AtmaNirbhar Bharat- Open and Closed economy

  • March 23, 2022
  • Posted by: admin1
  • Category: DPN Topics
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AtmaNirbhar Bharat- Open and Closed economy

Subject : Economy

Section : External sector

Context:

India is not favouring a closed economy by promoting AtmaNirbhar mission, and remains very deeply committed to greater integration with global flows and the regional networks according to the NITI Ayog.

Open and Close Economy

An economy is divided as an open economy and closed economy based on the free movement of labour and capital with other countries in the world.

A society is classified as having a closed or open economy based on the following factors:

  • Output Market: An economy can deal with and trade commodities and services with other countries or do so on its own. This broadens preferences by allowing customers and manufacturers to choose between domestic and foreign commodities.
  • Financial Market: An economy can frequently purchase financial assets from other countries or strive to produce enough to meet its needs.
  • Labor Market: Companies can choose where to locate their manufacturing plants, and employees can choose where to work. There are several immigration laws that limit the movement of labour between countries.

An open economy is one that trades commodities, services as well as financial assets with other countries.

  • It purchases shares, debentures, bonds, and other securities from foreign countries and sells securities to foreign countries.
  • It borrows money from and lends money to other countries.
  • It is able to send and receive gifts and remittances from foreigners.
  • Normal residents of an open economy are free to move or work in the domestic territory of other economies.
  • In an open economy, Gross Domestic Product and Gross National Product are not the same things for these reasons.

GNP= GDP + Net factor income from abroad

GDP= GNP – Net factor income from abroad

A closed economy is completely self-sufficient, which means that no imports enter and no exports leave the country.

It does not export goods or services to other countries and does not import goods or services from other countries.

  • It neither buys nor sells shares, debentures, bonds, and other financial instruments to foreign countries, making it a closed economy.
  • It does not borrow from or lend to other countries.
  • It accepts no gifts from foreigners and sends no gifts to foreigners.
  • Normal residents of a closed economy are unable to travel to other countries to work in their home country. No foreigner is permitted to work on a closed economy’s domestic territory.
  • In a closed economy, Gross Domestic Product and Gross National Product are the same for the reasons stated above.

‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’

‘Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission)’ with an economic stimulus package — worth Rs 20 lakh crores aimed towards achieving the mission.

The announced economic package is 10% of India’s Gross Domestic Product (GDP) in 2019-20.

The Self-Reliant India Mission aims towards cutting down import dependence by focussing on substitution while improving safety compliance and quality goods to gain global market share.

The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves creation of a helping hand to the whole world.

The Mission is based on five pillars namely,

  • Economy
  • Infrastructure
  • System
  • Vibrant Demography
  • Demand

The government recognised that the covid induced lockdowns and quarantines disrupted economic activity. Therefore, it quickly put in place economic safety nets along with several liberalisation policies mainly focused on value addition and further integration of the domestic economy with global supply chains.

Atmanirbhar Bharat was launched in various trenches:

The first tranche of Atmanirbhar Bharat Abhiyan

  • Emergency W/C Facility for Businesses, incl MSMEs
  • Subordinate Debt for Stressed MSMEs
  • Fund for Funds for MSMEs
  • EPF Support for Business & Workers
  • Reduction in EPF rates
  • Special liquidity Scheme for NBFC/HFC/MFIs
  • Partial Credit Guarantee Scheme for 2.0 for Liabilities of NBFCs/MFIs
  • Liquidity Injection for DISCOMs
  • Reduction in TDS/TCS rates

The second tranche of Atmanirbhar Bharat Abhiyan

  • Free Food Grain Supply to Migrant Workers for 2 Months
  • Interest Subvention of Mudra Shishu Loans
  • Special Credit Facility to Street Vendors
  • Housing CLSS-MIG
  • Additional Emergency Working Capital through NABARD
  • Additional Credit Through KCC

The third tranche of Atmanirbhar Bharat Abhiyan 

  • Food Micro Enterprises
  • Pradhan Mantri MatsyaSampada Yojana
  • TOP to TOTAL: Operation Greens
  • Agri Infrastructure Fund
  • Animal Husbandry Infrastructure Development Fund
  • Promotion of Herbal Cultivation
  • Beekeeping Initiative

Other major decisions taken under Atmanirbhar Bharat Abhiyan

  • Self-reliance in defence production
    • Ban the import of several weapons and a separate budget provisioning for domestic capital procurement to help reduce the huge defence import bill.
    • Corporatize the Ordnance Factory Board to improve autonomy, accountability, and efficiency.
    • Increased FDI limit in the defence manufacturing under the automatic route from 49 percent to 74 percent.
  • Aircraft and aerospace sector
    • Restrictions on the utilization of the Indian airspace will be eased so that civilian flying becomes more efficient.
    • Development of world-class airports through PPP,
    • The tax regime for Aircraft Maintenance, Repair, and Overhaul ecosystem is rationalized and the convergence between the defence sector and the civil MROs will be established to create economies of scale.
    • Boosting private participation in space activities. The private sector will be allowed to use ISRO facilities and other relevant assets to improve their capacities.
AtmaNirbhar Bharat- Open and Closed economy economy