In 2008-09, the financial stresses peaked following the failure of the US financial firm Lehman Brothers in September 2008. This triggered a panic in financial markets globally. The world has witnessed one of the worst economic and financial crises during 2008-09 since the great depression of 1929. India too faced a financial crisis beside the…
The Fiscal Responsibility and Budget Management Act, of 2003, was enacted by the Indian government to institutionalise financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and the overall management of public funds by moving towards a balanced budget, and strengthen fiscal prudence. The Act’s long-term objective is for India to achieve fiscal stability and…
The tools of monetary policy refer to the tools used by the Central Bank (RBI in India) to meet the set objectives of price stability and growth of the economy. The tools used by the Central Bank for the above purposes are; Cash Reserve Ratio (CRR), Statutory Liquidity Reserve (SLR) Directed credit and administered interest…
The Gross Domestic Product (GDP), which is the total value of goods and services produced in a country, keeps fluctuating over time due to expansion and contraction in economic activity. This experience of expansion and contraction in an economy from time to time is known as the business cycle. A business cycle is completed when…
On Tuesday, RBI Governor Shri Shaktikanta Das, launched the PRAVAAH portal, the Retail Direct Mobile App, and a FinTech Repository. These three initiatives were earlier announced as part of RBI’s bi-monthly Statement on Development and Regulatory Policies in April 2023, April 2024, and December 2023 respectively. PRAVAAH is a secure and centralised web-based portal. The…
Regional Economic cooperation refers to an agreement between groups of countries in a geographic region, to promote economic cooperation by reducing trade barriers and non-tariff barriers to the free flow of goods, services, and factors of production between each other. The objective of regional economic cooperation is to promote the welfare of the peoples of…
From various theories like classical theory, loanable-fund theory, neo-classical theory of Pigou, and determining the rate of interest put forward from time to time, we have seen that all these theories suffer from various drawbacks and are indeterminate. The Keynesian theory considered only the monetary factors and the classical theory only the real factors as…
In terms of Section 10 (1) of FEMA 1999, RBI may authorize Full Fledged Money Changers (FFMCs)/non-bank Authorised Dealers (ADs) Category-II to deal in foreign exchange as an authorised dealer, money changer, or off-shore banking unit or in any other manner as it deems fit. In terms of extant instructions, these authorized dealers may obtain…
(This article elucidates Keynes’ Liquidity Preference Theory of Rate of Interest, Money Demand Determination of Rate of Interest: Equilibrium in the Money Market, Effect of an Increase in the Money in Money Demand or Liquidity Preference Curve, The Liquidity Preference Theory, proposed by John Maynard Keynes, explains interest rate determination based on people’s preference for…
Economists like Ricardo, J. S. Mill, Marshall, and Pigou developed the classical theory of interest which is also known as the capital theory of interest, the saving-investment theory of interest, or the real theory of interest. In the classical theory, the equilibrium rate of interest is the one that equals the supply of loanable funds…