Economic structure of India.ppt

7/24/2019 Economic structure of India.ppt

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Introduction to BusinessEnvironment


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ECONOMIC STRUCTURE OF

INDIA ECONOMIC STRUCTURE OF INDIA Mixed economy of India consists of public and private sector. Policy on the

public sector has been guided by the Industrial Policy Resolutions 195 and 1991!hich gave a strategic role in the economy. India !as based agrarian economy!ith !ea" industrial base# lo! level savings and investments and near essence of

infrastructural facilities. Public sector

$he ob%ect of accelerating the pace of eco&development and the politicalideology# gave the public sector a dominant role in the industrial development ofthe nation led to rapid gro!th of the 'tate (!ned )nterprises *'()s+ sector inIndia.

$hese enterprises came to cover a !ide spectrum of activities in basicstrategic industries li"e steel# coal# minerals and metals# petroleum# heavyengineering# chemicals# fertili,ers and pharmaceuticals etc.# on one hand andconsumer goods# trading and mar"eting activities# transportation# services#contracts and consultancy services# tourist service# -nancial services#development of small industries etc.# on the other.

Objectives It !as promoted as an instrument for implementation of the govt.s

socio&eco policies.


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INDIA /nderdeveloped economythe current status of indian economy is a result of its evolution over the years. Indian is still an

underdeveloped economy despite signi-cant progressive changes over the six decades sinceindependence.

1. 0o! per apita Income2 according to !orld development indicateors database of the!orld ban". $he 34P per capita incomeis one of the lo!est in the !orld. It stood at

956 in 7668 as per the !orld ban" data released on 7thapril 7669. as against :6for pa"istan.

!" Indi#$s %er c#%it# income*nominal+ !as 1586 in 761;# ran"ed at 176th out of1 countries by the omestic Product vary by source.;. Ine?ualities in Income distribution2 !ealth is distributed in fe! hands


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INDIA Objectives It !as promoted as an instrument for implementation of the govt.s

socio&eco policies.

$o help in the rapid eco gro!th and development andindustriali,ation of the country and create the necessary

infrastructure for economic development. $o earn return on investment and thus generate

resources for development. $o promote redistribution on income @ !ealth $o create employment opportunities $o promote balanced regional development $o assist the development of small scale and ancillary

industries $o promote import substitution# save and earn foreign

exchange for the economy.


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&ro't( ) %er*orm#nce o*%ublic enter%rise Public Sector R#tn#s

3ovt. in 1998 Auly unfolded its strategy to grant autonomy to come P'/s on an experimental basis!as to select some vanguard P'/s to support them in their drive to become global giants. Bfter in&depthinterministerial discussions. 4ine P'/s !ere selected. $hese are 4avaratnas.

=harath Ceavy )lectricals 0td *=C)0+

=harath Petroleum orporation 0td *=P0+

Cindustan petroleum orporation 0td *CP0+

Indian (il orporation 0td *I(+

Indian Petrochemicals orporation 0td *IP0+

4ational $hermal Po!er orporation 0td *4$P0+

(il @ 4atural 3as orporation 0td *(43+

'teel Buthority of India 0td *'BI0+

Didesh 'anchar 4igam 0td *D'40+

3BI0 *3as Buthority of India 0td+ @ M$40 * Mahanagar $elephone 4igam ltd+ !ere given same status. Bllthese !ere given freedom to incur.

apital expenditure

>ecide on %oint venture

'et up subsidiariesEoFcers board

)nter into technology @ strategic alliances

Raise funds from capital mar"ets *international @ domestic+

)n%oy substantial operations and managerial autonomy


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Economic Pl#nnin+ in Indi#From Mi,ed to # M#r-et

econom." Economic Pl#nnin+ in Indi# From Mi,ed to # M#r-et econom."

$here are three types of economy.

Mar"et )conomy &


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A Pure M#r-et Econom.

No +overnment involvement in economicdecisions

T(e +overnment lets t(e %eo%le #ns'er t(et(ree b#sic economic /uestions 0(#t1 Customers decide t(rou+( t(eir

%urc(#ses

2o'1T(is is le*t u% to t(e individu#l business3BUT4 # business must be %ro5t#ble

0(o1 Peo%le '(o (#ve mone. c#n bu. more 3t(is encour#+es (#rd 'or- #nd investments


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A Pure Comm#nd

Econom. T(e &overnment controls t(e *#ctors o*%roduction #nd m#-es #ll t(e decisions T(e+overnment is res%onsible *or #ns'erin+ t(e

t(ree economic /uestions 0(#t1 One %erson 6 # dict#tor7 or # +rou% o*

+overnment o8ci#ls 6centr#l %l#nnin+ committee7decide '(#t is to be %roduced

2o'1 T(e +overnment o'ns #ll t(e *#ctors o*%roduction #nd m#-es #ll t(e decisions #bout%roduction

0(o1 T(e +overnment decide '(o receives '(#t

is %roduced in t(e econom.


