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perhaps no country could be distinguished as developed in the sense that we understand development. In Economics. The separation of productive activities between the two distinct sectors of agriculture including quarrying (also called the Primary Sector) and (v) . Once agriculture began and developed. along with income. Development as a process had probably started quite early in history. India. manufacturing and services as three distinct sectors of the economy. in this book. These were the first human-made products called ‘artefacts’. we have not emphasised on the external factors. we will study how people actually perceive development and how it can be measured. cultivating or extracting of purely natural products such as fruit. Sometimes. Economists called the process of making the artefacts ‘manufacture’ as distinguished from ‘agriculture (including quarrying)’ that covered the gathering. The process of development may also restart after such interruptions. weapons. This is because the state of development (or underdevelopment) of a country has often depended on outcomes of wars and conquests and on colonial exploitation of one country by another. probably was started. as producers or consumers of goods and services. the extraction of other natural products. like mineral ores. However. We will look at the extent to which some of the important developmental indicators help in understanding development and how the process may affect different people differently. This has happened in the case of our own country. We have taken a long view of the process of development: a process that could have started before any external factors intervened or interrupted it. we usually try to look at development as a process of change in the economic life of the people.A FEW INTRODUCTORY WORDS FOR TEACHERS This book introduces you to a simplified view of the process of development in the Indian economy. There are various measures available for this purpose. and continue on independent lines after the period of subjugation ends. broadly define the quality of life of a people. In this book the first beginnings of development are seen in terms of the emergence of agriculture. We have also tried to look at economic development not in isolation but as part of a more general concept of human development that includes the development of health and education and other indicators that. Perhaps the process would have started in most human settlements when people started living in relative peace and in more or less fixed habitations without which agriculture would not have been possible on any significant scale. Humans learnt to use the non-food products like wood from trees and the minerals obtained from quarrying as raw materials for making their tools. This latter process of recovering stones and other minerals is called ‘quarrying’. In the first chapter. rice or minerals. utensils. development is studied mainly as a phenomenon that acquired significance only with the growth of the modern industrial civilisation. To begin with. fishing nets and so on.

The discussion here is focussed on India and the changes that have occurred in the three sectors over the past decades. higher standards of living leading to more productive investments contributing to development. regarded as the father of economics had called it. manufacture (also called the Secondary Sector) was probably the first visible manifestation of economic development. and private and public sectors. Besides this. There were also doctors who healed people when they were injured or had fallen ill. Then there emerged specialists who were not themselves producing any good at all: they were people specialising in teaching others how to do these things better. poverty and debt-trap leading to increased poverty. The fourth chapter focuses on a particular dimension of globalisation that is economic in nature — the complex organisation of production. Some important factors and institutions that facilitate globalisation also find place in this chapter. At first every person. it also provides two other ways of classifying economic activities — organised and unorganised. or trap or hunt animals and birds for food and so on. secondary and tertiary sectors. The second chapter will look at the way economic activities in a modern economy can be classified and understood within the framework of primary. Then at some point the advantage of ‘division of labour’ must have been felt. consumers belonging to all (vi) . the chapter appraises the impacts of globalisation (positive and negative) on the Indian economy. This was also ‘development’ of a kind. others on how to till the soil. These ideas are presented through case studies. which has influenced development and people around the world in various ways. Then the chapter moves on to discuss the role of banks and other institutions in providing credit to the people. still others on how to produce pottery. How multinational companies facilitate globalisation through trade and investment is also explained. presumably. The relevance of additional ways of classification for understanding the problems and challenges of the modern Indian economy is illustrated using real life examples and case studies. The third chapter initiates the learners into the world of money — its role in a modern economy. Humans found out with experience that production became more efficient if some people concentrated on learning how to fish. forms and its linkage with various institutions such as banks. In the end. higher income streams. Globalisation is an important phenomenon. This separation came about through the process of “division of labour” as Adam Smith. The examples Labour is the and case studies in this chapter and elsewhere try to examine whether the source of all wealth benefits of development are spreading to all people (producers big and small. workers in the organised or unorganised sectors. The process is briefly explained below. or a vicious cycle of indebtedness. The process of development leads to not only higher levels of production in different sectors of the economy. Naturally division of labour between people increased the productivity of all the people and the economy grew. but has some down sides too. Issues stressed in the discussion on credit are (a) pervasiveness of credit in economic life across a very large section of the population (b) the preponderance of informal credit in India and (c) role of credit in creating either a self-sustaining virtuous cycle of productive investment. or at least members of every household. had to do everything all by themselves.

we can protect the rights of citizens as consumers. reference books. debates etc. The chapters start with Note for the teacher. Some of them are mentioned in the Note for the teacher and some in Suggested Readings given at the end of this book. The intention is to allow for more interaction than is usually observed but there is no fixed formula for doing this. consumers are often at the receiving end of business malpractices. and (iii) sources for additional details relating to different topics. men and women and so on) or are being confined to only some privileged sections. Features of this Textbook The purpose of the book is to understand the economic life around us and also to think about what we would mean by economic development for people. We have used many reference materials while preparing this book. DEVELOPMENT! expensive and time-consuming legal procedures. Teachers could read this page before they start teaching a chapter. Our final chapter presents a relevant study of how. interviews with people around. This could be in the form of short surveys. It is important that additional information and readings be brought into classroom discussion. After tracing the historical root of the consumer movement and through various real-life instances. During the process of rapid development and emergence of new brands and advertisement campaigns by unscrupulous producers. wallpaper displays. Some of the internal exercises should be done in the discussion mode. skits. These have to be read and used keeping this overall objective in view. many news clippings. given after each section in the chapters. There are many examples and case-studies that we have used both as an aid for conceptual clarity and to relate these ideas to real life.income groups. Students can discuss these in groups and present their conclusions and the answers may be put up for debate with the entire class. Besides these. These should then be used for reflection and creative expression by students themselves in the form of making charts. This contains a few questions to review the section and open-ended questions and activities that can be taken up within and outside the classroom. this chapter tells of different inexpensive consumer protection mechanisms evolved over the years. Each teacher would find his or her own ways and we would like to express our faith in their abilities to do so. It also offers details of how people can now assert some of their rights at very little expense at the THIS IS GOOD special consumer courts that operate outside the existing cumbersome. There are several internal exercises in Let’s work this out. or newspaper clippings etc. and to what extent. This will require more time but it is essential as this allows students to explore and learn from each other. Evaluation While addressing the need for reforms in education. (ii) some pointers to how the chapter could be taught. It contains the details of (i) the broad approach and content of the chapter. the National Curriculum Framework 2005 and the Position Paper of the National Focus Group on (vii) . reports from government and non-government organisations were also used.

about 80 per cent of farmers are small farmers.80. What should be the developmental goals for such an area? (viii) .000 39. teachers can formulate additional questions. Questions to test reflective thinking (a) Look at the picture (high rise buildings with slums around).Examination Reforms call for a change in the way questions are asked in examinations. reflection and hones the analytical ability of learners.000 2. who need credit for cultivation. (ii) Show the data as a bar diagram similar to Graph 2 in the chapter 2. (i) all goods and services (ii) all final goods and services (iii) all intermediate goods and services (iv) all intermediate and final goods and services (b) Analyse the role of credit for development. Questions that test the understanding of core concepts (a) GDP is the total value of _________ produced during a p articular year.000 (i) Calculate the share of the three sectors in GDP for 1950 and 2000. imagination.000 2000 3. interpretation and coherent presentation (a) The following table gives the GDP in Rupees (crores) by the three secors: Year primary secondary tertiary 1950 80.55.000 5. (c) In what ways will the production of cars by Ford Motors in India lead to interlinking of production? (d) How would flexibility in labour laws help companies? Questions to assess analytical abilities. (i) Why might banks be unwilling to lend to small farmers? (ii) What are the other sources from which small farmers can borrow? (iii) Explain with an example how the terms of credit can be unfavourable for the small farmer. The questions asked in this book make a departure from an evaluation pattern that encourages rote-memorisation to one that inculcates creative thinking. (iv) Suggest some ways by which small farmers can get cheap credit. (iii) What conclusions can we draw from the bar graph? (b) In India.14.000 19. Based on the examples shown here.

Email id: classtenecons2007@hotmail. Now the RTI Act gives you the power to question. We hope that you along with your students would look at this textbook itself in a critical manner and send us your critique. It is also necessary to develop questions that require students to draw from one or more areas of the syllabus for making relevant connections between materials from different chapters. (d) People make complaints about the lack of civic amenities such as bad roads or poor water and health facilities but no one listens. questions. (c) “Tertiary sector is not playing any significant role in the development of Indian economy”. to the following address. For instance. Questions that test the ability to apply concepts and ideas to real life problems / situations (a) What can be some of the developmental goals for your village. PROGRAMME COORDINATOR Economics Textbook for Class X Department of Education in Social Sciences and Humanities National Council of Educational Research and Training Sri Aurobindo Marg New Delhi – 110 016. town or locality? (b) Students in a school are often classified into primary and secondary or junior and senior. (e) Describe some of your duties as consumers if you visit a shopping complex in your locality. How is this statement relevant to the discussion of development? Discuss. Do you agree? Discuss. clarification. Find out who are these people and why are they opposing TEXTBOOK DEVELOPMENT COMMITTEE (ix) . we saw what may be development for one may be destructive for others. in Chapter 4 one question links to Chapter 1— In chapter 1. (b) “The Earth has enough resources to meet the needs of all but not enough to satisfy the greed of even one person”. Do you agree? Give reasons in support of your answer. What is the criterion used here? Do you think this is useful classification? (c) In what ways can employment be increased in urban areas? (d) What do you understand by disguised unemployment? Explain with an example each from the urban and rural areas. etc. The setting of SEZs has been opposed by some people in India. AND we could continue this discussion further.

the end of each section there are a few www. they Economy. Infant common indicators for development.nic. Literacy Rate. Life do these would need further explanation. At these institutions (www. NOTES FOR NOTES FORTHE TEACHER TEACHERS CHAPTER I : DEVELOPMENT Development has many aspects. you may log on to the websites of students to argue their point of view. have to understand that people have There are certain terms used in this different perspectives on development and chapter that would require clarification — there are ways by which we can arrive at Per Capita Income.worldbank. Attendance Ratio.6. opinion and possibility of debate. we need newer ways reports published by the Government of of looking at development using indicators India (Economic Survey). www. Hence. 2 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . they recap the ideas Bank’s Handbook of Statistics on Indian discussed in the section and second. These serve two Data is also available from the Reserve purposes: first. Development Report) and World Bank It is necessary for you to expect the (World Development Indicators). You How can countries or states be may also need to clarify the concept of compared using some selected purchasing power parity that is used to development indicators is another calculate per capita income in Table 1. complex and macro in nature. It classroom and on a topic such as the may be interesting to look up these reports we Human Development Index. These students to respond actively in the reports are being published every year.rbi. They to their real-life situations. Economic development terms are used as an aid to the discussion can be measured and income is the most and not something to be memorised. However. question that students would read about It is necessary to keep in mind that these in this chapter. Though data have also presented analysis that is more pertaining to these terms are provided. United Nations of quality of life and environmental Development Programme (Human sustainability.undp. the income Sources for Information method. available at www. we have used situations that they Expectancy. there would be wide variation in if they are available in your school library. questions and activities. has several The data for this chapter is taken from weaknesses. common method for measuring Allow If not. Gross Enrolment Ratio. To Mortality Rate. The enable better understanding of the themes purpose of this chapter is to enable discussed by bringing the learners closer students to understand this idea. and can respond to in an intuitive though useful.

CHAPTER I DEVELOPMENT The idea of development or progress has always been with us. Also. it is only through a democratic political process that these hopes and “Without me they cannot develop.. This is because the way we live today is influenced by the past. we have ideas about what a country should be like. you will find answers to many of these questions not just in economics but also in your course in history and political science. We can’t desire for change without being aware of this. We have aspirations or desires about what we would like to do and how we would like to live. possibilities can be achieved in in this system I cannot develop!” real life. D EVELOPMENT 3 . You will learn more about these issues in greater depth in higher classes. In the same way. What are the essential things that we require? Can life be better for all? How should people live together? Can there be more equality? Development involves thinking about these questions and about the ways in which we can work towards achieving these goals.. Similarly. This is a complex task and in this chapter we shall make a beginning at understanding development.

Do all of these persons important for them.. that which have the same notion of development can fulfil their aspirations or desires. or progress? Most likely not. What are their aspirations? You will find that some columns are partially filled.1 DEVELOPMENTAL GOALS OF DIFFERENT CATEGORIES OF PERSONS Category of Person Developmental Goals / Aspirations More days of work and better wages. WHAT DEVELOPMENT PROMISES — DIFFERENT PEOPLE. Try to complete the table. She is able to pursue her studies abroad. Assured a high family income through higher support prices for Prosperous farmers from Punjab their crops and through hardworking and cheap labourers. groups of persons may seek things 4 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT .e. i. there is no social discrimination and they too can become leaders in the village. You can also add any other category of persons. at times. two persons or one of them seeks different things. Farmers who depend only on rain for growing crops A rural woman from a land owning family Urban unemployed youth A boy from a rich urban family She gets as much freedom as her brother and is able to A girl from a rich urban family decide what she wants to do in life. Each In fact. they should be able to settle their children abroad.1. local school is able to Landless rural labourers provide quality education for their children. let us now They seek things that are most examine it. An adivasi from Narmada valley Having filled Table 1. DIFFERENT GOALS YOU WANT A CAR CAR? THE WAY OUR COUNTRY IS Let us try to imagine what SET UP ALL YOU CAN HOPE FOR IS MAY BE TO ONE DAY OWN THE RICKSHAW YOU PULL! development or progress is likely to mean to different persons listed in Table 1. TABLE 1.1.

and decent price for their crops Money. wages. you more income or more consumption will notice one common thing: what because material goods are not all people desire are regular work. freedom. But the quality of our income. as much freedom and opportunity as different persons can have her brother.1 again. they want more our life depends. in some cases. two things are quite clear: one. meeting against resent discrimination. life also depends on non-material Besides seeking more income. or material things that one or other products that they produce. industrialists may the other. If it is not way or the other. DON’T WANT TO submerge the land and disrupt the DEVELOP! lives of people who are displaced – such as tribals. is one factor on which In other words. INCOME AND OTHER GOALS If you go over Table 1. Her brother two. things mentioned above. You A demonstration security. to get one may not be development for more electricity. role of your friends in your life. Similarly. All these are there are many things that are not raising the height important goals. They may desire their friendship. what may be development for may not like this. But this may destructive for the other.which are conflicting. people also seek obvious to you. and that he also shares different developmental goals and in the household work. In fact. then just think of the things like equal treatment. They might resent this and may prefer small check dams or tanks to irrigate their land. easily measured but they mean a lot of Sardar Sarovar Dam on these may be more important than to our lives. and respect of others. better that you need to live. Similarly. It may even be THOSE PEOPLE want more dams. can buy with it. Narmada River . These are often ignored. one. A girl expects So.

it will be wrong to conclude Similarly. In another case. sharing of housework and a such as facilities for your family. it is get a job in a far off place. 6 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . you would find that decide? What would be a fair and just different students in the class have given path for all? We also have to think different answers to the above question. Discuss among However. LET’S WORK THESE OUT 1. apart from income. If you and society increases. may offer high pay but no Hence. then their notion different as well as conflicting of national development is also likely notions of a country’s development. 4. A safe and secure to learn. before also the case that if there is respect accepting it you would try to consider for women there would be more many factors. Would the idea benefit a large many different answers and not be too number of people or only a small sure of any of these. 2. (b) Because life situations of persons are different. their dignity in the household Consider another example. you might yourself think of things. However. to be different. However. 3. Why do different persons have different notions of development? Which of the following explanations is more important and why? (a) Because people are different. Explain some of the important ideas of the above section in your own words. Another job. if for development. Do the following two statement s mean the same? Justify your answer. that what cannot be measured is not people look at a mix of goals. NATIONAL DEVELOPMENT If. the developmental goals job security and also leave no time for that people have are not only about your family. whether there is a better way of doing In fact. (a) People have different developmental goals. can all the ideas be yourselves on what India should do considered equally important? Or. greater acceptance of women working atmosphere. individuals different persons could have seek different goals. (b) People have conflicting developmental goals. for development. sense of security. or opportunity working outside. a job may environment may allow more women give you less pay but may offer regular to take up a variety of jobs or run employment that enhances your a business. however. there are conflicts how does one Most likely. It is very group? National development means important to keep in mind that thinking about these questions. It is important. This will reduce your better income but also about other sense of security and freedom. important things in life. as we have seen above. Give some examples where factors other than income are important aspects of our lives. true that if women are engaged in paid work.

Read this newspaper report and answer the questions that follow: 0 tonnes A vessel dumped 50 st es in to of liq ui d to xi c wa a city and open-air dumps in sea. If you know of any such controversy. diarrh re pe rs on s we m on th se ve n spital and dead. a y Co as Ab id ja n in Iv or mes Th e fu country in Africa. sk in ra caused nausea a oe a etc . What should be the developmental goals for such an area? 2. (i) Who are the people who benefited and who did not? (ii) What should be the developmental goal for this country? 3. Look at the picture on the right. LET’S WORK THESE OUT Discuss the following situations: 1. . try to find out arguments advanced by different people. Af ter fainting. st e to xi c wa fro m th e hi gh ly sh es. You may do so by talking to different persons or you may find it from newspapers and television. for symptoms of po mpany A multinational co tr ol eu m an d de a lin g in pe loc al ra cte d a metals had cont t to e Ivo ry Co as company of th fro m xic wa st e dispose the to its ship. What can be some of the developmental goals for your village. This in the surrounding ty ca lle d ha pp en ed in a ci t. town or locality? ACTIVITY 1 If even the idea of what constitutes development can be varied and conflicting. then certainly there can be differences about ways of developing. twenty in ho treated twenty six thousand isoning. D EVELOPMENT 7 .

and should have. This is based on the countries are generally called understanding that more income developed and others under . how shall we is also called per capita income. total income is not such an be the friendliest one. their per annum. how come some income.000 For comparing countries. talents residents of the country. let us consider another question. The healthiest student us the total income of the country. Which aspects do we use to compare them? Let us look at Now. Still. we have to choose the income of the country divided by its criterion for the all-round progress of total population. are Countries with higher income are generally called developed countries. 8 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . income in 2004 was just Rs 28. what is the income of a students in the class itself. So. O f per capita income of Rs 4. This gives and interests. are called what are important characteristics rich countries and those with per that should form the basis of capita income of Rs 37. we compare organise a picnic. The average income children in the class. income itself is considered to be one they could have similarities as well as important goal. India cooperation. if for some the average income which is the total purpose. Are people in to choose a sports team. brought out by the World important characteristics of Bank. a debate one country better off than others in a team. Countries with on these characteristics. and certain other small countries. they will be able to get with greater income.000 per course. How do country? Intuitively.000 or less are comparison: friendliness and spirit of called low-income countries. there can be differences about annum and above in 2004. may not be the most studious one. this criterion is used in persons and compare them based classifying countries. countries have compare students? The criterion we different populations. greater When we compare different things. a music team or a team to different country? Hence. means more of all things that human developed? Before we come to this. how do we useful measure. do it? In World Development Report Usually we take one or more 2006. We use different criterion person is likely to earn.53. However. the income of the we compare different students? They country is the income of all the differ in their height. comparing total may use depends on the purpose of income will not tell us what an average comparison. creativity or marks comes in the category of low-income secured? countries because its per capita This is true of development too. differences. for comparison between The most intelligent student may not countries. So. health. income is considered to be one of excluding countries of Middle East the most important attributes. Whatever people like. beings need. The rich countries. HOW TO COMPARE DIFFERENT COUNTRIES OR STATES? You might ask — if development can more developed than others with less mean different things. Since.

