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Abs Vidhya Mandhir Thiruvallur Study Material - Economics Indian Economic Development
Abs Vidhya Mandhir Thiruvallur Study Material - Economics Indian Economic Development
THIRUVALLUR
STUDY MATERIAL – ECONOMICS
INDIAN ECONOMIC DEVELOPMENT
Chapter 1:- Indian economy on the eve of Independence
Introduction:- Before the
advent of British rule, Indian
economy was flourishing.
Introduction:- On 15 August
A. Economic system:- It refers to the system which shows the central problem of an economy. It is a
system of production, resource allocation and distribution of goods and services within a society.
Types of system
Capitalism Socialism Mixed economy
1). This is the system where there 1). This is the system where 1). It is a system where
is no direct intervention of the government plays an active role government sector as well as
government. in an economy. private sector plays active role.
2). It is free economy where 2). Economic activities are 2). Law or various other
market forces of demand and regulated by government. important decisions are taken by
supply organise economic government and economic
activities. activities are conducted by
market forces.
3). MERITS:- It promote self 3). It promote social justice and 3). It enhances consumers choice
growth and economic growth. work to provide social equality. and their welfare.
4). DEMERITS:- It ignores poor 4). It lacks development activities 4). Lack of self interest in public
section of society because their and does not foster economic sector.
main motive is to earn profits. growth.
B. Economic planning:-
It is a system under which set of targets is defined by central authority of the country.
It basically means utilization of resources in different development activities in accordance with national
priorities.
1. Long period goal of planning:-Plans in India were made for five years plan. First five year plan was
launched on April 1, 1951 ending March 31, 1956.
OBJECTIVES:-
a. Growth or increase in GDP:-
Because of backward economy during British rule, during making of plans, government had to focus on
economic growth as its primary objective.
Growth refers to increase in the country‘s capacity to produce the amount of goods and services within the
country.
It refers to steady increase in the GDP.
It is necessary to produce more goods and services if the people of India are to enjoy rich life.
Innovative technology also enhances productivity or output per unit of inputs.
b. Full employment:-
It is a situation when everyone who is able to work at existing wage rate is getting work.
It implies that there should be higher rate of active participation of the working age group in economic
activities of the country in the process of growth.
It is a common goal of five year plans and is directly related to economic growth of the country.
It amounts to achieve growth with social justice.
c.Equitable distribution or Equity:-
Along with growth it is important to ensure that economic development is shared by all citizens to promote
social justice.
Benefits of growth should be provided to large sections of society, so that distribution of income becomes
equitable.
Everyone should be able to meet his or her basic needs such as food, education, health etc. Inequality in the
distribution of wealth should be reduced.
d. Modernization:-
During British rule, India was lacking in technical knowledge. They were not able to compete with Britain
goods.
So, it was necessary to provide technical know-how and should be taken as goal.
Adoption of technology is called modernization.
It refers to those institutional changes in economic activities which make an economy progressive and
modern. For eg:- Green revolution.
Modernization does not refer only to use of new technology but also to change in social outlook. Such as
women empowerment.
e. Self reliance:-
It means dependence on domestically produced goods. This is another major objective which targets non-
interference by foreign countries.
A nation can promote economic growth and modernization by using its own resources.
The first seven year plans gave importance to self reliance which means avoiding import of those goods
which could be produced in India.
This policy was considered necessary in order to reduce our dependence on foreign countries, especially
for food.
2. Short term goals:- It depends upon the current need of the country.
Plan 1 (1951-1956) Increase in agriculture production
Plan 2(1956-1961) Increase in industrial production
Plan 3(1961-1966) Self sufficiency in food grains
Plan 4(1969-1974) Focused on price stability
Plan 5(1974-1979) Alleviation of poverty
Plan 6(1980-1985) Alleviation of poverty
Plan 7(1985-1990) Employment opportunities
Plan 8(1992-1997) Full employment, universalization of education
Plan 9(1997-2002) Growth, price stability, and environmental
sustainability
Plan 10(2002-2007) Better quality of life
Plan 11(2007-2012) Poverty reduction, job creation
Plan 12(2012-2017) Inclusive growth
Agriculture
C. Agrarian reforms/Reforms in Indian agriculture:-
I. Institutional or Land Reforms:-
i. Abolition of intermediaries:-
During British rule, Zamindari system was implemented which was the reason of backwardness in
agriculture.
After independence, steps were taken to abolish intermediaries and make the tillers of the soil as the
owners of the soil.
This has been done to stop the exploitation of cultivators by Zamindars.
ii. Regulation of rent:-
Earlier intermediaries used to collect as much rent they want.
To put an end to this exploitation, government has fixed the rent of cultivators.
It should not exceed one third of crop value.
iii. Consolidation of holdings:-
Consolidation process was undertaken by government to handle fragmented land.
It is a process where farmers were allotted land at one place as a replacement of their scattered land.
It saves cost of farming.
iv. Ceiling on land holdings:-
It was another policy towards land reforms to promote equity in agriculture sector.
This means fixing the maximum size of land which could be owned by an individual and beyond that
limit, the land would be taken over by the government.
And the government would allot this land to landless cultivators and small farmers.
v. Cooperative farming:-
This means farming done by more than one farmer on same land.
It will encourage small farmers to do farming and earn profits.
Together they can buy inputs at less price and sell their produce at higher rate.
II. General reforms:-
i. Irrigation facilities:-
In order to increase the production, irrigation facilities have been provided to farmers to supply the
required quantity of water.
At present irrigational facilities cover 45% of land under cultivation as compared to 15% in 1950.
Due to construction of multipurpose projects and tubewells, larger areas have been covered.
ii. Provision of credit:-
Cooperative credit societies and rural development banks have been established to meet the finance
requirements of the farmers.
They provide funds at lower rate of interest. Commercial banks also meet the credit needs of farmers.
NABARD was established to provide credit facilities to the farmers at the National level in 1982.
iii. Regulated markets and cooperative marketing scheme:-
There have been regular markets being established in all parts of country.
This was done to protect farmers from exploitation by the middlemen.
Market committees were appointed by government which govern these markets and help farmers to get
remunerative price of their produce.
Cooperative marketing societies have also been established which help farmers to value their produce and
also provide storage houses to keep their produce safely.
iv. Price support policy:-
Government initiated a policy of minimum support price to encourage farmers to increase production.
In this policy government fixes a price higher than the market price and if farmers are not able to sell
their entire production at increased price, then government buys this surplus at increased price.
Government keeps this surplus in its buffer stock and uses it during the time of emergencies like flood,
earthquake, famines etc.
D. Green Revolution:-
The stagnation in Indian
i. Use of HYV seeds:-
High Yield Variety Seeds were adopted in India in 1966.
It led to increase in production of food grains especially for wheat and rice. This strategy is known as
Green revolution.
In 2015-2016. National Seed Corporation has distributed 304 lakh quintals of seeds among farmers in
different parts of country.
ii. Use of chemical fertilizers:-
The use of HYV seeds required the use of fertilizers which contributed in enhancing the productivity.
In 2015-16, 267.5 lakh tonnes of chemical fertilizers were used.
iii. Use of Insecticides and pesticides:-
In order to protect the crops from diseases and insects, steps were taken by using insecticides and
pesticides.
Integrated pest management programme was adopted for plant protection.
This programme emphasized upon growth of healthy crops.
iv. Scientific farm management practices:-
Various programmes were launched which promoted scientific way of cultivation instead of conventional
farming.
They emphasized upon the use of fertilizers, crop rotation process, selection of seeds and their quality.
v. Mechanized means of cultivation:-
Agriculture machines were introduced to cultivate the land.
Credit facilities at less rate of interest were provided especially to small farmers. So that they can easily
afford these machines.
E. Achievements of agrarian reforms:- (Green Revolution)
i. Spurt in crop productivity:- The green revolution resulted in multiple rise in food production. It helped
in recovering the country from regular food shortages and end the stagnation period in Indian agriculture.
ii. Decrease in price of food grains:- The price of food grains declined relative to other items of
consumption. The low income groups who spend a large percentage of their income on food, benefited
from this decline in relative prices.
iii. Buffer stock:- The spread of green revolution technology enabled the government to procure sufficient
amount of food grains to build buffer stock which could be used in times of food shortage.
iv. Commercialization of Agriculture:- Agriculture became both subsistence farming and commercial
farming. Green revolution resulted in Marketable or marketable surplus. This is a sign of growth and
development.
v. Change in farmer’s outlook:- Now farmers have changed their view points. They do not consider
farming just to complete their basic needs rather it is considered as a commercial venture.
vi. Self – sufficiency in food grains:- The spread of green revolution technology enabled India to achieve
self-sufficiency in food grains. India no more was dependent on foreign countries in this regard.
