Important Economic Concepkbt-Part-I.pdf

Important Economic Concept Part-I

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1. Agricultural Census

Agricultural Census, which is conducted every five years in India. It is the largest countrywide

statistical operation undertaken by Ministry of Agriculture, for collection of data on structure of

operational holdings by different size classes and social groups. Primary ( fresh data) and secondary

(already published) data on structure of Indian agriculture are collected under this operation with the

help of State Governments. The first Agricultural Census in the country was conducted with

reference year 1970-71.

Agricultural Census is carried out as a Central Sector Scheme under which 100% financial assistance

is provided to States/Union Territoriess. Agricultural Census operation is carried out in three phases.

During Phase-I, a list of all holdings with data on area, gender and social group of the holder is

prepared with the help of listing schedule. During Phase-II detailed data on tenancy, land use,

irrigation status, area under different crops (irrigated and un-irrigated) are collected in holding

schedule. Phase-III, which is called as Input Survey, relates to collection of data of input use across

various crops, States and size groups of holdings, in addition to data on agriculture credit,

implements and machinery, livestock and seeds.

2. Agricultural Labourers

A person who works on another person's land for wages in money or kind or share is regarded as an

agricultural labourer. She or he has no risk in the cultivation, but merely works on another person's

land for wages. An agricultural labourer has no right of lease or contract on land on which she/he

works.

3. Agricultural Marketing Information Network (AGMARKNET)

Agricultural Marketing Information Network (AGMARKNET) was launched in March 2000 by the

Union Ministry of Agriculture. The Directorate of Marketing and Inspection (DMI), under the

Ministry, links around 7,000 agricultural wholesale markets in India with the State Agricultural

Marketing Boards and Directorates for effective information exchange. This e-governance portal

AGMARKNET, implemented by National Informatics Centre (NIC), facilitates generation and

transmission of prices, commodity arrival information from agricultural produce markets, and web-

based dissemination to producers, consumers, traders, and policy makers transparently and quickly.

The AGMARKNET website (http://www.agmarknet.nic.in) is a G2C e-governance portal that caters

to the needs of various stakeholders such as farmers, industry, policy makers and academic

institutions by providing agricultural marketing related information from a single window. The

portal has helped to reach farmers who do not have sufficient resources to get adequate market

information. It facilitates web- based information flow, of the daily arrivals and prices of

commodities in the agricultural produce markets spread across the country. The data transmitted

from all the markets is available on the AGMARKNET portal in 8 regional languages and English. It

displays Commodity-wise, Variety-wise daily prices and arrivals information from all wholesale

markets. Various types of reports can be viewed including trend reports for prices and arrivals for

important commodities.

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Directorate of Marketing and Inspection (DMI) has liaison with the State Agricultural Marketing

Boards and Directorates for Agricultural Marketing Development in the country. Agricultural

Produce Market Committee (APMC) displays the prices prevailing in the market on the notice

boards and broadcasts this information through All India Radio etc. This information is also supplied

to State & Central Government from important markets. The statistics of arrival, sales, prices etc. are

generally maintained by APMCs.

AGMARKNET is also expected to play a crucial role in enabling e-commerce in agricultural

marketing.

4. Agricultural Regions of India

There are five agricultural regions in the country viz ;

Rice region: This extends from the eastern part to include a very large part o the north-

eastern and south-eastern India with another strip along the western coast.

Wheat region: This extends to most of the northern, western and central India.

Millet-Sorghum region: This covers Rajasthan, Madhya Pradesh and the Deccan Plateau

in the centre of the Indian peninsula.

Temperate Himalayan Region: This region is spread over Kashmir, Himachal Pradesh,

Uttarakhand and some adjoining areas. Here potatoes are as important as a cereal crops (which are

mainly maize and rice) and the tree-fruits form a large part of agricultural production.

Plantation crops region: In Assam and the hills of Southern India tea is produced. Coffee

is produced in the hills of the western peninsular India. Rubber is grown in Kerala and some of the

North-Eastern States like Tripura. Spices grown in Kerala, parts of Karnataka and Tamil Nadu.

5. Alternative Investment Funds (AIFs)

Anything alternate to traditional form of investments gets categorized as alternative investments.

Now, what is considered as traditional may vary from country to country. Generally, investments in

stocks or bonds or fixed deposits or real estates are considered as traditional investments. However,

even with respect to investments in stocks, if the investments are in the stocks of small and medium

scale enterprises (SMEs), it gets categorized as alternative investments in many jurisdictions (For

instance, the SME exchange is called as Alternative Investment Market (AIM) in UK). Generally,

the term AIF refers to private equity and hedge funds.

In India, alternative investment funds (AIFs) are defined in Regulation 2(1)(b) of Securities and

Exchange Board of India (Alternative Investment Funds) Regulations, 2012. It refers to any

privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or

a company or a body corporate or a Limited Liability Partnership(LLP) which are not presently

covered by any Regulation of SEBI governing fund management (like, Regulations governing

Mutual Fund or Collective Investment Scheme)nor coming under the direct regulation of any other

sectoral regulators in India-IRDA, PFRDA, RBI. Hence, in India, AIFs are private funds which are

otherwise not coming under the jurisdiction of any regulatory agency in India.

Thus, the definition of AIFs includes venture Capital Fund, hedge funds, private equity funds,

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commodity funds, Debt Funds, infrastructure funds, etc.,while, it excludes Mutual funds or

collective investment Schemes, family trusts, Employee Stock Option / purchase Schemes, employee

welfare trusts or gratuity trusts, holding companies within the meaning of Section 4 of the Companies Act, 1956, securitization trusts regulated under a specific regulatory framework, and

funds managed by securitization company or reconstruction company which is registered with the

RBI under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002.

One AIF can float several schemes. Investors in these funds are large lyinstitutional, high net worth

individuals and corporates.

6. Annual Financial Statement

Annual Financial Statement is a document presented to the Parliament every year under Article 112

of the Constitution of India, showing estimated receipts and expenditures of the Government of India

for the coming year in relation to revised estimates for the previous year as also the actual amounts

for the year prior to it.

The receipts and disbursements are shown under three parts in which Government Accounts are to

be kept viz.,(i) Consolidated Fund, (ii) Contingency Fund and (iii) Public Account.

Under the Constitution, Annual Financial Statement has to distinguish expenditure on revenue

account from other expenditure. Government Budget, therefore, comprises of Revenue

Budget and Capital Budget.

The estimates of receipts and expenditure included in the Annual Financial Statement are for the

expenditure net of refunds and recoveries, as will be reflected in the accounts.

The estimates of receipts and disbursements in the Annual Financial Statement are shown according

to the accounting classification prescribed by Comptroller and Auditor General of

India under Article 150 of the Constitution, which enables Parliament and the public to make a

meaningful analysis of allocation of resources and purposes of Government expenditure.

Annual Financial Statement is essentially the Budget of the Government. In case of the Central

Government, the Budget is presented in two parts, viz., the Railway Budget pertains to Railway

Finance and the General Budget (or what is commonly known as Union Budget) relating to the

financial position of the Government of India, excluding Railways. The Railway Budget is presented

by the Railway Minister sometime in the third week of February. By convention, the General Budget

is presented to Lok Sabha by the Finance Minister on the last working day of February of each year.

A copy of the respective Budgets is simultaneously laid on the Table of Rajya Sabha.

However, these days, the term Union Budget includes not just the Annual Financial Statement but

also the policy documents associated with it like, Budget Speech, Finance Bill, Appropriation

Bill, Demand for grants, documents submitted under Fiscal Responsibility and Budget Management

Act like, macro-economic framework statement, medium term fiscal policy statement etc.

7. Appropriation

According to Article 114 of the Indian constitution, no money can be withdrawn from

the Consolidated Fund of India to meet specified expenditure except under an appropriation made by

Law. Similarly, State (sub-national) Governments can also draw from their Consolidated Funds only

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after an appropriation act is passed. Every year, after budgetary estimates are approved, an

Appropriation Bill is passed by the Parliament/state legislature and then it is presented to the

President/Governor. After the assent by the President/governor to the bill, it becomes an Act.

However, if during the course of the financial year, the funds so appropriated are found to be

insufficient, the Constitution provides for seeking approval from the Parliament or State Legislature

for supplementary grants.

