Monday 25 April 2011

  Who is the regulator of capital market in India?
Q. : Who is the regulator of capital market in india?
  1. RBI (it issues Govt-securities)
  2. SEBI (it securities exchange market)
  3. MoF (it decides how much G-sec to be issued)  or
  4. all three of them
  5. Ans:
  • Capital market = Primary market + Secondary market
  • SEBI controls both primary and secondary market. Means SEBI controls the entire capital market.
  • RBI is 'controller' only for Banking and not for securities.
  • MoF (Ministry of Finance) decides how much Government security is to be issued, but it for filling the Government's money requirement. It doesn't regulate the capital market, it merely participates in it to get money.

Contradiction in GDP (Expenditure) formula?
in the start of definition of gdp.....u r nt counting income of
anil kapoor or garry kirsten.....but in the topic....expenditure
method of calculating gdp....u have used exports-imports.....is this
nt contradictory.....kindly plz....xplain?

Anil kapoor-Garry Kirsten example was for GNP. [GNP= domestic product+income from abroad]

For GDP (expenditure), we've to calculate
consumption (C), Government's expenditure (G), investment(I) and eXport (X).
But what if government imports 5000 special mobile devices to print biometric UID smartcards? That is also counted in Government's expenditure accounts (G).
So, we've to deduct all the iMports (M) to prevent them from being counted into nation's GDP.
That's why


GDP (Expenditure)= C+I+G+(X-M)
Now, GNP (national product)= Domestic product + Income from abroad.
But since foreigners will be sending remittances to their families back home. So if every nation adds(+) foreigner's income (who is residing in their country) into their GNP, then it'll lead to double counting. So we've to deduct(-) the remittances. 
Hence  
GNP= GDP + Income from abroad - income earned by foreigners.

Saturday 23 April 2011

[Economy] 3 Methods of calculating GDP
Got this question from mail,
what are these income,production and expenditure methods in calulating GDP?how do terms like NNP, NDP, GNP,GDP,NNPFC,NNPMP DIFFER FROM EACH OTHER. what is difference between gdp at constant prices and current prices. its very confusing

I'll deal with each question in one post.
Earlier I had wrote an article on GDP, GNP,NNP, 
anyways lets refresh the concepts again.

GDP (Gross Domestic Product) means,

Money value of everything you produce within your country.
(Domestic=within country).
Everything means products and services.

GNP (Gross National Product) means,


The Money value of everything you produce within your country PLUS your income from abroad. Anil Kapoor goes to America, get 5 million dollar$ to play baddie in Mission Impossible 4, but sends that money to India = counted in India's GNP.
But with same logic, Cricket Coach Gary Kirsten gets 50 lakh rupees from BCCI, and sends it to his family in S.Africa, you've to deduct it from India's GNP. (South Africans will count it in their GNP)
Similarly, Americans will subtract the dollar value of Anil Kapoor's remittance to India while counting their GNP.
So, what'll be the (stupid) formula?
Gross National production=Money value of everything produced within India+Incoming money from outside-Outgoing money to abroad.
Or you can simply say
GNP = GDP + incoming money from abroad - Outgoing money to abroad.

How GDP calculated and what is are these income, production and expenditure methods.

GDP is calculated by three methods.


Theoretically all three of them should give same final number, but in reality there will be slight difference between each of them.

#A: EXPENDITURE METHOD OF COUNTING GDP



Here you count the money spent by everyone.

So How to make a 'technical' formula? Ask yourself, where is the money changing hands? There are five components of that.
Image Hosted by ImageShack.us

#1: CONSUMPTION BY PRIVATE CITIZENS [C]


like you and me buying (overpriced) daal, vegetables and milk (courtesy: Sharad Pawar).
I buy your second-hand bike for 15,000 Rupees, should we including it in the consumer Expenditure (C) ? Nope. Because the bike Is not 'produced again.
[Image]
Second hand products are not counted

When you had bought that bike for Rs.30000, 10 years ago, we had counted that money in that year's GDP. So second hand-product sale money cannot be counted in this year's GDP.
Now, I buy your second-hand bike from an auto dealer, (who gets Rs.1000 Commission) should we include it in the (C)? Hell Yes, because he sold his 'service' to me uniquely. Every time he sells a second hand product, although no new 'product' is created but new service is delivered by him.
WHAT IF SAME 1000 RUPEE NOTE IS CHANGING HANDS?
[Image]
Each service or product has separate value even if same currency note is used to purchase it

