NOTES FOR REVISION

VOLUME 1
Conditions in the indian economy on the eve of independence:

1. Low level of economic development (GDP & per capita income)

2. Backward agriculture sector
3. Less developed industrial sector.
4. Foreign trade characteristics
5. Adverse demographic conditions
6. Under-developed infrastructure
7. More dependant on Primary sector

INDIAN ECONOMY 1950-1990

Economic planning-
Means utilisation of countries’ resources in different development activities, in accordance
with national priorities.

GOALS OF PLANNING IN INDIA-

1. Long term goals (to be achieved over period of 20 years)
2. Short term Goals ( To be achieved over a period of 5 years)

Long term Goals- objectives of planning.

1. Modernisation
2. Self reliance
3. Economic growth
4. Equity
5. Full employment

Short term Goals- objectives of a 5 year plan.

Short term objectives vary from plan to plan depending on the current needs of the country.
In India growth and equity are the objective of all 5 year plans.

Agriculture
Main features of indian agriculture:
1. Low productivity
2. Disguised unemployment
3. Dependance on rainfall
4. Subsistence farming
5. Traditional inputs
6. Small holding
7. Backward technology
8. Landlord tenant conflict

Problems of Indian agriculture:

 1. General problems
a. Pressure of population on land
b. Land degradation
c. Subsistence farming
d. Social environment
e. Crop loss by pest, insect, flood, drought.

Institutional problems
a. Small and scattered holdings
b. Poor implementation of land reforms
c. Lack of credit and marketing facilities

Technical problems
a. Lack of irrigation facility
b. Wrong cropping pattern
c. Outdated techniques of production

Disguised unemployment is unemployment that does not affect aggregate economic output. It occurs
when productivity is low and too many workers are filling too few jobs. It can refer to any part of the
population that is not employed at full capacity.

Industrialisation is a pre-condition for the final take-off of an economy.

Reforms in Indian agriculture

1. Institutional reforms (aka land reforms)
2. General reforms
3. Technical reforms or green revolution

ACHIEVEMENTS OF GREEN REVOLUTION

1. Rise in production and productivity
2. Increase in income
3. Increase in employment

INCREASE IN EMPLOYMENT
LEADING TO
INCREASE IN PRODUCTIVITY AND PRODUCTION
LEADING TO
INCREASE IN INCOME

FAILURES OF GREEN REVOLUTION

1. Restricted to limited crops and areas
2. Neglected land reforms
3. Increase in income disparity
CHAPTER 3- ECONOMIC REFORM SINCE 1991

What is economic reform?

Economic reforms or structural adjustment is a long term multi dimensional
package of various policies (liberalisation, privatisation and globalisation) and
programmes for the speedy growth, efficiency in production and to make a
competitive environment.

Factors responsible for economic reforms:

1. Fall in foreign exchange reserve: as imports grew faster than exports
2. Adverse balance of payments resulted in a repayment crisis.
3. Mounting fiscal deficit as govt expenditure grew faster than revenue.
4. Rise in prices, which has the negative impact on investment
5. Failure of public enterprise:- very low return on high investment
6. Gulf crisis increases crude oil prices which negatively affected on BOP
(Balance of payment)
7. High rate of deficit financing
8. Collapse of soviet block

Measures of New Economic policy

Stabilisation measures: These are short run measures introduced by Govt to control
rise in price, adverse balance of payment and fall in foreign ex-change reserve.

Structural adjustment: These are long run policies, aimed at improving the efficiency
of the economy and increasing its international competiveness by removing the
rigidity in various segment of the Indian economy.

In the new economic policy 1991, Structural reforms can be seen with respect to.
1. Liberalisation.
2. Privatisation
3. Globalisation.

Liberalisation
Liberalisation means removing all unnecessary control and restrictions like
permit licences, protectionist duties quotas etc. In other words it may be
defined as the loosening of the govt regulations in a country to allow for
private sector companies to operate business transactions with fewer
restrictions.
Objectives of liberalisation
1. To decrease the debt burden of the country.
2. To expand the size of the market.
3. To increase competition among domestic industries.
4. To encourage export and import of goods and services.

ECONOMIC REFORMS UNDER LIBERALISATION:

1. Industrial sector reforms
2. Financial sector reforms
3. Fiscal reforms/Tax reforms
4. Foreign exchange reforms
5. Trade and investment reforms

Privatisation
Privatisation is the general process of involving the private sector in the
ownership or operation of a state owned enterprise.
POLICIES ADOPTED FOR PRIVATISATION:
1. Contraction of public sector
2. Abolish the ownership of govt in the management of public enterprises
3. Sale of shares of public enterprises.

