Category: Commerce Notes PPT

We come across the term “Economic Reforms” quite often, and it is important to know what Economic Reforms are? Economic Reforms are defined as changes in policies that aim at improving the economic efficiency of a Country. The need for Economic Reforms essentially arises from distortions that are caused either due to international regulations or by the Government. Economic Reforms occur when there is deregulation or a reduction in the size of the Government. It is also done by eliminating or decreasing the market distortion in specific sectors of the Economy. 

 

The Economic Reforms encompass changes in Economy-wide policies such as tax and competition policies. These Reforms are centered around bringing Economic efficiency and not geared towards eradicating other issues like unemployment or equity growth.

 

Table of Content – 

• Economic Reforms – Introduction 

• Indian Economy During Reforms

• Reasons and Effects of Economic Crisis of 1991

• New Economic Reforms in India

1. Liberalization

2. Privatization

3. Globalization

 

Introduction of Indian Economy During Reforms

In the year 1991, India saw a tectonic shift in its economic policies, making it a landmark year in the history of the Indian Economy. The humongous Economic crisis suffered by India in 1991 was uncontrollable with the situation getting bleak gradually. The result was that inflation reached its peak with daily use commodities becoming extremely expensive, striking people. 

 

Reasons and Effects of Economic Crisis of 1991

The primary reason for the crisis in 1991 can be attributed to a decline in exports which started in the 1980s. India had to pay in dollars for importing any commodity such as petroleum and the Country’s earnings in dollars from export were not meeting this need.

 

The debilitating effects of the Economic crisis had a cascading effect on India’s failing Economy.

• The foreign currency reserves kept going down, which posed a significant crisis of balance of payment in front of the Country.

• Government income was not enough to resolve these issues as the revenue generated through income tax was quite inadequate.

• India had to borrow a massive amount of 7 billion USD from IBRD (International Bank for reconstruction and development). It is the lending arm of the World Bank and the IMF (International monetary fund). India got this loan on the condition that it would liberalize its Economic policy and make way for international trade in India.

 

New Economic Reforms in India

India has seen many Economic Reforms since the late 1970s in the form of liberalization. However, a whole battery of Economic Reforms came about in 1991, which had a direct effect on the growth rate of the Country. The new Economic Reforms refer to the neo-liberal policies that the Indian Government introduced in 1991.

 

The three main pillars of this Reform were: Liberalization, Globalisation, and Privatization.

1. Liberalization

Right from the 1980s India has witnessed significant Reforms which fall under the following two groups.

• Stabilization Measures – These are short-term measures that are aimed at reducing the crisis by maintaining foreign exchange reserves.

• Structural Reform Policies – These are long-term measures that work at the root of Economic policies. They are geared towards enhancing international competitiveness and discarding hindrances like rigid rules and restraining regulations.

 

The license-raj was a bottleneck for the Economic growth of India.

 

Breaking these shackles was the major part of the liberalization of India’s Economy. Many changes were done in the following areas.

• Import of technology.

• Protection of domestic industries from foreign competition by imposing quantitative restrictions on imports.

• Import of capital goods along with an affordable rate of public investment.

• The industrial licensing system was eradicated barring a few industries like alcohol, drugs, cigarettes, harmful chemicals, industrial explosives, aerospace, electronics, and pharmaceuticals.

• India allowed investment by FII (foreign institutional investors) like mutual funds, merchant Bankers, pension funds, etc. in the Indian financial arena.

 

The following are some of the beneficial effects of liberalization of the Economy in India.

• Rise in stock market values.

• India is now one of the prominent exporters of IT products and services.

• There was a reduced political risk for the investors.

2. Privatization

Privatization means giving private players a chance into segments that were earlier monopolized by the Government. This included transforming Government companies into private companies by the following three means.

• The Government withdrew from the management and ownership of the company.

• Public sector companies were sold to private sector companies.

• Disinvestment, i.e., selling a portion of the Government companies’ equity to the public.

 

The Government also vested the autonomy of managerial decisions to some

 

private companies in the public sector industries to improve their efficiency. Some of the highly regarded industries were given the status of:

• Maharatnas – The Indian oil corporation Ltd. and Steel Authority of India Ltd. are some of the industries given this status.

• Navratnas – This includes Hindustan Aeronautics Ltd., National Aluminum Company (NALCO), and Mahanagar Telephone Nigam Ltd.

• Miniratnas – Some of the industries given this status are BSNL (Bharat Sanchar Nigam Ltd.), IRCTC (Indian railway catering and tourism corporation) Ltd., and the Airport Authority of India.

