NEER AND REER

What exactly are nominal & real exchange rates?

ET IN THE CLASS ROOM, TNN Jan 27, 2003, 02.51am IST

Nominal exchange rate is the price of one currency in terms of number of units of some other currency. This is determined by fiat in a fixed rate regime and by demand and supply for the two currencies in the foreign exchange rate market in a floating rate regime.

It is 'nominal' because it measures only the numerical exchange value, and does not say anything about other aspects such as the purchasing power of that currency. In a floating rate regime, an increase in the value of the domestic currency against other currencies is called an appreciation, while a decrease in value is called depreciation. In contrast, an increase in the exchange rate in a fixed rate regime is called a revaluation (for an increase) and a decrease in the exchange value of the domestic currency is referred to as a devaluation.

What is real exchange rate?

To incorporate the purchasing power and competitiveness aspect and, therefore, make the measure more meaningful, real exchange rates are used. The real exchange rates are nothing but the nominal exchange rates multiplied by the price indices of the two countries. This means the market price level of goods and services, given by indices of inflation. So if the price level in the US is higher than the price level in India, then the real exchange rate of the rupee versus the dollar will be greater than the nominal exchange rate. Suppose the nominal exchange rate is Rs 50 and US prices are greater than Indian prices, a dollar will buy more in India than what Rs 50 will buy in the US. So the real rupee-dollar exchange rate is greater than the nominal rate. If the real exchange rate is calculated using the price levels of common traded goods, then it gives a measure of export competitiveness. For example, if both the US and India manufacture the same (or highly comparable) pharmaceutical drug, and Indian drug prices are lower than US prices, then the exchange rate in terms of drugs is favourable to India. This can be generalized to all the goods manufactured by the two economies that compete in the export market. If the real rupee-dollar exchange rate based on export-competing goods depreciates, then Indian exports enjoy an enhanced pricing advantage over US goods. The converse is true for a real appreciation.

POST OFFICE SAVING ACCOUNT

                    Savings Account

• Rate of interest 4% per annum

• Minimum INR 20/- for opening.

•  Account can be opened by cash only.

•  Minimum balance to be maintained in a non-cheque 

 facility account is INR 50/-.

•  Cheque facility available if an account is opened with INR

  500/- and for this purpose minimum balance of INR 500/-in

  an account is to be maintained.

•  Cheque facility can be taken in an existing account also.

•  Interest earned is Tax Free up to INR 10,000/-  per year 

 from financial  year 2012-13.

•  Nomination facility is available at the time of opening and

  also after opening of account.

  

•  Account canbe transferred from one post office to another. 


•  One account can be opened in one post office

•  Account can be opened in the name of minor and a minor

    of 10 years and above age can open and operate the

    account.

•  Joint account can be opened by two or three adults.

•   At least one transaction of deposit or withdrawal in three

     financial years is necessary to keep the account active.

•    Single account can be converted into Joint and Vice 

      Versa.

  Minor after attaining majority has to apply for conversion of

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  Deposits and withdrawals can be done through any 

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 *Inter Post office transactions can be done between CBS

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* ATM/Debit Cards can be issued to Savings Account 

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GDP deflator

GDP deflator is a measure of price

 inflation/deflation with respect to a specific 

base year; the GDP deflator of the base year

 itself is equal to 100.

Sukanya Samriddhi Accounts      

• Rate of interest 9.1% Per Annum(2014-15),calculated on yearly basis ,Yearly compounded.

• Minimum INR. 1000/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposit in multiple of INR 100/- Deposits can be made in lump-sum No limit on number of deposits either in a month or in a Financial year

• A legal Guardian/Natural Guardian can open account in the name of Girl Child.

• A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children.

• Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.

• If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.

• Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.
• Account can be closed after completion of 21 years.

• If account is not closed after maturity, balance will continue to earn interest as specified for the scheme from time to time.

• Normal Premature closer will be allowed after completion of 18 years /provided that girl is married.

Kisan Vikas Patra (KVP) 

IT IS A INSTRUMENT ISSUED BY INDIAN POST OFFICE PREVIOUSLY THEY WERE ENGAGED WITH SENDING LETTER BUT DUE TO DIGITISATION THEY HAVE LESS WORK TO DO.NOW THE INCOME FROM POST OFFICE REDUCES CONTINUOUSLY BUT THEY HAVE REACH IN INTERIOR SECTOR OF RURAL AREA.WHERE BANKS DOES NOT HAVE BRANCH,THEIR HAS A  POST OFFICE.SO INDIAN GOVT WANT TO REACH DIRECTLY TO THE RURAL PEOPLE TO HELP THEM THROUGH POST OFFICE.NOW GOVT  AND RBI DECIDED TO GIVE  LICENCE TO POST OFFICE AS BANK.PREVIOUSLY GOVT'S MONEY WESTED THROUGH CORRUPTION AND POOR DOES NOT GET BENEFIT.NOW GOVT WANT TO SEND MONEY TO THEIR BANK ACCOUNT SO THAT THEY CAN USE FULL MONEY FOR THEIR DEVELOPMENT WHICH IS CALLED DIRECT BENEFIT TRANSFER(DBT) THROUGH PRADHAN MANTRI JAN DHAN YOJANA.

{I HONOUR OUR GOVERNOR, CHIEF ECONOMIC ADVISOR AND GOVT TO TAKE WONDERFUL DECISIONS. I WANT TO ANALISE FEW MORE EXCELLENT WORK BY OUR BUREAUCRATS AND ECONOMIST IN MY UPCOMING BLOGS } 

    

• Amount Invested doubles in 100 months (8 years & 4

 months) 

• Available in denominations of Rs 1,000, 5000, 10,000 and 

Rs 50,000. Minimum deposit Rs 1000/- and no maximum

 limit.

• Certificate can be purchased by an adult for himself or on

 behalf of a minor or by two adults.

• KVP can be purchased from any Departmental Post office.

• Facility of nomination is available.

• Certificate can be transferred from one person to another

 and from one post office to another. 

• Certificate can be encased after 2 & 1/2 years from the

 date of issue.