F. Limitations of green revolution:-
i. Limited crops:- The effect of green revolution is confined to limited crops like wheat, rice, bazar, maize
etc. It has limited effect on commercial crops like tea, rubber, jute, etc.
ii. Un-even spread:- In the first phase of the Green revolution (approx. mid 1960 upto mid 1970), the use of
HYV seeds was restricted to states such as Punjab, Tamil Nadu, and Andhra Pradesh. Thus, there were
regional inequalities.
iii. Limited farming population:- Farming population consists of big and small farmers. Only big farmers
can afford HYV seeds, as it requires various other inputs which are beyond the reach of small farmers.
iv. Economic divide:- The farmers who could benefit from HYV seeds required reliable irrigation facilities
as well as the financial resources to purchase fertilizers and pesticides, which small farmers could not
afford. This increased the inequality between small and big farmers.
Role of government in ensuring that the green revolution benefitted small farmers as well.
1. The government provided loans at a low rate to small farmers.
2. The government also provided subsidized fertilizers so that small farmers could also have
access to the needed inputs.
G. Subsidies
Subsidies means the help given by government to small or marginal farmers.
Arguments against subsidies Arguments in favour of subsidies
1. Once the technology is found profitable and is 1. Any new technology is considered to be
widely adopted, subsidies should be eliminated risky. So subsidies encouraged the farmers
since their purpose has been served. to test new technology.
2. Subsidies are meant to benefit the farmer but a 2. The government should continue with
substantial amount of fertilizer subsidy also agriculture subsidy because farming in
benefits the fertilizer industry. India continues to be risky as it vitally
depends on the monsoon.
3. Among farmers the subsidy largely benefits the 3. Most farmers are very poor and they will
farmers in the more prosperous regions. So, not be able to afford the required input
there is no case for continuing with fertilizer without subsidies.
subsidies. It does not benefit the target group.
4. It is a huge burden on the government 4. Eliminating subsidies will increase the
finances. inequality between rich and poor farmers
and violate the goal of equity.
Strategy of Industrial growth
H. Role of public sector in industrial development:-
i. Lack of capital:-
Indian industrialists did not have the sufficient capital to undertake investment for the development of
industries.
Because of lack of capital investments by the private entrepreneurs, government had to undertake capital
investment through public sector undertakings.
ii. Low inducement to invest:-
The Indian market was not big enough to encourage industries to undertake major projects even if they
had the capital to do so.
There was low level of aggregate demand because of limited size of market.
There was no inducement to invest because of low profitability.
So, public sector had initiated the process of industrialization.
iii. Growth with social justice:-
The objective of socialistic pattern of society could be achieved only through direct participation of the
government in the process of industrialization.
Because it requires investment that generates employment rather than investment to maximize profits.
A. Economic reforms:-
It is a set of economic policy adopted by government to increase the pace of growth and development.
In 1991, the government of India adopted New Economic policy.
Its components are LIBERALISATION, PRIVATISATION & GLOBALISATION.
B. Need for economic reforms:-
i. Fiscal deficit:-
Fiscal deficit is the difference between government expenditure and government revenue.
Prior to 1991, fiscal deficit was very high because of expenditure in non-development areas and non-
plan expenditure.
The income of public sector was not high to meet the expenditure.
ii. Adverse balance of payments:-
Balance of payment crisis is balance of payment deficit which means imports are greater than exports.
Before 1991, exports were less due to poor quality of domestic goods and imports were more despite of
heavy tariff duty and quotas.
In the wake of these facts, NEP was the only alternative.
iii. Fall in foreign exchange reserves:-
These are the reserves of foreign assets like foreign currencies, foreign securities.
Foreign exchange reserves were reduced because of high imports. There was also not sufficient foreign
exchange to pay the interest to international money lenders.
The situation became so serious that the government had to mortgage country‘s gold reserves with
World Bank.
iv. Inflationary spiral:-
Inflation is consistent rise in general price level.
Before 1991, prices of essential goods have increased.
Because of inflation, economic crisis got worse. Therefore, the need of NEP arises.
v. Poor performance of PSUs:-
Several thousand crore rupees was spent in the growth and development of PSU‘s in India.
But they were not performing well, they incurred huge losses.
Public sector continued to operate even in those areas which could be comfortably shifted to private
sector.
C. Elements of New Economic policy:-
I. Liberalization: - Liberalization of the economy means freedom given to producing units from the rules
imposed by the government.
Reforms under liberalization:-
1) Industrial sector reforms: - Government introduced industrial policy in 1991. Various measures were
taken such as:-
i. Abolition of Industrial licensing:-
Earlier industrialists had to get permission from the government to set up their industry.
As per NEP, Industrialist licensing was abolished except industries— alcohol, cigarettes, hazardous
chemicals, industrial explosives, electronics, aerospace and drugs and pharmaceuticals.
ii. Contraction of public sector:-
It was felt that government cannot control everything. So private sector was allowed to participate in
growth object of the country.
The number of industries which were reserved for public sector was reduced from 17 to 3. These were
defence equipment, atomic energy and railway transports.
iii. De-reservation of production areas:-
Prior to 1991, some goods could be produced only in small scale industries.
Now many goods produced by SSI have been dereserved.
Market forces were allowed for allocation of resources.
iv. Expansion of production capacity:-
Earlier there was restriction on the production of goods.
But with economic policy, freedom for licensing was given. It now depends upon producer how to
produce and what to produce.
v. Freedom to import capital goods:-
Liberalization policy gave freedom to import capital goods and technology in order to develop strong
infrastructural base of the country.
2) Financial sector reforms:-
i. Role of RBI:-
Earlier the role of RBI was of regulator. As regulator RBI used to fix interest rate structure.
But with NEP, RBI‘s role was converted from regulator to facilitator. Now RBI has given freedom to
commercial banks to decide upon interest rates.
ii. Establishment of private sector banks:-
Earlier more importance was given to public sector banks.
However, reform policies led to the establishment of private sector banks, Indian as well as foreign,
which increased the size of competition and provided better services to customers.
iii. Foreign investment:-
Foreign institutional investors such as merchant bankers, mutual funds and pension funds are now
allowed to invest in Indian Financial markets.
Foreign investment increased to 50%.
iv. Setting up new branches:-
Full freedom is given to commercial banks to set up new branches all over the country, if they fulfill
the conditions of RBI.
3) Fiscal reforms: - (These are the reforms related to tax structure.)
i. Reduction in Direct taxes:-
With economic reforms, income tax rate has been reduced. This reduction tries to ensure that
individuals do not evade the tax.
ii. Reforms in Indirect taxes:-
Reforms were made in Indirect taxes. Now a days GST has been launched which generates additional
tax revenue, increases tax compliance and reduces tax evasion.
iii. Simplified taxpaying procedure:-
In order to avoid confusion, the taxpaying procedure has been simplified.
4) External sector reforms:-
i. Devaluation of rupee:-
Devaluation refers to reduction in the value of domestic currency. This increases exports and reduces
imports which in turn increase the inflow of foreign exchange.
ii. Foreign trade policy:-
Tariff on imports was reduced to enhance the domestic trade and achieve economic growth.
Import licensing was abolished.
Export duty has been withdrawn to promote competition.
II. Privatization:-
It refers to transfer of ownership, management and control of government sector enterprises to the
private sector.
It means greater role to the private sector and reduced role of public sector.
It can be done by two ways:-
By withdrawal of the government ownership and management of public sector companies.
By sale of public sector companies.
Privatization of the public sector undertakings by selling part of the equity of PSU‘s to the private
sector is known as disinvestment.
The purpose of privatization is to improve financial discipline and facilitate modernization by
encouraging private sector to invest and participate in economic development with their administrative
efficiency.
It was also envisaged that private capital and managerial capabilities could be effectively utilized to
improve the performance of PSU‘s.
Need for privatization:-
The industrial policy resolution stated the importance of public sector for growth and social justice.
Employment was shifted from agriculture to Industries and Nine public sector enterprises known as
NAVRATANS were contributing to GDP.
But other public sector industries were not managed properly and turned into losses.
So, it was decided to sell out public sector shares to private entrepreneurs but keeping Navratans into
public sector.
i. Impact of privatization:-
Positive impact:-
Improves efficiency of management: - Privatization focused on self-interest that is profit
maximization, which increases the efficiency of work. Entrepreneurs work with full commitment and
as a result, they achieve higher production.
Competitiveness: - Privatization focused upon improving the performance by utilizing the capital and
managerial capabilities in an effective way. This encourages competition in domestic and international
market which induces modernization.
Diversification of products: - In order to generate more profit, production process was diversified and
expanded.
