Economy - Classmate Academy

Economy

Micro EconomicsMacro Economics

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Macro Economics

Macro EconomicsMacro Economics


Some Basic Definitions :

Economics :It is the social science that analyses the production,distribution and consumption of goods and services .

The study of how we work together to transform scarceresources into goods and services to satisfy the most pressing ofour infinite wants and how we distribute these goods andservices among ourselves.services among ourselves.

Micro Economics: which examines the behaviour of firm,consumers and the role of government.

Macro Economics: which deals with Inflation, unemployment,Industrial production and the role of government.


Micro Economics :

• Product pricing• Consumer behaviour• Factor pricing• Economic conditions of section of people• Study of firms• Location of a industry

Macro Economics :Macro Economics :

• National income and output• General price level• Balance of trade and payments • External value of money• Saving and investment • Employment and growth.


Every society has to answer three questions:

• What goods and services should be produced in the country?

• How should the goods and services be produced? Should producers use more human labor or more capital (machines) for producing things?


(machines) for producing things?

• How should the goods and services be distributed among people?

Types of Economy:

Capitalist Economy: It is characterised by existence ofprivate enterprise and ownership of all important sectors.

Socialist Economy: It is characterized by existence ofpublic enterprises or state ownership of capital in allimportant spheres of economic activity.important spheres of economic activity.

Mixed Economy : In this system, public and private sectorsco-exist, India economy is a mixed economy.


Adam Smith :• The Theory of Moral Sentiments (1759)• An Enquiry into the Nature and Cause of the Wealth of

Nations.(1776)

• Market ="the invisible hand"• laissez-faire (let it be)• economics(From Mercantilism to Free trade )


Great Depression : 1929,US

John Maynard Keynes :

The end Of laissez -FaireGeneral Theory of Employment, Interest and Money (1936)

socialism:Socialism is a social and economic system characterized by socialownership of the means of production and co-operativemanagement of the economy.

was created to contrast against the liberal doctrine of"individualism", which stressed that people act or should act as ifthey are in isolation from one another


Utopian Socialism: ((First person)Thomas Moore,book Utopia)Marx and Engel pointed out thatSaint Simon : Voluntary formation of social groups into largefamily like organizations.

From each according to his ability to each according to his needSaint –simon(France),RobertOwen(england),Fourier (USA)

Robert Owen in 1827, father of the cooperative movement.

Syndicalism (France) inspired in part by the ideas of Pierre JosephProudhon and later by Fernand Pelloutier and Georges Sorel

Factories managed by both Workers and Specialist called Syndicates

Guild Socialism : G. D. H. Cole & William Morris.The guild socialists "stood for state ownership of industry, combined


The guild socialists "stood for state ownership of industry, combinedwith ‘workers’ control’ through delegation of authority to nationalguilds organized internally on democratic lines

The Fabian Society' is a British socialist organization which wasestablished with the purpose of advancing the principles of socialismvia gradualist and reformist means.

Communists :

Karl Marx and Fredrick Angels :The Communist Manifesto (1848) and Das Kapital (1867–1894).

revolutionary socialism, and state socialism versus libertariansocialism.

Socialist Economy: It is characterized by existence of public


Socialist Economy: It is characterized by existence of publicenterprises or state ownership of capital in all important spheresof economic activity.

Gross domestic Product(GDP):It is the value of all final goods andservices produced in the economy during an year.

Economic growth : It can be defined as a sustained increase in thereal per capita income of a country.it is quantitative in nature.

Economic Development: It is a phenomena where growth isaccompanied by redistribution of resources in favor of theaccompanied by redistribution of resources in favor of therelatively worse off.

Sustainable Development: It is the development process whichallows for development of the present generation withoutcompromising the capacity of future generation to meet theirdevelopment needs.


Physical quality of Life Index: Morris DavidHis Indicators were : Life Expectancy, Infant Mortality, BasicLiteracy.

Human development report (HDR,1990):Mahboob-ul-Haq & Amartya sen

Human Development Index:Per capita -Income-as measured by real GDP per capita (PPP)


Human Development Index:• Per capita -Income-as measured by real GDP per capita (PPP)• Longevity -Life expectancy at Birth• Literacy levels-Adult Literacy (2/3 weight)+ combined

primary, secondary and tertiary enrollment ratio(1/3 weight).

Industrial Revolution :

Carrying capacity : the resource extraction is not above the rate of regeneration of the resource and the wastes generated are within the assimilating capacity of the environment.

Absorptive capacity :means the ability of the environment to absorb degradation.


Fossil Fuels, Green house gases and Global Warming

1972 : Stockholm Conference on the Human Environment

1987 : Go Harlem Burtland Report : Our Common Future

1992 : Earth Summit ,Rio-de-Janerio

Gender related Development Index(GDI): same as HDI, taking in to account only gender related indicators.

Gender Empowerment Measure: captures Gender equality in three different areas• Political participation measured by women's and men's

share in parliamentary seats.• Economic participation :measured by women and men's

percentage shares of position as legislators, senior officers percentage shares of position as legislators, senior officers and managers and women and men's percentage shares of professionals and technical positions.

• Power over economic resources as measured by women's and men's estimated earned income.

Green GDP: Environmentally adjusted GDP.Green GDP = GDP-Depreciation of natural Capital.


National Income: Measurement

Gross domestic Product(GDP):It is the value of all final goods and services produced in the economy during an year.

Gross National Product(GNP):it refers to the money value of total output or production of final goods and services produced by nationals of a country during a given period of time generally a year.

Unlike the GNP,GDP does not include the net factor income from abroad.

GNP=GDP+X-MX=Income received from abroad by the nationals .M= income paid to the foreign nationals with in our country.

Net Domestic Product (NDP):It is obtained by subtracting depreciation value from the GDP.

Net National Product(NNP):It is obtained by subtracting depreciation value from GNP.


Measuring National Income :

Three methods:• Product Method /Value added method

eg. Agriculture,Forestry,mining.

• Income Methodeg. Banking, Insurance.

• Expenditure Method.• Expenditure Method.eg. Construction

• CSO(1950) estimates National Income of India.• Dadabhai Naoroji• VKRV Rao made the first scientific estimates in 1925-29• First official estimates in year ,1949 Ministry of commerce.• Now CSO is under MoSPI.


Product Method:

• Let us suppose that there are only two kinds of producers in the economy.

• wheat producers (or the farmers) and the bread makers (the bakers)• Total value of wheat that the farmers have produced is Rs 100.• Out of this they have sold Rs 50 worth of wheat to the bakers.• The bakers have used this amount of wheat completely during the

year and have produced Rs 200 worth of bread.

• What is the value of total production in the economy


Product Method:

Expenditure Method :


Income Method :


Factors of Production : Land, Labor ,Capital, Entrepreneurship

Factor Cost +Indirect Taxes =Market Price. Factor Cost –subsidy=Market price.Net National Product at market Prices = GDP at factor cost +Net indirect Taxes-Subsidy.

Net National Product at Factor cost = NNP at market Prices –Net Indirect Taxes+ Subsidy.Indirect Taxes+ Subsidy.

NNP at FC =National Income

Per capita income, also known as income per person, is the mean income of the people in an economic unit such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate ( National income) and dividing it by the total population.


Rank Country GDP in PPP Year1 United States 16,768 20132 China 16,162 20133 India 6,776 2013

GDP(at purchasing power parity) per capita, i.e. the purchasing power parity (PPP) value of all final goods and services produced within a country in a given year


3 India 6,776 20134 Japan 4,641 2013

New Estimates :

Base year from 2004-05 to 2011-2012

Growth for 2013-2014 is 6.9 %

• Capital goods :They are defined as all the goods produced for use in future productive process. Eg. machinery, equipment, roads and bridges.

• Consumer Goods : Goods like food and clothing that are consumed when purchased by goods, are consumed when purchased by their ultimate consumers are called consumption goods or consumer goods.

• Consumer durables : like television sets, automobilesor home computers, although they are for ultimate

consumption have one characteristic in common with capital goods – they are also durable

• ICOR: It is the ratio of investment to change in output.


Sectors of Economy:

Primary sectors : The primary sector of the economy makes direct use of national resources .eg agriculture,fishing,mining.

Secondary sector: This sector generally takes the output od the primary sectors and manufacturing finished goods. All


the primary sectors and manufacturing finished goods. All industrial production comes under this.

Tertiary sector: It involves providing intangible goods like services. Eg. Financial services, management,consultancy, and It are good examples of service sectors

Country Origin of GDP

Agriculture Industry Services

U.K 0.7% 21.6% 77.6%

U.S.A 1.2% 20.0% 78.0%

JAPAN 1.1% 27.4% 71.5%


JAPAN 1.1% 27.4% 71.5%

THAILAND 12.4% 41.1% 46.5%

PAKISTAN 21.6% 24.9% 53.4%

CHINA 10.0% 46.6% 43.3%

INDIA 17.2% 26.4% 56.4%

Primary Secondary Tertiary

1951 56 16 28

2011 13.9 27 59

Share in GDP :

Distribution of working population :

Primary Secondary Tertiary

1951 72 10.7 17.2

2011 53.5 20.9 25.6

Distribution of working population :


Classification of Economy :

Agriculture sector: Agriculture , Fisheries, Forestry.

