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Business cycles are basically fluctuations in the production levels of economies above and below the trend of the equilibirium levels.86 But why do economies fluctuate? There are many factors which are said to be responsible for it, as per the experts:
(i) Economic instability and uncertainty (due to logical or illogical expectations) may discourage investments thereby reducing growth in the long-term.
(ii) A lack of the creative destruction (i.e. innovation) may put the economy in a slump or slowdown in its overall production.
(iii) Anti-inflationary government policies (especially when general elections are nearing ) may direct the attraction of investors in the economy.
(iv) Unforseen disasters may cause economies to fluctuate.
1. Samuelson, Paul A. and Nardhaus, William D., Economics, Tata McGraw-Hill, N. Delhi, 2006, p. 439.
2. Mc Cormick, B.J. et.al, Introducing Economics, Penguin Education, Great Britain, 1974, p.609.
3. Penguin Dictionary of Economics, Penguin Books, London, 7th Ed., 2003.
4. Collins internet-linked Dictionary of Economics, Harper-Collins Publishers., Glasgow, 2006.
5. Mathew Bishop, Pocket Economist, The Economist, London, 2007, p. 121.
6. Stiglitz, Joseph E. and Walsh, Carl E., Economics, W.W. Norton & Company, New York, 2005, p. 509.
7. As per the Economic Survey, 1997–98, Ministry of Finance, GoI, N. Delhi, p. 89.
8. As per the Economic Survey, 2003–04, p. 90.
9. As the CRR for banks was revised upward to 6.5 per cent by the RBI in its Credit and Monetary Policy for April 2007 onwards and again increased to 7 per cent in the Review, July 31, 2007.
10. As the RBI increased the Repo Rate to 7.75 per cent in its Credit & Monetary Policy announced on
March 31, 2007.
11. Samuelson and Nordhaus, Economics, p. 671.
12. Collins Dictionary of Economics, p. 251.
13. Ibid.
14. Samuelson and Nordhaus, Economics, p. 671
15. As popularised by The Economist, The Wall Street Journal, The Economic Times
(India), etc.
16. Collins Dictionary of Economics, p. 251
17. Samuelson and Nordhaus, Economics, p. 671.
18. Thomas Sargent, ‘The Ends of Four Big Inflations’, in R. Hall, Inflations, Causes and Effects (as quoted by Stiglitz and Walsh, Economics, p. 513).
19. Stiglitz & Walsh, Economics, p. 512.
20. Sachs, Jeffery, The End of Poverty, Penguin Books, London, 2005, pp. 92–108
21. Hyperinflation erodes the value of money very fast and that too at a very high scale. We may put it with an example, suppose the annual rate of inflation is 100 per cent, money loses half its value every year. It means that a note of Rs. 100 will have a value of just Rs. 3 after five years.
22. Ministry of Finance, Economic Survey, 2000–01, (New Delhi: Government of India, 2001).
23. Stiglitz and Walsh, Economics, p. 511.
24. Penguin Dictionary of Economics.
25. Ibid.
26. J.K. Galbraith, A History of Economics, (London: Penguin Books, 1991), p. 205, pp. 267–70.
27. Patrick Lane, Economics (London: The Economist, 199), p. 270.
28. Stiglitz and Walsh, Economics, pp. 821–22.
29. Penguin Dictionary of Economics, pp. 297–98.
30. Gerald M. Meier and James E. Ranch, Leading Issues in Economic Development (New Delhi: Oxford University Press, 2006), pp. 37–39.
31. Stiglitz and Walsh, Economics, p. 822.
32. Samuelson and Nordhaus, Economics, pp. 680–87.
33. Collins Dictionary of Economics, p. 446.
34. Stiglitz and Walsh, Economics, p. 478.
35. C. Rangarajan, Indian Economy: Essays on Money and Finance, (New DelhI; UBSPD, 1998), p. 58.
36. Samuelson and Nordhaus, Economics, p. 723.
37. New Zealand passed a law to do this with a target of 0 to 2 per cent inflation with a provision that the Governor of the Reserve Bank of New Zealand could be fired if inflation crosses the 2 per cent upper limit—now this target range has been revised to 1 to 3 per cent (Stiglitz and Walsh, Economics, p. 849).
