1. Economy
Vinit Khandelwal

2. Economic Policy
1. Fiscal
1. Budget and Budgetary Provisions
2. Government Income/Expenditure
3. Budget Deficit
4. Public Debts/Borrowings
5. Subsidies/Grants
6. Tax Structure
7. Balance of Trade/Payment
8. Social Sector Priorities/Activities
9. Role of Government
10. Foreign Investments

3. Economic Policy (MI BCCI)
2. Monetary
1. Devised/Designed by Central Banking Authority (RBI)
2. Money Supply
3. Interest Rates
4. Bank Rate
5. Cash Reserve Ratio (CRR)
6. Capital Adequacy
7. Inflation etc

4. Economic Goals (GC PELE)
1. Growth
2. Competitiveness
3. Price Stability
4. Equitable distribution of Income
5. Low rate of Un-employment
6. Efficiency and Effectiveness

5. Domestic Product
• Domestic Product = Personal Consumption
Expenditure (C)
+ Domestic Investment (I)
+ Govt. Expenditures for
current G&S (G)
+ Exports of G&S (X)
- Imports of G&S (M)
• DP = C + I + G + X – M

6. Domestic Product
• GDP: Total Value of Final Output of Goods and
Services produced within a country’s domestic
economy by residents and non-residents.
• GNP: Total Domestic and Foreign output claimed by
residents of a country.
• NDP: GDP – Depreciation
• NNP: GNP – Depreciation
• National Income: Sum of all income derived from
supplying the factors of production.
Wages, Salaries, Rents, Interests and Profits.

7. Indian Economy: CSO
• CSO classifies Indian Economy in 6 Broad Sectors
1. Primary
1. Agriculture
2. Forestry & Logging
3. Fishing
4. Mining & Quarrying
2. Secondary (MCS)
1. Manufacturing
2. Construction
3. Supply of Electricity, Gas, Water

8. Indian Economy: CSO
3. Transport/Communication/Trade (ST RTC)
1. Storage
2. Transport
3. Railways
4. Trade, Hotels and Restaurants
5. Communication
4. Finance & Real Estate (BIBR)
1. Banking
2. Insurance
3. Business Services
4. Real Estate
5. Community and Personal Services (POD)
1. Public Administration
2. Defense
3. Other Services
6. Foreign Sector

9. National Income
• Combined Gross output in Sector 1 to 5 is called GDP
at Factor Cost
• GNP = Net Factor Income from Abroad
+ GDP at Factor Cost
• National Income Measurement Approches
1. Income Approach
• Wages, Salaries, Profits, Rent, Capital Consumption
2. Expenditure Approach
• Govt. Expenditure, Investments, Consumption
3. Output Approach
• Output from 1 to 5 sectors

10. National Income
• National Income Data is used for:
1. Economic Planning
2. Regulation of Economy
3. Comparing Per Capita Income / Standards of Living
4. Measuring National Economic Growth
Per Capita Income
• Per Capita Income = National Income/Population
• Rise in Per Capita Income indicates rise in
availability of Goods and Services
• Hence it is used as an Index of welfare of people

11. Difficulties in Estimating National Income
• Conceptual
1. To Include Services in National Income?
2. To Include Administrative Services in National Income?
• Practical Problems
– Presence of Large non-monetized sector
– Lack of Reliable and appropriate data
– Unreported Illegal Incomes
– Regional Disparities
– Difficulty in classification of working population

12. Inflation
• Inflation is Increase in Average Level of Prices
• Deflation is Decrease in Average Level of Prices
• Types
1. Creeping
2. Galloping
3. Hyper
1. Push Factors
2. Pull Factors
• Impact of Inflation
1. Condition of Poor deteriorates
2. Inequality increases
3. Economic development gets a set back as saving and
investments reduce

13. Business Cycle
• Expansion
– National Output : Rise
– Consumer and Capital Expenditure : Rise
– Employment : Rise
– Expansion in Bank Credit
• Peak/Boom
– Supply higher than Demand
– Wage Rates : Rise
– Cost of Inputs : Rise
– Demand for Capital Goods : Low

