ESI Descriptive Flashcards
Explain Factor cost and Market Price?
Factor Cost
Factor Cost is the final cost incurred for producing the goods or services from an unfinished good to a final product. It does not include the taxes incurred on producing the goods and services or the profit margin set by the company.
Factor Cost include the cost paid to the factors of production such as rent for Land, wages for Labours, interest for Capital and profit shared with Entrepreneurs.
For example, If a shoe manufacturer purchases raw materials for ₹1000 and pays ₹500 salaries to employees, then the factor cost will be ₹1000+₹500 = ₹1500
Market Price
Market Price is the final price of goods or services that are sold in a market to consumers. It includes indirect taxes and subsidies imposed on the product. The formula for calculating the market price is Factor Cost + Indirect tax - Subsidies. (Indirect tax – Subsidies) is also called Net Indirect Tax (NIT).
Therefore, Market Price = Factor Cost + Net Indirect Tax (NIT)
So for finding Factor Cost after the market price of goods or services, the formula will be Factor Cost = Market Price – Net Indirect Tax (NIT)
What is GDP, what are the ways to measure it?
Gross Domestic Product (GDP) is the final value of all the goods and services produced within a boundary of a country in a specified time period. It is one of the main tools to measure the growth or development of a country.
There are three ways to measure the GDP of a country:
1- Production Approach- In this method, the Gross Value Added (GVA) is calculated at each stage of the production process in the country. GVA is calculated by deducting the Value of Intermediate Consumption from The Gross Value of Output. Thus, the formula for Production Approach is GVA = Gross Value of Output – Value of Intermediate Consumption.
- Gross Value of Output is the total value of final goods and services produced in a country
- The value of Intermediate Consumption is the total cost of goods and services used in the production process. It includes the cost of raw materials, components, services, energy etc.
For example, If a manufacturer produces 100 products worth ₹10000 in a Financial Year and the Value of Intermediate Consumption of producing 100 products is ₹3000. Then the Gross Value Added by the manufacturer will be ₹10000 - ₹3000 = ₹7000.
Similarly, the GVA by all the industries can be summed to find the GDP of a country.
2- Expenditure Approach- In this method, GDP is calculated by the summation of the expenditure on final goods and services of all the sectors in a country and deducting the import expenditures of all the sectors.
The formula for calculating GDP using this approach is C + I + G + Net Export (Export-Import).
- “C” is the expenditure by the Household sector. It only spends on consumption goods
- “I” is the expenditure by the Private sector. It only spends on capital goods
- “G” is the expenditure by the Government sector. It spends on both consumption goods and capital goods
Note!- Import expenditure of all the sectors is not included and Intermediate goods and services are not included in the C, I and G.
3- Income Approach- It is the method GDP is calculated by measuring the total income earned by all the factors of production which are land, labour, capital and entrepreneurship.
The formula for calculating GDP using the Income method is Compensation of Employees (COE) + Operating Surplus (OS) + Mixed Income (MI) + Rental Income + (Taxes on Production and Imports – Subsidies)
- COE includes salary and other benefits given to employees by businesses and the government
- Operating Surplus (OS) is the rent, interest and profit made by incorporated businesses by selling goods and services
- Mixed-Income (MI) is the profit made by unincorporated businesses or self-employed workers like restaurant owners, plumbers, barbers etc.
- Taxes on Production and imports are income earned by the government
In India, the National Statistical Office (NSO) measures GDP by both the Production approach and the Expenditure approach.
What is GNP?
The Gross National Product (GNP), also known as the Gross National Income (GNI) is the total value of goods and services generated by the residents of a country regardless of their location. It includes income generated by Indian residents living in India and abroad.
The formula for calculating the GNP is GDP + Net Factor Income From Abroad (NFIA) = GNP. Wherein, NFIA = Income from abroad to India – Income from India to abroad
- GDP is the final value of goods and services produced within a country’s border
- NFIA is the final net income generated by Indian residents by working or having businesses in foreign countries
The two main differences between GDP and GNP are:
- GDP does not measure the final value of income generated from outside the country while GNP measures that
- GDP includes the final value of goods and services generated by foreign nationals working in India but GNP excludes that
What is Nominal GDP and Real GDP, what is the difference between them?
Nominal GDP or GDP at Current Market Price
Nominal GDP is calculated by calculating the value of final goods and services at the current market price. For example, if in 2023 a total of 500 units of goods and services were produced at ₹20 then the Nominal GDP will be 500 * 20 = 10000₹.
