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Structure of the Economy, Inflation and GDP
Dr. L. Mothilal, M.B.A., FDP-IIMA, PGCCA, Ph.D.
Assistant Professor,
Departmen...
What is Economy?
An economy is an area of the production, distribution,
or trade, and consumption of goods and services by...
Changes in the Indian Economy
Indian economy has been undergoing structural changes since
Independence
In economics, struc...
Structure of Global Economy until 2008
Globalization – Share of World’s GDP
India China Japan USA Europe
Rest of the
World
1 33 27 1 0 14 25
1500 25 25 3 0 21 26...
Globalization – Share of World’s GDP
33
25
15
12
8
4 3 4
6
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
45
1 1500 182...
G8 Countries Share in World’s GDP
68 68.3
66 67 67 66
64
60
58.4
50
55
60
65
70
1992 1994 1996 1998 2000 2002 2004 2006 20...
Emerging Markets Share in World’s GDP
0
2
4
6
8
10
12
14
1992 1994 1996 1998 2000 2002 2004 2006 2008
China, India, Mexico...
Top 10 Countries share of World GDP
Rank Country
GDP US$
Billions in
2016
Share of World
GDP %
In 2020
Share of World
GDP ...
INDIA’S political freedom is 70 years old & economic freedom from 1991.
Growing at about 7.2% annually from earlier HINDU ...
GDP - $9.489 trillion (PPP; 2017)
GDP Per Capita $7,153 (PPP est; 2017)
Human Development Index – 0.624 (Medium)
Labour Fo...
India’s Current GDP by Sectors
Agriculture
• 17% of GDP
• 47% of
Population
Industry
• 30% of GDP
• 22% of
Population
Serv...
Nature of Indian Economy
Low Per Capita Income Lackofindustrialization
Disparities in Income Distribution Operation of eco...
GDP
Gross domestic product (GDP) is the monetary value of all the finished goods
and services produced within a country's ...
GDP
Indus Valley Civilization, the first known permanent and predominantly
urban settlement that flourished between 3500 B...
India is estimated to have had the largest economy between 1 CE and 1000 CE,
controlling between one-third and one-fourth ...
Source: https://en.wikipedia.org/wiki/Economic_history_of_India
Source: https://en.wikipedia.org/wiki/Economic_history_of_India
GDP per capita of South Asian economies
Source: https://en.wikipedia.org/wiki/Economic_history_of_India
Source: https://en.wikipedia.org/wiki/Economic_history_of_India
Challenges of Indian Economy
Population
Explosion
Poverty
Unemployme
nt
Rural Urban
Divide
Low Rate of
Economic
Growth
Mal...
Economic Systems
Meaning of economic systems: “ is a system designed by a
nation to utilize its resources for the purpose ...
Functions of
Economic Systems
Determination
of production
and allocation
of resources
Organization of
the production
proce...
Socialism
Mixed
Economy
CapitalismTypes of
Economic
Systems
Features of
Capitalism
An economic
activity where the
means of
production are
privately owned
There is no
government
inter...
Capitalism
According to karl marx, “capitalism is a
particular mode of organization of
production which is characterised b...
Merits of
Capitalism
Democratic
Nature
Rapid
Economic
Growth
Incentives &
Innovation
Efficient
Utilisation
of Resources
Ca...
Demerits
of
Capitalism
Concentration
of Economic
Power
Rise of
Monopoly
Economic
Instability
Socialism is an economic system where the
means of production are either owned or
controlled by the state
According to “le...
Features of Socialism
No place for private
State itself decides -what to produce - how to produce -how to distribute
Gover...
Absence of Class Struggle
Economic Stability
Social Justice
Higher Economic Growth
Rational Allocation of
Resources
Corruption
Loss of
Consumer
Sovereignty
Concentration
of Economic
Power in the
State
Inefficacy and
Low
Productivity
Loss ...
Mixed Economy
The mixed economy shares features of
capitalism and state capitalism
(Socialism)
A mixed economic system is an economic
sy...
Advantages of Mixed Economy
Advantages of Capitalism & Socialism; No evils of either
Encouragement to Private Sector & Opt...
Demerits of Mixed Economy
Delay in Economic Decisions by Govt.
Wastage of Resources
Inefficient public sector
Unemployment...
Inflation
Inflation is a sustained increase in
the general price level of goods
and services in an economy over
a period o...
