SY B. Tech (Mechanical) eee Ur ar uu uae a) Perera) Unit -3 Government Policies ROHAN R OZARKAR Asst. Prof. @ RCPIT ShirpurUNIT3 EFM Tal Bina - Last 20 years Journey of Indian Economy, ~ Measures taken to grow Indian Economy, = Meaning of India is the world's fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP), - Ona per capita income basis, India ranked 139th by GDP (nominal) and 127th by GOP (PPP) (Data reference year 2023), - Comparison of top 5 largest economies in world, - Discuss key points of India latest union budget and - _ its impact on indian economy and citizens, = Meaning of Initiatives and expected impact on Indian Economy, like- = Make in india, - Digital India, ~ Skill India ete. OZRO| aid\e7 UNIT3 EFM Mud India's economic history over the past 80 years has been marked by periods of growth, stagnation, and transformation Pre-Independence Era (1940s) *Colonial Economy: India's economy was largely controlled by the British colonial government, serving the needs of the empire, + Agriculture-Based: The economy was predominantly agrarian, with a small industrial sector. +Poverty and Inequality: Widespread poverty and inequality prevailed. OZRO| aid,> UNIT3 EFM ieee ue keene India's economi ‘Statis of dian Economy before British Rule (uring Mughal Rue) ——— icuture 4 Manufacturing ear Sector (Forming) Indl wos ao frown L.~ (Cotton and Precious Prewasthe Tere wor Wordwise IrainSouree Demand due to income * Good Quality =f majority SkiledGreftsmam EPR ain ct pee Benefits to nda because of Brit ah. res oe fe = sito ee Fe Nv seen ish Rule Commercials of Agriculture (cash crop) {currency} = Introduced fetter Modes of| Transpor (Rat) = Modernized the Indian Economy (inaustaensetion) J Developed ‘Arie Setup (45) [Economy at Time of independence (wa was the Economie condtion lat the tie British eft na?) ax | eae soles aber mad serie uated Machines NoDwesifeston toweanacly Indust! ¥ tex Pabictmestnent Serer i WNGORE | rovertyand inequality er! inane istory over the past 80 years has been marked by periods of growth, stagnation, and transformation arcane | 706765 sevice | 15620%UNIT3 EFM ieee ue keen ed India’s Economic feaeoo| Policies from 1950-90 Post-Independence Era - Early Years (1947-1980): + Centralized Planning 1d Economy: Inds flowed Not Socoist IMixed Economy ssa or Coptalist + Agricultural Economy: a + Green Revolution (1960s-1970s): aes Indusries( PSU) [Development rt sector - Smal ase . India Made PonREN 5 var Pons & for Economie Perspective Banking Sector Expansion: evelopment Plan rade Policy Imported goods + Industrializatio nia followed Indian goods ward Lookin preferred to Slow Growth: Despite efforts, economic growth remained relatively slow, and poverty —_agis improve Started Green persisted, arate Revoution, Secor Provided Subsidies OZRO| aid,UNIT3 EFM ieee ue keen ed Why Economife Economic Liberalization (1991 Onward) Structural Reforms: The government initiated a series of reforms aimed at opening up the economy, reducing government intervention, and promoting competition Privatization: State-owned enterprises were privatized to enhance efficiency and attract investment. Globalization: India integrated into the global economy through trade liberalization and foreign investment. Globalisation Liberalisation [Why Economic Reforms' started by Indian Govt in 1991 2 e@ Ingo ch gr on ors at Deetining Foreign Exchange Reserves High inflation —— Consequences Dueto allthis, naia was Short of Funds 'so Economic Reforms Started Reforms Started? India was Short of Funds due to zonomic Crises of 191 It approached World Bank and IME for help ‘These agencies agreedto give loan on condition 3) India wil liberalize and open up the economy b) Reduce various restrictions India Start Economie Reforms (f3991 due to Pressure from World Bonk and IMF To get india out of Economic Crises ‘OzRO|ieee ue keen ed > Economic Liberalization (1991 Onward) What is Liberalization? teaehoo bery temeans Freedom {Removing fa Person) LUerlization emeans Promoting Free Market eonomy (Removing Restritionsin Ezonomy) ‘This Uberaization Started india in 1991 Prvatation ———teachoo eaning and example ores eon renee ete re ERA emit ‘are = ya modens tain at Cae ‘hats Prvezaion? Means shed up of cunership ‘of Gor owned enterprises Cransfer of buses fom (prea Seton What is Globalisation? teachoo = Important Points of clbasation re means folowing set poles whieh endo m resterinterdependence AL srintegration of world I ny bamoecone C2 Sn DAI sre broken (We con trovel Soe! oye ae UNIT3 EFMUNIT3 EFM ieee ue keen ed Outsourcing = teachoo -ositive teach IT and Service Sector Boom (2000s): Nouns eines neuer _— * Technological Advancements: Rapid growth in IT and ni iscwowieiess | ape laneaw abt ith Wario * Global Outsourcing: india became a major global Gee ae 198051200712 | reessee the outsourcing destination. rset, | inane | aay ere Cote Defense Sector Developme! ae + Indigenous Production: increased focus on domestic. defense production. contrition of Various Sectors to GOP 1990-91 2007-12 + Exports: Growth in defense exports. aoe || eee: | awe weneanewe! Recent Milestones: serps | os BRIERE 2.00 2208) sector + GST Implementation: Unified national market. i Tia ieaed ree + Economic Growth: Continued economic growth, aiming Taimssnce | SSH" nasty Industri fora $5 trillion eccnomy, owt eso") es som 2am A ag * Digital Revolution: Rapid expansion of the digital provems [resist] inconstent economy. + noe, |[fensratme | Serie si 2 Pabst 6.70% 10%) Growthin Rapid Growth: India achieved sustained economic growth Eris |fcorc Server rates, lifting millions out of poverty. ew = OZRO| aid,ieee ue keen ed Trends , Challenges ‘Growth: ori lion: Decl Growth *Unemployment: Persistent unemployment Pawerty Reauction: Dect poverty rates “Inequality: Income disparities Infrastructure: Improved infrastructure *Environment: Environmental concerns *Globalization: increased global integration Since 1947 Sree | Se aa 2020 2021 l I ‘As of March, 2024 (07-1724 since Fre Sten | Percapaneame: 2.28 India has transformed from agrarian economy to a global player. Future holds promise for continued growth and development OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae POINTS : 1. Economic Liberalization (1991) Shift from a closed economy to a more open market Key reforms in trade, industry, and finance 2. Growth Rate Trends ‘Average GDP growth rate over the years Sectors contributing to growth: IT, servi 3. Challenges Faced Global economic crises (2008, COVID-19} Issues like inflation, unemployment, and rural distress ss, manufacturing OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae India's Economic Crisis and the New Economic Policy (NEP) of 1991 Crisis Overview: Early 1990s: India faced a major economic crisis. Foreign currency reserves fell to cover only two weeks of imports. Inflation surged to 16.7%, Causes of the Crisis: Government expenditure exceeded revenue. High defense costs, subsidies, and interest payments on loans contributed to fiscal imbalance. Decline in the effectiveness of socialist policies. Introduction of NEP: in response to the crisis, the Government of India implemented the New Economic Policy (NEP) in 1991. The NEP built on reforms initiated in 1985. NEP: Aimed to reduce bureaucratic controls in the industrial sector. Shifted the government's role from a controller to a facilitator. Encouraged private sector participation and aimed to promote economic growth OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Main Objectives of the Economic Policy of 1991 1 2. 