Public Policy Course Outline Prof. Tarun Das

Economic Environment and PolicySession-1: Course Outline Prof. Tarun Das, Ph.D.

Prof. Tarun Das, IILM

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Economic Environment and Policy Course Outline Prof. Tarun Das

Contents 1. Profile of Resource Person 2. Course Objectives, Learning Outcome and Pedagogy 3. Course Outline 4. Course Modules, Sessions and Topics 5. Assessment Criteria 6. An Introduction to Macroeconomics Prof. Tarun Das, IILM

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1.1 Resource Person- Prof. Tarun Das • 1. 2. 3. 4. 5. 6.

Has 38 years experience for development management. Worked in last 20 years as: Adviser (Modeling), Planning Commission, Govt. of India, New Delhi, 1987-1988. Economic Adviser, Min of Finance, India, 1989Feb 2006. Professor (Public Policy), IILM, March 2006-May 2007. Asian Development Bank Strategic Planning Expert, Ministry of Finance, Govt. of Mongolia, Ulaanbaatar, June 2007- June 2008. Consultant, Commonwealth Secretariat, London, July - August 2008. World Bank Consultant to Uzbekistan, Tashkent, Sep-Oct 2008.

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1.2 Resource Person- Prof. Tarun Das • Worked as Consultant to the: World Bank, ADB, GDN, IMF, ILO, UNDP, UN Economic & Social Council for Asia & Pacific, UN Conference for Trade and Development, UN Institute for Training and Research, UN Statistical Institute for Asia and Pacific, UN Economic Commission for Africa. • Worked in 17 countries: Cambodia, Ethiopia, Gambia, India, Indonesia, Japan, Lao PDR, Malaysia, Mongolia, Nepal, Philippines, Samoa, Senegal, Switzerland, Thailand, UK, and USA. • Attended conferences in 10 countries: Bangladesh, Belgium, China, France, Germany, Ireland, Malaysia, Morocco, Singapore, UAE.

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1.3 Resource Person- Prof. Tarun Das • Research/Teaching Interest: Public Policy, Econometrics, Research Methodology, Economic Environment and Reforms, Poverty, Inequality, Public Debt and External Debt • Possesses diversity in skills in Teaching, Training, Research, Policy Planning and Modeling. Published books and papers on reforms, fiscal policies, performance and program budgeting, transport modeling, public debt, external debt, poverty, inequality, FDI, privatisation, technology transfer etc.. • Qualifications: MA in Econ. (Gold Medalist), Calcutta University, 1969.

-Ph.D. in Econ, as Commonwealth Scholar, East Anglia Univ., England, U.K., 1977.

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2.1 Course Objective •

•

•

The objective of this course is to facilitate the learning of macro business environment for informed decision making. The focus of the course is on holistic understanding of the functioning of the economy and putting business in broader macroeconomic framework . More emphasis will be laid on understanding of basic concepts, methodology, techniques, their uses and limitations, rather than formal proofs and derivation of formula. Prof. Tarun Das, IILM

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2.2 Learning Outcome At the end of the course students will have: • Comprehensive knowledge of the macro-economic framework, national income and its components, key macro-economic variables, concepts, and tools for effective business planning and decision making. • Comprehensive understanding of the Indian and global public policies, economic environment and institutions, which affect corporate planning, good governance and business prospects. • Practical experiences of team work, group responsibility and effective network.

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2.3 Pedagogy 1. Teaching techniques will consist of formal lectures, case studies and discussion sessions. 2. Selected case studies will be given so as to help students to relate theoretical concepts with real life situations in economic analysis, policy formulation and planning. 3. Students are also required to prepare group project reports on topical issues relating to economic environment and policy and present the group project reports in the class.

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2.4 Pedagogy 4. Students will be provided with course material well in advance. To make classroom presentations by the teacher more meaningful and effective, students are required to come prepared and collect related information and data from journals and websites, and participate actively in classroom sessions.

5. In order to learn leadership, teamwork and networking with each other, students are encouraged to participate actively in group discussions and preparation of project reports.

