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Table of Contents
INTRODUCTION ................................................................................................................................................. 11
Need for a constitution ............................................................................................................................................. 12
Types of constitutions ............................................................................................................................................... 12
Written and Unwritten constitutions ..................................................................................................................... 12
federal and unitary constitutions ............................................................................................................................. 13
confederation ............................................................................................................................................................ 13
constitutionalism ...................................................................................................................................................... 13
indian constitution: milestones in history ................................................................................................................ 14
legislature of various countries ................................................................................................................................. 24
bicameral countries .................................................................................................................................................. 25
SALIENT FEATURES OF THE INDIAN CONSTITUTION ................................................................ 27
Power resides with the people .................................................................................................................................. 27
rule of law prevails .................................................................................................................................................. 27
social document ........................................................................................................................................................ 27
written constitution .................................................................................................................................................. 27
preamble ................................................................................................................................................................... 28
federal structure ........................................................................................................................................................ 28
parliamentary government ....................................................................................................................................... 29
separation of powers ................................................................................................................................................. 30
secular state .............................................................................................................................................................. 31
independent judiciary ............................................................................................................................................... 31
judicial review .......................................................................................................................................................... 32
fundamental rights ................................................................................................................................................... 32
directive principles of state policy ............................................................................................................................ 32
fundamental duties .................................................................................................................................................. 32
flexibility of constitution and its basic structure ..................................................................................................... 33
universal adult suffrage ........................................................................................................................................... 33
emergency provisions................................................................................................................................................. 33
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independent agencies ................................................................................................................................................ 34
PREAMBLE .............................................................................................................................................................. 35
Purpose ..................................................................................................................................................................... 35
nature and scope ....................................................................................................................................................... 35
preamble: an aid to interpretation........................................................................................................................... 40
limitations of preamble as an internal aid to construction .................................................................................... 41
CITIZENSHIP ......................................................................................................................................................... 42
Parliaments power to regulate right of Citizenship by law and the Citizenship Act, 1955 ................................ 43
Idea of Justice I- Fundamental Rights ................................................................................................................ 45
What is Justice? ....................................................................................................................................................... 45
Nature of Fundamental Rights ............................................................................................................................... 45
The constitution of india ......................................................................................................................................... 47
contents ..................................................................................................................................................................... 47
Fundamental Rights-Contents ................................................................................................................................. 62
Right to Equality ..................................................................................................................................................... 62
Right to Freedom ..................................................................................................................................................... 63
Right against Exploitation ...................................................................................................................................... 67
Right to Freedom of Religion .................................................................................................................................. 67
Cultural and Educational Rights ........................................................................................................................... 68
Right to Constitutional Remedies ........................................................................................................................... 68
Idea of Justice II-Directive Principles of State Policy ..................................................................................... 70
Features of Directive Principles of State Policy ...................................................................................................... 70
Directive Principles of State Policy: Contents ......................................................................................................... 71
Directive Principles of State Policy and Fundamental Rights- Inter-Relationship ............................................... 73
Parliamentary Democracy ..................................................................................................................................... 75
Characteristics of the Parliamentary Form of Government ................................................................................... 75
Constitutional or Nominal and Real Executive ..................................................................................................... 75
Plural Executive....................................................................................................................................................... 76
Ministerial Responsibility and Collective Responsibility ........................................................................................ 76
Parliamentary Sovereignty ...................................................................................................................................... 77
Parliamentary Control over Administration .......................................................................................................... 78
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INDIAN FEDERALISM: NATURE AND PROBLEMS ............................................................................ 79
Written Constitution................................................................................................................................................ 79
Supremacy of the Constitution................................................................................................................................. 79
Rigid Constitution ................................................................................................................................................... 79
Division of Powers ................................................................................................................................................... 80
Independent Judiciary .............................................................................................................................................. 80
Bicameral Legislature .............................................................................................................................................. 80
Unitary features of the Indian Constitution ........................................................................................................... 80
A Strong Centre........................................................................................................................................................ 80
Single Citizenship .................................................................................................................................................... 81
Single Constitution for Union and State ................................................................................................................ 81
Centre Can Change the Name and Boundaries of States ...................................................................................... 81
Single Unified Judiciary .......................................................................................................................................... 81
Unequal Representation of States in the Rajya Sabha .......................................................................................... 81
