Composition of various factors that go in the economy (Structure) and the importance of GDP is presented

1. Structure of the Economy, Inflation and GDP
Dr. L. Mothilal, M.B.A., FDP-IIMA, PGCCA, Ph.D.
Assistant Professor,
Department of Management Studies
Pondicherry Central University, India
Email: mothilal2020@gmail.com
https://www.linkedin.com/in/dr-mothilal-lakavath-7469b34/
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2. What is Economy?
An economy is an area of the production, distribution,
or trade, and consumption of goods and services by
different agents in a given geographical location in
various countries.
An economy is the system according to which the
money, industry, and trade of a country or region are
organized.

3. Changes in the Indian Economy
Indian economy has been undergoing structural changes since
Independence
In economics, structural change is a shift or change in the basic ways a
market or economy functions or operates.
Such change can be caused by such factors as economic development, global shifts in capital and labor,
changes in resource availability due to war or natural disaster or discovery or depletion of natural
resources, or a change in political system.
For example, a subsistence economy may be transformed into a manufacturing economy, or a
regulated mixed economy may be liberalized. A current driver of structural change in the world economy
is globalization.
Structural change is possible because of the dynamic nature of
the economic system
Source: https://en.wikipedia.org/wiki/Structural_change

4. Structure of Global Economy until 2008

5. Globalization – Share of World’s GDP
India China Japan USA Europe
Rest of the
World
1 33 27 1 0 14 25
1500 25 25 3 0 21 26
1820 15 33 3 2 27 20
1870 12 17 2 9 38 22
1913 8 8 4 21 39 20
1950 4 5 3 28 31 29
1973 3 5 8 23 29 32
2001 4 7 8 23 21 37
2008 6 13 7 21 19 34

6. Globalization – Share of World’s GDP
33
25
15
12
8
4 3 4
6
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
45
1 1500 1820 1870 1913 1950 1973 2001 2008
India China
USA Japan
Europe Rest of the World
2 per. Mov. Avg. (Rest of the World)

7. G8 Countries Share in World’s GDP
68 68.3
66 67 67 66
64
60
58.4
50
55
60
65
70
1992 1994 1996 1998 2000 2002 2004 2006 2008
US, Japan, Germany, Britain, France, Italy,
Canada & Russia

8. Emerging Markets Share in World’s GDP
0
2
4
6
8
10
12
14
1992 1994 1996 1998 2000 2002 2004 2006 2008
China, India, Mexico, Brazil, & South Africa

9. Top 10 Countries share of World GDP
Rank Country
GDP US$
Billions in
2016
Share of World
GDP %
In 2020
Share of World
GDP %
Rank in
2020
1 China 21,269.02 17.9 29,348 19.6 1
2
United
States
18,561.93 15.6 21,927 14.7 2
3 India 8,720.51 7.32 12,842 8.58 3
4 Japan 4,931.88 4.14 5,483 3.67 4
5 Germany 3,979.08 3.34 4,583 3.06 5
6 Russia 3,745.08 3.14 4,309 2.88 6
7 Brazil 3,134.89 2.63 3,631 2.43 8
8 Indonesia 3,027.83 2.54 4,119 2.75 7
9
United
Kingdom
2,787.74 2.34 3,244 2.17 9
10 France 2,736.72 2.3

10. INDIA’S political freedom is 70 years old & economic freedom from 1991.
Growing at about 7.2% annually from earlier HINDU growth rate of 3.5%.
It has more than $392 billion forex reserves.
It has talented people from literature and art, to science and engineering,
to business and finance.
it has produced new enterprises & entrepreneurs such as Mittal Steel,
DLF, Reliance, Bharti, Dr. Reddy’s, Ranbaxy, Infosys, and more…
India’s Status

11. GDP - $9.489 trillion (PPP; 2017)
GDP Per Capita $7,153 (PPP est; 2017)
Human Development Index – 0.624 (Medium)
Labour Force – 52 Crores
Ease of Doing Business Rank, 2017 – 130
Public Debt – 66% of GDP (2017)
Revenue - $550b & Expenses - $720 b
Gross External Debt - $472 b
India’s GDP

12. India’s Current GDP by Sectors
Agriculture
• 17% of GDP
• 47% of
Population
Industry
• 30% of GDP
• 22% of
Population
Services
• 53% of GDP
• 31% of
Population

13. Nature of Indian Economy
Low Per Capita Income Lackofindustrialization
Disparities in Income Distribution Operation of economic vicious circles
Declining share of Agriculture Market imperfections
Over Population Bottlenecks in transport
Unbalanced Economic development Existence of traditional society
Lack of skilled workforce Ease of Doing Business – Very Poor

14. GDP
Gross domestic product (GDP) is the monetary value of all the finished goods
and services produced within a country's borders in a specific time period.
GDP includes all private and public consumption, government outlays,
investments, private inventories, paid-in construction costs and the foreign
balance of trade (exports are added, imports are subtracted). .
GDP is commonly used as an indicator of the economic health of a country, as
well as a gauge of a country's standard of living. Since the mode of measuring
GDP is uniform from country to country, GDP can be used to compare the
productivity of various countries with a high degree of accuracy
Source: http://www.investopedia.com/terms/g/gdp.asp

15. GDP
Indus Valley Civilization, the first known permanent and predominantly
urban settlement that flourished between 3500 BCE and 1800 BCE
boasted of an advanced and thriving economic system.
Its citizens practiced agriculture, domesticated animals, made sharp
tools and weapons from copper, bronze and tin and traded with other
cities.
Evidence of well laid streets, layouts, drainage system and water supply
in the valley's major cities, Harappa, Lothal, Mohenjo-daro and
Rakhigarhi reveals their knowledge of urban planning.

