B.S.

ANANGPURIA INSTITUTE OF LAW

LECTURE NOTES

Course - B.A. LL.B. (Hons.), 5 Year Course

Class, Semester - 2nd YEAR, 3rd Semester

Subject - Economics III, Code – 1725

Faculty Name – Ms. Dipika Singla

Session – 2020-21
 B.A. LL.B.(HONS) 5 YEAR COURSE THIRD SEMESTER
Economics –III CODE NO.1725 (2017-18)

Paper Fifth

MM: 80
Time: 3 hours

NOTE FOR EXAMINER/PAPER SETTER

The question paper of each course will be divided into Five sections, each of the First Four
Sections of the Question Paper will contain 2 questions respectively from Unit-1 to Unit-4 of
the syllabus. The students will be required to attempt one question from each section.
Section 5 of the question paper shall contain 8 short answer type questions of 3 marks
each(without any choice) covering the entire syllabus. As such Section 5 will be
compulsory.
Learning Objective:
Two papers are added in the course in second year on Indian Economy. The objective of
the syllabus is to enable the students to understand the working of Indian Economy and to
understand the basic economic problems and why do these arise. It aims to make them aware
about the Central Govt. Budget and other economic policies of the Govt and to understand
meaning and significance of economic and social infrastructure for our economy.
NOTE FOR STUDENTS ( ON QUESTION PAPER)
Attempt four questions from sections 1 to 4, selecting at least one question from each
section. These questions shall carry 14 marks each. Section 5 is compulsory and each
question in this section shall carry 3 marks.

UNIT-I Indian Economics:

a) Main Features; Geographic size, Endowment of Natural Resources
b) Population; Size, Composition, Population Problem: Population Control
c) Planning in India: Objective Strategies and Achievements
d) Latest Five Year Plan
UNIT-II
a) India’s Agriculture: Basic Characteristics, Problems
b) Trends in Agri Prod., Productivity, Causes of Low Productivity
c) Land Reforms
d) Green Revolution
UNIT-III
India’s Industrial Development:
a) Comparative role of public, private and joint sectors
b) Small Scale Industry-Role-Problem and Govt. Policy
c) Industrial Relation
d) Regulation and Control of Private Corporate Sector
UNIT-IV
a) Major Problems, Poverty; Extent, Nature, Causes
b) Unemployment; Dimension, nature and causes
c) Inequality; Extent of inequality
d) Inflation in India
BOOKS RECOMMENDED
• Dutt & Sunderem, S. Chand & Company Ltd, (New Delhi, Indian Economy, Edition
2016.)
• Aggarwal A.N., Problems of Development and Planning (Vikas publishing House, New
Delhi 2017)
• Verma Sanjiv, Indian Economy, (Unique Publishers New Delhi 2016 ed.)
• Ramesh Singh, Indian Economy, (Mcgraw hill education Delhi ed 2017)
• Myneni S.R, Indian Economy (Allahabad Law Agency, Faridabad Ed. 2016)
• Economic Survey: (Current Volume 2016-17 Issued by (Ministry of Finance)
*Students are advised to study latest edition of the books and case laws
 UNIT-I
MAIN FEATURES; GEOGRAPHIC SIZE, ENDOWMENT OF NATURAL RESOURCES
Indian economy bags the seventh position among the other strongest and largest economies among
the world. Being one of the top listed countries among the developing countries in terms of
industrialization and economic growth, India holds a robust stand with an average growth rate of
approx. 7%.
The Indian economy has emerged as a robust economic player among the economic giants like-US,
UK, China, etc. Even though the rate of growth has been sustainable and comparatively stable, but
there are still fair opportunities of growth.
With the growing standards and opportunities in India, it is expected to very soon capture a very
dominant position among the others in the world. The characteristic features of India Economy are
discussed below in details:
Basic Characteristics of Indian Economy as Developing Economy:
India ranks second in the world in terms of population and are the largest democratic country. India
has adopted a New Population Policy in 1990-91 which accelerated economic growth rate faster.
Basic characteristics are as follows,
1- Pre-dominance of Agriculture.
2- High population.
3- Underutilized Natural resources.
4- Low Human development index.
5- Lack of infrastructure facility.
6- Capital deficiency.
7- Wide spread unemployment.
8- Technological backwardness.
9- Poor economic organizations.
10- Low per capita income.
11- Economic backwardness.
12- Poverty.
1 Pre-Dominance of Agriculture:
Agriculture is the main sector of Indian economy which is in total contrast to the economic
structure of a developed economy. More than 70 % of the total population is engaged in agricultural
activities while the picture is absolutely different in advanced countries. Unemployment, poverty,
low productivity, lack of irrigation facility is the main problems of agriculture.
2 High Populations:
Population is a major factor influencing the nature of a country's economy. Over population creates
complex economic problems. India is the second largest populated country in the world having
population of 238 million in 2001 and 1138 million in 2011. It means 17,64% population has been
increased since 2001 to 2011. The population pressure is the result of two forces that is high birth
rate and lower death rate. As per 2011 census, India's birth rate was 23 and death rate was 7. High
population rate is the main problem that India has been facing since 50 years.
3 Underutilized Natural Resources:
It has been stated that India is a rich country inhabited by poor people. It means that the country
possesses abundant stock of natural resources but the problem is that these resources are not fully
utilized for the production of material goods and services.
4 Low Human Development Index:
In the developed countries, people are getting 3600 calories through food but Indians are not
getting even 2400 calories through food. It is a great draw back relating total intake. India's literacy
rate is 76 % but we can say 24 % people are still illiterate. India's life expectancy is 64 at live birth
and developed countries life expectancy is more than 80.
5 Lack of Infrastructure Facility:
Infrastructure is divided into two parts as follow,
A- Physical infrastructure
B- Social infrastructure
A- Physical infrastructure: It refers to road, electricity, banking, transportation, communication,
insurance, energy etc. Physical infrastructure is related to development process and it is closely
linked with GDP.
B- Social infrastructure: It refers to education, health, housing, drinking water and sanitation. Social
infrastructure related to human resource development and it is not directly or indirectly related to
GDP.
6 Capital Deficiency:
Capital deficiency affects economy as well as social factors, India suffers from deep rooted
shortage of capital. The level of savings is very low and capital formation rate is also low. Capital
deficiency is very low because the population rate rises at a rapid rate.
7 Wide Spread Unemployment:
Unemployment in India is a direct outcome of the rapidly increasing population. More people need
more jobs but the underdeveloped economy of India cannot accommodate them.
8 Technological Backwardness:
Technological backwardness is another feature of Indian economy. India is less advanced in
technology as compared to developed countries. As a result developed countries are better in
production than India. India is facing backward and outdated technology.
9 Poor Economic Organizations:
Economic organization is an important and pushing factor for economic institutions have been
working in India; however it is not developed enough. Banking systems are not developed well in
rural areas, in recent year’s capital and money markets are not much developed in India. Industrial
banks, financial institutions are not very common in India. In this point of view India has lack of
structural economic organization set up.
10 Low per Capita Income:
Due to large size of population, India is facing the problem of low per capita income. According to
the 2011 census, India's population is 121 crores. According to World Development Report, India's
per capita income was $3620. It is a very low per ca pita income as compared to developed
countries.
11 Economic Backwardness:
India is developing country and has been facing the problem of unemployment, poverty, low per
capita income, lack of technology, high growth rate of population, low labour efficiency, economic
ignorance, social and religious problems factors, immobility, limited developed occupation and
trade, caste system, corruption at every stage. Thus reflecting India as economically back ward
country.
12 Poverty:
Majority of people in India have low levels of income and poverty is mostly reflected in low level
income people. Lack of educational and health facilities, poor hygienic living conditions, criminal
environment, lack of infrastructural facilities effect on poverty. More ever rural as well as urban
area relates poverty. According to the Indian Planning Commission, there were 29 % people below
poverty line in 2009-10. Thus it is a huge challenge to reduce poverty.
Conclusion
These are the major characteristic /features of the Indian economy. India is an active member in
various economic groups’ like-BRICS and G-20. Not only does India have the potential in the form
of human capital and other raw materials, but is also technically advanced to support maximum
growth in the country. This is a true indicator of inviting foreign investments and creating the best
growth situation for both the foreign and national crowds.

POPULATION; SIZE, COMPOSITION, POPULATION PROBLEM: POPULATION

CONTROL

Population generally means the whole number of people or inhabitants in a country or region or the
total of individuals occupying an area or making up a whole.
Meaning of population
Population refers to the total number of people residing in a place. So, population of India means
 the total number of people living in India.
Size and composition of Population in India
The rapid and excessive increase in population is called Population Explosion. In India, population has
increased tremendously in post-independence period.
It increased more than 7.80 crore between 1951-61. Population has been increasing constantly since
1951.
In year 1991, it was estimated 84.63 crore and in 2001, it increased to 102.87 crore. In 2005 figure
stood at 109.10 crore. The rapid rate of increase in population is the main problem of the country.
Size of India’s Population:
India comes second to China as regards the size of its population. It occupies 2.4% of world’s area
and with 1.5% of world’s income; India is maintaining 16% of world’s population. It shows that
there is excessive burden of population in India. 1.60 Crore persons are added annually in country’s
population. First census took place in 1891 in India.
Composition of the Population of India
Age Composition
One of the most important characteristics of the population of India, the age composition
determines the country’s s social and economic structure. The total population is broadly divided
into three age groups-
 Children- below 15 years
 Working-age- 15- 59 years
 Aged (Senior)- 59 years and above
Adolescent population
This is one of the most important and influential elements of the age composition aspect of the
population. Adolescents are people between the age groups of 10-19 years and in our country. Also,
about one-fifth of the population comprise adolescent individuals. They are especially relevant to
the future growth and are the most significant part of the population of India.
Sex Ratio
The sex ratio of population is determined by the number of females for every 1000 males. This
helps in understanding the equality of males and females in the society, which consequently gives
an idea of the nation’s culture. India’s sex ratio has always been on the lower side, until recently.
States like Kerala and Union Territory of Pondicherry have higher sex ratio than the major states.
Literacy Rate
This is yet another important characteristics of the population because the literacy rate of a country
determines its economic structure and growth. Literacy, according to the 2001 Census, is the ability
of a person of 7 years and above to read and write in any language. The census states the literacy
rate of the population of India is almost 74.04% (2016).
Occupational Structure
The number of people in a population involved in different economic activities helps assess the
growth of the country’s economy. The occupational structure is the distribution of the population
across different occupations. This is an important element of the population of India. Also, our
occupational structure has three broad categories-
 Primary occupation- agriculture, fishing, mining, animal husbandry, forestry etc.
 Secondary occupation- manufacturing, building, construction work etc.
 Tertiary occupation- communication, transportation, administration etc.
Features of India’s Population
1. Large Size and Fast Growth:
The first main feature of Indian population is its large size and rapid growth. According to 2001
census, the population of India is 102.87 crore. In terms of size, it is the second largest population
in the world, next only to China whose population was 127 crore in 2001. India’s population was
23.6 crore in 1901 and it increased to 102.7 crore in 2001.
In addition to its size, the rate of growth of population has been alarming since 1951. At present,
India’s population is growing at a rate of 1.9 per cent per annum; 21 million people are added every
year which is more than the population of Australia. This situation is called population explosion
and this is the result of high birth rate and declining death rate.
2. Second Stage of Demographic Transition:
According to the theory of demographic transition, the population growth of a country passes
through three different stages as development proceeds. The first stage is characterised by high
birth rate and high death rate. So in this stage the net growth of population is zero. Till 1921, India
was in the 1st stage of demographic transition.
The second stage is featured by high birth rate and declining death rate leading to the rapid growth
of population. India entered the second stage of demographic transition after 1921. In 1921-30 India
entered the 2nd stage, the birth rate was 464 per thousand and death rate was 363 per thousand.
In 2000-01, birth rate was 25.8 and death rate declined to 85. This led to rapid growth of
population. India is now passing through the second stage of demographic transition. While
developed countries are in 3rd stage.
3. Rapidly Rising Density:
Another feature of India’s population is its rapidly rising density. Density of population means to
the average number of people living per square kilometre. The density of population in India was
117 per square km. in 1951 which increased to 324 in 2001. This makes India one of the most
densely populated countries of the world. This adversely affects the land-man ratio.
India occupies 2.4 per-cent of the total land area of the world but supports 16.7 per-cent of the total
world population. Moreover, there is no causal relationship between density of population and
economic development of a country. For example, Japan & England having higher density can be
rich and Afghanistan & Myanmar having lower density can be poor. However, in an
underdeveloped country like India with its low capital and technology, the rapidly rising density is
too heavy a burden for the country to bear.
4. Sex Ratio Composition Unfavourable to Female:
Sex ratio refers to the number of females per thousand males. India’s position is quite different than
other countries. For example, the number of female per thousand males was 1170 in Russia, 1060
in U.K., 1050 in U.S.A. whereas it is 927 in India according to 1991 census.
The sex ratio in India as 972 per thousand in 1901 which declined to 953 in 1921 and to 950 in
1931. Again, in 1951, sex ratio further declined to 946. In 1981, sex ratio reduced to 934 against
930 per thousand in 1971. During 1991, sex ratio was recorded 927 per thousand.
The sex ratio is 933 per thousand in 2001. State wise Kerala has more females than males. There
are 1040 females per thousand males. The lowest female ratio was recorded in Sikkim being 832.
Among the union territories Andaman and Nicobar Islands has the lowest sex ratio i.e. 760.
Therefore, we can conclude that sex ratio composition is totally unfavourable to female.
5. Bottom heavy Age Structure:
The age composition of Indian population is bottom heavy. It implies that ratio of persons in age
group 0-14 is relatively high. According to 2001 census, children below 14 years were 35.6%. This
figure is lower than the figures of previous year. High birth rate is mainly responsible for large
number of dependent children per adult. In developed countries the population of 0-14 age group is
between 20 to 25%. To reduce the percentage of this age group, it is essential to slow down the
birth rate.
6. Predominance of Rural Population:
Another feature of Indian population is the dominance of rural population. In 1951, rural population
was 82.7% and urban population was 17.3%. In 1991 rural population was 74.3% and urban
population was 257. In 2001, the rural population was 72.2% and urban population was 27.8. The
ratio of rural urban population of a country is an index of the level of industrialisation of that
country. So process of urbanisation slow and India continues to be land of villages.
7. Low Quality Population:
The quality of population can be judged from life expectancy, the level of literacy and level of
training of people. Keeping these parameters in mind, quality of population in India is low.
(a) Low Literacy Level:
Literacy Level in India is low. Literacy level in 1991 was 52.2% while male-female literacy ratio
was 64.1 and 39.3 per cent. In 2001, the literacy rate improved to 65.4 per cent out of which made
literacy was 75.8 and female literacy was 52.1 per cent. There are 35 crore people in our country
who are still illiterate.
(b) Low level of Education and Training:
The level of education and training is very low in India. So quality of population is poor. The
number of persons enrolled for higher education as percentage of population in age group 20-25
was a per cent in 1982. It is only one fourth of the developed countries. The number of doctors and
engineers per millions of population are 13 and 16 respectively. It is quite less as compared to
advanced countries.
(c) Low Life Expectancy:
By life expectancy we mean the average number of years a person is expected to live. Life
expectancy in India was 33 years. It was increased to 59 in 1991 and in 2001, life expectancy
increased to 63.9. Decline in death rate, decline in infant mortality rate and general improvement in
medical facilities etc. have improved the life expectancy. However, life expectancy is lower in India
as compared to life expectancy of the developed nations. Life expectancy is 80 years in Japan and
78 years in Norway.
8. Low Work Participation Rate:
Low proportion of labour force in total population is a striking feature of India’s population. In
India, Labour force means that portion of population which belongs to the age group of 15-59. In
other words, the ratio of working population to the total is referred to as work participation rate.
This rate is very low in India in comparison to the developed countries of the world. Total working
population was 43% in 1961 which declined to 37.6% in 1991. This position improved slightly to
39.2% in 2001. That means total non-working population was 623 million (60.8 per cent) and
working population was 402 million (39.2%). Similarly, low rate of female employment and
bottom-heavy age structure are mainly responsible for low work participation in India.
9. Symptoms of Over-population:
The concept of over-population is essentially a quantitative concept. When the population size of
the country exceeds the ideal size, we call it over-population. According to T.R. Malthus, the father
of demography, when the population of a country exceeds the means of substance available, the
country faces the problem of over-population.
No doubt, food production has increased substantially to 212 million tonnes but problems like
poverty, hunger, malnutrition are still acute. Agriculture is overcrowded in rural areas of the
country which is characterised by diminishing returns. This fact leads to the conclusion that India
has symptoms of over-population. Indian low per capita income, low standard of living, wide
spread unemployment and under-employment etc. indicate that our population size has crossed the
optimum limit.
Population Problems
Some of the major population problems of India are as follows:
1. Rapid Growth of Population
2. Disproportionate Gender Composition
3. Poor Standard of Living and Malnutrition
4. Unemployment.
5. Food Problem
6. Health Problems
7. Ecological Problems
1. Rapid Growth of Population:
We know that in spite of many attempts to check population growth, the birth rate is still high
(annual exponential growth rate is 1.64 per cent as per 2011 census), but the death rate has been
checked because of the development and extension of medical facilities.
Family planning is not practised sincerely on a large scale, especially in rural areas. This situation
has resulted into large proportion of youth (15-24 years, 2%) along with the aged (32% in 2011)
who are dependent on relatively small workforce of the population.
This large proportion of young population puts great pressure on the available medical, educational
and other social amenities. It is estimated that due to the rapid population growth, 25 million people
are homeless and 171 million people have no access to safe drinking water.
2. Disproportionate Gender Composition:
According to Census 2011, national sex ratio (females per 1,000 males) is 940. Most countries in
 (1) High female infant mortality (relative to male infant mortality), and
(2) Female foeticide.
Both in turn reflect parental and social discrimination against girls and has been recognized
essentially as an attitudinal problem. Experts cite societal pressure and dowry demands as the
reasons for this menace rather than lack of education and awareness.
3. Poor Standard of Living and Malnutrition:
Standard of living in a country is also affected by its population. In India, there is a great shortage
of nourishment, especially that of balanced diet. The standard of living is low and housing
conditions are often very poor which lead to health problems such as deficiency diseases. The
ignorance of people, inadequate medical facilities, and lack of financial resources come in the way
of improving the housing and health conditions.
4. Unemployment:
The pressure of unwanted population growth increases the army of unemployed youths of
employable age. Such desperate youths become a burden on the society. They may indulge in
unlawful activities and cause harm to the law-abiding people. In India, a large proportion of
population is dependent on agriculture which is mostly done by traditional methods, obsolete
equipment’s and inadequate financial resources. Consequently, the production per unit area is low.
The secondary and tertiary sectors (industries and services respectively) are relatively less
developed. Thus, there are very limited employment opportunities for both the unskilled and semi-
skilled people. The agricultural sector does not provide employment to a large number of unskilled
workers. The educated and skilled persons also have very limited opportunities of employment.
Consequently, both the uneducated and educated, skilled and unskilled, workers migrate to urban
areas in search of jobs.
Thus, the towns and cities have become overcrowded, making living conditions poorer and
resulting into socio-economic and environmental problems such as problems of crime and
delinquency, prostitution, pollution, transportation, violence, etc.
5. Food Problem:
Daily a large number of new mouths are added to our existing population which requires food for
their existence. Though the government has taken a number of measures for increasing the food
production which has led to bumper crops in the past few years but even then India has to import
food grains.
6. Health Problems:
(a) Repeated pregnancies will deteriorate the health of the mother which may increase maternal
mortality rate
(b) Higher infant and child deaths
(c) Lower expectation of life
(d) Inadequate nutrition
(e) Poor sanitation and pollution of water, food, soil and air
(f) Poor health care services. More hospitals, more doctors, more nurses and more financial
resources are needed.
7. Ecological Problems:
With population explosion we need more land for housing, hospitals, schools and industries etc. For
this purpose, we will have to destroy the forests which will lead to ecological disturbances in turn
leading to natural calamities.
From the above facts it is quite clear that food, social, economic and health problems of the country
cannot be successfully tackled till the population growth is controlled.
Remedies for Population Explosion/ Population Control-
Population explosion arising from high rate of growth of population is creating serious hurdles in
the path of economic development in India. Thus this problem of population explosion should be
tackled carefully. We shall have to attack the whole problem both from the population and
production fronts. While the population should reduce its pace of growth, production should also
increase simultaneously at a rapid rate. Now to control this present population problem of India,
broadly four-fold measures would be much required: (a) Economic measures, (b) Social measures,
(c) Family Planning measures and (d) Administrative measures.
(a) Economic Measures
 To contain the pace of growth of population in India economic measures can offer a permanent
solution to the problem. Considering the gravity of the situation, the most of the economic
measures require to be included are long-term in nature. These are as follows
1. Modernisation of agriculture.
In India, the primitive method of agriculture is still being followed in various parts of the country
which needs to be replaced by better methods. Thus modernised improved methods should be
introduced in the agricultural operations throughout the country for raising its productivity.
Increased agricultural productivity will raise the total agricultural production of the country which
in turn can support this increasing size of population of the country. This increased agricultural
production can also raise the standard of living of the rural people which can reduce the-birth rate
indirectly.
2. Industrial development.
As the agricultural sector of the country is over burdened with huge population pressure thus
industrialisation can transfer this surplus working force from agriculture to other sectors. Moreover,
growing industrial activity can also increase the urge of industrial workers to raise their standard of
which in turn will motivate them to restrict the size of their family. Thus the Government should
undertake some radical measures for rapid industrialisation of the country.
3. Urbanisation and more employment opportunities in urban areas.
Steps must be taken for the growth of urban centres in the country along with the creation of more
job opportunities in these urban areas. Tits will lead to migration of population from rural to urban
areas which will indirectly work as a powerful check on the growth of population in India.
4. Removal of poverty and ensuring minimum economic amenities.
Poor people notably remain unconcerned about limiting the size of their families. Thus proper
steps should be taken b) the Government for the removal of poverty in India. Once the poor people
are assured of basic economic amenities of life their attitudes towards their families will also
undergo a sea change. Thus the Government has got a responsibility to guarantee the right to work
and ensure a minimum wage to everyone.
(b) Social measures
Population explosion is also- resulted from some social evils. Thus to check population growth in
India following social measures are to be undertaken:
1. Postponement of the marriage.
Raising of the minimum age of marriage both through legislation and arousing consciousness can
play an effective role in checking population growth by reducing effective child-bearing, period and
particularly knocking off the most fertile period of child hearing.
2. Spread of education.
Spread of education can play an effective role in checking the growth rate of population in India.
Education and general enlightenment of the people can create desire for smaller families. Education
can make a frontal attack on superstitions and orthodoxy and also induces people to go for late
marriage and to adopt family planning norms.
3. Improving the status of women.
In India, women, more particularly rural women, are enjoying a very poor social status. Although
the constitution of the country guaranteed equal status between men and women but a high degree
of discrimination between them still prevails leading to a growth of family size. Increasing
employment of women and the improvement of their social status can effectively reduce the birth
rate of population in India.
(c) Family Planning measures
Family Planning measures can play an effective role in controlling population explosion in India.
In China, the family planning programme has been successful in bringing down the birth rate to 21
per thousand at present whereas it is 31 per thousand in India. This has become possible through
widespread use of contraceptives as nearly 74 per cent of married women of child bearing age use
contraceptives in China. Following are some of the family planning measures which are very
important in Indian context:
1. Arousing consciousness.
Through public information programme, people of India should be made more conscious about the
usefulness of family planning programme. All media of publicity should be used for this purpose.
2. Family Planning Centres.
Opening of family planning centres throughout the country can play an effective role in limiting
the size of family. Department of Family welfare must emphasise on setting up family planning
clinics for spreading knowledge about the use of contraceptives and other methods of birth control.
Moreover, a good number of contraceptive distribution centres should be established both in the
urban as well as rural areas of the country.
3. Research.
In the family planning programme of India more importance should be given stressed on
conducting research in the area like demography, reproductive biology, fertility control etc.
(d) Administrative Measures
Present situation in connection with population explosion in India demands some hard
administrative. measures.
1. Introduction of two-child norm.
The government of India should approve the two-child norm and put severe restrictions on limiting
the size of family as it is done in China.
2. Incentives and disincentives.
The Government should introduce various incentive schemes for adopting small family norm such
as cash incentive, preference for employment, preference for promotion etc. likewise, in respect of
the violation of family planning norms, disincentive schemes should be introduced for withdrawing
these incentives totally.
3. To stop influx of population.
A significant portion of the increase in the population of the country is due to continuous
immigration of population from the neighbouring countries. Thus this influx of population in the
form of infiltration should be stopped completely and proper steps should he devised to check this
large scale infiltration. These steps include—sealing of international border, creation of no-man's
land, increased patrolling, imposition of night curfew on border areas and to tone up border
administration effectively.
Thus to control this high rate of growth of population in India all the above-mentioned four-fold
measures should be introduced simultaneously.

