Category: Economics

The paper “International Cooperation in Economic and Security Affairs, by Charles Lipson, published in the October 1984 issue of “World Politics” focuses on analyzing the different forms of strategic interaction that address issues pertaining to international cooperation in economic and security affairs. It analyzes the use of the Prisoner’s Dilemma theory to help clarify some basic features of international conflict and cooperation as well as some objections for its usage as a model of international interaction.

It also discusses factors that affect the relationship between superpowers, the hegemonic system, the effect of recessions, the evolution of cooperation as well as detailed account of sustained economic cooperation among developed nations.

The Prisoner’s Dilemma theory demonstrates both the possible benefits from cooperation and the factors that hinder it. The study of international political economy must address how relationships are corrected to make cooperation of exchange sensibly secure.

The author emphasizes the main issue in international relations theory, which is the emergence and maintenance of cooperation among sovereign, self-interest states, performing in the absence of centralized authority.

Every nation must readily commit to comply with economic agreements in order to facilitate trust and eliminate the risks of cooperating. Strategic cooperation is important in encouraging the creation of rules, norms, and political institutions in the international economy and in security affairs. It is also important to understand the pattern of rule construction in international cooperation.

This report has been an honest and dedicated attempt to make the analysis on marketing material as authentic as it could. And I earnestly hope that it provides useful and workable information and knowledge to any person reading it. During this period, I had the pleasure of working closely with accomplished organization people who shared with me their experience and helped me in completion of my research. I express my sincere thanks to my project guide Mr. Pranav Nagpurkar Lastly I am grateful to my parents who been my mentors and motivators.

I am also thankful to all my batch mates who have been directly or indirectly involved in successful completion of this project. Indian economy is the tenth largest economy in the world by nominal GDP and third largest by purchasing power. India is one of the G-20 major economies and member of BRICS. According to IMF India ranked 134th by nominal GDP on the basis of per capita income in 2012.

Its GDP is about $1. 824 trillion and per capita income is about $1491. Its GDP contribution by sector wise is agriculture 17. %, industry 26. 4% and services 56. 4% in 2011. Its population is about 1. 2 billion and labour force is 498. 4 million in 2012. Labour force by occupation: agriculture 52%, industry 14% and services 34%. Unemployement rate in India is 9. 9%. Its investment is about 30% of GDP. Revenue of India is $171. 5 billion and expenditure over $281 billion. It has deficit budget of 5. 6% of the GDP. Main industries are textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, and pharmaceuticals.

Its export is about 309. 1 billion and import is about 500. 3 billion. The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation.

In 1991, India adopted liberal and free-market oriented principles and liberalized its economy to international trade under the guidance of Manmohan Singh, who then was the Finance Minister of India under the leadership of P. V. Narasimha Rao the then Prime Minister who eliminated License Raj a pre- and post-British Era mechanism of strict government control on setting up new industry. By 2008, India had established itself as one of the world’s fastest growing economies. Growth significantly slowed to 6. % in 2008–09, but subsequently recovered to 7. 4% in 2009–10, while the fiscal deficit rose from 5. 9% to a high 6. 5% during the same period. India’s current account deficit urged to 4. 1% of GDP during Q2 FY11 against 3. 2% the previous quarter. India’s public debt stood at 68. 05% of GDP which is highest among the emerging economies. However, inflation remains stubbornly high with 7. 55% in August 2012, the highest amotrade (counting exports and imports) stands at $ 606. 7 billion and is currently the 9th largest in the world.

During 2011–12, India’s foreign trade grew by an impressive 30. 6% to reach $ 792. 3 billion (Exports-38. 33% & Imports-61. 67%). India has the world’s third largest road network, covering more than 4. 3 million kilometers and carrying 60% of freight and 87% of passenger traffic. Indian Railways is the fourth largest rail network in the world, with a track length of 114,500 kilometers. India has 13 major ports, handling a cargo volume of 850 million tonnes in 2010. India has a national teledensity rate of 74. 15% with 926. 3 million telephone subscribers, two-thirds of them in urban areas. But Internet use is rare, with around 13. 3 million broadband lines in India in December 2011. However, this is growing and is expected to boom following the expansion of 3G. * India’s current account deficit- The deficit has increased to a record 5. 6 percent of GDP in 2011-12, far above what the Reserve Bank of India considers to be a sustainable level, namely 2. 5 percent of GDP.

The key reason for the large current account deficit is the trade deficit increasing due to India’s relatively poor competitiveness and high dependence on oil and gold imports, which alone account for virtually half of total imports. Boosting merchandise exports through greater diversification across destinations and products are essential to bridge the trade deficit but this cannot be achieved without boosting labour productivity and enhancing transportation infrastructure, especially ports. With regards to gold, dematerialization, and introduction of inflation linked bonds would help reduce its physical imports of gold.

