Respect Indian ingenuity

 The wheel has turned full circle. Once India’s premier telecom R&D outfit, the Centre for Development of Telematics (C-DoT), has tied up with the French telecom outfit Alcatel to develop “broadband wireless access systems”. The new venture, to be a “global research and development centre” is likely be christened AlcaDoT. The whole exercise is ironical, in more ways than one. C-DoT, when it came up in the late ’80s, was conceived with the aim of taking on the MNCs, who were the sole suppliers of telephone exchanges to India then. These MNCs often milked India as there was no local substitute and they could charge what they felt like. C-DoT changed all that. As Sam Pitroda utilised his friendship with Rajiv Gandhi to ensure political patronage, and coupled that with the redoubtable telecom mind of G B Meemamsi, things began to take shape, which shook the MNCs. Alcatel, which was the main supplier of telephone exchanges to India, and had a tie-up with ITI for producing switches, felt the most threatened. One remembers the shenanigans of these MNCs, who felt they might lose their toehold in what had the potential to be a huge market, and the subsequent setting up of a committee under K P P Nambiar. The committee, instead of lauding C-DoT for what it had achieved for the nation in terms of rural exchange and other developments, chose to damn it for sins it never committed. There was little doubt at whose behest these moves, designed to scuttle C-DoT’s meteoric rise, were made. However, despite that, C-DoT delivered. India has around five million fixed telephone lines currently. C-DoT accounts for perhaps 30-35% of these. The real impact, however, is far greater. The ubiquitous STD/ISD booths dotting our rural landscape as also the NHs are the gift of C-DoT’s rural automatic exchange. If telecom connectivity is the engine of an economy, C-DoT made that possible. Add to that the bargaining chip that it provided resulting in the cost per line plummeting from over Rs 9,000 per line to under Rs 2,500 now. Sure, there are other reasons for this drop in prices such as competition, lowering cost of technology and others, but the initial push was undoubtedly provided by the fact that we could always say, “else we have C-DoT.” But what did it get in return? Step-motherly treatment from successive ministers, who thought of it as no more than a small ego massager to be used to satisfy their whims. One wanted it to be used for developing mobile switches, and the present one now wants to do something as long as it is done in his home state. One look at the initial clauses that the JV was supposed to work under and the casual approach becomes clear. A close look almost shows that some clauses were anti-national. One such clause stated that the shareholders would not compete with the business of the JV company. Nothing wrong with that, except that C-DoT affiliates were defined in a manner that it included R&D initiatives of Isro and DRDO as well. The hawk eyes of a couple of governing council members caught this and it has apparently been confined now to telecom R&D institutions under the communications ministry.

It’s mind vs mindset in India

 A recent visitor to Shanghai came back impressed with the spanking new glass and steel visage of modernity. He also noticed the extent of computerisation and how IT was being used to improve efficiencies in the day to day functioning. Being a regular visitor to the country, he also noticed that most of the IT solutions continued to be in the local language, although English was creeping up too. The attempt is not to compare the IT industries of India and China, for such a comparison is hardly flattering. Except in software exports, where we have a reputation, in the rest of the areas that comprise IT – hardware, domestic software, telecommunications infrastructure, among others, we are pygmies. I am merely trying to re-emphasise the importance of using IT to improve efficiencies on the domestic front. IT is the most efficient tool to improve efficiencies, be it governance or corporate management. A report by the Centre for Media Studies, for example, had shown through statistics that computerisation in various government departments, wherever it happened, had led to a substantial decline in corruption levels. For functions such as land record, electricity, municipal corporations, urban development, transport, civil supplies, hospitals, water supply and railways, to name a few, where it is possible to virtually avoid human interface if computers can take over, it would make life so much simpler for the common man. Not only would it save him from the clutches of the corrupt, but it would improve the speed of delivery too. But how does one achieve this? It certainly cannot be done when a country of over a billion people adds no more than 3 million computers in a year. It cannot be done if the sole emphasis of policy makers remains software exports. And most importantly, it is virtually impossible if in a country as diverse as ours with multiple languages, the only language in which computers work is English! Not that the government is not aware of this. Tomes have been prepared by ministries ranging from HRD to IT, about writing software in Indian languages. Seminars and workshops have been conducted to discuss the issue. However, since it is not as sexy as exports, nor do dollars come tumbling in, it remains no more than lip service. The big daddies of the IT industry too are never seen espousing the cause of software in local languages. Their reasons could be commercial, after all they are responsible to their shareholders and must look after their company’s bottom line. But this is where the government’s push is required. As long as the emphasis is on English language, as it currently is, our sole concern is exports, not domestic use. To put it rather crudely, all that some of our brightest are doing so far is to make the Americans, and others, work more efficiently. The skills that are talked about with envy the world over have made not an iota of difference to the lives of people in India.

A favourite movie

 The Infosys chairman and I have something in common It was only the other day, while flipping through a magazine, that I realised that the founder of one of India’s most innovative corporates and I had something in common, apart from living in Bangalore. “Why can’t you learn from him?” has been the constant refrain at home ever since N R Narayana Murthy rightly became an icon after starting a company which, in the space of 25 years, has become a household name all over the world. The question of “Why can’t you learn from him?” has been reiterated with each magazine story on the simplicity of the guy who thinks nothing of picking up a broom to clean the toilet on a daily basis. I have been known to pick up a broom but that is only when there is a cockroach to be disposed of late in the night when there is no maid to do the needful. Magazine stories on how he queues up for his meals at the self-service office-canteen have evoked caustic comments on my habit of parking myself in front of the TV during one-day cricket matches telecast in the evening and insisting that whoever serves me tea does not stand between me and the idiot box when a ball is being bowled. And there is no getting away from the guy even when one is holidaying overseas in Sri Lanka on one of those few-days-and-some-nights tours which seem economical when you read the advertisement. After checking in late in the night at a Colombo hotel, I was irritated at how long the process seemed to take for a reservation which had been made on the phone from India. Without quite calling the chap at the counter an idiot, I was trying to make him feel like one when he looked up and said, “We had another gentleman from Bangalore staying with us called Narayana Murthy and he was so well-behaved, so well-behaved.” And the guy at the Colombo hotel counter sighed as if to wonder why not all Bangaloreans could be counted on to be well-behaved! So it was with a feeling of ‘Here we go again’ that I picked up the June 4 issue of ‘The Week’ and realised that Narayana Murthy was one of the icons featured in the cover story. As expected, the snippets mentioned that he was uncompromising about simplicity, had refused Z-category security, lived in a three-bedroom house bought in 1986 — one bedroom more than the flat I had bought in 1995 and called Deja View and don’t ask me why! — and took the company bus to work. If my company had a bus and I could be sure of a seat, so would I, I told myself. It was the next bit which grabbed my attention: “Hasn’t watched a movie for 20 years, except The Titanic.” And then I realised that Narayana Murthy and I finally had something in common. And I’m not referring to the bit about not watching a movie for two decades. If I haven’t watched a movie in a theatre for 20 years, it’s not because I have been busy starting a company and making it a household name and not just in terms of M-cap. It’s just that the sound level in movie halls gives me a headache. And it just doesn’t make sense to pay for a headache when you can get one free! It was the bit about the ‘Titanic’ which caught my eye. If I have seen a movie 20 times in the last decade on a late-night TV channel, it is the ‘Titanic’. ‘Titanic’ is one of the most classy films ever screened even if it is all about class, with the ladies and gentlemen aboard the world’s most exclusive luxury liner not expected to fraternise with the hoi polloi in the steerage. And yet Leonardo di Caprio’s eternally young Jack Dawson is able to reach out to Kate Winslet’s winsome Rose Bukater who doesn’t quite know how to escape from the impending marriage to a millionaire which her mother has arranged. Dawson, as the young artist who lives for the moment and asks for nothing more than blank paper to sketch the daily inspiration on, comes across like a breath of fresh air on a ship full of millionaires who know the price of everything but the value of nothing. Yet ‘Titanic’ is much more than an impending marriage on the rocks and a shipwrecked 1912 romance! There are moments of incredibly moving heroism like the musicians playing “Abide with me” even when the ship is going down. And if, while inputting this, my mind hums “My heart will go on”, it is because we Indians are not just moved by M-cap, whether we are Narayana Murthys or scribbling scribes!

The regulator or a doormat?