 

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3. Globalization

Before 1991, there were no foreign players in the Indian Economy, and Indian companies competed only with one another. After 1991 the Indian domestic market opened up for foreign companies and was integrated with the global market. It raised competition for Indian companies, but at the same time, it brought a flow of foreign money to India in the form of investments. Globalization worked two ways, i.e., now Indian companies could also get into foreign business and invest in other countries. For example, ONGC Videsh has branches in 16 different countries, HCL in 31 countries, and Tata Steel in 26 countries.

Key points from the Chapter – 

• India was a closed economy until 1991 which means it doesn’t engage in trade activity with other countries

• The 1991 BOP crisis made India go for new Economic Reforms on the recommendation of the International Monetary Fund (IMF)

• Liberalization resulted in an inflow of foreign investments in the Country

• Privatization allowed competition and ended the Government’s monopoly 

• Globalization resulted in the expansion of the global supply chain 

• LPG Reforms improved the financial status of the nation’s Economy

• The services sector grew many folds after the Reforms.

Insurance is a very significant part of our lives. It is what guards us, secures us, and even our loved ones from any sort of mishap. There are many sorts of insurances available out there. And you can get many for yourself, as per your need, as well. 

Why do we Need Insurance?

Life is uncertain; there are no guarantees or predictions about what will happen in one’s life. Similarly, businesses also don’t have any guarantee as they face many unexpected losses or damages in the long run. Assets like cars, bikes, etc. also don’t have any certainty in their lifetime, they can get stolen or damaged in the long run. One can fight all these risks with an insurance cover.

 

Insurance Definition

Insurance is generally defined as a contract which is also called a policy. An insurance policy is a contract in which an individual or an organization gets financial protection and compensation for any damages by the insurer of the insurance company. In simpler words, one can answer what is an insurance policy as a form of protection from any unexpected loss or damage. From this paragraph, one can get a clear overview of insurance meaning. 

 

Principles of Insurance

To ensure the proper functioning of the insurance contract, the insurer and the insured have to follow the following principles.

Importance of Insurance

Insurance plays a major role in the insured’s life. Here are a few pointers that will show how:

• The insured’s family is protected with the help of insurance at the time something unexpected happens. Their family doesn’t have to worry about the monetary aspects of the finances in this case.

• We all know that unexpected events can occur at any time and are a part of life. In case of any injury, illness, or death, finances are the last thing that they need to worry about. This way, their emotional stress is also reduced to an extent.

• Insurance is a great financial security to an individual’s family. An insurance policy gives the family the coverage needed as well as the courage to move on.

• Insurance is peace of mind for the insured in case of theft or medical emergency. This way they would not have to go and arrange money or go into a panic mode. 

• The funds which are provided by the insurance company are well enough for managing the school fees of the insured children. It also takes care of their standard of living.

Functions of Insurance

The functions of insurance can be listed as follows:

• They provide certainty to the insured.

• They ensure the protection of the family.

• They are risk-sharing policies.

• They prevent the damages that can come from loss.

• It provides capital.

• It’s known for improving efficiency.

• It helps in boosting the economy.

 

Types of Insurance

After having gone through the following points, one can get an answer to the question of how many types of insurance are there?

 

Health Insurance

Health insurance is a contract that is formed between a health insurer and a policyholder. This policyholder is also known as the insured person. In this contract, the health insurer agrees to pay the full medical cost of the insured or just a portion of it.

 

Car Insurance

Vehicle insurance covers cars, motorcycles, trucks and all the other vehicles running on the road. This insurance is meant for giving protection against any physical damage or bodily injury that the vehicle suffers from recklessness or an accident. All the cost incurred to repair the vehicle is met by the insurance company. 

 

Life Insurance

Life insurance is a contract in which the beneficiary is paid a fixed amount of money by the insurer after the death of the insured. The beneficiary uses this money to clear out the debts of the insured and also to meet his/her financial expenses after the death of the insured. The beneficiary is usually the spouse of the deceased. The beneficiary name is mentioned in the contract.

 

Homeowners Insurance

Homeowners’ insurance protects one’s house from the uncertainty of any damages. The insurance covers the house the insured person resides in and other associated structures connected to the house such as the balcony, garage and porch. The insurer will provide the amount incurred to repair any damage in the house or its associated structures.

 

Umbrella Insurance

Umbrella insurance is also known as liability insurance. It covers the cost that is incurred in excess of other insurance policies. It gives a person extra coverage on another type of insurance policy that he/she is in.

