Glossary A–Z.

B

Balance of paymentsThe record of all a country’s transactions with the rest of the world over a period: trade, income, transfers and flows of investment and loans.Basis pointOne hundredth of a percentage point (0.01%). Central banks and markets use it to describe small changes in interest rates: a rise of 25 basis points takes a rate from…

C

Capital expenditureGovernment spending that creates lasting assets, such as roads, railways and power lines, as opposed to revenue expenditure on salaries, interest and subsidies.Cash reserve ratioThe share of their deposits that banks must keep as cash with the Reserve Bank of India, earning no interest. Changing it is one way the RBI adjusts the money available…Compound interestInterest earned on both the original amount and the interest already added. Over long periods it makes savings — and debts — grow much faster than simple interest.Consumer Price IndexAn index that tracks the prices of a fixed basket of goods and services bought by households, from food and fuel to rent and school fees. India’s CPI is compiled by the…Core inflationInflation excluding the prices of food and fuel, which swing sharply. Central banks watch it to see the underlying trend.Credit ratingAn agency’s assessment of how likely a borrower — a company or a government — is to repay its debts. Lower ratings usually mean higher borrowing costs.Current account deficitWhen a country pays the rest of the world more for imports of goods and services, interest and transfers than it earns from it. It has to be financed by money flowing…

D

DeflationA sustained fall in the general level of prices. It sounds good but can hurt an economy, because people delay buying and debts become harder to repay.DepreciationA fall in the value of a currency against other currencies. A weaker rupee makes imports such as oil and electronics dearer, and Indian exports cheaper abroad.Direct benefit transferPaying subsidies and welfare money straight into beneficiaries’ bank accounts instead of through intermediaries. India began rolling it out in 2013.Direct taxA tax paid directly by the person or company it is levied on, such as income tax or corporate tax.DisinflationA slowdown in the rate of inflation: prices are still rising, but more slowly.DisinvestmentThe sale by the government of some or all of its shares in a state-owned company.DovishDescribes a central banker or policy that leans towards lower interest rates to support growth and jobs, accepting a little more inflation.

F

Financial yearThe twelve months a government or company uses for its accounts. In India it runs from 1 April to 31 March, so “2026–27” means April 2026 to March 2027.Fiscal deficitThe gap between what a government spends and what it receives in a year, not counting borrowing. In effect, it is how much the government has to borrow.Fiscal policyA government’s decisions on taxes and public spending, and therefore on how much it needs to borrow.Foreign direct investmentInvestment by a foreign company or person that gives lasting control or a significant stake in a business, such as building a factory. It differs from portfolio…Foreign exchange reservesForeign currencies, gold and other assets held by a central bank. They pay for imports in an emergency and let the central bank sell dollars to slow a fall in its own…

G

GDPGross domestic product: the total value of all the final goods and services produced within a country in a given period, usually a quarter or a year. It is the most…Gini coefficientA measure of inequality from 0 (everyone has the same income or wealth) to 1, or 100 (one person has everything).Gross value addedThe value of output minus the cost of the goods and services used to produce it. GVA shows which sectors — farming, industry, services — are driving growth; GDP is GVA…GSTGoods and Services Tax: India’s tax on the supply of goods and services, introduced on 1 July 2017 in place of a long list of central and state taxes. Within a state it…

H

HawkishDescribes a central banker or policy that leans towards higher interest rates to bring inflation down, even at some cost to growth.

I

Index of Industrial ProductionA monthly index of the output of mining, manufacturing and electricity, published in India by the National Statistics Office.Indirect taxA tax collected by a seller and passed on to the buyer in the price, such as GST or customs duty.InflationThe rate at which the general level of prices rises, usually measured over twelve months. If inflation is 5%, something that cost ₹100 a year ago costs about ₹105 today…

L

LiquidityHow much money is readily available in the banking system — or, for an asset, how quickly it can be sold without a big loss.

M

Marginal standing facilityThe RBI window where banks can borrow overnight in an emergency, at a rate above the repo rate. Its rate is the ceiling of the interest-rate corridor.Minimum support priceThe price at which the government offers to buy a crop from farmers, announced for 22 crops on the advice of the Commission for Agricultural Costs and Prices.Monetary policyWhat a central bank does with interest rates and the supply of money to keep inflation under control and support growth and jobs.Monetary Policy CommitteeThe six-member panel that sets the Reserve Bank of India’s repo rate: three members from the RBI, including the Governor, and three external members appointed by the…

N

Non-performing assetA bank loan on which interest or repayment has been overdue for more than 90 days.

P

Per capita incomeA country’s income divided by its population: a rough measure of average living standards that says nothing about how income is shared.Periodic Labour Force SurveyIndia’s official survey of employment and unemployment, run by the National Statistics Office.Public sector undertakingA company in which the Union or a state government holds a majority stake.Purchasing managers’ indexA monthly survey-based indicator of business conditions. A reading above 50 means activity is expanding; below 50 means it is shrinking.Purchasing power parityA way of comparing incomes and economies that adjusts for differences in prices between countries — a rupee buys more in India than its dollar exchange rate suggests.

Q

Quantitative easingWhen a central bank creates money to buy government bonds and other assets on a large scale, to push down long-term interest rates once short-term rates are already very…

R

Real GDPGDP adjusted for inflation, so that it shows the change in the volume of goods and services rather than in prices. Growth rates are normally quoted in real terms.RecessionA significant fall in economic activity that lasts more than a few months. A common rule of thumb is two quarters in a row in which GDP shrinks.RemittancesMoney sent home by people working in another country. India has for many years been the world’s largest recipient, according to the World Bank.Repo rateThe interest rate at which a central bank lends short-term money to commercial banks against government securities. In India it is the Reserve Bank of India’s main…Reverse repo rateThe rate at which the Reserve Bank of India absorbs surplus money from banks. Since April 2022 the standing deposit facility (SDF) has taken its place as the floor of…

S

StagflationAn unhappy mix of slow or falling growth, rising unemployment and high inflation — hard to fix, because the usual cure for inflation (higher interest rates) also slows…Standing deposit facilityThe RBI window where banks can park surplus money overnight without the RBI having to give securities in return. Since 2022 its rate has been the floor of the RBI’s…Statutory liquidity ratioThe share of their deposits that Indian banks must hold in safe, liquid assets, mainly government securities.SubsidyMoney the government spends to make something cheaper, such as food, fertiliser or cooking gas.

T

TariffA tax on imported goods, paid by the importer. Governments use tariffs to raise money, protect home industries or put pressure on other countries.TDSTax deducted at source: tax taken out by the payer (an employer or a bank, for example) before the money is paid, and credited to the recipient’s tax account.Trade deficitWhen the value of a country’s imports is greater than the value of its exports.

U

Unemployment rateThe share of people in the labour force — those working or looking for work — who have no job.Union BudgetThe central government’s annual financial statement, required by Article 112 of the Constitution. It sets out tax and spending plans for the financial year that starts…UPIUnified Payments Interface: India’s system for instant payments between bank accounts using a phone, run by the National Payments Corporation of India and launched in…

W

Wholesale Price IndexAn index of prices at the wholesale stage — what businesses pay for goods in bulk — before retail margins and taxes are added. In India it is published by the Ministry…