AEC 102 Fundamentals of Agricultural Economics 2020-2021 PDF

**NEWLY PROPOSED COURSE FOR B.Sc.(ABM)** **AEC 102 (2+0) 2: Fundamentals of Agricultural Economics** **Theory:** **Agricultural economics:** Meaning, definition, characteristics of agriculture, Nature and scope of agricultural economics, Distinction between agriculture and industry, Role of agriculture in economic development, Role of government interventions in agricultural development, **Planning and agricultural development:** Meaning and **o**bjectives economic planning, benefits of planning, Agricultural development during different Five Year Plans in India, Measures of reorganization of agriculture. **Factors of production:** Meaning, definitions; Land & characteristics, factors affecting productivity of land, extensive and intensive cultivation; Labour- quantity and quality of labour, forms of division of labour, merits and demerits of division of labour, efficiency of labour, Capital -- characteristics -- process of capital formation; forms of capital in agriculture, Organization of business firms -- Forms of business organizations and their characteristics. **Land reforms:** concept of land reforms, Land tenure systems, abolition of intermediaries, tenancy reforms, recent polices on land reforms and the progress achieved, Concepts of agricultural land holdings in India. **Theory of production:** Meaning, definition of production, production function, types of production functions-Continuous, discontinuous. Laws of returns, LDMR-definition and its stages and its assumptions, concept of elasticity of production. **Scale of production:** Meaning, classification of economies of large-scale production: 1. Internal economies and 2. External economies. Types of internal and external economies. Diseconomies of lagre scale production and its advantages and dis-advantages. **Theory of costs:** Meaning, definitions, short run and long run costs and fixed cost, variables cost, average and marginal costs, cost curves, and economies of scale--types of internal and external economies, and diseconomies. Other cost concepts: nominal cost, real cost, economic cost, explicit and implicit costs, opportunity cost and establishment cost. revenue concepts-total revenue, average revenue and marginal revenue and profit maximization. **Reference:** 1. Subba Reddy, Raghuram, Neelakant Shastry and I Bhavani Devi : Agricultural Economics. 2. Sadhu and Singh: Fundamentals of Agricultural Economics 3. S.S. Johl and T.R. Kapur: Fundamentals of farm business Management 4. Jingan, M.L., Principles of Economics 5. Dr. K.K. Dewett and M.H. Navalur: Modern Economic Theory 6. Agrawal, A. N: Indian Agriculture -- problems, progress and prospects 7. Ahuja H.L : [Macroeconomics](https://www.amazon.in/Macroeconomics-Ahuja-H-L/dp/9385401351/ref=sr_1_12?adgrpid=67393523428&ext_vrnc=hi&gclid=EAIaIQobChMIvP_b-uqT5QIVizUrCh1RKg_8EAAYASAAEgLEi_D_BwE&hvadid=356458771808&hvdev=c&hvlocphy=9040224&hvnetw=s&hvpos=1t1&hvqmt=e&hvrand=17590821708347146851&hvtargid=kwd-321785856718&hydadcr=8435_1935980&keywords=books+on+macroeconomics&qid=1570784157&sr=8-12) 8. Basava K.D: Principles of Economics 9. Chinna,S.S, Agricultural Economics and Indian Agriculture. 10. Jingan, M.L., Advanced Economic Theory-Micro and Macro Economics **\--** **[AEC-102 (2+0):] Fundamentals of Agricultural Economics** **I Semester 2020-21 Period: (15-02-2021 to 10-07-2021)** **I B.Sc. (Hons.) ABM** **[COURSE OUTLINE]** +-----------------------------------+-----------------------------------+ | **WEEK ENDING** | **THEORY TOPICS** | +===================================+===================================+ | 1 | **Economics-** meaning and | | | definitions-Wealth, welfare, | | | Scarcity and growth. | +-----------------------------------+-----------------------------------+ | 2-3 | **Agricultural economics:** | | | Meaning, definitions, | | | characteristics of agriculture, | | | Nature and scope of agricultural | | | economics. Distinction between | | | agriculture and industry, Role of | | | agriculture in economic | | | development. | +-----------------------------------+-----------------------------------+ | 4-5 | **Planning and agricultural | | | development:** Concept of | | | planning**,** Economic planning: | | | Concept & definitions, Features | | | of economic planning, | | | Objectives/need for economic | | | planning, benefits of planning, | | | Agricultural development during | | | different Five Year Plans in | | | India; **NITI Aayog: Origin, | | | Functions of NITI Aayog.** | +-----------------------------------+-----------------------------------+ | 6-9 | **Factors of production:** | | | Meaning, definitions; Land & | | | characteristics, factors | | | affecting productivity of land, | | | extensive and intensive | | | cultivation; Labour- | | | Characteristics of labour, | | | quantity and quality of labour- | | | Theories of population-Malthusian | | | and optimum theory of population, | | | Division of labour- meaning, | | | forms, merits and demerits of | | | division of labour, Efficiency of | | | labour; Capital -- | | | characteristics -- process of | | | capital formation; forms of | | | capital in agriculture; | | | Organization of business firms -- | | | Forms of business organizations | | | and their characteristics. | +-----------------------------------+-----------------------------------+ | 10-11 | **Land reforms:** Land tenure | | | systems- Zamindari system, | | | Ryotwari System, Mahalwari | | | System; land reforms- meaning and | | | objectives, abolition of | | | intermediaries, tenancy reforms, | | | recent polices on land reforms | | | and the progress achieved, | | | Concepts of agricultural land | | | holdings in India, Factors | | | determining size of farms | +-----------------------------------+-----------------------------------+ | 12-14 | **Theory of production:** Meaning | | | & definition of production and | | | production function. Meaning and | | | Types-Continuous & discontinuous | | | production function, Laws of | | | returns- Increasing, constant and | | | decreasing rate of returns; | | | LDMR-definition and its stages | | | and its assumptions, concept of | | | elasticity of production. | +-----------------------------------+-----------------------------------+ | 15-17 | **Scale of production:** Meaning, | | | classification of economies of | | | large-scale production: | | | | | | 1.Internal economies and 2. | | | External economies. Types of | | | internal and external economies. | | | Diseconomies of large scale | | | production and its advantages and | | | dis-advantages. | +-----------------------------------+-----------------------------------+ | 18-20 | **Theory of costs:** Meaning, | | | definitions, types of costs- | | | short run and long run costs and | | | fixed costs, variable costs, | | | average and marginal costs. Cost | | | curves (seven cost concepts), and | | | economies of scale--types of | | | internal and external economies, | | | and diseconomies. Other cost | | | concepts: nominal cost, real | | | cost, economic cost, explicit and | | | implicit costs, opportunity cost | | | and establishment cost. Revenue | | | concepts-Total revenue, Average | | | revenue and Marginal revenue and | | | profit maximization. | +-----------------------------------+-----------------------------------+ **Economics-** meaning and definitions-Wealth, welfare, Scarcity and growth. **Economics: Concept of economics, Reasons to Study Economics, definitions** **What Economics is all about?** **& why we study Economics?