Real GDP or GDP at Constant Price
Real GDP is calculated by taking the price of the base year for calculating the final value of goods and services. The base year for calculating Real GDP in India is 2011-12. It is set by the Central Statistical Office (CSO), MoSPI. It is the more accurate way to measure the GDP.
For example, if the total goods and services produced in 2023 are 500 units and the base price of goods and services in 2011-12 was ₹10 then the Real GDP in 2023 will be ₹5000.
Difference between Nominal GDP and Real GDP
- Nominal GDP includes both changes in price and production but Real GDP only includes the change in Production or quantity.
- Nominal GDP reflects the change in both the price and production of goods and services while Real GDP reflects only the change in the production of goods and services
Real GDP is a more accurate way of measuring GDP than Nominal GDP because it shows the change in the production of goods and services from the base year. The change in both price and quantity of goods and services in Nominal GDP makes it difficult to measure economic growth.
What is GDP deflator?
GDP Deflator shows the percentage change in the current price of goods and services compared to the price of the same goods and services in the base year. The formula for calculating GDP Deflator is Nominal GDP/Real GDP * 100.
If the GDP Deflator is increased by 20%, then it shows that the current prices of goods and services are 20% higher than it was in the base year.
The GDP deflator is used as an alternative to the CPI (Consumer Price Index) for measuring inflation. The difference between both is that CPI includes imported goods and services but the GDP deflator does not include imported goods and services.
Note- GDP – Depreciation = Net Domestic Product (NDP)
GNP – Depreciation = Net National Product (NNP)
Depreciation is the decrease in assets over time.
What is National Income and Per Capita Income?
National Income is the sum total of all the income generated by the factors of production within India and abroad within a financial year. It includes Net Factor Income From Abroad (NFIA) thus, it does not include income going from India to abroad.
National Income is equal to the Net National Product (NNP) at factor cost as it involves the factor income generated by Indian residents. Thus, the formula for calculating national income from NNP will be GDP at factor cost + NFIA - Depreciation = NNP at factor cost. Therefore NNP at factor cost is equal to the National Income.
Thus, the difference between GNP at factor cost and National Income is that National Income does not include depreciation.
Per Capita Income
Per Capita Income is the average income of a people in a country in a specified year. It is often used as an indicator to measure the standard of living in a country. The formula for measuring per capita income is National Income/Total Population of the country.
What is the difference between Growth and Development?
Economic growth is the increase in the real value of goods and services produced in an economy. It is quantitative and is typically measured by an increase or decrease in the percentage of the GDP (Gross Domestic Product). Other quantitative factors include National Income and Per Capita income.
Economic development is a broader term and it includes both quantitative and qualitative factors. Along with quantitative factors, it includes factors that improve the Quality of life or standard of living which are:
- Human Development Index
- Human Poverty Index
- Literacy rate
- Healthcare improvement
- Life expectancy
What is a Financial Crisis and what were the Causes of the 2007-08 Global Financial Crisis?
What was the impact of Global Financial Crisis on India and What was India’s response?
Financial Crisis is a situation where there is a decrease in the value of financial assets due to a disruption in the financial market such as a currency crisis, stock exchange crisis and banking crisis. Financial Crisis leads to:
- Decline in the Economic growth of a country
- Loss of confidence in the financial system
- Unemployment
- Poverty and Hunger
- Inequality
Causes of Global Financial Crisis
Sub-Prime Lending
Sub-prime lending by financial institutes in the USA was the main cause of the 2007-08 Global financial crisis. Sub-prime mortgages were provided to low-income homebuyers. They were unable to lend back to banks and financial institutes when the interest rates of houses rose. Sub-prime mortgage buyers had poor creditworthiness which led to the collapse of the financial sector
Securitization
Another cause of the financial crisis was the securitization of Sub-prime mortgages. Homebuyers were provided mortgages in the form of securities by lenders which also led to default of credit by investors due to poor creditworthiness. Complex financial instruments were also used such as Credit Default Swaps (CDS) and other derivatives which further increased the risk of default.
Regulatory Failures
The government and the Financial regulatory authorities implemented poor regulations on lending and there was inadequate supervision of banks and financial institutions. This encouraged more sub-prime lending for homebuyers and resulted in more mortgage defaults.
Excessive Leverage Excessive Leverage
Banks and financial institutes were highly leveraged due to high Sub-prime lending. This increased the risk exposure of banks and financial institutes which led to the financial crisis after the loans were defaulted.
