INDIAN ECONOMY

 BANKING/INSURANCE EXAMINATIONS – RAPID READING EXERCISE

INDIAN ECONOMY

v Indian economy is world’s 9th largest economy on exchange rate basis and 4th largest economy on PPP basis in 2010

v PPP is called as the purchasing power party

v Purchasing power party is a theory and according to the theory – the exchange rates between currencies are balanced when their purchasing power is the same in each of the two countries 

v The main characteristics of Indian economy are – agrarian economy, mixed economy and developing economy

v Agrarian economy – it is also called as primary economy. Agriculture dominance prevails in both the gross national product and employment and more than half of India’s working population is engaged in agriculture

v Mixed economy – It is an economy where both public and private sector coexist. The nature of Indian economy is a mixed economy coined by J M Keynes

v Developing economy – the following are the features of developing economy

o   Low per capita income

o   Occupational pattern is primary producing

o   Heavy population pressure

o   Prevalence of chronic unemployment and under employment

o   Steadily improving rate of capital formation

o   Low capital per head

o   Mal distribution of wealth/assets

o   Low level of living of the average Indian

o   Low human development indicators

v The broad sectors of Indian economy are:

o   Primary sector

o   Secondary sector

o   Tertiary sector

v Primary sector consists of agriculture, forestry and fishing

v Secondary sector consists of mining, manufacturing, electricity, gas and water supply and construction

v The tertiary sector consists of – business, transport, telecommunication, banking, insurance, real estate, community and personnel services

v GNP – GDP - NNP

v National income – 

o   It is the net value of all the final goods and services produced in a country

o   During a financial year

o   It is a flow concept

o   In India, the financial year is from April 1st to March 31st

o   The national income is calculated annually

v According to National Income committee 1949 – national income estimate measures the volume of commodities and services turned out during a given period counted without duplication

v National income – is the measurement of the production power of an economic system during a given time period

v National wealth is the measurement of the present assets available at a given time and it is a stock concept

v Gross National Product – it refers to the money value of total output of production of final goods and services produced by the nationals of a country during a given period of time, generally a year

v Gross national product = C+G+I+(X-M)+(R-P) where, C = consumption expenditure; G = government expenditure; I = Investment expenditure; X-M = net exports and R-P = net factor income from abroad

v Gross domestic product – It is the total money value of all final goods and services produced within the geographical boundaries of the country during a given period of time

v Gross domestic product = GNP – (R-P) and when R-P is equal to 0, then GDP = GNP

v Net national product is obtained by subtracting depreciation value – ie. The capital stock consumption from gross national product

v NNP = gross national product – depreciation

v Personal Income - It is that income which is actually obtained by the individual or nationals

v Personal Income = National Income – undistributed profits of corporations – payment for social security provisions – corporate taxes + transfer payments + net interest paid by the government

v Personal disposable income – PDI

v Personal disposable income – when personal direct taxes are subtracted from personal income, the obtained value is called as personal disposable income

v Personal disposable income = PI – direct taxes

v Personal disposable income = consumption + saving

v NATIONAL INCOME

v When the national income is measured at the base year price, it is called as national income at constant prices

v When the national income is measured at the current year price, it is called as national income at current prices

v In 1968, the first attempt was made by Dadabhai Naoroji in arriving at national income through his book – Poverty and Un British rule in India

v The first scientific attempt to measure national income was made by Prof VKRV Rao during 1931-1932

v In 1949, National Income Committee under the chairmanship of Prof PC Mahalanobis was constituted

v National Statistical Commission – NSO was set up on June 1,2005 for promoting statistical network in the country and it was headed by SD Tendulkar

v In 1949, Central Statistical Organisation was constituted to public national income data

v NSSO – National sample survey organization

v NSSO was set up in 1950 for conducting large scale sample survey to meet the data needs of the country for the estimation of national income and other aggregates

v PLANNING

v Planning is a continuous attempt on the part of policy makers to achieve multiple and predetermined objectives of development within a specific period of time in a planned way

v The first attempt was made by Sir M. Visvesvarayya through his bookd – Planned economy for India in 1934

v National Planning Commission was set up under the chairmanship of J L Nehru in 1938

v HISTORY OF PLANNING

v 1944 – Bombay Plan ( a plan of economic development) by eight industrialists

v 1944 – Gandhian plan by S N Agarwal

v 1945 – People’s plan by M N Roy

v 1950 – Sarvodaya plan by Jai Prakash Narayan

v Planning commission was set up by Government of India on 15.3.1950

v The present composition of Planning commission is as detailed below:

o   Dr. Manmohan sing – chairman

o   Shri Montek Singh Ahuwalia – deputy chairman

o   Shri Soumitra Choudhary – member

o   Shri Mihir Shah – member

o   Shri K. Kasturi Rengan – member

o   Shri Aman Maira – member

o   Shri Abhijit Sen – Member

o   Shri Syeda Hameed – member

o   Shri Narendra Jadhav – member

o   Shri B K Chaturvedi – member

v NATIONAL DEVELOPMENT COUNCIL

v National Development Council was constituted on 6.8.1952

v The prime minister is the ex officio chairman

v The secretary of the Planning Commission is the ex-officio secretary of the national development council