Common All-India Services ..................................................................................................................................... 82
Emergency Provisions............................................................................................................................................... 82
Political Executive at the Union Level ................................................................................................................... 82
THE PRESIDENT OF INDIA............................................................................................................................ 83
Powers of the President ............................................................................................................................................ 83
Executive Powers ..................................................................................................................................................... 83
Legislative Powers ................................................................................................................................................... 84
Financial Powers ..................................................................................................................................................... 85
Judicial Powers ........................................................................................................................................................ 86
Emergency Powers.................................................................................................................................................... 86
Consequence of the Proclamation ............................................................................................................................ 87
Financial Emergency ............................................................................................................................................... 88
Position of the President .......................................................................................................................................... 88
Steps to Curb Presidents Power-Amendment of Article 74 ................................................................................... 88
Working of the Constitution .................................................................................................................................... 89
VICE-PRESIDENT ................................................................................................................................................ 93
Functions .................................................................................................................................................................. 93
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The Council of Ministers ....................................................................................................................................... 94
Composition.............................................................................................................................................................. 94
THE CONSTITUTION (NINETY-FIRST AMENDMENT) ACT, 2003......................................... 94
Council of Ministers and Cabinet ........................................................................................................................... 95
Functions of the Cabinet.......................................................................................................................................... 96
Executive Functions ................................................................................................................................................. 96
Legislative functions ................................................................................................................................................ 96
Financial powers ..................................................................................................................................................... 96
Cabinet Committees ................................................................................................................................................. 97
N. Gopalaswamy Ayyangar Committees Report ................................................................................................... 98
Recommendations of the Administrative Reforms Commission .......................................................................... 100
Ministries and Departments ................................................................................................................................. 101
Working of the Ministries/Departments .............................................................................................................. 101
The Secretariat ...................................................................................................................................................... 102
Executive Organization of the Department .......................................................................................................... 102
MINISTRIES/DEPARTMENTS OF THE GOVERNMENT ............................................................... 103
THE PRIME MINISTER .................................................................................................................................. 106
Appointment of the Prime Minister ..................................................................................................................... 106
The Prime Minister as the Head of the Council of Ministers ............................................................................. 107
The Prime Minister and the Parliament ............................................................................................................. 108
The Link Between the President and Cabinet..................................................................................................... 108
Spokesman of the Government on Foreign Policy................................................................................................ 109
The Prime Ministers Control over Intelligence Agencies .................................................................................... 109
Administrative and Executive Functions of the Prime Minister ........................................................................ 109
Position of the Prime Minister ............................................................................................................................. 110
PMO ...................................................................................................................................................................... 110
THE PARLIAMENT .......................................................................................................................................... 112
The Lok Sabha ..................................................................................................................................................... 112
Speaker of the Lok Sabha ..................................................................................................................................... 114
Power and Functions of the Speaker ................................................................................................................... 114
The Rajya Sabha .................................................................................................................................................. 116
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Rajya Sabha: Its Composition ............................................................................................................................. 116
Leader of the House .......................................................................................................................................... 118
Power and Functions of the Rajya Sabha ........................................................................................................... 120
Legislative Powers ................................................................................................................................................ 121
Constitutional Amendments ................................................................................................................................. 121
The Role of the Rajya Sabha ............................................................................................................................... 122
Power of the Parliament ...................................................................................................................................... 122
Financial Powers .................................................................................................................................................. 123
The Finance Commission ..................................................................................................................................... 124
Appointment .......................................................................................................................................................... 124
Composition........................................................................................................................................................... 124
Functions of Finance Commission .............................................................................................................. 125
Finance Commission ........................................................................................................................................ 125
Year of Establishment ...................................................................................................................................... 125
Chairman ......................................................................................................................................................... 125
Operational Duration ...................................................................................................................................... 125
Finance Commission And Planning Commission ............................................................................................... 126
Judicial Powers ..................................................................................................................................................... 127
Parliamentary Committees ................................................................................................................................... 128
PARLIAMENTARY TERMS .......................................................................................................................... 131
ANTI-DEFECTION LAW ................................................................................................................................ 138
Provisions of the Act ............................................................................................................................................. 138
Disqualification .................................................................................................................................................... 138
THE SUPREME COURT OF INDIA ........................................................................................................... 148
The Appointment Of Judges ................................................................................................................................. 148
Qualification of Judges ......................................................................................................................................... 149
