Economics is a branch of social science. In simple words we can say that Economics is the study of how people choose to use their available resources in most efficient way. Please note down that Economics is not only about managing money and finance. It is much more than that in contemporary context. There is no universal definition of Economics because it is really difficult to cover all aspects of economics into a water tight boundary. Yet some scholars tried to defined Economics in their words as given below-

“Economics is the study of how individuals and groups make decisions with limited resources as to best satisfy their wants, needs, and desires”

“Economics is the social science that examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants”

A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay- “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, family, health, law, politics, religion, social institutions, war, and even to science

Over all we can say that Economics is the branch of social science that studies the production, distribution, and consumption of goods and services in a society

On the basis of above definition, we can break down the study of economics into two broad categories

This is a sub branch of economics that deals with economics decisions made at a low, or micro, level. How does the change of a price of good influence a family’s purchasing decisions-? If my wages rise, will I be inclined to work more hours or less hours-?

This is a sub branch of Economics which deals with a larger/broader level of economy. It relates to issues such as determination of national income, savings, investment, employment at aggregate levels, tax collection, government expenditure, foreign trade, money supply and price level etc

The economy of India is the 12^th largest economy in the world by market exchange rates and 4^th largest economy of world by purchasing power parity (PPP) as per the latest report of World Bank. Despite recent global economic recession, Indian Economy is growing at a healthy rate of 6% and considered as one of the fast emerging economy in world along with China, Brazil, South Africa and Mexico. In the 21^st century, India is an emerging economic power with vast human and natural resources, and a huge knowledge base. Economists predict that by 2020, India will be among the leading economies of the world. However, Indian Economy is still lagging behind in many spheres like more than 60% of India’s total working population is still engaged into agricultural activates, while its contribution into GDP is only around 18%. India is a labor surplus country and problem of sectional unemployment still a matter of concern for GOI.

India was under social democratic-based policies from 1947 to 1991. The economy was characterized by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the economy towards a market-based system. A revival of economic reforms and better economic policy in 2000s accelerated India’s economic growth rate. By 2008, India had established itself as the world’s second-fastest growing major economy after China. India’s large service industry accounts for 54% of the country’s GDP while the industrial and agricultural sector contribute 29% and 17% respectively. Agriculture is the predominant occupation in India, accounting for about 60% of employment. The service sector makes up a further 28% and Industrial sector around 12%.The labor force totals half a billion workers. India ranked 31^st in Financial development index-2009 produced by World Economic Forum

Meeting the needs of the present without compromising the ability of future generations to meet their needs is called sustainable development. This concept is popular in present context of development

In common meaning Micro credit is “Loan of very small amount”. It can be defined as provision of parsimony, credit and other financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve living standards. The institutions that provide Micro Credit are called Micro Credit Institutions. Micro Credit is provided to those individuals that lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. This group of individuals includes artisans, tiny and small industries, grocers, vegetable vendors, rickshaw pullers, roadside retailers and the like. Other activities include farming, poultry, cattle rearing, piggery, fishery etc.

The innovative idea of Microcredit originated with the Grameen Bank in Bangladesh. In 1976 Professor Muhammad Yunus launched a research project to examine the possibility of designing a credit delivery system to provide banking services targeted to the rural poor. The Grameen Bank is a microfinance organization and community development bank started in Bangladesh that makes small loans known as microcredit. The organization and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006; the organization’s Low-cost Housing Programme won a World Habitat Award in 1998. The United Nations declared 2005 the International Year of Microcredit.

Before the nationalization of banks in India in 1969, co-operative banks were the main dispensers of small loans in the organized sector. Commercial banks were not easily accessible to small borrowers. Those were the days of security-oriented approach. Nobody could think of a loan, big or small, without a guarantor or mortgage of immovable property. Profit was the only motive of the banking. However Nationalization changed the picture and the nationalized banks opened branches in the remotest corners of the country. They were to implement various government schemes like the Twenty Point Program, Antyodaya Program, subsidized Differentiated Rate of Interest loan etc. which aimed at uplifting the poorest of the poor with the help of micro credit.

