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FACETS OF ECONOMIC

ENVIRONMENT

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FACETS OF ECONOMIC ENVIRONMENT

ECONOMIC ENVIRONMENT

ECONOMIC OPPORTUNI

TY&

THREATS

ECONOMIC STABILITY

AND INSTABILITY

ECONOMIC POLICY

STURCTURE OF

ECONOMYNATURE OF ECONOMY

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NATURE OF ECONOMY

The degree on which the economic activities are performed will result in the generation of income from resources, this determine the standard of living and the development of an economy.

Economy can be classified on the basics of :

• Income• GDP• Adjusted GNP• Industrialization

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STRUCTURE OF ECONOMY Economic structure is a term that describes the

changing balance of output, trade, incomes and employment drawn from different economic sectors – ranging from primary (farming, fishing, mining etc) to secondary (manufacturing and construction industries) to tertiary and quaternary sectors (tourism, banking, software industries).

Types of change

Incremental Structural Change

It results from the extension or integration of markets or an increase in the possession of various factors of production

Innovative structural Change

It is achieved through the establishment or organization of a new exchange relationship and through the exercise of entrepreneurship quality

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Where do STRUCTURAL CHANGE occur ? Sectoral Composition

Occupation

Sector 2013 2014Agriculture 17.97 17.01

Industry 30.73 30.02

Tertiary 51.31 52.97

Source: www.cia.gov/cia/publication/factbook

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ECONOMIC POLICIES Economic policy refers to the actions that

governments take in the economic field. It covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the economy.policies have a twofold objective

First at macro level Second to control unwanted expansion

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Example:

New Industrial Policy 1991 The industries have been freed to a large extent from the licenses and other controls

Effort to encourage foreign investment

Policies for correcting regional imbalance

Policies to regulate monopolistic tendencies

Policies for balanced industrial structure

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ECONOMIC STABILITY AND INSTABILITY Economic stability refers to an absence

of excessive fluctuations in the macroeconomy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable.

For the success of business, it is essential to understand the phase of business cycle:

Recession or depressionFinancial crises in Thailand – 1990

Devaluation of Yuan

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Cont…

Level of stabilitySyrian economy coming to a standstill due to political turmoil.

Recovery and boom Prise rise Employment Interest rate

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ECONOMIC OPPORTUNITIES AND THREATS

These are related to domestic economic conditions, policies and the economic health of the rest of the world sector.

Threats Arise from micro and macro

environment that determines the existence of the business.

Eg : Brain drain affect IT sector, BPO sector moving from India

Opportunities Make in India, Design in India, Digital India