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Major Economic Organizational Issues

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Major Economic Organizational Issues Ankur Verma * Business Cycle The economy tends to move in a series of ups and downs, called Business Cycle, rather than in a steady pattern. The greatest world-wide economic depression of 1930s. Business cycles are an issue for the organizations. During recessions many business go bust, and even for those that survive, profits fall. In contrast during boom, demand for most products rises, profits rise, and most business find it easy to expand. * Inflation Decrease in the value of money with an increase in price levels is called Inflation .Inflation matters to organization because it creates distortions in the price mechanism, most notable by eroding the real value of anything accounted for in money terms. Some organization will make arbitrary gains as a result of inflation, and others will lose. A pick-up in inflation is usually the signal for tightening of monetary policy that raises interest rates and brings about a slowdown in the economy. Such downturns in the economy have an adverse effect on most organization. * Unemployment In times of low unemployment, organizations will find it difficult to hire scarce workers, especially those with requisite skills. In periods of high unemployment, organizations will often find their employees more interested in bargaining for some measures of job security rather than increased wages. * Government Budget Deficits It is a Budget Deficits when the Government spending is more than it is raising from taxation. Organizations worry about budget deficits for two main reasons. First, government borrowing competes with organization's borrowing in capital markets and may raise interest rates for organizations. Second, government in deficits may be forced to raise taxes and thereby reduce profits and consumer demands * Interest Rates. Monetary policy involves changes in interest rates, or the money supply, to influence the economy. High interest rates are a symptom of a tight monetary policy. When interest rates are high, organizations find it more costly to borrow, and this makes them more reluctant to invest in expanding their business. ...read more.


Mixed economy is a merger of the socialist and capitalist economy. India's mixed economy has switched roles embracing capitalist economy to greater extent over the past decade. In India the public sector covers the railways and postal services. Nationalization of banks have also taken place, recently phases of privatization are on the run. Public expenditure: Public expenditure in India basically constitutes capital and revenue expenditure. These are included in central plan expenditure, central assistance and non-development expenditure. Central plan expenditure is for the allocation of resources in development schemes given in plans of the central government and public sector undertakings. Central assistance is the aids provided for plans of state governments and union territories. Capital defense expenditure, loans for public enterprises, states and union territories and foreign governments fall under non-development capital expenditure. Whereas non-development revenue expenditure consists of revenue defense expenditure, subsidies, postal deficit, administrative expenditure, pensions, debt relief to farmers etc. Public receipts: Tax system has undergone serious changes or reforms over the years. The Union government levies income tax, sales tax, custom and excise duties, the State government levies sales tax on intra-state sale of goods, entertainment, alcohol, transfer of property etc., and local government extract taxes from property, public utility services, etc. therefore more than a quarter of the union government's tax revenues is commonly used with the state governments. Central government receives non-tax revenues from fiscal services, public sector dividends etc, whereas state government's non-tax revenues come from grants, interest receipts, and other economic and social services. Financial institution: The Reserve Bank of India, Bombay Stock Exchange and the National Stock Exchange is located in Mumbai which is the commercial capital of India. To offer tax benefits and better infrastructure for setting up business, Special Economic Zones and software parks has been set up by India. Civil services, railways and the central bank sectors were already inherited from the British during the time of independence. ...read more.


Thus , even with these improvements, agriculture accounts for only 20% of the nation's gross national product. The structural changes gave increased authority of local officials and plant managers in the industry, permitted a wide variety of small-scale enterprises in service and light manufacturing. Due to its increasing openness to foreign trade and investment, in 1999, China Economy became the second largest economy of the world after the USA, in terms of GDP. At present, more than half of the population depends on agriculture for living. However agriculture's contribution to GDP has remained low. Large share of industrial production in GDP, characterized the Chinese economy, much before the start of economic reforms there. In 1978, industry accounted for 50% of officially measured GDP. This was particularly striking because so much of the workforce remained on the land. The relative share of the services sector has since remained steady ( 33% in 2003), and the continued shrinkage in the relative contribution of agriculture has been reflected in a larger share for the industrial sector, which in 2003 accounted for around 52.3% of GDP. China ranks first in world production of red meat. producer of rice and wheat, among cash crops, china ranks first in cotton and tobacco and is an important producer of oilseeds, silk, tea, ramie, jute, hemp, sugarcane, and sugar beets. Due to improved technology, the fishing industry has grown considerably since the late 1970s. ROLE OF STATE vs MARKET Until 1978, industrial output was dominated by large state-owned enterprises (SOEs). Gradually, the share of state-owned and state-holding enterprises in gross industrial output value had shrunk; in 2002 it was around 41%. However, state-owned companies, controlled by economic ministries in Beijing (Capital of China), represented only 16% of industrial output. State-holding enterprises may control large numbers of state firms, and are not 100% state-owned. The changes in economic policy, including decentralization of control and the creation of "special economic zones" to attract foreign investment, led to considerable industrial growth, especially in light industries that produce consumer goods ...read more.

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