INDIAN ECONOMIC

DEVELOPMENT
CLASS-XII

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 Preface

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 Contents

1. Indian Economy on the Eve of Independence ... 1-10

2. Indian Economy (1950-1990) ... 11-20
3. Economic Reforms Since 1991 ... 21-34
4. Human Capital Formation ... 35-42
5. Rural Development ... 43-52
6. Employment-Growth, Informalisation and Other Issues ... 53-60
7. Environment and Sustainable Development ... 61-73
8. Development Experience of India - A Comparison with Neighbours ... 74-84
 CHAPTER
Indian Economy on the
1 Eve of Independence

TOPICS TO BE COVERED
‰ Agriculture Sector
‰ Industrial Sector
‰ Occupational Structure
‰ Demographic Conditions
‰ Foreign Trade
‰ Infrastructure
‰ The Features of the Indian Economy on the Eve of Independence

‰ Before the advent of British rule, India was:

1. Independent economy
2. Agriculture was main source of livelihood
3. Famous for handicraft (in the field of cotton, silk, metal, precious stones etc.)
‰ Sole Purpose of British Colonial rule in India: Development of modern industries in Britain by
making India a supplier of raw materials which was to be used in the production of final goods in
Great Britain.
The economic policies made by Britishers were more related to the protection and promotion of
economic interest of their home country than the development of India. This made India a supplier
of raw material and consumer of finished Industrial Products from Britain.
India a supplier of raw material

INDIA BRITAIN

Import of finished Industrial

Products from Britain

AGRICULTURE SECTOR
‰ State of agriculture sector on the eve of Independence:
1. Main Source of living
2. Low productivity/Stagnant
3. Dependence on monsoon
‰ Causes of Stagnation and Low Productivity in agriculture Sector:
1. Land Settlement: Under British rule, Zamindar/landlord exploited Cultivators in many ways.
First, they charged high rent/Lagaan without knowing the monetary conditions of farmers.
Second, they grabbed ownership rights of land from the farmers as a punishment for delay
in rent payment
Third, they did zero efforts towards making improvements on land
2. Lack of proper inputs: Low level of technology is lack of irrigation facility and negligible use
of fertilisers, added to aggravate the flight of the farmers and contributed to the dismal level
of agricultural productivity.
3. Commercialisation of agriculture: It refers to the production of cash crops instead of food
crops. Indian farmers were forced to grow commercial crops (like indigo, cotton, jute etc).
Instead of food crops (like rice and wheat). This commercialisation of agriculture not only
increased the burden of high revenues on the poor farmers but also led India to face shortage
of food grains, resources, technology and investment. Therefore, Indian agriculture remained
backward and primitive.

INDUSTRIAL SECTOR
Britishers were the reason for de-industrialisation by not taking any steps to promote modern industry
and reduced India to only an exporter of raw material and importer of finished goods.
Textile Industry in Bengal: Muslin is a type of cotton textile which had its origin in Bengal,
Particularly, Places in and around Dhaka (now the capital city of Bangladesh). Daccai Muslin had
gained world-wide fame as an exquisite type of cotton textile. The finest variety of muslin was called
malmal. Foreign travellers also used to refer to it as malmal shahi or malmal khas meaning that it
was wore by, or fit for, the royalty.
In the second half of the 19th century, modern industry showed slow growth.
This development was confined to the setting up of cotton and jute textile mills.
Subsequently, the iron and steel industries began coming up in the beginning of the 20th century. In
this context, the Tata iron and steel company (TISCO) was incorporated in August, 1907 in India. It
established its first plant in Jamshedpur (Bihar at present Jharkhand).
But, these Industries were the result of hard work by the private sector. The government role in the
process of modern Industrialisation was very limited.
‰ The state of the Industrial Sector at the eve of Independence:
1. Destruction of Handicraft Industry: The Britishers adopted the following policies to
systematically destroy the handicraft Industry.
(i) Discriminatory Tariff Policy of the British Government: Heavy tariff on the export
of Indian Handicraft was imposed and tariff free export of raw material to Britain was
allowed So, Indian handicraft started losing their markets.
(ii) Competition from Machine – made Products: Machine made products from Britain
were cheap and better in quality than the handicrafts products. This also led Indian
handicrafts to close their business.
(iii) Introduction of Railways in India: The Britishers introduced Railways in India, to
expand the market of its law priced Industrial Products.

2 Indian Economic Development PW

 So, the demand for expensive handicrafts products started to fall, thus heading to the
downfall of handicrafts industry.
2. Slow Growth of Modern Industry Reasons:
(i) Limited Growth of Public sector Enterprises: Only few public sector enterprises such
as railways, power, pot and telegraph were developed by the Britishers to increase the
market size for British products in India.
(ii) Lopsided Industrial Structure: The Industrial growth was lopsided; in the sense that
the consumer goods industry was not adequately supported by the capital goods Industry.
(iii) Lack of Basic and Heavy Industries: No Priority was given for the development of
basic and heavy Industries
TISCO was the only heavy Industry in India.

OCCUPATIONAL STRUCTURE
It refers to the distribution of workforce among different economic sectors such as Primary, Secondary
and tertiary sector.
‰ State of Occupational Structure on the eve of Independence:
1. Agriculture was the main source of occupation and about 72.7 percent of the working
population was engaged in agriculture.
2. Only 10.1 percent of the working population was engaged in the manufacturing sector, which
showed the backwardness of Indian Industry.
3. Only 17.2 percent of the working population was engaged in the service sector, which also
proved the slow growth of tertiary sector.
4. There was an unbalanced growth of the Indian economy at the time of Independence. It
indicates regional variations. There was a rise in agricultural workforce in Punjab, Rajasthan
and Orissa but a fall in that of Bombay and Madras Presidency.

DEMOGRAPHIC CONDITIONS
It includes a detailed estimation of population size, along with a complete demographic profile of the
country like death rate, birth rate etc.
India’s 1st official census operation was undertaken in the year 1881. After that the census is conducted
every 10 years.
Year of Great Divide 1921
Phase-I Phase-II
1921 was the year of great divide in the history After 1921, there was considerable and contin-
of population growth in India because the growth uous increase in the population that is called
rate of population was generally low before 1921 phase two of demographic transition.
‰ Demographic Conditions on the eve of Independence:
1. Both the birth rate and death rate were as high as 48 and 40 per thousand.
2. Life expectancy was as low as 32 years showing the lack of health care facilities.
3. Literacy rate was as low as 16 percent, which reflects the social and economic backwardness
of the country. Female literacy rate was very low at only 7 percent.

Indian Economy on the Eve of Independence 3

 4. The Infant mortality rate was 218 per thousand.
5. Rampant poverty was also lowering the demographic profile of Indians.

FOREIGN TRADE
Opening of the Suez canal is shortened waterway between Britain and India in 1869 gave easy access
of the Indian market to Britishers and also reduced their cost of transportation.
‰ State of Foreign Trade on eve of Independence:
1. Volume of Foreign Trade: Under colonial rule, India became an exporter of primary products
such as raw silk, cotton, wool, sugar, Indigo, jute etc. and an importer of finished consumer
goods like cotton silk and woollen clothes and capital goods like light machinery produced
in the factories of Britain.
2. Direction of Foreign Trade: Britain maintained a monopoly control over India’s exports and
imports, Due to this, more than 50 percent of India’s foreign Trade was restricted to Britain
and the rest was allowed with a few other countries like China, Ceylon (Sri Lanka) and Iran.
3. Drain of India’s Wealth: Export surplus and profit earned from foreign Trade was not used
in any development activity of India. Rather, it was used to maintain the British administration
and as well as on war expenses. All of this led to the drain of Indian wealth.
Suez Canal was opened in 1869. Suez Canal is an artificial waterway running from North
to South across the Isthmus of Suez in North Eastern Egypt. It is one of the most important
waterways in the world.
Its opening reduced the cost of transportation and made access to the Indian market easier
and economical. A significant reduction in transport cost prompted monopoly control of
India’s foreign trade by the British government.

INFRASTRUCTURE
There were some positive contributions of the British government in the field of infrastructure, However,
the contributions were not intentional but purely to satisfy the economic interest of their own country.
Positive effects of infrastructure on Indian economy during British Rule:
1. Providing transport facilities, especially railways, was introduced in 1850.
2. Development of ports.
3. Postal and telegraph services were introduced.
4. The British government gave a strong and efficient administrative set up.

THE FEATURES OF THE INDIAN ECONOMY ON THE EVE OF

INDEPENDENCE
1. Backward and stagnant economy - as the level of economic growth was very low. It is indicated
by a lower level of GDP and a lower level of national income.
2. Dependent economy - as India was relying on imports of food grains from other countries.
3. Depleted economy - as natural resources of India were exploited to the maximum level.
4. Disintegrated economy - as the partition of India resulted in a shortage of certain food grains,
shortage of cotton, and jute because major related areas went to Pakistan.

4 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS
1. Identify the correct combination of the ‘Goals (c) Indian manufactured products enjoyed
of Indian Five Year Plans’: a worldwide market before the British
 (CBSE SQP 2023-24) established themselves in India.
(a) Growth, Equality, Modernisation, Self- (d) The role of the public sector under the
Reliance British rule was confined only to a few
(b) Development, Equality, Modernisation, industries.
Sustainability 5. Which major economic sector dominated the
(c) Good Health, Education, Modernisation, Indian economy on the eve of independence?
Sustainability (a) Agriculture (b) Manufacturing
(d) Growth, Equity, Modernisation, Self- (c) Services (d) Mining
Reliance 6. When was planning commission established?
2. The overarching objective of equitable  (KVS SQP 2019-20)
distribution goals in planning is to: (a) 1947 (b) 1948
 (CBSE SQP 2023-24) (c) 1950 (d) 1951
(a) ensure a fair and just society for all 7. Whose estimate of national income was
citizens considered very significant?
(b) fo s te r c o m p e t i t i o n by re d u c i n g  (KVS SQP 2019-20)
government intervention in markets (a) Dadabhai Naoroji (b) William Digby
(c) focus on short-term gains rather than (c) RC Desai (d) VKRV Rao.
long-term societal benefits 8. Major contribution to the GDP of the country
(d) enhance economic growth through on the eve of independence was from:
targeted investments in specific sectors  (KVS SQP 2019-20)
3. Main intention of the British rulers behind (a) Tertiary sector
the introduction of railways in India was: (b) Primary Sector
(a) to earn profit through foreign trade. (c) Secondary sector
(b) to break geographical and cultural (d) Both Primary and secondary sector.
barriers. 9. The main interest of the Zamindar was:
(c) cheap and rapid movement of people  (KVS SQP 2019-20)
from one place to another. (a) To collect rent
(d) to develop India’s cotton and jute (b) To improve the condition of agriculture
industry. (c) To produce food crops
4. Which of the following is not a true statement? (d) To produce cash crops.
(a) On the eve of Independence, agriculture 10. Details about the population of British India
was the principal occupation of the were first collected in: (KVS SQP 2019-20)
people in India. (a) 1871 (b) 1881
(b) Mining is the main secondary occupation. (c) 1891 (d) 1901

Indian Economy on the Eve of Independence 5

11. Initially, the industrial development was
confined to the setting up of:
 (KVS SQP 2019-20)
(a) Cotton textile mills
(b) Jute textile mills
(c) Cotton and jute textile mills
(d) Capital goods industry.
SUBJECTIVE TYPE QUESTIONS
1. ‟During the colonial period, a number of
socio-economic indicators were in a
dilapidated state.” List any three such
indicators that led to the worsening of India’s
demographic profile. (CBSE SQP 2023-24)
2. “The pre-independent India’s occupational
structure experienced growing regional
variation.” Justify the above statement with
valid explanation. (CBSE SQP 2023-24)
3. Identify and briefly explain three key features
of the Indian economy on the eve of
independence that contributed to its
predominantly stagnant structure.
 (CBSE SQP 2023-24)
4. Describe three key features of India’s foreign
trade on the eve of independence. Illustrate
with examples the country’s trading patterns
with other nations.  (CBSE SQP 2023-24)
5. In order to understand the complexities of
the industrial sector in India on the eve of
independence, elaborate on the prevailing
conditions that contributed to “Systematic
de-industrialization” and technological
backwardness.  (CBSE SQP 2023-24)
6. Analyze the complex challenges posed by
India’s foreign trade situation on the eve of
Answers
1. (d) 2. (a) 3. (a) 4. (b) 5. (a)
11. (c) 12. (c)
6 Indian Economic Development PW
12. In the history of demographic transition,
which year is regarded as the year of great
divide?  (KVS SQP 2019-20)
(a) 1901
(b) 1902
(c) 1921
(d) 1923
independence. Investigate the factors that
led to the trade imbalances and dependence
on imports during this period.
 (CBSE SQP 2023-24)
7. Comment upon any two salient features of
the foreign trade policy of India, on the eve
of Independence.
8. Highlight the challenges faced by the
agricultural sector in India during the eve of
independence.
9. Do you agree with the view that the zamindari
system brought stability to cultivation during
the British rule in India? Give reason for your
answer.
10. (A) What was the state of Indian agriculture
on the eve of independence?
(B) Comment upon the state of agriculture
in India during the pre-British period.
11. What was the monopoly control of India’s
foreign trade by the British government?
How was the two-fold motive behind the
systematic de-industrialisations of the
British in pre-independent India?
6. (c) 7. (d) 8. (b) 9. (a) 10. (b)
 Solutions
SUBJECTIVE TYPE QUESTIONS
1. India’s demographic indicators were in a
dilapidated state during the colonial period as:
 The overall literacy level was less (below
16%).
 Life expectancy was very low (32 years).
 Alarming infant mortality rate (218/1000).
2. The pre-independent India’s occupational
structure experienced growing regional
variation as:
 Parts of Madras Presidency, Bombay and
Bengal witnessed a decline in the
dependence of the workforce on the
agricultural sector with a commensurate
increase in the manufacturing and the
services sectors.
 There had been an increase in the share
of workforce in agriculture in states such
as Orissa, Rajasthan and Punjab.
3. Three key features of the Indian economy on
the eve of independence that contributed to
its predominantly stagnant structure:
I. Agricultural Dominance and Low
Productivity: The Indian economy was
primarily agrarian, with agriculture being
the main occupation for a significant
portion of the population. However, the
agricultural sector suffered from low
productivity due to traditional and
outdated farming methods. Lack of modern
agricultural technology, inadequate
irrigation facilities, and fragmented land
holdings limited economies of scale,
resulting in stagnant agricultural output
and perpetuating rural poverty.
II. Colonial Economic Exploitation: The
British colonial rule pursued economic
policies that were designed to serve
Britain’s interests at the expense of Indian
development. India was primarily treated
Indian Economy on the Eve of Independence
as a supplier of raw materials for British
industries, while finished goods were
imported, leading to deindustrialization.
The drain of wealth from India through
heavy taxation and unequal trade policies
hindered the growth of domestic
industries and stifled economic progress.
III. L i m i te d I n d u s t r i a l i z a t i o n a n d
Infrastructure: The Indian economy
lacked significant industrialization on the
eve of independence. The lack of domestic
industries and a weak manufacturing base
limited employment opportunity outside
the agricultural sector. Additionally,
inadequate infrastructure, including
transportation and communication
networks, hampered the efficient
movement of goods and services, restricting
market integration and economic growth.
4. On the eve of independence in 1947, India’s
foreign trade was characterized by several
key features:
I. Dominance of British Trade Relations:
The country’s trade was largely focused
on exporting raw materials, such as
cotton, jute and tea to Britain and
importing finished goods in return. This
trade pattern resulted from the
exploitative economic policies imposed
by British colonial rule, which hindered
India’s industrial development.
II. Limited Diversification of Trading
Partners: India had limited trading
partners outside the British Empire. The
colonial rule discouraged India from
actively engaging in trade with other
countries, and the majority of its foreign
trade was confined to British colonies.
This lack of diversification in trading
partners restricted India’s economic
7
 growth and hindered the development of
a more dynamic foreign trade landscape.
III. Low Share of Industrial Exports:
India’s foreign trade was characterized
by a relatively low share of manufactured
or industrial goods in its export basket.
The economy was primarily agrarian,
and the majority of exports consisted of
primary agricultural commodities. This
limited India’s ability to earn foreign
exchange and hindered the development
of a self-reliant industrial base.
5. Systematic Deindustrialization during British
Rule in India:
I. D e c l i n e o f I n d i a n co u r t s : T h e
disappearance of Indian courts struck the
first blow at Indian handicrafts. As native
states passed under British rule, the
demand for fine articles, for display in
durbars and other ceremonial occasions
disappeared. The ordinary demand did
continue for some time longer, but the
younger generation lacked the means
and inducement to patronize the arts and
handicrafts and they declined.
II. Introduction of New Patterns: With the
disappearance of Indian states, old rulers
and nobles also disappeared and their
place was taken up by the European
Officers and tourists. Indian craftsmen,
however, did not clearly understand the
forms and patterns which suited
European tastes. They tried to please
their new customers by copying their
forms and patterns.
III. Competition of Machine Made Goods:
Apart from the abolition of Indian courts
and the introduction of foreign influences,
it was the superior manufacturing
technique based on power and improved
machinery which enabled the British
manufacturers to drive the Indian
artisans from out of their home market.
6. British rule in India brought an end to India’s
foreign trade as India primarily became a net
exporter of raw materials and importer of
finished goods produced by British industry.
8 Indian Economic Development PW
I. Net Exporter of Primary Products and
Importer of Finished Goods: India
under British rule became an exporter of
raw materials (cotton, wool, indigo, etc)
and importer of finished goods.
Composition of exports and imports
showed the backwardness of the economy.
II. Monopoly control of India’s Foreign
Trade: British government monopolized
the exports and import soft the country
in a way that, more than 50% trade with
Britain only. Imports of Britain’s finished
goods provided a huge market to British
industry in India.
III. Surplus Trade but only to benefit the
British: Despite the exports exceeded
our imports there was mass export of
primary goods which was a sign of
economic backwardness. Trade surplus
used for administrative and war expenses
of Britishers and not for growth and
development of the country.
7. On the eve of Independence, India’s foreign
trade policy had two salient features that
shaped its approach to international trade.
These features were:
Import Substitution: One of the key features
of India’s foreign trade policy was import
substitution. The country aimed to reduce its
dependency on foreign goods and promote
domestic industries by producing goods
within the country. Import substitution was
seen as a means to achieve self-sufficiency
and promote indigenous industries. The
policy involved imposing high tariffs and
restrictions on imports to protect domestic
industries from foreign competition. The
focus was on developing a strong industrial
base within the country to meet the demands
of the growing population.
Export of Primary Goods: Another salient
feature of India’s foreign trade policy was
the export of primary goods, particularly
agricultural products and raw materials.
India, being an agrarian economy, had a
surplus of agricultural produce and raw
materials like jute, cotton, tea, and spices.
 These goods were exported to generate
foreign exchange and earn revenue for the
country. The export of primary goods played
a significant role in balancing the trade deficit
and meeting the demands of foreign markets.
8. Challenges Faced by the Agricultural
Sector:
Low Productivity: Outdated farming prac-
tices, lack of modern technology, and in-
adequate infrastructure contribute to low
productivity.
Small Landholdings: Fragmented land-
holdings lead to inefficiencies and lack of
economies of scale.
Income Disparities: Farmers often face in-
come disparities due to unequal distribution
of resources, leading to socio-economic issues.
9. It is true that the Zamindari system during
British rule brought instability to Indian
cultivation.
For instance, It led to frequent ejection of the
tillers of the soil. They lost their permanent
rights of cultivation, and accordingly, lost
permanent interest in cultivation.
Under this system, the tillers of the soil lacked
ownership rights. As a result, they had no
interest in improving agriculture.
10. I. The state of Indian agriculture on the eve
of independence is as under:
(a) Low Production and Productivity: Both
production as well as productivity were
found to be extremely low on the eve of
independence. This was a result of the
lack of means with the farmers, and lack
of incentive to the tillers of the soil.
(b) Fo r c e d C o m m e r c i a l i s a t i o n o f
Agriculture: Commercialisation of
agriculture refers to a shift from
subsistence cultivation (cultivation for
self-consumption) to cultivation of cash
crops for the market. Farmers were
forced to grow commercial crops to cope
with the needs of the British industry.
(c) Small and Fragmented Holdings:
Landholdings were both small as well as
Indian Economy on the Eve of Independence
f r a g m e n t e d . A c c o r d i n g l y, m o s t
landholdings were uneconomic: yielding
low output at high cost.
II. The state of agriculture in India during
pre-British period is as under:
(a) Prior to the British Raj in India, rural India
was described as a system of self-contained
village communities. These village
communities included farmers and the
functionaries.
(b) The farmers were engaged in crop farming
or cattle farming while the functionaries
would render essential services like that
of blacksmiths, goldsmiths, washermen
and shoe-makers.
(c) There were no intermediaries (like
zamindars) between the state and the
farmers; the farmers would pay land
revenue directly to the king.
11. The British had a monopoly on export of
raw materials from India and the import of
finished goods from britain. During the time
of British rule, India’s more than 50% of trade
was restricted to the United Kingdom.
The two-fold motive for the systematic
destabilization of indigenous Indian
industries in the pre-independent era;
One, it was to exploit India’s wealth of raw
material for the then expanding process of
industrialisation in Britain. Supplies of raw
material were diverted from indigenous
industries to the expanding industries in
Great Britain. It was possible simply because
India was treated as a colonial territory of
Great Britain.
Two, it was to exploit the Indian economy as
a potential market for the industrial products
of Britain. Great Britain was experiencing
an industrial revolution. Revolutionary
expansion of industry in Britain required
an equally revolutionary expansion of the
market for the British industrial goods. The
trade policy adopted by the British was such
that the British products started replacing
Indian products in the Indian markets. This
led to destruction of the Indian industry.
9
 CHAPTER SUMMARY AND GLOSSARY

Before The Advent of British Rule In India State of Agriculture Sector on The Eve of
U Independent economy Independence.
U Famous for handicrafts U Main source of living
Sole Purpose of British Colonial Rule in India U Dependency on monsoon
U Exporting raw material from India to Britain U Low productivity/stagnant growth
U Importing finished goods to India from Britain for the Causes of Stagnation and Low Productivity in
economic interest of their home country. Agriculture
State of Infrastructure on The Eve of Independence U Terms of revenue settlement
U Positive contribution of the British govt. in the field of U Land settlement system
infrastructure. U Lack of proper inputs
U Provided transport facilities, Specially railway was U Commercialisation of agriculture
introduced in 1850s.
State of The Industrial Sector at the EVE of
U Development of ports Independence
U Postal and telegraph services were introduced.
Destruction of handicraft industry
U British govt. gave a strong and efficient administrative
U Discriminatory tariff policy of the british govt.
set up.
U Competition from machine - made products
U Evolution of Banking and Monetary system.
U Introduction of railways in India
Slow growth of public sector enterprises
U Limited growth of public sector enterprises
U Lopsided industrial structure

Indian Economy on the

Eve of Independence

State of Occupational Structure on The EVE of Independence

U Agriculture; Main Source of Occupation as About 72.7 % People Were Engaged In Agriculture.
U Only 10.1 % of the working population were engaged in manufacturing sector.
U An unbalanced growth of Indian economy at the time of Independence . It indicates regional variations.
Demographic Conditions on The Eve of Independence
U High birth rate and death rate indicating very low survival rate
U Life expectancy was low as 44%.
U Literacy rate was also low as 16%. Female literacy was only at 7%.
U Rampant poverty was also lowering the demographic profile of India.
U The Infant mortality rate was 218 per thousand.
State of Foreign Trade at The Eve of Independence.
U Volume of foreign trade
U Direction of foreign trade
U Drain of India’s wealth.



