CLASS: 9TH

SUBJECT: ECONOMICS
TOPIC:
UNDERSTANDING THE INDIAN ECONOMY

⚫ ECONOMIC ACTIVITIES:
Actions that involve the production, consumption and distribution of goods and
services are called as economic activities, e.g, fishing,farming,banking, etc.
Hence, any human activity which is performed in exchange for money can be termed
as an economic activity.

⚫ SECTORS OF ECONOMY:
1. Primary Sector
2. Secondary Sector
3. Tertiary Sector

1. Primary Sector: This sector involves all activities connected with the extraction of natural
resources. Primary economic activities include agricultural activities, forestry, mining,
grazing, fishing.
Processing raw material and their packaging are also included in this sector.

2. Secondary Sector: This sector is involved with the production of finished goods from the
raw material shipped by the primary sector. This sector involves all the manufacturing,
processing and construction jobs of an economy.
Few of the activities associated with this sector include metalworking, textile industry,
automobile industry, construction work etc. Since, this sector gradually became associated
with different types of industries, so it is also called as industrial sector.

3. Tertiary Sector: This sector mostly denotes an economy’s service industry. In this sector,
the economic activities include selling goods produced by the secondary sector, as well as
providing commercial services to the general population and other sectors of the economy.
Tertiary sector includes wholesale and retail sales, restaurant business, healthcare services,
distribution and transportation of goods etc. Since, these activities generate services rather
than goods, this sector is also called as the service sector.

⚫ REASONS FOR THE GROWING IMPORTANCE OF TERITARY

SECTOR IN INDIA:

1. Basic services like hospitals, transport, banks, courts etc., are the responsibility of the
government in a developing country like India, hence they need to be developed and
updated constantly to cater to the basic needs of the people.
2. Demand for services such as transport, trade and storage grows with the development of
primary and secondary sector.
3. Rises in people’s income leads to rise in demand of more services.
4. As the development increases, new services also becomes important.

⚫ EVOLUTION OF AN ECONOMY FROM PRIMARY SECTOR TO

TERITARY SECTOR:
1. All economic activity was in the primary sector during early civilization. After the surplus
production of food, people’s need for other products increased which led to the
development of the secondary sector.
2. The growth of secondary sector spread it’s influence during the industrial revolution in the
19th century.
3. A support system was needed to facilitate the industrial activity. Certain sectors like
transport and finance played an important role in supporting the industrial activity. Thus,
the growth of tertiary sector increased.
4. The service sector has become the most important in terms of total production.
5. Most working people are also employed in the tertiary sector.
6. Over the 30 years between 1980 and 2010, while production in all the three sectors has
increased, it increased more in the tertiary sector. As a result, in the year 2010-11, the
tertiary sector has emerged as the largest producing sector in India.

⚫ WHAT IS GDP?

Gross Domestic Product or GDP is defined as the total monetary or market value of all finished
goods and services produced within a country’s borders in a specific time period.

GDP= Consumption + Investment + Government Expenditures + (Exports-Imports).

⚫ SIGNIFICANCE OF GDP:

1. It represents the economic health of a country.

2. While framing monetary policies, policy makers look to GDP when making decisions on
interest rates, tax, and trade policies.
3. It represents a sum of country’s production level in a year.

NOMINAL GDP ( includes inflation)

REAL GDP ( excludes inflation)

GDP DEFLATOR:

A GDP deflator is a tool that is used to measure price changes over time, and it is also
known as the GDP price deflator or implicit GDP price deflator. It measures the changes in
prices for all the goods and services produced in an economy. It measures inflation (prices
going up) and deflation (prices going down).

GDP Deflator = N.GDP/ R.GDP * 100

⚫ Sectorial Share in GDP:

Agriculture: 18.4%
 Industry: 28.3%
Services: 53.3%
⚫ Employment Generation As Per Sectors:
Primary Sector: 51%
Secondary Sector: 22%
Tertiary Sector: 27%
⚫
⚫

⚫ AGRICULTURE AND ALLIED SECTOR:

1. Indian agriculture sector provides livelihood support to about 50% of population and
has a share of around 18% in the country’s GDP.
2. The green revolution transformed India from a food deficient stage to a surplus food
market.
3. But, the terrible famines have become events due to which the agricultural production
does not show large variation.
4. The growth rate of agricultural production declined from 3.72% in 80’s to 2.35 in the
90’s indicating towards the need of sustainability in agriculture.
5. Indian agriculture still faces problems like inadequate capital formation, low production,
high cost of production, uneven growth etc.
6. Indian agriculture is witnessing a phase of diversification, where attention is now
shifting to high value crops from traditional crops.
7. To improve the condition of Indian agriculture, intervention is needed in the areas of
policy, technology and market access.

