CHAPTER VIII DEFICIT FINANCING. Deficit financing is financing the budget deficit. budget deficit and deficit financing.
|
|
- Bertina Stafford
- 5 years ago
- Views:
Transcription
1 CHAPTER VIII DEFICIT FINANCING Deficit financing is financing the budget deficit by created money, Thus there is a difference between budget deficit and deficit financing. Deficit financing is a method of financing the budget deficit# We note two important characteristics of deficit financing. (1) One is the fact of financing the budget deficit and(2 ) the other is that, this financing is done by the increase in money supply. This is a very general definition of deficit financing, but it would be better if we take into accout some more technical' definitions cf it. The import of all the -technical definitions of deficit financing would be the same, but going through these technical definitions will bring about certain implicit aspects of it into explicit relief and thus will enable us to understand the effects of deficit financing on the economy better. There are three ways in which deficit financing may take place (B.R. Shenoy, 1958) 1, When the Central Bank of the country (which is
2 the RBI in India) gives credit to the government or 2, when the commercial banks and other banks give credit to the Government or 3» when the government withdraws its own cash balances from the Central Bank, the money supply is increased which is utilised to finance the excess of expenditure of the government over its revenue - that is budget deficit. In the first and the third cases, money comes from the RBI and hence it is by increasing the supply of reserve money that the budget deficit is financed. Even in the case of the commercial banks investing in government securities, it is done so with the help of the cash reserves of the banks lying with the RBI. Cash reserves with the banks or with the RBI are not the part of money supply. So when the banks invest in government securities, their cash reserves with the RBI are debited in their accounts and credited to the account of the government and when the government spends this amount, the supply of the reserve money in the economy gets increased. So we observe that in all the three cases of deficit financing, the money comes from the RBI. So deficit financing can 'toeas wall defined as financing the budget deficit with the help of money coming from the RBI. Money that comes from the
3 - 200 RBI has "been given various names e.g. reserve money, Government money, high-powered money, legal tender money etc. The difference between currency and the reserve money is that only currency with the public is taken into account when the word 'currency' is mentioned, while the reserve money is the sum of the currency with the public and with the banks. By 'currency' it is meant only the currency with the public, while the reserve money includes both, namely currency with the public and the currency with the banks. We know that money supply represents the liabilities of the RBI and to a minor extent, the liabilities of the Treasury. The Treasury issues one rupee notes and other small coins which form a very insignificant part of the total supply of reserve money. These one rupee notes and small coins issued by the Government are also a part of reserve money, but we have already observed that they constitute a very insignificant part of the total supply of reserve money. Rupee notes of the higher dcmviination are issued by the RBI. Thus the money issued by the RBI and the Treasury are the liabilities of the RBI and the Government respectively. When money is issued by those two agencies, the Government is the beneficiary and credit
4 201 -.is taken for this money by the Government in the "budget and it is usod to finance its own expenditure. As this money is not the part of revenue of the Government and still it is usod to finance the Government expenditure and there "by the budget deficit, it is also considered to be a part of deficit financing. In the process, money supply has been augmented which has boon used to finance Government expenditure and budget deficit and hence it is definitely the case of deficit financing. There are three different ways in which the RBI gives credit to the Government. and advances to the Government. 1. by providing loans 2. the other method is to purchase the Treasury bills and 3. the third one is to purchase the Government securities. Thus loans, advances, purchase of treasury bills and the purchase of Government securities by the RBI are the different ways of giving credit to the Government and all these ways of giving credit to the Government constitute deficit financing. The investment in Government securities or the purchase of treasury bills of the Government by the commercial banks and co-operative banks are the different ways of giving credit to the Government by the banks.
5 When the deposits of the Government with the RBI or the cash balances of the Treasury are withdrawn by the Government, then it also constitutes a case of deficit financing. Deposits of the Government with the RBI and the cash balances of the Government with the Treasury are called non-monetary liabilities of the RBI and the Treasury. They are the liabilities of the RBI and the Treasury respectively. But they are non-monetary liabilities, because money lying with the RBI or the Treasury is not considered to be a part of money supply and hence these liabilities are not considered to be monetary in character. When the Government withdraws its deposits or balances and thus when they come into the hands of the Government, they become the part of money supply. When they are spent by the Government, the total supply of reserve money in the economy gets increased. On the other hand, as the deposits with the RBI and the cash balances with the Treasury are reduced in the process, the non-monetary liabilities of the RBI and the Treasury also got reduced. Thus the reduction in the non-monetary liabilities of the RBI and the Treasury implies an increase in the monetary liabilities of the RBI and the Treasury and hence it implies an increase in money supply
6 (i.e. of reserve money) in the economy. This is done to finance the Government expenditure and budget deficit and so the case of the reduction of the non-monetary liabilities of the RBI and the Treasury that takes place on account of Government transactions, is also a case of deficit financing. So in order to take into account the quantum -of deficit financing, the variations in the following items must be taken into account (S.B.I., 1961): 1, Issue of Rupee notes and coins by the RBI. 2, Issue of one rupee notes and small coins by the Treasury. 3» Loans and advances by the RBI to the Government. 4, Purchase of treasury bills and Government securities by the RBI, 5, Purchase of treasury bills and investment in Government securities by the commercial banks and the state co-operative banks, 6, Withdrawal of its own deposits by the Government from RBI. 7«Withdrawal of its balances by the Government from the Treasury, The sum of the variations in the above mentioned seven items is considered to be the quantum of deficit financing during that given period of time.
