केन्द्रीय विद्यालय संगठन

KENDRIYA VIDYALAYA SANGATHAN

शिक्षा एिं प्रशिक्षण का आँचशलक संस्थान, मैसूरू

ZONAL INSTITUTE OF EDUCATION AND TRAINING, MYSURU

Study Material
(INDIAN ECONOMIC DEVELOPMENT)

Session – 2022-23
Class – XII

Subject – ECONOMICS
Subject Code – 030

Prepared By – M r s . R u m m a R a i n a
(Training Associate, ECONOMICS)

1
 INDEX

S. NO. Topic Page No

1.
CBSE Syllabus 2022-23 Class XII 3-5
(Indian Economic Development))

2.
Unit Wise Weightage of marks 6
(Indian Economic Development)

3.
Unit 6: Development Experience(1947-90) & Economic 7-104
Reforms since 1991.

4. Unit 7: Current Challenges facing Indian Economy. 105-144

5. Unit 8: Development Experience of India. 145-158

2
 Part B: Indian Economic Development

Unit 6: Development Experience(1947-90) & Economic Reforms since 1991.

❖ A brief introduction of the state of Indian economy on the eve of independence.

❖ Indian economic system and common goals of Five Year Plans.

❖ Main features, problems and policies of agriculture (institutional aspects and

new agricultural strategy)

❖ Industry (IPR 1956; SSI – role & importance) and foreign trade.

❖ Economic Reforms since 1991: Features and appraisals of liberalisation,

globalisation and privatisation (LPG policy); Concepts of demonetization and
GST
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 Part B: Indian Economic Development

Unit 7: Current challenges facing Indian Economy

❖ Human Capital Formation: How people become resource; Role of human

capital in economic development; Growth of Education Sector in India.

❖ Rural development: Key issues - credit and marketing - role of cooperatives;

agricultural diversification; alternative farming - organic farming.

❖ Employment: Growth and changes in work force participation rate in formal

and informal sectors; problems and policies.

❖ Sustainable Economic Development: Meaning, Effects of Economic

Development on Resources and Environment, including global warming .

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 Part B: Indian Economic Development

Unit 8: Development Experience of India.

❖ A comparison with neighbours

❖ India and Pakistan

❖ India and China

❖ Issues: economic growth, population, sectoral development and other Human

Development Indicators

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 Unit Wise Weightage of Marks
(Indian Economic Development)

PART B INDIAN ECONOMIC DEVELOPMENT MARKS

UNIT 6 Development Experience(1947-90) and 12

Economic Reforms since 1991.

UNIT 7 Current Challenges facing Indian Economy 20

UNIT 8 Development Experience of India- A Comparison with 08

Neighbours

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UNIT 6: Development Experience(1947-90) and
Economic Reforms since 1991.

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TOPIC 1 :Indian Economy on the Eve of
Independence

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TOPIC 2 : FIVE YEAR PLANS (1947-1990)

Five Year Plans: History

▪ The leaders of independent India had to decide the

type of economic system most suitable for our nation,
a system which would promote the welfare of all.

▪ The concept of economic planning in India was

derived from Russia (then USSR). India has launched
12 five year plans so far. The first five-year plan was
launched in 1951.

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 GOALS OF THE FIVE YEAR PLANS

• GROWTH This does not mean that all

1 the plans have given equal
importance to all these goals.
2
• MODERNISATION Due to limited resources, a
choice has to be made in each
plan about which of the goals
3
• SELF-RELIANCE is to be given primary
importance.

4
• EQUITY

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GROWTH:

▪ It refers to increase in the country’s capacity to produce the output of

goods and services within the country.
▪ A good indicator of economic growth is steady increase in the Gross
Domestic Product (GDP).
▪ The GDP is the market value of all the goods and services produced in
the country during a year.
▪ The GDP of a country is derived from the different sectors of the
economy, namely the agricultural sector, the industrial sector and the
service sector.
▪ The contribution made by each of these sectors makes up the
structural composition of the economy.

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MODERNISATION:

▪ To increase the production of goods and services the

producers have to adopt new technology.

▪ Adoption of new technology is called modernization.

▪ However, modernization does not refer only to the use of new

technology but also to changes in social outlook such as the
recognition that women should have the same rights as men
& that they are recognised as major contributors in the
growth process of an economy.

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SELF-RELIANCE:

▪ A nation can promote economic growth and modernization by

using its own resources or by using resources imported from
other nations.
▪ The first seven five year plans gave importance to self-reliance
which means avoiding imports of those goods which could be
produced in India itself.
▪ This policy was considered a necessity in order to reduce our
dependence on foreign countries, especially for food.
▪ It is understandable that people who were recently freed from
foreign domination should give importance to self-reliance.
▪ Further, it was feared that dependence on imported food supplies,
foreign technology and foreign capital may make India’s
sovereignty vulnerable to foreign interference in our policies.
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EQUITY:

▪ It is important to ensure that the benefits of economic

prosperity reach the poor sections as well instead of being
enjoyed only by the rich.

▪ So, in addition to growth, modernization and self-reliance,

equity is also important. Every Indian should be able to meet
his or her basic needs such as food, a decent house,
education and health care and inequality in the distribution
of wealth should be reduced.

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Objectives of Five Year Plans: A Review

1. First Five Year Plan:

▪ It was made for the duration of 1951 to 1956.

▪ Its main focus was on the agricultural development of the
country.
▪ This plan was successful and achieved growth rate of 3.6%
(more than its target)

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2. Second Five Year Plan:

▪ It was made for the duration of 1956

to 1961.

▪ It was based on the P.C. Mahalnobis

Model.

▪ Its main focus was on the industrial

development of the country.
Prof. PC Mahalnobis
▪ This plan was successful and achieved
a growth rate of 4.1%
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3. Third Five Year Plan:
▪ It was made for the duration of 1961 to 1966.
▪ This plan is called ‘Gadgil Yojna’ also.
▪ The main target of this plan was to make the economy independent and
to reach the self active position of take-off.
▪ Due to China war, this plan could not achieve its growth target of 5.6%

4. Plan Holiday:
▪ The duration of the plan holiday was from 1966 to 1969.
▪ The main reason behind the plan holiday was the Indo-Pakistan war &
failure of the third plan.
▪ During this plan, annual plans were made and equal priority was given
to agriculture its allied sectors and the industry sector.

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5. Fourth Five Year Plan:

▪ Its duration was from 1969 to 1974.

▪ There were two main objectives of this plan i.e. growth
with stability and progressive achievement of self-
reliance.
▪ During this plan, the slogan of “Garibi Hatao” was given
during the 1971 elections by Indira Gandhi.
▪ This plan failed and could achieve a growth rate of 3.3%
only against the target of 5.7%.

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6. Fifth Five Year Plan:
▪ Its duration was 1974 to 1979.
▪ In this plan top priority was given to agriculture, next came
to industry and mines.
▪ Overall this plan was successful which achieved a growth of
4.8% against the target of 4.4%.
▪ The draft of this plan was prepared and launched by the D.P.
Dhar. This plan was terminated in 1978.

7. Rolling Plan:
This plan was started with an annual plan for 1978-79 and as
a continuation of the terminated fifth-five year plan.

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8. Sixth Five Year Plan:

▪ Its duration was from 1980 to 1985.

▪ The basic objective of this plan was poverty eradication and

technological self-reliance.

▪ It was based on investment Yojna, infrastructural changes

and trend to the growth model.

▪ Its growth target was 5.2% but it achieved 5.7%.

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9. Seventh Five Year Plan:
▪ Its duration was from 1985 to 1990.
▪ The objectives of this plan include the establishment of a self-
sufficient economy, opportunities for productive employment.
▪ For the first time, the private sector got the priority
over public sector.
▪ Its growth target was 5.0% but it achieved 6.0%.

Annual Plans:
Eighth five Plan could not take place due to the volatile
political situation at the centre. So two annual programmes
are formed in 1990-91& 1991-92.

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10. Eighth Five Year Plan:

▪ Its duration was from 1992 to 1997.

▪ In this plan, the top priority was given to the development of

human resources i.e. employment, education, and public
health.

▪ During this plan, Narasimha Rao Govt. launched the New

Economic Policy of India.

