⋄ Meaning:
Economics is the study of scarcity and its implications for the use of resources, production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society.
⋄ Definition:
Adam Smith defines economics as “An inquiry into the nature and causes of the wealth of nations.”
↠Economics is the social science that studies the production, distribution, and consumption of goods and services.
↠ Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics is a field which analyzes what's viewed as basic elements in the economy, including individual agents and markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the economy as a system where production, consumption, saving, and investment interact, and factors affecting it: employment of the resources of labour, capital, and land, currency inflation, economic growth, and public policies that have impact on these elements.
↠ Other broad distinctions within economics include those between positive economics, describing "what is", and normative economics, advocating "what ought to be"; between economic theory and applied economics; between rational and behavioural economics; and between mainstream economics and heterodox economics.
↠ Economic analysis can be applied throughout society, including business, finance, health care, engineering and government. It is also applied to such diverse subjects as crime, education, the family, feminism, law, philosophy, politics, religion, social institutions, war, science, and the environment.
☸ In the year 2020-2021 :
↣ India’s economy is estimated to contract by 9.6% in 2020, while it is projected to grow at 7.3% in 2021, a report released by the United Nations Department of Economic and Social Affairs, said on Tuesday.
↣ The report, titled “World Economic Situation and Prospects 2021”, suggested that the global economy shrank by 4.3% last year, which was over 2.5 times more than the contraction during the financial crisis of 2009. The estimated recovery of 4.7% in the global economy in 2021 will barely offset the losses of 2020, the report said.
↣ As for India, the report said that the economy suffered setback as domestic consumption got hit due to to “lockdowns and other containment efforts”, even as the spread of coronavirus could not be halted. It further said that the pandemic affected labour markets in the developing world, with unemployment in India rising to 23% by mid-2020. Taking further note of labour market in south Asia, the report said that informal workers, who account for over 80% of all the workers in Bangladesh, India and Pakistan were “far more exposed” to loss of employment.
↣ India’s growth forecast of 7.3% for the calendar year 2021 is the highest among major economies of the world, according to the report. China will come a close second at 7.2% growth, the UN report said.
↣ Last month, government data for the first advance estimates of this fiscal, projected India’s economy to contract by 7.7% in real terms. However, that projection was for the financial year (April 2020-March 2021), whereas the UN report estimates are for the calendar year (January 2020 - December 2020).
↣ India’s Gross Domestic Product growth rate had contracted by 7.5% in the second quarter (July-September), after shrinking by an unprecedented 23.9% in the first three month period (April-June) of the financial year. The Reserve Bank of India has predicted economy to register positive growth in the third quarter (October-December).
☸ In the year 2021-22 :
↣ Indian economy contracted by 6.6 per cent in 2020-21 as against the earlier estimate of 7.3 per cent decline, showing that the COVID-19 pandemic hit economy did not perform as badly as was initially worked out.
↣ As per the provisional estimates released in May 2021, the GDP had contracted by 7.3 per cent during 2020-21 on account of the outbreak of COVID-19 and subsequent nationwide lockdown to contain the pandemic.
↣ The National Statistical Office has also revised downward the real GDP growth number for 2019-20 to 3.7 per cent as against the earlier estimate of 4 per cent.
↣ "Real GDP or GDP at constant (2011-12) prices for the years 2020-21 and 2019-20 stands at Rs 135.58 lakh crore and Rs 145.16 lakh crore, respectively, showing a contraction of 6.6 per cent during 2020-21 as compared to growth of 3.7 per cent during 2019-20," National Statistical Office said in the revised national account data released on Monday.
↣ Under the first revision released in January 2021, real GDP or GDP at constant (2011-12) prices for the years 2019-20 was pegged at Rs 145.69 lakh crore, showing growth of 4 per cent during 2019-20.
↣ "In terms of real GVA (gross value added), i.e., GVA at constant (2011-12) basic prices, there has been a contraction of 4.8 per cent in 2020-21, as against growth of 3.8 per cent in 2019-20," NSO stated.
↣ During 2020-21, the growth rates of the primary sector (comprising agriculture, forestry, fishing and mining & quarrying), secondary sector (comprising manufacturing, electricity, gas, water supply & other utility services, and construction) and tertiary sector (services) have been estimated as 1.6 per cent, (-)2.8 per cent and (-) 7.8 per cent as against a growth of 1.9 per cent, (-) 6.8 per cent and (-) 8.4 per cent, respectively, in the previous year.
↣ Nominal Net National Income (NNI) or NNI at current prices for the year 2020-21 stands at Rs 171.94 lakh crore as against Rs 177.17 lakh crore in 2019-20, showing a contraction of 2.9 per cent during 2020-21 as against growth of 6 per cent in the previous year, it stated.
