Economy

Infrastructure Debt Funds

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Infrastructure Debt Funds

  • In Sept 2011, RBI issued guidelines for permitting banks and NBFCs to set up IDFs to help meet long term financing for the sector
  • IDFs would be set up either as MFs or NBFCs
  • NBFC sponsoring IDF-MF should have a minimum net owned funds of Rs 300 crore and CAR of 15 percent
  • Besides, its NPAs should be less than 3% of net advances and the NBFCs should have been in existence for at least five years and earning profits for the last three years
  • Banks and NBFCs would be eligible to sponsor IDFs as mutual funds with prior approval of the RBI
  • SEBI has amended the Mutual Funds Regulations to provide regulatory framework for IDF-MFs
  • Banks acting as sponsors to IDF-MFs would be subject to existing prudential limits including limits on investments in financial services companies and limits on capital market exposure

Role and Functions of Reserve Bank of India

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Role of RBI

Pre-reform Post-reform
Developmental Role: the developmental role has increased in view of the changing structure of the economy with a focus on SMEs and financial inclusion Priority Sector Lending: Introduced from 1974 with public sector banks. Extended to all commercial banks by 1992 In the revised guidelines for PSL the thrust is on ensuring adequate flow of bank credit to those sectors that impact large segments of the population and weaker sections, and to the sectors which are employment intensive such as agriculture and small enterprises
Lead Bank Scheme Special Agricultural Credit Plan introduced.
Kisan Credit Card scheme (1998-99)
Focus on credit flow to micro, small and  medium enterprises development
Financial Inclusion
Monetary Policy: the role of RBI has changed from regulating credit and money flow directly to using market mechanisms for achieving policy targets. MP framework has changed to promote financial deregulations and market development. Role as a facilitator rather than as principal actor. M3 as an intermediary target Multiple Indicator Approach
Regulation of foreign exchange Management of foreign exchange
Direct credit control Open Market Operations, MSS, LAF
Rupee convertability highly managed Full current ac convertability and some capital account convertability
Banker to the government Monetary policy was linked to the fiscal policy due to automatic monetisation of the deficit Delinking of monetary policy from the fiscal policy. From 2006, under FRBM, RBI ceased to participate in the primary market auctions of the central government’s securities.
As regulator of financial sector: As regulator of the financial sector, RBI has faced the challenge of regulating the increasing financial sector in India. Credit flows have increased. RBI had to make sure that financial institutions are regulated in a way to protect the consumers while not impeding economic growth. Reduction in SLR
Custodian of FOREX reserves Forex reserves have increased drastically. Need to manage it adequately and avoid inflationary impact
Inflation Direct instruments were used Multiple indicators
Financial Stability Closed economy Increased FDI and FII has made financial stability one of the policy objectives.
Money Market Narsimhan Committee (1998) recommended reforms in the money market

 

 

Tax Reforms in India, Direct & Indirect Tax Reforms. Subsidies- Cash Transfer of Subsidy Issue.

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Tax Reforms in India

Sience 1990 ie the liberalization of Indian economy saw the beginning of Taxation reforms in the nation. The taxation system in the nation has been subjected to consistent and comprehensive reform. Following factors arise the need for tax reforms in India:-

  • Tax resources must be maximized for increased social sector investment in the economy.
  • International competitiveness must be imparted to Indian economy in the globalized world.
  • Transaction costs are high which must be reduced.
  • Investment flow should be maximized.
  • Equity should be improved
  • The high cost nature of Indian economy should be changed.
  • Compliance should be increased.
Direct & Indirect Tax Reforms

Direct tax reforms undertaken by the government are as follows:-

  • Reduction and rationalization of tax rates, India now has three rates of income tax with the highest being at 30%.
  • Simplification of process, through e-filling and simplifying the tax return forms.
  • Strengthening of administration to check the leakage and increasing the tax base.
  • Widening of tax base to include more tax payers in the tax net.
  • Withdrawal of tax exceptions gradually.
  • Minimum Alternate Tax (MAT) was introduced for the ‘Zero Tax’ companies.
  • The direct tax code of 2010 replace the outdated tax code of 1961.

Indirect tax reforms undertaken by the government are as follows:-

  • Reduction in the peak tariff rates.
  • reduction in the number of slabs
  • Progressive change from specific duty to ad valor-em tax.
  • VAT is introduced.
  • GST has been planned to be introduced.
  • Negative list of services since 2012.
Subsidies- Cash Transfer of Subsidy Issue.

A subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

Direct Cash Transfer Scheme is a poverty reduction measure in which government subsidies and other benefits are given directly to the poor in cash rather than in the form of subsidies.

It can help the government reach out to identified beneficiaries and can plug leakages. Currently, ration shop owners divert subsidised PDS grains or kerosene to open market and make fast buck. Such Leakages could stop. The scheme will also enhance efficiency of welfare schemes.

The money is directly transferred into bank accounts of beneficiaries. LPG and kerosene subsidies, pension payments, scholarships and employment guarantee scheme payments as well as benefits under other government welfare programmes will be made directly to beneficiaries. The money can then be used to buy services from the market. For eg. if subsidy on LPG or kerosene is abolished and the government still wants to give the subsidy to the poor, the subsidy portion will be transferred as cash into the banks of the intended beneficiaries.

It is feared that the money may not be used for the intended purpose and men may squander it.

Electronic Benefit Transfer (EBT) has already begun on a pilot basis in Andhra Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu, West Bengal, Karnataka, Pondicherry and Sikkim. The government claims the results are encouraging.

Only Aadhar card holders will get cash transfer. As of today, only 21 crore of the 120 crore people have Aadhar cards. Two other drawbacks are that most BPL families don’t have bank accounts and several villages don’t have any bank branches. These factors can limit the reach of cash transfer.

subsidity

 

 

 

An Introduction to Nagaland Economy

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An Introduction to Nagaland Economy

Nagaland is one among the north-eastern states in India. It’s deckled on its west and north by Assam, on its east by Myanmar (formerly called Burma), on its north by Arunachal Pradesh, and on its south by Manipur.

Nagaland is one among India’s smallest states, with a complete area of 16,579 sq kilometer (6400 sq mi). The Naga Hills run through this tiny state that has Saramati as its highest peak at a height of concerning 12,600 ft. Dhansiri, Doyang, Dikhu and Jhanji are the rivers that flow through this state. The piece of land is mountainous, thickly wooded, and cut by deep river valleys. There’s a good variety of plant and animal life. Nagaland features a monsoon climate with usually high humidity; rain averages between 1800 to 2500 millimeter (70 to 100 inches) a year.

Nagaland features a single-chamber legislative assembly with sixty seats. The state sends 2 members to the Indian Parliament: one to the Rajya Sabha (Upper House) and one to the Lok Sabha (Lower House). There are seven government body districts – Mokokchung, Tuensang, Mon, Wokha, Zunheboto, Phek and Kohima.

The state is found between the 93°20′ E and 95°15′ E Longitudes and 25°6′ and 27°4′ N Latitudes. The whole area lined by the state is 16,579 sq. kilometer. Nagaland was declared the sixteenth state of the country of India on 1 December 1963. Before this, Nagaland accustomed is a union territory. The opposite attention-grabbing data about Nagaland is that it homes as several as sixteen totally different ethnic groups. These groups of individuals have their own separate cultural identities that embrace customs, dresses and languages. Nearly 90 % of the population of Nagaland is devout Christians. The state conjointly features a substantial Hindu people. Kohima, the capital city of the state, features a range of sites that should be visited by the tourists because it can facilitate them in obtaining an insight of the wealthy history place. The name ‘Kohima’ has been derived from the name of a plant known as ‘Kew Hi’ that thrives within the mountainous region. Kohima is a fascinating place, blessed with lots of natural beauty.

Nagaland has primarily an agricultural economy. An excellent ambition of the inhabitant is to possess a bumper harvest. One among the vital motivation behind the practice of head-hunting within the past was the assumption that it might guarantee a decent harvest.

A remarkable feature of economy is that there are not any traveller landlords and there’s no category of landless peasants. The village is so organized that the fundamental demand of food, clothing and shelter are certain to all the members. The population as a whole stay gainfully used in productive activities and there’s no surplus labour. Throughout the Kheti season, it becomes tough to induce employed labour and if in the least they’re out there, terribly high wages have to be compelled to be paid. There is, however, a system of providing communal labour by forming what are known as ‘field companies’ of men and women of a similar age bracket. Each member of the corporate gets the advantages of company’s labour by flip.

The major supply of revenue for the govt till recently has been the house-tax. Currently it’s supplemented by the sale return of forest merchandise and tax of urban commodities.