IndustrialSector:Mining,Manufacturing,Construction,Electricity,Gas and water.

Services Sector: Transport, Storage and Communication, Hotel,Finance ,Real estate, Public administration etc.Finance ,Real estate, Public administration etc.

Primary sector: Agriculture Sector +Mining.

Secondary Sector: Industrial Sector -Mining


S.No Category Global ranking

1 Area 72 Population 23 Labour Force 24 GDP(nominal) 105 GDP(PPP) 36 GDP(nominal) 1386 GDP(nominal)

per capita138

7 HDI 135


HDI = 135/187 (0.586)GDI = 132/148 (0.828)

Poverty and Unemployment

Short Term Unemployment :

Cyclical unemployment: Unemployment due to down turn in the economy which is cyclical fluctuation in any economy, is called unemployment

• Phase of increasing growth rates • Phase of increasing growth rates • Deflation or disinflation phase• Recession • Reflation

Frictional Unemployment: Unemployment caused due to short term obstacles in the economy like change in technology is known as frictional unemployment.


Seasonal unemployment :Reoccurrence of unemployment in a certain period of the year on a regular basis.

Disguised unemployment : when marginal productivity of surplus work force is negligible due to engagement of work force more than required is known as disguised unemployment.

Under employment: If a person is not employed according to one’s qualifications or full period is known as underemployment.

Structural unemployment: surplus of labour force in one sector of the Structural unemployment: surplus of labour force in one sector of the economy and at the same time there is short supply of work force in the other sector .

Voluntary Unemployment:

Labour Force : All those who are willing to work

Work Force : Demand for labour www.classmateacademy.com 32

Short term Schemes: Temporary solution.JRY---->JGSY------->SGRY(JGSY+EAS)----->MNREGA

Long term schemes: Permanent solution.IRDP,DWCRA,TRYSEM,SITRA1999,all of IRDP,TRYSEM,DWCRA,SITRA merged to SGSY.Now referred to as NRLM.

Montek Singh Ahluwalia Committe,2001Montek Singh Ahluwalia Committe,2001SP Gupta commmittee,2001:target 10 million oppurtunities


Poverty :

• Absolute Poverty: it is a level of income which is not sufficient tofulfill the basic needs of a person.

• Relative poverty: It is related with the unequal distribution ofincome in the country.

• Lorenz curve: it is a curve which shows the inequality indistribution like inequality in income.distribution like inequality in income.

• Gini coefficient: It is a co-efficient which shows the inequality indistribution like inequality in income. The value of Co-efficientvaries between 0 and 100(in % terms)The value of the coefficientincreases with increase in inequality.

• Gini coefficient =area between lorenz curve &45 line/area ofbelow 45 line.


Poverty line:

Defined on the level of nutrition-2400 cal/2100 calConverted to poverty line basket(monetary terms)

It is based on the consumption income in India.

Poverty rate now is 22 %(approx).

World Bank Definition:$ 1.25 per person perday.World Bank Definition:$ 1.25 per person perday.

poverty Urban Rural

Tendulkar(2005) 37.2%(2005)21.9(2012)

Rs 33 and 25.7% Rs 27 and 41.8%

Rangarajan(2012) 29.6% Rs 47 and 30.95% Rs 32 and 26.4%


Tendulkar 2004 2011Poor % 37.2 21.9Poor Cr. 41 27

Highest rural poverty Lowest poverty1.tie: Odisha, MP2.Bihar3.Assam

1.Kerala (7.1%)2.Himachal (8.1%)3.Punjab (8.3%)

Rural poverty line (Rs) Tendulkar C.Rangarajanper day per person 27 32


per day per person 27 32per person per month 816* 972per family of five, per month 4080 4860*

Poverty in India: Year 2011Formula # of BPL in croresTendulkar 27Rangarajan 37difference 10 crore = 100 million BPL increased

Poverty alleviation schemes:

Basic Needs Short-term Long-term

ICDS,1975 Employment Guarantee Scheme of Maharashtra(1972)

TRYSEM(1979),NREP(1980)

Food for Work(1977-78) Rural Landless Employment GuaranteePrograme(1993)

DWCRA(1982)

PDS (APL,BPL),1997 Jawahar/Nehru Rozgaar SEEUEY(1984)


PDS (APL,BPL),1997 Jawahar/Nehru RozgaarYojana,1989

SEEUEY(1984)

AAY,2000 SJSRY(1997) SJGSY(1999)

Annapurna Yojana,199910Kg food grains to those who do not get pension

Sampoorna GrameenRojgaar Yojana,2001

NRLM(2011)

MNREGA(2006)-right based approach

Infrastructure Education Health

CADP(1974) Sarva Shiksha Abhiyan(SSA)/Right to Education (RTE)

ICDS,1975

DDP(1977) National Programme for Education of Girls at Elementary Level (NPEGEL)

MDM,1995

IRDP(1980) Kasturba Gandhi Education NRHM,2005


IRDP(1980) Kasturba Gandhi Education Scheme(1997)

NRHM,2005

MPLADS(1993) Rashtriya Madhyamik ShikshaAbhiyan (RMSA) 2009

PMSSY,

PMGSSY(2000) Saakshar Bharat (SaaksharBharat)

Bharat Nirman,2005 Rashtriya Uchchatar ShikshaAbhiyan(RUSA)

Bharath Nirman:

• Irrigation: To ensure irrigation for additional one crore hectare land by2009.

• Roads: To link all villages of 1000 population with main roads and also tolink all ST and hilly villages up to 500 population with roads.

• Housing : Construction of additional 60 lakh houses for the poor.• Housing : Construction of additional 60 lakh houses for the poor.

• Water supply : To ensure drinking water to all remaining 74,000 villages.

• Electrification: To supply electricity to all remaining 1,25,000 villagesand to provide electricity connections to 2.3 cr houses.

• Rural Communication :To provide telephone facilities to all remaining66,000(approx) villages.


Education:RTE

Sarva Shiksha Abhiyan : Implemented since 2000 tp address the needs of children in the age group 6-14.

National programme for Education of Girls at Elementary Level: NPEGEL,Implemented in rural areas where the level of rural female literacy is less than the national national average.(educationally backward blocks).

National Programme for Mid-day Meals:since 1995 one of the worlds largest National Programme for Mid-day Meals:since 1995 one of the worlds largest scheme.

Kasturba Gandhi Balika Vidyalaya: These are residential schools at the upper primary level for girls belonging predominantly to SC,ST,OBC and minority communities.


Health :

National Rural Health Mission: A scheme that operates through out the country with speicial focus on 18 states which include 8 Empowered action group of states(Bihar,Jh,MP,Ch,UP,Orissa& Raj).

ASHA (Accredited Social Health Activist).

Pradhan Mantri Swasthaya Suraksha Yojana : To reduce the regional imbalances in the availability of affordable and reliable tertiary health care imbalances in the availability of affordable and reliable tertiary health care services.Setting up of 6 AIIMS like institutions .Upgrading 13 existing government medical college institutions.


Population: Human resourceBirth rate : Number of births per thousand population in a year .

Death rate: Number of death per one thousand population in a year.

Natural growth rate :The difference between birth rate and death rate is called Naturalgrowth rate of population.

Neo-Natal Mortality rate: Number of death of children below one month of age perthousand live births.

Infant mortality Rate :Number of deaths of children below one year of age per oneInfant mortality Rate :Number of deaths of children below one year of age per onethousand live births.

Child Mortality: Number of deaths of children below five years of age per thousand infants.

Maternal Mortality rate: Number of maternal deaths one lakh live births.

Life expectany at birth:The average expected life of children born in a given period .


Literacy rate: The percentage of population in the age group of 7 years and above who canread, write and understand at least one language.

TFR(Total fertility Rate)-Number of births per woman is called TFR.

Gross fertility Rate –(No. of Births)/(Female population 15-49).

Sex ratio: number of women per 1000 men.Best state –KeralaWorst state : Haryana, Punjab

Population Theories:Population Theories:• Malthusian Theory-An Essay on Principle of Population,1798• Optimum population Theory• Demographic transition theory

Demographic Transition Theory:First Phase------------------(phase of stagnation 1901-1921)Second Phase --------------(Phase of steady growth 1921-1951)Third Phase------------------(Phase of rapid Population growth 1951-81)Fourth Phase-----------------(Phase of high but decelerating growth 1981-01)



United States US $53,143

Canada US $ 51,911

Earliest references of census are found in :• 'Rig-Veda' reveals that some kind of population count was maintained in

during 800-600 BC in India.• Kautilya’s ‘Arthashastra’(321-296 BC) and later, in • Abul Fazl’s ‘Ain-Akbari’ (1595-96)• First census:1872• Second Census:1881• The 1901 Census: Herbert Risley, The People of India(Inclusion of caste)

National Population Policy:2001• TFR 2.1 by 2010.• Long term population stabilization by 2045.• Long term population stabilization by 2045.• National Population Stabilization Fund Established in 2003,under ministry of health.

