structural changes in the economy_be seminar

7/28/2019 Structural Changes in the Economy_BE Seminar

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(Indian Economy)

Structural Changes in the

Economy


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A large pool of skilled workers

A rapidly growing middle class witha strong desire to consume.

A rich natural resource base,especially coal, iron ore, water,

limestone and granite.

Indian Economy

(Strengths)


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Lack of Capital

Lack of adequate infrastructure Bureaucracy and corruption

Foreign currency risk

Indian Economy

(Weakness)


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Like its Asian neighbors, India has a large skilledworkforce, the engine of prosperity, butcorruption and a lack of capital have put thebrakes on growth.

Despite all these factors, Independent India havecome across many Structural Changes in its

Economy. And we will be discussing on that.


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Indian economy is a pure example ofmixed economy.

The countries that adopted a mixedcapitalist structure had a remarkablerise in their economy.

Nature of Indian Economy


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South Korea was noteven manufactured

a single car tire in1945

Now they are one ofthe largestautomobile exportersin the world..!

India was producingworld class steel @

cheapest price to the

world

Later we importedsteel from countrieslike Japan who

produces steel afterimporting iron ore fromIndia


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Low per capita income : India is one of the mostunderdeveloped countries in terms of per capita income. In1988, Indias Purchasing Power Parity was around 1/17th ofUSAs PPP estimate of GNP per capita. And it was 1700 US$

Dominance of agriculture : In 1988, agriculture provided

25% of GDP. And the bad side about this is, 65% of Indianpopulation still depends on agriculture for income.Dependency on agriculture of such a large population is amajor reason for poverty in India.

Characteristics of Indian Economy


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Rapid growth of population : Asper 2010 census, the population isover 1.21 billion. The death rates are

falling without correspondingdecrease in birth rate. This is realpopulation explosion. Because of thisthe average availability of land isnow less than 2 hectares per head.


Population

PovertyIlliteracy


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Inequitable distribution of incomeand poverty :The distribution ofincome and wealth is unbalanced.

A few business houses were able to getlicenses and they produces everythingfrom pins to truck.

Artificial scarcity of goods leads to blackmarket and thus black money.



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Indian economy is an example of complexmixed economic system.

Has multiple sectors like public, private,

joint, co-operative etc.

During 1980s the MRTP and FERA actswere strong.

But later in 1991 amendment in both actsoccurred and even the import policy wasliberalized.

Complete mixed economy


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Industrial licensing

Foreign investment

MRTP Public sector

Foreign technology agreement

After liberalization in 1991, the economic face ofIndia had changed drastically.

The industrial policy features


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The government has a positive roleto play in the field of economicactivity.

India is a best mixed economiccountry. The following explains whythe Indian economy should beconsidered a mixed economy.

India a mixed economy


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Private ownership of the means ofproduction and profit-inducedcommodity production

Significant role of market mechanism

Big business houses

Public sector

Economic planning

Government as a regulator

Reasons


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The face of Indian economydrastically changed since 1991.earlier the pricing was governed by

administered price mechanisms, buttoday market forces govern pricing.

With GDP in nominal terms of US$692 billion in 2004, India is now theworlds 10th largest economy.

Changing face in the economy


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Economic policies formulated andimplemented by the governmentconvey business in different ways.

Almost every business is influencedby some or other economic policy.

The main policies are :

Economic policies


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Statement of governments incomesource and expenditure.

Government earns income by direct orindirect taxes.

Touches every walk of life and peopleof nation.

Influences demand, supply, disposableincome, savings rate etc.

Fiscal policy


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Determines supply of currency ineconomy.

Through supply of money, thisregulates interest rates and inflation.

Thus it influences all businesses.

Monetary policy


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Defines scope and role of differentsectors like public, private, joint, co-operative etc.

Can influence the level of industrialactivity, location of units, productportfolio etc in different areas.

Industrial policy


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Not only influences the export andimport as its name says, but alsoinfluences the whole business.

A liberal foreign trade policy compelsthe organization to work on itsproduct portfolio, quality control andcosts to stay in the competition.

Foreign trade policy


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This is crucial to business.

Its a tool in the hands of government

to influence international trade. After liberalization, the exchange

rates are determined by market

forces.

Foreign exchange rate policy


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It influences foreign investment andtechnology inflow into the country.

On one handF

oreignD

irectInvestment boosts the level ofeconomy as it improvesinfrastructure, on other hand it

improves technology, productportfolio, exports, developments etc.

Foreign investment & Technologypolicy

structural changes in the economy_be seminar

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