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Indian Economy

S.No Topic

1. Indian Economy
(a) Sectors

2. National Income and its types

3. MIBOR and MIBID

4. GST e-way Bill

(a) Definition
(b) Objectives
(c) Benefits
(d) Features

Indian Economy
India is a developing country and our economy is a mixed economy where the public sector co-exists with
the private sector.
India is likely to be the third largest economy with a GDP size of $15 trillion by 2030.The economy of India
is currently the world’s fourth largest in terms of real GDP (purchasing power parity) after the USA, China
and Japan and the second fastest-growing major economy in the world after China.
Sectors of Indian Economy:
There are three sectors of Indian Economy. They are:
1. Primary sector
2. Secondary sector
3. Tertiary sector

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Primary Sector:
 Primary sector of the Indian Economy includes activities undertaken by directly using natural
resources.
 The services in this sector are entirely dependent on the availability of natural resources in order to
keep the day-to-day operations running.
 Some of Examples are: Agriculture, Mining, Fishing, Forestry, Dairy
 It forms the base of all other products and so it is called agriculture and allied sector.
 People engaged in Primary sector work are called red-collar workers.
Secondary Sector:
 Secondary sector includes the industries where the finished products are made from natural
materials produced in the primary sector.
 Both these sectors end product is the consumption by the people. This sector is responsible for the
employment of almost 14 percent of the entire workforce currently working in India.
 The secondary sector also contributes to almost 28 percent of the share of GDP.
 This sector is the backbone of Indian economy and there are more development and growth in the
near future.
 Some of examples are cotton fabric, Sugarcane production , Oil refinery, Textile Mills, Brewing
plants and processing industries etc.
 It is also called Industrial Sector.

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 People engaged in secondary sector work are called blue collar workers.
Tertiary Sector:
 When the activity involves providing intangible goods like services then this is part of the tertiary
sector.
 It is also called as service sector.
 The main problem that this sector is that the jobs which involve lower salaries do not attract much
employment.
 Some of examples are Financial services, telephony, Management consultancy and IT.
 Goods transportation come under this sector.
 People engaged in these type of works is called white collar jobs.

Other classifications:
Organized sector:
 The sector which carries out all activity through a system and follows the law of the land is called
organized sector.
 It can also be defined as a sector, which is registered with the government and a number of acts
apply to the enterprises.
 Schools and hospitals are covered under the organized sector.
 Workers in the organized sector enjoy security of employment.
 They are expected to work only a fixed number of hours. If they work more, they have to be paid
overtime by the employer.
Unorganized sector:

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 An unorganized worker is a home-based worker or a self-employed worker or a wage worker in the

organized sector
 The unorganized sector uses mainly labour intensive and indigenous technology.
 The workers in unorganized sector are so scattered that the implementation of the Legislation is
very inadequate and ineffective. There are hardly any unions in this sector to act as watch-dogs.
 Small shopkeepers, some small scale manufacturing units keep all their attention on profit making
and ignore their workers basic rights.
Public sector:
 In the sector, government owns most of the assets and it is the part of the economy concerned with
providing various governmental services.
 The purpose of the public sector is not just to earn profits.
 Governments raise money through taxes and other ways to meet expenses on the services
rendered by it.
Private Sector:
 Ownership of assets and delivery of services is in the hands of private individuals or companies.
 Activities in the private sector are guided by the motive to earn profits. To get such services we
have to pay money to these individuals and companies.
 It is also called as citizen sector.

National Income and its Types

Definition: National Income refers to the money value of all the goods and services produced in a country
during a financial year. In other words, the final outcome of all the economic activities of the nation during a
period of one year, valued in terms of money is called as a National income
National income is calculated for a particular period, normally a financial year (In India, financial year
means April 1 to March 31 of next year). Net factor income from abroad is added to the domestic product
to get the value of National Income.
National Income = C + I + G + (X – M) Where,
C = Total consumption expenditure I = Total investment expenditure
G = Total government expenditure X – M = Export – Import
Concepts of National Income:

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1. Gross Domestic Product (GDP):

