INDIAN

ECONOMIC
DEVELOPMENT
CLASS-XII
 Unit-1. Indian economy on the eve of Independence

A. Introduction:-
 The structure of India‘s present day economy is not just of current making; it has its roots steeped in
history, particularly in the period when India was under British rule which lasted for almost two
centuries before India finally won its independence on 15 August 1947.
 The sole purpose of the British colonial rule in India was to reduce the country to being a raw
material supplier for Great Britain‘s own rapidly expanding modern industrial base.
B. Low level of economic development:-
 India had an independent economy before the advent of the British rule. Though agriculture was the
main source of livelihood for most people, yet, the country‘s economy was characterized by various
kinds of manufacturing activities.
 India was particularly well known for its handicraft industries in the fields of cotton and silk
textiles, metal and precious stone works etc. These products enjoyed a worldwide market based on
the reputation of the fine quality of material used and the high standards of craftsmanship seen in all
imports from India.
 The economic policies pursued by the colonial government in India were concerned more with the
protection and promotion of the economic interests of their home country than with the
development of the Indian economy.
 Such policies brought about a fundamental change in the structure of the Indian economy —
transforming the country into supplier of raw materials and consumer of finished industrial products
from Britain.
 Obviously, the colonial government never made any sincere attempt to estimate India‘s national and
per capita income. Some individual attempts which were made to measure such incomes yielded
conflicting and inconsistent results.
 Among the notable estimators —
Dadabhai Naroji, William Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai .
— it was Rao, whose estimates during the colonial period was considered very significant.
 However, most studies did find that the country‘s growth of aggregate real output during the first
half of the 20th century was less than 2% and only 0.5 % growth in per capita output per year.
C. Agriculture sector:-
 Stagnation: - British colonial rule remained fundamentally agrarian — about 85 per cent of the
country‘s population lived mostly in villages and derived livelihood directly or indirectly from
agriculture. The agricultural sector continued to experience stagnation.
 Low productivity: - Agricultural productivity became low in absolute terms. This stagnation in the
agricultural sector was caused mainly because of the various systems of land settlement that were
introduced by the colonial government.
 Zamindari system:- Particularly, under the zamindari system which was implemented in the
Bengal Presidency, the profit accruing out of the agriculture sector went to the zamindars instead of
the cultivators. However, zamindars and the colonial government did nothing to improve the
 condition of agriculture. The main interest of the zamindars was only to collect rent irrespective of
the economic condition of the cultivators; this caused immense misery and social tension among the
cultivators.
 Land revenue settlement:- To a very great extent, the terms of the revenue settlement were also
responsible for the zamindars adopting such an attitude; dates for depositing specified sums of
revenue were fixed, failing which the zamindars were to lose their rights.
 Lack of facilities: - Besides this, low levels of technology, lack of irrigation facilities and
negligible use of fertilizers, all contributed to the poor level of agricultural productivity.
 Commercialization: - There was, of course, some evidence of a relatively higher yield of cash
crops in certain areas of the country due to commercialisation of agriculture. But this could hardly
help farmers in improving their economic condition as, instead of producing food crops, now they
were producing cash crops which were to be ultimately used by British industries back home. While
a small section of farmers changed their cropping pattern from food crops to commercial crops, a
large section of tenants, small farmers and sharecroppers neither had resources and technology nor
had incentive to invest in agriculture.
Practice questions:-
1. What was the focus of the economic policies pursued by the colonial government in India? What
was the impact of these policies?
2. Name some notable economists who estimated India‘s per capita income during the colonial
period.
3. What were the main causes of India‘s agricultural stagnation during the colonial period?
4. Explain how Zamindari system was an important cause of agriculture stagnation during colonial
period.
5. Explain the level of growth of aggregate and per capita output during the British period.
D. Industrial sector:-
 India could not develop a sound industrial base under the colonial rule. Even as the country‘s world
famous handicraft industries declined.
(i) Discriminatory tariff policy: - British required raw material for their as well as market for their
final products. For this purpose they target India. They used discriminatory tariff policy. This policy
allowed free export of raw material from India and free import of Britain made goods to India. They
placed heavy export on Indian handicrafts. It led to decline of handicrafts both in domestic as well
as in International markets.
(ii) Competition from machine made products: - Machine made goods from Britain were low
priced which gave competition to Indian handicrafts which were costlier. Competition from Britain
made goods declined the demand of handicrafts in India.
(iii) New patterns of Demand: - Due to impact of British culture taste and preferences of people
were shifting in favour of British products in Indian markets. This led to fall in demand for Indian
made goods which were mostly based on Indian handicrafts.
(iv) Disappearance of princely courts:- Before the British rule, Indian handicrafts were supported
by Indian emperors, princes, Nawabs etc. which had given our handicrafts domestic and
international recognition. Because of British rule, princely courts started disappearing and
accordingly Indian handicrafts too disappeared.
 The decline of the indigenous handicraft industries created not only massive unemployment in
India but also a new demand in the Indian consumer market, which was now deprived of the
supply of locally made goods. This demand was profitably met by the increasing imports of
cheap manufactured goods from Britain.
 The primary motive of the colonial government behind this policy of systematically de-
industrializing India was two-fold.
(i) The intention was, first, to reduce India to the status of a mere exporter of important raw
materials for the upcoming modern industries in Britain and,
(ii) second, to turn India into a sprawling market for the finished products of those industries
so that their continued expansion could be ensured to the maximum advantage of their home
country — Britain.
 During the second half of the nineteenth century, modern industry began to take root in India but its
progress remained very slow.
 Initially, this development was confined to the setting up of cotton and jute textile mills.
 The cotton textile mills, mainly dominated by Indians, were located in the western parts of the
country, namely, Maharashtra and Gujarat, while the jute mills dominated by the foreigners were
mainly concentrated in Bengal.
 Subsequently, the iron and steel industries began coming up in the beginning of the twentieth
century.
 The Tata Iron and Steel Company (TISCO) were incorporated in 1907. A few other industries in the
fields of sugar, cement, paper etc. came up after the Second World War.
 However, there were certain drawbacks of modern industrialization:-
(i) Lack of capital goods industry: - Capital goods industry means industries which can produce
machine tools which are, in turn, used for producing articles for current consumption. There was
hardly any capital goods industry to help promote industrialization in India.
(ii) No substitute: - The establishment of a few manufacturing units was no substitute to the near
wholesale displacement of the country‘s traditional handicraft industries.
(iii) Low growth rate: - The growth rate of the new industrial sector and its contribution to the
GDP remained very small.
(iv) Limited area of operation: - Another drawback of the new industrial sector was the limited
area of operation of the public sector. This sector remained confined only to the railways, power
generation, communication, ports and some other departmental undertakings.
Practice question:-
1. Name some modern industries which were in operation in our country at the time of
independence.
2. What was the two-fold motive behind the systematic de-industrialization affected by the British
in pre - independent India?
3. The traditional handicrafts industries were ruined under the British rule. Do you agree with this
view? Give reasons in support of your answer.
4. What was the adverse impact of destruction of Indian handicrafts?
5. Critically apprise some of the shortfalls of the industrial policy pursued by the British colonial
administration.
E. Foreign trade:-
 India has been an important trading nation since ancient times. But the restrictive policies of
commodity production, trade and tariff pursued by the colonial government adversely affected the
structure, composition and volume of India‘s foreign trade.
 Consequently, India became an exporter of primary products such as raw silk, cotton, wool, sugar,
indigo, jute etc. and an importer of finished consumer goods like cotton, silk and woolen clothes
and capital goods like light machinery produced in the factories of Britain.
 Britain maintained a monopoly control over India‘s exports and imports. As a result, more than half
of India‘s foreign trade was restricted to Britain while the rest was allowed with a few other
countries like China, Ceylon (Sri Lanka) and Persia (Iran).
 The opening of the Suez Canal further intensified British control over India‘s foreign trade. Suez
Canal is an artificial waterway running from north to south across the Isthmus of Suez in north-
eastern Egypt. It connects Port Said on the Mediterranean Sea with the Gulf of Suez, an arm of the
Red Sea. The canal provides a direct trade route for ships operating between European or American
ports and ports located in South Asia, East Africa and Oceania by doing away with the need to sail
around Africa. Strategically and economically, it is one of the most important waterways in the
world. Its opening in 1869 reduced the cost of transportation and made access to the Indian market
easier.
 The most important characteristic of India’s foreign trade throughout the colonial period was
the generation of a large export surplus.
(i) But this surplus came at a huge cost to the country‘s economy. Several essential commodities—
food grains, clothes, kerosene etc. — were scarcely available in the domestic market.
(ii) Furthermore, this export surplus did not result in any flow of gold or silver into India.
(iii) Rather, this was used to make payments for the expenses incurred by an office set up by the
colonial government in Britain, expenses on war, again fought by the British government, and the
import of invisible items, all of which led to the drain of Indian wealth.
F. Demographic condition:-
 Various details about the population of British India were first collected through a census in 1881.
Though suffering from certain limitations, it revealed the unevenness in India‘s population growth.
Subsequently, every ten years such census operations were carried out.
 Before 1921, India was in the first stage of demographic transition. The second stage of transition
began after 1921. However, neither the total population of India nor the rate of population growth at
this stage was very high.
 The various social development indicators were also not quite encouraging.
(i) The overall literacy level was less than 16 per cent. Out of this, the female literacy level was at a
negligible low of about seven per cent.
(ii) Public health facilities were either unavailable to large chunks of population or, when available,
were highly inadequate.
(iii) Consequently, water and air-borne diseases were rampant and took a huge toll on life.
 (iv) No wonder, the overall mortality rate was very high and in that, particularly, the infant
mortality rate was quite alarming—about 218 per thousand in contrast to the present infant
mortality rate of 33 per thousand.
(v) Life expectancy was also very low—32 years in contrast to the present 69 years.
(vi) There is extensive poverty prevailed in India during the colonial period which contributed to
the worsening profile of India‘s population of the time.
