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Module 3Economics of Development

IBE-Module 3 By: Monica M

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Economic Development

An economy is a system in which productive units uselimited resources to produce a variety of marketableproducts.

Economic growth is defined as process in, which the realnational output of a country increases over a period oftime

Economic growthis the increase in the amount of the Goodsand services produced by an economyover time

Economic development implies progressive changes in

the socio-economic structure of the country.(The level of economic growth, level of education, level of health

service, degree of modernization, status of women, level ofnutrition, quality of infrastructure, distribution of goods &Services and access to communication)

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Economic growth can be shown graphically by shifting theproduction possibilities curve outward.

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Distance of shiftrepresents an increasein productive capacity

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How Do We Define Economic Growth?

Observation

India has a real GDP more than fifteen times as large asthat of Denmark.

Indias population is about 200 times greater than that ofDenmark.

India is relatively poor and Denmark is relatively rich.

Economic Growth

Increase in per capita real GDP measured by its rate ofchange per year.

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Population(2011) 1.21 billion

GDP at market prices (2010-11) US $ 1.01 trillion

GDP Rate 2011 8.6%

GDP at PPP US $ 4.16 trillion

Per Capita Income (2010-11) Rs. 53,331

GDP per capita growth % (2010 - 11) 16.9%

Inflation Rate(2010) 8.8%

Inflation rate (consumer prices): 6.8% (2011 est.)

FDI Inflows into India US$ 19 billion

Stock Market Capitalisation US$ 1 Trillion

Economic Indicators - India

THINK INDIA, THINK TIMES

Source : The Economic Times Intelligence Group.

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IndiaAs a Developing Economy

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GDP: $4.06 Trillion as on 2010-11Central Statistics Office, Department OfEconomic Affairs

Year Gross domestic product

2000 5.83

2001 3.885

2002 4.558

2003 6.852

2004 7.591

2005 9.033

2006 9.532007 9.991

2008 6.186

2009 6.771

2010 10.094

2011 8.6

2012 9- Estimated

http://timesofindia.indiatimes.com/

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What Does Gross Domestic Product - GDPMean?

The monetary value of all the finished goods and servicesproduced within a country's borders in a specific time period,though GDP is usually calculated on an annual basis. Itincludes all of private and public consumption, governmentoutlays, investments and exports less imports that occur

within a defined territory.

GDP = C + G + I + NX

where:

"C" is equal to all private consumption, or consumerspending, in a nation's economy"G" is the sum of government spending"I" is the sum of all the country's businesses spending oncapital"NX" is the nation's total net exports, calculated as total

exports minus total imports. (NX = Exports - Imports)

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Costs and Benefits of Economic Growth

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Economic Growth

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Features of Indian Economy

Indian Economy is developing economy and primarily an agricultureeconomy as more than 60% of the population is engaged in agricultureand allied activities.

Indian economy is evolved as mixed economy economy in the sense thatboth private sector

and public sector coexist and participate in the production process. There has been remarkable improvement in social sectors such as

education, health, housing, water supply, civic amenities etc.

The economy has low per capita income and low capital accumulation.

Although two-thirds of the Indian workforce still earn their livelihood

directly or indirectly through agriculture, services are a growing sectorand are playing an increasingly important role of India's economy.

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Cont.

India is a major exporter of highly-skilled workers in software and financialservices, and software engineering

It is characterized by high population density and population growth.

About one-third of the population live below poverty line.

There is high level of unemployment rate and illiteracy rate

The level of technology used in production process is low in many sectors.

Modern technology has not been adopted in all sectors of the economy.

There is a shortage of physical and economic infrastructure, transportation

(Roads, railways, airlines), power (electricity, gas), and communication

(telephone, Internet) have not reached all parts of the country.

Even some parts of the country do not have provisions for schools, colleges,

hospitals, and safe drinking-water supply

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Determinants of Economic Development

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EconomicFactors

Non EconomicFactors

Capital Formation

Natural ResourcesMarketable surplus ofagricultureConditions in ForeignTradeEconomic system

Human Resources

TechnologyPolitical FreedomSocial Organization: E.g.