Consumer’s sovereignty: - Goods produced by industrialists was according to the choice of
consumers, which resulted in wider choice and better quality of life.
Reduces deficit: - Privatization reduces the financial burden of government by earning sufficient
profits and support government by paying taxes.
Negative impact:-
Neglect social interest:-Private sector functions mainly with the objective of profit maximization,
which ignores the social welfare of people.
High priced goods: - Privatization works according to demand and supply forces. It will increase the
price and it became a major problem of inflation.
Monopolistic control: - If privatization continued to spread like this then soon there will be monopoly
control of private sector which will hamper the objective of growth with social justice.
III. Globalization:-
It is the outcome of policies of liberalization and privatization.
It refers to free interaction among all the countries of the world in various fields like trade, technology,
loans investment, outsourcing etc.
Policies:-
i. Increase in equity limit of foreign investment:-
The foreign equity limit has been raised from 40% to 51%.
Approvals, sanctions and constraints on foreign investments have been relaxed after economic reforms.
Foreign exchange management act has been enforced.
ii. Partial convertibility:-
Partial convertibility of the currency was allowed by the government.
It refers to purchase and sale of foreign currencies at a price determined by the market. It was allowed
for import and export of goods and services, payment of interest etc.
iii. Long term trade policy:-
A new five year trade policy was announced to establish the framework of trade with rest of the world.
It removed almost all the restrictions on external trade.
Open competition has been encouraged. All sorts of goods can be traded except for some goods which
are of strategic importance to the nation.
iv. Reduction in Tariffs:-
In conformity with new economic policy, custom duties and tariffs imposed on imports and exports
have been gradually reduced.
The ones, which are still prevailing, have been modified to encourage competitiveness and promote
international trade.
v. Withdrawal of quantitative restrictions:-
Because of policies of WTO the restriction on imports has been abolished.
It ensures that all member countries should be given equal opportunity to trade in international market.
OUTSOURCING: - A company hires regular services from external sources, mostly from other countries,
which was previously provided internally or from within the country.
The low wage rates and availability of skilled manpower in India have made it a destination for global
outsourcing in the post reform period.
WTO: - Founded in 1995 as the successor of GATT. The objectives of WTO are:-
To enlarge production and trade of services.
To ensure optimum utilization of resources.
To protect the environment.
Advantages of Outsourcing:-
a) Employment: For a developing country like India, employment generation is an important objective
and outsourcing proves to be a boon for creating more employment opportunities. It leads to
generation of newer and higher paying jobs.
b) Exchange of technical know-how: Outsourcing enables the exchange of ideas and technical know-
how of sophisticated and advanced technology from developed to developing countries.
c) International worthiness: Outsourcing to India also enhances India‘s international worthiness
credibility. This increases the inflow of investment to India.
d) Encourages other sectors: Outsourcing not only benefits the service sector but also affects other
related sectors like industrial and agricultural sector through various backward and forward linkages.
e) Contributes to human capital formation: Outsourcing helps in the development and formation of
human capital by training, imparting them with advanced skills, thereby, increasing their future scope
and their suitability for high ranked jobs.
f) Better standard of living and eradication of poverty: By creating more and higher paying jobs,
outsourcing improves the standard and quality of living of the people in the developing countries. It
also helps in reducing poverty.
D. An appraisal of LPG policy:-
MERITS:-
i. Vibrant economy:-
There has been an increase in overall growth rate of the country.
In twelfth plan (2012-17) the GDP rate increased.
In order to achieve such high growth rate, the agriculture sector, industrial sector and service sector has
to be involved.
ii. Stimulant to industrial production:-
LPG policy has shown structural changes and it was a great stimulant to industrial production.
Because of such policies many industries came up and they have gained global recognition.
iii. Check on fiscal deficit:-
Fiscal deficit, which adversely affected the Indian economy prior to 1991, now started recovering after
the economic reforms.
It reduced from 8.5% in 1991 to nearly 4% in 2015-2016.
iv. A check on inflation:-
Prior to 1991, general price level was rising. Gulf crisis hit the Indian economy adversely and there was
continuous increase in the price level.
Due to LPG policies, inflation is brought under control. The annual rate of inflation reduced from
nearly 16.7% to 5.7%.
v. Consumer’s sovereignty:-
Now, consumers have ample of goods to make choice because of diverse global markets.
Products are as per the taste and preference of consumers.
Overall consumption expenditure has risen which implies increase in status of people.
vi. Rise in foreign exchange reserves:-
Due to rise in exports, the amount of forex reserves has also increased which contributes in the growth
rate of country.
DEMERITS:-
i. Neglect of agriculture:-
Reforms have not been able to benefit agriculture. It is because public investment in agriculture sector
like irrigation, power, roads etc. has been reduced in the reform period.
There was more focus on production of cash crops instead of food crops.
ii. Urban concentration of economic growth:-
The entire industries were set up in the urban areas which will increase gap between rural and urban
area.
The industries are set up in urban areas because the infrastructural facilities are available there.
iii. Economic colonialism:-
MNC‘s are being set up in the country, therefore it affects the domestic industries.
Domestic industries are unable to compete with foreign companies.
iv. Spread of consumerism:-
Because of competition and setup of Multinational companies consumers are adopting themselves into
western culture.
v. Lopsided growth process:-
Growth process was incomplete as it did not focus upon all sectors of the economy.
Industrialization is being given more importance and farming sector is being neglected.
Production of cash crops has increased supply in foreign markets whereas domestic supply has been
reduced.
Demonetization:- New
initiative was taken by the
Government of India on 8
G
S
Features:-
It is a destination based consumption tax with facility of Input Tax Credit in the supply chain.
There are 5 standard rates applied i.e.0%, 5%, 12%, 18% and 28%.
It has amalgamated a large number of central and state taxes and cesses.
a. Strategic sale Minority sale
i. Strategic sale refers to the sale of 51% or more Minority Sale refers to the sale of less than 49%
stake of a PSU to the private sector who bids stake of a PSU to the private sector.
the highest.
ii. The ownership of PSU is handed over to the The ownership of PSU still remains with the
private sector. government as it holds 51% of stakes.
A. Poverty:-
Poverty refers to a state in which an individual is unable to fulfill even the basic needs of life.
The minimum requirements include food, clothing, housing, education and health facilities.
In a developing country, most of the people do not have sufficient facilities and such nation lives in poverty
and remains in vicious circle of poverty.
B. Relative and Absolute poverty:-
i. Relative poverty:-
It refers to poverty of people, in relation to other people, regions or countries. It is the income position of
one group of people in comparison with other classes.
It compares the inequality of Income and assets ownership. It helps in understanding the relative position
of different groups of the population.
ii. Absolute poverty:-
It refers to the total number of people living below poverty line.
So, absolute poverty refers to a situation when a person is unable to meet this minimum consumption level.
C. Who are poor?
Those who cannot fulfill the basic requirements of life are called poor.
When minimum needs of life are not fulfilled, there will be a lot of discomfort, pain and sufferings among
people.
Beggars, pushcart vendors, street cobblers, landless labourers.
They live in kutcha hutments; many of them do not get even two meals a day.
Unstable employment. They do not have electricity, and no access to safe drinking water. Malnutrition
among them is high.
Kinds of poor
Chronic poor Transient poor Non-poor
Always poor Churning poor (who moves in and Who are never poor
out of poverty)
Usually poor Occasionally poor (who are rich
most of the time)
D. Poverty line:-
Dadabhai Naroji was the first person to discuss the concept of poverty line.
It refers to a cut-off point which divides people of region as poor and non-poor.
Percentage of population below poverty line is called ―Head Count Ratio‖
Determination of poverty line
Monthly per capita expenditure Income method
In this only private consumption expenditure is Rural area- income should be 816 where
considered. as in urban area income should be 1000.
In expenditure, food as well as non-food items are More income is required in urban area as
to be taken.
things are costly in urban area as
Consumption of food item is taken in terms of
calories. compared to rural area.
Requirement for calories:-
Rural area:- 2435 calorie
Urban area:- 2045 calorie
More calories are to be consumed in rural areas as
they perform more of the physical work.
On the basis of this in 2011-12 government has
identified income method also.
Limitations of Monthly per capita expenditure:-
This mechanism groups all the poor together and does not differentiate between the very poor and the other
poor.
Also this mechanism takes into account expenditure on food and income but there are other factors also
which is ignored such as basic education, health care etc.
This mechanism is helpful in identifying the poor as a group to be taken care of by the government, but it
would be difficult to identify who among the poor need help the most.
Social factors are also ignored such as illiteracy, ill health and lack of access to resources.
E. Trends of poverty in India:-
The two lines in the chart indicate the national poverty line. The first line below indicates poverty level
during 2011-12 and the other line indicates
the same for the year 1973-74. This means
proportion of poor in India during 1973-2012
has come down from 55 to 22 percent.