7 In practice,.an easy way to know the quantum of deficit financing is to take into account the variations in the financial assets and the non-monetary liabilities of the RBI and of the Treasury, assets and liabilities are equal. arc two sides of the same coin. In the balance sheet, Assets and lia bilities In practice, the money supply on account of Government transactions is increased when the credit is given by the banking system (RBI, Scheduled and unscheduled commercial banks and the state co-operative banks) to the Government. By the word Government', it is meant the Central Government as well as the State Governments. The credit given by the banking system constitutes the assets for the banking system. In the process, money supply increases and it constitutes the liabilities of the RBI also. But in practice, it is better to take Into account the credit side or the asset side in order to gauge the quantum of deficit financing. In the same way, the withdrawal of the deposits or the cash balances from the RBI or the Treasury, implies reduction of the non-monetary liabilities of the RBI and Treasury respectively. But in fact, it is the increase in monetary liabilities of the RBI and Treasury. Deposits and cash balances being non-monetary liabilities, it is
8 better and more convenient to take into account the reduction in these non-monetary liabilities rather than increase in monetary liabilities of RBI and the Treasury in order to arrive at the true quantum of deficit financing. The simple definition of deficit financing is net bank credit to the Government, This item includes all the items enumerated above that give rise to deficit financing. As for example, when the RBI gives advances or loans to the Government or purchases treasury bills of the Government or invests in Government securities, they all happen to be different cases or versions of giving credit to the Government by the Central Bank. When the commercial banks invest in Government securities or purchase treasury bills with the help of their cash reserves lying with the Central Bank, they thereby advance credit to the Government. When on account of Government transactions, non-monetary liabilities of the RBI alter, this change involves change in money supply (high-powered money) which is meant to finance Government expenditure. Inversely, if the deposits of the Government with the Reserve Bank or the Treasury increase, the non-monetary liabilities of the RBI and the Treasury increase and the
9 206 - money supply (.high-powered money) in the economy is reduced due to Government transactionsi So this fall in money supply is on account of increase in the non-monetary liabilities of the RBI which is the consequence of the Government transactions* This change in non-monetary liabilities of RBI and the Treasury must be deducted from the gross bank credit to the Government. Thus we observe that in order to gauge the true measure of bank-credit to the Government, the change in the non-monetary liabilities of the RBI must be taken into account simultaneously with their monetary liabilities, because as the increase in the monetary liabilities implies the increase in money supply, so the increase in the non-monetary liabilities reduces the money supply. When the RBI issues rupee notes and coins, it is doing so on behalf of the Government. The RBI then gives these rupee notes and coins to the Government as if, by way of loans. Thus the supply of reserve money is injected into the economy by the RBI through the channel of the Government, Thus this is also the part of RBI s credit to the Government and the Government uses it to finance its own expenditure and so it is a case of deficit financing.
10 207 - When tile Treasury issues one x-upee notes and small coinst it is as good as withdrawal of its own cash balances ty the Government from the RBI or the Treasury & So this also constitutes a part of bank credit to the Government. Hence when we take into account all types of credit given to the Government and from this gross amount, deduct the change in the non-monetary liabilities of the RBI, we get the true measure of net bank credit to the Government which is deficit financing. Here a recent example regarding the budget provision for the year will clarify the issue. The Government resolved to borrow Rs.900 crores against the foreign exchange reserves of the RBI. This use of accumulated foreign exchange reserves to the extent of Rs.900 crores, has been dubbed as inflationary. It has sparked a heated controversy in the newspapers and also in the learned academic journals. When we analyse this phenomenon, we have to distinguish between deficit financing, change in money supply and inflation. exchange reserves of RBI are the assets of RBI. Foreign The Government purchases these foreign exchange reserves. But how is the Government enabled to do so? Against the treasury bills, the Government borrows money from
11 RBI,' and with the help of this money, the Government purchases the foreign exchange reserves1. The foreign, exchange reserves of the RBI are reduced which implies the reduction of the assets of the RBI which in turn implies a fall in money supply. But at the same time, the Government has borrowed money from the RBI and has purchased these foreign exchange reserves, so the consequent deficit financing increases the money supplyi Thu the reduction of foreign exchange reserves of the RBI reduces money supply, but the manner of financing the purchase of foreign exchange reserves by the Government increases the money supply. These two opposite forces cancel each other and therefore the total money supply does not change at all. This can be represented, in another way also. Treasury bills take the place of the reduced foreign exchange reserves. Treasury bills are also the assets of the RBI as the foreign exchange reserves are. So the total assets and hence the total liabilities of the RBI do not change and hence the total money supply in the economy does not alter, as the money supply is nothing but the monetary liabilities of the banking system and the Treasury. Thus here we have a case of deficit financing which does not increase money
12 ~ supply* In this case, in order to purchase the foreign exchange from the RBI, the Government, has to Borrow money from the RBI which is a case of deficit financing. But that money is to be given to the RBI and not spent in the economy. Therefore borrowing from the RBI implies expansion of money supply, but purchasing foreign exchange from the RBI by the Government like any other importer is the case of contraction of money supply So in this entire process of purchase of foreign exchange from RBI by the Government, there is deficit financing which does not increase the money supply. Some may hot even call it deficit financing, because it does not increase money supply in the economy. The important characteristic of deficit financing is that it increases the money supply. Still however if at all it is considered to be a case of deficit financing, then it is merely a formal kind of deficit financing and it should be clarified that it does not result into increase in money supply. Now the third category which is that of inflation remains to be discussed. The question is whether this purchase of foreign exchange by the Government from RBI becomes responsible for the rise in the price level or. not. We have already noted that there is no increase
