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ECONOMICS OF DEVELOPMENT
ECONOMICS OF DEVELOPMENT
An economy or economic system refers in which the various
economic activities relating to production, distribution,
exchange and consumption of goods and services are
organized in a country and the way in which the people of a
country earn their living.
It comprises the factories, firms, mines, shops, banks, schools,
offices, transport systems, theatres, hospitals, public
administration, defense etc., which help in the production and
distribution of goods and services in the country.
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CHARACTERISTICS OF INDIAN
ECONOMY
Poor quality of Indian working population: compared to advanced
countries the poor quality of Indian labor is due to the reason that the
laborers of India are poor and under fed.
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CHARACTERISTICS OF INDIAN
ECONOMY
Existence of Dualistic or Dual sector: In India both ancient and
modern sectors exist side by side. We find ancient wooden ploughs as well
as the modern tractors. Similarly in industries old and obsolete machines
and modern sophisticated machines.
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2.
3.
4.
5.
Problem of unemployment
6.
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Capital Formation
Capital output Ration
Curb the Growth of population
Create Human capital
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1850-1950 Indian economy was stagnant for 100 years, but now
the economy is progressing also with the recent LPG of Indian
economy.
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sectors
1970-71
1980-81
2003-04
Primary
45.8%
39.6%
24.0%
Secondary 22.3%
24.4%
25%
tertiary
40%
51.4%
31.9%
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Year
2003-04
2004-05
2005-06
2006-07
Industry
7.0
8.4
8.3
10.6
Mfrg.
7.4
9.2
9.1
11.5
Services
8.5
9.6
9.8
11.2
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OBJECTIVE OF
TH
11
PLAN
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INFLATION
Inflation refers to a situation when there is a general rise in prices
and a corresponding fall in value of money.
TYPES OF INFLATION
Creeping inflation Price Rise by 2% -PA not controlled in time prove
disastrous economic & political stability of the economy
Walking inflation mild & tolerable > 10% PA moderate stable
inflation- people expectations remain more or less stable.
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CAUSES OF INFLATION
The basic cause of inflation normally occurs, when aggregate
demand for output tends to be excessive in relative to the
supply
of output.
1.CHANGES IN MONEY SUPPLY
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CAUSES OF INFLATION
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CAUSES OF INFLATION
3. Changes in Business and Consumer Expenditure :
consumer spends more on goods & services the
demand also increase business activity.
Higher purchase & installment schemes.
4. Foreign demand: inflation may also be caused due
to changes in supply of goods and services, when it
does not keep pace with the increased demand for
goods and service
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CAUSES OF INFLATION
Inflation may occur due to the following different causes:
EFFECTS OF INFLATION
Effect on Production & Employment: motivates Cos to expand
its production normally leads to generation of Employment
opportunities.
Effect on Distribution of national income
Effect on producers
Effect on wage and salary earners
Effect on fixed income groups
Effect on debtors (gain)and creditors suffer badly)
Effect on farmers-benefit due to increase in prices of crops
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CONTROL ON INFLATION
1. DIRECT MEASURES control on prices and rationing
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CONTROL ON INFLATION
3. MONETARY MEASURES: RBI Open market operations, & Bank rate policy.
.
4. WAGE CONTROL : money wage rate rises faster than the productivity of
labor. However wage controls difficult to implement.
5. PRICE CONTROL: fixation of maximum prices at which
commodities are to be sold.
6. OTHER MEASURES: diverting funds only towards production of
necessary commodities, instead of luxury items.
Exports can be increased and imports restrictions can be relaxed.
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PRICE INDICES
The numerical value that summarizes price level is called price
indices.
The purpose Of PI helps in explaining the purchasing power or
inflation/Deflation from one period to another.
Types of Price Indices:
1. Wholesale price Index (WPI)
2. Consumer Price Index (CPI)
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PRICE INDICES
1.
2.
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BUSINESS CYCLE
A business cycle can be defined as wavelike
fluctuations of business activity characterized by
recurring phases of expansion and contraction in
periods varying from three to four years.
Fluctuation rather than stability is the rule in every
business record.
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Prosperity phase
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1.
2.
3.
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