Meanwhile, for oil, achieving greater energy efficiency, aligning domestic oil prices to international ones are a key or to find out different alternative/ substitute for it. * Qualitative and quantitative fiscal consolidation: Together with the current account deficit, the stubbornly high fiscal deficit (5. 8 percent of GDP in 2011-12) makes the Indian economy more vulnerable to shocks than most emerging markets. India’s twin deficits have adversely affected macro stability by pushing up inflation, undermining growth and leaving limited room for monetary accommodation.

India’s fiscal policy has been too loose for too long. The government must focus on quality spending by channeling resources towards infrastructure and human capital investments while reducing unproductive spending, particularly on food, fertilizer and fuel subsidies. Furthermore, the government must implement revenue enhancing reforms by making the tax system more efficient and improving compliance. * Lowering high and sticky inflation- India’s persistently high inflation is fallout of myriad factors that are both cyclical and structural in nature.

These include supply side bottlenecks, very high reliance on imported energy and lax fiscal policy. While a loose fiscal policy has boosted aggregate demand, particularly across rural areas, an enabling environment to enhance supply response is missing, thus aggravating inflation pressures. Containing inflation near the RBI’s comfort zone of 4 to 5 percent is crucial to facilitate sustainable growth. * Rebalancing the growth mix in favor of investment: India’s GDP growth is mainly consumption driven in good part due to consumption subsidies.

Eliminating such subsidies will, thus, actually have three positive outcomes: reducing the fiscal deficit as well as excessive consumption which should also help reignite a virtuous savings investment cycle. In fact, since the global financial crisis of 2008-09, India’s savings rate has declined (to near 29 percent from a peak of 37 percent in 2009) amid high inflation and fiscal slippages. Given that India’s investment upturn during the golden years between 2004-2008 was largely financed by domestic savings, a revival in India’s domestic savings is critical for aiding a sustainable upturn in investment.

In this regard, the Indian government needs to improve further on reforms execution and policy clarity so as to underpin foreign investor confidence. * Manufacturing sector- Being a primarily services driven economy, the share of manufacturing has been stagnant at a mere 16 percent of total GDP. India’s Asian peers, such as China, South Korea and Taiwan, have immensely benefited from a strong manufacturing sector, which enables greater employment creation, attracts higher and stable foreign direct investment and bolsters infrastructure development.

However, bottlenecks in land acquisition, archaic labor laws, poor physical infrastructure, less favorable tax rules and tight regulations deter manufacturing sector growth in India. Reassuringly, the Indian government has approved a national manufacturing policy aimed to increase the manufacturing’s share in GDP from the current 16 to 22 percent in a decade and in turn create millions of jobs and add capacity to sustain the pace of economic growth. That said, effective implementation of such policy drive will clearly prove difficult given past records.

Population- India’s population is about 1. 2 billion in 2012 which is a major challenge for the economy of India. For the developing countries like India, population explosion is a curse and is damaging to the development of the country and it’s society. The developing countries already facing a lack in their resources, and with the rapidly increasing population, the resources available per person are reduced further, leading to increased poverty, lack of food, malnutrition, and other large population-related problems.

The literal meaning of population is “the whole number of people or inhabitants in a country or region” , and the literal meaning of population explosion is “a pyramiding of numbers of a biological population”. As the number of people in a pyramid increases, so do the problems related to the increased population. The main factors affecting the population change are the birth rate, death rate and migration. The birth rate is the ratio between births and individuals in a specified population and time. The death rate is the ratio between the number of deaths and individuals in a specified population and time.

Migration is the number of people moving in (immigration) or out (emigration) of a country, place or locality. Immigration from the neighboring countries of Bangladesh and Nepal is also one of the causes of increasing population in India. The Population density (people per sq. km) in India was last reported at 411. 89 in 2010, according to a World Bank report published in 2012 which is very high. Measures to overcome from it. For limiting the population increase and we have to spend money on controlling the birth rate.

Some of the programs have been successful, and the rate of increase has also reduced, but has still to reach the sustainable rate. The major factors affecting the population increase of India are the rapidly increasing birth rate and decreasing death rates. We can follow strict birth control measures like China to decrease the birth rate, but we cannot go and decrease our technological advancements to decrease the death rate. Thus, our main emphasis falls on decreasing the birth rate. Several government-funded agencies like the Family Planning Association of India spend hundreds of thousands of dollars on promoting family planning.

These organizations aim to promote family planning as a basic human right and the norm of a two-child family on a voluntary basis, to achieve a balance between the population size and resources, to prepare young people for responsible attitudes in human sexuality, and to provide education and services to all. The family planning methods provided by the family planning program are vasectomy, tubectomy, IUD, conventional contraceptives(that is condoms, diaphragms, jelly/cream tubes, foam tables) and oral pills.

In addition, induced abortion is available, free of charge, in institutions recognized by the government for this purpose. However, the success of the family planning program in India depends on several factors like literacy, religion and the region where the couple live. * Poverty- It is a situation in which a person is unable to get minimum basic necessities of life, i. e.. food, clothing and shelter for his or her living. In economic terms they are called poverty ridden and are people living below poverty line (BPL).

