Family law

Q.1 Explain in detail the Western perspective and Indian perspective of Law and Economics?

Ans:

Professor Bruce Ackerman of the Yale Law School described the economic approach to law as “the most
important development in legal scholarship of the twentieth century.” The new field’s impact extends
beyond the universities to the practice of law and the implementation of public policy. Law and
economics is the legal study of the economic impact of the statutes and the laws that govern a policy
measure, country’s wealth, income and so on.

Why has the economic analysis of law succeeded so spectacularly, especially in the United States but
increasingly also in other countries?7 Like the rabbit in Australia, economics found a vacant niche in the
“intellectual ecology” of the law and rapidly filled it. To explain the niche, consider this classical
definition of some kinds of laws: “A law is an obligation backed by a state sanction.”

Law and economics is different from other forms of legal studies in 2 ways, a legal system is efficient if
the person ready to pay the most for a right gets granted that right. There are two legal efficiency theories,
both of which are supported by legal and economic evidence. The positive theory of legal efficiency
asserts that common law (the fundamental body of law in England and her colonial holdings, including
the United States) is efficient, whereas the normative theory asserts that law should be efficient. It is vital
to comprehend the distinction between the two options. Economists are mostly in agreement on these
points.

Western perspective

Richard A. Posner, in MICHAEL FAURE & ROGER VAN DEN BERGH, EDS., ESSAYS IN LAW
AND ECONOMICS (1989) said, “To me the most interesting aspect of the law and economics movement
has been its aspiration to place the study of law on a scientific basis, with coherent theory, precise
hypotheses deduced from the theory, and empirical tests of the hypotheses. Law is a social institution of
enormous antiquity and importance, and I can see no reason why it should not be amenable to scientific
study. Economics is the most advanced of the social sciences, and the legal system contains many
parallels to and overlaps with the systems that economists have studied successfully.”

Ronald Coase has also made a substantial contribution to the development of legal and economic studies.
"Using economists' methodologies and concepts to assess the workings of the legal system, generally
referred to as economic analysis of the law," he said, and "a study of the legal system's influence on the

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economic system." The second section is "the part of law and economics with which I am most
intrigued," according to Coase. He used actual court cases as examples instead of the hypothetical
instances that economists typically use in their studies. The item was clearly designed by a financial
expert. In "The Problem of Social Cost," on the other hand, he tried something new. Judges, he observed,
appeared to be more conscious of the economic environment in their decisions than many other
professions, although they did not always express their opinions freely. He did this to make economics
seem interesting, not to praise the judges.

Economics provided a scientific theory to predict the effects of legal sanctions on behaviour. To
economists, sanctions look like prices, and presumably, people respond to these sanctions much as they
respond to prices. People respond to higher prices by consuming less of the more expensive good;
presumably, people also respond to more severe legal sanctions by doing less of the sanctioned activity.
Economics has mathematically precise theories (price theory and game theory) and empirically sound
methods (statistics and econometrics) for analysing the effects of the implicit prices that laws attach to
behaviour.

Law's economic studies have had a significant impact in the United States and around the world. In the
United States, as well as Commonwealth nations and Europe, economic analysis, as well as legal and
economic theory, are frequently used in judicial rulings. Law and economics have also affected legal
education, with graduate degrees offered in a number of countries. The availability of law and economics
textbooks in English and other European languages (Schäfer and Ott 2004; MacKay 2013) might be used
to gauge law and economics' effect in civil law countries.

Faculty with a graduate degree in economics may be found in many law schools in North America,
Europe, and Asia. In addition, an increasing number of professional economists are researching and
writing on the intersection of economic and legal ideas. Law and economics are "the intellectual tendency
that has had the biggest influence on American academic law in the preceding quarter-century [of the
twentieth century]," according to Anthony Kronman, former dean of Yale Law School.

