During the decades of British colonial rule in India, there were no efforts made to calculate India’s per capital income. Similarly, the British rulers never found it necessary to calculate our National Income or our Gross Domestic Product. Upon gaining independence, some Indian individuals did try to measure India’s incomes. But the attempts tragically failed due to inconsistency, lack of expertise and inaccuracy. But the contributions of VKRV Rao and Dadabai Naoroji was very significant in this field.

Our economy had been a victim of enormous exploitation. Our natural resources, iron ores, gold mines, wealth and manpower was subject to intense exploitation. Due to these atrocities, the Indian economy on the eve of independence showed poor/low economic growth. Immense efforts and knowledge were essential in order to move ahead.

Although India was a very independent economy before the British rule, towards the end, it was exhausted. The Indian economy on the eve of independence was struggling to find the path. Since all the policies that the British were framing only promote their interests, we were diverging from prosperity. We were mere raw-material suppliers to the British. They made use of our labour without treating them well. The 200 years of British rule also took away our will to gain <a href="https://www.toppr.com/bytes/education-knowledge-exam-results/">knowledge</a> and awareness. Since we were their slaves, we never got the right to proper education. And as a result of these actions, towards the end of their reign, we were illiterate. The Indian economy on the eve of independence was full of people who had absolutely no plan as to how to help the nation.

When a commercial bank faces financial crisis and fails to obtain funds from other sources, then the central bank plays the vital role of ‘lender of last resort’ and provides them with the financial assistance in the form of credit. This role of the central bank saves the commercial bank from bankruptcy. Thus, the central bank plays the role of guarantor for the commercial banks and maintains a sound and healthy banking system in the economy.

It is one of the most important activities of commercial banks. Through the process of money creation, commercial banks are able to create credit, which is in far excess of the initial deposits. However, it is legally compulsory for the banks to keep a certain minimum fraction of their deposits as reserves. The fraction is called the Legal Reserve Ratio (LRR) and is fixed by the central bank. Banks do not keep 100% reserves against the deposits. They keep reserves only to the extent indicated by the Central Bank.

Now coming to the money creation process of commercial banks, it can be ascertained by using the given formula
Money Creation = Initial Deposits {tex}\times \frac { 1 } { \mathrm { LRR } }{/tex}. 
For example, let the LRR be 20% and Initial deposits = Rs.10,000.  As required, the banks keep 20% i.e. Rs. 2,000 as cash and lend the remaining amount of Rs. 8,000.
Further, it is also assumed that persons receiving the debt will deposit the amount in the bank. This will result in banks receiving fresh deposits of Rs. 8,000. The banks again keep Rs. 1,600 as cash and lend Rs. 6,400, which is also 80% of the last deposit, this money also comes back to the banks leading to a fresh deposit of Rs. 6,400. In this way, the money goes on multiplying and ultimately, total money creation according to the formula, will be

Money Creation ={tex}10,000 \times \frac { 1 } { 20 \% }{/tex}

=Rs. 50,000. 

Money creation is a process in which a Commercial Bank creates total deposits many times the initial deposits.

If net factor income earned from abroad is negative 

Export receipts are not a part of Net Factor Income from Abroad.
Because of two reasons:

• Export refers to the purchase of domestically produced goods by the rest of the world. Goods produced within the domestic territory of a country are to be treated as a part of GDP.
• Export receipts refer to revenue of the firms from the sale of its output. These are not the receipts of factor incomes from abroad which are to be in the form of rent, interest, profit and wages.

It simply means that if there exists any currency issue such as, non-acceptance of currency, then the central bank is responsible to give the assets of the same amount (i.e equal to currency value) to the public. These assets can be gold coins, foreign exchange, etc.