MASS POVERTY: When a large section of the people in an economy is deprived of the basic necessities, that economy is said to be in mass poverty. Since it is the responsibility of the state to remove poverty, it has to take certain steps. -Developing an appropriate mechanism to identify the poverty – ridden people. -Estimate the total number of poverty-ridden persons with the help of that mechanism. In the first approach, expenditure incurred by a family on various items is used. In the second, the income earned by a family is used.

To analysis the environmental sustainability we must first understand the concept of Sustainability to help us preform a successful environmental analyses and define the key problem of Woolworths sustainability and recommend correct and fast result solutions so the Sustainability is a strategic plan that help’s companies to develop their economic growth over the long term through their interest in environmental and social problems and connect them to the business model of their company.

The difference between corporate social responsibility and sustainability as sustainability involves forward path of the business profitability and changing the cultural of the company while social responsibility deals with issues retroactively and looks at the past actions that has been taking.

Environmental sustainability Is a percentage of using the renewable resources for the company where it achieves its sustainable economic growth, now a days their is no company that can grow economically indefinitely without causing any environmental harm, but they can reduce the harm through using of alternative and new methods to preserve the resources of renewable and economic growth such as Woolworth.

From Woolworths point of view the sustainability means doing the right thing and implementing it can have huge impact on their organizations, but at the same time they believe that sustainable behavior help them making good sense of business so they consider sustainability as serious matter and they try their best to have right tools and methods to achieve there sustainability strategy by including sustainability process in all there stores across Australia and New Zealand.

Changing the behavior and mentality of 180,000 employees is anomies challenge to Woolworths, but they insensate that they can overcome the challenges by using transparency and openness in any obstacles they face by identifying the right action that will be taken to help them in measuring the performance quality and speed to meet the target goal, in addition they are willing to significantly spend money and provide the necessary resources to bring the strategy to life and maintain the long-term cost of the business.

The competitive rivalry is at the highest level between the companies in the supermarket industry, where is based on the price of the product, location of the store and type of the serves they are offering, but Woolworth strategy of using the sustainability increased they rivalry among the competitor where most of the customers are concern with the environmental behavior of the company.

Threat of Substitution: The industrial substitute that supermarket can face is the availability of similar alternative places where the customer can buy what they need in same quality, lower price, the location of the alternative super market and the parking place finally the verity of the product. In Woolworth’s case the substitute of the supermarket is moderate to high.

Threat of New Entry:

The supermarket industry is not an low price industry and any one can invest in, the reason why it’s hared to start a supermarket is the obstacles that cold appear which is high market price of the lands, hug capital and government restrictions and regulations can stop the business to enter the market however the quality and the price od the product also should be customize in a way the fits the customer need and bought

PESTLE Analysis The success of Woolworth as best company in Australia and the significantly positive macro-economic environment can estimate New Zealand, which is deals with political, economic, social and technological factors of the organization.

Political

The Political and economic relations bonds and stability between Australia and New Zealand has helped Woolworths to ensure its constancy in both countries, where it is considered it self working within a single economy, which leads to the emergence of the difference between the shareholders in Australia or abroad, this stability also dragged the company to high profitability level.

Economic

On the economic front the level of economic and living standard in Australia is very high, Australia’s GDP is about 699 per capital were it’s grades the tenth place in the economic growth at the world level, according to the Statistics made by International Monetary Fund in 2010, but in the recent years the Australian economy growth has been very slow which post a threat for Woolworth’s industry so they decided to expand their operation to India to sustain its growth in retail industry.

Social

The reason why Woolworths started to apply a strategy of environmental sustainability is the environmental concern among the community and high level of people awareness where they have started to look at the environment preserving behavioral of the company, and that may impact the company investment, further more they also addresses the customers satisfaction bye providing them with convenient and efficient services.

Technological

Woolworth has attached the innovations in their all processes that involve the communication with the costumer to improve the efficiency of their serves. In 2008 it introduced the self-checkout machines that allow the customer to scan, weigh and pay for their groceries via cash, credit or debit cards. They also employed the SOA (Service Oriented Architecture) software that monitors its business activity, identify the weakness of their service in real time and reduce costs.

This case shares with us about the story of Galanz Enterprises Group Co. Ltd. (Galanz) had transformed itself from a manufacturer of down feather products into a world class manufacturer of microwave ovens producing more than 50 per cent of the global output in 2007. This case describes the competitive and operational strategies that Galanz used to achieve such a meteoric growth. The company started out with a clear competitive strategy based on cost leadership. It designed and implemented operations system to help achieve lower cost through economy of scale, the transfer of production capacity from developed countries and full utilization of the available production capacity.

Case Analysis & Problem solving

1. What were the order winner/order qualifier for Galanz in the microwave oven business during the early stage of its development? When Galanz started its business, the microwave oven business in China was in its infancy and it was less risk to invest in the technology associated with microwave ovens because this technology had been mature and stable for a long time.

