Indian Economy Part 3 – Terminology in Indian Economy

IAS Toppers (10)

Ad Valoren Tax A tax proportional to the object being taxes
Arbitrage The process of buying a good or asset in one market where price is low and simultaneously selling it in another market where prices are higher.
Administered price Price set by a single body usually government
Asset Stripping Selling surplus land on machinery of an industrial undertaking to use idle asset into cash.
Bankruptcy A legal arrangement to deal with the affairs of individuals unable to pay their debts
Bear Market A stock market in which prices are excepted to fall
Blue chip The equity shares of large and reputed companies. Such companies have normally high market reputation
Bond A security with a redemption date over a year later than its date of issue.
Bill of Sight Declaration made by importer to the custom. In situation when the importer wants to inspect the good before paying duties
Bill of Lading It is documentary evidence giving details of goods shipped, the ship on which goods are consigned and the name of the consigner and the consignee.
Begger my/thy neighbour policy Used in international trade one country’s benefit is at the loss of other company
Budget deficit The excess of a government’s total expenditure over its income
Bull market A stock market in which prices are expected to rise
Call option A contract giving the holder the right but not obligation to buy a good or security on some future date at a pre – arranged price
Capital account convertibility It is a feature of a nation’s financial regime that centre’s on the ability to conduct transaction of a local financial assets freely and at country determined exchanged rate
Counter trade policy In this trade goods are purchased from the seller only when the seller is ready to buy something from purchaser also.
Capital market Capital market refers to stock exchange and other institutions where securities are bought and sold
Cash reserve ratio It is portion of total time and demand liability of a bank that is to be parked with the central bank
Cess A temporary additional tax whose destination is fixed. Ex. Central road cess, Education cess
Commodity A standardized god, which is traded in bulk and whose units are interchangeable
Common stock The equity capital of a corporation
Corporate tax Tax levied on corporate on their profits, distinct from taxation of the incomes of their owners.
Credit Rating An assessment of the portability that an individual, firm or country will be able and willing to pay debts.
Current Account Deficit Also referred as CAD, it refers to an excess over receipts on current account in a country’s balance of payment
Debenture A security loan raised by a company usually with fixed interest and sometimes with a fixed redemption date
Debt Money owned by one person or organisation to another
Deficit financing Ways and means to finance budgetary deficit. This may include printing of new money, market borrowing etc.
Deflation A progressive reduction in price level or a reduction in activity due to lack of effective demand.
Demat Acronym for De – materialized Account. This is required for trading on stock market
Disinflation A situation in which inflation enters into negative domain or inflation becomes negative

