www.gradeup.com

www.gradeup.com

Economic Survey Important

Terms Part 1

1. Annual Status of Education Report

(ASER):

The report is released by the NGO Pratham. It

is an annual survey that aims to provide

reliable estimates of children's enrolment and

basic learning levels for each district and state

in India. It measures the learning outcomes

based on parameters such as reading and

comprehension, common calculations, daily

tasks, map and general knowledge and

financial calculations. ASER Survey has been

conducted every year since 2005 in all rural

districts of India. It is the largest citizen-led

survey in India. ASER is a household-based

rather than school-based survey.

2. Aggregate Technical and

Commercial (AT&C):

A T & C loss is nothing but the sum total of

technical and commercial losses and shortage

due to non-realisation of billed amount.

Technical loss depends upon losses incurred

from machinery (Transformers), lines and

improper maintenance of plant and machinery

etc. Commercial losses are losses due to

reasons such as theft, meter bypassing, etc.

The advantage of the parameter is that it

provides a realistic picture of energy &

revenue loss situation. The government has

launched DDUGJY (Deen Dayal Upadhayay

Gram Jyoti Yojana) and IPDS (Integrated

Power Development Scheme) to reduce such

losses.

3. Domestic Tariff Area (DTA):

As per the Special Economic Zones Act, 2005,

DTA means the whole of India (including

territorial waters and continental shelf) but

does not include the area of the Special

Economic Zones.

The Domestic Tariff Area enables companies

to set up manufacturing units that cater to the

needs of the domestic market. SEZ is for

export oriented units and not for domestic

market.

A Unit can sell goods and services including

rejects or wastes or scraps or remnants or

broken diamonds or by-products arising

during the manufacturing process or in

connection therewith, in the Domestic Tariff

Area on payment of Customs duties or Excise

Duties, as the case may be.

4. Electronic National Agriculture

Market (e-NAM):

National Agriculture Market (NAM) is a Pan-

India electronic trading portal which networks

the existing APMC mandis to create a unified

national market for agricultural commodities.

Small Farmers’ Agribusiness Consortium

(SFAC) is the lead promoter of NAM. SFAC is

a registered society of Department of

Agriculture, Cooperation & Farmers’ Welfare

(DAC&FW) under Ministry of Agriculture and

Farmer Welfare.

5. Foreign Investment Promotion

Board (FIPB):

The FIPB was a national agency of

Government of India, with the remit to

consider and recommend foreign direct

investment (FDI) which does not come under

the automatic route.

It acted as a single window clearance for

proposals on FDI in India. The FIPB was

housed in the Department of Economic Affairs,

Ministry of Finance. FIPB was abolished on 24

May 2017.

Economic Survey Important Terms Part 2

1. Gross Fixed Capital Formation

(GFCF):

It refers to the net increase in physical assets

(investment minus disposals) within the

measurement period. GFCF is called “gross”

because the measure does not make any

adjustments to deduct the consumption of

fixed capital (depreciation of fixed assets)

from the investment figures. GFCF is not a

measure of total investment, because only the

value of net additions to fixed assets is

measured. It also does not include land

purchases. It is a component of expenditure

approach to calculating GDP.

www.gradeup.com

2. Global Innovation Index (GII):

The Global Innovation Index (GII) is an annual

ranking of countries by their capacity and

success in innovation. It is published by

Cornell University, INSEAD, and the World

Intellectual Property Organization (WIPO), in

partnership with other organisations and

institutions. The GII is commonly used by

corporate and government officials to

compare countries by their level of innovation.

India improved its position from 66 (2016) to

60 (2017) out of 127 countries.

3. Gender Parity Index (GPI):

It is a socio-economic index usually designed

to measure the relative access to education of

males and females. This index is released by

UNESCO. In its simplest form, it is calculated

as the quotient of the number of females by

the number of males enrolled in a given stage

of education (primary, secondary, etc.). GPI

equal to 1 indicates parity between females

and males.

4. Goods and Services Tax (GST):

The Goods and Services Tax (GST) is a value-

added tax levied on most goods and services

sold for domestic consumption. The GST is

paid by consumers, but it is remitted to the

government by the businesses selling the

goods and services. Credits of input taxes paid

at each stage will be available in the

subsequent stage of value addition, which

makes GST essentially a tax only on value

addition at each stage. France was the first

country to implement the GST in 1954.

5. Cultivated Biological Resources

(CBR):

CBR refers to livestock for breeding, dairy,

draught, etc. and vineyards, orchards and

other plantations of trees yielding repeat

products that are under the direct control,

responsibility and management of institutional

units.

