Types of economic system
Capitalist economy (means of production are out, controlled and
Fixed cost to market price + nit ///////market price to fixed cost - nit
domestic to National + nfia ///////National to domestic - nfia
gross to net - dep ////////net to gross + dep
nfia = factor income from abroad - factor income to abroad
nit= in direct tax - subsidy /////depreciation / cost of fixed capital
value added method GDPmp ///////vo= total sales + change in stock
IC= consumption of raw material ///////VA= VO-IC
VO= price * number of unit sold
vo= VOp+VOs+VOt ////// VA= GVAmp=GDAmp
income method NDPfc
ndpfc= coe + interest + rented loyalty plus profit + mixed income
coe= salary and wages in cash in kind Service Security Scheme
profit= dividend + corporate tax + retained earnings
operating surplus = interest + rental profits
Expindituree method GDPmp
private final consumption expenditure Plus Government final consumption
expenditure +gross domestic consumption formation + net Exports
net exports= exports- inports
gross domestic capital formation= gross fixed capital formation + changing stock
income(y)= consumption + saving
AD=C+I ///// AS=C+S
APC=C/Y=1-APS ///////APS=S/Y=1-APC
MPC=chnage in c/change in y= 1-MPS
MPS= chnage in s/chnage in y= 1-MPC
C= ^c+b(Y) //// S= -^c + (1-b)Y
multiplier(k)= change in y/change in i =1/1-mpc=1/mps
revenue deficit= revenue expenditure - revenue receipts
physical deficit=total expenditure - total receipts excluding borowing
primary deficit=Physical deficit - interest payment
revenue deficit= revemnue expemditure - revenue recipts
fiscal deficit= total expenditure-total recipts excluding borrowng
primary deficit= fiscal deficit-intrest payments
Industrial development
Developing countries can progress only if if they have good industrial
sector
Rule of public sector in industrial development
Shortage of capital with private sector, lack of incentive for private
sector, objective of social welfare
Industrial policy resolution, 1956
It was comprehensive package of policy measure which covers various
issues connected with different industry enterprises of the country.
Classification of industries
Schedule A 17 industries like arms, automatic, energy, heavy and core
industry, oil, railway, shipping etc
Schedule B 12 industries like aluminium, other mining, industry, machine
tools and fertilise etc
Schedule C Consist of remaining private sector industries
Foreign trade
Foreign trade in India includes all important exports from India entered
into plant well in air of 1950 and at that time import substitution was
major element of India’s trade industry policy
Trade policy import substitution
In seven plant trade was characterised by an inward looking trade
strategy technically called import substitution. Import substitution refer
to a policy of replacement of substitution of an import by domestic
production
Critical of industrial develop 1950 to 1990
The production of GDP contributes to industrial sector increase to 11.8%
to 26.6%. The 6% annual growth rate of the industrial sector during the
period is also admiral. Indian industry was no longer restricted to cotton,
textile and jute. It include in general included via range of consumer
quotes, promotion of small scale industry, protection from foreign
Comp, licensing policy, public sector
operative by a private sector), socialist economy(means of
production are controlled and operated by government sector.),
mixed economy(both public and private sector are allotted
respective roles for solving economic centre problems) ///////////
Goals of five-year plans
1,Growth (aims to increase country capacity to produce good ), 2,
modernisation( aims at adoption of new technology and change in
Social outlook) (adoption of new technology, change in social outlook
)3, self Reliance(aims to make economy, self-reliant) (to reduce
foreign independence, to avoid foreign interference )4, equity(aims to
ensure that everyone gets basic needs and to reduce inequalities)
Features of agriculture /////////Low productivity, distinguish
unemployment, highly dependency on rainfall, subsistence farming,
outdated technology, conflicts between tenants and landlords,small
land holdings
Land reforms /////////Land reforms primarily referred to change
in the ownership of land holdings .
There was a great need for land reforms in the country like India,
where majority of population depends on agriculture. Land reforms
were needed to achieve objective of equity in agriculture.
Abolition of intermediaries //////Aim to be held and the idea behind
the step of ownership of land would be given initiative to the actual
dealer to make improvements and to increase output . the abolition
of intermediators brought to 200, lakh
tenants into direct with government. The ownership rights granted to
talent gave them the incentive to increase output and this
contribution to growth in agriculture.
