J | Demographic Issues ; 4® EFFECTS OF RAPID POPULATION GROWTH IN INDIA 1. Providing employment to growing population: This is so because in developing economies majority of the population is illiterate. The burden of school aged population has already shown signs of becoming unbearable. The proportion of children in schools is increasing fast and, vast numbers are still not covered. The absolute number or illiterate persons increases every year. This is only an indication of the wastage of human resources for want of appropriate development opportunities. 2. Problem of utilization of manpower: Better educated manpower aspires for occupations of greater prestige, which are opened up by the new development efforts. Because of its capital intensive nature, the ability of the new economy for employment generation becomes restricted. Simultaneously, it renders many of the old occupations out of date and redundant. As a result, under- employment and unemployment, including unemployment of educated persons, increases. There is thus wastage of even developed human capital. 3. Over-strained infrastructure: Facilities such as housing, transportation, health care, and education become inadequate. The worst symptoms of congestion in every aspect of living conditions are manifested in the urban areas. In countries such as India, a situation of "over urbanization" prevails which puts unbearable strain on urban amenities. Overcrowded houses, slums and unsanitary localities, traffic congestion and crowded hospitals have become common features in the developing countries, eco ae . a ane, renewable natural exploited. This results i eiaeais ie: vied eee ion and desertification with permanent damage to the renewable resources.Macro Economics | 22 5. Increased cost. of production: Human ingenuity and technological advancement makes it possible to increase production of goods and services. But, it must be kept in mind that, the cost of production of the basic necessities of life, such as food, increases when the population is growing fast and worse lands are brought into cultivation with costly irrigation etc. 6. Inequitable distribution of income: Both at the international and national levels income disparities increase. The increase in gross national product (GNP) is greatly reduced in per capita terms on account of the rapidly growing population. In the face of a rapidly growing population, the major concern of a developing country tends to be focused more on economic growth as such. Considerations of unequal distribution of income are pushed to background. So inequalities within the country tend to widen further. 7. Inflation: Rise in population increases the demand for the goods and services. The people in less developed nations become aware of the requirement and as a‘result the demand increases. But the supply rises at a slow rate and as a result the price increases. 8. Food scarcity: The increasing population in India has also led to the scarcity of food grains. India has to often import food grains from neighboring countries whenever there is 2 natural calamity or scanty rainfall. Food grain production is not adequate enough for the whole population. 9. Problem of foreign exchange: The rise in population increases the consumption and as a result reduces the savings and investment level. The low per capita income reduces the level of savings and investment.| Demographic Issues 10. Low L.Q level: The problem of population reduces the quality of human index. It makes the children weak, mentally and physically. This is attributed due to poor and non-nutritious diet among women of poor families. EATwords price inflation. @ (A) @) (©) @) (A) some vy ~~ Macro Economics [28 isi ices. In oth In short, inflation is the situation of rising eo attod » the value of money is falling. It may be a mone! (3) TYPES (OR) FORMS OF INFLATION The inflation can be divided into the following types OF forms ; On the basis of rate of inflation : (1) Creeping inflation (2) Galloping inflation (3) Hyper inflation On the basis of Degree of Control (1) Open inflation (2) Suppressed inflation On the basis of Causes : (1) — Credit inflation (2) Currency inflation (3) Budgetary inflation (4) Demand pull inflation (5) Cost push inflation On the basis of employment (1) Semi-inflation (2) Full inflation Now let us discuss the above said types in detail : , On the basis of rate of inflation : (1) Creeping inflation : | In this situation, the prices increase at a very slow rate duritt years. One can not feel it. It is said that during this tyP°°[Inflation nflation, the prices increase at the rate of 3% per year. If the national “income is rising, such inflation does not disturb the economy. ‘ometimnes creeping inflation becomes a bless for the economy. (2) Galloping inflation : After creeping inflation, this type of inflation starts. Under this pe of inflation, the prices rise upto 