The six states –Tamil Nadu, Uttar Pradesh,
Bihar, Madhya Pradesh, West Bengal and
Orissa- contained large section of poor in
1973-74.
In 2012 poverty has been reduced in some of
the states but states like Odhisha, Madhya
Pradesh, Bihar and Uttar Pradesh are still far
above the national poverty line.
West Bengal and Tamil Nadu reduced the
poverty level much better than other states.
F. Causes of poverty:-
i. Low level of national product:-
The reason of poverty is low or poor level of national income in the country.
The per capita income of the country falls in the category of poorest country.
Less GDP implies less availability of goods and services among people, so they fall into the category of
poverty.
ii. High growth rate of population:-
The growth rate of population in India has always been higher than economic growth rate of the nation.
This leads to fall in per capita availability of goods and services.
The combination of growing poverty and growing population has resulted in higher level of poverty.
iii. Inflationary spiral:-
Because of low growth rate and high population in less developed countries, general price level tends to
rise.
This rise in price is known as Inflation which is the reason of poverty.
Combination of rise in prices and lower level of Income has decreased the purchasing power of people
resulting in poor quality of life.
iv. Unemployment:-
Poverty is just a reflection of unemployment.
Lack of job opportunities, lack of awareness, immobility of factors of production etc are responsible for
unemployment.
It has become a chronic problem which causes a challenge to the country. It has resulted in low level of
output, low level of income etc.
It is because of low level of income, people are unable to meet their basic needs.
v. Capital deficiency:-
There is lack of capital in the country due to which it causes low level of economic development.
Capital deficiency exists because of low level of income due to which there is low level of savings and low
level of capital formation.
It has resulted in declined levels of production, income, savings investment and capital formation,
unemployment and hence poverty.
vi. Fragmentation of land holdings:-
A large section of poor in India have very small lands and that too are less fertile as well as depends upon
rainfall.
The income from these small land holdings is not sufficient for their survival and they do not have alternate
employment opportunities.
G. Measures to remove poverty:-
1. Three dimensional approach to poverty alleviation:-
i. Growth oriented approach:-
a) Combating poverty through GDP growth:-
This is the most important measure to solve poverty by increasing the GDP.
There is the need to develop infrastructure so that new job opportunities can be generated and extra labour
force could be indulged in producing goods and services.
Greater employment results in higher growth rate and it implies less poverty
b) Combating poverty through population control:-
Poverty can be eradicated to a large extent, if we are able to control population. It will help us to cover the
gap between availability of resources and demand of goods and services.
If growth rate of population is moderated then there will be increase in GDP.
Both at an individual level and at national level, the country is able to enjoy a better standard as there
would be decrease in the percentage of people below the poverty line.
ii. Poverty alleviation programmes/ Employment generation programmes:-
a) Rural employment generation programme:-
This programme aims at creating self-employment opportunities in rural areas.
It is implemented by khadi and village industries commission.
In this programme, financial assistance is provided in the form of bank loan.
b) Swarnajayanti Gram Swarojgar Yojana:-
It is for self-employment programme, launched from April 1, 1999.
It aims to assist poor families by organizing them into self-help groups.
Under this program, a large number of small enterprises were established in rural areas.
It was restructured into National Rural Livelihood Mission.
c) National Rural Livelihood:-
It is to provide self-employment to 90 lakh people. This mission is also known as Aajeevika.
This was implemented in 150 districts 2012-13
Later on expended to 150 districts 2014-15 .
d) Samporana Grameen Rojgar Yojana:-
It was launched on 1 Sep, 2001. This scheme was launched to provide wage employment to poor workers.
It focuses on the development of regional, economic and social conditions.
It focused on the development of infrastructure.
The cost of this program is to be shared between the center states.
e) Swarna jayanti Shahri Rojgar Yojana:-
It was launched in 1997. It aims at creating employment opportunities for both self-employment and wage
employment in urban areas.
It includes urban-self-employment program and urban wage employment program.
The cost of this program is shared between the center and state in the ratio of 75:25.
f) Prime Minister’s Rojgar Yojana:-
It aims to provide employment to educated unemployed by giving financial help, So that they can set up
their own enterprises.
By 2003-05, 3.5 million people got employment under the scheme.
g) Mahatma Gandhi National Rural Employment Guarantee Act:-
It was launched in August, 2005.
The aim of the act is to provide guaranteed wage employment to every household for 100 minimum years.
Under this act all those who are ready to work at the minimum wage can report for work in areas where this
program is implemented.
iii. Providing minimum basic amenities through public expenditure:-
a) The third approach to reducing poverty is to provide minimum basic amenities to the people through public
expenditure on social consumption needs- provision of food grains at subsidized rates, education, health,
water supply and sanitation.
b) Three major programmes that aim at improving the food and nutritional status of the poor are Public
distribution system, integrated child development scheme and Midday Meal scheme.
c) Pradhan Mantri Sadak Yojana, Pradhan Mantri Gramodya Yojana, Valmiki Ambedkar Awas Yojana are
also attempts in developing infrastructure and housing conditions.
d) The government has also introduced a few schemes to provide health insurance to poor people.
e) National social assistance programme initiated by central government is the programme for elderly people
who do not have anyone to take care of them. In this pension is given to sustain them. Poor women and
widows are also covered under this programme.
f) From 2014, a scheme called Pradhan Mantri Jan Dhan Yojana is available in which people are encouraged
to open bank accounts. This scheme transfers all the benefits of government schemes and subsidies to
account holders directly. Each bank account holder is entitled to 1 lakh accident insurance and 30,000 life
insurance cover.
I. Critical Evaluation of Poverty Alleviation Programs:-
Achievements of PAP
Percentage of population who are under poverty reduced from 37.2 % in 2004-05 to 21.9 % in 2011-12.
Wages rates have increased.
Growth oriented approach, specific alleviation programs and meeting the minimum needs of the poor, have
been able to reduce poverty.
Failure of PAP:-
Unequal distribution of land and other assets:- Due to unequal distribution of land and other assets, the
benefits from direct poverty alleviation programmes have been appropriated by the non-poor.
Insufficient resources:- compared to the magnitude of poverty, the amount of resources allocated for
these programmes is not sufficient.
Inefficient use and wastage of resources:- These programmes depend mainly on government and bank
officials for their implementation. Since such officials are ill motivated, inadequately trained and
corruption prone, the resources are inefficiently used and wasted.
Chapter-8 Human capital Formation
Just as a country can turn
A. Concept:-
Human capital refers to the stock of skill and expertise if human beings in the country.
Human capital formation implies the addition to the stock of abilities and skills among the population of
the country.
It is basically acquiring and increasing the number of people who have skills and expertise which are
important for overall development of the country.
B. Sources of human capital formation:-
i. Expenditure on education:-
Investment in education is considered as one of the main sources of human capital.
Expenditure on education increases the efficiency and skill of human capital.
Education enhances mental horizon of human resources and helps in generating profits in future.
Individuals invest in education to increase their skills and efficiency resulting in higher earning capacity.
ii. Expenditure on health:-
Health is considered to be an important input for the development of nation as much as it is important for
the development of an individual.
It directly increases the physical and mental ability of human beings and produces healthy labour force.
Healthy person adds more to GDP of the nation than a sick person.
iii. On-the job training:-
This type of training is required to enhance skills and expertise of human capital in order to increase the
productivity of workers.
This is the training given to the individual at the time when he performs his job by skilled workers.
Expenditure done on this training programme will enhance the labour productivity.
This may take different forms:- the workers may be trained in the firm itself under the supervision of
skilled labour.
iv.Expenditure on migration:-
Migration means movement from one place to another.
People move from one place to another in search of jobs where they can utilize their skill in an efficient
way.
Expenditure done on migration is also considered as source of human capital formation as the earnings are
much higher than cost.
Migration involves cost of transportation, higher cost of living etc.
v. Expenditure on information:-
People spend to acquire information relating to market and educational institutions.
The information is necessary to make decisions regarding investment in human capital as well as for
efficient utilization of resources.
C. Role of human capital formation:-
i. Higher productivity of physical capital:-
Physical capital formation depends upon human capital formation.
The physical capital can be utilised effectively only by skilled and intelligent work of human capital in the
economy.
Thus, human capital formation raises productivity of physical capital which is desired for economic
growth.
ii. Innovative skills:-
The human capital formation not only increases the productivity of human resources but also stimulates
innovation.
Education provides knowledge to understand changes in society and scientific advancements thus
facilitating inventions & innovation.
Large the number of skilled and trained personnel, greater the possibilities of innovation.
iii. Higher rate of participation and equality:-
Higher rate of participation means increase in employment.