At the early stage, Galanz did not have any competitive edge in production technology but only an abundant supply of cheap labor and land. Thus the only way to compete the market is to offering a low price. From 1996 to 2002, Galanz adopted a low-price strategy by repeatedly implementing cycles of price cutting and production capacity expansion.

2. Rank the importance of Galanz’s operations objectives of cost, quality, flexibility, delivery, service and innovations. How has the importance changed over the years? At the very beginning, Galanz ranked cost as the most important operations objectives. The rest objectives are ranked equally after the cost. After the early success resulted by the price war and cost leadership, Galanz started emphasizing the importance of innovation and quality. Since 1996, the rapid growth of Galanz endangered the market share of foreign brands such as Toshiba and Panasonic who are also the suppliers of Galanz on magnetrons. To limited the threat from Galanz, Toshiba and Panasonic reduce the supply of magnetrons, which forced Galanz developed and produced its own magnetrons. To reduce the cost and improve the quality, Galanz started to vertically integrate its supply chain by manufacturing more of its components.

3. What is the role technology has played in the success of Galanz. The technology have play very important role in the success of Galanz. The supply crisis of magnetrons motivated Galanz put technical innovation on a more important position. The collaboration with local university and institutes helped Galanz mastered the core technology of magnetron. Continuous invest on innovation and learning the most advanced technologies from overseas partners allowed the company to reduced costs, improve the design of the products and lifted Galanz into the high-end product market.

4. What are the Galanz’s competitive and operations strategies, and how does its operations strategy support its competitive strategy? Galanz’s competitive strategy is cost leadership. To support the competitive strategy of cost leadership, Galanz use below tactics in operations.

1) To effectively expand the production capacity, Galanz escalated the production capacity through a free production line transfer from foreign OEM partners. The same tactic was applied to attract component suppliers setting up component facilities in Galanz. To further increase its production capacity, Galanz fully utilized its production facilities and labor resources to extreme by operating 3 shifts per day, seven days a week and 365 days a year. 2) Repeatedly implementing cycles of price cutting and production capacity expansion. Since Galanz enjoyed tremendous economies of scale for low cost production, the company pushes its sales team to work hard so that the market could absorb the additional inventory. 3) In an additional effort to reduce cost, Galanz started to vertically integrate its supply chain by manufacturing more of its components. About 90% of the microwave oven parts were produced by Galanz.

The threat of new entry of the firm is somewhat small because the firm is the large company with long and specialized experience. It is difficulty for new entry to complete with existing products and services which need a large amount of investment and cost in order to run the business and develop the products and services. It is very difficult for the new entry because GE has a very strong brand and reputation as well as patents and know-how that has the new entry cannot be done in the short period in order to compete with GE and other major competitors in this industry.

The power of buyers The bargaining power of the buyers is high. This is because, the extremely high of switching cost from competitors such as technology industry where the buyers can find the information easily which will has an impact on them in order to make a decision to purchasing the products. It would benefit of the firm if they can sell a large volume of products.

However, there are not all of businesses in GE that have positive impact from switching cost of buying.

The power of supplier The firm tends to create long-term relationship with suppliers and most of them are work together in strategic alliance by sharing the knowledge and technology. With this relationship, it is win-win situation that GE and their suppliers will get. Therefore, the bargaining power of supplier is not high since they have become interconnected in term of knowledge and technology. Hence, the suppliers have to take this opportunity to build the relationship with the firm in order to compete with their business.

The threats of substitutes The firm has to concern about the threat of new product being produced which will barrier the business performance. There are many products can take the place of the firm products and services.

Competitive rivalry The competition is quite high, because the diversification of the business is high and the number of rivalry in the industry is increasing due to the lucrative profit which will cause more risk to GE. The main competitors of the firm are Siemens AG and Emerson Electric. Because they are also leading diversified firm as well as General Electric.

Politics highlight the role of nation governments, as the large global company, the firm has to deal with national political systems differently. The difficulties to negotiate with government conditions including tax systems, regulations and restriction which the firm has to adjust the service conditions and product requirements to get into the nation markets. These will be the huge impact which the firm has to be considered properly in order to work well with the governments and reach customer goals.

However, The political conflict might have an effect on investment decisions of new entry.

For example, according to Dibb and Lyndon, the research say that annually, firms in United States have to hand in tax returns to The Internal Revenue Authority on April 15th as the US government required. The other example is in Thailand. Due to inconsistency of Thai government, there was a political protester occurred in Bangkok public places such as national airport and many other important places which stop and extremely harm the economy.

This shows the difference of political stability (Thailand’s Protesters Highlight Rifts, 2009).