At Chicago University, neoclassical economics was known for being anti-historical. The marginal list
revolution and Marshal started the dissociation of economics from actual real time, and therefore from
history, which proceeded with Keynes and culminated in Chicago in the 1950s. "Advanced economic
theory dominated the 1950s." It was a world of markets, allocation, and equilibrium; abstraction and
deduction; marginalise and incremental change; optimization and mathematization; optimization and
mathematization; optimization and mathematization; optimization and mathematization; and optimization
and mathematization. It was a case when neoclassical theory's key assumptions held up nicely.

Indian Perspective

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Economics of law and law with economics are two interrelated concepts having a very wide perspective.
Economics of law has a methodological approach, i.e., the analysis of law from the perspective of
economics along with the introspection of the field of economics. Economics has a lot of impact on law,
and such an influence cannot be ignored. Although the law has a lot of impact on the economy, this fact
has not been taken into consideration in theory.

India's economic growth is segmented by region and sector. India's court system is notoriously sluggish,
even by developing-country standards. Because certain businesses rely on contract enforcement more
than others, delays in India's courts have a significant detrimental impact on formal industrial production
and job development. Between 1970 and 2004, the fastest-growing states, Andhra Pradesh, West Bengal,
Karnataka, Gujarat, and Maharashtra, grew more than twice as fast as the slowest-growing states. The
richest five states accumulated a disproportionately significant percentage of capital, accounting for about
55% of total stock, compared to just 15% for the worst five. Furthermore, half of all FDI approvals go to
the top five states. High-skilled and service-related industries fuel the majority of economic development.
As a result, India's legal institutions and policies have a significant influence on the country's economic
growth.

Firms in contract-intensive sectors should grow faster than firms in non-contract-intensive industries,
according to research, if they are situated in Indian states with functional courts, as seen in the graph
below. Between major Indian states, the graph displays the difference in average job growth rates for
contract-intensive and non-contract-intensive firms (vertical axis), as evaluated by court efficiency
(horizontal axis). The percentage of cases settled in district/sessions courts within a year was used to
gauge judicial efficiency in 1999.

Another impediment to economic progress is legal authorities' protectionist attitude. Indian politicians
have a tendency to overprotect Indian businesses against international competition, which has a negative
impact on both the quality of service provided to consumers and the economy's overall growth.

As a result, there is now a strong relationship between India's legal and economic achievements. India's
legal development challenges must be solved in order to ensure the country's long-term and better
economic growth.

Q.2. Significance of Economics and Law perspective of the Intellectual Property rights with reference of
Indian’ IPR?

Ans.

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Intellectual property rights have great importance in the growth of a country. In many developed
countries, the strict enforcement of the IPR role has a huge contribution to economic growth. IPR
promotes innovation which leads to economic growth. Nowadays every business in the world is the
creation of Innovation. The current era has realized the importance of IPR laws. It is not only innovation
but also the name which matters in today’s world. The name carries huge value in the form of goodwill.
Some companies just sell their name in exchange for a huge amount of money. Intellectual Property rights
have a great influence on the financial improvement of a nation. It is very important to protect the interest
and rights of people to evolve in innovation and creation which is directly linked to the development and
growth of the country.

The IPR system ascends to protect individual property rights and ideas that they have come up on their
own. It not only provides a better environment to work and innovate but also encourage such innovation.
In an economical society, the ability to innovate and adapt to the market have been crucial to garner lead
over your competitors and IPR would protect your intellectual property. Due to IPR restrictions,
intelligence can be bought and sold. Person has a legal claim to the products of his labour when he
devotes significant time, energy, money, and other resources to the growth of his knowledge in order to
achieve a certain objective. Any intangible manifestation or a commodity should only be utilised with the
authorization of the creator. This is not only ethically good, but it is also financially prudent. IPR provides
a secure environment for investors, scientists, artists, designers, and merchants, among others, to
stimulate innovation and scientific temper. This type of technology has the potential to provide huge
benefits and returns to both producers and consumers. As a result, the IPR system strives for a balance
between public and private rights. A 20-year patent is awarded to the inventor of any new product or
technology. Patents of this nature expire after 20 years, allowing the generic business to profit from the
patented product.

