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Stock Exchanges and Stock Indices—National and International

Stock Market
A stock market / share market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy.
Brief History of Stock Market:
In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. The Amsterdam Stock Exchange is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany, France and the Netherlands.[6]
Stock market crash:
A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic and investing public's loss of confidence. Often, stock market crashes end speculative economic bubbles.
There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000, and the Stock Market Crash of 2008.
One of the most famous stock market crashes started October 24, 1929 on Black Thursday. Another famous crash took place on October 19, 1987 – Black Monday.
Stock Market Indices:• International
BBC Global 30 - world stock market index of 30 of the largest companies by stock market value in Europe, Asia and the Americas.
iShares MSCI EAFE Index (EFA) - provides investment results generally equivalent to publicly traded securities in the European, Australasian and Far Eastern markets. Maintained by Morgan Stanley Capital International.
MSCI World - free-float weighted equity index. Index includes stocks of all the developed markets. Common benchmark for world stock funds.
S&P Global 1200 - global stocks index covering 31 countries and around 70 percent of global market capitalization.
• United States
AMEX Composite - composite value of all of the stocks traded on the American Stock Exchange.
Dow Jones Indexes - leading global index provider.
Dow Jones Industrial Average - one of the most widely quoted of all the market indicators. Consists of 30 of the largest publicly traded firms in the U.S.
Dow Jones Wilshire 5000 - designed to track the performance of all publicly traded companies based in the U.S.
NASDAQ Composite - broad market index of all of the common stocks and similar securities traded on the NASDAQ stock market.
NYSE Composite - covers all common stocks listed on the New York Stock Exchange.
Russell Indexes - leading U.S. equity index family for institutional investors.
Russell 3000 Index - measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
S&P 500 - stock market index containing the stocks of 500 Large-Cap corporations. Comprises over 70% of the total market cap of all stocks traded in the U.S. Owned by Standard & Poor's.
Africa
Egypt : Case 30 - index of the Cairo & Alexandria Stock Exchange; includes the top 30 companies in terms of liquidity and activity.
Morocco : MASI Index - stock index of the Casablanca Stock Exchange.
South Africa : Johannesburg All Share Index
Asia and Pacific : S&P ASIA 50
Australia : All Ordinaries - index of shares listed on the Australian Stock Exchange (ASX).
S&P/ASX 200
China : SSE Composite - index of all listed stocks (A shares and B shares) at Shanghai Stock Exchange.
Hong Kong : Hang Seng Indexes - record daily changes of the largest companies of the Hong Kong stock market (represent about 67% of capitalization of the Hong Kong Stock Exchange).
India
BSE SENSEX 30 - includes the 30 largest and most actively traded stocks on the Bombay Stock Exchange.
S&P CNX Nifty - index for 50 large companies on the National Stock Exchange of India.
Indonesia : JSX Composite - index of all stocks traded on the Jakarta Stock Exchange.
Japan : Nikkei 225 - stock market index for the Tokyo Stock Exchange.
Malaysia : FTSE Bursa Malaysia Index
New Zealand : NZX 50
Pakistan : KSE 100 - index acting as a benchmark to compare prices on the Karachi Stock Exchange.
Philippines : PSEi Index - index acting as a benchmark to compare prices on the Karachi Stock Exchange.
Singapore : ST Index
South Korea : KOSPI - index of all common shares on the Korean Stock Exchanges.
Taiwan : TSEC - capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
Canada : S&P/TSX Composite - index of the stock prices of the largest companies on Toronto Stock Exchange.
Europe : Dow Jones Euro Stoxx 50 - free-float market capitalization-weighted index of 50 Eurozone stocks. Provides a blue-chip representation of Supersector leaders in the Eurozone.
FTSEurofirst Index Series - provides pan-European indices. Joint product of FTSE Group, the leading global index provider, and Euronext, an integrated cross border European exchange.
FTSEurofirst 300 Index - free-float capitalization-weighted price index. Measures the performance of Europe's largest 300 companies by market capitalization. Covers 70% of Europe's market cap.
OMX Baltic Index - covers stock exchanges in Estonia, Latvia and Lithuania.
OMX Nordic 40 - market value-weighted index of the 40 most-traded stock classes of shares in Copenhagen, Helsinki, Reykjavik and Stockholm.
S&P Europe 350 - free float market cap weighted index. Covers at least 70% of European equity market capitalization.
Belgium : BEL20
Czech Republic : PX Index
Denmark : OMX Copenhagen 20
Finland : OMX Helsinki 25
France : CAC 40 - contains 40 stocks selected among the top 100 market capitalisation and the most active stocks listed on Euronext Paris.
Germany : DAX - measures the performance of the Prime Standard’s 30 largest German companies in terms of order book volume and market capitalization.
Ireland : ISEQ 20 - represents the 20 most liquid and largest capped equities quoted on the Irish Stock Exchange.
Italy : S&P/MIB Index - capitalization weighted index developed by S&P and Borsa Italiana.
Netherlands : AEX Index - index of Euronext Amsterdam, consists of the 25 most active securities in the Netherlands.
Poland : Warsaw Stock Exchange WIG Index
Portugal : PSI-20
Russia : MICEX Index - capital-weighted price index of the 30 major and most liquid Russian stocks traded at the Moscow Interbank Currency Exchange.
RTS Index - index of 50 Russian stocks traded on the RTS Stock Exchange.
Spain : IBEX 35
Sweden : OMX Stockholm 30 Index
Switzerland : Swiss Market Index (SMI) - includes the twenty largest and most liquid SPI stocks; represents about 85% of the free- float market capitalization of the Swiss equity market.
United Kingdom : FTSE 100 Index (Financial Times Stock Exchange Index) - capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange.
Middle East
Israel : TA-25 - index tracks the prices of the shares of the 25 companies with the highest market capitalization on the Tel-Aviv exchange.
Jordan : ASE Market Capitalization Weighted Index
Oman : MSM 30
South America : iShares S&P Latin America 40 Index (ILF)
Argentina : MERVAL - index of the Buenos Aires Stock Exchange.
Brazil : Bovespa Index - index of about 50 stocks that are traded on the Sao Paulo Stock Exchange.
Mexico : Indice de Precios y Cotizaciones (IPC) - index of 35 stocks traded on the Bolsa Mexicana de Valores.

Bombay Stock Exchange:
Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage of over 135 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act (SCRA) 1956. It migrated from the open out-cry system to an online screen-based order driven trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatised and demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualisation, BSE has two of world's prominent exchanges, Deutsche Börse and Singapore Exchange, as its strategic partners.

Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with cost and time efficient access to resources. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market.

Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in handling of transactions through its electronic trading system. The companies listed on BSE command a total market capitalization of USD Trillion 1.06 as of July, 2009. BSE reaches to over 400 cities and town nation-wide and has around 4,937 listed companies, with over 7745 scrips being traded as on 31st July 09.

The BSE Index, SENSEX, is India's first and most popular stock market benchmark index. Sensex is tracked worldwide. It constitutes 30 stocks representing 12 major sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to market movements and market realities. Apart from the SENSEX, BSE offers 23 indices, including 13 sectoral indices. It has entered into an index cooperation agreement with Deutsche Börse and Singapore Stock Exchange. These agreements have made SENSEX and other BSE indices available to investors across the globe. Moreover, Barclays Global Investors (BGI), at Hong Kong, the global leader in ETFs through its iShares® brand, has created the exchange traded fund (ETF) called 'iShares® BSE SENSEX India Tracker' which tracks the SENSEX. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market.

The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BOLT is currently operating in 25,000 Trader Workstations located across over 359 cities in India.

BSEWEBX.com: In February 2001, BSE introduced the world's first centralized exchange-based Internet trading system, BSEWEBX.com. This initiative enables investors anywhere in the world to trade on the BSE platform.

Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the price movements, volume positions and members' positions and real-time measurement of default risk, market reconstruction and generation of cross market alerts.

