1 Buy book s :http://www.dishapublication.com/entrance-exams-books/ssc-exams.html INTRODUCTION The Economy o f India i s the n inth largest in the world by nomi nal GDP and the thir d largest by purchasing pow er parity (PPP). The independence-era Indian economy bef ore and a li ttle after 1947 was inspired by the economy of the Soviet Union with socialist practi ce s, large pub lic sec tors , hi gh impo rt d utie s and lesser private participation chara cterising it, leading to massive inefficiencies and widespread corruption. Howe ver, later on India adopted free market principles and liberalised its eco nomy to international trade. Following these strong economic reforms, the country's economic growth progressed at a r apid pace with very high rates of growth and large in creases in the in comes of people. India recorded the highest growth rates in the mid-2000s, and is one of the fastest-growing economies in the world. The growth was led primarily due to a huge increase in the size of the middle class consumer, a large labour force and considerable foreign investme nts. India is th e fourtee nth largest exporter and elev enth largest importer in the world. Rec ently India h as become one of the most attr active destinatio ns for investment owing to favourable government policies andreforms. The approval of Foreign Direct Investment (FDI) in several sectors have allowed investments to pour into the economy. According to the data provided by Department ofIndustrial Policy and Promotion (DIPP), the cumulative amount of FDI inflows in the country in the period April 2000-September2014 was US$ 345,073 million. Growth in India was expected to rise to 5.6 per cent in 2014 an dpick up further to 6.4 per cent in 2015 as both exports andinvestment was expected to increase, according to the WorldEconomic Outlook (WEO) report released by International Monetary Fund (IMF). Sectors projected to do well in the coming years include automotive, technology, life sciences and consumer products. Engineering and research and development (ER&D) export revenue from India is expected to reach US$ 37-45 billion by 2020, from an estimated US$ 12.4 billion in FY14. Further more, the U S$ 1.2 trillion investment that t he gove rnment has planned for the infrastructure sector in the 12th Five-YearPlan is set to help in furth er improving the export performance o fIndian companies and the Indian growth story, which will consequently improve the overall I ndian economy. ECONOMY TYPES An economy is a system whereby goods are produced andexchanged. Without a viable economy , a state will collapse. There are three ma in types of economies: free market, command, andmixed. The chart below compares free-market and commandeconomies; mixed eco nomies are a combination of the t wo. Free-Market V ersus Command Economies Free-Mar ke t Eco nomie s Command Eco nomie s Us ually oc cur in dem oc ratic Usual ly o cc ur in communis t orst at es authoritarian states Indi vidual s and bus ines ses The stat e's ce ntral gove rnment ma ke their o wn e co nomic ma ke s al l of t he c ountry 's decisions. economic decisions. FREE-MARKET ECONOMIES In free-market economies, which are essentially capitalist economies, businesses and individuals have the freedom to pursue their own economic interests, buying and sellin g goods on a competitive market, which naturally determines a fair pr ice for goods and services. COMMAND ECONOMIES A command economy is also known as a centrally plan ned economy beca use the ce ntral, or national, gov ernment plans the ec onomy. Generally, com munist states have command economies, although China h as been moving recently towards a capit alists economy . In a communist society, the central government controls the entire economy, allocating resources and dictating prices for goods andservices. Some non communist authoritarian states also have command economies. In t imes of war, mos t sta tes-even democratic, free-market states-take an active role in econom ic planni ng but not necessarily to the extent of communist states. MIXED ECONOMIES A mixed economy combines eleme nts of free-market and commandeconomies. Even among free-market states, the government usually takes some action to direct the economy. These moves are made for a vari ety of reasons; for example, some are designedto protect certain industries or help consumers. In economic language, th is means that most states have mixed economies. With the induction of liberali sation, Licence Raj was abolished, ended public monopolies which allowed automatic approval offoreign direct investment in various sectors. India has become one of the fastest-growing developing economies since 1990. It is projected that in 2035, I ndia will be the third lar gest economy ofthe world after US and China. India has taken a drift from its earlier st and of Mixed Economies. ECONOMY SECTORS Primary Sector: When the economic activity depends mainly on exploitation of natural resources then that a ctivity co mes underthe primar y secto r. A griculture and agri culture related activities are th e prima ry sectors of economy. ECONOMY H P T E R
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The Economy of India is the ninth largest in the world by nominal
GDP and the third largest by purchasing power parity (PPP). Theindependence-era Indian economy before and a little after 1947was inspired by the economy of the Soviet Union with socialist practices, large public sectors, high import duties and lesser private
participation characterising it, leading to massive inefficienciesand widespread corruption. However, later on India adopted freemarket principles and liberalised its economy to international trade.Following these strong economic reforms, the country's economicgrowth progressed at a rapid pace with very high rates of growthand large increases in the incomes of people.India recorded the highest growth rates in the mid-2000s, and isone of the fastest-growing economies in the world. The growthwas led primarily due to a huge increase in the size of the middleclass consumer, a large labour force and considerable foreigninvestments. India is the fourteenth largest exporter and eleventhlargest importer in the world.Recently India has become one of the most attractive destinationsfor investment owing to favourable government policies and reforms. The approval of Foreign Direct Investment (FDI) inseveral sectors have allowed investments to pour into theeconomy. According to the data provided by Department of Industrial Policy and Promotion (DIPP), the cumulative amount
of FDI inflows in the country in the period April 2000-September 2014 was US$ 345,073 million.