Indian IPR laws give effect to 4 intellectual property types over which a claimed can be failed to maintain
economic advantage. They are as follows:

Copyright

Copyright is a bundle of legal rights granted to authors of literary, theatrical, musical, and artistic works,
as well as motion picture and sound recording artists. The right to replicate, communicate to the public,
modify, and translate a work is granted under copyright law. The copyrights of works from nations that
are part of the International Copyright Order are protected as if they were Indian works in India. The
duration of a work's copyright cannot exceed the period of the work's copyright in the nation where it was
created. Without the need for any processes, copyright is secured instantly. Copyright exists as soon as a
work is created, and there are no processes for claiming it. If a disagreement arises over who owns the
copyright, the certificate of copyright registration and the entries made therein serve as prima facie

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evidence in a court of law. Copyright applications can be sent to the Copyright Office. A computer
programme or software can likewise be considered a "literary work." Computer programmes, tables, and
compilations, including computer databases, are deemed "literary work" under the Copyright Act of 1957.
The application for registration of copyright for software commodities must contain 'Source Code.' India
has a sizable copyright-based creative economy. The Copyright Act is broad, and recent amendments
have bolstered the rights of creators. The 2013 Marrakesh Treaty on Access to Copyright Works for
Visually Impaired Persons was ratified by India first. The enforcement of copyright has been and will
continue to be aggressive. The rights of copyright holders and the rights of the public have been
effectively balanced in Indian court judgements. The entire spectrum of moral rights is acknowledged.

Patents

Patent law exists to promote scientific research, new technologies, and technological advancement. The
cost of the monopoly is the disclosure of the invention to the Patent Office, following which it becomes
public domain once the monopoly period (20 years) has expired. A patent is only awarded for an
innovation that is both innovative and lucrative, according to the basic concept of patent law. For a patent
to be legitimate, it must be the inventor's original discovery, not merely confirmation of what was already
known before to the patent's date. In addition to being a unique product, a patented innovation must be
beneficial. Patent evergreening is not permitted: To be patentable, an improvement on something
previously known or a combination of previously known difficulties must be more than a basic workshop
improvement and must satisfy the test of invention or inventive step independently. It must provide a new
result, a new article, or a new item that is superior to or less expensive than the prior one. In relation to
the old, the new subject matter must be "innovative." Patentees should be compensated for their ideas,
and patented commodities, particularly medications, should be made affordable to the general public in
developing and developing countries.

Unaffordable medicine prices for the general public or the patentee's failure to meet market demand
TRIPs also specifies that in some circumstances, such as a national emergency or extraordinary urgency,
or in cases of public non-commercial usage, the necessity for a compulsory licencing may be removed.

The Indian Patent Act makes no mention of data exclusivity. Clinical trials and research consume a
tremendous amount of time, effort, and money for businesses. They gather a significant amount of
essential information during this time. These firms must disclose data to authorities when requesting
authorization to commercialise a product or filing for patents. In exchange for data exclusivity, companies
want authorities to agree not to disclose their data with any other parties for a set length of time.

Geographical Indicators

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A geographical indicator (GI) is a term used to describe items that have a distinct geographical origin and
are associated with certain traits or a reputation. A sign must identify a product as being from a certain
location in order to serve as a GI. In addition, the product's traits, attributes, or reputation should be
primarily related to its origin. There is an obvious relationship between the product and its original site of
manufacturing since the attributes are reliant on the geographical region of production. Individuals who
have the right to use a geographical indication can prevent a third party whose product does not meet the
rules from utilising the indicator. Producers of Darjeeling tea can prohibit the use of the term "Darjeeling"
for tea that was not grown in their tea gardens or prepared in accordance with the requirements outlined in
the geographical indicator's code of practise in areas where the Darjeeling geographical indication is
protected, for example. On the other hand, the owner of a protected geographical indication cannot
prevent others from creating a product using the same processes as those indicated in the indicator's
specifications. A geographical indicator is frequently safeguarded by obtaining a right to the sign that
makes up the signal.

