MP Psc English Medium

08/05/2017

MPTRIFAC (MP Trade and Investment Facilitation Corporation) is acting as the Single Window Secretariat for Investment promotion and facilitation in the state since 2004. MP TRIFAC has developed an ICT (Information & Communication Technology) enabled single window system, which allows the investor to apply online for various approvals required to setup a business in the state.

Benefits to Investor
Provides one stop solution to facilitate investor in the state through the web portal
Less physical interaction with various departments
Allowing online submission of applications
24*7 access to information and services
Status update through SMS & E-mails
Helpdesk support
Simplified application process

Subsidary of MPTRIFAC- MPAKVN Bhopal

MP AUDYOGIK KENDRA VIKAS NIGAM, BHOPAL (Subsidiary of MPTRIFAC Ltd.) Was incorporated on 16.October.1987 under the Indian Companies Act 1956. The Nigam has been entrusted the responsibility of Industrial promotion through development of Industrial Growth Centers in selected areas of its jurisdiction in the State of Madhya Pradesh. Authorized Share Capital of the Corporation is Rs. 700.00 lakhs and Issued, subscribed & paid-up capital of the corporation is Rs. 285.01 Lakhs.

Corporation Has Following Developed Growth Centers/ Food Parks:-

1. Growth Centre - Mandideep Phase-I, Mandideep-Phase- II, Distt. Raisen
2. Growth Centre - Pillukhedi , Distt. Rajgarh
3. Food Park - Babai Distt. Hoshangabad.
4. Food Park - Piparia Distt. Hoshangabad.
5. Special Education Zone - Acharpura, Distt. Bhopal.
6. Industrial Area MSME - Acharpura, Distt. Bhopal.
7. Industrial Area - Bagroda Distt. Bhopal.
8. Industrial Area - Jambar Bagri, Distt. Vidisha.

OTHER ON-GOING PROJECTS:-
1. Industrial Aarea, Mohasa/ Babai, Distt. Hoshangabad,
2. Industrial Area, Kiratpur, Distt. Hoshangabad,
3. New Plastic Park at Tamot Distt. Raisen,

Source of Income of Corporation:-
1. Premium from allotted land for Industrial Units under growth centre
2. Development Charges. Maintenance Charges
3. Water supply charges from units
4. Fund sanctioned from Govt. of India/ State Govt.
5. Deposit/Aside works allotted by Government

Corporation has Six Site offices in each growth centre
1. Growth Centre – Mandideep
2. Growth Centre - Pillukhedi
3. Industrial Area – Bagroda
4. Industrial Area – Acharpura
5. Industrial Area – Jambar Bagri
6. Food Park - Pipariya

01/05/2017

The National Green Tribunal’s historic order banning 10-year-old diesel vehicles in Delhi- NCR “is challenged by government, the government has said
the order of the tribunal goes far beyond the provisions of the law as the order is given without being subject to any examination,” the Ministry of Heavy Industries told a bench headed by NGT Chairperson Justice Swatanter Kumar.

In written submissions, it said “powers to fix the age of the vehicle is with the Central Government only, which has to be notified through a Gazette. Hence, the order of the NGT would be in violation of the Motor Vehicle Act.

“The MV Act mentions that the registering authority should satisfy that the vehicle will constitute a danger to the public and it is beyond reasonable repair.”

The Ministry also said the NGT has “incorrectly” noted that the vehicle density in Delhi NCR was very high as the region was a wide geographical area covering Delhi and parts of Haryana, Rajasthan and Uttar Pradesh.

Opposing the ban on decade-old diesel vehicles, the Ministry has told the tribunal that
diesel was not the only polluting fuel as they have higher fuel efficiency which led to 10-15 per cent lower carbon dioxide emission compared to a petrol vehicle.

Delhi government’s odd-even road rationing scheme and said that Central Pollution Control Board has unequivocally established that pollution levels did not come down due to reduction in vehicles.

Points
NCR
Fuel Efficiency
NGT
Motor Vehicle Act

The National Capital Region (NCR) is a coordinated planning region centred upon the National Capital Territory of Delhi in India. It encompasses the entire NCT of Delhi and several districts surrounding it from the states of Haryana, Uttar Pradesh and Rajasthan.

The NCR and the associated National Capital Region Planning Board were created in 1985 to plan the development of the region and to evolve harmonized policies for the

control of land-uses and development of infrastructure in the region

The National Capital Region (NCR) and its planning board were created under the National Capital Region Planning Board Act of 1985.

