INDIAN ECONOMIC DEVELOPMENT

TEXTBOOK FOR CLASS XI

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11100 – INDIAN ECONOMIC DEVELOPMENT
ISBN 81-7450-551-2
Textbook for Class XI

First Edition ALL RIGHTS RESERVED

February 2006 Phalguna 1927 q No part of this publication may be reproduced, stored in a retrieval
system or transmitted, in any form or by any means, electronic,
Reprinted mechanical, photocopying, recording or otherwise without the prior
October 2006, December 2007, permission of the publisher.
December 2008, January 2010, q This book is sold subject to the condition that it shall not, by way of
trade, be lent, re-sold, hired out or otherwise disposed of without the
January 2011, March 2012, publisher’s consent, in any form of binding or cover other than that in
January 2013, January 2014, which it is published.
December 2014, February 2016, q The correct price of this publication is the price printed on this page,
January 2017, January 2018, Any revised price indicated by a rubber stamp or by a sticker or by any
other means is incorrect and should be unacceptable.
February 2019, December 2019,
February 2021 OFFICES OF THE PUBLICATION
DIVISION, NCERT
Revised Edition
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Reprinted New Delhi 110 016 Phone : 011-26562708
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 FOREWORD

The National Curriculum Framework (NCF) 2005, recommends that

children’s life at school must be linked to their life outside the school.
This principle marks a departure from the legacy of bookish learning
which continues to shape our system and causes a gap between the
school, home and community. The syllabi and textbooks developed on
the basis of NCF signify an attempt to implement this basic idea. They
also attempt to discourage rote learning and the maintenance of sharp
boundaries between different subject areas. We hope these measures
will take us significantly further in the direction of a child-centred system
of education outlined in the National Policy on Education (1986).
The success of this effort depends on the steps that school principals
and teachers will take to encourage children to reflect on their own
learning and to pursue imaginative activities and questions. We must
recognise that, given space, time and freedom, children generate new
knowledge by engaging with the information passed on to them by adults.
Treating the prescribed textbook as the sole basis of examination is one
of the key reasons why other resources and sites of learning are ignored.
Inculcating creativity and initiative is possible if we perceive and treat
children as participants in learning, not as receivers of a fixed body of
knowledge.
These aims imply considerable change in school routines and mode
of functioning. Flexibility in the daily time-table is as necessary as rigour
in implementing the annual calendar so that the required number of
teaching days are actually devoted to teaching. The methods used for
teaching and evaluation will also determine how effective this textbook
proves for making children’s life at school a happy experience, rather
than a source of stress or boredom. Syllabus designers have tried to
address the problem of curricular burden by restructuring and
reorienting knowledge at different stages with greater consideration for
child psychology and the time available for teaching. The textbook
attempts to enhance this endeavour by giving higher priority and space
to opportunities for contemplation and wondering, discussion in small
groups, and activities requiring hands-on experience.

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 The National Council of Educational Research and Training (NCERT)
appreciates the hard work done by the textbook development committee
responsible for this book. We wish to thank the Chairperson of the
advisory group in Social Sciences, Professor Hari Vasudevan and the
Chief Advisor for this book, Professor Tapas Majumdar for guiding the
work of this committee. Several teachers contributed to the development
of this textbook; we are grateful to their principals for making this
possible. We are indebted to the institutions and organisations which
have generously permitted us to draw upon their resources, material
and personnel. We are especially grateful to the members of the National
Monitoring Committee, appointed by the Department of Secondary and
Higher Education, Ministry of Human Resource Development under the
Chairpersonship of Professor Mrinal Miri and Professor G.P. Deshpande,
for their valuable time and contribution. As an organisation committed
to systemic reform and continuous improvement in the quality of its
products, NCERT welcomes comments and suggestions which will enable
us to undertake further revision and refinement.

Director
New Delhi National Council of Educational
20 December 2005 Research and Training

iv

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 RATIONALISATION OF CONTENT IN THE TEXTBOOKS
In view of the COVID-19 pandemic, it is imperative to reduce content load
on students. The National Education Policy 2020, also emphasises reducing
the content load and providing opportunities for experiential learning with
creative mindset. In this background, the NCERT has undertaken the
exercise to rationalise the textbooks across all classes. Learning Outcomes
already developed by the NCERT across classes have been taken into
consideration in this exercise.
Contents of the textbooks have been rationalised in view of the
following:
• Overlapping with similar content included in other subject areas in the
same class
• Similar content included in the lower or higher class in the same subject
• Difficulty level
• Content, which is easily accessible to students without much
interventions from teachers and can be learned by children through
self-learning or peer-learning
• Content, which is irrelevant in the present context

This present edition, is a reformatted version after carrying out the

changes given above.