International Treaties

Patents, copyright, trademarks, industrial designs, plant varieties, and other intellectual property issues are
only a few examples. There was a need for protection in each of these domains at different times. Many
agreements take into account these difficulties. Under the auspices of the World Trade Organization, the
TRIPS Agreement remains the strongest, broadest, and most encompassing of all (WTO). For the sake of
context, other agreements are given. The two main organisations are the World Intellectual Property
Organization (WIPO), which is part of the United Nations, and the World Intellectual Property
Organization (WIPO), which supervises the 1-7 treaties listed below. No organisation is bound by the 8th
Treaty. The World Trade Organization is another important organisation. The World Trade Organization
is in charge of the 9th World Trade Organization (or TRIPS). The United Nations Educational, Scientific,
and Cultural Organization is in charge of the ninth treaty (UNESCO).

Q.3. Write short notes on.

1. IBC CODE 2016.

Ans.

Insolvency and Bankruptcy Code (IBC) 2016 was implemented through an act of Parliament. It got
Presidential assent in May 2016. Centre introduced the IBC in 2016 to resolve claims involving insolvent

6
companies. The bankruptcy code is a one stop solution for resolving insolvencies, which previously was a
long process that did not offer an economically viable arrangement. The code aims to protect the interests
of small investors and make the process of doing business less cumbersome. The IBC has 255 sections
and 11 Schedules.

IBC was intended to tackle the bad loan problems that were affecting the banking system. The IBC
process has changed the debtor-creditor relationship. A number of major cases have been resolved in two
years, while some others are in advanced stages of resolution. It provides for a time-bound process to
resolve insolvency. When a default in repayment occurs, creditors gain control over debtor’s assets and
must take decisions to resolve insolvency. Under IBC, debtor and creditor both can start 'recovery'
proceedings against each other.

Companies have to complete the entire insolvency exercise within 180 days under IBC. The deadline may
be extended if the creditors do not raise objections on the extension. For smaller companies, including
start-ups with an annual turnover of Rs 1 crore, the whole exercise of insolvency must be completed in 90
days and the deadline can be extended by 45 days. If debt resolution doesn't happen the company goes for
liquidation.

It created a single law for insolvency and bankruptcy and modifying Indian corporate laws. Law
consolidation is not a new concept in India, since the GST was formed by consolidating 17 laws into one.
This code does not apply to any other bodies, such as societies, trust boards, and so on, in addition to the
four institutions stated. This code addresses insolvency, bankruptcy, and liquidation, where insolvency
and bankruptcy appear to be synonymous but have distinct meanings. Insolvency refers to a circumstance
or legal procedure in which a court of competent jurisdiction declares an entity insolvent on the basis of
an application submitted by that entity. In a nutshell, bankruptcy is a legal status; insolvency can or
cannot lead to bankruptcy. This code is also used if a firm is liquidated or willingly wound up.

One of the main goals of the IBC is to encourage entrepreneurship in India by establishing LLPs, which
means that only the entity's invested capital and assets are used to repay the debts claimed; during the
winding up of the companies, when creditors demand their money back, it allows other companies to
acquire by proving their resolution plans in order to satisfy the creditors. As a result, in order to facilitate
the process, the legislation streamlines and consolidates all of the entities' insolvency regulations.
Following its enactment, the code consolidated and amended all existing insolvency laws for the
corporations to which it applies, protects the company's stakeholders and creditors, and establishes the
Insolvency and Bankruptcy Board of India.

This code provides a rapid technique for recognising early financial distress and, depending on the
circumstances, triggering the company's rebirth or winding up. In the case of companies, creditors file an

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insolvency petition with the National Company Law Tribunal, which also acts as a judicial authority in
other situations. A plea for insolvency is submitted to the adjudicating authority (NCLT in case of
corporate debtors) by financial or operation creditors or the corporate debtor itself. The maximum time
allowed to either accept or reject the plea is 14 days. If the plea is accepted, the tribunal has to appoint an
Interim Resolution Professional (IRP) to draft a resolution plan within 180 days (extendable by 90 days).
following which the Corporate Insolvency Resolution process is initiated by the court. For the said period,
the board of directors of the company stands suspended, and the promoters do not have a say in the
management of the company. The IRP, if required, can seek the support of the company's management
for day-to-day operations. If the CIRP fails in reviving the company the liquidation process is initiated.