16. India is estimated to have had the largest economy between 1 CE and 1000 CE,
controlling between one-third and one-fourth of the world's wealth at the time,
though GDP was stagnant.
India experienced GDP growth in the late medieval era after 1000, during the
Delhi Sultanate, but was overtaken by Ming China as the largest economy by
1500.
After most of the subcontinent was reunited under the Mughal Empire, India
returned to being the largest economy by 1700, controlling about a quarter of
the world economy, before declining under British rule in the late 18th century.
According to the Balance of Economic Power, India had the largest and most
advanced economy for most of the time span between the 1st century and 18th
century, the most of any country for a large part of the last two millennia.

17. Source: https://en.wikipedia.org/wiki/Economic_history_of_India

18. Source: https://en.wikipedia.org/wiki/Economic_history_of_India

19. GDP per capita of South Asian economies
Source: https://en.wikipedia.org/wiki/Economic_history_of_India

20. Source: https://en.wikipedia.org/wiki/Economic_history_of_India

21. Challenges of Indian Economy
Population
Explosion
Poverty
Unemployme
nt
Rural Urban
Divide
Low Rate of
Economic
Growth
Malnutrition
Inequitable
Distribution
of Income
Labour
shortage in
Agriculture
Low level of
Human
Development
Technology
Backwardness
Poor
Business
Environment
Lack of
Entrepreneur
ial Culture

22. Economic Systems
Meaning of economic systems: “ is a system designed by a
nation to utilize its resources for the purpose of satisfying the
needs and wants of people.”
Definition of economic system: According to “Carl Landauer”
“an economic system is the sum total of the devices by which
preferences among alternative purposes of economic activity is
determined and by which individual activities are coordinated
for the achievement of these purpose.”

23. Functions of
Economic Systems
Determination
of production
and allocation
of resources
Organization of
the production
process
Income
Distribution
Provision for
the future and
posterity
Economic
growth and
dynamism
Improve
standard of
living

24. Socialism
Mixed
Economy
CapitalismTypes of
Economic
Systems

25. Features of
Capitalism
An economic
activity where the
means of
production are
privately owned
There is no
government
interference
Basic production
units are 1)
Household 2)
Firms
Consumers’
sovereignty
Competition
Market System

26. Capitalism
According to karl marx, “capitalism is a
particular mode of organization of
production which is characterised by
wage, slavery production of profit and
creation of surplus value.”

27. Merits of
Capitalism
Democratic
Nature
Rapid
Economic
Growth
Incentives &
Innovation
Efficient
Utilisation
of Resources
Capital
Formation
Flexibility
and
Adaptability

28. Demerits
of
Capitalism
Concentration
of Economic
Power
Rise of
Monopoly
Economic
Instability

30. Socialism is an economic system where the
means of production are either owned or
controlled by the state
According to “left witch” “in socialism the
role of the state is central it owns the means
of production and directs economic activity”

31. Features of Socialism
No place for private
State itself decides -what to produce - how to produce -how to distribute
Government ownership
Distribution of income
Restriction of occupation
Central authority
Social welfare
Peaceful and democratic evaluation
Absence of competition
Equality of opportunity
Classless society

32. Absence of Class Struggle
Economic Stability
Social Justice
Higher Economic Growth
Rational Allocation of
Resources

33. Corruption
Loss of
Consumer
Sovereignty
Concentration
of Economic
Power in the
State
Inefficacy and
Low
Productivity
Loss of
Occupational
Freedom

34. Mixed Economy

35. The mixed economy shares features of
capitalism and state capitalism
(Socialism)
A mixed economic system is an economic
system that features characteristics of
both capitalism and socialism

36. Advantages of Mixed Economy
Advantages of Capitalism & Socialism; No evils of either
Encouragement to Private Sector & Optimum Use of Resources
Government directs economic activity towards certain socially important areas of the
economy and the balance is subject to the operation of the price mechanism.
Freedom & Social Welfare
It creates a Balance in Regional Developments

37. Demerits of Mixed Economy
Delay in Economic Decisions by Govt.
Wastage of Resources
Inefficient public sector
Unemployment and Uncertainties
No freedom to Private sector

38. Inflation
Inflation is a sustained increase in
the general price level of goods
and services in an economy over
a period of time
Deflation is a persistent decrease in
the general price level of goods and
services