 Gross Domestic Product (GDP) is the broadest quantitative measure of a nation's total economic
activity.
 More specifically, GDP represents the monetary value of all goods and services produced within a
nation's geographic borders over a specified period of time.
 GDP calculation includes income of foreigners in a Country but excludes income of those people
who are living outside of that country.
2. Net Domestic Product (NDP):
 Net domestic product (NDP) is an annual measure of the economic output of a nation that is
adjusted to account for depreciation.
 Net domestic product accounts for capital that has been consumed over the year in the form of
housing, vehicle, or machinery deterioration.
 NDP = Gross Domestic Product – Depreciation
 Depreciation constitutes all wear and tear or any other damages to the final product. It mainly
occurs due to unsafe transportation, Unsafe practices at storing, and many more.
3. Gross National Product:
Gross national product (GNP) is an estimate of total value of all the final products and services turned out
in a given period by the means of production owned by a country's residents.
While Calculating GNP, income of foreigners in a country is excluded but income of people who are living
outside of that country is included. The value of GNP is calculated on the basis of GDP.
GNP = GDP + X – M

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Where,
X = income of the people of a country who are living outside of the Country M = income of the foreigners in
a country

BASIS FOR GDP GNP

COMPARISON
Meaning The worth of goods and services The worth of goods and services

produced within the geographical produced by the country's citizens

limits of the country is known as irrespective of the geographical

Gross Domestic Product (GDP). location is known as Gross National

Product (GNP).
What is it? Production of products within the Production of products by the
enterprises owned by the residents of
country's boundary.
the country.

Basis Location Citizenship

Calculation GDP = Consumption + Investment GNP = GDP - NFIA
+ Government Spending + Net
Export

On which scale On a local scale On international scale

productivity is

measured?
Focus on Domestic production Production by nationals
Outlines The strength of the country's How the residents are contributing

domestic economy. towards the country's economy.

4. Net National Product:
Net national product (NNP) is gross national product (GNP), the total value of finished goods and services
produced by a country's citizens overseas and domestically, minus depreciation.

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NNP = GNP - Depreciation

National income calculated by considering two major cost factors, which are listed as follows:
Factor Cost- It constitutes production cost which includes cost of raw materials, machine cost, salary and
many more things at ground level.
Market Cost- It constitutes whole sale cost which includes Transportation cost, Salary, Indirect tax,
Maintenance cost, costs at ground level and marginal profit.
NNP (Factor Cost) = NNP (Market Cost) + Subsidies – Indirect tax

MIBOR and MIBID

Based on the recommendation of the Committee for the Development of Debt Market, the National Stock
Exchange (NSE) launched the Mumbai Interbank Offer Rate (MIBOR) and Mumbai Interbank Bid Rate
(MIBID) in June, 1998.
MIBOR:
 MIBOR is the acronym for Mumbai Interbank Offer Rate, the yardstick of the Indian call money
market.
 It is the rate at which banks borrow unsecured funds from one another in the interbank market.
 At present, it is used as a reference rate for floating rate notes, corporate debentures, term
deposits, interest rate swaps and forward rate agreements.
 The pricing of overnight indexed swaps, a type of overnight interest rate swap used for hedging
interest rate risk is based on overnight MIBOR.
 MIBOR is calculated based on input from a panel of 30 banks and primary dealers and it represents
India’s interbank borrowing rate.
 MIBOR is the indicator of Lending Rates for loans.
 Banks borrow and lend money to one another on the interbank market to maintain legal liquidity
levels and meet reserve requirements placed on them by regulators.
Methods for calculating MIBOR:
MIBOR is calculated through a combination of the two following methods:
 Polling – rates are taken through a representative panel of 30 banks and primary dealers. The rates
provided by this panel will then be summarized.

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 Bootstrapping – since there is no guarantee that the panel of participants will provide honest rates,
bootstrapping has to be combined with the polling method. This method involves statistical testing of
the mean reference rate for the purpose of reducing the noise and identifying the deviations in the
data gathered from market participants.
MIBID:
 MIBID stands for The Mumbai Interbank Bid Rate.
 MIBID is the rate of interest that a bank would be willing to pay to secure a deposit from another
bank in the Indian interbank market.
 The MIBID rate is the weighted average of all interest rates that the participating banks offer on
deposits on a particular day. It is calculated by the National Stock Exchange (NSE).
 MIBID was initially launched for the overnight call money market. However, it was later extended to
term money for 14 days/1 month/3 month durations on popular demand.
 MIBID is calculated using the weighted average of transactions obtained from the Clearing
Corporation of India’s trading system.
 Only trades that happen between 9 am and 10 am in the negotiated dealing system call segment
are considered.
 MIBID rate is always lower than MIBOR rate because banks will try to pay less interest after taking
loans and will try to get more interest while offering loans.
 The MIBID rate and MIBOR rate are used as a benchmark rate for majority of deals struck for
Interest Rate Swaps, Term Deposits, Forward Rate Agreements and Floating Rate Debentures, etc.

