Chapter 1- Wealth Creation- Economic Survey 2020 Analysis

<<2/”>a >h4 style=”text-align: center;”>Chapter 1: Wealth Creation: The Invisible Hand Supported by the Hand of Trust

 

Importance of Wealth creation:

  • It lead to efficient and more utilisation of raw material.
  • It lead to increase in the Aggregate Demand in the economy.
  • Increase in the Direct Tax flows
  • Increase in the salaries of employees working in an ecosystem with expanding wealth.
  • Increase in Foreign Exchange survey.
  • Increase in the return on Investment.

 

Wealth creation through the Invisible hands of the market How and examples to prove that:

  • Formulation of right policies and schemes.
  • Commerceand the pursuit of prosperity is an intrinsicpart of Indian civilizational ethos. Just follow that instinct.
  • The evidence since 1991 showsthat enabling the invisible hand of markets,i.e., increasing economic openness, has huge impact in enhancing wealth both inthe aggregate and within sectors.
  • Liberalised sector have performed better than the closed sector. Ex: Steel and cement performed better than coal sector, Credit/ GDP increased drastically for Private Sector Banks as compared to Public Sector Banks, Growth of Mutual fund sector post 2003( opening up of sector) . All these examples make a strong case for regulated privatisation and hence the wealth creation.

 

 

 

 

Instrument of Wealth creation and creation of hand of Trust:

  • Equal opportunity for new entrants is important, a 10% rise in new firms at district level yields 1.8% increase in gross domestic product.

Equal opportunity needs to be provided by the government through fair means.

  • Do away with the pro crony economy and Regulatory relics
    • Pro crony economy: Policies favouring few big tycoons
    • Regulatory relics: Overhang of socialist phase between 1950-1991
  • Providing efficient financial sector. Indian Banking sector is poorly developed.
  • Efficient management of data repository of the consumers in banks. This centralised repository will cation banks in advance against the habitual defaulter and thus preventing NPA.
    • Central repository of information on large corporates will help to identify willful and genuine defaulter.

 

  • Government should strengthen its role as referee. The Resource scarcity need to be addressed in SEBI, CCI etc.
  • Use of Artificial Intelligence and Machine Learning to flag mall practice.
  • Creation of wealth shall be on ethical lines. Intrinsic motivation need to be strengthen. For example: Banks should recognised the ethical corporates and they should be felicitated.

 

Example to show importance of trust:

Just as farmers burning the stubble create negative externalities for all citizens through the contaminated air, when a corporate intentionally misreports financial information, it harms investors by creatinga negative externality of low trust for all domestic and international investors in the financials of firms in the economy.

 

 

To conclude,

Introducing the idea of “trust as a public good that gets enhanced with greater use”, the Survey suggests that policies must empower transparency and effective enforcement using data and technology to enhance this public good.

 

 

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Wealth creation is the process of generating new wealth. It can be done through a variety of means, including Entrepreneurship, investing, and innovation. Wealth creation is important because it helps to improve people’s lives. It can lead to higher incomes, better Education, and improved Health care.

India is a country with a long history of wealth creation. The country has a rich culture and a strong entrepreneurial spirit. In recent years, India has experienced rapid economic growth, which has led to increased wealth creation. However, there are still a number of challenges that need to be addressed in order to ensure that wealth creation is sustainable and inclusive.

One of the biggest challenges to wealth creation in India is inequality. The gap between the rich and the poor is widening, and this is leading to social unrest. The government needs to take steps to reduce inequality, such as investing in education and healthcare for the poor.

Another challenge to wealth creation in India is Corruption. Corruption is a major problem in the country, and it is estimated that it costs the economy billions of dollars each year. The government needs to take steps to reduce corruption, such as strengthening the judiciary and improving transparency.

Infrastructure-2/”>INFRASTRUCTURE is also a challenge to wealth creation in India. The country’s infrastructure is in need of major investment, and this is holding back economic growth. The government needs to invest in roads, bridges, Airports, and power Plants.

Education is another challenge to wealth creation in India. The country’s education system is in need of reform, and this is leading to a shortage of skilled workers. The government needs to invest in education and improve the quality of education.

Despite these challenges, India has the potential to be a major wealth creator. The country has a young Population, a growing economy, and a strong entrepreneurial spirit. The government needs to take steps to address the challenges that are holding back wealth creation, and if it does, India can become one of the wealthiest countries in the world.

Here are some specific policy interventions that the government can take to promote wealth creation in India:

  • Invest in infrastructure: The government can invest in roads, bridges, airports, and power plants. This will help to improve the business Environment and make it easier for businesses to grow.
  • Reform the education system: The government can reform the education system to produce more skilled workers. This will help to address the shortage of skilled workers and make it easier for businesses to find the workers they need.
  • Reduce corruption: The government can take steps to reduce corruption. This will help to improve the business environment and make it easier for businesses to operate.
  • Promote innovation: The government can promote innovation by providing tax breaks and other incentives to businesses that invest in research and development. This will help to encourage businesses to develop new products and Services that meet the needs of consumers.

These are just some of the policy interventions that the government can take to promote wealth creation in India. If the government takes these steps, India can become one of the wealthiest countries in the world.