Economic Survey Important

Terms Part 3

1. Exit Issue (Chakravyuh

Challenge):

The Chakravyuh challenge invokes the legend

of the Charkravyuh from the Mahabharata

describing the ability to enter but not able to

exit. Exit issue denotes the obstacles faced by

firms, wanting to wrap up their business. India

seems to have a disproportionately large

share of inefficient firms with very low

productivity and with little exit. This lack of

exit generates externalities that hurt the

economy.

Impeded exit has substantial fiscal, economic,

and political costs.

• Fiscal Costs: Inefficient firms often

require government support in the

form of explicit subsidies (for example

bailouts) or implicit subsidies (tariffs,

loans from state banks).

• Economic Costs: Misallocation of

scarce resources and factors of

production in unproductive uses

including overhang of stressed assets

on corporate and bank balance sheets.

• Political costs: Government support

to “sick” firms can give the impression

that government favors large

corporates, which politically limits its

ability to undertake measures that will

benefit the economy but might be seen

as further benefitting businesses.

2. TBS Problem:

The balance sheets of both public sector banks

(PSBs) and some corporate houses are in

terrible shape and it has been a major

obstacle to investment and reviving growth.

The problems faced by the Public Sector Banks

are linked directly to that of the corporate

sector. During the boom years, some

companies borrowed a lot of money from

banks to invest in infrastructure and

commodity-related businesses, such as steel,

power, infrastructure etc. But now, due to

slump in both these sectors, the corporate

profits have hit new lows.

With low profits, the corporates are not able

to repay their loans and their debts are rising

at an alarming level. This is the Twin Balance

Sheet Problem.

3. Overleveraged Firms:

Overleveraged companies are often unable to

pay their operating expenses because of

excessive costs due to their debt burden such

as interest payments and principal

repayments.

www.gradeup.com

4. Ever-greening of Loans:

Ever-greening refers to the practice of

companies taking a fresh loan to pay up an old

loan. Evergreen loans can be problematic if a

borrower’s financial condition deteriorates.

Former Finance Minister Yashwant Sinha

today had cautioned banks to desist from

blatant evergreening of loans.

5. Restructured Loans:

A loan for which the parties have agreed to

alter the terms, usually to make them more

favorable to the borrower. For example, the

borrower may restructure a loan to receive a

lower interest rate or monthly payment.

Sometimes, the repayment period may also

be extended to make it favourable to the

borrower. The economic survey has warned

against such a banking practice.

Economic Survey Important

Terms Part 4

1. Written off Loans:

Banks prefer to never have to write off bad

debt since their loan portfolios are their

primary assets and source of future revenue.

However, loans that cannot be collected or are

unreasonably difficult to collect reflect very

poorly on a bank's financial statements and

can divert resources from more productive

activity. Therefore, banks write off bad debt

that is declared non collectable removing it

from their balance sheets.

There is no meaning that the borrower is

pardoned or got exempted from payment.

2. NEER:

The nominal effective exchange rate (NEER) is

an unadjusted weighted average rate at which

one country's currency exchanges for a basket

of multiple foreign currencies. In economics,

the NEER is an indicator of a country's

international competitiveness in terms of the

foreign exchange (forex) market.

The NEER only describes relative value i.e. it

only describes whether a currency is weak or

strong, or weakening or strengthening,

compared to foreign currencies.

A higher NEER coefficient (above 1) means

that the home country's currency is usually

worth more than an imported currency, and a

lower coefficient (below 1) means that the

home currency is usually worth less than the

imported currency.

3. REER:

The real effective exchange rate (REER) is the

weighted average of a country's currency

relative to an index or basket of other major

currencies, adjusted for the effects of

inflation.

The REER is used to measure the value of a

specific currency in relation to an average

group of major currencies.

A country's REER is an important measure

when assessing its trade capabilities and

current import/export situation.

4. Labour Force Participation Rate

(LFPR):

Labour force participation rate is defined as

the section of working population in the age

group of 16-64 in the economy currently

employed or seeking employment. People who

are still undergoing studies, housewives and

persons above the age of 64 are not reckoned

in the labour force.

The Labour Force Participation Rate (LFPR),

obtained by dividing the number of persons in

the labour force by total population, is an

important parameter in employment

projections and formulation of employment

strategies.

At the time of recession, it is generally seen

that the labour force participation rate goes

down.

