This document provides an overview of the topic of industrial economics. It discusses key concepts such as: - Industrial economics deals with economic problems of firms and industries and their relationship with society. - Descriptive economics aims to provide information to industrialists about resources, infrastructure, competition and policies. - Analytical economics covers topics like market analysis, pricing, investment planning and financial decisions. - Other sections define related terms like cottage industry, capital intensive techniques, productivity, intellectual property rights, foreign direct investment, and the factors that influence investment.

1. Industrial economics
ELECTIVE COURSE
DESH D. YADAV
ECE, SMVDU

2. Industrial Economics Mean
 Industrial economics is a distinctive branch of economics which
deals with the economic problems of firms and industries, and their
relationship with society.
 it deals with the information about the competitors, natural resources
and factors of production and government rules and regulations
related to the concerned industry

3. elements of industrial economics
1. descriptive –
 descriptive element, is concerned with the information content of
the subject. It aims at providing the industrialist or businessman with
a survey of the industrial and commercial organizations of his own
country and of the other countries with which he might come in
contact. It would give him full information regarding the natural
resources, industrial climate in the country, situation of the
infrastructure including lines of traffic, supplies of factors of
production, trade and commercial policies of the governments
and the degree of competition in the business in which he
operates.

4. …..elements of industrial economics
2. ANALYTICAL ECONOMICS
 This is the analytical part dealing with topics such as market analysis,
pricing, choice of techniques, location of plant, investment planning,
hiring and firing of labour, financial decisions, product diversification and
so on.
 It is a vital part of the subject and much of the received theory of
industrial economics is concerned with this

5. Cottage Industry
 An industry whose labour force consists of family units or individuals
working at home with their own equipment.
 a small and often informally organized industry.
 examples of COTTAGE INDUSTRY-weaving, pottery, etc.

6. CAPITAL INTENSIVE TECHNIQUE
 A business process or an industry that requires large amounts
of money and other financial resources to produce a good
or service. A business is considered capital intensive based
on the ratio of the capital required to the amount of labor
that is required.
 Companies in capital-intensive industries are thus often
marked by high levels of depreciation and fixed assets on
the balance sheet.

7. Industrial Productivity
 Productivity is an average measure of the efficiency of production.
It can be expressed as the ratio of output to inputs used in the
production process, i.e. output per unit of input.
 Productivity is a crucial factor in production performance of firms
and nations. Increasing national productivity can raise living
standards because more real income improves people's ability to
purchase goods and services, enjoy leisure, improve housing and
education and contribute to social and environmental programs.
Productivity growth also helps businesses to be more profitable.

8. Intellectual property rights
 Intellectual property rights refers to the general term for the assignment
of property rights through patents, copyrights and trademarks.
These property rights allow the holder to exercise a monopoly on the use
of the item for a specified period.
 IP is protected in law by, for example, patents, copyright and trademarks,
which enable people to earn recognition or financial benefit from what
they invent or create. By striking the right balance between the interests
of innovators and the wider public interest, the IP system aims to foster an
environment in which creativity and innovation can flourish.

9. FOREIGN DIRECT INVESTMENT
 FDI is the purchase or construction of tangible assets (land, factories,
machines, buildings and enterprises) in one country by firms from another
country. This does not include investment in stock markets. Increased
access to FDI is seen as one of the key benefits of globalization because it
is thought to lead to capital formation, technology and knowledge
transfer, higher wages and greater job opportunities.
 FDI, along with international financial stability, are vital components to
national and international development efforts. Many other international
policy documents stress the value of FDI but critics are concerned that its
benefits are very unequally distributed, both globally and within societies.

10. …..Foreign Direct Investment
 FDI is an important source of private capital for some developing
countries. The booming economies of Asia have become the largest
recipients of FDI, with their share of total FDI rising from 28% in the 1980s to
60% in the 1990s; from 1985 to 1991, 55% of all FDI went to just six countries.
The top 500 multinational corporations, 90% of which are based in the
United States, Europe, and Japan, are responsible for 90% of FDI
investment.

11. …. the factors which encourage investment FDI
 Proponents of FDI argue that it generates a virtuous cycle (good
economic performance leading to more investment), further reinforcing
economic growth. However, others argue that the factors which
encourage investment - particularly low wages and a lax regulatory
environment - may be detrimental to development. For example, women
make up 90% of those working in export processing zones (set up to
encourage FDI). Many suffer poor working conditions and health risks, as
well as low pay. In some countries, FDI investment employs only relatively
skilled workers and thus benefits are unlikely to flow to the most vulnerable
groups.

12. …Factor’s Responsible for More FDI
FDI is more likely to go to countries with the right “pull-factors”.
 Cheaper costs - including wages, materials, and land.
 A deregulated environment
 A sizeable domestic market and its growth - particularly important are
privatization, service sector and import substitution activities
 Economic and political stability - in particular, absence of hyperinflation,
existence of security for personnel
 Infrastructure - both transport and information
 Good macroeconomic management, education systems, legal frameworks,
cooperation with trade unions
 Perceived security of foreign investment property rights.