From the text. can we conclude that all sections of the economy have become better? Illustrate your answer with an example. live in country A. D EVELOPMENT 9 . From this. A and assured of being its fifth citizen B. 3. what other property of income is important in comparing two or more societies? 4. On the other hand most citizens in Country A 9500 10500 9800 10000 10200 country B are poor and one Country B 500 500 500 500 48000 person is extremely rich. we have assumed but if it is a lottery that decides that they have only five citizens each. 6. In this Country (in Rupees) country people are neither very I II III IV V Average rich nor extremely poor. AND HE TOOK 2.2 COMPARISON OF TWO average income. find out the per capita income level of middle-income countries as per WDR 2006. Besides size of per capita income. to become a developed country. Write a paragraph on your notion of what should India do. Suppose records show that the average income in a country has been increasing over a period of time. WE LET’S WORK THESE OUT MADE THE CHAIRS 1.2. THEM. let us consider two countries. Hence. COUNTRY WITH NO RICH AND NO POOR COUNTRY WITH RICH AND POOR WE MADE THE CHAIRS AND WE USE THEM. they also hide disparities. country A is COUNTRIES preferred because it has more Monthly incomes of citizens in 2007 equitable distribution. For example. For the sake of simplicity. 5. or achieve. Average Income While ‘averages’ are useful for comparison. Why do you think average income is an important criterion for development? Explain. Even though both the countries have identical TABLE 1. Based on our citizenship number then data given in Table 1. while average income is useful Will you be equally happy to live in both these for comparison it does not tell us countries? Are both equally developed? Perhaps how this income is distributed some of us may like to live in country B if we are among people. calculate the perhaps most of us will prefer to average income for both the countries. Give three examples where an average is used for comparing situations.

besides average income. when we Kerala 22800 think of a nation or a region. Similarly. if per capita income Capita Net State Domestic Product at were to be used as the measure of Current Prices for 2002-03. Bihar 5700 we may. Punjab has data pertaining to these states given the highest per capita income and in Table 1. a person in example. a person in Bihar would earn only around Actually.3 PER CAPITA INCOME think of better income but OF SELECT STATES also have goals such as State Per Capita Income security. Punjab will be ignore what this complicated term considered the most developed and exactly means. on an average. Roughly we can take Bihar the least developed state of the it to be per capita income of the state. Literacy Rate measures the proportion of literate population in the 7 and above age group.000 in one year income of Punjab. three.500. Let us development.000 (2003) (2001) for Class I-V (1995-96) Punjab 49 70 81 Kerala 11 91 91 Bihar 60 47 41 Explanation of some of the terms used in this table: Infant Mortality Rate (or IMR) indicates the number of children that die before the age of one year as a proportion of 1000 live children bor n in that particular year.4. What could these attributes be? Bihar is at the bottom. think of other equally important attributes. TABLE 1. respect for others. Now. So. freedom etc. Table 1. on an average. for 2002-03 (in Rs) equal treatment. we found that people not only TABLE 1. let us look at certain other We find that of the three. Punjab 26000 in mind.3 gives the per capita Punjab earned Rs 26. INCOME AND OTHER CRITERIA When we looked at individual aspirations and goals. Kerala and Bihar. Net Attendance Ratio is the total number of children of age group 6-10 attending school as a percentage of total number of children in the same age group. whereas. these figures are of Per Rs 5. This means Let us examine this through an that. KERALA AND BIHAR State Infant Mortality Rate Literacy Rate (%) Net Attendance Ratio per 1.4 SOME COMPARATIVE DATA ON PUNJAB. 10 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT .

Money may also not government should open schools and be able to protect you from infectious provide other facilities so that all diseases. Just you would not be able to read what think of how dear you are to your you are reading now. other than you. think of how every one is so happy when a child is born. also the average person in Kerala but lags cheapest way. Now. So you are actually ensure that you get unadulterated able to study because many other medicines. How painful it must be to these parents? Next. children. note the year to which this data pertains. it is 56 years after independence when our metro towns are full of high-rise buildings and shopping malls! Most babies do not get basic health care PUBLIC FACILITIES How is it that the average person in Actually for many of the important Punjab has more income than the things in life the best way. This means that if you children dying within one year of birth went to school in Bihar more than half is 49. unless the whole of your children have a chance to study. are not able to achieve secondary level schooling because government/society has not provided adequate facilities. So we are not talking of old times. income by itself is not a man? What if no one. So. try to think of parents whose children die before they even celebrate their first birthday. is to provide these goods behind in these crucial areas? The and services collectively. It is 2003. The last column Kerala. of your class would be missing. completely adequate indicator of in your village or locality is interested material goods and services that in studying? Would you be able to citizens are able to use. For example. Even community takes preventive steps. the per capita who could have been in school are not income of Punjab is much more than there! If this had happened to you. your money cannot buy afford to send you to some private you a pollution-free environment or school elsewhere. study? Not unless your parents could normally.3. Kerala as shown in Table 1. in many areas. now. unless you can afford to children also want to study and shift to a community that already has because many people believe that the all these things. Just think – reason is — money in your pocket will it be cheaper to have collective cannot buy all the goods and security for the whole locality or for services that you may need to live each house to have its own security well. particularly girls. parents. What does this table show? The The problem does not end with first column of the table shows that in Infant Mortality Rate. which is nearly five times more. Those On the other hand. D EVELOPMENT 11 . out of 1000 children born alive shows that more that half of the 11 died before completing one year of children in Bihar do not even get to age but in Punjab the proportion of go to school.

Does availability of good health and educational facilities depend only on amount of money spent by the government on these facilities? What other factors could be relevant? 4. whereas in Jharkhand only 8 per cent of rural people do so.5 EDUCATIONAL ACHIEVEMENT OF RURAL POPULATION OF UTTAR PRADESH Category Male Female Literacy rate for rural population 52% 19% Literacy rate for children in age group 10-14 years 68% 39% Percentage of rural children aged 10-14 attending school 64% 31% (a) The literacy rate for all age groups. TABLE 1. the provision of basic health and people there are able to get the educational facilities. you may need to make calculations based on the table. LET’S WORK THESE OUT 1. Where would people be better off and why? ACTIVITY 2 Study Table 1. (b) It is clear from the table that _____ % of rural girls and _____% of rural boys are not attending school. Is Punjab ahead of Bihar in literacy rate etc. Think of other examples where collective provision of goods and services is cheaper than individual provision. as it is in terms of per capita income? 2. (c) This high level of illiteracy among __________ age group. which was expected to be achieved by 1960. Look at data in Table 1. ration shop. even after more than 60 years of our independence. 3.e. For this. illiteracy among children in the age group 10- 14 is as high as _____% for rural females and _____% for rural males.4.3 and 1. the Public Distribution nutritional status of people of such System (PDS) functions well. If some states is certainly likely to be better. In Tamil Nadu. In many other states also we are nowhere near realisation of the constitutional goal of free and compulsory education for all children up to the age of 14. However.5 carefully and fill in the blanks in the following paragraphs. does not Rate because it has adequate function properly in such places. in problem rectified. it is not just that these many adults could not attend school but that there are _____ who are currently not in school. is most disturbing. 75 per cent of the people living in rural areas use a ration shop. Similarly. i. Health and some states. Kerala has a low Infant Mortality PDS shop. is _____ for rural males and _____ for rural females. including young and old. Therefore. 12 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT .

6 SOME DATA REGARDING INDIA AND ITS NEIGHBOURS FOR 2004 Country Per Capita Life Literacy Rate Gross Enrolment HDI Rank in Income Expectancy for 15+ yrs Ratio for three the world in US$ at birth population levels Sri Lanka 4390 74 91 69 93 India 3139 64 61 60 126 Myanmar 1027 61 90 48 130 Pakistan 2225 63 50 35 134 Nepal 1490 62 50 61 138 Bangladesh 1870 63 41 53 137 NOTES 1. such as the and height of three adult persons of different ones we used in comparison of economic backgrounds Kerala and Punjab. their health between economic status and per capita income. domestic and education indicators have come servants. If this it is an inadequate measure of the figure is less than 18. then a person is overweight. if this BMI is think of other criterion. Then take the height in metres. It is also done in a way so that every dollar would buy the same amount of goods and services in any country. There could more than 25. average expected length of life of a person at the time of birth. Per Capita Income is calculated in dollars for all countries so that it can be compared. Collect the data from as a measure of development. Report published by UNDP compares Calculate their BMI. Take the weight the level of income is important. to be widely used along with income business-persons etc. HDI ranks in above table are out of 177 countries in all. as the name suggests. TABLE 1. However. Gross Enrolment Ratio for three levels means enrolment ratio for primary school. we need is a small number of the Let each student in a most important things. Do be a long list of such criterion but remember that this criterion is not applicable to growing then it would not be so useful. Do countries based on the educational you find any relationship levels of the people. yet of the person in kg. such as construction Over the past decade or so. 4. Health and class find out the weight education indicators. D EVELOPMENT 13 . This is easy to calculate. health workers. Human Development make a combined table. For all the students and instance. What children. Divide the weight by the square of the height.ACTIVITY 3 HUMAN DEVELOPMENT One way to find out if adults are undernourished is to REPOR REPORTT calculate what nutrition scientists call Body Mass Once it is realised that even though Index (BMI). we begin to considered undernourished.5 then the person would be level of development. 3. Life Expectancy at birth denotes. 2. secondary school and higher education beyond secondary school. HDI stands for Human Development Index. are among them. It background of person and her/his nutritional status? would be interesting to look at certain relevant data regarding India and its neighbours from Human Development Report 2006. office workers.

Nearly one-third of the country is overusing their groundwater reserves. 60 per cent of the country would be doing the same if the present way of using this resource continues. In another 25 years. their Nepal has half the per capita income health.. some coastal areas and the rapidly growing urban settlements. hard rock plateau areas of central and south India. It is people. ND WHY LET’S UNDERSTA SO TH RO UG H THE THIS IS PLE: FOLLOWING EXAM Example 1: Groundwater in India “Recent evidence suggests that the groundwater is under serious threat of overuse in many parts of the country.” (a) Why ground water is overused? (b) Can there be development without overuse? 14 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . in life expectancy and literacy levels. Sri Report but. of development are not sustainable.P. it has made it very clear respect and a big country like ours that what is important in has such a low rank in the world? development is what is happening to Table 1.6 also shows that though citizens of a country. Isn’t it surprising that a small added to the Human Development country in our neighbourhood. and levels. “We have not inherited We would certainly like this level of the world from our development to go up further or at forefathers — we have least be maintained for future borrowed it from our generations. since the second half of the twentieth century. However. Do you think there are certain Many improvements have been other aspects that should be suggested in calculating HDI and considered in measuring human many new components have been development? SUSTAINABILITY OF DEVELOPMENT Suppose for the present that a particular country is quite developed. yet it is not far behind India important.” desirable. that is most of India. their well being. About 300 districts have reported a water level decline of over 4 metres during the past 20 years. is much ahead of India in every Development. a number of scientists have been warning that the present type. Groundwater overuse is particularly found in the agriculturally prosperous regions of Punjab and Western U. by pre-fixing Human to Lanka. This is obviously children.

We have a fixed stock on earth case of crops and plants. The question of sustainability of development raises many fundamentally new issues about the nature and process of development. in the case of not know of earlier. if we use more than this way add to the stock. RTAKEN ALL THE ARE BEING UNDE Example 2: Exhaustion of Natural Resources Look at the following data for crude oil.7 CRUDE OIL RESERVES Region/Country Reserves Number of Years (Billion Tonnes) Reserves will last Middle East 89 93 United States of America 4 10 World 137 43 The table gives an estimate of reserves of crude oil (column1). what is being replenished by rain then over time. For example. More important. we would be overusing this resource. (a) Is crude oil essential for the development process in a country? Discuss. UDE OIL THAT WE FOR EXAMPLE. These resources which will get exhausted after years are replenished by nature as in the of use. However. which cannot be replenished. New sources in groundwater. (b) India has to import crude oil. it also tells us for how many years the stock of crude oil will last if people continue to extract it at the present rate. However. Groundwater is an example of Non-renewable resources are those renewable resources. The reserves would last only 43 years more. HOWEVER WE RENEWABLE RESO DID CE OF OIL THAT WE MAY FIND A SOUR NS RLIER. This is for the world as a whole. even this will get exhausted. What problems do you anticipate for the country looking at the above situation? D EVELOPMENT 15 . We do even these resources may be discover new resources that we did overused. TABLE 1. Countries like India depend on importing oil from abroad because they do not have enough stocks of their own. different countries face different situations. EXPLORATIO NOT KNOW OF EA TIME. CR E EARTH IS A NON- EXTRACT FROM TH URCE. However. There are countries like USA which have low reserves and hence want to secure oil through military or economic power. If prices of oil increase this becomes a burden for everyone.

if any? 5. Do you agree? Discuss. what we wish to knowledge in which scientists. What is the main criterion used by the World Bank in classifying different countries? What are the limitations of this criterion. What could be the other possibilities fifty years from now? 9. the question of no longer region or nation specific. If the income of three families is Rs 4000. The average per capita income of these families is Rs 5000. So economists. Which of the following neighbouring countries has better performance in terms of human development than India? (i) Bangladesh (ii) Sri Lanka (iii) Nepal (iv) Pakistan 3. per capita income is not a useful criterion at all and should not be used to compare states. Assume there are four families in a country. with lower per capita income has a better human development ranking than Punjab. Why is the issue of sustainability important for development? 16 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . Why do we use averages? Are there any limitations to their use? Illustrate with your own examples related to development. or state boundaries. Kerala. Our future is linked together. this issue is In general. philosophers and other the debate on development continues. Consequences of environmental social scientists are working degradation do not respect national together. Find out the present sources of energy that are used by the people in India. development or progress is perennial. Hence. Development of a country can generally be determined by (i) its per capita income (ii) its average literacy level (iii) health status of its people (iv) all the above 2. become and what our goals are. 8. At all times as a member of society Sustainability of development is and as individuals we need to ask comparatively a new area of where we want to go. Rs 7000 and Rs 3000 respectively. EXERCISES 1. In what respects is the criterion used by the UNDP for measuring development different from the one used by the World Bank? 6. what is the income of the fourth family? (i) Rs 7500 (ii) Rs 3000 (iii) Rs 2000 (iv) Rs 6000 4. 7.

“The Earth has enough resources to meet the needs of all but not enough to satisfy the greed of even one person”.10. For each of the items given in Table 1. It is based on a survey of various states for the year 2001. (ii) Can you guess why around 40 per cent of people in the country are undernourished even though it is argued that there is enough food in the country? Describe in your own words. List a few examples of environmental degradation that you may have observed around you. Each group should prepare a wall chart. State Male Female (%) (%) Kerala 22 19 Karnataka 36 38 Madhya Pradesh 43 42 All States 37 36 (i) Compare the nutritional level of people in Kerala and Madhya Pradesh. How is this statement relevant to the disscusion of development? Discuss. The following table shows the proportion of undernourished adults in India. 11. Ask them all the questions that come to your mind. Look at the table and answer the following questions. Discuss these ideas in groups. 12. 13. ADDITIONAL PROJECT / ACTIVITY Invite three dif ferent speakers to talk to you about the development of your region. D EVELOPMENT 17 .6. giving reasons about ideas that you agree or do not agree with. find out which country is at the top and which is at the bottom.

encourage the students to talk to various particularly to develop the analytical ability working people around them (such as of learners. While elaborating the ideas highlighted. This can be highlighted issues. domestic The employment figures are based on workers etc. organised/ from the media could be used for this unorganised. by the changes in the roles of sectors. NSSO is an activities. vendors. Planning and Programme highlighted is about the problems caused Implementation. It is prominently displayed in storyboards.) to know more about how they data taken from the five-yearly surveys live and work. The declining importance Census of India. and important to emphasise the changing encourage the class to discuss these roles of sectors. on employment and unemployment the students can be encouraged to develop conducted by the National Sample Survey their own classification of economic Organisation (NSSO). For evaluation purposes. NOTES FOR THE TEACHER CHAPTER 2: SECTORS OF THE INDIAN ECONOMY An economy is best understood when we of agriculture and growing importance of study its components or sectors. Employment etc. organised or unorganised. the key issue of protecting the students to the rapid growth of service workers engaged in the sector should be sector. You may encourage the students create a discussion about these types by to bring important cuttings and stories taking examples familiar to the students from newspapers. The website you can log onto is: The chapter has taken the example of http:/mospi. secondary or Survey. teachers can refer to Economic shop owners. organisation under the Ministry of Another important issue to be Statistics. Government of India. Several activities The GDP data used in this chapter and exercises are suggested in the chapter pertaining to Gross Domestic Product at to help the students understand how a Factor Cost by Industry of Origin at person’s activity could be placed — 1993-94 prices is taken from Economic whether in the primary. Information derived primary/secondary/tertiary. Since the students may find this difficult to Sources for Information understand. Domestic Product. and other information relating to the Indian public or private sector. You may three more examples that they may observe in types of classifications are discussed: their day-to-day life. Based on such information. 18 U NDERSTANDING E CONOMIC D EVEL OPMENT NDERSTANDING . casual workers. You may also encourage the provided in the chapter. which could be and relate them to their daily life. Employment data is also unemployment and what the government available from other sources such as can do to solve it. It is a valuable source of GDP and tertiary. and public/private. While discussing the unorganised further by drawing attention of the sector.nic. the students may students to visit persons and enterprises need to be familiarised with a few in the unorganised sector and get a first fundamental concepts such as Gross hand experience from real life situation. In this chapter. workshop mechanics. vegetable Survey to get data for different years. it is necessary to explain to them through examples. You can purpose. Sectoral industry and services should be related classification can be done on the basis of to the experience of the children by taking several criteria.

You will find that people are engaged in various economic activities. These activities are happening around us every minute even as we speak. Some of these are activities producing goods. . CHAPTER 2 SECTORS OF THE INDIAN ECONOMY SECTORS OF ECONOMIC ACTIVITIES Let us look at these pictures. These groups are also called sectors. How do we understand these activities? One way of doing this is to group them (classify them) using some important criterion. Some others are producing services.

