Chapter 1 - Unit I- Indian Economy on the Eve of Independence

Question 1:

What was the focus of the economic policies pursued by the colonial government in India?
What were the impacts of these policies?

Answer:

The main focus of the economic policies pursued by the colonial government was to make
India a mere supplier of Britain’s own flourishing industrial base. The policies were
concerned mainly with the fortification and advancement for their home country. The
interests of the Indian economy were completely ignored. Such policies brought structural
changes in the Indian economy by transforming it to a supplier of raw materials and
consumer of finished products from Britain. The impacts of these policies are discussed as
follows in detail;

i. Low Economic Development

Throughout the British rule, Indian economy experienced very low level of economic
development. As per some researches, Indian economy grew at even less than two percent
during 1900-50. The reason for such a low level of development was that the British
government was more concerned with the promotion of economic interests of their home
country. Consequently, the colonial rule transformed India’s agriculture sector to a mere
supplier of raw materials for the British industries. This not only affected the production of
the agricultural sector but also ruined the small manufacturing units like handicrafts and
cotton industries. These manufacturing units faced a stiff competition from the British
machine made textiles and handlooms.

ii. Backwardness of Indian Agriculture

Under the colonial rule, India was basically an agrarian economy employing nearly 85% of its
population. Nevertheless, the growth of the agriculture sector was meager. This was due to
the prevalence of various systems of Land Settlement, particularly Zamindari system. Under
this system, the zamindars (owners of land) were required to pay very high revenue (lagaan)
to the British government, which they used to collect from the peasants (landless labourers,
who were actually cultivating). The zamindars were mainly concerned with extracting high
revenues from the peasants but never took any steps to improve the productivity of the
land. Moreover, in order to feed British industries with cheap raw materials, the Indian
peasants were forced to grow cash crops (such as, indigo, cotton, etc.) instead of food crops
(such as, rice and wheat). This commercialisation of agriculture not only increased the
burden of high revenues on the poor peasants but also led India to face shortage of food
grains. Therefore, Indian agriculture remained backward and primitive.

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iii. Deindustrialization of Indian Economy

India failed to develop a sound and strong industrial base during the colonial rule. The status
of industrial sector during the British rule can be well defined by the term ‘systematic
deindustrialization’. The cause of deindustrialization can be attributed to the downfall of
India’s handicraft industry and the cause of bleak growth of modern industry was the lack of
investment. On one hand, the British government imposed heavy tariffs on the export of
Indian handicraft products and on the other hand, allowed free exports of Indian raw
materials to Britain and free imports of British products to India. As a result of the heavy
tariffs, the Indian exports became costlier and its demand in the international market fell
drastically that led to the collapse of Indian handicrafts industries. Simultaneously, the
demand for the handicrafts products also fell in the domestic markets due to stiff
competition from the machine made textiles of Britain. As a result, the domestic industries
lacked investment and growth initiatives.

iv. Regression in Foreign Trade

During the colonial rule, the British government owned the monopoly power over India’s
foreign trade. The British government used the trade policy according to the interests of
their home country. The exports and imports transactions were restricted only to India and
Britain. On one hand, the exports from India provided the cheap raw materials to the British
industries and on the other hand, India's imports from Britain provided a virgin market for
Britain’s products. In either ways, British industries were benefitted. Moreover, the surplus
generated from t foreign trade was not invested in the Indian economy; instead it was used
in administrative and war purposes by Britain to spread their colonial power.

Question 2:

Name some notable economists who estimated India’s per capita income during the
colonial period.

Answer:

As the British government was never interested in upliftment of our country, so they never
took any initiative to measure India’s national and per capita income. Though some of the
economists tried to estimate India’s national income and per capita income during the
colonial rule, but the results are mixed and conflicting. The following are some of the
notable economists who were engaged in estimation of national income and per capita
income:

I. Dadabhai Naroji
II. William Digbay
III. Findlay Shirras
IV. V.K.R.V Rao

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V. R.C. Desai

Out of these, V.K.R.V Rao's estimates are considered to be significant. Most of these studies
revealed that Indian economy grew at even less than two percent during 1900-50 with half
per cent growth in per capita output per year.

Question 3:

What were the main causes of India’s agricultural stagnation during the colonial period?

Answer:

Under the colonial rule, India was basically an agrarian economy, employing nearly 85% of
its population. Nevertheless, the growth of the agriculture sector was meager. The following
are the causes explaining stagnancy in Indian agriculture sector during the colonial rule:

1. Introduction of Land Revenue System

This was due to prevalence of various systems of Land Settlement, particularly Zamindari
system. This system was introduced by Lord Cornwallis in Bengal in 1793. Under this system,
the zamindars(owners of land) were required to pay very high revenue (lagaan) to the
British government, which they used to collect from the peasants (landless labourers, who
were actually cultivating). The zamindars were mainly concerned with extracting high
revenues from the peasants but never took any steps to improve the productivity of the
land. This resulted in low agricultural productivity and worsened the peasants economically.

2. Forceful Commercialisation

Initially before the British rule, the farmers were practicing conventional subsistence
farming. They used to grow crops like rice and wheat for their own consumption. But
afterwards, in order to feed British industries with cheap raw materials, the Indian farmers
were forced to grow commercial crops (like indigo required by British industries to dye
textiles) instead of food crops (like rice and wheat). This led to the commercialisation of
Indian agriculture. This commercialisation of Indian agriculture not only increased the
burden of high revenues on the poor farmers but also led India to face shortage of food
grains, resources, technology and investment. Therefore, Indian agriculture remained
backward and primitive.

3. Lack of Irrigation Facilities and Resources

Besides the above factors, Indian agricultural sector also faced lack of irrigation facilities,
insignificant use of fertilisers, lack of investment, frequent famines and other natural
calamities, etc. that further exaggerated the agricultural performance and made it more
vulnerable.

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Question 4:

Name some modern industries which were in operation in our country at the time of
independence.

Answer:

The second half of the nineteenth century witnessed the emergence of modern industries.
At the initial stage, development was confined to setting up of cotton and jute textile mills.
The western parts of the country Maharashtra and Gujarat was the hub for cotton textile
mills which were mainly dominated by the Indians whereas the jute industries were mainly
concentrated in Bengal and were dominated by the British. In the beginning of the
20thcentury, Iron and steel industries also started emerging gradually. It was incorporated
in 1907. Some other industries that were operating at a smaller scale during the British era
were sugar industry, cement industry and paper industry.

Question 5:

What was the two-fold motive behind the systematic deindustrialisation affected by the
British in pre - independent India?

Answer:

The following are the two-fold motives behind the systematic deindustrialisation affected by
the British:

1. Making India a Supplier of Raw Materials: The main motive of the British government was
to make India a mere supplier of cheap raw materials to feed its own flourishing industrial
base.

2. Making India a Market for Finished Goods: Another important objective of the British
government was to use India as a virgin market to sell the finished goods produced by the
British industries.

Question 6:

The traditional handicrafts industries were ruined under the British rule. Do you agree
with this view? Give reasons in support of your answer.

Answer:

Yes, we do agree with the above statement that the traditional handicrafts industries were
ruined under the British times. The following are the reasons in favour of the statement.

1. Discriminatory Tariff Policy: The British rule in India corresponded with its
industrialisation. The British rule used India both as a source of cheap raw materials as well
as easy accessible market for their finished products. Thereby, they imposed heavy tariffs

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(export duties) on India’s export of handicraft products, while allowed free export of India’s
raw material to Britain and free import of British products into India. This made Indian
exports costlier and its international demand fell drastically leading to the collapse of
handicrafts industries.

2. Competition from Machine made Britain Goods: The demand for the handicrafts
products experienced a downward trend in the domestic markets as well. This was due to
stiff competition from the machine made textiles from Britain. This was because of the
reason that the goods produced mechanically in Britain were comparatively cheaper and of
superior quality than the Indian handicraft goods. This narrowed the market for Indian
industries.

3. Emergence of New Class: The British rule in India popularised western lifestyle in India.
There was an emergence of a new section of population (consisting mainly of zamindars) in
India who liked the British goods. This section used to spend lavishly on the British products
that provided impetus for the development of British industries at the cost of the domestic
industries. Hence, gradually Indian industries perished away.

4. Disappearance of Princely State: Prior to the advent of British, India was ruled by princely
states. They used to patronise handicrafts industries and consequently, Indian handicrafts
gained reputation in the international markets. But during the British rule, these princely
states were ruined thereby ruining the protection of these handicrafts industries. Thus,
gradually Indian handicrafts lost its reputation and its importance deteriorated.

Question 7:

What objectives did the British intend to achieve through their policies of infrastructure
development in India?

Answer:

One cannot deny the fact that under the British rule, there was significant change in the
infrastructural development in the country. But the bonafide motive of the British behind
the infrastructure development was only to serve their own colonial interests. There was
infrastructural development in the fields of transport and communication. The roads served
the purpose of facilitating transportation of raw materials from different parts of the
country to ports, and ports were developed for easy and fast exports to and imports from
Britain. Similarly, railways were introduced and developed for the transportation of finished
goods of British industries to the interiors of India. Railways assisted British industries to
widen the market for their finished products. Post and telegraphs were developed to
enhance the efficiency and effectiveness of the British administration. Hence, the aim of
infrastructural development was not the growth and development of the Indian economy
but to serve their own interest.

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 Chapter 1 - Unit I- Indian Economy on the Eve of Independence

Question 8:

Critically appraise some of the shortfalls of the industrial policy pursued by the British
colonial administration.

Answer:

The focus of the industrial policies pursued by the colonial government in India was to make
our country a mere supplier of Britain’s own flourishing industrial base. The policies were
concerned mainly with the fortification and advancement for their own country. The
industrial policy pursued by the British colonial administration has the following shortfalls:

1. Neglect of Indian Handicraft Industries: The British followed a discriminatory tariff policy
under which they imposed heavy tariffs (export duties) on India’s export of handicraft
products while allowed free export of India’s raw material to Britain and free import of
British products to India. This made Indian exports costlier and its international demand fell
drastically leading to the collapse of handicrafts industries. Also, Indian handicrafts faced a
stiff competition from machine made textiles of Britain. The emergence of a new section of
people who liked the British goods more in comparison to the domestic goods encouraged
British industries at the cost of Indian industries. This led to the declining demand for Indian
products and encouraged foreign products.

2. Lack of Investment in Indian Industries: The modern industries in India demanded

investments in capital goods that were beyond the means of Indian investors. On the other
hand, British government was least interested in investing in Indian industries. Thus, due to
the lack of sufficient investment, the growth of Indian industries was acutely constrained.

Question 9:

What do you understand by the drain of Indian wealth during the colonial period?

Answer:

Dadabhai Naroji advocated the theory of ‘Drain of Wealth’ in the 19th century. The colonial
period was marked by the exploitation of Indian resources. The sole motive of Britain to
conquer India was to own a perennial source of cheap raw materials to feed its own
industrial base in Britain. Further, British government used India’s manpower to spread its
colonial base outside India. Also, the administrative expenses that were incurred by the
British government to manage the colonial rule in India were borne by Indian Exchequer.
Thus, the British rule drained out Indian wealth for the fulfillment of its own interests.

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Question 10:

Which is regarded as the defining year to mark the demographic transition from its first to
the second decisive stage?

Answer:

The year 1921 is regarded as the defining year or the ‘Year of Great Divide’ because prior to
1921, population growth in India was never consistent. India was in the first phase of
demographic transition till 1921 that was characterised by high birth rate and high death
rate. It implies low survival rate (or low life expectancy), which was nearly 8 per thousand
per annum. Therefore, the period before 1921 witnessed stagnant population growth rate.
After 1921, India’s population growth never declined and showed a consistent upward
trend.

Question 11:

Give a quantitative appraisal of India’s demographic profile during the colonial period.

Answer:

India’s Demographic conditions during the British rule depict our economy as stagnant and
backward. Both the birth rate and death rate were as high as 48 and 40 per thousand. Due
to high birth rate and high death rate the population growth was stagnant. The Infant
Mortality Rate was also very high of about 218 per thousand. The Life Expectancy Rate was
as low as 32 years while presently it is 63.5 years. The literacy rate was less than 16 percent
which denotes social backwardness and gender bias in the economy. We can infer from the
above figures that India was featured with massive poverty, low standard and quality of
living and low survival rate in the country. The lack of health care facilities and lack of health
awareness were the main causes behind such demographic conditions of India.

Question 12:

Highlight the salient features of India’s pre-independence occupational structure.

Answer:

The occupational structure that refers to the distribution of population engaged in different
occupations, showed no variation throughout the British rule. The following are the salient
features of India’s pre-independence occupational structure:

1. Agriculture- The Prime Occupation: Under the colonial rule, India was basically an
agrarian economy, employing nearly 85% of its population. As India had a massive poverty
during the colonial rule, so a large proportion of the population was engaged in agricultural
sector to earn their subsistence. But due to the prevalence of Zamindari system, agricultural
sector lacked investment and, thereby, its growth was highly constrained. Thus, in other

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words, despite employing a significant proportion of the population, the growth of

agriculture sector was meager.

2. Industry- The Bleak Occupation: Apart from agriculture, a small proportion of population
was employed in manufacturing sector. Nearly 10% of the total workforce was engaged in
manufacturing and industrial sector. This was due to the stiff competition that the Indian
industries faced from the machine made cheap goods from Britain. Further, the lack of
investment, initiatives and the unfavourable tariff structure constrained industrial sector.
Thus, the Indian industrial sector failed to contribute significantly to India’s GDP.

3. Unbalanced Growth: The three sectors of Indian economy, i.e. agricultural, industrial and
tertiary sector were unequally developed. While the agricultural sector was relatively
developed, whereas, the other two sectors were at their infant stage. In addition, there was
regional variation in the occupational structure of India. While on the one hand, states like
Tamil Nadu, Andhra Pradesh and Bombay experienced a fall in the agricultural work force on
the other hand states like Orissa, Rajasthan and Punjab experienced a rise in the agricultural
workforce.

Question 13:

Underscore some of the India’s most crucial economic challenges at the time of
independence.

Answer:

The exploitative colonial rule of the British hampered almost every spheres of Indian
economy badly. As an end-result, India faced acute economic challenges at the time of
independence. The following are some of the economic challenges faced by the Indian
economy:

1. Low Level of Agricultural Productivity: During the colonial rule Indian agricultural sector
was used by the British to suit to their own interest. Consequently, Indian agricultural sector
experienced stagnancy, low level of productivity, lack of investment, poor condition of
landless farmers and peasants. Thus, the immediate concern for India was to develop its
agricultural sector and its productivity. Some of the immediate reforms needed at the time
of independence were abolition of Zamindari system, need of land reforms, reducing
inequality of land ownership and upliftment of the peasants.

2. Infant Industrial Sector: India failed to develop a sound industrial base during the colonial
rule. In order to develop the industrial sector, India needed huge capital, investments,
infrastructure, human skills, technical knowhow and modern technology. Further, due to
stiff competition from the British industries, India’s domestic industries failed to sustain.
Thus, developing small scale and large scale industries simultaneously was the main concern

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for India to develop its industrial sector. Moreover, the need to increase the share of
industrial sector to India’s GDP was one of the important economic challenges for India.

3. Lack in Infrastructure: Although there was a significant change in the infrastructural

development in the country but this was not sufficient to improve the performance of
agricultural and industrial sector. Also, there was a need to upgrade the existing
infrastructure and to modernise the infrastructure to enhance its efficiency and
effectiveness.

4. Poverty and Inequalities: India was trapped in the vicious circle of poverty and inequality.
The colonial rule drained out a significant portion of India's wealth to Britain. Consequently,
majority of India’s population was poverty trodden. This further exaggerated economic
inequalities across the country.

Question 14:

When was India’s first official census operation undertaken?

Answer:

India’s first official census operation was undertaken in the year 1881. After that the census
has been conducted after every 10 years. It involves a detailed estimation of population
size, along with a complete demographic profile of the country.

Question 15:

Indicate the volume and direction of trade at the time of independence.

Answer:

During the colonial rule, the British followed a discriminatory tariff policy under which they
imposed heavy tariffs (export duties) on India’s export of handicraft products, while
allowing free export of India’s raw material to Britain and free import of British products to
India. This made Indian exports costlier and its international demand fell drastically. India’s
export basket during the colonial rule comprised mainly of primary products like sugar, jute,
silk, etc. and the imports comprised of finished consumer goods like cotton, woolen clothes,
etc, from Britain. As the monopoly power of India’s export and import rested with Britain,
so, more than half of India’s trade was restricted to Britain and the remaining imports were
directed towards China, Persia, and Srilanka. The opening up of Suez Canal further
intensified the monopoly power of the British over India’s foreign trade. It led to the fast
movement of goods from India to Britain and vice-versa. The surplus generated from India’s
foreign trade was not invested in Indian economy; rather it was used for administrative and
war purposes. This led to the drain of Indian wealth to Britain.

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Question 16:

Were there any positive contributions made by the British in India? Discuss.

Answer:

Yes, there were various positive contributions that were made by the British in India. The
contributions were not intentional but purely the effects of colonial exploitation of the
British. The following are the positive contributions made by the British:

1. Introduction of Railways: The introduction of railways by the British was a breakthrough

in the development process of Indian economy. It opened up the cultural and geographical
barriers and facilitated commercialisation of Indian agriculture.

2. Introduction of Commercialisation of Agriculture: The introduction of commercial

agriculture is an important breakthrough in the history of Indian agriculture. Prior to the
advent of the British, Indian agriculture was of subsistence nature. But with the
commercialisation of agriculture, the agricultural production was carried out as per the
market requirements. It was due to this factor that today India can aim at attaining self-
sufficiency in food grains production.

3. Introduced Free Trade to India: British forced India to follow free trade pattern during
the colonial rule. This is the key concept of globalisation today. The free trade provided
domestic industry with a platform to compete with the Britain industries. The introduction
of free trade led to an increase in the volume of India’s export rapidly.

4. Development of Infrastructure: The infrastructure developed in India by the British

proved as useful tool to check the spread of famines. The telegram and postal services
served Indian public.

5. Promoted Western Culture: English as a language promoted westernised form of

education. The English language acted as a window to the outside world. This has integrated
India with the rest of the world.

6. Role Model: The way and the technique of British administration acts as a role model for
the Indian politicians and planners. It helped Indian politicians to govern the country in an
efficient and effective manner.

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 Chapter 2 - Unit I- Indian Economy 1950-1990
Question 1:

Define a plan.

Answer:

A plan is a proposed list of goals that an economy wants to achieve within a specific period
of time. It suggests the optimum ways to utilise the scarce available resources to achieve
the enlisted goals. In India, planning is done for a period of five years, which is called five
year plan. Plans have both specific and general goals. Some of the common goals are
economic growth, modernisation, self-reliance and equity. Plans lay down the basic
framework over which the policies are designed. Often various goals are conflicting to each
other, for example, modernisation reduces labour employment. So there is a need to
maintain a balance among different goals.

Question 2:

Why did India opt for planning?

Answer:

Soon after independence, India faced an important choice to opt either for capitalism or
socialism. Finally, India, inspired by the extraordinary success of planning in Soviet Union,
opted for socialism. Although, Indian political and economic conditions were not as
favourable as it was for Soviet Unions to opt for socialism, yet India adopted socialism but
with a difference. India hinged upon the socialist idea with a strong emphasis on public
sector and active participation of the private sector in a democratic framework. The
Planning Commission (1950) was established with the motive that the government would
undertake comprehensive planning for the nation as a whole, where public sector would lay
down the basic economic framework and would encourage private sector for their active
contribution to the economic growth.

Question 3:

Why should plans have goals?

Answer:

Every plan should have specified goals. Plan without goal is like life without soul. While a
plan specifies the means and ways to allocate scarce resources to achieve proposed targets,
goals are the ultimate targets, the achievement of which ensures the success of plans. Thus,
plans must include the goals.

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Question 4:

What are high Yielding Variety (HYV) seeds?

Answer:

High Yielding Variety of seeds was developed by the Nobel Laureate Dr. Narman Barlauf in
Mexico. These seeds are more productive and need regular and adequate irrigation facilities
along with greater use of fertilisers and pesticides. In 1966, consequent to the use of HYV
seeds, Indian agricultural sector experienced Green Revolution, especially in the crops of
rice and wheat. HYV seeds grow faster than the normal seeds and, consequently, crops can
be harvested in a much shorter time period. Initially, HYV seeds were used in states like
Punjab, Andhra Pradesh and Tamil Nadu (as these states had more suitable irrigation
facilities) and later on to other states. Consequent to the use of HYV seeds, the production
of food grains in 1967-68 increased by 25% (approx).

Question 5:

What is marketable surplus?

Answer:

Marketable surplus refers to the difference between the total output produced by a farmer
and his on-farm consumption. In other words, it is that portion of the total output that the
farmer sells in the market.

Marketable surplus = Total farm output produced by farmer – Own consumption of farm
output

Question 6:

Explain the need and type of land reforms implemented in the agriculture sector.

Answer:

The need for land reforms in India was very necessary due to the following reasons:

1. Land Tenure System: There were three types of land tenure systems namely, the
Zamindari System, the Mahalwari System and the Ryotwari System prevalent in the Indian
agricultural sector at the time of independence. The common feature of these three
systems was that the land was mostly cultivated by the tenants and the land revenues were
paid by them to their landlords. This led to the exploitation of tenants in the form of
exorbitant rents.

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2. Size of Land Holdings: The size of land holdings owned by the farmers was very small. In
addition, the land holdings were fragmented. This obstructed the use of modern techniques.

3. Lack of Initiative: As most of the land was owned by the landlords, so the farmers lacked
initiative and neither had enough means to undertake mechanised methods of cultivation.

4. Traditional Approach and Low Productivity: Indian farmers used to rely on the
conventional and the traditional inputs and methods and climatic conditions that hampered
the productivity of agricultural sector.

5. Absence of Marketing System: Due to the absence of well developed marketing system,
the farmers used to rely on the intermediaries to sell their product in the market. These
intermediaries used to purchase the farm products at a very low price and sell them at
higher price at market. Consequently, the correct profit share did not accrue to the farmer
and, hence, this led to the lack of finance and investment on farm.

6. Nature of Farming: The basic motive for farming was for subsistence. That is, farming was
done basically to earn survival and not for sale and to earn profit.

Due to the above problems in the Indian agriculture, it was very necessary to undertake land
reforms. Land reforms comprise of the following steps:-

1. Abolishing Intermediaries: The prime focus of land reforms was to abolish

intermediaries like Zamindars, Jagirdars, etc. There were many steps undertaken to make
the tillers, the owners of the land.

2. Regulation of Rent: The cultivators were exploited in the form of exorbitant rents. In the
first five year plan, the maximum rent fixed was one-fourth or one-fifth of the total farm
produce (except in Punjab and Haryana, where it was rd). The regulations of rent not only
reduced the burden from the tenants but also enabled them with greater portion of finance
to invest on farm.

3. Consolidation of Holdings: As the land holdings were small and also fragmented, so it was
very necessary to consolidate the land holdings for the use of modern and advanced
technology. The farmers were given consolidated holdings equal to the total of the land in
their various fragmented plots. This enabled them the benefits associated with the large
scale production.

4. Land Ceilings: It means legislated fixed amount of land that an individual may hold. The
basic motive behind this step was to promote equality of ownership of land holdings. This
eradicated the concentration of land holdings in few hands. Government used to confiscate
the excess land over the fixed amount of land and distribute it among the landless farmers.

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5. Co-operative Farming: This step was taken to counter the problems due to sub-division of
holdings. Small scale farming by an individual land holder is neither profitable nor
productive, so, these steps encouraged different farmers to pool their farms and perform
farming jointly. This enhanced the productivity and greater profits were shared by the
individual farmers.

Question 7:

What is Green Revolution? Why was it implemented and how did it benefit the farmers?
Explain in brief.

Answer:

Due to low productivity, frequent occurrence of famines and low levels of agricultural
products in the latter half of second five year plan, a team was formed to suggest various
ways to counter these problems. As per the recommendations of the team, government
introduced the use of HYV seeds, modern techniques and inputs like fertilisers, irrigation
facilities and subsidised credit. These steps collectively are known as Intensive Area
Development Programme (IADP). Consequently, in the year 1967-68, food grains production
increased nearly by 25%. Due to this substantial increase of food grains production, this
outcome is known as ‘Green Revolution’. The word Green Revolution comprises of two
words ‘Green’ that is associated to crops and ‘Revolution’ is associated to the substantial
increase.

