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School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI 110 068
1. a) Explain the reasons why a business manager be concerned with business environment?

A business organization cannot exist in a vacuum. It needs living persons, natural resources and places and things to exist. The
sum of all these factors and forces is called the business environment.

The success of every business depends on adapting itself to the environment within which it functions. For example, ------------
----------------------------------------------------------------------------------------------- policies. Similarly, a change in the
technology may render the existing products obsolete, as we have seen that the introduction of computer has replaced the
typewriters; the colour television has made the black and -------------------------------------------------------------------------
-------------------------------------------------------------------------------, e.g., the demand for jeans reduced the sale of
other traditional wear. All these aspects are external factors ----------------------------------------------------------------------
----------------------------------------------------------------------------------. Hence, it is very necessary to have a clear
understanding of the concept of business environment and the nature of its various components.
The term business environment connotes external forces, factors ----------------------------------------------------------------
----------------------------------------------------------------------competitors, suppliers, government, and the social, political,
legal and technological factors etc. While some of these factors or forces may have direct influence over the business firm, others
may operate indirectly. Thus, business environment may be defined --------------------------------------------------------------
------------------------------------------------------------------------------------------factors, such as economic factors, social
factors, political and legal factors, demographic factors, and technical factors etc., which are uncontrollable in nature and affects
the business decisions of a firm.

It is important for managers to understand this aspect of the business environment because it can affect their firm and how it
should be run. No business is insulated from the outside environment. Things like political decisions, for example, can have a ----
----------------------------------------------------------------------------- example, the managers must be aware of things like new
competitors entering -------------------------------------------------------------------------------------------------------------
------------------------------------------- own firm, they may well be caught unaware and unready for changes that affect their
firms.

It is important for managers ----------------------------------------------------------------------- as discussed below:

1. To ------------------------------------------------------------- their business

Managers must be aware of, and understand, the ---------------------------------------------------------------------------------
-----------------------------------------------------------------------for ways to increase their respective businesses' market
share. Knowledge of what the competition is doing in terms of -------------------------------------------------------------------
-------------------------------------------------------policies in place to compete with their competition. Consequently, they are
protecting their market share as best they can and even working to increase their market share by trying to stay one step ahead of
their competition.

2. To understand how government regulations affect their business

Laws of the land affect businesses and managers must be aware of how these laws affect their operations. An example of this is
the increasing environmental -----------------------------------------------------------------------------------------------------
---------------------------------------------------of these laws and regulations in the workplace. Furthermore, businesses must
understand how government regulations affect their bottom line -------------------------------------------------------------------------------
----------------------------------------------- procedures required to adhere to government laws and regulations.

3. To ----------------------------------------------------------------- their operations

Managers must be aware of technological ----------------------------------------------------------------------------------------
----------------------------------------------------------------all the technological innovations out there. In essence, any
technology that can reduce costs and increase production and efficiency should be seriously considered. However, changing to a
new technology just because it is the ---------------------------------------------------------------------------------------------
-----------------------------------------------------------Everything new when it comes to technology is not for every business
and managers must do a "cost-benefit' analysis before putting out money for any new technology.

4. To understand -------------------------------------------- affect their business

Managers must follow the news more so than ever as worldwide turmoil, with tensions and sanctions abounding are able to
directly and indirectly affect their operations. A perfect example is the -----------------------------------------------------------
---------------------------------------------------------------------------------------------that require capital and that are on the
major markets must understand how geopolitical concerns affect investors, who may shy away from investing in a business that is
at the whim of geopolitical turmoil. A current perfect example of this ------------------------------------------------------------
--------------------------------------------------------------------------------------------and stabilize. Some investors are
shying away from investing in the oil patch presently.

5. To ------------------------------------------------ force
Managers must understand what skilled ------------------------------------------------------------------------------------------
--------------------------------------------------------------so they can attract first-rate candidates to their enterprises. Managers
must be aware of college and university programs that are training suitable -------------------------------------------------------
-------------------------------------------------------------------------------------------------have an edge when it comes to
knowledgeable and business savvy employees.

Example-

The same solar business can use --------------------------------------------------------------------------------------------------

------------------------------------------------------to achieve a social purpose, such as reducing carbon emissions, and then try
to minimize its tax obligations. It is also important, as described by Pacific Gas and Electric (PG&E) CEO Peter Darbee
previously, that the focus of ------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------in a free market economy.
Sustainable businesses, such as the companies presented in the case studysuch as ----------------------------------------------
----------------------------------------------------------------------------------------------------------and also tend to
recognize that government policies and programs are often necessary to help them achieve their objectives and therefore are
inclined to try to work with and even partner with --------------------------------------------------------------------------------
------------------------------------------------------------------------purpose are both strongly influenced by government
policies, and it is always important for sustainable businesses to manage their relationships with government (local, state, national,
and international) effectively.

Businesses also use campaign contributions to support ---------------------------------------------------------------------------

-----------------------------------------------------------------------------. Their access to funds for lobbying and campaign
contributions gives them a significant voice in the political system and on policies that can impact sustainable businesses.

b) Discuss how non-economic environment affects business decisions giving examples.

Non-economic environment comprises social, ------------------------------------------------------------------------------------

--------------------------------------------------------------------is likely to have a far-reaching impact on their operations. The
various elements of non-economic environment affects business decisions in following ways:

1. Political -----------------------------:-

In modern times, politico-legal ---------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
--------------------------------play useful role in shaping, directing, developing and controlling business activities.
For Example- You may be aware that Coca-Cola, a -----------------------------------------------------------------------------
---------------------------------------------------------------------------. Most of the labour unions in India are affiliated to
various political parties. Strikes, lockouts and labour disputes etc. also ------------------------------------------------------------
--------------------------------------------------------------------------------------------and started contributing positively to
the success of the business organization and its operations through workers participation in management.

The legislature take decision on a particular course of ----------------------------------------------------------------------------

----------------------------------------------------------------------------in all the activities of legislature and executive.
Maintenance of political stability is an -------------------------------------------------------------------------------------------
-------------------------------------------------------------political instability prevailing in those countries.

The legal environment of business constitutes legislations related to property and business organisations, laws of contracts,
bankruptcy, mutual obligations of labour -----------------------------------------------------------------------------------------
---------------------------------------------------------------. MRTP and FERA Act are restrictive in nature.

However, some stringent provisions of FERA has been replaced by FEMA. Thus politico-legal environment is quite important for
maintaining a sound and meaningful business environment.

2. Demographic ---------------------------:

Demographic environment is also an important constituent of business environment. Accordingly, demographic factors like, rise
and growth rate of population, age and sex composition of population, rural urban distribution of population, educational levels,
religion, ethnicity, caste, language etc. are all relevant to business conditions.