Take. activity like dairy. a good by exploiting natural it may be necessary to store these in produces resources. goods that are Sector here. Similarly. Similarly. Why others over telephone or send letters goods (communication) or borrow money primary? This is because it forms the base for all from banks (banking) to help other products that we production and trade. for different kinds of industries that came Primary example. Since this sector undertaken by directly using gradually became associated with the natural resources. we require teachers. We convert earth into bricks and use bricks to make houses There are many activities that are and buildings. lawyers. ways of manufacturing that we and those who provide personal associate with industrial activity. a as internet cafe. takes place within a crop season. it is also called as industrial sector. The product process. The cobblers. the cultivation of cotton. 20 U NDERST ANDING E CONOMIC D EVEL OPMENT . subsequently make. The product from the above two. This could be in a factory. at different spin yarn and weave cloth. in the case of an of the primary and secondary sectors. Service sector also includes some The secondary sector covers essential services that may not directly activities in which natural products help in the production of goods. and people to do product is not produced by nature administrative and accounting works. Since these activities Secondary other sectors generate services rather than goods. software companies etc have goods workshop or at home. Using We begin by looking sugarcane as a raw material. most of the natural trade are some examples of tertiary helps to develop products we get are from activities. It (Agriculture) up. For example. do not on the biological process of produce a good but they are an aid the animals and availability or a support for the production Tertiary (Service) of fodder etc. is a third category of activities that falls on natural factors like rainfall. but not entirely. For Sector the growth of the cotton plant. (Industrial) the tertiary sector is also called the Sector forestry. certain new services some process of manufacturing is based on information technology such produces essential. there depend mainly. banking. It is services such as washermen. doctors. minerals sector would need to be transported and ores are also natural by trucks or trains and then sold in products. by themselves. we After primary and secondary. At times. Transport. the next step after primary. we become important. barbers. We also may need to talk to natural the primary sector. For example. milk. dairy. fishing. agriculture. is a natural activities that help in the development product. but has to be made and therefore In recent times. When we produce wholesale and retail shops. These are of this activity. it is an activity of godowns. under tertiary sector and is different sunshine and climate. also is a natural produced in the primary or secondary product. kind of economic activ sugar or gur. sector. we make ities. Since storage. we are dependent These activities. For are changed into other forms through example. this sector is also called agriculture and related service sector. cotton. call manufactured centres. using cotton fibre from the plant. communication. ATM booths.

etc. electricity . Complete the above table to show how sectors are dependent on each other. Let us look at som are hi TABLE 2. ar e grouped into three different cate thou Economic activities. The mill will have to shut the primary. What is the criterion that is used? Do you think this is a useful classification? Discuss. Cost of cultivation of the farmers will rise and their profits will be reduced. e examples. secondary and tertiary sectors using examples other than those mentioned in the text. secondary and tertiary sectors: • Tailor • Workers in match factory • Basket weaver • Money lender • Flower cultivator • Gardener • Milk vendor • Potter • Fishermen • Bee-keeper • Priest • Astronaut • Courier • Call centre employee 4. Cotton prices will fall. S ECTORS OF THE INDIAN ECONOMY 21 . Students in a school are often classified into primary and secondary or junior and senior. gories. Indian cotton cultivation will become less profitable and the farmers may even go bankrupt. down. Farmers buy many goods such as tractors. Explain the difference between primary. Imagine what would happen to cotton cultivation if companies decide not to buy from the Indian market and import all cotton they need from other countries. Imagine what would happen if the price of fertilisers or pumpsets go up. Imagine what would happen if there is a strike by transporters and lorries refuse to take vegetables. if they cannot quickly switch to other crops. Food will become scarce in urban areas whereas farmers will be unable to sell their products. pesticides and fertilisers. Classify the following list of occupations under primary.1 EXAMPLES OF ECONOMIC ACTIVITIES EXAMPLE WHAT DOES THIS SHOW? Imagine what would happen if farmers This is an example of the secondary or refuse to sell sugarcane to a particular industrial sector being dependent on sugar mill. ghly interdepen dent. People working in industrial and service sector need food. 2. milk. 3. LET’S WORK THESE OUT 1. gh . pumpsets. from rural areas.

the 22 U NDERST ANDING E CONOMIC D EVEL OPMENT .000. goods that reach the consumers. while other sectors are relatively small in size. for instance. Similarly. a farmer who sells wheat to a flour mill for Rs 8 per kg.. the value of Rs 60 for the biscuits (final good) THAT I PRODUCE ! already includes the value of flour (Rs 10). The biscuit company uses the flour and things such as sugar and oil to make four packets of biscuits. Intermediate goods are used up in producing final goods and services. you might think this is an impossible task! Not only would the task be enormous. is to see how much goods and services are produced and how many people work in each sector. The next step. therefore. To get around this problem. In an economy there could be one or more sectors which are dominant in terms of total production and employment. The value of final goods already includes the value of all . The value of 5000 coconuts at Rs 10 per coconut will be Rs 50. secondary and tertiary sectors produce a very large number of goods and services. the three sectors have a large number of people working in them to produce these goods and services.. economists suggest that the values of goods and services should be used rather than adding up the actual numbers. Also. How do we count the various goods and services and know the total production in each sector? With so many thousands of goods and services produced.000.BUT I SHOULD BE PAID THE the intermediate goods that are used in making the final FULL VALUE OF THE WHEAT good. Why are only ‘final goods and services’ counted? In contrast to final goods. It won’t make sense!!! You are right in thinking so.e. It makes sense only to include the final goods and services. It sells biscuits in the market to the consumers for Rs 60 (Rs 15 per packet). The mill grinds the wheat and sells the flour to a biscuit company for Rs 10 per kg. the value of wheat will be Rs 80. COMPARING THE THREE SECTORS The various production activities in the primary. Remember. Take. For example. if 10. Biscuits are the final goods.000 kgs of wheat is sold at Rs 8 per kg. you might also wonder how we can add up cars and computers and nails and furniture. goods such as wheat and the wheat flour in this example are intermediate goods. Similarly.. and then added up. Hence. i. the value of goods and services in the three sectors are calculated. Not every good (or service) that is produced and sold needs to be counted. there is one precaution one has to take.

the value of the same things a number Over a long time (more than of times. the last five years. India? Over the years have there been countries that at initial stages of changes similar to the pattern development. Secondary sector value of all final goods and services gradually became the most important produced within a country during a in total production and employment. It is the at cheap rates. now developed. the mammoth task of measuring GDP is undertaken by a In the past 100 years. place. the general pattern observed in developed countries. In India. particular year.value of all other intermediate goods administrators. Buying and To count goods and services we add the numbers that are produced. a shift had taken the economy is. with the help of various tertiary sector in developed countries. However. most of the goods produced the value of the flour and wheat were natural products from the separately is therefore not correct primary sector and most people were because then we would be counting also employed in this sector. This is prices and then estimates the GDP. Correct and arrange the important aspects for calculating GDP from this Jumble. There 2. important in terms of total production. This been a further shift from secondary to Ministry. This means that the importance of the sectors had changed. Many people could now take up other activities. then as flour hundred years). there were also transporters. production in the three sectors gives People began to use many more what is called the Gross Domestic goods that were produced in factories Product (GDP) of a country. To count this stage. And the sum of to work in factories in large numbers. Those people who had the total production of the sector earlier worked on farms now began for that year. activity. First as wheat. Historical Change in Sectors What is the total production and Generally. it has been noted from the employment in the three sectors in histories of many. As the methods of farming LET’S WORK THESE OUT changed and agriculture sector began 1. because new methods of The value of final goods and manufacturing were introduced. We count all those that were produced in selling activities increased many times. over time. Since we shouldn’t leave out anything Besides. collects information relating to total Most of the working people are also volume of goods and services and their employed in the service sector. at would have been included. were increasing number of craft- persons and traders. government departments of all the The service sector has become the most Indian states and union territories. it produced much more about the shifts that have taken place between sectors? food than before. S ECTORS OF THE INDIAN ECONOMY 23 . GDP shows how big Hence. services produced in each sector factories came up and started during a particular year provides expanding. primary sector was the observed for the developed countries? most important sector of economic We shall see in the next section. What does the history of developed countries indicate to prosper. we add up all these goods and services. army etc. and especially and finally as biscuits. there has central government ministry.

Let’s find out. three sectors has increased. village administrative offices. courts. are required. it has In a developing country the increased the most in the tertiary government has to take responsibility sector. defence. What was the GDP of India in 2003? 0 1973 2003 Why is the tertiary sector becoming rison so important in India? There could be What does the compa several reasons. development of services such as 24 U NDERST ANDING E CONOMIC D EVEL OPMENT . 140000 Rupees (Crore) 130000 LET’S WORK THESE 120000 110000 OUT 100000 Answer the following questions by 90000 looking at the graph: 80000 70000 Tertiary sector 1. educational institutions. These and 2003. the tertiary sector has emerged as the Second. Which was the largest producing sector in 1973? 60000 50000 Secondary sector 2. As a result. the development of largest producing sector in India agriculture and industry leads to the replacing the primary sector. etc. Which is the largest producing 40000 sector in 2003? Primary sector 30000 3 . in the year 2003. while production in all the can be considered as basic services. Tertiary Sector in Production transport. PRIMARY. Rising Importance of the municipal corporations. 03 show? between 1973 and 20 n we draw What conclusions ca First. post and telegraph services. SECONDARY AND TERTIARY SECTORS IN INDIA Graph 1 shows the production of goods Graph 1 : GDP by Primary. You can see 180000 how the total 170000 production has 160000 grown over the 150000 thirty years. This 210000 is shown for two 200000 years. banks. in any country several ? from the comparison services such as hospitals. 1973 and 190000 2003. Can you say which sector has 20000 grown the most over thirty years? 10000 4. insurance Over the thirty years between 1973 companies. police stations. for the provision of these services. Secondary and and services in the Tertiary Sectors three sectors.

over the past decade or so. You 0% shall read more about this in the next 1973 2000 section. not all of the service sector is growing The primary sector continues to be equally well. Now you can employment? It is because not directly see the changing importance enough jobs were created in the of the sectors over the thirty years. At one end there are a limited number of services that employ highly Graph 3 : Share of Sectors in Employment (%) skilled and educated workers. 80% Tertiary sector Employment repair persons. transport persons. certain new services such as those based on information and communication technology have A remarkable fact about India is become important and essential. Hence. 80% 70% Tertiary sector Third. Greater the Graph 2 : Share of Sectors in GDP (%) development of the primary and 100% secondary sectors. secondary and tertiary sectors. The that while there has been a change production of these services has been in the share of the three sectors in rising rapidly. At the other end. more would be the 90% demand for such services. trade. 0% 1973 2003 Fourth.transport. private hospitals. as income levels rise. Even S ECTORS OF THE INDIAN ECONOMY 25 . people. Where are most of the people employed? Why didn’t a similar shift out of Graph 2 presents percentage share of primary sector happen in case of the three sectors in GDP. a similar shift has not taken see examples of these new services place in employment. especially in big cities. only a part of this 10% sector is growing in importance. there are a very large 100% number of workers engaged in 90% services such as small shopkeepers. In Chapter 4. 70% etc. we shall GDP. as we have already seen. shopping. professional training 20% etc. storage and the like. Primary sector 30% private schools. Graph 3 and the reasons for their expansion. These people barely manage to 60% 50% Secondary sector earn a living and yet they perform 40% these services because no alternative Primary sector 30% opportunities for work are available 20% to them. shows the share of employment in However. Service sector in India the largest employer even in the employs many different kinds of year 2000. certain GDP 60% sections of people start demanding Secondary sector 50% many more services like eating out. You can see this change quite 10% sharply in cities. you must remember that the three sectors in 1973 and 2000. 40% tourism.

the secondary and tertiary people may move to work in a sectors produce three-fourth of the factory. Since you do not workers in the country are working need five people to look after that in the primary sector. have a job and is clearly visible as employment in the industry went unemployed. In contrast to farm. Does this mean would also continue to produce as that the workers in agriculture are much from their land. casual workers in the service All five members of her family work sector in urban areas who search in the plot throughout the year. employment Sukhram. not producing as much as they could? There are lakhs of farmers like Laxmi in India. we see gets divided. owning about This underemployment can also two hectares of unirrigated land happen in other sectors. take the case of a small farmer. suffer. Once again the earnings of produce whereas they employ less the family would increase and they than half the people. Each one is doing other people of the service sector some work but no one is fully on the street pushing a cart or employed. Similarly. Hence. The same called disguised unemployment. on his land. sector rose by 11 times. For instance. This kind of better opportunities. it is also up by only 2. where people spend the whole day but earn are apparently working but all very little. mainly in small plot. production will not be agricultural production will not affected. two this. You will see that everyone repair persons and others doing is working. Laxmi’s family is now able to earn some extra income As a result. workers in agricultural sector ar e under .5 times. though industrial output or the underemployment is hidden in production of goods went up by contrast to someone who does not eight times during the period. So. While production in the service Now. This is the situation of selling something where they may underemployment. In other words. take up other work would increase the total family income. In the above example. more than half of the through wages. They are Why? They have nowhere else to go employed as painters. producing only a does not affect production on their quarter of the GDP. even if you move a few with proper work elsewhere. For dependent only on rain and example there are thousands of growing crops like jowar and arhar. for work. They are doing this of them are made to work less work because they do not have than their potential. 26 U NDERST ANDING E CONOMIC D EVEL OPMENT . supposing a landlord. Many of them don’t find in actual fact their labour effort work everyday. Laxmi . two people moving out agriculture. for daily employment. people out. The incomes of the people who employed. but odd jobs. applies to tertiary sector as well. comes and hires one or in the service sector rose less than two members of the family to work three times. none remains idle. This means that even What it means is that there are if we remove a lot of people from more people in agriculture than is agricultural sector and provide them necessary. plumbers.

Let us suppose that one hectare of wheat can provide employment to two people for 50 days (including sowing.2 SHARE OF PRIMARY SECTOR IN GDP AND EMPLOYMENT 1973 2000 or 2003 Share in GDP Share in employment What are the changes that you observe in the primary sector over a span of thirty years? 2. Complete the table using the data given in Graphs 2 and 3 and answer the question that follows. during the rabi season. fertiliser S ECTORS OF THE INDIAN ECONOMY 27 . Compare and contrast the changes in India with the pattern that was observed for developed countries. The government can spend some money or banks can provide a loan. What kind of changes between sectors were desired but did not happen in India? 4. Why should we be worried about underemployment? How to Create More Employment? From the above discussion. wheat. LET’S WORK THESE OUT 1. TABLE 2. Choose the correct answer: Underemployment occurs when people (i) do not want to work (ii) are working in a lazy manner (iii) are working less than what they are capable of doing (iv) are not paid for their work 3. Take the case of Laxmi with her two-hectare plot of un-irrigated land. to construct a well for her family to irrigate the land. In what ways can one increase employment for people? Let us look at some of them. we can see that there continues to be considerable underemployment in agriculture. There are also people who are not employed at all. Laxmi will then be able to irrigate her land and take a second crop. watering.

we also such farms. suppose Laxmi and other Another way by which we can farmers produce much more than tackle this problem is to identify. So. farmer. we can start honey collection centres Laxmi’s need is not confined to where farmers can come and sell wild water alone. before. only about two-thirds are attending . So she will have to borrow money Gur Making in markets. fertilisers. needs in Chapter 3. To cultivate the land. This activity give an opportunity for farmers to can provide productive employment to store their products like potatoes and not just farmers but also others such as onions and sell them when the price those in services like transport or trade. two rate of interest. We will look at some of these problem of underemployment. she will be able to buy all these suppose a new dam is constructed in time and cultivate her land. They would also need to sell some promote and locate industries and of this. Being a poor sweet potato. Opening a cold storage could grow and sell these crops. tomato. For this they may be required to services in semi-rural areas where a transport their products to a nearby large number of people may be town. which can be sold in outside these. If the local bank gives more members of the family can be her credit at a reasonable rate of employed in her own field. or makes better rural roads so and chickpea (pulse crops). In villages near forest areas. can continue to example. This could lead to a lot of need to provide cheap agricultural employment generation within the credit to the farmers for farming to agricultural sector itself reducing the improve. is good. This and canals are dug to irrigate many means that along with water. she honey. Now. wheat. who now these and sell in the cities is one such have access to water. This will provide Haryana from moneylenders and pay a high employment in industries located in semi-rural areas and not necessarily in large urban centres. Now interest. industries that process vegetables and agricultural equipments and agricultural produce like potato. suppose money in transportation and storage of many farmers decide to grow arhar crops. application and harvesting). Setting that mini-trucks reach everywhere up a dal mill to procure and process several farmers like Laxmi. pumpsets to draw water. It is also possible to set up also needs seeds. For instance. rice. she cannot afford many of fruits. What groups of peop le do you think are unempl oyed or underemployed in your ar ea ? Ca n yo u th in k of some measures that could be taken up for them ? Do you know that in India there are about 200 million children in the school-going age group? Out of this. Money and Credit. If the government invests some employed.

health workers etc. LET’S WORK THESE OUT 1. every year we can give are able to. nurses. Why do you think NREGA 2005 is referred to as ‘ Right to work’ ? 2. If the government fails in We must realise that some of the suggestions discussed above would its duty to provide employment. A study conducted by the Planning Commission estimates that nearly 20 lakh jobs can be created in the education sector alone. we need some quick people. How would income and employment increase if farmers were provided with irrigation and marketing facilities? 4. Every state or region has potential for increasing the income and employment for people in that area. or new services like IT. work additional employment to more than are guaranteed 100 days of 35 lakh people. says that if tourism as a sector is Under NREGA 2005. Some of these would require proper to Work in 200 districts of India. These are some ways by which jobs would be created and we would also be able to address the important aspects of development talked about in Chapter 1. Imagine that you are the village head. and are in need of. For give unemployment allowances to the the short-term. all those who improved. It is planning and support from the called National Rural Employment government. more teachers and other staff. 3. For example. to work in rural areas. The rest are not— they may be at home or many of them may be working as child labourers. Similarly. or regional craft industry. it will take a long time to implement. Recognising this. In that capacity suggest some activities that you think should be taken up under this Act that would also increase the income of people? Discuss.schools. the in future help to increase the central government in India recently production from land will be given made a law implementing the Right preference under the Act. If these children are to attend schools. the same study by the Planning Commission Guarantee Act 2005 (NREGA 2005). employment in a year by the government. The types of work that would measures. we need many more doctors. if we are to improve the health situation. we will require more buildings. It could be tourism. In what ways can employment be increased in urban areas? S ECTORS OF THE INDIAN ECONOMY 29 .

30 a. in the evening. Some of these people may not be employed by Kanta works in the organised anyone but may work on their own sector. He can be asked to leave anytime by his emplo yer. She s not go to office on other allowances. She att s her salary regularly 9. Kanta doe y. What are 30 U NDERST ANDING E CONOMIC D EVEL OPMENT . and therefore.m. all the terms and conditions of Kamal Kamal is Kanta’s neighbour. This is a paid holida tment letter stating work. It is called benefits from the employers. Factories Act. He gets no other allowances apart from his wa ges.m. If they work more. differences in Do you see the s of w or k th e co n d it io n organised because it has some formal and Kamal? between Kanta processes and procedures. she was given an appoin work.30 p. to 5. He is a da ily wa ge lab ou rer in a ne arb y grocery shop. What are their conditions of work? Are there any rules and regulations that are followed as regards their employment? K a n ta ends her office from Kanta works in an office. This looks at the way people are employed.m. He is not paid for the days he does not work. at the end of every month. Minimum Wages Act. They rules and regulations which are are expected to work only a fixed given in various laws such as the number of hours. Shops and employer. When she joined Sundays. They are registered by the Workers in the organised sector government and have to follow its enjoy security of employment. He goes to the shop at 7:30 in the morning and works till 8:00 p. In add as per the rules laid she also gets provident fund also gets medical and down by the government. He has therefore no leave or paid holidays. Nor was he given any formal let ter sa yin g tha t he ha s be en employed in the shop. She get ition to the salary. Organised sector covers those but they too have to register enterprises or places of work where themselves with the government and the terms of employment are regular follow the rules and regulations. They also get several other Establishments Act etc. DIVISION OF SECTORS AS ORGANISED AND UNORGANISED Let us examine another way of classifying activities in the economy. they have to be paid overtime by the Payment of Gratuity Act. people have assured work.