Gradually there was establishment of Regional Rural Banks (RRBs), Deposit Insurance and Credit Guarantee Corporation (DICGC), National Bank for Rural and Agricultural Development (NABARD), Small Industrial Development Bank of India (SIDBI), Export Credit Guarantee Corporation (ECGC) and the latest Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE). The CGTMSE covers collateral-free credit up to Rs. 50 lakhs. These institutions play supportive roles to ensure uninterrupted flow of credit to small time borrowers. Under the present directive of the RBI, the priority sectors must get a minimum of 40% share of a commercial banks’ total lending. This includes 16% for the agriculture sector.

A Self-Help Group (SHG) is a registered or unregistered group of micro entrepreneurs belonging to homogenous social and economic background voluntarily, who come together to save small amounts regularly, to mutually agree to contribute to a common fund and to meet their emergency needs on mutual help basis. The group members use collective wisdom and peer pressure to ensure proper end-use of credit and timely repayment thereof. SHG provides strength to an economically poor individual as part of a group. Financing through SHGs reduces transaction costs for both lenders and borrowers.

With a view to facilitating smoother and more meaningful banking with the poor, A pilot project for purveying micro credit by linking Self-Help Groups (SHGs) with banks was launched by NABARD in 1991-92. The aim was to make it possible facilitating smoother and more meaningful banking with the poor. RBI had then advised commercial banks to actively participate in this linkage programme. The scheme has since been extended to RRBs and co-operative banks. More than 90 per cent of the groups linked with banks are exclusive women groups. SHG-bank linkage programme has surely emerged as the dominant micro finance dispensation model in India; other models too have evolved as significant micro finance purveying channels.

There was a time when India considered as “Sparrow of Gold.” It was the wealth of India, which attracted so many invaders and foreign rulers towards the country at that time. During ancient time when other countries had limited trade activities, India enjoyed a very well developed trade and commerce. The famous silk route of India is very well known even today. After the advent of British East India Company in 1600, the trade activities were in favor of India till 1757.  But in the beginning of 18^th Century when industrial revolution emerged in England, British used India as producer of raw material for their industries on one hand and exploited the country as potential mark for various goods produced into factories of England. Gradually till 1813 handloom and craft business of India totally ruined by British for their personal advantages. Dada Bhai Narojee exposed the “drain of wealth” from India in his famous work

Independence came with pain of partition to India. Hence it was not easy to put the country on path of rapid development. Indian Government opted for planned economy [a type of economy where economic planning plays very crucial role in the socio-economic development of country]. To achieve the desired and consistent growth in Indian Economy, GOI came up with idea of “Five Year Plans.” To implement this idea Planning Commission was constituted in 1950 and 1^st Five year plan was formulated for period from 1951 to 1956. At present 11^th Five year plan is going on and Indian economy is growing with a healthy rate of 8% since last on decade

The initial idea of planned economy did not work as well as it was expected. It resulted into heavy burden of external debt on India. Hence GOI came with new economic policy in 1991. The 3 main objectives of this new economic policy was as follows-

Laissez Faire is a French term and it literally means no interference. It is a doctrine which states that government generally should not intervene in the economic activities and economy should be market oriented based upon demand and supply principle

The organized banking system of India can be divided into following 3 categories-

**RBI was established in 1935 on recommendations of Young Hitler Commission and nationalized in 1949. RBI was established in Kolkata initially but later headquarters of RBI shifted to Mumbai. Its financial year is from 1^st July to 30^th June. RBI’s main function is to control flow of money in Indian Market i. e. formulation and implementation of Monetary Policy for India. RBI formulate such policy every year and came up with its review quarterly [at an interval of 3 months]. During this quarterly review of monetary policy, RBI announce current rate of various financial control mechanisms like Bank Rate, SLR, CRR and Repo Rate.