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Reprint 2025-26
 TEXTBOOK DEVELOPMENT COMMITTEE

CHAIRPERSON, ADVISORY COMMITTEE FOR TEXTBOOKS IN SOCIAL SCIENCES

ATHIGHER SECONDARY LEVEL
Hari Vasudevan, Professor, Department of History, University of Calcutta,
Kolkata
CHIEF ADVISOR
Tapas Majumdar, Emeritus Professor, Jawaharlal Nehru University, New
Delhi
MEMBERS
Bharat C. Thakur, PGT, Government Pratibha Vikas Vidyalaya, Surajmal
Vihar, Delhi
Gopinath Perumula, Lecturer, Tata Institute of Social Sciences, Mumbai
Jaya Singh, Lecturer, DESS, NCERT, New Delhi
Nishit Ranjan Das, PGT, New Alipore Multipurpose School, Behala, Kolkata
Naushad Ali Azad, Professor, Department of Economics, Jamia Millia
Islamia, New Delhi
Neeraja Rashmi, Reader, DESS, NCERT, New Delhi
Rama Gopal, Professor, Department of Economics, Annamalai University,
Annamalai Nagar, Tamil Nadu
Pratima Kumari, Lecturer, DERPP, NCERT, New Delhi
Poonam Bakshi, Senior Lecturer, Department of Economics, Punjab
University, Chandigarh
R. Srinivasan, S.G. Lecturer, Department of Economics, Arignar Anna
Government Arts College, Villupuram, Tamil Nadu
Sabitha Patnaik, PGT, Demonstration School, Regional Institute of
Education, Sachivalaya Marg, Bhubaneswar
Sharmista Banerjee, Headmistress, Bidya Bharti Girls High School, Kolkata
MEMBER–COORDINATOR
M.V. Srinivasan, Lecturer, DESS, NCERT, New Delhi

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 ACKNOWLEDGEMENTS
Many friends and colleagues have helped in preparing this textbook. The
National Council of Educational Research and Training acknowledges
M. Karpagam, Lecturer, Department of Economics, Meenakshi College,
Chennai; J. John, Director, Centre for Education and Communication, New
Delhi; Pratyusa K. Mandal, Reader, DESS, NCER T, New Delhi; Nandana
Reddy, Director (Development), Concern for Working Children, Bangalore;
V. Selvam, Research Scholar, Centre for Study of Regional Development
and Satish Jain, Professor, Centre for Economic Studies and Planning,
Jawaharlal Nehru University, New Delhi; Pooja Kapoor, Modern School,
Barakhamba Road, New Delhi; Priya Vaidya, Sardar Patel Vidyalaya, Lodhi
Estate, New Delhi; and Nalini Padmanabhan, DTEA Senior Secondary
School, Janakpuri, New Delhi for providing their feedback and inputs.
The Council expresses its gratitude to Jan Breman and Parthiv Shah
for using photographs from their book, Working in the mill no more,
published by Oxford University Press, Delhi. Some stories were taken from
the book, Everybody Loves a Good Drought, authored by P. Sainath and
published by Penguin Books, New Delhi. A photo relating to farmers
committing suicides has been used from The Hindu. A few photographs
and text materials on environmental issues have been used from the State
of India’s Environment 1 and 2 published by the Centre for Science and
Environment, New Delhi. The Council thanks the authors, copyright holders
and publishers of these reference materials. The Council also acknowledges
the Press Information Bureau, Ministry of Information and Broadcasting,
New Delhi; National Rail Museum, New Delhi for allowing to use photographs
available in their photo library. Some photographs were given by S. Thirumal
Murugan, Principal, Adhiyaman Matriculation School, Uthangarai, Tamil
Nadu; John Suresh Kumar, Synodical Board of Social Service; Sindhu
Menon of Labour File, New Delhi; R. C. Das of CIET, New Delhi; Renuka of
National Institute of Health and Family Welfare, New Delhi. The Council
acknowledges their contribution as well. Special thanks are due to Savita
Sinha, Professor and Head, Department of Education in Social Sciences
and Humanities for her support. The Council gratefully acknowledges the
contributions of Mamta and Arvind Sharma, DTP Operators; Neena
Chandra, Copy Editor; Dillip Kumar Agasti, Proof Reader; and Dinesh Kumar,
Incharge Computer Station in shaping this book. The efforts of the
Publication Department, NCERT are also duly acknowledged.
The Council also acknowledges the efforts of Neerja Rashmi, Professor,
DESS, NCERT; M.V. Srinivasan, DESS, NCERT; Jaya Singh, DESS, NCERT;
Pratima Kumari, Associate Professor, DESS, NCERT; Ashita Raveendran,
Associate Professor, PMD, NCERT; Sabita Patnaik, PGT Economics, DMS,
RIE, Bhubaneshwar; Anita Raveendra PGT Economics, DMS, RIE, Mysore,
towards the rationalisation of content of the textbook.