For example a country where ----------------------------------------------------------------------------------------------------

----------------------------------------------------of cities and towns are different than the people of rural areas. The high rise of
population indicates the easy availability of labour. These encourage the business enterprises to use labour intensive techniques of
production. Moreover, availability of ---------------------------------------------------------------------------------------------
-----------------------------------------------------------, Germany, UK, are coming to India due to easy availability of skilled
manpower. Thus, a firm that keeps a watch on the changes on the demographic front and reads them accurately will find
opportunities knocking at its doorsteps.

Size of population, growth rate of population, age-composition etc. influences the demand pattern for various goods. Again, large
labour force and rapid growth of labour supply affect the choice of techniques. Considering the labour supply position and the rate
of wages, technologies of business is being finalized.

In a labour surplus economy, labour intensive ------------------------------------------------------------------------------------

--------------------------------------------------------------------quite complex.
3. Socio-Cultural -------------------------------:

Socio-cultural environment is another --------------------------------------------------------------------------------------------

------------------------------------------------------------, religion and education and the social responsibilities of business. All
the business firms usually operate in a definite socio-cultural environment and they have to formulate their business policies
considering this factor.

The social structure and the values that a society cherishes have a considerable influence on the functioning of business firms. For
example, during festive ----------------------------------------------------------------------------------------------------------
----------------------------------------------of the products. Due to change in family composition, more nuclear families with
single child concepts have come up. This increases the demand for the different types of household goods. It may be noted that the
consumption patterns, the dressing and living styles of people belonging to different social structures and culture vary
significantly.

As the culture of a society lasts for a long period ---------------------------------------------------------------------------------

-----------------------------------------------------------------------. While advertising their products the business firms have
to give due weightage to the attitudes of the people, which may be liberal or conservative.

SOCIAL FACTORS WHICH IMPACT PEPSICO

Analysis shows that social factors impact the beverage company greatly. The key reason behind this is perhaps that Pepsi is a non-
alcoholic beverage. It has to maintain the strict differences in cultures around the world.

It is essential that Pepsi ----------------------------------------------------------------------------------------------------------

----------------------------------------------together. The social implications are visible in marketing campaigns most of the
time.
For example, the religious festivals featured in TVC -----------------------------------------------------------------------------
---------------------------------------------------------------------------upon the opportunity.

4. Technological Environment:

Technological environment is an -------------------------------------------------------------------------------------------------

-------------------------------------------------------, The technology available to a particular country is all those techniques it
knows about (or may with not too much difficulty obtain knowledge about) and could acquire, while the technology in use is that
subset of techniques it has acquired.

The varying technological environments of different countries affect the designing of products. For example, in USA and many
other countries electrical ---------------------------------------------------------------------------------------------------------
-----------------------------------------------. Hence, in order to survive and grow in the market, a business has to adopt the
technological changes from time to time.

Thus it is quite important for a ---------------------------------------------------------------------------------------------------

-----------------------------------------------------changes for its adoption in their business activities.

5. Natural Environment:

Natural environment also influences a --------------------------------------------------------------------------------------------

------------------------------------------------------------the establishment and maintenance of industrial activity.

In earlier times, the effects of industrial a -----------------------------------------------------------------------------------------

---------------------------------------------------------------, viz., minerals and forest resources but also contaminated water
and polluted air to a considerable extent. All these have created a serious environmental damage.

Business is greatly influenced by the nature of natural environment. For example, a ----------------------------------------------
----------------------------------------------------------------------------------------------------------near the sources of
input. Further, governments policies to maintain ecological balance, conservation of natural resources etc. put additional
responsibility on the business sector.

Moreover, suitable natural environment is also an a ------------------------------------------------------------------------------

--------------------------------------------------------------------------includes suitable climate, balanced weather, suitable
natural environment, i.e., free from flood and draught etc. Moreover, the maintenance of eco-friendly atmosphere is also quite
important for the promotion of developmental activities in an economy.

2. What are the major factors of widespread sickness among the SSI units? How can sickness be
identified? Suggest measures to enhance economic viability of the segment.

The Small Scale Industrial sector is one of a --------------------------------------------------------------------------------------

------------------------------------------------------------------. With the advent of planned economy from 1951 and the
subsequent industrial policy followed by Government of India, both planners and Government earmarked a special role for small-
scale industries and medium scale industries in the Indian economy.

A developing economy like India cannot afford the growing a --------------------------------------------------------------------

------------------------------------------------------------------------------------, the industrial sickness becomes all the more
an alarming problem. Industrial sickness usually refers to a situation when an industrial firm performs poorly, incurs losses for
several years and often defaults in its debt repayment obligations.
The FICCI study entitled Industrial Sickness a -------------------------------------------------------------------------------
-------------------------------------------------------------------------policies on pricing, duties, taxes, high interest rates, taxes
on profit, slackness in demand, sluggishness in export markets, high labour cost, inadequate availability of inputs, lack of
infrastructure and the like.

The internal factors which contribute to a ----------------------------------------------------------------------------------------

----------------------------------------------------------------and internal factors in some detail.

External Factors:

The following are -------------------------------- sickness in India:

(i) General -------------------------------- Trend:

Sometimes a general depression hits industrial units. a ----------------------------------------------------------------------------
----------------------------------------------------------------------------projects. Improper demand estimation for the products
to project lands the industrial units in difficulties.

(ii) High Prices of Inputs:

When the costs of manufacture are high and sales a -------------------------------------------------------------------------------
-------------------------------------------------------------------------crisis goes up whereas the competitive forces keep down
the prices of the products.

(iii) ---------------------- of Raw Materials:

When the supplies of raw materials are -------------------------------------------------------------------------------------------------------------
----------------- to be in trouble. This often occurs in case of supply of imported raw materials.

(iv) Changes in Government Policies:

The industrial sickness is also caused by certain a --------------------------------------------------------------------------------
------------------------------------------------------------------------Government policies regarding imports, industrial
licensing, taxation can make viable units sick. For example, liberal import policy since 1991 has rendered many small-scale
industrial units sick.

(v) Infrastructure Bottlenecks:

Often the infrastructure difficulty is responsible for industrial sickness. No industrial unit can survive prolonged transport and
power bottlenecks.

Internal Factors:
The following ----------------------------------------------------------------------- for industrial sickness:

(i) Project --------------------------------------------Deficiencies:

The industrial unit becomes sick ------------------------------------------------------------ and technical viabilities of the project.

(ii) Industrial ------------------------------------------------ Motivation:

When there is labour discontent, no a ---------------------------------------------------------------------------------------------
-----------------------------------------------------------of several industrial units.

