INTRODUCTION

This project is based on the effect of different government policies on the production
possibility curve, many government policies like Make in India, Digital India , Goods and
Services Tax, etc. have effect on the production capability of our economy.
The objective of this project was the find out the effect of the policies on the same and
to get to know my economy better, I chose this particular topic to enhance my
understanding and grasp of this particular topic and understand the basics of
economics, the details I got from this project’s research were astounding and I learnt a
lot of new things from this.

ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my teacher as well as
our principal who gave me the golden opportunity to do this wonderful project
on the topic effect of government policies on production possibility curve ,which
also helped me in doing a lot of Research and i came to know about so many new
things I am really thankful to them.
I would also like to thank CBSE for giving me a project on such a topic which
enhanced my knowledge and understanding of various aspects.
lastly i would also like to thank my parents and friends who helped me a lot in
finalizing this project within the limited time frame.

What is production
possibility curve?
A production–possibility frontier (PPF) or production possibility Curve (PPC) is a
graphical representation of possible combinations of two goods (such as butter and
guns) that can be produced with constant technology and resources per unit of time,
such that more of one good could be produced only by diverting resources from the
other good, resulting in less production of it; usually for an economy, but which can also
be interpreted as applying for an individual, household, etc.

Graphically bounding the production set for fixed input quantities, the PPF curve shows
the maximum possible production level of one commodity for any given production
level of the other, given the existing state of technology.

By doing so, it defines productive efficiency in the context of that production set: a point
on the frontier indicates efficient use of the available inputs, a point beneath the curve
indicates inefficiency, and a point beyond the curve indicates impossibility.

PPFs are normally drawn as bulging upwards or outwards from the origin ("concave"
when viewed from the origin), but they can be represented as bulging downward
(inwards) or linear (straight), depending on a number of assumptions.

A PPF illustrates several economic concepts, such as scarcity of resources

(the fundamental economic problem that all societies face), opportunity cost (or
marginal rate of transformation), productive efficiency, allocative efficiency,
and economies of scale.

An outward shift of the PPF results from growth of the availability of inputs, such as
physical capital or labour, or from technological progress in knowledge of how to
transform inputs into outputs. Such a shift reflects, for instance, economic growth of an
economy already operating at its full productivity (on the PPF), which means that more
of both outputs can now be produced during the specified period of time without
sacrificing the output of either good.

Conversely, the PPF will shift inward if the labor force shrinks, the supply of raw
materials is depleted, or a natural disaster decreases the stock of physical capital.

However, most economic contractions reflect not that less can be produced but that the
economy has started operating below the frontier, as typically, both labor and physical
capital are underemployed, remaining therefore idle.
Effect of demonetization

All the points on the PPC curve depict efficient outcomes i.e. we are producing exactly the
amount which can be produced by the fixed number of resources, but that's an ideal case.

We, in India, are obviously inside the area of feasible but inefficient outcomes because its
very difficult to have all the outcomes as efficient.

Two scenarios as always occur in economics -

In short run, since the society was depending on cash for a long time, their purchasing
power decreases because of demonetization, so demand decreases. Industries which cannot
change their supply immediately will have inelastic supply and some other will have a bit
elastic relative to others. Overall it will be a less efficient outcome compared to previous
one, something like this

In long run, however, the growth rate will increase because society will be moving towards
a cashless society, which will lead to more buying, hence more production. The production
will definitely increase in the long run.

Moreover, better technology can also come in the long run, positively reinforcing the effect
to the above in long run.

So, in long run, the outcome is expected to move above the starting point, ceterius paribus,

The RBI in its annual report said that the value of banknotes in circulation declined by
20.2 per cent over the year to 13,102 billion as at end-March 2017. The volume of
banknotes, however, increased by 11.1 per cent, mainly due to higher infusion of
banknotes of lower denomination in circulation following the demonetisation.

Thus we find that money supply has decreased by 20.2% during 2016–17 in comparison
to 2015–16. This will have an inward shift of PPF as less labour with be employed and
less raw materials will be procured for further investment. Thus growth rate during last
two quarters have been reduced in comparison to corresponding earlier period.

To conclude we can observe although growth rates have declined in the last two
quarters and likely to grow at a lesser rate in two subsequent quarters, it is hoped that
economy will move away from speculative growth to a regulated economy through a
more tax compliant economy because of demonetisation and other measures taken by
RBI and the government in recent times.
A positive outcome of demonetisation will be low inflation rate which will lead to rapid
growth in income, investment and employment.

Effect of Foreign outflow

PPC or the Production Possibility Curve will in the long term shift righwards thereby expanding
the economy due to increased employment, higher demand, more foreign currency inflow from
tourists, better picture of India in the world, higher rankings, better ratings, multiplier effects,
etc.

