KALYAN CITY LIFE

Introduction to India's Foreign Trade ↓

Foreign Trade is one of the significant macro fundamental variable of an economy. India till recently was predominantly a primary goods exporting and mainly an industrial goods importing country.

In 1950s, India's share in the world trade was 1.78% which was decline to 0.59% in 1990 and continues to remain around 0.60% till now. India's share in world exports was 0.8% in 2006.

A. Composition of India's Exports ↓

Britishers strongly believed that India was a country well suited to supply raw materials and other primary goods and a good market place for British manufacturers. So at the time of our independence our exports were predominantly of primary goods and imports were of manufacturers. At the time of independence agricultural commodities and light manufactured consumer goods dominated India's export basket. During the post independence period India's composition of exports changed.

Now exports of India's are broadly classified into following four categories.

The Second World War ended in Europe in May 1945. After its end, some countries in the world soon realised the importance and need of international trade. Later, after a period of two years, these countries finally came together and started discussing important plans with an intension to promote global trade. As a result, the General Agreement On Tariff and Trade (i.e GATT) was first signed by 23 countries, in April 1947, at Geneva, Switzerland.

India was one of the founding members of GATT. In 1994, the membership of GATT rose to 118 countries. In 1995, its membership rose even further, and 123 countries were in the GATT list. By December 2010, the total membership of WTO reached its peak value of 153.

The primary objective of the GATT was to promote world trade through co-operation of its member countries. GATT provided for reduction of high tariff rates and even eased out numerous trade restrictions. GATT's plan was to promote global trade in a gradual fashion or step-by-step manner over a period of time. This was supposed to be accomplished through different rounds of trade negotiations to be held from time to time. So far, eight rounds have been held. The guiding principle of GATT was the MFN (Most Favoured Nation) clause. The purpose of this clause was to discourage Bilateralism and encourage Multilateralism for the expansion of world trade. In the various rounds of trade negotiations, member nations agreed on tariff reduction over a large number of traded goods.

Factors Deciding Stress Vulnerability of Employees

Some employees are more vulnerable to stress as compared to others. Stress Vulnerability of employees depends upon three main factors like stress threshold, type of person they are and their control on work methods.

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1. Stress Threshold - Low and High ↓

Stressors are the factors that cause stress. Stress Threshold is the degree of stressors that a person can endure before stress related symptoms occur and adversely start affecting his or her performance.

Some people with a low threshold are unable to sustain even a small level of stress. They get easily distracted, stressed-out and lose their calmness due to any slightest change or disruption in their routine workflow.

On the other hand, there are also people with a high threshold who can tolerate a high level of stress. These people are able to stay calm, maintain their coolness, adjust to any new situation and yet remain productive. They are able to do so because of their experience and confidence on their skills and abilities. However, if people with high threshold experience prolonged stress then there are chances that their performance may decline.

Stress can be either helpful or harmful to job performance, depending upon its level. When stress is absent, it limits job challenges and performance becomes low. As stress increases gradually, job performance also tends to increase, because stress helps a person to gather and use resources to meet job requirements.

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Constructive stress inculcates encouragement among employees and helps them to tackle various job challenges. Eventually, a time comes when stress reaches its maximum saturation point that corresponds approximately to the employee's day to day performance capability. Beyond this point, stress shows no signs of improvement in job performance.

Finally, if stress is too high, it turns into a damaging force. Job performance begins to decline at the same point because excessive stress interferes with performance. An employee lose the ability to cope, fails to make a decision and displays inconsistent behaviour. If stress continues to increase even further it reaches a breaking point. At this breaking stage, an employee is very upset and mentally devastated. Soon he/she completely breaks down. Performance becomes zero, no longer feels like working for their employer, absenteeism increases, eventually resulting into quitting of a job or getting fired.

Meaning of Frustration ↓

Frustration is one of the causes of stress. It arises when one's motivation to achieve a desired goal is blocked. For example, an employee wants to finish a report before the end of the day but finds that something or the others keep interrupting him at work. This can lead to his frustration.

