Definition of agriculture finance

Murray (1953) described agricultural finance. Agriculture finance is also known as “a financial
analysis of borrowing funds and reserves by farmers, the operation of farm lending agencies,
association and of organization interest in loans for agriculture .”
Another definition of agriculture finance is given according to Tandon and Dhondyal (1962). He
specified the term “agricultural and another in finance.” It is known as an associate of agricultural
economics, which negotiates with financial or economic resources that all are connected to
individual farm divisions.”

Types of Agricultural Loans in India

The farmers can take a loan for the various activities of agriculture. These activities include Storage
purposes, Expansion of the production, product marketing, Finance, conducting day-to-day
processes, Buying land, and Purchasing farming equipment or machineries such as tractors and
harvesters. There are too many types of agricultural loans in India. If you want to know about them,
you can follow the below-given points.

 The first type of agriculture finance is Crop Loan. Any farmer can take a crop loan through the
National Bank for Agriculture and Rural Development Bank and other commercial sector banks.
 Apart from this, the Kisan Credit Card is also another type of agriculture loan in India. It was
launched in India for the first time by the Indian banks in 1998. Any farmer can take the borrowed
funds at 7 percent per annum and more than amounts up to Rs. 3 lakh.
 Apart from this, another type of Agricultural loan in India is the Combine Harvester Loan,
Multipurpose Gold Loan, Drip Irrigation Loan, Tractor Loan, Poultry Loan, and Dairy Loan.
 The National Bank for Agriculture and Rural Development is one of the best banks to take loans for
farmers. The NABARD is the exclusive and most wondrous bank that provides financial help to the
farmers. The Kisan Credit Card Scheme, Loans by Nationalized Banks, Private Sector Bank
Agricultural Loans, and Loans by State Bank of India is also a type of agriculture loan.
So, these are the Types of Agricultural Loans in India. Any farmer can benefit from these loans from
specified banks and agricultural sectors.

The Need for Agriculture Finance

The need for agriculture finance in this current time is more than before. Some farmers take this aid
especially to accomplish their production needs and buy various kinds of farming instruments.
Moreover, the other needs of the Agricultural finance are to meet various needs of the farmers like
agricultural marketing, post-harvesting storage, and transport of produce, supply of power, need for
good quality seeds, procurement of fertilizers, diseases, and issues like low rainfall, meeting the
risks like damage due to pests, etc. So, all these are the needs of agriculture finance.
What is Agricultural Marketing?
 Agricultural marketing is a method that includes gathering, storage, preparation,
shipping, and delivery of different farming materials across the country.
 Agricultural marketing, which is essentially a subset of the overall marketing
system, refers to all of the activities, agencies, and policies involved in farmers
procuring farm inputs and moving agricultural produce from farms to
consumers/manufacturers/exporters.
 An effective marketing system reduces costs while increasing benefits to all segments of
society.
 It should provide remunerative prices to farmers, food of sufficient quality at reasonable
prices to consumers, and adequate margins to middlemen to ensure their continued
participation in the trade.
 Several central government organisations in India are involved in agricultural marketing,
including the Commission of Agricultural Costs and Prices, Food Corporation of
India, Cotton Corporation of India, Jute Corporation of India, and others.
 There are also marketing organisations for rubber, tea, coffee, tobacco, spices, and
vegetables.
 Agricultural marketing has an essential function to play in the overall agricultural growth.
 It provides farmers with economic security through fair and remunerative compensation
for agricultural produce.
 At the same time, it ensures affordable and accessible food products to consumers
thereby reducing inflation.
 Land Reforms in India
Land in India is referred to as a social asset because the law distinguishes the
ownership of land and an individual’s right to use land, which is very important in
allocating land resources. The land is an inalienable asset because individuals can have
legal rights only over the land they currently possess and not the land they might desire.
The law declares that an individual can have the right to use land provided possession
of the land is in their name. An individual does not have a right to use land from
somebody else. The land also provides a form of security for a person because they
own it and cannot be disposed of by anyone except if there are extraordinary
circumstances such as where food will be denied to a child or if there is fear of bad
weather or natural calamity. Land reforms are policies adopted by the government to
correct the imbalance in ownership, use, and distribution. Land reforms help improve
the living conditions of landless poor and agricultural laborers.
The legislation for Indian land reforms has been passed into law only at the state level.
Land reforms in India have helped improve the lives of millions of people. Land reforms
have led to increased agricultural production and a decline in poverty. The number of
landless, which was one-third of all poor, has decreased from 57% (1983) to 5% (1997).
Landless households (for temporary and permanent reasons) were estimated at 16% in
1994.
The Land reforms aim to redress the imbalance in land ownership, distribution, and use.
The Land reforms legislation is intended to empower the poor farmers and agricultural
laborers who are primarily dependent on agriculture for their livelihood.

Objectives of Land and Land Reforms

The main objectives of land reforms can be summarized as follows:
 Increase agricultural productivity through investments by landholders in agricultural extension, agro-
processing, marketing, and value-added services. This will also contribute to stabilizing food prices
and increasing household income.
 Reduce poverty and increase the incomes of landless poor and marginal farmers by giving them
improved access to credit and market facilities.
 Provide a sustainable, efficient, and equitable mechanism for land redistribution.
 Improve overall management of natural resources, including forests, water, fisheries, etc., by
involving all stakeholders in planning for sustainable development.

These land reforms are strongly regarded as an effective tool for poverty reduction and
social reconstruction in India. This is also one of the most important policies
implemented in India after Independence. This plan provides a path to recognize and
consolidate the land rights of the poor and marginal farmers, especially in agricultural
lands, which are being held illegally by powerful landholding interests.
What are the Main Features of
the National Agricultural Policy
of India?
The main features of the National Agricultural Policy are:

1. Privatisation of agriculture and price protection of farmers in the

post QR (Quantitative Restrictions) regime would be part of the
government’s strategy to synergise agricultural growth.

2. Private sector participation would be promoted through contract

farming and land leasing arrangements to allow accelerated
technology transfer, capital inflow, assured markets for crop
production especially of oilseeds, cotton and horticultural crops.

3. The policy envisages evolving a ‘National Livestock Breeding

Strategy’ to meet the requirement of milk, meat, egg and livestock
products and to enhance the role of draught animals as a source of
energy for farming operations.

4. High priority would be accorded to evolve new location-specific and

economically viable improved varieties of farm and horticulture crops,
livestock species and aquaculture.

5. The restrictions on the movement of agricultural commodities

throughout the country would be progressively dismantled. The
structure of taxes on food grains and other commercial crops would be
reviewed.
6. The excise duty on materials such as farm machinery and
implements and fertilizers used as inputs in agricultural production,
post-harvest stage and processing would be reviewed.

7. Rural electrification would be given high priority as a prime mover

for agricultural development.

8. The use of new and renewable sources of energy for irrigation and
other agricultural purposes would be encouraged.

9. Progressive institutionalisation of rural and farm credit would be

continued for providing timely and adequate credit to farmers.

10. Endeavour would be made to provide a package insurance policy

for the farmers, right from sowing of crops to post-harvest operations
including market fluctuations in the prices of agricultural produce.

