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what does economy mean ?  The term "economy" refers to the system by which a society or a country organizes and manages its resources, production, distribution, and consumption of goods and services. It encompasses various activities, including the production of goods and services, the allocation of resources, the exchange of goods and services, and the overall management of economic activities within a given area. Economy can also refer to the overall state or condition of a country's financial and commercial activities, including factors such as employment rates, inflation, economic growth, and the stability of financial markets. It is often measured and analyzed through economic indicators, such as gross domestic product (GDP), unemployment rates, inflation rates, and trade balances. The study of economics involves analyzing how individuals, businesses, and governments make decisions regarding the allocation of resources and how these decisions affect the overall funct...

What is Currency chests? Currency chests are branches of selected banks authorised by the RBI to stock rupee notes and coins. The responsibility for managing the currency in circulation is vested in the RBI. The central bank advises the Centre on the number of notes to be printed, the currency denominations, security features and so on. The number of notes that need to be printed is determined using a statistical model that takes the pace of economic growth, rate of inflation and the replacement rate of soiled notes. The Government has, however, reserved the right to determine the amount of coins that have to be minted. The RBI offices in various cities receive the notes from note presses and coins from the mints. These are sent to the currency chests and small coin depots from where they are distributed to bank branches. The RBI has set up over 4,075 currency chests all over the country. Besides these, there are around 3,746 bank branches that act as small coin depots to stock small c...

What Is Bancassurance? Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell insurance schemes to the bank's clients. This partnership arrangement can be profitable for both companies. Banks earn additional revenue by selling insurance products, and insurance companies expand their customer base without increasing their sales force. What is circular economy? The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended. In practice, it implies reducing waste to a minimum. When a product reaches the end of its life, its materials are kept within the economy wherever possible thanks to recycling. These can be productively used again and again, thereby creating further value. What is Plastic Money? Plastic money is your debit or cr...

Initial Public Offering (IPO) If a closely held company i.e. a company in which all the shares are held by the promoter wants to raise funds for the first time by selling its shares to the interested investor then it is termed as IPO of that company. For this purpose an application known as Draft Red Herring Prospectus is filed to get the permission with SEBI. The prospectus is named so because the cover page of the prospectus is printed in red. This concept was borrowed from the American Stock Market. Once the permission is granted the company hires merchant banking companies or investment banking companies that evaluate the financial health of the company and even its future prospects. Based on that it is decided that over the value of the share how much premium can be added while selling the shares. Thereafter the company comes out with advertisements. The interested investors transfer money from their bank account directly and the shares are transferred to their Demat a...

In the year 2015, the government introduced Sovereign Gold Bond scheme as well as Gold Monetization Scheme. These were aimed at bringing down the import of gold in physical form so that the outflow of foreign currencies can be prevented. Sovereign Gold Bond scheme-: Sovereign Gold Bond scheme was introduced in order to bring down investment in gold in physical form. Investment in gold in physical form suffers from some basic risks. First of all, the risk is related to the purity of gold in physical form. Secondly the risk is related to its safety. If it is kept in a locker, it will incur cost. If it is kept at home the risk involved will be high. Hence, investment in gold which is in the form of bond is always beneficial. This scheme has following provisions - 1. The bond is issued in the form of paper and even in digital form by the RBI through the permission of Government of India. 2. It is issued with the face value of minimum 1 gram of gold and thereafter in multip...

Subsidies in Agriculture -: Subsidies can be defined as financial assistance provided by the government in order to ensure availability of essential goods and services at a price below the market price to the consumers. Subsidies have always been used as an important tool in order to reduce the impact of poverty over the general consumers. They can be classified into two important types:- 1. Indirect subsidies 2. Direct subsidies In case of indirect subsidies the benefit is provided by the government to the consumers or the beneficiaries but the payment is done by the government to someone else. For Example prior to the scheme of Direct Benefit Transfer- DBT, even in case of LPG cylinders indirect subsidies were given. The consumer was provided cylinder at a subsidized price but the payment was done by the government to the oil marketing companies. Indirect subsidies may lead to misuse of resources. It is mainly because all the beneficiaries may not be real. On the o...

Initially, the World Bank was officially known as International Bank for Reconstruction and Development (IBRD). World Bank was only its popular name. IBRD was set up to reconstruct the entire world destroyed during World War II. However, when the responsibility was fulfilled, it was officially renamed as World Bank, and IBRD was made a part of the World Bank. In the 1960s, International Development Association (IDA) was set up and it was also made a part of the World Bank. Hence, at present World Bank means IBRD + IDA. Later on, 3 more organizations were brought under the purview of the World Bank. Which are as follows:- 1. International Finance Corporation (IFC) 2. Multilateral Investment Guarantee Agency (MIGA) 3. International Centre for Settlement of Investment Dispute (ICSID) When IFC, MIGA, and ICSID are clubbed together with World Bank, it is referred to as World Bank Group. So, World Bank Group means IBRD + IDA + IFC + MIGA + ICSID. International Bank...