This sector includes a large unorganised sector. The unorganised number of people who are employed sector is characterised by small and on their own doing small jobs such scattered units which are largely as selling on the street or doing repair outside the control of the government. Compare and contrast their working conditions in all aspects. Kamal works in the employer. The table below shows the estimated number of workers in India in the organised and unorganised sectors. Employment is not secure. these workers get may be asked to leave. provident is no provision for overtime. work. There payment during holidays. leave due to sickness to get medical benefits and. They are supposed leave. under the etc.3 WORKERS IN DIFFERENT SECTORS (IN MILLIONS) Sector Organised Unorganised Total Primary 2 242 Secondary 9 54 63 Tertiary 17 76 93 Total 28 Total in Percentage 100% · What is the percentage of people in the unorganised sector in agriculture? · Do you agree that agriculture is an unorganised sector activity? Why? · If we look at the country as a whole. Fill in the missing data and answer the questions that follow. such and a safe working environment. paid fund. Organised sector employment is available to only about ———% of the workers in India. Read the table carefully. gratuity etc.these benefits? They get paid leave. 3. low-paid and often not regular. Talk to someone who has a regular job in the organised sector and another who works in the unorganised sector. as during some seasons. People laws. 4. depends on the whims of the In contrast. holidays. Look at the following examples. we find that ———% of the workers in India are in the unorganised sector. When there is less work. TABLE 2. the factory manager has to can be asked to leave without any ensure facilities like drinking water reason. some people When they retire. farmers work on their There are rules and regulations but own and hire labourers as and when these are not followed. Which of these are unorganised sector activities? (i) A teacher taking classes in a school (ii) A headload worker carrying a bag of cement on his back in a market (iii) A farmer irrigating her field (iv) A doctor in a hospital treating a patient (v) A daily wage labourer working under a contractor (vi) A factory worker going to work in a big factory (vii) A handloom weaver working in her house 2. Similarly. How would you distinguish between organised and unorganised sectors? Explain in your own words. S ECTORS OF THE INDIAN ECONOMY 31 . A lot also pensions as well. Jobs here are they require. LET’S WORK THESE OUT 1.

a large number facility for timely delivery of seeds. is also a need for protection and support of the workers in the We also find that majority of unorganised sector. When factories close down. How to Protect Workers in Who are these vulnerable people the Unorganised Sector? who need protection? In the rural areas. of workers are forced to enter the agricultural inputs. unorganised Their earnings are low and not sector comprises mainly of workers in regular. it is also common vendors. In the urban areas. These workers are forced to support for procuring raw material take up jobs in the unorganised and marketing of output. in construction. These farmers need refuse to follow laws that protect to be supported through adequate labourers. credit. storage unorganised sector jobs. They adopt India are in small and marginal such strategies to evade taxes and farmer category. Protection and support to the unorganised sector workers is thus necessary for both economic and social development. These jobs are not secure and small-scale industry. which pay a facilities and marketing outlets. very low salary.. blacksmiths. sharecroppers and artisans organised sector have been expanding (such as weavers. Nearly many organised sector enterprises in 80 per cent of rural households in the unorganised sector. But the labourers. the unorganised sector mostly The organised sector offers jobs that comprises of landless agricultural are the most sought-after. The casual sector with low earnings. many once regular workers are found selling goods or pushing a cart or doing some other odd job 32 U NDERST ANDING E CONOMIC D EVEL OPMENT . rag pickers etc. and those who work as street Since the 1990s. these workers also face social discrimination. workers from scheduled castes. They are often exploited and not paid a fair wage. Small-scale losing their jobs in the organised industry also needs government’s sector. It is also common to find carpenters and goldsmiths). very slowly. trade and transport etc. head load workers. small and marginal employment opportunities in the farmers. As a result. Hence. garment to see a large number of workers makers. casual workers have no other benefits. workers in both rural and urban besides the need for more work. there areas need to be protected. tribes and backward communities find themselves in the unorganised sector. Besides getting the irregular and low paid work.

sector whereas companies like Tata There are several things needed by Iron and Steel Company Limited the society as a whole but which the (TISCO) or Reliance Industries private sector will not provide at Limited (RIL) are privately owned. In dividing the economic activities into three sectors — primary. tertiary — the criterion used was the ‘nature of activity’. secondary. Similarly. sector is not just to earn profits. which is beyond the capacity S ECTORS OF THE INDIAN ECONOMY 33 . of activity Tertiary Organised. we were able to analyse the pattern of total production and employment in India. one needs to use the process of classification to think in a useful manner. Unorganised SECTORS IN TERMS OF OWNERSHIP: PUBLIC AND PRIVATE SECTORS Another way of classifying economic To get such services we have to pay activities into sectors could be on the money to these individuals and basis of who owns assets and is companies. The purpose of the public responsible for the delivery of services. Railways or activities? Why do governments spend post office is an example of the public on such activities? Let’s find out. What was the most important conclusion that was derived from the classification exercises? What were the problems and solutions that were indicated? Can you summarise the information in the following table? TABLE 2. Modern ownership of assets and delivery of day governments spend on a whole services is in the hands of private range of activities. On the basis of this classification. we divided the economic activities into organised and unorganised and used the classification to look at employment in the two sectors. the government Governments raise money through owns most of the assets and provides taxes and other ways to meet expenses all the services. In the private sector. In the public sector.4 CLASSIFYING ECONOMIC ACTIVITIES Sector Criteria used Most important Problems indicated and conclusion how they can be tackled Primary. a reasonable cost. LET’S RECALL With so many activities taking place around us. money. on the services rendered by it. Why? Some of Activities in the private sector are these need spending large sums of guided by the motive to earn profits. The criterion for classification could be many depending on what we desire to find out. The process of classification helps to analyse a situation. What are these individuals or companies. Nature Secondary.

We also produced in the tertiary sector contribute looked at the difference between private and the most to GDP. This it stores in its and nutrition. railways. secondary or tertiary sectors. You poorest and most ignored regions of have read about this in the chapter the country through increased on Food Security in Class IX. human development such as Similarly. Running proper schools everyone. we know that nearly half example. Providing health and education governments have to undertake such facilities for all is one example. One way of doing this Another classification is to consider whether is to examine whether the activity relates to people are working in organised or the primary. We have also seen public activities to focus on certain areas. Government here steps in by is higher than that of the poorest producing and supplying electricity regions of the world such as the at rates which these industries can African countries. buys wheat and rice from farmers at housing facilities for the poor and food a ‘fair price’. Also. which particularly elementary education. Even if supports both farmers and they do provide these things they consumers. Government also afford. responsibility of the government. bridges. Many units. would charge a high rate for their There are a large number of use. Examples are construction of activities which are the primary roads. The generating electricity. It is also the duty of godowns and sells at a lower price to the government to take care of the consumers through ration shops. The spending in such areas. the Government in India availability of safe drinking water. For Similarly. In this way. the employment remains public activities. selling electricity at the cost of India’s children are malnourished of generation may push up the costs and a quarter of them are critically ill. for the last thirty years. There are some activities. irrigation through dams etc. The the duty of the government. 34 U NDERST ANDING E CONOMIC D EVEL OPMENT . collecting government has to bear some of the money from thousands of people who cost. unorganised sectors. The infant mortality rate of small-scale units. Government has to bear part needs to pay attention to aspects of of the cost. of the private sector. and why it is important for in the primary sector. meaningful groups. Most people are The data for India. is the government has to support. might have to shut Orissa (87) or Madhya Pradesh (85) down. the government use these facilities is not easy. of production of goods in many We have read about Infant Mortality industries. especially Rates. Thus. working in the unorganised sectors and shows that while goods and services protection is necessary for them. SUMMING UP In this chapter we have looked at ways of what all can be done for increasing classifying economic activities into some employment opportunities in the country. India’s size private sector may not continue their of illiterate population is one of the production or business unless largest in the world. We have heavy spending and ensure that discussed some of these issues in the these facilities are available for first chapter. government encourages it. providing government must spend on these. harbours. and providing quality education.

(a) The sectors are classified into public and private sector on the basis of: (i) employment conditions (ii) the nature of economic activity (iii) ownership of enterprises (iv) number of workers employed in the enterprise (b) Production of a commodity. Choose the most appropriate answer. (tertiary / agricultural) (iii) Most of the workers in the _________ sector enjoy job security. (has / has not) (ii) Workers in the _________ sector do not produce goods. (large / small) (v) Cotton is a _________ product and cloth is a _________ product. (organised / unorganised) (iv) A _________ proportion of labourers in India are working in the unorganised sector. mostly through the natural process. is an activity in _________ sector. secondary and tertiary sectors are_________ [independent / interdependent] 2. (i) all goods and services (ii) all final goods and services (iii) all intermediate goods and services (iv) all intermediate and final goods and services (d) In terms of GDP the share of tertiary sector in 2003 is _________ (i) between 20 to 30 per cent (ii) between 30 to 40 per cent (iii) between 50 to 60 per cent (iv) 70 per cent S ECTORS OF THE INDIAN E CONOMY 35 .EXERCISES 1. (i) primary (ii) secondary (iii) tertiary (iv) information technology (c) GDP is the total value of _________ produced during a particular year. Fill in the blanks using the correct option given in the bracket: (i) Employment in the service sector _________ increased to the same extent as production. [natural /manufactured] (vi) The activities in primary.

Air India. 7. doctor. 11. 3. In what way can you classify them? Explain your choice. Match the following: Problems faced by farming sector Some possible measures 1. clinics in 15 marketplaces with formal license People working on the street. tailor. 8.” Do you agree? Give reasons in support of your answer. potter (ii) Teacher. Find the odd one out and say why. secondary and tertiary is useful? Explain how. Debt burden (c) Procurement of food grains by government 4. What do you understand by disguised unemployment? Explain with an example each from the urban and rural areas. domestic 20 workers Working in small workshops usually not registered with the government Complete the table. office. Compelled to sell their grains to (e) Banks to provide credit with low interest the local traders soon after harvest 4. construction workers. Make a long list of all kinds of work that you find adults around you doing for a living. lawyer (iii) Postman. What is the percentage of workers in the unorganised sector in this city? 6. vegetable vendor. Distinguish between open unemployment and disguised unemployment. A research scholar looked at the working people in the city of Surat and found the following. 9. All India Radio 5. (i) Tourist guide. SAHARA Airlines. soldier. dhobi. No job in the off season (d) Construction of canals by the government 5. cobbler. Low prices for crops (b) Cooperative marketing societies 3. For each of the sectors that we came across in this chapter why should one focus on employment and GDP? Could there be other issues which should be examined? Discuss. 10. How is the tertiary sector different from other sectors? Illustrate with a few examples. Indian Railways. Unirrigated land (a) Setting up agro-based mills 2. Place of work Nature of employment Percentage of working people In offices and factories registered Organised 15 with the government Own shops. 36 U UNDERST ANDING E NDERSTANDING CONOMIC D ECONOMIC DEVEL EVELOPMENT OPMENT EVELOPMENT . 12. police constable (iv) MTNL. Do you think the classification of economic activities into primary. “Tertiary sector is not playing any significant role in the development of Indian economy.

Explain the objective of implementing the NREGA 2005. 19. What kind of ways should be thought of for generating more employment in the city? 24.000 19. A study in Ahmedabad found that out of 15.14. Give a few examples of public sector activities and explain why the government has taken them up. Present this data as a table. How are the activities in the economy classified on the basis of employment conditions? 16. 15. Service sector in India employs two different kinds of people. Discuss and fill the following table giving one example each from your area.000 workers in the city. Explain with examples.000 (i) Calculate the share of the three sectors in GDP for 1950 and 2000. 21. 23. The tot al income of the city in this year (1997-1998) was Rs 60. Well managed organisation Badly managed organisation Public sector Private Sector 20.55. The workers in the unorganised sector need protection on the following issues : wages.000 2.00. The following table gives the GDP in Rupees (Crores) by the three sectors: Year primary secondary tertiary 1950 80. Who are these? 14.000 million.000 worked in the unorganised sector. (ii) Show the data as a bar diagram similar to Graph 2 in the chapter. Out of this Rs 32. safety and health.13.000 5. Explain how public sector contributes to the economic development of a nation. 17.00.000 2000 3. Do you agree with this view? Give reasons in support of your answer. (iii) What conclusions can we draw from the bar graph? S ECTORS OF THE INDIAN ECONOMY 37 . 11. Compare the employment conditions prevailing in the organised and unorganised sectors. 22. 18.000 million was generated in the organised sector. Using examples from your area compare and contrast that activities and functions of private and public sectors.000 39.80. Workers are exploited in the unorganised sector.

such as that of are linked to the banking system. understand this in a conceptual manner. offers many opportunities to students to explore on their own. In order to get the details of bank-related What are the aspects that one looks at in statistics or a particular detail of a bank. any credit arrangement and how this affects you can log on to the websites of Reserve people is the main focus of the second part Bank of India (www. that students may be made central idea of the first part of the chapter. The Credit is a crucial element in economic information and data on Grameen Bank is life and it is therefore important to first taken from newspaper reports and websites. This is the Grameen Bank. 2003. The other crucial curiosities. We need not get into a Sources for Information formal discussion of the ‘functions of money’ but let it come up as questions. The present situation in and the of the chapter. NOTES FOR THE TEACHER CHAPTER 3 : MONEY AND CREDIT Money is a fascinating subject and full of familiar to your students. conducted by NSSO. There are many forms were used. and on reasonable money and how various forms were used at terms. Investment Survey. We need to emphasise that this is a different times is an interesting story. December 2005). element for the students. At this right of the people and without which a large stage the purpose is to allow students to section of them would be kept out of the realise the social situation in which these development process. familiar with but it is important to realise that we don’t have answers to all questions. The world around us of fers concerned Modern forms of money innovative interventions. It is important to capture this issue of credit is its availability to all. 501. where We need to find new ways and this is one of newer forms of money are slowly spreading the social challenges that developing with computerisation of the banking system. Report No. The history of especially the poor. countries face.rbi. There are The data on formal and informal sector credit certain areas that are not covered such as used in this chapter is drawn from the ‘creation of money’ (money multiplier) or the survey on rural debt by the National Sample backing of the modern system that may be Survey Organisation (All India Debt and discussed if you desire. 38 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . Data on self-help groups a tremendous variety of such arrangements is provided on the website of National Bank and it would be ideal to explain these for Agriculture and Rural Development aspects of credit from situations that are (NABARD) (www.nabard.



The use of money spans a very large difficult it would be if the shoe
part of our everyday life. Look around manufacturer had to directly
you and you would easily be able to exchange shoes for wheat without the
identify several transactions involving use of money. He would have to look
money in any single day. Can you for a wheat growing farmer who not I DON’T NEED
make a list of these? In many of these only wants to sell wheat SHOES. I NEED
transactions, goods are being bought YOU SHOES but also wants to buy the CLOTHES.
and sold with the use of money. In FOR YOUR shoes in exchange.
some of these transactions, services WHEAT. That is, both parties
are being exchanged with money. For have to agree to
some, there might not be any actual sell and buy each
transfer of money taking place now others commodities.
but a promise to pay money later. This is known as
double coincidence
Have you ever wondered why
of wants. What a person
transactions are made in I WANT SHOES.
desires to sell is exactly what the
money? The reason is simple. BUT I DON’T HAVE
other wishes to buy. In a barter WHEAT.
A person holding money can easily
system where goods are directly
exchange it for any commodity or
exchanged without the use of money,
service that he or she might want.
double coincidence of wants is an
Thus everyone prefers to receive
essential feature.
payments in money and then
exchange the money for things that In contrast, in an economy where
they want. Take the case of a shoe money is in use, money by providing
manufacturer. He wants to sell shoes the crucial intermediate step
in the market and buy wheat. The eliminates the need for double
shoe manufacturer will first exchange coincidence of wants. It is no longer
shoes that he has produced for necessary for the shoe manufacturer
money, and then exchange the money to look for a farmer who will buy his
for wheat. Imagine how much more shoes and at the same time sell him

wheat. All he has to do is find a buyer
for his shoes. Once he has exchanged
his shoes for money, he can purchase
wheat or any other commodity in the
market. Since money acts as an
intermediate in the exchange process,
it is called a medium of exchange.

1. How does the use of money make it easier to exchange things?
2. Can you think of some examples of goods / services being exchanged or wages being
paid through barter?

We have seen that money is organisation is allowed to issue
something that can act as a medium currency. Moreover, the law legalises
of exchange in transactions. Before the use of rupee as a medium of
Early punch- the introduction of coins, a variety of payment that cannot be refused in
marked coins objects was used as money. For settling transactions in India. No
(may be 2500 example, since the very early ages, individual in India can legally refuse
years old)
Indians used grains and cattle as a payment made in rupees. Hence,
money. Thereafter came the use of the rupee is widely accepted as a
metallic coins — gold, silver, copper medium of exchange.
coins — a phase which continued well
into the last century. Deposits with Banks
The other form in which people hold
coins Currency money is as deposits with banks. At
Modern forms of money include a point of time, people need only some
currency — paper notes and coins. currency for their day-to-day needs.
Unlike the things that were used as For instance, workers who receive
money earlier, modern currency is not their salaries at the end of each month
made of precious metal such as gold, have extra cash at the beginning of
Tughlaq silver and copper. And unlike grain the month. What do people do with
and cattle, they are neither of this extra cash? They deposit it with
everyday use. The modern currency the banks by opening a bank
is without any use of its own. account in their name. Banks accept
Mohar the deposits and also pay an amount
Then, why is it accepted as a
as interest on the deposits. In this way
Akbar’s medium of exchange? It is accepted
reign people’s money is safe with the
as a medium of exchange because the
banks and it earns an amount as
currency is authorised by the
interest. People also have the
government of the country.
provision to withdraw the money as
In India, the Reserve Bank of India and when they require. Since the
issues currency notes on behalf of the deposits in the bank accounts can be
central government. As per Indian withdrawn on demand, these
law, no other individual or deposits are called demand deposits.
Modern coin


Demand deposits offer another made by cheques instead of cash.
interesting facility. It is this facility For payment through cheque, the
which lends it the essential payer who has an account with the
characteristics of money (that of a bank, makes out a cheque for a
medium of exchange). You would specific amount. A cheque is a
have heard of payments being paper instructing the bank to pay
a specific amount from the
person’s account to the person in
UNDERSTAND whose name the cheque has been
HOW CHEQUE P issued.

Cheque Payments
A shoe manufacturer, M. Salim has to make a payment to the leather supplier and writes
a cheque for a specific amount. This means that the shoe manufacturer instructs his
bank to pay this amount to the leather supplier. The leather supplier takes this cheque,
and deposits it in his own account in the bank. The money is transferred from one bank
account to another bank account in a couple of days. The transaction is complete without
any payment of cash.

