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SLrucLure of lndlan Lconomy

O underdeveloped or developlng economy


O er caplLa lncome less Lhan a quarLer of unlLed sLaLes are
underdeveloped counLrles
O ueveloplng economles means counLrles Lhough sLlll
undeveloped Lhe process of developmenL has been
lnlLlaLed
O @he lndlan economy was ln ma[or crlsls ln 1991 when forelgn
currency reserves wenL down Lo $1 bllllon and lnflaLlon was as
hlgh as 17 llscal deflclL was also hlgh and had become
unsusLalnable lorelgn lnvesLors n8ls had losL confldence ln
lndlan economy CaplLal was flylng ouL of Lhe counLry and
were close Lo defaulLlng on loans @hls came as a perlod of
economlc LransacLlon whlch [olLed Lhe economy ouL of Lhelr
convenLlonal selfrellanL and soclallsLlc pollcles of economy
AdopLlon of LlberallzaLlon rlvaLlzaLlon and CloballzaLlon
(LC) ln 1991 led Lo Lhe real lnLegraLlon of Lhe lndlan economy
lnLo Lhe global economy
@he lndlan Lconomy
% lndla ls Lhe 4
Lh
largesL economy ln Lhe world as measured by purchaslng
power
% lndla's economy grew aL an average raLe of 73
O lndla has a consumer base of 12 bllllon people and
O More number of enLrepreneurs
% JlLh upper lncome and rlch classes growlng rapldly and deprlved classes
acLually falllng lndla's lncome demographlcs wlll acLually be nrecognlzable
by Lhe end of Lhe decade (a wlde gap b/w poor Lhe rlch)
@he lndlan LconomyposL
economlc reforms
lndla has among Lhe
hlghesL reLurns on
forelgn lnvesLmenL
uoo 5cbelomoo clsco 5ystem loc os tolJ to
8osloess week Aoqost 2005
uoo 5cbelomoo clsco 5ystem loc os tolJ to
8osloess week Aoqost 2005
Je came Lo lndla for Lhe
cosLs sLayed for Lhe quallLy
and are now lnvesLlng for
lnnovaLlon"
A 1 keotoey
lul cooflJeoce loJex 2005
A 1 keotoey
lul cooflJeoce loJex 2005
lndla ls among Lhe Lhree
mosL aLLracLlve lul
desLlnaLlons ln Lhe
world
Iock welcb
Ceoetol lecttlc
Iock welcb
Ceoetol lecttlc
lndla ls a developed
counLry as far as
lnLellecLual caplLal ls
concerned"
u5 uepottmeot of
commetce
u5 uepottmeot of
commetce
8y 2032 lndla wlll be
among Lhe Lhree largesL
economles ln Lhe world
8klc kepott ColJmoo 5ocbs 8klc kepott ColJmoo 5ocbs
wry lrd|a? - 0uole urquole
1tovyo kboll
AcNlelseo
1tovyo kboll
AcNlelseo
@he lndlan markeL has Lwo core
advanLages an lncreaslng
presence of mulLlnaLlonals and
an upswlng ln Lhe l@ exporLs"
ctolq 8ottett
lotel cotpototloo
ctolq 8ottett
lotel cotpototloo
lndla has evolved lnLo
one of Lhe worlds
leadlng Lechnology
cenLers
rlvaLlsaLlon
O @ransfer of ownershlp or sale of publlc enLerprlses
O MeanL Lo lmprove Lhe performance of publlc enLerprlses
O @rled ln counLrles llke CreaL 8rlLaln Chlna uS @urkey
8razll Mexlco !apan eLc
rlvaLlsaLlon ln lndla
O @wo common meLhods
O Pavlng fewer conLrols and regulaLlons by Lhe sLaLe ln
economlc acLlvlLles
O @ransferrlng ownershlp of sLaLe equlLy ln Sus Lo prlvaLe
lndlvlduals and lnsLlLuLlons
8eneflLs
1 lncreaslng overall efflclency
2 lmprovemenL ln Lhe quallLy of managemenL and declslon
maklng
3 no governmenL flnanclal backlng and Lherefore caplLal
markeL wlll compel Lhese enLerprlses Lo be more efflclenL
4 SubsLanLlal reducLlon ln governmenL's budgeLary supporL
resulLlng ln reducLlon ln budgeLary deflclL