▪ This plan was successful and got an annual growth rate of

6.8% against the target of 5.6%.
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11. Ninth Five Year Plan:
▪ Its duration was from 1997 to 2002.
▪ The main focus of this plan was “growth with justice and equity”.
▪ It was launched in the 50th year of independence of India.
▪ This plan failed to achieve the growth target of 7% and grow only at
the rate of 5.6%.

12. Tenth Five Year Plan:

▪ Its duration was from 2002 to 2007.
▪ This plan aims to double the Per Capita Income of India in the next
10 years.
▪ It aims to reduce the poverty ratio of 15% by 2012.
▪ Its growth target was 8.0% but it achieved only 7.2%.
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13. Eleventh Five Year Plan:
▪ Its duration was from 2007 to 2012.
▪ It was prepared by the C. Rangarajan.
▪ Its main theme was “faster and more inclusive growth”
▪ Its growth rate target was 8.1% but it achieved only 7.9%

14. Twelfth Five Year Plan:

▪ Its duration was from 2012 to 2017.
▪ Its main theme is “Faster, More Inclusive and Sustainable Growth”.
▪ Its growth rate target is 8%.

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 Present Scenario of Planning in India
▪ The present NDA government has stopped the formation of five-year
plans. So the 12th five-year plan would be called the last five-year
plan of India. The decades-old Five-Year Plans made way for a three-
year action plan, which was part of a seven-year strategy paper and
a 15-year vision document. The NITI Aayog, came into existence on
January 1, 2015. It replaced the Planning Commission, launching a
three-year action plan from April 1, 2017.

▪ The three-year action plan documents only provide a broad roadmap

to the government. The document does not detail any schemes or
allocations as it has no financial powers. Since it need not be
approved by the Union Cabinet, its recommendations are not binding
on the government.

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 TOPIC 3: Main features, problems and policies of
Agriculture (1947-1990)
IMPORTANCE OF AGRICULTURE IN THE INDIAN ECONOMY:

• Substantial contribution to GDP.

• Principal source of supply of wage goods.
• Principal sector of employment.
• Principal source of supply of raw materials.
• Principal source of supply of demand for industrial goods.
• Substantial contribution to international and domestic trade.
• Support to transport industry by offering goods of bulk transport.
• Significant source of wealth of the nation.

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 Land Reforms in India

• At the time of independence, the land tenure system was characterized by

intermediaries who merely collected rent from the actual tillers of the soil
without contributing towards improvements on the farm.

• The low productivity of the agricultural sector forced India to import food
from the United States of America (U.S.A.)

• Equity in agriculture was called for which primarily refer to change in the
ownership of landholdings.

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 Land Reforms in India

• Just a year after independence, steps were taken to abolish intermediaries

and to make the tillers the owners of land.
• The idea behind this move was that ownership of land would give incentives
to the tillers to invest in making improvements provided sufficient capital was
made available to them.
• Land ceiling was another policy to promote equity in the agricultural sector.
• This means fixing the maximum size of land which could be owned by an
individual.
• The purpose of land ceiling was to reduce the concentration of land
ownership in a few hands.

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 Land Reforms in India

• The ownership conferred on tenants gave them the incentive to increase

output and this contributed to growth in agriculture.

• However, the goal of equity was not fully served by abolition of intermediaries.

• In some areas the former zamindars continued to own large areas of land by
making use of some loopholes in the legislation.

• The land ceiling legislation also faced hurdles. The big landlords challenged
the legislation in the courts, delaying its implementation.

• They used this delay to register their lands in the name of close relatives,
thereby escaping from the legislation.

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Green Revolution in India

Prof. MS Swaminathan
Father of the Green Revolution
 GREEN REVOLUTION IN INDIA

• India’s agriculture vitally depends on the monsoon and if the

monsoon fell short the farmers were in trouble unless they
had access to irrigation facilities which very few had.

• The stagnation in agriculture during the colonial rule was

permanently broken by the green revolution.

• This refers to the large increase in production of food grains

resulting from the use of high yielding variety (HYV) seeds
especially for wheat and rice.

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 GREEN REVOLUTION IN INDIA
• The use of these seeds required the use of fertilizer and pesticide in the
correct quantities as well as regular supply of water; the application of these
inputs in correct proportions is vital.

• The farmers who could benefit from HYV seeds required reliable irrigation
facilities as well as the financial resources to purchase fertilizer and pesticide.

• As a result, in the first phase of the green revolution (approximately mid

1960s up to mid 1970s), the use of HYV seeds were restricted to the more
affluent states such as Punjab, Andhra Pradesh and Tamil Nadu.

▪ Further, the use of HYV seeds primarily benefited the wheat-growing regions
only.

▪ In the second phase of the green revolution (mid-1970s to mid-1980s), the

HYV technology spread to a larger number of states and benefited more
variety of crops. 62
 Advantages of the Green Revolution
• The spread of green revolution technology enabled India to achieve self-
sufficiency in food grains.
• We no longer had to be at the mercy of America, or any other nation, for
meeting our nation’s food requirements.
• The portion of agricultural produce which is sold in the market by the
farmers is called marketed surplus.
• A good proportion of the rice and wheat produced during the green revolution
period was sold by the farmers in the market.
• As a result, the price of food grains declined relative to other items of
consumption.
• The low-income groups, who spend a large percentage of their income on
food, benefited from this decline in relative prices.
• The green revolution enabled the government to procure sufficient amount of
food grains to build a stock which could be used in times of food shortage.

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 Risks of the Green Revolution

• While the nation had immensely benefited from the green revolution, the
technology involved was not free from risks.

• One such risk was the possibility that it would increase the disparities between
small and big farmers since only the big farmers could afford the required inputs,
thereby reaping most of the benefits of the green revolution.

• Moreover, the HYV crops were also more prone to attack by pests and the small
farmers who adopted this technology could lose everything in a pest attack.

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 Proactive Government Role

• Fortunately, these fears did not come true because of the steps taken by the
government.

• The government provided loans at a low interest rate to small farmers and
subsidized fertilizers so that small farmers could also have access to the
needed inputs.

• Since the small farmers could obtain the required inputs, the output on small
farms equalled the output on large farms in the course of time.

• As a result, the green revolution benefited the small as well as rich farmers.

• The risk of the small farmers being ruined when pests attack their crops was
considerably reduced by the services rendered by research institutes
established by the government.

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 The Debate over Subsidies
• It is generally agreed that it was necessary to use subsidies to provide an incentive for
adoption of the new HYV technology by farmers in general and small farmers in
particular.

• Subsidies were, therefore, needed to encourage farmers to test the new technology.

• Some economists believe that once the technology is found profitable and is widely
adopted, subsidies should be phased out since their purpose has been served.

• Further, subsidies are meant to benefit the farmers but a substantial amount of
fertilizer subsidy also benefits the fertilizer industry; and among farmers, the subsidy
largely benefits the farmers in the more prosperous regions.

• Therefore, it is argued that there is no case for continuing with fertilizer subsidies; it
does not benefit the target group and it is a huge burden on the government &
finances.
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 The Debate over Subsidies
• On the other hand, some believe that the government should continue with
agricultural subsidies because farming in India continues to be a risky
business.

• Most farmers are very poor and they will not be able to afford the required
inputs without subsidies. Eliminating subsidies will increase the inequality
between rich and poor farmers and violate the goal of equity.

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 Conclusion

• Thus, by the late 1960s, Indian agricultural productivity had increased

sufficiently to enable the country to be self-sufficient in food grains.

• On the negative side, some 65 per cent of the country’s population continued
to be employed in agriculture even as late as 1990.

• Economists have found that as a nation becomes more prosperous, the

proportion of GDP contributed by agriculture as well as the proportion of

population working in the sector declines considerably.
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SUMMING UP

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TOPIC 4: INDUSTRY & FOREIGN TRADE (1947-1990)

IMPORTANCE OF INDUSTRY IN THE INDIAN ECONOMY:

▪ Good industrial sector contributes to progress of poor nations.

▪ Employment provided by industries considered to be more stable as compared to

agriculture.

▪ Industry provides modernisation and overall prosperity.

▪ Hence, the five year plans place a lot of emphasis on Industrial development.