Credit Rating Agencies
Poor judgement by the Credit Rating Agencies (CRA) also led to the financial crisis. CRAs gave high credit ratings to investors and some complex financial instruments which led to high exposure of banks.
Impact of the Global financial crisis on the Indian Economy
1- Capital Outflow- There was a great decrease in capital outflow in India due to the financial crisis. The increase in capital outflow was a result of the withdrawal of Foreign Institutional Investors (FII) from the Indian market and the withdrawal of foreign currency deposits which depreciated the value of Indian currency
2- Stock Market Crash- Following the withdrawal of Foreign Institutional Investors (FII), there was a great decline in the stock market of India. This was caused due to the reduction in the Foreign Portfolio Investments (FPI) from other countries which affected the prices of the stock market heavily
3- Money Market- The Financial Crisis prompted the Indian banks and financial institutes to tighten their liquidity position and increase short-term interest rates. Banks were hesitant to lend resulting in a slowdown in credit growth and a decline in investment.
4- Decline in GDP- Key sectors such as manufacturing, real estate and services were affected by the financial crisis. Due to the global financial crisis, there was an increase in global prices of commodities and a reduction in global demand. This resulted in the decline of the manufacturing sector in India and Real estate investors were finding it difficult to raise funds due to high-interest rates.
The Services sector which included IT, BPO and Tourism services was also impacted by the global financial crisis due to less demand in the global market. All this culminated to decline of India’s GDP (Gross Domestic Product) growth.
India’s Response to the Financial Crisis
The Indian Economy was not directly impacted by the Global Financial Crisis as the Indian Economy was not much exposed to the Sub-Prime mortgage market like other countries and India was not deeply integrated with the Global Financial system.
However, the Indian Economy was indirectly affected and India used a combination of Monetary and Fiscal policy measures to control the economic crisis and improve India’s GDP growth which was
Monetary Policy Measures
- RBI reduced the CRR (Cash Reserve Ratio) to 5% and Statutory Liquidity Ratio (SLR) to 24%. This resulted in more liquidity for banks to lend and further increased the money supply in the market
- RBI decreased the Policy Repo Rate to 4.75% and Reverse Repo Rate to 3.25%. This encouraged banks to borrow more money from the RBI and Deposit less money with the RBI respectively which further led to an increase in liquidity in the market.
- RBI provided a special refinance facility to banks up to 1% of their total deposit. This encouraged banks to borrow more money from the RBI and increase liquidity
- For increasing the Foreign Currency Reserve, Interest rates of non-domestic deposits were increased which encourage more foreign currency deposits. External Commercial borrowing restrictions were eased which encouraged companies to borrow more foreign currency and increase forex exchange.
- The Pre and Post-shipment rupee export credit limit was increased by 90 days each which gave more time to exporters to repay the credit, thus encouraging trade
- The Export Credit Refinance (ECR) limit of Scheduled Commercial Banks (SCB) was increased from 15% to 50% of their Outstanding export credit. This enabled banks to refinance capital for lending more to exporters
- RBI introduced a liquidity facility for NBCS (Non-Banking Financial Institutes) through a Special Purpose Vehicle (SPV) to infuse more liquidity into the market
Fiscal Policy Measures
The government announced three fiscal packages worth ₹80100 crores to boost economic growth. The first fiscal package focused on the direct increase in government expenditure. It had ₹20000 crores as additional expenditure, Central Excise duty was reduced to 4% and ₹2000 crores benefits for exporters.
The second fiscal package was focused on improving the supply of finance. It included a reduction in interest rates, liquidity enhancement to productive sectors, financial aid for the export sector, a boost for the infrastructure sector and easier access to External Commercial Borrowings (ECB).
The third fiscal package included a further tax cut of ₹29100 crores
What are the 1991 Economic Reforms in India what were the impact of Economic reforms in India?
The 1991 Economic reforms, also called the New Economic Policy (NEP) or the LPG (Liberalization, Privatization and Globalization) reforms were a series of economic policies implemented by the government of India in response to the 1991 Indian Economic Crisis. The Economic crisis was caused by a high Balance of Payment (BoP) deficit, high Fiscal deficit, reduction in foreign exchange reserves and external debt burden.