On 9 June 2015 the Government of India approved the inclusion of three more districts in NCR - Jind and Karnal in the state of Haryana and Muzaffarnagar in U.P. There are now a total of 22 districts (outside Delhi NCT) within NCR, covering a total area of 50,566 km2

The 1985 Act gives the NCRCB has the ability to select districts outside of the NCR to act as counter magnets, with a view to developing them further.

Counter-magnet cities are identified as those that can be developed as alternative centres of growth and attract migrants to them rather than Delhi.
The criteria for selecting counter magnet towns are: that they should have their own established roots and potential of growth and should not be centres of either religious, strategic or environmental importance

Fuel efficiency is a form of thermal efficiency, meaning the efficiency of a process that converts chemical potential energy contained in a carrier fuel into kinetic energy or work.

In the context of transport, fuel economy is the energy efficiency of a particular vehicle, given as a ratio of distance traveled per unit of fuel consumed.

• Fuel consumption is the amount of fuel used per unit distance; for example, litres per 100 kilometres (L/100 km).
• Fuel economy is the distance travelled per unit volume of fuel used; for example, kilometres per litre (km/L)

Diesel engines generally achieve greater fuel efficiency than petrol (gasoline) engines. Passenger car diesel engines have energy efficiency of up to 41% but more typically 30%, and petrol engines of up to 37.3%, but more typically 20%.

NGT

National Green Tribunal Act, 2010 (NGT) is an Act of the Parliament of India which enables creation of a special tribunal to handle the expeditious disposal of the cases pertaining to environmental issues. It draws inspiration from the India's constitutional provision of Article 21, which assures the citizens of India the right to a healthy environment.

On 18 October 2010, Justice Lokeshwar Singh Panta became its first Chairman. Currently it is chaired by Justice Swatanter Kumar since 20 Dec 2012.

The Tribunal's dedicated jurisdiction in environmental matters shall provide speedy environmental justice and help reduce the burden of litigation in the higher courts.
The Tribunal shall not be bound by the procedure laid down under the Code of Civil Procedure, 1908, but shall be guided by principles of natural justice.

The tribunal is mandated to make and endeavour for disposal of applications or appeals finally within 6 months of filing of the same.

Initially, the NGT is proposed to be set up at five places of sittings and will follow circuit procedure for making itself more accessible; New Delhi is the Principal Place of Sitting of the Tribunal and Bhopal, Pune, Kolkata and Chennai shall be the other 4 place of sitting of the Tribunal

The MoEF has in a short affidavit filed in response to an application on climate change said, “The issue of climate change is the subject of international conventions and protocols and does not lie in the ambit of Section 14 of the National Green Tribunal Act.”

Section 14 of the NGT Act deals with the jurisdiction and powers of the Tribunal to settle disputes. It grants the Tribunal the jurisdiction over all civil cases where a substantial question relating to environment is involved. Such questions arise out of implementation of enactments specified in Schedule 1 of the Act.

The seven enactments specified in Schedule 1 to the NGT Act are – The Water Act, The Water Cess Act, The Forest (Conservation) Act, The Air (Preventon and Control of Pollution Act) and The Environment Protection Act.
It also lists The Public Liability Insurance Act and The Biological Diversity Act.

30/04/2017

Twin balance sheet problem refers to the burden of over leveraged companies and bad loans of banks.

Generally, Leverage of a company is inversely proportional to economic growth and so GDP growth should mean that our company should be under leveraged & this in turn means NPAs
of banks should be less.
This is the Indian paradox: GDP is increasing, companies are over leveraged and NPA of banks are jumping.

What needs to be done?

RBI’s efforts
1. Rescheduling of loans to give more time to stressed companies. Under 5/25 Refinancing of Infrastructure Scheme, lenders were allowed to extend amortization period to 25 years with interest rate adjusted every 5 years
2. Encouraged the establishment of ARCs under SARFESI ACT 2002. However, this step was not successful as ARC’s brought only 5% of total NPA’s of book value over 2014-2015 and 2015-2016.

SDR (Strategic Debt Restructuring) was introduced in June 2015 under which creditors could take over firms that were unable to pay and sell them to new owners.