I gave a note of Rs.1000 to that dealer as part of his brokerage (dalaali) and he gives the same Rs.1000 note to the electricity company for his monthly bill.
Same Rs.1000 note is changing hands so is our GDP =Rs.1000? Nope. GDP is the money value of everything produced within India. So brokerage service is Rs.1000 separately and the electricity produced is also worth Rs.1000 separately. Therefore, Even as same 1000 rupee note is given to both parties.
Total GDP=1000 brokeage+1000 electricity bill=Rs.2000
If electri.co gives that 1000 rupee note to its peon as salary, then again it has to be counted. Because peon sold his unique service separately to the company. So in that case
Total GDP =Brokerge+Electric bill+peon^' salary=Rs.3000

#2: Investment [I]


People investing in sharemarket, putting money in banks etc.

#3: Government spending [G]


Like buying (overpriced) sports equipment from Kalmaadi's associates during Common wealth games. Government  paying salary to staff, buying new tanks and missiles..everything.

#4, 5 :Export & Import [X & M]


Money we get from export is added.
You remember that GDP means Money value of everything we produce within India. So if we import something, it has to be subtracted, because it is not produced within India.
So formula (for ease In remembering)
GDP = Consumer+Investor+Governer + (eXporter - iMporter)
Technically correct formula:
GDP(Expenditure)=C+I+G+(X-M)

#B: Income Method of counting gdp


Here you count everyone's income. But some people may be running business in credit (udhaari), sometimes payments are delayed. So may not give the 'full picture' for the given year.

#C: Production method of counting gdp


Total money value of everything produced (value added at each stage)
  1.     Farmer produced Wheat and sold 100 kg of it @ 2000 Rs. (Original value)
  2.     Flour mill, purchased it, grinded it and sold the flour to baker @ 2500 Rs. (+500 value added to previous purchase)
  3.     Baker made breads, cookies and biscuits and sold the total production @3500 Rs to its final customers. (+1000 value added to previous purchase)

what is total 'GDP' here?
2000+2500+3500=8000 Rs? Hell no! You've to see the value added.
So, total money value of this line is: 2000+500+1000=3500.
Not all of the wheat goes into Baker's oven. Some of it will go in making beer, some in a normal household for making roti and so on. You've to track the value added in each different line.

To be continued... GDP at nominal price, Market price, Factor Cost, etc.etc.etc.

[Economy Q] GDP at Factor cost and Market price (GDPFC & GDPMP), NNPFC,NNPMP
Posted: 21 Apr 2011 02:57 AM PDT
Continuing the previous post,
GDP at Factor cost means, money value of everything produced in India, without counting Government's role in it. i.e. indirect tax and subsidies.

Example#1: Subsidy

1 kg. Urea fertilizer's original-price is 500 Rs.
When it reaches the local supplier, Government is giving 10% subsidy. So farmer purchases it @ (500-50)=Rs. 450
  1. GDP @ Factor cost= 500 [i.e. without Government's involvement]
  2. GDP @ Market price= 450 [with Government's involvement]

Example#2: Tax

Box of 10 Blank DVDs =Rs.100 +10% VAT so final M.R.P.=Rs.110
  1. GDP @ Factor cost=Rs.100 (Real value of those dvds)
  2. GDP@ Market price=Rs.110

How will you calculate GDPMP if GDPFC is given, & vice versa?

GDP@Market price=GDP@ Factor price+Government involvement
Now, Government involvement=+Indirect taxes-subsidies
So finally,
GDP@Market price=GDP@Factor cost+Indirect tax-subsidies
Or doing the reverse,  
GDP@Factor cost=GDP@market price-Indirect tax+subsidies
Still doubt (like I always had about everything in college)? Following table should clarify it.
[Image]
GDP @ Factor Cost and Market Price for same Urea and Blank DVDs

As you can see, Factor cost= Original or real value of something.
So at marketprice, even when Government is giving subsidy, the manufacturer still receives the original price. E.g. although farmer pays Rs.450, still manufacturer gets Rs.500 so we 'add' subsidy when converting MP to FC.
Similarly, even when customer pays MRP of DVD is 110, the DVD-manufacturer is still getting 100 Rs. So we 'deduct' the indirect tax(VAT) while converting MP to FC.

