Economics of the World

 Marathon Session on Economy
 Economics: An Introduction
 National income
 Monetary Policy & Banking
 Inflation & Related Concepts
 Fiscal Policy
 Tax system in India
 International Trade

Economics: A Introduction
 Economics deals with the management of scare
resources.
 Ex: Water Resources, Mineral Resources

 Economics Is the study of how societies

use scarce resources to produce valuable commodities
and distribute them among different people.

 Basically the management of scarce resources of
studies how individual make choice of require
appreciation economic logic because it involve choice.
 Economics deal with the management of scarce
resources

 Economics studies how individual firms government
and other organization within our society make
choices economics studies economic activities of
mankind
 Resources
Economics include Production, distribution, trade,
consumption of goods & services.

 Branches of Economics:
 Macroeconomics- Small level- Individual player, household,
small level business.
 Macroeconomics- economy as a whole.
 Inflation
 Poverty
 Unemployment

Microeconomics : examines behavior of individual actors such
as consumers business, household etc.
Eg. How many cars, Jio company etc.

Macroeconomics: Study as a whole
Eg. Inflation, National income, employment, poverty etc.
Relation between Economy & Economics
Goal: The goal is improving living condition welfare or
battement of human

 Capitalist Economy : free Market Economy
 India- Onion/Tomatoes
 100/--150/- Make my Trip
 Market forces Go IBIBO
 Demand Supply

Invisible hand of market forces
Prices
Adam smith : Capitalist Economy
Book : wealth of Nation

UK, France, USA
Western European Country
State has no economic role

 MIX Economy : Market Forces
• Public Interest
• (Macroeconomic stability)

• Mix Economy : Market + State
• (Macroeconomic Stability)
• Interfere

• Demand spending
• PMKGY 1.7 L.cr.
• ABA 21 L. cr.
• 1929
• Great Depression
• GDP| Output
• John Meyerd Keynes
• State Intervention
• Market
• Poverty
• Unemployment

 State Economy
 Stat (Govt.)

 America
• Production New Deal
Social Assistance

• Supply
• Price
• Centralized Economy
• Central Planned Economy
• Market economy
• New Approach:
• Laissez faire (free market)
• Strengthening Poor| Not Providing employment
• Marginalized | BPL
• Demand Does not fall
• Demand Unemployment

•
• Labour poduction Raw material
• Vicious Cycle

 Keynes – he suggested good intervention in the economy
spending the infrastructure
 Demand increase- Create employment- Purchasing power
Virtuous cycle
 Government spending to boost demand to get out the
economic depression
 Successful 1929
 America
 Social Prog
 - Free Education
 - Health
 - New Deal

 Mix Economy : India, Malaysia, Indonesia Etc

 Role of State in Economy
 1. Regulator : Economic policies and Implementation
 2. Producer & Supplier of Private good services

BSNL | Oil distribution companies

 3. Public goods & Services
 Road
 No charge
 Public Distribution PMKGY
NFSA 80 Cr.
Subsidized Food Grain
70% API China

 Economic Reform
 Means striking right balance between the role of the sate and
the market in the economy
Invisible Hand
More eq sufficient

Trust
State

Interference
• c- Market

S- State

80%
70%
60%
50% STRATIGIC
DIS INVESTMENT
OR PRIVATIZATION
MIX

Telecom|Air India
Pivatization
50% 80% 70% 60%
DISINVESTMENT

FPS
DBT

IMF /WB
Role of State

Sectors of Economy
 Primary sectors
 Fisheries
 Diary farming
 Agri
 Metal Minerals
 Secondary Sectors
 Manufacturing Sectors
 Producing of primary sector as it raw material
 Textile (Cotton)

 Tertiary Sectors (Source Sector): All economic activities where
various services like education, health, banking, tourism etc
are provided
 - Insurance

Natural
Resources
Direct Use

1.Agrarian economy: If the contribution of primary sector I
GDP is more than 50%
2.Industrial Sector : Contribution more than 50% of
Industrial Sector
3. Service Economy : If the contribution of service sector of
GDP is more than 50%
Labour intensive
Make in India
Tourism, Banking

ABA -MSME

 National Income Accounting (NIA)
 NIA- Set of rules and facts to use to measure the output of a country
 -Welbeing
 GDP : Gross domestic product : Total market value of all final goods
and ervic produced within country and within particular time period

 2 Car – 10 Lakh
 8 Tyres- 50,000

 GP Two Types:
 Nominal GDP : Current year production value at current year prices
 Real GDP: Current year production value at base year prices (2011-12)


 Real Growth : Its inflation adjusted
 Gain from resale are exclude
 Agent
 Transfer payments are excluded

 Three Approaches of GDP
 1. Output Approach : Total market value
of goods & services
 2. Expenditure Approach: Spending get firms recover for the
final goods & services

 3. Income Approach : Factor of production earn wages-
labour- Profit- entrepreneurship-

 Rent-land,- Interest -Capital.

Firms House hold

PAYMENT

INCOME

 GDP: GDP is equal to the total value of spending of
firms receive which they produce
 Gross means depreciation wear & tear of machinery in
their use) of capital stock is not subtracted
 If Depreciation is subtracted it become NDP
 Market Price: Actual transacted price and it includes
indirect taxes
 Factor Cost: It is the actual cost of production and it
includes indirect taxes

 GNP : Gross National Product : GDP + Income from
Abroad (What foreigners produce in the country is

subtracted form what Indian produce abroad or vice-
versa )

 The profit of foreign firm earned within India are
included in India’s GDP but no in Indian GDP
 GNP = GDP+ Net Income from abroad
 NNP= GNP – Depreciation (Net National Product)
Hyndai | Honda
x Included

 NI =(National Income) : NNP at factor cost
 NNP : Indirect Tax + Subsidy
 National Income = NNP at factor cost
 Per Capita Income : Per capita GDP- means GDP is
divided by mid year production of corresponding year.
 Nominal GDP : 5th India
 GDP Calculating current year production –current
year price
 Personal Income: It is the part of national Income is
received by households

 PI= NI – In distributed profit- net interest payments-
corporate tax+ transfer payments by govt and firms

 Personal Disposable Income (PI)-Personal Tax
payment – Non Tax Payment- PDI
 The personal disposable income is the part of income
that totally belong to the households
 Base Year- 2011-2012
 Base year is used to examine performance of the
economy in real terms
 Because it deducts the impact and inflation and
deflation
 It is prepared by central statistical office(CSO)
 1
st Base year- 1948-49
 2004-2005

 eg. Firm- Maggi 80/- Real GDP 80/-
 Base year
 80/- 90/- 100/-
 Inflation
 Green GDP : is a index of economic growth with the
environment consciences of growth
 GDP : Cost of Ecological degradation
 1000-300=700
 Genuine Process of Indicator (GPI)
 Is used to indicate harmful economic growth under
which inequalities fill up environmental damage in
huge

 This is a concept in green and welfare economics, it
helps in measurement of wellbeing of a country
 GDP deflator :Nominal GDP/ Real GDP x 100
 GDP CY Price GDP
 HDI Index :
 GHI – BHUTAN
 GDP deflator does not include price of important good
 It covered whole economy unlike WPI & CPI GDP
deflator encompasses entire spectrum of goods &
service, Hence it is a comprehensive measure of
inflation.