10 Indian Economic Development PW

 CHAPTER
Indian Economy
2 (1950-1990)

TOPICS TO BE COVERED
‰ Agriculture Sector
‰ Debate Over Subsidies
‰ Industrial Sector
‰ Foreign Trade

‰ Economic Planning: It means utilisation of a country’s resources into different development

activities as per the national priorities.
 Planning commission was set up in 1950.
 National Development council was set up in 1952.
‰ Long Term Goals of Economic Planning:
(A) Modernisation: It refers to the adoption of new technology and changes in social outlook. It
is done with an aim to increase the production of goods and services. For example, a farmer
can increase the output on the farm by using new seed varieties instead of using old ones.
(B) Self Reliance/Self Sufficiency: It refers to reducing dependence on imports. India has achieved
self sufficiency of foodgrains.
(C) Economic Growth: It refers to increasing the GDP of a country. GDP refers to the money value
of all final goods and services produced in the domestic boundary of a country.
(D) Equity: It refers to the reduction in inequality of income and wealth. To achieve this target,
various poverty alleviation programmes were introduced.
‰ NITI AAYOG: National Institution for transforming India Aayog.
 It replaced the planning commission.
 It was formed on 1st January 2015.
 Planning commission was discontinued in India after its 12th five year plan which was
completed in 2017.
 From 2017 onwards, 15 years vision is followed in India instead of 5 years planning system.

AGRICULTURE SECTOR
New agriculture policy was started in 1961. It is also known as New Agriculture Strategy (NAS) or
Seed – water – fertiliser Technology.
1. Problems of Indian Agriculture sector:
(a) Defective land settlement system includes exploitation of farmers by zamindar and unequal
distribution of land.
(b) Low productivity due to lack of technology, lack of irrigation facilities and lack of infrastructure.
2. Following measures were taken to solve the problem of Indian agriculture:
(a) Land Reforms
(b) Green Revaluation
(c) Subsidies
‰ Land Reforms: Land reforms refers to change in the ownership of land holdings.
1. Land Ceiling: It refers to fixing the maximum size of land which could be owned by an
individual. It is done to bring equality in the agriculture sector.
2. Consolidation of Land Holdings: It means to bring landholdings of a farmer at one place
rather than scattered in pieces at several places.
3. Removal of intermediaries: Zamindari system of land settlement was removed.
4. Cooperative Farming: Cooperative farming involves farmers pooling their resources, both
labour and capital, to cultivate collectively. This ensures optimal utilization of land and
resources, leading to increased agricultural productivity.
5. Regulation of Rent: The Regulation of Rent aims to prevent the exploitation of tenants by
landlords. Historically, tenants often faced exorbitant rents and insecure land tenure, hindering
agricultural development.
The most notable and successful example of land reforms are in the states of West Bengal
and Kerala.
‰ Green Revolution:
1. It refers to an increase in the production in the production of food grain specially wheat and
rice due to the use of high yielding variety (HYV) seeds, fertilisers, pesticides and irrigation
facilities.
2. It was launched in mid 1960s.
3. It is also known as new agricultural strategy (NAS) or seed-fertiliser- water technology.
4. It was a part of new agricultural policy started in 1961.
‰ Importance of Green Revolution:
1. Self sufficiency/Attainable Marketable surplus: Marketable surplus refers to the part of
agricultural produce which is sold in the market after self consumption.
2. Buffer stock: The green revolution enabled the government to obtain sufficient amount of
food grains to build a stock which could be used in times of food shortage.
3. Benefits to low income groups: Benefits to low income growth groups with an increase in
supply of food gains. The price eventually fell down which enabled the members of low income
groups to obtain the food grains at much cheaper rates.

12 Indian Economic Development PW

 “Green revolution experienced the success in two phases.”In the first phase (the mid-60s to
mid-70s), the use of HYV seeds was restricted to a more affluent state like Punjab, Andhra
Pradesh, and Tamil Nadu etc. Further, the use of HYV seeds primarily benefitted the wheat
growing regions only. In the second phase (the mid-70s to mid-80s), the HYV technology
spread to a larger number of states and benefitted more variety of crops.
‰ Challenges to Green Revolution:
1. Risks of pest attacks: The HYV crops were more prone to attack by pests so this was a risk
that small farmers who adopted this technology could lose everything in pest attack.
2. Increase in income Inequality: There was a risk that expensive prices of HYV seeds,
fertilizers, pesticides etc, could have increased the inequality of income as only big farmers
could afford it.

DEBATE OVER SUBSIDIES

‰ Economists in Favour:
1. There was a risk of pest attacks on crops cultivated from HYV seeds. So, Subsidies were crucial.
2. The poor farmers were not capable of affording the costly inputs.
3. This could have increased the inequality of income hence subsidies were crucial.
‰ Economists Against Subsides:
1. The maximum benefits of subsidies on inputs was reaped only by the large farmers who do
not actually need them as they could afford inputs at higher price.
2. Subsidies are benefitting fertilizer industries more than farmer.

INDUSTRIAL SECTOR
1. Problems of Industrial sector at the time of Independence:
A. Slow growth of modern industries.
B. Lack of capital goods industries.
C. Limited role of public sector.
2. Measures taken for Industrial development:
 Industrial Policy Resolution (IPR) 1948: The industrial sector faced a scarcity of capital,
hindering the establishment and expansion of industries. Limited financial resources impeded
the sector’s growth.
 Industrial Licensing Policy 1951: The licensing policy introduced extensive bureaucratic
controls, leading to delays and inefficiencies in obtaining licenses for industrial setup and
expansion. This bureaucratic intervention often stifled entrepreneurship.
 Karve Committee 1955: While the Karve Committee aimed to develop Small Scale Industries
(SSI) and village industries, there were challenges in implementation, including inadequate
infrastructure, lack of credit facilities, and limited market access for small enterprises.
 Industrial Policy Resolution (IPR) 1956 (Most Important): The IPR 1956 emphasized a
dominant role for the public sector in strategic industries. This approach led to issues such as
inefficiencies, lack of competition, and slow growth in certain sectors due to the monopoly of
state-owned enterprises.

Indian Economy (1950-1990) 13

  Main Features of IPR 1956:
A. According to IPR 1956, Industries were classified into following 3 categories :
Category–1: 17 Industries were listed in this category and all were established and
owned exclusively by the public sector like aviation, electricity, atomic energy etc.
Category–2: 12 industries were listed in this category for which the public sector will
perform the main role while the private sector will play the secondary role. It means the
private sector supplements the public sector in these industries like cotton, textile, jute,
aluminium etc.
Category–3: In this Category, Industries could be established through a license from the
government.
B. Private sector industries could be established through a license from the government.
C. Tax rebates and other concessions were offered to those private enterprises whose
industry was established in backward regions of the country.
D. More importance was given on the development of SSI through subsidies and tax
concessions.
 New Industrial Policy 1991: Before the New Industrial Policy of 1991, the industrial sector
faced constraints due to limited liberalization measures. The closed economy approach resulted
in restricted foreign investment, outdated technology, and reduced competitiveness in the
global market.
In summary, at the time of Independence, the Indian industrial sector encountered challenges
such as capital scarcity, bureaucratic controls, difficulties in Small Scale Industry development,
dominance of the public sector, and a lack of liberalization. The subsequent policy changes,
especially the New Industrial Policy of 1991, aimed to address these issues and pave the way
for a more dynamic and competitive industrial landscape in India.

FOREIGN TRADE
1. Indian foreign trade policy followed these objectives:
(a) Protection of domestic industries from foreign competition.
(b) Saving foreign exchange by restricting expenditure on imports.
2. Following measures were taken to achieve above mentioned objectives:
(a) Import substitution.
(b) Tariff: Refers to the taxes imposed on imported goods.
(c) Quota: Refers to fixing the maximum limit on imports.
‰ Import Substitution Policy:
1. It refers to the replacement of imports by domestic production.
2. It is also called inward looking policy.
3. Reasons for import substitution were:
(a) The risk of falling foreign exchange reserve in India.
(b) Indian goods were unable to compete with foreign goods.

14 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS

1. The shackles of agriculture during the (c) Either (a) or (b)

colonial rule were permanently broken by (d) None of these
the Green Revolution that resulted from the
application of ____________. (Choose the correct 6. Self –reliance means avoiding:
alternative to fill up the blank)  (KVS SQP 2019-20)
 (CBSE SQP 2023-24) (a) Exports
I. High Yielding Varieties (HYV) (b) Imports
II. Mechanization of Agriculture (c) Both (a) and (b)
III. Chemical Fertilizers and Pesticides (d) None of the above
IV. Organic Fertilizers and Pesticides 7. A good indicator of growth is steady increase
Alternatives: in the:  (KVS SQP 2019-20)
(a) I, II, IV (b) I, II, III (a) Gross Domestic Product
(c) II, III, IV (d) I, III, IV (b) Net Domestic Product
2. Land Ceiling refers to: (c) Population
(a) Fixed rural landholdings at the existing (d) National income
level 8. Which factor led to the breaking up of the
(b) Fix land area for irrigation purposes stagnation of agriculture?
(c) Fix urban landholdings at the existing  (KVS SQP 2019-20)
level (a) Land reforms (b) Green Revolution
(d) Fix quantum of land held by an individual (c) Buffer stocks (d) Land ceiling
3. Which policy approach did India adopt for 9. The planning commission was set up in:
economic development during the period  (KVS SQP 2019-20)
1950-1990? (a) 1948 (b) 1950
(a) Laissez-faire capitalism (c) 1951 (d) 1956
(b) Import substitution industrialization 10. Who is known as the architect of “Indian
(c) Free trade and globalization Planning”?  (KVS SQP 2019-20)
(d) Privatization and liberalization (a) Jawaharlal Nehru
4. What was the main objective of India’s (b) Dr. BR Ambedkar
Second Five-Year Plan (1956-1961)? (c) PC Mahalanobis
(a) Achieving self-sufficiency in food (d) Sardar Vallabhbhai Patel
production
11. When was first five-year plan introduced?
(b) Promoting heavy industrialization  (KVS SQP 2019-20)
(c) Reducing income inequality (a) 1st April, 1950 (b) 1st April, 1951
(d) Enhancing foreign trade (c) 1st April, 1952 (d) 31st March, 1950
5. Public sector enterprises are driven largely 12. The common goals of the five year plans are:
by consideration of: (KVS SQP 2019-20)  (KVS SQP 2019-20)
(a) Profit (a) Modernisation (b) Growth
(b) Social welfare (c) Self –reliance (d) All of the above

Indian Economy (1950-1990) 15

13. Long- term objectives to be achieved over a
long period of time formulated with reference
to common goals of plans are called:
 (KVS SQP 2019-20)
(a) Objectives of plans
(b) Objectives of planning
(c) Perspective plans
(d) Both (b) and (c)
14. Under which system the goods are distributed
among people not on the basis of what people
need but on the basis of purchasing power?
(KVS SQP 2019-20)
SUBJECTIVE TYPE QUESTIONS
1. Green revolution transformed India from a
subsistent food grain economy to a food
surplus economy.” Justify the statement,
giving reasons in support of your answer.
 (CBSE SQP 2023-24)
2. “In order to protect domestic industries,
India followed the regime of restrictions on
imports.” Briefly outline and discuss such
steps taken by the government to promote
import substitution policy.
 (CBSE SQP 2023-24)
3. “In India, after 1947 land reforms were
introduced on a large scale.” In the light of
the given statement, discuss any one such
land reform.  (CBSE SQP 2023-24)
4. “In the post-reform period, the Government
of India decided to retain profit-making
Public Sector Undertakings (PSUs). It
provided a special status to PSUs to enable
them to expand in the global market.” Do you
agree with the given statement? Give valid
reasons in support of your answer.
 (CBSE SQP 2023-24)
5. Considering ‘Agricultural Subsidy as a Vice,’
a n a ly z e t h r e e p r o m i n e n t n e g a t ive
implications stemming from agricultural
16 Indian Economic Development PW
(a) Capitalistic system
(b) Socialistic system
(c) Mixed system
(d) Dual system
15. Green Revolution introduced during the
planning process was restricted mainly to:
 (KVS SQP 2019-20)
(a) Wheat and rice
(b) Cereals and pulses
(c) Cotton and jute
(d) Jowar and bajra
subsidies associated with providing subsidies
to farmers.  (CBSE SQP 2023-24)
6. Highlighting three significant adverse
impacts, conduct a comprehensive analysis
to eva l u a te t h e p o te n t i a l n e ga t ive
repercussions of implementing the economic
strategy of Import Substitution in developing
nations.  (CBSE SQP 2023-24)
7. Why has the industrial sector performed
poorly in the reform period?
8. Explain ‘growth with equity’ as a planning
objective.
9. What is Green Revolution? Why was it
implemented and how did it benefit the
farmers? Explain in brief.
10. ‘Atamnirbhar Bharat’ had been at the roots
of the Indian planning process in the form of
self-reliance as an objective of the planning
process. Do you agree with the given
statement? Justify the rationale of the given
statement. Government took various steps to
protect Small-scale Industries from Big
Firms. Defend or Refute.
11. What structural changes do occupational
sectors undergo as an economy develops?
12. Why should Economic plans have goals?
Write your principal observation.
 Answers
1. (b) 2. (d) 3. (b) 4. (b) 5. (b)
11. (b) 12. (d) 13. (d) 14. (a) 15. (a)
Solutions
SUBJECTIVE TYPE QUESTIONS
1. Before the advent of Green Revolution, a large
proportion of agricultural produce was
consumed by the farmers themselves instead
of being sold in the market. Green Revolution
led to an increase in the growth of agricultural
output. After the Green Revolution, a greater
proportion of the agro-produce (wheat and
rice) was sold by the farmers in the market.
That led to the attainment of marketed
surplus and converted India into a food
surplus economy from the food scarce one.
2. In order to protect domestic industries, India
followed the import substitution policy.
This policy aimed at substituting imports
with domestic production. The domestic
industries were protected from foreign
competition by using the following tools:
(i) Tariffs: Tariffs are a tax on imported
goods that make imported goods dearer
and discourage their usage.
(ii) Quotas: Quotas specify the quantity of
goods that can be imported.
3. Land reforms were inevitable in the post-
independence era. The policy makers
of independent India introduced land
reforms such as land ceiling, abolition of
intermediaries etc. Land ceiling means
fixing up the maximum size of landholding
which could be owned by an individual.
This step was essential to promote equity
in the agricultural sector so as to reduce the
concentration of land ownership in a few
hands.
6. (b) 7. (a) 8. (b) 9. (b) 10. (c)
4. Yes. In order to improve efficiency,
infuse professionalism and enable Public
Sector Undertakings (PSUs) to compete
more effectively in the liberalised global
environment, the government identified profit
making PSUs. Government declared them
as Maharatnas, Navratnas and Miniratnas.
PSUs were given greater managerial and
operational autonomy, in taking various
decisions. As a result, over the years these
Maharatnas, Navratnas and Miniratnas have
performed exceedingly well and established
themselves as market leaders.
5. The negative implications of providing
subsidies to farmers under the context
of “Agricultural Subsidy as a Vice”, are as
follows:
(i) Huge Burden on Government Finances:
Agricultural subsidies can impose a
substantial financial burden on government
resources and public funds. Providing
subsidies requires significant budget
allocation, which may divert resources
from other critical sectors such as health,
education and infrastructure. The
allocation of a large portion of the budget
to subsidies can limit the government’s
ability to address other pressing
needs.
(ii) Misappropriated Benefits and
Inequities: Agricultural subsidies may not
always reach their intended beneficiaries
and can lead to misappropriation and
Indian Economy (1950-1990) 17
 unequal distribution of benefits. Subsidies
may be misused or diverted by middlemen,
powerful interest groups, or large-scale
farmers, leaving small and marginalized
farmers with limited access to these
benefits. This results in unequal
distribution and exacerbates income
disparities.
(iii) W a s t e f u l C o n s u m p t i o n a n d
Overproduction: Agricultural subsidies
can lead to wasteful consumption and
overproduction, straining resources and
market imbalances. Subsidies that reduce
the cost of inputs such as water, fertilizers
and energy can encourage their excessive
use, leading to wastage and environmental
degradation. Overproduction resulting
from subsidies can cause market gluts
and affect prices.
6. Import substitution is when a country tries to
8. Growth refers to increase in the country’s
make things at home instead of buying them
from other countries. It has some benefits but
also some problems:
(i) Missing out on world trade: If a country
only makes things for itself, it might miss
chances to sell things to other countries.
This means it might not make as much
money as it could.
(ii) Less competition, more costs: If a
country doesn’t buy things from other
countries, its own businesses might not
try as hard to do a good job. This can
mean things cost more and aren’t made
as well.
(iii) Wasting resources: If a country tries to
make everything itself, even things it’s
not good at, it might not use its resources
(like workers, materials and money) as
wisely as it could. This can make the
whole economy less productive.
7. The industrial sector performed poorly
in the reform period because of following
reasons:
9. Green Revolution refers to the large increase
(i) C heaper Imported Goods: Due to
globalisation, there was a greater flow of
18 Indian Economic Development PW
goods and capital from developed
countries. As a result, domestic industries
were exposed to imported goods.
Cheaper imports replaced the demand
for domestic goods and domestic
manufacturers started facing competition
from imports.
(ii) Lack of infrastructure facilities: The
infrastructure facilities, including power
supply, have remained inadequate due
to lack of investment.
(iii) Non-Tariff Barriers by Developed
countries: All quota restrictions on
exports of textiles and clothing have been
removed from India. But some developed
countries, like USA have not removed
their quota restrictions on import of
textiles from India.
capacity to produce the output of goods and
services within the country. Growth implies:
 Either a larger stock of productive capital;
 Or a larger size of supporting services like
transport and banking;
 Or an increase in the efficiency of
productive capital and services.
A good indicator of economic growth is
steady increase in the Gross Domestic
Product (GDP). Increase in GDP or availability
of goods and services enables people to enjoy
a more rich and varied life.
According to Equity, every Indian should
be able to meet his or her basic needs
(food, house, education and health care)
and inequality in the distribution of wealth
should be reduced. Equity aims to raise the
standard of living of all people. So, ‘growth
with equity’ helps to achieve planning
objective of development with social justice.
in production of food grains due to use of high
yielding variety (HYV) seeds.
 It was implemented because:
 The agricultural sector accounted for the
l a rg e s t s h a re o f wo rk fo rc e w i t h
approximately 70-75 percent.
 The productivity in the agricultural sector
was very low due to use of outdated
technology and absence of required
infrastructure and India was forced to
import food from the United States of
America.
Benefits of Green Revolution: The spread
of Green Revolution benefitted the farmers.
(i) A ttaining Marketable Surplus: Green
Revolution resulted in ‘Marketable
Surplus: Marketable surplus refers to
that part of agricultural produce which
is sold in the market by the farmers after
meeting their own consumption
requirement.
(ii) Buffer Stock of Food Grains: The green
revolution enabled to procure sufficient
amount of food grains to build a stock
which could be used in times of food
shortage.
(iii) Benefit to low-income groups: As large
proportion of food grains was sold by the
farmers in the market. their prices
declined relative to other items of
consumption. The low-income groups,
who spend a large percentage of their
income on food, benefited from this
decline in relative prices.
10. The given statement is correct.
In the early post-independence period, the
aim of the government’s policy was to reduce
the dependence on the foreign countries for
goods, services, technology and capital. It
stressed on the use of domestic resources to
avoid foreign interference as it was feared
that the dependence on imported food
supplies, foreign technology and foreign
capital may increase foreign interference in
the policies of our country. Thus, the main
thrust of the ‘Atamnirbhar Bharat’ is also to
make India an economy that is self-reliant
and self-sufficient.
The given statement is defended. Following
steps were taken by the government to
protect Small-scale Industries from big
firms: Reservation of Products: Government
reserved production of a number of products
for the small-scale industry. The criterion
for reserving the products depended on the
ability of these units to manufacture the
goods.
Various Concessions: Small-scale industries
were also given concessions, such as lower
excise duty and bank loans at lower interest
rates.
11. As a country develops, the share of agriculture
in national income declines, and the share of
the industry becomes dominant.
The working force shifts from agricultural
occupations to non-agricultural occupations
namely, industrial and service occupations.
The working force in the rural areas are also
shifting towards the more developed and
advanced job opportunities in urban areas.
12. Plans must have goals. Without goals, there
is no planning.
In fact, planning is defined as a strategy that
defines how to allocate the country’s scarce
resources to different uses with a view to
achieving a given set of goals.
These goals often relate to growth and social
justice.
Indian Economy (1950-1990) 19
 CHAPTER SUMMARY AND GLOSSARY

Economic Planning Agriculture Sector

U Utilisation of country's resources into different development 1. New agriculture policy was started in 1961
activities as per the national priorities. 2. 
Measures taken to solve the problem of
U Planning commission was set up in 1950 Indian agriculture
U National development council set up in 1952 Land Reforms
Objectives of planning U Land ceiling, Consolidation of land holdings,
Modernisation, Self reliance/self sufficiency, Economic growth, Equity Abolition of intermediaries, Cooperative
farming & Regulation of rent
Green Revolution
NITI Aayog Launched in 1965-1966, known as new
U National institution for transforming India Aayog agricultural strategy or seed - fertiliser-water-
U It replaced planning commission technology.
U It was formed on 1st January 2015 U Importance of green revolution: Self-
U From 2017 onwards , 15 years vision is followed sufficiency/attainable marketable surplus,
in India instead of 5 years planning system. Buffer stock, Benefits to low income group
U Challenges to green revolution: Risks of
pest attacks, Increase in income inequality
Indian Economy
3. Organic farming: Refers to the form of
during 1950-1990 agriculture using organic manure instead of
chemical fertilizers and pesticides.