What is wealth creation?

Wealth creation is the process of generating new wealth. It can be done through a variety of means, such as investing, entrepreneurship, and innovation.

What are the different types of wealth?

There are two main types of wealth: financial wealth and non-financial wealth. Financial wealth is the value of assets such as cash, stocks, and Bonds. Non-financial wealth is the value of assets such as real estate, cars, and jewelry.

What are the factors that contribute to wealth creation?

There are a number of factors that contribute to wealth creation, including:

  • Economic growth: When the economy grows, it creates opportunities for businesses to expand and for people to earn more Money.
  • Technological innovation: New technologies can create new products and services, which can lead to new businesses and new jobs.
  • Entrepreneurship: Entrepreneurs are people who start their own businesses. They take risks and create new products and services, which can lead to economic growth and job creation.
  • Education: Education helps people develop the skills they need to get good jobs and earn higher incomes.
  • Financial Literacy: Financial literacy is the knowledge and skills people need to make Sound financial decisions. It can help people save money, invest wisely, and avoid debt.

What are the benefits of wealth creation?

There are a number of benefits to wealth creation, including:

  • Increased economic growth: When people have more money, they spend more money, which helps businesses grow and create jobs.
  • Reduced POVERTY: When people have more money, they are less likely to live in poverty.
  • Improved health: People with more money tend to have better health outcomes, as they have access to better healthcare and can afford to buy healthier foods.
  • Increased education: People with more money are more likely to get a good education, which can help them get better jobs and earn higher incomes.
  • Improved Quality Of Life: People with more money tend to have a higher quality of life, as they can afford to buy nicer homes, cars, and other goods and services.

What are the challenges of wealth creation?

There are a number of challenges to wealth creation, including:

  • Inequality: Wealth is often concentrated in the hands of a few people, which can lead to inequality.
  • Corruption: Corruption can lead to the misallocation of Resources, which can hinder wealth creation.
  • Lack of access to capital: Many people do not have access to the capital they need to start businesses or invest in new ventures.
  • Lack of education: Many people do not have the education they need to get good jobs and earn higher incomes.
  • Political instability: Political instability can discourage investment and economic growth.

What are the policies that can promote wealth creation?

There are a number of policies that can promote wealth creation, including:

  • Investing in education: Education is essential for people to develop the skills they need to get good jobs and earn higher incomes.
  • Promoting entrepreneurship: Entrepreneurship is essential for economic growth and job creation.
  • Reducing inequality: Inequality can hinder economic growth and social cohesion.
  • Fighting corruption: Corruption can lead to the misallocation of resources, which can hinder wealth creation.
  • Improving access to capital: Many people do not have access to the capital they need to start businesses or invest in new ventures.
  • Promoting innovation: Innovation is essential for economic growth and job creation.
  • Investing in infrastructure: Infrastructure is essential for businesses to operate and for people to get around.
  • Reducing taxes: Taxes can discourage investment and economic growth.
  • Promoting trade: Trade can help businesses to expand and to sell their products and services to more people.
  • Investing in research and development: Research and development is essential for businesses to develop new products and services.

Question 1

Which of the following is not a factor that contributes to wealth creation?

(A) Human Capital
(B) Natural Resources
(C) Physical capital
(D) Technology

Answer
(B) Natural resources

Explanation
Natural resources are not a factor that contributes to wealth creation. They are a factor that contributes to economic growth, but they are not a factor that contributes to wealth creation. Wealth creation is the process of increasing the value of assets over time. Natural resources are not assets, they are inputs into the production process.

Question 2

Which of the following is not a way to increase wealth creation?

(A) Increase investment in human capital
(B) Increase investment in physical capital
(C) Increase investment in natural resources
(D) Increase innovation

Answer
(C) Increase investment in natural resources

Explanation
Natural resources are not a factor that contributes to wealth creation. They are a factor that contributes to economic growth, but they are not a factor that contributes to wealth creation. Wealth creation is the process of increasing the value of assets over time. Natural resources are not assets, they are inputs into the production process.

Question 3

Which of the following is not a benefit of wealth creation?

(A) Increased economic growth
(B) Increased EMPLOYMENT
(C) Increased standard of living
(D) Increased inequality

Answer
(D) Increased inequality

Explanation
Wealth creation can lead to increased inequality, but it is not a necessary consequence of wealth creation. Wealth creation can also lead to increased economic growth, increased employment, and increased standard of living.

Question 4

Which of the following is not a challenge of wealth creation?

(A) Income inequality
(B) Environmental Degradation
(C) Political instability
(D) Social unrest

Answer
(A) Income inequality

Explanation
Income inequality is a challenge of wealth creation, but it is not the only challenge. Wealth creation can also lead to environmental degradation, political instability, and social unrest.

Question 5

Which of the following is the best way to address the challenges of wealth creation?

(A) Increase taxes on the wealthy
(B) Invest in education and healthcare
(C) Promote Sustainable Development
(D) All of the above

Answer
(D) All of the above

Explanation
All of the above are ways to address the challenges of wealth creation. Increasing taxes on the wealthy can help to reduce income inequality. Investing in education and healthcare can help to improve the standard of living for everyone. Promoting sustainable development can help to protect the environment.

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