14. Business Cycle
• Recession/Depression
– Demand : Fall
– Supply very high than Demand
– Starts from few industries, moving through the economy
– Income : Fall
• Trough
– National Income and Expenditure : Fall
– Employment : Fall
– Demand for Capital Goods : Fall
– Liquidity and Profitability Problems
• Recovery and Expansion
– Renovation/Modernization Starts
– Investments starts coming in

15. Banking Sector
Vinit Khandelwal

16. Banking Sector Reforms – Basic Structure
LN PPPPP BCCD GG QSTN
1. Initiated Post LPG
2. Got boost from Narasimham Committee
3. 1969 - Entry of Private Banks, Indian & Foreign
4. Movement away from Activity to
Professionalization
5. Reduced Government intervention
6. Re-Organizing: Global, National, Regional
7. Balance Sheet Transparency
8. CRR and SLR Reduction
9. Partial Deregulation of Interest Rates on Advances
and Deposits (own PLR/Lending/Deposit Rates)

17. Banking Sector Reforms – Basic Structure
10.Partial Deviation from Directed Lending (Priority
Sector Lending: 40% to 25% of Total Advances)
11.Qualitative than Quantitative approach
12.Special Tribunals – speed up the recovery of loans
13.Prudential Norms introduced to ensure financial
health of Banking/Financial Institutions
14.Profitability Norms
15.Capital Adequacy Norms
16.Technology Up gradation
17.NPA Management

18. 4 Steps to NPA Management
1. Assessment
2. Provisioning
3. Recovery
4. Prevention

19. 1. Assessment
(Health Codes: BArDaISSSSfa)
• 1988-89, Assets were allotted HEALTH CODES
1. Bad & Doubtful of Debt Recovery
2. Advanced Recalled
3. Decreed Accounts
4. Irregular
5. Satisfactory
6. Sick-viable
7. Sick-non-viable
8. Suit-Filed Accounts

20. 2. Provisioning (SSDsuL)
• Assets were further Classified into
1. Standard No Provision
2. Sub-Standard 10% Provision
3. Doubtful
1. Secured 20 to 50% Provision
2. Unsecured 100% Provision
4. Loss 100% Provision

21. 3.Recovery (DSLR)
• Settlement Advisory Committees (SAC) 1999
• Debt Recovery Tribunals (DRT)
• Recovery of Debt due to Banks and Financial
Institutions Act (RDBFA) amended in 2000
• Lok Adalats

22. Basle Norms
1. Earlier: Capital Adequacy Norms did not receive adequate
emphasis
• because of false assumption that Govt. owned
Banks/Financial Institutions cannot fail/run into problems
2. Now: Capital Adequacy Norms
• based upon recommendations of the committee on
• Banking Regulations and Supervisory Practices (1988) of
Basle – Based Bank of International Settlement
3. Inter Alia, All Banks would have to achieve 8% Capital
Adequacy Ratio
4. PSBs had to increase Capital Base
– By 5840 crores by 31 March 1991
– By 20000 crores by 1996

23. Up gradation of Technology
1. Computerization of Operations
2. Leverage IT for:
1. Competitive Advantage
2. Better House-Keeping
3. CRM / Service Quality
4. ALM etc

24. Conclusion
• Measures of Reforms initiated and those under way
are expected to create in the financial system:
1. Conducive environment for Competition
2. Better Operational Efficiency
3. Better Customer Service / Product Development
4. Higher Productivity / Profitability
5. Strengthen Organizational and Managerial abilities
6. Financial Viability of the System
7. Withstand problems which may arise in the normal course
of Business

25. Conclusion
• Nationalization of Major Banks
– 1969 14
– 1980 6
• Banking Network – 76,000 branches
• Banks have acted as not only a catalyst but as engine
of/for economic development
• Challenges
1. To NOT be considered“Rich Country of Poor People”
rather “Rich Country of Rich People”
2. New Product Development
3. Better Customer Orientation (CRM)
4. One Stop Financial Services Super-Shoppe
5. Mobile/Internet Banking