Scrip-wise Weights in SENSEX:

Company Weight in Index (%)
RELIANCE 12.74
INFOSYS TECH 10.20
ICICI BANK L 7.92
LARSEN & TOUBRO 6.77
HDFC 5.21
I T C LTD 5.10
HDFC BANK LT 5.04
STATE BANK OF India 4.50
ONG CORP LTD 3.77
TCS LTD. 3.55
BHEL 3.30
BHARTI ARTEL 3.06
TATA STEEL 3.00
STERLITE 2.43
HIND UNILEVER 2.03
NTPC LTD
1.99
TATA MOTORS
1.82
HINDALCO IN
1.80
MAHINDRA & M
1.75
MARUTISUZUK
1.71
TATA POWER
1.67
WIPRO LTD.
1.63
GRASIM INDUS
1.48
HEROHONDA M
1.42
JAIPRAK ASSO
1.27
REL INFRA
1.15
SUN PHARMACE
1.02
DLF LIMITED
0.98
REL COM LTD
0.91
ACC LTD
0.79
S&P CNX Nifty:
S&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.
• The total traded value for the last six months of all Nifty stocks is approximately 52% of the traded value of all stocks on the NSE
• Nifty stocks represent about 63% of the Free Float Market Capitalization as on Dec 31, 2009.
• S&P CNX Nifty is professionally maintained and is ideal for derivatives trading.
• Major companies included in ABB Ltd., ACC Ltd, Ambuja Cements Ltd, BHEL, Bharti Airtel, DLF, GAIL, HDFC Bank Ltd., etc.
From June 26, 2009, S&P CNX Nifty is computed based on free float methodology.
SEBI:
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. 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” SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.
Chairmen of SEBI:
I. C.B.Bhave Feb, 2008—till date
II. Shri M.. Damodaran February 18, 2005 to February 18, 2008
III. Shri G. N. Bajpai February 20, 2002 to February 18, 2005
IV. Shri D. R. Mehta 21, 1995 to February 20, 2002
V. Shri S. S. Nadkarni January 17, 1994 to January 31, 1995
VI. Shri G. V. Ramakrishna August 24, 1990 to January 17, 1994
VII. Dr. S. A. Dave April 12, 1988 to August 23, 1990

Some Stock Market Concepts:
Acquisition
When one company purchases a majority stake in the acquired.
American Depository Receipt (ADR)
A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas.
American Depository Share (ADS)
A share issued under deposit agreement that represents an underlying security in the issuer's home country. The terms American depositary receipt (ADR) and American depositary share (ADS) are often thought to mean the same thing. However, an ADS is the actual share trading, while an ADR represents a bundle of ADSs.
Annual General Meeting (AGM)
A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings.
Annual Report
A company's annual statement of financial operations. Annual reports include a balance sheet, income statement, auditor's report, and a description of the company's operations.
Annuity
A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.
Arbitrage
The difference between price of a security in two different exchanges. The difference can be used to make profits by persons holding a security to sell the same at an exchange where its price is high and buy it at an exchange where it is available at a lower price.
Back door listing
A strategy of going public used by a company that fails to meet the criteria for listing on a stock exchange. To get onto the exchange, the company desiring to go public acquires an already listed company.
Bad Debt
A debt that is not collectible and therefore worthless to the creditor. This debt, once considered to be bad, will be written off by the company as an expense.
Balance Sheet
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.
Balanced Fund
A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income.
Bankruptcy
The state of a person or firm unable to repay debts.
Basis Point
A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.
Bear Market
A market condition in which the prices of shares are falling or are expected to fall.
Best Bid
The highest quoted bid for a particular share among all those offered by competing market makers.
Blue Chip
A nationally recognized, well-established and financially sound company.
Bond
A debt investment with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate
Book Building
The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors.
Book Closure
A company's announcement of a dividend or bonus to investors.
Book Value
The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.
Boom
A period of time during which sales or business activity increases rapidly.
Bottom
The lowest point or price reached by a financial security, commodity, index or economic cycle in a given time period, which is followed by a steady increase.
Broker
An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
Bubble
A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs.
Bull Market
A financial market of a certain group of shares in which prices are rising or are expected to rise.
Bullion
Gold and silver that is officially recognized as high quality (at least 99.5% pure), and is in the form of bars rather than coins.
CAGR
The year-over-year growth rate of an investment over a specified period of time. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate
Capital Gain
An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold.
Capital Gains Tax
A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price.
Cash Flow Statement
This document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.
Choppy Market
A stock market condition whereby prices swing up and down considerably but with no resulting overall price movement in either direction.
Closely Held Shares
The shares held by individuals closely related to a company.
Closing Price
The final price at which a security is traded on a given trading day.
Commodity
A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services.
Commodity Index
An index that tracks a basket of commodities to measure their performance.
Common Shareholder
An individual, business or institution that holds common shares in a company, giving the holder an ownership stake in the company. This will also give the holder the right to vote on corporate issues such as board elections and corporate policy, along with the right to any common dividend payments.
Crash
A major decline in a financial market.
Demat – Dematerialization
The move from physical certificates to electronic book keeping.
Dalal Street
A term that refers to the Bombay Stock Exchange, the major stock exchange in India. The street is home not only the Bombay Stock Exchange but also a large number of other financial institutions.
Day Trader
A stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Most trades are entered and closed out within the same day.
De-merger
A corporate strategy to sell off subsidiaries or divisions of a company.
Debenture
A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital.
Debt
An amount of money borrowed and owed by one party to another.
Debt Fund
An investment pool, such as a mutual fund or ETF, in which core holdings are fixed income investments.The fee ratios on debt funds are lower, on average, than equity funds because the overall management costs are lower.
Deflation
A general decline in prices, often caused by a reduction in the supply of money or credit. It is the opposite of inflation.
Delisting
The removal of a listed security from the exchange on which it trades.
Derivative
A security whose price is dependent upon or derived from one or more underlying assets. The derivative is a contract between two or more parties. Its value is determined by fluctuations in the underlying asset like commodities, bonds, stocks, etc
Disinvestment
The action of an organization or government selling or liquidating an asset or subsidiary.
Diversification
A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.
Dividend
Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Downgrade
A negative change in the rating of a security.
EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA is a good metric to evaluate profitability
EPS - Earnings Per Share
EPS is the earning on each share of a company
ESOP - Employee Stock Ownership Plan
A qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the sponsoring employer.
FCCB - Foreign Currency Convertible Bond
A type of convertible bond issued in a currency different than the issuer's domestic currency.
FDI - Foreign Direct Investment
An investment abroad, usually where the company being invested in is controlled by the foreign corporation.
FII - Foreign Institutional Investor.
Fiscal Year
Any 12-month period that a company uses for accounting purposes.
.Fund Of Funds
A mutual fund that invests in other mutual funds.
Fundamental Analysis
Fundamental analysis is to produce a value that an investor can compare with the security's current price in hopes of figuring out what sort of position to take on that stock.
Futures
GAAP - Generally Accepted Accounting Principles
The common set of accounting principles, standards and procedures that companies use to compile their financial statements.
GDP
The forfeited output of a country's economy.
GDR - Global Depositary Receipt
A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank.
Gilt Fund
A mutual fund that invests in several different types of medium and long-term government securities in addition to top quality corporate debt.
Going Public
The process of selling shares that were formerly privately held to new investors for the first time. Also known as Initial public offering (IPO).
Growth Fund
A diversified portfolio of stocks that has capital appreciation as its primary goal, and thereby invests in companies that reinvest their earnings into expansion, acquisitions, and/or research and development.
Haircut
The difference between prices at which a market maker can buy and sell a security.
Hammering
The rapid and concentrated sale of a stock thought to be overvalued by the market.
Hedge
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.
Hedge Fund
An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns.
Holding Period
In a long position, holding period refers to the time between an asset's purchase and its sale. In a short sale, the length of time for which the short position is held.
Initial Public Offering – IPO
The first sale of stock by a private company to the public.
Iceberg Order
A large single order that has been divided into smaller lots, usually by the use of an automated program, for the purpose of hiding the actual order quantity.
In And Out
The purchase and sale of a security within a short period of time, usually on the same day.
Income Fund
A mutual fund that seeks to provide stable current income by investing in securities that pay interest or dividends.
Index
A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it.
Index Fund
A portfolio of investments that is weighted the same as a stock-exchange index in order to mirror its performance.
Inflation
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
Inorganic Growth
A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the companies own business activity.


Insider Trading
The buying or selling of a security by someone who has access to material, nonpublic information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still nonpublic.
Institutional Investor
A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions.
Liquidity
The degree to which an asset or security can be bought or sold in the market without affecting the asset's price.
t price".
Maturity Date
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop.
Medium Term
An intermediate period of time to hold an asset.
Mid Cap
Companies having a market capitalization between Rs 500 crore and Rs 1,000 crore
Monetary Policy
The actions of a reserve bank of india, that determine the size and rate of growth of the money supply, which in turn affects interest rates.
Money Market
The securities market dealing in short-term debt and monetary instruments.
Mutual Fund
A security that gives small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.
NAV - Net Asset Value
The total value of the fund's portfolio less liabilities.
Open End Fund
A type of mutual fund where there are no restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell.
Oversubscribed
A situation in which the demand for an initial public offering of securities exceeds the number of shares issued.
P/E Ratio - Price-Earnings Ratio
PE ratio or PE multiples is the ratio arrived by dividing Current market Price by Earnings per share of that stock.
Pension Fund
A fund established by an employer to facilitate and organize the investment of employees' retirement funds contributed by the employer and employees.
Portfolio
The group of assets - such as stocks, bonds and mutuals - held by an investor.

Preferred Stock
A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock.
Company
A company that has issued securities through an initial public offering and which are traded on at least one stock exchange.
Public Offering
he sale of equity shares or other financial instruments by an organization to the public in order to raise funds for business expansion and investment.
Redemption
The return of an investor's principal in a security, such as a stock, bond, or mutual fund.
Registrar
An institution or organization that is responsible for keeping records of bondholders and shareholders.
Sensex
An abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE.
Warrant
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.
Write-Off
A reduction in the value of an asset or earnings by the amount of an expense or loss.
YOY - Year Over Year
A method of evaluating two or more measured events that compares the results of measurement at one time period with those from another time period, on an annualized basis.
Yield
Yield is the annual rate of return for any investment and is expressed as a percentage.

