Page 12 - DECO201_MACRO_ECONOMICS_ENGLISH

Unit 1: Introduction to Macro Economics

Supply-side Policies: designed to make markets work more efficiently. Notes
Direct controls or regulation of particular markets.

Caselet Crippling Infrastructure in India

rippling infrastructure shortages are the leading constraint to rapid growth as
well as in spreading this growth more widely. These shortages have resulted in a
Cskewed pattern of growth that is not sustainable.
While the high skill services sector that employs the better educated among India's work
force has flourished, the growth of more labor-intensive manufacturing that generates
jobs for low and semi-skilled workers has remained constrained.
Infrastructure shortages have particularly hindered the growth of export oriented
manufacturing and value-added agriculture that integrate into global supply chains, and
need good roads, ports, airports, and railways as well as reliable power and water to
prosper.
Challenges:
India needs to invest 3-4% more of its GDP on infrastructure to sustain 8% growth.

The private sector can play an important role in investing in infrastructure, including
through public private partnerships.
Improving the country's capacity to implement infrastructure projects will be as
important as increasing the amount of investment available.
Investments should improve the delivery of services, and service providers need to
be made more accountable to consumers.
Emphasis should be placed on maintaining existing assets.
Reforms need to be accelerated in all sectors. Difficult issues such as rationalizing
user fees for services need to be faced.

Source: www.worldbank.org
1.3.2 Instruments of Macro Economic Policy

The main instruments of Macro Economic policy are:
Monetary Policy

Monetary policy is one of the tools that a national government uses to influence its economy.
Using its monetary authority to control the supply and availability of money, a government
attempts to influence the overall level of economic activity in line with its political objectives.
Usually this goal is "Macro Economic stability" - low unemployment, low inflation, economic
growth, and a balance of external payments.

Did u know? Monetary policy is usually administered by a government appointed "Central
Bank", the Reserve Bank of India and the Federal Reserve Bank in the United States.

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