**RBI is the supreme banking authority and all other banks of India works under guidelines given by it. Notes and Coins of only Rupee 1 are released by Finance Ministry of India and all other currency notes as well as coins are released by RBI. Even Currency printing press cannot print notes without permission of RBI

The trade activity with other countries on globe is known as Foreign Trade. It is directly related to export-import of a country with other countries. The foreign trade of India was very well developed during ancient history. The orientation of foreign trade of India totally changed with advent of British Empire in India. Immediately after independence GOI adopted inward looking foreign trade policy to restrict global trade but picture has been changed with new economic policy of the country which emphasized on globalization. In 1950, the Indian Share in total world trade was just 1.78% which further decreased to 0.6% in 1995. The foreign trade of India is going upwards and it is expected to be 2% of total world trade by 2009 [As per figure released by WTO]. These figures clearly shows that India has failed to increase its share in the total world trade

India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the WTO. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labor and environment issues and other non-tariff barriers into the WTO policies. Since liberalization India opened almost all sectors for FDI [Foreign Direct Investment] and continuously signing pact with international economic organizations like ASEAN and APEC to harness international trade potential. USA is top trade partner of India followed by China. These days India is considered as one of the hottest destination for FDI. Recently Ministry of Commerce and Trade came up with new Foreign Trade Policy to boost its share in total world trade

The Union Commerce Ministry, Government of India announces the integrated Foreign Trade Policy FTP in every five year. This is also called EXIM [Export, import] policy. This policy is updated every year with some modifications and new schemes. New schemes come into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy which was announced on Thursday August 28, 2009 is an integrated policy for the period 2009-14.

Aim in General: The policy aims at developing export potential, improving export performance, boosting foreign trade and earning valuable foreign exchange. FTP assumes great significance this year as India’s exports have been battered by the global recession. A fall in exports has led to the closure of several small- and medium-scale export-oriented units, resulting in large-scale unemployment.

EPCG [Export Promotion Capital Goods Scheme] Scheme:

Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, has been extended for the 5 year Policy period 2009-14. Support for Green products and products from North East extended.

Announcements for FPS [Focus Product Scheme], FMS [Focus Market Scheme], MLFPS [Market Linked Focus Product Scheme]-

MDA [Market Development Scheme] & MAI [Market Access Initiative]-

Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) has been announced.

The following cities have been recognized as towns of export excellence (TEE)

Scheme for Status Holders (Status Holders means star status holders)

Extension of Income Tax Exemption to EOU [Export Oriented Units] and STPI [Software Technology Parks of India]-

Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income Tax Act has been already extended for the financial year 2010-11 in the Budget 2009-10.

Extension of ECGC [Export Credit Guarantee Corporation (of India Ltd)]-

The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95%, to the adversely affected sectors, is continued till March, 2010.

On the payment of 50 % applicable export duty, Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses.

The claims under Focus Product Scheme, the requirement of “Handloom mark” was required earlier which has been removed.

To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme.

Project Exports and a large number of manufactured goods covered under FPS and MLFPS.

Custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norm included in factoring.

Number of sample pieces has been increased from the existing 15 to 50. This will facilitate the duty free import of samples by exporters.

Convertibility of Shipping Bills-

Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export Promotion scheme to other scheme. Customs shall now permit this conversion within three months, instead of the present limited period of only one month.

Reduction in Transaction Costs-

Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty also before fulfillment of export obligation under Advance Authorization and EPCG Scheme. Earlier it was allowed after fulfillment of export obligation.

Licenses for the import of sports weapon will be issued now by Regional Authorities provided a NOC (No Objection Certificate) is issued by Ministry of Sports & Youth Affairs. (Earlier DGFT [Directorate General of Foreign Trade] Headquarters had to be approached for this)

To solve the problem of medical device industry, the procedure for issue of Free Sale Certificate has been simplified and the validity of the Certificate has been increased from 1 year to 2 years.

Those Automobile industries which have their R&D establishment will be allowed free import of reference fuels (petrol and diesel), up to a maximum of 5 KL per annum, which are not manufactured in India.

Mr. Anand Sharma announced that an Inter Ministerial Committee will be formed to redress/ resolve problems/issues of exporters.

A Directorate of Trade Remedy Measures shall be set up, which will enable support to Indian industry and exporters, especially the Micro Small & medium Enterprises MSMEs in availing their rights through trade remedy instruments,

Earlier the payment of customs duty for Export Obligation (EO) shortfall under Advance Authorization, DFIA or EPCG Authorization was allowed in cash only. Now this payment can be done in the way of debit of Duty Credit scrip’s.