13 in money supply* So there is no possibility of price- rise,, But then, the question arises whether the price- level remains stable or it falls. We should not gloss over the fact that the Government will import goods from abroad with the help of these foreign exchange reserves acquired. This will increase the total available supply of goods in the domestic economy while the money supply has not increased on account of it. Increase in the available supply of goods in the context of the constant money supply would lead to a.fall in the price level. This shows that the purchase of foreign exchange by the Government from the RBI is anti-inflationary, though it is neutral in terms of change in money supply. So in order to arrive at the true magnitude of total deficit financing, it is always advisable to deduct the deficit financing resorted to by the Government for the purchase of foreign exchange from the RBI, as the total of deficit financing includes this kind of formal deficit financing also. If the rupee value of the foreign exchange acquired by the Government is not deducted from the total deficit financing, it will give a wrong picture regarding the true quantum of deficit financing. So from the bank
14 credit given to the Government by the banking system* the value of foreign exchange purchased by the Government must be deducted* as the total bank credit already includes credit given to the Government-for the purchase of foreign exchange reserves. Deficit financing (bearing in mind* the above mentioned exception) results into increase in money supply, but every increase in money supply is not necessary inflationary* In this regard* two factors must be taken into account 1. First is change in money supply due to other contributory factors like credit creation by the banks when loans are given to the commercial sector and the change in the foreign exchange reserves of the banking system and 2. the other (factor which neutralises the effect of increase in money supply on prices) is growth in national output. Here we are dealing with altogether a different type of a problem than what we had dealt with previously. Here we are not trying to understand the correct magnitude of deficit financing,but we are taking into account the entire amount of deficit financing, the sum of the true deficit financing as well as the formal deficit financing (of a kind that we just discussed above). Because now we are endeavouring to understand
15 the safe limits of deficit financing which is nen-infla- tionary (B.R. Shenoy, 1958)i There are three factors tha.t affect the growth of money supply in the economy? 1* Net "bank credit to the Government (Deficit financing), 2k Net bank credit to the commercial sector, 3, Change in the foreign exchange reserves of the banking system. Upto a certain limit, total expansion of money supply is not inflationary, but beyond it, it grows to be inflationary. Deficit financing being only one of the three factors that influence money supply, the fixing up of the safe limit of deficit financing requires the knowledge abotxt the contribution of the other two factors in changing the money supply. The safe limit of deficit financing cannot be judged in an isolated way. Inflation is a persistent rise in the general price level,- Change in the price-level is not a matter of money supply alone, though the cause of inflation is monetary. The effect of the increase in money supply on the general price level can be neutralised by the increase in national output. As the volume of national output increases, the demand for money to function as a general
16 medium of exchange and a store of value also increases* Demand for money is the obverse of the demand for goods* That part of one's income which is not spent on goods, constitutes one's demand/for money* The sum total of individuals' demand for money goes to make the total demand for money in the society; Corresponding to demand for money, there is outpiit in the market, because demand for money is a part of income and income is a result of contribution to output. So the demand for money implies the supply of goods being undemanded and the purchasing power being hoarded in the liquid form, So if money supply is increased, it takes the place of the hoarded money when it appears in the market for demanding goods and the goods are already there in the market. So money supply can safely be augmented to the extent of the increase in the demand for money. By the safe increase in money supply, it is meant, that much expansion of money supply which does not endanger price-stability. The expansion of money supply which maintains price stability is the sa.fe limit of the expansion of money supply. Deficit financing is also a case of expansion of money supply. Suppose the annual national output has
17 - 214 increased by 4 per cent and hence demand for money has also increased by 4 per cent. So the total money supply can s-fely be increased by 4 per cent without endangering price stability. Now suppose foreign exchange reserves of the banking system have been responsible for the increase in money supply by 2fo and also suppose, money supply has increased by 1 per cent through credit creation by banks. So through other sources, money supply has already been increased by 3$. Hence only 1 per cent increase in money supioly through deficit financing is the possible safe limit of deficit financing in this context. Because the increase in total supply of money is 4 per cent and the increase in the demand for money is also 4 per cent as a result of 4 per cent increase in national output. Hence the real value of money will remain the same and the general price level will not alter. Price-stability would be maintained if deficit financing is limited to this safe limit (B.R. Shenoy, 1958).
Unit 9: Money and Banking
Unit 9: Money and Banking Name: Date: / / Functions of Money The first and foremost role of money is that it acts as a medium of exchange. Barter exchanges become extremely difficult in a large economy
More informationCIE Economics A-level
CIE Economics A-level Topic 4: The Macroeconomy f) Money supply (theory) Notes Quantity theory of money (MV = PT) The Quantity Theory of Money states that there is inflation if the money supply increases
More informationMONEY & BANKING. Samir K Mahajan
MONEY & BANKING MONEY: MEANING AND FUNCTIONS Money is regarded any object which is generally accepted as: medium of exchange unit of account i.e. common measure of value standard of deferred payment store
More information/
SAMPLE QUESTIN PAPER 2 Economics Class II Time allowed: 3hrs Maximum Marks: 100 General Instructions: i. All questions in both the sections are compulsory. ii. Marks for questions are indicated against
More informationAsset-Liability Management in Banks
Asset-Liability Management (ALM) Asset-Liability Management in Banks Bankers make decisions every day about buying and selling securities, about whether to make particular loans, and about how to fund
More informationDESIGN OF QUESTION PAPER ECONOMICS (030) CLASS-XII
DESIGN OF QUESTION PAPER ECONOMICS (030) CLASS-XII Marks 100 Duration 3 hrs. 1. Weightage by type of questions Type Number of questions Marks Total Estimated time a candidate is expected to take to answer
More informationInflation in the Indian Economy
D. M. Moni Assistant Professor in Economics, N.M.Christian College, Marthandam- 629 165, Tamil Nadu, India E-mail: monileomoni@gmail.com (Received on 15 March 2014 and accepted on 15 June 2014) Asian Journal
More informationSample Question Paper Economics. Class XII. Time : 3 Hours Maximum Marks : 100 General Instructions: Section A: Microeconomics
Sample Question Paper Economics Class XII Time : 3 Hours Maximum Marks : 100 General Instructions: 1. All questions in both sections are compulsory. However, there is internal choice in some questions.