Inflation
Related Concepts
 Means persistent rise in general level of prices of goods
& services.

 Particular commodity – Skewflation
 Types if inflation –
 These are based on the ate on general price increase.
 Creeping inflation : When the rate of price increase I
to % per year, creeping inflation is manageable and
good for economy because producers & traders make
reasonable profits and it encourage them to invest

 2.Walking inflation: 5 to 10%
 3.Galloping Inflation : Above 10%
 4. Hyper inflation : above 50 %
 Purchasing power of currency
 Reasons Behind Inflation:
 Types of inflation based on causes:
 Demand Prices
 1.Demand Pull inflation :
To much money chasing to few goods,
Demand increases due to increased money supply in the
market and due to private and govt. spending.
Also known as growth & wage inflation

Zimbabwe Hyper Inflation
rate

At peak daily
inflation of 98 %

 Cost push Inflation- ( Supply hock inflation ) This
inflation is caused by reduced supply to increased
price of input – G&S
 Parle G 5/- 8/- Factor Cost
 Example: High cost of Capital, Crude oil prices
increase, increases prices of imported goods will
increase the cost of production
 Structural Inflation : Caused by deficiencies in certain
conditions in economy
 Eg: Backward agriculture sectors, in efficient
distribution and storage facilities
 Developing County Infrastructure
 Agri infustructure fund ANB

Reasons for Inflation
1.Increase in money supply
2. Increase in purchasing power
3.Increase in demand of goods & service
4.Increase crude oil price- Cost pull
5.Ba Monsoon, Agriculture, impacts

Crops x Productivity

6.Black Marketing
7.Hoarding
8.Cartelization

Impacts of inflation
 Reduces the purchasing power of money
 It hurts the poor most RBI
 It re distributes wealth from creditors to debtors
 An hence lenders suffer an borrowers gains
 Tax payer suffer an (As indirect tax like GST will be
increased on some regular items
 Less Savings Inflation RBI
Control

Controlling of Inflation
 1.Fiscal Measures-
 It deals with government policy to influence
macroeconomics
 Ex- spending Tax, Reduction in indirect taxes (GST, Import
Duty)
 2.Administrative –
 It includes initiatives the actions like Anti Black Marketing,
Action against hoarding & subsidized distribution etc.
 3. Monetary Measures-
 It includes initiatives related to monetary policies of RBI
 Ex-change in policy rates, CRR

Related concepts
 1.Disinflation: It refers to reduction in the rate of
inflation but inflation remains positive

2000

+VE
Inflation %
rates

-VE
Inflation
inflation Disinflation

Therefore in case of disinflation, No of years, prices of goods &
services rise.

 Open Inflation : When the govt/state does not attempt
to interrupt price rise
 Ex: Capitalist Economy (USA, UK)
 Repressed / Suppressed Inflation: When govt/ state
interrupts an tie to check price rise
 Ex: Mixed Economy India
 Skewflation: Episodic price rise, pertaining to one or
small group of commodities
 EX: Sudden demand of sanitizer due to COVID- 19
 Stagflation : Stagflation & Inflation
 Rising unemployment, Inflation due recession
1 2 3

 Stagflation Economic Growth
 Inflation
 Unemployment

 Core Inflation: Exclusion of food & energy articles from
the basket
 Headline Inflation: Measure the total inflation, it means
it includes all commodities, including food & fuel
 Philips Curves – It shows the inverse relationship
between the rate of inflation & unemployment
Recession
GDP successive
Slowdown GDP Growth

Inflation

Unemployment

8%
6%
2% 2% 6% 8%

 Deflation – Deflation occurs,
 People choose to hold on to saving instead of spending
 It today since

Deflation Disinflation Deflation

Prices fall

CPI It will be lower tomorrow,- even lower next week,
even lower in a month

2000 2018

 Deflation (Prices fall)- Demand
 Unemployment
 Vicious cycle can be formed and as economic activity
grants to halt
 Self – reinforcing- Therefore it is very difficult to
recover and there is a chance of Bankruptcy

 Deflation makes it more expensive to service existing
debts & hence banks tends to lend less, it further
reduces demand & creates deflationary pressure
Demand pull inflation Demand
Price

Lending
Money
Supply

Deflation Flowchart

 Demand Lower Price for goods & services

Smaller Cash flow and
profit for companies

Reduction in
Production

Increase
Unemployment

Low Spending on Goods &
Services

 Base Effect: Impact of the LY Inflation over the
Current year Inflation

 120-100
100

x 100

2015 2016 2017 2018
100 120 140
20% 16.66%

20/120*100=16.66%

 To acknowledge headline inflation by RBI for
monetary management
 -2011/2011
 CPI Combined
 CPI (R)+(U)
 Headline Inflation
 Weightage - CPI
 Food
 Fuel
 Housing
 Clothing
 Miscellaneous

GDP Deflator
Nominal GDP/Real GDP

Monetary Policy
 Money Supply
 The policy of influencing money supply & interest rate
to affect the output of inflation
 Macro economic tool
 Credit policy is a part of monetary policy
 Deals with questions like, How much what rate
 Price Stability- Controlling the inflation
 Accelerating growth of economy
 Employment & growth
 Balancing saving & investment

 Trade off- An act of balancing between two opposite
situation, qualities of things, both of which you want &
need.
 Inflation & economic growth
 Ex- Preparation of IAS & Job
 Indices of the Inflation- WPI /CPI
 WPI- Measures the change in the price of goods at
wholesale, Indirect tax include

 x Services

 Goods
 2011/2012 BY
 697 Commodities- 676 Pre
 (3 Major Groups)

