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UPPSC Batch

DAILY
CLASS NOTES
Economics

Lecture – 03
Measures of Economic Development
and Inclusive Growth
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Measures of Economic Development and Inclusive Growth

What is Economic Growth?
Economic growth refers to an increase in a country’s production of goods and services over time. It is usually
measured in Gross Domestic Product (GDP).
How is Economic Growth different from Economic Development?
❖ Economic Growth is based only on quantitative aspects like income and growth, whereas economic
development includes improvement in standards of living, education, health, and well-being.
❖ Growth can happen without development (e.g., if a country’s economy increases but poverty remains high,
but development ensures that growth reaches all sections of society.
❖ Economic growth can be short-term, while development is a long-term process involving social progress
and sustainability.
Measures of Economic Development
❖ Gross Domestic Product (GDP)
➢ GDP is the total monetary value of all goods and services produced within a country during a specific
period.
➢ It is widely used as an indicator of economic growth, but it does not account for income distribution or
quality of life.
➢ According to the World Bank, India’s GDP in 2023 was approximately 3.7 trillion dollars, making
it the 5th largest economy.
➢ The GDP growth rate for India in 2023-24 was 7.6% (Source-RBI). However India’s GDP per capita
remains lower compared to developed countries.
➢ GDP can be measured in three ways: Production, income, and expenditure.
 Production Method (Value-Added Method)
➢ This method calculates GDP by summing the value added at each stage of production.
➢ It focuses on the contribution of different industries and sectors to GDP.
➢ Formula:
 GDP = ∑(Value of Output)−∑(Value of Intermediate Goods)
➢ Example: If a farmer sells wheat for ₹10, a baker buys it and makes bread worth ₹50, then the value
added is ₹40 (₹50 - ₹10).
❖ Income Method
➢ This method calculates GDP by adding up all incomes earned by individuals and businesses in an
economy.
➢ It considers wages, rent, interest, and profits as key components.
➢ Formula:
 GDP = Wages + Rent + Interest + Profit
➢ Example: If an economy has total wages of ₹500, rent of ₹100, interest of ₹200, and profits of ₹300, the
GDP by the income method is ₹1,100.
❖ Expenditure Method
➢ This method calculates GDP by summing all expenditures made in an economy.
➢ It considers consumption, investment, government spending, and net exports.
➢ Formula:
 GDP = C + I + G + (X−M)
 Where:
▪ C = Private Consumption Expenditure
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▪ I = Gross Private Domestic Investment