Economic The fluctuation of national growth rate and fuel price is significant. It can be the greatly impact on the firm. Operational cost and labor cost have to be considered. The firm has to avoid both of deflation and inflation of every countries because the difference of economic growth and the external factors which will affect the firm such as the unpredictable situation which come from the fluctuation of currency exchange. The different currency exchange rate has an influence on the firm in order to predict an economic performance. The term of trade to comparing import price and export price also have to be considered in order to know the balancing payments which will be the main factor causing the currency exchange rate issue.

Social It depends on changes of social trend which affect the national demand. There are many variations that have to be determined including culture, norms, religion and social environment. GE considered the social issues as one of the main factors in order to doing investment in that country.

For example, considering about demographic statistics in order to make the products which can support the people and get into market target. In addition, managing people in organization to work in that invested country to perceive the other opinions which will benefit for developing the product or adapting the services for satisfy the customer needs such as GE healthcare in Japan, they can get into the healthcare market because the firm investigate the market properly and make the right decision to take this advantage by selling high definition of Low-dose scans because Japanese tend to concern about health problems (GE annual report, 2011). However, The failure of investment in developing country is higher than developed country due to quality of life, living expense and social welfare.

Technical According to high pace of competition, the innovative technologies are always being released by utilizing more advance technology from competitors. The firm focuses on innovative products. It will be the key to compete with others by using new business models which invented by GE technology. Whereas the development of existing products is tend to be slow down the businesses performances because the advance technology from competitors. It can see from the table as below.

Environmental The company concerned about the environmental issues because the firm have to deal with different environmental factors in different countries. Although there were a degradation of environmental in Asia, the geography is also benefit to open the new industry because the expense is lower than developed countries which have high tax such as the carbon emission tax which causing the firm performance in Australia and affecting the firm investment (Meng, Siriwardana & Mcneill, 2011). Thus, the company decided to investment in developing countries instead due to low environmental regulation issues.

Legal Free trade agreements signed with Japan, Australia, Vietnam, Malaysia, Thailand, Canada, German, Korea and the opening market in Southeast Asia is significant based on US trade agreements (GE News, 2011). Regarding to Opening free trade market, the firm will able to expand the businesses easily. However, the manufacturers are controlled by the laws and agreements of each country.

The process in which a society or country (or world) transforms itself from a primarily agricultural society into one based on the manufacturing of goods and services. Individual manual labor is often replaced by mechanized mass production and craftsmen are replaced by assembly lines. Characteristics of industrialization include the use of technological innovation to solve problems as opposed to superstition or dependency upon conditions outside human control such as the weather, as well as more efficient division of labor and economic growth.

Industrialization is most commonly associated with the European Industrial Revolution of the late eighteenth and early nineteenth centuries. The onset of the second World War also led to a great deal of industrialization which resulted in the growth and development of large urban centers and as well as suburbs. Industrialization is an outgrowth of capitalism.

Before India was introduced to the industrialization or the industrial revolution, india was largely an agricultural country. Before the british invasion India became famous for her handicrafts and textiles too.

During the Mughal Period, India had a considerable variety of arts and handicrafts and the products commanded wide range of foreign markets. At that time no other country produced products that could be imported to India in exchange for cotton and silk goods which were in world-wide demand.

Europe had to pay in billions for the increasing volume of Indian exports. India was also famous for jewelry of exquisite quality made out of gold, silver, copper, brass and bell-metal.Many urban centers were famous for carving work in ivory, wood, stone and marble. In bigger towns each handicraft was organized into a guild which safeguarded the professional interest of its members. The emergence of modern industrial enterprises can be traced back to the end of the 18th century. The new industrial activity took two forms, plantations and factory industries. Real and satisfactory progress in the factory industries began only after 1875. During the next two decades, two textile units – cotton and jute- flourished.

Initially, India’s domestic economy depended mostly on the agriculture. Globally, its textile and jewelry industry were very famous, but since all the industries were fully controlled by man, the speed of the produce could not match the growing demands of foreign merchants. Then began the industrial revolution in india, which was introduced by the british. The use of machines in the industries brought about great progress and economical growth to the country. One of the main reasons why India is a member of the BRICS nations[->0] and is tipped to be the next global superpower is its rapid pace of industrialization. India’s industrial growth was recorded in 2010 at 16.8%, highest in 20 years. Thus it has a major contribution to India’s economic growth rate in 2010-2011 which is measured at about an impressive 8.6%. The rate of investment in India has been found to have exceeded 36% of the country’s GDP and this has happened because India is making progress in the industrial sector by leaps and bounds.

On the technology front, the biggest advancements were in steam power. New fuels such as coal and petroleum, were incorporated into new steam engines. This revolutionized many industries including textiles and manufacturing. Also, a new communication medium was invented called the telegraph. This made communicating across the ocean much faster. But, along with this great leap in technology, there was an overall downfall in the socioeconomic and cultural situation of the people. Growth of cities were one of the major consequences of the Industrial Revolution. Many people, who initially practiced agriculture, were imposed on with heavy taxes and unable to pay taxes to the british officers were forced to move to the cities. With the new industrial age, a new qauntitative and materialistic view of the world took place. This caused the need for people to consume as much as they could. This still happens today. The negative impact of industrial revolution on india is due to two major factors.

