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NCERT NOTES
ECONOMICS
11th Standard
Indian Economic
Development

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Content Sheet

Unit: I: Development Policies and Experience (1947-1990) 3

1. Indian Economy on the eve of Independence 4
2. Indian Economy 1950-1990 8
Unit: II: Economic Reforms Since 1991 14
3. Liberalisation, Privatisation and Globalisation: An Appraisal 15
Unit: III: Current challenges facing the Indian Economy 20
4. Poverty 21
5. Human Capital Formation in India 27
6. Rural Development 32
7. Employment: Growth, Informa­lisation and Other Issues 37
8. Infrastructure 41
9. Environment and Sustainable Development 48
Unit: IV: Development Experiences of India: A Comparison with Neighbours 54
10. Comparative Development Experiences of India and Its Neighbours 55
Content Sheet

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Unit: I
Development Policies
and Experience
(1947-1990)

Content Sheet

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1 Indian Economy on the eve

of Independence
Chapter 1

On the eve of independence, the Indian V.K.R.V. Rao and R.C. Desai.
economy was in a very bad shape due
to the presence of British colonial rule.
The sole purpose of the British colonial Sectoral Scenario During Colonial Times
rule in India was to reduce the country Agricultural Sector:
to be a raw material supplier for Great y Indian economy was an agrarian
Britain’s own rapidly expanding modern economy. About 85 percent of the
industrial base. country’s population lived mostly in
villages and derived livelihood directly
Law Economic Development Under the or indirectly from agriculture.
British Rule: y The agricultural productivity was low
y India had an independent economy due to low levels of technology, lack
before the advent of the British rule. of irrigation facilities and negligible
y Despite agriculture being the main use of fertilisers. But the sector also
source of livelihood, the country’s experienced some growth due to the
economy was characterised by various expansion of the aggregate area under
kinds of manufacturing activities such cultivation.
as handicrafts industries, metal and y Various systems of land settlement were
stone works, etc. introduced by the colonial government,
y The Indian manufactured products which resulted in stagnation of the
enjoyed a worldwide market based on sector.
the reputation of the fine quality of y Particularly the zamindari system,
material used and the high standards of implemented in the then Bengal
craftsmanship seen in all imports from Presidency, the profit accruing out
India. of the agriculture sector went to the
y However, later the colonial economic zamindars instead of the cultivators.
policy was more concerned with y Many Zamindars did nothing to improve
Indian Economy on the eve of Independence

Britain’s domestic interests rather than the condition of agriculture. Their

with India’s development. main interest being to only collect rent
y Such a policy brought about a regardless of the economic condition of
fundamental change in the structure of the cultivators.
the Indian economy i.e., transforming y There was, of course, some evidence of
the country into a supplier of raw a relatively higher yield of cash crops
materials and consumer of finished in certain areas of the country due
industrial products from Britain. to commercialisation of agriculture.
y Moreover, no sincere attempt to But this could hardly help farmers in
estimate India’s national and per capita improving their economic condition as,
income, was made by the government. instead of producing food crops, now
y Some individual attempts were made they were producing cash crops which
to measure such incomes by Dadabhai were to be ultimately used by British
Naoroji, William Digby, Findlay Shirras, industries back home.

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Chapter 1
y India’s agriculture was starved of and Steel Company (TISCO) was
investment in terracing, flood-control, incorporated in 1907.
drainage and desalination of soil. y A few other industries in the fields of
y Small farmers and sharecroppers neither sugar, cement, paper etc. came up after
had resources and technology nor had the Second World War.
incentive to invest in agriculture. y However, there was hardly any capital
goods industry to help promote further
Industrial Sector: industrialisation in India.
y India could not develop a sound y The growth rate of the new industrial
industrial base under colonial rule. sector and its contribution to the Gross
y Even as the country’s world-famous Domestic Product (GDP) remained
handicraft industries declined and no small.
corresponding modern industrial base y The public sector industries were
was allowed. confined to railways, power generation,
y The primary motive of the colonial communications, ports and some other
government behind this policy of departmental undertakings.
systematically industrialisation India
was two-fold: Foreign Trade:
⚪ Reduce India to the status of a mere y India has been an important trading
exporter of important raw materials nation since ancient times.
for the upcoming modern industries y Restrictive colonial policies of
in Britain. commodity production, trade and
⚪ Turn India into a sprawling market tariff adversely affected the structure,
for the finished products of those composition and volume of India’s
industries. foreign trade.
y Decline of the indigenous handicraft y Consequently, India became an exporter
industries created massive of primary products such as raw silk,
unemployment and a demand now cotton, wool, sugar, indigo, jute etc.

Indian Economy on the eve of Independence

being fulfilled by cheap British imports. and an importer of finished consumer
y During the second half of the nineteenth goods like cotton, silk and woollen
century, modern industry began to take clothes and capital goods like light
root in India, but its progress remained machinery produced in the factories of
slow. Britain.
y Modern industry initially, confined to y Practically, Britain maintained a
cotton (mainly in Maharashtra and monopoly over India’s exports and
Gujarat) and jute textile (mainly in imports.
Bengal) mills, dominated by Indians and y As a result, more than half of India’s
the British, respectively. foreign trade was restricted to Britain
y The iron and steel industries began while the rest were allowed with a few
coming up in the beginning of the other countries like China, Ceylon (Sri
twentieth century. The Tata Iron Lanka) and Persia (Iran).

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literacy level was at a negligible low of

Case study: about 7 per cent.
y The opening of the Suez Canal y Public health facilities were either
further intensified British control unavailable or highly inadequate.
over India’s foreign trade. y Water and air-borne diseases were
y Opened in 1869 Suez Canal rampant and took a huge toll on life.
provides a direct trade route y Overall mortality rate was very high,
for ships operating between particularly, the infant mortality rate
European or American ports and was quite alarming—about 218 per
ports located in South Asia, East thousands.
Africa and Oceania. It is one of the y Life expectancy was also very low at
most important waterways in the just 44 years.
world. y Extensive poverty prevailed in India
y A large exportable surplus was during the colonial period which
generated, but it came at a huge contributed to the worsening profile of
cost to the country’s economy as India’s population of the time.
this did not result in any flow of
gold or silver into India. Rather, Occupational structure:
this was used to make payments y The occupational structure is basically
for the: the distribution of working persons
⚪ Expenses incurred by an across different industries and
office set up by the colonial sectors.
government in Britain. y The agricultural sector accounted
⚪ Expenses on war, fought by for the largest share of workforce,
the British government. which usually remained at a high of
Import of invisible items, all of 70-75 percent while the manu-
which led to the drain of Indian facturing and the services sectors
wealth. accounted for only 10 and 15-20 percent
Indian Economy on the eve of Independence

respectively.
y There was a growing regional variation
Demographic Condition: in the occupational structure.
y Various details about the population ⚪ Parts of the then Madras Bombay
of British India were first collected and Bengal witnessed a decline in
through a census in 1881 which revealed the dependence of the workforce
the unevenness in India’s population on the agricultural sector with a
growth. commensurate increase in the
y Neither the total population of India nor manufacturing and the services
the rate of population growth at this sectors.
stage was very high. ⚪ Increased dependence on agriculture
y The overall literacy level was also less in states such as Orissa, Rajasthan
than 16 percent. Out of this, the female and Punjab.

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Chapter 1
Infrastructure: were outweighed by the country’s huge
y Basic infrastructures such as railways, economic loss.
ports, water transport, posts and y System of inland sea lanes was
telegraphs were developed. developed.
y However, the real motive behind this y System of electric telegraph was
development was to serve various introduced primarily to maintain law
colonial interests. and order.
y The British introduced Railways in India y The postal services were expanded but
in 1850 and it is considered as one of remained all through inadequate.
the most important contributions. By the time of independence, the
y The railways affected the structure of the impact of two centuries long colonial
Indian economy in two important ways: rule was visible on all aspects of the
⚪ It enabled people to undertake long Indian economy, resulting in widespread
distance travel and thereby break poverty and unemployment, leaving
geographical and cultural barriers. enormous social and economic
⚪ It fostered commercialisation of challenges before the country.
Indian agriculture which adversely
affected the self-sufficiency of the Interesting Point:
village economies in India. y Capital goods industries: The industries
which can produce machine tools which
However, social benefits gained owing are, in turn, used for producing articles
to the introduction of the railways, for current consumption.

Indian Economy on the eve of Independence

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2 Indian Economy 1950-1990

Chapter 2

Post-independence, it was decided that need and not on what they can afford to
India would be a socialist society with purchase.
a strong public sector but also with
private property and democracy where Mixed:
the government would plan for the y In a mixed economic system, the
economy with the private sector being government and the market together
encouraged to be part of the plan effort. decide what to produce, how to produce
and how to distribute.
The ‘Industrial Policy Resolution’ of y In general, the market provides whatever
1948 and the Directive Principles of goods and services it can produce
the Indian Constitution reflected this well, and the government will provide
outlook. essential goods and services which the
market fails to do.
Types of Economic Systems
Capitalist: Five-year Plans:
y The production and distribution depend A plan spells out how the resources
on the market forces of supply and of a nation should be put to use in
demand. order to achieve the goals as well as
y Only those consumer goods that are in specified objectives within a specified
demand will be produced. period of time. In India plans were of
y If labour is cheaper than capital, more five years duration and were called
labour-intensive methods of production five-year plans (borrowed from the
will be used and vice-versa. former Soviet Union, the pioneer in
y The goods produced are distributed national planning).
among people not on the basis of In 1950, the Planning Commission was
what people need but on the basis of set up with the Prime Minister as its
Purchasing Power which is the ability to Chairperson.
buy goods and services.
Goals of five-year plans:
Socialist: The five-year plans had four major
y The government decides what goods goals, which were provided varied
are to be produced in accordance with importance in different plans based
the needs of society. upon the availability of resources. These
y The government decides how goods are goals were:
Indian Economy 1950-1990

to be produced and how they should be y Growth: Increase in the country’s

distributed. capacity to generate more economic
y Strictly, a socialist society has no private output by producing more goods and
property since everything is owned by services within the country.
the state. ⚪ A good indicator of economic growth
y In principle, distribution under socialism is the steady increase in the Gross
is supposed to be based on what people Domestic Product (GDP).

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Chapter 2
y Modernisation: Adoption of new Agriculture
technology in order to increase the Land Reforms:
production of goods and services is y At the time of independence, the land
called modernisation. For example, a tenure system was characterised
farmer can increase the output on the by intermediaries (variously called
farm by using new seed varieties instead zamindars, jagirdars etc.) who merely
of using the old ones. collected rent from the actual tillers of
⚪ Modernisation is not only limited the soil without contributing towards
to the use of new technology but improvements on the farm.
also to changes in social outlook y Equity in agriculture called for land
such as the recognition that women reforms which primarily refer to change
should have the same rights as in the ownership of landholdings, in
men. favour of the actual tiller.
y Self-reliance: It means avoiding imports y Land ceiling was another policy which
of those goods which could be produced fixed the maximum size of land which
in India itself. could be owned by an individual.
⚪ First seven five-year plans gave y Positive aspects of land reforms:
importance to self-reliance. This ⚪ The ownership conferred on tenants
policy was considered a necessity gave them the incentive to increase
in order to reduce our dependence output and this contributed to
on foreign countries, especially for growth in agriculture.
food. ⚪ Land reforms were successful in
⚪ Further, it was feared that depend- Kerala and West Bengal because
ence on imported food supplies, these states had governments
foreign technology and foreign cap- committed to pay the policy of land
ital may make India’s sovereignty to the tiller.
vulnerable to foreign interference in ⚪ Steps were taken to abolish
our policies. intermediaries and to make the
y Equity: It is important to ensure that tillers the owners of the land.
the benefits of economic prosperity ⚪ The abolition of intermediaries
reach the poor sections as well instead meant that the tenants came into
of being enjoyed only by the rich. direct contact with the government.
⚪ Every Indian should be able to y Limitations of land reforms:
meet his or her basic needs such ⚪ In some areas Zamindars evaded
Indian Economy 1950-1990

as food, a decent house, education these legislations by exploiting

and health care and inequality in loopholes.
the distribution of wealth should be ⚪ The poorest of the agricultural
reduced. labourers (such as sharecroppers
The first seven five-year plans covering and landless labourers) did not
the period 1950-1990, attempted to benefit from land reforms.
realize these goals in different sectors
as follows:

