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Gross Domestic ProductGross Domestic Product
Total money value of all final goods &
services manufactured within the country in one year.
Annual value of goods sold and services
paid for inside a country
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Nominal & Real GDP Nominal & Real GDP
Nominal GDP measures the value of all the goods and services produced and expressed at current prices.
Real GDP measures the value of all the goods and services produced expressed at the prices of some base year
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Different ways of arriving @ GDP
Different ways of arriving @ GDP
GDP at Constant Prices
GDP at Current Prices
Calculated at constant prices to know “real growth”
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Gross National Product (GNP)
Gross National Product (GNP)
GNP = GDP + Income accruing to domestic residents from investments abroad – income earned by foreigners in the country.
Annual value of goods and services in a country including income from other countries
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National Income
Sum of total incomes of normal residents of a
country before deduction of direct taxes.
To calculate total income, add all payments for
the use of factors of production , like wages, salaries, profits & net income from abroad.
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Per Capita IncomePer Capita Income
Income per head = Population
IncomeNational
• Average income of one person.
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Inflation Excess Demand in the economy High costs Increase in money supply More money chasing fewer goods Rise in prices, purchasing power of money decreases High interest rates tend to increase
inflation Zimbabwe classic case of gallopping
inflation currency scrapped
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INDICATORS OF ECONOMY
INDICATORS OF ECONOMY
Poverty Line Consumption expenditure required for
getting 2100 calories per person in urban area
and 2400 calories in rural areas.
Key parameters No. of people BPL % of population BPL
(Conti…)
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Orissa highest percentage of BPL population
Some poverty zones are BIMARU and the KBK
belt in Orissa. The BPL percentage in India differs
according to the methodology adopted.
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INDICATORS OF ECONOMY
HDI - HUMAN DEVELOPMENT INDEX
INDICATORS OF ECONOMY
HDI - HUMAN DEVELOPMENT INDEX Developed by UNDP in 1996.
Measures physical quality of life in a country along with 3 key parameters
Life expectancy at birth No. of years in school Per capita income HDI 2009 – India at 134 (182 countries
ranked) HDI 2009 No. 1 is Norway Niger ranked at 182
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INDICATORS OF ECONOMYINDICATORS OF ECONOMY
WPI - WHOLESALE PRICE INDEXWPI - WHOLESALE PRICE INDEX
Measures increase/decrease in industrial,
commercial prices of commodities under 3 broad categories.
Primary articles – 98 items Fuel, power etc., – 19 items Manufactured products – 318
items Certain weightage to each
category of commodities
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WPI – IIWPI – II
Base year – 1993 – 94 Used for calculating INFLATION. WPI no longer a true indicator of inflation as
it may not reflect ground reality The basket of commodities may be outdated New series introduced from April 1st, 2000 435 commodities in the new series; as
against 447 in the old series.
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INDICATORS OF ECONOMY
INDICATORS OF ECONOMY
CPI – CONSUMER PRICE INDEX
Calculates increase/decrease in retail price
Direct bearing on consumers Different types of CPIs for
agricultural laborers industrial workers urban non-manual employee
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FOREIGN DIRECT INVESTMENT (FDI)
FDI supplements domestic investment The investment made to acquire long term
benefits in enterprises operating outside the
economy of the investor The FDI relationship consists of a parent
enterprise and a foreign affiliate which together form a transnational corporation
Mauritius, Singapore and USA are the three biggest sources of FDI (Conti…)
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FDI involves bringing scarce capital, technology and managerial expertise FDI creates jobs FDI barred at present in retail trading except
single brand product retailing FDI restricted to 26% in print media relating to news and current affairs FDI restricted to 26% in insurance and defence
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Foreign Institutional Investor (FII)
Foreign Institutional Investor (FII)
FII means an entity established or incorporated outside India which
proposes to make investment in the financial markets in India
FII is not stable money
Unlike FDI the focus of FII is on making quick profits.
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CRR Minimum 3% Maximum 20% SLR Minimum 24% Maximum 40% Cash Reserve Ratio (CRR) – 5% Statutory Liquidity Ratio (SLR) –
25% Bank Rate – 6% Repo Rate – 4.75% Reverse Repo Rate – 3.25%
Key indicators of banking sector
(Conti…)
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Bank Rate is for a longer period say 6 months
to one year Repo and reverse repo rates are for the
short term. They are used to either increase
money supply or mop up excess liquidity Repo and reverse repo have now assumed more importance than BR PLR is benchmark rate
Concept of BPLR under scrutiny Majority of Banks lending is under BPLR
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FOREXFOREX Exchange control Fixed Exchange rates Free/Floating exchange rates Depreciation/appreciation Devaluation India’s forex reserves more than $120
billion invested mostly in low yielding US
securities Countries like China and India are financing consumption in the USA China–largest forex reserves in the world
more than $ 1 trillion
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Purchasing Power Parity (PPP)
Purchasing Power Parity (PPP) An exchange rate between two currencies
such that the same basket of goods and services
could be bought in each country if the cost were converted at that exchange rate.