38. Samuelson and Nordhaus, Economics, p. 674.
39. Samuelson and Nordhaus, Economics, p. 674.
40. Ministry of Finance, Economic Survey 2006–07 (New Delhi: Government of India, 2007), p. 85.
41. The three major classifications of the items in the WPI were followed for the first time when India went for the third revision of the prices with 1970–71 as the base year which was introduced in January 1977. The same classification is followed till date with changes in the assignments of weights to the items (Ministry of Finance, Economic Survey 2006–07, p. 85).
42. The economies of the Euro-American region have a single CPI as the majority of consumers show the same consumer behaviour (see J.B. Rosser and M.V. Rosser, Comparative Economics in a Transforming World Economy (Cambridge USA: Prentice Hall, MIT Press, 2004)).
43. Ministry of Finance, Economic Survey 2006–07, p. 90.
44. Ministry of Finance, Economic Survey 2001–02, p. 90.
45. Ministry of Finance, Economic Survey 2001–02, p. 91.
46. Ministry of Finance, Economic Survey 2006–07, p. 90.
47. Pranab Bardhan agrees to Amartya Sen (How is India Doing?’, New York Review of Books, December 1982) in: ‘A Political Economy Perspective on Development’ in Bimal Jalan ed. Indian Economy Problems and Prospects, (New Delhi: Penguin Books, 1992), p. 369.
48. Rosser and Rosser, Comparative Economics in a Transforming World Economy.
49. Based on Rangarajan, Indian Economy, p. 63; Jalan,
50. Ministry of Finance, Economic Survey 2013–14 (New Delhi: Government of India, 2014), pp. 75–77.
51. Ministry of Finance, Economic Survey 2014–15 (New Delhi: Government of India, 2015), Vol. 2, pp. 69–75.
52. Desai, Meghnad, ‘Development Perspectives’ in I. J. Ahluwalia and I.M.D. Little, (eds), India’s Economic Reforms and Development, (New Delhi: Oxford
University Press, 1998), p. 41.
53. Jalan Bimal, India’s Economic Policy, (New Delhi: Penguin Books, 1992), pp. 52– 58.
54. C. Rangarajan, ‘Development, Inflation and Monetary Policy’, in I.J. Ahluwalia and
I.M.D. Little (eds), India’s Economic Reforms and Development, (New Delhi: Oxford University Press, 1998), pp. 56–57.
55. Jalan, India’s Economic Policy, pp. 191–203.
56. Chelliah Committee Report, 1993.
57. V.M. Dandekar, ‘Forty Years After Independence’, (New Delhi: Penguin Books, 1992), pp. 81–88. in the Bimal Jalan (ed.), Indian Economy: Problems and Prospects.
58. Y.V. Reddy, Lectures on Economic and Financial Sector Reforms in India (New Delhi: Oxford University Press, 2002), pp. 176–77.
59. Ashima Goyal, ‘Puzzles in India Performance: Deficits without Diaster’ in Kirit S. Parikh and R. Radhakrishna (eds), India Development Report, 2004–05 (New Delhi: IGIDR and Oxford University Press, 2005),
pp. 191–208.
60. Kaushik Basu, India Emerging Economy: Performance and Prospects in the 1990’s and Beyond (New Delhi: Oxford University Press, 2004), pp. 89–103.
61. S. Fisher, ‘Modern Central Banking’, in F. Capie etal.,The Future of Central Banking, The Tercentenary Symposium of the Bank of England (Cambridge: Cambridge University Press, 1994)
pp. 262–308.
