Smart cities, also called digital city, intelligent city and cyberville, are cities that use technology to improve the quality of services, decrease costs, reduce the consumption of resources and engage more actively with its people. It further extends to sustainable and advanced functions of water, electricity, health care and energy facilities. Smart cities use information and communications technology (ICT) to not only maintain, but also enhance and manage urban inflow and allow quick and efficient responses to challenges. There are several sectors that have invested in ‘smart city’ technology, for example, government, health care, energy, waste, water and electricity.

There has been a rapid increase in investment in smart cities. This is primarily a consequence of changes in economic and environmental conditions coupled with the growth of the technology sector. The introduction of e-commerce and entertainment, a quickly ageing population and increasing burden on public finances has also caused a sudden peak in the interest in smart cities and information and communications technology.

According to economists Deakin and Al Waer smart cities can be defines as cities which have the following properties:-

• Implementation of a wide variety of digital technologies for betterment of communities and cities
• The use to information and communication technology (ICT) to transform life within the region
• The use of ICT by government systems
• The use of ICT to bring people together enhancing their quality of life and the services provided to them

Countries and international organisations are investing heavily in smart cities. The European Union has constantly worked towards achieving the goal of ‘smart’ urban growth in cities. It has also formulated an agendum, Europe’s Digital Agenda, wherein it primarily focuses on improving and solidifying innovation and ICT to be used for public services.

The primary aim of establishing smart cities is to improve the physical infrastructure like roads and highways, along with the improvement and digitalisation of governance. Smart cities have been invested in with the intention of improving the quality of every citizen’s life. All smart cities will run on technology that is an amalgamation of human intelligence, artificial intelligence and collective intelligence.

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Transatlantic Trade and Investment Partnership (acronym TTIP) is a bilateral trade agreement between European Union and the United States of America. The aim of this agreement is to regulate and synchronize trade between the two states. It aims to reduce tariff barriers to zero and non-tariff barriers by 25%-50%.Negotiations regarding the agreement are taking place between the European Commission (on European Union’s behalf) and the Office of the United States Trade Representative (on United States’ behalf).

Approximately 60% of the world GDP is facilitated by the United States and European Union together.  The two partners together make up 33% of the world trade in goods and 42% in services. The implementation of this agreement will lead to the formation of the largest free trade zone ever, accounting for 46% of the world GDP. Moreover, the European Commission has reported that both partners would gain tremendously from TTIP. The European Union’s economy is said to increase by 120 billion Euros and United States economy by 95 billion Euros.

TTIP will not only increase employment with respect to exports, but will also create a market with cheaper goods and services. Moreover, according to a study by the Centre for Economic Policy Research (2013), TTIP would raise the standard of living of families in Europe as a result of decline in price and increase in wages.

However, fears regards the agreement have been mounting. People feel that the agreement would lead to extensive privatisation in terms of the US providing UK with critical public services such as transport, health and education. Another primary fear is that this would lead to a significant decline in quality standards, for example while EU doesn’t permit cosmetics which have been tested on animals, the US does.

TTIP would also lead to the creation of ISDS, acronym for Investor-State Dispute Settlements. This will allow various corporations to sue governments in case of loss caused (supposedly) by policies implemented like them. The fear lies in the fact that, this would leave a lot of power in the hands of multinationals which could lead to them controlling the government.  There is a lot of controversy surrounding the agreement however, one hopes for a good outcome.

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Gross Domestic Product, GDP, can be simply defined as the sum of the market value of all the goods and services produced in an economy during a given accounting year. The theory regarding GDP was first introduced by William Petty in an attempt to defend landlords against taxation during the period of 1652 to 1674, a time of war between the Dutch and the English. The concept was further enhanced upon but Charles Davenant in 1695. The GDP of a nation is a measure of the size of its economy. Gross Domestic Product can help us estimate the contribution each sector makes to the national income.

Gross Domestic Product can be measured in three ways, namely, Income Approach, Expenditure Approach and Product Approach.

The Income Approach measures GDP as the sum of:

1. Wages
2. Interest Income
3. Profits
4. Rental Income

The Expenditure Approach measures GNP as the sum of:

1. Private Consumption Investment
2. Investment Expenditure
3. Government Consumption Expenditure
4. Net Exports

The Product Approach measures GDP as the difference between:

1. Value of Output Value of output-value of input
2. Value of Input

Gross Domestic Product can be of two types, namely, real GDP and nominal GDP. The real GDP is calculated at base year prices and thus remains unaffected by change in prices. It only depends on the quantity of output. The nominal GDP is calculated at current year prices and thus is affected by both prices and quantity.

