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Sources Of Economic Growth And Development - Economic Environment And Transition In Indian Economy
Managerial Economics - Economic Environment And Transition In Indian Economy
Sources Of Economic Growth And Development - Economic Environment And Transition In Indian Economy
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Sources Of Economic Growth And Development
Sources Of Economic Growth And Development:
1. Natural resources: Without natural resources it is difficult to achieve economic development. It highly depends on factor endowment.
2. Human Resource and population growth: Labour is the most active factor of production. Therefore sufficient number of quality labour force is essential.
3. Capital formation and accumulation: Economic growth is a function of capital formation of a country. Without capital mobilization it is impossible to develop the economy.
4. Technological progress: Advancement of technology is a key factor for development and it helps to utilize resources in an effective manner.
5. Entrepreneurship: Without
strong risk taking entrepreneurs an industry cannot innovate and introduce new products to the society.
6. Investment criteria: The investment policy and regulation of a country improves the investment and in turn helps the economy to grow at a faster rate.
7. Removal of market imperfection: To develop a countries economy removal of imperfect market and reducing monopoly market are essential.
8. Capital output ratio: High capital output ratio indicates the increase in productivity of capital invested.
1. Desire for development: Desire to grow in the right direction is important for the economic development of a country.
2. Widespread education: The growth in the educational sector will help the society to grow at a faster rate.
3. Social and industrial reforms: Liberal social system, and reduced disparity helps the economy to grow.
4. Good government: Establishment of consistent law and order is essential to grow internationally.
1. Population growth
2. Removal of monopoly
3. Optimum utilization of resources
4. Development planning and
5. Financial stability
Meier and Baldwin have listed the following areas as important for government action
1. Government may establish markets
2. Government may establish enterprises at high risk and low profit .
3. Government direction is needed to promote external economies for balanced growth.
The
Government of India set up the Central Statistical Organization
The economic scenario provided before the adoption of the New Economic Policy were,
1. Highly autarkic economy: India was experiencing autarky and closed economic system.
2. Centralized planning: All economic plans were centralized and controlled at the centre.
3. Protectionist trade policies: Trade policy was closed and not opened to the world. I.e. it was following a protectionist trade policy.
4. High tariffs and non tariff barriers: India had high level of tariff and non tariff trade barriers
5. Capital controls: The capital market was controlled by the government of India.
11. Managed
exchange rate in the place of controlled exchange rate.
12. Portfolio investment strengthened.
1. Low productivity levels: The economy was opened up but the productivity level was low to compete in the market.
2. Infrastructure deficiencies: Infrastructure facilities of our country have not fully improved to meet the targeted economic growth.
3. Rising public sector debts: The government borrowings and accumulated debt were high.
4. High subsidies fostering inefficiency: Government provided more subsidies which in turn increased the inefficiency of the organizations.
5. Low literacy levels: The literacy rates have not increased at a faster rate to compete in the open economy.
6. Demographic deficiencies: The demographic deficiencies, did not support the transitional policies of our country.
7. Rigid labour laws: The labour laws were not favorable to bring in more Human Resource
8. Functioning of judicial system: Our legal environment also has not been supportive towards the liberalization of the country.
9. Campaigns against cultural consumerism: Due to transition the consumer behaviour of the society has changed and hence we are able to see the cultural commonality, and also campaigns against the cultural consumerism.
10. Corruption: Along with economic changes corruption has been pervasive at all levels and has increased.
1. Large potential markets: Both urban and rural markets of India are growing at a faster rate.
2. Booming IT and Biotech sectors: India occupies a leading position in the world in these sectors.
3. Highly professional and scientific manpower: India is having the third largest technically qualified man Power.
4. Trend towards political decentralization: Now the trend has started towards decentralization.
5. Dominant player in south Asian region in certain areas of economic activity.
6. Competitive Environment has already set in almost all spheres of life.
Inspite of all the above stated barriers India has great potential to grow in the future. The major reasons for the growth of the economy are liberalization of our economy followed by privatization and globalization.
Economic Factors:
1. Natural resources: Without natural resources it is difficult to achieve economic development. It highly depends on factor endowment.
2. Human Resource and population growth: Labour is the most active factor of production. Therefore sufficient number of quality labour force is essential.
3. Capital formation and accumulation: Economic growth is a function of capital formation of a country. Without capital mobilization it is impossible to develop the economy.
4. Technological progress: Advancement of technology is a key factor for development and it helps to utilize resources in an effective manner.
6. Investment criteria: The investment policy and regulation of a country improves the investment and in turn helps the economy to grow at a faster rate.
7. Removal of market imperfection: To develop a countries economy removal of imperfect market and reducing monopoly market are essential.