A compilation of previous years’ GS Indian Economics questions

2009

1. Answer any one of the following questions (in about 250 words each) 30
a) Comment on the salient features of the Integrated Energy Policy recently approved by the government and its implication on the energy security needs of the country.
b) How far has impact of the global meltdown been reflected in the Economic Survey 2008-09? Identify some of the core areas given priority to neutralize the adverse effects of the global downturn.
2. Comment critically on any one of the following statements in not more than 200 words: 20
(a) “Foreign investment is far from being critical to India’s economic growth.”
(b) “The lesion of the current global financial crisis is that India should halt and may be even reverse financial liberalization.”
3. Answer any one of the following in about 200 words: 20
(a) “In the WTO negotiations over the years of the DOHA Round, India appears to be diluting its stand on agriculture issues to pursue perceived gains in services.” Critically examine the statement.
(b) Discuss the Indo-US knowledge initiative in Agriculture.
4. Answer any two of the following questions (in about 150 words each) 15×2=30
a) Evaluate the prospects for greater economic cooperation between India & China.
b) Does India need the World Bank ?
c) Critically assesses the recent Free Trade Agreement entered into by India with ASEAN.

2008
1. Answer any one of the following questions (in about 250 words each) 30
(a) “Globalisation has brought about a distinct class divide in India instead of ushering in a classless society.” Critically examine this argument.
(b) “The conditions of urban poor are more deplorable than that of their rural counterparts.” Give your views.
2. Answer any one of the following (in about 250 words): 30
(a) Discuss India’s stand on agricultureal issues in WTO’s Ministerial Conferences since Doha Round.
(b) Assess the performance of India in attracting Foreign Direct Investment (FDI).
3. Answer any two of the following (answer to each question should be in about 150 words) 15x2=30
(a) Assistance to the States for Development of Export Infrastructure and other Activities (ASIDE).
(b) Convertibility of Indian Rupee.
(c) India on Global Competitiveness Index-2007.
4. Write about the following (answer to each question in about 20 words):
5x2=10
(a) Special Drawing Rights (SDRs)
(b) NAMA
(c) Non-tariff barriers
(d) Current Account Balance
(e) Free Trade Area

2007
1. Answer anyone of the following (in about 250 words): 30
(a). What is Dumping? Evaluate the remedial measures taken by Government of India vis-à-vis WTO provision regarding dumping.
(b) Comment on the relationship between credit availability and agricultural growth in India.
2. Answer any two of the following (answer to each question should be in about 150 words) 15x2=30
(a). What is the meaning and aim of social forestry ? What are the main weaknesses noticed in social forestry programme?
(b). Bring out the main objective of Rastriya Krishi Bima Yojana. The scheme is being implemented by which agency.
(c). Explain Mega Food park Scheme of Government of India.
3. Write about the following (answer to each question should be in about 20 words): 2x15 = 30
(a) Explain the term Merit Goods
(b) What is Cheap Money?
(c) What is Countervailing Duty?
(d) What is Hot Money?
(e). Explain the Concept Trickle Down Theory
(f) What is Stagflation?
(g) What is Engel's Law?
(h) Meaning of CCIL
(i) What is Administered Price?
(j) What is Venture Capital?
(k) Explain the term Balance on Current Account
(I) What is Consolidated Fund?
(m) What is Budget Deficit?
(n) Explain the term Most Favoured Nations.
(0) Meaning of Capital-Output Ratio.

2006
1. Answer any one of the following (in about 250 words each) : 30
(a) Discuss the importance of World Trade Organisation of Indian Economy in the light of various
opportunity and challenges at the global level.
(b) Describe the main sources of industrial finance in India. How India could be benefited from recent developments in international finance?
2. Answer any two of the following (in about 150 words each): 15x2=30
(a) Discuss the role of public sector during the post-reform period of Indian economy.
(b) Examine the effects of globalisation on poverty removal in India.
(c) What are the implications of gender disparities in India.
3. Answer the following (in about 20 words each) : 2x10=20
(a) What is Philips curve ?
(b) What is Hundi?
(c) What is twin deficit?
(d) What is the main difference between free trade area and common market?
(e) What is forward currency market?
(f) What is Laffer curve?
(g) What is Eurobonds?
(h) What is disguised unemployment?
(i) What are nifty junior?
(j) What is Agri-Trade?
(k) What is CEMA bloc ?
(l) What is rolling settlement ?
(m) What is Difference between Green Box subsidies and Blue Box subsidies?
(o) What are non factor services in India’s Balance of payment?

2005
1. Answer anyone of the following (in about 250 words): 30
(a) Discuss the causes and ramifications of hunger in Africa.
(b) What are the reasons for industrial sickness in India? Suggest suitable remedies.
2. Answer any two of the following (answer to each question should be in about 150 words): 2 x 15 = 30
(a) What is the role of external financial assistance in Indian economy?
(b) Enumerate the objectives of Latin American Reserve Fund. Do you favour such a fund for Asian countries?
(c) Examine the functions of the European Free Trade Association.
3. Answer or write about the following (in about 20 words each): 15x2=30
(a) What is Mekong - Ganga Co-operation?
(b) What is IFC?
(c) Crude oil price and Indian economy
(d) What is Gandhian economy?
(e) Second Green Revolution
(f) Kasturba Gandhi Balika Vidyalaya Yojana
(g) What is Euro-control?
(h) Dow Jones
(i) 'Bluetooth
(j) MFN status to India: Pakistan
(k) The notion of development of under-development
(I) Cost-push inflation
(m) What is Green GDP?
(n) What were the terms of reference of the Abid Hussain Committee?
(0)What is structural unemployment?

2004
1. Answer any ONE of the following (in about 250 words): 30
(a) State the comprehensive structural reforms under-taken to improve the Indian economy since 1991.
(b) How is poverty level measured? Evaluate poverty eradication programmes in India.
2. Answer any TWO of the following (in about 150 words each): 15x2= 30
(a) Describe the recommendations of Narasimham Committee regarding the banking sector in India.
(b) Examine the effect of economic development on environmental degradation in India.
(c) What ails India's road transport economy? Suggest measures of remedy.
3. Answer the following (in about 20 words each): 2 x 15 = 30
(a) What are the major provisions of Agreements on Agriculture in the context of World Trade Organisation?
(b) Elucidate Special Drawing Rights.
(c) What is Cash Reserve Ratio?
(d) What does "priority sector lending" mean?
(e) What is Minimum Alternative Tax (MAT)?
(f) What is Business Process Outsourcing (BPO)?
(g) What is 'social justice' in the context of Indian economy?
(h) Explain the objectives of Plant Varieties Right Act, 2002.
(i) How is human development index for life expectancy measured?
(j) What are the objectives of the Twelfth Finance Commission?
(k) Explain the necessity and role of controls in a mixed economy like India.
(i) Distinguish between primary sector, secondary sector and tertiary sector. What is the change in the share of each sector in Gross Domestic Product (GDP) during period of 1950--2000?
(m) What is the main objective of Security and Exchange Board of India (SEBI)?
(n) What has been the policy of agricultural development during last two decades in India?
(0) What is deficit financing?

2003
1. Answer any one of the following (about 250 words) 30
a) Write a note on the strategy of planning in India since 1951.
b) What were the major recommendations of the Task Force on direct taxes appointed under the Chairmanship of Shri Vijay L. Kelkar?
2. Answer any two of the following (about 150 words) 15X2=30
a) Outline the important objectives of the Tenth Five Year Plan.
b) What is a Finance Commission?
c) Point out the measures undertaken towards flexibility in capital account transactions during the recent past.
3. Answer the following (about 20 words) 2X15=30
a) What is Plan Holiday?
b) Why did India have a surplus in current account balance in 2001-02 after a gap of 24 years?
c) What is Value Added Tax?
d) What is the main objective of the Competition Act, 2002?
e) Name the two agencies that have helped to promote Foreign Direct Investment in India.
f) What is the main thrust of the Fiscal Responsibility and Budget Management Bill?
g) Highlight the main features of the policy relating to buy-back of shares.
h) Why was Janashree Bima Yojana introduced?
i) When was the idea of Agriculture Insurance Corporation mooted?
j) What is the policy of the Government with respect to child labour?
k) Explain the objectives of the National Health Policy, 2002.
l) What was the main objective of the ‘Operation Blackboard’ scheme?
m) Explain the essential feature of differential rate of interest scheme.
n) Which are the three major items of expenditure of the Government of India on revenue account?
o) What was the essential feature of the Pradhan Mantri Gram Sadak Yojana?