 WPI is computed by the office of economic advisor
 Ministry of commerce & Industry
 (1) Manufactured products-64.23%
 (2) Primary Articles-22.62%
 (3) Fuel & Power -13.15 %

CPI – Consumer Price Index
 Indices to measure the inflation
 Retail level
 B.Y of CPI is 2012
 Release by CSO (Central Statistical Office)
 Rural Urban
 2000/- 15000/-

 1.Consumer (IW)
 CPI- Pay Commission
 2.CPI- UNME(Urban Non Manual Employee)
 If the 50% income is form Agri
 3.CPI (AL)
 4.CPI (RL)-2011
 CPI (Rural +Urban) and get CPI(C)

 Expansionary Monetary Policy
 Money Supply
 Recession Repo Rate
 Policy Rate 75 Bps Money Supply
 2008 & 2009
 Contractionary Monetary Policy
 When inflation high

 Tools to achieve the monetary policy objectives
 Repo Rate : RBI lends on short term basis to banks on
the society of government bonds
 For this RBI Charges repo rate for the money it lends.
 Reverse Repo Rate: 4%
 Policy Rate RBI SBI
 Short Term 100
 Repurchase Agreement Reverse Repo Rate

 Absorb excess liquidity with the sale of securities

LIQUIITY ADJUTMENT FACILITY(LAF)
 RBI
 Repo rate+ Reverse Repo Rate= LAF
 Because LAF covers the credit at repo rate & reverse repo
rate
 Funs under LAF are used by the banks to fix their day to
day matches in the liquidity
 LONG TERM REPO OPERATION
 (1 to 3 years) money to banks at prevailing Repo Rate,
accepting govt securities Money Supply
 Liquidity Crunch

 Bank Rate:
 RBI Changes on its long term lending to its clients
(Commercial banks, government, cooperative Banks)
 Used to manage the money supply in the market

 MARGINAL STANDING FACILITY (MSF)
 RBI
 Overweight from RBI
 Helps in easing the LIQUIDITY in the Market

 MSF requires collateral of approved government
securities against the borrowing, because MSF is
something that banks opt in extreme financial crisis.
 Increase in Demand of Liquidity an decrease in supply
of liquidity at a same time resulting in lack of liquidity
Reserve Requirement
-A fraction of their deposits CRR-3%
-Satisfy various needs RBI

 Providing loans to government (SLR)
 Safety of banking operation
 Regulation of liquidity
 Checking Speculation
 Inflation Management
 Reserve requirement can be in the form of RBI approve
securities with themselves or cash that are kept with
RBI (CRR)

STATUTORY LIQUIDITY RATIO(SLR)
 Non Cash form 18% 100
 1000 Bank
 CASH RESERVE RATIO (CRR)

Ratio of total deposit of a bank which is kept with

RBI, in the form of cash.
 CRR earns no interest
 Can be adjusted to manage liquidity & Inflation

 Open Market Operation (OMO)
 Purchase and sale of govt securities in the open market
by RBI to influence volume of money & credit in the
economy
 OMO is an important & feasible tool of monetary policy
 It does not change the total stock of government
securities but change the proportion held by the RBI &
commercial Bank.

 MARKET STABILIZATION SCHEME

 2004
 Aims to absorb surplus liquidity though the sale of short dated
government securities and treasury bills.
 MSS is the sterilization efforts of RBI in order to protect economy
from external stock

 MORAL SUATION
 Not to force on the banks into adhering policy
 For eg. Closed by meeting discussion

MORAL SUATION
 Not to force on the banks into adhering policy
 For Eg. Closed by meeting discussion

 CREDIT CEILING:
 RBI Restricts credit supply to a particular sector to check the
speculations, black marketing, hoarding etc
 BANK RATE :
 The interest rate below which scheduled commercial banks cannot
lend to the customers.
 2010
 Benchmark Prime lending Rate (BPLR):
 Bank fix their own Base Rate, hence base rates vary from bank to
bank according to differentiation in the operational cost of Banks

 MARGINAL COST OF FUNDS BASED ON LENDING
RATES (MCLR)
 Introduce in FY 2016-17
 Banks shifted to new methodology to complete their
rates
 Actual lending rates will be fixed by adding spread(
Profit Margin) to MCLR
 Tenure based Internal Benchmark
 Determined by the banks depending on the period left
for a payment of loans.
 It is reviewed by every month

 Money Supply : Refers to the total stock of money are
in circulation among the public at particular point of
time.
 DD(Demand Deposit)
 Saving+ Current A/C balance
 T D (Time Deposits)
 Fixed deposit have the fixed period of maturity.

 Measures of Money Supply
 M1- CU+DD Cash in Hand & Demand Deposits
(SA+CU)
 M2- M1+Saving deposits with Pos
 M3- M1+TD (Aggregate Money Resource)
 M4- M3+Saving deposits with POs

Liquidity

FIAT MONEY/ LEGAL TENDERS
 Currency note or coins are known as legal tenders, DD.
 Because it cannot be refused by any citizen for trading
purpose
 DD x

 RBI established in 1935
 Under Hilton young commission
 Nationalized in 1949

Functions of RBI
 RBI has a sole right to issue notes of all denominations
exact s 1 Note which I issues by GOI, bearing the
signature of finance secretary, However RBI manages
distribution of all currency notes including Rs 1 Note.
 Banker to Government :
 RBI help the government to raise loans and act as an
advisor to GOI in Monetary & Banking related issues.

