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Dr-Bhawana Sharma

Chapter 8
Human capital formation in India
Skill is valued, because it contributes to the process of production by raising the level of efficiency
or the level of productivity.

Higher Skills- Higher Contribution in Production- Higher Reward

1. Concept of Human Capital and Human Capital Formation

According to G.M. Meier Human Capital Formation is the process of acquiring and increasing
the number of person who have the skill, education and experience which are essential for the
economic and political development of a country.
It refers to the stock of Skill and expertise of a nation at a time.

2. Determinants or sources of Human Capital Formation (Way of adding to the stock

of human capital)

I. Expenditure on Education: It is the most effective way of enhancing the productivity of

workforce. A persons earning during his whole life would far exceed his expenditure on
education. Monetary benefits of education far exceed the cost of education.
II. Expenditure on Health: A sound mind in a sound body is an old saying which clearly indicate
that a healthy person will adds more to the GDP of the nation instead of a sick person. Thus, it
is a siginifant determinant of human capital formation.
III. On-The Job Training: On the job training helps a person to sharpen their specialised skills. The
returns also would be far exceeding the cost of such training programmes. Therefore, it is an
important source.
IV. Study Programmes for Adults: Government organize some educational programmes for the
adults to enhance their skills and productivity.
V. Migration: It involves cost of transportation from one place to another place and cost of living in
different environment. Because their salary is greater than the cost of migration. Thus, it is a
better source of human capital formation.
VI. Expenditure on Information: Information relating to job market and educational institutions
offering specialised skills is an important source of skill formation.

Human Capital and Human Development

Human Capital: It consists of Skills as used in the process of production.

Human Development: Development of the individual by acquiring good

education and attaining good health.

3. Role of Human Capital Formation or Human Capital Formation and Economic

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I. Change in Emotional and Material Environment of Growth:

Emotional Environment helps to people towards their growth-oriented attitude and
aspiration while material environment helps to society towards higher number of skilled and
trained workers.
II. Higher Productivity of Physical Capital : It accelerate the growth and productivity as expert
engineers and skilled workers can certainly handle machines better than others.
III. Innovative Skills : As skills will be increases, innovation also will be increased.
IV. Higher Rate of Participation and Equality:
Human capital Formation Greater Employment Increased rate of participation
Economic and social equality in the society or development

4. Problems facing Human Capital Formation in India

I. Rising Population: Rising Population adversely affects the quality of human capital. It creates the
problem of housing, drainage, water-system, hospitals, education etc. As a result it affect the
quality of life and lowers the capacity to acquired knowledge.
II. Brain-Drain: People, who are born, educated and trained in India, are going to some other
country for job. As a result, it slows down the development of domestic country.
III. Deficient Manpower Planning: Though, India is among the higher populated countries, still
there are not enough efforts have been made to maintain the gap between demand and supply
of manpower which create the shortage of manpower.
IV. Insufficient On-The job training in Primary Sector: Primary Sector (eg. Agriculture) in India is
not getting enough attention to improve the professional skills.
V. Low Academic Standards: Instead of having many universities here, still the problem of low
quality of education exists. This is a problem which restricts the human capital formation.

5. Education as an essential element of human resource development:

Education refers to the process of teaching, training (in School and college) and learning to
improve knowledge and develop skills. According to Census 2011, literacy rate is 74.04 in
India while it is 90-95% in many developed countries.
Literacy is just refers to the ability to read and write.

All Educated people are literate but all literate people are not necessarily educated.

Importance and Objectives of Education

1. Produced responsible citizens
2. Develops science and technology
3. Facilitates use of nation and human resources
4. Helps in economic development
5. Promotes cultural standard
6. Develop human personality
7. Mental strength

Need for Government Intervention in Education and Health

If private investors will invest, education and health will be expensive which is not possible for
poor people. Thus, Government gives subsidy and provides education and health on very less

Growth of Education Sector in India

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1. Expansion of General Education: In 1951, only 16% were literate while in 2011, it is 74%
literacy rate in India.
2. Elementary Education (Primary and Middle class upto 8th) : It consist age group of 6-14
years children. In 1950-51, their number was 2023 lakh and in 2011-12 it increased to 11.92
lakh. Bihar, Rajasthan, UP and Arunachal Pradesh are the most backward states in India.

Gross Enrolment Ratio for Elementary Education (class 1-8)

Number of Students enrolled for elementary education

In 1951 gross enrolment ratio was 43%, presently it is found to be more than 100%.