S4A (Sustainable Structuring of Stressed Assets) was announced in 2016, under which creditors could provide firms with debt reductions up to 50% in order to restore their financial viability. However result is not encouraging by the end of Dec 2016.only 2 dozens companies entered into negotiations under SDR & only 1 under S4A.

RBI encouraged creditors to form forum, where decision can be taken by 75% of creditors by value and 60% by number. But reaching agreement is difficult as different banks have different degree of credit exposure, incentives etc. E.g. a bank
with large exposure will be ready to bear large losses


RBI emphasized ARQ (Asset Quality Review) to verify that banks were advancing loans in line with RBI’s loan classification rules.

Government’s effort: Under Indradhanush scheme government promised to infuse rupees 70,000 Cr. of capital into the Public
Sector banks by 2018-2019. But this is far from sufficient.

30/04/2017

Lokayuykt in M.P.

The Lokayuykt Organization in Madhya Pradesh came into existence in Feb.1982 after the Madhya Pradesh Lokayuykt and Up-Lokayukt Act, 1981(hereinafter called the Act) was enacted by the State Legislature.

Attempt to establish an independent Organization on the lines of "Ombudsman" started way back in mid 70’s after the State Administrative Reforms Commission recommended that the State Vigilance Commission, which was then functioning as an instrument to prevent/check corruption should be replaced by an organization with statutory base and powers.

In view of the above observations of the ARC and on the basis of various recommendations received from the Government of India, a bill was moved in the M.P. Legislative Assembly in the year 1975 which was sent for President’s assent after its passage by the Assembly. But due to certain rethinking at the level of the Union Government the bill was returned to the State Government for reconsideration and the same was passed in April 1981 with certain modifications.

The bill so passed became the Act after it received the Presidential assent in September 1981. The Lokayukt Organization constituted under the Act replaced the Vigilance Commission. Having received the statutory base the Lokayukt Organization is totally free from the executive influence.

AGAINST WHOM A COMPLAINT CAN BE MADE ?

A complaint can be made against any public servant defined in Section 2 (g) of the Lokayukt Evam Up-Lokayukt Adhiniyam, 1981. According to this sub-section the following functionaries have been defined as public servant:-

Section 2(e) Chief Minister, Deputy Chief Minister, Minister, Minister of State, Deputy Minister, Parliamentary Secretary and shall include Neta Pratipaksha.

Sec. 2(g) "Public servant"

WHAT IS AN ALLEGATION ?

A complaint can be made against any public servant with regard to an allegation which is defined in Sub-section (b) of Section 2 of Madhya Pradesh Lokayukt Act, 1981. The definition of allegation is re-produced below:-

"allegation" in relation to a public servant means any affirmation that such public servant,

(i)has abused his position as such to obtain any gain or favour to himself or to any other person or to cause undue harm to any person;

(ii)was actuated in the discharge of his functions as such public servant by improper or corrupt motives;

(iii)is guilty of corruption; or

(iv)is in possession of pecuniary resources or property disproportionate to his known source of income and such pecuniary resources or property is held by the public servant personally or by any member of his family or by some other person on his behalf

To assist the Lokayukt and the Up-Lokayukt the organization is divided into four functional wings, which are as under:-

1. Administrative And Enquiry Section:

2. Legal Section:

3. Special Police Establishment (SPE):

It is constituted under a special Act called "The Madhya Pradesh Special Police Establishment Act 1947", for the investigation of certain offences affecting the public administration and those falling under provisions of prevention of corruption Act which is a Central Act.

The SPE is headed by Director General who is in the rank of Director General or Additional Director General of Police Madhya Pradesh. He is assisted by one IGP, two DIG’s, 8 SP’s, 26 DSP’s, 41 Inspectors and 162 men of the other ranks. The superintendence of investigation by M.P. Special Police Establishment (SPE) vests with the Lokayukt. There are 7 divisional offices of the SPE, which are located at divisional headquarters of revenue divisions.

4. Technical Cell:

The organization also has a Technical Cell which deals with the enquires of technical nature. This wing is headed by Chief Engineer, under whom there are three Executive Engineers, one each from Water Resources, Public Works and Public Health Engineering Department.

District Vigilance Committees:

The Act provides for constitution of Vigilance Committees at Divisional level. Each Committee consist of three members out of whom one is retired Judicial Officer not below the rank of a Civil Judge, Class-1 or a retired Executive Officer having experience of Courts working not below the rank of a Class-I Officer of the State Government.
Seven Divisional Committees have been constituted. The Committees enquire into the complaints referred to them by the Lokayukt or the Up-Lokayukt and submit a report to the Lokayukt or the Up-Lokayukt as the case may be.

