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An Open Economy

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Syskool
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open economy
open economy

An open economy is an economy in which there are economic activities between the domestic community and outside can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border. Trade can be in the form of managerial exchange, technology transfers, all kinds of goods and services.

The act of selling goods or services to a foreign country is called exporting. The act of buying goods or services from a foreign country is called importing. Together exporting and importing are collectively called international trade.

Read Also: Indian economy

There are a number of advantages for citizens of a country with an open economy. One primary advantage is that the citizen consumers have a much larger variety of goods and services from which to choose. Additionally, consumers have an opportunity to invest their savings outside of the country.

In an open economy, both imports and exports are permitted, and they can consume a large portion of the company’s total gross domestic product in any given year. Imports give citizens of a country access to products and services provided by other nations, which allows for more consumer freedom because people have a wider range of choices. Exports allow companies and citizens to break into other markets to find new buyers for their products.

Must Read: Industries Contributing to Indian Economy

A completely open economy is one that has no trade barriers. Most of the world’s hundred-plus nations are relatively open, but much less than they could be because of a wide assortment of trade restrictions. The more an economy is open, the more dependent it is on happenings around the world.

An open market is characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization and any other regulations or practices that interfere with the natural functioning of the free market. Anyone can participate in an open market. There may be competitive barriers to entry, but there are no regulatory barriers to entry.

In an open economy, a country’s spending in any given year need not to equal its output of goods and services. A country can spend more money than it produces by borrowing from abroad, or it can spend less than it produces and lend the difference to foreigners.

Also, Read:

Colonial Exploitation of Indian Economy

Committees On Various Sectors In Economy

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Urjit Patel Committee

By
Syskool
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urjit Patel Committee
urjit Patel Committee

Urjit R Patel (born 28 October 1963) is an eminent economist, consultant, and banker, currently serving as Deputy Governor of the Reserve Bank of India. He was also Advisor of the Boston Consulting Group. As Deputy Governor of RBI, Dr. Patel looks after Monetary Policy, Economic Policy Research, Statistics and Information Management, Deposit Insurance, Communication and Right to Information.

The Urjit Patel Committee report to revise and strengthen the monetary policy framework suggests some sweeping changes to overhaul the existing operating structures including a shift to CPI as the nominal anchor for inflation and moving to a model followed by the Federal Reserve to set up a monetary policy committee headed by the governor to vote on rate decisions. It also lays out a prescriptive roadmap to bring down inflation and makes recommendations for the government to reduce its fiscal deficit.

Read Also: Fiscal Policy

The Expert Committee headed by RBI Deputy Governor Urjit R Patel (The person is also known for UPA II 100 days action program) submitted its report to Revise and Strengthen the Monetary Policy Framework.

The main recommendations of committee are as follows:-

  • RBI should adopt the new Consumer Price Index (CPI) as the measure of the nominal anchor for the policy framework.
  • The nominal anchor or the target for inflation should be set at 4 per cent with a band of +/- 2 percent around it.
  • The monetary policy regime must shift away from the current approach to one that is centred around the nominal anchor new CPI only.
  • Inflation from the current level of 10 per cent to be brought down to 8 percent over a period not exceeding the next 12 months and to 6 per cent over a period not exceeding the next 24 month period before formally adopting the recommended target of 4 percent inflation with a band of +/- 2 percent.
  • The committee asked the Central Government to ensure that the fiscal deficit as a ratio to Gross Domestic Product is brought down to 3.0 percent by 2016-17.
  • That the monetary policy decision-making should be vested with a Monetary Policy Committee (MPC). It went on to recommend that the Governor of the RBI should be the Chairman of the MPC. The term of office of the MPC could be three years, without the prospect of renewal.
  • All fixed income financial products should be treated on a par with bank deposits for the purposes of taxation and Tax Deduction at Source.
  • The RBI should introduce a remunerated standing deposit facility, which would effectively empower it with unlimited sterilisation capability. As a buffer against outflows, the RBI’s strategy should be to build an adequate level of foreign exchange reserves.