Human capital formation has increased the productivity of individuals which increases employment
opportunities and also provides economic and social equality.
iv. Improvement in quality of life:-
The quality of life improves due to quality education, health and skill formation acquired by the people.
Human capital formation enables them to enjoy a higher standard of living, they are able to generate better
remuneration for them and for the nation.
v. Change in emotional and material environment of growth:-
Change in emotional growth means change in attitude level of individual. Individual will become more
growth oriented.
Change in material environment means now society as a whole can grow as there are more skilled people
or workers who will implement the plans & policies in an effective way.
D. Problems facing human capital formation:-
i. Rising population:-
Continuous rise in population will adversely affect the quality of human capital.
Benefits of economic growth relating to housing, hospitals, education etc. have reduced due to rising
population.
Rapidly rising population lowers the capacity to possess skill and expertise required for economic growth.
ii.Brain-drain:-
Loss of resources in terms of ―Brain-Drain‖ is a serious outcome of migration when educated and skilled
manpower moves to other countries to work.
The countries like India cannot afford migration of persons of high calibre and possessing high quality
education who choose to render their services abroad.
iii. Deficient manpower planning:-
In India, there exists imbalance between the demand and supply of human resources required for different
categories of work.
Because of poor manpower planning there is wastage of scarce resources of the country.
iv. Insufficient training in primary sector:-
Primary sector is the most important sector but proper training is not provided to them in order to utilize
the resources effectively.
There are widespread inefficiencies in arranging on-the job training programmes.
v. Low academic standards:-
Educational facilities in India have not developed as required for economic growth.
There is mismatch between the requirement of skills and available academic standards.
The result of this is that skills, training and expertise obtained by human capital is insufficient to meet the
desired standards of economic growth.
E. Reports on the Indian Economy:-
Two independent reports on the Indian Economy, in recent times, have identified that India would grow
faster due to its strength in human capital formation.
Deutsche Bank, a German bank in its report on ‗Global Growth Centers‘ identified that India will emerge
as one among four major growth centres in the world by the year 2020.
With reference to India it states, ―Between 2005 and 2020 we expect a 40% rise in the average years of
education in India.
World Bank, in its recent report, ‗India and the knowledge Economy- Leveraging strengths and
opportunities‘, states that India should make a transition to the knowledge economy and if it uses its
knowledge as much as Ireland does then the per capita income of India will increase from US$1000 IN
2002 to US$3000 in 2020.
It further states that the Indian economy has all the key ingredients for making this transition such as, a
critical mass of skilled workers, a well-functioning democracy and diversified science and technology
infrastructure.
F. Government intervention in Education and health sectors:-
Expenditure on education and health makes substantial long term impact and they cannot be easily
reversed; hence, government intervention is essential.
The role of government is to ensure that the private providers of these services adhere to the standards
stipulated by the government and charge the correct price.
In a developing country like India, with a large section of the population living below the poverty line,
many of us cannot afford to access basic education and health care facilities.
Basic health care and education is a right of the citizens. So it is essential that the government should
provide education and health services free of cost for the deserving citizens and those from the socially
oppressed classes.
G. Growth of education sector in India:-
During 1952-2014, education expenditure as percentage of total government expenditure increased from
7.92 to 15.7 and as percentage of GDP increased from 0.64 to 4.13.
In 2009, the Government of India enacted the Right to Education Act to make free education a fundamental
right of all children in the age group of 6-14 years.
Government of India has also started levying a 2 % ‗Education Cess’ on all Union taxes. The revenues
from education cess have been earmarked for spending on elementary education.
In addition to this, the government sanctions a large outlay for the promotion of higher education and new
loan schemes for students to pursue higher education.
H. Educational achievements in India:-
S. no Particulars 1990 2000 2015
1. Adult literacy rate (%) of people aged above 15
Male 61.9 68.4 81
Female 37.9 45.4 63
2 Primary education completion rate
Male 78 85 94
Female 61 69 99
3 Youth literacy rate
Male 76.6 79.7 92
Female 54.2 64.8 87
A. Rural development:-
It is the process which targets betterment of rural areas.
It focuses on the action plan for the development of rural areas that are lagging behind in the overall
development of the country.
The key issues in Rural Development:-
Development of human resources
Land reforms
Infrastructure development
Finance for land reforms and agriculture marketing
B. The challenges of rural development:-
1) The lingering challenges:-
a) The challenge of rural credit:-
Rural credit refers to the credit for farmers in rural areas. Credit facility /loan contribute to the growth of
rural areas.
The need for credit arises because poor farmers do not have surplus to invest in the improvement of
agriculture.
There is time difference between sowing and harvesting of the crops. Farmers borrow in between sowing
and harvesting of the crops. Farmers borrow in between to meet their requirements.
Need for credit:-
i. Short term credit:-
It is the credit required to meet short term needs.
The period of this loan ranges between 6-12 months.
It is required to buy seeds, tools, manures, fertilizers etc.
ii. Medium term credit:-
It is credit required to meet medium term needs.
The period of this loan ranges from 12 months- 5 years.
It is required to buy machinery, fences, digging wells, constructing cattle sheds etc.
iii. Long term credit:-
It is credit required to meet long term needs.
The period of this loan ranges between 5-20 years.
It is required to buy lands, heavy machines and equipments.
Sources of Rural credit:-
i. Non-institutional sources:-
These are traditional sources of rural credit in India. These sources include money-lenders, landlords, and
traders.
They charge very high rate of interest and thus exploit farmers.
They acquire land on failure to pay back the loan.
They force farmers to sell their crops to them at low prices.
ii. Institutional sources:-
a. Cooperative credit societies:-
These societies advance credit to the farmers at reasonable rate of interest. These contribute nearly 30% of
the rural credit.
These focus on the following objectives:-
To free the farmers from the hands of money lenders.
To advance credit at low rates of interest.
To spread credit facilities all over the country.
To ensure timely and continuous flow of credit to the rural areas.
b. RRBs and land development bank:-
RRBs are regional rural banks and land development banks set up to promote credit facilities.
The credit is granted against the mortgage of their lands.
These banks provide credit for purchasing agricultural inputs, construction etc.
c. State bank of India and other commercial banks:-
The state bank of India was set up in 1955 with a focus on rural credit.
After the nationalization in 1969, commercial banks played a major role in advancing credit.
Commercial banks directly help the farmers by expanding their branches in rural areas.
It also indirectly helps the farmers through agents.
d. NABARD:-
NABARD means National bank for agriculture and rural development. It was set up in 1982 as an apex
body to coordinate the activities of other financial institutions.
It promotes the strength of the credit institutions in credit delivery system.
It provides assistance to non-farms sector also and evaluates the projects financed by it.
It coordinates the functioning of different financial institutions involved in advancing rural credit.
e. Self-Help groups
Formal sources are not inadequate and not able to meet their requirements.
It promote saving habits by contribution from each member.
From the pooled money, credit is given to needy members to be repayable in small installments at
reasonable rate of interest.
SHGs have helped in the empowerment of women. It is also known as micro-credit programme.
For eg:- Kudumbashree is a women oriented community based self help group implemented in kerala in
1955.
Stage I: SHG provides a new
opportunity for women to
come together, meet
Rural banking-A critical evaluation:-
Banking credit facility is available by keeping something as collateral security because of this poor and
marginal farmers are left out.
There is relaxed policy relating to recovery of loans and because of this sometimes bank may fall in
problem.
Farming families fail to save money properly due to which deposit funds are less in commercial banks.
b) The challenge of agriculture marketing:-
It is a process that involves the assembling, storage processing, transportation, packaging, grading and
distribution of different agricultural commodities across the country.
Measures initiated by government to improve marketing system:-
i. Regulated markets:-
These were created to create transparent marketing conditions which will benefit farmers as well as
consumers.
This measure protects the farmers from exploitation by the middlemen.
The market committees ensure that the farmers get reasonable price of their produce.
There is strict vigil on the use of proper scales and weighs.
ii. Cooperative agricultural marketing societies:-
Under this system, farmers get together and form marketing societies to sell the produce collectively
and take benefit of collective bargaining to secure a better price of their products.
iii. Provision of warehousing facilities:-
Government has provided storage facilities in the view to help farmers for storing the goods.
This encourages the farmers to store their produce in the warehouse of central or state government and
sell their produce at a time when the price is attractive.
Power generation:-
Power / electricity are the most visible forms of energy, which is often identified with progress in modern
civilization.
It is a very important component of infrastructure which influences the economic development of the
country.
The growth rate of demand for power is generally higher than the GDP growth rate. Studies point out that in
order to have 8% GDP growth per annum, power supply needs to grow around 12 % annually.