More informationECONOMICS-2015 (Annual) CLASS-XII
ECONOMICS-2015 (Annual) CLASS-XII Q.1. Define indifference curve. 1 Ans. An indifferent curve is the locus of point particularly by consumption of goods which yield the same utility to the consumer, so
More informationSummary o. f findings, Conclusion and suggestions
Summary o. f findings, Conclusion and suggestions CHAPTER-IX SUMMARY OF FINDINGS, CONCLUSION AND SUGGESTIONS In this chapter, an attempt is made to highlight the major inferences with a view of provide
More informationSENIOR SCHOOL CERTIFICATE EXAMINATION
SENIOR SCHOOL CERTIFICATE EXAMINATION MARCH-0 MARKING SCHEME ECONOMICS (FOREIGN) SET- Expected Answers / Value Points GENERAL INSTRUCTIONS :. Please examine each part of a question carefully and allocate
More informationECOWRAP AT 71.2, RUPEE COULD SLID FURTHER. Be the Bank of Choice for a Transforming India SEPTEMBER 04, 2018 ISSUE NO: 43, FY19 SBI ECOWRAP
ECOWRAP Be the Bank of Choice for a Transforming India SEPTEMBER 04, 2018 ISSUE NO: 43, FY19 AT 71.2, RUPEE COULD SLID FURTHER The rupee has now depreciated by 6.2% since June 2018 when the RBI started
More informationhttp:/// Guess Paper 2014 Class XII Subject Economics Total Marks: 100 Time:3 Hours. General Instructions: (i) All questions in both the sections are compulsory. (ii) Marks for questions are indicated
More informationNATIONAL INCOME. be less than NDP FC. State the meaning of injection in income flow, with the help of an example.
NATIONAL INCOME Q. 1. When will be NDP MP be less than NDP FC? Q.2. State the meaning of consumption of fixed capital? Q.3. State the meaning of injection in income flow, with the help of an example. Q.4.
More informationSeminar on Fiscal & Monetary Policy Dr. (CA) Abhijit Phadnis
Monetary Policy Seminar on Fiscal & Monetary Policy 15.2.2014 Dr. (CA) Abhijit Phadnis Overview of presentation Concept of money Monetary aggregates Understanding RBI Balance Sheet Monetary & fiscal policy
More informationAssociate of Saha Institute of Nuclear Physics Ph.D. Certified Associate of Indian Institute of Bankers
Bio-Data Name: Qualifications: Experience: Dr. Udayan Kumar Basu M.Sc. (1 st Class 1st) Associate of Saha Institute of Nuclear Physics Ph.D. Certified Associate of Indian Institute of Bankers Nearly 30
More informationSan Francisco State University ECON 302. Money
San Francisco State University ECON 302 What is Money? Money Michael Bar We de ne money as the medium of echange in the economy, i.e. a commodity or nancial asset that is generally acceptable in echange
More informationEOCNOMICS- MONEY AND CREDIT
EOCNOMICS- MONEY AND CREDIT Banks circulate the money deposited by customers in the banks by lending it out to businesses at a rate of interest as a credit, which then acts as the income of the bank....
More informationStudymate Solutions to CBSE Board Examination
Studymate Solutions to CBSE Board Examination 2017-2018 Series : SGN Code No. 58/1 Roll No. Candidates must write the Code on the title page of the answer-book. 4 Please check that this question paper
More informationWESTERN INDIAN REGIONAL COUNCIL, THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. Workshop on Transfer Pricing. Safe Harbour Rules- An Overview
WESTERN INDIAN REGIONAL COUNCIL, THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA Workshop on Transfer Pricing Safe Harbour Rules- An Overview Sanjay Kapadia Background Introduced in Finance (No 2) Act,
More informationECONOMICS. Time allowed : 3 hours Maximum Marks : 100 QUESTION PAPER CODE 58/1/1 SECTION - A. 1. Define an indifference curve. 1
ECONOMICS Time allowed : 3 hours Maximum Marks : 100 General Instructions: (i) (ii) (iii) (iv) (v) (vi) All questions in both the sections are compulsory. Marks for questions are indicated against each.
