9. Terms

1) OMO – Open market Operations

2) OIS - An interest rate swap involving the overnight rate being exchanged for some fixed interest rate

3) Debt-to-GDP ratio: In economics, the debt-to-GDP ratio is one of the key indicators of the health of an economy. It is the amount of national debt of a country as a percentage of its Gross Domestic Product (GDP). A low debt-to-GDP ratio indicates an economy that produces a large number of goods and services and probably profits that are high enough to pay back debts. In general terms Debt-to-GDP measures the financial leverage of an economy. Governments aim for low debt-to-GDP ratios and can stand-up to the risks involved by increasing debt as their economies have a higher GDP and profit margin.

US      = 99% to GDP
Japan = 229% to GDP
India   = 68% to GDP
Brizil   = 65% tp GDP
China  = 17% Tp GDP

4) The Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods. Some countries (like India and The Philippines) use WPI changes as a central measure of inflation. However, United States now report a producer price index instead.
The Wholesale Price Index or WPI is "the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure is released weekly on every thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.

Calculation

The wholesale price index (WPI) is calculated based on the wholesale price of a few relevant commodities of over 2,400 commodities available. The commodities chosen for the calculation are based on their importance in the region and the point of time the WPI is employed. For example in India about 435 items were used for calculating the WPI in base year 1993-94 while the advanced base year 2004-05 uses 676 items. The indicator tracks the price movement of each commodity individually. Based on this individual movement, the WPI is determined through the averaging principle.

5) Fiscal Deficit

The fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowing). The elements of the fiscal deficit are (a) the revenue deficit, which is the difference between the government’s current (or revenue) expenditure and total current receipts (that is, excluding borrowing) and (b) capital expenditure. The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, that is mainly from banks).

6) Balance of Payment
The two principal parts of the BOP accounts are the current account and the capital account.
The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit (trade deficit). It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers. It is called the current account as it covers transactions in the "here and now" - those that don't give rise to future claims.
The capital account records the net change in ownership of foreign assets. It includes the reserve account (the foreign exchange market operations of a nation's central bank), along with loans and investments between the country and the rest of world (but not the future regular repayments/dividends that the loans and investments yield; those are earnings and will be recorded in the current account). The term "capital account" is also used in the narrower sense that excludes central bank foreign exchange market operations: Sometimes the reserve account is classified as "below the line" and so not reported as part of the capital account.
Expressed with the broader meaning for the capital account, the BOP identity assumes that any current account surplus will be balanced by a capital account deficit of equal size - or alternatively a current account deficit will be balanced by a corresponding capital account surplus:
The balancing item, which may be positive or negative, is simply an amount that accounts for any statistical errors and assures that the current and capital accounts sum to zero

7) PMI - Purchasing Managers' Index (PMI)

The Purchasing Managers' Index (PMI) is an indicator produced by Markit Group and the Institute for Supply Management of financial activity reflecting purchasing managers' acquisition of goods and services.
Markit Group and the Institute for Supply Management compile The Purchasing Managers' Index (PMI) surveys on a monthly basis by polling businesses that represent the make up of the respective sector. The surveys cover private sector companies, but not the public sector.

The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

PMI data are presented in the form of diffusion indexes and are calculated as follows:

INDEX = (P₁*1) + (P₂*0.5) + (P₃*0)

·         P₁ = Percentage number of answers that reported an improvement.

·         P₂ = Percentage number of answers that reported no change.

·         P₃ = Percentage number of answers that reported a deterioration.

Thus, if 100% of the panel reported an improvement the index would be 100.0. If 100% reported a deterioration the index would be zero. If 100% of the panel saw no change the index would be 50.0 (P2 * 0.5).

Therefore, an index reading of 50.0 means that the variable is unchanged, a number over 50.0 indicates an improvement while anything below 50.0 suggests a decline. The further away from 50.0 the index is, the stronger the change over the month. E.g. a reading of 55.0 points to a stronger increase in a variable than a reading of 52.5.