Similarly

NNPFC and NNPMP

GNP = everything produced inside India + Anil Kapoor's income from Hollywood - Gary Kirsten's remittance to S.Africa 
So, what is Net National product @ Factor cost, and @Market price.
Net = Gross minus depreciation. (doubt? Click me
So NNP=GNP minus depreciation.
And factor cost, market price, just as explained above..with and without Government intervention.

To be continued.. GDP @ Current Price and Constant Price, GDP deflator

[Economy Q] GDP DEFLATOR, REAL AND NOMINAL GDP
 
 GDP mean money value of everything* produced inside India.
(*Everything means goods and services.)
100 kg. of onion produced in 2009, market price = 20 Rs/kg.
100 kg of onion produced in 2010, market price =70 Rs/kg (courtesy: Sharad Pawar)
So, India's GDP has increased at the rate of 250% in a year! But the World bank and leading economists say we can hardly reach 9% GDP increase rate per year. So what is this 250%??
It's nothing but inflation. Just because onion prices rose thanks to Government's faulty food policy or black marketers, doesn't mean that real-GDP has increased and that our contry has prospered.
So how do we find real GDP for 2010, when prices of everything have increased due to inflation?
We need to compare 2010's production to some base year.
Let's pick 2003-04 as base year. So whatever price Onion had in that year, will be our base price.
IN 2003-04, average price of 1 kg onion was 30 Rs. A kilo.
2010's GDP= 1 kg onion price of base year (2003-04) *multiply* total onions produced in 2010
=30 x 100
=Rs. 3,000 is our real-GDP for 2010.

So Formula: Real GDP= Price of xyz item in base year x Quantity produced in current year.

GDP Deflator

Image: Formula



In our onion case
Nominal GDP in 2010= 70 Rs/kg x 100 kg=Rs. 7000
Real GDP as we calculated=3000.
So, GDP deflator= [7000/3000]x100= 233

What does it mean?
Here, GDP deflator is >greater than 100. That means there is inflation. (very very heavy inflation)
IF it was near to 100, that'd mean, there is no difference in real and nominal GDP hence there is no inflation in India.
We've WPI and CPI to measure inflation, but they don't include each and every product and service available in India, while with GDP deflator, we can get an inflation-picture of them too.

btw, DONOT CONFUSE ABSOLUTE GDP NUMBER WITH PERCENTAGE RISE.

Newspaper: "Montek Singh said we've got 8% GDP in 2010"
That doesn't mean India's GDP is 8%. It only means whatever was our GDP in 2009, we've increased it by 8%.
IF India produced goods and services worth 100 billion $ in 2009, then in 2010 we've produced goods n services worth 108 billion $. That's why GDP rose by 8%.
Now back in our onion example,
2009's real GDP=3000
2010's real GDP=3000
So real-GDP has rose by 0% in two years.

Monday 18 April 2011



[Economy Q] Minimum Alternative Tax (MAT) its provisions in DTC
Question from via email
Explain Minimum Alternate Tax (MAT) and its provisions under the new Direct tax code (DTC)
Ans
First we need to understand why Government takes MAT?

Zero Tax companies


Example, A company's book-profit is 10 lakh Rupees.
Then they use some creative accounting methods like depreciation, donations etc. to claim deductions and finally their 'taxable' income is reduced to almost zero.

e.g. in 2009 during the recession time, Government of India launched a scheme to give 50% depreciation to commercial vehicles. (with assumption that it'll boost the vehicle demand and help the automobile industry to come out of the recession.)

So the company buys a truck, for 20 lakh rupees on loan.
Their deduction on first year= 50% of 20 lakh rupees= 10 lakh rupees.
Their taxable income = book profit minus deductions =10 minus 10=0.
So they don't have to pay any tax on their profit at all!

Other tricks involve donating 5,000 rupees to some religious institution run by con-man and getting donation-receipt of 5 lakh rupees. And claiming deduction! and so on..


These companies, making profit but having zero taxable income, are known as 'Zero tax companies'

Minimum Alternative Tax (MAT)

Around 1997, Indian Government realized above large-scale problem of creative accounting and tax-deduction. So it came up with MAT (Minimum alternative tax).
So if company's taxable income is less than 30% of its book profit, then it'll have to pay MAT, which is around 15% of the book profit.
Therefore, now even if above zero-tax company escapes the regular taxes, it still has to pay 1.5 lakh rupees in MAT.