G. Occupational structure:-
 During the colonial period, the occupational structure of India, i.e., distribution of working persons
across different industries and sectors, showed little sign of change.
 The agricultural sector accounted for the largest share of workforce, which usually remained at a
high of 70-75 per cent while the manufacturing and the services sectors accounted for only 10 and
15-20 per cent respectively.
 Another striking aspect was the growing regional variation. Parts of the Madras Presidency,
Bombay and Bengal witnessed a decline in the dependence of the workforce on the agricultural
sector with a commensurate increase in the manufacturing and the services sectors. However, there
had been an increase in the share of workforce in agriculture during the same time in states such as
Orissa, Rajasthan and Punjab.
H. Infrastructure:-Under the colonial regime, basic infrastructure such as railways, ports, water
transport, posts and telegraphs did develop. However, the real motive behind this development was
not to provide basic amenities to the people but also to complete their own interests.
 Roads constructed in India prior to the advent of the British rule were not fit for modern transport.
The roads that were built primarily served the purposes of mobilizing the army within India and
drawing out raw materials from the countryside to send it to England.
 There always remained an acute shortage of all-weather roads to reach out to the rural areas during
the rainy season. Naturally, therefore, people mostly living in these areas suffered during natural
calamities and famines.
 The British introduced the railways in India in 1850 and it is considered as one of their most
important contributions.
 The railways affected the structure of the Indian economy in two important ways.
(i) On the one hand it enabled people to undertake long distance travel and thereby break
geographical and cultural barriers while,
(ii) On the other hand, it increased commercialisation of Indian agriculture which adversely affected
the self-sufficiency of the village economies in India.
 The introduction of the expensive system of electric telegraph in India, similarly, served the purpose
of maintaining law and order. The postal services, on the other hand, despite serving a useful public
purpose, remained all through inadequate.
I. Positive impacts:-
 Commercialization of agriculture: - Encouragement to commercialized agriculture proved boon
for India. Farming gradually became profitable by selling surplus produce.
 Construction of all-weather roads: - The British constructed modern roads in India, which help in
easy movement of goods and human beings.
 Introduction of Railways in India: - The British introduced the railways in 1850. Indian people
gained social benefits due to railways but there was huge economic loss to Indian government.
 Check on famines: - Development of transportation helped in controlling the effects of famines. As
goods and services are supplied everywhere it is required at the times of famines.
 Monetary system of exchange: - British rule helped in removing barter system due to its problems.
They introduced money as a medium of exchange.
 Effective administration: - They followed effective and efficient administrative system which left
good work culture in India.

Practice Questions:-
1. What objectives did the British intend to achieve through their policies of infrastructure
development in India?
2. What do you understand by the drain of Indian wealth during the colonial period?
3. Which is regarded as defining year to mark the demographic transition from its first to the
second decisive stage?
4. Give a quantitative appraisal of India‘s Demographic profile during the colonial period.
5. Highlight the salient features of India‘s pre-independence occupational structure.
6. Were there any positive contributions made by the British in India? Discuss.
7. Indicate the volume and direction of trade at the time of independence.
8. Underscore some of India‘s most crucial economic challenges at the time of independence.
9. Describe India‘s occupational structure during the British period.
10.How did British rule help India in commercialisation of agriculture?
 Unit-2. Indian Economy -1950-1990

A. Introduction:-
 India would be a socialist society with a strong public sector but also with private property and
democracy; the government would plan for the economy with the private sector being encouraged
to be part of the plan effort.
 The ‗Industrial Policy Resolution‘ of 1948 and the Directive Principles of the Indian Constitution
reflected this outlook. In 1950, the Planning Commission was set up with the Prime Minister as its
Chairperson.
 The era of five year plans had begun. First five year plan was initiated in the year 1951-1956.
 Planning, in the real sense of the term, began with the Second Five Year Plan. The Second Plan, a
landmark contribution to development planning in general, laid down the basic ideas regarding
goals of Indian planning; this plan was based on the ideas of Mahalanobis.
 In that sense, he can be regarded as the architect of Indian planning. Mahalanobis was born in 1893
in Calcutta. Mahalanobis established the Indian Statistical Institute (ISI) in Calcutta and started a
journal, Sankhya, which still serves as a respected forum for statisticians to discuss their ideas.
B. Objectives:-
 A plan should have some clearly specified goals. The goals of the five year plans were: growth,
modernization, self-reliance and equity.
 This does not mean that all the plans have given equal importance to all these goals. Due to limited
resources, a choice has to be made in each plan about which of the goals is to be given primary
importance.
 Nevertheless, the planners have to ensure that, as far as possible, the policies of the plans do not
contradict these four goals.
(I) 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 final goods and services produced in the country during a year.
 You can think of the GDP as a cake and growth is increase in the size of the cake. If the cake is
larger, more people can enjoy it. It is necessary to produce more goods and services if the people of
India are to enjoy (in the words of the First Five Year Plan) a more rich and varied life.
 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.
 In some countries, growth in agriculture contributes more to the GDP growth, while in some
countries the growth in the service sector contributes more to GDP growth.
(II) Modernisation: To increase the production of goods and services the producers have to adopt
new technology. Adoption of new technology is called modernisation.
 However, modernisation 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.
 In a traditional society, women are supposed to remain at home while men work.
 A modern society makes use of the talents of women in the work place — in banks, factories,
schools etc. — and such a society in most occasions is also prosperous.
 (III) Self-reliance: A nation can promote economic growth and modernisation 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.
(IV) Equity: Economic growth is an increase in the total output of final goods and services in a
country. Equity refers to reduction in inequality of income or wealth, uplifting weaker sections of
society and equal distribution of economic wealth.
 Growth, modernization and self -reliance by themselves, may not improve the kind of life which people are
living. 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.
 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.
Practice questions:-
1. Define plan.
2. Why did India opt for planning?
3. Why should plans have goals?
4. What is sectoral composition of an economy? Is it necessary that the service sector should
contribute maximum to GDP of an economy? Comment.
5. Explain ‗growth with equity‘ as a planning objective.
6. Does modernization as a planning objective create contradiction in the light of employment
generation? Explain.
7. Why was it necessary for a developing country like India to follow self-reliance as a planning
objective?
8. Modernisation as a planning objective shows a dichotomy with employment generation. Justify
the statement.
9. Atmanirbhar Bharat had been at the roots of the Indian planning process in the form of Self-
reliance as an objective of the planning process. Do you agree with the given statement? Justify
the rationale of the given statement.

C. Agriculture:-
 During the colonial rule there was neither growth nor equity in the agricultural sector. The policy
makers of independent India had to address these issues which they did through land reforms and
promoting the use of ‗High Yielding Variety‘ (HYV) seeds which ushered in a revolution in Indian
agriculture.
 (I) Land Reforms: The low productivity of the agricultural sector forced India to import food
from the United States of America (U.S.A.).
 Equity in agriculture called for land reforms which primarily refer to change in the ownership of
landholdings. 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.
 (II) 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.
 The abolition of intermediaries meant that some 200 lakh tenants came into direct contact with the
government-they were freed from being exploited by the Zamindars. The transfer of ownership
gave them the incentive to increase output and this contributed to growth in agriculture.
 Drawbacks: - However, the goal of equity was not fully served by abolition of intermediaries. In
some areas the former zamindar continued to own large areas of land by making use of some
loopholes in the legislation; there were cases where tenants were removed and the landowners
claimed to be self-cultivators (the actual tillers), claiming ownership of the land; and even when the
tillers got ownership of land, the poorest of the agricultural labourers (such as sharecroppers and
landless labourers) did not benefit from land reforms.
 Problems:-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.
 The legislation also had a lot of loopholes which were exploited by the big landholders to retain
their land.
 Land reforms were successful in Kerala and West Bengal because these states had governments
committed to the policy of land to the tiller. Unfortunately other states did not have the same level
of commitment and vast inequality in landholding continues to this day.
D. Green revolution:-
 At independence, about 75 per cent of the country‘s population was dependent on agriculture.
Productivity in the agricultural sector was very low because of the use of old technology and the
absence of required infrastructure for the vast majority of farmers. 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. 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 first phase of the green revolution (approximately mid 1960s up to mid-1970s), the use of HYV
seeds was 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.
 Importance: - (i) The spread of green revolution technology enabled India to achieve self-
sufficiency in food grains.
(ii) India no longer had to be depending on America, or any other nation, for meeting its food
requirements. Growth in agricultural output is important but it is not enough.
(iii) 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 (available as marketed surplus) was sold by the farmers in the market.
(iv)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.
 (v) 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.
 Problems: - While the nation had immensely benefited from the green revolution, the technology
involved was not free from risks. (i) 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.
(ii) 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.
 Solutions by Government: - Fortunately, these fears did not come true because of the steps taken
by the government.
(i) 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.
(ii) Since the small farmers could obtain the required inputs, the output on small farms equaled the
output on large farms in the course of time. As a result, the green revolution benefited the small as
well as rich farmers.
(iii) 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. The green
revolution would have favored the rich farmers only if the state did not play an extensive role in
ensuring that the small farmer also gains from the new technology.
E. 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. Any new
technology will be looked upon as being risky by farmers. Subsidies were, therefore, needed to
encourage farmers to test the new technology.
 Arguments against subsidies: - (i) 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.
(ii) 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.
(iii) 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‘s finances.
 Arguments in favour: - (i) On the other hand, some believe that the government should continue
with agricultural subsidies because farming in India continues to be a risky business.
(ii) Most farmers are very poor and they will not be able to afford the required inputs without
subsidies.
(iii) Eliminating subsidies will increase the inequality between rich and poor farmers and violate the
goal of equity.
(iv) These experts argue that if subsidies are largely benefiting the fertilizer industry and big
farmers, the correct policy is not to abolish subsidies but to take steps to ensure that only the poor
farmers enjoy the benefits.
 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.
 In India, between 1950 and 1990, the proportion of GDP contributed by agriculture declined
significantly but not the population depending on it (67.5 per cent in 1950 to 64.9 per cent by 1990).