8 to 10% rapidly. It becomes a challenge for the government. So, the steps to control it is hard and Re ‘fast required. : (3) Hyper inflation or Jumping inflation : This becomes the highest stage of inflation. In this type of inflation, the price level develops at the highest speed within a short time endlessly. Such inflation was found in Germany after the Second World War. This inflation is like “Tsunami” which destroys all the trades, businesses and rational society. B) On the basis of Degree of Control : (1) Open inflation : In open inflation, the inflation is allowed to develop without any government controls and checks. The prices rise openly and boldly, (2) Suppressed inflation : Under this type of inflation, the price rise is under the control of ernment. The government, through monetary policy, controls the tsing prices for some period. According to Paul Einzing, “Inflation Prevented by government measures such as rationing, price control ete. from Producing its effects on pricing, it is suppressed inflation.” eh ws| Macro Economics | 39, (C) On the basis of causes : | (1) Credit Inflation : This inflation exists due to large scale of expansion of creg, money from the banks. Large credit increases money supply and | becomes the root of inflation. (2) Currency Inflation : | When the flow of money increases in circulation, it becom: currency inflation. When government issues more currency, sug inflation starts in economy. (3) Budgetary Inflation : When the government shows more expenditure than the level o revenues (the gap between expenditure and revenue), such inflatio; begins. The Government raises money supply to overcome th: expenditure. (4) Demand-pull Inflation : When effective demand increases more than the supply of goods and services in the economy, it affects price level. The prices increase due to shortage of supply. This inflation can be controlled by monetary and fiscal policy of the Government. | (5) Cost-push Inflation : | This inflation exists due to increase in the cost of production. Such increase in cost of production happens due to an increase it wages, increase in profit margin. | When wages are increased due to the demand of unions. without increasing productivity of labour, the cost of production increases. Secondly, when the producers increase the profit margit, that affect on production cost which affect on price level in the market, because they add extra profit in the price of the commodity. Besides: > |J | Inflation * e increase in raw material, roduction costs. transportation, taxes also effects )) On the basis of employment : We can divide this inflation into following types : (1) Semi-inflation ; As J. M. Keynes has said, “Semi-inflation exists when price partly due to the increase in the supply of money before the point of full employment, it is known as semi-inflation or Bottleneck (2) Full-inflation : When the economy has of full employment level with any increase in money supply, full-inflation will increase in the economy. * 5 5 5 5 It means the prices rise because the production can not be increased - due to the fully employed situation of all the factors. (4) CAUSES OF INFLATION According to Pigou and Keynes, the prices of commodities and services do not change until there is a state of full employment in the economy, with every increase in the money supply. If money a supply changes regularly beyond its limit, the state of inflation starts. Now examine the different causes of inflation. _ Causes of Inflation : (1) Upward Shift in Demand : When effective demand in the economy increases by any reason and on the other hand, the supply of goods and services do not increase similarly to the demand, it creates the state of price rising. It happens due to the shortage of supply of goods and services. In other _ Words, we can say that if there is upward shift in demand, it becomesMacro Economics 132 ¢ cause of inflation. There are some reasons why the demang (a) Increase in money supply : | Increase in money supply will increase the people’s Money| : income. The expansion of paper currency by the government jg because of the deficit budget and the government wants more money, to make up excess expenditure, For the economic development, the) government makes plans, for different economic schemes. For that) purpose, the government requires more money. Sometimes the money circulation also increases. The credit] creation of banks also push up the money circulation. If the people, have much more disposable income or the government reduce the rate of taxation. All these become the reason of upward demand. The increase of foreign demand for domestic goods and) services or the rapid growth of population also becomes one of the causes of excess demand in economy. (b) Downward shift in supply : | The another important cause of inflation is downward shift in supply. When the effective demand increases, the supply means the _ level of production of goods and services do not increase at the level of demand. It creates shortage of supply. As a result the prices of | goods and services increase and inflationary pressure starts. This | situation happens due to following factors. (a) Shogtage of factor supply : | | During this situation the factors of production as skilled and | technical workers, capital equipment, raw materials and managerial knowhow etc. become the bar in the course of increasé production. “actor inefficiency becomes the bottlerieck to production.