▪India’s large population and Introduction of alternative machinery which were more efficient than man– These two factors are closely interrelated:- ▪ the introduction of finer machinery improved the production of goods and reduced the number of employees. Since a large number of indians who were once practicing agriculture were led to the factories, a major population was now going with the swing of the industrial revolution, i.e.. working in the factories.the introduction of finer machinery improved the production of goods and reduced the number of employees and adversely affected the middle class and lower sections of the society. One machine could perform what ten men could and eventually machine replaced man. Lots and lots of people were jobless. Indians suffer from the industrial revolution even today as a major portion of the indian population is unemployed.

Industrialization plays a significant role in the process of economic development. The examples of developed countries indicate that there is a direct relationship between high level of income and industrial development. Industrialization has its own merits as well demerits. The merits are –job creation, development in science and technology,better infrastructure, better healthcare, more amenities and comfort to the masses, more affluence, better educational levels of the masses, good help to agricultural sector in terms of farm equipments, tractors, irrigation tools,pesticides, fertilizers so the country can achieve self sufficiency in food grains.

The less developed countries are generally primary producers and import industrial output. With industrialization of their own economy they need not import industrial product from outside and this helps in reducing the trade gap. The question that now arises is “Is india a developed country?” The answer lies within, whether india is a primary producer or has a industrial economy. In fact, India has a balance of both kinds of economy because agriculture forms a major part of india’s occupation, which is primary produce but, of late, many industries are spreading from cities to villages like wildfire hence, increasing the industrial economy.

India is actually developing at a very fast rate in the industrial sector, and at this rate of progress, India is estimated to be a developed superpower. Looking at India’s GDP, India is already a well developed nation, but the lack of well-maintained infrastructure and unorganized roads has prevented it from being titled as a ‘developed nation’. Industrialization also helps in satisfying a variety of demands of the consumer’s. With modernization of the economy the demand for industrial product has increased considerably. Industrialization brings a change in the socio-cultural environment of the economy. It makes people dynamic, hard-working, mobile, skillful, efficient, and punctual. It brings a change in the way-of life of the people and makes people more commercial. It also provides security to the economy by making it self-dependent.

India has seen a rapid rise in industrialization in the past few decades, due its expansion in markets such as pharmaceuticals, bio-engineering, nuclear technology, informatics and technology-oriented higher education. These latest trends have made India more globally-minded as their desire to trade with the world increases.

It is said that India has deliberately targeted markets they know they can make instant in-roads into. Industries such as pharmaceuticals and bio-engineering have been seen as ideal in increasing the national income using the country’s new-found expertise. Also, India now exports a whole variety of products and knowledge, including petroleum products, textile goods, jewelry, software, engineering goods, chemicals, and leather merchandise.

There are a lot of comparisons drawn between India’s industrialization model and that of China. Both countries have realized the importance of the export market and how to capitalize on their huge workforces – allowing them to become leading powers in the global market on several fronts. Western countries look favorably to countries such as India and China due to their low production costs in comparison to European and US prices; again a favorable characteristic allowing the countries to build their economies.

The industrialization of India looks set to continue for some time and the result could well be that India becomes a major player in many global markets in the future.

Industrialization plays a vital role in the economic development of an underdeveloped country. The historical facts reveal that all the developed countries of the world broke the vicious circle of underdevelopment by industrialization.

1. Raising Income: The first important role is that industrial development provide a secure basis for a rapid growth of income. 2. Changing the Structure of the Economy: In order to develop the economy underdeveloped countries need structural change through industrialization. History shows that in the process of becoming developed economy the share of the industrial sector should rise and that of the agricultural sector decline. This is only possible through deliberate industrialization. As a result, the benefits of industrialization will ‘trickle down’ to the other sectors of the economy in the form of the development of agricultural and service sectors leading to the rise in employment, output and income.

3. Meeting High-Income Demands: Beyond certain limits, the demands of the people are usually for industrial products alone. After having met the needs of food, income of the people are spent mostly on manufactured goods. This means the income-elasticity of demand for the manufactured goods is high and that of agricultural products is low. To meet these demands and increase the economy’s output underdeveloped countries need industrialization.

4. Overcoming Deterioration in the Terms of Trade: Underdeveloped countries like India need industrialization to free themselves from the adverse effects of fluctuations in the prices of primary products and deterioration in their terms of trade. Such countries mainly export primary products and import manufactured goods. The prices of primary products have been falling or are stable whereas the prices of manufactured products have been rising. This led to deterioration in the terms of trade of the LDCs. For economic development such countries must shake off their dependence on primary products. They should adopt import substituting and export oriented industrialization. 6. Increased employment opportunities.

Industrialization provides increased employment opportunities in small and large scale industries. In an agrarian economy, industry absorbs underemployed and unemployed workers of agricultural sector and thereby increases the income of the community.