GST e-way Bill

E way Bill:

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 E way Bill is the short form of Electronic Way Bill.

 It is a unique document/bill, which is electronically generated for the specific
consignment/movement of goods from one place to another, either inter-state or intra-state and of
value more than INR 50,000, required under the current GST regime.
 As per the update on 23rd Mar 2018, Generation of the e-Way Bill has been made compulsory from
1st April 2018.
 Inter-state implementation of e-way bill is notified to be implemented from 1st April 2018.
 The implementation of E - way Bill to kick-off from 15th April 2018 in a phased manner.
 When e-Way Bill is generated, a unique e-Way Bill Number (EBN) is made available to the supplier,
recipient and transporter.
 The e-Way Bill replaces the Way Bill, which was a physical document and existed during the VAT
regime for the movement of goods.
Who should register E way Bill:
Registered Person – E way bill must be generated when there is a movement of goods of more than
Rs50,000 in value to or from a Registered Person. A Registered person or the transporter may choose to
generate and carry E way bill even if the value of goods is less than Rs50,000.
Unregistered Persons – Unregistered persons are also required to generate e-Way Bill. However, where a
supply is made by an unregistered person to a registered person, the receiver will have to ensure all the
compliances are met as if they were the supplier.
Transporter – Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the
supplier has not generated an e-Way Bill.
Objectives:

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 Single e-way Bill for hassle-free

 No need for a separate transit pass in each State for the movement of goods
 Shift from departmental-policing Model to self-declaration Model for movement of goods

Intimation of Generation of E way Bill:

1. Upon the generation of e-way bill, a unique e-way bill number shall be made available to the supplier,
recipient and transporter on the GST website who may utilize the same for furnishing the details in form
GSTR 1
2. The recipient shall communicate his acceptance or rejection of the consignment covered by the e-way
bill within 72 hours
3. In case the recipient does not communicate his acceptance or rejection within 72 hours of the details
being available on the GST website, it shall be deemed that he has accepted the details.
How to Generate E way bill:

 It can be generated on the e- way bill portal.

 You need to login the portal.
 Further steps need to be followed are given as a guide one way bill generation in e way bill portal
Documents required to generate E way Bill:
1. Invoice/Bill of supply/ Challan related to consignment of goods
2. Transport by road- Transporter ID or Vehicle Number
3. Transport by rail , ship or air- Transporter ID, Transport document number and Date on the document.

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Benefits of GST E way Bill:

 Ultimately, the digital interface system will facilitate a faster movement of goods, improve the
turnaround time of trucks, and help the logistics industry by allowing for an increase in the average
distances travelled.
 Taxpayers/transporters need not visit any tax officers/check posts for generation of e-way
Bill/movement of goods across States.
 No waiting time at check posts and faster movement of goods thereby optimum use of
vehicles/resources, since there are no check posts in GST regime.
 User-friendly e-way Bill system
 Easy and quick generation of e-way Bill
 Checks and balances for smooth tax administration and process simplification for easier Verification
of e-way Bill by Tax Officers.
 All of these benefits will reduce travel time as well as travel costs.
Features of GST E way bill:
 User can create masters of his Customers, Suppliers & Products for easy generation of e-way Bill.
 User can monitor e-way Bills generated on his account/behalf
 Multiple modes for e-way Bill generation for ease of use.
 User can create sub-users and Roles on portal for generation of e-way Bill.
 Alerts will be sent to users via mail and SMS on registered mail id/mobile number.
 Vehicle number can be entered either by the supplier/recipient of goods who generates EWB or the
transporter.
 QR code will be printed on each e-way Bill for ease of seeing details.

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 Consolidated e-way Bill can be generated for vehicle carrying multiple consignments.

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