 Bankers Bank:
 (Lender to last resort ) RBI helps at the time of crisis &
commercial bank borrow from RBI
 Controllers of the credit
 Since RBI has power to influence the volume of credit
created the banks in India. It has a control over the
credit supply.RBI sets the official interest rate s like repo
rate.
 Repo Rate
 Money Supply
 Credit Supply

Agents & Advisor to GOI
 Because RBI accepts loans & manage public debts on the
behalf of GOI, at the same time RBI issues government
bonds & T- Bills
 Custodians of foreign reserves

 $513 bn Forex

 Supervisory Functions
 Deals under RBI Act 1934
 Banking Regulation Act 1949
 Granting License to Banks
 Branch Expansion
 Ensuring health of financial system

Monetary Policy Framework
 (4 +-2) % Valid
 March 2021
 Monetary Policy Framework (4+-2)
 6 members (3 RBI + 3GOI)
 Monetary Policy Committee
 Benchmark policy rate to control inflation within the target

 Repo Rate

RRB – Regional Rural Bank
 Weak and mobilize rural savings
 1975
 Schedule commercial bank
 Mentioned : Schedule 2 of RBI Act
 They promote the objective of financial inclusion
 RRB also work in urban area
 Contribution to the share capital of the RRB(in %)
 Government of India 50
 State contribution 15
 Sponsoring of Nationalized bank- 35

Cooperative Banks
 This bank perform all the main bank function such as
deposit Mobilization, Supply of credit etc.
 Agriculture related
 Rural based industries
 Shorterm & Long Term
 RBI- NABARD Central & State governments
 It has three tier structures-
 1. Primary credit societies (Urban / Agricultural)
 2 .State Cooperative Banks (SCB)
 3. District Central Cooperative Bank (DCCB)

Fiscal Policy
 Government fiscal policy- Spending
 Deals with changes in it expenditure & taxes to stabilize
the level of output & up and own in the economy
 The policy which influences the macroeconomic
conditions
 Functions of government through budget
 1. Allocation of public good- Road, Airport, Railways,
Energy utilities, Education, Healthcare, Social
 2. Distribution of income- Redistribution of income- Free
rider,
 Which is considered fare.
 3. Stabilization- Spending

 Tax – IT
 Cooperation

 PMGKY – PMGKAJ- 80Cr.
 Money Supply
 Demand
 ANB 20L cr.
 1.PMGKY
 2.RBI Policy rate
 3.Agri, MSME CRR

 Budget(Leather Bag)
 : Annual financial statement of the estimated receipts
& expenditure of the government in respect of every
financial year.
 COI under Art-112 has a provision of Budget
 Budget Comprises of
 1.Revenue Budget- Revenue receipts, Revenue
Expenditure
 2.Capital Budget- Capital Receipts
 Capital Expenditure

 Revenue Budget:
 Revenue receipts : Non Redeemable
 : The receipts of the government
which cannot be reclaimed
 TAX REVENUE NON-TAX REVENUE
 Direct Tax Interest received on loans
 Profit on Investment
 Fees provide by GOI
 For services provided
 Income Tax
 Wealth Tax
 Corporation Tax

 Indirect tax
 GST
 Customs Duty
 Comes under tax revenue of GOI
 Revenue Expenditure/ Consumption Expenditure
 Does not create assets
 Salaries & Pension
 Defense Services payments
 Subsidies
 Interest payments (Maximum)
 Other than the creation of physical & Finaiancial Assets

 Revenue Budget : Shows the current revenue receipt as well
as expenditure that can be met from these receipts
 Tax Non Tax
 Capital Budget : An account of assets as well as liabilities of
central government which takes accounts of the changes in
capital
 Capital Receipts:
 Creates liabilities
 Reduce financial assets
 Includes-
 Recovery of loans granted by Central government which
takes accounts of the changes in capital
 Capital Expenditure
 Creation of physical or financial assets
 Loans given to stats o other
 100- land parties

Loan-
Market

Banks- SLR

 Investment in shares
 Purchasing in Machinery
 Purchasing of building
 Acquisition of land

18-19(RE) 19-20(RE) 19-20 (RE) 20-21 (BE)

Revenue
Receipts

15,52,916 18,62,161 18,50,101 20,20,926

Capital
Receipts

7,62,197 8,23,588 8,48,451 10,21,304

Total Receipts 23,15,113 27,86,349, 26,98,552, 30,42,230

Revenue
Deficit

4,54,483 4,85,019 4,99,544 6,09,219

Effective
Revenue
Deficit

2,62,702, 2,77,686 3,07,807 4,02,719

Fiscal Deficit 6,49,418 7,03,760 7,66,846 7,96,337

Primary Deficit 66,770 43,289 1,41,741 88,134

 Measures of Government Deficit
 When government Spends more than it collects by way of
revenue. It incurs the deficit.
 Revenue Deficit – Revenue Expenditure- Revenue Deficits
 Effective Revenue Deficits- State grants the revenue deficit
which includes those revenue in the form of grants for
creating capital assets.
 For Ex: If a GOI give grants to the state
 Government for the construction of roads
 Ponds etc.


Some Asset
creation in the
form of grants for
creating capital
assets

 Revenue Deficit- Revenue deficit refers to excess of
government revenue expenditure over revenue receipts. It
means, government is using its saving to finance
consumption expenditure.

 Since revenue expenditure includes grants to the states and
some these grants are used for capital asset creation under the
central sector schemes
 Hence it is totally unproductive
 Fiscal deficit – It refers to the difference between
government expenditure and its total receipts excluding
borrowing- Capital Receipts
 Hence, Fiscal Deficit indicates total borrowing
requirements of the governments

Capital Asset creation

 Net Fiscal Deficit : Gross Fiscal Deficits- Loan & Grant
given to states
 Fiscal Deficit is a key variable in judging the financial
 Health sector and macroeconomic stability.
 Primary Deficit :
 Fiscal Deficits- Net Interest Liabilities
 It is used to focus on present fiscal imbalances

 Monetized Deficit : It is the part of the fiscal deficit
provided by the RBI. It is the borrowings made from
the RBI through printing fresh currency
 It is used when government cannot borrow form the
market 100-50

 Monetized deficit means the increase in the net RBI
credit to the central govt.
 Deficit Financing : It includes internal debt
comprising loans from foreign counties &
International financial Institution , NRI deposits etc
 Public Debt:
 Sovereign Bonds + Internal Debt External Debt
 Market
 Bond
 Savings
 Taxes
 Future Generation

Borrowings

Fiscal Drug
 It is a situation where inflation pushes income in
higher tax brackets.

 The result is increases in taxes but no increase in social
purchasing power
 In this, government gains due to higher tax collections
and the economy suffers as growing growth is dragged
down due to less demand

TAX
 Types of Taxes
 1. Direct Taxes
 2.Indiect Taxes
 1.Direct Taxes:
 Direct Tax is levied on the income or profit of an individual or
a company
 Ex: Corporation Tax, Income Tax
 2.Indirect Tax :
 Indirect tax is levied on manufacturing & sale of goods &
services
 GST, Customs Duty, Etc.

