Balance of Payment

#1: NCERT

Long term loan from RBIOnly for Sch. Commercial banks can borrow from RBI @this Interest rate. Can even use SLR securitiesWhat RBI pays to its clients for short term loansAll clients can borrow short term loans from RBI @this interest rate. cant use SLR securities though!Banks have to keep this much in cash, gold, G-sec & other RBI approved securitiesHave to set aside this much cash in reserve =no income

NDTLQuant. ToolInflation fightTight/DearDeflation fightEasy/CheapCRR, SLRIncreaseDecreaseOMOSellBuyPolicyRATEIncreaseDecreaseMonetary PolicyQualitative /selective/ direct Tools

Evolution & financial inclusion

Rs.10 lakh1 lakh4 lakh5 lakh20%80%Equity: ShareholdersProprietorsCreditors

T-BillG-SecShort termLong term

SharesADRDividend$$NASDAQETF: Exchange Traded Fund

Portfolio Goldman SachRs.10Rs.10Rs.10

ONGC, CIL, GAIL10 CPSERs.3000 croreNFORs.20

BSE-NSENAV fluctuates daily10

P-NoteDerives value from FIIs portfolio

Sadhu Yadav a.k.a Politician, builder, Contractor & Mafia all in one Multiskill

Hawala operator sends Rupees to Tax Haven, convertingto DollarsHedge Fund Manager or Investment banker in Tax Haven

SEBI registered FII

FIIs portfolio

12SENSEX calculation: 1979

30k with Mallya70k with public

13Demat SystemYour DEMAT accountYour Paper SharesFinancial inclusion#PAN#DEMATSecurities depository ltd.13

SaharaNSEL

SaradhaFinancial Scams in Recent yearsModus Operandi Ph.D Only Basic ideaHow to prevent- FSLRC.Important

#1: NCERTMajor topicsCoveredNew topicBalance of PaymentInternational TradeDefinitionComponents

Sami song18Maintained by Central bank of each countryAs per IMF manual BMP6All amounts Expressed in Dollar$$Credit: Incoming money (+)Debit: Outgoing money (-)Sample Click meSystem RecordBoP

Debit: outgoingCredit: incoming19

Sami song20

Anil to Adnan?No because both residents.Economic Transactions

Tom Cruise to Adnan Sami?Yesbecause resident vs non-residentUS Fed Reserve: outgoing (-)Indian RBI: incoming (+)Economic Transactions

Adnan to Parents in Pakistan?YesIndian RBI: outgoing (-)Pak Central Bank: incoming (+)Canadian Centre Bank. (NA)

Economic Transactions

Worlds Balance of Payment=ZERO

Sami song25Balance of PaymentInternational TradeDefinitionComponents

Component+ Credit (Incoming)Debit (Outgoing)NetVisible=>Goods(Export) 3 lakh(Import) - 5 lakhMINUS 2 lakh BoP: Current Account (2013-14) Million USDBalance of Trade =Net difference between Imports & ExportsTrade Deficit = When BoT is negative. (IM > EX)Trade Surplus = BoT Positive (EX > IM)

Main ImportsMain Exports

TRADEDeficit

For Ranking refer to Ch.6 of Economic SurveyBalance of Trade

Deficitsurplus

Current AccountProfit, interest dividend (-)Foreign investor: debt / EquityBoard of Directors, ChairmanCEO/MD, Executives, Staff

Capital Account (+)Kishor Biyani, Future group, Pantaloon36Shares sold money taken outCapital (-)Foreign investor: debt / EquityBoard of Directors, ChairmanCEO/MD, Executives, Staff

Capital Account (+)Kishor Biyani, Future group, Pantaloon37Bond/DebenturePrincipal repaidCapital (-)Foreign investor: debt / EquityBoard of Directors, ChairmanCEO/MD, Executives, Staff

Capital Account (+)Kishor Biyani, Future group, Pantaloon38

DeficitsurplusProfit-interest-DividendsDeficit

Current Account BalanceDEFICITSURPLUSDEFICITSURPLUSRemittances 2013 (World Bank) BillionIndia70China60Philippines25Mexico22Nigeria21

Visible: -147 billionInvisible: +115 billionBalance: (-) 32 billionHence Current Account DeficitVisible vs InvisibleCAD

Indias CAD: Past Present FutureHow to reduce CAD?

Crude oil consumption reduce? Not possible beyond a point.Gold ban? Smuggling; reduce inflation; +ve Real interest rateIT boost? Alone insufficientAgro + Mfg. + service: boostFDI promote? Capital PLUS but Current MINUS

Current Account Deficit

Capital AccountCapital AccountDifference between FDI and FPI (FII)

By finance ministryto bring clarity on definition of FDI and FIIRecommendations accepted in June 2014Arvind Mayaram PanelFDI-FII48Types of companies: Mayaram FII10% or more FDI