▪ G = Government Expenditure
▪ X-M = Net Exports (Exports - Imports)
❖ Gross National Income (GNI)
➢ GNI includes GDP along with net income from abroad (income earned by residents from overseas
minus income earned by foreigners within the country).
➢ It provides a more comprehensive measure of national income, especially for economies with significant
remittances or foreign investments.
❖ Per Capita Income
➢ It is calculated as GDP divided by the total population.
➢ A higher per capita income generally indicates a higher standard of living.
➢ However, it does not account for income inequality, regional disparities, or variations in purchasing
power.
➢ In 2023, Inda’s per capita GDP was $2610, highlighting the need for more inclusive growth
❖ Human Development Index (HDI)
➢ Developed by the United Nations Development Programme (UNDP), HDI measures a country’s overall
development based on three dimensions:
 Health – Measured by life expectancy at birth. In India, life expectancy is around 70.1 years.
 Education – Measured by mean years of schooling and expected years of schooling. The expected
years of schooling in India is still around 12. 6 years, whereas the mean years of schooling is 6.5
years, indicating challenges in education accessibility.
 Standard of Living – Measured by GNI per capita (PPP-adjusted).
 HDI provides a more comprehensive assessment of economic development than GDP alone.
❖ Unemployment and Labour Force Participation Rate:
➢ The unemployment rate measures the percentage of the labour force that is jobless and actively
looking for employment. The Labour Force Participation Rate measures the percentage of working
age people who are actively seeking jobs or are employed.
➢ According to the Periodic Labour Force Participation Rate, India’s Urban unemployment Rate was
6.6%, indicating improvement post pandemic
➢ The Female Labour Participation Rate stands at 37% highlighting gender disparities.
❖ Sustainable Development Goals (SDGs)
➢ The United Nations introduced 17 SDGs to ensure holistic and sustainable development by 2030.
➢ Key goals related to economic development include:
 No Poverty (SDG 1)
 Zero Hunger (SDG 2)
 Good Health and Well-being (SDG 3)
 Quality Education (SDG 4)
 Decent Work and Economic Growth (SDG 8)
 Reduced Inequality (SDG 10)
➢ The SDG Index measures countries' progress toward achieving the 17 sustainable goals set by the
United Nations. India’s SDG Index score was 71 out of 100 indicating moderate progress.
➢ The challenges remain in gender equality, climate action, and sustainable cities.
❖ Global Innovation Index (GIN)
➢ The Global Innovation Index measures a country’s capacity for innovation based on research,
technology, sophistication, and human capital released by the World Intellectual Property
Organisation (WIPO).
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➢ India’s rank in GIN 2024 was 39th, making it the top-ranking country in South Asia.
➢ Initiatives like Start-up India, Digital India have contributed to this progress.
❖ Gini Coefficient (Income Inequality Measure)
➢ It measures income inequality within a country on a scale of 0 to 1, where 0 represents perfect equality
and 1 represents extreme inequality.
➢ A high Gini coefficient indicates greater income disparity, which can hinder overall economic
development.
➢ Governments aim to reduce income inequality through progressive taxation and social welfare schemes.
❖ Poverty Line & Headcount Ratio
➢ The poverty line is the minimum income level required to meet basic needs.
➢ The Headcount Ratio measures the percentage of the population below the poverty line.
➢ Various countries have different poverty thresholds based on cost-of-living variations.
Inclusive Growth
❖ Introduction
➢ Inclusive Growth refers to economic growth that is broad-based, sustainable and ensures equitable
opportunities for all sections of society.
➢ It aims to reduce poverty, bridge income inequality, and provide opportunities for marginalized and
vulnerable groups.
➢ The concept is aligned with the United Nations Sustainable Development Goals (SDGs),
❖ Financial Inclusion
➢ Financial inclusion refers to the process of ensuring access to financial services such as banking, credit,
insurance, and pension schemes at an affordable cost for all individuals, especially the weaker sections
of society.
➢ Objectives of Financial Inclusion
 Provide universal access to banking services.
 Promote digital payments and financial literacy.
 Ensure the availability of credit to marginalized sections.
 Encourage savings and investment among low-income groups.
 Support entrepreneurship through microfinance and self-help groups.
➢ Government Initiatives for Financial Inclusion:
 Pradhan Mantri Jan Dhan Yojana (PMJDY):
▪ Nationwide financial inclusion program providing zero-balance bank accounts, debit cards, and
insurance coverage.
▪ Over 500 million bank accounts have been opened since 2014, indicating economic and
financial inclusion under PMJDY.
 MUDRA Scheme:
• Provides collateral-free loans to small and micro enterprises.
• Over 23 lakh crore rupees have been disbursed under the MUDRA scheme to provide support
ot small businesses and entrepreneurs.
❖ Employment Generation and Skill Development
➢ Employment generation and skill development are crucial for economic growth, poverty reduction, and
social equity.
➢ The government has launched various initiatives to promote job creation and upskill the workforce to
meet industry demands.
➢ Government Initiatives for Employment Generation
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➢ Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005:

 Provides 100 days of guaranteed wage employment in rural areas.
 Focuses on unskilled manual work to improve rural infrastructure.
➢ Prime Minister’s Employment Generation Programme (PMEGP)
 Provides financial assistance to set up micro-enterprises in rural and urban areas.
➢ Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY)
 Aims to enhance the employability of rural youth through skill training.
➢ Start-Up India and Stand-Up India
 Encourages entrepreneurship and job creation through financial and policy support.
➢ Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
 Provides short-term skill training in various sectors.
 Offers certification and financial incentives for trainees.
 Over 13mn youth have received skilled training to improve employability.
❖ Social Inclusion: Health, Education and Gender Equality
➢ Social inclusion refers to the process of ensuring equal opportunities and access to resources for all
individuals, particularly marginalized and disadvantaged groups.
➢ Health and gender equality are crucial aspects of social inclusion, as disparities in these areas lead to
wider societal inequalities.
➢ Social Inclusion in Health
 Unequal access to healthcare leads to poverty traps, lower life expectancy, and reduced
workforce participation.
 Vulnerable groups such as women, children, the elderly, the disabled, Scheduled Castes (SCs),
Scheduled Tribes (STs), and economically weaker sections often face exclusion from healthcare
services.
 Government Initiatives for Inclusive Healthcare:
❖ Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana - PMJAY): Provides free health insurance for
poor families, covering 500 million people and providing free medical treatment up to 5 lakh rupees.
➢ Social Inclusion in Gender Equality
 Gender equality ensures equal rights, responsibilities, and opportunities for all genders.
 Women’s empowerment is essential for achieving Sustainable Development Goals (SDGs),
particularly SDG 5 (Gender Equality).
 Government Initiatives for Gender Equality
▪ Sukanya Samriddhi Yojana (SSY): Financial empowerment through savings schemes for
girls. It facilitated 6.2 million accounts, encouraging financial security and education for girls.
▪ Beti Bachao Beti Padhao (BBBP): Aims to reduce sex ratio imbalance and promote girl child
education.
▪ Pradhan Mantri Matru Vandana Yojana (PMMVY): Maternity benefits to pregnant and
lactating women.
❖ Infrastructure and Digital Inclusion
➢ Developing strong physical and digital infrastructure bridges regional disparities and boosts economic
participation.
➢ Government steps for improving Infrastructure and Digital inclusion
 Smart Cities Mission:
▪ It aims to develop 100 smart cities with modern amenities.
▪ Over 2 lakh crore has been invested in urban transformation.
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 Bharatmala and Sagarmala Yojana

▪ It aims to improve road connectivity and reduce transportation costs.
 Gati Shakti (National Master Plan for Infrastructure):
▪ Holistic planning for multimodal connectivity.
 Digital India Mission:
▪ Promotes e-Governance, digital literacy, and internet accessibility.
▪ India has 850 million internet users driving digital payments and e-governance.
 PM WANI (Wi-Fi Access Network Interface):
▪ Expands public Wi-Fi networks for last-mile connectivity.

