Published by: Divyanshu Nayak 
What is Economy?
An Economy consists of production, trade of distribution and consumption of limited goods and services by different agents in a given geographical location. It is a framework within which economic activities like investment, production and consumption are carried out. or in a brief economy can be considered as “careful management of available resources.“
The economy of India is the 7th largest in the world by nominal GDP and 3rd largest by Purchasing Power Parity (PPP). On per-capita income basis, India is ranked 140th by nominal GDP and 122nd by PPP in 2015, according to International Monetary Fund (IMF). India is the 19th largest Exporter and 13th largest Importer in the world.
TYPES OF ECONOMY
- Capitalist Economy
- Socialist Economy
- Mixed Economy
- Green Economy
Let’s Brief all these types of Economy
1. Capitalist Economy
In this type of economy, the central prob;ems of the economy is that there is no interference by the government and price mechanism operate through the forces of demand and supply.
2. Socialist Economy
All important decision regarding production, exchange and consumptiuon of goods services are made by the government. The closest example of a centrally planned economy is the Soviet Union in the 20th century.
3. Mixed Economy
This consists of a combination of public sector and private sector units. A mixed economic system is an economic system that features characteristics of both capitalism and socialism it basically incorporates governmental involvement in market-based economies.
4. Green Economy
The green economy is an economic development model based on suitable development and knowledge of ecological economics.
Sectors of Economy
- Primary Sector
- This sector is involved in the extraction or harvesting of products from the earth. it includes the production of raw materials and basic foods such as
- Agriculture
- Mining ( Metals, Minerals, Ores )
- Forestry
- Fishing etc…
- This sector is involved in the extraction or harvesting of products from the earth. it includes the production of raw materials and basic foods such as
- Secondary Sector
- The Secondary sector of the economy is involved in the production of finished goods. All manufacturing, Processing, Construction activities lie in this sector. Such as,
- Construction of a building
- Production of cloth, bread
- Electricity, Gas Drinking water etc..
- The Secondary sector of the economy is involved in the production of finished goods. All manufacturing, Processing, Construction activities lie in this sector. Such as,
- Tertiary Sector
- the tertiary sector of the economy is also called the Services Sector such as
- Retail outlets
- Banking
- Tourism
- Transport
- Trade
- Entertainment etc..
- the tertiary sector of the economy is also called the Services Sector such as
- Core Sector
- The core sector consists of eight industries in the economy having a weightage of 37.90% in the Index of Industrial Production (IIP). These eight sectors are Coal, Crude Oil, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement and Electricity.
Economic Development
Economic development is the development of economic wealth of countries, regions or communities for the well being of their inhabitants. In general, economic development is usually the focus of federal state, and local governments to improve our standards of living through the creation of jobs, the support of the innovation and new ideas, the creation of higher wealth and the creation of overall better quality of life
Measurement of Economic Development
- Purchasing power parity Method
- Human Development Index
- Green GNP
- Net Economic Welfare
- Poverty Index
- Basic Necessities
- Physical Quality of Life Index
- National Prosperity Index
- Gender-Based Development Index
National Income
National income means the value of goods and services produced by a country during a financial year and it also includes net factor income from abroad, ie, National Income ( NI ) measures the productive power of an economy in a given period to turn out Goods and Services for final consumption National income is an uncertain term and is often used interchangeably with the national dividend, national output, and national expenditure.
Concept of National Income
National Income can be measured by GND, GDP, GNI, NNP, NNI, & Per-Capita Income. GDP and Per-Capita Income are concidered as the most standard measure of economic development.
Following are the Modern National Income definition
- GDP
- GNP
Gross Domestic Product
It is the money value of all final goods and services produced in the domestic teritoryof a country during a year. In GDP income generated by foreigners in a country is included but Income generated by nationals of a country outside the country is not included.
GDP = Private Consumption (C) + Gross Investment (I) + Government Investment (G)
Further, GDP is calculated at market price and is defined as GDP at market prices. Different constituents of GDP are:
- Wages and salaries
- Rent
- Interest
- Undistributed profits
- Mixed-income
- Direct taxes
- Dividend
- Depreciation
Gross National Product
It is monetary value of all final goods and services produced by the residents of the country in a year.
GNP = GDP + Income generated by nationals of a country outside the country (X) – In come generated by foreigners in a country (M)
GNP = GDP + ( X – M )
Methods of Measuring National Income
National Income can be Calculated by Three Methods
- Production Method
- Income Method
- Consumption Method
Production Method
The net value of final goods and services produced in a country during a year is obtained which is called total final product. It emphasises a calculation of the net contribution at every stage of production/ manufacturing. this is referred to as a value-adding concept.
Income Method
In this method, a total of net income earned by working people in different sectors and commercial enterprises is obtained. Incomes of both categories of people – Tax Payers and Non-Tax payers are added to obtain national income. By income method, National Income is obtained by adding receipts as total rent, total wages, total interest and total profit.
Consumption Method
It is also called the expenditure method. Income is either spent on consumption or saved. Hence, National income is the addition of total consumption and total savings. In India, a combination of production method and income method is used for estimating National Income.
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