Ch-1 Development

1. What is Development?

• Development means economic growth along with better education, health, and quality
of life.
• Different people have different development goals (e.g., a farmer may want better
irrigation, while a factory worker may want higher wages).
• Apart from income, people want freedom, security, equal treatment, and respect.

2. National Development

• National Development refers to the improvement in the living standards of people.

• Different people have different views on what makes a country developed.
• Key indicators of national development:
o Income (Per Capita Income)
o Education (Literacy Rate, Net Attendance Ratio)
o Health (Infant Mortality Rate, Life Expectancy)

Comparison of Countries and States

3. How Countries are Compared?

• Income is the main factor used to compare countries.

• National Income: Total income earned by a country.
• Per Capita Income (Average Income):

𝑻𝒐𝒕𝒂𝒍 𝑰𝒏𝒄𝒐𝒎𝒆 𝒐𝒇 𝑪𝒐𝒖𝒏𝒕𝒓𝒚

𝐏𝐞𝐫 𝐂𝐚𝐩𝐢𝐭𝐚 𝐈𝐧𝐜𝐨𝐦𝐞 =
𝑻𝒐𝒕𝒂𝒍 𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏

o Used by the World Bank to classify countries:

▪ Rich Countries: Per Capita Income above $12,056 (in 2017).
▪ Poor Countries: Per Capita Income below $955.
▪ India: Considered a lower-middle-income country (Per Capita Income:
$1,820 in 2017).

4. Other Criteria for Comparison

• Per Capita Income alone is not enough to measure development.

• Important indicators:
o Infant Mortality Rate (IMR): Number of babies dying before age 1 per 1,000
live births.
 ▪ Kerala has the lowest IMR in India due to good healthcare.
▪ Madhya Pradesh has the highest IMR in India.
o Literacy Rate: Percentage of people (7+ years) who can read and write.
▪ Kerala has the highest literacy rate (96.2%).
▪ Andhra Pradesh has the lowest literacy rate (66.4%).
o Net Attendance Ratio: Percentage of students attending school.
• Public facilities (healthcare, education, clean drinking water, sanitation) improve
quality of life.

Human Development Index (HDI)

• Created by UNDP (United Nations Development Programme).
• Measures overall development of a country based on:
1. Life Expectancy (average age a person is expected to live).
2. Literacy Rate: Percentage of people (7+ years) who can read and write.
3. Net Attendance Ratio (percentage of students enrolled in schools).
4. Per Capita Income (average income per person).
• India’s HDI Rank (2021): 131st in the world.

Public Facilities
• Public facilities are provided by the government to improve people's well-being.
• Examples:
o Schools, hospitals, electricity, transport, sanitation, water supply.
o Kerala has a low IMR because of better healthcare facilities.
• Public Distribution System (PDS) helps provide affordable food grains.
• Money alone cannot ensure a good life; public services are necessary.

Sustainable Development
• Sustainable Development: Meeting today’s needs without harming the future.
• Why is it important?
o Prevents overuse of resources.
o Protects the environment.
o Ensures resources are available for future generations.
• Ways to achieve sustainable development:
1. Use renewable resources (solar, wind energy).
2. Reduce fossil fuel consumption.
3. Adopt organic farming.
4. Prevent global warming.
5. Avoid excessive groundwater use.
• Mahatma Gandhi: “The earth has enough resources for everyone’s need, but not for one
person’s greed.”
 Ch-2 Sectors of the Indian Economy

1. Classification of Economic Activities

Economic activities are those which generate income. They are divided into three sectors:

• Primary Sector: Uses natural resources to produce goods.

o Examples: Farming, fishing, mining, forestry.
• Secondary Sector: Involves manufacturing and processing of raw materials.
o Examples: Making sugar from sugarcane, making clothes from cotton.
• Tertiary Sector: Provides services rather than goods.
o Examples: Transport, banking, teaching, healthcare.

All three sectors are interdependent and contribute to economic growth.

2. Contribution of Sectors to GDP and Employment

• GDP (Gross Domestic Product): Total value of goods and services produced in a
country in one year.
• Primary sector employs the most workers but contributes only 25% to GDP.
• Tertiary sector has become the largest contributor to GDP (more than half of India’s
GDP).
• Growth of the service sector is due to:
o Government spending on education, healthcare, and public services.
o Increased demand for private services (tourism, shopping, private schools).
o Growth of IT and communication industries.

3. Unemployment in India

• Underemployment (Disguised Unemployment): More people are working in a job than

needed. Example: A family of five working on a small farm, but only two are needed.
• Ways to Create More Jobs:
o Building irrigation projects (dams, canals) to support farmers.
o Providing cheap loans for businesses.
o Expanding rural education and skill training.
o Developing small industries, handicrafts, and tourism.

4. MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, 2005)

• Provides 100 days of guaranteed wage employment in rural areas.

• Aims to:
o Reduce poverty by giving jobs.
o Develop rural infrastructure (roads, wells, ponds).
o Prevent migration to cities for jobs.
Organized and Unorganized Sectors
5. Organized Sector

• Government or private jobs with fixed salaries and benefits.

• Job security, fixed working hours, paid leave, pension.
• Examples: Government offices, banks, big companies.

6. Unorganized Sector

• No job security, low wages, no benefits.

• Examples: Small shops, street vendors, casual construction workers.
• Need for government protection:
o Set minimum wages.
o Provide health and safety measures.
o Regulate working hours.

Public and Private Sectors

7. Public Sector

• Owned by the government.

• Provides essential services for welfare, not profit.
• Examples: Railways, post office, government hospitals.

8. Private Sector

• Owned by individuals or companies.

• Works for profit.
• Examples: Tata, Reliance, Infosys.
• Government’s Role:
o Regulates private businesses.
o Provides public services like schools, healthcare.
o Supports farmers and poor people through food subsidies.

Sustainability and Future Growth

• India still has a large agricultural workforce, but industries and services are growing.
• Government must invest in education and skill development to reduce
unemployment.
• Balance is needed among all three sectors for overall economic growth.
 Ch-3 Money and Credit

1. Money as a Medium of Exchange

• In the past, people used barter system (exchange of goods without money), which
required double coincidence of wants (both parties should want what the other offers).
• Money removed this problem by becoming a common medium of exchange.

2. Evolution of Money
• Early money: Grains, cattle, wheat, livestock.
• Later: Metal coins (gold, silver, copper).
• Modern money: Paper notes and coins.

Modern Currency

• Includes paper notes and coins made of cheap metals.

• Has no value on its own, but is officially recognized by the government.
• Issued by the Reserve Bank of India (RBI) (except ₹1 note and coins, issued by the
government).
• Indian rupee (₹) is the only legal currency in India.

3. Bank Deposits and Demand Deposits

• People deposit their extra money in banks for safety.
• Banks pay interest on deposits.
• Demand deposits: Money that can be withdrawn anytime.
• Cheque: A written order to a bank to pay a person directly from an account.

4. Loan Activities of Banks

• Banks keep only 15% of deposits in cash for daily withdrawals.
• The rest is used for loans to earn profit.
• Banks charge higher interest on loans than what they pay on deposits.
• Difference between loan interest and deposit interest is the bank’s profit.
• A loan is also called credit.
5. Credit (Loans) and Terms of Credit
• Credit is an agreement where a lender gives money, goods, or services to a borrower in
exchange for repayment later.
• Terms of credit include:
o Interest rate (extra amount borrower pays on the loan).
o Collateral (security like land, house, vehicle, or bank deposits).
o Documents (proof of identity, residence, employment, and income).

Two Types of Credit Situations

1. Positive Credit: Borrowed money is invested in business and generates profit.

2. Negative Credit: Borrowed money is used unproductively (e.g., marriage) and causes
debt burden.

6. Sources of Credit
Feature Formal Credit (Banks & Informal Credit (Moneylenders,
Cooperatives) Relatives, etc.)

Who gives the loan? Banks, Cooperative Societies Moneylenders, Traders, Landlords,
Friends, Relatives

Who controls it? Reserve Bank of India (RBI) No one controls it

Interest Rate Low and fixed by RBI High and can be unfair
Rules & Agreements Proper written agreements No proper rules, depends on the
lender

Need for Security (Collateral) Mostly required (e.g., property, May or may not be needed
gold, bank savings)

Loan Use Mostly for business, farming, Often for personal needs (marriage,
education, etc. emergency)

Safety for Borrowers Safe, banks can’t cheat or harass Risky, lenders may trouble borrowers
borrowers if they can’t repay

Where it is available? More in cities (urban areas) More in villages (rural areas)

Effect on People Helps growth and avoids debt Can cause debt traps and financial
problems stress
7. Self-Help Groups (SHGs)
• Small groups of poor people (15-20 members) who come together to save money and
help each other.
• Members deposit small amounts regularly and use the savings to give loans to group
members when needed.
• SHGs mainly help poor people, especially women, in rural areas.

Need for SHGs

• Banks are not available in all villages or demand too many documents & collateral.
• Moneylenders charge very high interest rates and exploit poor people.
• Poor people don’t have security (land, property) to get bank loans.
• SHGs help by giving loans without collateral at lower interest rates.

