PAN Card; its importance and how to get a PAN card

Permanent Account Number (PAN) is an unique alphanumeric combination consists of ten characters (6 letters and four numbers) issued to all juristic entities identifiable under the Indian Income Tax Act 1961.It is almost equivalent to a national identification number. One can not open demat account with out PAN card.So it is necessary for trading in Stock Market.
 PAN is issued in the form of a laminated card, by the Income-tax department under the auspices of the Central Board for Direct Taxes (CBDT). One person can apply and obtain only for one PAN. Obtaining or possessing more than one Permanent Account Number is against the law.

 How to get a PAN card?
  You can get PAN card by applying at UTI website or NSDL website.
In order to apply for a PAN one must fill in one of the following forms.
If you are an Indian citizen, you have to submit your ‘Application for allotment of new PAN’ in Form 49A and if you are a foreign citizen you will have to submit your ‘Application for allotment of new PAN’ in Form 49AA.

Uses of PAN
It is used as an important Identity proof.PAN is Mandatory for financial transactions such as opening bank account, to file income tax returns and to purchase assets above specified limits.The primary aim of PAN is to bring a universal identification key factor for all financial transactions.It indirectly prevent tax evasion by keeping a track of monetary transactions of high net worth individuals.

Features
PAN is unique and permanent.Address change inside the country will not affect PAN.

The other areas where PANCARD is useful
 Earlier I have mentioned in this post PANCARD is must for trading in Stock markets.There are many other areas where Pan Card is mandatory or useful.
1. Pan card is necessary for filing Income tax return online (E-Filing).
2.Pan Card is useful for bank transactions.If you have a fixed deposit on a Bank that exceeds RS 50,000, a copy of PAN card needs to be given. If you are not submitting a copy of PAN card, the bank will deduct TDS of 20% or at the prevailing rate (whichever is higher).
3. It is useful in the purchase of real estate and vehicles.
4. In hotels, restaurants and travel agencies if your bill exceeds RS 25,000 you may have to produce a copy of PAN Card.
5. Jewellery Purchase- For Higher value jewellery purchasing Pan Card is essential.
For tele phone installation, Visa and other credit cards, and in some purchasing Pan card is necessary.
 To invest and file tax returns in India NRI's also need PAN Cards.

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Bank rate, Repo, CRR ,SLR and other key rates

Bank Rate
Bank rate is the interest rate charged by the central bank [in India Central bank is the Reserve Bank of India (RBI)] to commercial banks for the loans and advances.In other words, this is the rate at which Reserve Bank of India lends money to financial institutions and banks.If the bank rate is hiked, long term interest rates also tend to move in upward direction.It is because the banks use the fund they borrowed at a lower rate, for lending to individuals and corporates at a higher rate of interest to make profit.
When unemployment of a country is high, lower bank rate is helpful to expand the economy.It will lower the burden of borrowers.When inflation of a country is high, higher bank rates help to control the inflation by controlling the flow of money.
 In India the bank rate acts as the penal rate charged on domestic banks for shortfalls in meeting their reserve requirements (That is, cash reserve ratio and statutory liquidity ratio). The bank rate is used as a reference rate for indexation purposes by several organizations.
 In United States of America, the bank rate is the federal funds rate.It is controlled by the Federal Open Market Committee (FOMC). FOMC buys and sells securities to regulate money supply.The process of regulation of the economy by the Federal Open Market Committee (FOMC) is called  monetary policy.
 Increase in bank rates will affect the growth of Industries as the money circulation becomes very low.Hence only in case of higher or hyper inflation the central bank hike bank rates that too only for a short period.
Repo Rate
Repo (Repurchase) rate is the rate at which banks borrow funds for short term use from the central bank.Decrease in Repo rate helps banks to get money at a cheaper rate. On the other hand the increase in repo rate makes borrowing expensive.When liquidity crunch occurs in the market central bank increases repo rate.
 In case of an inflation, central bank will try to reduce the money supply by increasing the repo Rate. When repo rates are hiked, banks will borrow less amount of money from central bank and thus the amount of money they are lending to the public will decrease.If deflation occurs, central bank will want to inject more money supply and they will reduce the repo rate.
Reverse Repo Rate
Reverse Repo Rate is the exactly opposite to repo rate.It refer to the rate at which the Cental bank [In India Reserve Bank of India (RBI)] borrows excess money from domestic banks (private and public sector banks), when there is too much money flowing in the banking system.
Reverse repo rate helps to control the economic stability of the country.
 The defferance between repo and reverse repo is that in repo, the central bank injects liquidity and in reverse repo it absorbs liquidity.
Call Rate
The interest rate paid by the domestic banks for borrowing for their daily fund requirement is called 'Call Rate'. Banks some times need funds on daily basis, for that they borrow from other banks according to their requirements on a regular basis.
Cash reserve Ratio (CRR)
The meaning of CRR is Cash reserve Ratio.The domestic or national banks have to maintain or keep a portion of their deposit with Central Bank.This minimum ratio is known as Cash reserve ratio.It enables Central bank to control the liquidity in the system.It also ensures that a portion of bank deposit is risk free.In case of Inflation, the central bank increases the CRR rate and thus the available amount to banks becomes down.If the central bank decreases the CRR rate the availability of money increases.That is, more money will come on hands of banks.
Statutory Liquidity Ratio (SLR)
 SLR means Statutory Liquidity Ratio.The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio.Before providing credit to its customers the banks have to maintain or keep a part of its deposits in the form of gold, cash or other government approved securities as a part of SLR requirements.In India SLR is determined and maintained by Reserve Bank of India.With the SLR tuning, RBI can control the inflation through controlling credit growth and money supply.

