Economics Briefs
Transcript of Economics Briefs
-
7/29/2019 Economics Briefs
1/21
KEY ECONOMIC PARAMETERS
ECONOMIC POLICY AND GOVERNMENT
-
7/29/2019 Economics Briefs
2/21
KEY ECONOMIC PARAMETERS
GDP
INFLATION
INTERESTRATES
EXCHANGERATES
-
7/29/2019 Economics Briefs
3/21
GDP(1/2)
It is the total market value of all final goods andservices produced in a country in a given year.
It includes
Production by American or Japanese Company in India
It excludes
Production by Indian Company outside India
The most important question to ask is WHERE ISIT PRODUCED
-
7/29/2019 Economics Briefs
4/21
GDP (2/2)
It can be measured in 3 ways It is the sum total of all the expenditure on all final goods and services produced
It is the sum total of all the income generated by production in the country
It is the sum total ofvalue added at every stage of production of goods and services
GDP = consumption + gross investment + government spending +(exports imports) GDP = C + I + G + (X M).
Demerits of the measure Doesnt include own consumed production
Doesnt include house-wifes work at home
Doesnt include underground economy
-
7/29/2019 Economics Briefs
5/21
INFLATION
Rate of change in Prices: Factors affecting this will bediscussed later
Price Indexes
GDP Deflator
Consumer Price Index (CPI)
Wholesale Price Index (WPI)
Difference b/w WPI and CPI
Learn to distinguish between Disinflation / Deflation / Stagflation / Hyperinflation /
-
7/29/2019 Economics Briefs
6/21
EXCHANGE RATES
Fixed Determined by Central Bank
Floating Market-determined
Effect of Currency Appreciation (Rs/$ goes from 50 to 40) Costly Exports:A Rs 50 Chocolate which costs $1 would now cost $1.25 Cheap Imports: Oil barrel ($100) costing Rs 5K would now cost Rs 4K
Decreased Interest burden for the government loan in internationalmarket
What would be the effect of Currency Depreciation
-
7/29/2019 Economics Briefs
7/21
ECONOMIC POLICY&
GOVERNMENT
THE BUDGET
MONETARYPOLICY
FISCAL POLICY
MANAGING
DEFICIT
DISINVESTMENT
-
7/29/2019 Economics Briefs
8/21
THE BUDGET
Revenue Deficit = Revenue Exp. - Revenue Receipts
(Plan + Non - Plan) (Tax + Non -Tax)
Fiscal Deficit = Total Expenditure - ( Revenue Receipts
(Rev.+ Cap. Exp.) +Recovery of Loans
+Receipts from PSU
Disinvestment)
Primary Deficit = Fiscal Deficit - Interest Payments
-
7/29/2019 Economics Briefs
9/21
Definition & the Process
Fiscal policy is the manipulation of government spending andtaxation.
-
7/29/2019 Economics Briefs
10/21
The Budget Deficit
A governments budget deficitis thedifference between what it spends (G) and
what it collects in taxes (T) in a given period:
Budget def G Ticit
IfG exceeds T, the government must
borrow from the public to finance the deficit.It does so by selling Treasury bonds and
bills. In this case, a part of household
saving (S) goes to the government.
-
7/29/2019 Economics Briefs
11/21
ECONOMIC POLICY
Monetary Policy
Key rates of the economy
Money Growth vs Inflation Targeting
Money Multiplier
Fiscal Policy Managing Government Revenue
Managing Government Expenditure
Crowding Out Effect: less availibilty of money forprivate company due to low liquidity in market
-
7/29/2019 Economics Briefs
12/21
Fiscal
Manage Growth RateManage Employment
Govt. Expenses
Subsidies/ Taxes
Monetary
Stabilize Economy
Manage Inflation
Repo
CRR
Open Market Ops
Tools Tools
Policies
-
7/29/2019 Economics Briefs
13/21
Monetary Policy
-
7/29/2019 Economics Briefs
14/21
Targets
Inflation Money Supply
Instruments
Repo CRR Sterilization
Indicators
Interest Ex rate
Monetary Policy
-
7/29/2019 Economics Briefs
15/21
KEY INTEREST RATES
CRR- Cash reserve ratio
Minimum %age in form of cash and deposits
Repo rate
Rate at which banks borrows from RBI Reverse repo rate
Call money market rate
Inter-bank lending rate
SLR- Statutory Liquidity ratio Min %age in form of govt. securities
-
7/29/2019 Economics Briefs
16/21
BALANCE OF PAYMENTS
Record of all the transactions made between the country and rest of the world.
Current A/C
Deals with exports and imports of goods, services and transfers
Capital A/C
Accounts the international capital flowing in and out of the domestic country
See more details of current Account & Capital Account on next slide
Forex Reserves
Liquid assets held by a central bank or government of a country, for use inintervening in the foreign exchange market.
Includes Countrys gold holdings
Convertible foreign currencies
Exchange reserves balances with International Monetary Fund (IMF)
-
7/29/2019 Economics Briefs
17/21
-
7/29/2019 Economics Briefs
18/21
FISCAL DEFICIT
Budget 2012-13
Fiscal deficit projected at 5.1 per cent of GDP
FRBM Act
Revenue Deficit to 0% by 2009-10
Fiscal Deficit to 3% by 2008-09
Disinvestment, Sale of 3G Spectrum,PSUstocks(ONGC,NTPC,SAIL,OIL )
Cause Economic Downturn Increased Government
Spending
That lead to reduce the current fiscal deficit
-
7/29/2019 Economics Briefs
19/21
A PEEP INTO THE PAST
THE GREAT
DEPRESSION
ECONOMICPERSPECTIVES
-
7/29/2019 Economics Briefs
20/21
-
7/29/2019 Economics Briefs
21/21