The NEP introduced various economic reforms under the leadership of P.V Narasimha Rao such as Liberalization, Privatisation and other reforms which also led to Globalization of the Indian economy. The reforms taken by the Indian government were:
Liberalization of Industries
- The License raj system was dismantled and licensing requirements for various industries and businesses were removed to boost investment. Currently, few businesses require licencing from the government mostly due to environmental and pollution concerns.
- Industries were de-regulated and several regulatory restrictions by the government were eased for industries to operate smoothly.
- FDI restrictions were eased and automatic approval for FDI in several industries was allowed.
Privatization
The government reduced its ownership in several Public Sector Enterprises through strategic disinvestment. This encouraged more private investment.
Financial Sector Reforms
The government took various financial sector reforms in response to the 1991 Indian Economic crisis which were
- Capital Market was introduced for portfolio investment and Indian businesses were permitted to access the global Capital Markets.
- Foreign equity investment restrictions were eased and Foreign equity investment of up to 51% required no approval from the government
- More private and foreign banks were introduced to increase competition in the banking sector and improve financial inclusion.
- Foreign Institutional Investors (FII) were allowed to invest in the Indian financial market.
Fiscal Reforms
- Government introduced tax reforms and reduced Personal income tax, corporate tax and customs duties to control inflation
- Fiscal policy measures were launched to reduce the fiscal deficit
Impacts of the Economic Reforms
- There has been significant growth in the Indian economy since the implementation of the 1991 economic reforms. The GDP (Gross Domestic Product) of India has grown from USD 266 billion in 1991 to USD 3.7 trillion in 2023.
- Foreign investment and technology have improved due to reforms such as an increase in FDI and new technologies entering the Indian market due to the Liberalization of trade and investment.
- The economic reforms have promoted Globalization and improved the integration of the Indian economy with the rest of the world. Thus, attracting more foreign investments and improving trade relations.
- There has been a significant reduction in poverty due to economic reforms. According to the Multidimensional Poverty Index, 145 million people exited poverty in 15 years from 2005 to 2021.
- The Financial Sector Reforms have strengthened the Indian Financial System. The economic reforms brought new technologies and interventions which improved financial inclusion.
- The Life expectancy of India also improved due to the development of the healthcare infrastructure of India which contributed to the growth of human development in India.
The impacts of Economic Reforms have not been uniform across the country. The economic reforms have not focused on equal growth thus, there is high inequality in India and marginalized communities have been left behind. The environmental and social justice issues have also not been adequately addressed.
However, the government is working on addressing these issues through poverty alleviation programmes, Women empowerment and implementation of social justice schemes. The government is also promoting sustainable development through various schemes and making efforts to ensure inclusive economic growth in the country.
Write a note on Money Market in India?
The Money market in India refers to a place where highly liquid short-term financial instruments are traded from one day to one year. The key participants in the money market are RBI, Commercial banks, Public-sector banks, NBFCs, LIC etc. In India, the money market is regulated by the RBI (Reserve Bank of India) and SEBI (Securities and Exchange Board of India).
Money Market Instruments in India
1- Call Money, Notice Money and Term Money markets- Under call money and Notice money and term money markets, buying and selling of funds take place between banks and other financial institutions.
- Under the Call money market, transactions take place within 1 day
- Under the Notice money market, transactions take place from a tenor of 2 days to 14 days
- Under the Term money market, transactions take place from a tenor of 15 days to 365 days
Term Money transactions are facilitated on the NDS (Negotiated Dealing System) platform while the Call money and Notice Money transactions take place on the NDS-Call. The NDS platform is operated by the RBI.
2- Treasury Bills- Treasury bills are short-term debt instruments issued by the RBI on behalf of the central government through auction. They are issued at a discount and redeemed at the face value. They are issued in three tenors of 91 days, 182 days and 364 days.
For example, A treasury bill of ₹100 face value is issued by the government at a discount of ₹95 for a 91-day tenor. The investor will redeem a profit of ₹5 at maturity. Thus, the gain on a treasury bill is the difference between the face value and discount value of the bill.
3- Commerical Paper- Commercial Papers are short-term debt instruments that are issued as promissory notes by corporates, primary dealers and All India Financial Institutions (AIFI) to meet their short-term liquidity requirement. It serves as an alternative for corporates to borrow from a bank.
Commercial Papers are issued at a discount by the issuer and redeemed at face value by the investor.
