UNIT 8:

FINANCIAL POLICIES
 MONETARY POLICY
 It is concerned with the measures taken for regulating supply of money
and availability of credit in the economy.
 It deals with the distribution of credit among users

 It also deals with the determination of lending rates and borrowing

rates of interest
 It is widely used as a tool for controlling the inflation, bring about a
price stability, create a trust in the currency.
 MONETARY POLICY
 There are several direct and indirect instruments that are used for
implementing a monetary policy. They are:
 Repo Rate
 Reverse Repo Rate
 Liquidity Adjustment Facility (LAF)
 Marginal Standing Facility (MSF)
 Bank Rate
 Cash Reserve Ratio
 Statutory Liquidity Ratio
 Open Market Operations
 Market Stabilization Scheme (MSS)
 Variation in the Reserve Ratios (VRR)
 Moral Suasion
 Control through Directives
 Credit Rationing
 FISCAL POLICY
 It is concerned with raising revenue and deciding on the expenditures
of the Government.
 It operates through the Budget.

 The Union Budget gives a estimate of Government revenues and

expenditures for the ensuing FY.
 All receipts and disbursements received by the Government are kept in
two different accounts viz. Consolidate Fund of India and Public
Account of India
 The budget is vertically divided into revenues and expenditures and
horizontally divided into revenue account and capital account.
 FINANCIAL MARKET STRUCTURE
 It comprises of
 Credit Market
 Foreign Exchange Market
 Debt Market
 Derivatives Market
 STOCK MARKET AND ITS REGULATION
 SCRA – Stock Exchange means any body of individuals, whether
incorporated or not, constituted for the purpose of assisting, regulating
or controlling the business of buying, selling or dealing in securities.
 SCRA – Securities include shares, scrips, stocks, bonds, debentures, or
other marketable securities of a like nature in or of any incorporated
company or body corporate; Government Securities; such other
instruments as maybe declared by the Central Government to be
securities and right or interest in securities.
 IMPORTANCE OF STOCK EXCHANGE
 Regarded as essential concomitant of a capitalist economy
 Helps bring capital necessary for economic progress

 Provides mobility to funds

 Provides marketability and price continuity for shares

 Ensures fair dealings

 ORGANIZATION OF STOCK EXCHANGE IN INDIA
 There are 21 functioning stock exchanges in India the main being BSE
and NSE
 Both BSE and NSE are public limited companies.

 There are about 10,000 listed companies in India

 With the introduction of SCRA only recognized stock exchanges are

allowed to function in the country.
 As per the Government policy, there should only one exchange in one
area.
 Each stock exchange will be managed by an Executive
Committee/Council of Management/ Governing Body.
 Government can nominate not more than 3 members on the board of
recognized stock exchange.
 The Exchange will be governed by the bye-laws established by the
governing body.
 ORGANIZATION OF STOCK EXCHANGE IN INDIA
 Members
 Authorized Clerks

 Remisers

 Clearing House
 REGULATION OF STOCK EXCHANGE
 Main objective of SCRA is to prevent undesirable transactions in
securities by regulating the business of dealing in securities and by
providing for certain matters connected with transactions in securities.
 Other Objectives:
 Empower the Central Government to regulate dealings in and functioning of
Stock Exchanges in India
 Promote healthy and orderly development of stock markets
 Prevent unhealthy speculation and other undesirable activities
 Protect the interest of investors
 Provide for reasonable uniformity in respect of bye-laws and rules of
different stock exchanges.
 REGULATION OF STOCK EXCHANGE
 The Act has given certain authority to Central Government/SEBI
pertaining to stock exchanges:
 Grant or withdrawal of recognition
 Power to direct the exchange to make or amend the bye – laws
 Power to make or amend bye-laws
 Monitoring the exchange working
 Power to suspend business
 Power to supersede the governing body of the exchange
 Regulations related to Listing
 NATIONAL STOCK EXCHANGE
 Established by Financial Institutions in 1994
 Electronic Screen based trading