3. Secondary and Senior Secondary Education : In 1950-51 it was 7.4 thousand while in 2011-
12 it was 15 lakh. Presently, 565 Navodaya Vidyalaya schools are functioning and many
Kendriya Vidyala are functioning for the benefit of the children of transferable employees.

Enrollment in Secondary Education (Age group of 14-18 years,

Class IX and X)
4. Higher
It was just 5% in 1951 which isonly
Education: In 1951 there were 52%27inuniversities.
secondaryPresently it in
and 28% is 665 universities.
35829 colleges for general degree, 11315 colleges for professional degrees and 2 crore
students are studying for higher studies.
5. Vocationalisation of Secondary Education: Vocation courses have been introduced in the
area of agriculture, trade and commerce, engineering, technology, health and medicines.
About 10 lakh students are doing vocational courses.
6. Technical, Medical and Agricultural Education : There are 1418 polytechnic institutions are
functioning with 2.12 lakh students, 3400 engineering colleges with 1500000 students, 289
medical colleges with 32815 students. Many research centres also have been established
such as IIT, ISI etc.
7. Rural Education: Under National Rural Higher Education Council (NRHEC) 14 rural
educational institutions has been set up. ST and SC students are getting free education.
8. Adult and Female Education: In 1988, National Literacy Mission was set up to provide
education to adults. Since 1976, Formal Education Programme and Women Education
Council have been launched to provide education.
9. Total Literacy Campaign: National Literacy Mission was launched, now been recast as
Saakshar Bharat with a central focus on female education

Development of Literacy Rates

1951 2011
Literacy Rate 16% 74.04
Female Literacy rate 65.46
Male Literacy Rate 82.14
Literacy Rate in Rural area 68.9
Rural female literacy 58.8
Urban female literacy 79.7
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Conclusion: post independence, number of literates has increased five-fold, number of

schools has increased four-fold and number of students has increased more than 10 times.
Rate of literate has risen up from 16 to 74.04 %. Kerala is on top with 94% among all states in

Educational Finance: Who spends on Education and how much:

The State Govt: Between 10-30 % of annual budget
The Central Govt: Rs. 450000 Annually
Total percentage expenditure by the govt. (State and Central around 80-90 percent)
The parents (Fee): 4-5 percent.
The private Trust: 7%
Endowments: 3%

Education is still a challenging proposition:

It is encouraging to note that nearly 96.5 % children are now the school goers. But still a Survey
by the Child Rights and You finds that many children drop out from the school or dont take
admission due to lack of transfer documentation, birth certificate etc. Following points makes
education a challenging task:

1. Large number of Illiterates: Presently 36% are illiterate and this is a huge ratio.
2. Inadequate Vocationalisation: People are degree-oriented. Thus, there is lackness of
vocationalization of education.
3. Gender Bias: The enrolment ratio is low among the females as compared to males. So
Gender Bias creates a challenge
4. Low Rural Access Level: For rural people, education is still beyond the expectation as
compared to urban people.
5. Privatisation: Being very expensive, Private education has widen the gulf between access
level for the rich and the poor.
6. Low Government Expenditure on Education: The amound spended by Government on
education is less than required amound.

Conclusion of the chapter: Since 1951, there is remarkable growth in education sector in India
but still the growth is not satisfactory as compared to other countries as well as being a second
most populated country there is need to develop our education system more. Instead of degree-
oriented, there is a need to vocationalise our education system as well as to provide quality
education for growth and development of the nation.

Chapter 9

Rural Development
Althgough Noticeable changes have occurred in the Indian Economy since independence. Still,
we cannot be called as developed nation when more than 20% population is living in abject
poverty, also due to massive unemployment, higher suicide rate among farmers, polluted water,
high rate of illiteracy etc. Reason: Growth is not sufficient in rural areas due to all these issues.
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I. Challenges of Rural development

What does Rural Development Mean?

Rural development means an action plan for the social and economic growth of the rural area,
focusing on emerging challenges in rural areas.

Tha major lingering challenges are:

Challenge of rural credit

Challenge of rural marketing

The major Emerging challenges are:

Exploring options of sustainable livelihood other than farming

Challenges of organic farming

The Lingering Challenges of Rural Development

1. The challenge of rural credit: Credit is the lifeline for farming in rural areas cause of:
a) Most farming families are producing just enough for subsistence and they required credit
for further investment
b) The gestation lag between sowing and harvesting of the crop is quite long.

