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Unit 5

Indian Economy
Economic Development
• It is a complex process which is influenced by
  both economic & non-economic factors.
• Some of the economic factors are:
1. Economic system
2. Capital stock
3. Rate of capital accumulation
4. Capital output ratio in various sectors
5. Agricultural surplus
6. Foreign trade etc…
• Some of the non economic factors are:
1. Quantity & quality of Human resource
2. Social organisation
3. General education
4. Technical know-how
5. Political freedom
6. Corruption free environment
7. People’s will to develop the country
8. Natural resources
National Income Analysis
• NI is the money value of all final outcome of
  all economic activities of the people in the
  country.
• Gross domestic product (GDP) refers to the
  market value of all final goods and services
  produced within a country in a given period.
• GNP means the total of all business
  production and service sector industry in a
  country plus its gain on overseas investment.
GNP = market value of final goods & services +
 incomes earned by the nationals in the foreign
 countries – income earned locally but accruing
 to foreigners.

GDP = market value of final goods & services
 produced by residents in the country +
 incomes earned locally by foreigners - income
 received by nationals in the foreign countries.
Planning in India
• The economy of India is based in part on planning
  through its five-year plans, which are developed,
  executed and monitored by the Planning
  Commission.
• Long term objectives of Planning are:
1. Increasing NI
2. Reduce inequalities
3. Eliminate poverty
4. Create full employment
5. Sectoral growth
Monetary Policy
• Government and Central Bank make use of
  various fiscal and monetary measures to
  achieve stability and growth by influencing
  and regulating the behavior of the
  consumers, investors and savers.
• These policies can help the overall economic
  situation and business prospects.
• They encourage investment and production in
  certain priority sectors and discourage them in
  the non priority sectors.
• They can affect the aggregate demand and
  supply and the levels of
  employment, wages, interest, rent, prices and
  profit.
What is Monetary Policy?
• Monetary policy refers to the policy regarding
  money supply and bank credit in the country
  and it is formulated and announced by the
  Central Bank of the country ie. the RBI.
• In simple words, it refers to the policy of the
  govt pertaining to the monetary matters in
  the economic system.
• The scope of this policy spans the entire area
  of economic transactions in the economy.
Instruments of Monetary Policy
• General (Quantitative) – Bank rate policy, open
  market operations, Cash reserve ratio, statutory
  liquidity ratio which affect the economy in general.

• Selective (Qualitative) – Minimum margins for
  lending against specific securities, ceilings on volume
  for credit, discriminatory rates of interest, moral
  suasion which affects selective sectors and segments
  of the economy.

General Credit Controls are inter-related and have to be
  operated in co-ordination. All these instruments
  affect the bank reserves.
Industrial policy
• It refers to govt policy towards the
  establishment of industries, their working
  conditions & management.
• First industrial policy was spelled out in the
  year 1948.
• Policy of 1991 brought revolution in Indian
  industries through introducing Licensing
  Raj, abolishing MRTP, Foreign technology
  liberlisation, Foreign Investment.
Industrial sickness
• Acc to RBI, a sick industrial unit is one which
  has reported cash loss for the previous year of
  its operation and in the judgement of the
  financing bank is likely to incur each loss for
  the current year and also in the following year.
• Causes for sickness in the industries can be
  classified into:
1. Internal
2. External

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Unit 5 indian eco

  • 2. Economic Development • It is a complex process which is influenced by both economic & non-economic factors. • Some of the economic factors are: 1. Economic system 2. Capital stock 3. Rate of capital accumulation 4. Capital output ratio in various sectors 5. Agricultural surplus 6. Foreign trade etc…
  • 3. • Some of the non economic factors are: 1. Quantity & quality of Human resource 2. Social organisation 3. General education 4. Technical know-how 5. Political freedom 6. Corruption free environment 7. People’s will to develop the country 8. Natural resources
  • 4. National Income Analysis • NI is the money value of all final outcome of all economic activities of the people in the country. • Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period. • GNP means the total of all business production and service sector industry in a country plus its gain on overseas investment.
  • 5. GNP = market value of final goods & services + incomes earned by the nationals in the foreign countries – income earned locally but accruing to foreigners. GDP = market value of final goods & services produced by residents in the country + incomes earned locally by foreigners - income received by nationals in the foreign countries.
  • 6. Planning in India • The economy of India is based in part on planning through its five-year plans, which are developed, executed and monitored by the Planning Commission. • Long term objectives of Planning are: 1. Increasing NI 2. Reduce inequalities 3. Eliminate poverty 4. Create full employment 5. Sectoral growth
  • 7. Monetary Policy • Government and Central Bank make use of various fiscal and monetary measures to achieve stability and growth by influencing and regulating the behavior of the consumers, investors and savers. • These policies can help the overall economic situation and business prospects. • They encourage investment and production in certain priority sectors and discourage them in the non priority sectors. • They can affect the aggregate demand and supply and the levels of employment, wages, interest, rent, prices and profit.
  • 8. What is Monetary Policy? • Monetary policy refers to the policy regarding money supply and bank credit in the country and it is formulated and announced by the Central Bank of the country ie. the RBI. • In simple words, it refers to the policy of the govt pertaining to the monetary matters in the economic system. • The scope of this policy spans the entire area of economic transactions in the economy.
  • 9. Instruments of Monetary Policy • General (Quantitative) – Bank rate policy, open market operations, Cash reserve ratio, statutory liquidity ratio which affect the economy in general. • Selective (Qualitative) – Minimum margins for lending against specific securities, ceilings on volume for credit, discriminatory rates of interest, moral suasion which affects selective sectors and segments of the economy. General Credit Controls are inter-related and have to be operated in co-ordination. All these instruments affect the bank reserves.
  • 10. Industrial policy • It refers to govt policy towards the establishment of industries, their working conditions & management. • First industrial policy was spelled out in the year 1948. • Policy of 1991 brought revolution in Indian industries through introducing Licensing Raj, abolishing MRTP, Foreign technology liberlisation, Foreign Investment.
  • 11. Industrial sickness • Acc to RBI, a sick industrial unit is one which has reported cash loss for the previous year of its operation and in the judgement of the financing bank is likely to incur each loss for the current year and also in the following year. • Causes for sickness in the industries can be classified into: 1. Internal 2. External