The answer is that the industrial sector and the service sector did not absorb the people working in
the agricultural sector. Many economists call this an important failure of our policies followed
during 1950-1990.
Practice questions:-
1. What are HYV seeds?
2. What is marketable surplus?
3. Explain the need and type of land reforms implemented in agriculture sector.
4. What is green revolution? Why was it implemented and how did it benefit the farmers?
5. What are the risks associated with green revolution and how government tries to overcome that
risk?
6. Why were land reforms not implemented successfully?
7. ‗Land ceiling promotes equity.‘ Support the given statement with valid explanation.

F. Industries:-
 Economists have found that poor nations can progress only if they have a good industrial sector.
Industry provides employment which is more stable than the employment in agriculture; it promotes
modernization and overall prosperity. It is for this reason that the five year plans placed a lot of
emphasis on industrial development. At the time of independence, the variety of industries was very
narrow — largely confined to cotton textiles and jute. There were two wellmanaged iron and steel
firms — one in Jamshedpur and the other in Kolkata.
 Public and Private Sectors in Indian Industrial Development: At the time of independence, Indian
industrialists did not have the capital to invest in industrial area that is required for the development
of Indian economy and moreover market was not big enough to encourage industrialists to
undertake major projects.
 Because of these reasons the governments had to play an extensive role in promoting the industrial
sector. In addition, the decision to develop the Indian economy led to the policy of the government
controlling the commanding heights of the economy, as the Second Five Year plan put it. This
meant that the government would have complete control of those industries that were vital for the
economy.
 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. This resolution classified industries
into three categories. The first category comprised industries which would be exclusively
owned by the government; the second category consisted of industries in which the private
sector could supplement the efforts of the public sector, with the government 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. 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.
 Even an existing industry had to obtain a license for expanding output or for diversifying
production (producing a new variety of goods). This was meant to ensure that the quantity of goods
 produced was not more than what the economy required. License to expand production was given
only if the government was convinced that the economy required a larger quantity of goods.
 Small-Scale Industry: In 1955, the Village and Small-Scale Industries Committee, also called
the Karve Committee, noted the possibility of using small-scale industries for promoting rural
development.
 (i) 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 lakh; at present the maximum investment
allowed is rupees one crore.
(ii) 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.
(iii) 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.
(iv) They were also given concessions such as lower excise duty and bank loans at lower interest
rates.
Practice questions
1. Why was public sector given a leading role in industrial development during the planning period?
2. Why and how was private sector regulated under the IPR 1956?
3. Critically appraise the impact of Industrial development in 1950-1990.
4. Write a brief note on SSI.

G. Trade policies:-
 The industrial policy that India 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.
(i) This policy aimed at replacing or substituting imports with domestic production. For example,
instead of importing vehicles made in a foreign country, industries would be encouraged to produce
them in India itself. In this policy the government protected the domestic industries from foreign
competition. Protection from imports took two forms: tariffs and quotas.
(ii) Tariffs are a tax on imported goods; they make imported goods more expensive and discourage
their use. Quotas specify the quantity of goods which can be imported.
(iii) The effect of tariffs and quotas is that they restrict imports and, therefore, protect the domestic
firms from foreign competition.
 Effects: - (i) The policy of protection was based on the notion that industries of developing
countries were not in a position to compete against the goods produced by more developed
economies.
(ii) It was assumed that if the domestic industries were protected they would learn to compete in the
course of time.
(iii) Our planners also feared the possibility of foreign exchange being spent on import of luxury
goods if no restrictions were placed on imports.
(iv) Nor was any serious thought given to promote exports until the mid-1980s.
H. Effect of Policies on Industrial Development:
 Positive impact: - (i) 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 13 per cent in 1950-51 to 24.6 per cent in 1990-91.
 (ii) 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.
(iii) No longer was Indian industry restricted largely to cotton textiles and jute; in fact, the industrial
sector became well diversified by 1990, largely due to the public sector.
(iv) The promotion of small-scale industries gave opportunities to those people who did not have
the capital to start large firms to get into business.
(v) Protection from foreign competition enabled the development of indigenous industries in the
areas of electronics and automobile sectors which otherwise could not have developed.
 Negative impact:- (i) 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.
(ii) It is now widely held that state enterprises continued to produce certain goods and services
(often monopolizing them) although this was no longer required. An example is the provision of
telecommunication service.
(iii) 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.
(iv) 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.
(v) The excessive regulation of what came to be called the permit license raj prevented certain firms
from becoming more efficient.
(vi) The protection from foreign competition was 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.
(vii) The producers were aware that they had a captive market; so they had no incentive to improve
the quality of their goods. This, along with other problems, led the government to introduce a new
economic policy in 1991.
Practice questions:-
1. Explain how import substitution can protect domestic industry.
2. Though public sector is very essential for industries, many public sector undertakings incur huge
losses and are a drain on the economy‘s resources. Discuss the usefulness of public sector
undertakings in the light of this fact.
3. ―The progress of the Indian economy during the first seven plans was impressive indeed‖. Do
you agree with the above statement? Give valid reason in support of your answer.
4. ―While the nation had immensely benefitted from the green revolution, the technology involved
was not free from risks.‖ Do you agree with the given statement?
 Unit-3. Economic reforms since 1991
A. Introduction:-
 In 1991, India met with an economic crisis relating to its external debt — the government was not
able to repay its borrowings from abroad.
 Foreign exchange reserves were not sufficient for even a fortnight to buy petroleum and other
important items from foreign countries. The crisis further increased prices of essential goods.
B. Reasons:-
 The rise of the financial crisis can be traced from the inefficient management of the Indian
economy in the 1980s.
 The government expenditure was more than its income, the government borrows to finance the
deficit from banks and also from people within the country and from international financial
institutions.
 The government had to increase its revenue to meet challenges like unemployment, poverty and
population explosion. But government was not able to generate additional revenue.
 The income from public sector undertakings was also not very high to meet the growing
expenditure.
 Prices of many essential goods increased. Imports grew at a very high rate without matching
growth of exports. There was also not sufficient foreign exchange to pay the interest that needed
to be paid to international lenders.
C. Solution:-
 India approached the International Bank for Reconstruction and Development (IBRD), popularly
known as World Bank and the International Monetary Fund (IMF), and received $7 billion as loan
to manage the crisis.
 For availing the loan, these international agencies expected India to liberalise and open up the
economy by removing restrictions on the private sector, reduce the role of the government in
many areas and remove trade restrictions between India and other countries.
 India announced the New Economic Policy (NEP). The NEP consisted of wide ranging economic
reforms.
 This set of policies can broadly be classified into two groups: the stabilisation measures and the
structural reform measures.
 Stabilisation measures are short term measures, intended to correct some of the weaknesses that
have developed in the balance of payments and to bring inflation under control.
 Structural reform policies are long-term measures, aimed at improving the efficiency of the
economy and increasing its international competitiveness by removing the rigidities in various
segments of the Indian economy. The government initiated policies divided into three categories:-
Liberalisation, Privatisation and Globalisation.
Practice questions:-
1. Why were reforms introduced in India?
2. What is the other name of World Bank?
3. When was new economic policy announced and who announced it?
4. Describe the crisis prevailing in India before 1991.
5. What are the two kinds of measures in which NEP can be classified?

D. Liberalization:-
 Liberalisation was introduced to put an end to the restrictions and open various sectors of the
economy. It mainly focused on Industrial sector, financial sector, tax reforms and foreign
exchange reserves.
 (A). Deregulation of Industrial Sector: In India, regulatory mechanisms were enforced in
various ways like:- (i) industrial licensing , (ii) private sector was not allowed in many industries
(iii) some goods could be produced only in small-scale industries, and (iv) controls on price
fixation.
 The reform policies introduced in and after 1991 removed many of these restrictions.
(i) Industrial licensing was abolished for almost all except these industries: - alcohol, cigarettes,
hazardous chemicals, industrial explosives, electronics, aerospace and drugs and pharmaceuticals.
(ii) The only industries which are now reserved for the public sector are a part of atomic energy
generation and some core activities in railway transport.
(iii) Many goods produced by small-scale industries have now been dereserved.
(iv) The market has been allowed to determine the prices.
 (B). Financial Sector Reforms: The financial sector in India is regulated by the Reserve Bank of
India (RBI). One of the major aims of financial sector reforms is:-
(i) To reduce the role of RBI from regulator to facilitator of financial sector. This means that the
financial sector may be allowed to take decisions on many matters without consulting the RBI.
(ii) The reform policies led to the establishment of private sector banks, Indian as well as foreign.
(iii) Foreign investment limit in banks was raised to around 74 per cent.
(iv).Those banks which fulfill certain conditions have been given freedom to set up new branches
without the approval of the RBI.
(v). Foreign Institutional Investors (FII), such as merchant bankers, mutual funds and pension
funds, are now allowed to invest in Indian financial markets.
 (C).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.
(i) Since 1991, there has been a reduction in the taxes on individual incomes because it was felt
that high rates of income tax were the reason for tax evasion.
(ii) The rate of corporation tax, which was very high earlier, has been gradually reduced.
(iii) Efforts have also been made to reform the indirect taxes, In 2016, the Indian Parliament
passed a law, Goods and Services Tax Act 2016, to simplify and introduce a unified indirect tax
system in India. This law came into effect from July 2017. This is expected to generate additional
revenue for the government, reduce tax evasion and create ‗one nation, one tax and one market‘.
(iv) In order to encourage better compliance on the part of taxpayers, many procedures have been
simplified and the rates also lowered.
 (D) Foreign Exchange Reforms: The first important reform in the external sector was made in
the foreign exchange market.
(i) In 1991, as an immediate measure to resolve the balance of payments crisis, the rupee was
devalued against foreign currencies. This led to an increase in the inflow of foreign exchange.
(ii) It also set the tone to free the determination of rupee value in the foreign exchange market
from government control. Now, markets determine exchange rates based on the demand and
supply of foreign exchange.