 

The Telecom Regulatory Authority of India has a former telecom hand, having been the Telecom Commission chairman earlier, He would soon realise the telecom world has undergone a change since his DoT days. More importantly, he followsl, who came minus any telecom experience, but with the blessings of the then communications minister, and left behind a considerable legacy. Of course, whether that legacy is good or bad is debatable, depending on which side of the fence you are on. And this (which side of the fence) issue is what has turned the regulator into a controversial body and controlling that would undoubtedly be the challenging part of new assignment. Speculation that his the chosen one to succeed  he had been doing the rounds for months. So much so that his appointment as the head of C-DoT-Alcatel venture, several months ago, was made precisely with this in mind. Apparently, for a person to be appointed Trai chairman, he must be holding some sort of a government position. But that is the government’s side. It was the division among the industry which was even more interesting. It depended on whether the corporate lobbied for him or not. Those who supported his candidature would not tire of narrating an incident when he apparently threw out of his room a top corporate executive, whose powers in the corridors of power are legendary.

Mathematical Economics

 mathematics for economics [Music] page one mathematics for economics contents module one real number system 1.1 natural and whole numbers 1.2 rational and irrational numbers 1.3 sets module 2 expressions and equations 2.1 variables and parameters 2.2 algebraic expressions module 3 linear equations in two variables 3.1 graph of linear equations in two variables 3.2 economic application of linear equation into variables module 4 slope of a straight line 4.1 slope of a straight line 4.2 economic application of slope of a straight line 4.3 relation between slope of a line and shape of its graph module 5 equation of a straight line [Music] 5.1 intercepts of a straight line 5.2 general form of equation of a straight line module 6 system of linear equations 6.1 solving for a system of linear equations 6.2 economic application of a system of linear equations 6.3 inequality conditions in expressions 6.4 economic applications of inequality condition in expressions module 7 functions of one variable 7.1 functions of one variable and their graphs 7.1.1 linear functions 7.1.2 absolute value function 7.1.3 non-linear functions 7.1.4 rectangular hyperbola 7.2 applications of non-linear curves in economics 7.2.1 marginal product and average product curves are inverted u in shape 7.2.2 marginal cost and average cost curves are u shaped 7.2.3 indifference curves are convex to the origin 7.2.4 production possibility frontier is strictly concave to origin 7.2.5 constant elasticity demand curve has a shape of rectangular hyperbola module 8 absolute and relative change 8.1 absolute change and relative change module 9 geometric sequence 9.1 geometric sequence 9.2 economic application of geometric sequence page 3 list of figures figure 1 representing whole numbers on the number line figure 2 representing negative numbers on the number line figure 3 decimal forms of real numbers figure four relation between different types of real numbers figure five cartesian coordinate system figure six two dimensional x x-y plane figure 7 graph of a linear equation in two variables figure 8 graph of a linear equation in one variable figure 9 graph of a budget equation figure 10 a positive slope of a line b negative slope of a line c 0 slope d undefined slope figure 11 a positively sloped lines b negatively sloped lines figure 12 budget line figure 13 slope and y-intercepts figure 14 slope of parallel lines figure 15 solving for system of linear equations figure 16 graphing inequality on a two dimensional plane figure 17 function in one variable figure 18 graph of y is equal to x square figure 19 a downward sloping strictly convex curve b upward sloping strictly convex curve figure 20 graph of y is equal to minus x square plus 1 figure 21 a downward sloping strictly concave curve b upward sloping strictly concave curve figure 22 rectangular hyperbola curve figure 23 average product and marginal product curve figure 24 average cost and marginal cost curve figure 25 indifference curve figure 26 production possibility frontier figure 27 constant elasticity demand curve