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 Public And Private Sectors In Industrial Development

▪ Reasons the state had to play an extensive role in promoting the industrial sector:

➢ At the time of independence, Indian industrialists did not have the capital to undertake

investment in industrial ventures required for the development of our economy.

➢ The market wasn’t big enough to encourage industrialists to undertake major projects even

if they had the capital to do so.

➢ In addition, the decision to develop the Indian economy on socialist lines led to the policy
of the state controlling the commanding heights of the economy, as the Second Five Year
plan put it.
➢ This meant that the state would have complete control of those industries that were vital
for the economy.
➢ The policies of the private sector would have to be complimentary to those of the public
sector, with the public sector leading the way.

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 Industrial Policy Resolution 1956
(IPR 1956)

▪ In accordance with the goal of the state controlling the commanding

heights of the economy, the Industrial Policy Resolution of 1956 was
adopted.

▪ This resolution formed the basis of the Second Five Year Plan, the plan
which tried to build the basis for a socialist pattern of society.

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 Industrial Policy Resolution 1956

▪ IPR classified industries into three categories:

➢ The strong first category comprised industries which would be exclusively

owned by the state.

➢ The second category consisted of industries in which the private sector

could supplement the efforts of the state sector, with the state taking the
sole responsibility for starting new units.

➢ The third category consisted of the remaining industries which were to be

in the private sector. Although there was a category of industries left to
the private sector, the sector was kept under state control through a
system of licenses.

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 Industrial Policy Resolution 1956
(IPR 1956)

➢ No new industry was allowed unless a license was obtained from the
government. This policy was used for promoting industry in backward
regions; it was easier to obtain a license if the industrial unit was
established in an economically backward area.

➢ In addition, such units were given certain concessions such as tax benefits
and electricity at a lower tariff. The purpose of this policy was to promote
regional equality.

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 Industrial Policy Resolution 1956
(IPR 1956)
▪ Small Scale Industry

➢A small-scale industry is defined with reference to the maximum

investment allowed on the assets of a unit. This limit has changed
over a period of time.

➢In 1950 a small-scale industrial unit was one which invested a

maximum of rupees five lakhs. Today however, this limit is
between 25 lakhs and 10 crores in case of a Manufacturing unit
and between 10 lakhs and 5 crores in case of a service sector.

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 Protection to Small Scale Industry
▪ It is believed that small-scale industries are more labour intensive i.e.,
they use more labour than the large-scale industries and, therefore,
generate more employment.

▪ But these industries cannot compete with the big industrial firms; it is
obvious that development of small-scale industry requires them to be
shielded from the large firms.

▪ For this purpose, the production of a number of products was reserved for
the small-scale industry.

▪ The criterion of reservation being the ability of these units to

manufacture the goods.

▪ They were also given concessions such as lower excise duty and bank
loans at lower interest rates.
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 Policy of Import Substitution
(Inward Looking Trade Strategy)
▪ The industrial policy that we adopted was closely related to the trade policy.

▪ In the first seven plans, trade was characterized by what is commonly called
an Inward Looking Trade Strategy.
▪ Technically, this strategy is called Import Substitution.
▪ This policy aimed at replacing or substituting imports with domestic
production.
▪ In this policy the government protected the domestic industries from foreign
competition.
▪ The policy of protection is based on the notion that industries of developing
countries are not in a position to compete against the goods produced by
more developed economies.
▪ It is assumed that if the domestic industries are protected they will learn to
compete in the course of time.

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 Trade Policy: Import Substitution
Protection from imports took two forms :
TARIFFS QUOTAS

✓ A tax on imported goods. ✓ The quantity of goods

which can be imported
✓ It made imported goods was limited.
The effect of tariffs and quotas is that they restrict imports and, therefore,

protect the domestic firms from foreign competition.

more expensive and

discouraged their use.

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 Benefits of Inward Looking Trade Strategy
➢ The achievements of India’s industrial sector during the first seven plans are
impressive indeed. The proportion of GDP contributed by the industrial sector
increased in the period from 11.8 per cent in 1950-51 to 24.6 per cent in 1990-91.

➢ The rise in the industry’s share of GDP is an important indicator of development.

The six per cent annual growth rate of the industrial sector during the period is
commendable.
➢ No longer was Indian industry restricted largely to cotton textiles and jute; in fact,
the industrial sector became well diversified by 1990, largely due to the public
sector.

➢ The promotion of small-scale industries gave opportunities to those people who

did not have the capital to start large firms to get into business.

➢ Protection from foreign competition enabled the development of indigenous

industries in the areas of electronics and automobile sectors which otherwise
could not have developed. 79
 Limitations of Inward Looking Trade Strategy
➢ In spite of the contribution made by the public sector to the growth of the Indian
economy, some economists are critical of the performance of many public sector
enterprises.
➢ The point is that after four decades of Planned development of Indian Economy no
distinction was made between:
i. What the public sector alone can do .
ii. What the private sector can also do.
➢ Many public sector firms incurred huge losses but continued to function because
it is difficult to close a government undertaking even if it is a drain on the nation’s
limited resources. This does not mean that private firms are always profitable.
However, a loss-making private firm will not waste resources by being kept
running despite the losses.
➢ A few economists also point out that the public sector is not meant for earning
profits but to promote the welfare of the nation. The public sector firms, on this
view, should be evaluated on the basis of the extent to which they contribute to the
welfare of people and not on the profits they earn.

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 Limitations of Government Policies On
Industrial Development

▪ The need to obtain a license to start an industry was misused by industrial

houses.

▪ A big industrialist would get a license not for starting a new firm but to
prevent competitors from starting new firms.

▪ The excessive regulation of what came to be called the permit license raj
prevented certain firms from becoming more efficient.

▪ More time was spent by industrialists in trying to obtain a license or lobby

with the concerned ministries rather than on thinking about how to improve
their products.
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 Limitations of Government Policies On
Industrial Development
▪ The protection from foreign competition is also being criticized on the ground that
it continued even after it proved to do more harm than good.

▪ Due to restrictions on imports, the Indian consumers had to purchase whatever

the Indian producers produced.

▪ The producers were aware that they had a captive market; so they had no
incentive to improve the quality of their goods.

▪ Regarding protection, some economists hold that we should protect our producers
from foreign competition as long as the rich nations continue to do so.

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 Limitations of Government Policies On
Industrial Development
▪ Excessive government regulation prevented growth of entrepreneurship.

▪ In the name of self-reliance, our producers were protected against foreign competition

and this did not give them the incentive to improve the quality of goods that they
produced.

▪ Our policies were inward oriented and so we failed to develop a strong export sector.

▪ Owing to all these conflicts, economists called for a change in our policy.

▪ The need for reform of economic policy was also widely felt in the context of changing

global economic scenario.

▪ Hence, the new economic policy was initiated in 1991 to make our economy more

efficient. 83
 TOPIC 5: ECONOMIC REFORMS SINCE 1991

Economic Crisis in 1991 and Indian Economy Reforms

o Crisis in India is figured out because of the inefficient management in the Indian
economy in 1980s.

o The revenues generated by the government were not adequate to meet the growing
expenses.

o Hence, the government resorted to borrowing to pay for its debts and was caught
in a debt-trap.

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 Causes of Economic Crisis
1) The continued spending on development programmes of the government did not
generate additional revenue.

2) The government was not able to generate sufficient funds from internal sources such
as taxation.

3) Expenditure on areas like social sector and defense do not provide immediate returns,
so there was a need to utilize the rest of the revenue in a highly effective manner, which
government failed to do so.

4) The income from public sector undertakings was also not very high to meet the
growing expenditures.

5) Foreign exchange borrowed from other countries and international financial

institutions was spent on meeting consumption needs and to make repayment on other85
loans.
 Need for Economic Reforms
1) The economic policy followed by the government up to 1990 failed in many
aspects and landed the country in an unprecedented economic crisis.

2) The situation was so alarming that India’s foreign reserves were barely
enough to pay for two weeks of imports.

3) New loans were not available and NRIs were withdrawing large amounts.

4) There was an erosion of confidence of International investors in the Indian

economy.
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The Following Points Highlight the Need for Economic
Reforms in the Country
1) Increasing fiscal deficit.

2) Adverse balance of payments.

3) Gulf crisis.

4) Rise in prices.

5) High rate of deficit financing.

