UNIT 4

NATIONAL INCOME
• National income is the sum total of the value
of all the goods and services manufactured by
the residents of the country, in a year., within
its domestic boundaries or outside. It is the
net amount of income of the citizens by
production in a year.
• To be more precise, national income is the accumulated
money value of all final goods and services produced in
a country during one financial year. Computation of
National Income is very vital as it indicates the overall
health of our economy for that particular year.

• The aggregate economic performance of a nation is

calculated with the help of National income data. The
basic purpose of national income is to throw light on
aggregate output and income and provide a basis for
the government to formulate its policy, programs, to
maximize the national welfare of the people. Central
Statistical Organization calculates the national income
in India.
According to Marshall: “The labor and capital of
a country acting on its natural resources
produce annually a certain net aggregate of
commodities, material and immaterial including
services of all kinds. This is the true net annual
income or revenue of the country or national
dividend.”
CONCEPTS
Gross Domestic Product
Gross Domestic Product, abbreviated as GDP, is the aggregate
value of goods and services produced in a country. GDP is
calculated over regular time intervals, such as a quarter or a
year. GDP as an economic indicator is used worldwide to
measure the growth of countries economy.

Goods are valued at their market prices, so:

All goods measured in the same units
Things without exact market value are excluded.
Constituents of GDP
• Wages and salaries
• Rent
• Interest
• Undistributed profits
• Mixed-income
• Direct taxes
• Dividend
• Depreciation
The Formula for Calculation of GDP

GDP = consumption + investment + government

spending + exports - imports
Gross National Product
Gross National Product (GNP) is an estimated value of all goods and services
produced by a country’s residents and businesses. GNP does not include the
services used to produce manufactured goods because its value is included in the
price of the finished product. It also includes net income arising in a country from
abroad.

Components of GNP
• Consumer goods and services
• Gross private domestic income
• Goods produced or services rendered
• Income arising from abroad.

Formula to Calculate GNP

GNP = GDP + NR (Net income from assets abroad or Net Income Receipts) - NP (Net
payment outflow to foreign assets).
Importance of National Income

Setting Economic Policy

National Income indicates the status of the economy and can give a clear picture of the
country’s economic growth. National Income statistics can help economists in formulating
economic policies for economic development.

Inflation and Deflationary Gaps

For timely anti-inflationary and deflationary policies, we need aggregate data of national
income. If expenditure increases from the total output, it shows inflammatory gaps and
vice versa.

Budget Preparation
The budget of the country is highly dependent on the net national income and its concepts.
The Government formulates the yearly budget with the help of national income statistics in
order to avoid any cynical policies.
Standard of Living
National income data assists the government in comparing the
standard of living amongst countries and people living in the same
country at different times.

Defense and Development

National income estimates help us to bifurcate the national product
between defense and development purposes of the country. From such
figures, we can easily know, how much can be set aside for the defense
budget.
Sets of methods for measuring National Income
There are four methods of measuring national income. The type of method
to be used depends on the availability of data in a country and the purpose
which is attempted for.

Income Method
In this method, we add net income payments received by all citizens of a
country in a particular year. Net incomes that result in all the factors of
production like net rents, wages, interest, and profits are all added together,
but income received in the form of transfer payments are omitted.
 METHODS
Product Method
According to this method, the aggregate value of final goods and services
produced in a country during a financial year is computed at market prices. To find
out GNP, the data of all the productive activities-agricultural products, Minerals,
Industrial products, the contributions to production made by transport, insurance,
communication, lawyers, doctors, teachers. Etc are accumulated and assessed.
Expenditure Method
The total expenditure by the society in a financial year is summed up together and
includes personal consumption expenditure, net domestic investment,
government expenditure on goods and services, and net foreign investment. This
concept is backed by the assumption that national income is equal to national
expenditure.
Value Added Method
The distinction between the value of material outputs and material inputs at
every stage of production is Value added.
 ECONOMIC INDICATORS