3 8ecovery of governmenL fund whlch could more producLlvely
be used ln developmenL acLlvlLles
6 8educLlon ln pollLlcal and bureaucraLlc lnLerferences 8eLLer
lndusLrlal relaLlons managemenL eLc
ShorLcomlngs
O A slzable number of Sus have been lncurrlng and reporLlng
losses on a conLlnual basls ConsequenLly a large number of
Sus have already been referred of 8ll8
O MulLlpllclLy of auLhorlLles Lo whom Lhe Sus are accounLable
O uelay ln lmplemenLaLlon of pro[ecLs leadlng Lo cosL escalaLlon
and oLher consequences
O lneffecLlve and wldespread lnefflclency on managemenL
O Many Sus are operaLlng wlLhouL Lhe leader (le chlef
execuLlve or chalrman)
ShorLcomlngs (cnLd)
O JlLh a vlew Lo provlde opporLunlLles for more and more
unemployed youLhs more number of people Lhan
requlred were recrulLed and Lherefore many Sus are
oversLaffed resulLlng ln lower labour producLlvlLy bad
lndusLrlal relaLlons eLc
O unremuneraLlve prlclng pollcy
O A number of slck companles (40 companles) whlch were
ln Lhe prlvaLe secLor was Laken over by publlc secLor
malnly Lo proLecL Lhe employees @hese slck unlLs are
causlng a blg draln on Lhe resources of Lhe sLaLe eLc
MeLhods of rlvaLlzaLlon
O lour lmporLanL modes of prlvaLlzaLlon
a) lranchlslng
b) ConLracLlng
c) Leaslng
d) ulslnvesLmenL
ulslnvesLmenL
O MeeL Lhe growlng budgeL deflclL
O @ransfer of govL ownershlp when Lhe dlluLlon ls 31
O 8rlng down Lhe govL equlLy Lo 26 or lower
Cb[ect|ves
O 8educe flnanclal burden on govL
O lmprove publllc flnance
O lnLroduce compeLlLlon
8easons for Slow rogress
O no clear framework or pollcy
O used Lo meeL Lhe flscal deflclL
O lallure Lo aLLracL Lhe forelgn buyers
CloballsaLlon
O lnLegraLlng domesLlc economy wlLh Lhe world economy
O ulverse world unlfled lnLo a slngle socleLy
O Cpenlng up of world Lrade
O @he lnternotiono/ Monetory lund deflnes globallzaLlon
as Lhe qtowloq ecooomlc lotetJepeoJeoce of cooottles
wotlJwlJe tbtooqb locteosloq volome ooJ votlety of ctoss
botJet ttoosoctloos lo qooJs ooJ setvlces ftee lotetootloool
copltol flows ooJ mote toplJ ooJ wlJespteoJ Jlffosloo of
tecbooloqy
teps 1aken to G|oba||ze Ind|an
Lconomy
1 Deva|uat|on @o solve Lhe balance of paymenL problem
lndlan currency were devaluaLed by 18 Lo 19
2 D|s|nvestment @o make Lhe LC model smooLh many of Lhe
publlc secLors were sold Lo Lhe prlvaLe secLor
3 A||ow|ng Iore|gn D|rect Investment (IDI) lul was allowed
ln a wlde range of secLors such as lnsurance (26) defense
lndusLrles (26) eLc
4 NkI cheme @he faclllLles whlch were avallable Lo forelgn
lnvesLors were also glven Lo n8ls
LffecLs CloballsaLlon
O Plgh economlc growLh
O LxporLs have boomed
O lndlas companles are seLLlng up companles abroad
O lndla has beLLer Lechnologlcal developmenL for Lhe
beneflL of Lhe common man ( moblles road LransporL
cheap cloLhes eLc) resulLed ln reverse braln draln ln
developlng counLrles
O CreaLer and fasLer flow of lnformaLlon beLween counLrles
and greaLer culLural lnLeracLlon has helped Lo overcome
culLural barrlers
#Je hove everythinq by q/obo/itotion we hove
nothinq by q/obo/itotion"
O 9kC
O 8aLe of growLh of Cu of lndla
O lorelgn exchange lncreased
O Share ln world exporLs lncreased
O CN
O Share of agrlculLure ln gdp wenL down
O number of rural landless famlly lncreased
