Management Programme
ASSIGNMENT FIRST SEMESTER 2011
MS-03: ECONOMIC AND SOCIAL ENVIRONMENT
School of Management Studies INDIRA GANDHI NATIONAL OPEN UNIVERSITY MAIDAN GARHI, NEW DELHI – 110 0 68
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ASSIGNMENT
Course Code Course Title
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Assignment Code Coverage
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MS-3 Economic and Social Environment 3/TMA/SEM-I/2011 3/TMA/SEM-I/2011 All Blocks
Note: Answer all the questions questions and send them them to the Coordinator Coordinator of the Study Centre Centre you are attached with.
1. Identi Identify fy the the criti critica call elem element entss of the the socio sociolog logic ical al enviro environm nment ent of busin business ess and analyze the social problems and prospects with the help of examples. The business environment includes the marketplace, marketplace, yourself and your business partners, and any external factor that may positively or negatively affect the level of your business success. Today we are going to look at three aspects of the environment; transformation, transformation, opport opp ortuni uniti ties es and and obsta obstacle cles, s, and two two groups groups of envir environm onmen entt handl handling ing strate strategi gies; es; consolidation strategies, and exit strategies.
1. The Amount Of Transformation Required To Reach Your Goal
Achievin Achieving g any goal require requiress change. change. It is importa important nt when setting setting business business goals to determine determine the amount of change required. If the change is great it may be better to break the goal down to sub-goals in order to make success more accessible.
Start with the question; why hasn’t the business already attained that goal? This will help determine exactly what needs to be changed as well as the amount of change needed.
It is important to determine how those changes can be accomplished in the current environment by looking at the opportunities and threats in the environment and the strengths and weakness within the business. Opportunities, Strengths And Advantages
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Every environment provides opportunities to those who develop the skill of seeing them. Every business business has its own strengths and its own advantages advantages over other businesses. businesses. The wise business manager can determine the best combination of these opportunities, strengths and advantages and then implement strategies to maximize profit at this point in the environment.
Even in the toughest times, when most businesses are in trouble, there are always some businesses businesses that are prospering. If you develop the skills for assessing opportunities, opportunities, strengths and advantages and the habit of acting on that assessment by taking appropriate goal directed action, then your business will always be one of those that are prospering.
3. Obstacles, Threats and Limitations
The environment always contains opportunities and it also always contains obstacles. Your business always has some limitations at any particular point in time and there are always threats to your success and profitability.
Since we know that these “problems” will always exist the wise business manager develops the skill of recognizing them early and develops and implements implements risk management management strategies to guide the business through the difficulties while at the same time the business is focusing its efforts on profiting from the opportunities.
4. Consolidation Strategies
A business requires change in order to grow but constant change can be destabilizing. The wise business manager determines when it is appropriate to consolidate the gains made so that those gains become a strong foundation on which to build the next campaign of positive change.
A thorough understanding of the business environment can help determine the best point at which to consolidate and the best strategy to implement that consolidation.
5. Exit Strategies
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No No matt matter er how skilled skilled the manag manager er is, or how how well well the environ environme ment nt is analy analyze zed d for opportunities, and threats, or how good the consolidation strategy may be, there is always the possibility that things don’t go to plan.
For this reason there is a golden rule that needs to be followed in every campaign; never enter any business campaign without a predetermined exit strategy.
The best time to determine strategies for how to exit a campaign with the minimum of difficulty difficulty or loss is before the campaign starts. This is when you are calm and clear thinking. If you wait until things are going wrong and the pressure is at a peak you are far less likely to find the best solution.
That was a brief introduction introduction to capitalizing capitalizing on the business environment. environment. Now it’s up to you to put aside some time to use these five points to help you look at the current environment for your business and determine how you can capitalize on that environment to increase your business success.