PLANNING IN INDIA
Introduction
After independence India had launched a programme of five year plans to make the optimum use of
country’s available resources and remove its under development. Since the year 1951, a continuous
process of five year plans has been going on. So far we have completed 12 five year plans.
Meaning of Economic Planning
Economic planning refers to the process where in a central planning authority make efforts to use
optimally available resources for the achievement of pre-determined objectives within a specified
period of time.
Definition
According to Robinson
“Economic Planning is a method of realising ideas of welfare state”.
Planning in India
 1938: ‘National Planning Committee’ was established under the chairmanship of Jawaharlal
Nehru by the Indian National Congress. Its recommendations could not be implemented because of
the beginning of the Second World War and changes in the Indian political situation.
 1944: ‘Bombay Plan’ was presented by 8 leading industrialists of Bombay. 
 1944: ‘Gandhian Plan’ was given by Mr Narayan Agarwal. 
 1945: ‘People’s Plan’ was given by M N Roy. 
 1950: ‘Sarvodaya Plan’ was given by J P Narayan. A few points of this plan were accepted by the
Government.
Functions
1) To make an assessment of the material, capital and human resources of the country, including
technical personnel, and investigate the possibilities of augmenting those resources which are found
to be deficient in relation to the nation's requirement.
2) To formulate a plan for the most effective and balanced utilisation of country's resources.
3) To define the stages, on the basis of priority, in which the plan should be carried out and propose
the allocation of resources for the due completion of each stage.
4) To indicate the factors that tend to retard economic development.
5) To determine the conditions which need to be established for the successful execution of the plan
within the incumbent socio-political situation of the country.
6) To determine the nature of the machinery required for securing the successful implementation of
each stage of the plan in all its aspects.
7) To appraise from time to time the progress achieved in the execution of each stage of the plan and
also recommend the adjustments of policy and measures which are deemed important vis-a-vis a
successful implementation of the plan.
8) To make necessary recommendations from time to time regarding those things which are deemed
necessary for facilitating the execution of these functions. Such recommendations can be related to
the prevailing economic conditions, current policies, measures or development programmes. They
can even be given out in response to some specific problems referred to the commission by the
central or the state governments.
Objectives of Planning-
Indian planning, ever since its inception, has attempted to meet the various significant objectives of
multi-faceted development which can be explained as follows:
Specific Objectives/ Short term Objectives:
1st Five Year Plan (1951-56) – Agricultural Development
2nd Five Year Plan (1956-61) – Import Substitution, Heavy& Basic Industrial Sector
3rd Five Year Plan (1961-66) – Economic Sufficiency
4th Five Year Plan (1969-74) – Technological Reforms in agriculture, Growth with Justice
5th Five Year Plan (1974-79) - Removal of Poverty and Self-reliance
6th Five Year Plan (1980-85) – Food and Fuel Strategy
7th Five Year Plan (1985-90) – Human resource Development, Employment Generation
8th Five Year Plan (1992-97) – LPG Policy
9th Five Year Plan (1997-02) – Growth with social justice and equity
10th Five-year Plan (2002-07) - Self-employment and resources development
11th Five Year Plan (2007-12) - Comprehensive and faster growth
12th Five Year plan (2012-17) - Improvement of Health, Education and Sanitation
Long term Objectives:
1. Economic Development:
The main objective of Indian planning is to achieve the goal of economic development economic
development is necessary for under developed countries because they can solve the problems of
general poverty, unemployment and backwardness through it.
Economic development is concerned with the increase in per capita income and causes behind this
increase.
2. Increase Employment:
Another objective of the plans is better utilization of man power resource and increasing
employment opportunities. Measures have been taken to provide employment to millions of people
during plans. It is estimated that by the end of Tenth Plan (2007) 39 crore people will be employed.
3. Self-Sufficient:
It has been the objective of the plans that the country becomes self-sufficient regarding food grains
and industrial raw material like iron and steel etc. Also, growth is to be self-sustained for which
rates of saving and investment are to be raised. With the completion of Third Plan, Indian economy
has reached the take off stage of development. The main objective of the Tenth Plan is to get rid of
dependence on foreign aid by increasing export trade and developing internal resources.
4. Economic Stability:
Stability is as important as growth. It implies absence of frequent end excessive occurrence of
inflation and deflation. If the price level rises very high or falls very low, many types of structural
imbalances are created in the economy.
Economic stability has been one of the objectives of every Five-year plan in India. Some rise in
prices is inevitable as a result of economic development, but it should not be out of proportions.
However, since the beginning of second plan, the prices have been rising rather considerably.
5. Social Welfare and Services:
The objective of the five year plans has been to promote labour welfare, economic development of
backward classes and social welfare of the poor people. Development of social services like
education, health, technical education, scientific advancement etc. has also been the objective of the
Plans.
6. Regional Development:
Different regions of India are not economically equally developed. Punjab, Haryana, Gujarat,
Maharashtra, Tamil Nadu, Andhra Pradesh etc. are relatively more developed. But U.P., Bihar,
Orissa, Nagaland, Meghalaya and H.P. are economically backward. Rapid economic development
of backward regions is one of the priorities of five year plans to achieve regional equality.
7. To Reduce Economic Inequalities:
Every Plan has aimed at reducing economic inequalities. Economic inequalities are indicative of
exploitation and injustice in the country. It results in making the rich richer and the poor poorer.
Several measures have been taken in the plans to achieve the objectives of economic equality
specially by way of progressive taxation and reservation of jobs for the economically backward
classes. The goal of socialistic pattern of society was set in the second plan mainly to achieve this
objective.
8. Social Justice:
Another objective of every plan has been to promote social justice. It is possible in two ways, one is
to reduce the poverty of the poorest section of the society and the other is to reduce the inequalities
of wealth and income. According to Eighth Plan, a person is poor if the spends on consumption less
than Rs. 328 per month in rural area and Rs. 454 per month in urban area at 1999-2000 prices.
About 26 percent of Indian population lives below poverty line. The tenth plan aims to reduce this
to 21%.
9. Increase in Standard of Living:
The other objective of the plan is to increase the standard of living of the people. Standard of living
depends on many factors such as per capita increase in income, price stability, equal distribution of
income etc. During the period of Plans, the per capita income at current prices has reached only up
to Rs. 20988.
10. Increase in National and Per Capita Incomes:
One of the basic objectives of economic planning in India is to increase national and per capita
incomes. As a direct consequence of economic planning, India’s national and per capita income
rose, though not as rapidly as the Plans projected. National income at 1999-2000 prices rose from
Rs. 224,786 crores in 1950-51 to Rs. 3,114,452 crores in 2006-07, sharing a CARG of 4.8%.
11. Progress in Agriculture:
During the 55 years (1950-51 to 2005-06) the Government had spent, on an average, 23 to 24 per
cent of the Plan outlay in each of the Five Year Plans on the development of agriculture, allied
activities and irrigation. This expenditure was in addition to the private sector investment on
agriculture and minor irrigation. As a direct result of this Plan outlay, agricultural production
increased steadily, though not to the extent planned by the Government.
12. Progress in Industry:
The progress in some basic industries such as coal, iron ore, cement, fertilisers, finished steel,
aluminium, petroleum (crude) and electricity, has been really impressive. Equally impressive is the
progress in metallurgical industries, chemical and allied industries.
13. Per Capita Availability of Consumer Goods:
As a direct consequence of the increase in planned production in agriculture, industry and in all
other sectors of the economy, per capita availability and consumption of essential consumer goods
had increased steadily. The increase would have been much greater if population had not risen at
the rate of 2.1 % per annum or if population growth had been effectively controlled.
14. Increase in Saving and Capital Formation:
In spite of an increase in per capita consumption of operational consumer goods, gross domestic
saving as a proportion of GDP had increased from 8.9% in 1950-51 to 32.4% in 2005- 06. Gross
domestic capital formation increased from 8.7% to 33.8% during this period.
15. Development of Economic Infrastructure:
Another achievement of great significance is the creation of economic infrastructure which lays
foundation for industrialisation. The expansion of roads and road transport has led to the widening
of the market. Irrigation and rural electrification have given a boost to agriculture.
Hydroelectric projects have supplied energy for installing factories and other modest establishments
in small towns and cities. An integrated infrastructure has opened the possibilities of modernising
semi-urban and rural areas.
16. Import Substitution and Diversification of Exports:
Due to the adoption of the policy of achieving rapid industrialisation, India’s dependence on
foreign countries for capital goods has declined. Similarly, a large number of consumer goods
imported earlier are now being domestically produced. This has led to import substitution.
Consequently, the commodity composition of India’s exports has changed in favour of
manufactures, mineral oils and engineering goods.
17. Development of Science and Technology:
Another achievement of planning is the growth of science and technology and the development of
technical and managerial cadres to run the modern industrial economy. This has significantly
reduced India’s dependence on foreign experts. Moreover, India has started exporting technical
experts to Middle East and African countries.
18. Build-Up of a Huge Educational Network:
One of the greatest achievement of Indian planning is the development of a huge educational
system—the third largest in the world. Enrolment at primary and middle schools increased from
223 lakhs in 1950-51 to 1,283 lakhs in 2005-06, showing CARG of 3.2%. Moreover, the literacy
rate has gone up from 18.3% to 64.8%—showing a CARG of 2.3%.
Major Failures of Planning:
In spite of massive achievement of objectives of five year plans, a lot failures come across which
can be explain briefly as follows-
1. Failure to Eliminate Poverty:
In spite of 57 years (1951-2007) of planning 26% of total population (260 mn.) still lies below the
poverty line. So, the planning process has lost its relevance to the poor people.
2. Increase in unemployment:
During the period of five year plans, unemployment went on rising. At the end of first five-year
plan 53 lakh persons were unemployed. Their number rise to 349 in 2004-05. In the last 22 years’
employment opportunities have increase by 2.3 percent while the supply of labour has increased by
2.5% resulting in an increase in unemployment.
3. Slow Growth in Production Sector:
In the five-year plan, growth rate of production was slow in many sectors. Priority should have
been given to the development of agriculture in all the plans, but it was not done. Capital intensive
industries in urban areas were given precedence over small scale industries in the rural areas. In
agriculture green revolution continues to be confined largely to wheat and rice crop.
4. Failure to Check the Growth of Black Money:
For various reasons, mainly the fiscal system, the rich people have accumulated huge black money.
They have indulged in conspicuous consumption. As a result, there has been misallocation of
resources. Various measures adopted to unearth black money—such as voluntary disclosure
scheme—have largely failed.
5. Failure to Implement Land Reforms:
The policy decisions to transfer ownership of land to the peasantry was not properly implemented.
The progress of land reforms has been rather slow and the State Governments were not eager to
implement them with a speed for a quick transition to progressive agriculture and socialism.
6. Inadequate Growth Rate:
In quantitative terms, the growth rate of the Indian economy may be good but not satisfactory by
any standards. Since the actual growth rate was less than the planned or targeted rate of growth it
was not possible to meet other goals of planning such as poverty alleviation and improvement of
living standards.
7. Unemployment:
The removal of unemployment is considered to be another important objective of India’s five-year
plans. But the employment generation programmes did not achieve much success and the problem
 of unemployment has become more and more serious plan after plan. The number of applicants on
the live register of employment exchanges increased from 17.83 lakhs in 1981 to 40.37 lakhs in
1999.
8. Regional Imbalance:
The entire planning exercise has created a vast regional imbalance. Over the years, inequalities
among the States have widened. This is mainly because the backward areas did not receive fair
treatment, so far as resource transfer is concerned.
9. Inflation:
Finally, the benefits of economic planning have largely offset by price inflation. The prices of
essential goods have been increasing much faster than other prices. This has resulted in great
hardships to the vast majority of the people mainly the poor and the weak. Growth without stability
has become an essential characteristic of Indian planning.
10. Stagnant Economy:
When India was freed, it has deep marks of stagnation. During the phase of fifty years of economic
planning, its growth rate is zero or near.
According to one estimate, growth of national income was about 1.15 per cent during 1860 to 1950
per year and growth of per capita was at less than 0.5 per cent.
11. Abnormal Growth of Population:
In all plans, main objective was to check over-population but it has miserably failed to bridge the
galloping population. The rapid growth of population has aggravated the situation to the worst. This
problem gives birth to twin problems of poverty and unemployment.
12. Adverse Balance of Payment:
Truly, the production of agricultural and industrial sector has increased manifold but still we are
dependent on imports. In our plans, we have stressed on export promotion and import substitution
to correct the adverse balance of payment but no headway has been seen in this direction. It has
continuously been unfavourable.
13. Unproductive Expenditure:
India is deficient in capital due to rising expenditure on unproductive channels. Moreover, huge
investments are made on the construction of five star hotels and other wasteful consumption. Its
benefits go in the hand of few affluent people who generally concentrate wealth. Consequently, rich
becomes rich and poor’s lag behind.
14. Vicious Circle of Poverty:
Another major objective of planning in India is the eradication of poverty. However, we have badly
failed on this front also as more than 30% of India’s population is still-living below poverty line.
We are encircled by vicious circle of poverty. A large proportion of India’s population does not get
even bare necessities of life satisfied.