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⚪ The big landlords challenged the sufficient amounts of food grains to

legislation in the courts, delaying its build a stock which could be used in
implementation. times of food shortage.
⚪ They used this delay to register y Limitations of the Green Revolution:
their lands in the name of close ⚪ The use of these seeds required the
relatives, thereby escaping from the use of fertiliser and pesticide in the
legislation. correct quantities as well as regular
⚪ In some states it did not become supply of water, hence the green
very successful and vast inequality revolution benefited the farmers
continues. who had access to such facilities.
⚪ As a result, in the first phase of
The Green Revolution: the green revolution (approximately
y It refers to the large increase in mid 1960s upto mid 1970s), the
production of food grains resulting from use of HYV seeds was restricted to
the use of high yielding variety (HYV) the more affluent states such as
seeds especially for wheat and rice. Punjab, Andhra Pradesh and Tamil
y Background: Nadu.
⚪ At independence, productivity in ⚪ The use of HYV seeds primarily
the agricultural sector was very low benefited the wheat growing regions
because of the use of old technology only.
and the absence of required ⚪ It increased the disparities between
infrastructure for the vast majority small and big farmers.
of farmers. ⚪ HYV crops were also more prone to
⚪ India’s agriculture vitally depended attack by pests.
on the monsoon and if the monsoon y Proactive steps taken by the government
fell short the farmers were in trouble to bridge the limitations:
unless they had access to irrigation ⚪ Loans at a low interest rate to small
facilities which very few had. farmers and subsidised fertilisers to
⚪ The stagnation in agriculture during make needed inputs accessible.
colonial rule was permanently ⚪ Research institutes established to
broken by the green revolution. give advice on reducing pest attack
y Benefits from the Green Revolution: risk.
⚪ The spread of the green revolution ⚪ In the second phase of the green
enabled India to achieve self- revolution (mid-1970s to mid-
Indian Economy 1950-1990

sufficiency in food grains. 1980s), the HYV technology spread

⚪ The price of food grains declined to a larger number of states and
relative to other items of benefited more variety of crops.
consumption. ⚪ The green revolution favoured
⚪ Low-income groups benefited from the rich farmers only but due to
this decline in relative prices. the extensive role of government,
⚪ Government was able to procure small farmers in various states got
benefited.

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Chapter 2
The debate over Agricultural Subsidies:
y It is generally agreed that it was Impact of these policies in
necessary to give subsidies to provide agricultural sector:
an incentive for adoption of the new y By the late 1960s, Indian
HYV technology by general and small agricultural productivity increased
farmers in particular. sufficiently to enable the country
y The government recognised the need for to be self-sufficient in food grains.
subsidies as farming in India continues y In India, between 1950 and 1990, the
to be a risky business as: proportion of GDP contributed by
⚪ Most farmers are very poor, and agriculture declined significantly.
they will not be able to afford y But on the downturn some
the required inputs without 65 percent of the country’s
subsidies. population continued to be
⚪ Eliminating subsidies will increase employed in agriculture even as
the inequality between rich and late as 1990. The reason for this
poor farmers and violate the goal of trend is that the industrial sector
equity. and the service sector did not
⚪ The correct policy is not to abolish absorb the people working in the
subsidies but to take steps to ensure agricultural sector.
that only the poor farmers enjoy the
benefits.
y On the contrary, subsidies in agriculture agriculture; it promotes modernisation
are criticised on the following grounds: and overall prosperity. It is for this reason
⚪ Subsidies should be phased out that the five year plans placed a lot of
since their purpose has been served. emphasis on industrial development.
⚪ The subsidy largely benefits the The erstwhile governments had to play
farmers in the more prosperous an extensive role in promoting the
regions. industrial sector as:
⚪ It does not benefit the target group y Indian industrialists did not have the
and it is a huge burden on the capital to undertake investment in
government’s finances. industrial ventures important for the
⚪ Subsidies are meant to benefit the nation’s development.
farmers, but a substantial amount y The market was not big enough to
of fertiliser subsidy also benefits encourage investment.
Indian Economy 1950-1990

the fertiliser industry. y Indian economic development on

socialist lines led to the policy of
Industry and Trade: the government controlling the
Poor nations can progress only if commanding heights of the economy
they have a good industrial sector. (as put by the second five-year plan).
Industry provides employment which
is more stable than the employment in

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Industrial Policy Resolution 1956: Committee), noted the possibility

This resolution formed the basis of the of using small-scale industries for
Second Five Year Plan, the plan which tried promoting rural development.
to build the basis for a socialist pattern y Small-scale industries are more ‘labour
of society. This resolution classified intensive’ i.e., they use more labour
industries into three categories. than the large-scale industries and,
y The first category comprised industries therefore, generate more employment.
which would be exclusively owned by y Thus, the production of a number
the government. of products was reserved for the
y The second category consisted of indus- small-scale industry; the criterion of
tries in which the private sector could reservation being the ability of these
supplement the efforts of the public units to manufacture the goods.
sector, with the government taking the y For the development of small-scale
sole responsibility for starting new units. industries, they were given concessions
y The third category consisted of the such as lower excise duty and bank
remaining industries which were to be loans at lower interest rate.
in the private sector. This sector was
kept under state control through a Trade policy: Import substitution
system of licenses. y In the first seven plans, trade was
⚪ No new industry was allowed unless characterised by an inward-looking
a license was obtained from the trade strategy. Technically, this strategy
government. is called import substitution.
⚪ Even an existing industry had to y This policy aimed at replacing or
obtain a license for expanding substituting imports with domestic
output or for diversifying production production.
(producing a new variety of goods). y Under this policy, the government
⚪ This policy was used for promoting protected the domestic industries from
industry in backward regions. foreign competition in two forms:
⚪ Tariffs: A tax on imported goods;
Small-Scale Industry: they make imported goods more
y It is defined with reference to the expensive and discourage their use.
maximum investment allowed on the ⚪ Quotas: It specifies the quantity of
assets of a unit. This investment limit goods which can be imported.
has changed over a period of time. y Tariffs and quotas are the tools which
Indian Economy 1950-1990

y In 1950 a small-scale industrial unit restrict imports and, therefore, protect

was one which invested a maximum the domestic firms from foreign compe-
of rupees five lakh; at present the tition.
maximum investment allowed is rupees y It was assumed that if the domestic
one crore. industries were protected, they would
y In 1955, the Village and Small- learn to compete in the course of time.
Scale Industries Committee (Karve

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Chapter 2
y The policy of protection was based on function because it is difficult to
the notion that industries of developing close a government undertaking
countries were not in a position to even if it is a drain on the nation’s
compete against the goods produced by limited resources.
more developed economies. ⚪ Licensing norms were misused by
y It was assumed that if the domestic industrial houses, often spending
industries were protected, they would more time in trying to obtain a
learn to compete in the course of license or lobby with the concerned
time. ministries rather than on thinking
y There was also a fear of the possibility about how to improve their products.
of foreign exchange being spent on ⚪ The excessive regulation of what
import of luxury goods if no restrictions came to be called the permit license
were placed on imports. raj prevented certain firms from
becoming more efficient.
Effect of Policies on Industrial ⚪ Due to restrictions on imports, the
Development: Indian consumers had to purchase
y Positive effects: whatever the Indian producers
⚪ The proportion of GDP contributed produced, and the producers
by the industrial sector increased enjoyed a captive market.
in the period from 11.8 per cent in The progress of the Indian economy
1950-51 to 24.6 per cent in 1990-91. during the first seven plans was
Registering a commendable six per impressive indeed. Indian policies
cent annual growth rate. were ‘inward oriented’ that failed to
⚪ Industrial sector became well develop a strong export sector. The
diversified by 1990. need for reform of economic policy was
⚪ The promotion of small-scale widely felt in the context of changing
industries gave opportunities to global economic scenario, and the new
people with limited capital. economic policy was initiated in 1991 to
⚪ Protection from foreign competition make Indian economy more efficient.
enabled the development of
indigenous industries in areas like Interesting Points:
electronics and automobile sectors. y Gross Domestic Product (GDP): It is the
y Negative effects: market value of all the final goods and
⚪ State enterprises continued to services produced in the country during
Indian Economy 1950-1990

produce certain goods and services a year.

(often monopolising them) although y Marketed Surplus: The portion of
this was no longer required. agricultural produce which is sold in the
⚪ Many public sector firms incurred market by the farmers.
huge losses but continued to

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Unit: II
Economic Reforms
Since 1991
Indian Economy 1950-1990

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3 Liberalisation, Privatisation
and Globalisation: An Appraisal

Chapter 3
In 1991, India met with a severe y To tackle the situation, India
economic crisis relating to its external approached the International Bank
debt — the government was not able for Reconstruction and Development
to make repayments on its borrowings (IBRD), popularly known as World Bank
from abroad; foreign exchange and the International Monetary Fund
reserves dropped to levels that were (IMF), and received $7 billion as loan to
not sufficient for even a fortnight. The manage the crisis.
crisis was further compounded by rising y For availing the loan, these international
prices of essential goods. All these led agencies expected India to liberalise
the government to introduce a new set and open the economy by removing
of policy measures. restrictions on the private sector, reduce
the role of the government in many
Background: areas and remove trade restrictions
y The origin of the financial crisis can be between India and other countries.
traced from the inefficient management y India agreed to the conditionalities of the
of the Indian economy in the 1980s. World Bank and the IMF and announced
y During the said period the government’s the New Economic Policy (NEP).
expenditure remained more than its y This set of policies can broadly be
income (revenue) due to high spending classified into two groups:
on development programmes. ⚪ Stabilisation measures: These were
y The income from public sector the short-term measures, intended
undertakings was also not very high to to correct some of the weaknesses
that have developed in the balance

Liberalisation, Privatisation and Globalisation: An Appraisal

meet the growing expenditure.
y At times, India’s foreign exchange, of payments and to bring inflation
borrowed from other countries and under control.
international financial institutions, ⚪ Structural reform measures: These
was spent on meeting consumption are the long-term measures,
needs. aimed at improving the efficiency
y Imports grew at a very high rate without of the economy and increasing its
matching growth of exports. international competitiveness by
y In the late 1980s, government removing the rigidities in various
expenditure began to exceed its revenue segments of the Indian economy.
by such large margins that meeting The government initiated a variety of
the expenditure through borrowings policies which fall under three heads
became unsustainable. viz., liberalisation, privatisation and
y Foreign exchange reserves of the globalisation.
country dropped to dangerous levels.
Moreover, meeting consumption needs Liberalisation:
and fulfilling interest obligations Liberalisation was introduced to put an
became difficult for the country. end to economic restrictions and open

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various sectors of the economy. Various y Foreign Institutional Investors, such as

policies under liberalisation were as merchant bankers, mutual funds and
follows: pension funds, were also allowed to
invest in Indian financial markets.
Deregulation of Industrial Sector: y Tax Reforms: Tax reforms are concerned
Earlier in India, mechanisms such as with the reforms in the government’s
industrial licensing, reserving certain taxation and public expenditure policies,
industries for the public sector, policies collectively known as fiscal policy.
permitting only small-scale industries Some of the changes made under tax
allowed in certain areas, controls on reforms are:
price fixation and distribution of certain ⚪ Taxes on individual income has been
products were used to regulate the continuously reduced as it was felt
industry. Later, the reforms made the that high rates of income tax were
following changes: an important reason for tax evasion.
y Industrial licensing was abolished It is a fact that moderate rates of
for almost all but product categories income tax encourage savings and
— alcohol, cigarettes, hazardous voluntary disclosure of income.
chemicals, industrial explosives, ⚪ The rate of corporation tax has been
electronics, aerospace and drugs and gradually reduced as it was very high
pharmaceuticals. earlier.
y Only defence equipment, atomic energy ⚪ Efforts have also been made to
generation and railway transport were reform the indirect taxes, taxes
Liberalisation, Privatisation and Globalisation: An Appraisal

left reserved for the public sector. levied on commodities, in order to

y Many goods produced by small-scale facilitate the establishment of a
industries have now been de-reserved. common national market for goods
y In many industries, the market has been and commodities.
allowed to determine the prices. ⚪ In 2016, the Indian Parliament passed
Goods and Services Tax (GST) Act,
Financial Sector Reforms: to simplify and introduce a unified
y Financial sector in India, which includes indirect tax system in India, which
financial institutions such as commercial came into effect from July 2017. This
banks, investment banks and foreign is expected to generate additional
exchange markets, regulated by the RBI. revenue for the government, reduce
y One major aim of the financial sector tax evasion and create ‘one nation,
reform is to reduce the role of RBI one tax and one market’.
from regulator to facilitator of financial ⚪ Moreover, to encourage better
sector. compliance on the part of
y It led to the establishment of private taxpayers, many procedures have
sector banks both Indian as well as been simplified and the rates also
foreign private banks. substantially lowered.