Tenure ................................................................................................................................................................... 149
Removal................................................................................................................................................................. 149
Salary of the Judges .............................................................................................................................................. 149
Prohibition of Practice after Retirement .............................................................................................................. 150
The seat of the supreme court ................................................................................................................................ 150
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Supreme court: a court of record ........................................................................................................................... 150
Jurisdiction and powers of the supreme court....................................................................................................... 151
Original Jurisdiction ............................................................................................................................................. 151
Appellate Jurisdiction ........................................................................................................................................... 152
Advisory Jurisdiction ............................................................................................................................................. 153
Writ Jurisdiction ................................................................................................................................................... 153
Supreme Court And Judicial Review ................................................................................................................... 154
Judicial Review of the Constitutional Amendments ............................................................................................ 155
Judicial Review of Legislative Enactments and Ordinances .............................................................................. 155
HIGH COURT ..................................................................................................................................................... 157
Organisation Of High Court ................................................................................................................................ 157
Appointment of Judges .......................................................................................................................................... 157
Qualifications of Judges ........................................................................................................................................ 158
Oath or Affirmation ............................................................................................................................................. 158
Tenure of Judges .................................................................................................................................................... 158
Removal of Judges ................................................................................................................................................. 158
Salaries and Allowances ....................................................................................................................................... 159
Transfer of Judges ................................................................................................................................................. 159
Acting Chief Justice ............................................................................................................................................... 159
Additional and Acting Judges .............................................................................................................................. 160
Retired Judges ....................................................................................................................................................... 160
Independence of High court .................................................................................................................................. 160
Jurisdiction and Powers of high court .................................................................................................................. 161
Control over Subordinate Courts .......................................................................................................................... 164
A Court of Record ................................................................................................................................................. 164
Power of Judicial Review ..................................................................................................................................... 165
GOVERNMENT ACCOUNTS ....................................................................................................................... 167
Structure of accounts and flow of funds ............................................................................................................... 167
Consolidated fund of india ................................................................................................................................... 167
Contingency fund of india .................................................................................................................................... 168
Public account ....................................................................................................................................................... 168
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COMPTROLLER AND AUDITOR GENERAL OF INDIA ................................................................ 169
Audit Jurisdiction ................................................................................................................................................. 169
Nature of Audit ..................................................................................................................................................... 169
ELECTION COMMISSION ............................................................................................................................ 171
Composition........................................................................................................................................................... 171
Independence ......................................................................................................................................................... 172
Powers and functions ............................................................................................................................................ 172
UNION PUBLIC SERVICE COMMISSION.............................................................................................. 174
Historical background .......................................................................................................................................... 174
Provisions for independent working of the upsc ................................................................................................... 174
Composition........................................................................................................................................................... 175
Functions ............................................................................................................................................................... 175
ATTORNEY GENERAL AND SOLICITOR GENERAL OF INDIA ............................................... 177
Appointment and term .......................................................................................................................................... 177
Duties and functions ............................................................................................................................................. 177
Rights and limitations .......................................................................................................................................... 177
SOLICITOR GENERAL OF INDIA ............................................................................................................. 179
CENTRAL INFORMATION COMMISSION .......................................................................................... 180
Composition........................................................................................................................................................... 180
Tenure and service conditions ............................................................................................................................... 180
Powers and functions ............................................................................................................................................ 181
CENTRAL VIGILANCE COMMISSION .................................................................................................. 182
Composition........................................................................................................................................................... 182
Functions ............................................................................................................................................................... 182
Jurisdiction ............................................................................................................................................................ 183
Constitutional Protection to Civil Servants ......................................................................................................... 183
Constitutional Safeguards .................................................................................................................................... 184
ADMINISTRATIVE REFORMS IN INDIA .............................................................................................. 185
Reports on Indian Administration, 1946-1997.................................................................................................. 185
Indian Institute of Public Administration (IIPA) .............................................................................................. 186
Administrative Reforms Commission (1966-1970) ............................................................................................ 186
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FIFTH PAY COMMISSION AND ADMINISTRATIVE REFORMS ....................................................... 187
Second Administrative Reforms Commission (2005) ......................................................................................... 188
NATIONAL COMMISSION FOR SCs ................................................................................................... 190
Evolution of the commission ................................................................................................................................. 190
Functions of the commission ................................................................................................................................. 190
Report of the commission ...................................................................................................................................... 191
Powers of the commission ..................................................................................................................................... 191
NATIONAL COMMISSION FOR STs ................................................................................................... 192