Land ceiling /////////Land ceiling refer to the fixing the specified limit
of land which could be owned by an end as well. The purpose of land
ceiling was to reduce the concentration of land ownership in few
hands. Land ceiling help to promote equity in agriculture sector.
Green revolution ////////At the time of independence, about 75% of
country population was dependent on agriculture. Indian Indian
agriculture depends on monsoon and in case of shortage of monsoon
the farmer has to pay a lot of troubles. More the productivity in the
agriculture sector was very low due to outdated technology .
Green Revolution refers to large increase in production of food due to
use of high yield variety, HYV, seat or miracle seat, especially for feet
and rice. Green revolution is the specular advancement in field of
agriculture.
Effect of green revolution
1,Attaining marketable surplus(marketable surplus referred to the
part of agricultural produce which is sold in market by farmer after
meeting around consumption requirement)
2, buffer stock of food grains(green revolution enable the government
to procure sufficient amount of foodgrain to build a stock which
could be used in times of food shortage)3, benefit to low income
group(as large power portion of foodgrain was sold to the farmer in
the market, their prices declined relative to the other item of
consumption)
/debate over subsidies to agriculture
Subsidy means that farm Harman input at price lower than the market
price. In other words, subsidies, financial assistance provided by
government to producer to fulfil social welfare objectives.
Economics in favour of subsidies
The government should continue with agriculture subsidies as
farming in India continues to be risky business, majority of farmers
are very poor and they will not able to go forward the required input
without the sufficient is, eliminating subsidies will increase the
income equality between the rich poor farmers will boil the ultimate
good of equaty.
Economic and the subsidies
According to some economic subsidies were granted by the
government to provide an incentive for adoption of new H by V tech
technology. So after the wide acceptance of technology, technology
subsidy should be faced out of these purpose have been served,
subsidies, do not benefit the poor and small pharma has benefit of
substantial amount of subsidy, go to fertiliser industry and
prosperous farmers .
 Need for economic reforms
High physical deficit, Balance of payment crisis, failure of public sector,
increasing prices
Liberalisation :-it means giving greater freedom to economic agents to take their
own decision. It implies rating, trade and industry from warned government
controls and restrictions.
Measures :-industrial sector, reforms (exemption of industries, from licensing,
contraction of public sector, freedom from MRT, freedom, to import of capital
goods and technology, reforms in small sector )financial sector reforms(change in
role of RBI, establishment of public sector, banks, opening up of stock market for
foreign investors, establishing of national stock exchange, Jan dhan Yojana), tax
reforms(there are two type of tax, direct tax and indirect tax:-reduction in taxes,
reforms, intact, taxes, simplification of process), and external sector
reforms(foreign investment policy, foreign exchange reforms, foreign trade policy
reforms)
Privatisation
Privatisation referred to any process that reduces the participation of state and
public sector in economic activity of a country. It employs a greater role for
private capital and enterprises in the functioning of economy. Arguments for
privatisation, poor performance of public enterprises, raising budgetary deficit,
high capital output ratio
Arguments against privatisation, unbalanced growth, adverse effect of standard
of living, for development of infrastructure, growth of monopoly
Globalisation
The term globalisation indicates the opening of economic for world market. It
includes interaction of economy relating to production, trading and financial
financial transaction with other countries of the world.
Positive effect
High growth rate, outsourcing, growth of service, sector, benefit to Indian
estimate of receipts and expenditure during the fiscal year. ///////
companies, consumers sovereignty , increase in foreign direct investment,
increase in foreign exchange reserve, increase in share in world trade, check on
inflation
Negative effect
Reforms and agriculture, known level of industrial growth, disinvestment, control
over economy by MNC, unbalanced growth, process, poverty, still wide, spread,
jobless growth
Effects of demonetisation
Inconvenience and hardship to people, adverse effect on economic activity,
impact on GDP// positive effect eliminated the counterfeit currency,
Has come and, demonetisation has promoted digital transactions, rise in real
state, have came down and affordable.
