods in the cotton value chain.
• Conference led to the introduction of the "Bale Identification and Traceability System" (BITS)
using Blockchain Technology.
• It also led to the launch of the Kasturi Cotton program for quality cotton with traceability.
BITS
• The BITS is a technological initiative in the cotton industry that utilizes Blockchain Technology
to assign unique QR codes to cotton bales.
• BITS was introduced to ensure that key information about cotton bales, such as their
quality, variety, origin, and processing details, is transparent and easily accessible to
both domestic and international buyers.
• By scanning the QR code, stakeholders, including cotton buyers, textile manufacturers, and
others, can trace the entire journey of the cotton bale from its origin to the final product.
• BITS is implemented by the Cotton Corporation of India (CCI) in collaboration with other
relevant stakeholders such as State Governments.
Kasturi Cotton Program

• The Kasturi Cotton Program is an initiative introduced by the Ministry of Textiles in
India to promote the production and availability of premium quality cotton with traceability.
• TEXPROCIL, in collaboration with CCI on behalf of the Ministry of Textiles, is overseeing the
implementation of this program.
• Certified Quality: Kasturi Cotton is not just any cotton; it is certified to meet certain quality
standards, which may include fiber length, strength, color, and other characteristics
that make it suitable for premium textile products.
 SILK INDUSTRY IN INDIA

• India stands as the world's second-largest producer of raw silk after China.
• In the fiscal year 2020-21, the country produced a substantial 33,739 MT of raw silk.
• India boasts a diverse range of silk types, including Mulberry, Tasar, Muga, and Eri.
The variations arise from the distinct feeding habits of the silkworms.
• The silk industry stands as one of India's largest foreign exchange earners, contributing
significantly to the country's economic landscape.
• The country's sericulture industry employs around 9.76 million people in rural and semi-
urban areas. The sericulture activities in India are spread across 52,360 villages.
Leading States:
• In the fiscal year 2021-22, Karnataka emerged as the leading state in India's silk
production, making a substantial contribution of 32%.
• Other significant contributors include Andhra Pradesh (25%), along with states like Assam,
Bihar, Gujarat, and West Bengal, all playing pivotal roles in the thriving silk industry.
• Top Importers: The country exports to more than 30 countries in the world. Some of the top
importers are the USA, UAE, China, UK, Australia, and Germany.
Central Silk Board (CSB)

• It is a statutory body, established in 1948 by an Act of Parliament, under the administrative
control of the Ministry of Textiles, Government of India.
• Its headquarters is located in Bangalore.
• The CSB is responsible for the overall development and promotion of the sericulture and silk
industry in India, through research, extension, training, quality control, and marketing
support.
Initiatives
• Silk Samagra: Central Silk Board has been implementing a Central Sector Scheme “Silk
Samagra” an Integrated Scheme for Development of Silk Industry (ISDSI) during the
year (2017-20) with an aims & objective to scale up production by improving the quality and
productivity and to empower downtrodden, poor & backward families through various
activities of sericulture in the country.
• The scheme comprises four (4) major Components viz. (i) Research & Development,
Training, Transfer of Technology and I.T. Initiatives, (ii) Seed Organizations, (iii) Coordination
and Market Development and (iv) Quality Certification Systems (QCS) / Export Brand
Promotion and Technology Up-gradation.
• North East Region Textile Promotion Scheme (NERTPS): The objective of this scheme
is the revival, expansion, and diversification of sericulture in the North Eastern States with a
special focus on Eri and Muga silks.
ACHIEVE ‘RANK’ IN UPSC

‘COMPLETE REVISION AND PRACTICE PROGRAM’
Perfectly suitable for all students who have/are...