Though GDP tells us about the structure of the industries in terms of GDP contribution, it cannot effectively be attributed as a measure of welfare, wealth and prosperity.  An increase in GDP may not necessarily mean an increase in welfare and it doesn’t take into account the increase in population. Thus, though GDP may increase, the per capita income falls. Moreover, it doesn’t take into account rise in prices. If the prices increase at a rate greater than GDP then the individual would be worse off, as compared to before. Non-market activities such as leisure activities, activities of a housewife etc that brings pleasure to a family/individual doesn’t count in the GDP, however, increases welfare of the individual.

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The last couple of months have seen a steep fall in inflation rates. The WPI, acronym for Wholesale Price Index, which depends on the inflation rate, fell from -2.4% in June to -4.05% in July. This was mainly driven by a fall in food prices by 1.16% and a fall of 1.47% in prices of manufactured goods. Inflation in retail also fell from 5.4% in June to 3.78% in July.

Inflation can be defined as a prolonged increase in general price levels. It leads to a hike in prices of goods and services. Inflation usually occurs over a period of time. As price increases, the quantity of goods and services a consumer can buy falls. Therefore, a rise in prices leads to a reduction in a consumer’s purchasing power, that is, his/her real money balances falls (W/P). The most common form of measuring inflation rate is Price Index.

Inflation has both positive and negative impacts. The negative impacts of inflation are hoarding of commodities due to high prices, increased cost of holding money, fall in savings and investment due to uncertainty in inflation rates in the future. However, the positive side of inflation contradicts the negative impact of fall in investment. A rise in inflation encourages people to spend and invest as the money they currently hold becomes less and less in value due to rapidly increasing inflation. It also causes a fall in the burden of debt, maintains a low nominal interest rate and reduces unemployment.

The opposite of inflation is called deflation. The phenomenon of deflation can be defined as a fall in general price level over a period of time. It is also called negative inflation rate. Deflation occurs when the inflation rate falls below 0%. As deflation occurs people are able to buy more quantity of goods and services with the same amount of money as they had before. Thus, the value of a consumer’s money holdings increase, that is, value of real money balances increase.

Therefore, we see that deflation is essentially a subset of inflation or an extension of the concept of inflation.

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The United Nations Population Fund (UNFPA) defines demographic dividend as “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older)”. Demographic dividend has been extensively used in association with India. We all talk about how India’s comparative advantage is it demographic dividend, but have we ever wondered about this came to be?

India is home to one-sixth of the globe’s population. There are several doubts however, as to how such a rapid population growth took place despite the fact that there is a decent and reliable amount of data available. The census data shows that population growth between:

Population growth in India saw a rapid acceleration post 1921. However, according to economists Vasaria & Vasaria there were several limitations to population census during this period which led to incorrect recording of population data. In the first official census carried out in 1881, the enumeration of the population of Central India, Punjab, Hyderabad and Rajasthan was not conducted, despite the fact it was home to 33 million people. Also, 12 million more people were not covered in this enumeration. In 1872, the census of India was reported at 203 million, however was later corrected to 236 million. Moreover, the population of Assam and Bengal up to 1872 was estimated at 40 million, however, in the 1872 census the population was recorded at 65.75 million. These figures indicate the discrepancies in the census recording during the period.

According to Vasaria & Vasaria an underdeveloped country has high birth rates, as well as, growth rates. Developing countries have high birth rates and low death rates and developed countries have low birth and death rates (minimum). Up to 1921, the population growth was slow. This can be shown as:

YEAR                         GROWTH (census)                GROWTH (Davis)¹

1881                            2.07                                         0.09

1921                            0.09                                         0.09

After 1921, the population grew at a very rapid pace and population explosion took place. Thus, 1921 is known as the year of great divide.