Basic of Indian Economy

very good afternoon Of course a very warm welcome to all of you in this GDP I could tenth session on basics of Indian economy now I hope you are not studying very well you're over the tiredness of the exam seasons and you are ready to take on the next challenge that is Gd and PA why it's the basic concept behind these series of lectures is to give you a brief idea of what all is going around as far as Indian economy and certain political issues social issues are concerned so what you will be having are a series of six lectures and this is one all basics of Indian economy so I do hope that you have your pen and paper ready at hand I'll be scribbling down a lot of stuff giving you a lot of information beyond what is given in the presentation and the handouts that you will have so please make sure you have your pen and paper ready at hand also another thing as far as the handout of this particular presentation is concerned that those are available in your inbox article tab in your app so here we go basics of Indian economy so let's start with the very basics economics is the science economics is the science which studies human behavior so let us underline the important aspects it is a science of course it studies human behavior and the relationship between ends and scarce means which have alternative uses so first of all it is an academic discipline it is a science or not that is a debate which is out of our purview of of course most importantly it studies human behavior so there is an element of subjectivity as far as economics is concerned it is concerned with the relationship between ends that is your goals or the society's goals and the ways that you reach those goals that is the means of course we study economics because these means that is how we reach our goals these are always limited limited and not unlimited otherwise also there is an element of prioritization as far as these scarce resources are concerned so these resources have a large number of alternative uses right and only and the decision-making as far as economics is concern is related to prioritization of their use now talking about the central concerns or central problems of economics first of all we spoke about earlier the problem of allocation of resources how these resources might be economic resources in terms of capital the money that we have they might be natural resources of course precious metals coal natural gas etc and also and very importantly abundant resources human resources the second major problem or second major concern of economics of course is the problem of fuller utilization of resources so what we are really targeting at is efficient and the best use of scarce resources that we already have next of course is we do have resources at our hands at our disposal we utilize them and also what we want to do is utilize the existing resources to enhance the amount of resources available to us now of course when you talk about natural resources like coal gas etcetera we cannot actually make them grow however when you talk about other resources like capital or in fact human resources these are resources that we have our not have in our hands and we can if they if we are efficiently utilizing them then possibly we can see some growth in this so this is also concerned about economics or suteki I think there's a problem at your and I believe I'm audible to everyone else so do check you sound setup so moving on to forms of economic systems now there are different ways in which we can utilize the resources to the best of our abilities there are different philosophies and there are different ideologies behind them so this is something that we will be discussing in the subsequent slides so the first economic system that will discuss is capitalism it is one of the most popular ones today it is one of the oldest ones that we have in practice and these are certain basic features of capitalism the characteristic or the principal feature of courses right to private property now of course when you talk about capitalism everything is privately owned so for a car you can say this car belongs to someone as far as a business for a factory is concerned that business is registered in a particular individuals name there is no government intervention in the capitalist system for example so as far as government intervention goes the government does not interfere as far as prices of commodities are concerned how much commodities are being produced or what kind of commodities can be consumed these decisions these critical decisions for the economy are taken by private producers and consumers themselves ok next for our important instruction for you this is a one and a half hour session so after every half an hour let us have a question session because if you guys are keep asking me questions in the middle of the lecture then if we won't ever get to the end of it so just remind me after after a half an hour we'll have a quick five or seven minutes question-and-answer session next of course in the capitalist system there is a free hand given to market forces that is demand and supply so whatever the producers the manufacturers want to produce they will produce government will not instruct instruct them what on what to produce or intervene in their decision-making and also what I as an individual buyer or a consumer what I want to buy we'll be allowed to buy of course with the restrictions of laws the second point is similar to the previous one freedom of choice in production and consumption again there is no level of government intervention in these cases lastly and very importantly there is the public sector as such does not exist in a capitalist society so there will be there will be no companies which are owned by the state or by the government now when you talk about the merits and demerits of such a system of course most of you can imagine as far as merits is concerned firstly this will such a system will establish a meritocratic society so only the peoples who are very good talented skilled and hardworking will be able to make profits and other people not so much second merit of capitalism of course using this system an economy can register very high levels of growth so when you talk about the demerits of this particular system that is capitalism now since the basic motive of capitalists society or capitalist or business owners rather is profit maximization in order to increase their profits these business owners might start exploiting their workers or the labor class right so they might do this by reducing their wages to the bare minimum or making them work for extraordinarily very high number of hours right so exploitation of the poor people or the labor class the second major demerit of course is that it a capitalist system leads to permanence or perpetuation of poverty so whoever is in fact poor in a capitalist society he has lesser opportunities to become rich and the rich person will always tend to become richer so the gap between Richard rich people and the poor people will continue to rice if there is no government intervention again similar the third point is third demerit of capitalism of courses that there is no scope of social welfare as the public sector does not exist in such economies right so there are no government schools there are no government hospitals everything is privately owned so you can imagine the poor people of the society will not be getting or may not be able to afford services from these institutions guys you'll have to give me one minute I just be right back yes sorry for the interruption the next economic system that we'll be talking about this socialism so it is the sole socialism is an economic system that advocates complete or absolute state ownership control and organization of the means of production and distribution this is entirely opposite to the capitalist society everything in in in which everything is privately owned so in socialism everything a factory land agricultural land any asset etcetera is collectively owned or owned by the state now socialist society is a centrally governed society in this all the decisions all the major decisions of the economy are taken by the central government of a particular economy or a state and as such the economy is blind so you will see the concept of 5-year plans ten-year plans etc there is a huge amount of restriction on market forces so people are not actually free to produce whatever they want to what in fact consume whatever they want to again as we already understand there is absolutely no room for existence of private property or the private sector in a socialist economy so when you talk about the merits of such society of course the demerit of capitalist society that is exploitation of labor and the pork last that will be entirely removed because everything is owned by the state and state is accepted state is accept expected to take care of all the needs of the poor sections of the society another concept is that of another advantage is that of social welfare so as far as social societies or economies are concerned social welfare that is upliftment of deprived sections of the society this is something that will be taken care of because everything is in fact owned by the government of course when you talk about the demerits of a socialist society since the power is concentrated in the central government then there is a high propensity of corruption to be creeping up in the system secondly of course such an economy because it is taking care of every single person in the society it is very unlikely that such an economy will register a high economic growth of course since everyone is treated equally skills and talented are not really appreciated in such an economy then it is it will act like a disincentive for the population and it is likely that there is no incentive for them to work hard for greater profits so the next type of economy is a mixed economy it is a compromise between capitalism and socialism so it takes the merits of capitalism and combines them with the merits of socialism in trying to minimize the demerits of both of course India is a mixed economy so we also see these features in our economy conspiracy so we have a coexistence of public and private sector so in telecom you have BSNL and Vodafone in in Civil Aviation you have Air India and other private airlines like Jet Airways and so on and so forth slaw as far as productive resources are concerned the same resources that we talked about earlier both private sector and these state-owned them the government tries to intervene the least possible in the least possible manner in production or the functioning of the private sector however in certain special cases certain critical areas government does intervene for example price regulation and the case that we are the example that we can speak about here is the concept of MSP that is minimum support price so the government at the beginning of each harvest season says let us say the MSP of wheat is rupees 1500 per Quinten so if a farmer is not able to sell his supply of wheat then the government promises that it will purchase this feed on his produce at this particular rate this is done so that farmers have an incentive to produce more and more and they should not suffer for a bumper harvest because a bumper harvest will in fact lead to falling or crashing prices in a simple capitalist society so there is in fact government intervention as far as price regulation is censored and also we need talk about income distribution over here we can talk about subsidies government gives a lot of subsidies in three broad categories food fuel and fertilizers right and these subsidies are targeted at the poor people for vulnerable sections of the society like s C's s T's and poor farmers so government will intervene in income distribution as well so when you talk about economic growth of course the government gives the free hand gives a free hand to the private sector it is allowed to grow at its own pace make its own decisions and also development in this case government will take care of certain deprived sections of the society or certain areas for example which are remote so it is only the government of India or the state government which will establish a school in a small village of Bihar and the government does not expect the private sector to be contributing over there so wherever it is needed the government will intervene to ensure the development of the nation moving on to the certain conceptual parts of studying and economy so how is the health or the performance of an economy measured first concept of courses GDP or gross domestic product so it is the sum total of the values of all final goods and services final goods and services produced within the geographical territory I am only writing the keywords here produced within the geographical territory of an economy for a given period of time sum total of values of final goods and services produced within the geographical territory of a economy of a country within a specific period of time so when you talk about final goods we talk about the goods as they are consumed by the end consumer so when it if you're calculating the value of an automobile you will not take the values separately of the steering wheel or the seat or the engine you will take the final value of the car as it is being used by the end consumer like us it is a geographical or a territorial concept so if an American company or a company from UK is setting up shop in India and producing the value of its goods will be added in the GDP of our country as far as time is concerned the GDP is measured usually for in a period of one year next is a concept that is net domestic product so this is nothing but GDP minus depreciation most of you must be knowing depreciation is an accounting term and it is referred to as a reduction in the accounting value of an asset you do wear and tear next we have a concept that is gross national product the key word here is national so this based on nationality as opposed to GDP which is based on territory so the value of goods and services produced by Indians who are working abroad is added to the GDP and then the value of the foreigners who are working in India is subtracted that's how you obtain gross national product so next is a term that is next national product of course this is nothing but G NP minus depreciation so I think half an hour for we are already into half an hour in this session so any questions that you ask so Divya has asked the merits of mixed economy right maybe also the merits of mixed economy is a combination of socialism and capitalism and as far as the merits is concerned it is the same story so wherever the government intervenes a lot there is a propensity of corruption that we are seeing around us everywhere so wherever the private sector is strong it is expected that it is believed that it will lead to exploitation of people for example if a private company wants to set up a hydropower plant in a state like let us say Himachal Pradesh it is likely that it will not take care of the needs of the people who are living there and the people who might need need to be migrated out of the state I mean when you are China is a very unique example politically as far as a political system is concerned they are still socialist because there is only one single party in China there's a single-party rule right however when you talk about economically they are capitalists they have moved to towards capitalism or introduced economic reforms to have capitalism since in the year 1978 Rossio when you talk about the economies or the economic systems that we have spoken about they usually lie on a single continuum at one end is capitalism and the other it is socialism and somewhere in the middle of course is the mixed economies so we talked about ideally or or economies which are absolutely capitalist there are no such economies that exists right now and when you talk about economies which are absolutely socialist again there is a similar story however what you can do is if this is a central point if this is the center point of these this continuum there are certain economies which like more towards capitalism like USA okay and there are certain economies which are lying more towards socialism for example Cuba and if you talk about India or this continue perhaps you can categorize us somewhere over here so there is no hardened so there is no absolute capitalist economies and no absolute socialist economies money will be covering standard of living in some time Amrit a communism is a very broad-based term which includes political aspects as well right and socialism is more concerned about economies khushboo there is no there is no concept like best economy of course you understand that having money or national income we refer to as net national product when you talk about national income that is the nnp okay guys let's move on over here in this slide I will be giving you some data of course this data I am sure some of you are getting scared of looking at this data but however if you do try to remember this data and code them in a GD or P I it will be very helpful as far as your score is concerned so do try to remember or memorize certain basic data of Indian economy so India as you know is an emerging economy when you talk about nominal GDP we are ranked seventh in the world and the top economy as far as nominal GDP is concerned is USA however when you