BIGG in reducing the burden on the government

BIGG B PRELIMINARY

CASE STUDY

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Brinda Gupta

Dhruv Rastogi

                                                                                            Class: XI-F    

 

 

 

1. 1. You are elected as the President of Venezuela. Currently your country is

Facing a historic crisis. There is widespread unemployment in your country,

Inflation is off the charts, and people have come on the streets to protest due to

whichPresidentNicolásMaduroresigned.Totopitallyourmainsourceofrevenue,

Oil, has been hit and its production is hitting an all-time low. They hope that the

Change in presidency will signal some relief. What step swill you take both

Economic and social to #Make Venezuela Great Again? (5MARKS)

 

Ans?

 

1.     Devaluating currency: Devaluating bolivar will lead to:

·        Rise in the exports henceforth helping in generation of foreign exchange and increasing the foreign exchange reserves.

·        Affect the black market helping in generation of revenue

 

2.     Shifting from a social to a mixed economy: This shift will help in reducing the burden on the government especially in terms of losses it bearing with respect to Oil and Natural Gas companies.

 

3.     Privatization: Privatization of government operated companies and setups in order to reduce the risk of losses and allowing it to focus on revenue generating and other sectors of the economy

 

4.     Promoting other sectors: With the help of foreign exchange earned due to devaluation investments should  be made in the

 

·        manufacturing and agricultural sector to earn immediate earnings through its production consumed domestically helping in fighting hunger as well as through exports leading to surplus generation

·        education sector: when the economy is comparatively stable, investing in the education sector should be one of the top priorities to develop human resources and reducing dependency on oil production

 

5.     Freezing crude oil production: this will help in reducing the supply of oil in the market while the demand remains the same.  The prices of oil will rise in the market and thus due to high rate of demand countries will agree to negotiate a higher price and thus on resuming oil production a higher amount of price on oil will be obtained.

 

6.     FDI Reserves: an increase in the interest rate of FDI reserves leading to an increase in the interest rates provided by banks due to which people will withdraw and spend less amount of mount thus controlling inflation.

 

7.     Introducing laws and legislations that would

·        Promote entrepreneurship

·        Prevent hoarding and black marketing

·        Put a ban on the production of oil barrels by private companies

 

 

 

 

 

 

 

 

 

 

2.  You are Juan Vicente Gomez, President of Venezuela 1922. The GDP of the Country is low and the national reserves are depleting. Your researchers have just discovered a huge oil well .Upon drilling, oil came gushing out in a jet, rising to 40 m in height taking 9 days to contain. Majority of your advisers are telling you to start setting up refineries and sell it blindly as much as you can but there are others too who are skeptical about the idea and think that doing so could do more harm than good. What steps would you do to manage your resources, maximize your profits while averting any future crisis? (5MARKS)

 

Ans)

THE FUTURE STRATEGY

Setting up government owned oil refineries in a limited number to export products and bye products of petroleum to countries in order to earn foreign exchange and revenue

The number of oil barrels produced and sold will be limited to the extent that it helps in gaining revenue such that it sources further production, inside development along with surplus generation

The refineries will be nationalized in order to ensure transparency in the production and export process and to prevent marketing of oil in the black market

 

 

The revenue generated will be allocated accordingly:

1.     Human resource development : This involved investment in

·        The  education sector-

Ø Setting up educational institutions

Ø Vocational training and imparting skills

Ø Aiding free education to the poor section of the society

·        Training of skilled and  unskilled workers of the society

 

2.     Setting up of a stabilization fund

 

3.     Domestic investment:

a)     Investment in infrastructure: investing to build roads, offices, institutions etc. to increase the standards of living

b)    Investing in the public and private institutions at large and small scale alongside promoting entrepreneurship

c)     Developing medium and small size enterprises to provide inputs for mining operations and Oil and Natural gas companies

d)    Technological investment to increase the indigenous database and reduce dependency on imports

e)     Developing the service sector to create job opportunities and overcoming the problem of unemployment

 

4.     Stabilize foreign exchange reserves

a)     Well-designed, competitive transparent contracts between Venezuela and the foreign country whereby they negotiate the exchange price, strategies to be put to use in case of unstable oil prices etc.

b)    Low exchange rates in some sectors to promote exports and get the necessary inputs by importing from other countries.