⚫ INDUSTRIAL SECTOR:
1. Industrial output is also an important component of the GDP of a nation.
2. Currently, India’s manufacturing contributes about 16% to the GDP and India’s share in
world manufacturing is only1.8%
3. This is in sharp contrast to China, where manufacturing contributes to 34% to the GDP
and share in there share is 13.7% of the world manufacturing.
4. While share of manufacturing in India’s GDP is stagnated at 15-16%, the sector does
have immense potential for growth.
5. The National Manufacturing Policy aims at enhancing the share of manufacturing to 25%
within a decade and creating around 100 million jobs.

⚫ SERVICE SECTOR:
1. The service sector in India employs around 31% of the total population according to the
world bank.
2. The service sector in India is the major source that contributes over 50% to the country's
GDP.
3. It is the fastest growing sector in the whole world.
4. There are lots of departments in this sector that are responsible for the rise in the
economic development in India e.g, banking, tourism etc.
⚫ OTHER SECTORS:
1. On the basis of activity/nature:
a) Primary Sector
b) Secondary Sector
c) Tertiary Sector.

2. On the basis of working conditions:

a) Organized Sector
b) Unorganized Sector

3. On the basis of ownership:

a) Private Sector
b) Public Sector

⚫ Organized Sector: This sector is made up of businesses that are registered with
government and follow its guidelines and regulations. The organized sector tends to
have better salary and are typically well paid. E.g., Government institutions.

⚫ Unorganized Sector: It is made up of businesses that are not registered with

government and do not follow its guidelines. E.g., salesman

⚫ Public Sector: Companies that are owned by central or state government or both and
provided goods and services to the public. E.g., LIC, BSNL, etc.

⚫ Private Sector: It is the part of economy that is owned by individuals, private companies
or non government entities. E.g., Reliance, TATA, etc.

⚫ PEOPLE AS A RESOURCE:
1. It is a way of referring to a country’s working people in terms of their existing productive
skills and abilities.
2. Population is also a resource which cam be termed as ‘human resource’. When the existing
human resource is further developed by becoming more healthy and educated, it is termed
as, “human capital formation”.
3. All the activities carried out by the productive population of the country add value to
national income. Such activities are called as economic activities.
4. Economic activities have 2 parts: a) Market Activities b) Non-Market Activities.
5. Market activities involve those activities which are performed for pay or profit. It includes
production of goods and services.
6. Non-Market activities include activities which are done for self consumption.

⚫ INDICATORS OF DEVELOPMENT:
1. The education and health of the people of a country can be considered ad the major factors
determining the quality of its population.
2. The quality of population ultimately decides the growth rate of the country.
3. Illiterate or unhealthy people are a liability for the economy, while as literate and healthy
people are are an asset.
4. The standards which determine the quality of population of a country are:
a) Education
b) Health
c) Unemployment
d) Poverty.

⚫ HEALTH:
1. Health is the ability of a person to fight illness and is one of the most important factor in
determining the quality of a population.
2. When people have access to quality health-care, they are more likely to remain productive
and healthy.
3. Improvement in health status of the country has been the priority of the country.
4. India's national policy, too, aims at improving the accessibility of health-care, family welfare
and nutritional service with a special focus on the underprivileged section of the society.
5. Over the last five decades, India has built an extensive health infrastructure.
6. The measures adopted by the country have increased the life expectancy rate to 69.89% per
year an infant mortality rate 30.15% death/1000 live births.
7. Increase in life expectancy and improvement in child care are useful in assessing future
progress of the country.
8. The government still needs to work towards devising effective policies, laying sufficient
emphasis on wider determinants of health-care, such as food, livelihood security, nutrition,
sanitation, etc.

⚫ EDUCATION:
1. Education is a major contributor of the growth of a society.
2. With a view to strengthen and universalize education in India, government has introduced
various schemes at various levels.
3. The literacy rates have increased from 18% in 1951 to 74.04% in 2011. However, a vast
difference is noticed across sections of population.
4. Literacy rate among males is nearly 50% higher than females and is about 50% higher in
urban areas as compared to the rural areas.
5. During 1952-2010, total government expenditure on education increased from 7.92% to
11.1% and as percentage of GDP it increased from 0.64% to 3.25%.
6. Elementary education takes major share of the total education expenditure.