Industrial Sector
Measures taken for industrial development: IPR 1948, Industrial licensing Foreign Trade
policy 1951, Karve committee was formed in 1955, IPR 1956, New industrial Objectives
policy 1991 U Protection of domestic industries from foreign
Main features of IPR 1956: Industrial Licensing System competition.
Reservations and other Concessions: To ensure and enhance the growth U Saving foreign exchange by restricting
of the small-scale industries, the govt. gave various concessions to these expenditure on imports.
industries. Measures
Tax rebates and other concessions were offered to those private enterprises U Tariff: Refers to the taxes imposed on imported
whose industry was established in backward regions of the country. goods
Classification of Industries as per IPR, 1956 U Quota: Refers to fixing the maximum limit on
imports.
Import Substitution
Schedule-A Schedule-B Schedule-C U Refers to the replacement of imports by domestic
(Comprises of industries (Comprises of 12 industries which (Comprises of remaining
exclusively owned by state) would be progressively state-owned) industries which were in the production.
private sector) U Also known as inward looking policy
Reasons for import substitution
Main features of IPR 1956: U The risk of falling foreign exchange reserve in
1. Industrial Licensing System India.
2. Reservations and other Concessions U Indian goods were unable to compete with
foreign goods.



20 Indian Economic Development PW

 CHAPTER
Economic Reforms
3 Since 1991

TOPICS TO BE COVERED
‰ Need of Economic Reforms
‰ Liberalisation
‰ Economic Reforms under Liberalisation
‰ Privatisation
‰ Policies Adopted for Privatisation
‰ Globalisation
‰ Policy Promoting Globalisation
‰ Outsourcing
‰ Demonetisation
‰ Objectives of Demonetisation
‰ World Trade Organisation (WTO)
‰ Functions of WTO
‰ Key Terms
‰ Critical Appraisal of Economic Reforms of 1991

NEED OF ECONOMIC REFORMS

1. Mounting Fiscal Deficit: A high fiscal deficit indicates that the government is spending more
money than it is generating. Economic reforms are needed to address this imbalance, ensuring
sustainable fiscal policies and reducing the burden on the economy.
2. Adverse Balance of Payments (BoP): An adverse BoP implies that a country is spending more
on imports than it is earning from exports. Economic reforms are essential to enhance export
competitiveness, attract foreign investment, and correct the trade imbalance for a healthier BoP
position.
3. Fall in Foreign Exchange Reserves: Depleting foreign exchange reserves can lead to currency
depreciation and economic instability. Reforms are necessary to boost reserves through measures
like export promotion, foreign direct investment (FDI), and prudent monetary policies.
4. Inflation: Inflation erodes the purchasing power of currency, impacting both consumers and
businesses. Economic reforms plays a crucial role while implementing monetary and fiscal policies
that control inflation and maintain price stability for sustainable economic growth.
 5. Poor Performance of Public Sector Enterprises (PSEs): Reforms are needed to address
inefficiencies and enhance the competitiveness of Public Sector Enterprises. This may involve
restructuring, privatization, or strategic partnerships to improve their performance and
contribution to the economy.
6. Gulf Crisis: Economic reforms become necessary in response to external shocks like the Gulf
Crisis, which can affect trade, oil prices, and remittances. Diversifying the economy, promoting
resilience, and adapting policies are crucial during such crisis.

Segments of New Economic Policy

Stabilization measures Structural adjustment

These are short - run There are long- run policies,

measures introduced by
government to control
the rise in price, adverse
balance of payment, and fall
in foreign exchange reserve
aimed at improving the efficiency
of the economy and increasing its
international competitiveness by
removing the rigidity in various
segments of the Indian economy.

Structural Reforms OR Components of New Economic Policy

Liberalisation Privatisation Globalisation

LIBERALISATION
Liberalisation means removing all unnecessary control and restrictions like permits, licences, tariffs,
quotas etc.

ECONOMIC REFORMS UNDER LIBERALISATION

‰ Industrial Sector Reforms:
1. Delicensing: The removal of industrial licensing allowed businesses more freedom to set up
and expand without the need for government approvals, fostering competitiveness and
efficiency.
2. Decrease in the Role of the Public Sector: Liberalization aimed to reduce the government’s
direct involvement in industries, promoting private sector participation and efficiency.
3. Abolition of MRTP Act 1969: The abolition of the Monopolies and Restrictive Trade Practices
(MRTP) Act aimed to encourage competition and prevent monopolistic practices.
‰ Financial Sector/Banking Reforms:
1. Change in the Role of RBI: The Reserve Bank of India (RBI) underwent changes to shift
towards a more market-oriented approach, allowing greater autonomy to banks.

22 Indian Economic Development PW

 2. Decrease in Interest Rates: Liberalization brought about a move towards market-determined
interest rates, promoting efficiency and competition in the financial sector.
3. Origin of Private Banks: Liberalization facilitated the entry of private banks, introducing
competition and innovation in the banking sector.
‰ Fiscal/Tax Reforms:
1. Simplification of Tax Structure: Liberalization efforts included simplifying the tax structure
to reduce complexity and improve compliance.
2. Decrease in Tax Rates: Lowering tax rates aimed to incentivize investment, stimulate
economic growth, and attract foreign capital.
3. Goods and Services Tax (GST): The introduction of GST streamlined indirect taxes, creating
a unified tax structure and reducing cascading effects.
‰ Foreign Exchange Reforms:
1. Devaluation of Rupee: Devaluation aimed to make exports more competitive by lowering
the value of the national currency relative to other currencies.
2. Shift from Fixed to Flexible Exchange Rate System: Moving away from a fixed exchange
rate system allowed the currency to be determined by market forces, fostering a more dynamic
and responsive exchange rate.
‰ Foreign Trade Reforms:
1. Reduction in Import Duty: Lowering import duties aimed to promote imports, enhance
competition, and provide consumers access to a wider range of goods at competitive prices.
2. Removal of Export Duty: Removing export duties encouraged businesses to expand their
reach in international markets by making Indian goods more competitive globally.

PRIVATISATION
Privatisation is the general process of involving the private sector in the ownership or management
of state–owned enterprises

POLICIES ADOPTED FOR PRIVATISATION

‰ Transfer of Ownership and Management: Involves selling public sector enterprises to private
entities, transferring both ownership and managerial control. It enhances efficiency, improves
performance, and utilizes resources better.
‰ Sale of Shares of Public Sector Enterprises: Involves selling a portion of government-owned
enterprise shares to private investors. Bring in private capital, introduce market discipline, and
enhance competitiveness. Includes Initial Public Offerings (IPOs) or strategic sales to private
investors.
‰ The government envisaged that privatisation could provide strong impetus to the inflow of FDI. The
government has also made attempts to improve the efficiency of PSUs by giving them autonomy in
taking managerial decisions. For instance, some PSUs have been granted special status as maharatnas.
navratnas and miniratnas. The Central Public Sector Enterprises are designated with different status.
A few examples of public enterprises with their status are as follows:
(i) Maharatnas: (a) Indian Oil Corporation Limited and (b) Steel Authority of India Limited.

Economic Reforms Since 1991 23

 (ii) Navratnas: (a) Hindustan Aeronautics Limited and (b) Mahanagar Telephone Nigam Limited.
(iii) Miniratnas: (a) Bharat Sanchar Nigam Limited, (b) Airport Authority of India and (c) Indian
Railway Catering and Tourism Corporation Limited.
Many of these profitable PSEs were originally formed during the 1950s and 1960s when self-
reliance was an important element of public policy. They were set up with the intention of providing
infrastructure and direct employment to the public so that quality end-product reaches the masses
at a nominal cost and the companies themselves were made accountable to all stakeholders.

GLOBALISATION
It refers to the process of integrating one’s domestic economy with the rest of the world.

POLICY PROMOTING GLOBALISATION

‰ Increase in Equity Limit of Foreign Investment: Involves raising the maximum percentage of
a company’s ownership that foreign investors can hold. Encourages foreign direct investment
(FDI), promoting global integration and providing access to external capital, technology, and
expertise. Typically done through changes in regulations or policies allowing higher foreign equity
participation in various sectors.
‰ Reduction in Tariffs: Involves lowering or eliminating import taxes on goods and services.
Facilitates international trade, making imports more accessible and affordable. Promotes
competitiveness and integration into the global economy. Tariff reduction can be part of broader
trade agreements or unilateral policy decisions to boost economic openness.

OUTSOURCING
1. It is an outcome of globalisation
2. Outsourcing is the business practice of hiring a party outside a company to perform services or
create goods.
‰ Services include outsourcing in India:
1. IT
2. Banking Services
3. Accounting
4. Business Process Outsourcing (BPOs)
5. Knowledge Process Outsourcing (KPOs)
‰ India is favourite Destination for Outsourcing because:
1. Cheap Labour: India provides a cost-effective labour force, offering savings for businesses
while maintaining service quality.
2. Qualified Personnel: With a large pool of skilled professionals, India offers expertise across
various sectors, making it an attractive option for outsourcing tasks.
3. Stable Political Environment: India’s political stability provides a secure environment for
long-term business planning and operations, contributing to its attractiveness as an
outsourcing hub.

24 Indian Economic Development PW

 4. Abundant Resources: The country’s abundant resources, including a vast and diverse
workforce, support scalability and efficiency in outsourcing operations.
‰ Goods and Service Tax:
GST is a single comprehensive indirect tax that has replaced many indirect taxes like : VAT, Sales
Tax etc.
 Simplification of Tax System
 One nation, One tax
 Types of GST
1.
2.
SGST
CGST } Intra - State

3.
4.
IGST
UTGST
} Inter – State

DEMONETISATION
It refers to the withdrawal of existing currency from circulation, usually involving the replacement of
old currency notes with new ones.

OBJECTIVES OF DEMONETISATION
‰ To Reduce Tax Evasion: Demonetisation aims to curb the use of undeclared income and discourage
tax evasion by making it difficult to hoard large sums of unaccounted cash.
‰ To Bring Black Money Back into the Banking System: By invalidating certain currency notes,
the government seeks to prompt individuals holding unaccounted wealth (black money) to deposit
it into the formal banking system, making it traceable and taxable.
‰ To Fight Corruption: Demonetisation is often implemented as an anti-corruption measure,
disrupting the flow of illicit funds and making it more challenging for corrupt practices that involve
unaccounted cash transactions.
‰ To Curb Terrorism: Disrupting the funding sources for illegal activities, including terrorism, is
a key objective. Demonetisation aims to make it harder for such groups to use unaccounted funds
for their operations.
‰ To Stop Circulation of Fake Currency: Demonetisation helps in replacing old currency with new,
more secure notes, reducing the circulation of counterfeit currency. It aims to strengthen the
integrity of the currency system.

WORLD TRADE ORGANISATION (WTO)

1. WTO was setup in 1995, replacing GATT
2. GATT was established in 1948
3. WTO started its operations from 1 January 1995 under the Marrakesh agreement, signed by 123
countries.
4. As of 2016, the WTO has 164 members.

Economic Reforms Since 1991 25

FUNCTIONS OF WTO
‰ To Facilitate International Trade: The WTO aims to facilitate the smooth flow of international
trade by providing a platform for negotiations, agreements, and dispute resolution among its
member countries.
‰ To Encourage International Trade: The WTO encourages and promotes international trade by
creating a framework of rules and agreements that aim to reduce barriers and create a more open
and predictable trading environment.
‰ Equal Opportunities to All Its Members: The WTO seeks to ensure that all member countries
have equal opportunities in international trade. It works towards reducing discriminatory practices,
providing fair access to markets, and promoting inclusivity.
‰ Environment Protection: While the primary focus is on trade, the WTO recognizes the need to
balance economic objectives with environmental concerns. It aims to facilitate trade without
compromising sustainable development and environmental protection.
‰ Solves Disputes: The WTO provides a platform for resolving trade disputes among member
countries. Its Dispute Settlement Mechanism helps address conflicts related to trade policies and
practices, ensuring a rules-based resolution process.

KEY TERMS
‰ Strategic Sale:
1. Strategic sale refers to the sale of 51% or more stake of a PSU to the private sector who bids
the highest.
2. The ownership of PSU is handed over to the private sector.
‰ Minority Sale:
1. Minority sale refers to sale of less than 49% stake of a PSU to the private sector.
2. The ownership of PSU still remains with the government as it holds 51% of stakes
‰ Bilateral Trade:
1. It is a trade agreement between two countries.
2. This is an agreement that provides equal opportunities to both the countries.
‰ Multilateral Trade:
1. It is a trade agreement among more than two countries.
2. This is an agreement that provides equal opportunities to all the member countries in the
international market.
‰ Tariff Barriers:
1. It refers to the tax imposed on imports by the country to protect its domestic industries.
2. It includes custom duties, export & import duties.
3. It is imposed on the physical units (like per Kg) or on the value of the goods imported.
‰ Non-Tariff Barriers:
1. It refers to the restrictions other than taxes, imposed on imports by the country.
2. It includes Quotas and licences.
3. It is imposed on the quantity and quality of the goods imported.

26 Indian Economic Development PW

CRITICAL APPRAISAL OF ECONOMIC REFORMS OF 1991
‰ Positive Impacts:
1. Increases in Foreign Investment: The reforms attracted higher levels of foreign investment,
fostering economic growth and bringing in valuable capital and technology.
2. Increase in Foreign Exchange Resources: The liberalization measures led to an augmentation
of foreign exchange reserves, strengthening the country’s ability to meet international payment
obligations.
3. Decrease in Inflation Rates: Economic reforms contributed to better macroeconomic stability,
leading to a decrease in inflation rates, providing relief to consumers and businesses.
4. Increase in National Income: The liberalization policies positively impacted the overall
economic performance, resulting in an increase in the national income of the country.
5. Increase in Exports: Liberalization facilitated a more open and competitive market,
contributing to increased exports, thereby boosting the country’s trade balance.
‰ Negative Impacts:
1. Neglect of Agriculture Sector: The reforms were criticized for not adequately addressing
the challenges faced by the agriculture sector, leading to disparities and insufficient growth
in this crucial area.
2. Jobless Growth: While economic growth occurred, there were concerns about the quality of
employment generated, with jobless growth observed in certain sectors.
3. Rise in Income Inequalities: The economic reforms contributed to a rise in income
inequalities, creating a gap between the affluent and the marginalized sections of society.
4. Adverse Effects of Disinvestment Policies: Disinvestment in public sector enterprises led
to job losses and concerns about the potential negative impact on certain industries and
communities.
5. Spread of Consumerism: While consumerism increased, it also raised concerns about the
impact on traditional values and sustainable development, leading to potential social and
environmental consequences.

Economic Reforms Since 1991 27

 MULTIPLE CHOICE QUESTIONS
1. Read the following statements: Assertion (A)
and Reason (R). Choose the correct alternative
from those given below:
 (CBSE SQP 2023-24)
Assertion (A): In 1991, as an immediate
measure to resolve the Balance of Payments
crisis, the rupee was devalued against foreign
currencies.
Reason (R): Devaluation of currency was
eminent, to replenish the deteriorated foreign
exchange reserves.
Alternatives:
(a) Both Assertion (A) and Reason (R) are
true and (R) is the correct explanation of
(A).
(b) Both Assertion (A) and Reason (R) are
true, (R) is not the correct explanation
of (A).
(c) Assertion (A) is true, but Reason (R) is
false.
(d) Assertion (A) is false, but Reason (R) is
true.
2. Read the following statements: Assertion (A)
and Reason (R). Choose the correct alternative
from those given below:
 (CBSE SQP 2023-24)
Assertion (A): The industrial sector reforms
implemented under liberalization policies in
a country led to an increase in Foreign Direct
Investment in the manufacturing sector.
Reason (R): Liberalization policies aimed to
toughen trade barriers, regulate industries, and
provide a conducive environment for Indigenous
investors, making the manufacturing sector
more attractive for FDI.
Alternatives:
(a) The Assertion (A) is true, but the Reason
(R) is false.
(b) The Assertion (A) is false, but the Reason
(R) is true.
28 Indian Economic Development PW
(c) Both the Assertion (A) and Reason (R)
are true, but the Reason (R) is not the
correct explanation of the assertion (A).
(d) Both the Assertion (A) and Reason (R)
are true, and the Reason (R) is the correct
explanation of the assertion (A).
3. Which of the following is not a policy initiated
under New Economic Policy?
(a) Liberalisation (b) Privatisation
(c) Globalisation (d) Licensing
4. When was the New Economic Policy
announced?
(a) June, 1991 (b) May, 1991
(c) July, 1991 (d) January, 1991
5. What was the primary objective of the
Economic Reforms of 1991 in India?
(a) Poverty eradication
(b) Economic self-reliance
(c) Foreign aid rejection
(d) Industrialization
6. Which finance minister played a pivotal role
in initiating the 1991 economic reforms in
India?
(a) Manmohan Singh
(b) Atal Bihari Vajpayee
(c) P. Chidambaram
(d) Arun Jaitley
7. International Bank for Reconstruction and
Development (IBRD) is popularly known as:
 (KVS SQP 2019-20)
(a) World Bank
(b) Bank of Tokyo
(c) American Express
(d) HSBC Bank
8. IMF stands for:  (KVS SQP 2019-20)
(a) International Monetary Foundation
(b) Internal Monetary Fund
(c) International Monetary Fund
(d) International money foundation 3.
 9. What was the one major proposal of new (c) To reduce the burden on public
industrial policy (1991)? administration
 (KVS SQP 2019-20) (d) All the above
(a) NRI’s will not be allowed for capital 11. Rate of which tax was reduced as per the tax
investment in India. reforms of 1991:  (KVS SQP 2019-20)
(b) Facility of FDI up to 51 percent in high (a) Income tax
priority industries
(b) Corporation tax
(c) Import restrictions on technical know-
(c) Value-added tax
how for one year
(d) Property tax
(d) Abolition of industrial licensing except
for six industries 12. Which is the latest tax introduced by the
government of India?  (KVS SQP 2019-20)
10. Objectives of privatization policy are:
 (KVS SQP 2019-20) (a) Goods and services tax
(a) To improve the government’s financial (b) Value-added tax
position (c) Service tax
(b) To improve the performance of an (d) Corporation tax
enterprise

SUBJECTIVE TYPE QUESTIONS

1. What measures have been taken under
Liberalisation? (Any four)
 (KVS SQP 2019-20)
2. What is privatization and explain steps taken
toward it? (KVS SQP 2019-20)
3. Explain the main objectives of Globalization.
 (KVS SQP 2020-21)
4. What are the major factors responsible for
the high growth of the service sector?
 (KVS SQP 2020-21)
5. Explain financial sectors reforms under
Liberalisation. (KVS SQP 2020-21)
6. What are the objectives of WTO?
 (KVS SQP 2020-21)
7. What do you understand by GST? How good
is a system of GST as compared to the old tax
system? (KVS SQP 2020-21)
8. Give any three aims of demonetization.
 (KVS SQP 2020-21)
9. What are Fiscal policy reforms? Explain.
 (KVS SQP 2020-21)
10. Agricultural sector appears to be adversely
affected by the reform process. Why?