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2. “The “The structural structural changes changes which which are quite quite fundament fundamental al in character character are inherent inherent in the process of economic growth.” Discuss this statement. The Stat The Statem emen entt is tota totall lly y agre agreea eabl blee that that stru struct ctur ural al chan change gess whic which h are are qu quit itee fundamental in character are inherent in the process of economic growth . Structuralchange change theor theory y deals deals with with polic policie iess focuse focused d on changi changing ng the the econom economic ic struct structur ures es of developing developing countries from being composed primarily primarily of subsistence subsistence agricultural agricultural practices to being a "more modern, more urbanized, and more industrially diverse manufacturing and service economy." There are two major forms of structural-change theory; W. Lewis' two-sector surplus model, which views agrarian societies as consisting of large amounts of surplus labor which can be utilized to spur the development development of an urbanized industrial sector, and Hollis Chenery's patterns of development approach, which holds that different countries become wealthy via different trajectories. The pattern that a particular country will follow, in this framework, depends on its size and resources, and potentially other factors including its current income level and comparative advantages relative to other nations. Empirical analysis in this framework studies the "sequential process through which the economic, industrial and institutional structure of an underdeveloped underdeveloped economy is transformed over time to permit new industries to replace traditional agriculture agriculture as the engine of economic growth."
Structural-change approaches to development economics have faced criticism for their emphasis on urban development at the expense of rural development development which can lead to a substantial rise in inequality between internal regions of a country. The two-sector surplus model, which was developed in the 1950s, has been further criticized for its underlying assumption that predominantly agrarian societies suffer from a surplus of labor. Actual empirical studies have shown that such labor surpluses are only seasonal and drawing such labor to urban areas can result in a collapse of the agricultural sector. The patterns of development approach have been criticized for lacking a theoretical framework.
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3. Briefl Briefly y explain explain the Tenth Tenth Five Five Plan Plan (2002-20 (2002-2007), 07), highlighti highlighting ng its weaknes weaknesses ses and strengths. Refer to the Planning Commission report on website.
First Five-Year Plan, 1951–1956
The first Indian Prime Minister, Jawaharlal Nehru presented the first five-year plan to the Parliament of India on 8 December 1951. The plan addressed, mainly, the agrarian sector, including investments in dams and irrigation. The agricultural sector was hit hardest by the partition of India and needed needed urgent urgent attention. attention. The total total planned planned budget of 206.8 206.8 billion billion (US$23.6 billion in the 1950 exchange rate) rate) was allocated to seven broad areas: irrigation and energy (27.2 percent), agriculture and community development (17.4 percent), percent), transport and communications (24 percent), industry (8.4 percent), social services (16.64 percent), land rehabilitation (4.1 percent), and for other sectors and services (2.5 percent). The target growth rate was 2.1% annual gross domestic product (GDP) growth; the achieved growth rate was 3.6%. The net domestic product went up by 15%. The monsoon was good and there were relatively high crop yields, yields, boosting exchange reserves and the per capita income, income, which increased by 8%. National income increased more than the per capita income due to rapid population population growth. growth. Many irrigation projects were initiated during this period, including the Bhakra Dam and Hirakud Dam. Dam. The World Health Organization, Organization, with the Indian government, addressed children's health and reduced infant mortality, mortality, indirectly contributing to population growth. At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as major technical technical institutions. institutions. The University Grant Commission was set up to take care of funding and take measures measures to strengthen strengthen the higher education in the country. country.[ Contracts were signed to start five steel plants, which came into existence in the middle of the second fiveyear plan. Second Five-Year Plan, 1956–1961