LATEST FIVE YEAR PLAN

12th Five Year Plan 2012-17

12th Five Year Plan 2012-17 as per the draft document released by the Planning Commission aims
at a growth rate of 8%. Vision of 12th Five Year Plan (2012-17)
Twelfth Five Year Plan focuses on Growth – Growth which is
 Faster
 Inclusive-Inclusiveness is a multi-dimensional concept:
i. Reduce poverty
ii. Improve regional equality across states and within states
iii. Improve conditions for SCs, STs, OBCs, Minorities
iv. Generate attractive employment opportunities for youth
v. Close gender gaps
 Sustainable
Objectives / targets of 12th five-year plan (2012-17)-
The 12th Five Year Plan (2012-17) consist of basically 25 Core Monitor Able Targets which are as-
Economic Growth
 Real GDP growth at 8%.
 Agriculture growth at 4%.
 Manufacturing growth at 10%.
 Every state must attain higher growth rate than the rate achieved during 11th plan.
Poverty and Employment
 Poverty rate to be reduced by 10% than the rate at the end of 11th plan. 
 5 Crore new work opportunities and skill certifications in non-farm sector.
Education
 Mean years of schooling to increase to 7 years.
 20 lakh seats for each age bracket in higher education.
 End gender gap and social gap in school enrolment.
Health
 Reduce: IMR to 25; MMR to 1. Increase Child Sex Ratio to 950.
 Reduce Total Fertility Rate to 2.1
 Reduce under nutrition of children in age group 0-3 to half of NFHS-3 levels. 
Infrastructure
 Investment in Infrastructure at 9% of GDP
 Gross Irrigated Area 103 million hectare (from 90 million hectare)
 Electricity to all villages; Reduce AT&C losses by 20%.
 Connect Villages with All Weather Roads
 National and State high ways to a minimum of 2 lane standard.
 Complete Eastern and Western Dedicated Freight Corridors.
 Rural Tele-Density to 70%.
 40 Litres Per Capita per Day Drinking Water to 50% of rural population; Nirmal Gram Status to
50% of all Gram Panchayats.
Environment and Sustainability
 Increase green cover by 1 million hectares every year.
 30,000 MW renewable energy during Five Year Period.
 Emission intensity of GDP to be reduced to 20-25% of 2005 levels by 2020
Service Delivery
 Banking Services to 90% of Indian Households. 
 Subsidies and Welfare related payment to be routed through Aadhar based Direct Cash Transfer
Scheme
Evaluation and Effectiveness of 12th plan-
 Twelfth Plan sets ambitious targets for Flagship Programmes in areas of Health, Education, Rural
infrastructure, Livelihood Development etc.
 Too much focus on the level of expenditure in these programmes. Not enough on effectiveness in
terms of end results
 Implementation in the field is the responsibility of State Government agencies. However,
programme guidelines are set by the Central Government.
 There are demands for greater flexibility from states.
Alternative Scenarios
12th Plan goal of 8% inclusive growth is not a foregone conclusion
Depends on difficult policy decisions to be taken by Centre and States.
For the first time Plan presents three scenarios
Strong Inclusive Growth 8%
Insufficient Action 6 to 6.5%
Policy logjam 5 to 5.5%
 UNIT-II
INDIA’S AGRICULTURE
Agriculture may be defined as the science, art, or practice of cultivating the soil, producing crops, and
raising livestock and in varying degrees the preparation and marketing of the resulting products.
In other words Agriculture is the cultivation of land and breeding of animals and plants to
provide food, fibre, medicinal plants and other products to sustain and enhance life Meaning
of agriculture-
The word agriculture derived from two Latin words “agri” and “culture”. The word agri means
implying field and culture means implying cultivation.
Thus agriculture is the art or science of production of crops and livestock on a farm.
Definition
According to Rimando
“Agriculture is the systematic raising of useful plants and livestock under the management of man”.
According to H.M. Pava
“Agriculture is the growing of both plants and animals for human needs “.
Agriculture sector in India:
 Net sown area still accounts for about 47% of the total cultivable area of India.
 India is an agricultural economy where approx. 49% of the people depend on agriculture.
 Accounts for about 35% of our national income.
 Share in GDP → 14 %
 Provides food for the people and fodder for the animals.
 Main source of raw materials to the agro-based industries viz. sugar, textile, edible oil, etc.
 Provides market for many agricultural finished products
 Source of Foreign exchange through exports of agriculture-based produce.
 Helps in better distribution of income and wealth.
Characteristics of Indian Agriculture
Indian economy is basically an agricultural economy. A substantial portion of India’s national
income comes from the agricultural sector. A vast majority of India’s population is dependent on
agriculture for its livelihood. Agriculture also provides employment opportunities to many, both
directly and indirectly.
The production and marketing of agricultural goods poses certain peculiar problems for the
producers. This is mainly because the agricultural goods possess certain peculiar characteristics.
These are as follows:
1. Subsistence Agriculture:
As mentioned earlier, most parts of India have subsistence agriculture. This type of agriculture has
been practised in India for several hundreds of years and still prevails in a larger part of India in spite
of the large scale change in agricultural practices after independence.
2. Pressure of population on Agriculture:
Despite increase in urbanization and industrialization, about 70% of population is still directly or
indirectly dependent on agriculture.
3. Mechanization of farming:
Green Revolution took place in India in the late sixties and early seventies. After more than forty
years of Green Revolution and revolution in agricultural machinery and equipment’s, complete
mechanization is still a distant dream
4. Dependence upon monsoon:
Since independence, there has been a rapid expansion of irrigation infrastructure. Despite the large
scale expansion, only about one third of total cropped area is irrigated today. As a consequence, two
third of cropped areas is still dependent upon monsoon. As you know, monsoon in India is uncertain
and unreliable. This has become even more unreliable due to change in climate.
5. Variety of crops:
 India has diversity of topography, climate and soil. Since India has both tropical and temperate
climate, crops of both the climate are found in India. There are very few countries in the world that
have variety comparable to that of India.
6. Predominance of food crops:
Since Indian agriculture has to feed a large population, production of food crops is the first priority of
the farmers almost everywhere in the country. However, in recent years, there has been a decline in
the share of land used for food crops due to various other commercially most advantageous uses of
these land.
7. Seasonal patterns:
India has three distinct agricultural/cropping seasons. You might have heard about kharif, rabi and
zaid. In India there are specific crops grown in these three seasons. For example, rice is a kharif crop
whereas wheat is a rabi crop.
8. Small land holdings:
The national average size of the land holdings is only 1.7 hectares. It is uneconomical to cultivate
small farms and thus is a great hindrance to the progress of agriculture. Most of the farmers in our
country are not owners of the land they cultivate.
9. Low Productivity:
The agricultural productivity in India is low as compared to that of the developed countries. In most of
the agro-climatic regions the per unit production is much below the national and international levels.
The low levels of agricultural return may be attributed to obsolete technology, small size of holdings,
scattered fields and inequality in ownership.
Most of the farmers are tradition bound, superstitious, uneducated, and conservative and their risk
taking capacity in very low. They are generally shy in the adoption of new technology and their poor
economic condition is an impediment in the purchase of new seeds, fertilizers, good tools and
technology and development of irrigation and other infrastructural facilities in their fields.
10. Poor Linkage with Industrial Sector:
Indian agriculture in most parts of the country has a very limited forward linkage with other activities.
The links between agriculture and industry in terms of labour and material inputs are still very weak.
The existing links are to provide raw materials for agro-based industries and a provider of raw
materials to the industrial sector. The farmers are not in a position to dictate the terms in the fixation
of price of agricultural commodities. His poor economic status comes in the way of developing strong
linkages with industries.
11. Regional Inequalities in Food Production:
Several states of the country are deficient in food production while a few are the surplus producers.
The states of Punjab and Haryana are the surplus producers of wheat and rice, exporting these cereals
to Uttar Pradesh, Bihar, West Bengal, Orissa, Madhya Pradesh, Andhra Pradesh, Rajasthan, Jammu &
Kashmir, Gujarat, Maharashtra and Karnataka. Same is the case in the production of cash crops
(sugarcane, jute, cotton, tea, coffee, spices, and fruits), milk products, fisheries and forest products.
12. Agriculture holds significant position in international Trade of Indian Economy:
Though the share of agriculture in total exports is falling, agricultural products and agro-based
commodities accounted for about 10.35 per cent of total exports in 2006-07. This reflects the
increasing dynamism of the economic profile of the country. Further, agriculture accounts for 4 per
cent to 6 per cent of total value of imports. Thus agriculture sector occupies an important position in
the country’s international trade of Indian economy. In fact, a major portion of international trade is in
the agricultural products.
Indian Agriculture Problems
1. Instability: Agriculture in India is largely depends on monsoon. As a result, production of food-
grains fluctuates year after year. A year of abundant output of cereals is often followed by a year of
acute shortage.
This, in its turn, leads to price income and employment fluctuations. However, for the thirteen year, in
successive (1987-88 to 1999-00) a normal monsoon has been observed.
2. Cropping Pattern: The crops that are grown in India are divided into two broad categories:
food crops and non-food crops. While the former comprise food-grains, sugarcane and other
beverages, the latter includes different kinds of fibres and oilseeds.
In recent years there has occurred a fall in agricultural production mainly due to fall in the output of
 non-food articles. Moreover, rabi production has become as important as kharif production in the late
1990s. In 1999-2000, for example, of the total grain production of 209 mn. tones, rabi accounted for 104
mn. tones. This indicates a structural change in agricultural production.
3. Land Ownership: Although the ownership of agricultural land in India is fairly widely
distributed, there is some degree of concentration of land holding. Inequality in land distribution is
also due to the fact that there are frequent changes in land ownership in India. It is believed that
large parcels of land in India are owned by a- relatively small section of the rich farmers, landlords
and money-lenders, while the vast majority of farmers own very little amount of land, or no land at
all.
Moreover, most holdings are small and uneconomic. So the advantages of large-scale farming cannot
be derived and cost per unit with ‘uneconomic’ holdings are high, output per hectare is hec- tare is
low. As a result, peasants cannot generate sufficient marketable surplus. So they are not only poor but
are often in debt.
4. Sub-Division and Fragmentation of Holding: Due to the growth of population and breakdown
of the joint family system, there has occurred continuous sub-division of agricultural land into
smaller and smaller plots. At times small farmers are forced to sell a portion of their land to repay
their debt. This creates further sub-division of land.
Sub-division, in its turn, leads to fragmentation of holdings. When the size of holdings become
smaller and smaller, cultivation becomes uneconomic. As a result, a major portion of land is not
brought under the plough. Such sub-division and fragmentation make the efficient use of land
virtually impossible and add to the difficulties of increasing capital equipment on the farm. All
these factors account for the low productivity of Indian agriculture.
5. Land Tenure: The land tenure system of India is also far from perfect. In the pre-independence
period, most tenants suffered from insecurity of tenancy. They could be evicted any time. However,
various steps have been taken after Independence to provide security of tenancy.

TRENDS IN AGRICULTURE PRODUCTION AND PRODUCTIVITY IN INDIA

Agriculture Production
The agriculture production refers to the total production or output produced of two kinds of crops
viz. food crops and non-food crops.
Food crops consist of cereals such as rice, wheat, jowar etc and pulses such gram, moong etc. The
non-food crops consist of oilseeds, sugarcane, cotton, jute etc. In India food-crops are grown over
nearly three-fourths of gross sown area.
Trends in Agriculture Production
In the earlier years of economic planning food availability was the serious problem in India. The
total food grain production was hardly 51 million tonnes in 1950-51, which increased to 219.3
million tones in 2007-08
.
Crops 1950-51 1990-91 2015-16

Non Food Grains

Oil Seeds 6.2 21.9 198.0

Cotton 3.0 12.2 33501

Food Grains

Rice 21.3 74.29 90.6

Wheat 6.18 55.14 -

Agriculture Productivity
Productivity shows the production or output per unit of input. So agricultural productivity relates to
land productivity i.e. yield per hectare. In other words, agriculture productivity refers to the capacity
of lands to produce. For measuring agriculture productivity quantity of produce is taken in to accounts
not its value. It is measured as-
 (i) Agriculture Productivity = Output or total production/Amount of inputs employed
(i.e. labour or land)
Agricultural productivity is generally studied form two perspectives:
(i) Productivity of Land Productivity of Labour

(i) Productivity of Land:

It is given as output or yield per hectare of land. In the early period of independence, the yield per
hectare of land was extremely low in case of all crops. The two major food-crops viz. Wheat and rice
have shown substantial increase in productivity during early 70’s. The productivity in coarse cereals
like maize improved largely after 1980-81. This is mainly due to widespread use of high yielding
varieties of seeds, development of irrigation facilities and use of fertilizers. In case of other crops like
pulses and oilseeds, productivity gains have been negligible. But for other food crops the increase in
productivity has been very slow. In the case of non-food crops the significant increase in productivity
occurs in cotton. The productivity growth in oilseeds has not been very encouraging.
(ii) Productivity of Labour Engaged in Agriculture: It is given as output per person working in
agriculture. The per capita output of Indian cultivator is very poor as compared to cultivators in the
developed countries. This can be seen from the fact that 52 percent of workforce engaged in
agriculture contributes only 18.5 percent of national income in 2006-07. Thus remaining 48 percent
(engaged in non-agro sector) contributes more than 80 percent of national income. In developed
nations like USA, U.K. the contribution of agriculture accounts for about 5 percent to 7percent of
national income with only 5 percent to 25 percent of workforce engaged in agriculture. This clearly
indicates the low level of productivity of workforce engaged in the agriculture.
International Comparisons of India’s Agricultural Productivity
Despite the substantial improvements in the productivity in case of major crops the productivity
trends in India is far below those obtained in many developed nations. The productivity of some crops
in India and other countries. It is clear from this table that the yield per hectare of rice was less than 40
percent of the yield in the USA and Japan and about one-third of Egypt. In case of other crops also
India stands extremely poor in comparison to other countries.

CAUSES FOR LOW AGRICULTURAL PRODUCTIVITY

(a) General Causes

1) Overcrowding in agriculture. — Indian agriculture is overcrowded by the people. This has led to
decline in the per capital land area, sub-division and fragmentation of land holdings, distinguished
unemployment and negative marginal productivity. Even the sub-marginal lands of inferior quality
are being brought under cultivation on account of the severe pressure of population on land, these
lands being generally inferior always yield less.
2) Unfavourable rural environment: Environment is villages is unfavourable and unconducive to
the development of agriculture. Farmers are ignorant and uneducated. They are influenced and
guided by the customs and social institutions like caste and joint family system. People are
conserving due to such atmosphere in the villages. Religion has left its impression on the minds of
the rural people. This type of atmosphere has been discouraging our farmers to make any
improvement on their lands.
3) Lack of Finance, Storage and marketing facilities. - Agricultural productivity, in India has
suffered in the initial stages due to the non-availability of finance, storage and marketing facilities.
The provisions made under planning are inadequate.
4) Lack of improved seeds, manure and plant protection. — The Indian farmer selects his seeds
indiscriminately and often hasten, to buy them from the grocer's shop when the sowing season on.
Poor quality of seeds must yield poor quality of crops. Failure (it applying the chemical fertilizers
and applying the pesticides at proper time is the cause for the low productivity.
5) Weaknesses in policy perceptions. — Recent research studies have drawn attention to this factor.
Owing to a number of economic and political compulsions, the Indian strategy for agricultural
growth remained preoccupied.
(b) Institutional Factors.
(1) Uneconomical size of holdings. — India is a poor country consisting of small farmers. Every
 farmer owns a land. More than 70 per cent of the total land holdings are small in size. Not only the
land holdings are small, but they are scattered. The application of modern science and technology to
agriculture has become a difficult task. The small size of holdings has contributed to the low productivity of
agriculture.
(2) Faulty land system. — Due to defective land system, there are two classes, viz., the class of
landlords and the tenants. The class of landlords exploited the tenants. Under tenancy system land
belongs not to the tiller but to the landlord. The tenant has no security and he cannot invest. Under
these difficult conditions, it is impossible to expect the tiller to increase agricultural productivity.
(c) Technological Factors
(1) Poor techniques of production. — Primitive and poor techniques of production, inadequate
and obsolete nature of implements and failure to apply modern science and technology to our
agriculture have been the contributory factors for the low productivity of agriculture in India. Our
farmers having been entangled by the vicious circle of poverty have continued agricultural
operations with old methods.
(2) Inadequate irrigation facilities. — Indian agriculture is still a 'gamble in the monsoons'.
Agricultural production in our country is highly responsible to the uncertainty of rainfall. Monsoons
are irregular, uncertain, unfriendly and unevenly distributed. They set in either too early or too late.
Nearly 70 per cent of the cultivable area is still deprived of the irrigation facilities. This factor too
has contributed to the low productivity of agriculture in India.
(3) Lack of research. —Low level of research is also one of the factors responsible for the low
productivity of agriculture in India.
(4) Subsistence farming. — Agriculture in India has remained a low income occupation for
centuries. Our farmers are satisfied with the subsistence type of farming. They have never
considered agriculture a business proposition. This has kept our farmers in a state of misery and
poverty. Under such circumstances one cannot expect to increase productivity.
(5) Rural indebtedness. — Rural indebtedness is another contributory factor to the low
productivity of agriculture in India. He cannot come out of it. He cannot find anything to invest as
he has to pay all the income to the borrower.
Solutions / Remedies for Indian Agriculture
 Better irrigation facilities viz. Drip & sprinkler irrigation
 Consolidation of Land Holdings & land reforms
 Deploy Soil Conservation techniques
 Mechanization, hybrid seeds, fertilizer, pesticides
 Scientific farming & educating the farmers about the same
 Spread Green revolution to all states
 Financial inclusion in rural areas to provide sound credit system
 Providing proper electricity & storage system for agricultural produces
 Storage house near farms for better food processing
 Skilling farmers to prevent wastage of labour use
 Improving rural infrastructure
 Providing real time market price for agro produces.

LAND REFORMS

Land Reforms usually refers to redistribution of Land from rich to poor. in other words, changes
brought about in the agrarian structure through direct intervention are characterised as land reforms.
Meaning
Land reforms means “a redistribution of the rights of ownership and/or use of land away from
large landowners and in favour of cultivators with very limited or no landholdings.” The
meaning of land reforms can be explained more briefly in two senses which are-
 Narrow Sense
 Broad Sense
In narrow sense-
Land reforms are concerned with those reforms related to land ownership and land holdings.
In broad sense-
 Land reforms is used to mean those measures of reforms necessary to raise agricultural productivity
which include reforms relating to fixation of rent on land, abolition of intermediaries, credit and
marketing arrangements etc.
Definition
According to Gunnar Myrdal
“Land reforms is a planned and institutional reorganisation of the relation between man and
land”.
Pre independence land tenure system-
In the time pre independence i.e., British era and pre British era, mainly three types of tenure
system prevailing in the economy which are as-
Zamindari:
Lord Cornwallis gave birth to Zamindari system in India. He introduced this system for the first time
in 1793 in West Bengal and was later adopted in other states as well. Under this system, the land was
held by a person who was responsible for the payment of land revenue. Actual cultivation was done
by tenants while land remained under the control absentee landlords. (Land revenue was selected by
zamindars from the farmers are paid to government.
Mahalwari:
This system was initiated by William Bentinck in Agra and Oudh and was later extended to Madhya
Pradesh and Punjab. Under this system, the village communities held the village lands commonly and
it was joint responsibility of these communities to make payments of the land revenue. The land
ownership is held as joint ownership with the village body. The land can be cultivated by tenants who
can pay cash / kind / share.
Ryotwari:
It was started in Madras since 1772 and was later extended to other states. Under this system, the
responsibility of paying land revenue to the Government was of the cultivator himself and there was no
intermediary between him and the state. The ryot had full right regarding sale, transfer and leasing of
land and could not be evicted from the land as long as he pays the land revenue. But the settlement of
land revenue under Ryotwari system was done on temporary basis and was periodic after 20, 30 or 40
years. It was extended to Bombay Presidency.
Objectives of land reforms-
The main objectives of the Land Reforms are as follows:
1. To make redistribution of Land to make a socialistic pattern of society. Such an effort will reduce
the inequalities in ownership of land.
2. To ensure land ceiling and take away the surplus land to be distributed among the small and
marginal farmers.
3. To legitimize tenancy with the ceiling limit.
4. To register all the tenancy with the village Panchayats.
5. To establish relation between tenancy and ceiling.
6. To remove rural poverty.
7. Proliferating socialist development to lessen social inequality
8. Empowerment of women in the traditionally male driven society.
9. To increase productivity of agriculture.
10. To see that everyone can have a right on a piece of land.
11. Protection of tribal by not allowing outsiders to take their land.
Measures of Land Reforms:
The comprehensive land reform policy that evolved so far after independence consisted of:
 Abolishment of Intermediaries
 Tenancy Reforms
 Ceiling on land holdings
 Land Consolidation
 Co-operative farming
 Compilation and updating of land records
1. Abolishment of Intermediaries - It was widely recognised that the main cause of stagnation in the
agriculture economy was to a large extent due to exploitative agrarian relations.
The Chief instrument of the exploitation was the intermediaries like Zamindars, patronised and
 promoted by the British government.
About 60% of the area under cultivation was under the Zamindari system on the eve of the
Independence. The States took the task of abolishing the intermediaries like Zamindars by passing
the legislations. The first Act to abolish intermediaries was passed in Madras in 1948. Since then,
state after state passed legislation abolishing Zamindari rights.
The Orissa Estates Abolition Act was passed in 1951. By 1955, the progress for the abolition of
intermediaries had been completed in almost all the states.
The abolition of intermediaries has both advantages and disadvantages.
Advantages:
(a) As a result of the abolition of intermediaries, about 2 crore tenants are estimated to have come
into direct contact with the State making them owners of land.
(b) The abolition of intermediaries has led to the end of a parasite class. More lands have been
brought to government possession for distribution to landless farmers.
(c) A considerable area of cultivable waste land and private forests belonging to the intermediaries
has been vested in the State.
Disadvantages:
(a) Abolition of intermediaries has resulted in a heavy burden on the state exchequer. The ex-
intermediaries have been given a compensation amounting to Rs. 670 crores in cash and in bonds.
(b) It has led to large-scale eviction. Large-scale eviction, in turn, has given rise to several problems
– social, economic, administrative and legal.
(c) Instead of the abolition of the official land-lords, absentee land-lords as a class have emerged.
Hence the claim of the official documents pertaining to the abolition of intermediaries has no
logical foundation. The truth is that it has changed only its garb.
2. Tenancy Reforms:
Tenancy reforms included the following set of measures:
 Regulation of rent
 Security of tenure
 Ownership rights of tenants
Tenants in India are classified into
 Occupancy Tenants: They enjoy permanent right over land and cannot be evicted easily. 
 Tenants at will: They do not enjoy any right over land and can be evicted by the landlords anytime.
Therefore, to protect the tenants at will and subtenants, the tenancy reforms are passed by the
various state governments.
Regulation of Rents: Under the British Government, the rents charged was highly exploitative with no
sound economics behind it. These highly exploitative rents spelt high misery on the tenants and
trapped them into vicious circles of debt and poverty.
To provide relief to the tenants from exploitative rents, the Indian government after independence
passed legislations to regulate the rents (maximum limits- 25% on rent was fixed) and to reduce the
miseries of the tenants.
Security of Tenure: To protect the tenants from arbitrary evictions and to grant them permanent
rights over land, legislations had been passed in most states. Legislations passed by the States has
three essential aims;
 Evictions must not take place except in accordance with the provisions of law
 Land may be resumed by the owner, if at all, for the “Personal Cultivation” only
 In the event of land taken by the owner the tenant is assured of a prescribed minimum area.
Ownership Rights of Tenants: It has been repeatedly emphasised by the government, that the
ownership rights of the land should be conferred to the actual cultivator. Accordingly, most states
have passed legislations to transfer ownership rights to the tenants.
As a result of these measures about 40 lakh tenants have already acquired ownership rights over 37
lakh hectares of land. They have become better-off economically and socially.
3. Ceiling on land holdings:
The third important step of land reforms relates to the imposition of ceiling on land holdings.
Ceiling on land holdings implies the fixing of the maximum amount of land that an individual or
family can possess. Land ceiling has two aspects which are:
 fixation of ceiling limit and
 Acquisition of surplus land and its distribution among the small farmers and landless workers.
In order to bring about uniformity, a new policy was evolved in 1971. The main features were:
 Lowering of ceiling to 28 acres of wetland and 54 acres of unirrigated land
 Change over to the family rather than the individual as the unit for determining land holdings
lowered ceiling for a family of five.
 Fewer exemptions from ceilings.
 Retrospective application of the law for declaring Benami transactions null and void,
 No scope to move the court on the ground of infringement of fundamental rights.
4. Land Consolidation
Land Consolidation means merging of multiple consolidated farms and giving it to each farmer.
The measure is adopted to solve the problem of land fragmentation. The Land consolidation
program required granting of one consolidated land to the farmer, which is equal to the total land
holdings in different scatters under the farmer possession. It simply means instead of holding
multiple small lands in different places; the farmer will be given a single big piece of land.
Advantages of Consolidation of Holdings:
Consolidation of holdings has several advantages. They are as follows:
(a) It prevents the endless subdivision and fragmentation of land holdings.
(b) It saves the time and labour of a farmer.
(c) It effect improvement on land in the form of bunding, fencing etc.
(d) It promotes large-scale cultivation.
(e) It brings down the cost of cultivation and reduces litigation among farmers.
5. Co-operative farming:
It has been advocated to solve the problems of sub-division and fragmentation of holdings. In this
system, farmers pool their small holdings for the purpose of cultivation and reap benefits of large scale
farming. The advantages of scientific farming, adopting the new potential technologies can be reaped;
co-operative farming lays the foundation of strong democracy, self-help and mutual help. In the Indian
context joint co-operative farms and service co-operatives are mostly observable.
Co-operative farming in India has largely been a failure. The reason is not far to seek. The farmer in
India has not been properly socialised in the cooperative system. Again, the attitude of the bureaucrats
towards cooperative farming is not favourable.
6. Compilation and updating of land records:
Compilation and updating of the land records are an essential condition for the effective
implementation of land reforms programme. In recent years the states have been urged to take all
measures for updating land records with the utmost urgency by adopting a time-bound programme.
Efforts are also being made to maintain the land records through computerization.
Causes of failure of land reforms:
There are a number of causes for the failure of the programmes of land reforms. They are as
follows:
1. Undue advance publicity and delay in enacting land laws:
Much publicity has been given in advance by the leaders of the ruling party to the proposed land
reforms after independence. Again, the time taken for a bill to become an Act in many states has
been unusually long.
2. Loose definition of the term “personal cultivation”:
The term “Personal cultivation’ is quite loose. One could resume land for personal cultivation under
the definition even while sitting at a distance of 200 miles. The Zamindars have been permitted to
possess substantial areas of land for cultivation. Again, the laws have provided for many exemptions
in the form of land awarded for gallantry, land under orchards, tea estates, well-run farms etc.
3. Optional nature of the laws:
Most of the laws granting ownership rights to tenants are not mandatory. They are rather optimal.
The tenants have to move the government for grant of ownership rights. They will not get them
automatically. On many occasions, tenants hesitate to approach the law courts for this purpose
merely out of fear of the landlords.
4. Malafide transfer of land:
To escape the laws relating to land ceilings, the Zamindars have indulged in large scale transfer of
land to their family members or kinsmen. Such Malafide transactions do not make any change in the
operational aspect of agriculture.
5. Lack of social consciousness among the tenants:
The capacity of the tenants to fight for their right also counts a lot in the context of land reforms.
M.L. Dantwala rightly observed, “Large holders, articulate and capable, organised pressure in defence
of their interests and the small cultivators and the landless were not only unorganised but in most
cases, ignorant of legal and constitutional process; the former were very often successful in getting the
land reforms modified or even nullified both at the stage of legislation as well as
implementation”.
6. State side with the big farmers:
N. C. Saxena has rightly observed that the state governments which control the land operations have
moved favourably towards the big farmers. The interests of the small farmers have been vitally
affected.
7. Lack of strong political will:
The programme of land reforms necessitates adequate political desire, zeal and support. But
unfortunately the political leaders only wear a mask of progressive socialistic outlook. In this
regard, the report of the Task Force on Agrarian Relations deserves mention. The report says
“Enactment of progressive measures of land reforms and their efficient implementation call for hard
political decisions and effective political support, direction and control”.
But in reality, this important factor is lacking and often standing in its way. The lack of political will
is amply demonstrated by the large gaps between policy and legislation and between law and its
implementation.
8. Bureaucratic corruption:
It is an acknowledged fact that whenever some honest officials implement the laws relating to land
reforms sincerely, they incur the wrath of the political leaders who ultimately put them in
unnecessary difficulties.
Land reforms provide a golden opportunity to the Patwari and other functionaries of the Revenue
Department to make money. Again in many cases the highly placed officials are themselves
landlords.
9. Surplus land is fallow and uncultivable land:
The holders of surplus land manipulate the land data in such a way that the land in excess in their
possession is usually barren and uncultivable. Such a surplus land does not yield any benefit to the
landless peasants. In this way the very purpose of land reforms legislation is defeated.
10. Absence of records:
Absence of records regarding ownership and possession of land and about its actual cultivators
stands in the way of properly identifying the beneficiaries of land reforms.
11. Lack of uniformity in land reforms laws:
Land reforms laws are not uniform throughout India. They are different in different states. This also
accounts for the slow progress of land reforms measures.