Age classification:0-14 yrs : Dependent Population15-59 yrs : working age population 60+ yrs : Dependent Population

Demographic Dividend


Country Infant Mortality Rate

Germany 3.3

U.K 4.4

USA 6.4

Canada 4.9

France 3.4


France 3.4

Australia 4.1

Japan 2.4

China 12.1

India 44

State Birth Rate Death rate IMR

Kerala 14.8 7.0 13

Tamil Nadu 15.9 7.6 24

Andhra Pradesh

17.9 7.6 46


Maharashtra 17.1 6.5 28

Karnataka 19.2 7.1 38

West Bengal 16.8 6.0 31

Punjab 16.6 7.0 34

State Birth Rate Death rate IMR

Orissa 20.5 8.6 61

Gujarat 21.8 6.7 44

Haryana 22.3 6.6 48

Assam 23.2 8.2 58


Assam 23.2 8.2 58

Bihar 28.1 6.8 48

MP 27.3 8.3 62

Rajasthan 26.7 6.7 55

U.P 28.3 8.1 61

Janani Suraksha Yojana : 2005

One-time cash incentive to pregnant women for institutional/home births through skilled assistance

Indira Gandhi Matritva Sahyog Yojana:2010A cash incentive of Rs. 4000 to women (19 years and above) for the first two live births


CensusYear

Total Population(in crore)

DecadalGrowthRate (in %)

Average AnnualGrowth Rate (in%)

1901191119211931194119511961

23.8425.2125.1327.9031.8736.1143.92

-+5.75-0.31+11.00+14.22+13.31+21.64

+0.11+0.56-0.03+1.04+1.33+1.25+1.961961

19711981199120012011

43.9254.8268.3384.64102.87121.02

+21.64+24.80+24.66+23.87+21.54+17.64

+1.96+2.20+2.22+2.16+1.97+1.64


TFR : 2.3 (Survey ),women 48 % of population

1 Dadra and Nagar Haveli 55.88 %

2 Daman and Diu 53.76 %

3 Puducherry 28.08 %

4 Meghalaya 27.95 %

5 Arunachal Pradesh 26.03 %

High Growth Rate :

Population Density: 2001-3242001-3242011-382

1 Uttar Pradesh 199,812,341

2 Maharashtra 112,374,333

3 Bihar 104,099,452

4 West Bengal 91,276,115

5 MadhyaPradesh 72,626,809

Total Population :


SEX Ratio

Country 2001 2011

World 986 984

China 944 926

India 933 943


USA 1029 1025

Brazil 1025 1042

Russian Federation 1140 1167Japan 1041 1055

Census Year Sex Ratio1901 9721911 9641921 9551931 9501941 945

Sex Ratio :

1951 9461961 9411971 9311981 9341991 9272001 9332011 943


State 2011

Kerala 1084

Tamil Nadu 995

Andhra Pradesh 992

Orissa 978

H.P 974

Sex ratio :


H.P 974

Gujarat 918

Bihar 916

UP 908

Punjab 893

Haryana 877

S.No. Census Year Total (%) Male (%) Female (%)

1 1901 5.35 9.83 0.60

2 1911 5.92 10.56 1.05

3 1921 7.16 12.21 1.81

4 1931 9.50 15.59 2.93

5 1941 16.10 24.90 7.30

6 1951 16.67 24.95 9.45

Literacy:

6 1951 16.67 24.95 9.45

7 1961 24.02 34.44 12.95

8 1971 29.45 39.45 18.69

9 1981 36.23 46.89 24.82

10 1991 42.84 52.74 32.17

11 2001 64.83 75.26 53.67

12 2011 74.04 82.14 65.46


Population Density :1 Bihar 11062 West Bengal 10283 Kerala 8604 Uttar Pradesh 8295 Haryana 573


5 Haryana 573

1 Delhi 11,320

2 Chandigarh 9,258

3 Puducherry 2,547

4 Daman and Diu 2,191

5 Lakshadweep 2,149

Union Territories : Density

Decadal Growth rate :

State %

1 Meghalaya 27.95

2 Arunachal Pradesh 26.03

3 Bihar 25.42

4 J & K 23.64

5 Mizoram 23.48


Variation on religious level-• Jains - 94.1% (highest literate)• Christians - 80.3%• Buddhists - 72.7%• Sikhs - 69.4%• Hindus - 65.1%• Muslims - 59.1%States of India (in descending order) having highest literacy rate• Kerala-94.00%• Mizoram -91.33%• Goa- 88.70%• Tripura-87.22%• Tripura-87.22%• H.P-82.80 %States of India (in ascending order) having lowest literacy rate• Bihar (61.80%)• Arunachal Pradesh (65.38%)• Rajasthan (66.11%)• Jharkhand (66.41%)• Jammu & Kashmir (67.16%)• Uttar Pradesh (67.68%)


Union territories of India (in descending order) having highest literacy rate• Lakshadweep (91.85%)• Daman and Diu (87.10%)• Andaman& Nicobar Islands (86.63%)• Delhi (86.21%)• Chandigarh (86.05%)

Union territories of India (in ascending order) having least literacy rate• Dadra and Nagar Haveli (76.24%)• Puducherry (85.85%)• Chandigarh (86.05%)

• Kerala has the highest male literacy followed by Mizoram, Goa and Maharashtra.

• Kerala has also the highest female literacy followed by Mizoram, Goa and Himachal Pradesh.

• Among union territories, Lakshadweep stands first both in male and female literacy.


Life expectancy (at the time of birth) (2001-2006) :Total - 65.3 yearsMale - 63.87 yearsFemale - 66.91 years

Religious Group Percent(2011)Hindus 79.5

Muslims 14.2Muslims 14.2

Christians 2.78

Sikhs 1.7

Buddhists 0.77

Jains 0.41


Religious Composition.

Hindus:(80.45%)Himachal Pradesh-95.4%Mizoram-3.6%.Muslims:(13.5%)UP,WBJ&K-66.9%Assam-30.9%West Bengal -25.2%Kerala-24.7%

Christians(2.34%):KeralaNagaland -90%Mizoram -87%, Meghalaya-70%Manipur- 32.2%Goa -26.7%

Sikhs(1.87%):Punjab-70 % of population.Punjab-59.91% Chandigarh-16.1%,Haryana -5.54%. Kerala-24.7%

Mizoram -1.14%

Lakshadweep-94.3%

Haryana -5.54%. Delhi-4.01%Jammu & Kashmir -2.04%Rajasthan-1.45%

Buddhists-Maharashtra-73.4%Sikkim -28%Arunachal PradeshMizoram Tripura. Ladakh (Jammu and Kashmir) and Dharmshala (Himachal Pradesh)


Jains-

MaharashtraRajasthanGujarat Delhi.

Parsis-

Maharashtra (mainly in Mumbai) Maharashtra (mainly in Mumbai) and Gujarat.


Age 0-14yrs 15-59 yrs

1971 41.2 % 53.4%

1981 38.1% 56.3%

1991 36.3% 57.7%

2013 28.4% 63.3%


2013 28.4% 63.3%

In 2020 avg age ,India =29 yrsChina=37 yrsUSA=37 yrs

WesternEurope=45yrsJapan=48yrs

Globally ,shortage of young population of 56m,India only country with excess of 47 m

Urban Habitat:

Definition:• All the places with Muncipalities,Municipal corporations,Cantonments and

Notifies urban areas.

• Census DefinitionMinimum population-5000Minimum Population Density-400 per sq km.Minimum 75% of the male working population whould engage in non-agricultural activities.activities.

• Classification of cities in India :Group 1 --------1,00,000 and above PopulationGroup 2---------50,000 -99,999Group 3 ---------20,000-49,999Group 4 ----------10,000-19,999Group 5 ----------5000-9,999Group 6 ----------Less than 5,000


Highest population in Group 1,Highest number of cities is in Group-4.

Slum population :MH, AP, UP, WB, TN, Del

Cities :Mumbai, Delhi, Calcutta, Chennai, Nagpur, Hyderabad, Pune.

2011- 31 % Population in India

SMART Cities : 100 Smart cities ,each city to be given 100 Cr.


Atal Mission for Urban Renewal and Transformation (AMRUT) : 500 cities with 1 Lakh and above Population

Housing for All by 2022‘

Shyama Prasad Mukherji Rurban Mission (SPMRM) :The clusters will be geographically contiguous Gram Panchayats with a population of about 25000 to 50000 in plain and coastal areas and a population of 5000 to 15000 in desert, hilly or tribal areas.

While addressing the Constituent Assembly in 1947, Jawaharlal Nehru had said,

“This achievement (Independence) is but a step, an opening of opportunity, to the great triumphs and achievements that await us…the ending of poverty and ignorance and disease and inequality of opportunity.”

First Five Year Plan (1951-56),

“the urge to bring economic and social change under present conditions comes from fact of poverty and inequalities of wealth, income and opportunities.

Second Five year plan :Second Five year plan :

The benefits of economic development must accrue more and more to the relatively less privileged classes of society .


Indian Planning:1950- up to now

Economic Planning is a development strategy taking into consideration limited resources to achieve long term objective in the economy.

Types of Planning:Planning on the basis of role of STATE:

Imperative Planning: All the economic decisions are taken by single central authority ,usually known as central Planning Authority.authority ,usually known as central Planning Authority.