26. • Challenges
6. Transparency / Disclosure Practices
7. SURVIVAL OF THE FITTEST
8. Being able to adopt and adapt to Dynamic and Constantly
Changing Local and Global Business Environment
9. Before 1991, The Economist, a British Weekly, brought a
special issue on Indian Economy:
• Due to excessive Government Controls and Regulations, Indian
economy was not able to deliver
• Indian economy is like “TIGER IN CAGE”
10. During 1993-94, The Economist:
• With Policy of LPG and abolition of Controls and Regulations the
GOI has done it’s bit
• “Although the Cage is wide open, the Tiger refuses to come out”

27. Commercial Banking
Vinit Khandelwal

28. Commercial Banking
1. “Engine for Economic Development”
2. Lending, Investments and Related Services facilitate
Production, Distribution and Consumption
3. What is a Bank
– A Bank is an Organization that
– Accepts Monies (Deposits)
– Repayable on demand, either by Cash, Cheque or DD
– Monies so mobilized are Utilized for
– Lending (Advances/Credits) &
– Investments (CLR/SLR)

29. Commercial Banking
1. Operates in 2 Ways
1. Branch Banking
2. Unit Banking
2. Courtesy the British Rule, banks have been
operating in Branch Banking Mode
3. As Banks were started on British Pattern in the
Beginning of 19th Century, all banks were set up as
Joint Stock Company and were governed by
Companies Law

30. Evolution
• 1949
• 1955
• 1959
• 1961
• 1968
• 1969
• Regulations – Banking Companies Act, 1949
• Nationalization Phase I – Imperial Bank into
SBI
• Nationalization Phase II – Princely State
Banks into SBI subsidiaries
• Insurance Cover to Depositors – Deposit
Insurance Corporation
• National Credit Council
• Nationalization Phase III – 14 Major Banks
with DTL of over Rs. 50 Crores Nationalized

31. Evolution
• 1971
• 1975
• 1985
• 1996
• 1998
• Credit Guarantee – Credit Guarantee
Corporation
• New Regional Rural Banks
• Nationalization Phase IV - 6 Commercial
Banks with DTL of over Rs. 200 Crores
Nationalized
• Re-Organization of Banking
• New Private Banks
• Review – Re-Examination

32. Commercial Banking
• Commercial Banks 2 Broad Categories
1. Scheduled
1. Public Sector
1. SBI
2. Associate Banks of SBI
3. Nationalized Banks
4. IDBI Bank Ltd.
5. Regional Rural Banks
2. Private Sector
1. Old
2. New Post 1996
3. Foreign
4. Co-Operatives
1. Urban
2. State
3. District Central
4. Land Development Banks
2. Unscheduled

33. Functions
1. Mobilizing Deposits
1. Current
2. Savings
3. Recurring
4. Fixed
• Cumulative
• Non-Cumulative
2. Investments (CLR/SLR)
3. Providing Financial Services

34. Functions
4. Providing Credit
1. Working Capital
1. Cash Credit Facility
2. Over-Draft Facility
2. Term Loan
1. Demand Loan
2. Installment Credit
3. Medium Term
4. Long Term
1. Equity
2. Plant & Machinery
3. Housing
4. Industrial Estate

35. Why Nationalization?
1. Widening Branch Network of Banks in Rural and
Semi-Urban areas
2. Greater Mobilization of Savings through Deposits
3. Re-Orientation of Credit Flow to benefit the
Neglected Sectors (Agriculture, SSI, Small Business)
4. Extensive Expansion in Rural and Semi Rural areas
– 4:1
5. Significant expansion of Credit to the
Weaker/Neglected Sector – 40% of Advances
6. Maintaining Credit/Deposit Ratio – 60% in
Rural/Semi-Urban areas to prevent siphoning of
funds from these areas to urban areas