[Inflation (b) Increased Exports : When the exports of goods and services increase, there will be a (c) Diminishing returns or increasing costs : There are three stages in production activities. First is This is also the cause why the shortage of supply exists in the _ market. To earn more profit in future, some producers and traders create an artificial shortage of supply in running market. Naturally, such tendency create a great shortage of goods in economy. ‘There are some other factors also which affect supply and they 3 create shortage in supply — (1) Higher wage rates pe (2) Higher profit margins (3) Higher taxes (4) Administered higher prices of inputs (5) Natural factors (6) Government policies FY.B.B.A, M. ECO.-3Macro Economics | 34 Conclusion : The effects of all above said factors create inflation in| economy. Imbalance between the demand force and supply force a the root of inflation. es |(2) Gross National Product (GNP) GNP is a useful method of calculating national income. It is also known 23 Gross National Product or mixed national product. TheMacro Economics | 64 proportion of Gross National Product is wider than Gross Domestic Product (GDP), because the earning from GNP is made, from GDp plus earning from foreign sources are also considered. Secondly, the payments made to foreign countries is deducted which is generally very small. This happens in developed countries. But in the underdeveloped countries mostly opposite conditions prevail in comparison to developed countries. The calculation of national income is based on Gross National Product. At that time, the depreciation of capital sources is not deducted. As a result, the volume of GNP is found greated than NNP. Suppose in a given country, the total production of rice was W, wheat production X, clothes total production Y and total production of machinery is Z, in 2015 and in the same year the price of each product is A, B, C and D respectively. So, the value of that country’s GNP becomes = AW + BX + CY + DZ. We can get the money value by multiplying material national product with its prevailing prices. Such money value is also called the country’s GNP. @() Net National Product (NNP) : This is also an important concept to calculate national income. It is known as Net National Product. Its size is smaller than GNP. This is because the amount remains after deducting the depreciation of capital sources from the Gross National Product. Net National Product means total consumption value + value of investment. The value of net national income can be calculated in two ‘ways : (i) _Inrelation to market prices and (ii) In relation to the value of production sources.65| National Income er (@ In relation to market prices : When the Net National Product is calculated keeping in mind the market prices, then it is known as National Income at market price. (ii) In relation to the value of production sources : When Net National product is calculated, keeping in mind the yalue of production sources, then it is known as National Income at Factor Cost. In any type of calculation, NNP is the perfect indicator of national progress because this national income is derived after deducting the depreciation cost of sources, which is deducted from the Gross National Product. In any given year, how much progress has been made in a country can be known from the Net National Product. Modern economists consider NNP as a correct measure of country’s economics progress. In short, “During any year when the end products and services produced in a country are added and when values of capital means are added and depreciation of capital means are deducted, the remaining is called pure national product or Net National Income.’” (4) Personal Income : Personal Income is that income which is actually obtained by nationals. Personal income is obtained by deducting corporate taxes and payments made for social securities, provisions from national income and adding to it government transfer payments, business transfer payments and net interest paid by the government. In €quation form - EY.B.B.A. M. ECO.