⚫ MAJOR GOVERNMENT SCHEMES FOR PROMOTING ELEMENTARY EDUCATION:

1. Sarva Shiksha Abhiyan(SSA): Sarva Shiksha Abhiyan (SSA) is a comprehensive and

integrated flagship programme of Government of India to attain Universal Elementary
Education (UEE), covering the entire country in a mission mode. SSA has been launched in
2001-2002 in partnership with the State Governments and Local Self Governments. The
programme aims to provide useful and relevant, elementary education to all children in the
6 to 14 age group by 2010. It is an initiative to universalize and improve quality of education
through decentralized and context specific planning and a process based, time bound
implementation strategy. The programme lays emphasis on bridging all gender and social
category gaps at elementary education level with time bound objectives.

2. Rashtriya Madhyamik Shiksha Abhiyan(RMSA): This scheme was launched in March, 2009
with the objective to enhance access to secondary education and to improve its quality. The
implementation of the scheme started from 2009-10. It is envisaged to achieve an
enrolment rate of 75% from 52.26% in 2005-06 at secondary stage of implementation of the
scheme by providing a secondary school within a reasonable distance of any habitation. The
other objectives include improving quality of education imparted at secondary level through
 making all secondary schools conform to prescribed norms, removing gender,
socioeconomic and disability barriers, providing universal access to secondary level
education by 2017, i.e., by the end of 12th Five Year Plan and achieving universal retention
by 2020.

3. Mid Day Meal Scheme: To enhance enrolment, retention, attendance and simultaneously
improving nutritional levels among children, the National Programme of Nutritional
Support to Primary Education (NP-NSPE), popularly known as Mid-Day Meal Scheme, was
launched as a Centrally Sponsored Scheme on 15th August 1995, initially in 2,408 blocks
in the country. From 2008-09 i.e w.e.f 1st April’2008, the programme covers all children
studying in Government, Local Body and Government-aided primary and upper primary
schools and centres supported under SSA (presently Samagra Shiksha) of all areas across
the country. Mid-Day Meal Scheme was started in the State of Assam during the 2004-05
financial year. The name of the scheme was changed to Pradhan Mantri Poshan Shakti
Nirman (PM-POSHAN) in September 2021. Children of preparatory Class i.e. Class just
before Class-I in primary schools have been included in PM-POSHAN since April, 2022.

⚫ UNEMPLOYMENT:
1. Unemployment is a situation when a person who is actively looking for work is unable to
find work. An individual is considered unemployed if he or she is a member of a country's
labour force and is capable and willing to work for pay but is unable to do so.
2. One of the important reasons of unemployment in India is the slow growth of capital
formation as compared to increase in labour force.
3. India faces unemployment in both rural as well as urban areas. However, the nature of
unemployment differs in rural and urban areas.
4. Unemployment leads to wastage of manpower and resource and tends to increase
economic overload.
5. Increase in unemployment is an indicator of a depressed economy.

⚫ Types of Unemployment:

1. Seasonal Unemployment: Disguised unemployment: occurs when more people are working
in a job than are actually needed. For example, if eight people are involved in an agricultural
activity but the work/activity actually requires the services of five people, then three
people are extra. If these three people out of eight are removed, total production will not
be affected. This kind of unemployment n is mostly a feature of rural areas.
2. Disguised unemployment: Seasonal unemployment occurs when people are only able to
find work during certain months of the year. Agricultural laborers, for example, find work
only during peak seasons, such as sowing, harvesting, weeding, and threshing. This is due to
the seasonal nature of agriculture in India. This kind of unemployment is also found in rural
areas.

3. Educated Unemployment:Educated unemployment refers to the situation in which a large

number of young people with matriculation, graduation, and post-graduation degrees are
unable to find suitable employment. India has a large population, and a large number of
people graduate from schools and colleges each year. The number of educated people
graduating from educational institutions is not keeping up with the number of jobs available
in various sectors. As a result, educated unemployed people are a distinctive problem in
India.
⚫ POVERTY:
1. Poverty refers to a situation in which a section of society is unable to meet its basic needs
which include food and lack of shelter, lack of clean water and sanitation facilities, and lack
of a regular job at a minimum decent level. Poverty is considered as one of the biggest
challenges of independent India.
2. It is thus a situation of lack of income to acquire minimum necessities of life.
3. Every fourth person in India is poor, this means, roughly 260 million people in India live in
poverty.
4. India has the largest single concentration of the poor in the world.