talk about GDP calculated at PPP India writes third and in this case China tops followed by USA and then of course we have India so the next question I am sure that is in your mind this is the latest data Russia again limit your questions to the next at the end of this particular half an our GDP our purchasing power parity now PPP is a concept which is used to equalize the different cost of living in different countries of course USA you must have heard is a more expensive country or the cost of living in USA is slightly high right as compared to India so PPP is nothing is it is a statistical measure which equalizes this difference created due to cost of living so for example currently one dollar equals approximately 70 rupees what you want to sajin illustration if you go to mcdonald's in india with 70 bucks I am sure you can buy a couple of things and have a decent meal or a snack out of it however if you go to USA a McDonald's in USA for $1 it is unlikely that you will be able to buy similar things I should did in India so this is this difference is created of course you do different costs of living this difference is removed when you talk about GDP at PPP again when you talk about but GDP per capita in terms of PPP it is higher India recently has overtaken China in terms of the rate of growth so that is the huge news if you are able to port this in any GDP where good marks for you as far as unemployment rate is concerned we are hovering around 5% we have managed to reduced it reduce it considerably over the past 10 or 15 years when it used to be around 10 or 12 percent now you will find a large number of figures as far as population below poverty line so World Bank over here as quoted India has quoted that India has 21 point 3 percent people who are below the poverty line as far as the last census or such or Tendulkar committee report is concerned the figure was twenty-one point nine percent right now another report has come which is say twenty nine percent so this is the twenty one point nine percent is the last official authentic figure as far as poverty ratio in India is concerned if you have to code then you put this particular figure again let's talk about exports and imports of course India is a net importing economy you can see it from this figure right so we have a huge trade deficit this is been Lee because our biggest imports are oil and natural gas in which case we are importing more than seventy percent of our annual need for natural gas and petroleum right so this really inflates our import bill export with we are lacking in a lot of high value products like engineered products so over here that is why our exports tend to remain on a lower side now take a careful look at the table in front of you siddharth i am not sure if you joined us right now i'll take questions at 3:00 p.m. so let us have a brief comparison of indian economies of india USA and China the first row of course gives you percentage of GDP contribution of agriculture industry and services and then percentage of population that is engaged in these three sectors of our economy as you can see there are some glaring observation glaring imbalances as far as Indian agriculture is concerned so almost 50% of our population is engaged in agriculture but they are producing only eighteen point seven percent of the economic output right so this is a huge problem that the Indian economy is facing a large number of people contributing very little to the economy however the scene is opposite as far as services sector is concerned so over here around twenty seven percent of the people contributing to 50 percent in the economy right again another problem that you see a large the largest group of people are engaged in agriculture now this is a huge problem for us because agriculture itself is a low productive activity the profits that you can hope to earn from agriculture are considerably less when you compare it with industries and services so what we are essentially targeting is shifting this excess population into industry now another question that you might ask why only industry and why not services but because industry is or manufacturing sector is employee intensive employee intensive what this means is the manufacturing sector needs all kinds of labor which are skilled unskilled or semi-skilled so industry sector industries will absorb all this all kind of labors and the number of late employment number of jobs that the industrial sector can provide is considerably higher when you compare it to services so we talk about services itself it is only suitable for highly skilled people's of it if you think about software industry in India only highly skilled and highly educated people can hope to enter this particular set up so that is why we are really focusing on industry now let us take a look at China of course China is considered to be a manufacturing hub of the world or the factory of the world so it is a considerable part of it is of its economy is formed by the industry or the manufacturing sector similarly services sector is also highly developed again when you talk about China it is not a developed economy as such it is a developing or an emerging economy so over here also considerably large number of people are still employed in agriculture the USA I have deliberately taken USA as a comparison because USA is a fully developed economy so over here if you observe these figures these are almost equal so the number of people employed in each sector is contributing almost equally to the economy as such right okay now the data in the previous slide was updated this is a particular table this has slightly outdated data but it is useful when we are comparing these three economies of course when you take a look at here we are import dependent and surprised perhaps some of you are surprised how come USA is importing so much as compared to its exports it's supposed to be a developed economy so still why is it so dependent on exports and the answer you will find in the previous slide as far as services sector is concerned a large number of its for a huge portion proposed proportion of this population that is 80 percent is engaged in services and very less that is 18.4% is engaged in manufacturing sector so most of what is USA importing is manufactured goods like automobiles etc yeah so next we'll talk about our basic features of Indian economy almost I am sure most of you already know thee know these features low per capita income yes a large proportion of our population is below poverty line and it does bring down the average per capita income in the country there are huge inequalities in income distribution so the top 10% of Indian the top 10% richest Indians upon 75% of the economic resources so there are huge imbalances in Inked income distribution so we have a rapidly growing population as far as figures for 2001 11 census this period is concerned our population group grew by almost 17 percent so every year we had a population equivalent to the population of Australia there is low rate of capital formation of India has been capital starved or capital poor poor never since our independence from the British so that is why we keep on looking at a broke foreign countries to bring in more fbi's or foreign direct investments in our nation so we have a dualistic nature of economy so in every sector of the economy you will see that there are modern industries as well and there are traditional industries as well so if you talk about agriculture the richer farmers of punjab haryana western yupi are using modern techniques of agriculture however if you compare them with poorer farmers of let us say Telangana or with harbours these people are poor and continue to use traditional methods of Agriculture again we have already discussed that India is a mixed economy and follows the concepts or philosophy of capitalism as well as socialism or when we attain independence we were highly influenced by the economy of USSR USSR of course adopted a socialist economy and our political leaders try to emulate this in India so we borrowed this idea of economic planning or centralized planning from the erstwhile USSR however one key difference was the planning in India was indicative and not imperative so whatever the targets were given they were mainly guidelines and they were not really target based a growth it was imperative in case of USSR so Planning Commission was an organization which was critical in economic planning in India it was established in 1950 and its key job was to create or formulate five-year plans for social and economic development in the country but currently we are in the twelfth five-year plan period this particular plan started of course in the year 2012 and will go on till 2017 so again these are certain figures that you must try and memorize try and coat them what exactly our political leadership or what exactly where exactly are we headed to or what are our targets so agricultural growth we are targeting a growth rate or four percent per annum this is related to what I said earlier agriculture is a very low productivity activity right so that is why four percent it does not sound so much however for agriculture we talk about agriculture it is a decent enough target industrial growth again it is a high productive sector so ten percent per annum is something that we can we are aiming at in the 12th five-year plan and this is most important aspect of the 12th five-year plan we need more than one trillion dollars investment in infrastructure this includes roads railways telecommunications shipping etc also more critically at is power so India is a power starved nation so we need more than 1 trillion dollars to finance our infrastructure or growing infrastructure needs again we need greater focus on health and education the we're the 12th five-year plan has not been scrapped even though the Planning Commission has been done available again we are we continue to plan for better targeting of subsidies and bring down the power ratio by a poverty ratio by 10 percent so we had 21.9% you want to reduce it to eleven point nine percent done this is an interesting scheme or a very important team per speaker scheme that is being launched by the government in 2013 that is direct cash transfer or direct benefits transfer now I am sure most of you are already familiar with it because we are we've already started getting LPG subsidies under this particular scheme so what the government does what the government used to do earlier let us say in case of LPG we could buy LPG you would buy LPG from certain shops at the subsidized price so let us say the market price of an LPG Surinder used to be 600 bucks so you go to a shop go to a agency rather and you would purchase it by at 400 rupees the balance 200 rupees the government would transfer to the agency our gas agency now this particular system was creating huge problems as far as corruption is concerned so there was large amount of so large amount of bit fridges or leakages from these particular subsidized agencies now in order to remove these practices do away with these practices this particular scheme was launched so the two hundred rupee which previously the government would pay to the lpg agency now the government what it does is transfers it directly to your accounts so this particular scheme has been started as far as LPG is concerned on an India All India level however the government plans to expand its scope to include all kinds of transfers that the government does to people for example scholarships disaster relief your moderator pages etc okay let us have that question-and-answer session right now before we move on yes any questions Mandeep as far as your first statement is concerned concerned per-capita income is not the best indicator of economic development economic development includes a large number of other factors also like how equal the society is is health and education facilities are they being given to all sections of the society are the poor people also enjoying the benefits of very high quality health and education services right so as far as increase in per capita income is concerned first the government is continuously working towards increasing the economic output by providing better infrastructure by creating more jobs and investing more in social welfare projects when we talked about dualistic nature of the society there are still a lot of industries in which modern and traditional practices coexist or work in parallel right so when you talk about agriculture you get you have rich farmers who are using imported tractors right and also poor farmers who are still using cattle for in agriculture yes any other question a Siddharth I believe I explained this difference earlier I think you join the session much later yes any other questions okay moving on so broadly speaking there are three sectors of an economy I yes sir thinking okay moving on so there are three major broad sectors in which three broad categories in which an economy can be divided first of all of course is the primary sector this involves industries which are related to harvesting of naturally occurring resources of course it includes agriculture mining quarry etc next is the secondary sector this involves the manufacturing sector that is involves processing of primary sector goods lastly we have the tertiary sector that involves services sector again this includes banking services insurance services etc now one common phenomena that we have seen across development of economy is the world over when the economy is less developed the primary sector continues to be the dominant force in the economy as far as as the economy develops and in and becomes a developing economy slowly but surely the secondary sector of the manufacturing sector dominates the economy and as we saw in the case of USA which is a developed economy tertiary sector tends to become more dominant as far as contribution to economy is concerned right so if we try to understand this phenomena in case of less developed economies they do not have industries they do not have a can't equate capital so all what they can do is not extract or utilize the resources as they are occurring naturally but slowly as capital accumulates people become richer companies become richer the government becomes richer industries start to develop the people who are involved in the primary sector shift towards the develop being sector so the manufacturing sector right so industry tends to become dominant now as far as industry is concerned then these economies reach a point in which they reach a saturation so for example if you talk about us a per capita ownership of automobiles is 800 out of 1000 people so out of it out of 1,000 Americans 800 have cars so you can naturally imagine there is no incentive for produced producers to increase their outputs of automobiles in us say in this case industries stagnate markets saturate and people shift towards more of services however when you talk about India this particular phase that is the domination domination of the secondary sector this never came in the development of our economy we straightaway shifted from less lesser developed economy to or other we it straight away shifted from the dominance of primary sector to the tertiary sector now the reasons of this particular phenomena are many fold however one major reason was that we've always been capital starved but we've always had less capital as compared to other nations also you can understand the secondary sector of the manufacturing sector requires considerable amount of capital investment for it to grow that is something that we were not having so we shifted more or focused more on the tertiary sector for example the information technology industry now I will be going through very recent government initiatives taken by the central government for each sector including agriculture manufacturing and services now a PMC but these are laws which regulate how farmers get their produce to consumers so this is a huge chain if you want to understand this farmers will go and accumulate their goods at selected places called Mondays and over here's over here retailers or shopkeepers will buy the produce by the farmers and you as a consumer will purchase your food from the retailers now what we have been saying in the past is as far as this particular stage is concerned it has a large number of problems it has a large number of middlemen and intermediaries who are exploiting our poor farmers and giving them least possible compensation so this particular Act which shrimp which regulates this process is being reviewed to make it more friendly for our farmers one of the proposals in this case is that of contract farming and this will allow a farmer to directly sell his or her own goods to the customer this is already in operation so for example a McDonald's or KFC directly signs an agreement with the farmer it produced it provides with high quality seeds high quality material inputs fertilizers money etc and says and agrees and the farmer agrees to use his expertise and land of course to produce the kind of goods that they want so the farmer is saved from this particular chain entirely otherwise these are two recently launched at AI BP & free shi shi Eugenia these are being launched for the benefit of farmers again I I recommend that you read a couple of lines on them get a few facts again the government is working towards providing good quality seeds