Need of Green Revolution

The needs of Green Revolution are as follows.

1. Low Irrigation Facility: The well irrigated and permanent irrigated area was only 17% in
1951. The major part of area was dependent on rainfall and, consequently, agriculture
suffered from low level of production.

2. Conventional and Traditional Approach: The use of conventional inputs and absence of
modern techniques further hampered the agricultural productivity.

3. Frequent Occurrence of Famines: Famines in India were very frequent during the period
1940s to 1970s. Further, due to higher growth rate of populations, agriculture failed to grow
at the same speed.

4. Lack of Finance (credit): Small and marginal farmers found it very difficult to get finance
and credit at cheap rate from the government and banks ,hence, fell an easy prey to the
money lenders.

5. Self-sufficiency: Due to the traditional agricultural practices, low productivity, and to feed
growing population, often food grains were imported that drained away scarce foreign

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reserves. It was thought that with the increased production due to Green Revolution,
government can maintain buffer stock and India can achieve self-sufficiency and self-
reliable.

6. Marketising Agriculture: Agriculture was basically for subsistence and, therefore, less
amount of agricultural product was offered for sale in the market. Hence, the need was felt
to encourage the farmers to increase their production and offer a greater portion of their
products for sale in the market.

Question 8:

Explain ‘growth with equity’ as a planning objective.

Answer:

Both growth and equity are the two important aspects of India’s five year plans. While
growth refers to the increase in GDP over a long period of time equity refers to an equitable
distribution of GDP so that the benefits due to higher economic growth are shared by all
sections of population. Equity implies social justice. Growth itself is desirable but growth in
itself does not guarantee the welfare of people. Growth is assessed by the market value of
goods and services (GDP) and it may be possible that the goods and services that are
produced may not benefit the majority of population. In other words, only a few with high
level of living and money income may get the share of GDP. Hence, growth with equity is a
rational and desirable objective of planning. This objective ensures that the benefits of high
growth are shared by all the people equally and, hence, this not only leads to reduction of
inequality of income, poverty promotion of egalitarian society but also enables everyone to
be self-reliant. Therefore, to conclude, it can be said that growth with equity is the most
important objective of an economic planning.

Question 9:

Does modernisation as a planning objective create contradiction in the light of

employment generation? Explain.

Answer:

No, modernisation as a planning objective does not contradict employment generation. In

fact both modernisation and employment generation are positively correlated. While
modernisation refers to the use of new and modern technology in production process that
may make some people lose their jobs in the initial stages. But gradually, the use of modern
technology and input will raise the productivity and, consequently, the income of the people
that will further raise the demand for goods and services. In order to fulfill this increased
demand, there will be more job opportunities that will lead more people to be hired and,
hence, more employment opportunities will be generated. Hence, both modernisation and
employment generation are not contradictory but are complementary to each other.
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Question 10:

Why was it necessary for a developing country like India to follow self-reliance as a
planning objective?

Answer:

Self-reliance implies discouraging the imports of those goods that could be produced
domestically. Achieving self-reliance is of prime importance for a developing country like,
India as otherwise, it would increase the country’s dependence on foreign products.
Dependence on foreign goods and services can promote economic growth of India but this
would not contribute to the development of domestic productive resources. Dependence
on foreign goods and services provides impetus to foreign country’s industries at the cost of
domestic infant industries. Further, imports drain away the scarce foreign reserves that are
of prime importance to any developing and underdeveloped economy. Therefore, achieving
self-reliance is an important objective for developing countries in order to avoid themselves
from being acquiescent to the developed nations.

Question 11:

What is sectoral composition of an economy? Is it necessary that the service sector should
contribute maximum to GDP of an economy? Comment.

Answer:

The sectoral composition of an economy is the contribution of different sectors to total GDP
of an economy during a year. That is, the share of agricultural sector, industrial sector and
service sector in GDP.

Yes, it is necessary that at the later stages of development, service sector should contribute
the maximum to the total GDP. This phenomenon is called Structural Transformation. This
implies that gradually the country’s dependence on the agricultural sector will shift from the
maximum to minimum and, at the same time, the share of industrial and service sector in
the total GDP will increase. This structural transformation together with the economic
growth is termed as economic development.

Question 12:

Why was public sector given a leading role in industrial development during the planning
period?

Answer:

At the time of independence, Indian economic conditions were very poor and weak. There
were neither sufficient foreign reserve nor did India have international investment
credibility. In the facet of such poor economic condition it was only the public sectors that

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need to take the initiative. The following are the reason that explains the driving role of the
public sector in the industrial development:

1. Need of Heavy Investment: There was a need of heavy investment for industrial
development. It was very difficult for the private sector to invest such a big amount. Further,
the risks involved in these projects were also very high and also these projects had long
gestation period. Thus, the government played the leading role to provide the basic
framework of heavy industries.

2. Low Level of Demand: At the time of independence, the majority of population was poor
and had low level of income. Consequently, there was low level of demand and so there was
no impetus for any private sector to undertake investment in order to fulfill these demands.
Thus, India was trapped into a vicious circle of low demand. The only way to encourage
demand was by public sector investments.

Question 13:

Explain the statement that green revolution enabled the government to procure sufficient
food grains to build its stocks that could be used during times of shortage.

Answer:

Green Revolution led to an increase in the production of food grains. With the use of
modern technology, extensive use of fertilisers, pesticides and HYV seeds there was a
significant increase in the agricultural productivity and product per farm land. In addition,
the spread of marketing system, abolition of intermediaries and easy availability of credit
has enabled farmers with greater portion of marketable surplus. All these factors enabled
the government to procure sufficient food grains to build the buffer stock and to provide
cushion against the shocks of famines and shortages.

Question 14:

While subsidies encourage farmers to use new technology, they are a huge burden on
government finances. Discuss the usefulness of subsidies in the light of this fact.

Answer:

Subsidy means availing some important inputs to farmers at a concessional rate that is
much lower than its market rate. During 1960s, in order to adopt new technology HYV seeds
and use of modern fertilisers and insecticides, farmers were provided inputs at a subsidised
rate. Thus, the public sector role was needed to invest heavily, so as to raise the income of
people that will in turn raise the demand and so on.

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The following arguments are given in favour of subsidy:

1) Subsidy is very important for marginal land holders and poor farmers who cannot avail
the essential farm inputs at the ongoing market rate.

2) Subsidy in 1960s was basically an incentive for the farmers to adopt modern techniques
and vital inputs like fertilisers, HYV seeds, etc. The subsidy was mainly of convincing and
lucrative nature so that the farmers do not hesitate to use these modern techniques.

3) Subsidy is generally provided to the poor farmers with the motive of reducing inequality
of income between rich and poor farmers and to promote an egalitarian distribution of
income.

4) It is argued that the adoption of new technology and techniques are not risk free and only
daring farmers are only willing to adopt them.

The following arguments are given against subsidy.

1) It is generally argued that subsidy favours and benefits fertiliser industries than the
farmers. Subsidies provide a protective shield against the market conditions and,
consequently, these industries need not to bother about their market share and
competition.

2) Subsidies are also enjoyed by the potential farmers who do not need them. This often
leads to the misallocation and wastage of the scarce resources.

3) Subsidies, if provided at a much lower rate than the market rate may lead to the wastage
of resources. For example, subsidised electricity leads to the wastage of energy.

4) There is a general consensus that in order to assess the benefit and feasibility of a
particular technique, subsidy should be provided but once the performance has been

judged subsidies should be stopped.

Hence, based on the above pros and cons, we can conclude that although subsidies are very
useful and necessary for poor farmers and to overcome uncertainties associated with
farming, it put an excessive burden on the scarce government finances. Thus, a proper
planning, suitable reforms and allocation of subsidies only to the needy farmers is required.

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 Chapter 2 - Unit I- Indian Economy 1950-1990
Question 15:

Why, despite the implementation of green revolution, 65 per cent of our population
continued to be engaged in the agriculture sector till 1990?

Answer:

Although Indian agricultural production increased substantially that enabled India to attain
the status of self-sufficiency in food grains but this increase is substantial only in comparison
to food grain production in the past. Further, India failed to achieve structural
transformation associated with the agricultural revolution and development. That is, in
other words, industrial and service sector failed to generate significant employment
opportunities in order to attract and absorb excess agricultural labour. The agricultural
contribution to GDP has fallen from 51% in 1960-61 to 44% in 1970-71, on the other hand,
the share of industry and service sector in India’s GDP increased merely from 19% to 23%
and from 30% to 33% during the same period. Meantime, the percentage of population
dependent on agriculture decreased merely from 67.50% (in 1950) to 64.9% (in 1990).
Hence, the industrial and service sector growth was not very significant and, hence, failed to
employ and attract surplus labour from agricultural sector. This may be because of the flaws
in the economic policies that became the bottleneck for the growth of secondary and
tertiary sector.

Question 16:

Though public sector is very essential for industries, many public sector undertakings incur
huge losses and are a drain on the economy’s resources. Discuss the usefulness of public
sector undertakings in the light of this fact.

Answer:

Although, the mismanagement and wrong planning in PSUs may lead to misallocation and,
consequently, to wastage of the scarce resources and finance but PSUs do have some
positive and useful advantages.

1. Enhancing Nation’s Welfare: The main motive of the PSU was to provide goods and
services that add to the welfare of the country as a whole. For example, schools, hospitals,
electricity, etc. These services not only enhance welfare of country’s population but also
enhance the future prospects of economic growth and development.

2. Long Gestation Projects: It was not feasible and economically viable for the private
sectors to invest in the big and wide projects like basic industries and electricity, railways,
roads, etc. This is because these projects need a very huge initial investment and have long
gestation period. Hence, PSU is the most appropriate to invest in these projects.

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 Chapter 2 - Unit I- Indian Economy 1950-1990
3. Basic Framework: An important ideology that was inherited in the initial five year plans
was that the public sector should lay down the basic framework for industrialisation that
would encourage the private sector at the latter stage of industrialisation.

4. Socialist Track: In the initial years after independence, Indian planners and thinkers were
more inclined towards socialist pattern. It was justified on the rational ground that if the
government controls the productive resources and production, then it won’t mislead the
country’s economic growth. This was the basic rationale to set up PSUs. These PSUs produce
goods not according to the price signals but according to the social needs and economic
welfare growth of the country.

5. Reduce Inequality of Income and Generate Employment Opportunities: It was assumed

that in order to reduce inequalities of income, eradicate poverty and to raise the standard
of living, government sector should invest in the economy via PSUs.

Question 17:

Explain how import substitution can protect domestic industry.

Answer:

In the initial seven five year plans, India opted for import substitution strategy, which
implies discouraging the imports of those goods that could be produced domestically.
Import Substitution Strategy not only reduces an economy’s dependence on the foreign
goods but also provides impetus to the domestic firms. Government provides various
financial encouragements, incentives, licenses to the domestic producers to produce
domestically the import substituted goods. This would not only allow the domestic
producers to sustain but also enables them to grow as they enjoy the protective
environment. They need not to fear from any competition and also not to worry about their
market share as license gives them the monopoly status in the domestic market. Being
monopolist, they earn more profits and invest continuously in R&D and always look for new
and innovative techniques. This gradually improves their competitiveness and when they
are exposed to the international market they can survive and compete with their foreign
counterparts.

Question 18:

Why and how was private sector regulated under the IPR 1956?

Answer:

IPR 1956 was adopted in order to accomplish the aim of state controlling the commanding
heights of economy. This policy was aligned with the Indian economy’s inclination towards
socialist pattern of system of Soviet Union. According to this resolution, industries were
classified into following three categories:

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 Chapter 2 - Unit I- Indian Economy 1950-1990
Category 1: Those industries that are established and owned exclusively by the public
sector.

Category 2: Those industries in which public sector will perform the primary role while the
private sector will play the secondary role. That is, the private sector supplements the public
sector in these industries.

Category 3: Those industries that are not included in Category 1 and Category 2 are left to
the private sector.

These industries that were left to the private sector, the government owns an indirect
control by the way of license. In order to initiate a new industry, private entrepreneurs
should obtain license (or permit) from the government. By licensing system, tax holidays
and subsidies government can promote industries in a backward region that will ,in turn,
promote the welfare and development of that region. This was supposed to reduce regional
disparities.

Further, in order to expand the scale of production, private sector needs to obtain license
from government. This was supposed to keep a check on the production of goods that are
socially undesirable and unwanted. Hence, the state fully controlled the private sector
either directly or indirectly.

Question 19:

Match the following:

1. Prime Minister A. Seeds that give large proportion of output

2. Gross Domestic B. Quantity of goods that can be imported

Product
3. Quota C. Chairperson of the planning commission
4. Land Reforms D. The money value of all the final goods and
services produced within the economy in one
year
5. HYV Seeds E. Improvements in the field of agriculture to
increase its productivity
6. Subsidy F. The monetary assistance given by
government for production activities.

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 Chapter 2 - Unit I- Indian Economy 1950-1990
Answer:
1. Prime Minister C. Chairperson of the planning commission

2. Gross Domestic D. The money value of all the final goods and
Product services produced within the economy in one year
3. Quota B. Quantity of goods that can be imported
4. Land Reforms E. Improvements in the field of agriculture to
increase its productivity
5. HYV Seeds A. Seeds that give large proportion of output
6. Subsidy F. The monetary assistance given by government for
production activities.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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Question 1:

Why were reforms introduced in India?

Answer:

Economic reforms were introduced in the year 1991 in India to combat economic crisis.
Economic Crisis of 1991 was a culminated outcome of the policy failure in the preceding
years. It was in that year the Indian government was experiencing huge fiscal deficits, large
balance of payment deficits, high inflation level and an acute fall in the foreign exchange
reserves. Moreover, the gulf crisis of 1990-91 led to an acute rise in the prices of fuel which
further pushed up the inflation level. Because of the combined effect of all these factors,
economic reforms became inevitable and were the only way to move Indian economy out of
this crisis.

The following are the factors that necessitated the need for the economic reforms.

1. Huge Fiscal Deficit: Throughout 1980s, fiscal deficit was getting worse due to huge non-
development expenditures. As a result, gross fiscal deficit rose from 5.7% of GDP to 6.6% of
GDP during 1980-81 to 1990-91. Subsequently, a major portion of this deficit was financed
by borrowings (both from external and domestic source).

The increased borrowings resulted in increased public debt and mounting interest payment
obligations. The domestic borrowings by government increased from 35% to 49.8% of GDP
during 1980-81 to 1990-91. Moreover, the interest payments obligations accounted for
39.1% of total fiscal deficit. Consequently, India lost its financial worthiness in the
international market and, fell in a debt trap. Thus, economic reforms were needed urgently.

2. Weak BOP Situation: BOP represents the excess of total amount of exports over total
amount of imports. Due to lack of competitiveness of Indian products, India was not able to
earn enough foreign exchange through exports to finance our imports. The current account
deficit rose from 1.35% to 3.69% of GDP during 1980-81 to 1990-91. In order to finance this
huge current account deficit, Indian government borrowed a huge amount from the
international market. Consequently, the external debt increased from 12% to 23% of GDP
during the same period. On the other hand, Indian exports were not potent enough to earn
sufficient foreign exchange to repay these external debt obligations. This BOP crisis
compelled the need for the economic reforms.

3. High level of Inflation: The high fiscal deficits forced the central government to monetise
the fiscal deficits by borrowings from RBI. RBI printed new money that pushed up the
inflation level, thereby, making the domestic goods more expensive. The rate of inflation
rose from 6.7% p.a. to 10.3% p.a. during 1980s to 1990-91. In order to lower the inflation
rate, government in 1991 had to opt for the economic reforms.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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4. Sick PSUs: Public Sector Undertakings were assigned the prime role of industrialisation
and removal of inequality of income and poverty. But the subsequent years witnessed the
failure of PSUs to perform these roles efficiently and effectively. Instead of being a revenue
generator for the central government, these became liability. The sick PSUs added an extra
financial burden on the government’s budget.

Thus, because of all the above reasons existing concomitantly, the economic reforms
became inevitable.

Question 2:

Why is it necessary to become a member of WTO?

Answer:

It is important for any country to become a member of WTO (World Trade Organisation)
for the following reasons:

I. WTO provides equal opportunities to all its member countries to trade in the
international market.
II. It provides its member countries with larger scope to produce at large scale to cater
to the needs of people across the international boundaries. This provides ample
scope to utilise world resources optimally and provides greater market accessibility.
III. It advocates for the removal of tariff and non-tariff barriers, thereby, promoting
healthier and fairer competition among different producers of different countries.
IV. The countries of similar economic conditions being members of WTO can raise their
voice to safeguards their common interests.

Question 3:

Why did RBI have to change its role from controller to facilitator of financial sector in
India?

Answer:

Prior to liberalisation, RBI used to regulate and control the financial sector that includes
financial institutions like commercial banks, investment banks, stock exchange operations
and foreign exchange market. With the economic liberalisation and financial sector reforms,
RBI needed to shift its role from a controller to facilitator of the financial sector. This implies
that the financial organisations were free to make their own decisions on many matters
without consulting the RBI. This opened up the gates of financial sectors for the private
players. The main objective behind the financial reforms was to encourage private sector
participation, increase competition and allowing market forces to operate in the financial
sector. Thus, it can be said that before liberalisation, RBI was controlling the financial sector

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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operations whereas in the post-liberalisation period, the financial sector operations were
mostly based on the market forces.

Question 4:

How is RBI controlling the commercial banks?

Answer:

RBI controls the commercial banks via various instruments like Statutory Liquidity Ratio
(SLR), Cash Reserve Ratio (CRR), Bank Rate, Prime Lending (PLR), Repo Rate, Reverse Repo
Rate and fixing the interest rates and deciding the nature of lending to various sectors.
These are those ratios and rates that are fixed by RBI and it is mandatory for all the
commercial banks to follow or maintain these rates. All these measures control the
commercials banks' operations and also control money supply in Indian economy.

Question 5:

What do you understand by devaluation of rupee?

Answer:

Devaluation of Rupee refers to the fall in the value of rupee in terms of foreign currency.
Specifically, it implies deliberate official lowering of the value of the country's currency with
respect to the foreign currency. Devalutaion prevails under the fixed exchange rate regime.
This implies that value of rupee has fallen and the value of foreign currency has risen. It
means that now (after devaluation) one US$ can be exchanged for more rupees. This
encourages exports and discourages imports as the former is cheaper now for foreign
countries and the latter is expensive for Indians.

Question 6:

Distinguish between the following

(i) Strategic and Minority sale

(ii) Bilateral and Multi-lateral trade

(iii) Tariff and Non-tariff barriers.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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Answer:

(i)
(i) Strategic Sale Minority Sale
a) Strategic Sale refers to the sale of 51% Minority Sale refers to the sale of
or more stake of a PSU to the private less than 49% stake of a PSU to the
sector who bids the highest. private sector.
b) The ownership of PSU is handed over The ownership of PSU still remains
to the private sector. with the government as it holds
51% of stakes.

(ii)
(ii) Bilateral Trade Multilateral Trade
a) It is a trade agreement between two It is a trade agreement among more
countries than two countries.
b) This is an agreement that provides This is an agreement that provides
equal opportunities to both the equal opportunities to all the
countries. member countries in the
international market

(iii)
(iii) Tariff Barriers Non-tariff Barriers
a) It refers to the tax imposed on the It refers to the restrictions other than
imports by the country to protect its taxes, imposed on imports by the
domestic industries. country.
b) It includes custom duties, export- It includes quotes and licenses.
import duties
c) It is imposed on the physical units It is imposed on the quantity and
(like per tonne) or on value of the quality
goods imported.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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Question 7:

Why are tariffs imposed?

Answer:

Tariffs are imposed to make imports from foreign countries relatively expensive than
domestic goods, thereby, t discouraging imports indirectly. These are imposed to provide a
safe and protective environment to the infant domestic firms from their technologically
advanced foreign counterparts. Tariffs facilitate the domestic firms to survive and grow.
Tariffs are also imposed on those goods that the government thinks to be socially unwanted
and imports of which will exert unnecessary burden on the scarce foreign exchange
reserves.

Question 8:

What is the meaning of quantitative restrictions?

Answer:

Quantitative Restrictions (QRs) refer to the restrictions in the form of limits or quotas on the
amount of commodities that can either be imported or exported. QRs usually on imports
(refers to non-tariff measures) are imposed to discourage imports of foreign goods and to
reduce Balance of Payment (BOP) deficits. The imposition of QRs provides impetus to the
domestic firms to survive, grow and expand in a protective and lesser competitive
environment.

Question 9:

Those public sector undertakings which are making profits should be privatised. Do you
agree with this view? Why?

Answer:

An efficient and profit earning PSU is a revenue generator for the government. But if, a PSU
is an inefficient and loss making one, then the same PSU exerts unnecessary burden on the
government's scarce revenues and further may lead to budget deficit. The loss making PSUs
should be privatised whereas it would not be fair to privatise a profit making PSU. Privatising
a PSU may lead to concentration of monopoly power in the private hands. Further some of
the PSUs like, water, railways, etc. enhance the welfare of nation and is meant to serve
general public at a very nominal cost. Privatisation of such important PSUs will lead to loss
of welfare of poor people. Hence, only less important PSUs should be privatised while
leaving the core and important PSUs to be owned by the public sector. Instead of
privatisation of profit-making PSUs, government can allow more degree of autonomy and

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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accountability in their operations, which will not only increase their productivity and
efficiency but also enhance their competitiveness with their private counterparts.

Question 10:

Do you think outsourcing is good for India? Why are developed countries opposing it?

Answer:

Yes, outsourcing is good for India. The following points suggest that outsourcing is good
for India.

1. Employment: For a developing country like India, employment generation is an important

objective and outsourcing proves to be a boon for creating more employment
opportunities. It leads to generation of newer and higher paying jobs.

2. Exchange of technical know-how: Outsourcing enables the exchange of ideas and

technical know-how of sophisticated and advanced technology from developed to
developing countries.

3. International worthiness: Outsourcing to India also enhances India’s international

worthiness credibility. This increases the inflow of investment to India.

4. Encourages other sectors: Outsourcing not only benefits the service sector but also
affects other related sectors like industrial and agricultural sector through various backward
and forward linkages.

5. Contributes to human capital formation: Outsourcing helps in the development and

formation of human capital by training, imparting them with advanced skills, thereby,
increasing their future scope and their suitability for high ranked jobs.

6. Better standard of living and eradication of poverty: By creating more and higher paying
jobs, outsourcing improves the standard and quality of living of the people in the developing
countries. It also helps in reducing poverty.

7. Greater infrastructural investment: Outsourcing to India requires better quality

infrastructure. This leads to the modernisation of the economy and larger investment by the
government to develop quality infrastructure and develop quality human capital.

However, Outsourcing to India is good but developed countries oppose this because
outsourcing leads to the outflow of investments and funds from the developed countries to
the less developed countries. Also the MNCs contribute more to the development of the
host country than the home country. Further, outsourcing reduces the employment
generation in the developed countries as the same jobs can be done in the less developed

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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countries at relatively cheap wages. Moreover, this leads to job insecurity in the developed
countries as at a point of time jobs can be outsourced to the developing countries.

Question 11:

India has certain advantages which make it a favourite outsourcing destination. What are
these advantages?

Answer:

The following points qualify India to be the favourite spot for outsourcing by various
MNCs.

1. Easy Availability of Cheap Labour: As the wage rates in India are comparatively lower
than that of in the developed countries, MNCs find it economically feasible to outsource
their business in India.

2. Reasonable Degree of Skills: Indians have fairly reasonable degree of skills and
techniques that need low training period and, thus, low cost of training.

3. International worthiness: India has a fair international worthiness and also credibility..
This enhances the faith of the foreign investors in India.

4. Virgin Market: India has a virgin market for produced goods and services. This not only
helps the MNCs to explore the wide domestic market of India but also conquer the
international market as the cost of production in India is relatively cheaper.

5. Stable Political Environment: The democratic political environment in India provides a

stable and secured environment to the MNCs to expand and grow.