Functions of the commission ................................................................................................................................. 192
Report of the commission ...................................................................................................................................... 192
Powers of the commission ..................................................................................................................................... 193
National Human Rights Commission ............................................................................................................. 194
Preamble To The Universal Declaration Of Human Rights, 1948 .................................................................. 194
Constitution of National Human Rights Commission........................................................................................ 194
Removal of a Member of the Commission ........................................................................................................... 195
Term of Office of Members ................................................................................................................................... 195
Officers and Staff of the Commission .................................................................................................................. 195
Functions and Powers of the Commission ........................................................................................................... 195
Powers Relating to Enquiries ............................................................................................................................... 196
STATE ADMINISTRATION ......................................................................................................................... 198
THE GOVERNOR ............................................................................................................................................. 198
Appointment of the Governor ............................................................................................................................... 198
Selection of Type of Persons as Governor ............................................................................................................. 198
Term ...................................................................................................................................................................... 199
Transfer of the Governor....................................................................................................................................... 199
Emoluments........................................................................................................................................................... 199
Immunities ............................................................................................................................................................ 199
Power of the Governor .......................................................................................................................................... 200
Position of the Governor ....................................................................................................................................... 202
Position of the Governor After 1967 ................................................................................................................... 204
THE CHIEF MINISTER................................................................................................................................... 206
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Appointment of the Chief Minister....................................................................................................................... 206
Powers and Functions .......................................................................................................................................... 206
Allocation of Portfolios ......................................................................................................................................... 206
COUNCIL OF MINISTERS ............................................................................................................................. 208
Chief Secretary ...................................................................................................................................................... 209
EXECUTIVE DEPARTMENTS/DIRECTORATES ................................................................................... 211
ADVOCATE GENERAL OF THE STATE ............................................................................................... 213
Appointment and term .......................................................................................................................................... 213
Duties and functions ............................................................................................................................................. 213
CENTRE-STATE RELATIONS ..................................................................................................................... 214
Legislative relations ......................................................................................................................................... 214
Administrative relations ................................................................................................................................. 216
Financial relations ............................................................................................................................................ 219
STATE INFORMATION COMMISSION ................................................................................................. 221
Composition ...................................................................................................................................................... 221
Tenure and service conditions ...................................................................................................................... 221
Powers and functions ...................................................................................................................................... 222
STATE PUBLIC SERVICE COMMISSION .............................................................................................. 223
Composition........................................................................................................................................................... 223
Removal................................................................................................................................................................. 223
Independence ......................................................................................................................................................... 224
Functions ............................................................................................................................................................... 224
Joint state public service commission .................................................................................................................... 225
SPECIAL STATUS OF JAMMU & KASHMIR ......................................................................................... 227
Features Of J&K Constitution............................................................................................................................. 227
Panchayati Raj ....................................................................................................................................................... 229
The Concept Of Panchayati Raj .................................................................................................................. 229
G.V.K. Rao Committee (1985) ................................................................................................................. 230
L.M.Singhvi Committee (1986) ................................................................................................................ 230
THE CONSTITUTION (SEVENTY-THIRD AMENDMENT) ACT, 1992 ................................ 230
Urban Local Government ................................................................................................................................... 238
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The Constitution (74th Amendment) Act, 1992 ...................................................................................... 238
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Table of Contents RIGHT TO INFORMATION ACT 2005 ........................................................................................................................ 2
Overview of the RTI Act 2005 ........................................................................................................................................ 2
How the RTI Act has Helped: Success Stories ................................................................................................................ 6
Issues in Implementation of the RTI Act 2005 .............................................................................................................. 7
Large Pendency of Cases before Information Commissions ....................................................................................... 7
Who is Eligible to Seek Information? ............................................................................................................................. 9
Rights Conferred on Citizens under the Act .................................................................................................................... 9
Process for Making a Request for Information and Appeal ......................................................................................... 10
Obligations of Public Authorities under the Act............................................................................................................ 12
Maintenance of Records ................................................................................................................................................. 13
Procedure to be followed by PIO for Disposal of Request for Information .................................................................. 14
Fee for Seeking Information........................................................................................................................................... 14
Time Limit for Supply of Information .......................................................................................................................... 17
Table summarizes the time limit for disposal of applications in different situations: ................................................. 17
Third Party Information................................................................................................................................................ 18
CYBER LAWS IN INDIA ............................................................................................................................................... 19
Governing Laws ............................................................................................................................................................. 19
Scope and applicability .................................................................................................................................................. 19
The major acts, which got amended after enactment of ITA ....................................................................................... 20
CONSUMER PROTECTION AND NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION ... 22
CONFONET Project ..................................................................................................................................................... 23
