Indian Economy Unit-II Niti Aayog and Development.pptx

Economic Development & Economic Growth, LPG Model, Mixed Economy, Niti Aayog: Scope, Objectives, Role & Functions

1. INDIAN ECONOMY: NITI AAYOG AND DEVELOPMENT E545 Dr. A. Royal Edward Williams Associate Professor of Economics Sacred Heart College (A), Tamil Nadu

2. ECONOMIC GROWTH AND DEVELOPMENT The concepts of economic growth and development in the specialized literature “The standard of living” of the population includes various aspects related to: safe drinking water, increasing the number of jobs, improving hygiene systems, eradicating poverty, medical facilities, increasing the level of literacy, balanced infrastructure, etc. indicator of economic development. Thus, an upward evolution of economic development is very important and will be reflected in the “quality of life” of the population in the respective country, being more important than obtaining the status of a developed nation.

3. The differences between Economic Growth and Development Economic growth represents the growth of the real production of a country, in a certain period of time, while economic development represents the achievement of higher production, a better “standard of living” and advanced technology. E conomic growth does not take into account the incomes from the informal economy (it includes unregistered economic activities), while economic development takes into account all the activities, formal or informal, and facilitates the poor people a place to live and the opportunity to work according to the training they have.

4. Economic growth does not give us information about the degree of use of natural resources, about pollution, congestion or the degree of disease of the population. States through their governments have to deal with environmental issues, especially global warming. Economic development aims at Sustainability, that is, meeting the needs of people today but with concern for future generations. Economic growth can be included in the economic development. Economic growth is reflected by the size of a country's gross domestic product (GDP), and economic development is specific to developed countries and is a broader notion than economic growth. This refers to an increase of the real national income of the economic and social structure of a country for a long time. Economic development is also targeted by underdeveloped or developing countries.

5. The economic growth is realized automatically compared to the economic development that involves the planning of the activities as regards the obtaining of results. This indicates the growth of the country's GDP or GNP every year, expressed as a percentage. It is also essential that the growth of the "national product per capita" within a defined period of time, ie the rate of growth of the total production, must be higher than the rate of growth of the population.

6. Economic growth is necessary, but not sufficient to achieve economic development. Economic growth has specific measurement indicators, as well as economic development. Economic growth can be measured by the difference between the per capita income from one year to another and the economic development by “increasing the life expectancy rate, the infant mortality rate, the literacy rate and the poverty level”.

7. Determinants of Economic Development and Growth

8. Determinants for Economic Development Economic Factors Natural Resources Capital formation Size for the Market Structural change Financial system Marketable Surplus Foreign trade Economic system Non-Economic Factors Human Resource Technical know-how Political freedom Social Organisation Corruption-free administration Desire for development Moral, ethical and social values Casino capital Patrimonial Capitalism

9. Determinants of Economic growth Investment in physical capital Human capital development Technological innovation Institutional factors Macroeconomic stability Trade openness Entrepreneurship and innovation Natural resources

10. Mixed Economy A mixed economic system is one that combines aspects of both capitalism and socialism. A mixed economic system accepts private property and permits economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims.

11. Features of Mixed Economy Coexistence of All Sectors Cooperative Sector Freedom and Control Economic Planning Social Welfare

12. Merits of a Mixed Economy Efficient allocation of resources Incentives for innovation and production efficiency Government support Freedom the citizens enjoy. Ownership and existence of private producers also increase capital formation in the country. Price mechanism prevails. Also enjoys the advantages of central economic planning. There is healthy competition in the market.

13. Drawbacks of a Mixed Economic System Lack of government support Undue influence from private enterprises

14. LPG Model of Development What is Planning? The planning for the development of the economy of the nation is called economic planning. The planning consists of the allocation of the resources to the organisations that can enhance the economy of the country.

15. What is the LPG model of development? The LPG model of development consists of three measures that help develop the economy of the nation and the measures are

16. Liberalisation Liberalisation promotes the end of the restriction that can be a hindrance in the development of the economy of the nation. The objective of this measure is to enhance the competition within the domestic industries, improve foreign technologies and capital, and reduce the debt of the country.