GREEN REVOLUTION
Introduction
The dramatic transformation in agriculture practices that involves the use of new methods of
cultivation and inputs refers to as Green Revolution in India. The green revolution consists of
technological improvements which were mainly adopted to increase agriculture productivity. The
green revolution occurs as a result of adoption of new agriculture strategy during mid-60 by
Government of India to achieve self-sufficiency in the food grains production. These changes bring
about a substantial increase in agriculture production in a short span of time.
Meaning
Green revolution in India refers to the technological breakthrough in Indian agriculture by the
development and use of high yielding varieties of seeds, minor irrigation, use of fertilizers etc. in
other words: the introduction of high yielding varieties of seeds after 1965 and increased use of
fertilizers and irrigation are known collectively as green revolution”.
Green revolution is also known as “seed – water – fertilizers – pesticides - technology”.
Reasons why we need/ adopt / causes of green revolution
 To increase agricultural productivity
 Usage of high yielding variety of seeds
 Modern agriculture machinery
 Agriculture research
 Rural electrification
 Plant protection
 Multiple cropping
Components of Green Revolution
The core components of new agriculture strategy are:
(i) Use of High-Yielding Variety(HYV) seeds that matures in short span of time.
(ii) Application of fertilizers, manures and chemicals in the agriculture production.
(iii) Multiple Cropping Patterns that allows farmers to grow two or more crops on the same
land as HYV seeds matures quickly. This helped to the increase of total production.
(iv) Mechanization of farming with the use of machines like tractors, harvesters pump sets
etc. in the agriculture occur in a big way.
(v) Better Infrastructure facilities in terms of better transportation, irrigation,
warehousing, marketing facilities, rural electrification were developed during the period of
green revolution.
(vi) Price Incentives involving provision of the minimum support prices for various crops so
as to allow reasonable price to farmers for their produce. This offers inventive to the farmers to
adopt new practices.
(vii) Better financial assistance through spread of credit facilities with the development of
wide network of commercial banks, cooperative banks and establishment of National Bank for
Agriculture and Rural Development (NABARD) as an apex bank to coordinate the rural
finance in India.
Main features of green revolution
(1) The High Yielding Varieties (HYV) programme
The HYV programme has accelerated the green revolution. Improved strains of seeds are essential
for increasing agricultural production. Hybridisation techniques for maize and millets had been
initiated as early as 1960. Hybrid seeds began to be adopted by 1963. In wheat a beginning of great
importance was made in 1963-64 by trying out the Mexican dwarf varieties on a selected basis.
HYV increased from 1.18 million hectares in 1966-67 to 61 million hectares in 1989-90. 64.8
million hectares of land have been estimated to be covered by the HYV seeds programme as at the
beginning of the Eighth Plan which is planned to go up to 78 million hectares by the end of the
Eighth Plan and is planned to go up to 82 million hectares by the end of the Ninth Plan. HYV seeds
programme stands to favour wheat and paddy in that order, The HYV seeds are produced in
research institutes and agriculture universities. The procurement and distribution of HYV seeds are
made by the agricultural department and cooperative societies.
(2) Multiple Cropping. —
Thanks to new seeds maturing earl it has become possible to obtain three, even four crops instead of
two from the same plot- in a year. The new multiple cropping plan was taken up in 1967-68. It aims
at the development of short duration varieties of rice, wheat, maize, jawar, bajra, barley, oilseeds,
potato and vegetables for new crop rotations.
(3) Minor irrigation. —
Minor irrigation also constitutes an important component of the new strategy of agricultural
development. It ensures better use of land and ground water through multiple cropping pattern. The
additional area brought under irrigation increased considerably.
(4) Use of fertilizers. —
The increase in the consumption of fertilizers is more significant. The use of chemical fertilizers is
now widely accepted as one of the key elements in the strategy accelerating for the growth of
agricultural output, especially in short run. According to one estimate, the use of one tonne of plant
nutrients would be equivalent to adding about 4 hectares’ crop-land in terms of additional
production. The intensive cultivation brought a revolution in food production. Fertilizer
consumption began to pick up from 1960 onwards and got a boost from the mid-sixties after to lion
of HYV seeds.
(5) Plant Protection. —
Another important aspect of green revolution is plant protection by Using pesticides and other such
 devices.
(6) Modern Equipment and Machinery—
Modern machinery and implements like tractors, harvesters, pumping sets, tube wells, etc. are
being increasingly used and are replacing the use of bullocks wherever possible. Being time
saving use of modern machinery in agriculture is conducive to multiple cropping.
(7) Support Prices-
An important plank of the new strategy is the policy of support prices for food grains adopted in
964. In 1965 the Agricultural Prices commission and The Food Corporation of India were set up in
pursuance of this policy for the purpose of fixing prices of food grains.
(8) Processing, Storage and Marketing Facilities. -
These facilities are being improved and extended so that the increase in agricultural production is
put to profitable use.
(9) Improved Credit Policy-
Farm finance is being given more attention so that the farmer is not handicapped in efficiently
carrying his operations. The share of institutional credit in meeting the credit requirements of the
agricultural sector has of late been rising rapidly.
(10) Farmer’s training and education. -
A pilot scheme for farmers' training and education Was started in 1966-67 in five districts. The
scheme envisaged functional literacy, farm broadcasts and farmers' training. In subsequent years, it
was extended to other districts. The other features of the farmers' education programmes are the
dissemination of agricultural information through audio visual and formation of farmers' discussion
groups. The Indian Council of Agricultural Research (ICAR) has been entrusted with this task.
Impact of Green Revolution
The green revolution resulted quantitative and qualitative development in the agriculture in India.
The quantitative improvement occurs as a result of steep increase in the production of agriculture
output. The qualitative improvement resulted into adoption of modernized technology in the
agriculture. The impact of green revolution can be discussed as follows:
1. Spectacular increase in agriculture production
The dependence on food imports is eliminated with the increase in agriculture production.
The country becomes self-sufficient in food grains. In fact, India was the second largest importer in
1966 and it imported no food grain in subsequent decades except during late 80’s and early 90’s
mainly due to failure of monsoons or untimely rains or floods in different regions. Among the food
grains it is wheat crop which drew maximum benefit from green revolution by increasing
production from 81 million tonnes in 1967 to 250.2 million tonnes in 2012-13. However, it may be
noted that in recent years’ annual growth in the food grain production is losing its momentum.
2. Improvement in productivity
The tremendous increase in agriculture production occurred as a result of improvements in
productivity. The productivity was quite low in the pre-green revolution period. The substantial
increase in the productivity occurred in wheat and rice in the earlier periods but later on it spread to
other crops also.
3. Increase in Employment
Green revolution generated employment opportunities into diverse activities which were
created as a result of multiple cropping and mechanization of farming. It helped to stimulate non-
farm economy that generated newer employment in various services such as milling, marketing,
warehousing etc.
4. Food grain Price Stability
The adoption of new agricultural technology has led to the increased production and
marketable surplus of crops especially food grains that have resulted into price stability of food
items.
5. Strengthening of forward and backward linkages with industry
The increase in agriculture production has strengthened the forward linkage of agriculture sector
with industry in the sense of supplying inputs to the industry. The backward linkage with the
industry has also received a boost as agricultural modernization created larger demand for inputs
produced by industry.
Negative impact / Issues of Green Revolution-
1. Significant deceleration in investment.
According to G.S. Bhalla, the most important reason for the deceleration in the growth of
agriculture during the reform period has been a significant deceleration in the public and overall
 investment in agriculture during this period. Total investment in agriculture as a proportion of
GDP declined from 9.9 per cent during 1990-91 to 6.5 per cent in 2007-08 and stood at 7.5 per
cent in 2010-11. The share of public sector investment in total investment in agriculture which was
29.6 per cent in 1990-91 fell to only 15.1 per cent in 2010-11. The collapse of public sector
investment in agriculture is a serious cause of concern because of the potential negative impact on
agricultural growth. For example, Gulati and Bathla have estimated that a 10 per cent decrease in
public investment leads to a 2.4 per cent annual reduction in agricultural GDP growth.
2. Failure to evolve new technologies.
India was able to avail of the potential of seed-fertiliser technology because of favourable
international research collaboration. However, the country has failed to make a major breakthrough
in frontier areas like biotechnological research. "Lack of investment in research and technology in
agriculture has resulted in the non-availability of any new cost reducing technology in agriculture
and has led to declining input use efficiency."" Balakrishnan, Golait and Pankaj Kumar have
estimated that the growth of public expenditure on research and education, at constant prices, which
was 9.5 per cent in 1970s and 6.3 per cent in 1980s fell to only 4.8 per cent over the period 1990-
2005. In the case of extension services, the slowdown was particularly sharp - from 7.0 per cent in
1980s to just 2.0 per cent over the period 1990-2005.
3. Shrinking farm size.
The farm rise is persistently shrinking in India. As noted by Pulapre Balakrishnan, Ramesh Golait
and Pankaj Kumar, this is a long-term trend and unless addressed, can have permanent adverse
consequences for the agricultural sector, impinging upon its prospects. -'' While 39.1 per cent
holdings were marginal holdings (i.e. less than one hectare in size) in 1960-61, 67.0 per cent
holdings fell under this category in 2010-11. The area operated by these holdings increased from
only 6.9 percent in 1960-61 to 22.2 per cent in 2010-11. If small holdings (i.e., between one
hectare and two hectares) at added to marginal holdings, these holdings together rose from 61.7
percent in 1960-61 to as high as 85% in 2010-11 and area operated by them rose from 19.3% to as
high as 44.3% over the period. This is a clear indication of shrinking farm size in Indian
agriculture.
4. Inadequate irrigation cover
According to Report on Currency and Finance. 2001-02, inadequate irrigation cover for most of the
crops is an important constraining factor in speedy adoption of improved technology. The main
points mentioned in the Report in this context are as follows:
(i) only 40 per cent of the gross cropped area in the country was under irrigation in 2002-03
(even in 2009-10, only 45 per cent of the gross cropped areas was under irrigation);
(ii) the share of public expenditure on irrigation and flood control to total public expenditure
has declined over the years;
(iii) irrigation coverage across various States is quite skewed (for instance, while 98.0 per cent of
gross cropped area in Punjab was irrigated in 2009-10, in Maharashtra only 19.2 per cent of
cultivated area was irrigated);
(iv) the distribution of irrigation facilities across crops is equally skewed (for instance, while 91.7
per cent of area under wheat and 58 per cent area under rice was irrigated in 2009-10 only 16.2
per cent area under pulses and 25.9 per cent area under oilseeds was irrigated in that year).
The low irrigation cover for various crops has led to severe rainfall dependency (the correlation
between production and rainfall was particularly for pulses and oilseeds). "This rainfall
dependence of Indian agriculture imparted variability to production in the latter part of the 1990s
when the spatio-temporal distribution of rainfall remained largely skewed."
5. Inadequate adoption of technology.
One of the main reasons for the low levels of yields in Indian agriculture has been the unsatisfactory
spread of new technological practices including the adoption of High Yielding Varieties (HYV) of
seeds and usage of Fertilisers and pesticides and inadequate spread of farm management techniques
and other practices such as soil conservation and crop rotation. For instance, the area under HYV
seeds, which recorded a trend growth rate of 8.1 per cent per annum in the 1980s, decelerated to 4.4
per cent per annum in the 1990s. Availability of quality seeds is inadequate and usage of high
yielding hybrid seeds is very low and occurs only in the case of a few crops. Similarly, there was a
decline in growth rate of fertilisers to 4.3 per cent in the 1990s from 7.8 per cent in the 1980s with
wide variations across States.
6. Unbalanced use of inputs.
Various subsidies on inputs have resulted in skewed and unsustainable use of inputs. For instance,
 subsidies on urea have resulted in unbalanced use of Nitrogen (urea), Phosphorus (phosphate) and
Potassium (potash) fertilisers and aggravated deficiency in use of micronutrients. Subsidies on
electricity and diesel have led to the cultivation of water intensive crops such as rice and wheat with
skewed consumption of nitrogenous leading to an unsustainable cropping pattern. Moreover,
subsidies on electricity and diesel have encouraged big farmers to install large capacity pumps for
drawing water from ground water table. This has enabled them to draw water away from the water
table adjoining their farms and at a faster rate than those with smaller pumps. This tendency has hail
in adverse impact on the level of water table and the ability of small and marginal farmers to irrigate
their farms.
7. Decline in plan outlay.
Another manifestation of neglect tit agriculture is that the actual expenditure on agriculture,
irrigation and flood control as a proportion of actual total plan expenditure is declining rapidly over
the plans. It declined from 37 per cent during First plan to only 20.5 per cent in the Ninth Plan and
20.1 per cent in the Tenth Plan (it stood at 20.9 per cent in the Eleventh Plan). According to G.S.
Bhalla, "The decline in planned outlay has resulted in gradual deterioration of rural infrastructure
like irrigation, canals, roads, warehouses, etc. This has resulted in reducing the potential for future
growth. -"
8. Credit delivery system.
Lack of adequate credit for investment is an important impediment to expansion of acreage under
HYV seeds and the use of optimum dose of inputs. According to the Report On Currency and
Finance, 2001-02, the credit delivery scenario at the disaggregated level in the 1990s was a cause
of concern as there was a deceleration in the scheduled commercial banks' disbursements of direct
finance to small farmers from 15.1 per cent in the 1980s to 11.0 per cent in the 1990s. Similarly,
the annual compound growth rate of direct finance (disbursements) to marginal farmers,
decelerated to 13 per cent from 18.1 per cent during the same period_ The annual compound
growth rates of medium/long-term loans disbursed to agriculture and allied activities (direct
advances) declined to
9.7 per cent in the 1990s from 11.5 per cent in the 1980s. This is likely to have had an adverse
impact on private sector capital formation in agriculture.
Conclusion
Green Revolution has done a lot of positive things, saving the lives of millions of peoples and
exponentially increasing the yield of food crops. But environmental degradation makes the Green
Revolution an overall inefficient, short-term solution to the problem of food insecurity. So, more
sustainable and environmental friendly system of cultivation needs to be practiced. The world needs
green Revolution 2, which promises to feed a growing world population sustainably –without
compromising the needs of future generations.
 UNIT-
III
COMPARATIVE ROLE OF PUBLIC, PRIVATE AND JOINT SECTORS