What is NABARD?
The NABARD – National Bank for Agriculture and Rural
Development was established in July 1982 by combining the
Agriculture Credit Department, Agriculture Refinance and
Development Corporation, and Rural Planning and Credit Cell of
the Reserve Bank of India. The headquarter of NABARD is
located in Mumbai
NABARD Notes

 The objective of NABARD is to meet the rural development

and credit needs of agriculture in India.
 NABARD was envisioned as the apex baking institution for
the entire rural credit system.
 It also provides funding to rural credit institutions and
coordinates with their operations.
  NABARD started its operations with a share capital of RS.
1400 crores. Further, RBI’s Agricultural Credit Funds
transferred 1400 crores.
 NABARD has several branches across India.

Functions of NABARD
NABARD plays a crucial role in channelizing funds, implementing
various rural development schemes, and extending financial
assistance to agriculture-related projects. Mainly, NABARD has
three functions – Financial functions, Developmental functions,
and supervision functions.
Financial Functions of NABARD

 NABARD offers financial assistance to the farm sector

through refinancing a wide range of agriculture and allied
activities.
 State cooperative banks, commercial banks, state land
development banks, and regional rural banks are eligible for
refinancing.
 NABARD is also empowered to extend loans and advances
against the stock security and promissory notes.
 Additionally, to fund seasonal agricultural operations,
NABARD also makes short-term loans to Regional Rural
Banks and Co-operative Banks.
Developmental Functions of NABARD

 NABARD is involved in development activities as well,

coordinates rural credit agencies, and helps to address rural
and agricultural issues.
 To assist the boosting rural and agricultural development
research, NABARD has RDF (Research and Development
Fund)
 NABARD also has the power to establish a “ Reserve Fund”
or any other funds it finds appropriate.
Supervisory Functions of NABARD
  Banking Regulation Act 1949 gave the power to NABARD to
inspect the operations of cooperative banks and Regional
Rural Banks.
 Before granting permission to open a new branch, the
Reserve Bank of India must receive a recommendation from
NABARD.

Industrialisation: Definition
Before learning about the growth and pattern of industrialisation, we need to know its definition.
Industrialisation can be defined as the economic and social transformation of an agricultural society
into a fully advanced Industrial society. It includes the use of machinery, advanced technology, and
assembly line for the mass production of goods and services. Industrialisation helps grow the
economy and society at large by saving time and money.

History of Industrialisation
Industrialisation or the Industrial Revolution started in the mid 18th century in many European
countries. Following the industrial revolution in Europe in the 18th century, North America was the
second continent where the Industrial Revolution took place in the 19th century.
Many countries in Europe became a part of the revolution, including Great Britain, Belgium,
Switzerland, Germany, and France. The production in the countries of revolution multiplied, and as a
result, the rural work was transformed into industrial labour. Many technical and innovative changes
were brought about in the work environment to enhance the revolution.
Gradually different countries of the world adopted industrialisation and transformed their economy
into industrial economies. The industrial revolution in East Asia countries took place between the mid
19th century to 20th century, when countries like Brazil, Russia, India, China, and South Africa were
in the process of industrialisation.

Growth and Pattern of Industrialisation

in India
Above, we learned about industrialisation and its history. Now, let’s learn about the growth pattern of
industrialisation in India:
Industrialisation or the Industrial Revolution in India started in the mid 19th century, and it is divided
into four significant stages. The four significant stages of Industrialisation represent its growth
pattern. Let’s learn about each stage or phase in detail.
First Phase or Premature Stage: India’s first industrialisation phase comprises the first three plans
that help build a strong industrial base. The first phase started in 1951 and continued till 1965.
In the premature stage, investments were made in heavy industries, including iron, steel, and
machine-building sectors. During the premature stage, the industrial growth rate fluctuated between
5.0 to 9.0 per cent.
Second Phase or Deceleration Stage: The second phase of the Industrial Revolution in India
started in 1965 and lasted till 1980. During this period, the production growth rate declined from 9
per cent to 4.1 per cent.
The stage was a period of struggle for the Indian industries. There was a steep decline in the
percentage of industrial output, and during 1979-80, the industrial growth rate was negative.
Third Phase or Recovery Stage: The third stage comprised the sixth and seventh plans and was
considered a period of recovery of the Industrial growth rate. The third phase started in early 1981
and continued till 1991.
During the first five years, i.e. from 1981-85, the industrial growth rate bounced up to 7 per cent.
Furthermore, it grew to 8.6 per cent from 1985-90. The growth rate was rapid in industries like
petrochemicals and chemicals, 11.19 per cent.
However, heavy industries such as iron and steel showed a growth rate of 5 per cent. It clearly
shows the shift of industrial development from heavy to chemical industries.
Fourth Phase or Retrogression Stage: The fourth and final phase of the Industrial Revolution
started in 1991. In this stage, the industries saw a rapid deterioration followed by an upturn and
downturn in the growth rate.
The industrial growth rate declined due to the decline in the export of goods and the government’s
monetary policy.

New Industrial Policy, 1991

The New Industrial Policy, 1991 had the main objective of providing facilities to market
forces and to increase efficiency.

Larger roles were provided by

 L – Liberalization (Reduction of government control)

 P – Privatization (Increasing the role & scope of the private sector)
  G – Globalisation (Integration of the Indian economy with the world economy)

Because of LPG, old domestic firms have to compete with New Domestic firms, MNC’s
and imported items

The government allowed Domestic firms to import better technology to improve

efficiency and to have access to better technology. The Foreign Direct Investment
ceiling was increased from 40% to 51% in selected sectors.

The maximum FDI limit is 100% in selected sectors like infrastructure sectors. Foreign
Investment promotion board was established. It is a single-window FDI clearance
agency. The technology transfer agreement was allowed under the automatic route.

Phased Manufacturing Programme was a condition on foreign firms to reduce imported

inputs and use domestic inputs, it was abolished in 1991.

Under the Mandatory convertibility clause, while giving loans to firms, part of the loan
will/can be converted to equity of the company if the banks want the loan in a specified
time. This was also abolished.

Industrial licensing was abolished except for 18 industries.

Monopolies and Restrictive Trade Practices Act – Under his MRTP commission was
established. MRTP Act was introduced to check monopolies. The MRTP Act was
relaxed in 1991.

On the recommendation of the SVS Raghavan committee, Competition Act 2000 was
passed. Its objectives were to promote competition by creating an enabling
environment.

To know more about the Competition Commission of India, check the linked article.

Review of the Public sector under this New Industrial Policy, 1991 are:

 Public sector investments (Disinvestment of Public sector)

 De-reservations –Industries reserved exclusively for the public sector were reduced
 Professionalization of Management of PSUs
 Sick PSUs to be referred to the Board for Industrial and financial restructuring (BIFR).
 The scope of MoUs was strengthened (MoU is an agreement between a PSU and concerned
ministry).

There are some state-wise Industrial policies that would be relevant for UPSC aspirants
to understand Industrial Policies better and in-depth.
New Industrial Policy, 1991
The New Industrial Policy, 1991 had the main objective of providing facilities to market
forces and to increase efficiency.