3. 4. 5. 6. 7. 8 Globalization: integrate the Indian economy into the global market. Inflation Control: Reduce the rate of inflation. Balance of Payments: Correct the disequilibrium in the balance of payments. Economic Growth: Achieve a higher economic growth rate. Foreign Exchange Reserves: Build sufficient foreign exchange reserves. Economic Stabilization: Stabilize the economy and reduce fiscal deficit. International Trade Relations: Establish international trade relations for unrestricted flow of goods. Private Sector Participation: Increase participation of the private sector in the economy. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Features of the Economic Policy of 1991 Delicensing: + Removed government licenses for most industries; only four require licenses (Electronics, Aerospace and defense equipment, Industral explosives, Hazardous chemicals, drugs, and pharmaceuticals) Abolition of MRTP Act: + Eliminated the need for government approval for large industrial expansions and mergers. Support for Small Sector: + Increased investment limit for small units from €1 to 85 crores to boost growth, output, employment, and exports. Foreign Investment: + Allowed Foreign Direct Investment (FOI) up to 51%, later increased to 100% in certain sectors. Reduced Public Sector Role: + Cut the number of industries reserved for the public sector from 17 to 8; only railways and atomic energy remain. Trade Liberalization: + Abolished import licensing; established Special Economic Zones (SEZ), Agro Export Zones (AEZ) for promoting exports. Insurance Sector Reforms + Ended government monopoly; introduced private companies through Insurance Regulatory and Development Authority (IRDA), inancial Sector Reforms + Allowed new private and foreign banks to operate, increasing competition, OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Components of the New Economic Policy (NEP) A) Liberalization Defi their self-interest. n: Economic freedom allowing producers, consumers, and owners of resources to make decisions based on Measures: Flexible interest Rates: Banks set interest rates based on market demand and supply. Industrial Expansion: Industries can diversify and set their own production limits. Abolition of MRTP Act: Removed restrictions on large firms, allowing more freedom in investment decisions. FERA Reforms: FERA (1973) replaced by FEMA (1999), promoting international trade and flexibility in foreign exchange laws. Infrastructure Investments: Opened to domestic and foreign investments. Foreign Technology: Allowed use of foreign technology in high-priority sectors to enhance competitiveness. ‘SEBI (Securities and Exchange Board of India) Establishment: to protect investor interests in securities, OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Components of the New Economic Policy (NEP) 8) Privatization Definition: Transfer of ownership from the public sector to the private sector, introducing private management and control Measures: Disinvestment: Selling shares of public sector units (e.g., Maruti) to private investors. Dereservation Policy: Reduced the number of industries reserved for the public sector from 17 to 2. BIFR (Board for Industrial and Financial Reconstruction) Creation: Set up to manage sick public sector units. National Renewal Board (NRB): Provides compensation for retrenched workers from closed public sector units. Navratna Status: Awarded to nine top-performing PSUs to give them more autonomy. 1) 10C : Indian Oil Corporation 6) VSNL : Videsh Sanchar Nigam Limited 2) ONGC: Oil and Natural Gas Corporation. 7) BHEL : Bharat Heavy Electricals Lt. 3) HPCL : Hindustan Peroleum Corporation Ltd, 8) SAIL: Steel Authority of India Ltd 4) BPCL : Bharat Petroleum Corporation Ltd, 9) NTPC: National Thermal Power Corporation 5) IPCL : Indian Petrochemicals Corporation Ltd. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Components of the New Economic Policy (NEP) C) Globalization Definition: Integration of the national economy with the global economy, facilitating the free flow of goods, services, capital, labor, and technology across borders. Measures: Removal of Restrictions: Abolished quantitative restrictions on imports and exports, lowering tariff rates. Encouragement of Foreign Capital: Opened the economy to attract foreign investments. Rupee Convertibility: Made the Indian Rupee fully convertible for current account transactions. Foreign Collaboration: Allowed partnerships between Indian and foreign companies (e.g., Maruti-Suzuki). Long-term Trade Policy: Established a liberalized framework for foreign trade, encouraging collaboration. Export Promotion: Incentives for exporters through the EXIM policy ((Export-Import Policy)) and creation of Special Economic Zones (SEZ). OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Evaluation of the Economic Policy of 1991. Major Achievements: + Revolution in IT Sector: Globalization spurred growth in the IT sector, boosting India’s GDP. Indian software engineers are in high demand internationally. + Improvement in Financial Facilities: The entry of private and foreign banks has made the financial sector more professional and competitive, offering services like credit cards and e-banking, + Improved Educational Standards: Globalization has encouraged Indian students to pursue higher education abroad, facilitated by easier access to educational loans and scholarships, + Increase in Exports: There has been @ significant increase in exports, including machinery and chemicals, improving India's balance of payments, iversification of Cropping Patterns: Farmers have diversified their crops beyond staples and cash crops to include non-traditional products lke horticulture and medicinal plants. + Addressing Scarcity: Liberal imports have helped alleviate shortages of goods and raw materials, aiding in controling inflation. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Evaluation of the Economic Policy of 1991 Major Failures: + Lack of Self-Sufficiency: Globalization hinders self-sufficiency in food production, as countries focus on profitable goods demanded globally + Adverse Effects on Domestic Market: Domestic markets face challenges due to a flood of cheaper imported goods, impacting local producers + Negative Impact on Poor Farmers: The benefits of globalization primarily favor wealthy farmers, leaving poorer farmers struggling with debt and competition. + Unhealthy Competition: Indian entrepreneurs struggle against multinational corporations (MNCS), leading to the closure of local units and increased unemployment. + Neglect of Welfare Aspects: The privatization of essential services like health and education has led to high costs, prioritizing profit over welfare, + Rising Unemployment: Many industries have shut down due to competition from MINCs, resulting in job losses and increased poverty and inequality. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Economic Planning in India Planning Commission was established in 1950 to formulate economic plans. It was replaced by NITI Aayog in 2015. economic planning is a time-bound program to achieve specific goals using available resources. Dr. H. D. Dickinson: Planning involves making major economic decisions for the economy. Mrs. Barbara Wooten: It's a deliberate choice of economic priorities by a public authority. Features: 1. Central Planning Authority: Led by a central body (formerly Planning Commission, now NIT! Aayog). 2. Survey: A comprehensive study of resources. 3. Objectives: Goals are realistic and flexible. 4. Priorities and Targets: Set based on sector importance. 5, 6, 7, Mobilization of Resources: Through taxation, savings, public debt, ete. Plan Period: Typically, five years. Evaluation: Periodic reviews to adjust targets. 8. Continuous Process: Ongoing for sustained development. 9. Coordination: Between central and state governments, 10. Flexibility: Plans can be adjusted during implementation. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Economic Planning in India Planning Commission was established in 1950 to formulate economic plans. It was replaced by NITI Aayog in 2015. economic planning is a time-bound program to achieve specific goals using available resources. Dr. H. D. Dickinson: Planning involves making major economic decisions for the economy. Mrs. Barbara Wooten: It's a deliberate choice of economic priorities by a public authority. Features: 1. Central Planning Authority: Led by a central body (formerly Planning Commission, now NIT! Aayog). 2. Survey: A comprehensive study of resources. 3. Objectives: Goals are realistic and flexible. 4. Priorities and Targets: Set based on sector importance. 5, 6, 7, Mobilization of Resources: Through taxation, savings, public debt, ete. Plan Period: Typically, five years. Evaluation: Periodic reviews to adjust targets. 8. Continuous Process: Ongoing for sustained development. 9. Coordination: Between central and state governments, 10. Flexibility: Plans can be adjusted during implementation. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Plan Period Ast Plan 1951-1956 2nd Plan 1956-1961 3rd Plan 1961-1966 3 Annual Plans 1966-1969 4th Plan 1969-1974 Sth Plan 1974-1979 Rolling Plan 1978-1980 6th Plan 1980-1985 7th Plan 1985-1990 2 Annual Plans 1990-199 8th Plan 1992-1997 Sth Plan 1997-2002 10th Plan 2002-2007 ith Plan 2007-2012 2th Plan 2012-2017 Focus / Achievements Focus: Agriculture & irrigation. Achievements: Major irrigation projects (e.g., Bhakra Dam). Focus: Industrialization. Achievements: Growth in heavy industries (steel plants) Focus: Agriculture & self-reliance. Achievements: Derailed by wars & drought. Focus: Crisis management due to wars/drought, Achie! Focus: Stability & self-reliance. Achievements: Strengthened agriculture (Green Revolution), Focus: Poverty eradication (Garibi Hatao}. Achievements: Plan cut short due to political change. ‘cus: Short-term planning after po Focus: Poverty alleviation & technology. Achievements: Growth in employment & industry. Focus: Modernization & employment. Achievements: IT growth, agricultural improvement. fansition during economic crisis. Achievements: Laid groundwork for 1 Focus: Liberalization, privatization, globalization (LPG). Achievements: Economic growth boosted. Focus: Social justice & poverty reduction. Achievements: Moderate growth, social sector focus. Focus: 8% GDP growth. Achievements: 7.6% growth, poverty reduction, infrastructure improvement. Focus: Inclusive growth. Achievements: Major investments in health, education, infrastructure. Focus: Sustainable, inclusive growth, Achievements: Moderate growth, transition to NITI Aayog. ents: Green Revolution started ‘The 12th Pan (2032-2017) was the las ofits kind, after which India moved towards 2 long-term strategic planning approach under NIT Aayog. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae NITI Aayog (National Institution for Transforming India) NITI Aayog was established in January 2015 to replace the Planning Commission. Its goal is to enhance the role of states in policy-making, promote federalism, and accelerate economic growth. It became fully operational after the Twelfth Five Year Plan ended in March 2017. Structure of NITI Aayog The structure, as outlined in the 2015 resolution, includes: Governing Council: Comprised of Chief Ministers and Governors of Union Territories, Regional Councils: Address issues affecting multiple states or regions. Special Invitees: Experts nominated by the Prime Minister. jonal Framework: Chairperson: Prime Minister of India Vice Chairperson: Appointed by the Prime Minister Members: 5 full-time and 2 part-time members Ex-Officio Members: Up to 4 Union Ministers Chief Executive Officer (CEO): Appointed by the Prime Minister for a fixed tenure Secretariat: As needed OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae NITI Aayog (National Institution for Transforming India) NITI Aayog was established in January 2015 to replace the Planning Commission. Its goal is to enhance the role of states in policy-making, promote federalism, and accelerate economic growth. It became fully operational after the Twelfth Five Year Plan ended in March 2017. Functions + Shared National Agenda: Develops national priorities and strategies. + Support to States: Helps states tackle challenges and utilize strengths, + Decentralized Planning: Promotes local input in planning. + Knowledge Hub: Shares research and best practices for governance. + Monitoring and Evaluation: Assesses policy effectiveness and identifies improvements. + Cooperative Federalism: Engages states in national policy-making, + Additional Functions: Intet-consultation, conflict resolution, technological upgrades. OZRO| aid,UNIT3 EFM Perc eka uk eneae Last 20 Years Journey of the Indian Economy Early 2000s: Recovery and Growth Post-Reforms Recovery: After the economic reforms in 1991, India started to grow steadily. IT Boom: The rise of the information technology (IT) sector made India a global leader in software services. Strong Growth: The economy grew at about 6-8% each year. 2008 Global Financial Crisis, Impact: The global financial crisis hit India, slowing down growth. Government Response: The government introduced stimulus measures (economic policies and actions) to support the economy, which helped it recover. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae 2010 - 2020 : Continued Growth and Reforms + Introduction of Goods and Services Tax (GST) (2017) ‘A major tax reform aimed at unifying India’s indirect tax structure. Simplified the tax regime, improved compliance, and increased revenue collection. + Make in India initiative (2014) Launched to encourage manufacturing and attract foreign investment. Aimed at increasing the manufacturing sector's contribution to GDP. + Digital india Campaign (2015) Focused on transforming India into a digitally empowered society. Promoted digital infrastructure, digital literacy, and e-governance. + Demonetization (2016) Aimed to curb black money and counterfeit currency. Short-term disruption in the economy, but long-term effects on digital transactions and tax compliance Strong Growth Rates: The economy saw growth rates reach around 8% in 2016-17. OZRO| aid,\e7 UNIT3 EFM Perc eka uk eneae Impact of Global Events (2019-2022) * Global Issues: Trade tensions and slowdowns in other countries affected India’s growth. + Economic Slowdown (2019) Slowing growth rates due to various factors, including reduced consumption and investment. ‘The manufacturing sector faced challenges, prompting government interventions. + COVID-19 Pandemic (2020) Severe impact on the economy, with GOP contracting by around 7.3% in FY 2020-21. Lockdowns led to disruptions in supply chains, loss of jobs, and increased poverty. Government launched Aatmanirbhar Bharat (Self-Reliant India) package to support recovery Recovery and Current Trends (2022-Present) Digital Growth: The pandemic accelerated the shift towards digital services and innovation Post-Pandemic Recovery: GDP growth rebounded, with projections of around 7% growth in 2022-23. Recovery driven by consumption, investment, and strong agricultural performance. Focus on Infrastructure and Innovation Continued investments in infrastructure projects (roads, railways, urban development). Emphasis on innovation, startups, and green technology. Focus on Sustainability: There is a growing emphasis on renewable energy and sustainable practices. OZRO| aid,UNIT3 EFM Perc eka uk eneae Current Challenges Inflationary pressures, supply chain disruptions, and geopolitical tensions (e.g., Russia-Ukraine war) Need for sustainable growth, job creation, and skill development Conclusion In the past 20 years, India's economy has changed from being mostly agrarian to a diverse one with strong services and manufacturing sectors. Despite challenges, including the pandemic, India has shown resilience and is positioned for continued growth, focusing on reforms, digitalization, and sustainability for the future. Transition from agrarian to a more diversified economy, with significant contributions from services and manufacturing. Challenges remain in terms of income inequality, unemployment, and environmental sustainability OZRO| aid,Last 20 Years Journey ofthe indian Economy 1 Growth Rate ‘Average GDP Growth: Over the past two decades, Incl has maintained an impressive GDP growth rate of approximately 6-7. This growth has positioned India as one ofthe fastest growing major economies soba ‘Sectoral Booms: ‘Information Technology (IT): The IT secor has experienced exponential grow, becoming 2 significant contributor to GDP, exports, and employment. Companies ike Infosys and TCS have gained international recognition + Services Sector: The services sector, including finance, rel estate, and telecommunications, has also seen substantial growth, contributing over 55% to the GOP “+ Manufacturing and Agriculture: While marufecturing has grown, I Aas not kept pace with Services. Agriculture remains 2 vial sector but faces challenges lke imate change and productivity issues. 2. Key Reforms ‘Goods and Services Tax (GST) + mplementaion: Introduced in ly 2017, GST aimed to simply the tax structure by replacing multile indirect taves witha unified tax system, + impact: Streamlines ax compliance, improved revenue collection, and entanced ease of dong business Digital nities: ‘+ Digital India Program: Launched to transform India into a digtaly empowered society. This includes improving digital nas promoting dgtal iteray. “+ Fianclal Inclusion; natives like Jan Ohan Yojana aimed at providing banking services to the unbanked population, facitating acces to financial products stabor Law Reforms: +" Simplification of Labor Laws: The consolidation of multiple abor laws into four labor codes aimed at improving the eae of doing business while protecting worker ight + impact on Employment: Designed to encourage formalization ofthe workforce, although challenges remain in implementation and coverage. 3. challenges Unemployment: Despite economic growth, job creation has not kept pace. The informal sector dominates the labor marke, leading to precarious employment situations stnflation:Indahas face fluctuating infation rates, impacting purchasing power and economic stabil. Recent global dsrupions have exacerbated inflationary pressures. ‘Informal Sector: large potion a the workforce remains in the informal sector, which poses challenges in terms of ob securty, benefits, and taxation. slncome Inequality: Economic growth has not been inclusive, leading to ring income cspartes, Urban areas have prospered more than rural regions, highlighting the nees forbalenced growth Conclusion Te last two decades have seen India transition into a glal economic player, marked by significant growth and reform. However, challenges such as unemployment, ination, and the informal sector remain crticalssues that need adaressng for sustainable and inclusive economic development. ture increasing internet access, and\e7 UNIT3 EFM Week darlene 1. Economic Reforms Liberalization (1991) Shift from a closed economy to an open market model. Removal of license raj, deregulation of industries, and reduced tariffs to encourage foreign investment. 