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Chapter 3
Types of Taxes: Mainly, there are two types of taxes - direct tax and indirect tax.
Direct taxes are the taxes on incomes of individuals, as well as profits of business
enterprises. Whereas indirect taxes are the taxes levied only on commodities.

Foreign Exchange Reforms: y This can be done either by withdrawal of

y As an immediate measure to tackle the government from the management
the BOP crisis the Rupee was devalued or by outright sale of public sector
against foreign currencies. Leading to companies.
an increase in foreign exchange inflow. y Privatisation of the public sector enter-
y Reforms also set the tone for market- prises by selling off part of the equity
based determination of the value of of Public Sector Enterprises (PSEs) to
Rupee, instead of the earlier system of the public is known as disinvestment,
government determined value. which was undertaken with an aim of
y Trade and Investment Policy Reforms: improving financial discipline and facil-
It aimed at increasing the efficiency itating modernisation, by using private
and international competitiveness of capital and managerial capability.
the local industry along with the inflow y The government envisaged that
of foreign investment and technology. privatisation could provide strong
The following steps were undertaken: impetus to the inflow of FDI.
⚪ Removal quantitative restrictions y Also, to increase the efficiency of the

Liberalisation, Privatisation and Globalisation: An Appraisal

on imports and exports. PSU’s managerial autonomy in decision
⚪ Reduction of tariff rates. making has been provided to them,
⚪ Removal of licensing procedures for instance by granting them special
for imports. Although, not in the status such as Maharatnas, Navratnas
case of environmentally sensitive and Miniratnas.
industries.
⚪ Removal of export duties to increase Globalisation:
the global competitiveness of y It is the process of integration of the
domestic goods. economy of a country with the world
⚪ Further the quantitative restrictions economy.
on imports of manufactured y It is a complex phenomenon aiming
consumer goods and agricultural to transform the world into greater
products were also fully removed interdependence and integration,
from April 2001. by creating networks and activities
transcending economic, social, and
Privatisation: geographical boundaries thus creating a
y Privatisation is the process of transfer borderless world.
of ownership and control of an asset y The globalisation process has had the
from government to any private entity. following outcomes:

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Outsourcing: of world resources and to protect the

y In outsourcing, a company hires regular environment.
service from external sources, mostly y The WTO agreements cover trade in
from other countries, which was goods as well as services to facilitate
previously provided internally or from international trade (bilateral and
within the country (like legal advice, multilateral) through removal of tariff as
computer service, advertisement etc.). well as non-tariff barriers and providing
y Growth of Information Technology has greater market access to all member
given impetus to outsourcing of many countries.
of the services, and today services such
as voice-based business processes Indian economy during reforms: An
(popularly known as BPO or call assessment
centres), record keeping, accountancy, The reforms have had a positive impact
banking services, music recording, film for the Indian economy, although at the
editing, book transcription, clinical same time have gone through criticism
advice or even teaching are being as well.
outsourced by companies in developed
countries to India. Positive impacts of the Reforms:
y The low wage rates and availability of y During the reform period, the growth of
skilled manpower have made India a agriculture has been declined, industrial
destination for global outsourcing, post sector reported fluctuations and the
reforms. growth of the service sector has gone up.
India witnessed a rapid growth in GDP
Liberalisation, Privatisation and Globalisation: An Appraisal

y
World Trade Organisation (WTO): on a continual basis for two decades.
y The WTO was founded in 1995 as the This growth has mainly been driven by
successor organisation to the General growth in the service sector.
Agreement on Trade and Tariff (GATT) y The opening of the economy has led
which was an earlier global trade to a rapid increase in foreign direct
organisation, formed in 1948. investment and foreign exchange
⚪ GAAT was established in 1948 with reserves.
23 countries as the global trade y India is now seen as a successful
organization to administer all exporter of auto parts, engineering
multilateral trade agreements by goods, IT software and textiles.
providing equal opportunities to all y Rising prices have also been kept under
countries in the international market control.
for trading purposes.
y It is expected to establish a rule- Criticism of the reforms:
based trading regime free of arbitrary y Growth and Employment: Though the
restrictions on trade. GDP growth rate has increased in the
y And enlarge production and trade of reform period but not created sufficient
services, to ensure optimum utilisation employment.

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Chapter 3
y Reforms in Agriculture: undervalued and sold, leading to loss
⚪ Unlike the green revolution, of the government and the proceeds
public Investment in agricultural from such sales have often been used
Infrastructure has fallen. to meet revenue shortfalls, instead of
⚪ Partial removal of fertilizer subsidy further investments.
has increased costs for small & y Reforms and fiscal policies: The
marginal farmers. reforms led to tax rationalization, but
⚪ Due to import relaxations, Indian are criticized on the following grounds:
farmers are facing adverse compe- ⚪ Tax rate reduction has not led to
tition from cheaper foreign produce. increased tax revenue.
⚪ Pressure on food prices due to shift ⚪ Other measures like tariff reduction,
of focus to cash crops, resulting have reduced the scope to raise tax
from export orientation. from imports.
y Reforms in Industry: Industrial growth ⚪ Tax benefits provided for attracting
has also recorded a slowdown, reasons foreign investment have further
include: impacted tax revenue.
⚪ Cheaper imports replacing domestic ⚪ The limitation of tax revenue has
demand. placed limits on Public expenditure
⚪ Increased competition from imports. especially in the social sector.
Due to it, there is an adverse impact In a nutshell the globalization and the
on domestic industry and job reforms process, has afforded both
generation. opportunities and challenges. The
⚪ Lack of investment in infrastructure reforms were based on an externally

Liberalisation, Privatisation and Globalisation: An Appraisal

such as power facilities. advised policy to tackle the crisis and
⚪ Developed countries have not have led to a concentrated growth for
provided the same kind of market the high-income groups and services
access, as the developing countries. related to them, instead of the sectors
y Disinvestment: The assets of the vital to the Indian economy and the
Public sector enterprises have been Indian people.

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Unit: III
Current challenges
facing the Indian
Liberalisation, Privatisation and Globalisation: An Appraisal

Economy

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4 Poverty

Chapter 4
Poverty is the state of being extremely agricultural labourers, or the cultivators
poor and it is a situation that people with very small landholdings.
want to escape. The successive five- y Urban poor are largely the outflow of
year plans of India have laid emphasis the rural poor, migrating to urban areas
on the upliftment of the poorest of the in search of better opportunities.
poor. Poverty has many dimensions, it Economists identify the poor based
has to be looked at through a variety on their occupation and ownership of
of indicators such as levels of income assets.
and consumption, social indicators, and
indicators of vulnerability to risks and of The process of identifying Poor People:
socio-political access. To solve the problem of poverty, the
government first needs to identify
Key feature to understand who a Poor the poor based on a scale to measure
is, are: poverty. There were several attempts to
y They possess few assets and reside in develop such a scale to identify poverty.
kutcha hutments with walls made of y Dadabhai Naoroji was the first to
baked mud and roofs made of grass, discuss the concept of a Poverty Line.
thatch, bamboo and wood. He used the menu for a prisoner and
y In rural areas, mostly poor are landless used appropriate prevailing prices to
or in possession of small patches of arrive at what may be called ‘jail cost
wastelands. of living’.
y They lack access to food leading to ⚪ However, only adults stay in jail
hunger and starvation. whereas, in an actual society, there
y They lack basic literacy and skills and are children too. He, therefore,
hence have very limited economic appropriately adjusted this cost of
opportunities. Poor people also face living to arrive at the poverty line.
unstable employment. y In 1962, the Planning Commission now
y Lack of this nutrition leads to alarming called as NITI Aayog formed a study
levels of malnutrition and leading to group to measure the poverty line.
illness making them physically weak. y In 1979, another body called the ‘Task
y Limited economic opportunities, Force on Projections of Minimum Needs
causing vulnerability to be exploited by and Effective Consumption Demand’
the employer. was formed.
y They lack access to basic facilities like y In 1989 and 2005, ‘Expert Groups’ were
electricity, cooking fuel, safe drinking also constituted for the same purpose.
water etc. For the purpose of defining poverty
y Extreme gender inequality is also seen people are divided into poor and non-
in both economic and social aspects. poor, however there are many kinds of
y Rural poor are largely the landless poor and non-poor, due to which any
Poverty

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such scale forms a continuum from the churning poor who regularly move in and
very poor to the absolutely rich. out of poverty (E.g., small farmers and
seasonal workers) and the occasionally
Categorising Poverty: poor who are rich most of the time but
y Chronic poor: People who are always may sometimes have a patch of bad
poor and those who are usually poor luck. They are called the transient poor.
but who may sometimes have a little y Non-poor: There are those who
more money are grouped together as are never poor, and they are the
the chronic poor. E.g., casual workers. non-poor.
y Transient poor: Another group are the

Chart 4.1: The Chronic Poor, Transient Poor, and Non-poor

Poverty Line: Problems with the mechanism in

y One way to determine the poverty line determining Poverty Line:
is by the monetary value (per capita y It groups all the poor together without
expenditure) of the minimum calorie differentiating between the very poor
intake. and the other poor (making it difficult
y It was estimated at 2,400 calories per to identify, who needs the help most).
day for a rural person and 2,100 calories y This mechanism considers the
for a person in the urban area. expenditure on food and a few select
y In 2011-12, the poverty line was defined items as proxy for income, economists
for rural areas as consumption worth question its basis.
Rs. 816 per person a month and for y There are many factors, other than
urban areas it was Rs. 1,000. income and assets, which are associated
y The government uses Monthly Per with poverty; for instance, the
Capita Expenditure (MPCE) as proxy for accessibility to basic education, health
income of households to identify the care, drinking water and sanitation.
poor. They need to be considered to develop
Poverty Line.
Poverty

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Chapter 4
y The existing mechanism does not take
into consideration social factors that
trigger and perpetuate poverty such as
illiteracy, ill health, lack of access to
resources, discrimination, or lack of civil
and political freedoms.
Due to various limitations in the official
estimation of poverty, scholars have
attempted to find alternative methods.
For instance, Amartya Sen, noted Nobel
Laureate, has developed an index
known as Sen Index.
Fig 4.2: Population Between Poverty Line in Some
The number of poor in India: Large States, 1973-2012 (%)
y The number of poor is estimated
by ‘Head Count Ratio’ which is the y Yet, the poverty levels in four states
proportion of people below the poverty - Odisha, Madhya Pradesh, Bihar and
line. Uttar Pradesh are still far above the
y The official data on poverty made national poverty level.
available to the public by the NITI
Aayog. It is estimated on the basis Causes of poverty:
of consumption expenditure data y Deprivation of quality education and
collected by the National Sample unable to acquire skills which fetch
Survey Organisation (NSSO) now called better incomes.
as National Statistical Office. y Denial of healthcare services.
y Trend from 1973-2012: y It can also be caused as a result of
⚪ The number of poor reduced from social, economic and political inequality,
320 million in 1973-74 to 270 million social exclusion, unemployment,
in 2011-12. indebtedness, unequal distribution of
⚪ Percentage of poor has reduced from wealth.
55% in 1973-74 to 22% in 2011-12. y Poverty is also explained by general,
⚪ More than 80% of the poor resided economy-wide problems, such as, low
in rural areas, this has not changed capital formation, lack of infrastructure,
much. lack of demand, pressure of population,
y Six states - Tamil Nadu, Uttar Pradesh, lack of social and welfare nets.
Bihar, Madhya Pradesh, West Bengal, y Impact of British rule:
and Odisha - contained a large section ⚪ There was substantial de-
of poor in 1973-74. industrialisation in India under the
y During 1973- 2012, many Indian states British rule.
reduced the poverty levels to a ⚪ India experienced severe famines,
considerable extent. due to the export of food grains.
Poverty

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⚪ British policies involved sharply deprivation of lower income groups.

