UNIT – 5

MBA
Managerial Economics

Semester 1

-By Sonika Rawal

 TOPICS COVERED
• Economic Growth And
Development
• Sources Of Economic
Growth And Development
• Pre And Post Transition
• LPG
• Reasons For Implementing
LPG
• Weakness Of LPG Model
• Role of Government in India
• Public Private Participation
• Reasons for Failure of PPP
• Industrial finance
• Foreign Direct Investment
Advantages and
disadvantages of FDI
• Need for FDI in India
• Cross Border Merger And
Acquisition
 Economic Growth And
Development

Economic growth implies more output and economic

development implies both increase in output and
changes in the technology and institutional
arrangement by which it is produced.
 Sources Of Economic Growth
And Development
Economic Factors Non Economic Factors
1. Natural resources
2. Human Resource and population
growth 1. Desire for development
3. Capital formation and 2. Widespread education
accumulation 3. Social and industrial reforms
4. Technological progress
4. Good government
5. Entrepreneurship
6. Investment criteria
7. Removal of market imperfection
8. Capital output ratio
 Pre And Post Transition
Pre Transition
1.Highly autarkic economy
2. Centralized planning
3. Protectionist trade policies
4. High tariffs and non tariff barriers
5. Capital controls
6. Import substitution
7. State owned public sector
industries
8. State controlled financial sector
9. Import Restrictions
10. Regulated markets
11. Administrative prices
Post Transition
1. Deregulation and Liberalization
2. Lowering of the tariffs
3. Export incentives
4. Special Economic Zones
5. Disinvestment of public sector
units.
6. Promotion of Foreign Direct
Investments.
7. Tax incentives
8. Managed exchange rate in the
place of controlled exchange rate
9. Declining incidence of poverty
The major reasons for the growth of the economy are liberalization of our
economy followed by privatization and globalization.
Liberalisation
Privatisation
 Weakness Of LPG Model

1. Narrow focus
2. Free entry of MNCs
3. Agricultural sector was bypassed
4. Facilitated more imports
5. Capital intensive development
 Role Of Government In India
1. Individual Freedom:
Consumers enjoy freedom
of consumption, production
and process
2. Coexistence of Public and
Private Sector: Basic
industries requiring heavy
investment, and social
welfare activities belong to
the public sector and the rest
to the private sector.
3. Planning: Detailed
planning is for public
sector, broader targets are
for the private.
4. Social Welfare: Policies
are framed to develop
backward regions,
increasing employment
and infrastructure
facilities.
PPP Project means “a project based on a contract
or concession agreement, between a government
or statutory entity on the one side and a private
sector company on the other side, for delivering an
infrastructure service on payment of user charges”.
 Reasons For Failure
Of Some PPP Projects

• Insufficient resources
• Poor drafts
• Lack of experience
• Inadequate monitoring
Industrial Finance
FDI (Foreign Direct Investment)
 Need for FDI in India

 Sustaining a high level of investment

 Technological gap
 Exploitation of natural resources
 Understanding the initial risk
 Development of basic infrastructure
 Improvement in the balance of payments position
 Foreign firm’s helps in increasing the competition
 Cross Border
Merger And Acquisition
THANK YOU