 (E)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. The trade policy reforms aimed at:-
(i) Removal of quantitative restrictions on imports and exports , (ii) Reduction of tariff rates and
(iii) Removal of licensing procedures for imports. Import licensing was abolished except in case
of hazardous and environmentally sensitive industries. , (iv) Quantitative restrictions on imports of
manufactured consumer goods and agricultural products were also fully removed from April 2001.
 Export duties have been removed to increase the competitive position of Indian goods in the
international markets.
E. Privatization:-
 It implies shedding of the ownership or management of a government owned enterprise.
Government companies are converted into private companies in two ways (i) by withdrawal of the
government from ownership and management of public sector companies and or (ii) by outright
sale of public sector companies.
 Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the public
is known as disinvestment. The purpose of the sale, according to the government, was mainly to
improve financial discipline and facilitate modernization.
 The government envisaged that privatisation could provide strong influence to the inflow of FDI.
The government has also made attempts to improve the efficiency of PSUs by giving them
autonomy in taking managerial decisions.
 (i) In order to improve efficiency, boost professionalism and enable them to compete more
effectively in the liberalized global environment, the government identifies PSEs and declares
them as maharanis, nirvanas and miniratnas.
(ii) They were given greater managerial and operational freedom, in taking various decisions to
run the company efficiently and increase their profits.
(iii) Greater operational, financial and managerial autonomy has also been granted to profit-
making enterprises referred to as miniratnas.
 The Central Public Sector Enterprises are designated with different status. (i) Maharatnas – (a)
Indian Oil Corporation Limited, and (b) Steel Authority of India Limited,
(ii) Navratnas – (a) Hindustan Aeronautics Limited, (b) Mahanagar Telephone Nigam Limited;
(iii) Miniratnas –(a) Bharat Sanchar Nigam Limited; (b) Airport Authority of India and (c) Indian
Railway Catering and Tourism Corporation Limited.
 (i) They were set up with the intention of providing infrastructure and direct employment to the
public so that quality end-product reaches the masses at a minimal cost and the companies
themselves were made accountable to all stakeholders.
(ii) The granting of status resulted in better performance of these companies. The government has
decided to expand public sector in the global markets and raise resources by themselves from
financial markets.
F. Globalisation:-
 It is an outcome of the set of various policies that are aimed at transforming the world towards
greater interdependence and integration.
 (A)Outsourcing: This is one of the important outcomes of the globalisation process. 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 etc provided by respective departments of the company). As a form of
economic activity, outsourcing has intensified, in recent times, because of the growth of fast
modes of communication, particularly the growth of Information Technology (IT).
(i) Many of the services such as voice-based business processes (popularly known as BPO or call
centres), record keeping, and accountancy, banking services, music recording, film editing, book
transcription, clinical advice or even teaching are being outsourced by companies in developed
countries to India.
(iii) Most multinational corporations, and even small companies, are outsourcing their services to
India where they can be availed at a cheaper cost with reasonable degree of skill and accuracy.
 (iv) The low wage rates and availability of skilled manpower in India have made it a destination
for global outsourcing in the post-reform period.
 (B)World Trade Organization (WTO): The WTO was founded in 1995 as the successor
organisations to the General Agreement on Trade and Tariff (GATT). GATT was established in
1948 with 23 countries global trade organisations to administer all multilateral trade agreements
by providing equal opportunities to all countries in the international market for trading purposes.
(i) WTO is expected to establish a rule-based trading regime in which nations cannot place
arbitrary restrictions on trade. (ii) In addition, its purpose is also to enlarge production and trade of
services, to ensure optimum utilization of world resources and to protect the environment.
(iii) The WTO agreements cover trade in goods as well as services to facilitate international trade
(bilateral and multilateral) through removal of tariff as well as non-tariff barriers and providing
greater market access to all member countries.
(iv) As an important member of WTO, India has been in the forefront of framing fair global rules,
regulations and safeguards and advocating the interests of the developing world.
(v) India has kept its commitments towards liberalisation of trade, made in the WTO, by removing
quantitative restrictions on imports and reducing tariff rates.
(vi) Some scholars question the usefulness of India being a member of the WTO as a major
volume of international trade occurs among the developed nations.
(vii) They also say that while developed countries file complaints over agricultural subsidies given
in their countries, developing countries feel cheated as they are forced to open their markets for
developed countries but are not allowed access to the markets of developed countries.
G. Effect of Reforms:-
 Reforms in Agriculture: Reforms have not been able to benefit agriculture, where the growth
rate has been decreasing.
(i) Since 1991, public investment in agriculture sector especially in infrastructure, which includes
irrigation, power, roads, market linkages and research and extension (which played a crucial role
in the Green Revolution), has fallen.
(ii) Further, the partial removal of fertilizer subsidy has led to increase in the cost of production,
which has severely affected the small and marginal farmers.
(iii) This sector has been experiencing a number of policy changes such as reduction in import
duties on agricultural products, low minimum support price and lifting of quantitative restrictions
on the imports of agricultural products. These have adversely affected Indian farmers as they now
have to face increased international competition.
(iv)Moreover, because of exportoriented policy strategies in agriculture, there 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. This puts pressure on prices of food grains.
 Reforms in Industry: Industrial growth has also recorded a slowdown. This is because of
decreasing demand of industrial products due to various reasons such as cheaper imports,
inadequate investment in infrastructure etc.
(i) In a globalized world, developing countries are compelled to open up their economies to
greater flow of goods and capital from developed countries and rendering their industries
vulnerable to imported goods.
(ii) Cheaper imports have, thus, replaced the demand for domestic goods. Domestic manufacturers
are facing competition from imports.
(ii)The infrastructure facilities, including power supply, have remained inadequate due to lack of
investment. Globalisation is, thus, often seen as creating conditions for the free movement of
 goods and services from foreign countries that adversely affect the local industries and
employment opportunities in developing countries.
(iv)Moreover, a developing country like India still does not have the access to developed
countries‘ markets because of high non-tariff barriers.
(v) For example, although all quota restrictions on exports of textiles and clothing have been
removed in India, USA has not removed their quota restriction on import of textiles from India
and China.
Practice questions:-
Why is it necessary to became a member of WTO?
Why did RBI have to change its role from controller to facilitator of financial sector in India?
Distinguish between the following (i) Strategic and Minority sale (ii) Bilateral and Multi-lateral trade (iii)
Tariff and Non-tariff barriers.
Do you think the navaratna policy of the government helps in improving the performance of public sector
undertakings in India? How?
What are the major factors responsible for the high growth of the service sector?
India has certain advantages which makes it a favourite outsourcing destination. What are these
advantages?
Agriculture sector appears to be adversely affected by the reform process. Why?
Why has the industrial sector performed poorly in the reform period?
Discuss economic reforms in India in the light of social justice and welfare

Unit-4 Human Capital Formation

A. Introduction
 Just as a country can turn physical resources like land into physical capital like factories, similarly,
it can also turn human resources like students into human capital like engineers and doctors.
 This means that we need investment in human capital to produce more human capital out of human
resources.
Difference between Human capital and Physical Capital
Physical capital Human Capital
It is used to produce goods and services. It increases efficiency to produce goods and
services.
It is sold in the market. It is not sold, only the services of human capital
are sold.
It depreciates over time due to continuous use. There is no depreciation but to increase
efficiency investment is required.
It is separable from its owner. It can not be separated from its owner.
B. Sources of Human Capital Formation:-
 Education:-
 Investment in education is considered as one of the main sources of human capital.
 Spending on education by individuals is similar to spending on capital goods by companies with the
objective of increasing future profits over a period of time.
 Likewise, individuals invest in education with the objective of increasing their future income.
 Health:-
  Health is also considered as an important input for the development of a nation as much as it is
important for the development of an individual.
 A sick labour without access to medical facilities is compelled to abstain from work and there is
loss of productivity. Hence, expenditure on health is an important source of human capital
formation.
 The amount of money spent on preventive medicine (vaccination), curative medicine (medical
intervention during illness), social medicine (spread of health literacy) and provision of clean
drinking water and good sanitation are the various forms of health expenditures.
 Health expenditure directly increases the supply of healthy labour force and is, thus, a source of
human capital formation.
 On the job training:-
 Firms spend on giving on-the job-training to their workers.
 This may take different forms: one, the workers may be trained in the firm itself under the
supervision of a skilled worker; two, the workers may be sent for off-campus training. In both these
cases firms incur some expenses.
 Expenditure regarding on the-job training is a source of human capital formation as the return of
such expenditure in the form of enhanced labour productivity is more than the cost of it.
 Migration:-
 People migrate in search of jobs that fetch them higher salaries than what they may get in their
native places. Unemployment is the reason for the rural-urban migration in India.
 Technically qualified persons, like engineers and doctors, migrate to other countries because of
higher salaries.
 Migration in both these cases involves cost of transport, higher cost of living in the migrated places
and psychic costs of living in a strange sociocultural setup.
 The enhanced earnings in the new place outweigh the costs of migration.
 Information:-
 People spend to acquire information relating to the labour market and other markets like education
and health.
 This information is necessary to make decisions regarding investments in human capital as well as
for efficient utilisation of the acquired human capital stock.
 Expenditure incurred for acquiring information relating to the labour market and other markets is
also a source of human capital formation.
C. Human capital and Economic Growth:-
 Economic growth means the increase in real national income of a country; naturally, the
contribution of the educated person to economic growth is more than that of an illiterate person.
Healthy person is also an important factor for economic growth.
 This enhanced productivity of human beings and also stimulates innovations and creates ability to
learn new technologies.
 Education provides knowledge to understand changes in society and scientific advancements, thus,
facilitate inventions and innovations.
 The Seventh Five Year Plan focus on Human Capital.
The National Education Policy 2020 states that the world is undergoing rapid changes in the area
of knowledge. With scientific and technological advances, such as the rise of machine learning, and
artificial intelligence, many unskilled jobs may be taken over by machines, while the need for a
skilled workforce, is increasing.