Public Sector in India

Public sector consists of undertakings which are directed either, by a branch of Government itself
or by a body set up by Governor to direct the undertaking in public interest. A public sector
enterprise is by definition an enterprise where there is no private owners where its functions are not
merely confined to the maximisation of profits or the promotion of the private interest of the
enterprise, but are governed by the public or social interest, and where the management is
responsible to the Government either directly as in a departmental undertaking or indirectly as in
Government companies and corporations."
The public sector undertakings in India cover a very wide range:
i. Manufacturing industries like steel (Bhilai, Durgap Rourkela, Bokaro, Visakhapatnam steel
plants), locomotives and coaches (Chittaranjan Locomotive Factory in West Bengal, Integral
Coach Factory, Perambur); heavy electricals (Bharat Heavy Electrical Machine Tools,
Hindustan Machine Tools Ltd., etc.); fertilizers (Sindri Fertilizer Factory, etc.); Ship building
(at Visakhapatnam); heavy engineering (in Ranchi), aircraft (Bangalore); antibiotics (Pimpri
and Rishikesh);
ii. Oil exploration, production, repairing (ONGC);
iii. Life and general insurance;
iv. Banking (Nationalized banks);
v. Air transport (Indian Airlines Corporation);
vi. Trade internal and foreign (Food Corporation of India' State Trading Corporation, etc.)
Role of Public Sector
1. Rapid Industrial Development. — As India requires quick and rapid development of
industries, the State has to assume a dominant role in industrialization. Some of the basic
and heavy industries which are not generally undertaken by the private enterprise as they
yield very often low rate of profit, are to be started by the public sector. The development
of such basic and heavy industries initiates the general process of industrialization. All
the plans have envisaged a greater role for the State in the economic development of the
country when the private sector alone could not hope to achieve optimum development.
2. Building Socialistic Pattern of Society- Building up of the socialistic pattern of
society requires the expansion of the public sector. The growth of public sector ensures
rapid economic development (aid greater employment opportunities. The development
of a large public sector means for effecting the transition towards socialism.
3. Provision of infrastructure. - There is the need of adequate infrastructure for
rapid industrial development and particularly for the private sector to undertake
enterprise. Infrastructure has to be provided by the Government as public
utilities.
4. Social Overheads. - It is for the public sector to 1 social overhead like institutions for
research and general am" technical education, hospitals, etc. The private investor
cannot be expected to put his capital in such projects where no money returns can be
expected. The return in the form of better health and higher education and technical
skills accrue to the whole society rather than to the individual investors.
5. Instrument of Social Change. - There are several desirable social objectives for which
Government can only rely on public sector. One such objective is the reduction of
economic inequalities and lessening of disparities in income and wealth. Expansion of
public sector will prevent the concentration of income and wealth in a few hands. Profits
of public enterprises can be utilized for promoting general social welfare.
6. Balanced Regional Development. - The private sector as it is interested in its own
profit motive may not start enterprises in backward and underdeveloped regions. The
public sector can do what the private sector cannot do. The development of under
developed regions is more a special responsibility of the public sector.
7. Resource Mobilization - Rapid industrialization requires resource mobilization on
 a massive scale. Such large scale mobilization of resources is not possible for the
private sector. The Government has to take a big lead in collecting resources for
rapid industrialization.
8. Optimum Allocation of Resources. - The scarce resources should be put to the best
possible uses. The private sector which is profit motivated, miss-allocate the resources
by providing non-essential luxury goods at a time when the need is that of producing the
necessaries for masses. For correcting such misallocation of resources, the public sector
has to expand its activities.
9. Creation of Investible Resources. - The private sector may not plough back its profits
for investment. The private industrialists use their profits for conspicuous consumption.
But the public sector can use its resources and profits for further investment and thus
help in creating investible resources.
10. Provision of Employment. - Public sector provides two categories of employment: (i)
Government administration and other Government services like health, education,
research and various activities to promote economic development, and (ii) public sector
proper, i.e., economic enterprises owned by the Centre, State and local Governments.
11. Share in Saving and Capital Formation of the Economy - The share of the public
sector is nearly one-half of the capital formation. But the share of savings by the public
sector in gross domestic saving has not taken a significant place. The amount of capital
employed per unit of output in the public sector is far greater than in the private sector.
This is largely due to the differences in the nature of investment in the public sector.
12. Import Substitution and export promotion - Some public sector enterprises were
started specifically to produce goods, which were formerly imported and thus to save
foreign exchange. Some other public enterprises have done much to promote India's
exports.
13. Volume of Sales of the Public Sector - The share of the public sector has increased
significantly in net domestic product (NDP). This is largely due to a rapid expansion of
the public sector enterprises.
14. Contribution to Central Exchequer - The public enterprises contribute to the Central
Exchequer through the payment of: (i) dividends, (ii) corporate taxes, (iii) excise duties,
etc. In this way, they help in mobilization of resources for the planned development.
Shortcomings of Public Enterprises
1. Mounting Losses. - Some public sector undertakings low profits and some others are
making losses. The losses of public sectors are mounting up year after year due to the
wrong policies and their implementation.
2. Price Policy. - The pricing policies of the public undertakings arc are not guided solely
by the profit maximisation principle, but are under the regulation and control of
Government. Under public utility approach some undertakings imply a pricing policy
that yields a no profit no loss situation. &bit industries adopt a minimum price policy
and the administered prices were intentionally kept very low. As the price policy is
determined by the objectives which they are expected to serve, the public enterprises
earn losses than profits.
3. Over Capitalization. - Public sector projects are charged with over-capitalization. The
input-output ratio obtaining in many projects was unfavourable. The causes leading to
over- capitalization can be traced to inadequate planning, delays and avoidable
expenditure during construction, surplus machine capacity, tied aid resulting in the
compulsion to purchase imported equipment on a non-competitive basis, expensive
turnkey contracts, bad location of projects and the provision of housing and other
amenities on liberal scale.
4. Delays in completion and increase in costs of construction. - Many of the public
projects took longer time to complete than was initially envisaged. Due to this, the cost
of the projects was also revised upwards. This is due to poor and inadequate project
planning.
5. Use of manpower resources in excess of actual requirements. - There is poor
manpower planning and this is clearly reflected in the inadequate arrangements for
training and education on of workers. Labour indiscipline was one of the causes for the
poor Performance of the public sector enterprises in recent years.
6. Under-utilization of capacity. - Many power sector undertakings operated in the
 capacity utilization round of half to two-thirds and even below the half utilization of
rated capacity. This is certainly not an optimum situation.
7. Faulty controls. - The poor performance of public sector enterprises is often ascribed to
faulty controls, financial and otherwise, exercised over them. At present, control is
exercised by the Finance Ministry and Minister-in-charge of the undertaking and the
Parliament. The audit of the Auditor-General tends to be inhibitive of all initiative by the
enterprises,
Parliamentary control over the operations and capital development plans of
public enterprises tend to become quite rigid.
8. Inefficient management - Managerial effectiveness and efficiency are crucial
factors in improving the overall performance of the public enterprises. An
unfortunate practice has been to use bureaucrats as Chairmen, Managing Directors
and Managers of public enterprises. Many of them are not really qualified to run
industrial enterprises. Another wrong practice has been to send professional
politicians to manage public enterprises.
9. Decision-making: If decisions are not taken and implemented in time, the resultant time
and cost overruns are likely to result in imbalances among mutually interrelated projects
and may lead to under/over utilization of capacities and thus affect the productivity of
investment in an overall sense.
10. Oversized plants: Oversized plants also appear to be the major cause of the
failure of public enterprises.
11. High Social Costs: The tendency to 'over build social overheads' has also been noticed
by many observers. Costs have been inflated by a large element of township costs and
by administrative delays and a consequent rise in overheads.
12. Higher Capital Intensities leading to lower employment generation: Since a large
number of public enterprises were directed towards basic and heavy industries, these
have shown higher capital intensities. Due to this, there is lower employment generation
in public sector enterprises.
Suggestions for Improving the Performance of Public Enterprises
The public sector plants can thrive only in a congenial atmosphere. Unless a suitable political,
industrial, economic and administrative atmosphere is created, it may not be possible for the public
sector enterprises to reach the desired efficiency in the near future. The following steps should be
taken to remove the shortfalls of public enterprises:
(1) First, proper project planning based on economic and scientific calculation should be
drawn.
(2) The public sector units should have clear objectives and priorities before them.
(3) To formulate a realistic time schedule and to adhere to it is of basic importance for
starting any public undertaking in which hundreds of crores of rupees are sunk.
(4) It is the right choice of managers that will determine the success of public
enterprises. Professional and well-trained managers should be appointed to
manage the public enterprises.
(5) For the effective working of public sector enterprises, political considerations should
not come in their way. Location should be decided purely on technical and economic
considerations. Further, there is a need to impart autonomy of functioning to public
enterprises. The chief executives should be allowed to function without interference
from the politicians or officials of the ministry concerned.
(6) The surplus labour in public sector units should be put to productive uses by
transferring to other enterprises and enhance the productivity of labour.
Private Sector in India
Private enterprises are normally small units, owned managed by individual proprietors and
partnership and only in a minority of cases they are public limited companies. The private sector is
also called as 'Corporate Industrial Sector'. Private sector enterprises are characterised by ownership
and management in private hands, personal initiative and profit motive.
In India, the private hands, sector embraces the whole of agriculture and allied activities plantations,
mining, internal and international trade, etc. In the mixed economy of India, private sector plays a
complementary role to the public sector. The private sector is more interested in quick yielding
industries and no large profits in as short a period as possible. Naturally the private sector is
considered most suitable to consumer goods industries which involve limited and short gestation
 periods.
Role of Private Sector in India
(1) General economic development by private sector.
Private sector is responsible for the setting up and expansion industries such as cotton and jute
textiles, sugar, paper, edible Oils iron and steel industries, etc. The private sector was given
sufficient scope to produce intermediate goods and machines. The whole range of industries
producing chemicals, paints, plastics, machine-tools ferrous and non-ferrous metals, rubber, etc.
have developed in private sector. India has become self-sufficient in many consumer goods.
(2) Development of agriculture.
The agricultural sector which consists of agriculture proper and other allied activities such as
dairying, animal husbandry, poultry, etc. is completely managed by private enterprise contributes
nearly 40 per cent of domestic GNP and private employment to nearly 65 per cent of the working
population. But, in practice, agriculture is not run on a commercial basis and much of it is in the
hands of small and marginal farmers.
(3) Development of trade.
Both wholesale and retail business has always been in the private sector because the trading
services can be best rendered by private businessmen. The Government interference is there only to
control and regulate private trade through controls on prices, quotas, etc.
(4) Development of small-scale and the cottage industries.
Small and cottage industries in India are in India are in the private sector and they have an
important role to play in industrial development. They are particularly suited for the utilization of
local employment opportunities, as they are labour-intensive. The Government extends assistance
to the small-scale sector directly in the form of technical assistance, purchase of machinery,
provision of credit and allocation of raw material, etc.
(5) Contribution to GNP and employment potential.
The private sector contributes 75 per cent of the net domestic product. The population working in
private sector is 90 per cent. The dominance of the private sector is so overwhelming. Thus, the
private sector has been assigned an important role in India and it has exhibited its inherent strength
and superiority.
Limitations and Weakness of the Private Sector
1. Emphasis on non-priority industries.
The private corporate sector helped in the expansion of consumer goods industries having
low priority, such as man-made fibres, perfumes d cosmetics, air-conditioners,
refrigerators, TVs, etc. These goods art are „want to satisfy the consumption needs of
elitist rich.
2. Emergence of monopoly power and concentration.
With the rapid expansion of the economy, some of the industrial houses which had existed
and flourished even before independence were able to take advantage of all the facilities
provided by the Government and acquire monopolistic power. They have acquired wealth
and economic power and twenty big industrial houses have emerged as clear economic
leaders in the country.
3. Industrial disputes.
The private sector is plagued by poor industrial relations and the valuable man-days lost due
to strikes and lock-outs since independence. These disputes hamper the smooth progress of
the industries while the private capitalists are interested in the maximisation of profits; the
workers aim at maximisation of wages and allowances. Due to this, industrial disputes are
not natural in the private enterprises. The country has suffered heavily in terms of loss of
production on account of industrial disputes.
4. Industrial sickness.
A common feature of the private sector is the growing industrial sickness in many lines of
industrial and business activity. The result is that these units do not work or do not work to
their full capacity. As such the capacity remains unutilized or underutilized, involving
wastage of society's resources. The production falls, with consequent loss to the firms in
terms of revenues, wages and profits. The society loses on account of shortage of goods.
And the Government has also to forego some tax-revenue. Low quality of technical
performance, poor maintenance, poor industrial relations, poor marketing, inefficient and
dishonest I, management, market fluctuations, all these are responsible for growing
industrial sickness in the country.
 5. Improper working.
Private sector has fallen much short of what this sector is capable of achievement. They do
not seem concerned about the quality of products. They are not for cost reducing devises.
There are many unfair practices in which many businesses indulge in often resulting in the
generation of black money and corrupt business dealings. Private sector has failed to foster
the business culture that is appropriate for a proper functioning of the market.
6. Procedural delays.
There are too many regulations imposed by the Government on the private sector and too
many procedural delays. Decisions, which used to be taken at one time at a low level of
Government bureaucracy are concentrated in the hands of the top bureaucracy, or with the
ministers.
7. Unrealistic controls.
Another area in which industry is adversely affected is that of price restraints and price
controls. Any form of price control leads, in the long term to greater shortages as investment
shifts away to more attractive avenues. The effects of price control are as follows:
(a) Erosion in quality of product;
(b) Shortage which leads for black marketing;
(c) Discouragement of capital investment in industry;
(d) Generation of black money;
(e) Corruption in bureaucracy;
(f) Total neglect of consumer needs
8. Capacity restraints
Another major obstacle for industry in private sector is the curb on growth through
licensing of capacity. It has resulted in growing shortage of almost all vital products.
9. Dependence on public sector.
Dependence on an increasingly inefficient public sector for the supply of essential inputs like
electricity, coal, petroleum products, transportation, communication is another major
problem of private sector.
10. Managerial remuneration
A major setback to honest private enterprise in our country was the illogical restraints placed
on remuneration. The principle of not being allowed recognise to and reward responsibility
and achievement can only lead us more towards a non-achieving society.
11. Dependence on other countries.
Our industry mostly depends on other countries for technology. Much has been paid
for royalties for the technology imported.
12. Stagnation in real wages
Wages for industrial workers have been reached to a stagnation stage. There is no increase
in wages due to stagnation of the productivity of working class. If at all, there is increase in
wages it is due to inflation and price rise.
13. Regional imbalances
As the industries in private sector concentrate in industrially developed cities, other
places remain as backward due to lack of industrial development.
Suggestions for Remedial Action
1. Continuous growth
Like all dynamic organizations, any industrial unit has to grow continuously. If the
growth of any unit is artificially curbed, it leads to increasing cost which either ruins the
unit or the cost has to be passed on to consumer. Neither of this is in public interest.
Therefore, we must recognise the need for controlling growth of units in each industry.
Addition to capacity is required not only to meet increased domestic demand but also to
create necessary surplus for exports.
2. Increasing exemption limit for licensing and MRTP
The cost of fixed capital required for the same level of capacity has increased many times
during the last two decades. Simultaneously, the optimum size in many industries has also
gone up substantially. Therefore, it is only logical to increase the exemption limit for
industrial licensing, MRTP, etc. on the basis of an index that takes into account inflation in
capital costs.
3. Incentives for export-oriented industries
Our country has a great potential for exports due to cheap and skilled labour and
 management. It will be advantageous if export-oriented units are placed under the special
care of the ministry responsible for stimulating exports.
4. Reservations to be discontinued
The system of reservation for small-scale industry, which is only a form for issuing passport
to inefficiency. If required, it is better to give a measure of protection to the small-scale
industries, we can do so through excise concessions. Efficient use of resources, innovation
and better services to consumers will point towards the growth of large-scale enterprises.
5. Training of officials
One of the major problems in the administration of Government regulations is the lack of
trust and understanding between the businessmen and officials. To gain an understanding
of the
business the officers should be given an opportunity to work as officers in a private
sector company.
6. Modifying public sector monopolies
For bringing efficient functioning, Government may have to throw open industries
on a selective basis, reserved for public sector to private enterprises.
7. Revival of public sector
We should place more faith in our private sector. We have enough skills commercially,
technically and managerially in our country and we can confidently let our private sector
collaborate more freely. A change in attitude towards private sector is required to emerge
from our backwardness.
8. Self-regulation by private sector
To win the confidence of the consumers, it is essential that a beginning should be made in
the direction of self-monitoring and self-regulation by the business community.
Joint Sector
The joint sector represents a new ideology of industrial management. The concept of the
joint sector is a compromise between the alternatives of total nationalization and free
enterprise economy. The Industrial Licensing Policy Inquiry Committee popularly known
as Dutt Committee (1969) recommended the creating of the joint sector on the basis of the
Industrial Policy Resolution of 1956. The joint sector is a form of partnership between the
private sector and the Government and its ownership and control are effectively shared
between public sector agencies on the one hand and a private group on the other. The Dutt
Committee (1969) envisaged the concept of joint sector 'as an important means of curbing
the increasing concentration of economic power'. The Committee confined the joint sector
to the core sector only. Thus, today, the concept of joint sector refers to a 'new undertaking'
in which the State also holds the equity and controls the management of the company along
with the private collaborator.
Broadly speaking, joint sector enterprises may be brought into being through anyone of the
following ways:
i. The Central Government through any of the administrative ministries may set up new
companies jointly with private partners involving substantial equity participation by
both partners.
ii. The State Government or their Industrial Development Corporations may set up
new enterprises jointly with private partners involving equity participation by both
parties.
iii. Public financial institutions may, through equity participation or conversion of debt
into equity, transform enterprises promoted by private entrepreneurs into joint sector
companies.
iv. The existing public sector companies may be transformed into joint sector
enterprises through the sale of equity shares to private entrepreneurs or to the
general public.
Role of the Joint Sector.
The rationale for the development of joint sector projects is as follows:
(1) Curbing the concentration of economic power: Government participation in the ownership
and management of enterprises jointly with the private entrepreneurs could be an effective
means for controlling monopoly, concentration of economic power and business malpractices.
(2) Social Control over Industry: Joint sector is a tool for so al control over industry, without
resort to outright nationalization. Joint sector can be used to promote socio-economic objectives
 of the Government such as maintenance of reasonable prices, regional dispersal of industries,
and investment in research to improve further technological capabilities, development of
exports, etc.
(3) Acceleration of Industrial Growth: By providing public support and patronage, the joint
sector may encourage small and medium entrepreneurs, help them to mobilize resources to
procure machinery and equipment and build up confidence to face the uncertainties of modern
business. This is the only way to ensure that medium sized public sector companies contribute
increasingly to industrial growth.
(4) Balanced Regional Development: By a process of spreading projects to different regions with
due regard to the resource endowment pattern and with linkages and spread effect, Joint Sector
projects have been expected to promote a balanced development:' of the various regions in a State.
(5) Mobilization of Resources: The State investment in joint sector projects encourages the private
entrepreneurs as well as local and other institutional savers to invest and thus mobilize local
savings of a sizable magnitude.
(6) Broad-basing Entrepreneurship: If the joint sector enterprises are permitted into a wide
range of industries, many small entrepreneurs will be able to come forward and take advantage
of Government support and facilitating role.
(7) State-sponsored industrialization: The joint sector may be regarded as a part of the
strategy of State sponsored industrialization.
(8) Extension of public control: The joint sector will enable the Government to enter the highly
profitable lines of industrial activity, reduce the dominant economic power of the large
industrial houses.
(9) Alternative to public and private sectors: The main advantage of the joint sector is that
it combines the favourable points found in the public as well as the private sector and
seeks to eliminate the negative points in both.
Thus, the rationale for setting up joint sector was mainly for developing backward areas, reducing
concentration of economic power and to accelerate industrial development. (iii)
Problems of the Joint Sector.
The following three problems are specific to the joint sector in addition to other problems common
to all industrial activity, be it in the public, private or the joint sector:
(i) There is a problem of management and control domination of the Government and private
partners;
(ii) Tile joint sector enables private entrepreneurs to promote large projects with less of
equity participation;
(iii) The Government tries to commit for public accountability and auditing whereas the private
entrepreneurs try to motivate to be commercial profitability and this controversy leads for
problems.