But how long? Very difficult to even beginning to comprehend a timeline. Right now, the Swach
Bharat is struggling to survive and we do not know if it will. Namami Gange's, another flagship
programme, fate is also in the balance. And even if we are to assume tomorrow these and many
more such programmes become 100% efficient, then too it will take years alstogether to see
even the slightest of results.

But that does not mean they are useless. They are possibly the more critical at this hour, the call
of time and economic benefits aside, we have to look at ecological benefits and survive as a
civilization.

A large scale of the outflow of the foreign capital would lead to the reduction in the
resources available to an economy.
The decline in resources would rather lead further to a decline of the country’s overall
capacity.

This will lead to a downward shift in the production possibilities curve because now the
economy will produce less of both commodities.

Gst
Goods & Services Tax (GST) has an edge over the erstwhile Indirect Taxation system
with regards to input tax credit. Previously while tax calculation the tax payer got input
credit only for the Excise, Service and VAT portion. It means if CST, Customs or any
other indirect taxes are payable during sale, no credit on such taxes could be setoff
against the similar taxes paid during purchase of inputs for production. Unlike it, GST
has optimal provision for availing Input Tax Credit, which has made GST cost efficient.
Consequently, capital goods became cheaper than before causing multifold increase in
domestic as well as Foreign Direct Investments. This has increased the production
potential causing a rightward shift in the Production Possibility Frontier (PPF).
GST initially will have a negative effect for sure on all sectors because even though most
companies have made themselves ready for GST on paper but actually the entire sector is not
ready at all.

Coming to PPC: Companies have to now update their GSTIN with Google Payments & Digital
Marketing Agencies also have to do the same. But for Individuals it is not compulsory.

Service based companies & mostly Advertising Firms will now attract a service tax of 18%, 3%
more from the previous tax regime.

However according to experts PPC will for surely gain in the longer run.

As companies will be getting benefits from Input credit of GST, their Advertising spend will
surely increase as the cost of creating a creative will also be reduced.
Digital india
Digital India agenda will drive to advancement in technology. Excellent technology in the understanding
of augmented online foundation and internet connectivity will enhance the composition capability of
the marketplace. Subsequently, the PPC will displace to the right from M to N.

So, when expenses increase by making in India operations, it will originate PPC move rightward as
production will advance. It outlines commercial growth. Expansion in an economy's prolific
potential can be determined by an outward transformation in the economics Production Possibility
Frontier (PPF).

The Impact of Digital India mission on PPC of an economy is that it is shifted right side after evaluation of
digital India mission.

PPC stands for production Possibility Curve mapping the production on the X-axis and production of
another good on Y-axis. Digital India will lead to technology improvements and production capacity.

Online infrastructure has impacted the digital India in the most astonishing way. Competition have been
increased and products have become better because of advancement if the technology. Time can be
saved and cost can be reduced because of technology advancements. Transparency have been
maintained in the well-organized way.

The Impact of Digital India mission on PPC of an economy is that it is shifted right side after evaluation of
digital India mission.

Make in india

An economy is on the curve if all the resources are being used efficiently. Normally the
economy can be under the curve but, can never be off the curve like shown in point C.
Point B shows optimal use of all the available resources for the production. Point A is
realistic case as the world is not ideal and not all available resources can be used
efficiently.

What Make in India is trying to do is provide financial boost via investments (most of
them indirectly) to the Indian economy. This will result in multiplier effect in the
economy. The effect though fades out with time but in general the result will be
positive. One direct effect will be a rightward shift in the curve. This will allow economy
to produce more of both goods (in reality it will be more than two goods).

As some products serve as raw material to other industries thus, increase in production
of one good will result in increase of production of other goods and the cycle will
continue. This is multiplier effect in general. As production is increasing, there might
be decrease in prices of some goods as there will be rightward shift in supply
curve in supply and demand graph of goods.

Increase in production will increase the requirement for labor which will in turn
increase employment rate. On micro level when one industry is increasing its
production, it will require more tools and machines for the task. This will increase labor
requirement for the industries that make tools and machines for bigger industries.

On macro level, if Make in India goes well, then it will increase in employment rate,
more quantity of supplied goods, lower prices for consumers, multiplier boost to
economy, etc.

BIBLIOGRAPHY/SOURCES
BOOKS:-
 Introductory micro economics – Sandeep Garg
 NCERT Class 11 economics
INTERNET:-
 Google – www.google.co.in
 Wikipedia – www.wikipedia.org
 Quora – www.quora.com
 Brainly – www.brainly.in