• An economic indicator is a metric used to

assess, measure, and evaluate the overall
state of health of the macroeconomy.
Economic indicators are often collected by a
government agency or private business
intelligence organization in the form of a
census or survey, which is then analyzed
further to generate an economic indicator.
Which is the Primary Economic Indicator?
Gross Domestic Product (GDP)
The Gross Domestic Product (GDP) is widely accepted as the primary
indicator of macroeconomic performance. The GDP, as an absolute
value, shows the overall size of an economy, while changes in the
GDP, often measured as real growth in GDP, show the overall health
of the economy.
• The GDP consists of four components, namely:
• Consumption
• Investment
• Government Expenditure
• Net Exports
• So far, the only country to not use GDP as an economic measure is the
Kingdom of Bhutan, which uses the Gross National Happiness index as an
alternative.
• However, for all its uses, GDP is not a perfect measure of the economy. It is
because GDP can vary by political definition even if there is no difference in
the economy. For example, the EU imposed a rule on indebtedness that a
country should maintain a deficit within 3% of its GDP. By estimating and
including the black market in its GDP calculations, Italy boosted its economy
by 1.3%. It gave the Italian government more freedom in budgetary
spending.
• Another issue relating to reliance on GDP as an economic indicator is that it
is only released every three months. In order to make timely decisions,
alternative economic indicators that are released more frequently are used.
The indicators, which are selected based on a high predictive value in
relation to GDP, are used to forecast the overall state of the economy.
2. Consumer spending
• Consumer spending is a crucial driver of economic growth. Tracking
trends in consumer spending can help businesses anticipate demand for
their products or services.
3. Unemployment rate
• Labor market statistics are lagging indicators—the data requires time to
gather, calculate and report. A high unemployment rate may indicate a
weaker economy, while a low rate could suggest a stronger economy with
greater consumer spending.
4. Interest rates
• Interest rates set by the Federal Reserve, the central bank of the U.S., can
impact borrowing costs for businesses. Changes in interest rates can
influence consumer spending, investment decisions and overall economic
activity.
5. The Consumer Price Index (CPI)
The CPI, also called the inflation rate, reflects increases in cost of
living, or inflation. The U.S. Bureau of Labor Statistics publishes the
CPI monthly. Inflation measures the rate at which prices for goods
and services rise over time. Businesses need to monitor inflation
to adjust their pricing strategies and account for rising costs.
6. Business Confidence Index
This index measures business owners' confidence in the economy
based on opinion surveys on future developments. It considers
production, orders and stocks of finished goods. A high confidence
level can indicate optimism about future economic conditions,
which can lead to increased investment and growth.
7. Stock market performance
Stock markets track the values of publicly traded companies, which are just one part of the
broader economy. While not a direct economic indicator, the performance of stock markets can
reflect investor sentiment and overall economic health. Businesses may track stock market trends
to gauge market sentiment.
8. Trade balance
Trade balance measures the difference between a country’s exports and its imports. Changes in
the trade balance can impact exchange rates, which can affect businesses engaged in
international trade across different currencies.
9. The housing market
Housing market indicators, such as housing starts, home sales and home prices, can provide
insights into consumer confidence and spending patterns. Changes in the housing market can
directly impact businesses related to construction, real estate, and home improvement.
10. Public policy and regulations
Changes in government policies and regulations—from local ordinances up to international
treaties, in some cases—can significantly impact businesses. It's important for business owners