In social group area like Nagaland, the obstacles to economic development usually arise out of the prevailing physical, social and economic conditions. The physical condition relate to the mountainous terrain, dense forests and tough communications. The social obstacles are the people’s initial apathy to any quite innovation, lack of education and primitive strategies of production. The economic difficulties are the dearth of capital, absence of promoting centres, and similar alternative factors. To those it may additionally add the political condition arising out of the subversive activities of the underground Nagas. A planned effort in yet being created to avoid these bottlenecks and develop the area. Preliminary investigation were meted out by the National Council of Applied Economic analysis, and this was followed by an in depth examination of the techno-economic information.

In education and road building, the progress has been extraordinary. The urge for education has nowadays replaced the recent looking for heads. A woman could refuse to marry an uneducated man within the same manner as, in the earlier days; she refused to just accept a partner who had not taken one head. Within the field of education Nagaland isn’t thus developed. Even if there are educated individuals, they like white-collar employment. They hesitate to require agriculture as occupation. Hence, government has got to take steps to seek out appropriate employment opportunities for them.

There were hardly any motorable roads within the Naga Hills until Independence. Now, the whole road length is concerning 9,315 km. Dimapur is that the solely place wherever rail and air services are accessible. In road-building, the efforts of the government are adequately supplemented by the border roads task force. The roads cut by the border roads, between Kohima and Meluri, Mokokchung and Tuensang and Akhegwo and Tuensang are feats of engineering ability.

There has been a considerable enlargement of medical and public health facilities. To beat the shortage of doctors, the government has been granting liberal stipends to students finding out medication.

Water supply schemes have conjointly been undertaken in order that the women folks don’t have to be compelled to walk long distances for this basic necessity of life.

Forests being a crucial supply of revenue, measures are initiated to develop them. Forests space is split into 3 classes: Reserved forests, protected forests and personal forests. The proportion of forest space to the whole surface area is about 33rd. The forest department has established wild life sanctuaries, zoological park, and facility, forest coaching colleges and a seasoning and treatment plant.

Electricity has currently reached the interior villages from where darkness has been displaced. Nagaland was the primary state within the North-east to attain 100% rural electrification by 1988.

A department of geology and mining has come upon. In depth and intensive mineral survey and investigation show an encouraging image of the mineral potential of the state. The necessary minerals embrace top-grade rock, coal, copper, chromium, slate, oil and gas etc.

Social welfare has not been neglected. Schemes for the care of the mentally and physically incapacitated area unit being enforced. Some vocational education centres are started.

Economy of Nagaland presents a number of sectors that put together generate revenue for this north-eastern state of India. Agriculture is that the mainstay of Nagaland. The maximum amount as 70th of the overall population of Nagaland is engaged in farming activities. Terrace and jhum cultivation are the two ways by that crops are full-grown within the state of Nagaland.

 

The water system industry of Nagaland is another major section of the state that contributes considerably towards the expansion of the economy. Availability of water to numerous agricultural and industrial corners of Nagaland plays a significant role in enhancing the economic stability of the state.

 

Livestock is another key economic issue of Nagaland which has work, farming, livestock farming, farm and poultry. There are several industrial units in Nagaland that offer a significant boost to the economic development of the state. The medium scale industries of Nagaland that generate large quantity of revenue are placed in varied components of the state.

 

The state has stock of minerals too like that of coal, gas, nickel, ornamental stones, marble, cobalt-chromium bearing iron ore, petroleum, and so on. The banks placed in Nagaland are legendary to be a significant assistant in the economic progress of the state. The commercial enterprise trade of Nagaland is counted mutually of the prime contributors of economic improvement of the place. This can be as a result of with its made natural treasure Nagaland attracts thousands of tourists at intervals its premises around the year.

 

There is no denying the very fact that economy of Nagaland is the symbol of the progressive and speedily growing part of the state.

 

Agriculture in Nagaland is taken into account a major source of revenue for the state. Economy of Nagaland gets a significant boost through the agricultural activities of the state. Terrace and jhum cultivation area unit wide practiced by the social group communities of Nagaland. The crops that have a high yield within the state of Nagaland embrace rice, tobacco, oilseeds, pulses, fibers, potato and sugarcane. The native individuals of Nagaland earn their living by growing variety of crops in their fields.

 

One of the most important reasons behind the flourishing agricultural economy of Nagaland is that the developed state of irrigation within the place. The water channels that are controlled by bamboo sticks offer unrestrained irrigation facilities to the crop fields of Nagaland. Excluding major crops the farmers of Nagaland additionally turn out plantation crops like coffee, tea and cardamom.

