Session 1:

Indian economy since independence

Pre-reform, post-reform and post Covid

Country classification (GDP PCT and HDI)

- GDP per capita and HDI (Human Development Index)

- Measure different aspects of a country's economic and human development
performance.
- GDP per capita measures the average economic output per person in a country. It
focuses solely on the economic aspect and does not consider other factors related to
human development, such as education and health. Countries with a high GDP per
capita are generally considered to have a higher standard of living and more economic
resources available to their citizens. However, it does not reflect a country's overall well-
being and quality of life.
- GNP: Low-income, lower-middle, upper middle, and high income
- On the other hand, HDI is a composite index that takes into account three dimensions:
life expectancy (health), education (knowledge), and per capita income (standard of
living). HDI provides a broader view of a country's development and well-being, as it
considers not only economic aspects but also factors related to health and education.
HDI allows for a more comprehensive comparison of countries' human development
performance.
- Value is between 0-1
- Low HD, Medium, High HD, and Very High HD

PPP GDP
- PPP GDP rankings are particularly useful when comparing living standards, real
economic output, and purchasing power across countries. It helps to provide a more
accurate picture of the relative economic strength and well-being of different nations by
accounting for differences in the cost of living and inflation rates.

Session 2:

V.M Dandekar: Indian Economy since independence

- The objective of public policy in India since Independence has been to promote rapid
and balanced economic development with equity and justice.
- The First Five Year Plan focused on doubling per capita income in 27 years, with
modest goals due to urgent issues after independence.
- The target was to raise national income to Rs 100 billion, achieving a 2.13%
annual growth rate, accomplished without price rise—subsequent plans aimed
for higher growth rates, with increasing investments as a percentage of GDP.
 - However, the Sixth and Seventh Plans saw a sudden rise in investment without
adequate explanation, resulting in higher capital/output ratios.
- The private sector's investment increased significantly, but plan fulfillments were nominal
due to rising current prices, causing actual performance to fall short of targets. Accurate
growth rates varied between 2.36% and over 5% during different plan periods.
- The National Domestic Product (NDP) at constant prices finds that the average growth
rate from 1950-51 to 1984-85 is about 3.57%. This consistent growth rate has been
referred to as the "Hindu Rate of Growth" by some economists.
- The composition of the NDP has shifted over the years, with agriculture showing
the lowest growth rate of 2.12% per annum, while registered manufacturing,
public administration and defense, and other sectors experienced higher growth
rates.

Indian Economy: Pre and post reforms

Pre-liberalization (1947-1991)
- License raj (controlled environment domination of the public sector)
- Central planning, Rapid development of heavy industries, green revolution
Post-liberalization (1991 onwards)
- Economic reforms: Industrial sector, financial sector

Nehruvian Model/strategy: pre-reform

The First Five-year plan was launched in 1951

- Target was 2.1%, and achieved around 3.2%
- Was focused on agricultural market (dominant sector)
- Harold doman model
- Investment rate
- Capital-output ratio
- It is the relationship between the level of investment made in the
economy and the consequent increase in Gross Domestic Product
(GDP).
- Lower is better; more output with less capital.
- Efficiency of capital
Rate of growth= Rate of investment/Capital output ratio
= 31/6
- Average capital-output ratio (ACOR)- total investment/total output
- Incremental Capital output ratio (ICOR)- change in investment/change in
output

Second Five-year plan

- Based on the Mahalnobis model
 - The plan attempted to determine the optimal allocation of investment between
productive sectors to maximize long-run economic growth.
- Focus on heavy and key industries.
- Fast industrialization
- Credit was more to big industries and not agricultural sectors. Thus, bank
nationalization happened in 1969.
FERA & FEMA
- Foreign exchange regulation act (FERA) and Foreign Exchange Management Act
(FEMA)

Third five-year plan

- Collapse of Economy
- Drought (1966-1967) and the foreign exchange crisis in the mid-sixties
- War with china and Pakistan (increase in defense expenditure)
- Tradeoff
- The agriculture sector was neglected
- Three years of plan holidays (1966-69)
- Could not achieve the desired growth rate

Indian Economy: Pre-independence period/at the time of independence

- Predominantly rural and agricultural
- Unbalanced occupational structure
- Low PCI and consumption

Watch economic sutra by sanjeev sanyal episode 12- journey of Indian economy (Part 01)

Session 3:

Growth Record of the Indian Economy, 1950-2008: A Story of Sustained Savings and
Investment.

