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Outlook of Indian Economy
Outlook of Indian Economy
INDIAN
ECONOMY
INTRODUCTION TO
ECONOMICS
& ORGANISING IT
ECONOMICS-THE DISCIPLINE
Economics is the study how societies use scarce resources to produce valuable commodities
and distribute them among different people. Economics, THM, 2005.
Economics studies how individuals, firms, government and other organisations within our
society make choices and how these choices determine the use of its resources. Economics,
N&C, 2006.
The Branch of knowledge, which concerns with production, consumption, and transfer of
wealth.
ECONOMIC ACTIVITIES
Improving living conditions of the humanity at large has been the real and
the ultimate goal of the discipline.
CHALLENGES OF THE ECONOMY
Any one issue which has affected civilised history of mankind the most and has been a
contentious issue is the way the production process in an economy should be organised.
Capitalistic Economy
Inspired from Adam Smith-Wealth of the Nations(1776)
‘Invisible Hand’ of ‘market forces’(price mechanism) will bring the state of equilibrium
Ex: USA just after Independence
ORGANISING AN ECONOMY continued…
State Economy
Inspired by books of German philosopher Karl Marx
USSR after 1917 and ideal shape in Republic of China(1949)
The decisions related to production, supply and prices were all suggested to be taken by the state
only
Mixed Economy
After Great Depression 1929, Inspired from: The General Theory of Employment, Interest and
Money(1936) By: John Maynard Keynes.
he suggested an increase in government expenditures, discretionary fiscal policy (fiscal deficit,
lower interest rates, cheap money supply, etc.).
Role of State in an Economy
1. Primary sector:
• This sector includes all those economic activities where there is the direct use
of natural resources as agriculture, forestry, fishing, fuels, metals, minerals,
etc.
• Broadly, such economies term their agricultural sector as the primary sector.
This is the case in India
2. Secondary sector:
• This sector is rightly called the manufacturing sector which uses the produce
of the primary sector as its raw materials.
• Since manufacturing is done by the industries, this sector is also called the
industrial sector— bread and biscuits, cakes, automobiles, textiles, etc.
3. Tertiary sector
This sector includes all those economic activities where different ‘services’ are
produced such as education, banking, insurance, transportation, tourism, etc.
This sector is also known as the services sector.
Types of Economies
1. Agrarian Economy
An economy is called agrarian if the share of its primary sector is 50 per cent or
more in the total output of the economy.
India was an Agrarian economy at the time of Independence, but now it shows the
typical symptom of a service economy.
The primary sector’s contribution is falling to almost 18 per cent of its
total produce, while almost 60 per cent of their population depends on
the primary sector for its livelihood.
Thus, in monetary terms India is no more an agrarian economy, the
dependency ratio makes it so—
2. Industrial Economy:
If the secondary sector contributes 50 per cent or more to the total produce value of an
economy, it is an industrial economy.
Higher the contribution, higher is the level of industrialization.
3. Service Economy:
An economy whose 50 per cent or more produce value comes from the tertiary sector is
known as the service economy.
The tertiary sector provides livelihood to the largest number of people in such
economies.
The Second World War had established the fact that industrial activities were a faster
way to earn income in comparison to agrarian activities— and almost every country
started their preparation for the process of industrialization.
Country after country successfully industrialized and a pattern of population shift
occurred from one to another sector of the economy, which was known as the stages of
growth of an economy.
India was one of those countries.
Idea Of National Income
&
Economic Growth
Taxes
Subsidies
Low Level of
Low
Low Income Human
Investment
Capital
Low
Low Saving
Productivity
DEVELOPMENT
Example:
Development
Growth
ECONOMIC DEVELOPMENT
Presented By Akash
Definition of Happiness
Presented By Akash
What is GNH(Gross National Happiness)
Presented By Akash
Pioneer of Gross National Happiness
Presented By Akash
Behavioural Economics
Presented By Akash
Values and Economics
Honesty and Integrity can act as cement for self-interest driven economic
growth.
Good news is that people have started to believe that these values can be
developed and nurtured.
Presented By Akash
State of Indian economy at the time of
independence
• Indian economy was mostly agrarian with more than 50% of GDP
coming from agriculture. It was a stagnant economy (0.5% p a growth
between 1860 -1945) characterized by widespread poverty.
• Agriculture:
• More than 70% of labor force was employed in agriculture. India
was exporting tea, coffee, sugarcane, spices, oilseeds to Britain.
• Productivity in Agriculture was amongst the lowest in the world.
• Industry
• Industrial revolution has destroyed the Indian handicraft industry
• Only 6.6% of national income came from manufacturing and it
employed on 1.8% (2.2 million) of working population.
State of Indian economy at the time of independence
Prime Moving Force.
• Govt. opted for industry as PMF for the economy
• It was an illogical decision as-
• No presence of infrastructure sector viz.Power/Coal/Cement Ind
• Lack of investible capital.
• Absence of technology, skilled manpower & market for industries.
• Other social psychological factors.
• Agriculture could have been the obvious choice since-
• Fertile land which was fit for cultivation.
• Human Capital didn't require high skills of training.
• Economy would have achieved food security.
• Major policy shift announced in 2002-Agriculuture was
announced as PMF
Major Policies by Govt.
• Infrastructural Needs-
• Focus on Power, Transportation & Communications to drive
economy expansion.
• Pvt. sectors were kept out since there no market for such
infrastructure.
• Masses lacked the market linked purchasing power capacity.
• No alternatives, hence govt still has the monopoly in infra
sectors viz.power,railways,aviations,telecommunications.
• Industrial Needs
• Industry was the PMF for economy.
• Requirement of core industries viz.Steel,Cement,Coal,Crude
Oil,Oil refining & Electricity to enable manufacturing.
The results of mixed economy
• The mixed economy resulted in the worst features of socialism
and capitalism
• Controls of socialism
• Monopolies and lobbies of capitalism
• It did not deliver social justice and welfare
• Quality education and public health did not reach the poor
masses.
• Subsidies got delivered -mostly to the well off.
• India learnt by this experiment that State does not necessarily
work on behalf of people –it works on behalf of itself –the
politicians, bureaucrats and the special interest groups that
support them.
• We squandered the first 40 years in this experiment when the
Asian economies were rising
Employment & Development of Social Sector