 

Renters Insurance

Renters insurance is meant for tenants who use it to protect their personal property from any damage or theft. The insurance covers all the assets owned by the tenants. This is done because the landlord doesn’t take any responsibility for the assets of the tenant. Nowadays, landlords are not allowing tenants who don’t have renters insurance.

 

Travel Insurance

Travel insurance is good for those people who travel a lot. It covers trip cancellations, lost or misplaced luggage, travel accidents and even medical expenses.

 

Pet Insurance

Pet insurance is meant for meeting all the expenses that are incurred concerning the sickness and accidents of the pet. All the medical expenses of the pet are taken care of by the insurer.

 

All these insurances are provided by different types of insurance companies.

Nowadays, report writing is convenient for multiple purposes. Reports are an informative communication process for society. Reports are written to inform society about a particular topic or news. Reports can cover a wide range of information on a topic and deliver the right perspective of an issue to the audience. Reports are written on a specific topic to serve in front of some particular audiences. The quality of a report depends on its elements, such as accuracy, objectives, information, format, completion, etc. The quality of a report decides how acceptable it will be to the audience. 

Therefore, you must remember the elements of report writing.

What is Report Writing?

Report Writing is a formal style of presenting information to the audience. The report is well-structured documentation of any event or information. It is important to know the definition of report writing for writing a report. It always reminds you how to write a report and which points you should keep in mind while writing a report.

What do You mean by Report Writing?

Report writing refers to the write-up, which is the reflection of any issue of the society presented to various types of audiences. Before you start report writing, you should know what is meant by report writing. According to that, a report should be written following a clear roadmap.

How to Write a Report?

From the above paragraphs, you must have gotten a rough idea of what report writing is. Now, we have to focus on how to write a report. To write a report, you must keep in mind some essential factors and follow a proper writing format.

Essential Elements of a Report

Before writing a report, everyone should know the following elements of report writing.

• Correct Information: A report must be written after enough research work. All the information about the respective topic must be correct. Any wrong information can have an adverse effect on the audience.

• Topic Clarity: The audience should get a clear idea of the topic. The report topic should not be unclear. Before going deep into the topic, an introduction is much required.

• Write-Up Flow: The whole report should follow a proper write-up flow. The report should be divided into some essential parts, such as introduction, body, conclusion, and summary.

• Excellent Presentation: The report should be presented very well. A good title, subheadings, bullet points, tables, reference links can be included in the report to make it impressive, well-structured, and formal.

• Completion: The information given in the report should be unbiased and complete.

Some Points to Keep in Mind During Report Writing

• No personal opinion is allowed in a report.

• The report must be topic orientated.

• The structure should be neat and clean.

• Tables, bullet points, graphs can be included as proof of the information.

• Adding a summary to highlight the main points is very common.

• A report may include appendices, and often it has pre-designed layouts.

How to Write a Report Introduction

The report introduction is one of the most significant parts of a report. The introduction to any write-up defines its quality, and a report is not an exception to it. After writing the introduction, you will get a clear picture of how to prepare the rest of the report.

Classification of Reports

Generally, reports are of the following types.

• Long and short reports.

• Internal and external reports.

• Vertical and lateral reports.

• Formal and informal reports.

• Informational and analytical reports.

Did You Know?

People with vast knowledge often make their report writing boring to the readers. If a writer knows a lot and the reader knows very little, it is dreadful. The readers become sleepy when reading the report with a lot of information. They cannot retain interest to read a report overloaded with information. For avoiding this problem, a report writer should write on an exciting topic creatively. It is the only way to deal with this issue.

In modern times information has emerged to be the greatest revolution even in the history of mankind. With the invention of print media and digital media dissemination of news and information has become easy and fast. Tons of information in the form of data and prints are generated every day. Refer to the official website of or the app for an elaborate and comprehensive explanation of the topic.

The process of presentation of the news or an event is as important as the information intended. The consensus has developed for a particular type of writing for the very purpose of representation of the news reporting and it is known as Report writing. Report Writing is never static but has changed with time and is known to adopt a distinct style during various periods. But some factors never change and are more like basic principles of report writing in any region or time. These ingredients constitute the ‘essential elements of report writing.’

Knowing these essential elements is a prerequisite for any report writer, they are as follows:

1. Correct Information: It is the soul of the document or report. Any compromise in the mention of the accurate information gathered is a blunder and unethical too.

2. Topic Clarity: The purpose of the report writing is to provide the information to its general consumers in an easy-to-understand language and ideas. Having clarity in the whole purpose and content matter helps us to do this successfully.

3. Write of Flow: The language of the report doesn’t need only to be simple but also needs to follow a proper flow of ideas for a better picture and easy acknowledgment of the ideas for the readers.