More informationINSTITUTE OF ACTUARIES OF INDIA
INSTITUTE OF ACTUARIES OF INDIA EXAMINATIONS 18 th September 2017 Subject CT7 Business Economics Time allowed: Three Hours (10.30 to 13.30 Hours.) Total Marks: 100 INSTRUCTIONS TO THE CANDIDATES 1. Please
More informationCHAPTER 31 Money, Banking, and Financial Institutions
CHAPTER 31 Money, Banking, and Financial Institutions Answers to Short-Answer, Essays, and Problems 1. What is money? Explain in terms of the functions of money. Money is whatever performs the three basic
More informationA L L I N D I A B A N K R E T I R E E S F E D E R A T I O N D-1/1, Sector-C, Scheme-71, Near Kasara Bazar School, Indore
Vice Ref: 2013/502 Date: 24.08.13 Shri M.V.Murali, Convenor, UFBU, C/o. State Bank of India, SBI Buildings, Bank Street, Koti, HYDERABAD - 500 095. Dear Sir RE: PENSION FUND MANAGEMENT AND RELATED ISSUES
More informationGrowth of Factor Inputs and Total Factor Productivity in Indian Public Sector Enterprises*
Growth of Factor Inputs and Total Factor Productivity in Indian Public Sector Enterprises* Bakul H. Dholakia The public sector undertakings in India have come under heavy criticism for inefficient management
More informationBuoyant Economies. Formula for the Current Account Balance
Buoyant Economies Formula for the Current Account Balance Introduction This paper presents models that explain how growth in the quantity of money determines the current account balance. Money should constrain
More information1 Declaration and Payment
Star Rating On the basis of Maximum marks from a chapter On the basis of Questions included every year from a chapter On the basis of Compulsory questions from a chapter Nil Nil 1 Declaration and Payment
More informationSAMPLE QUESTION PAPER 2 ECONOMICS Class XII BLUE PRINT
SAMPLE QUESTION PAPER 2 ECONOMICS Class XII Maximum Marks: 00 Time: 3 hours BLUE PRINT Sl. No. Forms of Questions Content Unit Very Short ( Mark) Short Answer (3,4 Marks) Long Answer (6 Marks) Total. Unit
More informationBefore analysing the problem of public debt of State Governments in
P CHAPTER 3 PUBLIC DEBT OF INDIA 3.1 Introduction Before analysing the problem of public debt of State Governments in India, it may be necessary to have an idea of the total public debt scenario in India.
More informationANSWER KEY. 1 a) Distribution Of national product should be equal or unequal ( Ans) 1
Roll Number Code Number:0/1 ANSWER KEY INDIAN SCHOOL MUSCAT THIRD PRELIMINARY EXAMINATION ECONOMICS CLASS: XII Sub. Code: 00 Time Allotted: Hrs 0.02.2018 Max. Marks: 80 SECTION A (MICRO ECONOMICS) 1 a)
More informationSubsidies in the fiscal system would be considerably understated if one
Conclusions Subsidies in the fiscal system would be considerably understated if one looked only at the explicit budgetary provisions of subsidies. The hidden subsidies are exposed by measuring subsidies
More informationECOWRAP COSTS OF RUPEE DEPRECIATION. Be the Bank of Choice for a Transforming India SBI ECOWRAP
ECOWRAP Be the Bank of Choice for a Transforming India SEPTEMBER 06, 2018 ISSUE NO:44, FY19 COSTS OF RUPEE DEPRECIATION In the hindsight, the rupee depreciation of 13% in 2018 and around 7% since Jun 18
More informationGovernment Cash Balances - Linkages with Liquidity
Amol Agrawal amol@stcipd.com +91-22-6622234 Government Cash Balances - Linkages with Liquidity We have been releasing reports in the nature of primers on RBI s operations and accounts (Refer Guide to Weekly
More informationCHAPTER IV LENDING OPERATIONS AND RECOVERY PERFORMANCE
CHAPTER IV LENDING OPERATIONS AND RECOVERY PERFORMANCE The management of funds has emerged as an area of vital importance for banks. The success of banks depends on the efficient management of funds. The
More informationFiscal policy. Macroeconomics 5th lecture
Fiscal policy Macroeconomics 5th lecture Reminder Transactions by the government Firms Commodity market transfer payments taxes Government transfer payments taxes Households Financial markets 2 Fiscal
More informationExternal Account and Foreign Debt Management
The Lahore Journal of Economics Special Edition External Account and Foreign Debt Management Ashfaque H. Khan * Abstract The paper highlights strong gains in the macro area. The author also shows how total
More informationThe Perimeter Guidance Manual. Chapter 3A. Guidance on the scope of the Electronic Money Regulations 2011
The Perimeter Guidance Manual Chapter Guidance on the scope of the Electronic Money Regulations 2011 PERG : Guidance on the Section.1 : Introduction.1 Introduction Q1. What is the purpose of these questions
More informationMonetary Policy and Role of Banks
Monetary Policy and Role of Banks February 2015 The Federal Reserve has been pumping in huge amounts into the US economy by way of Open Market Operations (OMOs) for the last few years. It bought securities
More informationThe Government and Fiscal Policy
The and Fiscal Policy 9 Nothing in macroeconomics or microeconomics arouses as much controversy as the role of government in the economy. In microeconomics, the active presence of government in regulating
More informationMoney and Banking, Commercial Banks. General Economics
Money and Banking, Commercial Banks General Economics Money Money is an important and indispensable element of modern civilization. In ordinary usage, what we use to pay for things is called money. To
More informationBANKING AND INSURANCE
BANKING AND INSURANCE Coverage 18.1 The two main activities covered under this sector are banking and insurance which comprises of: commercial banks; banking department of Reserve Bank of India (RBI);