 With climate change, increasing pollution, and depleting natural resources, there will be a shift in
how we meet the world‘s needs resulting in the need for new skilled labour.
 The growing emergence of epidemics and pandemics will also call for collaborative research in
infectious disease and development of vaccines and increasing the need for multidisciplinary
learning.
 There will be a growing demand for humanities and art, as India moves towards becoming a
developed country as well as among the three largest economies in the world.
 This policy vision suggests how human capital formation in India will move its economy to a higher
growth based on knowledge landscape.
D. Human capital and Human development:-
HUMAN CAPITAL HUMAN DEVELOPMENT
Human capital considers education and Human development is based on the idea that
health as a means to increase labour education and health are integral to human well-
productivity. being
Human capital treats human beings as a In the human development perspective, human
means to an end; the end being the increase beings are ends in themselves.
in productivity.
Any investment in education and health is Human welfare should be increased through
unproductive if it does not enhance output investments in education and health even if such
of goods and services. investments do not result in higher labour
productivity.

E. State of Human capital formation in India:-

 Human capital formation is the outcome of investments in education, health, on-the-job training,
migration and information. Of these education and health are very important sources of human
capital formation.
 Expenditures on both education and health are to be carried out simultaneously by all the three tiers
of the government.
 There is need for government intervention in education and health sectors.
 Expenditures on education and health make long-term impact and they cannot be easily reversed;
hence, government intervention is essential.
 For instance, once a child is admitted to a school or health care centre where the required services
are not provided, before the decision is taken to shift the child to another institution, substantial
amount of damage would have been done.
 Moreover, individual consumers of these services do not have complete information about the
quality of services and their costs.
 In this situation, the providers of education and health services acquire monopoly power and are
involved in exploitation.
 The role of government in this situation is to ensure that the private providers of these services
follow the rules provided by the government and charge the correct price.
F. Education sector in India:-
 In India, the ministries of education at the union and state level, departments of education and
various organisations like National Council of Educational Research and Training (NCERT),
University Grants Commission (UGC) and All India Council of Technical Education (AICTE)
facilitate institutions which come under the education sector.
 This expenditure by the government is expressed in two ways (i) as a percentage of ‗total
government expenditure‘ (ii) as a percentage of Gross Domestic Product (GDP).
 The percentage of ‗education expenditure of total government expenditure‘ indicates the importance
of education before the government. During 1952-2014, education expenditure as percentage of
total government expenditure increased from 7.92 to 15.7
 The percentage of ‗education expenditure of GDP‘ expresses how much of people‘s income is being
committed to the development of education in the country. During 1952-2014, percentage of GDP
increased from 0.64 to 4.13.
 Elementary education takes a major share of total education expenditure and the share of the
higher/tertiary education is the least.
 As we expand school education, we need more teachers who are trained in the higher educational
institutions; therefore, expenditure on all levels of education should be increased.
 In 2014-15, the per capita public expenditure on elementary education differs considerably across
states from as high as Rs 34,651 in Himachal Pradesh to as low as Rs 4088 in Bihar. This leads to
differences in educational opportunities and attainments across states.
 The Education Commission (1964–66) had recommended that at least 6 per cent of GDP be
spent on education so as to make a noticeable rate of growth in educational achievements.
 The Tapas Majumdar Committee, appointed by the Government of India in 1999, estimated
an expenditure of around Rs 1.37 lakh crore over 10 years (1998-99 to 2006-07) to bring all Indian
children in the age group of 6-14 years under the purview of school education.
 Compared to this desired level of education expenditure of around 6 per cent of GDP, the current
level of a little over 4 per cent has been quite inadequate.
 In principle, a goal of 6 per cent needs to be reached—this has been accepted as a must for the
coming years.
 In 2009, the Government of India enacted the Right of Children to Free and Compulsory Education
Act to make free education a fundamental right of all children in the age group of 6-14 years.
 Government of India has also started levying a 2 per cent ‗education cess‘ on all Union taxes. The
revenues from education cess have been used for spending on elementary education.
G. Future prospects:-
 Education for All — Still a Distant Dream:
 Though literacy rates for both — adults as well as youth — have increased, still the absolute
number of illiterates in India is as much as India‘s population was at the time of independence.
 In 1950, when the Constitution of India was passed it was ensured that the government should
provide free and compulsory education for all children up to the age of 14 years within 10 years
from the commencement of the Constitution.
 If it had been implemented earlier, we would have cent per cent literacy by now.
 Gender Equity — Better than Before:
 The differences in literacy rates between males and females are narrowing signifying a positive
development in gender equity.
 Still the need to promote education for women in India is important for improving economic
independence and social status of women.
 We have miles to go in achieving cent per cent adult literacy.
 Higher Education — a Few Takers:
 The Indian education pyramid is steep, indicating lesser and lesser number of people reaching the
higher education level.
 Moreover, the level of unemployment among educated youth is the highest.
 As per NSSO data, in the year 2011-12,
 The rate of unemployment among youth males who studied graduation and above in rural areas
were 19 per cent.
 Their urban area had less level of unemployment at 16 per cent.
 The most severely affected ones were young rural female graduates as nearly 30 per cent of them
are unemployed.
Therefore, the government should increase allocation for higher education and also improve the
standard of higher education institutions. So that students are imparted employable skills in such
institutions.
 Unit-5 Rural Development
A. Rural development:-
 Agriculture is the major source of livelihood in the rural sector.
 Rural development is a comprehensive term. It essentially focuses on action for the development of
areas that are lagging behind in the overall development of the village economy. The key issues in
rural development are:-
 Development of human resources
 Land reforms
 Development of the productive resources
 Infrastructure development like electricity, irrigation, credit, marketing, transport facilities
 Special measures for alleviation of poverty
 All this means that people engaged in farm and non-farm activities in rural areas have to be
provided with various means that help them increase the productivity.
 Earlier, GDP was on a decline, the population dependent on this sector did not show any significant
change. Further, after the initiation of reforms, the growth rate of agriculture sector decreased to 3%
per annum during the 1991-2012, which was lower than the earlier years.
 During 2014-15, the GVA growth rate of agriculture was less than 1%. Scholars identify decline in
public investment since 1991 as the major reason for this.
 They also argue that inadequate infrastructure, lack of alternate employment opportunities in the
industry or service sector, increasing casualisation of employment etc., further decrease rural
development.
B. Credit:-
 Growth of rural economy depends primarily on addition of capital, from time to time, to realise
higher productivity in agriculture and non-agriculture sectors.
 Farmers borrow from various sources to meet their starting investment on seeds, fertilisers,
implements and other family expenses of marriage, death, religious ceremonies etc.
 At the time of independence, moneylenders and traders exploited small and marginal farmers and
landless labourers by lending them on high interest rates and by manipulating the accounts to keep
them in a debt-trap.
 In 1969, India adopted social banking and multiagency approach to adequately meet the needs of
rural credit.
 National Bank for Agriculture and Rural Development (NABARD) was set up in 1982 as an apex
body to coordinate the activities of all institutions involved in the rural financing system.
 Rural banking today consists of a set of multi-agency institutions, namely, commercial banks,
regional rural banks (RRBs), cooperatives and land development banks. They are expected to give
loans at cheaper rates.
 Self-Help Groups (henceforth SHGs) have emerged to fill the gap in the formal credit system also
known as Micro finance.
 The SHGs promote savings in small ratio by a minimum contribution from each member.
 From the collected money, credit is given to the needy members to be repayable in small
installments at reasonable interest rates.
 By May 2019, nearly 6 crore women in India have become member in 54 lakh women SHGs. Such
credit provisions are generally referred to as micro-credit programmes.
 SHGs have helped in the empowerment of women.
 ‗Kudumbashree‘ is a women-oriented community-based poverty reduction programme being
implemented in Kerala.
  In 1995, society was started as a small savings bank for poor women with the objective to
encourage savings.
 Rural Banking- Critical Appraisal:-
 Banking credit facility is available by keeping something as collateral security because of this poor
and marginal farmers are left out.
 There is relaxed policy relating to recovery of loans and farmers are refusing to pay back loans
because of this sometimes bank may fall in problem.
 Farming families they are failed to save money properly due to which deposit funds are less in
commercial banks.
 To improve the situation, In recent years, all the adults are encouraged to open bank accounts as a
part of a scheme known as Jan Dhan Yojana. Those bank holders can get Rs. 1-2 lakh accidental
insurance coverage and overdraft facilities for Rs. 10,000 and get their wages, old age pension and
other social security payments of the government transferred to bank accounts. There is no need to
keep minimum bank balance. This has led to more than 40 crore people opening bank accounts.
C. Agriculture Market system:-
 The mechanism through which goods reach different places depends on the market channels.
 Agricultural marketing is a process that involves the assembling, storage, processing, transportation,
packaging, grading and distribution of different agricultural commodities across the country.
 Even today, more than 10 per cent of goods produced in farms are wasted due to lack of storage.
Therefore, government intervention became necessary to regulate the activities of the private
traders.
 The first step was regulation of markets to create orderly and transparent marketing conditions.
By and large, this policy benefited farmers as well as consumers.
 Second component is provision of physical infrastructure facilities like roads, railways,
warehouses, godowns, cold storages and processing units. The current infrastructure facilities are
quite inadequate to meet the growing demand and need to be improved.
 Cooperative marketing, in realising fair prices for farmers‘ products, is the third aspect of
government initiative.
 The fourth element is the policy instruments like
(i) assurance of minimum support prices (MSP) for agricultural products
(ii) maintenance of buffer stocks of wheat and rice by Food Corporation of India and
(iii) distribution of food grains and sugar through PDS. These instruments are aimed at protecting
the income of the farmers and providing foodgrains at a subsidised rate to the poor.
D. Emerging alternate marketing channels:-
 It has been realised that if farmers directly sell their produce to consumers, it increases their
incomes.
 Some examples of direct marketing channels are
 Apni Mandi (Punjab, Haryana and Rajasthan)
 Hadaspar Mandi (Pune)
 Rythu Bazars (vegetable and fruit markets in Andhra Pradesh and Telangana)
 Uzhavar Sandies (farmers markets in Tamil Nadu).