4. Excellent Presentation: Finally the whole work must be a unique and satisfying representation of the information we are trying to convey to our readers.

5. Completion: The writer must take care to conclude the report with an open-minded and unbiased voice.

Debentures are a type of debt instrument issued by a company or a government to raise capital or funds for its business. It is an acknowledgement given by them for having borrowed a certain amount of money, which it promises to repay at a future date. 

The debenture is issued under the company’s seal. It is in the form of a certificate, which is an acknowledgement of indebtedness. It usually specifies a particular period or date for repayment. The debenture contains a contract for repayment of the principal after a fixed period and for payment of interest on debentures at a fixed rate.  Also, it generally creates a charge on the undertaking of the company or some parts of its property. Some debentures can be converted to equity shares, while others cannot be.

Issue of Debentures

In general terms, the definition of the word issue is to supply or distribute. But in this context, the meaning of the word ‘issue’ is to give out a certificate with the company’s seal as an acknowledgement of the debt taken by the company. The procedure for issue of debentures by a company is very much like the issue of shares. Another word for issuing can be supplied or giving out something, which may be banknotes or company shares.

Interest on Debentures

In general terms, the definition of the word issue is to supply or distribute. But in this context issuing debentures means to give out a certificate with the company’s seal as an acknowledgement of the debt taken by the company. The procedure for the issue of debentures by a company is very much like the issue of shares. Another word for issuing can be supplied or giving out something, which may be banknotes or company shares.

Terms of Issue

Companies use debentures when they need money for their expansion. The terms of issue of debentures come with a promise to repay at a future date. Debentures are a part of the borrowed capital. Therefore debenture holders are called creditors of the company. At the time of liquidation and repayment, first preferences are given to the denture holders.

There are four different types of debentures. They are (1) Secured and Unsecured (2) Registered and Bearer and (3) Convertible and Non-Convertible. (4) First and Second.

1. Secured Debentures: These are the debentures where a charge has been established on the properties or assets of the company for the purpose of repayment of the debt. 

Unsecured Debentures: These debentures do not have a particular charge on the assets of the company. However, a floating charge may be established by default.

2. Registered Debentures: These debentures have details of names, addresses, and particulars of holdings of the debenture holders. The said details are filed in a register kept by the company. These debentures can be moved only by a normal transfer deed. 

Bearer Debentures: These debentures can be transferred by way of delivery. The company does not have any record of the debenture holders

3. Convertible Debentures: These debentures are chargeable to equity shares or in any other security either at the choice of the company or of its holder. These debentures are either fully or partly convertible. 

Non-Convertible Debentures: These cannot be changed into shares or any other security.

4. First Debenture: This type is repaid before the other debentures. 

Second Debenture:  This can be paid only after the First debenture is paid back.   

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Ethical Words and Definitions

Words related to ethics or the words associated with ethics in this context would be individualism, value-system, principle etc. There are both advantages and disadvantages in investing in debentures issued by the companies. 

• Few terms of ethics in business are Honesty, Integrity, Promise-Keeping & Trustworthiness, Loyalty, Law Abiding, etc.

Advantages

1. If the investor needs fixed income at a lesser risk, they prefer this. 

2. Financing through them is less costly, compared to the cost of preference or equity capital. 

3. The company does not involve its profits in a debenture. 

4. A debenture does not carry voting rights. Financing through them does not dilute the control of equity shareholders on management.

Disadvantages

1. Every company has a certain borrowing capacity. With the issue of debentures, the capacity of the company to further borrow funds reduces. 

2. Debentures put a burden on the company on its earnings. So there is a greater risk when the earnings of the company fluctuate. 

3. The company has to make provisions for repayment on the specified date, even during the period of financial strain on the company.

A cash book is defined as a subsidiary accounting book that records only cash transactions. There are thousands of cash transactions that take place in an organization in a given accounting year and it is an extremely tedious and meticulous job to journalize them. The main function of a Cash book is to record the cash transactions which are used as a ledger and a journal to find out about the activities in a firm. The cash receipts are recorded on the debit side while all the cash payments are entered on the credit side. 

 

Types of Cash Books

The cash books can be classified primarily into four different types that are:

1. Simple Cash Books – 

These are also known as Single Column Cash Books. They are used to record the cash transactions and the cash receipts (cash that comes in) are entered on the left side while the cash payments are recorded on the right side. As all cash transactions are recorded in one book, there is no need for a cash ledger account. 

2. Two Column Cash Books –

In a two-column cash book, there is an additional column provided for recording the specific discount entries which allow the discount transactions to be recorded in the same cash book along with the cash transactions. This cash book is usually maintained by organizations where it is a general practice to give or receive discounts. 