raising rural taxes that enabled ⚪ The unequal distribution of income
merchants and moneylenders to and assets has also led to the
become large landowners. Due to persistence of poverty in India.
this, land equations in the rural ⚪ Over the years, the gap between
regions were changed. the rich and the poor in India has
y Post-independence the government widened.
undertook land redistribution, but many y Poverty is a multi-dimensional challenge
new land holders either did not have the for India that needs to be addressed on
necessary capital to farm or the land a war footing.
holdings were too small to be viable.
y Also, most of the Indian states failed to Policies and Programmes towards
implement land redistribution policies. Poverty Alleviation:
y With rapid population growth the per- The government’s approach to poverty
head availability of cultivable land has reduction was of three dimensions:
declined leading to fragmentation Growth oriented approach:
and economically insignificant land y This was the major focus of planning in
holdings. the 1950s and early 1960s, it was based
y Situation of debt trap to natural on the expectation that the effects of
calamities/drought etc. due to economic growth.
dependence of agriculture on rains. y The rapid increase in economic growth
y Vulnerable sections like Scheduled (measured in GDP) and per capita
Castes and Scheduled Tribes were income would spread to all sections
unable to participate in the new of society and will trickle down to the
economic opportunities due to lack of poor sections.
necessary skills and knowledge. y Growth from Green Revolution was
y Urban poor are very vulnerable due to expected to spread its impact to even
lack of social security when employed the underdeveloped and poorer sections
as causal labourers. of the community.
y Poverty is also closely related to nature y However, India experienced a major
of employment: drawback in the growth-oriented
⚪ Unemployment or under approach:
employment and the casual and ⚪ Growth in per capita income
intermittent nature of work in both and agriculture has not been so
rural and urban areas that compels impressive.
indebtedness, in turn, reinforces ⚪ The gap between poor and rich has
poverty. widened.
⚪ A steep rise in the price of food ⚪ The benefits of economic growth
grains and other essential goods have not trickled down to the
further intensifies the hardship and poor.
Poverty

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Chapter 4
Specific Poverty alleviation Programmes wage can report for work in areas where
Approach: this programme is implemented.
y This approach has been initiated from
the Third Five Year Plan (1961-66) and Basic Amenities Approach:
progressively enlarged since then. y The Fifth Five Year Plan contemplated
y Most poverty alleviation programmes this approach.
implemented are based on the y India was among the pioneers in the
perspective of the Five- Year Plans. world to envisage that through public
y Expanding self-employment programmes expenditure on social consumption
and wage employment programmes are needs, subsidised food grains,
being considered as the major ways of education, health, water supply and
addressing poverty. Examples include: sanitation, people’s living standard
⚪ Food for Work programme was could be improved.
initiated in the 1970s. y Three major programmes that aim at
⚪ Rural Employment Generation improving the food and nutritional status
Programme aimed at creating self- of the poor are: Public Distribution
employment opportunities in urban System, Integrated Child Development
areas. Scheme, and Midday Meal Scheme.
⚪ Prime Minister’s Rozgar Yojana, y Pradhan Mantri Gram Sadak Yojana and
financial aid for educated Valmiki Ambedkar Awas Yojana are also
unemployed from low-income attempts in developing infrastructure
families to setup enterprises. and housing conditions.
⚪ Swarna Jayanti Shahari Rozgar y Under National Social Assistance
Yojana for self and wage employment Programme some elderly people, poor
in urban areas. women who are destitute and widows
y These last three programmes have now are provided pension support.
become Prime Minister’s Employment y Pradhan Mantri Jan-Dhan Yojana is
Generation Programme (PMEGP). available in which people in India are
y Now those who wish to benefit from encouraged to open bank accounts.
these programmes are encouraged to Besides promoting savings habit, this
form Self-Help Groups. scheme intends to transfer all the
y National Rural Livelihoods Mission benefits of government schemes and
(NRLM) and renamed as Deendayal subsidies to account holders directly.
Upadhyay Antyodaya Yojana and India has achieved satisfactory progress
National Urban Livelihoods Mission are in many aspects under this approach.
providing aid to the SHG’s.
y Mahatma Gandhi National Rural Poverty Alleviation Programmes- A
Employment Guarantee Act (MNREGA): Critical Assessment:
Under this Act, all those among the poor The poverty alleviation programmes
who are ready to work at the minimum resulted a substantial improvement. The
Poverty

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percentage of absolute poor in some y Non-participation of local level

states is now well below the national institutions in programme
average. However certain limitations implementation.
have been observed.
Way Forward:
Limitations: y Without the active participation of the
y Poverty, hunger, malnourishment, poor, successful implementation of any
illiteracy and lack of basic amenities programme is not possible.
continue to be a common feature in y Poverty can effectively be eradicated
many parts of India. only when the poor start contributing
y Change in nomenclature, integration to growth by their active involvement in
or mutations of programmes has been the growth process.
done however, none resulted in any y Involvement can be ensured by
radical change. social mobilisation, encouraging poor
y Due to unequal distribution of land and people to participate and get them
other assets, the benefits from direct empowered. This will also help create
poverty alleviation programmes have employment opportunities which may
been appropriated by the non-poor. lead to increase in levels of income,
y The number of resources allocated skill development, health and literacy.
for these programmes is not y Moreover, it is necessary to identify
sufficient. poverty-stricken areas and provide
y Moreover, implementation depends infrastructure such as schools, roads,
mainly on government and bank power, telecom, IT services, training
officials for their implementation. institutions etc.
Since, such officials are ill motivated,
inadequately trained, corruption prone Interesting Facts:
and vulnerable to pressure from a y India had the largest area under cotton
variety of local elites, the resources are cultivation in the world covering 125
inefficiently used and wasted. lakh hectares in 2017–18.
Poverty

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5 Human Capital Formation

in India

Chapter 5
Just like physical resources like land Migration:
are converted into physical capital like y Migration is done in search of jobs that
factories, human resource of a country fetch them higher salaries than what
can be turned into human capital such they may get in their native places.
as doctors and engineers. However, to y Unemployment is the reason for the
produce more human capital, initial rural-urban migration in India.
human capital in the form of professors y Better salaries for technically qualified
and teachers is needed. persons is the reason for migrating to
countries.
Sources of Human Capital: y Enhanced earnings due to migration
Investments in education, health, on the justify the migration costs like transport,
job training, migration and information cost of living etc.
are the sources of human capital
formation. Information:
Education: Enhanced employment and y People spend to acquire information
earnings by acquiring new skills and relating to the labour market and other
knowledge. markets like education and health. For
example,
Health: ⚪ Knowing the level of salaries
y Expenditure on health is an important associated with various types of
source of human capital formation by jobs.
enhancing the wellbeing and physical ⚪ Which educational institutions
and mental capacity of an individual in provide the right type of employable
a disease-free state of his body. skills and at what cost.
y Preventive medicine (vaccination), y This information is necessary to make
curative medicine (medical intervention decisions regarding investments in human
during illness), social medicine (spread capital as well as for efficient utilisation
of health literacy) and provision of clean of the acquired human capital stock.
drinking water and good sanitation
are the various forms of health Human Capital and Economic Growth:
expenditures. y Economic growth means the increase in
Human Capital Formation in India
real national income of a country.
On the job-training: y The contribution of the educated and
y Firms spend on giving on-the job training healthy person to economic growth is
to their workers. more than that of an illiterate person.
y This may either be under a skilled y Both education and health, along with
worker’s supervision or in off-campus many other factors like on-the-job
training. training, job market information and
y Enhanced labour productivity justifies migration, increase an individual’s
the cost incurred on on-the job training. income generating capacity.

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y However, relation between economic y This policy vision suggests how human
growth and human capital is not very capital formation in India will move its
clear. economy to a higher growth trajectory.
⚪ This may be due to measurement
problem of human capital, as Human Capital and Human development:
education or health measured in y Human capital considers education and
terms of years of schooling, life health as a means to increase labour
expectancy etc. may not reflect the productivity. (human beings as a means
true status of people. to an end)
y Human capital growth in developing y Human development is based on the
countries has been faster but the idea that education and health are
growth of per capita real income has integral to human well-being. (human
not been that fast. beings are ends in themselves)
y Also, this relation between both
variables is bi-directional, that is, State of Human Capital formation in
higher income causes building of high India:
level of human capital and vice versa, Expenditures on both education
that is, high level of human capital and health are to be carried out
causes growth of income. simultaneously by all the three tiers of
the government (union, state and local
Indian context: governments).
y India recognised the importance of
human capital in economic growth long Need for government intervention in
ago. education and Health Sectors:
y The Seventh Five Year Plan laid emphasis y Both private and public sector exists
on human capital for economic growth. in education and health, as they create
y The Draft National Education Policy both social and private benefits.
2019 states that by 2030-2032 India will y Expenditures on education and health
be the third largest economy at over make substantial long-term impact and
ten trillion and this economy would be they cannot be easily reversed; hence,
driven by knowledge resources and not government intervention is essential.
Vulnerability of common consumers of
Human Capital Formation in India

by natural resources. y
y India will need a knowledge society these services due to lack of information,
based on a robust education system, make a case for government presence
with all the requisite attributes and to ensure free and fair operations.
characteristics in the context of changes y In India, the Ministries of education at
in knowledge demands, technologies, the union and state level, departments
and the way in which society lives and of education and various organisations
works.” like National Council of Educational
Research and Training (NCERT),

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Chapter 5
University Grants Commission (UGC) y Elementary education takes a major
and All India Council of Technical share of total education expenditure
Education (AICTE) facilitate institutions and the share of the higher/tertiary
which come under the education sector. education (institutions of higher
y The Ministries of Health at the union learning like colleges, polytechnics and
and state level, departments of health universities) is the least.
and various organisations like National y Expenditure per student in tertiary
Medical Commission and Indian Council education is higher than that of
for Medical Research (ICMR) facilitate elementary.
institutions which come under the y In 2014-15, the per capita public
health sector. expenditure on elementary education
y Due to widespread poverty, super differs considerably across states from
speciality institutions in health and as high as Rs 34,651 in Himachal Pradesh
education sectors are inaccessible for to as low as Rs 4088 in Bihar, leading
many. to differences in intra-state educational
y Furthermore, basic education and attainments.
health care is considered as a right of y Various commissions have recommended
the citizens, then it is essential that the upon education expenditure:
government should provide education ⚪ Education Commission (1964–66)
and health services free of cost for the had recommended for at least
deserving citizens and those from the 6 per cent of GDP to be spent on
socially oppressed classes. education.
y Both, the union and state governments, ⚪ Tapas Majumdar Committee:
have been stepping up expenditures in Expenditure of around Rs 1.37 lakh
the education sector over the years in crore over 10 years (1998-99 to
order to fulfil the objective of attaining 2006-07) to bring all Indian children
cent per cent literacy and considerably in the age group of 6-14 years under
increase the average educational the purview of school education.
attainment of Indians. y Compared to this desired level of
education expenditure of around 6
Education sector in India: per cent of GDP, the current level of
During 1952-2014, education expenditure a little over 4 per cent has been quite
Human Capital Formation in India
y
as percentage of total government inadequate.
expenditure increased from 7.92 to 15.7
and as percentage of GDP increased Steps taken by the government:
from 0.64 to 4.13. y In 2009, the Government of India
y Throughout this period the increase in enacted the Right of Children to Free
education expenditure has not been and Compulsory Education Act to make
uniform and there has been irregular free education a fundamental right of all
rise and fall. children in the age group of 6-14 years.

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y Levying of a 2 per cent ‘education cess’ Sanctioning a large outlay for the
on all Union taxes. The revenues from promotion of higher education and new
education cess has been earmarked for loan schemes for students to pursue
spending on elementary education. higher education.

Educational Achievements in India:

Table 5.1: Educational Attainment in India

The attainments in terms of adult in gender equity; still the need to

literacy level, primary education promote education for women in India
completion rate and youth literacy rate, is imminent for various reasons such
are mentioned in the chart above. as improving economic independence
and social status of women and also
Future Prospects: because women education makes a
Education for All — Still a Distant favourable impact on fertility rate and
Dream: health care of women and children.
The Directive Principles of the
Constitution provided that the Higher Education — a Few Takers:
government should provide free and y The level of unemployment among
compulsory education for all children educated youth is the highest.
up to the age of 14 years within 10 y As per NSSO data, in the year 2011-12,
Human Capital Formation in India

years from the commencement of this the rate of unemployment among youth
constitution, but this has not been males who studied graduation and
achieved yet. above in rural areas was 19 per cent (30
per cent for females), 16 per cent for
Gender Equity — Better than Before: urban areas.
The differences in literacy rates between y In contrast to this, only about 3-6 per
males and females are narrowing, cent of primary level educated youth in
signifying a positive development rural and urban areas were unemployed.