8. Capital output ratio: High capital output ratio indicates the increase in productivity of capital invested.
Non Economic Factors:
1. Desire for development: Desire to grow in the right direction is important for the economic development of a country.
2. Widespread education: The growth in the educational sector will help the society to grow at a faster rate.
3. Social and industrial reforms: Liberal social system, and reduced disparity helps the economy to grow.
4. Good government: Establishment of consistent law and order is essential to grow internationally.
Pre Requisites Of Economic Growth:
1. Population growth
2. Removal of monopoly
3. Optimum utilization of resources
4. Development planning and
5. Financial stability
Meier and Baldwin have listed the following areas as important for government action
1. Government may establish markets
2. Government may establish enterprises at high risk and low profit .
3. Government direction is needed to promote external economies for balanced growth.
Pre Transition:
The economic scenario provided before the adoption of the New Economic Policy were,
1. Highly autarkic economy: India was experiencing autarky and closed economic system.
2. Centralized planning: All economic plans were centralized and controlled at the centre.
3. Protectionist trade policies: Trade policy was closed and not opened to the world. I.e. it was following a protectionist trade policy.
4. High tariffs and non tariff barriers: India had high level of tariff and non tariff trade barriers
5. Capital controls: The capital market was controlled by the government of India.
6.
Import substitution: Our
country had been adopting import restrictions
with large import substitutions.
7. State owned public sector industries: Most of the industries were owned by the central or state government before economic reforms.
8. State controlled financial sector: The financial sector was controlled and monitored by the government.
9. Import Restrictions: Reservation policies like quota system were followed for imports.
10. Regulated markets: Market for all commodities was regulated by the government.
11. Administrative prices: Market price was regulated with the help of price ceiling and by adopting dual pricing policy.
The economic scenario prevailing as on date i.e. after the adoption of the New Economic Policy in India after 1991 are:
1. Deregulation and liberalization of the Industries
2. Lowering of the tariffs and easing of import licensing requirements.
3. Export incentives were provided to the exporters to promote exports.
4. Special Economic Zones were established to promote exports and encourage exports.
5. Single window licensing policy.
6. Declining incidence of poverty.
7. Divestment of public sector units.
8. Liberalization of the banking and financial sectors.
9. Promotion of Foreign Direct Investments.
10. Tax incentives for capital investment in domestic and foreign markets
7. State owned public sector industries: Most of the industries were owned by the central or state government before economic reforms.
8. State controlled financial sector: The financial sector was controlled and monitored by the government.
9. Import Restrictions: Reservation policies like quota system were followed for imports.
10. Regulated markets: Market for all commodities was regulated by the government.
11. Administrative prices: Market price was regulated with the help of price ceiling and by adopting dual pricing policy.
Post Transition:
The economic scenario prevailing as on date i.e. after the adoption of the New Economic Policy in India after 1991 are:
1. Deregulation and liberalization of the Industries
2. Lowering of the tariffs and easing of import licensing requirements.
3. Export incentives were provided to the exporters to promote exports.
4. Special Economic Zones were established to promote exports and encourage exports.
5. Single window licensing policy.
6. Declining incidence of poverty.
7. Divestment of public sector units.
8. Liberalization of the banking and financial sectors.
9. Promotion of Foreign Direct Investments.
10. Tax incentives for capital investment in domestic and foreign markets
12. Portfolio investment strengthened.
Barriers To The Faster Economic Growth:
1. Low productivity levels: The economy was opened up but the productivity level was low to compete in the market.
2. Infrastructure deficiencies: Infrastructure facilities of our country have not fully improved to meet the targeted economic growth.
3. Rising public sector debts: The government borrowings and accumulated debt were high.
4. High subsidies fostering inefficiency: Government provided more subsidies which in turn increased the inefficiency of the organizations.
5. Low literacy levels: The literacy rates have not increased at a faster rate to compete in the open economy.
6. Demographic deficiencies: The demographic deficiencies, did not support the transitional policies of our country.
7. Rigid labour laws: The labour laws were not favorable to bring in more Human Resource
8. Functioning of judicial system: Our legal environment also has not been supportive towards the liberalization of the country.
9. Campaigns against cultural consumerism: Due to transition the consumer behaviour of the society has changed and hence we are able to see the cultural commonality, and also campaigns against the cultural consumerism.
10. Corruption: Along with economic changes corruption has been pervasive at all levels and has increased.
Growth Potentials Of The Indian Economy Especially After Transition:
1. Large potential markets: Both urban and rural markets of India are growing at a faster rate.
2. Booming IT and Biotech sectors: India occupies a leading position in the world in these sectors.
3. Highly professional and scientific manpower: India is having the third largest technically qualified man Power.
4. Trend towards political decentralization: Now the trend has started towards decentralization.
5. Dominant player in south Asian region in certain areas of economic activity.
6. Competitive Environment has already set in almost all spheres of life.
Inspite of all the above stated barriers India has great potential to grow in the future. The major reasons for the growth of the economy are liberalization of our economy followed by privatization and globalization.
Tags : Managerial Economics - Economic Environment And Transition In Indian Economy
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