ECONOMIC &BUSINESS

ENVIRONMENT OF
CANADA

Submitted To:- Submitted By:-

Prof.P.Chakravarthy Gyan Bhusan
Jitendra Pradhan
Krishan Gopal
 Contents:-
 Introduction
 Country profile
 Facts & Figures
 Overview
 Political Environment & Economic System
 Regulating Economic & Industrial Activity
- Industrial Licensing Policy
- Monetary & Fiscal Policy
- Trade policy
 National income
 Inflation
 Globalization, Liberalization & Privatization
INDRODUCTION
The study of business environment is one of the most exciting branches of broader
disciplines of economics and management Economics, in addition to the efficient
allocation of scarce resources, also deals with the financial, political, social and
institutional mechanisms, both public and private, necessary to bring about rapid
and large scale improvements in the standard of living. It is very interesting to
study and analyses Canada and Mexico, their economic structures, monetary and
banking developments, securities market, inflation,
external sector.

Canada country profile

Canada is the second largest country in the world
after Russia. Its population is only about one-fifth
of Russia's however.

Nearly 90% of Canadians live within 200km of the

border with the United States, which means that
Canada contains vast expanses of wilderness to the north.

The relationship to its powerful neighbour is a defining factor for Canada. The US
and Canada have the world's largest trading relationship.

Overview
The North American Free Trade Agreement, involving Canada, the US and
Mexico, has brought a trade boom for Canada. But thorny issues abound.
American moves which impact on Canadian exports, in the form of tariffs on
Canadian timber and increased subsidies for US farmers, have created particular
tension.

Canada is also worried about pollution from US factories near the border, and
about the possible impact on the environment of the exploitation of oil deposits in
Alaska.
Canada pursues a foreign policy that is distinct from that of the US. The country
has committed troops to the American-led war on terror, but does not back the US
trade embargo on Cuba. Canada did not send troops to join the US-led war in Iraq.

After the 11 September 2001 attacks in the US, the challenge of securing the
9,000-km Canada-US border from possible terrorist
infiltration prompted both countries to look at ways
of sharing information.

Immigration has helped to make Canada one of the

world's richest nations. Challenges related to
discrimination and integration are gaining
increasing attention. Many recent newcomers hail
from Asia. Canada's indigenous peoples make up
less than two per cent of the population. The way in Toronto: The thriving metropolis
which provincial governments share land and is Canada's commercial hub
natural resources with native groups is an ongoing
issue.

Separatist aspirations in the predominantly French-speaking province of Quebec

are a major domestic issue. A referendum in 1995 saw advocates of an independent
Quebec only narrowly defeated. Subsequent opinion polls indicated a fall in
support for independence and the pro-independence Parti Quebecois was defeated
in 2003's provincial election.

The concept of nationhood for Quebec resurfaced in late 2006, when parliament
agreed that the Quebecois should be considered a "nation" within a united Canada.
The move was largely symbolic, having no constitutional or legal grounding.

Canada has been asserting its sovereignty in the Arctic with growing vigour and
has become embroiled in territorial spats with the US and Denmark. At stake is the
possible bounty from previously-untapped reserves of oil and gas.
Facts:-
 Full name: Canada
 Population: 33.8 million (UN, 2010)
 Capital: Ottawa
 Largest city: Toronto
 Area: 9.9 million sq km (3.8 m sq miles)
 Major languages: English, French (both official)
 Major religion: Christianity
 Life expectancy: 79 yrs(men), 84 yrs(women) (UN)
 Monetary unit: 1 Canadian dollar = 100 cents
 Main exports: Machinery and equipment,
automotive products, metals and plastics, forestry
products, agricultural and fishing products, energy products
 GNI per capita: US $42,170 (World Bank, 2009)
 Internet domain: .ca
ECONOMY OF CANADA
Canada extends from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic
Ocean. It is the second largest country in size in the world and shares its border with the United
States of America.

Canada’s economy is a mixed economy and the country is one of the most important suppliers
of agricultural products. The Canadian Prairies are one of the biggest contributors of wheat and
other grains. Atlantic Canada has vast deposits of natural gas and oil as well. Canada is the
biggest producer of zinc, uranium and is a big source of global gold, nickel, lead and aluminum.  

After witnessing solid economic growth between 1993 and 2007, Canada’s economy went into
a severe recession in 2008. Consequently, the country recorded its first-ever fiscal deficit in
2009. Canada’s conservative lending practices have, however, enabled its banking segment to
recover fast and emerge stronger from t Canada Economy: GDP

Although the services segment contributes nearly two thirds of Canada’s GDP, manufacturing,
especially the automobile industry, also plays a significant role in the country’s economic
growth. The country’s services segment includes retail, communication, real estate, financial
services, health and education (both under the government’s purview), entertainment, technology
and tourism.