28/04/2017

Visa policy of India

Citizens of the following countries do not require visas or passports to enter India (unless arriving from mainland China), and may remain in the country without any limit of stay. Citizens of these countries may also live and work freely in India

BHUTAN and NEPAL

Citizens of the following countries do not require visas to enter India (unless arriving from mainland China)

Maldives

Citizens of the following countries can apply for a visa on arrival (VOA) in Bengaluru, Chennai, Delhi, Hyderabad, Kolkata or Mumbai. The visa is issued for business, tourist, medical and conference categories, and has a validity of 30 days

Japan

Foreign citizens possessing an Overseas Citizen of India registration certificate are exempt from visa requirements, and have the right of domicile in India. Citizens of Afghanistan, Bangladesh, Bhutan, mainland China, Nepal, Pakistan, or Sri Lanka are generally not entitled to hold Overseas Indian Citizenship.

e-Visa

e-Visa has 3 sub-categories i.e., e-Tourist visa, e-Business Visa and e-Medical visa. A foreigner will be permitted to club these categories.
Applicants of the eligible countries/territories may apply online minimum 4 days in advance of the date of arrival with a window of 120 days. Example: If you are applying on 1st Sept then applicant can select arrival date from 5th Sept to 2nd Jane-Visa
Applicant should carry a copy of Electronic Travel Authorization (ETA) along with him/her at the time of travel.
The validity of e-Visa will be 60 days from the date of arrival in India.Double entry is permitted on e-Tourist Visa and e-Business Visa. Triple entry will be permitted on e-Medical Visa.
e-Visa is valid for entry through 24 designated Airports and 3 designated seaports (i.e. Cochin, Goa, Mangalore). However, the foreigner can take exit from any of the authorized Immigration Check Posts (ICPs) in India.e-Visa can be availed for maximum of two times in a calendar year i.e. between January to December.

Eligibility

International Travellers whose sole objective of visiting India is recreation , sight seeing , casual visit to meet friends or relatives, short duration medical treatment or casual business visit.

Passport should have at least six months validity from the date of arrival in India. The passport should have at least two blank pages for stamping by the Immigration Officer.

International Travellers should have return ticket or onward journey ticket,with sufficient money to spend during his/her stay in India.

International Travellers having Pakistani Passport or Pakistani origin may please apply for regular Visa at Indian Mission.
Not available to Diplomatic/Official Passport Holders or Laissez-passer travel document holders.

Not available to individuals endorsed on Parent's/Spouse's Passport i.e. each individual should have a separate passport.
Not available to International Travel Document Holder

Visa on Arrival for Pak nationals

Eligibility:

Visa-on-Arrival for a maximum of two times in a calendar year for single entry, 45 days’ stay, maximum upto 5 places can be issued at Attari Immigration Point to a Pakistani national who is more than 65 years old and is crossing Attari on foot and :

whose sole objective of visiting India is to meet friends or relatives (individuals who want to avail business, medical, conference or pilgrim Visa have to apply to the respective Mission/Post for the requisite Visa)

28/04/2017

Visa policy in News

USA
L1 and H1B Visas are highly sought after by employers who want to recruit the talent of skilled individuals overseas
On an L1 visa, the maximum length an individual is allowed to stay is 7 years (5 years as an L-1B professional). An H1B visa holder may remain in the county for a total of six years but there exists the opportunity to file for a 3-year extension.

Below is the breakdown for L1A, L1B, and H1B visas:

L1A—Seven Years

L1B—Five Years

H1B—Six Years

L1 Visa is an Intra-Company Transferee Visa.
It is a non-immigrant visa
The purpose of L1 visa is to allow large multinationals - with operations across various countries - to shift employees in specialized positions on a temporary basis to the United States

Workers who can be transferred to the United States can be categorised into two specific types of visas - L1A and L1B. Managers and executives come under the category of L1As while L1Bs encompass workers with specialized knowledge.

In L1A Visa is provided to top executives
In L1B Visa is provided to non executives

One of the biggest advantages of L1 Visa is that there there is no cap on L1s which have to be approved every year.