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Chapter 5
y Therefore, the government should The further equitable spread of health
increase allocation for higher education and education across all sections of the
and also improve the standard of higher society will supplement the existing rich
education institutions, so that students stock of technical and scientific man-
are imparted employable skills in such power of the country to ensure nation’s
institutions. social and economic development.

Human Capital Formation in India

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6 Rural Development
Chapter 6

Due to a vast section of the country meeting various social and economic
residing in rural areas and many of them expenses.
living under the conditions of poverty, y Historically rural credit largely originated
development of rural areas becomes from money lenders and traders, which
the central focus point in overall growth wasn’t fair and often led to exploitation
and development of the country. of the borrower, leading to a situation
of debt-trap.
Mahatma Gandhi once said that the y In 1969, adaptation of social banking and
real progress of India did not mean, multi-agency approach, was adopted to
simply the growth and expansion of meet the demand of rural credit.
industrial urban centres but mainly the y As an apex body of the rural financing
development of the villages. system NABARD (National Bank for
Agricultural and Rural Development)
Aspects of Rural Development: was set up in 1982.
y It comprehensively encompasses the y Production oriented lending due to
development of various areas which are Green Revolution.
lagging behind in context of the overall y Today a vast institutional structure
village economy. Some areas include: of Commercial banks, Regional Rural
y Factors of Human Resource Development Banks (RRBs), Cooperatives and Land
– literacy (specifically female), Development Banks, are present with
education and skill development, health an aim of providing adequate and cheap
(sanitation and public health). credit.
y Land reforms. y But to bridge the limitations of the
y Development of the productive formal credit system, like lack of
resources of each locality. collateral etc. Self Help Groups (SHG’s)
y Infrastructure development like are today playing a major role in the
electricity, irrigation, credit, marketing, rural credit framework.
transport facilities etc. ⚪ By May 2019, 54 lakh women SHGs
y Poverty alleviation measures. have nearly 6 crore women members
By means of interventions in these in India, signifying the role of SHGs
areas, rural population can be equipped in Women Empowerment.
for higher productivity and further ⚪ About Rupees: 10- 15,000 per SHG
diversification into non-farm productive and another Rupees 2.5 lakhs
activities. per SHG are being provided as a
Community Investment Support
Credit and Marketing in Rural Areas: Fund (CISF) to help them take up
Due to the long gestational time period self-employment opportunities.
Rural Development

between, sowing and receiving income y These credit provisions are generally
from the produce farmers take loans for referred to as micro-credit programmes.

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Chapter 6
transportation, packaging, grading and
Case Study: distribution of different agricultural
y The Poor Women’s Bank commodities across the country.
‘Kudumbashree’ is a women- Pre-Independence scenario:
oriented community-based y Faulty weighing of produce and
poverty reduction programme account manipulation by traders while
being implemented in Kerala. purchasing from the farmers.
y In 1995, a thrift and credit society y Forced sales at low prices due to
were started as a small savings bank farmer’s lack of information about
for poor women with the objective prevailing market prices.
to encourage savings. These y Lack of storage facilities, which could
societies have been acclaimed have enabled delayed sales at better
as the largest informal banks in prices.
Asia in terms of participation and This made a case for government
savings mobilised. intervention post-independence.

Corrective measures taken:

Rural Banking — a Critical Appraisal y Regulation of markets to enable rule-
Positive impacts of rural banking: based and transparent exchange.
y Better availability of credit facilities y Developing enabling infrastructure
to meet production needs due to like roads, warehouses, railways, cold
expansion of rural banking system. storage etc.
y Food security due to enhanced y Cooperative marketing for realizing
production. better value for farmer’s produce.
y Introducing policy instruments like:
Gaps in the rural banking system: ⚪ Assurance of Minimum Support
y Other institutions except Commercial Prices (MSP) for agricultural
Banks have not been able to mobilise products.
deposits, and conduct effective loan ⚪ Maintenance of buffer stocks of
recoveries. wheat and rice by Food Corporation
y This has led to high loan default rates. of India.
y In the post reform period, focus has ⚪ Distribution of food grains and sugar
shifted away from reforms in the rural through PDS.
banking sector. y However, despite government
intervention, private trade (by
Agricultural Market System: moneylenders, rural political elites,
It refers to the process that involves big merchants and rich farmers)
Rural Development

the assembling, storage, processing, predominates agricultural markets.

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Emerging Alternate Marketing Channels: based industries like crafts, pottery etc.
y Farmers directly selling their produce lack infrastructural and other support.
to consumers, results in increased Various sub-sectors in detail are as
incomes for the farmers. E.g.: Apni follows:
Mandi (Punjab, Haryana and Rajasthan);
Hadaspar Mandi (Pune); Rythu Bazars Animal Husbandry:
(vegetable and fruit markets in Andhra y In India, the farming community uses
Pradesh and Telangana). the mixed crop-livestock farming
y National and multi-national fast-food system (livestock sector alone provides
chains are now entering into contracts alternative livelihood options to over 70
with farmers to get the produce of million small and marginal farmers.)
desired quality. y It increases stability in income, food
security, transport, fuel and nutrition
Diversification into Productive for the family.
Activities: Performance of the Indian dairy sector:
y Diversification has two aspects; one is y Over the last three decades has been
the change in cropping pattern; and quite impressive.
y Shift of workforce from agriculture to y Milk production in the country has
other allied activities (livestock, poultry, increased by about ten times between
fisheries etc.) and non-agriculture 1951-2016. Mainly due to ‘Operation
sector. Flood’.
⚪ It is a system whereby all the
The need for diversification: farmers can pool their milk produced
y Greater risk in depending exclusively on according to different grading
farming for livelihood. (based on quality) and the same is
y Provide productive sustainable processed and marketed to urban
livelihood options to rural people. centres through cooperatives.
y In areas with limited irrigation facilities, ⚪ In this system the farmers are assured
difficulty in finding alternate meaningful of a fair price and income from the
employment in the Rabi season (Non- supply of milk to urban markets.
Monsoon season). Meat, eggs, wool and other by- products
y Therefore, expansion into other sectors are also emerging as important
is essential to provide supplementary productive sectors for diversification.
gainful employment and in realising
higher levels of income for rural Fisheries:
people to overcome poverty and other ⚪ In India, after progressive increase
tribulations. in budgetary allocations and
Rural Development

Various sub sectors which permit introduction of new technologies

diversification into them, include agro- in fisheries and aquaculture, the
processing industries, leather industry, development of fisheries has come
tourism etc. Also, traditional home- a long way.

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Chapter 6
y India has emerged as a world leader
in producing a variety of fruits like
mangoes, bananas, coconuts, cashew
nuts and a number of spices and is the
second largest producer of fruits and
vegetables.
y Improved economic conditions of
farmers engaged in Horticulture has
been there.
y Flower harvesting, nursery maintenance,
Fig 6.1: Distribution of Poultry and
Livestock in India, 2012 hybrid seed production and tissue
culture, propagation of fruits and
⚪ Fish production in terms of value is flowers and food processing are highly
65 and 35 percent, from inland and remunerative employment options for
marine sources respectively. women in rural areas.
⚪ In India, West Bengal, Andhra Pradesh, y Enhancing its role requires investment in
Kerala, Gujarat, Maharashtra and infrastructure like electricity, cold storage
Tamil Nadu are major fish producing systems, marketing linkages, small-
states. scale processing units and technology
⚪ Poverty, underemployment, low per improvement and dissemination.
capita incomes are problems facing
the people engaged in fisheries. Other Alternate Livelihood Options:
⚪ There is a need to increase credit y Information Technology can play a
facilities through cooperatives and major role in enhancing the creative
SHGs for fisherwomen to meet the potential and knowledge embedded in
working capital requirements for the society, along with better prediction
marketing. of areas of food insecurity, weather
vulnerability.
Horticulture: y Acting as a change catalyst it has
Horticultural crops consist of cops the potential to create many new
such as fruits, vegetables, tuber crops, opportunities in the rural areas of the
flowers, medicinal and aromatic plants, country.
spices and plantation crops. (wide variety
due to India’s varying soils and climate). Sustainable Development and Organic
y These crops play a vital role in providing Farming:
food and nutrition, besides addressing y Chemical fertilizers and toxic pesticides
employment concerns. are polluting water sources, harming
Rural Development

y Horticulture sector contributes nearly soils, live-stock and natural eco-

one-third of the value of agriculture systems.
output and six per cent of Gross y As an alternative, organic agriculture is
Domestic Product of India. a whole system of farming that restores,

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maintains and enhances the ecological Limitations with organic farming (Indian
balance. Context):
y Awareness and willingness to adapt
Benefits of Organic Farming: new technology on account of farmers
y Substitute to costlier agricultural is needed.
inputs, with cheaper locally produced y Inadequate infrastructure and the
organic inputs. problem of marketing the products.
y Income through exports on the back of y Yields from organic farming are less
rising demand for organic crops. than modern agricultural farming in the
y Better nutritional value as compared to initial years.
chemical farming. y Small and marginal farmers may find
y The produce is pesticide-free and it difficult to adapt to largescale
produced in an environmentally production.
sustainable way. y Organic produce may also have more
blemishes and a shorter shelf life than
sprayed produce.
Case Study: y Choice in production of off-season
y Organic Food Organic food is crops is quite limited in organic farming.
growing in popularity across
the world. Many countries have
around 10 per cent of their food
system under organic farming.
y There are many retail chains and
supermarkets which are accorded
with green status to sell organic
food.
y Moreover, organic foods command
higher price of around 10-100 per
cent than conventional ones.
Rural Development

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7 Employment: Growth, Informa­

lisation and Other Issues

Chapter 7
All those engaged in economic activities for the appropriate job to suit their
(that is the activities that are contributing qualifications and skills.
to the Gross National Product of the y Compared to females, more males are
country), in whatever capacity are found to be working.
counted as employed (workers). y Where men are able to earn high
incomes, families discourage female
In Indian context: members from taking up jobs.
y In 2011-12, India had about a 473 million y Non-recognition of women’s work
strong workforce. and, therefore the underestimation of
y The rural workers constitute about the number of women workers in the
three-fourth of this 473 million. country.
y About 70 per cent of the workers are
men. Self-Employed and Hired Workers:
y Women workers account for one-third y Workers who own and operate an
of the rural workforce whereas in urban enterprise to earn their livelihood are
areas, they are just one-fifth of the known as self-employed; about 52 per
workforce. cent workforce in India belongs to this
y The women engaged in domestic and category.
household work are not paid wages; y The construction workers are known as
hence are not categorised as workers. casual wage labourers; they account for
about 25 per cent of India’s workforce.
Participation of People in Employment: y When a worker is engaged by someone or
y Worker-population ratio is used as an an enterprise and paid his or her wages
indicator to analyse the employment on a regular basis, they are known as

Employment: Growth, Informa­lisation and Other Issues

situation. regular salaried employees; they account
y It is the proportion of the population for 23 per cent of India’s workforce.
engaged in producing goods and
services (Workers) to the Population
(defined as the total number of people
who reside in a particular locality at a
particular point of time).

General employment scenario in India:

y People in rural areas have limited
resources to earn a higher income and
participate more in the employment
market.
y Urban people have a variety of
employment opportunities. They look Fig 7.1: Distribution of Employment by Region

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Employment in Firms, Factories and Growth and Changing Structure of

Offices: Employment:
y All economic activities are divided y During the period 1950–2010, Gross
into eight different industrial divisions: Domestic Product (GDP) of India
They are (i) Agriculture (ii) Mining grew positively and was higher than
and Quarrying (iii) Manufacturing (iv) the employment growth (However
Electricity, Gas and Water Supply (v) fluctuating).
Construction (vi) Trade (vii) Transport y However, there was always fluctuation
and Storage and (viii) Services. in the growth of GDP.
y During this period, employment grew at
All India Scenario: the rate of not more than 2 per cent.
y Primary sector is the main source of y Employment growth started declining
employment for majority of workers in and reached the level of growth that
India. India had in the early stages of planning.
y Secondary sector provides employment y Widening gap between the growth of
to only about 24 per cent of workforce. GDP and employment.
y About 31 per cent of workers are in the y Indian economy, without generating
service sector. employment, we have been able to
produce more goods and services.
Rural India Scenario: (jobless growth).
y About 60 per cent of the workforce y Distribution of workforce by industrial
in rural India depends on agriculture, sectors shows substantial shift from
forestry and fishing. farm work to non-farm work (From 74
y About 20 per cent of rural workers are percent of workforce in 1972-73 to 50
Employment: Growth, Informa­lisation and Other Issues

working in manufacturing industries, percent in 2011-12)

construction and other industrial y People have moved from self-
activities. employment and regular salaried
y Service sector provides employment to employment to casual wage work. Yet
about 20 per cent of rural workers. self-employment continues to be the
major employment provider.
Urban India Scenario: y Scholars call the process of moving from
y Agriculture is not a major source of self-employment and regular salaried
employment in urban areas where employment to casual wage work as
people are mainly engaged in the service casualisation of workforce.
sector.
y About 60 per cent of urban workers are Informalisation Of Workforce:
in the service sector. Over the years the quality of employment
y The secondary sector gives employment has been deteriorating, depriving a vast
to about one-third of urban workforce. section of social and economic security.