Akshayapatra

CorruptionWill to develop

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Major issues of development India as adeveloping economy

1. Low per capita Income:

Per capita incomein the country rose to over Rs 53,331 in2010-11 from Rs 18,450 in 2001-02

United States Per Capita Income in the year 2011 is $41,663 -- High Per Capita Income

Per capita income is estimated to have risen 16.9% to Rs53,331 compared to Rs 46,117 in the previous year.annual average growth rate

An economy where the per capita real income is less than$1000 a year is considered an under-developed economy.

Per capita Income = National Income / Total Population

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http://timesofindia.indiatimes.com/

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2. Disparities in Income distribution

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High degree of disparity in Income distribution.Income Disparity is more intensive in urban area ascompared with rural area.Day to Day basis worker has remained more stable.

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3. Poverty Line In India

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As per the findings of Tendulkar Committee on Poverty , Indiaspoverty rate is estimated at 37.2% of the total population.Indias poverty rate is expected to fall to 22% by 2015 from 51%

in 1990, which forecast Indias poverty rate to drop to 24% by thatyear.

The poverty rate is measured by assessing the number of peoplewho live below $1.25 a day, a threshold set by the World Bank.

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Poverty Rate

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4. Low level of productive efficiency due to inadequatenutrition and Malnutrition

The Level of mal nutrition was higher in the urban areasthan in the rural areas.

Malnutrition(Starvation) leads to death or disease that inturn reduces productivity

Improving nutrition increases productivity and economicgrowth - World Health Organization (WHO)

The National Sample Survey has estimated that about56% of urban population & 49% of rural population suffer

from inadequate nutrition (2,400 Calories/Day)

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5. Over populationIndia's population rises to 1.21 billion:

Census of India 2011:The population of India, at 1210.2 million, is almost equal to the combined

population of U.S.A., Indonesia, Brazil, Pakistan, Bangladesh &Japan puttogether (1214.3 million)

http://timesofindia.indiatimes.com/

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Cont.

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6. Imbalance between Population size, Resourcesand Capital

Due to over population, available land and otherresources are affected which creates the imbalance inthe Indian Economy.

With rising population, per capita availability of land andother such resources declines.

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7. Problem of Unemployment

unemployment rate =number unemp loyed

labor force100

The unemployment rate which had increased from 6.06% in199394 to 7.31% in 19992000 and further to 8.28% in200405, came down to 6.60% in 200910. (Twelfth Five YearPlan)The Indian unemployment rate in 2011 has also remained acause of concern among the people. The latest reportsindicate that the unemployment rate of the country is at 9.8%this year which is quite high.

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Cont..

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Unemployment rate:9.8% (2011 est.)country comparison to the world: 10910% (2010 est.)

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8. Lack of Entrepreneurs

In the theory of growth, entrepreneurs plays a vitalrole in the economy.

The society possess people who are gifted withentrepreneurial skills, it is bound to grow rapidly.

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9. Lack of capital

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Savings are low in India due to low national incomebut high expenditure.

The Gross domestic savings (% of GDP) in Indiawas 31.26 in 2009

Capital accumulation is necessary tohave economic growth.

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10. Lack of Industrialization

India lacks in large industrialization based on modern and advancedtechnology.

Average growth of industrial sector was 8.5% in India

The Growth Rate of the Industrial Sector finally came to 9.8% in 2006-2007

Indias Index of Industrial Production was 6.80 percent in the month ofJanuary 2012 on a year-on-year basis, as compared 7.52 percent growthin January 2011.