Appropriation Accounts present the total amount of funds (original and supplementary) authorised

by the Parliament/State legislature in the budget vis-a-vis the actual expenditure incurred against

each head of expenditure. The Office of the Comptroller and Auditor General of India reports to the

Union and State Legislatures any discrepancies that occur between the amounts appropriated for a

particular head of expenditure and what was actually spent at the end of the financial year. These

reports provide an indication of unrealistic budget estimates made by various departments. Any

expenditure in excess of what was approved requires regularization by the Parliament/State

Legislature.

Some expenditure of Government (e.g. public debt repayments, expenditure incurred on the

Judiciary etc.) is not voted by the Legislature and such expenditure is Charged on Consolidated Fund under Article 112 (3) of the Constitution and is called Charged Appropriation.

All other expenditure is required under Article 113 (2) of the Constitution to be voted by the

Legislature and is called voted grant.

8. ASHA (Accredited Social Health Activist)

ASHA is a woman grass root level health volunteer, who links households with health facilities. As

per norms, there should be one ASHA for every 1000 population.

She disseminates health related information and assists households to gain access to health care

facilities. She is paid on the basis of performance (incentive) for the task she undertakes.

9. Assigned Revenue

The term is used to refer to various tax/duty/cess/surcharge/levy etc., proceeds of which are

(traditionally) collected by State Government (on behalf of) local bodies viz.,

Panchayat/Municipality and (subsequently) adjusted with/assigned to them. Collection of such

revenue is governed by relevant Act(s) administered by Panchayat/Municipality.

Typical examples of assigned revenue include entertainment tax, surcharge on stamp duty, local

cess/surcharge on land revenue, lease amount of mines and minerals, sale proceeds of social forestry

plantations etc. State Finance Commissions recommend devolution of assigned revenue to local

bodies on objective criteria, which may be specified by them in specific context.

10. Association of State Road Transport Undertakings (ASRTU)

Association of State Road Transport Undertakings (ASRTU) came into existence on 13th August,

1965 with the objective of providing a forum for exchange of ideas on best practices of State Road

Transport Undertakings (SRTUs). ASRTU constitutes the backbone of mobility for the urban and

rural population across India. ASRTU plays an important role in promoting affordable mode of

public transport for socio-economic development of country. Public SRTUs are backbone of country

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and thus ASRTU is committed to provide all necessary help to them in their production, quality

monitoring and to address to their common problems.

11. Atal Pension Yojana (APY)

Atal Pension Yojana is a pension scheme for the unorganized sector that provides a defined

pension, depending on the contribution and the period of contribution. Government contributes 50%

of the beneficiaries premium limited to Rs.1,000 each year, for five years, in the new accounts opened before 31st December 2015.

The Scheme focuses on the unorganized sector where nearly 400 million employees representing

more than 80 per cent of all employees are engaged. Atal Pension Yojana would provide a fixed

minimum pension Rs.1000 to Rs.5000 per month starting from the age of 60. The amount of pension

will depend on the monthly contribution by the employee and the age at which the employee

subscribes to the scheme. In any case, the individual will have to subscribe under Atal Pension

Yojana for a minimum of 20 years.

The scheme is aimed at those who are not members of any statutory social security scheme and who

are not Income Tax payers.

The pension would also be available to the spouse on the death of the subscriber and thereafter, the

pension corpus would be returned to the nominee. The minimum age of joining APY is 18 years and

maximum age is 40 years. The benefit of fixed minimum pension would be guaranteed by the

Government.

The scheme was launched in simultaneous functions held at 115 venues across the country on 9 May

2015. The most significant part of this Scheme is co-contribution by government of Rs.1000/- per

annum or 50% of the total contribution whichever is lower, for the first 5 years if one joins the

scheme before the end of the first year of its launch, that is 31 December, 2015.

12. AYUSH

AYUSH signifies a combination of alternative system of Medicine, which was earlier known as

Indian System of Medicine. AYUSH includes Ayurveda, Yoga and Naturopathy, Unani, Siddha and

Homeopathy. The objective of AYUSH is to promote medical pluralism and to introduce strategies

for mainstreaming the indigenous systems of medicine. In India, at the Union Government level,

AYUSH activities are coordinated by Department of AYUSH under Ministry of Health & Family

Welfare. Most of these medical practices originated in India and outside, but got adopted in India in

the course of time.

Ayurveda is more prevalent in the states of Kerala, Maharashtra, Himachal Pradesh, Gujarat,

Karnataka, Madhya Pradesh, Rajasthan, Uttar Pradesh, Delhi, Haryana, Punjab, Uttarkhand, Goa and

Orissa.

The practice of Unani System could be seen in some parts of Andhra Pradesh, Karnataka, Jammu &

Kashmir, Bihar, Maharashtra, Madhya Pradesh, Uttar Pradesh, Delhi and Rajasthan.

Homoeopathy is widely practiced in Uttar Pradesh, Kerala, West Bengal, Orissa, Andhra Pradesh,

Maharashtra, Punjab, Tamil Nadu, Bihar, Gujarat and the North Eastern States and the Siddha

system is practiced in the areas of Tamil Nadu, Pondicherry and Kerala.

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In September 2009 Sowa Rigpa system of medicine was also recognized as a traditional system of

medicine. Sowa Rigpa, commonly known as Amchi is one of the oldest surviving system of medicine in the world, popular in the Himalayan region of India. In India this system is practiced in

Sikkim, Arunachal Pradesh, Darjeeling (West Bengal), Lahoul and Spiti (Himachal Pradesh) and

Ladakh region of Jammu & Kashmir.

The Department of Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy (AYUSH),

Ministry of Health and Family Welfare has been accorded the status of a Ministry with effect from

09.11.2014 by the Cabinet Secretariat.

National AYUSH Mission (NAM) launched on 15 September 2014 as part of 12th Plan envisages

better access to AYUSH services through increase in number of AYUSH Hospitals and

Dispensaries, ensuring availability of AYUSH drugs and trained manpower.

13. Back-to-Back Loans

State Governments in India cannot access external sources of finance directly. The 12th Finance

Commission recommended the transfer of external assistance to State Governments in India by the

Union Government on a Back-to-Back basis. This recommendation was accepted by the Government of India for general category states and the arrangement came into effect from April 1,

2005. For special category states ( Northeastern states, Uttarakhand, Himachal and J&K), external

borrowings are in the form of 90 per cent grant and 10 per cent loan from the Union Government.

Passing loans on Back-to-Back basis to State Governments implies that States would face identical terms and conditions (including concessional interest rates, grace period and maturity profile,

commitment charges and amortization schedules) on account of their access to finance from bilateral

and multilateral sources, as is faced by the Union Government.

This arrangement entails exposure of States to uncertain movements in international rates of interest

(as multilateral agencies viz. IBRD benchmark their interest rates to a reference rate viz. the LIBOR)

and currency exchange rates. As per the Back-to-Back loan transfer arrangement, states would have to face currency risk since principal repayments and interest payments on such loans to external

agencies are designated in foreign currencies. In case of adverse exchange rate movement(s) larger

rupee provisions may be required to meet debt service obligations that may negatively impact the

fiscal health of the state concerned.

14. Backwardness

As a consequence of amalgamation of regions at varying levels of socio- economic development &

different political and administrative structures, the modern state has inherited regional imbalances

that still persist. The backwardness of states is measured to understand the extent of these regional

imbalances. Some of the attempts to define or measure backwardness in India are mentioned below:

Measuring backwardness of Districts at the national level - 2003-04

Concept of Backwardness also came up in the context of a scheme for backward districts, called

Backward Districts Initiative Rashtriya Sam Vikas Yojana (RSVY) (A Tenth Plan Initiative). The Rashtriya Sam Vikas Yojana (RSVY) was being implemented in 147 districts since 2003-04.

The list of districts covered under the RSVY may be seen here. The Scheme was aimed at focused

development programmes for backward areas which would help reduce imbalances and speed up

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development. The identification of backward districts within a State was made on the basis of an

index of backwardness comprising three parameters with equal weights to each:

value of output per agricultural worker;

agriculture wage rate; and

percentage of SC/ST population of the districts.

This Scheme later (2006-07) got subsumed in the Backward Regions Grant Fund program, the

guidelines of which may be seen here. BRGF consists of two components - (a) Districts Component

covering 270 districts, and (b) State Component-which covers special plan for West Bengal, Bihar

and the Kalahandi Bolangir-Koraput (KBK) Region of Odisha and Bundelkhand packages for UP &

MP. The implementing Ministry for the BRGF districts component is the Ministry of Panchayati

Raj. This Scheme was also proposed for closure from December 2009 as most of the districts have

claimed their total allocation of Rs.45 crore each. As such there is no proposal under consideration

of the Government to extend RSVY to other districts of the country. However, a special

development package of Rs. 850.00 crore has been provided to the state of Andhra Pradesh from

BRGF (State component) during 2014-15.Pursuant to the recommendations of 14th Finance

Commission for higher untied tax devolution to states, the scheme followed a natural death since

2015-16. Hence, the ongoing projects under BRGF for addressing Intra-State inequality may be

supported by the States out of their own funds, including received under the recommendations of

14th Finance Commission.