fertilizers technology another important initiative is that of Kissel credit card which allows our farmers to take loans using this particular card and the Jonathan yogena this particular scheme of course is aimed towards financial inclusion and aims to open bank accounts for a large number of households in the country it has been very successful so it has opened up proximately 19.6 crude accounts in the last 1 1 and a half years since it has been launched in August 2014 so another important aspect of giving support to the agriculture sector involves micro finance so microfinance is nothing but providing finances or loans advances etc to majorly low income clients and the self-employed who traditionally lack access to banking and related services as far as this particular section of the society is concerned they are indeed of small ticket size as far as finances is concerned so perhaps a farmer would need five thousand rupees or ten thousand rupees every year at the beginning of the harvest season or before or at the beginning of the sowing season now auric are traditional banks and other institutions are always apprehensive of extending loans to such farmers because of course farmers as a community is a very risky customer when you talk about our pants they are risky because they are entirely dependent on weather phenomena so other for other bands would be skeptical in extending loans to them over here micro financing institutions provide this service in the last budget the government announced the formation of mudra Bank this is micro units development and refinancing agency bhadram Bank this is nothing but a refinancing agency's which will provide loans to other micro financing institutions microfinance further the ticket size is less and this duration of these particular loans are quite less more very importantly loans are offered without collaterals or security you know it is very unlikely that a poor self-employed person let us say who wants to set up a business and needs ten thousand as the seed capital would have any security or collateral over here micro financing institution extend these loans to such needy people and of course these loans are generally taken for income generation purposes so they are not specific loans for example car loans education loans these are nouns taken specifically for income generation so when you talk about the government initiatives as far as industry is concerned in 1991 the Indian government took a major step of reforming our economy so we introduced LPG right liberalization privatization at globalization related reforms so we saw a large number of private sector large number of industries being opened by for the private sector which in terms of globalization we allowed foreign capital in terms of FDI and FII to be invested in the country and liberalisation so till then our create barriers in terms of import duties were very high we then after 1991 try to reduce them again as far as industry is concerned the government is facilitating in terms of technology research and development so you will keep on finding this word in almost every economy related topic so government is again improving the infrastructure in terms of railways and dedicated flight corridor freight corridors is very important because there is a thumb rule if you want to transfer anything any product to a distance which is greater than 250 kilometers yes so far it if if you have to transport up of or send a product more than 250 kilometers then railways are the more cost-effective of the as compared to roads again India is make taking another interim many international collaborations are Prime Minister is visiting a large number of nations to many if you ask the opposition but still we need FDI and Indian companies are acquiring large number of companies outside of the country as well so as far as SMEs are concerned small and medium enterprises the government has initiated a large number of schemes to provide them with less or less interest loans again this is a brief introduction regarding the economic reforms as they were initiated 1991 so the dominance of the public sector in industrial activity was removed that monopoly was removed a large number of industrial activities especially the commercial goods sector was opened up for the private sector so till then the government enjoyed a large number of discretionary controls on industrial investment and capacity expansion so if you had to set up a factory before 1991 you would go to the government to set to get a license if you want to if you wanted to expand or rather expand the capacity of your factory again you would approach the government for a permission also let us say if you're producing pens and now you want to produce pencils or rather you want to change the product mix that you're producing then again you had to approach the government so there were large number of controls or regulations that existed these were removed as far as pre disconcert the tariff barriers and non-tariff barriers were brought down to allow for India to import the things that it needs earlier we had limitations in terms of FDI and FII s were not allowed so far under globalization we opened our economies to both moving on with government initiatives as far to develop the industrial sector the next very important initiative or campaign that the government of india has launched is that of make in india its objective or the purpose is to encourage manufacturing in india by domestic as well as foreign entrepreneurs so we are looking for FDI to be coming into our country people setting up shop setting up factories and producing goods in the country as well as we are also encouraging domestic of domestic entrepreneurs to set up factories and create jobs in India as far as its objective is concerned it wants to it seeks to improve the improve India's Ease of Doing Business ranking so what we are targeting is a right which is below 50 in the ease of doing business by 2019 so as far as making India is concerned there are five mechanisms that it is targeting first is simplification of processes so even till today even after 91 reforms we have if I want to set up a factory or a shop in India I have to approach a large number of departments to set up my business so on an average it takes about 30 to 40 days to start a business in the country whereas a country like Singapore the process takes only two days so these processes have to be simplified and controls should be lessened again we come across this familiar term infrastructure improvement is required third skill development now we all have heard that India is short of doctors engineers etc however one more thing that we tend to forget is India is also falling short of workers like plumbers carpenters people who can operate heavy machinery in factories so these people are also very important in the development of an economy so as far as skill development vocational training is also a focus of make in India and also we have another scheme running that is called skill India make it in here tends to put this focusing on twenty five manufacturing sectors these are certain sectors which are political leaders or economic thinkers have felt that in in which we have the potential of becoming top ten in the world in the coming year so only such sectors have been chosen to be focused upon again India is attracting more and more FDI to get more and more capital so for example recently we increased the FDI limit to 49 percent in terms of defence production yes so we came across this term ease of doing business this is a ranking which has been given by world bank group as the name suggests it describes the ease or difficulty in doing business in the country recently India has been ranked 130 out of a total of 189 countries last year we had 142 so we have shown a considerable jump so the various areas which are looked at as far as ease of doing this business is concerned regulation to start business finances issue property issues taxes legal ease etc so these are the factors which will decide the ease of doing business of a inner country so moving on to the government initiatives take for the services sector first of all FDI inflows so recently insurance sector FDI limits work increase to 49 percent 49 percent please don't mind my handwriting digital India campaign this is something that I will be taking up in detail in some slides of course we want to in rural internet penetration so national optic fiber network this is providing high-speed broadband access to every village in the country right benchmarking by government companies in terms of quality of services that they are providing again we are promoting tourism and extending e tourist visa facilities to large number of countries and most recently and importantly to China now let us discuss about digital India so this is an initiative by the Government of India it is mainly concerned with creation of digital infrastructure like high-speed Internet connections also what it is targeting is delivery of services especially the services given by the government in a digital mode and as well as creating more and more awareness and literacy in terms of digital knowledge so let us talk about the basic components of digital India again we want to create digital highways but Broadway and highways to provide high-speed Internet connections which will allow people in in our villages to access key literacy campaigns he lectures probably something similar to this one universal access to mobile connectivity now as of now we are already as per the latest recent data by tra I already India has more than 1 billion mobile users public Internet access programs of course we want to extend the benefits of internet or connectivity to all sections of the society then key governance that is reforming government through technology so let us so we want to get over the red tape ISM the bureaucracy bureaucracy of the government's are moving hard copied files and let the government funk make the government function on digital platforms ecran thie is related to electronic delivery of services so for example the exams that you take for example the cat you filled up the form online and the exam is conducted online so these are some things electronic delivery of services also if you want to apply to the passport for example in Chandigarh it is very easy now because everything is online information for all now as far as the right to information is concerned one of the clauses was to make the information public without the public asking for it now only using through using digital formats it is possible so take so scanned copies of all important government documents can be put up on their websites of course one aspect of manufacturing that India is really lagging behind is electronics goods so over here also digital India focuses on it wants to create digital India will also aim to create professionals for IT jobs in terms of their training and I am including their early early harvest programs that is catching the people young in terms of information knowledge of information technology and up gradation of Indian information technology sector yes moving on let us try and understand the concept of foreign direct investments so if a foreign company or a foreign headquartered company comes into the country and invests for a long-term for example sets of a factory that is known as foreign direct investments opposing Li there is foreign institutional investments so these are foreigners or people based outside outside of the country which invest only for a short term only in the financial markets of the country so let us say if the share market is now for some reason fi is will come in which is a large number of shares when the share market does go up then they will remove or take away that money so naturally fi I is not a very reliable source of foreign exchange because they can take out their money in a very easy manner next and this is related to a question which was asked to me earlier the debate related to growth versus development now economic growth is a narrower concept as compared to economic development economic growth is a objective concept that is you measure growth in numbers 8% 9% 10% however when you talk about economic development it is related to standard of living standard of living of people right so it is obviously the krama growth is a part of standard of living so it is a much broader concept when you compare it to economic growth now the idea is how to measure such a broad concept for this idea so we use a concept called HDI or Human Development Index every year the United Nations Development Program brings out ranking of nations in terms of HDI right so it has three indicators which are measured and on the basis of which HDI is calculated first of course is indicators related to health so over here you will find average expected age average age expectancy in a in a country education right so this will include certain literacy measures and of course think um in which G and P what per capita is taken so you can see HDI is a more comprehensive concept to ensure that the development is affecting all sections of the society or the benefits of economic roads are being perkily rated to even the lower sections of the society okay next important concept is of course related to inflation it is a rise in the general level of prices of goods and services in economy over a period of time so there are three ways the there are three types of inflation's first is demand put second is cost push and third is structural inflation structure inflation now of course when the demand of a particular good rises rapidly that relate it causes a rise in prices or inflation such inflation is known as demand for inflation when the raw material cost or the cost of inputs Rises for example the cost of oil if it rises then of course travel becomes expensive you see inflation in travel rates so that is called cost push inflation and then structure inflation is related to lack of infrastructure in the country so that example that we took earlier if you're transporting goods for to over 250 kilometers if you're using roads then you are taking in extra costs and of course this will contribute to inflation that is known as structural inflation so very briefly we will talk about what monetary policy is all about in detail this will be covered in detail in in the lecture related to banking sector so monetary policy is a policy that the RBI makes to control the money supply in the economy so money supply is nothing but the money that is circulating in the economy so you can very well imagine if the money supply increases that is money in our pockets on people's pockets increases demand will increase which will lead to increase in prices or inflation so if the inflation is very high and the RBA wants to control it it will reduce money supply using its various tools of monetary policy and lead to reduction in prices or controlling inflation right guys that brings us to the end of this particular presentation so I will take questions now okay the question is why 250 kilometers so if you are using a railway transport for a distance which is less than 250 kilometers it ends up being very high due to economies of scale right so if you obviously sending a large amount of goods over very long distances if you're using roads using trucks cargo transporters etc that becomes expensive when you compare it to database okay I apologize I'll answer any question again I'm sorry so the question is why 250 kilometers in terms of railway and Road but this is a concept related to economies of scale naturally if you're transporting a large amount of goods however the distance is less than 250 kilometers then railways will be more expensive to you as compared to roads and if the distance is greater than 250 kilometers and you are transporting a large number of goods using a number of trucks if the distance exceeds 250 kilometers then railways is a better option so this is a nothing but a thumb rule yes any other question before we end this lecture any other question guys yes anchor this video will be available on YouTube as well uncle no issues I guess you can write you can view this video online this will be put up on YouTube or not on our official channel that is hit bull's eye okay ash on as far as LPG is concerned the L started L L stands for liberalisation P stands for privatization right so as far as P is concerned earlier before 1991 the government sector enjoyed monopoly over the industrial sector that is private sector was not allowed to let us say produce steel in the country right however after 1991 it was decided that private sector if they have the capability skills and the money they can invest in or start manufacturing in the country as well as far as globalization is concerned globalization is nothing but coming together of all world economies so we allowed foreign foreign companies for example US companies to come in invest in India earlier we were putting restrictions on them they were how RBI controls the money supply that will be covered in a separate presentation or separate lecture that is banking sector and related issues in India you can note down my email ids as well but guys only academic related queries right so don't ask me which college is better how should i film the forum for that we have separate experts right we have no more questions so thank you so much for attending this live lecture right thank you