Structure of the Economy, Inflation and GDP
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Structure of the Economy, Inflation and GDP

Composition of various factors that go in the economy (Structure) and the importance of GDP is presented

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Structure of the Economy, Inflation and GDP

  1. 1. Structure of the Economy, Inflation and GDP Dr. L. Mothilal, M.B.A., FDP-IIMA, PGCCA, Ph.D. Assistant Professor, Department of Management Studies Pondicherry Central University, India Email: mothilal2020@gmail.com https://www.linkedin.com/in/dr-mothilal-lakavath-7469b34/ https://www.slideshare.net/mothilalacad https://www.facebook.com/mothilal2020
  2. 2. What is Economy? An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents in a given geographical location in various countries. An economy is the system according to which the money, industry, and trade of a country or region are organized.
  3. 3. Changes in the Indian Economy Indian economy has been undergoing structural changes since Independence In economics, structural change is a shift or change in the basic ways a market or economy functions or operates. Such change can be caused by such factors as economic development, global shifts in capital and labor, changes in resource availability due to war or natural disaster or discovery or depletion of natural resources, or a change in political system. For example, a subsistence economy may be transformed into a manufacturing economy, or a regulated mixed economy may be liberalized. A current driver of structural change in the world economy is globalization. Structural change is possible because of the dynamic nature of the economic system Source: https://en.wikipedia.org/wiki/Structural_change
  4. 4. Structure of Global Economy until 2008
  5. 5. Globalization – Share of World’s GDP India China Japan USA Europe Rest of the World 1 33 27 1 0 14 25 1500 25 25 3 0 21 26 1820 15 33 3 2 27 20 1870 12 17 2 9 38 22 1913 8 8 4 21 39 20 1950 4 5 3 28 31 29 1973 3 5 8 23 29 32 2001 4 7 8 23 21 37 2008 6 13 7 21 19 34
  6. 6. Globalization – Share of World’s GDP 33 25 15 12 8 4 3 4 6 0 5 10 15 20 25 30 35 40 0 5 10 15 20 25 30 35 40 45 1 1500 1820 1870 1913 1950 1973 2001 2008 India China USA Japan Europe Rest of the World 2 per. Mov. Avg. (Rest of the World)
  7. 7. G8 Countries Share in World’s GDP 68 68.3 66 67 67 66 64 60 58.4 50 55 60 65 70 1992 1994 1996 1998 2000 2002 2004 2006 2008 US, Japan, Germany, Britain, France, Italy, Canada & Russia
  8. 8. Emerging Markets Share in World’s GDP 0 2 4 6 8 10 12 14 1992 1994 1996 1998 2000 2002 2004 2006 2008 China, India, Mexico, Brazil, & South Africa
  9. 9. Top 10 Countries share of World GDP Rank Country GDP US$ Billions in 2016 Share of World GDP % In 2020 Share of World GDP % Rank in 2020 1 China 21,269.02 17.9 29,348 19.6 1 2 United States 18,561.93 15.6 21,927 14.7 2 3 India 8,720.51 7.32 12,842 8.58 3 4 Japan 4,931.88 4.14 5,483 3.67 4 5 Germany 3,979.08 3.34 4,583 3.06 5 6 Russia 3,745.08 3.14 4,309 2.88 6 7 Brazil 3,134.89 2.63 3,631 2.43 8 8 Indonesia 3,027.83 2.54 4,119 2.75 7 9 United Kingdom 2,787.74 2.34 3,244 2.17 9 10 France 2,736.72 2.3
  10. 10. INDIA’S political freedom is 70 years old & economic freedom from 1991. Growing at about 7.2% annually from earlier HINDU growth rate of 3.5%. It has more than $392 billion forex reserves. It has talented people from literature and art, to science and engineering, to business and finance. it has produced new enterprises & entrepreneurs such as Mittal Steel, DLF, Reliance, Bharti, Dr. Reddy’s, Ranbaxy, Infosys, and more… India’s Status
  11. 11. GDP - $9.489 trillion (PPP; 2017) GDP Per Capita $7,153 (PPP est; 2017) Human Development Index – 0.624 (Medium) Labour Force – 52 Crores Ease of Doing Business Rank, 2017 – 130 Public Debt – 66% of GDP (2017) Revenue - $550b & Expenses - $720 b Gross External Debt - $472 b India’s GDP
  12. 12. India’s Current GDP by Sectors Agriculture • 17% of GDP • 47% of Population Industry • 30% of GDP • 22% of Population Services • 53% of GDP • 31% of Population
  13. 13. Nature of Indian Economy Low Per Capita Income Lackofindustrialization Disparities in Income Distribution Operation of economic vicious circles Declining share of Agriculture Market imperfections Over Population Bottlenecks in transport Unbalanced Economic development Existence of traditional society Lack of skilled workforce Ease of Doing Business – Very Poor
  14. 14. GDP Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. GDP includes all private and public consumption, government outlays, investments, private inventories, paid-in construction costs and the foreign balance of trade (exports are added, imports are subtracted). . GDP is commonly used as an indicator of the economic health of a country, as well as a gauge of a country's standard of living. Since the mode of measuring GDP is uniform from country to country, GDP can be used to compare the productivity of various countries with a high degree of accuracy Source: http://www.investopedia.com/terms/g/gdp.asp
  15. 15. GDP Indus Valley Civilization, the first known permanent and predominantly urban settlement that flourished between 3500 BCE and 1800 BCE boasted of an advanced and thriving economic system. Its citizens practiced agriculture, domesticated animals, made sharp tools and weapons from copper, bronze and tin and traded with other cities. Evidence of well laid streets, layouts, drainage system and water supply in the valley's major cities, Harappa, Lothal, Mohenjo-daro and Rakhigarhi reveals their knowledge of urban planning.