The proportion of Canada’s GDP devoted to agriculture has declined significantly, but the
nation still remains one of the biggest exporters of agricultural products, including wheat and
grains, to the US, Europe and East Asia. Low labor costs, a publicly funded health care system
and a highly educated population have attracted several American and Japanese automobile
majors to set up their manufacturing plants in Central Canada. 

Canada Economy: Resources

One of the wealthiest nations in the world, Canada’s considerable natural resources allow it to
play a significant role in international trade. Canada’s economic profile is quite similar to that of
the United States, as reflected in its market-oriented economic system. 

Canada’s natural resources are spread across its various regions. While the oil industry is
important in Alberta, Newfoundland and Labrador, Northern Ontario houses a large number of
mines of coal, copper, iron ore and gold. The British Columbia region is famous for forestry,
while the fishing industry is quite strong in the Atlantic Provinces.

Canada Economy: Trade

Canada’s biggest trading partner is the US. Here are some important trade related facts about
Canada:

 Nearly 80% of its exports are to the US

 Over 65% of Canada’s imports are from the US
 Canada is the largest foreign supplier of energy to the US
 The national electricity grids of the two countries are linked to each other
 The commodity sector is the largest trade component

In addition, the US is the largest foreign investor in Canada, with investments primarily targeted
at the latter’s mining, smelting, petroleum, chemical and machinery segments.

Canada Economy: Key Statistics

Here are some key statistics, according to the 2009 estimates

 GDP (real growth rate): -2.4%

 Unemployment rate: 8.5%
 Consumer Price inflation : 0.2%

ECONOMY OF INDIA

INDIA is following mixed economy. It is followed by socialist where equal

importance is given to both public and private sectors. All economists agree that a
mixed economy must be adopted for the benefit of the vast majority of the people
rather than for a small aristocratic or capitalist class. Mixed economies entail
democratic control of the economy, though they differ over issues like the extent to
which an economy could involve markets and whether control should be
centralised or extensively dispersed.

ECONOMY HISTORY OF INDIA –

Pre-liberalisation period (1947–1991)

Indian economic policy after independence was influenced by the colonial

experience, which was seen by Indian leaders as exploitative, and by those leaders'
exposure to democratic socialism as well as the progress achieved by the economy
of the Soviet Union. Five-Year Plans of India resembled central planning in the
Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance,
and electrical plants, among other industries, were effectively nationalised in the
mid-1950s.

Jawaharlal Nehru, the first prime minister of India, along with the statistician
Prasanta Chandra Mahalanobis, formulated and oversaw economic policy during
the initial years of the country's existence. They expected favourable outcomes
from their strategy, involving the rapid development of heavy industry by both
public and private sectors, and based on direct and indirect state intervention,
rather than the more extreme Soviet-style central command system. Since 1965,
the use of high-yielding varieties of seeds, increased fertilisers and improved
irrigation facilities collectively contributed to the Green Revolution in India, which
improved the condition of agriculture in India by increasing productivity of food as
well as commercial crops, improving crop patterns and strengthening forward and
backward linkages between agriculture and industry.

Post-liberalisation period (since 1991)

In the late 1970s, the government led by Morarji Desai eased restrictions on
capacity expansion for incumbent companies; removed price controls, reduced
corporate taxes and promoted the creation of small scale industries in large
numbers. Prime Minister Narasimha Rao, along with his finance minister
Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did
away with the Licence Raj (investment, industrial and import licensing), reduced
tariffs and interest rates and ended many public monopolies, allowing automatic
approval of foreign direct investment in many sectors.

NATIONAL INCOME
National income- calculation of national income requires adding together all final
goods and services produced in a country in a given year.

National Income is important because of the following reasons:

 To see the economic development of the country.

 To assess the developmental objectives.

  To know the contribution of the various sectors to National Income.

CONCEPTS OF NATIONAL INCOME – The five important concepts of

national income, viz, the gross national product (GNP), Net national product
(NNP), Nation income, personal income (PI), and Disposable income (DI).

Gross national product (GNP) – in this include GDP AND NFIA. NIFA is the
difference between income received from abroad for abroad for rendering factor
services and income paid towards services rendered by foreign nationals in the
domestic territory of a country.

GNP = GDP + NFIA

Net domestic product and net national product – While calculating GDP or GNP
we ignore depreciation of assets or capital consumption, else they would not reveal
complete flow of goods and services through various sectors.