2002
1. Answer any one of the following (about 250 words) : 30
(a) Outline the main targets fixed in the National Population policy 2000. What have been the follow up
measures to this policy?
(b) The main thrust of the EXIM Policy 2002-07 is on creating a framework for enhancing India’s export
capability. In the light of this statement outline the salient features of EXIM Policy 2002-07.
2. Answer any two of the following (about 150 words) : 15x2=30
(a) What are ‘Minimum Support Prices’ in agricultural products? What are their objectives?
(b) Outline the main objectives and achievements of the policy of disinvestment in India?
(c) With what objectives was ‘Essential Commodities Act 1955’ amended last year?
3. Answer the following (about 20 words) 2x15=30
(a) What is the peak rate of Custom duty? What are its objectives in India?
(b) Define fiscal deficit.
(c) Explain the provision of OGL.
(d) Elucidate ‘Special Economic Zones’
(e) Highlight the salient feature of ‘National Highway Development Project’
(f) What is the role of SEBI
(g) Explain RBI’s Automatic Route in FDIs.
(h) With what objectives was the ‘Annapurna’ scheme launched?
(i) Elucidate ‘Sampoorna Gramin Rozgar Yojana’
(j) The union budget 2002-03 recommended some services to be taxed. Name any 4 of these services.
(k) What is dumping? What is its objective?
(l) What do you understand by ‘Capital account Convertibility’ of Rupee?
(m) Define Sex ration in the population of India. What is its present status?
(n) Distinguish between ad-valorem and specific duties.
(o) Define zero-based budget.

2001
1. Answer anyone of the following.(Answer should be in about 250 words) 30
(a) What is the incidence of poverty in India ? How should poverty alleviation programme be constructed?
(b) Indian Economy presents a paradox of high saving rate with low income and high saving rate with low growth rate. Analyze.
2. Answer any two of the following. (Answer to each question should be in about 150 words): 2 x 15 =30
a). Liberalization of Indian Economy since 1991 has led to excessive consumerism and over production of white goods’ Elucidate.
b). What are the hurdle faced by finance Ministers of India in keeping the fiscal deficit below 3-4 percent of the GDP ? Suggest steps to lower the fiscal deficit?
c). Discuss the nature and causes of the UTI Crisis with particular reference of US 64. How does this UTI fiasco affect the investment climate in India?
3. Answer the following. (Answer to each question should be in about 20 words) : 2 x 15 = 30
a) What is “ CRISIL” ? What does it do ?
b) What do you understand by “Current Account Convertibility of Rupee” ?
c) What do you mean by proving industry status to agriculture in India ?
d) Elucidate “ Operation Flood “
e) Expand the Term “ Nasdaq “
f) Differentiate between “ Galloping Inflation “ and “ Running away inflation”
g) What is meant by “ couple protection Ratio”
h) Distinguish between “ Human development Index “ and “ Gender related development Index”.
i) What is Green GNP
j) Distinguish between a “ Hard “ currency and a “ soft “ currency.
k) Explain “ rolling plan “ .
l) Illustrate Lorenz curve
m) What is meant by “ Trickle Down “ theory of development.
n) What is “ misery index “.
o) What is meant by “ Most favoured Nation” policy?

2000
1. Answer anyone of the following. (Answer should be in about 250 words) 30
(a) India is rapidly emerging as an Information Technology (IT) Superpower. Discuss some aspects of the growth of this Sector in the Indian economy. What role can public policy play in further enhancing growth prospects in this Sector?
(b) Control over growth of population in India is an essential condition for the country's rapid economic development. Discuss.
2. Answer any two of the following. (Answer to each question should be in about 150 words): 2 x 15 =30
(a) Discuss the reasons for the failure of the Seattle Millennium talks on the WTO (World Trade Organisation). Discuss some implications of this failure for the Indian economy.
(b) What is (Revised) Targeted Public Distribution System? What are its main features?
(c) Discuss the economic effects of Black money (Parallel economy) in Indian economy.
3. Answer the following. (Answer to each question should be in about 20 words) : 2 x 15 = 30
(a) What are the main objectives of the 9th Five-Year Plan of the Government of India?
(b) Write a note on MODVAT Scheme of 1986.
(c) Explain per capita income as a measurement of economic growth.
(d) What are the objectives of Social Security?
(e) What do you mean by 'Parallel Economy’?
(f) Describe the use of 'Command Area Development' in India.
(g) What is ICOR (Incremental Capital Output Ratio)?
(h) What are the main objectives of NABARD?
(i) What do you know about 11th Finance Commission?
(j) What do you mean by revenue deficit in the Central Government's Budget?
(k) How has the Census (1991) defined the Urban Areas?
(l) What are the objectives of New Economic Policy of the Government of India?
(m) Write a note on Rao-Manmohan model of development.
(n) What is the rational for 'Mid-day Meal' Scheme?
(o) What has been the impact of the recent economic reforms programme on the incidence of poverty in India?

Strategic subdivision of syllabus for comprehensive and better coverage:
 Structure of the Indian Economy
 Aspects of Indian Economy
 Planning and Indian Economy
 India and the World (only economic aspects)
 Globalisation and Indian Economic Reforms (Prof.S.Maitra)

CSE General Studies Main : Indian Economics

Syllabus
Paper: I
(i) The Indian economy and issues relating to planning, mobilization of resources, growth, development and employment.
(ii) Issues arising from the social and economic exclusion of large sections from the benefits of development.
(iii) Other issues relating to the development and management of human resource.
Paper: II
2. India’s Economic Interaction with the World
In this part, questions will be on economic and trade issues such as foreign trade, foreign investment; economic and diplomacy issues relating to oil, gas and energy flows; the role and functions of I.M.F., World Bank, W.T.O., WIPO etc. which influence India’s economic interaction with other countries and international institutions.

Pricing of Petroleum Products in India and Parekh Committee Report

India’s consumption of petroleum products has grown at an annual compound growth rate of around 4% during 2002-03 and 2008-09. At present domestic production of crude oil meets around 20% of domestic demand for petroleum products. India’s dependence on oil imports is projected to rise to 90% by 2030. As a result, domestic costs and prices of petroleum products will be increasingly aligned to prices of oil in the international market. With this in view, the Government had notified in March 2002 that consumer prices of all petroleum products except LPG for domestic use and kerosene for public distribution system (PDS) should be determined by market factors. However, this competitive market structure envisaged in the 2002 oil sector reforms was jolted by the sharp rise in oil prices since 2004-05.

In March 2002, price of crude oil in the international market was US$23.3/barrel: it rose to US$39.2/barrel in 2004-05, US$72/barrel in July 2007 and further to US144/barrel in July 2008. Then it fell sharply. In December 2008 oil prices fell back to July 2004 level. Since then oil prices have bounced back to US$75/barrel in December 2009.

In order to shield the Indian economy and consumers from the adverse impact of a volatile international oil market, the government decided to fix the consumer prices of four sensitive petroleum products, viz. petrol, diesel, domestic LPG, PDS kerosene. As the prices of these products were below their cost, government devised a compensation mechanism for the public sector oil marketing companies (OMCs). This mechanism essentially involved financial support to OMCs from other public sector upstream companies, viz. ONGC, OIL and GAIL by way of price discounts and from the government through issue of bonds.

During the period 2003-04 to 2008-09, the OMCs suffered under-recoveries of Rs.2,99,222 crore, which were partly compensated by the Government through issue of Oil Bonds of Rs.1,42,203 crore while the upstream oil PSUs contributed Rs.1,01,285 Crore. Fixation of prices of these essential commodities by the Government at different points of time led to speculations, hoarding, temporary shortages and above all diversion of diesel, LPG, Kerosene to unintended uses. Particularly, the demand for petrol and diesel zoomed even during 2008-09 and 2009-10 when other free products faced lower consumer demands due to industrial slow down.

The financial strength of the public sector oil companies weakened considerably. They could not avail the opportunity to retain the above income for investment in the crucial E&P sector.

Besides, the substantial time taken by the government in processing the proposals for issue of bonds resulted in sever cash flow constraints for the OMCs.

The government policy approach on pricing petroleum products since 1970s has moved between cost-based pricing and import parity pricing (IPP). In the past, the first major policy shift in pricing of petroleum products occurred in 1976, when the Government replaced IPP of the 1960s by cost-plus pricing. This came to be known as Administered Pricing Mechanism (APM), which was applied to the entire oil sector. APM was completely abandoned in April 2002.
The period from 2004 to 2008 saw distinct policy phases: first, a price band mechanism, then trade parity pricing (TPP)

Recommendations:

A viable long-term strategy for pricing major petroleum products is required. It should limit the fiscal burden on government and keep the domestic oil industry financially healthy and competitive.

We recommend that petrol and diesel prices should be market determined both at the refinery gate and at the retail level.

The price of PDS kerosene needs to be increased by at least Rs.6/litre so that the share of
expenditure on kerosene in the total consumption expenditure of rural households remains at the
same level as in 2002. Thereafter, price of PDS kerosene be raised every year in step with the
growth in per capita agricultural GDP at nominal price.

Our analysis shows that prices of domestic LPG can be increased by at least Rs. 100 per
cylinder. Thereafter, the price of domestic LPG should be periodically revised based on increase in paying capacity as reflected in the rising per capita income.

Criticism:

Parikh Committee’s recommendations are bad for the country and worse for the aam aadmi. Bad for the country because the recommendations do not address the problems of petroleum pricing in their entirety and appear to be driven by the desire to allow private sector refiners, originally set up for export of products, an entry into the domestic market under the garb of liberalising price of petrol and diesel. This would be detrimental to the public sector refiners in the current context.