This plan functioned on the basis of a nude model. The Mahalanobis model was propounded by Prasanta Chandra Mahalanobis in the year 1953. The second five-year plan focused on industry, industry, especially especially heavy heavy industry industry.. Unli Unlike ke the the Firs Firstt plan plan,, whic which h focu focuse sed d main mainly ly on agriculture, domestic production of industrial products was encouraged in the Second plan, particularly in the development of the public sector . The plan followed the Mahalanobis model, model, an economic economic development development model model devel develope oped d by the India Indian n statistician Prasanta Chandra Mahalanobis Mahalanobis in 1953. Hydroelectric Hydroelectric power projects power projects and five steel mills at Bhilai, Durgapur , and Rourkela were established. Coal production was increased. More railway lines were added in the north east. The Atomic Energy Commission was formed in 1958 with Homi J. Bhabha as the first chairman. The Tata Institute of Fundamental Research was established as a research institute. In 1957 a talent search and scholarship program was begun to find talented young students to train for work in nuclear power. The total amount allocated under the second five year plan in India was Rs. 4,800 crore. This amount was allocated among various sectors:
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Mining and industry Community and agriculture development Power and irrigation Social services Communications and transport Miscellaneous
Third Five-Year Plan, 1961–1966
The third plan stressed on agriculture and improving production of rice, but the brief Sinobrief SinoIndian War of 1962 exposed weaknesses in the economy and shifted the focus towards the Defence industry. industry. In 1965-1966, India fought a war with Pakistan. Pakistan. The war led to inflation and the priority was shifted to price to price stabilisation. stabilisation. The construction of dams of dams continued. Many cement and fertilizer plants plants were also built. Punjab began producing an abundance of wheat of wheat.. Many primary schools were started in rural areas. In an effort to bring democracy to the grassroot level, Panchayat elections were started and the states were given more development responsibilities. State electricity electricity boards and state secondary education boards were formed. States were made responsible for secondary for secondary and higher education. education. Fourth Five-Year Plan, 1969–1974
At this this time time Indira Indira Gandhi Gandhi was was the the Prime Prime Ministe Minister r . Th Thee Indir Indiraa Gandh Gandhii gov govern ernme ment nt nationalised 14 major Indian banks and the Green Revolution in India advanced agriculture. In addition, the situation in East Pakistan (now Bangladesh) Bangladesh) was becoming dire as the IndoPakistani War of 1971 and Bangladesh Liberation War took War took place. Funds earmarked for the industrial development had to be diverted for the war effort. India also performed the Smiling Buddha underground underground nuclear test in 1974, partially in response to the United States deployment deployment of the Seventh Fleet in the Bay of Bengal. Bengal. The fleet had been deployed to warn India against attacking West Pakistan and extending the war. Fifth Five-Year Plan, 1974–1979
Stress was laid on employment, employment, poverty alleviation, and justice. justice. The plan also focused on self-reliance in agricultural production production and defense. In 1978 the newly elected elected Morarji Desai government rejected the plan. Electricity Supply Act was enacted in 1975, which enabled the Central Government to enter into power generation and transmission leaders. The Indian national highway system was introduced for the first time and many roads were widened to accommodate the increasing traffic. traffic. Tourism also expanded. Sixth Five-Year Plan, 1980–1985
The sixth plan also marked the beginning of economi of economicc liberalization liberalization.. Price controls were eliminated and ration shops were closed. This led to an increase in food prices and an
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increase in the cost of living. living. This was the end of Nehruvian of Nehruvian Plan and Rajiv Gandhi was prime minister during this period. Family planning was also expanded in order to prevent overpopulation. In contrast to China's China's strict and binding one-child one-child policy, Indian policy did not rely on the threat of force. More prosperous areas of India adopted family planning more rapidly than less prosperous areas, which continued to have a high birth high birth rate. rate. Seventh Five-Year Plan, 1985–1990
The Seventh Plan marked the comeback of the Congress Party to power. The plan laid stress on improving the productivity level of industries by upgrading of technology. The main objectives of the 7th five year plans were to establish establish growth in areas of increasing economic productivity, production of food grains, and generating employment opportunities. The thrust areas of the 7th Five year plan have been enlisted below: • • • • • • • •
Social Justice Removal of oppression of the weak Using modern technology Agricultural development Anti-poverty programs Full supply of food, clothing, and shelter Increasing productivity of small and large scale farmers Making India an Independent Economy