Larger roles were provided by

 L – Liberalization (Reduction of government control)

 P – Privatization (Increasing the role & scope of the private sector)
 G – Globalisation (Integration of the Indian economy with the world economy)

Because of LPG, old domestic firms have to compete with New Domestic firms, MNC’s
and imported items

The government allowed Domestic firms to import better technology to improve

efficiency and to have access to better technology. The Foreign Direct Investment
ceiling was increased from 40% to 51% in selected sectors.

The maximum FDI limit is 100% in selected sectors like infrastructure sectors. Foreign
Investment promotion board was established. It is a single-window FDI clearance
agency. The technology transfer agreement was allowed under the automatic route.

Phased Manufacturing Programme was a condition on foreign firms to reduce imported

inputs and use domestic inputs, it was abolished in 1991.

Under the Mandatory convertibility clause, while giving loans to firms, part of the loan
will/can be converted to equity of the company if the banks want the loan in a specified
time. This was also abolished.

Industrial licensing was abolished except for 18 industries.

Monopolies and Restrictive Trade Practices Act – Under his MRTP commission was
established. MRTP Act was introduced to check monopolies. The MRTP Act was
relaxed in 1991.

On the recommendation of the SVS Raghavan committee, Competition Act 2000 was
passed. Its objectives were to promote competition by creating an enabling
environment.

To know more about the Competition Commission of India, check the linked article.

Review of the Public sector under this New Industrial Policy, 1991 are:

 Public sector investments (Disinvestment of Public sector)

 De-reservations –Industries reserved exclusively for the public sector were reduced
 Professionalization of Management of PSUs
 Sick PSUs to be referred to the Board for Industrial and financial restructuring (BIFR).
  The scope of MoUs was strengthened (MoU is an agreement between a PSU and concerned
ministry).

There are some state-wise Industrial policies that would be relevant for UPSC aspirants
to understand Industrial

What is the MRTP Act?

Monopolistic trade practices mean dominant trade practices where a firm or an
oligopolistic firm consisting of a set of 3 companies reach a dominant position in
the market. They are then able to control the market by eliminating competition or
regulating prices and the output of products.
Restrictive trade practices occur by joint action of a group of two or more
organizations to avoid market competition, irrespective of market share. Such
practices are seen as prejudicial to public interests.
The MRTP act was the first substantial legislation with the goal of regulating free
and unfettered trade. This act was geared towards ensuring distinction between
restrictive and monopolistic trade practices.
From 1977 the Sachar committee was appointed by the government to ensure
mandatory review of the MRTP act. The committee also made sure there were
mandatory recommendations for streamlining its activities.
The initial objectives of the MRTP Act are mentioned below:

The principal objectives sought to be achieved through the MRTP Act are:
 prevention of concentration of economic power to the common detriment;
 control of monopolies;
 prohibition of monopolistic trade practices;
 prohibition of restrictive trade practices;
 prohibition of unfair trade practices.
Out of these five, the first two have been de-emphasized, after the 1991
amendment to the Act. The emphasis has not only shifted to the three last
mentioned objectives but they have been re-emphasized. Yet to the extent that
monopolies tend to bring about monopolistic trade practices, the Act provides for
their surveillance. Briefly, the Act is designed to guard against different aspects
of market imperfections. For instance, a merger, which can increase the
dominance of the combine or has resulted in a large share in the market can be
looked at in terms of the provisions of the Act and the objectives governing them.

Roles Played by Public Sector in

Indian Economy

1. Generation of Income:
Public sector in India has been playing a definite positive role in
generating income in the economy. The share of public sector in net
domestic product (NDP) at current prices has increased from 7.5 per
cent in 1950-51 to 21.7 per cent in 2003-04. Again the share of public
sector enterprises only (excluding public administration and defence)
in NDP was also increased from 3.5 per cent in 1950-51 to 11.12 per
cent in 2005-06.

2. Capital Formation:
Public sector has been playing an important role in the gross domestic
capital formation of the country. The share of public sector in gross
domestic capital formation has increased from 3.5 per cent during the
First Plan to 9.2 per cent during the Eighth Plan.

3. Employment:
Public sector is playing an important role in generating employment in
the country.

Public sector employments are of two categories, i.e:

ADVERTISEMENTS:

(a) Public sector employment in government administration, defence

and other government services and
(b) Employment in public sector economic enterprises of both Centre,
State and Local bodies. In 1971, the public sector offered employment
opportunities to about 11 million persons but in 2003 their number
rose to 18.6 million showing about 69 per cent increase during this
period.

4. Infrastructure:
Without the development of infrastructural facilities, economic
development is impossible. Public sector investment on infrastructure
sector like power, transportation, communication, basic and heavy
industries, irrigation, education and technical training etc. has paved
the way for agricultural and industrial development of the country
leading to the overall development of the economy as a whole. Private
sector investments are also depending on these infrastructural
facilities developed by the public sector of the country.

5. Strong Industrial base:

Another important role of the public sector is that it has successfully
build the strong industrial base in the country. The industrial base of
the economy is now considerably strengthened with the development
of public sector industries in various fields like—iron and steel, coal,
heavy engineering, heavy electrical machinery, petroleum and natural
gas, fertilizers, chemicals, drugs etc.

The development of private sector industries is also solely depending

on these industries. Thus by developing a strong industrial base, the
public sector has developed a suitable base for rapid industrialization
in the country. Moreover, public sector has also been dominating in
critical areas such as petroleum products, coal, copper, lead, hydro
and steam turbines etc.
6. Export Promotion and Import Substitution:
ADVERTISEMENTS:

Public sector enterprises have been contributing a lot for the

promotion of India’s exports. The foreign exchange earning of the
public enterprises rose from Rs. 35 crore in 1965-66 to Rs. 5,831 crore
in 1984-85 and then to Rs. 34,893 crore in 2003- 04. Thus, the export
performance of the public sector enterprises in India is quite
satisfactory.

7. Contribution to Central Exchequer:

The public sector enterprises are contributing a good amount of
resources to the central exchequer regularly in the form of dividend,
excise duty, custom duty, corporate taxes etc. During the Sixth Plan,
the contribution of public enterprises to the central exchequer was to
the tune of Rs. 27,570 crore.

ADVERTISEMENTS:

Again this contribution has increased from Rs. 7,610 crore in 1980-81
to Rs. 18,264 crore in 1989-90 and then to Rs. 85,445 crore in 2003-
04. Out of this total contribution, the amount of dividend contributed
only 2 to 3 per cent of it.

8. Checking Concentration of Income and Wealth:

Expansion of public sector enterprises in India has been successfully
checking the concentration of economic power into the hands of a few
and thus are redressing the problem of inequalities of income and-
wealth of the economy. Thus, the public sector can reduce this
problem of inequalities through diversion of profits for the welfare of
the poor people, undertaking measures for labour welfare and also by
producing commodities for mass consumption.
9. Removal of Regional Disparities:
From the very beginning industrial development in India was very
much skewed towards certain big port cities like Mumbai, Kolkata and
Chennai. In order to remove regional disparities, the public sector
tried to disperse various units towards the backward states like Bihar,
Orissa, and Madhya Pradesh. Thus, considering all these foregoing
aspects it can be observed that in-spite of showing poor performance,
the public sector is playing dominant role in all-round development of
the economy of the country.