However, the Parliamentary Standing Committee on Finance in its report in April 2015 (on

the Demand for Grants of Ministry of Finance) had disagreed with this view in their report and were

of the view that such subsuming of specific schemes designed with a special purpose / focus to uplift

living standards in backward and under-developed areas / regions with chronic poverty is not

desirable. According to the Committee, Central budgetary support and an element of hand-holding

by way of special central assistance is therefore still required to bring about social and economic

development in such areas, which are lagging far behind in socioeconomic indices and which also

face extraordinary challenges.In this regard the Committee desired that the recommendations of

Raghuram Rajan's Report on backwardness of States (Committee for Evolving a Composite

Development Index of States) may be considered and appropriately implemented.

Measuring backwardness of states - 2013

Government in May 2013, decided to constitute an Expert Committee under the chairmanship of Dr.

Raghuram Rajan to measure backwardness of the Indian States by evolving a Composite

Development Index of States for guiding devolution of funds from central government to such

backward states. The committee submitted its report in September 2013.

The Committee proposed a general method for allocating funds from the Centre to the states based

both on a states development needs as well as its development performance. Towards this, committee created a multi-dimensional index based on certain measures which correspond to the

multi dimensional approach to defining poverty outlined in the Twelfth Plan. Need is based on a

simple index of (under) development computed as an average of the following ten sub-components:

monthly per capita consumption expenditure

education

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health

household amenities

poverty rate

female literacy

percent of SC-ST population

urbanization rate

financial inclusion

connectivity

Improvements to a states development index over time (that is, a fall in underdevelopment) is taken as the measure of performance. Less developed states rank higher on the index, and would get larger

allocations based on the need criteria, with allocations increasing more than linearly to the most

underdeveloped states.

The Committee recommended that States that score 0.6 and above on the Index may be classified as

Least Developed; States that score below 0.6 and above 0.4 may be classified as Less Developed; and States that score below 0.4 may be classified as Relatively Developed. The Least Developed states effectively subsume what is now special category state.

Using the index, the Committee has identified the Least Developed states as Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan and Uttar

Pradesh. Government as on date has not taken any decision on the recommendations of the

Committee.

15. Banking Correspondent (BC)

Banking Correspondents (BCs) are individuals/entities engaged by a bank in India (commercial

banks, Regional Rural Banks (RRBs) and Local Area Banks (LABs)) for providing banking services

in unbanked / under-banked geographical territories. A banking correspondent works as an agent of

the bank and substitutes for the brick and mortar branch of the bank.

BCs engage in

identification of borrowers;

collection and preliminary processing of loan applications including verification of primary

information/data;

creating awareness about savings and other products and education and advice on managing

money and debt counselling;

processing and submission of applications to banks;

promoting, nurturing and monitoring of Self Help Groups/ Joint Liability Groups/Credit

Groups/others;

post-sanction monitoring;

follow-up for recovery,

disbursal of small value credit,

recovery of principal / collection of interest

collection of small value deposits

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sale of micro insurance/ mutual fund products/ pension products/ other third party products

and

receipt and delivery of small value remittances/ other payment instruments.

The banks in India may engage the following individuals/entities as BCs.

Individuals like retired bank employees, retired teachers, retired government employees and

ex-servicemen, individual owners of kirana (small shops) / medical /Fair Price shops, individual

Public Call Office (PCO) operators, agents of Small Savings schemes of Government of

India/Insurance Companies, individuals who own petrol pumps, authorized functionaries of well-run

Self Help Groups (SHGs) which are linked to banks, any other individual including those operating

Common Service Centres (CSCs);

NGOs/ Micro Finance Institutions set up under Societies/ Trust Acts or as Section 25

Companies ;

Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/

Cooperative Societies Acts of States/Multi State Cooperative Societies Act;

Post Offices;

Companies registered under the Indian Companies Act, 2013 with large and widespread

retail outlets

Non-banking Finance Companies (NBFCs) were not allowed to be appointed as Business

Correspondents (BCs) by banks. However, since June 2014 banks have been permitted to engage

non-deposit taking NBFCs (NBFCs-ND) as BCs, subject to certain conditions:

While a BC can be a BC for more than one bank, at the point of customer interface, a retail outlet or

a sub-agent of a BC shall represent and provide banking services of only one bank.

The banks will be fully responsible for the actions of the BCs and their retail outlets / sub agents.

Banking Correspondent in India, in all sense of the term, is equivalent to what is known as

"Correspondent Banking" in Brazil (Generally, the term correspondent bank refers to a bank which

functions as an agent of another bank in a foreign jurisdiction. However, Brazil uses this term for

domestic agency services by individuals / entities). In some countries BC model is known as "Agent

Banking".

16. Base Effect

The base effect refers to the impact of the rise in price level (i.e. last years inflation) in the previous year over the corresponding rise in price levels in the current year (i.e., current inflation): if the price

index had risen at a high rate in the corresponding period of the previous year leading to a high

inflation rate, some of the potential rise is already factored in, therefore a similar absolute increase in

the Price index in the current year will lead to a relatively lower inflation rates. On the other hand, if

the inflation rate was too low in the corresponding period of the previous year, even a relatively

smaller rise in the Price Index will arithmetically give a high rate of current inflation.

17. Base Rate

The base rate, introduced with effect from 1st July 2011 by the Reserve Bank of India, is the new

benchmark rate for lending operations of banks. It is a tool which will help in bringing more

transparency in lending operations of banks.

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Base rate is defined as the minimum interest rate of a bank below which it is not viable to lend.It

replaces the benchmark prime lending rate (BPLR), the interest rate which commercial banks

charged their most credit worthy customer.

Base rate includes all those elements of the lending rates that are common across all categories of

borrowers.

Banks are free to choose any benchmark to arrive at the base rate. The interest on all categories of

loans is determined with respect to the base rate except the following loans; (a) DRI advances ( that

is Differential rate of interest scheme whereby banks offer financial assistance at concessional rates)

(b) loans to banks own employees (c) loans to banks depositors against their own deposits. Base rate is to be reviewed at least once in a quarter and has to be disclosed to the public. Each bank

arrives at its base rate separately. Banks are free to choose any methodology to arrive at the base rate

which is consistent , appropriate and transparent.

18. Basic Road Statistics of India (BRSI)

The Basic Road Statistics of India is a premier publication on the road sector providing

comprehensive information on different categories of road in the country, at the National, State and

Local (municipalities and panchayat) levels. It is brought out regularly every year by Transport

Research Wing (TRW) of the Ministry of Road Transport & Highways. It is vital to have

comprehensive data on road infrastructure to assist in policy planning and investment decision. The

latest publication Basic Road Statistics of India provides detailed data spread over 11 Sections comprising of a Section each on Road Length (Total and Surfaced) All India and State-wise,

National Highways, State Highways, Other Public Works Department Roads, Zilla Parishad Roads,

Village Panchayat Roads, CD/Panchayat Samiti Roads, Urban Roads, Project Roads, Plan Outlay

and Expenditure on Roads and Miscellaneous information on National Highways & PMGSY.

Annexed tables list out major terms and definitions relevant to the road sector.

19. Basic Port Statistics of India (BPSI)

The Basic Port Statistics of India is a premier publication which is brought out every year by

Transport Research Wing. It intends to provide comprehensive and analytical descriptions of the

different facets of the maritime transport activity. It highlights the volume and composition of

seaborne trade across the major ports (12) and minor ports (199) of India in the backdrop of global

and domestic macro developments. The major ports in India are administered by the central shipping

ministry while minor ports are administered by relevant department or ministries of the coastal

states.

20. Bid Rigging

Bid rigging is a widely known term across the world. Bidding, as a practice, is intended to enable the

procurement of goods or services on the most favourable terms and conditions. Invitation of bids is

resorted to both by Government (and Government entities) and private bodies (companies,

corporations, etc.). But the objective of securing the most favourable prices and conditions may be

negated if the prospective bidders collude or act in concert. Such collusive bidding called bid rigging contravenes the very purpose of inviting tenders and is inherently anticompetitive. If bid rigging takes place in Government tenders, it is likely to have severe adverse effects on its purchases

and on cost effectiveness of public spending and wastes public resources. It is therefore important

that the procurement process is highly competitive and not affected by practices such as collusion,

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bid rigging, fraud and corruption. All over the world, bid rigging or collusive bidding is treated with

severity in the law as reflected by the presumptive approach.