Consumer Rights............................................................................................................................................................. 23
Department of Consumer Affairs ................................................................................................................................... 24
Bureau of Indian Standards.......................................................................................................................................... 24
BIS Hallmark ................................................................................................................................................................ 25
ISI Mark ........................................................................................................................................................................ 25
EXPORTS AND IMPORT LAWS ................................................................................................................................. 26
COMPETITION PROTECTION LAWS ....................................................................................................................... 31
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mintooTypewritten text
mintooTypewritten textBASIC LAWS IN INDIA
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Table of Contents WHAT IS ECONOMICS .................................................................................................................................................................................... 9
Economic Systems ................................................................................................................................................................................................ 10
Microeconomics and Macroeconomics .......................................................................................................................................................... 10
Positive and Normative Economics ................................................................................................................................................................ 11
Normative economics .......................................................................................................................................................................................... 11
Supply and Demand ............................................................................................................................................................................................ 11
Perfect Competition ............................................................................................................................................................................................. 13
Monopoly ................................................................................................................................................................................................................ 13
The Sources of Monopoly .................................................................................................................................................................................. 14
The Concept of Imperfect Competition ........................................................................................................................................................ 14
Monopolistic Competition ................................................................................................................................................................................. 14
Non price Competition ....................................................................................................................................................................................... 14
Oligopoly ................................................................................................................................................................................................................. 15
Income Inequality ................................................................................................................................................................................................ 15
Why do wages differ? ........................................................................................................................................................................................... 15
Measuring Income Inequality ........................................................................................................................................................................... 16
The Lorenz Curve ................................................................................................................................................................................................ 16
What is Free Trade .............................................................................................................................................................................................. 18
Freer Trade and World Trade Organization ............................................................................................................................................... 18
The Working of WTO ........................................................................................................................................................................................ 21
Implementation Issues and the Future........................................................................................................................................................... 22
Customs Duties ..................................................................................................................................................................................................... 23
Subsidies.................................................................................................................................................................................................................. 23
Domestic support: the boxes ............................................................................................................................................................................. 23
Market Access ........................................................................................................................................................................................................ 24
Export subsidies .................................................................................................................................................................................................... 24
Criticism .................................................................................................................................................................................................................. 24
Mechanisms for developing countries ............................................................................................................................................................ 25
Special Safeguard Mechanism .......................................................................................................................................................................... 25
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Ministerial conferences ....................................................................................................................................................................................... 25
Doha Round ........................................................................................................................................................................................................... 25
PRODUCTION, INCOME, AND EMPLOYMENT ............................................................................................................................... 27
GDP .......................................................................................................................................................................................................................... 28
The Expenditure Approach to GDP ............................................................................................................................................................... 28
Other Approaches To GDP ............................................................................................................................................................................... 29
The Value-Added Approach ............................................................................................................................................................................. 29
The Factor Payments Approach ...................................................................................................................................................................... 29
Measuring GDP: A Summary ........................................................................................................................................................................... 30
Real versus Nominal GDP ................................................................................................................................................................................. 30
Purchasing Power Parity .................................................................................................................................................................................... 31
EMPLOYMENT AND UNEMPLOYMENT ............................................................................................................................................. 31
Types of Unemployment .................................................................................................................................................................................... 32
THE BUSINESS CYCLE .................................................................................................................................................................................. 34
INJECTIONS AND LEAKAGES .................................................................................................................................................................. 35
ANATOMY OF INFLATION ........................................................................................................................................................................ 36
What is inflation? .................................................................................................................................................................................................. 36
Laspeyres Price Index :An Easy Formula to Calculate Price Level ....................................................................................................... 37
WHY DOES INFLATION OCCUR? ............................................................................................................................................................ 37
Supply Shock/Cost-Push Inflation ................................................................................................................................................................... 38
Demand-Pull Inflation ........................................................................................................................................................................................ 38
German Hyperinflation: Too Much Money Chasing Too Few Goods! ................................................................................................ 40
Why worry about inflation? ............................................................................................................................................................................... 40
