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Summary

Economics Class 46

## IMF & INDIA (5:03 PM):

- India is a founding member of the IMF.
- India was a borrower and currently, it is emerging as a lender. (India lent during the **Eurozone Crisis**).
- The eurozone crisis is also known as the **European Union Debt crisis** during 2009-2010.
- India's voting rights have increased from 2.3% to 2.64%.
- IMF helped India during its Balance Of Payment (BOP) crisis in 1991.
- India borrowed under the **Extended Fund Facility(EFF)**  in 1981.
- India also borrowed under the **Standby Arrangement**in 1991.

## World Bank Group(WBG):

|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
| Member of the WBG | IBRD | IDA | IFC | MIGA | ICSID |
| Formed in | 1944 | 1960 | 1956 | 1988 | 1966 |

## General information about WBG:

|  |  |  |
| --- | --- | --- |
| Body | Purpose | Voting structure |
| International Bank for Reconstruction and Development (IBRD) | - Developmental loans, originally to war-ravaged European countries. - Now it focuses on other developing and under-developed countries and on sustainable development. | Based on share capital given. The USA has the most voting power. |
| International Development Association | - Interest-free long-term loans and grants for poor countries that are not credit-worthy. | Based on share capital given. The USA has the most voting power. |
| International Finance Corporation | - Supports Private enterprises of developing countries. - India has been its beneficiary in many ventures like launching **Masala Bonds.** | Based on share capital given. The USA has the most voting power. |
| Multilateral  Investment Guarantee Agency | - Provide guarantees for protecting foreign investments in developing nations against arbitrary policy action of the government( and not market risks). - Such a guarantee then makes the foreign investor more willing to invest in the developing country. | Based on share capital given. The USA has the most voting power. |
| International Centre for Settlement of Investment Disputes | Settling disputes between the companies and the local authority( domestic government). India is not a member of ICSID. | It is based on the principle of arbitration and has no concept of voting as such. |

- India is a **Blend Nation.**
- It means that India borrows from both the IBRD (because India is credit-worthy) and the IDA (because India has a large poor population).
- India, just like many post-colonial nations needed foreign aid for standing up on its feet.
- The aid can be used for developmental projects (capital investments) and also for transfer payments (revenue expenditure).
- Transfer payments like subsidies, pensions, etc. can also be used for electoral gains, but in some cases, they are necessary for the poorest population.

## MAJOR REPORTS BY WORLD BANK (5:40 PM):

## World Development Report:

- It has been published annually since 1978 by the IBRD.
- The report provides an in-depth analysis of specific aspects of economic development.
- This year's report focuses on migrants & refugees along with their reflections on societies.

## Ease of Doing Business Report:

- This is an annual report published by the World Bank.
- The report considers 10 qualitative indicators to judge the business atmosphere of any region.
- A higher rank would mean a conducive regulatory environment.
- India is ranked 77th out of 190 economies.

## Global Economic Prospects:

- It is issued by the World Bank twice a year in January & June.
- The report examines global economic development & prospects with a special focus on emerging and developing economies.

## Global Findex Database:

- It was launched by the World Bank every three years after 2011.
- The database was formed with help from the **Bill & Melinda Gates** Foundation.
- The database is a comprehensive data set on financial inclusion- how people save, borrow, make payments, manage risks, etc.

## Transformative Carbon Asset Facility:

- It was launched by the World Bank in 2015 to provide a financially innovative results-based carbon market mechanism under the **Paris Agreement 2015.**

## Poverty & Shared Prosperity Report:

- It is a biennial (once in two years) report released by the World Bank.
- It provides consistent estimates of global poverty & shared prosperity.

## APPROACH TO THE EXAMINATION(6:15 PM):

- **Previous Year's**questions are very important.
- For prelims, we can refer to questions from 1995, and from 2013 for mains.
- Any source for them would be enough.
- For mains, we must first go through solutions of previous questions, and then go through the mains questions as given in the printed material.
- Volume II will be more important for this purpose.
- Class notes must be condensed to around 20 pages after 3 revisions.
- We must use topper notes for reference.
- We must try to follow the approach of the topper who we feel has a similar approach( weaknesses, strengths) to us.
- We must avoid being anxious regarding our language skills at this stage of preparation.
- Note-making and addition must be done in the original source (book or notes) only.
- Notemaking must be made as per the topics mentioned in the syllabus.
- Notes must be updated as per current affairs.