Collusive bidding or bid rigging may occur in various ways by which firms coordinate their bids on

procurement or project contracts. Origin of bid rigging is as old as system of procurement. However,

an apt codification on the same may be the Sherman Act, 1890 of the United States, which is

considered the first codified law to look into agreements leading to bid rigging. Governments are

most often the target of bid rigging. Bid rigging is one of the most widely prosecuted forms of

collusion. Bid rigging may take various forms such as bid suppression, complimentary bidding, bid

rotation, and sub contracting etc.

21. Bio-fuels

Bio-fuels are environment friendly fuels derived from renewable bio-mass resources. In India, a

definition of bio-fuels is provided in the National Bio-fuel Policy of 2009. As per that definition,

biofuels are those liquid or gaseous fuels produced from biomass resources and used in place of, or in addition to, diesel, petrol or other fossil fuels for transport, stationary, portable and other

applications. In this context, 'biomass resources' refer to the biodegradable fraction of products,

wastes and residues from agriculture, forestry and related industries as well as the biodegradable

fraction of industrial and municipal wastes.

Three broad categories of bio-fuels are identified in India:

1. bio-ethanol: ethanol produced from biomass such as sugar containing materials, like sugar cane, sugar beet, sweet sorghum, etc.; starch containing materials such as corn, cassava, algae etc.; and,

cellulosic materials such as bagasse, wood waste, agricultural and forestry residues etc.;

2. biodiesel: a methyl or ethyl ester of fatty acids produced from vegetable oils, both edible and non-edible, or animal fat of diesel quality; and

3. other biofuels: biomethanol, bio CNG, biosynthetic fuels etc.

Bio-fuels provide a strategic advantage to promote sustainable development and to supplement

conventional energy sources in meeting the rapidly increasing requirements associated with high

economic growth for transportation fuels.

The Indian approach to bio-fuels is somewhat different from the current international approaches

since it is based solely on non-food feedstocks to be raised on degraded or wastelands that are not

suited to agriculture, thus avoiding a possible conflict of fuel vs. food security.

Further, the Ministry of Road Transport & Highways has started the initiative of promoting vehicles

which are fueled with clean fuels like Bio-Ethanol, Bio-CNG, Bio-Diesel, Electric Batteries, etc. The

specifications for test reference fuel for Bio-Ethanol fuel vehicles and emission for Bio-Ethanol Fuel

Vehicles, have been notified by the Ministry. In July 2015, the Ministry notified norms for the use of

Bio-CNG for testing and exhaust emission for vehicles running on Bio-CNG and the related norms.

With this notification, the vehicle manufacturers can manufacture, sell and get the vehicles fueled by

Bio-CNG in the country.

22. Broad Based Fund

Broad based fund means a fund established or incorporated outside India, which has at least 20

investors with no single individual investor holding more than 49 percent of the shares or units of the

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fund. If the broad based fund has institutional investor(s), then it is not necessary for the fund to have

20 investors. Further, if the broad based fund has an institutional investor who holds more than 49

percent of the shares or units in the fund, then the institutional investor must itself be a broad based

fund.

In India, the following entities proposing to invest on behalf of broad based funds, are eligible to be

registered as FIIs:

(1).Asset Management Companies (2).Investment Manager/Advisor (3).Institutional Portfolio

Managers (4).Trustee of a Trust and (5).Bank

24. Cabinet Committee

In a parliamentary democracy, a Cabinet Minister with the title of Prime Minister is the Executive

head of the Government, while the Head of State is a largely ceremonial monarch or president. The

Executive branch of the Government has sole authority and responsibility for the daily

administration of the State bureaucracy.

The Prime Minister selects the team of Ministers in the Cabinet and allocates portfolio. In most

cases, the Prime Minister sets up different Cabinet Committees with select members of the Cabinet

and assigns specific functions to such Cabinet Committees for smooth and convenient functioning of

the Government.

A Cabinet Committee can be either set up with a broad mandate or with a specific mandate. Many a

times, when an activity/agenda of the Government acquires prominence or requires special thrust, a

Cabinet Committee may be set up for focussed attention. In all areas delegated to the Cabinet

Committees, normally the decision of the Cabinet Committee in question is the decision of the

Government of the day. However, it is up to the Prime Minister to decide if any issue decided by a

Cabinet Committee should be re-opened or discussed in the full Cabinet.

The Parliament of India (Sansad / ) is the federal and supreme legislative body of India. It consists of two houses the Lower House House of the People called Lok Sabha ( )and the Upper House- Council of States called Rajya Sabha.( ).

Though the political party /coalition that have the absolute majority ( i.e at least one seat more than

50 percent of total seats contested and decided) in Lok Sabha forms the Government, the Prime

Minister and the members of the Cabinet can be from either House of Parliament. In 1961,

the Government of India Transaction of Business Rules (TBR), 1961 were framed, which inter-alia

prescribed the procedure in which the Executive arm of the Government would conduct its business

in a convenient and streamlined manner.

In terms of the TBR, 1961, inter-alia, there shall be Standing Committees of the Cabinet as set out in the First Schedule to the TBR, 1961, with the functions specified therein. The Prime Minister

may, from time to time, amend the Schedule by adding to or reducing the numbers of such

Committees or by modifying the functions assigned to them. Every Standing Committee shall

consist of such Ministers as the Prime Minister may from time to time specify. Conventionally,

while Ministers with Cabinet rank are named as members of the Standing Committees of the Cabinet, Ministers of State, irrespective of their status of having Independent Charge of a

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Ministry/Department, and others with rank of a Cabinet Minister or Minister of State are named as special invitees.

The Second Schedule to TBR 1961, lists the items of Government business where the full Cabinet,

and not any Standing Committee of the Cabinet should take a decision. However, to the extent there

is a commonality between the cases enumerated in the Second Schedule and the cases set out in the

First Schedule, the Standing Committees of the Cabinet shall be competent to take a final decision in

the matter, except in cases where the relevant entries in the respective Schedules themselves

preclude the Committees from taking such decisions. Also, any decision taken by a Standing

Committee may be reviewed by the Cabinet.

25. Existing Cabinet Committees

As on 20th March 2013 there are 10 (ten) Standing Committees of the Cabinet. These are the

Appointments Committee of the Cabinet (ACC), the Cabinet Committee on Accommodation(CCA),

the Cabinet Committee on Economic Affairs (CCEA) , the Cabinet Committee on Parliamentary

Affairs, the Cabinet Committee on Political Affairs (CCPA), the Cabinet Committee on Prices

(CCP), the Cabinet Committee on Security (CCS), the Cabinet Committee on World Trade

Organisation Matters (CCWTO), the Cabinet Committee on Investment (CCI), and the Cabinet

Committee on Unique Identification Authority of India related issues (CCUID).

While three of the Cabinet Committees, the ACC, CCA and the Cabinet Committee on

Parliamentary Affairs deal with internal housekeeping and functioning of the Government, three

Cabinet Committees have very limited mandates, i.e, CCP is for regulating prices of essential

commodities, CCWTO is for matters relating to WTO, and CCUID is for matters relating to UID.

Prominent Cabinet Committees whose functioning is of general interest are the Cabinet Committee

on Economic Affairs (CCEA), the Cabinet Committee on Investment (CCI), the Cabinet Committee

on Political Affairs (CCPA), and the Cabinet Committee on Security (CCS).

The latest Cabinet Committee is that on investment. On 2 January 2013, the Government has set up

the Cabinet Committee on Investments (CCI) with the Prime Minister as the Chairman to expedite

decisions on approvals/clearances for implementation of projects. This is expected to improve the

investment environment by bringing transparency, efficiency and accountability in accordance of

various approvals and sanctions.

Reconstitution of Cabinet Committees in June 2014

On 10th June 2014, the new Government headed by Prime Minister Shri Narendra Modi decided to

discontinue the following four Standing Committees of the Cabinet:

1. Cabinet Committee on Management of Natural Calamities: The functions of this Committee will

be handled by the Committee under the Cabinet Secretary whenever natural calamities occur.

2. Cabinet Committee on Prices: The functions of this Committee will be handled by the Cabinet

Committee on Economic Affairs.