6. Favourable Government Policies: The most important point that makes India as the most
favourite spot for outsourcing is the favourable government and tax policies. MNCs gets
various types of lucrative offers from the Indian government like tax holidays, low rate of
tax, easy tax policies, etc. All these policies enable the MNCs to retain a major portion of
their earnings in the form of savings that they can invest to grow and expand their business.

7. Lack of Competitive Competitors: The most important for the MNCs in India is that they
don’t face stiff competition from the Indian domestic industries. This almost enables them
to enjoy a monopoly status in the Indian markets.

8. Reasonable Degree of Infrastructural Investment: Indian government has invested

heavily in the past two decades in the infrastructural sector. Various steps have been taken
for connecting remote and rural areas to the metropolitan and other major cities. This has

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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not only reduced the cost of production of the MNCs but also helped them operate
efficiently and effectively.

9. Cheap and Abundant Availability of Raw Materials: India is well enriched in natural
resources. This ensures the MNCs cheap availability of raw material and undisturbed and
perennial supply of raw materials. This enables proper and smooth operation of MNCs.

Question 12:

Do you think the navaratna policy of the government helps in improving the performance
of public sector undertakings in India? How?

Answer:

To improve efficiency, infuse professionalism and to enable PSUs to compete effectively in

the market, government awarded the status of ‘navaratnas’ to the following nine PSUs:

1) Indian Oil Corporation Ltd (IOCL)

2) Bharat Petroleum Corporation Ltd (BPCL)
3) Hindustan Petroleum Corporation Ltd (HPCL)
4) Oil and Natural Gas Corporation Ltd (ONGC)
5) Steel Authority of India Ltd (SAIL)
6) India Petro-chemicals Corporations Ltd (IPCL)
7) Bharat Heavy Electricals Ltd (BHEL)
8) National Thermal Power Corporation (NTPC)
9) Videsh Sanchar Nigam Ltd (VSNL)

These corporations were granted a greater degree of financial, managerial and operational
autonomy. This boosted their efficiency and effectiveness. They also became highly
competitive and some of them are becoming the giant global players. Consequent to their
better performance, government retained them under public sector and enabled them to
grow themselves not only in the domestic market but also in the international market.
These corporations are self-reliant and financially self-sufficient. Thus, the navaratnapolicy
has certainly improved the performance of these PSUs.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
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Question 13:

What are the major factors responsible for the high growth of the service sector?

Answer:

The major factors that led to the growth of service sectors in India are as follows;

1. High demand for services as final product: India was a virgin market for service sector.
So, when service sector started booming due to business outsourcing from the developed
countries to India, there was very high demand for these services especially for banking,
computer service, advertisement and communication. This high demand in turn led to a
high growth rate of service sector.

2. Liberalisation and economic reforms: The growth of Indian service sector is also
attributable to the liberalisation and various economic reforms that were initiated in 1991.
Due to these reforms, various restrictions on the movement of international finance were
minimised. This led to huge inflow of foreign capital, foreign direct investments and
outsourcing to India. This encouraged the service sector growth.

3. Structural transformation: Indian economy is experiencing structural transformation that

implies shift of economic dependence from primary to tertiary sector. Due to this
transformation, there was increased demand of services by other sectors which y boosted
the service sector.

4. Advanced technology and growth of IT: The advancements and innovations in the IT
sector enabled the use of internet, telecommunication, mobile phone and electronic
transactions across different countries. All these contributed to the growth of the service
sector in India.

5. Increased volume of trade: Low tariff and non-tariff barriers on imports by India are also
responsible for high growth rate of service sector. The foreign trade reforms enabled the
domestic products to interact and compete in the international markets.

6. Cheap labour and reasonable degree of skill in India: Due to the availability of cheap
labour and reasonable degree of skilled man power in India, developed countries found
outsourcing to India feasible and profitable. The business outsourcing in itself provides
substantial encouragements (like development of human capital that requires services like
good coaching centers and reputed institutions, etc.) to the growth of service sector.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
Globalisation: An Appraisal
Question 14:

Agriculture sector appears to be adversely affected by the reform process. Why?

Answer:

The economic reforms of 1991 did not benefit the agricultural sector significantly. The
following are the reasons that explain the adverse effects of the economic reforms on
India’s agriculture sector:

1. Reduction of Public Investment: There has been a drastic decrease in the volume of
public investment in the agricultural sector. There has been an acute cutback from the
Indian government to provide sufficient irrigation facilities, electricity, information system,
market linkages and roads. Moreover, investment in agricultural research and development
was not as extensive as it was during green revolution phase

2. Removal of Subsidies: Removal of subsidies on fertilisers pushed up the cost of

production of agriculture. This made farming more expensive, thereby, adversely affecting
the poor and marginal farmers.

3. Liberalisation and Reduction in Import Duties on Agricultural Products: Due to

adherence to the WTO commitments, Indian government reduced import duties on
agricultural products that forced the poor and marginal farmers to compete with their
foreign counterparts in the international markets. Stiff competition in the international
market along with traditional techniques of farming badly affected the poor farmers.

4. Shift towards Cash Crops and Lack of Food Grains: The export oriented production
strategies led to the shift of agricultural production from food grains to the production of
cash crops like cotton, jute, etc. This led to reduced availability of food grains and,
consequently, t lower nutritional values which further reduced their productivity.

5. Inflationary Pressures on Food Grains: The shift towards cash crops production along
with the removal of subsidies exerted inflationary pressures on the prices of food grains.
This in turn adversely affected the agricultural sector’s performance by making the cost of
producing food grains more expensive.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
Globalisation: An Appraisal
Question 15:

Why has the industrial sector performed poorly in the reform period?

Answer:

Similar to the agricultural sector, industrial sector’s performance was also poor. The poor
performance of industrial sector may be attributable to the following reasons:

1. Cheaper Imports: The demand for industrial output reduced due to the cheaper imports.
The imports from the developed countries were cheaper due to the removal of import
tariffs. These cheaper and quality foreign imports led to the fall in the demand of domestic
goods.

2. Lack of Investment: Due to the lack of investment in infrastructure facilities (including

power supply) the domestic firms could not compete with their developed foreign
counterparts in terms of cost of production and quality of goods. The inadequate
infrastructural investment pushed up the cost of production of the domestic producers and,
consequently, led to the non-feasibility of their growth prospectus.

3. High Non-tariffs Barriers by the Developed Countries: It was very difficult to access the
developed countries market due to high non-tariff barriers maintained by the developed
countries. For instance, US did not remove quota restrictions on imports of textiles from
India and China.

4. Vulnerable and Infant Domestic Industries: During the pre-liberalised period, the
domestic industries were provided a protective environment to grow and expand. But at the
time of liberalisation, the domestic industries were still not developed up to the extent it
was thought and consequently, they could not compete with the multi-national companies.
The dependence of domestic industries on traditional technologies which were neither cost
effective nor quality effective was an important reason for their poor growth. Thus, the
domestic industries were adversely affected by liberalisation.

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 Chapter 3 - Unit II- Liberalisation, Privatisation and
Globalisation: An Appraisal
Question 16:

Discuss economic reforms in India in the light of social justice and welfare.

Answer:

The economic reforms have enabled India to access and compete in the international
markets. This facilitated the movement of goods and services across the international
boundaries. Further, the increased inflows of foreign capital and investment to India have
eliminated the shortage of foreign exchange to finance the imports of sophisticated and
advanced technologies to India. Moreover, the boom in the outsourcing and the service
sector led India’s economic growth and GDP to increase by many folds. But on the other
side, agriculture that employed a significant proportion of population, failed to be benefited
by these economic reforms. Also the reforms favoured the high income group population at
the cost of their poor counterparts. This resulted in wide and still increasing economic and
social inequalities among different section of population. Further, the economic reforms
developed the areas that were well connected with the metropolitan cities leaving the
remote and rural area undeveloped. Consequently, there were wide regional disparities.
The boom in the service sector, especially in the form of quality education, superior health
care facilities, IT, tourism, multiplex cinemas, etc. were out of the reach of the poor section
of the population. The population engaged in the agricultural and allied sectors has still not
been able to share the fruits of advanced technology and modern techniques. Further, the
high income group has experienced increase in income, thereby, appreciating the quality of
their consumption basket, leaving the low and middle income group to fight hard to earn
their livelihood. Thus, it can be concluded that the economic reforms failed to provide social
justice and enhance welfare of the general public of India.

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 Chapter 4 - Unit III- Poverty
Question 1:

Why is calorie-based norm not adequate to identify the poor?

Answer:

The calorie-based norm is not adequate to identify the poor because of the following
reasons:

a) This mechanism does not differentiate a very poor from other poor. It categorises
them into one category that is, ‘poor’. Consequently, it indicates whole class of poor
and not, especially, those poor who are the most needy.
b) This mechanism uses inappropriate proxies for income like Monthly Per Capita
Expenditure (MPCE), etc. These items do not act as suitable and appropriate proxies
for income to measure calorie requirements.
c) This mechanism does not consider various important factors that are associated with
poverty. These factors are health care, clean drinking water, proper sanitation and
basic education. Mere estimation of calorie intake does not reflect the true
economic condition of an individual.
d) Another shortcoming of calorie-based norm is that it fails to account for social
factors that exaggerate and worsen poverty like ill health, lack of access to
resources, lack of civil and political freedom, etc.

Therefore, because of these shortcomings in the calorie-based norm, it cannot be used to

identify the poor.

Question 2:

What is meant by ‘Food for Work’ programme?

Answer:

Food for Work (FFW) programme was started in 2000-01 with the objective of generating
ample employment opportunities for unskilled labourers concentrated in the drought-
affected states of Chattisgarh, Gujarat, Himachal Pradesh, M.P, Orissa, Rajasthan,
Maharashtra and Uttaranchal. This programme provides food in exchange of work done by
labourers. This programme was aimed to protect poor people against reduction in their
purchasing power capacity in the natural calamities prone areas. The work done by the
labourers includes watershed development works, water harvesting and construction of
metal roads connecting rural and urban areas. This programme not only provides labourers
with food but also creates semi-durable assets that facilitate economic and social
development of the backward areas.

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 Chapter 4 - Unit III- Poverty
Question 3:

Why are employment generation programmes important in poverty alleviation in India?

Answer:

The importance of employment generation programmes in poverty alleviation efforts in

India are as follows:-

(i) Direct Relationship between Employment and Poverty Alleviation

There exists a positive relationship between employment and poverty alleviation. If

government aims at creating new employment opportunities, then more people will be
employed that will raise their income and, thus, will pull them above the poverty line.

(ii) Higher Standard of Living

With the increase in income, consequent to the new employment opportunities, poverty
trodden people can enjoy higher standard of living and greater accessibility to education,
better health facilities, proper sanitation, etc.

(iii) Reduce Rural-Urban Migration

Poor people tend to migrate from rural to urban areas in sought of better employment and
earning opportunities. This creates undue burden on the urban areas to provide ample job
opportunities to these migrants. Failure of this leads to formation of informal sector that
makes these people more vulnerable in the urban areas. A positive point of employment
generation programmes is that it generates ample employment opportunities in rural areas
so as to reduce rural-urban migration.

(iv) Creation of Durable Assets

The employment generation programmes aim at creation of durable assets like watershed
development works, water harvesting, irrigation facilities, canal building, construction of
roads connecting rural areas to urban areas and construction of dams. All these assets play
an important role in the social and economic development of the country.

(v) Self-sufficiency and Self-reliant Areas

The creation of these durable assets protects the poverty-trodden areas from natural
calamities such as floods and droughts thereby facilitating these areas to be self-sufficient
and self reliant.

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 Chapter 4 - Unit III- Poverty
(vi) Impart and Enhance Skills

Most of the employment generation programmes help in human capital formation by

enhancing knowledge and imparting skills to the unskilled labourers. Such skills increase the
employment prospect of the unskilled labourers in the industrial and the service sectors.
This not only enhances income earning capacities of these people but also alleviates poverty
simultaneously.

(vii) Reduce underemployment and disguised unemployment

Indian agricultural sector is characterised by disguised unemployment. This implies that

although a labourer is engaged in agriculture but the total output won’t be affected even if
the labourer is withdrawn. The role of employment generation programmes in reducing
disguised unemployment is very important. These programmes engage these extra
labourers in economically fruitful activities, thereby, reducing unnecessary burden on the
agricultural sector.

Question 4:

How can creation of income earning assets address the problem of poverty?

Answer:

The income earning assets are those assets the ownership of which are controlled and
owned by the members of a household. These are land, capital, labour and different levels
of skills. Poverty and inequality of income arises due to improper distribution of and access
to such income-earning assets. The labour skills of the poverty-trodden population are
usually traditional and poor in quality that consequently leads to poor income and
employment opportunities. Moreover, a substantial proportion of population is engaged in
the small scale production that often lacks capital and modern technology. Consequently,
such techniques directly hamper the income earning capabilities of small scale industries. In
addition to this, poor people often lack access to social services like proper medical and
health care facilities, better education, proper sanitation, etc. The lack of access to such
social services affects health, productivity and finally income earning capabilities of the
poor.

In order to alleviate the problem of poverty, the role of income earning assets cannot be
substituted. There are various measures that can create income earning assets for the poor
people like providing proper access to easy credit, capital, monetary assistance, imparting
technical skills, allotment of land to the landless and marginal farmers and better access to
education, health services along with better access to information and support services for
increasing their productivity. All these measures directly or indirectly contribute positively
to the quality of human capital and their endowment of income-earning assets. This in turn

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 Chapter 4 - Unit III- Poverty
leads to increase in the income opportunities and earning capabilities, thereby, contributing
to the alleviation of poverty.

Question 5:

The three dimensional attack on poverty adopted by the government has not succeeded
in poverty alleviation in India. Comment.

Answer:

In order to alleviate poverty, government has adopted the following three dimensional
approaches:

I. Trickle-down Approach- This approach is based on the expectation that the positive
effects of economic growth will be trickled down or benefit all sections of the society
and also the poor people.
II. Poverty Alleviation Approach- This approach aimed at the creation of income-
earning assets and employment generation opportunities.
III. Providing Basic Amenities- This approach aimed at providing the basic amenities like
proper medical and health care facilities, better education, proper sanitation etc. to
the poor people. These basic amenities positively affect health, productivity, income-
earning opportunities and, thereby, alleviate poverty.

A thorough analysis of the three dimensional approach yield the following conclusions:

Although there has been a reduction in the percentage of absolute poor in some of the
states but still the poor people lack basic amenities, literacy, and nourishment.

Secondly, there has not been significant change in the ownership of income-earning assets
and productive resources.

Thirdly, land reforms do not have high successful records (except West Bengal and Kerala)
that further added to the inequality of income from land.

Fourthly, lack of capital and availability of easy credit, lack of modern technology and poor
access to information and marketing became the major bottlenecks for the small productive
houses like cottage industries and other small scale industries.

Fifthly, improper implementation of poverty alleviation programmes by ill-motivated and

inadequately trained bureaucrats further worsened the situation.

Sixthly, corruption along with the inclination towards interest of elites led to an inefficient
and misallocation of scarce resources.

Therefore, it can be summed up that although various poverty alleviation programmes were
well planned on papers but these were not implemented properly.

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 Chapter 4 - Unit III- Poverty
Question 6:

What programmes has the government adopted to help the elderly people and poor and
destitute women?

Answer:

The government has adopted various programmes to help the elderly people and poor and
destitute women. One of such programmes is National Social Assistance Programme,
introduced by the central government. This programme targets elderly people, widows and
the poor and destitute women who are alone and have no one to take care of them. Under
this programme, these targeted people are given pension to sustain their livelihood.

Question 7:

Is there any relationship between unemployment and poverty? Explain.

Answer:

Yes, there do exist a direct and positive relationship between unemployment and poverty.
Unemployment leads to poverty and poverty in turn leads to unemployment.

An unemployed person has no means to earn money and cannot fulfill his own and his
family’s basic needs. He and his family cannot avail quality education, medical facilities and
has no means to create income-earning assets. Such circumstances often compel
indebtedness. Consequently, an unemployed person exaggerates poverty for his family due
to indebtedness. This confirms the positive relationship between unemployment and
poverty.

If government wants to alleviate poverty, then it should aim at creating new employment
opportunities. As a result, more people will get employed and perhaps their income will rise.
This rise in income will improve their access to quality education, better health care and
other basic amenities. Further, these newly employed people will experience appreciation in
their living standards and can create income-earning assets. The combined result of all these
factors leads to alleviation of poverty. Hence, there exists a positive (but a negative)
relationship between unemployment (employment) and poverty.

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 Chapter 4 - Unit III- Poverty
Question 8:

Suppose you are from a poor family and you wish to get help from the government to set
up a petty shop. Under which scheme will you apply for assistance and why?

ANSWER:

For setting up a petty shop, I would apply for financial assistance under the programme of
Prime Minister’s Rozgar Yojana(PMRY). Under this programme, an unemployed educated
person from low-income family in rural and urban areas can set up any kind of enterprise
that can generate employment.

Question 9:

Illustrate the difference between rural and urban poverty. Is it correct to say that poverty
has shifted from rural to urban areas? Use the trends in poverty ratio to support your
answer.

Answer:

The major difference between rural and urban poverty in India lies in the standard of living.
The latter enjoys higher living standard compared to the former and the standard of living
may be attributable to the wide income disparity and gap between the two. Another major
difference is the level of education and also access to education. The urban Poor enjoy
better access to quality education than the rural counterparts. Thirdly, health care facilities
prevalent in the urban areas are far better than that of in the rural areas. Also the rural poor
people lack access to these health facilities and important medical information. Fourthly,
the difference lies in the type of houses they live in. The rural poor lives in kutcha house,
while the urban poor resides in pucca houses which are well developed with proper
sanitation facilities. Fifthly, rural poverty is temporary as the rural poor can migrate to urban
areas to seek employment but, on the other hand, urban poverty is permanent.
Year Poverty Ratio
Rural (%) Urban (%) Total (%)
1973-74 56.4 49.0 54.9
1977-78 53.1 45.2 51.3
1983 45.6 40.8 44.5
1987-88 39.1 38.2 38.9
1993-94 37.3 32.4 36.0
1999-2000 27.1 23.6 26.1
2004-05 28.3 25.7 27.5
comparable with
1993-94
Estimates Source: Planning Commission Estimates (Uniform Reference Period)

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 Chapter 4 - Unit III- Poverty
Yes, it is correct to say that poverty has shifted from rural to urban areas. The above data
spells out how rural poverty has declined significantly from 56.4% to 28.3% from 1973-74 to
2004-05 whereas decline in urban poverty (from 49% to 25.7%) is not so significant. Over
the years, rural poor has migrated to urban areas in order to seek for better employment
opportunities and better living standard. But on the other hand, since rural people lack skills
and education, so the urban industrial sector fails to absorb this excess supply of labour.
Consequently, these unskilled labourers form an informal sector (like rickshaw puller,
barber, cobbler, etc.) that makes them even more vulnerable. Thus, the trends in poverty in
India support the statement that poverty has shifted from rural to urban areas.
Question 10:

Suppose you are a resident of a village, suggest a few measures to tackle the problem of
poverty.

Answer:

Being a resident of a village, I would suggest the following measures to tackle the problem
of poverty:

1. Identification of poor.
2. Generating employment opportunities for the identified poor.
3. Free access to education and health care facilities.
4. Establishment of small scale industries.
5. Redistribution of income-earning assets.
6. Encouraging poor for their active participation
7. Organising Training Camps and Night Classes for imparting vocational training to
unskilled labourers.
8. Advancing financial and technical assistance to establish small enterprises.
9. Upgradation of agricultural practices to raise productivity
10. Enforcement of measures to check population growth.
11. Development of infrastructure.
12. Motivating the poor to acquire skills, information and knowledge.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 1:

What are the two major sources of human capital in a country?

Answer:

Human capital is a stock of skill and expertise of a nation at a particular point of time. The
contribution of human skills and expertise towards economic growth and development is
invaluable. This is because a stock of quality enriched human capital raises individual
efficiency and productivity thereby raising the aggregate production and economic well
being of a country. Thus, the importance of investment in enriching human capital is
immense and long lasting. The following are the two prime ways o to develop human capital
qualitatively:

I. Investment in Educational Sector: Education not only raises the standard and quality
of living but also encourages modern attitude of the people. Moreover, education
increases the productive capacity and productivity of a nation’s workforce by honing
their skills. Further, education increases the acceptability of modern techniques and
also facilitates a primitive economy to break the shackles of tradition and
backwardness. An investment in educational sector has two fold benefits. It not only
increases the income earning capacity but also reduces the skewed distribution of
income thereby forming an egalitarian society. The investment in educational sector
has long lasting returns. It not only enhances the present economic condition but
also improves the future prospects of a country. The importance of education is not
only limited to making people educated. but also in facilitating an underdeveloped
economy to solve different but interrelated macro economic problems like, poverty,
income inequality, population, investments, under utilisation of resources.
Therefore, investment in education must be accorded high priority in an
underdeveloped country as it leads to the enhancement of human capital
qualitatively.
II. Investment in Health Sector: There is a saying “The greatest wealth is health”. The
wealth of a country can be increased with the efforts of healthy workforce.
Investment in health sector increases efficiency, efficacy and productivity of a
nation’s workforce. In contrast to an unhealthy person, a healthy person can work
better with more efficiency and, consequently, can contribute relatively more to the
GDP of the country. Good health and medical facilities not only increase life
expectancy but also improves quality and standard of life. Investment in health
sector ensures the perennial supply of healthy workforce. Some of the common
expenditures incurred in the health sector are on providing better medical facilities,
easy availability of life saving drugs, common vaccination, spread of medical
knowledge, provision of proper sanitation and clean drinking water, etc. Thus, the
expenditure incurred on health is important in building and maintaining a productive

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 Chapter 5 - Unit III- Human Capital Formation In India
work force that in turn leads to the development of quality human capital in a
country.

Question 2:

What are the indicators of educational achievement in a country?

Answer:

Education makes a person well equipped with skills. An educated person is more skillful and
productive than an uneducated person. Consequently, the former enjoys higher income
earning capacity than the latter. Therefore, the prime indicator of educational achievement
is the income earning capacity of an individual. Besides this, there are other essential
indicators whose scope is even wider. These are:

1. Adult Literacy Rate: This rate indicates the percentage of the literate adult population
who are aged 15 years and above. The word literacy in this context is confined only to the
ability to read and write. It provides a measure of the stock of literate persons within the
adult population. This rate is expressed in terms of percentage. Higher the percentage of
adult literacy rate, higher the educational achievement in a country. This rate is the most
important indicator for a country as it indicates the percentage of the population that can
participate in the economic activity of the country.

2. Youth Literacy Rate: This rate indicates the percentage of literate people between the
age of 15-24 who can read and write. It denotes the stock of literate population within the
youth population. This is an important indicator of educational achievement in a country.
This is because of the fact that majority of a country’s population is not able to continue
their education till this age. Therefore, higher the youth literacy rate, higher will be the
achievement of a country in terms of education.

3. Primary Education Completion Rate: This rate indicates the percentage of students
completing the last year of primary school. Primary education includes students of the class
group 1 to 8 in the age group of 6-14 years. It includes basic education in reading, writing
and mathematics along with an elementary understanding of other subjects such as history,
geography, natural sciences, social sciences, art and music. Lower primary education
completion rate leads to lower youth literacy rate and, hence, lower adult literacy rate.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 3:

Why do we observe regional differences in educational attainment in India?

Answer:

India is a land of diverse culture, religions and communities. Every region has its own
customs and tradition. Also, as we go from one state to another, we find many differences
in terms of language, habit, culture, need, climate, etc. Due to these differences, there exist
regional differences in the educational attainment in our country. There exists a difference
in the pattern of education across India. Some regions lack educational facilities whereas
some give undue importance to education. For example, states like Bihar, Rajasthan, U.P
and Arunachal Pradesh are educationally backward whereas, states like Kerela, Tamil Nadu
and Uttranchal have higher literacy rates. Generally, it can be observed that the states that
lack employment opportunities and where the standard of living is close to the subsistence
level, education is given lesser importance. People in such states are engaged either in
agricultural sector or informal sector that has very less to do with education. The
opportunity cost of sending children to school in such states is very high than employing
them. The neglect of education in these regions is primarily because of the low standard of
living and poverty. These people cannot afford to send their children to schools and, in fact,
employ them either in the farm lands or in informal sector. Further, it can also be observed
that male children across India have lopsided access to education compared to female
children. Besides the above factor, there are other factors like custom, climate, etc. that
explains the regional differences in educational attainment in India.

Question 4:

Bring out the differences between human capital and human development.

Answer:

Human capital and human development are interrelated concepts but they are not
identical. While human capital refers to the stock of a nation’s human skills and expertise at
a particular point of time human development refers to holistic development and well being
of a nation’s human capital. On one hand, human capital considers education and health as
a means (skills and expertises) to enhance productive capacity, on the other hand human
development considers human beings as end in itself. The important difference between
human capital and human development is associated with the difference in the motive of
investment. While human capital focuses on t investment in education and health sector to
increase productivity and efficiency of workforce,on the other hand, human development
focuses on investment in education and health sector to increase the general well being and
standard and quality of living of human capital. If investment fails to increase the efficiency
and income earning capacity, then human capital regards the investment to be
unproductive. But, human development advocates in favour of such investments even

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 Chapter 5 - Unit III- Human Capital Formation In India
though these had failed to bring out higher productivity and efficiency. Human development
protects every individual’s right to get education and lead a healthy life.

Question 5:

How is human development a broader term as compared to human capital?

Answer:

Human development is a broader term as compared to human capital because human

capital is a means to an end whereas human development is an end in itself.

Human capital considers education and health as a means to make a human being a good
productive person. Human capital is a means to an end, where means implies skills that are
used in the process of production and end denotes the consequent increase in the
productivity. The higher levels of output can be achieved through extensive application of
human capital.

On the other hand, human development is an end in itself which refers to the holistic
development of the individuals. The development can be possible only by acquiring good
education and attaining good health. Therefore, education and health are the two main
features of human development. Human development occurs when majority of people in
the economy are educated and healthy. Thus, the end signifies the development of an
individual via education and health. Therefore, we can conclude that human development is
a broader term as compared to human capital.

Question 6:

What factors contribute to human capital formation?

Answer:

Human capital formation is an aggregate outcome of the investments in education,

health, transport and communication sector, technical know-how and on-the-job training
and migration. These factors are explained below.

i. Education

Education not only raises the standard and quality of living but also encourages modern
attitudes of people. Moreover, education increases the productive capacity and productivity
of a nation’s workforce by honing their skills. Further, education increases the acceptability
of the modern techniques and also facilitates a primitive economy to break the shackles of
tradition and backwardness. An investment in educational sector has two fold benefits. It
not only increases the income earning capacity but also reduces the skewed distribution of
income, thereby, forming an egalitarian society. The investment in educational sector has
long lasting returns. It not only enhances the present economic condition but also improves

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 Chapter 5 - Unit III- Human Capital Formation In India
the future prospects of a country. The importance of education is not only limited to making
people educated but also in facilitating an underdeveloped economy to solve different but
interrelated macro economic problems like, poverty, income inequality, population,
investments, under utilisation of resources. Therefore, investment in education must be
accorded high priority in a country.

ii. Health

There is a saying “The greatest wealth is health”. The wealth of a country can be increased
with the efforts of healthy workforce. Investment in health sector increases efficiency,
efficacy and productivity of a nation’s workforce. In contrast to an unhealthy person, a
healthy person can work better with more efficiency and, consequently, can contribute
relatively more to the GDP of a country. Good health and medical facilities not only increase
the life expectancy but also improve quality and standard of living. Investing in health sector
ensures the perennial supply of healthy workforce. Some of the common expenditures
incurred in the health sector are on providing better medical facilities, easy availability of
life savings drugs, common vaccination, spread of medical knowledge, provision of proper
sanitation and clean drinking water, etc. Thus, the expenditure incurred on health is
important in the building and maintaining a productive work force.

iii. On-the-Job Training

Training refers to the act of acquiring skills, knowledge and competency required to perform
a particular job efficiently and effectively. On-the-job training is the most effective kind of
training to a trainee, imparting him the technical skills and know-how at the actual work
site. In this type of training, a trainee is assisted (or hands on) and trained by a trainer
(usually by an experienced employee) when the trainee is actually doing the job. This helps
the trainee not only to acquire the theoretical and practical skills simultaneously but also
enables him to learn from the experiences of his trainer and, thereby, can increase his
efficiency and productivity. This is the most common type of training programs because the
returns in terms of increased productivity far exceed the cost of the training. Thus, the
expenditures on such training improve the quality of human capital by enhancing its
productivity, efficiency and income earning capacity.

iv. Migration

Migration refers to the movement of people from underdeveloped or developing countries

to developed countries in search of better avenues. Migrations contribute to human capital
formation as it facilitates the utilisation of inactive or underdeveloped skills of an individual.
The cost of migration involves cost of transportation and cost of living at the migrated
places. Usually, the cost of migration is very high due to the high cost of transportation and
high cost of livelihood in the developed countries. But still, people migrate in search of
better job opportunities and handsome salaries. Migration of human capital helps the

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 Chapter 5 - Unit III- Human Capital Formation In India
underdeveloped countries to acquire technical skills, efforts reducing methods and efficient
way of performing tasks. These skills and know-how are transmitted by the migrated people
to their home country that not only add to the economic growth and development but also
enhance the human capital of the home country.

v. Information

The degree of availability of jobs, salaries and admissions related information also play an
important role in the determination of human capital. The availability of jobs and
admissions related information not only helps the students to opt for the best choice
according to their interest areas but also lead to the effective utilisation of human skills and
knowledge. Similarly, the availability of medical information and health awareness
determine the health of the people. Thus, the expenditure on the spread of information (of
education and health) determines the effectiveness and efficacy of human capital.

Question 7:

How government organisations facilitate the functioning of schools and hospitals in India?

Answer:

The government organisations play an important role in the functioning of schools and
hospitals in India. The private institutions in the field of education and health are guided by
the profit motive. Consequently, the price of these facilities provided is high. In such a
scenario, government intervention becomes essential to regulate their functioning and
make these facilities available to the masses. The government organisations aim at
protecting the interest of the weaker and under priviledged section of the society.
Moreover, as education and health sectors have long gestation period, private sector cannot
be solely relied upon for their development. Thus, to boost the health and education
facilities the government has set up various organisations. The following are some of such
important organisations and their functioning.

1. NCERT (National Council of Education Research and Training)- This is responsible for
designing textbooks upto standard 12th which form the base for school curriculum in India.

2. UGC (University Grants Commission)- It is the prime funding authority for university
education

3. AICTE (All India Council for Technical Education)- It enforces rules and regulations
regarding technical and engineering education in India.

4. ICMR (India Council for Medical Research)- It enforces rules and regulations regarding
education and research in health sector.

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 Chapter 5 - Unit III- Human Capital Formation In India
5. National Institute of Health and Family Welfare- This institute is responsible for the
promotion of health and family welfare programmes.

Question 8:

Education is considered an important input for the development of a nation. How?

Answer:

Education is considered as an important input for the development of a nation because

the development of a nation rests on the proportion of the educated people in the
country. The significance of education in the economic development of a nation is
explained through the following points:

I. Imparts Quality Skills and Knowledge: Education endows people with quality skills,
thereby, enhancing their productivity. Consequently, it enhances the income earning
capacities of and opportunities for the people. Moreover, it also enables human
capital to utilise the available physical capital optimally.
II. Develops Mental Abilities: Education develops mental abilities of people and helps
them to make their choice rationally and intellectually. Education churns out good
citizens by inculcating values in them.
III. Acceptability of Modernisation: An educated public of a nation has greater
acceptability of modernisation and modern techniques. This not only helps the
economy to grow but also facilitates a primitive economy to break the shackles of
tradition and backwardness.
IV. Eradicates Skewed Income Distribution: Education not only increases the income
earning capacity but also reduces the skewed distribution of income, thereby,
forming an egalitarian society.
V. Raises Standard and Quality of Living: Education enhances the income earning
capacity of people and, thereby, raising the standard of living and improving the
quality of living.
VI. Increases the Participation Rate: It fosters economic development by increasing the
participation of people in the process of growth and development.
VII. One Solution for Other Economic Problems: The importance of education is not only
limited to making people educated but also in facilitating an underdeveloped
economy to solve different but interrelated macro economic problems like poverty,
income inequality, population, investments, under utilisation of resources.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 9:

Discuss the following as a source of human capital formation

(i) Health infrastructure

(ii) Expenditure on migration.

Answer:

(i) Health infrastructure

There is a saying “The greatest wealth is health”. The wealth of a country can be increased
with the efforts of healthy workforce. Investment in health sector increases efficiency,
efficacy and productivity of a nation’s workforce. In contrast to an unhealthy person, a
healthy person can work better with more efficiency and, consequently, can contribute
relatively more to the GDP of the country. Good health and medical facilities not only
extends life expectancy but also improves quality and standard of life. Investing in health
sector ensures the perennial supply of healthy workforce. Some of the common
expenditures incurred in the health sector are on providing better medical facilities, easy
availability of life savings drugs, common vaccination, spread of medical knowledge,
provision of proper sanitation and clean drinking water, etc. Thus, the expenditure incurred
on health is important in building and maintaining a productive work force.

(ii) Expenditure on migration

Migration refers to the movement of people from underdeveloped or developing countries

to t developed countries in search for better avenues. Migrations contribute to human
capital formation as it facilitates the utilisation of inactive or underdeveloped skills of an
individual. The cost of migration involves cost of transportation, and cost of living at the
migrated places. Usually, the cost of migration is very high due to the high cost of
transportation and high cost of livelihood in the developed countries. But still, people
migrate in search of better job opportunities and handsome salaries. Migration of human
capital helps the underdeveloped countries to acquire technical skills, efforts reducing
methods and efficient ways of performing tasks. These skills and know-how are transmitted
by the migrated people to their home country that not only add to the economic growth
and development but also enhance the human capital of the home country. If the gains
from migration outweigh the migration costs then it can be inferred that migration leads to
better utilisation of human capital skills.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 10:

Establish the need for acquiring information relating to health and education expenditure
for the effective utilisation of human resources.

Answer:

The degree of availability of jobs, salaries and admissions related information plays an
important role in the determination of human capital. The availability of jobs and
admissions related information not only help the students to opt for the best choice
according to their interest areas but also leads to the effective utilisation of human skills and
knowledge. Some of the important medium of catering different information related to
jobs, eligibility criteria, posts and salaries are Employment News (Rozgar Samachar),
Employment Exchanges, various TV programs and government and non-government
websites. While on the one hand, expenditures on education enhance human skills and their
utilisations, on the other hand, the expenditure on health improves health, efficiency,
quality of living and life expectancy of people. The expenditure incurred on the availability
of medical information and health awareness determines the health of the people. The
acceptability and the use of medical information and family welfare programmes are often
obstructed by lack of its publicity and promotion. Often people are reluctant to opt for
various health measures due to the lack of complete knowledge and information. For
example, few years back, people knew very little about polio and about its vaccination. But
due to the constant efforts by various government and non-government organisations
under the Pulse Polio Immunisation Program, people are now well aware of polio.
Therefore, it is due to the continuous publicity and various awareness campaigns, this
program have gained public consciousness. Thus, the expenditure on the spread of
information (of education and health) determines the effectiveness and efficacy of human
capital.

Question 11:

How does investment in human capital contribute to growth?

Answer:

Human capital and economic growth goes hand in hand. Human capital formation
accelerates the economic growth whereas economic growth in turn facilitates human
capital formation. The interrelationship between economic growth and human capital
formation can be explained with the help of the below mentioned points.

1. Increase in the Productivity of Physical Capital: Physical capital refers to the stock of
produced means of production. It consists of machines, production plants, tools and
equipments. The skilled workers handle the productive assets in such a manner that
these not only enhance their productivity and but also lead to an efficient utilisation

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 Chapter 5 - Unit III- Human Capital Formation In India
of the physical capital. When the productivity increases, the pace of growth is
automatically accelerated.
2. Innovation of Skills: An educated person is more productive and skillful. He has the
potential to develop new skills and innovate new techniques that can be more
efficient and productive. Greater the number of skilled and trained personnel,
greater will be probabilities of innovations.
3. High Participation Rate and Equality: Human capital endowed with higher technical
skills and innovating power is more productive and efficient. This increases the
participation of more people in the process of economic growth and development.
Higher the participation rate, higher is the degree of social and economic equality
across the country.

Thus, we can conclude that human capital and economic growth goes hand in hand. Human
capital formation accelerates the economic growth whereas economic growth also
facilitates human capital formation.

Question 12:

There is a downward trend in inequality world-wide with a rise in the average education
levels. Comment.

Answer:

Theoretically, there is a negative relationship between education level and degree of

inequality. This relationship has been practically established across the world in recent
decades. Education not only imparts technical skills but also at the same time enhances
productivity of a person. An educated person, endowed with higher productivity and
efficiency enjoys relatively higher income earning capacity. The higher income earning
capacity and greater acceptability of modern techniques raise the standard and quality of
living. Distribution of income has become less skewed and gap between the rich and the
poor has been narrowing slowly. Gradually, the importance of education is being realised
world-wide and, consequently, governments of different countries have been investing
heavily in the education sector. With the rise in average education levels, not only inequality
but also other problems like, poverty, underutilisation of resources and inferior standards
and quality of life have been minimised.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 13:

Examine the role of education in the economic development of a nation.

Answer:

An increase in the level of production of goods and services of a country along with
improvement in the quality of life is referred to as economic development. The role of
education in the economic development of a nation is explained through the following
points:

I. Imparts Quality Skills and Knowledge: Education endows people with quality skills
and, thereby, enhances their productivity. Consequently, it enhances the income
earning capacities of and opportunities for people. Moreover, it also enables human
capital to utilise the available physical capital optimally.
II. Develops Mental Abilities: Education develops mental abilities of people and helps
them to make their choice rationally and intellectually. Education churns out good
citizens by inculcating values in them.
III. Acceptability of Modernisation: An educated public of a nation has greater
acceptability of modernisation and modern techniques. This not only helps the
economy to grow but also facilitates a primitive economy to break the shackles of
traditions and backwardness.
IV. Eradicates Skewed Income Distribution: Education not only increases the income
earning capacity but also reduces the skewed distribution of income and thereby
forms an egalitarian society.
V. Raises Standard and Quality of Living: Education enhances the income earning
capacity of people and, thereby, it raises the standard of living and also improves the
quality of living.
VI. Increases the Participation Rate: It fosters economic development by increasing the
participation of people in the process of growth and development.
VII. One Solution for Other Economic Problems: The importance of education is not only
limited to making people educated but also in facilitating an underdeveloped
economy to solve different but interrelated macro economic problems like, poverty,
income inequality, population, investments, under utilisation of resources.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 14:

Explain how investment in education stimulates economic growth.

Answer:

An increase in the level of production of goods and services (national income) of a country
over a certain period of time is referred to as economic growth. Higher level of investment
in education sector would lead to higher proportion of educated people working with higher
participation in economic activities and, therefore, would lead to higher economic growth.
The following are the various ways in which investment in education stimulates economic
growth:

I. Imparts Quality Skills and Knowledge: Education endows people with quality skills
and, thereby, enhances their productivity. Consequently, it enhances the income
earning capacities of and opportunities for the people. Moreover, it also enables the
human capital to utilise the available physical capital optimally.
II. Develops Mental Abilities: Education develops the mental abilities of people and
helps them to make their choice rationally and intellectually. Education churns out
good citizens by inculcating values in them.
III. Acceptability of Modernisation: An educated public of a nation has greater
acceptability of modernisation and modern techniques. This not only helps the
economy to grow but also facilitates a primitive economy to break the shackles of
tradition and backwardness.
IV. Eradicates Skewed Income Distribution: Education not only increases the income
earning capacity but also reduces the skewed distribution of income, thereby, forms
an egalitarian society.
V. Raises Standard and Quality of Living: Education enhances the income earning
capacity of t people, thereby; it raises the standard of living and also improves the
quality of living.
VI. Increases the Participation Rate: It fosters economic development by increasing the
participation of people in the process of growth and development.
VII. One Solution for Other Economic Problems: The importance of education is not only
limited to making people educated But also in facilitating an underdeveloped
economy to solve different but interrelated macro economic problems like poverty,
income inequality, population, investments, under utilisation of resources.

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 Chapter 5 - Unit III- Human Capital Formation In India
Question 15:

Bring out the need for on-the-job-training for a person.

Answer:

Training refers to the act of acquiring skills, knowledge and competency required to perform
a particular job efficiently and effectively. On-the-job training is the most effective kind of
training to a trainee, imparting him the technical skills and know-how at the actual work
site. In this type of training, a trainee is assisted (or hands on) and trained by a trainer
(usually by an experienced employee), when the trainee is actually doing the job. This helps
the trainee not only to acquire the theoretical and practical skills simultaneously but also
enables him to learn from the experiences of his trainer, thereby, can increase his efficiency
and productivity. This is the most common type of training programs because the returns in
terms of increased productivity far exceed the cost of the training. Thus, the expenditures
on such training improve the quality of human capital by enhancing its productivity,
efficiency and income earning capacity.

The need for on the job training has been highlighted in the following points:

I. On-the-job training is the most common method to train freshers or new employees.
II. This type of training helps the trainee to acquire the theoretical and practical skills
simultaneously.
III. It enables the person to absorb values, norms and standards of an organisation
within the organisation because the employee sees them in everyday action.
IV. As it is done under the supervision of a skilled or experienced worker, the trainee
can learn from the experiences of the supervisor.
V. It is a cost efficient method as the benefits accruing in terms of higher productivity
outweigh the expenditure incurred on such training.

Question 16:

Trace the relationship between human capital and economic growth.

Answer:

Human capital and economic growth goes hand in hand. Human capital formation
accelerates the economic growth whereas economic growth in turn facilitates human
capital formation. The interrelationship between the economic growth and the human
capital formation can be explained with the help of the below mentioned points.

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 Chapter 5 - Unit III- Human Capital Formation In India
1. Increase in the Productivity of Physical Capital: Physical capital refers to the stock of
produced means of production. It consists of machines, production plants, tools and
equipments. The skilled workers handle the productive assets in such a manner that
these not only enhances their productivity and but also leads to an efficient
utilisation of the physical capital. When the productivity increases, the pace of
growth is automatically accelerated.
2. Innovation of Skills: An educated person is more productive and skillful. He has the
potential to develop new skills and innovate new techniques that can be more
efficient and productive. Greater the number of skilled and trained personnel,
greater will be probabilities of innovations.
3. High Participation Rate and Equality: Human capital endowed with higher technical
skills and innovating power is more productive and efficient. This increases the
participation of more people in the process of economic growth and development.
Higher the participation rate, higher is the degree of social and economic equality
across the country.

Thus, we can conclude that human capital and economic growth goes hand in hand. Human
capital formation accelerates the economic growth whereas economic growth also
facilitates human capital formation.

Question 17:

Discuss the need for promoting women’s education in India.

Answer:

The access to education has always been lopsided towards India’s male population. Women
have always been neglected in the field of education. The weaker and lower status of
women in India can be attributed to the negligence of their education. Women have always
been considered as a liability for a family. The roots of such thoughts are deep rooted in the
traditional beliefs and customs. The role of women in the economic and social spheres
cannot be neglected in order to achieve overall economic development and growth. With
the rise in the educational levels and modernisation, people have realised the importance of
female education. The need for female education should be highlighted in India in order to
empower women. The following are the important points that advocate in favour of
promoting women education:

I. Women education is essential for improving their economic independence and

economic feasibility.
II. Women education is important in order to raise the social and moral status of
women.
III. It plays a significant role in maintaining favorable fertility rate.

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 Chapter 5 - Unit III- Human Capital Formation In India
IV. Health care of women and children can be enhanced with education imparted to
women.
V. An educated women can infuse good moral values and can impart quality education
to her children.

Question 18:

Argue in favour of the need for different forms of government intervention in education
and health sectors.

Answer:

India being a federal country, expenditures on both education and health are carried out by
all the three tiers of the government. In India, the education and health sectors services are
provided both by the public as well as by the private institutions. While, the private
institutions are guided by the market and profit motive, on the other hand, the public
institutions are guided by the main motive of rendering services and to enhance human
capital. As the cost of education and health facilities provided by private institutions is
higher, so it is difficult for the majority of population to avail these services because of their
economic inability. Thus, it is very important for the government to provide quality
education and health facilities to this section of the population. Moreover, private
institutions are unable to reach remote and rural areas where people lack initiative for
education and health. In this context, the role of government to encourage them and to
make them aware of advantages of education and health cannot be substituted. Also, there
are some underprivileged sections of population like, ST, SC, OBC, the interests of whose
can only be protected by the interference of government. Moreover, people as individual
consumers do not have complete information about the quality of services and the related
costs. This often leads to exploitation of people. Hence, government intervention in health
and education sector is must in order to enhance the quality of human capital.

Question 19:

What are the main problems of human capital formation in India?

Answer:

India is faced with many problems of human capital formation. These are as follows:

I. Rising Population: The rising population exerts pressure on the available limited
resources. In other words, it reduces the per head availability of facilities like
housing, sanitation, education, power supply, etc. So, the pressure on these facilities
retards the quality of life and lowers the capacity to acquire specialised skills and
knowledge.
II. Brain Drain: People migrate from one place to another in search of better job
opportunities and handsome salaries. This puts a serious threat to the process of
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 Chapter 5 - Unit III- Human Capital Formation In India
human capital formation. It leads to the loss of quality people like doctors,
engineers, etc. who have high caliber and are rare in a developing country. The cost
of such loss of quality human capital is very high.
III. Improper Man Power Planning: India lacks in proper man power planning. No major
efforts have been taken to maintain the demand-supply balance of the rising labour
force. So, it leads to the wastage and misallocation of human skills.
IV. Low Academic Standards: In order to spread education, various educational
institutions are opening up regardless of deficiency in their standards. These
institutions impart inferior quality of education and skills and that in turn causes
deficiency in the productivity and efficiency. This is one of the important hindrances
for the development of quality human capital formation.

Question 20:

In your view, is it essential for the government to regulate the fee structure in education
and health care institutions? If so, why?

Answer:

Education and health sectors are the two key sectors responsible for the formation of good
quality human capital. The development of these two sectors are emphasised by almost all
the less developed countries. In India, expenditures on both education and health sectors
are carried out by all the three tiers of the government and also by private institutions.
While, private institutions are guided by market and profit motive, the public institutions are
guided by the main motive of rendering services and to enhance human capital. As the cost
of education and health facilities provided by the private institutions is higher, so it is
difficult for the majority of the population to avail these services because of their economic
inability. Thus, it is very important for the government to provide quality education and
health facilities to this section of the population. Further, as the Indian constitution counts
right to free education and medical facilities as the fundamental right of citizens, so it is the
responsibility of the government to provide education and health services to all. Moreover,
the private institutions are unable to reach the remote and rural areas where people lack
initiative for education and health. In this context, the role of government is to encourage
them and to make them aware of the advantages of education and health. Also, there are
some underprivileged sections of population like ST, SC, OBC, the interests of whose can
only be protected by the interference of the government. Moreover, the people as
individual consumers do not have complete information about the quality of services and
the related costs. This often leads to exploitation of people. Hence, government
intervention in health and education sector to regulate the fees structure is must in order to
enhance the quality of human capital.

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 Chapter 6 - Unit III- Rural Development
Question 1:

What do you mean by rural development? Bring out the key issues in rural development.

Answer:

Rural areas support the bulk of India’s population. Simultaneously, these areas are the
breeding ground of poverty, hunger and starvation. So, to accelerate the process of growth
and development of a country, rural development must be accorded priority. Rural
development refers to the actions and initiatives taken for the social and economic
development of the rural or backward areas. The key issues in rural development are as
follows:

1. Human Capital Formation- Rural areas lack quality human capital. Therefore, rural
development programmes should aim at development of human resources by investing in
education, technical skills development through on-the-job training, health care, etc.

2. Development of Productive Resources- Productive resources help in generating

employment opportunities. In rural areas, the main occupation is agriculture that usually
suffers from low productivity, lack of infrastructure and disguised unemployment. Thus,
rural development must aim at development of alternative sources of occupation.
Development of productive resources reduces excess burden on the agricultural sector,
thereby, increasing productivity and income of the rural people.

3. Development of Rural Infrastructure- Infrastructure development is a very crucial issue

at the micro level. It provides a support system to all the production activities in the
economy, the absence of which makes economic growth and social development
impossible. Development of rural infrastructure includes development of bank, credit
societies, electricity, means of transport, means of irrigation, development of markets,
facilities for agricultural research, etc.

4. Land reforms- Land reforms along with technical reforms must be initiated in the rural
areas. These enable the use of modern techniques and methods, thereby, increasing the
productivity and aggregate volume of farm output. In addition, land reforms lead to efficient
and optimum use of land, enabling large scale production.

5. Lessening Poverty- Poverty is one of the main causes of rural underdevelopment. Poverty
is not a problem in itself; in fact, it gives rise to many other interrelated problems like
unemployment, inferior human capital, underdevelopment and backwardness, inequalities,
etc. An important step that should be taken in order to tackle t poverty is to develop
income-earning assets. Such assets would generate income, raise living standards and make
rural people self-sufficient.

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 Chapter 6 - Unit III- Rural Development
Question 2:

Discuss the importance of credit in rural development.

Answer:

Finance and credit are the two essential requirements for rural development. The rural
areas often suffer from low income leading to low rate of savings. Farmers find it very
difficult to increase their productivity by investing on their farm lands. Further, the limited
number of banks that are available in the rural areas prefer to forward credit to the farmers
with large land-holdings. Getting credit from banks being difficult, the small and marginal
farmers fall easy prey to the money lenders. The infusion of credit is very essential for the
growth of agricultural sector, leading to rural economic development. The importance of
credit in rural development is highlighted in the following points:

1. Credit helps the farmers to commercialise their farming. In other words, commercial
farming requires funds that are provided via credit. As the small and the marginal
farmers produce only for their subsistence, they fail to generate sufficient surplus to
reinvest on their lands leading to degradation of the land.
2. Secondly, given the long gestation period between sowing and harvesting of the
crops, credit is extended to the farmers for meeting their initial requirements of
farm inputs like seeds, fertilisers, etc.
3. Credit saves the farmers from the vicious circle of poverty. The farmers require funds
for meeting their general and specific needs. These needs are to be fulfilled via
credit.
4. Lastly, agriculture has always been dependent at the vagaries of climate. In the
absence of good monsoon or crop failure, farmers are worst hurt. Thus, in order to
save them from such tragedy, crop insurance and farm credit plays a vital role.

Question 3:

Explain the role of micro-credit in meeting credit requirements of the poor.

Answer:

Micro credit refers to credit and other financial services provided to the poor through Self
Help Groups (SHGs) and non government organisations. The Self Help Groups are playing a
crucial role in meeting the credit requirements of the poor by inculcating saving habits
among the rural households. The individual savings of many farmers are pooled together to
meet the financial requirements of the needy members of the SHGs. The members of these
groups have been linked with the banks. In other words, SHGs enable the economically poor
individual to gain strength as part of a group. Also, the financing done through SHGs reduces
transaction costs for both the lenders and the borrowers. The National Bank for Agricultural
and Rural Development (NABARD) played a key role in providing credit at special

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 Chapter 6 - Unit III- Rural Development
concessional rates. Presently, more than seven lakhs SHGs are operating across different
rural areas. SHGs' programmes are becoming popular among the small and marginal
borrowers owing to their informal credit delivery mechanism along with minimum legal
formalities.

Question 4:

Explain the steps taken by the government in developing rural markets.

Answer:

The following are the various steps initiated by the Indian government to develop the rural
markets:

1. Regulated Markets: The government came up with the concept of regulated market
where the sale and purchase of the products are monitored by the Market Committee. This
Market Committee consists of farmers, government agents and traders. This practice
infuses greater transparency in the marketing system through the use of proper scales and
weights. Such committees ensure the farmers and the consumers in receiving fair price in
exchange of their products

2. Infrastructure Development: The present infrastructure is not sufficient to meet the

growing demands of the farmers. Indian government provided cold storages and
warehouses that help the farmers to sell their product at the time when the price is
attractive. Also, railways offer subsidised transport facilities to the farmers. This enables the
farmers to bring their product to urban areas where they can earn huge profits.

3. Co-operative Agricultural Marketing Societies: The government also started co-operative

marketing under which the farmers get access to fair prices. This is due to the better and
enhanced bargaining power of the farmers via collective sale in the market.

4. MSP Policy: Minimum Support Price is a minimum legislated price that a farmer may
charge in exchange for his products. This enables them to sell their products in the open
market at a higher price. The MSP insulates the farmers in case of price fall as this is the
minimum price that they can receive. The need of such assurance to the farmers is of
immense importance as farming in India is subject to many uncertainties.

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 Chapter 6 - Unit III- Rural Development
Question 5:

Why is agricultural diversification essential for sustainable livelihoods?

ANSWER:

The agricultural diversification implies diversification of crop production and shifting of

agricultural workforce to other allied activities such as livestock, poultry, fisheries, etc. and
non-agriculture sector. The shift from the crop farming to non-farm employment is essential
in order to raise income and to explore alternative avenues of sustainable livelihood. The
importance of agricultural diversification can be explained with the help of the following
points:

1. A substantial portion of Indian farming is dependent on the vagaries of monsoon,

making it a risky affair to rely upon solely. Accordingly, the need for diversification is
required to enable the farmers to earn from other alternative non-farm occupations.
This lessens excess burden on agriculture by reducing disguised unemployment.
2. The kharif season opens up ample opportunities for agricultural employment.
However, owing to lack of irrigation facilities, the farmers fail to get gainful
employment opportunities during the Rabi season.. Therefore, the need of
diversification arises during the Rabiseason.
3. Agriculture being over crowded cannot further generate employment opportunities..
Therefore, the prospects of the non-farm sectors should be opened up in the rural
areas to provide job opportunities, thereby, diverting workforce from the already
crowded agricultural sector.
4. The non farm sector has several segments that possess dynamic linkages. Such
linkages enhance the healthy growth of an economy.

Question 6:

Critically evaluate the role of the rural banking system in the process of rural development
in India.

Answer:

With the nationalisation of the commercial banks after 1969, the concept of social banking
came into existence. It implies extending institutional credit at moderate rate of interest.
The National Bank for Agricultural and Rural Development (NABARD) has made a significant
progress in the field of rural credit. It cannot be denied that the institutional credit has freed
the farmers from the trap of money lenders and mahajans. But, on the other hand,
institutional credit is not free from deficiencies. The rural or institutional credit has
invariably been associated with security or collateral. Consequently, a substantial number of
farmers cannot avail credit. Also, the commercial banks failed to encourage the habit of
thrift among farmers. In addition to this, the leniency on the part of the government to

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 Chapter 6 - Unit III- Rural Development
collect taxes was another setback in the rural banking. This further led to the emergence of
the feeling among the farmers of not repaying the borrowed amount. This increased the
defaulter’s rate and led to financial unfeasibility for the rural banks.

Question 7:

What do you mean by agricultural marketing?

Answer:

Agricultural marketing refers to all those processes that are involved from harvesting to
final sales of the products by the farmers. These processes involve:

a) Gathering the product after harvesting.

b) Processing the product
c) Grading the product, according to, different quality norms
d) Packaging the product
e) Storing the product for future use
f) Selling the product at attractive prices

In other words, it does not simply refer to the farmers’ act of bringing their product to the
market for the purpose of sale. But it also includes all those activities that help the farmers
to fetch the maximum price for his product.

Question 8:

Mention some obstacles that hinder the mechanism of agricultural marketing.

Answer:

Agricultural marketing does not simply refer to the farmers’ act of bringing their product to
the market for the purpose of sale. But it also includes all those activities that help the
farmers to fetch the maximum price for their product. The following are some of the
obstacles that hinder the mechanism of agricultural marketing:

I. Farmers are vulnerable to defective weighing techniques and misappropriation of

accounts.
II. Farmers are often ill-informed about market prices and market conditions. Being
ignorant, farmers are forced to sell their product at lower prices.
III. The farmers lack access to proper storage facilities to store their produce for future
sell at better prices.
IV. The farmers cannot avail agricultural credit, leading to their exploitation by the
moneylenders and mahajans.

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 Chapter 6 - Unit III- Rural Development
Question 9:

What are the alternative channels available for agricultural marketing? Give some
examples.

Answer:

The small and marginal farmers, selling their product through the middlemen, were
exploited by these middlemen. The farmers were not given appropriate price for their
product. In this context; there arose a need for an alternative marketing channel. Under this
channel, the farmers can sell their product directly to the consumers that would fetch them
comparatively higher price, thereby, attractive profits. Some of the examples of alternative
agricultural marketing are Apni Mandi in states like Punjab, Haryana and Rajasthan,
Hadaspar Mandi in Pune, Rythu Bazars in Andhra Pradesh, Uzhavar Sandies in Tamil Nadu.
Another alternative channel for agricultural marketing is the contract of direct sales
between the farmers and the national and international companies. These companies offer
advance payments to the farmers for supplying products at pre-determined rates. These
alternative agricultural channels raise farmer’s income and simultaneously reduce price risk
for the small and marginal farmers.

Question 10:

Distinguish between ‘Green Revolution’ and ‘Golden Revolution’

Answer:

Green Revolution Golden Revolution

The combined use of HYV seeds and The rapid growth in the production of the
increased use of fertilisers and developed horticultural crops such as fruits, vegetables,
irrigation facilities jointly to increase the tuber crops, flowers, etc. is known as Golden
production of rice and wheat. This Revolution.
increase in the production of the food
grains is known as the Green Revolution.

It led to increase in the production, It led to increase in production of fruits,

especially, of rice and wheat. vegetables, flowers, aromatic plants, spices,
etc.

As a result of this revolution, India As a result of this revolution, India became a

became self-sufficient in the production of world leader in the production of mangoes,
wheat and rice. bananas, coconut and spices.

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 Chapter 6 - Unit III- Rural Development
Question 11:

Do you think the various measures taken by the government to improve agricultural
marketing are sufficient? Discuss.

ANSWER:

To improve the system of agricultural marketing the government initiated a number of

measures such as organisation of regulated markets, infrastructural development (cold
storage, warehouses, etc.), propagation of market information through agriculture based
programmes on radio and television, Minimum Support Price Policy, etc. However, despite
various attempts by the government the system of agricultural marketing in India has only
been partly successful. The following are some of the obstacles in the successful agricultural
marketing system.

1. It is found that farmers often fall prey to defecting weighing techniques and
misappropriation of accounts.
2. Farmers lack knowledge of market prices and market conditions which forces them
to sell their produce at a lower price.
3. Storage facilities are insufficient which forces the farmers to sell their produce at a
lower price right after harvesting. Also, insufficient storage makes the crops
vulnerable to pests and bad weather.
4. There is lack of institutional sources of finance which forces the farmers to fall back
on moneylenders for obtaining credit.
5. Transportation facilities are insufficient as a result of which the farmers are unable
to sell their produce at far off places.
6. Due to the presence of large number of intermediaries farmers remain separated
from the actual consumers. The intermediaries purchase the produce from the
farmers at a very low price and sell them at a much higher price in the market. This
implies that the farmers receive a very small share of the actual return of the
produce.

Question 12:

Explain the role of non-farm employment in promoting rural diversification.

Answer:

The non-farm areas of employment are essential with a view to raise income and
exploring alternative avenues of sustainable livelihood besides agriculture. The following
are the importance of non-farm employment opportunities in promoting rural
diversification:

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 Chapter 6 - Unit III- Rural Development
1. A substantial portion of Indian farming is dependent on the vagaries of monsoon,
making it a risky affair to rely upon solely. Hence, non-farm employment
opportunities are to be explored to enable the farmers to earn from alternative non-
farm occupations. This will lessen the excess burden on agriculture by reducing
disguised unemployment.
2. The kharif season opens up ample opportunities for agricultural employment.
However, due to lack of irrigation facilities, the farmers fail to get gainful
employment opportunities during the Rabi season. Therefore, absence of
opportunities in agriculture sector should be compensated in non-farm sectors.
3. Agriculture being over crowded cannot further generate employment opportunities
to the farmers. Therefore, the prospects of the non-farm sectors should be opened
up in the rural areas to provide job opportunities, thereby, diverting workforce from
the already crowded agricultural sector.
4. The non-farming sector has several segments that have dynamic linkages. Such
linkages enhance the healthy growth of the rural areas.
5. The non-farm sector provides employment opportunities for the whole year as
compared to the farming occupation. So, it helps to eradicate poverty from the rural
areas.
6. Most of the output of non-farm sectors acts as an input for the large scale industries.
For example, agro-processing industries, food processing industries, leather industry,
tourism,etc. This has two-fold benefits. First, the large scale industries can specialise
in their final output by relying on the processed inputs from the non-farm sectors.
Secondly, such dependence of the large scale industries provides impetus to the
non-farm sectors reducing the urban-rural regional disparities.

Question 13:

Bring out the importance of animal husbandry, fisheries and horticulture as a source of
diversification.

Answer:

Importance of Animal Husbandry

Animal husbandry is the most important non-farm employment in India. It is also known as
Livestock Farming. Poultry, cattle and goats/sheep are the important components of
livestock farming in India. Most of the rural families carry out livestock farming together
with crop farming in order to increase their income. The share of livestock farming is
comparatively higher in the semi arid and arid areas than the irrigated areas. This is because
the arid areas have lesser access to irrigation facilitiesand thereby, crop farming is less
feasible. Thus, in other words, it can be said that livestock farming provides sustainable
livelihood to the people in the semi arid and arid regions where farming can’t be performed
well. Further, capital investment in livestock farming is comparatively less than that in crop

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 Chapter 6 - Unit III- Rural Development
farming. In addition, livestock farming is an important source of employment for rural
women. Presently, animal husbandry is the most important source of alternative
employment, employing approximately 70 million small and marginal farmers. Besides
providing employment, livestock farming has resulted in increased production of milk, eggs,
meat, wool and other by-products, enhancing the consumption bundle qualitatively and
nutritionally.

Importance of Fisheries

‘Fisheries’ are an important source of livelihood in the coastal states such as Kerala,
Maharashtra, Gujarat and Tamil Nadu. The fishing community in India depends on water
bodies- both inland and marine water bodies. Inland sources include rivers, lakes, ponds,
and streams, while, the marine sources include seas and oceans. The increasing efforts by
the state governments have attracted funds in this sector, boosting the production. But this
community remains one of the backward communities in the country due to low per capita
earnings, lack of labour mobility to other sectors, illiteracy and indebtedness. Despite a
significant segment engaged, this sector contributes only 1.4% to India’s total GDP.

Importance of Horticulture

Horticulture is emerging as an important source of livelihood in the rural areas. Horticultural

crops include fruits, vegetables, medicinal and aromatic plants and flowers. Presently, India
is the second largest producer of fruits and vegetables that includes mangoes, bananas,
coconuts, cashew nuts and variety of species. There has been a considerable rise in the
income levels of families engaged in horticultural production. The increase in horticultural
production has lowered the vulnerability of small and marginal farmers. This has provided a
gateway of opportunities for employment for women. It generates employment for 19% of
India’s total labour force. In contrast to fishing, Horticulture does not suffer from ecological
and environmental problem. Hence, horticulture must be promoted with sufficient
investment and infrastructure.

Question 14:

‘Information technology plays a very significant role in achieving sustainable development

and food security’ — comment.

Answer:

Information technology (IT) plays a very significant role in achieving sustainable

development and food security. IT enables to provide and store data related to the past and
future conditions providing inputs for policy decision and for adopting various corrective
measures. For example, with the help of IT, weather conditions can be forecast. If ,for
example, there is a probability of crop failure, then preventive measures can be taken to
avoid or mitigate the impact of food insecurity. Information technology facilitates the

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 Chapter 6 - Unit III- Rural Development
storage and dissemination of information on emerging technologies, weather and soil
conditions for growing various crops, etc, which ease the decision making process vis-a-vis
production and productivity. Now days, the farmers can consult Kisan Call Centres and
various web sites providing valuable information regarding measures to improve farm
productivity and quality of farm inputs, seeds, fertilisers and various modern techniques. It
acts as a tool for identifying the experts on food security and sustainable development. . IT
sector also generates employment opportunities in the backward areas via developing ‘info
kiosk’ (i.e. PC with internet, scanner, etc.) in the rural areas. Thus, it can be said that IT plays
a vital role in assuring food security and sustainable development in India.

Question 15:

What is organic farming and how does it promote sustainable development?

Answer:

Organic farming refers to a system of farming that sustains and enhances the ecological
balance. In other words, this system of farming relies upon the use of organic inputs for
cultivation. The traditional farming involves the use of chemical fertilisers, toxic pesticides,
etc. that harms the eco system drastically. So, this type of farming is practiced to produce
toxic-free food for the consumers while simultaneously maintaining the fertility of the soil
and contributing to ecological balance. This type of farming enables eco friendly sustainable
economic development.

Question 16:

Identify the benefits and limitations of organic farming.

Answer:

Organic farming has some notable advantages as compared to the conventional farming.
The advantages of the organic farming are as follows:

1. Discards Use of Chemicals: Unlike conventional farming, organic farming is free from
synthetic chemicals. The chemicals present in the chemical fertilisers penetrate into
the ground water and raises its nitrate content. This cause health hazards and also
pollutes the environment. So, organic farming is an environment friendly method of
farming.
2. Sustains Soil Fertility: The use of chemical fertilisers leads to erosion of soil fertility.
Organic farming discards the use of chemical fertilisers. Therefore, this farming is
practiced to produce non-toxic food for the consumers without degrading the soil
fertility.
3. Healthier Food: Organically grown crops have high nutritional value than the
conventionally grown crops. Also, the demand for organic farming rises rapidly even
at a higher price.
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 Chapter 6 - Unit III- Rural Development
4. Inexpensive Technology for Small and Marginal Farmers: The small and marginal
farmers constitute the bulk of the farming. Organic farming offers an inexpensive
farming technique to these small and marginal farmers.
5. Generates Income from Exports: It generates higher income from exports as there is
huge international demand for organic crops.

Limitations of Organic Farming:

Despite the above mentioned benefits, Organic Farming suffers from the following
limitations:

1. Organic Farming offers lesser yield than the conventional farming. Therefore, the
productivity of the Organic Farming is lower than that of the conventional farming.
2. The popularity of organic farming depends on the awareness and willingness of the
farmers to adopt this technology. Due to lower productivity, farmers lack initiative to
adopt Organic Farming techniques.
3. The inadequate infrastructure and problem of marketing are the major concerns that
need to be addressed to promote Organic Farming.
4. As Organic Farming offers lesser yield than conventional farming, this farming is not
financially viable for the small and marginal land-holdings farmers.

Question 17:

Enlist some problems faced by farmers during the initial years of organic farming.

Answer:

In the initial years, it has been observed that the yields from Organic Farming are lesser than
the modern agricultural farming. So, the farmers found it difficult to undertake large scale
production. Also, due to the low yield per hectare, this technique was not financially viable
for the small and marginal workers. The products obtained from organic farming have
shorter life and are quickly-perishable. Moreover, the choice in production during off-
season is quite limited in Organic Farming. Despite these shortcomings in the initial years,
India has attained comparative advantage in Organic Farming due to labour intensive
techniques. Hence, the availability of labour in abundance popularised Organic Farming in
India.

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Question 1:

Who is a worker?

Answer:

People work for earning their livelihood. A person who is involved in production activity
contributing to the flow of goods and services in the economy is called a worker. In other
words, a worker is regarded as an economic agent who contributes to the production of
goods and services, thereby, to the GDP during a particular year. A worker renders services
to others and receives rewards in the form of wages, salaries or in kind. Hence, we can say
that when an individual is engaged in a production activity or self employed and contributes
to the generation of GDP, then, that person is referred to as a worker. For example, a
doctor, an engineer working in a factory, etc.

Question 2:

Define worker-population ratio.

Answer:

Worker-Population ratio is defined as the proportion of population that is actively

contributing to the production of goods and services. It is measured by the ratio between
the country’s workforce and its total population. This ratio acts as an indicator for assessing
the employment level in a particular country at any point of time. Higher the worker-
population ratio higher is the engagement of people in the productive activities and vice-
versa. Worker-population ratio is estimated by dividing the total work force by the total
population and multiplying by 100. Algebraically,
𝑇𝑜𝑡𝑎𝑙 𝑊𝑜𝑟𝑘𝑓𝑜𝑟𝑐𝑒
Worker-Population Ratio = 𝑇𝑜𝑡𝑎𝑙 𝑝𝑜𝑢𝑙𝑎𝑡𝑖𝑜𝑛 × 100

Question 3:

Are the following workers — a beggar, a thief, a smuggler, a gambler? Why?

Answer:

No, a beggar, a thief, a smuggler, a gambler cannot be called as workers. A worker is

involved in a production activity that contributes to the GDP of a country. As none of them
(a beggar, a thief, a smuggler and a gambler) are involved in any legal economic production
activity that contributes to the national income of the country, hence, none of them can be
regarded as workers.

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Question 4:

Find the odd man out (i) owner of a saloon (ii) a cobbler (iii) a cashier in Mother Dairy (iv)
a tuition master (v) transport operator (vi) construction worker.

ANSWER:

Tuition master and the owner of a saloon are the odd man out. This is because all others are
hired while these two are self employed. Tuition master and the owner of a saloon are
engaged in their own business and own profession, whereas, the cobbler, the construction
worker, the transport operator and the cashier in the Mother Dairy are hired and render
their services to others in exchange of rewards in the form of salaries or wages.

Question 5:

The newly emerging jobs are found mostly in the ____________sector.

(Service/Manufacturing).

Answer:

The newly emerging jobs are found mostly in the service sector.

The service sector is taking a lead over the manufacturing sector as a source of employment.
It includes trade, commerce, banking, insurance, health and other services. These services
are developing at a faster pace than the manufacturing and other allied production
activities. This is because of the globalisation of the economy.

Question 6:

An establishment with four hired workers is known as __________ (formal/informal)

sector establishment.

ANSWER:

An establishment with four hired workers is known as informal sector establishment.

An informal sector is an unorganised sector of the economy. It includes all enterprises that
hire less than 10 workers, except farming and self employment ventures. Therefore, an
establishment with four hired workers is known as informal sector establishment.

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Question 7:

Raj is going to school. When he is not in school, you will find him working in his farm. Can
you consider him as a worker? Why?

Answer:

Yes, Raj can be considered as a worker. This is because his work is contributing to the total
output of the farm. Further, as implied by the definition of worker, a person who is engaged
in an economic activity or is assisting anyone in an economic activity and, thereby,
contributing to the GDP of the country is regarded as worker, so, Raj is a worker.

Question 8:

Compared to urban women, more rural women are found working. Why?

Answer:

The percentage of female workforce in the rural areas is nearly 30 % while it is only 14 % in
the urban areas. This depicts that as compared to the urban women more rural women
accounts for higher share in the female workforce. While on the one hand, the rural women
are less educated, unskilled and low productive, on the other hand, urban women being
more educated and more skilled and productive have higher probability to get employment.
Ironically, the urban female accounts for lesser share in the female workforce as compared
to their rural counterparts. The following are the reasons for low share of urban females in
the total female workforce:

As in the agricultural and allied activities, high degree of skills and specialisations is not
required, so, rural women engage themselves to support their family on farms.

As poverty in the rural areas is more widespread than in the urban areas, so, the rural
women engage themselves in low productive jobs just to support the livelihood of their
families.

As the urban families usually earn comparatively higher income than the rural families and,
further, poverty in the urban areas is not as widespread as that of in the rural areas, so,
there is lesser need for female members to get themselves employed.

The decision to take up jobs by the female members rests on the family’s decision rather
than her individual decision.

Although female literacy in India is improving, yet it has to get much better before urban
female accounts for higher share in the total female workforce.

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Question 9:

Meena is a housewife. Besides taking care of household chores, she works in the cloth
shop which is owned and operated by her husband. Can she be considered as a worker?
Why?

Answer:

A person who is involved in the production activity and contributes to the generation of GDP
is referred to as worker. As here Meena works in the cloth shop to support her husband and
contributes to GDP by rendering her services, so, she can be considered as a worker.

Question 10:

Find the odd man out (i) rickshaw puller who works under a rick- shaw owner (ii) mason
(iii) mechanic shop worker (iv) shoeshine boy.

Answer:

Shoe shine boy is a odd man out. All others (a rickshaw puller, a mason, and mechanic shop
worker) are hired workers. They render their services to their employers and receive
rewards in the form of salaries or wages in return. On the other hand, shoe shine boy is a
self-employed worker and carries out his occupation himself. In other words, he is engaged
in his own profession.

Question 11:

The following table shows distribution of workforce in India for the year 1972-73. Analyse it
and give reasons for the nature of workforce distribution. You will notice that the data is
pertaining to the situation in India 30 years ago!
Place of Residence Workforce (in millions)
Male Female Total
Rural 125 69 195

Urban 32 7 39

Answer:

(i) The total workforce in India in the year 1972-73 was 234 million that includes
195 million workforce of rural and 39 million of the urban population. This
indicates a greater involvement of rural workforce comprising of 83 % of the

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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total workforce as compared to 17% of the urban workforce. This is because a
majority of rural population was engaged in agricultural and allied sectors.
(ii) The rural workforce comprises of 64% of the male workforce and 36% of female
workforce. On the contrast, the urban workforce comprises of about 82% of male
workforce and 18% of female workforce. The participation of males in both rural
as well as in the urban areas is higher than the females because of the lack of
opportunities available to women for acquiring education. Also, families often
discouraged female members to take up job and, consequently, women were
confined to household works only.
(iii) Comparing urban female work force with that of the rural female workforce, we
can conclude that the females in the rural areas formed 36 % of the workforce,
whereas, the females in the urban areas formed only 18% of the workforce. In
the rural areas, despite a majority of the population was engaged in farming and
allied activities, agricultural sector had low productivity. Consequent to the low
productivity, rural people had low earnings that further led to widespread
poverty in the rural areas.

Thus, it can be concluded by analysing the above data that Indian economy suffered from
low productivity, acute unemployment and widespread poverty, disguised unemployment in
agricultural sector and low female participation rate in the workforce 30 years ago

Question 12:

The following table shows the population and worker population ratio for India in 1999-
2000. Can you estimate the workforce (urban and total) for India?

Region Estimates of Worker Estimated No. of

population Population Workers
(in crores) Ratio (in crores)
Rural 71.88 41.9 71.88
× 41.9 = 30.12
100
?
Urban 28.52 33.7

Total 100.40 39.5 ?

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Answer:

Region Estimates of Worker Estimated No. of

population Population Workers
(in crores) Ratio (in crores)
Rural 71.88 41.9 71.88
× 41.9 = 30.12
100
28.52
× 33.7 = 9.61124
Urban 28.52 33.7 100

Total 100.40 39.5 100.40

× 39. = 39.658
100

𝟐𝟖.𝟓𝟐
Estimated No. of Workers in urban Areas = × 𝟑𝟑. 𝟕 = 𝟗. 𝟔𝟏𝟏𝟐𝟒
𝟏𝟎𝟎

𝟏𝟎𝟎.𝟒𝟎
Total Workforce in India = × 𝟑𝟗. 𝟓 = 𝟑𝟗. 𝟔𝟓𝟖
𝟏𝟎𝟎

Question 13:

Why are regular salaried employees more in urban areas than in rural areas?

Answer:

Regular salaried employees are those hired workers who are on the permanent payrolls of
their employers. They are usually skilled workers and are entitled to all types of social
security benefits. The concentration of these workers is higher in the urban areas as
compared to the rural areas because such jobs require skilled and specialised workers. The
opportunities to acquire and enhance such skills are available more in the urban areas. And
these skills are acquired through the process of training and education that cannot be
accessed in the rural areas due to the lack of investment, infrastructure and low literacy
level of rural people. Further, the big companies are concentrated only in the urban areas
due to the presence of infrastructure and availability of modern facilities like banks,
transport and communication, etc. Therefore, the bulk of the jobs for the regular salaried
employees are concentrated more in the urban areas resulting in the increase in number of
the regular salaried employees.

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Question 14:

Why are less women found in regular salaried employment?

Answer:

Lesser women are found in regular salaried employment as compared to men because a
larger proportion of women are engaged in the economic activities without stable contracts
and steady income. The stable contracts and steady income are two features prevalent in
the regular salaried employment. Women are engaged in informal segments of the
economy, where they are not entitled to any social security benefits. Moreover, women
work in more vulnerable situations than men and have lower bargaining power and,
consequently, are paid lesser than the male workforce. Thus, the women workers are more
likely to be found in the self-employment and casual work as compared to men rather than
regular salaried employment.

Question 15:

Analyse the recent trends in sectoral distribution of workforce in India.

Answer:

The three major sectors of an economy i.e. Primary, Secondary and Tertiary collectively are
known as occupational structure of an economy. The primary sector includes agriculture,
forestry, fishing, mining, etc. The secondary sector consists of manufacturing and
construction activities. Tertiary sector includes various services like transport,
communication, trade, etc. Primary sector is the prime source of employment for the
majority of the workers in India. Its contribution is as high as 57.3 % of our total workforce.
About 17.6% and 25.1% of the total workforce is employed in the secondary and the service
sector respectively. People living in the urban areas are largely engaged in secondary and
tertiary sectors and those in the rural areas are involved basically in primary sectors. Also,
the tertiary sector is taking a lead over the secondary sector as a source of employment and
increasing share in India’s GDP. As far as the distribution of male and female is considered, a
high percentage of total female workforces are engaged in the primary sector than in the
secondary and tertiary sectors.

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Question 16:

Compared to the 1970s, there has hardly been any change in the distribution of workforce
across various industries. Comment.

Answer:

India being an agrarian economy has majority of population dependent on the agricultural
sector to earn their livelihood. Although, the developmental strategies in India have aimed
at the reduction of population dependent on agriculture, yet the reduction in the population
engaged in agricultural sector has not been significant. In 1972-73, about 74 % of the work
force was engaged in primary sector which reduced to 60% in 1999-00. On the other hand,
the shares of secondary and tertiary sectors in employment rose from 11 % to 16 % and 15
% to 24 % respectively. The work force distribution indicates that over the last three
decades i.e. from 1972-2000, people have moved from self-employment and regular
salaried employment to casual wage worker. This particular pattern of moving from self
employment and regular salaried employment to casual wage work is termed as
casualisation of work force. Thus, it can be concluded that although changes in the
distribution of workforce have taken place, yet industrial and tertiary sector need to
increase their share in the workforce distribution by generating more employment
opportunities and absorbing excess labour from the agricultural sector.

Question 17:

Do you think that in the last 50 years, employment generated in the country is
commensurate with the growth of GDP in India? How?

Answer:

Economic growth implies growth in the GDP, i.e. growth in the aggregate output produced
during an accounting period within the domestic territory of an economy. The increased
output level is achieved by generating more employment opportunities and through
employing better technology. During the recent past, India has witnessed jobless economic
growth that raised the aggregate output level without the proportionate rise in the
employment opportunities and, consequently, unemployment continued to exist. The
reason is that the rise in GDP is caused by employing modern and improved technology that
substituted labour for machines. This failed to generate new employment opportunities in
the industrial and the tertiary sectors. Thus, the industrial and the tertiary sectors failed to
absorb the excess labour from the agricultural sector. As a result, disguised unemployment
in the agricultural sector continued along with low levels of productivity and massive
poverty. In addition to this, MNCs that played an important role in India’s economic growth
provided employment only to the educated and specialised workforce. These MNCs aimed

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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at achieving higher output levels by employing better technology rather than generating
greater employment opportunities. Thus, employment generated in the country does not
commensurate with the growth of GDP in India.

Question 18:

Is it necessary to generate employment in the formal sector rather than in the informal
sector? Why?

Answer:

Formal Sector refers to the organised sector of the economy. It includes government
departments, public enterprises and private establishments that hire 10 or more workers.
Workers of the formal sectors enjoy social security benefits and also they remain protected
by the labour laws. On the other hand, the informal sector is an unorganised sector of the
economy. People engaged in this sector do not enjoy any social security benefits and do not
have any trade unions and, consequently, have low bargaining power. This makes them
more vulnerable to the uncertainties of the market. Creating more jobs in the formal sector
will not only absorb workforce from the informal sector but also helps in reducing poverty
and income inequalities. Thus, in order to safeguard the interests of the informal sector and
to utilise this portion of the workforce for achieving economic growth, it is very important to
generate more employment opportunity in the formal sector rather than in the informal
sector.

Question 19:

Victor is able to get work only for two hours in a day. Rest of the day, he is looking for
work. Is he unemployed? Why? What kind of jobs could persons like Victor is doing?

Answer:

Yes, Victor is an unemployed worker. He works for two hours a day but a major portion of
the day he is looking for work and is unemployed. This implies that he is an underemployed
worker. The situation of underemployment refers to a situation in which a person gets work
for lesser time than the time he actually can and wants to work. According to the National
Sample Survey Statistics, a person who is employed for less than 28 hours in a week is called
underemployed. Victor could do jobs that are part time in nature like dropping news papers,
working in a restaurant, delivering couriers, bank tellers, etc.

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Chapter 7 - Unit III- Employment: Growth, In formalisation
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Question 20:

You are residing in a village. If you are asked to advice the village panchayat, what kinds of
activities would you suggest for the improvement of your village which would also
generate employment.

Answer:

The following are the suggestions that can generate employment opportunities in village:

i. Increase Production: It is of prime importance to increase production in the

agricultural and industrial sectors in order to increase employment. For this
purpose, small scale and cottage industries should be promoted. This will not
only generate new employment opportunities but also assist the industrial
sector, as the production of the small scale and cottage industries act as
subsidiaries to the industrial sector.
ii. Increase Productivity: The demand and productivity for labour are directly
related to each other. The higher productivity generates higher profits that in
turn implies higher investment and generates higher demand for labour. Rural
workers should be imparted technical knowledge and modern know-how that
will not only increase their productivity but also enhance their acceptability of
modernisation.
iii. Control over Population: Population explosion is one of the important concerns
for India. It hinders economic growth prospects. The rising population leads to
the rise in unemployment and, therefore, poverty. Thus, rural people should be
made aware of various birth control measures and also the benefits associated
with family planning and nuclear-family.
iv. Creating Non-agricultural Employment: India being an agrarian economy
employs a major proportion of workforce in the agricultural sector. The
development of this sector is still a far cry and, consequently, suffers from
disguised unemployment. Moreover, as agriculture is a seasonal occupation, so,
many farmers remain unemployed for three to four months in a year. Thus, it is
necessary to engage these people in non-agricultural sectors for the phase they
are off from cultivation. Creation of non-agricultural job like pottery, handicrafts,
not only reduces disguised unemployment but also contributes to enhanced
income to the farmers in the off-season, which could be invested in the farm to
improve farm productivity and farm products.
v. Easy Credit and Finance: Often, the rural people find it difficult to access finance
due to the lack of sufficient financial institutions in the rural areas. Even if the
finance or the credit is available, then this is provided at higher lending rates. The

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Chapter 7 - Unit III- Employment: Growth, In formalisation
and Other Issues
lack of credit acts as a bottleneck for the rural growth. Thus, financial institutions
and banks should be set up to provide easy credit to the rural people.
vi. Education and Health Facilities: Rural areas have always lagged behind in
education and health care facilities. This not only impedes their productivity but
also reduces their life expectancy and quality of standard of living. Along with
primary and secondary schools, night schools for adults, imparting technical
education and technical know-how, proper sanitation and hospitals should be
established in the rural areas.

Question 21:

Who is a casual wage labourer?

Answer:

Casual workers refer to those workers who do not work throughout the year. They only
work for few months. Casual workers are not hired by employers on a regular basis. They do
not enjoy social security benefits like provident fund, gratuity, etc. They are generally
unskilled workers. For example: workers working at a construction site.

Question 22:

How will you know whether a worker is working in the informal sector?

Answer:

The following features help to recognise a worker working in the informal sector:

i. A worker working in an enterprise (other than the public sector establishments

and the private sector establishments) hiring 10 or less than 10 workers.
ii. This sector includes millions of farmers, agricultural labourers, owners of small
enterprises and self employed. These sections of people are not hired worker.
iii. A worker working in informal sector does not enjoy social security benefits such
as provident fund, gratuity, pension, etc.
iv. The economic interest of the workers working in the informal sector is not
protected by any Labour Laws other than Minimum Wages Act. Therefore,
workers in the informal sector are highly exposed to the uncertainties of the
market and have low bargaining power.

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 Chapter 8 - Unit III- Infrastructure
Question 1:

Explain the term infrastructure.

Answer:

The term infrastructure refers to the underlying tangible and organisational structures that
are essential for the smooth and prosperous functioning of an economy. In other words,
infrastructure is regarded as a core support system that enables an economy to grow and
develop. Generally, the term infrastructure means technical structure such as roads,
transport, communication, bridges, dams, power, public institutions like schools, hospitals,
etc. These structures not only serve as basic input for various economic activities like
production, investment, but also enable an economy to break the shackles of traditional and
primitive social structures and customs. The difference between a developed country and
an underdeveloped country can be mainly attributed to the lack of sufficient and technically
advanced infrastructure in the latter. Infrastructure has two-fold benefits- as an input and as
a support system. Infrastructure as an input (roads, bank and power) facilitates the
production process and attracts investment from domestic as well as from foreign investors.
Infrastructure as a support system (such as schools, hospital) develops the quality of human
capital by imparting quality and technical education and health facilities. This raises the
standard and quality of living and helps the economy to eradicate major economic problems
like poverty, unemployment and inequality. Hence, it can be concluded that the presence of
quality and sufficient infrastructure is a necessary and sufficient condition for accomplishing
economic growth and development.

Question 2:

Explain the two categories into which infrastructure are divided. How are both
interdependent?

ANSWER:

Infrastructure is broadly classified under two categories:

a. Economic infrastructure
b. Social infrastructure

Economic Infrastructure refers to the elements of economic change that aid in the process
of production and distribution. It improves the quality of economic resources and, thus,
raises the productivity of the economy as a whole. In this way, it serves as a support system
to economic growth. Energy, transportation, communication, banking and financial
institutions are some of the examples of economic infrastructure. Greater the economic
infrastructure, greater will be the production and more generation of employment
opportunities. Thus, expenditure incurred on the economic infrastructure can be regarded
as a necessary condition for economic growth.
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 Chapter 8 - Unit III- Infrastructure
Social Infrastructure refers to all those facilities and institutions that enhance the quality of
human capital. Educational institutions, hospitals, nursing homes, housing facilities etc. are
some of the examples of social infrastructures. The availability of such infrastructures raises
the human productivity, thereby, improves the quality of standard of living. Unlike,
economic infrastructure, social infrastructure indirectly increase the productivity and
production of goods and services. For example, availability of better health care and medical
facilities enable a perennial supply of healthy workforce that in turn is reflected in the form
of increased production levels.

Both economic and social infrastructures are interdependent on and complementary to

each other. While economic infrastructure fosters economic growth, social infrastructure
enhances the quality of standard of living and thereby leads to the welfare of the economy
as a whole. The combined effect of these two infrastructures contributes to the prosperity
of the economy. The economic growth attained with the help of economic infrastructure is
imperfect without t human development which is attained by means of social infrastructure.
Thus, one infrastructure supports the other.

Question 3:

How do infrastructure facilities boost production?

Answer:

Infrastructure-social and economic, facilitates production. The role of infrastructure in

economic production can be understood with the help of an example. If agriculture is
devoid of irrigation facilities, then it would entirely depend on the monsoon that may
hamper its production and productivity. As irrigation is essential to enhance productivity of
agricultural sector, in the same manner, infrastructure is essential for smooth and efficient
production of all sectors of the economy. Similarly, industrial production in the absence of
proper means of transportation may lead to delays in the movement of raw materials,
capital goods and finished goods. This in turn, leads to delays in the production process and,
thereby, hampers industrial production. Thus, infrastructure is the necessary condition for
higher productivity and higher production.

Question 4:

Infrastructure contributes to the economic development of a country. Do you agree?

Explain.

Answer:

Yes, infrastructure acts as a support system for production activity in the economy and,
thereby, contributes to economic development. The following points will further explain
the role of infrastructure in the economic development of a country:

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 Chapter 8 - Unit III- Infrastructure
i. Infrastructure Increases Productivity: Infrastructure-social and economic
facilitates production. The availability of quality infrastructure guarantees
increase in production and productivity. Infrastructure ensures easy movement
of goods and raw materials,thereby, reducing inefficiencies and lead to efficient
utilisation of scarce resources and eliminate wastages.
ii. Infrastructure Encourages Investment: Infrastructure provides an environment
conducive to investment. Lack of facilities discourage investment. For example,
an investor will not invest in absence of basic infrastructure such as transport
and communication.
iii. Infrastructure Generates Linkages in Production: Infrastructure promotes
economic development by way of various linkages– forward and backward
linkages. In other words, infrastructure provides scope for expansion of one
industry due to the expansion of the other by way of forward and backward
linkages. The process of economic growth becomes a dynamic process in the
presence of sufficient infrastructure facilities. This can be explained with the help
of a forward linkage. For example, if irrigation facilities boost agricultural
production, then the related industries that depend on agriculture for the supply
of raw materials simultaneously experience increased production.
iv. Infrastructure Enhances Size of the Market: Infrastructure widens the size of the
market. The fast and cost-effective movement of raw materials and finished
goods in bulk enables a producer to offer his products across the country and
even across international boundaries.

Question 5:

What is the state of rural infrastructure in India?

Answer:

During the colonial rule,the British aimed at developing infrastructure to facilitate their
trade affairs. At the time of independence, Indian government found lack of sound
infrastructure to realise their dream of economic development and growth. Most of the
infrastructural development concentrated in the urban areas. The infrastructural
development in the rural areas is still very meagre as compared to the size of the rural
population. The women in the rural areas are still making use of bio fuels like cow-dung and
fuel wood to meet their energy needs. The census of 2001 states that only 56% of the
households has electricity connection, whereas, 43% still use kerosene. About 90% of the
rural households use bio fuels for cooking. Tap water is used by only 24% of the rural
households and improved sanitation is available to only 20%. As the infrastructure is an
essential element of economic growth, so, it becomes a need of the hour to address the
problem of infrastructure. The government of India invested only small proportion of GDP
on infrastructure i.e. only 5% that is lesser than that of China and Indonesia. The economists

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 Chapter 8 - Unit III- Infrastructure
see India as the third biggest economy in the world. For that to happen, India will have to
boost its infrastructure, especially rural infrastructure. This will not only promote economic
development of our country but also enhance economic welfare.

Question 6:

What is the significance of energy? Differentiate between commercial and non-

commercial sources of energy.

Answer:

Energy is the most important component of economic infrastructure. It is a critical aspect of

the development process of a nation. It is essential for industries as no commodity is
produced without using energy. Now a days, energy is used even in the agricultural sector. It
is needed to operate tube-wells, tractors and thrashers. It is also required in houses for
cooking. One cannot even think of a day without electricity and other sources of energy like
petrol, LPG, etc. So, we can say that energy is lifeline of the entire production activity.

Commercial energy Non Commercial energy

i. The sources of energy that i. The sources of energy that are usually
are available to the users at available freely to the users are
some price are referred to as referred to as non-commercial energy.
commercial energy. ii. This form of energy is used for
ii. This form of energy is used domestic consumption.
for commercial purposes. ii. iii. For example, Firewood, agricultural
i. iii. For example, coal, waste, animal waste (cow dung)
petroleum, natural gas and
electricity.

Question 7:

What are the three basic sources of generating power?

Answer:

The three basic sources of generating power are thermal, hydro-electric, and nuclear power.
The thermal power uses heat energy as its base for the production of electricity. Hydro-
electric power involves production of electricity through the use of kineticforce of falling
water. And the nuclear power involves the use of sustained nuclear fission to generate
electricity.

The thermal sources, hydro-electric sources and nuclear power accounts for 70%, 28% and
2% of the power generation capacity respectively in India.

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 Chapter 8 - Unit III- Infrastructure
Question 8:

What do you mean by transmission and distribution losses? How can they be reduced?

Answer:

Electric power transmission and distribution losses refer to the losses that occur in
transmission between the sources of supply and points of distribution. In other words, the
loss of power that arises due to the inherent resistance and transformation inefficiencies in
the electrical conductors and distribution transformers respectively are called transmission
and distribution losses.

The following measures should be taken to reduce power transmission and distribution
losses;

i. Improved technology of transmission and distribution should be used.

ii. Electricity distribution network should be privatised. This willinfuse efficiency,
thereby, eliminating wastages.
iii. Theft cases of electricity should be handled strictly by the trustworthy employees.
Strict imposition of fines and penalties should be imposed.

Question 9:

What are the various non-commercial sources of energy?

Answer:

The sources of energy that are generally available free to the users and that do not have a
recognized market are referred to as non-commercial energy. This form of energy is used
for domestic and for consumption purposes, for example, Firewood, agricultural waste,
animal waste (cow dung), etc. These goods neither command a price nor have established
market.

Question 10:

Justify that energy crisis can be overcome with the use of renewable sources of energy.

Answer:

When the resources are extracted at more rapid pace than its regeneration, then we say
that the carrying capacity of the environment reduces. The environment fails to perform its
function of sustaining life and this results in an environmental crisis. These environmental
crises are the result of a fall in the carrying and absorptive capacity of the environment. In
today’s scenario, the rate of consumption of resources is faster than the rate of their
production. Consequently, the resources get exhausted quickly. But on the other hand,
renewable resources get renewed or replenished quickly. These are unlimited and are not

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 Chapter 8 - Unit III- Infrastructure
affected by human activities, such as solar and wind energy. Hence, energy crises can be
overcome by the increased use of cost-effective technology of searching the renewable
resources of energy.

Question 11:

How has the consumption pattern of energy changed over the years?

Answer:

The percentage use of different sources of energy is referred to as pattern of energy

consumption. It can only be analysed when different sources of energy are converted into a
common unit, which is termed as MTOE (Million Tonnes of Oil Equivalent) in India. The
pattern of energy consumption has undergone considerable change overtime. The use of
primary sources like coal, petroleum and natural gas has undergone a significant change.
The non-commercial use of this energy has increased from 36% to 76% during 1953-54 to
2004-05. The percentage of direct final consumption of coal has drastically reduced
irrespective of the increase in the total consumption of coal. Its consumption increased from
95 million tonnes in 1980-81 to 355 million tonnes in 2008-09. Also, the consumption of oil,
for which our country was dependent upon Gulf countries, has increased. The consumption
of electricity in the agricultural sector has increased overtime, whereas, it remained the
highest in the industrial sector as compared to other sectors.

Question 12:

How are the rates of consumption of energy and economic growth connected?

Answer:

The rate of consumption of energy is crucial for economic growth or development process
of a nation. The consumption of renewable sources of energy is related to sustainable
economic development. The renewable sources of energy are free from pollution and
health hazard. Also, energy consumption is essential for promoting agriculture and
industrial process. Hence, more use of renewable source of energy leads to more sustained
economic development.

Question 13:

What problems are being faced by the power sector in India?

Answer:

The power sector is m faced with some critical challenges. These are as follows:

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 Chapter 8 - Unit III- Infrastructure
i. The installed capacity of India to generate electricity is not sufficient enough to
meet an annual economic growth of 7%.
ii. The State Electricity Boards (SEBs) that distribute electricity suffered a great loss
of more than Rs.500 billion due to transmission and distribution of electricity.
iii. The wrong pricing of electricity like supply of electricity at subsidised rates to
agricultural sector and theft of electricity has exaggerated the problems of power
sector.
iv. The high power tariffs and prolonged power cuts is another challenge in the
power sector.
v. The thermal power station faces the scarcity of the raw materials to generate
electricity.

Question 14:

Discuss the reforms which have been initiated recently to meet the energy crisis in India.

Answer:

The following reforms have been initiated by the government to meet the energy crises:

Privatisation in Power Generation Sector: The government earlier had the monopoly in the
generation and distribution of electricity. Now, private sector has been given the rights to
generate power.

Privatisation in Power Transmission: The Indian government has approved Tata Power and
Powergrid Corporation of India for constructing transmission networks in joint venture.

POWER for ALL by 2012: The Ministry of Power has set up an objective of ‘POWER for ALL
by 2012’ to achieve the target of 1000 KwHr (Units) of per capita consumption of electricity
in India. This objective is aligned with the objective to achieve an economic growth of 8%
p.a. The main motive of this target is to improve the quality of power, improve the
commercial viability of power industries and to provide power to all.

Setting up Regulatory Mechanism: The Central Electricity Regulatory Commission (CERC)

along with State Electricity Regulatory Commissions (SERC) has been established in 19 states
under the Electricity Regulatory Commissions Act, 1998. These commissions and authorities
regulate tariff, promote efficiency and competition.

Encouraging FDI: In order to achieve the target of POWER for ALL by 2012, the Ministry of
Power aimed at attracting €223.22 billion of Investment (FDI and Domestic Investment
Combined) into the power sector.

Accelerated Power Development and Reform Programme (APDRP): APDRP has been
initiated in the year 2000-01 with the motive of improving financial viability, reducing
transmission and distribution losses and promoting transparency through computerization.

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 Chapter 8 - Unit III- Infrastructure
Awareness: The government is encouraging people to increase the use of renewable
resources and also creating awareness among the people to reduce the conventional
resources. During the Eight Five Year Plan, government has set up National Energy Efficiency
Programme (NEEP) that aimed at conservation of petroleum products.

Improving Productivity: The Indian government has been emphasising on the measures to
improve the productivity of the existing power generating industries.

Question 15:

What are the main characteristics of health of the people of our country?

Answer:

Health is not only mere absence of disease but also includes the state of complete physical,
mental, and social well-being of an individual. In other words, it means a sound physical and
mental state of the individual. A person’s ability to work depends on his health. A healthy
person can contribute more actively. Hence, health and development of a person are the
integral parts of a nation's social and economic development.

It is very difficult to assess public health in terms of the single set of measures. So, various
other indicators have been taken into account like infant mortality rate, maternal mortality
rate, life expectancy and nutrition level along with the communicable and non
communicable diseases. The various health indicators in India have been tabulated in the
table below.

Health Indicators in India

Health Indicators India

Infant Mortality Rate/1,000 live-births 68

Under-5 mortality/1,000 live-births 87
Birth by skilled attendants 43
Fully immunised 67
Health expenditure as % of GDP 1.4
Government health spending to 5 total government spending (%) 5
Per Capita spending in International Dollars 96

Source: World Health Record 2005 and Economic Survey 2007-08

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 Chapter 8 - Unit III- Infrastructure
Question 16:

What is a global burden of disease?

Answer:

Global Burden of Disease (GBD) is an indicator used by the experts to measure the number
of people dying prematurely due to a particular disease. This also includes the number of
years spent by them in a state of disability due to various diseases. India bears a frightening
20 % of the GBD. More than half of the GBD is accounted by communicable diseases such as
diarrhea, malaria and tuberculosis.

Question 17:

Discuss the main drawbacks of our health care system.

Answer:

In recent years, India has embarked upon the development of vast health infrastructure..
This is evident from the fall in the death rate, infant mortality rate and rise in life
expectancy. But more need to be done in the field of health care. The following are some
of the deficiencies in the Indian health care:

a. Unequal Distribution of Health Care Services: The health care services are
unequally distributed across rural and urban areas. Rural areas that supports
70 % of the population, has only of the hospitals. Further, the doctor-
population ratio is as worse as 1:2,000. This implies that for every 2,000
people, there is only one doctor in India. Only half of the dispensaries are set
up in villages. Most of the health care facilities have been confined mostly to
the urban areas.
b. Communicable Diseases: various communicable diseases like AIDS (Acquired
Immune Deficiency Syndrome), HIV (Human Immune Deficiency Syndrome),
and SARS (Severe Acute Respiratory Syndrome)have made their way to India..
All these deadly diseases pose serious threat to t human capital reserve,
thereby,impeding economic growth.
c. Poor Management: The health care centres lack trained and skilled
personnel in the rural areas. Therefore, rural people have to rush to the
urban health care centres. This becomes worse in the absence of proper
roads and other cost-effective means of transportation.
d. Lack of Modern Techniques and Facilities: The government health centres
are usually devoid of the basic facilities like blood testing, X-rays, etc. These
centres lack modern techniques and medical facilities like, CT-scan,
sonography, etc. In order to avail these services, people need to depend on
the private hospitals that charge exorbitant fees.

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 Chapter 8 - Unit III- Infrastructure
e. Privatisation: The inability of the government to provide sufficient health
care centres and other medical facilities paved the way for the private sector
to step in. The private sector is governed by price signals, thereby, catering to
the need of the higher income group, leaving the low income group and the
poor at their own mercy. This is due to the privatisation of the health care
sector The private hospitals are attracting more patients than the
government hospitals as the government hospitals are devoid of facilities.

Question 18:

How has women’s health become a matter of great concern?

Answer:

Half of the total population in India constitutes women. Women are lagging behind in
education, health care, and economic participation as compared to men. The child sex ratio
has declined from 945 in 1991 to 927, showing the growing incidents of female foeticide in
the country. The married women population close to 3,00,000 have already given birth to
one child. About 50 % of the married women between the age of 15 and 49 suffer from
anemia. This resulted in 19 % of maternal deaths. The major cause of maternal morbidity
and mortality in India is abortions. These factors point towards the women's health due to
which it has become a matter of great concern.

Question 19:

Describe the meaning of public health. Discuss the major public health measures
undertaken by the state in recent years to control diseases.

Answer:

Public health refers to the act of protecting public’s health through education, research and
developmentand promotion of healthy lifestyle. It aims at the improvement and well being
of the people around the globe. It focuses on the protection and improvement of health of
the entire population rather than individual.

In the recent years, India has embarked upon the development of vast infrastructure.. At
the village level, a variety of hospitals were set upby the name of Primary Health Centres
(PHCs). The large number of hospitals is run by various voluntary agencies and by the private
sector. The hospitals are managed by professionals and by Para Medical professionals
trained in medical, pharmacy and nursing colleges. There has been a significant expansion in
the provision of health services. The number of hospitals and dispensaries has increased
from 9300 to 43300 and hospital beds from 1.2 to 7.2 million during 1951 to 2000. Also,
nursing personnel has increased from 0.18 to 8.7 lakh and allopathic doctors from 0.62 to 5
lakhs during the same period. The provision of various facilities has resulted in the
eradication of small pox, polio, leprosy, and other deadly diseases.
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 Chapter 8 - Unit III- Infrastructure
Question 20:

Differentiate the six systems of Indian medicine.

Answer:

The following are the six systems of medicines constituted by ISM (Indian Systems of
Medicines).

a. Ayurveda
b. Yoga
c. Siddha
d. Naturopathy
e. Unani
f. Homeopathy

Ayurveda is one of the traditional systems of medicine that is still used in India. It is a holistic
way to achieve health through body, mind and spirit. The ayurvedic practitioners
recommend diet and lifestyle changes along with drug therapy. They have identified a
number of medicinal preparations and surgical procedures for curing various ailments and
diseases that cannot be completely curable in other medical systems. The methods of
ayurveda such as applying herbs and massage can also be applied along with other systems.

Yoga as an art originated and was practised in India from thousand years. It has references
in ‘Upanishads’ and ’Puranas’ composed by Indian Aryans in the Vedic period. The main
credit for systematising yoga goes to Patanjali who wrote ‘Yoga Sutra’, two thousand years
ago. Yoga Sutra is the most important basic text on Yoga. It is through this means that the
essential message of yoga is spread throughout the world. It is defined as an art of righteous
living or an integrated system for the benefit of the body, mind and inner spirit.

Siddha comes from the word Siddhi which means an object to attain perfection or heaven.
This is the oldest among the Indian Medical Systems namely Ayurveda and Unani. It is also
known as Siddha Vaidya in India and also the oldest medical system in the world. As
nowadays, people’s preference to natural health remedies and herbal health remedies is
increasing day by day, Siddha has emerged as an important and unique system of Indian
medicine when compared to other traditional medical systems in existence.

Naturopathy deals with the healing power of nature as it assumes that all healing powers
are within our body. This means that within every human organism there is a healing
energy. Naturopathy regards that when we go against nature only then we fall ill. ‘Fasting’
has been described as Nature’s way to recover. A thorough rest that includes fasting is the
most favorable condition in which an ailing body can purify and recover itself.

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 Chapter 8 - Unit III- Infrastructure
Unani has a long and impressive record in India. It was introduced in India around 10th
century A.D. with the spread of Islamic civilisation. Now Unanipathy has become an
important part of Indian Systems of Medicine. India is one of the leading countries in terms
of its popularity. It is very much similar to our Ayurveda. Unani established that disease is a
natural process and that the symptoms are the reactions of the body to the disease.

Homeopathy consists of two words ‘Homeo’ meaning similar and ‘Pathos’ meaning suffering
or treatment.In this system, a drug and a disease that produce similar symptoms cancels
each other. It is popular among the people due to its remarkable healing capacity. Also, its
remedies are free from side effects.

Question 21:

How can we increase the effectiveness of health care programmes?

Answer:

Health is a public good and a basic human right. Therefore, it should be provided to all and
no person should be deprived of health care facilities. These facilities can be provided to all
if public health services are decentralised. It implies that the power of providing these
services should be delegated from the central to the local authorities. The success of health
care depends upon education, spread of knowledge, awareness and efficient health
infrastructure. It is crucial to create awareness about health and hygiene among people. The
telecom and IT sectors can further aggravate the effectiveness of health care programmes.
Further, providing quality medical facilities at nominal costs can promote its worthiness and
popularity. In order to enhance the effectiveness of health care programmes, the main focus
should be on increasing the number of hospitals, modernisation of medical facilities,
development of infrastructure, improving the doctor-population ratio and increasing the
number of medical colleges in India. The availability and development of medical facilities in
the rural areas is still a far cry. Further, there must be some regulation to check the
exorbitant fees charged by the private medical centres to make health care facilities
accessible and affordable to all.

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 Chapter 9 - Unit III- Environment and Sustainable
Development
Question 1:

What is meant by environment?

Answer:

Environment refers to all the surroundings which have an impact on human lives. It is the
sum total of the surroundings and resources that effect our existence and quality of life. It
includes all the biotic and abiotic factors. Biotic factors include all the living creatures like
plants, animals, forests, etc. while abiotic factors include all non-living things like air, water,
land, etc. that are provided free of cost by nature. Biotic and abiotic both make up our
surroundings and impact our existence and quality of life. In other words, environment
encompasses the r the biotic and abiotic components and their relations.

Question 2:

What happens when the rate of resource extraction exceeds that of their regeneration?

Answer:

Environment performs several functions, but its essential function of sustaining life carries
much significance. Environment provides us with life supporting elements like Sun light, soil,
water and air. On extracting resources at a more rapid pace than its regeneration, the
carrying capacity of the environment reduces, leading to a failure in its life sustaining
function. This results in environmental crises, one of the common problems faced by almost
all the countries of the world.

Question 3:

Classify the following into renewable and non-renewable resources

(i) trees (ii) fish (iii) petroleum (iv) coal (v) iron-ore (vi) water

Answer:

Renewable resources are those inexhaustible resources capable of being replenished easily.
Water, trees and fish are the renewable resources.

Non-renewable resources are those resources that are likely to be exhausted or depleted on
use. Petroleum, coal and iron ore are non-renewable resources. The pace of re-occurrence
of these resources is slower than that of their exploitation.

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 Chapter 9 - Unit III- Environment and Sustainable
Development
Question 4:

Two major environmental issues facing the world today are_____________

and_____________.

Answer:

Two major environmental issues facing the world today are Global Warming and Ozone
Depletion.

Global warming refers to the phenomenon of sustained increase in global temperature due
to environmental pollution and deforestation. It is caused by the emission of Green House
Gases, particularly, carbon dioxide. The increase in the level of carbon dioxide raises the
temperature of the earth surface, accelerating the melting of polar ice. This leads to the rise
in the sea level. Thus, the disturbed ecological balance leads to increasing natural calamities,
posing a threat to human survival.

Ozone acts as a cover for the earth surface that is very essential for the sustenance of life. It
prevents the harmful ultra violet radiations from penetrating the earth surface. But its
depletion is becoming a global concern these days. This is due to the excessive use of
cooling substances in the air conditioners and the refrigerators. As ozone depletes, the
possibility of ultra violet radiations penetrating to the earth surface increases, posing a
threat to the life on earth.

Question 5:

How do the following factors contribute to the environmental crisis in India? What
problem do they pose for the government?

(i) Rising population

(ii) Air pollution
(iii) Water contamination
(iv) Affluent consumption standards
(v) Illiteracy
(vi) Industrialization
(vii) Urbanization
(viii) Reduction of forest coverage
(ix) Poaching
(x) Global warming.

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Answer:

(i) Rising Population

Rising population has exerted an excessive burden on the environment in terms of two basic
aspects. The intensive and extensive extraction of both renewable and non-renewable
resources has led to exhaustion of the vital resources. Also, the explosive population size
has triggered excessive demand for housing, thereby, resulting in widespread deforestation
and fast depletion of other natural resources leading to ecological imbalances. Therefore, it
is high time for the Indian government to take preventive measures to control population
explosion.

(ii) Air Pollution

Air consists of oxygen that supports life. Air pollution implies contamination of air, i.e.
absence of fresh air (oxygen) to breathe. Various pollutants like CO2, CO, SO2, SO, etc.
pollutes air. Air pollution causes hypertension, asthma, respiratory and cardio-vascular
problems. Thus, the Indian government should take various steps to control air pollution,
avoid deforestation, increase health investment and also search for new alternative
pollution free technology such as CNG, etc.

(iii) Water Contamination

Contamination of water or pollution of water is posing a serious threat to human life. It is

one of the principal causes of all deadly diseases such as diarrhea, hepatitis, cholera, etc. It
occurs due to dumping of industrial waste, agricultural waste and sewerage into the water
bodies. Thus, the Indian government should put a check on wastewater disposal. This calls
for high capital investment for installation and maintenance of purifier machines.

(iv) Affluent Consumption Standards

Affluent Consumption Standards have placed a huge stress on the environment in terms of
resources supply and assimilation of waste. The resources have become extinct and wastes
generated are beyond the absorptive capacity of the environment leading to environmental
crises. The government is compelled to spend huge amounts on research and development
to explore alternative environment friendly resources. Also, upgradation of environmental
quality entails huge cost

(v) Illiteracy

Man, if illiterate will not use the resources judiciously that will ultimately lead to overuse or
misuse of the scarce resources. The resources can be judiciously and efficiently exploited
(with minimum waste) only when people are aware of and skillful in utilising the resources.
Otherwise lack of knowledge and skills may lead to excessive extraction of resources and,

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thereby, its misuse. Thus, the government should take measures to create awareness and
spread technical knowledge among people about various efficient and economising
methods.

(vi) Industrialisation

Industrialisation, on one hand, enhances our living standards but, on the other hand, it
causes deforestation, depletion of natural resources. In the blind rage to achieve economic
development, industrialisation acts as a catalyst. In order to speed up the process of
industrialisation, natural resources are exploited at a rapid pace. More trees are being felled
and, increasing volume of toxics and industrial wastes are dumped into the water bodies. All
these culminate to ecological imbalances posing threat to sustainable economic
development. Thus, the government should take measures to check undue and unnecessary
industrial growth in order to restore ecological balance.

(vii) Urbanisation

Urbanisation, on the one hand, infuses modernisation of lifestyle but, on the other hand, it
leads to deforestation. In order to meet the growing demand for houses, more trees are to
be felled, decreasing the land-per-man ratio. Rapid urbanisation puts an excess burden on
the natural resources, causing depletion. Urbanisation also reduces the availability of land
for farming purpose and lowers farm outputs. Hence, the government should take measures
to mitigate the impact of urbanisation by promoting small and cottage rural industries, rural
infrastructural development, thereby, reducing the rural-urban migration. Further, the
government should also promote afforestation and most importantly, adopt measures to
arrest population explosion.

(viii) Reduction of forest coverage

The need for reduction of forest coverage or deforestation arises due to the growing
demand for land, wood, rise in population and river valley projects. Deforestation leads to
reduction in oxygen level in air, soil erosion, climate change and global warming due to rise
in the CO2 level. Thus, measures are needed to promote afforestation, opening up of
sanctuaries and national park such as Jim Corbett National Park.

(ix) Poaching

Poaching is the illegal capturing, killing and hunting of animals. Due to this, many animals
are on the verge of extinction. The excessive hunting and killing of animals result in serious
ecological imbalances. Thus, in order to save the rare species such as Tiger, Asian Elephants,
Grevy’s Zebra, etc. more sanctuaries and national parks are to be set up. There is also need
for various environmental legislations like Endangered Species Act in the USA that imposes
strict penalties on the law breakers.

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(x) Global warming

Global warming refers to the phenomenon of sustained increase in global temperature due
to environmental pollution and deforestation. It is caused by the emission of Green House
Gases that include, particularly, carbon dioxide. The increase in the level of carbon dioxide
raises the temperature of the earth surface. This risen temperature accelerates the melting
of polar ice that further leads to the rise in the sea level. Thus, the incidence of natural
calamities rises due to disturbed ecological balance, thereby, posing a threat to human life.

Question 6:

What are the functions of the environment?

Answer:

The environment performs the following four dynamic functions:

1. Offer Production Resources: Environment provides us with wide tangible resources

like minerals, water and soil. These are the gifts of nature. These resources act as an
input for converting natural resources into productive and useful things. In other
words, environment provides input for production that enhances human life
qualitatively.
2. Sustains Life: Environment provides us with vital ingredients like sun, soil, water and
air that are necessary for the survival of life. Absence of these essential elements
implies absence of life. It supports biodiversity.
3. Assimilates Waste: The activities of production and consumption generate waste.
This waste in the form of garbage is absorbed by the environment automatically.
4. Enhances Quality of Life: Environment includes surroundings such as rivers, oceans,
mountains and deserts. It provides scenic beauty that man admires in life and adds
to the quality of human life.

Question 7:

Identify six factors contributing to land degradation in India.

Answer:

Degradation of land refers to the gradual but consistent loss of fertility.. This is emerging as
a serious concern in the context of environmental issues in India. The following are the
factors that contribute to land degradation in India:

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a. Soil Erosion: The removal of upper layer of the soil caused by agents like strong
winds or floods is termed as soil erosion. The top most layer of the soil carries major
and essential nutrients like nitrogen, phosphorous and potassium. Consequently, the
loss of this layer deteriorates the quality and productivity of land.
b. Alkalinity and Salinity of Soil: The salinity and alkalinity is caused by the problem of
water logging. Water logged on the top layer of soil absorbs all the nutrients present
in the soil, thereby, reducing its fertility.
c. Deforestation: The growing population along with their ever growing demand lead
to large scale destruction of forest cover. The reduction of forest coverage leads to
soil erosion that in turn causes climate change
d. Shifting Cultivation: The practice of shifting cultivation and subsistence farming
carried by the small and the marginal farmers result in the replenishment of soil
nutrients and, hence, its fertility.
e. Excessive use of Fertilisers: The excessive use of chemical fertilisers, insecticides and
pesticides lowers the quality and fertility of soil.
f. Desertification: The spread of deserts in arid and semi arid areas is referred to as
desertification. It occurs due to overgrazing of the animals. This results in the
reduction of lush green areas that in turn leads to replenishment of soil fertility.

Question 8:

Explain how the opportunity costs of negative environmental impact are high.

Answer:

Opportunity cost is the cost that is foregone when we make a choice or a decision. If a piece
of land is to be used for wheat production then the production of say, rice, is to be
sacrificed. The loss of rice production is the opportunity cost of producing wheat. In the
similar way, the cost of negative environment is the opportunity cost of huge expenditure
incurred on health and searching new alternatives. This is explained elaborately in the
following paragraph;

When the resources are extracted at a more rapid pace than its regeneration, then we say
that the carrying capacity of the environment reduces. In such situation, environment fails
to perform its function of sustaining life, thereby, resulting in environmental crises. In other
words, environmental crises are an aggregate outcome of excessive exploitation of natural
resources and excessive generation of wastes. Therefore, there arises a need for exploration
of new alternative eco-friendly resources to avoid environmental crisis. Moreover,
environmental crises lead to greater incidence of respiratory and water borne diseases,
necessitating higher health expenditures and investments. The costs involved in searching
new alternative resources together with the greater health expenditures constitute the
opportunity costs of negative environmental impact. Such opportunity costs are very high

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and require voluminous financial commitments by the government. Therefore, the
opportunity costs of negative environmental impact are high.

Question 9:

Outline the steps involved in attaining sustainable development in India.

Answer:

Sustainable development refers to the achievement of economic development by careful

and judicial utilisation of the natural resources so that the present generations’ needs are
fulfilled without compromising that of the future generations’. It becomes our moral
responsibility to hand over earth in good order to the future generation. Aligned with the
view of a leading environmental economist, Herman Daly, India has taken the following
steps to achieve the aim of sustainable development:

i. Population Control Measures

India has promoted various measures to arrest population explosion. The various population
control measures include spread of awareness and knowledge of birth control measures and
literacy.

ii. Use of Environment Supportive Fuel

As the fuels such as petrol and diesel emit huge amount of carbon dioxide that leads to
global warming, so, the Indian government has promoted the use of CNG and LPG. These
are clean, eco-friendly fuels that emit lesser smoke.

iii. Use of Solar and Wind Energy

India being a moderate country is enriched with sunlight and wind power. These are two
free gifts of nature that is non-exhaustible. It solves the problem of economic growth with
due focus on sustainable development.

iv. Recycling and Ban on Plastic Bags

The industrial and household wastes are accumulated on daily basis. There is a need to
develop the habit of recycling of waste products in order to sustain the environment.
Household waste can be used as manure for organic farming. A very recent step taken by
the Indian government is banning the use of plastic bags. This is a very good step as plastic
bags do not get decomposed easily and leads to pollution while recycling.

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v. Pollution Tax and Fines

Indian government has taken many steps to control pollution. Some of the measures are
regular vehicle checkups, levying pollution tax on the industries emitting smoke. These
measures are coupled with huge fines and even imprisonment for the law breakers.

vi. Use of the Input Efficient Technology

The input efficient methods have been devised that not only increases the production and
productivity but also efficiency with which the inputs are used. The efficient use of input, on
one hand, leads to lesser exploitation of the natural resources and, on the other hand,
enhances the future economic growth prospects of India.

Question 10:

India has abundant natural resources - substantiate the statement.

Answer:

India is fortunate enough to have abundant natural resources. It comprises of rich and
fertile soil, plenty of rivers and tributaries, green forests, mineral deposits, mountains, etc.
The Indo-Gangetic plains are the most fertile, densely populated and cultivated plains in the
world. It stretches from the Arabian Sea to the Bay of Bengal. The black soil of the Deccan
Plateau is suitable for the cultivation of cotton in the country. India’s lush green forests
serve as a natural cover for the majority of the population. India holds more than 20 % of
the world’s total iron ore reserves. There are mountain ranges that facilitate the operation
of the mini hydel plants. It also has vast variety of flora of 15,000 species of plants. The
country is also endowed with numerous minerals that are found under the earth’s surface
like coal, natural gas, copper, diamonds, etc.

Question 11:

Is environmental crisis a recent phenomenon? If so, why?

Answer:

Yes, the environmental crisis is a very recent phenomenon; the sparks of such crisis were
never visible in the past. In the early centuries before industrialisation, the population
growth was on a tight rein. The demand of the environmental resources was much lower
than its supply. Environment supported the world’s population in the past as the rate of
usage of the resources was lesser. Also, the rate of regeneration of resources exceeded the
rate with which the resources were exploited. In other words, the threat of environment
crisis was never felt in the past as the exploitation of natural resources was within the
carrying capacity of the environment. But, today, due to heavy industrialisation,

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urbanisation, man has started exploiting nature to its maximum. Nuclear and industrial
wastes being dumped into the water bodies, pollution of land and air has affected the
environment in three-fold manner. Now, the rate of exploitation of natural resources is
lagging behind the rate of regeneration of the natural resources. Consequently, the
mounting pressure on the carrying capacity of the environment is paving the way for
environmental crises.

Question 12:

Give two instances of

(a) Overuse of environmental resources

(b) Misuse of environmental resources.

Answer:

(a) Overuse of environmental resources

i. Drying up of Rivers: The increasing irrigation and construction of flood storage

reservoirs are resulting in the drying up of rivers.
ii. Excessive Deforestation: The growing population and their ever growing demand
are resulting in large scale deforestation. This leads to soil erosion, making the
soil infertile.

(b) Misuse of environmental resources.

i. Use of Rivers to Discharge the Waste: Water is essential for life. The misuse of
water as a resource is responsible for its pollution and contamination. The
factors responsible for water pollution are the discharge of domestic sewerage,
industrial waste, and thermal power plants into the rivers.
ii. Use of Wood for Cooking Food: Wood is a non-renewable source of energy. It is
obtained from trees. Using wood instead of eco friendly alternative fuels for
cooking purposes brings about deforestation.

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Question 13:

State any four pressing environmental concerns of India. Correction for environmental
damages involves opportunity costs. Explain.

ANSWER:

Air pollution, water contamination, soil erosion, deforestation and wild life extinction are
some of the most pressing environmental concerns for India. But the priority issues include
global warming, land degradation, ozone depletion and management of fresh water.

Opportunity cost is the cost that is foregone when we make a choice or a decision. If a piece
of land is to be used for wheat production then the production of say, rice, is to be
sacrificed. The loss of rice production is the opportunity cost of producing wheat. In the
similar way, the opportunity cost of correction for environmental damages refers to the
huge amount of expenditure incurred on searching for new efficient alternatives. The heavy
intensive and extensive extraction of both renewable and non-renewable resources
demands expenditure for exploring new alternative resources in order to avoid an
environmental crisis. The discovery of such resources requires heavy investment by the
government. Also, implementation and maintenance of these alternative resources involve
very high cost. The best example is the advent of CNG in order to reduce the rising problem
of pollution in Delhi. The government has incurred heavy investment to popularise CNG and
to make the consumers aware regarding its uses. Therefore, the correction for
environmental damages involves opportunity cost that is very high.

Question 14:

Explain the supply-demand reversal of environmental resources.

Answer:

From the very inception of civilisation till the advent of industrialisation, the rate of
extraction of the natural resources was far behind the rate of their regeneration. That is, in
other words, the demand for resources falls short of the supply of the resources. The
exploitation of nature by man was within the absorptive capacity of the environment. But,
in today’s scenario with population explosion and industrial revolution, the demand for
resources for both production and distribution has risen at a much more rapid rate.
However, the rate of regeneration of these resources is relatively much lower than the rate
of their extraction. In other words, the rate of consumption (demand) of the natural
resources exceeds that of their supply. This is beyond the absorptive capacity of the
environment and has made environmental crisis more probable. This reversal in the
demand and supply relationship is referred to as the supply-demand reversal of the
environmental resources.

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Question 15:

Account for the current environmental crisis.

Answer:

The population explosion and affluent consumption have placed an undue and excess
burden on the environment. The resources are increasingly exhausted day by day, but the
regeneration of resources is constant. So, when the resources are extracted at a rapid pace
than its regeneration, then the carrying capacity of the environment reduces. Then
environment fails to perform its function of sustaining life, consequently, resulting in an
environmental crisis. The current environmental crises include two major global issues,
namely, global warming and ozone depletion. Global warming is the result of rising
temperature globally due to the emission of green house gases, especially, carbon dioxide.
The rise in temperature accelerates the melting of polar ice leading to the rise of water level
in the sea. This leads to ecological imbalances. Ozone depletion is another major concern
that is caused due to the excessive use of chlorofluorocarbon (CFCs) in the air conditioners
and refrigerators. As ozone depletes, the possibility of ultra violet radiations penetrating
into earth surface increases, posing a threat to the living organisms. The culminated effect
of these two accounts for major concern of environmental crisis in the present time.

Question 16:

Highlight any two serious adverse environmental consequences of development in India.

India’s environmental problems pose a dichotomy-they are poverty induced and, at the
same time, due to affluence in living standards. Is this true?

Answer:

The two serious issues or consequences of development in India are land degradation and
biodiversity loss. The developmental activities in India exerted tremendous pressure on the
natural resources and also affected human health and well being.

Land Degradation: The gradual but consistent loss of fertility of land is referred to as
degradation of land. This is emerging as a serious concern in the context of environmental
issues in India. The following are the factors that contribute to land degradation in India:

a. Soil Erosion: The removal of upper layer of the soil caused either by the
strong winds or floods is termed as soil erosion. This top most layer of the soil
carries major nutrients like nitrogen, phosphorous and potassium that are
essential for the growth of plants. Therefore, the loss of this layer reduces
the productivity of the land.

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b. Alkalinity and Salinity of Soil: The salinity and alkalinity is caused by the
problem of water logging. The water logged on the top layer of soil absorbs
all the nutrients present in the soil leading to the deterioration of fertility of
land.
c. Deforestation: The growing population and their ever growing demand leads
to a large scale destruction of forest cover. The removal of forest cover
affects the ecological balance by reducing the level of oxygen in the air. This
leads to increase in the pollutants that cause various health hazards.
d. Shifting Cultivation: The practice of shifting cultivation along with the
subsistence farming carried by small and marginal farmers resulted in the
replenishment of soil nutrients and fertility.

The environmental problems points to the paradoxical situation in the country.

Deforestation in India is a rapid consequence of population explosion and widespread
poverty. The poor people in the rural areas are compelled to fell trees for earning their
livelihood. The growing demand for natural resources to carry out production activity in the
urban areas is also equally responsible for the present environmental degradation. There
are two different opinions on the effect of environmental activities. One opinion advocates
for India’s prosperity by resorting to industrial production, while, the other opinion
highlights the threat of pollution due to rapidly growing industrial sector. This can be
understood as in the wake of rapid urbanisation, the expansion of vehicular traffic
generates pollution of noise and air.

Question 17:

What is sustainable development?

Answer:

Meeting the basic needs of all that requires distribution of resources is our moral
responsibility. It becomes a moral obligation to hand over the earth to the future generation
in good order. But, it is realised that if the resources (non renewable) are utilised fully then
these will deplete so fast that it will not meet the production capacity of the future
generation. The economic development achieved today in such manner cannot be sustained
for a long time as the production capacity of the future generations in absence of productive
resources reduces. Therefore, sustainable development is the process of economic
development that aims at meeting the needs of the present generation without comprising
the needs of the future generations. Sustainable development maximises welfare of both
present and future generations. In other words, it is that process of economic growth that is
sustained over a long period of time without causing any fall in quality of life of the future
generations.

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Question 18:

Keeping in view your locality, describe any four strategies of sustainable development.

Answer:

Sustainable development means a judicious or optimum utilisation of resources in such a

manner that the pace of economic growth sustains with inter-generational equity.

The following are the four strategies of attaining sustainable development:

1. Use of Environment Friendly Fuel

The growing use of fuel such as petrol and diesel emits huge amount of carbon dioxide that
adds to the Green House impact. In order to control pollution, the use of CNG and LPG
should be promoted. These fuels are cleaner fuels, smokeless and eco-friendly.

2. Use of Renewable Resources

India is well enriched with sunlight, water and wind energy. These are the free gift of nature
that are non–exhaustible and pollution free. Thus, attempts should be made to harness
solar and wind energy by employing different technologies. It not only solves the problem of
economic growth but also the problem of sustainable economic development.

3. Recycling

The industrial and household wastes should be accumulated on daily basis. These wastes
should be distinguished as bio-degradable and non-biodegradable wastes. The bio-
degradable wastes are those wastes that can be decomposed and can be used as manure
for organic farming. The non-biodegradable wastes like plastic, etc. can be recycled and re-
used.

4. Use of the Input Efficient Technology

The input efficient methods and techniques should be devised so that more production is
possible at per unit of input. This efficient utilisation of the natural resources leads to lesser
exploitation of the natural resources.

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Question 19:

Explain the relevance of intergenerational equity in the definition of sustainable

development.

Answer:

Meeting the basic needs of all that requires the distribution of resources is our moral
obligation. It becomes obligatory to hand over the earth to the future generation in a good
order. But, it is realised that if the resources (non renewable) are utilised fully, then these
will deplete so fast that it will reduce the production capacity of the future generations. The
economic development achieved today in such manner cannot be sustained for a long time
as the production capacity of the future generations in absence of productive resources
reduces. Therefore, sustainable development is the process of economic development that
aims at meeting the needs of the present generation without comprising the needs of the
future generations. Sustainable development maximises the welfare of both present and
future generations. This development does not mean a check on the existing pace of
economic growth. It only means a judicious or optimum utilisation of resources in such a
manner that pace of economic growth sustains with inter generational equity.

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Experiences of India and its Neighbours
Question 1:

Why are regional and economic groupings formed?

Answer:

With the objective of understanding various means and strategies to strengthen the
economies, different nations of the world are motivated to form regional and global
economic groups like SAARC, European Union, ASEAN, etc. The formation of such regional
and economic groups helps the member countries to know the development strategies and
measures adopted by other member countries. This enables them to analyse their strength
and weakness and, thereby, formulate policies to accelerate social progress and cultural
development among its member countries. Secondly, another important purpose behind
setting up of these groups is maintenance of peace and stability of the member countries. In
addition to this, these groups provide a common platform to raise their voice in a unified
manner on common issues to safeguard their common interests.

Question 2:

What are the various means by which countries are trying to strengthen their own
domestic economies?

Answer:

The following are the various means through which the nations are trying to strengthen
their own domestic economies:

Nations are forming various regional and economic groupings like SAARC, European Union,
G-8, G-20, ASEAN etc. in order to strengthen their economies. These groups provide a
common platform to the member countries to raise their voice in a unified manner on
common issues to safeguard their common interests.

Further, they are also interested in knowing the developmental process adopted by their
neighbouring nations, so as to analyse their strengths and weaknesses. Accordingly, they
formulate policies to accelerate social progress and cultural development among the
member countries.

Moreover, nations also resort to liberalising their economies. This minimises the
government interference in economic activities. The economy is governed by market forces,
i.e. demand and supply forces.

Nations also resort to the process of globalisation to open up their economies to provide
wide international market to their domestic producers.

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Question 3:

What similar developmental strategies have India and Pakistan followed for their
respective developmental paths?

Answer:

India and Pakistan both have followed a similar developmental strategy. The main
similarities between the developmental strategies can be summed up as:

i. India and Pakistan both have started their developmental programmes based on
economic planning soon after their independence in 1947.
ii. Both the countries relied on the public sector for initiating the process of growth and
development.
iii. Both of them have followed the path of mixed economic structure involving the
participation of both the state as well as the private sector.
iv. Both of them introduced economic reforms at the same time to strengthen their
economies.

Question 4:

Explain the Great Leap Forward campaign of China as initiated in 1958.

Answer:

The Great Leap Forward (GLF) was a campaign initiated in 1958 in China. The aims of this
campaign are as follows:

The aim of the campaign was to initiate large scale industrialisation in the country
concentrating not only in the urban areas but also in the rural ones.

The people in the urban areas were motivated to set up industries in their backyards.

In the rural areas, Commune System was implemented. Under this system, people were
engaged in collective farming.

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Question 5:

China’s rapid industrial growth can be traced back to its reforms in 1978. Do you agree?
Elucidate.

Answer:

Yes, it cannot be denied that China’s rapid industrial growth is an aggregate outcome of the
various economic reforms that were introduced in phases since 1978. In the initial phase,
reforms were initiated in agriculture, foreign trade and investment sectors. The system of
collective farming known as Commune System was implemented. Under this system, land
was divided into small plots that were allocated to the individual households. These
households were allowed to keep the remaining income from land after paying the taxes to
the government. In the later phase, reforms were initiated in the industrial sector. During
this phase, the private firms and village and township enterprises were allowed to produce
goods and services and to compete with the State Owned Enterprises. The reforms also
included dual pricing. The dual pricing implies that the farmers and the industrial units were
required to buy and sell a fixed quantity of inputs and output at the price fixed by the
government and the remaining quantities were traded at the market price. Gradually, with
the rapid increase in the aggregate production in the later years, the quantities traded in the
market increased by many folds. The reforms also included setting up of Special Economic
Zones to attract foreign investors. Therefore, China’s rapid industrial growth is attributable
to the success of different phases of its economic reforms.

Question 6:

Describe the path of developmental initiatives taken by Pakistan for its economic
development.

Answer:

a) With the aim of economic development, Pakistan adopted the pattern of mixed
economy where both private and public sectors coexist
b) Pakistan introduced a variety of regulated policy framework for import substitution,
industrialisation during 1950s and 1960s. This implies producing goods domestically
to substitute imports, thereby, discouraging imports and simultaneously encouraging
and developing domestic industries.
c) In order to protect domestic industries producing consumer goods, policy measure
was initiated to create t tariff barriers.
d) The introduction of Green Revolution mechanised agriculture leading to the increase
in the production of food grains.

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e) The mechanisation of agriculture was followed by the nationalisation of capital
goods industries in 1970s.
f) In the late 1970s and early 1980s, Pakistan shifted its policy orientation by
denationalising the thrust areas, thereby, encouraging the private sector.
g) All these above measures created an environment conducive to initiate the
economic reforms that were ultimately initiated in 1988.

Question 7:

What is the important implication of the one child norm in China?

Answer:

The important implication of the one-child norm in China is the low population growth. This
measure also led to the fall in the sex ratio in China, i.e. the proportion of females per
thousand males. However, the country believes that in the coming decades there will be
more elderly people in proportion to the young people. This will oblige the country to
provide social security measures with fewer workers.

Question 8:

Mention the salient demographic indicators of China, Pakistan and India.

Answer:

The important demographic indicators of Indian, China and Pakistan are tabulated as below.

Demographic Indicators, 2000-01

Country Estimated Annual Growth Density Sex Fertility Urbanisation

Population Rate of Population (per sq. Ratio Rate
(in millions) (1990-2003) km)
India 1103.6 1.7 358 933 3.0 27.8
China 1303.7 1.0 138 937 1.8 36.1
Pakistan 162.4 2.5 193 922 5.1 33.4

The important demographic indicators are as follows:

a) Total Population: China is the largest populated country in the world followed by
India. The above table depicts that China’s population in 2000-01 was approximately
1303.7 million and that of India and Pakistan was 1103.6 million and 162.4 million
respectively.
b) Annual Growth Rate of Population: Although China is the largest populated country
but a strong positive point for China is that, its annual growth rate of population is
just 1% per annum while that of India and Pakistan is 1.7% and 2.5% per annum.

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 Chapter 10 - Unit IV- Comparative Development
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With such a high growth rate it would not be wrong to expect that in the
forthcoming decades India will surpass the total population of China.
c) Density of Population: In spite of the fact that China is highly populated and
geographically occupying the largest area among the three nations, its density of
population is the lowest. It is as low as 138 persons per square kilometer of area
compared to 358 and 193 persons in India and Pakistan respectively. Lower the
degree of density of population the lower is the pressure on the country’s natural
resources and higher is the probability of sustainable development.
d) Sex Ratio: This ratio counts the number of females per 1000 males. The sex ratios in
all the three countries are almost same with China having a marginally higher sex
ratio of 937 females per 1000 males. This depicts the low economic and social status
of women in India and Pakistan.
e) Fertility Rate: This rate refers to the number of children a woman gives birth to
during her lifetime. China enjoys an upper hand in this case. The fertility rate of
Chinese woman is only 1.8 whereas those of India and Pakistan are 3.0 and 5.1. This
implies that in India and Pakistan a woman usually gives birth to approximately 3 and
5 children. This is the most important concern for both India and Pakistan, as with
such a high fertility rate, population in the coming decades will surpass that of China.
f) Urbanisation: Lastly, China is comparatively more urbanised than India and Pakistan.
The rate of urbanisation in China is 36.1% while that in India and Pakistan is 27.8%
and 33.4% respectively. The degree of urbanisation depicts the standard and quality
of living of people of a particular country. Also, this confirms the shift in the
economic structure of an economy. Higher degree of urbanisation reveals
higher industrialisation and development of tertiary sector in the economy.

Thus to sum up, although China is the largest populated country but its other demographic
indicators are stronger than those of both India and Pakistan. It would not be wrong to
expect a decline in China’s population in the coming decades due to implementation of
various policy measures and also due to low annual growth rate of population.

Question 9:

Compare and contrast India and China’s sectoral contribution towards GDP in 2003. What
does it indicate?

Answer:

The comparison of India’s and China’s sectoral contribution towards their respective GDP
can be done with the help of the data tabulated below:

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 Chapter 10 - Unit IV- Comparative Development
Experiences of India and its Neighbours

Sectors Contribution to GDP (in %) (2003)

India China
Primary (Agriculture) 23 15
Secondary (Industry) 26 53
Tertiary (Service) 51 32

1. Contribution of Primary Sector to GDP: The data above reveals that the contribution
of the primary sector to India’s GDP is 23% compared to 15% of China’s GDP. This
confirms the agrarian nature of Indian economy.
2. Contribution of Secondary Sector to GDP: The data also reveals that China has
comparatively a strong industrial base as compared to India. The contribution of
secondary sector to China’s GDP is 53% against the contribution of mere 26% to
India’s GDP. From this, we can infer that India’s industrial sector is far behind that of
China.
3. Contribution of Tertiary Sector to GDP: We can also analyze that although India’s
industrial sector is not as strong as that of China yet the contribution of India’s
service sector is much stronger to its than that of China.
Thus, analysing the above data helps us to conclude that a significant portion of India’s GDP
is contributed by tertiary sector followed by its agriculture sector. On the contrary, the
major contributor to China’s GDP is the secondary sector followed by its tertiary
sector.

The process of economic growth has led to a tremendous shift in the sectoral share of
output and employment. The percentage share of the primary sector in total output and
employment tends to decrease while that of the secondary and tertiary sector tends to
increase. The following facts explain the sectoral share in output and employment of India
and China.

i. Both India and China have shown a noticeable structural transformation from the
primary sector to other two sectors. The primary sector in both the countries is
no longer the important contributor to the nation’s GDP.
ii. While India is relying more on its tertiary sector China is relying more on its
secondary sector in terms of the sectoral contribution to their GDP. The
experience of China is similar to that of the other developed countries in the
world. The experience of the developed countries shows that secondary sector
followed by the tertiary sector emerge as the leading sectors of the economy.
Compared to China, India showed a direct shift from the primary sector to
tertiary sector. This is due to the fast integration of these two economies with
the other market economies of the world.

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 Chapter 10 - Unit IV- Comparative Development
Experiences of India and its Neighbours
Question 10:

Mention the various indicators of human development.

Answer:

The indicators of human development are:

i. Life Expectancy.
ii. Adult Literacy Rate.
iii. Infant Mortality Rate.
iv. Percentage of the population below poverty line.
v. GDP per capita
vi. Percentage of the population having access to improved sanitation
vii. Percentage of the population having access to improved water sources.

Question 11:

Define liberty indicator. Give some examples of liberty indicators.

Answer:

Liberty Indicator may be defined as the measure of the extent of demographic participation
in the social and political decision making. In other words, it is an index used to measure the
participation of the people in taking decisions. Some examples of liberty indicators are the
measures of the extent of the Constitutional Protection Rights given to the citizens and the
extent of the Constitutional Protection of the independence of the Judiciary and Rule of
Law.

Question 12:

Evaluate the various factors that led to the rapid growth in economic development in
China.

Answer:

China’s rapid economic development is an aggregate outcome of the introduction of the

reforms in phases since 1978. The following are the various factors that led to the rapid
growth in the economic development in China:

In the initial phase, reforms were initiated in agriculture, foreign trade and investment
sectors. The system of collective farming known as Commune System was implemented.
Under this system, land was divided into small plots that were allocated to the individual
households. These households were allowed to keep the remaining income from land after
paying the taxes to the government.

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 Chapter 10 - Unit IV- Comparative Development
Experiences of India and its Neighbours
In the later phase, reforms were initiated in the industrial sector. During this phase, the
private firms, village and township enterprises were allowed to produce goods and services
and to compete with the State Owned Enterprises.

The dual pricing were implemented. This implies that the farmers and the industrial units
were required to buy and sell a fixed quantity of inputs and output at the price fixed by the
government and the remaining quantities were traded at the market price. Gradually, with
rapid increase in aggregate production in the later years, the quantities traded in the market
increased by many folds.

The reforms also included setting up of Special Economic Zones to attract foreign investors
and to encourage its exports.

Therefore, the aggregate focus of all these economic reforms resulted in rapid industrial
growth and economic development in China.

Question 13:

Group the following features pertaining to the economies of India, China and Pakistan
under three heads

 One-child norm
 Low fertility rate
 High degree of urbanisation
 Mixed economy
 Very high fertility rate
 Large population
 High density of population
 Growth due to manufacturing sector
 Growth due to service sector

Answer:

India China Pakistan

Mixed economy One-child norm Mixed economy

High density of Low fertility rate Very high fertility rate
population
Growth due to High degree of urbanisation Large population
service sector Growth due to manufacturing
sector

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 Chapter 10 - Unit IV- Comparative Development
Experiences of India and its Neighbours
Question 14:

Give reasons for the slow growth and re-emergence of poverty in Pakistan.

Answer:

The following are the main reasons for the slow growth and re-emergence of poverty in
Pakistan:

Greater Dependency on the Public Sector Enterprises: The main cause behind the slow
economic growth in Pakistan is the greater dependence on Public Sector Enterprises.
Pakistan relied largely on the policy of protection by assigning central role to the Public
Sector Enterprises. The operational inefficiencies of Public Sector Enterprises along with the
misallocation of scarce resources resulted in dormant economic growth rate.

Traditional Agricultural Practices: The agricultural practices in Pakistan relied heavily on

traditional methods and the vagaries of climatic conditions resulting in low productivity.
Consequently, the agricultural sector was not able to flourish to the extent it was thought
of.

Undeveloped Manufacturing Sector: The major portion of the foreign exchange earnings of
Pakistan was in the form of remittances from Pakistani workers in the Middle-east and
exports of highly volatile agricultural products. This can be regarded as one of the reasons
for the slow economic growth. This is because the inflow of foreign exchange in the form of
remittances substituted the need for development of manufacturing sector to earn foreign
exchange by exporting manufactured goods.

Increasing Dependence on Foreign Loans: There was an increasing dependence on foreign

loans for meeting t foreign exchange requirements. Pakistan faced increasing difficulty in
repaying these loans along with the mounting interest obligations in the years of agricultural
failure. The increasing burden of huge foreign loans impeded the economic growth
prospects of Pakistan.

Lack of Political Stability: The lack of political stability demanded huge public expenditure
for maintaining law and order in the country. This huge public expenditure acted as a drain
on the country’s economic resources.

Insufficient Foreign Investment: Pakistan also failed to attract sufficient foreign investment
due to lack of political stability, low degree of international credibility and lack of well
developed infrastructure.

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 Chapter 10 - Unit IV- Comparative Development
Experiences of India and its Neighbours
Question 15:

Compare and contrast the development of India, China and Pakistan with respect to some
salient human development indicators.

Answer:

The following are the indicators of human development:

i. Life Expectancy
ii. Adult Literacy Rate
iii. Infant Mortality Rate
iv. Percentage of the population below poverty line
v. GDP per capita
vi. Percentage of the population having access to improved sanitation
vii. Percentage of the population having access to improved water sources.

On the basis of individual indices of these parameters, a Human Development Index (HDI)
was constructed. The higher the value of HDI, higher will be the level of growth and
development of a country. The rankings are accorded to the countries as per their HDI.
China ranked 81, India 128th and Pakistan 136th. High ranking of China is due to the higher
GDP per capita. Moreover, the one-child norm led to sustained rise in the GDP,
consequently, China was ranked higher than India and Pakistan in HDI.

Question 16:

Comment on the growth rate trends witnessed in China and India in the last two decades.

Answer:

India, with democratic institutions, performed moderately, but the majority of its people
still depend on agriculture. Infrastructure is lacking in many parts of the country. It is yet to
raise the Standard of living of more than one-fourth of its population that lives below the
poverty line.

On the other hand, the lack of political freedom and its implications in China are the major
concern in the last two decades. The country used the market system without losing
political commitment and succeeded in raising the level of growth along with poverty
alleviation. China used the market mechanism to create additional social and economic
opportunities. The country has also ensured social security in the rural areas by retaining
collective farming known as Commune System. Public intervention in social infrastructure
prior to the introduction of the economic reforms has brought positive results in the human
development indicators of China.

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