Due to the institution of IBC, we have seen that many business entities are paying up front before being
declared insolvent. The success of the act lies in the fact that many cases have been resolved even before
it was referred to NCLT. 4452 cases were dismissed at the pre-admission stage. Hence, it shows the
effectiveness of IBC. Presently, there are 1332 cases before NCLT. Realization by creditors around Rs
80,000cr in resolution cases. Banks recovered Rs 5.28 lakh crore in 2017-18, compared to just Rs 38500
cr in 2016-17. The maximum amount recovered was Rs 4, 92,500 cr from 21 companies.

2. Bargaining Theory

Ans.

Bargaining theory is the branch of game theory dealing with the analysis of bargaining problems, in
which some parties bargain over the division of certain goods. A solution to a bargaining problem means
the determination of such a division. Examples of simple as well as more complex applications of
bargaining theory to economic, political and social situations abound. Essentially, one may apply an
axiomatic approach to bargaining problems, i.e., postulate some axioms concerning a potential solution,
and then investigate its existence and properties resulting from the adopted axioms. One may also apply a
different approach to bargaining problems, called the dynamic or strategic approach, which involves the
representation of a bargain as a non-cooperative game and the investigation of solutions from among the
equilibria of the game. Bargaining games are scenarios in which two or more players must agree on how
to share an object or monetary amount. In these games, each participant desires to reach an agreement
rather than refrain from doing so. However, everyone wishes that the arrangement benefits their own
interests. Examples include the negotiation involved between a labour union and the directors of a
corporation discussing salary hikes, a disagreement between two communities over the allocation of a
shared land, or the terms under which two countries agree to nuclear disarmament. When analysing these
types of problems, the goal is to find a solution that indicates which component in dispute pertains to each

8
person involved. Players in a bargaining situation might negotiate for the overall goal at a specific point
in time. The challenge can also be partitioned such that distinct stages of the overall goal are subject to
bargaining.

Smith hinted at such a theory when he noted that employers had greater bargaining strength than
employees. Employers were in a better position to unify their opposition to employee demands, and
employers were also able to withstand the loss of income for a longer period than could the employees.
This idea was developed to a considerable extent by John Davidson, who proposed in The Bargain
Theory of Wages (1898) that the determination of wages is an extremely complicated process involving
numerous influences that interact to establish the relative bargaining strength of the parties.

This theory argues that no one factor or single combination of factors determines wages and that no one
rate of pay necessarily prevails. Instead, there is a range of rates, any of which may exist simultaneously.
The upper limit of the range represents the rate beyond which the employer refuses to hire certain
workers. This rate can be influenced by many factors, including the productivity of the workers, the
competitive situation, the size of the investment, and the employer’s estimate of future business
conditions. The lower limit of the range defines the rate below which the workers will not offer their
services to the employer. Influences on this rate include minimum wage legislation, the workers’ standard
of living, their appraisal of the employment situation, and their knowledge of rates paid to others. Neither
the upper nor the lower limit is fixed, and either may move upward or downward. The rate or rates within
the range are determined by relative bargaining power.

The bargaining theory is very attractive to labour organizations, for, contrary to the subsistence and
wages-fund theories, it provides a very cogent reason for the existence of unions: simply put, the
bargaining strength of a union is much greater than that of individuals. It should be observed, however,
that historically labourers were capable of improving their situations without the help of labour
organizations. This indicates that factors other than the relative bargaining strength of the parties must
have been at work. Although the bargaining theory can explain wage rates in short-run situations (such as
the existence of certain wage differentials), over the long run it has failed to explain the changes that are
observed in the average levels of wages.

