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î Why the pace of economic development varies
across countries both in terms of time and in
terms of extent?
î Is it because countries have arrived at different
stages of growth and economic development?
î Is it because of the different endowment of
factors of production including technology,
quality of manpower, government and policies?

c

 
  
 
c


 

 

î ¦conomy or Growth of GDP varies with time
and across countries.
î Developed countries of the world with full
employment have achieved their potential GNP
whereas underdeveloped countries have a great
scope to achieve their potential GNP.

c

 
  
 
c


 

 

î ¦conomic history of the world suggests that
there occur phases of growth across countries at
different point of time depending upon their
stage of economic development and exposure to
world economy and sometime simultaneously.
î It also suggests that occasionally economic crises
also take place. What are various manifestations
of economic crises? Identify them. What factors
lead to those crises. How they are different from
trade cycles?

c

 
  
 
c


 

 

î 0il crisis in 1971& 1979
î Russian rouble crisis 1998
î Maxican (peso) currency crisis 1994
î Asian crisis 1997
î Global Financial crisis 2008

c

 
  
 
c


 

 -

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î What has been the growth of Indian
economy since 1952 and the 3.5 percent
rate of growth that we achieved during
1952-80 had undergone ups and downs at
different points of time and sometime for
quite few years too. What could be the
possible reasons for the lack luster
performance of Indian economy?

c

 
  
 
c


 

 

î [ince 1992 to 1997 Indian economy
witnessed average growth of about 7 per
cent per annum and subsequently a
slowdown during the subsequent years till
2002-2003. What factors were responsible
for the upswing and down swing in the
growth of Indian economy?

c

 
  
 
c


 

 

î Whether the process and triggers of
upswing and down swing at different
points of time in a country differ? 0r
there are some universal triggers as
explained by various theories of business
cycle.
î These are some of the questions the session
on Business cycle will deal with.

c

 
  
 
c


 

 

î Besides, the Keynesian model that we
discussed till now took into consideration
only the product market.
î Product market has a direct relationship
with money market.
î Production of Gs & [s requires investment
and investment is dependent upon rate of
interest.
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î Rate of interest is determined by the
demand for money and supply of money.
î This equilibrium bet money mkt and
product mkt can be explained with the
help of I[ & LM curve.

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î RBI and Govt become proactive.
î Lot of lequidity comes in the market.
î Capital market starts looking up.
î New IP0s start coming into the market
and are oversubscribed.
î FDI and FII inflow icreases.

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î Banks start looking forward to increase
their asset base and profit avenues.
î Product market, factor market and money
market become vibrant.
î General wage level increase and with this
cost of production also increases.

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î General price level increase and govt
attempts to control it by either through
monetary measures or fiscal measures.
î Banks come under pressure to increase
interest rate.
î This leads to increase in the cost of
production and serves as dampener on the
overall invt and bus environ.
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A recession is a period of declining real
GDP, falling incomes, and rising
unemployment for two consecutive
quarters.
A depression is a severe recession.

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 X    
   
î Growth of NI in India
î 69-70: 6.5% 96-97: 8.2%
î 70-71 : 5.1% 97-98: 4.8%
î 71-72: 0.9% 98-99: 6.5%
î 72-73 : 0.3% 99-2000: 6.5%

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 "   
,-*,.
î Recession in mfg(mfg+ele+minining)
showed weakness.
î Basic and intermediate goods industries
which showed steady growth in the first
part of 90s.
î 10 out of 17, 2-digit industries in this
group registered a growth rate of less then
5% during 96-97&97-98
c

 
  
 
c


 

 

î This was because of deceleration in the
industrial invt, exports and con demand
generated by low growth of rural incomes.
î Moderate groth in money supply and
credit
î Infrastructural bottlenecks
î 0vervalued exchange rate
î Deceleration in world eco growth
c

 
  
 
c


 

 

î Decline in public and pvt sector
investment.
î GFCF declined from 18.9% in 95-96 to
6.3% in 96-97 and 5.3% in 97-98
î This in turn adversely effected the demand
for ind products via inter sectoral linkages

c

 
  
 
c


 

 

î Real value added in ag. increased@1%p.a.
In contrast to 3.5% during 91-94 leading
to decline in rural incomes and adversely
affected d-for ind products
î [upply of finance from banks and capital
markets to ind sector declined

c

 
  
 
c


 

 

î IDBI, ICICI loan disbursement declined
rom 26% during 92-95 to 15% 96-97.
î [mall and medium corporates were worst
sufferers.

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