Features
- They are issued from a tenor of 15 days to 1 year
- They are issued at a denomination of ₹5 lakhs and multiple
- Only a scheduled bank can act as an Issuing and Paying (IPA) or intermediary to facilitate transactions between issuer and investor
- Every issue of commercial, including renewal should be treated as a fresh issue
4- Certificate of Deposit (CD)- CDs are negotiable short-term debt instruments issued by banks as promissory notes from a maturity period of 3 months to 1 year. They are used by banks to meet their short-term liquidity requirements.
Features
- They are issued by Scheduled commercial banks, Regional Rural banks and Small finance banks
- Issued to individuals, corporates, trusts, funds and associations
- Issue at either Over-The-Counter (OTC) markets or recognized stock exchanges in India
- Issued at either fixed or floating rate of interest
5- Commercial Bills- Commercial bills are short-term debt instruments which are used to provide liquidity between three participants which are seller (issuer), buyer and bank.
For example, A seller of goods wants to sell his goods to a company (buyer). The buyer agrees to purchase goods worth ₹10000 on credit and pay the amount at a future date but the seller needs immediate money.
Therefore, for this seller will issue a commercial bill to the buyer that serves as a written promise that the buyer has to pay the amount for the goods purchased.
The seller will sell the commercial bill to a bank or financial institute and the bank will provide ₹9000 to the seller at a discount rate of 10%. The banks will thereafter, take the principal amount ₹10000 from the company at maturity.
Thus, in a commercial bill transaction
- seller receives immediate liquidity
- Buyer receives goods and services if they are unable to pay the amount immediately
- Banks earn profit by buying the commercial bill at a discount
Write a note on 15th Finance Commission of India and what were different recommendations by the 15th Finance Commission?
The 15th Finance Commission was formed in Nov 2017 under Article 280 of the Indian Constitution. It is a constitutional body that defines the financial relations between the state and central governments and provides recommendations for the Indian economy for the 2020-21 to 2025-26 period.
- The commission consists of a chairman and 4 members. The chairman of the commission is Nand Kishore Singh.
- The 15th Finance Commission report is organised in four volumes. Volumes 1 and 2 contain the main report, Volume 3 is devoted to the Union government and Volume 4 is devoted to state governments.
The recommendations of the 15th Finance Commission are:
Vertical Devolution:
Vertical Devolution refers to the share of union taxes to the state governments by the central government.
- The commission has recommended that 41% of the union taxes will be shared with the state governments
- 1% of the union taxes will be retained for the newly formed union territories of Ladakh and Jammu & Kashmir
Horizontal Devolution:
Horizontal devolution is the share of taxes among different states by themselves. The commission has given different weightage to different criteria under horizontal devolution which includes
- 45% weightage to the Income Distance
- 15% weightage to Population
- 15% weightage to Area
- 12.5% weightage to Demographic Performance
- 10% to forest and Ecology
- 2.5% weightage to tax effort
Grant Recommendations by the 15th Finance Commission:
1- Revenue Deficit Grant- The commission has recommended a revenue deficit grant if the state governments face a revenue deficit even after the devolution of 41% of funds
2- Local Body Grant- The commission has recommended a 60% grant to Rural Local Bodies (RLB) and Urban Local Bodies (ULB) in the areas of Sanitation, safe drinking water, solid waste management and maintenance of ODF (Open Defecation Free) status.
40% of the grant is recommended for the Panchayati Raj Institutions to act at their own discretion for improving basic services.
3- Disaster Risk Management Grant- The commission has recommended a Disaster Risk Management Grant to state governments in the ratio of 75% by the Centre government and 25% by the State governments. The ratio is 90:10 for Northeast states.
4- Sector-Specific Grant- These are the performance-based grant recommended by the commission for the sectors which are Health, Education, power, maintenance of PMGSY roads, Judiciary, Statistics and Aspiration districts and Blocks.
5- State Specific Grant- The commission has recommended State-specific grants based on six themes which are
a) Social needs
b) Administrative governance and related infrastructure
c) Conservation and Sustainable use of water, sanitation and drainage
d) Preserving culture and Historical monuments
e) High-cost physical infrastructure
f) Monuments
Recommendation of Fiscal Roadmap
- The commission has recommended the centre reduce the fiscal deficit to 4% of the GDP by 2025-26.
- It has recommended a fiscal deficit for states of 4% of GSDP in 2021-22, 3.5% of GSDP in 2022-23 and 3% of GSDP for 2023-24 to 2025-26
- Extra annual borrowing will be allowed to states worth 0.5% of GSDP for the first 4 years for adopting Power sector reforms
- The commission has recommended restructuring the Fiscal Responsibility and Budget Management (FRMB) Act, 2003
What is Balance of Payment (BoP), what are the main components of the BoP?