H1-B Visa is a multiple entry non-immigrant visa which allows foreign workers employed by US companies to work in the United States. The H1-B visa is a non-immigrant visa given by the United States to employ skilled workers from other countries for various specialised fields of occupation for a certain period of time.
There is a general quota for a year (65,000). Also, there is an additional quota of 20,000 for individuals with a masters degree.

H1-B visa programme Bill? Protect and Grow American Jobs Act
The proposed legislation is also called the ‘Issa’ Bill as “the bipartisan legislation” was introduced by U.S. Congressman Darrell Issa, aiming to “stop the outsourcing of American jobs by companies abusing the H1-B visa program.”

Features

prohibits companies from hiring H1-B employees if they employ more than 50 people and more than 50 per cent of their employees are H1-B and L-1 visa holders

It explicitly prohibits replacement of American workers by H1-B or L-1 visa holders.

The Bill seeks to increase the minimum salary of H1-B visa holders to $1,00,000 per annum

eliminate the Masters Degree exemption

India had in March said it had initiated a World Trade Organisation dispute proceeding against the U.S. for increasing fees on H1-B and L-1 non-immigrant visas.

another visa in news 457 visa

The Australian Subclass 457 Work Visa allows Australian and overseas employers to sponsor an immigrant worker to enter Australia for up to 4 years in order to engage in skilled work. The visa holder's family members can also gain entry to Australia, and may work and/or study during their stay.

Once a person enters Australia on a 457 work visa, there is no limit to the number of times he or she can enter and leave the country during the time frame of his or her visa

Australia abolishes 457 visa programme used largely by Indians
Australia on Tuesday abolished a visa programme used by over 95,000 temporary foreign workers, majority of them Indians, to tackle the growing unemployment in the country. The programme will be replaced by another visa programme, with new restrictions.

The programme, known as 457 visa, allows business to employ foreign workers for a period up to four years in skilled jobs where there is a shortage of Australian workers.

27/04/2017

Very Important Topics for MP PSC Mains

On Malnutrition 100% questions expected, Prepare thoroughly the different schemes of Central government and M.P. Govt, Factors responsible and why it is more prevalent in M.P. especially among the tribes Sahariya also prepare the suggestions to prevent it

On Vector Born Disease control short questions and long questons both expected. prepare mainly for Malaria, Dengue, Filariasis, Japanese Encephalitis, Kala Azar and Chikanguniya

On Non vector born Disease Study about Lifestyle disease like Diabetes, Heart attack etc

there may be questions asked regarding Universal Immunization programme and Indradhanush Immunization scheme

Definitions of the following are very important
Natality
Mortality
Emigraion
Imigration
MMR
IMR
S*x Ratio
Population Density
Child
Neonate
Juvenile
Adolescent
ICDS

26/04/2017

25/04/2017

Some important MCQs which may help you in Paper 3 MP PSC Mains

Maternal Mortality Rate is expressed as
1. Number of pregnant women dying per 100 of pregnancies
2. Number of pregnant women dying per 1000 of pregnancies
3. Number of pregnant women dying per 10,000 of pregnancies
4. Number of pregnant women dying per 100,000 of pregnancies

Correct Answer Number of pregnant women dying per 100,000 of pregnancies

The ideal body weight of a full term infant at the time of birth should be
1. 2.2 kg
2. 3.2 kg
3. 4.2 kg
4. 5.2 kg

Correct Answer 3.2 kg

Ideal body weight of an Indian reference man and woman respectively are
1. 70 kg and 60 kg
2. 60 kg and 55 kg
3. 50 kg and 45 kg
4. 45 kg and 40 kg

Correct Answer 60 kg and 55 kg

Pneumonia is usually caused by the infection of
1. Viruses
2. Bacteria
3. Both of the above
4. None of the above

Correct Answer Both of the above

What diseases are regularly tested for even during a normal pregnancy?
1. AIDS
2. Hepatitis B
3. Down's syndrome
4. All of the above

Correct Answer All of the above

Which of the following decreased in human body during Dengue fever?
1. Platelets
2. Hemoglobin
3. RBC
4. Sugar

Correct Answer Platelets

Objective of National Rural Health Mission (NRHM) is to provide
1. To provide quality health care to the rural population
2. To provide affordable health care to the rural population
3. To provide health care Facilities to especially the vulnerable groups
4. All of the above

Correct Answer All of the above

Diarrheal diseases, measles and respiratory and other infections result in
1. Positive protein and Energy balance
2. Negative protein and Energy balance
3. Equal protein and Energy balance
4. None of the above