SMALL SCALE INDUSTRY

Introduction
India is predominantly an agricultural country. Apart from agriculture, small scale & large scale
industries have been also developed. Small scale industries are the backbone of our industrial
structure as they provide a variety of non-traditional, low technology products. They are also
engaged in the processing, preserving, manufacturing & servicing activities and play a vital role in
balanced and sustainable economic growth. Thus, a proper development of small scale industries is
essential for the healthy growth of economy.
The primary object of developing small scale industries in rural areas is to generate better
employment opportunities, raise income levels & standards of living of people. Small scale
industries are essential for providing subsidiary or alternate occupations and utilization of local
labour & raw materials. They facilitate an effective mobilization of resources of capital and skill
and also stimulate the growth of industrial entrepreneurship. Thus, the development of small scale
industries is an integral part of the overall economic, social and industrial development of a
country. Meaning
Small scale industries (SSIs) also known as MSMEs are defined & categorized by the Micro,
Small & Medium Enterprises Development Act, 2006. The act categorizes different scale of
industries on the basis of investment in plant & machinery in case of manufacturing industries and
on the basis of investment in equipment in case of service sector industries.
1. Micro Scale Enterprise:
 Manufacturing enterprises in which investment in plant & machineries does not exceed Rs 25.00
lakhs and service sector industries in which investment in equipment does not exceed Rs 10.00
lakhs are termed as micro scale enterprises.
2. Small Scale Enterprise:
Manufacturing enterprises in which investment in plant & machineries is more than Rs 25.00 lakhs
but does not exceed Rs 5.00 crores and service sector industries in which investment in equipment
is more than Rs 10.00 lakhs but does not exceed Rs 2.00 crores are termed as small-scale
enterprises.
3. Medium Scale Enterprise:
Manufacturing enterprises in which investment in plant & machineries is more than Rs 5.00 crores
but does not exceed Rs 10.00 crores and service sector industries in which investment in equipment
is more than Rs 2.00 crores but does not exceed Rs 5.00 crores are termed as medium scale
enterprises.
DEFINITIONS OF SMALL SCALE INDUSTRIES
According to The Small Scale Industries Board(1955) –
“A unit employing less than 50 persons if using power and less than 100 persons without the use of
power and with capital assets not exceeding Rs. five lakhs.”
Definition by Planning Commission:
“The small scale industries are mainly located in urban centres as separate establishments. In other
words small scale industries produce goods with partially or wholly mechanized equipment
employing outside labour.”
CLASSIFICATION OF SMALL SCALE INDUSTRIES
Small scale industries in India are divided as under-
Traditional sector:
1. Handicrafts
2. Handlooms
3. Khadi, village and Cottage industries
4. Coir
5. Sericulture
Modern
sector
1. Power loom
2. Residual SSI
Importance of SSIs-
Small scale industries play an important role for the development of Indian economy in many ways.
About 60 to 70 percent of the total innovations in India comes from the SSIs. Many of the big
businesses today were all started small and then nurtured into big businesses. The following are
some of the important role played by small- scale industries in India.
1. Employment generation:
The basic problem that is confronting the Indian economy is increasing pressure of population on
the land and the need to create massive employment opportunities. This problem is solved to larger
extent by small-scale industries because small- scale industries are labour intensive in character.
They generate huge number of employment opportunities. Employment generation by this sector
has shown a phenomenal growth. It is a powerful tool of job creation.
2. Mobilisation of resources and entrepreneurial skill:
Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from rural
and semi-urban areas remain untouched from the clutches of large industries and put them into
productive use by investing in small-scale units. Small entrepreneurs also improve social welfare of
a country by harnessing dormant, previously overlooked talent. Thus, a huge amount of latent
resources is being mobilised by the small-scale sector for the development of the economy.
3. Equitable distribution of income:
Small entrepreneurs stimulate a redistribution of wealth, income and political power within
societies in ways that are economically positive and without being politically disruptive. Thus
small-scale industries ensure equitable distribution of income and wealth in the Indian society
which is largely characterised by more concentration of income and wealth in the organised
section keeping unorganised sector undeveloped. This is mainly due to the fact that small
industries are widespread as compared to large industries and are having large employment
potential.
 4. Regional dispersal of industries
There has been massive concentration of industries m a few large cities of different states of Indian
union. People migrate from rural and semi urban areas to these highly developed centres in search
of employment and sometimes to earn a better living which ultimately leads to many evil
consequences of over-crowding, pollution, creation of slums, etc. This problem of Indian economy
is better solved by small- scale industries which utilise local resources and brings about dispersion
of industries in the various parts of the country thus promotes balanced regional development.
5. Provides opportunities for development of technology:
Small-scale industries have tremendous capacity to generate or absorb innovations. They provide
ample opportunities for the development of technology and technology in return, creates an
environment conducive to the development of small units. The entrepreneurs of small units play a
strategic role in commercialising new inventions and products. It also facilitates the transfer of
technology from one to the other. As a result, the economy reaps the benefit of improved
technology.
6. Indigenization:
Small-scale industries make better use of indigenous organisational and management capabilities by
drawing on a pool of entrepreneurial talent that is limited in the early stages of economic
development. They provide productive outlets for the enterprising independent people. They also
provide a seed bed for entrepreneurial talent and a testing ground for new ventures.
7. Promotes exports:
Small-scale industries have registered a phenomenal growth in export over the years. The value of
exports of products of small-scale industries has increased to Rs. 393 crores in 1973-74 to Rs. 71,
244 crores in 2002-03. This contributes about 35% India's total export. Thus they help in increasing
the country's foreign exchange reserves thereby reduces the pressure on country's balance of
payment.
8. Supports the growth of large industries:
The small-scale industries play an important role in assisting bigger industries and projects so that
the planned activity of development work is timely attended. They support the growth of large
industries by providing, components, accessories and semi-finished goods required by them. In fact,
small industries can breathe vitality into the life of large industries.
9. Better industrial relations:
Better industrial relations between the employer and employees helps in increasing the efficiency of
employees and reducing the frequency of industrial disputes. The loss of production and man-days
are comparatively less in small- scale industries. There are hardly any strikes and lock out in these
industries due to good employee-employer relationship.
10. SSI Facilitates Women Growth
It provides employment opportunities to women in India. It promotes entrepreneurial skills among
women as special incentives are given to women entrepreneurs.
11. SSI Meets Consumer Demands
SSI produces wide range of products required by consumers in India. SSI meets the demand of the
consumers without creating a shortage for goods. Hence, it serves as an anti-inflationary force by
providing goods of daily use.
12. SSI Ensures Social Advantage
SSI helps in the development of the society by reducing concentration of income and wealth in few
hands. SSI provides employment to people and pave for independent living. SSI helps the people
living in rural and backward sector to participate in the process of development. It encourages
democracy and self-governance.
13. Develops Entrepreneurship
It helps to develop a class of entrepreneurs in the society. It helps the job seekers to turn out as job
givers. It promotes self-employment and spirit of self-reliance in the society. Development of small
scale industries helps to increase the per capita income of India in various ways. It facilitates
development of backward areas and weaker sections of the society. Small Scale Industries are adept
in distributing national income in more efficient and equitable manner among the various
participants of the society.
Problems faced by SSIs-
Although the problems vary from region to region and size of the industry( there are many
categories under small scale industry tag depending upon the capital one is investing or has
invested).Here are some common problems faced by MSME’s ,as they are generally, called across
the country:
1. Poor capacity utilization
In many of the Small Scale Industries, the capacity utilization is not even 50% of the installed
capacity. Nearly half of the machinery remains idle. Capital is unnecessarily locked up and idle
machinery also occupies space and needs to be serviced resulting in increased costs.
2. Incompetent management
Many Small Scale Industries are run in an incompetent manner by poorly qualified entrepreneurs
without much skill or experience. Very little thought has gone into matters such as demand,
production level and techniques, financial availability, plant location, future prospects etc.
According to one official study, the major reason for SSI sickness is deficiency in project
Management i.e., inexperience of promoters in the basic processes of production, cash flow etc.
3. Inadequate Finance
Many Small Scale Industries face the problem of scarcity of funds. They are not able to access the
domestic capital market to raise resources. They are also not able to tap foreign markets by issuing
ADR’s (American Depository Receipts) GDR’s (Global Depository Receipts) etc. because of their
small capital base. Banks and financial institutions require various procedures and formalities to be
completed. Even after a long delay, the funds allocated are inadequate.
Bank credit to the small scale sector as a percentage of total credit has been declining. It fell from
16% in 1999 to 12.5% in 2002. Small Scale Industries are not able to get funds immediately for
their needs. They have to depend on private money lenders who charge high interest. Finance, as a
whole, both long and short term, accounts for as large as 43% of the sector’s sickness.
4. Raw material shortages
Raw materials are not available at the required quantity and quality. Since demand for raw materials
is more than the supply, the prices of raw materials are quite high which pushes up the cost.
Scarcity of raw materials results in idle capacity, low production, inability to meet demand and loss
of customers.
5. Lack of marketing support
Small Scale Industries lack market knowledge with regard to competitors, consumer preferences,
market trends. Since their production volume is small and cannot meet demand for large quantities
their market is very restricted. Now with the process of liberalization and globalization they are
facing competition from local industries as well as foreign competitors who sell better quality
products at lower prices. For e.g. heavily subsidized but better quality imports from China has made
most of the Indian SSI units producing toys, electronic goods, machine tools, chemicals, locks and
paper etc., unviable.
6. Problem of working capital
Many Small Scale Industries face the problem of inadequate working capital. Due to lack of market
knowledge their production exceeds demand, and capital gets locked in unsold stock. They do not
have enough funds to meet operational expenses and run the business.
7. Problems in Export
They lack knowledge about the export procedures, demand patterns, product preferences,
international currency rates and foreign buyer behaviour. Small Scale Industries are not able to
penetrate foreign markets because of their poor quality and lack of cost competitiveness. In
countries like Taiwan, Japan etc. products produced by Small Scale Industries are exported to many
foreign countries. But in India not much thought and focus has gone into improving the export
competitiveness of Small Scale Industries.
8. Lack of technology up-gradation
Many Small Scale Industries still use primitive, outdated technology leading to poor quality and
low productivity. They do not have adequate funds, skills or resources to engage in research and
development to develop new technologies. Acquiring technology from other firms is costly.
Therefore, Small Scale Industries are left with no choice but to continue with their old techniques.
9. Multiplicity of labour laws
One of the merits of Small Scale Industries are that they are labour intensive and can provide
employment to a large number of people. But the multiplicity of labour laws, need to maintain
several records (PF, ESI, Muster Rolls etc.), fines and penalties for minor violations etc. place
Small Scale Industries at a great disadvantage.
10. Inability to meet environmental standards
The government lays down strict environmental standards and Courts have ordered closure of
polluting industries. Small Scale Industries which are already facing shortage of funds to carry out
 their business are not able to spend huge sums on erecting chimneys, setting up effluent treatment
plants etc.
11. Delayed payments
Small Scale Industries buy raw materials on cash but due to the intense competition have to sell
their products on credit. Buying on cash and selling on credit itself places a great strain on finances.
The greater problem is payments are delayed, sometimes even by 6 months to one year. It is not
only the private sector but even government departments are equally guilty. Delayed payments
severely impact the survival of many Small Scale Industries.
12. Poor industrial relations
Many Small Scale Industries are not able to match the pay and benefits offered by large enterprises,
because their revenues and profitability are low and also uncertain. This leads to labour problems.
Employees fight for higher wages and benefits which the SSI is not able to provide. This may lead
to strikes, resulting in damage to property in case of violence by employees, production losses etc.
13. Strain on government finances
Marketing of products manufactured by Small Scale Industries is a problem area. The government
has to provide high subsidies to promote sales of products produced by Khadi and Village
Industries. This places a great strain on government finances.
14. Concentration of industrial units
There is high concentration of small scale industrial units in a few states. Of the estimated 3.37
million units as on 2000-01, nearly 60% were located in six states. West Bengal, Madhya Pradesh
and Uttar Pradesh alone account for 20% of Small Scale Industries. Due to concentration, there is
high competition among them to procure raw materials and other industrial inputs. This leads to
high costs and scarcity of raw materials and other inputs affecting their production and increasing
costs.
15. Inadequate dispersal
One of the objectives of the government in promoting Small Scale Industries was to increase
industrial development and employment opportunities throughout the country. Since nearly 60% of
the Small Scale Industries are concentrated in few states, the objective of balanced regional
development and promotion of backward areas has not been achieved. Further majority of Small
Scale Industries are located in urban areas and the aim of industrial development in rural areas has
also been defeated.
16. Widespread sickness
Sickness among Small Scale Industries is widespread. Sickness is not detected in the initial stages
and large amount of funds are locked in them. Nearly two and a half lakh SSI units are sick and as
on 2001 and nearly Rs. five thousand five hundred crores of bank funds are locked in them. Due to
these new entrepreneurs are not able to get loans, workers in the sick units lose their jobs and
industrial and economic development is affected. In Maharashtra alone nearly 3 lakh units have
closed down, 38 lakh workers have lost their jobs and the loss to the government is Rs. 5,000
crores.
17. Lack of awareness
The government has set up many organizations to support and provide assistance to Small Scale
Industries. But, many of the entrepreneurs running Small Scale Industries are not aware of the
various support services.
18. Government interference
Small Scale Industries have to maintain a number of records and there are endless government
inspections. A lot of time, money and effort is wasted in complying with various inspections and
records verification. This prevents Small Scale Industries from fully concentrating on their business
activities.
Government Policy and Programmes for Development of SSIs-
SSIs play a vital role in the industrial development of our economy. Given the competition they
face from the large scale industries, the government has taken up following policies and
programmes to encourage small-scale and village industries:
1. Formation of boards
In 1948, the Cottage Industries Board was set-up. In November 1952, All India Handicrafts Board
was set up. The Boards lay special emphasis on the development of co-operatives in the SSIs and
promoting marketing of handloom products.
2. Khadi and Village Industries Commission (K VIC)
Functions of the KVIC are to plan organise and implement programmes for the development of
 khadi and village industries. Its activities include training of artisans, supervisory and managerial
personnel and building up reserves of raw materials, tools, implements and equipment’s and to
make these available to the implementing agencies at reasonable prices.
3. Granting credit
State Financial Corporations have been set up for providing financial help to SSIs. Public sector
banks are taking keen interest in financing Projects of cottage and small scale industries. The Credit
Guarantee Scheme, formed in 1960 encourages lending institutions to finance SSIs.
4. District Industrial Centres (DICs)
District Industrial Centres were set up in 1978 with an objective to support SSIs. They provided
assistance to SSIs both in pre-investment and post-investment stages. They implemented Self
Employment Scheme for educated unemployed youth.
5. Small Industries Development Organisation (SIDO)
SIDO helps SSIs by providing counselling, consultancy, marketing and other research studies. It
has launched various testing stations and tool rooms.
6. Modernisation of selected SSIs
This programme was included in the twenty point programme given by the government. It provided
facilities for growth of handlooms, handicrafts and other SSIs.
7. National Institute for Entrepreneurship and Small Scale Business Development
(NIESBD) This programme was set up in 1983 to organise and conduct various training
programmes. It also undertakes research activities, conducts seminars and workshops.
8. Reservation of items to be produced by MSMEs
Industries Act of 1951 provided statutory reservation of specific items for exclusive production by
SSIs. Entry of large and medium-scale industries was prohibited in this area. In October 2008, 21
items were reserved for MSMEs. These were bread, bricks, wooden furniture, wax candles, exercise
books and registers, fireworks, etc.
9. Industrial estates
Industrial estates were set up all over India which had factory sheds, premises and other
infrastructural facilities for setting up small industrial units.
10. Government purchases from SSIs
The government has a policy of exclusive purchase of about 411, items manufactured by SSIs. This
prevents exploitation of SSIs.
Conclusion
SSEs enjoy inherent advantages over their larger counterparts in terms of generation of
employment opportunities, equality of income and wealth and greater export potential. The
globalize economy has ushered in greater accessibility to the market, need of greater linkage of
SSEs with larger companies and improved manufacturing techniques. The measure adopted by
Government have been attempted to alleviate the problems of SSEs. The recent initiatives have
changed the outlook of business from protection to liberalization. It has created a sense of
competition amongst SSEs.

INDUSTRIAL RELATIONS

Introduction
Industrial relations are the relationships between employees and employers within the
organizational settings. The relationships which arise at and out of the workplace generally include
the relationships between individual workers, the relationships between workers and their employer,
the relationships between employers, the relationships employers and workers have with the
organizations formed to promote their respective interests, and the relations between those
organizations, at all levels. The term industrial relations have a broad as well as a narrow outlook.
Originally, industrial relations were broadly defined to include the relationships and interactions
between employers and employees.
Meaning of Industrial Relations
Industrial relations refers to the relationship between employers and employees in industry, and
the political decisions and laws that affect it.
The term „Industrial Relations‟ comprises of two terms: ‘Industry’ and ‘Relations’
“Industry” refers to “any productive activity in which an individual (or a group of individuals) is
(are) engaged”.
By “relations” we mean “the relationships that exist within the industry between the employer and
 his workmen.”
The Industrial Relation relations also called as labour - management, employee employer’s
relations.
Definition
According to V. Agnihotri
"The term industrial relations explains the relationship between employees and management which
stems directly or indirectly from union- employer relationship”.
According to J. Henry Richardson
"Industrial relations may be referred to as an art, the art of living together for purposes of
production”.
According to Allan Flanders
"The subject of industrial relations deals with certain regulated institutionalized relationship in
industry”.
According to H.A. Clegg
"The field of industrial relations includes the study of workers and their trade unions, management,
employers' associations and the state institutions concerned with the regulation of employment”.
Parties to Industrial Relations
 Employees
 Employers
 Trade Union
 Employer-Employee Associations
 Government
 Courts & Tribunals
IMPORTANCE OF INDUSTRIAL RELATIONS
Industrial relations are one of the most delicate and complex elements of a modern industrial
society. With growing prosperity and rising wages, workers have earned higher wages and have
better education; and there is sophistication and generally greater mobility. Career patterns have
changed. The healthy industrial relations are key to the progress. Their significance may be
discussed as under –
1. Uninterrupted production –
The most important benefit of industrial relations is that this ensures continuity of production. This
means, continuous employment for all from manager to workers. The resources are fully utilized,
resulting in the maximum possible production. There is uninterrupted flow of income for all.
Smooth running of an industry is of vital importance for several other industries; to other industries
if the products are intermediaries or inputs; to exporters if these are export goods; to consumers and
workers, if these are goods of mass consumption.
2. Reduction in Industrial Disputes –
Good industrial relation reduces the industrial disputes. Disputes are reflections of the failure of
basic human urges or motivations to secure adequate satisfaction or expression which are fully
cured by good industrial relations. Strikes, lockouts, go-slow tactics, "gherao" and grievances are
some of the reflections of industrial unrest which do not spring up in an atmosphere of industrial
peace. It helps promoting co-operation and increasing production.
3. High morale –
Good industrial relations improve the morale of the employees. Employees work with great zeal
with the feeling in mind that the interest of employer and employees is one and the same, i.e. to
increase production. Every worker feels that he is a co-owner of the gains of industry. The employer
in his turn must realize that the gains of industry are not for him along but they should be shared
equally and generously with his workers.
4. Mental Revolution –
The main object of industrial relation is a complete mental revolution of workers and employees.
The industrial peace lies ultimately in a transformed outlook on the part of both. It is the business
of leadership in the ranks of workers, employees and Government to work out a new relationship in
consonance with a spirit of true democracy. Both should think themselves as partners of the
industry and the role of workers in such a partnership should be recognized. On the other hand,
workers must recognize employer's authority. 123 It will naturally have impact on production
because they recognize the interest of each other.
5. New Programmes –
 New programmes for workers’ development are introduced in an atmosphere of peace such as
training facilities, labour welfare facilities etc. It increases the efficiency of workers resulting in
higher and better production at lower costs.
6. Reduced Wastage –
Good industrial relations are maintained on the basis of cooperation and recognition of each other.
It will help increase production. Wastages of man, material and machines are reduced to the
minimum and thus national interest is protected.
Objectives
The objectives of industrial relations are:
a) To safeguard the interest of labour as well as of management by securing the highest level of
mutual understating and goodwill between all sections in industry which take part in the
process of production
b) To avoid industrial conflicts and develop harmonious relations, which are essential for
the productive efficiency of workers and the industrial progress of the country
c) To raise productivity to a higher level in an era of full employment by reducing the
tendency to higher and frequent absenteeism
d) To establish and maintain industrial democracy based on labour partnership, not only for
the purpose of sharing the gains of organization but also participating in managerial decisions
so that the individual's personality may be fully developed and he may grow into a civilized
citizen of the country
e) To bring down strikes, lockouts and gheraos by providing better and reasonable wages
and fringe benefits to the workers, and improved living conditions
f) To bring about government control over such units and plants as are running at losses or
where production has to be regulated in the public interest
g) To ensure that the state endeavours to bridge the gap between the unbalanced, disordered and
maladjusted social order (which has been the result of industrial development) and the need for
re shaping the complex social relationships emerging out of technological advances by
controlling and disciplining its members, and adjusting their conflicting interests protecting
some and restraining others and evolving a healthy social order.
FACTORS AFFECTING INDUSTRIAL RELATIONS
It can be affected, broadly, by the following factors-
1. ORGANISATIONAL STRUCTURE
The organizational structure formalizes relationship within the organization. It has geographical,
hierarchical and operational dimensions. Those dimensions, depending upon the size and nature,
complicate the relationship in terms of communication, conduct, control and coordination.
The set of rules and procedures prescribed in the organization for harmonious working and warmth
in climate helps canalize efforts and reduce discords/ conflicts. It provides roles for all the players
in the organization and their norms of behaviours. 139 Power distance and delegation of decision
making also contributes to a great extent towards maintenance of Industrial relations.
2. LEADERSHIP STYLE
Behaviours and functional styles of the leaders in the organization bear a great influence on the
climate. Every leader, in his/her own unique way influences the functioning of the formal structures
by informal and formal interventions. A leader having reverence for his followers will develop
team spirit if he leads by example. Industrial climate is a very delicate factor that can be destroyed
easily but built with difficulty. It is as fragile as a glass bangle. In the present times carrot is not so
enticing and the stick not so threatening in public organizations in India.
3. INDIVIDUAL BEHAVIOR
Industrial relations ultimately depend upon the individuals constituting the organization because
every individual is the creator of the climate around him. Individuals perceive situations differently
at times as individuals and as groups. Experience, exposure, skills, orientation, background,
achievement of individuals makes them behave differently in responding to situations or in creating
situations.
4. LEGAL AND POLITICAL ENVIRONMENT
Industrial relations in an organization is effected by the legal and constitutional framework which
determine the rights and privileges, powers and immunities, roles and domains, territories and
boundaries of the different players to Industrial relations.
5. TECHNICAL AND ECONOMIC ENVIRONMENT
The changes taking place in the technical and economic field puts pressures on the organization
 and affects its operational and financial strategies and employment and IR policies. Changes in
technical and economic environment continuously affect the attitudes, mind-sets, strategies,
mannerisms, elasticity and accommodating spirit of the parties involved in Industrial relations.
The expectations of both the employer and employees from each other also depend upon the
employment situation in the industry and outside. The expectations and their fulfilment or non-
fulfilment has a bearing on the relationship.
6. ATTITUDES AND MINDSETS
The outcome of the Industrial relations process depends upon the accommodating spirit and the
synergetic effect of the actions and behaviour of the parties concerned towards Industrial relations.
How the negotiations and exchanges take place depends upon the objectives, interests and attitude
of the parties to Industrial Relations.
 The attitude of management to employees and union.
 Attitude of employees to management.
 Attitude of employees to the union.
Approaches to IR
There are mainly three approaches to IR
1. Unitary approach
2. Pluralistic Approach
3. Marxist Approach
Unitary approach
 IR is grounded in mutual co-operation, individual treatment, team work and shared goals.
 Union co-operate with the mgt. & the management’s right to manage is accepted because there is
no
„ we they feeling‟
 Assumption: Common interest & promotion of harmony No strikes are there.
 It’s a reactive IR strategy.
 They seek direct negotiations with employees.
Pluralistic Approach
 It perceives:
a) Org. as coalitions of competing interest.
b) TU as legitimate representatives of employee interests.
c) Stability in IR as the product of concessions and compromises between mgt. & unions.
d) Conflict between Mgt. and workers is understood as inevitable.
e) Conflict is viewed as conducive for innovation and growth.
f) Strong union is necessary.
Marxist Approach
 Regard conflict as Pluralists.
 Marxists see conflict as a product of the capitalist society.
 Conflict arises due to the division in the society between those who own resources and those
who have only labour to offer.
 For Marxist all strikes are political.
 He regards state intervention via legislation & the creation of Industrial tribunals as
supporting management’s interest rather than ensuring a balance between the competing
groups. Suggestions to improve Industrial Relations:
 Sound personnel policies:
Policies and procedures concerning the compensation, transfer and promotion, etc. of employees
should be fair and transparent. All policies and rules relating to Industrial relations should be fair
and transparent to everybody in the enterprise and to the union leaders.
 Participative management:
Employees should associate workers and unions in the formulation and implementation of HR
policies and practices.
 Responsible unions:
A strong trade union is an asset to the employer. Trade unions should adopt a responsible rather
than political approach to industrial relations.
 Employee welfare:
Employers should recognise the need for the welfare of workers. They must ensure reasonable
wages, satisfactory working conditions, and other necessary facilities for labour. Management
 should have a genuine concern for the welfare and betterment of the working class.
 Grievance procedure:
A well-established and properly administered system committed to the timely and satisfactory
redresses of employee’s grievances can be very helpful in improving Industrial relations. A
suggestion scheme will help to satisfy the creative urge of the workers.
 Constructive attitude:
Both management and trade unions should adopt positive attitude towards each other. Management
must recognise unions as the spokesmen of the workers’ grievances and as custodians of their
interests. The employer should accept workers as equal partners in a joint endeavour for good
Industrial relations.
 Proper communication channel
Creating a proper communication channel to avoid grievances and misunderstandings among
employees
 Education and training imparted to the employees