13.  Both FDI and FII is related to investment in a foreign country. FDI or Foreign
Direct Investment is an investment that a parent company makes in a foreign
country. On the contrary, FII or Foreign Institutional Investor is an investment
made by an investor in the markets of a foreign nation.
 In FII, the companies only need to get registered in the stock exchange to
make investments. But FDI is quite different from it as they invest in a foreign
nation.
 FII can enter the stock market easily and also withdraw from it easily.
But FDI cannot enter and exit that easily. This difference is what makes nations
to choose FDI’s more than then FIIs.
Difference Between FDI and FII
(Foreign Direct/Institutional Investment)

14. Causes of Industrialization
1- Natural Resources
2- Growing Population
3- Improved Transportation
4- High Immigration
5- New Inventions
6- Investment Capital

15. Natural Resources
 Abundance of Forests: Cheap resource for building material.
 Large Supplies of Water: Vital source for human life, source for
power for businesses, shipping industry.
 Coal, Iron, Copper, Silver: Fuel source, tools, electricity, money

16. Growing Population
 Population growth will cause an increase of demand.
 More people = needed goods = growth of industry
Improved Transportation
 Railroad business booms as a result .
 Increases demand = increased supply = increase of shipping needs

17. High Immigration
 As people immigrated, some immigrants were skilled in trades that
would help industry grow.
 Unskilled workers provided cheap labor.
 More people = more workers

18. New Inventions
 New inventions helped produce goods more efficiently.
 Patents became common
 Economy Thriving = Increase of Business Profits
Investment Capital

19. Forecasting
 The use of historic data to determine the direction of future trends.
Forecasting is used by companies to determine how to allocate
their budgets for an upcoming period of time. This is typically based
on demand for the goods and services it offers, compared to the
cost of producing them.
 Investors utilize forecasting to determine if events affecting a
company, such as sales expectations, will increase or decrease the
price of shares in that company.
 Forecasting also provides an important benchmark for firms which
have a long-term perspective of operations.

20. Risk Management
 The process of identification, analysis and either acceptance or
mitigation of uncertainty in investment decision-making. Essentially,
risk management occurs anytime an investor or fund manager
analyses and attempts to quantify the potential for losses in an
investment and then takes the appropriate action (or inaction)
given their investment objectives and risk tolerance. Inadequate
risk management can result in severe consequences for
companies as well as individuals. For example, the recession that
began in 2008 was largely caused by the loose credit risk
management of financial firms.
 risk management is a two-step process - determining what risks exist
in an investment and then handling those risks in a way best-suited
to your investment objectives.

21. Sick Industry
 An industrial unit (a) which could not reach the stage of normal
production with normal profit or (b) has incurred loss or remained at
the unprofitable level for consecutive three to six years from the first
year of commercial production or (c) could not produce above
the break-even point for reasons beyond the control of the
entrepreneurs.
 The government first defined a sick industry through Sick Industries
Rehabilitation Cell in 1991.

22. Inclusive Growth
 Inclusive growth means economic growth that creates
employment opportunities and helps in reducing poverty.
 It means having access to essential services in health and
education by the poor.
 It includes providing equality of opportunity, empowering people
through education and skill development.
 It also encompasses a growth process that is environment friendly
growth, aims for good governance and a helps in creation of a
gender sensitive society.

23. Disinvestment
 In business, disinvestment means to sell off certain assets such as a
manufacturing plant, a division or subsidiary, or product line.
 The action of an organization or government selling or liquidating
an asset or subsidiary.
 A company or government organization will divest an asset or
subsidiary as a strategic move for the company, planning to put
the proceeds from the divestiture to better use that garners a
higher return on investment.
 Disinvestment is sometimes described as the opposite of capital
expenditures

24. Fixed and Variable Cost
 fixed costs are defined as expenses that do not change as a
function of the activity of a business, within the relevant period. For
example, a retailer must pay rent and utility bills irrespective of
sales.
 Variable costs are those costs that vary depending on a
company's production volume; they rise as production increases
and fall as production decreases.
 Variable costs differ from fixed costs such as rent, advertising,
insurance and office supplies, which tend to remain the same
regardless of production output.

25. Surplus Budget
 A situation in which income exceeds expenditures. The term
"budget surplus" is most commonly used to refer to the financial
situations of governments; individuals speak of "savings" rather than
a "budget surplus.
 A surplus is considered a sign that government is being run
efficiently. A budget surplus might be used to pay off debt, save for
the future, or to make a desired purchase that has been delayed.
 A city government that had a surplus might use the money to
make improvements to a run-down park, for example.

26. Deficit Budget
 A status of financial health in which expenditures exceed revenue.
The term "budget deficit" is most commonly used to refer to
government spending rather than business or individual spending.
When referring to accrued federal government deficits, the term
"national debt” is used.
 The opposite of a budget deficit is a budget surplus, and when
inflows equal outflows, the budget is said to be balanced.
 Budget deficits as a percentage of GDP may decrease in times of
economic prosperity, as increased tax revenue, lower
unemployment and economic growth reduce the need for
government programs such as unemployment insurance.
 Countries can counter budget deficits by promoting economic
growth, reducing government spending and increasing taxes.

27. Microfinance and Benefits of Microfinance
 A type of banking service that is provided to unemployed or low-
income individuals or groups who would otherwise have no other
means of gaining financial services.
 the goal of microfinance is to give low income people an
opportunity to become self-sufficient by providing a means of
saving money, borrowing money and insurance.
 The World Bank estimates that there are more than 500 million
people who have directly or indirectly benefited from
microfinance-related operations.

28. MAKE IN INDIA