Economy

Introduction:- Recently released GDP data of the government allows a meagre 4.5% growth in the second quarter of the 2019-2020 fiscal year. The underlying reasons have been largely pointed out by several sources as demand, a create unorganized sector, etc. Consumption and demand in Indian economy As shown in the basic economic textbook, demand remains the most important factor for the growth of an economy along with another factor. On account of high unemployment’s, low wages, then consumption has slid by a huge margin. This esteem a reduction in the income of these citizens. The rural economy frames the backbone of domestic demand, however, the leaked consumption data reveals a decline in the consumption expenditure in rural areas on several heads. Do you know: C Language was not called C at the beginning. It has been named as C after passing many stages of evolution.Find the basic c programs for interview. Check now. Reasons for the slowdown:- Shortage of funds with the investors on account of trapped money with government per fame of fiscal deficit. High Non-Performing Assets. low demand for consumption an account of low employment, low income. The disturbed state of the economy, especially the unorganized sector after demonetization. Way ahead:- The government needs to realize the true fiscal deficit which is higher than 103% of the budgeted target for 2019-2020 in October. This will need the RBI to buy bonds from the government, giving more space for new bonds being released. The increased flow of cash in the cash drawn informal economy is the need of the house. More and easy credit should be given. Boost investor sentiment. Invest in infrastructure building and employment-generating schemes such an MGNREGS. Improve the employment rate and decreasing the fiscal rate and inflation. Although there is a serve nee to look at for increase in consumption and cash flow, to simple injection of money in the economy will lead to stagflation and will have to be complimented with structural actions and reforms. End note Xamnation is India’ leading online learning platform for government exams preparation and campus placements. We are offering live classes, online material and test series for various exams and courses. Please check Xamnation courses for our online courses. Check our main courses: RBI Grade B Coaching SEBI Grade A Coaching UPSC essay writing practice

 Development Finance Institution (DFI) :- A DFI also known as a development bank or development finance company is a financial institution that provides risk capital for economic development project on non-commercial basis. Difference between DFI & Commercial Banks :- DFIS Commercial Bank Provide long term capital to productive sectors like infrastructure. Provide financial assistance or lends to government to undertake infrastructure projects with long gestation period & huge capital. Have a broad develop outlook. Provide sector specific loan. A multipurpose financial institution concerned with providing all types of financial assistance medium as well as long to the government for development projects. Source their capital fund government guarantee. Provide short term loans for business or providing finance for consumers. Provide financial assistance to business for short term duration. Have a narrow develop outlook. No such criteria in commercial bank. Commercial Bank is basically a retail unit dealing with individuals & corporates. Commercial Banks do banking business with the aim of earning profit. Source their capital fund public deposit. Need for India to have DFIS :- To solve the infrastructure financial needs of the country since banks don’t have the long term funds to finance such projects. In india there is no DFIS to fund long term infrastructure project , establishments of DFIS will enhance debt flow towards such projects. DFIS could cater to the wholesale & long term financial needs of the growing economy. As per RBI’s discussion paper on wholesale & long term finance banks in 2017 there is a decline in the long term assets relative to total assets on the banks balance sheet. Provide concessional funds at a lower rate of interest. Social return of DFIS is quite high. Specialised in nature cater the need of long term finance & quicken the economical development. Issues involved / disadvantages:- In emerging sector risk may be higher than the ordinary financial system & they are unable to bear the risk. Problem in mobilisation of resources. Removal of concessional rate regime. Problem of competitive interest rate.    RBI Grade B Online Coaching Program

WTO is an international organization to handle world trade. Currently, there is a stall in the world trade due to the US-China war and move specifically of the withdrawal of developing nations tag from India and China by the USA. This is due to The USA alleges India and China Misusing developing nation tag Themselves opaque about subsidy, government enterprise etc. Resulting in Going against A.23 of Dispute Settlement Understanding of WTO (prohibition of the unilateral embargo) Relegating WTO’s position. Disrupting world order might give to rise to jungle rain in world trade order. Tips for cracking Group Discussion: Don’t take anything personal. The other person may or may not agree with you, please don’t take it personally. Find our latest group discussion topics and related preparation material in mock gd course. In order to evaluate the situation, one must analyze WTO’s utilities. They are:- WHO – Emerges helped in trade growth – stability – improving world economy after World War II. Caused Massive Structural Change. E.g.: 1995 – 0.8% Internet Users 2019 – 57% Internet Users Promoted International Trade E.g.: Single iPhone – 14 components 7/8 Multinational Company 40 countries Lowered Import tariff by 15% Implemented Free Trade Agreements. Functioned – Forum for dispute settlement E.g.: Avoided Trade war worth $340 billion. Tips for cracking Group Discussion: Don’t get angry when aroused by the other person. Maintain your cool. Find our latest group discussion topics and related preparation material in mock gd course. Yet sure is some short timing in WTO’s functioning. They are: The multilateral process not fortified Negotiation 164 members Complex Rise of Regionalism Suffers from Evolutionary bias Yes, I think WTO shall average as a lynchpin of global trade governance. The following steps shall assist this emergence. The assistance of the USA – through a reasonable later. Reasonable Multilateralism – Open discussion – hearing all members. Alternative entering into plurilateral agreements. Big players should share the burden rather than being altruistic. The world order is a must for global peace and to tackle an omniscient recession crisis. Rise of WTO shall be an important defence in such a crisis NABARD 2019