-5Macro Economics | 66 Personal Income = National Income - Undistributed profits of corporation - Payments for social security. Provisions - Corporate taxes + Government transfer payments + Business transfer payments + Net interest paid by government. It should be kept in mind that personal income is a flow concept. =al(4)_ CONCEPTS —(1) Devaluation ~4) ~~ Tariff (2) Dumping (5) Quotas (3) Exchange rate @() Devaluation: Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. ‘Devaluation’ means official lowering of the value of a country’s currency within a fixed exchange rate system by which the monetary authority formally sets a new fixed rate with respect to a foreign *Devaluation - Wikipedia, the free encyclopedia - page - | to 4.125 | International Trade reference currency. In contract, depreciation is used to describe a decrease in a currency’s value (relative to other major currency bench marks) due to market forces, not Government or Central bank policy actions. Under the Second System Central banks maintain the rates up or down by buying or selling foreign currency. In common modern usage. it specifically implies an official lowering of the value of a currency of the country within fixed exchange rate system by which the monetary authority formally new fixed rates with respect to a foreign reference currency. In contrast depreciation is used for the unofficial increase in the exchange rate in a floating exchange rate system. The opposite of devaluation is called revaluation, Depreciation and devaluation are sometimes incorrectly used te values in terms of other interchangeably, but they always refé currencies. Inflation, on the other hand, refers to the value of the currency in goods and services (related to its purchasing power). Altering the face value of a currency without reducing its exchange rate is a redenomination, not a devaluation or revaluation. Reasons for Devaluation : Following are the reasons why a country resorts to currency devaluation. (1) To Boost up Exports : the goods and services less expensive in sers of our goods shall have to pay more competitive in market and The devaluation make: export market because the purcha: less amount of it, the goods shall be traders are attracted to purchase our goods.“= Macro Economics 1126 (2) To Discourage Imports : The import shall be costlier because the domestic importers shall have to pay more amount in terms of domestic currency that shall make the imports costlier. (4) To adjust Balance of payments : As the import is discouraged, exports increase, the balance of payment shall naturally be favourable. Due to boost in exports and a reduced in imports, the trade deficit shall be narrow which is a good sign for the balance of payment of the nation. Advantages of devaluation : Following are the advantages of devaluation : (1) Due to devaluation export shall increase because the goods become less expensive and more competitive. (2) Due to increase in export, the GDP (Gross Domestic Product) of the country shall increase. (3) It may help to reduce the problem of unemployment. (4) Good balance of payment situation makes the economy sound and stable. Disadvantages of devaluation : Following are the disadvantages of devaluation - (1) The effect of devaluation may be neuteralised by increase in demand of goods in market. (2) The other country may retaliate and go for ‘Tit for Tal” approach. (3) The imported goods shall be constlier that may generate cost push inflation.127 | International Trade (4) Due to increased demand, there may. be shortage in domestic market that might lead to demand pull inflation, 2) Dumping : 1. Introduction ; In the initial time, there was a scarcity of goods due to lower production and less developed means of production. But after the industrial revolution took Place, the era of mass production commenced. Certain consumers are able to produce the goods at a larger scale at a lower cost due to improved techniques and economies of scale. But due to less Consumption in domestic market, they may sell their product at cheaper rate in other countries, This practice is known as dumping in an economic term, ‘Dumping’ simply means to dispose of the rubbish, waste or unwanted material, typically in a careless way. 2. Definition: “Dumping is a pricing strategy that occurs when manufacturers export a product to another country at a price below the price charged in its home market or below its cost of production.” 3. How does it happen? Dumping is an outcome of mass production that can not be absorbed in a domestic market. The surplus production can be supplied in another nation at a lower price but the question is how it happens ? Take an example, in a vegetable market, a seller has started selling ‘Sabjis’ at higher price but as the day progresses, price is teduced and so at the end of the day, he will be ready ‘to sell Vegetables at the least cost, at the price even less than cost. It happens a ——Macro Economics | 128 because he has already earned sufficient and targeted profit at the begining of the day. In the same manner producers in a developed country shall charge higher price in the begining and recover the profit. As soon as the domestic demand is met, they ‘dump’ the surplus in developing countries at the least price because they offer even to dump them ina sea ! In short dumping is a form of price discrimination between domestic market and foreign market. 