Indian economic overview, challenges and strategic implications of social, economic and legal institutions for entrepreneurship

1. 17-09-2016

2. Course code:-RAWE
Course title:-Rural
Agriculture Work Experience
Credit hour:-(0+4)
B.Sc.(Ag.) 4th Yr., INSTITUTE OF AGRICULTURE SCIENCES, BHU 17-09-2016

3. Contents:
 Indian economic overview: a) Introduction.
b) Salient features.
 Challenges before Indian economy.
 Sectors of Indian economy : a) Agriculture.
b) Industry.
c) Services.
 Strategic implications of Social, Economic & Legal
institutions for entrepreneurship.
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5. INTRODUCTION:-
 For over a century, the United States has been the largest
economy in the world but major developments have taken
place in the world economy since then, leading to the shift of
focus from the United States (US) and the rich countries of
Europe to the two Asian giants, India and China.
 The share of the US in world GDP is expected to fall (from
21 percent to 18 percent) and that of India to rise (from 6
percent to 11 percent in 2025), and hence the latter will
emerge as the third pole in the global economy after the US
and China.
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6. SALIENT FEATURES:-
 India is the 10th largest economy in the world by nominal GDP.
 In terms of Purchasing power parity(PPP), it is the 3rd largest
economy after US & China.
 The country is one of the G-20 major economies, a member
of BRICS and a developing economy among the top 20 global
traders according to the WTO.
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7. …. The per capita GDP contribution was 1623 USD in 2014.
 The average GDP growth rate of India for the decade 2006-16
has been 8.5%.
 As of 2015, the GDP growth rate was 7.2%.
 Unemployment has dropped by 2% annually, and illiteracy
and mortality rates have also been falling, indicating that India
is not only growing but developing too.
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8. Challenges Before Indian Economy
& ways to overcome them:-
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9. …. Implementing appropriate tax reforms to remove indirect
taxes.
 Policy interventions in terms of simplifying procedures
and relaxing entry barriers for business activities.
 Checking the growth of population. Due to a high
population growth, per capita remains very poor. It was
only $ 2880 in 2003 (World Bank figures).
 Transforming the booming youth population into human
capital. As per Global human capital index 2016,
India has been placed 105th out of 130 countries.
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10. ….
 Creating jobs and meaningful employment opportunities.
 Building infrastructure, particularly in the backward states &
in the agriculture sector.
 Access to finance for farmers & enterprises at competitive
rates and for all credit worthy projects.
 Pursuing the objective of food security through productivity
increase and agriculture marketing reforms.
 Luring higher foreign direct investment (FDI) which trigger
technology upgradation, assists human capital formation &
improves the efficiency of resource use. 17-09-2016

11. Agricultural
Sector
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12. ….
 Agriculture and allied sectors like forestry& animal husbandry
accounts for 16.3% of total GDP at 2015-16 prices in 2013-14(CSO).
 It employs 49.7 per cent of the total work force as in 2013.
 The index of agricultural production(IAP) for the year 2012-13 was
124.2.(Dept of ag. & co.).
 It is the largest economic sector of India. Due to steady improvement
in irrigation, technology, modern agricultural practices, the yield per
unit area of all crops have increased tremendously since
independence, but significant research is still sought to negate the
effect of monsoon woes which make it an unreliable sector in our
economy.
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13. Food grain production over the years:-
257.1
265.6
257.4
0
Production(in million tonnes)
2012-13 2013-14
2014-15
Source: Economic survey 2015-16(GOI). 17-09-2016

14. Agricultural development:-
 Despite the substantial decline in the share of agriculture sector in
the GDP over the years, the fact that almost half of the total
workforce being dependent on agriculture and allied activities for
their livelihood, underscores the significance of the sector to
sustain growth in the country.
 The 12th Five-year plan (2009-2010 to 2014-15) has set a target of
3.1 per cent growth in agriculture sector to achieve a target of 8.7
per cent GDP growth.
 With the rising and substantial increase in income, especially of
non-agricultural workforce, there is a huge demand potential for
agriculture and agro-processing industries.
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15. 12.8
14.1
14.17
12 12.5 13 13.5 14 14.5
2011-12
2012-13
2013-14
Export earnings from agriculture sector(%)
Export earnings from
agriculture sector(%)
Source: Economic survey 2015-16(GOI). 17-09-2016