** - To understand the economic theory - To understanding the national & world economy - To understand how the social and economic changes are linked with economics - To build career in the related areas **[Meaning of the Word "Economics": ]** The word 'Economics' is derived from **Greek word** **OIKNOMICAS** i.e., '**Oikos'** meaning **'A House or Household'** and '**NOMOS**' meaning 'To Manage"**(Nemein-to Manage)**. Together therefore-"**A Household Management"** ***by using*** the **limited funds available** in the **most efficient manner** to derive **maximum satisfaction**. Economics therefore, Concerned with the **study of** **how people choose** to **use their scarce resources** to attempt to **satisfy their unlimited wants**. **[Origin of Economics]** ***All human activities** aimed to **generate income & its spending** (b/n resources & wants) are termed as **economic activities**, & are **responsible for** the **origin & development of Economics** as **a subject**.* *The **science of economics** is only **two centuries** **old**. It was **born with the publication** of **Adam Smith's "Wealth of Nation" in 1776**.* ***Originally,** it was known as "**Political Economy** \"which implies the **management of the resources of state*** - *Towards the **close of the 19^th^ century**, the subject **came to be known** form "**Political Economy" to "Economics".*** In **Today's World, "ECONOMICS"** has become one of the **most *important and very popular social sciences in the world*.** According to ***Paul Samuelson, an American economist*,** **"*Economics is the queen of the social sciences*".** - It **deals** with ***production, consumption, distribution & investment of goods & services*** in the economy. - Shows **how scarce resources** can **be used** to **increase wealth & human welfare**. - F**ocus of economics** center around the "**scarcity of resources**" and "the **choices among their alternative uses**". - **Knowledge of economics** helps to **compare alternatives** for choosing the best **alternative among them**. **Reasons to Study Economics** 1. Economics has its **[application in all forms of economic]**supply to the **[demand conditions]** in **the market** and can **take advantage** of the **market prices**. 3. **Uncertainty of output:** 4. **Seasonability of production:** 5. **Perishable nature of products:** While, in **[case of industry]**, the products are **non-perishable**, **[durable]** in nature and **[production]** remains **more stable**. As a result of this, the **[prices of these products remain]** **[more stable]**. 6. **Joint Products :** In case of **[industrial production]**, they are **[not jointly produced]** and **[even when]** are **[produced]** **[jointly it is easy to estimate]** within the same plant. 7. **Bulkiness of the products:** The nature of agril. products are **[bulky and pose problem]** in **[storage, transportation, processing, handling, distribution]**, etc and **[require]** **[high cost]** **towards these**. 8. **Problems of standardization:** The **[physical]** (**[size, shape, length]** etc) and **[quality]** (**colour**, **[ripeness]**, **taste**, **[nutrients]**, **appearance**, etc) **parameters** of agril. products are **[not standardized]**. **[T]here exists** a **difference w.r.t.** **[physical]** and **[quality parameters]** for the **[same product produced]** in **different areas, [by different farmers]** and **[even adjacent farmers]**. **No such standardization** is **possible**. There is a **[high variation within each product]** and **[within]** and **[between regions]**, even **[between farmers]** due to **[variation in the methods]** of production and **[varying agro-soil-climatic]** conditions. Lack of **[standardization pose problem]** in **[grading]** and **[pricing]** of the **produce**. Thus, **[cause a high price variation]** for the **[same commodity]**. In case of **[industrial production]**, there is a **[high uniformity]** in the products produced due to [**standardized production** **methods**] and **[definite]** inputs and output **relationship** between. Hence **it can** **be said that there is a standardization** by parts. Ex: Automobiles, **Industrial equipments**, **electronic gadgets**, tools, **computers**, etc. 9. **Long** **time lag in the production of agril. commodities:** - **[Changes in the demand conditions] for commodities:** Hence, **[farmers can't make definite plans]** to **[produce]** or **these changes** will **[upset the plans]** of **the farmers. [ ]** - Decisions of **growing crops on the [prevailing/current prices] may [not bring higher] farm [returns]** as the **[market prices]** must **[have declined]** by the **[time crop are harvested]**. - **[High price fluctuations]** in the **[prices leads]** **[to variations in the]** **[incomes of the farmers]**. - **Adjustment of Supply and Demand** is **[not possible immediately]** in **[case of agril. commodities]**. Any **increase in demand can't be accompanied** by **[increase in supply]** and **[vice-a-versa]**. **[Once]** the **[commodities are produced]** they **[can't be withdrawn]** or **[can't be stored]** for **[a longer period]** due to **[perishable nature]** of the products. This is because of **[biological and role of nature]** in **[agril. production]**, **[periodicity]** of operations. On the contrary, the l**[ag in time between investment to returns is very short]** in the **[industry]** as the **[nature has no role]** in its production. This **[results into high capital turnovers]** in **industry**. Due to **[less time lag]**, the **[firms in the industry]** can **[adjust their Supply]** to the **[Demand conditions]** and thereby **[reduce]** the **[price fluctuations]** in the **[market]**. Thus, enable them to **[get stable incomes]**. 10. **Requires large proportion of land:** Agriculture being **[land based/intensive production]** requires **[large land area]** against **[only a small area]** in **[industry]**. 11. **Inelastic nature of demand:** The demand for **agricultural commodities** does **not increase** with **decline in price** of the commodity **unlimitedly** as the **commodities are basic necessities** and can be **demanded up to certain level** and **not beyond**. 12. **Operation of the Law of Diminishing Marginal Returns:** The application of LDMR is found **[both in agricultural and industrial production]** and it **[sets earlier] in agriculture** when **[compared to industry]**. The **reasons for [early]** **[LDMR]** operation **[in agriculture]** production are **[dependence on nature], [biological production]-i.e., [Potentials of crop/varieties gets exhausted]** at **[some stage]** and **[crop]** **[stop responding]** to the **[quantity of inputs applied]** (**[variable input to the fixed]** resources), **Exhaustion of soil health**: **Soil** **[physical, chemical and biological properties]** get exhausted **[in the]** **[course of production period]** and thereby **[fail to respond to]** the **[applied input quantity]** and **[indivisible nature of labour.]** The **LDMR operate early** in agriculture as **the marginal efficiency** of the **variable input** in **[relation to the fixed resources]** in the production **[goes on decreasing]** **[at some stage in the production.]