BALANCE OF PAYMENT

pe &
MISCELLANEOUS
POVERTY
 Poverty
-

1. Absolute Poverty: SAsevere deprivation of Basic Human needs

2. Relative Poverty: Household income lower than the median income
3. Subjective Poverty
Poverty Estimation
-

Pre Independence
-

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1st done by: Dadabhai Naroji, gave unofficial poverty line through his book “Poverty and
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UnBritish Rule in India” ↓

-
He made the earliest estimation of poverty
Talked about drain of wealth
↓ from India
National Planning Committee, 1938 -> Subash Chandra Bose
↳ 1st Chairman: J L Nehru
↓
Bombay Plan, 1944
-
It was a set of proposals by influential businessman leaders for the development of India
·
I 75 per capita per year

Post Independence
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1. Dandekar and Rath Committee, 1971

-

-
Made the 1st systematic assessment of Poverty
↑
Used the data of NSSO (National Sample Survey Office)
-
Expenditure based poverty line ↳ Under MoSPI

2. Alagh Committee, 1979 Rural: 2400 Calories

-

-
Nutrition based poverty line
Urban: 2100 Calories

3. Lakdawala Committee, 1993

e n

I
Poverty line based on CPI-IW, CPI-AW
-
State-wise poverty line ↳Rural ↳ Urban Uniform Reference Period
7 Replaced by
V
Mixed Reference Period (Health/education)
A
4. Tendulkar Committee, 2009

C
-

↑ Health and Education should also be taken under Basic Needs

Poverty line based on Purchasing Power Parity: if someone is spending more than E33/
day (not poor), not more than E33/day (poor)

Poverty Line (2011-12)

1.ERural: 816/month
2. Urban: E 1000/month
L
% of people below poverty line: 21.9% (2011-12)
↓7
Urban Rural
13.7% 25.7%

Poverty Ratio: 29.5%

-
Head count ratio = No. of multidimensionally poor people
7
W
Urban: 26.4% Total Population
/
Rural: 30.9%

/ Head count Ratio: Proportion of Population BPL

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5. Rangarajan Committee, 2014

-

↑
Created categories within nutritional requirements
I
Calories

..
Protein
Fat
· Also, talked about Modified Mixed Reference Period

Balance of Payment
-

-
Record of a Nation’s Financial Transaction (import and export) Borrowing/Lending

↓ ↓
Change in Foreign exchange
Visible items reserve
Invisible items
Current Account
-
Capital Account
-

Goods (visible) Investments

"
Services (invisible) ↓ t
Transfer payments Foreign Direct Investment Foreign Institutional Investors/
n e

Remittances
-

W
Long-term investment Foreign Portfolio Investments
-

eg: Walmart acquired I Short-term investments

India is top receiver of majority stakes of -
Also called as Hot Money
remittances (1st) Flipkart Eg: borrowing, lending, sale/
purchase of assets, NRI
deposits
 Current Account Deficit (CAD): 3.3% of GDP (currently)
1
Value of imports Value of Exports

I Twin Deficit: CAD + Fiscal Deficit

Empty of FOREX Reserves
Balance of Payment Crisis -
1991: Balance of payment crisis in India (then PM, P V Narasimha Rao, Manmohan
Singh (then Finance Minister)

m
Liberalisation
LPG Reforms

Privatisation Globalisation

FOREX Reserves Currencies

1. Foreign currency assets USA
2. Gold reserves - Euro
3. Special Drawing Rights (SDR)
E Yen (Japan)
Yuan (China)
Pound (Britain)
4. Reserve Tranche Position: required quota to be maintained within the IMF

Debaters in IMF
. 1st: Argentina
4th Pakistan

IMF (International Monetary Fund)

Headquarter: Washington D.C.

UN Monetary and Financial Conference

Bretton Woods Conference, 1944 - 44 Nations -> 730 delegates

↓ ↓
IMF World Bank
↳ HQ: Washington, D.C.
I NOSTRO: Owna
Our account/money in your bank
Eg: Bank X has an account with Bank Y in Bank Y’s home currency

VOSTRO: Your account/money in our bank

I

Eg: City Banks partners with HDFC Bank based in India and opens an account with the
denoted currency INR

FERA: Foreign Exchange Regulation Act, 1973

-
replaced by
FEMA: Foreign Exchange Management Act, 1999
Exporters will benefit in case of
N
Depreciation: Decrease
loss of value
Loss of domestic
in value of domesticcurrency
currency depreciation
Due to market forces
Appreciation: Increase of value of domestic currency ·
Floating Exchange Rates

Devaluation: it is Official Depreciation

Government interference
· Fixed Exchange Rates
-
n
Regulation: it is Official Appreciation
Revaluation:

Lorenz Curve: wealth distribution, talks about income inequality

-

I Gini Coefficient:
lity
-

0- 1
a
equ O: perfect equality
e of
1: perfect inequality
Lin

V
V
More Inequality
Less Inequality
 ↓
MPI Concept: 2010 by UNDP along with
the Oxford Poverty and Human
V
v W
Development Initiative (OPHI)
Total indicators: 10

NITI AAYOG launched: 12 indicators -

> National Multidimensional Poverty Index

Multidimensional Poverty in India since 2005-06

↑
Recently 24.82 Cr people have escaped poverty
7

In Uttar Pradesh max people have escaped poverty

*

I
Lorez Curve - Inequality in distribution of income or wealth
Phillips Curve - Inflation and Employment
: Engel Curve - Income and proportion of expenditure on food
-

Laffer Curve - Tax rates and tax revenue

Gini Coefficient or Gini Ratio can be associated with measurement of income inequality in an economy

I
Devaluation of currency will be more beneficial if prices of exports rise proportionately