Sources of power:-
Health
Tier-3 Tertiary
set up in small towns and medical centres which
Tier-1 PHC,CHC and
managed by doctor and and have facilities for
provide special facilities.
ANM. surgery and are set
up in big cities. These are like AIIMS,PGI
Tier-2
It also educates people
Secondary
etc.
about health care &
provide immunisation
Sub
facilities.
It offer preliminary
treatment.
Women’s Health:-
Women suffer many disadvantages as compared to men in the areas of education, participation in economic
activities and health care.
The deterioration in the child sex ratio in the country from 927 in 2001 to 914 in 2011 points to the growing
incidence of female foeticide.
Close to 3,00,000 girls aged below 15 years are not only married but have already borne children at least
once.
More than 50% of married women in the age group of 15-49 years have anaemia and nutritional anaemia
caused by iron deficiency, which has contributed to 19% of maternal deaths.
Abortions are also major cause of maternal morbidity and mortality in India.
Health as an emerging challenge:-
i. Unequal distribution of health care center:-Distribution of health care facilities is very inequitable
across different parts of the country. Most of health care facilities are in urban areas.
ii. Communicable diseases:-There is urgent requirement to identify, prevent and make people aware of some
communicable diseases which are threat to society such as AIDS, HIV, and SARS etc.
iii. Poor management:-There is huge shortage of health personal as per the requirement to provide health
care facilities. Health personal are inefficient to meet the growing need to provide medical assistance,
especially in rural areas.
iv. Privatization:-Private sector has grown by leaps & bounds in providing health care facilities. This health
care provides services which are very expensive and cannot be affordable by everyone.
v. Poor upkeep and maintenance:-Maintenance of public sector health care centers is very poor. The quality
difference in terms of cleanliness is so huge between private & public health care that people are forced to
depend upon private treatment.
vi. Poor sanitation level:-Level in sanitation is very poor in India. We will not be able to maintain the required
standard of keeping our surrounding clean and making people aware of benefits of clean surrounding.
Suggestions to improve health care facilities:-
i. Decentralization of public health services:- Health is a vital public good and a basic human right.
All citizens can get better health facilities if public health services are decentralized.
ii. Sound health infrastructure:- Success in the long-term battle against diseases depends on education and
efficient health infrastructure. It is, therefore, critical to create awareness on health and hygiene and
provide efficient systems. The role of telecom and IT sectors cannot be neglected in this process.
iii. Primary health care:- The effectiveness of healthcare programmes also rests on primary healthcare.
The ultimate goal should be to help people move towards a better quality of life.
iv. Reducing the gap between urban and rural healthcare:- There is a sharp divide between urban and rural
healthcare in India. If we continue to ignore this deepening divide, we run the risk of destabilizing the socio-
economic fabric of our country.
v. Accessibility and affordability of basic healthcare:- In order to provide basic healthcare to
all, accessibility and affordability need to be integrated in our basic health infrastructure.
CH-12 Environment and Sustainable Development
A. Concept of environment:-
Environment is the condition which influences human life.
It includes living and non-living elements such as birds, animals, forest etc. and air, water, land etc.
It includes all the biotic and abiotic factors that influence each other.
Environment includes water, air and land and the inter-relationship which exists among and between water,
air, land and human beings and other creatures, plants, micro-organisms and property.
B. Significance of environment:-
i. Environment offers resources for production:-
Environment supplies resources which are important for production.
Resources include renewable and non- renewable resources such as-trees, plants, fossil fuels etc.
These are natural resources and are used as inputs for producing goods and services.
ii. Environment sustains life:-
It includes the basic element required for survival. For eg:- Air, water, soil, sun etc.
Environment has that capacity which supports life.
Absence of elements such as air, water etc. implies end of life.
iii. Environment assimilates (absorbs) waste:-
During the production process lots of waste is generated.
Generation of waste occurs in the form of garbage. Environment absorbs this waste created by the activities
of production and consumption.
The wastes generated should be within the carrying capacity of the environment.
Carrying capacity or absorptive capacity means the ability of the environment to absorb degradation.
iv. Environment enhances quality of life:-
Environment includes all those elements which improve quality of human life. For eg:-land, seas, ocean
etc.
All these elements make our surroundings beautiful and refreshing.
Human being would cherish and enjoy these surroundings which will help in improving their quality of
life.
C. Current environmental crisis:-
Opportunity cost of negative environmental impacts is high.
Many resources have become extinct and the wastes generated are beyond the absorptive capacity of the
environment.
The industrial development has polluted and dried up rivers and other aquifers making water an economic
good.
The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some
of these vital resources and we are compelled to spend huge amounts on technology and research to explore
new resources.
Added to these are the health costs of degraded environmental quality- decline in air and water quality has
resulted in increased incidence of respiratory and water-borne diseases. Hence the expenditure on health is
also rising.
Global environment issues such as the global warming and ozone depletion also contribute to increased
financial commitments for the government.
D. Supply-demand reversal of environmental resources:-
In the early days when civilization just began, or before this phenomenal increase in population, or before
countries took to industrialization, the demand for environmental resources and services was much less
than their supply.
This meant that pollution was within the absorptive capacity of the environment and the rate of resource
extraction was less than the rate of regeneration of these resources.
Hence environmental problems did not arise.
But with the population explosion and with the advent of industrial revolution to meet the growing needs of
the expanding population, things changed.
The result was that the demand for resources for both production and consumption went beyond the rate of
regeneration of the resources.
The pressure on the absorptive capacity of the environment increased tremendously.
This has resulted in a reversal of supply-demand relationship of environmental resources.
E. Challenges to India’s environment:-
The threat to India‘s environment poses a dichotomy:-
o Threat of poverty-induced environmental degradation
o Threat of pollution from affluence and a rapidly growing industrial sector.
The priority issues identified are:
1) Land degradation:-
It refers to a decline in fertility of land and quality of the soil.
It occurs because of soil erosion, unstable use and inappropriate management practices.
Some other factors responsible for land degradation are:-
Shifting cultivation.
Forest fires and over grazing.
Improper crop rotation etc.
Unsustainable fuel wood and fodder extraction.
2) Soil erosion:-
It means loss of upper layer of the soil which contains major nutrients for growth of plants.
Excessive water logging on the top of soil reduces its fertility.
Estimates of soil erosion show that soil is being eroded at a rate of 5.3 billion tonnes a year for the entire
country.
According to the Government of India, the quantity of nutrients lost due to erosion each year ranges from
5.8 to 8.4 million tonnes.
3) Deforestation:-
It is a continuous and regular decrease in forest area. Forest cover indicates the quality of land.
It is because of cutting trees to meet the need of raw- materials for growing industrialization.
Deforestation arises because of urbanization. More and more forests are cleared for development of towns.
Multi-purpose river projects like (Bhakra dam) are another factor, contributing to deforestation.
The consequences of deforestation are:-
Negative effect on wild life and plant life.
Deterioration in the quality of land resources.
Harm to the natural environment of the country.
4) Pollution:-
It refers to those chemical substances which contaminate the environment.
The CPCB (Central Pollution Control Board) has identified seventeen categories of industries as
significantly polluting.
i. Air pollution:-
Air pollution means presence of air pollutants in the air which are harmful to human beings, animals and
vegetation.
The causes of increase in air pollution are rapid industrialization, urbanization, thermal power plants.
Following factors contribute to air pollution:-
Smoke emitted by the industries due to use of fossil fuels.
Vehicular emissions due to the use of liquid fuels.
Smoke emitted by consumption of energy in rural households.
It causes various diseases like asthma, hypertension, respiratory problems etc.
ii. Water pollution:-
Water pollution means presence of water pollutants in the water which contaminate or degrade the quality
of water.
The cause of increasing water pollution is rapid industrialization, refineries etc.
Major concern is rapid growth of industries like textiles, chemicals, refineries etc.
Soil erosion, decay of organic matter mixed with pesticides and insecticides runs into streams and rivers
which contaminates water.
Thus the major sources of water pollution are:-domestic sewage, industrial waste, agricultural waste etc.
Water being very basic element of life, if polluted, creates health problems like hepatitis, diarrhoea etc.
iii. Noise pollution:-
Noise pollution means discomfort and irritation caused by loud sound.
Noise created by loudspeaker, vehicles, animals, machines cause noise pollution.
Thus the major sources of noise pollution are:-
Sound produced by heavy machines.
Sound produced by automobiles.
Sound produced by the industrial machines.
Sound produced by household appliances like mixer-grinders, water boosters and washing machines.
F. Sustainable development:-
It refers to the development strategy to meet the needs of present generation without compromising the
needs of future generations.
It enables all generations to make best use of resources.
Development that will allow all future generations to have a potential average quality of life that is at least
as high as that which is being enjoyed by the current generation.