[Q] ENGLISH a big necessity in clearing IAS and State PSC exam

Got question via email
I wanted to ask that is ENGLISH a big necessity in clearing IAS exam and other STATE PSC'S..

Ans:
As per new pattern in IAS exam (known as CSAT), there will be compulsory English grammar/ comprehension questions in the prelim paper-II. [its marks will be counted in the prelim-selection list]

In the mains exam of IAS, there is a compulsory english language paper, but its marks are not counted in the final merit list. However, in some State PSCs such as Gujarat, the marks of compulsory English language paper (mains) are counted in the final merit list.

So yes English has became a big necessity for clearing competitive exams be it IAS and State PSC or Bank.

Sunday 17 April 2011


IMPORTANT DAYS FOR UPSC PRELIMS


January


  27

February


  2
world's wetlands day

March


  8
International Women's Day and UN Day for Women's Rights and International Peace 
  21
International Day for the Elimination of Racial Discrimination
  21 March - 28 March 
Week of Solidarity with the Peoples Struggling against Racism and Racial Discrimination
  22
World Water Day
  23

April


  4
International Day for Mine Awareness and Assistance in Mine Action
  7
  23
World Book and Copyright Day

May


  3
  15
  17
World Information Society Day (formerly World Telecommunication Day)
  21
  22
International Day for Biological Diversity (formerly December 29, changed in 2001)

  25 May - 1 June
Week of Solidarity with the Peoples of Non-Self-Governing Territories
  29
  31
World No-Tobacco Day

June


  5
  17
  20
  23
  26
International Day Against Drug Abuse and Illicit Trafficking and 
International Day in Support of Victims of Torture

July


  1st Saturday
  11
World Population Day

August


  9
International Day of the World's Indigenous People
  12
International Youth Day
  23
International Day for the Remembrance of the Slave Trade and its Abolition

September


  8
International Literacy Day
  16
International Day for the Preservation of the Ozone Layer
  21
International Day of Peace (formerly the opening day of the UN General Assembly, changed to a set date as of 2002)
  During last week
World Maritime Day

October


  1
International Day for the Older Person
  4 October - 10 October
World Space Week
  5
World Teacher's Day
  1st Monday
World Habitat Day
  2nd Wednesday
International Day for Natural Disaster Reduction
  9
World Post Day
  10
World Mental Health Day
  16
World Food Day
  17
International Day for the Eradication of Poverty
  24
United Nations Day  and  World Developemnt Information Day
  24 October - 30 October 
Disarmament Week

November


   6
International Day for Preventing the Exploitation of the Environment in War and Armed Conflict
  14
World Diabetes Day
  16
International Day of Tolerance
  3rd Sunday
World Day of Remembrance for Road Traffic Victims
  20
Universal Children's Day, and 
Africa Industrialization Day
  21
World Television Day
  25
International Day for the Elimination of Violence against Women
  29
International Day of Solidarity with the Palestinian People

December


  1
World AIDS Day
  2
International Day for the Abolition of Slavery
  3
  5
  7
  9
  10
Human Rights Day
  11
International Mountain Day
  18
International Migrants Day
  19
  20
International Human Solidarity Day


 CANCUN AGREEMENT


The official talks of CONFERENCE OF PARITIES (COP-16) ended on December 10 ,2010 at Cancun, Mexico and marked a turning point in the global negotiations to agree a global deal to tackle dangerous climate change.
Key outcomes from the agreements at the Summit are:
·                                 Objective: agreed to peak emissions and an overall 2 degree target to limit temperature rise.
·                                 Emissions: bringing details of what developed and developing countries are doing to tackle climate change,                           promised in Copenhagen, into the UN system so they can be assessed.
·                                 MRV: agreed a system so we know how countries are living up to their promises to take action on emissions
·                                 Long-term finance: established the Green Climate Fund and will start to get it ready to help developing countries go low carbon and adapt to climate impacts.
·                                 Deforestation: agreed to slow, halt and reverse destruction of trees and agree the rules for delivering it and for monitoring progress.
·                                 Technology/Adaptation: set up the mechanisms to help developing countries access low carbon technology, and adapt to climate change
THTHE COP-17 WILL BE HELD AT DURBAN,SOUTH AFRICA FROM NOV28th   TO DEC 9th,  2011.