Restricted Items can be imported now (as replenishment) against transferred DFIAs (Duty Free Import Authorizations) as the present DFRC (Duty Free Replenishment Card) scheme.

There is a provision for state-run banks to provide dollar credits

Uruguay Round of Multilateral Trade Negotiations comprised 28 Agreements. It had two components-

World Trade Organization (WTO) was founded to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakesh Agreement, replacing the General Agreements on Tariffs and Trade (GATT). The WTO has 153 members which represent more than 95% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference’s policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO’s headquarters is at the Centre William Rappard, Geneva, Switzerland.

WTO is currently endeavoring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world’s population.

However, the negotiation has been dogged by “disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a ‘special safeguard measure’ to protect farmers from surges in imports. At this time, the future of the Doha Round is uncertain.”

The inaugural ministerial conference was held in Singapore in 1996. Disagreements between largely developed and developing economies emerged during this conference over four issues initiated by this conference, which led to them being collectively referred to as the “Singapore issues”.

The Singapore issues were:

The developing countries opposed these issues as they were not in their favors. The European Union, Japan and Korea favored these issues and pushed them in successive conferences. US said that it could accept some or all of them at various times, but preferring to focus on market access.

The Doha Development Round was launched at the conference. The talks are stalled even today and impetus is on reaching a final agreement. The major impediment is different interests of developed and developing nations.

This ministerial conference was called for to reach an agreement on the Doha round. However, an alliance of 22 southern states, the G20 developing nations (led by India, China and Brazil), demanded agreements on Singapore issues and called for an end to agricultural subsidies within the EU and the US. There was no progress made in this round too.

The sixth WTO ministerial conference was held in Hong Kong from 13 December – 18 December 2005 with an aim to reach an agreement on Doha Round by 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries, following the Everything But Arms initiative of the European Union — but with up to 3% of tariff lines exempted. Other major issues were left for further negotiation to be completed by the end of 2010

This will held in Geneva from 30 November–December 2009.

Global competitiveness report 2009-10

The Global Competitiveness Report is a report annually published by the World Economic Forum since 1979. This report “assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity.

India has moved up one position to 49 (GCI 4.30) in the Global Competitiveness Report 2009-2010.

Finance Ministers of the world’s 20 most powerful countries are gathering for a two-day meet starting to discuss reforms to tackle black money and money laundering in London

Trade ministers from about 35 countries met in Delhi recently to give impetus to the Doha round of trade talks. This article covers in a condensed form the background of the stalled Doha round of Trade negotiations, understanding the issues of the developing countries and challenges ahead.

The objective of the Delhi meeting was neither to focus on negotiations on specific topics nor to reach an agreement .The objective was to concentrate on working on a timetable for the talks. India’s foreign trade minister, Anand Sharma had invited the leaders to get some momentum into the negotiations.

The core issues were echoed in G20 summits in Washington in November and London in April as well as the G8+ summit in L’Aquila in July apart from a meeting of farm exporters in June at Bali and again at the Organisation for Economic Cooperation and Development (OPEC) in Paris and in July at a meeting of the Asia-Pacific APEC grouping.

United States is key to any deal is expected by many other countries to start engaging in the negotiations; however the key focus of Obama Administration seems to be upon economic crisis and health care besides to be able to point to new opportunities for U.S. business.

Developed countries emphasize the big emerging countries like China, India and Brazil to open their markets and not make excessive use of special arrangements for developing countries in a Doha deal to shield their industries from competition.

There are gaps and unresolved issues on agriculture and non-agriculture market access (Nama). The center point of talks involves efforts to open up trade in agriculture and industrial goods.

The involves rich countries to open their protected markets for agriculture produce and cutting their heavy subsidies they provide to their farmers & agro exporters , as they are able to wipe out the farmers in poor / developing countries out of the market.

The richer developing countries will also cut industrial tariffs in return so that it opens up their markets for industrial goods to do business with both rich and poor countries.

There seems to be a more of a split between the developing and the developed nations