ECONOMIC: GLOSSARY

• Accession Tax: tax levied on gifts and inherited property. It is levied on recipients and is related to his economic circumstances
• Active Stock: the companies, shares of which are more frequently dealt in the stock exchange market are called active stock.
• Ad Valorem Tax: a tax proportional to the price of the object being taxed in contrast with a specific tax at a rate per unit of quantity.
• Authorised Capital: also called nominal capital, it is the maximum amount that promoters of a joint stock company can raise through public subscription.
• Balance Of Payments: a description showing all the payments made by a country to the world and the receipts of that country from the world.
• Balanced Budget: equality between total government receipts and expenditure. There is thus no need to borrow and thereby increase the government debt.
• Blue Box: recognised by the WTO, it is a credit accredited to a country towards providing R & D activities in agriculture and related fields.
• Blue Chip: a first class equity share, the purchase of which entails little risk.
• Call Money: money lent in the money market, repayable at a very short notice. This is a liquid asset.
• Couple Protection Ratio: it is the percentage of eligible couple effectively protected against pregnancy by various methods of contraception.
• CRISIL: it stands for Credit Rating Information Services of India Limited. It provides credit rating services by assessing the comparative risk of investment in the listed securities of different companies.
• Dear Money: high interest rates which make it expensive to borrow. This policy is used to reduce aggregate demand in the economy.
• Debt Service: the payments due under debt contracts. This includes payments of interest as it becomes due and redemption payments.
• Dependency Ratio: it is the ratio of adults and children vis-s-vis the working group in a population.
• Eg.India- 46%
• Effective Exchange Rate: a country's exchange rate, taking a weighted average of its bilateral nominal exchange rates against other currencies.
• ELSS: Equity Linked Saving Scheme offered by mutual funds. Investment in these schemes are eligible for tax benefits under section 80-c of IT act.
• Enterpot: a place where goods are imported and re-exported without processing.
• Financial Inclusion Fund: budget 2007-08 announced to establish the fund with NABARD for meeting the cost of development and promotional interventions aimed at ensuring that vulnerable groups get access to adequate credit and financial services at an affordable cost.
• Fiscal Policy: the use of taxation and government spending to influence the economy to encourage or discourage particular forms of activity.
• Fiscal Stance: the tendency of the tax and spending policies embodied in a government's budget to expend or contract the economy.
• FMC (Forward Markets' Commission): Regulator of forward markets, it deals with the registration and regulation of commodity futures brokers, warehouses and commodity agents. It was set up in 1953 to regulate the commodity futures market. FMC is one of the oldest regulators in the country. FMC monitors market activities on real time basis and takes preventive and pro-active measures to prevent any manipulation.
• Frictional Unemployment: the unemployment that would exist because as people change jobs because some sectors of the economy grow and others contract.
• Fringe Benefit Tax: introduced in the budget 2005-06, a tax targeted at those benefits enjoyed collectively by the employees and not attributable to individual employees, which are to be taxed in hands of employer.
• Futures Market: a market organization through which futures contracts are traded. These contracts commit both parties to buy and sell commodities, shares or currencies on future date at a price fixed when the contract is made.
• Gender Budgeting: Union Budget 2005-06 has institutionalized Gender Budgeting, perceived as a powerful tool, not only for tracking allocation of resources for women but also covers implementation Issues and outcomes.
• Guilt Edged Security: securities which have lowest risk , e.g. Government securities
• Merit Goods: those public goods where a social benefit is more than individual benefit.
• E.g. primary health, education etc.
• Minimum Alternative Tax: A minimum amount of tax, which a company has to pay despite its accounts book profits. It was brought to tax those companies, which avoid paying tax by showing zero profit.
• Minimum Support Prices: these prices are generally announced before the start of the sowing season and are fixed for major agriculture commodities. This is form of commitment made by the government to the farmers.
• Monetized Deficit: It refers to the net addition of RBI credit to the government by way of printing fresh currency by the RBI.
• MoU: it stands for Memorandum of Understanding. It is written expression of intension of the signatories of the MoU to carry out their shares of tasks in furtherance of their joint intent.
• Mutual Fund: Funds set up on the principle of pooled risk and pooled resources of large number of small industries with the purpose of giving them the benefit of the share market.
• NASDAQ: National Association of Securities Dealers Automated Quotation, located in USA and mainly the It related companies are listed in it.
• One Time Settlement: Introduced by the RBI to identify the defaulter of Banks, sit across the table, negotiate and settle the debt once and for all.
• Open General License: Items can be imported without quotas or restrictions. It is only subject to industrial licensing.
