Indian Economy & Macroeconomics (Class-XII)

Measure to Correct Deficient Demand Following measures may be adopted to correct the deficient demand: FISCAL MEASURE- Increase in Government Spending:  During deficient demand, the government should increase expenditure on public works like construction of roads, flyovers, buildings, etc. This will increase the aggregate demand and will help to correct the situation of deficient demand. Decrease In Tax Government should decrease the rate of direct taxes (improve progressive tax system)  Increase subsidy MONETARY MEASURE Two major instruments are: (i) Quantitative Instruments; (ii) Qualitative Instruments Quantitative Instruments; 1. Bank Rate During deficient demand, the central bank reduces the bank rate in order to expand credit. It leads to fall in the market rate of interest which induces people to borrow more funds. It ultimately leads to increase in the aggregate demand. Repo Rate: Repo rate relates to the loans offered by the RBI to the commercial banks

Measure to Correct Excess Demand FISCAL MEASURE 1.Increase Taxes Government impose higher amount of taxes causing the decrease in purchasing power of the people. 2.Decrease in Government Spending: government should reduce its expenditure on public works thereby reducing the money income of the people and their demand for goods and services. 3. Increase in Public Borrowing/Public Debt:  This measure means that government should raise loans from public and hence borrowing decreases the purchasing power of people by leaving them with lesser amount of money. MONETARY MEASURE Two major instruments of Monetary Policy, used to decrease availability of credit are: (i) Quantitative Instruments; (ii) Qualitative Instruments. Quantitative Measure 1. Increase in Bank Rate: The term ‘Bank Rate’ refers to the rate at which central bank lends money to commercial banks .During excess demand, central bank increases the bank rate, which discourages borrowers from taking loans.

Eastimation of National Income Some important formulas-  How to change each other Gross-Dep. à Net,         Net+ Dep=Gross MP-NIT=FC ,                FC+NIT=MP   DI+NFIA=NI ,                                 NI-NFIA=DI { Dep- Depreciation, MP-Market Price, FC- Factor cost, NIT- Net Indirect Tax} There are three methods of the  Eastimation of National Income- i) Value Added Method- GVO MP =Sales+ Change in Stock GVA MP /GDP MP= GVO MP –IC (Domestic Income) NDP FC =GDP MP -Dep.-NIT (National Income) NNP FC = GDP MP -Dep.-NIT+NFIA (Sales =Domestic Sales+ Export), (Change in stock= Closing stock –Opening Stock)   (NIT=IT-Subsidy) ( Net Indirect Tax= Indirect tax-Subsidies) ii) Expenditure Method- GDP MP =GFCE+ PFCE+ GDCF+ Net Export GDCF=GDFCF+ Change in Stock GDCF=NDCF+ Dep. GDCF=NDFCF+ Change in Stock+ De p. (Domestic Income) NDP FC =GDP MP -Dep.-NIT (National Income) NNP FC = GDP MP -Dep.-NIT+NFIA iii) Income M

Rural  development:  Key  issues  -  credit  and  marketing  -  role  of  cooperatives; agricultural  diversification;  alternative  farming  -  organic  farming Rural Development Rural development means an action-plan for the economic and social upliftment of rural areas. Objectives of rural development: 1. Increasing productivity of agricultural sector. 2. Generating alternative means of livelihood in rural sector. 3. Promoting education and health facilities in the rural areas.  KEY ISSUES IN RURAL DEVELOPMENT 1.Development of human resources 2.Land reforms 3.Development of productive resources 4.Infrastructure development 5.Special measures for poverty alleviation                        RURAL CREDIT Rural credit means credit for the farming communities. Sources of rural credit in India. 1. Non-institutional sources are money lenders, traders and commission agents, landlord, relatives and friends. 2. Institutional sources are as follow: (i) Co-operative credit

Goods & Service Tax (GST)   The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. GST Act was passed in the Parliament on 24th March, 2017 and it came into effect from 1st July 2017. Goods & Services Tax is a comprehensive, multi-stage, destination-based tax that is levied on every value addition by the Central and State governments. Before the implementation  GST, various central, state and local area taxes were levied in India. These indirect taxes have now been subsumed under GST which is based on the principle of ONE NATION ONE TAX.   Features of GST    (i)  GST is a comprehensive tax as various indirect taxes have been merged in this single tax except Customs duty, taxes on petroleum products, alcoholic drinks and taxes levied by local bodies.  (ii)   GST is a multi-stage tax because it is proposed to be levied at all stages starting from production up to final consumption (iii) GST is a Value Added tax because it is levied o

DEMONETISATION Demonetisation is the act of stripping a currency unit of its status as legal tender”. DEMONETISATION IN INDIA After demonetising bank notes on two previous occasions i.e. in the year 1946 and 1978 the Government of India decided to do so again on November 8, 2016, wherein, higher  denomination currency notes of `500 and `1,000 ceased to be legal tender. These notes accounted for 86% of the country’s  currency supply. Aim of Demonetisation The recent move of demonetisation by the  Government of India aimed at achieving the following objectives: 1.To curb corruption and penalise illicit activities and wealth acquired from it.   2.To curtail circulation of counterfeit currency(fake currency). 3.To tax unaccounted private wealth maintained in the form of cash. 4.To reduce tax evasion and to increase tax base. Impact of Demonetisation Some of the notable short term impacts of demonetisation are discussed below. 1.A decline in the stock

     INFRASTRUCTURE               Infrastructure :  Meaning  and  Types:  Case Studies:  Energy  and  Health:  Problems  and Policies-  A  critical  assessment; INFRASTRUCTURE Infrastructure refers to the basic supporting  structure which is built to provide different kinds of services in an economy.  TYPE OF INFRASTRUCTURE Economic Infrastructure   (a) It directly  supports the economic system. It helps the economic system from inside. (b) Example: Energy, transport system. It helps the economic system from inside. (c) It improves the quality of economic resources and thus raises the production.(d) Expenditure on it will raise the stock of physical capital. (e) It will raise the process of economic growth. Social Infrastructure (a) It indirectly supports the economic system. It helps the economic system from outside. (b) Example:Health, education and housing. (c) It improves

Sustainable Economic Development Meaning,  Effects  of  Economic  Development  on Resources  and  Environment,  including  global  warming SUSTAINABLE DEVELOPMENT  MEANING “Sustainable development is development that meets the needs of the present, without compromising the ability of future generations to meet their own needs.” SUSTAINABLE ECONOMIC DEVELOPMENT:  MEANING "Economic development that is conducted without depletion of natural resources." Goals of Sustainable Development There are three primary goals of sustainable development: 1.To minimize the depletion of natural resources when creating new developments. 2.To create development that can be maintained and sustained without causing further harm to the environment. 3.To provide methods for retrofitting existing development to make them into eco friendly facilities and projects. Effects  of  Economic  Development  on Resources:- 1.Reduction of forest coverage  -Th

H UMAN CAPITAL Human capital refers to the stock of skill, ability, expertise, education and knowledge in a nation at a given point of time.  Chapter -05 HUMAN CAPITAL FORMATION Physical capital refers to all those inputs which are required for further production, like plant and machinery, factory, buildings, raw materials, etc. Human capital refers to the stock of skill, ability, expertise, education and knowledge involved in the people. Meaning of Human Capital formation: Human capital formation means the development of abilities and skills among the population of the country. Sources of Human Capital Formation: 1) Expenditure on education: (It is one of the most important sources of human capital formation) proper utility of man power depends on the system of education, training and industrial experience of the people. Spending on education by individuals is similar to spending on capital goods by companies with the objective of increasing future pro