Eco 8th Lecture[1]

Economics Analysis for Economics Analysis for Managerial ApplicationsManagerial Applications

-Taught By:Ms.Dimple, Assistant Professor

FMS Department, NIFT Delhi

Industrial PolicyIndustrial Policy

Industrial policy of a nation is the true determinant of foreign investment as well as domestic investment.

Objective of the Industrial policy should be for bringing higher growth and prosperity for a country.

Objectives of the Industrial PolicyObjectives of the Industrial Policy

Maintaining a sustained growth in productivity;

Enhancing gainful employment; Achieving optimal utilization of human

resources; Attaining international competitiveness

and Transforming the country into a major

partner and player in the global arena.

Key areas of focusKey areas of focus

Deregulating Indian industry; Allowing the industry freedom and

flexibility in responding to market forces and

Providing a policy regime that facilitates and fosters growth of Indian industry.

Important initiatives taken by Govt. of India to Important initiatives taken by Govt. of India to achieve Industrial policy objectivesachieve Industrial policy objectives

Liberalization of Industrial Licensing Policy Introduction of Industrial Entrepreneurs'

Memorandum(IEM)Liberalization of the Location Policy Policy for Small Scale Non-Resident Indians SchemeElectronic Hardware Technology Park

(EHTP)/Software Technology Park (STP) scheme

Policy for Foreign Direct Investment (FDI)

Indian EconomyIndian Economy

The twelfth largest in the world, when measured in USD exchange-rate t A GDP of US $1.09 trillion 3rd largest in terms of purchasing power 2nd fastest growing major economy in the world GDP growth rate of 9.4% for the fiscal year 2006–2007 two-thirds of the Indian workforce still earn their livelihood

directly or indirectly through agriculture services are a growing sector India is a major exporter of highly-skilled workers in

software and financial services India followed a socialist-inspired approach for most of its

independent history since the early 1990s, India has gradually opened up its

markets through economic reforms by reducing government controls on foreign trade and investment

Challenges for the Indian EconomyChallenges for the Indian Economy

Sustaining the growth momentum and achieving an annual average growth of 7-8 % in the next five years.

Simplifying procedures and relaxing entry barriers for business activities. Checking the growth of population; India is the second highest populated country in

the world after China. However in terms of density India exceeds China as India's land area is almost half of China's total land. Due to a high population growth, GNI per capita remains very poor. It was only $ 2880 in 2003 (world bank figures).

Boosting agricultural growth through diversification and development of agro processing.

Expanding industry fast, by at least 10% per year to integrate not only the surplus labor in agriculture but also the unprecedented number of women and teenagers joining the labor force every year.

Developing world-class infrastructure for sustaining growth in all the sectors of the economy.

Allowing foreign investment in more areas Effecting fiscal consolidation and eliminating the revenue deficit through revenue

enhancement and expenditure management. Empowering the population through universal education and health care. India

needs to improve its HDI rank, as at 127 it is way below many other developing countries' performance.

Why India is the new how-favourite FDI destination for Why India is the new how-favourite FDI destination for InvestorsInvestors

The economy has grown at an impressive growth rate of 9.4 per cent during 2006-07 as against 9 per cent in 2005-06.

The growth rate has been spurred by the industrial and services sectors, which have logged a 10.9 and 11 per cent rise in 2006-07 respectively, against 9.6 per and 9.8 cent in 2005-06.

Some of the propellers of GDP growth for 2006-07 have been manufacturing, which grew by 12.3 per cent (against 9.1 per cent in 2005-06), trade, hotels, transport and communications sector, which grew by 13 per cent (against 10.4 per cent in 2005-06), and construction, which grew by 10.7 per cent.

Electricity, gas and water supply also grew by 7.4 per cent in 2006-07 against 5.4 per cent in 2005-06.

There has been an exceptional growth rate in some specific industries, like commercial vehicles at 17.9 per cent, telephone equipment sector by 43.5 per cent, passenger growth in civil aviation by 32.2 per cent and information technology by 31 per cent (in revenue terms).

Overall balance of payments recorded a surplus of US$ 36.6 billion during 2006-07, as against US$ 15.1 billion in 2005-06

Gross Domestic Product (GDP)Gross Domestic Product (GDP)

The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year).

A region's gross domestic product, or GDP, is one of the ways of measuring the size of its economy.

GDP = consumption + investment + (government spending) +

(exports − imports),

or,

GDP = C + I + G + (X-M)

Gross National Product (GNP)Gross National Product (GNP)

Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. They use a system of national accounts or national accounting first developed during the 1940s. Some of the more common measures are Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP), and Net National Income (NNI).

GNP per person is often used as a measure of a person's welfare. Countries with higher GNP may score highly on other measures of welfare, such as life expectancy. However, there are serious limitations to the usefulness of GNP as a measure of welfare:

Measures of GNP typically exclude unpaid economic activity, most importantly domestic work such as childcare. This leads to distortions; for example, a paid childminder's income contributes to GNP, but an unpaid parent's time spent caring for children will not, even though they are both carrying out the same economic activity.

GNP takes no account of the inputs used to produce the output. For example, if everyone worked for twice the number of hours, then GNP might roughly double, but this does not necessarily mean that workers are better off as they would have less leisure time. Similarly, the impact of economic activity on the environment is not measured in calculating GNP.

Comparison of GNP from one country to another may be distorted by movements in exchange rates. Measuring national income at purchasing power parity may overcome this problem at the risk of overvaluing basic goods and services, for example subsistence farming.

GNP does not measure factors that affect quality of life, such as the quality of the environment (as distinct from the input value) and security from crime. This leads to distortions - for example, spending on cleaning up an oil spill is included in GNP, but the negative impact of the spill on well-being (e.g. loss of clean beaches) is not measured.

GNP is the mean wealth rather than median wealth. Countries with a skewed income distribution may have a relatively high per-capita GNP while the majority of its citizens have a relatively low level of income, due to concentration of wealth in the hands of a small fraction of the population.

THANK YOUTHANK YOU