More informationChapter 3 Domestic Money Markets, Interest Rates and the Price Level
George Alogoskoufis, International Macroeconomics and Finance Chapter 3 Domestic Money Markets, Interest Rates and the Price Level Interest rates in each country are determined in the domestic money and
More informationUNIT 5 COST OF CAPITAL
UNIT 5 COST OF CAPITAL UNIT 5 COST OF CAPITAL Cost of Capital Structure 5.0 Introduction 5.1 Unit Objectives 5.2 Concept of Cost of Capital 5.3 Importance of Cost of Capital 5.4 Classification of Cost
More informationCorporate Social Responsibility (Sec 135) Part-1
Corporate Social Responsibility (Sec 135) Part-1 1. Legislative Background The notes on clauses to the Companies Bill, 2011 read as follows: Clause 135. This new clause seeks to provide that every company
More informationPeriyar Journal of Research in Business and Development Studies, 1(2), July-December 2016, ISSN (O)
48 Demonetization and Its major parameters which influence in India Diksha Sahni, Periyar Management and Computer College, Delhi ABSTRACT Demonetization refers to the act of stripping a currency unit of
More informationSYLLABUS ECONOMICS (CODE NO. 30) Class XII
Annexure O SYLLABUS ECONOMICS (CODE NO. 30) Class XII 2013-14 Paper I 3 Hours 100 Marks ------------------------------------------------------------------------------------------------------------ Units
More informationCPW2A THEORY OF MONEY AND BANKING. Unit : I
THEORY OF MONEY AND BANKING Unit : I Unit: I Introduction to money Kinds functions and significance Demand for and supply of Money Monetary standards Gold standard Bimetallism and paper currency systems
More informationCapital Adequacy Ratio as Performance Indicator of Banking Sector in India-An Analytical Study of Selected Banks
Everant.org/AFMJ Research Article Account and Financial Management Journal ISSN: 2456-3374 Capital Adequacy Ratio as Performance Indicator of ing Sector in India-An Analytical Study of Selected s Rakesh
More informationANNEXURE C. Although financial accounting systems had been a part and parcel of companies,
ANNEXURE C C1. Principles of Accounting Although financial accounting systems had been a part and parcel of companies, engineers who are largely involved in management programs are seldom exposed to the
More informationImpact of Bullion fluctuations in Indian Economy
Impact of Bullion fluctuations in Indian Economy Ms.Pallabi Mukherjee Assistant Professor, IBMR, IPS Academy, Indore, MP. ABSTRACT India's share in the world trade of gold is as less as 2% but its demand
More informationKENDRIYA VIDYALAYA SANGATHAN ERNAKULAM REGION SECOND PRE-BOARD EXAMINATION CLASS XII ECONOMICS (30) Time Allowed- 3 Hours
KENDRIYA VIDYALAYA SANGATHAN ERNAKULAM REGION SECOND PRE-BOARD EXAMINATION 208-9 CLASS XII ECONOMICS (0) MM-80 Time Allowed- Hours General Instructions: i. All questions in both sections are compulsory.
More information4.2 Fiscal Policy.notebook May 02, Fiscal Policy
4.2 Fiscal Policy How do we achieve our three economic objectives? Economic Growth Full Employment Steady inflation With Monetary and Fiscal Policy! Review of the Business Cycle A cycle goes through a
More informationSocial Security Provisioning in Bihar: A Case for Universal Old Age Pension
Social Security Provisioning in Bihar: A Case for Universal Old Age Pension First Author: Dr. Manjur Ali (Research Officer) Second Author: Nilachala Acharya Authors Organisation: Centre for Budget and
More informationPRADHAN MANTRI J AN-DHAN YOJANA (PMJDY) - Frequently Asked Questions (FAQs)
PRADHAN MANTRI J AN-DHAN YOJANA (PMJDY) - Frequently Asked Questions (FAQs) Q. 1. What is Pradhan Mantri Jan-Dhan Yojana? Ans. Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusion
More informationTABLE OF CONTENTS. Page No.
TABLE OF CONTENTS 1. Budget : An overview 1-2 2. Rupee : As it come and goes 3 3. Budget: Basic Details 4 4. Economic Growth and Real and Nominal Income 5 5. Growth in Own Revenues (Tax + Non-Tax) and
More informationPAPER 8: COST ACCOUNTING & FINANCIAL MANAGEMENT
PAPER 8: COST ACCOUNTING & FINANCIAL MANAGEMENT Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 LEVEL B The following table lists the
More informationInternational Finance Prof. A. K. Misra Department of Management Indian Institute of Technology, Kharagpur
International Finance Prof. A. K. Misra Department of Management Indian Institute of Technology, Kharagpur Lecture - 25 Evaluation of Foreign Direct Investment Let us discuss section 25 that is on foreign
More informationRECOGNITION OF GOVERNMENT PENSION OBLIGATIONS
RECOGNITION OF GOVERNMENT PENSION OBLIGATIONS Preface By Brian Donaghue 1 This paper addresses the recognition of obligations arising from retirement pension schemes, other than those relating to employee
More informationMultiplier and Accelerator (Determination of National Income Continued)
Multiplier and Accelerator (Determination of National Income Continued) THE MULTIPLIER: eynes Multiplier Theory gives great importance to increase in public investment and government spending for raising
More informationBusiness Analysis for Engineers Prof. S. Vaidhyasubramaniam Adjunct Professor, School of Law SASTRA University-Thanjavur
Business Analysis for Engineers Prof. S. Vaidhyasubramaniam Adjunct Professor, School of Law SASTRA University-Thanjavur Lecture-5 Balance Sheet Fundamentals The last class we ended the discussion with
More informationFACTORS AFFECTING BANK CREDIT IN INDIA