• Opportunity Cost: it is a measure of the economic cost of using a resource to produce one particular good or service in terms of the alternatives thereby foregone.
• Parallel Economy: it implies the functioning of illegal and subterranean economic activities that run parallel, but in contradiction, with the avowed social objectives.
• Planning By Direction: In this type of planning, the government gives directions/commands to producers and they have to comply with in it. Government directly regulates economic activities.
• Planning By Inducement: Type of democratic planning by manipulation of market by indirect states actions like subsidies and tax benefits.
• Prime Lending Rate: The rate at which the banks lend to their prime customers or high ranging companies/ blue chip companies.
• Procurement Prices: The prices at which government buys surpluses from the farmers coming in the market. The minimum support price and procurement price may be the same. Since 1971 onwards, they have been made equal in India.
• Producer Price Index: Measures price changes (inflation) from producers perspective. In PPI, only basic prices are used for compilation, while taxes, trade margins and transport costs are excluded.
• Pump Pricing: Process of increasing the government expenditure particularly at a time when the economy is under recession so that private sector investment does not take place.
• Purchasing Power Parity: It implies that with a unit of currency one can buy the same basket of goods and services at home and abroad.
• Rationing of Credit: the process under which the central bank directs the commercial banks to give credit to various sectors according to the priorities of the economy.
• Repo Rate: It is the rate at which RBI repurchases the government securities from commercial banks.
• S &P: one of the mains US credit rating agency, which produces the S&P 500 stock price index.
• Stock Security Transaction Tax: A tax imposed on sale and purchase of securities of the stock market, effective from October 2004.
• Social Overhead Capital: Capital invested in making social infrastructure like schools for the benefit of community at large.
• Special Drawing Rights (SDR): An International reserve currency system under IMF, which provides for new type of currency to serve the agreement of the nations as the first legal tender money.
• Special Economic Zones: An SEZ is a designated duty free area to be treated as foreign territory for trade operations and tariff. It can be used for manufacturing, trading and services.
• Stagnation: A situation in which there is no change in techniques or income levels.
• Sterilization: The method by which central bank prevents balance of payment surpluses or deficits from affecting the domestic money supply.
• Stock Option: A right to buy share in a company on some future date at a pre-arranged price.
• Structural Inflation: Inflation that arises as a result of supply in elasticity and structural rigidities in the industrial sectors of economy.
• Structural Unemployment: Unemployment due to lack of capital equipment, which unemployed workers could use, or lack among unemployed workers could use, or lack among unemployed workers of the skills necessary to produce anything for which there is market. Subsidy: Transfer payment to household or business by government to enable them to produce or consume a commodity at a cheaper price is called subsidy.
• Sukur Bonds: The Islamic Bonds used in Islamic Banking.
• Sunrise Industries: Industries in the forefront of development, which have immense future potential
• E.g. IT industry, biotechnology, pharmaceuticals etc.
• Syndicate Loan: A loan provided by a syndicate of banks or others lending institutions.
• Tangible Assets: Assets that can be touched. This should literally include only physical objects like plant and equipment but also used to include leases and company shares, as these are mainly titles to tangible assets.
• Tax Gap: The difference between potential revenue and the actual collection is called tax gap.
• Technological Unemployment: unemployment due to technical progress. This applies to particular types of workers whose skill is made redundant because of change of methods of production.
• Trade Barriers: Laws, institutions or practices which make trade between countries more difficult or expensive than trade within countries.
• Trading Currency: A currency used to invoice international trade transaction. The currency of either the buyer or the seller or of a third country may be used.
• Trading Off: Something sacrificing in order to get more of something else, e.g. sacrificing consumption now for later by devoting the present resources to investment.
• Transfer Payment: Payment made by one sector of the economy to another without any returns,
• E.g. unemployment and social security payments.
• Transfer Pricing: An accounting policy to lower down the total taxes paid by the MNCs by showing intra corporate sale and purchase of goods thereby showing low profits to lower the payable tax.
• Venture Capital: Private equity to help new companies grow. A valuable alternative source of finance for entrepreneurs who might otherwise have to rely on a loan from a probably risk averse bank manager.
• Voluntary Unemployment: Unemployment through opting not to work, even though there are jobs available. This is the joblessness that remains when there is otherwise full employment. It includes frictional unemployment as a result of people changing jobs, people not working while they undertake job search and people who just do not want to work.
• Wage Drift: The difference between basic pay and total earnings. Wage drift consists of things such as overtime payments, bonuses, profit share and performance- related pay. It usually increases during periods of strong growth and declines during an economic downturn.
• Zero-Based Budget: zero based budgets means every expenditure, whether on a new scheme or an ongoing activity, in the budget has been freshly justified.