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Different sectors

Economy mainly divided into three sectors:

1. Primary (18.1%): The primary sectorincludes the production of raw material and

basic foods. Basically Comprises of

Agriculture 12.3%

Forestry 1.4%

Fishing 0.7% Mining 3.7%

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Indias position in world Agriculture

Rank

Total Area Seventh Irrigated Area First Population Second Economically Active population Second Total Cereals Third

Wheat Second Rice Second Coarse grains Fourth Total Pulses First Oil Seeds Second

Fruits and Vegetables Second Implements (Tractors) Third Milk First Live Stock (castles, Buffaloes) First

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Contribution of different sector to GDP

18.1

26.3

55.6

Primary Secondary Tertiary

GDP Rate FIGURES AS ON 2011GDP FIGURES

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Primary Sector in India

Agriculture - products:rice, wheat, oilseed, cotton, jute, tea, sugarcane, lentils,onions, potatoes; dairy products, sheep, goats, poultry; fish

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Major Crop Production (1999-2000)Rice 89.5 million tonnes

Wheat 75.6 million tonnes

Common Cereals 30.5 million tonnes

Pulses 13.4 million tonnesOilseeds 20.9 million tonnes

Sugarcane 29.9 million tonnes

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Cont.

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Cont.

Source: Ministry of Agriculture,Government of India

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Exports and Imports - Agriculture

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Indias agricultural exports amounted to US $23.2 billion with a 1.7per cent share of worldtrade in agriculture in 2010.

On the other hand, Indias agricultural importsamounted to US $ 17.5 billion with a 1.2 per centshare of world trade in agriculture in 2010.

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The agriculture sector

1. Food Grain Production: 206.4 million tones in 2004-05 244.78 million tones in 2010-11

Target 250.48 million tones in 2011-12.

2. Plantation crops: Largest producer and consumer of Tea.

27% World production, 13% world trade.

Tea production in India during the year 2010-11 has beenestimated at 0.97 million tonnes as against 0.99 milliontonnes in 2009-10.

India is the sixth largest producer of coffee

The production of Natural Rubber in 2011-12 is projected at9.02 lakh tonnes

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3. Live stock, poultry & Fisheries:

66.5% Countries GDP, Agriculture by-products. This sector contributed

121.84 million tonnes of milk,

63.02 billion eggs,

42.99 million kg wool,

4.83 million tonnes of meat.

India ranks first in the world in milk production, which wentup from 17 million tonnes in 1950-51 to 121.84 milliontonnes in 2010-11

India is the 3rdlargest fish producer in the world andContribute $4.4 Billion to the national Income which isabout 1.4% of total GDP

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Cont

4. Agriculture Credit: The Government had announceda target of 3,75,000 crore for flow of agriculturalcredit in 2010-11

RBI, Commercial banks, NABARD

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Cont.

5. Irrigation: Sources: Canals

Wells and tube wells

Tanks

Other Sources.

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Rashtriya Krishi Vikas Yojana (RKVY): The RKVY was launched in 2007-08with an outlay of ` 25,000 crore in the Eleventh Plan forincentivizing states to enhance public investment toachieve 4 per cent growth rate in agriculture

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Mile Stones in Agricultural Development

Green Revolution (1968)

Ever-Green Revolution (1996)

Blue Revolution (water, fish)

White Revolution (Milk) Yellow Revolution (flower, edible)

Bio-Technology Revolution (Tissue culture, Genetic engg)

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Technologies for Sustainable Agricultural

Development

Biotechnology

Pre & post harvesting technology

Energy saving technology

Environment protection technology Information and Communication technology

GIS & RS technology

Internet/Intranet Technology

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Cont

Pressure of the Population on Land Land Degradation

Water Balance

Low level of mechanization

Low Fertilizer Consumption

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2. Secondary (Industry):

The secondary sector of the economymanufactures finished goods.

All of manufacturing, processing, and constructionlies within the secondary sector.

Activities associated with the secondary sectorinclude metal working and smelting, automobileproduction, textile production, chemical and

engineering industries

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Contribution of secondary sector

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Secondary Sector

Industries: Textiles, chemicals, food processing, steel,transportation equipment, cement, petroleum,machinery, software, pharmaceuticals etc.