Indicative Planning :Planning by incentive/inducement.The state interference is limited to making policy and adopting indirect control. Government takes help of private sector in plan formulating a plan .The ways of achieving such targets is left to private sectors.

Planning by Inducement: It is a feature of mixed economy.The government sets broad objectives and targets of development ,but instruments used are not like in a Planning by command,but use indirect methods like Tax benefits


Planning on the basis of plan formulation and implementation:Centralised Planning: It is similar to planning by command .The process of plan formulation lies at the hand of a central authority usually central planning Authority.

Decentralised Planning: Planning from below.The plan is formulated a various levels ,like in India centre,state, local levels and amalgamated and a Plan is formulated at National Level.

Planning on the basis of time period of plans:

Prespective Planning :It is called a long term Plan .Under this system the plan is Prespective Planning :It is called a long term Plan .Under this system the plan is formulated for a longer period say 15-20 yrs

Medium Plan :Planning for a limited period say 5 years ,targets are set for five years.

Annual Plan: All the perspective and medium plans may have annual targets specified for a fixed plan.


Flexibility or rigidity of plan :

Fixed Plan: Such are formulated time period of 5 years and 10 years. Targets are fixed for a fixed period .

Rolling Plans: This Plan contains 3 plans .Annual Plan,Five year Plan and long term plan.

History of Planning in India:

• M .Vishveshvarya(1934):”Planned Economy for India”.• National Planning Committee (1938):J Nehru.• Bombay Plan(1944):Industrailists• Sriman Narayan :”Gandhi Plan”• People Plan (1945):M.N.Roy• Jay Prakash Narayana(1950):Sarvodaya Plan.

• Planning Commission(1950)• NDC(1952)


Indian Planning : the changes

Phase 1:1950-51 to 1965-66---Nehruvian EraPhase 2:1965-66 to 1979-80---Indira Gandhi eraPhase 3 1979-80 to 1991-92---Structural Change Beginning of liberalisationPhase 4:1991-92 to 2013-14---LPG

First five year Plan(1951-56):Development of Agriculture• Harrold-Domar Model.• CDP• Hirakud and Bhakra Nangal• Hirakud and Bhakra Nangal

Second five year plan(1956-61):Rapid Industrialisation.• Mahalanobis Model.• Influenced by soviet model.• Rapid industrialisation.• UGC,IITs• Steel Plants• Bhilai(USSR),Durgapur (Britain),Rourkela(Germany)


Industrial Policy Resolution 1956 (IPR 1956):• exclusively owned by the state; • private sector could supplement the efforts of the state sector, • private sector.

Trade Policy : Import Substitution

Protection : Tariffs and Quotas

Industry groups ExamplesIndustry groups Examples

Basic Industries Steel industry, Aluminium smelters, Cotton ginning mills, Sulphuric Acid & Caustic Soda

Capital goods industries Machinery except electric, electric Machinery, Shipbuilding, Railroad equipment, Motor vehicles

Intermediate Petroleum refinery , Ferro-Chrome alloy

Consumer goods industries


SCHEDULE A• Arms and ammunition and allied items of defence equipment• Atomic energy.• Iron and steel.• Heavy castings and forgings of iron and steel.• Heavy plant and machinery required for iron and steel production, for mining, for

machine tool manufacture and for such other basic industries as may be specified by the Central Government.

• Heavy electrical plant including large hydraulic and steam turbines.• Coal and lignite.• Mineral oils.• Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond.


• Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond.• Mining and processing of copper, lead, zinc, tin, molybdenum and wolfram.• Minerals specified in the Schedule to the Atomic Energy (Control of Production and

Use) Order, 1953.• Aircraft.• Air transport• Railway transport.• Shipbuilding.• Telephones and telephone cables, telegraph and wireless apparatus (excluding radio

receiving sets).• Generation and distribution of electricity.

SCHEDULE B

• All other minerals except "minor minerals" as defined in Section 3 of the Minerals Concession Rules, 1949.

• Aluminium and other non-ferrous metals not included in Schedule 'A'.

• Machine tools.• Ferro-alloys and tool steels.• Basic and intermediate products required by chemical industries

such as the manufacture of drugs, dyestuffs and plastics.• Antibiotics and other essential drugs.


• Antibiotics and other essential drugs.• Fertilizers.• Synthetic rubber.• Carbonisation of coal.• Chemical pulp.• Road transport.• Sea transport

Third Plan(1961-1966):Self reliance and Self sustained economy• Import Substitution• Gadgil Yojana• Two wars &Political Instability• Officially declared failure

Plan Holiday:1966-69• Three Annual Plans

Fourth Plan(1969-1974):Self reliance in growth with stability• Growth with Justice and Garibi hatao.• Aggressive policies• Aggressive policies• FERA,1973—To use forex reserves properly• Bank Nationalisation,1969• MRTP,1969---To prevent the emergence of Monopoly.• 1971-74:Inflation(>10%),1971 War,Oil shock.• Operation Smiling Buddha

Fifth Plan(1974-79):Poverty Eradication.• National emergency,1975.• 20 Point Programme.• Food for work programme started.


Programme Year Obejctive

CDP 1952 Rural development

HYVP 1966-67 To increase productivity of food grains by adopting latest varieties of inputs for crops.

Special Area Programs:


Command Area Development Program

1974-75 To ensure better and rapid utilization of irrigation capacities of medium and large projects.

Desert development Program

1977-78 For controlling the desert and prevent expansion of Desert

Small farmer Development Agency

1974-75 Technical and Financial assistance to small farmers

Training rural youth for self employment(TRYSEM)

1979 Program of training rural youth for self employment

Development of women and children in rural areas (DWCRA)

1982 To provide suitable opportunities of self-employment to the women belonging to the

Programs for specific Sections(Groups):


women belonging to the rural families who are living below the poverty line

Integrated Child Development Scheme(ICDS)

1975 Child Nutrition and Pre-primary education.

Rolling Plan(1978-1980):• Every year performance of the plan would be assessed and a new plan would be

based on such an assessment would be made for the subsequent year.

Sixth Plan(1980-85):Employment Generation(Perspective Planning)• PC--Structural changes in the economy• Liberal licensingEg. Agro based industries• More Poverty Eradication Programmes

Seventh Plan(1985-90):Modernisation Towards 21 century• Continued sixth plan,Liberalisation• Continued sixth plan,Liberalisation

in Industries like Electronics, Food Processing etcTechnology missions like Oilseeds etc.

• More investments in PSU,modernisation.• More Schemes like JRY

1990’s severe economic crisis,Gulf war,Credit rating agencies down graded India,NRIalso with draw money from India.

Plan Holiday (1990-92):Annual Plans• 24,July,1991 –Liberlisation –”New Industrial Policy”


Milton Friedman:

Chicago School of Economics

Reaganomics and Thatcherism

Trickle-down theory


Neo Right Policy – Privatization, Liberalization

Regulating Body Area year

SEBI(Formerly CCI) Capital Market 1992

IRDA Insurance sector 1999

CCI (MRTP) Competition 2002

TRAI Telecom 1997

PFRDA Pension 2003

FSSAI Food Safety and Standards Authority of

2011


Standards Authority of India

IWAI Inland Waterways Authority of India

1986

CERC Central electricity Regulatory Commission

1998

Eighth Plan (1992-97):Human Resource Development• John Miller• Employment, Education and Public Health• Economic growth 6.7%

Privatization : Privatization is to increase participation of private sector in the public sector companies by capital investment or by management or both or to hand over a public sector unit to a private company .

Liberalization :It is the process by which government control is relaxed or abolished.

Globalization :The process of amalgamation of Economy with the world economy is called Globalization . It is signified by lower duties on import and export.

Disinvestment: To reduce the government share in the public sector is called disinvestment.

Ninth Plan(1997-2002):Growth with Social justice and Equity• Focus on agriculture and rural development to eradicate poverty.• Problems in International level


Tenth Plan (2002-2007): Growth, equality & employment generation

Eleventh Plan(2007-2012):Towards faster and more inclusive Growth

Twelfth Plan(2012-2017):Faster,More Inclusive and sustainable Growth

1. Economic Growth• Real GDP Growth Rate of 8.0 per cent.• Agriculture Growth Rate of 4.0 per cent.• Manufacturing Growth Rate of 10.0 per cent.

2. Poverty and employment2. Poverty and employment• Poverty to be reduced by 10%• Generate 50million additional Employment opportunities in non-farm sector

and provide skill certification to equivalent numbers.

3. Education• Mean years of schooling to be seven years• Enhance access to higher education by creating additional 2 Million seats• Eliminate gender and social gap in school education (girls,SC,ST,Muslims,etc)


4.Health • IMR-25,MMR-1,CSR(950)• TFR-2.1• Reduce under Nutrition among children by half among 0-3 yrs children.

5. Infrastructure Including rural Infrastrucure:• All weather road connectivity• Two laning of state highways• Teledensity-70%

6. Environment and sustainability6. Environment and sustainability• Green cover 1 million hectares• 30,000 MW renewable energy• Reduce emission intensity by 20-25%,reduction over 2005 levels by 2020.

7.Service Delivery• 90% financial Inclusion.• Subsidies be given through DTC.