Disinvestment A process by which Government Control in PSUs is reduced. This is done by selling the Government’s share in the PSU to private parties or individuals via stock exchange.
Dumping The sale of any foreign commodity in a foreign market at a price below host country & also at times such quantity that cannot be explained in the fair competition
Deadweight debt It means a debt incurred to meet current expenditure.
Excise duty Duty levied by the government on the production of goods.
Exim Bank An agency setup by Indian government to promote Indian trade. The bank assists exports by providing finance or guaranteeing or insuring private loans to finance them.
Entrepot Trade Import of goods with intention of exporting them without rendering them liable for duty.
Ergonomics Improvement of the man machine interface for higher efficiency.
Euro Dollar US dollar or right US dollar held by the people outside USA
Engel’s law The portion of income spent on food diminishes with income increase.
FDI Acronym for foreign direct investment. The acquisition by resident of a country of assets abroad.
FEMA Acronym for foreign Exchange Management Act. The act replaced Foreign Exchange Regulation Act. It provides legal framework to manage Foreign Exchange in India.
FII Acronym for foreign Institutional Investment. It is an investor or an investment fund that is registered in a country outside of the one in which it is currently investing.
Fiscal Deficit This deficit tells the true position of economy. It is obtained by adding total budgetary deficit n and market borrowings.
Fiscal Federalism The process by which notion of federalism could be brought in financial matters in a federal state. In this case the constituting units are provided with a domain to work upon in fiscal matters.
Fiscal drag During inflation income for the govt. from taxes increases by proportion higher than the inflation.
GDP deflator A price index used to assess whether there has been a real rise or fall in GDP from one year to another. GDP at current prices are divided by GDP deflator to obtain in index of GDP at base year prices.
Giffen Goods A good for which demand falls when its price falls.
Global Innovation index It is a global index measuring the level of innovation of a country.
Government Bonds/Security A bond or security with the banking of state guarantee on the repayment of the money.
GST An indirect tax which would be levied on all goods and services in India.
Gini Coefficient Area between the Lorentz curve and the line of perfect equality
Green shoots It is a term used colloquially to indicate signs of economy recovery during an economic downturn.
Hawala An informal transfer system which is considered illegal generally. It exists outside of or parallel to traditional banking financial system.
Hedge fund An Investment fund specializing in taking speculative positions in markets for shares or currency, which the fund does not actually possess in expectation that prices will fall.
Inclusive Growth It is model of growth which is broad based and shared and pro – poor.
Inflation A situation in which prices are on the rise or when money loses its purchasing power.
Inflation Indexed Bond These are bonds where the principal is indexed to inflation.
Labour Market The process by which workers and employers are brought into contact and wages and conditions of work are decided.
LAF (Liquidity Adjustment Facility) It is a monetary policy tool which allows banks to borrow money through repurchase agreements.
Laffer curve A curve that shows the relation between tax rate and revenue raised
Liquidity In financial terms anything which could be easily turned into money and at a fairly predictable price. The property of having liquid assets.
Memorandum of Understanding (MoU) An agreement signed between two entities by which one entity agrees not to interfere in the working of other entity, on the promise that the second entity will give desired results to the first entity. This usually occurs between governments and their PSUs.
Money Market This is the market for very short – term loans for example overnight transaction.
(Marginal standing facility)
Under this the RBI allows banks to borrow up to 1% of their time and demand liabilities.
Multi brand retail It is marketing of two or more similar and competing products by the same firm.
Mutual Fund A financial institution which holds shares on behalf of investors.
National Income The total income of residents of a country, measures at factor cost after deducting capital consumption.
Open Market Operation The purchase or sale of securities by the central bank as a means of changing interests rates and money supply. If the central bank buys securities their prices rise, interest rate fall and money supply increases. If the central bank sells securities their prices fall, interest rate raise and the money supply decreases.
Organisation and Method (O & M) Examination of office work to make them more efficient.
Pareto Optimally A situation in which a person can be made better off without making another person worse off.
Per Capita Income The national income of a country or region when divided by its population.
Ponzi Scheme It is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors rather than from profit earned by individual organization running the operation.
Primary Deficit It is the difference between current government spending on goods and services and total current revenue from all types of taxes.
Pump priming The theory that it is possible for the government to bring about permanent recovery from a slump by a temporary injection of purchasing power of the economy.
Purchasing power parity It states that exchange rates between currencies are determined in the long run by the amount of goods and services that each can buy.
Parallel Import Importing without intellectual property consideration (Grey market)
Private placement Method of selling securities privately to a selective group of investors
Real effective exchange rate It is an index that describes the relative strength of a currency relative to a basket of other currencies.
Regressive tax A tax where the ratio of tax paid to income falls as income rises
Repo rate It is the rate at which RBI lends money to commercial banks on short term basis.
Reserve Repo Rate It is the rate at which RBI borrows money from commercial banks on short term basis.
Redundance Permanent laying – off surplus workers
Real cost According to the Adam smith, it refers to pains and sacrifices of labour.
Sales tax Tax levied on sale of goods.
SEBI Acronym for Securities and Exchange Board of India. The body was constituted in 1988 and was made a statutory body in 1992. It is the capital market regulator in India.
Service tax An indirect tax levied on services obtained from service providers.
Sovereign Debt Debt of the government of an independent country
Special Economic Zone A demarcated area in a country which for all practical purposes of taxation is considered a foreign territory. The area is mainly used for production of goods and domestic laws related to labour and taxation are applicable their in limited manner.
Stagflation A situation where an economy persistently suffers from both high inflation and high unemployment
Statutory Liquidity Ratio (SLR) It is the amount money which the bank has to keep with itself at all times in liquid cash.
Subsidy An attempt by the government to keep the retail price of goods low of compensating the producer of the goods for high cost of manufacturing.
Surcharge A temporary additional tax whose destination is to be decided by the levying authority.
Sustainable growth A model of growth in which resources are used in such a manner that the stake on these resources of future generations is not compromised.
Sleeping partner, Dormant partner A person who invests but does not take part in running of the business.
Treasury bill A short dated government security. These bills bear no normal interest, but are promises to pay in 90 days – time.
Twin deficit The concept contends that there is a strong link between a national economy’s current account balance and its government budget balance.
VAT Acronym for value added tax; It is a tax on the value addition done to a product.
Zero based budgeting A concept of budgeting which came up in USA in this type of budget the schemes and programme are evaluated from start or zero base and if they are found to be good these are included in the budget of next year.

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