NDP = GDP – Depreciation

Personal income = personal income is the total income received by the individuals
of a country from all sources before direct taxes in one year.

Personal income = national income – undistributed corporate profits – corporate

taxes – social security contributions + transfer payments + interest on public debt.

NATIONAL INCOME OR NATIONAL INCOME AT FACTOR COST (NI) – it

means the sum of all incomes earned by resource suppliers for their contribution of
labour, capital, and entrepreneurial ability, which go into the year’s net production.

NI = NNP (National Income at market prices) – indirect taxes + subsidies.

• GDP growth of CANADA • GDP of INDIA

• 5.6% (2009/Q1 to 2010/Q1) 8.9%(2010,Q2)
• GDP per capita • GDP per capita
• PPP: $43,100 (2008) • $1,176 (nominal: 137th; 2010)
(US$41,016) • $3,290 (PPP: 127th; 2010)
• GDP by sector • GDP by sector
• agriculture (2.1%), industry • Services (57%), industry (28%),
(28.8%), services (69.1%) agriculture (15%) (2009–10)
(2007 est.) • Inflation (CPI)
• Inflation (CPI)
• 1.4% (2010 est.)
• Population
below poverty line
• 10.8% (relative) (2005)
• Main industries
• transportation equipment,
chemicals, processed and
unprocessed minerals, food
products, wood and paper
products, fish products,
petroleum and natural gas
• Ease of Doing Business Rank
• Exports
• $369.2 billion (2009 est.)
• Export goods
• motor vehicles and parts,
industrial machinery, aircraft,
telecommunications equipment,
electronics, chemicals, plastics,
fertilizers, wood pulp, timber,
crude petroleum, natural gas,
electricity, aluminium
Import goods
• machinery and equipment,
motor vehicles and parts,
electronics, crude oil,
chemicals, electricity, durable
consumer goods,
• 8.43% (December 2010)
• Population
below poverty line
• 37% (2010)
• Main industries
• telecommunications, textiles,
chemicals, food processing,
steel, transportation equipment,
cement, mining, petroleum,
machinery, information
technology, pharmaceuticals
• Exports
• $210 billion (17th; 2010)
• Export goods
• software, petroleum products,
textile goods, gems and
jewellery, engineering goods,
chemicals, leather manufactures
• $327 billion (11th; 2010)
Import goods
• crude oil, machinery, gems,
fertiliser, chemicals
 INFLATION
► Inflation is commonly understood as a situation of substantial and rapid
general increase in the level of prices and consequent deterioration in the
value of money over a period of time

► Inflation define as "a state in which the value of money is falling, i.e.,
prices are rising."

Features of Inflationary Economy

► Continuously rising price trend

► The money supply is in excess of the requisite production and exchange

needs of the economy.

► Over-expansion of credit by the banks

► A good part of the flow of credit is supplied to unproductive channels,

speculative activities, and sick and non-viable units of production

► Artificial scarcity is commonly caused by hoarding activities and has

become conspicuous for traders, producers and consumers.

► lack of financial discipline on the part of the government

► Sect oral price disequilibrium.

► Interest rates in the unaccounted and unorganized sectors tend to be

higher, than the organized sectors of the money market.

► Labor unrest, strikes,-lock-outs, etc.

Measures of inflation
► Wholesale Price Index (WPI)

► Consumer Price Indices (CPIs)

 ► Real Estate/Housing price index

Wholesale Price Index (WPI)

► Wholesale Price Index (WPI) was first published in 1902

► It was replaced by most developed countries by the Consumer Price

Index(CPI) in the 1970s.

► WPI is the index that is used to measure the change in the average price
level of goods traded in wholesale market.

► The Indian government has taken WPI as an indicator of the rate of

inflation in the economy.

Consumer Price Index

► It is a price index that tracks the prices of a specified basket of
consumer goods and services, providing a measure of inflation.

► CPI is a fixed quantity price index and considered by some a cost of

living index

► The four consumer price indices are: CPI-IW for industrial workers;
CPI-UNME for urban non-manual employees; CPIAL for agricultural
labourers; and, CPI-RL for rural labourers.