Schemes of New Government :

• Pradhan Mantri Jan Dhan Yojana : 28 Aug,2014 : • Rupay Debit card• Accident insurance cover of Rs 1L• Life insurance cover of Rs30,000to those who opened account before 16,Jan• 28 Jan : 12.31cr (7.36 in rural areas ,4.95 in urban areas )• 67.5 % with zero balance

DDUGJY : Deendayal Upadhyaya Gram Jyoti Yojana (Garv : Grameen Vidyutikaran app)

• Separation of agriculture and non-agriculture feeders


• Separation of agriculture and non-agriculture feeders • Augmentation of transmission and distribution • Metering in rural areas

Swach Bharat Mission : 2oct,2014 by 2oct 2019Awareness,solidwaste,sanitation,

Heritage City Development and Augmentation Yojana(HRIDAY)Heritage linked urban development(12 cities Ajmer,Varanasi,Warangal,badami,Puri,Gaya)

Smart City Scheme : 100 cities

J : JanDhan Yojana, 125.5 m JanDhan bank accountsA : Aadhaar,757m Aadhaar numbers M : Mobile numbers, 904m mobile phones .

PAHAL : (Pratyaksh Hanstantrit Labh)

01/01/2015 launched throughout the country


01/01/2015 launched throughout the country

ASER report :Grade 5 -47% could read grade 2

Padhe Bharath Bade Bharath : focuses on early reading, writing and comprehension and early grade mathematics.

Deendayal Upadhyaya grameen Koushalya Yojana(Ddu-GKY) : Training and career


Training and career

Nai Manzil : Education and skill development of dropoutswithout a formal school-leaving certificate to obtain one and find better employment.

Pandit Madan Mohan Malaviya Mission for Teachers Training: Dec 25

Atal Pension Yojana : APY is applicable to all citizen of India aged between 18-40 years,would receive the fixed monthly pension of Rs. 1000 to Rs 5000 at the age of 60 years, depending on their contributions.

Government would co-contribute 50 per cent of a subscriber’s contribution or Rs 1,000 per annum, whichever is lower to each eligible subscriber account for a period of of 5 years from 2015-16 to 2019-20.

Pradhan Mantri Jeevan Jyoti Bima Yojana: Eligibility: Available to people in the age group of 18 to 50 and having a bank account. People who join the scheme before completing 50 years can, however, continue to have the risk of life cover up to the age of 55 years subject to payment of premium.


the risk of life cover up to the age of 55 years subject to payment of premium.Premium: Rs 330 per annum. It will be auto-debited in one installment.Payment Mode: The payment of premium will be directly auto-debited by the bank from the subscribers account.Risk Coverage: Rs. 2 Lakh in case of death for any reason.

Pradhan Mantri Suraksha Bima Yojana:Eligibility: Available to people in age group 18 to 70 years with bank account.Premium: Rs 12 per annum.Payment Mode: The premium will be directly auto-debited by the bank from the subscribers account. This is the only mode available.Risk Coverage: For accidental death and full disability – Rs 2 Lakh and for partial disability – Rs 1 Lakh.

Nai Roshini : Leadership training programme for minority women.

MANAS (Maulana Azad National Academy for Skills)Upgrading entrepreneurial skill of minority youth for sled employment

Mission Indradhanush (25 dec): To cover all the children who are either unvaccinated or are partially vaccinated against 7 preventable diseases Diphtheria,Whooping Cough,Tetanus,Polio,Tuberclosis,Measles


Diphtheria,Whooping Cough,Tetanus,Polio,Tuberclosis,Measles

Immunization –From 65% to 90%

Beti Bachao BetiPadhao Programme (BBBP) : 22 Jan,2015 at panipat,HaryanaFirst in 100 distHaryana-835Sukanya Samriddhi account" special account for girl child,Rs1000 at time of birth ,then any amount in multiples of hundred and at 18 yrs,Rs 1,50,000

Sansad Adarsh Gram Yojana(SAGY): 11Oct,2014


11Oct,2014One Model village -2016Two Model Villages -2019

Vanbandhu Kalyan Yojana : One Block In Tribal areas (schedule 5 states),10 cr for all round development .

Sugamya Bharat Abhiyan(Accessible India Campaign ) : Is the nationwide campaign for achieving universal accessibility for all citizens including Persons with Disabilities, to be able to gain access and live independently.DEC-3, International day of Persons with disability.

UDAY : Ujwal Discom Assurance Yojna


• Improving operational efficiencies of discoms, • Reduction of cost of power,• Reduction in interest cost of discoms and • Enforcing financial discipline on discoms through alignment

with state finances.

DELP : Domestic Efficient Lighting ProgrammeEESL : Efficient Energy Services Limited Pub ltd

Start Up India

• Single Window Clearance even with the help of a mobile application• 10,000 crore funds of fund• 80% reduction in patent registration fee• Modified and more friendly Bankruptcy Code to ensure 90-day exit

window• Freedom from mystifying inspections for 3 years• Freedom from Capital Gain Tax for 3 years


• Freedom from Capital Gain Tax for 3 years• Freedom from tax in profits for 3 years• Eliminating red tape• Self-certification compliance• Innovation hub under Atal Innovation Mission• Starting with 5 lakh schools to target 10 lakh children for innovation

programme

Stand Up India Scheme to promote entrepreneurship among Scheduled Caste/Scheduled Tribes (SC/ST) and Women entrepreneurs.

• The Scheme seeks to facilitate at least two such projects on an average one for each category of entrepreneur per bank branch.

• The Stand-up India is component of Start-up India, Stand up India slogan anchored by Department of Financial Services (DFS) to encourage greenfield enterprises by Women and SC/ST entrepreneurs.


• It will refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount 10,000 crore rupees

• It would provide women and SC/ST entrepreneurs bank loans repayable up to 7 years. It would be between 10 lakh to 1 crore rupees for greenfield enterprises in the non-farm sector.

Pradhan Mantri Kaushal Vikas Yojana

• PMKVY is a flagship scheme that would ensure that the youth undergo skill training under NSDC and this scheme would affect the skill sets of around 24 lakh individuals across the length and breadth of the country.

• The National Skill Qualification Framework (NSQF) would be the benchmark of training programs carried out under the PM Kaushal Vikas Yojana.


PM Kaushal Vikas Yojana.• The scheme would also award monetary rewards to the

successful trainees on completion and the certifications and assessments would be carried out by third party assessment bodies.

• The average monetary reward given to each trainee would be around Rs 8,000

Agriculture :The Back bone to Indian Economy

• 50% of work force and 14 % GDP.

Land Reforms:• Abolition of intermediaries• Tenancy reformsRegulation of rentSecurity of tenureOwnership rights to tenantsOwnership rights to tenants• Land ceilings.

• Green RevolutionProduction =Productivity*areaIncrease in production through productivity is known as Green revolution

Inputs: Irrigation,HYV,Fertilizers and pesticides.IAAPHYVP,1966


HYV:IACR: Crop specific Institutes responsible for developing the seeds.

Chemical Fertilizers:NPK(ideally 4:2:1)N-UreaP-DAP,SSPK-MOPMicro Nutrients: Boron,Zinc

Subsidized:APM-Adminstered Price Mechanism.Deregulation of Phosphatic and Potash fertilizers in 1992Deregulation of Phosphatic and Potash fertilizers in 1992Now to reduce subsidy ,NBS nutrient based subsidy

Irrigation:• Of the total area under food grains, only 48.3% area is irrigated .• 60% irrigation is tube wells,30%-canals.

• Command Area Development Programme(CADP),1974-75• AIBP,1996-97• Drought Prone Area Programme(DPAP),1973• Desert Development Programme(DDP),1977


Pricing in Agriculture:

Minimum Support Price(MSP):It is fixed before sowing i.e start of the season.24 crops are under MSPCACP,1965

Procurement Price: It is the price at which the government procures foodgrains for buffer stock and PDS.

Issue Price : It is the price at which the government sells the agricultural produce from its stocks.

PDS : FCI keeps stock of food grains for the government .Food Subsidy-Consumer Subsidy + Buffer Subsidy.Consumer subsidy: the difference of procurement price and issue price.Buffer subsidy : it is the cost incurred between the point of purchase and point of sale1997-TPDS(APL+BPL)2000-AAY(Poorest of the poor)NFSA-National Food security Act.Ever green revolution,Second Green Revolution,Rainbow Revolution.


Agriculture finance:27% institutional sources,22%--non institutional sources,51% unable to get any loan.

Short Term: 0-15 monthsMedium Term: 15-5 YearsLong term: 5> yearsCooperatives:Started in 1904Three Tier Structure : Primary Credit Societies,DCCB,SCB

Commercial Banks:After Nationalisation,60% credit through Commercial banks.

RRB,1975:set up by lead banks at district level with primary objective of RRB,1975:set up by lead banks at district level with primary objective of branch expansion and lending to rural areas.9% lending.