 GST is a Destination Based Tax
 GST has replaced many indirect taxes like excise duty,
 VAT (Value Added Tax), Service Tax Etc.
20%
Borrowings

18%
Corporation
Tax

17% Income
Tax

4% Customs

 GST is Multi Stage Tax is levied on every value addition
 Introducing/ rolling out GST have helped in removing
cascading tax effect (tax on tax)
 3 Taxes
 SGST – It stands for state goods & service tax.
 IGST- It stands for inter- state or between the states
GST. It will be collected by central
 CGST-It stands for Central GST
 It is a structural reform Tax
 Talks started in 2007 and rolled out in 2017, so it took
10 years

 GST Council : Art 279(A)
 Finance Minister is a chairman of GST council

 Trends in Tax receipts

16.2

10.8

5.6

4.5

5.9

4.9

Gross Tax Receipts

Direct Tax

Indirect Tax

 Tax base:
 IT refers to the value of services & and income on which
Tax is imposed
 In case of Income tax, tax base is taxable income
 Tax Buoyancy :
 Growth based increased in tax collection
 Here, Tax base increases (Because increase in total input
or output ) but there is no change in the tax rate
 Taxable Income
 Tax expenditure : Tax expenditure refers as forgone
result of exemption concessions
 It is justified for promoting regional balances growth &
incentives given to priority sector

 Cess: It is an additional levy on a Tax which is used for
specific purpose
 Cess collection can be used for designated end only
 Example : Health & Education cess.

Naxalism
LWE

 Surcharge :
 It is also additional levy
 Collection from surcharge can be use for any purpose
 Hence, surcharge is general, while cess is specific
 Tarrif:
 Tarriff is a tax levied on imports or exports between the
sovereign status
 It is used to safeguards in domestic industries
 Example : Customs Duty
 Tax Avoidance- Legal
 Tax Evasion – Illegal

 Minimum Alternative Tax (MAT)
 Normally, a company pays tax on income accordance
with Income Tax Act.
 Therefore, some companies show profit under company
Act but taxable Income as per IT Act..
 These companies known as Zero Tax Companies.
 To address these loopholes, MAT was introduced.
 But profit & Loss of company are prepared/ calculated as
per the provision of company.

 Laffer curve :
 It shows relation between Revenue & Tax rate.

INTERNATIONAL TRADE
 OPEN ECONOMY- Generally Trade with other nation.
In such economies exchange of goods services & asset
takes place with rest of the world such economy is
known as open economy
 Closed economy- No such interaction takes place.
 Global interaction of the economies widen choices in
3 broad ways.
 Through international trade consumers have
opportunity to choice between domestic & foreign
goods this is known as product market linkage.

 International market linkage forms can choose where
to work

 Balance of payments refers to the record of the
transacting in goods & services and assets between
residents of a country with rest of the world for a time
period

Labour Market Linkge

Balance of payments

 BOP is the way of listing receipts and payments in
international transactions of a country
 The decrease in official reserve is called overall balance of
payments deficit because it is a record of transactions in
goods & services and transfer payments
 BoP-(1) Current Account
 (2) Capital Account

 Current Account : Three main account
 1.Trade Balance
 Trade in goods
 Trade Deficit = Import> Export
 Trade Surplus= Export > Import
 2. Trade in Services- Banking, Tourism| Indian’s Bahar
 3.Transfer Payments- free, remittances, foreign grant

 Balances of exports and imports of goods & services
 Including net transfer payments we get current
account balance both Government and Private
payments are included in the calculation current
account
 Current account deficit- Crude oil – Import
 Negative current account- Gold It is known as current
account deficit
 Current account might be positive or negetive
 Positive current known as current account surplus, the
current account surplus increases the country’s net
foreign assets.

 In case of negative current account it is known as
current account deficit
 Capital A/C: Records all transactions between
residents of a county and the rest of the world which
causes the changes in the assets and liabilities of a
residents of the country or its government
 Record all international purchases and sale of assets
such as money, stocks, bonds etc.
 Capital account include external assistance net
commercial borrowing, NRI Deposits, foreign
Investments like FDI, FII

 Forex (Foreign exchange Reserve)
 Forex reserve used bt the RBI to take a operation in the
forex market to stabilize the exchange rate of rupee
and ensure that there is no speculation.
 Types of currency regime
 1.Fixed
 2.Floating
 3.Managed $1= 75/-
 78
 80

 Floating Currency regime : In this regime exchange rate is
floating and are market driven.
 It means exchange rates are regulated by the factors such as
demand & supply of a domestic and foreign currencies

 Fixed Currency regime : In this regime the exchange rate of
a particular currency fixed by the monetary authority
 State.
 Managed currency regime: In this regime exchange rates
managed
 It is the mixture of fixed and flexible exchange rate system
in which government regulate the exchange rate it is known
as duel currency regime

 Most of the modern economies follow this system. Ex:
India
 Depreciation : When domestic currencies loose its
value in front of foreign currency, If it is market driven
; It is known as depreciation.
 $500b $1= 75R - 70

 Appreciation : If a free floating domestic currency
increases its value against the value of a foreign
currency
80/-

 Devaluation : The exchange rate value of a currency
 that cut down by its government against the foreign
currency. It is known as official depreciation
 Revaluation : It is official appreciation in which
domestic currency is increased by the government
against foreign currency.
 Nominal Effective Exchange rate refers to the
prevailing official exchange rate.
 NEER
 Real effective exchange rate: In this inflation
adjustment exchange rate the calculation of real
exchange rate inflation India's trading partners is
featured in.

 Development Banks
 Shadow Banking
 NBFC

 Development Banks
 NABARD- Agri Rural Bank
 SIDBI- MSME
 EXIM- EXIM
 IFCI-
 MUDRA BANK
 NHB

 NABARD- Financial Inclusion
 - Refinancing Agency

 Reliance
 NABARD
 World Bank
 ADB
 CBS
 RRBs
 SCBS
 SCADBS
 NABARD SUPERVISES
 State Cooperative Banks (STCBS)
 District Cooperative Central Banks (DCCBs)
 Regional Rural Banks (RRBS)
 Cottage Industries
 Rural Innovation Fund
 Rural Infrastructure Development Fund (RIDF)|
BANKS RRB

 SHADOW BANKING

 Traditional Related Banking
 Do not accept demand deposit

 SIDBI-
(Small Industries Development Bank of India
-1990
-MSME
 EXIM
 Direct Lending
 MoF
 The Export Import Bank of India Act
 1982
 Financial Assistance to exporters & Importers

