Economics for Class 11 Chapter 3 Economic Reforms Since 1991

Learn CBSE Economics Index Terms for Class 11, Chapter 3 Economic Reforms Since 1991

1. Foreign Exchange Reserves – Forex reserves or foreign exchange reserves (FX reserves) are assets that are held by a nation’s central bank or monetary authority. It is generally held in reserve currencies, usually the US Dollar and, to a lesser degree, the Euro, Japanese Yen, and Pound Sterling. It is used to back its liabilities – like the native currency issued and also reserves deposited by financial institutions or the government with the central bank.

2. Trade Deficit – A trade deficit is said to take place when the imports done by a country exceed that of the exports done by a country in a fiscal year. The trade deficit is also termed the negative balance of trade.

A trade deficit is a way of measuring the extent to which international trade is happening between the countries of the world. A trade deficit can be calculated for different types and categories of goods and services and for international transactions such as current account, financial account, and capital account.

A trade deficit is said to occur when there is a negative balance in an international transaction account. These international accounts, like the balance of payments, keep track of all the transactions of monetary nature between the residents and non-residents.

3. Financial Institutions – The financial institutions act as a mediator between the investor and the borrower. The investor’s savings are mobilised either directly or indirectly via the financial markets. The best example of a financial institution is a bank. People with surplus amounts of money make savings in their accounts, and people in dire need of money take loans. The bank acts as an intermediate between the two.

4. IMF – IMF stands for International Monetary Fund; it is an international organisation that works towards improving monetary cooperation, promoting sustainable development, improving financial stability, and reducing poverty around the world.

5. New Economic Policy – New economic policy reforms are those neo-liberal reforms that were introduced by the Government of India in 1991. The main aim of these reforms was to pave the way for the economic growth of the country.

6. Balance of Payments – The balance of payments (BOP) is the bookkeeping or accounting of a country’s global exchanges for a specific time frame period. Any exchange that makes cash flow into a nation is a credit for its BOP account, and any exchange that makes cash stream/flow out is a debit.

For instance, when a nation trades 20 red automobiles to another country, a credit is made in the balance of payments account.

7. Inflation – In economics, inflation (or less frequently, price inflation) is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

As per RBI, an inflation target of 4% with a +/-2 % tolerance band is appropriate for the next five years (2021-2025).

8. Fiscal Policy – Fiscal policy deals with the revenue and expenditure policy of the government.

9. Foreign Exchange Markets – The foreign exchange market is the marketplace in which participants are able to sell, purchase, exchange, and theorise on currencies. Foreign exchange markets are made up of investment management firms, banks, central banks, hedge funds, commercial companies and investors, and retail forex brokers.

The major participants involved in the foreign exchange market are forex brokers, commercial banks, and other legitimised dealers and monetary authorities. It is important to note that although participants may possess their own trading centres, the market in itself is spread worldwide. There is close and continuous contact between the trading centres, and there is more than one market where the participants can deal.

10. Stock Exchange – A stock exchange is an important factor in the capital market. It is a secure place where trading is done in a systematic way. Here, the securities are bought and sold as per well-structured rules and regulations. Securities mentioned here include debenture and shares issued by a public company that is correctly listed at the stock exchange, debenture and bonds issued by the government bodies, and municipal and public bodies.

Typically, bonds are traded Over-the-Counter (OTC), but a few corporate bonds are sold in a stock exchange. It can enforce rules and regulations on the brokers and firms that are enrolled with them.

In other words, a stock exchange is a forum where securities like bonds and stocks are purchased and traded. This can be both an online trading platform and offline (physical location).

11. Foreign Institutional Investors – Foreign Institutional Investors (FIIs) are the entities established outside India that are responsible for making investment proposals in India. They play an important role in the economy of a country. There are over 1450 FIIs registered under the Securities and Exchange Board of India (SEBI).

During 1996-97, the following changes were made in the SEBI Regulations, 1995 to facilitate the inflow of foreign portfolio investment, including each of the foreign institutional investors can now invest up to 10% of the equity of any one company, subject to the overall limit of 24% on investments by all FIIs, NRIs, and OCBs. The FIIs have been permitted to invest 100% of their portfolios in debt securities under the approval of SEBI. The FIIs that are eligible under SEBI are permitted to include the endowments, university funds, foundations, charitable trusts, and societies registered with a statutory authority of their country and having a track record of 5 years.