- It is widely believed that the Indian economy witnessed near stagnation in real GDP
growth till the late 1970s. But closer review suggests a continuing increase in real GDP
growth over each decade since independence, interspersed with an interregnum during
the 1970s.
- Interestingly, the growth of manufacturing production, in terms of decadal averages, was
roughly constant at around 5.6-5.9 percent in the first five decades after independence,
except for the 1970s.
- Two other features of our growth history are notable.
- Agricultural growth has been subject to large variations over the decades.
- The severe deceleration in agricultural growth particularly marks the
1970s interregnum
- Followed by a marked recovery in the 1980s and a slowdown after that.
- Until the 1990s, little note had been taken of growth in the services sector
 - Since 2003-03, there has been a strengthening of the growth momentum.
- Restructuring measures by domestic industry
- Overall reduction in domestic interest rates (both nominal and real)
- Improved corporate profitability
- A benign investment climate amidst strong global demand
- Commitment rules based fiscal policy
- The continues acceleration can be explained by
- It is associated with consistent trends of increasing domestic savings and
investment over decades.
- Gross domestic savings (GDS) risen from 9.6% in 1950s to 34% of GDP at
present
- PAT witnessed an annual avg growth of around 47% per annum over the four years
ended 2006-07
- Not only has a consistent upward trend in India's investment rate since the 1950s but
there is also evidence that capital has been employed productively. Barring the decade
of the 1970s, the incremental capital-output ratio (icor) has hovered around 4.
- While subsidies provide short-term benefits, they hinder long-term investments and
encourage inefficiency in resource use.
- Such issues are vital in the context of agricultural developments, especially the
context of domestic demand-supply gaps of significant crops and elevated
international prices.
-

FIVE YEAR PLAN

Objectives:
- Achieve a high growth rate
- Improve the standard of living
- Achieve economic stability
- Achieve self-sufficiency
- Reduce inequalities

But,
- After the 3rd five-year plan, Plan holiday can (1966-69)

Role of capital in achieving a high growth rate

- Increases productivity of labor and other factors. This is because the returns to capital
(Investment) in LDC are usually higher than in developed countries with a huge amount
of capital and have started experiencing diminishing returns to capital.
- Technologically backward countries, the growth rate capital required to absorb new tech
is likely greater than...

India’s Development Strategy (1950-80)

- Inward-looking development strategy
 - Close Economy
- Centrally planned model of economic development (Soviet influence)
- Mixed market: Co-existence of public and private sectors
- Growth rate: 3.5% (1951-80) and 5.5%(1980s)

Malthusian theory

Fourth Five-Year Plan (1969-74)

- PM Indira Gandhi’s first plan
- Rising population, unemployment, and poverty were the main areas of concern
- Developed in response to drought, devaluation, and Inflation
- Asian Oil Crisis of 1973
- Target of food security
- High inflation

Session 4:

Reading- Reforms in India

- Fiscal deficit
- Balance of payments
- Inflation

- Low equilibrium growth

- Debt-to-service ratio
- Entity's ability to generate enough cash to cover its debt service obligations

- Wage populism
- More wages paid to employees

- Fiscal profligacy
- Overspending
- Excess expenditure
- Increase in money supply>Increase in inflation
- Increase in Public debt
- Internal borrowing and external borrowing
- Causes fiscal Deficit (expenditure is greater than revenue)

Subsidies (agricultural) + Defence + Interest payments

Direct Tax(51%)= Income tax + corporate tax

 - Only 3% of the population pays income tax
- During the 1980s, less than 1% paid income tax
Indirect Tax(49%)= GST

FRBM Act
- The Indian Parliament instituted the Financial Responsibility and Budgeting
Management Act to uplift fiscal stability, mitigate the fiscal deficit, gain macroeconomic
stability, and regulate public funds by moving toward a balanced budget and
reintegrating fiscal frugality.

Puzzled growth:

1. It was a service sector-led growth.

- Is this growth pattern correct?