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Types of Reactions to Frustration ↓

The reactions to frustration are also known as Defense Mechanisms. These defense mechanisms are so called as they try to defend individuals from the psychological effects of a blocked goal. When some employees get frustrated, they become tensed and irritable. They experience an uneasy feeling in their stomach and also show various other reactions of frustration.

What is Stress? Meaning

Stress is a general term applied to various psychologic (mental) and physiologic (bodily) pressures experienced or felt by people throughout their lives.

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Definition of Stress

Stress is defined as “a state of psychological and physiological imbalance resulting from the disparity between situational demand and the individual's ability and motivation to meet those needs.”

Dr. Hans Selye, one of the leading authorities on the concept of stress, described stress as “the rate of all wear and tear caused by life.”

Stress can be positive or negative:

1. Stress is good when the situation offers an opportunity to a person to gain something. It acts as a motivator for peak performance.
2. Stress is negative when a person faces social, physical, organizational and emotional problems.

Factors that are responsible for causing stress are called stressors.

The importance of intellectual property rights (IPRs) in international trade is increasing day by day. The agreement on Trade Related Intellectual Property Rights (TRIPs) establishes standards for the protection of intellectual property rights including patents, industrial designs, trademarks and copyrights. The Trips agreement is an important aspect of the WTO.

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What is TRIPs Agreement?

The TRIPs is a WTO agreement. It is an international agreement signed by member countries to protect and enforce intellectual property rights (IPRs) such as patents, trademarks, industrial designs, copyrights, etc.

According to Harold Koontz, Mary Parker Follett and other notable thinkers, "Management is an art of getting things (i.e work, task) done through people."

So, Is Management really an innovative Art that inculcates Creativity?

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Before we arrive at our conclusion, let's find out whether management is really an art or not by discussing and analysing following important points.

Every art is innovative in nature. New and improved designs, automated and error-free systems of a workflow, creative writings, abstract paintings and sculptures, magnificent architectures and giant constructions, etc., are all best examples of artistic innovations. These mesmerizing arts act as symbols of inspiration, possibility and creativity. They teach us how simple remarkable ideas can be turn a visionary dream into a reality.

1. Insurer

The company which issues insurance policy is called insurer. Insurance company is also called assurer or underwriter. Insurer agrees to pay compensation on the happening of uncertain and unfortunate event.

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2. Insured

The person who is protected against uncertain losses and who is paid a compensation by the insurance company is called insured or assured. He is a person in whose favour insurance policy in issued. He is also called a policyholder.

Understanding Principles of Insurance

The main objective of every insurance contract is to give financial security and protection to the insured from any future uncertainties. Insured must never ever try to misuse this safe financial cover.

Seeking profit opportunities by reporting false occurrences violates the terms and conditions of an insurance contract. This breaks trust, results in breaching of a contract and invites legal penalties.

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An insurer must always investigate any doubtable insurance claims. It is also a duty of the insurer to accept and approve all genuine insurance claims made, as early as possible without any further delays and annoying hindrances.

Comparison - H.O Theory Vs Ricardian Theory ↓

The advantage or superiority of Ohlin's Modern Theory over the Ricardian Classical Theory of international trade gets highlighted from the following important points of comparison.

1. No difference among internal and international trade

According to the Classical economists, there is a need for a separate theory of international trade because of the differences between internal and international trade.

But according to Ohlin, there is no need for a separate theory of international trade, as fundamental principle of both is same.

Ohlin's Factor Price Equalization Theorem

In International Trade, commodities move instead of factors.

According to Bertil Ohlin,

"Commodity movement acts as a substitute for factor movement in bringing about factor price equalisation."