Correct Answer Negative protein and Energy balance

Tuberculosis (TB) is an infectious disease caused by the bacterium:
1. Mycobacterium tuberculosis
2. Mycobacterium marinum
3. Mycobacterium fortuitum
4. Mycobacterium chelonae

Correct Answer Mycobacterium tuberculosis

Triple Antigen Vaccine” given to the infants for the prevention
1. Polio, Diphtheria and Tetanus
2. Diphtheria, Whooping cough and Tetanus
3. Tetanus, Tuberculosis and Polio
4. Diphtheria, Typhoid and Tetanus

Correct Answer Diphtheria, Whooping cough and Tetanus

Which of these is a misconception about heredity
1. Heredity means that a person will not change
2. It is a waste of effort to try to influence a trait that has a strong heredity component
3. If a trait is inherited, it will have similar effects, who inherit it/
4. All of the above

Correct Answer All of the above

Which of the following human characteristics are determined by genetics?
1. Height
2. Skin colour
3. Personality
4. All the above

Correct Answer All the above

Score IQ of mentally re****ed children
1. 80
2. 90
3. 65
4. 70

Correct Answer 70

ICDS comprises
1. Aganwadi Workers, Helpers and Supervisor
2. Child Development Project Officers (CDPO’s
3. District Programme Officer (DPO’s
4. All of the above

Correct Answer All of the above

Each gram of hemoglobin contains about
1. 6.34 mg of iron
2. 4.25 mg of iron
3. 3.34 mg of iron
4. 2.24 mg of iron

Correct Answer 3.34 mg of iron

A balanced diet should provide around
1. 20-25 percent of total calorie from carbohydrate
2. 40-45 percent of total calorie from carbohydrate
3. 60-70 percent of total calorie from carbohydrate
4. 70-80 percent of total calorie from carbohydrate

Correct Answer 60-70 percent of total calorie from carbohydrate

The period from conception to birth is known as
1. Prenatal period
2. Postnatal period
3. Period of neonate
4. Period of o**m

Correct Answer Prenatal period

‘Juvenile’ means a child below the age of
1. 16 years of age
2. 17 years of age
3. 18 years of age
4. 21 years of age

Correct Answer 18 years of age

How many days in the year State Governments/UTs have been requested to provide supplementary food to the beneficiaries through ICDS scheme?
1. 100 days
2. 200 days
3. 300 days
4. 400 days

Correct Answer 300 days

In which of the following disease Oral rehydration salts (ORS) solution therapy is not used for the treatment
1. Diabetes
2. Dysentery
3. Loose motion
4. Diarrhea

Correct Answer Diabetes

Which of the following statement is incorrect about the tetanus
1. Toxin¬mediated disease caused by Clostridium tetani/
2. Tetanus is transmitted from person to person
3. Clostridium tetani spores are introduced into acute wounds from trauma, surgeries and injections, or chronic skin lesions and infections
4. The incubation period of tetanus is usually between 3 and 21 days

Correct Answer Tetanus is transmitted from person to person

25/04/2017

MP PSC Mains practice questions

1. Explain how ethics contributes to social and human well being.

2. why should impartiality and non-partisanship be considered as foundational values in public services? Illustrate with examples,

3. Discuss Mahatma Gandhi's concepts of several sins

4. What do you understand by the term governance, good governance and ethical governance?

5. How could social influence and persuasion contribute to the success of Swachh Bharat Abhiyan?

6. Anger is harmful negative emotion. It is injurious to both personal life and work life.
a. Discuss how it leads to negative emotions and undesirable behaviours.
b. How can it be managed and controlled?

25/04/2017

In the current year questions must be from demonetisation in all the exams whether its MP PSC MAINS or UPSC Pre. Here are some fodder points which you should include in your answers which is collected from website of Eklavya Jha IAS Coaching Institute Chandigarh

Government took a major initiative to cling the economic system through demonetization. It created huge economic disruption with 85% currency reverting back to the banks. According to government, the 4 major objectives behind this demonetisation is to curb
1. Corruption
2. Counterfeiting
3. Terrorist activities
4. Black money

This article tries to analyse the compulsions which forced
government to withdraw over 80% of the currency from a country that is highly cash dependent.