What is disinvestment?
Literally, disinvestment means selling of assets. Here, in the case of
PUSs, disinvestment means Government selling/ diluting its stake
(share) in Public Sector Undertakings in which it has a majority
holding. Disinvestment is carried out as a budgetary exercise, under
which the government announces yearly targets for disinvestment for
selected PSUs.

What are the Salient features of Current Disinvestment

Policy?

The policy of disinvestment has evolved since the early 1990s and now
(bduget 2016), the government has brought some changes including
bringing back strategic disinvestment (previously strategic sale).
Budget 2016 has brought several notable changes including renaming of
Department of Disinvestment as Department of investment and Public
Asset Management (DIPAM). As per the latest policy, disinvestment
now covers two types: (1) disinvestment through minority stake sale
and (2) strategic disinvestment. Following are the main features of the
current disinvestment policy.
(a) Public Sector Undertakings are the wealth of the Nation and to
ensure this wealth rests in the hands of the people, promote public
ownership of CPSEs;

(b) In the case of disinvestment through minority stake (share) sale in

listed CPSEs, the Government will retain majority shareholding, i.e. at
least 51 per cent of the shareholding and management control of the
Public Sector Undertakings;

(c) Strategic disinvestment by way of sale of substantial portion of

Government shareholding in identified CPSEs up to 50 per cent or
more, along with transfer of management control.

The government also separately mentioned disinvestment targets under

the two types: disinvestment target for the current financial year is Rs.
56,500 crore comprising Rs. 36,000 crores from disinvestment of
CPSEs and Rs. 20,500 crores from “Strategic Disinvestment”.

Functions of SIDBI
 Small Industries Development Bank of India refinances loans that are
extended by the PLIs to the small-scale industrial units and also offers
resources assistance to them.
 It discounts and rediscounts bills.

 It also helps in expanding marketing channels for the products of SSI

(Small Scale Industries) sector both in the domestic as well as
international markets.

 It offers services like factoring, leasing etc. to the industrial concerns in

the small-scale sector.

 It promotes employment-oriented industries particularly in semi-urban

areas for creating employment opportunities and thus checking the
relocation of people to the urban areas.

 It also initiates steps for modernisation and technological up-gradation of

current units.

 It also enables the timely flow of credit for working capital as well as term
loans to Small Scale Industries in cooperation with commercial banks.

 It also co-promotes state-level venture funds.

Ro

Role and Importance of Small Scale Industries

le and Importance of Small Scale Industries
e and Importance of Small Scale Industries
Small scale industries are those industries in which production, manufacturing and providing the
services are executed on a small or micro scale.
In a country like India, the small scale industries play a very important role in generating
employment, improving the financial status of people, development of rural areas and removing
the regional imbalances.

Let us look into the roles and importance of small scale industries in India:

1. Employment generation: Small scale industries are one of the best sources of employment
generation in India. Employment is one of the most important factors that determines the growth
of a nation. Therefore, development of small scale industries should be encouraged for the
development of more employment opportunities in the nation.

2. Less Capital Requirement: Small scale industries are less capital intensive than the large scale
industries. Capital is scarce in developing countries like India and therefore, small scale
industries are most suitable for maintaining the balance.

3. Use of resources and development of entrepreneurial skills: Small scale industries allow for
the development of entrepreneurial skills among the rural population which is not having the
scope of large scale industries. These industries help in the appropriate use of the resources
available in the rural areas, which leads to development of rural areas.

4. Equal income distribution: Small scale industries by generating employment opportunities

create equal income opportunities for the youth of the underdeveloped areas. This leads to the
growth of the nation in terms of employment, human development.

5. Maintains regional balance: It has been seen that large scale industries are mostly concentrated
in the large cities or restricted to areas which leads to migration of people in search of
employment to these cities. The result of such a migration is overcrowding of the city and
damage to the environment. For sustaining a large population, more of natural resources need to
be utilised.

6. Short production time: Small scale industries have a shorter production time than the large
scale industries which results in flow of money in the economy.

7. Supporting the large scale industries: Small scale industries help in the growth of the large
scale industries by producing ancillary products for the large industries or producing small
components that will be useful for the assembling of final products by the large scale industries.

8. Improvement in Export: Small scale industries contribute to around 40% of the total exports
done by India, which forms a significant part of the revenue earned from the exports. Small scale
industries work towards increasing the forex reserves of the country that reduces the load on
balance of payment of the country.

9. Reduce the dependence of agriculture: Most of the rural population will be dependent on
agriculture and this creates a burden on the agricultural sector. Small scale industries by
providing employment opportunities to the rural population provides more avenues for growth
and also paves way for a more arranged distribution of occupation.

Recent change inTrends in Banking

In recent years, there have been many changes in the banking industry.
These trends in banking have made the whole process of banking very
easy. These trends include the following:

RTGS – Real Time Gross Settlement

RTGS was introduced in India in March 2004. It is a system through

which a bank receives instruction in the form of electronic for
transferring the funds from one bank account to the other bank
accounts.

As the name suggests, the transfer of funds between the accounts takes
place in ‘real time’. The RTGS system is kept running and maintained
by the RBI.

So, it is operated by the RBI who provides it the faster and efficient way
to transfer the funds while facilitating the various financial operations.

Thus, the money send under this system is instantaneous and the

HE
beneficiary gets the money within two hours.

E-cheques
This technology has been developed in the US which will replace the
conventional paper cheques in India. Thus, to include this method of E-
cheque and make it mandatory, a negotiable instruments act has been
included in the amendment.

Electronic Clearing Service

ECS is an electronic system that is used to make the payments and

receipts that are in bulk. The payments need to be similar in nature
which can be smaller in amount and repetitive in nature.

Thus, this facility is specifically beneficial to government agencies and

companies that make or receive large bulk payments.

EFT – Electoral Funds Transfer

This is a system to transfer the money from one’s bank account to other
accounts.

So, in this system, the concerning party that wants to make the payment
instructs the bank and make a cash payment or authorizes the bank to
transfer the funds directly.

So, the sender should provide the bank with the complete details like
the name of the receiver, account type, account number of the respective
bank, city name, branch name, and other details to the bank.

Thus it will ensure that the amount reaches the beneficiaries account
quickly and correctly.

ATM – Automatic Teller Machine

This is the most popular method in India to withdraw the money. The
customers can enable this service to withdraw the money 24 by 7.
It allows the customers to perform all day to day bank activities without
interacting with any humans. Furthermore, these facilities are also used
for the payment of funds, utility bills, etc.

The other trends in the banking sector include a point of sale terminal,
telebanking, and electronic data interchange.