1931                            1.01                                         1.01

1941                            1.40                                         1.40

Population growth in India in the 20^th century can be attributed more to fertility and mortality rates rather than migration. According to economist Sumit Guha, the population grew on account of declining mortality rates. His observations were supported by economist Kinslay Davis who studied crude death rates during the period 1911-1948. He stated that there was an “unmistakable downward trend” after 1918. He also studied the infant mortality rates and stated that the data, “reveal a high point in 1918 and gradually declined thereafter”. He also realised that during this period there were numerous deaths that were not accounted for and thus, made the required changes and reported a crude birth rate of 40 per 1000 individuals, with a mortality rate slightly less than this. According to him, this mortality rate fell significantly post 1918. His finds were corroborated by Sumit Guha, who studied the crude death rates post 1892. He reported a crude death rate of 30 per 1000 individuals, which in the next 30 years fell further to 24.7 and 22.4.

Therefore, one is able to infer that the acceleration in population growth in India was on account of falling mortality. This is how our population came to be the second largest in the world.

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Economics and finance, though studied as separate disciplines are often used as interchangeable terms by us. They are inter-linked in various aspects and it is their synergy that helps in economic growth.

Economics refers to the study of allocating limited resources to meet unlimited human desires in an (attempted) equitable manner. Finance includes saving, lending, borrowing etc. Thus, finance is often regarded as a subset of Economics. A good example of the amalgamation of the two subjects is Financial Economics. Financial economics studies the interdependence of financial variables with two main aspects, which are asset pricing and corporate finance. Another example is Financial Econometrics. This deals with various techniques of advanced statistics in corporation with microeconomic, as well as, macroeconomic models used in the study of financial economics.

Moreover, literature and evidence shows that a more efficient and effective financial system helps not only to alleviate external constraints of financing but, also promotes the development of mechanisms that stimulate economic growth.  A wide range of evidence suggests that finance is tremendously important for growth, especially during the first few stages of economic development. Political, geographical, legal and cultural aspects effect financial systems which in turn effect the economy.

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Whether one has studied economics or not they have probably heard the phrase ‘factors of production’. The factors of production in an economy are labour, capital, entrepreneurship and land. Another phrase for factors of production is factor endowment. Factor endowments are essentially factors of production used by an economy to make the most of manufacturing. Abundance of these resources often leads to countries becoming prosperous and wealthy nations. However, one cannot generalise this observation as prosperity and growth of a nation is also dependant on equitable access and distribution of resources.

There is a famous theory on factor endowment that is associated to international trade by Hecksher-Ohlin. It comments of the relationship between international and interregional production costs and supply of production factors. The theory states that the differences in the costs of production stems from the differences in the supply of factor endowments.

The Hecksher-Ohlin theory of factor endowment in international trade is used to determine comparative advantage of various countries. According to the theory, a country will have a comparative advantage in a good produced by factors it is abundantly endowed with. While dealing with this theory we must keep in mind that factor endowments are meant to be dealt in ratios. For example, a country may have large amounts of both capital and labour; however, one factor may be proportionally more than the other. This is what makes the difference.

The factor endowment theory has drawn criticism. The assumptions of this theory may be flawed. Let me give you an example to explain. At a point of time, both the United States and East Asia suffered from disproportionate quantities of labour and capital. Though, East Asia began to grow more rapidly than the United States, trade between the two regions grew, when in fact in accordance with the theory it should have fallen.

The theory suffers from several fallacies. One of the most prominent being too many unrealistic assumptions such as no trade between nations, no transportation, trade between only two countries and only two goods being produced. Thus, one can gage that this theory explains only a small fraction of world trade.

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One always talks about ‘quality’. One always looks for the best quality of cloth or the most eco-friendly and organic quality of food items. Policymakers aim to improve the quality of life of the underprivileged. In today’s techno-savvy fast paced world, where everyone is nose deep in their laptops typing and clicking frantically to meet deadlines Software Quality Assurance (SQA) is extremely important.

Software Quality Assurance (SQA) refers to the process of analyzing developed software to check whether it meets the standardized quality specifications. SQA is part of the software development life cycle (SDLC) that regularly tests software to ensure it meets the specified norms of quality. This not only ensures development and use of good quality software but is also adaptable to different models of software advancement being developed. Software Quality Assurance uses various testing methodologies to test and analyze software. This testing doesn’t take place after the software is developed but follows a prolonged testing process. It tests the software at each and every stage of development till the time it has been completely developed. Moreover, it includes checking of the entire process such as coding, software design, source code control, code reviews, software configuration management and release management. It can be used for many software models. For example: ISO 9000 and CMMI

Every SQA company has a set of value propositions it puts forth to differentiate itself from the others in an attempt to put them in another (superior) league altogether. Some of these proportions are:

1. Early fixation of defects: some companies like ‘Elixirct’ have an ‘early-test’ system which helps fix defects in the beginning stages of development.
2. Best of both worlds: in this case, there are numerous centres set up all across the world which helps reduce costs.
3. Quality and Innovation: ‘Sapple Systems’ provide within their value proposition framework “Innovation & Quality”. Their efforts are three fold:

• Commitment to quality
• Innovative testing
• Improved results

SQA helps deal with below power software systems in the market. It not only fuels innovation and growth but also brings to the market high quality goods. It improves the market quality, increases customer base, reduces costs of maintenance and leads to sustainability.