Contribution of secondary sector to GDP is 26.3

Industrial production growth rate:6.7% (2011 est.)country comparison to the world: 41

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IndiaEconomy 2012http://www.theodora.com/wfbcurrent/india/india_economy.html

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Industries in India

Employment in Industry Sector 64.6 million people 1999-2000 100.7 million people 2009-10

Automobile Industry

Gems and jewelers

Textile Industry

Steel Industry.

Food processing industry Chemical Industry.

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1. Automobile Industry

1. Passenger Vehicles: Growth Rate 2.9%2. Commercial Vehicles: higher by 25.9%

The Indian auto exports will be up to $5.62 billion in theyear ending March 2011 and the same will grow to $17.64

billion in 2015-16. Technological demands in automobile industry

Fuel Efficiency

Cost effectiveness

Innovative Features

Safety and Durability

Decrease in the Excise Duty and tariff

Increase in the credit Facility.

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Type of Vehicle 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Units

Passenger Vehicles 1,209,876 1,309,300 1,545,223 1,777,583 1,838,697 Number

CommercialVehicles 353,703 391,083 519,982 549,006 417,126 Number

Three Wheelers 374,445 434,423 556,126 500,660 501,030 Number

Two Wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626 Number

Total 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479 Number

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2. Gems and Jewelers Industry

One of Indias leading foreign exchange earning sectors Gem & Jewellery sector accounted for 16.67% of Indiastotal Merchandise Exports Volume of exports pegged at US$ 43139.24 million as of March 2011

Gems and Jewelers industry includes: GemsGem Stones(Colored) Gold Jewelers

Cut polished diamonds

Costume jewelleries,

Platinum

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3. Textile Industry

The Indian textile industry is one of the major sectors of Indianeconomy largely contributing towards the growth of the country'sindustrial sector.

The Indian Textiles contributes about 14%to the industrialproduction,

4%to the Gross Domestic Product and

14%to the countries export earnings ($26.82 Billion 2010-11)

The Indian textile industry can be divided into a number ofsegments such as

Cotton,

Silk, Woollen,

Readymade,

Jute and handicraft.

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Cont

The total cloth production registered duringSeptember 2010 was 10.2 per cent higherthan that registered for September 2009.

It provides direct employment to over 35

million people.

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4. Steel Industry

India ranked as the fourth largest producer of crude steelin the world during January-November 2011 after China,Japan, and the USASteel production reached 28.49million tone (MT) in April-September 2009.

About 50% of the steel produced in India is exported.

India accounts for over 7% of the total steel produced

globally

India accounts for around 5 per cent of the global steel

consumption Iron and steel is the backbone of all industries.

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Cont.

Huge Iron Ore reserves23 bn. tones Indian Steel Producers are increasingly looking for

overseas acquisitions in steel as well as raw materials.

Positive overall growth in the production of crude steel

value-added steel used Automotive sector,

heavy machinery,

Physical infrastructure.

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Top Players In India

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5. Food Processes Industry

The food processing industry is one of the II largestindustries in India.

India is ranked 5thin terms of production, consumption andexport.

The Food Processing Industries are: Dabur India Ltd. Haldiram Marketing Pvt. Ltd.

MTR Foods Ltd.

Parle Agro Pvt. Ltd.

HUL

Britannia Industries Ltd.

ITC

Nestle India Pvt. Ltd and Cadbury India Ltd..

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Food Processes Industry

Fruits & Vegetables, Fisheries, Milk & Milk Products,Meat & Poultry, Packaged/Convenience Foods,

Alcoholic Beverages & Soft Drinks and Grains

India's food processing sector covers fruit andvegetables; meat and poultry; milk and milk products,alcoholic beverages, fisheries, plantation, grainprocessing and other consumer product groups likeconfectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods etc.

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6. Chemical Industry

Chemicals are also directly used by consumers in theform of

pharmaceuticals,

cosmetics,

household products, paints, etc.