** The LDMR states **"If increasing amounts of one input are added to the other factors which are held constant, the amount of output added per unit of the variable input will eventually starts declining"** The operation **[of LDMR in agriculture serve as a biggest limitation]** to **[expand production]** or is a [**fundamental law**] which is **[affecting agricultural production]**. However, it **[can't be eliminated]** or **avoided** but **[can only be delayed] or [postponed]** for **[some time]** **using b[etter production technology]** and **[better management] practices**. **[On the contrary]** in case of **industrial production** the **[LDMR operates]**, but a **[very later stage]**. But **until then** **[the plant size can be increased]** to **[increase the production]** or **[undertake operation]** and **[maintenance/repairs]** of **[machines/equipments]** to **[prolong production efficiency]** **[thereby]** can **[expand production]**. **[After certain stage]** in production **(many periods)**, the **[LDMR operates]** **[even in]** the **[industry]** when the **[machines/plant becomes old]** and **[where]** the **[efficiency with which the inputs are converted into output]** by **[machines starts declining]**. **Role of agriculture in economic development:** Agriculture is the backbone of the economic system of any country and plays a major role in economic development of the country. In India, agricultural sector plays a strategic role in the process of economic development of a country. The agriculture sector is the backbone of an economy which provides the basic ingredients to mankind and now raw material for industrialization. It has already made a significant contribution to the economic prosperity of advanced countries and its role in the economic development of less developed countries is of vital importance. **Agriculture** plays a vital **role** in the **Indian** economy. Agriculture contributed in the initial two decades towards the total National output between 48% and 60%. At present, over 70 % of the rural households depend directly on **agriculture** as a means of living. The aggregate share of agriculture and allied sectors like agri-business, animal husbandry, fisheries etc., The present contribution of agriculture sector is about 15 per cent to the national income and provides employment to over 60% of the population. **According to Prof. Kinderberger, agriculture makes its contribution to economic development in several ways, viz:** \(1) By providing food and raw material to non-agricultural sectors of the economy, \(2) By creating demand for goods produced in non-agricultural sectors, by the rural people on the strength of the purchasing power, earned by them on selling the marketable surplus, \(3) By providing investable surplus in the form of savings and taxes to be invested in non-agricultural sector, \(4) By earning valuable foreign exchange through the export of agricultural products, \(5) Providing employment to a vast army of uneducated, backward and unskilled labour. As a matter of fact, if the process of economic development is to be initiated and made self-sustaining, it must begin for agricultural sector. **6. Its Contribution to National Income and capital formation:** **7. It is a Pre-Requisite for Raw Material:** **8. It helps in Phasing out Economic Depression:** During depression, industrial production can be stopped or reduced but agricultural production continues as it produces basic necessities of life. Thus it continues to create effective demand even during adverse conditions of the economy. **9. It is the main Source of Foreign Exchange for the Country:** **10. It helps to increase employment opportunities for rural people:** Agriculture provides employment opportunities for rural people on a large scale in underdeveloped and developing countries. It is an important source of livelihood. Generally, landless workers and marginal farmers are engaged in non-agricultural jobs like handicrafts, furniture, textiles, leather, metal work, processing industries, and in other service sectors. These rural units fulfill merely local demands. In India about 70.6% of total labour force depends upon agriculture. **11. It is the main source for improving the rural welfare:** It is time that rural economy depends on agriculture. The rising agricultural surplus caused by increasing agricultural production and productivity tends to improve social welfare, particularly in rural areas. **Role/Objectives of government interventions in agricultural development** 1. Land reforms for redistribution of surplus land to landless 2. Tenancy reforms; eliminated intermediary systems 3. Supply Capital required for agriculture 4. Create market infrastructure for agriculture inputs & products 5. Protection against natural calamities 6. To provide food both quantitatively and of quality. 7. To increase the supply of raw materials to industries 8. To Increase the employment and income levels 9. To promote export of agricultural commodities 10. To Improve the quality of life of the people (standard of living) **Planning and agricultural development:** Concept of planning**,** Economic planning: Concept & definitions, Features of economic planning, Objectives/need for economic planning, benefits of planning, Agricultural development during different Five Year Plans in India; **NITI Aayog: Origin, Functions of NITI Aayog.** **Concept of Planning:** Planning is nothing but **thinking before the action takes place.** It helps us to take a good decision in advance the way to deal with the situations, which we are going to encounter in future. It involves logical thinking and rational decision making. **Planning** is the process of deciding when, what, where and how to do a certain activity before starting to work. Planning is one of the fundamental management function, which involves** decision w.r.t** what is to be done, when is it to be done, how it is to be done and who is going to do it. It is an intellectual process which needs a lot of thinking before a formation of **plans**. **Planning** is to set goals and to make certain guidelines to achieve the goals. Agriculture planning includes all those measures undertaken by the government for agriculture development in the country. A good planning is based on the initial resources of the country to achieve the feasible goals and policies. In this way, domestic resources are planned for attaining economic stability. **Strategies of Planning : includes various strategies/policies such as** 1. Increase agricultural production -- by giving importance to agriculture sector in different Five Year Plans to improve transport, irrigation, institutional credit, marketing facilities, supply of quality inputs on time, consolidation of holdings, strengthening agriculture education, reducing population pressure on land, land reforms, cooperative farming and development of village and cottage industries. 2. Increase employment opportunities by adoption of new technologies, establishing agro-based industries and employment generation schemes 3. Reduce population pressure on land by way of developing alternative employment opportunities in secondary and subsidiary sectors 4. Reduce income inequality in rural sector by undertaking various rural development activities and earmarking higher and higher funds during various FYPs. **Economic planning:** Economic Planning has been adopted in different parts of the world for various reasons. Economic planning is a resource allocation mechanism and it is defined as a direct allocation of resources. Economic Planning is to make decision with respect to the use of resources. Economic Planning is a term used to describe the long term plans of government to co-ordinate and develop the economy. Economic planning in India was started in 1950 is necessary for economic development and economic growth. **Definitions of economic planning:** Prof. Robbins : "collective control or supervision of private activities of production and exchange." "the direction of productive activity by a central authority". : : **Features of Economic Planning:** There are eight **elements** involved in a good **plan** are as under: 1. Definite Objective 2. Central **Planning** Authority 3. Democratic Character 4. Only an Advisory Role of **Planning** Commission 5. Comprehensiveness 6. **Planning** for Consumption 7. Rational Allocation of Resources 8. Feasible Policies and Targets #### History of economic planning in India: #### Planning is a continuous process that involves choices and decision making about allocation of available resources with the objective of achieving effective and efficient utilization and growth of these resources. In India, planning is done both at the center as well as the state level. Economic planning is done by the central authority after a complete survey of the economic situation. The policy objectives are designed based on the future development goals of the country. In India, until 2014, planning was the responsibility of the National Planning Commission that was established on March 15, 1950. The first five-year plan was prepared by the Planning Commission for the period 1951-56. The first Prime Minister of India, Pandit Jawaharlal Nehru was the first chairman of the Planning Commission. **The Prime Minister was always the ex-officio chairman of the Planning Commission.