The Brundtland Commission emphasises on protecting the future generations.
To achieve sustainable development, the following steps must be taken:-
Limiting the human population to a level within carrying capacity of the environment.
The carrying capacity of the environment is like a ‗plimsoll line‘ of the ship which is its load limit
mark.
In the absence of plimsoll line for the economy, human activities grow beyond the carrying capacity
of the Earth and prevents sustainable development.
Technological progress should be input efficient and not input consuming.
Renewable resources should be extracted on a sustainable basis, that is, rate of extraction should not
exceed rate of regeneration.
For non-renewable resources, rate of depletion should not exceed the rate of creation of renewable
substitutes.
Inefficiencies arising from pollution should be corrected.
Strategies for sustainable development:-
i. Solar energy:-
India is naturally endowed with a large quantity of solar energy in the form of sunlight.
With the help of photovoltaic cells, solar energy can be converted into electricity.
These cells use special kind of materials to capture solar energy and then convert the energy into
electricity.
This technique is totally free from pollution.
Sunlight is non-exhaustible source of energy which will solve economic problems and also achieve
sustainable development.
ii. Wind power:-
In areas where speed of wind is usually high, windmills can provide electricity without any adverse effect
on environment.
Wind turbines move with wind and electricity is generated.
No doubt, the initial cost is high.
But the benefits are such that the high costs get easily absorbed.
iii. Mini-hydel plants:-
In mountainous regions, streams can be found almost everywhere. A large percentage of such streams are
perennial.
Mini-hydel plants use the energy of such streams to move small turbines.
The turbines generate electricity which can be used locally.
They generate enough power to meet local demands.
They can also do away with the need for large scale transmission towers and cables and avoid transmission
loss.
iv. Organic farming:-
Organic farming can be used as substitute to chemical fertilizers etc. then chemical fertilizer reduce soil
fertility and loss of production capacity of soil for future generations.
Organic farming focuses on soil health and prevents water pollution.
In certain parts of country, cattle is maintained only because it produces dung which is an important
fertilizer.
Biopest control:- Several types of pest controlling chemicals have been isolated from neem and these are
being used.
v. LPG, Gobar Gas in rural areas:-
Households in rural areas generally use wood, dung cake or other biomass as fuel.
LPG is a clean fuel. It reduces household pollution to a large extent. Also, energy waste is minimized.
In addition , gobar gas plants are being provided through easy loans and subsidy.
For the gobar gas plant to function, cattle dung is fed to the plant and gas is produced which is used as fuel
while the slurry which is left over is a very good organic fertilizer and soil conditioner.
vi. Strict law on the disposal of chemical effluents:-
There should be strict vigil on implementation of law made for chemical disposal.
Strict actions should be taken against those who violate the law by disposing of chemical residuals in
water.
vii. Awareness to conserve natural resources:-
Natural resources should be conserved for inter- generation equity. It means equal opportunities for present
and future generations.
Awareness programmes will help in conserving natural resources.
Ch-13 Development experience of India, Pakistan and China- A comparative study
In 1965, Mao introduced the Great Proletarian Cultural Revolution (1966-76) under which students and
professionals were sent to work and learn from country side.
China‘s present rapid industrial growth can be traced back to its reforms in 1978.
China introduced reforms in phases.
Initial phase Later phase
Reforms were initiated in agriculture, Reforms were initiated in industrial sector.
foreign trade and investment sectors. Private sectors were allowed to produce goods.
For example:- in agriculture , commune At this stage enterprises owned by government
lands were divided into small plots, were allowed to face competition.
which were allocated to individual The reform process also involved dual pricing.
households. Producers were supposed to sell fixed amount of
They were allowed to keep all income quantity at fixed price decided by government
from the land after paying stipulated whereas rest of the quantities could be sold at
taxes. market price.
SEZ were set up to attract foreign investors.
However, in recent past, GDP growth in China has slowed down. some of the reasons are:-
Demand of Chinese products has reduced in global economies.
Chinese economy slowed down because of less domestic investment.
Chinese people were migrating to other countries in search of skilled job opportunities.
Environmental degradation was a concern in China because more industries were set up and
were causing serious challenge of sustainable development.
C. Growth story of Pakistan:-
Pakistan adopted various economic policies similar to those adopted by India.
Pakistan also followed mixed economy model with co-existence of public and private sectors.
In the late 1950‘s and 1960‘s Pakistan introduced various policies. Such as tariff protection for
manufacturing of consumer goods together with direct import controls on competing imports.
The introduction of Green Revolution changed the agrarian sector. It led to increase in public investments
in infrastructure which finally led to a rise in the production of food grains.
In the 1970‘s nationalization of capital goods industries took place. Pakistan then shifted its policy and
introduced denationalization on encouragement of private sector.
They received financial support from western countries and also financial support to private sector from
government.
In 1988 Pakistan introduced economic reforms.
In Pakistan the reform process led to worsening of all the economic situations.
The reasons for slow down of
growth and reemergence of
Poverty in Pakistan‘s
D. Economic Development Indicators of India, China and Pakistan:-
1. Salient Demographic Indicators of India, China and Pakistan:-
Select Demographic Indicators, 2015
Country Population Density Annual Sex ratio Fertility rate urbanisation
Growth of
population
India 1311 441 1.2 929 2.3 33
China 1371 146 0.5 941 1.6 56
Pakistan 188 245 2.1 947 3.7 39
China has the highest population followed by India. If we look at the global population, out of every six
persons in the world one is Indian and another is Chinese. The population of Pakistan is very small
accounts for roughly about one-tenth of China or India.
China is the largest nation and geographically occupies largest area but its population density is the lowest.
The population growth is highest in Pakistan followed by India and China. Major reason for low population
growth in China was ‗One Child Policy‘ norm initiated in late 1970‘s.
Sex ratio is low in all the three countries. Preference for sons, in all these countries is the reason for low
sex ratio.
The fertility rate is also low in China and very high in Pakistan.
Urbanization is high in China with India having 33% of its people living in urban areas.
2. GDP growth rate trends in India, China and Pakistan:-
Annual growth of GDP (in %), 1980-2017
Country 1980-90 2015-17
India 5.7 7.3
China 10.3 6.8
Pakistan 6.3 5.3
China has the second largest GDP of $ 19.8 trillion whereas India and Pakistan‘s GDP is $8.07 and $0.97
trillion.
When many countries were finding it difficult to maintain a growth rate of even 5%, China was able to
maintain near double digit growth rate for one decade.
In the 1980‘s, Pakistan was ahead of India, China was having double-digit growth and India was at the
bottom.
In 2011-15, there has been a decline in China‘s growth rates whereas, Pakistan met with drastic decline at
4%. Some scholars hold economic reforms in 1988 and political instability responsible behind the trend.
3. Sectoral contribution towards GDP in India, China and Pakistan
Sector India China Pakistan
Agriculture 17 9 25
Industry 30 43 21
Services 53 48 54
Total 100 100 100
Share of agriculture sector:- In China, the contribution of agriculture to GDP was 9% in 2015-17, in India it
was 17% and in Pakistan, it was 25%.
Share of Manufacturing and service sector:- In all three economies, the industry and service sectors
contribute more in terms of output. In China, manufacturing and service sectors contribute the highest to
GDP at 43% and 48% respectively whereas in India and Pakistan, it is the service sector which contributes
the highest by more than 50% of GDP. The contribution of Industries to GDP is at 30% in India and 21 %
in Pakistan.
4. Sectoral share of employment in India, China and Pakistan
Sector India China Pakistan
Agriculture 42.7 17.5 42
Industry 23.8 26.5 3.7
Services 33.5 56 54.3
Total 100 100 100
In China, only 17.5% of the workforce was engaged in agriculture in 2015-17.
But the proportion of workforce that works in this sector is more in India.
In Pakistan, 42 % of people work in agriculture sector whereas in India it is 42.7%
In all three countries workforce in Industry and Services sectors is less.
In China, workforce in service sector is high as compared to India and Pakistan.
5. Development of India, China and Pakistan with respect to indicators of human development:-
Item India China Pakistan
HDI 0.64 0.75 0.56
Rank 130 86 150
Life expectancy 68.8 76.4 66.6
Years of schooling 6.4 7.8 8.6
GDP per capita 6427 15309 5035
BPL 60.4 23.5 46.4
Infant mortality rate 34.6 8.5 64.2
Maternal mortality rate 174 27 178
Improved sanitation 44.2 75 58.3
Improved water sources 94 96 91
Undernourished children 37.9 8.1 46.4
China is moving ahead of India and Pakistan. Two indicators are there that is Income indicator and
Health indicator.
Pakistan is ahead of India in reducing BPL and also in sanitation. India has largest share of poor among
three countries.