36. Why Nationalization?
7. Higher Interest Rates for Bigger Borrowers
Lower Interest Rates for Lower Borrowers
8. RRBs set up in 1970s to meet credit needs of weaker
sections in rural areas
9. Lead Bank Scheme launched
10. Formulation of District Credit Plans/Annual Action
Plans as part of Area Planning to ensure Dove-tailing of
Banks’ credit plans with Developmental Plans
11. Credit Authorization Scheme/Tandon Committee
Norms implemented to prevent large borrowers from
pre-emptying credit from banking system
12. Formalities regarding application, processing,
guarantee streamlined and simplified

37. Why Nationalization?
7. Discretionary powers reviewed/enhanced to
facilitate speedy disposal
8. Move from Security/Guarantee to Activity/Purpose
9. Move from 3rd Party Collaterals to creating security
from Assets financed by the Banks
10. Emphasis on need based finance and end-use
credit

38. Insurance
Vinit Khandelwal

39. Definition
1. Functional Def
– Co-operative Device to spread loss caused by a particular
risk over a number of people who are exposed to it and
agree to insure themselves too by bearing nominal
expenditure.
2. Contractual Def
– Sum of Money as a premium is paid in consideration of
insurer’s incurring the risk of paying large sum upon a given
contingency.
• Examples
1. Life
2. Marine
3. Fire
4. Vehicle
5. Miscellaneous

40. Functions
1. Primary
1. Security
2. Protection
3. Risk Sharing
2. Secondary
1. Prevents Loss
2. Provision of Capital
3. Improves Efficiency of person by reducing worries
4. Economic Progress

41. Nature
1. Risk Sharing
2. Co-operative Device
3. Payment at contingency
4. Large number of insured people
5. Not Gambling
6. Not Charity
Principles of Insurance
1. Principles of Co-operation
2. Principles of Probability

42. Types
Business Point of View
1. Life
2. General
3. Social
Risk Point of View
1. Personal
1. Life
2. Accident
3. Health
2. Property
1. Marine
2. Fire
3. Automobile
4. Cattle
5. Crop
6. Machinery
7. Theft
3. Liability
1. Third Party
2. Employee
3. Motor
4. Re-Insurance
4. Fidelity
1. Fiduciary
2. Credit
3. Privilege

43. Types of Insurance Organizations
• Self Insurance #
• Individual Insurers #
• Partnership #
• Joint Stock Companies
• Mutual Companies
• Co-operative Insurance Organizations
• Lloyd’s Association
# Now Disappeared

44. Insurance: Economic Developmen
• Capital formation is critical for economic
development
• Insurance Sector contributes to Capital formation
through the 3 stages
1. Real Savings
2. Mobilization of Savings
3. Investments
• Functions as Financial Intermediary
• Tool for mobilizing savings

45. Insurance: Regulation & Control
• Indian General Insurance Industry governed by
1. Insurance Act, 1938
2. Insurance Regulatory and Development Authority Act,
1999 (IRDA)
3. General Insurance Business (Nationalization) Act,
1972
• Life Insurance Industry is governed by
1. Insurance Act, 1938
2. Insurance Regulatory and Development Authority Act,
1999 (IRDA)
3. Life Insurance Corporation Act, 1956

46. IRDA, 1999: Duties, Powers, Functions
1. Watchdog and Regulator for Insurance Sector in
India
2. IRDA has been vested with Statutory Status
3. Issue applicants, Certificate of Registration
4. Renew, Modify, Withdraw, Suspend, Cancel
registrations
5. Protection of Interests of Policy Holders
6. Specifying Qualifications, Code-of-Conduct, Training
for intermediaries/Insurance intermediaries/Agents
7. Promoting and Regulating Professional Organizations
connected with Insurance and Re-insurance Business

47. IRDA, 1999: Duties, Powers, Functions
8. .
1. Call for Information
2. Inspecting
3. Enquiring
4. Investigations
5. Audits
of Insurers, Intermediaries, Insurance Intermediaries and other
organizations connected to Insurance Business.
9. Control and Regulation of
1. Rates
2. Advantages
3. Terms and Conditions
Offered by insurers
10. Specifying form and manner in which
1. Books of Accounts will be maintained
2. Statement of Accounts will be rendered