Objectives of privatisation:-
1. Raising funds from disinvestment
2. Improving the financial condition of the govt,
3. Bringing healthy competition within an economy
4. Making way for foreign direct investment

Globalisation
May be defined as a process associated with increasing openness, growing
economic interdependence and deepening economic integration in the world
economy. Policy promoting globalisation.
1. Increase in equity limit of foreign investment
2. Partial convertibility
3. Long term trade policy
4. Reduction in tariff

An Appraisal of LPG (liberalisation Privatisation Globalisation) policies:-

1. Increase in foreign investment
 2. Increase in foreign exchange reserves
3. A check of inflation
4. Increase in national income
5. Increase in exports
6. Consumer sovereignty
Negative Impact:
1. Neglect of agriculture
2. Jobless growth
3. Increase income inequalities
4. Adverse effect of disinvestment policy
5. Spread of consumerism
6. Cultural erosion
7. Encourages economic colonialism

World Trade Organisation(WTO)

World Trade Organisation, as an institution was established in 1995. It replaced
General Agreement on Trade and Tariffs (GATT) which was in place since 1946.

The overriding objective of the WTO is to help trade flow smoothly, freely, fairly
and predictably

to meet its objective WTO performs the following functions:-

● Administering W.T.O Trade Agreements.

● Acting as a Forum for trade negotiations.
● Settling and Handling Trade disputes
● Monitoring and reviewing national trade policies,
● Assisting the member in trade policies through technical assistance and
training programmes
● Technical assistance and training for developing countries.
● Cooperation with other International Organisation

ECONOMICS:
IMP FORMULAS
Total production of goods and services by firms = Total consumption of goods and
services by Household Sector.
(ii) Factor Payments by Firms = Factor Incomes of Household Sector.
(iii) Consumption expenditure of Household sector = Income of Firm.

Household Sector
Ex, factor payment by a firm i.e wages paid by the firm will be an income to the
labourer, i.e household sector.

Real Flow
Real flow of income implies the flow of factor services from the household
sector to the producing sector and corresponding flow of goods and services
from the producing sector.

Money Flow
Money flow refers to the flow of factor income, as rent, interest, profit and
wages from the producing sector to the housing sector, as monetary rewards
for their factor services.

CHAPTER 3
FORMULAS TO REMEMBER
*Net Investment = Gross investment - depreciation*
*Gross value = Net value + Depreciation*
*Market Price = Factor cost - NIT*
*NIT = indirect tax - Subsidies*
*NFIA = FIA + Factor income paid to abroad*
*National income = Domestic income + NFIA*
*NFIA = Net compensation of employees + Net income from property and
entrepreneurship + Net Retained Earnings*
*GDPFC = GDPMP - NIT*
*NDPMP = GDPMP - Depreciation*
*NDPFC = GDPMP - NIT - Depreciation*
*GNPMP = GDPMP + NFIA*
*GNPFC = GNPMP - NIT*
*NNPMP = GNPMP - Depreciation*
*NNPFC = GNPMP - NIT - Depreciation*
*NDPFC is aka Domestic income*
*NNPFC is aka National income*

DEFINITIONS

* GDPMP- It refers to the gross market value of all final goods and services produced
within the domestic territory of a country during a period of one year.*
*GDPFC- It refers to the net money value of all final goods and services produced
within the domestic territory of a country during a period of one year.*

*NDPMP- It refers to the net market value of all the final goods and services produced
within the domestic territory of a country during a period of one year.*

*NDPFC- It refers to the net money value of all the final goods and services produced
within the domestic territory of a country during the period of one year.*

*GNPMP- It refers to the gross market value of all the final goods and services
produced by the normal residents of a country during a period of one year.*

*GNPFC- It refers to the gross market value of all the final goods and services
produced by the normal residents of a country during a period of one year.*

*NNPMP- It refers to the Net market value of all final goods and services produced by
the normal residents of a country during a period of one year.*

*NNPFC- It refers to the Net money value of all final goods and services produced by
the normal residents of a country during a period of one year.*
DOMESTIC INCOME(NDPFC) VS NATIONAL INCOME(NNPFC)
BASIS Domestic Income
Nature of concept It is a territorial concept
as it includes the value of
final goods and services
produced within the
domestic territory of a
country.
Category of producers It considers all producers
within the domestic
territory of the country.
NFIA It does not include NFIA.
GDPMP VS NATIONAL INCOME (NNPFC)
BASIS GDPMP
Nature of concept It is a territorial concept
as it includes the value of
final goods and services
produced within the
domestic territory of the
country.
Category of producers It considers all the
producers within the
domestic territory of the
country.
NIT (Net Indirect Tax) It is at market price, i.e it
includes net indirect
taxes.
National Income
It is a national concept as
it includes the value of
final goods and services
produced in the entire
world.
It considers all producers
who are normal residents
of the country.
It includes NFIA.
NATIONAL INCOME
It is a national concept as
it includes the value of
final goods and services
produced in the entire
world.
It considers the producers
who are normal residents
of the country.
It is a factor cost i.e it
excludes net indirect
taxes.
Depreciation It is inclusive of It does not include
depreciation. depreciation.

KEY
NIT = NET INDIRECT TAX
FIA = FACTOR INCOME FROM ABROAD
NFIA = NET FACTOR INCOME FROM ABROAD

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