Author - LAWGICA
Uploaded on March 10, 2021
Gross Domestic Product (GDP) is the total value of goods and services produced
in a country in one year. GDP refers to the value of goods produced within the
geographical territory of a country irrespective of whether they are produced
by citizens or foreigners. In 2019, GDP in India was at around 2.59 trillion
Gross National Product (GNP) is the total value of the goods and services
produced by a country’s citizens or companies in one year irrespective of their
geographic location. India gnp for 2019 was $2,893.21B, a 6.61% increase from
Domestic Product: NDP = GDP – Depreciation
National Product: NNP = GNP – Depreciation
A decrease in the value of an asset over time due to wear and tear.
Process by which the central bank in a country controls the supply of money. In
India, the central bank is the Reserve Bank of India (RBI). Repo, Reverse Repo,
CRR, SLR etc are part of monetary policy.
REPO rate: Re Purchase Option
(REPO): Rate at which the RBI gives loans to other banks. REPO means Re
Purchase Option – the rate by which RBI gives loans to other banks. Bank
re-purchase the securities deposited with RBI at the REPO rate. The present
rate is 5.15%.
Reverse REPO rate: RBI
at times borrows from banks at a rate lower than REPO rate, and that rate is
known as Reverse REPO rate (now 4%). REPO and Reverse Repo are two major
options under LAF (Liquidity Adjustment Facility). RRR=4.9%
Cash Reserve Ratio (CRR): The percentage of liquid cash every bank has to keep
with the RBI. It is a percentage of their deposits. CRR is 4%
Statutory Liquidity Ratio (SLR): The percentage of liquid cash reserves every
bank has to keep with themselves. 18%
Marginal Standing Facility (MSF): The rate at which banks can borrow overnight
funds from RBI against the approved government securities. Here, the borrowing
limit is 2% of the banks’ Net Demand and Time Liabilities (NDTL). The marginal
standing facility (MSF) rate and the Bank Rate stand at 4.25%
Higher rate (than the REPO rate) at which the RBI gives loans to other banks. A
higher bank rate would mean higher lending rates by banks. The RBI can raise
the bank rate to check liquidity. Here there is no 2% of NDTL limit.
Capital to Risk-Weighted Assets Ratio (CRAR): The ratio of a bank’s capital to
The policy of a government by which it adjusts the tax rates and spending
levels to influence the national economy.
It is the difference between the government’s total expenditure and its total
receipts (excluding borrowing). A fiscal deficit occurs when this expenditure
exceeds the revenue generated.
Payments (BOP): It is the difference in total value between
payments into and out of a country over a period.
Balance of Trade (BOT): It
is the difference between a country’s imports and exports for a time period.
The BOT is a part of the BOP.
It is the sum of money invested in a business to generate a profit.
It is an environmental tax imposed on products that use carbon-based materials
and cause greenhouse pollution. Currently the carbon tax stands at 400rs per
The rate at which the prices of goods and services rise in a country. Thus, it causes
a fall in the purchasing power of the currency.
It is a prolonged and severe downturn in the economic activity of a country. It
is more severe than a recession.
Foreign Direct Investment (FDI): It is an investment made by a company or an
individual in one country in business interests in another country. RBI
Agreement: It is an agreement between two or more countries that
eliminates trade tariffs between the countries and also tries to reduce
non-trade barriers to trade between the countries.
A country’s tax rates are said to be progressive when the tax rates increase as
the taxable amounts increase.
It is the tax imposed on imported goods and services. So, tariffs make imported
Special Economic Zone (SEZ): It is a zone or an area in a country where there
are separate business and trade laws as compared to the rest of the country.
They are created to increase trade and investment and to create employment opportunities.
Opportunity Cost: It is defined with respect to a particular value or action and is equal to the value of the foregone alternative choice or action.
Permit License Raj: A term used to denote the rules and regulations framed by the government to start, run and operate an enterprise for production of goods and services in India.
Quantitative Restrictions: Restrictions in the form of total quantities or quotas imposed on imports to reduce balance of payments (BOP) deficit and protect domestic industry.
Special Economic Zones: It is a geographical region that has economic laws different from a country’s typical economic laws. Usually the goal is to increase foreign investment. Special Economic Zones have been established in several countries, including the People’s Republic of China, India, Jordan, Poland, Kazakhstan, the Philippines and Russia.