2. Policy Initiatives ‘Make in India (2014): To promote manufacturing in India, make the country a global manufacturing hub, and create jobs. Impact: Encouraged both domestic and foreign companies to invest in manufacturing sectors, with initiatives targeting sectors like defense, electronics, and textiles, “Startup India: ‘Support for Startups: Provides various benefits such as tax exemptions, access to funding, and easier regulatory compliance. Incubation Programs: Promotes entrepreneurship and innovation, fostering a robust startup ecosystem. *Aatmanirbhar Bharat (Self-Reliant India) (2020) Launched in response to the COVID-19 pandemic, emphasizing self-reliance in various sectors. Focused on boosting local manufacturing, encouraging startups, and promoting local products. + Employment Generation Schemes Programs like MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) to provide guaranteed ‘wage employment in rural areas. OZRO| aid,\e7 UNIT3 EFM Week darlene 3. Infrastructure Development: * Investment in Infrastructure: Significant investment in transportation (roads, railways, ports), energy (renewable sources), and urban development to enhance connectivity and support economic activities + National Infrastructure Pipeline (NIP) ‘Aimed at enhancing the country’s infrastructure through substantial investments in sectors like transportation, energy, and urban development. Expected to generate millions of jobs and stimulate economic growth. + Smart Cities Mission Focused on urban renewal and sustainable development to enhance the quality of life in cities. Aims to improve urban infrastructure and services. 4, Financial Reforms *Goods and Services Tax (GST): Unified Tax System: Simplifies the tax structure, reduces the tax burden on businesses, and enhances compliance. Increased Revenue: Aims to improve tax collection efficiency, contributing to government revenues. + Financial Inclusion Initiatives: Pradhan Mantri Jan Dhan Yojana (PMIDY): Aimed at increasing bank account access among the unbanked population, promoting savings and financial stability. Microfinance : microfinance institutions to empower marginalized communities economically. “Banking Sector Reforms Strengthening of public sector banks through recapitalization & consolidation to improve efficiency and performance. OZRO| aid,\e7 UNIT3 EFM Week darlene 5. Foreign Direct Investment (FDI) Policy Reforms Relaxation of FDI norms across various sectors (e.g., defense, retail, and insurance) to attract foreign capital. Encouraged joint ventures and collaborations with international companies 6. Social Sector Investments + Education and Skill Development: Skill India Mission (2015): Aims to train millions of youth in various skills to enhance employability and meet industry demands. Focused on vocational training and entrepreneurship to reduce unemployment. Education Reforms(NEP): Investments in higher education and vocational training to improve the quality and accessibility of education, + Healthcare Initiatives: ‘Ayushman Bharat: A flagship health insurance scheme aimed at providing health coverage to vulnerable populations, improving healthcare access and outcomes. 7. Technology and Digital Initiatives igital India (2015): Focused on digital infrastructure and digital literacy to improve access to technology and services. Promoted e-governance and digital transactions to increase efficiency and transparency. “Innovation and R&D Support: Financial incentives and grants for research in technology and innovation to boost competitiveness. OZRO| aid,\e7 UNIT3 EFM Week darlene 8, Agricultural Reforms PM-KISAN Scheme Direct cash transfer to farmers to support their income and encourage agricultural productivity. Reforms in Agricultural Marketing Implementation of the Agricultural Produce Market Committee (APMC) Act amendments to promote direct selling and better pricing for farmers. 9. Trade and Export Policies Trade Agreements Negotiation of various trade agreements to boost exports and enhance market access for Indian products. Export Promotion Schemes Initiatives like Merchandise Exports from India Scheme (MEIS) to incentivize exporters and enhance global competitiveness. OZRO| aid,UNIT3 EFM 1. Nominal GDP Nominal GDP measures the total value of goods and services produced in a country using current prices without adjusting for inflation Nominal GDF ZlPrice of good i x Quantity of good i) Example: In Year 1, the country produced: Manufacturing: 100 cars priced at *6,00,000 each, Services: A software company provided services worth %70,00,000. ‘Agriculture: 200 tons of wheat priced at £20,000 per ton. 100 cars x %6,00,000) + (%70,00,000 in services) + (200 tons x %20,000) 6,00,00,000 (manufacturing) + %70,00,000 (services) + %40,00,000 (agriculture) = *7,10,00,000 Nominal GDP for Year 1 In Year 2, production and prices increased: Manufacturing: 110 cars priced at %6,50,000 each. Services: Software services now worth 80,00,000. Agriculture: 210 tons of wheat priced at £22,000 per ton, Nominal GDP for Year 2 = (110 cars x %6,50,000) + (880,00,000 in services) + (210 tons x %22,000) 7,15,00,000 (manufacturing) + %80,00,000 (services) + %46,20,000 (agriculture) = %8,41,20,000 OZRO| aid,\e7 UNIT3 EFM 2. Real GDP Real GDP adjusts for inflation, using constant prices from a base year to measure the true increase in production Real GDP = 3(Price of good i in base year x Quantity of good jin current year) Example: In Year 3 (Base Year), the country produced: “Manufacturing: 100 cars priced at X6,00,000 each. Services: A software company provided services worth ¥70,00,000. Agriculture: 200 tons of wheat priced at €20,000 per ton, In Year 2, the country produced Manufacturing: 110 cars priced at %6,50,000 each. Services: Software services now worth %80,00,000. Agriculture: 210 tons of wheat priced at £22,000 per ton, using Year 1 prices to calculate Real GDP - Real GDP for Year 2 = (110 cars x %6,00,000) + €80,00,000 (services) + (210 tons x 20,000) = %6,60,00,000 (manufacturing) + 80,00,000 (services) + %42,00,000 (agriculture) = €7,82,00,000 OZRO| aid,y UNIT3 EFM 3. GDP per capita GDP per capita divides the GDP (either nominal or real) by the population, giving the average economic output per person. Example: ‘Assume the population is 1,500 people in both years. Nominal GDP per capita for Year 1 = ¥7,10,00,000 / 1,500 = °4,73,333 Nominal GDP per capita for Year 2 = %8,41,20,000 / 1,500 = €5,60,800 Real GDP per capita for Year 2 = 87,82,00,000 / 1,500 = 85,21,333 Example: Country A: Nominal GDP = §100 crore, Population Country B: Nominal GOP = 80 crore, Population Based on nominal GOP, Country A seems richer. However, if Country B has a lower cost of living, its GDP PPP could be higher, indicating a better standard of living million, GDP per capita = 100 500,000, GDP per capita = *160 OZRO| aid,UNIT3 EFM 4, Purchasing Power Parity (PPP) PPP adjusts for differences in the cost of living between countries. Itestimates how much a set basket of goods would cost in one country versus