Investment Insights

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What is foreign direct investment (FDI)?  FDI refers to investment in India by nonresident entity or person through merger & acquisition or setting up new operations.   It’s an investment made to acquire lasting interest in the enterprise operating outside of the economy of the investor.   Department of Industrial Policy & Promotion (DIPP) is […]

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Composition of GDP

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Gross Domestic Product (GDP) Composition  GDP is the value of all goods and services produced within an economy in a financial year.   GDP is the primary economic indicator to estimate the size of an economy.   Indian economy is broadly divided into 3 sectors which contribute to the GDP namely agriculture and allied activities, […]

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External Debt

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What is external debt and its composition?  External debt refers to the portion of a country’s debt borrowed from outside the country.   Foreign creditors include commercial banks, government, financial institutions etc.   External debt composition of India can be roughly broken up into short term debt and long term debt which includes multilateral debt1, […]

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Trade Balance

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What is a Trade balance?  Trade balance is the difference between a country?s exports and imports of goods.   Positive trade balance i.e. trade surplus is when exports are more than imports.   Negative trade balance i.e. trade deficit is when imports are more than exports.   Trade balance forms part of the current account […]

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What is a Treasury bill?  Treasury Bills (T-bills) are the instruments of short term borrowing by the central government.   They are promissory notes issued at discount and for a fixed period. The interest received on them is the discount which is the difference between the price at which they are issued and their redemption […]

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Forex Reserves

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What are forex reserves?  Foreign exchange reserves (Forex reserves) are generally defined as assets held by RBI which is denominated in other foreign currencies.   Forex reserves include foreign currency assets, gold, special drawing rights (SDR) and reserve position in IMF.   Foreign currency assets are investments in foreign bonds, Tbills, deposits with foreign central […]

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Currency Leakage

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What is currency leakage?  Currency with public refers to cash held with public rather than being deposited in bank.   Outflow of money from the banking system is known as currency leakage and represents currency with public.   Currency leakage impacts the money supply1 in the economy and creates liquidity issues for the banks.   […]

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What is net demand and time liability (NDTL)?   NDTL is sum of demand and time liabilities (deposits) of banks with public and other banks wherein assets with other banks is subtracted to get net liability of other banks.   Deposits of banks are its liability and consist of demand and time deposits of public […]

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What is liquidity adjustment facility-LAF?  Liquidity adjustment facility (LAF) is a monetary policy tool used by RBI to manage market liquidity and money supply targets.   LAF was introduced in June 2000 and conducted daily on overnight basis.   It helps banksto adjust their daily liquidity mismatches by pledging government securities over and above the […]

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Subsidy

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Trend of India subsidy bill  Subsidy is benefits given by the government to companies and citizens of India either in form of cash payment or tax reduction.   Subsidy forms the part of the revenue non plan expenditure of the government and adds to the fiscal deficit.   Chart below shows trend in subsidies from […]

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