 Further, several national and multinational fast food chains are increasingly entering into contracts
with farmers to encourage them to cultivate farm products (vegetables, fruits, etc.) of the desired
quality by providing them with facilities of seeds and other inputs and also purchase of the products
at pre-decided prices.
 It is argued that such arrangements will help in reducing the price risks of farmers and would also
expand the markets for farm products.
E. Agriculture Diversification:-
 Diversification includes two aspects - one relates to change in cropping pattern and the other relates
to a shift of workforce from agriculture to other allied activities (livestock, poultry, fisheries etc.)
and non-agriculture sector.
 The need for diversification arises:-
 Diversification is necessary to reduce the risk from agriculture sector and it also provide alternate
livelihood options to rural people.
 Much of the agricultural activities are in the Kharif season. During Rabi season, in areas where
there are inadequate irrigation facilities, it becomes difficult to find gainful employment.
 Expansion into other sectors helps in realising higher levels of income for rural people to overcome
poverty and other tribulations.
 As agriculture is already overcrowded, a major proportion of the increasing labour force needs to
find alternate employment opportunities in other non-farm sectors.
Non- farm activities:-
 Animal Husbandry: In India, the farming community uses the mixed crop-livestock farming
system. A significant number of women also find employment in the livestock sector.
 Poultry accounts for the largest share with 61 per cent. Milk production in the country has increased
by about ten times between 1951-2016.
 This can be attributed mainly to the successful implementation of ‗Operation Flood‘.
 It is a system whereby all the farmers can pool their milk produced according to different grading
(based on quality), processed and marketed to urban centres through cooperatives.
 In this system the farmers are assured of a fair price and income from the supply of milk to urban
markets.
 Fisheries: The fishing community regards the water body as ‗mother‘ or ‗provider‘.
 The water bodies consisting of sea, oceans, rivers, lakes etc. are, life-giving source for the fishing
community.
 Today total fish production accounts for 0.9 per cent of the total GDP.
 There is a need to increase credit facilities through cooperatives and SHGs for fisherwomen to meet
the working capital requirements for marketing.
 Horticulture: Blessed with a varying climate and soil conditions, India has adopted growing of
diverse horticultural crops such as fruits, vegetables, tuber crops, flowers, medicinal, spices and
plantation crops.
 Horticulture sector contributes nearly one-third of the value of agriculture output and 6% of Gross
Domestic Product of India.
 Economic condition of many farmers engaged in horticulture has improved and it has become a
means of improving livelihood for many unprivileged classes.
 Other Alternate Livelihood Options:
 The IT has revolutionised many sectors in the Indian economy.
 IT plays an important role in achieving sustainable development and food security in the twenty-
first century.
 Governments can predict areas of food insecurity and vulnerability using appropriate information
and software tools so that action can be taken to prevent or reduce the likelihood of an emergency.
 It also has a positive impact on the agriculture sector as it can disseminate information regarding
emerging technologies and its applications, prices, weather and soil conditions for growing different
crops etc.
 IT act as a tool for releasing the creative potential and knowledge embedded in the society.
  It also has potential of employment generation in rural areas.
F. Organic farming:-
 Organic agriculture is a whole system of farming that restores, maintains and enhances the
ecological balance. There is an increasing demand for organically grown food to enhance food
safety throughout the world.
 Benefits of Organic Farming:
 Organic agriculture offers a means to substitute costlier agricultural inputs (such as HYV seeds,
chemical fertilisers, pesticides etc.) with locally produced organic inputs that are cheaper and
thereby generate good returns on investment.
 Organic agriculture also generates income through exports as the demand for organically grown
crops is on a rise.
 Studies across countries have shown that organically grown food has more nutritional value than
chemical farming thus providing us with healthy foods.
 Since organic farming requires more labour input than conventional farming, India will find
organic farming an attractive proposition.
 Finally, the produce is pesticide-free and produced in an environmentally sustainable way.
 Challenges:-
 Organic farming requires awareness and willingness on the part of farmers to adapt to new
technology.
 Inadequate infrastructure and the problem of marketing the products are major concerns which
need to be solved and implementation of appropriate agriculture policy to promote organic farming.
 It has been observed that the produce from organic farming is less than modern agricultural farming
in the initial years.
 Organic produce may also have a shorter shelf life than sprayed produce.
 Moreover choice in production of off-season crops is quite limited in organic farming.

Nevertheless, organic farming helps in sustainable development of agriculture and India has a clear
advantage in producing organic products for both domestic and international markets.
 Unit-6 Employment: - Growth, Informalisation and Other Issues
A. GDP and GNP:-
 The total money value of all goods and services produced in a domestic territory is known as Gross
Domestic Product. When we add Net factor income from abroad in this then it is known as Gross
National Product.
 ―Those activities which contribute to gross national product are known as economic activities.‖
B. Workers:-
 All those who are involved in these activities are known as worker in whatever capacity.
 The one who are temporary absent from work due to illness, injury etc. is also workers.
 Those who help main workers in the economic activities are also known as workers.
 Those who are self -employed are also known as workers.
C. Employment:-
 Employment means the state of having a job or being employed. In India, employment is multi-
faceted.
 Some get employment throughout the year.
 While estimating the number of workers, all those who are engaged in economic activities are
employment.
D. Participation of employment:-
 During 2017-18, India had about a 471 million strong workforce. Majority of our population reside
in rural areas.
 Rural workers constitute about 2/3rd of this 471 million.
 77% of workers are men and rest is women.
 Rural areas women workers are 1/4th whereas in urban areas it‘s- 1/5th.
E. Worker-population Ratio:-
 Worker-population ratio is an indicator which is used for analyzing the employment situation in the
country.
 If this ratio is higher, it means that engagement of people is greater, if this ratio of a country is
medium or low; it means that a very high proportion is not involved in employment.
 ―Population is defined as the total number of people who reside in a particular locality at a
particular point of time.‖
 Worker population ratio= x 100
F. Difference in worker population ratio between rural and urban areas:-
 People in rural areas have limited resources to earn a higher income and participate more in the
employment market.
 Many do not go to school, colleges and other institutions.
 Even if some go they discontinue in the middle to join the workforce whereas in urban areas-
individuals are able to study in various educational institutions.
 Urban people have variety of employment opportunities. They look for appropriate job which suit
their qualifications and skills.
 In rural areas, people cannot stay at home as their economic condition does not allow them to do so.
G. Why there is difference in working population of urban females and rural females?
 The difference in participation rates is very large. In urban areas only 14% are engaged for 100
females and in rural areas about 18% are engaged for 100 females.
 It is common to find that where men are able to earn high incomes, families discourage female
members for taking up jobs.
 Many household activities done by women are not recognized as productive work. It leads to non-
recognition of women‘s work.
H. Self -employed and Hired workers:-
 Self -employed: - Workers who owned and operate an enterprise to earn their livelihood are known
as self-employed. They account for 52%.
 Casual wage labourers: - Such labourers are casually engaged in other firms and in return, get
remuneration for the work done. It comprised of 25%.
 Regular salaried employees: - When a worker is engaged by someone or an enterprise and paid his
or her wages on a regular basis, they are known as regular salaried employees. It comprised of 23%.
I. Employment in firms, factories and offices:-
 Because of economic development of a country labour flows from agriculture to industrial or
service sector.
 For this purpose workers migrate from rural to urban areas.
 Economic activities are divided into 8 categories: - Agriculture, mining and quarrying (Primary
sector), Manufacturing, electricity, gas and water supply, construction (secondary sector), trade,
transport and storage, services (tertiary sector).
J. Sectoral share- Employment:-
 Primary sector is the main source of
employment for majority of workers in
India. It is 45%.
 Secondary sector provides employment
to 24% workforce.
 Service sector provides employment to
31% workforce.
K. Employment by region:-
 About 60% of workforce in rural depends upon primary sector.
 About 20% of rural workers are working in manufacturing industries.
 Service sector provides employment to 20% of rural workforce.
 Urban area‘s major employment is in service sector that is 60% where- as agriculture does not
provide employment opportunities. Industrial sector provides 34% of employment opportunities.
L. Employment by gender:-
 About 57% of the female workforce is employed in the primary sector whereas less than half of
males work in that sector.
 Men get opportunities in both secondary and service sector.
M. Growth and changing structure of employment:-
 Two developmental indicators: - Growth of employment and GDP.
 During this period 1950-2010, GDP of
India grew positively and was higher
than employment growth.
 There was always fluctuation in the
growth of GDP. During this period
growth rate of employment was not
more than 2%.
 In late 1990‘s, employment growth
started declining and reached to that
level from where planning phase was
started.
 There was widening gap between GDP and Employment. This means without generating
employment, more goods and services are produced known as ―Jobless growth‖.
 After reforms, GDP no doubt has increased but employment decreases.
 The gap between GDP and Employment was highest in 2005-2010.
 It is the time when employment hits the lowest and GDP was highest.
N. Employment in various Industries and their status:-
 Indian is agrarian country, majority of population depend upon agriculture.
 Developmental strategies have aimed at reducing the percentage of population depending upon
agriculture.
 Sector wise: - In 1972-73, about 74% of workforce was in primary sector whereas this percentage
reduced to 50% in 2011-12. Secondary and service sectors are sharing positive results. The
employment in these sectors has increased from 11 to 24% and 15 to 27%.
 Status wise: - The distribution of workforce in different status indicates that over the last five
decades (1972-2018), people have moved from regular salaried employment to casual wage work.
Scholars call this process of moving from self-employment and regular salaried employment to
casual wage work as casualization of workforce.
O. Informalisation of Indian Workforce:-
Formal sector Informal sector
All the public and private sector that employs All other who are not public and private having
more than 10 hired workers come under formal less than 10 hired labours form informal sector.
sector.
They get regular income, enjoy social security It includes farmers, agricultural labours, self -
benefits. employed having no hired workers.