It is often used to compare the standards of living between countries.
Rate of exchange between two countries determined by comparing respective internal price levels
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Current A/c Convertibility Current A/c
Convertibility Free flow for purposes other than for
capital purchases and loans Exports Imports Travel Study abroad Medical treatment Employment abroad Gifts Consultancy Intl. credit cards
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The freedom to convert local financial assets into foreign financial assets & vice versa at market determined rates of exchange
Indicator of a developed economy Gives confidence to investors However, leaves the country at risk Tarapore Committee 1997
Fiscal consolidation – low inflation Financial sector reforms
Capital A/c ConvertibilityCapital A/c Convertibility
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TAXES DIRECT TAXES Direct incidence of tax on the person who pays the tax.
liability to pay tax is NOT passed on to someone else. e.g. INCOME TAX, CORPORATION TAX, WEALTH TAX, LAND REVENUE, GIFT TAX etc….
INDIRECT TAXES Levied on goods and services. Traders/producers pay it.
Liability passed on to end customer. e.g. VAT, EXCISE TAX, CUSTOMS DUTY, SERVICE TAX… New Tax on Goods and Services [TGS] to be
implemented from April 1st 2010 New Tax code proposed to replace Income Tax Act
1961.
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SUBSIDIES Grants to suppliers of goods and services Used to keep consumer prices down (LPG &
Kerosine, PDS to BPL) To prop up production (farm and fertilizer
subsidies) To boost exports To lower cost (tax subsidies) To improve infrastructure Meet social obligations (subsidy on food,
education) Cross subsidies (petroleum products) Cross subsidies in Banking through concept
of Below PLR loans
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SUBSIDIES IN 2008-09 Food subsidy – Rs.32,667 cr.
Fertilizer subsidy – Rs.30,986cr. Kerosine & LPG – Rs.30,000 cr. Politically and socially sensitive
issue. LPG subsidy aimed at the middle
class
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DISINVESTMENT 1991-92 to July 2007 Target – Rs.96,800 crore Achievement – Rs.51,608 crore (14 companies privatised) Issues
Loss making units Social responsibility Method – Public issue, strategic sale Valuation Creating monopolies – (IPCL, VSNL) Job loss Loss of govt. control
(Conti…)
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Ministry of Disinvestment formed by NDA Govt Abolished by UPA Govt
Present policy is to opt for the IPO model of disinvestment rather than outright sale
Minimum Govt stake in PSU’s to be 51% National Investment Fund created to pool
disinvestment proceeds Focus on Investment rather than disinvestment Investment Commission formed. Some prominent disinvestments are BALCO
in 2001 and Hindustan Zinc Ltd in 2001-02 and VSL in 2001
Current polices: Disinvestment to be used sparingly
Global financial trends do not favour disinvestment
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INFRASTRUCTURE Transport – Railways, roads, shipping , civil
aviation Communication – Telecom, P & T Energy – Electricity, Oil, coal, non-
conventional sources
Science & Technology Banking, finance and insurance Social – education, health India lags behind China in development of
infrastructure
(Conti…)
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Top priority to creation of infrastructure Amartya Sen’s analysis that India has
neglected social infrastructure
Delhi Mumbai Industrial corridor [DMIC] in 2008 with Japan’s assistance
Aim is to create state-of-the art infrastructure to activate local commerce
Petroleum Chemical Petrochemical Investment Regions [PCPIR] proposed in 2007
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PATENTS Product patents Process patents Patents Act 1970 Generic Drugs – $80 bn worth Reverse Engg Huge opportunity Compulsory Licensing India has created a digital data base of
traditional knowledge of healing systems like Yoga, Ayurveda, Unani and Siddha and registered with European Patent Office [EPO]
(Conti…)
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Frivolous patents granted in Western countries for traditional Indian products like neem, turmeric and even for Yoga
Geographical Indication (GI) is a patent associated with a region
Ex: Kalamkari art, Darjeeling Tea, Coorg coffee latest Tirupati Laddu
Mashelkar committee on patents The patent regime of WTO can be overlooked
in times of medical emergencies like Swine Flu
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SSISSIManufacturing Services
Micro 25 lakhs 10 lakhsSmall 25 lac - 5 crores 10 lac – 2 crMedium 5 – 10 crores 2 -
5 cr
♦ 128.44 lakh units♦ Turnover – Rs.4,97,842 cr♦ Employs 312.52 lakh people♦ Exports worth Rs.86,013 cr
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TARIFF BARRIERS Customs Duty Countervailing Duty Anti-dumping duty Transit duty Cess Additional duties or surcharges
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Non-Tariff Barriers Health, Safety regulations Quality norms (ISO & EN standards , FDA,
CE mark) Quarantine laws Local subsidies Channelised imports through
governmental agencies (eg: sugar imports through STC)
Licencing policy Quota restrictions Import bans Cumbersome Customs procedures
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Fiscal PolicyThe government’s policy of achieving economic objectives (employment, per capita
income…)through government earning and spending
related to increase or decrease in taxes.