Getting the Inflation Rate Right ...................................................................................................................................................................... 42
Consumer Price Indices (CPIs) ........................................................................................................................................................................ 42
Headline Inflation ................................................................................................................................................................................................ 43
Core Inflation ........................................................................................................................................................................................................ 43
Policies For Controlling Inflation .................................................................................................................................................................... 44
FISCAL POLICY ................................................................................................................................................................................................. 54
Classical Economics ............................................................................................................................................................................................. 54
Keynesian Economics .......................................................................................................................................................................................... 54
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Expansionary Fiscal Policy ................................................................................................................................................................................ 54
Increased Government Spending .................................................................................................................................................................... 54
Contractionary Fiscal Policy ............................................................................................................................................................................. 55
The Effects of Government Spending ............................................................................................................................................................ 55
Built-In Stabilizers ................................................................................................................................................................................................ 56
Difference between revenue and capital flows ............................................................................................................................................. 56
Indias fiscal policy architecture ....................................................................................................................................................................... 56
MONETARY POLICY ...................................................................................................................................................................................... 58
The Three Functions of Money ....................................................................................................................................................................... 58
The Money Supply ............................................................................................................................................................................................... 59
BUDGET, DEFICITS, AND TAXATION ................................................................................................................................................. 61
Origin of the Budget ............................................................................................................................................................................................ 61
What is the size of the budget? ......................................................................................................................................................................... 62
EXPENDITURE, REVENUE, & DEFICIT ................................................................................................................................................ 62
Types of Expenditure and Revenue ................................................................................................................................................................ 62
Types of Deficit ..................................................................................................................................................................................................... 63
Size and Composition of Deficits ..................................................................................................................................................................... 64
PRINCIPLES OF TAXATION ...................................................................................................................................................................... 67
Types of Taxes ...................................................................................................................................................................................................... 67
Composition of Taxes ......................................................................................................................................................................................... 68
Goods and Services Tax ..................................................................................................................................................................................... 69
RESERVE BANK OF INDIA .......................................................................................................................................................................... 70
Functions of RBI ................................................................................................................................................................................................... 71
Organisation .......................................................................................................................................................................................................... 71
Monetary Management ...................................................................................................................................................................................... 73
Monetary Policy in India .................................................................................................................................................................................... 73
Monetary Policy Framework ............................................................................................................................................................................. 74
Institutional Mechanism for Monetary Policy-making .............................................................................................................................. 75
Issuer of Currency ................................................................................................................................................................................................ 76
Currency Management ....................................................................................................................................................................................... 77
Currency Distribution ......................................................................................................................................................................................... 77
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Coin Distribution.................................................................................................................................................................................................. 78
Special Type of Notes .......................................................................................................................................................................................... 78
Exchange of Notes ................................................................................................................................................................................................ 78
Combating Counterfeiting ................................................................................................................................................................................. 79
Banker and Debt Management to Government .......................................................................................................................................... 79
Banker to the central Government .................................................................................................................................................................. 79
Banker to the State Government ...................................................................................................................................................................... 80
Management of Public Debt ............................................................................................................................................................................. 80
Banker to Banks .................................................................................................................................................................................................... 80
Reserve Bank as Banker to Banks .................................................................................................................................................................... 81
Lender of Last Resort .......................................................................................................................................................................................... 81
Financial Regulation and Supervision ........................................................................................................................................................... 82
Regulatory and Supervisory Functions .......................................................................................................................................................... 82
Foreign Exchange Reserves Management .................................................................................................................................................... 91
Deployment of Reserves ..................................................................................................................................................................................... 92
Foreign Exchange Management ...................................................................................................................................................................... 92
Evolution ................................................................................................................................................................................................................. 92
Liberalised Approach .......................................................................................................................................................................................... 93
Exchange Rate Policy .......................................................................................................................................................................................... 94