4. Advantages of Dumping : Dumping is an advantage to the selling companies only. — Seller shall be able to sale the whole lot of production. It helps to make entry into new market. L + Dumping helps to expand the international trade volume of exporting countries. —> The word becomes more competitive in terms of price and the final consumers may be benefited. 5. Disadvantages : — Trade dumping can be costly to maintain over time. — The producer in an exporting country may demand from the Government for subsidizing his production activity which may’ prove to be costlier for the respective govt. — The trading partners may restrict the goods in question by way of quota and tariff barriers.r~f 129 | International Trade The Dumping is legal under WTO Rules but most of the members are against of dumping because it erodes the domestic industries especially in the developing and underdeveloped countries. 43) Exchange Rate 1. Introduction : The exchange of goods and services among various nation is known as an international trade. The major question involved in an international trades is that of currency conversion. Generally the currency is converted in the currency of another nation according to the purchasing power of various currencies. But many factors affect the currency rates, so these factors and problems can be better studied under the heading of “Exchange Rate”. 2. Definition : “The Rate at which one currency is converted in to the currency of the other nation is known as exchange rate. e.g. 1 $ can be purchased with the help of Rs. 65, Rs. 65 is an exchange rate for India and $ 1/65 is an exchange rate for U.S. 3. Types of Exchange Rates : Types of Exchange Rate Nominal Exchange Rate Real Exchange Rate (NER) (RER) Nominal Exchange Rate : Nominal Exchange Rate is the relative price of the currency of two nations. OR FY.B.B.A. M. ECO-9Macro Economics 1139 It is the price of foreign currency in terms of domestic Currency, 4. Real Exchange Rate: It is the rate at which goods of one country can be traded for the goods of another country. It is also known as terms of trade. 5. Exchange Rate System : Exchange Rate System Fixed Exchange Rate System _ Flexible Exchange Rate System (Pegged Exchange Rate System) (Floating Exchange Rate System) @) Fixed Exchange Rate System : Fixed exchange rate system refers to a system in which exchange rate for currency is fixed by the government. The government buys foreign currency when rate becomes weak and it sells currency when the exchange rate get stronger. For this purpose, government has to keep large reserve of Foreign Exchange to maintain the exchange rate at the fixed level. Under this system each country keeps value of its currency fixed in terms of some ‘External Standard’. This external standard can be gold, silver, another country’s currency or even some internationally agreed unit of Account. The value of domestic currency tied to the value of another currency, it is known as “Pegging” while the value of currency is fixed in terms of some other currency or gold, it is known as “Parity Value’ of currency.131 | International Trade Advantages : () The Government can have better control over the value of currency, (ii) Whenever an adverse balan ce of payment situation occurs, it can be favourably settled. (iv) The reserve Of foreign exchange with the government, helps the conomy in adverse world economic condition. (vy) Fixed Exchange Rate eliminates tisk and unceriainities, (vi) The Exchange Rate re ‘Mains unchanged for lon; So the speculation ing 8 period of time ‘urrencies can be avoided. . (vii) The Fixed Exchange Rate helps to fight inflation, Disadvantages ; quate amount of Foreign ~ Poor and developing Countries fj difficult to Maintain such leve] of ‘Forex? Reserve, May not fulfill the objectives of expansion ‘mployment, ind it (ii) Itis Not flexible, so jt of economy and full e to happen, may start trading the foreign currency, (iv) It may not hel P to solve the Problem of Serious Payment crisis,Macro Economics | 132 (ii) Flexible Exchange Rate System = Flexible exchange rate system means a system in which exchange rate is determined by forces of demand and supply of different currencies in foreign exchange market. The value of currency is allowed to fluctuate freely according to changes in demand and supply of foreign exchange. There is no official intervention of Government. Flexible Exchange Rate is also known as ‘Floating Exchange Rate’. It is determined by demands and supply of respective currencies. The government need not keep the reserve of the foreign exchange. Advantages : — Itreduces the intervention of Government. — Acountry