Alkali chemicals, inorganic chemicals, and organicchemicals constitute the major segments of the

chemicals industry. Production of chemicals in 2010-11 is 5196000 Metric

Tonne.

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http://www.google.co.in/imgres?imgurl=http://www.dcra.dc.gov/DC/DCRA/Images%20and%20Media/construction.jpg&imgrefurl=http://www.dcra.dc.gov/DC/DCRA/Inspections/Construction+Inspections&h=652&w=521&sz=88&tbnid=A_93fM-fOAmCFM:&tbnh=251&tbnw=201&prev=/images?q=picture+of+construction&zoom=1&q=picture+of+construction&hl=en&usg=__QmLO4g6kutxZ_F0HGDu1O4YnrrM=&sa=X&ei=JBx_TZb_ForkrAfbh4jDBw&ved=0CBsQ9QEwAA

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Construction

Construction sector contribute 7.9% to Indian GDP.2009-10

Construction as a sector can broadly be divided intothree major categories:

CONSTRUCTION

Infrastructure Real Estate Industrial

Roads, Railways,Bridges, Ports,

Airports, Power,Irrigation

Commercial,Retail,

Housing

Metal RefineriesFertilizers,

Petrochemicals,Cement,Oil & Gas

http://www.google.co.in/imgres?imgurl=http://www.dcra.dc.gov/DC/DCRA/Images%20and%20Media/construction.jpg&imgrefurl=http://www.dcra.dc.gov/DC/DCRA/Inspections/Construction+Inspections&h=652&w=521&sz=88&tbnid=A_93fM-fOAmCFM:&tbnh=251&tbnw=201&prev=/images?q=picture+of+construction&zoom=1&q=picture+of+construction&hl=en&usg=__QmLO4g6kutxZ_F0HGDu1O4YnrrM=&sa=X&ei=JBx_TZb_ForkrAfbh4jDBw&ved=0CBsQ9QEwAA

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The tertiary sector of the economy is the service industry.

It is the largest and fastest growing sector India bycontributing 55.6% of GDP.

This sector provides services to the general population and

to businesses.

Activities associated with this sector include retail andwholesale sales, transportation and distribution,entertainment (movies, television, radio, music ,media,

tourism, insurance, banking, healthcare, and law) and IT,TeleCommunication

3. Tertiary (Service):

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Tertiary Sector

Main service industries are

Business services

Finance

Transport

Communications Utilities

The share of services in Indias GDP at factor cost (atcurrent prices) increased from 33.5% in 1950-1 to 55.6

per cent in 2010-11 and to 56.3% in 2011-12

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Share of different services categories in GDP

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Service Sectors Percentage

Trade, hotels, & restaurants 16.9

Transport, storage, &communication

7.8

Financing, insurance, realestate, & business services

16.6

Community, social, & personal

services

14.3

Total 55.6

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Importance of service sector in India

Contribution to National Income: More than 50% of national

income is contributed Create employment : Many people are employed in service sector

like Software, Aviation, entertainment, hospitals, tourism, retails etc.

Helps primary & Secondary sector: Service sector is important for

rapid development of primary & secondary sectors Increases in Exports: Software exports in 2011-12 are estimated at

US$69 billion compared to US$59 billion in 2010-11.

Improvement in Indians Images: Good performance in this sectorimproves the image of the India.

Adds to comforts &leisure: Many services like hotels, resorts,entertainment and travel adds to comfort and leisure to the people.

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Growth of service in India

Increasing share in GDP: Contribution of service sector toGDP was 52.9% in 2006-07 and consequently increaseto 55.6% in 2010-11

Increasing share in employment: Rural-147 and Urban-

582 people are employed out of 1000 employed people Increasing share in Export: trade is at 37.5 per cent in

2010-11 compared to 21.2 per cent in 1997-8

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Growth of service in India

Growth of new type of services: Service sectorexpanded t medical tourism, consultancy, courier service,interior designing etc.