Answers

1. (a) 2. (a) 3. (d) 4. (c) 5. (b) 6. (a) 7. (a) 8. (c) 9. (d) 10. (d)
11. (b) 12. (a)

Economic Reforms Since 1991 29

 Solutions
SUBJECTIVE TYPE QUESTIONS
1. Measures taken under Liberalisation:
(i) Abolishing of Industrial licensing
system: Prior to liberalization, industrial
licensing was a mandatory requirement
for starting a business in many sectors.
The government would regulate and
control the number of firms in a particular
industry. The abolition of the industrial
licensing system was a key step in
liberalization, allowing for greater
competition and reducing bureaucratic
hurdles for businesses.
(ii) Amendment to MRTP Act: The MRTP
Act was amended to remove restrictions
on the size and expansion of businesses.
The aim was to promote healthy
competition, remove barriers to entry,
and encourage efficiency in the market.
The amended act aimed at preventing
monopolistic practices and restrictive
trade practices.
(iii) Reducing the role of RBI: The reduction
of the role of the Reserve Bank of India
involved moving towards a more market-
oriented approach to monetary policy. It
included reforms in interest rate
mechanisms and reducing direct control
over the financial sector. The idea was to
create a more flexible and market-driven
financial system.
(iv) Rationalisation of taxes: Rationalization
of taxes involved simplifying the tax
structure, reducing tax rates, and
eliminating unnecessary complexities.
This was aimed at promoting investment,
encouraging entrepreneurship, and
making the tax system more transparent.
It also helped in attracting foreign
investment by creating a more business-
friendly environment.
2. Privatisation is the opening of the economy
to the private sector. Privatization involves
transferring ownership and control of state-
owned enterprises to the private sector.
30 Indian Economic Development PW
Measures:
(i) Reduction of major industries of the
Government: This refers to the govern-
ment reducing its direct involvement in
owning and operating major industries.
In the context of privatization, the gov-
ernment may sell, transfer, or gradually
phase out its ownership and control of
key industries, allowing private enter-
prises to take a more prominent role.
(ii) Disinvestment of public sector: Disin-
vestment involves the sale of govern-
ment-owned assets, such as shares in
public sector enterprises, to private in-
vestors. This process can take various
forms, including the sale of minority
stakes or even a complete transfer of
ownership. Disinvestment aims to bring
in private capital, improve efficiency, and
promote competition in sectors that
were previously dominated by govern-
ment-owned entities.
3. Following are the main objectives of
globalization are as follows:
(i) Reduction of trade barriers to
liberalize world trade: Globalization
aims to decrease barriers such as tariffs
and quotas, fostering an environment of
increased international trade.
(ii) Serves as a platform for countries to
raise their concern regarding the
trade policies of their trading partners:
Globalization provides a forum for
countries to engage in discussions and
negotiations regarding trade policies,
ensuring a more cooperative and
transparent global trade system.
(iii) To enlarge production and trade of
services: Globalization involves not only
the exchange of goods but also the
expansion of services across borders,
promoting a more interconnected global
economy.
 (iv) To protect the environment: Some
aspects of globalization focus on
promoting sustainable practices and
environment friendly policies to address
global environmental challenges.
(v) To provide greater market access to
all member countries: Globalization
seeks to create a level playing field,
allowing countries to access international
markets and promoting fair competition.
(vi) To ensure optimum utilization of
world resources: Globalization aims to
optimize the use of global resources by
facilitating efficient production and
distribution processes on a global scale.
4. Major Factors responsible for the high growth
of the service sector are:
(i) Cheap labour and reasonable degree
of skill in India: The availability of
skilled labour at competitive costs has
been a significant factor driving the
growth of the service sector, particularly
in countries like India.
(ii) Advanced technology and growth of IT:
The adoption of advanced technologies,
especially in the Information Technology
(IT) sector, has played a crucial role in the
expansion of the service industry, enhanc-
ing efficiency and enabling global connec-
tivity.
(iii) Structural transformation: The service
sector has experienced growth as econ-
omies undergo structural transforma-
tions, shifting from traditional industries
to more service-oriented ones.
(iv) High demand for services as final
product: Increasing consumer demand
for services, whether in finance,
healthcare, education, or other areas, has
been a driving force behind the growth
of the service sector.
5. Financial sectors reforms under Liberalisation
are:
(i) Freedom to determine own interest:
Liberalization in the financial sector
often involves granting financial
institutions the freedom to determine
their own interest rates. This move away
from strict government control allows
market forces to play a role in setting
interest rates.
(ii) Private banks granted permission:
Liberalization typically involves reducing
restrictions on the establishment and
operation of private banks. Granting
permission for the establishment of
private banks fosters competition in the
banking sector.
(iii) Permission for foreign investment:
Liberalization in the financial sector
often includes measures to encourage
and facilitate foreign investment. This
may involve allowing foreign entities to
invest in domestic financial institutions
or financial markets, promoting global
integration of the financial sector.
6. Objectives of World Trade Organization
(WTO) are:
(i) Reduction of trade barriers to liberalize
world trade: The WTO aims to facilitate
global trade by working towards the
reduction of barriers such as tariffs and
quotas, promoting a more open and
accessible international trading system.
(ii) Serves as a platform for countries to
raise their concerns regarding the
trade policies of their trading
partners: The WTO provides a forum for
member countries to discuss and address
concerns related to trade policies,
fostering a platform for negotiation and
dispute resolution.
(iii) To enlarge production and trade of
services: The WTO encourages the
expansion of both goods and services
trade, fostering economic growth and
development.
(iv) To ensure optimum utilization of
world resources: By promoting efficient
and fair trade practices, the WTO aims
to ensure the optimal use of global
resources in the production and exchange
of goods and services.
(v) To protect the environment: The WTO
recognizes the importance of sustainable
Economic Reforms Since 1991 31
 development and aims to incorporate
environmental considerations into its
trade-related policies.
(vi) To provide greater market access to
all member countries: The WTO works
towards creating a level playing field,
ensuring that member countries have
fair and equitable access to international
markets.
7. GST is the “single comprehensive indirect
tax” on supply of goods and services right
from manufacturer or service provider to the
consumer.
The system of GST as compared to the old tax
system.
(i) It has simplified the multiplicity of taxes
on goods and services.
(ii) The laws, procedures and rates of taxes
across the country are also now
standardized.
(iii) It has also facilitated the freedom of
movement of goods and services.
(iv) It has created a common market in the
country.
8. The three aims of demonetization are:
(i) To Curb corruption: Demonetization is
sometimes implemented as a measure
to reduce or eliminate corruption by
rendering certain high-denomination
currency notes invalid. The idea is to
disrupt illegal cash transactions and curb
the flow of unaccounted money.
(ii) To curb counterfeiting: Demonetization
can be aimed at tackling the issue of
counterfeit currency. By invalidating
existing high-denomination notes and
introducing new ones with enhanced
security features, authorities seek to
catch counterfeiting activities.
(iii) To curb the use of high denomination
notes for terrorist activities: Large-
denomination currency notes can facilitate
illegal activities, including funding
terrorist operations. Demonetization is
intended to disrupt such funding by
rendering the existing high-denomination
32 Indian Economic Development PW
notes useless and introducing measures
to track and control cash flows.
9. Fiscal policy reforms were undertaken
to improve the expenditure and revenue
policies of the government.
The following steps were undertaken:
(i) Tax Reforms: Tax rates were reduced, tax
evasion was plugged and procedures
were simplified.
(ii) Government expenditure was curtailed
by cutting down on unnecessary
expenses. Borrowings were reduced and
all loss-making PSU’s were shut down.
(iii) Disinvestment in PSU’s was undertaken
to plug the budgetary deficit.
10. Economic reforms did not benefit agriculture
and the agricultural growth rate has been
decelerating because of the following
reasons:
(i) Public investment in the agriculture
sector has been reduced in the reform
period due to which irrigation, power,
roads, market linkages, and agricultural
research have suffered.
(ii) The removal of fertilizer subsidies has
led to an increase in the cost of production,
which has severely affected the small and
marginal farmers.
(iii) Globalisation and membership of WTO
have resulted in policy changes such as
reduction in Import duties on agricultural
products, removal of minimum support
price, and lifting of quantitative
restrictions on agricultural products
which have increased international
competition for Indian farmers making
their condition more miserable.
(iv) There has been a shift from production
for the domestic market towards
production for the export market because
of export-oriented policy strategies in
agriculture. This has shifted the focus on
cash crops in place of the production of
food grains which has led to a fall in the
supply of food grains thereby creating
pressure on prices of food grains.
 CHAPTER SUMMARY AND GLOSSARY
Globalisation
Globalisation may be defined as a process associated with increasing
openness, growing economic interdependence and deepening economic
integration in the world economy.
Policy promoting globalisation.
U Increase in equity limit of foreign investment.
U Partial convertibility.
U Long term trade policy.
U Reduction in tariff
Privatisation
Involving the private sector in the ownership or
operation of a state owned enterprises.
Policies adopted for privatisation
U Contraction of public sector.
U Abolished the ownership of Govt. in the
management of public enterprises.
U Sale of shares of public enterprises
Economic
Reforms since
Need of Economic Reforms
U Mounting fiscal deficit,
U Adverse BOP
U Fall in foreign exchange reserves
U Inflation
U Poor performance of PSE's
U Gulf crisis
Outsourcing
An outcome of globalisation. It is the business
practice of hiring a party outside a company to
perform services or create goods.
Services include outsourcing in India
Information technology, Banking services,
Accounting, BPOs, KPOs, etc.
India is favourite destination for outsourcing
because:
Cheap labour, Qualified personnel, Stable political
environment, Abundant resources
Liberalisation
Removing all unnecessary control and restrictions
like permits licences, protectionist duties, quotas,
etc.
Economic reforms under liberalisation:
Industrial sector reforms:
U Contraction of Public Sector
U Abolition of Industrial Licensing
U Freedom to Import capital goods
Financial sector/banking reforms:
U De-regulation of interest rates
U Reducing various Ratios like SLR and CRR
Components
U Change in the role of the central bank or the RBI
of Economic
from the regulator to facilitator of the economy
Reforms
and banks.
Fiscal/tax reforms:
U Simplification of tax structure
U Decrease in tax rates
U Good and services tax
1991 Foreign exchange reforms:
U Devaluation of rupee
U Shift from fixed exchange rate to flexible
exchange rate system
Foreign trade reforms:
U Reduction in import duty
U Removal of export duty
Segments of New Economic Policy
Stabilization measures: Short run measures by govt. to
control rise in price, adverse balance of payment fall in
foreign exchange reserve.
Structural adjustment: Long run policies, Aimed at
improving the efficiency of the economy & increasing its
international competitiveness by removing the rigidity in
various segment of the Indian economy.
Economic Reforms Since 1991 33
 World Trade Organisation (WTO)
WTO was founded in 1995 as the successor organisation to the
General Agreement on Trade and Tariff (GATT).
Aim (Functions) of WTO
U To establish a rule-based trading regime in which
nations cannot place arbitrary restrictions on trade.
U To enlarge production and trade of services.
U To ensure optimum utilisation of world resources.
U To protect the environment.

Goods And Service Tax

GST is a single domestic indirect tax law for the entire country.
Under the GST regime, the tax is levied at every point of sale.
Types of GST
U Intra-state: SGST, CGST
U Inter-state: IGST, UTGST
Demonatisation
Economic Reforms It means withdraw of existing currency from use.
since 1991 Objectives of demonatisation
U To reduce tax evasion
U To bring black money back into the banking system
U To fight with corruption
U To curb terrorism
U To stop circulation of fake currency

Critical Appraisal
Positive Impacts
1. Increase in foreign investment.
2. Increase in foreign exchange reserves.
3. A check of inflation.
4. Increase in national income.
5. Increase in exports.
6. Consumer sovereignty.
Negative Impacts
1. Neglect of agriculture.
2. Jobless growth.
3. Increase income inequalities.
4. Adverse effect of disinvestment policy.
5. Spread of consumerism.
6. Cultural erosion.



34 Indian Economic Development PW

 CHAPTER

4 Human Capital Formation

TOPICS TO BE COVERED
‰ Human Capital Formation
‰ Education

‰ Human Capital: It refers to the stock of skill, ability, expertise and knowledge of a nation at a
point of time.
‰ Physical Capital: It refers to the inputs and property which are required for further production
like factory, plant and machinery, buildings, raw material etc.
‰ Physical Capital v/s Human Capital
S. No Physical Capitals Human Capital
1. It is tangible It is intangible
2. It is separable from its owners It cannot be separated from its owners
3. It is perfectly mobile between the countries Its mobility is restricted by nationality and
cultures
4. It depreciates over time due to constant use It depreciates with ageing but can be made
or due to change in technology up through continuous investment in
education and health.
5. It creates only private benefit It creates private benefit as well as social
benefit

HUMAN CAPITAL FORMATION

Human capital formation is the process of increasing the stock of human capital over a period
of time.
‰ Sources of Human Capital Formation  Memory Trick - METHI
1. Expenditure on Education: Investment expenditure on education leads to the generation
of technical skills, creation of manpower, decrease in population growth rate etc. It increases
productivity and productive, resource in the country. Hence, Education is the source of human
capital formation.
2. Expenditure on health: A sick labour without access of medical facilities always escapes
from work and leads to the loss of productivity.
There can be following forms of health expenditure:
(i) Preventive medicine (before illness treatment i.e. vaccination)
(ii) Curative medicine (during illness medicine)
(iii) Social Medicine
(iv) Clean drinking water etc.
Hence, health is an important input of development and source of human capital formation.
 3. On–the–Job Training: It refers to the learning while doing expenditure on such training is
source of human capital formation because it increases worker’s skill, efficiency and
productivity than its cost.
4. Migration: People migrates from one place to another for the purpose of earning more. This
migration involves some costs like transportation cost, living cost etc, it increases the earnings
as well. This earning remains greater than migration cost.
5. Information: People seek information for their betterment i.e., information related to labour
market for the for the purpose of good job, information related to health and education.
People spend money for acquiring information and information becomes important source
of human capital formation.
‰ Role of Human Capital Formation:
1. Effective use of Physical Capital: Better use of physical capital is possible with intelligent
work of human beings. Human skills and efforts leads to effective use of physical capital.
2. Higher Productivity and Production: Human capital formation raises the productivity and
production as knowledgeable and skilled worker makes the better use of the resources.
Increase in productivity and quality production depends on technical skills of the people
which can be acquired only by education or training and maintaining health of the
people.
3. Control of Population Growth: It has been observed that educated persons have smaller
families as compared to illiterate families, So, spread of education is necessary to control the
population growth rate.
4. Inventions, Innovations and Technological Improvement: These are all due to the extra
knowledge acquired during education which provides lot of innovations and inventions and
availability of educated workers will make easy the adaptation of new technologies.
5. Increases Life Expectancy and Quality of Life: Formation of human capital raises life
expectancy of the people. Health facilities and availability of nutritive food enable people to
live a healthy and long life. This in turn, adds to the quality of life.
‰ Problems of Human Capital Formation:
1. Rising Population: Rapidly population adversely affects the quality of human capital formation
in developing countries. It reduces per capita availability of existing facilities and resources.
2. Long Term process: The process of Human development takes long time. So, the process
which produces skilled people is slow.
3. High Regional and Gender Inequality: Regional and gender inequality lowers the human
development levels.
4. Brain Drain: Migration of highly skilled labour termed as “Brain Drain” adversely affects the
economic development. People born here, educated here and providing services to other
countries by migrating themselves this, causes brain drain.
5. Insufficient on-the-job-training in Agriculture: Agriculture sector is neglected where the
workers are not given on-the-job training to absorb emerging new technologies.

36 Indian Economic Development PW

 6. High Poverty Levels: A large proportion of the population lives below poverty line and do
not have access to basic health and educational facilities. A large section of society cannot
afford to get higher education on expensive medical treatment of major disease.

EDUCATION
Education refers to the process of teaching, training and learning especially in schools, colleges,
to improve knowledge and develop skills.
‰ Problems Relating to Development of Education in India:
1. Large Number of Illiterates: With the rise in population, no of illiterate persons is also
rising. They don’t understand the value of education therefore shows least interest for
educating their children as well.
2. Inadequate Vocationalisation: Indian education system is degree oriented not knowledge
oriented. The vocational courses provided by the education system of India are not to provide
them jobs.
3. Gender Bias: India is still facing the problem of gender biasness. There are many hindrances
on the way of girl’s education.
4. Low Rural Access Level: Are education system fails to provide good quality education in the
rural and remote areas in the rural areas the schools are situated far away and even the level
of education provided in those schools is quite low.
5. Low Government Expenditure on Education: The Government of India is not spending
much on education. The amount spent should be as equivalent to the population rise ratio ,
so that per head availability of resources increases.
6. Privatisation of Education is very Expensive: In the modern era education like all other
sectors is privatised, which is not affordable by all income groups. This creates divide.
‰ Right to Education (RTE): In the year 2009 the government of India has brought about on Act,
called RTE. It promises education to all. It makes free education a fundamental right of all children
in the age group of 6-14 years.
‰ Important Fact: The education commission (1964-66) had recommended that at least 6% of GDP
to be spent on education so as to make a noticeable rate of growth in education.
‰ Education Sector in India:
1. Elementary education
2. Secondary and Senior Secondary education.
3. Higher Education.
1. Elementary education:
(a) Elementary education covers students from class 1 to class 8 (primary and middle) in
the age – group of 6 to 14 years. The number of primary and middle schools has
considerably increased from 2.23 lakhs. Near about 97% children in the age group of
6-14 years have been receiving education in schools.
(b) Various policies such as Sarva Shiksha Abhiyan, Mid-day meal Scheme, district primary
education programme, right to education have been playing major role in enhancing
primary education in India.

Human Capital Formation 37

 2. Secondary and Senior Secondary education: At central level, Navodaya Schools and Kendriya
Vidyalayas are playing 2 vital role in promoting education at this level.
3. Higher Education:
(a) As per a survey in India near about 665 universities are importing education at higher
level and number of colleges importing general education is 35829.
(b) Number of students getting higher education is about 130 lakhs.
(c) In this, polytechnic institutions, engineering colleges, medical colleges, research centres
like IIT, agriculture research institute. India statistical institute, IIM etc. are playing
prominent roles
‰ Human Capital Formation in India:
1. The seventh five year plan stressed upon the importance of human capital.
2. In India, ministry of education at the centre and state level, NCERT (National council of
educational Research and training), UGC (University Grant Commission), AICTE (All India
Council of Technical Education) regulate the education sector.
3. In India, ministry of health at the union and the state level and ICMR (Indian Council of medical
Research) regulate the health sector
4. World Bank states that India will become the knowledge economy.
‰ Interrelation between Human Capital Formation and Economic Growth: Human capital
formation raises the process of Economic Growth and economic growth raises the process of
human capital formation.
Basis of Difference Human Capital Human Development
Concept Human capital is a comparatively Human development is a comparatively
narrow concept broader concept
Central theme It considers that health and It considers that health and education
education are the best means to help in the overall development of the
improve the productivity of the individual, as a healthy life
labour force
Welfare In case of human capital, health Human development considers that
and education are not useful human welfare incresed by having good
as long as they do not result in health and proper education even if they
improved productivity do not result in any improvements in
productivity

38 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS

1. Five-year plan recognized the importance of 7. What is the full form of ICMR?
Human Capital (KV SQP 2021-22)  (SQP 2020-21)
(a) Seventh (b) Third (a) International Council of Medical Research
(c) Eight (d) Sixth (b) India Council of Medical Resources
(c) International Council of Medical Resources
2. India, which of the following organizations
(d) Indian Council for Medical Research
regulate the health sector?
8. Which one of the following is not a problem
 (CBSE SQP 2020-21)
of Human Capital formation in India? (Choose
(a) ICMR (b) UGC the correct alternative)
(c) AICTE (d) None of these  (CBSE SQP 2021-22)
3. In the year Indian Government made free and (a) Low academic standard
compulsory education for age group of 16 to (b) Low Savings
14 years? (CBSE SQP 2020-21) (c) Rising Population
(a) 2001 (b) 2009 (d) Lack of proper man power planning
(c) 2003 (d) 2007 9. Read the following statement- Assertion (A)
and reasons (R). Choose one of the correct
4. Which one of the following is a reason for alternatives given below:
poor human capital formation in India? Assertion (A): People migrate in search of
 (SQP 2021-22) jobs that fetch them higher salaries than what
(a) Brain drain they may get in their native places.
(b) Insufficient resources Reason (R): Technically qualified persons,
like engineers and doctors, migrate to
(c) High Growth of Population
othercountries. (CBSE SQP 2021-22)
(d) All of these Alternatives:
5. Which of the following is not a source of (a) Both assertion (A) and reason (R) are
Human Capital Formation? true and reasons (R) is the correct
 (KV SQP 2022-23) explanation of assertion (A).
(a) Expenditure on Infrastructure (b) Both assertion and reason are true and
reason (R) is not the correct explanation
(b) Expenditure on Education
of assertion (A).
(c) Expenditure on On-the-job training (c) Assertion (A) is true but reason (R) is
(d) Expenditure on Migration false.
6. ________ refers to the stock of skill, ability, (d) Assertion (A) is false but reason (R) is
expertise, education and knowledge embodied true.

in the people. (KV SQP 2021-22) 10. Following information is not collected by
spending on information. (SQP 2021-22)
(a) Human Resource
(a) Level of salaries
(b) Physical Capital
(b) Educational institutions
(c) Human Capital (c) Types of skills taught
(d) None of these (d) Number of hospitals

Human Capital Formation 39

11. It refers to the process of creating an
environment in which people can enjoy long,
healthy and creative lives. (Choose the
correct alternative) (CBSE SQP 2020-21)
(a) Economic growth
(b) Human capital
(c) Higher production
(d) Human development
12. Read the following statement: Assertion (A)
and reasons (R). Choose one of the correct
alternatives given below:
Assertion (A): Expenditures on education
and health make substantial long-term
impact and they cannot be easily reversed.
SUBJECTIVE TYPE QUESTIONS
1. Name the two government organizations that
regulate the Health and Education sector.
 (SQP 2020-21)
2. What is the difference between Human
Capital and Human Development?
 (KV SQP 2020-21)
3. How Education contributes to economic
growth of a country? (KV SQP 2021-22)
Answers
1. (a) 2. (a) 3. (b) 4. (d) 5. (a)
11. (d) 12. (a)
40 Indian Economic Development PW
Reason (R): Government intervention is
essential in expenditures on education and
health. (CBSE SQP 2021-22)
Alternatives:
(a) Both assertion (A) and reason (R) are
true and reasons (R) is the correct
explanation of assertion (A).
(b) Both assertion and reason are true and
reason (R) is not the correct explanation
of assertion (A).
(c) Assertion (A) is true but reason (R) is
false.
(d) Assertion (A) is false but reason (R) is
true.
4. What is the difference between Physical
Capital and Human Capital?
 (KV SQP 2020-21)
5. Why is the need for on-job-training for a
person? (CBSE SQP 2020-21)
6. What are the differences between human
capital and human development?
6. (c) 7. (d) 8. (b) 9. (a) 10. (d)
 Solutions

SUBJECTIVE TYPE QUESTIONS

1. Health Sector: (vi) It facilitates adaptation of new technol-
(i) Ministries of Health at the Central and at ogies.
State level. 4. Physical Capital:
(ii) Indian Council for Medical Research (i) It can be easily sold in the market.
(ICMR). (ii) It depreciates with the passage of time.
Education Sector: (iii) It is more mobile between countries.
(i) Ministries of Education at the Union and (iv) It can be separated from its owner.
State level. (v) It can be built through imports.
(ii) National Council of Educational Research Human Capital:
and Training (NCERT). (i) It cannot be sold in market.
2. Human Capital Vs Human Development: (ii) Depreciation in Human Capital can be
reduced by making.
(i) It considers education and health as a
(iii) Continuous investments in education and
means to increase the labour productivity. health.
(ii) Human Capital treats human beings as a (iv) It is less mobile between countries.
means to increase in productivity. (v) It cannot be separated from the owner.
Human Development: (vi) Human Capital formation is to be done
(i) According to human development, through conscious policy formulations.
education and health are integral to 5. On job training is required for the
human well-being. following reasons.
(ii) Human beings ends in themselves. (i) Such training has the advantage that it can
3. (i) Education confers higher earning be provided fast and without much cost.
capacity on people. (ii) It increases the skill and efficiency of the
(ii) It gives better social standing and pride. workers.
(iii) It enables one to make better choices in (iii) It increases the Production and Produc-
tivity of the workers.
life.
(iv) Workers may be trained in the firm itself
(iv) It provides knowledge to understand the under supervision of a skilled worker.
changes taking place in society.
(v) Workers may be sent for off-campus
(v) It also stimulates innovations. training.
6.
Basis Human Capital Human Development
Concept It is a narrow concept. It is a broader concept.
Means of It considers education It considers that education and health are integral to
productivity and health as a means human well being because only when people have the
to increase labjojux ability to read and write and the ability to lead a long
productivity. and healthy life, they will be able to make other choices
they value.