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 Emergence of New Economic Policy
(NEP-1991)

o Finally, India approached International Bank for Reconstitution and

Development, popularly known as World Bank and International

Monetary Fund (IMF) and received $7 million as a loan to manage the
crisis.

o International agencies expected India to liberalize and open up economy

by removing restrictions on private sector and remove trade restrictions

between India and Foreign countries.

o India agreed to the Conditions of world bank and IMF and had

announced new economic policy which consisted of wide range of

economic reforms.
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 LIBERALISATION
o Liberalisation was introduced to put an end to these restrictions and open

various sectors of the economy.

o It is generally defined as loosening of government regulations in a country to

allow for private sector companies to operate business transactions with

fewer restrictions.

o In relation to Developing countries this refers to opening of economic borders

for multinational and foreign investment.

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 Objectives of Liberalisation

1) To increase competition among domestic industries.

2) To increase foreign capital formation and technology.

3) To decrease the debt burden of the country.

4) To encourage export and import of goods and services.

5) To expand the size of the market.

90
 Economic reforms under Liberalisation

1) Deregulation of Industrial sector: In India, the following steps were taken to

deregulate the industrial sector.

a) Abolition of Industrial Licensing government: abolished the licensing

requirement of all Industries, except for the five Industries which are: Liquor,

Cigarettes, Defence equipment, Industrial explosives, Dangerous chemicals and

pharmaceuticals.

b) Contraction of Public Sector: The number of industries reserved for the

public sector was reduced from 17 to 8. Presently only three Industries are ‘reserved
91
for public sector’. They are Railways, Atomic Energy and Defense.
 Economic reforms under Liberalisation
c) De-reservation of Production Areas: The production which were early
reserved for SSIs were de-reserved.

d) Expansion of Production Capacity: The producers were allowed to expand

their production capacity according to market demand. The need for licensing

was abolished.

e) Freedom to Import Capital Goods: The business and Production units were

given freedom to import capital goods to upgrade their technology.

92
 Economic reforms under Liberalisation

2) Financial Sector Reforms: It includes Financial Institutions such as Commercial

banks, Investment Banks, Stock exchange operations and Foreign exchange

Market.

3) Tax Reforms: Tax reforms are concerned with the reforms in the government’s

taxation and public expenditure policies, which are collectively known as its fiscal

policy. Since 1991, there has been a continuous reduction in the taxes on

individual incomes as it was felt that high rates of income tax were an important

reason for tax evasion.

93
 Economic reforms under Liberalisation

4) Foreign Exchange Reforms: It includes reforms relating to foreign exchange and

foreign trade.

5) Trade and Investment Policy Reforms: Liberalisation of trade and investment

regime was initiated to increase international competitiveness of industrial

production and also foreign investments and technology into the economy.

94
 PRIVATISATION

o It implies shedding of the ownership or management of a government owned

enterprise. Government companies are converted into private companies.

o Privatisation of the public sector enterprises by selling off part of the equity of

PSEs to the public is known as disinvestment.

95
 GLOBALISATION

o It means integration of the economy of the country with the world economy.

o Globalisation encourages foreign trade and private and institutional foreign

investment.

o Globalisation is a complex phenomenon as it is an outcome of the set of

various policies that are aimed at transforming the world towards greater

interdependence and integration.

96
 Outsourcing

o This is one of the important outcomes of the globalisation process.

o In outsourcing, a company hires regular service from external sources,

mostly from other countries, which was previously provided internally or from

within the country (like legal advice, computer service, advertisement,

security — each provided by respective departments of the company).

97
 World Trade Organisation (WTO)

▪ The WTO was founded in 1995 as the successor organisation to the General

Agreement on Trade and Tariff (GATT).

▪ GATT was established in 1948 with 23 countries as the global trade

organization to administer all multilateral trade agreements by providing equal

opportunities to all countries in the international market for trading purposes.

▪ WTO is expected to establish a rule-based trading regime in which nations

cannot place arbitrary restrictions on trade.

98
 Economic Growth During Reforms
Main highlights

1) Growth of an economy is measured by gross domestic product (GDP). The growth of

GDP increased from 5.6% during 1980-1991 to 8.2% during 2007-2012.

2) During the reform period, the growth of Agriculture was declined. While the industrial
sector reported fluctuation, the growth of service sector has gone up. This indicates
that the growth is mainly driven by the growth in service sector.

3) The opening up of the economy has led to the foreign direct investment and foreign
exchange reserves. The foreign investment which includes Foreign Direct Investment
(FDI) and Foreign Institutional Investment (FII), has increased from about US $100m
million in 1990 -1991 to US $400 billion in 2010-2011.
99
 Economic Growth During Reforms
Main highlights

4) There has been increase in Foreign exchange reserves from about US $6 billion in

1990-1991 to US $300 billion in 2011-2012. In 2011 India was the 7th largest foreign

exchange holder in the world.

5) India is seen as a successful exporter of auto parts, engineering goods, IT software and

textiles in the reform period. Rising prices also have been kept under control.

100
 Failures of Economic Reforms
1) Neglect of Agriculture:
a) There has been deterioration in agricultural growth rate.
b) This deterioration is the root cause of the problem of rural distress that
reached crisis in some parts of the country.
c) Economic reforms have not been able to benefit the agricultural sector
because:
✓ Public investment in agriculture sector especially in infrastructure which includes
irrigation, power, roads, market linkages and research and extension has been reduced
in the reform period.
✓ The removal of fertilizer subsidy has led to increase in the cost of products, removal of
minimum support price and lifting of quantitative restrictions have increased the
threat of international competition to the Indian formers.
✓ Export-oriented policy strategies in agriculture has been a shift from production for the
domestic market towards production for the export market focusing on cash crops in
lieu of production of food grains.
101
 Failures of Economic Reforms
2) Uneven Growth in Industrial Sector:
a) Industrial sector registered uneven growth during this period.
b) This is because of decreasing demand of industrial products due to various reasons-
✓ Cheaper imports have decreased the demand of domestic industrial goods.
✓ There was inadequate investment in infrastructure facilities such as power supply.
✓ A developing country like India still does not have the access to developed countries
markets because of high non-tariff barriers.
3) Other Failures:
In addition to the above mentioned failures, the other drawbacks of LPG policy were:
a) It led to urban concentration of growth process.
b) It encouraged economic colonialism.
c) It resulted in the spread of consumerism.
d) It led to cultural erosion.
102
 SUGGESTED VIDEOS
INDIAN ECONOMY ON THE EVE OF INDEPENDENCE

❖https://www.youtube.com/watch?v=1eZOY12F76M
❖ https://diksha.gov.in/resources/play/collection/do_3131034753248870401940?contentType=TextBook
❖ https://diksha.gov.in/resources/play/collection/do_3131034753248870401940?contentType=TextBook
❖ https://diksha.gov.in/resources/play/collection/do_3131034753248870401940?contentType=TextBook

FIVE YEAR PLANS(1947-1990)

❖ https://www.youtube.com/watch?v=4koLdo_QIpU
❖ https://diksha.gov.in/resources/play/collection/do_31304486090502963215168?contentType=TextBook
❖ https://diksha.gov.in/resources/play/content/do_3130829121631354881101

MAIN FEATURES , PROBLEMS & POLICIES OF AGRICULTURE(1947-90)

❖ https://www.youtube.com/watch?v=d7H_l4oUt9Y
❖ https://diksha.gov.in/resources/play/collection/do_31310349737096806411159?contentType=TextBook

INDUSTRY AND FOREIGN TRADE(1947-90)

❖ https://www.youtube.com/watch?v=ibhtEFSFnA0

ECONOMIC REFORMS SINCE 1991

❖ https://diksha.gov.in/resources/play/content/do_31350197471004262412604
❖ https://diksha.gov.in/resources/play/content/do_3130907202680012801417
❖ https://diksha.gov.in/resources/play/content/do_3130907241754132481419 103
 SOURCE ACKNOWLEDGEMENT

1. Diksha Portal; Ministry of Education Govt. of India.

2. Indian Economic Development : NCERT
3. Indian Economic Development : Jain & Ohri
4. Indian Economic Development : Sandeep Garg
5. Internet resources for pictures.

