CENTRE FOR DISTANCE AND ONLINE EDUCATION
ASSIGNMENT
SESSION APRIL, 2024
PROGRAM BACHELOR OF BUSINESS ADMINISTRATION
(BBA)
SEMESTER V
COURSE CODE & NAME DBB3112– ECONOMIC PLANNING
Q1. Define economic planning. Explain the factors and indicators of economic growth.
To accomplish desired economic outcomes, a process of goal-setting, decision-making, and policy
implementation is called economic planning. In order to guarantee the best possible use of these
resources, it entails the distribution of resources—both capital and human—as well as the coordination of
diverse economic activity. Economic planning can be done in a number of ways, from suggestive
planning to centralised planning, and is usually done by governments or central planning authorities.
Economic growth factors and indicators are crucial metrics for evaluating an economy's performance and
advancement. These variables and metrics offer perceptions into the general well-being and progress of
an economy, assisting economists and policymakers in making defensible choices. The following are
some important variables and measures of economic growth:
1. Gross Domestic Product (GDP): One of the most popular measures of economic expansion is GDP. It
calculates the total worth of products and services generated inside a nation's boundaries over a given
time frame. A rise in GDP denotes expansion in the economy, but a fall could suggest a downturn or
recession.
2. Employment levels: An economy's employment levels show how well-equipped it is to create jobs and
support its citizens financially. While high unemployment rates can impede growth and result in social
and economic issues, low unemployment rates are a sign of a robust labour market and support economic
expansion.
3. Investment: Investment is essential to economic progress since it fosters the creation of new
technologies and increases productive capacity. High levels of domestic and foreign investment can
stimulate innovation and raise productivity, which in turn can propel economic growth.
4. Productivity: Productivity is a measure of how well resources are used in the production of goods and
services. Since higher productivity levels are a reflection of improved infrastructure, resource efficiency,
and technical breakthroughs, they are typically linked to economic growth.
5. Inflation: Generally speaking, inflation is the term for price increases that occur over time and can
impact economic growth in both good and negative ways. While high levels of inflation can reduce
purchasing power and impair economic growth, moderate levels are sometimes considered as a sign of a
robust economy.
6. Trade balance: One key measure of economic growth is the trade balance, which is the difference
between a nation's imports and exports. Exports exceeding imports in a positive trade balance indicates
competitiveness and the capacity to make money through foreign trade.
7. Government policies: The monetary and fiscal policies of the government have a big influence on
economic growth. Economic growth can be promoted by sound fiscal policies like keeping a balanced
budget and making infrastructure investments. In a similar vein, growth can be supported by sound
monetary policies that ensure sufficient liquidity and limit inflation.
Q2. Explain in detail the 5 major sectors in economy with examples.
The economy is classified into five major sectors, namely agriculture, industry, construction, services,
and government. Each sector plays a crucial role in the overall functioning and growth of the economy. In
this document, we will delve into each sector, providing a detailed explanation along with relevant
examples.
1. Agriculture: The main goals of the agriculture sector are the production of food and raw materials
through plant and animal raising. It covers pursuits including fishing, farming, raising cattle, and forestry.
This industry makes a substantial contribution to the economy by guaranteeing food security, creating
jobs, and supplying raw materials to other industries. For instance, a sizable amount of the GDP in India
comes from agriculture, which also provides a living for a sizable portion of the population that works in
farming and associated fields.
2. Industry: The manufacturing and processing of raw materials into completed commodities is the scope
of the industry sector. It is further broken down into smaller areas like manufacturing, energy production,
and mining. Production of electronics, cars, and textiles are examples of manufacturing-related activities.
The production of commodities for both domestic and international markets is one way that industries
support economic growth. For instance, the manufacturing and export of vehicles contributes significantly
to the economies of nations like Germany, Japan, and the United States by creating jobs and income.
3. Construction: Buildings, roads, bridges, and dams are examples of the physical infrastructure that is
created, altered, and repaired in the construction industry. It encompasses tasks including engineering,
building, and architectural design. In addition to producing jobs, this industry advances economic growth
by raising living standards generally and building necessary infrastructure for a variety of businesses. For
example, building new highways, railway networks, and airports improves connectivity, increases
traveller traffic, and eases trade and commerce.