Eighth Five-Year Plan, 1992–1997
Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy was undertaken undertaken to correct the burgeoningdeficit burgeoning deficit and foreign debt. Meanwhile India became a member of the World Trade Organization on 1 Janu Januar ary y 1995 1995.T .Thi hiss plan plan can can be term termed ed as Rao Rao and and Manm Manmoh ohan an mode modell of Econ Econom omic ic devel developm opment ent.. Th Thee major major object objectiv ives es inclu included ded,, contr controll ollin ing g pop popul ulati ation on growt growth, h, pov povert erty y reduction, reduction, employment employment generation, generation, strengthening strengthening the infrastructure, infrastructure, Institutional building, touri tourism sm manag managem emen ent, t, Huma Human n Resou Resourc rcee devel developm opment ent,, Involv Involvem ement ent of Panch Panchay ayat at raj, raj, Nagarapalikas, N.G.O'S and Decentralization and people's participation. Energy was given priority with 26.6% of the outlay. An average annual growth rate of 6.7% against the target 5.6% was achieved. Ninth Five-Year Plan, 1997–2002
Ninth Five Year Plan India runs through the period from 1997 to 2002 with the main aim of atta attain inin ing g obje object ctiv ives es like like spee speedy dy indu indust stri rial aliz izat atio ion, n, huma human n deve develo lopm pmen ent, t, full full-s -sca cale le employment, poverty reduction, and self-reliance on domestic resources. The main objectives of the Ninth Five Year Plan of India are:
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to prioritize agricultural sector and emphasize on the rural development to generate adequate employment opportunities and promote poverty reduction to stabilize the prices in order to accelerate the growth rate of the economy to ensure food and nutritional security to provide for the basic infrastructural facilities like education for all, safe drinking water, primary health care, transport, energy to check the growing population increase to encourage social issues like women empowerment, conservation of certain benefits for the Special Groups of the society to create a liberal market for increase in private investments
During the Ninth Plan period, the growth rate was 5.35 per cent, a percentage point lower than the target GDP growth of 6.5 per cent. Tenth Five-Year Plan, 2002–2007 • • •
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Attain 8% GDP growth per year. Reduction of poverty poverty ratio by 5 percentage points by 2007. Providing gainful and high-quality employment at least to the addition to the labour force;*All children in India in school by 2003; all children to complete 5 years of schooling by 2007. Redu Reduct ctio ion n in gend gender er gaps gaps in lite litera racy cy and and wage wage rate ratess by at leas leastt 50% 50% by 2007;*Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2%;*Increase in Literacy Rates to 75 per cent within the Tenth Plan period (2002 to 2007).
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4. “The Foreign Foreign Trade Regime has undergone changes overtime.” overtime.” Briefly Briefly examine the phases of change.
The administrative administrative control regime, regime, which applies to all merchandise has several changes overtime which are as follow…..
Under Law 7/1991, the government is entitled to regulate the import regime through decrees. decrees. Decrees must be approved by the Committee of Tariffs, Customs and Foreign Trade, whose main members are the vice-ministers of economy.(1) Decrees must be approved with the recom recomme menda ndati tion on of the Supe Superio riorr Counc Council il of Fore Foreign ign Trade Trade,, which which is compos composed ed of the ministers of economy and the president of India.(2)
Under Decree 3803/2006, the Committee of Imports of the Ministry of Trade, Industry and Tourism will be the competent administrative authority to grant licences for the import of goods. The administrative authorization of prior licenses for the import of goods is mandatory now in the following cases:
* Goods included in the list established by the government;
* Goods that do not require payment under the exchange regime, including:
* goods imported as foreign investment or contributions in kind;
* donations;
* previously-paid imports originating from the free trade zone;
* personal belongings and luggage;
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* legalization of merchandise; and
* goods identified by the government within the import policy framework;
* Requests for import of goods with tariff and tax exemptions;
* Requests for import of used, faulty, reconstructed, reconstructed, refurbished or remanufactured remanufactured goods or inventory leftovers;
* imports originating from official and governmental organizations, except for gasoline and other fuels; and
* waste and scrap iron in cases determined by the government .