- Country classification: Low-income, lower-middle, upper-middle, high income
- Agriculture (low income) should be higher>lower middle (manufacturing)
should be higher> high income (service) should be higher.
- We are in lower middle income, and instead of focusing on
manufacturing, we jumped directly to service.
- 2002-2008: Boom period (and it was the service sector that helped our economy
grow at a fast rate)

Session 5:

Pre-reading:

- The text discusses India's economic slowdown from 2017 to 2019, its causes, and the
subsequent impact of the COVID-19 crisis.
- During this period, India's growth rate dropped from nearly 8% in 2016 to around 4.2% in
the fiscal year 2019-2020.
- The decline was marked by negative growth in sectors like manufacturing, attributed to
reduced demand for consumer goods and durable items.
- The automotive sector saw significant declines, and a substantial drop in consumption,
particularly in rural areas, led to increased poverty.
- The government disputed the figures, but data from different sources supported the
extent of the economic decline.
- Investments also decreased as both private and public sectors experienced reduced
investment rates. The COVID-19 crisis further exacerbated these challenges.

The rise in the unemployment rate was the first social consequence of the economic slowdown,
which also came at a time when demographic dynamism remained very strong
 - The urban youth were the most badly affected by unemployment. 44% of the 20-24
years old living in cities were jobless in December 2019. Ironically, the more they were
educated, the more unemployed they were.

Another consequence of the economic crisis is a decline in tax revenues for public finances, in a
country where the tax to GDP ratio is below 17-18%.
- Their debt increased by 9.8% in 2018-19 and 11.5% in 2019-20, making India exceed
the highest subnational debt ratio among the BRICS countries.
- Impacted welfare spending

Three major decisions that might have caused the slowdown- Demonetization, GST and
agricultural prices

- A report by the All India Manufacturers' Organisation (AIMO) based on 34,000 Micro,
Small, and Medium Enterprises (MSMEs) shows that these enterprises saw their profits
fall by 43, 35 and 24%, respectively as a result of demonetization and GST, which led
them to reduce their workforce by the same proportion.
- The decline in agricultural income comes, among many 12 structural factors, from (1)
land parceling from father to sons – plural – to the extent that today 70% of farmers
cultivate less than 1 ha and that the number of farm workers exceeds those who live off
their land, and (2) water-related issues, either too scarce or too abundant, whether as a
result of climate change leading to an increasingly erratic monsoon regime or the drying
up of water tables from which sugar cane and cotton growers have been drawing with
restraints.
The "Shramik Special" trains were introduced by the Indian Railways to facilitate the movement
of stranded migrant workers, students, and other individuals back to their home states. These
special trains operated between different states and were organized in coordination with state
governments. The trains aimed to ensure safe travel for migrants and prevent the spread of the
virus.

In addition to the Shramik Special trains, state governments also arranged buses and other
forms of transport to facilitate the movement of migrant workers from cities to their home
villages and towns. Local authorities, non-governmental organizations (NGOs), and volunteers
supported and assisted migrants during their journey.

Session notes:

Short term crisis-

- Unprecedented Balance of Payments in 1991-92
Current account deficit rose to 2.9% of GDP
- Worsening of trade balance
- The gulf war
Medium term crisis
- Widening gap in resource mobilization for meeting the targets of the FYPs
- Limited private FDI and domestic investment
- Failure to raise savings to finance the planned investment
- Unsustainable financing of seventh Five Year Plan

Longer term crisis

- Low equilibrium growth trap: Hindu rate of growth i.e. 3.5% from 1951 to 1980 and a little
over 5% in 1980s
- Over 2% annual growth rate of population was a drag on the Indian Economy (poverty
and unemployment)
- Population explosion
- Neglected Human Resource Development
- Health and education were neglected
- Tight regulatory system over the industrial and foreign trade sectors- tariffs and non-tariff
barriers
- Inward looking economy
- Increase in smuggling
- Over centralization, export pessimism and import substitution

Micro economic inefficiencies: over bureaucratization

> macro-economic inefficiencies
Neglect of agriculture and rural sector
Sickness of the financial sector
- The term NPA was not known before 1991

Tax Buoyancy (positive or negative)= % change in Tax Revenue/ % change in GDP

It was greater than 2% in 2002-2008

READ:
World Economic Forums: Future of Jobs
National manufacturing policy
SESSION 6:

Pre-Reading

- An understanding of demography is essential to policymakers and may be used in three

main ways. First, as a predictive tool of great power, providing a powerful lens through
which future trends may be viewed.
- Second, demographic changes provide beneficial conditions for development, offering a
country the chance to set out on a path of rapid growth.
- Finally, demography offers a narrative about future challenges.