↣ Per Capita Income i.e. Per Capita Net National Income at current prices is estimated at Rs 1,32,115 and Rs 1,26,855 respectively for the years 2019-20 and 2020-21, it stated.
☸ In the year 2022-23 :
↣ India was forecast to grow at 6.7% in 2022 and this projection has been downgraded to 4.6% by UNCTAD
↣ The UN Conference on Trade and Development (UNCTAD) report downgraded its global economic growth projection for 2022 to 2.6% from 3.6% due to shocks from the Ukraine war and changes in macroeconomic policies that put developing countries particularly at risk.
↣ The report said while Russia will experience a deep recession this year, significant slowdowns in growth are expected in parts of Western Europe and Central, South and South-East Asia.
↣ India was forecast to grow at 6.7% in 2022 and this projection has been downgraded to 4.6% by UNCTAD.
↣ The report said as some of the other economies in South and Western Asia may gain some benefits from fast growth of demand and prices of energy, they will be hampered by the adversities in primary commodity markets, especially food inflation, and will be further hit by inherent financial instabilities.
↣ India in particular will face restraints on several fronts: energy access and prices, primary commodity bottlenecks, reflexes from trade sanctions, food inflation, tightening policies and financial instability, it said.
↣ The report has downgraded the GDP growth of the US from 3% to 2.4%. China will also see growth decrease to 4.8% from 5.7%. The report projects a deep recession for Russia, with growth decelerating from 2.3% to -7.3%.
↣ The report said the Russian economy faces stringent external constraints imposed by the sanctions.
↣ While Russia is still exporting oil and gas, and will therefore see compensating increases of revenue due to high prices, sanctions severely limit the use of foreign exchange earnings for the purchase of imports or debt servicing.
↣ Russia will experience severe shortages of a wide range of imported goods, high inflation and a substantially devalued currency. While the state will likely act to cushion the shock and limit unemployment and the fall of household incomes, its capacity is limited.
↣ Trade with China and some other partners will continue, but they will not be able to provide substitutes for the wide range of imported goods that the Russian Federation currently cannot access. Assuming the sanctions remain in place through 2022, even if the fighting in Ukraine ends, Russia will experience a severe recession, it said.
↣ The report noted that a number of developing country central banks also engaged in quantitative easing: active purchasing of bonds in the open market.
↣A small number of developing country central banks engaged in private sector bond purchases, but public bond buying was more widespread: the central banks of India, Thailand, Colombia and South Africa, among others, engaged in public bond purchases.
↣ In the global monetary hierarchy, the place of a national currency today is determined less by the size of its domestic production base than by the size of its domestic financial sector.
↣ The currencies of Brazil, Russia, India and China account for no more than 3.5% of the $6.6 trillion daily turnover in the forex markets, a ratio barely one-tenth of the United States dollar’s 44%, it said.
↣ UNCTAD said the ongoing war in Ukraine is likely to reinforce the monetary tightening trend in advanced countries following similar moves that began in late 2021 in several developing countries due to inflationary pressures, with expenditure cuts also anticipated in upcoming budgets.
↣ UNCTAD is worried that a combination of weakening global demand, insufficient policy coordination at the international level and elevated debt levels from the pandemic, will generate financial shockwaves that can push some developing countries into a downward spiral of insolvency, recession and arrested development.
↣ The economic effects of the Ukraine war will compound the ongoing economic slowdown globally and weaken the recovery from the COVID-19 pandemic, UNCTAD Secretary-General Rebeca Grynspan said.
↣ Many developing countries have struggled to gain economic traction coming out of the COVID-19 recession and are now facing strong headwinds from the war. Whether this leads to unrest or not, a profound social anxiety is already spreading.
↣ Even without lasting financial market disruptions, developing economies will face severe constraints on growth. During the pandemic, their public and private debt stocks have increased. And issues that receded from view during the pandemic, including high corporate leverage and rising household debt in middle-income developing countries, will resurface as policy tightens.
↣ The war has put further upward pressure on international prices of energy and primary commodities, stretching household budgets and adding to production costs, while disruptions to trade and the effects of sanctions are likely to have a chilling effect on long-term investment.
↣ Coming just as pandemic-induced disruptions seemed to subside, the geopolitical crisis has dealt a blow to confidence domestically
↣ The added pressure of price increases is intensifying calls for a policy response in advanced economies, including on the fiscal front, threatening a sharper than expected slowdown in growth, the UNCTAD report said.
↣ Soaring food and fuel prices will have an immediate effect on the most vulnerable in developing countries, resulting in hunger and hardship for households who spend the highest share of their income on food. But the loss of purchasing power and real spending will ultimately be felt by everyone.
↣ The danger for many of the developing countries that are heavily reliant on food and fuel imports is more profound as higher prices threaten livelihoods, discourage investment and raise the spectre of widening trade deficits, the report said.