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GLOSSARYGLOSSARY

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Gross Domestic ProductGross Domestic Product

Total money value of all final goods &

services manufactured within the country in one year.

Annual value of goods sold and services

paid for inside a country

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Nominal & Real GDP Nominal & Real GDP

Nominal GDP measures the value of all the goods and services produced and expressed at current prices.

Real GDP measures the value of all the goods and services produced expressed at the prices of some base year

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Different ways of arriving @ GDP

Different ways of arriving @ GDP

GDP at Constant Prices

GDP at Current Prices

Calculated at constant prices to know “real growth”

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Gross National Product (GNP)

Gross National Product (GNP)

GNP = GDP + Income accruing to domestic residents from investments abroad – income earned by foreigners in the country.

Annual value of goods and services in a country including income from other countries

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National Income

Sum of total incomes of normal residents of a

country before deduction of direct taxes.

To calculate total income, add all payments for

the use of factors of production , like wages, salaries, profits & net income from abroad.

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Per Capita IncomePer Capita Income

Income per head = Population

IncomeNational

• Average income of one person.

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Inflation Excess Demand in the economy High costs Increase in money supply More money chasing fewer goods Rise in prices, purchasing power of money decreases High interest rates tend to increase

inflation Zimbabwe classic case of gallopping

inflation currency scrapped

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INDICATORS OF ECONOMY

INDICATORS OF ECONOMY

Poverty Line Consumption expenditure required for

getting 2100 calories per person in urban area

and 2400 calories in rural areas.

Key parameters No. of people BPL % of population BPL

(Conti…)

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Orissa highest percentage of BPL population

Some poverty zones are BIMARU and the KBK

belt in Orissa. The BPL percentage in India differs

according to the methodology adopted.

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INDICATORS OF ECONOMY

HDI - HUMAN DEVELOPMENT INDEX

INDICATORS OF ECONOMY

HDI - HUMAN DEVELOPMENT INDEX Developed by UNDP in 1996.

Measures physical quality of life in a country along with 3 key parameters

Life expectancy at birth No. of years in school Per capita income HDI 2009 – India at 134 (182 countries

ranked) HDI 2009 No. 1 is Norway Niger ranked at 182

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INDICATORS OF ECONOMYINDICATORS OF ECONOMY

WPI - WHOLESALE PRICE INDEXWPI - WHOLESALE PRICE INDEX

Measures increase/decrease in industrial,

commercial prices of commodities under 3 broad categories.

Primary articles – 98 items Fuel, power etc., – 19 items Manufactured products – 318

items Certain weightage to each

category of commodities

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WPI – IIWPI – II

Base year – 1993 – 94 Used for calculating INFLATION. WPI no longer a true indicator of inflation as

it may not reflect ground reality The basket of commodities may be outdated New series introduced from April 1st, 2000 435 commodities in the new series; as

against 447 in the old series.

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INDICATORS OF ECONOMY

INDICATORS OF ECONOMY

CPI – CONSUMER PRICE INDEX

Calculates increase/decrease in retail price

Direct bearing on consumers Different types of CPIs for

agricultural laborers industrial workers urban non-manual employee

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FOREIGN DIRECT INVESTMENT (FDI)

FDI supplements domestic investment The investment made to acquire long term

benefits in enterprises operating outside the

economy of the investor The FDI relationship consists of a parent

enterprise and a foreign affiliate which together form a transnational corporation

Mauritius, Singapore and USA are the three biggest sources of FDI (Conti…)

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FDI involves bringing scarce capital, technology and managerial expertise FDI creates jobs FDI barred at present in retail trading except

single brand product retailing FDI restricted to 26% in print media relating to news and current affairs FDI restricted to 26% in insurance and defence

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Foreign Institutional Investor (FII)

Foreign Institutional Investor (FII)

FII means an entity established or incorporated outside India which

proposes to make investment in the financial markets in India

FII is not stable money

Unlike FDI the focus of FII is on making quick profits.