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3.1 Course Outline: A quote from “Alice in Wonderland’”

“Would you tell me please, which way I ought to

go from here?” asked Alice. “That depends a great deal on where you want to get to,” said the cat. “I don’t much care where ….,” said Alice. “Then it does not matter which way you go,” said the cat. ….. “Alice in Wonderland”, Lewis B. Carroll. _____________________________________ Eventually Alice realized that it matters a great deal to know “where to go” and “how to get there”. The same is true today for any branch of Economics.

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3.2 Introduction to the CourseEconomic Environment and Policy falls under the broad head of Macroeconomics “The master economist must be a mathematician, historian, statesman, philosopher. He must understand symbols and speak in words. He must study the present in the light of the past for the purposes of the future.” So said John Maynard Keynes, regarded as the Father of Macroeconomics.

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3.3 Micro Economics • Deals with allocation of resources in a market economy • Allocation of resources is, in fact, explained in terms of prices of goods and prices of factors of production Micro-Economic Theory Product Pricing Theory of Production & Cost Theory of Demand Prof. Tarun Das, IILM

Factor Pricing (Theory of Distribution) Interest (Capital)

Wages (Labor) Rent (Land)

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Theory of Economic Welfare (Welfare Economics) Profits (Entrepre neur) 12

3.4 Macro Economics – Deals with the analysis of economy as a national or aggregate level, such as national income, output, employment, consumption, savings, investment, inflation, money supply, international trade, balance of payments etc. – In the words of Kenneth E. Boulding “Macroeconomics deals not with individual quantities, but with aggregates of these quantitities, not with individual incomes but with national income, not with individual prices but with price levels, not with individual output but with national output.” – Gardner Ackley says “Macroeconomics deals with economic affairs at large. It concerns the overall dimensions of economic life. It studies the character of forests independently of trees which compose it.”

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3.5 Basic Macroeconomic Balance Equations

Y=C+I+X–M (1) Y=C+S (2) Y = Wages+ Rent+ Interest+ Profits (3) Where, Y = Income, C = Consumption S = Savings, I = Investment, X = Exports, M = Imports Macroeconomics is the study of the behavior of these components and the factors which determine them. Factors include inflation, interest rate, exchange rate, employment etc. and public policies and structural reforms.

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3.6 Macro Economics Macro-Economic Theory Theory of Income & Employment

Theory of General Price Level & Inflation

Macro Theory of Distribution (Relative Factor Shares)

(Development Economics)

Theory of Investment

Theory of Consumpti on

Theory of Economic Growth

Theory of Fluctuations (Business Cycles) Prof. Tarun Das, IILM

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3.7 Economic Environment Economic environment is the most significant component of the business environment. It affects the success and failures, and the survival of a company. Economic environment comprises 3 broad categories: (1) General economic conditions in terms of GDP, per capita income, inflation, trade, employment, poverty and inequality etc. (2) Industrial conditions: Industrial output, profits, employment, labor relations etc. (3) Supply of resources – land, labor and capital, machinery and management. •

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4.1 Modules, Sessions, and Topics Session-1: Introduction to the Course About the course • Readings • Learning approaches • Learning expectations • Evaluation criteria • How to earn good credit in this course? Sessions 2-3 Module I: Introduction to •

Macroeconomic Environment and Systems.

• Macroeconomic factors influencing business • Brief Introduction to Economic Systems – Capitalism, Socialism, Mixed Economy, Market Friendly Approach • Brief Overview of Economic Planning in India • Understanding Economic Reforms

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4.2 Modules, Sessions, and Topics Sessions 4-6 Macroeconomic framework in the context of Keynesian Model Module II: Basic Macroeconomic Framework • Circular flow of income, GDP, GNP, NDP, NNP etc.