5. Liquidity Adjustment Facility

(LAF):

A liquidity adjustment facility (LAF) is a tool

used in monetary policy by the RBI that allows

it to borrow money through repurchase

agreements. LAF allows banks to respond to

liquidity pressures.

It is used by governments to assure basic

stability in the financial markets.

LAF includes both repos and reverse repo

agreements. It is also known as Liquidity

corridor.

www.gradeup.com

Economic Survey Important

Terms Part 5

1. Nominal GDP and Real GDP:

Nominal GDP is gross domestic product (GDP)

evaluated at current market prices, GDP being

the monetary value of all the finished goods

and services produced within a country’s

borders in a specific time period.

Nominal GDP differs from real GDP as real

GDP includes changes in prices due to inflation

or a rise in the overall price level. As a result,

nominal GDP will often appear higher than real

GDP.

2. GDP Deflator:

It is a measure of the level of prices of all new,

domestically produced, final goods and

services in an economy. It is calculated by

dividing Nominal GDP/ Real GDP.

If we wish to analyze the impact of price

changes throughout an economy, then the

GDP deflator is the preferred price index.

3. Marginal Standing Facility (MSF):

Marginal standing facility (MSF) is a window

for banks to borrow from the RBI in an

emergency situation when inter-bank liquidity

dries up completely. It was introduced by RBI

in 2011.

Banks borrow from the central bank by

pledging government securities at a rate

higher than the repo rate under liquidity

adjustment facility or LAF in short.

4. Quantitative Easing:

Quantitative easing is an unconventional

monetary policy in which a central bank

purchases government securities or other

securities from the market in order to lower

interest rates and increase the money supply.

Quantitative easing increases the money

supply by flooding financial institutions with

capital in an effort to promote increased

lending and liquidity.

Quantitative easing does not involve the

printing of new banknotes.

5. Index of Industrial Production:

The Index of Industrial Production (IIP) is an

index which shows the growth rates in

different industry groups of the economy in a

stipulated period of time.

It is a composite indicator expressed in terms

of an index number which also measures the

short term changes in the volume of

production of a basket of industrial products

during a given period with respect to the base

period.

The IIP index is computed and published by

the Central Statistical Organisation (CSO) on

a monthly basis.

Economic Survey Important

Terms Part 6

1. The Trade Facilitation Agreement:

WTO Members concluded negotiations on a

landmark Trade Facilitation Agreement (TFA)

at their 2013 Bali Ministerial Conference. The

TFA contains provisions for expediting the

movement, release and clearance of goods,

including goods in transit.

The TFA was the first Agreement concluded at

the WTO by all of its Members.

To facilitate domestic coordination and

implementation of the TFA, the Cabinet also

cleared the proposal to set up a National

Committee on Trade Facilitation (NCTF) to be

jointly chaired by the commerce and revenue

secretaries. These objectives are also in

consonance with India’s “Ease of Doing

Business” initiative.

2. Cohort:

Group whose members share a significant

experience at a certain period of time or have

one or more similar characteristics. People

born in the same year, for example, are the

birth cohorts (generation) for that year.

Therefore, a cohort is a group of subjects who

share a defining characteristic.

3. Engel’s Law:

Engel's Law is an economic theory introduced

by Ernst Engel which states that the

percentage of income allocated for food

purchases decreases as income rises. As a

household's income increases, the percentage

of income spent on food decreases while the

proportion spent on other goods (such as

luxury goods) increases.

It similarly states that lower income

households spend a greater proportion of their

available income on food than middle or

higher income households.

www.gradeup.com

4. Public Sector Asset Rehabilitation

Agency:

Although this was an agency which got

mention in the Economic Survey 2016-2017,

but the term is important for this year as well.

A new Public Sector Asset Rehabilitation

Agency (PARA) may be set up to buy bad

loans from state-run banks so that the lenders

can be relieved of a problem that has been

weighing on their performance, and can shift

focus to lending. PARA will be an independent

entity that will identify the largest NPA

accounts held by banks, and then buy these

out from them.

PARA is expected to raise capital for its

buyouts by issuing government securities,

tapping the capital markets or receiving a

capital infusion from the RBI.

5. Universal Basic Income:

Although this was a scheme which got

mention in the Economic Survey 2016-2017,

but the term is important for this year as well.

Universal Basic Income is a form of social

security scheme that is guaranteed to citizens

and transferred directly to their bank

accounts. A universal basic income, like

constitutional rights, would be unconditional

and universal.

The concept of Universal Basic Income (UBI)

has been provided as an alternative to the

various social welfare schemes in an effort to

reduce poverty.

***

www.gradeup.com