Government sources of funds : Taxes and duties, government
businesses, fines, borrowing from public, investments
Government uses of funds : Infrastructure, mining, public welfare, defense, power generation, research and
developmentFiscal policy intimately linked to the Union Budget
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Monetary PolicyMonetary PolicyMonetary PolicyMonetary PolicyThe government’s policy of achieving The government’s policy of achieving economic objectiveseconomic objectives (employment, per capita (employment, per capita
income, balance of trade, economic parity…)income, balance of trade, economic parity…)
by controlling money supply through by controlling money supply through instrument like interest ratesinstrument like interest rates
Decrease in supply Decrease in supply : Deflation or decrease in : Deflation or decrease in pricespricesIncrease in supplyIncrease in supply : Inflation or increase in : Inflation or increase in pricesprices
Monetary policy intimately connected to RBI’s Monetary policy intimately connected to RBI’s policiespolicies
The government’s policy of achieving The government’s policy of achieving economic objectiveseconomic objectives (employment, per capita (employment, per capita
income, balance of trade, economic parity…)income, balance of trade, economic parity…)
by controlling money supply through by controlling money supply through instrument like interest ratesinstrument like interest rates
Decrease in supply Decrease in supply : Deflation or decrease in : Deflation or decrease in pricespricesIncrease in supplyIncrease in supply : Inflation or increase in : Inflation or increase in pricesprices
Monetary policy intimately connected to RBI’s Monetary policy intimately connected to RBI’s policiespolicies
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Hyper Inflation Stagflation Deflation Reflation Highest inflation in world is in
Zimbabwe Currency made worthless due to
inflation
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Appreciation of the Appreciation of the RupeeRupee
Indication of economy doing well Importers & borrowers in forex are happy Domestic consumers are happy Interest on government borrowings come
down Companies with forex loans will gain Debt of the government decreases Lowers inflation rate Exporters are hit Margins erode Producers have to cut costs
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Agriculture Contributes about 22% to GDP 60% of area sown dependent on rainfall 65 to 70% of population dependent on
agriculture 230.67 mt foodgrain production in 2007 – 08 National Food Security Mission launched to
enhance production of rice wheat and pulses India second highest producer of fruits and
vegetables in world Largest producer of milk in the world
(Conti…)
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India is home of spices-largest producer, consumer and exporter of spices
India largest producer of cashewnuts and basmati rice
National Horticultural Mission 2005 National Project for Organic Farming 2004 India has largest livestock population in
world National Fisheries Development Board set
up in Hyderabad
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Energy Coal main source of energy [67%] Installed power capacity is 149,391.91 MW as of
31st May, 2009. Electricity Act 2003 - SERC’s formed Coal based Ultra Mega Power Projects [UMPP] of 4000 MW each National Solar Mission to be launched on
November 14th 2009
Nuclear energy to be key for India’s quest for energy security. Hence 123 pact.
Nuclear energy at present contributes 3 to 4% to total energy pie
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Miscellaneous India a services sector led economy defies
conventional logic Conventional model is transition from
manufacturing to services India is services sector led but still
predominantly rural
Manufacturing and infrastructure are top priorities of the Government
Among infrastructure, social infrastructure is a very vital area
(Conti…)
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Disinvestment of sick PSU’s and profit making PSU’s is needed to generate huge funds for infrastructure, specially social infrastructure
Second generation economic reforms needed in power, agriculture, legal sector and financial sector
Massive transfer of population away from unproductive agriculture to other sectors like services and manufacturing
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Polity – Polity –
UPA – in May 2009. Congress 206 seats TMC second largest component of UPA Verdict 2009 is the defeat of the Third and
Fourth Front primarily rather than of the NDA
Highest tally contributed to NDA by Karnataka
Left Front humbled in West Bengal Agatha Sangma-youngest Union Cabinet
Minister, Age 28 years(Conti…)
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Shashi Tharoor is MOS External affairs Meira Kumar first woman to be the Lok
Sabha Speaker
LK Advani and Arun Jaitley leaders of opposition in Lok Sabha and Rajya Sabha
Oldest Cabinet Minister SM Krishna age 77 years
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Polity – Polity – Ramesh Pokhariyal new Chief Minister of
Uttarakhand K. Rosaiah new Chief Minister of Andhra
Pradesh Sikkim creates history-all MLA’s belong to the
ruling party Ashok Gehlot new Chief Minister of Rajasthan Navin Chawla is the new chief Election
Commissioner Mohan Bhagwat new RSS Chief Congress retains power in Maharashtra,
Haryana and Arunachal Pradesh in October 2009.