Growth in India was expected to rise to 5.6 per cent in 2014 and pick up further to 6.4 per cent in 2015 as both exports and investment was expected to increase, according to the World Economic Outlook (WEO) report released by InternationalMonetary Fund (IMF).Sectors projected to do well in the coming years includeautomotive, technology, life sciences and consumer products.Engineering and research and development (ER&D) exportrevenue from India is expected to reach US$ 37-45 billion by 2020,from an estimated US$ 12.4 billion in FY14.Furthermore, the US$ 1.2 trillion investment that the governmenthas planned for the infrastructure sector in the 12th Five-Year Plan is set to help in further improving the export performance of
Indian companies and the Indian growth story, which will
consequently improve the overall Indian economy.
ECONOMY TYPES
An economy is a system whereby goods are produced and
exchanged. Without a viable economy, a state will collapse. There
are three main types of economies: free market, command, and
mixed. The chart below compares free-market and command
economies; mixed economies are a combination of the two.
Free-Market Versus Command Economies
Free-Market Economies Command Economies
Usually occur in democratic Usually occur in communist or
states authoritarian states
Individuals and businesses The state's central government
make their own economic makes all of the country's
decisions. economic decisions.
FREE-MARKET ECONOMIES
In free-market economies, which are essentially capitalist
economies, businesses and individuals have the freedom to pursue their own economic interests, buying and selling goodson a competitive market, which naturally determines a fair price
for goods and services.
COMMAND ECONOMIES
A command economy is also known as a centrally planned economy
because the central, or national, government plans the economy.
Generally, communist states have command economies, although
China has been moving recently towards a capitalists economy. In
a communist society, the central government controls the entire
economy, allocating resources and dictating prices for goods and
services. Some non communist authoritarian states also have
command economies. In times of war, most states-even democratic,free-market states-take an active role in economic planning but not
necessarily to the extent of communist states.
MIXED ECONOMIES
A mixed economy combines elements of free-market and command
economies. Even among free-market states, the government
usually takes some action to direct the economy. These moves
are made for a variety of reasons; for example, some are designed
to protect certain industries or help consumers. In economic
language, this means that most states have mixed economies.
With the induction of liberalisation, Licence Raj was abolished,
ended public monopolies which allowed automatic approval of
foreign direct investment in various sectors. India has becomeone of the fastest-growing developing economies since 1990. It
is projected that in 2035, India will be the third largest economy ofthe world after US and China. India has taken a drift from its
earlier stand of Mixed Economies.
ECONOMY SECTORS
Primary Sector: When the economic activity depends mainly
on exploitation of natural resources then that activity comes under
the primary sector. Agriculture and agriculture related activities
Gross National Product (GNP): It is the most comprehensive
measure of the nation's productive activities. The GNP is defined
as the value of all final goods and services produced during a
specific period, usually one year, plus incomes earned abroad by
the nationals minus incomes earned locally by the foreigners.
The GNP is identical to Gross National Income (GNI). Thus, GNP
= GNI. The difference between them is only of procedural. While
GNP is estimated on the basis of product-flows, the GNI is
estimated on the basis of money income flows, (i.e., wages, profits,
rent, interest, etc.)
GROSS DOMESTIC PRODUCT (GDP)
The Gross Domestic Product (GDP) is defined as the market value
of all final goods and services produced in the domestic economy
during a period of one year, plus income earned locally by the
foreigners minus incomes earned abroad by the nationals. TheGDP is similar to GNP with procedural difference. In case of GNPthe incomes earned by the nationals in foreign countries are added and incomes earned locally by the foreigners are deducted fromthe market value of domestically produced goods and services.
In case of GDP, the process is reverse - incomes earned locally by
foreigners are added and incomes earned abroad by the nationalsare deducted from the total value of domestically produced goodsand services.