Through labour law their rights are protected. Don‘t get regular salaries.
Workers form trade unions and bargain with
employers.
P. Quality of employment:-
 Quality of employment has been deteriorating over the years. Development planning was in such a
way that as economy grows, more and more workers would become formal sector workers but this
has not happened.
 Out of 473 million workers (2011-12) there were only 30 million workers in the formal sector.
 Only about 6% are employed in formal sector rest 94% are in informal sector.
 Even after working for more than 10-20 years, workers in the informal sector do not get maternity
benefits, provident fund, gratuity and pension.
Attention towards informal sector:-
 Since the late 1970‘s, many developing countries, including India started paying attention towards
informal sector. 94% of the total workforce they are in informal sector.
 Workers and enterprises in the informal sector do not get regular income. They do not have any
protection or regulation from the government.
 Workers are dismissed without any compensation. Technology used in the informal sector
enterprises is outdated; they also do not maintain any accounts.
 Workers of this sector live in slum areas.
 Of late, owing to the efforts of International Labour organisations the Indian government has
initiated the modernization of informal sector enterprises and provision of social security measures
to informal sector workers.
Q. Unemployment:-
 The National Statistical office (earlier known as National sample survey organisations) defines
unemployment as a situation in which all those who, owing to lack of work are not working but
either seeks work through employment exchanges.
 Economists define unemployment as: - ―Unemployed person is one who is not able to get
employment of even one hour in half day.‖
Types of unemployment:-
 Open unemployment: - Many individual go to employment exchanges, register themselves, some go
to factories and offices and give their bio-data, ask for vacancy is known as open unemployment.
 Disguised unemployment: - It is also known as hidden unemployment. The more number of
workers are working than required; this extra number of workers is disguisedly unemployed. In
rural area 1/3rd of agriculture worker are disguisedly unemployed.
 Seasonal unemployment: - When individuals work for one season and in another season they are
unemployed. Many people migrate from one area to another area because work in agriculture is
seasonal.
R. Government measures:-
 National Rural Employment Guarantee Act 2005:- It promises 100 days of guaranteed wage
employment to all rural households who volunteer to do unskilled manual work.
Government efforts can be broadly categorized into direct and indirect participation.
 Direct participation: - Government employs people in various departments for administrative
purposes. It also runs industries, hotels and transport companies and hence provides employment
directly to workers.
 When output of goods and services are increased by government enterprises, then private
enterprises which receive raw materials from government enterprises, will also raise their output
and hence employment opportunities also created. This is called indirect participation.
 There are certain employment generation programme was implemented for poverty alleviation.
They not only provide employment but also various services such as: - Health, education, safe
drinking water, nutrition etc.
 Unit-7 Environment and sustainable development
A. Definition:-
 Environment is the total planetary inheritance and totality of all resources. It includes the entire
biotic and abiotic factor that influences each other.
 All living elements- the birds, animals and plants are biotic elements whereas rock, sunlight are
examples of abiotic elements.
 A study of the environment that calls for the study of the inter-relationship between these biotic and
abiotic components of the environment.
B. Functions of Environment:-
 It supplies resources which include renewable and non -renewable resources. Renewable resources
are those resources which can‘t be exhausted or depleted always remain available. For eg: - woods.
Non-renewable resources are those which get exhausted with use. For eg: - Fossil fuel.
 It assimilates waste which means it absorbs waste. The waste generated should be within the
carrying capacity of the environment.
 It sustains life by providing genetic and biodiversity. If waste generation will not be within the
absorptive capacity then environment cannot perform this function.
 It also provides aesthetic view to enhance quality of life.
C. Environmental crisis:-
 The rising population of the developing countries and affluent consumption and production
standards of the developed world have placed a huge stress on environment.
 Many resources have become extinct and the wastes generated are beyond the absorptive capacity
of the environment.
 Absorptive capacity means the ability of environment to absorb degradation.
 This result in Environmental crisis.
D. Opportunity cost of negative environmental impacts are high:-
 The past development has polluted and dried up rivers making water an economic good.
 Because of excessive use of resources they get exhausted and some of the vital resources and we are
compelled to spend huge amounts on technology and research to explore new resources.
 Added to these are the health costs of degraded environmental quality- decline in air and water
quality- more of respiratory and water borne diseases.
 The expenditure on health is also rising. Global issues such as global warming and ozone depletion
also contribute to increased financial commitments for the government.
E. Supply-Demand Reversal:-
 In early days when civilization just began, or before this phenomenal increase in population and
before countries took to industrialization, the demand for environmental resources is less than
supply.
 Pollution was within absorptive capacity of the environment and the rate of resource extraction was
less than the rate of regeneration of these resources.
 Hence, Environmental problem did not arise.
 But with population explosion and with the advent of industrial revolution to meet the growing
needs of the expanding population, things changed.
 Now a day, demand for resources went beyond the rate of regeneration of the resources which is not
within the absorptive capacity of environment.
 Supply of resources has reduced whereas demand has increased more. Hence, the environmental
issues of waste generation and pollution have become critical.
 We are now faced with increased demand for environmental resources and services but their supply
is limited due to overuse and misuse of resources.
F. State of India’s Environment:-
 India has abundant natural resources in terms of rich quality of soil. The black soil of the Deccan
Plateau is particularly suitable for cultivation of cotton.
 The Indi-Gangetic plain spread from Arabian Sea to the Bay of Bengal- is one of the most fertile
lands.
 India‘s forests provide green cover for a majority of its population and wildlife.
 India accounts for nearly 8% of the world‘s total iron-ore reserves.
 Bauxite, copper, chromate, diamonds, gold, lead, lignite, manganese, zinc, uranium etc. are also
available in India.
G. The threat to India’s environment poses a dichotomy:-
 Threat of poverty- induced environmental degradation and at the same time, threat of pollution from
affluence and rapidly growing industrial sector.
 Two major environmental concerns- water and air pollution.
 Air pollution, water contamination, soil erosion, deforestation are environmental concerns in India.
 In India, air pollution is widespread in urban areas where vehicles, industries and thermal power
plant are the major contributors.
 Vehicular emissions are of particular concern since these are ground level sources and thus have
maximum impact on population.
 The number of motor vehicles has increased from about 3 lakh in 1951 to 30 crores in 2019. In
2016, personal transport vehicles (two-wheeled vehicles and cars only) constituted about 85 per
cent of the total number of registered vehicles thus contributing significantly to total air pollution
load.
 India is one of the ten most industrialised nations of the world. The CPCB (Central pollution control
board) has identified 17 categories of industries those are highly polluting.
 The priority issues identified are (i) land degradation (ii) biodiversity loss (iii) air pollution with
special reference to vehicular pollution in urban cities (iv) management of fresh water (v) solid
waste management.
 Land in India suffers from varying degrees and types of degradation. Some of the factors
responsible for land degradation are (i) loss of vegetation due to deforestation (ii) unsustainable fuel
wood and fodder extraction (iii) shifting cultivation (iv) encroachment into forest lands (v) forest
fires and over grazing (vi) non-adoption of soil conservation measures (vii) improper crop rotation
(viii) use of fertilisers and pesticides (ix) improper planning and management of irrigation systems
(x) extraction of ground water.
H. Sustainable development:-
 The concept of Sustainable development was emphasized by the United Nations Conference on
Environment and Development (UNCED) ―Development that meet the need of the present
generation without compromising the ability of the future generation to meet their own needs.‖
 The seminal report—Our Common Future—that explained sustainable development as ‗meeting the
basic needs of all and extending to all the opportunity to satisfy their aspirations for a better life‘
 The Brundtland Commission emphasize on protecting future generation. The present generation can
promote development that enhances the natural and built environment in ways that are compatible
with
 Conservation and promotion of natural resources
 Preservation of the regenerative capacity of the world‘s natural ecological system.
 Avoiding the imposition of added costs or risks on future generation.
I. Steps to be taken to achieve sustainable development:-
 According to Herman Daly, a leading environmental economist, to achieve sustainable
development, the following needs to be done:-
 Limiting the human population to a level within the carrying capacity of the environment.
 The carrying capacity of the environment is like ‗plimsoll line‘ of the ship which is its load limit
mark.
 Human scale if grows more than carrying capacity go beyond that which deviates from sustainable
development.
 Modernization of technology should be input efficient not input consuming.
 Renewable resources should be extracted on sustainable basis so that its usage should not exceed its
regeneration. Inefficiencies arising from pollution should be corrected.
J. Strategies for sustainable development:-
 Use of non-conventional source of energy: - India mostly depends upon Thermal and hydro which
have adverse impact on environment. Wind power and solar rays are good example of non-
conventional source of energy.
 LPG, Gobar gas: - Rural areas use wood as fuel which again has adverse effect on environment. To
rectify the situation, subsidized LPG is being provided which is known as clean fuel. For eg: -
Gobar gas plants. Easy loans are being provided to launch this plant. Pradhan mantri ujjwal yojana
was also launched on May 2016 to distribute 50 million LPG to women of below poverty line.
Firewood, coal and cow dung are targeted under this scheme.
 CNG: - Use of CNG as fuel in public transport system will lower air pollution an air will become
cleaner.
 Wind power: - In those areas where speed of wind is usually is high, wind mills can provide
electricity without any adverse effect on environment. Wind turbines move with wind and
electricity is generated.
 Solar energy: - With the help of photovoltaic cells, solar energy can be converted into electricity.
This technique is totally free from pollution. India is also leading an international body called
International Solar Alliance.
 Mini- hydel plants: - In mountainous regions, streams can be found almost everywhere. Mini-hydel
plants use the energy of such streams to move small turbines. The turbines generate electricity
which can be used locally.
 Bio-composting: - Instead of using pesticides and fertilizers, farmers can use compost made from
organic wastes. Cattles producing dung which is an important fertilizers and soil conditioner.
Earthworms can convert organic matter into compost faster than the normal composting process.
 Biopest control: - Best method to overcome adverse effects of green revolution is to use pesticides
based on plant products. Neem trees are proving to be quite useful.