In a traditional bargaining situation, the conclusion is either an agreement reached by all interested parties
or the status quo of the problem. It is clear that looking at how individual parties make decisions is
insufficient to predict what type of agreement will be reached. Classical bargaining theory, on the other
hand, holds that, as anticipated by the rational choice model, each participant in a negotiation would
choose among feasible offers. A von Neumann–Morgenstern utility theorem function is thought to
indicate each player's preferences for different agreements. Nash (1950) defines a traditional bargaining
problem as a sequence of joint utility allocations, some of which correspond to what the players would

9
get if they achieved an agreement and another which represents what they would get if they did not reach
an agreement. Retailers can choose to sell at posted prices or allow bargaining: selling at posted prices
commits the retailer not to exploit buyers once they enter the store, making the store more appealing to
potential customers; bargaining allows the retailer to price discriminate between different types of
customers, making the store more appealing to potential customers. Firms advertise prices in some
marketplaces, such as those for automobiles and high-priced technology products, but are eager to bargain
with buyers. When the proportion of consumers who bargain grows, prices tend to rise.

Q.4. Explain in details the Interrelationship between Law and Economics with illustration?

Ans.

The law and the economy interact in many ways. Whereas private law assists individuals and groups
who are willing to enter into agreements in a free market, public law seeks to correct the outcomes
of a free market system by means of economic and social regulation. Economists themselves should
be informed about the legal environment in which economic activities must be conducted, while
lawyers should be aware of the economic effects of current legal rules and the expected outcome
under a different legal regime. Law & Economics meshes together two of society’s fundamental
social constructs into one subject, allowing a multi-faceted study of significant problems which exist
in each subject.

The methodological approach to law and economics is to analyse law from an economics perspective
while simultaneously introspecting on the subject of economics. This is a relatively new field that is
gaining popularity. Law & Economics, with its positive economic analysis, seeks to explain the
behaviour of legislators, prosecutors, judges, and bureaucrats. The model of rational choice, which
underlies much of modern economics, proved to be very useful for explaining (and predicting) how
people act under various legal constraints. This positive analysis informs the normative branch of the
discipline about possible outcomes. If effects of divergent legal rules and institutions are known, the
normative analyst will be able to discern efficient rules from those that are inefficient and formulate
reform proposals to increase the efficiency of the law. Also, Law & Economics has the ability to
improve the quality of the legal system. In the last decades, an impressive literature has developed,
showing the strength of both positive and normative economic analysis in various areas of law.
Lawyers should be aware of the economic consequences of current legal laws as well as the expected
outcome under a changing legal regime, whereas economists should be aware of the legal framework in
which economic activities must be carried out.
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Positive analysis informs the discipline's normative branch on likely outcomes. The normative analyst
will be able to identify between efficient and inefficient regulations and recommend revisions to increase
the law's efficiency if the implications of various legal norms and institutions are known. Law and
Economics has the ability to improve the quality of the legal system. A considerable body of work has
arisen in recent decades proving the utility of both positive and normative economic analysis in a range of
legal circumstances.

Markets are more efficient than courts, according to law and economics. According to positive theory, the
legal system will drive a transaction into the market whenever practicable. When this isn't possible, the
legal system tries to "imitate a market" by guessing what the parties would want if markets existed.

The second aspect of law and economics is the emphasis on incentives and people's responses to these
incentives. Damage payments under tort (accident) law, for example, are intended to motivate future
injurers to make efficient (cost-justified) efforts to avoid causing the accident. Law, economics, and other
branches of economics all share the premise that people are rational and respond to incentives.
Individuals are less inclined to undertake something as the expense of doing it rises. The use of empirical
or statistical methods to assess these responses to incentives is more widespread in law and economics
than in other legal disciplines.

Illustrations:

Law and economics can also be used to justify inefficient property definitions. Because no one owns wild
fish, for example, catching one is the only way to own one. The result is overfishing. It is an important
area of contemporary research since new copying and duplicating technologies are having a significant
influence on the definition of intellectual property rights and the incentives for generating such property.
Because of the amount of data, criminal law has been the subject of the most in-depth empirical study in
law and economics. Criminals, like everyone else, respond to incentives, according to economic theory,
and there is undeniable evidence that increases in the frequency and severity of punishment in a
jurisdiction result in decreased crime rates. The issue of the deterrent effect of capital punishment has
been more contentious, but several recent papers using advanced econometric techniques and large
amounts of data have discovered a significant deterrent effect: each execution prevents between eight and
twenty-eight murders, with eighteen being the best single estimate. There hasn't been any published peer-
reviewed empirical critique of these works. According to research on procedural procedures, more rights
for accused persons have been connected to an increase in crime. In a disputed study, John Donohue and
Steven Levitt argue that relaxing abortion restrictions lowered crime because unwanted children were
more likely to become criminals. There is also a lot of debate in the literature concerning the influence of
laws that makes it easier to carry concealed guns on crime. Some, like as John Lott, find significant