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Mi,ed Economies

Some +overnment involvementt(rou+( m#nd#tor. l#'s #nd

re+ul#tions t(#t businesses *ollo' 9#bor 9#'s: Minimum 0#+e

T(e +overnment %rovides soci#l%ro+r#ms *or t(ose '(o need (el% Medic#re: 'el*#re

All economies #re mi,ed t(e. #recl#ssi5ed b#sed on (o' muc( t(e

+overnment is involved in t(e %rocess


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Economies In Tr#nsition

T(e bre#-u% o* t(e Soviet Union is t(ebest e,#m%le o* # countr. c(#n+in+

*rom # Comm#nd Econom. to # M#r-etEconom.

St#te o'ned industries (#ve been%riv#ti;ed 6+overnment o'ned

businesses #re sold to %riv#te citi;ens7 Tod#. even soci#list countries #re

sellin+ some o* t(eir +overnmento'ned businesses to individu#ls


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econom." Structure o* Econom.

$he contributions of sectors li"e primary *agri+# secondary*industrial+ and tertiary sectors form structure of economy.

Bs economy develops share of primary sectors in

development# employment @ 3>P declines. Manufacturing alsodeclines. $he service sector is largest @ fast operating sector. $heycontribute upto 6G of !orld 3>P and is less in developed countries


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econom." Per*orm#nce

Blthough !e have failed to achieve targets @ ;6G still underpoverty line. India is one of the largest industrial po!ers in the!orld and has the ;rdlargest stoc" of scienti-c manpo!er.

C(#r#cteristics o* Industries

/ntil 1991# the development of the private sector !as understrict 3ovt. control# !as exercised through industrial licensing. 0o!

li"e the Industries *>evelopment @ Regulation+ Bct# the ompaniesBct gave enormous control over the management and control offunctioning of the industries. $he M.R.$.P. Bct controlled merges#amalgamations and ta"eovers.


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/ntil 1991# the development of the private sector !as under strict3ovt. control# !as exercised through industrial licensing. 0o! li"e theIndustries *>evelopment @ Regulation+ Bct# the ompanies Bct gaveenormous control over the management and control of functioning of the

industries. $he M.R.$.P. Bct controlled merges# amalgamations andta"eovers.


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T(e Develo%ment o* Industries

Private 'ector

Public 'ector

Aoint 'ector has been promoted to facilitate the utili,ation

of the resources and talents of the private sector andfunction !ith social orientation of public sector.

o&op. sector2 Made progress in industries li"e sugar# cottontextiles and fertili,ers. 3ro!th of this sector promotesindustrial democracy @ discourages concentration of

economic po!er in fe! hands. Dillage @ small industries H 4ot given the deserving

importance. 'ome units are reserved for them and theproducts too.


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Im%ort Substitution ) E,%ort Contribution

Import substitution assumed importance after the second plan.In early decades of planning# considerable import substitution too"place in many important areas H in capital goods# organic chemicals#pharmaceuticals# dyestus etc. $he )xport Policy Resolution of 1986emphasi,ed the importance of development and expansion ofexport oriented production. $he Import 'ubstitution Industriali,aiton'trategy *I'I+ follo!ed in India has had adverse eects. $he highprotection from foreign competition# resulted in high costs# poor?uality# indierence to!ards consumers and lac" of innovativeness.

In mid 1956s Aute @ cotton industries *textiles+ !ere deniedforeign exchange and !ith liberali,ation non&essential industries!ere given import substitution.

$he import restrictions# high costs and poor ?uality also veryseverely aected Indias export performance.


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C(#r#cteristics o* Industries C#%#cit. Utili;#tion

/nder utili,ation H amounts to !astage of scarce resources# leads to cost&push inJation. reates demand supply

imbalance# aect balance of trade# employment# saving and investment. /nder utili,ation of Industrial policy is due tofactors li"e as Kplanned excess capacityL calculated to meet the demand in the foreseeable future# tech KinvisibilitiesL!hich may create capacity in excess present demandNO and Kinitial testingL troubles of ne! industries !hich is incapable inthe developing economy.