** The Deputy Chairman who was nominated by commission held the rank of a cabinet minister. In 2014, the government led by **Prime Minister Narendra Modi dissolved the Planning Commission** and **replaced it by the think tank called NITI Aayog**. NITI here, stands for National Institution for Transforming India. **Five Year Plans in India:** The economy of India is based in part on planning through its five year plans which are developed, executed and monitored by planning commission. The process of planning is inspired by **certain long term objectives.**\ which constituted General objectives of Five Year Plans and were centered towards a high rate of growth, Economic self-reliance, Social justice, Modernization of the economy, Economic stability, **Raising Investment Income, Removal of Poverty, and Full Employment ** #### #### Objectives/need of economic Planning: Planning plays a very significant role especially in a developing country like India. The following are some of the objectives of economic planning in India. #### **1. Economic Growth and Development:** Every five-year plan had a growth target that had to be achieved by the end of the planning period. In order to bring about an improvement in standard of living of the people, the per capita income has to rise. A rise in per capita income is necessary to overcome the problems of poverty and its effects. **2. Increase in Employment:** The developing economies generally suffer from open unemployment and disguised unemployment. India is no exception to it. Slow growth of the agricultural sector and lack of investments in the industrial sector are major causes for high levels of unemployment in the country. Measures have been taken in every five- year plan to create employment opportunities, thereby, increasing labor productivity. **3. Increase in Investment:** Economic growth cannot be achieved unless adequate investments are made to bring about an increase in output capacity. Investments help in creating employment opportunities. One of the objectives of planning is, thus, to push up the rate of investment to ensure smooth flow of capital to various sectors of the economy. **4. Development of Infrastructure :** Planning alone can help an underdeveloped economy to build up its infrastructure -- irrigation and power, transport and communication and schools and hospitals. The establishment of these social economic overheads is essential for an all-round harmonious and integrated development. The private enterprise is guided by profit motive and is not interested in these items of social gain. **5. Social Justice and Equity:** The five-year plans also focused on reducing inequalities in the distribution of income in order to ensure social justice. Prevalence of inequalities in the economy results in exploitation of the poor wherein the rich become richer and the poor become poorer. **6. Balanced Regional Development:** In India, there exists a wide gap in the development of different states and regions. While Gujarat, Tamil Nadu, Maharashtra etc., enjoy high levels of development, there are states like Bihar, Odisha, Nagaland etc., which remain backward. Planning aims at bringing about a balanced regional development by diverting more resources to the poor and backward regions. **7. Modernization:** Modernization refers to a shift in the composition of output, innovation and advancement in technology. Modernization helps an economy to advance at a faster pace and compete with the developed nations of the world. The objective of planning is to encourage and incentivise investments into various sectors of the economy, especially the industrial sector, to help them adopt new technologies and thus, increase efficiency. #### 8. Development of Money and Capital Markets : The expansion of the domestic and foreign trade requires not only the development of the agricultural and industrial sectors along with social and economic overheads but also the existence of financial institutions. Money and Capital market are underdeveloped countries are primary stage. This factor acts as an obstacle to the growth of industries and trade. The planning authority which can control and regulate the domestic and foreign trade in the best interests of the economy. #### 9. To improve and Strengthen Market Mechanism : The rationale for planning arises in such countries to improve and strengthen the market mechanism. The market mechanism works imperfectly in underdeveloped countries because of the ignorance and unfamiliarity with it. A large part of the economy comprises the non-monetized sector. The product, factor, money and capital markets are not organized properly. The market mechanism is required to be perfected in underdeveloped countries through planning. **Benefits of planning : Major achievements of planning in India are** 1. Economic growth 2. Progress in Agriculture 3. Industrial growth 4. Public sector 5. Infrastructure 6. Education and health care 7. Growth of service sector 8. Savings and investments 9. Science and technology 10. Foreign trade **Failures of Economic Planning in India** 1. Rise in Prices: 2. Increase in unemployment: 3. Slow Growth in Production Sector: 4. Inequality in Distribution of Income and Wealth: 5. Inefficient Administration: 6. Lack of Strong Foundation: 7. Extra Ambitious: 8. Paradox of Saving and Investment: #### #### Agricultural development during different Five Year Plans **First Five Year Plan:** (1951 − 56) : It was formulated for the period 1951-56, when India was confronting the problems of huge influx of refugees, food shortage and severe inflation. The plan, thus, focused on the primary sector, that is, the agricultural sector to increase the food production in India to overcome the crisis. The monsoon was favorable to agriculture in those years and therefore, the production increased. The first five-year plan was quite successful as the targeted growth rate was 2.1 percent and the achieved growth rate was 3.6 percent. **Second Five Year Plan:** (1956 − 61) It was formulated for the period 1956-61 and It shifted basic emphasis from agriculture to industry or rapid industrialization. The plan aimed at the development of heavy and basic industries and conceived that agricultural sector could be given lower priority as it has been able to achieve its targets in the previous plan. The second plan achieved only a moderate success due to the severe shortage of foreign exchange on account of huge imports to meet the requirements of the industrial sector. The actual growth rate achieved in the plan was 4.3 percent against the target of 4.5 percent. **Third Five Year Plan:** (1961 − 66) It was formulated for the period 1961-66. Indian economy has entered a take-off stage. Therefore, its aim was to make India a 'self-reliant' and 'self-generating' economy. Also, it was realized from the experience of first two plans that agriculture should be given the top priority to suffice the requirement of export and industry. However, the Indo-China conflict in 1962 and the Indo-Pakistan conflict in 1965 made the plan a complete failure as huge amount of expenditure had to be allocated to meet the defense requirements. The actual growth rate achieved in the plan was 2.8 percent as against the target of 5.6 percent. **Three Annual Plans (1966 − 69):** Plan holiday for 3 years. The prevailing crisis in agriculture and serious food shortage, so there is a emphasis on agriculture during the Annual Plans. During these plans a whole new agricultural strategy involving wide-spread distribution of High-Yielding Varieties of seeds, fertilizers, exploitation of irrigation potential and soil conservation was put into action. **Fourth Plan:** (1969 − 74). Main emphasis on agriculture's growth rate so that a chain reaction can start. Fared well in the first two years with record production but last three years were failure because of poor monsoon. Had to tackle the influx of Bangladeshi refugees before and after 1971 Indo-Pak war. **Fifth Plan:** (1974 − 79) The plan proposed to achieve two main objectives viz, 'removal of poverty' (Garibi Hatao) and 'attainment of self reliance' through promotion of high rate of growth, better distribution of income and a very significant growth in the domestic rate of savings. The plan was terminated in 1978 (instead of 1979) when Janta Govt. Came to power. **Rolling Plan:** (1978 − 80) There were 2 Sixth Plans. First one is by Janta Govt (for 78 − 83) which was in operation for only 2 years. Second is by the Congress Govt. when it returned to power in 1980. **Sixth Plan:** (1980 − 85) Objectives: Increase in national income, modernization of technology, ensuring continuous decrease in poverty and unemployment, population control through family planning, etc. **Seventh Plan:** (1985 − 90) The Seventh plan emphasized policies and programs which aimed at rapid growth in food-grains production, increased employment opportunities and productivity within the framework of basic tenants of planning. It was a great success, the economy recorded 6% growth rate against the targeted 5%. **Eighth Plan:** (1992 − 97) The eighth plan was postponed by two years because of political situation at the Centre and it was launched after a worsening Balance of Payment position and inflation during 1990 − 91. The plan undertook various drastic policy measures to combat the bad economic situation and to undertake an annual average growth of 5.6%. Some of the main economic performances during eighth plan period were rapid economic growth, high growth of agriculture and allied sector, and manufacturing sector, growth in exports and imports, improvement in trade and current account deficit. **Ninth Plan:** (1997 − 2002) It was developed in the context of four important dimensions: Quality of life, generation of productive employment, regional balance and self-reliance. **Tenth Plan:** (2002 − 2007) to achieve the growth rate of GDP\@8%.Reduction of poverty ratio to 20% by 2007 and to 10% by 2012.Providing gainful high quality employment to the addition to the labour force over the tenth plan period. Universal access to primary education by 2007.Providing gainful and high-quality employment at least to the addition to the labor force.Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.20-point program was introduced. **Eleventh Plan:** (2007-2012) The overall and comprehensive picture of the growth and plan performance during the 11th Five Year Plan (2007 -- 2012) and performance of various Flagship programmes being implemented in the state for Economic growth, Ensuring Equity and Social Justice **Twelvth Plan:** (2012-2017). The Twelvth Five-Year Plan of the Government of India has decided for the growth rate at 8.2% but the National Development Council (NDC) on 27 Dec 2012 approved 8% growth rate for 12th five-year plan. **NITI Aayog** (**National Institution for Transforming India**): On 1 January 2015 a Cabinet resolution was passed to replace the Planning Commission with the newly formed **NITI Aayog** (**National Institution for Transforming India**). The Union Government of **India** announced the formation of **NITI Aayog** on 1 January 2015. The National Institution for Transforming India, also called NITI Aayog, was formed via a [**resolution of the Union Cabinet on January 1, 2015**](https://niti.gov.in/sites/default/files/2018-12/cabinet-resolution_EN.pdf). NITI Aayog is the premier policy **'Think Tank'** of the Government of India, **providing both directional and policy inputs**. While **designing strategic and long term policies and programmes** for the Government of India, NITI Aayog also provides **relevant technical advice to the Centre and States**. [**The Governing Council of NITI**](https://niti.gov.in/sites/default/files/2018-12/Composition-of-Governing-Council-of-NITI-Aayog.pdf), with The Prime Minister as its Chairman, comprises Chief Ministers of all States and Lt. Governors of Union Territories (UTs). The Government of India, in keeping with its reform agenda, constituted the NITI Aayog to replace the Planning Commission instituted in 1950. This was done in order to better serve the needs and aspirations of the people of India. An important evolutionary change from the past, NITI Aayog acts as the quintessential platform of the Government of India to bring States to act together in national interest, and thereby fosters Cooperative Federalism. On 7 June 2018, the Prime Minister approved the reconstitution of NITI Aayog to include Ex-officio members and special invitees. **NITI Aayog \[National Institution for Transforming India\]** It is policy think tank of Government of India, established with the aim to achieve Sustainable Development Goals and to enhance cooperative federalism by fostering involvement of State Governments in the economic policy-making process using a bottom-up approach. Its initiatives include \"15 year road map\", \"7-year vision, strategy and action plan\", AMRUT \[Atal Mission for Rejuvenation and Urban Transformation\], Digital India, Atal Innovation Mission, Medical Education Reform, Agriculture reforms (Model Land Leasing Law, Reforms of the Agricultural Produce Marketing Committee Act, Agricultural Marketing and Farmer Friendly Reforms Index for ranking states), Sub-Group of Chief Ministers on Swachh Bharat Abhiyan, on Skill Development, Task Forces on Agriculture and Elimination of Poverty, and Transforming India Lecture Series. ========================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================= It was established on 1-1-2015, by the NDA government, to replace the Planning Commission which followed the top-down model. Prime Minister is the Ex-officio chairman. Permanent members of the governing council are all state Chief Ministers, chief ministers of Delhi and Pondicherry, Lieutenant Governor of Andaman and Nicobar, and vice chairman nominated by the Prime Minister. In addition, temporary members selected from the leading universities and research institutions include a chief executive officer, four ex-official members and two part-time members. ================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================= Functions ========= 1. To evolve a shared vision of national development priorities sectors and strategies. 2. To foster cooperative federalism through structured support initiatives and mechanisms, recognizing that strong States make a strong nation. 3. To develop mechanisms to formulate credible plans at the village level. 4. To pay special attention to the sections of our society that may be at risk of not benefiting adequately from economic progress. 5. To design strategic and long term policy and programme frameworks and initiatives, and monitor their progress and their efficacy. The lessons learnt through monitoring and feedback will be used for making innovative improvements, including necessary mid-course corrections. 6. To provide advice and encourage partnerships between key stakeholders and national and international like-minded Think tanks, as well as educational and policy research institutions. 7. To create a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and other partners. 8. To maintain a state-of-the-art Resource Centre, be a repository of research on good governance and best practices in sustainable and equitable development. 9. To actively monitor and evaluate the implementation of programmes, including the identification of the needed resources so as to strengthen the probability of success and scope of delivery. 10. To focus on technology upgradation and capacity building for implementation of programmes. **Members** 1. The Prime Minister as the Chairperson. 