Functions of SHGs

1. Encourage Savings:
o Each member saves a small amount regularly.
o The collected money is kept in a bank account in the group’s name.
2. Provide Loans at Low Interest:
o SHGs give loans to members for small businesses, farming, education,
medical needs, etc.
o Interest is much lower than moneylenders.
3. Help in Getting Bank Loans:
o After a few years, banks lend money to SHGs without asking for collateral.
4. Promote Women Empowerment:
o Many SHGs are run by women, helping them earn money and gain confidence.
o They become financially independent and participate in decision-making.
5. Discuss and Solve Social Issues:
o SHGs hold regular meetings where members talk about problems like:
▪ Health and sanitation
▪ Domestic violence
▪ Education for children
▪ Awareness about rights and government schemes

Advantages of SHGs

• Easy and Quick Loans – No need for collateral like land or property.
• Low-Interest Rates – Much cheaper than moneylenders’ high interest.
• Empowers Women – Helps women become financially independent.
• Encourages Saving Habit – Makes people save regularly.
• Supports Small Businesses – Loans are used for self-employment, farming, etc.
• Social Improvement – SHGs discuss education, health, and other community issues.
 Ch-4 Globalisation and the Indian Economy
1. What is Globalisation?

• Globalisation means connecting a country’s economy with the world.

• It allows free movement of goods, services, technology, capital, and people between
countries.
• Foreign trade helps in the integration of markets between different countries.

2. Role of Foreign Trade in Globalisation

• Foreign trade allows:

o Countries to use resources efficiently.
o Export of surplus production to other countries.
o Increase in employment, industrial growth, and economic development.

3. Role of Multinational Corporations (MNCs)

• MNCs are companies that have business operations in multiple countries.

• They invest in different countries (foreign investment) to make more profit.
• MNCs work in three ways:
1. Joint production – Partnering with local companies.
2. Buying local companies – Acquiring smaller businesses (e.g., Cargill Foods
buying Parakh Foods).
3. Controlling production – Placing orders with local producers and selling under
their own brand name.
• MNCs prefer location with:
o Close to market
o Cheap labour/employees.
o Availability of raw materials.
o Good infrastructure/public facilities.
o Business-friendly government policies.

4. Factors That Enabled Globalisation

1. Technology Advancement
o Faster transport, communication, and production methods.
o Internet, mobile phones, and computers help in quick information exchange.
2. Liberalisation of Trade (1991 Reforms)
o The Indian government removed trade barriers and allowed foreign companies
to invest in India.
o Reduced import taxes to make trade easier.
3. Foreign Investment Policy
 o FDI (Foreign Direct Investment) allows foreign companies to invest in India,
creating more jobs and industries.

5. Impacts of Globalisation (Positive & Negative)

Positive Impacts:

✔ Increased Trade & Economic Growth – Countries can sell their products worldwide,
increasing profits and jobs.
✔ Better Technology & Innovation – Countries share new ideas and technology,
improving industries and daily life.
✔ More Job Opportunities – MNCs create employment in different countries,
especially in developing nations.
✔ Lower Prices & More Choices – Goods become cheaper, and people have access to a
variety of products.
✔ Cultural Exchange – People experience different cultures, food, fashion, and
lifestyles through travel, media, and the internet.

Negative Impacts:

Job Losses in Some Sectors – Some local businesses were shut down due to
increasing competition, leading to unemployment.
Increasing Gap Between Rich & Poor – Wealthy companies and people benefit
more, while poor workers and small businesses suffer.
Environmental Damage – Increased production and transportation cause pollution
and climate change.
Loss of Cultural Identity – Western culture often dominates, making traditional
customs and local industries fade away.
Exploitation of Workers – Many workers in developing countries are paid low
wages and work in poor conditions.

Globalisation has both advantages and disadvantages, depending on how it is managed by

governments and businesses.

6. Special Economic Zones (SEZs)

• The government created SEZs to attract foreign companies to invest in India.

• SEZs have world-class facilities like electricity, roads, and internet to help businesses
grow.

7. World Trade Organization (WTO)

• WTO promotes free international trade and has 164 member countries.
• Goal: Reduce trade barriers and encourage fair trade.
 • Issue: Developed countries benefit more, while developing nations struggle with
competition.

8. Struggles Due to Globalisation

• Small manufacturers are losing jobs because they can’t compete with MNCs.
• Workers don’t get benefits like provident fund, medical allowance, and job security.
• Example: A worker like Sushila gets a temporary job without extra benefits and loses
her income if she takes a day off.

9. How to Ensure Fair Globalisation?

✔ Stronger labour laws to protect workers.

✔ Support for small businesses to compete with MNCs.
✔ Trade barriers to protect local industries.
✔ Developing countries should work together in WTO for fair trade policies.