World Trade Organization (WTO) WTO came into existence as a successor of GATT (General Agreement on Tariffs and Trades), in the year 1995. GATT was an agreement that was signed in 1947, and it became effective in 1948. It was not an organization but a mere agreement signed by a number of countries to ensure restriction-free trade in goods. However, in the developed countries as the labor cost started increasing, the production of goods started becoming costlier. Hence, manufacturing industries started shifting toward developing economies. The economy of developed countries started shifting towards the service sector therefore the existence of GATT would have helped only the developing economies which had become manufacturing hubs by the early 1990s. Hence, in the 8th and last round of GATT, which was held in Uruguay, the idea of WTO was conceived. The then Director General of GATT Arthur Dunkel was given the responsibility to prepare a blueprint for WTO. Hence under the Ma...

What is WTO norms ? Trade related aspect of intellectual property rights These rights are granted under WTO norms. They protect intellectual properties. These properties are products of the human mind, which are new, novel, and non- obvious and have commercial utility. The TRIPs laws cover the followings:- 1. Patent 2. Copyright 3. Trademark 4. Trade secret 5. Geographical indication Patent  It is a right provided to the inventor of a technology, chemical, medicine or any other product which is nonobvious, completely new and has a commercial utility. For example: - Microchips. Patent right is granted for 20 years. During these 20 years, no other individual or company can produce or sell the same product without any prior permission of the patent holder. Prior to 2005 India only provided process patent and not product patent. It means that India provided patent to only the process by which the product was produced. Since on the final product, no patent right was guar...

New Economic Policy/Industrial Policy/LPG Model  Why was NEP introduced? In 1956 the economic policies which were formulated continued for long. Although the country and economic conditions were changing but the policies remained the same. The existing policies failed to fulfill the need of changing global and domestic conditions. When was new economic policy introduced ? The East India Company had come to India in order to conduct the business but it ruled the country for long. So the country was a scared. Foreign investment in the country remained restricted under Nehru- Mahalanobis approach. Since India was not self-sufficient, its import remained higher as compared to the export. For this India had to borrow foreign currencies in order to bridge the gap. In order to repay the loan, the country had to borrow again. It became a situation of debt trap. Because of not having enough foreign currencies, India fell into Balance of Payment Crisis in 1990-91. This situation ...

What is Macroeconomics, definition & example? Macroeconomics is a particular branch of economics that examines the behaviour and performance of an economy as a whole.  Looking at a country’s wider economic picture, it focuses on the aggregate changes in an economy, such as unemployment, growth rate, GDP, inflation and more.  As a field of study, it attempts to measure how well an economy is performing, understand what forces drive it, and how its performance can be improved. Researchers will look at two main areas: long-term economic growth and performance in shorter-term business cycles.  What is Microeconomics, definition and example ? The opposite of macroeconomics is microeconomics - a branch of economics which examines the financial decision-making process of individuals, households and businesses. Generally, it applies to markets of goods and services, dealing with individual and economic issues, including: what buying habits people have, what factor...

The concept of Maharatna, Navratna and Miniratna  In order to provide financial autonomy to the public sector companies, the concept of Navratna and Miniratna was introduced in 1997. The concept of Maharatna was introduced later in 2009. In order to categorise a company as Maharatna Company  the following conditions have to be fulfilled:- ● It should be a public sector company. ● It should be listed on the stock exchange. ● It should have a global presence. ● It should be an existing Navratna company. ● In last 3 years average annual revenue of the company should not be less than 25,000 crore rupees. ● In last 3 years average annual net worth of the company should not be less than 15,000 crore rupees. ● In the last three years average annual profit of the company should not be less than 5,000 crore rupees. Maharatna company may do a capital investment of upto rupees 5,000 crore or up to 15% of its net worth (whichever is less), in one financial year with...

What is the problem with Sri Lanka ? Sri Lanka has been in a serious crisis as a result of an unparalleled economic collapse. Due to its depleting forex reserves and crushing debt, the island had struggled to import basic commodities for its 22 million citizens. It had led to anti-government protests. India emerged as the largest contributor to the island nation.  Tourism had been the third-largest source of foreign exchange for the nation. After the 2019 Easter Sunday suicide attacks, which claimed more than 250 lives tourism got affected. The number of visitors decreased by as much as 70%. The tourism sector was severely harmed by the Covid-19 pandemic. Even the exports of tea, rubber, spices and garments suffered.  What caused sri-lanka crisis? The government’s ban on chemical fertilizers in order to make Srilanka an organic nation heavily backfired. Production fell and inflation soared. The Chinese debt trap diplomacy affected the nation very badly. The Fiscal ...

It refers to foreign investment which comes to the Indian stock market. A huge amount of money is invested and shares are bought in large numbers in a diversified manner by these big investors. However, even after buying shares in large quantity, these investors are not at all interested in the management of the company. Their only intuition is to make instant profit based on movement in the Stock Market. The money brought by FPI into a country never remains stable in one country. It moves from one country to another. Hence, this money is referred to as Hot money. FPI is broadly divided into 2 types- 1) Foreign Institutional Investment (FII) 2) Qualified Foreign Investment (QFI) Foreign Institutional Investment (Fll) They are foreign mutual fund companies or insurance companies. They collect money from a number of interested investors and invest that entire pool of money in the stock market of different countries. Qualified Foreign Investment (QFI) QFIs are individual ...