Human Capital Formation 41

 CHAPTER SUMMARY AND GLOSSARY
U Human Capital: Refers to the stock of
skill, ability, expertise, education, & knowledge
embodied in the people/human being of a nation
at a point in time.
U Human capital formation is a process of acquiring
& increasing the number of skilled, educated, &
experienced people who are important for the
economic, social, & political development of
the country.
U Physical capital: refers to man-made means of
production or all those inputs which are required
for production like machines, buildings, etc.
Sources of Human capital formation
U Expenditure on Education
U Expenditure on Health
U Expenditure on the Job Training
U Expenditure on Migration
U Expenditure on acquiring information
Education Sector in India
U Elementary education
U Secondary and senior secondary education
U Higher education
Importance and objectives of education
U Education produces good citizens.
U Education facilitates use of resources in the country.
U Develops science and technology.
U Expands mental horizon of the people.
U Promotes cultural standard of the citizens.
U Develops human personality.
42 Indian Economic Development PW
Eduction
It implies the process of teaching, training & learning
especially in schools, colleges, to improve knowledge and
develop skills
Importance and objectives of education
U Education produces good citizens.
U Education facilitates use of resources in the
country.
U Develops science and technology.
U Expands mental horizon of the people.
U Promotes cultural standard of the citizens.
U Develops human personality.
Role of human capital formation
U Raises production
U Change in emotional and physical
environment of growth.
U Improves quality of life
Human Capital U Raises life expectancy
Formation U Innovative skills.
U Raises social justice and equality
Problems related to human capital formation
U Rising population
U High regional and gender inequality.
U Brain drain
U Insufficient man power planning.
U Insufficient on the job training in agriculture
U High poverty levels
U Low academic standards
Problems relating to development of education in India
U Large number of illiterates.
U Inadequate vocationalisation.
U Gender bias.
U Low rural access level.
U Low government expenditure on education.

 CHAPTER

5 Rural Development

TOPICS TO BE COVERED
‰ Credit in Rural Area
‰ Agricultural Marketing
‰ Diversification in Agriculture
‰ Organic Farming
‰ Golden Revolution
‰ Operation Flood

‰ Rural Development: Rural development is a process of social and economic development of the
people living in village areas.
‰ Key Issues:
1. Infrastructure
2. Poverty
3. Land reforms
4. Development of productive resource of each locality
5. Development of human resources like health, addressing both sanitation and public health
6. Development of human resource including literacy, education, and skill development

CREDIT IN RURAL AREA

Rural credit means loan or financial assistance that is taken by the people residing in the rural areas
for the purpose of agriculture or setting up small businesses.
‰ Sources of Rural Credit in India:
1. Non-Institutional Sources: Non-Institutional sources are money lenders, traders and
commission agents, landlords, relatives and friends.
2. Institutional Sources: Institutional sources are those financial institutions which work under
the guidelines of government and RBI and provide short term, medium term and long term
loans to the farmer in urban, rural and remote areas. These institutions charge a minimum
rate of interest from the farmers. Following are some examples of institutional sources.
1. Co-operative credit societies
2. Commercial Banks
3. Land development Banks
4. Regional Rural Banks
5. NABARD (National bank for Agriculture and Rural Development)
6. Self help groups (SHGs)
7. The Government
 In order to provide term loan for agricultural needs of the farmers, Indian banks
introduced Kisan Credit Card (KCC) scheme in August 1998. The model of KCC scheme
was prepared by NABARD (National Bank for Agriculture and Rural Development).
‰ Micro Credit Programmes:
1. National Bank for agriculture and rural development (NABARD): NABARD is an apex
institution entrusted with all matters concerning policy, planning and operation in the field
of rural credit and related economic activities.
Its main functions are:
(i) To serve as an apex funding agency for the institution providing credit in rural areas.
(ii) To take appropriate measures to improve the credit delivery system. The bank was to
focus on restricting credit institutions and training of personnel.
2. Regional Rural Banks (RRBs): are an important source of institutional credit in rural areas.
They were established in 1975. They are opened up in areas where there are no banking
facilities. Their main objective is to provide credit and their facilities, especially to small and
marginal farmers, agriculture labourers, artisans and small entrepreneurs in rural areas.
‰ Critical Appraisal of Rural Banking:
1. Insufficient Volume of Credit: The volume of credit provided to these institutions is not
sufficient to meet the requirements of all marginal and poor class farmers.
2. Inadequate Coverage of Institutional Sources: These institutional sources are not spread
all over the rural regions so due to inadequate coverage the needs of the farmers are not met
properly.
3. Inadequate Amount of Sanction: The amount of loan applied by the farmers and the amount
of loan sanctioned makes a big difference. Sanctioned amount used to be quite less, and that
could not help the farmers that much.
4. Less Attention to Poor or Marginal Farmers: Benefits of all the credit schemes were taken
by big farmers only. Poor and marginal farmers could not take the advantage because they
were not having anything to mortgage.
5. Growing Over-dues: Due to poor production or due to poor weather the farmers couldn’t
pay back the loan this led to increase in the over dues, which intends to increase the liability
of farmers.

Types of Rural Credit

According to Time According to Purpose

According to Time

Short Term Credit Medium term Credit Long term Credit

44 Indian Economic Development PW

‰ Short Term Credit: They are required to meet short-term needs or to purchase inputs like seeds,
tools, fertilizers, payment of wages, payment of electricity bill etc. These loans are for 6-12 months
and are generally payable after harvesting and marketing.
‰ Medium Term Credit: These are required to meet medium term needs or for purchasing
machinery, constructing fences, digging wells, purchasing animals and pump sets, constructing
cattle sheds etc. These loans are generally for about one year to five years.
‰ Long Term Credit: These are required to meet the long-term needs like for making permanent
improvements, purchasing additional land, for purchasing tractor and heavy machinery etc. The
duration of these loans is generally about 5 years to 20 years.
According to Purpose

Productive Credit Unproductive Credit

‰ Productive Credit: These are required to meet production needs/purposes or for purchasing
seeds, tools, fertilizers, payment of wages, payment of electricity bill, machinery, constructing a
fence, digging well, purchasing animals and sets, constructing cattle sheds, making permanent
improvement for purchasing additional land for, purchasing tractors and heavy machinery etc.
‰ Unproductive Credit: These are required to meet unproductive needs/purpose or consumption
expenditure like marriage and other social and religious functions.

AGRICULTURAL MARKETING
Agricultural Marketing covers the service involved in moving an agricultural product from the farm
to the consumer.
‰ Defects of Agriculture Marketing:
1. Inadequate warehouses: Lack of storage facilities for the farmers is the major defect of
agriculture marketing system in India, due to which farmers sell their product even at low prices.
2. Multiplicity of middlemen: Middleman charges commission for their services and multiplicity
of middlemen reduces the income of the farmer.
3. Malpractice in unregulated markets: Malpractices in unregulated markets like lack of
proper weighing machines and grading scales often offer poor prices to the farmers.
4. Inadequate means of transport and communication: Due to lack of transportation facilities
farmers used to sell their output to the middleman at lower prices than market price. And
due to poor communication they didn’t even get to know the prevailing market prices.
Distress Sale: It refers to a situation where farmers are compelled to sell their produce
immediately after the harvest at a very poor price. Farmers do this because of many reasons
like lack of warehouse facilities and because of poverty etc.
‰ Measures Adopted by the Government to Improve Marketing System:
1. Regulated Market: The government came up with the concept of a regulated market where
the sale and purchase of goods are monitored by the market committee. This market committee
consists of farmers, government agents and traders. This infuses greater transparency in the
marketing system through the use of proper scales and weights such committees ensure the
farmers and the consumers receive fair price in exchange of their products.

Rural Development 45
 2. Infrastructure Development: The present infrastructure is not sufficient to meet the growing
demands of the farmers. The government of India has provided cold storages and warehouses
that help the farmers to sell their product at the time when the price is attractive. Also, railways
offer subsidised transport facilities to the farmers. This enables the farmers to bring their
product to urban areas where they can earn huge profits.
3. Co-operative Agricultural Marketing Societies: The government also started co-operative
marketing under which the farmer gets access to fair prices. This is due to the better and
enhanced bargaining power of the farmers via collective sale in the market.
4. Policy Instruments:
(i) MSP: Minimum support price. It is a minimum legislated price that a farmer may charge
in exchange for his products. This enables them to sell their products in the open market
at a higher price. The MSP insulates the farmers in case of price fall as this is the minimum
price that they can receive. Due to uncertainties faced by the farmers, the need of such
assurance to them is of immense importance.
(ii) Public Distribution System (PDS): Public distribution system is that system under
which the government distributes basic food items to the yellow card holders at
subsidised rates. These are also known as fare price shops. The surplus output bought
from the farmers is kept in PDS for distribution.
Examples of Alternative Agricultural Marketing are:
‰ Apni Mandi in states like Punjab, Haryana and Rajasthan.
‰ Hadaspar Mandi in Pune.
‰ Rythu Bazars in Andhra Pradesh, Uzhavar Sandies in Tamil Nadu.
‰ Another alternative channel for agricultural marketing is the contract of direct sales between
the farmers and the national and international companies.

‰ Kudumbashree was established in 1997 in Kerala, aiming at eradicating poverty and empowering
women following the recommendations of a government-appointed task force.
‰ The mission was launched with the support of the Government of India and NABARD (National
Bank for Agriculture and Rural Development).
‰ Kudumbashree meaning ‘prosperity of the family’ in the Malayalam language and therefore
focuses on poverty alleviation and women empowerment, promoting democratic leadership
and provides support structures within the “Kudumbashree family”.

DIVERSIFICATION IN AGRICULTURE
It refers to either a change in cropping pattern or the farmers opting for other non-farming options like
poultry farming, animal husbandry etc.
‰ Diversification of Crop Production: It refers to a system of multiple cropping rather than mono
cropping. It may also mean a shift from subsistence farming to commercial farming.
‰ Advantages:
1. It lowers the risk of farmers on account of failure of monsoon.
2. It enhances the scope for commercialisation of farming.
3. Minimise the market risk arising due to price fluctuation.

46 Indian Economic Development PW

‰ Diversification of Production Activities: It implies a shift from crop farming to non-farming
areas of employment. Non-farm areas of employment include.
1. Animal Husbandry: It is one of the alternative channels of Earning their living which is
concerned with animals that are raised for meat, fibre, milk, silk and other dairy products.
2. Fisheries: This includes harvesting fishes and other aquatic animals to earn a living. This
production activity can be done only near the coastal areas.
3. Horticulture: This includes the production of fruits and vegetables at large scale. It has
become a greater source of earnings for the farmers nowadays producing a variety of vegetables
and fruits.
4. Cottage and Household Industry: These are the industries that are run by the households
with minimum investment at their backyards and providing employment by using labour
intensive techniques.
5. Information Technology: every village has a knowledge centre that helps and guides the
farmer regarding diversification of production activities and Alternative channels of earning.
Extra Knowledge
Tamil Nadu women in Agriculture (TANWA): TANWA is a project launched in Tamil Nadu
with a view to training women in diverse techniques of farming. This project was started
in the late 1980s.

ORGANIC FARMING
It refers to the form of agriculture using organic manure instead of chemical fertilisers and pesticides.
‰ Benefits of Organic Farming:
1. Economic Farming: It uses locally made cheaper inputs. It is not costly because it avoids the
uses of expensive chemicals and HYV seeds.
2. Healthier and Tastier food: It provides the food with high nutritional value than the food
growing through conventional farming.
3. Eco-Friendly Farming: Organic farming is pesticide free and does not create any air and land
pollution.
4. Generate Income through Exports: It is a good source of earning. There is a large export
demand for organic food world wide.
5. Generate Employment: It requires more labour than conventional farming. So it is a good
source of employment in rural areas.
‰ Organic Farming Suffers from the following Limitations:
1. Organic farming offers less yield than conventional farming. Therefore, the productivity of
organic farming is lower than that of the conventional farming.
2. Organic products are sooner perishable.

GOLDEN REVOLUTION
The period between 1991-2003 is called ‘Golden Revolution’. India has emerged as a world’s leading
country in producing a variety of fruits like mangoes, bananas, coconuts, cashew, nuts and a number
of spices and is the second largest producer of fruits and vegetables.

Rural Development 47
OPERATION FLOOD
Operation Flood was launched to help farmers direct their own development. It has placed the control
of the resources they create in their own hands. The Operation flood, also known as white Revolution
in India, was launched in the 1970s to make India self dependent in milk production. Dr. Verghese
Kurien is known as the Father of the white Revolution in India. White Revolution is associated with an
increase in the milk production. Operation flood has helped dairy farmers direct their own development,
placing control of the resources they create in their own hands.

Q. Give three sources that collect data on unemployment.

Ans.
(a) Reports of census of India.
(b) National sample survey organization reports of employment and unemployment situation
and.
(c) Directorate general of employment and training - data of registration with employment
exchange.

48 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS
1. Why is the minimum support price fixed by
the government? (KV SQP 2020-21)
(a) For government own benefit
(b) To safeguard the interest of farmers
(c) To safeguard the interest of consumers
(d) None of these
2. ______ is the apex body which coordinates the
functioning of different financial institutions
working for expansion of rural credit.
 (CBSE SQP 2021-22)
(a) NABARD
(b) Self-Help Groups
(c) Regional Rural Banks
(d) Commercial Banks
3. Organic Farming is beneficial because:
 (SQP 2022-23)
(a) It generates income through international
exports.
(b) It is produced in an environmentally
sustainable way.
(c) It provides healthy food.
(d) All of these
4. The scheme of “Micro Finance” is extended
through: (KV SQP 2020-21)
(a) Self-Help Groups
(b) Land Development Banks
(c) NABARD
(d) Regional Rural Banks
5. Which one of the following is not a non-
institutional source of credit?
 (CBSE SQP 2021-22)
(a) Money lenders
(b) Relatives
(c) Traders and commission agents
(d) Land development bank
6. Name the state which is held as a success
story in the efficient implementation of milk
cooperatives (SQP 2022-23)
(a) Maharashtra
(b) Jammu and Kashmir
(c) Gujarat
(d) Andhra Pradesh
7. National Bank for Agriculture and Rural
Development was set up in which year?
 (SQP 2022-23)
(a) 1981
(b) 1982
(c) 1984
(d) 1986
8. Which of the following is not a part of
agricultural marketing?
 (CBSE SQP 2021-22)
(a) Storage
(b) Cultivation
(c) Gathering
(d) Processing
9. Given below are 2 statements: Assertion (A)
and Reason (R). Choose the correct alternative.
 (KV SQP 2022-23)
Assertion (A): Change in cropping pattern
is a form of Diversification of farm activities.
Reason (R): Most agricultural activities are
seasonal in nature.
Alternatives:
(a) Both (A) and (R) are true and (R) is correct
explanation for (A).
(b) Both (A) and (R) are true and (R) is not
the correct explanation for (A).
(c) (A) is true and (R) are false.
(d) (A) is false and (R) is true.

Rural Development 49
 TRUE/FALSE
10. Diversification of crop production increases market risks. 
SUBJECTIVE TYPE QUESTIONS
1. Name the alternate marketing channels.
 (KV SQP 2022-23)
2. What are the policy instruments initiated by
the government to protect the farmer’s
interests? (SQP 2021-22)
Answers
1. (b) 2. (a) 3. (a) 4. (a) 5. (d)
10. False
Solutions
SUBJECTIVE TYPE QUESTIONS
1. The concept of “Farmers Market” was
started, to give a boost to the small farmers
by providing them direct access to the
consumers and eliminating the middlemen.
Some Examples of these Channels:
 Apni Mandi in Punjab, Haryana and
Rajasthan
 Hadaspar Mandi in Pune
 Rythu bazars in Andhra Pradesh
 Uzhavar Sandies in Tamil Nadu
2. These below 3 instruments initiated by
the government: Minimum Support Price
(MSP) It is a minimum legislated price that
a farmer may charge in exchange for his
products. This enables them to sell their
products in the open market at a higher
price. The MSP insulates the farmers in case
50 Indian Economic Development PW
(KV SQP 2022-23)
3. What are the measures taken by the
government to improve agriculture marketing?
 (CBSE SQP 2022-23)
4. Define Agricultural Marketing and what
are the problems faced by the farmers?
6. (c) 7. (b) 8. (b) 9. (b)
of price fall as this is the minimum price that
they can receive. Due to uncertainties faced
by the farmers, the need of such assurance
to them is of immense importance.
Maintenance of buffer stocks: Buffer stocks
are maintained by the food corporation of
India. During the year of surplus production
the government used to purchase all the
surplus output left with the farmers after
selling in the market. This output is stored in
the buffer stocks which is used for the at the
time of need or emergency and it also ensures
uninterrupted supply of food grains. This also
helps those farmers who are not able to sell
their entire output in the market.
Public Distribution System (PDS): Public
distribution system is that system under
which the government distributes basic food
 items to the yellow card holders at subsidised
rates. These are also known as fare price
shops. The surplus output bought from the
farmers is kept in PDS for distribution.
3. Measures adopted by the government to
improve marketing system:
(i) Regulated Market: The government
came up with the concept of a regulated
market where the sale and purchase of
goods are monitored by the market
committee. This market committee
consists of farmers, government agents
and traders. This infuses greater
transparency in the marketing system
through the use of proper scales and
weights such committees ensure the
farmers and the consumers receive fair
price in exchange of their products.
(ii) Infrastructure Development: The
present infrastructure is not sufficient to
meet the growing demands of the
farmers. The government of India has
provided cold storages and warehouses
that help the farmers to sell their product
at the time when the price is attractive.
Also, railways offer subsidised transport
facilities to the farmers. This enables the
farmers to bring their product to urban
areas where they can earn huge profits.
(iii) Co-operative Agricultural Marketing
Societies: The government also started
co-operative marketing under which the
farmer gets access to fair prices. This is
due to the better and enhanced bargaining
power of the farmers via collective sale
in the market.
4. Agricultural Marketing: It is a process that
involves assembling, storage, processing,
transportation, packaging, grading and
distribution of different agricultural
commodities across the country.
Problems faced by the farmers:
 Inadequate warehouses: Lack of storage
facilities for the farmers is the major
defect of agriculture marketing system in
India, due to which farmers sell their
product even at low prices.
 Multiplicity of middlemen: Middlemen
charge commission for their services and
multiplicity of middlemen reduces the
income of the farmer.
 Malpractice in unregulated markets:
Malpractices in unregulated markets like
lack of proper weighing machines and
grading scales often offer poor prices to
the farmers.
 Inadequate means of transport and
communication: Due to lack of transpor-
tation facilities farmers used to sell their
output to the middleman at lower prices
than market price. And due to poor com-
munication, they didn’t even get to know
the prevailing market prices.
Rural Development 51
 CHAPTER SUMMARY AND GLOSSARY
Rural Credit
Rural credit refers to any kind of loan or financial assistance
that is taken by the people residing in the rural areas for the
purpose of agriculture or setting up small businesses.
Sources of Rural Credit
U Non-institutional sources
U Institutional sources
• Co-operative credit societies
• State Bank of India
• Regional Rural Bank
• National Bank for Agriculture and Rural Development
(NABARD)
Types of rural credit (According to time)
U Short Term Credit: Generally stretches over a period of 6
to 12 months.
U Medium Term Credit: Generally stretch over a period of 12
months to 5 years
U Long Term Credit: Period of such loan ranges between 5
to 20 years
Golden Revolution
U The period between 1991-2003 is called
‘Golden Revolution’.
U India has emerged as a world leader in
producing a variety of fruits, like mangoes,
bananas, coconuts, cashew, nuts and a number
of species and is the second largest producer
of fruits and vegetables.
Diversification in Agriculture
It refers to the either a change in cropping pattern or
the farmers opting for other non-farming options like
poultry farming, animal husbandry etc.
Aspects of agricultural activities.
Diversification of crop production: System of multiple
cropping rather than mono cropping. It may also mean
a shift from subsistence farming to commercial farming.
Diversification of production activities: It imply a shift
from crops farming to non-farming areas of employment.
Non farm areas of employment includes
U Animal Husbandry
U Fisheries
U Horticulture
U Cottage and Household industries
U Information technology-every village a knowledge
Centre
52 Indian Economic Development PW
Key issues of action plan for rural
development
Development of infrastructure, Human capital
formation, Development of productive resources,
Poverty alleviation, Land reforms.
Agricultural Marketing
It covers the service involves in moving an
agricultural product from the farm to the
consumer.
Defects of agricultural marketing
Inadequate warehouses, Multiplicity of
middlemen, Malpractice in unregulated
markets, Lack of adequate finance, Inadequate
means of transport and communication.
Rural
Development Operation Flood
U The Operation Flood, also known as
White Revolution in India was launched
in 1970s to make India self dependent in
milk production.
U Dr Verghese Kurien is known as the father
of The White Revolution in India
Measure adopted by the government to
improve marketing system
Regulated Market, Infrastructure Development,
Co-operative Agricultural Marketing Societies,
Policy instruments
Micro Credit Programmes
U National Bank for Agriculture and Rural
U Development [NABARD]
U Regional rural banks [RRBs]
U Tamil Nadu women in Agriculture
[TANWA]

 CHAPTER
Employment-Growth,
6 Informalisation and
Other Issues

TOPICS TO BE COVERED
‰ Meaning of Worker
‰ Informalisation of Workforce
‰ Types of unemployment
‰ Causes of Unemployment
‰ Remedial Measures for Unemployment
‰ Role of Government to Reduce Unemployment

‰ Labour Force: It is a currently active population; it is the sum of people who are employed and
unemployed.
‰ Work Force: It is a part of the population that is actually employed.
‰ Worker – Population Ratio:
Total number of worker
It can be calculated by: × 100
Population
Worker population ratio is an important indicator of the employment situation in an economy.
This is the ratio of workers to total population.
‰ Rate of Unemployment: The unemployment rate is defined as the percentage of unemployed
workers in the total labour force.
No. of Unemployed Person
Calculated as: × 100
Labourforce

MEANING OF WORKER
Worker is a person who is busy performing any economic activity. In other words, a worker is
regarded as an economic agent who contributes to the production of goods and services, thereby,
to the GDP during a particular year.
Q. Are the following workers – A Beggar, A Thief, A smuggler, A Gambler? Why?
Ans. No beggar, thief, smuggler, or gambler cannot be called a worker. A worker is involved in
production activity that contributes to the GDP of a country. As none of them are involved
in any legal economic production activity that contributes to the GDP of the country. Hence,
none of them can be treated as a worker.
‰ Types of Worker:
 Self-Employed: They are the workers who operate their own enterprise and earn profits in
return.
 Casual Worker: They are the workers who are
Types of Workers
casually engaged and get wages for the work
done.
 Regular – Salaried Employees: They are the
Hired Worker Self Employed
workers who are employed by someone and
get wages on a regular basis.
 Formal Sector Employment: It refers to the Casual Worker
enterprise where at least 10 workers are
employed. Employees working in this sector Regular Worker
enjoy social security benefits like provident
fund, gratuity etc. They are also known as
organised sectors. Formal Sector workers account for just 6% of the total workforce in India.
 Informal Sector employment: It refers to the
enterprise where less than 10 workers are Employment Sector
employed. Employees working in this sector don’t
enjoy such social security benefits. No trade union
exists for the employees working in the informal Informal Sector Formal Sector
sector. It is also known as the unorganised sector.
Informal sector employment accounts for approx.
94% of the total workforce.