v Chief Ministers of all states and the members of the Planning Commission are the members of the national development council

v The following are the functions:

o   Aims to make cooperative environment for economic planning between the states and the planning commission

o   It evaluates the management of plans from time to time

o   It analyses the policies affecting the development

o   It gives suggestions to achieve fixed aim in the plans

o   It gives final approval to the five year plans

v The strategies of planning in the country are:

o   Harrod Domar planning

o   Nehru Mahalanobis strategy

o   Gandhian strategy

o   LPG strategy

o   Pura strategy

v The following are the types of planning:

o   Planning by direction

o   Planning by inducement

o   Financial planning

o   Physical planning

o   Perspective planning

o   Indicative planning

o   Imperative planning

o   Rolling plan

o   Core plan

v The following are the details of various five year plans in the country:

o   First plan – 1951 – 1956

o   Second plan – 1956 – 1961

o   Third plan – 1961-1966 (Gadgil yojana)

o   Fourth plan – 1969 – 1974

o   Fifth plan – 1974 – 1979

o   Sixth plan – 1980-1985

o   Seventh plan – 1985 – 1990

o   Eighth plan – 1992 – 1997

o   Ninth plan – 1997 – 2002

o   Tenth plan – 2002 – 2007

v The eleventh plan document was titled as – TOWARDS FASTER AND MORE INCLUSIVE GROWTH

v The monitorable targets for eleventh five year plan were:

o   Income and poverty

o   Education

o   Health

o   Women and children

o   Infrastructure

o   Environment

v The twelfth plan period is 2012 – 2017

v The twelfth plan document was titled as – FASTER, SUSTAINABLE AND MORE INCLUSIVE GROWTH

v Inclusive development means – development which is participative and empowers every individual especially the poor and excluded

v The essential elements of inclusive development are:

o   Poverty reduction and increase in quantity and quality of employment

o   Agricultural development

o   Reduction in regional disparities

o   Social sector development

o   Protecting the environment

v The various indexes of human development are:

o   Human development index – HDI

o   Inequality adjusted HDI – IHDI

o   Gender inequality indeed – GII

o   Multidimensional poverty index – MPI

v Causes of rural poverty are:

o   Rapid population growth

o   Lack of capital

o   Lack of alternate employment opportunities other than agriculture

o   Excessive population –pressure on agriculture

o   Illiteracy

o   Regional disparities

o   Joint family system

o   Child marriage

o   Lack of proper implementation of PDS

v The different types of unemployment are:

o   Structural unemployment 

o   Under employment

o   Open unemployment

o   Disguised unemployment

o   Frictional unemployment

o   Seasonal unemployment

o   Classical unemployment

o   Cyclical unemployment

v Structural unemployment – associated with economic structure of the country – productive capacity is inadequate to create a sufficient number of jobs

v Under employment – employed for low paid wages or low responsibilities with respect to their potentials

v Open unemployment – Workers live without any employment. Educated unemployment and unskilled labour unemployment are included in open unemployment

v Disguised unemployment – When a person does not contribute anything in the production process or in other words, if he can be removed from the work without affecting the productivity adversely, he will be treated as disguised unemployed and the marginal productivity of such unemployed person is found to be zero – agriculture sector

v Frictional unemployment - The unemployment generated due to change in market conditions (change in demand and supply condition) is called as frictional unemployment

v Seasonal unemployment – It appears due to a change in demand based on seasonal variations. Labourers do not get work round the year and they get employment during peak seasons – agriculture, match industries and film industries

v Classical unemployment – This type of unemployment problem arises when the wages rise above the equilibrium full employment level and in such a situation the wages are not flexible downwards which will imply that unemployment would persist for long. Such wages may be set by manipulations in the trade union. 

v Cylical unemployment – Cyclical or demand deficient unemployment occurs when the economy is in need of low work force. The demand for labour increases with the economy in the boom phase. Again, when the economy passes though recession, demand for labour contracts and the surplus is released as the unemployed labour force.

v Selected health indicators are:

o   Crude birth rate

o   Crude death rate

o   Total fertility rate

o   Maternal mortality rate

o   Infant mortality rate

o   Child mortality rate

v The flagship programme of Government of India are:

o   Sarva Shiksha Abhiyan - 2001

o   National Rural Health Mission- 2005

o   Integrated child development scheme - 1975

o   Midday meal – 1995

o   National rural drinking water programme – 2009

o   Total sanitation programme – TSP - 2000

o   National social assistance programme – NSAP

o   Mahatma Gandhi Rural Employment Guarantee act – 2.2.2006

o   Indira Awas Yojana – 1999

o   Rajiv Gandhi Gramin Vidyuthikaran Yojana - 2005

o   JLN National Urban Renewal Mission – 3.12.2005

o   Bharat Nirman Yojana- 16.12.2005