2. Vice Chairperson: Rajiv Kumar 3. Ex-Officio Members: Rajnath Singh, Arun Jaitley, Suresh Prabhu and Radha Mohan Singh 4. Full-time Members: Bibek Debroy (Economist), V. K. Saraswat (former DRDO Chief), Ramesh Chand (Agriculture Expert) and Dr. Vinod Paul (Public Health expert) 5. Chief Executive Officer (CEO): Amitabh Kant. **The NITI Aayog** is a policy think tank of the Government of India, established with the aim to achieve sustainable development goals with cooperative federalism by promotion of the involvement of State Governments of India in the economic policy-making process using a bottom-up approach. **[Website](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+website&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdSSz0620s8uiM8p18_Mi0_Oz83NLC7OzM-zKk9NKs4sSV3EKpSXWZKpkJhYmZ-uABUEAHpjhLtFAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAZegQIDxAV): **[niti.gov.in](http://www.niti.gov.in/) **[Formed](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+formed&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdSSy0620s8uiM8p18_Mi0_Oz83NLC7OzM-zSssvyk1NWcQqmJdZkqmQmFiZn64AEQMAMZD2LkMAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAaegQIDxAZ): **1 January 2015 **[Objectives](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+objectives&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdRSyk620s8uiM8p18_Mi0_Oz83NLC7OzM-zyk_KSk0uySxLLV7EKpqXWZKpkJhYmZ-ugBAHAJcK-5xLAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAbegQIDxAc): **To promote involvement and participation in the economic policy-making process by the State Governments of India **[Jurisdiction](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+jurisdiction&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdRSyU620s8uiM8p18_Mi0_Oz83NLC7OzM-zyiotyixOyUwuAXIWsYrnZZZkKiQmVuanKyDLAABZVY8UTwAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAcegQIDxAf): **[Government of India](https://www.google.com/search?biw=1366&bih=625&q=Government+of+India&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKVTiBHGMCpJyy7VUspOt9LML4nPK9TPz4pPzc3Mzi4sz8_OsskqLMotTMpNLgJxFrMLu-WWpRXm5qXklCvlpCp55KZmJAAMOfOxWAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQmxMoATAcegQIDxAg) **[Headquarters](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+headquarters&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdRSyU620s8uiM8p18_Mi0_Oz83NLC7OzM-zykhNTCksTSwqSS0qXsQqnpdZkqmQmFiZn66ALAMA_CCsuE8AAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAdegQIDxAj): **[New Delhi](https://www.google.com/search?biw=1366&bih=625&q=New+Delhi&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKVTiAHFScsoMtFSyk630swvic8r1M_Pik_NzczOLizPz86wyUhNTCksTi0pSi4oXsXL6pZYruKTmZGQCAJD6mSNLAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQmxMoATAdegQIDxAk) **[Chairperson](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+chairperson&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdRSzSi30k_Oz8lJTS7JzM_Tzy9KT8zLrEoEcYqtkjMSM4tyE_MWsYrlZZZkKiQmVuanK4BFC1KLivPzAEaZeYRPAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAfegQIDxAn): Prime Minister,** [Narendra Modi](https://www.google.com/search?biw=1366&bih=625&q=Narendra+Modi&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKVTiBHGMLM0KjbRUM8qt9JPzc3JSk0sy8_P084vSE_MyqxJBnGKr5IzEzKLcxLxFrLx-iUWpeSlFiQq--SmZAK1jLvBRAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQmxMoATAfegQIDxAo) (ex-officio chairman) **Permanent member:** All state chief minister and governors of union territories **[Founder](https://www.google.com/search?biw=1366&bih=625&q=niti+aayog+founder&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKdRSzU620s8vSk_My6xKLMnMz0PhWKXll-alpBYtYhXKyyzJVEhMrMxPV4AKAgBT2_VOSwAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQ6BMoADAgegQIDxAr): **[National Democratic Alliance](https://www.google.com/search?biw=1366&bih=625&q=National+Democratic+Alliance&stick=H4sIAAAAAAAAAOPgE-LWz9U3MDTKMUxLKVTiBHGMTCrTzbRUs5Ot9POL0hPzMqsSSzLz81A4Vmn5pXkpqUWLWGX8wAKJOQouqbn5yUVAXrKCY05OZmJecioAf-QRBmAAAAA&sa=X&ved=2ahUKEwjdjYmmyJPlAhWBXCsKHRMvDMgQmxMoATAgegQIDxAs) **Vice Chairperson**: Rajiv Kumar **Ex-Officio Members**: Rajnath Singh, Arun Jaitley, Suresh Prabhu and Radha Mohan Singh **Full-time Members**: Bibek Debroy (Economist), V. K. Saraswat (former DRDO Chief), Ramesh Chand (Agriculture Expert) and Dr. Vinod Paul (Public Health expert) **Chief Executive Officer (CEO):** Amitabh Kant. **Factors of production:** Meaning, definitions; Land & characteristics, factors affecting productivity of land, extensive and intensive cultivation; Labour- quantity and quality of labour, forms of division of labour, merits and demerits of division of labour, efficiency of labour, Capital -- characteristics -- process of capital formation; forms of capital in agriculture, Organization of business firms -- Forms of business organizations and their characteristics. **FACTORS OF PRODUCTION** **Factors of production** **Meaning:** Productive resources used to produce a given produce are called factors of production. Services of resources are also used up in the production process. These productive resources may be raw materials, services of various categories of labourers, or capital supplied by capitalists or entrepreneurship of an entrepreneur who assembles the other factors of production. These factors or resources are also called inputs. Thus, the factors of production are traditionally classified as land, labour, capital and organization. Production, in economics, is understood as the transformation of inputs (or) factors into outputs. For productions of anything, certain factors or agents are required. The factors /agents required for production are called as factors of productions. All available factors available for production of any things are categorized into four factors [Four factors of production:] 1. Land 2. Laborer 3. Capital 4. Organization **[Relative importance of factor of production ]** Relative importance of factor of production varies from time to time. In the early stages of cultivation, Land was considered as the most important factors of production. After some time, when man began to exploit natural resources, labour was considered as more important than land. Today, capital and organization are considered as most important. Land & characteristics: **Land** Land, as ordinarily understood, refers to earth's surface. But in economics, the term land is used in a very wider sense. land means not only soil but also all other nature resources available to man for the production of wealth. Marshall defined land as "the materials and forces which nature gives freely for man's aid in land and water, in air and light and heat". Land refers to those natural resources that are useful and scarce. In other words, land stands for all natural resources, which yield an income or have an exchange value. **Importance of land:** 3. Location of industry depends on land resources. 4. Development of land depends of transportation and topography of land or other natural resources. 5. Land influences the occupation, life of the standard of living of the people of the country. **Characteristics Features of Land:** Land as a factor of production has the following characteristic features: 1. Free gift of nature and Permanent: Fixed in nature/ limited in area: Total land surface is fixed (cannot increase or decrease). 2. Land is fixed in quantity: It is said that land has no supply price. That is, price of land prevailing in the market cannot affect its supply; the price may be high or low, its supply remains the same. 3. Land cannot be created by human efforts. 4. Land has original and indestructible properties: it cannot destroy by human beings. Loss of fertility is temporary or after sometime it gains back its fertility. 5. Land lacks mobility in the geographical sense: It cannot be shifted or removed physically from one place to another. 