Any additional imports into India fall under the free import regime; some imports must be registered, while in other cases registration is not required. Both types of import are regulated by the Direction of Foreign Trade of the Ministry of Commerce, Industry and Tourism. Under the regime of free import with registration set forth in Article 2 of Decree 3803/2006, 3803/2006, importers must submit certain information and request authorization in advance from the relevant administrative authorities and the Ministry of Foreign Trade with regard to the following goods:
* fishing resources;
* monitoring and security equipment;
* Radioactive isotopes and substances;
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* Goods reserved for the armed forces;
* Hydrocarbons, fuels and gasoline;
* goods subject to sanitary control to preserve human, vegetal and animal safety and health; goods subject to technical requirements and regulations;
* goods subject to quantitative restrictions;
* goods subject to control to guarantee environmental protection; and
* automotive vehicles.
The sanitary, environmental, environmental, energy, technical and radiation radiation control authorities authorities must receive reque request stss in advan advance ce and and issue issue their their opini opinions ons accord according ingly ly.. Reque Request stss are are recei received ved and and processed through the Unique Window of Foreign Trade, a service that operates on the Internet. It is managed by the Assistant Direction of Design and Administration of Operations of the Ministry of Commerce, Industry and Tourism.
The authorizations given within the framework of the foreign trade regime for the import of goods (either through licences or registrations) have a term of 12 months for capital goods (which may be extended by a further 12 months) and six months for other goods (which may be extended by three months).
The free import regime without registration applies to goods that do not require licences or authorizations within the free import regime with registration. In these cases importers may request request customs customs clearanc clearancee declarat declarations ions from the relevan relevantt authori authorities ties without without having having to provide additional documents.
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Authorizations (where applicable) must be presented as supporting documents for customs clearance and import declarations. Authorizations and registrations must be provided to the customs authorities to obtain customs clearance.
Importers must keep these documents for a minimum of five years; they must be available for revie review w and contro controll by the the custo customs ms autho authori riti ties es of the the Nati Nationa onall Dire Direct ction ion of Taxes Taxes and Customs whenever required.
To benefit from all the legal advantages and comply with the legal requirements of the regime for the import of goods into India, importers and suppliers may seek legal advice from a trade lawyer before developing any projects for international sales of goods or import contracts.
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5. Disc Discus usss the the appr approa oach ches es to tax tax equi equity ty with with spec specia iall refe refere renc ncee to ‘abi ‘abili lity ty to pay pay principle.’ User pays, or beneficiary pays, is a pricing approach based on the idea that the most efficient allocation of resources occurs when consumers pay the full cost of the goods that they consume. In public finance it stands with another principle of "ability to pay," which states that those who have the means should share more of the burden of public services. services. Thee abil Th abilit ity y to pay pay prin princi cipl plee is one one the the reas reason onss for for the the gene genera rall acce accept ptan ance ce of the the progressive income tax system.
The principle of user pay supports the idea of horizontal equity, equity, which states that those in similar wealth and income positions should be treated equally by the tax system. The basic idea is that those who do not use a service should not be obligated to pay for it. As long as the beneficiary aligns exactly with the user, the user pay principle works. Those who do not go to a movie are not obligated to pay for someone else to attend.
In public goods, beneficiaries and users often do not align. The divergence of user and beneficiary occurs when production and consumption have external effects. The driver, who purchases gasoline, may believe he or she is paying for the full cost (user pay) of using gasoline, except that greenhouse gases are produced. These impose costs on the environment and are believed to contribute to climate change. The "beneficiaries" must bear costs not paid in the purchase of gasoline. In this case the user pay principle results in the driver not paying the full or social cost of using fossil fuels, which creates creates a strong argumen argumentt for regulation regulation and other other forms forms of public public interve interventio ntion. n. Increasi Increasing ng taxes taxes on gasoline is one possible response that preserves the user pay principle by increasing the costs to user.
