✦ The term economics comes from the Ancient Greek word oikonomia mean management of a household, administration. The term economic process refers to those activities, through which goods and services aimed at satisfying human needs, are produced, distributed and used.
✦ Economics includes the study of labour, land and investments of money, income and production and taxes and government expenditures.
✦ Adam Smith regarded as the Father of Economics, defines Economics as, “The science relating to the laws of production, distribution and exchange.
Branches of Economics
✦ The two chief branches are
✦ It examines the behavior of basic elements in the economy, including individual agents (such as households and firms or as buyers, and sellers) and market and their interaction.
✦ It is concerned with how the overall economy works. It studies such things as employment, gross domestic product and inflation; the stuff of news stories and government policy debates.
✦ It studies the economy as a whole and its features like national income, employment, poverty, balance of payments and inflation.
✦ Economy represents the production, distribution or trade and consumption of goods and services in a given geographical area by different agents, which can be individuals, businesses, organization or governments.
✦ The study of economy of any country helps us in finding out the financial condition of the population as well as the different working sectors of the economy.
✦ The Modern Economy is a complex machine. Its job is to allocate limited resources and distribute output among a large number of agents mainly individuals, firms and governments allowing for the possibility that each agent’s action can (directly or indirectly) affect other agent’s actions.
✦ Market-economy mostly free from trade barriers and where exports and imports from a large percentage of the GDP.
✦ No economy is totally open or closed in terms of trade restrictions and all governments have varying degrees of control over movements of capital and labour.
✦ Degree of openness of an economy determines a government’s freedom to pursue economic policies of its choice and the suceptability of the country to the international economic cycles.
✦ An economy in which no activity is conducted with outside economies. A closed economy is self-sufficient meaning that no imports are brought in and no exports are sent out.
✦ The goal of such economy is to provide consumers with everything that they need from within the country’s borders.
Broad Sectors of Indian Economy
✦ Primary sector: Agriculture, forestry and fishing (also called raw materials).
✦ Secondary Sector: Mining manufacturing, electricity gas and water supply, construction (also called manufacturing sector).
✦ Tertiary Sector: business, transport, telecommunication, banking, insurance, real estate, community and personnel services (also called service sector).
Nature of Indian Economy
1. Mixed Economy: It is an economy, where both public and private sector co-exist. The nature of Indian economy is a mixed economy. The term Mixed economy was coined by JM Keynes.
2. Developing Economy: Following features shows that Indian economy is a developing economy
a) Low per capita income.
b) Occupational pattern is primary producing.
c) Heavy population pressure.
d) Prevalence of chronic unemployment and underemployment.
e) Steadily improving rate of capital formation.
f) Low capital per head.
g) Inequal distribution of wealth/assets.
3. Agrarian Economy: An agrarian economy is a type of economy that relies primarily on agricultural industry including livestock farming or crop production. More than half of India ‘s working population is engaged in agriculture.
Economy explains the financial condition of the different sectors of the country. The study of economy of any country helps us in finding out the financial condition of the population as well as the different working sectors of the economy. It also helps in comparing the economic condition of two different countries
✦ Indian economy is world’s 7th largest economy on exchange rate basis and 3th largest economy on PPP basis in 2014 (World Bank)
✦ The government has forecast a growth rate of 7%- 7.5% for the year 2015-16, whilst the RBI expects the same to be at 7%(Base year: 2011-2012)
✦ India has a share of 17.4 % in world population ,but accounts for only 2.3% of world’s GNI (Gross National Income) on exchange rate
|Purchasing Power parity (PPP) is a theory, which states that exchanges rates between currencies are balanced, when their purchasing power is the same in each of the two countries.