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UPPSC Batch
Economics DMP–02
Measures of Economic Development and Inclusive Growth – Practice Questions

1. What do you understand by inclusive growth? Discuss its significance in the Indian economy.
(12 Marks, 200 Words)
How to approach the question:
❖ Introduction: Start your answer by introducing Inclusive Growth in 20-30 words.
❖ Main Body: Discuss the features of inclusive growth and its significance for the indian economy.
Discuss the challenges to inclusive growth in India and suggest a way forward for ensuring inclusive
growth in India in 130-140 words.
❖ Conclusion: Write a conclusion highlighting how inclusive growth helps in realizing India’s vision
of "Sabka Saath, Sabka Vikas, Sabka Vishwas” in 20-30 words.
Model Answer:
Introduction:
Inclusive growth refers to economic growth that is broad-based, sustainable, and ensures equal opportunities
for all sections of society. It focuses on reducing income inequality, improving access to basic services, and
ensuring social and economic participation for marginalized groups. According to the OECD, inclusive
growth is “economic growth that creates opportunities for all segments of the population and distributes the
dividends of increased prosperity fairly.”
Main Body:
Features of Inclusive Growth
❖ Sustained and Equitable Growth Ensures long-term economic development with a fair distribution of
benefits.
❖ Employment Generation: Expands productive employment opportunities across all sectors.
❖ Poverty Reduction: Helps uplift weaker sections of society by improving income levels.
❖ Access to Basic Services: Ensures access to education, healthcare, financial services, and infrastructure.
❖ Social Inclusion: Empowers marginalized communities, including women, SCs, STs, and economically
weaker sections.
Significance of Inclusive Growth in the Indian Economy
❖ Reduces Poverty and Inequality
➢ India, with a large population below the poverty line, needs inclusive policies to bridge the income
gap.
➢ Programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
provide livelihood security to rural households.
❖ Enhances Human Capital Development
➢ Education and health are crucial for a productive workforce.
➢ Initiatives like Samagra Shiksha Abhiyan and Ayushman Bharat enhance access to quality
education and healthcare.
❖ Promotes Sustainable Economic Growth
➢ Inclusive policies lead to broad-based economic growth, preventing economic disparities.
➢ Investments in rural infrastructure (e.g., Pradhan Mantri Gram Sadak Yojana) boost economic
activity in underserved regions.
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❖ Encourages Employment Generation

➢ MSMEs, start-ups, and the Skill India Mission help create jobs for the youth and marginalized
sections.
➢ Make in India and Stand-Up India promote entrepreneurship and self-employment.
❖ Financial Inclusion and Economic Empowerment
➢ Programs like Jan Dhan Yojana, Direct Benefit Transfer (DBT), and Microfinance initiatives help
bring the unbanked population into the formal economy.
❖ Strengthens Social Stability and Democracy
➢ Inclusive policies prevent social unrest arising from economic disparities.
➢ A more equitable society enhances political stability and strengthens democratic institutions.
❖ Bridges Regional Imbalances
➢ Economic disparities between urban and rural areas are a challenge.
➢ Policies like the Aspirational Districts Programme and the Smart Cities Mission ensure
balanced regional development.
Challenges to Inclusive Growth in India
❖ High Income Inequality: The wealth gap between the rich and the poor is widening.
❖ Unemployment and Informal Sector: A large part of the workforce is in the unorganized sector with
no social security.
❖ Limited Access to Quality Healthcare and Education: Rural areas still suffer from poor
infrastructure.
❖ Gender Disparities: Women’s participation in the workforce remains low due to societal and economic
barriers.
Way Forward
❖ Strengthening Social Sector Spending: More investment in education, healthcare, and nutrition.
❖ Boosting Employment Opportunities: Focus on skill development, rural employment, and industrial
growth.
❖ Reducing Regional Disparities: Equitable distribution of resources through decentralized planning.
❖ Promoting Sustainable Growth: Ensuring environmentally friendly policies alongside economic
development.
❖ Enhancing Financial Inclusion: Expanding banking, credit, and insurance facilities to marginalized
sections.
Conclusion:
Inclusive growth is not just an economic necessity but a social imperative for India. Sustainable and equitable
growth ensures poverty reduction, job creation, and social stability, making India’s growth model resilient
and people-centric. With a strong policy framework and effective implementation, India can achieve its
vision of "Sabka Saath, Sabka Vikas, Sabka Vishwas."
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