What is meant by Animal husbandry ? husbandry is considered to be a part of the allied activities associated with agriculture. It is an economic activity which can be conducted along with agriculture. Agriculture and animal husbandry do not require separate infrastructure and can be done simultaneously without affecting each other. Agriculture suffers from a number of uncertainties. Failure of Monsoon, slight climatic change may affect agriculture instantly. Hence in such situation animal husbandry serves as an alternative and become a source of additional income for the farmers. That is the reason why, it is considered to be complementary to agricultural activities. Infact through agriculture, availability of fodder can be ensured for animal husbandry and through animal husbandry availability of of natural fertilizers can be ensured for agriculture. Therefore they both are complementary to each other. In order to strengthen animal husbandry as an important economic activi...

To improve the health of public sector banks on the recommendation of P.J. Nayak Committee Report, Mission Indradhanush was initiated by the Finance Ministry. Since another Mission Indradhanush was initiated by Ministry of Health in order to avoid any confusion this mission was renamed as mission Indradhanush 2.0. The Mission Indradhanush initiated by the Ministry of Health and Family Welfare was related to complete immunization. However, this Mission Indradhanush is related to banking sector reform. It is renamed as Indradhanush because it has 7 Provisions. Since the provisions start with A and end with G, it is also known as A to G of the banking sector reform. The Provisions are as follows: - A = Appointment. B = Bank Board Bureau. C = Capitalisation. D = De-stressing. E = Empowerment. F = Framework of Accountability. G = Governance Reforms. Since, in the beginning the public sector banks in India were headed by a CMD (Chairman and Managing Director). It was...

What is Economic Growth and Economic Development? Economic growth is a quantitative concept whereas economic development is a qualitative concept. Growth refers to increase in production or increase in GDP over a period of time. Hence, it is only concerned with numbers. On the other hand, growth with equity is economic development. It means that if the benefit of increase in production reaches the entire population, it is termed as economic development. Hence, equitable distribution of resources leading to improvement in living standard is economic development. It can be said that economic growth is essential for economic development but it is not sufficient. Development also requires other initiatives like proper redistribution.  In any country, micro as well as macro both the factors should be conducive enough to ensure continuous economic growth. The micro factors are the increasing household demand and the increase in productivity and production of individual firms. On the ...

What are Islamic Banks in India? Islamic Banks are common in all the Islamic countries. However, in India it is a completely new concept. The first Islamic bank to be given license in India by the RBI was Cheraman Financial Services Limited, set up in Kerala in 2013. Cheraman financial services limited is termed as Islamic Bank but it functions as NBFC. With 11% stake in this NBFC, Kerala State Industrial Development Corporation is the single largest stakeholder. No other stakeholder can have more than 9% of the stake.    Where is first Islamic Banks established ? first foreign Islamic bank to set up its branch in India was Islamic Development Bank from Jeddah Saudi Arabia. The branch was established in Ahmedabad as a part of memorandum of understanding signed with Exim Bank (Exim = Export/Import). What are importance of Islamic Banks? Islamic Banks are an important instrument of financial inclusion even. According to the belief of Islam, receiving interest and pay...

What is full form of NABARD & Who is CEO OF NABARD? The full form of NABARD is National Bank for Agriculture & Rural Development; and the CEO OF NABARD IS Shri Shji K V . NABARD Act, and established & Committee. NABARD Act was passed in 1981 but it was set up in 1982. It was set up as a Development Bank under Sivaraman Committee recommendation. It was set up as a 50-50 joint venture by RBI and Government of India. The total capital investment was of rupees 100 crore. However, the RBI has brought down its holding in NABARD in 2018. Now the Government of India holds 100% stake in NABARD. About NABARD- It acts as a refinance agency. It means that the government of India infuses money in NABARD and NABARD provides loans to those banks which provide loan for agriculture and rural development. However, NABARD can also do direct lending to state governments, corporates, cooperative society etc. for setting up food processing units, food parks etc. and also for deve...

IMF is referred to as the twin sister of the World Bank. However, the function of the IMF is completely different from the World Bank. The most important responsibility of the IMF is to provide short-term loans to the member countries in the Balance of Payment crisis situation.  The other responsibilities are to promote a single international accounting system to ensure financial cooperation among the member countries, to ensure a stable exchange rate of different domestic currencies, and to also promote private investment in the member countries. The highest decision-making body in IMF is the Board of Governors (BoG). The BoG consists of the Finance Minister of all the member countries. It also has an alternate Governor who is the Governor of the Central Bank of the respective countries. For any decision to be taken at least 114 countries should vote in favor of the proposal. At the same time, at least 85% of the total votes should be polled in favor of the proposal. S...