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In a two country model with relatively large differences in their endowments (capital and labour), prior to trade the prices of these factors will be different. With the opening of trade, each country will export the product of its abundant cheap factor. When export demand is added to domestic demand, prices of their abundant cheap factor will rise. The domestic demand for the products of scarce factors tend to decline due to the availability of such products through imports. This in turns lead to decline in the price of the scarce factor. In each country, due to the prices of the abundant factor rising and scarce factor falling the prices of both factors of production tend to move towards the same level.

Introduction To Heckscher Ohlin's H-O Theory ↓

The Modern Theory of international trade has been advocated by Bertil Ohlin. Ohlin has drawn his ideas from Heckscher's General Equilibrium Analysis. Hence it is also known as Heckscher Ohlin (HO) Model / Theorem / Theory.

According to Bertil Ohlin, trade arises due to the differences in the relative prices of different goods in different countries. The difference in commodity price is due to the difference in factor prices (i.e. costs). Factor prices differ because endowments (i.e. capital and labour) differ in countries. Hence, trade occurs because different countries have different factor endowments.

The Heckscher Ohlin theorem states that countries which are rich in labour will export labour intensive goods and countries which are rich in capital will export capital intensive goods.

Concerned over the worsening of fiscal situation, in 2000, the Government of India had set up a committee to recommend draft legislation for fiscal responsibility. Based on the recommendations of the Committee, Government of India introduced the Fiscal Responsibility and Budget Management (FRBM) Bill in December 2000. In this Bill numerical targets for various fiscal indicators were specified. The Bill was referred to the Parliamentary Standing Committee on Finance. The Standing Committee recommended that the numerical targets proposed in the Bill should be incorporated in the rules to be framed under the Act. Taking into account the recommendations of the Standing Committee, a revised Bill was introduced in April 2003. The Bill was passed in Lok Sabha in May 2003 and in Rajya Sabha in August 2003. After receiving the assent of the President, it became an Act in August 2003. The FRBM Act 2003 was further amended.

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The FRBM Bill / Act provides rules for fiscal responsibility of the Central Government. The FRBM Act 2003 (as amended) became effective from July 5, 2004. Under this Act, Rules are framed relating to fiscal responsibility of the Central Government, which came into force on 5th July 2004.

Scope of Commerce

Scope of commerce means or implies the coverage of commerce.

The scope of modern commerce has become very wide, perhaps it has no boundary at all, because it has crossed the boundaries of nations, and it has acquired an international status.

Scope of commerce includes the role played by trade and aids to trade, banks and insurance companies; transport and advertising agencies which have contributed to a large extent for widening the scope of commerce.

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What is Fiscal Crisis ?

The fiscal imbalance takes place when the government expenditure exceeds government revenue. This fiscal imbalance is also refered as the fiscal crisis.

In 1980, the growing burden of non-development expenditure caused deterioration in the fiscal situation of India. Later this resulted in a fiscal crisis at the beginning of 1991-1992.

Indicators of Fiscal Crisis ↓

The main indicators of fiscal crisis are various deficits such as :-

1. Revenue Deficit (RD) : It is the difference between revenue receipts (income) and revenue expenditure.
2. Budgetary Deficit (BD) : It is the difference between total expenditure and total receipts. Here, both revenue and capital expenditure and receipts are considered.
3. Fiscal Deficit (FD) : It is the excess of total expenditure over revenue receipts and grants. In other words, fiscal deficit is the budget deficit plus government borrowings and other liabilities.
4. Primary Deficit (PD) : It is the fiscal deficit minus interest payments.

Measures To Overcome Fiscal Imbalance In India ↓

Fiscal imbalance takes place due to excess of government expenditure over revenue. To overcome the deficit, government resort to borrowings. This further aggravates the situation of debt servicing.

Therefore there is a need to correct and overcome the fiscal imbalance.