:

5.     Government accountability:

a)     Transparency in revenue collection,  its  utilization and working of the government to ensure that all citizens reap the benefits of the natural resource and not just a section of the society

Ø It will also reduce the chances of a conflict related with acquisition of natural resources

b)    People’s consent regarding their displacement in relation to oil and gas exploration along with providing appropriate compensation

 

6.     Growth of other sectors of economy

With the primes focus being the production and export of oil development of other s0ectors of economy in important

a)     The agricultural sector- one-third of our population depends on agricultural and thus along with technological upgradation being provided , resources for its expansion and growth should also be allocated

b)    Manufacturing and service sector – the volatile nature of oil prices leads to unstable growth of economy. In order to prevent it the economy of Venezuela should also depend on the these sectors to provide a stable growth and reduce dependency on the international banks that run in and out  

 

7.     Development of other resources which Venezuela is rich in, like gold, nickel, iron ore, steel, diamond, alumina , coal and bauxite

 

3. Do you think that being natural resource rich is advantageous to countries in the present scenario when transportation costs are decreasing and the world is pushing towards globalization? Consider all the factors before answering.                                      (10MARKS)

 

It is not a question about whether the resources are good or bad for development but rather under what circumstances are they good and bad for development?

Yes, it is advantageous to be a natural resource rich country even when the world is moving towards globalization. The benefit of it is multifold:

1.     Self-sufficiency: The presence of natural resources help a country in developing on its strengths and earning revenues making it self-sufficient.

it helps in development of the economy by undertaking production activities, creating job employment opportunities, increasing the GDP of the country etc

 

2.     Foreign relations: Countries are depending on the resource country for its imports to develop its economy. The dependency of countries especially developed countries like the P5 helps in establishing and improving good foreign relations.

 

3.     Export: The resource country sets up refineries (if needed) and exports its resources at a higher price to other countries which helps in earning foreign exchange.

 

4.     Global Market: The resource country has a strong footing in the global market due to the dependency of other countries on it and the associations they have to maintain in order to keep the export of resources constant

 

5.     Upper hand: It has an upper hand even when the economy is down because the need of natural resources is boundless putting it at a dominant position.

 

6.     Support from international banks and financial institutions

 

7.     Globalization: Even when the world is moving towards globalization and the service sector is becoming vast, the natural resources are a necessary as they form the roots for the development of every sector and its practically impossible to carry out activities without them

 

 However as seen in many cases including Venezuela , Republic of Congo etc. natural resource rich countries tend to play on their strengths rather than emphasizing on the development of other sectors at the same time thus have suffered the perplexing effects of inflation, malnutrition, unemployment etc.

Being a resource rich country comes at a cost and following are the drawbacks many have to face:

1.     Over dependence:

·        The resource countries starts to adversely depend on its resources as a source of revenue rather than focusing on the other sectors of the economy too

·        The country only plays on its strengths and thus becomes dependent on other countries and imports for its development

 

2.     Unstable economic growth:

·        Due to over dependence of the country on its resources , even a slight change in prices interrupt  its production and export activities leading to unstable economic growth

·        The international banks keep entering and exiting as per the current prices creating instability

 

3.     Conflicts:

The government and the people might enter in a conflict due to

·        The displacement of people in relation to exploration of oil and gas

·        The benefits of its resources being occupied by the higher class of society

·        Conflicts  regarding the acquisition of assets

 

Irrespective of all these disadvantages mentioned above, being a resource rich country is advantageous.

Natural resources are a necessity more than of advantage to the development of an economy. They are the roots for the growth of all the sectors ranging from agriculture to the service sector.

 But the presence of abundant resources is not sufficient, its optimum utilization is essential to develop the country and increase the standards of living

No country can develop with just being dependent on its resources. It is the benefits of the resources it has to reap to make its economy a success.

·        The country should use its natural resources to gain foreign exchange and develop other sectors in order to reduce its dependency on its natural resources and making its economy stable.

·        Along with producing and developing its resources, it should make overall development of the country its goal.

·        Technological, human resource and  infrastructural development is a must to improve the standards of living

 

Thus no economy can survive without natural resources and its presence beneficial to any country but should be appropriately utilized to reach a high economic growth, stability and a strong and dominant position in this new era of globalization. 

 

 

 

 

 

 

 

 

 

 

 

4.     Is water wet?

 

Wet: it is a situation when one is quenched in liquid but is present on land surrounded by air not by liquid

Someone dipped in water will not be termed as wet but when it comes outside will be.

We are usually splashed by water based liquids thus we often use the term *water is wet*

However if one is dipped inside oil and then taken out will also be termed as wet

Thus all liquids are wet (exceptions like mercury are present because they can’t be tested)

However this does not mean that only the object is wet.

Wetting is basically the ability of any liquid to remain in contact with a solid surface. It does not have to mix with the adjacent material to be considered wet.

So yes both the wetting and wetted material is wet

Thus water is wet