Indian Economy - Sustainable Development

 

• The economic growth that a country and its people achieve over a period of time, is achieved at the cost of the environment.

• Environment is badly damaged because of various economic activities — industrial activities, mining activities, and infrastructure development, etc.

• Sustainable development is the need of the hour. It has the potential to address the challenges of the environment and also of the economy.

• All biotic and abiotic factors collectively constitute environment.

• All living organisms, such as animals, human beings, plants, birds, insects, and all other single cell and multi-cell organisms are biotic elements.

• All other non-living things, such as air, water, land, etc. are abiotic elements.

Significance of Environment

• Environment plays a significant role in every aspect of life. The contributions of the environment are varied: It provides resources (both renewable and non-renewable resources).

  • It has the capacity to assimilate wastes.

  • It provides diversity, essential for the sustenance of life.

  • It provides aesthetic services.

• Environment has the carrying capacity, i.e., it re-generates some sorts of resources provided the rate of exploitation is lesser than the rate of re-generation; if the rate of exploitation increases, the resources get exhausted.

• Environment has the capacity to expel impurities (various pollution in the environment); it has limited capacity (absorption capacity); hence, if the rate of pollution is more than the rate of purification, then it is a threat to the environment (i.e. environmental crisis)

Major Problems

• The environmental crisis creates many problems such as depletion of Ozonelayer and Global Warming at the global level.

• Environment has a major impact on the life and living of people; it may cause health issues, natural calamities (floods, earthquakes, droughts, etc.).

• India has abundant natural resources (both renewable and non-renewable resources).

• An exponential increase in population threatened led to over-exploitation of the natural resources which thereby threatened the environment.

• Some problems with the exploitation of resources in India are −

  • Water pollution
  • Air pollution
  • Land degradation
  • Deforestation
  • Desertification,
  • Wildlife extinction, etc.

• The per capita forest land in India is about 0.08 hectare, while the requirement is 0.47 hectare.

• India has about 17% of the world’s total human population and 20% of the world’s total animal population, whereas, it has only 2.5% of world’s total geographical area.

• The number of vehicles in India increased from 3 lakhs (in 1951) to 67 crores in 2003.

• The use of motor vehicles is one of the major sources of air pollution in India.

• The Central Pollution Control Board (CPCB) of India has identified 17 categories of polluting industries.

• Environmental crisis also leads to economic crisis.

Global Warming

Global warming is a human-induced impact on the environment, under which the temperature of the lower atmosphere is increasing.

In the last two centuries, because of increasing industrial activities, burning of fossil fuels, deforestation, etc. emission of some of the greenhouse gasses (i.e. carbon dioxide, methane, CH4, etc.) have been increasing beyond the limit of environment’s absorbing capacity. The increased amount of greenhouses disrupted the cycle of heat budget; resultantly, the temperature of the lower atmosphere is increasing.

The major consequences of global warming are — melting of polar ice, sea level rise, coastal floods, extinction of various organisms, ecological imbalances, natural calamities, etc.

To arrest this alarming trend, international efforts have been made. The first attempt of that sort is the Kyoto Protocol, which was the result of the UN Conference held in Kyoto, Japan in 1997. The Kyoto Protocol set parameters to control the impacts of global warming by reducing the emission of greenhouse gases globally.

Ozone Depletion

Ozone depletion is the phenomenon of reduction of the ozone layer. Ozone layer is a Stratospheric layer of Ozone (O₃) that filters the sun’s ultraviolet rays and protects us from many diseases including skin cancer, cataract, and sunburn.

But because of the excessive emission of chlorofluorocarbons (CFCs), used as cooling substances in air-conditioners and refrigerators, or as aerosol propellants and bromofluorocarbons (halons), used as fire extinguishers, ozone layer is getting depleted (as shown in the above image – through a time period).

The Montreal Protocol was brought into existence to restrain the use of CFC compounds along other ozone depleting agents including carbon tetrachloride, trichloroethane (methyl chloroform), and halons (bromine compounds).

Sustainable Development

• The notion of Sustainable Development was adopted by the United Nations Conference on Environment and Development (UNCED).

• Sustainable Development is defined as the development that meets the needs of the present without compromising the ability of future generation to meet their own needs.

• The Brundtland Commission suggested that meeting the needs of the future depends on how well we balance social, economic, and environmental objectives, or needs, when making decisions today.

• Using the non-conventional sources of energy (such as Hydro power, wind power, geothermal energy, tidal power, etc.) is one the best strategies to protect the environment.

• In rural India, a good number of people still use wood and other biomass products for cooking, and it has a great negative impact on the environment as the process involves cutting of trees; hence, providing them LPG as an alternative strategy would help save the environment.

• Promoting the use of CNG for motor vehicles is another important alternative.

• Solar power is very handy to use; a solar power plant can be established either for a single household and also for a big factory.

• Promoting the use of traditional knowledge practices is also environmental friendly and also good for the human health.

• Organic farming also needs to be promoted at large scale to improve the environmental condition, as conservation of the environment is the major objective of sustainable development.

• Pollution Control Boards − Central Pollution Control Board (CPCB), established in 1974, aims to address the environmental concerns especially, water and air pollution.

• The CPCB is responsible to investigate, collect, and provide information related to water, air, and land pollution across the country. It also sets a standard for the sewage/trade effluent and emissions of various industrial pollutants.