Increase in number of service providers:

E.g. Telecommunication sectors: Airtel

BSNL

Reliance

Vodafone

TATA

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Growth in tertiary sector in recent year

Transport logistics: The sales of the transport logistics services industry are

estimated to have grown by a healthy 7.2 per cent during 2009-10. In 2010-11as a whole, the sales of this sector are expected to grow by 13 per cent andProfit after Tax (PAT) is expected to grow by 11 per cent.

Shipping: The shipping sectors sales are expected to fall by 3 per cent in2010-11. Freight rates are likely to remain weak during the second half of the

year. After two consecutive years of decline, the sales growth is likely to pickup in 2011-12 at 3.2 per cent with a slow recovery in cargo volumes and animprovement in freight rates.

Aviation: Oil marketing companies hiked aviation turbine fuel (ATF) prices forthe fortnight beginning 1 January 2011. The ATF price ex-Mumbai rose by 5.9

per cent as compared to the corresponding fortnight a month ago, toRs.48,059 per kilolitre. This was 16.6 per cent higher than the average ATFprice in January 2010. In 2010-11 as a whole.

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Cont.

Retail sector: Retail sector is expected to record healthy sales in 2010-11 and grow by 10.2 per cent in

2011-12. The sectors PAT margin is expected to expand over the next three years on account of afaster rise in income vis-a-vis expense.

Health Services: The health services sectors sales are expected to grow by a healthy 25.6 per cent in2010-11 and 19.8 percent in 2011-12 driven by a healthy rise in sales.

Hotel:After falling in 2009-10, the hotel sectors sales are likely to grow in 2010-11 by 18.1 per cent due

to both, higher occupancies and Average Room Rate (ARRs).

Telecom:After rising by just 2.2 per cent during 2009-10, sales growth of the telecom industrywitnessed a recovery and improved during the first half of 2010-11. This recovery in sales growth isexpected to continue. During 2010-11 and 2011-12, sales are expected to rise by 11.4 per cent and 14.6per cent respectively driven by an increase in the subscriber base and a deceleration in the fall of both,average revenue per user (ARPU) and the minutes of usage per user (MOU).

Software: The Indian software industry is mainly export-oriented. The industry garners around 60-70 percent of the total revenue from its two largest markets, namely the US and Europe. The economicslowdown in these major export destinations led to a deceleration in growth of sales of the Indiansoftware industry to 5.9 per cent. However, sales are expected to grow at 16.9 per cent and 17.8 percent, respectively during 2010-11 and 2011-12 due to higher client additions and an uptick in billingrates.

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Business Cycle

A Business cycle can be defined as wave like fluctuationsof business activity characterized by recurring phases ofexpansion and contraction in periods varying from threeto four years.

Business Cycle are a types of fluctuations found in the

economic activity of the nations that organizes their workmainly in business enterprises.

A cycle consist of expansion and contractions.

The business cycle is the periodic but irregular up-and-

down movements in economic activity, measured byfluctuations in Real GDP and other macroeconomicvariables.

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Phases of Business Cycle: According To Joseph

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Peak

Trough

The Phases of the Business Cycle

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Expansion ExpansionRecession

The Phases of the Business Cycle

Seculargrowthtrend

Trough

Peak

0Jan.-Mar

TotalOutpu

t

Apr.-June

July-Sept.

Oct.-Dec.

Jan.-Mar

Apr.-June

July-Sept.

Oct.-Dec.

Jan.-Mar

Apr.-June

It represents the increase or decrease in the total

output of the economy

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Prosperity Phase

The Prosperity phase begins from an equilibrium positionunder the stimulus of forces which create expectations ofrising profits , increases scope of activities of theentrepreneur.

Payment and expenses of wages increases rapidly

Demand for the consumption of goods also grows rapidly.

In this phase, High capital investment and expansion ofthe bank credit, high prices, high profit and fullemployment.

Boom in the normal expansion of economic activity in aneconomy.