(iii) Wrong ---------------------------------------------:

If the promoters use wrong technology, results are bound to be unsatisfactory. Many industrial units, especially in the small-scale
sector, do not seek professional a -------------------------------------------------------------------------------------------------
-------------------------------------------------------losses and become sick and non-viable.

(iv) ------------------------------ Problems:

The industrial unit --------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------- sick when its product-mix is not attuned to the consumers demand.
(v) Wrong Location:
If the location of ----------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------- of inputs, it is bound to experience insurmountable difficulties.

(vi) ------------------------------ Finance:

Inadequate -----------------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------- to grief. It will not be able to withstand operational losses.

(vii) ---------------------------------------------- Structure:

If capital structure proves to be a -------------------------------------------------------------------------------------------------
-------------------------------------------------------for the unit concerned.

(viii) Management Deficiencies:

The biggest cause of industrial a -------------------------------------------------------------------------------------------------
-------------------------------------------------------cause of industrial sickness. Inefficient management results in inability to
perceive things in proper perspective devoid a ------------------------------------------------------------------------------------
--------------------------------------------------------------------and high-handed decisions.

(ix) Voluntary Sickness:

There is some sickness a ---------------------------------------------------------------------------------------------------------
-----------------------------------------------, or simple cause but may be the result of a combination of number of allied causes.

An analysis of 637 large-scale units a --------------------------------------------------------------------------------------------

------------------------------------------------------------recession and environmental factors came second with 23 per cent.

The other causes were technical a ------------------------------------------------------------------------------------------------

-------------------------------------------------------- crores were put under the nursing programme.

How can ------------------------------------ identified

According to the Development --------------------------------------------------------------- becomes sick if its:

(a) Capacity utilization is less ---------------------------------------------------------------- years (incipient sickness),

(b) Net ----------------------------------------------------------- per cent; and

(c) The unit has --------------------------------------------------------- six months.

On the basis of the above definitions of a sick industrial unit, it emerges that the symptoms of the sickness of an industrial unit
manifest themselves in the form of a ---------------------------------------------------------------------------------------------
-----------------------------------------------------------of the unit upon frequent infusion of funds.

Suggestions for ------------------------------------------------------- Units:

The rehabilitation of sick units or restoring --------------------------------------------------------------------------------------------------------

----------------------------------------- serious social, economic and political consequences of industrial illness.

The following measures ---------------------------------------------------:

(i) Cooperation ----------------------------------------------------------------------------- Banks:

Since commercial banks provide a -----------------------------------------------------------------------------------------------
---------------------------------------------------------for rescue operations.

(ii) Coordination --------------------------------------------------------------- Agencies:

All government agencies, ------------------------------------------------------------------------ sick units to health.

(iii) Full cooperation from ---------------------------------------------------------------------------------- from the employees, is also

essential to take the concern out of the difficulties in which it is involved.

(iv) Willing ---------------------------------------------------------------------- Project Promoters:

Generally there is a lack of trust and confidence a --------------------------------------------------------------------------------
------------------------------------------------to recover them instead of curing of the health of the sick units.

(v) Checking -----------------------------------------------------------:

The banks should verify on a regular basis the valuation of inventories -----------------------------------------------------------------------
--- prevent over-borrowing on the hypothecation of inventories.

(vi) -----------------------------------------------------------------:
There should be well ------------------------------------------------------------------------------------------------ will be a leap in the dark.
Good marketing arrangements will prevent industrial sickness.

(vii) Recovery --------------------------------------:

Every effort should be ----------------------------------------------------------------------------------------- funds to avoid sickness.

(viii) ---------------------------------------- of Machinery:

If the sick unit is to be ------------------------------------------------------------------------------------ be discarded at the earliest.

(ix) Improving ----------------------------------------:

Restrictive -------------------------------------------------------------------------- will go a long way in curing industrial sickness.

(x) Efficient ---------------------------------------:

If necessary a --------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------, courage and ability to steer in bad weather.

(xi) Performance --------------------------------:

It is necessary to offer ---------------------------------------------------------------------------------------------------------------------------------
--------------------- efforts. This will be quite helpful in curing industrial sickness.

(xii) Sympathetic ----------------------------------------------------- Attitude:

During periods of industrial a ----------------------------------------------------------------------------------------------------
----------------------------------------------------a solution instead.

(xiii) Austerity and Economy:

Austerity and disciplines should a ------------------------------------------------------------------------------------------------
--------------------------------------------------------, unnecessary personal expenses should be ruthlessly cut down.

3. Examine the progress of Indian economy towards globalization in the post reform years. Comment on
the slow pace of progress of globalization and identify the major reasons.

Economic growth usually refers to quantitative rise in National Income and Per Capita Income of an economy during a period of
time. To understand economic growth in India, a ---------------------------------------------------------------------------------
-----------------------------------------------------------------------when it achieved independence in 1947. Even though India
has started the process of economic development under the Five Year Plans, it continued to face many problems. The major
issues, which India has to deal with a ---------------------------------------------------------------------------------------------
-----------------------------------------------------------, industry and so on.
During the period 1950-51 and 1999-2000, a -------------------------------------------------------------------------------------
-------------------------------------------------------------------respectively, while per capita NNP growth rate was only 1.71
per cent. The per capita NNP at constant (1993-94) prices (real per capita income) increased from Rs. 3687 in 1950-51 to Rs.
10306 in 2000-01. Thus during the 41 years period, the per capita income more than doubled itself approximately.

The economic development in India followed a ---------------------------------------------------------------------------------

----------------------------------------------------------------------- around 1% annualized rate in the three decades after its
independence. Since the mid-1980s, India has a ----------------------------------------------------------------------------------
----------------------------------------------------------------------towards a free market economy.

In the late 2000s, India's growth reached 7.5%, a ---------------------------------------------------------------------------------

-----------------------------------------------------------------------average annual growth rates (2007-12)
for Uttarakhand (13.66%), Bihar (10.15%) a -------------------------------------------------------------------------------------
-------------------------------------------------------------------India is the seventh-largest economy in the world and the third
largest by purchasing power parity adjusted exchange rates (PPP). On per capita basis, it ranks 140th in the world or 129th by
PPP.

The economic growth has been driven by the a -----------------------------------------------------------------------------------

---------------------------------------------------------------------one and that the country may be able to skip the
intermediate industrialisation-led phase in the transformation of its economic structure. Serious concerns have been raised about
the jobless nature of the economic growth.

The advocates of the reforms process claim a a -----------------------------------------------------------------------------------

---------------------------------------------------------------------all political parties that the reforms are a historical necessity
and it would not be possible to reverse the reform process. Even the left parties, after the collapse of Soviet Union, have veered
round the view that reforms in the form of liberalisation a ------------------------------------------------------------------------
--------------------------------------------------------------------------------the growth, the benefits of the growth have not
percolated to poor and weaker section of the society.