The fiscal imbalance can be corrected by adopting following two methods:-

1. Reducing Government Expenditure.
2. Raising proper financial resources (funds) for productive purposes.

A. Reduce Government Expenditure ↓

Suggested ways by which government's expenditure can be reduced are :-

1. Reduction in Interest Burden

Over the years, there has been considerable increase in Government borrowings. As a result, the interest payment of the Government has increased considerably. The interest payment has been the single major component of revenue expenditure of both the state and central government. For instance, the interest payment of the central government of India has increased from Rs.21,500 crores in 1990-91 to Rs.1,39,823 crores in 2005-06, which works out as 33% of the total revenue expenditure. Therefore, there is a need to reduce government borrowings so as to reduce interest burden, which in turn would reduce Government expenditure.

Meaning of Fiscal Policy ↓

The fiscal policy is concerned with the raising of government revenue and incurring of government expenditure. To generate revenue and to incur expenditure, the government frames a policy called budgetary policy or fiscal policy. So, the fiscal policy is concerned with government expenditure and government revenue.

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Fiscal policy has to decide on the size and pattern of flow of expenditure from the government to the economy and from the economy back to the government. So, in broad term fiscal policy refers to "that segment of national economic policy which is primarily concerned with the receipts and expenditure of central government." In other words, fiscal policy refers to the policy of the government with regard to taxation, public expenditure and public borrowings.

The importance of fiscal policy is high in underdeveloped countries. The state has to play active and important role. In a democratic society direct methods are not approved. So, the government has to depend on indirect methods of regulations. In this way, fiscal policy is a powerful weapon in the hands of government by means of which it can achieve the objectives of development.

Meaning of Commerce

Commerce is a branch of business. It is concerned with the exchange of goods and services. It includes all those activities, which directly or indirectly facilitate that exchange.

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What are the Aids To Trade in Commerce? Meaning

Trade or exchange of goods involves several difficulties, which are removed by auxiliaries or supplementary supports known as Aids to Trade.

Here, aids to trade refers to all those involved activities, which directly or indirectly facilitates smooth exchange of goods and services.

Aids to trade includes Transport, Communication, Warehousing, Banking, Insurance, Advertising, Salesmanship, Mercantile agents, Trade promotion organizations in a country and Global organizations for international trade. These important auxiliaries ensure a smooth flow of goods from producers to the consumers.

What is Trade? Meaning and Nature

Trade refers to buying and selling of goods and services for money or money's worth. It involves transfer or exchange of goods and services for money or money's worth. The manufacturers or producer produces the goods, then moves on to the wholesaler, then to retailer and finally to the ultimate consumer.

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Trade is essential for satisfaction of human wants, Trade is conducted not only for the sake of earning profit; it also provides service to the consumers. Trade is an important social activity because the society needs uninterrupted supply of goods forever increasing and ever changing but never ending human wants. Trade has taken birth with the beginning of human life and shall continue as long as human life exists on the earth. It enhances the standard of living of consumers. Thus we can say that trade is a very important social activity.

What is Industry ? Meaning ↓

The production side of business activity is referred as industry. It is a business activity, which is related to the raising, producing, processing or manufacturing of products.

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The products are consumer's goods as well as producer's goods. Consumer goods are goods, which are used finally by consumers. E.g. Food grains, textiles, cosmetics, VCR, etc. Producer's goods are the goods used by manufacturers for producing some other goods. E.g. Machinery, tools, equipments, etc.

Expansion of trade and commerce depends on industrial growth. It represents the supply side of market.

What is Business? Meaning

Human beings are continuously engaged in some activity or another to satisfy their unlimited wants. Every day we come across the word 'business' or 'businessman' directly or indirectly. The business has become an essential part of the modern world.

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Business is an economic activity, which is related to continuous and regular production and distribution of goods and services for satisfying human wants.

What are Economic Activities ? Meaning ↓

Economic activities are related to production, distribution, exchange and consumption of goods and services.

The primary aim of the economic activity is the production of goods and services with a view to make them available to consumer.

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"Human activities which are performed in exchange for money or money's worth are called economic activities."

In other words, economic activities are those efforts which are undertaken by man to earn Income, Money, Wealth for his life and to secure maximum satisfaction of wants with limited and scarce means.

E.g. A worker works in a factory and gets wages.