another, allowing for better international comparisons of living standards and economic output. PPP adjustment Example : ‘Assume the nominal GDP of €8,41,20,000 in Year 2 and the cost of living in this country is relatively low. ‘The PPP exchange rate is X45 per 1 international dollar {instead of 880 per US dollar in nominal terms), PPP-GDP for Year 2 = 8,41,20,000 / 45 = 18,69,333 international dollars This helps compare the economic output of this country to others in terms of what people can actually buy within the country. PPP per Capita: divides the GDP (PPP) by the population PPP GOP per capita for Year 2 = 18,69,333 / 1,500 = 1,246 international dollars This helps compare how much people can actually buy with their income in different countries. OZRO| aid,UNIT3 EFM + Nominal GDP can be misleading due to inflation it measures total output at current prices. + Real GDP provides a more accurate picture of economic growth by removing inflation. + GDP per capita shows the average income per person, useful for understanding living standards. + GDP PPP adjusts for cost of living differences, provides a more accurate comparison of economic output across countries, focusing on what people can buy in their respective economies, us al >) @ G GDP Purchasing Power Real GOP Nominal GDP: GOP per capita GDP Growth Rate ee, Adjusts forifation or Considers current prices _—Measures GOP per Compares year-over-year Adjusts GDP fr local price efision anduses abase without austing for person, reflecting average econome output changes andiving cost ferences year's prices inflaton oftennigher "living standaras and tomeasureeconome for ntemational than real GOP prosperty ‘growth ‘comparisons OZRO| aid,© uNT3 EFM eecumeicn ca) INDIA as the 5" -largest economy by Nominal GDP INDIA as the 3" -largest economy by GDP Purchasing Power Parity (PPP) INDIA as the 139% economy by Nominal GDP INDIA as the 127 economy by GDP Purchasing Power Parity (PPP) OZRO| aid,UNIT3 EFM Puck eee ho ear kos Nominal GDP - Nominal Gross Domestic Product (GDP) measures the total value of all goods and services produced in a country at current market prices, without adjusting for inflation. Inns Rank A of 203, oa Top 10 Largest India ranks as the 5!™largest economy in the world by nominal GOP, Ee bnomnion following the United States, China, Japan, and Germany. nme word & The GOP Per Capita Meaning + Economic Size: This ranking signifies India’s significant economic output, and its role in the global economy player. + Investment Opportunities: A large nominal GDP often attracts foreign investments and businesses looking to tap into a vast consumer market. + Global Influence: As a top economy, India can influence global economic policies and trends. OZRO| aid,oor, UNIT3 EFM ca Acca) Purchasing Power Parity (PPP) - PPP measures the relative value of currencies by comparing what the same amount of money can buy in different countries through a "basket of goods" approach. It adjusts GDP to account for differences in price levels and living costs between countries. India's Rank: As of 2023, India ranks as the 3" largest economy in the world by purchasing power parity (PPP) . after the China, United States. Meaning: + Standard of Living: India has a relatively low cost of living compared to developed rations, the same amount of money in India buys more goods and services than it, ‘would in countries like the USA or Germany than nominal GDP might suggest + Economic Potential: A high PPP suggests a large domestic market with significant consumption potential, give better understanding of real value of India’s economic output + International Comparisons: when compared to other countries, as it accounts for local price levels, This ranking reflects India’s domestic purchasing power and indicates how much people can buy with their money in India’s economy. ‘The nominal GDP ranking highlights India's large-scale production and the importance ofits economy in global trade and investment. ‘The PPP ranking shows the significant purchasing power within India’s borders, illustrating that the standard of living and the economic capacity of Indian citizens is higher than nominal figures suggest. NOMINAL GDP AT PPP INTERNATIONAL TRILLION $ OZRO| aid,UNIT3 EFM ae ec eeu eal heed Gea) Per Capita Income: The average income per person in a country, calculated by dividing the total GDP by the population. This measure gives an idea of the economic well-being of the average citizen. Per Capita Income by GDP (Nominal): India's Rank: as of 2023, India ranks as the 139M in the world by per capita nominal GOP. Meaning: + Even though India isthe Sth largest economy, its large population dilutes the average income per person. + Itrefiects current income levels without adjusting for price differences across countries. *+ Suggests challenges related to income distribution, where many citizens may experience lower | those in higher-ranking nations. + Indicates potential issues with poverty levels and overall economic inequality. ig standards compared to Top 10 Countries By GDP (Nomial) Per Capita BOGOF dSO9 89 LijemBourg elond Norway Switzerland Singapore Qatar lend Denmerk Australia. SU2SK ST4SOK STOMIOK $077K —SOLIOKN. © SSSEOK SEOOIK © STSTOK $5ABTK © —$49GK OZRO| aid,UNIT3 EFM Ona per capita income basis, India ranked 127" by GDP (PPP) Per Capita Income: The average income per person in a country, calculated by dividing the total GDP by the population This measure gives an idea of the economic well-being of the average citizen. Per Capita Income by GDP (Nominal): India's Rank: as of 2023, India ranks as the 127% in the world by per capita GDP (PPP), Meaning ‘+ When adjusted for purchasing power, India moves up slightly, as goods and services are cheaper in India compared to many countries. + Implies that while average incomes may be low in nominal terms, the purchasing power of Indian citizens is relatively better when, considering local prices. + PPP shows how much income can actually buy within India, giving a better picture of the average person's purchasing power + Suggests that goods and services are more affordable, allowing citizens to have a decent standard of living in local terms. ‘Top 10 Countries By GDP (PPP) Per Capita QDQZQVBI9DGD9GHD®D sszox suaax s1sseo« sizassK Sensex EUs sezoax —seneeK $0000 S7B00K OZRO| aid,\e7 UNIT3 EFM Meaning of India's GDP Rankings (as 2023) Conclusion: + India's economic rankings show both its global strength and internal challenges. + While India is the Sth-largest economy by nominal GDP, its per capita income is lower due to its large population (wealth distribution challenge). + The PPP ranking (3rd-largest) highlights stronger purchasing power, but raising indi challenge + Focused policies are needed to promote