Prepared By – Mrs. Rumma Raina

Training Associate, ECONOMICS
ZIET Mysore.

104
UNIT 7: Current challenges facing Indian Economy

105
 TOPIC 1: HUMAN CAPITAL FORMATION

▪ Human Capital Formation - It refers to the process of acquiring and increasing

the number of persons who have the skill, education and experience which are
critical for the economic and political development of a country.
Difference between Human Capital and Physical Capital Formation

Physical Capital Human Capital

(i) All those resources which are (i) Refers to the stock of skill,
required for further production, ability, expertise, education and
like plants and machinery, factory knowledge in a nation at a given
buildings, equipment etc. point.
(ii) Sold in market. (ii) Can’t be sold.
(iii) Depreciates over time . (iii) No depreciation.
(iv) Separable from its owner. (iv) Can’t be Separated.
(v) Economic and technical process (v) Partially a social process.

106
 Importance of Human Capital Formation in
Economic Development
➢ Physical capital utilized efficiently.

➢ Optimum utilisation of resources.

➢ Better Co-ordination between factors.

➢ Innovations & technological improvement.

➢ Rate of economic growth becomes faster.

➢ Changes in the outlook of the labour force.

➢ Production of National Wealth goes up.

➢ Quality of life improves.

➢ Plays a key role in economic development strategy. 107

 Sources of Human Capital Formation
Expenditure on Education: increases future income & raises standard of living.

Expenditure on Health: helps to build productive labour force & improve quality of life.

On-the-job-training: increases skill & efficiency of workers.

Expenditure on Migration: helps to increase earnings in the migrated place.

Expenditure on Information: helps to make decisions in investment in human capital.

Concept of Human Development Index (HDI)

Human development index is broadly an arrangement of social aggregates average of
longevity, knowledge and access to resources. India’s position is 132nd out of 191
countries of the world. It is from the HDI prepared by UNDP in 2021.
The value of HDI is 0.633.
108
 Problems of Human Capital Formation
Insufficient resources: Resources allocated have been much less than resources required.

Serious inefficiencies: Underutilization of resources, massive illiteracy, poor health

facilities etc have not been attended to properly.

High growth of population: Reduces per head availability of facilities & hence quality of
human capital.
Lack of proper manpower planning: Wastage of resources due to imbalance between
demand & supply of skilled manpower resources.

Insufficient on-the-job-training in Primary sector: Serious deficiency of human

capital formation in the primary sector, mainly, agriculture.

Low academic standards: Large numbers of poor quality higher education institutions
churning out skill deficient human capital.

Brain drain: Cost of loss of quality human capital which migrates in search of better jobs &
salaries is very high. 109
 EDUCATION SECTOR IN INDIA
Education: It refers to the process of teaching, training and learning especially in
schools or colleges, to improve knowledge and develop skill.

RIGHT TO EDUCATION ACT : A Fundamental Right

The Constitution (Eighty-sixth Amendment) Act, 2002 inserted Article 21-A in the
Constitution of India to provide free and compulsory education of all children in the
age group of six to fourteen years as a Fundamental Right.
‘Free education’ means that no child, other than a child who has been admitted
by his or her parents to a school which is not supported by the appropriate
Government, shall be liable to pay any kind of fee or charges or expenses which may
prevent him or her from pursuing and completing elementary education.
‘Compulsory education’ casts an obligation on the appropriate Government and
local authorities to provide and ensure admission, attendance and completion of
elementary education by all children in the 6-14 age group. With this, India has
moved forward to a rights based framework that casts a legal obligation on the
Central and State Governments to implement this fundamental child right as
enshrined in the Article 21-A of the Constitution, in accordance with the provisions
of the RTE Act.
110
 Educational Achievement in India
It is based on three components:
Adult literacy rate: It refers to the ratio of literate adult population to the total
adult population 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. It has shown a rise amongst both males &
females.

Primary completion rate: It refers to percentage of students completing the last

year of primary school. Lower primary education completion rate leads to lower
youth literacy rate and, hence, lower adult literacy rate. It has shown a rise
amongst both males & females.

Youth literacy rate: It is the percentage of people in the age group of 15-24 who
can, with understanding, read and write a short, simple statement on their
everyday life. higher the youth literacy rate, higher will be the achievement of a
country in terms of education. It has shown a rise amongst both males & females.
111
 Development/Availability of Education in India
✓ Elementary Education:
❖ Sarv Shiksha Abhiyan (SSA)

❖ Mid day Meal Plan.

❖ Kasturba Gandhi Vidyalaya..

❖ Balika Vidyalaya Scheme.

✓ Secondary Education:
❖ Navodaya Vidyalaya.

❖ Kendriya Vidyalaya.

❖ National Council of Educational Research and Training.

❖ Vocationalisation of Secondary Education.

✓ University and Higher Education:

❖ IGNOU

❖ Academic Staff College.

✓ Technical, Medical and Agriculture Education

✓ Rural Education

✓ Adult and Continuing Education 112

Inadequacies and Challenges in Education Sector
in India
Widespread Illiteracy.
Low rural access level.
Low enrolment ratio.
Insufficient Government Expenditure.
Unbalanced Development.
Disparities in Educational Development.
Defective Examination System.
Gender Bias.
Lack of Vocational Training.
Low Standard of Education.
Privatisation of Education.

113
 TOPIC 2: RURAL DEVELOPMENT

▪ Definition: An action plan for the economic & social growth of the rural areas. It
is a continuous comprehensive socio-economic process, attempting to improve all
aspects of rural life..
▪ Significance: Bulk of our population lives in rural areas in abject poverty. Overall
growth of the economy would be a distant dream unless it is aligned with the
growth & development of rural areas..
CHALLENGES OF RURAL DEVELOPMENT
LINGERING CHALLENGES
EMERGING CHALLENGES
❖ Rural Credit
❖ Diversification of productive activities

❖ Rural Marketing
❖ Organic farming

114
 RURAL CREDIT
(Lingering Challenge)
➢ Provision of loans especially in production for agriculture and non- agricultural
sectors.

➢ Credit facilities in the rural areas have contributed a large increase in agricultural
productivity and employment facilities in non-agricultural sectors.

➢ Loans are provided in rural areas to the frames in order to purchase machinery,
agricultural implements etc.

➢ Government also provides long term loans for improvement of the land, digging
tube well, purchase of tractors etc. which can be repaid in 15to 20 years.

➢ Unproductive loans are provided to farmers for personal purposes to support them
& their family in case of a crop failure.
115
 SOURCES OF RURAL CREDIT
▪ Non-institution Sources: These are the traditional sources of agricultural
credit in India. They include money lenders, relatives, traders, commission
agents and land lords.
▪ Institutional Sources: They are cooperative credit, land development
banks, commercial banks, regional rural banks, govt., national bank for
agricultural and rural development and also self-help groups.
▪ Micro finance: A credit scheme extended to the poor through Self Help
Groups (SGHs)
▪ Self-Help Groups (SGHs): Set up to promote thrift in small proportions by a
minimum contribution from each member. From the pooled money, credit is
given to the needy numbers to be repayable in small instalments at
reasonable interest rates.
116
 AGRICULTURAL MARKETING
(Lingering Challenge)
➢ Gathering the produce after harvesting.

➢ Processing the produce.

➢ Grading the produce as per it’s quality.

➢ Packaging as per the preferences of the buyers.

➢ Storing the produce for future sale.

➢ Selling the produce when the price is lucrative.

Thus, Agricultural marketing a process which involves assembling, storage,

processing, transportation, packaging, grading and distribution of different
agricultural commodities across the country.

117
 GOVERNMENT MEASURES TO IMPROVE
AGRICULTURAL MARKETING
➢ Regulated Markets: Regulated markets have been established to create orderly and transparent
marketing condition. This is organized in order to protect farmers from malpractices of sellers and
brokers.

➢ Cooperative Marketing: Marketing societies are formed by farmers to sell the output collectively
and to take advantages of collective bargaining for obtaining a better price. Cooperatives have not
been functioning properly in recent past due to inadequate coverage of farmer members and
processing cooperatives and also inefficient management.

➢ Infrastructural facilities: Govt. has also provided infrastructural facilities like roads, railways,
warehousing, cold storage and processing units.

➢ Standardization and Grading: Grading & Quality control helps farmers to get good price for quality
products produced by them.