Account number

Bank branch

Cheque number Coding used by banks

Thus we see that demand deposits You must remember the role that
share the essential features of money. the banks play here. But for the
The facility of cheques against demand banks, there would be no demand
deposits makes it possible to directly deposits and no payments by
settle payments without the use of cash. cheques against these deposits. The
Since demand deposits are accepted modern forms of money — currency
widely as a means of payment, along and deposits — are closely linked to
with currency, they constitute money the working of the modern banking
in the modern economy. system.


banks mediate deposits as cash with themselves. 3. banks in India these days funds (the depositors) and those who hold about 15 per cent of their are in need of these funds (the deposits as cash. Since. public? There is an interesting Banks make use of the deposits to mechanism at work here. What do you think wo uld happen Banks use the major portion of the if all the depositors went to ask deposits to extend loans. Banks keep meet the loan requirements of the only a small proportion of their people. (iii) Salim’s balance in his bank account increases and Prem’s balance decreases.000 in cash for making payments. Banks charge a higher provision to pay the depositors who interest rate on loans than what they might come to withdraw money from offer on deposits. This is kept as borrowers). The difference the bank on any given day. Why are demand deposits considered as money? LOAN ACTIVITIES OF BANKS Let us take the story of banks further. only some of its borrowers and what is paid to many depositors come to withdraw depositors is their main source of cash. (ii) Salim’s balance in his bank account decreases and Prem’s balance increases. huge demand for loans for various What do the banks do with the economic activities. After the transaction between Salim and Prem. In this way. Salim wants to withdraw Rs 20. (i) Salim’s balance in his bank account increases. and Prem’s balance increases. There is a for their money at th e same time? DEPOSITORS BORROWERS People make People take deposits loans People make People repay withdrawals and loans with get interest interest 42 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . the bank is able to manage with income. For between those who have surplus example. Tick the correct answer. We shall read more deposits which they accept from the about this in the following sections. LET’S WORK THESE OUT 1. How would he write a cheque to withdraw money? 2. on between what is charged from any particular day. M. this cash.

Credit therefore plays a vital and positive role in this situation. has Second. Salim has to hire a few month. and thereby increase his earnings. To meet these expenses. The credit helps him to meet the ongoing expenses of production. He has to purchase the raw deliver the order. (1) Festival Season It is festival season two months from now now and promises to pay him later. Salim repay the money that he had borrowed. She is caught in debt. he obtains loan in cash from the received an order from a large trader in large trader as advance payment for town for 3. Salim. complete production on time.TWO DIFFERENT CREDIT SITUATIONS A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (loan) refers to an agreement in which the lender supplies the borrower with money. She is unable to repay the moneylender and the debt grows over the year into a large amount. (2) Swapna’s Problem Swapna. To complete deliver the whole order by the end of the production on time. Next year. a small farmer.000 pairs of shoes to be 1000 pairs of shoes with a promise to delivered in a month time. make a good profit. and the shoe manufacturer. M ONEY AND CREDIT 43 . Midway through the season the crop is hit by pests and the crop fails. he asks the leather supplier to supply leather In this case. it makes little difference. and materials. Swapna takes a fresh loan for cultivation. more workers for stitching and pasting At the end of the month. It is a normal crop this year. But the earnings are not enough to cover the old loan. hoping that her harvest would help repay the loan. Salim obtains credit to meet the working capital needs of production. First. Though Swapna sprays her crops with expensive pesticides. goods or services in return for the promise of future payment. She has to sell a part of the land to pay off the debt. grows groundnut on her three acres of land. Let us see how credit works through the following two examples. She takes a loan from the moneylender to meet the expenses of cultivation. Salim is able to work. obtains loans from two sources.

Farmers the borrower into a situation from usually take crop loans at the which recovery is very painful. vehicle. credit pushes the person into LET’S WORK THESE OUT a debt trap. In income from farming. Collateral is an asset that the borrower owns (such as land. her loan she has to sell Salim Swapna a portion of her land. depends 2. fertilisers. left her worse off. TERMS OF CREDIT Every loan agreement specifies an repayment of the principal. If the borrower fails to repay the loan. of helping Swapna improve her etc. This is an three to four months between the time example of what is commonly called when the farmers buy these inputs debt-trap. therefore. factors – pesticides. Fill the following table. land to repay the loan. In interest rate which the borrower must addition. in case of loss. There is a minimum stretch of earnings. repair of equipment. To repay 1. livestock are some common examples of collateral used for borrowing. electricity. role of moneylenders. because of the crop failure. instead water. Supposing Salim continues to get orders from traders. the main demand In Swapna’s case. pesticides. the lender has the right to sell the asset or collateral to obtain payment. deposits with banks. building. What was the risk? Whether credit would What was the outcome? be useful or not. What are the reasons that make Swapna’s situation so risky? Discuss there is some support. climate. Credit in this case pushes and when they sell the crop. Credit. Repayment of the increase earnings and therefore the loan is crucially dependent on the person is better off than before. Crop crop made loan repayment production involves considerable impossible. What would be on the risks in the his position after 6 years? situation and whether 3. In rural areas. . the failure of the for credit is for crop production. deposits with banks) and uses this as a guarantee to a lender until the loan is repaid. livestocks. lenders may demand pay to the lender along with the collateral (security) against loans. another situation. Property such as land titles. She is clearly much Why did they need credit? worse off than before. beginning of the season and repay the In one situation credit helps to loan after harvest. She had to sell part of the costs on seeds.

collateral and documentation requirement. Fill in the blanks choosing the correct option from the brackets. does it in any way affect their capacity to borrow? 3. Loan amount (in Rupees) Duration of loan Documents required Interest rate Mode of repayment Collateral Interest rate. They may vary depending on the nature of the lender and the borrower. A House Loan Megha has taken a loan of Rs 5 lakhs from the bank to purchase a house. This means __________ (low/high) interest rate. documents showing her employment records and salary before the bank agreed to give her the loan. borrowers look for easy terms of credit. Why do lenders ask for collateral while lending? 2. Megha had to submit to the bank. Given that a large number of people in our country are poor. and the mode of repayment together comprise what is called the terms of credit. ______________(easy/ tough) conditions for repayment. which will be returned to Megha only when she repays the entire loan with interest. The annual interest rate on the loan is 12 per cent and the loan is to be repaid in 10 years in monthly instalments. The terms of credit vary substantially from one credit arrangement to another. Fill the following details of Megha’s housing loan. The bank retained as collateral the papers of the new house. LET’S WORK THESE OUT 1. M ONEY AND CREDIT 45 . ___________(less/more) collateral and documentation requirements. While taking a loan. The next section will provide examples of the varying terms of credit in different credit arrangements.

the trader supplies the farm inputs on against the cold storage receipt. Arun has seven Shyamal tells us that every season he needs acres of land. 6. Ra money by working for th ma repays the e landowner. He is one of the few persons loans for cultivation on his 1. anytime in the next three years. and needs cred it to meet the daily after the harvest.000. since the crop prices are low no work. He then intends to store village at an interest rate of three per cent the rest of the potatoes in a cold storage per month. Though the landowner doesn’t treat her well. Variety of Credit Arrangements Example of a Village Rohit and Ranjan had finished reading about the terms of credit in class. Most of the time.. a medium landowner in Sonpur. At the beginning of the cropping and apply for a fresh loan from the bank season. a small irriga farm We next meet Arun who is supervising the work of one farm labourer. Rama has to take a fresh loan. There are ar when Rama has promptly. This way the trader works as an agricultural lab can ensure that the money is repaid several months in the ye ourer. Arun plans For the last few years. sh e ow es th e la nd ow ne r Rs 5. Also. for credit. We first meet w it h a re planted ted village. a small W e h e a d d ir e w or ki ng a t be Shy labourers would potato crops. The bank credit. e rs a n d 15th Nov. Expenses on sudden illnesses or make a profit from buying the crop at a low functions in the family ar e also met through price from the farmers and then selling it loans. The interest rate on the loan the village moneylender at an interest rate of is 8. Shyamal has been to repay the loan after harvest by selling a borrowing from an agricultural trader in the part of the crop. Th this time of th amal. She sell the crop to him. Read what they record. They were eager to know the various credit arrangements that existed in their area: who were the people who provided credit? Who were the borrowers? What were the terms of credit? They decided to talk to some people in their village. she continu es to work for him since she can get loans from him when in need. At pr es en t. the trader also makes the farmers promise to R ama is working in a neigh bouring field.5 acres of land. the trader is able to expenses. The landowner charges an interest rate of 5 per cent per month. . 200 e fi e ld s w h e re m o s t fa rm e fields c tl y fo r th e day. and can be repaid five per cent per month (60% per annum). er in S on pu r. later when the price has risen. which is to be repaid when the crops offers this facility to farmers who have are ready for harvest. Rama tells us that the only source of credit for the landless pe ople in Sonpur are the landowner-employers . he would borrow money from cultivation. taken crop loan from them. before the previous loa n has been repaid.5 per cent per annum. Besides the interest charge on the loan. Till in Sonpur to receive bank loan for a few years back.. Rama has to depe nd on her employer.

· interest rate on bank loans is same as the interest rate charged by the traders. 4. industrial workers cooperatives. There are several types of cooperatives possible such as farmers cooperatives. the medium farmer and the landless agricultural worker in Sonpur. List the various sources of credit in Sonpur. Krishak Cooperative functions in a village not very far away from Sonpur. weavers cooperatives. With these deposits as collateral. Why will Arun have a higher income from cultivation compared to Shyamal? 5. Comp are the terms of credit for the small farmer. Record your conversation. the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). the Cooperative has obtained a large loan from the bank. loans for cultivation and agricultural trade. Members of a cooperative pool their resources for cooperation in certain areas. · banks demand collateral which everyone cannot provide. Can everyone in Sonpur get credit at a cheap rate? Who are the people who can? 6. Rama’s debt · will rise. Tick the correct answer. 3. another round of lending can take place.Loans from Cooperatives Besides banks. Underline the various uses of credit in Sonpur in the above passages. fishery loans. · will remain constant. 2. Once these loans are repaid. 7. Krishak Cooperative provides loans for the purchase of agricultural implements. Note the differences in the terms of credit across people. Talk to some people to find out the credit arrangements that exist in your area. It has 2300 farmers as members. etc. (ii) Arun is one of the few people in Sonpur to take a bank loan because · other people in the village prefer to borrow from the moneylenders. LET’S WORK THESE OUT 1. M ONEY AND C REDIT 47 . · will decline. loans for construction of houses and for a variety of other expenses. It accepts deposits from its members. These funds are used to provide loans to members. (i) Over the years.

Among the former Landlords 1 % are loans from banks and cooperatives. In Graph 1 you can see the various sources of credit to rural households in India. at what interest minimum cash balance out of the rate. Banks Societies employers. Periodically. to whom. etc. traders. to The Reserve Bank of India small borrowers etc. The 25% 27% informal lenders include Commercial Cooperative moneylenders. Similarly. supervises the credit activities of lenders in the informal sector. deposits they receive. Is more credit the RBI sees that the banks give loans coming from the formal sector or the not just to profit-making businesses informal sector? and traders but also to small cultivators. The Traders various types of loans 3% Relatives and can be conveniently Friends 30% 7 % grouped as formal sector loans and Moneylenders Others 7% informal sector loans. They BUT WHY SHOULD can lend at whatever interest rate they A BANK WANT US TO HAVE A HIGHER INCOME? . supervises the functioning of formal banks have to submit information to sources of loans.FORMAL SECTOR CREDIT IN INDIA We have seen in the above examples that Graph 1 : Sources of Credit people obtain loans from for Rural Households in India in 2003 various sources. For instance. relatives and friends. etc. small scale industries. we the RBI on how much they are have seen that the banks maintain a lending. The RBI monitors the banks in actually There is no organisation which maintaining cash balance.

sources. half of the total credit needs of the For these reasons. from the cost to the borrower of informal poor to rich. This could availing cheap credit from formal lead to increasing debt (as we saw for lenders whereas the poor households Rama in Sonpur) and debt trap. banks and rural people. In certain are from informal sources.choose. There is no one to stop them Formal and Informal Credit: from using unfair means to get their Who gets what? money back. Graph 2 shows the importance of Compared to the formal lenders. They could set up new industries or poor households well-off rich trade in goods. Also. This would lead to higher incomes Graph 2 : Of all the loans taken by urban housholds in 2003. You can see that 85 per cent of the Higher cost of borrowing means a loans taken by poor households in the larger part of the earnings of the urban areas are from informal borrowers is used to repay the loan. The rich households are income of the borrower. the high interest rate for per cent are from formal sources. formal and informal sources of credit most of the informal lenders charge a for people in urban areas. The people much higher interest on loans. Thus. so because of the high cost of the formal sector still meets only about borrowing. enterprise by borrowing may not do What does all this suggest? First. set up 85% 72% 90% small-scale industries etc. while 90 cases. What do you left for themselves (as we saw for find? Only 10 per cent of their loans Shyamal in Sonpur). Compare this with the rich Hence. PURPLE : Per cent of loans from the FORMAL sector M ONEY AND CREDIT 49 . The remaining credit cooperative societies need to lend needs are met from informal sources. have to pay a large amount for people who might wish to start an borrowing. what and many people percentage was formal and what percentage was informal? could then borrow cheaply for a variety of needs. borrowers have less income urban households. are divided into four groups. They 15% 10% could grow crops. do 28% 53% 47% business. Cheap housholds with few assets households households and affordable credit is crucial for the BLUE : Per cent of loans from the INFORMAL sector country’s develop- ment. loans is much higher. more. A borrowing can mean that the amount similar pattern is also found in rural to be repaid is greater than the areas. as shown in the figure.

Should there be a supervisor. Thus. Why is it so? Banks are not bank loans. LET’S WORK THESE OUT 1. It is important dependence on informal sources that the formal credit is distributed of credit reduces. What are the differences between formal and informal sources of credit? 2. approach the Megha. getting a know the borrowers personally and loan from a bank is much more hence are often willing to give a difficult than taking a loan from loan without collateral. bank loans require proper moneylenders even without repaying 50 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . it is necessary these loans. Most loans from informal lenders Secondly. that looks into the loan activities of informal lenders? Why would its task be quite difficult? 4. it is the richer that banks and cooperatives households who receive formal credit increase their lending particularly whereas the poor have to depend on in the rural areas. while formal sector carry a very high interest rate and do loans need to expand. Even when they are present. on the other hand. Informal lenders such as present everywhere in rural India. such as the Reserve Bank of India. if necessary. As we saw for can. it is also little to increase the income of the necessary that everyone receives borrowers. The borrowers informal sources. more equally so that the poor can benefit from the cheaper loans. so that the the informal sources. At present. Why should credit at reasonable rates be available for all? 3. Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households? A worker stitching a quilt DO YOU THINK A BANK WILL GIVE ME A LOAN? SELF-HELP GROUPS FOR THE POOR In the previous section we have seen documents and collateral. Absence of that poor households are still collateral is one of the major reasons dependent on informal sources of which prevents the poor from getting credit. moneylenders.

into small Self Help Groups organised in SHGs. handlooms. it becomes eligible for variety of social issues such as health. The idea is to of this feature. Loan is sanctioned in the name of the group and is A women’s self-help group meeting in Gujarat meant to create self- employment opportunities for the members. They can get timely loans from Rs 25 to Rs 100 or more. etc. for acquiring assets like sewing machine. The group decides as regards the loans M ONEY AND CREDIT 51 . amount. Moreover. buying seeds.g. it is the group transactions and harass the poor which is responsible for the repayment borrowers. A typical SHG has 15-20 members.their earlier loans. small loans are provided to the members for releasing mortgaged land. even though they (SHGs) and pool (collect) their have no collateral as such. Because loans to the poor. The group charges interest on only does it help women to become these loans but this is still less than financially self-reliant. for meeting working capital needs (e. the regular what the moneylender charges. availing loan from the bank. banks are willing to organise rural poor. for a variety of purposes and at a depending on the ability of the people reasonable interest rate. of the loan. However. Not needs. raw materials like bamboo and cloth). for housing materials. if the group is regular platform to discuss and act on a in savings. who meet and save overcome the problem of lack of regularly. usually belonging to one Thus. Any case of non- repayment of loan by any one In recent years. Saving per member varies collateral. to save. etc. nutrition. the SHGs help borrowers neighbourhood. Also. cattle. For instance. the to be granted — the purpose. domestic violence. in particular lend to the poor women when women. keep no records of the schedule etc. Members can take small loans SHGs are the building blocks of from the group itself to meet their organisation of the rural poor. people have tried member is followed up seriously by out some newer ways of providing other members in the group. fertilisers. Most of the important decisions regarding the savings and loan activities are taken by the group members. repayment of interest. moneylenders charge very high rates interest to be charged. savings. After meetings of the group provide a a year or two.

the more expensive informal credit or in certain situations make the becomes less.000 villages spread people with their millions of small across Bangladesh. Look at a 10 rupee note. What are the reasons why the banks might not be willing to lend to certain borrowers? 52 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . 2. How does money solve the problem of double coincidence of wants? Explain with an example of your own. conditions that are appropriate and Grameen Bank now has over 6 million reasonable these millions of small borrowers in about 40. Credit. What is written on top? Can you explain this statement? 5. Grameen Bank of Bangladesh Grameen Bank of Bangladesh is one of the biggest success stories in reaching the poor to “If credit can be made available to meet their credit needs at reasonable rates. At are linked with the banking system. not only are poor women reliable borrowers. credit might create further problems for the borrower. present. In situations with high risks. How do banks mediate between those who have surplus money and those who need money? 4. Also. Both these steps are sources or informal sources. 3. SUMMING UP In this chapter we have looked at the credit vary substantially between modern forms of money and how they formal and informal lenders. Almost all of the borrowers pursuits can add up to create the are women and belong to poorest sections of biggest development wonder. These borrowers have proved that Professor Muhammad Yunus. the poor people on terms and Started in the 1970s as a small project. What is the basic idea behind the SHGs for the poor? Explain in your own words. increases so that the dependence on as we saw can have a positive impact. the founder of Grameen Bank. Why do we need to expand formal sources of credit in India? 6. These can be either formal societies etc. get a much greater share of formal Credit is available from a variety of loans from banks. Explain. Economic that the total formal sector credit activities require loans or credit.” the society. cooperative sources. It is essential take loans from these banks. it is the richer households On one side are the depositors who who receive credit from formal sources keep their money in the banks and on whereas the poor have to depend on the other side are the borrowers who the informal sources. 7. but that they can start and run a variety of and recipient of 2006 Nobel Prize for Peace small income-generating activities successfully. EXERCISES 1. the poor should borrower worse off. Terms of important for development.

