Have you ever got confused about many economic terms you encounter on the news when the Union Budget is announced or when the RBI (Reserve Bank of India) makes a press conference? Fear not! If you are not an Economics student, chances are you may not know about many of these terms, and even if you are one, there’s no harm in brushing up your memory.
Here’s a massive list of economic jargon simplified for your understanding:
FISCAL POLICY
This refers to the policies framed by the government for a particular year according to the annual economic survey and the annual budget to help the government regulate taxation and for allocation of budgets to various departments and States for their proper functioning.
MONETARY POLICY
This is the macroeconomic policy that our country’s apex central bank (RBI) decides. The monetary policy highlights various tools to monitor and influence various macroeconomic indicators like bank interest rates, consumption, inflation rate, liquidity, money supply policy and the Gross Domestic Product (GDP) of India.
GDP – GROSS DOMESTIC PRODUCT
GDP is the total monetary value of all goods and services produced in India within a specified year. This value is irrespective of the fact that these goods and services are produced by citizens or foreigners.
GNP – GROSS NATIONAL PRODUCT
Gross national product (GNP) is the total monetary market value of all the goods and services produced in a specified year by the country’s own domestic labor force and total property supplied by the citizens of a country.
DIFFERENCE BETWEEN GNP AND GDP
Gross Domestic Product (GDP) and Gross National Product (GNP) are both similar in the fact that they both try to measure the total market value of all goods and services produced for final sale in an economy (India, in this case).
However, they differ in one major factor – while GDP measures the domestic levels of production in a country, GNP sets out to measure the levels of production supplied by all the citizens or business corporations from a particular country (our case, India) working or producing in any country. So, Indians working anywhere in the world = GNP. Foreigners (expats from other countries) working in India = GDP.
GDP is used to indicate the overall health of a nation’s economy and is used by governments for drafting policies and business investors to make decisions about investment in a particular nation. The GNP of India indicates the total production levels of any Indian or Indian-owned entity (for e.g. Tata Group in the United Kingdom), regardless of where in the world the actual production of goods and services is taking place. This defines the economy in terms of the country’s citizens’ output and is called the national output.
NATIONAL INCOME
The total income earned in a country due to various manufacturing processes it operates. It indicates the income of an economy and its total output value.
PER CAPITA INCOME
When the GNP of a country is divided by its total population, Per capita income comes up. It is used an economic indicator of the levels of rise and/or fall in the price of living and development in a country. However, it does not account for inequalities of the income distribution.
FISCAL DEFICIT
It is the difference between the total expenditure a government makes versus its total receipts (excluding borrowing).
A fiscal deficit occurs when the expenditure exceeds the revenue generated in a particular year and is recorded as a percentage of the country’s gross domestic product (GDP)
BALANCED BUDGET
When a country’s income is same as current expenditure, the budget is said to be balanced and there is no fiscal deficit in that particular financial year.
ZERO-BASED BUDGETING
ZBB is the practice in which a review of every scheme is conducted before a budgetary provision is made in its favor. It helps the government to justify the utility cost in terms of government expenditure on a specific scheme or planned project.
This method helps the taxpayer to ensure that every rupee spent from their tax results in progressive utility. ZBB generally helps subvert large deficits made by the Union Government on failed/delayed projects.
FISCAL CONSOLIDATION
A reduction made in the underlying fiscal deficit to subvert macroeconomic losses. It does not eliminate fiscal debt.
FISCAL FEDERALISM
A branch of economics that tries to understand centralized types of economic functions and instruments that can help in the decentralization of government functions with reference to economic growth.
DEPRECIATION
It is the amount of decrease in the monetary value of an asset over time due to wear and tear and other microeconomic factors.
NDP – NET DOMESTIC PRODUCT
NDP = GDP – Depreciation
NNP – NET NATIONAL PRODUCT
NNP = GNP – Depreciation