It would, therefore, be desirable to a ----------------------------------------------------------------------------------------------

----------------------------------------------------------the social justice. The Common Minimum Programme of the Congress-
led united front in 2004-05 resolved to restrict privatization only to the loss making enterprises. There would be no further
shedding of public sector enterprises that are being a -----------------------------------------------------------------------------
---------------------------------------------------------------------------was converted to one department in the Ministry of
Finance with the Union Government.

Higher Growth Rate achieved: The average a ----------------------------------------------------------------------------------

----------------------------------------------------------------------4 per cent growth rate of per capita GDP. This is an
achievement, which has not been witnessed earlier during the last 50 years of planning.

Control of Inflation: The first four years of the 1990s a -------------------------------------------------------------------------

-------------------------------------------------------------------------------of the rupee, periodical increases in administered
prices (especially in official procurement and issue prices of food grains), weather conditions, shortages of some commodities of
common consumption, and large money creation due to a ------------------------------------------------------------------------
--------------------------------------------------------------------------------. However, from 1995-96 onwards, there has been
a continuous deceleration and the average inflation for the period 1996-97 to 2000-01 is by far the lowest since the mid-1950s in
terms of the 52-week average. The point-to-point average a ----------------------------------------------------------------------
----------------------------------------------------------------------------------, on the demand side, there has been a
monetization of the budgetary deficits by the Reserve Bank of India (RBI) had accounted for a predominant part of reserve money
creation and the resultant growth, often excessive, in money supply. Since 1996-97, monetization of the budget deficit has
declined sharply.

During 1993 and 1994, primary liquidity was created a ---------------------------------------------------------------------------

-----------------------------------------------------------------------------economies, the impact of the Mexican crisis and the
steps taken by the government of India to regulate the recourse of Indian industry to foreign financial markets, these inflows
moderated. As governments borrowing is still very a ----------------------------------------------------------------------------
----------------------------------------------------------------------------authorities who would like to restrain money growth
to keep inflation under check. However, as pressures for reserve money creation come down, the RBI should be in a better
position to balance the objectives of economic growth and a ----------------------------------------------------------------------
----------------------------------------------------------------------------------would be facilitated by large food stocks of 58
million tonnes as of January 2002 and high foreign exchange reserves of US$119bn as at the beginning of June 2004.

On the whole the reforms of PSUs, including a -----------------------------------------------------------------------------------

---------------------------------------------------------------------so raised are being used to reduce the budget deficit, rather
than strengthening the PSUs. Along with this, labour a ---------------------------------------------------------------------------
-----------------------------------------------------------------------------would be advisable to reform it.

The reforms process especially its emphasis on a ---------------------------------------------------------------------------------

-----------------------------------------------------------------------fixed investment rose to 16.8 per cent of GDP in 1997-98
from 10.7 percent in 1980-81 and 12.71 percent in 1990-91. India, for the first time, was one of the top ten emerging market
destinations for FDI (excluding developed countries). a --------------------------------------------------------------------------
------------------------------------------------------------------------------. If adjustment is made for the contribution of Non-
resident Indians in FDI to the tune of 10.4 per cent; a -----------------------------------------------------------------------------
---------------------------------------------------------------------------and can take flight in a period of political uncertainty.

Moreover, critics point out that nearly 39 per cent a ------------------------------------------------------------------------------

--------------------------------------------------------------------------goods like, colas, jams, potato chips, wafers, ice creams,
etc. only displaces Indian labour and capital employed in the a -------------------------------------------------------------------
-------------------------------------------------------------------------------------, point out that while foreign investment and
technology are needed, the government should be more selective by obtaining these for the capital goods and infrastructure sectors
so that they enhance both the capacity and capability of the Indian economy.

Globalization and ----------------------------------------------- Economy:

Developments and Challenges Globalization (a -----------------------------------------------------------------------------------
---------------------------------------------------------------------, transportation, and trade. The term is sometimes used to
refer specifically to economic globalization: the a --------------------------------------------------------------------------------
------------------------------------------------------------------------of technology.

Globalization as a spatial integration a -------------------------------------------------------------------------------------------

-------------------------------------------------------------in such a way that local happenings are shaped by events occurring
many miles away and vice versa. Globalization a ------------------------------------------------------------------------------
--------------------------------------------------------------------------overall growth of the economy. It also heralded the
integration of the Indian economy into the global economy. The Indian economy was in major crisis in 1991 when foreign
currency reserves went down to $1 billion. a -------------------------------------------------------------------------------------
-------------------------------------------------------------------and Globalization launched by the then Finance Minister Man
Mohan Singh that India saw its development in various sectors.

Advent of --------------------------------- Policy

After suffering a huge financial and economic crisis Dr. Man Mohan Singh brought a new policy which is known as
Liberalization, Privatization and Globalization Policy (LPG Policy) also known as New Economic Policy,1991 as it was a
measure to come out of the ------------------------------------------------------------------------------ and globalize the economy:
1. Devaluation: To -------------------------------------------------------------------------------- by 18 to 19%.
2. Disinvestment: To make the LPG model smooth ---------------------------------------------------- sector.
3. Allowing Foreign Direct Investment (FDI): FDI was allowed in -------------------------------- defense industries (26%) etc.
4. NRI Scheme: The --------------------------------------------------------------------------------------- given to NRI's.

The New Economic Policy (NEP-1991) a ----------------------------------------------------------------------------------------

---------------------------------------------------------------- (i) liberalization (internal and external), (ii) extending
privatization, (iii) redirecting scarce Public Sector Resources to Areas where the private sector is unlikely to enter, (iv)
globalization of economy, and (v) market friendly state.

Consequences ---------------------------------------:
The implications of a -------------------------------------------------------------------------------------------------------------
-------------------------------------------in goods and services and in movement of capital. As a result domestic economic
developments are not determined entirely by a -----------------------------------------------------------------------------------
---------------------------------------------------------------------economy, while formulating and evaluating its domestic
policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This
constrained the policy option available to the a -----------------------------------------------------------------------------------
---------------------------------------------------------------------on various sector of Indian Economy.
.

Conclusion-
Economic Reforms were introduced by a -----------------------------------------------------------------------------------------
---------------------------------------------------------------. Some measures of delicensing, raising the MRTP limit from Rs.
20 crores to Rs. 100 crores, broad-banding scheme etc., were taken, but the government did not take a categorical position on
issues relating to privatisation and globalisation.

A sharp departure from the Industrial Policy of a ---------------------------------------------------------------------------------

-----------------------------------------------------------------------. The main aim of liberalisation was to dismantle excessive
regulatory framework and bureaucratic controls that acted as shackles on freedom of enterprise.