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Productivity Increases: EconomicDevelopment

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Savings Investment Capital Accumulation

Higher Productivity More Stuff Full Employment

Higher Living Standards

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Recession Phase

A Recessionis a contraction phase of the businesscycle

A Recession is typically a drop in the stock market,Increase in the unemployment rate & Decline indomestic market.

A drastic slowing down in economy where GDP hasfallen in two consecutive quarters.

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Recession Period- Decrease in GDP Rate

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Year Gross domestic product

2000 5.83

2001 3.885

2002 4.558

2003 6.852

2004 7.5912005 9.033

2006 9.53

2007 9.991

2008 6.186

2009 6.771

2010 10.094

2011 8.6

2012 9- Estimated

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Recession Phase

The Symptoms of recessions are: Scarcity of labor, raw materials which increases the cost

relative to prices.

Rise in the rate of interest

Failure of consumption due to rising prices

Recession are the result of reduction in the demandof products in the Global market.

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Recession In US 2008- Impact on India

The United States entered 2008 during a housing market

correction, a subprime mortgage crisis and a decliningdollar value

Major banks have landed in trouble after people could notpay back loans

Sub-primeis a high risk debt offered to people with poorcredit worthiness or unstable incomes.

Result -Over consumption/ Extravagant spending by theconsumer and thus for years the prices of homes in theU.S. kept rising.

Since then1. Loans became difficult to come by banks2. Bank cut Credit card limits.

Thus, U.S. consumer significantly reduce spending.

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Cont.

Reduced spending meant - reduced activity formost businesses and consumers.

Businesses started to layoff workers (firing peopleas there was no work).Because of layoff, Unemployment started to rise

(10.9%) which resulted in further reduction inspending by consumer. Dollar value Declined and Stock market crashed. All this slowed down the growth of economy.

GDP growth rate fell to 2%. All this put together has driven the U.S. economy

in recession.

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Impact of Global Recession On India

As a result India's export growth as turned negative and fallsharply.

The sensex crashed by nearly 13% in the two tradingseasons of January.

The central bank rate of interest drastically increase 11.5%

to 16%. The net profit of major player real estate decline as compareto pervious financial year.

The textile, garment, and handicraft industry loose 4 millionjobs by April 2009.

The recession had no much impact on the Agriculturalsector. The rupees has positive impact on import but have negative

impact on export and FDIs.

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Cont.

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D i / T h

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Depression / Trough

In this phase, there is sharp deduction of production,mass unemployment, falling prices, falling profits, lowwages, high rate of business failures

The fall in the purchasing power is fundamentalbackground of the fall in prices

There will be no hopes for the entrepreneurs to startup, investors to invest in stocks.

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Recovery

It implies increase in the business activity after thedepression phase

The industrial production picks up slowly and gradually.

In this phase, Slow rise in prices

Small rise in profits

Wages also rise

New investment

New projects

Banks relaxes the credits facilities. Purchasing power of the buyers

Increases the productivity.

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Ch t i ti /F t f B i C l

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Characteristics/Features of Business Cycle

Recurring Fluctuations: Business cycle are Continuous:an expansion turns into a recession that is followed by acontraction and then a revival that in turn, begins theprocess all over

Period of business cycle is longer than a year: 3 to 4

Years. Presence of alternative forces of expansion &

contractions: Boom and Depression

Phenomenon of the crisis: Expansion and Depression

Synchronic: Affects all the Industry/sectors of an economy.

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Important Questions

1. How do you measure per capita income

2. India as a developing economy Comment3. What is a business cycle? Explain the different phases of the

business cycle4. State the characteristic features of Indian economy5. Explain the main features of a business cycle?

6. What are the major issues of development India as a developingeconomy7. Explain Determinants of Economic Development.8. Mention the major drivers of growth in Indian economy?9. Short Note on the growth in tertiary sectors in recent years10.Define Economic Development11.What is the difference between economic growth & development?12.Short Note on:

1. Primary Sector2. Secondary sector