inclusive growth, to ensure sustainable growth and better living standards for all. ual prosperity is still a Challenges: + Income inequality and improving living standards remain critical issues. + Need for better infrastructure, education, and healthcare Opportunities: + Room for economic growth through higher productivity and job creation. + Targeted investments can boost per capita income and improve prosperity OZRO| aid,CATER eeeiee)} Tae endseuieon gs (2023) Rank | Country | Nominal | GDP | Nominal | GDPPPP | Growth | TOP 10 Usa Gor pep GOPper_— per Rate(t), §©=—) WORLD'S $26.85T {erion (ition | Capita capita LARGEST so} US) (US) (uso) United ECONOMIES 1 nted 369 269 81,000 81,000 16 (Senpcummcrmgeecr China states > Sacer 2 China 177 -301_—12,500 21,500 3.0 = 3 lpan 42 SS 33,500 43,500 13, 4 Germany 4248 43,500 57,0004 =n 20 wae son 5 ina 37 137-2600 9,700 63 =P’ sea ny oa Faw... US Largest economy ih consumer spending edernectnolagy nane, innovation, ; Seay faxes rong malo economy, manactuing onerous ela gotl vade a intuence. ede ‘Advanced technology and innovation; strong automotive and electronics industries. Sas Europe’ leet economy svongmanuectugseca, panuary mmacnney 306 neaenenme Ge Rapa growing economy; ge serie stor; giant potential for manuacturing and\e7 UNIT3 EFM Cee deka ee Comparisons of economies: | 81] ai. ae io pe 1. United States: Strengths: Diverse economy, strong innovation, global influence. Weaknesses: High national debt, income inequality. 2. China: Strengths: Rapid growth, large workforce, manufacturing prowess. Weaknesses: Overteliance on exports, environmental concerns. 3. Japan: Strengths: Advanced technology, strong manufacturing base. Weaknesses: Aging population, low birth rate. 4. Germany: Strengths: Export-oriented economy, strong manufacturing base, social welfare system, Weaknesses: Dependence on exports, demographic challenges, 5. India: Strengths: Large and growing population, diverse economy, IT services. Weaknesses: Infrastructure challenges, income inequality, bureaucracy.\e7 UNIT3 EFM aed eunuch ae) Comparison by - 1. Economic Size and Growth: The United States remains the world's largest economy. China's rapid growth is fueled by manufacturing and exports. India has a large domestic market and significant purchasing power. 2. Per Capita Income: The U.S. and Germany have higher standards of living, China and India face challenges in income distribution. 3. Sectoral Strengths: United States: Technology, finance, healthcare. China: Manufacturing, technology, services, Japan: High-tech, automotive. Germany: Engineering, manufacturing India: Services, IT, manufacturing potential Each economy plays a key role in the interconnected global market Understanding these economies' strengths and challenges is crucial for analyzing global economic trends and investment opportunities. OZRO| aid,UNIT3 EFM ea n Budget (2023) Inclusive Development Green growth Unleashing Potential Reaching the ‘Ctenoren ror peo onde Last Mile Infrastructure & investment Youth Power ree Franch Wa Bpnbestresien tee aye ee ere ele se acne Priorities Stata tanent Union Budget (2023) ‘OzRO|UNIT3 EFM Key Points of India’s Latest Union Budget (2023) WHERE DOES THE WHERE DOES THE = 60? = COME FROM ? Non-Debs a ‘aplal een con renin oats Non-tax Revenue, Union Budget (2023) OZRO| aid, astaother\e7 UNIT3 EFM Key Points of India’s Latest Union Budget (2023) + Major Allocations 1. Health Sector: 1. Increased funding for the Ayushman Bharat scheme to expand health coverage. 2. Investments in healthcare infrastructure under the National Health Mission. 3, Focus on pandemic preparedness through the Pradhan Mantri Swasthya Suraksha Yojana 2. Education: 1, Enhanced allocations for the National Education Mission to improve educational facilities. 2. Funding for the Pradhan Mantri Kaushal Vikas Yojana to support skill development. 3. Emphasis on digital learning initiatives through the Digital India program. 3. Infrastructure: 1. Significant investments in the Bharatmala Pariyojana for road development. 2. Development of smart cities under the Smart Cities Mission. 3, Green initiatives, including funding for the National Electric Mo! 4, Welfare Schemes: 11, Support for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to provide job security. 2. Funding for schemes targeting women and children, such as Beti Bachao Beti Padhao and the Integrated Child Development Services (ICDS). ity Mi OZRO| aid,\e7 UNIT3 EFM Pounce n Budget (2023) + Tax Reforms and Fiscal Measures 1. Direct Tax Reforms 1. Simplification of tax structure, potentially increasing the tax base. 2. Possible adjust ments to income tax slabs to provide relief to middle-income earners, 2. Indirect Tax Adjustments: 1. Changes in Goods and Services Tax (GST) rates to streamline compliance and enhance revenue. 3. Fiscal Disci 1. Target for fiscal deficit reduction over the next few years. 2. Measures to enhance efficiency in government spending and improve revenue collection. OZRO| aid,\e7 UNIT3 EFM needa Latest Union Budget (2023) Impact on Economy 1, Economic Growth Boost to GOP: Infrastructure spending and job creation initiatives are expected to drive economic growth, contribute positively to GOP [Attracting Investments: Tax incentives and a supportive regulatory environment may attract foreign and domestic investments, fostering a more robust business climate. 2. Employment Generation Job Creation: Investments in infrastructure, healthcare, and education sectors are likely to create job opportunities, addressing unemployment, especially among youth. Skill Development: Focus on skill training programs will enhance workforce capabilities and improve employability. 3. Improved Living Standards Healthcare Access: Increased healthcare funding can lead to better health outcomes, particularly for low-income populations, improving quality of life Rural Development: Agricultural support measures are expected to uplift rural economies and improve the livelihoods of farmers. Environmental Sustainability Promotion of Clean Energy: Investments in renewable energy will contribute to environmental sustainability and help combat climate change, benefiting future generations Sustainable Practices: Encouraging green technologies and practices can lead to a more sustainable economy in the long run. ancial Stability Fiscal Discipline: A focus on maintaining fiscal discipline may help stabilize the economy and bulld investor confidence Public Investment: Enhanced public investment in key sectors can stimulate private sector growth and boost economic resilience. ay fetes) OZRO| aid,\e7 UNIT3 EFM Make in india Objectives: Boost manufacturing and create jobs, attract FDI Expected outcomes: : Increased foreign investment and domestic