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Structure of Indian Economy
Structure of Indian Economy
STRUCTURE OF INDIAN
ECONOMY
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Economic System
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Types
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CAPITALISM
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Capitalism
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• ADAM SMITH called “the obvious and
simple system of natural liberty”
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(Book: Wealth of Nations).
Subject to certain restrictions,
individuals (alone or with others) are free to
decide where to invest, what to produce or sell,
and what prices to charge. There is no natural
limit to the range of their efforts in terms of
assets, sales, and profits; or the number of
customers, employees, and investors; or
whether they operate in local, regional,
national, or international markets.
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Benefits of Capitalism
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SOCIALISM
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Socialists argue that socialism would allow for wealth to be distributed based
on how much one contributes to society, as opposed to how much capital one
holds.
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Features of Socialism;
• Social Ownership of means of production
• Existance of public sector
• Decisive role of Economic Planning
• Production guided by Social Benefits
• Abolition of exploitation of labour
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Benefits of Socialism
i. Better salaries
ii. Stable Environment
iii. Eliminates poverty
iv. Better Products
v. Fulfills survival need
vi. Opportunity for citizens to explore non-economically-
productive pursuits
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Criticism of Socialism
Distortedprice signals
Suppression of economic democracy
Slow Technological advancements
Minimize self management
Reduced incentives
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COMPARISON
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BASIS OF DIFFERENCE CAPITALIST ECONOMY SOCIALIST ECONOMY
Resources Ownership Privately owned State owned
Foundation
16 belief competition brings out the best in cooperation is the best way for
people people to coexist
Earning of wealth everyone works for his own wealth everyone works for wealth
which is distributed equally to
everyone
Market Scenario Level playing field Protection to PSUs, Private
enterprises are permitted in
few businesses only
Govt. interference Only in situations where laws have Fully involved
been broken
Employees motivation Highly motivated on account of Rarely motivated as
proportional benefits performance is not rewarded
Merit Perception of better economic Equal distribution of income
growth because of competition results in welfare of all
Demerit Few individuals/groups attain Hard work is not rewarded,
powers, rest are exploited BBA-112 lazy employees also enjoy
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equal level of benefits
Mixed Economy
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Provides a clear demarcation of the boundaries of public
sector and private sector so that the core sector and strategic
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sectors are invariably in the public sector.
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Features
Resources are owned both by the government as well as
private individuals. i.e. co-existence of both public sector and
private sector.
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Advantages
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