 Micro Units Development & Refinance Agency Bank
 Pradhan Mantri Mudra Yojana- 2015
 Non- cooperate, non farm (Small / Micro Enterprises)
 Commercial Bank, RRBs, Small Finance Banks, MFIs, NBFCs
 Those Eligible to borrow from Mudra Bank are
 Small Manufacturing Units
 Shopkeepers
 Fruit & Vegetable Vendors
 Artisans
 Industrial Financial Cooperation of India
 1948
 Statutory Cooperation
 BSE, NSE
 RBI,
 JUDISDICTION of MoF, GoI

 DICGS(Deposit Insurance Credit Guarantee
Cooperation)
 Rs 1 Lakh- 5LAKH
 Yes Bank Bank Run
 R/R- CRR
 MSF- SLR CRAR
 Priority Sector Lending – LIG
 SCB – 100-40%
 Fresh Categories
 Bank Finance to startups- 50Cr.
 Financial Inclusion – PMYDY
 Regional Rural Banks- (RRBs)

 URBAN
 Helps to the weaker and to mobilize rural savings
 Share Capital
 Govt. of India- 50%
 State Contribution – 15%
 Nationalized Banks- 35%

 RRBs MGNRGA
 Credit Cards
 Mobile Banking
 Internet Banking
 UPI Services
 Process & Augmentation

 Bank
 Deposit Rates Lending Rates
 Loan – Asset- NPA
 Liability
 12 PSB
 22 Public Sector Banks
 46 Foreign Banks
 56 RRBs
 1485 UCBs
 96000 RCBs
 2,13,145 ATMs September 2021
 Commercial Banks – Profit
 Cooperative Banks- No Profit No Loss

5% 8%

 Small Finance Banks
 Payment Banks

 1949 Commercial Banks
 General public, Cooperate & Govt

PAY TM

MSME Sector

LIMITED TARGETED BANKS

Nationalization – Ownership GOI RRBS

PSB 12 PVT ICICI,
HDFC

FOREIGN BANKS

 Scheduled & Non Scheduled Banks
 2
nd schedule RBI Act of 1934
 Paid up capital of Rs. 5 lakh
 Cooperation Rather then Sole Proprietorship

 Cooperative Banks
 They work on no profit no loss basis
 Managing Committee
 State Co operation Societies Act, 1912
 RBI
 Banking Regulation Act 1949
 NABARD (Agri Rural)

 Three tiers structures
 1. Primary Credit Societies- PCS
 (Urban/ Agricultural)

 2.(DCCB) District Central Cooperative Banks
 3.State Cooperative Banks

 Under duel registration
 State register of societies & the RBI
 Failures & Frauds
 Agriculture related products & rural based products.

SCBS

DCCB

URBAN AGRI

 Short as well as long term loans.
 Financial help from from RBI- NABARD. Central &
State
 Pricer approval of RBI
 Issue equity shares or special shares to its members or
any other person
 Issue unsecured debentures or bonds less then 10 years
 Essentially means non numbers can become share
holders of the bank.
 Primary Agricultural Credit Societies (PACS)
 8.6 cr- 5 L.cr depender base
 Net worth of 47 Banks

 Niche Banks:
 Differentiated Banking
 The Idea of Differentiated bank was mooted by Nachiket
Mor Committee, 2014 for financial inclusion
 Classified as payment banks, small finance banks etc
 Small Finance Banks
 Paid up equity capital
 200 cr.
 Sell forex to customers
 Sell mutual funds. Insurance & Provisions
 Will be given schedule bank status

 Non Bank Financial Companies(NBFCs)
 Do not have banking license
 Companies Act 1958
 IPO ( Shares/ Stocks/ Bonds/ Debenture/ Securities
 GoI
 NBFC Demand Deposit x
 Payment Settlement Systems. 12m – 60months
 Ex: Investment banks, mortgage lenders, money
market funds, Insurance companies, hedge funds,
Private equity funds.

 Traditional Regulated Banking
 Do not accept traditional deposit
Base layer
Top

Upper

Middle layer
Extreme Risk

NBFC

HFC

SYSTEMS

SHADOW BANKING

Ramesh Singh
(Kapil Sikka Sir)
 An Introduction
 More than a Dismissal Science
 Defining Economics
 Micro & Macro
 What is Economy?

 More than a Dismissal Science
 Depressing and poor science
 A failed science (in wake of 2008 crisis)
 Yet valuable in nature,

 Defining Economics
 Economic Activities Human Being
 Money
 Going Temple and giving alms
 Hence : Goods & Services
 Supply & Demand factor
 Societies capability of using scarce Scarce Resources
 Goods are scarce

Unlimited needs

 A working definition:
 Pofit, loans, Livelihood, Occupation, wage, employment

 Micro & Macro
 After great Depression
 Keynes father of Economics
 Micro – Bottom up approach
 Macro- Top Down

SUPPLY

DEMAND

P
R
I
C
E

QUANTITY
EQULIBRIUM

 Co relation
 Demand & Supply Price Rise
• Inflation

 Effect on Inflation, GDP, Employment
 MICRO MACRO
1.Individual Unit 1.Large Unit
2.Maginal Analysis 2.National Income, Public
Finance, employment
3.Inividual Prices, Individual 3.National Income, Total
Output, Total Consumption
and General price level.

Consumption & production
4.Simple 4.Complex due to the study of

large groups

5.Price analysis 5.Income Analysis
6.Studies Individual problems 6.Problems relating to
And is less important comparative economy and its importance is

growing

study for Input.

 Economics & Economy

Defined Territory Practical Application Economic Affairs Inflation

SECTORS & TYPES OF ECONOMICS

PRIMARY SECONDARY TRTIARY QUATERNARY QUINARY

Redcollar
Agricilture
Fuels
Fishing
Forestry
Metals
Minerals

BLUE
COLLAR
Manufacture
Refining
Production
Food
Processing

WHITE
COLLAR
SERVICE
TRANSPOR
TATION
COMMUNI
CATION

BANKING
IT SECTOR
EDUCATION
KNOWLEDE
HUB
KNOWLEDGE
SECTOR

R&Ds
CEOs
SCIENTIST
BUREAUCR
ACY

 W.W. Rostow Perspective (1960)
 Five Linear stages, though the three main sectors. i.e
, agriculture, Industry & Services