KCC,Kisan Credit Card Scheme:Issued by commercial banks,cooperatives and RRB. Commercial banks have issued maximum no of KCC

NABARD,1982

Priority Sector Lending: Decided by RBI, Indian Banks-40%,Foreign Banks-32% (Agriculture)


Agriculture Insurance:NAIS,1999:To protect BanksMNAIS-Modified NAISWBCIS-Weather based Insurance scheme,2007Pvt Companies-IFFCO-TOKYO,ICICI-LOMBARDCPIS-

Agriculture Insurance Company of India Limited: GIC(35%),NABARD(30%), remaining by Four PSU

Micro Finance:Started in 1992,MFIsStarted in 1992,MFIs

RKVY-Rashtriya Krishi Vikas YojanaNHM-National horticulture missionNBM-National Bamboo Mission.NFSMNCM,2004-MS SwaminathanNational Policy For farmers,2007

RIDF-rural Infrastructure Development Funds,1996


New Schemes :

Pradhan Mantri Krishi Sinchayee Yojana :

Neeranchal National Watershed Project: Integrated watershed management program (IWMP)

Soil Health Card : Swasth Dharaa. Khet Haraa


Soil Health Card : Swasth Dharaa. Khet Haraa

Shanta Kumar Committee on FCI

Pradhan Mantri Fasal Bima Yojana :

• premium will be 2 % of the sum insured for Kharif season crops and 1.5 % for Rabi season crops. The rates are also applicable for oilseeds.

• The premium rates for commercial crops like cotton and other horticultural crops will be 5 % of the insurance sum assured.


Industry: Its Development

Industrial Policy-1948:• Public sector emphasized• Private sector given limited role(lack of capacity + willingness)Industrial development act ,1951

Industrial Policy ,1956Role of Public sector expanded.Schedule A-17 Public sector.Schedule B -12 Public+privateSchedule B -12 Public+private

Industrial Policy,1973:Joint Sector was allowed in important and export oriented Industries.Eg.Maruti,Vespa,HeroHonda.

Industrial Policy,1980: Beginning of Gradual Liberalisation process in the countryAgro based industries,backward areas and export oreinted industries


Liberalization :It is the Process by which government control is relaxed or abolished.

Privatization :Privatization is to increase the participation of private sector in the public sector companies by capital investment or by management or both or to hand over a public sector unit to private company.

Globalization: The process of amalgamation of an economy with world economy is called Globalization. It is signified by lower duties on import and export .

Disinvestment: To reduce the government share in the public sector is called disinvestment.

New Industrial Policy,1991:• Except 18 industries all other were freed from compulsory licensing in

1991,now only 3 (Atomic energy,Atomic minerals and railways)• MRTP,1969 is replaced by competition act,2002• FERA,1973 replaced by FEMA,2000.


Public sector: Changes• Now only Three reserved –Atomic energy, atomic minerals and railways.• Policy of recommending sick PSUs to BIFR.

Policy of MOU-Arjunsen Gupta CommitteePSU granted more managerial and financial autonomy .Beginning of Navratna,Maharatna,Mini-ratna.(1,2)

Policy of disinvestment.Policy of disinvestment.BRPSE,(2004)-Board of Reconstruction of Public Sector Enterprises-to revive sick PSU units.

VRS-Golden Handshake.

National Investment Fund(2005):

Present status : 290 CPSEs ,234(operational) and 56 (under construction)


Maharatna Navratna Miniratna Category-I Miniratna Category-II

Eligibility

Three years with an average annual net profit of over Rs. 2500 crore (earlier was 5,000 Cr), OR Average annual Net worth of Rs. 10,000 crore for 3 years (earlier was 15,000 Cr), OR Average annual Turnover of

A score of 60 (out of 100), based on six parameters which include net profit, net worth, total manpower cost, total cost of production, cost of services, PBDIT (Profit Before Depreciation, Interest and Taxes), capital employed, etc., ANDA

Have made profits continuously for the last three years or earned a net profit of Rs. 30 crore or more in one of the three years

Have made profits continuously for the last three years and should have a positive net worth.


Average annual Turnover of Rs. 20,000 crore for 3 years (earlier was 25,000 Cr)

employed, etc., ANDA company must first be a Miniratna and have 4 independent directors on its board before it can be made a Navratna.

years

Benefits for investment

Rs. 1,000 crore - Rs. 5,000 crore, or free to decide on investments up to 15% of their net worth in a project

up to Rs. 1,000 crore or 15% of their net worth on a single project or 30% of their net worth in the whole year (not exceeding Rs. 1,000 crores).

up to Rs. 500 crore or equal to their net worth, whichever is lower.

up to Rs. 300 crore or up to 50% of their net worth, whichever is lower.

Maharatna CPSEs• Bharat Heavy Electricals Limited• Coal India Limited• GAIL (India) Limited• Indian Oil Corporation Limited• NTPC Limited• Oil & Natural Gas Corporation Limited• Steel Authority of India LimitedNavratna CPSEs• Bharat Electronics Limited• Bharat Petroleum Corporation Limited• Hindustan Aeronautics Limited• Hindustan Petroleum Corporation Limited• Hindustan Petroleum Corporation Limited• Mahanagar Telephone Nigam Limited• National Aluminium Company Limited• NMDC Limited• Neyveli Lignite Corporation Limited• Oil India Limited• Power Finance Corporation Limited• Power Grid Corporation of India Limited• Rashtriya Ispat Nigam Limited• Rural Electrification Corporation Limited• Shipping Corporation of India Limited


Foreign Sector:• After 1991, Policy is to promote foreign investment in India.• FDI, allowed in some sectors up to 100%• FIIs allowed to invest in Indian Capital Market.• Indian Companies allowed to raise ADR/GDR

Classification of Industries:• No of EmployeesOrganised(>10), Unorganised(<10) • Turnover criteria• Small sector

There are about 460 million workers in the country.

There are about 29 million workers in the formal sector.• Small sector

Small Scale sector: Definition based on Investment amount .

Since 2006 MSME Act

Manufacturing ServicesMicro 25 lakh 10 LakhSmall 5 cr 2 crMedium 10 cr 5 cr


workers in the formal sector.

SIDBI-Small Industries Development Bank of India,1990

Recent Measures:Credit Linked capital subsidy scheme:SMERA(Small and Medium Enterprises Rating Agency)

Some Important Committees of small scale sector

Abid Hussian Committee: Small Scale Sector.

Meera Seth Committee: Handloom Sector.

M.L Kapoor Committee: Better Credit facility to Small scale sector .

IIP- Index of Industrial of Production(now base 2004-05,Base=100):682 items

Mining: 14.17% Basic Goods:Manufacturing: 75..53% Capital Goods:Electricity : 10.32% Intermediate Goods:

Consumer Goods:


3.61 cr (MSME ),37.5% of GDP

Schemes :

• Prime Ministers employment Generation Programme• Micro and small Enterprises –Cluster Development

Programme• Credit Guarantee Fund Scheme for micro and small

Enterprises


Enterprises• Performance and Credit Rating Scheme• Assistance to Training Institutions • Scheme of Fund for Regeneration of Training Industries

Recent Initiatives to boost Industrial growth :

E-Biz project : G2B portal to serve as one stop shop foe delivery of services ,24*7

Skill development : 31 Industry/employer led Sector Skill Councils and aligned with 25 sectors of ‘Make In India’.

Labour reforms : Shram Suvidha Portal launched for online registration of units,filing of self-certified,simplified,single online return .


units,filing of self-certified,simplified,single online return .

Mudra Bank : (Micro Units Development Refinance Agency)5.77 crore small business unitsFund : Rs 20,000 crore.Loan amount based on stage of business Shishu : Rs 50,000Kishor : Rs 50,000-5,00,000Tarun : Rs 10,00,000

Financial System in India

Financial System------------Money Market +Capital Market

Money market: Short term ,up to 1 yearCapital market : more than 1 year.

Money market Instruments:• Call Money market• Treasury Bill market • Commercial Bill market• Commercial Bill market• Certificate of Deposit• Commercial Paper Market

Treasury Bill markets:

Repo Rate : It is the rate at which RBI provides short term loan to the banks.

Reverse Repo Rate: It is the rate at which the banks park their funds with RBI for short term


Capital Market : Internal + External

Internal Source: Shares + Debentures+ Reinvestment of Profit

External Sources: Banks + Financial Institutions.

Shares: they are associated with a company, all shares have equal value hence called as equity shares.Ordinary : They are normal shares.Preference : They have some preference over ordinary shares. Eg fixed dividend,company (usually no voting rights )is winded up .

Debenture: It is an instrument used by companies to get a loan.

Convertible: Convertible to share on maturity.Non- Convertible: Principle is paid on maturity.

Buy back of shares: Usually done by promoters.Splitting of shares :Conversion of shares in to more shares of less denomination.

IPO: Initial Public Offer.FPO: Forward Public offer.


BSE: Bombay stock exchange ,oldest stock exchange in India ,1875

NSE: Established on recommendation of Pherwani Committee ,started in 1994

Depository system : In this system there is no physical transfer of securities change in ownership is done through electronic ledger entry transfer.

MCX-SX: Third Stock exchange of the country.

United Stock Exchange of India : The Fourth stock exchange at the national United Stock Exchange of India : The Fourth stock exchange at the national level.BSE-30,BSE-50,NSE-50,NSE-500.

Bull: These are he investors who buy at low prices and after some time sell at higher prices.

Bear: These are the investor who first sell at higher price and after some time purchase at lower prices.