Must Read: Government to Appoint New Governor of Reserve Bank of India (RBI)

Inflation based on Consumer Price Index (CPI) was 9.87% in December while Wholesale Price Index (WPI)-based inflation was 6.16% during the same month. Currently, RBI tracks WPI inflation as the primary price indicator even as it takes into account all types of inflation numbers before drafting the monetary policy.

Since food and fuel account for more than 57 per cent of the CPI on which the direct influence of monetary policy is limited, the commitment to the nominal anchor would need to be demonstrated by timely monetary policy response to risks from second-round effects and inflation expectations in response to shocks to food and fuel, the committee pointed out.

The committee asked the Central Government to ensure that the fiscal deficit as a ratio to GDP (gross domestic product) is brought down to 3.0 percent by 2016-17. “Administered setting of prices, wages and interest rates are significant impediments to monetary policy transmission and achievement of the price stability objective.

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Major Crops of India

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Syskool
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Major Crops of India

Agriculture is an old economic activity in our country which produces most of the food that we consume. Two-third of the total population of India is engaged in agricultural activities. Some of the major crops produced here are wheat, rice, maize and also tea, coffee, spices, etc.

Also Read:Crops of the world

Major Crops

A variety of food and non-food crops are grown in different parts of our country. They are:

Rice

It is grown in the plains of north and in the parts of north-eastern India; it is also cultivated in coastal and deltaic regions. India is the second largest producer in the world after China. Areas of less rainfall, such as Punjab, Haryana and Western Uttar Pradesh and parts of Rajasthan have been made appropriate for cultivation of rice with the development of canal and irrigation tubewells.

Must Read: Rice production in India

Maize

It is a kharif crop which in both used as food and fodder. Karnataka, Uttar-Pradesh, Bihar, Andhra Pradesh and Madhya Pradesh are the major maize-producing states of India. Production of maize have increased with the use of modern inputs such as HYV seeds, fertilizers and irrigation.

Millets

The coarse grains, such as, jowar, bagra and ragi are major millets produced in India. Maharashtra is the largest producer of jowar. Other than this, Karnataka, Andhra Pradesh and Madhya Pradesh are other leading producer of jowar.

Bajra is grown in Rajasthan, which is the largest producer of bajra, followed by Uttar Pradesh, Maharashtra, Gujarat and Haryana.

Ragi is grown in dry regions and Karnataka is its largest producer followed by Tamil Nadu, Himachal Pradesh, Uttarakhand, Sikkim, Jharkhand and Arunachal Pradesh.

Wheat

It is the second most important cereal crop after rice and the two important wheat-growing zones of India are the Ganga- satluj plains in north-west and black soil region of the Deccan. Punjab, Haryana, Uttar Pradesh, Bihar, Rajasthan and Madhya Pradesh are the leading producers of wheat.

Don’t Miss: GM Seeds: A Solution to Food Security

Pulses

India is the largest producer and consumer of pulses in the world. Major pulses grown are tur, Urad, moong, masur, peas and gram. The leading states producing pulses are Madhya Pradesh, Uttar Pradesh, Rajasthan, Maharashtra and Karnataka.

Sugarcane

India is the second largest producer of sugarcane after Brazil. Sugarcane is the main source of sugar, gur, khandsari and molasses. Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Bihar, Punjab and Haryana are the sugarcane producing States of India.

Oil Seeds

Main oil-seeds of India includes mustard, groundnut, coconut, Sesamum (til), soyabean, caster seeds, cotton seeds, linseed and sunflower, in which some are edible and used in cooking. Also, some are used a raw material for the production of soap, cosmetics and ointments.

Groundnut is the major oil seed produced in Andhra Pradesh, Tamil Nadu, Karnataka, Gujarat and Maharashtra. Sesamum is a kharif crop in north and caster seed is grown both as rabi and kharif crop.