Chipko or Appikco Movement

The meaning of Chipko is ‘to hug’. This movement was started A similar movement, known as ‘Appiko’, was started in Salkani jungle of Sirsi district of Karnataka (one of the southern states of India).

Indian Economy - Macro Economics

 

• Macroeconomics is a broader concept; it talks about the whole economics of the country. For example −

  • Growth of GDP
  • Total production of cereals in India
  • Total export in 2014
  • Unemployment
  • Inflation etc

• In the economy of a country, the output level of all the goods and services in the company have a tendency to move together. For example, if output of food grain is experiencing a growth, it is generally accompanied by a rise in the output level of industrial goods.

• The prices of different goods and services generally have a tendency to rise or fall simultaneously. We can also observe that the employment level in different production units also goes up or down together.

• Macroeconomics simplifies the analysis of how the country’s total production and level of employment are related to attributes (called ‘variables’) such as prices, rate of interest, wage rates, profits and so on.

• When these attributes start changing fast, like when prices are going up (in what is called an inflation), or employment and production levels are going down (heading for a depression), the general directions of the movements of these variables for all the individual commodities are usually of the same kind as are seen for the aggregates for the economy as a whole.

Types of Commodities

• All kinds of the commodities in an economy are divided into three major parts −

  • Agricultural goods
  • Industrial goods
  • Services

• Further, Macroeconomics tries to analyse how the individual output levels, prices, and employment levels of these different goods get determined.

Economic Agents

• Economic agents are those individuals or institutions who have an effect on the economy of a country. For example −

  • Consumers who decide how much to consume.

  • Producers who decide the production level.

  • Other agents like government, bank etc. who decide the different policies.

• Adam Smith, the father of modern economics, had suggested that if the buyers and the sellers in each market take their decisions following only their own self-interest, economists will not need to think of the wealth and welfare of the country as a whole separately.

• Macroeconomic policies are generally controlled and operated by the State itself or statutory bodies like the RBI, Securities Exchange Board of India (SEBI), etc.

• According to John Maynard Keynes (the writer of ‘The General Theory of Employment Interest and Money’), all the labours who are ready to work will be finding the employment and all the factories will be working at their full capacity.

• The classical and traditional thinking (of Keynes) changed after the Great Depression of 1929.

• The expenditure, which raises the production capacity of a firm or an enterprise is called investment expenditure.

Capitalist Economy

• The characteristics of a Capitalist Economy are −

  • It is based on wage-labour and private ownership of the means of production.

  • Here, most of the inputs and outputs of production are supplied through the market (i.e. they are commodities) and essentially all production is in this mode.

  • The sale and purchase of labour service takes place at wage rate.

• The capitalist country is that country in which production activities are mainly carried out by capitalist enterprises or several entrepreneurs.

• Land, Labour, and Capital are the key factors of production in a capitalist economy.

• Profit is the part of revenue, which is left with the entrepreneur after the payment of rent for land and building and wages to the labourers or workers.

Indian Economy - Micro Economics

 

• Needs are the basic items required for human survival. And, goods and services are produced to satisfy those basic needs. Every individual in one or the other way is engaged in the production of goods and services.

• As resources are limited; therefore, allocation of the resources and the distribution of the final mix of goods and services are the basic economic problems of our society.

• The basic economic activities of our society are production, exchange, and consumptions of goods and services.

• If production does not meet the demand, it leads to scarcity.

• These problems can be solved either by a personal discussion with the individual (whose demands need to be fulfilled) as done in the market or by a planned approach initiated by the central authority, i.e., the government at the center.

Types of Economy

• Based on the characteristics, an economy is divided into two types. They are −

  • Centrally planned economy
  • Market economy

• In a centrally planned economy, the government or the central authority plans and makes decisions regarding all the important activities in the economy.

• On the other hand, in the market economy, all the economic activities are planned and organized by the market.

• Market in economics is an institution that facilitates people free interaction and ensures the economic activities run smoothly. So, market is basically a center where people can exchange their products with each other.

• In economics, market is a place that regulates and manages the demand and prices of goods. For example, as the demand for product rises, prices of that product also rises.

• In the present world, most of the countries have mixed economies; it is an economic system with a mixture of economic planning with government intervention and market. Here, the government intervenes and makes important decisions. Markets are given partial liberty to make decisions, which would benefit the market and the economy.

• India accepted the policy of mixed economy after independence. In 1948, India declared itself a mixed economy for the very first time.

• Positive economic analysis describes how the different mechanisms of an economy work.

• Normative economic analysis is the study of what economic mechanism should be adopted in order to achieve a particular goal.

• Economics is broadly categorized into two groups. They are −

  • Microeconomics
  • Macroeconomics

• Microeconomics largely describes the behavior of individual economic agents in the markets for different goods and services and tries to figure out how prices and quantities of goods and services are determined through the interaction of different individuals in the markets.

• Major questions answered in Microeconomics are −

  • What is the level of total output in the economy?

  • How is the total output determined?

  • How does the total output grow over time?

  • Are the resources of the economy (e.g. labor) fully employed?

  • What are the reasons behind the unemployment of resources?

  • Why do prices rise?

• On the other hand, Macroeconomics describes the economy as a whole by focusing on aggregate measures, such as total output, employment, and aggregate price level.

Indian Economy - Open

 

• In the modern world, most of the economies are ‘Open Economy’ because of the three following reasons −

  • Market Linkage − It means consumers and firms both have the opportunity to choose between domestic and foreign goods.

  • Financial Market Linkage − It means investors have the opportunity to choose between domestic and foreign assets.

  • Factor Market Linkage − It means firms can choose where to locate production and workers can choose where to work.

• Total foreign trade (i.e., exports + imports) as a proportion of GDP is a common measure of the degree of openness of an economy.

Features of Open Economy

• Every country has its own currency and in the international market, there are hundreds of currencies with different values; hence, the International Monetary System has been set up to handle these issues and ensure stability in international transactions.

• The Balance of Payments (BoP) keep a record of the transactions in goods, services, and assets between residents of a country and with the rest of the world for a given period (typically a year).

• The Current Account records exports and imports of goods and services and transfer payments.

• When exports are greater than imports, it is known as trade surplus and when imports are greater than exports, it is known as trade deficit and the balance of exports and imports of goods is known as the trade balance.

• Exchange rate is the rate at which one currency is exchanged with the other.

• Bilateral nominal exchange rates refer to exchange rates for one currency against another and they are nominal because they quote the exchange rate in terms of money, for example, one pound or dollar is equal to many rupees.

• The real exchange rate is often considered as a measure of a country’s international competitiveness.

• In a system of flexible exchange rates (also called floating exchange rates), the exchange rate is determined by the forces of market — demand and supply.

• Changes in the price of foreign exchange under the flexible exchange rates are referred to as currency depreciation or currency appreciation.

• Managed Floating Exchange Rate System is a mixture of a flexible exchange rate system (the float part) and a fixed rate system (the managed part).

• Managed Floating Exchange Rate System, also known as dirty floating, is the system under which central banks intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements whenever they feel that such actions are appropriate. Official reserve transactions are, therefore, not equal to zero.

Gold Standard System

• Under the Gold Standard system, each participant country is committed to guarantee the free convertibility of its currency into gold at a fixed price, which means that the residents have, at their disposal, a domestic currency which is freely convertible at a fixed price into another asset (gold) acceptable for all international payments.

• The gold standard system made it possible for each currency to be convertible into any other currency at a fixed price.

• In 1967, gold was removed by creating the Special Drawing Rights (SDRs) (also called as ‘paper gold’), in the IMF with the purpose to increase the stock of international reserves.

Close Economy Vs Open Economy

• In a closed economy, there are three sources of demand for domestic goods. The sources are as follows −

  • Consumption (C)
  • Government spending (G)
  • Domestic investment (I)

• Closed economy = C + G + I.

• On the other hand, in an open economy, exports and imports are the additional elements, considered to measure the economy.

• An increase in foreign income leads to increased exports. This thereby increases domestic output and improves the trade balance.

Indian Economy - Reforms

 

• 1991 was a landmark year in the history of Indian economy. There was a tectonic shift in the Indian economic policy (during this year).

• In 1991, India suffered great economic crisis, which was uncontrollable, the condition was worsening gradually; resultantly, the inflation of the prices of daily use commodities hit the people hard.

• As the foreign currency reserves went down, the balance of payment crisis was a major challenge for the country to deal with.

• The reason for this crisis was long standing decline in exports, since 1980. When we import some product (such as petroleum), we need to pay in dollars, which we earn through export of our products.

• On the other hand, government’s income was inadequate to address the issue; the revenue that the Government generated through taxation was inadequate.