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Chapter 7
However, a small section of workers To Identify the unemployed there are
is able to get regular income. Through 3 major sources to get data from:
labour laws they can protect their y Reports of Census of India,
interests, and form trade unions, to y National Sample Survey Office’s Reports
bargain with the employers. of Employment and Unemployment
Situation,
Division of workforce in formal and y Annual Reports of Periodic Labour
informal sectors: Force Survey, and Directorate General
y Formal Sector: All the public sector of Employment and Training Data
establishments and those private of Registration with Employment
sector establishments which employ 10 Exchanges.
hired workers, or more are called formal
sector establishments and those who Types of Unemployment:
work in such establishments are formal y The one defined by the NSSO definition
sector workers. is called “open unemployment”.
y Informal Sector: All other enterprises y However, the unemployment prevailing
and workers working in those enterprises in Indian Farms is called “Disguised
form the informal sector. Unemployment” i.e., where the work
y Formal sector workers enjoy better requiring services of only 10 people
social security and income. is being done by 20 people (Marginal
y Since late 1970s the Indian Government, Productivity is zero).
has been paying attention to the workers y One study conducted in the late 1950s
employed in the informal sector. showed about one third of agriculture
y Owing to the efforts of the International workers in India as disguisedly

Employment: Growth, Informa­lisation and Other Issues

Labour Organisation (ILO), efforts to unemployed.
modernise the informal sector and y Another, form is Seasonal Unemploy-
provide for better social security to the ment where workers migrate to urban
workers there have been made. areas in search of work during the
season, when there is no work on the
Unemployment: farm.
NSSO defines unemployment as a situa- However, the governments are taking
tion in which all those who, owing to lack several initiatives to facilitate a living
of work, are not working but either seek wage for the low-income families.
work through employment exchanges,
intermediaries, friends or relatives or Government and Employment
by making applications to prospective Generation:
employers or express their willingness or Government follows two broad
availability for work under the prevailing strategies to facilitate employment
condition of work and remunerations. generation.

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y Firstly, the government employs y Assistance for people to buy income

people in various departments for and employment generating assets,
administrative purposes and as workers development of community assets
in government run industries. by generating wage employment,
y Due to increased output in the public construction of houses and sanitation,
sector, spill over growth impact is assistance for constructing houses,
also observed in the private sector, laying of rural roads, development of
in turn increasing the employment wastelands/ degraded lands.
there.
y Secondly, comes the employment Interesting Points:
generation programmes. They aim at y Mahatma Gandhi National Rural
providing not only employment but Employment Guarantee Act 2005
also services in areas such as primary promises 100 days of guaranteed wage
health, primary education, rural drinking employment to all rural households who
water, nutrition, etc. volunteer to do unskilled manual work.
Employment: Growth, Informa­lisation and Other Issues

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8 Infrastructure

Chapter 8
Infrastructure constitutes all the y The quality of transport and
support structures like Transport communication infrastructure can
systems, communication facilities etc. affect access to health care.
which facilitate the development of a
country. The state of Infrastructure in India:
y Infrastructure provides supporting y Traditionally the role of developing
services in the main areas of industrial country’s infrastructure was limited to
and agricultural production, domestic the government, today even the private
and foreign trade and commerce. sector is actively participating in it.
y It includes roads, railways, ports, y Despite hosting a majority of our
airports, dams, power stations, oil population, rural India still lacks in
and gas pipelines, telecommunication Infrastructure facilities.
facilities etc. y Census 2011 on the status of
y Infrastructure is divided into 2 Infrastructure in India:
categories: ⚪ Only 56 per cent rural households
⚪ Economic Infrastructure: have an electricity connection.
Infrastructure associated with ⚪ 43 per cent households still use
energy, transportation and kerosene.
communication. ⚪ About 85 per cent households use
⚪ Social Infrastructure: Infrastructure bio-fuels for cooking.
related to education, health and ⚪ Tap water availability is limited to
housing. only 31 per cent households.
⚪ 69 per cent people depend on open
Relevance of Infrastructure: sources like wells etc. for drinking
y It provides the support system for the water needs.
efficient working of modern industrial ⚪ Access to improved sanitation in
economy. rural areas was only 30 per cent.
y Modern agriculture also depends on it y India invests only 30 per cent of its GDP
for speedy and large-scale transport on infrastructure, which is far below
system. Now it also depends upon that of China and Indonesia.
modern insurance and banking facilities. y For becoming the world’s third largest
y Infrastructure contributes to economic economy, India will need to give greater
development of a country both by push to infrastructure development.
increasing the productivity of the factors y Low Income countries are more focused
of production and improving the quality on basic infrastructure like irrigation,
of life of its people. power etc.
y Improvements in water supply and y Developed economies are more focused
sanitation have a large impact by upon service-related infrastructure.
reducing morbidity (meaning proneness y Thus, development of infrastructure and
Infrastructure

to fall ill). economic development go hand in hand.

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y Improper Infrastructure acts as a severe Non-conventional Sources of Energy:

constraint to economic development. y Both commercial and non-commercial
sources of energy are known as
Energy conventional sources of energy.
Sources of Energy: y There are three other sources of energy
Energy is a critical aspect of national which are commonly termed as non-
development, having applications conventional sources — solar energy,
across all sectors of the economy. They wind energy and tidal power.
can be divided into commercial and y Being a tropical country, India has
non-commercial sources. almost unlimited potential for producing
y Commercial: The sources which are all three types of energy if some
bought and sold, for example coal, appropriate cost-effective technologies
petroleum, electricity etc. They are are used/ developed.
generally exhaustible.
y Non-Commercial: The sources which Consumption Pattern of Commercial
are found in nature/ forests, for example Energy in India:
fuelwood, agricultural waste etc. They Commercial energy consumption makes
are generally renewable. up about 74 per cent of the total energy
More than 60 per cent India depends consumed in India. Share of Various
upon traditional sources for meeting sources in it, is as follows:
cooking and heating needs.

Fig 8.1: Share of Commercial Energy

y Transport sector was the largest energy agriculture and other sectors has been
consumer of commercial energy in increasing.
1953-54. y With economic growth, corresponding
Infrastructure

y However, share of this sector has been increase in energy consumption has
falling and the share of household, been there.

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Chapter 8
Power/Electricity: Challenges in the Power Sector:
Electricity is the most visible form y Insufficient installed capacity as
of energy and also the one directly compared demands of high economic
associated with development. growth.
y The growth rate of demand for power ⚪ India’s commercial energy supply
is generally higher than the GDP growth needs to grow at about 7%, currently
rate. we are only able to add 20000 MW
y Studies point out that in order to have per year.
8 per cent GDP growth per annum, y Under-utilization of installed capacity
power supply needs to grow around due to improper running of power
12 per cent annually. plants.
y The various sources, which account for y Transmission & Distribution losses,
power generation capacity in India are wrong pricing of electricity and other
as follows: inefficiencies are leading to losses in
excess of Rupees 20,000 Crores to the
State Electricity Boards (SEBs)
⚪ Some say that distribution of
electricity to farmers is the main
reason for these losses.
⚪ Stealing of electricity in many areas
is also adding to the problem.
y Private sector power generators are yet
to play their role in a major way; same is
Fig 8.2: Different Sources of Electricity the case with foreign investors.
Generated in India, 2016 y General public unrest due to high power
tariffs and prolonged power cuts in
different parts of the country.
y India’s energy policy encourages three y Thermal power plants are facing
energy sources — solar, hydel, and wind shortage of raw material and coal
as they avoid carbon emission due to supplies.
non-dependence upon fossil fuels. y Continued economic development
y However, this has not resulted in faster and population growth are driving the
growth of electricity produced from demand for energy faster than what
these sources. India is producing currently.
y Nuclear Energy in India only accounts for y Much higher prices for electricity
2.5% as compared to global average of have impacted certain sectors very
13%, some suggest from environmental badly due to privatisation of the power
viewpoint, this capacity should be sector, primarily the distribution
enhanced. aspect.
Infrastructure

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More public investment, better research y Also, nursing personnel increased from
and development efforts, exploration, 18,000 to 30 lakh and allopathic doctors
technological innovation and use of from 62,000 to 11.5 lakhs.
renewable energy sources can ensure y Today, at the village level, a variety of
additional supply of electricity. hospitals, technically known as Primary
Health Centres (PHCs) have been set up
Health: by the government.
Health is the holistic process related to y Also has a large number of hospitals run
overall growth and development of the by voluntary agencies and the private
nation by providing the ability to realise sector.
one’s potential to an individual. It is not The expansion of health infrastructure
merely limited to absence of disease. has resulted in the eradication of
y Health infrastructure includes hospitals, smallpox, guinea worms and the near
doctors, nurses and other para-medical eradication of polio and leprosy.
professionals, beds, equipment required
in hospitals and a well-developed Health System in India India’s health
pharmaceutical industry. infrastructure and health care:
y However, the mere presence of y Made up of a three-tier system —
infrastructure is not enough, it needs to primary, secondary and tertiary.
be accessible as well. y Primary health care: includes education
y It has been a focus of planning to ensure concerning prevailing health problems
that no individual is denied health care, and methods of identifying, preventing
merely due to the inability to pay. and controlling them; promotion of
food supply and proper nutrition
State of Health Infrastructure: and adequate supply of water and
y Since Independence, there has been a basic sanitation; maternal and child
significant expansion in the physical health care; immunisation against
provision of health services. major infectious diseases and injuries;
y The Union Government evolves broad promotion of mental health and
policies and plans through the Central provision of essential drugs.
Council of Health and Family Welfare. ⚪ Auxiliary Nursing Midwife (ANM)
⚪ It collects information and renders is the first person who provides
financial and technical assistance primary healthcare in rural areas.
to State governments, Union ⚪ Primary Health Centres (PHC),
Territories and other bodies for the Community Health Centres (CHC) and
implementation of important health sub-centres, have been established
programmes in the country. in villages to provide primary health
y During 1951–2018, the number of care there, generally manned by a
government hospitals and dispensaries single doctor and limited staff.
Infrastructure

together increased from 9,300 to 53,800 y Secondary health care institutions:

and hospital beds from 1.2 to 7.1 lakhs. Hospitals which have better facilities

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Chapter 8
for surgery, X-ray, Electro Cardio Gram y In 2001-02, there were more than 13 lakh
(ECG) etc. medical enterprises employing 22 lakh
y They function both as primary health people; more than 80 per cent of them
care provider and also provide better are single person owned, and operated
healthcare facilities. They are mostly by one person occasionally employing a
located in district headquarters and in hired worker.
big towns. y Private sector in India has grown
y Tertiary sector: Hospitals which independently without any major
have advanced level equipment and regulation;
medicines and undertake all the y Owing to liberalisation measures, many
complicated health problems, which non-resident Indians and industrial
could not be managed by primary and and pharmaceutical companies have
secondary hospitals, come under the. set up state-of-the-art super-specialty
y The tertiary sector also includes many hospitals to attract India’s rich and
premier institutes which not only impart medical tourists.
quality medical education and conduct
research but also provide specialised However, some private practitioners
health care. Some of them are: All India are not even registered doctors and are
Institute of Medical Science, New Delhi; known as quacks.
Post Graduate Institute, Chandigarh;
etc.
Medical Tourism — A great
Private Sector Health Infrastructure: opportunity:
Private sector has grown by leaps and y India’s health services combine
bounds in the recent times. the latest medical technologies
y More than 70 per cent of the hospitals with qualified professionals and
in India are run by the private sector. are cheaper as compared to costs
y They control nearly two-fifth of the beds of similar healthcare services
available in the hospitals. in other countries. Leading to
y Nearly 60 per cent of dispensaries are foreign nationals arriving in India
run by the same private sector. for healthcare.
y They provide healthcare for 80 per cent y In 2016, 2,01,000 foreigners visited
of out-patients and 46 per cent of in- India for medical treatment. And
patients. this figure is likely to increase by
y Private sector has been playing a 15 per cent each year.
dominant role in medical education y Experts predict that by 2020
and training, medical technology and India could earn more than 500
diagnostics, manufacture and sale of billion rupees a year through such
pharmaceuticals, hospital construction ‘medical tourism’.
Infrastructure

and the provision of medical services.