The facts that motivated demonetization can be summarised under following heads
1. High Currency/ GDP ratio
2. High cash dependent economy
3. Dominance of high denomination currency
4. Mismatch between present PCI and high value currency notes
5. Soil Rate of low denomination currency notes ismuch higher than that of high denomination currency notes.

Dimensions of currency
Before going into the details of real motive behind demonetization, we must try to understand the dimensions of currency.

Cash can be understood in terms of two dimensions:
1. In termsof function, cash can be used as Medium of exchange i.e. transaction, or A store of value
2. In termsof nature, it may be Legal, or Illegal

So, we may find legal or illegal transaction as well legal or illegal store of value Illegal transaction leads to the growth and progress of corruption, counterfeiting and terrorist financing.
Illegal store of value results in the generation of black money.


Now we can analyse government’s compulsion of demonetization one by one.

Currency/ GDP ratio (C/GDP)

First we should know the different cases of C/GDP ratios and then we will try to correlate them with Indian conditions.

Two conditions may occur: one when the ratio increases and second, when the ratio may decline.

Increasing ratio may be either due to increase in currency circulation in the market, or decline in GDP

Decreasing ratio may be either due to decrease in currency circulation in the market, or increase in GDP

However, these two cases may lead to different possibilities under increasing or decreasing C/ GDP. First ratio increase may be when
1. Currency circulation in the market increases with GDP declining or remaining constant. Under this situation high C/ GDP ratio indicates the generation of black money.

2. Currency circulation increaseswith corresponding increase in GDP. Thishas lesser potential for black money generation.

3. GDP decreaseswith money supply either constant or increasing. This also indicates the generation of black money.

Secondly, ratio decrease may be when
1. Currency in the market decreases and GDP either remain constant or increases. This is a difficult condition to assume.

2. GDP increases and currency supply increaseswith lesser intensity. Thishas lesser potential for black money generation.

So, we may conclude that the chances of black money generation arise when there is mismatch between money in circulation and the GDP growth.

Indian scenario and C/GDP Ratio
Just after independence C/GDP Ratio was high at 12%
It declined to 9%in 1967-68 There after the ratio seems to have responded to the growth
It began its upward trend in late 1970swhen growth increased
It further accelerated during growth boom of 2000s
It declined in late 2000s and early 2010s during the period of high inflation
It rebounded to 12%after 2014-15 when inflation declined.

NOTE: With such high C/GDP ratio in India, there is maximum possibility of black money generation.

High cash dependent economy

Indian economy is highly cash dependent economy but it does not reflect in GDP growth. So, we may conclude that some of the cash holding were not used for legitimate transactions but
for other activities like corruption.

According to Transparency International, there is direct relationship between cash in circulation and the level of corruption.

Dominance of high denomination currency

India’s high level of currency circulation is dominated by high denomination currency notes. (over 80%in 500 and 1000 currency notes) High value currency notes are mostly used for store value rather than for transaction.

These stored high value notes are used more for other activities, rather than facilitation of
economic transactions.

Mismatch between present PCI and high value currency notes
High level currency notesdo not match with the current level of PCI.
The higher the note is relative to income, less likely it is to be used purely for transaction purposes.

In India, it is still high, though in the last few decades after 2000s, it has fallen. So, we may say that high denomination note have become increasingly useful for transaction in recent past.

Soil Rate (SR)
Soil rate is the rate at which notes are considered to be too damaged to use and have been returned to the central bank.
In India, SR of low denomination currency notes (SR-HCN) is 33%, while that of 500 notes is 22% and 1000 notes is 11%.

If different currency notes are equally transacted, then there SRs must be the same. Since SRs of high denomination notes (SR-HCN) are less, it indicates towards the generation of non-transacted black money.
However, this assumption need not be correct, as higher denomination notes are less frequently used as compared to low denomination notes and so SR-LCN ishigher than SR-HCN.

Conclusion
A country with such large cash circulation that doesnot translate into economic growth must have other utilities in the form of corruption and black money. So, this condition was the real
hindrance against inclusive growth and social justice, which are the core of our constitutional and political thought.

Therefore, the core objective of demonetisation can be summed up as

1. To curb corruption
2. To limit counterfeiting
3. To restrict terrorist activities
4. To remove black money from the system
5. To encourage inclusive growth
6. To achieve social justice
7. To reduce rural- urban divide
8. To promote sustainable development

Compiled by Eklavya Jha IAS Coaching Institute Chandigarh