2. Economy
• “the wealth and resources of a community,
especially in terms of the production and
consumption of goods and services”
BE/POL ENV & ECO SYS 2
3. Economic Systems
• Economic activities take place within the
framework of an economic system.
• An economic system is the socio economic
and political framework within which an
economy functions.
• The choice of economic system is influenced
by:
political, social, historical or ideological
considerations.
BE/POL ENV & ECO SYS 3
4. Problems faced by Economy
• What goods and services must be produced
and in what amount?
• How and where should the production be
organized so as to produce these goods and
services?
• Are the countries resources fully utilized?
• How to allocate the available resources among
production units?
BE/POL ENV & ECO SYS 4
5. Problems faced by Economy
• How should be the resultant output be
distributed?
• What proportion of goods produced shall be
capital and consumption?
BE/POL ENV & ECO SYS 5
6. Market or Capitalist Economy
• A free enterprise economy is feature of
capitalism.
• A free enterprise aims at :
– Free trade
– Freedom of choice in consumption
– Freedom of choice in production
– Freedom of occupation
BE/POL ENV & ECO SYS 6
7. Features of Market Economy
• Private Property
• Consumer Sovereignty
• Freedom of Enterprise
• Enlightened self interest
• Profit Motive
• Competition
• Existence of Markets and Prices
BE/POL ENV & ECO SYS 7
8. Features of Market Economy
• Absence of Central Plan
• Limited Government
• Active Entrepreneurship
• Class Conflict
• Use of Advanced Technology
• Specialization based on Division of labour
• Extensive use of money
BE/POL ENV & ECO SYS 8
9. Market Economy
Merits
• Automatic functioning
• Leads to greater efficiency and
incentive for hard work
• Higher rate of capital
formation and growth
• Economic Development and
prosperity
• Optimum utilization of
resources
• System of reward and penalty
Demerits
• Too materialistic
• Class Conflict
• Social Injustice and
Inequality
• Human welfare ignored
• Economic instability and
unemployment
• Misallocation of resources
• Malpractices
BE/POL ENV & ECO SYS 9
10. Planned or Socialist Economy
Features of
Planned
Economy
Public
ownershi
p of
property
Central
Planning
Authority
Growing
role of
public
Sector
Economi
c
equality
of ppl
Equality of
opportunity
Social
welfare and
security
Classless
Society
State is final
arbiter of all
issues
BE/POL ENV & ECO SYS 10
11. Planned Economy
Merits
• Social Justice
• Rapid Development
• Rational outlook and
scientific temperament
• Avoids pitfalls of market
economy
• Better allocation of
resources
• Improvement in productive
efficiency
Demerits
• Extensive centralisation and
bureaucratisation
• Equality of opportunity and
equitable distribution in
socialism is a myth
• Kills private initiative and
enterprise
• Lacks consumer sovereignty
• Slow and lethargic
BE/POL ENV & ECO SYS 11
12. Mixed Economy
• Co-existence of private and public sector
• Nationalisation of basic industries
• Reduction of inequalities of income
• Provision of social welfare measures
• Promotion of economic development through
planned efforts
• Resource allocation through the price system
and government directions
BE/POL ENV & ECO SYS 12
13. Mixed Economy
• Government control and regulation of the
private sector
• Consumer Sovereignty is protected but
government controls production ,
consumption and distribution
• Government is committed to the promotion of
public welfare and protection of labor and the
poor and the marginalized
BE/POL ENV & ECO SYS 13
14. Mixed Economy
• Prices are determined by market forces but
products of public sector are governed by
administered prices
• Control of monopoly
BE/POL ENV & ECO SYS 14
15. Indian Economy
• Achievement of faster economic growth
• Best allocation of Resources
• Balance between the Private and Public
Sectors
• The establishment of a welfare state
• Heavy Capital investment through planned
effort
BE/POL ENV & ECO SYS 15
16. Indian Economy…The Lackings
• Undue emphasis on growth of public sector
• Inefficiency of both the sectors
• Ineffective control of the private sector
• Economic Fluctuations
• Failure to solve demographic and
unemployment problems and inflation
• Extensive and corrupt bureaucracy
BE/POL ENV & ECO SYS 16
17. Economic Reforms of India
• 3 pillars of economic reforms in India
–Liberalisation
–Privatisation
–Globalisation
BE/POL ENV & ECO SYS 17
18. Liberalisation
• Delicenscing
• Corporatisation of PSU
• Shifting of products and industries from
administered pricing mechanism
• Freedom to PSU to access capital markets
BE/POL ENV & ECO SYS 18
19. Privatisation
• Divesture
• Denationalisation
• Opening up of core sectors earlier reserved for
public sector to private investment(roads ,
ports, insurance, power transmission,
telecommunications, etc)
BE/POL ENV & ECO SYS 19
20. Globalisation
• Reduction in scope of restrictive canalised trade
• Increase in FDI in number of areas
• Sustained reduction in custom duties on number
of import items
• Free import of large number of open general
licence
• Simplification, rationalisation and standardisation
of number of export-import procedures and
documentation
BE/POL ENV & ECO SYS 20
21. Growth and Development
BE/POL ENV & ECO SYS 21
GROWTH DEVELOPMENT
Uni-dimensional Multi-dimensional
Income Based Standard Of Living
Economy Society
22. Assignment
• ADVISABLE TO DO ASSIGNMENT;FINAL CALL YOU
YOURSELF HAVE TO TAKE.
• ASSIGNMENT IS GIVEN FOR UNDERSTANDING
THE SYLLABUS AND CLEAR DIFFICULTIES ;IF ANY .
• Give detailed information on following points:
– GDP
– GNP
– NDP
– NNP
Also mention the figures available for FY 2012-13
(TIP : for figures refer, http://www.indiabudget.nic.in)
BE/POL ENV & ECO SYS 22