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6. Write Write short short notes notes on the followi following:ng:-
Growth and Efficiency of industry
The industrial sector is one of the main sectors that contribute in india. The country ranks four fourte teen enth th in the the fact factor ory y outp output ut in the the worl world. d. Th Thee indu indust stri rial al sect sector or is made made up of manufacturing, mining and quarrying, and electricity, water supply, and gas sectors. The industrial sector accounts for around 27.6% of the India and it employs over 17% of the total workforce workforce in the country. The Growth Rate of the Industrial Industrial Sector in India came to around 5.2% 5.2% in 200 20022- 200 2003. 3. In this this year year,, withi within n the the India India , the the minin mining g and quarry quarryin ing g sector sector contributed 4.4%, the electricity, water supply, and gas sector contributed 2.8%, and the manufacturing sector contributed around 5.7%.
The Growth Rate Rate of the Industry Sector Sector in India came to around 6.6% in 2003- 2004 and in this year, the electricity, water supply, and gas sector contributed 4.8%, the mining and quarrying sector contributed 5.3%, and the manufacturing sector contributed 7.1% in India . Industry Growth Growth Rate in India came to 7.4% in 2004- 2005, with the manufacturing manufacturing sector contributing contributing 8.1%, the mining and quarrying sector contributing 5.8%, and the water supply, electricity, and gas sector contributing 4.3% in India .
Industry Industry Growth Growth Rate Rate in India India came came to 7.6% in 2005- 2006. 2006. In this this year, the mining mining and quarrying quarrying sector contributed contributed 0.9%, the manufacturing manufacturing sector contributed 9.0%, and the water supply, gas, and electricity sector contributed 4.3%. The Growth Rate of the Industrial Sector finally came to 9.8% in 2006- 2007. This shows that Industry Growth Rate in India has been on the rise over the last few years. The reasons for the rise of Industry Growth Rate in India The reasons reasons for the increase increase of Industry Industry Growth Growth Rate in India are that huge amounts amounts of investments are being made in this sector and this has helped the industries to grow. Further the reasons for the rise of the Growth Rate of the Industrial Sector in India are that the consumption of the industrial goods has increased a great deal in the country, which in its turn has boosted the industrial sector. Also the reasons for the increase of Industry Growth Rate in India are that the industrial goods goods are being exported in huge quantities quantities from the country. The Indian government must boost the Industrial Sector Industry Growth Rate in India thus has been registering steady growth over the past few years. This has given a major boost to the Indian economy. The government of India thus
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must continue to make efforts to boost the industrial sector in the country. For this will in turn help to grow the country's economy.
Primary functions of money
* Medium of exchange: The most important functions of money is to serve as a medium of exchange. It facilitates buying and selling to take place. It solves all the problems of barter system. People can exchange goods and services through money. By using money anything anything can be purchased in the market. For example, a seller sells a commodity by accepting money and by using this money, he can buy some other commodity which he wants.
* Measure of value: Money is a common measure of value. The value of all the commodities can be expressed in terms of money. It is a measuring rod and it can be expressed in the price ratio of different commodities. In India, rupee is the standard of measure, and therefore prices of goods and services are expressed in terms of rupees.
Subsidy
A subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., (e.g., as a result of continuous unprofitable operations) operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production.
Subsidies can be regarded as a form of protectionism or trade barrier by making domestic goods and services artificially competitive against imports. Subsidies may distort markets, and can impose large economic costs. Financial assistance in the form of a subsidy may come from one's government, but the term subsidy may also refer to assistance granted by others, such as individuals or non-governmental institutions.
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