 Mainly operates in Wholesale Debt Market, Capital Market,

Derivatives Market.
 Objectives:
 To establish nation wide trading facility for equities, debts and hybrids
 To facilitate equal access to investors across the country
 To provide fairness, efficiency and transparency to the securities trading
 To enable shorter settlement cycles
 To meet international securities market standards
 NATIONAL STOCK EXCHANGE
 Features:
 Fully automated screen based trading
 Capital market segment, Wholesale Debt market segment, Derivative
segment
 No trading ring facility.
 Trading members in capital market connected to the central computer
through a satellite link up using VSATs. (Very Small Aperture Terminals)
 Debt market traders connect through high speed lines
 Order driven systems
 On completion of trade, the trading members gets all the details of the
executed trade on his screen in printable format.
 Identity of trading member not disclosed
 TYPES OF MARKETS
 The NEAT system (National Exchange for Automated Trading) has 4
types of markets
 Normal Market
 Odd lot Market
 Spot Market
 Auction Market
 OVER THE COUNTER EXCHANGE OF INDIA
 Is an electronic stock exchange based in India
 Comprised of small- and medium-sized firms looking to gain access to
the capital markets.
 Like electronic exchanges in the U.S. such as the Nasdaq, there is no
central place of exchange and all trading is done through electronic
networks.
 ICICI, UTI, IFCI, IDBI, SBI Capital Markets Ltd, Canara Bank
Financial Services Ltd, GIC and LIC are sponsors of this exchange
 OVER THE COUNTER EXCHANGE OF INDIA -
FEATURES
 A company promoted by Financial Institutions
 Many restrictions for listing

 Pricing methods different from other stock exchanges

 A market for Spot Deals

 Daily settlement

 Members to maintain minimum capital of Rs 4 lacs

 Satellite Facility

 Computerized Transcations
 OVER THE COUNTER EXCHANGE OF INDIA -
BENEFITS
 To Investors:
 Quick payment and delivery
 Price transparency
 Saves the investors from unscrupulous behavior of brokers
 Liquidity from scrips of small and new companies
 Fair prices
 Simple process
 Facility to sell even odd lots
 To Companies:
 Enable small and less liquid companies to get listed
 Facilitates new issue at lower cost
 Makes raising of capital easy
 OVER THE COUNTER EXCHANGE OF INDIA –
MANNER OF DOING TRANSACTIONS
 Members invite companies for raising capital
 Dealers perform the dual role of broker and market marker

 Custodian or settler validates the documents, stores and arranges

clearing.
 Registrar and transfer agents ensure share transfer and allottments and
inform the companies
 OVER THE COUNTER EXCHANGE OF INDIA –
LISTING
 Eligibility
 Rs 30 Lacs capital and a minimum issue of Rs 20 lacs
 More than Rs 30 lacs capital but less thas Rs 300 lacs and a minimum issue
of 40% of issued capital or Rs 20 lacs whichever is higher
 More than Rs 300 lacs capital requirements and guideliness as are applicable
for listing at other exchanges
 Company has to be sponsored by member
 Member to act as compulsory Market Marker for atleast 3 years

 Companies listed at other recognized stock exchanges not eligible for

listing.
 SEBI
 SEBI (Securities Exchange Board of India) was constituted in 1988
and was made a statutory body by The SEBI Act,1992.
 Management:
 A Chairman, 2 members from amongst the officials of the Ministries of
Central Government dealing in Finance and Law, 1 member from amongst
the officials of Reserve Bank of India, 2 members i.e. experts in securities
markets appointed by Central Government.
 Central Government has a right to supersede SEBI
 Objectives:
 To protect the interest of investors in securities
 To promote the development of securities market
 To regulate the Securities Markets
 SEBI
 Powers and Functions:
 Regulate the business of stock exchanges or any other securities market.
 Register and regulate the working of stock brokers, sub – brokers, share
transfer agents, bankers to the issue, trustees of trust deeds, registrar to the
issue, merchant bankers, underwriters, portfolio managers, investment
advisers and such other persons associated with securities market.
 Registering and regulating the working of collective investment schemes
including mutual funds
 Prohibiting fraudulent and unfair trade practices
 Promoting investor educations and training
 Prohibiting insider trading
 Regulating substantial acquisition of shares and take overs
 Calling for information from, undertaking inspection, conducting enquires
and audits of exchanges and intermediaries
 Performing such functions as may be delegated by the Central Government
 INDUSTRIAL FINANCE
 Types of Industrial Finance:
 Short Term
 Medium Term
 Long Term