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Real & Nominal Interest Rates

Real interest rate = Nominal interest rate – rate of inflation

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CRR Minimum 3% Maximum 20% SLR Minimum 24% Maximum 40% Cash Reserve Ratio (CRR) – 5% Statutory Liquidity Ratio (SLR) –

25% Bank Rate – 6% Repo Rate – 4.75% Reverse Repo Rate – 3.25%

Key indicators of banking sector

(Conti…)

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Bank Rate is for a longer period say 6 months

to one year Repo and reverse repo rates are for the

short term. They are used to either increase

money supply or mop up excess liquidity Repo and reverse repo have now assumed more importance than BR PLR is benchmark rate

Concept of BPLR under scrutiny Majority of Banks lending is under BPLR

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FOREXFOREX Exchange control Fixed Exchange rates Free/Floating exchange rates Depreciation/appreciation Devaluation India’s forex reserves more than $120

billion invested mostly in low yielding US

securities Countries like China and India are financing consumption in the USA China–largest forex reserves in the world

more than $ 1 trillion

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Purchasing Power Parity (PPP)

Purchasing Power Parity (PPP) An exchange rate between two currencies

such that the same basket of goods and services

could be bought in each country if the cost were converted at that exchange rate.

It is often used to compare the standards of living between countries.

Rate of exchange between two countries determined by comparing respective internal price levels

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Current A/c Convertibility Current A/c

Convertibility Free flow for purposes other than for

capital purchases and loans Exports Imports Travel Study abroad Medical treatment Employment abroad Gifts Consultancy Intl. credit cards

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The freedom to convert local financial assets into foreign financial assets & vice versa at market determined rates of exchange

Indicator of a developed economy Gives confidence to investors However, leaves the country at risk Tarapore Committee 1997

Fiscal consolidation – low inflation Financial sector reforms

Capital A/c ConvertibilityCapital A/c Convertibility

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TAXES DIRECT TAXES Direct incidence of tax on the person who pays the tax.

liability to pay tax is NOT passed on to someone else. e.g. INCOME TAX, CORPORATION TAX, WEALTH TAX, LAND REVENUE, GIFT TAX etc….

INDIRECT TAXES Levied on goods and services. Traders/producers pay it.

Liability passed on to end customer. e.g. VAT, EXCISE TAX, CUSTOMS DUTY, SERVICE TAX… New Tax on Goods and Services [TGS] to be

implemented from April 1st 2010 New Tax code proposed to replace Income Tax Act

1961.

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SUBSIDIES Grants to suppliers of goods and services Used to keep consumer prices down (LPG &

Kerosine, PDS to BPL) To prop up production (farm and fertilizer

subsidies) To boost exports To lower cost (tax subsidies) To improve infrastructure Meet social obligations (subsidy on food,

education) Cross subsidies (petroleum products) Cross subsidies in Banking through concept

of Below PLR loans

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SUBSIDIES IN 2008-09 Food subsidy – Rs.32,667 cr.

Fertilizer subsidy – Rs.30,986cr. Kerosine & LPG – Rs.30,000 cr. Politically and socially sensitive

issue. LPG subsidy aimed at the middle

class

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CORE SECTORS Coal Cement Power Steel Petroleum Petroleum refinery products

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DISINVESTMENT 1991-92 to July 2007 Target – Rs.96,800 crore Achievement – Rs.51,608 crore (14 companies privatised) Issues

Loss making units Social responsibility Method – Public issue, strategic sale Valuation Creating monopolies – (IPCL, VSNL) Job loss Loss of govt. control

(Conti…)

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Ministry of Disinvestment formed by NDA Govt Abolished by UPA Govt

Present policy is to opt for the IPO model of disinvestment rather than outright sale