• Open versus Closed Economy • Keynesian Model

• Consumption – MPC, MPS, Multiplier

• Investment function, COR and Accelerator

• Business Cycles Sessions 7-9 Budget, Inflation, Fiscal and monetary policies Module III: Monetary and Fiscal Policies • • • • • •

• Inflation

Role of RBI Monetary Policy in India Banking Sector Reforms The Union Budget Fiscal, revenue, and primary deficits Fiscal Policies

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4.3 Modules, Sessions, and Topics Sessions 10-12: Industrial scenario and policies. Module IV: Industrial Policy and regulation • Growth, problems and policy issues

• Recent changes in Industrial Policy • Public versus private sector • Major industries in competitive environment: Textile, Automobile; FMCG; Electronics • Competing in the new economic environment Sessions 13-14: Review of Modules I to IV: What did you we learn? Sessions 15-17: Role of service sectors Module V: Services Sector • Growth, problems and policy issues

• Emerging sectors – finance, telecom and retail Prof. Tarun Das, IILM

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4.4 Modules, Sessions, and Topics Session 18-19: Dynamics of rural and agriculture business Module VI: Understanding Rural Business • Agriculture in the Indian economy • Public/private initiatives to stimulate the rural economy • Agriculture related industries – food processing, biotechnology Sessions 20-21: Review of Modules I to IV: What did you we learn? Session 22-24: External sector and balance of payments Module VII: External Sector • Exports/Imports and Trade Policy • Capital flows • Balance of payments • Exchange rate • WTO/other trading agreements Prof. Tarun Das, IILM

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4.5 Essential References Books Essential Text Book: Justin Paul, Business Environment – Text and Cases, Tata McGraw Hill

Essential Reference • Economic Survey 2007-08, Ministry of Finance, Govt of India. • Reserve Bank of India- Annual Report 2008, RBI, Mumbai. • Economic Times and Economic & Political Weekly Additional References • Francis Cherunilam: Business Environment-Text & Cases, Himalaya Publishing House. • Bimal Jalan- India’s Economic Policy: Preparing for the Twenty First Century, Viking/ Penguin, 1997. • T.N. Srinivasan- Eight Lectures on India’s Economic Reforms, Oxford University Press. • Ernst and Young- Doing Business in India, Ernst & Young Private Ltd. • Uma Kapila: Understanding the Problems of Indian Economy, Academic Foundation Prof. Tarun Das, IILM

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4.6 Additional References: Publications by Professor Tarun Das 1. 2.

3. 4. 5.

6.

Economic Reforms in India- Rationale, Scope, Progress and Unfinished Agenda, pp.1-80, Bank of Maharashtra, Planning Dept, Pune, Feb 2003. Preparation of Indices for Services Production and Prices, jointly with A. Saha, R. Dasgupta and R. Parmar, pp1-250, National Institute for Banking and Management (NIBM), Pune, India, Jan 2003. Implications of Globalization on Industrial Diversification in Asia, pp.ix+1-86, UN ESCAP, Bangkok, UN Publications Sales No.E.02.II.F.52, December 2001. Foreign Investment- Technology Transfer- and Growth Nexus in Asian economies, pp.1-158, UN ESCAP, United Nations, Bangkok, Oct 1997. Policies and Strategies for Promoting Private Sector’s Role in Industrial and Technological Development in Asia, pp.1-171, ST/ESCAP/1696, UN, New York, 1996.

Official Economic statistics- Part-1 on Government Finance Statistics and Balance of Payments Statistics, pp.1-70, Part2 on Monetary and Financial statistics, UN Statistical Institute for Asia and Pacific, Chiba, Japan, Aug 2007.

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7.