 Corporate Securities:
 Ownership Securities
 Creditorship Securities
 INDUSTRIAL FINANCE
 Ownership Securities:
 Preference Shares
 Cumulative
 Convertible Cumulative

 Non- Cumulative

 Redeemable

 Irredeemable

 Participating

 Non – Participating

 Equity Shares
 INDUSTRIAL FINANCE
 Creditorship Securities:
 Debentures
 Redeemable
 Irredeemable

 Mortgage

 Simple

 Registered

 Bearer

 Convertible

 Non – Convertible

 Public Deposits
 INDUSTRIAL FINANCE
Internal Finance:
 Ploughing Back of Profits
 Benefits To Company:
 Withstand difficult situations
 Adopt a stable dividend policy

 Modernization and expansion plans will not suffer

 Reserves built may be useful to retire bonds, deposits, debentures

 Increases creditworthiness

 Reduces dependence on external sources of Finance

 Benefits to Shareholders:
 Reasonable assurance of stability of rate of dividend
 Assures soundness of the Company

 Increases share value

 Benefits to Society:
 Expansion leads to economies of scale and modernization increases productivity
 Low costs

 Increases employment opportunities

 INDUSTRIAL FINANCE
Internal Finance:
 Ploughing Back of Profits
 Dangers:
 Lead to concentration of economic power
 Gives scope for manipulation with respect to share prices and dividend

 Misuse of funds for personal benefits

 Over capitalization

 Interferes with the rights and freedom of shareholders.

FINANCIAL INSTITUTIONS
 1. Industrial development bank of india(IDBI)
 Subsidiary organisatoins
 SIDBI
 IDBI CAPITAL
 IDBI BANK
 INTECH
 ITSL
 2 Induatrial Finance Corporation of India
 Project financing
 Financial services
 Lending policies
 3 Industrial Credit and Investment Corporation
of India Limited(ICICI)
 Venture funds management company

 Securities and finance company

 Brokerage services

 Capital services limited

 4 Industrial investment bank of india

 5 Discount and Finance house of india

 6 State Financial corporation

 7 State Industrial development investment

corporation
 8 Investment Institutions
 Unit trust of india

 Life insurance corporation of india

 General insurance corporation of india

 9 Small industries development bank of India

 10 National small Industries corporation

 11 State small industries development

corporation
 12 Khadi and village

 13 Commercial Banks
 UNIT 9:
LABOUR ENVIRONMENT
 LABOUR WELFARE AND SECURITY
 ILO defines Labour Welfare as “ such services, facilities and amenities
as adequate canteens, rest and recreation facilities, arrangements for
travel to and from their houses, and such other services amenities and
facilities as contribute to improvements in the conditions under which
workers are employed”
 ILO recommended the following concerning labour welfare:
 Food and meals facilities
 Rest and recreation facilities (excluding holiday facilities)
 Transportation facilities especially where public transport is inadequate.