17. Privatisation The privatisation policy of the model defines the privatisation of the government-owned industries so that the economy of the country can be enhanced. The above policy of the model increases the impact of private companies over government-owned industries. 

18. Globalisation The globalisation policy of the model aims to connect the economy of the country to the global economy so that the level of the economy can be enhanced. The above-stated policy of the model focuses on foreign trade and investments so that a borderless world can be created.

19. What is LPG Reforms? The term LPG stands for Liberalization, Privatization, and Globalization, representing the three core areas of focus in the Indian government’s New Economic Policy of 1991. The LPG Policy was introduced under the leadership of Prime Minister Shri P V Narasimha Rao and Finance Minister Dr. Manmohan Singh

20. Why was LPG Policy introduced in India? Balance of Payments Crisis: India faced a deficit in foreign currency, leading to low foreign exchange reserves and a growing debt burden. Underperforming Public Sector Undertakings (PSUs): Many PSUs were incurring losses, becoming a financial burden for the government. Fiscal Deficit and Public Debt: The government grappled with a fiscal deficit and substantial public debt, posing challenges to financial stability. High Inflation: Inflation rates soared, necessitating measures to address economic instability and rising prices. License Raj: Government restrictions and bureaucratic hurdle hindered business growth and discouraged private enterprise.

21. Objectives of LPG Reforms Economic Transformation: Shift the Indian economy from a Soviet-style model to a market economy with reduced government control and increased economic activity. Address Balance of Payments Crisis: Resolve the balance of payments deficit and strengthen India’s foreign exchange reserves. Promote Economic Growth: Stimulate economic growth and expansion by integrating Indian businesses into global trade markets. Facilitate International Trade: Enable the flow of goods, services, and capital across international borders, promoting trade and economic exchanges. Encourage Private Sector Participation: Foster increased participation of private entities in various sectors of the economy, promoting competition, innovation, and efficiency.

22. Features of LPG Reforms  Liberalization Privatization Globalization Deregulation Transfer of PSU ownership Trade liberalization Tariff reduction Disinvestment of PSUs Foreign direct investment Market-oriented policies Public-private partnerships Integration into global markets Financial sector reforms Asset monetization Technology transfer Competition promotion Market competition Cross-border trade Easing of licensing norms Private sector participation Access to global capital Removal of trade barriers Strategic sales Economic diplomacy FDI promotion Commercialization of assets International collaborations Exchange rate reforms Capital market reforms Export-oriented policies Intellectual property rights VRS and employee buyouts Global supply chain integration

23. Benefits of LPG Reforms Balance of Payments Improvement: Overcoming the balance of payments crisis and reducing reliance on foreign loans. Fiscal Deficit Reduction: Privatization of inefficient PSUs, leading to reduced government expenditure and losses. Economic Growth: Encouraging competition through reduced government restrictions, promoting private sector participation, and countering state monopolies. Global Market Participation: Enabling India’s entry into global trade markets and establishing its position as a major developing country.

24. Basic of Indian Five Year Plans Introduction: Planning plays an important role in the smooth functioning of an economy. In 1950, the Government set up the Planning Commission to create, develop, and execute India’s five-year plans. In each five-year plan of India and how it helps achieve the basic objectives of growth, employment, self-reliance, and also social justice. Further, it also takes into account the new constraints and possibilities to make the necessary directional changes and emphasis.

25. Objectives of Five-Year Plan of India The objectives of these five-year plans were as follows: Economic Growth Economic Equity and Social Justice Full Employment Economic Self-Reliance Modernization

26. NITI AAYOG The Planning Commission which has a legacy of 65 years has been replaced by the NITI Aayog. The utility and significance of the Planning Commission had been questioned for a longer period.  The replacement seems to be more relevant and responsive to the present economic needs and scenario in the country.

27. The NITI Aayog was formed on January 1, 2015. In Sanskrit, the word “NITI” means morality, behaviour, guidance, etc. But, in the present context, it means policy and the NITI stands for “National Institution for Transforming India”. It is the country’s premier policy-making institution that is expected to bolster the economic growth of the country. It aims to construct a strong state that will help to create a dynamic and strong nation. This helps India to emerge as a major economy in the world. The NITI Aayog’s creation has two hubs called “Team India Hub” and “Knowledge and Innovation Hub”.