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 HOW TO USE THIS BOOK

The main objective of this book, Indian Economic Development, is to

expose you to some of the key issues facing the Indian economy. In
this process, as young adults, you are expected to be sensitised about
these issues, appreciate and learn to critically assess the role of the
government in various economic spheres. The book also provides
opportunities for knowing what economic resources are and how these
resources are being utilised in different sectors. You are also exposed
to numerical information relating to various aspects of Indian economy
and India’s economic policies. You are expected to develop analytical
skills, interpret the economic events and visualise the economic future
of India. Nevertheless, conscious effort has been made not to burden
with concepts and data.
With regard to various economic issues and trends, this book
attempts to bring out alternative views on every issue so that you can
engage yourself in well-informed debates. On completion of the course,
Indian Economic Development, you are expected to acquire skills to
understand macroeconomic events which occur around you, and to
critically evaluate and interpret the relevant information provided by
the media.
This course comprises of many activities with each chapter. You need
to carry out those activities under the guidance of teachers. In fact, the
role of the teacher in enriching the understanding of the Indian economy
is greater in this course. The activities include classroom discussions,
collecting information from government documents such
as Economic Survey, archival materials, from newspapers,
television, internet and other sources. Learners should also
be encouraged to read the original works of scholars on
various topics.
For all this to happen, the teachers have to initiate the
process by taking some steps before starting the course. At the beginning
of the academic year, you can collect clippings from newspapers and
magazines relating to different topics under the course — five year
plans and the role of NITI Aayog in planning; allocation of funds to
various sectors like agriculture, industry, services and for specific
causes such as poverty and employment; key issues of rural

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development, environment, various infrastructure— health, education
and energy; and economic events in China and Pakistan. You may
maintain these clippings, and when the teacher starts teaching a
particular topic, you can cull out those news items, which you have
collected from the beginning of the course, and display/use them in
the classroom. It is necessary for you to build this collection right from
the beginning of the course so that the relevent information is at hand as
and when needed; this habit will also come in handy during later stages
of education.
The schools will have to buy a hard copy of the Economic Survey
for the latest year. You will notice that information relating to the Indian
Economy is updated in the Economic Survey. It is necessary for you to
familiarise yourselves with such reports and work on relevant activities.
The statistical tables available as Appendix in the Economic Survey
would be immensely helpful in understanding various issues.
While discussing a particular issue, discussion of the numerical
information about the issue is inevitable. For instance, when we talk of
growth rates — overall growth rates and growth of different sectors —
though it may be necessary for you to have a rough idea about the
trends in growth rates, the process involved in reaching the level of
growth and factors contributing to the trend rather than mere
reproduction of tabular data of growth rate.
You will notice numbered boxes in all chapters. These boxes
supplement the information given in the text. Through these boxes, an
attempt has been made to lend a humane touch and, thus, bring the
issue under discussion closer to real life. However, these boxes, as also
‘Work These Out’ activities, are not meant for examination/evaluation
purposes.
Besides the relatively conventional ‘Exercises’, each
chapter has ‘Suggested Additional Activities’ at
the end and ‘Work This/These Out’ as part of
the text; the more elaborate activities of these
can be treated as projects. You may explore beyond the text
while attempting these activities.
Understandably, Information Technology facilities may not
be available in all the schools, however, it is important to take
note that various information relating to the Indian economy are available
on the internet. You need to learn to use the internet and access the
websites of various government departments to get the required
information. For instance, the details relating to poverty are published