Fiscal Consolidation means policy undertaken by government to reduce its Fiscal/Revenue Deficit. Without going into technicality of Fiscal and revenue deficit, we can say that deficit is difference between what a government spend and what a government earned. Government can practice Fiscal consolidation either by reducing their expenditure (outflow of money) or by increase their earning (inflow of money except debt). Effect on aggregate demand will depends upon how government is going to have fiscal consolidation. 1. Fiscal consolidation through cutting in spending: If government achieve fiscal consolidation through decrease in Government spending then it is going to reduce the Aggregate Demand (AD). This will occur as Govt. spending reduces so the government demand. But AD will not going to decrease by same amount by which Govt. spending reduced but it is going to be reduced much more than that and that is called multiplier effect. To understand the multiplier effect we have to understand what Aggregate Demand (AD) is? See also: Important current affairs videos on economics AD is nothing but demand of the products produced in a country. So demand comes from four sectors –  1. People within county  2. Government  3. Industry (which we call as Investment)  4. People from other country (called as export) Therefore AD = C+I+G+NX Where C= Private Consumption I = Private Investment G = Government Spending NX = Net Export ( Export – Import) By looking at above equation it can be wrongly considered that if Govt. spending reduced by Rs 100 then AD should reduced by Rs 100 but it is not the case. The reason is that the private consumption depends upon the GDP which in turn equal to AD when economy is in equilibrium. Let’s  understand this by an example. Let’s say government decided to reduce its spending and droped the plan of constructing a road. Then there will be less income for road constructor so he will demand less stuff. (Let’s say that stuff is bread). Consequently, there will be less income for bread maker, so further his demand will reduce and so on….. Same has been shown in following figure: Following figure showing the case what would happen when government increases its expenditure With this it should be clear that Decrease in Government Expenditure (done to achieve fiscal consolidation) or increase in expenditure going to respectively decrease  and increase the AD by many fold amount. See also: Free mock test for Economics and Social Issues Caveat: It is not always the case; in some economic situation the government expenditure will not have any multiplier effect.  Some of such situation is like when interest sensitivity of money demand is 0, or when interest sensitivity of investment is very high (around infinite). However this situation has been/ will be disused in some other article. In following part I will going to explain mathematics behind above explanation. You may skip this without losing any understanding ***************************************************************************** If you want to know the exact mathematical relationship between AD and Govt. expenditure, you should read the following. C  is proportional to GDP (Y) Let’s say C=  Cbar+cY Where “c”  is called propensity to consume, which is  the sensitivity to consume with income. Higher the “c” higher is the sensitivity that is for a given increase in income higher increase in consumption. Obviously, value of “c” can not be more than 1 And Cbar is some part of consumption which does not depend upon income ( like essential food , cloths etc.) When economy is in equilibrium then whatever has been demanded that has been produced i.e. aggregated demand (AD) will be equal to GDP (Y) i.e. AD = Y So Y  = AD = C+I+G+NX Y = Cbar+cY + I + G + NX Y = [1/(1-c)] * ( Cbar + G + NX + I) If G changes by “∆G” the Y changes by [1/(1-c)] *∆G So if c is 0.6 and G decrease by Rs 100 Crore then GDP (or AD)  will reduce by Rs 250 Crore *************************************************************************** Do you know Python is the de facto language for data scientists, statisticians, machine learning experts, and web enthusiasts. Get python online coaching and learning material. 2. Fiscal consolidation through increasing revenue: If govt. try to achieve to fiscal consolidation by increasing its revenue (which generally not the case) in that case effect on AD is not that simple as in previous case. It depends upon how government has increased its revenue, in case it is increased by increase in tax then it will reduce the AD as increase in tax causes the decrease in money in hand of people and they will demand less. If government increase its revenue by selling its assets (like coal block, spectrum etc.) then it will not affect the aggregate demand as directly as in other case. This is all about the effect of Government expenditure ( which is part of fiscal policy) on Aggregated Demand and GDP.  In case of any doubt you may ask in comment section.   See more:  FRDI bill National minimum wage in India Repo rate and Bank rate We are offering online coaching in following exams. 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