Taking a leaf about country's techbook

Soaking in the results of the scorching growth pace the Dragon has set! When queried about why India cannot do what its northern neighbour can, he lamented the various issues which hammer (and sickle!) our growth initiatives. However, a World Bank official put things in perspective saying the problem with India was not too much democracy, but bureaucracy, adding “if authoritarian rule was the answer to economic growth, then North Korea would be manna and South Korea would be in the doldrums.” The Bank official hit the nail on the head, but only partially. One only needs to look around to see how China goes about building itself and compare it with what we do. Since telecommunications is the big story in both countries, a close look at the sector itself would provide more than just clues. Nokia, the Finnish GSM giant, is starting a new JV with China’s Putian Communications to develop technology for Chinese 3G mobile standard known as TD-SCDMA. The company, according to reports, would invest $111 million and hold 49% stake in the venture. This follows a similar announcement by Germany’s Siemens AG last year which committed over $100 million for a similar development with Huawei Technologies. Other big daddies of the mobile world, Motorola and Ericsson, too have made commitments to support the Chinese standard. It is no secret that China has been actively pushing for its own standard in 3G to not only foster development of its own telecom sector, but more importantly, to avoid the huge royalties they would be required to pay to the existing manufacturers. It is quite possible that China would eventually go with the uniform world standard, but this posturing would get it concessions which we in India can only dream of. An instance of this is already visible in the GSM market. Currently there are four European (Ericsson, Nokia, Alcatel and Siemens), two American (Motorola and Nortel) and four Chinese (Huawei, ZTE, Datang and Putian) companies making GSM infrastructure. Wonder why, if the Indian market is among the most sought after market in the world, there aren’t any Indian manufacturer in the picture? The answer is simple. The Chinese seem to be governed by national interests alone. A high ranking official from a leading American telecom consultancy told me that the Chinese cleverly played their market card with the monopolistic European and American manufacturers.

Let them play computer games

 How can the prince reach the crow-master, who, after having been slashed to pieces after a deft bout of swordsmanship, has flapped out of death in the form a dozen misshapen crows and reassembled himself on a castle battlement to which there is no obvious means of traverse? As the teenager’s mind races and he strategises a route that involves multiple launching pads for superhuman leaps, his mother comes up from behind and orders him to shut down the computer. He has entertained himself enough for the day, with TV, football with his friends, and at least 100 pages of Eragon, re-read for the nth time. Time he got back to his maths. After all, he has do well in his 12th Board exams, do better in assorted entrance exams and prepare himself for a successful life. The son protests that he has already studied enough for the day. This is a routine piece of family drama acted out in most middle-class homes of urban India with much sincere passion on the part of all members of the cast involved. In most cases, it continues as intermittent farce till the exams finally get over. Rarely, it ends as tragedy of the kind that was witnessed in Delhi recently, where a girl, who eventually got 94per cent marks in her Board exam committed suicide because she didn’t want to study science while her parents wanted her to study nothing else. At the root of this collective perverse behaviour is an education system that is badly out of sync with the real world. The average middle-class Indian parent tends to take pride in the vaunted IITs, and in the toughness of the entrance exams for IITs and IIMs. He looks at the success of Indian IT firms and the fabulous salaries of IIM grads, his chest swells up with patriotism, stars float over his eyes and he turns on his son and, these days, daughter to push the teenager down the path of austere abstinence that alone leads to scholastic success. This is perverse in multiple ways. For one, neither these institutions of learning nor India’s educational system as a whole can claim to be world-class. A recent ranking of the world’s finest universities found that only two from India figured in the top 500, with the higher ranking one kicking in somewhere between 300 and 400. The ranking was done on the basis of fairly objective parameters such as the number of Nobel prizes won by faculty or alumni, citation of articles written by faculty members, etc. India is yet to break out of the ancient Brahmanical scholastic tradition that held that all knowledge has already been discovered and that the seeker’s job was merely to learn what had been laid out in the relevant texts. The system militated against innovation. Only sheer individual brilliance could squeeze out the odd original idea from those wrung out by this system of rote learning. Educational systems around the world have evolved, to encourage innovation and creativity. Students learn to question, not to passively acquiesce in the wisdom handed down by generations. Such system-induced originality lies at the root of not just the higher rankings of the West’s educational institutions but also of their economic success. Mind-numbing conformity is only one problem. Capacity, or its lack, is another. Only around 9per cent of Indians make it to college. There is no reason whatsoever to keep the number of IIT and IIM seats as limited as they are. We need a huge expansion in the intake of students across the board in the tertiary sector of education.

Duniya goal hai!