28. Objectives of NITI Aayog: States’ active participation in “light of national objectives” and the provision of a framework ‘national agenda’. To foster cooperative federalism on an ongoing basis through well-organized assistance programs and procedures with the states. To develop ways for developing a sustainable plan at the village stage and subsequently aggregating them at various levels of government. An economic program that takes into account national security concerns is among the objectives of NITI Aayog. To provide particular regard to those segments of society who may be at threat of not benefiting sufficiently from economic advancement.

29. To provide particular regard to those segments of society who may be at threat of not benefiting sufficiently from economic advancement. Develop strategic and long-term policy, program, and initiative frameworks and initiatives and evaluate their development and success. To provide guidance and foster collaborations between key stakeholders, national and international think tanks, and educational and political research organizations. To develop knowledge, creativity, and a support system for entrepreneurs through a shared network of “national and international” professionals. To create a forum to resolve cross-sectoral and cross-departmental issues to expedite the progressive agenda’s completion.

30. To maintain a cutting-edge Resource Centre, serve as a repository for research on excellent governance and best practices in socio-economic development, and assist in disseminating to participants. To efficiently screen and evaluate the execution of projects and strategies, including identifying the resources required to increase the probability of success. To focus on technology advancement and capacity growth to carry out programs and projects. To carry out any other actions required to execute the public investment schedule and objectives of NITI Aayog.

31. Role of NITI Aayog NITI Aayog has the twin mandate to oversee the adoption and monitoring of the SDGs in the country and promote competitive and cooperative federalism among States and UTs.  The task at hand for NITI Aayog is not just to periodically collect data on SDGs but to proactively realize the goals and targets. The Ministry of Statistics and Programme Implementation ( MoSPI ) has already undertaken a parallel exercise of interaction with the Ministries to evolve indicators reflecting the SDG goals and targets.

32. NITI Aayog in consultation with MoSPI has prepared a draft mapping of the goals and targets as an initial step. Further, the centrally sponsored schemes, including the ‘core of the core’, ‘core’ and ‘optional’ schemes implemented by the States, and some of the recent initiatives undertaken by the Central Government have been mapped. Moreover, Ministries and States are implementing central sector schemes and state schemes, respectively, aligned with one or more SDGs.

33. The Functions of NITI Aayog The following are the detailed functions of NITI Aayog (National Institution for Transforming India): 1. Collaborate with the governments of the states on national development priorities, sectors, and strategies. 2. National Labor Economics Research and Development Institute (NILERD) 3. Another function of NITI Aayog is to serve as the Planning Commission’s successor.

34. 1.Collaborate with the governments of the states on national development priorities, sectors, and strategies. Create a federal system in which national and state governments work in harmony and coordination. Implement rural development schemes and initiatives. Ensure that economic strategy and policy are in the best interests of national security. Encourage partnerships between key stakeholders and like-minded think tanks on a national and international scale, as well as educational and policy research institutions.

35. With the assistance of national and international experts, practitioners, and other partners, develop a knowledge, innovation, and entrepreneurial support system. Maintain a cutting-edge Resource Center and serve as a research hub for good governance and best practices in sustainable and equitable development. Actively monitor and evaluate programme and initiative implementation, with a focus on technology upgradation and capacity building.

36. Feature of NITI Aayog: NITI Aayog is developing itself as a state-of-the-art resource centre with the necessary knowledge and skills that will enable it to act with speed, promote research and innovation, provide strategic policy vision for the government, and deal with contingent issues. It is supported by an attached office, Development Monitoring and Evaluation Organisation (DMEO), a flagship initiative, Atal Innovation Mission (AIM) and an autonomous body, National Institute of Labour Economics Research and Development (NILERD).

37. NITI Aayog’s entire gamut of activities can be divided into four main heads: Policy and Programme Framework Cooperative Federalism Monitoring and Evaluation Think Tank, and Knowledge and Innovation Hub

38. Thank you