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DRIVE
falls
2016
PROGRAM
BBA
SEMESTER
V
SUBJECT
CODE & NAME
BBA
503
ECONOMIC
PLANNING AND POLICIES
1 Briefly explain
any 3 types of theory of Economic Development and also discuss the features of
a Developing Economy?
3 types of Economic development
theory
Features of a Developing Economy
Answer: Theories
of Economic Development
(a)
The ‘Wealth of Nations’ Theory: Adam Smith has been
recognized as the leading expounder of economic thought. Adam Smith’s opinions
can be prominently seen in the works published by David Ricardo and Karl Marx
in the 19th century, and by John Maynard Keynes and Milton Friedman in the 20th
century. The Wealth of Nations,
which is a series of five books, sought to determine the nature and cause of a
nation’s prosperity. Smith observed increasing division of labour as the main
cause of prosperity. Smith was very much opposed to mercantilism—the practice
of artificially maintaining a trade surplus on the erroneous belief that doing
so increased wealth. Adam Smith was of the opinion that government plays a
vital role in promoting a nation’s prosperity. .Similar to other modern believers,
Smith also thought that the government should put into effect contracts and
grant patents and copyrights to promote inventions and new ideas. One clear
distinction between Smith and most modern believers in free markets is that
Smith favoured retaliatory tariffs. Due to the systematic and comprehensive
study of the subject done until that era, his economic thinking became the
postulate for classical economics.
(b)
Theory of Comparative Advantage: The brilliant British
economist David Ricardo was one of the most important figures sought out for
the development of economic theory. He articulated and formulated the
‘Classical’ system of political economy. His thoughts dominated the economic
world throughout the 19th century and his legacy continues till today.
Ricardo’s most famous work is his Principles
of Political Economy and Taxation. In 1817, David Ricardo published this
book, in which he presented the law of comparative advantage. This is one of
the most important and still unchallenged laws of economics with many practical
applications.
(c)
The Theory of Population: Thomas Malthus’s social and economic ideas focussed on
his theory of population. Thomas was of the view that population increases at a
faster rate as compared to the production of food. As a result the number of
people in society will be constantly pressing and creating liability on the
means of physical subsistence. Malthusian theory presented a different opinion
from the more traditional economic growth theory of Adam Smith. The acceptance
of Malthus’s ideas in Smith’s doctrine resulted in the incorporation of the
most outstanding features of the classical system of economics. Malthusian
population theory was considered prominent and famous throughout the 19th
century. However, it lost its prominence when scholars realized that Malthus
had underestimated the rate of technical change. Malthus did regard serious and
cumulative efforts on the part of the people as an accelerator in the process
of economic development. According to him, development of an economy is not an
automatic process.
Important
Features of a Developing Economy
·
Dominance
of agricultural sector: Agriculture
is the major source of income in undeveloped and developing economies. Such
economies are also, therefore, known as agrarian economies. A large section of
the population earns a living by tilling the land.
·
Small
and large scale of production: Both the private and public sectors exist in the
economy side by side. Goods are produced on large scale and on small scale as
well by public and private sectors.
·
Production
for self-consumption: A
large amount of goods and services produced are consumed by the producers
themselves. Self utilization of resources is also one feature that is prominent
in such economies. Majority of farmers grow crops for their own consumption.
·
Illiteracy:
Another
important feature of a developing economy is the huge gap between the educated
and the uneducated. Illiteracy is widespread in such economies. Efforts are
continually being made to eradicate illiteracy, and yet illiteracy and
unskilled labour are widely dominant.
·
Underutilization
of resources: No
doubt God has gifted developing economies with significant amounts of natural
resources and large numbers of labour forces. But the unfortunate part is that
due to lack of technical knowledge, natural resources are not discovered or
fully utilized. Similarly, labour force is either unemployed or underemployed.
·
Preference
for labour intensive industries: Unemployment and underemployment are one of the
major problems of developing economies, so small scale and cottage industries
mushroom which absorb large number of hands but large industries do not find
any place to grow which further retards the growth of developing economies.
·
Vicious
circle of poverty: Poverty
gives rise to a vicious circle in a developing economy. Due to poverty there is
low income, lesser investment, lesser production and the result is abject
poverty once again. Developing economies find it very difficult to break this
vicious circle. International organizations like IMF, UNESCO, UNICEF and World
Bank, from time-to-time, extend monetary assistance to such economies.
2. Explain the role
of the Public Sector in India
Role of the Public Sector in
India
Answer: Role of
the Public Sector in India
Public
sector in India has been criticized vehemently by a number of supporters of the
private sector who have chosen to shut their eyes towards the achievements of
the public sector. To understand the role of the public sector, we
3 Discuss in detail
Liberalization, Privatization and Globalization (LPG) Model of Development with
the help of examples?
Liberalization, Privatization and
Globalization (LPG) Model of Development
Answer: The LPG
Model of development was brought out in 1991. The model was pioneered by the
then Finance Minister Dr. Manmohan Singh with a huge impact and it proposed to
lay focus on liberalization, privatization and globalization.
4 Discuss the
Significance of Agriculture in the National Economy?
Significance of Agriculture in
the National Economy
Answer: Significance
of Agriculture in the National Economy
Agriculture
has always been the backbone of the Indian economy and despite concerted
industrialization in the last six decades; agriculture still occupies a place
of pride. It provides employment to around 60 per cent of the total work force
in the country. The significance of agriculture in the national economy can be
best explained by
5 Discuss the
Overview of the Services Sector
Overview of the Services Sector
Answer: Overview
of the Services Sector
The
growth rate of the Indian economy (measured in terms of GDP at factor cost at
2004-05 prices) was 5.4 per cent in the first half (H1) of year 2012-13 as against
7.3 per cent in the corresponding time period of the previous year. The growth
for the full year of 2011-12 was 6.5 per cent vis-à-vis the growth rate of 8.4
per cent achieved in each of the previous two years i.e. 2009-10 and 2010- 11.
The slowdown has been all-pervasive and almost all the sectors have been affected.
The growth rate has been 2.1 per cent for agriculture and allied sectors, 3.2
per cent for industry sector and 7.0 per cent for the services sector in the first
half of 2012-13. The growth rates were 3.4 per cent, 4.7 per cent and 9.5 per
cent, for agriculture, industry and services, respectively in
6. Write short
notes on:
a) Foreign Direct
Investment (FDI) in India
b) Communication
system in India
Answer:
a) Foreign Direct Investment (FDI) in India
Latest
terms of trade development with respect to important areas like auto
components, apparels, chemicals, pharmaceuticals, jewellery, etc., form the
basis for FDI in India although its rigid FDI policies made for an important
obstacle in this context. Recently, a more liberalized FDI policy of India
allowed upto 100 per cent FDI stake in different ventures which includes the
real-estate sector as well. Some of the industrial policy reforms are removal
of restrictions on development providing easy access to foreign technology and
FDI and fulfilling industrial licensing requirements. Many changes were
approved on the FDI policy to eliminate the restrictions imposed in most of the
sectors. Restrictions will be reduced in different sectors like civil aviation,
construction development, industrial parks, commodity exchanges, petroleum and
natural gas, credit-information services,
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