The Parikh Committee recommendations are worse for the aam aadmi because inclusive development shall remain a pipe dream without ensuring access to lifeline levels of modern commercial energy for all. Barring public distribution system (PDS) kerosene, the rest of the petroleum products are currently priced outside the reach of the bottom two-thirds of Indians and the report of the committee talks of further inflationary price increases.

The latest Parikh Committee does not propose “bold” reforms – it proposes bad reforms.

Source: Parekh Committee Report + EPW March 27, 2010

Yashpal Committee Report

Yashpal Committee was set up in February, 2008 to advise on “renovation and rejuvenation of higher education” in India. The major recommendations of the committee include:
i. Creation of an all-encompassing National Commission for Higher Education and Research (NCHER), a Constitutional body to replace the existing regulatory bodies including the UGC, AICTE, NCTE and DEC;
ii. Universities to be made responsible regarding the academic content of all courses and programmes of study including professional courses. Professional bodies like the AICTE, NCTE, MCI, BCI, COA,INC, PCI etc. to be divested of their academic functions, which would be restored to the universities;
iii. Curricular reform to be the topmost priority of the newly created NCHER which would create a curricular framework based on the principles of mobility within a full range of curricular areas and integration of skills with academic depth;
iv. It should be mandatory for all universities to have a rich undergraduate programme and undergraduate students must get opportunities to interact with the best faculty;
v. Undergraduate programs to be restructured to enable students to have opportunities to access all curricular areas with fair degree of mobility;
vi. The vocational education sector should be brought under the purview of universities and by providing necessary accreditation to the courses available in polytechnics, industrial training institutions, and so on;
vii. The NCHER should also galvanize research in the university system through the creation of a National Research Foundation;
viii. New governing structures to be evolved to enable the universities to preserve their autonomy in a transparent and accountable manner;
ix. Practice of according status of deemed university be stopped forthwith till the NCHER takes a considered view on it.
x. Modern higher education system requires extension facilities, sophisticated equipment and highly specialized knowledge and competent teachers. Hence, one of the primary tasks of the NCHER to create several inter-university centres (IUCs) in diverse fields to create the best of these possibilities and attract the participation of several institutions of higher learning to avail them;
xi. Institutions of excellence like the IITs and IIMs to be encouraged to diversify and expand their scope to work as full-fledged universities;
xii. One of the first tasks of the NCHER should be to identify the best 1,500 colleges across India to upgrade them as universities, and create clusters of other potentially good colleges to evolve as universities.
xiii. Universities to establish live relationship with the real world outside and develop capacities to respond to the challenges faced by rural and urban economies and culture;
xiv. All levels of teacher education to be brought under the purview of higher education;
xv. A national testing scheme for admission to the universities on the pattern of the GRE to be evolved which would be open to all the aspirants of University education, to be held more than once a year . Students would be permitted to send their best test score to the university of their choice.
xvi. Quantum of Central financial support to State-funded universities be enhanced substantially on an incentive pattern, keeping in view the needs for their growth;
xvii. Expansion of the higher education system to be evaluated and assessed continuously to excel and to respond to the needs of different regions in India in order to ensure not only equity and access but also quality and opportunity of growth along the academic vertical.

National Knowledge Commission

National Knowledge Commission
National Knowledge Commission (NKC) was constituted in June 2005 under the Chairmanship of Mr. Sam Pitroda, to prepare a blueprint for reform of our knowledge related institutions and infrastructure which would enable India to meet the challenges of the future. The vision for NKC was “to create a second wave of institution building, and of excellence in the fields of education, research and capability building.”
Broadly, the objectives of reform and change in the higher education system in India, as set by the NKC, are: expansion, excellence and inclusion. The major recommendations of NKC for achieving these objectives are:
(i) Expansion:
• Create many more universities--1500 universities nationwide and achieve a gross enrolment ratio of at least 15 per cent by 2015.
• Change the system of regulation for higher education--establish an Independent Regulatory Authority for Higher Education (IRAHE)
• Increase public spending and diversify sources of financing--government support for higher education should increase to at least 1.5 per cent of GDP, out of a total of at least 6 per cent of GDP for education overall. Other possibilities that can complement the increase in public expenditure should be explored.
(ii) Inclusion:
• Ensure access for all deserving students--no student is denied the opportunity to participate in higher education due to financial constraints.
• Affirmative action—ensure access to education for economically and historically socially underprivileged students
(iii) Excellence:
• Reform existing universities—revise or restructure curricula, transition to a course credit system where degrees are granted on the basis of completing a requisite number of credits from different courses;
• Restructure undergraduate colleges—to provide autonomy to colleges either as individual colleges or as clusters of colleges, A Central Board of Undergraduate Education (CBUE) should be established, along with State Boards of Undergraduate Education, which would set curricula and conduct examinations for undergraduate New undergraduate colleges could be established as community colleges colleges that choose to be affiliated with them.
• Promote enhanced quality— The higher education system must provide for accountability to society and create accountability within. An expansion of higher education which provides students with choices and creates competition between institutions is going to be vital in enhancing accountability. Evaluation of courses and teachers by students as well as peer evaluation of teachers by teachers should be encouraged. There must be a focus on upgrading infrastructure, improving the training of teachers and continuous assessment of syllabi and examination systems. It is necessary to formulate appropriate policies for the entry of foreign institutions into India and the promotion of Indian institutions abroad, while ensuring a level playing field for foreign and domestic institutions within the country.

Union Budget 2010-11
On February 26, 2010, Finance Minister Pranab Mukherjee presented a Budget that broadly focused on fiscal stabilization. The Union Budget was presented at a time when the Indian economy was on the path of revival and almost all demand indicators had turned significantly positive. Investment and consumption demand was also on a revival mode. The buoyancy in the manufacturing sector and uptick in import and export were also working well for economic growth prospects.
In the current economic scenario, what was required from the Budget was a further push for consumption and investment. The Budget announcements have tried to do just that.
The continued thrust on agriculture, infrastructure and rural development will unlock much of the economic growth potential in the medium-term. Along with maintaining the focus on broad based growth, the Budget has also addressed concerns on the fiscal deficit front.
Given that overall demand in the economy is still firming up, it is unlikely that the 2% hike in excise duty will be passed on, thus mitigating any immediate inflationary concerns. Also, the focus on improving food security should aid in containing food price inflation. It remains to be seen, however, how the increase in excise duty for petrol and diesel pans out in terms of its impact on inflation.
The corporate sector was slapped with a higher minimum alternate tax (MAT) at 18 per cent, in comparison to 15 per cent earlier. However, the reduction in surcharge by 2.5 percentage points to 7.5 per cent will offset much of the higher MAT impact.
On the reforms' front, Mr Mukherjee accepted the 13th Finance Commission’s recommendations on the suggested tax-sharing formula with States, but decided to wait for a status paper to study the implications of the Commission’s proposal on capping the government’s combined debt at 68 per cent of GDP. He also deferred announcing the roadmap for the introduction of a goods and services tax (GST) to April 2011, bas also the implementation of the Direct Taxes Code.
On the crucial question of implementing oil pricing reforms, as suggested by the Kirit Parikh Committee report, the Finance Minister put the ball in his colleague Murli Deora’s court, saying the petroleum minister would take an appropriate decision in due course.
In the financial sector, the Finance Minister proposed that private players would be considered for some additional licenses for banks and non-banking finance companies, subject to the fulfilment of the Reserve Bank of India’s eligibility criteria. He also allocated over Rs 16,500 crore to ensure that public sector banks are able to attain a minimum eight per cent Tier-I capital by March 2011.
On the expenditure side, the Finance Minister provided generous allocations for the rural development and social sectors. Total plan expenditure is slated to go up 18 per cent to Rs 3.73 lakh crore, while the Centre’s budgetary support would go up by a higher margin of 22 per cent to Rs 2.8 lakh crore. Agriculture, too, received special attention with a four-pronged strategy that focused on agricultural production, reduction in wastage, credit support to farmers and a thrust on the food processing sector.