REGULATION AND CONTROL OF PRIVATE SECTOR

Private sector includes all different types of individual or corporate enterprises, both domestic and
foreign, engaged in different fields of productive activity. Private sector enterprises are owned and
managed by the private sector. These private sector enterprises are mostly characterized by certain
common characteristics like private initiative, profit motive and ownership and management in
private hands.
In 18th and 19th century, most of the countries of the world adopted the policy of laissez faire
where the Governments followed a policy of non-interference in economic activity by the State.
This had led to huge expansion of private sector in almost all the countries of the world. In recent
times, the private sector has changed its character and is now quite different from the private
enterprises of the past. Now-a-days, the private sector in the form of corporate industrial units are
normally owned by the shareholders and managed by professional managers, where they are not
only guided by profit motive but also by expansion, consolidation, arousing social consciousness,
social responsibilities, social welfare etc.
Regulation of private corporate sector
The Industrial Policy of 1948 outlined the way the private sector industries are to be controlled and
regulated. The methods of regulation are licensing, controls and quotas.
Licensing
The objectives of industrial licensing may be specifically spelt out as under:
(i) to prevent concentration of economic power in a few hands;
(ii) to promote and encourage the decentralized small and village industries;
(iii) to make an optimum use of the limited capital resources and the available technical skills so
that they are not frittered away in unnecessary or less important channels of investment;
(iv) to promote and foster export-oriented industries in order to earn foreign exchange for
investment in desirable directions;
(v) to channelize investments in directions suiting the country's current needs;
(vi) to build up a self-reliant economy and with that end in view promote import substitution
industries;
(vii) To bring about regional balanced development by making investments in the
development of backward exceptionally underdeveloped regions;
(viii) to encourage the use of critical inputs like scarce raw materials, fertilizers, etc.;
(ix) to promotes such industries as result in energy conserving and high fuel efficiency;
(x) to promote industries in areas which preserve ecological balance;
(xi) to avoid putting undue strain on the transport system and minimise cross haulage;
(xii) to develop a new class of enlightened entrepreneurs; and priorities.
(xiii) to guide the development f industries as per the plan priorities.
Industries (Development and Regelation) Act, 1951(IDRA)
Industrial licensing was introduced in India with the enactment of the Industrial (Development and
Regulation) Act, 1951, in. pursuance of the Industrial Policy Resolution, 1948. The Act came into
force on May 8, 1952. The objectives of the Act are
(1) The regulation of industrial investment and production according to plan priorities and targets;
(2) Protection of small entrepreneurs against competition from large industries;
 (3) Prevention of monopoly and concentration of ownership of industries; and
(4) Balanced regional development with a view to reducing disparities in the level of
development of different regions and the economy.
It was hoped that through the instrument of industrial licensing, the State would be able to direct
investment into the most important branches, correlate supply and demand in the domestic market,
eliminate competition and ensure the optimum utilization of social capital.
Hazari Report
The main objectives of the study were as follows
(i) To review the issue of licences under the Industrial (Development and Regulation) Act;
(ii) To suggest modifications in the licensing system in the light of the present stage of development;
(iii) To study the volume of licences issued to the house of Birlas and other large groups.
Dutt Committee Report
The terms of reference of this committee were:
(i) to enquire into the working of the industrial licensee system with a view to ascertaining whether
the larger industrial houses had in fact secured undue advantage over other applicants and, if
they had, whether there Was, any justification for this;
(ii) to enquire into the charge of non-implementation of licences issued to the large industrial
houses and whether the non-implementation had resulted in pre-emption of capacity;
(iii) to find whether the licensing system was so operating as to achieve the objectives of the
Industrial Policy Resolution, 1956 particularly in regard to the regional dispersal of industries,
growth of small scale and medium industries;
(iv) to enquire whether the policies followed by public financial institutions had resulted in any
undue preference being given to the larger industrial houses.
Industrial Licence Policy, 1970
On the basis of the recommendations of the Dutt Committee, the Government announced Industrial
Licensing Policy in February, 1970. The main features of this policy were as under
(i) The core sector consists basic, critical and strategic industries in the economy. A It includes
industries divided into 9 sectors as follows (i) Agricultural inputs; (ii) Iron and steel; (iii) Non-
ferrous metals; (iv) Petroleum; (v) Coking coal; (vi) Heavy industrial machinery; (vii) Ship-
building and building of dredgers.' (viii) Newsprint, and (ix) Electronic. Detailed industry plans
would be available for these industries and essential inputs made available on a priority basis.
Such of these industries which were reserved for the public sector in 1956 Resolution would
remain reserved for
it while in all others, large industrial houses and foreign companies would be allowed to participate.
(ii) All new investments of more than Rs. 5 crores are classified as 'Heavy Investment Sector'.
The large industrial houses can establish industrial units in the core sector and the heavy
investment sector except in case of the industries reserved for the public sector in the 1956
Resolution.
(iii) Industries involving investment between Rs. 1 crore and Rs. 5 crores were included in the
middle sector. For these industries, licensing policy would be considerably liberalized and
licensing procedures considerably simplified.
(iv) Industry involving investment of less than Rs. 1 crore were put in the unlicensed sector since
their setting up would not require any licence. It is called 'Reserved Sector' consisting of the
small-scale industries. The big houses should not enter this reserved sector. The first list of the
small-scale industries given reservation included: (i) steel furniture, (ii) cycle tyres and tubes,
(iii) mechanical toys, (iv) aluminium utensils, (v) fountain pens, (vi) electric horns, (vii)
hydraulic jacks below 30 tonne capacity, and (viii) tooth paste.
(v) The licensing policy adopted, in principle, the concept of joint sector. It was laid down that while
sanctioning loans or subscribing to debentures, public financial institutions should in future have
the option to convert them into equity within a specified period of time. Some specific guidelines
were laid down for the purpose. Once convertibility clause was agreed to, the undertaking was
required to appoint representatives of the leading institutions on company board.
Controls
A control is said to be established when an individual’s freedom is restricted in relation to a
particular object. More precisely, when an individual's right of choice is restricted, a control is said
to have been exercised. Planning involves the control and regulation of the private sector for the
fulfilment of the objectives of the plan. To allocate scarce resources among competing ends, the
Government controls the production of goods by deciding what to produce, how to produce and
 how much to produce. Since then there are adverse balance of payments and acute shortage of
foreign exchange, import, export and exchange controls are introduced.
(i) Capital Issues Control
The capital issues control is primarily meant to channelize investments in priority sectors and check
investments in non-priority or unproductive sectors. The control is exercised under the provisions of
the Capital Issues Act, 1956. Under this Act, permission from the Central Government is necessary
for the issue of capital in the following respects
(a) Issue of capital in excess of Rs. 1 crore during a period of 12 months
(b) Issue of bonus shares of any amount by public or private limited companies
(c) offer of securities for sale to public at premium or discount.
(d) renewal or postponement of the date of maturity or repayment of any security maturing
for repayment.
(e) issue of debentures carrying conversion rights other than those privately placed with
financial institutions.
The Securities Contracts (Regulation) Act, 1956, provides for apart from regulation of stock
exchanges, a general system and apparatus of control to ensure fair dealing in securities and
protecting investors.
(ii) Import and Export Control.
Import and export control in India is exercised under the provisions of the Imports and Exports
(Control) Act, 1947. Under this Act, the Central Government has promulgated the Imports (Control)
Order, 1955 and Export (Control) Order, 1962. Under these orders, the exports and imports have
been brought within the purview of licensing by designated authority.
The licence to be issued depends upon several factors, like availability of foreign exchange,
essentially of the item for the manufacturing unit, availability of the commodity from indigenous
sources and role of the industry in the national context.
(iii) Commodity Control.
Commodity control in India is exercised under the provisions of the Essential Commodities Act,
1955 which empowers the Central of the various Acts enacted by the Government. The first is the
list Government to control, regulate or prohibit the production, distribution, transport, trade,
consumption or storage, to prescribe their prices and even to take over stocks on conditions it itself
sets. The Government can provide:
(i) for controlling the prices at which such an article shall be purchased and sold;
(ii) for regulating by licences, the distribution, transport, etc. of such articles;
(iii) for prohibiting any person to withhold from sale of an article ordinarily kept for sale;
(iv) for requiring producers of any such articles to sell the whole or a part of their stocks;
(v) for regulating such articles as are detrimental to public interest;
(vi) for requiring the sellers to exhibit price list, etc.
(vii) for collecting information and statistics and the like.
Besides, there are a number of enactments to control various specific commodities such as The
Coir Industry Act, 1983, The Rubber Act, 1947, The Sugar (Regulation and Production) Act, 1961,
The Cement Control Order, 1961, The Fertilizers Control Order, 1957, Motor Cars (Distribution
and Sales) Control. Order, 1959, Scooters (Distribution and Sales) Control Order, 1960, etc.
The Foreign Exchange Management Act, 1999 (FEMA)
The Foreign Exchange Regulation Act, 1973 (FERA) has been repealed by a new Act called the
Foreign Exchange Management Act, 1999 (FEMA) and it came into force with effect from 1st June,
2000. This enactment marks a 'transition from the era of regulation, control and prohibition' to a
'new era for consolidation and management of foreign exchange reserves for the country.' This Act
aims to consolidate and amend the law relating to foreign exchange with the object of:
• facilitating external trade and payment, and
• Promoting orderly development and maintenance foreign exchange market in India.
 UNIT-IV
POVERTY

Meaning:
Poverty can be defined as the lack of basic needs that are necessary for one to lead a relatively
comfortable life. Such requirements may include shelter, clothing, food, education, and healthcare.
At present, 28.5% of the Indian population lives below the poverty line. In the category of poor
falls the people whose daily income is less than 33 rupees a day in cities and 27 rupees a day in
villages. Poverty can either be relative or absolute because whereas other people may be
comfortable with their lives, they may be deemed to be living in poverty when
compared against those who are extremely wealthy.
Definition:
According to Harrington
“Poverty is the deprivation of those minimal levels of food, health, housing, education and
recreation which are compatible with the contemporary technology, beliefs and values of a
particular society”.
According to Gillin and Gillin
“Poverty is that condition in which a person either because of inadequate income or unwise
expenditures does not maintain a scale of living high enough to provide for his physical and
mental efficiency and to enable him and his natural dependents to function usually according to the
standards of society of which he is a member”.
Types of Poverty:
Poverty has different meanings for different people. The perception of poverty differs from
person to person.
There are basically two types of poverty.

Absolute poverty is measured against a pre-determined level of living that families should be able
to afford. Consumption of food grains, vegetables, milk products and other items that are
necessary for a healthy living and access to other non-food items are included in the absolute
minimum consumption basket.
These standards are then converted into monetary units and defined as the poverty line. People
with consumption expenditure below this threshold are considered poor.
Relative poverty is closely associated with the issues of inequality. The income or consumption of
the last quintile of the population would be termed poor even though on absolute poverty definition
none of the people in the last quintile group may be poor. Per capita income of a country could also
be used to identify the poor.
Persons with per capita incomes of half the country’s per capita income could be termed as poor
even though they may be in a position to afford the minimum basket of goods and services that
may represent the poverty line. This again reflects concerns of equality.
Extent of Poverty in India
Though India is regarded as a developing country it is very badly facing the problem of poverty. We
became independent six decades ago and still our society has not become free from the stranglehold
of the problems such as poverty, over-population, unemployment, illiteracy, etc.
It is unfortunate that in India appropriate and reliable data for the direct estimation of poverty are
not available. The government has not made any serious attempt in this direction. However, some
private individuals and agencies have made their own attempts to estimate poverty.
 (i) Estimates of Dandekar and Rath:
As per the estimates of Dandekar and Rath, as early as in 1960-61 roughly 40% of the
rural population and 50% of the urban population were living below poverty line.
(ii) Estimates of S.S. Minhas:
The study of Dr. Minhas revealed that about 65% of population in 1956-57 and 50.6% of
population in 1967-68 in rural India were living below the poverty line.
(iii) Planning Commission’s Estimates:
On the basis of a large sample survey data on consumer expenditure, conducted by the NSSO
[National Sample Survey Organization], the Planning Commission estimated poverty in the
country at the national and state level.
These estimates made by the Commission at an interval of approximately five years, give us some
picture about the extent of poverty in India until 1990- 2000. The following it throws some light
on the extent of poverty in India.
As it reveals that in 1999- 2000, 26.1% of the people, that is, 260.3 million people were living
below the poverty line. As per the poverty projection made for the year 2007, the figures were
likely to be at 19.3% and 220% million respectively.
Extent of Poverty in Different States:
The level of poverty is not the same in all the states. Poverty was found to be highest in Orissa
[47.15%] in 1999-2000 and Bihar [46.2%] respectively. In U.P., highest number of poor
people [5.29 crore, or 31.5%] were found.
The estimates reveal that in 1999-2000, about 193.2 million poor people were living in rural
areas and 67.1 million, in urban areas. In Karnataka, about 104.40 lakh [20.04%] people were
living below the poverty line.
Causes of Poverty
There are different situations that may cause an individual to live in poverty. Some of these
situations are unique to every person while others are universal. These are some of the causes
of poverty:
1. Over-population:
When too many people live in a geographical location, they compete for the available resources.
The chances are that the resources are not always going to be enough to support everyone. Those
who miss out will have to struggle to make ends meet. Overpopulation can result in the
unavailability of land which is an important factor of production. Even without formal
employment, those who have land can cultivate crops for food and sale.
2. Illiteracy:
Lack of education can lead to poverty in different ways. When people go to school, they become
equipped with skills and techniques that make them employable. They can thus earn good incomes
and lead good lives. On the other hand, people who have not gone to school will either be
employed as casual labourers with minimum wages or completely be without a means of getting
income.
Education opens a path to success even for people who are born into low-income families.
Illiteracy also means that an individual lacks the intellectual capacity to make sound financial
decisions. It can result in poor investment moves or bad spending habits that cause poverty.
3. Casteism and Untouchability:
Caste systems deny those who are considered as less worthy a fair shot at success. It condemns
them to a mediocre kind of life even when they have the potential to be great and find success. It
means that if one is born into the wrong caste, he or she will be confined to the living standards
of it.
4. Gender inequality:
This is still a major problem in the 21st century. Even though there have been some remarkable
improvements in addressing the issue of gender equality, a lot of challenges still exist. The
phenomenon of unequal pay based on gender has caused more women than men to live in poverty.
The failure to educate the girl child by several communities around the world condemns them to a
life of poverty. They have to depend on men to provide for them and sometimes get married just
to escape poverty. Some societies do not let the girl child inherit property such as land from a
parent. They, therefore, have no means to generate income and make a good life for themselves.
5. Economic inequality:
Unequal distribution of wealth especially in countries where the ruling elite come from a certain
 region usually lives those who are not represented in government wallowing in poverty. They are
denied basic infrastructures that are critical to the development and have to contend with the little
resources available. This creates a cycle of poverty and many socio-economic problems.
6. Natural Causes:
Environmental and geographical factors may also cause poverty. Floods, earthquakes, and
droughts can cause devastations and economic hardships as well as poverty. People may lose their
businesses, sources of income, and houses as a result of natural disasters. Change in weather
patterns and soil degradation can sometimes lead to poor agricultural harvests. If the community
depends on farming for income, it will be left without a viable way to generate money.
7. Labour exploitation:
Unethical business practices like labour exploitation also result in poverty. There are business
owners who in a bid to increase profit margins, pay workers very little amounts of wages. As
they accumulate wealth, the poor people who break blood and sweat while earning them money
live in very poor conditions.
8. Resistance to change:
This can cause poverty in many ways. When the people of a country refuse to usher in a new and
visionary leadership that has good plans to bring socio-economic development, the nation is left
lagging behind in development. A lot of countries have been plagued by bad leadership and this
has caused economic hardships among the citizens. Resisting change such as the need to educate
girls, opening up the country to foreign direct investment and a call to embrace new ways of doing
business can also cause poverty.
9. Unorganized Loans at higher interest rates in rural areas:
Such loans that are paid at higher interest rates reduce profit margins and kill off small businesses.
They also encourage consumerism, and this creates several financial problems especially for those
living in rural areas. Unorganized loans can leave the borrower worse of than he or she was before
taking the credit facility.
10. Wastage of resources:
Improper utilization of resources by government agencies and individuals can later lead to
poverty. People who are initially rich can also become poor through wasteful expenditure. This is
greatly driven by the culture of consumerism
Effects of Poverty
Poverty has so many negative effects on both the individual and the society. These are some of
the reasons why poverty is not a good thing:
1. Hinders economic prosperity of the nation:
The economic growth of a country is mostly driven by the business ventures of its citizens. If
many of them are poor, the country will be underdeveloped.
2. Crimes:
It has been established that crime rates are usually higher in areas or countries with high levels
of poverty compared to those that are experiencing rapid economic growth and good amounts of
income per household.
3. Malnutrition:
Insufficient food and the inability to afford a decent meal results in malnutrition. Many people who
live in poverty forego several meals and sometimes when they eat, the food lacks essential nutrients
necessary for good growth.
4. Health problems:
Many people living in poverty are unable to afford good healthcare. They are therefore plagued
by different health problems since they cannot afford treatment. The poor living conditions may
also cause diseases.
5. Less liberty:
They say money is not everything but nevertheless, it is important to have it. It can afford you the
best things in life and give you different options to choose from. Poor people do not get to
Choose their professions because they have to make do with what is available. Many will get you
a good education and make it possible to study the career of your choice.
6. Moral and self-esteem:
This is something that is easy to observe in a social setup. Those who live in poverty usually
feel like they do not have the moral authority to demand better services or ask that they are
treated fairly. Many of them also suffer from low self-esteem because they think that they are
 not good enough.
7. Insufficient food and water:
To eat, one has to have money to buy the food. That is one luxury that those who live in poverty
do not have. Poor areas have insufficient food and lack clean water to use in the home.
8. Lack of basic amenities:
Important public amenities such as good drainage systems, piped water, schools, health centres,
and personal amenities like heating are things that those who live in poverty lack.
9. Stress:
Increased social disturbances can cause stress. The mind will be at constant war thinking of
where to get the next meal, what the future holds or how to overcome the different problems
associated with poverty. A poor person rarely experiences peace of mind.
10. Feminization of poverty:
This is where the burdens of poverty are borne by women. They are left with the responsibility
of taking care of the children and holding the family together.
Control Measures / Solutions
These are some of the ways by which poverty can be controlled:
1. Free education:
This opens up opportunities for many people and provides individuals as well as families with a
means to escape poverty. It is the ideal way to break the cycle of poverty that has bedevilled
several families.
2. Government grants:
These can be in the form of free mid-day meals or even scholarships. It eases the financial
pressure on families and allows them to direct the little money that they have towards business
ventures.
3. Creation of job opportunities:
A high rate of employment reduces the level of poverty in a country. When more people
are employed, many households also earn incomes and live comfortably.
4. Vocation and Technical training:
This is skill based training meant to equip individuals within the society with technical skills to
enable them become entrepreneurs or professionally employed even without higher education.
Such a move would be key in uplifting the lives of people in rural areas and reducing poverty
levels.
5. Free medical care facilities:
This would ensure that people living in poverty have good healthcare services. It would also help
keep them healthy and strong to seek out money making opportunities. Staying healthy and active
is very important in fighting poverty and improving living standards.
6. Education about family planning:
One interesting factor is that a lot of people living in poverty have very large families compared
to those who are considered to be well off. Taking care of a big family requires resources. There is
thus a need to carry out civic education about the necessity of family planning.
7. Increase in earning capacity:
Gradually and systematically increasing the minimum wage should be the objective of every
government. This will increase the incomes earned and subsequently reduce poverty levels.
There should also be laws that deter employees from paying workers less than they deserve.
8. Casteism and untouchability need to be abolished:
No one should be condemned to a life of poverty and mediocrity at birth. It hinders the utilization
of talents and denies well-deserving people the chance to take a shot at their dreams. To borrow
an example from capitalism, everyone should be free to pursue financial success and be rewarded
according to efforts.
9. Women empowerment:
Gender inequality should be abolished if the society is to realize meaningful growth and
development. Denying women, the opportunity to pursue financial success does the community
no good. If anything, it compounds the problems associated with poverty. Statistics has shown
that regions with many economically empowered women are more developed than those with
glaring gender disparities.
10. Low-cost loans:
Cheap credit facilities will encourage the growth of small businesses and provide people,
 especially those in rural areas, with a means to escape poverty. Low-cost loans are essential for
spurring economic growth in the local community.
Conclusion
Everyone aspires to attain financial prosperity and live a comfortable life. To realize these
aspirations, it is crucial to seek out reasonable opportunities and pursue them. One cannot succeed
without working towards a goal. A life of poverty means that an individual is not able to enjoy
some of the good things in life. It is, therefore, important to eliminate obstacles to prosperity by
controlling poverty and creating an environment where everyone has a fair shot at success. Every
individual is bestowed with certain gifts, and the fulfilment of potential can only be possible
when the available conditions allow it.

UNEMPLOYMENT

“Unemployment”, may be elaborated as a state of not finding work by an individual who is fit and
willing to work. It is usually measured in percentage; the number of individuals without work out
of the total “labour force” of the country or specific social groups. Labour force is the term
collectively applied to the total number of individuals within the population who are willing and
capable of doing work. Unemployment rate of a country is indicative of its socio-economic health.
In other words, Unemployment is a situation where in the person willing to work fails to find a job
that earns them living. Unemployment means lack of employment. In simple way, unemployment
means the state of being unemployed.
Definition
According to A.C. Pigou
“Unemployment means, all those who are willing to work are not able to find job”.
Unemployment definition by ILO
Unemployed people are "those who are currently not working but are willing and able to work
for pay, currently available to work, and have actively searched for work".

