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There are three types of economic systems.
It is that profit-oriented system where profitthe factors of production are privately owned.
USA, Spain, England, Sweden, South Korea all have capitalist economy
is characterized by: Private ownership of means of production Production for the market Price mechanism Labour power as a commodity . 2. It 1. 4. 3.
8. 5. Exploitation of labour Growing wealth of capitalists Emergence of the working class Class contradiction 6. . 7.Continued .
Socialism Here there is social ownership of factors of production and objective of economy is to maximize social benefit rather than private benefit. It was 1st established in Russia. Gradually countries of Europe. . China adopted the socialist system.
It is characterized by 1. 3. 5. Social ownership of means of production Predominance of public sector Decisive role of planning Production guided by social benefit Abolition of exploitation of labour . 2. 4.
Mixed economy 1. It is an economic system where elements of both capitalism as well as socialism are found. It is characterized by: Private and state ownership of means of production Decisive role of market mechanism and supportive role of planning . 2.
Intervention role of the state Public sector activities guided by social benefit.Continued . . Supportive role of economic planning 4. 3. 5.
Comparing economic systems Capitalism Private ownership of means of production Socialism State ownership of means of production Mixed economy Private and state ownership of means of production Co-existence of private and public sectors Decisive role of market and supportive role of planning Profit induced private business Production in the state sector guided by social benefit Intervention role of the state Predominance of private sector Decisive role of market Predominance of public sector Decisive role of planning Profit induced business Exploitation of labour Profit guided by social benefit Abolition of exploitation of labour Dominant role of the state Restricted role of the government .
Economic factors .
Nature of economic environment Business is dependent on economic environment for inputs Business is dependent on economic environment for selling its finished goods are supplying macro economic forecasts to various industrial establishments Economists .
Factors affecting business Growth strategy Economic systems Economic planning Industry Agriculture Infrastructure Removal of regional imbalances Price and distribution controls Human resources Per capita and national income .
Growth strategy Growth strategy of India was based on Soviet model owned and invested capital and mobilized savings State Private sector activities had to be strictly regulated and controlled trade had a relatively smaller role Foreign .
Continued . It was thought that labour force in developing countries could only be absorbed in industry and hence agriculture was neglected. .
.Economic systems The concept of welfare state has become popular which is a modification of capitalism that provides for state intervention when certain deficiencies occur.
2. 3.India s economic philosophy Mixed economy has been chosen under which we have three parts: Sectors in which Both production and distribution are managed and controlled by the State State and private enterprise jointly participate in production and distribution Private enterprise has complete access subject to general state regulation 1. .
Economic planning The public sector will have to operate according to certain priorities to realize specific social and economic goals. Objectives of 5-year plans 5 1. 2. Close watch is kept on private sectors operations. Increase production to have greater NI Achieve full employment .
Thailand and Indonesia etc. labour market rigidities held the country behind. India was ahead of South Korea. During 1960s. Although services sector is India s strength it has not grown in double digits in last 9 years . tariffs and quotas. Malaysia. Industry But administrative controls like product reservation for public sector and small scale industries. Taiwan.
Industrial sector should overtake services sector. To improve industrial performance Indian firms must come out of the locallocalmarket enough mindset and think in global terms SEZs should be encouraged 1.Continued . 2. if India were to attain 8% growth in GDP. .
Continued . Indian labour laws need to be reformed and made flexible and industry friendly Skill development of workers should be given additional attention .
High capital-output ratio capital . Deficiency in investment 2. Primary reason for low growth in NI is 1.National income and Per Capita Income Aggregate flow of goods and services during a time period by the factors of production is known as national income or national product. A high growth rate indicates that the economy is a developed one.
. 3.Continued . Low agricultural growth Low industrial growth Population explosion 4. 5.
People together constitute one of the factors of production. of economic prosperity depends on the quality of its people Degree .Human resource People provide market for goods produced and services rendered.
spices. Major Agricultural exports mainly are tea. 2006source of livelihood-more than 70% of livelihoodworking population engaged in agriculture. fruits. sugar etc.Agriculture Contribution of agriculture to GDP has come down from 57% in 1950 to 18% in 2006-07. . oil. cotton. vegetables. cocoa. coffee. tobacco.
Continued . 3. Product contribution Market contribution Factor contribution Foreign exchange contribution . 2. Industrial production precedes economic growth and agriculture precedes industrial growth through 1. 4.
transport and communication. .Infrastructure Distinguishing Public features Goods Externalities Monopolies Public sector It includes energy.
80.084 mn units during 1995-96. India has one of the largest road networks in the world 3.000 trains everyday to transport 13 mn passengers and 1. IR contributes 1% to the GDP and employs 1.Growth of Infrastructure Power generation in 2003-04 stood at 5. 1995Indian Railways runs about 14.6 mn people.3 mn km.3 mn tones of freight.32.430 2003mn units from 3. .
92 mn in 2004 Internet There are about 189 Internet service providers operating across India. The subscriber base in telecommunications segment grew from 41.Continued . .84 mn in 2004. subscriber base has increased from 3.32 mn in 2003 to 4.48 mn in 2003 to 42.
It means widespread diffusion of industries to backward areas so far as it is economically feasible.Balanced Regional Development It means the fullest development of the potentialities of an area according to its capacity so that the benefits of overall economic growth are shared by the inhabitants of all the regions. .
.Causes for backwardness and regional imbalances British developed some regions at the cost of others. Richness of factor endowments of a region is also a cause for regional imbalances. Political factors also contribute to regional imbalances. Financial institutions prefer borrowers from developed regions.
Continued . Fiscal policy by favoring high income areas for public investment and spending . particularly technical education. Disparity among different states in the provision of educational and training facilities.
Measures to remove regional imbalances Financial support to backward regions Special are development programmes Dispersal of industries Growth centers Banking policy Increasing Government expenditure .
3. 2.Price and distribution controls 1. 4. Objectives Supply of essential commodities at reasonable prices Prevention of hoarding and blackblackmarketing Maintain quality of goods and services Prevent monopoly and unfair trade practices .
Continued . . Ensure supply of inputs to priority sectors Ensure price stability Ensure minimum returns to producers 6. 5. 7.
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