Gilt Edged Security: Government security.www.classmateacademy.com 126

Merchant Bank : These are not Banks ,they are financial intermediaries which provide various financial services like management of the new issue , arrangement of loans financial advice etc.

Seed Capital: Seed Capital refers to the cash you need to get your business started, The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own , or until it is ready for further investments.

Angel Investor : Is an affluent individual who provides capital for a business Angel Investor : Is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity

Venture Capital Fund: For new or specialised areas funding is provided.

Crowdfunding : It is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet


Derivatives: Purchasing of an item for Future Trading.

Forward Market Commission(FMC):It is the agency to regulate commodity futures in India.

Commodity Futures market in India :

MCX : Multi Commodity Exchange ,Mumbai.

NCDEX : National Commodity and Derivatives Exchange ,Mumbai.


NCDEX : National Commodity and Derivatives Exchange ,Mumbai.

NPS: New Pension Scheme,2004The NPS was made mandatory for central government employees from Apr 1 ,2004

SEBI: Established in 1992,as a regulator of capital market.

It the autonomous regulatory authority of the capital market with wide spread powers .

Insider Trading : Getting information about the company which is other wise not available in all.

PLR : Prime Lending Rate• It is the rate applicable to more credit worthy borrower (safest loan).• It is the rate applicable to more credit worthy borrower (safest loan).• If lending is less than PLR it is called Sub-PLR.

Base Rate : It is the minimum rate of lending of the bank.

BASEL -3:To be Introduced in India from 2017-2018Basel1 : 1988 Basel 2: 2004 Basel 3: 2010 CAR/CRAR: Capital Adequacy ratio. Ratio of capital and Risk assets.


Monetary Sector : Money and Inflation.

Money :It’s a medium of exchange. Its legal tender .

Inflation : is a sustained increase in the general price level of goods and services in an economy over a period of time.Deflation : A reduction in the level of national income and output usually accompanied by reduction in price level.Stagflation :Is a term used in economics to describe a situation where the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high.

Measurement of Inflation : In India we use different indices for different purposes.Measurement of Inflation : In India we use different indices for different purposes.

WPI(2004-05)-Base 100(676 commodities):• Primary articles(20.11%),Fuel & Power(14.91%),Manufactured goods(64.97%)Food articles(24.27%)

• CPI-AL : It is used for revision of minimum wages of agricultural workers.

• CPI-RL :

• CPI-IW: It is used for wage revision of industrial workers.

• CPI-UNME: It is used by services sector like revision of DA by government.


CPI-UNME: is published by CSO ,rest by Ministry of labour.

Headline Inflation vs Core Inflation : Head line inflation rate is about total inflation in the economy while core inflation excludes food and energy prices.

New CPI series : 2011CPI(Urban),CPI(Rural),CPI(Combined)(Base 2010-100)310-Towns,1181-Villages.

Reasons for inflation :• Demand Pull• Cost Push• Cost Push

Effects:• Supply side• Demand side• Savings• Imports/Exports

• From April,2014 the RBI had announced its intent to anchor its monetary policy To headline CPI (combined )


RBI-Reserve Bank Of IndiaFunctions:

Normal Central Bank Functions:• Issue of currency notes:• Banker to the Government• Banker’s Bank• Regulation of Foreign Exchange• Collection and Publication of Data

Instruments of credit Control:Instruments of credit Control:Bank Rate : The rate at which RBI lends loans to the banks.

CRR : The ratio of demand and term deposits with the banks that they have to keep with the RBI.

SLR : The ratio of demand and term deposit with the banks that they have to keep in liquid form i.e cash , gold and permitted securities

OMO: Sale and Purchase of securities by the RBI is termed as open market operations


Fiscal Sector: Taxes, Centre-state, Budget

Progressive Taxation : The tax system in which tax rates increase with increase in tax base i.e income tax in India.

Regressive Taxation: The tax system in which tax rates decrease with in crease in tax base .

Proportional Tax system : The tax system in which there is no change with change in tax base , eg .corporate tax, customs duties, central excise .

Direct Tax : The tax in which the impact and incidence of tax is one the same Direct Tax : The tax in which the impact and incidence of tax is one the same entity; i.e income tax, corporate tax. In case of direct tax the burden of tax cannot be shifted.

Indirect Tax : The tax in which the impact and incidence of tax is on different entities. i.e service tax ,custom duties etc.

Ad valorem Tax : If the tax is levied on the basis of value of the product or service in percentage terms.


Countervailing Duty : The duty imposed on imported goods equivalent to the domestic taxes on domestic products.

Dumping Duty :This duty is imposed on imported goods if the exporting country is exporting the products on the price which is less than the domestic price of the product.

Securities Transaction Tax (STT):The tax imposed on transaction of securities in capital market in India since 2004-2005.it varies from 0.017% -0.125%

Tobin Tax :The tax Imposed on International Transactions of Currencies.

Commodity Transaction Tax : It is just like STT but is imposed on commodities in the futures market.

Service tax : This tax was first imposed in India in 1994-95,on three services,at the rate of 5 %.But now a negative list of 17 services exits in India,since 2013

MAT: This tax is levied from those companies which are zero tax companies because of various rebates and exemptions.


Centre –State : Financial Relations

Federal Structure ----Division of powers between Centre and states

Unitary Bias----more powers to centre.

Centre ----------------> State(gives money to states).

• Share in taxes –decided by finance Commission.(Art-280).• Share in taxes –decided by finance Commission.(Art-280).

• Grants-in-Aid(one part reco –F.C +Discretionary Grants).

• Loans (Planning Commission ).


Taxes Right to Impose

Right to Collect

Right to Use

Income Tax, Corporate Tax, Service Tax, Central excise Centre Centre Centreand states

Sales Tax, State Excise Tax , Entertainment Tax ,Land revenue, Tax on agricultural Income

States States States

Estate duty on all except agricultural land, tax on rail Centre Centre States

Division of Taxes:

Estate duty on all except agricultural land, tax on rail fare and freight ,terminal tax on rail, sea and air travel and transport ,tax on sale of news papers and advertisements

Centre Centre States

Stamp duty, Excise Duty on medicines and cosmetics Centre States States

Finance Commission : K.C.Neogi(First), Vijay Kelkar (13 Finance Commission.)Y V Reddy (14 Finance Commission.)• Share of States to be 42%


FFC :

Share of states from divisible pool to 42 %


Fiscal capacity/Income distance :The income distance criterion was first used by Twelfth FC, measured by per capita GSDP as a proxy for the distance between states in tax capacity. When so proxied, the procedure implicitly applies a single average tax-to GSDP ratio to determine fiscal capacity distance between states.

Fiscal discipline as a criterion for tax devolution was used by


Fiscal discipline as a criterion for tax devolution was used by Eleventh and Twelfth FC to provide an incentive to states managing their finances prudently

VAT: In this tax system, tax is imposed on every stage of production or sale of goods and services on the basis of value addition in each stage.

1981, Manufactured VATL.N Jha Committee led to introduction of 1986,Mod VAT 2000, CENVAT

Goods Services

Centre CENVAT Service Tax

State VAT/ST -

• Vijay Kelkar Committee,2002 :Recommended the implementation of VAT at state level also.

• Haryana(First state ,2003)…UP was the last state now all states follow this system.

• GST proposal since 2006 .• 122 Amendment Bill ,GST.• Empowered Committee under –Asim Dasgupta (First), Sushil Modi

(Second)


Grant –in- Aid :• One part recommendation by FC• Discretionary grants

These are given based on the Gadgil Formula(1969),Mukherjee Formula (1991).

Service tax In India: Started by Union Government in 1994-95,Telephone,General Insurance &Stock Broking.Now a Negative list of 17 Commodities Exist .92 Amendment act ,Service tax may be levied by Centre but Collected and 92 Amendment act ,Service tax may be levied by Centre but Collected and appropriated by Centre and State.

Contribution from Different Taxes:• Corporation Tax• Income Tax• Union Excise tax• Customs Tax• Service Tax

DTC,1961 to be changed


Fiscal Sector :

Union Budget

Revenue

Revenue Account

Capital Account

Expenditure

Plan Expenditure

Non-Planned Expenditure

Tax

Tax on income

Tax on property

Tax on services

Non Tax Revenue

Fiscal & other

services

Dividend and profits

Interest receipts

Capital


Budget : It is always an estimate of Receipts & Expenditure.

Receipts:

Revenue receipts • Tax revenue• Non-tax revenue(Interest,dividend,fines )

Capital receipts • Repayment of loans• Repayment of loans• Other receipts• Loans and Other Liabilities

• Revenue: Income which is to be received in the present year.

• Capital : Income which will be received in the Future(more than a year) or spent as part of repayment of previous obligation.


Expenditure:

Planned• Expenditure in the budget on the recommendation of PC.

Non-Planned • Interest Payment• Subsidies• Defence• Public Administration

Expenditure on Revenue Account :

Those consumed in the present year.e.g : maintenance of canal , Rent of buildings, Salaries of Government Officials etc.

Expenditure on Capital Account :

Those that create Capital assets.E.G : Constructing canals , new buildings etc.


Revenue Deficit: Excess of revenue expenditure over revenue receipts .