What is the criterion that you have used for classification? M ONEY AND CREDIT 53 . (d) Suggest some ways by which small farmers can get cheap credit. (b) Cooperatives. who need credit for cultivation. What are the purposes for which the following people might need loans? Fill in the column. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary? 9. (c) Employers. Occupations Reason for needing a Loan Construction worker Graduate student who is computer literate A person employed in government service Migrant labourer in Delhi Household maid Small trader Autorickshaw driver A worker whose factory has closed down Next. Analyse the role of credit for development. (ii) Formal sources of credit does not include (a) Banks. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss. (b) Members. In India. (iv) Banks charge a higher interest rate on loans than what they offer on __________. about 80 per cent of farmers are small farmers. Fill in the blanks: (i) Majority of the credit needs of the _________________households are met from informal sources. ADDITIONAL PROJECT / ACTIVITY The following table shows people in a variety of occupations in urban areas. 13. 12. (a) Why might banks be unwilling to lend to small farmers? (b) What are the other sources from which the small farmers can borrow? (c) Explain with an example how the terms of credit can be unfavourable for the small farmer. 8. (c) Non-government organisation. Choose the most appropriate answer. (i) In a SHG most of the decisions regarding savings and loan activities are taken by (a) Bank. 11. (v) _______________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender. (iii) __________________ issues currency notes on behalf of the Central Government. (ii) ___________________costs of borrowing increase the debt-burden. 10. Manav needs a loan to set up a small business. classify the people into two groups based on whom you think might get a bank loan and those who might not.

NOTES FOR THE TEACHER CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY Most regions of the world are getting increasingly of trade and investment policies the rapid rise section draws on the topics covered in Chapters and influence of the MNCs has been shown 1 and 2 (for example. 54 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . While this interconnectedness from international organisations such as the across countries has many dimensions — WTO. etc. by the International Labour highlighting the role of MNCs in the process. Another interesting have to ensure that the students grasp this idea resource is the WTO website http://www. examples and from the Indian context. before moving on to the It gives access to the variety of agreements that next While discussing liberalisation. one recommended website is rapid improvements in technology. we find that MNCs have been a major force in the balances in power are interesting subjects that globalisation process connecting distant regions can be covered in a discussion mode rather than of the world. You Organisation — www.ilo. Also. liberalisation www. For company related information. with sufficient clarity. A role-play could be complex issues of portfolio investment have been conceived to compare and contrast the pre and left out. most MNCs have their own Globalisation has been facilitated by several websites. Collective brainstorming passages like the one given after Section II to sessions can be conducted to analyse such test and reinforce new concepts. mainly drawn goal). you between countries through foreign trade and have to keep in mind that the students are foreign investments by multinational unaware of what India was like in the corporations (MNCs). post-liberalisation era. situations. social and economic — this area for students and you may. To what extent has globalisation of the chapter discusses this. the chapter. are being negotiated at the WTO. It defines globalisation as the integration While a must while discussing this section. which you can refer to. This might teaching. As you will notice. Integration of production and integration of Sources for Information markets is a key idea behind understanding the process of globalisation and its impact.wto. Note that the examples activities drawn from the local environment are are an aid to explain a more general point. international negotiations under WTO and the uneven If we look at the past thirty years or so. political. This has The call for a fairer globalisation has been given. been dealt with at length in this chapter. the more pre-liberalisation among others. pressures interconnected. such as the impact of imports on You can also creatively use comprehension local farmers. Three of these have been highlighted: the MNCs. what is a fair development through a variety of examples. production to other countries and what are the The final section covers the impact of ways in which they are doing so? The first part globalisation. the emphasis should be on the ideas include contexts that have not been covered in and examples are to be used as illustrations. Why are the MNCs spreading their as lectures. Rather than contributed to the development process? This relying on quantitative estimates. encourage them to do their own sense. Similarly. Improvement in technology is a fascinating cultural. with a few chapter looks at globalisation in a more limited directions. If you want to critically look at factors.

G LOBALISA TION AND THE INDIAN E CONOMY 55 . new models of automobiles can be seen on Indian roads. mobile phones and televisions made by the leading manufacturers of the world are within our reach. CHAPTER 4 GLOBALISATION AND THE INDIAN ECONOMY As consumers in today’s world. Indians are buying cars produced by nearly all the top companies in the world. Today. Every season. In a matter of years. You wouldn’t have found such a wide variety of goods in Indian markets even two decades back. some of us have a wide choice of goods and services before us. how are these changes affecting the lives of the people? We shall dwell on these questions in this chapter. The latest models of digital cameras. Such wide-ranging choice of goods in our markets is a relatively recent phenomenon. Gone are the days when Ambassador and Fiat were the only cars on Indian roads. our markets have been transformed! How do we understand these rapid transformations? What are the factors that are bringing about these changes? And. A similar explosion of brands can be seen for many other goods: from shirts to televisions to processed fruit juices.

and food stuff and imported finished This is done so that the cost of goods. What company that owns or controls crossed the boundaries of these production in more than one nation. This is a call centre in Bangalore. food MNCs set up offices and factories for stuff and finished products. designs its products in research centres in the United States. producing industrial equipment. These are then shipped to Mexico and Eastern Europe where the products are assembled and the finished products are sold all over the world. Colonies production in regions where they can such as India exported raw materials get cheap labour and other resources. and then has the components manufactured in China. Consider the before large companies called following example. equipped with telecom facilities and access to Internet to provide information and support to customers abroad. This was earn greater profits. Spreading of Production by an MNC A large MNC. production was largely emerged on the scene. 56 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . Meanwhile. countries were raw materials. A MNC is a organised within countries. PRODUCTION ACROSS COUNTRIES Until the middle of the twentieth multinational corporations (MNCs) century. the company’s customer care is carried out through call centres located in India. Trade was the main channel production is low and the MNCs can connecting distant countries.

production across the borders to the Mexico and Eastern Europe are useful multinationals can be truly immense. in the US and Europe. the company may.. The brand tag says ‘Made in Thailand’ but they are not Thai products... In making garments. India has but more important. The English speaking youth who can production process is divided into provide customer care services. MNCs set up factories and EXPENSIVE HERE! offices for production.. It also has educated increasingly complex ways. You will read more about the policies Second.. MNCs set up production where it is close to the markets. China cent cost-savings for the MNC! provides the advantage of being a The advantage of spreading out cheap manufacturing location. First. We dissect the manufacturing process and look for the best solution at each step. building. MNCs can provide money for MNCs might look for government additional investments. and where the benefit to the local company of such availability of other factors of joint production is two-fold. new machines for faster production. And small parts and spread out across the all this probably can mean 50-60 per globe. MNCs set up production At times. The money that is spent to buy assets such as land.. As understand the technical aspects of a result. machines and other equipment is called investment. for example. production is assured. where jointly with some of the local there is skilled and unskilled labour companies of these countries. We are doing it globally. G LOBALISA TION AND THE INDIAN E CONOMY 57 . In addition. Having assured themselves of these IT HAS BECOME conditions. get cotton fibre from Korea. . Any investment is made with the hope that these assets will earn profits. In the above example. production is organised in production. the goods and highly skilled engineers who can services are produced globally. the latest technology for production. THIS FACTORY TO ANOTHER COUNTRY.. LET’S WORK THIS OUT Complete the following statement to show how the production process in the garment industry is spread across countries. The available at low costs. INTERLINKING PRODUCTION ACROSS COUNTRIES In general. In this example the MNC is not only for their closeness to the markets selling its finished products globally. like buying policies that look after their interests. MNCs might bring with them WE WILL SHIFT later in the chapter. Investment made by MNCs is called foreign investment.

by using the local companies for supplies. Also. small producers around the world. with a capacity to make 5 million pouches daily! In fact. delivery. Garments. To take an example. sports items are examples of quality. Large MNCs. By setting up partnerships with local companies. But the most common route for MNC investments is to buy up local companies and then to expand production. Parakh Foods had built a large marketing network in various parts of India. many of the top MNCs have wealth exceeding the entire budgets of the developing country Jeans produced in developing countries being sold in USA for Rs 6500 ($145) governments. imagine the power and influence of these MNCs! There’s another way in which The products are supplied to the MNCs control production. which then sell these under MNCs in developed countries place their own brand names to the orders for production with small customers. tremendous power to determine price. MNCs with huge wealth can quite easily do so. footwear. production in these widely dispersed locations is getting interlinked. 58 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . where its brand was well-reputed. Cargill is now the largest producer of edible oil in India. a very large American MNC. MNCs are exerting a strong influence on production at these distant locations. has bought over smaller Indian companies such as Parakh Foods. we see that there are a Women at home in Ludhiana making footballs for large MNCs variety of ways in which the MNCs are spreading their production and interacting with local producers in various countries across the globe. With such enormous wealth. As a result. whose control has now shifted to Cargill. Parakh Foods had four oil refineries. Cargill Foods. by closely competing with the local companies or buying them up. Thus. and labour industries where production is conditions for these distant carried out by a large number of producers. These large MNCs have producers.

In what ways will the production of cars by Ford Motors in India lead to and trucks. you would compete in markets located in other remember that it was trading interests countries of the world. Explain world. Similarly. but also the lower costs of production. an American Read the passage on the left and answer the questions.e. 7. for the which attracted various trading buyers. What is foreign investment? How much did Ford Motors invest in India? automobile manufacturers 3. Ford Motors was 6. foreign trade the main channel connecting creates an opportunity for the countries. Pepsi..000 cars were exported from India to South Africa. Ford Motors came the statement. Also. The company wants to develop Ford India as a component supplying base for its other plants across the globe. Can you guess why? while 24. Japanese or European. is one of the 1. markets of their connecting India and South Asia to own countries. By the year interlinking of production? 2004. Honda. Producers can sell their markets both in the East and West produce not only in markets located and the extensive trade that took place within the country but can also along these routes. parts to Ford Motors a major Indian (c) closeness to a large number of buyers in India and China manufacturer of jeeps 5. In what ways is a MNC different from other companies? selling 27. LET’S WORK THESE OUT Ford Motors. Cars made by Indian workers being transported to be sold abroad by MNCs. 1700 crore to manufacturing car components for its global operations? Discuss the set up a large plant near following factors: Chennai. G LOBALISA TION AND THE INDIAN E CONOMY 59 .000 cars in the Indian markets. i. Would you say Ford Motors is a MNC? Why? world’s largest 2. This was done (a) cost of labour and other resources in India in collaboration with (b) the presence of several local manufacturers who supply auto- Mahindra and Mahindra. In history you would have producers to reach beyond the read about the trade routes domestic markets. such as Nike. Nokia. Mexico and Brazil. import of goods produced in companies such as the East India another country is one way of Company to India. company. FOREIGN TRADE AND INTEGRATION OF MARKETS For a long time foreign trade has been To put it simply. Coca-Cola. What then is the expanding the choice of goods beyond basic function of foreign trade? what is domestically produced. By setting up their production plants in India. MNCs such as Ford with production spread Motors tap the advantage not only of the large markets that countries over 26 countries of the such as India provide. Why do you think the company wants to develop India as a base for spent Rs. to India in 1995 and 4. Nearly all major multinationals are American.

Toys much less. They face losses. Chinese toys makers. in the Indian m Chinese Toys in India Chinese manufacturers learn What is happening here? As a of an opportunity to export toys result of trade. The opposite is true for Indian 70 to 80 per cent of the toy toy makers. ade fect of foreign tr Let us see the ef ys ple of Chinese to through the exam arkets. They start In the competition between exporting plastic toys to India. are now cheaper in the Indian markets than earlier. Within a year. option of choosing between Indian buyers have a greater Indian and the Chinese toys. Indian and Chinese toys. 60 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . a high price. Chinese toys to India. Indian markets. For the Chinese toy and new designs. this provides an become more popular in the opportunity to expand business. Buyers in India now have the Chinese toys prove better. shops have replaced Indian as their toys are selling toys with Chinese toys. choice of toys and at lower Because of the cheaper prices prices. where toys are sold at come into the Indian markets.

3. Prices of similar goods in the two markets tend to become equal. At the same OUR WORLD YOU’RE time. foreign trade between countries PLAYING WITH! SOMEDAY YOU’LL has been rising rapidly. 4. activities of most MNCs involve substantial trade in goods and also services. Choice of goods in the markets rises. the car manufacturing plant of Ford Motors GLOBALISATION IS FUN! in India not only produces cars for the Indian markets. For instance. producers in the two countries now closely compete against each other even though they are separated by thousands of miles! Foreign trade thus results in connecting the markets or integration of markets in different countries. with the opening of trade. (b) steel companies in India. A large part HAVE TO PAY THE of the foreign trade is also controlled PRICE! by MNCs. Small traders of readymade garments facing stiff competition from both the MNC brands and imports. WHAT IS GLOBALISATION? In the past two to three decades. (a) steel companies in China. In general. it also exports cars to other developing countries and exports car components for its many factories around the world. Foreign investment by MNCs in these BE CAREFUL! THAT’S countries has been rising. How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries? Explain. LET’S WORK THESE OUT 1. Explain how the import of steel by China will affect. more and more MNCs have been looking for locations around the world which would be cheap for their production. (c) industries buying steel for production of other industrial goods in China. And. goods travel from one market to another. Likewise. What was the main channel connecting countries in the past? How is it different now? 2. G LOBALISA TION AND THE INDIAN E CONOMY 61 . In recent years China has been importing steel from India. Distinguish between foreign trade and foreign investment.

. 62 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT .. The result of greater foreign contact with each other than a few investment and greater foreign trade decades back. planes and trucks. What is the role of MNCs in the globalisation process? 2. the past fifty years have seen several improvements in transportation technology. People usually the globalisation process. What are the various ways in which countries can be linked? 3. (b) greater competition among producers. Containers for transport of goods Goods are placed in containers that can be loaded intact onto ships. better jobs or investments and technology are better education. the cost of air transport has fallen. 1. through the movement of people MNCs are playing a major role in between countries. Similarly. FACTORS THAT HAVE ENABLED GLOBALISATION Technology Rapid improvement in technology has been one major factor that has stimulated the globalisation process. shall result in (a) lesser competition among producers.. This is interconnection between countries. Containers have led to huge reduction in port handling costs and increased the speed with which exports can reach markets. however. For instance. This has made much faster delivery of goods across long distances possible at lower costs. there has not been regions of the world are in closer much increase in the movement of people between countries due to LET’S WORK THESE OUT various restrictions. (c) no change in competition among producers. This has enabled much greater volumes of goods being transported by airlines. Globalisation is this there is one more way in which the process of rapid integration or countries can be connected. railways.WE’VE SEEN GREAT IMPROVEMENTS IN TRANSPOR TATION. countries. In the past few moving between countries. Most decades. production and markets across services. . by connecting countries. Globalisation. More move from one country to another in and more goods and services.. search of better income. investments and technology. Choose the correct option. has been greater integration of Besides the movements of goods.

underline the words describing the use of technology in production. recent times.. As you would be aware. where you the developments in information and can obtain and share information on communication technology. After printing. has been facilitated by satellite communication devices. (voice-mail) across the world at Telecommunication facilities (tele.BUT WHERE communicate from remote areas. MY CHILD! THIS connected with globalisation? Would THIS? I CAN HARDLY READ PRINTING PRESS IS NOT globalisation have been possible THE WORDS IN MY BOOK! FOR ORDINARY INDIANS! without expansion of IT? G LOBALISA TION AND THE INDIAN E CONOMY 63 . computers. The designers in the Delhi office get orders on how to design the magazine from the office in London using telecommunication facilities. fax) are used to contact one another around the world. The designing is done on a computer. telephone including mobile phones. technology in the areas Internet also allows us to send instant of telecommunications... How is information technology TEXTBOOK PRINTED LIKE NO. In almost anything you want to know. and to . Even the payment of money for designing and printing from a bank in London to a bank in Delhi is done instantly through the Internet (e-banking)! LET’S WORK THESE OUT 1. In the above example. The text of the magazine is sent through Internet to the Delhi office. Even more remarkable have been amazing world of internet. electronic mail (e-mail) and talk Internet has been changing rapidly. the magazines are sent by air to London. You might have also ventured into the chnology mmunication te Info rm atio n an d t) co h as played a major role in Using IT in (or IT in sh or sp re ad in g ou t p roduction of se rvices . graph. to access information instantly. negligible costs.. computers have now entered almost every field of activity. BUT WHY ISN’T MY 2. Globalisation s. IT LOOKS LIKE A VERY NICE MAGAZINE. Let us see how across countrie A news magazine published for London readers is to be designed and printed in Delhi. This IS THE ELECTRICITY?.

during the early stages of Let us return to the example of imports development. using the example of Chinese toys. The government imposes have allowed these industries to come much less restrictions than before up. barriers on foreign trade and barriers to increase or decrease foreign investment were removed to a (regulate) foreign trade and to decide large extent. India allowed imports and is therefore said to be more liberal. The government could also place a limit on the number of goods that can be imported. Thus. Indian toy-makers will performance of producers within the prosper. LET’S WORK THESE OUT 1. Can you explain. businesses are Industries were just coming up in the allowed to make decisions freely 1950s and 1960s. What would happen? Those who wish to import these toys Starting around 1991. This meant that goods what kinds of goods and how much could be imported and exported of each. easily and also foreign companies could set up factories and offices The Indian government. after here. should come into the country. have given protection to of Chinese toys in India. Removing barriers or restrictions This was considered necessary to set by the government is what is protect the producers within the known as liberalisation. fertilisers. 64 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . how quotas can be used as trade barriers? Do you think this should be used? Discuss. It felt that imports from China will automatically competition would improve the reduce. the time had come for Indian Chinese toys will no longer be as producers to compete with producers cheap in the Indian markets and around the globe. Governments can use trade Thus. petroleum policy etc. It is called a barrier international organisations. had put barriers to foreign trade and foreign investment. import of toys. With country from foreign competition. country since they would have to improve their quality. reaching changes in policy were made Because of the tax. buyers will have in India. liberalisation of trade. some far- would have to pay tax on this. Suppose the domestic producers through a variety Indian government puts a tax on of means. The government decided that to pay a higher price on imported toys. This decision Tax on imports is an example of was supported by powerful trade barrier. What do you understand by liberalisation of foreign trade? 2. Liberalisation of foreign trade of only essential items such as and foreign investment machinery. Note that all developed countries. This is known as quotas. because some restriction has been set up. Tax on imports is one type of trade barrier. and competition about what they wish to import or from imports at that stage would not export. Independence.