to stay informed about potential policy changes that could affect their operations
• Leading indicators: Change direction before peaks
or troughs in the business cycle, helping strategists
and businesses anticipate cyclical turns.
• Coincident indicators: Change direction at roughly
the same time as the peaks or troughs, confirming
the economy’s current phase.
• Lagging indicators: Change direction after
expansions or contractions have already begun, as
seen in the unemployment rate.
 TECHNOLOGY AND EMPLOYMENT
The forecasted demand for IT and IT enabled services are going to
grow to the extent of 5.3 million in 2022 which indicates that the
technology is going to play a major role in creating employment
opportunities in the future. The technology based human
requirement of the world is also growing at a faster way. The
developing countries like India and other Asian countries have more
population particularly, India has the highest young population. India
produces more engineers every year therefore the opportunities can
be optimally utilized by our country. In the recent past, the BPO
organizations mushroomed in India but due to political and economic
crisis of USA it has changed now. Therefore the change in economic
activities of the world has an impact in determining the employment
generation of a country.
• The key contributor to the Services Sector accounting for
5.8% of India’s overall GDP Ֆ Among the largest
employment generators in the organized sector employing
7.5 million people, estimated to cross the 10 million mark
by 2010 Ֆ Revenues estimated at USD 71 billion in 2008-09,
consistent rise in growth with 5 year compound annual
growth (CAGR) at 27% Ֆ Exports constitute two-thirds of
overall revenues with a marginally higher 5 year CAGR of
28.7%.The US and UK remain the largest export geographies
– 79%, steady expansion of other export destinations
notably Continental Europe – CAGR more than 50% over FY
2004-08.
• Domestic IT revenues estimated at USD 24.3 billion,
with a 5 year CAGR of 24%. Ֆ Industry’s vertical
market exposure well diversified across several mature
and emerging sectors. Ֆ BFSI, Telecom and
Manufacturing: Among the top 4 verticals for both
export and domest ic market. Ֆ ITeS-BPO sector the
fastest growing segment of the IT industry in both the
export and domestic market. Ֆ Export earnings in
2008-09 estimated at USD 12.8 billion (a 5 year CAGR
of 32.9%) Ֆ Domestic revenues at USD 1.9 billion – a
growth of 45.3%
• The impact of technology on employment is
complex and multifaceted and can be both
positive and negative. On the one hand,
technology can create new jobs and industries,
and increase productivity, leading to economic
growth and higher standards of living. On the
other hand, technology can also displace workers,
particularly those in manual or low-skilled jobs,
and lead to a widening gap between the highly
skilled and the unskilled.
Positive impacts of technology on employment include:
• Job creation: Technology can create new industries and jobs,
such as in software development, data analysis, and cyber
security.
• Productivity improvement: By automating manual and
repetitive tasks, technology can increase the efficiency and
productivity of workers, leading to higher economic growth
and higher standards of living.
• Remote work: Technology, particularly the internet and cloud-
based tools, has made remote work possible, allowing people
to work from anywhere, which can provide more flexibility and
work-life balance.
Negative impacts of technology on employment include:
• Job displacement: Technology can displace workers in manual
and low-skilled jobs, such as manufacturing and manual labor, as
automation and artificial intelligence become more prevalent.
• Skill mismatch: Technology can create a gap between workers
who have the skills to take advantage of new opportunities and
those who do not, leading to unemployment and wage
stagnation.
• Income inequality: The benefits of technological progress may
not be evenly distributed, with highly skilled workers and
technology companies reaping the lion's share of the rewards,
while low-skilled workers are left behind
 Business Cycle
• The Business Cycle allows people to
understand the direction the economy (GDP)
is going (growing or shrinking) and plan
accordingly.