Minimum Govt stake in PSU’s to be 51% National Investment Fund created to pool

disinvestment proceeds Focus on Investment rather than disinvestment Investment Commission formed. Some prominent disinvestments are BALCO

in 2001 and Hindustan Zinc Ltd in 2001-02 and VSL in 2001

Current polices: Disinvestment to be used sparingly

Global financial trends do not favour disinvestment

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INFRASTRUCTURE Transport – Railways, roads, shipping , civil

aviation Communication – Telecom, P & T Energy – Electricity, Oil, coal, non-

conventional sources

Science & Technology Banking, finance and insurance Social – education, health India lags behind China in development of

infrastructure

(Conti…)

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Top priority to creation of infrastructure Amartya Sen’s analysis that India has

neglected social infrastructure

Delhi Mumbai Industrial corridor [DMIC] in 2008 with Japan’s assistance

Aim is to create state-of-the art infrastructure to activate local commerce

Petroleum Chemical Petrochemical Investment Regions [PCPIR] proposed in 2007

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PATENTS Product patents Process patents Patents Act 1970 Generic Drugs – $80 bn worth Reverse Engg Huge opportunity Compulsory Licensing India has created a digital data base of

traditional knowledge of healing systems like Yoga, Ayurveda, Unani and Siddha and registered with European Patent Office [EPO]

(Conti…)

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Frivolous patents granted in Western countries for traditional Indian products like neem, turmeric and even for Yoga

Geographical Indication (GI) is a patent associated with a region

Ex: Kalamkari art, Darjeeling Tea, Coorg coffee latest Tirupati Laddu

Mashelkar committee on patents The patent regime of WTO can be overlooked

in times of medical emergencies like Swine Flu

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SSISSIManufacturing Services

Micro 25 lakhs 10 lakhsSmall 25 lac - 5 crores 10 lac – 2 crMedium 5 – 10 crores 2 -

5 cr

♦ 128.44 lakh units♦ Turnover – Rs.4,97,842 cr♦ Employs 312.52 lakh people♦ Exports worth Rs.86,013 cr

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IMPORT RESTRICTIONS

Tariff Barriers

Non-Tariff Barriers

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TARIFF BARRIERS Customs Duty Countervailing Duty Anti-dumping duty Transit duty Cess Additional duties or surcharges

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Non-Tariff Barriers Health, Safety regulations Quality norms (ISO & EN standards , FDA,

CE mark) Quarantine laws Local subsidies Channelised imports through

governmental agencies (eg: sugar imports through STC)

Licencing policy Quota restrictions Import bans Cumbersome Customs procedures

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Fiscal PolicyThe government’s policy of achieving economic objectives (employment, per capita

income…)through government earning and spending

related to increase or decrease in taxes.

Government sources of funds : Taxes and duties, government

businesses, fines, borrowing from public, investments

Government uses of funds : Infrastructure, mining, public welfare, defense, power generation, research and

developmentFiscal policy intimately linked to the Union Budget

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Monetary PolicyMonetary PolicyMonetary PolicyMonetary PolicyThe government’s policy of achieving The government’s policy of achieving economic objectiveseconomic objectives (employment, per capita (employment, per capita

income, balance of trade, economic parity…)income, balance of trade, economic parity…)

by controlling money supply through by controlling money supply through instrument like interest ratesinstrument like interest rates

Decrease in supply Decrease in supply : Deflation or decrease in : Deflation or decrease in pricespricesIncrease in supplyIncrease in supply : Inflation or increase in : Inflation or increase in pricesprices

Monetary policy intimately connected to RBI’s Monetary policy intimately connected to RBI’s policiespolicies

The government’s policy of achieving The government’s policy of achieving economic objectiveseconomic objectives (employment, per capita (employment, per capita

income, balance of trade, economic parity…)income, balance of trade, economic parity…)

by controlling money supply through by controlling money supply through instrument like interest ratesinstrument like interest rates

Decrease in supply Decrease in supply : Deflation or decrease in : Deflation or decrease in pricespricesIncrease in supplyIncrease in supply : Inflation or increase in : Inflation or increase in pricesprices