production capabilities, increased exports Digital India Goals: Enhance digital infrastructure, promote digital literacy Impact on sectors: E-governance, e-commerce, Boosting innovation and efficiency across sectors Skill India Focus on skill development and vocational training to millions of youth. Long-term benefits: Reducing skill gaps in the labor market , Reducing unemployment, enhancing productivity OZRO| aid,\e7 UNIT3 EFM Make in India (Launched in 2014) Goals Enhance Manufacturing Promote India as a global manufacturing hub by improving industrial infrastructure and reducing regulatory hurdles. Focus on sectors such as electronics, automobiles, textiles, and defense. Create Jobs: Generate millions of jobs through increased manufacturing activity. Encourage skill development and vocational training to match industry needs. Boost Innovation: Foster a culture of innovation and research & development (R&O) in manufacturing, Support startups and encourage collaboration between industry and academia. Attract Foreign Investment: Simplify foreign direct invest ment (FD!) policies to attract international companies, Create favorable conditions for global investors to set up manufacturing units in India, OZRO| aid,\e7 UNIT3 EFM Make in India (Launched in 2014) Expected Impact Increased Foreign Investment: Higher FDI inflows as global companies seek to leverage India's manufacturing capabilities. Strengthening of supply chains by integrating Indian manufacturers into global networks. Domestic Production Capabilities: Growth in domestic manufacturing output, reducing reliance on imports. Development of local suppliers and ancillary industries, boosting overall economic resilience. Economic Growth: Contributing to GDP growth through increased industrial output and employment. Enhanced export potential, improving India's trade balance. Skill Development and Employment: Creation of a skilled workforce equipped for the manufacturing sector. Reduction in unemployment rates, especially among youth and rural populations. Regional Development: Promoting industrialization in underdeveloped regions, leading to balanced regional growth. Infrastructure development in these areas, enhancing connectivity and access to markets. OZRO| aid,\e7 UNIT3 EFM DRUG) Digital India (Launched in 2015) Meaning aims to transform India into a digitally empowered society and knowledge economy. Goals - Universal Internet Access: Ensure high-speed internet connectivity in rural and urban areas to bridge the digital divide Implement initiatives like BharatNet to provide broadband connectivity to villages. al Literacy: Promote digital literacy programs to empower citizens with essential digital skills. Launch campaigns to educate people on using digital platforms for various services, including banking, health, and education. E-Governance: Enhance transparency and efficiency in government services through digital platforms. implement online portals and mobile applications for easy access to public services (c.g,, e-District, M-Governance). Promotion of Digital Infrastructure: Strengthen the IT infrastructure to support digital initiatives, including data centers and cloud services. Foster innovation hubs and incubators to encourage startups in the digital space. Digital Payment Systems: Encourage cashless transactions through initiatives like Digital India Payments and UPI (Unified Payments Interface). Promote financial inclusion by providing digital banking services to underserved populations. OZRO| aid,UNIT3 EFM Penne Digital India (Launched in 2015) Expected Impact Improved Efficiency: E-governance initiatives will streamline processes, reduce corruption, and improve the delivery of public Economic Growth: Digital transformation can enhance productivity across sectors, leading to economic growth. Increased Accessibility By promoting digital literacy and access to technology, it can empower marginalized communities and enhance inclusivity. Innovation and Startups: Encouraging technology adoption fosters innovation and the growth of startups, contributing to job creation and economic dynamism. Social Inclusion: Empowering marginalized communities by providing access to digital tools and services. Enhanced Citizen Services: improved access to healthcare, education, and government services through digital platforms. Increased transparency and accountability in governance, building trust between citizens and the government OZRO| aid,\e7 UNIT3 EFM Skill India (Launched in 2015) Meaning equipping the youth with skills necessary for employment and entrepreneurship. Goals Provide Training to Millions of Youth: Implement skill development programs across various sectors to equip young people with the necessary skills for employment. Focus on sectors with high demand for skilled labor, such as manufacturing, services, construction, and information technology. Enhance Vocational Training: Promote technical and vocational education through partnerships with industries and educational institutions. Establish skill development centers and initiatives like Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to standardize training programs. Encourage Entrepreneurship: Provide training and resources for aspiring entrepreneurs to start their own businesses. Support initiatives that offer mentorship, funding, and market access for startups. Promote Lifelong Learning: Encourage continuous skill upgrading and re-skilling to keep pace with changing job requirements. Offer online courses and modular training programs to make learning accessible. OZRO| aid,\e7 UNIT3 EFM Skill India (Launched in 2015) Expected Impact Reducing Skill Gaps: Address mismatches between skills possessed by job seekers and those demanded by employers, leading to a more efficient labor market. Enhance the quality of the workforce, making it more competitive and productive. Enhancing Employability: Increase job opportunities for youth by providing them with relevant skills that meet industry standards. Empower individuals with certifications that boost their employability and career prospects. Driving Economic Growth Contribute to economic development by creating a skilled workforce that can support various sectors of economy Foster productivity improvements, which can lead to higher GDP growth. Empowering Marginalized Communities: Provide opportunities for underprivileged and rural youth to gain skills and secure decent employment. Promote social equity by reducing barriers to entry in the job market. Fostering Innovation and Entrepreneurship: Cultivate a culture of innovation by equipping young people with skills to develop new ideas and businesses. Encourage job creation through entrepreneurship, contributing to economic diversification. OZRO| aid,