62. Paul Krugman, ‘Stable Prices and Fast Growth: Just Say No’, Economist 31 (1996):
pp. 15–18.
63. Ahluwalia and Little, India Economic Reforms and Development, p. 2.
64. Ministry of Finance, Economic Survey 1997–98 (New Delhi: Goverment of India, 1998), p. 92.
65. Rangarajan, ‘Development, Inflation and Monetary Policy, pp. 61–63.
66. We may refer to almost all the credit and monetary policies announced by the RBI during this period.
67. As the RBI put it in its Credit and Monetary Policy Review of July 31, 2007.
68. It should be noted here that the level of inflation was below 5 per cent till the new Government came to power and the outgoing Government was blamed to freeze the inflation data to a more politically digestable level (i.e., below 5 per cent). The new Government in the process of preparing a producer price index
(PPI) has also committed to make the inflation data automated like the share indices.
69. Stiglitz and Walsh, Economics, p. 517.
70. Ministry of Finance, Economic Survey 2006–07, p. 92.
71. Samuelson and Nordhaus, Economics, p. 441.
72. Ministry of Finance, Economic Survey 2006–07, p. 94.
73. ‘The number of National Statistical Agencies collecting service producer prices data, though growing, is still small’, points out the OECD-Eurosat, 2005 Inquiry on National Collection of Services Producer Prices Preliminary Report, giving information on 45 such countries. The report further adds that while some such agencies have focused exclusively on the price of services provided to enterprises, others have approached the subject more broadly through the development of services producer price indices with varying approaches and coverage. As per the report, at present, 30 countries collect services producer prices while prelimilary works have started in other countries, particularly the European countries under the auspices of the Eurosat. Other than the developed Euro-American economies some other countries which worked as inspiration for India which have such an index are China, Hong Kong, Czech Republic, Slovak Republic, Poland, Lithuania, Israel and Vietnam.
74. Collins internet-linked Dictionary of Economics, Glasgow, 2006 & Oxford Business Dictionary, N. Delhi, 2004.
75. Simon Cox (ed.), Economics (London: The Economists, 2007), p. 60.
76. A very lively description of the Great Depression has been presented by Lee Iacocca in his autobiography. This is known as the Great Depression due to its length and depth—the economies could recover fully out of it only by the mid- 1940s (Stiglitz and Walsh,
p. 495).
77. Suggested by John Meynard Keynes in his seminal work The General Theory of Employment, Interest and Money (New York: Harcourt, 1935).
78. Economic Surveys, 1996–97 to 2002–03, MoF, GoI,
N. Delhi.
79. Stiglitz & Walsh, op. cit., p. 945.
80. Samuelson and Nordhaus, op.cit. pp. 680–84.
81. Stiglitz and Walsh, op.cit. pp. 495–796.
82. Economic Survey, 1996–97, MoF, GoI, N. Delhi.
83. Economic Survey, 1996–97, MoF, GoI, N. Delhi.
84. It should be noted here that as an impact of recession the rate of inflation (at WPI) had been falling down throughout the mid 1998–99 fiscal finally to the level of 0.5 per cent for a fortnight (Economic Survey, 1998–99, GoI, N. Delhi).
85. The literature of Economics and the empirical world experiences suggest that the phase of recession has all the symptoms of depression except one. Every thing being the same till producers are cutting the labour by force ‘involuntarily (i.e. forced labour cut) it is the starting of depression—to be competitive in the market every producer starts ‘forced labour cuts’—ultimately putting the economy into the grip of a full grown depression.
86. Cox, Simon, op. cit., p. 58.
C H A P T E R
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O Land Refonns
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□ Animal Rcsring
♤ Food Management
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O FarmSubsidies
♤ FoodSecurity
O PDS& FoodSubsidy
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□ Commodity Fuo.m::s
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□ Rcquircmcors
O Supply Chain
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O Fann Waste Debate
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D Seed Development O Fenmsers
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