World Trade Organization (WTO)

In brief, the WTO or World Trade Organization, is a place where countries meet to make rules and
settle disagreements on trade. It helps to settle trade disagreements between countries. It supports
developing countries so they can benefit more from trade. The primary function of the World Trade
Organization WTO is to liberalize international trade through negotiating agreements with clear rules
that promote more open, fair and predictable conditions for trade among its member countries

Functions of WTO
The functions of WTO have been stated below.

o Promote trade liberalization: The WTO aims to progressively lower trade barriers such as
tariffs, quotas and subsidies. The goal is to facilitate increased trade among nations.
o Settle trade disputes: The WTO is a platform for member countries to negotiate and resolve
trade conflicts. This helps create a stable trading environment.
o Increase market access: The WTO works towards eliminating discriminatory treatment in
international trade. The goal is to allow all countries to benefit from global trade.
o Achieve trade policy transparency: The WTO notification procedures require member
countries to report and share information on trade policies, activities and measures. This
helps create predictability.
o Protect the interests of developing countries: The WTO aims to integrate developing
countries into the multilateral trading system. Special provisions are made for developing
economies.
o Discuss issues related to trade and globalization: The WTO provides a forum for nations to
discuss issues such as the environment, e-commerce, trade facilitation, competition policy,
transparency in government procurement, etc.
o Settle trade rules and obligations: The WTO maintains and enforces the legal framework of
international trading rules and obligations. These cover goods, services as well as intellectual
property.
o Resolve future trade challenges: The WTO aims to deal with new and emerging challenges in
global trade and ensure the continued relevance and effectiveness of the multilateral trading
system.
 o It negotiates and administers rules for trade between nations. These rules cover goods,
services and intellectual property.
o It provides a platform for member countries to settle trade disputes. When countries disagree
over trade, they can come to the WTO to resolve these issues.
o It monitors the trade policies of nations and ensures transparency. Each country reports its
trade policies and activities to the WTO.
o It offers training programs to help developing countries understand trade rules and expand
their trade. The aim is to close the gap in trade knowledge between developed and
developing nations.
o It cooperates with other global organizations like the World Bank

South Asian Association for Regional

Cooperation (SAARC)
History
The South Asian Association for Regional Cooperation (SAARC) is an economic and political
organization of eight countries in South Asia. It was established in 1985 when the Heads of State of
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka formally adopted the charter.
Afghanistan joined as the 8th member of SAARC in 2007. To date, 18th Summits have been held
and Nepal’s former Foreign Secretary is the current Secretary General of SAARC. The 19th Summit
will be hosted by Pakistan in 2016.

Objectives
SAARC aims to promote economic growth, social progress and cultural development within the
South Asia region. The objectives of SAARC, as defined in its charter, are as follows:

 Promote the welfare of the peoples of South Asia and improve their quality of life
 Accelerate economic growth, social progress and cultural development in the region by
providing all individuals the opportunity to live in dignity and realise their full potential
 Promote and strengthen collective self-reliance among the countries of South Asia
 Contribute to mutual trust, understanding and appreciation of one another’s problems
 Promote active collaboration and mutual assistance in the economic, social, cultural,
technical and scientific fields
 Strengthen co-operation with other developing countries
 Strengthen co-operation among themselves in international forms on matters of common
interest; and
 Cooperate with international and regional organisation with similar aims and purposes.
FDI
Foreign Direct Investment (FDI) is the investment of funds by an organisation from
one country into another, with the intent of establishing ’lasting interest’. According to
OECD (Organisation for Economic Co-operation and Development), lasting interest is
determined when the organisation acquires a minimum of 10% of voting power in
another organisation. For instance: the act of an Indian company such as Ola opening
another headquarters in Sydney, Australia will be considered as bringing FDI
into Australia.
Reinvestment of profits from overseas operations, as well as intra - organisational
loans and borrowings to overseas subsidiaries are also categorised as FDI.
The meaning of FDI is not restricted only to international movement of capital. Its
definition also encompasses the international movement of elements that are
complementary to capital - such as skills, processes, management, technology etc.
There is a difference between FDI and FPI (Foreign Portfolio Investments), wherein
the investor purchases equity of foreign companies. FPI means only equity infusion,
and does not imply the establishment of a lasting interest.
FDI can be Greenfield, wherein an organisation creates a subsidiary concern in
another country and builds its business operations there from the ground up.
Greenfield investments provide the highest degree of control to the organisation. It
can construct the production plant as per its specifications, employ and train human
resources as per company standards, as well as design and monitor its operational
processes.
There are many ways in which FDI benefits the recipient nation:
1. Increased Employment and Economic Growth
Creation of jobs is the most obvious advantage of FDI. It is also one of the most
important reasons why a nation, especially a developing one, looks to attract FDI.
Increased FDI boosts the manufacturing as well as the services sector. This in turn
creates jobs, and helps reduce unemployment among the educated youth - as well as
skilled and unskilled labour - in the country. Increased employment translates to
increased incomes, and equips the population with enhanced buying power. This
boosts the economy of the country.
2. Human Resource Development
This is one of the less obvious advantages of FDI. Hence, it is often understated.
Human Capital refers to the knowledge and competence of the workforce. Skills
gained and enhanced through training and experience boost the education and human
capital quotient of the country. Once developed, human capital is mobile. It can train
human resources in other companies, thereby creating a ripple effect.
3. Development of Backward Areas
This is one of the most crucial benefits of FDI for a developing country. FDI enables
the transformation of backward areas in a country into industrial centres. This in turn
provides a boost to the social economy of the area. The Hyundai unit at
Sriperumbudur, Tamil Nadu in India exemplifies this process.
4. Provision of Finance & Technology
Recipient businesses get access to latest financing tools, technologies and operational
practices from across the world. Over time, the introduction of newer, enhanced
technologies and processes results in their diffusion into the local economy, resulting
in enhanced efficiency and effectiveness of the industry.
5. Increase in Exports
Not all goods produced through FDI are meant for domestic consumption. Many of
these products have global markets. The creation of 100% Export Oriented Units and
Economic Zones have further assisted FDI investors in boosting their exports from
other countries.
6. Exchange Rate Stability
The constant flow of FDI into a country translates into a continuous flow of foreign
exchange. This helps the country’s Central Bank maintain a comfortable reserve of
foreign exchange. This in turn ensures stable exchange rates.
7. Stimulation of Economic Development
This is another very important advantage of FDI. FDI is a source of external capital
and higher revenues for a country. When factories are constructed, at least some local
labour, materials and equipment are utilised. Once the construction is complete, the
factory will employ some local employees and further use local materials and
services. The people who are employed by such factories thus have more money to
spend. This creates more jobs.
These factories will also create additional tax revenue for the Government, that can be
infused into creating and improving physical and financial infrastructure.
8. Improved Capital Flow
Inflow of capital is particularly beneficial for countries with limited domestic
resources, as well as for nations with restricted opportunities to raise funds in global
capital markets.
9. Creation of a Competitive Market
By facilitating the entry of foreign organisations into the domestic marketplace, FDI
helps create a competitive environment, as well as break domestic monopolies. A
healthy competitive environment pushes firms to continuously enhance their
processes and product offerings, thereby fostering innovation. Consumers also gain
access to a wider range of competitively priced products.

explain the recent trends in tourism

industry

1. Bleisure Travel
 Bleisure travel is a growing tourism trend where people extend their business travel to leisure
activities. Experts predict it will continue to grow in the mobile workforce. Although business
travel has started to make its comeback in 2021, bleisure is believed to be its future.
2. Automation
Gone are the days when booking a trip required clients to make a phone call, speak directly to a
service provider, or walk into the supplier’s office for face-to-face negotiation.
3. Mobile Bookings
Another important aspect when it comes to digitization is mobile bookings.
Operators report that 2 in 5 online bookings are made on mobile devices. These smartphone
shoppers are also more valuable to your business because of the following reasons:
 They spend 50% more on tours and activities per trip.
 They average 2.9 tours per trip.
 They are twice as likely to leave online reviews.