⚫ POVERTY LINE:
1. The poverty line is a method to measure poverty based on income or consumption levels.
Poverty line varies according to time and place.
2. In India, the poverty line is determined through a minimum level of food requirement,
clothing, footwear, fuel and light, educational and medical requirement, etc. These physical
quantities are multiplied by their prices in rupees.
3. In India, poverty is calculated on the basis of the desired calorie requirement.
4. The accepted average calorie requirement in India is 2400 calories per person per day in
rural areas and 2100 calories per person per day in urban areas.
5. On the basis of these calculations, for the year 2011–12, the poverty line for a person was
fixed at Rs 816 per month for rural areas and Rs 1000 for urban areas.
6. Those below the limit are popularly known as people living below poverty line (BPL).
7. Those living above the limit are known as above poverty line (APL).
8. The poverty line is estimated periodically (normally every five years) by conducting sample
surveys carried out by the National Sample Survey Organisation (NSSO).

⚫ CAUSES OF POVERTY IN INDIA:

1. High growth of population: In the last 45 years, the population has increased at the
whopping rate of 2.2% per annum. An average of approx. 17 million people are added every
year to the population which raises the demand for consumption goods considerably. The
high rate of population growth accompanied by low rate of growth leads to low growth of
per capita income.

2. Rural economy and backward agriculture: In agriculture, the productivity level is very low
due to subdivided and fragmented holdings, lack of capital, use of traditional methods of
cultivation, illiteracy etc. The very reason for poverty in the country is this factor only.
3. Underutilized resources: Underemployment and veiled unemployment of human resources
and less utilization of resources have resulted in low production in the agricultural sector.
This brought a downfall in their standard of living.

4. Lack of infrastructure: Facilities of transportation, banking, roads, water, power, health etc
are highly deficient. The growth of these aspects in necessary for the development of any
country.

5. Huge income inequalities: Unequal distribution of land and other resources is one of the
major reasons for high income inequalities. The distribution channel should be robust in
order to remove poverty. Mass consumption of goods and food grains etc. should be
distributed first among the poor population. Present public distribution system must be re-
organized and extended to rural and semi-urban areas of the country.
6. Sociocultural and economic factors: India’s social set up is very much backward with the rest
of the world and not at all beneficial for faster development. The caste system, inheritance
law, rigid traditions and customs are putting hindrances in the way of faster development
and have aggravated the problem of poverty.

7. High level of indebtedness: Small farmers need money to buy agricultural inputs like seeds,
fertilizers,pesticides. Since, poor people hardly have any savings, they borrow. Unable to
repay because of poverty, they become victims of indebtedness. So, the high level of
indebtedness is both the cause and effect of poverty.

⚫ ANTI POVERTY MEASURES:

1. The government of India has taken up number of initiatives and programmes in order to
address the poverty.
2. The major poverty alleviation programmes launched by the government of India are:

i. MGNREGA 2005:

1. Mahatma Gandhi National Rural Employment Guarantee Act 2005 or MGNREGA, earlier
known as the National Rural Employment Guarantee Act or NREGA, is an Indian social
welfare measure that aims to guarantee the 'right to work'.

2. This act was passed on 23 August 2005 and was implemented in February 2006 under
the UPA government of Prime Minister Manmohan Singh following tabling of the bill in
parliament by the Minister for Rural Development Raghuvansh Prasad Singh.

3. It aims to enhance livelihood security in rural areas by providing at least 100 days of assured
and guaranteed wage employment in a financial year to at least one member of every Indian
rural household whose adult members volunteer to do unskilled manual work.

4. Women are guaranteed one third of the jobs made available under the MGNREGA and
efforts are made to ensure that at least 50%.

5. Another aim of MGNREGA is to create durable assets (such as roads, canals, ponds and wells).
Employment is to be provided within 5 km of an applicant's residence, and minimum legal wage
under the law is to be paid. If work is not provided within 15 days of applying, applicants are
entitled to an unemployment allowance. That is, if the government fails to provide employment,
it has to provide certain unemployment allowances to those people.

6. Thus, employment UNDER MGNREGA is a legal entitlement.

II. NFWP:

1.The National Food for Work Programme (NFWP), 2004 was launched by the Ministry of Rural
Development, central government on 14 November 2004 in 150 of the most backward districts
of India to generate supplementary wage employment.

2.The programme is open to all Indian poor who are ready to do manual unskilled labour work
sponsored scheme. Food grains are provided to the States free of cost. The transportation cost,
handling charges, and taxes on food grains will, however, be the responsibility of the States.
 It has always been better to supply food grains free of cost instead of distributing money among
them. The eligibility criteria were relaxed to provide for both Below Poverty Line (BPL) and Above
Poverty Line (APL) families.[1] This is one of a number of schemes built on the food for work
concept.