Real estate/housing price index

► Rapid urbanization and high economic growth experienced by the
urban centers in the last few years has resulted in an upsurge in
property values.
 ► The National Housing Bank (NHB) had earlier set up a Technical
Advisory Group (TAG) to explore the possibility of constructing a real
estate price index. TAG has since submitted its report and have
provided index of housing prices in five cities for 2000-05 on a pilot
basis

INFLATION IN CANADA
The inflation rate in Canada was last reported at 2.3 percent in January of 2011.
From 1915 until 2010, the average inflation rate in Canada was 3.26 percent
reaching an historical high of 21.60 percent in June of 1920 and a record low of
-17.80 percent in June of 1921. Inflation rate refers to a general rise in prices
measured against a standard level of purchasing power. The most well known
measures of Inflation are the CPI which measures consumer prices, and the GDP
deflator, which measures inflation in the whole of the domestic economy. This
page includes: Canada Inflation Rate chart, historical data and news.

Canada's Inflation Rate Slows to 2.3% in January

Canada's inflation rose 2.3% in the 12 months to January 2011, following the 2.4% increase posted
L
in December 2010.

Energy prices rose 9.0% during the 12 months to January, following a 10.5% increase in
December. Gasoline prices increased 13.0% in January, matching the increase in December.
Consumers also paid 6.4% more for electricity in January compared with the same month
last year.

Excluding energy, the Consumer Price Index (CPI) rose 1.7% in the 12 months to January,
identical to the increase in December.

On a seasonally adjusted monthly basis, consumer prices rose 0.3% from December 2010 to
January 2011, the seventh consecutive monthly increase. In addition, the transportation
index, which includes gasoline, also increased for the seventh consecutive month, rising
1.1% from December to January. The food index went up 0.5%, matching the increase in
December.

On a year-over-year basis, prices increased in seven of the eight major components of the
CPI in the year to January. The only exception was clothing and footwear.

The largest increase occurred in the transportation component, where prices rose 4.8% in the
12 months to January, following a 4.9% advance in December.
In addition to higher gasoline prices in the 12 months to January, consumers paid 4.8% more
in passenger vehicle insurance premiums. They also paid more for the purchase of passenger
vehicles and for air transportation.

Shelter costs rose 2.2% in January, following a 2.7% rise in December. Along with higher
electricity prices, homeowners' replacement cost increased 3.6%. However, the mortgage
interest cost index, which measures the change in the interest portion of payments on
outstanding mortgage debt, continued to decrease.

Food prices rose 2.1% in the 12 months to January, following a 1.7% increase in December.
Consumers paid 4.0% more for meat and 10.7% more for sugar and confectionery. Prices
for food purchased from restaurants also increased 2.7%.

The recreation, education and reading price index rose 1.6% in January, after increasing
1.1% in December. Prices rose for cablevision and satellite services and for the use of
recreational facilities and services. Conversely, prices fell for computer equipment and
supplies as well as for video equipment.

Prices for household operations, furnishings and equipment increased 1.6% between January
2010 and January 2011. Within this component, higher prices were recorded for several
items, notably for child care and domestic services.

Prices for alcoholic beverages and tobacco products rose 3.1% in January. Consumers paid
5.4% more for cigarettes.

In January, prices for clothing and footwear continued to decline on a year-over-year basis.
Clothing and footwear prices fell 2.4% in January, following a 2.0% decrease in December.
Consumers paid less for women's clothing and children's clothing.
INFLATION IN INDIA

► products primarily responsible for the current inflation in India are

food products of different kinds, including cereals, intermediates
like metals and the universal intermediate, oil
GLOBALISATION
Globalization is a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international trade and investment and
aided by information technology. This process has effects on the environment, on culture, on
political systems, on economic development and prosperity, and on human physical well-being
in societies around the world.

Globalization in India
In early 1990s the Indian economy had witnessed dramatic policy changes. The idea behind the
new economic model known as Liberalization, Privatization and Globalization in India (LPG),
was to make the Indian economy one of the fastest growing economies in the world. An array of
reforms was initiated with regard to industrial, trade and social sector to make the economy more
competitive. The economic changes initiated have had a dramatic effect on the overall growth of
the economy. It also heralded the integration of the Indian economy into the global economy.
The Indian economy was in major crisis in 1991 when foreign currency reserves went down to
$1 billion and inflation was as high as 17%. Fiscal deficit was also high and NRI's were not
interested in investing in India. Then the following measures were taken to liberalize and
globalize the economy.

Steps Taken to Globalize Indian Economy

Some of the steps taken to liberalize and globalize our economy were:

1. Devaluation: To solve the balance of payment problem Indian currency were devaluated by
18 to 19%.

2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the
private sector.

3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such
as Insurance (26%), defense industries (26%) etc.

4. NRI Scheme: The facilities which were available to foreign investors were also given to
NRI's.

Merits and Demerits of Globalization

The Merits of Globalization are as follows:

 There is an International market for companies and for consumers there is a wider range
of products to choose from.
 Increase in flow of investments from developed countries to developing countries, which
can be used for economic reconstruction.
  Greater and faster flow of information between countries and greater cultural interaction
has helped to overcome cultural barriers.
 Technological development has resulted in reverse brain drain in developing countries.