4. Services: A wide variety of economic activity that supply intangible services instead of tangible items
is referred to as the services sector. It encompasses industries including banking, healthcare, education,
travel, and hospitality as well as professional services like accounting and law. Since the services sector
contributes significantly to GDP and employment in many nations, it is frequently regarded as the
foundation of contemporary economies. For instance, the financial industry is essential in fostering
stability and economic growth since it offers investing, banking, and insurance services.
5. Government: All operations conducted by the federal, state, and local governments are included in the
government sector. In addition to regulating economic activity, upholding law and order, and allocating
resources effectively, governments also provide basic services. Moreover, the government sector is
essential in maintaining economic stability and control through monetary and fiscal policies. Government
investment on social welfare, defence, and infrastructure, for instance, boosts the economy generally and
encourages economic activity.
In summary, the creation of jobs, economic growth, and societal well-being are all facilitated by the
combined efforts of the five main economic sectors: government, industry, services, construction, and
agriculture. Every sector has distinct qualities, importance, and a part in forming the economy. These
sectors are interdependent because changes in one can have a significant impact on other sectors and the
economy.
Q3. Explain the mechanisms of all the 5-year plans in detail.
[Link] the process of poverty and unemployment estimation in India.
The government of India uses the estimation of poverty and unemployment as a vital tool to
learn more about the socioeconomic circumstances of its people. The Indian government uses a
variety of techniques and metrics to determine poverty and unemployment rates with accuracy.
The process of estimating poverty and unemployment in India is clarified in this publication.
The primary agency in India for estimating poverty is the Planning Commission, which develops
social and economic development programmes. The National Sample Survey (NSS), a large-
scale sample survey, provides consumption spending data that the Planning Commission
employs in its approach. Periodically, this survey is carried out to gather data on a variety of
household-related topics, including consumption habits.
The idea of the poverty line serves as the foundation for the approach used to estimate poverty.
The minimal amount of money or consumption required to meet one's essential needs and the
prerequisites for a respectable standard of living is known as the poverty line. In India, the
amount needed to buy a certain quantity of calories and other necessities is considered the
poverty line.
The Planning Commission makes distinct calculations of the poverty line for rural and urban
areas using information gathered from the NSS survey. Periodically, the poverty line is revised to
reflect shifts in consumer behaviour and price trends. The most recent estimates of the poverty
line included in the document are for the fiscal year 2011–12.
The NSS survey data is also the basis for the calculation of unemployment in India. The NSS
gathers data on household and individual employment and unemployment status. The number of
jobless people divided by the entire labour force—which consists of both employed and
unemployed people—is how the unemployment rate is determined.
Data on the unemployment rate from 2004–05 to 2012–13 is provided in the document. It
demonstrates that India's unemployment rate has been falling over time, pointing to a
comparatively stable labour economy. It is crucial to remember that the unemployment rate does
not fully reflect the level of underemployment and informal employment; rather, it merely offers
a snapshot of the labour market at a specific moment in time.
In conclusion, the estimation of poverty and unemployment in India is a complex process that
involves the collection and analysis of large-scale survey data. The Planning Commission plays a
key role in this process by utilizing the data from the NSS survey to calculate poverty lines and
estimate unemployment rates. These estimates are crucial for policy formulation and
implementing targeted interventions to alleviate poverty and unemployment in the country.
[Link] do you mean by inflation? Explain the causes for rise of prices in India.
The steady rise in the average level of prices for goods and services over an extended period in an
economy is referred to as inflation. It implies that when prices rise, money loses purchasing power. An
economy may experience both positive and negative repercussions from inflation, therefore it's critical to
comprehend its sources and ramifications.
There are a number of reasons why prices are rising in India, which results in inflation. The inflation
driven by demand is one of the main causes. This happens when the economy has an overabundance of
demand for products and services, which raises the need for inputs like labour and raw materials. In order
to maximise their earnings, producers raise prices when demand exceeds supply.
Cost-push inflation is another factor contributing to inflation in India. This is the result of firms having to
raise their manufacturing costs, which drives up consumer prices. Cost-push inflation is a result of
multiple variables in India. Increasing oil prices is one of them. Since India depends mostly on oil
imports, rising oil prices drive up the cost of production and transportation, which in turn drives up
pricing.
Food inflation is another factor driving cost-push inflation in India. Given that India is an agricultural
nation, changes in agricultural productivity can have a big effect on food costs. Food prices can rise in
response to a reduction in supply caused by variables including unfavourable monsoon seasons,
interruptions in the supply chain, and export limitations.