 The study team of Government of India appointed in 1959 divided the

labour welfare activities in 3 groups:
 Welfare within the premises of the establishment
 Welfare outside the establishment
 Social Security
 LABOUR WELFARE AND SECURITY
 Welfare within the premises are regulated by
 Factories Act, 1948
 The Mines Act, 1952
 Dock Workers (Safety, Health and Welfare) Scheme, 1961
 The Motor Transport Workers Acct , 1961
 Contract Labour (Regulation and Abolition) Act, 1970
 Welfare Outside the Establishment
 Maternity Benefits
 Social Insurance
 Education
 Housing
 Holiday Homes
 Vocational Courses
 CENTRAL BOARD FOR WORKER’S EDUCATION
(CBWE)
 It is tripartite body registered under the Societies Registration Act,
1860
 It implements worker’s education programmes at national, regional
and unit/village levels.
 Focus is to educate about the rights and obligations of the working
class and their effective contribution to the socio-economic
development of the country.
 It is Head Quartered in Nagpur. It has 4 Regional Directorates at Delhi,
Kolkata, Mumbai and Chennai. It also has regional and sub – regional
centers.
 V.V. Giri National Labour Institute an autonomous body of the
Ministry of Labour is engaged in research pertaining to labour welfare.
 The National Safety Council, 1966 is concerned mainly with safety of
labour.
 SOCIAL SECURITY
 It is expected that the country takes care of its citizens from the “cradle
to the grave”
 In the words of V.V. Giri “ Social security measures have a two-fold
significance for every developing country. They constitute an
important step towards the goal of a Welfare State, by improving living
and working conditions ad affording the people protection against the
uncertainties of the future. These measures are also important for every
industrialization plan, for not only do they enable workers to become
more efficient but they also reduce the wastage arising from industrial
disputes. The man days lost on account of sickness and disability also
constitute a heavy drain on the slender resources of the workers and on
the industrial output of the country. Lack of social security impedes
production and prevents the formation of a stable and efficient labour
force. Social security, is therefore, not a burden but a wise investment
in long run.”
 LEGISLATIVE ENACTMENTS
 Acts that provide security in cases of employment injury, maternity
and sickness
 The Workmen’s Compensation act, 1923
 The Maternity Benefits Act, 1961
 The Employee’s State Insurance Act, 1948

 Acts that cover the risks of old age and unemployment

 The Employee’s Provident Fund and Miscellaneous Provisions Act, 1952
 The Coal Mines Provident Fund, Family Pension and Bonus Act, 1948
 The Payment of Gratuity Act, 1972
 The Industrial Disputes Act, 1947
 INDUSTRIAL RELATIONS
 The core of industrial relations is the various aspects of interactions
between employer and employees, employees and employees,
employers and employers and between state, employer and employees.
 INDUSTRIAL DISPUTES
 The Industrial Disputes Act , 1947 defines industrial disputes as “ It
means any dispute of difference between employers and employers or
between employers and workmen or between workmen and workmen
which is connected with the employment or non-employment or the
terms of employment or with the conditions of labour of any person.
 Labour unrest is psychological and the disputes are concrete evidence
of unrest.
 INDUSTRIAL DISPUTES - CAUSES
 Conflict of Interests
 Economic Causes:
 Wages
 Bonus
 Economic Security

 Working Conditions and Labour Welfare

 Personnel Factors

 Psychological Factors

 External Factors
 INDUSTRIAL DISPUTES - PREVENTIONS
 Employer – Employee Relations
 Tripartite Machinery

 Code of Discipline and Industrial Truce Resolution

 Works Committee
 INDUSTRIAL DISPUTES - SETTLEMENT
 Voluntary Arbitration
 Under the Act:
 Grievance Settlement Authority
 Conciliation Officers
 Board of Conciliation
 Courts of Inquiry
 Labour Courts
 Tribunals
 National Tribunals
 Reference and Awards
 Prohibition of Strikes and Lockouts
 TRADE UNIONS - MEANING
 According to the Trade Unions Act, 1926 “ Trade Union means any
combination whether temporary or permanent, formed primarily for
the purpose of regulating the relations between workmen and
employers or between workmen and workmen or between employers
and employers or for imposing restrictive conditions on the conduct of
any trade or business and includes any federation of two or more trade
unions”.
 TRADE UNIONS - FUNCTIONS
 Secure fair wages
 Safeguard Security of tenure

 Improve service conditions

 Improve opportunities for promotion and training

 Improve living and working conditions

 Provide educational, cultural and recreational facilities

 Co-operate in and facilitate technological advancement

 Promote interests of workers

 Responsive co-operation for improving levels of production, discipline

and quality
 Labour welfare

 Social Responsibilities
 TRADE UNIONS - LIMITATIONS
 Limited Representation
 Small- Size and Increasing Numbers

