General Discussions On Various

Economic Issues Such As

Public Versus Private Participation,
Equity, Labour Intensive
Versus Capital Intensive Projects.
S u b j ec t : B u ild in g Eco nomic s a n d S o c io lo gy
6 th S emester, VSA P

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 1

 INDEX
1 . Ec o n o m i c I s s u e s S u c h A s P u b l i c Ve r s u s P r i v a te Pa r t i c i p a t i o n
i. Indian Economy
ii. Characteristics of Indian economy
iii. Economic development
iv. Public sector
v. Public sector enterprises
vi. Private sector
vii. Private sector enterprises
viii. Types of private sector
ix. Roles of private sector
x. Differences of public sector and private sector
xi. Issues
2 . Eq u i t y
3 . L a b o u r I n te n s i v e
Ve r s u s C a p i ta l I n te n s i v e P r o j e c t s

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 2

 INDIAN ECONOMY
• India is the sixth-largest economy (by nominal GDP)
in the world.
• Economists categorizes India as a newly
industrialized country (NIC).
• India is a mixed economy.
• In India, most of the labour force is employed in the
agriculture and industry sectors.
• The main characteristics of the Indian economy are
high dependence on the primary sector, low per-
capita income, big population, unemployment,
unequal distribution of wealth, and lack of
infrastructure.
• India’s major trade partners are the US, China, and
the United Arab Emirates

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 3

 CHARACTERISTICS OF THE INDIAN ECONOMY
1. Low Per Capita Real Income
2. High Rate of Population Growth
3. The Endless Loop of Poverty
4. Highlights of the Indian Economy
5. Agro-Based Economy
6. Overpopulation
7. Incongruities in Income
As per the most recent report, 1% of Indians own 53% of the abundance of the country’s wealth.
8. Destruction in Capital Formation
The rate of capital development is emphatically associated with lower levels of pay or income.
There is a tremendous decrease in Gross Domestic Capital contrasted with the earlier years.
9. Poor Infrastructural Development
10. Imperfect Market
11. Endless Loop of Poverty
India is an ideal illustration of the term ‘A nation is poor since it is poor’. The endless loop of
neediness or poverty traps these types of developing countries.
12. Obsolete Technology
Indian creation of work is labour-intensive in nature. There is an absence of innovations and
modern machinery.
13. Backward Society
14. Low Per Capita Income:
The per capita pay of India is considerably less than that of the other developing nations.

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 4

 PUBLIC SECTOR
Budgetary
• The public sector also called the state sector Central
• It is the part of the economy composed of government
both public services and public enterprises. Extra Budgetary
General State
• The public sector might provide services that a government governments Social Security
non-payer cannot be excluded from (such as street
lighting), services which benefit all of society rather Funds
Local
than just the individual who uses the service.
governments
Public Sector
Public Central Bank
Nonfinancial
Corporations
Public
Public Deposit-taking
Corporations Corporation - CB
Public Public
Financial Deposit-taking
Corporations Corporations

Other
Public Financial
Corporations

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 5

 ECONOMIC DEVELOPMENT
• Role of public sector in economic development :

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 6

 PUBLIC SECTOR ENTERPRISES
Public sector enterprises : The public sector consists of various organizations owned and managed by
the government. These organizations may either be partly or wholly owned
by the central or state government.
• Public enterprises, or state-owned enterprises, are self-financing commercial enterprises that are
under public ownership which provide various private goods and services for sale and usually operate
on a commercial basis.
• They are the organizations that are not part of the public sector are either part of the private
sector or voluntary sector.
• The private sector is composed of the economic sectors that are intended to earn a profit for the
owners of the enterprise.
• The voluntary, civic or social sector concerns a diverse array of non-profit organizations
emphasizing civil society.
• Examples - Public sectors include public goods and governmental services such as the
i. military,
ii. law enforcement,
iii. infrastructure,
iv. public transit,
v. public education,
vi. along with health care and
vii. those working for the government itself, such as elected officials.

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 7

 PUBLIC SECTOR ISSUES
• Bureaucracy and Inefficiency :
Government agencies are often criticized for being bureaucratic and slow-moving, which can hinder
efficiency and responsiveness to the needs of citizens.
• Fiscal Deficit :
Governments frequently face challenges in managing fiscal deficits, balancing budgets, and ensuring
sustainable public finances. Overspending or inefficient allocation of resources can lead to deficits
and debt accumulation.
• Corruption and Rent-seeking :
Corruption within the public sector can result in misallocation of resources, reduced public trust,
and distorted economic outcomes. Rent-seeking behavior, where individuals or groups seek to gain
wealth without creating new wealth, can undermine the efficiency of public sector activities.
• Political Interference :
Political considerations may influence decision-making within the public sector, leading to
suboptimal outcomes. This can include patronage appointments, favoritism in procurement
processes, or policies driven by short-term political gains rather than long-term economic
objectives.
• Service Delivery :
Ensuring effective and equitable delivery of public services such as healthcare, education, and
infrastructure remains a challenge for many governments, particularly in developing countries or
regions with limited resources.

