ECONOMICS

CHAPTER -1- DEVELOPMENT

Development – It refers to the increase in National Income (traditional

notion of development). It can be defined as a growth in the economic,
social, and political aspects of a country.
Development can be divided into – Economic and Human development
Economic development Human development
1.Sustained increase in per capita It is a broader aspect as it includes
income that promotes economic monetary and non- monetary
welfare by reducing poverty and aspects.
unemployment.
2.Includes only quantitative It includes quantitative as well as
growth. qualitative growth.
3.Indicators- It includes Per capita Indicators – Includes literacy rate,
Income and National Income. Infant Mortality rate, public
facilities.

National Income (NI)

• It is the sum - total of goods and services produced in the country
plus Income from abroad (exports) in a particular year.
• It is the sum -total of income of residents of the country.
Per Capita Income –
• It refers to the contribution made by one person towards the total
Income.
• PCI = NI/ total population of a country
Developmental goals/Features of development/Aspects of
development –
• Common goals (same goals) – There are some needs which are
common for all- e.g., Freedom, security. Income, respect.
• Different goals – Development does not mean the same for
every individual as the life situation of people is different. E.g.
The developmental goal for a farmer may be better irrigational
facilities but for an unemployed youth it can be employment
opportunities.
• Conflicting goals – What may be a developmental goal for
some may be destructive for others. e.g., Industrialists want
dams for electricity, but such dams would displace the natives
of that region.
Income and other goals
 • Income is the most important goal for any individual.
• Apart from income certain other factors like freedom, better
health, education, indiscrimination etc. (non-materialistic
goals) are also desired by the people.
• Sometimes people give more importance to non-materialistic
goods rather than materialistic goods in life.
• Thus, development should not be seen only in quantitative
terms but also in qualitative terms.
• Thus, development is a mix of goals. For e.g. If women are
engaged in paid jobs, their dignity in the household increases,
decision making power increases. A safe and secure
environment may allow women to take up jobs.
National development
• The idea of development that benefits many people in a nation
is called national development.
• It may include a pollution-free environment, better health and
educational facilities, and an increase in per capita income.

Comparison of countries based on development –

(a)World Bank Criteria

• Published in World Development Report.

• Per Capita Income is the base for comparison.
• Less reliable because it considers only PCI.
• Countries are divided into rich and poor,
• If PCI > US $49300 per annum- Rich countries.
• PCI<US $ 2500 per annum - Poor countries.
• India’s PCI is US $ 6700 per annum – Low middle-income
country.

(b)UNDP Criteria
• Published in human development report
• Educational levels, health status, PCI are the major indicators for
comparison.
• More reliable since it consists of all indicators.
Merits and Demerits of PCI (average income)
Merits
• Averages are used for better understanding.
• It is a single value that summarizes characteristics of large data.
• For comparison between countries total income is not very
useful.
• Different countries have different populations, so the total
population will not tell us what an average person is likely to
earn.

Demerits
• Per capita income does not tell us about the distribution of
income in a country. It hides the disparity.
• It does not tell us anything about the services that influence the
quality of life such as good healthcare, education etc.
• PCI is affected by the size of population of a country. If a
country has a large population, its PCI will be low despite
having a large NI.
Income and other criteria
• Money in your pocket cannot buy all the good and services that
you may need to live well.
• Money cannot buy us a pollution-free environment.
• Money cannot buy us a disease-free life and we might not be
able to get protection from infection disease.
• Besides money, people also like to have equal treatment in
society, freedom, dignity and honor in their lives, which money
cannot buy.
Public Facilities
• Public facilities refer to facilities which a person cannot purchase
or arrange at individual level, these are provided by the
government.
• Following are the main public facilities needed for the
development of a nation- pollution free environment, good
infrastructure, good law and order, provision for safe drinking
water, sanitation, provision of public distribution system
• Public facilities ensure safety, security, health, and education for
the population of the country.
 • It aids them to work better, earn better and to have better facilities
of life.
Sustainable Development
• Sustainable development is development that meets the need of the
present without compromising the ability of future generations to
meet their needs.
• Sustainability of development means economic development
without any damage to the environment.
• To make development sustainable, non-renewable sources of
energy are to be saved for the future generation.
• The technology must be made eco-friendly so that it does not harm
the environment.

Measure for sustainable development

Mahatma Gandhi said, ‘The earth has enough resources to meet the
needs of all but not enough to satisfy the greed of even one person.’
• Controlling overuse and creating awareness to provide sustainable
development.
• Increased use of renewable resources.
• Less use of fossil fuels.
• Introduction of organic farming.
• Adopting measures to reduce global warming.
• Use environmentally friendly sources of energy.
• E.g., Ground water is a natural resource which has been utilized to
the maximum. Efforts should be made not to overuse or degrade
the quality of water. Government should adopt a strategy to
provide adequate water supply.
Environment Degradation and its consequences
• Deterioration of the environment through depletion of resources
such as air, water, soil is called environmental degradation.
• It is a global issue which leads to destruction of the eco system.
• The consequence of environmental degradation does not respect
national or state boundaries.
• Deforestation may affect rainfall patterns.
• Pollution in one country may affect another in the form of acid
rain, global warming etc.
Steps to control land degradation
• Careful planning and setting up of industries.
• Conservation of renewable and non-renewable resources.
• Proper selection of fuel.
• Organic farming.
Comparison of Kerala and Haryana
• Kerala, with lower per capita income, has a better human
development ranking than Haryana.
• Hence, per capita income is not a useful criterion at all and should
not be used to compare states.
• This is true because the literacy rate, infant mortality rate,
healthcare facilities, etc. are better in Kerala in comparison to
Haryana.
• The per capita income I only calculated by calculating the average
income of the state, irrespective of any other factor.
Definitions
• IMR – Infant Mortality Rate: It indicates the number of children
that die before the age of one-year as a proportion of the thousand
live children born in that particular year.
• Literacy Rate: It measures the proportion of the literate
population in the 7 and above age group.
• Net Attendance Ratio: It is the total number of children of age
group 14 and 15years attending school as a percentage of total
number of children in the same age group.
• Gross Enrolment Ratio: It means enrolment ratio for primary,
secondary and higher education.

Extra Question
• There are 8 families, and their Total Income is Rs. 40,000.
Calculate the PCI of each family. Does this mean that there is
equal distribution of wealth among families?
 PCI= Total Income/Total population
40,000/8= 5000
No, it does not mean that there is equal distribution of wealth
among these families. PCI does not tell us how income is
distributed.