O lssues ln publlc secLor corrupLlon lack of efflclency ln work
lneffecLlve managemenL
O uecreased lul
O lncreased gap beLween rlch and poor
Maln Challenges lndla faced afLer
Lhe economlc reforms
O Low growLh ln AgrlculLure SecLor
O Cap beLween Lhe rlch and Lhe poor
O lncreased consumpLlon behavlour
Cap beLween 8lch and poor
O ptlmoty objectlves of tbe ecooomlc pollcles of most cooottles
lo tbe wotlJ bos beeo ecooomlc epoollty epool poy fot epool
wotk
O lndla has always wlLnessed a wlde gap beLween Lhe rlch and
Lhe poor
O @here's been greaL economlc developmenL and
lndusLrlallzaLlon buL lL has served Lo beneflL only Lhe
enLrepreneurs
O @he salarled employed have noL been able Lo rlse above Lhe
mlddle class
O @he lncome of Lhe rlchesL 1 of people ls Lhe same as LhaL of
Lhe pooresL 60 (Source 88C)
CA 8L@JLLn 8lCP Anu CC8
AgrlculLure SecLor
O Lven afLer globallzaLlon condlLlon of agrlculLure has noL
lmproved @he share of agrlculLure ln Lhe Cu ls only
17 @he number of landless famllles has lncreased and
farmers are sLlll commlLLlng sulclde
AgrlculLure SecLor
O @he Lconomlc Survey reporLs released Llll 1991 conLalned Lhe
ChapLers ln Lhe followlng order (1) lnLroducLlon (2)
AgrlculLural roducLlon (3) lndusLrlal erformance and
ollcles (4) lnfrasLrucLure (3) Puman 8esources (6) rlces
rlce ollcy and ubllc ulsLrlbuLlon SysLem (7) llscal ollcy
and CovernmenL 8udgeL (8) MoneLary and CredlL
uevelopmenLs (9) @he LxLernal SecLor and (10) roblems and
rospecLs
O ln Lhe Lconomlc Survey 199192 llnance MlnlsLer Manmohan
Slngh recasL Lhe ChapLers ln Lhe followlng order (1)
lnLroducLlon (2) ubllc llnance (3) Money and CredlL (4)
rlces and ulsLrlbuLlon (3) 8alance of aymenLs (6) lndusLry
(7) AgrlculLure (8) lnfrasLrucLure and (9) Soclal SecLors
AgrlculLure SecLor
O AgrlculLure has been and sLlll remalns Lhe backbone of
Lhe lndlan economy
O ln 1931 agrlculLure provlded employmenL Lo 72 per cenL
of Lhe populaLlon and conLrlbuLed 39 per cenL of Lhe
gross domesLlc producL
O @he share of agrlculLure and Allled secLors ln gdp ls
esLlmaLed Lo be 142 ln 20102011
O 8esulLed ln a lowerlng Lhe per caplLa lncome of Lhe
farmers and lncreaslng Lhe rural lndebLedness
Plgh lnpuL CosLs
O Seeds@he blggesL lnpuL for farmers ls seeds 8efore llberallsaLlon
farmers across Lhe counLry had access Lo seeds from sLaLe
governmenL lnsLlLuLlons @he seed markeL was well regulaLed and
Lhls ensured quallLy ln prlvaLely sold seeds Loo JlLh llberallzaLlon
seed prlces shoL up and fake seeds made an appearance ln a blg
way LxpecLlng hlgh ylelds farmers lnvesL heavlly CuLpuL ls noL
commensuraLe wlLh Lhe heavy lnvesLmenL ln Lhe seeds and farmers
are pushed lnLo debL @he abundanL avallablllLy of spurlous seeds ls
anoLher problem whlch leads Lo crop fallures LlLher LempLed by
Lhelr lower prlce or unable Lo dlscern Lhe dlfference farmers lnvesL
heavlly ln Lhese seeds and agaln low ouLpuL pushes Lhem lnLo debL
Larller farmers could save a parL of Lhe harvesL and use Lhe seeds
for Lhe nexL culLlvaLlon buL some geneLlcally modlfled seeds known
as @ermlnaLor prevenL harvesLed seeds from germlnaLlng hence
forclng Lhe farmers Lo lnvesL ln Lhem every season
lmbalance ln ferLlllzer use
O Cne measure of Lhe llberallsaLlon pollcy whlch had an