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 8

 PRIVARE SECTOR & PRIVARE ENTERPRISES
• The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned
by private groups, usually as a means of establishment for profit or non profit, rather than being owned
by the government. The private sector is part of the economy.
Private sector enterprises : The private sector consists of business owned by individuals or a group of
individuals. The various forms of organization are sole proprietorship,
partnership, joint Hindu family, cooperative and company.
• There are numerous types of undertakings in the private sector. Some of the examples of the private
sector include:
• Privately owned small- and medium-size businesses :
These businesses constitute the bulk of the private sector. They are responsible for most of the jobs in
the economy and range from firms with a single employee to companies with up to 500 employees.
Example : Architects, Doctors, engineers, lawyers etc…

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 9

 TYPES OF PRIVARE SECTOR
1. Sole proprietorships : Plumbers, technicians, contractors, developers and designers
2. Partnerships : Legal, accounting, tax and dentistry
3. Privately owned corporations : Hospitality, leisure, retail and food
4. Large multinational corporations : Corporations that employ 500 or more people are considered large.
Firms under this classification are the most prominent members of the private sector. Their importance
results from exerting considerable political and economic influence. Government agencies exercise
regulations on them but do not control them.
5. Nonprofits : Nonprofit organizations participate in activities perceived as publicly desirable, such as
social services, education and natural resource conservation. Their main aim is delivering services for
the general good and benefit of the community. While some nonprofits are self-sustainable, others
depend on donations for financing. Nonprofits receive special tax considerations from the government.

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 10

 ROLES OF PRIVARE SECTOR
The role of the private sector is integral to the development of an economy. Here are some specific roles
of the private sector:
i. Significant stakeholders of the economy: The private sector is an important player in the economy
due to the input it makes to the national income. Particularly, it delivers vital goods and services,
contributes to tax revenues and ensures the efficient flow of capital.
ii. Generate employment: The private sector plays the pivotal role of generating employment
opportunities within its community.
iii. Assist in development: The private sector plays a dominant role in different types of
developments. Specifically, it enhances the process of industrialization and community
improvement. By introducing new commodities, equipment, machinery and technology,
companies in the private sector produce innovative ideas that modify methods of production and
lead to better economic development.
iv. Provision of goods and services: The private sector is the main provider of goods and services. It
promotes human capital development, which gives it the ability to produce more goods and
services and therefore satisfy market demand.
v. Promote diversification of business: The private sector is full of firms conducting varied
businesses. Essentially, this sector provides new companies with the opportunity to develop no
matter the type of business.

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 11

 DIFFERENCES

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 12

 PUBLIC SECTOR ISSUES
• Market Monopoly and Oligopoly:
Concentration of market power in the hands of a few large firms can lead to monopolistic or
oligopolistic practices, limiting competition and potentially harming consumers through higher
prices, reduced choice, and lower quality.
• Corporate Governance:
Ensuring effective corporate governance is essential for maintaining investor confidence, protecting
shareholder interests, and promoting long-term sustainability. Issues such as executive
compensation, board accountability, and transparency can impact trust in the private sector.
• Market Failures:
Despite the belief in the efficiency of markets, they can fail to allocate resources optimally in certain
circumstances, leading to outcomes such as externalities (e.g., pollution), information asymmetry,
or public goods undersupply. Addressing these market failures often requires government
intervention.
• Labor Exploitation:
Concerns regarding labor rights, fair wages, and working conditions persist in many industries, both
domestically and globally. Exploitative practices such as sweatshops or child labor tarnish the
reputation of companies and raise ethical questions about corporate responsibility.
• Environmental Impact:
Private sector activities can have significant environmental consequences, including pollution,
resource depletion, and habitat destruction. Balancing economic growth with environmental
sustainability poses a fundamental challenge for businesses and society as a whole.

ECONOMIC ISSUES SUCH AS PUBLIC VERSUS PRIVATE PARTICIPATION. 13

General discussions on various
economic issues such as
public versus private participation, Equity,
Labour Intensive versus Capital Intensive Projects

1
Subject : Building Economics and Sociology
6th Semester, VSAP

EQUITY, LABOUR INTENSIVE VERSUS CAPITAL INTENSIVE PROJECTS

 Index

1. Economic Issues Such As Public Versus Private Participation

i. Indian Economy vii. Private sector enterprises
ii. Characteristics of Indian economy viii. Types of private sector
iii. Economic development ix. Roles of private sector  Done
iv. Public sector x. Differences of public sector and
v. Public sector enterprises private sector
vi. Private sector xi. Issues
2. Equity iii. Types of equity
i. Definition iv. Economic Equity
ii. Principles of Equity v. Lorenz Curve

3. Labour Intensive versus Capital Intensive Projects 2

i. Labour intensive project
ii. Advantages and
Disadvantages of Labour
intensive project
iii.

