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