➢ Minimum Support Price: To safeguard the interest of the farmers, government fixes the minimum
support price for agricultural products like wheat, rice, maize, cotton, sugarcane, pulses etc. The
government offers to buy any amount of grains from the farmers at a price higher than the market
price in order to help them recover their loss. The Government in turn supplies these products in
public distribution system to the BPL & APL card holders. 118
 LIMITATIONS OF AGRICULTURAL
MARKETING IN INDIA
❑ Lack of storage facilities: for food grain and crops has damaged the products
either by rats or insects or due to rain.
❑ Distress Sale: Most Indian farmers are poor and they have no capacity to
wait for better price. They sell the commodities at whatever the price
available immediately. As a result they go for distress sale of their output to
the village money lenders or traders for poor price.
❑ Lack of transportation: as a result farmer cannot reach nearly mandis to sell
their produce at a fair price.
❑ Long chain of middleman: or intermediaries between the cultivator and the
consumer will also reduce the profit of the producer.
❑ There are also other defects like lack of institutional finance, lack of
professional guidance etc. This makes Indian marketing system
disorganized. 119
 AGRICULTURAL DIVERSIFICATION
Definition: Re-allocation of some of farm’s productive resources into new activities or crops
reducing market risk.

AGRICULTURAL DIVERSIFICATION HAS TWO ASPECTS

Diversification of Crop Production Diversification of Production Activity

*Production of a diverse variety of *Shift from crop farming to other areas

crops rather than one specialised crop. of production activity/employment.

*It implies a shift from single-cropping *It not only raises the income of the
system to multi-cropping system. farmers but also stabilises it.

*It would minimise market risk arising *It provides supplementary gainful
due to price fluctuations and monsoon employment to the famers.
failures.

120
DIVERSIFICATION OF PRODUCTIVE ACTIVITIES
(Emerging Challenge)
❖ Agriculture is already overcrowded & hence, major portion of the increasing
labour force needs to find alternate employment opportunities in other non-
farm sectors.
❖ This will provide alternate sustainable livelihood and would raise the level of
income.
❖ Some of the non- farm activities are animal husbandry, dairy farming,
fishers, horticulture, agro-processing industries, food processing industries
leather industry, tourism etc.
❖ These sectors have the potential but they lack infrastructure and other
financial support.
❖ Operation flood is a system, whereby all the farmers can pool their milk
produce according to different grading and the same is processed and
marketed to urban centers through cooperatives.
❖ The period of 1991-2003 is known as Golden Revolution because during
this period, the planned investment in horticulture became highly
productive and the sector emerged as a sustainable livelihood option. 121
 ROLE OF INFORMATION TECHNOLOGY IN
RURAL DEVELOPMENT
Information Technology has revolutionized many sectors in Indian economy.
There is a broad agreement that IT will play critical role in achieving
sustainable development and food security in the 20th century.

Through proper information and software tools, govt has been able to predict
area of food insecurity and vulnerability to prevent or reduce the livelihood of
an emergency.

It also has a posture impact on the agricultural sector as it circulate

information regarding technologies and its application, prices, weather and
soil condition for growing different crops.

This has increased the scientific knowledge about farming and minimized
associated risks.

The aim for increasing the role of information technology is to make every
village a Knowledge Centre where IT provides a sustainable option of
employment and livelihood.
122
 ORGANIC FARMING
(Emerging Challenge)
Organic farming is the process of producing food naturally.
This method avoids the use of synthetic chemical fertilizers and genetically modified
organisms.
It is eco-friendly and is deeply linked with sustainable development.
It maintains, restores & enhances the ecological balance.
Animal manures & composts are the basic organic inputs.
It focuses on maintaining ‘Soil-health’ rather than ‘Plant-health’.
In most of the developed countries, nearly 10% of their food system comes under organic
farming.
To encourage sale of organic food, retail chains & supermarkets are awarded with GREEN
STATUS.
Organic foods command higher price than the conventionally grown foods.
It offers an inexpensive farming technology to small & marginal farmers.
123
 LIMITATIONS OF ORGANIC FARMING
Organic farming needs to be popularized by creating awareness and willingness

on the part of the farmers for adoption of new methods.

There is no proper infrastructure and marketing facilities for these products

alone.

An appropriate agricultural policy should be brought in for organic farming.

The fields for organic farming are less than modern agricultural farming in the

initial years.

Therefore small and marginal farmers may find it difficult to adapt to large scale

production.

Organic food items are costlier than the conventionally produced food items.
124
 TOPIC 3: EMPLOYMENT
BASIC CONCEPTS
1. WORKER: A worker is an individual who is involved in some productive activity to earn a
living. Workers include all those people who are engaged in work whether for others (paid
workers) or self-employed.

2. TYPES OF WORKERS: TYPES OF WORKERS

Self-employed
Hired Workers
People working in their own
People hired by others and are
business/profession. They
paid wages/salaries as a
earn profit as a reward for
reward for their services.
their service.

Casual Workers Regular Workers

They are daily wagers who They are on permanent rolls of the
are not on the permanent employers & are entitled to social
rolls of the employers & are security benefits.
not entitled to social security
benefits. 125
 BASIC CONCEPTS
3. DIFFERENCE BETWEEN LABOUR FORCE & LABOUR SUPPLY

LABOUR FORCE LABOUR SUPPLY

Number of persons actually Measured in terms of man-days

working/willing to work. of work. One man-day refers to 8
hours of work.

Not related to Wage-rate. Always related to Wage-rate.

Size of labour force changes only Supply of labour can

when the number of people increase/decrease even when
actually working/willing to work the number of workers remain
increase or decreases. constant because it is measured
in terms of man-days.
126
 BASIC CONCEPTS
4. WORKFORCE : Labour force - Number of persons not working but willing to
work.

5. NUMBER OF PERSONS UNEMPLOYED : Labour Force – Work Force

6. RATE OF UNEMPLOYMENT : Number of persons unemployed X 100

Size of Labour Force

7. PARTICIPATION RATE : Total workforce X 100

Total population

127
 FACTS ON WORKFORCE IN INDIA RATE OF
PARTICIPATION IN INDIA
➢ Bulk of our workforce is rural based:
❖Despite employing nearly 50% of workforce, the rural economy in India is
contributing less than 20% to GDP.
❖It is an indicator of low productivity & low reward for work, leading to
widespread poverty on the rural areas.
➢ Percentage of female workers is low and lower still in Urban areas:
❖Female education in India is still a far cry, implying low opportunities for
jobs.
❖In urban areas even the available job opportunities to females are not
actually utilised since job work for women is still governed by family
decisions.
❖Higher employment among females in the rural areas mostly in low paid and
less productive jobs is mainly due to widespread rural poverty.
❖Low employment among women is a sign of social and economic
backwardness of a nation.

128
 FACTS ON DISTRIBUTIONOF WORKFORCE
ACROSS DIFFERENT SECTORS IN INDIA

➢ Continued dependence on Primary activities despite low level of productivity

& low wage rates.
➢ Failure of Secondary & Tertiary sectors to generate ample job opportunities
causing greater employment in the primary sector.
➢ Industrialisation has failed to take-off to become the leading sector of growth.

➢ Service sector has developed faster than manufacturing & allied production
activities which can be explained in terms of globalisation of the Indian
economy.
➢ Lack of non-farm job opportunities in the rural areas causing rural
population to be engaged more in the agricultural sector.

129
 JOBLESS GROWTH
A situation when the level of output in the economy tends to rise owing to

innovative technology without any significant rise in the level of employment.

It leads to chronic unemployment even when there is rise in GDP.

Our growth process has been increasingly hijacked by MNCs who specialise

in achieving high growth through efficient use of technology rather than

through greater use of manpower.

Hence, growth is moving faster than the opportunities of employment

creating “Jobless Growth”

130
 CASUALISATION & INFORMALISATION OF
WORKFORCE
INFORMALISATION
CASUALISATION A situation where
A situation when the percentage of workforce
percentage of casually in the formal sector
hired workers in the total tends to decline & that in
workforce tends to rise the informal sector tends
over time. to rise.