Neither of these two countries-India and Pakistan have been able to save women from maternal
mortality.
Liberty indicator:- It
Ch-1 Indian Economy on the Eve of Independence Day
Objective type questions:-
1. During British period, Indian economy was:-
(a) semi-feudal income (b) disintegrated economy
(c) colonial economy (d) all of the above
2. First attempt to estimate national income in India during British period was made by:-
(a) Findlay Shirras (b) Dadabhai Naroji (c) William Digbey (d) V.K.R.V.Rao
3. In livelihood agriculture, farmers:-
(a) exchange all their products with other products
(b) produce goods for market only
(c) depend on market-conditions
(d) mainly produce food crops only
4. In British India, cloth industry was concentrated at:-
(a) Ahmedabad (b) Bengaluru (c) Hyderabad (d) Ghaziabad
5. During British regime which one of the following work was not performed:-
(a) establishment of railways (b) establishment of telephone system
(c) establishment of wireless system (d) establishment of metro in Delhi
6. An economy which is made to serve the interest of its rulers is called:-
(a) colonial economy (b) agricultural economy
(c) industrial economy (d) all of the above
7. Major contribution to GDP of the country on the eve of Independence was from:-
(a) agriculture (b) trade (c) modern industries (d) none of these
8. Which among the following is the cause of agricultural stagnation during the British colonial rule?
(a) System of land settlement (b) Limited public sector
(c) Mass illiteracy (d) All of the above
9. In which year, railways was introduced in India?
(a) 1850 (b) 1853 (c) 1890 (d) 1892
10. The first railways in India was operated between which of the following two stations:-
(a) Delhi and Bombay (b) Bombay and Kolkata
(c) Bombay and Thane (d) Bombay and Pune
11. Which industry of India suffered the most due to British rules?
(a) Paper (b) Cement (c) Capital (d) Handicraft
12. Which of the following factor further caused decline of jute textile after partition of the country?
(a) British policies (b) Famines
(c) Lack of raw materials (d) All of the above
13. Which of the following statement is true for British period in India?
(a) India attained self-sufficiency in food grain production
(b) There were check over famines
(c) Effective administrative setup
(d) All of the above are true
14. Which one of the following was high during British rule in India?
(a) Literacy rate (b) Female literacy
(c)Infant mortality rate (d) Life Expectancy
15. Britishers created a monopoly over India‘s foreign trade, from which of the following ways?
(a) Full control over foreign trade (b) Discriminatory tariff rates
(c) Opening of Suez Canal (d) All of the above
16. The second stage of demographic transition began after .(1921/1930)
17. Growth rate of sector was very small in GDP. (agriculture/industrial)
18. The Tata iron and steel company was incorporated in .(1910/1907)
19. First Indian census of population during British rule took place in the year .
20. The share of workforce engaged in agriculture during British rule was .
21. Before independence, the India‘s jute industries concentrated in part of the country.
22. Under colonial rule, the cotton textile industries were dominated by .
23. During colonial period, India had a balance of trade.
24. During British rule in India about of population was living in rural areas.
25. Literacy rate during British rule was approximately_ .
26. Occupational structure refers to the distribution of population into various sectors of economic
activity.
27. First train in Indian railways began its operation in 1953. (True/False)
28. Infant mortality rate refers to the number of infants living per 1000 live birth. (True/False)
29. Commercialization of agriculture means production of crops for self-consumption. (True/False)
30. During colonial period, India‘s export trade was export surplus. (True/False)
31. Indian economy was source of raw material for British industries. (True/False)
32. First census was conducted in 1881 during British India period. (True/False)
33. Capital goods industry produced machine tools which in turn, used for producing articles for current
consumption. (True/False)
34. During the colonial rule, there always remained an acute shortage of all-weather roads. (True/False)
35. Match the following:-
Group I Group II
1. Railway services in India 1853
2. First Indian census 1850
3. Second stage of demographic transition 1881
4. First train in India 1921
59. Match the following economic indicators with their appropriate description:-
1. Gross domestic product Avoiding imports of those goods which can be produced in
India
2. Modernization Adoption of new technology
The money value of all final goods and services produced
within the economy in a year.
60. Match the following terms with their appropriate description:-
Quota Quantity of goods that can be imported
High yielding variety seeds Improvement in the field of agriculture to increase
productivity
Seeds that give large proportion of output
Short answer type questions: - (3 Marks)
1. What are the main objectives of 11th five year plan?
2. What were the two main land reforms undertaken in India?
3. What is Green Revolution? When and why was it implemented?
4. Explain the statement that green revolution enabled the government to procure sufficient food grains to
build its stocks that could be used during time of shortage.
5. Explain land ceiling as a policy to promote equity in agriculture.
6. What is cooperative farming?
7. Why small scale industries need protection from government?
CH 4- Poverty
Objective type questions:-
1. With which disparity of income and its distribution are associated?
(a) absolute poverty (b) relative poverty
(c) chronic poverty (d) all of the above
2. Relative poverty is prevalent in:-
(a) capitalist countries (b) socialist countries
(c) communist countries (d) developed countries
3. Absolute poverty is prevalent in:-
(a) capitalist countries (b) socialist countries
(c) communist countries (d) developed countries
4. Estimation of poverty in rural economies is as per day consumption of calories:-
(a) less than 2200 (b) less than 2100
(c) less than 2400 (d) less than 2000
5. Estimation of poverty in urban areas is as per day consumption of calories:-
(a) less than 2200 (b) less than 2100
(c) less than 2400 (d) less than 2000
6. What is the main reason of poverty in India in urban
areas:-
(a) Lack of professional education (b) unequal distribution
(c) lack of planning facilities (d) money inflation
7. Which kind of poverty is related to the distribution of income:-
(a) low line poverty (b) absolute poverty
(c) relative poverty (d) none of these
8. People who do not usually have sufficient money to fulfill their basic needs are referred to as:-
(a) Usually poor (b) always poor (c) occasionally poor (d) churning poor
9. Poverty ratio has for both urban and rural areas.
(a) Increased (b) decreased
(c) remains constant (d) none of these
10. Which one of the following groups is vulnerable to poverty?
(a) Scheduled caste (b) Landless agricultural labourer
(c) Urban agricultural household (d) All of the above
11. Which of the following programme has been merged with MGNREGA?
(a) Food for work programme (b) National food for work programme
(c) Rural employment generation programme (d) None of the above
12. Who was the first person to define poverty line in terms of Jail Cost of Living?
(a) Dadabai Naroji (b) V.K.R.V. Rao (c) William Digbey (d) R.C.Desai
13. Economist identifies the poor on the basis of their ownership of assets .
(a) Income (b) Occupation (c) Expenditure (d) Living standard
14. Small farmers and seasonal workers are categorized as:-
(a) Chronic poor (b) Churning poor
(c) Occasionally poor (d)Both (b) and (c)
15. Following is not a part of poverty alleviation programme:-
(a) Desert development plan (b) Minimum need programme
(c) Employment exchange (d) Jawahar yojana
16. Which of these is not a cause of low productivity?
(a) General factors (b) Institutional factors
(c) Social factors (d) Technological factors
17. Which projects have been launched to provide self-employment?
(a) Rural Employment Generation programme (b)Prime Minister rozgar yojana
(c) Swarna Jayanti shahri rozgar yojana (d) All of the above
18. was the first person to discuss the concept of poverty line.
19. Percentage of population below poverty line is called .
20. , noted Laureate, has developed an Index to estimate poverty, known as Sen Index.
21. Three major programmes that aim at improving the food and nutritional status of the poor are .
22. are attempts in developing infrastructure and housing conditions.
23. From 2014, a scheme called is available in which people in India are encouraged to open bank
accounts.
24. Under scheme each bank account holder is entitled to 1 lakh accident insurance and 30,000 life
insurance cover.
25. The government‘s approach to poverty reduction was of three dimensions. (True/False)
26. The fruits of development have not reached all sections of the population in India. (True/False)
27. Casual workers are grouped as the chronic poor. (True/False)
28. The minimum calorie intake in rural area is 2100 calories. (True/False)
29. Casual labourers are among the most vulnerable in society. (True/False)
30. Poverty is closely related to nature of employment. (True/False)
3. How does the government claim that there is a decline in poverty levels? Why do economists raise
doubts about the government‘s claim?
Long answer type questions:- (6)
1. Write the measures to remove poverty.
2. Why are employment generation programmes important in poverty alleviation in India?
3. Define poverty line. How does it categorise poverty? Why is calorie-based norm not adequate to identify
the poor households in our country? Explain.
4. ―Though the policy towards poverty alleviation has evolved in a progressive manner, over the last six and
a half decades, it has not undergone any radical transformation.‖ Comment.