Revenue receipts = Tax revenue +non-tax revenue.Revenue expenditure=Plan+ Non-Plan.

Budget Deficit :It is the excess of total expenditure over total receipts.

Total expenditure = Revenue expenditure+ capital expenditure.Total expenditure = Revenue expenditure+ capital expenditure.Total revenue = Revenue receipts + Capital receipts .

Fiscal Deficit : Total expenditure –Total receipts (but the receipt component does not include borrowings and other liabilities).

Deficit Financing : It is the difference between expenditure and receipts . www.classmateacademy.com 146

Fiscal cost of subsidies : Rs 3,78.000 L cr ,4.2 % of GDP

FRBM,Act : Fiscal Responsibility and Budget Management act,2003Initial targets :• Revenue deficit -0 %• Fiscal deficit -3% by 2008-09


• Fiscal deficit -3% by 2008-09

• Due to recession now targets changed to 2016-17 on the recommendation of Rangarajan Committee.

Main Features of FRBM act ,1. The Act mandates the central government to take appropriate measures toreduce fiscal deficit to not more than 3 percent of GDP and to eliminatethe revenue deficit by March 31, 2009 and thereafter build up adequaterevenue surplus.2. It requires the reduction in fiscal deficit by 0.3 per cent of GDP eachyear and the revenue deficit by 0.5 per cent. If this is not achieved throughtax revenues, the necessary adjustment has to come from a reductionin expenditure.3. The actual deficits may exceed the targets specified only on grounds ofnational security or natural calamity or such other exceptional grounds


national security or natural calamity or such other exceptional groundsas the central government may specify.4. The central government shall not borrow from the Reserve Bank of Indiaexcept by way of advances to meet temporary excess of cash disbursementsover cash receipts.5. The Reserve Bank of India must not subscribe to the primary issues ofcentral government securities from the year 2006-07.6. Measures to be taken to ensure greater transparency in fiscal operations.7. The central government to lay before both Houses of Parliament threestatements – Medium-term Fiscal Policy Statement, The Fiscal PolicyStrategy Statement, The Macro

Fiscal Policy : It is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.

Fiscal Stimulus: An increase in Public Spending or a reduction in the level of taxation that might be performed by a government in order to encourage and support economic growth. Most government bail out package form part of fiscal stimulus.

Laffer Curve :

Chelliah Committee : Related to Direct tax reforms ,1991


Foreign Sector:

After Independence : The immediate policy was based on import restrictions.

Quantitative Restrictions (QRs): • Negative list –NO Import is allowed.• Canalised –Import only of essential items but through specified agencies.• OGL- Open general license .

Tariff barrier: High rates if Import.

Non-Tariff barrier: Restrictions of import on the ground of Technology level, human health ,environment etc.health ,environment etc.e.g: No car of less than E-IV standards is allowed ,Banning certain chemicals in Food.

During 1970’s SE Asian countries proved that aggressive policies can be used to increase the exports.

In 1980s we started export Promotion policy .1985 : First Export –Import Policy (EXIM Policy started ) ,3 years


1992: First five year EXIM policy which was co-terminus with Five Year Plan.

Due the reforms of 1991,

Imports : Procedures for imports were simplified, QRs removed, Tariff rates reduced now stand at 10% for most of the goods.

Exports : More Emphasis and new schemes to increase the exports from India.

e.gEPCG: Export Promotion of Capital goods Scheme.EPCG: Export Promotion of Capital goods Scheme.

SEZ,Act 2005 :Started in India ,Asia First EPZ-Kandla,1965.AEZ: Agriculture Export Zones, Nodal Agency –APEDA (Min Of Commerce)AEZ-Chillies-GunturAEZ-Mangoes-VijayawadaAEZ-Hyderabad-Grapes,Mangoes


Exim Policy 2002 -2007 ,• Focus Africa .• Reviving relations with CIS Countries.

FTP-2004 Introduction of many schemes:• Focus Market Scheme(FMS)• Focus Product Scheme(FPS)• Vishesh Krishi Upaj Yojana (VKUY)• Served From India (SIF)

FTP-2009 : FTP-2009 : FPS,FMS,MLFPS,VKGUY,AIIS(Agri Infrastructure Incentive scheme)Other Policies :Look East Policy: To diversify the direction of our trade, Today the trade with Asia is 50-55 % of our Total Trade.

Free Trade Area(FTA) : It is an agreement between two countries or a group of countries for concessional Import duty rates.(Only Goods)

Comprehensive Economic Cooperation Agreement (CECA/CEPA) :This includes not only goods but also services, investments, recognition of degrees etc.


Negative List : The duty concessions will not be available on the goods included in the negative list .

The whole negotiation is about negative list .

Rule of Origin(ROO) :It should be originated from the country .If at least 35 % of value addition is in the region.

Positive List : Concession will be available only to the items in this list . E.gSAFTA.(2006).

Composition of Trade-Imports Exports• POL 1.Engineering Goods• Capital Goods 2.POL• Electronic Goods 3.Gems & Jewellery• Gold & Silver 4. Agriculture and allied• Chemicals 5.Textiles • Pearls & Stones 6.Chemicals


Trade :

World level % Exports Imports

2004 0.8% 1.0%

2012 1.7% 2.5 %

Exports :


Region 2004 2013

Europe 23.6% 18.6%

NA 20.1 17.2

Asia 47.9 49.4

Africa 6.7 9.9

Exports :

Imports % of Total

China 11.2

UAE 7.6

SA 6.8

USA 5.1

Survey :2014


Exports % Total

UAE 11.7

USA 11.6

China 5.3

Singapore 4.5

Balance of Payments: BOP

Bop is an account of transactions between a country and rest of the world.

Part 1 Accounts –Current Account :• Imports-Imports of goods (services not included)• Exports Balance of Trade =Export-Import• Invisibles(Net): Services, remittances .• Current Account Balance : BoT+ Invisibles.

Part 2 –Capital Account :• Capital Account (Net):Investment (Net)-FDI,FIILoan(Net)-ECB etc.Banking-NRI deposit etc.

Over all BOP: Current + Capital .This should be positive.Increase in BOP ,so this surplus is shifted to forex reserves.


Country Reserves in Billion dollars

1 China 3840

2 Japan 1312

3 Switzerland 526.6

4 Russia Federation 388.5

5 Brazil 363.6


5 Brazil 363.6

6 Korea, Republic of 363.2

7 China, Hongkong 344.6

8 India 320.6

9 Germany 192.7

10 Thailand 163.7

Convertibility Of Rupee :

Convertibility: Permission to convert domestic currency into foreign currency and foreign currency into domestic currency.

Rupee made Convertible on Trade Account in 1993-93Rupee made Convertible on Current Account in 1994-95

For Capital Account Convertibility , a committee was established in 1997, calledTarapore Committee Again in 2006 Same committee was appointed .Again in 2006 Same committee was appointed .

Present Status :

Rupee remain Partially convertible in Capital Account.

FDI,FII,ECB there are limits that are specified to each sector with in the limits they are convertible outside the limits they are not .


Absolute advantage : The capability to produce more of a given product using less of a given resource than a competing entity.

Adam Smith : Wealth of Nations

Out -Put Per Day Of Work :

Food Clothing


Food Clothing

Country A 6 3

Country B 1 2

Comparative advantage : The ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

David Ricardo :

Out -Put Per Day Of Work:

Food Clothing

Country A 6 3

Country B 1 2


Food Clothing

Country A 18 9

Country B 3 6

Out-Put after 6 Days :

Food Clothing

Country A 36 0

Country B 12

WORLD TRADE ORGANISATION

GATT- General agreement on tariffs and trade

MFN –Most favored nation

URUGUAY round of negotiations ---1986-1994

Arthur Dunkel came up with a draft which led to establishment of WTO on 1st

Jan 1995Jan 1995

RUSSIA and VANAUTU(2012)Tajikistan(2013),Yemen(2015),Seychelles(2015)(Total -161)

Roberto Azevedo—present Director General


Agreements under WTO

ATC-Agreement on Textiles and Clothing

TRIPS-Trade related intellectual property rights

2001 Doha round of talks:• AOA-Agreement on Agriculture• NAMA- Non Agriculture Market Access• NAMA- Non Agriculture Market Access• GATS-General agreement on trade and services

• Uruguay Round : maximum support to agriculture is 10 %

• G-33 proposed a change to this


WORLD BANK• International bank for reconstruction and development – IBRD, 1944

Also known as WORLD BANK• International Finance Corporation –IFC, 1956• International Development Association-IDA, 1960• International Centre for Settlement of Investment Disputes-ICSID, 1966• Multilateral Investment Guarantee Agency-MIGA, 1988• WDR

IMF• International Monetary Fund, 1944• SDR-Special Drawing Rights: Official currency of IMF• SDR-Special Drawing Rights: Official currency of IMF• The value of the SDR was initially defined as equivalent to 0.888671 grams of fine

gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies. Currently,

• the Chinese Renminbi (RMB) as the fifth currency, effective October 1, 2016• Voting %

USA – 16.75INDIA- 2.34CHINA- 3.81

• WEO www.classmateacademy.com 164

Economy - Classmate Academy

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