INFORMALISATION OF WORKFORCE
It refers to the percentage of the workforce in the informal sector to total workforce increases.
 Informalisation of Indian Workforce: Workers and enterprises in the informal sector do not
get regular income. These do not have protection or regulation from the government. Workers
are dismissed without any compensation. Technology used in this sector is outdated. They also
do not maintain any accounts. Workers of this sector live in slums and are squatters.
 Casualisation of Workforce: The process of moving from self-employed and regular salaried
work to casual wages work is known as casualization of the workforce.
‰ Jobless Growth: It is defined as a situation where GDP grows faster than the employment
opportunities resulting in unemployment.

TYPES OF UNEMPLOYMENT
‰ Disguised/Hidden Unemployment: It is found when more than the desired number of workers
are engaged in a work such
that marginal productivity Type of Unemploment in India
of many workers edges
toward zero. It is most
commonly seen in the Disguised Seasonal Open
agriculture sector. Unemployment Unemployment Unemployment

54 Indian Economic Development PW

‰ Seasonal Unemployment: It refers to the unemployment that occurs at a certain season of the year.
‰ Open Unemployment: People do not get work when they are able to do so and are also willing
to do so. Such an unemployment situation is clearly seen in big cities.

CAUSES OF UNEMPLOYMENT
1. Slow speed of economic growth: The role of economic growth in generating employment
is very crucial and the current growth rate Could not provide sufficient job opportunities,
causing unemployment.
2. Fast speed of population growth: India’s population is increasing at a rapid rate and India’s
population is on track to exceed that of China by year 2024 making it most populous country
in the 21st century. The imbalance between economic growth rate and population growth
rate results in A larger percentage of population being unemployed.
3. Defective educational system: The education system in India provides degree oriented
education, not knowledge oriented. This results in large number of educated people
unemployed.
4. Low capital formation: India faces the problem of shortage of capital and low rates of saving
and investment. Lack of Investment opportunities also creates these problems. Investment relies
on savings, which remains insufficient to create new job opportunities and stimulate growth.
5. Slow growth of Agriculture: In India, Agriculture is the main source of occupation but
agriculture provides only seasonal occupation. This seasonal nature of agricultural work
leaves many laborers unemployed.
6. Slow growth of the Industry: Slow growth of the industrial sector is also one of the leading
reasons for unemployment. Our country is facing loss of small scale and cottage industries
and rise of large scale industries. Large scale industries using updated modern technology
uses capital intensive technique on the other hand small scale and cottage industries are
labour intensive in nature.
7. Inadequate economic planning: The absence of comprehensive national plans to bridge
the gaps of labor supply and labor demand also leads to unemployment. More introduction
and development of large scale industries also lead to less rate of employment.

REMEDIAL MEASURES FOR UNEMPLOYMENT

1. Control on population growth: India should take some remedial actions to control population
growth like China. Control in population growth rate will help to raise per head availability
of resources which will lead to overall growth
2. Creation of employment opportunities: Economic planning should be in such a way that
it should create more and more employment opportunities. This can be done by comprehensive
planning at central level.
3. Reform of educational system and skill growth: Revamp the education system to align
with the demand of the job market. India should introduce vocational courses at the early age
of school education which will increase the skills and will help to provide job

Employment-Growth, Informalisation and Other Issues 55

 4. Development of the Industrial sector: Industrial sector leads when we count for employment
opportunities. More emphasis should be laid on the development of industries which can
provide employment by using a large man force. Development of industries in the rural areas
should be encouraged by the government.
5. Development of the Agriculture Sector: Like all other sectors, the Agriculture sector should
also be given special attention. Farmers should be given special education relating to their
productive activities and non farm jobs. They should be taught multiple cropping so that the
farmers may remain employed throughout the year.

ROLE OF GOVERNMENT TO REDUCE UNEMPLOYMENT

Direct Measures:

1. D i r e c t R e c r u i t m e n t i n P S U s :
Government Measures to
Government gives or provides jobs to Reduce Unemployment
unemployed people in PSUs.
Example: BHEL, NTPC, NNPC, SAIL,
GAIL, BPCL, Indian oil etc. Direct Measures Indirect Measures
 Indirect Measures:
1. Purchase of goods and services in the open market: Government purchases some
goods and services from the market instead of producing them on their own.
Example: Stationary Products, Food services etc.
2. Employment generation Programmes:
(a) Mahatma Gandhi National Rural employment Guarantee Act (MNREGA):
Mahatma Gandhi National Rural Employment Guarantee Act 2000 earlier known as
National Rural Employment Guarantee Act (NAREGA) is an Indian social welfare
measure that aims to guarantee the right to work. It aims to provide at least 100
days of wage employment in a financial year at least to one member of every
household.
(b) Prime minister Rojgar Yojna.
(c) Swarna Jayanti Shahri Rojgar Yojna.
(d) Swarna Jayanti Gram Swarojgar Yojna.

56 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS
1. Most of the disguised unemployed persons (c) Seasonal unemployment
in India are found in: (CBSE SQP 2018-19) (d) Structural unemployment
(a) Agriculture (b) Industry 7. Jobless growth leads to unemployment
(c) Trade (d) Transport because: (KVS SQP 2018-19)
2. Unemployment refers to people: (a) Labour refuses to migrate
 (CBSE SQP 2018-19)
(b) Labour is very expensive
(a) Who are not willing to work
(c) GDP growth is slow
(b) Who are willing but not get work
(d) Growth is due to technology
(c) Who leave their jobs in search of better
ones 8. Krishna has his own -land on which he grows
only one crop in a year. He works only for 5 to
(d) Who have been dismissed because of
incorrect practice 7 months in a year. The kind of unemployment
he faces in the remaining parts of years is
3. The major cause of unemployment in India
called. (KVS SQP 2022-23)
can be classified as: (CBSE SQP 2019-20)
(a) Disguised unemployment
(a) Under development
(b) Frictional unemployment
(b) Rapid population growth
(c) Seasonal unemployment
(c) Defective planning
(d) All of these (d) Cyclic unemployment

4. Supply of labour corresponding to different 9. Unemployment is defined as:

wage rates is referred as:  (KVS SQP 2022-23)
 (CBSE SQP 2017-18) (a) The section of the population that is not
(a) Labour supply capable of being employed.
(b) Labour force (b) The section of population willing to work
(c) Participation rate but unable to find employment.
(d) Work force (c) The section of population that is waiting
5. Those who do not get any pension or gratuity to be employed.
benefits are known as:(KVS SQP 2018-19) (d) The section of population that are without
(a) Self-employed workers the skills needed by employers.
(b) Casual workers 10. The formula to calculate workforce
(c) Regular workers participation ratio is (KVS SQP 2021-22)
(d) Unemployed (a) (Workforce/Total population) × 100
6. In which type of unemployment do the (b) (Number of unemployed persons/Labour
marginal productivity of the workers is zero? force ) × 100
 (KVS SQP 2019-20) (c) Workforce + Numbers of people who are
(a) Disguised unemployment willing to work but are unemployed
(b) Involuntary unemployment (d) (Workforce/Labour force ) × 100

Employment-Growth, Informalisation and Other Issues 57

 SUBJECTIVE TYPE QUESTIONS
1. Why do we differentiate between Economic
activity and production activity?
 (KVS SQP 2022-23)
2. What do you mean by formal sector
establishment? (KVS SQP 2021-22)
3. What do you mean by Informal sector
establishment? (KVS SQP 2021-22)
4. Why are regular salaried employees more in
urban areas than in rural areas?
 (KVS SQP 2019-20)
5. How can we calculate the number of
unemployed people and employed people?
 (KVS SQP 2022-23)
Answers
1. (a) 2. (b) 3. (d) 4. (a) 5. (b)
Solutions
SUBJECTIVE TYPE QUESTIONS
1. We differentiate between Economic activity
and production activity to calculate the
number of workers. People engaged only in
production activities are to be included in the
category of workers.
2. (i) All the public enterprises and private
establishments, which employ 10 or
more hired workers are called formal
sector establishments.
(ii) They get all types of social security
benefits.
58 Indian Economic Development PW
6. Why is the worker population ratio higher in
males than in females in India?
 (KVS SQP 2020-21)
7. How are the economic activities into different
industrial divisions? (CBSE SQP 2021-22)
8. Explain various types of unemployment?
 (CBSE SQP 2021-22)
9. Do you think that the last 50 years,
Employment generated in the country is
commensurate with the growth of GDP in
India? (CBSE SQP 2021-22)
10. What activities would you suggest to generate
employment in rural areas?
 (CBSE SQP 2020-21)
6. (a) 7. (d) 8. (c) 9. (b) 10. (a)
3. (i) All those private enterprises which
hire less than 10 workers are called
Informal sectors.
(ii) Here they do not get regular income.
No protection or regulation by the
government can be dismissed at any
time. They live in slums, use outdated
technology, and do not maintain
accounts.
(iii) Eg: Workers who work in farms, owners
of Small Enterprises, Agriculture
labourers.
4. (i) Because of the availability of educational
institutions, regular salaried employees
are more in urban areas than rural areas.
As such they get better opportunities
for their skill.
(ii) Whereas, in rural areas, the majority
of the people are illiterate and lack
skills, which are needed for regular
employment.
5. Unemployed people = labour force – Work
force.
Meaning of Employment: Employment is
an activity which enables a person to earn
his living.
Total number of workers in India Working
Population Ratio
Total Number of worker
= × 100
 Population
It helps in knowing the proportion of the
population that is actively contributing to the
production of goods and services of a country.
6. According to the 1981 census, a worker is
defined as one who worked in an economic
activity over a period of six months or more.
Consequently, the worker Population ratio
among females reduced considerably.
 In India, women are discouraged to work
out of homes.
 Males have more skills than females.
It helps in knowing the proportion of the
population that is actively contributing to the
production of goods and services of a country.
7. The economic activities are distributed into
eight different industrial divisions:
(a) Agriculture
(b) Mining and quarrying
(c) Manufacturing
(d) electricity, gas and water supply
(e) construction
(f) Trade
(g) Transport and Storage
(h) Services
Employment-Growth, Informalisation and Other Issues
8. Three main types of unemployment prevailing
in our economy are
(i) Open unemployment: It refers to an able
bodied person, who is willing to work
but could not find a job at the current
wage rate, this type of unemployment
is especially seen in urban areas.
(ii) Disguised Unemployment: It is
common in rural areas in India. It refers
that even if a certain amount of labour
is withdrawn, the marginal product
remains the same. It also means that
there are more people than required.
(iii) Seasonal unemployment: It is found
mostly in rural areas because the work
in Agriculture is seasonal. When there
is no job to do on farms during off
season, rural People migrate to urban
areas in search of jobs.
9. No, In the last 50 years employment generation
in the country is not commensurate with the
growth of GDP.
(i) During the period 1950-2010, GDP of
India grew positively and was Higher
than the employment growth.
(ii) Employment growth started declining
and the gap between growth of GDP
and employment widened. It means
India has been able to produce
more number of goods and services
without corresponding increase in the
generation employment opportunities
10. (i) Employment can be generated by
developing non-farm activities like
reclamation of work, machine repairs,
rural transport services, creation of
public assets, construction etc.
(ii) Diversification of activities.
(iii) Development of village handicrafts and
cottage industries as these have a larger
potential for absorbing the labour
force.
(iv) Encouraging the informal sector.
59
 CHAPTER SUMMARY AND GLOSSARY

Meaning of Worker Work Force

Worker is a person who is busy performing any economic Work force is the part of the population that is actually employed.
Worker-population ratio
activity
U Worker population ratio is an important indicator of the
Types of Worker employment situation in an economy. This is the ratio of
Self-employed workers to total population.
They are the worker who own operates their own enterprise U It can be calculated
[52% of population]. Total Number of worker
Hired Worker Population × 100
U Casual Worker: They are worker who are casually engaged
Rate of Unemployment
and get wages for the work done [30% of population].
The unemployment rate is defined as the percentage of
U Regular-salaried employees: They are the worker who unemployed workers in the total labour force
are engaged by someone and get wages on regular basis
Unemployment Part of Population
[18% of population]. Population × 100

Labour Force
It is a currently active population, is the
sum of person who are employed and
unemployed.
Employment Sector
Formal Sector Employment: Refers to
the enterprise where at least 10 workers are
employed.
Informal Sector Employment: Refers to
the enterprise where less than 10 workers are
employed
Informalisation of Workforce: It refers to a
situation where percentage of the workforce in
the informal sector to total workforce increases.
Remedial measure for unemployment
U Accelerating economic growth
U Control on population growth
U Improvement in infrastructure facilities.
U Creation of employment opportunities.
U Reform of educational system and skill growth
U Development of industrial sector.
U Development of agriculture sector
Causes of Unemployment
U Slow speed of economic growth.
U Fast speed of population growth.
Employment: U Defective educational system.
Growth Informalisation U Low capital formation.
U Slow growth of agriculture.
and Other Issues U Slow growth of the industry.
U Inadequate employment planning
Role of Government to Reduce
Unemployment
U Direct recruitment in PSUs
U Purchase of goods and services in the open
market.
U Employment generation programmes
Jobless Growth
It is defined as a situation where GDP grow faster than the employment
opportunities resulting in unemployment
Types of Unemployment
Disguised/Hidden Unemployment: It is fond when more than the desired
number of workers are engaged in a work such that marginal productivity of
many workers edges toward zero. It is most commonly seen in agriculture
sector.
Seasonal Unemployment: Refer to the unemployment that occurs at a certain
season of the year.
Open Unemployment: People do not get work when they are able to do so and
also willing to do so. Such unemployment situation is clearly seen in big cities



60 Indian Economic Development PW

 CHAPTER
Environment and
7 Sustainable Development

TOPICS TO BE COVERED
‰ Environment
‰ Global Warming
‰ Ozone Layer Depletion
‰ Pollution
‰ Land Degradation
‰ India’s Environmental Problem Pose a Dichotomy
‰ The Supply-demand Reversal of Environmental Resources
‰ Sustainable Development

ENVIRONMENT
It refers to the total of all living things (biotic elements) and non-living things (abiotic elements)
surrounding us.
‰ Functions/Significance of Environment:
1. Provide Resources for Production: Any material gathered from the environment that is
utilized by the society is environmental resource that includes air for breathing, water, oil,
metals, land for living and farming etc.
Environmental resources can be renewable or non-renewable resources. Renewable resources
are those that can be renewed over time like water, air and light. Non-renewable resources
like petroleum found under seas and oceans are resources that will be exhausted after
continuous use. The environment continuously supplies its occupants with resources of all
kinds.
2. Environment Assimilates Waste: The environment assimilates waste that means the
environment absorbs the solid and liquid wastes created by humans and other living things.
3. Environment sustains life: The environment sustains life on earth by providing both genetic
and bio-diversities.
4. It Provides Aesthetic Services: Environment also provides aesthetic services like beautiful
scenery of forest, lands, water foils, mountains like the Himalaya ranges, lagoons, glaciers,
valleys etc.
‰ Absorptive Capacity:
1. It refers to the capacity of the environment to absorb degradation.
2. It is also known as assimilation capacity.
‰ Carrying Capacity: Carrying capacity implies two things:
1. Resource extraction should remain below the rate of resource regeneration.
2. Generation of wastes should remain within the absorption capacity of the environment.
If these two conditions are not fulfilled then an environmental crisis occurs.
Two instances of overuse of environmental resources are:
 Excess use of electricity leads to depletion of resources like coal and water from which
electricity is generated.
 Excess use of petrol and diesel in vehicles.
Two instances of misuse of environmental resources are:
 Soil degradation due to improper crop rotation and crop shifting.
 Drying up of rivers due to supply of water from them to dams and reservoirs.

‰ Major Environmental Problem:

1. Global warming
2. Ozone layer depletion
3. Pollution
4. Land degradation

GLOBAL WARMING
It refers to a gradual increase in the overall temperature of the earth’s atmosphere and oceans.
‰ Causes of Global Warming:
1. Global warming has been caused due to an increase in greenhouse gases like carbon dioxide,
methane, ozone, nitrous oxide, water vapour etc.
2. The burning of coal and petroleum also increases greenhouse gases. Animal waste also leads
due to an increase in methane gas.
3. Deforestation increases the amount of carbon dioxide in the atmosphere.
‰ Main effects of Global Warming:
1. Ice is melting worldwide. It leads to a rise in sea level and floods in the coastal area.
2. Tropical storms are becoming stronger.
3. Increase in tropical diseases like malaria, cholera, dengue, yellow fever, chikungunya etc.
4. So many species like polar bears, whales etc. are in danger of becoming extinct forever.

OZONE LAYER DEPLETION

1. It refers to the reduction in the amount of ozone in the stratosphere.
2. This problem is caused by a high level of Chlorofluorocarbons (CFCs) used in cooking substances,
in air conditioners and refrigerators or Bromofluorocarbons (BFCs) used in fire extinguishers.
3. As a result of ozone layer depletion, more UV radiation from the sun comes to the earth causing
damage to living organisms in the form of diseases like skin cancer.

62 Indian Economic Development PW

 Montreal Protocol – 1987
The Montreal Protocol, established in 1987, is an international treaty designed to protect the
ozone layer by phasing out the production and consumption of numerous substances that are
responsible for ozone depletion. India joined Montreal protocol in 1960 in London meet.

POLLUTION
The major forms of pollution are as follows:
1. Air pollution: Contamination of the air by harmful substances, such as gases, particulates, and
biological molecules. This can lead to respiratory diseases, smog, and climate change.
2. Water pollution: The contamination of water bodies, such as rivers, lakes, and oceans, by pollutants
such as chemicals, pathogens, and plastics. It affects aquatic life, ecosystems, and human health.
3. Noise Pollution: Excessive or disturbing noise that interferes with normal activities, causing
annoyance, stress, and hearing loss. It can be from sources like traffic, industrial machinery, and
loud music.
4. Land Pollution: Contamination of the land by waste products, chemicals, and other harmful
materials. This includes littering, improper disposal of waste, and soil contamination from
industrial activities. It can lead to degradation of soil fertility, loss of biodiversity, and health
hazards.
‰ The Central Pollution Control Board was set up by central government for the purpose of
controlling water pollution and air pollution. The CPCB has identified 17 categories of
industries (large and medium scale) as significantly polluting.
‰ These categories cover a range of industries such as thermal power plants, pulp and paper
industries, pharmaceutical industries, fertilizer industries, etc., which have a significant
impact on the environment.

LAND DEGRADATION
It refers to a fall in the overall health of the land including the quality of soil and water commonly
caused by human activities.
‰ Factors Responsible for Land Degradation:
1. Loss of vegetation due to deforestation: Removal of trees and vegetation cover leads to soil
erosion, loss of biodiversity, and reduced soil fertility.
2. Unsustainable fuelwood and fodder extraction: Overexploitation of natural resources for
energy and fodder can contribute to land degradation and habitat loss.
3. Shifting cultivation: Traditional agricultural practice involving the clearing of land for farming,
which can lead to soil erosion and nutrient depletion.
4. Encroachment into forest lands: Expansion of human settlements, agriculture, and
infrastructure into forested areas can degrade land and disrupt ecosystems.
5. Forest fires and overgrazing: Uncontrolled fires and excessive grazing can destroy vegetation
cover and degrade soil quality.