48. IRDA, 1999: Duties, Powers, Functions
11. Regulating Investment of Funds by Insurance
Companies
12. Regulating Maintenance of Margin of Solvency
13. Adjudication of disputes between insurers and
intermediaries/insurance intermediaries
14. Supervising functioning of Tariff Advisory
Committee
15. Specifying percentage of the premium income of
the insurer to finance schemes
16. Specifying percentage of Life Insurance & General
Insurance business to be undertaken by the
insurer in the Rural/Social Sector

49. Reforms in the Indian Insurance Sector
1. Malhotra Committee April 1993
2. Headed by Sri R. N. Malhotra
Former Secretary, Finance, GoI
Former Governer, RBI
3. Examine structure of Insurance Industry and
4. Recommend changes to make it more efficient
and competitive
1. Opening up of Insurance Sector for Private Sector
2. Allow Foreign Equity in Indian Insurance Companies
3. Setting up Strong and Effective Insurance Regulatory
Authority in India

50. New Norms
1. Capital Requirement for
1. Starting General/Life Insurance Company 100 cr
2. Starting Re-Insurance Company 200 cr
2. Required Solvency Margin Highest
1. 50 cr 100 cr for Re-Insurance
2. Sum equivalent to 25% of premium income
3. Sum equivalent to 30% of net incurred claim

51. Advantages of Foreign Participation
1. Investment in Customer Service & Value
2. Transfer of Technological Know-How
3. Transfer of Managerial Know-How
4. Additional Financial Resources/Capital
Disadvantages of Foreign Participation
1. Foreign Insurers dominate Domestic Market
2. Foreign Insurers will service the market
selectively (class rather than mass Insurance
products and Services)

52. Retail Sector in India
Vinit Khandelwal

53. Retail Sector in India
1. Retail Sector contributes 14 – 15% of GDP
2. Retails Sector provides employment to
approximately 8% of the total Employed
Population
3. Retail Industry is expected to grow at 9% annually
between 2012-16
4. India is one of the 5 Biggest Retail Market with a
population of more than 1.2 Billion

54. Organized Retail in India
1. Modern Retail in India is worth $455 Billion
2. Organized Retail Industry Expected to grow at
24% annually
3. Food Retail in India dominates Shopping Basket
4. Mobile phone Retail - $16.7 Billion Business
– Growing at 20% annually
5. Government policies becoming more favourable
– Allowing FDI upto 51% in multi-brand retail, although
with a few constraints
– 100% FDI in single brand retail

55. Un-Organized Retail in India
1. India having the most unorganized retail
2. Traditionally shop in front and house at the back
3. 99% of unorganized retailers in < 500 square feet area
4. Traditional Retail to grow at 8% annually
5. Itinerant Salesmen, Haats, Mandis, Melas

56. Finding Success
1. Reliance Fresh
2. Aditya Birla Retail
3. Future Retail India Ltd. has sold majority stakes in
Pantaloons to Aditya Birla Group
4. Close to 30 Crore consumers shop from Future
Group's Retail Store annually
Failures
1. Subhiksha Trading Services Ltd.
2. Vishal Trading Services Ltd.

57. Global Overview
USA
32%
Europe
31%
Asia Pacific
26%
Rest of the
World
11%
Retail Market Space

58. Global Overview
1. Largest Corporation in the World : A Retailer
– Wal-Mart
– Since 2002
2. Fortune 500 List 2005
– 34 Retailers

59. Retail in India
1. Formats
1. Traditional
2. Established
3. Emerging
2. Has become a mix of
1. Life-style Expression
2. Experience
3. Entertainment