16. ….
 As per the ‘Agriculture policy vision 2020’, there would be
around 2.5 million tonnes of extra demand for food grains
annually, while significant increases are being needed in the
supply of livestock, fish & horticulture products as well.
 The 12th Five-year plan (2009-2010 to 2014-15) has set a target
of 3.1 per cent growth in agriculture sector to achieve a target
of 8.7 per cent GDP growth.
 If Indian economy has to achieve an annual average GDP
growth of around 9.5-10% in the next five years, agriculture
sector has to grow by around 4.5-5.0%. 17-09-2016

17. 1.1
3.7
1.2
0 1 2 3 4
2014-15
2013-14
2012-13
Agriculture growth(%)
Agriculture growth(%)
Source: Economic survey 2015-16(GOI). 17-09-2016

18. ….
 Given that modern technologies for agricultural sector require
increased use of water, there should be significant rise in area
covered under irrigation facilities. This will also help in
unleashing the agriculture sector from the vagaries of monsoon.
 Measures such as increasing power supply to the sector,
improving credit facilities for farmers, establishing competitive
seed markets & ensuring attractive prices for seeds, improving
terms of trade for agriculture and strengthening of agriculture-
industry linkages should remain high in the policy framework for
the sector.
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19. ….
 Given that post- harvest losses generally range from 5-10%
for non-perishables and about 30% for perishable farm
output, an emphasis should be placed on the development of
post-harvest handling & agro-processing in order to
minimize the post-harvest losses.
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21. ….
 Index of industrial production which measures the overall
industrial growth rate was 3.1 per cent in 2015-16.
 . The sector accounted for 31.0% of the total GDP(2015-16).
 The sector has 24.4 per cent share in total employment as in
2011-12.
 The largest sector here holds the textile industry. Automobile
sector has also demonstrated the inherent strength of Indian
labour & capital.
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22. 2.4
4.5
5.1
0
1
2
3
4
5
6
2013-14 2014-15 2015-16
Growth rate(%)
Growth rate(%)
Source: Economic survey 2015-16(GOI). 17-09-2016

23. Sub-sectors of Industry:-
5
8.8
7.1
0
1
2
3
4
5
6
7
8
9
10
Mining & quarrying Manufacturing &
electricity
Gas & water supply
Growth % (2009-10)
Growth % (2009-10)
Source: Economic survey 2015-16(GOI). 17-09-2016

24. RECENT INITIATIVES TO BOOST
INDUSTRIAL GROWTH:-
 Ease of Doing Business.
 Make in India.
 E-Biz Project.
 Skill development.
 Streamlining environment and forest clearances.
 Labour- sector reforms.
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26. ….
 The services sector is the fastest growing sector with its growth
rate being 10.8 per cent in 2015-16.
 The sector has contributed 52.7 per cent in India’s GDP (2015-
16).
 It’s share in employment is 28.5 per cent (2011-12).
 The growth of it’s labour productivity in the decade 2000-2010
was 6.5 per cent.
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27. 8.6
5.7 5.6
0
1
2
3
4
5
6
7
8
9
10
Spain India China
Service sector’s growth (pp) in share to GDP (2001-13)
Growth (pp) in share to GDP
(2001-13)
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28. SUB-SECTORS:-
45.8
18.8
7.8
0.8
11.8
11.5
5.8
EXPORT(%)
Computer services
Other business services
Technical & trade related
services
R & D services
Travel services
Transport services
Finance, insurance &
pension servicesSource: Economic survey 2015-16(GOI). 17-09-2016