4. Personalization
According to Think with Google, 57% of travelers believe that companies should personalize
their buying experience and base it on their behaviors, personal preferences, and past choices.
Personalization is also important when it comes to the actual tour or activity. By offering flexible
experiences that can be tailored to a traveler’s needs, you stand a chance of better satisfying your
clients, and that can lead to repeat visits. Your priority should, therefore, be on offering
customer-oriented services.
5. Tech-Empowered Travel
We already talked about automation and mobile bookings as some of the future trends in the
tourism sector. But existing and emerging technologies will continue to influence travel in many
other ways.
A recent Amadeus survey states that technology and innovation seem to be key in building
traveler confidence and they will increase willingness to travel in the next 12 months.
6. Sustainable Tourism
Following the COP 26 UN Climate Change Conference and the launch of The Glasgow
Declaration on Climate Action, countries are urged to accelerate climate action in tourism. So
encouraging sustainable tourism practices and environmental initiatives is of utmost importance
for the resilience of the sector.
7. Active Ecotourism
Active Ecotourism is another trend that has emerged in response to the calls for more sustainable
and thoughtful tourism. It encourages combining the passion for travel with direct involvement
in conservation and supporting the local environment.

explain the recent trends in HEALTH

industry
Top 10 Technology Trends in Healthcare (2024)
1. Healthcare AI
AI is advancing the healthcare industry by replacing traditional, labor-intensive
processes with swift, remote, and real-time solutions for diagnosis, treatment,
and disease prevention. HealthTech startups are developing software platforms,
APIs, and digital products to harness AI’s potential. Key applications include
clinical workflow management, where AI streamlines patient care coordination
and administrative tasks.
2. Internet of Medical Things
IoMT is instrumental in the development of products that need less or no human
interaction to provide healthcare services. Connected medical devices,
equipment, and infrastructure facilitate applications such as automatic
disinfection, smart diagnosis, and remote patient management. Wearable health
monitors, for example, track vital signs and transmit data for real-time analysis.
Smart pills with sensors provide insights into patient medication adherence and
internal health metrics. Cognitive IoMT (CIoMT) represents a recent subtrend,
combining sensory information and automated processing for real-time
diagnosis, monitoring, and disease control, all communicated through networks.
These technologies are revolutionizing healthcare delivery with minimal human
intervention.
3. Telemedicine
The COVID-19 pandemic accelerated the adoption of telemedicine by many
governments, healthcare systems, clinicians, and patients. To tackle the
pandemic, governments issued telemedicine guidelines to decongest healthcare
facilities. Telemedicine minimizes the load on facilities and reduces the use of
personal protective equipment (PPE) as medical practitioners reach their patients
via telecommunication.
4. Big Data & Healthcare Analytics
The volume of health and medical data is expected to increase exponentially in
the coming years. MedTech startups leverage big data in healthcare and
advanced analytics to analyze unstructured and huge volumes of medical data.
Predictive analytics tools analyze vast medical datasets to identify disease
patterns, enabling early diagnosis and personalized treatment plans.
Electronic health records (EHRs) integrate and analyze patient data across
various healthcare systems, improving care coordination and patient outcomes.
Moroever, AI-driven platforms analyze unstructured medical data, offering new
insights into disease mechanisms and enhancing treatment methods. These
technologies collectively facilitate improved patient services, disease detection,
and process quality monitoring in healthcare institutions, driven by the
exponential growth in medical data.
5. Immersive Technology
Immersive technologies, including AR/VR and MR, are becoming increasingly
prevalent in the healthcare sector. VR applications range from rehabilitation
therapy for cognitive and physical disorders to exposure therapy for anxiety
disorders. In medical education, AR/VR is crucial for providing interactive and
realistic training experiences.

6. Mobile Health (mHealth)

mHealth technologies provide access to personalized information using
digital solutions and connected devices. Mobile devices enable visualization of
health issues that prevent patient commitment. Unconstrained by geographical
boundaries and using real-time data streams, smartphone-linked wearable
sensors, point-of-need diagnostic devices, and medical-grade imaging make
healthcare delivery more equitable and accessible.
7. 3D Printing in Healthcare
3D printing is gaining traction in the healthcare industry for multiple applications
like printing lightweight prosthetics, bionics, and casts for fracture repair.
The use of inexpensive, lightweight biomaterials and smart materials ensures
improvement in care delivery and time of production while reducing costs.
3D printing technologies are advancing the development of patient-specific
models of organs and surgical tools, using the patient’s own medical imaging.
Another area of application includes personalized surgical instruments that
increase a surgeon’s dexterity and support better surgery outcomes while
facilitating faster and less traumatic procedures.

8. Blockchain
The security and traceability of blockchain make the technology suitable for
multiple applications in the healthcare industry. Some of these include electronic
medical records, remote patient monitoring, pharmaceutical supply chain, and
health insurance claims.
Blockchain in healthcare supports the management of EHRs and FHIRChain
(Fast Health Interoperability Records) for sharing clinical data. It also plays an
important role in smart contracts, tackling drug counterfeiting, as well as storing,
sharing, and retrieving remotely collected biomedical data.
Balance of Payments
Utility of Economics to Society

Balance of Payments

The Balance of Payments or BoP is a statement or record of

all monetary and economic transactions made between a country and
the rest of the world within a defined period (every quarter or year).
These records include transactions made by individuals, companies and
the government. Keeping a record of these transactions helps the
country to monitor the flow of money and develop policies that would

In a perfect scenario, the Balance of Payments (BoP) should be zero.

That is, the money coming in and the money going out should balance
out. But that doesn’t happen in most cases. A country’s BoP statement
correctly indicates whether the country has a surplus or a deficit of
funds. A BoP surplus indicates that a country’s exports are more than its
imports. A BoP deficit, on the other hand, indicates that a country’s
imports are more than exports. Both scenarios have short-term and
long-term effects on the country’s economy.

Components of BoP

Now let’s understand the different components of the BoP. The BoP
consists of three main components—current account, capital account,
and financial account. As mentioned earlier, the BoP should be zero.
The current account must balance with the combined capital and
financial accounts.

Explore more under Balance of Payments

Open-Economy Macroeconomics

 Trade Deficit, Savings, and Investments

 International Experience of Exchange Rate Systems
 National Income Identity for Open Economy
 Exchange Rate
Current Account

The current account monitors the flow of funds from goods and services
trade (import and export) between countries. Now this includes money
received or spent on manufactured goods and raw materials. It also
includes revenue from tourism, transportation receipts, revenue from
specialized services (medicine, law, engineering), and royalties from
patents and copyrights. In addition, the current account includes
revenue from stocks.