60. Drivers of Retail in India
1. GDP Contribution: Large and Increasing
2. Employment Provider: Major
3. Retailers Diversifying their activities
– Future Group entered Insurance
4. Organizations Growing at International Scale
5. Income: Increasing
6. Working Women/2 Income Families
7. Disposable Income: Increased
8. Lifestyle changes / High Aspirations
9. Rural and Urban: Diminishing Differences

61. Drivers of Retail in India
10. Manufacturing Sector Easing Product Supply
11. Technological Advancement
12. Import duties reduced
13. Customer Service Emphasis (CRM)
14. Vast Middle Class Population
15. Large working population with a median age 24
16. Increasing Nuclear Families in Urban Areas
17. Government policies becoming more favorable

62. FDI in Retail
1. FDI in Single Brand Retail: 100%
– Source 30% from MSMEs: ‘Mandatory’ to ‘Preferably’
2. FDI in Multi Brand Retail: 51%
– Minimum: $ 100 Million
– 50% of FDI in Infrastructure (Storage, Logistics)
– City Population: 10 Lakh+ Only
– Individual State’s Permission
• 54 Cities can Open: Only States of 18 Cities permitted
– TESCO is entering India, in times when it’s slow on
Global Expansion due to sluggish sales in the west

63. Challenges
1. Unorganized Sector Competition
2. Sawadeshi Sentiments
3. Lack of Trained/Qualified/Professional HR
4. Space: Non-availability at affordable prices
5. Infrastructure: Poor (Roads, Logistics, Storage)
6. Labor Laws
7. Cater ‘Lifestyle’ and ‘Value for Money’ together
8. Government Corruption issues
9. Controlling Costs and Prices
10. Legal and Policy Issues

64. Application of IT in Retail
1. Inventory Management
2. Billing Quickly
3. Track Slow/Fast Moving Stock
4. Easy Financials
5. Analyze Customers
6. Tracking Stock
7. Customer Service: Enhanced
8. Reduce Errors/Leaks
9. Database Management
10. Increase Competitiveness

65. Application of IT in Retail
11. RFID – Radio Frequency Identification
– Chitale Bandhu Mithaiwale (Revenue 200 crore) with
11 stores in Pune are early adoptors of technology
– Use of RFID to reduce billing time and manage
inventory
12. Online Retail

66. I.T. Sector in India
Vinit Khandelwal

67. Impact of IT
1. Reduce Geographical distance
2. Routinize un-structured processes
3. Reduce Human Labor
4. Complex Analysis
5. Inventory Management
6. Reduce Errors/Leakages
7. Enhance Processes: Time and Energy
8. Communication: Effective

68. ITeS
• Services offered using IT
• India: Ahead of All
1. Customer Care
2. Medical Transcriptions
3. GIS
4. Animation
5. BPO/KPO
6. Back Office Operations
7. Collection Service
8. Educational Services

69. Why Outsource to India
1. High Quality Technical Skills/Knowledge Talent
2. Cost Effective English Speaking Employees
3. Supporting Govt. Policies
4. Technical/Management Education Infrastructure
5. Improving Basic Infrastructure (Roads, Ban-width)

70. Healthcare Sector in India
Vinit Khandelwal

71. Evolution of Healthcare
• Phase I (1947-83):
Healthcare policy based on 2 principles
1. None should be denied care for want of ability to pay
2. State’s responsibility to provide healthcare for people
• Phase II (1983-2000)
1. First National Health Policy announced in 1983
1. Private Initiative in Healthcare Service Delivery encouraged
2. Expand Access to Publicly Funded Primary Health Care
• Phase III (Post 2000)
1. State Role: Only Provider to Financier as well
2. Liberalization of Insurance sector

72. Healthcare Reforms: Focus
1. Financing
1. Risk Sharing Schemes (Health Insurance)
2. Competitive Approach
2. Provision
1. Equal distribution of care for under-privileged
2. Horizontal Approach than Vertical
3. Rural area to be covered
3. Resource – Human, Technology, Money
1. Doctors and Technical Staff generation
2. Private and International Monetary funding
4. Governance
1. Decentralization
5. R&D
6. PPP