## Approaches for some questions:

## I. Critical Evaluation of Five-Year Plans:

- Keywords like "substantiate, evaluate", etc. demand relevant data and/or examples.
- We will list the long-term objectives of planning and discuss the performance.
- We can mention the objectives & results of some important plans like the first and second.

## II. SERVICES -LED GROWTH AFTER 1991 REFORMS; IS IT SUSTAINABLE (6:40 PM):

- We can evaluate the performance of the services-led growth (or nay reform) in a period of around 8-10 years.
- We need to cover aspects like FDI, job creation, effects on GDP, increase in exports, etc.
- We must give a background of the BOP crisis, LPG reforms, growth trajectory, overcoming the hindu growth rate, etc.
- We must also cover some negative aspects like income inequality, ignoring agriculture, over-regulation of manufacturing, etc.
- It would be very good if we could prepare data for important and expected themes.

## General Instructions:

- We must prepare the presentation strategies beforehand- relevant diagrams, bar graphs, pie charts, flow charts, etc.
- We must practice such presentations while writing mock tests as it is very difficult to replicate these things directly in the examination hall for the first time.
- We also expect some repetitions from the Economics Optional question paper, like **jobless growth.**
- We must not prepare even those topics in a very technical manner but must look for some value addition in terms of presentation or data.

## REVISION THROUGH QUESTIONS (7:15 PM):

- **Marginal Standing Facility (MSF)** is for overnight borrowings only by commercial banks and banks can use the  SLR securities.
- **Repo Rate**borrowings can be availed by both commercial banks and governments, and banks cannot use SLR securities.
- **A counter-cyclical buffer** is abuffer of capital maintained by banks in good times, which may be used to maintain the credit flow  in difficult times
- The **Hawkish money policy/Calibrated tightening** would decrease the money supply in the economy during high inflation.
- **Net Fiscal Deficit** is the **Gross Fiscal Deficit** - the loans given (capital expenditure).
- **GDP** = C + I + G + (X-M).
- C is consumer spending, I is business investment, G is government spending, and (X-M) is net exports.
- Here, investment into shares is not considered under I.
- **Harrod Domar's Model** mentioned that a better saving: capital-output ratio will drive national development.
- The First Five-year plan was based on this model
- **Indicative planning** was introduced in the 8th five-year plan (1992-1997).
- **Rolling Plans**saw three plans- 1 year, 3 years, and a long-term plan.
- **National Treatment as per WTO**means
- **Countervailing Duty** refers to the duty levied over imported products that have been made cheaper by their original countries through subsidies and other similar facilities.
- **Anti-dumping duty** is levied over the imported products that are cheaper in their domestic country than the importing country so as to bring parity with the domestic manufacturers of the importing country.
- **Trade-Related Investment Measures TRIMS** is only for goods and not for services.
- GNP can be greater than or less than GDP as per the **NFIA- Net Factor Income from Abroad.**
- **Net Retained Earnings and Net Interest Earnings** are a part of NFIA.
- Transfer payments & grants are not a part of NFIA
- **Transfer income** is a part of personal income calculation but not of national income.
- Goods produced for own consumption are also a part of national income calculation.
- **A Cess** is for a specific purpose, it can be carried forward, not shared with the states.
- **A surcharge** is a tax on tax to reduce income inequality
- **Advalorem tax** is when the tax is levied on the quantity regarding the specifications.
- **For example**, a tax on soap bars will be the same on any size of soap.
- **Specific tax** is as per the specifications.
- **For example-**cigarettes as taxed as per their length in India.
- **Minimum Alternate Tax**reduces the tax exemptions availed by companies so that they pay at least a minimum amount of corporate tax to the government.
- **Asset Monetisation** is trying to monetize (earn money ) through the assets that were not monetized earlier.
- **For example**- Leasing out advertisement space on Metro stations.
- The **Poverty Gap Ratio** is used to measure the intensity of poverty.
- The **Squared Poverty Gap Ratio** amplifies the magnitude which gives a better idea regarding poverty in a smaller area.
- **Fair and Remunerative Price (FRP)** has legal backing, is only for sugarcane, and has to be settled within 14 days.
- **Minimum Support Price (MSP)** has no legal backing.

## The syllabus for Economics has been completed for RB 1 2024.