Credit need of the Indian farmers are classified into three categories:

I. Short Term Credit: for purchase of inputs like seeds, fertilisers,pesticides, payments of
electricity bill etc. Duration is 6-12 months of this borrowing.
II. Medium-term Credit: for purchase of machinery, construction fences, digging the well
etc. Credit duration is 12 months to 5 years.
III. Long term Credit: for purchase of land. Duration is 5-20 years.
Sources of Rural Credit

Non-Institutional sources Institutional Sources

1. Cooperative Credit Societies

2. State Bank of India and other
commercial banks
3. Regional Rural Banks (RRB) and
Land development Banks
4. National Bank for Agriculture
and Rural Development
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A) Non-Institutional Sources: Landlords, village traders and moneylenders are the three
important sources. In 1951, around 93% of the total borrowing of the farmers were
accounting these sources only.
B) Institutional Sources: Including Government, Cooperatives, Commerical banks and the
Regional Rural Banks. In 1951, they accounted only 7% of the credit needs of the
farmers but now it increased by 66%.

Some important institutional agencies offering rural credit:

I. Cooperative credit societies: Cooperative credit contributes nearly 15% in rural credit.
It has following objectives:
To ensure rapidly flow of credit
Eliminate the moneylenders
To spread credit facilities across all regions
Adequate credit support.
II. State bank of India and other Commercial Banks: SBI was set up in 1955.
Commecial Banks contribute 75% in rural credit.
III. Regional Rural Banks (RRB) and Land Development Bank: It is established to
provide credit to weaker section and backward areas people. These banks operates at
the district level.
IV. NABARD : It has following functions:
Apex banking institution in the field of rural credit
To improve the credit delivery system
To coordinate rural functioning activities
Monitoring and evaluation of projects.

RBI and Rural Credit

RBI focuses on :

1. Short term refinance in agriculture activities

2. Development of cooperative societies
3. Expansion of source of funds for long and short term
4. Training and professionalisation
5. Rural Credit survey
6. Helping Bank branch expansion programme
7. Guidance to all matters related to rural credit

Self-help Group (SHG) : SHG encourages small saving among its

members. At present, 7 lakh SHGs are operating in rural areas.They offered
credit at moderate rate of interate without any security.

Rural Banking- A Critical Evaluation

Dr-Bhawana Sharma

Rural Banking has been expanded since nationalisation of banks (1969). It is not denying that
institutional credit has gone a long way in liberating the farmers from the debt trap of mahajans
and moneylenders, it has promoted commercialisation of agriculture. But it is also true that many
commercial banks have failed to develop a culture of thrift among the farming families.

The Challenge of Agriculture Marketing

Agriculture marketing includes all stages between harvesting to final sale of the produce by the
farmers such as processing, grading, packaging and storing it. It helps him getting best price for
his produce.

At the time of independence, the farmers were obliged to sell their crop to the moneylenders,no
matters how low the market price is. This situation knows as Distress Sale. Farmers holding
capacity was Zero on their produce.

a)Measures Initiated by the Government to Improve Market System

1. Regulated Market: The govt. has established regulated market yards, where farmers can
come to sale their produce on fair prices.. It also offer storage facility to them where they
can store their produce.
2. Cooperative Agricultural Marketing Societies : Govt. is encouraging cooperative
agriculture Marketing Socieities where they can find themselves better bargainers. Such
as Milk Cooperative in Gujrat, which has a key role in bringing White Revolution.
3. Provision of Warehousing Facilities: It provides Storage facility to the farmers.
4. Subdised Transport: Railway provides this facility to bring their produce in urban areas.
5. Dissemination of Information: Electronic Media and print media are engaged to
provide information related to market
6. MSP policy (Minimum Support Price Policy) : MSP is an assurance to the farmers that
their produce would be purchased by the govt. at the specied price.

b)Alternative Marketing Channels A ray of hope

Direct sale by the farmers to the consumers is one such channel active in Punjab, Haryana and
Rajasthan through Apni Mandi, Big Bazar. Direct Sale Contract with MNCs (Reliance) is
another channel. These companies offers advance payment to the farmers for supplying their
produce at pre-determined rates.

c)Agriculture Diversification and Market Risk

Agriculture diversification refers to the re-allocation of some of farms productive resources into
new activities. Diversification has two aspects:
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1. Diversification of Crop production: Minimizes the market risk due to price

fluctuations. Also minimizes the risk occurring from monsoon failure.
2. Diversification of Production Activity/Employment: A shift from crop farming to other
areas of production activity/employment.