EQUITY, LABOUR INTENSIVE VERSUS CAPITAL INTENSIVE PROJECTS

i. Equity is based on the idea of moral equality the principle that people should be treated as
equals
ii. The idea of equity is the application of this principle of moral equality to the ways in which
people are treated in society
iii. The principle should cover every individual’s actions in society but should also be of particular
importance in setting goals for and constraints on actions by governments and states

HIG MIG LIG

3
 Principles of Equity :
i. Equal life chances
ii. Equal concern for peoples needs
iii. Meritocracy : Positions in society and rewards should be distributed to reflect differences in
effort and ability, based on fair competition
Types of equity in economics :
i. Vertical equity : According to this principle, a person earning more income must pay more
taxes, thus, redistributing his wealth to different sections of society.
ii. Horizontal equity : This means that people with the same income, wealth, or other economic
characteristics should pay the same amount of taxes, receive the same benefits, and face the
same regulations and restrictions.

HIG
HIG

MIG & LIG

Equity i.e, ≠

TAX
TAX

MIG & LIG

4
Vertical Equity Horizontal Equity
i. Economic equity refers to the fair distribution of economic resources, opportunities, and
outcomes among individuals or groups within a society.
ii. It's about ensuring that everyone has a reasonable and just chance to access resources,
participate in economic activities, and benefit from the fruits of economic growth.
iii. This concept often involves addressing disparities in income, wealth, employment, education,
and access to essential services.

Equity Formula :

5
iv. Achieving economic equity typically requires a combination of policies and initiatives aimed at reducing
inequality and promoting inclusion.
v. This might involve progressive taxation, social welfare programs, education and job training initiatives,
affordable housing policies, and efforts to eliminate discriminatory practices in the workplace and financial
systems.
vi. Economic equity is not just a matter of fairness; it's also essential for promoting social stability, reducing
poverty, and fostering sustainable economic growth.
Lorenz Curve :
In economics, the Lorenz curve is a graphical representation of the distribution of income or of wealth. It was
developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution

6
i. Labor intensive project is heavily based on labors. Therefore, it is also known as labor based project.
ii. It uses different types of work force of society, specially semi-skilled and unskilled manpower to perform the
project task. There is very high involvement of labors and they play vital role in success of the project.
iii. The main objectives of the implementation of these kinds of project is to generate maximum employment
opportunities to all categories of people in society.
iv. Thus, it helps to bring social equality and justice by equal distribution of income in society and maintain
economic stability in the country.
v. It utilized few technology in the process of project implementation. It requires less capital as compared to
capital intensive project.
vi. Labor intensive project is more appropriate in those country where there is high availability of manpower,
cheap manpower, low capital, low technology development.

7
Advantage of Labor Intensive Project: Disadvantages of Labor Intensive Project:

i. It provides high employment opportunities. i. It gives less priority to technology innovation and
ii. It helps to maintain economic stability. development due to labor based project.
iii. They are very useful for countries having a vast ii. It effects the competitive capacity of the project.
pool of unemployed labor resources. iii. It is time consuming that lengthen the project life
iv. They create economic stability in the country cycle.
through employment. People's participation is iv. It is costly in long run.
promoted at local levels. v. It is unable to handle complexities.
v. It ensures optimum utilization of scarce resources. vi. Poor capital formation.
vi. The wage differentials are not pronounced so as to vii. It lacks improved and advanced skills
bring social equality and justice.
vii. Its impact on environment is low.
viii. It requires less capital and use indigenous
technology.
ix. It helps to increase per capita income.
x. It also reduces import.

8
i. Generally capital intensive projects are profit oriented.
ii. It's task are complex in nature. So advance technology like automation, computerization, robotization and
information is extensively used on capital intensive project.
iii. It makes the project less costly in long run.
iv. It is better technique for qualitative and mass production.
v. Mostly it uses high skill technical and professional manpower. But it does not provide employment
opportunities to all types of work force in society.
vi. Capital intensive projects are appropriate to implement in those countries where availability of sufficient
capital for investment, well technological development, availability of well skilled manpower and high level
cost due to labor shortage.
vii. However it helps to improve the economic condition of developing country rapidly.

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Advantage of Capital Intensive Project: Disadvantages of Capital Intensive Project:

i. It produces greater quality output. i. It ignores human factors.

ii. It is less time consuming than labor based ii. It needs huge amount of capital for investment.
technique. iii. It uses expensive technology.
iii. It is less costly in long run. iv. It may adversely affect the balance of payment
iv. It is best suited for handling complexity. due to huge enforcement of large machinery,
v. It increases the export trade. equipment and technology.
vi. It helps to develop technology. v. It reduces the employment opportunity.
vii. It makes possible optimum utilization of resources. vi. It may create the situation of social injustice due
to unequal distribution of income in society.
viii. It contributes in rapid economic growth of a
country.
ix. It promotes skill and knowledge.

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