Static Quiz 02 February 2024 (Economy) 

GVA basic prices = GVA factor cost + Production Taxes – Production subsidies
GDPMP = GVA basic prices + product taxes – Product subsidies
GDPMP = GVA at factor cost/basic prices + Indirect taxes – Subsidies

The following are some basic differences in CPI, WPI and GDP deflator:
• In wholesale market services are not traded, so WPI does not include the inflation in services, while CPI and GDP deflator capture inflation in services also.

• The goods purchased by consumers in the retail market do not represent all the goods produced in the country (capital goods are purchased by the companies), so CPI does not include such capital goods but GDP deflator takes into account of all such goods and services produced in the country.

• CPI and WPI include prices of goods produced domestically and imported both but GDP deflator does not include prices of imported goods.

• The weights are constant (in the basket) in CPI and WPI, but they differ according to production level of each good and services in GDP deflator.

Debt security represents money that is borrowed and must be repaid with terms that define the amount borrowed, interest rate and maturity date. Holders of debt security receive interest and repayment of the principal.

Equity securities entitle the holder to some control of the company on a proportionate basis i.e. the equity holders get voting rights and thus some control of the business.

Government Securities:

A Government Security (G-Sec) is a tradable instrument issued by the Central Government or the State Governments. G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. (Govt. issues only debt securities). There are four kinds of government securities.

G-Secs are issued through auctions conducted by RBI. Auctions are conducted on the electronic platform called the E-Kuber, the Core Banking Solution (CBS) platform of RBI. Commercial banks, scheduled Urban Cooperative Banks (UCBs), Primary Dealers (PD), insurance companies and provident funds are members of this platform. Foreign Portfolio Investors (FPIs) also participate in this market. Individuals (retail investors) can also participate directly in the Govt. securities market.

Government Securities (G-Sec):

1. Treasury bills or T-bills: These are short term debt instruments issued by the Government of India for a maturity of less than one year. Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity. For example, a 91-day Treasury bill of ₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would be redeemed at the face value of ₹100/-. (Treasury bills are traded in money market).

2. Cash Management Bills (CMB): In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days.

3. Dated Securities: Dated central government securities have a tenor of more than one year up to 40 years.

4. State Development Loans (SDL): State Governments also raise loans from the market which are called SDLs with maturity more than one year. SDLs issued by the State Governments also qualify for SLR.