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8,3000 sq. km of India claimed by China8,3000 sq. km of India claimed by China China objects to ADB’s loan to Arunachal PradeshChina objects to ADB’s loan to Arunachal Pradesh Arunachal regarded by China as “Southern Tibet”Arunachal regarded by China as “Southern Tibet” China objects to Dalai Lama’s and Manmohan Singhs China objects to Dalai Lama’s and Manmohan Singhs
visits to Tawang visits to Tawang India bans Chinese mobiles, dairy products and toysIndia bans Chinese mobiles, dairy products and toys China says Agni - V can target most of ChinaChina says Agni - V can target most of China China reveals a plan on its semi-official website to China reveals a plan on its semi-official website to
balkanisebalkanise India into 15 to 20 pieces by using Pakistan, Bangladesh India into 15 to 20 pieces by using Pakistan, Bangladesh andand taking the assistance of various terrorist organizations like taking the assistance of various terrorist organizations like ULFA etc ULFA etc
The two fastest growing economies in the world are China The two fastest growing economies in the world are China
and India and India India is the world’s largest democracy and China is theIndia is the world’s largest democracy and China is the
world’s largest “free-market” and politically regimented world’s largest “free-market” and politically regimented countrycountry
8,3000 sq. km of India claimed by China8,3000 sq. km of India claimed by China China objects to ADB’s loan to Arunachal PradeshChina objects to ADB’s loan to Arunachal Pradesh Arunachal regarded by China as “Southern Tibet”Arunachal regarded by China as “Southern Tibet” China objects to Dalai Lama’s and Manmohan Singhs China objects to Dalai Lama’s and Manmohan Singhs
visits to Tawang visits to Tawang India bans Chinese mobiles, dairy products and toysIndia bans Chinese mobiles, dairy products and toys China says Agni - V can target most of ChinaChina says Agni - V can target most of China China reveals a plan on its semi-official website to China reveals a plan on its semi-official website to
balkanisebalkanise India into 15 to 20 pieces by using Pakistan, Bangladesh India into 15 to 20 pieces by using Pakistan, Bangladesh andand taking the assistance of various terrorist organizations like taking the assistance of various terrorist organizations like ULFA etc ULFA etc
The two fastest growing economies in the world are China The two fastest growing economies in the world are China
and India and India India is the world’s largest democracy and China is theIndia is the world’s largest democracy and China is the
world’s largest “free-market” and politically regimented world’s largest “free-market” and politically regimented countrycountry
INDIA – CHINA TIES INDIA – CHINA TIES INDIA – CHINA TIES INDIA – CHINA TIES
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JASWANT SINGH JASWANT SINGH Author of “Jinnah – India – Partition –
Independence” Former Defence and External Affairs Minister
in NDA Govt
Expelled from BJP for sympathetic portrayal of Jinnah and criticism of Sardar Patel Gandhiji and Jawaharlal Nehru.
He is chairman of Public Accounts Committee [PAC] in Lok Sabha.
