Economic and Social Environment Solved Assignment Q6

26 OCT
Posted by admin as IGNOU MBA Solved Assignments, Solved New Assignments 2009

Q6. Write short notes on

a) Economic Environment
b) Public Accountability
c) Industrial Policy of 1956

a) Economic Environment:

Economics is the social science that studies the production, distribution, and consumption of goods and services. Current
economic models developed out of the broader field of political economy in the late 19th century, owing to a desire to use an
empirical approach more akin to the physical sciences.

A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay: “the science which studies
human behaviour as a relationship between ends and scarce means which have alternative uses.” Scarcity means that
available resources are insufficient to satisfy all wants and needs. Absent scarcity and alternative uses of available resources,
there is no economic problem. The subject thus defined involves the study of choices as they are affected by incentives and
resources.

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout
society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social
institutions, war, and science. The expanding domain of economics in the social sciences has been described as economic
imperialism.

Common distinctions are drawn between various dimensions of economics: between positive economics (describing “what is”)
and normative economics (advocating “what ought to be”) or between economic theory and applied economics or between
mainstream economics (more “orthodox” dealing with the “rationality-individualism-equilibrium nexus”) and heterodox
economics (more “radical” dealing with the “institutions-history-social structure nexus”). However the primary textbook
distinction is between microeconomics (”small” economics), which examines the economic behavior of agents (including
individuals and firms) and macroeconomics (”big” economics), addressing issues of unemployment, inflation, monetary and
fiscal policy for an entire economy.

The economic environment comprises of:

* Income and wealth: Income in an economy is measured by GDP, GNP and per capita income. High values of these factors
show a progressiveeconomic environment.

* Employment levels: High employment represents a positive picture of the economy. However, there are many forms of
unemployment, including partial employment and disguised unemployment.

* Productivity: This is the output generated from a given amount of inputs. High levels of productivity support the economic
environment.

The economic environment can be classified into:

* Microeconomic environment: It includes the economic environment of a particular industry, firm or household and is
primarily concerned with price determination of individual factors. The main consideration from a microeconomic perspective
is the efficient allocation of resources. This is necessary to maximize total output.

* Macroeconomic environment: It includes all the economic factors in totality. The main consideration here is the
determination of the levels of income and employment in the economy.

Over the course of the twentieth century, the focus has shifted from cities and countries to the global economy being the chief
economic unit.

b) Public Accountability:
Accountability is a concept in ethics with several meanings. It is often used synonymously with such concepts as
responsibility, answerability, enforcement, blameworthiness, liability, and other terms associated with the expectation of
account-giving. As an aspect of governance, it has been central to discussions related to problems in both the public and
private (corporation) worlds.

Accountability is defined as “A is accountable to B when A is obliged to inform B about A’s (past or future) actions and
decisions, to justify them, and to suffer punishment in the case of eventual misconduct”.

In leadership roles, accountability is the acknowledgment and assumption of responsibility for actions, products, decisions,
and policies including the administration, governance, and implementation within the scope of the role or employment position
and encompassing the obligation to report, explain and be answerable for resulting consequences.

With the increase over the last several decades in public service provision by private entities, especially in Britain and the
United States, some have called for increased political accountability mechanisms to be applied to otherwise non-political
entities. Legal scholar Anne Davies, for instance, argues that the line between public institutions and private entities like
corporations is becoming blurred in certain areas of public service provision in the United Kingdom and that this can
compromise political accountability in those areas. She and others argue that some administrative law reforms are necessary
to address this accountability gap.

With respect to the public/private overlap in the United States, public concern over the contracting out of government
(including military) services and the resulting accountability gap has been highlighted recently following the shooting incident
involving the Blackwater security firm in Iraq.

c) Industrial Policy of 1956:

The Industrial Policy Resolution – 1956 was shaped by the Mahalanobis Model of growth, which suggested that emphasis on
heavy industries would lead the economy towards a long term higher growth path. The Resolution widened the scope of the
public sector. The objective was to accelerate economic growth and boost the process of industrialization as a means to
achieving a socialistic pattern of society. Given the scarce capital and inadequate entrepreneurial base, the Resolution
accorded a predominant role to the State to assume direct responsibility for industrial development. All
industries of basic and strategic importance and those in the nature of public utility services besides those requiring large
scale investment were reserved for the public sector.

The Industrial Policy Resolution – 1956 classified industries into three categories. The first category comprised 17 industries
(included in Schedule A of the Resolution) exclusively under the domain of the Government. These included inter alia,
railways, air transport, arms and ammunition, iron and steel and atomic energy. The second category comprised 12 industries
(included in Schedule B of the Resolution), which were envisaged to be progressively State owned but private sector was
expected to supplement the efforts of the State.

The third category contained all the remaining industries and it was expected that private sector would initiate development of
these industries but they would remain open for the State as well. It was envisaged that the State would
facilitate and encourage development of these industries in the private sector, in accordance with the programmes formulated
under the Five Year Plans, by appropriate fiscal measures and ensuring adequate infrastructure. Despite the
demarcation of industries into separate categories, the Resolution was flexible enough to allow the required adjustments and
modifications in the national interest.

Another objective spelt out in the Industrial Policy Resolution – 1956 was the removal of regional disparities through
development of regions with low industrial base. Accordingly, adequate infrastructure for industrial development of such
regions was duly emphasized. Given the potential to provide large-scale employment, the Resolution reiterated the
Government’s determination to provide all sorts of assistance to small and cottage industries for wider dispersal of the
industrial base and more equitable distribution of income. The Resolution, in fact, reflected the prevalent value system of
India in the early 1950s, which was centered around self sufficiency in industrial production. The Industrial Policy Resolution –
1956 was a landmark policy statement and it formed the basis of subsequent policy announcements.