Chapter-6 FACTORS AFFECTING BANK CREDIT IN INDIA Banks deploy credit as per their credit or loan policy. Credit policy of a bank, basically, provides a direction to the use of funds, controls the size
More informationAiro International Research Journal ISSN: March, 2017 Volume IX
Demonetization and Its Impact on Banking Sector- Issues and Challenges K. Sunanda, Doctoral research Scholar, Department of Business Management, OU. EmailID: sunanda.gangaboina@gmail.com ABSTRACT The move
More informationEconomic Times Exclusive: HARVARD PUNDITS RESET THE AGENDA 11 February 1999 Part 4 of 4
Economic Times Exclusive: HARVARD PUNDITS RESET THE AGENDA 11 February 1999 Part 4 of 4 Fiscal Restraint is the Need of the Hour Nirupam Bajpai and Jeffrey Sachs caution against the widening budget deficit
More information(All Batches) DATE: MAXIMUM MARKS: 100 TIMING: 3¼ Hours
(All Batches) DATE: 16.04.2018 MAXIMUM MARKS: 100 TIMING: 3¼ Hours FINANCIAL MANAGEMENT & ECONOMICS FOR FINANCE SECTION A Q. No. 1 is compulsory. Wherever necessary suitable assumptions should be made
More informationChapter 3. Money and Banking 3.1 FUNCTIONS OF MONEY
Chapter 3 Money and Banking Money is the commonly accepted medium of exchange. In an economy which consists of only one individual there cannot be any exchange of commodities and hence there is no role
More informationEQUATED MONTHLY INSTALLMENTS (EMI)
Today, we have a loan for just about everything, be it a house, car, foreign trip and even a mobile. The 'loan culture' has caught on in a big way. A majority of people have availed of loans at some point
More informationSENIOR SCHOOL CERTIFICATE EXAMINATION
SENI SCHOOL CERTIFICATE EXAMINATION MARCH-0 MARKING SCHEME ECONOMICS (FEIGN) SET- Expected Answers / Value Points GENERAL INSTRUCTIONS :. Please examine each part of a question carefully and allocate the
More informationSuggested Answer_Syl2012_Dec2015_Paper 12 FINAL EXAMINATION
FINAL EXAMINATION GROUP II (SYLLABUS 2012) SUGGESTED ANSWERS TO QUESTIONS DECEMBER 2015 Paper-12 : COMPANY ACCOUNTS AND AUDIT Time Allowed : 3 Hours Full Marks : 100 The figures in the margin on the right
More informationJOINT VENTURES ACHIEVING A BALANCE: ASSISTING PRO-COMPETITIVE VENTURES WITHOUT PERMITTING OBVIOUS ANTI-COMPETITIVE BEHAVIOUR
2003 Forum: The Dawson Review 321 JOINT VENTURES ACHIEVING A BALANCE: ASSISTING PRO-COMPETITIVE VENTURES WITHOUT PERMITTING OBVIOUS ANTI-COMPETITIVE BEHAVIOUR BY CAROLYN ODDIE Despite encompassing a wide
More informationPRADHAN MANTRI JAN-DHAN YOJANA (PMJDY) - Frequently Asked Questions (FAQs)
PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY) - Frequently Asked Questions (FAQs) Q. 1. What is Pradhan Mantri Jan-Dhan Yojana? Ans. Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusion
More informationUsha Thorat: Impact of global financial crisis on Reserve Bank of India (RBI) as a national regulator
Usha Thorat: Impact of global financial crisis on Reserve Bank of India (RBI) as a national regulator Presentation by Ms Usha Thorat, Deputy Governor of the Reserve Bank of India, at the 56th EXCOM Meeting
More informationMARKING SCHEME. Economics ( ) - SET 2 SECTION-A. Q.No. Value points to answers Marks Allocation SECTION A : MICRO ECONOMICS
MARKING SCHEME Economics (2016-17) - SET 2 SECTION-A Q.No. Value points to answers Marks Allocation SECTION A : MICRO ECONOMICS 1. A consumer is said to be rational when he aims at maximizing his utility
More informationADR/NEW State Budget Analysis for Karnataka
ADR/NEW State Budget Analysis for Karnataka By Association for Democratic Reforms (ADR), and Karnataka Election Watch (KEW) August, 2012 Abstract/Introduction The overall financial performance of Karnataka
More informationBUDGETING. After studying this unit you will be able to know: different approaches for the preparation of budgets; 10.
UNIT 10 Structure APPROACHES TO BUDGETING 10.0 Objectives 10.1 Introduction 10.2 Fixed Budgeting 10.3 Flexible Budgeting 10.4 Difference between Fixed and Flexible Budgeting 10.5 Appropriation Budgeting
More informationFrequently Asked Questions (FAQs) on Pradhan Mantri Jan Dhan Yojana (PMJDY)
Frequently Asked Questions (FAQs) on Pradhan Mantri Jan Dhan Yojana (PMJDY) Q. 1. What is Pradhan Mantri Jan-Dhan Yojana? Ans. Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusion
More informationGOLD PRICE MOVEMENTS IN INDIA AND GLOBAL MARKET
53 GOLD PRICE MOVEMENTS IN INDIA AND GLOBAL MARKET Shaik Saleem, Research Scholar, Department of Management Studies, Sri Venkateswara University, Tirupati, Andhra Pradesh, India. Dr. M. Srinivasa Reddy,
More informationSCHEDULE 1 [See Regulation 5(1) (i)]
SCHEDULE 1 [See Regulation 5(1) (i)] Non-Resident (External) Rupee Account Scheme NRE Account 1. Eligibility: Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted to open and maintain
More informationII. FISCAL SITUATION
II. FISCAL SITUATION Combined Government Finances: 2006-07 With the resumption of fiscal consolidation process at the Centre in terms of the Fiscal Responsibility and Budget Management (FRBM) Rules, 2004
More informationCHAPTER I INTRODUCTION
CHAPTER I INTRODUCTION The study of public finance is concerned with the revenue expenditure process of a government. In India, since Independence, there has been a sustained and significant expansion
More informationChapter 11: The Effects of General Fluctuations in Wages on the Prices of Production
Chapter 11: The Effects of General Fluctuations in Wages on the Prices of Production To appreciate what Marx wants to achieve here, it is worth setting his argument in political economic context. Adam
