Palampur, though fictional, represents a myriad of real Indian villages. Through its lens, we can understand the intricate dance of various production activities and the foundation on which these activities stand.

The very essence of production is to create goods and services that cater to our needs. But how is it all orchestrated?

Land And Natural Resources: Everything starts from the ‘land’. It’s the stage upon which the theatre of production is set. Apart from fertile land, other natural resources like water, forests, and minerals form the backbone of production.

Labour: The human touch — be it a skilled craftsman, an educated professional, or manual ‘labour’, is indispensable. They convert raw materials into products.

Physical Capital: ‘Physical capital’ encompasses tools, machinery, and infrastructure required at various production stages. It’s not just about the physical tools but also includes raw materials and the funds to drive operations. It can be divided into fixed capital and working capital.

The tools, machines, buildings which can be used in production over many years are called fixed capital.

Raw materials and money in hand are called working capital. Unlike tools and machines, these are used up in production.