What is the importance and Limitations of the Balance of Payment (BoP)?
Balance of Payment (BoP) is the systematic report of all the economic transactions of the country with the rest of the world in a specified period of time. It is an important economic indicator that reflects a country’s economic health and global position in the market. It is prepared by the Reserve Bank of India (RBI).
The two main components of the Balance of Payment (BoP) are:
1- Current Account- It includes the net income of the country and direct payments. Net income includes net export and import of goods and services and Net Factor income such as employee compensation, rent and investment income. Direct payments include remittances, gifts and grants.
The main purpose of a Current account is to evaluate the net export and import of a country. A current account surplus means that the country is exporting more goods and services than importing while a Current account deficit means the country is importing more goods & services than exporting.
2- Capital Account- It includes the net change in the assets and liabilities of a country due to capital inflows and outflows that directly affects the assets and liabilities of the country. It includes Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), loans by companies and governments, Forex reserve, the flow of taxes and banking capital.
The main purpose of a Capital account is to determine the net investment position of a country. A Capital account surplus indicates that there is an increase in domestic investment from foreign countries or a decrease in foreign investments by the domestic country
The formula for calculating the Balance of Payment is “Current Account + Capital Account = Balance of Payment”. For example, if the Current account is -150 million USD and Capital Account is 200 million USD, then the balance of payment will be “-150+200 = 50 million USD”
Importance of Balance of Payment
- It ensures the economic stability of the country by finding the gaps in transactions with the rest of the world. For example, If there is a Current account deficit due to low export competitiveness, then the government will implement policies that boost export competitiveness
- It helps the country to form trade policies by analysing the balance of payment position and increasing or decreasing export and import duties based on the balance of payment position
- Investors continuously monitor the balance of payment position of a country to take investment decisions. A healthy balance of payment position will attract more investment while a poor balance of payment position will reduce investment
Limitations of Balance of Payment
- It does not include transactions taking place within the country
- Collecting data for the balance of payment transactions is a difficult and time-consuming process. Thus, the data collected can be inaccurate and misleading
- Countries may manipulate their balance of payment data to project economic soundness and generate more investment
- The transaction data in the Balance of Payment does not include the quality of the transaction of goods and services. For example, a property may have a different transaction value than it is projected
Write a note on Globalization, what are the steps taken by the Indian government for Globalization?
Globalization is the economic process of integration and interaction among people, companies and governments worldwide. The increase in global interaction leads to the spread of knowledge, culture, technology and innovation.
According to the International Monetary Fund (IMF), the four key aspects of Globalisation are:
- Trade and Transaction
- Movement and migration of people
- Investment and Capital movements
- Knowledge Dissemination
Benefits of Globalization
- It increases economic growth by an increase in the level of international trade and the exchange of goods and services
- It enhances innovation through the exchange of ideas and information and the development of new technologies and products
- It increases competition which leads to a decrease in the price of products and an increase in efficiency
- It improves international relations as globalization involves forming friendly bureaucratic policies
Demerits of Globalization
- It leads to inequality as the income is disproportionately divided among the rich and the poor
- It leads to increase dependence on other nations as countries import crucial goods and services. Thus, countries often have to take political sides with the countries that they are dependent on
- It leads to environmental degradation as natural resources are exploited for producing goods and services
- It leads to the exploitation of workers as developed countries outsource cheap labours and employ them with low wages and poor working conditions
- It has led to a loss of cultural diversity as globalization has made Western culture dominant worldwide
Steps Taken by the Indian Government in Globalization
Trade Liberalization: The government has increased trade liberalization by easing export-import policies and Foreign Direct Investment (FDI) policies
Technology upgradation: The government has invested in enhancing Information Technology (IT) infrastructure to promote ease of doing business and attract foreign investment
Promoting Tourism: The government has eased visa restrictions and is promoting the cultural heritage of India through global advertisement to boost tourism
Special Economic Zones (SEZ): The government has set special geographical areas for economic activities called Special Economic Zones (SEZ) which attract Foreign Direct Investments (FDI) by providing tax benefits and better infrastructure for businesses
National Logistics Policy (NLP): The National Logistics Policy 2022 (NLP) was launched for improving the logistics infrastructure of India and providing ease of doing business for companies operating in India