In addition, due to longer life, healthy individuals are inclined to accumulate greater savings than
individuals in poor health. Higher savings as a proportion of the national income increase
investment prospects, leading to higher national output.

The text underscores the need for investments in education and healthcare to equip the
workforce with the necessary skills and to improve labor productivity. Improved health and
education indicators translate into a more skilled, healthier, and efficient workforce that can
contribute effectively to economic growth.

Ensuring gender equality can have a profound impact on economic development. Empowering
women to participate in the workforce and make informed decisions about family planning
contributes to economic growth and reduces dependency ratios. Policies that promote women's
education, equal employment opportunities, and health services can yield long-term benefits.

Session notes:

- Demographic dividend
Economic growth brought on by a country's population structure change is usually due to a fall
in fertility and mortality rates.

- Dependency ratio
- Life expectancy
- Window of opportunity
- Baby boom period
- Fertility rate

Demographic transition theory

Stage I: Underdeveloped
- High birth rate
- High death rate
Lack of medical facilities, poor sanitation, and poor water quality, the birth rate was high
because of son preference. Illiteracy, High mortality
Stage II: Population explosion

- The birth rate stayed the same.

- Death rate reduced
Education was given more emphasis and improvement in medical facilities.

Stage III: Developed

- Birth rate decreased
- Death rate decreased

This is a Goldilocks period.

Labor workforce inequality of women workforce

- Income effect
- Substitution effect
- The wage gap is very high

SESSION 7:

Demographic dividen>2040
- Investment in Human Capital- Health and education
- Women participation
- Burden of
- Labor reforms

CMIE

SESSION 8:

According to the document, ensuring the sustainability of agriculture in India involves focusing
on various aspects, such as reviewing water, energy, and fertilizer subsidies that encourage
unsustainable resource use. It also encourages agricultural producers to adopt specific
technologies that increase agricultural productivity while enhancing environmental sustainability.
The document suggests that higher agricultural growth should be achieved sustainably by using
lower resources and promoting less input growth. Additionally, the document mentions the need
to maintain sustainability by considering factors like remunerative prices, market reforms, water
management, and technology adoption.

The document suggests several policies and reforms that are needed to transform Indian
agriculture in the next decade. These include:
1.Shifting from cereal-based agriculture to non-cereal based crops and allied activities.
2.Focusing on the non-farm sector to double farm income, considering different size classes
and environmental considerations.
3.Implementing remunerative prices and market reforms to enhance farmers' incomes.
4.Allowing farmers more freedom in markets and exports beyond the harvest stage.
5.Emphasizing the importance of basics like water and technology.
6.Ensuring inclusiveness by focusing on lagging regions, small farmers, and women.
7.Reviewing water, energy, and fertilizer subsidies to encourage sustainable resource use.
8.Encouraging the adoption of specific technologies that increase agricultural productivity while
enhancing environmental sustainability.

These policies and reforms aim to address the goals of agricultural development in India, which
include achieving high growth, promoting inclusiveness, and ensuring the sustainability of
agriculture.
Millets are known for their nutritional value, drought tolerance, and low input requirements,
which could contribute to sustainable agricultural practices and enhance food security.

Agricultural sector in India

- Majority of income comes from the non-farm sector than farm.

Target of 4%
- Self-sufficiency

Terms of trade in agriculture

- Price of input is rising than its output
- Price of input/price of output

Millet- 2023 year of Millet by UN

- Low input requirement
- High nutritional value
- Less water requirements

Employment elasticity
- a measure of the percentage change in employment associated with a 1 percentage
point change in economic growth.

Farm to factory to fork

SESSION 9:

Non-farm activities are activities not related to farming:

- Manufacturing and services

Gross value added:

Percentage share in GDP

Commission of Agriculture cost price fixes > FCI > PDS

MSP of 22 crops:
- 14 Khari
- 6 Rabi
- 2…

CACP considers the following factors while fixing MSP:

- Cost of production
- Overall demand-supply conditions
- Domestic and international conditions
- Inter-crop price parity
- ToT between agriculture and non agriculture sector
- ENsures Utilization of Land, water and other production resources
- Minimum of 50% over the cost

Why agri-reforms are required:

- Making farmers self-reliant and prosperous

FARM BILLS DEBATE:

The three farm bills in India, also known as the Farm Bills of 2020, were:

1. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm
Services Bill, 2020
3. The Essential Commodities (Amendment) Bill, 2020

The first bill allowed farmers to sell their produce outside of the Agricultural Produce Market
Committees (APMCs), which are government-regulated wholesale markets. This was seen as a
way to give farmers more freedom to negotiate prices and find better buyers for their produce.