GDP > 50% economy- Primary
-17.4

-31% Industrial Sector

-53.66% GDP

Primary Sectors In India

SECONDARY SECTORS

TERTIARY SECTOR IN INDIA

 In 1776
 The Wealth of Nations
 (Adam Smith)
 Smith rejects government interference in market
activities, and instead status governments should
 Serve just 3 functions
 1.Potect National Borders,
 2.Enforce Civil laws
 3.Engage in public works i.e- Education

 Adam Smith: Government intervention disrupts the
believed law of demand & supply
 Idea of Invisible Hand
 Laissez faire (Non-Interference)
 Specialization of labour
 Across Europe- American under free market system,
Private Enterprise System Etc.
 Promote idea of Natural Liberty
 Invisible Hand- Capitalist Economy
 Buying – selling is determined by need & prices

 Free Market

 Capitalist Economy:
 Private ownership of resources
 Economic Freedom
 Limited Intervention of government
 Profit Motive

Non Interference

Free Exchange

Capitalism

SOME GOVT
REGULATION

CEATION OF
WEALTH

 Pros & Cons
 Incentive for work
 Consumers have choices
 Prevents governments unnecessary interference Rich &
poor
 Creates large inequality
 Monopolistic fear in long term
 Exploitation of community resouces

 Birth of State Economy
 Karl Marx
 Social Good USSR- Lelin
 Marx & Bolshevik Resolution 1917-1916
 Mao’s Policy in china- 1949-50
 Workers of the world unite you have nothing to loose
but your chains
 Socialism is a response to industrial capital
 Father of socialism

 State Model of Socialist
 Shared ownership of resources and central planning
offer a more equitable distribution of goods and services
 Planning
 Benefit
 Inequality- minimum
They hold that workers- who contribute to economic output
should expect a commensurate reward
 Ownership of resource lies with the state (Public Ownership)
 No Market
 No property rights
 Planned & Controlled Production
 Started with Bolsheviks 1917

 Pros & Cons:
 No exploitation of workers
 Equality is practiced
 Poverty is eliminated
 Abuse by State
 No incentive means no hard work
 Internal decay of system
 K. Max-From each according to his ability, to each
according to his needs

 Socialism Communism
 Resources owned by state Resources owned by

society
 Means End
 State is there to Plan & Control Withering away of state
 Equality Equality is practised
 Limited private ownership No private ownership
 You have two cows you give one You have 2 cows the state takes
both and gives you some milk

to your neighbor

 Mixed= Capitalist+ Socialist
 State- market mix
 Principles of capitalism & Socialism
 Tate Intervention exists with necessary regulations &
taxation
 Essential Services
 Profit
 Invisible hand of Adam smith and capitalist ethos of
market got a major setback during great depression
(1929)
 BSNL | AIRTEL
 Demands

1930 Geat epression
WorldKeynes-

 Impacted entire globe
 Millions became unemployed
 Industrial units were shutdown due sharp fall in
demand
 Failures of smith gave rise to Keynes
 Keynes
 Criticized the invisible hand principle
 Suggested that free market results into “Strangulating
the poor”
 Capitalized wages does not support market at large,
fall in demand brings economy down

Keynes suggested
 Government Intervention
 Increased government expenditures- Public
 Cheap money supply
 Boost demand supply
 His policies pulled out the world out of crisis and
hence a new concept was born
 Hence:
 Great Depression pushed to this idea
 France announced in 1944 with national planning
 World Bank promoted this in late 80’s
 Socialist countries accepted in 80’s

ANB COVID
1930

PUBLIC

TYPES OF GOODS

STATE
HEALTH
EDUCATION
COMMUNICATION

PRIVATE OTHER GOODS
COMMUNICATION

Pros & Cons:

 Freedom of capitalists
 Welfare for needy
 Planned growth
 Unnecessary control on private sector
 Fear of Nationalization
 Inefficient public sector
 Failed Mao Zedong’s (Great Set leap & Great cultural
revolution)
 In 1985, China announced its open door policy, the first
experiment in “Market socialism” under Deng Xiaoping
BANKS 1969

WHITE
ELEPHANT

CAPITALIST

Why India Mixed Economy
 Poverty Alleviation
 Protection of poor
 Planned development of country
 Distribution of necessary resources
 #Which is the best type of economy
 State produce or private production , should be
allowed
 Mixed economy is the best solution

1930

 #Capitalist turning to mixed economy during
depression/Covid calamity
 Pauperization of masses
 (Poor)
 Governments took control of producing and supplying
some basic goods and services which are known as
public goods
 50% of GDP spent on Public goods (School, Education,
Health, Social Service, Health care)
 Public goods were given free

FRANCE
1994 First
Time

PUBLIC GOODS
PRIVATE GOODS

NON NECESSARY GOODS

 Market Socialism
 Basic Edifice

 Oskar lange suggested the same things for socialist

economy

 Lange Praised the state economy but suggested to look

towards capitalist economy
 Advised Market socialism
 FDI| Private Investment

CHINA
CAPITALIST
NATIONALIST

Reforms of 80’s  Glasnos  Prestroika  Open door policy

1975
-76
Privatization

Is market socialism success
 Soviet union, Ideas of ‘glasnos’ Openness and
‘prestroika’ restructuring, resulting disintegration
 It was “a political fallout of an economic
mismanagement
 China was prepared for a phased shift
 1980’s was a fix for world governments

 Post 2nd world war many countries decided to adopt
Mix economy .
India, Malayasia, Indoneia, to name a few
MIX ECONOMY COUNTRIES

 In 90’s World Bank took authoritative step to open up
Indian economy
 IMF & WB asked governments to mark their territories
of intervention

 Capitalist Socialist

World Development Report 1999

Complement HYBRID

 Distribution System
 Three evolved three distribution systems also evolved
with a economic systems
 Capitalist distributed through markets
 Socialist distributed without markets
 Mixed economy distributed it through hybrid system.

 Washington Consensus
 Neoliberal reforms
 Structural Reforms
 Long-term economic growth in developing countries
 Reforms suggested
 Low government borrowing – to discourage developing
economics controlling high fiscal deposits elative to their
GDP
 Curtailing subsidies : focus on long-term growth supporting
sectors Like, Primary Education, Primary Healthcare &
infrastructure
 Fiscal Deficit Expenditure> Earning 120>100

 Tax reform : Policies to broaden the tax base and adopt
moderate marginal tax rates
 50%, 20% 30%
 Interest rate distribution:
 Market determined, These interest rates should be
positive after taking inflation into account (real
interest rate)

 Encouraging competitive exchange rate though free-
floating currency exchange

 Trade barriers such as tariffs an quotas
 Relaxing rules on FDIs
 Privatization of State enterprises, Typically in
developing countries, these industries include railway,
oil and gas.
 Deregulating the industries and making them
competitive.
 Development of property rights
 LPG is key Privatization
Globalization
Liberalization

Neo Liberalization

 Liberalization
 Increasing competition amongst domestic countries
 Encouraging Foreign Trade
 Opening up Industrial sectors
 De-licensing (Ending License raj)

 Single Window.