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by the NITI Aayog. You need to know that the NITI Aayog of the
Government of India has a website in which various reports relating to
different aspects of India, including poverty, are available in the form of
reports. Since it may not be always possible to procure
such reports in hard copy, students and teachers may
attempt to download such reports from websites and use
them in the classroom.
The reports such as Economic Surveys of the last 10 years are
available on the website: http://www.indiabudget.gov.in. Many
organisations change their website addresses. In case a website given
in this book is not accessible, kindly search those websites through
search engines such as Google (www.google.co.in).
For the first time, each chapter has been briefly summed up in the
‘Recap’ to facilitate learning. Also, please take note that sources for all
tables have not been given with the table as these tables were sourced
from various research material which have been covered under
‘References’ for each chapter.
We wish to reiterate the fact that the prime objective of this course
on Indian economy is to introduce the basic macro issues of the Indian
economy to the student community and to initiate a well-informed
debate on our economy. We also stress that collaborative learning is an
important aspect of this course, hence the involvement of students, as
well as, teachers in collecting information on the Indian economy from
other sources is necessary and such collected information should be
used as important inputs for both teaching, as well as, learning about
the Indian economy.
You can send your queries and feedback relating to any part of this book
to the following address.
Programme Coordinator (Economics)
Department of Education in Social Sciences
National Council of Educational Research and Training
Sri Aurobindo Marg
New Delhi 110 016.
Email: [email protected]

xi

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 THE CONSTITUTION OF
INDIA
PREAMBLE
WE, THE PEOPLE OF INDIA, having
solemnly resolved to constitute India into a
1
[SOVEREIGN SOCIALIST SECULAR
DEMOCRATIC REPUBLIC] and to secure
to all its citizens :
JUSTICE, social, economic and
political;
LIBERTY of thought, expression, belief,
faith and worship;
EQUALITY of status and of opportunity
and to promote among them all;
FRATERNITY assuring the dignity of
the individual and the 2[unity and
integrity of the Nation];
IN OUR CONSTITUENT ASSEMBLY
this twenty-sixth day of November, 1949 do
HEREBY ADOPT, ENACT AND GIVE TO
OURSELVES THIS CONSTITUTION.
1. Subs. by the Constitution (Forty-second Amendment) Act, 1976, Sec.2,
for "Sovereign Democratic Republic" (w.e.f. 3.1.1977)
2. Subs. by the Constitution (Forty-second Amendment) Act, 1976, Sec.2,
for "Unity of the Nation" (w.e.f. 3.1.1977)

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 CONTENTS

FOREWORD iii
RATIONALISATION OF CONTENT IN THE TEXTBOOKS v
UNIT I: DEVELOPMENT POLICIES AND EXPERIENCE (1947–90) 1–35
CHAPTER 1: INDIAN ECONOMY ON THE EVE OF INDEPENDENCE 3
– LOW LEVEL OF ECONOMIC DEVELOPMENT UNDER THE COLONIAL RULE 4
– AGRICULTURAL SECTOR 5
– INDUSTRIAL SECTOR 7
– FOREIGN TRADE 8
– DEMOGRAPHIC CONDITION 9
– OCCUPATIONAL STRUCTURE 10
– INFRASTRUCTURE 11
CHAPTER 2: INDIAN ECONOMY 1950-1990 16
– THE GOALS OF FIVE YEAR PLANS 19
– AGRICULTURE 22
– INDUSTRY AND TRADE 27
– TRADE POLICY: IMPORT SUBSTITUTION 30

UNIT II: ECONOMIC REFORMS SINCE 1991 36–56

CHAPTER 3: LIBERALISATION, PRIVATISATION AND GLOBALISATION: AN APPRAISAL 38
– BACKGROUND 39
– LIBERALISATION 41
– PRIVATISATION 44
– GLOBALISATION 45
– INDIAN ECONOMY DURING REFORMS: AN ASSESSMENT 48

UNIT III: CURRENT CHALLENGES FACING THE INDIAN ECONOMY 57–74

CHAPTER 4: HUMAN CAPITAL FORMATION IN INDIA 58

– WHAT IS HUMAN CAPITAL? 60
– SOURCES OF HUMAN CAPITAL 60

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 – HUMAN CAPITAL AND HUMAN DEVELOPMENT 66
– STATE OF HUMAN CAPITAL FORMATION IN INDIA 67
– EDUCATION SECTOR IN INDIA 68
– FUTURE PROSPECTS 70

CHAPTER 5: RURAL DEVELOPMENT 75–91

– WHAT IS RURAL DEVELOPMENT? 76
– CREDIT AND MARKETING IN RURAL AREAS 77
– AGRICULTURAL MARKET SYSTEM 80
– DIVERSIFICATION INTO PRODUCTIVE ACTIVITIES 82
– SUSTAINABLE DEVELOPMENT AND ORGANIC FARMING 86

