|Table of contents
|Co-relation between Market Economy and Poverty
|Differences Between - Market Failure and Government Failure
|Structural Composition of the Economy
|Newly Industrialized Country
|Least Development Countries
|India's Initiatives for Green Accounting
|Sarkozy's Initiatives for GDP Alternative
|Need a Change
|Calculation of GDP in India
Some proponents of market economies believe that the government should intervene to prevent market failure while preserving the general character of a market economy. It seeks an alternative economic system other than socialism and a laissez-faire economy, combining private enterprise with measures of the state to establish fair competition, low inflation, low levels of unemployment, good working conditions, and social welfare.
Free market economists argue that planned economies and Welfare will not solve poverty problems but only make them worse. They believe that the only way to solve poverty is by creating new wealth. They believe that this is most efficiently achieved through low levels of government regulation and interference, free trade, and tax reform and reduction. An open economy, competition and innovation generate growth and employment. Advocates of the third way -social market solutions to poverty- believe that there is a legitimate role the government can 'play in fighting poverty. They believe this can be achieved through the creation of social safety nets such as social security and worker’s compensation.
Most modern industrialized nations today are not typically representative of Laissez-faire principles, as they usually involve significant amounts of government intervention in the economy. This intervention includes minimum wages to increase the standard of living, antimonopoly regulation to prevent monopolies, progressive income taxes, welfare programs to provide a safety net for those without the capacity to find work, disability assistance, subsidy programs for businesses and agricultural products to stabilize prices -protect jobs within a country, government ownership of some industry, regulation of market. Competition to ensure fair standards and practices to protect the consumer and worker, and economic trade barriers in the form of protective tariffs - quotas on imports - or internal regulation favouring domestic industry.
The inability of an unregulated market to achieve allocative efficiency is known as market failure. The main types of market failure are monopoly, steep inequality, pollution, etc. The Western economic recession since 2008 is the result of market failure where excessive speculation and borrowings have disoriented the economies with huge human and economic costs. Government failure is the public sector analogy to market failure and occurs when the government does not efficiently allocate goods and/or resources to consumers. Just as with market failures, there are many different kinds of government failures. Inefficient use of resources, wastage, and retarded economic growth due to government monopolies and regulation are the results of government failure. Often, the performance of the public sector in India is cited to exemplify government failure.
A developing country is a country that has not reached the Western-style standards of democratic governments, free market economies, industrialization, social programs, and human rights guarantees for its citizens. Countries with more advanced economies than other developing nations but which have not yet fully demonstrated the signs of a developed country are grouped under the term newly industrialized countries.
The category of newly industrialized country (NIC) is a socioeconomic classification applied to several Countries around the world. NICs are countries whose economies have not yet reached first-world status but have, in a macroeconomic sense, outpaced their developing counterparts Another characterization of NICs is that of nations undergoing rapid economic growth. Incipient or ongoing industrialization is an important indicator of a NIC. In many NICs, social upheaval can occur as primarily rural agricultural populations migrate to the cities, where the growth of manufacturing concerns and factories can draw many thousands of labourers. NICs usually share some other common features, including:
A High-income economy is defined by the World Bank as a country with a GDP per capita of $11,456 or more. While the term high income may be used interchangeably with “First World” and “developed country,” the technical definitions of these terms differ. The term “first world” commonly refers to those prosperous countries that aligned themselves with the U.S. and NATO during the Cold War. Several institutions, such as the International Monetary Fund (IMF), take factors other than high per capita income into account when classifying countries as “developed” Or “advanced economies.” According to the United Nations, for example, some high-income countries may also be developing countries. The GCC (Persian Gulf States) Countries, for example, are classified as developing high-income countries. Thus, a high-income Country may be classified as either developed or developing.
The term developed country, or advanced country, is used to categorize countries that have achieved a high level of industrialization in which the tertiary and quaternary sectors of industry dominate. Countries not fitting this definition may referred to as developing countries. This level of economic development usually translates into a high income per capita and a high Human Development Index (HDI) rating. Countries with high gross domestic product (GDP) per capita often fit the above description of a developed economy. However, anomalies exist when determining “developed” status by the factor GDP per capita alone.
Least developed countries (LDCs or Fourth World countries) are countries that, according to the United Nations, exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world. A country is classified as a Least Developed Country if it meets three criteria based on:
India aims to factor the use of natural resources in its economic growth estimates by 2015 as we seek to underscore the actions it is taking to fight global warming. The government said the country would seek to make “green accounting” part of government policy on economic growth. The alternative GDP (Gross Domestic Product) estimates account for the consumption of natural resources as well. This would help find out how much of a natural resource is being consumed in the course of economic growth, how much is being degraded and how much is being replenished. It is expected that in the future, more and more economists are likely to focus their time and energies on social investment accounting or green accounting … so that GDP really becomes not a gross domestic product but a green domestic product. Green gross domestic product, then or green GDP as outlined above, measures economic growth while factoring in the environmental consequences or externalities (how those outside a transaction are affected), of that growth. There are methodological concerns — how do we monetize the loss of biodiversity? How can we measure the economic impacts of climate change due to greenhouse gas emissions? While the green GDP has not yet been perfected as a measure of environmental costs, many countries are working to strike a balance between - green GDP and the original GDP.
Stiglitz explained: Stiglitz explained: The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens’ own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximize it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth — all of which might lower GDP growth. The fact that GDP may be a poor measure of well-being or even of market activity has, of course, long been recognized. But changes in society and the economy may have heightened the problems, at the same time, advances in economics and statistical techniques may have provided opportunities to improve our metrics.
India’s GDP Base Year has changed.
GDP based on 2011-12 did not reflect the current economic situation correctly. The new series will be in compliance with the United Nations guidelines in System of National Accounts-2008.
GVA - Gross Value Added
In simpler terms, GVA represents the value generated by the production of goods and services in an economy after accounting for the costs of production. It is used to analyze the performance of different sectors within an economy and helps in understanding their contributions to the overall economic growth.
GVA can be calculated using three different approaches:
GVA is an important indicator for policymakers, businesses, and researchers to evaluate the performance of an economy, identify areas of growth, and make informed decisions on resource allocation and investment. Comparing GVA across different sectors can help in prioritizing industries that need support and in developing strategies for balanced and sustainable economic growth.
|1. What is the correlation between a market economy and poverty?
|2. What are the differences between market failure and government failure?
|3. What is the structural composition of the economy?
|4. What is the difference between a developing country, a developed country, and a newly industrialized country?
|5. What are India's initiatives for green accounting?