MACROECONOMIC CONCEPT: INFLATION, CAPITAL MARKET: FOR UPSC,UPPSC,BPSC MAINS EXAM.

NOTE:- THE SOURCE OF DISCUSSION IS BASED ON ECONOMIC SURVEY AND BUDGET OF INDIA, AND VARIOUS REPORTS AVAILABLE ON INTERNET

MACROECONOMIC CONCEPT: INFLATION, CAPITAL MARKET.

Here, in this article, we try to find out some basic concepts and answers, the question that, What are the 3 major concerns of macroeconomics?

Macroeconomics focuses on three things: national output, unemployment, and inflation. What are the main problems of macroeconomics?

6 Major Macro-Economic Issues

• Issue 1. Employment and Unemployment:
• Issue  2. Inflation:
• Issue  3. The Trade Cycle:
• Issue  4. Stagflation:
• Issue  5. Economic Growth:
• Issue 6. The Exchange Rate and the Balance of Payments:

What are the types of macroeconomics?

The three main types of government macroeconomic policies are fiscal policy, monetary policy, and supply-side policies. Other government policies including industrial, competition and environmental policies

Now discussing CPI:

 the consumer price index is widely used as a macroeconomic indicator of inflation, as a tool by the govt. and central banks for inflation targeting and for monitoring price stability, and as a deflector in the national accounts. Cpi is also used for indexing dearness allowance to employees for an increase in prices.

what is the type of inflation?

Demand pulls inflation: This inflation occurs when aggregate demands increases at a faster rate than aggregate supply. This type of inflation will typically occur when the economy is growing faster than the long-run trend rate of growth. if demands exceed supply, the price of commodity rises.

Cost-push inflation: This inflation occurs when there is an increase in the cost of production for firms. cost-push inflation could be caused by rising energy and commodity prices.

Why demand-pull inflation occurs?

1. Increasing population and a natural increase in demands of goods in an economy.
2. An increase in income level leads to an increase in the purchasing power of people to purchase more goods.
3. Consumerism in the economy when people believe in spending money rather than saving.
4. Increase in money supply and liquidity in the economy.

What is planning and marketing economy?:

It is widely believed that planning is relevant for developing economies and the absence of a market mechanism results in most economic decisions being taken by the govt. As economies get market-oriented the role planning gets diluted as decisions get taken efficiently by the markets. This is actually an incorrect way of looking at planning and market economy as substitutes.both have a different set of objective planning gives a direction to the economy and, the market economy gives efficiency in the use of the resources, investments, and production in an economy.

Planning is much broader and it offers a macro perspective, the vision of the country into the future, table out a growth path, the required level of savings, and investment to achieve the desired level of growth in the economy. it also provides how-to allocate precious scarce resources to competing end uses. it ensures complementary investment and more balanced, equitable development and distribution in an economy.

India and their 5-year plans:

india's 5-year plans commenced with the first five-year plan spanning from 1951-52 to 1955-56, with a modest overall growth target of 2.1% with just having become an independent country, the objective was an increasing agriculture sector growth and balanced development while keeping inflation under control. being the first plan, targets were fairly modest and emphasis was on consolidation.

It was from the second five-year plan 1956-57 to 1960-61, that planning in the true form acquired the shape of vision of India's needs for the industrial base and the resultant initiation of industrialization. this was also known as "MAHALANOBIS MODEL", used in the 2nd five-year plan, which was creating significant capacity in both capitals as well as core industries by the government.

The emphasis of this model was on achieving self- reliance and also the ability to meet the needs of the domestic economy. this plan is known as "TOP-DOWN" industrialization of big industries creating a base for the growth of the medium and small- scale industries and going down to the village and cottage industries. This also gave birth to the concept of the public sector of the state-run enterprises based on the Russian model of industrialization. The public sector was also envisioned to meet broad socio- welfare objectives in the economy.

The 5th five year plan from 1975-75 to 1978-79, from the first time, actually addressed the issues of removal of poverty as a prime objective.

however, it was sixth 5-year plan 1980-81 to 1984-85, it was realized that the growth by itself was not sufficient, for one, there were not sufficiently high enough to address the larger issues of the poverty in the country and the other being that there was structural rigidity. This plan made a frontal attack on poverty when the then prime minister late Smt. Indira Gandhi gave the slogan of "Garibi Hatao".

it marks the transformation from allocating scarce resources in the economy to welfare orientation with a focus on specific programs for poverty alleviation. These were not new schemes, however, all different schemes were combined as one scheme and known as the "Integrated Rural Development Program - IRDP". 

It was the 1st plan to focus on gender issues, women empowerment, and the growing inequalities amongst the states and also intraregional imbalances.

The eight plan 1992-93 to 1996-97, It for the first time, brought the need for strengthening infrastructure especially in the areas of energy, transportation, communication, and energy. it was the first plan to have universal elementary education and eradication of illiteracy in the age group of 15-35 years as a major objective.

tenth plan2002-03 to 2006-07, become more ambitious in the terms of wide- range objectives addressing each and every aspect of the economy but for one difference it gave a time frame for poverty reduction, elementary education, literacy, and other issues. it plans for FISCAL RESPONSIBILITY BUDGET MANAGEMENT ACT.

The eleventh plan 2007-08 to 2011-12, has coined the concept of "INCLUSIVE GROWTH" which means the benefits of the growth should be benefiting the masses. It has set out monitorable and quantifiable targets both for the center as well as the states and has grouped the priority areas to be addressed by the govt.

Inclusive growth: theme of the 12th five-year plan:

The plan is expected to be one that encourages the development of India's agriculture, education, health, and social welfare through govt. spending. it is also expected to create employment through developing India's manufacturing sector and move the nation higher up the values chain. An important aspect of generating "inclusive growth is shifting targets of the govt. aid to rural areas. Typically, large projects such as power generation, roads whereby fright can travel " and airports receive the lions share of the govt. subsides, while rural infrastructure receives comparatively little.

 The objective of inclusive  growth:

1. improving economic growth.
2.  reducing obsequious poverty and generating employment.
3. promoting education.
4. improving and strengthening the health sector.
5. service delivery, environment, and sustainability.
6. infrastructure including rural and urban infrastructure.

What are the challenges of 12th five-year plan:

• A bigger challenge thanP11(plan-11) of providing for inclusive growth or the ability to provide broad-based benefits to the masses.
• planning would increasingly become indicative of the larger role of the private sector in total outlays.
• the challenge will be on improving agricultural production and productivity given the near-stagnation levels. Their commercialization adaptation of biotechnology, access to finance, land reforms, etc. 
• infrastructure investment and the requirement of the long- term resources are the more important needs for coordinated and effective infrastructure.
• poverty continues to be a major issues and also a major limitation of not having the actual number especially in recent times. MGNREGA seems to fails on the objective of reducing poverty.
• There is a need for labor sector reforms can not be more than the present because of there links with creating employments opportunities with increased growth in future 
• Panchayati raj institutions should have to play an important role in the growth and development of the village .

Competitive federalism:

To ensure the competitive federalism it has taken the following steps:

1. finalized indices to measure incremental annual outcomes in critical social sectors like health, education, water and sanitation, sustainable development goals.
2. develop the district hospital index to measure and monitor the performance of the hospitals with a focus on outputs and outcomes.
3. announced the composite water management index to access improve the performance of the states/ union territories inefficient management of the water resources.