CHAPTER 6: EMPLOYMENT: GROWTH, INFORMALISATION AND OTHER ISSUES 92–114

– WORKERS AND EMPLOYMENT 94
– PARTICIPATION OF PEOPLE IN EMPLOYMENT 95
– SELF-EMPLOYED AND HIRED WORKERS 96
– EMPLOYMENT IN FIRMS, FACTORIES AND OFFICES 99
– GROWTH AND CHANGING STRUCTURE OF EMPLOYMENT 100
– INFORMALISATION OF INDIAN WORKFORCE 103
– UNEMPLOYMENT 106
– GOVERNMENT AND EMPLOYMENT GENERATION 108

CHAPTER 7: ENVIRONMENT AND SUSTAINABLE DEVELOPMENT 115–131

– ENVIRONMENT — DEFINITION AND FUNCTIONS 116
– STATE OF INDIA’S ENVIRONMENT 120
– SUSTAINABLE DEVELOPMENT 124
– STRATEGIES FOR SUSTAINABLE DEVELOPMENT 125

UNIT IV: DEVELOPMENT EXPERIENCES OF INDIA: A COMPARISON 132–150

WITH NEIGHBOURS

CHAPTER 8: COMPARATIVE DEVELOPMENT EXPERIENCES OF 134

INDIA AND ITS NEIGHBOURS
– DEVELOPMENTAL PATH — A SNAPSHOT VIEW 135
– DEMOGRAPHIC INDICATORS 138

xiv

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– GROSS DOMESTIC PRODUCT AND SECTORS 139
– INDICATORS OF HUMAN DEVELOPMENT 142
– DEVELOPMENT STRATEGIES — AN APPRAISAL 143

GLOSSARY 151–159

xv

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 Constitution of India
Part IV A (Article 51 A)

Fundamental Duties
It shall be the duty of every citizen of India —
(a) to abide by the Constitution and respect its ideals and institutions, the
National Flag and the National Anthem;
(b) to cherish and follow the noble ideals which inspired our national struggle
for freedom;
(c) to uphold and protect the sovereignty, unity and integrity of India;
(d) to defend the country and render national service when called upon to
do so;
(e) to promote harmony and the spirit of common brotherhood amongst all
the people of India transcending religious, linguistic and regional or
sectional diversities; to renounce practices derogatory to the dignity of
women;
(f) to value and preserve the rich heritage of our composite culture;
(g) to protect and improve the natural environment including forests, lakes,
rivers, wildlife and to have compassion for living creatures;
(h) to develop the scientific temper, humanism and the spirit of inquiry and
reform;
(i) to safeguard public property and to abjure violence;
(j) to strive towards excellence in all spheres of individual and collective
activity so that the nation constantly rises to higher levels of endeavour
and achievement;
*(k) who is a parent or guardian, to provide opportunities for education to
his child or, as the case may be, ward between the age of six and
fourteen years.

Note: The Article 51A containing Fundamental Duties was inserted by the Constitution
(42nd Amendment) Act, 1976 (with effect from 3 January 1977).
*(k) was inserted by the Constitution (86th Amendment) Act, 2002 (with effect from
1 April 2010).

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Artificial Intelligence Beauty & Wellness Design Thinking & Financial Literacy
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Application Literate

Data Science (Class VIII Augmented Reality /

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only) Virtual Reality

Digital Citizenship Life Cycle of Medicine & Things you should know What to do when Doctor
Vaccine about keeping Medicines is not around
at home

Humanity & Covid-19 Blue Pottery Pottery Block Printing

 Food Food Preservation Baking Herbal Heritage

Khadi Mask Making Mass Media Making of a Graphic

Novel

Kashmiri Embroidery Satellites

Rockets
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Application of Photography
Satellites
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Retail Information Technology Automotive

Security

Introduction To Financial Introduction To Tourism Beauty & Wellness Agriculture

Markets

Food Production Front Office Operations Banking & Insurance Marketing & Sales

Health Care Apparel Multi Media Multi Skill Foundation

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Artificial Intelligence
Physical Activity Trainer Electronics & Hardware
Data Science
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Foundation Skills For Sciences Design Thinking & Innovation (NEW)

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Retail InformationTechnology Web Application Automotive

Financial Markets Management Tourism Beauty & Wellness Agriculture

Food Production Front Office Operations Banking Marketing

Health Care Insurance Horticulture Typography & Comp.

Application

Geospatial Technology Electrical Technology Electronic Technology Multi-Media

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Shorthand (Hindi) Air-Conditioning & Medical Diagnostics Textile Design

Refrigeration

Salesmanship Business Food Nutrition &

Design
Administration Dietetics

Mass Media Studies Library & Information Fashion Studies Applied Mathematics
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Education

Physical Activity Land Transportation Electronics & Design Thinking &

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