Market Operations ............................................................................................................................................................................................... 95
Monetary Operations .......................................................................................................................................................................................... 95
Domestic Foreign Exchange Market Operations ........................................................................................................................................ 96
Money Market ....................................................................................................................................................................................................... 96
Payment and Settlement Systems .................................................................................................................................................................... 97
Developmental Role............................................................................................................................................................................................. 98
Rural credit ............................................................................................................................................................................................................ 98
Micro, Small and Medium Enterprises Development ............................................................................................................................. 101
Export Credit ....................................................................................................................................................................................................... 102
Financial Inclusion ............................................................................................................................................................................................. 102
Customer Service ................................................................................................................................................................................................ 103
THE FINANCIAL SYSTEM ......................................................................................................................................................................... 105
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Financial intermediation and the flow of funds......................................................................................................................................... 105
Lenders and borrowers ..................................................................................................................................................................................... 105
Financial intermediaries ................................................................................................................................................................................... 106
Financial instruments ........................................................................................................................................................................................ 106
Financial markets ............................................................................................................................................................................................... 106
Cash and derivatives markets ......................................................................................................................................................................... 107
Spot and forward markets ................................................................................................................................................................................ 108
Primary and secondary markets ..................................................................................................................................................................... 108
Exchanges and over-the-counter markets .................................................................................................................................................... 108
Major stock exchanges (top 21 by market capitalization), as at 31 December 2012 ....................................................................... 108
International Stock Indexes ............................................................................................................................................................................ 110
Functions of the financial system ................................................................................................................................................................... 113
THE FOREIGN EXCHANGE MARKET ................................................................................................................................................ 115
The market defined ........................................................................................................................................................................................... 115
Characteristics ..................................................................................................................................................................................................... 116
Instruments .......................................................................................................................................................................................................... 116
Exchange rates .................................................................................................................................................................................................... 116
Swaps ...................................................................................................................................................................................................................... 117
Futures contracts ................................................................................................................................................................................................ 117
Options .................................................................................................................................................................................................................. 117
Participants ........................................................................................................................................................................................................... 118
Commercial banks ............................................................................................................................................................................................. 118
Non-bank financial institutions ...................................................................................................................................................................... 118
Firms and corporations ..................................................................................................................................................................................... 118
Central banks ....................................................................................................................................................................................................... 118
THE MONEY MARKET ................................................................................................................................................................................ 119
Definition ............................................................................................................................................................................................................. 119
Everything You Need to know about Money Market .............................................................................................................................. 119
THE EQUITY MARKET ............................................................................................................................................................................... 139
Characteristics ..................................................................................................................................................................................................... 139
Instruments .......................................................................................................................................................................................................... 140
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Ordinary shares ................................................................................................................................................................................................... 140
Preference shares ................................................................................................................................................................................................ 140
Depository receipts ............................................................................................................................................................................................. 141
Exchange traded funds ..................................................................................................................................................................................... 141
ETFs in India ....................................................................................................................................................................................................... 142
Schemes ................................................................................................................................................................................................................. 142
Asset Size .............................................................................................................................................................................................................. 142
Investment banks ................................................................................................................................................................................................ 143
Venture capitalists .............................................................................................................................................................................................. 143
Market cap of Top Indian Companies ......................................................................................................................................................... 144
Financial Times Global 500 ............................................................................................................................................................................ 144
Fortune Global 500 ............................................................................................................................................................................................ 145
Fortune 2013 list ................................................................................................................................................................................................. 145
Indian Companies in Fortune 500 ............................................................................................................................................................