Involved in controversy during NDA Govt for escorting terrorists to Kandahar
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AWARDS Deep Joshi awarded Magsaysay award for
social service Alice Munro wins 2009 Man Booker
International Prize President Barack Obama is “surprise”
choice for 2009 Nobel Peace Prize
Hilary Mantel wins 2009 Man Booker Prize Herta Muller 2009 Nobel Prize for Literature Elinor Ostrom and Oliver Williamson, Nobel
Prize Economics Venkatraman Ramakrishnan wins Nobel
Prize for Chemistry
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Business related awards Business related awards [ET Awards] [ET Awards]
Business related awards Business related awards [ET Awards] [ET Awards]
Business Leader of Year-Anand MahindraBusiness Leader of Year-Anand Mahindra Global Indian-Ram CharanGlobal Indian-Ram Charan Businesswoman of Year-Vinita BaliBusinesswoman of Year-Vinita Bali Corporate Excellence, Company of the Year- Corporate Excellence, Company of the Year-
Hero HondaHero Honda Entrepreneur of the Year-G V Krishna ReddyEntrepreneur of the Year-G V Krishna Reddy Corporate Citizen of the Year-TERI,Corporate Citizen of the Year-TERI, Reformer of the Year-Nitish KumarReformer of the Year-Nitish Kumar Life Time Achievement award-Keshub Life Time Achievement award-Keshub
MahindraMahindra
Business Leader of Year-Anand MahindraBusiness Leader of Year-Anand Mahindra Global Indian-Ram CharanGlobal Indian-Ram Charan Businesswoman of Year-Vinita BaliBusinesswoman of Year-Vinita Bali Corporate Excellence, Company of the Year- Corporate Excellence, Company of the Year-
Hero HondaHero Honda Entrepreneur of the Year-G V Krishna ReddyEntrepreneur of the Year-G V Krishna Reddy Corporate Citizen of the Year-TERI,Corporate Citizen of the Year-TERI, Reformer of the Year-Nitish KumarReformer of the Year-Nitish Kumar Life Time Achievement award-Keshub Life Time Achievement award-Keshub
MahindraMahindra
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SPORTS SPORTS SPORTS SPORTS Rio De Janiero 2016 OlympicsRio De Janiero 2016 Olympics 2010 FIFA World Cup venue is South Africa2010 FIFA World Cup venue is South Africa 2010 Commonwealth Games venue Delhi2010 Commonwealth Games venue Delhi 2010 World Cup Hockey venue Delhi2010 World Cup Hockey venue Delhi 2011 World Cup Cricket; India, Sri Lanka and 2011 World Cup Cricket; India, Sri Lanka and Bangladesh Bangladesh 2009 Castrol Award Player of the Year, 2009 Castrol Award Player of the Year, Gautam Gautam Gambhir Gambhir ICC Test Cricketer of Year 2009 is Gautam ICC Test Cricketer of Year 2009 is Gautam Gambhir Gambhir ICC, ODI player of Year 2009 is MS DhoniICC, ODI player of Year 2009 is MS Dhoni Union Minister for Sports, MS Gill Union Minister for Sports, MS Gill
Rio De Janiero 2016 OlympicsRio De Janiero 2016 Olympics 2010 FIFA World Cup venue is South Africa2010 FIFA World Cup venue is South Africa 2010 Commonwealth Games venue Delhi2010 Commonwealth Games venue Delhi 2010 World Cup Hockey venue Delhi2010 World Cup Hockey venue Delhi 2011 World Cup Cricket; India, Sri Lanka and 2011 World Cup Cricket; India, Sri Lanka and Bangladesh Bangladesh 2009 Castrol Award Player of the Year, 2009 Castrol Award Player of the Year, Gautam Gautam Gambhir Gambhir ICC Test Cricketer of Year 2009 is Gautam ICC Test Cricketer of Year 2009 is Gautam Gambhir Gambhir ICC, ODI player of Year 2009 is MS DhoniICC, ODI player of Year 2009 is MS Dhoni Union Minister for Sports, MS Gill Union Minister for Sports, MS Gill
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MISCELLANEOUS MISCELLANEOUS Mamta Banerjee coins slogan of “Ma Maati
Manush” Pranab Mukherjee and P. Chaidambaram unveil
proposal for a new Tax Code Nandan Nilekani appointed chief of the Unique
Identification Authority C. Ranagarajan is reappointed chairman of PM’s
Economic Advisory Council Barack Obama is youngest American president to
win Nobel Peace Prize
(Conti…)
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Former President Pervez Musharraf indicted for murder of Baluch nationalist leader Nawab Akbar Bugti
Centenary of eminent Defence Scientist, Suri Bhagwantam, observed
Angela Merkel most powerful woman in the world, according to Forbes
Jean Dreze, Belgian economist is ET’s Policy Change Agent of Year
Nandita Das is chairperson of the Children’s Film Society of India
Lee Kun Hee former head of Samsung given five year suspended jail sentence and a fine of $110 million imposed
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MISCELLANEOUS – Fortis acquires Wockhardt Hospitals Telecom rural penetration only 13% in India Swiss luxury goods giant Mont Blanc adopts
Mahatma Gandhi as brand ambassador for its Rs.14 lakh pen
Swati Piramal is new president of Assocham Current capacity of nuclear power in India is
4000 MW Lunar Crater Observation and Sensing Satellite
[LCROSS] of NASA crashlands on moon to search for water
Madhu Koda becomes first ex-chief minister to be charged under PMLA