The Demerits of Globalization are as follows:

 The outsourcing of jobs to developing countries has resulted in loss of jobs in developed
countries.
 There is a greater threat of spread of communicable diseases.
 There is an underlying threat of multinational corporations with immense power ruling
the globe.
 For smaller developing nations at the receiving end, it could indirectly lead to a subtle
form of colonization.

Summary
India gained highly from the LPG model as its GDP increased to 9.7% in 2007-2008. In respect
of market capitalization, India ranks fourth in the world. But even after globalization, condition
of agriculture has not improved. The share of agriculture in the GDP is only 17%. The number of
landless families has increased and farmers are still committing suicide. But seeing the positive
effects of globalization, it can be said that very soon India will overcome these hurdles too and
march strongly on its path of development.

GLOBALISATION IN CANADA

Canada's continued economic prosperity depends upon its success in world trade.
A fundamental shift is taking place in the global economy with Asia occupying an increasingly
central role.

At present, China is Canada's second largest trading partner, after the US. China currently
accounts for 60% of growth in world trade. By 2020, China is forecast to be the world's second
largest economy. India, with its newly thriving economy, also has potential to become a far more
significant trading partner for Canada and the National Capital Region (NCR).

The rate of growth and magnitude of resource consumption associated with these rising Asian
powers have far reaching impacts on global economies and ecologies. Continued economic
growth and affluence in China, India and other developing nations are a primary cause of the
increase in the global ecological footprint. Worldwatch says that “if by 2030 China and India
alone were to achieve a per-capita footprint equivalent to that of Japan today, together they
would require a full planet Earth to meet their needs.”

The United States faces an uncertain future due to a massive national debt, decaying
infrastructures, problematic internal financial and social policies and a decline in the reach of its
global influence. These problems are currently manifesting themselves through the 2008-9 global
recession, which started in the US, but these structural problems will continue in the US even
with an economic recovery. Since the US is Canada’s primary trading partner, these problems
are currently and will continue to have a negative impact on the Canadian economy. In fact the
deep-rooted problems in the US are almost certain to cascade into Canada. As illustrated below,
the Dow Jones and the TSE often appear as a mirror image, and cannot easily be de-coupled.

For thousands of years, people and businesses have been buying from and selling to each other
across great distances. However policy and technological developments of the past few decades
have spurred enormous increases in cross-border trade, investment, and migration. Since 1950,
for example, the volume of world trade has increased by 20 times, and from just 1997 to 1999
flows of foreign investment nearly doubled. Although global empires have existed many times in
human history, never before have we seen an economic system encompass the entire globe, and
integrate so many aspects of people’s lives.

The globalization trend dissolves national economic boundaries allowing cities (or more
correctly city regions) to be the driving force behind the world economy. It is cities, rather than
countries, that are competing globally. In this new hierarchy of city states, Canada’s largest
centre, Toronto, ranks 21st and is projected to decline slightly to 22nd by the year 2020.

Effects of Globalisation on Canada

 Although trade with developing nations is increasing, the United States will likely
continue to be Canada’s biggest trading partner.
 Economic problems in the US, such as the current recession, have far-reaching
implications for Canadian communities. This is especially so for southern Ontario, where
many jobs are tied to the US economy because they provide goods and services to our
neighbours to the south.
 Currency fluctuations are expected to continue, and the Canadian dollar may rise and fall
against the US dollar. Over the next few years, there is a case for depreciation of the
American dollar – but trying to predict currency changes over 2 or 3 decades is
impossible and regions must prepare for very different scenarios.
 Any depreciation of the American dollar has a direct an immediate negative impact on
Canadian tourism, and reduces the attractiveness of Canadian goods and services sold to
the US. Appreciation of the American dollar can spur exports and stimulate the economy,
but it also leads to foreign acquisitions and erosion of research, management and
executive functions within Canada.
 The United States is losing its global economic dominance, and it is possible that in the
future the Euro rather than the American dollar will become the “global” currency.
 Canadian companies are under increased pressure to amalgamate within Canada, to
ensure competition on a Global scale, or to risk begin bought or taken over by foreign
companies and investment. Increasingly, jobs in all areas will be outsourced.
 Canada risks failing behind other countries if it does not move towards value-added
industries, instead of emphasizing resource extraction.
 Market diversification, and less dependency on the current volatile American market may
be an essential strategy if Canada’s urban regions are to sustain a robust and reliable
economy