Completed GS ‘Foundation’ Coaching but still struggling with lack of
confidence.
Doing self-study but are clueless about right approach.
College students but not able to do regular studies.
Working professionals but having lack of time for regular studies.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
To know more about: ACHIEVE Program 2025 and Detailed Timetable

visit the website: www.shieldias.in
starting from
JUNE 2024 REGISTER

NOW
+91-7037272363
Very Affordable Monthly Fee/-
@ [email protected]
UPSC PRELIMS
special edition 2024
The benefits and impacts of ‘RAPID REVISION
BOOKS’ will multiply if you study them according to
MONTHLY ‘REVISION AND PRACTICE’ TIMETABLE
released by SHIELD IAS.
Website Email Phone

www.shieldias.in [email protected] 011-46512150, 7037272363
First Floor, 1/26, Vikas Marg, Near Metro Station, Laxmi Nagar, New Delhi. Metro pillar No. 24
For Business Inquiries: 9540411855

Rapid Revision Book Indian Economy UPSC Prelims 2024

Uploaded by

Copyright:

Available Formats

Rapid Revision Book Indian Economy UPSC Prelims 2024

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Rapid Revision Book Indian Economy UPSC Prelims 2024

Uploaded by

Copyright:

Available Formats

https://upscpdf.com/ https://upscpdf.

100% Reliable and Trustworthy

2024 special edition

The benefits and impacts of ‘RAPID REVISION

UPSC PRELIMS 2024

now comes in the form of…

Current Affairs Revision classes

Duration: One month

@Very Affordable Charges/-

UPSC PRELIMININARY EXAMINATION 2024

PURPOSE: To provide a HIGH QUALITY, PRECISE, CONCISE and CONFIDENCE BUILDING

Highlights of this book:

Best of Efforts and Sound Luck!

ECONOMY & SOCIAL CURRENCY SWAP 21

DEVELOPMENT CAPITALISM, COMMUNISM, AND 22

BALTIC DRY INDEX 09 FLOATING RATE LOANS 36

CAPITAL EXPENDITURE IN INDIA 10 FDI IN INDIA 37

CAPITAL ADEQUACY RATIO 10 FOREIGN PORTFOLIO 39

CARBON BORDER ADJUSTMENT 10 FRICTIONLESS CREDIT 39

CRITICAL MINERALS 14 GIG ECONOMY 45

CREDIT RATING AGENCIES 16 GI TAGS 46

CONSUMPTION BASED POVERTY 18 GLOBAL MINIMUM TAX 47

SHIELD IAS RAPID REVISION BOOK (ECONOMY & SOCIAL DEVELOPMENT)

GLOBALISATION VS. 51 MICROFINANCE INSTITUTIONS 76

GREENWASHING 53 NON-FOOD BANK CREDIT 77

G-SECs 53 MUTUAL FUNDS 78

RBI’s RETAIL DIRECT 55 MERCHANT DISCOUNT RATE 78

GST COUNCIL 55 (MDR)

HUMAN CAPITAL 56 NOBEL PRIZE 2023- ECONOMICS

INTERIM AND ANNUAL BUDGETS 61 OIML 85

IMF AND CRYPTOCURRENCY 61 PROTECTIONISM 85

INTERNATIONALISATION OF 62 PURCHASING MANAGERS INDEX 86

MONETARY POLICY COMMITTEE 69 RBI SURPLUS 93

INSTRUMENTS OF MONETARY 70 REGRESSION THEOREM 94

SHIELD IAS RAPID REVISION BOOK (ECONOMY & SOCIAL DEVELOPMENT)

SHG BANK LINKAGE 102

SHIELD IAS RAPID REVISION BOOK (ECONOMY & SOCIAL DEVELOPMENT)

ECONOMY & SOCIAL

Algorithmic-trading has many benefits.

www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 1

ECONOMY & SOCIAL DEVELOPMENT

across multiple markets, and multiple decision parameters, based on per-programmed

Algorithmic-trading can be applied in many forms of trading and investment

Role of the WTO in Regulating Anti-Dumping Measures

www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 2

ECONOMY & SOCIAL DEVELOPMENT

Types of Animal Husbandry

www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 3

ECONOMY & SOCIAL DEVELOPMENT

 ASIAN DEVELOPMENT BANK

www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 4

ECONOMY & SOCIAL DEVELOPMENT

 ALTERNATIVE INVESTMENT FUNDS

Category III AIFs

www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 5

ECONOMY & SOCIAL DEVELOPMENT

www.shieldias.in RAPID REVISION BOOK FOR PRELIMS 2024 6

ECONOMY & SOCIAL DEVELOPMENT

 BILATERAL INVESTMENT TREATIES

Important features of BIT: