Indian Eco PDF Updated

By DeeCee- Divine Classes
DIVINE CLASSES – DEECEE

BY RAJAT ARORA
INDIAN ECONOMICS
NOTES CLASS 12TH
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CHAPTER-1 INDIAN ECONOMY ON THE EVE OF INDEPENDENCE
Important Terms and Concepts-
1. Per Capita Income-National Income of a country divided by its

population ,during a period of time, i.e., P.C.I.= NI/Population
2. Agrarian Economy- An economy in which about 85% of the country’s
population lived mostly in villages and earned their livelihood from
agriculture (either directly or indirectly).
3. Agricultural stagnation- A period witnessed by no or slow rate of
economic growth in the agricultural sector.
4. Commercialisation of Agriculture- It means production of crops for
sale in the market rather than for self-consumption.
5. Economic drain- During the British Rule, the government incurred:
i Huge administration expenses to manage their colonial rule in
India.
ii Huge expenses to fight wars in pursuit of their policy of
imperialism. These expenses were to be borne by the Indian
exchequer. All this refers to ‘Economic Drain’ or drain of India’s
wealth.
6. Sharecropping – It is a form of agriculture in which a landowner
allows a tenant to use the land in return for a share of the crops
produced on their portion of land.
7. Colonialism- It refers to a system of political and social relations
between two countries, of which one is the ruler and other is its
colony. Ruling country not only has political control over the colony
but it also determines economic policies of dominated country.
Important dates-
 Battle of Plassey-1757
 Tata Iron and Steel Company (TISCO) -1907

 Year of Great Divide-1921
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 First Official Census-1881
 Suez Canal Opening-1869
 Introduction of Railways-1850
 1st Industrial Policy Resolution-1948
 2nd IPR- 30April,1956
 Planning Commission/ Indian Economic Planning-1950
 Green Revolution- 1956
Q1. Define the origin of British Rule.
Ans. ORIGIN OF BRITISH RULE-
 The foundation of British Empire was laid by Battle of Plassey, fought in

1757.
 After the revolution of 1857 the rule was transferred from the East India
Company to the British Crown.
Q2. What is the basic purpose of British Rule in India?
Ans. Basic purpose of British rule/ Aim of Britishers-

 The main purpose of British rule in India was to use Indian economy as
feeder economy for the development of British Economy. Finally, after
200 years, India gain independence on 15th August, 1947.
 Britishers take over raw material and sold us their finished goods.
Q3. Explain the features of Indian Economy before the arrival of Britishers.
Ans. Features of Indian economy before the arrival of Britishers-
1. Prosperous Economy- India was self-reliant and prosperous economy

before the arrival of Britishers.
2. Agrarian Economy- Agriculture was main source of livelihood and it
engaged about 2/3rd of the total population.
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3. Well-known Handicraft Industries- Indian was well known for its
handicraft industries in the fields of cotton and silk textiles, metal and
precious stone works, etc.
Britishers transformed the country into a supplier of raw materials and

consumer of finished goods & industrial products from Britain.
Q4. Name some economists who made certain attempts to estimate India’s
National and Per Capita Income.
Ans. Economists who have made certain attempts for National Income are:
• Some individual attempts to estimate National income & per capita

income was by: Dada Bhai Naoroji; William Digby; VKRV Rao; RC Desai
and Findlay Shirras.
• Economists whose calculation was considered as accurate for
calculation of NY was Dr. VKRV Rao.
Q5. How the Indian Economy exploited under British Rule?
Ans. Exploitation of Indian Economy under British Rule:
Indian economy under British rule is subjected to colonial exploitation, by the

British government.
Colonial Exploitation
Agricultural sector Industrial sector Foreign Trade
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Q6. Explain how agriculture sector was exploited during colonial rule?
Ans. Colonial Exploitation of Agricultural Sector:
Agriculture was exploited and stagnant due to following reasons-
I. Land Settlement System-

 Under this ‘Zamindari System’ was introduced
 Zamindars were declared as the owners of the soil and they
have to pay a fix amount to government by way of land
revenue and they were free to extract as much as they wish
from the tillers of the soils.
 On the other hand, Zamindars spent their revenue income on
the luxury of life.
 In return tillers get only some food or crops given by
Zamindars from the land.
II. Commercialisation of Agriculture-
 It means production of crops for sale in the market rather
than for self-consumption.
 Indian markets is a subsistence market but Britishers finish
this subsistence system.
 Britishers forced farmers to produce cash crops (i.e. cotton,
jute, indigo) rather food crops (i.e. wheat, pulses, etc.) which
leads farmers ultimately in debt.
III. Low Level of Productivity-
 Our land is less productive due to

 low level of technology
 No irrigation facilities
 No fertilisers /insecticides/ pesticides
 Cultivator had neither means nor any incentive to invest in
agriculture.
 British rule spent little on agriculture, technical or mass
education.
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Iv. Scarcity of Investment-
- India's agriculture was facing scarcity of investment in terracing,
flood-control and drainage.
- They neither had resources & technology not had incentive to invest
in agriculture.
Q7. Explain how Industrial Sector was exploited during British Rule?
Ans. COLONIAL EXPLOITATION ON INDUSTRIAL SECTOR:
The most popular industry is handicraft industries but Britishers
finished these industries by-
i. De-Industrialisation
 Britishers systematically destroy handicraft industry in two
folds.
 Take raw material from India at cheaper rates and used it in
modern industries at Britain.
 Self-finished products of British Industries in Indian markets at
higher price.
 This two fold policy led to the decline of Indian Industries.
ii) Discriminatory Tariff Policy-

 British found Indians the best source of raw material as well as
best markets for their industrial products.
 As a result a discriminatory tariff policy was persued.
 It includes:
a) Tariff free export of raw material from India and
b) Tariff free import of British industrial products into India.
 As a consequence-
a. British product started gaining Indian markets and Indian
handicrafts products started closing their domestic as well
as foreign market.
b. Decay of handicrafts was the end result.
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iii) Competition from machine made goods-
The competition forced Indian craftsmen to shut down their

Enterprises.
 As the machine made products from Britain were low cost
products and gave a stiff competition to Indian handicrafts
products.
 Also machine made products compete Indian handicraft
products in precision and quality.
iv) Low contribution to Gross Domestic Product (GDP) -

 Since industries has perished, so there is no production of
goods and services.
 So the growth rate of new industrial sector and its contribution
to the GDP remained very small.
v) Adverse Effects of decline of Handicraft industry-

a) High level of Unemployment-
 Decline of Indian handicrafts results in unemployment which

forced artisans to take up agriculture.
b) Import of finished goods.
 Indian goods can't compete with foreign competition of

machine made cheap goods which encouraged import from
Britain.
VI) Lack of capital goods Industries: -
 Capital Goods industry refers to those industries which can
produce machine tools.
 Which are, in turn, used for producing articles for current
consumptions.
vii) Limited role of Public Sector-

 Public sector did nothing for industrial sector.
 Public sector remained confined only to railways,
communication, power, ports, etc.
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Q8. What are the adverse effects of partition in India?

Ans. ADVERSE EFFECTS OF PARTITION-
1) Shortage of Raw Material
 Partition created the serious problem of shortage of raw material
for jute mills of Kolkata and Textile Mills of Mumbai and
Ahmedabad.
 The whole fertile land under jute production went to East
Pakistan (now Bangladesh).
2) Food Problem
 West Punjab and Sindh are the food granaries of India, as a result
these areas went to Pakistan.
 India had to face the problem of food crisis.
3) Loss of market
 Partition had reduced the size of market which was a severe blow to
Indian Industries.
Q9. State the India’s Foreign Trade during British Rule.

Ans. FOREIGN TRADE-
The state of India’s Foreign Trade during British Rule is discussed as under:
i) Net Exporter of primary products and Importer of finished goods
 Because of the colonial exploitation of Indian economy, India became
net exporter of primary raw material of silk, cotton, wool, sugar, indigo
etc.
 On the other hand, it became net exporter of finished goods produce by
British industries which includes capital goods, woollen clothes, silk etc.
ii) Monopoly control of India's foreign travel

 During British rule import and export of the country came under
monopoly control of British govt.
 More than 50% of India's foreign trade was restricted to Britain while
rest was allowed with countries like China, Persia.
 Opening of Suez Canal in 1869 served as direct route for ships
between India & Britain.
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iii) Drain of Indian wealth during British rule-
 India became exporter of raw material and importer of finished
goods.
 Revenue earned from raw material was used-
a. To meet expenses on war fought by government.
b. To import invisible items/ services like banking.
c. To make payments incurred by office set up in Britain.
Q10. Explain the Occupational Structure of India during Colonial Period.
Ans. Occupational Structure
It refers to distribution of working population across primary,
secondary and tertiary sector of the economy.
i. Agriculture-The principle source of occupation.

 During colonial period about 75% of working population was
engaged in agriculture.
 On the other hand, only 25% of the working population
accounted to manufacturing and service sectors.
ii. Regional Variation

 States like Tamil Nadu, Kerala, and Karnataka faced a decline
in workforce of agriculture sector where as an increase in
manufacturing & service sector.
 On the other hand, states such as Orissa, Rajasthan faced an
increase in the share of workforce in agriculture.
iii. Unbalanced Growth:
 Growth is said to be balanced when all sectors of the
economy are equally developed.
 However, in case of India, secondary and tertiary
sectors were in their infant stage of growth.
Hence the conclusion that Indian economy at the time of
independence was lopsided and backward.
Iv) Industry- An insignificant source of Occupation:
 On the eve of independence, barely 9.0 percent of the working
population in India was engaged in manufacturing industries,
mining, etc.
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 As against it, 32 percent in the USA, 42 percent in England and
39% in Japan are engaged in these activities. It further proves
how backward the Indian economy at the time of
independence.
Q11. State the situation of Infrastructure during British Rule.
Ans. INFRASTRUCTURE
On the eve of Independence, the state of Indian
infrastructure was-
i) Railways-
 The most important contribution of British rule was to
introduce railways in India in 1850.
 Railways enabled people to undertake long distance travel.
 Railways also promote foreign trade but it benefited Britishers
more than Indians.
ii) Air& Water transport-

 British government took measures for developing water & air
transport, however this was far from satisfactory.
 The inland waterways proved uneconomical because:
a. Severe competition from foreign shipping companies.
b. Lack of support from the British rulers in India.
iii) Roads-
 Roads were developed by Britishers to facilitate trade by
roadways.
 Roads were built for mobilising the army and shifting raw
materials.
iv) Communication-
 Posts and telegraphs were most popular means of
communication.
 The introduction of inexpensive system of electric telegraph in
India served the purpose of maintaining law and order.
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Q 12. Explain the reasons behind infrastructural development by
British government.
Ans. REASONS FOR INFRASTRUCTURAL DEVELOPMENT-
i) Roads-
 Roads were developed to facilitate transportation of raw
material and finished goods from different parts of the country
to the ports.
 On the other hand, roads were built for mobilizing the army for
drawing out the raw material.
ii) Railways-
-It was developed due to following reasons:
 To transport finish goods from Britain to the interior of colonial
India. Main aim was to widen the size of market for British
products in India.
 To have effective control & administration over vast Indian
Territory.
 To earn profits through foreign trade by linking railways with
major ports.
 To make profitable investment of British funds in India.
iii) Airways/ Seaways-
 Made for mainly transportation by water ways.
iv) Communication-
 Post, telegram was introduced at a high cost to serve the

purpose of maintaining law and order.
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Q 13. What are the positive contribution of British rule on Indian
economy?
Ans. Positive Contribution of British rule on Indian economy-
i) Self-sufficiency in food grains production.

 Forced commercialisation in Indian agriculture under British
rule led to gradual changes in the Outlook of farmer.
 The farmer started considering the market price of the
produced as an important determination of these production
decision.
ii) Infrastructural development-

 Development Of railways and roadways opened up new
opportunities for economic and social growth.
 It helped in transportation of food to drought hit areas and
promoted cultural affinity among people.
iii) Check on famines-

 Roads and railways worked as a great check on the occurrence
and impact of natural calamities as food supplies could be
transported to the affected areas in case of droughts.
iv) Shift to Monetary Exchange-
 British rule helped Indian economy to shift from barter system

of exchange to monetary system of exchange.
 Growth of monetary system facilitate division of labour,
specialisation and expansion of production.
v) Effective administrative set up-

 The British government in India left an efficient system of
administration.
 This served as a readymade reference for our politicians and
planners.
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Q 14. Explain the state of Indian economy on the eve of
independence.
Ans. State of Indian Economy on the eve of Independence-
i) Colonial Economy-
 British rule resulted in huge drain of wealth from India with the
supply of raw materials from India.
 Encouraged commercialization to transform Indian Economy
into a British colony.
ii) Semi-feudal Economy-

 Introduction of feudal system: led landlords to charge very
high rate of lagaan and were very cruel to the cultivators.
 Introduction of Capitalist system: led to creation of two
classes- capitalist and labourers.
iii) Stagnant Economy-

 An economy which is growing at a very low rate.
 India was stagnant economy mainly in agriculture sector.
iv) Backward Economy-

 Indian economy was backward and underdeveloped due
to:
 Low level of productivity.
o Traditional methods of
agriculture.
o Low per capita income
o High birth and death rate.
o Mass illiteracy.
v) Depleted (Depreciated Economy) -

 It refers to an economy where no arrangements have been made
to replace the physical assets, depreciated due to excessive use.
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vi) Amputated Economy-

 British policy of `divide and rule' always promoted discrimination
between various groups on the basis of religion, caste, language
and culture.
vii) Industrial Backwardness-
• There was a virtual lack of the basic and heavy industries in the
country.
• Production of machines was almost negligible.
• Small-scale and cottage industries were almost ruined.
• For the bulk of its capital-goods requirement, the Indian
industry was dependent upon imports from Britain.
Q 15. Explain the demographic file of India.
Ans. Demographic conditions during the British rule exhibited all features of a
stagnant and backward Indian economy-
 1st official census: the first official census was conducted in the
year 1881. From 1881 onwards, census operations were carried
out after every ten years.
 1921: year of the great divide: Before 1921, India was in the first
stage of demographic transition. The second stage began after
1921.
o The demographic condition during the colonial rule is described in the

following points:
1. High birth rate and death rate:
 Birth rate refers to number of children born per thousand in a year.
 Death rate refers to number of people dying per thousand persons in a
year.
 Both birth rate and death rate was very high at nearly 48 and 40 per
thousand respectively.
2. Poor health facilities:

 The level of public health facilities was very poor during the British rule.
 There was lack of proper housing, sanitation and health care facilities.
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3. high infant mortality rate :
 The infant mortality rate is the number of deaths per 1000 live births
of children under one year of age during a given year.
 Mortality rate was very high and particularly infant mortality rate was
as high as about 218 per thousand as compared to 37 per thousand
in the year 2015.
4. Low life expectancy:
 Life expectancy refers to the average number of years for which

people are expected to like.
 Life expectancy was also very low 44 years, in contrast to the present
68 years.
5. Low literacy rate:

 The overall literacy level was less than 16 percent. Out of this, the
female literacy level was at a negligible low of about 7 percent.
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CHAPTER-2 INDIAN ECONOMY (1950-1990)

Important Dates:
1- Planning Commission-1950
2- First five year plan-1st April,1951- 31st March,1956
3- Planning Commission to NITI Ayog -1st Jan,2015 (by BJP)
4- Green Revolution- 1966
5- Industrial Policy Resolution- 1948
6- Second Industrial policy resolution adopted in India- 30th April,1956
7- Industries (Development and Regulation) Act- 1951
8- India entered into Planned development era-1950’s
9- 30-April 1956 –second industrial policy resolution.
Introduction-
After two hundred years of British rule and their exploitative policies, India finally got
freedom on 15th August, 1947. Now, it is necessary to reconstruct the backward and
stagnant and depleted economy into a developed economy, the most important task before
the government of independent India was to decide the type of ‘Economic System’ which
would be most suitable for India.
Q.1 What do you mean by economic system?
Ans. Economic System refers to an arrangement by which central problems of an economy

are solved.
Q.2 What are the main central problems of an economy?
Ans. As such scarcity is evident, due to the availability of limited resources, and human
needs having no limit. Therefore, this variation between the supply and demand leads to
the formation of central problems of an economy.
A decision of allocation of resources needs to be taken depending on the central problems

of the economy.
1. What to produce
2. How to produce
3. For whom to
produce
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1. What to produce?
This problem refers to the decision regarding the selection of different commodities and the
quantities that need to be produced.
There are 2 aspects to the problem.
 What type of goods to be produced?

 How much amount of goods to be produced?
2. How to produce?
This aspect deals with the process or technique by which the goods and services can be
produced.
1. Labour Intensive Techniques: it is used with the help of more no. of labour and less
involvement of capital.
2. Capital Intensive Techniques: This technique involves more capital investment and
less utilisation of labour.
The choice of technique for production depends on the availability of the resource in that
nation, and hence resource allocation becomes a challenge.
3. For whom to produce
This problem deals with determining the people who will be the final consumers of the
goods produced. As the resources are scarce in an economy, it becomes difficult to cater to
all sections of society.
It leads to the creation of a problem of choice in an economy as a good that may be in

demand among a section, may not be in demand for another section of the society.
Such a situation arises due to the difference in income distribution among the population,
which causes a change in buying behaviour.
Q.3 What are the different types of economic systems?
1. Capitalist Economy: A capitalist economy is an economic system in which means of

production are owned, control and operated by the private sector.
2. Socialistic Economy: A socialistic economy is the one in which the means of
production are owned, controlled and operated by the government.
3. Mixed Economy: A mixed economic system refers to a system in which the public
sector and the private sector are allotted their respective roles for solving the central
problems of the economy.
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Q.4 What do you mean by capitalist economy and its features?
Capitalist Economy: A capitalist economy is an economic system in which means
of production are owned, control and operated by the private sector.
FEATURES:
 There is a private ownership of the means of production.

 Means of production are used in a manner such that the profits are maximised.
 The role of the government is largely confined to the maintenance of law & order
and defence of the country.
Q.5 What do you mean by Socialist economy and its features?

Socialistic Economy: A socialistic economy is the one in which the means of production
are owned, controlled and operated by the government.
FEATURES:
 Means of production are collectively owned by the society as a whole.

 Means of production are used in a manner such that social welfare is maximised.
 There is a direct participation of the government in the process of production. The
role of the government is not merely confined to law & order and defence.
Q6. What do you mean by mixed economy and its features?

Mixed Economy: A mixed economic system refers to a system in which the public
sector and the private sector are allotted their respective roles for solving the
central problems of the economy.
FEATURES:
 Means of production are owned by the private entrepreneurs as well as the

government.
 In the private sector, production decisions are governed by the principle of profit
maximisation, while in the public sector, social welfare rules the roost.
 Both private and public sectors play a significant role in the process of production.
Q.7 Which economic system India opted and why?
After the freedom, leaders of independent India (like Jawaharlal Nehru) were confused with
regard to economic system, to be followed in India.
 Some leaders were in favour of socialist economy. However, in a democratic country

like India, complete dilution of private ownership was not possible.
 Capitalist economic system did not appeal to Jawaharlal Nehru, our Prime Minister,
as under this system, there would be less chances for improvement in quality of life
of majority of people.
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 As a result, mixed economy (with best features of both socialist and capitalist
economy) was adopted by Indian economy.
The merit of mixed economy is that it combines the merits of capitalist as well as a
socialist economy. On the one hand, GDP growth is encouraged because of private
entrepreneurs are free to focus on ‘profit maximisation’. On the other hand, ‘social
justice’ or equality is promoted because the government sector places high priority on
the maximisation of social welfare.
Q.8 What is meant by Economic Planning?
• Economic planning can be defined as making major economic decisions (what, how
and for whom to produce) by the conscious decision of a determinate authority, on
the basis of a comprehensive survey of the economy as a whole.
• The Industrial Policy Resolution of 1948 and the Directive Principles of the Indian
Constitution assigned a leading role to the public sector. Private sector was also
encouraged to be part of the plan efforts.
• To make economic planning effective, the Government of India setup Planning
Commission in 1950, with the Prime Minister as the Chairman. (First chairman of
planning commission was prof. Mahalanobis).
• The purpose of the commission was to carefully assess the human and physical
resources of the country and to prepare the Plans for the effective use of resources.
• The Planning Commission fixed the planning period at five years, which began the
era of
‘Five Year Plans’.
Plans & periods Focus of the plan or the principal
objective
1st plan: April 1, 1951 ----march 31, (i) increase in agricultural
1956 production.
(ii) Equitable distribution of
production, income and
wealth.
2nd plan: April 1, 1956 --- march 31, (i) Increase in industrial
1961 production.
(ii) Development of heavy
industry.
3rd plan: April 1, 1961 (i) Self-sufficiency in food grain
production.
(ii) Generation of employment
opportunities.
(iii) Reduction in inequality.
Three Annual plans/April 1, 1966 – March 31, 1969
4th plan: April 1, 1969--- March 31, 1974 (i) Accelerating the process of
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growth.
(ii) Price stability.
5th plan: April 1, 1974 ---- march 31, Raising the living standards with a focus
1979 on weaker sections of the society.
Annual Plan/April 1, 1979 ---- March 31, 1980
6th plan: April 1, 1980 --- march 31, i) Removal of poverty
1985 ii) Reduction of inequality
iii) Development of infrastructure.
7th plan: April 1, 1985 ---- March 31, i) Generation of employment
1990. opportunities
ii) Increase in agricultural
productivity.
Two Annual Plans/April 1, 1990 ---March 31, 1992
8th plan: April 1, 1992 --- March 31, i) Fuller utilisation of manpower
1997 by the turn of the century.
ii) Universalisation of elementary
education.
iii) Strengthening of infrastructure
9thplan: April 1, 1997---- March 31, i) Agricultural and rural
2002 development
ii) Growth with price stability
iii) Checking the growth of
population.
10th plan: April 1, 2002 ---- March 31, i) Improving the quality of life
2007 through better health and
educational facilities and
improved levels of
consumption.
ii) Reduction in inequality through
inclusive growth.
11th Plan: April 1, 2007 ----March 31, i) Multiple targets covering not
2017 only growth but also poverty
reduction.
ii) Improving quality of education
and public health services.
iii) Strategy of second green
revolution.
iv) Generating high quality of job.
v) Protection of environment.
12th Plan: April 1, 2012 --- march 31, Faster, sustainable and more
2012 inclusive growth.
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Q.9 Explain some features of economic policy pursued under planning 1950-1991.
1) Heavy Reliance on public sector:
 Economic policy prior to 1991 indicated heavy reliance on public sector.
 It was realised that the objective of socialist pattern of society could be
achieved only through a comprehensive development of public sector
enterprise.
2) Regulated Development of Private sector:

 According to Industrial (Development and Regulation) Act, 1948 new industry
in the private sector could not be established without a licence and
registration.
 Regulated development of private sector was to ensure that there was no
concentration of economic power in the private hands.
3) Protection of small-scale industry and regulation of large scale industry:

 Large-scale industry was regulated through several acts.
 Small-scale industry, on the other hand, was offered protection from
competition- certain areas of production were exclusively reserved for the
small-scale industries, particularly labour-intensive industries such as
readymade garments, chemicals, etc.
 Several boards (like handloom board and silk board) were established to
promote the products of small scale industries in the global market.
4) Focus on saving and investment:

 Saving and investment identified as the key determinants of economic
growth.
 High interest rate were offered to promote saving while investment was
induced through subsidies and capital grants.
5) Protection from Foreign competition:

 Domestic industry was protected from foreign competition.
 High import duties and quantitative restrictions were levied on imports.
6) Focus on import of substitution:

 It implied domestic production of goods which were imported from abroad.
 The basic idea was to save foreign exchange and become self-sufficient.
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7) Restriction on foreign Capital:
 Foreign direct investment was controlled and regulated through foreign
exchange regulation act (FERA).
 This was to minimise economic control of the domestic market by the foreign
investors.
Q.10 What is the achievements of Planning?

Ans. Achievements:
1. Increase in national income:
 Increase in national income indicates economic growth.
 During the period prior to planning, national income of India increased at
the rate of just 0.5 percent per annum. Indian economy was, therefore,
stagnant economy.
 Increase in national income during the Twelfth plan was 6.8 percent
against the target of 8 percent. In 2018-19, increase in national income is
estimated to be 6.9 per cent.
Thus, during most plans, we failed to achieve the targeted rate of growth.
2. Increase in per capita income: over time, per capita income has recorded a
significant rise:
Over time, per capita income has recorded a significant rise.
 During the period prior to planning, rate of increase in per capita income
had only been notional.
 Twelfth plan estimated a growth rate of 5.5 percent per annum.
This does not show any promise of a rise in the quality of life each and
every individual in the economy.
3. Rise in Savings and Investment:

 In 1950-51, rate of saving was 9.5 percent of national income.
 It increased to 31.3 percent by the end of eleventh plan (2011-12) and
was estimated to be 30.5 percent in 2017-18.
We all know, that saving and investment are the principal drivers of economic
growth.
4. Growth and diversification of industry:

 Five year plans gave a big push to the basic and capital goods industries.
 In the eleventh plan, industrial production growth rate was 7.2 percent. It
increased to 6.9 percent in 2018-19.
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 Consumer goods industries have substantially grown to achieve the level
of self-sufficiency.
5. Employment:
 Serious efforts have been made during plans to increase employment
opportunity.
 During the eleventh plan, unemployment rate came down from 8.3
percent in 2004-05 to 5.6 percent in 2011-12. It increased to 6.9 percent
in 2018-19.
 In the twelfth five year plan, government has fixed the target of creating
50 million employment opportunities.
Q.11 What are the failures of planning in India?

Ans. Failures:
1. Abject poverty:
 In India, 21.9 percent of population still lives below the poverty line.
 There are those people who are getting even the essentials of life.
 Nearly 50 percent of those who are absolutely poor in the world are living
in India.
2. High Rate of Inflation:
 We have failed to tackle inflationary spiral in the country because high rate
of inflation has tended to erode the real income of the people.
 Also, economic divide between haves and have-nots has tended to rise.
 First plan is the only exception which price level slided down, in all other
plans the prices recorded a steep rise.
3. Unemployment Crises:
 While more and more opportunities of employment has been
generated, challenge of unemployment has not subsidies.
 At the end of first Plan, 53 lakh persons were unemployed. This number
rose to over 4 crore at the end of eleventh plan.
 This is emerging to be serious cause of social unrest, threatening the
process growth.
4. Inadequate Infrastructure: Development of infrastructure (including power,

roads, dams, bridges, schools, colleges and hospitals) continues to be inadequate
despite 67 years of planning. Consequently, actual growth has failed to match the
targets of growth has failed to match the targets of growth. Particularly, shortage of
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power has been a serious constraint in the overall process of growth and
development.
Q.12 What were the different goals of five year plan?

 In India, plans are made for duration of 5 years are known as five year plans.
 The five years plans have been concerned with the removal of economic
backwardness of the country to make India a developed country.
 The first five year plan listed the basic goals of India’s development, which
served as guiding principles of Indian planning.
 These basic goals are:
i. Growth
ii. Modernisation
iii. Self-reliance
iv. Equity
 Due to limited resources, a choice has to be made in each plan about which
of the goals is to be given primary importance. Nevertheless, the planners
have to ensure that, as far as possible, the policies of the plans do not
contradict these four goals.
Q.13 What is meant by growth?
Ans. Meaning:
 It refers to a consistent increase in GDP over a long period of time.

 Growth implies: either a large stock of productive capital; or a large size of
supporting services like transport and banking; or an increase in the
efficiency of productive capital and services; or increase in flow of goods and
services in an economy.
 A good indicator of economic growth, in the language of economics, is
steady increase in the GDP.
 In some countries, growth in agriculture contributes more to the GDP
growth, while in some countries, growth in service sector contributes more
to GDP growth.
Q.14 What is meant by modernisation?
Ans. Meaning:
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1. Modernisation refers to the integration of technology in the economy.
2. Adoption of New technology:
 Modernisation aims to increase the production of goods and services
through use of new technology.
 A factory can increase output by using new type of machine.
3. Change in social outlook:
Modernisation also requires change in social outlook, such as gender
empowerment or providing equal rights to women. A society will be more
civilised and prosperous if it makes use of the talents of women in the work
place.
4. The term modernisation indicates a variety of structural and institutional
changes in the framework of economic activity. Modernisation implies:
 Shift in sectoral composition of production and diversification of activities
 An advancement of technology and institutional innovations.
Q.15 What is meant by self-reliance?
Ans. Meaning:
1) Self-reliance means dependence on domestically produced goods, particularly

food grains.
2) Under this we have shifted from surplus to commercialisation. In other words, it
means to have development through domestic resources.
3) To reduce foreign dependence: As India was recently freed from foreign control,
it is necessary to reduce our dependence on foreign countries, especially for
food. So, stress should be given to attain self-reliance.
4) To avoid foreign interference: it was feared that dependence on imported food
supplies. Foreign technology and foreign capital may increase foreign
interference in the policies of our country.
Q.16 What do you mean by Equity?
Ans.
• The five year plans must also focus on the development of our society. It is essential
to ensure that these benefits from the economy are enjoyed by all members of the
society. This is where equity comes in.
• Equity focuses on ensuring that all citizens of our country have their basic needs for
food, housing, clothing etc. fulfilled. It also looks to reduce the wealth gap and the
inequality in our society.
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AGRICULTURE-
Q.17 What are the features of Agriculture?
The agriculture sector accounted for the largest share of workforce with
approximately 70-75 percent. So, agricultural development was focused right from
the First Five Year Plan.
Q.18 What are the features (or problems) of Agriculture?
1. Low productivity-
 Indian agriculture sector was known for its low productivity. Lack of
knowledge was responsible for stagnation in this sector.
 Since agricultural sector generates demand for the industrial sector,
backwardness of the agriculture implies slow growth of the industry.
2. Disguised Unemployment-It is a kind of unemployment in which there are people

who are visibly employed but are actually unemployed. This situation is also known
as 'hidden unemployment'. In such a situation more people are engaged in a work
than required.
3. High dependency on Rainfall-

 The Indian economy is heavily dependent on agriculture and the livelihood of
the Indian farmer largely depends on the Monsoon rains.
 Good rainfall means good crop and bad rainfall means bad crops.
 Consequently, growth process fails to be stable.
4. Subsistence agriculture-
 It means the primary objective of the farmer is to secure subsistence for his
family; it is not to earn profits.
 Subsistence agriculture fails to generate surplus for investment. It leads to
stagnation in agriculture.
5. Depreciated Technology-
 There were many obsolete technologies and harvesting machines. Harvesting
was generally done manually and was very tedious.
 Bulk of farming population in India is extremely poor. Lack of modern inputs
leads to low productivity and therefore, backwardness.
6. Landlord Tenant Conflicts-

 Farmers were often a part of a critical contract that bound them to their
landlords. Landlords used to extract huge amount of interest from farmers
and deprived them of their necessities.
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 Little or no surplus is left with the tenants for re-investment. Accordingly,
agriculture tends to stagnate.
Q.19 Explain the importance of Agriculture in the Indian Economy?

1) Contribution to GDP:
 Agriculture makes a significant contribution to GDP in India.
 The decline (in percentage contribution of agriculture in the economy.
 It often occurs owing to relatively faster growth of secondary and tertiary
sectors of the economy.
2) Source of employment:
 In India, agriculture is a significant source of employment.
 Over 50% of working population in India engaged in agricultural sector.
 Implying that agriculture is the principle source of subsistence for the
people in India.
3) Supply of raw material:
 Agriculture supplies industrial raw materials like cotton for the textile
industry, seeds for the oil industry, and sugarcane for the sugar mills.
 As a supplier of raw material, agricultural sector is of primary significance
for the growth of the industrial sector in the economy.
4) Source of demand for the industrial goods:
 Agricultural sector is an important source of demand for the industrial
goods.
 Agricultural prosperity leads to industrial prosperity.
5) Contribution to international trade:
 Agriculture makes a significant contribution to India’s international trade.
 India exports tea, jute, cashewnuts, tabacco, coffee and spices.
 Exports are a source of foreign exchange, which India needs for the
import of defence goods as well as crude oil.
Q.20 What are the problems faced by Indian agriculture?

1. Lack of permanent means of irrigation:
 Crop farming in India is heavily dependent on rainfall. Permanent means
of irrigation are extremely deficient.
 Stability in agricultural output requires that permanent means of
irrigation are developed across all parts of the country.
2. Deficiency of finance:
 Deficiency of finance is another major problem facing Indian Agriculture.
 Lack of finance hinders growth of Indian agriculture.
 High cost of borrowing leads to vicious circle of poverty of the farmers.
3. Small and scattered holdings:
 Holdings in India are not only small but scattered as well. Small holdings
do not allow the use of modern technology.
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 Scattered holdings increase the cost of management. This contributes to
backwardness of farming and poverty of the farmers.
4. Lack of organised marketing system:
 Agricultural marketing system is highly unorganised.
 They are obliged to sell their produce to the mahajans and money lenders
(in the local markets) in return for the loans they raise from these
middleman.
 At the level of marketing, the bulk of small holders fail to get a
remunerative price for their crops, because of the lack organised
marketing system.
5. Exploitative agrarian relations:
 Agrarian relations refer to the business relations between the landlords
and the tenants.
 Having paid exorbitant rents to the absentee landlords, the tillers of the
soil are left with little surplus for further investment.
 Accordingly, land continues to be used as a source of subsistence (or as a
means of livelihood) rather than a source of business profits.
Q.21 Give a brief description on agrarian reforms?

Ans.
1. Technical reforms:
Following steps have been taken by the government to upgrade the level of
technology in indian agriculture.
a. Use of HYV Seeds:
 HYV seeds have replaced the conventional varieties.
 HYV seeds (especially relating to wheat, bajra, rice, maize, jowar, and
cotton) have led to a substantial rise in crop productivity.
b. Use of chemical fertilizers:
 Chemical fertilizers are being increasingly used to enhance productivity.
 Use of chemical fertilizers has considerably increased over time.
c. Use of insecticides and pesticides for crop protection:
 Steps have been initiated to protect crops against diseases and
insecticides and pesticides.
 For plant protection, integrated Pest Management Programme was
adopted along with the adoption of HYV technology.
d. Scientific farm management practices:
 Stress has been laid on scientific cultivation, as against conventional
farming.
 Scientific methods of farming relate to
o Selection of crops and their quality.
o Preparation of soil
o Rotation of crops
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o Selection of seeds
o Use of fertilizers besides others.
2. Land reforms:
Action plan of the government with regard to land reforms includes the following
steps:
a. Abolition of intermediaries:
 Intermediaries (between the state and the actual tiller of the soil) popularly
known as zamindars have been abolished.
 Ownership rights have been conferred upon those who actually cultivate the
soil.
b. Regulation of rent:
 To put an end to excessive and illegal extortions from the cultivators,
rents have been fixed.
 Generally, these are not to exceed 1/3rd value of the crops.
c. Consolidation of holdings:
 With a view to reducing fragmentation, steps have been initiated for the
consolidation of holdings.
 Consolidation is the practice to allot land to the farmer at one place as
replacement for his scattered holdings here and there. It saves the cost of
cultivation.
d. Ceiling on land holdings
 With a view to promoting equality in the distribution of land, ceiling has
been imposed on the holding size.
 The surplus land has been resumed by the government and redistributed
among small holders or landless labourers.
3. General Reforms:
General reforms included the following steps:
a. Expansion of Irrigation Facilities:
 With a view to raising productivity in agriculture, irrigation facilities have
been expanded.
 Now, irrigation is covering about 45% of land under cultivation.
b. Provision of credit:
 Cooperative societies have been set up to provide credit to the farmers at
low rate of interest.
 Commercial banks have also been catering to credit needs of the farmers.
 Regional rural banks have been established to further enhance credit
facilities to the farmers.
 National bank for agriculture and rural development (NABARD) was
established to institutionalise credit facilities to the farmers at the
national level.
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c. Regulated markets and cooperative marketing societies:

 Regulated markets have been established with a view to offering
remunerative price to the farmers and protect them against exploitation
by the middleman.
 These committees ensure timely payment to the farmers, and also ensure
that only specified weights and measures are used to weigh and value the
farmers’ produce.
 Provision for storage of the crops is made by the societies on behalf of
the member farmers.
d. Price support policy:

 Government assures a minimum support price (MSP) to the farmer for his
produce so as to protect him against uncertainties of the market.
 Government is committed to buy the surplus produce of the farmer at
the minimum support price as and when the market price is lower than
that.
New Agriculture Strategy: Green Revolution in India

At the time of independence, about 75% of country’s population was dependent on
agriculture.
Green Revolution refers to the large increase in the production of food grains due
to use of high yielding variety (HYV) seeds. Green revolution is the spectacular
advancement in the field of agriculture.
Q.22 Why there was a need for green revolution?

• India’s agriculture vitally depends on the monsoon and in case of storage of
monsoon, the farmers had to face lot of troubles.
• Moreover, the productivity in the agricultural sector was very low due to use
of outdated technology and absence of required infrastructure.
• As a result of intensive and continued efforts of many agricultural scientists,
this stagnation in agriculture was permanently broken by the ‘Green
Revolution’.
Effects of Green Revolution-
Q.23 What were the effects of Green Revolution?
30
Ans. Production has increased due to extensive cultivation i.e., bringing new land
under the plough.
• The green revolution enabled the government to produce sufficient amount

of food grains to build a stock which could be used in times of food storage.
• The low-income groups, who spend a large percentage of their income on
food, benefited from the decline in relative prices of food grains.
• Use of chemical fertilizers has eliminated the need for fallowing.
• It caused a change in farmer’s outlook as farming is no longer viewed as a
source of subsistence, it is considered as a commercial venture as well.
Risk involved under Green Revolution-

Q.24 What was the risk involved under green revolution?
• Risk of Pest Attack: The HYV crops were more prone to attack by pests. So,
there was a risk that small farmers who adopted this technology could lose
everything in a pest attack.
• Risk of Increase in Income Inequalities: There was a risk that costly inputs
required under green revolution will increase the disparities between small
and big farmers. However, due to favourable steps taken by the government,
these fears did not come true.
Limitations of Green Revolution-

Q.25 What were the limitations/ disadvantages of Green Revolution?
1. Revolutionary rise in output is confirmed mainly to the production of food grains

(wheat and rice).
2. Spread of Green Revolution has not been uniform across all regions. In states like
Punjab, Haryana, Maharashtra and Tamil Nadu, it made a remarkable impact. But in
Eastern UP, Bihar, Madhya Pradesh and Odisha, its impact was relatively
insignificant.
3. It benefited only the rich farmers and not the small and marginal farmers as they
could not afford the inputs that were required for cultivation of these seeds.
4. Continuous use of groundwater for tube well irrigation reduced the water- table
below the ground.
Q.26 What was industrial development?
Ans. Industrial development is the building and growing of industries within an

economy. These industries include mass production, and other services. The
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developing countries like India can progress only if they have a good industrial
sector.
Q27. What are the features of Industrial growth?
Ans. Features
1. Public enterprises were to play a centre role in the process of industrialisation.

2. Process of industrialisation focused on ‘import substitution’. Implying that the
production of such goods was to be accorded a high priority which were
imported from rest of the world. The idea was to achieve self-reliance as well as
to economise the use of foreign exchange.
3. As far as possible, domestic industry was to be protected from foreign
competition. Protection was to be offered through
a) Heavy duty on imports, and
b) Fixation of import quotas. It was realised that protection would foster the
growth of the domestic industry.
4. Large-scale industry was to be developed with a view to building an
infrastructural base in the country.
Q.28 What are the positive and negative effects of industrialisation?
Positive effects:
1. Economic growth got a big push. Industrial output recorded a significant rise.
There was about 6 percent annual increase in output during the period 1950-
1990.
2. Growth of SSI made a substantial contribution in achieving the objectives of
growth with social justice.
3. The overall growth pattern in the economy showed a marked thrust on socialistic
pattern of society.
Negative effects:
1. Public sector monopolies gradually turned out to be a ‘dead social weight’.
Inefficiency, corruption, leakage emerged as their principal characteristics.
2. Lack of competition promoted the domestic entrepreneurs to focus upon
monopoly-control of the market. Growth through competition and
diversification was conveniently avoided.
3. Saving foreign exchange through import substitution (rather than generating
it through export promotion) proved to be an inefficient policy instrument.
Q.29 What was the role of public sector in industrial development?
There was a need for a leading role of the Public Sector due to the following reasons:
32
1) Shortage of Capital with Private Sector: Private entrepreneurs did not
have the capital to undertake investment in industrial ventures, required
for the development of economy.
2) Lack of Incentives for Private Sector: The Indian market was not big
enough to encourage private industrialists to undertake major projects,
even if they had capital to do so. Due to limited size of the market, there
was low level of demand for the industrial goods.
3) Objective of Social Welfare: The objective of equity and social welfare of
the government could be achieved only through direct participation of the
state in the process of industrialisation.
Q.30 What do you mean by industrial policy resolution 1956, when it was adopted?
Ans. Industrial Policy Resolution of 1956 (IPR 1956) is a resolution adopted by the Indian
Parliament in April 1956.
1. Industrial policy is a comprehensive package of policy measures which covers

various issues connected with different industrial enterprises of the country.
2. After industrial policy, 1948, Indian economy had to face a series of economic
and political changes, which necessitated the need for a fresh industrial policy for
the country. So, on 30th April, 1956, a second industrial policy resolution was
adopted in India.
3. Classification of industries:
o Schedule A: this first category compromised industries which would be
exclusively owned by the government state. In this schedule, 17 industries
were included, like arms and ammunition; atomic energy; heavy and core
industries; aircraft; oil; railways; shipping; etc.
o Schedule B: In his schedule, 12 industries were placed which would be
progressively state-owned. The state would take the initiative of setting up
industries and private sector will supplement efforts of the state.
o Schedule C: This schedule consisted of the remaining industries which were
to be in the private sector.
These industries were controlled by the state through a system of licences,
enforced under industries (development and regulation) act 1951.
4. Industrial licencing:
An industrial licence is a written permission from the government, to an
industrial unit to manufacture goods.
o Setting up of new industries
o Expansion of existing ones;
o Diversification of products.
5. Industrial concessions: the private entrepreneurs were offered many types of
industrial concessions for establishing industry in the backward regions of the
country. These concession included:
o Tax holiday (freedom from the payment of tax for some time), and
o Subsidised power supply.
Q.31 What do you mean by industrial licensing?
33
An industrial license is a written permission from the government, to an industrial unit to
manufacture goods. Under this:
1. No new industry was allowed unless a licence is obtained from the government.
2. It was easier to obtain a licence if the industrial unit was established in an
economically backward area.
3. The purpose of this policy was to promote regional equality.
4. License were needed even if an existing industry wants to expand output or
diversify production.
Q.32 What do you mean by Small-scale industry?
1. Small scale industries (SSI) are those industries in which manufacturing, production
& rendering of services, are done on a small or micro scale. These industries make a
one-time investment in machinery, plants and industries but it does not exceed Rs 1
crore.
2. At the beginning of planning (1951) it was defined as one whose investment did not
exceed 25 lakh.
Q.33 Explain the importance of small-scale industries?
1. SSI Increases Production-
India is one of the world’s fastest growing economies in the world. Consequently, its
production output is massive. It is pertinent to note that SSIs contribute almost 40% of
India’s gross industrial value.
2. SSI Increases Export-
Apart from producing more goods and services, SSIs have been able to export them in large
numbers as well. Almost half of India’s total exports these days come from small-scale
businesses.
3. SSI Provides Employment -
It is important to note firstly that Small Scale Industries employs more people than all
industries after agriculture. It distributes employment in all parts of the country and
prevents unemployment crisis.
4. SSI do Welfare of people-

Apart from providing profitable opportunities, Small Scale Industries play a large role in
advancing welfare measures in the Indian economy as well. A large number of poor and
marginalized sections of the population depend on them for their sustenance.
Q.34 What do you mean by foreign Trade?
34
Foreign trade is the exchange of capital, goods, and services across international borders or
territories.
Q.35 Explain a brief composition of foreign trade?
Ans. After independence, there has been a substantial change in the composition of India’s
foreign trade.
1) Decline in percentage share of agricultural exports:

It happened owing to the facts:
o That India started using its farm products as raw material for its domestic
industry
o That a substantial rise of India’s population has raised the domestic
consumption of farm products.
2) Decline in percentage share of conventional items:
o Conventional items of India’s exports include jute, tea, food grains and
minerals. These items constituted the bulk of India’s exports at the time of
independence.
o But with planned development programmes in place, domestic demand for
the conventional items has tended to rise.
3) increase in percentage share of manufactured goods:
o Percentage share of manufactured goods in total exports has tended to rise.
o This points to the fact that planned development programmes (launched
after independence) have started yielding results.
o These changes in the composition of India’s foreign trade suggest that India
is no longer a static and backward economy.
Q.36 What do you mean by Trade policy i.e. Import substitution or Inward looking strategy?
1) Import substitution refers to a policy of replacement or substitution of imports by

domestic production.
2) The basic aim of the policy was to protect domestic industries from foreign
competition.
3) The policy of Import substitution can serve 2 definite objectives:
o Savings of precious foreign exchange; and
o Achieving self-reliance
4) By adopting inward looking trade strategy, the government preferred to economise
the use of foreign exchange (through import substitution) rather than maximise the
generation of foreign exchange (through export promotion).
5) Also, the government wanted to protect the domestic industry from international
competition.
35
6) For example-instead of importing vehicles made in a foreign country, domestic
industries would be encouraged to produce them in India itself.
Q.37 What are the impact does inward looking strategy left on domestic industry?
Good impact:
1) Diversification of industrial growth:

o Modern industry was no longer confined to textile and jute.
o Industrial growth started spreading across engineering goods and a wide
range of consumer goods.
o It is widely recognised that electronic industry would have failed to take
roots in the domestic economy, had the policy of ‘protection’ not been
pursued.
2) Opportunities of investment:
o Protection to SSI (small-scale industry) opened new opportunities of
investment for those who did not have much capital.
o New investment opportunities implied new opportunities of self-
employment. It promoted growth with equity.
Bad Impacts:
1) Growth of inefficient Public Monopolies:

o Protection of public sector industry led to the growth of inefficient
monopolies.
o Telecommunication was a government monopoly till about 1990. We all
know that people had to wait for years and years just for a telephone
connection.
2) Lack of competition:
o Old users of cars still remember that ambassador and fiat were the only two
models produced by the domestic industry in India.
o No doubt that the domestic car industry flourished as a near-monopoly
owing to the policy of protection.
Protection from Imports through ‘Tariffs’ and ‘Quotas’-

Government made use of two ways to protect goods produced in India from imports:
i. Tariffs: Tariffs refers to taxes levied on imported goods. The basic aim
for imposing heavy duty on imported goods was to make them more
expensive and discourage their use.
ii. Quotas: Quotas refer to fixing the maximum limit on the imports of a
commodity by a domestic producer.
Reasons for Import Substitution-
36
1. The policy of protection is based on the fact that industries of developing countries
like India are not in a position to compete against the goods produced by more
developed economies. With protection, they will be able to compete in the due
course of time.
2. Restriction on import was necessary to overcome the fear of drain of foreign
exchange reserves on the import of luxury goods.
CRITICAL APPRAISAL OF INDUSTRIAL DEVELOPMENT (1950- 1990):

The achievements of India’s Industrial sector during the first seven plans are
impressive indeed.
I. The proportion of GDP contributed by the industrial sector increased in the period
from 11.8 percent in 1950-51 to 24.6 percent in 1990-91.
II. The rise in the industry’s share of GDP is an important indicator of development.
The six percent annual growth rate of the industrial sector during the period is
commendable.
III. No longer was Indian industry restricted largely to cotton textiles and jute; in fact,
the industrial sector became well diversified by 1990, largely due to the public
sector.
IV. The promotion of small-scale industries gave opportunities to those people who did
not have the capital to start large firms to get into business.
V. Protection from foreign competition enabled the development of indigenous
industries in the areas of electronics and automobile sectors which otherwise could
not have developed.
b. In spite of the contribution made by the public sector to the growth of Indian
economy, some economists are critical of the performance of many public
sector enterprises.
c. Many public sector incurred huge losses but continued to function because it
is difficult to close a government undertaking even if it is a drain on the
nation’s limited resources.
d. This does not mean that private firms are always profitable. However, a loss-
making private firm will not waste resources by being kept running despite
the losses.
e. The need to obtain a license to start an industry was misused by industrial
houses; a big industrialist would get a license not for starting a new firm but
to prevent competitors from starting new firms.
f. Regarding protection, some economists hold that we should protect our
producers from foreign competition as long as the rich nations continue to
do so. Owing to all these conflicts, economists called for a change in our
policy.
Conclusion-
37
a. The progress of the Indian economy during the first seven plans was
impressive indeed.
b. Our industries became far more diversified compared to the situation of
independence. India became self-sufficient in food production, thanks to
green revolution.
c. Land reforms resulted in the abolition of the hated zamindari system.
However, many economists became dissatisfied with the performance of
many public sector enterprises.
d. Excessive government regulation prevented growth of entrepreneurship. In
the name of self-reliance, our producers were protected against foreign
competition and this did not give them the incentive to improve the quality
of goods that they produced.
e. Our policies were ‘inward oriented’ and so we failed to develop a strong
export sector. The need for reform of economic policy was widely felt in the
context of changing global economic scenario, and the new economic policy
was initiated in 1991 to make our economy more efficient.
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CHAPTER-3 LIBERALISATION, PRIVATISATION AND GLOBALISATION:
AN APPRAISAL
Important terms:
 Bilateral trade: Trade between two countries is known as Bilateral Trade.
 Multi-lateral trade: Trade between more than two countries is known as Multi-
lateral Trade.
 Tariff Barriers: The barriers which are imposed on imports to make them relatively
costly and to protect the domestic production, are known as Tariff Barriers.
 Non-Tariff Barriers: The barriers which are imposed on the amount of imports and
exports are known as Non-Tariff Barriers.
Important dates:
GATT (General Agreement on Trade and Tariff)- 1948
WTO (World Trade Organisation)- 1995
Demonetisation- 8th November, 2016
GST (Good and service Tax) - 1st July, 2017
Q.1 What do you mean by economic reforms?
Ans. Economic reforms refer to a set of economic policies directed to accelerate the pace of
‘growth and development’.
Q.2 What were the reasons/Need for making economic reforms?
Ans. The various reasons which raised the need for making major economic reforms in the
country:
1. Poor Performance of Public Sector:

i. In the 40 years period (1951-90), public sector was assigned the work for the
economic development of India,
ii. However, the overall performance of public enterprise was very
disappointing.
iii. Due to huge losses incurred by number of public sector, government
recognized the need for making necessary reforms.
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2. Deficit in Balance of Payment (BOP):

i. It arises when foreign payments for imports exceed foreign receipts.
ii. Even after imposing heavy tariffs, there was a sharp rise of imports.
iii. On the other hand, there was a slow growth of exports due to low quality
and high prices of Indian goods in the international market.
3. Inflationary Pressures:
i. There was a consistent rise in the general price level in the economy due to
increase in money supply and shortage of essential goods.
ii. As, to control inflation a new set of policies were required.
4. Fall in foreign exchange reserves:

i. Foreign exchange reserves fell to the lowest level and it led to the foreign
exchange crisis in the country.
ii. The government was also not able to repay its borrowings from abroad.
5. Huge burden of debts:

i. The expenditure of government was much higher than revenue.
ii. As a result, government had to borrow money from banks, public and
international financial institutions like IMF etc.
6. Inefficient Management:
i. The government was not able to generate sufficient revenues from internal
sources such as taxation, running of public sector enterprises, etc.
ii. Government expenditure began to exceed its revenue by such large margins
that it became unsustainable.
iii. Also, the foreign exchange borrowed from other countries and international
financial institutions was spent on meeting consumption needs.
Q.3 What was the new economic policy & how it can be broadly classified?
Ans. The New Economic Policy (NEP) was announced in July 1991. It consisted of
wide range of economic reforms. The main aim of the policy was to create a
more competitive environment in the economy and remove the barriers to entry
and growth of firms.
The New Economic Policy can be broadly classified into two kinds of measures:
1. Stabilization Measures: They refer to short-term measures which aim at:
40
I. Correcting weaknesses of the balance of payments by maintaining sufficient
foreign exchange reserves; and
II. Controlling inflation by keeping the rising prices under control.
2. Structural Reforms Measures: They refer to long- term measures which
aim at: I. Improving the efficiency of the economy; and
II. Increasing international competitiveness by removing the rigidities in
various segments of the Indian economy.
Q.4 What were the elements of New Economic Policy (NEP)?
Ans. The government initiated a variety of policies which fall under three heads:
1. Liberalisation
2. Privatisation
3. Globalisation
Q.5 What were the components of NEP?
Ans. Three broad components of New Economic Policy are:
i. The policy of liberalisation (L) in place of licensing (L) for the industries and trade.
ii. The policy of privatisation (P) in place of quotas (Q) for the industrialists, and
iii. The policy of globalisation (G) in place of permits (P) for exports and imports.
Thus, LPG was set to replace LQP in 1991.
LPG are the supporting pillars, on which the structure of new economic policy of our
Government has been erected and implemented since 1991. These are discussed in brief
below:
Main policies of New Economic Policy
Liberalisation Privatisation Globalisation

Q.6 What do you mean by Liberalisation?
41
Ans. Liberalisation means removal of entry and growth restrictions on the private sector.
• Liberalisation involves deregulation and reduction of government controls and

greater autonomy (freedom) of private investment, to make economy more
competitive.
• Under Liberalisation, business is freely allowed to run on commercial lines.
Q.7 What was the purpose of Liberalisation?

• It was done to unlock the economic potential of the country by encouraging private
sector and multinational corporations to invest and expand.
• To introduce much more competition into the economy and creating incentives for
increasing efficiency of operations.
Q.8 What were the economic reforms under liberalization?

Ans.Liberalisation included the following reforms:-
i. Industrial sector reforms
ii. Financial sector reforms
iii. Tax reforms
iv. Foreign exchange reforms
v. Trade and investment policy reforms
i. Industrial Sector Reforms:
The various measures under industrial policy reforms include:
1. Reduction in Industrial Licensing:

• The new policy abolished industrial licensing for all the projects, except for a
short list of industries like, liquor, defence equipment’s, industrial explosives,
etc.
• No license were needed to set up new units or to expand or diversify
business.
• Only industries related to security and strategic considerations needed
licensing.
2. Decrease in role of Public sector:

• The striking feature was the substantive reduction in the role of the public
sector in the future industrial development of the country.
• The number of industries reserved for the public sector was reduced from 17
to 3 industries i.e.
(i) Defence equipment’s,
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(ii) Atomic energy generation, and
(iii) Railway transport.
3. De-reservation under small-scale industries:

• Many goods produced by small scale industries have now been de-reserved.
• The investment ceiling on plant & machinery for small undertakings
enhanced to rupees one crore.
• In many industries, the market was allowed to determine the prices through
forces of the market (and not by directive policy of the government).
4. Monopolies and Restrictive Trade Practices (MRTP) Act:
 Earlier production capacity was linked with licensing.

 Now, freedom from licencing implied freedom from capacity constraints.
 What to produce and how much to produce’ was now a matter of
producer’s choice depending on market conditions.
5. Freedom to Import Capital goods:
 Liberalisation also implied freedom for the industrialists to import capital

goods with a view to upgrading their technology.
 Permission was no longer required from the government to enter into
international agreements for the import of technology.
ii. Financial Sector Reforms:
The reforms introduced under financial sector are:
1. Change in Role of RBI:

i. The role of RBI was reduced from regulator top facilitator of financial
sector.
ii. As a result, financial sector was allowed to take decisions on many
matters, without consulting the RBI.
2. Origin of Private Banks:
i. The reforms policies led to the establishment of private sector banks,
Indian as well as foreign.
ii. For ex: Indian banks like ICICI and foreign banks like HSBC increased
the competition and benefited the consumers through lower interest
rates and better services.
3. Increase in limit of Foreign Investment:
i. The limit of foreign investment in banks was raised to around 51%.
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ii. Foreign institutional investors (FII) such as merchant bankers, mutual
funds and pension funds were now allowed to invest in Indian
financial markets.
4. Ease in Expansion Process:
Banks were given freedom to setup new branches (after fulfilment of certain
conditions) without the approval of the RBI.
iii. Tax Reforms/fiscal reforms:
Taxes are of two types-
• Direct Taxes:
i. They consist of taxes on incomes of individual as well as profits of
business refer enterprises.
ii. For example, income tax and corporate tax.
• Indirect taxes:
i. This refer to those taxes which affect the income and property of
persons through their consumption expenditure.
ii. Indirect taxes are generally imposed on goods and services.
iii. For example, Goods and Services Tax (GST).
The major tax reforms made are:
1. Reduction in Taxes:
i. Since 1991, there has been a continuous reduction in income
and corporate tax as high tax rates were an important reason for
tax evasion.
ii. It is now widely accepted that moderate rates of income tax
encourage savings and voluntary disclosure of income.
2. Reform in Indirect taxes:
Considerable reform have been made in indirect taxes to facilitate
establishment of common national market for goods and commodities.
3. Simplification of Process:
In order to encourage better compliance on the part of taxpayers, many

producers have been simplified.
GST:
The goods and service tax act was passed in the parliament on 29 th march, 2017 to
simplify and introduced a unified indirect tax system in India. The Act came into
effect on 1st July, 2017. This is expected to generate additional revenue for the
government, reduce tax evasion and create ‘one nation, one tax and one market’.
iv. Foreign Exchange Reforms:
44
The important reforms made in the foreign exchange market are:
1. Devaluation of Rupee:
i. Devaluation refers to reduction in the value of domestic currency by the
government.
ii. To overcome Balance of Payments crisis, the rupee value was devalued
against foreign currencies implying that a US dollar or British pound can buy
more goods in the Indian Market which led to an increase in the inflow of
foreign exchange.
2. Market Determination of Exchange Rate:
i. The government allowed rupee value to be free from its control.

ii. As a result, market forces of demand and supply determine the exchange
value of the Indian rupee in terms of foreign currency.
v. Trade and Investment Policy Reforms:
The reforms in the trade and investment policy was initiated-
• To increase the international competitiveness of industrial production.

• To promote foreign investments and technology into the economy.
• To promote efficiency of local industries and adoption of modern technologies.
The important trade and investment policy reform include:
1. Removal of Quantitative restrictions on Imports and Exports:

Under new economic policy, quantitative restrictions on imports and exports
were greatly reduced.
2. Removal of Export Duties:
Export duties were removed to increase the competitive position of Indian
goods in the international markets.
3. Reduction in Import Duties:
Import duties were reduced to improve the position of domestic goods in the
foreign market.
4. Relaxation in Import Licensing System:
i. The Import Licensing was abolished, except in case of hazardous and

environmentally sensitive industries.
ii. This encouraged domestic industries to import raw materials at better
prices, which raised their efficiency and made them more competitive.
Q.9 What do you mean by privatisation?
 Privatisation means transfer of ownership, management and control of public sector

enterprises to the entrepreneur in the private sector.
45
 The main purpose of privatisation is to improve financial discipline and facilitate
modernization.
Privatisation can be done in two ways-
• Transfer of ownership and management to private sector.

• Disinvestment- disinvestment refers to privatization of the public sector
undertaking (PSU) by selling off part of the equity of PSU’s to the public.
Q.10 Examine the need for Privatisation?
 Need for privatisation was felt mainly because of poor performance of PSUs.
 Through the spread of PSUs that the India could diversify its industrial base
between the period 1951-1991.
 The Indian economy underwent a structural transformation: people started
shifting from agriculture to industry as their source of livelihood, and there was a
gradual increase in the percentage contribution of industry to GDP.
 In efficiency and corruption had become so rampant in PSUs that their
privatisation was considered as the only remedy.
 In 1991, the government decided to phase out public enterprises by selling its
equity to the private entrepreneurs. Privatisation was to replace public
ownership of a large number of enterprises.
Q.11 What are the obvious gains & imperative losses of Privatisation?
Obvious Gains:-
 Privatisation excepts private enterprises to work in a competitive environment-
both domestic as well as international. Competition brings up-gradation and
modernisation. These are the essential conditions of growth and development.
 Privatisation promotes diversification and expansion of production. Unlike PSU’s
private enterprises invariably generate high profits.
 Privatisation promotes consumer’s sovereignty. Higher degree of consumers’
sovereignty implies wider choice and better quality of life.
Imperative Losses:
 Socialistic pattern of the society (in which ‘social interest’ is accorded top
priority) is left to survive only as theoretical possibility.
 Privatisation encourages the free play of market forces. But in the process, goods
are produced only for those who have the means to buy them.
 When prices rise (which is an obvious tendency in a system driven by the free
play of market forces), weaker sections of the society suffer deprivation.
Q.12 What is meant by Globalisation?
46
Globalization means integrating the national economy with the world economy through
removal of barriers on international trade and capital movements.
Q.13 What is the aim of Globalisation?
 It aims to create a borderless world and made the global markets more flexible.
 It is a complex phenomenon as it aims to transform the world towards greater
interdependence & integration.
 It involves creation of networks and activities transcending economic, social and
geographical boundaries.
Q.14 What were the policy strategies that promote Globalisation of the Indian Economy?
Ans. Following are the policy strategies that promote globalisation of the Indian economy:
1. Increase in equity limit of foreign Investment:

 Equity limit of foreign capital investment has been raised from the initial 40%.
It now ranges between 51 to 100 percent.
 Export trading houses have also been allowed foreign capital investment up
to 100 percent.
2. Partial convertibility:
 Partial convertibility refers to the sale and purchase of foreign currency (for
foreign transactions) at the market price.
 To achieve the objective of globalisation, partial convertibility of Indian rupee
has been allowed for the following transactions:
i. Import and export of goods and services,
ii. Payment of interest or dividend on investment,
iii. Remittances to meet family expenses.
3. Reduction in Tariffs:
In order to encourage competitiveness, tariff barriers have been withdrawn on most
goods are traded between India and rest of the world.
4. Withdrawal of Quantitative Restrictions:

The quantitative restrictions on all import items have been totally withdrawn.1
Q.15 What were the impact made by the Globalisation?
Ans.
1. The New Economic Policy prepared a specified list of high technology and high
investment priority industries, in which automatic permission will be available for
foreign direct investment up to 51 percent of foreign equity.
2. Automatic permission is provided in high priority industry upto a sum of rupees 1
crore and no permission is now required for hiring foreign technicians or for testing
indigenously developed technology abroad.
47
3. Rupee was devalued in July 1991 by nearly 20 percent to stimulate exports,
discouraged imports and raised the influx of foreign capital.
4. To integrate Indian economy with world, union budget 1992-93 made Indian rupees
partially convertible and then the rupee was made fully convertible in 1993-94
budget.
5. A new five year export-import policy (1992-97) removed all restrictions and controls
on the external trade and allowed market forces to play a greater role in respect of
exports and imports.
6. In order to bring the Indian economy within the ambit of global competition, the peak
rate of customs duty has been reduced to a considerable extent i.e. from 250 percent to
10 percent in 2001-2008.
Q.16 The process of Globalisation has produced positive as well as negative result.
Comments.
Ans. The process of globalisation through liberalisation and privatisation policies, has
produced positive as well as negative results, both for India and other countries.
POSITIVES:-
Globalisation resulted in:
• Greater access to global markets.

• Advanced technology
• Better future prospects for large industries of developing countries to
become important players in the international area.
• Gains from the sharing of ideas/ skills/ technologies across national borders.
NEGATIVES:
Globalisation has been criticised by some scholars because according to them:
• Benefits of globalization accure more to developed countries as they are able

to expand their markets in other countries.
• It comprises the welfare and identify of people belonging to poor countries.
• Market driven globalization increases the economic disparities among
nations and people.
Q.17 Discuss the concept of outsourcing. Name some of the services, which
being outsourced to India by the developed countries.
Ans. Outsourcing refers to contracting out some of its activities to a third party
which were earlier performed by the organization.
• It is one of the important outcomes of the globalization process.
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• Indian has become a favourable destination of outsourcing for most of the
MNC’S because of low wage rates and availability of skilled manpower.
• Some of the services outsourced in India by the developed countries include:
 Voice-based business process (BPO or Call centres)
 Record keeping
 Accountancy
 Banking services
 Music recording
 Film Editing
 Book transcription
 Clinical advice etc.
Q. Do you think outsourcing is good for India?
i. It generates employment opportunities in the domestic country.
ii. It contributes to GDP Growth
iii. It contributes to forex reserves.
WTO (World Trade organization)

• The WTO is an intergovernmental organization that is concerned with the
regulation of international trade between nations. It has 164 member states.
• WTO was founded in 1995 as the successor organization to the GATT.
(General Agreement on Trade & Ta riff)
• It is the largest international economic organization in the world.
• WTO agreements cover trade in goods as well as services, to facilitate
international trade.
• WTO agreements cover trade in goods as well as services, to facilitate
international trade.
• WTO intends to supervise and liberalise international trade.
Q.18 What are the major Functions of WTO?
Ans. Functions:
• To facilitate international trade through removal of tariff as well as non-tariff

barriers.
• To establish a rule based trading regime, in which nations cannot place
arbitrary restrictions on trade.
• To enlarge production and trade of services
49
• To ensure optimum utilization of world resources
• To protect the environment.
Q.19 Should India be a member of WTO?
Some scholar are of the view that there is no use for a developing country like
India to be a member of WTO. Acc. to them
- Major volume of international trade occurs among the developed nations.

- Developing countries are being cheated as they are forced to open up their
markets for developed countries and are not allowed access to market of developed
countries.
Q.20 State few arguments in favour or in against of New Economic Policy (NEP).
NEP created mixed reactions at different levels. Let us discuss in favour or in
against of NEP:-
In Favour of NEP:
I. Increase in rate of Economic Growth-

 The growth in GDP was 5.6% during 1980-91 .During 2018-19, growth in
GDP is estimated at 7.2%. The growth is mainly driven by the growth in
the service sector.
 Overall level of economic activity has trended up as indicated by GDP
growth.
II. Inflow of Foreign Investment-
• The opening up of economy has led to the rapid increase in foreign
direct investment (FDI).
• The foreign investment (FDI and Foreign Institutional Investment)
increased from about US & 100 million in 1990 to US $ 73.5 billion in
2014-15.
• The ‘MAKE IN INDIA’ INITIATIVE IN September 2014, has further
liberalized FDI inflow in India increased by 48%.
III. Rise in Foreign Exchange Reserve-

• India is one of the largest foreign exchange reserve holder in the world.
• Foreign exchange reserves has increased from about US & 6 billion in
1990-91 to about US & 321 billion in 2014-15.
• Good amount of forex reserves enhances economic confidence of the
global investors in the Indian markets.
IV. Rise in Exports-
50
India experienced considerable increase in exports of auto parts, engineering
goods, IT software & textile.
V. Control on Inflation-
 Increase in production tax reforms and other reforms helped in
controlling
 The annual rate of inflation reduced from peak level of 17% in 1991 to
around 5.48% in 2015-16 whereas normally it is 6.5%.
VI. Increase in role of Private Sector-

 This has been a matter of great relief to the government in view of the
facts that:
i. Domestic economy was not generating enough of surplus for re-
investment, and
ii. Indigenous technology was getting obsolete.
 Abolition of licensing system & removal of restrictions on entry of
private sector, have enlarged the area of operation of private sector.
VII. Consumer’s Sovereignty:

 Consumer’s sovereignty has expanded over time as a large variety of
goods and services from the diverse global markets are now within the
easy reach of the buyers.
 Producers are widely responding to the consumers’ choice and
preference.
In against of NEP:
I. Growing Unemployment-
Though GDP growth rate has increased in reform period but such growth failed
to generate sufficient employment opportunities in the country.
II. Neglect of Agriculture-

 Slow growth of agricultural sector must ultimately hinder the process
of growth of the industrial sector as well.
 Agriculture sector is an important source of raw material for the
industrial sector.
 Agricultural sector is the principal source of labour supply to the
industrial sector, and
51
 Agricultural sector is a significant source of demand for the industrial
products like tractors and thrashers.
III. Low level of Industrial Growth-
Industrial growth recorded a slow down due to the following reasons-
- Cheaper imported Goods-
 Due to globalisation, cheaper imports replaced the demand for
domestic goods and domestic manufacture started facing
competition from imports.
 Eg: cheaper Chinese goods pose a big threat to Indian
manufacturers.
- Lack of Infrastructure facilities-
Infrastructure facilities including power supply have remained
inadequate due to lack of investment.
- Non-tariff barriers by developed countries-
 All quota restrictions on exports of textiles and clothing have been
removed from India.
 Although some developed countries, like USA have not removed
their quota restrictions of textiles from India.
IV. Ineffective Disinvestment Policy-
 The government has always fixed a target for disinvestment of Public
Sector
Enterprises (PSEs).
 The disinvestment policy of government was not successful because
Assets of PSEs were undervalued & sold to private sector.
 Disinvestment were used to compensate shortage of govt. revenues
rather than using it for the development of PSEs & building social
infrastructure in the country.
V. Cultural erosion:
Globalisation has also led to cultural erosion in the Indian society. Following
are some significant observations in this context.
 Economic prosperity has taken a lead over all other parameters of life.
 Everybody wants to be economically independent and well-off,
regardless of his responsibility towards the family or the society.
 Loyalty towards the family and loyalty towards the society which used
to be the strongholds of the Indian social culture are being discarded.
VI. Spread of Consumerism-
 The new policy has been encoveraging a dangerous trend of
consumerism by encouraging production of luxuries & items of superior
consumption.
52
 The Indian society is adapting itself to the western culture of spending
through borrowing.
 This may expand size of the market for the traders and the
manufacturers, but certainly enhances vulnerability of the households
as consumers.
VII. Unbalanced growth-
 Growth has been concentrated only in some select areas in the services
sector rather than vital sectors, which provide livelihood to millions of
people in country.
 All MNC’s are focusing only on urban areas, where they find conductive
infrastructural facilities. This has further widened the ‘rural-urban gulf’.
 Economic and social dualism are always a big treat to the process of
growth and development.
GST (Goods & Service Tax)-
• The goods and service tax Act was passed in the Parliament on 29 th March,
2017 & came into effect on 1 July, 2017.
• It is a comprehensive, multi-stage, destination-based tax that is levied on every
value addition.
• It has been identified as one of the most important tax reforms post-
independence.
• The govt. of India implemented GST on credo ‘One Nation One Tax’
• It has replaced 17 Indirect taxes and 23 cesses of the centre and the states,
thereby eliminating the need for filling multiple returns & assessments
• it is charged at each stage of value addition.
• The last dealer in the supply chain passes on the added GST to the consumer,
making GST a destination based consumption tax.
Types of Taxes under GST-
1) Central Goods & Services Tax (CGST): It is the GST levied on the ‘Intra-state’ supply of
goods & services by centre.
2) State Goods & Services Tax (SGST): It is the GST levied on ‘Intra-state’ supply of
goods & services by state (including Union Territories with legislature).
3) Integrated Goods and Service Tax (IGST): It is the GST levied on ‘Inter-state’ supply of
goods or services and in collected by the centre. IGST is equal to the sum total of
CGST & SGST.
Input Tax Credit under GST-
53
Input tax credit means reducing the taxes paid on inputs from taxes to be paid
on output. When any supply of services or goods are supplied to a taxable
person, the GST charged is known as Input Tax.
Q.21 What are the benefits of GST?
1. Reduction in overall tax burden.

2. No hidden taxes.
3. Development of a harmonized national market for goods & services.
4. Higher disposable income in hand, education & essential needs.
5. Customers to have wider choice.
6. Increased economic activity.
7. More employment opportunities.
GST Council-
• GST council is a constitutional body for making recommendations to the
union, state govt. on issues related to Goods & Services tax.
1. Constitution: As per Article 279A of the amended constitution, the
GST council which will be a joint forum of centre and states, consists of – -
- Chairperson: Finance Minister

- Vice Chairman : Chosen amongst ministers of State
-Members: MOS (Finance) and all ministers of finance taxation of each
state.
2. Quorum: 50% of total no. of Members of goods and services tax council shall
constitute quorum at its meeting.
3. Majority required to taking Decisions-
i Every decision of GST council shall be taken at a meeting by a
majority of not less than 75% of weighted votes of the members
present & voting.
ii Vote of the central govt. shall have a weightage of one-third of total
votes cast, and
iii Votes of all State govt, taken together shall have a weightage of two
thirds of total vote caste, in that meeting.
SOME FACTS ABOUT GST:
Demonetisation:-
 Demonetisation is the act of removing a currency unit of its status as Legal

Tender.
54
 On the 8th of November, 2016, it was decided to demonetise high value currency
notes of denomination of Rs 500 and Rs 1,000.
 These notes accounted for almost 86% of the country’s cash supply.
 The aim of demonetisation was to curb corruption, counterfeiting the use of high
denomination notes for illegal activities and especially the accumulation of black
money.
Q.22 What are the features of Demonetisation?
 Tax administrative measures:-

Demonetisation is viewed as a ‘Tax Administration Measure as Cash holdings
arising from declared income was readily deposited in banks and exchanged for
new notes.
 Reduction in Tax Evasion:-
Demonetisation is also interpreted as a shift on the part of the government
indicating that Tax Evasion will no longer be tolerated or accepted.
 Channelizing savings into the formal financial system:-
o Most of the cash deposited in the banking system is bound to be
withdrawn.
o But, some of the new deposits scheme offered by the banks will continue
to provide a base loans, at lower interest rates.
 Cash-less economy:-
Demonetisation also aims to create a less-cash or cash-lite economy, i.e.,
channeling more savings through the formal financial system and improving tax
compliance.
55
Chapter-4 poverty
Q.1 What is poverty?
Ans. Meaning:
1. Poverty is the inability of a person to fulfil a minimum requirements of life.

2. The minimum requirements are-
a) food,
b) clothing,
c) housing,
d) education
e) health facilities
Q.2 Who are considered as poor?
Ans. Poverty has been divided into two parts/categories:
I. Poor in urban area

1. Poor in Urban Area- In urban area, poor people includes-
o push cart vendors,
o rag pickers,
o street cobblers,
o Beggars, etc.
2. They possess few assets & resides in kutcha house with walls made of mud, roofs
made of grass, bamboo & wood.
i. Poor in rural areas includes-
a) landless agricultural labourers,
b) cultivators, etc.
ii. They are engaged in variety of agricultural jobs and labours engaged in Non-
Agricultural jobs.
iii. Many rural people do not get even two meals a day.
Characteristics of Poors-
I. Poor Health-
a) Poor people are generally physically weak due to ill health, disability or
serious illness.
b) Their children are less liable to survive.
II. Hunger, Starvation & Malnutrition-
a) Starvation & hungers are the basic problems of the poor people.
b) Malnutrition is also high among the poor.
III. Lack of Electricity & water facilities-
a) Poor households do not have excess to electricity or even safe drinking
water.
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b) Their primary cooking fuel is firewood cow dunk cakes.
IV. Gender Inequality- Gender inequality prevails within the family in regards to
participant of gain full employment, education & in decision making.
V. Bigger Families-
a) The poor families are bigger in size which makes their economic conditions
worst.
b) They don’t have excess to meet their basic requirements of life.
VI. Debt-Trap-
a) They borrow money from money lenders to carry out their basic activities.
b) Money lenders charge high rate of interest which push them into the
chronic in debtness.
VII. Limited Economic Opportunities-
a) They have very limited economic opportunities due to lack of literacy and
skills and to which they face unstable employment.
b) They are not able to negotiate their legal wages from employers and are
exploited.
Ques:3 What are the measures of poverty?
Measures
of Poverty
Relative Poverty Absolute Poverty
Q.4 What is Relative Poverty?
a) Relative Poverty refers to the poverty of people in comparison to other people,

regions or nations.
b) For eg- If Shilpi has lower income as compare to shahrukh then, we can say that
shilpi is relatively poor.
c)
Q.5 What are the importance of relative poverty?
Or
How relative poverty is important?
Ans. It helps in understanding the relative positions of different segments of the
population.
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Q.6 What is the limitation of Relative Poverty?
Ans. Limitation:
a) It only reflects the relative position of different segments of the population in the
income hierarchy.
b) It does not consider how poor a person is or whether he is deprived of basic
minimum requirements of life or not.
Q.7 What do you mean by Absolute Poverty?

Ans.
i. Absolute poverty refers to the total no. of people living below poverty line.
ii. For eg: around 22% of India’s population is below poverty line according to
absolute measure.
Ques: What is the importance of absolute poverty?
Ans. In countries like India, the concept of absolute poverty is used to measure the
number of poor people.
Ques: What is the limitation of absolute poverty?
Ans.
i. The method of “Poverty line” used to measure absolute poverty which does
not differentiate between the very poor and the other poor.
ii. Moreover it does not consider social factors that generate and are
responsible for poverty, like illiteracy etc.
Q.8 What do you mean by poverty line how it is determined?

• Poverty line refers to a cut-off point (usually measures in terms of per capita
expenditure) which divides people of a region as poor or non-poor.
• In India, person who spent Rs816 on consumption in rural areas & Rs 1000 in urban
areas per month are treated as those below the poverty line.
• People having income below the poverty line are called poor & people having income
above the poverty line are called non-poor.
Determination of Poverty Line- Poverty is determined by MPCE Method
(Monthly per capita income.
1. Minimum Calories Intake- The planning commission has defined poverty line
on the basis of recommended nutritional requirements of –
 For the rural areas: 2400 calories per person per day for rural areas
 For the urban areas: 2100 calories per person per day in urban areas.
 High calories intake has been fixed for rural areas because the rural
workers has to do greater physical work than in urban workers.
2. Monetary value of Minimum Calories Intake- Planning commission has set
minimum monthly per capita consumption expenditure (MPCE) in 2011-12
is-
58
 For rural area: Rs816 per person
 For urban areas: Rs 1000
3. Poverty line divides the poor from the non-poor-
There are many kinds of poor-
POOR
ABSOLUTE POOR VERY POOR POOR
Similarly, there are various kinds of non-poor-
NON-POOR
Not so poor Very rich Upper Middle class
MIDDLE CLASS
This method of determining Poverty line is updated over time, to take care of
AbsoluteVery Poor Not so Middle Upper Rich Very MillionareBillinare

Poor Poor Poor Class Middle Rich
Class
POOR POVERTY LINE -POOR NON

changes in price levels.
Types of Poverty/ Poor-

There are mainly three kinds of poverty-
I. Chronic Poor- It includes people who are always poor & those who are usually poor.
II. Transient Poor- It may be classified as-
a) Churning Poor- who regularly in & out of poverty.
b) Occasionally Poor- who are rich most of the time & poor sometime.
III. Non-Poor- They are never poor.
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Q9. What are the types of two poor?
POOR
CHRONIC TRANSIENT NON-

POOR
Graphical Representation:
• Chronic Poor-
• Transient Poor-
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• Non-Poor-
Q.10 What are the reason for the people to critize poverty line?
The method (Monthly Per Capita Expenditure or MPCE) of determining Poverty

Line is criticized due to following reasons:
i. The method groups all the poor together and does not differentiate between
the very poor and the other poor.
ii. This mechanism is helpful in identifying the poor as a group to be taken care
of by the government. However, it is very difficult to identify the poor, who
need help the most.
iii. There are many factors, other than income and assets, which are associated
with poverty, like accessibility to basic education, health care, drinking water,
etc. which have been ignored.
iv. This method does not consider social factors that generate and are
responsible for poverty, like illiteracy, ill health, lack of access to resources,
discrimination or lack of civil and political freedoms.
Q.11 Is there any decrease in the poverty levels?

• However, it is argued by the economists that methodology followed to estimate the
poverty line and number of poor, are manipulated to arrive at the reduced figures of
the number of poor in India.
• Moreover, according to them, the poverty alleviation schemes of the government
should aim to improve human lives by reducing obstacles like illiteracy, ill health, lack
of access to resources, lack of civil and political freedoms. A person should be
healthy, well-nourished, knowledgeable and able to participate in the life of a
community.
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Q.12 How is Poverty Line Fixed in India:
Ans. Following observations relate to procedural details while fixing the poverty line India:
(i) In the estimation of consumption cut-off, only private consumption
expenditure is considered.
(ii) In private consumption expenditure, we consider not only food items but
non-food items as well.
(iii) For the consumption of food items, we work out per capita consumption of
calories. Frequency distribution is formed with different class intervals
showing the range of calorie consumption and the level of calorie
consumption. Higher class shows higher range of calorie consumption.
(iv) Frequencies are recorded against each class interval. Each frequency counts
the number of heads belonging to a particular consumption class.
(v) Finally head-count ratio is worked out showing poor and non-poor
(corresponding to the poverty line cut-off), separately for the rural and urban
areas. The ratio shows the percentage of population below poverty line.
Inter-State Comparison:
Here, following observations are of notable significance:
(i) The percentage of population below poverty line is different in different
states of India. (ii) It is reported to be highest in UP, Bihar, Odisha,
Chhattisgarh, Jharkhand, Manipur, Assam and Madhya Pradesh.
(iii) Nearly 29.4 per cent of population of UP, 33.7 per cent of Bihar 32.6 per cent of Odisha
and 31.7 per cent of Madhya Pradesh population is estimated to be living below the
poverty line.
(iv) In Punjab only 8.3 per cent of population is below poverty line.
(v) In Haryana 11.2 per cent and in Rajasthan 14.7 per cent of the population is living below
the poverty line.
Q.13 What are the causes of Poverty?

Ans. Main Reasons are:
I. Inequalities of Income-
 Unequal distribution of Income & Assets has also led to the main reason for
poverty in India.
 Rich is becoming richer day by day & poor is becoming poor day by day.
II. High Illiteracy rate-
 The weaker sections of the society have to take up low paid jobs due to lack
of knowledge.
 Most people of the society are not able to participate in emergent
employment opportunities as they do not have necessary knowledge &
skills to do so.
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III. Population Explosion-
 Rapid growth of population particularly among the poor is responsible for
the problem of poverty in the country.
 The risk in population is mainly due to fall in death rate.
 Total NY is spread over a large no. of people, the per capita income is bound
to be low.
IV. High level of Unemployment-
 A large section of urban poor in India are largely the rural poor who migrate
to urban areas in search of employment.
 Industrialization has not been able to absorb all these people.
 Those casual labours have limited skills, no job security, no assets & no
surplus to sustain them.
V. Inflation-
 The continuous rise in prices particularly of essential commodities like food
grains has added to miseries of the poor.
 Price are increasing continuously but the standstill in monthly income has
decreased the purchasing power of low income earners & resulted lowers
the standard of living.
VI. Low level of Economic Development-
 The Indian economy is highly underdeveloped due to related backwardness
of agriculture & industrial sectors.
 Due to slow pace of development nearly 25% of the population is still living
below the poverty line.
VII. Lack of Infrastructure-
 Economic and social infrastructure helps in the growth and development.
 Slow pace of growth and persistence of poverty are the obvious
consequences.
VIII. Outdated Social Institutions-
 The social structure of our country is full of outdated traditions and
institutions like caste system and joint family system.
 Such traditions and institutions obstruct dynamic change in the economy.
Growth rate is hampered and poverty is sustained.
Measures to Remove Poverty-
• Combating Poverty through GDP growth-

i. GDP growth is the ultimate solution to the problem of poverty.
ii. When the pace of the GDP growth exaggerated new opportunities of
employment are generated because of which More & more workers will find
employment in firms& factories.
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iii. Greater the employment more would be the growth process implying lesser
poverty.
• Combating poverty by improving the distribution of income- Poverty can be

combated by improving the distribution of Income through two measures.
I. Fiscal Measures- It refers to the policy of taxation & subsidies. It is required
that-
a) Government should give the importance to progressive tax structure
i.e., high taxes on rich while the poor are exempted.
b) The tax receipts of the govt. are used to subsidies poor sections of the
society. Subsidy should be offered on items like course cloths, course
grains & basic needs of the poor.
II. Legislative Measures-
 Legislative measures refers to minimum wages act, making it mandatory
for the employees.
 It also includes policies such as price floor for the purchase of farm
outputs.
 Law like right to education is another example of legislative measure to
enhance quality of life of poorer segments of society.
• Combating poverty through Population control-
o Indian experience shows that increase in National Income fails to be
reflected in quality of life of people, owing to rapid rise in population.
o Per capita income continues to be low because population is rising to
neutralize the rise in National income.
o Poverty can be removed only if growth rate of population is moderated, so
that increase in GDP is translated to increase in per capita GDP.
• Other measures enhancing quality of life of poor- The other measures includes-
 Development of Agriculture-
a) To remove poverty special efforts should be made to develop
agriculture. Agriculture should be mechanized & modernized.
b) Better seeds, means of irrigation, & composite fertilizers should be
used.
c) Small farmers should be given financial assistance.
d) Landless farmers should be given land.
 Eradication of Unemployment- Special measures should be taken to
eradicate unemployment-
a) The opportunities of employment in rural areas must be fully
explored.
b) Cottage industries & construction activities should be encouraged in
rural areas.
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c) Vocationalisation of education should be given a high priority to
tackle unemployment.
 Special focus on backward regions- Government should offer special
concessions & facilities to extremely backward regions like Odisha, Nagaland,
Bihar, UP, so as to encourage private investments.
 Labour intensive technique of production- India should adopt labour
intensive technique of production. It will raise the level of employment &
reduce the level of poverty.
 Provisions for minimum needs of the poor- Government should take
appropriate measures to meet minimum needs of the poor like supply of
drinking water, provisions of primary health centers, primary education, etc.
Ques:14 What are the measures/scheme adopted by government to remove

poverty.
Or
What are the poverty alleviation programmes?
Ans. Govt. alleviation programme
SELF EMPLOYMENT SCHEME WAGE EMPLOYMENT

SCHEME
 REGP 1) SGRY
 PMRY 2) NFFWP
 SJSRY 3) MGNREGA
 SGSY
1. Rural Employment generation Programme (REGP)-

 This programme was started by the government to create self-
employment opportunities in the rural areas and small towns.
 It was implemented by Khadi and village industries commission.
 Under this programme, one could get financial help in the form of bank
loans to set up small industries.
2. Prime Minister Rozgar Yojana (PMRY)-
Under this programme, the educated unemployed from low income families in
rural and urban areas were given financial help to set up their enterprise that
generated employment.
 PMRY generated 7 lakh micro-enterprises during the eighth Plan (1992-
97).
 By 2003-04, 03 million people got employment under this scheme.
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3. SGSY (Swarna Jayanti Gram Swarozgar Yojna)-

o To remove poverty from rural areas SGSY was launched in the villages
in Apr.1999.
o Under this programme a large number of small enterprises were
established in rural areas.
o In 2011-12, SGSY scheme was re-structured into national rural
livelihood mission.
o These enterprises were organised as individual enterprises as well as
collective basis as self help-groups.
4. SGRY (Sampoorna Gramin Rozgar Yojna)-

 SGRY was launched on 1st September, 2001.
 The main objectives of this Yojna are-
a) To provide employment opportunities to surplus workers.
b) To focus on development of Infrastructure.
c) To focus on the development of regional, economic & social
conditions.
d) This Yojna has set a target of creating 100cr man-day for labour.
5. Minimum Needs Programme- To raise the standard of living of the poor

minimum needs programme was launched. The programme covers primary
education, adult education, rural health, rural water supply, rural electrification,
rural housing &
ecological improvement of urban slums. This is expected to improve the quality
of life of poorer sections of the society.
6. Twenty Point Programme- A twenty point economic programme was launched

on 14Jan, 1982 with a view to eradicate poverty. This includes-
I. Increase in irrigation capacity.
II. Increase production of pulses & oil seeds
III. Minimum wages to agricultural workers
IV. Drinking water villages
V. Development of forest & gobar gas
VI. Setting up of primary health centers
VII. Family Planning
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7. SJSRY (Swarna Jayanti Shahri Rozgaar Yojna) –
 This Yojna was launched on Dec1, 1997.
 The objective of this Yojna is to provide self-employment or wage
employment to urban unemployed or under employed persons.
 It includes the following two programs-
I. Urban self-employment programme.
II. Urban wage employment programme. Out of the total expenditure of
this project 75% is to be borne by central government & 25% is to be
borne by state government.
8. MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) -

 Under this act all those who are willing to work at the minimum wage
are offered work for a minimum period of 100 days.
 Those seeking employment are to report in those rural areas where
the employment programme is launched.
 Under this scheme, 4.6 crore households were provided jobs in the
current financial year (as on 14 Jan, 2018).
9. National Food for work programme (NFFWP):

i. This programme was launched in 2004.
ii. The objective is to intensifying the generation of supplementary wage
employment.
iii. NFFWP was initially implemented in 150 most backward districts of
the country.
iv. The programme was implemented as a 100 percent centrally
sponsored scheme.
Ques: What are the critical evaluation of Poverty Alleviation Programmes?
The poverty alleviation programmes have been found unsatisfactory because of

the following reasons:
1. Lack of Resources: As compared to the magnitude of poverty, the amount of

resources arranged for these programs is not sufficient.
2. Unequal Distribution of assets: Due to unequal distribution of land and other

assets, the benefits from poverty alleviation programmes have been
appropriated by the non-poor.
3. Improper Implementation:
 These programmes depend mainly on government and bank officials
for their implementation.
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 corruption, lack of training, pressure from local leaders and non-
participation of local level institutions, resulted in improper
implementation of the programme.
4. Lack of Infrastructure: There was lack of infrastructural facilities, such as

a) schools,
b) road,
c) power,
d) telecom,
e) IT services, training institutions, etc. in the poverty stricken areas.
5. Lack of Active Participation of poor people:

 High growth rate alone is insufficient to reduce poverty.
 There is a need for active participation of the poor for effective
implementation of poverty alleviation programmes.
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Chapter-5 HUMAN CAPITAL FORMATION
Human Capital:
1. It refers to the stock of skill & expertise of a nation at a particular point

of time.
2. Workers of all types who are engaged or have the capacity & expertise
to be engaged in the process of production.
3. Eg. Engineers, doctors, profession etc.
Physical Capital - It includes all those inputs which are required for further
production like plant & machinery, buildings, machines, raw materials etc.
Difference between Physical Capital and Human Capital-
Basis Physical capital Human capital
Tangibility It is tangible & can be easily It is intangible & cannot be sold
sold in the market. in the market.
Depreciation It depreciate with passage of Depreciation in human can be
time. reduced by making investment
in education & health.
Mobility It is more mobility between It is less mobility between
countries countries as compare to
physical capital.
Separation Physical capital (machinery, Human capital (like skills, etc)
etc.) can be separated from cannot be separated from
its owner. owner.
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Q. What is Human Capital Formation?
I. It is the process adding to the stock of Human Capital over time who
have the skills, education and experience.
Sources of Human Capital Formation / Determinants of HCF -
SOURCES OF HCF
Expenditure Expenditure Expenditure the job

On Study
Programmes Migration
On education on health on information training for adults
II. It is associated with investment
1) Expenditure on Education –
• Expenditure on education is the most effective way of
raising a productive work and enables an individual to make good
living throughout his life.
• Most families decide to incure huge expenditure on
education even when they have to raise loans, reason being
return on such expenditure are substantially large.
• Individuals invest in education to increase their future
income and raise the living standard.
2) Expenditure on Health-
• A sound mind in a sound body is an old saying. Expenditure on
health makes a man more effective & therefore more productive.
• His contribution to the production process tends to rise & he
adds more to the GDP of the nation then a sick person.
• Expenditure on health is important to build and maintain
productive labour force and improve quality of life of people in
the society.
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3) Expenditure on Information-
• Information related to job markets & educational institutions
offering specialized skills in an important determinant of skill
formation.
• It involves amount spent on seeking information about
educational institutions, their educational standards and cost of
education.
• Information is necessary to make decisions regarding
investments in human capital as well as for efficient utilisation of
the acquired human capital stock.
4) On the Job- trainings-

• On the job trainings helps the workers to sharpen their
specialized skills. It enables them to raise the level of efficiency
which ultimately adds onto their productivity.
• Such training has the advantage that it can be provided fast and
without much cost.
• On-the-job-training may take different forms:
- Workers may be trained in the firm itself under the supervision
of a skilled worker; - Workers may be sent for off-campus training.
5) Study programme for Adults-
• Other than formal education at the primary, secondary &
University level at the government & NGO's organise study
programmes for adults to make them proficient in their working
areas.
• This enhances their productivity & serves as a source of human
capital formation.
6) Expenditure on Migration –
I. Migration contributes to human capital formation as it facilitates
utilisation of inactive skills of people or it facilitates better utilisation
of skills.
II. Migration involves cost of-
a. Transportation from one place to another.
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b. Living in different social environment. Yet people migrate because
the gains of migration (in terms of higher salaries) are greater than the
cost of migration.
III. Unemployed people from rural areas migrate to urban areas in
search of jobs.
Q. What is the role of Human Capital Formation?
1. Change in emotional & material environment of growth- Human Capital

formation generates a change in emotional & material environment of
growth.
a) Emotional environment becomes conducive to growth as people
tend to acquire growth oriented attitude and aspirations.
b) Material environment becomes helpful to growth as the societies
now possesses higher no. of trained & skilled person to
implement the plans of economic growth.
2. Innovative Skills-
1. Human Capital formation facilitates innovation, the undercurrent
of growth & development.
2. Larger the no. of skilled personnel greater the possibility
innovation in the areas of production & related activities.
• Education provides knowledge to understand changes in society
and scientific advancements, which facilitates inventions and
innovations.
• Similarly, the availability of educated labour force facilities
adaptation to new technologies.
3. Higher rate of Participation & equality-

1. By enhancing production capacities of labour force, human capital
formation induces greater employment.
2. This increases the rate of participation (% of labour participating
in the process of production).
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3. Higher the rate of participation greater is the degree of economic
& social equality in society.
4. Modernization of attitudes-
1. The knowledgeable, skilled and physically fit people are powerful
instrument of change in society.
2. Economic development of a country depends on the minds of the
people and their changing attitudes towards creating a will for
development.
3. Investment in human capital helps in changing mental outlook
and promotes development of the economy.
5. Control of Population Growth-

1. It has been observed that educated persons have smaller families
as compare to illiterate persons.
2. Spread of education is necessary to control population growth.
6. Improves Quality of Life-

1. The quality of population depends upon the level of education,
health of a person and skill formation acquired by the people.
2. Human capital formation not only makes people productive and
creative, but also transforms the lives of the people.
3. People start living and enjoying higher incomes and more
satisfying life.
Problems facing Human Capital Formation-
1. Rising Population-
1. Rising Population adversely affects the quality of Human Capital
because it reduces the per head availability of existing facilities-
a. Housing,
b. sanitation,
c. hospital,
d. Educations, etc.
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2. Reduce availability of the facilities leads to fall in the capacity to acquire
specialized skill & knowledge.
3. Brain-Drain-
1. Migration of persons born, educated & trained in India to develop
countries is a serious threat to the process of Human Capital
formation in the country.
2. The people who decide to migrate of persons of high caliber like
scientists, engineers, educationists, etc.
3. This describe as a problem of Brain Drain and also slows down the
process of human capital formation in the economy.
4. Low Academic Standards-

1. In our country to spread higher education many universities have
been opened, unmindful of their academic standards.
2. We have a large army of half-baked graduate & post-graduates
whose deficient skills only lowers the level of efficiency &
productivity.
5. Insufficient Resources-
1. The resources allocated to the formation of human capital
formation have been very less as compared to the required
resources.
2. Due to this reason, the facilities for the formation of human
capital have remain glossary inadequate.
6. Serious Inefficiencies-
1. There is a lot of wastage of society’s resources as capabilities of
educated people are either not made use are underutilized.
2. Massive illiteracy, non-education of many children, poor health
facilities are other inefficiencies, which have not been attended to
adequately and properly.
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Q. How is Education considered as an Essential Element of Human Resource
Development?
1. Meaning of Education-
1. Education implies the process of teaching, training & learning
(especially in schools or colleges.)
2. It improves knowledge & develop skills.
3. Education is the undercurrent of economic & social change. 2.
Importance / Objectives of Education-
i. Education produces responsible citizens.
ii. It develops science & technology
iii. It facilitates use of natural & human resource of all regions of the
country.
iv. It promotes cultural standards of citizen.
v. It develops human personalities.
vi. It extends mental horizon of the people.
vii. It helps economic development through greater participation of
the people in the process of growth and development.
3. Need for govt. intervention in education & health-
The need for government intervention in education & health primarily
arises because of the following reasons-
i. These sectors need huge investments with a very high fixed
expenditure.
ii. It difficult to expect private investors to invest in health&
education unless they are allowed to recover their huge costs
through high price of these services.
iii. People in poor country like India can’t afford high price for
education& health. As a result, these services would remain
beyond the reach of most people unless these are subsidized all
directly provided by the government.
Growth of Education Sector in India-

1) Expansion of General Education-
1. During the five years plan there is a serious expansion of
general education.
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2. The no. of educational institutions providing elementary
education.
3. This has increased roughly by five times & the no. of
students has increased ten-fold.
2) Elementary Education-
1. Elementary education covers from 1 to 8class (Primary&
Middle) in the age group of 6 to 14yrs.
2. The no. of primary & middle schools has considerably
increase.
3. Social and economic poverty is the principal cause of
educational backwardness.
3) Secondary & Senior Secondary Education-
1. In 1950-51, there were 7.4 thousands secondary & senior
secondary level schools with 15 lakhs students.
2. Certain schools were also established by the government to
impart modern education of good standard to talented
students of rural areas.
4) Higher Education-
1. After independence, higher education has shown a
convincing growth over time.
2. There are 799 universities in the country out of which 44 are
central universities.
3. There are 40 deemed to be universities.
5) Rural Education-
1. Rural areas have also witnessed expansion of education.
2. A national rural higher education council has been setup for this
purpose.
3. Under this council, 14 rural education institution have been
functioning.
4. Children of schedule caste & schedule tribes get free education
in all the states.
6) Total Literacy Campaign-
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1. National Literacy Mission was launched to render everybody
literate in the country.
2. This programme has now been recast as ‘Saakshar Bharat’ with
a central focus on female education.
3. The programme covers all those in the age group of 15 and
above.
4. It may be noted that there are 11crore illiterates in the country
between the age group of 15-25 years.
Q. How is Education still a challenge for the economy?

i. Gender biasness-
1. There is still a significant gender bias in offering
opportunities of education to male & female children.
2. Education system needs a sustainable change in the attitude
of the people.
3. The enrolment ratio is relatively low for females candidates
& their drop out ratio is considerably is high. ii.
Privatisation-
1. There is a growing trend toward privatization of education.
2. Being very expensive, private education has widen the gap
b/w access level for rich & poor.
3. There is almost a drought of educational opportunities for
poorer sections of the society.
iii. Low government expenditure on Education-
1. The government has failed to fulfill its commitment of
spending nearly 6% of GDP on education.
2. Actual expenditure has been around 4 to 5% only.
3. This points to the gap between what is intended or desired
and what is actually achieved.
iv. Low Rural access level-
1. There is a high degree of disparity of access to education.
2. The access level is considerably low for rural population as
compare to urbans.
v. Inadequate Vocationalisation-
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1. Education continues to be largely degree oriented.
2. Throwing millions of educated youth down to the corridors
of employment exchanges.
3. Vocationalisation of education is still a far cry.
vi. Large no. of Illiterates-
1. India harbours the largest no. of illiterates of the world.
2. Presently nearby 36crore people have estimated to be
illiterate.
3. This no. exceeds even the total population of most countries
in the world.
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Chapter-6 Rural Development
IMPORTANT TERMS:
1) Distress sale: it refers to a situation when the farmers are compelled to sell their
produce immediately after the harvest no matter how low the market price is.
2) Cooperative marketing: Cooperative marketing is a significant progressive step in the
context of agricultural market system.
3) Operation flood (white revolution):-
 It is a system of milk cooperatives, launched in 1970.
 The system requires the member farmers to pool their produce of milk for
collective sale in the market.
 Milk cooperatives in India have their epicentre in the state of Gujarat.
 It has proved to be an important non-farm area of income generation in the
rural areas.
4) Golden revolution:-
 It refers to a series of research, development and technology transfer
initiatives that increased production of horticultural crops (vegetables and
fruits) and honey.
 The period between 1991 to 2003 is known as the period of Golden Resolution
in India.
 The golden resolution is related to the production of honey and horticulture. It
is a part of important agricultural resolutions of India.
Rural Development-
1. It refers to an action plan for the social & economic growth attempting to improve
all the aspects of rural life.
2. The action plan is to focus on lingering & emergent challenges in rural areas.
Lingering challenges includes-
i. Rural Credit
ii. Rural marketing
RURAL DEVELOPMENT
SOCIAL DEVELOPMENT ECONOMIC

DEVELOPMENT
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Emerging challenges include-
i. Exploring options of sustainable

livelihood.
ii. The challenges of organic farming.
CHALLENES
Lighting challenges emerging challenges
Rural credit rural marketing livelihood organic

farming
Lingering challenges of Rural development-
i. Challenge of Rural Credit- Rural credit means credit for farming. Credit is the
lifeline of farming activities in the rural areas because-
a. Most of the farming families are small & marginal landholders & are
producing just enough for subsistence. They seldom generate surplus
for further investment. Hence, the need for credit is unavoidable.
b. The gestation lag between sowing & harvesting of the crops is quite
long which compounds the need for credit.
Types of Credit needs-
Credit Needs
Short term Medium term Long term
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Short-term Medium term Long-term
It is basically The loans are generally The period of such
required inputs, raised for a period loans ranging
raw materials. ranging between 12-5 between 5-20 yrs.
yrs.
The loans are This credit is required This credit is required
raised for a for: for:
period ranging a. Purchase of a. Purchase of
between 6-12
machinery. additional
months.
b. Constructing land.
fences. b. For carrying
For e.g.- credit c. Digging wells. out
required for permanent
purchase of improvements
seeds, fertilizers, on existing
pesticides etc. land.
Sources of Rural credit-

Sources
Non-Institutional sources institutional

sources
Non- institutional Institutional sources
sources
These accounted for These accounted for only
93% of the farmers in 7% of the credit needs of
the first five year plans. the farmers in the
beginning of first five year
but presently there has
increased to 66%.
These includes- These includes- government
landlords, village commercial Bank,
traders & money cooperatives, and regional
lenders. rural banks.
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Q. What do you mean by institutional agencies?
Ans. Institutional sources are established to provide adequate credit to farmers
at a cheaper interest rate.
Important Institutional Agencies offering Rural Credit in India-
i. Cooperative Credit Societies- These societies provide adequate credit to the

farmers at a reasonable rate of interest. These societies make sure-
a. To provide rapid& timely flow of credit to the farmers.
b. Elimination of money lenders as credit agencies.
c. To spread credit facilities across all regions of the country.
d. Provision of adequate credit in the areas covered by special
programmes of development.
Currently Cooperatives account for 16-17% of rural credit flow.
ii. State bank of India & other commercial bank-
a) The state bank of India was set up in 1955 with a focus on rural credit needs.
b) It is realised that rural credit needs could not met by credit cooperative
societies alone & hence, commercial bank should pay an important role.
c) This prompted nationalization of certain banks in 1969. The nationalized
commercial bank were directed to offer credit directly to farmers as well as
indirectly through cooperative societies.
ii. Regional Rural Banks & Land development banks-

a) RRB’s & land development banks were set up to promote credit supply
particularly in the remote rural areas & backward districts.
b) These banks operate at the district level.
c) These are under obligation to focus on credit needs of weaker section
of rural population.
iii. National Bank for Agriculture & Rural Development (NABARD) - NABARD is an
apex institution handling policy, planning & operations in the field of rural
credit & related economic activities. Its main functions are-
a) To serve as an apex funding agency for the institutions providing credit
in rural areas.
b) To take appropriate measures to improve credit delivery system.
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c) To coordinate the rural financing activities of all credit institutions &
maintain liaison with government of India.
d) To undertake monitoring & evaluation of projects refinanced by it.
Rural Banking- A Critical Evaluation
Some of the problems faced in rural banking are:
1. Sufficiency: The volume of rural credit in the country is still insufficient in comparison
to its demand.
2. Inadequate Coverage of institutional sources: The institutional credit arrangement
continues to be inadequate as they have failed to cover the entire rural farmers of the
country.
3. Less attention to poor or marginal farmers: Lesser attention has been given on the
credit requirements of needy (small and marginal) farmers. Also, well-to-do farmers
are getting more attention due to better credit worthiness.
4. Inadequate amount of sanction: the amount of loan sanctioned to the farmers is also
inadequate. As a result, farmers often divert such loans for unproductive purposes.
5. Growing Overdues: The problem of overdues in agricultural credit continues to be an
area of concern.
The basic reason for growing overdues is the poor repaying capacity of farmers.
i. Thus, the expansion and promotion of the rural banking sector has taken a
backseat after reforms.
ii. Except the commercial banks, other formal institutions failed to develop a
culture of deposit mobilization, lending to needy borrowers and effective loan
recovery.
To improve the situation:
 Bank need to change their approach from just being lenders to building
up relationship banking with the borrowers; and
 Farmers should also be encouraged to inculcate the habit of thrift
(saving) and efficient utilisation of financial resources.
Q. What is Agricultural marketing?
Agricultural marketing may be defined as a process that involves- assembling, storage,

processing, transportation, packaging, grading and distribution of different agricultural
commodities across the country.
a) Gathering the produced after harvesting: Farmers need to assemble their produce
on the farm after harvesting.
b) Processing the produced: After gathering, farmers need to do the further
processing of the produced.
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c) Grading the produced according to its quality: Farmers grade the produce
according to its quality.
d) Packaging the produced according to the buyer’s preference: Farmers pack their
produce in accordance to the buyer’s preference.
e) Storing the produced for future sale: They store the produce before it is finally
brought to the market for sale.
f) Selling the produced when the price is lucrative: Then at last, farmers sell their
produce when the price gets lucrative.
DEFECT OF AGRICULTURAL MARKETING

There are some defects in agricultural marketing:-
 Lack of transportation facilities
 Forced sales
 Numerous market changes
 Lack of credit facilities
 Lack of storage facilities
 Presence of middlemen
 Lack of standard weights & measures.
 Inadequate market information
Initiatives taken by government to improve marketing

system-
A. Cooperative Agricultural Marketing societies-
i. The government is encouraging the formation of cooperative agricultural
marketing societies.
ii. The aim of these cooperatives is to realise fair price for farmers products.
iii. The member of these societies find themselves better bargainers in the
market, getting better price of their produce through collective sale.
B. Provision of ware housing facilities-
i. With a view to avoid distress sale, the government is offering warehousing
facilities to the farmer.
ii. The central & state ware housing cooperations & the principles
government agencies offering storage space to the farmers.
iii. Storage helps the farmers to sell their produce at a time when market price
is lucrative.
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C. Subsidised Transport- Railways are offering subsidized transport facilities to the
farmers to bring their produce to urban market where they get a better deal.
D. Dissemination of Information-
i. Electronic media & print media are actively engaged in offering market
related information to farmers.
ii. The information is related to price behaviour in the market which helps the
famers in deciding how much to sell & when to sell.
E. MSP Policy-
i. MSP policy is an important step initiated by government to improve
agriculture marketing system.
ii. MSP is an assurance to the farmers that their produce would be purchased
by the government at the specified price.
iii. The farmers are free to sell their produce at a higher price than MSP in the
open market.
F. Regulated Markets-
i. Regulated Markets have been established with a view to protect the

farmers from the malpractices of sellers and brokers.
ii. Market system is made transparent with a strict vigil on the use of proper
scales and weights.
iii. These markets benefited to farmers as well as consumers.
Alternative Marketing Channels- A Ray of Hope

i. Emerging alternatives of agricultural marketing are a ray of hope to the
small and marginal farmers who have been silent sufferers at the hands of
middlemen.
ii. The states of Punjab , Haryana and Rajasthan are launching this channel
through ‘apni mandi’ , ‘big bazar’ and the state of Andhra Pradesh is
launching it through ‘Rythu Bazaars’ and the state of Tamil Nadu is
launching it through ‘Uzhavar Sandies’.
iii. It is hoped that, these systems of marketing grow in tandem with the
growth of national and multi-national retails.
Agricultural Diversification & Market risks-

Agricultural Diversification refers to reallocation of some of the firm production activity /
resources into new activities of crops.
Benefits of diversification:-
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i. It reduces the market risks as price of all crops may not drop at the same time.
ii. If one crop fetches low revenue than the other may fetch high.
iii. Hence, diversification helps stabilization of farm income by lowering the market
risk.
Diversification has two aspects-

Diversification
Diversification of crop production Diversification of production activity.
i. Diversification of Crop Production-

a) It implies a shift from single crop system into multiple cropping system
which means production of diverse variety of crop rather than one
specialized crops.
b) It would minimize the market risk arising due to price fluctuation & also
the risk occurring due to failure of monsoon.
ii. Diversification of Production Activity-
a) It implies a shift from crop farming to other areas of production
activity.
b) It is more significant to find sustainable livelihood and would also raise
the level of income as well as stabilizes it just because agricultural
sector is already overburdened.
Emerging Challenges of Rural Development-

A. Employment Outside agriculture-
Some options of employment other than agriculture are-
1) Animal Husbandry-
Animal Husbandry is that branch of agriculture, which is considered with
breeding, rearing and carrying for farm animals. It is also known as livestock
farming.
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 Under livestock farming, cattles, goats and fowls (duck, goose, etc.)
are the widely held species.
 India owns one of the largest livestock populations in the world.
 Livestock production provides increased stability in income, food
security, transport, fuel and nutrition for the family, without
disrupting other food producing activities.
 There are various problems in livestock sector too, i.e.
 Deficient veterinary care.
 Low productivity due to backward know how.
2) Fisheries-
i. Fisheries refers to the occupation devoted to the catching, processing
or selling of fish and other aquatic animals. Fisheries sector plays an
important role in the socio-economic development of the country.
ii. The fishing community depends almost equally or land sources &
marine source of fishes.
iii. In land sources includes- rivers, ponds, lake & seas. Together these
sources are called water bodies which are regarded as provider of
subsistence by the fishing community but fishing community is one of
the backward communities in the country.
iv. Some of the problems faced by these communities.
 Fishery technology is very outdated.
 Fishing communities are burdened with the debts.
 Low per capita earnings
3) Horticulture-
i. It is another alternative source of employment in rural areas. It is like
diversification of crop production.
ii. Horticulture crop includes- fruits, vegetables & flower beside several others.
iii. Presently India is the second largest producer of leading producer of
mangoes, bananas, coconuts, cashews & a varieties of spices.
iv. Horticulture is an emerging as an important means of sustainable living in
rural areas.
4) Cottage & Household Industries-
i. A cottage industry is a small scale industry is a small scale, decentralised
manufacturing business often operated out of a home rather than a purpose
built facility.
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ii. Cottage & Households industry have been a traditional source of non-farm.
The industry has been dominated by activities like spinning, weaving, dyeing
& bleaching.
iii. But now, with the growth of urban textile industry, these activities have been
hit hard in rural areas.
iv. Now, a day some new household activities like soap manufacturing, doll
making, mushroom cultivation & bee-keeping have emerged as alternative
sources of income generation.
5) Dairying:
Dairying is that branch of agriculture which involves breeding, raising and
utilisation of dairy animals for the production of milk and the various dairy
products processed from it.
i. Dairying is the business of producing, storing and distributing milk and
its products.
ii. The performance of the indian dairy sector over the last three
decades has been quite impressive.
iii. Due to the successful implementation of operation flood (white
revolution) India ranks first in the world in milk production. India’s
milk production increased from 17 million tonnes to 102.6 million
tons in 2006-07 and increased to 165.4 million tons in 2016-17.
iv. Meat, eggs, wool and other by products are also emerging as
important productive sectors for diversification.
B. Organic Farming & sustainable development –

• Organic farming is a system of farming which relies upon the use of organic inputs
for cultivation. Organic inputs indicates-animal manures & compost.
• It totally discards the use of chemical inputs like chemical fertilizers, insecticides &
pesticides.
• It is a system of farming that focuses on social health rather than plant health so
that farming becomes a long period sustainable process along with an eco-friendly
environment.
Advantages of Organic Farming-

1. Discards the use of non-renewable resources- Unlike conventional farming organic
farming does not use synthetic chemicals which are petroleum based. We all know
that petroleum is a non-renewable resource.
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2. Environment friendly- Organic farming is environment friendly, chemical fertilizers
pollutes the groundwater by raising the nitrate content. Nitrates are health hazards
& pollutes the environment. Organic farming discards the use of chemical
fertilizers.
3. Sustains Soil Fertility- Use of animal manures& composts helps in sustaining soil
fertility. On the other hand chemical fertilizers erode soil fertility accordingly.
Organic farming conducive to sustainable development of agriculture.
4. Healthier & Tastier food- Organic farming offers healthier & tastier food as
compare to conventional farming. According to the recent studies organically
growth food is nutritious than the food from chemical farming.
5. Inexpensive Technology for the Small and Marginal Farmers- Organic Farming
offers an inexpensive farming-technology to small and marginal farmers who
constitute the bulk of farming population in India. Conventional technology is to be
adopted as a package including HYV seeds, fertilizers, pesticides, insecticides,
besides good irrigation facilities.
It cannot be denied that organic farming offers lesser yield as compared to

conventional farming , and is therefore, not cost efficient. However, considering
the fact that organic foods are in high demand, higher product price is expected
to compensate for lower yield. Overall advantages of organic farming should
certainly make it more attractive proposition than conventional farming.
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Chapter-7 Employment: Growth, Informalisation and Other Issues
Ques: What do you mean by employment?
1. Employment is an activity which enables a person to earn means of living.

2. It refers to an arrangement by which a person earns income or means of
livelihood.
Ques: Who is Worker?
1) A worker is an individual who is engaged in some economic activity to earn a

living.
2) A worker contributes to the process of GDP by rendering his productive
services.
3) for eg- Farmers, managers, labours, doctors, bankers, professors, etc.
Worker
Sel-employe
worker Hired
Casual workers Regular

Self-employed Workers-
I. These are those workers who are engaged in their own business or own profession.
For eg- a farmer working on his own farm, an entrepreneur working in his own
company.
Hired Workers- These are those workers who work for others, render their services to
others, & as a reward get wages / salaries. They may also be paid kind. For eg- teacher
working in a school, nurse working in a hospital.
Hired workers may be further categorized as-
i. Casual Workers- casual workers are the daily wagers. They are not hired by their
employers on a regular basis.
ii. Also, they are not given any social security benefits like provident fund, gratuity
or pension.
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iii. Casual workers are usually unskilled. For eg- a worker working at a construction
site.
iv. Regular Workers-
I. Those workers who are on the permanent pay role of their employers are
called as regular workers.
II. They are entitled to all social security benefits like pension, gratuity &
provident fund.
III. A regular worker is usually a skilled worker. For eg- an engineer working in a
factory.
Labour Supply, Labour Force & Work Force-
I. Labour Supply-
I. Labour supply refers to the amount of labour that the workers are willing to
offer corresponding to a particular wage rate.
II. it is measured in terms of man-hours of work.
III. For eg- a worker is able to work 10hrs a day but willing to work only 6hrs a
day at a particular wage.
II. Labour Force-
I. Labour Force refers to the no. of workers actually working or willing to work.
II. It is not related to wage rate.
Ques: Difference between labour supply & labour force?
Labour supply Labour Force
1) It refers to supply of labour 1) It refers to the number of persons

corresponding to different wage actually working or willing to work. it
rates. supply of labour is measured is not related to the wage rate.
in terms of man-days of work and is
always related to wage rate.
2) Supply of labour can increase or
decrease even when the number of 2) Because it is measured in terms of
workers remains constant. Because the number of persons (not in terms
the supply of labour can increase or of person-days), size of the labour
decrease even when the number of force increases or decreases only
workers remains constant. because when the number of persons
the supply of labour is measured in actually working or willing to work
terms of man-days or person-days: increases or decreases.
one person referring to 8 hours of
work.
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III. Work Force- Work Force refers to the no. of person actually working & doesn’t
account for those who are willing to work. (but not working)
• Work Force= Labour Force- No. of person not working but are willing to
work.
• No. of persons unemployed= Labour Force- Work Force.
• Rate of Unemployment=
No. of persons unemployed x 100
Size of labour force

• Participation rate= Work Force x 100
Total Population
● participation rate refers to the percentage of the population actually working.
Ques: What do you mean by Casualisation and administration?
Ans. Casualisation & Informalisation of Workforce-

Casualisation of the workforce refers to a situation when the % of casually hired
workers in the total workforce tends to rise over time. Our workforce is suffering &
increasing incidency casualisation because-
a. The bulk of the self-employed workers is found in rural areas.

b. But, the employment on their farms is only for the name sake, in fact, they
are disguisedly employed.
c. For further employment opportunities, these workers migrate to urban areas
but in that areas too, they get employment only as casual workers. This is the
story of unskilled workers leading to casualisation of employment.
Informalisation-
Informalisation of workers is defined as a situation where percentage of work force in

formal sector tends to decline & in informal sector tends to rise.
Employment is broadly classified as-
a. Formal sector employment.

b. Informal sector employment.
a. Formal Sector-
I. It refers to the organised sector of the economy & includes all the government which
hier 10 or more workers.
II. Those working in organised sector are called formal workers.
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b. Informal Sector-
I. It refers to unorganized sector of the economy & includes all such private enterprises
which hier less than 10 workers, besides farming & self-employed ventures.
II. Those working in the unorganized sector are called informal workers.
From the point of view of employment status, there are following differences b/w
these two-
Basis Formal sector Informal Sector
Meaning The workers working in The workers working in the

organised sectors. unorganised sector.
Social security These workers are entitled to These are not entitled to social
benefits social security benefits like security benefits.
provident fund, gravity,
pension, etc.
trade unions They can form trade unions. They cannot form trade unions.
Ques: What do you mean by unemployment and what are the types of unemployment?
Ans. Unemployment refers to a situation when people are willing & able to work at the
existing wage rate but are not getting any work.
Types of unemployment:
Unemployment
RURAL URBAN
Disguised Seasonal Industrial Educated

Rural Unemployment- It is dominated by disguised & seasonal unemployment.
Disguised Unemployment-
I. It occurs when the number of workers engaged in a job is much more than actually
required to accomplish it.
II. If one of them is withdrawn from that job, total production will not fall.
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III. Disguised unemployment is rampant in Indian agriculture.
The main causes are-
i. On account of joint family system farming families continue to work on family

land. No matter the actual no. of workers far exceed the required number.
ii. Per person holding size continues to shrink with the expansion of family size.
iii. Lack of job opportunities outside agriculture compels the people to work on
family farms which further increases the possibility of disguised unemployment.
Seasonal Unemployment-
1. It occurs because agriculture is a seasonal occupation. During off season the farm
workers are often out of job and they have no work to do.
2. The volume of seasonal unemployment depends upon the conditions and methods
of cultivation in different states.
3. besides agriculture there are many other seasonal activities in rural areas like sugar
cane in which workers remain occupied for a few months in a year. Rest of the
period, they remain unemployed.
Urban Unemployment- Unemployment in urban sector is placed on two categories-
1) Industrial Unemployment.
2) Educated Unemployment.
1. Industrial Unemployment- It includes those illiterate persons who are willing to work
in Industries, mining, transport, trade & construction activities etc. The principle
cause of industrial unemployment-
i. Rapid Rise in Population- Rise in population leads to rise in supply of labour.
ii. Concentration of industries into urban areas- Due to the concentration of
industries in the urban areas, rural people tends to migrate in the urban areas in
search of jobs but the industrial expansion has not been so significant to provide
employment to all the migrants.
2. Educated Unemployment- In India, the problem of unemployment among the
educated people is quite grave. This problem poses a serious threat to social peace and
harmony. The principle factors behind this problem are-
iii. Education system in India is largely degree oriented rather than be job oriented.
Hence, degree holders often fails to find jobs.
iv. Expansion of educational institution is not much as compare to the number of
people demanding it.
v. Increase in employment opportunities has significantly lacked behind the
increase in size of educated labour force.
Other Common types of Unemployment-
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1) Open Unemployment-
I. It occurs when a worker is willing to work, has the necessary ability to work
yet he does not get any work. He remains unemployed for full time & is
totally dependent on the other members of the family.
II. This type of unemployment is usually found among agricultural labourers,
educated persons & those who come from villages to urban areas in search of
jobs but fails to get any work.
2) Structural unemployment:
I. It occurs due to structural changes in the economy. It is mainly of 2 types-
a. Change in technology- as a result of which old technocrats are no longer
needed, they are rendered unemployed.
b. Changes in the pattern of demand- because of which certain industries are
closed down & workers are thrown out. In a country like India, a high degree
of structural unemployment exists both in rural & urban areas.
3. Under Unemployment- It is a situation in which a worker not get a full time job. He
remains unemployed for some months in a year or some hours every day. The condition of
unemployment is found-
I. When a person’s engaged in a part time work are prepared to do more
work than they are actually doing.
II. When income of the person increases after shifting to other occupation
from their existing occupation.
Under employment is of two kinds-
A. Visible unemployment:- In this case, people work lesser than the standard
hours of work in a day.
B. Invisible Underemployment- In this case, people work full time but the
income is not proportionate to their abilities.
4. Frictional Unemployment- It occurs due to imperfections in the mobility of labour
across different occupations one wishes to move from one job to another but in the process
of change may remain unemployed for some time. This is called frictional unemployment.
5. Cyclical Unemployment- It occurs due to cyclical fluctuations in the economy. Phases
of boom, recession, depression & recovery are typical characteristics of a market economy.
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Boom
Recession Recovery
Depression
i. Boom relates to high level of economic activity & accordingly a high degree of
employment.
ii. Recession is a phase where there is a liquidity crunch in the economy. Because of
which there is a slowdown in the production & a cult in the employment
opportunities.
iii. Depression is phase when aggregate demand decline staggering a cult in output &
employment.
iv. Recovery is a phase when economic activities starts picking up. Outputs starts
responding to increase in AD. Hence employment opportunities began to rise.
Ques: Bring Out some of the Causes of Unemployment?
1) Rapid growth of Population-

● Constantly rising population have been a grave problem in India. It is one of
the principle factors contributing to unemployment.
● it has not been possible to generate so many employment opportunities to
absorb the large growing labour force.
2) Slow Economic Growth-
● Indian economy is under-developed & its rate of growth is very slow.
● Slow growth rate fails to generate employment opportunities for rising labour
force which is much more than the available employment opportunities.
3) Agriculture – A seasonal occupation-
● Agriculture is under-developed in India.
So, offers seasonal employment.
● It is the primary occupation of our country & a large size of population
depend upon it. But its seasonal character does not provide stable jobs to the
farmers. They remain idle 3-4 months in a year.
4) Low Saving & Investment-
● There is scarcity of capital & even the scarce capital has not been optimally
used to eradicate unemployment.
● Bulk of the capital has been invested in large scale industries where there is a
high capital per unit of labour.
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5) Limited Mobility of Labour- Mobility of labour in India is very low. Owing to a
variety of family as well as social constraints, people are reluctant to move to far-
off areas even when jobs are available there.
6) Low Academic Standards-
I. The prevailing education system in India is full of defects as it fails to make

any provision for imparting technical and vocational education.
II. As a result, educated people are unable to meet the requirements of the firm.
7) Joint-family system
8) Lack of irrigation facilities etc.
Ques: What are the Consequences of Unemployment?
Ans. Consequence of unemployment:
Social Consequences-
i. Low Quality of Life- Unemployment lowers the quality of life implying a state
of perpetual suffering.
ii. Greater Inequality- Higher the degree of unemployment greater the extent of
inequality in the distribution.
iii. Class Struggle- Unemployment divides the society into have’s or have nots
accordingly there is a class conflicts that compounds the problem of social unrest.
iv. Social Unrest- Terrorism may be motivated by several other factors but the
contribution of self-desperation (on account of unemployment) is by no means
less significant.
Economic Consequences-
i. Loss of Output- There is a loss of output to the extent of man power resources is
not utilized. Unemployed person makes no contribution to output even if they
have the potential to do so.
ii. Non- Utilisation of man power- To the extend people are unemployed man power
resources of the country are not utilized. It amounts to social wastage.
iii. Low Productivity- Owing to disguised unemployment there is a low level of
productivity (output per worker). Low productivity implies low growth rate.
iv. Low Capital Formation- Living only as consumers & contributing nothing to
production, unemployed people only adds to consumption neither do they earn
nor do they save for investment accordingly rate of capital formation remains
low.
Ques: Give some Suggestions to remove Unemployment?
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i. Increase in Production-
● To increase employment, it is essential to increase production in agriculture
& in industrial sectors.
● Foreign trade should also encourage production of industries, minerals, &
plantations should be accelerated. Greater the production, greater is the
demand for labour.
ii. Educational Reforms- There is an urgent need for educational reforms in the
country. Emphasizes should be placed on vocational education. Educated persons must
develop the spirit of serving in villages, in the capacity of doctors, teachers etc. Engineers
should be given financial assistance to setup their own business.
iii. Control of population growth:-
I. The rapid growth rate of population should be slowed down, so that the
additional jobs created do not fall short.
II. it is necessary to adopt an effective and meaningful population control policy,
like family planning programmes.
iv. Accelerating growth of GDP:-
I. The aggregate employment problem can be solved through the
process of accelerated growth.
II. Growth rates of GDP between 8 % and 9 % are needed over the next
ten years, to achieve a significant improvement in the employment
situation.
v. Encouragement to small-scale enterprises and Creation of self-employment:
I. The small-scale sector needs to be encouraged through multiple initiatives
like liberal finance, infrastructural facilities and marketing of their products.
II. Government should provide various facilities like financial assistance, training
of skills, marketing of products, etc. to generate more self-employment
opportunities.
vi. Manpower Planning:
I. The future requirements of educated manpower should be forecasted and
accordingly, intake into different professional courses should be determined.
II. As a result, excess manpower in the market of educated labour will be
eliminated.
vii. Increase in Productivity
viii. High rate of Capital formation etc.
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Ques. What is the size of work force in India?
i. India has a work force of nearly 40cr. People.
ii. About 70% of the work force comprises of male workers, only 30% are female
workers.
iii. iii. Nearly 70% of the work force is found in rural areas, urban workforce is only 30%
of the total.
Ques - Why is the bulk of our workforce rural based?
Ans - This is because the bulk of the jobs are in rural areas. As more people are engaged in
farming & allied activities but the bulk of our GDP derive is not from the rural economy. As
people are mainly engaged in farming activities contributing less to GDP. It implies low
productivity of workers in rural areas. Low productivity implies low earning which is why
there is a wide spread poverty in rural areas.
iv. Female work force (out of the total) in rural areas is nearly 30% while it is 20% in urban
areas.
Ques - Why is the percentage of female workers low & lower still in urban areas?
Ans3- This is because of the following reason-

i. Female education in India is still a far cry, implying low opportunities for job.
ii. Among most families in urban areas, job work for women is still governed by
family decisions rather than individual’s own decisions. This implies that even the
available opportunities are not utilized.
iii. Higher employment among women in rural areas is because of widespread rural
poverty. Female workers are largely engaged in low paid & less productive jobs
but add to their family income.
Rate of Participation in India in Production Activity-

It refers to the participation of people in production activity as measured as the
ratio of workforce to total population of the country. The rate of participation in
India-
i. Rate of participation for urban areas is about 43.5% (15-16).

ii. Rate of participation for rural areas is about 53%.
iii. In urban areas, the rate of participation is about 69% for men & 16.2% for
women.
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iv. In rural areas, the rate of participation is about 77.3% for men & 26.7% for
women.
v. Overall rate of participation in the country is about 50.3%.
Ques: What are the Reason for Participation?
i. High dependency ratio- overall rate of participation is not very high. Implying not
many people are engaged in production activity. It results in high dependency
ratio in the country.
ii. High rate of participation but low level of productivity in rural areas- As more
people are engaged in farming & allied activities, but bulk of our GDP derive is not
from rural economy. As people are mainly engaged in farming activities
contributing less to GDP.
iii. High rate of participation of women in rural areas-Higher employment among
women in rural areas is because of widespread rural poverty. Female workers are
largely engaged in low paid & less productive jobs but adds to their family
income.
OTHER TERMS:
Occupational Structure- Occupational structure includes-
a. Primary Sector- Agriculture, forestry, fishing, mining, etc.
b. Secondary Sector- Manufacturing, construction, electricity, gas, water supply,
etc.
c. Tertiary Sector- Trade, transport, storage, banking, insurance, etc.
46% of our workforce is engaged in Primary sector, tertiary sector accounts
for 32% whereas secondary sector offers employment 22% of our workforce.
Self- employed & hired workers- Self-employment is higher in rural areas as
compare to urban areas. In urban areas, people look for skilled jobs in offices &
factories where as in rural areas family farms are the most attractive means of
employment.
Percentage distribution of workers according to Gender- Among men
around 51.6% are hired whereas among women around 60% are hired.
Jobless Growth-
● It is a situation when the level of output in the economy tends to rise owing
to innovative technology without any perceptible rise in the level of
employment. Jobless growth leads to chronic unemployment even when
there is rise in GDP.
● In poor countries like India, economic growth becomes meaningful only when
it is associated with greater employment opportunities. But, unfortunately
indian economy is experiencing more GDP through technology rather than
employment of labour. Hence, it is a situation of jobless growth.
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Ques: Why is self-employment a prominent source of livelihood in India?
➢ In India, self-employment is a significant source of livelihood because:
❖ Literacy rate is low, implying low acquisition of skill for wage jobs,
❖ owing to diverse social environment across different regions mobility
of workers is low, and
❖ India is an underdeveloped economy, generating less jobs owing to
low level of investment.
Government Policies and Employment Generation:

I. Government has taken many initiatives to generate acceptable employment,
ensuring at least minimal safety and job satisfaction.
II. Government provides Direct Employment by employing people in various
departments for administrative purposes.
III. Private enterprises provide raw material to government enterprises which
will also raise their output. As a result, the number of employment
opportunities in the economy will increase. This increase in employment is
Known as Indirect Employment by the government.
IV. Government has also implemented a number of Employment Generation
Programmes, like National Rural Employment Guarantee Act-2005, Prime
Minister’s Rozgar Yojna, Swarna Jayanti Shahri Rozgar Yojna, etc.
V. Skill India, Make in India, start-ups are some recently launched campaigns by
the government of India to generate opportunities of employment.
VI. These campaigns are yet to actualise into the models of growth and
development. However, one can hope that once these schemes become
operational, the Indian economy would generate abundant opportunities of
employment.
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Chapter-8 Infrastructure
Q.1 What is Infrastructure?
Infrastructure refers to support system of economic & social development of a country

without which economic growth & social development would only remain to be primitive.
Or
Infrastructure refers to all such activities, services & facilities which are needed to provide
different kinds of services in an economy.
It is broadly categorized as-
i. Economic Infrastructure.
ii. Social Infrastructure.
i. Economic Infrastructure-
1. It refers to such elements of support system which serve as a driving force
for production activity in the economy.
2. It includes infrastructure associated with energy, transportation &
communication.
• Availability of power supply would accelerate the pace of production activity.
• Abundant means of transport would facilitate movement of goods.
ii. Social Infrastructure-
1. Social infrastructure refers to such element of support system which serves
as a driving force for social development of a country.
2. It includes infrastructure associated with education, health & housing.
3. Social development refers to human resource development of a country & it
occurs only when there is healthy & efficient workforce in a country.
While economic infrastructure accelerates the pace of growth where as social

infrastructure accelerates the process of human development.
Q. What is the role of infrastructure in economic development?
i. Infrastructure promotes productivity-

a. Productivity in Primary Sector-
1. In the absence of permanent means of irrigation, agricultural
production would be entirely dependent on rain fall.
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2. Farmers would sow the seeds of only if it rains & if the rainfall
deficient, sowing would also be deficient & hence actual output in
agriculture would remain lower than the potential output.
b. Productivity in Secondary Sector-

1. In the absence of sources of energy like coal, petroleum & electricity,
Industrial production would be totally depending in wind & solar
energy.
2. But these sources are still underdeveloped in our country.
3. In the absence of proper infrastructure low level of productivity
prevails in secondary sector.
c. Production in Tertiary Sector-
1. In the absence of well-developed infrastructure (transport &
communication), tourism cannot be considered as a productive
activity.
2. Tourism would exist only as the hobby of the explorers like
Columbus, Vasco-de-Gama.
3. All the sectors of the economy cannot be said as productive in the
absence of good infrastructural facility.
ii. Infrastructure induces Investment-
1. Infrastructure induces investment for eg- a develop network of highways
would definitely induce investment across all the sectors of the economy
because it facilitates efficient movement of goods & services across
different regions of the country.
2. Infrastructure is the backbone of business investment.
iii. Infrastructure enhances size of the market-
1. Large scale production is possible only when the size of the market is
large.
2. Railways were developed under the British rule so that the size of the
Indian market can be increased.
iv. Infrastructure enhances ability to work-
1. The educational & medical institutions promote education, skills
formation & health care.
2. These are the essential parameters to enhance the ability to work with
rising ability to work efficiency of an individual also rises. 3. Productivity
is increased & growth process is accelerated.
v. Infrastructure facilitate outsourcing-
1. A country having a good infrastructure emerges as a destination for
outsourcing.
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2. It is only because of sound system of social infrastructure in India that is
emerging to be a global destination of call centres, study centres and
medical tourism.
vi. Infrastructure induces Foreign Direct Investment (FDI) –
1. FDI is instrumental in the growth process in less developed countries like India
where domestic investment is very low.
2. Since 1991, FDI has substantially scaled up in the Indian economy all because
of expanding infrastructure.
vii. Infrastructure generates linkages in Production-
1. Developed means of transport & communication, ample of sources of
energy along with good facilities of banking and insurance would
generate inter-industrial linkages.
2. It is a situation when expansion of one industry facilitates the expansion
of other.
Health- Health means a sound physical & mental state of the individual. It doesn’t simply
mean absence of disease. Good health implies-
i. Increase in Mental abilities.

ii. Increase in productivity of labour. iii. Increase in overall
efficiency to handle difficult task.
Q. Development of Health services after Independence-
i. Decline in Death Rate- Death rate has come down from as high as-
o 1951-27/Thousand
o 2017-6.3/Thousand
ii. Reduction in Infant Mortality rate- Infant Mortality rate (referring to the
death of infants upto 1 year of age) has significantly reduced from-
o 1951-146 per thousand
o 2017-32 per thousand
iii. Rise in Expectancy of Life- Expectancy of life has risen from-
o 1951-32 years
o 2018-69.4 years
iv. Control over deadly disease- Deadly diseases like malaria, tuberculosis,
cholera & small pox has been bought under control.
v. Decline in under five mortality rate- Under five mortality rates have
declined from-
o 1960-248/thousand
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o 2017-39/thousand
Health as an emergent challenge-

i. Unequal distribution of health care services-
1. Distribution of health care services is extremely unequal across rural
& urban sector of the country.
2. Most of the health care facilities have been confined to urban areas.
ii. Communicable Disease-
1. Communicable disease is raising their ugly heads & causing a serious
threat to the society.
2. AIDS- (Acquired Immune Deficiency Syndrome)
3. HIV- (Human immune Deficiency virus)
iii. Poor Management-
1. There is substantial mismatch b/w the personnel for health care &
the number of health care centres.
2. Health personnel are grocely inadequate particularly in the rural
areas and often the rural folk have to rush to urban centres for
treatments.
v. Privatisation-
1. The government is gradually moving towards privatization of health
care services.
2. The number of private hospitals is surging in place of government
hospital.
3. Health care is becoming increasingly expensive & beyond the reach
of millions in India.
vi. Poor upkeep & maintenance-
1. Upkeep & maintenance of government health care centers is very
poor.
2. The quality difference b/w private & public hospitals are so huge that
people are completed to depend on private treatment even when
not affordable.
vii. Poor Sanitation level-
1. Sanitation level is extremely poor in both urban & rural areas in India.
2. Sanitation infrastructure has two functions-
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a. To make clean surroundings where we live & work.
b. To spread awareness of sanitation among various people &
encourage their participation in awareness programmes.
In both these areas, we are way behind the international standards.
Q. What are the importance of infrastructure?
Infrastructure is the support system in which the efficient working of a modern industrial
economy depends. The importance of infrastructure is illustrated in the following points:
1. Facilitates functioning of the economy:

a) The functioning of an economy depends on existence of infrastructural
facilities.
b) Agriculture, industry and services sectors depend heavily on infrastructural
facilities for their growth.
2. Agricultural development:
a) The development of modern agriculture depends on infrastructural
facilities (roadways, railways and shipping) for speedy and large-scale
transport of seeds, pesticides, fertilizers, etc.
b) There is also a need for insurance and banking facilities, so that
agriculture can operate on a large-scale.
3. Economic Development:
Development of infrastructure and economic development go hand in hand.
a) Agriculture depends on the adequate expansion and development of
irrigation facilities.
b) Industrial progress depends on the development of power and electricity
generation, transport and communications.
c) Infrastructure contributes to economic development of a country both by
increasing the productivity of the factors of production and improving the
quality of life of its people.
4. Better Quality of Life:
a) Well-developed infrastructure leads to better quality of life.
b) Improvements in water supply and sanitation have a large impact by
reducing ‘mobility’ (meaning proneness to fall ill) from major water borne
diseases and reducing the severity of disease and reducing the severity of
disease.
c) The quality of transport and communication infrastructure can affect access
to health care. However, air pollution and safety hazards connected to
transportation also affect morbidity, particularly in densely populated areas.
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5. Provides employment-
a) Infrastructure helps in generating employment as many people get
employment in infrastructural projects like construction and maintenance of
roads, railways, electricity plants, etc.
b) Many more people are able to find employment in industry and trade, after
the development of strong infrastructure.
Private sector Health Infrastructure-

1. More than 70% of the hospitals in India are run by the private sectors.
2. Private sector control nearly two fifth of beds available in the hospitals.
3. Nearly, 60% of dispensaries are run by the private sector.
4. Many NRIs and industrial and companies have set up super-specially hospitals to
attract India’s rich and medical tourists.
5. Private sector provides healthcare to 80% of outpatients and 46% of inpatients.
India Systems of medicines-
1. India has its own well developed alternate system of health care, namely:
AYUSH, consisting of six systems-
a) Ayurveda
b) Yoga
c) Unani
d) Siddha
e) Naturopathy
f) Homeopathy
2. ISM has huge potential and can solve a large part of our health care problems
because they are effective, safe and inexpensive.
3. Little efforts have been done to set up a framework to standardize education or
promote research.
4. ISM are the systems of medicine which have come to India from outside & got
assimilated into Indian culture.
Women’s Health-
1. Women in India suffer from serious neglect not only in the areas of
education but in the areas of education, but in the area of Health Care as
well.
2. Abortions are a major cause of maternal morbidity and mortality in India.
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3. More than 50% of women in India in the age group of 15-49 years suffer
from nutritional deficiency.
4. Female foeticide is a common practice, causing a decline in sex ratio.
Rural-Urban Divide-
People living in rural areas do not have sufficient health infrastructure. This has led
to differences in the health status of people.
1. The PHCs located in rural areas do not even offer X-ray or Blood testing
facilities, which constitutes basic health care.
2. In the rural areas, the percentage of people, who have no access to proper
healthcare facilities has increased over the last few years.
3. Villagers have no access to any specialized medical care, like pediatrics,
gynaecology, anaesthesia and obstetrics.
4. The poorest 20% of Indians living in both urban and rural areas spend 12% of
their income on health care while the rich spend only 2%.
Health: A basic human right-
In order to provide basic healthcare to all, accessibility and affordability needs to be

integrated in our basic health infrastructure.
1. All the citizens can get better health facilities if public health services are
decentralized.
2. Telecom and IT Sectors can play an important role in improving the health
process in the economy.
3. The effectiveness of healthcare programmes rests on primary healthcare. So,
serious steps should be taken to improve them.
4. Private public partnership (PPP) can effectively ensure reliability, quality and
affordability of both drugs and Medicare.
CRITICAL ASSESSMENT OF HEALTH INFRASTRUCTURE-
India has built up a vast health infrastructure over the years, but it still suffers from
number of deficiencies.
1. Inequitable distribution of Health services:

• The existing health system suffers from inequitable distribution of institutions
and manpower.
• About 70% of India’s population live in rural areas, but only 20% of total
hospitals are located in rural areas.
• Most of the modern health facilities are available only in the urban areas.
2. Communicable diseases:
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• Increasing attention is urgently needed for prevention of communicable
diseases
• AIDS (Acquired Immune Deficiency Syndrome), HIV (Human Immune Deficiency
Virus) and SARS (Serve Acute Respiratory syndrome), through effective control
measures.
3. Poor Sanitation Facilities-
• Sanitation facilities are extremely poor in both rural and urban areas.
• About 30% of the houses in urban areas do not have toilet facilities and the
condition in rural areas is even worse.
• Improvement in sanitation facilities are immediately needed for good health
of the people.
4. Lack of Manpower:
Even though, India produces 12,000 medical graduates every year, still there is huge
shortage of manpower.
5. Malnutrition:
Widespread malnutrition poses a major threat to the lives, especially in case of
children.
6. Role of Private Sector:
• Public sector has not been so successful in providing adequate health
structure.
• There is a need to increase collaboration of public sector with private sector
to meet health care needs of people.
EXPANSION OF PUBLIC HEALTH INFRASTRUCTURE

1. At village level, a variety of hospitals, technically known as Primary Health Centres
(PHCs), have been set up by the government.
2. India also has a large number of hospitals run by voluntary agencies and the private
sector.
3. These hospitals are manned by professionals and para-medical professionals trained
in medical, pharmacy, and nursing colleges.
4. Expansion of health infrastructure has resulted in the eradication of deadly diseases
like small pox, guinea worms and the near eradication of polio and leprosy.
Q. How Economic or social infrastructure are complementary to each other?
1. Economic and social infrastructure together helps in the overall development of the
economy.
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2. Economic infrastructure improves productivity levels in productive sectors such as
agriculture and industry, by providing support services such as energy, transport,
communication, etc.
3. Social infrastructure improves human productivity and efficiency through facilities
of education, health, housing, etc.
4. Social infrastructure improves human productivity and efficiency through facilitates
of education, health, housing, etc.
Hence, both are supplementary and complementary to each other.
Linkages in production:
Linkages in production refers to a situation when expansion of one industry facilitates

the expansion of the other. Economic growth becomes a self-propelling activity of
change. But this is possible only when we have ample infrastructural facilities.
ESSENTIAL INDICATORS OF GOOD HEALTH:
1. Low death rate

2. Low infant mortality rate
3. High expectancy of Life
4. Low incidence of deadly diseases
5. High nutrition levels
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Chapter-9 ENVIRONMENT & SUSTAINABLE DEVELOPMENT
Q. What is Environment?
1. Environment is defined as the total planetary inheritance & totality of all resources.
2. Environment is the sum total of external forces which surround us & includes all the
biotic & abiotic factors which influence each other.
Q. What is biotic elements?
1. These elements includes all living elements.
2. Eg-
a) birds,
b) animals,
c) forests,
d) plants,
e) Fisheries, etc.
Q. What is Abiotic Elements?
1. It includes all the non-living elements.
2. Eg-
a) air,
b) water,
c) Land etc.
Q. What are the Functions/ Significance of Environment?
1. Provides resources for Production- Environment supply resources for production to
the economy which are-
a. Renewable resources-
1) These are those resources which can be used without the possibility of
resources becoming depleted & exhausted.
2) For eg- trees, fishes etc.
b. Non-Renewable resources-
1) These are those resources which get exhausted with extraction & use.
2) For eg- Mines, fossil fuel etc.
2. Environment assimilates wastes-
1) Production & consumption activities generates a lot of wastage
2) Environment absorbed all the waste.
3. Environment sustains life-
1) Basic necessities of life are part of environment.
2) Environment sustains life by providing all these essential elements.
4. Environment enhances quality of life-
1) Surrounding includes rivers, oceans, mountains, & deserts.
2) Man enjoys these surroundings adding the quality of life.
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Q. What are the Problems of Environment?
There are 2 basic problem related to environment-
 Pollution Problem.
 Problem of excessive exploitation of natural resources or degradation of natural
resources.
PROBLEMS
POLLUTION Excessive exploitation of Resources.

1) Air 1) Exploitation of natural resources
2) Water 2) Global warming
3) Noise 3) Ozone depletion
Q. What do you meant by Pollution?
1) Pollution refers to those activities of production & consumption which
challenge the purity of air & water & there by pollute the environment.
2) It is a serious challenge related to the process of growth, particularly related
to the process of Industrialisation.
Pollution has mainly three forms-
1. Air Pollution.
2. Water Pollution.
3. Noise Pollution.
Air Pollution-
1) Pollution of air implies pollution of an essential element of life accordingly
quality of life is suffered.
2) Air Pollution occurs due to presence of materials in air in such concentration
which are harmful to the men & environment.
3) Air pollution is mainly coz of following factors-
i. Smoke emitted by the industries particularly those industries which
are using coal as energy.
ii. Poisonous gases emitted in the process of chemical treatment of
material- particularly plastic & leather industries.
iii. Air pollution is widespread in urban areas which have a high
concentration of industries & thermal power plants and vehicles.
Water Pollution-
1) Water is an essential element of life & its pollution is very threating. Many
state in India are on the brink of water famine.
2) The major problem is contamination of water which leads to disease like
diarrhea, hospitals, etc.
3) The main causes of water pollution are-
i. Domestic sewerage that flows into streams & rivers.
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ii. Industrial waste streaming into the rivers.
iii. Agricultural runoff (mixed with pesticides & insecticides) that runs
into the rivers & streams.
iv. Thermal power houses discharging ash mixed with water.
Noise Pollution-
Noise pollution can be defined as any distributing or unwanted noise that interferes
or harms human or wildlife.
1) It has a negative impact on Wildlife species by reducing habitat, quality,
increasing stress levels and making other sounds.
2) It has recorded an exponential growth because millions of vehicles fitted
with loud horns & noise generating engines are plying on the roads.
3) Excessive noise can cause irrigation and necessities fatigues the body and
the mind by which the efficiency is reduced.
Noise pollution is mainly caused because of-
i. Sound produced by vehicle engines.
ii. Sound produced by Industrial machines.
iii. Sound produced by household appliances like mixer grinder, washing
machines & water boosters.
Excessive Exploitation of Natural Resources-
1) The second problem is excessive exploitation of natural resources or
degradation of resources.
2) Natural resources are also called Natural capital & includes forests,
minerals, soil, etc.
Q. Why degradation of resources is increasing day by day?
i. In order to achieve economic growth man needs natural capital along
with natural capital.
ii. As a result of increase in production depreciation of both physical capital
& natural capital is taking place.
iii. We make provisions for replacement of physical capital but degradation
of natural capital is often ignored.
Degradation of Natural Resources
Deforestation Degradation of Land

i. Deforestation-
1) Industrialisation is a boon as it offers a large variety of things to consume
but it is a bane to when it causes deforestation.
2) Deforestation takes place because-
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a) Trees are felt to meet the growing demand for wood & other forests
products by the industries.
b) Industrialisation leads to urbanization & Urbanisation induces
deforestation as further development of township more & more
forests are cleared.
c) Multipurpose river projects like Damodar valley project or bhakra
dam are another factor contributing to Deforestation.
Degradation of Land-
It means loss of fertility or (loss of productivity) of land which occurs because of the
following factors-
a) Soil Erosion-
1) Soil erosion caused by strong winds or floods.
2) It refers to loss of upper layer of soil which contain major nutrients for
growth of plants like- Nitrogen, Phosphorus & Potassium.
b) Alkalinity and salinity of soil caused by Water logging.
c) Excessive water logged on the top soil tends to suck up the nutrients of the soil &
reduced its fertility.
Q. What are the Causes of Environmental Degradation?
I. Population Explosion-
1. One of the main cause of environmental degradation is population
explosion.
2. Pressure of population on land has tremendously increased.
3. Land has been ruthlessly exploited.
II. Widespread Poverty-
1. A large section of Indian population is absolutely poor to earn their
livelihood, these people cut trees for fuel wood & sale them.
2. This cause a massive erosion of natural capital.
III. Increase in Urbanisation-
1. Increase in urbanization has caused pressure on housing & other civic
amenities.
2. It has resulted in increase in demand for land & Excessive exploitation of
other natural resources.
IV. Increasing use of Insecticides, Pesticides & Fertilizers-
Increasing use of chemical fertilizers, insecticides & pesticides has also added to
environmental pollution.
V. Multiplicity of Transport Vehicles-
The multiplicity of transport vehicles has substantially increase the air & noise
pollution.
VI. Rapid Industrialisation-
1. Rapid Industrialisation has also contributed to air, water & noise pollution.
2. Industrial smoke is serious pollutant.
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Global Warming and Ozone Depletion:
Global Warming:
Global warming is the observed and projected increase in the average
temperature of earth’s atmosphere and oceans.
 Burning of coal and petroleum products
 Deforestation, which increases the amount of carbon dioxide in the atmosphere.
 Methane gas released in animal waste
Main effects of Global warming

Global warming adversely affects the earth:
 Ice is melting worldwide, especially at the earth’s poles. It has led to a steep rise
in sea level and coastal flooding.
 Hurricanes and other tropical storms are likely to become stronger.
 There are thousands of species (like polar bears) in danger of becoming extinct
forever.
Ozone Depletion:
Ozone depletion refers to destruction of ozone in the ozone layer due to
presence of chlorine from manmade chlorofluorocarbons (CFCs) and other
forces.
Cause of Ozone Depletion:
The problem of ozone depletion is caused by high levels of chlorine and bromine
compounds in the stratosphere.
 CFC, which is used as cooling substances in AC and refrigerators; or
 Aerosol propellants and Bromofluorocarbons (halons) which is used in fire
extinguishers.
Main effects of Ozone depletion:

As a result of depletion of the ozone layer, more ultra violet (UV) radiation comes to
earth and causes damage to living organisms.
 UV radiation seems to be responsible for skin cancer in human beings.
 UV radiation can also influence the growth of terrestrial plants.
Q. What are the Measures to Save Environment?

i. Population Control-
1. It is absolutely essential to check rising population & take necessary
measures to educate people.
2. Spread awareness about problems taking place in the country because of
population.
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ii. Social Awareness-
There is an urgent need to spread social awareness about-
 Dangers of Population,
 The way each individual can combat it.
iii. Afforestation Campaign-
Extensive afforestation campaign should be launched to protect environment.
iv. Control over Industrial & Agricultural pollution-
1. It is essential for environmental protection that air & water pollution
caused by Industrial development are managed & controlled.
2. The use of pesticides & chemical fertilizers should also be restricted to
avoid agricultural pollution.
v. Waste Management-
River water should be kept clean & provisions to be made to supply clean
drinking water to rural people.
vi. Management of solid waste-
1. Planned Management of Solid waste is very essential.
2. It should be treated chemically.
3. Rural garbage should be converted into compost.
Q. What are the reasons for environmental Crisis?

 Population explosion and advent of industrial revolution:
1. The population explosion and advent of industrial revolution has
increased the demand for environmental resources.
2. Their supply is limited due to overuse and misuse.
 Extensive extraction of renewable and non-renewable resources:
1. The intensive and extensive extraction of both renewable and non-
renewable resources has exhausted some of the vital resources.
2. Huge amount of money is spent on technology and research to explore
new resources.
 Extinction of many resources:
1. Extinction of many resources and continuous rise in population.
2. This also result in environmental crisis.
 Affluent Consumption and production standards:
1. Due to affluent consumption and production standards of the developed
world, the wastes generated.
2. The waste generated are beyond the absorptive capacity of the
environment.
 Air and water pollution due to development process:
1. The development process has polluted the atmosphere and waters and
there is decline in air and water quality (70% of water in India is
polluted).
2. It has resulted in increased incidence of respiratory and water-borne
diseases.
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 Global Warming and ozone Depletion:
1. The expenditure on health is also rising.
2. Global environmental issues such as global warming and ozone depletion
also contribute to the increased financial commitments for the
government.
Q. What is the state of environment in India?
India is the habitat of nearly 18 per cent of the world’s population, occupying just 2.5%
of the world’s geographical area.
 Natural endowment is getting excessively exploited, exceeding the rate of its
regeneration,
 Production and consumption wastes are being generated beyond the absorption
capacity of the environment, and
 Air pollution, water pollution and sound pollution are peaking up to the alarming
limits.
Q. What do you mean by Sustainable Development?
1. It is that process of economic development which aims at raising the quality of
life of both present as well as future generation without threating Natural
endowment environment.
2. The process of economic growth has caused various problems like-
i. Diverse crops grown on land has led to fall in soil fertility.
ii. Excessive mining of iron, coal, gold, silver & extraction of crude oil has
led to depletion of their stock.
iii. Smoke & other injurious emission from factories & transport has led to
pollution of environment.
Features of Sustainable Development-

i. Sustained rise in real per capita income & welfare-
There should be sustained rise in real per capita income & economic welfare
over time.
ii. Rational Use of Natural Resources-
1. Sustainable development does not mean that natural resources should
not be used.
2. It simply means that natural resources be rationally used in a manner
such that they are excessively exploited.
iii. Check on Pollution-
1. It discards those activities which induce environmental pollution.
2. Environmental pollution is too viewed as an element of social cost.
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Strategies for Sustainable Development
Following strategies needs to be followed to achieve sustainable development-
1. Input Efficient Technology-
 We are to device such production technologies which are input efficient.
 It results in maximization of output & maximum utilization of input.
 This will moderate the stress on resource endowment per unit of input.
2. Use of Environment friendly source of energy-
 When we talk about environment friendly sources it’s about LPG & CNG
only.
 These are cleaner fuels & environment friendly as well.
 The use of these fuels must be encouraged in place of petrol & diesel which
emit huge amount of carbon dioxide adding to impact of Greenhouse gases.
3. Shift to Organic Farming-
 Excessive use of chemical fertilizers, insecticides & pesticides have raised the
crop yield but at the cost of soil fertility.
 We should immediately switch to organic farming which mainly focus on soil
health rather than plant health.
4. Conversion of Sunlight into Solar energy & Solar energy into Electricity-
 India is blessed with abundant sunlight which is rich source of energy.
 Sunlight is both environment friendly as well as non-exhaustable source of
energy.
 Conversion of solar energy into electricity is an effective way to solve the
problem of economic growth & also a solution for sustainable development.
5. Public means of Transport-
 Public means of transport are comfortable & economical.
 The use of public transport will cut the private vehicular traffic & also
environmental pollution will be reduced.
6. Manage the Waste-
 Rather than allowing the industrial waste & household waste to flow into
streams & rivers it must be systematically managed.
 Household waste can be recycled into compost & used as a manure for
organic farming.
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Chapter-10 COMPARITIVE EXPERIENCES OF INDIA & ITS NEIGHBOURS
Strategy of Growth of India, China & Pakistan-
i. After independence, India & Pakistan adopted almost a similar strategy for
growth. The principal features of strategy were-
a. It was mixed economy model of growth.
b. Strategy of growth underlined the significance of both private & public
sector.
c. Private sector was assigned the key role of starting the process of
growth. This is because-
• Partition of country (into India & Pakistan) has rendered both the
economies as laggard economy (backward economies).
• Both the economies needed a big push of investment & only the
government could afford it.
Hence, the greater reliance was on the public sector.
d. Private sector was assigned the secondary role of pushing the process of
growth. i. On the other hand, China adopted a more religious model
growth. It decided to bring all critical areas of production under
government control, established as People’s Republic of China in 1949.
a. All the national resources (including land) were declared a government
monopoly.
b. Thus, China adopted statism as a model of growth i.e. the state was to
decide what to produce, how to produce & for whom to produce.
Common Elements in the Strategy of Growth adopted by India, China and

Pakistan –
• All the countries relied on public sector as the core sector of economy.
• All the three economies basically relied upon inward looking strategy of growth
(Import Substitution).
• Overtime the strategy of growth has undergone certain changes in India & Pakistan-
a. The government in both the economies are now relying on a model of growth
which continues to mixed economy model but it is the one which assigns
greater importance to private sector rather than public sector.
b. Also, there was greater importance given to FDI rather than domestic
investment.
On the other hand, the core element of growth in China has not changed. It
continues to be state manage economy. The Chinese economy has shown a
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significant transformation from a closed economy to open economy. It now largely
depends on external demand i.e., it is an export oriented economy.
Comparative Performance of Economies of India, China & Pakistan

The comparison is done with reference to the following parameters-
a. GDP growth.
b. Structure of growth.
c. Demographic Profile.
d. Human development.
GDP Growth-
Growth Story of China.
i. China has achieved the distinction of second largest economy in the world. GDP was
estimated to be 14.2 trillion USD (US dollars) in 2019.
ii. Between 1979 to 2017, average annual GDP growth was estimated to be 9%. It
reached its peak of 15.2% in 1984 & touch the bottom of 3.8% in 1990. In 2018, the
GDP growth rate was 6.6%.
iii. China achieved a breakthrough in GDP growth in early 1980’s. As a result of this, the
following changes takes place-
 Shift from centrally planned to a market economy.
 Focus on export related domestic production.
 In flex of FDI.
 Availability of cheap labour force giving china a comparative cost advantage.
 GLF (Great Leap Forward) campaign launched in 1958. iv. A quantum jump in FDI
because of –
 China established special economic zones (SEZ) offering all the basic amenities of
investors. 100% equity of the foreign investors & free flow of FDI in retail
sector.
v. A jump in GDP growth was achieved not only through FDI but also through domestic
investment induce through GLF campaign.
vi. China achieved a record growth in exports & by 2010, it emerged as the largest
exporter in the Global market.
120
Growth Story of India-
I. In 2019, GDP of India was estimated to be 2.972 trillion USD. Between the years
1951 to 2019, Indian economy achieved an annual average growth rate of 6%.
II. In India, GDP growth showed a substantial rise only after 1991, the year when New
Economic Policy launched. The principal features of NEP are- A massive shift
towards Privatization.
• A transformation towards Liberalization.
• Great reliance on export promotion rather than import substitution.
• Greater reliance on FDI rather than domestic investment.
III. NEP has focused on greater integration of domestic economy with Global
economies on the basis of free play of market forces.
IV. Around 1914, GDP growth has taken a significant hit. Hopes for employment
opportunities have dampened. Social unrest has tended to become as an emerging
challenge coz of- High rate of Inflation which lead to high rate of interest &
therefore low investment.
• Policy paralysis of the government because of political stability.
• Drought of FDI because of poor credit rating of Indian economy & deficient
infrastructure facilities.
V. The slowdown of Indian economy marked with scams & scandals lead to fall of the
government.
Growth Story of Pakistan-

i. In 2019, GDP of Pakistan was estimated to be 274.05 billion USD. Pakistan economy
recorded an average annual growth rate of 4.2% between the period 1960-2019.
ii. Pakistan achieved a back through in GDP growth in mid-80’s as a consequence of
economic reforms focusing on FDI & greater participation of private sector in the
process of growth.
iii. The economic reforms in Pakistan were similar to India but from the beginning of
2008, the economic outlook turned to be disappointing as-
a) Pakistan has been gripped by the war of terror.
b) It has eroded business confidence of the domestic as well as foreign investors as
a result, GDP growth has severely hit.
c) Corruption & political instability are the other factors contributing to economic
stagnation of the economy of Pakistan.
iv. Because of slow GDP growth, & low level of income the economy has almost sunk
into a low income low growth trapped.
121
Conclusion:
Relative growth of India, China & Pakistan-
1) China has outpaced both India & Pakistan with regard to GDP growth.
2) India has performed better than Pakistan but compare to China, India is way
behind.
3) The relative success of China is credited to political stability in China. China has
shown a strong political will to use the national resources in the best interest of
the nation.
4) The success of China (in terms of GDP growth) is an eye opener for most
developing nations of the world.
Structure of Growth (Sectorial share in output & employment)-

i. Growth process causes a shift in sectorial share in output & employment.
ii. The percentage share of primary sector in output & employment tends to
decrease while that of secondary & tertiary sector tends to increase as the
process of growth & development gathers momentum.
iii. All the 3 countries have experienced a noticeable structural transformation.
No longer is primary sector the principal contributor to GDP.
iv. In terms of sectorial contribution to GDP economies of India & Pakistan are
now relying more on tertiary sectors while the economy of China is relying
more on secondary sector.
v. The historical experience of develop nation shows that in terms of
percentage share in GDP ,it was first the secondary sector & later the
tertiary sector which emerges as the leading sector of the economy.
vi. The experience of India & Pakistan show a major shift directly from primary
sector to tertiary sector which means less emphasis has been given to
industrial expansion. The expansion of service sector in India & Pakistan is
because of the faster integration of these economies with the global
economy.
vii. In terms of employment the shift from primary to secondary & tertiary
sector has not been as significant in India as in China & Pakistan. India has
failed in this respect.
viii. People in India have stuck in primary sector despite in sustainable reduction
in % contribution of this sector to GDP.
ix. All this contributes to an economy slipping into a jobless growth process.
122
% Share in GDP
Sector India Pakistan China

Primary 15.4% 24.4% 7.9%
Secondary 23.1% 19.1% 40.5%
Tertiary 61.5% 56.5% 51.6%
% Share in Employment
Sector India Pakistan China

Primary 47% 42.3% 27.7%
Secondary 22% 22.6% 28.8%
Tertiary 31% 35.1% 43.5%
Human Development- The indicator of human development are-
a) Life Expectancy- Higher the better.

b) Adult Literacy rate- Higher the better.
c) Percentage of population below poverty line- Lower the better.
d) Infant mortality rate- Lower the better.
e) Maternal Mortality rate- Lower the better.
f) Percentage of population having excess to improve water resources- Higher the
better.
g) Percentage of under nourished population- Lower the better.
h) Percentage of Population having access to improved sanitation – Higher the better.
i) Purchasing power parity- Higher the better.
Based on these indicators a composite index is constructed which is known as

Human
Development Index (HDI). Higher value of HDI points to a higher rank & higher
level of growth & development of a country.
1) In the year 2017, HDI for China, India & Pakistan was estimated to be 0.752,
0.640, and
0.562.
2) Higher HDI rankings of China is mainly due to large GDP per capita.
3) Besides GDP per capita China has performed better than India & Pakistan in the
area of nourishment.
123
4) China has also perform better with regard to infant mortality rate & maternal
mortality rate.
5) As regard access to improve sanitation again, China shows better performance.
6) In the provision of improved water sources Pakistan has performed better than
India & China.
Demographic Profiles-
• India & China together are a habitat of 38% of the world’s population.
• India with a little more than 1.2 billion covering 18% of the world’s
population.
• China with nearly 1.34 billion people covering 20% of the world’s
population.
• In comparison Pakistan is a small country. Its population is just 1/10 of China
& India.
i. Both India & China are facing problems in the process of growth because of large
size of population. Large size of population requires huge amount of maintenance
investment.
ii. High maintenance investment implies low development investment. As a result the
pace of growth & development is impeded. (slows down)
iii. There are two demographic parameters which are in favor of China-
a) Moderate growth rate of Population.
b) Low density of Population.
iv. One child policy adopted by China in 1979 has been successfully pursued. As a result
growth rate of Population which was nearly 1.33% has now been reduce to 0.47%
p.a.
v. But the growth rate of Population continues to be fairly high in India & alarmingly
high in
Pakistan. (1.8)
vi. China has a low density of population as compare to India & Pakistan. This is
because of a large geographical area of China. It is estimated to be 143 person per
square km in China as compare to 382 & 225 persons in India & Pakistan.
vii. Both China & Pakistan are showing brighter sign of Urbanisation than to India. As a
result both the countries have succeeded than India in generating job opportunities
outside agriculture.
124
social backward. Female
feticideis the principal cause of low sex ratio.
Country Population Growth of PopulationDensity Sex ratio Urbanisation
(in million) (%) m) (/sq(/1000men)
k
India 1210 1.76 382 940 31.2
China 1339 0.47 143 950 51.3
Pakistan 176.2 1.8 225 952 37.2
viii. Sex ratio is found to biased against female in all the three countries. Low sex ratio
points to
Common Success story of India and Pakistan-
i. Both India and Pakistan have succeeded in more than doubling their per capita
incomes.
ii. The incidence of absolute poverty has been reduced significantly although the
number below poverty line continues to be very large.
iii. Food production has been successfully kept pace with the rise in population.
Leaving aside annual fluctuations due to weather conditions, both countries are
self-sufficient in food.
iv. Food self- sufficiency has been accompanied with improved nutritional status.
Daily caloric and protein intake per capita has risen by almost one-third.
However, malnourishment among children is still very high.
v. A well- developed modern sector has found global recognition in both the
countries. vi. India and Pakistan have almost similar performance with
regard to access to improved water resources.
Common Failures of India and Pakistan-
i. The relatively inward- looking economic policies and high protection to domestic
industry did not allow India and Pakistan to take timely advantage of
globalization.
ii. The mind-set of the politicians and the bureaucrats has not shown a progressive
change: Controls continue to be their preferred option rather than freedom of
choice of the producers and consumers.
iii. Private sector has thrived more on contacts, bribes, loans from public financial
institutions. Tax evasion is a national hobby. iv. Fiscal management is grossly
disappointing. Higher fiscal deficit averaging 7-8 percent of GDP has persisted
for fairly long periods of time.
v. Large population of tax revenue is spent to meet defence expenditure and
internal debt servicing. It hampers the process of growth.
125
vi. Deficient urban services are a big hurdle in their process of growth and
development.
vii. A wide lag between the formulation of policies on the one hand and their
implementation on the other, is a serious hindrance in the process of growth.
Areas where India has an edge over Pakistan-
i. In the area of skilled manpower and research development institutions, India is

better placed than Pakistan.
ii. India has shown a remarkable breakthrough in the export of software and
software- enabled services after economic reforms of 1991. Pakistan is far
behind.
iii. Human capital formation in India has emerged as a much more significant
determinant of growth than in Pakistan.
iv. Indian scientists excel in the areas of defence technology, space research,
electronics, and avionics, genetics, telecommunications, etc. Pakistan is way-
behind.
v. The number of PhDs produced by India in science and engineering every year is
higher than the entire stock of PhDs in Pakistan.
vi. India also has a better record of investment in education. The adult literacy rate,
female literacy rate, gross enrolment ratio at all levels, and education index
have trended up much faster in India than in Pakistan.
vii. Owing to rapid decline in fertility rate, population growth in India has been
slashed to
1.17%, while in Pakistan, it continues to be as high as 1.43% p.a.
viii. Issues of health facilities in general and infant mortality in particular are better
addresses in India.
Areas where Pakistan has an edge over India-
i. Starting from almost the same level as India. Pakistan has achieved better
results with regards to migration of workforce from agriculture to industry, or
migration of people from rural to urban areas.
ii. By reducing BPL population to 29.5 % (in 2013) of the total, Pakistan’s growth
strategy has a better human face than that of India.
iii. Even when the rate of investment in Pakistan has been lower than in India,
efficiency of investment has been higher.
China’s Edge over India-
i. The Chinese reform process began more comprehensively during the 80’s, when
India was in the mid-stream of slow growth process.
126
ii. Even when the reform process was actively pursued in the 90’s. India focused
more on GDP growth, in contrast to China’s initiative of focusing on poverty
alleviation.
iii. Restructuring of the Chinese agriculture went a long way. It abolished commune
system of farming. Instead, households were allotted land for individual
cultivation, though ownership of land remained with the state. This brought
about a radical transformation in agriculture.
iv. Also, global exposure of the economy has been far wider in China than in India.
Thus:
 China allowed foreign investors 100 percent equity investment.
 It allowed the foreign investors the freedom to ‘hire and fire’ the
workers.
It also offered them a lucrative infrastructure.
 By establishing SEZ, it offered lucrative infrastructural facilities to the
foreign investors.
 China was liberal in allowing FDI in retail.
127

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By DeeCee- Divine Classes

DIVINE CLASSES – DEECEE

CHAPTER-1 INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

Important Terms and Concepts-

1. Per Capita Income-National Income of a country divided by its

 Tata Iron and Steel Company (TISCO) -1907

Q1. Define the origin of British Rule.

Ans. ORIGIN OF BRITISH RULE-

 The foundation of British Empire was laid by Battle of Plassey, fought in

Q2. What is the basic purpose of British Rule in India?

Ans. Basic purpose of British rule/ Aim of Britishers-

Ans. Features of Indian economy before the arrival of Britishers-

1. Prosperous Economy- India was self-reliant and prosperous economy

Britishers transformed the country into a supplier of raw materials and

• Some individual attempts to estimate National income & per capita

Q5. How the Indian Economy exploited under British Rule?

Ans. Exploitation of Indian Economy under British Rule:

Indian economy under British rule is subjected to colonial exploitation, by the

Agricultural sector Industrial sector Foreign Trade

Ans. Colonial Exploitation of Agricultural Sector:

Agriculture was exploited and stagnant due to following reasons-

I. Land Settlement System-

III. Low Level of Productivity-

 Our land is less productive due to

ii) Discriminatory Tariff Policy-

The competition forced Indian craftsmen to shut down their

iv) Low contribution to Gross Domestic Product (GDP) -

v) Adverse Effects of decline of Handicraft industry-

 Decline of Indian handicrafts results in unemployment which

 Indian goods can't compete with foreign competition of

vii) Limited role of Public Sector-

Q8. What are the adverse effects of partition in India?

Q9. State the India’s Foreign Trade during British Rule.

ii) Monopoly control of India's foreign travel

i. Agriculture-The principle source of occupation.

ii. Regional Variation

ii) Air& Water transport-

iii) Airways/ Seaways-

 Made for mainly transportation by water ways.

 Post, telegram was introduced at a high cost to serve the

i) Self-sufficiency in food grains production.

ii) Infrastructural development-

iii) Check on famines-

iv) Shift to Monetary Exchange-

 British rule helped Indian economy to shift from barter system

v) Effective administrative set up-

ii) Semi-feudal Economy-

iii) Stagnant Economy-

iv) Backward Economy-

v) Depleted (Depreciated Economy) -

vi) Amputated Economy-

o The demographic condition during the colonial rule is described in the

2. Poor health facilities:

4. Low life expectancy:

 Life expectancy refers to the average number of years for which

5. Low literacy rate:

CHAPTER-2 INDIAN ECONOMY (1950-1990)

9- 30-April 1956 –second industrial policy resolution.

Q.1 What do you mean by economic system?

Ans. Economic System refers to an arrangement by which central problems of an economy

Q.2 What are the main central problems of an economy?

A decision of allocation of resources needs to be taken depending on the central problems

 What type of goods to be produced?