presentation-role of govt. in indian economy

8/9/2019 PRESENTATION-Role of Govt. in Indian Economy

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Presentation On WelfareEconomics

Presented by :-

Munshi Nazimuddin

Ipshita Mukherjee

Shrabani Mondol

Rajsuya Das

Sayantan Chowdhury

Pratik Kundu

Prajna Biswas


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What is mixed economy?

A mixed economy is an economic system that includesa variety of private and government control.


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Characteristics Of Mixed

Economy

Co-existence of public and private sectors.

Existence of partial planning or semi-planning.

Restricted freedom of private sector producers.

The existences of private property and private ownership of the means

of production.

Existence of mixed allocative pattern.


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India As A Mixed Economy

India followed a mixed economic model after its independence. With bothpublic and private sectors coexisted, a central role was assigned to the

states planning machinery for resource allocation across sectors. Thestated primary objectives of the planning process have been economicgrowth, social justice and self-reliance. The Five-Year Plans initiated since1951 provided the basic framework for the economic development strategyof the country. Accounting for about half of the capital formation in

the economy, the government sector directly played a major role in the

production process of the country for several decades.


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Indian Economy BeforeLiberlization


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1980s, suggests that the root cause of the crisis was the large andgrowing fiscal imbalance.

Large fiscal deficits emerged as a result of mounting governmentexpenditures, particularly during the second half of the 80s.

These fiscal deficits led to high levels of borrowing by the governmentfrom the Reserve Bank of India (RBI),IMF,World Bank.


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Over the 1980s, government expenditure in India grew at a phenomenalrate, faster than what government earns as revenues.

The subsidies grew at a rate faster than government expenditures.

Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 to Rs. 107.2billion in 1990-91.

Although, a large part of the problem concerning external imbalances in

India could be attributed to extraneous developments, such as two oil-shocks during the last decade.

Less attraction of Foreign Direct Investment.


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The Indian economy was indeed in deep trouble.

Lack of foreign reserves .

Gold reserve was empty.

Before 1991, India was a closed economy.

The government was close to default and its foreign exchange reserveshad reduced to the point that India could barely finance three weeksworth of imports.

The Government of India headed by Chandra Shekhar decided to usherin several reforms that are collectively termed as liberalisation in theIndian media with Man Mohan Singh whom he appointed as a specialeconomical advisor.


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Indian Economy AfterLiberalisation


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ChangingEnvironmentAfter 1991

Opening up of the Indian Economy

Before 1991 closed economy and import of certain goods wasrestricted.

After 1991 competition increased tremendously after the

liberalisation.

Competitors from all over the world enter the Indian market


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Implications

Growth of GDP increased.

Steady rise in Foreign Exchange Reserves.

Attraction Of Foreign Direct Investment.

Reduction in the import duty.

Rise in the share of Indias external trade.


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Pharmaceuticals Industry After

Liberalization

India is world's 4th largest pharmaceuticals producer with 8% share of

global production. 3 New Molecules discovered by Indian companies - 12 more in the finalstages.

Over 100 Indian formulations have received United States FDA

approval


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Biotech After Liberalization

More than 900 companies involved in traditional biotech products

Biopharma products 35 new MNC companies set up in past 5 years.

R&D and commercialization of products on agricultural biotechnology isthe latest trend.

Opportunities for fresh investment in Indian biotech sector in next 5-7years - US$ 1.5 2 billion


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Agri & Food Processing After

Liberalization

India is looking for investment in infrastructure, packaging andmarketing.

India - One of the largest food producers of the world

The Indian scientific and research talent had boomed up afterliberalization because of various MNC are investing big money in R&D.


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Auto & Auto Components After

Liberalization2nd largest small car market in the world.

Largest motorcycle manufacturer in the world.

2nd largest scooter and tractor manufacturer in the world.

Many international auto majors are manufacturing in India Daimler,Chrysler,GeneralMotors, Toyota, Ford, Honda, Hyundai,

Volkswagen, Suzuki etc

Most of them are also outsourcing their components from India as a hub.


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Production of Automobiles After

Liberalization (4 wheelers)

671,928

1,263,764

0

200000

400000

600000

800000

1000000

1200000

1400000

1992-93 1994-95 1996-97 1387276 1998-99 2000-01 2001-02 2002-03 2003-04

4 Wheelers (in Nos)


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Countries Invested In IndiaAfter Liberalization


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Share of top five investing countries in FDI inflows

Rank CountryInflows

(Million USD)Inflows (%)

1 Mauritius 85,178 44.24%

2 United States 18,040 9.37%

3 United Kingdom 15,363 7.98%

4 Netherlands 11,177 5.81%

5 Singapore 9,742 5.06%


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Role Played By Government

Through Budget

Year 2000: Direct and indirect subsidies were thrice the value of all

investments in agriculture leading to the occurrence of dismal state of

Affairs in this sector.

Present scenario: Fertilizer companies receive the bulk of Rs. 15000crore

as fertilizer subsidy. Big farmers get subsidy more than they desire

whereas small farmers run into debt which is totally against the

principle of welfare.

Some striking steps taken by Indian govt.


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Spend less than 0.3% of AGDP in agricultural research and

development.

Reservation in the textile sector has led to the lack of economies ofscale.

16% export duty on micro-irrigational system including itscomponents.

Inability in improving the health scenario of the country.

Insufficient allocation to the National Aids Control Organizations.


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Budget 2010

No tax for income upto 1.6 lakh.

For income between 1.6 lakh 5 lakh tax liability 10%. (old slab was Rs 1.6 to 3

lakh)For income between 5 lakh 8 lakh 20%. (old slab was Rs 3-5 lakh)

For income above 8 lakh 30% (old slab was Rs 5 lakh +)

Additional investment of 20K in infra bonds over and above Rs 1 lakh in 80C.

Increase in diesel prices

Some irrelevant measures in times of financial crisis:


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Some relevant measures taken:-

Investment made in developing the north-eastern region for improvingthe food-processing sector.

Increasing the scales of finance for the farmers.


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Sectors Where Govt. ShouldIntervene


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Oil Sector

Petrochemical Sector

Defence Sector

PF &Gratuity

Infrastructure


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Heavy Industries

Telecom Sector


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Influence Of The Sector Followed In

Indian Economy Before 1991

0

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30

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60

70

80

90

Govt. influence Market influence


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Influence Of The SectorFollowed In Indian Economy

After 1991

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30

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80

Govt. influence Market influence


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Thank You

presentation-role of govt. in indian economy

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