6. Land differs in fertility: Varies in quality and value: Land is not uniform in quality or fertility 7. Subject to LDMR: value of land differs from one locality to another. Application of more and more units of labour and capital to same pieces of land results in less than proportionate increase in production. Land thus, stands for **all natural resources** which yield an income and all free gift of nature in the form in which they exist before man begins to work upon them. **Factors affecting productivity of land:** The following factors affect the productivity of land in a country The factors affecting the productivity of land are broadly classified as - Physical factors - soil fertility, soil drainage, slope angle, aspect, scenery, mineral potential etc. - Economic factors - distance from markets, demand for different uses. - Social factors - **population** size, legislation, government policies. **They can be further elaborated as below** #### 1. Qualities of Land: The productivity of land depends on its natural qualities. #### #### #### #### #### #### organizational #### #### 9. Rural Environment: The developing countries are characterised by mass illiteracy and a conservative, superstitious social atmosphere in rural areas. The farmers, in general, are also reluctant to use modern methods of agriculture. #### 10. Pressure of Population on Agriculture: The high man-land ratio in the developed countries of the world is contrasted by low man-land ratio in the developing countries (of Asia in particular). Overcrowding in agriculture has resulted in fragmentation of landholdings and pseudo- unemployment in agriculture. #### Size of Holdings: In India, due to large population pressure the per capita landholding size is low to very low, which hamper mechanization. Moreover, small holdings cause great wastage of time, labour and cattle. Moreover, adopting scientific methods of cultivation is difficult in small holdings. #### Pattern of Land Tenure: In India, for example, ' the abolition of the zamindari system failed to improve the condition of tenants. The cultivators have to pay high rents for their lands. Under such adverse circumstances, productivity is a casualty. #### 13 **Concepts of extensive and intensive cultivation** There are various farming techniques that emerged in the past few years to increase the productivity of an agricultural land. Intensive farming and extensive farming are two such farming techniques that are practiced by farmers to increase the yield. **Intensive Farming**: It is a **farming** **method** that uses higher inputs and advanced agricultural techniques to increase the overall yield of crop on a limited land. **Extensive Farming** is one in which more and more land is brought under **cultivation** to increase the output produced. **Intensive Farming** **Extensive Farming** ----------------------- ----------------------- Labour- Meaning of labour, quantity and quality of labour, forms of division of labour, merits and demerits of division of labour, efficiency of labour, In the ordinary language, the term **"labour"** means any physical or manual work done by an unskilled worker which is done for a reward. But, in economics the term labour is used in a wider sense. In the words of prof. Marshall, "Labour is any exertion of mind or body undergone partly or wholly with a view to securing some good other than the pleasure derived directly from the work". According to **S. Evelyn Thomas** -- "Labour includes all **manual and mental effort** undertaken **for a reward**" From these definitions, it is clear that, in economics, the term **"labour" means** **any work, whether, manual or mental work done** by a person for ***a monetary consideration*** or ***reward.*** In other words, if refers to **any human effort physical or mental**, which results in the **production of wealth** (I.e. **goods and services**) and **for which** some **monetary reward is paid**. But **free labor i.e.** any work, physical or mental, **undertaken for pleasure** or **out of love and affection** **without expecting any monetary reward** is **not labour**. Accordingly, the work of factory worker, mine worker, farm worker, teacher, doctor, player, actor, singer, etc. For which some monetary reward is paid is labour. On the other hand, the service of a wife to the husband or the service of a mother to the children rendered out of love and affection without expecting any monetary reward cannot be considered as labour. Labour is an important factor of production. Without labor production in unthinkable. Farther, the need for labor arisen in all productive activities. Again, labor not only produces wealth but also consumes wealth. **[Characteristics of labour: ]** 1. Inseparable or Labour cannot be separated from the labourer-Labour is inseparable from the labourer. I.e. labour cannot be separated from the labourer. So, the labourer has to deliver his labour (I.e. service) in person. 2. Labour is highly perishable: Labour is perishable I.e. labour cannot be preserved or stored. So a day's labour lost is lost forever. In other words, if the labour or service of a labourer is not used on a particular day, it is lost forever. 3. Sells only his labour: A labourer sells only his labour, and not himself. According to Marshall," The worker sells his work, but he himself remains his own property". 4. Human: Labour is human. A laborer has feelings, likes and dislikes. So he cannot like a machine. Further, unlike a machine, a labourer needs healthy surroundings, rest and recreation and good treatment from the employer. 5. Differs in labour efficiency : labour differs in efficiency all the labourers do not have the same efficiency some are more efficient and others are less efficient. This is because some are strong and healthy, while others are weak and unhealthy some are intelligent, while others are dull. Some are educated and trained, while others are illiterate and untrained. Again, the efficiency of the same labourer differs from place to place, and from time to time. 6. Labour is Less mobile: Labour is less mobile than capital labour moves slowly between occupation and between places. Prof.Marshall has rightly remarked "labour is the most difficult commodity to be transported." This is because of the difference in language, religion, culture, sentiments, likes and dislikes of the labourers. 7. Labourer has a weak bargaining power: As labour is highly perishable, it has weak bargaining power. Individually, a worker cannot bargain with his employer for higher wages or better working conditions. Hence, labourers have to accept low wages rather than being idle or unemployed. However, collectively (I.e. through trade unions), workers can increase their bargaining power. 8. Supply is independent of demand: The supply of labour is almost independent of the demand for etc. That --means, the supply of labour cannot be easily and readily increased or decreased in ascendance with the changes in demand for etc. 9. The supply of labour changes slowly. Supply of labour cannot be curtailed immediately, even if wages fall. This is due to the fact that labourers must earn their subsistence, somehow. Conversely, increase in labour supply depends on new births and a long period of training **Quantity and Quality of labour** The amount of labour available in a country depends on two factors: 1\) Quality of labour 2\) Quantity of labour 1.a) Qualitative Aspect of Labour Qualitative aspects of labour refer to the efficiency of labour. Efficiency of labour means the amount of work, which a labourer can do with minimum cost and minimum time. Efficiency of labourer refers to the work turned out by a labourer per unit cost and per unit time. The following are some of the **important factors, which influence efficiency of labour**: i\) **Race:** Hereditary and racial characters influence the efficiency of labour. The efficiency of Japanese is higher than that of other human races. ii\) **Climate:** Cool climate is more conducive for hard work than the hot climate. iii\) **Education:** A higher educated or technically trained man has more efficiency than an uneducated or untrained person. iv\) **Personal Qualities:** If a person has a strong physique, mental alertness and intelligence, his efficiency will be greater. v\) **Organization and equipment:** A well-organized labour combined with sophisticated equipments would improve labour efficiency. vi\) **Environment**: Good lighting, ventilation and recreation facilities would improve labour efficiency. vii\) **Working hours:** Long working hours without sufficient intervals will reduce the efficiency of labour. viii) **Fair and prompt payment:** High and prompt payment to a labourer would increase his efficiency. ix\) **Labour organization:** If labourers are properly organized in the form of strong trade union, their efficiency will go up. x\) **Welfare activities:** Welfare activities like provision of housing, transport and educational facilities, insurance benefits, social security scheme etc. would increase labour efficiency. 