The ceiling on assets fixed under MRTP a ----------------------------------------------------------------------------------------

----------------------------------------------------------------a view to introduce competition. The number of items requiring
licensing was reduced to a short list of bare 4 industries. This freed the private sector to set up industrial units quickly.

Commission in the place of a -----------------------------------------------------------------------------------------------------

---------------------------------------------------the government.

Globalisation ---------------------------------------------------------- to globalisation are:

(i) trade flows. (ii) capital flows, (iii) a -------------------------------------------------------------------------------------------

-------------------------------------------------------------will remain incomplete.

Measures ------------------------------------- in India include:

(i) Reduction ------------------------------------------------
(ii) Encouragement -------------------------------------------- through
a) Grant of automatic a -----------------------------------------------------------------------------------------------------------
---------------------------------------------per cent foreign equity would be cleared automatically).
b) Majority foreign -------------------------------------------------------------- in trading companies.

(iii) Encouragement of ------------------------------------------------------- in foreign exchange.

Liberalisation, globalisation and privatisation are intended to achieve certain long-term goals of society. These goals are: (i) higher
growth of national and per capita income, (ii) full employment, (iii) self-reliance, (iv) reduction of inequalities of income and
wealth, (v) reduction of ----------------------------------------------------------------------- based on growth with social justice.

4. a) What are the major problems of fiscal policy? Describe.

In economics and political science, fiscal policy is a ------------------------------------------------------------------------------

--------------------------------------------------------------------------the government changes the levels of taxation and
government spending, it influences ------------------------------------------------------------------------------------------------------------------
----------------- attempts to stabilize the economy over the course of the business cycle.
Some of the -------------------------------------------- as follows:

Although fiscal policy gained ------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------- application has a number of problems or limitations.

In view of such a --------------------------------------------------------------- which are associated with a fiscal policy.

They are:

1. ----------------------------------------:
During the recent times, there is not a --------------------------------------------------------------------------------------------
------------------------------------------------------------. Unless the variations in taxes and public expenditure are neatly
timed, the desired counter-cyclical effects can not be realized.

There is generally some interval between the a -----------------------------------------------------------------------------------

---------------------------------------------------------------------measure can be effective. This time interval comprises of
three types of lags-recognition lag, administrative lag and operational lag.

() ------------------------------------- Lag:
This is the interval between the time when a --------------------------------------------------------------------------------------
------------------------------------------------------------------. Such a lag has a duration of 3 months. It can be reduced if the
forecasting is satisfactory.

(b) ------------------------------ Lag:

This is the interval between the time when a --------------------------------------------------------------------------------------
------------------------------------------------------------------recognized, the sanction from legislature and executive must
take some time and that may involve about 1 to 15 months of time.

In order to reduce such a lag a ----------------------------------------------------------------------------------------------------

----------------------------------------------------determine the inside lag of the fiscal policy and its length, according to Willes,
is 4 to 18 months.

(c) Operational Lag:

The time interval between when action is a ---------------------------------------------------------------------------------------
-----------------------------------------------------------------income taxes produce significant changes in disposable money
income and consumption within a month or two; changes in the corporate a ------------------------------------------------------
--------------------------------------------------------------------------------------------------a short duration of 1 to 3 months
only. J.G. Ranlett, however, considers that these estimates need modification.

On the basis of U.S. income tax data of a -----------------------------------------------------------------------------------------

---------------------------------------------------------------lag of fiscal policy is much lower than that of the monetary policy.
2. --------------------------------:
Another most serious limitation of a ----------------------------------------------------------------------------------------------
----------------------------------------------------------of expenditure to be incurred or the nature and extent of budget balance
to be framed cannot be suitably planned. In fact, success of fiscal measures depends on the accurate predictions of various
economic activities. In its absence, it proves to be a little bit erratic.
3. Correct ---------------------------------- Policy:
The most important necessity on which a -----------------------------------------------------------------------------------------
---------------------------------------------------------------timing of its application on the other. It is, however, too much to
expect that the government would be able to a -----------------------------------------------execution-time of fiscal policy.

4. Fiscal -----------------------------:
When monetary policy is general in nature and impersonal in impact, the fiscal policy, in contrast, is selective. The former permits
the market mechanism to operate smoothly. a ------------------------------------------------------------------------------------
--------------------------------------------------------------------upon ones value judgements. A particular set of fiscal
measures may have an excessively harsh impact upon certain sectors, while leaving others almost unaffected.
5. Inadequacy -------------------------- Measures:
In anti-depression fiscal policy, the expansion of a -------------------------------------------------------------------------------
-------------------------------------------------------------------------results or not. In case the injections or withdrawals from
the circular flow are more or less than what are required, the system will fail to move in the desired direction. This results in
exaggeration of instability in the economy.

6. Adverse ------------------------------------ of Income:

It is felt that fiscal policy measures redistribute income, a ------------------------------------------------------------------------
--------------------------------------------------------------------------------. But the fiscal action will be contractionary if
larger part of the additional income goes to people having higher marginal propensity to save.

7. ----------------------------- Effect:
The compensatory fiscal policies of the government may a -----------------------------------------------------------------------
---------------------------------------------------------------------------------of the government in economic activity at the
onset of recession strengthens the pessimistic expectations of the private entrepreneurs. The expansion of public spending may be
associated with a curtailment of private spending. Consequently, the fiscal measures may be self-offsetting.

8. Reduction --------------------------------- Income:

Balanced budget multiplier as a fiscal a ------------------------------------------------------------------------------------------
--------------------------------------------------------------of the taxpayers. In case it becomes smaller than the taxpayers, the
fiscal programmes under balanced budget will bring about reduction in the national income.

9. Solution for ---------------------:

The purpose of fiscal policy will be a ---------------------------------------------------------------------------------------------
-----------------------------------------------------------the tax measures are stringent and too high, they will certainly affect
the incentive to work. This is an important limitation of fiscal policy.

10. ---------------------------------- Management:

The use of fiscal instruments during unemployment and depression is often associated with the subsequent problem of debt
management. Because deficit a ---------------------------------------------------------------------------------------------------
-----------------------------------------------------of debt repayment and debt management.

11. Adverse ----------------------------------Reaction:

Large deficit ---------------------------------------------------------------------------------------------------------------------------------------------
-------------------------------. Rumours of government bankruptcy discourage investors and often flight of capital takes place.

12. Hardships in --------------:

The creation of additional a ------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------the largest part of their economy where marginal propensity to
consume is so high that most of the additional income is consumed and the marketable surplus is the least.

13. -------------------------------------------- Democratic Countries:

In a democracy fiscal policy measures must a ------------------------------------------------------------------------------------
--------------------------------------------------------------------often become irrelevant. The operational lag relating to fiscal
measures results in a considerable erosion of effect and the gap between expected achievement and the real attainment often
becomes vast.

b) Is the growth of public expenditure in India justified? Discuss.