II.The Emerging Challenges of Rural Development

A) Employment outside Agriculture B) Organic farming and sustainable development

Animal Husbandry Discard the use of non-renewable resources

Fisheries Encironment Friendly

Horticulture Sustain Soil fertility

Cottage and household industry Healthier and tastier food

Inexpensive technology for the small and

marginal farmers

A.) Employment outside Agriculture : it is an important challenge for the livelihood

1. Animal Husbandry: It is called livestock farming. Poultry(42%), cattle (25%), and
goat/sheep (20%) are important component in this regard. The scope of crop farming is
reducing due to less irrigation facilities.
2. Fisheries: This source is equally depends on inland and marine sources.Kerala,
Maharashtra, Gujrat and Tamilnadu are the principal states in India for fisheries.
3. Horticulture: It includes fruits, vegetables, flowers and many others. Presently, India is
second largest producer of fruits and vegetables in the World. Around 20% rural
employment is generated by horticulture.
4. Cottage and household industry: It inclues spinning, weaving, dyeing and bleaching.
Few other income generation activities are also emerged in last few years like : soap
manufacturing, doll-making,mushroom cultivation etc.

B) Organic Farming and Sustainable Development: It is a system which relies upon the use
of organic inputs of cultivation. Animal manures and compost are the major organic inputs.
The major focus is on maintaining soil health for long period sustainable process with eco-
friendly environment.
1. Discards the use of non-renewable resources: It doesnt not use synthetic chemicals
which are petroleum based.
2. Environment-friendly : Organic farming discards the use of chemical fertilizers such as
3. Sustains soil fertility: Organic farming nurtures soils as a resource for future generation
and sustainable development while conventional farming erodes fertility of soil.
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4. Healthier and Tastier food: Organicaly food is more nutritious than the food from
chemical farming.
5. Inexpensive technology for the small and marginal farmers: No expensive package is
required for organic farming such as HYV seeds, fertilizers, pesticides etc.

Conclusion: It cannot be denied that organic farming is not cost efficient but it is in high
demand. Thus, organic farming must be given preference over conventional farming.
Golden Revolution: series of research, development and technology transfer initiatives
increasing production of horticulture crops and honey.
Information Technology (IT) as an option of livelihood in rural areas: IT is known as
knowledge economy where 10 lakh rural people are using info-kiosks. It is
equipped with computers, scanners, printer and photocopiers. It is helpful to video
conferencing, e-mailing and transfer of documents.

Chapter 11
Inflation refers to a situation of increase in the general price level over a period of time. It can
be arised due to many reasons including a rise in the price of inputs, rate of interest, cost of
investment or fall in demand or income of the people.

1. Indicators of Inflation

Wholesale Price Index (WPI) : it measure the

change in wholesale prices on weekly basis. This index
covers approx 435 commodities.

Consumer Price Index (CPI) : It measures the

change in retail prices on monthly basis. CPI includes
goods and services both while WPI includes goods only.

GDP Deflator: It refers to the ratio between GDP at

current price and GDP at constant prices.

2. Trends of Infltion in India.

During 1951-56 (First plan) the change in price level was negative as -3.6, later in 1992-97 risen up
6.6% and during 2007-2012 (11th plan), average annual inflation rate was 7.4% .

3. Causes of Inflation
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I. Increase in Money Supply: Since 2nd five year plan, supply of money has increased more than
GDP, consequently prices also increasing.
II. Deficit Financing: Deficit financing refers to the policy of printing more notes. Budgetary deficit
also has rised.
III. Rise in Population: Due to high population rate, demand for primary goods also has increased.
While their output is not sufficient. Thus, prices increased.
IV. Periodic Fall in Production: Because of Failure of monsoon many times in between 1965 to 92,
production of foodgrains was dissatisfactory. Production also were insufficient due to shortage of
raw material, transport, machines and equipments etc. Thus, inflation arised.
V. Increase in Wages: If wages increases, prices increases, also rises cost of production. As a result,
inflation arises.
VI. Administered Prices:Due to hike in Administered prices, prices of railway freight, postal charges
and petrol also increases.
VII. Inflation across the Borders: Since 1980, crude oil prices also has risen up. Prices of all
imported raw material also has increased.
VIII. Hike in Indirect Taxes: hike in Sales tax, excise duty and custom duty also has gave birth of
IX. Credit Expansion: Easy avalilability of credit for the purchase of consumer goods has causes
rise in demand, consequently price level has tended to scale up.
X. Black Money: There is huge stock of unaccounted money in India which is lavishly spent. Thus,
inflation has increased.

Cost push inflation: it occurs when price level tends to rise owing to
the rising cost of production. Rise in cost of production may be related
to expensive inputs.