12. Tax Reforms – Tax reforms refer to reforms in the government’s policy of taxation and public expenditure, collectively known as fiscal policy. Taxes are of two types: direct and indirect taxes. The major tax reforms in India include a reduction in tax rates, reforms in the indirect tax system, and simplification of the process of tax declaration and collection.

13. Direct Taxes – A direct tax can be defined as a tax that is paid directly by an individual or organisation to the imposing entity (generally the government). A direct tax cannot be shifted to another individual or entity. The individual or organisation upon which the tax is levied is responsible for the fulfilment of the tax payment.

The Central Board of Direct Taxes deals with matters related to levying and collecting direct taxes and the formulation of various policies related to direct taxes. A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets, FBT, gift tax, capital gains tax, etc.

14. Corporation Tax – Corporation tax is a direct tax imposed on the net income or profit that enterprises make from their businesses. Companies, both public and privately registered in India under the Companies Act 1956, are liable to pay corporation tax. This tax is levied at a specific rate according to the provisions of the Income Tax Act, 1961.

In other words, corporation tax, also known as corporate tax, is the tax imposed by the Government of India on the net income or profit that corporate enterprises make from their businesses. It is a tax imposed on the net income of the company.

15. Indirect Tax – The term indirect tax has more than one meaning. In the colloquial sense, an indirect tax such as sales tax, a specific tax, value-added tax (VAT), or goods and services tax (GST) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).

The intermediary later files a tax return and forwards the tax proceeds to the government with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by the government from the persons (legal or natural) on which it is imposed.

16. Tariffs – Tariffs are taxes imposed on imports by a country to provide protection to its domestic industries. The imposition of tariffs increases the price of imported goods in the domestic country. The rise in price discourages consumption of imported goods by consumers, and thus, domestic industries are able to compete with imports from other countries. Tariffs may also be imposed on those imported goods which are socially undesirable. For example, in India, customs duty is imposed on imports of luxury goods.

17. Disinvestment – Disinvestment alludes to the method involved with selling equity shares of a public sector business undertaking to the public or the private sector. Through disinvestment, the responsibility and ownership of the government in a PSE gets weakened and diluted, and at the same time, the quantum of shares held by the private sector in that industry and business enterprise expands.

18. Import Licensing – According to WTO, import licensing is defined as “An administrative procedure requiring the submission of an application or other documentation (other than those required for customs purposes) to the relevant administrative body as a prior condition for importation of goods”.

19. Export Duties – Export duties either consist of specific taxes on goods and services or general taxes on goods and services that become payable when the goods are shipped from the home country or when the services are delivered to the non-residents. Any profits and revenues earned from export monopolies and the taxes that result from multiple exchange rates are not included while computing export duties.

20. Outsourcing – Outsourcing or re-appropriating is an understanding wherein one organisation recruits one more organisation to be liable for an arranged or existing activity that is or should be done internally, and in some cases includes moving workers and resources starting with one firm then onto the next. Offshoring usually lowers costs, better the availability of skilled people, and gets work done faster through a global talent pool. Usually, companies outsource to take advantage of specialised skills, cost efficiencies, and labour flexibility.

21. Foreign Direct Investment – Foreign direct investment (FDI) is an investment made by a company or an individual in one country into business interests located in another country. FDI is an important driver of economic growth. FDI is when a foreign entity acquires ownership or controlling stake in the shares of a company in one country or establishes businesses there.

The foreign entity has a say in the day-to-day operations of the company. FDI is not just the inflow of money but also the inflow of technology, knowledge, skills, and expertise/know-how.

22. WTO – The World Trade Organisation (WTO) is the only global international organisation dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The WTO’s goal is to help producers of goods and services, exporters, and importers conduct their business.

We hope that the offered Economics Index Terms for Class 11 with respect to Chapter 3: Economic Reforms Since 1991 will help you.

Related Links:

COMMERCE Related Links
Difference Between Wholesale And Retail Difference Between Sole Proprietorship And Partnership
Cost Center Vs Profit Center Share Capital
Difference Between Cash Flow And Fund Flow Foreign Trade In India
Difference Between Economic And Non Economic Activities Contingent Liabilities
Examples Of Liabilities And Assets National Income Formula