The size of public expenditure may be a ------------------------------------------------------------------------------------------

--------------------------------------------------------------as well as developing countries. The reasons are not far to seek.
There has been increasing political a ---------------------------------------------------------------------------------------------
----------------------------------------------------------- programmes.
Expenditure in absolute as well as relative terms i.e. as a ratio of a ----------------------------------------------------------------
----------------------------------------------------------------------------------------. Depending on the stage of a countrys
economic development, the structure of capital formation requires more public investment. Demographic and technological
factors are also responsible for a changing public expenditure share in GNP.

Growth of the Public Expenditure- Before a -----------------------------------------------------------------------------------

-------------------------------------------------------------------------------------began in late seventies.

The table shows the rapid rise in pu------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------- in 2005-06.

There has been tremendous increase in total public expenditure during the perioc -----------------------------------------------------------
----------------------------------------------------------------------------------------------------------------- crores in 2005-06.

The ratio of Public Expenditure to a ----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------survival. They hardly derive any benefit from the public
expenditure.

Causes for --------------------------------------- Expenditure

1. Population ------------------------------------ of planning, the population of India has increased from 36.1 crore in 1950-51, it has
crossed over 102 crore in 2001. The growth in a ----------------------------------------------------------------------------------
----------------------------------------------------------------------, whereas the aging population requires transfer payments
like old age pension, social security & health facilities.

2. ------------------- Expenditure- There has a -------------------------------------------------------------------------------------

-------------------------------------------------------------------which has increased significantly to Rs.51,542 crores in 2006-
07.

The defence expenditure has increase a -------------------------------------------------------------------------------------------

-------------------------------------------------------------countries are buying the latest defence equipments from developed
countries of the world.

3. Increase ------------------------- The increase in national a -----------------------------------------------------------------------

----------------------------------------------------------------------------------------because under the circumstances, the
Government is not only expected to expand its traditional activities but it also undertakes new activities.

4. Government Subsidies- The Government of India has a -----------------------------------------------------------------------

---------------------------------------------------------------------------------public expenditure has increased. According to
Economic Survey 2006-07 the expenditure on subsidies by central government in 1990-91 was Rs.9581 crores which has
increased significantly to Rs.44,792 crores in 2005-06.

5. Debt Servicing- The internal debt as well as external debt is on the iocrease a -------------------------------------------------
-------------------------------------------------------------------------------------------------------of which, the government
has to make huge amounts of money towards interest payments. The interest payment of the central government has increased
from 21,500 crore in 1990-91 to Rs.1,39,823 crores in 2006-07.
6. Expansion --------------------------- Machinery- There has been a --------------------------------------------------------------
------------------------------------------------------------------------------------------be incurred on administrative machinery
in respect of police, tax administration, administration of public sector enterprises, etc.

7. Development Projects- The a -------------------------------------------------------------------------------------------------

-------------------------------------------------------projects require lot of capital and revenue expenditure.

8. Urbanisation- There has been an increase in a ---------------------------------------------------------------------------------

-----------------------------------------------------------------------. The increase in urbanization requires heavy expenditure
on law and order, education, civil amenities like drinking water housing, electricity, etc.

9. Industrialisation- Setting up key and a ----------------------------------------------------------------------------------------

----------------------------------------------------------------including transport, communication, power, fuel, etc. The public
sector has created a strong infrastructure as a a -----------------------------------------------------------------------------------
---------------------------------------------------------------------them manifold.

10. Economic Incentives- Economic a -------------------------------------------------------------------------------------------

-------------------------------------------------------------Government whereas recoveries in respect of both economic and
social services have been insignificant.

11. Increase in -------------------------------- territories- There has been tremendous increase in grant in aid to state and union
territories during planning period. According to Tata Statistical a -----------------------------------------------------------------
---------------------------------------------------------------------------------------. The grant in aid to states and union
territories has increased significantly both for developmental purposes like construction of roads, railways, etc. and for non-
developmental purposes like police administration, tackling terrorism and naxalite activities, etc.

12. New Responsibilities- Several new a -----------------------------------------------------------------------------------------

---------------------------------------------------------------tensions which require greater amount of public services like Law
and Order, Defence, etc. Provisions of justice and constitutional remedies also require expenditure.

13. Education- Education not only contributes to mental development of man but also raises productivity. Moreover mass
education is necessary condition for the success of democracy. a -----------------------------------------------------------------
---------------------------------------------------------------------------------------for medical & technical education which
involves heavy expenditure. There is a tremendous rise in total public expenditure in India during the period 1961-2007 without
adequate increase in revenues. This has resulted in huge deficit in budget in India.

Hence there is a need to ----------------------------------------------------------------------- future period of time.

Based on above discussion we can say that yes, in India growth of public sector expenditure is justified.

5. Explain major trends in volume, composition and direction of Indias foreign trade in recent years. Do
you think that these trends portray a favorable trade environment in the country?

Foreign Trade is one of the significant a ------------------------------------------------------------------------------------------

--------------------------------------------------------------share in the world trade was 1.78% which was decline to 0.59% in
1990 and continues to remain around 0.60% till now. India's share in world exports was 0.8% in 2006.

Britishers strongly believed that India was a country well suited to supply raw materials and other primary goods and a good
market place for British manufacturers. So at the a -------------------------------------------------------------------------------
-------------------------------------------------------------------------and light manufactured consumer goods dominated
India's export basket. During the post independence period India's composition of exports changed. Now exports of India's are
broadly classified into following four categories.
Table below shows composition of India's export from 1990-91 to 2005-06.

The features of -------------------------------------------------- Trade are as follows:

1) Increasing ----------------------------------------------- Income:

In 1990-91, share of Indias foreign a --------------------------------------------------------------------------------------------

------------------------------------------------------------per cent respectively.

2) Less -------------------------------- Trade:

Share of Indias foreign trade in world trade has been declining. a ----------------------------------------------------------------
----------------------------------------------------------------------------------------share in world trade has gone-up from 1.4
per cent in 2004 to 1.5 per cent in 2006 and estimated to be 2 per cent in 2009.

3) Oceanic Trade:
Most of Indias trade is by sea, India a -------------------------------------------------------------------------------------------
---------------------------------------------------------in our export trade was 21.8 per cent and in import trade 19.1 per cent.

4) Dependence on a Few Ports: For its foreign a --------------------------------------------------------------------------------

------------------------------------------------------------------------ports to lessen the burden on former ports.

5) Increase --------------------------------- Trade:

Since 1990-91, volume and value of Indias a ------------------------------------------------------------------------------------
--------------------------------------------------------------------of imports was Rs 13, 74,436 crore.

