Name:Deepti Hemantkumar k Roll no :11013028 Div:c Case study: The article talks about the inclusive growth and

its relevance in todays context and talks about financial inclusion. Answer a) The twin goals of Indian economic planning have been rapid all-round economic growth equitable sharing of the fruits of development. while we have made a successful progress in achieving the first objective the second objective has remained elusive. The disparities have widened and some three-quarters of the population are mired in poverty. The world financial crisis offers an opportunity to make a course correction and advance towards inclusive growth. Inclusive growth refers to both the pace and the pattern of the economic growth. The focus is on productive employment rather than on direct income redistribution, as a means of increasing incomes for excluded groups. Inclusive growth is, therefore distinct from income distribution schemes which can in the short run reduce the disparities, between the poorest and the rest While income distribution inclusive growth allows people to contribute to and benefit from economic growth Apart from addressing the issue of inequality, the inclusive growth also make the poverty reduction efforts more effective by explicitly creating productive economic opportunities for the poor and vulnerable sections of the society. Answer b) Financial inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker

sections and low income groups at an affordable cost in a fair and transparent manner by mainstream institutional players. It is imperative that inclusive growth without financial inclusion will not succeed in achieving equitable objectives as financial inclusion can truly fortify the economic standards of the poor and the disadvantaged whose enrichment is foremost prerequisite for a nation encumbering growth trajectory. Here financial inclusion will help in striking a balance by channelizing the surplus to deficit units and bring them under the growth metaphor. The more the development larger is the thrust on empowering the low income group.

Que2 Discuss the importance of Foreign Investment in an Economy. Discuss the trend in Foreign Investment since 2001 in graphical form. (Reference indianbudget.nic.in economic survey balance of payment) 1. Definition-Foreign direct investment (FDI) refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. Foreign Investment Provides following Advantages:+ Foreign investment creates employment, and can lead to technological development through technology transfers. + It provides capital from rich countries for resource rich but capital poor India. + India can take advantage of superior R&D and managerial expertise. + Productivity, growth and competitiveness in export and import-competing industries are improved by foreign investment. + Increases living standards and economic growth.

2. As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI. 3. FDI provides the benefits of reduced cost through the realization of scale economies, and coordination advantages, especially for integrated supply chains.

60,000 50,000 40,000 30,000 20,000 10,000 0

Foreign Investment (Net)In US million Dollars

Foreign Investment (Net)In US million Dollars 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

IV 05 Marks

Explain the meaning of Fiscal Deficit. Show the trend in Gross Fiscal Deficit in India since 1991. Reference http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook%20of%2 0Statistics%20on%20Indian%20Economy Answer: A budget deficit occurs when an entity (often a government) spends more money than it takes in. The opposite is a budget surplus. The size of a governmental budget deficit is often an important political issue as well as one of economic policy. Fiscal conservatives denounce deficit spending and advocate balanced budgets. Keynesians argue that under some circumstances, deficit spending is justified. "Starve-the-beast" strategies usually lead to high budget deficits. An accumulated deficit over several years (or centuries) is referred to as the government debt. Often, a certain part of spending is dedicated to paying of debt with certain maturity, which can be refinanced by issuing new government bonds. That is, a fiscal deficit leads to an increase in an entity's debt to others. A deficit is a flow. And a debt is a stock. Debt is essentially an accumulated flow of deficits. Any deficit must, ultimately, be repaid, either through taxation, or seignorage. The Ricardian equivalence hypothesis states that this means a public deficit is exactly the same as a tax rise. The existence of a deficit has in some cases led to the existence of a capital market and been a great benefit to economic activity. A formula to calculate debt is: Debt = RBt-1 + (r-g)Gt - Tt R= real interest rate.

Bt-1= Debt of last year. r = Interest Rate g= growth rate Gt= Government Spending Tt = Tax Revenue.

450000 400000 350000 300000 250000 200000 150000 100000 50000 0

Gross fiscal deficit (Rs.Crore)

Gross fiscal deficit (Rs.Crore)

Anwer 3a

1800000 1600000 1400000 1200000 Turnover in Rs. 1000000 800000 Crore 600000 400000 200000 0

2003-04

1991-92

1994-95

1997-98

2000-01

2006-07

Years

2009-10

12 10 8 6 GDP 4 2 Turnover(In crores) 0 GDP