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The Leontief Paradox is one of the most famous and important contradictions in the history of economics. It was devised by W. W Leontief in contradiction of the H-O theory. Leontief also won a Nobel Prize in Economics for his input-output analysis in 1973.

The H-O theory simply states that a country with a labour intensive economy will export goods produced by it, while a country which is abundant in capital will export capital produced items. The Leontief Paradox opposes this theory with the example of the United States, a capital abundant country. Thus, in terms of the H-O theory United States being a more capital intensive economy, should export goods produced by this capital. However, on empirical analysis by Leontief using his input-output theory, one reached a conclusion that contradicted the H-O theory. Leontief learned that import substitutes by the United States were more capital intensive than its exports. Moreover, Robert Baldwin proved that the U.S imports were 27% more capital intensively produced as compared to exports of 1962 in 1971. This finding further validated the claims by other economists who did not accept the H-O theory.

Leontief soon tried to solve his own paradox by arguing that, the productivity of the labour in the United States was far more as compared to the countries it was getting its imports from. Thus, if the labour input of the country were adjusted by a factor of three, then the United States would actually become a labour abundant country. Despite these suggestions, economists continued to maintain the validity of the paradox.

Subsequent studies showed that ‘human capital’ was in fact a form of capital and that narrowly defining capital could prove to be erroneous. Moreover, Leontief was comparing the exports with import substitutes and not the actual imports. With time many flaws have surfaced with respect to the paradox. Some of them are lack of availability of resources and minerals, trade tariffs and barriers, product differentiation etc. Thus, it is very possible that the applicability of the Leontief Paradox is flawed in this case.

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The Heckscher-Ohlin theory of International Trade, also called the H-O theory was established by Bertil Ohlin. He derived this theory from the General Equilibrium Analysis of Eli Heckscher. Bertil Ohlin was a Swedish economist and politician. He served as the Minister of Trade for Sweden from 1944-1945. Moreover, he was a professor at Stockholm School of Economics in the early 1900’s.

The theory proposed by him is based on international trade. According to Ohlin, it is the difference of the relative prices of goods between different countries that facilitates trade. Commodities differ in prices on account of differences in costs of production. This further extends to differences in the costs of the factors of production as well. The various factors of production, such as, labour and capital have different costs varying from country to country.

The theory states, “A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor intensive good”.

This means that countries like India that is a labor intensive economy will export goods that are produced by them. However, in the case of countries like Germany a very significant portion of their export will be produced by capital (machinery).  The assumptions of this theory are as follows:

1. There are two countries that are taken into consideration
2. The two countries are equivalent
3. There are two factors of production –labour and capital
4. The costs of these factors must differ
5. They produce two goods –one capital intensive and the other labour intensive
6. The two economies follow a perfectly competitive market
7. Factors are allowed to move freely within the country. However, have no mobility outside
8. The production function is the same for the two countries
9. There is full employment in the economy
10. Trade is free
11. There are no transportation costs

Now the question arises, what determines that a country is labour intensive or factor intensive.

Economists are still not very clear as to what the underlying logic is. There has not been a unanimous acceptance of a particular method, however, most agree on the concept of factor prices. This concept basically says that, if labour is cheaper in comparison to capital in a particular country then that country is said to be labour intensive and vice versa.

This theory has several limitations that validate the fact that it lacks practical/analytical feasibility. Some of them are:

1. Impractical assumptions: the theory assumes that there is no cost of production, identical production functions, no qualitative difference in the factors, constant returns to scale, etc –this is not very realistic.
2. Many constraints: the theory has too many constraints such as only two countries, two commodities and only two factors of production.
3. One-sided theory: supply plays a more significant role as compared to demand.

There have been many instances where this theory has been contradicted. The most important being the Leontief paradox.

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