3. Cabinet Committee on World Trade Organisation Matters: The functions of this Committee will

be handled by the Cabinet Committee on Economic Affairs and, whenever necessary, by the full

Cabinet.

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4. Cabinet Committee on Unique Identification Authority of India related issues: Major decisions in

this area have already been taken and the remaining issues will be brought to the Cabinet Committee

on Economic Affairs.

On 19th June 2014 the Government reconstituted six Committees of the Cabinet i.e. Appointments

Committee of the Cabinet, Cabinet Committee on Accommodation, Cabinet Committee on

Economic Affairs, Cabinet Committee on Parliamentary Affairs, Cabinet Committee on Political

Affairs and Cabinet Committee on Security.

26. Capital Budget

Under Article 112 of the Constitution of India, the Annual Financial Statement has to distinguish

expenditure of the Government on revenue account from other expenditures. Government Budget,

therefore, comprises of Revenue Budget and Capital Budget.

Capital Budget consists of capital receipts and capital payments.

The capital receipts are loans raised by Government from public, called market loans, borrowings by

Government from Reserve Bank and other parties through sale of Treasury Bills, loans received

from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and

Union Territory Governments and other parties.

Capital payments consist of capital expenditure on acquisition of assets like land, buildings,

machinery, equipment, as also investments in shares, etc., and loans and advances granted by Central

Government to State and Union Territory Governments, Government companies, Corporations and

other parties.

27. Cash based Accounting System Versus Accrual Accounting System

The Indian Government accounts are prepared on a cash based accounting system. This system

recognizes a transaction when cash is paid or received. However it does not give a realistic account

of government's financial position because it lacks an adequate framework for accounting for assets

and liabilities, and depicting consumption of resources. Moreover capital expenditure (expenditure

on the creation of new assets) under the cash system is brought to account only in the year in which a

purchase or disposal of an asset is made. This is not an effective way to track assets created out of

public money. The present system does not reflect accrued liabilities arising from the gap between

commitments and transactions of government on the one hand and payments made. The Twelfth

Finance Commission recommended introduction of accrual accounting in Government. Government

has accepted the recommendation in principle and asked Government Accounting Standards

Advisory Board (GASAB) in the office of the Comptroller and Auditor General of India to draw a

roadmap for transition from cash to accrual accounting system and to prepare an operational

framework for its implementation. So far twenty one State Governments have agreed in principle to

introduce accrual accounting.

28. Cash Reserve Ratio (CRR)

Cash Reserve Ratio refers to the fraction of the total Net Demand and Time Liabilities (NDTL) of a

Scheduled Commercial Bank held in India, that it has to maintain as cash deposit with the Reserve

Bank of India (RBI). The requirement applies uniformly to all banks in the country irrespective of an

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individual banks financial situation or size. In contrast, certain countries e.g. China stipulates separate reserve requirements for large and small banks.

As per the RBI Act 1934, all Scheduled Commercial Banks (that includes public and private sector

banks, foreign banks, regional rural banks and co-operative banks) are required to maintain a cash

balance on average with the RBI on a fortnightly basis to cater to the CRR requirement. With effect

from December 28, 2002 all banks are required to maintain a minimum of 70 per cent of the required

average daily CRR on all days of the fortnight. Non Bank Financial Corporations (NBFCs) are

outside the purview of this reserve requirement.

Traditionally, the amount held to cater to the CRR requirement was stipulated to be no lower than 3

percent and no higher than 20 percent of the total NDTL held in India. However, the RBI

(amendment) Act, 2006 provides for removal of the floor and ceiling with respect to setting the CRR

and authorizes the RBI to set the ratio in keeping with the broad objective of maintaining monetary

stability in the economy.

Presently, banks are not paid any interest on behalf of the RBI for parking the required cash. If a

bank fails to meet its required reserve requirements, the RBI is empowered to impose apenalty by

charging a penal interest rate.

Historically, the CRR was mooted as a regulatory tool. However, over the years and especially after

the liberalization of the Indian economy in the early 1990s, with the economy experiencing

substantial inflows of capital exerting stress on the leverage of the central bank to manipulate

liquidity conditions in the domestic money market, the CRR assumed importance as one of the

important quantitative tools aiding in liquidity management. In contrast to the Liquidity Adjustment

Facility (LAF), which aids liquidity management on a daily basis via changes in repo and reverse-

repo rates, changes in the CRR is aimed at the same in the medium term.

A country that uses the CRR aggressively to control domestic liquidity and target the monetary roots

of inflation is China.

29. Central Plan Assistance

Financial assistance provided by Government of India to support States Five Year/intervening annual plans is called Central Plan Assistance (CPA) or Central Assistance (CA).

CPA or CA primarily comprises of the following:

CPA is provided, as per scheme of financing applicable for specific purposes, approved by Planning

Commission. It is released in the form of grants and/or loans in varying combinations, as per terms

& conditions defined by Ministry of Finance, Department of Expenditure.

Central Assistance in the form of ACA is provided also for various Centrally Sponsored

Schemes viz., Accelerated Irrigation Benefits Programme, Rashtriya Krishi Vikas Yojana etc. and

SCA is extended to states and UTs as additive to Special Component Plan (renamed Scheduled

Castes Sub Plan) and Tribal Sub Plan. Funds provided to States under Member of Parliament Local

Area Development Scheme @ Rs.5 crore per annum per MP also count as CA.

The term Plan Grants generally comprise of 'Block Grants which consists of Normal Central Assistance (NCA), Backward Regions Grant Fund (BRGF)- Scheme (State Component), Additional

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Central Assistance (ACA) for Externally Aided Projects (EAPs), Special Central Assistance (SCA),

Special Plan Assistance (SPA), etc.

Since 2015-16, pursuing the recommendations of the 14th Finance Commission, Some of the

schemes like NCA, SCA (untied), SPA, Additional Central Assistance for Other Projects (ACAOP),

Other ACA, SCA for Hill Areas Development Programme (HADP/WGDP), SCA under Backward

Regions Grant Fund (BRGF), National e-governance Plan (Mission mode project) and ACA for Left

wing Extremism (LWE) Affected Districts have been discontinued or subsumed under higher

devolution of taxes.

30. Central Sector and Centrally Sponsored Schemes

In Indias developmental plan exercise we have two types of schemes viz; central sector and centrally sponsored scheme. The nomenclature is derived from the pattern of funding and the

modality for implementation.

Under Central sector schemes, it is 100% funded by the Union government and implemented by the

Central Government machinery. Central sector schemes are mainly formulated on subjects from the

Union List.In addition, the Central Ministries also implement some schemes directly in States/UTs

which are called Central Sector Schemes but resources under these Schemes are not generally

transferred to States.

Under Centrally Sponsored Scheme (CSS) a certain percentage of the funding is borne by the States

in the ratio of 50:50, 70:30, 75:25 or 90:10 and the implementation is by the State Governments.

Centrally Sponsored Schemes are formulated in subjects from the State List to encourage States to

prioritise in areas that require more attention. Funds are routed either through consolidated fund of

States and or are transferred directly to State/ District Level Autonomous Bodies/Implementing

Agencies. As per the Baijal Committee Report, April, 1987, CSS have been defined as the schemes

which are funded directly by Central Ministries/Departments and implemented by States or their

agencies, irrespective of their pattern of financing, unless they fall under the Centre's sphere of

responsibility i.e., the Union List.

Conceptually both CSS and Additional Central Assistance (ACA) Schemes have been passed by the

Central Government to the State governments. The difference between the two has arisen because of

the historical evolution and the way these are being budgeted and controlled and release of funds

takes place. In case of CSS, the budgets are allocated under ministries concerned themselves and the

entire process of release is also done by them.

Subsequently, the 14th Finance Commission (FFC) substantially enhanced the share of the States in

the Central divisible pool from the current 32 % to 42 %, which is the biggest ever increase in

vertical tax devolution. Such tax devolution is untied and can be spent as desired by the States.

Consequent to this substantially higher devolution and resultant reduced fiscal space for the Center,

the Finance Minister, Shri Arun Jaitley, while presenting the Union Budget 2015-16, said that many

schemes on the State subjects were to be delinked from Central support. However, he said that

Centre decided to continue to contribute to such schemes representing national priorities, especially

those targeted at poverty alleviation. Further, the schemes mandated by legal obligations and those

backed by Cess collection would be fully provided for by the Central Government. Thus, Union

Budget 2015-16 changed the contours of the central sector and centrally sponsored schemes as

follows:

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As per the Budget 2015-16, centre has decided to support fully those schemes which are

targeted to the benefits of socially disadvantaged group.

