Fiscal Policy is a mechanism through which the Central Government controls the tax rates, thereby trying to balances its own finances, with economic growth. Two types of taxes are levied, both of which come under fiscal policy. The first is indirect taxes such as excise duty, sales tax and service tax. The second is direct tax such as personal or corporate income tax.

    Typically, a lower tax rate spurs consumption; but of course weakens the government financially. It is used when a government fears an economic slowdown. A higher tax rate can apply brakes on growth, but improves the government’s finances. Sometimes taxes are also used to fulfill the Government’s other objectives, like encouraging investments in backward areas, or discouraging purchase of goods like cigarettes and tobacco.

    Fiscal Deficit is the country's earnings (from taxes, etc), less its expenses (of maintaining the institutions, welfare programmes, etc), and less the interest outflow on debt. It is typically expressed as a percentage of GDP.

    Let's take a simple example – you have a good job, earning good annual increments. If you spend less than you earn, and save the rest, there is no problem whatsoever. This is like a fiscal surplus. Even if you live beyond your means for a few years, banks would be willing to lend to you, since your job and increments are good. They are confident you can pay loans back in the years to come. This is like running a fiscal deficit. Emerging countries like India regularly run fiscal deficits.

    The problem arises only if this deficit rises too high – for instance you have borrowed such a large fraction of your income that banks begin to wonder how you would repay. If your salary increments stop, then too you are likely to be at risk. If banks start holding back their lending, your profligate lifestyle takes a big hit. This is one of the causes of the Greek crisis.

    Consumer Price Index (CPI) is a measure of inflation for the final consumer. It takes into account prices of most goods and services that normal consumers deal with. This measure is defined separately for rural and urban consumers, since their consumption patterns differ. CPI (IW/AL/RL) is released once a month by Labour Bureau of the Govt and CPI  (Rural/Urban/Combined) is released by Central Statistics Office.

    A direct quotation of currency expresses the home currency per unit of foreign currency. So in India a direct quote for US dollars would be INR 48 = $ 1. This type of price quotation is used in most countries. The opposite is done in indirect quotation.

    An indirect quotation of currency expresses the foreign currency per unit of home currency. So in India an indirect quote for US dollars would be INR 1 = $ 0.0208. This type of quantity quotation is used in several European countries, Australia and New Zealand etc. The opposite is done in direct quotation.

    National Spot Exchange Ltd (NSEL) is a pan-India commodities spot exchange. It is the largest electronic spot commodities market in India by market share. NSEL is promoted by FTIL and NAFED and began operations late in 2008. Over 50 commodities in agricultural produce, bullion and energy segments are traded over the exchange.

    In 2010 NSEL introduced commodity investment products called e-Series for retail participation in commodities. It has e-Series products in gold, silver, copper, nickel, zinc, lead and platinum. These can be bought in small denominations and be held in demat form.

    NCDEX Spot Exchange Ltd is the first national level electronic spot exchange in India for commodities. NSPOT is mainly promoted by NCDEX, a leading commodities futures exchange. Its operations began late in 2006.

    Spot exchange means buying and selling of a commodity or currency for immediate delivery. The rate at which parties agree to buy or sell commodities or foreign exchange immediately is called spot exchange rate. In a spot exchange market commodities or currencies are traded at current market price and delivery is made immediately through the spot exchange's delivery platform. India has two dedicated spot exchanges for commodities- NSEL and NSPOT.

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