Environment and Sustainable Development 63

 6. Non-adoption of adequate soil conservation measures: Failure to implement erosion
control techniques and sustainable land management practices can accelerate land degradation.
7. Improper crop rotation: Single crop farming and lack of crop rotation can deplete soil
nutrients and increase vulnerability to pests and diseases.
8. Indiscriminate use of agrochemicals: Overuse of fertilizers and pesticides can contaminate
soil and water resources, leading to soil degradation and environmental pollution.
9. Improper planning and management of irrigation systems: Inefficient water management
practices can result in waterlogging, salinization, and soil erosion.
10. Extraction of groundwater beyond recharge capacity: Overexploitation of groundwater
resources can lower water tables and degrade land through subsidence and soil compaction.
11. Open access resource: Lack of regulation and management of common resources can lead
to overuse and degradation of land.
12. Poverty of agricultural community: Economic difficulties can lead to unsustainable land
use practices and degradation, as poor farmers may prioritize immediate needs over long-
term environmental sustainability.
The Appiko Movement was an Indian environmental movement that began in the Uttara Kannada
district of Karnataka in the Western Ghats in 1983. The Appiko movement was a southern version
of the Chipko movement, which began in the Garhwal Himalayan region of Uttarakhand (then
part of Uttar Pradesh) in 1973.
‰ Affluence Trap:
1. With affluence or economic well-being, more national resources are used up causing
environmental problems.
2. In the rich countries of the developed world, the high level of income is using natural resources
at a fast speed.

INDIA’S ENVIRONMENTAL PROBLEM POSE A DICHOTOMY

1. Poverty and Environmental Degradation: Many people in India, especially in rural areas, rely
directly on natural resources for their livelihoods. Poverty can drive unsustainable practices such
as overexploitation of forests for fuelwood, illegal logging, and unsustainable agriculture, leading
to deforestation, soil erosion, and loss of biodiversity. Lack of access to alternative sources of
income and inadequate environmental regulations amplify this issue.
2. Affluence and Environmental Degradation: As India’s economy grows and living standards
improve for some, there is a rise in consumption, industrialization, and urbanization. This leads
to increased pollution, resource depletion, and habitat destruction. Rapid urbanization results in
increased demand for energy, water, and land, leading to environmental degradation, air and water
pollution, and waste generation. Affluent lifestyles also contribute to higher levels of consumption
and waste production, exacerbating environmental problems.

THE SUPPLY–DEMAND REVERSAL OF ENVIRONMENTAL

RESOURCES
1. Before the advent of the industrial revolution, the rate of resource extraction was less than the
rate of regeneration of these resources. But with an expanding population and its growing needs
the demand for resources for both production and consumption needs went beyond the rate of
regeneration of the resources.

64 Indian Economic Development PW

 2. This has resulted in a reversal of supply – demand for relationships for environmental resources
as now there is very high demand for environmental resources and services but their supply is
limited due to overuse and misuse.

SUSTAINABLE DEVELOPMENT
It refers to the process of development which meets the needs of the present generation without
reducing the ability of future generations to meet their own needs.
‰ Strategies for Sustainable Development:
1. Use of Non-conventional Sources of Energy: India is hugely dependent on thermal and
hydro power plants to meet its power needs. Both of these have adverse environmental
impacts, thermal power plants emit large quantities of carbon dioxide which is a greenhouse
gas. Hydroelectric projects inundate forests and interfere with the national flow of water in
catchment areas and the river basins.
2. LPG, Gobar Gas in Rural Areas: Households in rural areas generally use wood, dung cake or
other biomass as fuel. This practice has several advance implications like deforestation
reduction in green cover, wastage cattle dung and air pollution. To rectify the situation
subsidized LPG is provided. LPG is a cleanful it reduces household pollution to a large extent.
Also, energy wastage is minimized.
3. CNG in Urban Areas: In Delhi, the use of Compressed natural gas (CNG) as fuel in public
transport system has significantly lowered air pollution and the air has become cleaner in
the last year.
4. Wind Power: In areas where wind is usually high. Windmills can provide electricity without
any adverse impact on the environment. Wind turbines move with the wind and electricity
is generated. No doubt, the initial cost is high but the benefits are such that the high costs get
easily absorbed.
5. Solar Power Through Photo Voice Cells: India is naturally endowed with a large quantity
of solar energy in the form of sunlight. We use it in different way. e.g., we use sunlight. We use
it to get the clothes, grains dried to keep our body warm in winter with the help of photovoltaic
cells. Solar energy can be converted into electricity. These cells use special kinds of materials
to capture solar energy and then convert the energy into electricity. This energy is extremely
useful for remote areas and for places where supply of power through guide or power lines
is either not possible or very costly.
6. Mini-hydel Plants: Mountainous regions, streams can be found almost everywhere. A large
percentage of such streams are perennial. Mini hydel plants use the energy of such streams
to move Small turbines. The turbines generate electricity which can be used locally, such
power plants are more or less environment – friendly as they do not use patterns in areas
where they are located, they generate enough power to meet local demands. This shows that
they can reduce the requirement of large scale transmission towers and cables and avoid
transmission less.
7. Traditional Knowledge and Practice: Traditionally, Indian people have been close to their
environment. They have more a component of the environment and not its controller with
the sudden onslaught of the western system of treatment. We were ignoring our traditional

Environment and Sustainable Development 65

 system such as Ayurveda, Unani, Tibetan and folk system, Nowadays every cosmetic produce
hair oil, toothpaste, body lotion, face cream and what not is herbal in composition, not only
are these products environment friendly, they are relatively free from side effects and do not
require large scale industrial and chemical processing.
8. Biocomposting: In our effort to increase agricultural production during the last five decades
or so, we almost totally reflected the use of compost and completely switched to chemical
fertilizers. The result is that large tracts of productive land have been adversely affected. Water
bodies including groundwater systems have suffered due to chemical contamination and
demand for irrigation has been going up year after year. In certain parts of the country, cattle
are maintained only because they produce dung which is an important fertilizer and soil
conditioner. Earthworms can convert organic matter into compost faster than the normal
composting process. This process is now being widely used.
9. Biopest Control: With the advent of the green revolution, the entire country entered into a
frenzy to use more and more chemical pesticides for higher yield. Soon, the adverse impacts
began to show food products were contaminated, soil, water bodies and even groundwater.
Water was polluted with pesticides, even milk, meat and fishes were found to be contaminated.
To meet this challenge, efforts to bring better methods of pest control with use of pesticides
like neem are proving to be quite useful. Mixed cropping and growing different crops in
consecutive years on the same land have also helped farmers.
The CPCB identified 17 industrial categories as significantly polluting. These categories cover
a range of industries such as thermal power plants, pulp and paper industries, pharmaceutical
industries, fertilizer industries, etc., which have a significant impact on the environment.
Brundtland commission–1983
Officially known as the World Commission on Environment and Development, was established
by the United Nations in 1983.Motive behind the formulation of the Brundtland commission was:
 To explore sustainable development.
 The relationship between economic growth and environmental protection.

66 Indian Economic Development PW

 MULTIPLE CHOICE QUESTIONS
1. When was the Environment (Protection) Act 6. Absorptive capacity is defined as:
passed? (KV SQP 2022-23)  (CBSE SQP 2021-22)
(a) 1984 (b) 1986 (a) Ability of the environment to absorb
(c) 1988 (d) 1990 degradation.
2. Which of the following is abiotic component (b) Resource generation within the
of environment? (CBSE SQP 2020-21) assimilating capacity of the environment.
(c) Average number of organisms living in a
(a) Bacteria (b) Animal
given environment.
(c) Humans (d) Minerals
(d) The minimum population surviving in
3. Economic development includes: the world as a whole.
 (KV SQP 2022-23)
7. Which of the following statement is correct?
(a) Economic growth
 (CBSE SQP 2021-22)
(b) Economic welfare
(a) Global warming is entirely a natural
(c) Both (a) and (b) phenomenon.
(d) None of these (b) Global warming is simply an another
4. Environment includes: (CBSE SQP 2021-22) term used for greenhouse effect.
(a) Biotic elements only (c) Global warming is the rise in average
(b) Abiotic elements only temperature at earth’s surface.
(c) Both biotic and abiotic elements (d) Global warming is caused by ozone
(d) None of these. depletion.

5. Which of the following is a biotic component 8. In 1997, a UN conference on climate change

of environment? (KV SQP 2020-21) was held in: (KVS SQP 2022-23)
(a) Plant (b) Soil (a) Japan (b) India
(c) Water (d) Light (c) Germany (d) China

FILL IN BLANK TYPE QUESTIONS

1. ___________ is defined as the total planetary
inheritance and the totality of all resources.
 (CBSE SQP 2021-22)
2. ____________ are those resources which get
exhausted with extraction use.
 (CBSE SQP 2020-21)
3. ________ observed and projected increase in the
average temperature of earth’s atmosphere
and oceans.  (KV SQP 2022-23)
4. ________ refers to the destruction of ozone in
the ozone layer, due to presence of chlorine
from man-made chlorofluorocarbons and
other factors. (CBSE SQP 2021-22)
5. Hepatitis disease occurs due to ___________
pollution. (KVS SQP 2022-23)

Environment and Sustainable Development 67

 SHORT ANSWER TYPE QUESTIONS
1. What does the environment constitute? 10. What kind of development strategy must the
 (CBSE SQP 2022-23) present generation adopt to promote
sustainable development?
2. Give the four vital functions of the
 (KVS SQP 2022-23)
environment. (KVS SQP 2021-22)
11. Give some of the long-term results of global
3. Why is it that the environmental problems
warming. (CBSE SQP 2021-22)
did not arise before? (CBSE SQP 2022-23)
12. Give the Reasons for Environmental Crises.
4. Give some of the long-term results of global
 (CBSE SQP 2020-21)
warming. (CBSE SQP 2021-22)
13. What is Carrying Capacity? Explain.
5. What has been the result of Ozone depletion?
 (SQP 2022-23)
 (KVS SQP 2022-23)
14. What has been the result of Ozone depletion?
6. Why has environmental depletion led to high
 (CBSE SQP 2021-22)
opportunity costs? (KVS SQP 2022-23)
15. Why has environmental depletion led to high
7. How can wind power and Biopest control
opportunity costs? (CBSE SQP 2021-22)
help to achieve sustainable development?
 (KVS SQP 2020-21) 16. Why does the present world stand at the
threshold of an environmental crisis?
8. How do thermal and hydroelectricity cause
 (KVS SQP 2022-23)
pollution ? (CBSE SQP 2022-23)
17. Which are the important mineral reserves in
9. Explain the relevance of inter-generational
India? (KVS SQP 2021-22)
equity to the definition of sustainable
development. (CBSE SQP 2021-22)

LONG ANSWERS TYPE QUESTIONS

1. State the factors responsible for land
degradation? (KVS SQP 2019-20)
2. What is sustainable development? Suggest any
four strategies for sustainable development.
 (CBSE SQP 2022-23)
3. Give benefits and limitations of solar and
wind power. (KVS SQP 2022-23)
4. What is pollution? Explain how water
pollution and noise pollution are harmful?
 (CBSE SQP 2021-22)

Answers

1. (b) 2. (d) 3. (c) 4. (c) 5. (a) 6. (a) 7. (c) 8. (a)

68 Indian Economic Development PW

 Solutions
FILL IN BLANK TYPE QUESTIONS
1. Environment
2. Non-renewable resources
3. Global warming
SHORT ANSWER TYPE QUESTIONS
1. (i) Environment includes all resources-
biotic and abiotic factors that influence
each other. Biotic resources include all
living elements such as birds, animals,
plant Forests, fisheries etc.
(ii) The abiotic elements include air, water,
land, etc. Rocks and sunlight are all
examples of abiotic elements of the
environment.
2. The four vital functions of environment are:
(i) It supplies resources both renewable
and non-renewable resources.
(ii) It assimilates waste.
(iii) It sustains life by providing genetic and
bio- diversity.
(iv) It provides aesthetic services like
scenery etc.
3. (i) In earlier times, the demand for
environmental resources and services
was much less than their supply.
(ii) Due to rapid urbanization, increased
demand for goods and services has
led to advanced industrialisation. This
has caused pollution, which is more
than the absorptive capacity of the
environment.
(iii) The rate at which the resources are
extracted by man has been more than
Environment and Sustainable Development
4. Ozone depletion
5. Water
the rate of regeneration of the resources,
thereby causing serious environmental
problems.
4. The long-term results of global warming are:
(i) melting of polar ice caps leading to a rise
in the sea level and coastal flooding.
(ii) Disruption of drinking water supplies
dependent on snow melts.
(iii) extinction of species.
(iv) Frequent tropical storms and tropical
diseases.
5. Due to the depletion of the ozone layer, the
ultra violet radiation is coming to earth
directly and causing damage to the living
organisms, e.g.,
(i) It causes skin cancer in humans.
(ii) It lowers the production of phytoplankton
and affects other aquatic organisms.
(iii) It influences the growth of terrestrial
plants.
6. The nation has to pay heavily on damages
to human health (fatal and nonfatal effects),
effects on crops and materials, damages
caused by global warming provoked by
greenhouse gasses, cost for correcting global
warming impacts. Health of people which is
affected due to increased levels of pollution
also requires more investment on health
facilities.
69
 7. Wind Power:
(i) Wind is a clean fuel. Wind power
produces no air and water pollution
because no fuel is burned to generate
electricity.
(ii) Wind power generation produces zero
carbon dioxide emissions.
(iii) Wind power is also a renewable source
of energy.
Bio-pest Control:
(i) Bio pest control is a natural way of
controlling that harms plants and
crops.
(ii) Natural enemies are used to check the
population of pests by using various
Animals and birds.
8. Both thermal and hydro electric sources of
energy have adverse environmental impacts.
(i) Thermal plants emit large quantities of
carbon dioxide which is a greenhouse
gas.
(ii) It also produces fly ash which causes
pollution of land, water etc.
(iii) Hydro electric power projects inundate
forests and restrict the natural flow of
Water in catchment areas.
9. Sustainable development implies that all
future generations should have an average
quality of life that is at least as high as that
being enjoyed by the present generation. It
is known as inter-generational equity. We
have a moral responsibility to hand over
The planet earth in good order to future
generations.
10. The present generation must promote
development in such a way that it enhances
the natural and built-in environment with:
(i) conservation of resources.
(ii) preservation of the regenerative
capacity of the world’s natural ecological
system.
70 Indian Economic Development PW
(iii) avoiding the added costs or risks on
future generations.
11. The long-term results of global warming are:
(i) Melting of polar ice caps leading to a rise
in the sea level and coastal flooding.
(ii) Disruption of drinking water supplies
dependent on snow melts.
(iii) Extinction of species. It leads to the
situation of environmental crises.
12. (i) Population explosion and Industrial
revolution has increased the demand
for environmental resources, but their
supply is limited due to misuse and
overuse.
(ii) The intensive and extensive extraction
of both renewable and non-renewable
resources has exhausted some of the
vital resources.
(iii) Extinction of many resources and
continuous rising population has also
resulted in an environmental crisis.
13. (i) Resources extraction should remain
below the rate of resource generations.
(ii) Generation of wastes should remain
within the absorption capacity of the
If these two conditions are not fulfilled,
then the environment fails to perform
its vital functions of life sustenance and
standard of developed world, the waste
generated is beyond the absorptive
capacity of the environment.
14. Due to the depletion of ozone layer, the ultra
violet radiation is coming to earth directly
and causing damage to the living organisms,
e.g.,
(i) It causes skin cancer in humans.
(ii) It lowers the production of phytoplankton
and affects other aquatic organisms.
(iii) It influences the growth of terrestrial
plants.
15. The nation has to pay heavily on damages
to human health (fatal and nonfatal effects),
effects on crops and materials, damages
caused by global warming provoked by
greenhouse gasses, cost for correcting global
warming impacts. Health of people which is
affected due to increased levels of pollution
also requires more investment on health
facilities.
16. The world today stands at a threshold of
serious environmental crisis.
(i) The rising population of the developing
countries and the affluent consumption
and production standards of the
developed nations have put a huge
stress on the environment in terms of
its functions of supplying resources and
assimilating wastes.
LONG ANSWER TYPE QUESTIONS
1. The factors contributing to land degradation
are:
(i) Loss of vegetation due to deforestation
(ii) Unsustainable fuel wood and fodder
extraction
(iii) Shifting agriculture
(iv) encroachment into forest lands
(v) Forest fires and overgrazing
(vi) N o n - a d o p t i o n o f a d e q u a te s o i l
conservation measures
(vii) Improper crop rotation
(viii) Indiscriminate use of agro-chemicals
such as fertilizers and pesticides
(ix) Improper planning and management of
irrigation systems
(x) extraction of ground water in excess of
the recharge capacity
(xi) Poverty of the agriculture-dependent
people.
2. ‘Sustainable development is development
that meets the need of the present generation
(ii) Many resources are becoming extinct
since their use is beyond the carrying
capacity of the environment, leading
to an environmental crisis. In earlier
times, the demand for environmental
resources and services was much less
than their supply.
(iii) Increased demand for goods and services
has led to advanced industrialisation.
This has caused pollution which is
more than the absorptive capacity of
the environment.
17. Iron-ore, coal and natural gas are found in
large quantities in India. India alone accounts
for nearly 20 percent of the world’s total
iron-ore reserves. Other mineral Reserves
bauxite, copper, chromate, diamond, gold,
lead, lignite, manganese, zinc, uranium ,etc.
without compromising the ability of the
future generations to meet their own
needs. The four strategies for sustainable
development are:
(i) Use of non-conventional sources of
energy: In India the use of LPG and
gobar gas in rural areas and the use of
CNG as fuel in urban area, wind power,
solar power along with the mini hydel
power plants which are environment-
friendly can generate enough power to
meet local demand.
(ii) Traditional knowledge and practices
have been more a component of the
environment and not its controller. With
the sudden onslaught of the western
system of treatment, the traditional
treatment systems like Ayurveda, Unani,
Tibetan and folk systems were ignored.
But now these are in great demand again
for treatment of chronic health problems.
Environment and Sustainable Development 71
 (iii) Bio Composting: Farmers had over a
period of five decades totally neglected
the use of compost and completely
switched over to chemical fertilizers,
which adversely affected the productive
land and water bodies. But now in
large numbers, the farmers have
again started using compost made
from organic wastes of various kinds.
Earthworms can convert organic
matter into compost faster.
(iv) Bio Pest Control: Due to the green
revolution, more and more use of
chemical pesticides for higher yield led
to the contamination of food products
like milk, meat and fish, soil, water
bodies and even groundwater were
polluted with pesticides. But now
efforts are being made to bring in better
methods of pest control like the ones
based on plant products like neem trees
are proving quite useful.
3. Solar Power:
Benefits:
(i) Virtually maintenance free.
(ii) Relatively easy to install.
(iii) Solar panels can provide plentiful power
during the long sunny hours of summer.
Limitations:
(i) In areas that experience a lot of overcast
or low light days, the output is not that
good, though still considerable.
(ii) It is not available at night or when there
is a dense cloud cover. This makes it
unreliable.
(iii) Solar power is currently significantly
more expensive and requires action by
consumers e.g., installing solar panels.
Wind Power:
Benefits:
(i) In high wind areas (at least 12 mph),
wind generators produce power, more
cost effectively than solar. Wind’s long-
term technical potential is believed
72 Indian Economic Development PW
to be 5 times current global energy
consumption or 40 times the current
electricity demand.
(ii) A moderate proportion of wind
generation can be connected without the
need for storage. The cost of maintenance
and storage is comparatively lower
compared to any other source of energy-
renewable or non-renewable.
(iii) Power output from wind varies though
it can be predicted with a fair degree of
confidence many hours ahead.
Limitations:
(i) Repair (even under warranty) can be
quite costly, especially on freestanding
towers because of crane costs, labour
for taking a wind generator down and
putting it back up, shipping costs to the
retailer or manufacturer etc.
(ii) Wind generators require foundation
work such as concrete anchors, good
wires etc. Depending on the chosen
tower design.
(iii) The trees might have to be cleared, a
practice against the conservation of
resources. The birds killed by wind
turbines could also cause concern.
4. (i) Pollution refers to the degraded
environmental quality on account of
rising population of the developing
countries.
(ii) As a result the extinction of many
resources and the wastes generated
being beyond the absorptive capacity
of the environment.
(iii) Rising population rapidly growing
industrial sector and pollution from
affluence have led to degraded
environmental quality by way of water
contamination (70% of water in India
is polluted), air pollution and noise
pollution have led to an increase in
the incidence of water- borne diseases
and respiratory problems along with
hearing loss.
 CHAPTER SUMMARY AND GLOSSARY

Misuse and Overuse of resources The supply-demand reversal of Sustainable Development

U Misuse of environment resources environmental resources U Sustainable development is that process
means wasting of our raw natural U Before the advent of the industrial of development which meets the needs
resources which leads to unbalance revolution, the rate of resource extraction of present generation without reducing
in the nature elements was less than the rate of regeneration of the ability of future generation to meet
U Overconsumption means consuming these resources, i.e. Demand was less than their own needs.
resources that we cannot replenish Supply. U Strategies for sustainable development
or that cannot sustain themselves at U With the expanding population and its 1. Use of non-conventional sources of
the rate we are consuming them. growing needs, the demand for resources energy.
for both production and consumption went 2. Use of cleaner fuels: LPG, Gobar
beyond the rate of regeneration of the gas in rural areas and CNG in Urban
resources, i.e. Demand is more than supply areas.
3. Use of Solar energy and wind power.
U Central pollution control Board set up 4. Shift to organic farming.
in 1974.
U Montreal Protocol - 1987
U Environmental protection act - 1986
U Brundtland commission - 1983 Environment and
Sustainable Development
Environment refers to the total of all
India's environment
living things (biotic elements) and problem pose a Dichotomy.
non-living things (abiotic elements) U Poverty is causing environmental
Carrying capacity surrounding us. degradation
U Resource extraction should remain U Affluence in living standards is
below the rate of resource regeneration causing environmental degradation.
U Generation of wastes should remain
within the absorption capacity of the
environment.
Functions of the Environment
Major environmental problems U Environment supplies resource (both renewable
Pollution and non-renewable resources) for production.
Air pollution U Environment assimilates waste,
� Water Pollution � Noise Pollution � Land Pollution U Environment sustains life.
Global warming U Environment enhances quality of life.
Global warming is a gradual increase in the average temperature of the
earth’s lower atmosphere. Global warming is caused by man-made increase
in carbon dioxide (CO2) and other greenhouse gases through the burning of
fossil fuels and deforestation. Affluence trap
Ozone depletion
Affluence trap means environmental degradation
Ozone depletion refers to reduction in the amount of Ozone (a protective
trap. With affluence or economic well-being more
layer) in the stratosphere.
natural resources are used up causing environmental
Land degradation
problems.
Land degradation refers to a decline in the overall quality of soil, water or
vegetation condition, commonly caused by human activities