11
decreases in crime as a result of these laws, while others report far smaller impacts, despite minimal
evidence of any increase in crime.

Illustration 2:

Take for example now that there is a shortage of GPUs in the market, however GPU’s are a commodity
used everywhere and such global shortage is slowing down the economy because offices cannot work
efficiently and even statistics and data face a hamper in progress. Legislations now can incentivise more
producers or businesses to produce this commodity by giving easy sanctions, subsidies etc to curb this
shortage and hence the slowdown would be solved. Now there is an excess of GPU’s in the market, now
the buyers can be incentivised to buy more of the commodity. Now, GPU’s are being used in cybercrimes
and to the detriment of the public good and some criminals are causing this using this commodity. Now
the government can regulate the GPU’s by ways of sanctions and requirements which engineer them from
abstaining from doing such things. Just like cough syrup was regulated to remove alcohol abuse but, more
medicinal use.

Q.5. Write short notes on

1. Social Welfare Maximization and Social Welfare System.

Ans.

The condition of Pareto efficiency as an ideal in welfare economics is the result of this microeconomic
study. When the economy is in a Pareto efficient state, social welfare is maximised since no resources can
be transferred to make one person better off without making at least one other worse off.

Pareto efficiency, also known as Pareto optimality, is an economic state in which resources cannot be
redistributed to benefit one individual without harming at least one other. Pareto efficiency means that
resources are distributed in the most cost-effective way possible, but it does not guarantee equality or
justice. When no economic adjustments can make one person better off without making at least one other
person worse off, the economy is considered to be in a Pareto optimal state. One objective of economic
policy could be to get the economy closer to a Pareto efficient condition.

Economists have established numerous criteria to determine whether a proposed change in market
circumstances or public policy will advance the economy toward Pareto efficiency. These criteria
estimate whether the welfare gains of a change in the economy outweigh the costs.

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However, Pareto efficiency does not offer a one-size-fits-all solution for how the economy should be
structured. It is conceivable to have many Pareto efficient distributions of wealth, income, and
productivity. While moving the economy toward Pareto efficiency may improve overall social welfare, it
does not provide a clear target for how economic resources should be distributed across persons and
markets to maximise social welfare. Welfare economists have proposed a variety of social welfare
functions to accomplish this. The purpose of welfare economic study of markets and public policy is to
maximise the value of this function.

The results of this form of social welfare analysis are strongly reliant on assumptions about whether and
how utility can be added or compared between persons, as well as philosophical and ethical assumptions
about how much weight to give to various people's well-being. These allow for the incorporation of
concepts such as fairness, justice, and rights into the analysis of social welfare, but they also make
welfare economics an essentially subjective and potentially contentious field.

What Is a Social Welfare System?

Individuals and families in need are helped by a social welfare system. Individuals and families might
receive different sorts and amounts of assistance based on their country, state, or region. Important:The
benefits and qualifying restrictions that a person or family receives as part of a social welfare system vary
by state.

How a Social Welfare System Works

1. Individuals and families benefit from social welfare programmes such as health care, food stamps,
unemployment compensation, housing help, and child care assistance.

2. The advantages that an individual can receive differ by state.

3. Eligibility is evaluated by elements relating to a person's financial situation and how it connects to the
state's minimum acceptable levels.

4. The size of the family unit, present income levels, and an evaluated disability are all considerations to
consider.

Individuals and families in need are helped through the social welfare system, which includes services
like health care, food stamps, and unemployment compensation.