Capital Account

The capital account monitors the flow of international capital

transactions. These transactions include the purchase or disposal of non-
financial assets (for example, land) and non-produced assets. The
capital account also includes money received from debt-forgiveness and
gift taxes. In addition, the capital account records the flow of the
financial assets by migrants leaving or entering a country and the
transfer, sale, or purchase of fixed assets.

Financial Account

The financial account monitors the flow of funds pertaining to

investments in businesses, real estate, and stocks. It also includes
government-owned assets such as gold and Special Drawing Rights
(SDRs) held with the International Monetary Fund (IMF). In addition, it
includes foreign investments and assets held abroad by nationals.
Similarly, the financial account includes a record of the assets owned by
foreign nationals
MONETORY POLICY

Objectives of Monetary Policy in India

Listed below are the major objectives of the monetary policy in India –
Regulation of Money Supply in the Economy
Monetary policy is designed to regulate the money supply in the economy by credit
expansion or credit contraction.
 Credit expansion – With credit expansion, which means issuing more loans, banks can expand
the money supply.
 Credit contraction – With credit contraction, meaning giving fewer loans, banks can limit the
money supply.
Reserve Bank of India aims to control the money supply to meet economic growth
needs and contracts it to curb inflation.
Attaining Price Stability
A primary objective of the monetary policy in India is to maintain price stability, which
means control over inflation. The price level is affected by the money supply. The
monetary policy regulates the money supply to maintain price stability.
Promoting Economic Growth
The monetary policy aims to make money and credit available for the country’s
economic growth. Those sectors significant for economic growth are provided with
adequate credit availability.
Encouraging Savings and Investments
The monetary policy promotes saving and investment by regulating the interest rate and
checking inflation. Higher rates of interest promote saving and investment.
Controlling Business Cycles
The monetary policy puts a check on boom and depression, which are the main phases
of the business cycle. In the boom period, credit is contracted to reduce the money
supply and thus check inflation. In the period of depression, credit is expanded to
increase the money supply and thus promote aggregate demand in the economy.
Promoting Employment
The monetary policy promotes employment by providing concessional loans to
productive sectors, small and medium entrepreneurs, and special loan schemes for
unemployed youth.
Related – Understanding the Keynesian Theory of Employment
Promoting Exports and Substituting Imports
The monetary policy encourages such industries by providing concessional loans to
export-oriented and import-substitution units. It further helps to improve the position of
the balance of payments.
Managing Aggregate Demand
Monetary authority tries to keep the aggregate demand in balance with the aggregate
supply of goods and services. If aggregate demand is to be increased, credit expands,
and the interest rate comes down. Because of low-interest rates, more people take
loans to buy goods and services, increasing aggregate demand and vice versa.
Ensuring More Credit for the Priority Sector
Monetary policy aims to provide more funds to priority sectors by lowering interest rates
for these sectors. The priority sector includes agriculture, small-scale industry, and
weaker sections of society.
Developing Infrastructure
Monetary policy aims at developing infrastructure. It provides concessional funds for
developing infrastructure.
Regulating and Expanding Banking
RBI regulates the economy’s banking system. RBI has expanded banking to all parts of
the country. Through monetary policy, RBI issues directives to different banks for setting
up rural branches to promote agricultural credit. Besides the government has also set
up cooperative and regional rural banks.

What is SEBI?
SEBI, or the Securities and Exchange Board of India, is a regulatory authority that
oversees and regulates the securities market in India. It was established to ensure the
fair and transparent functioning of the market, protect investors’ interests, and promote
the growth of the securities industry.
SEBI enforces rules and regulations, monitors market activities, and supervises various
participants, such as companies, intermediaries, and investors, to maintain the integrity
and efficiency of the Indian securities market.

History and Evolution of SEBI

The history and evolution of SEBI, the Securities and Exchange Board of India,
showcases a transformative journey that began in 1988. Over the years, its role and
responsibilities expanded significantly, shaping the landscape of India’s financial
markets.

1988 Establishment: SEBI was established to regulate and supervise the securities
market, addressing the lack of cohesive regulations that had led to inefficiencies and
malpractices.

Initial Focus: SEBI initially focused on monitoring stock exchanges and market
intermediaries to instill transparency and accountability in their operations.

Broadened Mandate: Over time, SEBI’s scope expanded to encompass various vital
functions, including overseeing public issuance of securities, ensuring ethical conduct
by companies, safeguarding investor interests, and promoting financial literacy.

Reforms and Regulatory Changes: SEBI initiated significant reforms to enhance

transparency, prevent fraudulent activities, and foster investor confidence. These
reforms played a pivotal role in shaping the modern securities market in India.

Liberalization Era: During the 1990s and early 2000s, SEBI was crucial in facilitating
India’s economic liberalization by introducing measures to encourage foreign
investments and simplify listing procedures.

Technological Integration: SEBI embraced technological advancements, adopting

online trading platforms and promoting the dematerialization of securities. These steps
streamlined operations and bolstered market surveillance capabilities.

Enforcement and Investor Protection: SEBI’s regulatory authority strengthened over

time, enabling it to enforce regulations, investigate violations, and take corrective
actions when necessary. The focus on protecting investor interests remained
paramount.

Market Integrity and Credibility: SEBI’s journey reflects its proactive approach to
adapting to market dynamics while upholding the twin pillars of market integrity and
investor credibility.

Objectives of SEBI
SEBI’s objectives encapsulate a holistic approach to safeguarding investor interests,
ensuring market transparency, and fostering a fair and secure environment for all
participants. Given below are the main objectives of SEBI:
Investor Protection:
One of SEBI’s primary goals is to safeguard the interests of investors. It enforces
regulations that prevent fraudulent and unfair trade practices, ensuring investors are
adequately informed and empowered to make informed decisions.

Market Integrity:
SEBI works diligently to maintain the integrity of the securities market. It enforces norms
that promote ethical conduct, transparency, and accountability among market
intermediaries, listed companies, and other participants.

Regulation and Oversight:

SEBI’s mandate includes regulating and overseeing various market intermediaries,
including stock exchanges, brokers, and other entities. This oversight ensures that
these intermediaries operate within established guidelines and do not compromise
market stability.

Promoting Fair Practices:

SEBI endeavors to create an equitable playing field for all participants in the market. It
introduces and enforces rules that foster fair practices among companies,
intermediaries, and investors, thus minimizing the scope for market manipulation.

Issuer Regulation:
SEBI plays a crucial role in regulating companies that issue securities to the public. It
ensures that companies provide accurate and transparent information to potential
investors, enabling them to make well-informed decisions.

Investor Education:
Another vital objective of SEBI is to promote investor education. By disseminating
knowledge about investment opportunities, risks, and market functioning, SEBI
empowers investors to make sound financial choices.

Market Development:
SEBI actively contributes to the development and growth of the securities market. It
introduces reforms and measures that facilitate the entry of new players, encourage
innovation, and improve market infrastructure.