5. Stimulates progress in other sectors. Industrialization stimulates progress in other sectors of the economy. A developments of one industry leads to the development and expansion of other industries. For instance the construction of a transistor radio plant, develops the small battery industry (backward linkage). The construction of milk processing plants adds to its line of production ice cream. cone cream plants etc.. (forward linkage). 8. Rise in agricultural production.

Industrialization provides machinery like tractors thrashers harvesters, bulldozers, transport, aerial spray etc, to be used in the farm sector. The increased use of modern inputs has increased the yield of crops per hectare. The increase in the income of the farmers has given boost to economic development in the country. 16. Increase in the Government revenue.

Industrialization increase the supply of goods both for internal and external markets. The export of goods provides foreign exchange. The customs excise duties and other taxes levied on the production of goods increase the revenue of the State. The income tax received from the industrialists adds to the revenue stream of the Government which eventually is spent for the welfare of the people as a whole.

The Banking Sector has for centuries now formed one of the pillars of economic prosperity. Indeed history provides us with some starting information regarding how banks provided finance for imperialist ventures in newly acquired colonies. Over time banks have formed an important part in providing an avenue for both savings and investments.

Land, Labor, capital and entrepreneurs are the basic economic resources available to business. However, to make the use of these resources, a business requires finance to purchase of the land, hire labor, pay for capital goods and pay for individuals with specialized skills.

Detail role of commercial banks in economic development is given below:

Trade Development

The commercial banks provide capital, technical assistance and other facilities to businessmen according to their need, which leads to development in trade.

Agriculture Development

Commercial banks finance the most important sector of the developing economics i.e. agriculture, short, medium and long-term loans are provided for the purchase of seeds and fertilizer, installation of tube wells, construction of warehouses, purchase of tractor and thresher etc.

Industrial Development

The countries, which concentrated on industrial sector made rapid economic development. South Korea, Malaysia, Taiwan, Hong Kong and Indonesia have recently developed their industrial sector with the help of commercial banks.

Capital Formation

Commercial banks help in increasing the rate of capital formation in a country. Capital formation means increase in number of production units, technology, plant and machinery. They finance the projects responsible for increasing the rate of capital formation.

Development of Foreign Trade

Commercial banks help the traders of two different countries to undertake business. Letter of credit is issued by the importer’s bank to the exporters to ensure the payment. The banks also arrange foreign exchange.

Transfer of Money

Commercial banks provide the facility of transferring funds from one place to another which leads to the growth of trade.

More Production

A good banking system ensures more production in all sectors of the economy. It increases the production capabilities of the economy by strengthening capital structure and division of labor

Development of Transport

The commercial banks financed the transport sector. It has reduced unemployment on one hand and increased the transport facility on the other hand. Remote areas are linked to main markets through developed transport system.

Safe Custody

The business concerns and individuals can make themselves tension free by depositing their surplus money in banks. The banks also provide them the facility of lockers to keep their precious articles and necessary documents safe.

Increase in Saving

Commercial banks persuade the people to save more. Different saving schemes with attractive interest rates are introduced for this purpose. Number of bank branches is opened in urban and rural areas.

Construction of Houses

Commercial banks provide credit facilities to their customers for the purchase or construction of houses.

Assistance to Government

By providing funds to government for development programs, the commercial banks share the government for economic stability.

Increase in Employment

A country’s economic prosperity depends on the development of trade, commerce industry, agriculture, transport and communication etc. These sectors are financed by the commercial banks and employment opportunities are increasing.

Saving in Metallic Reserve

Cheques and drafts etc works like money. In this way the need of precious metals to make coins reduces and metallic reserve of the country can be utilized on other important matters

Credit Creation

Commercial banks are called the factories of credit. They advance much more than what the collect from people in the form of deposits. Through the process of credit creation, commercial banks provide finance to all sectors of the economy thus making them more developed than before.

Proper use of Money

People deposit their saving in the banks, so the scattered money becomes a huge amount in the way, which can be used for different projects in a proper way.

Financial Advices

Commercial banks also give useful financial advices to promote the business of their customers, besides credit facilities.

Increase in Investment

Commercial banks mobilize savings of the people. They make them available to the farmers, traders and industrialists for the development of agriculture, trade and industry.

Success of Monetary Policy

Under the supervision of central bank, all scheduled commercial banks make effort for the success and objectives of monetary policy. This joined effort of commercial banks makes the economic development possible.

Use of Modern Technology

The use of modern technology in less developed countries is only possible in the presence of developed commercial banking as it can be the main source of their funds.

These funds are utilized for the import of modern technology from developed countries.

Export Promotion Cells

In order to boost the exports of the country, the banks have established export promotion cells for the information and guidance to the exporters.

Economic Prosperity

Economic prosperity of a country depends on number of factors including the development of commercial banking. A sound banking system promotes the economic status of the people by providing them short, medium and long-term loans.