 Traditional knowledge and practices:- Earlier, Indian people have been close to their environment.
They have been more a component of the environment.
 All the practices have been environmental friendly. Now days, modern system has caused large
scale damage to the environment.
 Traditional systems like Ayurveda, Unani. Tibetan and folk systems were very much powerful
for our health.
 These health care systems are in demand again for treating chronic health problems. People have
started demanding organic and herbal products.
  Now-a-days, every cosmetic produce- hair oils, toothpaste, body lotion, face cream- is herbal in
composition. Benefits: - The products are environmental friendly. They are free from side effects
and do not involve large-scale industrial and chemical processing.
Global warming:-
 It is gradual increase in the average temperature of the earth‘s lower atmosphere as a result of
increase in greenhouse gases since the industrial revolution.
 It is caused by man-made increase in carbon dioxide and other greenhouse gases through the
burning of fossil fuels and deforestation.
 Some of the effects of global warming are:-
 Melting of polar ice, resulting in rise in sea level and coastal flooding.
 Disruption of drinking water supplies dependent on snow melts.
 Extinction of species.
 Frequent tropical storms.
 Increase in incidence of tropical diseases.
 In 1997, a UN conference on climate change was held in Kyoto, Japan. It resulted in an
international agreement to fight global warming by reducing emissions of greenhouse gases by
industrialized nations.

Ozone depletion:-
 Ozone depletion refers to the phenomenon of reduction in the amount of ozone in the stratosphere.
 Reduction in the amount of ozone is a very crucial global environmental issue as ozone layer
protects the earth from ultraviolet rays of the sun.
 Ozone depletion is caused by high levels of chlorine and bromine compounds in the stratosphere.
The origins of these compounds are chlorofluorocarbons, used as cooling substances in air-
conditioners and refrigerators.
 As a result of ozone depletion, more ultraviolet radiations reaches the earth and harms the living
organisms.
 It causes skin cancer in humans, affects adversely the aquatic organisms, lowers the growth of
terrestrial plants etc.
 Unit-8 Comparative development experiences of India and its neighbours
A. Introduction:-
 India, Pakistan and China adopted similar strategies in their development path.
 India and Pakistan got independence in the year 1947. People ‘s Republic of China was established
in 1949.
 India announced its first Five year plan for the year 1951-56. Pakistan announced its first five year
plan, now called as medium term development plan in the year 1956. China announced its first five
year plan in the year 1953.
 Since 2018, Pakistan was working on 12th five year development plan (2018-23) whereas china is
working on 14th five year plan (2021-25).
 Until March 2017, India has been following five year-plan base development model.
 India and Pakistan adopted similar strategies, such as creating a large public sector and raising
public expenditure on social development.
 Till 1980‘s all the three countries had similar growth rates and per capita incomes.
B. Development path of China:-
 After the establishment of People‘s Republic of china under one party rule, all the critical sectors of
economy, enterprises and lands owned and operated by individuals were brought under government
control.
 Great Leap Forward campaign:-
 It was initiated in 1958 aimed at industrializing the country on a massive scale.
 People were encouraged to set up industries in their backyards.
 It met with many problems. A severe drought caused havoc in China killing 30 million people.
 When Russia had conflict with China, it withdrew its professionals who had earlier been sent to
China to help in industrialization process.
 In rural areas, communes were started. Under the commune system, people collectively cultivated
lands.
 In 1958, 26000 communes covering almost all the farm population.
 In 1965, Mao introduced the Great Proletarian Cultural Revolution (1966-76) under which students
and professionals were sent to work and learn from the country side.
 The present day fast industrial growth in China can be traced back to reforms introduced in
1978. These reforms are known as Structural reforms.
 China introduced reforms in two phases:-
 In the initial phase, reforms were introduced in agriculture, foreign trade and investment sectors.
In agriculture, commune lands were divided into small plots which were allocated to individual
household only for use not for ownership.
 They were allowed to keep all income from land after paying stipulated taxes.
 In later phase reforms were initiated in the industrial sector. Private sector firms which were
owned and operated by collective locals were allowed to produce goods according to their
wish.
 At this stage state owned enterprises were made to face competition with private sector.
 The reform process also involves dual pricing. This means fixing the prices in two ways; farmers
and industrial units were required to buy and sell fixed quantities of inputs and outputs on the
basis of price fixed by government and rest were purchased and sold at market prices.
 In order to attract foreign investors, Special Economic Zones were set up.
 Through the commune system, there was more equitable distribution of food grains.
  Expert point out that each reform was implemented on small scale and then extended on massive
scale.
 Why did China introduced Structural reforms in 1978?
 China did not have any compulsion by World Bank or IMF like India. The new leadership at that
time in China was not happy with the slow pace of growth and lack of modernization in the
Chinese economy under the Maoist rule.
 They felt that Maoist vision of economic development based on decentralization, self -sufficiency
and shunning of foreign technology, goods and capital had failed.
 Despite extensive land reforms, collectivization, the GLF and other initiatives, the per capita grain
output in 1978 was same as it was in the mid 1950‘s.
C. Development path of Pakistan:-
 Pakistan also follows the mixed economy model with co-existence of public and private sectors. In
the 1950‘s and 1960‘s Pakistan introduced a variety of regulated policy framework for import
substitution industrialization.
 The policy combined tariff protection for manufacturing of consumer goods together with direct
import controls on competing imports.
 The introduction of Green revolution led to mechanization and increase in public investment in
infrastructure in selected areas, which finally led to rise in the production of food grains.
 In the 1970‘s nationalization of capital goods industries took place. Pakistan then shifted its policy
orientation in the late 1970‘s and 1980s when the major thrust areas was decentralization and
encouragement to private sector.
 Pakistan also received financial support from western nations and remittances from continuously
increasing outflow of the migrants to the middle- east. This helped the country in increasing their
economic growth.
 Government also offered incentives to private sector. All this created a conducive climate for new
investments.
 In 1988 reforms were initiated in the country. But the reform process led to worsening of all the
economic indicators.
 The percentage of poor declined in 1960s but again started increasing after reforms. The
reasons for slow growth are:-
 Agriculture growth and food supply situation were based on good harvest not on the technical
changes. When there was a good harvest, the economy was in good condition. When it was not
then it showed negative trends.
 In Pakistan most foreign currency come from remittances send by workers working in middle-
east or exports of highly volatile agricultural products.
 There was also growing dependence on foreign loans on the one hand and increasing difficulty in
paying back the loans of the other.
D. Demographic indicators:-
 Looking at the global population,
out of every six persons living in
this world, one is an Indian and
another is Chinese.
 The population of Pakistan is very
small and accounts for roughly
about one-tenth of China or India.
 The growth rate of population is
highest in Pakistan followed by India and China.
 One child norm introduced in China in late 1970s as the major reason for low population growth.
 It led to the decline in sex ratio, the proportion of females per 1000 males. Sex ratio is low in all the
three countries. The main reason is the preference of son.
 One child norm along with controlling population growth has certain limitations like after few
decades in China, there will be more elderly people in proportion to young people. This led China
to allow couples to have two children.
 The fertility rate is low in China and very high in
Pakistan. Urbanisation is high in China with India
having 34% of its people living in urban areas.
E. Gross domestic product and sectors:-
 When many developed countries were finding it
difficult to maintain a growth rate of even 5 per
cent, China was able to maintain near double-digit
growth during 1980s.
 In the 1980s, Pakistan was ahead of India; China
was having double-digit growth and India was at
the bottom. In 2015–17, there has been a decline in Pakistan and China‘s growth rates, whereas,
India met with moderate increase in growth rates.
 Some scholars hold the reform processes introduced in Pakistan and political instability over a long
period as reasons behind the declining growth rate in Pakistan.
F. Sectoral share of Employment and GVA:-
 People are engaged in different sectors contribute to the Gross Domestic Product now called as
Gross Value Added. In China, due to
topographic and climatic conditions,
the area suitable for cultivation is
relatively small — only about 10 per
cent of its total land area.
 Until the 1980s, more than 80 per cent
of the people in China were dependent
on farming as their sole source of
livelihood. Since then, the government encouraged people to leave their fields and pursue other
activities such as handicrafts, commerce and transport.
 In 2018– 19, with 26 per cent of its workforce engaged in agriculture, its contribution to the GVA in
China is 7 per cent. In both India and Pakistan, the contributions of agriculture to GVA were 16 and
24 per cent. Total workforce that works in this sector is more in India.
 In China, industries contribute to GVA at 41, and employ 28 per cent of workforce. In all the three
countries, service sector contributes highest share of GVA.
 In the normal course of development, countries first shift their employment and output from
agriculture to Industry and then to services. This is what is happening in China.
 The proportion of workforce engaged in industry in India and Pakistan were low at 25 per cent and
24 per cent respectively. The contribution of industries to GVA is at 30 per cent in India and 19 per
cent in Pakistan. In these countries, the shift is taking place directly to the service sector.
 In all the three countries the service sector is emerging as a major player of development. It
contributes more to GVA.
 China‘s growth is contributed by the manufacturing and service sectors and India‘s growth by the
service sector. During this period, Pakistan has shown deceleration in all three sectors.
G. Indicators of Human
development:-
 China is moving ahead of India
and Pakistan. This is true for
many indicators — income
indicator such as GDP per
capita, or proportion of
population below poverty line or
health indicators such as
mortality rates, access to
sanitation, literacy, life expectancy or malnourishment.
 China and India are ahead of Pakistan in reducing proportion of people below the poverty line and
also their performance in sanitation.
 India and Pakistan have not been able to save women from maternal mortality. In China, for one
lakh births, only 29 women die whereas in India and Pakistan, about 133 and 140 women die
respectively.
 Report providing improved drinking water sources for most of its population. China has the
smallest share of poor among the three countries.
Along with these, we also need what may be called ‗liberty indicators‘. One such indicator has actually
been added as a measure of ‗the extent of democratic participation in social and political decision-
making‘.