On the recommendation of the second working group on money supply, RBI introduced a series of money stock measures in India since 1970 – 71, which are.
M1 – High powered money = monetary base = money with the public + reserves of banks with RBI.
M1 – Money with the public (currency notes and coins) + demand deposits of banks (on current and saving bank accounts) + other demand deposits with RBI.
M2 – M1 + saving bank deposits with the post offices.
M3 – M1 + term deposits with the bank.
M4 – M3 + all deposits of post offices.
M1 – measure represents the most liquid form of money among the four money stock measures adopted by the RBI.
M1 to M4 – liquidity gets reduced (M4 – posses the lowest liquidity among all these measures).
M3 – is the most important component, generally termed as “broad money”.
Cheap money policy –
Is that monetary policy in which loans and advances are made available on low interest rate and easy terms to industry, businessmen and consumers.
It increases the inflation rate in the economy and it is generally adopted to get rid of deflationary tendencies of the economy.
Dear money policy –
Is adopted to squeeze the credit utilization facility in the economy.
Under it interest rate is increased which helps in controlling inflation in the economy.
Union budget –
It is an extension account of the government’s finances, in which revenues from all sources and expanses of all activities under taken are aggregated.
Contains the government of India’s revenue and expenditure for one fiscal year, which runs from 1st April to 31st march.
In constitution it is mentioned as annual financial statement under Article 112 comprising the revenue budget, capital budget and also the estimates for the next fiscal year called budgeted estimates.
Tax is a compulsory payment by the citizens to the government to meet the public expenditure. It is legally imposed by the government on the tax payer and in no case taxpayer can deny to pay taxes to the government.
Direct tax – which is born by the person on whom it is levied. A direct tax cannot be shifted to other person. Some are as follows –
Income tax.
Levied directly on the income of the people by central government.
Corporate tax.
Levied on the profit of the companies or corporations.
The corporate tax rate is 30%.
It is the largest source of revenue.
Wealth tax.
Levied on the net wealth of the individuals, Hindu undivided family and joint stock companies.
Primarily imposed to reduce concentration of wealth in the society.
Gift tax.
Imposed by the government on all donations and gifts over and above the prescribed limits to the family members.
However a donation given by the charitable institutions and companies is not covered under gift tax.
This tax is basically imposed to check the evasion of estate duty and wealth tax.
Interest tax.
Imposed on the interest income of the commercial banks on their gross loans and advances.
Presently it is not in force in India.
Land revenue.
Profession tax.
Stamp duty and registration charges.
Securities transaction tax.
Banking cash transaction tax etc.
Indirect tax – those taxes which have their burden or impact on one person. But that person succeeds in shifting his burden on to others. Some are as follows –