• The economy follows the Business Cycle

regularly.
Phases of the Business Cycle
Expansion (Growing)
Peak (Top)
Contraction (Shrinking)
Trough (Bottom)
 Business Cycle
Peak
Peak

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 Expansion
• During a period of expansion:
– Wages increase
– Low unemployment
– People are optimistic and spending money
– High demand for goods
– Businesses start
– Easy to get a bank loan
– Businesses make profits and stock prices increase
 Peak
• When the economic cycle peaks:
– The economy stops growing (reached the top)
– GDP reaches maximum
– Businesses can’t produce any more or hire more
people
– Cycle begins to contract
 Contraction
• During a period of contraction:
– Businesses cut back production and layoff people
– Unemployment increases
– Number of jobs decline
– People are pessimistic (negative) and stop
spending money
– Banks stop lending money
 Trough
• When the economic cycle reaches a trough:
– Economy “bottoms-out” (reaches lowest point)
– High unemployment and low spending
– Stock prices drop

But, when we hit bottom, no where to go but

up!
UNLESS….
 Recession/Depression
• A prolonged contraction is called a recession
(contraction for over 6 months)

• A recession of more than one year is called a

depression
 Management of Fluctuation
• Monetary policy: Central banks can use interest rates and
open market operations to influence the
economy. Lowering interest rates can stimulate lending,
investment, and consumption, while raising rates can cool
an overheated economy.
• Fiscal policy: Governments can increase spending and cut
taxes to stimulate demand and protect jobs during
economic slowdowns.
• Regulatory intervention: Governments can regulate the
financial sector to ensure stability and avoid excesses that
could lead to economic crises.
• International coordination: National measures may not
be enough to control the economic cycle, so
international cooperation and coordinated policy
approaches are needed.
• Risk management strategies: Businesses can implement
risk management strategies, monitor consumer demand,
and diversify their products and services.
• Cash reserves: Businesses can maintain adequate cash
reserves.
• Contingency plans: Businesses can prepare contingency
plans for economic downturns.
 Employment Vs
Unemployment-Various Types
• Unemployment refers to a situation where a person
actively searches for employment but is unable to
find work. Unemployment is considered to be a key
measure of the health of the economy. The most
frequently used measure of unemployment is the
unemployment rate. It's calculated by dividing the
number of unemployed people by the number of
people in the labor force.

• K
• Unemployment is a key economic indicator
because it signals the ability (or inability) of
workers to obtain gainful work and contribute
to the productive output of the economy.
More unemployed workers mean less total
economic production.
Frictional Unemployment
• This type of unemployment is usually short-lived. It is also the
least problematic from an economic standpoint. It occurs
when people voluntarily change jobs. After a person leaves a
company, it naturally takes time to find another job. Similarly,
graduates just starting to look for jobs to enter the workforce
add to frictional unemployment.
• It is a natural result of the fact that market processes take
time and information can be costly. Searching for a new job,
recruiting new workers, and matching the right workers to the
right jobs all take time and effort. This results in frictional
unemployment.
• Cyclical Unemployment
• It is the variation in the number of unemployed workers
over the course of economic upturns and downturns, such
as those related to changes in oil prices. Unemployment
rises during recessionary periods and declines during
periods of economic growth.
• Preventing and alleviating cyclical unemployment during
recessions is one of the key reasons for the study of
economics and the various policy tools that governments
employ to stimulate the economy on the downside of
business cycles.
• Structural Unemployment
• It comes about through a technological change in the
structure of the economy in which labor markets operate.
Technological changes can lead to unemployment among
workers displaced from jobs that are no longer needed.
Examples of such changes include the replacement of horse-
drawn transport with automobiles and the automation of
manufacturing.
• Retraining these workers can be difficult, costly, and time-
consuming. Displaced workers often end up either
unemployed for extended periods or leaving the labor force
entirely.
Institutional Unemployment
• Institutional unemployment results from long-term or
permanent institutional factors and incentives in the
economy. The following can all contribute to institutional
unemployment:
• Government policies, such as high minimum wage floors,
generous social benefits programs, and restrictive
occupational licensing laws
• Labor market phenomena, including efficiency wages and
discriminatory hiring
• Labor market institutions, such as high rates of unionization
 Indian Economic growth and
Development-
• Economic growth can be defined as an
increase in the value of goods and services
produced in an economy over a period of
time. This value calculation is done in terms of
% increase in GDP or Gross Domestic Product.
• Economic growth is calculated in real terms
where the effects of variation in the value of
goods and services due to inflation distortion
are also accounted for.
Factors influencing Economic Growth
• Human resources – this is a major factor that is responsible for
boosting the economic growth of a country. The rate of
increase in the skills and capabilities of a workforce ultimately
increases the economic growth of a country.
• Infrastructure development- Improvements and increased
investment in physical capital such as roadways, machinery,
and factories will increase the efficiency of economic output
by reducing the cost.
• Planned utilization of natural resources – Proper use of
available natural resources like mineral deposits helps boost
the productivity of the economy.
• Population growth – An increase in the growth of the
population will result in the availability of more human
resources which in turn will increase the output in
terms of quantity. This is also an important factor that
influences economic growth.
• Advancement in technology – Improvement in
technology will affect the economic growth of a
country positively. The application of advanced
technology will result in increased productivity of labor
and economic growth will advance at a lower cost.
• The term economic development can be explained
as the process by which the economic well-being
and quality of life of a nation, community, or
particular region are improved according to
predefined goals and objectives.
• Economic development is a combination of market
productivity and the welfare values of the nation.
Factors Affecting Economic development
• Infrastructural improvement – Development in the
infrastructure improves the quality of life of people.
Therefore, an increase in the rate of infrastructural
development will result in the economic development of
a nation.
• Education – Improvement in literacy and technical
knowledge will result in a better understanding of the
usage of different equipment. This will increase labor
productivity and in turn, will result in the economic
development of a nation.
• Increase in the capital – Increase in capital formation will
result in more productive output in an economy and this
will affect the economic development positively.
 5 Phases of economic development