lmmedlaLe adverse effecL on farmers was Lhe devaluaLlon
of Lhe lndlan 8upee ln 1991 by 23 (an expllclL condlLlon
of Lhe lMl loan) lndlan crops became very cheap and
aLLracLlve ln Lhe global markeL and led Lo an exporL drlve
larmers were encouraged Lo shlfL from growlng a mlxLure
of LradlLlonal crops Lo exporL orlenLed cash crops llke
chllll coLLon and Lobacco @hese need far more lnpuLs of
pesLlclde ferLlllzer and waLer Lhan LradlLlonal crops
LlberallsaLlon pollcles reduced pesLlclde subsldy
LlecLrlclLy Larlffs have also been lncreased
ow pr|ce of Cutput
O JlLh a vlew Lo open lndlas markeLs Lhe llberallzaLlon reforms also
wlLhdrew Larlffs and duLles on lmporLs whlch proLecL and
encourage domesLlc lndusLry As a resulL cheap lmporLs flooded Lhe
markeL pushlng prlces of crops llke coLLon and pepper down
O kerala whlch ls world renowned for pepper has suffered as a resulL
of 0 duLy on lmporLs of pepper from SAA8C3 counLrles epper
whlch sold aL 8s 27000 a qulnLal (Auu 771) ln 1998 crashed Lo 8s
3000 (Auu 142) ln 2004 a decllne of 81 As a resulL lndlan exporLs
of pepper fell 31 ln 2003 from Lhe prevlous year (SalnaLh 2003)
Comblned wlLh Lhls droughL and crop fallure has hlL Lhe pepper
farmers of kerala hard and have forced Lhem lnLo a debL Lrap Close
Lo 30 of sulcldes among keralas farmers have been ln pepper
produclng dlsLrlcLs
Lack of credlL faclllLles and dependence
on prlvaLe money lenders
O ln 1969 ma[or lndlan banks were naLlonallzed and prlorlLy was glven Lo agrarlan
credlL whlch was hlLherLo severely neglecLed Powever wlLh llberallsaLlon
efflclency belng of uLmosL lmporLance such lendlng was deemed as belng low
proflL and lnefflclenL and credlL exLended Lo farmers was reduced dramaLlcally
falllng Lo 103 ln 2001 agalnsL a recommended LargeL of 18
O A lack of rural lnfrasLrucLure deLers prlvaLe banks from seLLlng up rural branches
wlLh Lhe responslblllLy falllng on Lhe governmenL whlch has reduced rural spendlng
as a resulL of lLs llberallsaLlon pollcles
O @hls aL a Llme when agrlculLure was golng Lhrough a crlsls proved dlsasLrous for
farmers who Lurned Lo prlvaLe money lenders who charge exorblLanL raLes of
lnLeresL someLlmes up Lo 24 a monLh
O JlLh lnpuL cosLs and ouLpuL prlces belng whaL Lhey are coupled wlLh crop fallures
and droughL Lhey are pushed lnLo debL whlch ls lmposslble Lo repay
O Andhra radesh had Lhe hlghesL percenLage of lndebLed farm households 82
644 of keralas farm households and 348 of MaharashLras farm households
were lndebLed lndebLedness had been ldenLlfled as Lhe slngle ma[or cause of
sulcldes ln boLh Andhra radesh kerala and MaharashLra
-Dl-
O lndla should pay lmmedlaLe aLLenLlon Lo ensure rapld
developmenL ln educaLlon healLh waLer and sanlLaLlon labor
and employmenL essenLlal for Lhe soclal pollLlcal and
economlc developmenL of Lhe counLry
O our progress ln educaLlon has been slow and superflclal
wlLhouL depLh and quallLy Lo compeLe Lhe lnLernaLlonal
sLandards
O lmmedlaLe sLeps Lo lncrease agrlculLural producLlon and creaLe
addlLlonal employmenL opporLunlLles ln Lhe rural parLs Lo
reduce Lhe growlng lnequallLy beLween urban and rural areas
agrlculLure ls sLlll Lhe largesL lndusLry provldlng employmenL Lo
abouL 60 per cenL of Lhe workforce ln Lhe counLry