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Inflation; Types and measures

 Inflation is a term used in Economics which is used to measure the rise in general level of prices for a bunch of goods and services over a period of time.When the price of a commodity or service increases the purchasing power of currency decreases.It results in the loss of value of money.Then each unit of currency can buy only fewer goods and services.
 Inflation can affect the economy of a country, positive and negative, in various ways.Economic experts are of the view that higher inflation is caused by the excessive growth of the money supply.
 If inflation gets totally out of control it affects the normal workings of the economy.This is called hyper inflation. Hyperinflation can lead to the abandonment of the use of the country's currency.
 There are two types of inflation
1. Demand Pull inflation- When there are less goods and more buyers, the demand increases.If the supply can not expand to meet the demand inflation occurs.This type of inflation is called demand Pull inflation.
2. Cost Push Inflation- Due to rise in input costs such as rapid wage increases,increase in corporate taxes and rise in imported raw material prices due to weak currencies the cost push inflation occurs.
 Inflation Rate
The inflation rate is the percentage rate of change of the overall price level of an economy over time.
 Measures of Inflation
  Inflation is usually estimated by calculating the inflation rate of a price index. usually Consumer Price Index or Wholesale price Index (WPI) is used to measure Inflation. In addition to this there are seven other important measures.producer price index (PPI), personal consumption expenditure (PCE) deflator, and gross domestic product (GDP) deflator, and a core version of each, which excludes food and energy.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) measures the prices of a bunch of goods and services purchased by a 'typical consumer'. In other words, the Consumer Price Index measures the changes in the cost of living.Some economists are of the view that the CPI overestimates true inflation by up to 1 per cent.
Producer Price Index (PPI)
The producer price index (PPI) measures the average change in the selling prices received by domestic producers to consumers and other businesses.Several products are sold to other businesses rather than consumers.So it differs from the CPI. producer price index measures both changes in revenue and changes in output.
Personal Consumption Expenditure (PCE) Deflator
The Personal Consumption Expenditure (PCE) measures the average change of price paid for all domestic purchases by all consumers.It measures the actual and imputed expenditures of households which also includes data pertaining to durable and non-durable goods and services.PCE deflator is also known as the PCE price index (PCEPI), 'PCE price deflator', and the 'Implicit Price Deflator'.
 The Personal Consumption Expenditure (PCE) is a volatile measure. Core PCE (CPCE) price index is less volatile than PCE Deflator which excludes the seasonal food and energy prices.
GDP Deflator
 In Ecocomics, the gross domestic product (GDP) deflator is used to measure the average change over time in the level of prices of all new, domestically produced, final goods and services.
It is calculated by using the following formula

GDP Deflator= Nominal GDP/Real GDP*100

Core Indexes
In addition to cite inflation numbers the economists usually refer to the Core version of that index.The core version excludes some volatile data.For example, In calculation of PCE the economist uses the oil and energy prices.But in Core PCE they exclude food and energy prices.

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