In case of some Centrally Sponsored Schemes, the Centre-State funding pattern will

undergo a change with States to contribute higher share. Details of changes in sharing pattern will

have to be worked out by administrative Ministry/Department.

In the Union Budget 2015-16, there are 31 Schemes to be fully sponsored by the Union

Government, 8 Schemes have been delinked from support of the Centre and 24 Schemes will now be

run with the changed sharing pattern.

31. Charged Expenditure

______________________________________________________________________________

In India's democratic system, the government cannot spend from the Consolidated Fund unless the

expenditure is voted in the lower house of Parliament or State Assemblies. However according to

Article 112 (3) and Article 202 (3) of the Constitution of India, the following expenditure does not

require a vote and is charged to the Consolidated Fund. They include salary, allowances and pension

for the President as well as Governors of States, Speaker and Deputy Speaker of the House of

People, the Comptroller General of India and Judges of the Supreme and High Courts. They also

include interest and other debt related charges of the Government and any sums required to satisfy

any court judgment pertaining to the Government.

32. Chit Funds / Chitty / Kuri/ Miscellaneous Non-banking Company

Chit funds are essentially saving institutions. They are of various forms and lack any standardised

form. Chit funds have regular members who make periodical subscriptions to the fund. The periodic

collection is given to some member of the chit funds selected on the basis of previously agreed

criterion. The beneficiary is selected usually on the basis of bids or by draw of lots or in some cases

by auction or by tender. In any case, each member of the chit fund is assured of his turn before the

second round starts and any member becomes entitled to get periodic collection again.

Chit funds are the Indian versions of Rotating Savings and Credit Associations found across the

globe.

Regulatory framework

Chit fund business is regulated under the Central Act of Chit Funds Act, 1982 and the Rules framed

under this Act by the various State Governments for this purpose. Central Government has not

framed any Rules of operation for them. Thus, Registration and Regulation of Chit funds are carried

out by State Governments under the Rules framed by them.

Functionally, Chit funds are included in the definition of Non- Banking Financial Companies by RBI

under the sub-head miscellaneous non-banking company(MNBC). But RBI has not laid out any

separate regulatory framework for them.

Cheating by Chit Fund company through fraudulent schemes is an offence under the Prize Chits and

Money Circulation Schemes (Banning) Act, 1978. The power to investigate and prosecute lies with

the State Governments.

For better identification of Chit Fund Companies, Rule 8(2)(b)(iii) of Companies (Incorporation)

Rules, 2014 framed under the Companies Act, 2013, provides that if the companys main business is

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that of a chit fund, its incorporation will not be allowed unless its name is indicative of that financial

activity, viz., Chit Fund

33. Clean Development Mechanism (CDM)

The Clean Development Mechanism (CDM) refers to a market mechanism for achieving greenhouse

gas emissions reduction and is defined in Article 12 of the Kyoto Protocol - an international treaty

for emissions reductions. CDM allows an industrialized/developed country with an emission-

reduction or emission-limitation commitment under the Kyoto Protocol (called as Annex I Party or

Annex B Party of the original Kyoto Protocol signed in 1997) to implement an emission-reduction

project in any of those developing countries (which may otherwise be not financially capable of

undertaking such projects), thereby earning them tradable Certified Emission Reduction (CER)

credits, each equivalent to one tonne of CO2. The saleable CERs earned from such projects can be

counted towards meeting the prescribed Kyoto targets.

CDM is one of the three market-based mechanisms set up under Kyoto Protocol, the other two being

- Joint Implementation and emissions trading or commonly called as carbon trading [which provides

for trading of (a) spare emission units available with any entity (savings from the assigned or

permissible emission levels), (b) CERs created from CDM activities, (c) an emission reduction

unit (ERU) generated by a Joint Implementation project and (d) removal units (RMU) created on the

basis of land use, land-use change and forestry (LULUCF) activities such as reforestation]

CDM helps developing countries to achieve development without compromising on sustainable

aspects while it gives developed countries a flexible mechanism for achieving emissions reductions.

On the other hand, JI helps developed countries to refashion their development strategies through

technology transfer.

34. Clean Energy Cess - Carbon Tax of India

Clean Energy Cess is a kind of carbon tax and is levied in India as a duty of Excise under section 83

(3) of the Finance Act, 2010 at the rate of Rs.100 per tonne on Coal, Lignite and Peat (goods

specified in the Tenth Schedule to the Finance Act, 2010) in order to finance and promote clean

environment initiatives, funding research in the area of clean environment or for any such related

purposes.

This was introduced, with effect from 1 July 2010, though the Union Budget 2010-11, on coal

produced in India or imported to India. This is in line with the principle of "polluter pays", which is

the basic guiding criteria for pollution management.

In many countries carbon taxes are levied also on other fossil fuels like petroleum, natural gas etc.

However, in India this is applied only on coal and its variants - lignite and peat. In any case,

subsequent to the global financial crisis of 2008, many countries have either abolished or reduced or

postponed their decisions on such carbon taxes.

The cess would apply to the gross quantity of raw coal, lignite or peat raised and dispatched from a

coal mine. No deduction from this quantity is be allowed for loss, if any, on account of washing of

coal or its conversion into any other product/form prior to its dispatch from the mine. At the same

time, cess would not be chargeable on washed coal or any other form provided the appropriate cess

has been paid at the raw stage. Thus, if appropriate cess has not been paid at the raw stage, then the

products would attract clean energy cess.

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Since Clean Energy Cess is being levied as a duty of excise, it would also apply to imported coal,

including washed coal by virtue of Section 3(1) of the Customs Tariff Act in the form of additional

duty of customs. Since imported coal would not satisfy the condition regarding payment of

appropriate cess at the raw stage, Clean Energy Cess would apply to all forms of imported coal.

In the State of Meghalaya, coal is mined under traditional and customary rights vested on the local

tribes. The mines operated by these tribes are not subjected to the provisions of laws that regulate the

operation of coal mines. Hence, full exemption from Clean Energy Cess is being provided to coal

produced in the State of Meghalaya under such rights.

Usage of the fund raised through Clean energy cess

The fund raised through the cess is being used for the National Clean Energy Fund for funding

research and innovative projects in clean energy technologies or renewable energy sources to reduce

dependence on fossil fuels. Thus, projects aiming at reduction of emissions with innovative

technologies from different sectors get considered under this funding mechanism.

The details of cess collected for each year is available in the Receipt Budget Document issued

alongside Union Budget under the Budget head 5.07.04 (under excise duty).

35. Collective Investment Scheme (CIS)

A Collective Investment Scheme (CIS), as its name suggests, is an investment scheme wherein

several individuals come together to pool their money for investing in a particular asset(s) and for

sharing the returns arising from that investment as per the agreement reached between them prior to

pooling in the money. The term has broader connotations and includes even mutual funds.

36. Commodities Transaction Tax (CTT)

Commodities transaction tax (CTT) is a tax similar to Securities Transaction Tax (STT), levied in

India, on transactions done on the domestic commodity derivatives exchanges.

Globally, commodity derivatives are also considered as financial contracts. Hence CTT can also be

considered as a type of financial transaction tax.

The concept of CTT was first introduced in the Union Budget 2008-09 (para 179 of the Budget

Speech).The Government had then proposed to impose a commodities transaction tax (CTT) of

0.017% (equivalent to the rate of equity futures at that point of time).

Like all financial transaction taxes, CTT aims at discouraging excessive speculation, which is

detrimental to the market andto bring parity between securities market and commodities market such

that there is no tax / regulatory arbitrage. (Futures contracts are financial instruments and provide for

price risk management and price discovery of the underlying asset (commodity / currency/ stocks /

interest). It is therefore essential that the policy framework governing is uniform across all the

contracts irrespective of the underlying to minimize the chances of regulatory arbitrage.) The

proposal of CTT also appears to have stemmed from the general policy of the Government to widen

the tax base.

37. Compensatory Afforestation

Compensatory Afforestation (CA) refers to afforestation and regeneration activities carried out as a

way of compensating for forest land diverted to non-forest purposes. Here "non-forest purpose"

means the breaking up or clearing of any forest land or a portion thereof for-

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the cultivation of tea, coffee, spices, rubber, palms, oil-bearing plants, horticultural crops or

medicinal plants;

any purpose other than reafforestation;

but does not include any work relating or ancillary to conservation, development and management of

forests and wildlife, namely, the establishment of check-posts, fire lines, wireless communications

and construction of fencing, bridges and culverts, dams, waterholes, trench marks, boundary marks,

pipelines or other like purposes.