Direct Taxes
• Those falling under the tax slab of up to Rs 1.6 lakh now do not have to pay any tax. From Rs 1.6 lakh to Rs 5 lakh the tax rate is at 10 per cent; Rs 5 lakh to Rs 8 lakh at 20 per cent; and income above Rs 8 lakh will be taxed at 30 per cent.
• To promote savings, deduction of an additional amount of Rs 20,000 has been allowed, over and above the existing limit of Rs 1 lakh on tax savings, for investment in long-term infrastructure bonds notified by the Central government.
• Apart from contributions to health insurance schemes currently allowed as a deduction under the Income-tax Act, contributions to the Central Government Health Scheme will also be allowed as a deduction.
• The current surcharge of 10 per cent on domestic companies has been reduced to 7.5 per cent. Minimum Alternate Tax (MAT) has been increased from 15 per cent to 18 per cent of book profits.
• To encourage R&D, the weighted deduction on expenditure incurred on in-house R&D has been enhanced from 150 per cent to 200 per cent.
• Limits for turnover over which accounts need to be audited have been enhanced to Rs 60 lakh for businesses and to Rs 15 lakh for professions.
• Limit of turnover for the purpose of presumptive taxation of small businesses has been enhanced to Rs 60 lakh.
Indirect Taxes
• Rate reduction in central excise duties has been partially rolled back and the standard rate on all non-petroleum products enhanced from 8 per cent to 10 per cent ad valorem.
• Excise duty on large cars, multi-utility vehicles and sports-utility vehicles has been increased from 20 per cent to 22 per cent.
• The basic duty of 5 per cent on crude petroleum, 7.5 per cent on diesel and petrol, and 10 per cent on other refined products has been restored. Central excise duty on petrol and diesel has been enhanced by Re 1 per litre each.
• Excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc has been enhanced.
• Certain services, hitherto untaxed, are being brought within the purview of Service tax, which include health checkups, services by electricity exchanges, services of sponsorship of sports, services of promoting of a "brand" of goods, services and events, amongst others. However accredited news agencies which provide news feed online and meet certain criteria have been exempted from service tax.
• Refrigeration units required for the manufacture of refrigerated vans or trucks will be fully exempt from customs duty. Specified equipment for preservation, storage and processing of agriculture and related sectors will be exempt from Central excise.
• To build the corpus of a National Clean Energy Fund, a clean energy cess on coal produced in India, at a nominal rate of Rs 50 per tonne, will be levied. This cess will also apply to imported coal.
• Monorail projects for urban transport will be granted project import status and be charged a concessional basic duty of 5 per cent.
Income-tax management simplified
In 2010-11, the salaried can look forward to easy tax filings. The new Saral-II form, which will only have two pages, will ease tax filing pains. It has been decided to phase-out the current, cumbersome form, 2F.
Tax-payers can also look forward to less interaction with the tax authorities, thanks to the computerisation and modernisation of the Income Tax Department. The Centralised Processing Centre at Bengaluru is fully functional and is currently processing around 20,000 returns a day. Tax experts say that such systems will make the audits more computerised and free from the control of any individual assessing officer.
The government has also introduced a pilot project, called ‘Sevottam’, to provide single window system for registration of all applications, including those for redressal of grievances, as well as paper returns. Currently, the scheme is on in Pune, Kochi and Chandigarh. Four more centres will be added in 2010-11.
Fiscal Consolidation Plan
In line with the recommendations of the 13th Finance Commission, Mr Pranab Mukherjee presented a roadmap for fiscal consolidation and set the fiscal deficit target at 5.5 per cent of the gross domestic product (GDP) for 2010-11. He also moved towards a transparent fiscal accounting system by including expenses due to oil and fertilizer subsidies as liabilities (of 2008-09) and cash subsidy in 2009-10, and stated the deficit for 2009-10 to be at 6.9 per cent of GDP, as against a comparable figure of 7.8 per cent of GDP in 2008-09. The target of 5.5 per cent for 2009-10 includes expenses on account of oil and fertilizer subsidies.
The actual net borrowing of the government in 2010-11 would be Rs 3,45,010 crore. The revenue deficit is also expected to show significant decline to 4 per cent of GDP from 5.3 per cent in 2009-10. The fiscal consolidation plan would be met through the availability of disinvestment proceeds and an overall reform in the expenditure management of the government including subsidies.
For 2009-10, the fiscal deficit was revised downwards to 6.7 per cent, from a projected target of 6.8 per cent. The fiscal deficit for 2009-10 is the widest deficit in the last two decades. In absolute terms, however, the fiscal deficit for 2009-10 was revised up by 3.25 per cent to Rs 4,14,041 crore from a target set at Rs 4,00,996 crore. For 2010-11, the fiscal deficit in absolute terms is estimated to be at Rs 3,81,408 crore.
Such an increase in fiscal deficit in absolute terms is on account of lower revenue receipts in the current fiscal, even as expenditure more or less met the targets. In proportion to GDP, the revenue deficit increased to 5.3 per cent, up from an earlier projection of 4.8 per cent.
With the government’s focus shifting to fiscal consolidation and tightening expenditure, it expects to spend 66 per cent of total expenditure on non-plan activities during 2010-11, compared to 70 per cent in 2009-10. The main reason for this is that the burden on account of Sixth Pay Commission report is off its back now.
The total government expenditure during 2010-11 would be Rs 11,08,749 crore, of which non-plan would be Rs 735,657 crore. Despite the austerity drive, the non-plan expenditure during the current year rose 15 per cent to Rs 706,371.23 crore. This was mainly on account of Rs 19,749 crore increase in subsidy payout, of which petroleum subsidy alone accounted for Rs 12,000 crore.
The total Central Plan outlay is Rs 524,484 crore during 2010-11, as against Rs 425,590 crore in the revised estimate for 2009-10.
The government has proposed a shift from bonds to cash for compensating the oil and fertiliser companies. The move will help in improving the cash flows of companies in both these sectors. However, the government allocated a lower subsidy of Rs 3,108 crore on petroleum products, primarily domestic LPG and kerosene, for 2010-11, compared to revised estimates of Rs 14,954 crore in 2009-10 over and above the grant of Rs 10,306 crore through bonds.
Infrastructure
Mr Pranab Mukherjee has allocated a large chunk of the total plan outlay of Rs 3,73,000 crore for 2010-11 to infrastructure sectors, including road, power, railway, ports and airports. To build the corpus of the National Clean Energy Fund set up earlier, he announced a cess on coal production at a nominal Rs 50 per tonne. This will be levied on imported coal, too. Around 75 per cent of the power generated in the country is coal-based.
In another step at cutting domestic carbon emissions, the government increased the plan outlay for the Renewable Energy Ministry by 61 per cent to Rs 1,000 crore for 2010-11. The Ministry is implementing the ambitious National Solar Mission, aimed at setting up 20,000 MW of solar power capacity by 2020.
Budget 2010 has also provided a concessional customs duty of five per cent for solar power generating equipment.
Allocations for roads and railways together were over 36,600 crore, an increase of Rs 3,300 crore. The government has targeted construction of national highways at the pace of 20 km a day.
Disbursements of the India Infrastructure Finance Company, set up to provide long-term financial assistance, would touch Rs 9,000 crore by March 2010 and reach around Rs 20,000 crore by March 2011.
Rural Infrastructure
Bharat Nirman, the six-fold action plan for rural infrastructure development, charted out in 2006 by the then UPA government, will enter the second year of its second phase with Rs 48,000 crore, with the bulk of the increase going to rural electrification, housing and roads.
The umbrella scheme, which has a clutch of six different programmes under it, had entered the second phase in 2009 with an allocation of Rs 40,900 crore. In 2010 it has gone up to Rs 48,000 crore.
The main areas covered under it are roads, houses, drinking water, irrigation, telephony and electricity in rural areas. The budget for the first phase was Rs 1,74,000 crore. But in the second phase, the road component alone is expected to cost Rs 1,32,000 crore, as per the Budget document.
The Pradhan Mantri Grameen Sadak Yojana (PMGSY), which targets to connect villages with a population of 1,000, has got an allocation of Rs 9,995 crore as against 2009-10 revised allocation of Rs 9,475 crore. The Yojana was launched on December 25, 2000 as a 100 per cent centrally sponsored scheme. But today it meets its expenses also through loans from the Asian Development Bank and World Bank.
In addition, an allocation of Rs 10,000 crore has been made as loan for PMGSY through the RIDF window of NABARD.
The PMGSY was to connect 66,000 habitations in the previous four years. The target now is to reach 1,67,000 habitations at a cost of Rs 1,32,000 crore by 2012.
The Bharat Nirman component on housing, called Indira Awas Yojana, which was to build 6 million dwellings in the four years ending 2009, now has a target of 12 million houses by 2014. The funds for this scheme implemented by the rural development ministry have gone up from Rs 7,918 crore in 2009-10 to Rs 8,996 crore in 2010-11.
About Rs 5,000 crore for this scheme will be provided by the National Investment Fund.
The funds for rural electrification have gone up in 2010-11 with fund transfers to Rajiv Gandhi Grameen Vidyutikaran Yojana going up from Rs 3,100 crore to Rs 5,000 crore. The entire funding for the scheme is coming from the National Investment Fund.
The scheme was started with the aim of providing power connections to 100,000 villages and release electricity connections to 23 million rural BPL households in five years.
The National Rural Employment Guarantee Scheme (NREGS) will continue with its mammoth agenda of providing 100 days of work in the country’s rural areas, drawing its oxygen mainly from the National Investment Fund (NIF). A major part of the scheme’s allocation will come from the NIF for the second consecutive year. NIF draws money from disinvestment of government stake in public sector undertakings.
The allocation for NREGS has gone up marginally from Rs 39,100 crore in 2009-10 to Rs 40,100 crore in 2010-11. But the share of NIF component in NREGS funding has gone up from Rs 11,730 crore in 2009-10 (when the total allocation was Rs 39,100 crore) to Rs 18,768 crore in 2010-11 (against the total allocation of Rs 40,100 crore). Therefore, the government expenditure on NREGP has been declining.
The NIF proceeds for 2009-10, estimated at Rs 25,000 crore, will come on account of disinvestment of government stake in NHPC Ltd, NTPC Ltd, Oil India Ltd, Rural Electrification Corporation Ltd and NMDC Ltd. The NIF, which was constituted in 2009, is expected to part-fund social sector schemes till 2011-12.
The increased funding of Rs 1,000 crore will barely be enough to create the over 300,000 Panchayat Bhawans or Rajiv Gandhi Seva Kendras proposed by the Rural Development Ministry in every panchayat in the country, or to fund NGOs in these panchayats to help run the scheme.
Meanwhile, this Budget has extended the Rashtriya Swasthya Bima Yojana (RSBY) benefits to all NREGS beneficiaries who had worked for more than 15 days during the preceding financial year.
The insurance coverage would be through the Rs 30 per year smart cards which would provide the entire family health insurance cover worth Rs 30,000.
Agriculture Sector
The agriculture sector is in for a major push with an unprecedented 21.6 per cent hike in the central plan allocation to address the supply side constrains that have led to high food inflation.
Besides measures to boost production, stress has been laid on opening up of retail trade to reduce the wide differences between the farm gate, wholesale and retail prices. Tax sops to infrastructure have also been proposed to facilitate storage and safe handling of perishable foods until the retail points.
A four-pronged strategy has been mooted in the Budget to spur growth in farm production. It involves measures to raise agricultural production; reduce wastages; strengthen credit support to farmers; and lend a thrust to the food processing sector for value addition of farm produce.
The Central Plan allocation for 2010-11 for the agriculture and allied sectors has been raised by Rs 2,185 crore to Rs 12,185 crore. It was Rs 10,123 crore in 2009-10 (revised estimates).
The food supplies are proposed to be augmented by extending the Green Revolution to the eastern States of Bihar, Chhattisgarh, Jharkhand, West Bengal and Orissa and eastern-Uttar Pradesh. Rs 400 crore have been set apart for this purpose.
About 60,000 villages are proposed to be selected for devoting exclusive attention to producing more pulses and oilseeds in the dry land areas through better water conservation measures. A sum of Rs 300 crore has been fixed for this scheme.
The 2010-11 target for total credit flow to the farm sector has been raised to Rs 3,75,000 crore from Rs 3,25,000 crore in 2009-10, to improve farmers’ access to credit. Besides, the debt waiver and debt relief scheme has been liberalized further by giving the farmers six more months, until June 30, 2010, for repaying the outstanding loans to get a concession on the interest. The interest subvention for the farmers who repay their debts in time has been stepped up from 1 per cent earlier to 2 per cent.
To lend impetus to the food processing sector, five more mega food parks are planned to be set up. These will be in addition to the 10 already being put up for value-addition of farm produce.
Service tax concessions, including exemptions, have been proposed for seed certification and transportation of cereals and pulses.
To sustain Green Revolution areas through conservation farming, which involves attention to soil health, water conservation and preservation of biodiversity, Rs 200 crore has been allocated for launching this climate-resilient agriculture initiative.
Public Debt
The biggest commitment of the government is to reduce public debt. The combined debt of the Centre and the States will be capped at 68 per cent of the gross domestic product (GDP) by 2014-15, as recommended by the Thirteenth Finance Commission. This is the first time the government will target an explicit reduction in its domestic public debt as a proportion of GDP.
Public Health
Mr Mukherjee raised the healthcare allocation for 2010-11, initiated mapping the country’s health profile and gave some tax relief on imported medical equipment. In an announcement of far-reaching importance for public health in India, he said a health profile of all districts will be prepared in 2010. The findings will be fed into major public health initiatives, especially the National Rural Health Mission (NRHM), a flagship programme of the United Progressive Alliance (UPA) government.
In keeping with its promise of increasing the spending on this sector, Finance Minister proposed to increase the plan allocation for the ministry of health and family welfare from Rs 20,217 crore in 2009-10 (revised estimates) to Rs 23,350 crore in 2010-11, a rise of 15.5 per cent.
The overall allocation for public health has been increased from Rs 1,928 crore in 2009-10 (revised estimates) to Rs 3,181 crore in 2010-11. The NRHM allocation has been raised from Rs 12,096 crore to Rs 13,910 crore. But, that for medical education, training and research has come down slightly from Rs 2,699 crore in 2009-10 (revised) to Rs 2,678 crore in 2010-11.
Given the rapid increase in diabetes and cardiovascular diseases in India, the allocation for programmes related to control and prevention of these diseases have been raised manifold—from Rs 17 crore in 2009-10 to Rs 90 crore in 2010-11.
The minister has also sought to bring some relief for state-of-the-art medical equipment. He announced a uniform, concessional basic duty of five per cent and CVD (countervailing duty) of four per cent, with full exemption from special additional duty on all medical equipment.
Environment
With India committing itself to a goal of 20-25 per cent cuts in its carbon emission intensity by 2020, Finance Minister Pranab Mukherjee announced a slew of measures to reduce dependence on fossil fuels in the long run and promote clean energy technology, as well as check pollution.
A National Clean Energy Fund for funding research and innovative projects would be established. Finance Minister also proposed a clean energy cess on coal produced in India, as well as on imported coal. ‘Polluter pays’ will remain the basic criterion, he said in his speech.
In addition, Mr Mukherjee announced a series of customs and excise duty cuts for photovoltaic and solar thermal power units, in keeping with the government’s resolve to implement the National Solar Mission.
Central budgetary allocation for the ministry of environment and forests has risen by about 10 per cent, from Rs 2,129 crore in 2009-10 to Rs 2,351 crore in 2010-11. However, the allocation for Project Tiger, a key programme to save the rapidly-dwindling tiger population in the country, has been cut by about Rs 30 crore.
With climate change on top of the government’s list of priorities, pollution control has seen a substantial increase in allocation. The allocation for control of river water pollution programmes has gone up.
States to get 32% of gross tax receipts
The Union government has used the Thirteenth Finance Commission’s devolution formula to transfer 32 per cent of its budgeted gross tax receipts for 2010-11 to the States, as against 30.5 per cent earlier.
According to the new devolution formula, 35 per cent weight will be given to area and population, fiscal discipline has 17.5 per cent weight with the remaining 47.5 per cent has been given to fiscal capacity distance.
In line with the revised formula, the net proceeds of union taxes and duties is budgeted at Rs 2,08,997 crore during 2010-11, with the Centre’s gross total revenue budgeted to rise by 17.94 per cent to Rs 7,46,651 crore during 2010-11, compared with Rs 6,33,095 crore in the revised estimates for 2009-10. The receipts in 2009-10 would, however, be 1.25 per cent lower than the budget estimates of Rs 6,41,079 crore with corporation tax, excise and service collections likely to be lower than what was expected in July 2009.
While Mr Mukherjee has estimated a revenue loss of Rs 26,000 crore on account of income tax concessions, he has budgeted for a net revenue gain of Rs 46,500 crore from indirect taxes.
UID Project
The Nandan Nilekani-headed Unique Identification Authority of India (UIDAI) has been allotted an outlay of Rs 1,900 crore for 2010-11, significantly up from Rs 31 crore the authority spent in 2009-10. The UIDAI was set up in 2009 with the intent of providing unique identity (UID) numbers to 1.2 billion people of the country.
The authority would provide an effective platform for financial inclusion and targeted subsidy payments. The first set of UIDs is expected to be issued between August 2010 and February 2011.
The UIDAI has also been roped in by other ministries to manage their resources. The human resource development ministry, for instance, will take the authority’s help to introduce educational reforms by using UID to bring the over 8 million ‘out of school’ children into the education system.
UIDAI plans to issue 600 million UIDs over the next five years but the project, first to its kind, faces several challenges. The first hurdle is the collection of data on everyone. The project will collect data such as iris profiles, biometric prints of 10 fingers, gender, mother and father’s names and address, among other details.
Package for Women
The outlay for Women and Child Development has been increased by almost 50 per cent. A mission for empowerment of women is being set up. The ICDS platform is being expanded for effective implementation of the Rajiv Gandhi Scheme for Adolescent Girls. A Mahila Kisan Sashaktikaran Pariyojana to meet the needs of women farmers is being launched, with Rs100 crore.
Energising India through Solar Power
The plan outlay of the Ministry of New and Renewable Energy has been increased by 61 per cent, from Rs 620 crore in 2009-10 to Rs 1,000 crore. The government envisages establishing India as a global leader in solar energy, targeting 20,000 MW of solar power by 2022.
Helping the Disabled
An Indian Sign Language Research and Training Centre for the benefit of the hearing-impaired is being set up. Also, District Disability Rehabilitation Centres are being set up in 50 additional districts, along with two composite regional centres for persons with disabilities.
Coal Regulatory Authority
A Coal Regulatory Authority is to be established. This will facilitate resolution of issues like economic pricing of coal and benchmarking of standards of performance. It is also proposed to introduce a competitive bidding process for allocating coal blocks for captive mining.
New Action on Internal Security
The Planning Commission will prepare an integrated action plan for areas hit by Left-wing extremism. Adequate funds will be made available for the plan. To build confidence, 2,000 youth will be appointed as constables from J&K in five Central paramilitary forces in 2010.
Special Golden Jubilee Package for Goa
Rs 200 crore has been provided as a Special Golden Jubilee package for Goa, to preserve its natural resources and increase its green cover through sustainable forestry.
Making Ganga cleaner
The allocation for National Ganga River Basin Authority has been doubled to Rs 500 crore. ‘Mission Clean Ganga 2020’ aims to ensure that no untreated municipal sewage or industrial effluent is discharged into the river.
Alternate Port for West Bengal
Recognising the need for developing an alternate port facility in West Bengal, it is proposed to develop a project at Sagar.
Skill Development Plans
The Prime Minister’s Council on National Skill Development has the mission to create 50 crore skilled people by 2022. The government proposes to launch an extensive skill development programme in the textile and garment sector by leveraging the strength of existing institutions and instruments of the Textile Ministry. The ministry plans to train 30 lakh persons over five years.
Defence Outlay Hiked
The Defence budget for 2010-11 is pegged at Rs 147,344 crore, up 8 per cent from the revised estimates of Rs 136,264 crore and four per cent from the budget estimates of Rs 141,703 crore in 2009-10. The armed forces will get around Rs 11,000 crore extra in 2010-11.