Monetary policy intimately connected to RBI’s Monetary policy intimately connected to RBI’s policiespolicies

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Hyper Inflation Stagflation Deflation Reflation Highest inflation in world is in

Zimbabwe Currency made worthless due to

inflation

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Appreciation of the Appreciation of the RupeeRupee

Indication of economy doing well Importers & borrowers in forex are happy Domestic consumers are happy Interest on government borrowings come

down Companies with forex loans will gain Debt of the government decreases Lowers inflation rate Exporters are hit Margins erode Producers have to cut costs

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Agriculture Contributes about 22% to GDP 60% of area sown dependent on rainfall 65 to 70% of population dependent on

agriculture 230.67 mt foodgrain production in 2007 – 08 National Food Security Mission launched to

enhance production of rice wheat and pulses India second highest producer of fruits and

vegetables in world Largest producer of milk in the world

(Conti…)

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India is home of spices-largest producer, consumer and exporter of spices

India largest producer of cashewnuts and basmati rice

National Horticultural Mission 2005 National Project for Organic Farming 2004 India has largest livestock population in

world National Fisheries Development Board set

up in Hyderabad

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Energy Coal main source of energy [67%] Installed power capacity is 149,391.91 MW as of

31st May, 2009. Electricity Act 2003 - SERC’s formed Coal based Ultra Mega Power Projects [UMPP] of 4000 MW each National Solar Mission to be launched on

November 14th 2009

Nuclear energy to be key for India’s quest for energy security. Hence 123 pact.

Nuclear energy at present contributes 3 to 4% to total energy pie

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Miscellaneous India a services sector led economy defies

conventional logic Conventional model is transition from

manufacturing to services India is services sector led but still

predominantly rural

Manufacturing and infrastructure are top priorities of the Government

Among infrastructure, social infrastructure is a very vital area

(Conti…)

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Disinvestment of sick PSU’s and profit making PSU’s is needed to generate huge funds for infrastructure, specially social infrastructure

Second generation economic reforms needed in power, agriculture, legal sector and financial sector

Massive transfer of population away from unproductive agriculture to other sectors like services and manufacturing

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Polity – Polity –

UPA – in May 2009. Congress 206 seats TMC second largest component of UPA Verdict 2009 is the defeat of the Third and

Fourth Front primarily rather than of the NDA

Highest tally contributed to NDA by Karnataka

Left Front humbled in West Bengal Agatha Sangma-youngest Union Cabinet

Minister, Age 28 years(Conti…)

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Shashi Tharoor is MOS External affairs Meira Kumar first woman to be the Lok

Sabha Speaker

LK Advani and Arun Jaitley leaders of opposition in Lok Sabha and Rajya Sabha

Oldest Cabinet Minister SM Krishna age 77 years

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Polity – Polity – Ramesh Pokhariyal new Chief Minister of

Uttarakhand K. Rosaiah new Chief Minister of Andhra

Pradesh Sikkim creates history-all MLA’s belong to the

ruling party Ashok Gehlot new Chief Minister of Rajasthan Navin Chawla is the new chief Election

Commissioner Mohan Bhagwat new RSS Chief Congress retains power in Maharashtra,

Haryana and Arunachal Pradesh in October 2009.

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8,3000 sq. km of India claimed by China8,3000 sq. km of India claimed by China China objects to ADB’s loan to Arunachal PradeshChina objects to ADB’s loan to Arunachal Pradesh Arunachal regarded by China as “Southern Tibet”Arunachal regarded by China as “Southern Tibet” China objects to Dalai Lama’s and Manmohan Singhs China objects to Dalai Lama’s and Manmohan Singhs

visits to Tawang visits to Tawang India bans Chinese mobiles, dairy products and toysIndia bans Chinese mobiles, dairy products and toys China says Agni - V can target most of ChinaChina says Agni - V can target most of China China reveals a plan on its semi-official website to China reveals a plan on its semi-official website to

balkanisebalkanise India into 15 to 20 pieces by using Pakistan, Bangladesh India into 15 to 20 pieces by using Pakistan, Bangladesh andand taking the assistance of various terrorist organizations like taking the assistance of various terrorist organizations like ULFA etc ULFA etc