 

Potato and sugarcane are the 2 prime cash crops that generate revenue for the Nagaland economy. Then there are several vegetables that are full-grown by the peasants of Nagaland like that of carrots, chillies, onion, melon, spinach leaf, cucumber, brinjal, tomatoes and mustard. Sugarcane, maize, yams, potato, millet and arums are considered because the principal crops of Nagaland state. The farmers of Nagaland grow their crops on the premise of the rain conditions within the place. Having an agri-climatic condition Nagaland is thought to possess high yield.

 

Since agriculture contributes considerably towards the economy of Nagaland therefore the govt. of the state is taking major initiatives to develop this specific field. From seed farms to irrigation comes the govt. is exploit no stones unturned to encourage the Nagaland agriculture.

 

The development trade in Nagaland has provided an impetus to the economic process of this north eastern state of India. The proliferation of enormous scale and medium scale industries has helped to lift the quality of living of the native inhabitants of Nagaland.

 

Endowed with ideal infrastructure, Nagaland supports many industries. a number of the renowned industries of the north eastern state of Nagaland are:

  • Bamboo connected industries like paper mills, plyboard factories etc.
  • Cottage industries like spinning, weaving, cane works etc.
  • Sugar mills
  • Oil factories

Some of the leading industrial organizations, process and producing plants in Nagaland are:

  • Nagaland plyboard Factory- placed within the district of Mon, the Nagaland plyboard manufacturing plant produces good quality plyboard
  • Nagaland Pulp and Paper Company restricted- The Nagaland Pulp and Paper Company Limited were supported in the year of 1971. Placed within the Mokokchung district of Nagaland, the corporate is known for rolling out glorious quality paper
  • Pineapple Fibre Plant- in the Baghty village of Wokha district of Nagaland, the Pineapple Fibre Plant is meant for manufacturing pineapple fibres.
  • Citronella Oil Industries- the Citronella Oil Industries is settled within the Mongsuyuyumi village of Mokokchung district of Nagaland. The trade is known for manufacturing Citronella oil
  • Nagaland Sugar Mill Company restricted- Nagaland Sugar Mill Company Limited was founded in the year of 1973. Settled in Dimapur of the district of Kohima, Nagaland Sugar Mill Company restricted is a renowned Public Sector of the state that produces sensible quality sugar
  • Fruit and Vegetable process Plant- the Fruit and Vegetable process Plant is supplied with all the fashionable machineries for process food
  • Mechanized Brick Plant- settled within the Tolumi village of Dimapur in Nagaland, the Mechanized Brick Plant is known for producing burnt bricks

The economy of Nagaland has received a lift from the event of many industries.

 

The commercial enterprise trade in Nagaland has vastly contributed to the economic strengthening of the north eastern state of India. The tourism trade of Nagaland helps the state to earn huge revenues.
Nagaland has several places of traveller interests that attract visitors throughout the year. A number of the notable traveller destinations of Nagaland are:

  • Japfu Peak- situated at an altitude of 130 foot, Japfu Peak offers the tourists with a beautiful chance to get pleasure from the natural splendor of the region
  • World war II burying ground- the world War II Cemetery of Nagaland reminds one among the fearless Indian and British soldier who fought with the Japanese troops throughout the Second World War
  • Kohima Village- Kohima Village offers the traveller with a novel scope to expertise the made ancient heritage of the state of Nagaland

The different social group cultural traditions of Nagaland create the north eastern state of India a lot of vibrant and enticing to tourists. The distinctive social customs and non secular ceremonies of the aboriginal tribes of Nagaland attract many tourists who are excited with the distinctive ancient heritage of the region that has percolated to the modern era from the traditional times.

Public Economics

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Public Economics

Study of economic efficiency, distribution and government economic policy.

Developed out of the original political economy of JS Mill and David Ricardo. It is a very important branch of economics because of the foundation it provides for practical policy analysis.

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Economic Terms

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Depository Receipt

A depositary receipt (DR) is a type of negotiable (transferable) financial security that is traded on a local stock exchange but represents a security, usually in the form of equity, that is issued by a foreign publicly listed company. The DR, which is a physical certificate, allows investors to hold shares in equity of other countries. One of the most common types of DRs is the American depositary receipt (ADR), which has been offering companies, investors and traders global investment opportunities since the 1920s.

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Impacts of Privatization

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Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of resources.
• Privatization has a positive impact on the financial health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt services to the customers and help in improving the overall infrastructure of the country.

DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA

• Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
• Privatization results in high employee turnover and a lot of investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
• There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
• Privatization escalates price inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man