 That sports has taken over the collective consciousness is apparent in the fact that names no longer mean what they used to. Time was when Rubens was associated with the 17th century Flemish artist who painted voluptuous nudes. Today, thanks to the fortnightly telecast of Formula One motor racing, Rubens is the first name of Brazilian driver Barichello who played second fiddle on the Ferrari team until they decided they wanted someone younger. Time was when we used to hum “Michael rowed the boat ashore — Hallelujah!” Today, Michael is the first name of the driver Rubens used to play second fiddle to and who is now going all out to regain the Formula One racing championship to an extent where he was accused of deliberately stopping his car at a bend on the Monaco circuit so as to make it difficult for the reigning champ Fernando Alonso to better his qualifying time and take pole position. And so Schumacher could well be nicknamed ‘Scheming Schumi’ by the Brit tabloids who could even throw in anecdotes of how other F1 drivers are scared of walking under a balcony lest Michael drop a hammer on their unprotected heads! Time was when Rooney was the surname of a Hollywood child artiste who later had a troubled existence because he never quite grew up. Today, with the World Cup on, Rooney can only refer to England’s striker Wayne whose temper is as explosive as the sudden solo spurts he makes into the opposition’s quarter, culminating in an unstoppage goal. And yet, like the child artiste Mickey, Wayne conveys the same impression of a troubled youth lost somewhere on the frontier between childhood dreams that everything is possible and the wisdom of maturity that life has its limitations. Rooney is the 21st century Peter Pan, trapped for ever in the role which fans in England and the world demand he play. The youth will play his heart out even while the media plays up any incident revealing his lack of maturity! Time was when Firpo’s was the name of a Calcutta restaurant whose breads and pastries used to tempt generations of greedy schoolboys in that phase of their lives when time stopped still and even raindrops would pause. Today, Park Street restaurants and night clubs like Moulin Rouge feature in period-piece movies like Pradeep Sarkar’s ‘Parineeta’, set in the early 1960s when there was only the Howrah Bridge across the Hooghly and Satyajit Ray had just got into his stride by following up ‘Pather Panchali’ with ‘Charulata’ and when Usha Iyer had not yet started singing at Trincas. Today, there are two bridges across the Hooghly and all we can do to remember the good old days is lean back and listen to the ‘Parineeta’ night-club singer croon, “Nayi nahi yeh baatein/Yeh baatein hai purani/Kaisi paheli hai yeh/Kaisi paheli zindagaani//Pee le issi mein nasha/Jisne piya woh gham mein bhi hasa/Pal mein hasaye aur pal mein rulaye, yeh kahani//Aankhon mein ghar sapna naya/Aansu tera ik moti hai bana/Duuri sajjan se jaise duri/Yeh shaam ho suhaani.” Time was when children would spend early mornings humming the spiritual Suprabhatham. On the morning of Wednesday, June 7, what I thought was a school-going kid humming the Suprabhatham turned out to be his commentary on the last ball of the first Test between India and the West Indies at Antugua: “Sreesanth runs in to bowl, Colleymore edges and he’s out! Out! Dravid takes a magnificent catch at first slip! And India have won!” Everything is possible in this world of make-believe. On that Jamaican evening of May 20, Yuvraj would have spotted that the fourth ball of the last over of the second one-dayer was a slower one, waited on it and lifted it over mid-on’s head for a match-winning brace! Which reminds me of the Lewis Carroll verse, “He thought he saw an elephant/upon the mantelpiece/He looked again and saw it was/a letter from his wife./At last, he said, I realise/the irony of life!” As a 12-year-old in the summer of 1998, Wayne Rooney would have imagined himself as a Beckham who, instead of being disqualified in the second-round World Cup match against Argentina, went on to score the winner and take England through. In the summer of 2002, Rooney would have imagined himself scoring a hat trick in the quarter-finals against the ultimate champs Brazil. The 20-year-old Rooney can now fulfil those dreams!

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 hitherto wholly under-utilised dimension of the spectrum can come into full play with new protocols that allow for regular use of the “white spaces” on frequencies. So, although the electromagnetic spectrum is finite and limited, it can be virtually non-depleting for practical purposes. The implication that spectrum may not be scarce in the traditional sense has profound significance for public policy design. It may well call for a paradigm shift. Against the backdrop of “dynamic spectrum allocation” with its possibilities for enhanced wireless connectivity, a spectrum policy of allocating extra bands of static (read ‘fixed’) spectrum to network operators is entirely questionable. Static spectrum allocation can be very inefficient indeed. Now, bandwidth demand would vary along the time dimension (from hour to hour), and the space dimension (from region to region). So it would inevitably be the case that the region with the largest spectrum peak demand would determine the spectrum demand for the whole mobile network. This would be the case for each service provider. The end result would be that a substantial part of the spectrum would be summarily wasted, in any given time and space. Instead, we need to leverage recent advances in spectrum management practice to make way for flexible and open access to a precious resource, the airwaves, in an increasingly wireless world. The fact remains that the instrument most used to assign spectrum resources to telecom operators has been auctions. The idea has been around since circa 1959. The logic was that the telco estimating the highest value for the spectrum would likely bid the most.