FORMAL SECTOR WORKERS INFORMAL SECTOR WORKER

*Work in the Organised sector of the *Work in the Unorganised sector of the
economy. economy.
*Entitled to social security benefits. *Not entitled to social security benefits.

*Can form trade unions. *Can not form trade unions.

*Protected by labour laws. *Not Protected by labour laws.

131
 UNEMPLOYMENT & IT’S TYPES IN INDIA
DEFINITION: A situation when people are willing & able to work at the existing
wage rate but are not getting work.
TYPES:
Urban Unemployment:
o Industrial unemployment: It refers to the unemployment among the
illiterates who wish to work in industrial establishment.

o Educated unemployment: Educated unemployment refers to the

unemployment among the educated people.

Rural Unemployment :
o Disguised unemployment: refers to a state in which more people are
engaged in work than are really needed.

o Seasonal unemployment: Unemployment that occurs at certain seasons

of the year is known as Seasonal unemployment.
132
 CAUSES OF UNEMPLOYMENT IN INDIA
Slow rate of economic growth

Population explosion

Underdeveloped agriculture

Defective educational system

Slow growth of Industry

Decline of cottage and small-scale industry .

Faulty planning

Inadequate employment planning.

Low capital formation.

133
 MEASURES SUGGESTED FOR
CONTROLLING UNEMPLOYMENT

Accelerating growth rate of GDP

Control of population growth

Encouragement to small scale enterprises.

Development of infrastructure.

Special employment programmes.

Rapid industrialisation.

134
 GOVERNMENT POLICIES & PROGRAMMES TO
COMBAT UNEMPLOYMENT
Prime Minister’s Rozgar Yojana (PMRY)

Swarna Jayanti Shahri Rozgar Yojana (SJSRY)

Rural Employment Generation Programme (REGP)

Prime Minister’s Employment Generation Programme (PMEGP)

Swarnajayanti Gram Swarozgar Yojana (SGSY)

National Rural Livelihood Mission (NRLM)

National Urban Livelihood Mission (NULM)

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

135
TOPIC 4: SUSTAINABLE ECONOMIC DEVELOPMENT

CONCEPT OF ENVIRONMENT:
➢ All those conditions & their effects which influence human life.

➢ It includes biotic as well as abiotic elements which make up our surroundings and

impact our existence & quality of life.

SIGNIFICANCE OF ENVIRONMENT:
➢ It offers renewable as well as non-renewable resources used in the production of

goods & services.

➢ Environment sustains life through sun, soil, water & air.

➢ Environment assimilates waste through it’s ‘Absorption Capacity’.

➢ It enhances quality of life.

136
 ENVIRONMENTAL CRISIS:
➢ It occurs when the ‘Carrying Capacity’ of the environment is challenged through
excessive through excessive exploitation of natural resources.
➢ Crisis also takes place when waste generation exceeds the ‘Absorptive Capacity’
of environment.

Carrying Capacity of Environment Absorptive Capacity of Environment

❖ State of balance between the rate at ❖ Ability of the environment to absorb
which natural resources are wastes.
exploited & the rate at which these
resources are regenerated. ❖ These wastes occur due to
production and consumption
❖ Permits exploitation of resources activities in the economy.
only to the extent that the total
resource endowment does not
deplete but remains intact.

137
 PRINCIPAL CAUSES OF ENVIRONMENTAL CRISIS:
➢ Population explosion and Industrial revolution has increased the demand for
environmental resources, but their supply is limited due to misuse and overuse.

➢ The intensive and extensive extraction of both renewable and non-renewable

resources has exhausted some of the vital resources.

➢ Extinction of many resources and continuous rising population has also resulted in
environmental crisis.

➢ Due to affluent consumption and production standard of developed world, the waste
generated is beyond the absorptive capacity of the environment.

➢ The development process has polluted environment, water and atmosphere and there
is decline in air and water quality.

➢ It has resulted in increased incidence of respiratory and water borne diseases. The
expenditure on health is also rising.

➢ Global environmental issues such as global warming & Ozone depletion also
contributes to the increased financial commitments of government.
138
 OPPORTUNITY COSTS OF ENVIRONMENTAL CRISIS:

➢ Unsustainable development practices have polluted/dried up water bodies making water

an ‘economic good’.

➢ Relentless extraction of resources has caused vital resources to get exhausted & huge

amounts of funds are being diverted to explore new resources.

➢ Cost of maintaining health has increased dur to air & water pollution.

➢ Very real threat of ‘Global Warming & Ozone Depletion’ causing climate change due to

increasing emissions of greenhouse gases raising the financial commitments of the

governments.

➢ Degradation of Land.

➢ Loss of Biodiversity.

➢ Solid Waste Management. 139

 GLOBAL WARMING OZONE DEPLETION
➢Gradual but consistent rise in global ➢ Reduction in the protective layer called
temperatures due to environmental Ozone in the stratosphere.
Pollution & deforestation. ➢ Ozone Depletion occurs due to:
➢Emission of greenhouse gases due to: ▪ Excessive presence of chlorine & bromine
▪ Burning of coal & petroleum products. compounds used in refrigerators,
▪ Deforestation causing increased air-conditioners, fire extinguishers etc.
amounts of carbon-dioxide in the ➢ Ozone Depletion leads to:
atmosphere. ▪ Greater ultraviolet radiation reaching the
▪ Increased cattle production & animal earth.
waste. ▪ Increased danger to the lives of living
➢Global warming leads to: organisms on earth.
▪ Rise in sea level due to melting of ▪ ‘MONTREAL PROTOCOL’ was signed to
polar ice. ban the use of Chlorine & Bromine
▪ Ecological imbalance leading to greater compounds.
incidence of natural calamities.
▪ Threat to human life & hence in 1997,
‘KYOTO PROTOCOL’ was signed to
focus on reduction of greenhouse
emissions.

140
CONCEPT OF SUSTAINBALE DEVELOPMENT:

➢ Process of growth which fulfills the needs of present generation without

challenging the ability of the future generations to fulfill their needs.

➢ This implies that the resources are rationally/judiciously utilized so that all

future generations have at least that quality of life which is being enjoyed by
the present generation.

AIMS OF SUSTAINABLE DEVELOPMENT:

➢ Equitable & sustainable use of resources, for both present & future

generations, without causing damage to environment.

➢ To protect & prevent any further damage to our life-support systems.

➢ To conserve & nurture biodiversity & other resources for long-term food

security.

141
STRATEGIES FOR SUSTAINABLE DEVELOPMENT:
➢ Reliance on non-conventional sources of energy.
➢ LPG & Gobar gas in rural areas.
➢ CNG in urban areas.
➢ Wind power.
➢ Solar power through photovoltaic cells.
➢ Bio-composting.
➢ Bio-pest control.
➢ Integrated Rural Development.
➢ Shift to Organic Farming.
➢ Mini hydel plants.
➢ Manage the Waste. (https://www.pinterest.com/pin/531776668503844518/?mt=login)
➢ Stringent Laws on the Disposal of Chemical Effluents.
➢ Public Means of Transportation.
➢ Awareness to Conserve Natural Assets for Inter-Generational Equity
142
 SUGGESTED VIDEOS
HUMAN CAPITAL FORMATION IN INDIA

https://diksha.gov.in/resources/play/content/do_3130956875039293441778
https://diksha.gov.in/resources/play/content/do_3130956846658519041246
RURAL DEVELOPMENT IN INDIA

https://diksha.gov.in/resources/play/content/do_31335631717073715211238
https://diksha.gov.in/resources/play/content/do_3131006416758538241545
https://diksha.gov.in/resources/play/content/do_313228692632207360151
https://diksha.gov.in/resources/play/collection/do_3132294648255119361517?conten
tType=TextBook
EMPLOYMENT IN INDIA

https://diksha.gov.in/resources/play/content/do_31311269217949286411933
https://diksha.gov.in/resources/play/content/do_31330807417674137612566
https://diksha.gov.in/resources/play/content/do_31343050436342579211163

SUSTAINABLE ECONOMIC DEVELOPMENT

https://diksha.gov.in/resources/play/content/do_31321631583408947211247
143
 SOURCE ACKNOWLEDGEMENT

1. Diksha Portal; Ministry of Education Govt. of India.

2. Indian Economic Development : NCERT
3. Indian Economic Development : Jain & Ohri
4. Indian Economic Development : Sandeep Garg
5. Internet resources for pictures.

