INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE

Post Graduate Programme in Management

Course Outline

Course Title Economic Environment

Course type Compulsory
Pre-requisites (if any) Successful completion of the Organization and
Market Economics
Course Credit 3
Total no. of sessions 24
Session Duration 75 minutes
Term II
Year and Batch 2019-20, PGP 23
Instructor(s) Profs. Ashok Thomas, Leena Mary Eapen, and
Rudra Sensarma

Introduction
This course is aimed at studying the economic environment of an economy from a macro
perspective with practical application in the Indian context. A study of economic
environment helps a business manager to evaluate the impact of the changing business
environment on decision making. In the Indian context, the introduction of economic reforms
since 1991 has brought in a sea change in the economic environment of India. Numerous
policy changes are being introduced both at the macro and at the micro level at frequent
intervals. Due to this, unlike in the past, the economic environment has been fast changing.
Hence, understanding the implications of the changing economic policies and environment
become imperative for practicing managers and business leaders.

The course covers important concepts and linkages relating to the economic environment.
They mainly include national income accounting; cost of living; labour market and
unemployment; aggregate expenditure, demand, and supply; monetary policy and fiscal
policy and international linkages. In this context, the course also covers the developments and
structural changes in the three key sectors of the Indian economy namely agriculture, industry
and services. These sectors witnessed major changes over the years which have far-reaching
implications for business and economy. A proper study of the various aspects of the three
sectors is important for a broader understanding of the dynamics of India’s economic
environment.

Learning Outcomes/Course Objectives

The basic objective of this course is to provide students with the skills to make intelligent
business decisions in a rapidly changing business environment. Successful completion of the
course will enable the students to understand the working of an economy, identify the major
macroeconomic goals and problems, understand the policies available to governments and
central banks to achieve these goals and solve the problems and most importantly to evaluate
the impact of such policies on businesses at the macro level as well as at the sectoral level.
The course will use a judicious mix of theory and real-world examples to understand the
relationship between the concepts covered in the course and current economic issues facing
India and the world. The objectives in particular are:
(1) To expose the students to the fundamental principles and issues of the economic
environment.
 (2) To enable the students to understand the functioning of India’s economic environment
and the policies followed by the government and central bank to achieve economic
policy goals.
(3) To enable the application of macroeconomic tools and techniques in anticipating
changes in the economic environment that will help in taking effective business
decisions.
(4) To understand the impact of government and central bank policies on the economy,
society and business.
___________________________________________________________________________
Textbooks and Learning Materials

Text Book(s)
Macroeconomics by Dean Karlan & Jonathan Morduch, McGraw Hill Education, 2017 (KM)

Reference Book(s)
Compendium of readings based on notes, articles, and reports on the different topics

Additional Reading(s)
 Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram
Rajan
 The Age of Turbulence: Adventures in a New World by Alan Greenspan
 Misbehaving: The Making of Behavioral Economics by Richard H. Thaler
 Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for
Global Capitalism by George A. Akerlof and Robert J. Shiller
 Making Globalization Work by Joseph E. Stiglitz
 Capital in the 21st Century by Thomas Piketty
 India Unbound: The Social and Economic Revolution from Independence to the
Global Information Age by Gurcharan Das
 India After the Global Crisis by Shankar Acharya

Technology and Software (if any)

Nil

Other Resources (Journals, Internet Websites) (if any)

 http://gregmankiw.blogspot.in/
 http://ajayshahblog.blogspot.in/
 http://www.economist.com/
 http://www.arthapedia.in/
 http://nourielroubini.blogspot.in/
 http://www.freakonomics.com/blog/
 http://economistsview.typepad.com/
 https://www.cnbctv18.com/tags/videos/indianomics.html (Indianomics)
 https://tinyurl.com/ya5at7g6 (Macros with Mythili, ET Now)

Pedagogy Used/Learning Process

Lectures; Classroom discussions; Case analysis and project work

Evaluation Components/Assessment of Student Learning

Assessment Tool Percentage Description
Quizzes 15% These components are required to assess
Midterm Exam 25% the depth and breadth of students’
End term Exam 30% understanding of key concepts and issues
covered in the course
Class Participation 10% Students are expected to actively participate
in the class discussion as it would provide
them opportunities to engage in active
learning through reflection, debates and
peer knowledge sharing.
Project Work (Report and 20% This facilitates students to demonstrate the
presentation) ability to integrate available information to
critically evaluate an important issue. This
also gives them an opportunity to develop
written communication skills, team work,
and presentation skills.

Session Plan

Session Topic Readings

No.
1 Introduction & Central Issues in Economic Environment Reading List
 Evolution of the World Economy to be Assigned
 Structural Transformation of the Indian (RLA)
Economy
 Contemporary Macroeconomic Issues
2-3 Tracking the Economy’s Performance KM, Ch. 7
 Measuring Economic Activity: GDP
 Real versus Nominal GDP
 Limitations of GDP
4 Tracking the Cost of Living KM, Ch. 8
 Measuring Price Level: CPI
 Inflation Index
 Purchasing Power Parity
5 Unemployment and Labour Market KM, Ch. 9
 Measuring Joblessness: Unemployment Rate
 Sources of Unemployment
 Labor Market Equilibrium
6 Economic Growth and Employment KM, Ch.10
 Jobless Growth ( project work) RLA

7-8 Aggregate Expenditure KM, Ch. 11

 Components of Aggregate Expenditure
 Equilibrium & Income Determination
 Autonomous Spending Multiplier
9-10 Aggregate Demand and Aggregate Supply KM, Ch. 12
 Aggregate Demand Curve
 Short-Run Aggregate Supply Curve
  Long Run Aggregate Supply Curve
11 Investment and Economic Growth RLA
 Labour Market reforms: Is this the need of the
hour? ( project work)
 Land Acquisition reforms: Challenge and way
out? ( project work)
12-13a Fiscal Policy KM, Ch. 13
 Fiscal Policy Response
 Fiscal Policy Tool
 Fiscal Impact of Budget
13b Understanding Budget Making in India RLA
 What goes behind annual budget making?
( Project work)

14-15 Money, Banking and Monetary Policy KM, Ch. 15

 Evolution of Money
 How Commercial Banks Create Money
 The Role of the Central Bank
16 Critical Issues in the Indian banking sector RLA
 NPAs in the Banking sector ( Project work)
 Financial Inclusion ( Project work)
17 Tackling Inflation KM, Ch. 16
 Quantity Theory of Money
 Inflation and Monetary Policy
 Inflation and Unemployment
18 Macroeconomic policies and Inflation Control RLA
 Monetary Policy Transmission ( Project work)
 Inflation Targeting ( Project work)

19-21 The Open Economy

 Trade and Balance of Payments
 Fixed and Flexible Exchange Rate Systems
 Macroeconomic Policy and Exchange Rate
22 Case Discussion: Indian Rupee Crisis KM, Ch. 18 and
Case: Indian
Rupee Crisis of
2013, Ivey
Publishing
23 Education, Health drivers of development: Evidence RLA
from India ( Project work)

Productivity puzzle in India: Reasons and Way out

( Project work)

24 Future economic challenges RLA

Additional Instructions (if any)

Will be announced at the beginning of the course