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.

Comments

Post a Comment

Popular posts from this blog

How about inter-connect exchanges?

 In the late ’80s, when Sam Pitroda controlled the reins of Indian telecom, there was constant talk of a new telecom policy. But once V P Singh came to power in early ’90s, Sam fell out of favour and the nation blundered along without a cogent policy. A few years down the line, the irrepressible N Vittal assumed charge of the Telecom Commission, becoming the first IAS officer to assume that role, and kept assuring all that the policy’d be out any day now, till one day, out of sheer exasperation, he told me, “I think I will just say that the new policy is coming on this day, this month, and not add the year to it”. We have come a long way since then. From a tele-density of under 1, it is now nudging 10, and mobiles have outstripped landlines in number. And sure enough, since the exciting Vittal quote, we are now readying the third policy document, whose draft has been around for a while. Like all documents, this one too is being analysed threadbare by intere...
Read more

War over spectrum allocation

 upset with the way the department of telecommunications has allocated spectrum for mobile operators. In a missive to the Telecom Commission chairman, and then to the prime minister, he has ripped through the department’s move to link spectrum allocation with technology and subscriber base. Gauging the seriousness of Tata’s allegations, and the fact that it has the potential to derail their ambitions, the GSM operators too have gone into an overdrive, with their association and the individual operators all sending rejoinders to whoever cares to listen. A spectrum war has begun. As the subscriber base has grown, the operators have been unable to meet the service quality, so they claim, due to the inadequate spectrum. However, since most of the spectrum in this country is held by defence forces, it is impossible for the government to make it available to operators at one go, as is done internationally. So the government allots additional spectrum “based on a...
Read more

The illusion of spectrum scarcity

 Come what come may, penned the Bard, Time and the hour runs through the roughest day. Actually, time brings all things to pass! Everything is a matter of chronology, really. Consider, for instance, the radio frequency spectrum for mobile telephony. In particular, the issue of extra bandwidth for the next — the third—generation (3G) mobile services. With the passage of time and technological change, the notion of routinely licensing chunks of spectrum for service providers is now being vigorously questioned, the world over. Very unlike in the analogue era, today’s digital technologies do allow for new approaches to freeing up and managing spectrum. As much as 99% of even highly saturated bands may be vacant in any specific moment in time and space, innovative software can dynamically shift signals to make full use of the fleeting openings in the wireless “ether”(“white spaces”). The point is, new technologies do allow for much flexibility in spectrum usage. The ...
Read more