4.7 Additional References Publications by Professor Tarun Das

Governance of Public Debt- International Experiences and Best Practices, pp.1-44, Best Practices series No.10, UNITAR, Geneva, 2006. 8. Financing International Cooperation behind National Bordersa Case Study for India, pp.1-46, Office of Development Studies, UNDP, New York. March 2006. 9. General Agreement on Trade in Services – Implications for the Indian financial sector, pp.6-14, Bima Vidya, MDC, Mumbai, July 2003. 10. Fiscal Policies for Management of External Capital Flows, pp. 194-207, in Corporate External Debt Management, edited by Jawahar Mulraj, CRISIL, Bombay, Dec 1999. 11. Macro-economic Framework and Foreign Investment in India, WG on Investment and Financial Flows, pp.1-75, TD/B/WG.1/Misc.3/ Add.3, UNCTAD, Geneva, 1993. 12. Structural Reforms and Stabilization Policies in India – Rationale and Medium Term Outlook, pp.20-56, in Economic Liberalization and its Impact, edited by SP Gupta, Macmillan India Limited, Delhi, 1993.

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4.8 References of study materials 1. 2. 3. 4. 5. 6.

Rakesh Basant, Corporate Response to Economic Reforms, EPW, March 4, 2000 Swaminathan A Aiyar, Times of India. ICFAI Centre for Management Research, The Indian Economy: Dealing with inflation Pattnaik and Sanantaraya, Indian Experience of Inflation, EPW, Jan. 28, 2006 Varsha Chitale, Budget Basics: How the books are (not) balanced, rediff.com article M H Balasubrahmanya, India’s Industrial Policy in the Pre-Liberalization and Liberalization Periods: A Macro Analysis, Indian Institute of Science

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4.9 References of study materials 7. James Gordon and Poonam Gupta,

Understanding India’s Services Revolution, IMF Working Paper WP/04/171 8. Kuttayan Annamalai and Sachin Rao, What Works: ITC’s E-Choupal and Profitable Rural Transformation, World Resources Institute 9. ICFAI Centre for Management Research, The Indian Rupee-US Dollar Exchange Rate: The Economic Impact of a Strengthening Currency 10. US International Commission, The Emergence of India’s Pharmaceutical Industry and Implications for US Generic Drug Market, Office of Economics Working Paper No. 2007-05-A

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4.10 Reference Journals and Websites

Journals / Magazines / Newspapers • Economic and Political Weekly • The Economist • Outlook Business • Business Today • The Economic Times Important Websites:

• • • • • • •

www.nationmaster.com www.nic.in www.ciionline.org www.indiabudget.nic.in www.finmin.nic.in www.ficci.com www.planningcommission.nic.in

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Sl. No.

5.1 Evaluation Criteria Components Weights Week (%)

1

Mid-Term Test

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5-6

2

Group Project/ Assignment

20

7-8

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End-Term Test

60

Total Prof. Tarun Das, IILM

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5.2 Evaluation Parameters • Evaluation Parameters include submission and presentation of Group Project/Assignment, and completing Mid-Term and End-Term Tests. • It is necessary to follow the exact time schedules for preparation and submission of group project/assignment as has been indicated by the course coordinators.

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5.3 Group Project and Presentation •

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•

•

Group project/ assignment shall be comprehensive in nature. The topic of the project/assignment shall be chosen by the group and finalize with the course teacher by the end of sixth week of teaching. The group shall be decided in consultation with the course teacher. The credit shall be given to the analytical writing and ability to relate with business decisions by picking up real time situation. It is mandatory that the entire class is present during the group presentation. The presentation shall be of 15-20 minutes for each group with a maximum of two presenters. Use of PPT/ OHP is essential. Credit shall be given for structured presentation, analytical content and ability to respond to queries. Course teacher may call for group viva-voce instead of presentation if deem fit.

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5.4 Mid Term and End Term Test Mid-Term Test • Mid-term test shall comprise of objective and short answer questions. The test shall be of one hour duration. The test shall be based broadly on the syllabus covered till mid-term teaching. End-Term Test • This would be a two-hour open-book examination. Prof. Tarun Das, IILM

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6.1 Preparation for the course As regards preparation for the course, in fact for any course, let me remind you of an age-old Chinese saying: “The best way to complete a work is to start. Thereafter, it doest not matter at what speed you go or if you stop for a while for taking rest. The only condition is that you should not leave the work in between. Continue to work until you finish it.”

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Thank you Have a Good Day

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