The second bill allowed farmers to contract farming agreements with private companies. This is
a type of agreement where the farmer agrees to grow a certain crop for the company, and the
company agrees to buy the crop at a predetermined price. This was seen as a way to provide
farmers with a guaranteed market for their produce and reduce their risk.

The third bill amended the Essential Commodities Act, 1955, to remove some restrictions on
stocking essential commodities. This was seen as a way to make it easier for companies to
store and distribute food grains and other essential commodities, which could help to stabilize
prices.

The Parliament of India passed the three farm bills in September 2020. However, they were met
with widespread protests from farmers, who argued that the bills would benefit corporates at the
expense of farmers. The protests lasted for over a year, and eventually led to the repeal of the
three bills in November 2021.

The advantages of the farm bills in India were argued to be:

Increased freedom for farmers to sell their produce:

- The bills allowed farmers to sell their produce outside of the APMCs, which were seen
as being inefficient and corrupt. This was seen as a way to give farmers more freedom
to negotiate prices and find better buyers for their produce.
Improved access to markets:
- The bills allowed farmers to sell their produce to buyers anywhere in India, which was
seen as a way to improve their access to markets and get better prices for their produce.
Attraction of investment:
- The bills were seen as a way to attract investment from private companies in the
agricultural sector, which could help to improve productivity and efficiency.
Reduced wastage:
- The bills were seen as a way to reduce wastage of agricultural produce, as farmers
would be able to sell their produce more quickly and efficiently.
Increased bargaining power:
- The bills were seen as a way to increase the bargaining power of farmers, as they would
be able to negotiate prices with buyers directly.

However, the farm bills were also met with criticism from some farmers, who argued that they
would benefit corporates at the expense of farmers. The main concerns were:

Lack of regulation:
- The bills did not have any provisions for regulating the prices of agricultural produce,
which was seen as a way for corporates to exploit farmers.
Monopoly power:
- The bills were seen as a way for corporates to gain a monopoly power in the agricultural
sector, which could lead to higher prices for consumers.
Unfair contracts:
- The bills did not have any provisions to protect farmers from unfair contracts with
corporates.
Loss of APMCs:
- The bills were seen as a way to weaken the APMCs, which were important for providing
farmers with a fair price for their produce.

The repeal of the bills in November 2021 showed that the government could not allay the
farmers' concerns...

The criticisms of the farm bills can be countered by addressing the concerns of the farmers.
This could be done by:

Regulating the prices of agricultural produce:

- The government could set up a system to regulate the prices of agricultural produce to
ensure that farmers get a fair price for their produce.
Protecting farmers from unfair contracts:
- The government could introduce laws to protect farmers from unfair contracts with
corporates. These laws could include provisions for minimum prices, dispute resolution
mechanisms, and penalties for unfair practices.
Strengthening the APMCs:
- The government could strengthen the APMCs by providing them with more funding and
resources. This would help to ensure that the APMCs continue to play an important role
in providing farmers with a fair price for their produce.
Providing more support to farmers:
- The government could provide more support to farmers, such as subsidies, crop
insurance, and access to credit. This would help reduce the risks farmers face and make
it easier for them to adopt new technologies and practices.

It is important to note that no single solution will address all of the concerns of the farmers. The
government must take a comprehensive approach to address the problems in the agricultural
sector.

In addition to the above, the government could also consider the following measures to improve
the condition of farmers in India:

Investing in agricultural research and development:

- This would help to develop new technologies and practices that can improve productivity
and efficiency in the agricultural sector.
Promoting crop diversification:
- This would help reduce the risks farmers face and make them more resilient to shocks.
Improving infrastructure:
- This would include improving roads, railways, and storage facilities, which would help to
reduce the cost of transporting and marketing agricultural produce.
Empowering women farmers:
 - Women farmers play a vital role in the agricultural sector but often face discrimination
and lack access to resources. The government could empower women farmers by
providing them with access to credit, training, and extension services.

By taking these measures, the government can help improve farmers' condition in India and
make them more prosperous.