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Indian Systems of Medicine (ISM): y Out of 4.1 million early deaths occurring
y It includes six systems—Ayurveda, globally due to air pollution, 1.1 million
Yoga, Unani, Siddha, Naturopathy and deaths occur in India alone.
Homeopathy (AYUSH). y The proportion of deaths occurs due to
y Currently, there are 4,095 AYUSH cancer (8 per cent) injuries (11 per cent)
hospitals and 27,951 dispensaries and as also has been increasing over the last
many as 8 lakh registered practitioners two decades.
in India. y At present, less than 20 per cent of
y But little has been done to set up a the population utilises public health
framework to standardise education or facilities.
to promote research. y Only 38 per cent of the PHCs have the
y ISMs have huge potential and can solve required number of doctors and only
a large part of our healthcare problems 30 per cent of the PHCs have sufficient
because they are effective, safe and stock of medicines.
inexpensive.
Urban-Rural and Poor-Rich Divide:
Indicators of Health and Health y Only one-fifth of India’s hospitals are
Infrastructure—A Critical Appraisal: located in rural areas, despite 70%
Health status of a country can be population living there.
assessed through indicators, such as y Rural India has only about half the
infant mortality and maternal mortality number of dispensaries.
rates, life expectancy and nutrition y Out of about 7.13 lakh beds in
levels, along with the incidence of government hospitals, roughly 30 per
communicable and non-communicable cent are available in rural areas.
diseases. y There are only 0.36 hospitals for every
y Government expenditure on health one lakh people in rural areas, as
sector at 1.28 per cent of the total compared to 3.6 in urban areas.
GDP in 2017-18 (as per National Health y States, like Bihar, Madhya Pradesh,
Profile). is abysmally low as compared Rajasthan and Uttar Pradesh, are
to other countries. relatively lagging behind in healthcare
y India has about one-fifth of the world’s facilities.
population but it bears a frightening y Even though 530 recognised medical
20 per cent of the global burden of colleges produce about 50,000 medical
diseases (GBD). graduates every year, the shortage of
y Two-thirds of number of years spent in doctors in rural areas persists.
disability owing to disease, was caused y Due to limited facilities in government
by noncommunicable diseases. institutions, poor people are forced
y Diarrhoea, lower respiratory system to access expensive private health
and other common infectious diseases care often leading to indebtedness,
Infrastructure

account for one-sixth of total deaths in distressed sale of assets etc., due to
India. low incomes.

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Chapter 8
People living in rural areas do not have y Creating awareness on health and
sufficient medical infrastructure. This hygiene.
has led to differences in the health y Emphasis on Primary Health Care.
status of people. y Bridging the rural-urban divide in
healthcare.
Women’s Health: y Integrating affordability and accessibility
y The deterioration in the child sex ratio in basic health infrastructure.
in the country from 927 in 2001 to 919 in
2011 points to the growing incidence of Interesting Facts and Terms:
female foeticide. y Net availability of power (what we get
y Five per cent of girls aged between in houses, offices etc.) = Generation
15-19 years are not only married but – consumption by power station
have already borne children at least auxiliaries – transmission losses.
once. y Compact Fluorescent Lamps (CFLs)
y More than 50 per cent of married consume 80 per cent less power as
women in the age group of 15–49 years compared to ordinary bulbs and days
have anaemia and nutritional anaemia LED (Light Emitting Diode) bulbs use
caused by iron deficiency; the trend is half as much as a CFL to produce the
not declining. same.
y GBD (Global Burden of Disease) is an
Improving healthcare framework: indicator used by experts to gauge the
y Public health services need to be number of people dying prematurely
decentralised. due to a particular disease.

Infrastructure

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9 Environment and Sustainable

Development
Chapter 9

Environment is defined as the total y In addition, the health quality is suffering

planetary inheritance and the totality from increased respiratory and water
of all resources including all the biotic borne diseases due to poor air and
and abiotic factors that influence each water quality.
other. y Global issues such as Global Warming,
Ozone Depletion are leading to
Functions of the Environment: additional stress and enhanced financial
y The environment performs four vital commitments.
functions: y In earlier centuries extraction rate of
⚪ Supplying resources: Both renewable resources and pollution generation rate
(can be used without possibility of was within the ability of the environment
being depleted) and non-renewable to sustain.
resources (get exhausted with use). y But due to population explosion and
⚪ Assimilates waste. changed consumption patterns with
⚪ Sustains life by providing genetic Industrial Revolution, today the demand
diversity and biodiversity. for resources has increased at a very
⚪ Provides aesthetic services like fast pace, but the supply of them is
scenery etc. limited.
y These functions can only be performed
properly as long as the demand on Global Warming:
these functions is within it’s carrying It is a gradual increase in the average
capacity. temperature of the earth’s lower
⚪ Implying that the resource extraction atmosphere.
is not above the rate of regeneration
of the resource and the wastes Causes:
generated are within the assimilating y Increase in greenhouse gases since the
capacity of the environment. Industrial Revolution (human induced).
Stress on these functions: y Increase in carbon dioxide and other
Environment and Sustainable Development

y Rising population and affluent greenhouse gases through the burning

consumption have, however, today of fossil fuels and deforestation.
placed huge stress on these functions.
y Many resources have become extinct Visible Impact:
and the wastes generated are beyond the y Atmospheric concentrations of car-
absorptive capacity of the environment: bon dioxide and CH4 have increased by
⚪ Meaning, the ability of the 31 per cent and 149 per cent respec-
environment to absorb degradation. tively above pre-industrial levels since
y High resource use rate has made 1750.
many like water scarce and demanding y Atmospheric temperature has risen
additional investment in exploring new by 1.1°F (0.6°C) and sea level has risen
resource base. several inches.

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Chapter 9
Long term Impact: Montreal Protocol banned the use of
y Melting of polar ice with a resulting rise chlorofluorocarbon (CFC) compounds,
in sea level and coastal flooding. as well as other ozone depleting chem-
y Disruption of drinking water supplies icals such as carbon tetrachloride,
dependent on snow melts. trichloroethane (also known as methyl
y Extinction of species as ecological chloroform), and bromine compounds
niches disappear. known as halons.
y More frequent tropical storms.
y Increased incidence of tropical diseases. State of India’s Environment:
UN Conference on Climate Change, held Availability of Natural Resources in
in Kyoto, Japan, in 1997, resulted in an India:
international agreement to fight global y The Indo-Gangetic plains — spread
warming which called for reductions from the Arabian Sea to the Bay of
in emissions of greenhouse gases by Bengal — are one of the most fertile,
industrialised nations. intensively cultivated and densely
populated regions in the world.
Ozone Depletion: y The black soil of the Deccan Plateau
The phenomenon of reductions in the is particularly suitable for cultivation
amount of ozone in the stratosphere. of cotton, leading to concentration of
textile industries in this region.
Cause: y India’s forests, though unevenly
y High levels of chlorine and bromine distributed, provide green cover for a
compounds in the stratosphere. majority of its population and natural
y Origins of these compounds are cover for its wildlife.
chlorofluorocarbons (CFC), used as y Large deposits of iron-ore, coal and
cooling substances in air conditioners natural gas are found in the country.
and refrigerators, or as aerosol y India accounts for nearly 8 per cent of
propellants, and bromofluorocarbons the world’s total iron-ore reserves.

Environment and Sustainable Development

(halons), used in fire extinguishers. y Bauxite, copper, chromate, diamonds,
gold, lead, lignite, manganese, zinc,
Impact: uranium, etc. are also available in
y A reduction of approximately 5 per cent different parts of the country.
in the ozone layer was detected from However, development has caused
1979 to 1990. stress on these limited resources.
y More ultraviolet (UV) radiation comes
to Earth and causes damage to living Factors responsible for India’s current
organisms. stressed environmental status:
y Responsible for skin cancer in y Threat of poverty-induced environmen-
humans; it also lowers production of tal degradation and, at the same time,
phytoplankton and thus affects other threat of pollution from affluence and a
aquatic organisms. rapidly growing industrial sector.

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y Air pollution, water contamination, y Pollution:

soil erosion, deforestation and wildlife ⚪ Vehicular emissions are of particular
extinction. concern since these are ground
y Land degradation, biodiversity loss, level sources and, thus, have the
air pollution with special reference maximum impact on the general
to vehicular pollution in urban cities, population.
management of fresh water and solid ⚪ The number of motor vehicles has
waste management. increased from about 3 lakh in
y Land Degradation: 1951 to 23 crores in 2016. In 2016,
⚪ Factors responsible for it are: Loss personal transport vehicles (two-
of vegetation due to deforestation, wheeled vehicles and cars only)
unsustainable fuel wood and fodder constituted about 85 per cent of the
extraction, shifting cultivation, total number of registered vehicles
encroachment into forest lands, thus contributing significantly to
forest fires and over grazing, total air pollution load.
non-adoption of adequate soil In order for various measures of
conservation measures, improper Environment Ministry and the central
crop rotation, indiscriminate use of and state pollution control boards, a
agro-chemicals such as fertilisers conscious adaptation of the path of
and pesticides, improper planning Sustainable Development is needed.
and management of irrigation
systems, extraction of ground water Pollution Control Boards:
in excess of the recharge capacity, To address water and air pollution, the
open access resource and poverty government set up the Central Pollution
of the agriculture-dependent Control Board (CPCB) in 1974. This was
people. followed by states establishing their
y High Population Density: own state level boards to address all
⚪ India supports approximately 17 per the environmental concerns.
Environment and Sustainable Development

cent of the world’s human and 20 Functions:

per cent of livestock population on y Investigate, collect and disseminate
a mere 2.5 per cent of the world’s information relating to water, air and
geographical area. land pollution.
⚪ As a result of which the country y Lay down standards for sewage/trade
loses 0.8 million tonnes of nitrogen, effluent and emissions.
1.8 million tonnes of phosphorus and y Provide technical assistance to
26.3 million tonnes of potassium governments in promoting cleanliness
every year. of streams and wells.
⚪ The quantity of nutrients lost due to y Organise, through mass media, a
erosion each year ranges from 5.8 to comprehensive mass awareness
8.4 million tonnes. programme for the same.

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Chapter 9
y Prepare manuals, codes and guidelines ⚪ Conservation of Natural Resources.
relating to treatment and disposal of ⚪ Preservation of the regenerative
sewage and trade effluents. capacity of the world’s natural
y They assess the air quality through ecological system.
regulation of industries. ⚪ Avoiding the imposition of added
y Periodically inspect every industry costs or risks on future generations.
under their jurisdiction to assess the According to Herman Daly, a leading
adequacy of treatment measures environmental economist, further ways
provided to treat the effluent and include:
gaseous emissions. y Limiting the human population to a
y Provide background air quality data level within the carrying capacity of the
needed for industrial siting and town environment.
planning. y Technological progress should be input
The pollution control boards collect, efficient and not input consuming.
collate and disseminate technical y Renewable resources should be
and statistical data relating to water extracted on a sustainable basis, that
pollution. They monitor the quality is, rate of extraction should not exceed
of water in 125 rivers (including the rate of regeneration.
tributaries), wells, lakes, creeks, ponds, y For non-renewable resources rate of
tanks, drains and canals. depletion should not exceed the rate of
creation of renewable substitutes.
Sustainable Development: y Inefficiencies arising from pollution
United Nations Conference on should be corrected.
Environment and Development
(UNCED), defined it as: Strategies for Sustainable Development:
‘Development that meets the need y Use of Non-conventional Sources of
of the present generation without Energy:
compromising the ability of the future ⚪ Thermal power plants emit large

Environment and Sustainable Development

generation to meet their own needs’. quantities of carbon dioxide and
y In more specific terms, sustainable also produce fly ash.
development aims at decreasing ⚪ Hydroelectric projects inundate
the absolute poverty of the poor by forests and interfere with the
providing lasting and secure livelihoods natural flow of water in catchment
that minimise resource depletion, areas and the river basins.
environmental degradation, cultural ⚪ Wind power and solar rays are good
disruption and social instability. examples of conventional but cleaner
Ways to practice sustainable and greener energy sources but are
development: not yet been explored on a large
y Practice ways that are compatible with: scale due to lack of technological
⚪ Conservation of natural assets. devices.