• The five phases of economic development introduced

through which all nations should pass to become developed
and the model declared that all nations exist some place on
this direct range, and climb up through each stage in the
advancement interaction:
• Traditional Society: There is a subsistence-based economy
based on agriculture, intensive labour, low levels of trade, and
a population without a scientific perspective on the world and
technology during this phase.
• Preconditions to Take-off: As a result, a general public begins
to foster assembling, as well as a more public/global
standpoint than a provincial one.
• Take-off: As such, we can think of this stage as a time of
intense growth when industrialization starts and workers
and institutions become concentrated around an industry.
• Drive to Maturity: As standards of living rise, use of
technology increases, and the economy grows and
diversifies, this stage takes a long time to complete.
• Age of High Mass Consumption: This last “developed” stage
was occupied by Western countries, particularly the United
States. In a capitalist economy, mass production and
consumerism characterise the economy of a country.
• Indian Economic Development
• Indian Economy on The Eve of Independence: This chapter explores
the state of the Indian economy just before independence, focusing
on various economic factors, conditions, and challenges faced
during the colonial period.
• Indian Economy 1950-1990: Examines the evolution of the Indian
economy from 1950 to 1990, covering major economic policies,
growth patterns, and the socio-economic impact of post-
independence developments.
• Liberalisation, Privatisation, and Globalisation: An Appraisal:
Discusses the major economic reforms of the 1990s, including
liberalisation, privatisation, and globalisation. This chapter evaluates
the impact of these reforms on the Indian economy.
• Human Capital Formation in India: Focuses on the role of human
capital in economic development. It covers aspects like education, skill
development, and health, and their influence on economic growth in
India.
• Rural Development: Explores the challenges and strategies for rural
development in India, including agricultural development,
infrastructure, and socio-economic programs aimed at improving rural
life.
• Employment: Growth, Informalisation, and Other Issues: Analyses
employment trends, the growth of informal employment sectors, and
other employment-related issues in India, offering insights into labour
market dynamics.
• Environment and Sustainable Development: Examines
the relationship between economic development and
environmental sustainability. This chapter discusses
issues related to environmental degradation and
sustainable practices.
• Comparative Development Experiences of India and
its Neighbours: Provides a comparative analysis of
India’s economic development with that of its
neighbouring countries. It highlights similarities,
differences, and lessons that can be learned from
regional experiences.
Issues in India’s growth, development, and employment
• The major factors impending India’s growth, development, and
employment are as follows:
• Illiteracy: Though India has made considerable progress in literacy,
a quarter of the population still lacks in this aspect which adversely
impacts the development and the growth of the economy.
• Poverty: A handful of the country's population lives below the
poverty line, which is a blot on the higher growth rate of the
economy as it fails to result in the development of the economy.
• Declining growth rate: The decline in the growth rate adversely
impacts the development of the economy.
• Inadequate secondary sector: India’s growth is driven by the
service sector, which fields to accommodate the ever-growing
workforce. The stagnation in the manufacturing sector is a major
cause of unemployment in the workforce.
• Agriculture sector dependent on monsoon: Approx 55% of the
agricultural sector is still dependent on the vagaries of monsoon.
Thus the primary sector, too, is left in the hands of nature.
• Unemployment and underemployment: Due to the paucity of
meaningful employment in the economy, the growing workforce
is concentrated in the agricultural sector or fails to find
employment that suits their capabilities resulting in a
higher unemployment rate.
Features of underdeveloped
economy
Poverty and Inequality
 Macroeconomic overview
India's economy is the world's fifth largest by nominal
GDP and is expected to become the third largest by
2027. Here are some macroeconomic indicators for
India:
Growth
• India's economy is the world's fastest growing