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 subscriber linked criteria, keeping in mind the optimal use of this resource and taking into account all relevant aspects such as technology specific requirements, traffic guidelines, number of base stations, etc.” This has resulted in 2:1 allotment criteria for GSM and CDMA operators, which means for an equal number of subscribers, CDMA operators are allotted half the spectrum given to GSM. It is easy to punch holes in DoT’s reasoning. It is no secret that operators have been exaggerating their subscriber base to bolster not only their claim to greater bandwidth, but also to make a marketing pitch and impress existing and prospective investors. Then there are allegations in case of one GSM and one CDMA operator that their phenomenal subscriber growth was fuelled by fictitious numbers used to show incoming international calls as being locally generated to avoid paying the huge ADC. With all this, and the absence of any independent agency to verify subscriber-base claims, it seems absurd that subscriber number was made one of the important criteria for additional spectrum allocation. Tata’s grouse seems justified.

Set the interconnect issue right

 Communications minister’s ‘India One’ scheme has everyone excited. While the minister himself cannot stop gloating over the Re 1 per minute call from anywhere to anywhere in India, several others see it as no more than a political stunt. Whether the common man will really benefit from this move, it’s too early to say. But if experts and analysts alone are heard, most feel it’s a move, which, if not ill conceived, is at least not fully thought through. While BSNL may hem and haw about the loss of revenue and others may point to the fine print saying it does not really help anyone except the big users, and that too only if you are on the same network and that the hiked rental offsets any advantage that the common man may really have had, there are more pertinent issues which seem to have been disregarded. For one, as this paper pointed out in a column a while ago, the primacy of India’s telecom watchdog to set tariffs has been undermined yet again. From all available information, the Trai was not consulted on the issue, unless the minister considers informing the watchdog as consulting. In any case, shouldn’t something like this be left for competition instead of pushing it through with an official diktat? Secondly, and most importantly, if there actually is a spurt in telephone usage, as the minister so proudly has been claiming it would, it would create havoc with interconnectivity. It is no secret that the main cause of deteriorating call completion rate in the country is the abysmally inadequate interconnectivity capacity available. Why then has India One been pushed through without even pretence of tackling this issue? There is not much difference between what Maran has done and what the tourism ministry had done with the Incredible India campaign. The snazzy campaign raised hype about the nation’s tourism potential to a new high even as the situation on the ground remains shameful. While it may have helped attract more people to India, it has also put off a great many who came here expecting the sky, only to be delivered an unpleasant experience. The only reason it has not yet backfired is because the country has so much to offer that visitors are willing to overlook the shortcomings! But this cannot go on. The situation concerning interconnectivity is worse. Forget rural areas, even between the metros, the situation is alarming.

Rural telecom, the cable way

 Gurgaon’s glitzy MG Road, also known as India’s ‘Mall Road’ and home to scores of eateries and bars, was witness to a strange protest the other day. Panchayats of villages adjoining the stretch gathered and demanded that bars in these steel and glass structures be shut down as they were corrupting their youth. It is easy to brand this as an act of backward ‘Haryanvis’, but the fact is for all the hype over the scorching pace set by our economy, we seem blissfully ignorant of a very disturbing trend: the rapidly growing divide between India’s haves and have-nots. The tell-tale signs are there for all to see. Traditionally, a large rural family owned land on which they cultivated to earn a living. Along came a builder and bought the family’s entire holding for a price which seemed stupendous for the family. The family rejoiced and splurged on goods and conveniences they always longed for, for years, while their youth invested in cars and other gadgetry which they considered hip. Before long, they blew up their fortune, but since there is no fallback option now, there is anger and frustration, specially among the youth, who fall easy prey to undesirable activities. While figures to convey this extremely disconcerting trend may not be readily available, a look at the rural versus urban tele-density figures provide the best indicator of this trend.

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 interested parties and lobbying is on in right earnest. Let us attempt here, therefore, to look at issues which it addresses cursorily, but which are important nevertheless. The telecom watchdog has recently come out with a study paper on ‘Next Generation Telecom Networks”. The paper begins with an interesting observation: British Telecom is working on a scheme that would route calls from and to mobiles within a building to a fixed network. It is common knowledge that over 60% of mobile calls originate and terminate within a building and if, for the ‘last mile’, the call could travel on fixed line, it would relieve a lot of scarce spectrum. The mobile operators have been clamouring for additional spectrum to fuel the growth in tele-density as it moves towards the targeted 22% by 2025 and 30% by 2030. Additional spectrum is a must for the networks to carry increased traffic. However, it is already difficult and finding more and more spectrum can only get tougher. The way out is to have a dedicated band for in-building use, as has been done in Switzerland, Sweden and the UK. More importantly, it is critical that this spectrum is not allotted to existing operators under any circumstances to prevent it being cornered by a few.

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.

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.