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DRIVE
falls 2016
PROGRAM
BBA
SEMESTER
V
SUBJECT CODE & NAME
BBA 503
ECONOMIC PLANNING AND POLICIES

1 Briefly explain any 3 types of theory of Economic Development and also discuss the features of a
Developing Economy?
3 types of Economic development theory
Features of a Developing Economy

Answer: Theories of Economic Development

(a) The Wealth of Nations Theory: Adam Smith has been recognized as the leading expounder of
economic thought. Adam Smiths opinions can be prominently seen in the works published by David
Ricardo and Karl Marx in the 19th century, and by John Maynard Keynes and Milton Friedman in the
20th century. The Wealth of Nations, which is a series of five books, sought to determine the nature and
cause of a nations prosperity. Smith observed increasing division of labour as the main cause of
prosperity. Smith was very much opposed to mercantilismthe practice of artificially maintaining a trade
surplus on the erroneous belief that doing so increased wealth. Adam Smith was of the opinion that
government plays a vital role in promoting a nations prosperity. .Similar to other modern believers,
Smith also thought that the government should put into effect contracts and grant patents and copyrights
to promote inventions and new ideas. One clear distinction between Smith and most modern believers in
free markets is that Smith favoured retaliatory tariffs. Due to the systematic and comprehensive study of
the subject done until that era, his economic thinking became the postulate for classical economics.

(b) Theory of Comparative Advantage: The brilliant British economist David Ricardo was one of the
most important figures sought out for the development of economic theory. He articulated and formulated
the Classical system of political economy. His thoughts dominated the economic world throughout the
19th century and his legacy continues till today. Ricardos most famous work is his Principles of Political
Economy and Taxation. In 1817, David Ricardo published this book, in which he presented the law of
comparative advantage. This is one of the most important and still unchallenged laws of economics with
many practical applications.

(c) The Theory of Population: Thomas Malthuss social and economic ideas focussed on his theory of
population. Thomas was of the view that population increases at a faster rate as compared to the
production of food. As a result the number of people in society will be constantly pressing and creating
liability on the means of physical subsistence. Malthusian theory presented a different opinion from the
more traditional economic growth theory of Adam Smith. The acceptance of Malthuss ideas in Smiths
doctrine resulted in the incorporation of the most outstanding features of the classical system of
economics. Malthusian population theory was considered prominent and famous throughout the 19th
century. However, it lost its prominence when scholars realized that Malthus had underestimated the rate
of technical change. Malthus did regard serious and cumulative efforts on the part of the people as an
accelerator in the process of economic development. According to him, development of an economy is
not an automatic process.

Important Features of a Developing Economy

Dominance of agricultural sector: Agriculture is the major source of income in undeveloped
and developing economies. Such economies are also, therefore, known as agrarian economies. A
large section of the population earns a living by tilling the land.
Small and large scale of production: Both the private and public sectors exist in the economy
side by side. Goods are produced on large scale and on small scale as well by public and private
sectors.
Production for self-consumption: A large amount of goods and services produced are consumed
by the producers themselves. Self utilization of resources is also one feature that is prominent in
such economies. Majority of farmers grow crops for their own consumption.
Illiteracy: Another important feature of a developing economy is the huge gap between the
educated and the uneducated. Illiteracy is widespread in such economies. Efforts are continually
being made to eradicate illiteracy, and yet illiteracy and unskilled labour are widely dominant.
Underutilization of resources: No doubt God has gifted developing economies with significant
amounts of natural resources and large numbers of labour forces. But the unfortunate part is that
due to lack of technical knowledge, natural resources are not discovered or fully utilized.
Similarly, labour force is either unemployed or underemployed.
Preference for labour intensive industries: Unemployment and underemployment are one of
the major problems of developing economies, so small scale and cottage industries mushroom
which absorb large number of hands but large industries do not find any place to grow which
further retards the growth of developing economies.
Vicious circle of poverty: Poverty gives rise to a vicious circle in a developing economy. Due to
poverty there is low income, lesser investment, lesser production and the result is abject poverty
once again. Developing economies find it very difficult to break this vicious circle. International
organizations like IMF, UNESCO, UNICEF and World Bank, from time-to-time, extend
monetary assistance to such economies.

2. Explain the role of the Public Sector in India

Role of the Public Sector in India

Answer: Role of the Public Sector in India

Public sector in India has been criticized vehemently by a number of supporters of the private sector who
have chosen to shut their eyes towards the achievements of the public sector. To understand the role of the
public sector, we
3 Discuss in detail Liberalization, Privatization and Globalization (LPG) Model of Development
with the help of examples?
Liberalization, Privatization and Globalization (LPG) Model of Development

Answer: The LPG Model of development was brought out in 1991. The model was pioneered by the then
Finance Minister Dr. Manmohan Singh with a huge impact and it proposed to lay focus on liberalization,
privatization and globalization.

4 Discuss the Significance of Agriculture in the National Economy?

Significance of Agriculture in the National Economy

Answer: Significance of Agriculture in the National Economy

Agriculture has always been the backbone of the Indian economy and despite concerted industrialization
in the last six decades; agriculture still occupies a place of pride. It provides employment to around 60 per
cent of the total work force in the country. The significance of agriculture in the national economy can be
best explained by

5 Discuss the Overview of the Services Sector

Overview of the Services Sector

Answer: Overview of the Services Sector

The growth rate of the Indian economy (measured in terms of GDP at factor cost at 2004-05 prices) was
5.4 per cent in the first half (H1) of year 2012-13 as against 7.3 per cent in the corresponding time period
of the previous year. The growth for the full year of 2011-12 was 6.5 per cent vis--vis the growth rate of
8.4 per cent achieved in each of the previous two years i.e. 2009-10 and 2010- 11. The slowdown has
been all-pervasive and almost all the sectors have been affected. The growth rate has been 2.1 per cent for
agriculture and allied sectors, 3.2 per cent for industry sector and 7.0 per cent for the services sector in the
first half of 2012-13. The growth rates were 3.4 per cent, 4.7 per cent and 9.5 per cent, for agriculture,
industry and services, respectively in

6. Write short notes on:

a) Foreign Direct Investment (FDI) in India
b) Communication system in India

Answer: a) Foreign Direct Investment (FDI) in India

Latest terms of trade development with respect to important areas like auto components, apparels,
chemicals, pharmaceuticals, jewellery, etc., form the basis for FDI in India although its rigid FDI policies
made for an important obstacle in this context. Recently, a more liberalized FDI policy of India allowed
upto 100 per cent FDI stake in different ventures which includes the real-estate sector as well. Some of
the industrial policy reforms are removal of restrictions on development providing easy access to foreign
technology and FDI and fulfilling industrial licensing requirements. Many changes were approved on the
FDI policy to eliminate the restrictions imposed in most of the sectors. Restrictions will be reduced in
different sectors like civil aviation, construction development, industrial parks, commodity exchanges,
petroleum and natural gas, credit-information services,

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