 Privatization:
 By disinvestment
 By withdrawal of governmental ownership and
management of public- sector companies

 Globalization
 One Village
 Connected

 World View
 Macedonian
 Nothing but Neoliberalization- Colony
 Market Fundamentalism

 FUNDA
 CAPITALIST

 Free market capitalism and away from governmental
spending, regulation and public ownership
 Fiscal austerity, de regulation, free trade, Privatization and
reduced govt spending
 Pinochet, Thatcher, Regan, Roger
 There is no alternative approach

 Unshakable belief
 Markets
 Market fundamentals

Reganomics
Neolibealization

MARKET FUNDAMENTALISM

Demand & Supply

No Welfare

Capitalist

 Some economists argue that trade is not always in the best
interest of developing economics
 Long Run projects govt investments are always required
 China has been taking benefits of this in Afican Nations
and under developed countries
 Privatization can often lead to companies ignoring certain
low income markets or the social needs of a developing
economy
 Hospital Health
 2008 US subprime crisis
 Joseph stiglitz eud of neolibealism

Criticism

Solutions

 Keynesian economics remains the only option
 Paul krugmen- Idea of interventalist state
 Skill, Poverty
 Health, Education
 Aertycen
 New Arrow of abenomics
 Strong Economy
 Support for families with children
 Social security

 Beijing Consensus
 Idea by joshua coper Remo
 Chinese model of economic development based upon
policies of Deng Xiaoping since 1976
 1.Constant experimentation and innovation Anti
Washington Consensus
 2.Peaceful distributive growth with gradual reforms
 3.Self-detemination & inclusion of selective foreign
Ideas.
 Higher attention as great recession heat the western
economics

 China grew double digits
 Became role model for world
 Things which worked for china may not work
for others due to heterogeneous issues.
 Chinese rise was declared as the death of market and
“rise of state-led growth. 2010

POVERTY ESTIMATION IN INDIA
 Poverty In India
 Essential for market
 Roti, Kapda, Makan
 Types: 1.Absolute Poverty-Basic living standards

2.Relative Poverty

Social Sector
Poverty estimation in India
-MOSPI
- Alagh Committee
- Raghurajan committee

 Broad Targeting
 Narrow Targeting
 Social Security
 Social security objective
 Need universal social security in India
 Universal Basic Income

Indira Awas Yojana
MID
MGNERGA
Total Sanitation
J N NRES
ICDS
NRHM
Rajeeb Gandhi Drinking Water Scheme

 Extreme poverty- Defined by WB
 As living on US $ 1.9 or less (PPP)
 The IMF working power
 Purchasing power parity formula
Cost of goods x in currency
 =
Cost of good x in currency
 PM Garib Kalyan yojana
 Cash Transfer
 80 Cr.
 NFSA

 6Kg rice / Wheat one person / month
 The Gini Coefficient
 Stands at 0.294
 Income in equality is measured through the Ginni
Coefficient
 Loenz curve graphical representation of the distribution of
income or wealth within population
 Suresh Tendulkar committee
 Spent> 33/day urban
 > 27/day Rural
 Not treated as poor
 < 21.9 %
 MPI 25% < BPL
 Over 50% Bihar poor in NITY aayogs Pover ty Index
 World Inequality Report - 2022

Yojona January 2021 Summery
India@75
M. Vankaiah Naidu
 Democratic Governance
 Public Health
 Agriculture
 Infrastructure

 Subjugation- Struggle
 Independence 1947 IAS/ IPS
 Challenges UNITY & INTEGRITY
POVERTY
ILLITERACY
MALNUTRITION
INEQUALITIES RICH & POOR

 Raw Material
 Finish Product

 Industrial Base
 Scientific Base
 Space sect
 Nuclear Sect

ENGLISH / BRITAIN

560+PRICELY STATES

Nehru JI

 V. President
 Now: Economic Power(3rd largest)
 PPP

 GDP
 5th

TOP Economy 2021 Viswa Guru
India

Great Philosophers
Scientists
Phy/ Che/ Astronomy
Medicine| Surgery
Astrology

 Transformed India into a developed prosperous nation
 Ageing World. M.ag <30 yrs
 Youth can be change makers
 Skills proper way
 Youthful energy
 Channelize

 Youth fight social
 Evils
 Castesim
 Corruption
 Communalism
 Gender discrimination

Aryabhatt
Barahamihir
Charak
Sussurta

 Economic Growth – Rapid
 Inclusive Growth Poor
 Rich- poor
 Environmental Friendly Naturally
 Sustainable development

 Public private partnership
 People Participation
 Good governance- 8 Pillars
 Prosperity ensure inequalities

RURAL WOMEN

SOLUTION

Democratic Values/ Tradition

Institution
Achievement of India
MP/MLA VOTE
Vote Election
Peaceful Power Transfer
Central African Republic
Civil War like Situation

 Democracy, Polity & Governance
 Dr. Najma Heptullah

 India Largest Democracy 1.3+
 Oldest America

 Capital will attack
 Rule of law
 Trust
 Process of Law

 Political Process
 Political Institutions Ex Pakistan

 Military Coup
 Myanmar
 Suki

Society + Individual

Equality
Liberty
Secularism
Justice

INSPIRE True Democracy

 Indian democracy is more then its political Institution
& process. In it broader sense Indian democracy
includes the idea that the Indian society & every
Indian citizen is Democratic, reflection basic
democratic values of equality, liberty, secularism &
justice in social sphere and individual Behavior.
 Challenges & Threats- Indian Democracy
 Democratic Governance is a condition in which the
promise of justice , liberty & Equality & Enshrined in
the constitution is realized in a democratic political
framework
 Social Justice
 SC/ST/Women/Senior Citizens/ Tribals
 Secularism

 Money Supply & Money Multiplier
 Money Multiplier = 1/Reserve Ratio
 M=(money multiplier)
 Money supply/ Money Base (Hypowerd Money)