major economy, with growth of 8.2% in
FY23/24. The International Monetary Fund and
Moody's predict growth of 7% and 7.2% in 2024-
25, respectively.
Manufacturing
• The manufacturing sector grew by 9.9% in FY23/24. The
government has implemented initiatives to improve the
business environment, logistics infrastructure, and tax
efficiency.
Services
• The services sector has remained resilient, compensating
for the underperformance in agriculture.
Unemployment
• Urban unemployment has improved gradually, falling from
14.3% in FY21/22 to 9% in FY24/25.
Foreign exchange reserves
• Foreign exchange reserves touched an all-time
high of $670.1 billion in early August 2024.
Foreign direct investment
• The government has implemented policies to
attract foreign investment, resulting in an 82%
increase in FDI equity inflows from 2013-14 to
2023-24.
MACROECONOMICS OVERVIEW
 Macroeconomic Environment
• The macroeconomic environment is the
broader economy and the forces that affect
it. It's the context in which businesses and
executives operate and make long-term
decisions
• Aggregate production: The total amount of goods and
services produced in an economy
• Spending: The amount of money spent in an economy
• Price levels: The general level of prices in an economy
• Monetary policy: The policy that governs the money
supply in an economy
• Fiscal policy: The policy that governs the government's
spending and revenue
• Inflation: The rate at which prices are rising in an
economy
• The macro environment affects how
businesses operate and the economy as a
whole. The impact of the macro environment
on a business depends on how much of its
business is dependent on the health of the
overall economy. For example, cyclical
industries are more influenced by the macro
environment than basic industries.
Gross Domestic Product
• Gross Domestic Product (GDP) is a measure of a
country’s output and production of goods and
services. The Bureau of Economic Analysis releases
a quarterly report on GDP growth that provides a
broad overview of the output of goods and services
across all sectors.1 An especially influential aspect
of GDP is corporate profits for the economy, which
is another measure of an economy’s
comprehensive productivity.2
Inflation
Inflation is a key factor watched by economists,
investors, and consumers. It affects the
purchasing power of the US dollar and is closely
watched by the Federal Reserve. The target rate
for annual inflation from the Federal Reserve is
2%. Inflation higher than 2% significantly
diminishes the purchasing power of the dollar,
making each unit less valuable as inflation rises.3
Employment
• Employment levels in the United States are
measured by the Bureau of Labor Statistics, which
releases a monthly report on business payrolls and
the status of the unemployment rate.45 The Federal
Reserve also seeks to regulate employment levels
through monetary policy stimulus and credit
measures. These policies can ease borrowing rates
for businesses to help improve capital spending and
business growth, resulting in employment growth.
• Consumer Spending
• Consumer spending made up 54% of the U.S.
GDP in the second quarter of 2021 and is widely
considered to be an important indicator of
macroeconomic performance.6 Slow growth or
decline in consumer spending suggests a
decline in aggregate demand, which economists
consider to be a symptom or even a cause of
macroeconomic downturns and recessions.
Monetary Policy
• The Federal Reserve’s monetary policy initiatives are a key factor
influencing the macro environment in the United States.
Monetary policy measures are typically centered around interest
rates and access to credit. Federal interest rate limits are one of
the main levers of the Federal Reserve’s monetary policy tools.
The Federal Reserve sets a federal funds rate for which federal
banks borrow from each other, and this rate is used as a base rate
for all credit rates in the broader market. The tightening of
monetary policy indicates rates are rising, making borrowing more
costly and less affordable.7
Fiscal Policy
• Fiscal policy refers to government policy around taxation,
borrowing, and spending. High tax rates can reduce
individual and business incentives to work, invest, and save.
The size of a government’s annual deficits and total debt can
influence market expectations regarding future tax rates,
inflation, and overall macroeconomic stability. Government
spending drives borrowing and taxation; it is also widely
used as a policy tool to try to stimulate economic activity
during slow times and make up for sluggish, consumer
spending and business investment during recessions.