Enforcement of Regulations:
SEBI is vested with the authority to enforce its regulations. It conducts investigations,
takes corrective actions, and imposes penalties on those who violate market rules,
thereby maintaining market discipline.
Functions of SEBI
SEBI, or the Securities and Exchange Board of India, is a pivotal regulatory authority
overseeing India’s securities market. Established in 1988, SEBI serves a multifaceted
role in ensuring the well-being of investors, upholding market integrity, and fostering the
growth of the financial ecosystem. SEBI usually has three major functions: Protective,
Regulatory, and Developmental functions. Below are details of each function of SEBI.

Protective Functions of SEBI:

Investor Safeguarding: One of SEBI’s key protective functions is safeguarding the
interests of investors. It formulates and enforces regulations to prevent fraudulent and
unfair trade practices, ensuring that investors are well-informed and protected.

Curbing Insider Trading: SEBI takes measures to curb insider trading, which involves
trading securities based on non-public information. By doing so, it promotes fair play
and prevents information asymmetry.

Prohibition of Fraudulent Activities: SEBI prevents market manipulation, fraudulent

schemes, and activities that can compromise market integrity. It investigates and takes
action against such activities to maintain a level playing field.

Regulatory Functions of SEBI:

Market Intermediary Oversight: SEBI regulates and supervises various market
intermediaries, including stock exchanges, brokers, and depositories, to ensure their
compliance with established norms and practices.

Issuer Regulations: It regulates companies that issue securities to the public, ensuring
that they provide accurate and transparent information to potential investors. This
enables investors to make well-informed decisions.

Listing and Disclosure Norms: SEBI sets listing and disclosure requirements for
companies listed on stock exchanges. This ensures transparency and allows investors
to access necessary information for making investment choices.

Developmental Functions of SEBI:

Market Infrastructure Enhancement: SEBI plays a developmental role by enhancing
market infrastructure. It introduces measures to improve trading systems, settlement
mechanisms, and investor services, contributing to the efficiency of the market.

Encouraging Innovation: SEBI promotes innovation within the securities market by

allowing the introduction of new financial products and trading mechanisms, fostering a
dynamic and evolving market landscape.

Investor Education: A vital developmental function of SEBI is investor education. It

seeks to empower investors by providing information and knowledge about investment
opportunities, risks, and market functioning.
 MONEY MARKETS
Money Market refers to a financial market characterized by short-term financial assets. These assets
are characterized by the liquidity of 1 year or less. In the money market, the trading of financial
assets takes place on stock exchanges. The securities in the concept of the money market are very
liquid. The short-term borrowing needs of participants are facilitated in the money market. The
participants here are individual investors, large institutional investors, and banks. Keep on reading to
know all about the concept of the money market. Here, we will also look at the various money
market instruments.

Objectives of Money Market

In the concept of the money market, the main objectives are as follows:

 To provide borrowers with short-term funds at a price that is considered reasonable.

 To provide lenders with sufficient liquidity due to short-term securities.
 To enable lenders to convert idle funds into profitable investments.
 To follow the rules and regulations of Government and authoritative bodies.
 To control and regulate the level of liquidity in the economic system.
 To assist organisations by providing them with required funds for meeting their working capital
requirements.
 To provide a good opportunity for the banks to invest their surplus funds.

Functions of the Money Market

The various functions of the money market are as follows:

 The money market ensures a balance between the demand of short-term funds and their supply.
 The money market facilitates economic growth by making funds available to various parties.
 Money markets allow governments to check and monitor the nation’s liquidity by impacting the
money supply. Thereby, deflation or inflation can be kept in check.
 A suitable platform is provided to parties for wholesaling, borrowing, or investing funds in the money
market.

Various Money Market Instruments

The various money market instruments are as follows:

1. Treasury Bills
 They are the most used instruments in the concept of the money market. Treasury bills have
different instruments for short-term maturities. These bills can differ from one nation to another. The
Indian government issues them at a discount for 2 weeks to 364 days.
The issuing of treasury bills takes place at a discount. Moreover, their repayment takes place at par
when maturity comes.

2. Commercial Bills

In the concept of the money market, commercial bills are similar to a bill of exchange. Organisations
issue them to needy parties for meeting short-term money requirements.
You will get much more efficient liquidity with commercial bills. This is because their transfer can
occur quickly from one party to another whenever there is a sudden cash need.

3. Certificate of Deposit

This is a negotiable term deposit acceptable by financial institutions like commercial banks. Their
issue generally takes place via a promissory note.
Certificate of Deposit can be issued to various parties like:

 Individuals
 Corporations
 Trusts
 Others
Commercial banks can issue them at a discount. Usually, the duration of the certificate of deposit is
somewhere in the range of 3 months to 1 year.

4. Commercial Paper

Commercial papers are issued by organisations for meeting their short-term working capital needs.
They are a suitable alternative to borrowing from the bank. The time period of commercial paper is,
on average, from 15 days to 365 days.
The government or the central bank makes rules regarding the issue of commercial papers.
Moreover, this issue must take place at a discount to face value. Also, their discount rate is
determined by the market.

5. Call Money

It is a segment where lending or borrowing takes place by scheduled commercial banks. This
lending or borrowing takes place on short notice, usually around 1-2 weeks. Call money helps in the
day-to-day management of organisational cash flows.
The interest rates in call money are market-driven. Therefore, they can be significantly impacted by
economic demand and supply changes.
Multinational Companies or Corporations (MNC)
Multinational Corporations or Multinational Companies are corporate
organizations that operate in more than one country other than home
country. Multinational Companies (MNCs) have their central head
office in the home country and secondary offices, facilities,
factories, industries, and other such assets in other countries.

These companies operate worldwide and hence also known as global

enterprises. The activities are controlled and operated by the parent
company worldwide. Products and services of MNCs are sold around
various countries which require global management.

Features of a Multinational Company – MNC

1. High Turnover and Many Assets

MNCs operate on a global scale. Which means they have huge assets in
almost all countries in which they operate. Their turnovers can also be
incomprehensibly large. For example, Apple has a market
capitalization of 1 trillion dollars. This is bigger than the entire
economy of Saudi Arabia!

2. Control

MNCs have unity of control. So while they have many branches in

many countries, the main control will remain with the head office in its
country of origin. The business operations in the host country have their
own management and offices, but the ultimate control will still remain
at the head office.
3. Technological Advantages

As we saw earlier, an MNC has at its disposal huge amounts of wealth

and investments. This allows them to use the best technology available
to boost their products and their company. Most companies also invest
huge money in their Research & Development Department to invent
and discover new technological marvels.

4. Management by Professionals

An MNC is run by very competent and capable individuals. They have

suitable managers to take care of their business operations, technology,
finances, expansion etc. And they are also able to attract the top talent to
their corporations due to their resources and their reputations.

5. Aggressive Marketing

MNCs can spend a lot of their money on marketing, advertising, and

promotional activities. They target an international audience, so
effective marketing becomes necessary. Aggressive marketing allows
them to capture the market and sell their products globally.