The two fastest growing economies in the world are China The two fastest growing economies in the world are China

and India and India India is the world’s largest democracy and China is theIndia is the world’s largest democracy and China is the

world’s largest “free-market” and politically regimented world’s largest “free-market” and politically regimented countrycountry

8,3000 sq. km of India claimed by China8,3000 sq. km of India claimed by China China objects to ADB’s loan to Arunachal PradeshChina objects to ADB’s loan to Arunachal Pradesh Arunachal regarded by China as “Southern Tibet”Arunachal regarded by China as “Southern Tibet” China objects to Dalai Lama’s and Manmohan Singhs China objects to Dalai Lama’s and Manmohan Singhs

visits to Tawang visits to Tawang India bans Chinese mobiles, dairy products and toysIndia bans Chinese mobiles, dairy products and toys China says Agni - V can target most of ChinaChina says Agni - V can target most of China China reveals a plan on its semi-official website to China reveals a plan on its semi-official website to

balkanisebalkanise India into 15 to 20 pieces by using Pakistan, Bangladesh India into 15 to 20 pieces by using Pakistan, Bangladesh andand taking the assistance of various terrorist organizations like taking the assistance of various terrorist organizations like ULFA etc ULFA etc

The two fastest growing economies in the world are China The two fastest growing economies in the world are China

and India and India India is the world’s largest democracy and China is theIndia is the world’s largest democracy and China is the

world’s largest “free-market” and politically regimented world’s largest “free-market” and politically regimented countrycountry

INDIA – CHINA TIES INDIA – CHINA TIES INDIA – CHINA TIES INDIA – CHINA TIES

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JASWANT SINGH JASWANT SINGH Author of “Jinnah – India – Partition –

Independence” Former Defence and External Affairs Minister

in NDA Govt

Expelled from BJP for sympathetic portrayal of Jinnah and criticism of Sardar Patel Gandhiji and Jawaharlal Nehru.

He is chairman of Public Accounts Committee [PAC] in Lok Sabha.

Involved in controversy during NDA Govt for escorting terrorists to Kandahar

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AWARDS Deep Joshi awarded Magsaysay award for

social service Alice Munro wins 2009 Man Booker

International Prize President Barack Obama is “surprise”

choice for 2009 Nobel Peace Prize

Hilary Mantel wins 2009 Man Booker Prize Herta Muller 2009 Nobel Prize for Literature Elinor Ostrom and Oliver Williamson, Nobel

Prize Economics Venkatraman Ramakrishnan wins Nobel

Prize for Chemistry

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Business related awards Business related awards [ET Awards] [ET Awards]

Business related awards Business related awards [ET Awards] [ET Awards]

Business Leader of Year-Anand MahindraBusiness Leader of Year-Anand Mahindra Global Indian-Ram CharanGlobal Indian-Ram Charan Businesswoman of Year-Vinita BaliBusinesswoman of Year-Vinita Bali Corporate Excellence, Company of the Year- Corporate Excellence, Company of the Year-

Hero HondaHero Honda Entrepreneur of the Year-G V Krishna ReddyEntrepreneur of the Year-G V Krishna Reddy Corporate Citizen of the Year-TERI,Corporate Citizen of the Year-TERI, Reformer of the Year-Nitish KumarReformer of the Year-Nitish Kumar Life Time Achievement award-Keshub Life Time Achievement award-Keshub

MahindraMahindra

Business Leader of Year-Anand MahindraBusiness Leader of Year-Anand Mahindra Global Indian-Ram CharanGlobal Indian-Ram Charan Businesswoman of Year-Vinita BaliBusinesswoman of Year-Vinita Bali Corporate Excellence, Company of the Year- Corporate Excellence, Company of the Year-