5%! And yet this very small percentage of people who are engaged in A typical cotton farm in USA consists of thousands of acres owned by a huge corporation that will sell cotton abroad at lowered prices. US farmers can sell the farm products at abnormally low prices. Is this free and fair trade?” a tiny 0. in practice. asking the the agriculture sector provides the developed country governments. foreign trade and investment are harmful. adversely affecting farmers in these countries. therefore. Compare this to a developed continued to pay your farmers vast sums of country such as the US with the money. WTO establishes Debate on Trade Practices You have seen in Chapter 2. But you significant portion of the GDP in have ignored the rules of WTO and have India. agriculture in the US receive massive sums of money from the US government for production and for exports to other countries. The surplus farm products are sold in other country markets at low prices. All countries in the world that the developed countries have should liberalise their policies. WORLD TRADE ORGANISATION We have seen that the liberalisation of rules regarding international trade. unfairly retained trade barriers. foreign trade and investment in India and sees that these rules are obeyed. developed countries. WTO rules have forced World Trade Organisation (WTO) is the developing countries to remove one such organisation whose aim is trade barriers. These currently members of the WTO organisations say that all barriers to (2006). it is seen ‘free’. that Developing countries are. An example of this is to liberalise international trade. was supported by some very powerful Nearly 150 countries of the world are international organisations. Due to this massive money that they receive. There should be no barriers. You have asked our governments to stop share of agriculture in GDP at 1% supporting our farmers. “We have bulk of employment and a reduced trade barriers as per WTO rules. Though WTO is supposed to allow Trade between countries should be free trade for all. On the other hand. but you are doing so and its share in total employment yourselves. G LOBALISA TION AND THE INDIAN E CONOMY 65 . the current debate on trade in Started at the initiative of the agricultural products.

trade between countries is not ______________________________. There is greater choice services such as banking in urban before these consumers who now areas. in many cases. particularly the well-off sections in the electronics. to these possible earlier.has been have been interested in industries of advantage to consumers. the lives of people? Let us look at some of the evidence. such as those which are environmentally friendly. local companies higher standards of living than was supplying raw materials. In these prices for several products. IMPACT OF GLOBALISATION IN INDIA In the last fifteen years. The aim of the WTO is to ____________________. MNCs have increased their investments in India over the past 15 Globalisation and greater years. we saw that the US government gives massive sums of money to farmers for production. which means investing in India competition among producers . These products have a large enjoy improved quality and lower number of well-off buyers. Discuss whether these are fair or not. of the Indian economy has come a the impact of globalisation has not long way. new jobs have these people today.both has been beneficial for them. Also. WTO was started at the initiative of __________countries. At times. Developing countries like India have ___________________. have continued to provide protection to their producers. soft drinks. industries have prospered. industries and services. As a result. What do you think can be done so that trade between countries is more fair? 3. and sees that ___________________ In practice. 2. globalisation Among producers and workers. enjoy much been created. governments also give support to promote production of certain types of goods. In the above example. LET’S WORK THESE OUT 1. What has been its effect on been uniform. etc. MNCs local and foreign producers . . WTO establishes rules regarding ________________ for all countries. Firstly. Fill in the blanks. fast food or urban areas. whereas developed countries. automobiles. such as cell phones.

WE five years. Asian Paints (paints). called regular basis. How has competition benefited people in India? 2. Besides. Some have providing services. Why do governments try to attract more foreign investment? 4. a host of to emerge as multinationals services such as data entry. roads. recreational and However. Should more Indian companies emerge as MNCs? How would it benefit the people in the country? 3. The Indian company with foreign companies. In the recent years. administrative tasks. the government governments in India are taking special has allowed companies to ignore many of steps to attract foreign companies to these. producing a magazine for the London Moreover. storage. LET’S WORK THESE OUT 1. Industrial zones. we saw what may be development for one may be destructive for others. companies hire workers Special Economic Zones (SEZs). Ranbaxy are now being done cheaply in (medicines). SEZs are to have world class intense pressure of work. Companies who set companies are demanding more flexibility up production units in the SEZs do not in labour laws. still not satisfied. Steps to Attract Foreign Investment In recent years. foreign educational facilities. the central and state rights. In Chapter 1. globalisation has based company and call centres are enabled some large Indian companies some examples. transport. have invested in newer technology and Globalisation has also created production methods and raised their new opportunities for companies production standards. reduce the cost of labour for the company. countries such as India and are Sundaram Fasteners (nuts and bolts) exported to the developed countries. engineering mobiles). have to pay taxes for an initial period of NOW. They worldwide. Find out who are these people and why are they opposing it. Infosys (IT). are ‘flexibly’ for short periods when there is being set up. ARE READY TO INVEST! Government has also allowed flexibility in the labour laws to attract foreign investment. Instead of hiring workers on a invest in India. account- themselves! Tata Motors (auto. particularly those gained from successful collaborations involving IT. You have seen in Chapter 2 that the companies in the organised sector have to obey certain rules that aim to protect the workers’ Secondly. ing. water. The setting of SEZs has been opposed by some people in India. G LOBALISA TION AND THE INDIAN E CONOMY 67 . This is done to facilities: electricity. several of the top Indian are some Indian companies which companies have been able to benefit are spreading their operations from the increased competition.

an industrial town vis ion in Tamil com pa nie s to mo ve int o ass Nadu. tyres. His struggle to run his compan Ravi now produces less than y started half the wh en the gov ern me nt rem capacitors that he produced in ove d the year restrictions on imports of capaci 20 00 an d ha s onl y sev en tors as wo rke rs per its agreement at WTO in 200 working for him. his own However. Small producers: Compete or perish For a large number of small producers and workers globalisation has posed major challenges. Ra for the vi took a ma nu fac tur e of tel evi sio loan from the bank to start n set s. What are the ways in which Ravi’s small production unit was affected by rising competition? 2. working under him. Recent studies point out that small producers in India need three things to compete better in the market (a) better roads. marketing and information network (b) improvements and modernisation of technology (c) timely availability of credit at reasonable interest rates. the tube lights. LET’S WORK THESE OUT 1. Should producers such as Ravi stop production because their cost of production is higher compared to producers in other countries? What do you think? 3. derabad and Chennai have closed the ir units. Batteries. plastics. water. Even wh electronic home appliances inc en some luding of them bought capacitors. Wit y would hin three pre fer to imp ort as the pri ce ye ars . The small industries in India employ the largest number of workers (20 million) in the country. dairy products. capacitors. R is in g Co m pe ti ti on Ravi did not expect that he wo uld have us ed to bu y dif fer en t com to face a crisis in such a sho pon en ts rt period inc lud ing cap aci tor s in bu lk of his life as industrialist. television etc. His friends main clients. Many of Ravi’s 1. power. 68 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . Several of the units have shut down rendering many workers jobless. he wa s ab le to of the exp an d im po rte d ite m wa s ha lf the pro du cti on an d ha d 20 wo pri ce rke rs charged by people like Ravi. raw materials. and vegetable oil are some examples of industries where the small manufacturers have been hit hard due to competition. the television com in the same business in Hy panies. z Can you explain how these three things would help Indian producers? z Do you think MNCs will be interested in investing in these? Why? z Do you think the government has a role in making these facilities available? Why? z Can you think of any other step that the government could take? Discuss. next only to agriculture. competition from the company producing capacitors MNC in 1992 bra nd s for ced the Ind ian tele in Hosur. Capacitors are used em blin g in many activities for MNCs. toys.

and returns at 10 p. late exporters try to cut labour costs. She wa d to get these large orders.m. Where Sushila’s factory closed in the for earlier a factory used to employ workers on 1990s. she is a tem f of working hours and work night shifts on a worker and ear ns less than hal ea rlie r. She While this competition among the garment off from work means no used exporters has allowed the MNCs to make large has none of the benefits she to her profits. away from where she lives. Wages wh at sh e wa s ea rni ng eve ry are low and workers are forced to work Su sh ila lea ves he r ho us e ek at 7:30 overtime to make both ends meet. Let us see how the workers in the garment export industry in India are having to bear this pressure of competition.m. regular basis during the peak season. Faced with growing competition. These large MNCs 35 year old Sushila has spent export with worldwide network look for the cheapest years as a worker in gar ment s em plo yed goods in order to maximise their profits. Indian garment as a ‘permanent worker’ entitle fund. aft er wo rki ng in thi s fac tor por ary Workers also have to put in very long several years. now they employ workers six months. wa ge. y for not have to pay workers for the whole year. provident wh en cost of raw materials cannot be reduced. ove rtim e at a dou ble rat e. Large MNCs in the garment industry in Europe and America order their products A Garment Worker many from Indian exporters. Factories closer ers benefits brought about by globalisation. This means that workers’ jobs are no longer secure. G L OBALISATION OBALISATION AND THE INDIAN E CONOMY 69 . most employers these days prefer to employ workers ‘flexibly’. home have widely fluctuating ord and therefore pay eve n less. she finally got a job Eve n only on a temporary basis so that they do km. exporters try hard to cut their own costs. the condition of employment shows that women are denied their fair share of benefits. seven days a we A day a. Competition and Uncertain Employment Globalisation and the pressure of competition have substantially changed the lives of workers. Though globalisation has created opportunities for paid work for women. workers are denied their fair share of to get earlier. To industry of Delhi. As health insurance. Factory workers folding garments for export. After searching for a job 30 a permanent basis. morning.

70 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . Its people’s organisations have policies must protect the interests. massive The government can play a major campaigns and representation by role in making this possible. make globalisation more ‘fair’? It can also align with other developing Fair globalisation would create countries with similar interests to opportunities for all. Most workers. It can support small skill and wealth have made the best producers to improve their use of the new opportunities. and also ensure fight against the domination of that the benefits of globalisation are developed countries in the WTO. the question is how to negotiate at the WTO for ‘fairer rules’. are employed in the unorganised sector. the government can ensure globalisation. the government can use Since globalisation is now a trade and investment barriers. Moreover. In what ways has competition affected workers. One of the present debates in India is whether companies should have flexible policies for employment. today. People with education. Based on what you have read in the chapter. 3. This has demonstrated read about some of the possible steps that people also can play an that the government can take. but relating to trade and investments at all the people in the country. You have the WTO. shared better. necessary. For important role in the struggle for fair instance. summarise the point of view of the employers and workers. In the past few years. It can reality. not influenced important decisions only of the rich and the powerful. What can be done by each of the following so that the workers can get a fair share of benefits brought by globalisation? (a) government (b) employers at the exporting factories (c) MNCs (d) workers. The conditions of work and the hardships of the workers described above have become common to many industrial units and services in India. Workers in the organised sector such as Sushila no longer get the protection and benefits that they enjoyed earlier. If who have not shared the benefits. THE STRUGGLE FOR A FAIR GLOBALISATION The above evidence indicates that that labour laws are properly not everyone has benefited from implemented and the workers get globalisation. On the performance till the time they become other hand. increasingly conditions of work in the organised sector have come to resemble the unorganised sector. Indian exporters and foreign MNCs in the garment industry? 2. their rights. there are many people strong enough to compete. LET’S WORK THESE OUT 1.

G LOBALISA TION AND THE INDIAN E CONOMY 71 . MNCs are playing a tries to liberalise trade and major role in the globalisation investment. we looked at the investment has facilitated present phase of globalisation. globalisation by removing Globalisation is the process of barriers to trade and rapid integration of countries. Fair has played a big role in globalisation would create organising production across opportunities for all.A demonstration against WTO in Hong Kong. In addition. At the inter- This is happening through national level. As a result. and also countries. education and wealth. process. many production is being organised small producers and workers in complex ways. 2005 SUMMING UP In this chapter. investment. have suffered as a result of the Technology. particularly IT. rising competition. production. WTO has put greater foreign trade and foreign pressure on developing coun- investment. ensure that the benefits of liberalisation of trade and globalisation are shared better. More and more MNCs While globalisation has are looking for locations around benefited well-off consumers the world that are cheap for their and also producers with skill.

“The impact of globalisation has not been uniform. Globalisation will continue in the future. 9. or control.Supposing you find two people arguing: One is saying globalisation has hurt our country’s development. How would flexibility in labour laws help companies? 4.Match the following. Markets in India are selling goods produced in many other countries.” Explain this statement. 2. Ranbaxy production of services (v) Several MNCs have invested in setting (e) Trade barriers up factories in India for production 72 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . the rising number of brands that we see in the markets might be produced by MNCs in India. Fill in the blanks. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here. production in other countries? 5. Indian buyers have a greater choice of goods than they did two decades back. Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return? 6. footwear. EXERCISES 1 What do you understand by globalisation? Explain in your own words. the effect of rising _______________ and ______________has meant greater _________________among the producers. globalisation is helping India develop. How would you respond to these arguments? 11. 10. Moreover. While consumers have more choices in the market. How has liberalisation of trade and investment policies helped the globalisation process? 8. Infosys. MNCs are investing in India because _____________ ___________________________________________ . Can you imagine what the world would be like twenty years from now? Give reasons for your answer. 12. sports regulate trade items (iii) Indian companies who have invested abroad (c) Call centres (iv) IT has helped in spreading of (d) Tata Motors. This means there is increasing ______________ with other countries. What are the various ways in which MNCs set up. 7. (i) MNCs buy at cheap rates from small (a) Automobiles producers (ii) Quotas and taxes on imports are used to (b) Garments. This is closely associated with the process of ______________. The other is telling. What was the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers? 3.

Collect information and photographs from newspapers. books.). (i) Various producers/companies in the industry (ii) Is the product exported to other countries (iii) Are there MNCs among the producers (iv) Competition in the industry (v) Conditions of work in the industry (vi) Has there been any major change in the industry in the past fifteen years (vii) Problems that people in the industry face. Take some branded products that we use everyday (soaps. garments. (b) goods. (c) form partnerships with local companies. television. (ii) The most common route for investments by MNCs in countries around the world is to (a) set up new factories. (c) goods. etc. toothpaste. 13. interviews with people on the following aspects of the industry.Choose the most appropriate option. (b) buy existing local companies. internet. Take any Indian industry or service of your choice. services and people between countries. services and investments between countries. II. investments and people between countries. G L OBALISATION OBALISATION AND THE INDIAN ECONOMY 73 . electronic goods. Check which of these are produced by MNCs. (iii) Globalisation has led to improvement in living conditions (a) of all the people (b) of people in the developed countries (c) of workers in the developing countries (d) none of the above ADDITIONAL ACTIVITY / PROJECT I. magazine clippings. (i) The past two decades of globalisation has seen rapid movements in (a) goods.

Some of these materials as part of their activities. This from authenticated websites. Finally it ends with some critical issues of Government Ministry of Consumer Affairs. Organise the visits to maximise learners’ This chapter provides case histories – how some experience. case studies and awareness in India. For example. the learners may do letter -writing and experiences.cuts-international. They need to be shared activities. This lesson contains is a website of Central ways. Making consumer rights within the context of the ways posters collectively is another way to think about markets operate in our country. Similarly there are many opportunities such materials from different sources: consumer for role-play in this chapter and this could be a protection councils. protection councils. case histories were taken from newspaper While carrying out each activity you could clippings and consumers who fought in start with a brainstorming session about the consumer courts. It would be preferred that students among learners so that they can also collect discuss these in groups orally. informed consumer arose out of consumer movement and active participation of people This chapter contains materials collected through their struggles over a long period. It publishes a variety of materials to create consumer This chapter has questions. aspects of unequal situations in a market and which require visits – visit to consumer poor enforcement of rules and regulations. Hence. http:// organisations helping consumers in different www. Another website www. We have to enable students to speaking activities. 74 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT .org is the website of a consumer organisation working in Aspects of Teaching / Sources of Information India for more than 20 years. the consumer movement in India. Let learners collect and read As part of this the students to link these narratives to their life chapter. newspapers chapter also provides details of a few and magazines. There are many these issues. For example. etc. things they need to do and how legal institutions helped consumers in beforehand and things that need to be collected getting compensated and in upholding their rights and the task (report/ project / article. The case histories would enable would carry out after the visit. We may have to be sensitive understand that the awareness of being a well. retail shops. there is a need to sensitise learners and encourage consumer court. to the language aspect of exercises. Have a discussion with them about consumers were exploited in a real life situation the purpose of the visit.) they as consumers. NOTES FOR THE TEACHER CHAPTER 5 : CONSUMER RIGHTS This chapter proposes to discuss the issue of understand the issues at a deeper level. etc. could be answered in writing individually. market places. consumer courts and useful way to share their experiences and internet. books. consumer organisations.mca. them to participate in the consumer movement.

In what ways were they denied justice? More importantly. CHAPTER 5 CONSUMER RIGHTS The collage you see below contains what are the ways in which they can some news clippings of consumer exercise their rights as consumers to court verdicts. . Why did the people go get a fair deal from the sellers when to the consumer court in these cases? they felt they had been denied a just These verdicts came about because treatment? some people persisted and struggled to get justice.

These are the final goods that all the responsibility on to the buyer. unorganised sector or to protect people from high interest rates Exploitation in the marketplace charged by moneylenders in the happens in various ways. At times false information is have talked of rules and regulations passed on through the media. or when adulterated/defective in Chapter 3 adopt various tricks to goods are sold. These could be as we shall discuss later. manner when producers are few and they could force a small farmer like powerful whereas consumers Swapna to sell her land to pay back purchase in small amounts and are the loan. themselves in a weak position.THE CONSUMER IN THE MARKETPLACE We participate in the market both as Likewise. These companies with conditions that are not fair and are huge wealth. moneylenders in the charges that were not mentioned informal sector that you read about before. Their position usually is – “If you didn’t like what you bought. Similarly. and for their protection. Consumers Whenever there is a complaint participate in the market when they regarding a good or service that had purchase goods and services that they been bought. For informal sector. many people who scattered. please In the preceding chapters we go elsewhere”. or services. To manipulate the market in various prevent such exploitation. Similarly. This happens especially work in the unorganised sector have when large companies are producing to work at a low wage and accept these goods. the seller tries to shift need. As if the seller has no discussed the need for rules and responsibility once a sale is regulations or steps that would completed! The consumer movement. shopkeepers weigh less than what they should or when traders add For example. organisations that have struggled For example. rules and regulations are producers and consumers. industry. power and reach can also often harmful to their health. is an effort for the protection of workers in the to change this situation. could be working in any of the sectors Individual consumers often find discussed earlier such as agriculture. we ways. rules and example. promote development. people as consumers use. THEY PURPOSELY MADE IT SO IT WOULD FALL APART AFTER A FEW MONTHS SO THAT I WILL BUY A NEW ONE! . sometimes traders indulge regulations are also required for in unfair trade practices such as when protecting the environment. There are other sources to attract consumers. bind the borrower: they could make the producer sell the produce to them Markets do not work in a fair at a low rate in return for a timely loan. As required for the protection of the producers of goods and services we consumers in the marketplace. a company for years for long to ensure that these rules are sold powder milk for babies all over followed.

What do you think should be the role of government to protect consumers? CONSUMER MOVEMENT The consumer movement arose out quality of goods and services on the of dissatisfaction of the consumers sellers. not happy with a particular brand black marketing. LET’S WORK THESE OUT 1. It took many years for malpractices in ration shops and organisations in India. adulteration of food product or shop. They formed careful while buying a commodity consumer groups to look into the or service. India amongst people. a long battle had to be fought with court cases to make cigarette- manufacturing companies accept that their product could cause cancer. Discuss in the classroom. There was as a ‘social force’ originated with the no legal system available to necessity of protecting and promoting consumers to protect them from the interests of consumers against exploitation in the marketplace. What are the various ways by which people may be exploited in the market? 2. there is a need for rules and regulations to ensure protection for consumers. than mother’s milk. and around overcrowding in the road passenger the world.the world as the most scientific EVERYONE KNOWS product claiming this to be better TOBACCO KILLS PEOPLE. consumer movement in an organised or would stop purchasing from that form in the 1960s. Similarly. Think of one example from your experience where you thought that there was some ‘cheating’ in the market. More recently. to create awareness transport. For unethical and unfair trade practices. the consumer movement indulged in by the sellers. This has also witnessed an upsurge in the number shifted the responsibility of ensuring of consumer groups. hoarding. Till the 1970s. Hence. shop. 3. It took years of BUT WHO CAN SAY THAT TOBACCO COMPANIES struggle before the company was SHOULD NOT BE FREE forced to accept that it had been TO SELL TOBACCO? making false claims. It was presumed that it was consumer organisations were largely the responsibility of consumers to be engaged in writing articles and holding exhibitions. he or she generally and edible oil gave birth to the avoided buying that brand product. when a consumer was Rampant food shortages. as many unfair practices were being In India. a long time. C ONSUMER R IGHTS 77 .

this has become the foundation for consumer movement. the movement succeeded in bringing pressure on business firms as well as government to correct business conduct which may be unfair and against the interests of consumers at large. There may be rules and regulations but they are often not followed. Because of all these efforts. Today. LET’S WORK THESE OUT 1. . popularly known as COPRA. You will learn more about COPRA later. Why? Discuss. What could have been the steps taken by consumer groups? 2. At the international level. Consumers International has become an umbrella body of 240 organisations from over 100 countries. A major step taken in 1986 by the Indian government was the enactment of the Consumer Protection Act 1986. This was a tool for nations to adopt measures to protect consumers and for consumer advocacy groups to press their governments to do so. Consumers International In 1985 United Nations adopted the UN Guidelines for Consumer Protection.