CA is one of the most important conditions stipulated by the Central Government while approving

proposals for de-reservation or diversion of forest land for non-forest use. The compensatory

afforestation is an additional plantation activity and not a diversion of part of the annual plantation

programme.

Elements of Schemes for Compensatory Afforestation The scheme for compensatory afforestation should contain the following details:-

Details of equivalent non-forest or degraded forest land identified for raising compensatory

afforestation.

Delineation of proposed area on a suitable map.

Agency responsible for afforestation.

Details of work schedule proposed for compensatory afforestation.

Cost structure of plantation, provision of funds and the mechanism to ensure that the funds

will be utilised for raising afforestation.

Details of proposed monitoring mechanism.

38. Concession Agreement

In India, the term concession agreement is often used in the context of public private

partnership projects (PPP).

The contractual arrangement entered between a public entity and a private entity in a PPP project,

whereby the obligations of both the parties are clearly specified, is called a concession agreement.

39. Consolidated Fund of India

This term derives its origin from the Constitution of India.

Under Article 266 (1) of the Constitution of India, all revenues ( example tax revenue from personal

income tax, corporate income tax, customs and excise duties as well as non-tax revenue such as

licence fees, dividends and profits from public sector undertakings etc. ) received by the Union

government as well as all loans raised by issue of treasury bills, internal and external loans and all

moneys received by the Union Government in repayment of loans shall form a consolidated fund

entitled the 'Consolidated Fund of India' for the Union Government.

Similarly, under Article 266 (1) of the Constitution of India, a Consolidated Fund Of State ( a

separate fund for each state) has been established where all revenues ( both tax revenues such as

Sales tax/VAT, stamp duty etc..and non-tax revenues such as user charges levied by State

governments ) received by the State government as well as all loans raised by issue of treasury bills,

internal and external loans and all moneys received by the State Government in repayment of loans

shall form part of the fund.

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The Comptroller and Auditor General of India audits these Funds and reports to the Union/State

legislatures when proper accounting procedures have not been followed.

40. Consumer Price Index

Consumer Price Index is a measure of change in retail prices of goods and services consumed by

defined population group in a given area with reference to a base year. This basket of goods and

services represents the level of living or the utility derived by the consumers at given levels of their

income, prices and tastes. The consumer price index number measures changes only in one of the

factors; prices. This index is an important economic indicator and is widely considered as a

barometer of inflation, a tool for monitoring price stability and as a deflator in national accounts.

Consumer price index is used as a measure of inflation in around 157 countries. The dearness

allowance of Government employees and wage contracts between labour and employer is based on

this index. The formula for calculating Consumer Price Index is Laspeyres index which is measured as follows;

41. Consumer Price Index(Urban) and Consumer Price Index(Rural)

The CPI(IW) and CPI(Al & RL) pertain to specific segment of population. Since these indices do

not cover all segments of population, it is difficult to ascertain the true variations in the price level .

To overcome this problem, a new index with a wider coverage is now being computed, CPI(Urban)

and CPI(Rural) by Central Statistics Office under Ministry of Statistics and Programme

Implementation.

42. Consumer Price Index for Industrial Workers CPI(IW)

This index is the oldest among the CPI indices as its dissemination started as early as in 1946. The

history of compilation and maintenance of Consumer Price Index for Industrial workers owes its

origin to the deteriorating economic condition of the workers post first world war which resulted in

sharp increase in prices. As a consequence of rise in prices and cost of living, the provincial

governments started compiling Consumer Price Index. The estimates were however not satisfactory.

In pursuance of the recommendation of Rau Court of enquiry, the work of compilation and

maintenance was taken over by government in 1943. Since 1958-59, the compilation of CPI(IW) has

been started by Labour Bureau ,an attached office under Ministry of Labour & Employment.

Consumer Price Index Numbers for Industrial workers measure a change over time in prices of a

fixed basket of goods and services consumed by Industrial Workers. The target group is an average

working class family belonging to any of the seven sectors of the economy- factories, mines,

plantation, motor transport, port, railways and electricity generation and distribution ..

43. Contingency Fund of India

This term derives its origin from the Constitution of India.

The Contingency Fund of India established under Article 267 (1) of the Constitution is in the nature

of an imprest (money maintained for a specific purpose) which is placed at the disposal of the

President to enable him/her to make advances to meet urgent unforeseen expenditure, pending

authorization by the Parliament. Approval of the legislature for such expenditure and for withdrawal

of an equivalent amount from the Consolidated Fund is subsequently obtained to ensure that the

corpus of the Contingency Fund remains intact. The corpus for Union Government at present is Rs

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500 crore (Rs 5 billion) and is enhanced from time to time by the Union Legislature. The Ministry of

Finance operates this Fund on behalf of the President of India.

Similarly, Contingency Fund of each State Government is established under Article 267(2) of the

Constitution this is in the nature of an imprest placed at the disposal of the Governor to enable him/her to make advances to meet urgent unforeseen expenditure, pending authorization by the State

Legislature. Approval of the Legislature for such expenditure and for withdrawal of an equivalent

amount from the Consolidated Fund is subsequently obtained, whereupon the advances from the

Contingency Fund are recouped to the Fund. The corpus varies across states and the quantum is

decided by the State legislatures.

44. Core inflation

Core Inflation is also known as underlying inflation, is a measure of inflation which excludes items

that face volatile price movement, notably food and energy. In other words, Core Inflation is nothing

but Headline Inflation minus inflation that is contributed by food and energy commodities. To

understand the concept in a better way we can say that food and fuel prices may go up in the short

run due to some disturbance in the agriculture sector or oil economy. However, over the long term

they tend to revert back to their normal trend growth. On the other hand, prices of other commodities

do not fluctuate as regularly as food and fuel as such increase in their prices could be taken relatively to be much more of a permanent nature. If this is so, then it follows logically for Central

Banks to target only core inflation, as it reflects the demand side pressure in the economy. In

practice too, the Reserve Bank of India (RBI) and Central Banks around the World always keep an

eye on the core inflation. Whenever core inflation rises, Central Banks increase their key policy rates

to suck excess liquidity from the market and vice versa. It is, therefore, a preferred tool for framing

long-term policy.

45. Cropping seasons of India- Kharif & Rabi

The agricultural crop year in India is from July to June. The Indian cropping season is classified into

two main seasons-(i) Kharif and (ii) Rabi based on the monsoon. The kharif cropping season is from

July October during the south-west monsoon and the Rabi cropping season is from October-March (winter). The crops grown between March and June are summer crops. Pakistan and Bangladesh are

two other countries that are using the term kharif and rabi to describe about their cropping patterns. The terms kharif and rabi originate from Arabic language where Kharif means autumn and Rabi means spring.

The kharif crops include rice, maize, sorghum, pearl millet/bajra, finger millet/ragi (cereals), arhar

(pulses), soyabean, groundnut (oilseeds), cotton etc. The rabi crops include wheat, barley, oats

(cereals), chickpea/gram (pulses), linseed, mustard (oilseeds) etc.

46. Debt Consolidation and Relief Facility (DCRF)

The Twelfth Finance Commission (TFC) had recommended a Debt Consolidation and Relief Facility

(DCRF) during its award period (01.04.2005 to 31.03.2010) to States.

This facility provided for (i) Consolidation of central loans from Ministry of Finance contracted till

31.3.2004 and outstanding as on 31.3.2005 for a fresh tenure of twenty years at an interest rate of

7.5% per annum and (ii) Debt waiver to states based on their fiscal performance. The facility is

subject to the condition that states enact their Fiscal Responsibility and Budgetary Management

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(FRBM) Acts as recommended by the Commission. Under the scheme, twenty-six states out of

twenty eight states (except Sikkim and West Bengal), which had enacted their Fiscal Responsibility

and Budget Management Acts, had availed of the facility of consolidation of their loans. Those

states which had improved their fiscal performance could also get their eligible debt waived.

The Thirteenth Finance Commission (FC-XIII) has extended the DCRF, limited to consolidation of

their loans only, to the states of Sikkim and West Bengal during 2010-15, provided these states put

in place their FRBM Acts as stipulated by FC-XIII. Sikkim and West Bengal have now enacted their

Fiscal Responsibility Legislations.