Must Read: Facts about Crops and Soils

Tea

Tea was introduced by British in our country, which grows well in tropical and sub-tropical climates endowed with deep and fertile well-drained soil.

Tea is processed in a tea garden to maintain its freshness and requires huge labour for its cultivation. The hills of Darjeeling and Jalpaiguri, Assam, West Bengal, Tamil Nadu and Kerala are the largest producers of tea in India. Some other tea producing states are Himachal Pradesh, Uttaranchal, Meghalaya, Andhra Pradesh and Tripura.

Also Read: Agriculture in India: Challenges with Agricultural Marketing and APMC Act

Coffee

The varieties of India coffee has a demand all over the world mostly for its good quality. The Arabica variety, which is brought from Yemen, is produced in India which was initially introduced on the Baba Budan Hills and now-a-days, it is confined to Nilgiri in Karnataka.

Horticulture crops

India is very famous for its fruits and vegetables around the would and is the largest producer as well.

The fruits like Mangoes, which is mostly produced in Maharashtra, Andhra Pradesh, Uttar Pradesh and West Bengal, Oranges which are produced in Nagpur and Cherrapunjee, Bananas of Kerala, Mizoram, Maharastra and Tamil Nadu, Lichi and guava which is grown in Uttar Pradesh and Bihar are demanded all over the world. The other fruits of great demand are Pineapples of Meghalaya, grapes of Andhra Pradesh, Maharastra; Aplles, pears, Apricots and Walnuts of Jammu and Kashmir and Himachal Pradesh.

In vegetables, India is an important producer of pea, onion, cabbage, tomato, cauliflower, brinjal and potato.

Non-Food Crops

Rubber

Rubber is grown in Kerala, Tamil Nadu, Karnataka and Andaman and Nicobar Islands and Meghalaya which is mainly used in the industries.

Also Read: Soils in India

Fibre

India produces four major fibre crops which are cotton, jute, hemp and natural silk. Cotton, jute and hemp are grown in soil and natural silk is obtained from cocoons of the silkworms fed on the green (mulberry) leaves.

Cotton

Cotton is produced on the black cotton soil of the Deccan Plateau as it requires high temperature, light rainfall and bright sun-shine. Maharashtra, Gujarat, Madhya Pradesh, Tamil Nadu, Punjab, Haryana and Uttar Pradesh are the major cotton producing States of India.

Jute

Jute has many uses such as in making gunny bags, mats, ropes carpets, yarn etc. which in grown on well-drained fertile soils of West Bengal, Bihar, Assam, Orissa and Meghalaya.

Don’t Miss: Food Chain and Food Web

Today in History – 1 April

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Syskool
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today in history 1 april

today in history 1 april

1839

Medical College Hospital in Calcutta having only 20 beds was opened for male patients .

1855

Ishwar Chandra Vidyasagar’s first Bengali primer ‘Varnaparichay’ was published.

1869

Income Tax was imposed. On the same day New Indian Divorce Act came into operation.

1878

Calcutta Museum was opened for general public.

1882

Savings Bank Postal system was introduced.

1889

Hindu’, English language newspaper changed its perodicity from weekly (20/09/1888) to daily.

1912

The imperial capital of India was moved from Calcutta to Old New Delhi and the Province of Delhi was declared by a proclamation.

1918

Royal Air Force replaces Royal Flying Corps in Britain.

1930

Government announced 15 yrs and 18 yrs as minimum marriageable age for girls and boys. This is presently remodified.

1933

Indian Air Force was established at Drigh Road in Karachi (now in Pakistan). Subroto Mukherjee and four other officers were inducted as pilots when the first Indian Air Force Squadron was formed. The first aircraft flight joined the Indian Air Force, at that time it possessed a strength of six RAF-trained officers and 19 Havai Sepoys (literally, air soldiers); its aircraft inventory comprised four Westland Wapiti II. A army co-operation biplaned at Drigh Road as the “”A”” Flight nucleus of the planned No.1 (Army Co-operation) Squad

1935

The Reserve Bank of India was established as a Central Bank and the job of issuing notes was entrusted to this bank. The Commissioner’s office which issued currency was abolished and was substituted by the Governer of the RBI. The issue offices scattered around the country came to be called as the regional offices of the Reserve Bank.