can have independent economic policy of its own. It need not to consider economic situation of other countries. — This system promoters economic development because it helps to achieve full employment, —> It automatically removes the disequallibrium in the balance of payment. —> It promots the international trade and foreign investment in the country. —> The Government need not have to hold much more amount of “Foreign Exchange Reserve’, Disadvantages : > Fluctuating Exchange rates cause changes in the price of imported and exported goods, so it may distabilise the economy. —» _ It encourages the speculation in trading of foreign exchange.133 | International Trade > situation. The economy. becomes more sensitive to the external economic Sudden rise and fall in the value of currency leads to large scale capital outflows and inflows that ruins the economy. > Flexible exchange rate does depreciation, so it may Fixed Exchange Rate V/s, not prevent the currency lead to the inflationary pressure. Floating Exchange Rate Basic Fixed Floating Determination It is official and fixed by government. It is determined by forces of demand and supply. Government control {There is complete jgovt. control. There is no govt. interention, Stability |The exchange rate generaly remains stable and only a ismall variation is, possible, The exchange rate keeps on changing.Macro Economics | 134 64) Tariff Trade Barriers 1. Introduction : Ideally speaking, the trade should flow naturally. But to protect the domestic economy producers, traders and some countries adopt trade barriers. The word ‘Barrier’ means an obstacle in the way that restricts the flow or weakens the flow. So the trade barriers can be defined as any policy or rate that restricts the trade between two nations. After the evolution of W.T.O., the major countries of the world have given up the trade barriers but they introduce the barriers occasionally to balance the economic situations, Trade Barriers Quantitative Qualitative Quota Tarrif Barriers -€. Non-Tarrif Barriers E.g. Licencer, Import quota etc. Tarriff In a simple term, tariff is a tax which is added to the cost of imported goods, Tarriff increases the cost of imported goods so the import can be discouraged.rv 45| International Trade ! T he reason why tarriff is levid ? The following are top 5-reasons for adopting the policy of tarrif: 1, To protect domestic employment : ; The competion increases due to imported goods. As a result of ii, domestic company may fire the workers or shift production abroad i cut the cost which causes higher unemployment. So the government restricts the cheap imported goods. 2. Protecting consumer : If the Govt. thinks that the product is likely to endanger the population it may levy a tarriff on such socially undesirable goods. 3. To protect infant industries : Infant industries are those which are in initial stage. They are established to foster the growth of certain sector as a part of import substitution policy. So by levy of tarrif on imported goods, Govt. tries to protect the domestic infant industries. Due to such policy, infant industries have to face less competition. 4, National security : Certain Industries are strategically important for security of nation like defence. Such industries are protected by levy of tariff by Government. 5. Retaliation : Retaliation means, following the same has adopted. Sometimes, the tarriff may also lev ‘ading partner has adopted the policy of tarriff barriers: Type of Tarriffs strategy as the opponant ied because the other Specific Tarriff Ad-Valoren TarriffMacro Economics | 136 @) Specific Tarriffs : A fixed fees levied on one unit of an imported good is known as a specific tarriff. This tarriff can vary according to the type of goods imported. Gi) Ad Valorem Tarriff : “Ad Valorem’ is a latin word, which means “According to value”. This tarriff is levied on a goods as a (%) percentage of value of Imported Goods. Advantages : (i) The domestic industries and goods can be protected from the competition of foreign goods. ii) More employment can be generated due to increased domestic production. (iii) Tarriff is a tax, so there shall be increase in tax revenue of the govt. which can be spent on the public welfare by govt. (iv) If tarriff is levied as a part of import substitution policy, it will benefit the country in long run. Disadvantages : (i) The consumers will have to suffer because the prices of imported goods shall be inflated which causes cost push . inflation. (ii) It may happen that the domestic industry may not be able to produce goods of equal quality. (ii) Due to lack of competition, the industrial units may be inefficient.a 311 jnternational Trade wy Duet? increased prices, the people may demand higher level of subsidies, that neuteralises the effect of higher tax collection. Tariff is an important tool of commercial policy. Although it is primarily