Demand Pull Inflation: occurs when price level tends to rise owing
to the pressure of demand in the economy.
4. Effects of Inflation / Problems related to Inflation
1. Inflation Hinders the process of growth: Inflation in cost of raw material, cost of production,
cost of wages hinders the process of growth.
2. Adverse effect on the people with fixed income: Quality of life suffers of those who have fixed
3. Increase in the cost of projects: Cost of projects tends to rise due to rise in projects, which
makes difficult to achieve pre-determined targets.
4. Adverse impact on Balance of payments (BOP) : Export increases and import decreases.
5. Wage-Price spiral: Real and money wages declined due to inflation
6. Inequality: Inflation gives birth to inequality in the distribution of income and wealth. Wage
earners suffers from problems.
7. Economic Stagnation: inflation lowers purchasing power of the people. Size of the market tends
to shrink.
8. Impact on FDI : Inflation threatens the flow of Foreign direct investment (FD).
9. Speculation and Hoarding: Traders make speculative investment on inventory stocks,
Accordingly current supplies are reduced.
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5. Govt. Policies to check Inflation

a) Price Policy: it refers to the policy of directing, regulating and controlling the prices of goods and
servies in the economy. It has 2 instruments:
Price Control of Essential Goods: Prices of certain essential goods are controlled to ensuring
their availability to all sections of the society.
Procurement Price and Support Price: Procurement price refers to the price fixed by the
Govt. at which it procures a part of the farmers produce to run its PDS (Public Distrbution
System). Support price is that which is offered by the Govt. to the farmers to purchase their
surplus outputs.

b) Monetary Policy: By which the Govt. controls the supply of money and the rate of interest in the
economy. It has 2 instruments:
Supply of Money: To control the inflation, RBI puts a check on the supply of money in India.
Rate of Interest: To check inflation, RBI raises the bank Rate.It causes a rise in market rate of
interest. Accordingly, demand for loans is reduced and reduces level of expenditure also.
Supply of Credit:
Increase in CRR (cash reserve ratio)
Sale of Govt. Securities
A rise in margin for loans
Credit rationing

c) Fiscal Policy: It is the revenue and expenditure policy of the Govt.

Principal Measure:
Publich Expenditure: To control the demand of goods and services, it is checked by the govt.
Public Debt : Allowed to rise through public borrowing. It reduces purchasing power of the
people and inflation controlled.
Taxes: If taxes will be taken from the people, rest of the amount of income will be reduced and
it will restrict their purchasing power.
Budget Policy: It is a policy by which govt. expenditure is decreased while the revenue is
Dr-Bhawana Sharma

Chapter 10

Employment and Unemployment

Introduction: Unemployment is a major reason behind poverty. It is a stigma to the society and
barrier for the development of a nation. A nation cannot be developed without the participation
of the workforce in the process of economic growth. This chapter forcuses on the basic problems
of the enemployment and steps taken by the govt. for generating employment in the country.

1. Some basic Concepts

Who is a worker? What is Employment?
Worker: A worker is an individual who is in some employment to earn a living.
GDP : Sume total of the goods and services, produced in a country during a year.
Eg. A worker, who is working in a garment factory is engaged in production activity and
contributing to the process of production.

Production activity and economic activity are different concept?

Economic is wider term and production activity is just an element of economic activity.
Those who are engaged in production are called as workers but those who are consuming they
are not workers.

activity Production

All production activities are economic activity but all economic activities are not production

Types of Workers

Self Employed Hired Worker

People working in their own business like A person who is working on salary basis in
a farmer working in his own farm, or an some other organization.
entrepreneur in his own factory

Causal Workers Regular Workers

They are daily wagers, not on They are on permaenent rolls of their
permanent rolls of the employersand getting social security nenefits
employer like, provident fund, gratuity or pension etc.
Labour Supply, Labour Force and Workforce

Labour Supply Labour force Workforce

Amount of labour that the Number of workers actually Number of persons actually
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workers are willing to offer working or willing to work. working and does not
corresponding to a It is not related to wage rate. account for those who are
particular wage rate. willing to work.
Suppose you can do work for WF= LF - No. of persons
10 hours but you are willing not working but are willing
to work only for 6 hours. to work
Can increase or decrease Can increase or decrease
even when the number of only when the no. of
workers remains constant. persons actually working or
willing to work increases or

Number of persons unemployed = Labour force- Workforce

Rate of Unemployment:

Participation Rate:

Why do people work ? Why should we study about working people?