Re+ion#l Dis%#rities Remov#l 3 T(ird Pl#n

0arge investments !ere made in bac"!ard areas. Incentive system !as introduced in thplan. $he bac"!ard area

development by industriali,ation is not given importance.

An Ev#lu#tion

'ince 1951# large investments have been made in building up capacity over a !ide spectrum of industries. India is ama%or industrial po!er in !orld.

8thyear revival states2

'ubstantial diversi-cation

Produce large @ broad range of industrial products

'elf&reliance achievedN

apital @ basic goods contribute 1 of total value added in manufacturing

Dirtual suFciency achieved

=et!een 1956 @ 7666# IP increased 77 fold.

3>P increased by 1;G in 1956&51 to 75G# 56 years of industriali,ation

$echnological# managerial# operational development

>evelopment of s"illed manpo!er !as also achieved.


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A+ricultur#l Sector

Bgriculture contributes over 1Ethof Indias 3>P# provides 7E;rdofpopulation livelihood# supplies ra! materials for number of industriesand contributes 1E5thof the export earnings. $he rural mar"et accountsfor !ell over 55G of the demand of QM3s.

P(#ses o* Develo%ment From


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A+ricultur#l Sector

E,%#nsion ) Develo%ment o* In%uts ) Services entral @ state 3ovts. Role in development of agriculture sector. Irrigation2 Increases agri productivity @ employment opportunities.

/nion @ 'tate governments are developing the area under irrigation byexecuting ma%or# medium and minor irrigation pro%ects and exploiting

ground !ater potential. Rural electri-cation programs *energisation ofpumpsets+ is also being implement. $his supports industries li"e cement#steel etc.# Irrigation electri-cation *aluminium cables# steels etc+ !ill alsoincrease demand for pumpsets# PD pipes# agri implements# insecticideand pesticides and fertili,ers# ban"s etc.

Private sectors li"e farmers organi,ation# voluntary bodies and general

publicN are ta"ing interest in irrigation. 3round !ater development isdone through o!n -nancing or institutional -nancing or both. 'tates li"e Maharashtra# Madhya Pradesh and Bndrapradesh have

initiated the action for privati,ation of irrigation pro%ects throughpro%ects li"e build o!n operate *=((+ or build o!n operate transfer*=(($+ or =uild o!n lease *=(0+ basis.


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A+ricultur#l Sector

A+ricultur#l M#r-etin+

thPlan H $hree essential elements of mar"eting.

'upport prices ad%usted !ith cost of production to ensure fair returns to the farmers.

Brrangements for procurement of agri produce at support prices# if prices decrease.

$he organi,ation loo" after this is Qood orporation of India# $he otton orporation of India# $heAute orporation of India and the o&operatives !ith the 4ational Bgricultural ooperativeQederation of India *4BQ)>+ as their Bpex (rgani,ation.

Director#te o* M#r-etin+ ) Ins%ection

Qunctions are to give advice to the entral @ 'tate 3ovts.# Promote grading andstandardi,ation# mar"et practices# extension# research# cold storage.

Bgmar" for otton# vegetable oils# ghee# cream# butter# rice and !heat.

Re+ul#ted M#r-ets

$he regulated mar"et is a mar"et !here the activities are regulated by la! and is meant fordealing in a speci-c commodity or group of commodities.

$he main ob%ective of the regulated mar"et is to save the farmers from the exploitation ofunscrupulous mar"et intermediaries and to ensure a fair price for their produce.

Co4o% M#r-etin+2 It !as started to help small farmers# grains @ agri products are graded andstored and sell at advantageous price. Mar"eting is the important function of co&op. mar"eting.


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A+ricultur#l Sector

A+ri Price Polic.2

Is decided by $he ommission for Bgri osts and Prices *BP+.

Bgri commodities li"e !heat and paddy have procurement prices -xed for them.

Minimum 'upport Prices2 for barley# gram# moong# urad# mustard# ground nut# sunJo!er seed# soyabean

and cotton *"apas+.

'tatutory Minimum Price2 for sugarcane# %ute and tobacco.


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ECONOMIC RO9E OF&O=ERNMENT

Entre%reneuri#l Role

)ntrepreneurial role includes establishing and operating businessenterprises and bearing ris"s. B number of factors such as socio&politicalideologies# dearth of private entrepreneurship# absence of inade?uate

competition in certain segments and resultant exploitations of consumershave contributed for the gro!th of state o!ned enterprises.

Pl#nnin+ role

'tate plays an important role as planner.


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T(#n- >ou

Economic structure of India.ppt

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