protection device, yet it proves to be a doubts - edged weapon. On one hand, it limits consumer's choice by forcing him to cut consumption of the goods he likes and onthe other it shifts the use of resources from one use to another, The effect of tariff is to change relative prices of goods and also prices of the factors of production. The following diagram explains the effects - Demand and Supply . In this diagram, demand and supply are represented along the x- “is and price along with Y-axis. DD and SS respectively are demand “td supply curves. Before the imposition of the tariff, domestic “oply is OL and domestic demand is OQ. OB is the price. At this ae demand exceeds the supply and the excess is met by imports ‘Wal 10 LQ. Now suppose tariff equal to BC is imposed. Since at OB |SMacro Economics | 13g price the imports have infinite elasticity, they will not be affected by the tariff. But it will raise the price in the domestic market from OB to OC. At OC price, foreign supply line shifts to CFH and imports are cut down from LQ to MP (= FH). As a result, the domestic production increases from OL to OM (i.e. by LM) Impacts of tariff The following are the different impacts of tariff : (a) Protective Impacts: Tariff reduces the imports of competing goods thus affording protection to the domestic produce. Domestic production is increased as shown above as a result of the imposition of tariff. This is known as protective impact. (b) Consumption impacts: When tariff is imposed, price of the commodity rises and domestic consumption is reduced from OQ to OP. This is called the consumption impact. (c) Revenue impacts: The Government derives revenue from the tariff which is measured by the quantity of the imports multiplied by the rate of the tariff. This is represented by the area FSTH. This is the revenue impact. (@) Redistribution: The imposition of tariff increases the price of the commodity and thus reduces the consumer’s surplus. In this way, some income is transferred from the consumers to the producers. This. affects distribution of income. It is called redistribution impact. In the diagram it is represented by the area BREC. oeSILUAUION U1 UU Lae Hee & [INEQUALITIES OF INCOME Introduction : India is suffering the disease of inequalities in income. It is a common problem in the world. Developed, underdeveloped and r this problem more or less in economy, developing countries suffe But countries like India have more crucial problems in this subject. Let us discuss the basic cases for this problem. 1. Causes and effects of inequalities of income : (1) Lack of educational opportunities : This problem is called illiteracy in India. The low level of literacy amongst the poor people is greatly found. It has a close relation with the low level of income, The poor people in India are mostly illiterate and due to that reason, they get less opportunities for jobs. For higher income, they require higher education and skill. Due to lack of education, they have to lead life with lower income. Secondly, the level of female education is also not admirable in the country because of illiteracy wave in Indian females. Poverty is also an important factor to increase illiteracy in India. The po children of our country seek nominal work, instead of getting —_71 | National Income ducation. In this way, illiteracy leads to poverty and income snequalitics in our country, (2) Gap between rich and poor : Duc to industrial progress, the society is divided into two f segments, They are rich group and poor group in the community, The group of socicty which get low income, have Jow standard of living and on the otherside the zoup of society which get high income, have high standard of living. Rich remains rich because of their richness and the poor remains poor duc their poverty. The rich community always exploits the poor. Many eco-social problems arises before the poor community. Thus, the problem of inequality of income arises. (3) Law of inheritance: This is also an important factor which creates inequality in income. Our society is traditional, We have old customs and ways of living. Our people prefer inheritance for the future generation. The parents would like their sons to adopt the same line of the work they obtained in inheritance. Even if the running activity does not give higher income, the parents would like to continue the same work in inheritance by new generation. Though, the developing cducational system has broken down such tradition in the society. Many educated people have changed inheritance and accepted new methods of earning. (4) Unequal distribution of income and resources : Another important factor of inequalities in income is uneven distribution of income as well as the resources of consumption. Our income distribution system is such that a major part of the bread goes to a handful of rich people. A very small part of income is left for the