BUDGET IN A NUTSHELL
• Additional Rs 1,65,000 cr for bank re-capitalisation
• Rs 3000 cr for agricultural impetus
• Farm loan payments to be extended for six months
• Fertilizer subsidy to be reduced
• Rs 100 cr woman farmer fund scheme
• Coal regulatory authority to be set up
• Clean energy fund to be established
• Interest subvention of 2% to be extended for handicrafts and SMEs
• Rs 200 cr for Tamil Nadu textile sector
• Interest subvention for housing loans up to 1 lacs
• Allocation to defence raised to Rs 1.47 lakh cr
• Defence capex raised to Rs 60,000 cr
• Divestment target of Rs 25,000 cr
• Rs 1200 cr assistance for drought in Bundelkhand
• Rs 48000 cr for Bharat Nirman
• NREGA scheme allocation raised to Rs 41,000 cr
• Allocation to health Rs 22,300 cr
• Allocation for school education up from Rs 26,800 cr to Rs 31036 cr
• Allocation to power sector at Rs 5130 cr
• Rs 10,000 cr allocated for Indira Awaas Yojna
• Social Security Fund to have corpus of over Rs 1000 cr
• Rs 2400 cr for MSMEs
• Government to contribute Rs 1000 per month for pension security
• Rs 5400 cr allocated for urban development
• Rs 66100 cr allocated for rural development
• Rs 1900 cr allocated for UID project
• Gross tax receipts Rs 7.46 lakh cr
• Government to set up National Mission for delivery of justice
• 15% rise in planned expenditure
• Fiscal deficit target of 5.5% in FY11
• Excise on all non smoking tobacco raised
• Televisions to be costlier
• Mobile phones to become cheaper
• Cement to be costlier
• Refrigerators to be costlier
• Jewellery to be more expensive
• Monorail granted project import status
• CDs to be cheaper
• Excise duty on CFL halved to 4%
• Bank farm loan target: Rs 3.75,lakh crore
• Nutrient based fertiliser subsidy scheme to come into force from April 1, 2010
• To build 20 km of highway every day
• Income tax on income upto Rs 1.6 lakh: Nil
• Income tax on income above Rs 1.6 lakh and upto Rs. 5 lakh: 10 per cent
• Income tax on income above Rs.5 lakh and upto Rs. 8 lakh: 20 per cent
• Income tax on income above Rs. 8 lakh 30 per cent