6) Change in -------------------------- of Exports:

Since independence, composition of export trade of India has undergone a change. Prior to independence, India used to export
agricultural products and raw materials, like jute, a -------------------------------------------------------------------------------
-------------------------------------------------------------------------manufactureditems like, machines, ready-made
garments, gems and jewellery, tea, jute manufactures, Cashew Kernels, electronic goods, especially hardwares and softwares
which occupy prime place in exports.

7) Change ------------------------------- Imports:

Since Independence, composition of Indias a ------------------------------------------------------------------------------------
--------------------------------------------------------------------, electrical goods, iron, steel, etc. Now it has been importing
mostly petrol and petroleum products, machines, chemicals-, fertilizers, oil seeds, raw materials, steel, edible oils, etc.

8) ------------------------------------ Trade:
It refers to the countries with whom a country trades. Main changes in the direction of foreign trade are as under:

In the year 1990, in exports the maximum share, i.e., a ---------------------------------------------------------------------------

-----------------------------------------------------------------------------Iran, Iraq, Saudi Arabia, Kuwait, etc. In 2008-09, the
largest share in Indias foreign trade (both imports and exports) was that of European Union (EU), i.e., Germany, Belgium,
France, U.K., etc., and developing countries. Now, U.A.E., China and U.S.A. have occupied important place in Indias foreign
trade. The importance of England, Russia, etc., has declined.
9) Mounting ------------------------------ Trade:
Since 1950-51, Indias balance of trade has been a -------------------------------------------------------------------------------
-------------------------------------------------------------------------of Rs 2 crore and by 1990-1991 it rose to Rs 16,933
crore. After the policy of liberalization, the country has witnessed a a -------------------------------------------------------------
-------------------------------------------------------------------------------------------value of exports accounted for this
tremendous rise in balance of trade deficit.

10) ------------------------------ Globalization:

Globalization and diversification mark the latest trend of Indias foreign trade. Indias foreign trade is no longer confined or a few
goods or a a ----------------------------------------------------------------------------------------------------------------------
----------------------------------pattern of Indias foreign trade.

11) ----------------------------------------------------- Sector:

Since 1991 the role of public sector in Indias a ----------------------------------------------------------------------------------
----------------------------------------------------------------------, Steel Authority of India Ltd. (SAIL), Hindustan Machine
Tools (HMT), Bharat Heavy Electrical Limited (BHEL), etc., used to play significant role in Indias foreign trade. As a result of
implementation of the policy of liberalization, the importance of all these public sector enterprises has diminished.

AS for as I think ----------------------------------------------------------------- for India because-

In 2009, India had a global export share of 1 per cent or more in 48 out of a total of 99 commodities at the two-digit Harmonized
System (HS) level, but a significant share a --------------------------------------------------------------------------------------
------------------------------------------------------------------had an increase in global share by 0.5 per cent point or more in
2009 over 2008.

Six items, which a ---------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------lost global shares in 2009 over 2008.

Noticeable is the near doubling in share of pearls, precious stones, metals, coins, etc., with growth in trading activity, and the fall
of nearly 2 percentage points in lac, gums, a --------------------------------------------------------------------------------------
------------------------------------------------------------------, 11 lost their shares in 2009 over 2008.

In the top 100 imports of the world at the four-digit HS level in 2011, India has only 6 items in the top 50; it has only 5 items with
a share of 5 per cent and above and 18 items a ------------------------------------------------------------------------------------
--------------------------------------------------------------------compared to 2010.

The new items are medicaments consisting a -------------------------------------------------------------------------------------

--------------------------------------------------------------------boats, cargo ships, barges and similar vessels; cane or beet
sugar and chemically pure sucrose in solid form; and maize.

India has a very high export share in world imports in the case of only two four-digit HS items, jewellery and diamonds. While
India can increase its shares further in the a ---------------------------------------------------------------------------------------
-----------------------------------------------------------------its competence.

Most of the items come under the three Es, electronic, electrical, and engineering items and some textiles items. Greater focus on
these items could lead to a perceptible increase in Indias share of exports in world imports.

There has been significant market a --------------------------------------------------------------------------------------------

------------------------------------------------------------. However, in 2012-13 (April-November), the share of Indias
exports to the USA increased to 13.5 per cent.

Within Asia, while the share of North a ----------------------------------------------------------------------------------------

----------------------------------------------------------------per cent and 10.3 per cent respectively in 2012-13 (April-
November), there was a noticeable rise in the share of West Asia-GCC (Gulf Cooperation Council) countries from 14.9 per
cent in 2011-12 to 17.7 per cent in 2012-13 (April-November).

In 2012-13 (April-November), compared to a ----------------------------------------------------------------------------------

----------------------------------------------------------------------to 61.1 per cent from 27.7 per cent.

The share of America in Indias imports also increased a ----------------------------------------------------------------------

----------------------------------------------------------------------------------half of this share. While Iran and UK are out
of this top 15 list in 2011-12, Iraq and Kuwait are the new entrants.

The musical chairs for the top slot among the top three a -----------------------------------------------------------------------
---------------------------------------------------------------------------------first in 2011-12 by China, and China in turn
relegated to second position by the UAE in 2012-13 (April-November).

The final word for 2012-13 is not yet out as the USA is inching closer to China with its share increasing by around one
percentage point and that of China falling. At 10 a -----------------------------------------------------------------------------
---------------------------------------------------------------------------show that among its top 15 trading partners, India
had bilateral trade surplus with four countries in 2011-12, viz. the UAE, USA, Singapore, and Hong Kong.

In 2012-13 (April-November), Indias trade balance with the UAE has turned slightly negative while it has improved further
with the USA and Hong Kong. Another important trend a ---------------------------------------------------------------------
-----------------------------------------------------------------------------------billion respectively in 2011-12. In 2012-13
(April-November), the export-import ratio with China worsened further to 0.23 from 0.31 in 2011 -12.

6. Write short notes on the following:

a) Balance of Payments

A countrys Balance of --------------------------------------------------------------------------------------------------------------------------------

---------------------------------------- position. It presents the international financial position of the country.

It helps the --------------------------------------------------------------------------------------- trade and payments issues on the other.

In the case of a developing ----------------------------------------------------------------------------------------------------------------------------

------------------ countrys economic development on the financial assistance by the developed countries.

A country with a balance of payments surplus is probably exporting much of its production. In addition, its government and
residents are savers, providing enough capital to finance a ------------------------------------------------------------------------
--------------------------------------------------------------------------------its residents to spend more and build a larger
domestic market. This will keep it from being too dependent on export-driven growth. It will also allow its companies to refine
goods and services, using the domestic ------------------------------------------------------------------------------------------
-------------------------------------------------------------- fluctuations.