Hero HondaHero Honda Entrepreneur of the Year-G V Krishna ReddyEntrepreneur of the Year-G V Krishna Reddy Corporate Citizen of the Year-TERI,Corporate Citizen of the Year-TERI, Reformer of the Year-Nitish KumarReformer of the Year-Nitish Kumar Life Time Achievement award-Keshub Life Time Achievement award-Keshub

MahindraMahindra

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SPORTS SPORTS SPORTS SPORTS Rio De Janiero 2016 OlympicsRio De Janiero 2016 Olympics 2010 FIFA World Cup venue is South Africa2010 FIFA World Cup venue is South Africa 2010 Commonwealth Games venue Delhi2010 Commonwealth Games venue Delhi 2010 World Cup Hockey venue Delhi2010 World Cup Hockey venue Delhi 2011 World Cup Cricket; India, Sri Lanka and 2011 World Cup Cricket; India, Sri Lanka and Bangladesh Bangladesh 2009 Castrol Award Player of the Year, 2009 Castrol Award Player of the Year, Gautam Gautam Gambhir Gambhir ICC Test Cricketer of Year 2009 is Gautam ICC Test Cricketer of Year 2009 is Gautam Gambhir Gambhir ICC, ODI player of Year 2009 is MS DhoniICC, ODI player of Year 2009 is MS Dhoni Union Minister for Sports, MS Gill Union Minister for Sports, MS Gill

Rio De Janiero 2016 OlympicsRio De Janiero 2016 Olympics 2010 FIFA World Cup venue is South Africa2010 FIFA World Cup venue is South Africa 2010 Commonwealth Games venue Delhi2010 Commonwealth Games venue Delhi 2010 World Cup Hockey venue Delhi2010 World Cup Hockey venue Delhi 2011 World Cup Cricket; India, Sri Lanka and 2011 World Cup Cricket; India, Sri Lanka and Bangladesh Bangladesh 2009 Castrol Award Player of the Year, 2009 Castrol Award Player of the Year, Gautam Gautam Gambhir Gambhir ICC Test Cricketer of Year 2009 is Gautam ICC Test Cricketer of Year 2009 is Gautam Gambhir Gambhir ICC, ODI player of Year 2009 is MS DhoniICC, ODI player of Year 2009 is MS Dhoni Union Minister for Sports, MS Gill Union Minister for Sports, MS Gill

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MISCELLANEOUS MISCELLANEOUS Mamta Banerjee coins slogan of “Ma Maati

Manush” Pranab Mukherjee and P. Chaidambaram unveil

proposal for a new Tax Code Nandan Nilekani appointed chief of the Unique

Identification Authority C. Ranagarajan is reappointed chairman of PM’s

Economic Advisory Council Barack Obama is youngest American president to

win Nobel Peace Prize

(Conti…)

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Former President Pervez Musharraf indicted for murder of Baluch nationalist leader Nawab Akbar Bugti

Centenary of eminent Defence Scientist, Suri Bhagwantam, observed

Angela Merkel most powerful woman in the world, according to Forbes

Jean Dreze, Belgian economist is ET’s Policy Change Agent of Year

Nandita Das is chairperson of the Children’s Film Society of India

Lee Kun Hee former head of Samsung given five year suspended jail sentence and a fine of $110 million imposed

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MISCELLANEOUS – Fortis acquires Wockhardt Hospitals Telecom rural penetration only 13% in India Swiss luxury goods giant Mont Blanc adopts

Mahatma Gandhi as brand ambassador for its Rs.14 lakh pen

Swati Piramal is new president of Assocham Current capacity of nuclear power in India is

4000 MW Lunar Crater Observation and Sensing Satellite

[LCROSS] of NASA crashlands on moon to search for water

Madhu Koda becomes first ex-chief minister to be charged under PMLA