 Multiplicity of Unions

 Inter – Union and Intra – Union Rivalries

 Political Infiltration

 Outside Leadership

 Meager Funds

 Low Income

 Illiteracy

 Lack of Integrity

 Unhealthy Attitude of Employers

 EXIT POLICY
 Need
 VRS and Golden Handshake

 National Renewal Fund

 UNIT 10:
PLANNING AND DEVELOPMENT
(NOTE ON NITI AAYOG DICTATED IN CLASS)
 UNIT 11:
GLOBAL ENVIRONMENT
 GATT/WTO
 GATT is the predecessor of WTO.
 The Bretton Woods Conference of 1944 had recommended the
establishment of GATT.
 India is one of the founders of GATT.

 Objectives:
 Raising standard of living
 Ensuring full employment and a large and steadily growing volume of real
income and effective demand
 Developing full use of the resources of the world
 Expansion of production and international trade.

 Principles:
 Non-discrimination
 Prohibition of quantitative restrictions
 Consultation
 GATT/WTO
The Uruguay Round
 Due to conflicts, the round could not be conducted in December 1990.
 Dunkel Draft
 First 6 rounds of MTNs concentrated exclusively on reducing tariffs
 The 7th round concentrated on tackling the various non- tariff barriers.
 Conversion of GATT into WTO with effect from 1 January 1995.
 The WTO headquartered in Geneva, Switzerland officially commenced on 1
January 1995 under the Marrakesh Agreement (marking the culmination of
the 12-year-long Uruguay Round of negotiations ) signed by 123 nations on
15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT)
 GATT/WTO
GATT WTO

Full Form General Agreement on Tariffs and World Trade

Trade Organization
Year of 1948 1995
Creation
Purpose To strengthen International Trade To govern GATT and
international trade
practices
Framework No permanent structure or Has a permanent
framework structure or framework
Scope Trade in goods Trade in goods, trade in
services and trade
related aspects of
intellectual property
rights
Parties Contracting Parties Members

Dispute Has a permanent appellate body to More powerful. Disputes

Resolution review findings and settle disputes. settlement was faster
However, it was less powerful, slow and more efficient.
and less efficient
 GATT/WTO
Functions of WTO:
 To help the trading industry to become smooth, fair, free and predictable.
 To administer multilateral trade and business agreements between its member
nations
 To resolve trade disputes
 To investigate unfair trade practices and avoid dumping
 To Promote fair competition
 Encouraging development and economic reform
 Providing Technical assistance and training for developing countries
 Cooperation with other international organizations like world bank and IMF
 To ensure trade without discrimination
 To ensure national treatment for goods and services
 GATT/WTO
Benefits of WTO
 MULTI NATIONAL CORPORATIONS

A multinational company has facilities

and other assets in at least one country
other than its home country
CHARACTARISTICS OF MNC
 Large size
 Multi countryoperations

 Various objectives

 Various environment

 Centralized ownership and control

 Multiple currencies
LIST OF MNC
 ABN AMRO
 Accenture

 Axis Bank ltd

 Adidas

 Ikea

 LG

 Sony
FOREIGN TRADE
 Foreign trade policies are government actions,especially tariffs,
import quotas, designed to increase net export by promoting exports
or restricting imports

 ADVANTAGES OF FOREIGN TRADE

 Maximum use of natural resources
 Availability of goods
 Specialization
 Economies of large scale
 Stability of prices
 Advance equipments
 Benefits to customers
 Development of the means of communication and transport
 Ability to face natural calamities
 Dicouragement to moinopolies
 Inter national cooperation
 Better employment
DISADVANTAGES
 Threat to infant industries
 Economic exploitation
 Endangers independence
 Misuse of natural resources
 Import of harmful goods
 World wars
 Trade and tariff agreement

 NECESSITY
 Mutual advantage
 Monopoly
 Comparative advantage
 Climatic condition
 Advanced technology