resources crisis,CAST STUDY solution
Read the following case situations and answer the questions given at the end.
6. FISCAL CRISIS IN INDIA (1990s)
India's problem is not lack of resources; it is the inability and or unwillingness to mobilise resources into the public sector. The Indian economy is not facing a resources crisis, it is confronting a fiscal crisis. The reasons for this are the steady decline over the years in the share of direct taxes in spite of the fact that both incomes and savings of the top 10 per cent of the households in the country have been steadily increasing. The government does not appear committed to placing greater reliance on direct taxes to mobilise resources. It is unwilling to tax the rich and therefore has no option except to fall back on indirect taxes and rely more than ever on borrowing from those who expect interest and tax concessions from temporarily parting with their resources to enable the government to continue its "development programmes". Grave inter-sectoral imbalances also exist in India's tax structure because agricultural incomes are virtually tax free. The Raj Committee had recommended the introduction of an agricultural tax to remove this inequity, but the State governments did nothing to implement the recommendation. The longterm fiscal policy also did nothing to eliminate this inter-sectoral inequity. Public sector enterprises failed to generate the contemplated reinvestible surplus and the small surplus that became available from these enterprises was not attributable to improved efficiency. The fiscal deficit reflects the total resource gap, which equals the excess of total government expenditure over government revenue and grants. The fiscal deficit thus fully indicates the indebtedness of the government. Questions : Suggest some remedies for the fiscal policy 10 to combat fiscal crisis in the situation described above. Are fiscal deficits good for developing 10 countries like India ? Discuss.
7. ECONOMIC ENVIRONMENT : A CASE OF MAHINDRA AND MAHINDRA
Mahindra and Mahindra manufactures and markets jeeps, and had a hold over a considerable portion of the jeep market in India in the past. It was ranked sixth in the automobile sector of India in 2004, up from the tenth rank in 2003. The following are the prominent jeeps which operate in the Indian market currently—Mahindra. Voyager, Mahindra-Armada, and MahindraCommander. Mahindra and Mahindra is now facing problems like cut-throat competition, price rise, and sluggish market for jeeps. In terms of price competition, Mahindra and Mahindra has an upper hand compared to Tata jeeps while Tempo Trax has a comparatively low price. Realising the need to grow fast, the company formulated an export policy. It paid off well. They formulated plans to develop and grow in foreign market. The first step was participation in trade fairs abroad, particularly in Hanover (Germany) and Paris (France). This has helped popularise its vehicle in those countries. Mahindra jeeps started selling in France and jeep export became an important marketing activity of the company. The company started manufacturing diesel engines in collaboration with Peugeot of France. As soon as the company came to know that Australia, Denmark, Italy, Norway, and Sweden could prove to be potential markets, plans began to be made accordingly. The company estimated that it would be able to export about 2,500 jeeps annually to Australia. In order to cater to the lower segment of the market, the Mahindra jeeps in Australia faced competition from Japanese companies. Stringent design rules and requirements also needed to be met in Australia. The company is confident of meeting all such requirements. The government's liberalisation policy will also be helpful. The company's new policy has to take into account environmental factors. The export policy with special reference to export market also deserves considerable evaluation and analysis because environmental factors such as technology, economics, social and political influences relevant to strategic decisions operate in an industry. Mahindra and Mahindra assessed all the opportunities in the market as well as the impact of external environment on their strategic planning before expanding production. In 2004, Mahindra and Mahindra showed significant improvement compared to Maruti Udyog, ranked as the number one automobile company, as is evident from the table below.
Question :
20 In the situation discussed above, which are the different environmental factors that lead to opportunities and threats to Mahindra and Mahindra ?