1936

Orissa state was formed as a province of British India separating from Bihar.

1944

Japanese troops conquer Jessami, East-India.

1947

Gandhiji addresses Asian Relations Conference in Delhi.

1954

Air Marshal Subroto Mukerjee became the first Indian to become the Air Officer Commanding, India Command.

1956

Companies Act of 1913 was revised and Indian Companies Act of 1956 came into force.

1957

Postage stamps and sale of postal stationary was introduced as per decimal coinage system and Rupee was established to Hundred Naya Paisa.

1962

Metric weights became compulsory as New Weights and Measurements Metric system was intoduced by Indian Government.

1963

Delhi Special Police Establishment acquired its popular current name Central Bureau of Investigation (CBI) through a Home Ministry resolution passed.

1969

India’s first Atomic Energy Reactor started at Tarapore.

1976

Television was separated from radio, and Doordarshan Corporation was established.

1978

India’s sixth Five-Year Plan commenced.

1987

Bureau of Indian Standards was changed to Indian Standards Institution.

1989

UN Peace-keeping Force arrives in Windhoek to prefare for independence of Namibia.

1990

Gold Control Act was withdrawn.

1993

National Aeronautical Laboratory becomes National Aerospace Laboratories

1995

The Airports Authority of India (AAI) formed by the merger of IAAI and NAA. AAI manages five international airports, 87 domestic airports and 28 civil enclaves.

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Securities and Exchange Board of India – SEBI

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Syskool
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sebi security and exchange board of india

Securities and Exchange Board of India (SEBI) was initially constituted on April 12, 1988, as a non-statutory body through a resolution of Government for dealing with all matters relating to development and regulation of securities market and investor protection and to advise the Government on all these matters. SEBI was given statutory status and powers through an ordinance promulgated on January 30, 1992.

The statutory powers and functions of SEBI were strengthened through the promulgation of the Securities Laws (Amendment) ordinance on January 25, 1995, which was subsequently replaced by an Act of Parliament. In terms of this Act, Securities, and Exchange Board of India (SEBI) has been vested with regulatory powers over corporate in the issuance of capital, the transfer of securities, and other related matters. Besides, SEBI has also been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violation.

SEBI is managed by six members

  • One chairman (nominated by Central Government),
  • Two members (Officials of central ministries),
  • one member from RBI, and
  • remaining two members are also nominated by Central Government.

The office of Securities and Exchange Board of India (SEBI) is situated in Mumbai with its regional offices in Kolkata, Delhi, and Chennai. In 1988, the initial capital of SEBI was 7.5 crore which was provided by its promoters (IDBI, ICICI, and IFCI). This amount was invested in its interest amount day-to-day expenses of Securities and Exchange Board of India (SEBI) are met.

All statutory powers for regulating Indian capital market are vested with Securities and Exchange Board of India (SEBI) itself.

Functions of SEBI

  1. To safeguard the interests of investors and to regulate capital market with suitable measures.
  2. To regulate the business of stock exchanges and other securities market.
  3. To regulate the working Stock Brokers, Sub-brokers, Share Transfer Agents, Trustees, Merchant Bankers, Underwriters, Portfolio Managers etc and also to make their registration.
  4. To register and regulate collective investment plans of mutual funds.
  5. To encourage self-regulatory organization.
  6. To eliminate malpractices of security markets.
  7. To train the persons associated with security markets and also to encourage investors’ education.
  8. To check inside trading of securities.
  9. To supervise the working of various organizations trading in the security market and also to ensure systematic dealing.
  10. To promote research and investigations for ensuring the attainment of above objectives.
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