1. To earn a living 1. To know the quality and quantity of human
2. Essential for existence resource
3. Sense of self-esteem 2. To analyse the significance of different
4. Contribute to GDP of the sectors
nation 3. To study on social issues related to workers
4. For manpower planning

2. Size of Workforce in India

Around 40 crore people
70:30 is the ratio of male and female workers
70:30 is the ratio of rural and urban area
Female workforce in rural area is 30% while 20% in urban areas. (Out of the total)
a) Why the bulk of our workforce is rural based? Because most of the people are engaged
in farming and allied activities but it doesnot mean that they are contributing in GDP is high.
It is due to low productivity and low reward.
b) Why is the percentage of female workers low and lower still in urban areas?
Low opportunity for jobs
Governed by family decision
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In rural areas they are engaged in low paid

3. Rate of participation in India

It refers to participation of people in production activity and is measured as a ratio of workforce

to total population. (2014)

Urban areas 47.2 % (73.8 Men, 18.5 Women)

Rural areas 73.8% (74.7 Men, 29.1 Women)

Observations behind the facts

1. High Dependency Ratio :Not many people are engaged in production activity.
2. High Rate of Participation, but low level of productivity in rural area: Due to low
productivity and low rewards
3. High Rate of Participation for women in Rural area: Because in rural area: poverty compels
them to avoid education and seek employment.

Under estimation of women workers in the country

a. Housewives are not deemed as workers because they are paid for it
and it is difficult to ascertain market value of their services as
b. Women working in farms in rural areas and working in joint family
business in urban areas are not considered as workers.
4. Self-employed and Hired workers in India
a) In urban areas: 37.9 % are Self employed and 62.1% are hired because in urban areas most
of the people look for jobs in office and facroties.

In Rural areas: 45.7% are self employed and 54.3% hired because in rural areas family
farms are the most attractive means of employment.

b) Males: 50.5% are Self-employed and 49.5 % are hired

Females: 45.7% are self employed and 54.3 % are hired
Reason : Because of family and social constraints, mobility of women workers is low
While in rural area women are satisfied with self employment like spinning, weaving, dyeing

In India, Self employment is a major source of livelihood due to low

literacy rate, low wage rate, low mobility, less opportunities of

5. Occupational Structure or Distribution of Workforce by Industry. (In


a.Occupationa b.Rural b. Urban c. Male c. Female In In

l Structure Workfoce Workforce Workforce Workforce 1950- 2013-
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51 2014
Primary 46.9% 60.8 8.2 45 57.3 72.72 46.9
Secondar 22.2% 19.2 30.4 19.1 14.9 10.02 22.2
y Sector
Tertiary 30.9% 20 61.4 25.3 18.9 17.26 30.9
Others 10.6 9.6

Reason a) : Because Most of the people in India re dependent on Agriculture

Reason b) : Because most of the rural workforce are engaged in primary sector(Agriculture)
while urban workforce are engaged in tertiary Sector (ServiceSector:Banking,
Insurace etc.)
Reason c) : Owing to social constraints, female workers are unwilling to migrate for outside
jobs. They prefer to work at their local place even for a low wage.

6. Jobless Growth : Jobless growth is a situation when the level of output in the economy tends
to rise owing to innovate technology without any perceptivble rise in the level of employment.
If economic growth is driven only by innovative technology, it fails to improve the level of
employment in the economy. Such a growth is called Jobless Growth

MNCs are achieving high growth through efficient use of technology rather than
through greater use of manpower. Thus, growth is moving faster than the job
opportunities, so it is a Jobless Growth
7. Casualisation and Informalisation of Workforce

Casualisation : a situation when the percentage of casually-hired workers in the total workforce
tends to rise over time.

1972-73 (%) 2013-14 (%)

Casually-hired 23 30.9
Self-employed 52 49.5
Regularly-hired 15 16.5

Informalisation: a situation where percentage of workforce in the formal sector tends to decline
and that in the informal sector tends to rise.


Formal Sector Informal Sector

Organised Sector such as all govt. deptt, All private enterprises including less
public and private enterprises which hire than 10 workers besides farming and
10 or more workers selfemployment
Benefits like PF, Gratuity, Pension etc. No benefit
Trade unions exist No trade unions
Protected from various labour laws No protection
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Note: Around 90% population are informal sector

8. Rural and Urban Unemployment

Who is Unemployed?

According to Prof. Pigou A man is unemployed only when he is both without a job or not
employed and also desires to be employed

Unemployment in India

Rural Unemployment Urban Unemployment

Disguised Unemployment: A Industrial Unemployment: It includes

situation wherein the no. of thoese illiterate person who are willing to
workers engaged in a job is much work in industries, mining, transport, trade
more than actually required. and construction activities.