Environment and Sustainable Development 73

 CHAPTER
Development
8 Experience of India - A
Comparison with Neighbours

TOPICS TO BE COVERED
‰ Development Strategies of India
‰ Development Strategies of Pakistan
‰ Development Strategies of China
‰ Common Development Strategy among India, Pakistan and China
‰ Demographic Indicator
‰ Gross Domestic Product (GDP)

DEVELOPMENT STRATEGIES OF INDIA

1. Freedom: India got independence from Britishers in 1947. At that time India was in a very
vulnerable condition.
2. Economic System: After independence India chose the model of mixed economy system. At that
time people of India were exploited by the British so they needed a model where government can
work for the social welfare.
3. Economic planning: In the year 1951 economic planning was started under these five year plans
and annual plans were started focussing on different sectors under different plans .
4. IPR 1956: Industrial Policy Resolution was started in 1956 which laid a strategy of licencing
permits and quotas for the private sector, and the major control was given to public sector by
keeping maximum control over the industries with the government.
5. New Agriculture Policy 1961: The new agricultural policy of 1961 in India aimed to enhance
agricultural productivity and promote modern farming techniques and to improve farmers’
economic conditions. It emphasised the Green Revolution advocating the use of a high yield variety
of seeds, fertilisers and irrigation. This policy played a crucial role in transforming India from a
food deficit nation to a self sufficient one in terms of food grains.
6. New Economic Policy/Economic Reforms 1991: The new economic policy was launched in
1991, this policy has laid a strategy of liberalisation, privatisation and globalisation and this has
led to a complete change in the economic condition of the country.
7. Shift from 5 Years Planning to Prospective Planning with a 15 Year Vision: In the year 2017
the Planning Commission was converted to Niti Aayog which focused on a prospective planning
of 15 years.
DEVELOPMENT STRATEGIES OF PAKISTAN
1. Freedom: Like India, Pakistan also got its independence in 1947.
2. Economic System: The economic model adopted by Pakistan was also a mixed economic model
as the condition of Pakistan was also not good at the time of Independence. So, they needed
complete government control over the country.
3. Economic Planning: In 1956, Pakistan introduced its first five year economic plan emphasising
economic development and industrialization. Plan aimed to boost agriculture, promote industrial
growth and address social welfare. Key sectors like irrigation, power and transportation received
attention. However the effectiveness of the plan faced challenges due to external factors including
geopolitical tensions and limited resources.
4. Import Substitution Policy: Pakistan’s import substitution policy of the 1950s aimed to reduce
dependence on imported goods by fostering domestic industries. Strategy involved encouraging
the production of goods domestically that were previously imported. The goal was to strengthen
the economy, promote industrialization and achieve self sufficiency in various sectors. However
over time this policy faced criticism for the potential inefficiencies and hindering export oriented
growth.
5. Green Revolution: The Green Revolution in Pakistan initiated in the late 1950s and gained
momentum in the 1960s aimed to enhance agricultural productivity through the adoption of
modern farming techniques. Involved the introduction of high yielding varieties of seeds, increased
use of fertilisers and improved irrigation methods. Foods were primarily focused on wheat
production leading to a significant increase in yields. The Green Revolution played a crucial role
in addressing food security concerns and boosting agricultural output in Pakistan.
6. Nationalisation of Capital Good Industry: In the 1970s Pakistan implemented a policy of
nationalisation including the nationalisation of capital goods industry. This involved the
government taking control of the key industries such as steel engineering and heavy machinery
with the aim of achieving greater state ownership and control over the means of production while
the intentions were to promote economic equality and reduce private ownership concentrations
the impact was mixed. Led to management challenges inefficiencies and in some cases a decline
in productivity within the affected industries.
7. Economic Reforms: In 1988, Pakistan underwent economic reforms under the government of
Prime Minister Benazir Bhutto. Aimed to address economic challenges liberalise the economy
and encourage private sector participation. Measures included trade liberalisation, reduction of
import restrictions and initiatives to attract foreign investment. Additionally, there were efforts
to improve fiscal discipline and enhance social welfare programmes. While these reforms aimed
to stimulate economic growth their success and impact were influenced by various factors and
subsequent policy changes in the following years.
Reasons for slow growth and re-emergence of poverty in Pakistan:
(i) Political instability: Because of lack of political instability the government has to incur huge
expenditure in maintaining law and order This causes losses.
(ii) Dependence on foreign loans: The economy of Pakistan was too much dependent on
remittances from abroad and the borrowings this also has led the economy to be in the debt
trap as they were no longer able to repay the loans.

Development Experience of India - A Comparison with Neighbours 75

 (iii) Fall in foreign exchange earnings: Due to the effect and the image of terrorism over the
country they faced huge decline in the exports and foreign direct investments in their country.
(iv) Too many expenses on defence: The expenses on the defence were so high that they had to
borrow from the rest of the world to meet their war expenses.

DEVELOPMENT STRATEGIES OF CHINA

1. Republic of China: The Republic of China declared independence on 1st October 1949 led by the
Chinese nationalist party following the Chinese civil war by the peoples of Republic of China.
2. Economic Planning: In 1953, the People’s Republic of China initiated its first five year plan
marking the beginning of systematic economic planning under the leadership of Communist Party.
The plan focused on industrialization with the emphasis on key sectors such as heavy industry
agriculture and infrastructure development. Aimed to transform China from an agrarian society
into an industrialised nation.
3. Economic System: At the time of Independence China adopted a command economy model. The
newly established People’s Republic of China under the leadership of the Chinese Communist
Party implemented centralised economic planning with the focus on state ownership control of
key industries.
4. Great Leap Forward (GLF) Campaign Started in 1958 in China:
(i) This campaign started in 1958 aimed at industrializing the country on a massive scale.
(ii) People were encouraged to set up industries in their backyards.
(iii) In rural areas, Commune System was started. Under this system, people were engaged in
collective farming. 26,000 communes were formed.
(iv) The duration of this campaign was 2 years i.e. 1958-1960. It was ended in 1960 as this program
faced many problems in the form of climate change (severe drought caused the death of around
30 million people).
5. Great Proletarian Cultural Revolution: In 1965, Mao se Tung Zedong started a cultural revolution
on a large scale. In this revolution students and professionals were sent to work or learn from the
countryside.
6. Economic Reforms: China’s economic reforms are often referred to as the reform and opening
up policy initiated by the Chinese government. These reforms marked a significant departure
from the centrally planned command economy model that characterised China’s economic
system.
7. One Child Policy: One child norm was launched in 1979 in China. The important implication of
the one-child norm in China is the low population growth and better health conditions of women.
This measure also led to a fall in the sex ratio in China. This policy was abandoned in 2016.

ONE CHILD POLICY

One child norm was launched in 1979 in China. The important implication of the one-child norm in
China is the low population growth and better health conditions of women. This measure also led to
a fall in the sex ratio in China. This policy was abandoned in 2016.

76 Indian Economic Development PW

ECONOMIC REFORMS IN CHINA
1. Two Phases: In the First Phase, China focused only upon the development of Agriculture,
investment and Foreign Trade. In the Second Phase, China focused upon the development of
Industries.
2. Dual Price Policy: China set a dual price policy, in which every item had two prices. First price
set by Government and after selling of specific amount as prescribed by government, then the
rest of the items would be sold at market price.
3. Special Economic Zones (SEZs): China established SEZ, these zones offered all basic amenities
to the investors. Accordingly, China became a lucrative destination for FDI.

COMMON DEVELOPMENT STRATEGY AMONG INDIA,

PAKISTAN AND CHINA
1. Economic Planning: All these countries started economic planning. India started in 1952, China
1953, Pakistan 1956.
2. Role of Public Sector: In India and Pakistan, there prevailed a mixed economy but these two also
focused more on the public sector and china’s government only focused on public sector.
3. Economic Reforms took place in all three countries: All these three countries did economic
reform. India did in 1991, Pakistan in 1988 and China in 1978.

Comparison

Demographic Human
GDP
Indicator Development Index

DEMOGRAPHIC INDICATOR
Population India China Pakistan
Numbers 140.76 Cr. 141.24 Cr. 231.14 Cr.
China and India are the most populated nations of the world. Population of Pakistan is comparatively
less.
Population Growth India China Pakistan
Rate 0.8% 0.1% 1.8%
Population is growing very fast in Pakistan and less fast in India and the population growth rate of
China is lowest.
Area India China Pakistan
KM 3.2 Million Km 9.5 Million Km 0.79 Million Km
Area of China is very large compared to India and Pakistan. Area of Pakistan is the least.
Population Density / Sq. Km India China Pakistan
Number 463 KM 153 KM 302.08 KM

Development Experience of India - A Comparison with Neighbours 77

It means Number of people living per unit area. Population density is lowest in China. Population
density is highest in India followed by Pakistan.
Sex Ratio India China Pakistan
Number 924 949 943
It means the number of females per 1000 males. It is low in all 3 countries due to preference for male
children.
Fertility Rate / Sq.km India China Pakistan
Rate 2.2 1.7 3.6
It means the average number of children born over a lifetime to women. It is highest in Pakistan followed
by India. And lowest in China.
Urbanisation India China Pakistan
Number 34 59 37
It means the percentage of population living in urban areas. It is highest in China followed by Pakistan,
then India. It means there is still a large number of people living in rural areas in India as well as Pakistan.

GROSS DOMESTIC PRODUCT (GDP)

‰ During 1980-90: China’s GDP was growing at a tremendous rate (around 10%). Pakistan’s GDP
growth rate (6.3%) was better than India’s GDP growth rate (5.7%)
‰ During 2015-17: India’s GDP grew at the fastest rate of 7.3%, China’s growth rate declined to
6.8% and Pakistan was at third at 5.3%.
Country 1980-90 2015-17
India 5.7% 7.3%
China 10.3% 6.8%
Pakistan 6.3% 5.3%
1. India’s GDP growth was lowest in 1980’s. Compared to China and Pakistan, in 2015 it was the
highest.
2. China’s GDP Growth was highest in 1980’s And now China is below India.
3. Pakistan’s GDP was better than India, now declined due to political instability.

HEALTH INDICATORS AS PER 2017-19 REPORT

Indicator India China Pakistan
Life Expectancy (Years) 69.7 76.9 67.3
Infant mortality rate (per 1000 live births) 29.9 7.4 57.2
Maternal mortality rate 29.9 27 178
Percentage of undernourished children 37.9 8.1 37.6
China has better health facilities as it has better life expectancy and lower mortality rate compared to
India and Pakistan.
Country India China Pakistan
Mean years of schooling (% aged 15 & above) 6.5 8.1 5.2

78 Indian Economic Development PW

China has better education facilities compared to India and Pakistan.
Country India China Pakistan
H.D.I. 0.645 0.761 0.557
Rank in world 130 87 154
China has a better rank than India and Pakistan. However, they are still not in the top 20 nations of
the world.
‰ Comparative Analysis of Development of India and its Neighbours (Pakistan and China)
1. The overall development of these three economies are broadly classified into Demographic
Indicators, Gross domestic products and sectors and Human Development Indicators. We
shall now comparatively analyse the development of India, Pakistan and China.
2. The population of Pakistan is very small and accounts for roughly about one-tenth of China
or India. Though China is the largest nation and geographically occupies the largest area
among the three nations, its density is also the lowest.
3. One child norm was Introduced in China in the late 1970’s to check the problem of population
growth. This measure led to a decline in the sex ratio.
4. In China, due to topographic and climatic conditions, the area suitable for cultivation is
relatively small, only about 10% of its total land area. The total cultivable area in China accounts
for 40% of the cultivable area in India.
5. The fertility rate is low in China and very high in Pakistan.
6. Pakistan is ahead of India in reducing the proportion of people below the poverty line and
also its performance in education, sanitation and access to clean drinking water is better than
that of India.
7. Urbanisation is high in Pakistan and China.
8. India is in the worst scenario as compared to the other two countries with respect to access
to improved sanitation and clean water.
9. China is moving ahead of both India and Pakistan in terms of Indicators of human development.
‰ Liberty Indicators:
1. It refers to the measure of calculating the level of demographic participation in social and
political decision making. In other words, it is an index used to measure the participation of
the people in taking decisions.
2. Example of liberty indicators are the measures of the extent of the constitutional protection
and rights given to the citizen and the extent of the constitutional protection of the
independence of the judiciary.

Development Experience of India - A Comparison with Neighbours 79

 MULTIPLE CHOICE QUESTIONS
1. One child policy was adopted by China in the 6. Human Development Index is a measure of
year. (CBSE SQP 2021-22)  (CBSE SQP 2021-22)
(a) 1972 (b) 1975 (a) birth rate
(c) 1979 (d) 1982 (b) death rate
2. Which of the following countries has shown (c) quality of life
the brighter signs of Urbanization? (d) quality of environment
 (CBSE SQP 2022-23) 7. China republic was established in
(a) India (b) China  (KVSQP 2020-21)
(c) Pakistan (d) Both (b) and (c) (a) 1945 (b) 1947
3. In China, commune system is related to (c) 1949 (d) 1951
 (KVSQP 2020-21) 8. Which is the poorest nation?
(a) Agriculture (b) Industry  (KVSQP 2019-20)
(c) Services (d) None of these (a) India
4. Great Leap Forward (GLF) was the campaign (b) China
launched in China in (CBSE SQP 2020-21) (c) Pakistan
(a) 1956 (b) 1958 (d) Canada
(c) 1962 (d) 1968 9. Which country adopted infant policy?
5. Which of the following countries has the  (CBSE SQP 2022-23)
highest density of population per square km? (a) India
 (CBSE SQP 2020-21) (b) China
(a) Pakistan (b) India (c) Pakistan
(c) China (d) Britain (d) None of these

TRUE AND FALSE TYPE QUESTIONS

1. In 1978 ‘Reform policy’ started by China.
 (CBSE SQP 2020-21)
2. Ratio of people below the poverty line in
India is higher than China.
 (CBSE SQP 2022-23)
3. In comparison to China, Indian economy has
been relying more on tertiary sector for GDP
growth  (CBSE SQP 2021-22)
4. China has density of population more than
India. (KVSQP 2021-22)
5. India has achieved better results as regards
access to improved water resources.
 (CBSE SQP 2020-21)

80 Indian Economic Development PW

 SHORT ANSWER TYPE QUESTIONS
1. Compare the structure of growth in India,
Pakistan and China. (CBSE SQP 2021-22)
2. Write three observations related to the
growth story of India, Pakistan and China.
 (KVSQP 2019-20)
3. Why Poverty re-emerging in Pakistan?
 (SQP 2020-21)
4. What are the basic components of New
Economic Policies (NEP) of India?
 (CBSE SQP 2021-22)
Answers
1. (c) 2. (b) 3. (a) 4. (b) 5. (b)
Solutions
TRUE AND FALSE TYPE QUESTIONS
1. True
2. True
3. True
SHORT ANSWER TYPE QUESTIONS
1. (i) India and Pakistan adopted a mixed
economy model of growth while China
adopted statism as a model of growth.
(ii) India and Pakistan have relied more on
the tertiary sector while China on the
secondary sector for the GDP growth
rate.
(iii) In China, the contribution of the
secondary sector to GDP is much more
than in India and Pakistan.
Development Experience of India - A Comparison with Neighbours
5. Explain the demographic profile of India,
Pakistan and China. (KVSQP 2020-21)
6. What are the features of the strategy of
growth adopted by India and Pakistan?
 (KVSQP 2020-21)
7. Write four observations on the common
success story of India and Pakistan?
 (CBSE SQP 2021-22)
6. (c) 7. (c) 8. (c) 9. (b)
4. False
5. False
2. (i) China has outpaced both India and
Pakistan with regard to GDP.
(ii) India has performed better than
Pakistan but compared with China,
India is way behind.
(iii) The relative success of China is
credited to political stability in China.
GDP growth is not the availability of
resources but good governance by
the state and good compliance by the
citizens.
81
3. (i) Lack of institutional reforms in
agriculture.
(ii) Lack of political stability.
(iii) Huge public expenditure on the
maintenance of law and order.
(iv) Allocation of huge funds to build a
strong defence system at the cost of
developmental expenditure.
4. (i) A massive shift towards privatization.
(ii) A transformation towards liberalization.
(iii) Greater reliance on export promotion
rather than import substitution.
(iv) Greater reliance on FDI rather than the
domestic investment.
5. (i) Density of population is much lower
than in China as compared with India
and Pakistan.
(ii) Growth rate of the population in China
has shown a much deeper decline than
the growth rate of population in India
and Pakistan.
(iii) Both China and Pakistan are showing
brighter signs of urbanization than in
India.
82 Indian Economic Development PW
(iv) Sex ratio is found to be biased against
females in all the three countries.
6. (i) It was a mixed economy model of
growth.
(ii) The strategy of growth underlined the
significance of both primary and public
sectors.
(iii) Public sector was assigned the key role
of kick starting the process of growth.
(iv) Private sector was assigned the
secondary role of pushing the process
of growth.
7. (i) India and Pakistan both have succeeded
in more than doubling their per capita
income.
(ii) The incidence of poverty has also been
reduced.
(iii) Self sufficiency in food grains has been
achieved.
(iv) A well developed modern sector has
emerged in both the countries.
 CHAPTER SUMMARY AND GLOSSARY
Development Strategies of India
U Freedom-1947
U Economic system- Mixed Economy
U Economic Planning-1951
U IPR 1956
U New Agriculture Policy1961
U New Economic Policy/Economic reforms 1991
U Shift from 5 years planning to perspective
planning with a 15 year vision-2017
Great Leap Forward[GLF]
U Great Leap Forward was the campaign
launched in China in 1958 by Mao Tse
Tung Zadong to accomplish economic
and industrial development at faster rate.
U The duration of this campaign was 2
year (1958-1960). It was ended in 1960
as this program faced many problem
in the form of climate change (severe
drought caused the death of around 30
million people).
One Child Policy
U One child norms was launched in 1979
in China. The important implication of
the one child norm in China is the low
population growth and better health
conditions of women. This measure also
led to fall in the sex ratio in China.
Development Strategies of Pakistan
U Freedom-1947
U Economic system- Mixed Economy
U Economic Planning-1951
U Import substitution policy-1950s
U Green Revolution-1950s
U Nationalisation of capital goods industry-1970s
U Economic reforms 1988
Comparative
Development
Experience of India
& its Neighbours
Great Proletarian Culture
Revolution
In 1965 Mao Tse Tung Zadong started
a culture revolution on a large scale. In
this revolution students and professionals
were sent to work and learn from the
country side.
Development Experience of India - A Comparison with Neighbours
Economic reforms in China
Two Phases
In Phase 1, China focused only upon the
development of Agriculture, Investment
and Foreign Trade. In phase 2, China
focused upon the development of Industry.
Dual Price Policy
China Set dual price policy, in this every
item had two price. First price set by
Government and after selling of specific
amount as prescribe by Government then
the rest of the items would be sold at
market price.
Special Economic Zones[SEZs]
China established SEZs, these zones
offered all basic amenities to the investors.
Development Strategies of China
U Republic of China-1949
U Economic Planning-1953
U Economic System- Command
Economy
U Great Leap Forward [GLF]-1958
U Great Proletarian Cultural Revolution-
[1965 to 1976]
U Economic Reform-1978
U One Child Policy -1979
83
 Common Strategy Demographic comparison
Demographic Indicator
Economic Planning
U Population of China and India is very high, Pakistan
U All these countries started economic planning. India
low
stared in 1952, China 1953 ,Pakistan 1956.
U Area of China is much higher, India smaller,
Role of Public Sector Pakistan smallest.
U India and Pakistan prevailed mixed economy but U Population Density: Very high in India and
these two also focused more on public sector and Pakistan, less in China
China’s Government only focused on public sector. U Sex Ratio: Poor in all 3 countries
Economic Reforms U Fertility Rate: Highest in Pakistan, then India,
U All these three countries did economic reform. India then China
did in 1991, Pakistan in 1988 and China in 1978. U Urbanization: China is much more urbanized than
India and Pakistan

Comparative Reason For Slow Growth & Re

Education And Human
Development Index Development emergence of Poverty in Pakistan
U China has better education facilities Experience of India U Political instability.
compared to India and Pakistan U Dependence on foreign loan.
U China has a better Rank than India and & its Neighbours U Fall in foreign exchange earnings.
Pakistan in HDI. U Too many expenses on defence.

Comparison of GDP
During 1980-90
U China’s GDP was growing at tremendous rate [Around
10%] Pakistan’s GDP Growth Rate was better than
Health Indicators as per 2017-19 Report India’s [6.3% of Pakistan compared to 5.7% of India]
Indicator India China Pakistan During 2015-17
Life Expectancy 69.7 76.9 67.3
U India’s is GDP grew at fastest rate of 7.3%. China’s
growth rate decline to 6.8% and Pakistan was at third
Infant Mortality Rate 29.9 7.4 57.2 at 5.3%.
Maternal Mortality Rate 29.9 27 178
Percentage of Undernourished 37.9 8.1 37.6
Children
Liberty Indicators
China has better health facilities. So It has better life
expectancy and lower mortality rate compared to India and It refers to the measure of calculating the level of demographic
Pakistan participation in social and political decision-making.
Example of liberty indicators:
U The extent of the Constitutional Protection Right given to
the citizens.
U The extent of the Constitutional Protection of the
independence of the judiciary and Rule of Law.



84 Indian Economic Development PW