Friday 15 April 2011

Civils General Studies Prelims Question Papers 1997-2009


Wednesday 13 April 2011

Psychology- sample notes

I am uploading some of the notes I prepared for psychology from June 2009 to September 2009. Kindly go through the Psychology mains post for the strategy and sources I referred.
I will explain how I prepared the notes. But I repeat- this is the strategy I followed in 2009 for psychology. If what you are doing is very different, don’t worry. There are n number of ways to score. Just chalk out a plan and try your best to implement it.
MK: Morgan and King/ MP: Mukul Pathak sir’s notes/CK: Chaplin- Krawiec
Paper 1- Chapter 2: Observation
Since I prepared every topic as a 60 marker, for observation I collected 15-20 points which I could later expand in the exam. An easy way to do that is to compare the given topic with other related topics. So if observation alone comes as a 60 marker (most likely it will be in conjunction with some other topic), just link it with case studies, experimental research, interview, etc.

Paper 1- Chapter 3: IRT
Since IRT can be asked as a 60 marker, I prepared the basics in detail. There is no point in collecting 20 pages on it. Sometimes questions asked are very difficult to predict and attempt even when the topic has been prepared. In that case, I attempted some other question. But I didn’t go much beyond the basics. Every thing has to be balanced in the limited amount of time available for preparation.


Paper 1- Chapter 4: Growth and development
It is a topic which has been very well covered in the books. So I didn’t refer any other source. I just noted each and every thing I could find in one place so as to make revision easier. A lot of time can be saved this way.


Paper 1- Chapter 5: Attention
It is well covered in Mukul Pathak sir’s notes and the models are explained very nicely in Morgan and King and other books. So I wrote everything in one place point-wise.


Paper 1- Chapter 12: Stereotypes and prejudices
It is an important topic not only for the psychology paper but even for other optionals such as Sociology, Essay and for GS. Since examples can be included very easily, I concentrated on collecting the keywords and theories that explain the two. This topic should be linked to other topics in both paper 1 and paper 2.





Paper 2- Chapter 7: Rehabilitation of HIV/AIDS victims
I am posting this topic because it is a classic example of those topics where a lot of material is available on the net, yet the time which might be invested in collecting data which is relevant might be much more than what you would invest if you think about the points on your own. I just collected some facts from the net.


Paper 2- Chapter 11: Government policies for promotion of entrepreneurship among youth including women entrepreneurs
Again a topic where we need to use our GS knowledge. I noted some of the schemes and institutes which I could find on the net. I added all the schemes and various bodies which are working in this field that I had come across in the India Yearbook.
I have uploaded only the 1st page. Details can easily be found on the net.

Paper 2- Chapter 13: Psychology of terrorism
I concentrated on collecting as many theories, key words and points as I could. Enough is available on the net.


Public Admin- sample notes

I am going to try to explain how I prepared the notes. Examples, etc can either be prepared beforehand or you may come up with something then and there while writing the answer. Also, linking various topics is extremely important as it leads to a complete answer. I don’t mean topics only in Pub Ad paper 1 and Pub Ad paper 2, but also relating topics in Pub Ad paper 1 and Psychology Paper 1 OR Psychology paper 2 and GS.
PA paper 1:
I have posted the notes I prepared for Kautilya from Prasad & Prasad. Through this I attempt to achieve the following:
1. How to reduce what you have to read for the exam, in order to make it manageable to revise.
2. The content remains the same, it’s only the presentation and wording which changes depending on the question asked.
3. How you can look forward to relating the topics once your notes are ready.

So this is everything I did for topic 1 from chapter 1 of paper 2. Similarly, I prepared for Mughal Administration from Fadia and Fadia & tried to revise the 2-3 pages I had again and again so that I would be able to remember the content in the exam.
Next is a topic from paper 1, Chapter 12: Public borrowings and public debt
I covered this topic from Fadia & Fadia and searched on the net for some facts. After I was finished with enough content to write a 60 marker, I did not refer anything else. I emphasised on revising as many times as I could the content I had.
Also, I would like to point out that most of the data I collected even for paper 1 topics was that of India. I never differentiated whether the topic was mentioned in paper 1 or paper 2. Answer had to be based on India. This is what the right orientation and approach is all about, and was taught very well by Pavan sir.

Public Admin paper 1- sample answers

I have uploaded two of my answers for pub ad paper 1. I have deliberately chosen theoretical questions as I feel in 2009, paper 1 was devoid of questions (except SHG and few others) where much creativity could be exhibited. Hope it helps.