Phillips Curve
Two goals of economic policymakers are low inflation and low unemployment, but often these goals conflict. Suppose, for instance, that policymakers were to use monetary or fiscal policy to expand aggregate demand. This policy would lead to higher output and a higher price level. Higher output means lower unemployment, because firms need more workers when they produce more. A higher price level means higher inflation. Thus, when policymakers move the economy up, they reduce the unemployment rate and raise the inflation rate. Conversely, when they contract aggregate demand and move the economy down, unemployment rises and inflation falls. This tradeoff between inflation and unemployment, called the Phillips curve.
The Phillips curve is named after New Zealand–born economist A. W. Phillips. In 1958 Phillips observed a negative relationship between the unemployment rate and the rate of wage inflation in data for the United Kingdom.

Sacrifice Ratio
The sacrifice ratio, is the percentage of a year’s real GDP that must be forgone to reduce inflation by 1 percentage point. A typical estimate is about 5: for every percentage point that inflation is to fall, 5 percent of one year’s GDP must be sacrificed.

GDP Deflator
The GDP deflator, also called the implicit price deflator for GDP, is defined as the ratio of nominal GDP to real GDP:
GDP Deflator = (Nominal GDP/ Real GDP)
Nominal GDP measures the value of the output of the economy at current prices. Real GDP measures output valued at constant prices. The GDP deflator measures the price of output relative to its price in the base year.

Okun’s Law
Okun’s law says that a change of 1 percentage point in the unemployment rate translates into a change of 2 percentage points in GDP. Therefore, reducing inflation by 1 percentage point requires about 2.5 percentage points of cyclical unemployment.

Natural rate of unemployment
The average rate of unemployment around which the economy fluctuates. The natural rate is the rate of unemployment toward which the economy gravitates in the long run, given all the labor-market imperfections that impede workers from instantly finding jobs. (Prof. S.MAITRA, JULY,2010)

Success Secrets
--A Lecture by Prof.S.Maitra at CII – Suresh Neotia Centre of
Excellence for Leadership(December,2009)

Hard work:
Remember that there is no substitute to hard work. All successful candidates say the hard work is one of the first pre-requisites for the success. There is no short cut to success and hard work never goes unrewarded.
Planning and systematic study:
Proper planning right from the stage of selection of optional subjects and selection of text books is absolutely necessary. Though there is no one way of studying, there are ways to study more effectively and with less stress and more enjoyment. It is important to know how to make use of the sources available to you in the best possible way. It is wise to take a three pronged approach to preparation, reading to learn, making effective notes and able to write answers to various kinds of questions.
Time management:
Effective time management is another requirement. If we spend our time in a frenzy of activity, we can achieve very little because we are not concentrating on the right things. We keep hearing the word "Busy" a lot. There are two kinds of ‘busy’(ness): chaotic, disorganized busy and calm, effective busy. It goes without saying that being the latter helps to pack in more productivity in your work. Improving our "effectiveness quotient" calls for mastery of basic time management skills.
Self-confidence:
Your self-confidence can make the difference. Your self-confidence should be at an all time high - always. You should be in the company of people, who can increase your motivational levels high and can inspire you. Form a group of close friends, who are as determined as you are to make it to the Civil Services Examination.
Dedication:
Be totally dedicated and focused in your studies. You have to sacrifice something like movies, parties, and entertainments etc at this stage of your life to achieve bigger things.
Patience:
As the CSE preparation spans a minimum of one year, right from the Preliminary stage to the interview state, it requires a lot of patience to maintain your tempo. One should not lose patience and the tempo throughout the preparation period till success.

Tips for answering questions at the Prelims:
( I am indebted to Mr. Parvez Dewan, IAS for giving me some of these tips.)
Don’t waste time:
Start answering the questions from the minute you get them. The time allotted is very limited, so waste no time on reading the entire question paper first. First answer all the question you are sure you know the answers to. Skip all the difficult questions in the first round: in this round if you find yourself stuck in a question for more than 10 seconds, just skip it.
However, keep making a small mark on the question paper to indicate that you have skipped that question in the first round. This will enable you to save time in the next rounds. If you answer a question in the second round, cancel this mark, so that in third round you know which questions still remain unanswered. Three rounds should be sufficient, bur you could break the process into a fourth round too.
Allocate time for each answer:
In GS Prelims, if are to answer 150 questions (120 questions for optional subject) in two hours, you have an average of 48 seconds (60 seconds for optional subject) for each questions. So on pro rata basis you should answer 25 questions every 20 minutes (30 questions every half an hour for optional subject). But be harsh with yourself in the first hour. Allocate 30-35 seconds for each question (40-45 seconds in case of optional subject).
Thus if in the first 20 minutes you haven’t answered 35-40 questions (25-27 questions in case of optional subject), you should tell yourself that you are not doing well. This is because in the first hour you will be answering the easiest questions and in the last half-hour you will need plenty of spare time for “logic and guesswork”. Even bright candidates sometimes find themselves slower than the pro-rata speed in the first half-hour. So unless you consciously try to be faster than that speed, you will run into trouble later.
Negative marking:
There will be penalty for wrong answers marked by a candidate in the objective type question papers. There will be four alternatives for the answer to every question. For each question for which a wrong answer has been given by the candidate, one-third (0.33) of the marks assigned to that question will be deducted as penalty. If a candidate gives more than one answer, it will be treated as a wrong even if one of the given answers happens to be correct and there will be same penalty. But if a question is left blank, i.e. no answer is given by the candidate, there will be no penalty for that question. Hence you need be very cautious in the second and third rounds when you are attempting those questions you are fairly, but not absolutely, certain about or those questions that you know absolutely nothing about.