The greatest importance of balance of payments lies in a ----------------------------------------------------------------------

----------------------------------------------------------------------------------short-term international economic prospects, to
evaluate the degree of its international solvency, and to determine the appropriateness of the exchange rate of countrys currency.

However, a countrys favorable balance a ----------------------------------------------------------------------------------------

----------------------------------------------------------------of bankruptcy.

A balance of payments deficit per se is not the a ----------------------------------------------------------------------------------

----------------------------------------------------------------------fundamental problems in that economy.

Similarly, a favorable balance of payments should not always make a country complacent. A poor country may have a favorable
balance of payments due to large inflow of foreign loans and equity capital. A developed country may have adverse balance of
payments due to massive assistance given to developing countries.
Thus, a deficit or surplus of balance of a -----------------------------------------------------------------------------------------
---------------------------------------------------------------of the period under review.

It does not provide data about assets and liabilities that relate one country to others. However, despite all these short comings, the
significance of balance of payments lies in the fact that it provides vital information to understand a countrys economic dealings
with other countries.

b) Role of Public Sector

Role and -----------------------------------------

The public sector has been a -----------------------------------------------------------------------------------------------------

---------------------------------------------------depends largely the achievement of the country's economic and social goals.

Public sector is considered a powerful a ------------------------------------------------------------------------------------------

--------------------------------------------------------------may be described as follows:

1. ---------------------- gaps:

At the time of independence, there a ----------------------------------------------------------------------------------------------

----------------------------------------------------------, involve considerable risk and suffer from long gestation periods.

Private sector concerns do not come a --------------------------------------------------------------------------------------------

------------------------------------------------------------the production of strategic capital goods.
The public sector has considerably widened the industrial base of the country and speeded up the pace of industrialisation.

2. ---------------------------:

Public sector has created a -------------------------------------------------------------------------------------------------------

-------------------------------------------------sector in India.
By taking over many sick units, the public sector has protected the employment of millions. Public sector has also contributed a
lot towards the improvement of working and living conditions of workers by serving as a model employer.

3. --------------------------------------------- development:

Private industries tend to concentrate a -------------------------------------------------------------------------------------------

-------------------------------------------------------------of the country.

These areas lacked basic industrial and a -----------------------------------------------------------------------------------------

---------------------------------------------transformation in the social-economic life of the people in these regions.

Steel plants of Bhilai, Rourkela and a --------------------------------------------------------------------------------------------

------------------------------------------------------------development of backward regions by the public sector.
4. Optimum --------------------------------- resources:

Public enterprises make better a --------------------------------------------------------------------------------------------------

------------------------------------------------------benefits of large scale operations.
They help to eliminate wasteful completion and ensure full use of installed capacity. Optimum utilisation of resources results in
better and cheaper production.

5. Mobilisation of surplus:

The profits earned by public a ----------------------------------------------------------------------------------------------------

----------------------------------------------------of capital formation in the country. Public enterprises earn considerable
foreign exchange through exports.

6. Self reliance:
Public enterprises a --------------------------------------------------------------------------------------------------------------
------------------------------------------exchange through exports.

7. Socialistic ------------------------ society:

Public sector is an a --------------------------------------------------------------------------------------------------------------

------------------------------------------of economic and social change.

8. --------------------------------------:

Public enterprises help in the establishment of a welfare state in the country. These enterprises supply essential commodities at
cheaper rates.

c) Economic Development and Economic Growth

Economic development is a term a -----------------------------------------------------------------------------------------------

---------------------------------------------------------, and especially Industrialization are other terms people have used while
discussing economic development. Economic development has a direct relationship with the environment and environmental
issues. Whereas economic development is a policy a -----------------------------------------------------------------------------
---------------------------------------------------------------------------, as economist Amartya Sen points out, "economic
growth is one aspect of the process of economic development".

Economic development is the development of a ----------------------------------------------------------------------------------

----------------------------------------------------------------------as efforts that seek to improve the economic well-being and

quality of life for a community by creating and/or retaining jobs and supporting or growing incomes and the tax base.

There are significant differences between a ---------------------------------------------------------------------------------------

-----------------------------------------------------------------income. National income or product is commonly expressed in
terms of a measure of the aggregate value-added output of the domestic economy called gross domestic product (GDP). When the
GDP of a nation rises economists refer to it as a ----------------------------------------------------------------------------------
----------------------------------------------------------------------literacy rates, life expectancy, and poverty rates. GDP is a
specific measure of economic welfare that does not take a ------------------------------------------------------------------------
--------------------------------------------------------------------------------definition of economic development.

In its broadest sense, economic development encompasses three major areas:

1) Policies that governments a ----------------------------------------------------------------------------------------------------

----------------------------------------------------institutions, trade, and tax policies.

2) Policies and programs to provide infrastructure and services such as highways, parks, affordable housing, crime prevention, and
educational programs and projects.

3) Policies and programs explicitly a ---------------------------------------------------------------------------------------------

-----------------------------------------------------------retention and expansion, technology transfer, workforce training and
real estate development. This third category is a primary focus of economic development professionals.

Economic growth is the increase in the a ----------------------------------------------------------------------------------------

----------------------------------------------------------------, or real GDP, usually in per capita terms.
Growth is usually calculated in real terms i.e., a --------------------------------------------------------------------------------
------------------------------------------------------------------------ growth is measured as the annual percent change of gross
domestic product (GDP), it has all the advantages and drawbacks of that measure.

The "rate of economic growth" refers to the a ------------------------------------------------------------------------------------

--------------------------------------------------------------------, which implicitly ignores the fluctuations in the GDP around
this trend.
An increase in economic growth a ------------------------------------------------------------------------------------------------
--------------------------------------------------------amount of inputs available for use (increased population, new territory) is
called extensive growth.

A country's general economic health can a ---------------------------------------------------------------------------------------

-----------------------------------------------------------------economic development.
Let's first examine economic growth. A country's a ------------------------------------------------------------------------------
--------------------------------------------------------------------------model that reflects the value of a country's output. In
other words, a country's GDP is the total monetary value of the goods and services produced by that country over a specific period
of time.

Example of --------------------------------

For example, let's say that a special a --------------------------------------------------------------------------------------------

------------------------------------------------------------business in Utopia. The new berry exporting business hired hundreds
of Utopians to farm, harvest, wash, box and ship the berries to grocers in Germany.

In one calendar year, the berry exporting a ---------------------------------------------------------------------------------------

-----------------------------------------------------------------Utopia's GDP increased, this means that Utopia experienced
economic growth.

In the United States, our periods of large economic growth are mostly associated with new technology. The Industrial Revolution
and the development of the Internet are two examples. When a -------------------------------------------------------------------
-------------------------------------------------------------------------------------, economic growth usually follows.

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