III. PMRY (Prime Minister Rozgar Yojna):

1. The Prime Minister Rozgar Yojna (PMRY) scheme is to provide assistant to the educated
unemployed persons. It relates to the setting up of self employment ventures through industry
services and business routes.
2.The scheme is for all educated unemployed persons of age 18-35 years, with a 10 years age
relaxation for SC/STs, ex-servicemen, physically handicapped persons and women. The scheme
envisages 22.5% reservation for SC/ST and 27 % for Other Backward Class (OBCs).
3.All economically viable activities including agriculture and allied activities but excluding direct
agricultural operations like raising crop, purchase of manure etc are covered under the scheme.

III. REGP (Rural Employment Generation Programme):

1.Rural Employment Generation Program mainly aims at self-employment opportunities in small
towns and villages. It is a scheme initiated by the Central Government of India.

2.The Khadi & Village Industries Commission (KVIC) launched and initiated the Rural Employment
Generation Programme (REGP) scheme on 1st April, 1995. They generated job opportunities for
around two million job seekers under the KVI sector in the rural areas of the country.

IV. SGSY (Swarnajayanti Gram Swarozgar Yojna):

SGSY is being implemented since April 1999 as a major anti-poverty scheme for the rural
poor, by organizing them into Self Help Groups (SHGs), providing them with skill
development training and helping them to get credit linkage with financial institutions and
providing infrastructure and marketing support for the products produced by them.

V. AAY ( Antodaya Anna Yojna):

1.Antyodaya Anna Yojana (AAY) is one of the biggest initiatives undertaken by the Government
of India. It is a public distribution system scheme that was implemented in India in 2000. The
main purpose of the system is to provide food security to the people and to end hunger in India.

2.It covers the poorest of the poor in our country through the supply of food and essential
commodities for their daily needs at subsidized rates.

3.All the poor, or beneficiaries-as we call them- get food and other commodities under the AAY
scheme. This is done at subsidized rates. The distribution also takes place through a public
distribution system. As per this initiative, wheat is provided at Rs.3 per Kg, Rice for Rs.2 per Kg.
All eligible families will get 35 Kg of rice every month. Families which come under this section can
buy 1 kg of sugar at a rate of Rs.18.50 per Kg through ration shops.
⚫ FOOD SECURITY:
Based on the 1996 World Food Summit, food security is defined when all people, at all times,
have physical and economic access to sufficient safe and nutritious food that meets their dietary
needs and food preferences for an active and healthy life.

The declaration further recognizes that poverty eradication is essential to improve access to
food.

It has the following dimensions:

1. Availability of food: means food production within the country, food imports etc are suffice to
meet the requirements.Food availability addresses the “supply side” of food security and is
determined by the level of food production, stock levels and net trade.

2. Accessibility: means food is within the reach of every person.

3. Affordability: implies that an individual has enough money to buy sufficient, safe and
nutritious food to meet one’s dietary needs.

Thus, food security is ensured in a country only if:

A. Enough food is available

B. All persons have the capacity to buy food of acceptable quality, and

C. There is no barrier on access to food.

⚫ WHO ARE FOOD INSECURE?

1.Food insecure people are unable to buy food due to their very low income levels.

2.In some regions of India, there are disproportionately very high numbers of people facing
food insecurity.

3.People living in regions prone to frequent natural disasters, remote and tribal areas,
economically backward states are more prone to food insecurity.

4.Largest number of food insecure people are in the states of West Bengal, Jharkhand, parts
of Maharashtra and Madhya Pradesh, Bihar, South eastern and eastern parts of Uttar
Pradesh.

5.Due to the seasonal nature of agricultural activities, people in rural areas are prone to food
insecurity.
 6.In urban areas, there is less work in the construction industry in the rainy season, hence
casual labourers in the construction works are prone to food insecurity. They face seasonal
hunger as they are unable to find work for the entire year.

7.A large number of children below 5 years of age, nursing mothers, pregnant women are
prone to food insecurity.

8.People affected by natural disasters and who are forced to migrate to different places are
prone to food insecurity.

9.People belonging to SC, ST, OBC, who have low land base and productivity are prone to
food insecurity.

10.The worst affected people with food insecurity are beggars, destitutes, petty self-
employed people, people providing traditional services, traditional artisans, people with no
land or very little land.

11.In urban areas, people working in the casual labor market, those employed in ill-paid
occupations etc are prone to food insecurity.

⚫ How is food security affected

during a calamity?
(i) Due to a natural calamity, total production of food grains decreases
(ii) It creates a shortage of food in the affected area.
(iii) Due to shortage of food, the prices go up.
(iv) At higher prices, some people cannot afford to buy food.
(v) If such a calamity occurs in a widespread area, it may cause a situation of starvation.
(vi) A massive situation of starvation might turn into a famine.