Unemployment definition by World Bank

“Unemployment refers to the share of the labour force that is without work but available for
and seeking employment”.
Some features of unemployment have been identified as follows:
1. The incidence of unemployment is much higher in urban areas than in rural areas.
2. Unemployment rates for women are higher than those for men.
3. The incidence of unemployment among the educated is much higher than the overall
unemployment.
4. There is greater unemployment in agricultural sector than in industrial and other major sectors.
Types of Unemployment
The most accepted classification of Unemployment recognizes two broad types: Voluntary
and Involuntary Unemployment.
Voluntary unemployment arises when an individual is not under any employment out of his
own desire not to work. Could be from their total apprehension towards the concept itself, or it
may be that an individual is unable to find work paying his desired wages and he doesn’t want to
settle.
Involuntary unemployment encompasses all those factors that prevent a physically fit individual
willing to work from getting an appointment. According to John Maynard Keynes, “involuntary
unemployment arises due to insufficiency of effective demand which can be solved by stepping
up aggregate demand through government intervention”.
Involuntary Unemployment is further categorized into subheads;
1. Structural: Such employment stems from any structural change in the economy that leads to
decline of specific industries. Long term changes in the market conditions, reorganization of the
same, and sudden changes in the technological sector, creates a Skill Gap in the existing workers.
2.
Regional: Globalization and relocation of jobs also leads to unemployment as workers are often
unable to move to the new location where the employers currently hold positions.
3. Seasonal: In some industries production activities are season best and employment occurs only
 in peak seasons. Agro-based industries and tourism industries are examples of this form of
unemployment.
4. Technological: This type of unemployment is either generated following the introduction of
technologically advanced mechanization that renders manual labour redundant, or through inclusion
of technology that the current labour force is ill-adapted to.
5. Frictional: This type of unemployment happens when the labour is either transitioning between
jobs or is trying to find a job more suited to their skill set. Friction is generally referred to the time,
energy and cost that a person invests while searching for a new job.
6. Educated: This form of unemployment happens when people with advanced degrees are unable
to procure an engagement that is suited to their level of training.
7. Casual: Some occupations can only offer temporary employment to individuals and their
engagements are subject to termination as soon as the demand subsides. Daily labourers who work
on a day-to-day basis are example of such types of unemployment.
8. Cyclical: This type of unemployment refers to the periodic cycle of unemployment associated
with cyclical trends of growth in business. Unemployment is low when business cycles are at their
peak and high when the gross economic output is low. Several external factors like wars, strikes and
political disturbances, natural calamities that affect business cycle are also contributors to cyclical
unemployment.
9. Disguised: This is a scenario when more people are employed in a job than is actually required
for it. This is hallmark of developing economies where availability of labour is abundant. It is
primarily a feature of the agricultural and unorganized sectors.
10. Natural Rate of Unemployment
This is the level of unemployment when the labour market is in equilibrium. It is the difference
between the labour force and those willing and able to accept a job at going wage rate. It
encompasses the different supply side unemployment like frictional and structural
unemployment.
11. Under-employment
This is when people have a job, but it is part time or temporary. They would like to work full
time, but only have a part time income.
Causes of Unemployment
Unemployment is a reason for alarming concern in India today. The root of the problem can
be traced to a host of reasons that contributes collectively towards this problem.
1. Economic Growth without adequate employment opportunities:
India’s GDP projections for year 2017 is 7.5% but that growth does not currently translate into
creating more employment opportunities for the labour force of the country. In a survey
conducted among a sample of 1072 companies across the nation and across various sectors,
during the financial year of 2014-2015 only 12,760 jobs were created compared to 188,371 jobs
in the year 2013-2014. In the year 2016, India’s rural unemployment rate stands at 7.15% whereas
unemployment rate in urban areas stand at 9.62%.
2. Education:
Although literacy rates have risen in the last few decades, there still remains a fundamental flaw
in the education system in India. The curriculum is mostly theory-oriented and fails to provide
vocational training required to match up with current economic environment. The degree-oriented
system renders itself redundant when it comes to producing human resources adept at fitting into
specific profiles within the economy.
3. Population growth:
Rapid growth of population has often been labelled as the major reason for increasing
unemployment in the country. In the last ten years (2006-2016), India’s population has increased
by 136.28 million and unemployment is at a 5 year high in the financial year of 2015-2016. Current
survey data revealed that at the all-India level, 77% of families do not have a regular salaried
person.
4. Faulty Employment planning:
The five-year plans implemented by the government have not contributed proportionately towards
generation of employment. The assumption was that growth in economy will automatically
generate enough employment. But in reality the scenario doesn’t quite match up to the assumption
and there have remained gaps between the required number of jobs and the actual numbers
generated.
 5. Drawback of Agriculture Infrastructure:
According current statistics, agriculture remains the biggest employer in the country contributing to
51% employment. But ironically the sector contributes a meagre 12-13% to the country’s GDP.
The problem of disguised unemployment has turned out the biggest contributor behind this deficit.
Also the seasonal nature of employment in this sector builds up recurring cycles of unemployment
for the rural population. Lack of proper irrigation infrastructures and outdated cultivation methods
still used renders most of the agriculture land in India usable for cultivating just one crop a year.
This is another contributing factor towards seasonal nature of unemployment in the sector.
6. Alternative opportunities:
There has been a definite push towards providing the people employment by the agriculture-
based industries with alternate methods of employment during the lull seasons. Skill-based
trainings for their employment in other sectors are lacking till date.
7. Slow Industrialization:
The industrial scenario in India is still slow to flourish. Agriculture still remains as the biggest
employer in the country. People are not yet keen towards self-employment, especially in the
rural sector, depending on existing employment opportunities.
8. Neglect of cottage industries:
For landless people in rural areas of India, one of the major means of livelihood is the cottage
industries like fabric and handicrafts. But these small-scale industries are adversely affected by
larger more mechanized industries which out-competes them in productivity. As a consequence,
it is becoming more and more difficult to sustain the cottage industries inciting loss of
employment for many.
9. Lack of Investment:
Inadequacy of capital investment persists heavily in India and that has been a key contributor in not
generating enough industry that in turn provides employment to the labour force.
10. Immobility of Labour:
One more factor that leads to unemployment is people not being interested to move for jobs.
Responsibility and attachment to family, language barrier, religion and lack of transport are
key contributing factors in this regard.
Solutions to Reduce Unemployment Rate
Collective efforts directed by the Government as well as citizens towards the following points might
help alleviate the problem of unemployment in the country.
1. Increased Industrialization:
One of the most sure-shot remedies of the unemployment situation in India is rapid
industrialization. Increased number of industries translates effectively into increased number of
employment opportunities. Due to the emphasis put on agriculture in our economy,
industrialization still takes a backseat, with farmers not ready to give up land for establishing
industries. They need to be encouraged with better incentives and guaranteed jobs for a member of
the family in the newly established industry.
2. Emphasis on Vocational and Technical Training:
The curriculum pursued in universities should be altered to focus more on practical aspects of
learning. More institutions need to be established that offer vocational courses that will
translate directly into relevant jobs.
3. Encouraging Self-employment:
Self-employment should be encouraged more with introduction of liability free loans and
government assistance for funding. Incubation centres need to be promoted to cultivate
original business ideas that will be financially viable.
4. Improved Infrastructure in Agriculture:Although India’s economic market is seeing
increased investments from overseas investors owing to its cheap labour costs; a lot more
is still need to bridge the gap of unemployment. Government as well as leading business
houses of the country should seek to invite more foreign collaboration and capital
investment in every sector.
5. Inviting Larger Capital Investments:
Although India’s economic market is seeing increased investments from overseas investors owing
to its cheap labour costs; a lot more is still need to bridge the gap of unemployment. Government
as well as leading business houses of the country should seek to invite more foreign collaboration
 and capital investment in every sector.
6. Focused Policy Implementation:
Subsequent policies have focused on the issues like poverty and unemployment, but the
implementation leaves a lot to be desired. Schemes like Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA) and Rajiv Gandhi Swavlamban Rozgar Yojna are
examples of the initiatives that the government has undertaken to address the unemployment
problem. The recent Make in India initiative is another such step that has heart in the right
place. The government should seek to streamline its implementation strategies so that the
benefit from such schemes may be maximized.

INEQUALITY
Inequality is often associated with the idea of income "fairness." Most people consider it "unfair"
if the rich have a disproportionally larger portion of a country's income compared to the general
population.
Income inequality is the unequal distribution of household or individual income across the various
participants in an economy. It is often presented as the percentage of income related to a
percentage of the population. For example, a statistic may indicate that 70% of a country's income
is controlled by 20% of that country's residents.
Meaning of Inequality
Inequality—the state of not being equal, especially in status, rights, and opportunities. In other
words a measurement of the distribution of income that highlights the gap between individuals
or households making most of the income in a given country and those making very little.
Extent of Inequality/Inequality in numbers
According to a report by the Johannesburg-based company New World Wealth, India is the
second- most unequal country globally, with millionaires controlling 54% of its wealth. With a
total
individual wealth of $5,600 billion, it’s among the 10 richest countries in the world – and yet
the average Indian is relatively poor.
Compare this with Japan, the most equal country in the world, where according to the
report millionaires control only 22% of total wealth.
In India, the richest 1% own 53% of the country’s wealth, according to the latest data from Credit
Suisse. The richest 5% own 68.6%, while the top 10% have 76.3%. At the other end of the
pyramid, the poorer half jostles for a mere 4.1% of national wealth.
What’s more, things are getting better for the rich. The Credit Suisse data shows that India’s
richest 1% owned just 36.8% of the country’s wealth in 2000, while the share of the top 10% was
65.9%. Since then they have steadily increased their share of the pie. The share of the top 1% now
exceeds 50%.
1. India added 17 new billionaires last year, raising the number to 101 billionaires.
2. Indian billionaires’ wealth increased by INR 4891 billion —from INR 15,778 billion to over
INR 20,676 billion. INR 4891 billion is sufficient to finance 85 per cent of the all states'
budget on Health and Education.
3. 73 percent of the wealth generated last year went to the richest one percent, while 67 crore
Indians who comprise the poorest half of the population saw one percent increase in their
wealth.
4. In the last 12 months the wealth of this elite group increased by Rs 20,913 billion. This
amount is equivalent to total budget of Central Government in 2017-18.
5. 37% of India’s billionaires have inherited (family) wealth. They control 51 per cent of the
total wealth of billionaires in the country
6. Only four women billionaires in India and three of them inherited family wealth
7. Between 2018 till 2022, India is estimated to produce 70 new millionaires every day
8. Number of billionaires has increased from only 9 in 2000 to 101 in 2017
9. 51 billionaires out of the total 101 are 65 years or above and own Rs 10,544 billion of total
wealth.
10. If we assume that in the next 20 years, at least Rs 10,544 billion will be passed on to the
inheritors and on that if 30% inheritance tax is imposed, the Government can earn at least Rs
 3176 billion. Rs 3176 billion sufficient to finance 6 crucial services--Medical & Public
Health, Family Welfare, Water & Sanitation, Housing, Urban Development and Labour &
Labour Welfare in all States.
11. Over the next 20 years, 500 of the world’s richest people will hand over $2.4 trillion to their
heirs – a sum larger than the GDP of India, a country of 1.3 billion people.
12. In countries like India and the Philippines, at least one in every two workers in the garment
sector are paid below the minimum wage (refer to Figure 9 in the report).
13. It would take 941 years for a minimum wage worker in rural India to earn what the top paid
executive at a leading Indian garment company earns in a year.
14. It would take around 17.5 days for the best paid executive at a top Indian garment company
to earn what a minimum wage worker in rural India will earn in their lifetime (presuming 50
years at work)
15. It would cost around Rs 326 million a year to ensure 14,764 minimum wage workers in rural
India were paid a living wage. This is about half the amount paid out to wealth shareholders
of a top Indian garment company.
16. India's top 10% of population holds 73% of the wealth.
Causes of Inequalities
There are several causes which are responsible for the creation and perpetuation of
economic inequalities:
(1) Private ownership of property
India has a mixed capitalistic economy. In this economic system people are guaranteed the right to
property. Under the system of private property, a person is free to earn, free to save and free to
own property. Once acquired property produces further and starts earning. Differences in property
lead to differences in income and wealth. There are inequalities in land ownership and
concentration of tangible wealth in the rural sector. Not only land, buildings, automobiles, etc. are
owned by individuals, but the means of production like factories, buses, mines, etc. air also
possessed by private persons and companies. A microscopic minority has acquired control over
vast assets. They establish monopoly and exploit the workers and consumers. The result of all is
that the owners of such monopoly houses become richer and richer leaving the rest poor.
(2) Inequalities in professional training
Incomes of business executives, engineers, lawyers and other professionals are often high and from
this fact emanates the notion that income inequalities arise from professional competence or lack of
it.
(3) Inheritance law
The existing inheritance law in India perpetuates income inequalities. Some persons are born
to landless parents and become labourers, other inherit a few hectares and earn low income.
Thus some persons are born with silver spoons and others are cursed with poverty.
(4) Difference in natural qualities
No two persons have the same intelligence. Some are more talented than others. Persons
with greater capacity and, earn health more than the dullards and sick.
(5) Social stratification
There is the caste system which is very deep rooted in our social system. According to this
system, the caste is linked with profession or occupation so that high castes follow the more
lucrative profession and low castes are condemned to low paid occupation. Inequality of income is
the natural consequent of such a social system.
(6) Increasing unemployment
A very large number who are under-employed and unemployed get less income and this state
of affairs result in inequalities of income. Increase in their number over time accentuates
already existing income inequalities.
(7) Inflation and price rise
The rising prices erode the real income of the working class, while the industrialists, traders and
big farmers with large marketable surplus have benefited a great deal from the inflationary process.
Thus, the inflation has greatly accentuated income inequalities.
(8) Credit policy of banks and financial corporations.
The large companies and bigger enterprises have easier access to the capital market as the
financial institutions and banks pursue a lending policy which discriminates against small
producers. This resulted in increased concentration of economic power with inevitable increase in
 income inequalities.
(9) Absence of social security
Social security measures may not t make the poor people equal to the rich, but these go a long
way in lessening inequalities because such measures are financed by taxing the rich. In India,
since social security is still in its infancy, economic inequalities are present
(10) Concentration of economic power
The concentration of economic power created economic inequalities. Several forces and factors
like financial aid, bank credit, life insurance corporation support, individual financers, government
policy, economies of scales and inter-locking devices lead for increased concentration of the,
economic power, Widespread of tax evasion also leads for concentration of economy power.
(11) Poverty
One of the basic causes of unequal distribution income and wealth in the country ‘is poverty
which is reflected in low consumption Levels, low per capita income and low standard of living of
the mass of the people.
Measures to Reduce Economic Inequalities
There is absolutely no justification for unequal incomes. If they prevail, then these inequalities
give rise to many evil consequences. These have adverse effects on production and investment.
While large many people cannot even express their need for essential goods in the market, a few
have the power to satisfy their luxuries. All this gives rise to a distribution of resources which is
socially unacceptable to people at large. To safeguard the national interest, the government has
taken steps to reduce
inequalities of income and wealth.
(1) Land reforms and redistribution of agricultural land.
Legislative measure was undertaken to abolish landlords and other intermediaries and ceiling
on holdings were fixed. The surplus land is being distributed among landless agriculturists.
(2) Control over monopolies and restrictive trade practices.
The Monopolies and Restrictive Trade Practices Act was passed as late as 1969. The MRTP
Commission was set up. The industrial ' licensing machinery is there to protect and encourage
small industries.
(3) Employment and wage policies.
Special employment programmes such as the Crash Scheme for Rural employment,
self- employment scheme, Food for Work and so on.
(4) Minimum needs programme.
It is essentially an investment in human resources development. The programme is expected to
improve the consumption levels of those living below poverty line and thereby reduce the
income inequalities.
(5) Programmes for the uplift of the rural poor.
The Integrated Rural Development Programme (IRDP), the NREP, the RLEGP and the jawahar
Lal Nehru Rozgar Yojana are working to benefit the rural poor people.
(6) Taxation
The progressive tax system has been designed to prevent concentration of wealth in a few
hands. Indirect taxes have been levied highly on luxury goods.
(7) Social security measures
The Workmen’s Compensation Act, Employees' State Insurance Act, Employees' Provident Fund
Act, etc. we’re providing social security provisions to workers to enhance real wages and to
reduce inequalities of income.
(8) Backward area
Agricultural and industrial developments in backward areas are essential for raising the income
levels of the people and reduce disparities of income and wealth. Agricultural productivity
Should be increased by providing new dry farming technology, irrigation facilities’ and improved
inputs. With the development of backward areas, agricultural and industrial productivity would
increase, employment opportunities would expand, incomes would rise and concentration of
economic power in a few hands and regions would be reduced.
(9) Price policy
Continuous rise in prices has eroded large chunks of the income of the masses, and increased
profit it thus margins of the producers, and distributors and accentuated income inequalities. This
necessitates stabilizing the price level to bring down the inequalities in India.
(10) Population control
 One of the important policies to income distribution over the long run is to control the growth rate
of population. Larger families mean lower per capita income. So to increase per capita income
there is need to adopt planning practices on a wide scale.
(11) Labour-intensive techniques
To minimize inequalities in., the means of production and to employment opportunities provide
larger opportunities for improving income distribution, the use of labour intensive techniques is
an important instrument of policy.

INFLATION

Meaning of Inflation:
By inflation we mean a general rise in prices. To be more correct, inflation is a persistent rise in
the general price level rather than a once-for-all rise in it.
On the other hand, deflation represents persistently falling prices. Inflation or persistently rising
prices is a major problem in India today. When price level rises due to inflation the value of
money falls. When there is a persistent rise in price level, the people need more and more money
to buy goods and services.
Definition
According to Keynes “Inflation is an expansion in the supply of money relative to the supply of
things to purchase”.
Types of Inflation
1. Creeping Inflation
Price rise at very slow rate (less than 3%) like that of a snail or creeper is called Creeping
inflation. It is regarded safe and essential for economic growth.
2. Walking or Trotting Inflation
Price rise moderately at the rate of 3 to 7% (or) less than 10% is called Walking or trotting
inflation. It is a warning signal to the government to be prepared to control inflation. If the
inflation crosses this range, it will have serious implication on the economy and individuals.
3. Running Inflation
Running inflation means price rise rapidly like the running of a horse at a rate of 10-20%. It
affects the economy adversely.
4. Hyperinflation (Or) Runway (Or) Galloping Inflation
The price rise at very fast at double or triple digit rate from 20 to 100% or more is called
Hyperinflation (or) Runaway (or) galloping inflation. Such a situation brings total collapse of
the monetary system because of the continuous fall in the purchasing power of money.
5. Stagflation
Stagflation refers to the situation of coexistence of stagnation and inflation in the
economy. Stagnation means low National Income growth and high unemployment.
6. Deflation
Deflation is opposite to that of inflation. The persistent and appreciable fall in the general level
of prices is called as deflation. The rate of change of price index is negative. The effects, cause
and measures are also in the opposite direction.
7. Disinflation
The rate of inflation at a slower rate is called disinflation. For example, if the inflation oflast
month was 6% and rate of inflation in the current month is 5% it is termed as disinflation.
8. Reflation
Reflation means deliberate action of government to increase rate of inflation to stimulate
economy. It is usually done to redeem the economy from deflationary situation.
Causes of Inflation
1. Increase in money supply:
Over the last few years the rate of increase in money supply has varied between 15 and 18 per
cent, whereas the national output has increased at an annual average rate of only 4 per cent. Hence
the rate of increase in output has not been sufficient to absorb the rising quantity of money in the
economy. Inflation is the obvious result.
2. Deficit financing:
When the government is unable to raise adequate revenue for its expenditure, it resorts to deficit
financing. During the sixth and seventh Plans, massive doses of deficit financing had been
 resorted to. It was Rs. 15,684 crores in the sixth Plan and Rs. 36,000 crores in the seventh Plan.
3. Increase in government expenditure:
Government expenditure in India during the recent years has been rising very fast. What is more
disturbing, proportion of non-development expenditure increased rapidly, being about 40 per cent
of total government expenditure. Non-development expenditure does not create real goods; it only
creates purchasing power and hence leads to inflation.
Not only the above mentioned factors on the Demand side cause inflation, factors on the
Supply side also add fuel to the flame of inflation.
4. Inadequate agricultural and industrial growth:
Agricultural and industrial growth in our country has been much below what we had targeted for.
Over the four decades’ period, food grains output has increased and-. i.e. of 3.2 per cent per
annum. But there are years of crop failure due to droughts. In the years of scarcity of food grains
not only the prices of food articles increased, the general price level also rose. Failure of crops
always encouraged big wholesale dealers to indulge in hoarding which accentuated scarcity
conditions and pushed up the price level.
Performance of the industrial sector, particularly in the period 1965 to 1985, has not been
satisfactory. Over the 15 years’ period from 1970 to 1985, industrial production increased at a
modest rate of 4.7 per cent per annum. Our industrial structure, developed on the basis of
heavy industry-led growth, is not suitable to meet the current demand for consumer goods.
5. Rise in administered prices:
In our economy a large part of the market is regulated by government action. There are a number of
important commodities, both agricultural and industrial, for which the price level is administered by
the government.
The government keeps on raising prices from time to time in order to cover up losses in the public
sector. This policy leads to cost-push inflation. The upward revision of administered prices of coal,
iron and steel, electricity and fertilisers were made at regular intervals. Once the administered
prices are raised, it is a signal for other price to go up.
6. Rising import prices:
Inflation has been a global phenomenon. International inflation gets imported into the country
through major imports like fertilisers, edible oil, steel, cement, chemicals, and machinery.
Increase in the import price of petroleum has been most spectacular and its contribution to
domestic price rise is very high.
7. Rising taxes:
To raise additional financial resources, government is depending more and more on indirect
taxes such as excise duties and sales tax. These taxes invariably raise the price level.
Measures to Control Inflation
The control of inflation needs a multi-pronged strategy. All the strategies need cooperation
and harmony among them.
1. Monetary Measures
a) Credit Control: - It is performed by Reserve Bank of India.
b) Demonetization of Currency: - Demonetization of currency means declaring that
hereafter currencies of particular denominations are invalid. It suddenly reduces the money to
the extent of money kept in those particular denominations. It is resorted to only in extreme cases.
2. Fiscal Measures
a) Reduction in Unnecessary Expenditure: - Reduction of unnecessary government expenditure
means less demand from government side. It brings down the price level.
b) Increase in Direct Taxes: - Increase in direct taxes like income tax reduces the disposable
income available with people. It means low demand from households. Less demand leads to lower
price.
c) Decrease in Indirect Taxes: - Decrease in indirect taxes like excise duty, sales tax brings the
prices down.
d) Surplus Budget
Surplus budget means less expenditure than receipts. It reduces the money supply and
government demand for goods and services. The price level is brought down due to
this.
3. Trade Measures
Trade measures refer to export and import of goods and services. In case of shortage of goods
in domestic market the supply can be increased through import of goods from foreign
 countries at low or nil import duty. The restriction in the form of import licenses has to be eased
to increase import. The higher supply helps to bring down the price.
4. Administrative Measures
a) Rational Wage Policy
Rational wage policy helps to keep the cost of production under control. The cost control means
price control.
b) Price Control
Direct price control also helps in inflation control. Price can be controlled by fixing maximum
price limits through administered price system and subsidy from the government.
c) Rationing
Rationing of goods in short supply keeps the demand under control so that price comes
under control.
Conclusion
Inflation is the financial problem of India at high majority. We should have to control it by such
way because there are many ways to develop the economic growth of our country. Inflation will be
on the lower level when people of the country and government are aware of the developed
country. Consequently, India will become growing country.