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y LPG, Gobar Gas in Rural Areas: large scale transmission towers and
⚪ Households in rural areas generally cables and avoid transmission loss.
use wood, dung cake or other y CNG in Urban Areas:
biomass as fuel, having adverse In Delhi, the use of Compressed Natural
environmental impacts. Gas (CNG) as fuel in public transport
⚪ To rectify the situation, subsidised system has significantly lowered air
LPG is being provided. pollution and the air has become
⚪ In addition, gobar gas plants are cleaner. In the last few years many other
being provided through easy loans Indian cities also began to use CNG.
and subsidy. y Wind Power:
y Solar Power through Photovoltaic Cells: In areas where speed of wind is usually
⚪ These cells use special kind of high, windmills can provide electricity
materials to capture solar energy without any adverse impact on the
and then convert the energy into environment. Wind turbines move with
electricity. the wind and electricity is generated.
⚪ This technology is extremely useful No doubt, the initial cost is high. But
for remote areas and for places the benefits are such that the high cost
where supply of power through grid gets easily absorbed.
or power lines is either not possible y Traditional Knowledge and Practices:
or proves very costly. ⚪ All our traditional practices have
⚪ This technique is also totally free been environment friendly. Only
from pollution. recently have we drifted away
⚪ In recent years India is taking efforts from the traditional systems and
to increase the power generation caused large scale damage to the
through solar. India is also leading environment.
an International body called ⚪ One apt example is in healthcare.
International Solar Alliance (ISA). India is very much privileged to
y Mini-hydel Plants: have about 15,000 species of plants
Environment and Sustainable Development

⚪ These plants use the energy of which have medicinal properties.

perennial mountainous streams to About 8,000 of these are in regular
move small turbines. use in various systems of treatment
⚪ The turbines generate electricity including the folk tradition.
which can be used locally. ⚪ With the sudden onslaught of the
⚪ Such power plants are more or less western system of treatment, we
environment friendly as they do not ignored our traditional systems such
change the land use pattern in areas as Ayurveda, Unani, Tibetan and folk
where they are located. systems.
⚪ They generate enough power to meet ⚪ These healthcare systems are in great
local demands. This means that they demand again for treating chronic
can also do away with the need for health problems. Now a days every

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Chapter 9
cosmetic produce — hair oil, tooth- y Biopest Control:
paste, body lotion, face cream and ⚪ Excessive pesticide use post green
what not — is herbal in composition. revolution had negative impacts on
⚪ Not only are these products the produce.
environment friendly, they are ⚪ Corrective step is the use of
relatively free from side effects and pesticides based on plant products,
do not involve large-scale industrial for example Neem.
and chemical processing. ⚪ Mixed cropping and growing
y Biocomposting: different crops in consecutive years
⚪ In recent times we have ignored on the same land have also helped
compost and completely shifted to farmers.
chemical fertilizers. ⚪ In addition, awareness is spreading
⚪ It has caused problems like land and about various animals and birds
water contamination. which help in controlling pests.
⚪ However, in certain parts of the For example, snakes are one of the
country, cattle are maintained only prime group of animals which prey
because they produce dung which upon rats, mice and various other
is an important fertiliser and soil pests.
conditioner.
⚪ Earthworms can convert organic In a nutshell, rapid human growth and
matter into compost faster than the development has put unprecedented
normal composting process. This pressure on the resources of the planet,
process is now being widely used. modification in our current consumption
⚪ Indirectly, the civic authorities methods is contingent to ensure a
are benefited too as they have to prosperous, equitable and sustainable
dispose reduced quantity of waste. future.

Environment and Sustainable Development

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Unit: IV
Development
Experiences of India:
A Comparison with
Neighbours
Environment and Sustainable Development

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Comparative Development
10 Experiences of India and Its
Neighbours

Chapter 10
In a globalized modern world, y In 1965, Mao introduced the Great
understanding of other economies Proletarian Cultural Revolution
is also important as all such major (1966–76) under which students and
economic activities cause an impact professionals were sent to work and
on overall human development in the learn from the countryside.
shared environment. y The present day fast industrial growth in
China can be traced back to the reforms
Developmental Path – A Snapshot View: introduced in 1978.
India, China and Pakistan have certain ⚪ Reforms in Agriculture:
similarities in their developmental  Commune lands were divided
strategies. into small plots, which were
y All three nations started their allocated (for use not ownership)
developmental path at the same time. to individual households. They
India (1947) , Pakistan (1947) , People’s were allowed to keep all income
Republic of China (1949). from the land after paying
y India announced its first Five Year Plan stipulated taxes.
for 1951–56, Pakistan announced its first ⚪ Reforms in the industrial sector:
five-year plan in 1956. China announced  Private enterprise operated by
its First Five Year Plan in 1953. local collectives were allowed to

Comparative Development Experiences of India and Its Neighbours

y India and Pakistan adopted similar produce goods.
strategies, such as creating a large public  Government owned enterprises
sector and raising public expenditure on were made to face competition.
social development. ⚪ Reforms in the market:
⚪ Dual Pricing was introduced, where
Development Policies of China and farmers and industrial units were
Pakistan: to buy and sell certain quantities of
China: inputs and outputs on government
y After the establishment of People’s fixed price, rest could be done on
Republic of China under one party rule. the market price.
y All critical sectors of the economy, y Over the years, as production increased,
enterprises and lands owned and the proportion of goods or inputs
operated by individuals were brought transacted in the market also increased.
under government control. In order to attract foreign investors,
y The Great Leap Forward (GLF) campaign special economic zones were set up.
initiated in 1958 aimed at industrialising
the country on a massive scale. Pakistan:
y People were encouraged to set up y Pakistan follows the mixed economy
industries in their backyards. model with co-existence of public and
y In rural areas, communes were started. private sectors.
Under the Commune system, people y In the late 1950s and 1960s, Pakistan
collectively cultivated lands. introduced a variety of regulated policy

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framework (for import substitution- ⚪ One child norm introduced in China

based industrialisation), combining tariff in the late 1970s is the major reason
protection and import controls. for low population growth, after a
y The introduction of Green Revolution led few decades there would be more
to mechanisation and increase in public elderly as compared to children.
investment and food grain production. ⚪ However, it has also put a
y In the 1970s, nationalisation of capital negative impact on the population
goods industries took place. composition in the nation.
y Pakistan then shifted its policy orienta- y Sex ratio is low and biased against
tion in the late 1970s and 1980s when the females in all three countries.
major thrust areas were denationalisation ⚪ Scholars cite son preference
and encouragement of private sector. prevailing in all these countries as
y During this period, they also received the reason.
financial support from western nations y The fertility rate is low in China and
and remittances from their Middle very high in Pakistan.
Eastern Diaspora. y Urbanisation is high in China with India
y The then government also offered having 34 per cent of its people living in
incentives to the private sector. urban areas.
y All this created a conducive climate for
Gross Domestic Product and Sectoral
Comparative Development Experiences of India and Its Neighbours

new investments.
Comparison:
Comparison of Demographic Indicators: y China has the second largest GDP (PPP)
y The population of Pakistan is very small of $22.5 trillion in the world, whereas,
and accounts for roughly about one- India’s GDP (PPP) is $9.03 trillion and
tenth of China or India. Pakistan’s GDP is $ 0.94 trillion.
y Though China is the largest nation and y China was able to maintain near double-
geographically occupies the largest area digit growth during 1980s.
among the three nations, its density is y In 2015–17, there has been a decline
the lowest. in Pakistan and China’s growth rates,
y Population growth was the highest in whereas India met with moderate
Pakistan, followed by India and China. increase in growth rates.

Table 10.1: Selected Demographic Indicators, 2017-18

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Chapter 10
Table 10.2: Annual Growth of GDP (%), 1980-2017

Table 10.3: Sectoral Share of Employment GVA and GDP (%) in 2018-2019

⚪ The reform processes introduced largest proportion of workforce in all

in Pakistan and political instability the three countries, has declined.
over a long period are understood as
Industrial Sector:

Comparative Development Experiences of India and Its Neighbours

reasons behind the declining growth
rate in Pakistan. y In India, China and Pakistan the
contribution of Industry to GVA and the
Primary Sector: proportion of workforce engaged in it
y In China, only about 10 per cent of its is 30, 19 and 41 per cent respectively
total land area is cultivable. (Contribution to GVA); 25, 24, 28 per
y More than 80% Chinese depended upon cent respectively (Workforce engaged).
agriculture for livelihood till the 1980s. y In the industrial sector, China has
y Since the Chinese government maintained a near double-digit growth
has encouraged people to pursue rate in 1980s but began showing
handicrafts, commerce and transport. decline in recent years, whereas, for
y Today, In china 26% workforce is India and Pakistan growth rate has
depended upon Agriculture and its declined.
contribution to GVA is 7%.
y In both India and Pakistan, the Service Sector:
contribution of agriculture to GVA y In all the three countries, service sector
were 16 and 24 per cent, respectively, contributes highest share of GVA.
proportion of workforce dependent y Pakistan was faster in shifting its
upon it is also 43 and 41 per cent workforce to service sector than India
respectively. and China.
y In the last five decades, the growth of y The proportion of workforce engaged in
agriculture sector, which employs the the service sector, in India, China and

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Table 10.4: Some Selected Indicators of Human Development

Pakistan has reached the level of 32, 46 However, to get a true and fair view,
and 35 per cent, respectively. we also need to look at the ‘liberty
y In case of service sector, China was able indicators’ i.e. Democratic Participation,
to maintain its rate of growth during extent of Constitutional protection
1980–1990, while there was a positive given to rights of citizens or the extent
Comparative Development Experiences of India and Its Neighbours

and increasing growth of India’s service of constitutional protection of the

sector output. Independence of the Judiciary and the
Rule of Law.
Thus, China’s growth is contributed by But Indicators for many of them have
the manufacturing and service sectors not even been introduced yet.
and India’s growth by the service sector.
During this period, Pakistan has shown Development Strategies- An Appraisal:
deceleration in all three sectors. Reforms process was introduced in all
the three countries, however the reason,
Indicators of Human Development: context and impacts differed.
y China is moving ahead of India and
Pakistan in many indicators. China:
y Pakistan is ahead of India in reducing y Reforms were initiated in China in 1978.
proportion of people below the poverty y Despite extensive land reforms,
line and also its performance in sanitation. collectivisation, the Great Leap Forward
y But neither of these two countries have and other initiatives, the per capita grain
been able to save women from maternal output in 1978 was the same as it was
mortality. in the mid-1950s.
y For the proportion of people below the y This slow pace of development and lack
international poverty rate of $ 3.20 a of Modernization under Mao stimulated
day, India has the largest share of poor the then government, to undertake
among the three countries. reforms.

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Chapter 10
y However, education, health, y However, during the last few years,
decentralized planning and existence Pakistan has recovered its economic
of small enterprises previously helped growth and has been sustaining.
improve economic and social indicators
in the post-reforms period. Conclusion:
y They first tried the reform on a small y India, China and Pakistan have travelled
scale and then accordingly implemented about seven decades of developmental
it on a large scale. path with varied results.
y Reforms created conditions for the y India has performed moderately
subsequent phenomenal growth in rural however, challenges in infrastructure,
industries and built up a strong support poverty alleviation remain.
base for more reforms. y Pakistan has suffered slowdown
largely because of political instability,
Pakistan: dependence upon remittances along
y Reforms were introduced in 1988. with volatile agricultural sector. How-
y It is argued that in Pakistan the reform ever, in the past few years, macroeco-
process led to worsening of all the nomic recovery and stability is being
economic indicators. observed.
y The reasons for slowdown of growth, y China has successfully used the

Comparative Development Experiences of India and Its Neighbours

have primarily been blamed upon the market system without losing political
lack of vision institutionalized process commitment to raise the levels of
of technical change in agricultural growth and reduce poverty, however
growth but based on the narrow vision lack of political freedom and human
of good harvest. rights implications remain.
y Also foreign exchange in the country y Also, unlike India and Pakistan; China has
came from remittances from the used the market mechanisms to create
diaspora and export of highly volatile new economic and social opportunities
agricultural products. instead of privatising public sector
y Growing dependence on foreign loans enterprises.
was there, leading to difficulty in paying
them back.

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