Moreover, structural issues are also responsible for India's inflation. These include things like poor
distribution system efficiency, supply bottlenecks, and inadequate infrastructure. The smooth movement
of goods and services can be impeded by logistical limitations and limited infrastructure, which can result
in increased pricing for consumers.
Apart from the local variables, there exist other elements that may impact inflation in India. For instance,
changes in the price of commodities internationally, shifts in currency rates, and changes in the state of
the world economy can all affect home market prices. Prices in India may be impacted by shifts in the
demand and supply dynamics for commodities like metals, energy, and agricultural items on a worldwide
scale.
Finally, there is a monetary component to inflation. Inflation is impacted by the Reserve Bank of India's
(RBI) monetary policy choices. Lower interest rates could encourage borrowing and spending, which
would increase inflation, if the RBI does so to boost economic growth.
In conclusion, there are several reasons for the price increases that have caused inflation in India. The
variables that drive price increases include demand-pull inflation, cost-push inflation, structural factors,
global factors, and monetary factors. To ensure price stability and rein in inflation, authorities must keep a
close eye on these variables and take the necessary action.
Q6. Elucidate the whole concept of Indian Financial System.
The intricate web of markets, financial institutions, tools, and laws that make up the Indian financial
system makes it easier for savers and borrowers to transfer money around the economy. It is essential for
mobilising savings and effectively allocating resources for economic growth.
The Indian financial system is made up of different parts. The banking industry, which consists of
regional rural banks, commercial banks, and cooperative banks, is one of the essential elements. These
financial institutions take deposits from the general population and offer loans and other financial services
to the government, businesses, and private citizens.
Particularly, commercial banks are well-represented in the Indian financial sector. They provide several
different services, including trade finance, credit cards, loans, savings and current accounts, and more. By
supplying money for investment and consumption, they also serve as middlemen between the economic
units experiencing a surplus and deficit.
In the Indian financial system, non-banking financial institutions (NBFCs) are just as important as banks.
Financial intermediaries known as non-bank financial companies (NBFCs) offer a range of financial
services, including asset financing, hire-purchase, leasing, and investment consulting. By providing credit
to groups of people who would not have easy access to typical banking services, they enhance the
function of banks.
The Indian financial system is also subject to oversight and regulation by a number of regulatory
authorities. The Reserve Bank of India (RBI) is the nation's central bank and is in charge of setting
monetary policy, issuing and managing currency, and supervising banks and non-bank financial
institutions. Investor interests are safeguarded and capital markets are regulated by the Securities and
Exchange Board of India (SEBI). The Pension Fund Regulatory and Development Authority (PFRDA)
and the Insurance Regulatory and Development Authority (IRDA) are two more regulatory agencies.
Additionally, there are various regulatory bodies that oversee and regulate the Indian financial system.
The Reserve Bank of India (RBI) is the central bank responsible for monetary policy, issue and
management of the country's currency, and regulation of banks and NBFCs. The Securities and Exchange
Board of India (SEBI) regulates capital markets and protects the interests of investors. Other regulatory
bodies include the Insurance Regulatory and Development Authority (IRDA) and Pension Fund
Regulatory and Development Authority (PFRDA).
Payment and settlement services, which make it easier for people, companies, and institutions to transfer
money, also help the Indian financial system. National Electronic Fund Transfer (NEFT), real-time gross
settlement (RTGS), and electronic fund transfer (EFT) are some of these systems.
Over the years, the Indian financial system has grown and changed significantly. New financial
institutions and creative financial products have emerged as a result of reforms like globalization,
privatization, and liberalization, which have also increased system efficiency and transparency.
Nonetheless, there are still issues and weaknesses with the Indian financial system. These include
problems with non-performing assets (NPAs), financial inclusion, credit availability for specific groups,
and regulatory and governance concerns. The government and regulatory agencies are working to resolve
these issues and fortify the Indian financial system in order to promote long-term, steady economic
growth.
Nonetheless, there are still issues and weaknesses with the Indian financial system. These include
problems with non-performing assets (NPAs), financial inclusion, credit availability for specific groups,
and regulatory and governance concerns. The government and regulatory agencies are working to resolve
these issues and fortify the Indian financial system in order to promote long-term, steady economic
growth.