3. Three Column Cash Books –

As the name suggests, three-column cash books have three columns; one for cash, one for the discount, and the additional bank columns. For most of the organizations that are now dealing with banking instruments like cheques or bills of exchange along with cash, a bank column in the cash book makes simplified accounting entries.

4. Petty Cash Book –

In each firm, the cash transactions take place in all the departments. These cash transactions are recorded in one of the three cash books but sometimes there are some cash transactions that are for very small amounts. Several of these transactions take place in a single day and are called petty cash transactions. Examples of such transactions are expenses for stationery, postage, food, etc.

Before we talk about the various reasons as to why there is a rising need for Consumer Protection, let’s talk about the basics first. 

Who Exactly is a Consumer?

An individual who buys or purchases any kinds of products and/or goods and services, not for resale or manufacturing purposes, but only for their personal use, is called a consumer. A consumer can either be one person or a group of individuals.

Consumer Protection works for both the business and the consumers. The consumers, in order to acquire the correct information of the product and services, require this consumer protection forum to keep them updated about their purchase. This enables the customers to make rational decisions and prevents them from misleading information broadcasted by the businesses.

We have already enhanced our scope about what is ‘Consumer Protection’, here in this section we will know about the measures initiated and the contributions done by the government in this legal protection for the consumers. 

Consumer Protection Measures in India 

Consumer Protection Measures have been initiated all over India. The measures are also in the form of Acts that are reformed and restructured from time to time. 

1. The Consumer Protection Act, 1986

This Act protects the rights of the consumers and makes them aware of their rights as a consumer. There are three-tier redressal forums to protect the rights of the consumer.

2. Indian Contract Act, 1972

The Indian Contract Act lays down the conditions that need to be fulfilled by the parties who contract in an agreement. This act regulates the buyers by keeping a legal check on their promise to sell authentic products to the seller. This Act protects the interest of both parties. It takes care that the contract is not breached, else respective remuneration has to be paid for such breach.  

3. The Sales of Goods Act, 1930

This protects the rights of the consumers in case the products received by them are sub-standard. 

4. The Prevention of Food Adulteration Act, 1954

The act confirms the purity of the food items and thereby ensures the health of the consumers. 

5. The Trade Marks Act, 1999

This Act protects the consumers from the false marks which could mislead them to consume the product, and thus cheat on them by serving less qualified products. 

What are the Rights of a Consumer?

A consumer has access to the following rights, courtesy of the Consumer Protection Act of 1986, and they are as follows: 

• The right to be informed.

• The right to safety. 

• The right to choose.

• The right to be heard.

• The right to consumer education and related information. 

• The right to seek redressal.

Consumer Protection Laws 

There are various consumer protection laws that help fellow consumers to raise their voices against exploitation. Few consumer protection laws are as follows:

1. Right to File a Complaint From Anywhere

This new right has enabled the consumer to file their complaint from literally anywhere, be it to the District Commission or the State Commission. With this right, the restriction of location is being wiped out. 

2. Right to Seek Compensation Under Product Liability

The consumer is saved from any damages from defective products or services. The seller is liable to pay the compensation of the damages done to the consumers. 

3. Right to Seek a Hearing Using Video Conferencing

This right helps the consumers to present themselves for hearing through video conferencing mode even. This extinguishes the barriers of location again. 

4. Right to Know Why His Complaint is Rejected

The commissions can never reject a complaint without hearing the complaint from the complainant. In fact, the commission needs to keep the complainant notified about its rejection or accept their complaint within 21 days if no answers are received then it is deemed to have been admitted.  

Role of the Government in Consumer Protection

The government prioritizes the protection of consumers. This is a reform that also contributes to the ‘New India’ mission. 

Role of Government in Protecting the Consumers are as Follows

• The government introduced bills that enforce consumer rights which in turn provide a mechanism for addressing the complaints regarding defective goods and services.

• There are consumer dispute redressal forums in the district, national and state levels that help the consumers in solving their grievances. 

• The bill has been initiated to establish the Consumer Protection Authority who investigates consumer complaints. 

• The bill of the government classifies the type of contract unfairness so that they can be addressed accurately. 

As a Consumer, How can One Make Sure that their Rights aren’t Violated?

The first and foremost step towards protecting one’s rights as a consumer is to get educated on the subject. It is extremely necessary for a consumer to be aware of his/her rights and to know when and where they can utilise these and how. This will help a consumer to not only stay on their guard, but it will also give them a sense of reassurance that if anything does go wrong, they would have the ability to enact their rights.