The public or government action to see National Commission that this quality is maintained. C ONSUMER R IGHTS 79 . property. There are many goods claiming compensation of Rs 5. 2. crippled a student for Kerala for removal of tonsils. For the following (you can add to the list) products/ services discuss what safety rules should be observed by the producer? (a) LPG cylinder (b) cinema theatre (c) circus (d) medicines (e) edible oil (f) marriage pandal (g) a high-rise building. CONSUMER RIGHTS SAFETY IS EVERYONE’S RIGHT Reji’s Suffering Reji’s suffering shows how a hospital. Reji’s father appealed again in the cause a serious accident. pressure cookers have a the evidence was not sufficient. An ENT life. The State Commission. Discuss. For service. in require special attention to safety. we as consumers. The National Consumer Disputes Redressal manufacturers of the safety valve have Commission located to ensure high quality. was admitted in a private clinic in anaesthesia. after looking into the However. the compensation. have the operation under general anaesthesia. held the products in the market because the hospital responsible supervision of these rules is weak and for medical negligence the consumer movement is also not and directed it to pay strong enough. dismissed safety valve which. due to negligence by the Reji Mathew. While using many goods and surgeon performed the tonsillectomy services. a healthy boy studying in doctors and staff in giving Class IX. As a right to be protected against the result of improper anaesthesia Reji showed marketing of goods and delivery of symptoms of some brain abnormalities services that are hazardous to life and because of which he was crippled for life. where you think that the responsibility lay with the producer. You also need in New Delhi. if it is defective. can it. we do find bad quality complaint. saying that example.00.000 for and services that we purchase that medical negligence and deficiency. Producers need to strictly His father filed a complaint in the State follow the required safety rules and Consumer Disputes Redressal Commission regulations. Find out any case of accident or negligence from people around you. LET’S WORK THESE OUT 1.

which ensures its can then complain and ask for citizens all the information about the compensation or replacement if the functions of government departments. ‘instructions for washing’. expiry sell medicines that have expired date and the address of the severe action can be taken against manufactur er. If the expiry period When you buy any commodity. 80 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . one can protest and medicines. If people number. Information about goods and product and find it defective well services within the expiry period. did not receive any news of the result. Consumers Information) Act. date of manufacture. the particulars of goods and services popularly known as RTI (Right to that they purchase. In recent times. product proves to be defective in any The effect of the RTI Act can be manner.. Amritha. on the packets. price. we can ask for a replacement. She therefore filed an application using the RTI Act saying that it was her right to know the result in a reasonable time so that she could plan her future. an engineering graduate after submitting all the certificates and attending the interview for a job in a government department. These details are about would blame the shopkeeper and will ingredients used. Similarly. you was not printed. the manufacturer will find certain details given on the packing. This is indicated by ‘MRP’ — risks associated with usage of that maximum retail price. When we buy them. For example. consumers can bargain with the seller you will find information on to sell at less than the MRP. In October 2005. the have the right to be informed about Government of India enacted a law. you might complain if someone sells a good at find ‘directions for proper use’ and more than the printed price on the information relating to side effects and packet. if we buy a understood from the following case. the right to Why is it that rules have been made information has been expanded to so that the manufacturer displays this cover various services provided by the information? It is because consumers Government. Waiting. When you buy garments. The officials also refused to comply with her queries. batch not accept the responsibility. She was not only informed about the reasons for delay in the declaration of results but also got her call letter for appointment as she performed well in the interview. In fact medicine..

000 for a as lumpsum for the entire frivolous appeal. At the time of district court’s direction joining the course. Now the RTI Act gives you the power to question. Pick up a few packaged goods that you want to buy and examine the information given. C ONSUMER R IGHTS 81 . regardless your right to choice is denied. has sometimes gas supply dealers insist the right to choose whether to continue that you have to buy the stove from to receive the service. found that the quality of teaching was The State Commission also restrained not up to the mark.000 order may invite penalties and saying that she had the right to imprisonment. The Institute Ansari Nagar.020 institute Rs 25. gender and nature of service. People make complaints about the lack of civic amenities such as bad roads or poor water and health facilities but no one listens. service in whatever capacity. It also course of two years. the commission said. fees from students for the entire When she filed the case in the District duration of the course in advance and Consumer Court. Suppose you want to buy In this way many a times you are toothpaste. Similarly. of age. When she asked all the educational and professional for a refund of the fee for one year. she decided to opt out of the pay Rs 7000 as compensation and course at the end of one year as she litigation cost. When we buy commodities we find that the price charged is sometimes higher or lower than the Maximum Retail Price printed on the pack. In what ways are they useful? Is there some information that you think should be given on those packaged goods but is not? Discuss. Any violation of this the Institute to refund Rs 28. Should consumer groups do something about this? 2. If you are incident? Any consumer who receives a not interested in buying the brush. The State professional courses in Commission upheld the New Delhi. 3. she and further fined the paid the fees Rs 61. What do we understand from this if you buy a tooth brush. LET’S WORK THESE OUT 1. Discuss the possible reasons. again appealed in the year course at a local State Consumer Com- coaching institute for mission. and the shop owner says forced to buy things that you may not that she can sell the toothpaste only wish to and you are left with no choice. Do you agree? Discuss. it institutions in the state from charging was denied to her. joined a two. them when you take a new connection. the Court directed that too at one go. a student of choose. When choice is denied A Refund Abirami. directed the institute to However.

He had sent a Such instances occur quite often in money-order to his village for his our country. z Scratch and win gifts worth Rs 10 lakhs. Let us take the consumers are denied their rights. z Buy shoes worth Rs 2000 and get one pair of shoes worth Rs 500 free. LET’S WORK THIS OUT The following are some of the catchy advertisements of products that we purchase from the market. z 15 gm more in every 500 gm pack. SEND MONEY ORDER TO HIS DAUGHTER 2. If any a district level consumer court in New damage is done to a consumer. All the steps he undertook are has the right to get compensation illustrated here. and Abirami given earlier in the chapter. z Subscribe for a newspaper with a gift at the end of a year. case of Prakash. You might be interested in knowing how an aggrieved person gets his or These are some examples in which her compensation. Where should these daughter’s marriage. PRAKASH GOES TO THE POST OFFICE TO 1. Which of the following offers would really benefit consumers? Discuss. she Delhi. Prakash filed a case in practices and exploitation. PRAKASH COMES TO KNOW THAT THE MONEY HAS NOT REACHED HIS DAUGHTER 82 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . z Win a gold coin inside a pack. z A milk chocolate inside a 500 gram glucose box. The money did consumers go to get justice? not reach his daughter at the time Consumers have the right to seek when she needed it nor did it reach redressal against unfair trade months later. Where should consumers go depending on the degree of damage. to get justice? There is a need to provide an easy and effective public system by which this Read again the cases of Reji Mathew can be done.


(d) She starts attending the court proceedings. to no effect. This calls for acquiring the knowledge and skill to become a well-informed consumer. (h) Within a few months. LEARNING TO BECOME WELL-INFORMED CONSUMERS When we as consumers become conscious of our rights. The consumer movement in India Under COPRA. (c) She realises that the dealer has given her defective material. (a) Arita files a case in the District Consumer Court. you might have noticed Thus. (e) She goes and complains to the dealer and the Branch office. They guide The district level court deals with the consumers on how to file cases in the cases involving claims upto Rs 20 consumer court. organisations locally known as state and national levels was set up consumer forums or consumer for redressal of consumer disputes. trade practice meted out to their members they take up the case on their behalf. colony. LET’S WORK THIS OUT Arrange the following in the correct order. while purchasing various goods and services. (f) She is asked to produce the bill and warranty before the court. a three-tier quasi- has led to the formation of various judicial machinery at the district. we will be able to discriminate and make informed choices. On many occasions. (b) She engages a professional person. (g) She purchases a wall clock from a retail outlet. How do we become conscious 84 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . protection councils. the dealer was ordered by the court to replace her old wall clock with a brand new one at no extra cost. in state and then in National level If you are living in a residential courts. the state level courts between they also represent individual Rs 20 lakhs and Rs 1 crore and the consumers in the consumer courts. If there is any unfair represent in the consumer courts. receive financial support from the If a case is dismissed in district level government for creating awareness court. the Act has enabled us as name boards of Resident Welfare consumers to have the right to Associations. the consumer can also appeal among the people. national level court deals with cases These voluntary organisations also involving claims exceeding Rs 1 crore. lakhs.

on the cover. it is mandatory on the part of the producers to get certified by these organisations. ISI and Agmark While buying many commodities. it is not compulsory for all the producers to follow standards. . Though these organisations develop quality standards for many products. The organisations that monitor and issue these certificates allow producers to use their logos provided they follow certain quality standards. you might have seen a logo with the letters ISI. cement.of our rights? Look at the posters on the right and in the previous page. However. These logos and certification help consumers get assured of quality while purchasing the goods and services. for some products that affect the health and safety of consumers or of products of mass consumption like LPG cylinders. What do you think? The enactment of COPRA has led to the setting up of separate departments of Consumer Affairs in central and state governments. Agmark or Hallmark. packaged drinking water. The posters that you have seen are one example through which government spread information about legal process which people can use. You might also be seeing such advertisements on television channels. food colours and additives.

LET’S WORK THESE OUT 1. Think of any particular commodity and the aspects that need to be looked at as a consumer. Find out the nearest consumer court for your area. ( ) (f) You realise that you have received a defective camera from a dealer. (d) Iqbal makes it a point to scan through all the particulars given on the pack of any item that he buys. He files a case in the District Level Consumer Forum. (iii) Right to redressal. The consumer movement in India expensive and time consuming. (a) Lata got an electric shock from a newly purchased iron. You are complaining to the head office persistently ( ). Design a poster for this. 2. (vi) Right to consumer education. It was on this day that the Indian country of which only about 20-25 Parliament enacted the Consumer are well organised and recognised for Protection Act in 1986. of the countries that have exclusive However. 5. ( ) (b) John is dissatisfied with the services provided by MTNL/BSNL/TATA INDICOM for the past few months. (ii) Right to information. TAKING THE CONSUMER MOVEMENT FORWARD India has been observing 24 their activities. She complained to the shopkeeper immediately. These cases require . There are today more December as the National Consumers’ than 700 consumer groups in the Day. Categorise the following cases under different heads and mark against each in brackets. The Consumer Protection Act 1986 ensures the following as rights which every consumer in India should possess (i) Right to choice. If the standardisation ensures the quality of a commodity. why are many goods available in the market without ISI or Agmark certification? 6. ( ) (e) You are not satisfied with the services of the cable operator catering to your locality but you are unable to switch over to anybody else. India is one their work. 3. consumers are required to numbers of organised groups and engage lawyers. process is becoming cumbersome. (iv) Right to representation. Look at the posters and cartoons in this chapter. What is the difference between consumer protection council and consumer court? 4. Find out the details of who provides Hallmark and ISO certification. the consumer redressal courts for consumer redressal. Many has made some progress in terms of a time. ( ) (c) Your friend has been sold a medicine that has crossed the expiry date and you are advising her to lodge a complaint ( ). (v) Right to safety.

time for filing and attending the court of laws that protect workers,
proceedings etc. In most purchases especially in the unorganised sectors
cash memos are not issued hence is weak. Similarly, rules and
evidence is not easy to gather. regulations for working of markets are
Moreover most purchases in the often not followed.
market are small retail sales. The Nevertheless, there is scope for
existing laws also are not very clear consumers to realise their role and
on the issue of compensation to importance. It is often said that
consumers injured by defective consumer movements can be effective
products. After 20 years of the only with the consumers’ active
enactment of COPRA, consumer involvement. It requires a voluntary
awareness in India is spreading but effort and struggle involving the
slowly. Besides this the enforcement participation of one and all.

1. Why are rules and regulations required in the marketplace? Illustrate with a few examples.
2. What factors gave birth to the consumer movement in India? Trace its evolution.
3. Explain the need for consumer consciousness by giving two examples.
4. Mention a few factors which cause exploitation of consumers.
5. What is the rationale behind the enactment of Consumer Protection Act 1986?
6. Describe some of your duties as consumers if you visit a shopping complex in your locality.
7. Suppose you buy a bottle of honey and a biscuit packet. Which logo or mark you will have
to look for and why?
8. What legal measures were taken by the government to empower the consumers in India?
9. Mention some of the rights of consumers and write a few sentences on each.
10. By what means can the consumers express their solidarity?
11. Critically examine the progress of consumer movement in India.
12. Match the following.
(i) Availing details of ingredients of a product (a) Right to safety
(ii) Agmark (b) Dealing with consumer cases
(iii) Accident due to faulty engine in a scooter (c) Certification of edible oil and cereals
(iv) District Consumer Court (d) Agency that develop standards for
goods and services
(v) Consumers International (e) Right to information
(vi) Bureau of Indian Standards (f) Global level institution of
consumer welfare organisations
13. Say True or False.
(i) COPRA applies only to goods.
(ii) India is one of the many countries in the world which has exclusive courts for consumer


(iii) When a consumer feels that he has been exploited, he must file a case in
the District Consumer Court.
(iv) It is worthwhile to move to consumer courts only if the damages incurred
are of high value.
(v) Hallmark is the certification maintained for standardisation of jewellry.

(vi) The consumer redressal process is very simple and quick.
(vii) A consumer has the right to get compensation depending on the degree of
the damage.


1. Your school organises a consumer awareness week. As the Secretary of the
Consumer Awareness Forum, draft a poster covering all the consumer right s.
You may use the clues and ideas given in the poster on page 84 and 85. This
activity can be done with the help of your English teacher.

2. Mrs. Krishna bought a colour television (CTV) against six months warranty. The
CTV stopped working after three months. When she complained to the dealer /
shop where it was purchased, they sent an engineer to set it right. The CTV
continues to give trouble and Mrs Krishna no longer gets any reply to the complaint
she made to the dealer / shop. She decides to write to the Consumer Forum in
her area. Write a letter on her behalf. You may discuss with your partner / group
members before you write it.

3. Establish a consumer club in your school. Organise mock consumer awareness
workshops like monitoring bookshops, canteen, and shops in your school area.

4. Prepare posters with catchy slogans like:

– An alert consumer is a safe consumer

– Buyers, Beware

– Consumers be cautious

– Be aware of your rights

– As consumers, assert your right

– Arise, awake and stop not till ______________________ (Complete it)

5. Interview 4-5 persons in your neighbourhood and collect varied experiences
regarding how they have been victims of such exploitation and their responses.
6. Conduct a survey in you locality by supplying the following questionnaire to get
an idea as to how alert they are as consumers.


For each question, tick one. Always Sometimes Never

1. When you buy some item, do you insist on a bill?
2. Do you keep the bill carefully?
3. If you realise that you have been tricked by the shop-
keeper, have you bothered to complain to him?
4. Have you been able to convince him that you’ve been
5. Do you simply grumble to yourself reconciling that it is
your fate that you are often being victimised so and it is
nothing new?
6. Do you look for ISI mark, expiry date etc.?
7. If the expiry date mentioned is just a month or so away,
do you insist on a fresh packet?
8. Do you weigh the new gas cylinder/old newspapers
yourself before buying/selling?
9. Do you raise an objection if a vegetable seller uses stones
in place of the exact weight?
10. Do excessively bright coloured vegetables arouse your
11. Are you brand-conscious?
12. Do you associate high price with good quality (to reassure
yourself that after all you have not paid a higher price just
like that)?
13. Do you unhesitatingly respond to catchy offers?
14. Do you compare the price paid by you with those of
15. Do you strongly believe that your shopkeeper never cheats
a regular customer like you?
16. Do you favour ‘home delivery’ of provision items without
any doubt regarding weight etc.?
17. Do you insist on ‘paying by meter’ when you travel by

(i) You are extremely aware as a consumer if your answers for
Qns. 5, 12, 13, 15 and 16 are (C) and for the rest (A).
(ii) If your answers are (A) for Qns. 5, 12, 13, 15 and 16 and the
rest (C), then you have to wake up as consumer.
(iii) If your answer is (B) for all the questions – you are somewhat


2006. Consumer Unity Trust Society. National Consumer Disputes Redressal Commission. Delhi. Jaipur. Delhi. 2005. Tirthankar Roy. Cambridge.. Second Edition. Jan Breman and Parthiv Shah. 2004. Oxford University Press. Amit Bhaduri. 2003. 2001. 2007. Macmillan. Jaipur. 1857-1947. Indian Economy. CUTS. Jan Breman. Understanding Poverty. The Economic History of India. State of the Indian Consumer: Analyses of the Implementation of the United Nations Guidelines for Consumer Protection. Landmark Judgments on Consumer Protection. 2005. Macroeconomics: The Dynamics of Commodity Production. Development with Dignity: The Case for Full Employment. 2002. Amit Bhaduri and Deepak Nayyar. Footloose Labour: Working in India’s Informal Economy. SUGGESTED READINGS Books Abijit Vinayak Banerjee. Stree. Working in the mill no more. 1985 in India. Indian Book Company. New Delhi. New York. Third Impression. Women and Globalisation: The Impact on Women Workers in the Formal and Informal Sectors in India. Bimal Jalan (ed. New Delhi. New Delhi. Oxford University Press. 1986. Penguin Books India. 2004. Intelligent Person’s Guide to Liberalisation. Delhi. Oxford University Press. Jean Dreze and Amartya Sen. Oxford University Press.). Amit Bhaduri. Cambridge University Press. Delhi. India: Development and Participation.Galbraith. Universal Law Publishing Co. Delhi. Penguin Books. New Delhi. Whence it Went. 2005. 90 U NDERSTANDING E CONOMIC D E V E L NDERSTANDING OPMENT LOPMENT . CUTS. 2006. 1975. Globalisation and its Discontents. John K. Joseph Stiglitz.). Is it Really Safe. New Delhi. 1996. Delhi. Consumer Unity Trust Society. Roland Benabou and Dilip Mookherjee (eds. Jagdish Bhagwati In Defence of Globalisation. Penguin Books. 2007. 1996. London. Money: Whence it Came. Indrani Mazumdar. National Book Trust. Oxford University Press.

Government of India.Government Publications Ministry of Finance. Govt of India. The World Bank. NSSO. Economic Survey. New Delhi. Key Results of Employment-Unemployment Rounds. UNDP. Ministry of Statistics and Programme Implementation. Geneva. World Development Indicators. Government of India. C ONSUMER R IGHTS 91 . Planning Commission. Handbook of Statistics on Indian Economy. National Human Development Report 2001. National Sample Survey Organisation. United Nations Development Programme. World Bank. Other Reports Reserve Bank of India. New Delhi. Human Development Report 2006. Washington. Mumbai.