This document provides an overview of different economic systems including market, planned, and mixed economies. It discusses key features and merits and demerits of each system. For market economies, features covered include private property, profit motive, and competition. Planned economies are characterized by public ownership, central planning, and equality. Mixed economies combine elements of both systems. The document then discusses India's economy, noting its emphasis on growth and development but also inefficiencies. It outlines reforms including liberalization, privatization, and globalization that opened the economy. In the end, it distinguishes between economic growth and development.

1. UNIT 1:
POLITICAL ENVIRONMENT AND
ECONOMIC SYSTEMS
Business Environment
BE/POL ENV & ECO SYS 1

2. Economy
• “the wealth and resources of a community,
especially in terms of the production and
consumption of goods and services”
BE/POL ENV & ECO SYS 2

3. Economic Systems
• Economic activities take place within the
framework of an economic system.
• An economic system is the socio economic
and political framework within which an
economy functions.
• The choice of economic system is influenced
by:
political, social, historical or ideological
considerations.
BE/POL ENV & ECO SYS 3

4. Problems faced by Economy
• What goods and services must be produced
and in what amount?
• How and where should the production be
organized so as to produce these goods and
services?
• Are the countries resources fully utilized?
• How to allocate the available resources among
production units?
BE/POL ENV & ECO SYS 4

5. Problems faced by Economy
• How should be the resultant output be
distributed?
• What proportion of goods produced shall be
capital and consumption?
BE/POL ENV & ECO SYS 5

6. Market or Capitalist Economy
• A free enterprise economy is feature of
capitalism.
• A free enterprise aims at :
– Free trade
– Freedom of choice in consumption
– Freedom of choice in production
– Freedom of occupation
BE/POL ENV & ECO SYS 6

7. Features of Market Economy
• Private Property
• Consumer Sovereignty
• Freedom of Enterprise
• Enlightened self interest
• Profit Motive
• Competition
• Existence of Markets and Prices
BE/POL ENV & ECO SYS 7

8. Features of Market Economy
• Absence of Central Plan
• Limited Government
• Active Entrepreneurship
• Class Conflict
• Use of Advanced Technology
• Specialization based on Division of labour
• Extensive use of money
BE/POL ENV & ECO SYS 8

9. Market Economy
Merits
• Automatic functioning
• Leads to greater efficiency and
incentive for hard work
• Higher rate of capital
formation and growth
• Economic Development and
prosperity
• Optimum utilization of
resources
• System of reward and penalty
Demerits
• Too materialistic
• Class Conflict
• Social Injustice and
Inequality
• Human welfare ignored
• Economic instability and
unemployment
• Misallocation of resources
• Malpractices
BE/POL ENV & ECO SYS 9

10. Planned or Socialist Economy
Features of
Planned
Economy
Public
ownershi
p of
property
Central
Planning
Authority
Growing
role of
public
Sector
Economi
c
equality
of ppl
Equality of
opportunity
Social
welfare and
security
Classless
Society
State is final
arbiter of all
issues
BE/POL ENV & ECO SYS 10

11. Planned Economy
Merits
• Social Justice
• Rapid Development
• Rational outlook and
scientific temperament
• Avoids pitfalls of market
economy
• Better allocation of
resources
• Improvement in productive
efficiency
Demerits
• Extensive centralisation and
bureaucratisation
• Equality of opportunity and
equitable distribution in
socialism is a myth
• Kills private initiative and
enterprise
• Lacks consumer sovereignty
• Slow and lethargic
BE/POL ENV & ECO SYS 11

12. Mixed Economy
• Co-existence of private and public sector
• Nationalisation of basic industries
• Reduction of inequalities of income
• Provision of social welfare measures
• Promotion of economic development through
planned efforts
• Resource allocation through the price system
and government directions
BE/POL ENV & ECO SYS 12

13. Mixed Economy
• Government control and regulation of the
private sector
• Consumer Sovereignty is protected but
government controls production ,
consumption and distribution
• Government is committed to the promotion of
public welfare and protection of labor and the
poor and the marginalized
BE/POL ENV & ECO SYS 13

14. Mixed Economy
• Prices are determined by market forces but
products of public sector are governed by
administered prices
• Control of monopoly
BE/POL ENV & ECO SYS 14

15. Indian Economy
• Achievement of faster economic growth
• Best allocation of Resources
• Balance between the Private and Public
Sectors
• The establishment of a welfare state
• Heavy Capital investment through planned
effort
BE/POL ENV & ECO SYS 15

16. Indian Economy…The Lackings
• Undue emphasis on growth of public sector
• Inefficiency of both the sectors
• Ineffective control of the private sector
• Economic Fluctuations
• Failure to solve demographic and
unemployment problems and inflation
• Extensive and corrupt bureaucracy
BE/POL ENV & ECO SYS 16

17. Economic Reforms of India
• 3 pillars of economic reforms in India
–Liberalisation
–Privatisation
–Globalisation
BE/POL ENV & ECO SYS 17

18. Liberalisation
• Delicenscing
• Corporatisation of PSU
• Shifting of products and industries from
administered pricing mechanism
• Freedom to PSU to access capital markets
BE/POL ENV & ECO SYS 18

19. Privatisation
• Divesture
• Denationalisation
• Opening up of core sectors earlier reserved for
public sector to private investment(roads ,
ports, insurance, power transmission,
telecommunications, etc)
BE/POL ENV & ECO SYS 19

20. Globalisation
• Reduction in scope of restrictive canalised trade
• Increase in FDI in number of areas
• Sustained reduction in custom duties on number
of import items
• Free import of large number of open general
licence
• Simplification, rationalisation and standardisation
of number of export-import procedures and
documentation
BE/POL ENV & ECO SYS 20

21. Growth and Development
BE/POL ENV & ECO SYS 21
GROWTH DEVELOPMENT
Uni-dimensional Multi-dimensional
Income Based Standard Of Living
Economy Society

22. Assignment
• ADVISABLE TO DO ASSIGNMENT;FINAL CALL YOU
YOURSELF HAVE TO TAKE.
• ASSIGNMENT IS GIVEN FOR UNDERSTANDING
THE SYLLABUS AND CLEAR DIFFICULTIES ;IF ANY .
• Give detailed information on following points:
– GDP
– GNP
– NDP
– NNP
Also mention the figures available for FY 2012-13
(TIP : for figures refer, http://www.indiabudget.nic.in)
BE/POL ENV & ECO SYS 22