Training Center

Commercial banks established many trading centers for their employees to modernize the banking system of a country. In this way the banking experts enhance their abilities and contribute towards the development of country.

SCARCITY:

A pervasive condition of human existence that results because society has unlimited wants and needs, but limited resources used for their satisfaction. This fundamental condition is the common thread that binds all of the topics studied in economics. Scarcity is a perpetual problem facing society due to limited resources andunlimited wants and needs satisfied with these resources. Scarcity means that society does not have enough of everything (resources) for everyone (wants and needs).

Two Components

Consider the two sides of the scarcity problem.

* Unlimited Wants and Needs: This is a basic characteristic of humanity which means that people are never totally satisfied with the quantity and variety of goods and services.

It means that people never get enough, that there is always something else that they would want or need.

* Limited Resources: This is a basic condition of nature which means that the quantities of available resources used for production are finite. It means that the economy has only so many resources that can be used AT ANY GIVEN TIME time to produce other goods and services. Humans live in a world of scarcity. This world of scarcity is what the study of economics is all about. That is why scarcity is usually subtitled: THE ECONOMIC PROBLEM.

Scarcity does not preclude technological advances and other discoveries that “lessen” the scarcity problem with better ways of satisfying wants and needs. In fact, scarcity actually predicts such things. People are motivated to work, go to school, invent products and discover new continents because they do not have all that they want. Why invent, discover, or explore if all wants and needs are satisfied? Increasing limited resources does not make them unlimited only less limited. Scarcity persists. Solutions?

Scarcity has been a perpetual, pervasive problem of humanity. There is no reason to think the future will escape the wrath of scarcity either. But why not? Can humans ever hope to solve the scarcity problem? Technological advances in recent centuries have certainly done a great deal to lessen the scarcity problem. A notable share of the world’s population residing in industrialized nations, while not free of scarcity, has achieved a relatively comfortable living standard. Given continued technological advances over the next few hundred years, perhaps society can solve the scarcity problem once and for all? It might happen. Who knows what the future might bring. But such is unlikely, even with technological advances.

The reason for this economic pessimism rests with the two, and ONLY two, possible ways to eliminate scarcity. 1. Unlimited resources: Unfortunately, the planet Earth is finite. The solar system is finite. The galaxy is finite. In all likelihood, the universe is finite. None of this bodes well for achieving unlimited resources as a means of solving the scarcity problem. 2. Limited wants and needs: If every human being had finite wants and needs that could be satisfied with a finite amount of resources, then scarcity would cease to exist. But what sort of genetic engineering would be needed for this? Would humans still be human?

3. You allow the market price to rise to the point where demand=supply. The item will still be scarce (because it is not in unlimited supply), but everyone who is willing to pay the price will be satisfied. Alternatively, you can ration by authority. Someone with enough power to coerce people to do what they won’t naturally do would simply choose who gets the scarce goods and who doesn’t. 4. Find economically viable alternatives/substitutes – e.g. instead of petrol, try vegetable oil (it works, but I don’t think cars are made for them).

5. Alter supply – e.g. instead of restricting imports, increase them.

6. Leverage – instead of allowing one unit of electricity to produce one unit of good, you can make one unit of electricity produce 5 units of good. They call this economies/efficiency, but the principle can be applied to various areas outside of production.

7. Increase the price – a side effect of the lack of supply, but you will probably be faced with lobbying groups.

8. Be prudent and prioritise use – if it’s scarce, it shouldn’t be wasted. So cut back on non-necessities.

9. Innovate -R&D to find new ways to solve the problem. Alternatively, you can change a few things and make a massive difference. However, innovation is spontaneous and is often circumstantial.

10. Reduce demand – change what the thing is used or alleviate the thing that it is used for. If the demand for the product is not there, scarcity is not so much a problem. Simpler said than done though. 11. Expansion of the productive capacity of an economy would help. However, it is likely scarcity will always exist as resources are limited but wants are infinite. So generally, it is how to allocate the resources most efficiently rather than how to solve scarcity, as scarcity can’t be solved. Resources have to be allocated at their optimum level, if this doesn’t occur it is known as market failure.

The government can intervene in the form of taxation (placed on a good to discourage its consumption), subsidies (given to firms to encourage production of a good, which makes it cheaper therefore encouraging consumption), regulation (laws used to prevent consumption of a good) and pollution permits (allocated to firms allowing them to produce a certain amount of pollution, they’re tradeable which encourages firms to be greener).

Economic Growth is a narrower concept than economic development.It is an increase in a country’s real level of national output which can be caused by an increase in the quality of resources (by education etc.), increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy. Economic Growth can be measured by an increase in a country’s GDP (gross domestic product).

Economic development is a normative concept i.e. it applies in the context of people’s sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice.

The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth.

It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.It implies an increase in the per capita income of every citizen. Economic Growth does not take into account the size of the informal economy.

The informal economy is also known as the black economy which is unrecorded economic activity. Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming. Economic growth is a necessary but not sufficient condition of economic development.