Prepared By – Mrs. Rumma Raina

Training Associate, ECONOMICS
ZIET Mysore

144
UNIT 8: Development Experience of India

145
TOPIC: DEVELOPMENT EXPERIENCE OF INDIA

COMPARISON OF INDIA WITH IT’S NEIGHBOURS ---CHINA AND PAKISTAN

146
 DEVELOPMENT PATH OF INDIA,CHINA & PAKISTAN

❖India announced it’s first five year plan in 1951, China in 1953 & Pakistan in 1956.

❖‘Mixed economy’ was adopted as the basic premise of growth model by India & Pakistan.

❖‘State ownership & Command economy’ served as the basic premise of China’s growth

model.

❖Till 1980s all the three countries had similar growth rates and per capita incomes.

❖Noticeable breakthrough was noticed in their growth process only after they opened up

and integrated themselves with the global economy.

❖Economic reforms were initiated in China in the year 1978, in Pakistan in the year 1988

& in India in the year 1991.

147
 DEVELOPMENT STRATEGY ADOPTED BY CHINA
❑ After the establishment of People’s Republic of China under one party rule, all

the critical sectors of the economy, enterprises and lands owned and operated by
individuals, were brought under government control.

❑ A Programme named ‘The Great leap Forward (GLF) campaign was initiated in

1958, which aimed at industrialising the country on a massive scale.

❑Under this programme, people were encouraged to set up industries in their

backyards.

❑ In1965, Mao-Tse-Tung introduced the ‘Great Proletarian Cultural Revolution

(1966-1976)’, under which students and professionals were sent to work and
learn from the countryside (rural areas).

❑In rural areas, commune system was started, under which people collectively
148
cultivated lands.
 DEVELOPMENT STRATEGY ADOPTED BY CHINA
❑ Reforms were introduced in China in phases.

❑ In the initial phase, reforms were initiated in agriculture, foreign trade and
investment sectors.
❑ In the later phase, reforms were initiated in the industrial sector.

❑ The reforms process also involved dual pricing. This means fixing the prices in
two ways:
✓ farmers and industrial units were required to buy and sell fixed quantities of
raw materials and products on the basis of prices fixed by the government.
✓ rest were purchased and sold at market prices.
❑ In order to attract foreign investors, special Economics Zones (SEZ) were set up.

❑ SEZ is a geographical region that has economic laws different from a country’s
typical economic laws. Usually the goal is to increase foreign investment.

149
 DEVELOPMENT STRATEGY ADOPTED BY PAKISTAN
❑ Pakistan followed the mixed economy model with co-existence of public and private
sectors.

❑ Pakistan introduced tariff protection for manufacturing of consumer goods, together

with direct import controls on competing imports.

❑ The introduction of Green Revolution and increase in public investment in

infrastructure in select areas, led to a rise in the production of food grains.

❑ In 1970s, Capital goods industries were nationalised.

❑ In 1988, structural reforms were implemented. Major thrust areas were

Denationalisation and encouragement to Private sector.

❑ Pakistan also received financial support from western nations and remittances from
emigrants to the Middle East countries. This helped the country in stimulating economic
growth.
150
 DEVELOPMENT STRATEGY ADOPTED BY INDIA
❑ After Independence, India adopted mixed economy as economic developmental
strategy.
❑ Both public and private sector co-exist side by side.

❑ In order to achieve rapid economic growth, planned development economy was

introduced.
❑ Both public and private sectors were allotted to carry business activities.

❑ Public sector was allotted activities like coal, mining, steel, power, roads etc.

❑ Private sector was allotted to establish industries subject to control and regulations in
the form of law.
❑ Public sector was given major push by the Government.

❑ Public sector was given importance in order to eliminate poverty, unemployment etc.

❑ Public sector contributed to the industrialisation of the economy.

❑ It also helped Indian economy to achieve a considerable degree of self-sufficiency. 151

 COMPARATIVE STUDY – INDIA, PAKISTAN AND CHINA
Demographic Indicators:
o The population of Pakistan is very small and accounts for roughly about one-
tenth of China and India.
o Though China is the largest nation geographically among the three, its density is
the lowest.
o Population growth is highest in Pakistan followed by India and China.

o One child norm which was introduced in China in the late 1970s is the major
reason for low population growth. But this measure led to a decline in the sex
ratio, that is the proportion of females per 1000 males.
o The sex ratio is low and biased against females in all the three countries. There is
strong son-preference prevailing in all these countries.
o The Fertility rate is low in China and very high in Pakistan.

o Urbanisation is high in both China and Pakistan- with India having 28 percent of
its people living in Urban areas.
152
 COMPARATIVE STUDY – INDIA, PAKISTAN AND CHINA

Gross Domestic Product (GDP) and Sectoral indicators :

o China recorded the GDP of 17.73 lakh crores USD in 2021 which is 0.85% of the world

economy. The GDP growth rate was 8.1%.

o India′s GDP was 3.17 lakh crores USD in 2021 i.e. a growth rate of 8.9%.

o Pakistan’s GDP in 2021 was 34,634.32 crores i.e. a growth rate of 6%.

o In China, around 22.9 percent of the workforce were employed in the agricultural

sector, 29.1 percent in the industrial sector and 48 percent in the service sector in the

year 2021.

153
 COMPARATIVE STUDY – INDIA, PAKISTAN AND CHINA
Gross Domestic Product (GDP) and Sectoral indicators :

o In India, around 45.6 percent of the workforce were employed in the agricultural
sector, 29.34 percent in the industrial sector and 25.06 percent in
the service sector in the year 2021.

o In China, manufacturing contributes the highest to GDP whereas in India and

Pakistan, it is the service sector which contributes the highest.

o China has followed the classical development pattern of gradual shift from
agriculture to manufacturing and then to services whereas India and Pakistan’s
shift has been directly from agriculture to service sector.

154
 COMPARATIVE STUDY – INDIA, PAKISTAN AND CHINA
Human Development Indicators:

o In most areas of human development, China has performed better than India and
Pakistan.

o This is true for many indicators-per Capita GDP or proportion of population

below poverty line, health indicators such as mortality rates, access to sanitation,
literacy, life expectancy, malnourishment etc.

o Pakistan is ahead of India in reducing proportion of people below the poverty line
and also its performance in transferring labour force from agricultural sector to
industrial sector and access to water is better than India.

o Contrary to it, India is ahead of Pakistan is education sector and providing health
services.

o India and Pakistan are ahead of China in providing improved water sources.

155
 CONCLUSION
➢ India performed moderately since :
❖ A majority of its people are still dependent on agriculture.
❖ Infrastructure is lacking in many parts of the country.
❖ It is yet to raise the level of living of more than 22% of its population that lives below the
poverty line.
➢ Pakistan has performed poorly due to :
❖ Political instability.
❖ Volatile performance of agriculture sector.
❖ Over dependence on remittances.
❖ Growing dependence on foreign loans on the one hand and increasing difficulty in paying
back the loans on the other.
➢ China has performed comparatively the best because :
❖ It has been successful in raising the level of growth along with alleviation of poverty.
❖It used the market mechanism to create additional social and economic opportunities
without political commitment.
❖By retaining collective ownership of land and allowing individuals to cultivate lands, China
has ensured social security in rural areas.
❖Public intervention in providing social infrastructure has brought about positive results 156 in
human development indicators in China.
 SUGGESTED VIDEOS

https://diksha.gov.in/resources/play/collection/do_3131034753248870401940?contentType=T
extBook

https://diksha.gov.in/resources/play/collection/do_3131034753248870401940?contentType=T
extBook

https://diksha.gov.in/resources/play/collection/do_3131034753248870401940?contentType=T
extBook

157
 SOURCE ACKNOWLEDGEMENT

1. Diksha Portal; Ministry of Education Govt. of India.

2. Indian Economic Development : NCERT
3. Indian Economic Development : Jain & Ohri
4. Indian Economic Development : Sandeep Garg
5. Internet resources for pictures.
6. https://mycbseguide.com/blog/development-experience-india-comparison-neighbours-class-11-notes-
economics/

Prepared By – M r s . R u m m a R a i n a
Training Associate, ECONOMICS
ZIET Mysore

158