Seasonal Unemployment: Educated Unemployment: No. of

During off season, often the farm colleges and universities are growing very
workers have no work to do. They fast but education system of India is not
usually remain unemployed for 5 job oriented. Thus, no. of job opportunities
to 7 months in a year lagged behind the size of education labour
Note : In 1961 there were 32 lakh registered unemployed, in 2008, their number rose to 270

Youth Unemployment and Women Unemployment

Youth Unemployment : Between the age group of 15-29 years. This exists in
both rural and urban areas. It is more among the educated (than uneducated

Women Unemployment: Around 78% women are not working in India.

Common Types of Unemployment in Rural and Urban Areas

1. Open Unemployment : Wherein although the worker is willing to work, he has ability to
work yet he does not get work and he remain unemployed and dependent on other earning
members of the family.
2. Structural Unemployment
a) Change in technology : old technocrats are no longer needed.
b) Change in the pattern of demand: Certain industries are closed down and the workers
are thrown out.
3. Underemployment: In which a worker doesnot get a full time job.He remain unemployed
for few month or few hours everyday. It has 2 types:
a) Visible Underemployment: People work lesser than the standard hours of work in a day.
Dr-Bhawana Sharma

b) Invisible Underemployment : He works full time, but his income is not appropriate
according to his abilities. Eg. If an MA degree holder has to work as a peon.
4. Frictional Unemployment: Due to mobility across different occupation. Eg. A married lady
may decide to remain out of job for a couple of weeks or months.
5. Cyclical Unemployment : It occure due to cyclical fluctuation in economy like Boom,
Recession, Depression and Recovery.

Causes of Unemployment In India

1. Slow Economic Growth: Slow Economy growth fails to generate sufficient no. of job
2. Rapid Growth of population: Size of population is more than no. of jobs.
3. Agriculture- A seasonal Occupation : It is seasonal in nature and does not provide stable
4. Lack of Irrigation Facilities: For irrigation, Mono-cropping (Only 1 crop per year)
becomes compulsion. As a result it creates unemployment.
5. Joint Family System : High tendency to survive on joint income without work.
6. Decay to cottage and small industries: Emergence of large industry in place of small
industry has failed to yield employment opportuni ities.
7. Low savings and Investment : There is scarcity of capital, as a result investment also
remains low and employment doesnot rises.
8. Mobility of labour: People doesnot want to leave their residence due to jobs at other place,
it creates unemployment

Economic and Social Consequences of Unemployment

Economic Consequences

1. Non-utilisation of Manpower: Manpower resources of the country are not utilised and
sheer wastage for the society.
2. Loss of output: Unemployed persons make no contribution to output even they have
3. Low capital Formation: Unemployed people do not earn anything thus, rate of capital
remains low.
4. Low productivity: Unemployed persons do not give productivity, it is the reason behind
low rate of growth.

Social Consequences

1. Low Quality of Life: Low standard

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2. Greater Inequality: Gap between rich and poor

3. Social Unrest: Terrorism, Crime and other illegal activities born.
4. Class Struggle: High and lower class
Suggestions to solve the problem of unemployment in India
1. Increase in Production: High rate of production will increase no. of jobs.
2. Increase in Productivity: Productivity generates high profit and greater demand of
3. High rate of capital formation: Investment should be encouraged to increase the
savings and capital
4. Help to self-employed persons: Govt. should provide facilities like irrigation, transport,
electricity, seeds, credit in rural areas while in urban areas also like credit, marketing, raw
material etc.
5. Educational Reforms: Vocational education should be encouraged and institutions
should cooperate to employment agencies
6. Techniques of production: Labour intensice technology should be replaced instead of
7. Cooperative Industries: People should contribute something and govt. also will support
these cooperative industries.
8. Importance to Employment programmes in plans: Employment programmes should
be encouraged by govt. which can best serve end as: irrigation projects, road
construction, rural electrification, soil conservation etc.

Chapter 12

1. Introduction

There are certain things such as power/energy/transport and communication, school, colleges
besides hospitals and nursing homes which serve as the foundation of economic growth and
social development of a country. Sum total of these thing make up Infrastructure

2. Concept of Infrstructure

It refers to such core elements of economic and social change which serve as a support
system to production activity in the economy.

Economic and Social Infrastructure

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Economic Infrstructure: all such elements of economic change which serve as a support
system to the process of economic growth such as power/transport and communication.

Social Infrstructure

Ir refers to core elements of social change which serve as a support system to the process of
social growth such as schools, college, hospitals and nursing homes.

Difference: Economic infrastructure fosters economic growth while social infrastructure

fosters human growth. Economic growth accelerates the process of growth while social
infrastructure accelerates the process of human development.