More informationIn Rs. Lakh Crore Spread (%) Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18
In Rs. Lakh Crore Spread (%) A Dislocated Bond Market What does it mean for investors? Since the release of the RBI monetary policy committee minutes on 19 th April 2018, bond yields have spiked. The benchmark
More informationACCOUNTING FOR PARTNERSHIP
ACCOUNTING FOR PARTNERSHIP BASIC CONCEPTS LEARNING OBJECTIVES After studying this chapter you will be able to : l Define partnership and list its essential features; l Explain the meaning and list the
More informationChapter 19 MONEY SUPPLIES, PRICE LEVELS, AND THE BALANCE OF PAYMENTS
Chapter 19 MONEY SUPPLIES, PRICE LEVELS, AND THE BALANCE OF PAYMENTS In the Keynesian model, the international transmission of shocks took place via the trade balance, with changes in national income or
More informationImpact of Asset-Liability Management on the Profitability of Banks
IOSR Journal of Business and Management (IOSR-JBM) e-issn: 2278-487X, p-issn: 2319-7668. Volume 19, Issue 7. Ver. VI. (July 2017), PP 72-76 www.iosrjournals.org Impact of Asset-Liability Management on
More informationDownloaded from
XII ECONOMICS SURE SHOT SHORT ANSWER QUESTIONS MICROECONOMICS UNIT - INTRODUCTION Q. Distinguish between microeconomics and macroeconomics. 3 Q.2 Discuss the central problems of an economy. Why do they
More informationGovernment s Agricultural economic initiatives and challenges ahead
Government s Agricultural economic initiatives and challenges ahead Author: Prof. Pravin B. Rayate* Dr. Suhas. B. Dhande** Prof. Manoj R. Mahanubhav** Abstract: Indian economy is highly dependent on agriculture
More informationGSTR - 3B Dec 3B Jan 3B Feb 3B Mar 3B Apr 3B GSTR -1 July to Nov 2017 Dec 2017 Jan 2018 Feb 2018 Mar 2018
Circular No. 26/26/2017-GST F. No. 349/164/2017/-GST Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs GST Policy Wing New Delhi, Dated the 29 th December,
More informationCHAPTER 4 IMPACT OF PROMOTIONAL ACTIVITIES ON BANKS DEPOSITS
CHAPTER 4 IMPACT OF PROMOTIONAL ACTIVITIES ON BANKS DEPOSITS One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. In fact, depositors are the major
More informationMARKING SCHEME Section A: Microeconomics
MARKING SCHEME Section A: Microeconomics 1. c) 2. - Give subsidies to reduce price. - Undertake health campaigns to promote the positive effects of milk consumption. (Any 1) 3. c) 4. If the river Kosi
More informationUNIT 8 DETERMINATIONS OF INCOME & EMPLOYMENT POINTS TO REMEMBER Aggregate demand refers to total demand for goods and services in the economy. AD represents the total expenditure on goods and services
More informationQuestions and Answers
Questions and Answers Ch 1 (continued) Q1: MCQ Aggregate Demand 1) The aggregate demand curve shows A) total expenditures at different levels of national income. B) the quantity of real GDP demanded at
More informationNRE (Non-Resident External) account And NRO (Non-Resident Ordinary) account INDIAN PROPERTY SHOW AT LONDON APRIL 2016
NRE (Non-Resident External) account And NRO (Non-Resident Ordinary) account INDIAN PROPERTY SHOW AT LONDON BRIEF INTRODUCTION NRIs (Non-Resident Indians) managing income earned in India and abroad may
More informationThe Clearing Corporation of India Limited Risk Management Department Consultation Paper. Recovery tools at the end of the prefunded Default Waterfall
14 th Feb 17 The Clearing Corporation of India Limited Risk Management Department Consultation Paper Recovery tools at the end of the prefunded Default Waterfall 1.0 Introduction 1.1 CCIL maintains prefunded
More informationFinancial Statement Analysis-FIN621 ACCOUNTING & ACCOUNTING PRINCIPLES
ACCOUNTING & ACCOUNTING PRINCIPLES Lesson-1 Accounting Almost every organization and individual maintains accounts and deals with accounting. In simple terms, it can be described as a record of Income
More informationTERMS AND CONDITIONS GOVERNING NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT) SYSTEM OF THE RESERVE BANK OF INDIA
TERMS AND CONDITIONS GOVERNING NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT) SYSTEM OF THE RESERVE BANK OF INDIA ICICI Bank shall endeavour to provide to the Customer, the National Electronic Funds Transfer
More informationFAQ: Financial Statements
Question 1: What is the correct order in which financial reports must be created? Answer 1: The income statement is created first, then the owners' equity statement, and finally the balance sheet. This
More informationFINANCIAL ECONOMICS. The table below shows the distribution if candidates by scores: Grade Marks % of Candidates
FINANCIAL ECONOMICS Overall Performance The table below shows the distribution if candidates by scores: Grade Marks % of Candidates F 3 0-34 32% F 2 35-44 35% F 1 45-48 4% P 50-74 28% D 75 and above 1%
More informationVIII. FINANCIAL STATISTICS
VIII. FINANCIAL STATISTICS INTRODUCTION 405. The financial statistics covered in this chapter have broader sectoral coverage than the monetary statistics described in Chapter 7. The scope of the monetary
More informationMonetary policy operating procedures: the Peruvian case
Monetary policy operating procedures: the Peruvian case Marylin Choy Chong 1. Background (i) Reforms At the end of 1990 Peru initiated a financial reform process as part of a broad set of structural reforms
More informationThe Exchange Rate and Canadian Inflation Targeting
The Exchange Rate and Canadian Inflation Targeting Christopher Ragan* An essential part of the Bank of Canada s inflation-control strategy is a flexible exchange rate that is free to adjust to various
More information