Benefits of Social Welfare Systems

Food, housing, child care, and medical care are all covered under the benefits available. Federal money
are distributed to the states for distribution in the case of TANF. These monies can be used for cash
assistance, giving a family the freedom to spend the money however they see fit to meet their needs and

13
commitments. Some housing advantages go beyond finding suitable and inexpensive residences and
offering financial aid with housing costs. Certain energy efficiency upgrades may be eligible for financial
help. It may also be eligible for assistance to assist with the payment of utility bills.

Disaster relief assistance, educational help, agricultural loans, and services expressly for veterans are all
part of the social welfare system.

2. The RBI Act, 1934.

Ans.

The Royal Commission on Indian Currency and Finance – commonly known as the Hilton-Young
Commission – advocated the establishment of a central bank for India in 1926, to separate the
government's control of currency and credit and to augment banking facilities across the country. The
Reserve Bank of India Act of 1934 established the institution and set in motion a chain of events that
resulted in the organization's initial activity in 1935. Since then, the Reserve Bank's mission and functions
have changed as the Indian economy and financial sector have evolved.

The Reserve Bank of India was established as a private-sector bank. The Reserve Bank of India's
headquarters were initially in Calcutta, however they were moved to Bombay later on. The Reserve Bank
of India issued its first currency notes in January 1938, in denominations of Rs.5 and Rs.10, followed by
Rs.100, Rs.1000, and Rs.10000 later that year.

With the onset of economic planning and the structural shift of the Indian economy, the Reserve Bank's
activities developed considerably. The Reserve Bank was obliged to play a proactive role in the nation-
building process as the central bank of a developing country freed from centuries of colonial dominance,
covering resource deficiencies in government plan finance and establishing key financial infrastructure.
As a "mother-of-institutions," the Reserve Bank played a crucial role in the development of India's
financial industry. The early focus was on putting in place institutional machinery to help with
development planning, whereas the reform era has been focused on developing and nurturing financial
markets. Global events (such as World War II and the collapse of the Bretton Woods system) had an
impact on the Reserve Bank's activities, but the Bank's pivotal role in India's central banking history
provided the pivotal turning moments. India's monetary policy framework has altered in tandem with
worldwide growth in the art of central banking. In fact, India was the first developing country to
implement monetary targeting in 1985. Although concerns for financial stability have remained vital in

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monetary management in India, as in other countries, the change from direct to indirect instruments of
control in the monetary framework during the 1990s was in line with worldwide trends.

The Reserve Bank has taken a participatory approach to policymaking and established a number of
institutional instruments to support it. When it comes to integrating Indian financial markets with the
global financial system, however, India has chosen to go slowly and steadily, adjusting the degree of
liberalisation to underlying macroeconomic developments, domestic financial system readiness, and
international financial market dynamics. The Reserve Bank has made a number of initiatives to improve
the supervisory and regulatory environment while also giving financial institutions the leeway to react to
rising competition and capitalise on new business opportunities provided by technological advancements.
The Reserve Bank has made conscious attempts to improve systemic efficiency while pursuing reforms
by re-orienting traditional responsibilities such as currency management and payment and settlement
system regulation.

All of these steps have strengthened India's financial sector, allowing it to adapt to shifting conditions,
and the world community's perception of India as an emerging economic powerhouse has shifted as a
result.

The Reserve Bank of India has control over everything from collecting payments on behalf of the central
government to granting licences to start banking businesses in India. It also has the power to remove a
banking company's licence.

The Reserve Bank of India (RBI) has played a critical role in the nation-building process, particularly in
the growth of the financial sector, while fulfilling its constitutional responsibilities. In reality, institution
formation is a unique component of central banking in India.

To investigate the Reserve Bank of India Act, 1934, and its impact on India's banking system.

The RBI is critical to the banking industry, as well as the economy's growth and development. The RBI is
in charge of everything from currency issue regulations to monetary stability and maintenance. The
central bank utilises quantitative and qualitative methods such as bank rate policy, open market
operations, SLR, CRR, margin restrictions, credit rationing, and so on to perform its credit management
mission. It serves as a parent to all commercial banks and banking institutions operating inside India's
borders.

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