Complement: When economic and social infrastrucute are put together that the process of
growth and development would become a dynamic process.

3. Infrastructure and development

I. Infrastructure impacts productivity

(1) Productivity in primary sector: Agriculture cannot not be done without the facility
of irrigation.
(2) Productivity in Secondary sector: Industrial productin is not possible without
energy, coal, petroleum and electricity.
(3) Productivity in Tertiary sector: Banking, Insurance, Tourism is also not possible
without transportation and communication.
II. Infrasturcture induces investment: A person cannot do business without the facilty of
transportation. Thus, due to lackness of infrastructure a person cannot do investment
III. Infrastructure generates linkages in production: Linkages is a situation where
expansion of one industry facilitates the expansion of the other.
IV. Infrastructure enhances size of the market: Infrastructure enhances the size of the
market as a result of increased production.
V. Infrastructure enhances ability to work: Educational institutions, healthcare and other
facilities has promote the skill formation of people and their ability.
VI. Infrastructure facilitates outsourcing: India is emerging to be globel destination for call
centres, study centres, medical transcription and such other services.
VII. Infrastructure induces FDI : Due to the expansion of infrastructure, Foreign direct
investment (FDI) also has started to expand in India.

Health (Key component of social infrastructure)

Health is a state of complete physical, mental and social well-being. Good health enhances the
quality of life. Good health implies the following:
i. Increase in overall efficient to handle difficult tasks
ii. Increase in productivity of labour
iii. Increase in mental abilities

Development of health services after independence: Following are the key points to this fact
1. Decline in death rate: 27.4% per thousand in 1951, 7.6% per thousand in 2015.
2. Reduction in infant mortality rate: 146/ thousand in 1951 to 40/thousand in 2013.
3. Rise in expectancy of life: 50 years in 1951 to 68 years in 2013.
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4. Control over deadly diseases: Like Malaria, tuberculosis(TB) and smallpox are under
5. Reduction in child mortality rate: 57/ thousand in 1951 to 15.2/thousand in 2009.

No. of hospitals are increased as 35000 at present. No. of Doctors has increased from 62000 to

Expansion in Nutrition Programme

70-80% people do not get nourishing food. There is lack of nutritive

elements like proteins, minerals, vitamins etc. Main function of nutrition
expansion blocks:

1. To find oout the nutritive deficiency

2. Expansion and publicity of programmes
3. Monitoring of nutrition programme.
In many states free nutritive food is given to the children. In 1996, a sum
of 1400 crore was provided. Major programmes:
a) Special nutritive programme: food is given to 229 lak children
and women
b) Mid-day mean: 211 lakh children of age group of 6-11 years
Nutrition education:
health Regarding nutritive die.

More than 80% total healthcare spending

78% rural and 81% urban patients are availing private non-institutional
58% rural and 62% urban are going to private hospitals
It has important role in medical education and training, medical technology,
manufacture and sale of medicines etc.
At the time of independence, only 8% was private healthcare facilities but
today, 93% of hospitals, 64% of beds, and 80-85% of doctors are realted to
private health care sector.

Health as an emerging challenge

During five years plans, major results are found

Death rate has reduced

Birth rate has reduced
Mortality rate has gone down
Expactancy of life has risen

Weakness of Health care sector

Unequal distribution: Most of the facilities are in urban areas.

Communicable diseases: AIDS, HIV and SARS are raising
Poor management: Mismatch between the personnel for healthcare and the
number of healthcare centres.
Privatisation : It is increasingly as expensive
Poor upkeep and maintenance: Govt. healthcare centres are very poor thus,
most of the people are dependent on private sector health care.
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Poor sanitation level: It is extremely poor in urband and rural areas both.
Sanitation infrastructure has two function : a) To make clean surroundings b)
To arouse awareness of sanitation among the people.

It is found that around 30% of the houses have no toilet facilities in the urban areas.

Rural-Urban and Rich-Poor divide

70% population are in rural areas still 80% hospitals are located in urban
Only 25% people get proper medical care
Rice spend only 2% of their income on health care while poor spends
around 12%.
Womens health

In USA, healthcare expenditure is nearly 15% of GDP, while in India, it is only

In USA, govt share in total expenditure on healthcare is 50% while in India it
is just 20%.

Indian System of Medicines (ISM)

India has six recognised systems of medicine such as Ayurveda, Yoga, Unani, Sidha,
Naturopathy and Homeopathy (AYUSH). As on April 1, 2010, there are 3277 ISM
hospitals, 24829 dispensaries, 62649 beds, 495 under graduate colleges and 106
post graduate colleges in India.