ECONOMIC

ENVIRONMENT
OF
BUSINESS
03

2011 02

BRAIN TEASER


MY FIREND WAS 17 YEARS OLD
DAY-BEFORE-YESTERDAY.
NEXT YEAR, SHE WILL BE 20 YEARS OLD.

BASED ON THE ABOVE INFORMATION,
WHAT IS THE DATE TODAY?



BROAD
PROFILE
OF THE
INDIAN
ECONOMY




1 INDIA AN UNDERDEVELOPED ECONOMY

INDEPENDENCE 62 YEARS AGO

PRIMARILY AN AGRICULTURAL ECONOMY

60% TO 70% OF POPULATION INVOLVED
IN AGRICULTURE



1.1 LOW PER CAPITA INCOME

EARLIER INDIAS PER CAPITA INCOME WAS LOW.

IT WAS 1/60
TH
OF USAS PCI

DEMOCRATIC PLANNING WAS THEN INTRODUCED

THE FIVE YEAR PLANS


1.2 INEQUITABOLE DISTRIBUTION OF INCOME
AND POVERTY

WORLD DEVELOPMENT REPORT 2005

HOUSEHOLDS % OF AGGREAGATE
HOUSEHOLD
EXPENDITURE

LOW CATEGORY 20% 8.9%

MIDDLE CATEGORY 60% 50.5%

TOP CATEGORY 20% 41.6%


CALORIE CONSUMPTION WAS ALSO LOW
1.3 PREDOMINANCE OF AGRICULTURE

% OF POPULATION DEPENDING ON AGRICULTURE

1951 - 69.7 %

2001 - 64.8 %

IN THE USA IT IS 2 %


GROWTH AND PROPERITY OF THE
AGRICULTURAL SECTOR IS A
PRECONDITION FOR THE GROWTH
OF THE BUSINESS SECTOR

1.4 RAPID POPULATION GROWTH

1951 - 361 MILLION

2001 - 1027 MILLION

RATE OF POP. GROWTH
MORE THAN 2 % PER ANNUM

AS POPULATION INCREASES
FOOD PRODUCTION HAS TO INCREASE

INFLATION



1.5 UNEMPLOYMENT
RURAL URBAN
PER 1000

M F M F

93 94 56 56 67 103
99 - 2000 72 66 72 98

IN DEVELOPED COUNTRIES UNEMPLOYMENT IS
DIRECTLY RELATED TO DEPRESSION

IN INDIA, RURAL EMPLOYMENT IS BASED ON
DAILY WAGES

INDUSTRIAL GROWTH NOT HIGH

EXPANSION IN GENERAL EDUCATION DEMANDED
WHITE COLLAR JOBS

1.6 SCARCITY OF CAPITAL


GROSS DOMESTIC

SAVING CAPITAL FORMATION

70 71 14.6 % 15.4 %

01 02 23.4 % 22.6 %


IN 03 04 INVESTMENT WAS 26.3 %

1.7 TECHNOLOGICAL BACKWARDNESS

AGRICULTURAL SECTOR STILL USING OLD
PRODUCTION TECHNIQUES

GROWTH OF THE COOPERATIVE SECTOR

INDUSTRIAL SECTOR MODERN PRODUCTION
TECHNIQUES WERE INTRODUCED

BUT A GAP STILL EXISTS

1.8 LACK OF ENTREPRENEURS

POSITIVE CHANGES SINCE 90 - 91

2 INDIA A DEVELOPING ECONOMY

2.1 NATIONAL INCOME TRENDS

SITUATION IMPROVED SINCE THE 80s

SINCE 1991, UNDER THE NEW ECONOMIC
POLICY THE GROWTH RATE WAS HIGH.

IN 03 04 NATIONAL INCOME INCREASED
BY 9 %


2.2 STRUCTURAL CHANGES

PRIMARY SECTOR - AGRICULTURE

SECONDARY SECTORS - INDUSTRIES
- CONSTRUCTION
- ELECTRICITY
etc..

TERTIARY SECTORS - TRADE
- TRANSPORT
- COMMUNICATION
- SERVICES



2.3 BASIC CAPITAL GOODS INDUSTRIES

PUBLIC SECTOR IRON & STEEL
HEAVY CHEMICALS
NITROGENOUS FERTILISERS
HEAVY ENGINEERING
MACHINE TOOLS
LOCOMOTIVES
HEAVY ELECTRICAL EQPT.
ALUMINIUM
PETROLEUM PRODUCTS


THE ABOVE INDUSTRIES ACCOUNTED FOR MORE
THAN 50% OF THE INDIAN PRODUCTION
2.4 DEVELOPMENT OF INFRASTRUCTURE
TRANSPORT FACILITIES
ENERGY PRODUCTION
TELECOMMUNICATION
INFRASTRUCTURE REPRESENTS, IF NOT THE
ENGINE, THEN THE WHEELS OF ECONOMIC
ACTIVITY.
FAVOURABLE CONDITIONS FOR BUSINESS GROWTH
AND ALSO FOR BETTER HUMAN LIVING.

Railway Route Length increased by more than
9000 kms.
Operation Fleet doubled.
Steam Locomotives replaced by Diesel and Electric.

Indian Road Network is the Largest in the World.
2001 02 24.8 lakh Km

Telecom Growth

2.5 PROGRESS IN BANKING AND FINANCIAL SECTOR

RBI WAS NATIONALISED IN 1949.

1955 IMPERIAL BANK OF INDIA WAS
NATIONALISED; BECAME SBI

1968 14 BIG COMMERCIAL BANKS NATIONALISED

MORE FUNDS WERE MADE AVAILABLE TO
PRIORITY SECTORS

CAPITAL MARKET DEVELOPMENT
SEBI FORMED IN 1988

3 INDIA A MIXED ECONOMY

3.1 PRIVATE OWNERSHIP OF PRODUCTION MEANS

PRIVATE SECTOR FOCUS
PUBLIC SECTOR SHARE REDUCED TO 25 %
GROWTH OF THE IT INDUSTRY

3.2 PREDOMINANCE OF THE MARKET

MARKET FOR COMMODITIES
MARKET FOR PRODUCTIVE FACTORS

GOVT. CONTROLS


3.3 GROWTH OF PRIVATE SECTOR MONOPOLIES

75 BIG BUSINESS HOUSES CONTROLLED
45% OF THE PAID-UP CAPITAL

EACH OF THE 4 LARGEST PRIVATE SECTOR
ENTERPRISES ASSETS RS 10,800 CR

RELIANCE TODAY Rs 74,873 CR

3.4 PUBLIC SECTOR
CONTROLS GETTING DILUTED

3.5 ECONOMIC PLANNING
MIXED ECONOMY
NOT SOCIALIST BUT CAPITALIST
GROWTH MODEST BUT STEADY
THANK YOU