29. SOCIAL INSTITUTIONS
 A social institution is a complex of positions, roles, norms,
and values lodged in particular types of social structures and
organizing relatively stable patterns of human resources with
respect to fundamental problems in sustaining viable societal
structures within a given environment.
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30. It’s relevance:-
 An understanding of a country’s business environment is not
complete without an appropriate understanding of social
institutions such as the economic system and the legal and
religious environment.
 Without an understanding of these social institutions, it is
difficult to have a complete understanding of the
entrepreneurial environment.
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31.  Definition: The economic system is the structures and
processes that guide the conduct of business activities
that lead to the production of goods and services
consumed by the members of a society.
Economic system:-
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32.  The allocation of resources.
 The organization of production.
 The distribution of finished goods and services.
 The promotion of economic progress.
 The maintenance of economic stabilility.
Functions:-
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33. Types of economy:-
 Capitalist/ Market /Free economy.
 Socialist/ Command economy.
 Mixed economy.
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34. Market / Capitalist/Free Economy
 It is marked by the production activities which are “decentralized to
private-property-rights holders (or their agents) who carry out these
activities for the purpose of making profits in a competitive
market.” It is characterized by economic freedom.
Examples:
 The U.S.A.
 Japan.
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35. Command/Socialist / Communist
Economy
 It is one where production resources are owned by the state and
production decisions are centrally coordinated. It is marked by the
dominance of public sector and its commitment for social good
(social welfare).
Examples:
 Cuba
 China
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36. Mixed Economy:-
 Economic System that incorporates some Governmental involvement
into a Market Based Economy.
 It combines aspects of both, the capitalist
& socialist economic systems.
Examples:
 INDIA
 Most “Modern” Economies
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37. Difference..
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38. Implications of economic systems on
entrepreneurship:-
 Privatization- a new powerful incentive to turn around
formerly state-run businesses namely profits.
 In market economies, government interference & labour
regulation is minimal. However, that’s not the case for many
of the mixed economies.
 Another aspect of economic systems applies to
TRANSITION ECONOMIES which are those societies that
are moving from socialism to a more market-based system.
Understanding the after-effects of communism on workers &
companies are a challenge to most of the MNCs.
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39. …. One other important component of the economic system is the
degree of governmental interference in the conduct of
business. In that context, MNCs may consider the index of
economic freedom, which refers to “the absence of
government coercion or constraint on the production,
distribution, or consumption of goods and services beyond the
extent necessary for citizens to protect and maintain liberty
itself.”
 Representative countries are listed for each of the five
categories of economic freedom, namely those nations that
are: 1)free, 2) mostly free, 3)moderately free, 4)mostly
‘unfree’ and 5) repressed.
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40. ….
FREE MOSTLY FREE MODERATELY
FREE
MOSTLY
UNFREE
REPRESSED
Hong Kong
Singapore
Australia
USA
UK
New
Zealand
Canada
Chile
Japan
Netherlands
Taiwan
Spain
Norway
Finland
Bahamas
Luxembourg
Mauritius
South Korea
France
Thailand
Namibia
Peru
Switzerland
Tunisia
Lebanon
Czech
Republic
India
China
Russia
Nigeria
Algeria
Vietnam
Ghana
Poland
Fiji
Senegal
Cuba
Libya
Angola
Belarus
Bangladesh
Burundi
Venezuela
Turkmenistan
Sierra Leone
Togo
Source: Based on heritage foundation index of economic freedom, www.heritage.org
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41. POLITICO-LEGAL SYSTEMS:-
 The politico-legal system is the unique system of regulations,
laws & rules formulated by the political establishment of the
country that affect the choices made by individuals in any
society and that govern the ways these individuals are
responsible for their decisions and actions.
 A widely accepted parameter indicating the degree of concern
of a government to facilitate acts of entrepreneurship is “the
ease of doing business index” created by the World Bank
Group. India has been ranked 130th out of a total of 189
countries measured on the index as on June 2015.
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42. Variables determining political & legal
business environment of a country:-
 Political stability.
 Government’s support to economic development.
 Labour and environment laws.
 Special policies, schemes and programmes.
 Entry barriers.
 Ease of doing business.
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43. Types of legal systems:-
 Common law: based on the concept of precedent, whereby the
law is applied after an examination of past cases.
Example: India, Australia, Japan, US.
 Civil law: based on a very detailed set of rules and regulations
that form part of a country’s legal code.
Example: France, Russia, Azerbaijan, Belarus.
 Islamic law: based on the Shari’ah,the law taken from the
Qur’an, Islam’s sacred texts.
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44. Environment of entrepreneurship.
Environmental influence
(Social, Cultural, Economic, Political & Legal)
Input
Business organisation
& processes
Output
Marketing &
consumption
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45. Welcome Queries…
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46. 
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