• India borrowed a loan of $7 Billion from the International Bank for Reconstruction and Development (IBRD), i.e., the World Bank and the International Monetary Fund (IMF), on the condition to liberalise the economic policy and open doors for international trade in India.

Liberalization

• The period from the late 1980s to now witnessed significant reforms. The reforms can be categorized into two groups −

  • Stabilisation measures.
  • Structural reform policies.

• Stabilisation measures are short-term in nature and attempt to control the crisis situation by maintaining sufficient foreign exchange reserves.

• Structural reform policies are long-term policies that attempt to improve the overall economic condition by increasing the international competitiveness and removing the rigidities and other restraining obstacles.

• Under the liberalisation policy of 1991, there were many changes in the areas of licensing and procedures, import of technology, import of capital goods coupled with a reasonable rate of public investment and almost total protection to domestic industries from international competition through quantitative restrictions on imports as well as high tariff rates.

• The industrial licensing system was almost abolished except for some industries such as cigarettes, alcohol, hazardous chemicals, electronics, aerospace, drugs and pharmaceuticals and industrial explosives.

• Particular industries such as the defence equipment, atomic energy generation, and railway are kept exclusively under the public sector.

• There are some industries that have been provided the liberty to fix the prices for their products by the government.

• Financial sector, which includes banks, stock exchange operations, and foreign exchange market were to be regulated and controlled by Reserve Bank of India (RBI), but the policy brought in a change, wherein, many of the financial institutions have been given liberty to take NOT ALL, but some major financial decisions on their own.

• Many Foreign Institutional Investors (FII) including merchant bankers, pension funds, mutual funds, etc. are allowed to invest in the Indian financial market.

• Tax policies and public expenditure policies are collectively known as fiscal policy.

• Tax is categorized into two parts — Direct Tax and Indirect Tax.

• Direct taxes are taxes collected on the income of individuals as well as business enterprises. After liberalization, the share of direct tax is coming down.

• Taxes levied on goods and commodities are known as indirect tax.

• Foreign exchange market has also been reformed and this helps to resolve the crisis of balance of payments.

• Trade and investment policy reforms increased the international competitiveness of the industrial sector.

• To protect domestic products and industries, the government used to impose quantitative restrictions on imports by keeping the tariffs very high. This policy has also underwent reforms now.

• Import licensing was removed; however, it remained active for the hazardous and environmentally sensitive industries.

• Quantitative restrictions have been completely abolished from April 2001.

• Export duties have also been removed to increase the competitive position of Indian goods in the international market.

Privatisation

• Privatisation means opening the doors of the sectors and industries which were once preserved for the government. This also includes selling the government-owned enterprises to private companies.

• Government companies transformed into private companies either by −

  • Government’s withdrawal from the ownership and management, or,

  • Selling the public sector companies to private companies.

• Selling a part of the equity of government enterprises to the public is called Disinvestment.

• Besides, to improve the efficiency of certain public sector industries, government has vested on them, the autonomy to take managerial decisions. And, some of the industries, which are highly regarded have been awarded the status of Maharatnas, Navratnas, and Miniratnas.

• Maharatnas include Indian Oil Corporation Limited and Steel Authority of India Limited.

• Navratnas include Hindustan Aeronautics Limited and Mahanagar Telephone Nigam Limited.

• Miniratnas include Bharat Sanchar Nigam Limited, Airport Authority of India, and Indian Railway Catering and Tourism Corporation Limited.

Globalisation

Globalisation is a complex phenomenon, which was a result of the integration of world economy and trade interdependence.

• Because of advanced development of information technology, many of the services now are getting outsourced. For example −

  • Business Process Outsourcing (BPO)
  • Voice-based business process
  • Record keeping
  • Banking services
  • Accountancy
  • Film editing
  • Music recording
  • Book writing
  • Research and editing, etc.

• Globalization helped to promote many Indian companies in the international market. It led to Indian companies opening their branches in different countries of the world. For example, ONGC Videsh operates in 16 countries, Tata Steel operates in 26 countries, HCL in 31 countries.

World Trade Organization (WTO)

• WTO was established in 1995.

• It was preceded by GATT (General Agreement on Trade and Tariff), which was established in 1948, which had 23 member countries participating in it.

• It was a multilateral trade agreement established with the objective to offer equal opportunity to all countries in the international market for the trading.

• WTO agreement covers goods as well as services and intended to provide equal opportunity to all by removing the various tariff rates (in different countries) and non-tariff barriers.

• As a member of WTO, India also follows the WTO’s agreements.

After the Reform Period

• After the reform of 1991, agriculture sector witnessed a decline; there was a fluctuation in the industrial sector, and the service sector experienced a significant growth.

• Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) have increased from about USD 100 million (in 1990-91) to USD 467 (billion in 2012-13).

• Though under the policy of globalisation, international market is open for all and there are equal opportunities for all; however, some economists are of the opinion that it is more beneficial for the developed countries.

• Local industries of developing countries are also facing lot of problems, as they now have to compete with the companies in foreign countries.

• Developing countries still have no access to developed countries’ local markets.

• Indian government since 1991, sets the amount of disinvestment target every year; in 2013-14, the target was about Rs. 56,000 Crores and it has achieved target of only about Rs. 26,000 Crores.

Siricilla Tragedy − Power sector reforms has increased the power tariff, which has badly affected the workers working especially in small scale industries.

For example, Siricilla, a town in Telangana is widely known for its power loom textile industry. Here, wages of workers are directly linked with the amount of production. In such situations, power cuts have direct impact on workers’ wage. This often leads to the workers committing suicides.

Indian Economy - Consumer Rights

 

• All of us are consumers, as all of us go to the market and purchase products; this is irrespective of the fact that we buy salt for Rs. 20 or a smart television for Rs. 50,000.

• It is legal as well as moral duty of sellers to provide quality products to their consumers and, it is the right of the consumer to buy products of good quality.

• Various laws, rules, and regulations have been put into practice to protect consumer rights.

• Providing bad, tampered, adulterated, or duplicate product is a violation of consumer rights. This may lead to legal action and the seller/producer may have to pay a huge compensation amount.

Consumer Movements

• The consumer movement in India as a ‘social force’ originated with the necessity to protect and promote the interests of consumers against the unethical and unfair trade practices. This movement aims to fight bad practices such as −

  • Rampant food shortages.
  • Black marketing.
  • Adulteration of food and edible oil.
  • Hoarding, etc.

• The consumer rights were legally recognized after the enactment of the Consumer Protection Act, (COPRA) of 1986 by the Government of India.

Consumer’s Right

• COPRA governs all business conducts and ensures consumer’s rights.

• If a producer/seller acts wrongly and causes harm to any consumer, then the consumer can exercise his right to ask for compensation. And, if the seller is not ready to pay the compensation amount, the aggrieved consumer can file a lawsuit in consumer’s court.

• As per the law, all producers and sellers are liable to provide all details of respective products. For example, on a medicine bottle, you can find the manufacturing date, the composition, manufacture’s details, expiry date, etc. (as shown in the image given below).

• It is consumers’ right to have this information (right to be informed) of the product that they are buying.

• If a consumer finds that the medicine, he has been given by a chemist is already beyond the expiry date or is a duplicate one, then he can take legal action against the medicine seller.

• Government of India enacted the Right to Information (RTI) Act in 2005 to ensure citizen’s access to public information.

• Right to Information Act is a comprehensive set of rules and guidelines that ensure and provide all the (asked/required) information to the (respective) citizens about the functioning of the government departments.

• It is the duty of the respective department (where you put query) to provide the required information (that you asked) with a specific timeline; they cannot ignore your query.

Consumer’s Court

• The place you can file a case for redressal of consumer dispute are categorized into three levels −

• If your case is valued at less than 2 million and you are not satisfied with the DCDRF’s judgment; you can further appeal to the state level court and so on.

• As a consumer, you have to be well informed about your rights; for that you need to acquire the knowledge and skill and become a well-informed consumer.

• 24 December of every year is observed as ‘National Consumers’ Day’ as Consumer Protection Act of 1986 was enacted on this date.

Problems

• In spite of so many years of COPRA enactment, lakhs of people are not able to exercise their consumer rights; they are being exploited.

• Many of the consumers have no idea about their (consumer) right, but there are also many other reasons, such as corruption, faulty practices, negligence by the consumer, etc.

• On the other hand, at many places neither sellers give memo (receipt) of purchased goods nor do buyers (consumers) ask for that; receipt supports the lawsuit.

• It is indispensable to have the purchase receipt to file a lawsuit; it is a must to ask for the correct purchase receipt whenever you buy something.

• To overcome the situation, consumers need to update themselves and participate and fight for their rights.

• As a responsible consumer, one should also make others aware; this is the best way to spread the awareness among the masses.