47. Deemed Export Benefit Scheme

Deemed Export Scheme, which has been in operation for more than two decades, is largely an Indian

concept. Deemed Exports refers to those transactions in which goods supplied do not leave country,

and payment for such supplies is received either in Indian rupees or in foreign exchange. The

Deemed export benefit include rebate on duty chargeable on imports or excisable material used in

the manufacture of goods which are supplied to the eligible projects.

Deemed Export Benefit Scheme benefits are availed of by units in Power, Petroleum refinery, fertilizer and Nuclear Power Projects. They are also availed by supply of goods to projects financed

by multi-lateral or bilateral agencies.

The policy aims to create a level playing field for the domestic industry vis--vis direct import by

providing duty free inputs or exemption/refund of duty paid on goods manufactured in India.

Deemed Export Scheme is primarily an instrument for import substitution. It helps in creating

manufacturing capability, value addition and employment opportunities in country

48. Deficit Measurement in India

There are different measures of deficits in macroeconomics and each type of deficit measure carries

a different macroeconomic meaning. The broad measures of deficit (which have been and/or are

being) reported by the government in India, may be classified, either in terms of the nature of transactions or on the basis of the means of financing them.

The chart below elucidates a list of different types of deficits that have been and are being used in

India.

I. Meaning of different measures of deficit

(a) Fiscal Deficit Gross Fiscal Deficit is defined as the excess of total expenditure of the government

over the total non-debt creating receipts.

Fiscal deficit can be either gross or net. The Central government makes capital disbursements as loans to the different segments of the economy. In the developing countries, a large part goes as

loans to other sectors-States and local Governments, public sector enterprises and the like. Net fiscal

deficit can be arrived at by deducting net domestic lending from gross fiscal deficit .

(b) Budget Deficit Also referred to as simply budget deficit is that part of the governments deficit which is financed through short-term borrowings. These short-term borrowings may be from the RBI

or from other sources.

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Normally, short-term borrowings from the RBI are through the net issuance of short-term treasury

bills (that is, ad-hoc and ordinary treasury bills) and by running-down the central governments cash balances held by the RBI.

(c) Monetized deficit Also known as the net reserve bank credit to the government, it is that part of the government deficit which is financed solely by borrowing from the RBI.

Since borrowings from the RBI can be both short-term and long-term, therefore, monetized deficit is

the sum of the net issuance of short-term treasury bills, dated securities (that is, long-term borrowing

from the RBI) and rupee coins held exclusively by the RBI, net of Governments deposits with the RBI.

This is different from the Traditional Budget deficit in two ways-

1. Traditional Budget deficit includes 91-day treasury bills held by both, the RBI and non-RBI entities whereas Monetized deficit includes 91-day Treasury Bills held only by the RBI.

2. Traditional Budget deficit includes only short-term sources of finance whereas Monetized deficit includes long-term securities also.

3. (d) Primary Deficit Gross Primary deficit is defined as gross fiscal deficit minus net interest payments. Net primary deficit, is gross primary deficit minus net domestic lending.

4. (e) Revenue deficit Revenue deficit is defined as the difference between revenue expenditure and revenue receipts.

5. (f) Effective revenue Deficit Introduced in 2011-12, it is defined as revenue deficit minus that revenue expenditure (in the form of grants), which goes into the creation of Capital Assets.

(g) Other measures of deficit Apart from these, there are various other types of measures of deficit

that are widely used internationally, like the Consolidated Public Sector Deficit, which is the

excess of expenditure over revenue for all the government entities; Operational Deficit, which is

the inflation-corrected deficit and is defined as Consolidated Public Sector Deficit minus inflation rate times the debt stock; Structural deficit which removes the effects of temporary movements in

the variables from their long-run values, thereby providing an idea of the long-run position of the

country after removing the impact of temporary shocks; and others.

49. Depository Receipts

A Depository Receipt (DR) is a financial instrument representing certain securities (eg. shares,

bonds etc.) issued by a company/entity in a foreign jurisdiction. Securities of a firm are deposited

with a domestic custodian in the firms domestic jurisdiction, and a corresponding depository receipt is issued abroad, which can be purchased by foreign investors. DR is a negotiable security (which means an instrument transferrable by mere delivery or by endorsement

and delivery) that can be traded on the stock exchange, if so desired.

DRs constitute an important mechanism through which issuers can raise funds outside their home

jurisdiction. DRs are issued for tapping foreign investors who otherwise may not be able to

participate directly in the domestic market. It is perceived as the beginning point of connecting with

the foreign investors (i.e. a stage before the actual listing the shares /securities in a foreign stock

exchange) or a way of introducing the company to a foreign investor. For investors, depository

receipt is a way of diversifying the risk, by getting exposure to a foreign market, but without the

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exchange rate risk as they are foreign currency denominated. Further, they feel more safe to invest

from their home location.

Depending on the location in which these receipts are issued they are called as ADRs or American

Depository Receipts (if they are issued in USA on the basis of the shares/securities of the domestic

(say Indian) company), IDR or Indian Depository Receipts (if they are issued in India on the basis

of the shares/securities of the foreign company; Standard Chartered issued the first IDR in India) or

in general as GDR or Global Depository Receipt.

Thus, ADR or GDR are issued outside India by a foreign depository on the back of an Indian

security deposited with a domestic Indian custodian in India (means a custodian or keeper of

securities- an Indian depository, a depository participant, or a bank- and having permission from the

securities market regulator, SEBI, to provide services as custodian).

Depository Receipt means a foreign currency denominated instrument, whether listed on an international exchange or not, issued by a foreign depository in a permissible jurisdiction on the

back of eligible securities issued or transferred to that foreign depository and deposited with a

domestic custodian and includes global depository receipt as defined in section 2(44) of the Companies Act, 2013.

As per the Companies Act, 2013 "Global Depository receipt" means any instrument in the form of a

depository receipt created by a foreign depository outside India and authorised by a company

making an issue of such depository receipts while the "Indian Depository Receipt means any instrument in the form of a depository receipt created by a domestic depository in India and

authorised by a company incorporated outside India;

In India any company - whether private limited or public limited or listed or unlisted - can issue

DRs. However listed DRs enjoy some tax benefits.

ADR /GDR issues based on shares of a company are considered as part of Foreign Direct Investment

(FDI) in India, though it is an indirect way of holding shares.

Types of DRs

DRs are generally classied as under:

Sponsored: Where the Indian issuer enters into a formal agreement with the foreign

depository for creation or issue of DRs. A sponsored DR issue can be further classied as:

Capital Raising: The issuer issues new securities which are deposited with a domestic

custodian. The foreign depository then creates DRs abroad for sale to foreign investors. This

constitutes a capital raising exercise, as the proceeds of the sale of DRs go to the Indian issuer.

Non-Capital Raising: In a non-capital raising issue, no fresh underlying securities are

issued. Rather, the issuer gets holders of its existing securities to deposit these securities with a

domestic custodian, so that DRs can be issued abroad by the foreign depository. This is not a capital

raising exercise for the Indian issuer, as the proceeds from the sale of the DRs go to the holders of

the underlying securities.

Unsponsored: Unsponsored DRs are where there is no formal agreement between the

foreign depository and the Indian issuer. Any person other than the Indian issuer may, without any

involvement of the issuer, deposit the securities with a domestic custodian in India. A foreign

depository then issues DRs abroad on the back of such deposited securities. This is not a capital

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raising exercise for the Indian issuer, as the proceeds from the sale of the DRs go to the holders of

the underlying securities.

Based on whether a DR is traded in an organised market or in the over the counter (OTC) market,

the DRs can be classied as listed or unlisted.

Listed: Listed DRs are traded on organised exchanges. The most common example of this

are American Depository Receipts (ADRs) which are traded on the New York Stock Exchange

(NYSE).

Unlisted: Unlisted DRs are traded over the counter (OTC) between parties. Such DRs are

not listed on any formal exchange.

International experience

The most common DR programs internationally are:

ADRs: DRs issued in United States of America (US) by foreign rms are usually referred to as ADRs. These are further classied based on the detailed rules under the US securities laws. The classication is based on applicable disclosure norms and consists of:

Level 1: These programs establish a trading presence in the US but cannot be used for

capital raising. They may only be traded on OTC markets, and can be unsponsored.

Level 2: These programs establish a trading presence on a national securities exchange in

the US but cannot be used for capital raising.

Level 3: These programs can not only establish a trading presence on a national securities

exchange in the US but also help raise capital for the foreign issuer.

Rule 144A: This involves sale of securities by a non-US issuer only to Qualied Institutional Buyers (QIBs) in the US.