Goods and services tax has been considered as biggest ever tax reform in Indian
expenditure policy), Employment generation (government budget is
tax system game changing tax by government implemented from July 1, 2017
Objectives of GST
To eliminate multiple taxes, to reduce overall tax burden, to boost economic
Components of budget;- revenue budget(and revenue budget is the
growth, to improve tax compliance
Benefits to Indian economy of GST
It has expanded the tax base, GDP is expected to rise by about 2%, tax compliance
is the statement of estimated capital receipts and estimated capital
will be easier, introduced high transparency in the taxation system
Revenue receipt;- revenue receipt with neither create and ability or
source of non tax revenue are interest, profit and dividend, licesnce
Sources of capital receipts are;- borrowing, recovery of loans, other
Deficient Demand - A situation when the
Aggregate Demand is less than the
Aggregate Supply in an economy,
corresponding to full employment in
the economy, is termed as deficient
demand.
Deficient demand > AS > AD,
Excess Demand: When the planned corresponding to full employment
aggregate expenditure is greater than the condition.
available output at full employment level, Deflationary Gap - When there is
the situation is termed as excess demand. It involuntary unemployment in the
leads to an inflationary gap in the economy. economy, there is a shortfall in
Inflationary Gap: When aggregate demand Aggregate Demand from the level
is more than the level of output at the full required to maintain a full-employment
employment level, then the gap is called equilibrium. This shortfall is termed a
inflationary gap. deflationary gap.
Features of Indian economy, feeder economy, semifinal, economy,
stagnant economy(absence of development), under developed and
backward economy(low per capita income), depleted economy(no
arrangement to replace the deprecited physical assets), dependent
economy,disintegrated economy’s////. State of agriculture
:=1,stagnation/ (main causes:- exploitation by zamidar, use of old
and outdated technology of production), 2,low level of production
and productivity (in 1947-48 508 tonnes and in 16, 17, 275.68
million) 3, forced commercialisation of agriculture, heavy
dependence on rainfall, landlord tenant relation, subsistence
farming ///// Industrial sector, D industrialisation, very few
modern industries, lack of capital goods and industries, limited role
of public sector, management agency system, contribution to GDP,
new pattern of demand,
oreign trade line, exporter of primary products and water of Finnish
goods, monopoly, control of Indian foreign trade, surplus trade,l
Infrastructure /// Railways, roads, power, Postal Service, air,
transport, irrigation health facilities
Indian industrial sector during British period
1,British systematically destroyed, Indian handicraft, industrial No
modern industry base as allowed to come up as British rulers D
industrialised the Indian economy. 2, during the British rule, there
was hardly any capital government to promote further
industrialisation in India.3, during the second half of 19th century.
Modern industries starting developing through very slow which
were mainly confined to cotton, textile and jute mills. 4, the
contribution of industrial sector to GDP was very small about 17%.
Government budget is an annual statement showing item wise
Objectives of government budget
realocation of resources(tax concession and subsidies, directly
producing goods and services), reducing inquality in income and
wealth(to government aims to influence distribution of income by
imposing taxes on the rich and spending more on the Welfare of
poor) ,economics stability(it means absence of large scale
fluctuation in prices), management of public Enterprises(large
number of public sector industries which are established for social
welfare), economic growth (it implies to real GDP of an in economy
increasing volume of goods and services produced in any
economy),reducing regional disparties(the government budget
aims to reduce its regional dispaties through its taxation and
used as an effective tool in the process of Employment generation
in various ways).....
statement of estimated revenue receipts and estimated revenue
expenditure during the fiscal year), capital budget= (capital budget
expenditure during the physical year).
cause any reduction in the acids of the government.Two source of
revenue receipts are tax revenue and non tax revenue///// tax
revenue refer to the sum total of receipts from the tax and other
due to imposed by the government. These are of two types direct
tax and indirect tax.//// non tax revenue refers to the receipts of
government from all sources other than pose of tax receipts. Main
fee, gift and grand, forfeatues,special assesment.
Capital receipts;- capital receipt refer to those received with her
either create and I will tea or cause A reduction in the Asset of the
government.
receipts like disinvestment and small saving.
Budget expenditure;- a refers to the estimated expenditure of the
government during a physically it have two categories revenue
expenditure and capital expenditure.
Revenue expenditure;- it refers to the expenditure with neither
create any asset nor causes reduction in any liability of the
government it is recurring in nature.
Capital expenditure;- it refers to the expenditure with either create
and asset or cause A reduction in the government. It is non
recurriung.
Revenue deficit it refers to access of revenue expenditure over the
revolutions during the given fiscal year.
Fiscall deficit;- it refers to the excess of total expenditure over the
total receipts excluding borings during the given physical year.
Implications of physical deficit;- debt trap, inflation, forign
independence, hampers the future growth.