ECONOMIC PLANNING IN INDIA
Economic planning in India was started in 1950 is necessary for economic development and economic growth. Economic Planningis a term used to describe the long term plans of government toco-ordinate and develop the economy. Economic Planning is tomake decision with respect to the use of resources.Need For Economic Planning: Social and Economic problemcreated by partition of Country.Objectives: Reduction of Unemployment, Modernisation,
Balanced Regional Development, Reduction of Economic in
Equalities, Economic Growth
OVERVIEW
The Indian economy still depends on the agricultural sector. Aboutone-third of its national income is derived from agriculture and itsallied sectors employing about two-third of the work force.Given below are the organisations and concepts associated withour economy:
The Department of Statistics in the Ministry of Planning and Programme Implementation is the apex body in the official statisticsystem of the country.The Department consists of:(i) Central Statistical Organisation (CSO) which is
responsible for formulation and maintenance of statistical
standard, work pertaining to national accounts, conduct of economic census and surveys, training in official statistics,coordination of statistical activities.
(ii) National Survey Organisation which was set up in 1950
with a programme of conducting large-scale surveys to
provide data for estimation of national income and related
aggregates for planning and policy formulation. It was
reorganised in 1970 by bringing together all aspects of
survey work into a single unified agency known as National
Sample Survey Organisation.
Ministry of Finance is responsible for the administration of the
finance of the government. It is concerned with all economic and
financial matters affecting the country.
This Ministry comprises four departments, namely:
(a) Economic Affairs
(b) Expenditure(c) Revenue
(d) Company AffairsThe Department of Economic Affairs consists of eight main
divisions:(i) Economic
(ii) Banking
(iii) Insurance(iv) Budget
(v) Investment
(vi) External Finance
(vii) Fund bank
(viii) Currency and coinage.This Department inter alia monitors current economic trends and
advises the government on all matters of internal and externaleconomic management.
Public Finance: The power to raise and disburse public funds
has been divided under the constitution between union and StateGovernment. Sources of revenue for Union and States are by
large mutually exclusive if shareable taxes are excluded.All receipts and disbursement of the Union are kept under two
separate headings namely:(a) Consolidated Fund of India and (b) Public Account of India.
All the revenues received, loans raised and money received in
repayment of loans by the Union form the Consolidated Fund. No money can be withdrawn from this fund except by an Act of
Parliament. All other receipts go to public accounts anddisbursements. These are not subject to the vote of Parliament.
To meet unforeseen needs not envisaged in the AnnualAppropriation Act, a Contingency Fund has been established.
These three are in each state also.Sources of Revenue: The main sources of the Union tax revenueare Custom duties, Union excise duties, Corporate and Income
taxes, non-tax revenues comprise interest receipts, includinginterest paid by the railways, telecommunications dividends and
profits.
The main heads of revenue in the states are taxes and dutieslevied by the respective state governments, shares of taxes levied
by the Union and grants received from the Union Property taxes,octroi and terminal taxes are the mainstay of local finance.
Public Debt: It includes internal debt comprising borrowing insidethe country like market loans, compensations and other bonds,
treasury bills issued to the RBI State Governments, Commercial
banks as well as non-negotiable non-interest bearing rupees
securities issued to the international financial institutions and
external debt comprising loans from foreign countries and
international financial institutions.
PLANNING COMMISION REPLACES THE NITI AAYOG
The Planning Commission was set up on the 15th of March, 1950
through a Cabinet Resolution. Nearly 65 years later, the country
has metamorphosed from an under-developed economy to an
emergent global nation with one of the world's largest economies
In the context of governance structures, the changed requirements
• Command Area Development Programme was started in1974-75 to utilise water in major and medium irrigation projectsin an optimum manner.
• Oil crisis : 1973 Sept.• 20 point programme replaced 5th plan discontinued 1 year in
advance.
6th Plan: 1978-83
• Proposed by Janata Party but it was defeated in electionsand could implement Rolling Plan for 2 years for 1978-80.Prof. DT Lakdawala was the Dy. Chairman, PlanningCommission.
• The idea “Rolling Plan” was taken from Japan.• “Rolling Plan” concept coined by Gunnar Myrdal.
• “Hindu rate of Growth” crossed from 5th plan. This conceptwas coined by Prof. Raj Krishna (Growth Rate 3% to 3.5%)
6th Plan: Aim 1980-85
• Poverty eradication.• IRDP, TRYSEM, NREP launched during this Plan.• Visakhapatnam Steel Plant (Andhra Pradesh), Salem (Tamil
Nadu) Bhadravathi Steel Plants were built.
7th Plan: 1985-90
• Food, Work, Productivity, “Jawahar Rozgar Yojana”launched in April 1989’.
• Vakil and Brahmananda’s wage good strategy adopted inthe 7th Plan.
8th Plan : 1992-97
• Indicative planning : Based on the model of John.W.Muller
• This plan achieved highest growth rate of 6.8%.
• “Indicative planning” implemented first in France in
1947–50.
9th Plan - Aim : 1997-2002
• Human resources development, growth with social justice
and equality agricultural rural development, important role