 Economic transition in india
India's impressive economic growth has kindled
hopes of it attaining developed country status by
2047, the centenary year of its independence.
However, this aspiration demands an arduous journey
of raising the country's per capita income by more
than five times, from the current USD 2,600 to USD
10,205, within the next 25 years. Achieving this
ambitious target effectively translates into sustaining
a per capita income growth rate of 7.5% annually and
an aggregate GDP growth rate of 9% over this period.
Merely accelerating growth is insufficient;
inclusivity is equally crucial. The daunting
challenges include creating jobs for the four million
individuals entering the workforce annually.
Therefore, India's journey towards becoming
a developed nation requires a multi-pronged
approach. Addressing fiscal and structural
challenges, while fostering inclusive growth and a
robust export sector, will pave the way for this
ambitious goal.
Economic Reforms in India
• Liberalization (1991): Initiated during a balance of payments
crisis, these reforms aimed to reduce government intervention
and regulation in various sectors, including industry, trade,
finance, and foreign investment. This dismantled the license-
permit-quota system, promoting growth and global integration.
• Privatization: India pursued privatization of public sector
enterprises to enhance efficiency, profitability, and
competitiveness, reduce fiscal burden, and generate resources.
Various methods like disinvestment and strategic sales have
been employed, raising over Rs 3 lakh crore since 1991.
• Globalization: Embracing globalization involves increased
trade, capital flows, technology transfers, and migration. While
it offers benefits like access to new markets and technology, it
also poses challenges such as competition and inequality.
• New Economic Policy (2020): Introduced in response to the
Covid-19 pandemic, this policy includes a Rs 20 lakh crore
stimulus package, reforms in multiple sectors, and a focus on
self-reliance and resilience.
• Insolvency and Bankruptcy Code (IBC): Introduced a time-
bound and market-based mechanism for resolving insolvency
cases, promoting entrepreneurship, and improving the ease of
doing business.
• Labour Codes: Consolidate and simplify labor laws
into four categories, seeking to provide flexibility to
employers, streamline compliance, extend social
security, and enhance the role of trade unions.
• Production-linked Incentive (PLI) Scheme
(2020): Aims to boost manufacturing and exports in
key sectors by offering financial incentives based on
incremental sales and investment.
• A developed country refers to a nation with a
mature and advanced economy, characterized by
high levels of industrialization, technological
infrastructure, and overall societal well-being.The
term "developed" is used to distinguish these
countries from "developing" or "underdeveloped"
nations, which are still in the process of economic
and social growth.
– India, which is the world's fifth largest economy with a
GDP of 3.42 Lakh Crores USD, is currently classified as
a developing nation.
• Key Characteristics of Developed
Countries: Economic Factors
• High per capita income (typically above USD
12,000 to USD 25,000 or more)
• Diversified and advanced industrial and
service sectors
• Robust infrastructure, including
transportation, communication, and utilities
• Stable and efficient financial markets
• Social and Human Development Factors
– High levels of education and literacy
– Access to quality healthcare and social services
– Low infant mortality and high life expectancy
rates
– Robust legal and political institutions, with
democratic governance
 – Technological and Innovation
• Advanced technological infrastructure and capabilities
• Strong emphasis on research and development (R&D)
• High levels of innovation and productivity
• Measurements and Indicators:
• Per Capita Income: One of the primary indicators
used to determine a country's development status
– Calculated by dividing the Gross Domestic Product
(GDP) by the total population
• Human Development Index (HDI): A composite index used
by the United Nations to measure a country's overall well-
being
– Factors include life expectancy, education levels, and standard of
living
– Countries with an HDI score above 0.8 are generally considered
developed
• Examples of Developed Countries:
– According to the International Monetary Fund (IMF), some
developed countries include the United States, Canada, Japan,
Australia, New Zealand.
• Other examples include Singapore, South Korea and Hong Kong in Asia.