  16. 16. India is estimated to have had the largest economy between 1 CE and 1000 CE, controlling between one-third and one-fourth of the world's wealth at the time, though GDP was stagnant. India experienced GDP growth in the late medieval era after 1000, during the Delhi Sultanate, but was overtaken by Ming China as the largest economy by 1500. After most of the subcontinent was reunited under the Mughal Empire, India returned to being the largest economy by 1700, controlling about a quarter of the world economy, before declining under British rule in the late 18th century. According to the Balance of Economic Power, India had the largest and most advanced economy for most of the time span between the 1st century and 18th century, the most of any country for a large part of the last two millennia.
  17. 17. Source: https://en.wikipedia.org/wiki/Economic_history_of_India
  18. 18. Source: https://en.wikipedia.org/wiki/Economic_history_of_India
  19. 19. GDP per capita of South Asian economies Source: https://en.wikipedia.org/wiki/Economic_history_of_India
  20. 20. Source: https://en.wikipedia.org/wiki/Economic_history_of_India
  21. 21. Challenges of Indian Economy Population Explosion Poverty Unemployme nt Rural Urban Divide Low Rate of Economic Growth Malnutrition Inequitable Distribution of Income Labour shortage in Agriculture Low level of Human Development Technology Backwardness Poor Business Environment Lack of Entrepreneur ial Culture
  22. 22. Economic Systems Meaning of economic systems: “ is a system designed by a nation to utilize its resources for the purpose of satisfying the needs and wants of people.” Definition of economic system: According to “Carl Landauer” “an economic system is the sum total of the devices by which preferences among alternative purposes of economic activity is determined and by which individual activities are coordinated for the achievement of these purpose.”
  23. 23. Functions of Economic Systems Determination of production and allocation of resources Organization of the production process Income Distribution Provision for the future and posterity Economic growth and dynamism Improve standard of living
  24. 24. Socialism Mixed Economy CapitalismTypes of Economic Systems
  25. 25. Features of Capitalism An economic activity where the means of production are privately owned There is no government interference Basic production units are 1) Household 2) Firms Consumers’ sovereignty Competition Market System
  26. 26. Capitalism According to karl marx, “capitalism is a particular mode of organization of production which is characterised by wage, slavery production of profit and creation of surplus value.”
  27. 27. Merits of Capitalism Democratic Nature Rapid Economic Growth Incentives & Innovation Efficient Utilisation of Resources Capital Formation Flexibility and Adaptability
  28. 28. Demerits of Capitalism Concentration of Economic Power Rise of Monopoly Economic Instability
  29. 29. Socialism is an economic system where the means of production are either owned or controlled by the state According to “left witch” “in socialism the role of the state is central it owns the means of production and directs economic activity”
  30. 30. Features of Socialism No place for private State itself decides -what to produce - how to produce -how to distribute Government ownership Distribution of income Restriction of occupation Central authority Social welfare Peaceful and democratic evaluation Absence of competition Equality of opportunity Classless society
  31. 31. Absence of Class Struggle Economic Stability Social Justice Higher Economic Growth Rational Allocation of Resources
  32. 32. Corruption Loss of Consumer Sovereignty Concentration of Economic Power in the State Inefficacy and Low Productivity Loss of Occupational Freedom
  33. 33. Mixed Economy
  34. 34. The mixed economy shares features of capitalism and state capitalism (Socialism) A mixed economic system is an economic system that features characteristics of both capitalism and socialism
  35. 35. Advantages of Mixed Economy Advantages of Capitalism & Socialism; No evils of either Encouragement to Private Sector & Optimum Use of Resources Government directs economic activity towards certain socially important areas of the economy and the balance is subject to the operation of the price mechanism. Freedom & Social Welfare It creates a Balance in Regional Developments
  36. 36. Demerits of Mixed Economy Delay in Economic Decisions by Govt. Wastage of Resources Inefficient public sector Unemployment and Uncertainties No freedom to Private sector
  37. 37. Inflation Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time Deflation is a persistent decrease in the general price level of goods and services

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