2\) **Quantitative Aspect of Labour** Quantitative aspect of labour refers to the size of working population in a country. There are certain theories of population, which explain why and how population increases and they also indicate the optimum size of population. Theories of population can be classified into two categories on the basis of \(i) food supply (Malthusian theory of Population) and \(ii) per capita output (Optimum theory of Population). i\. **Malthusian Theory of Population:** Thomas Robert Malthus (1766-1834), an English clergyman, propounded this theory in his famous book entitled **"An Essay on the Principles of Population"(1798).** **The fundamental propositions of the Malthusian theory are given below:** 1\) The size of population in a country is dependent on the production of food grains. If food supply is large, the country can support a large population. If food supply is small, the country can support only a small population. In other words, population is necessarily limited by the means of subsistence (food). 2\) Population tends to grow in geometric progression, viz., 1,2,4,8,16 and so on. In short, population gets doubled every 25 years. 3\) Food production tends to grow in arithmetic progression, viz., 1,2,3,4,5 and so on. In short, there will be a constant addition to food supply every 25 years. He thought that there is no limit to fertility of human beings. He said, "Men multiply like mice in the barn-yard". But the power of land to produce food is limited. 4\) Population increases at a faster rate than food production. Population always increases when the means of subsistence increases, unless prevented by some powerful and obvious checks. 5\) There are two types of checks, which can keep population at a level with the means of subsistence. They are the preventive and positive checks. Preventive checks would reduce the size of population by bringing down the birth rate. They are applied by man himself voluntarily. They include (a) celibacy, b) late marriage and (c) self control in married life. Positive checks reduce the growth of population by increasing the death rate. If people do not adopt preventive checks, nature will tend to be furious and impose certain checks to arrest the growth rate of population and they are known as positive checks. The positive checks are famines, epidemics, wars, earthquakes, floods, etc. Malthus recommended the use of preventive checks, if mankind was to escape from the nature's positive checks i.e., misery. **b) Criticism of Malthusian Theory** 1\) In later editions of his book, Malthus dropped the expressions of geometric and arithmetic progressions but still maintained that the increase in population would exceed the growth in food supply. However, in many Western countries, through the use of more capital and technology, food grain production was increased tremendously. In fact, the rate of increase of food production has been much greater than the rate of population growth in these countries. 2\) Malthus said that the population would increase, if the means of subsistence increase. However, when the standard of living of people increases in a country, the size of family gets reduced. 3\) Malthus compared population only with food production. He should have compared the growth of population with total production of all commodities. For example, Great Britain is able to export industrial products to other countries in exchange for food grains. 4\) Along with the expansion of population, it is not only the demand, but also the supply of food grains, which increases with the increase in the labour power of the country. It is argued that a child, on being born, has not only a mouth to be fed, but also has two hands to work. 5\) According to professor Seligman, the problem of population is not merely one of size, but of efficient production and equitable distribution. If with the expansion of population, production also increases and the increased production and national income are equitably distributed, then increase in population may do no harm to the country. **c) Does the Malthusian Theory Apply to India?** The Malthusian Theory is applicable to India to some extent. The population growth rate was 2.14 per cent per annum (1981-91) and the food grain production growth rate was 2.52 per cent (1949-50 to 1995-96). However, birth rate and death rate are very high in India. This is a symptom of over population. The average expectation of life is still very low. Standard of living in India is also very low. The country is being suffered by natural calamities like flood, drought, epidemics, and so on. Finally, there is a very heavy toll of human life due to communal clashes in India. Thus, except food grain production, all other development indicators are not favourable for the development of the country. **ii) Optimum Theory of Population** The optimum theory of population was propounded by **Edwin Cannan** in his book Wealth published in 1924 and was popularised by **Robbins, Dalton** and **Carr-Saunders**. Unlike the **Malthusian** theory, the optimum theory does not establish relationship between population growth and food supply. The optimum theory attempts to define what would economically be the ideal size of population for a particular country. According to the optimum theory, there is a particular size of population, which along with the existing natural resources and a given state of technology yields the highest income per capita in a country. **a) Under population:** If population of a country is below the optimum size, the country is said to be under-populated. In under populated country, the natural and capital resources are not fully exploited (utilized). **b) Over population:** If the population is in excess of optimum size, the country is said to be over populated. Following are some of the problems to be faced by over-populated country. 1\) Average productivity will decrease. 2\) Per capita income will be very low. 3\) Standard of living will fall. If the quantity of labour is small relative to the natural resources, then even the actually available resources remain under-utilized. If the population increases and more labourers become available to be combined with the given stock of the natural resources and capital equipments, out put per capita or per capita income will rise. As population continues to increase, a point will finally be reached when capital and natural resources are fully utilized and, therefore, output per capita is the highest. **The level of population at which per capita output (income) is the maximum is called the optimum population.** If population still goes on increasing, that is, crosses the optimum point, then the out put per capita will start declining. The country would then become over-populated. Optimum Theory of Population \| Economics In the figure 4, at Po level of population, the output per capita (MPo) is the highest. If the population increases beyond Po, output per capita falls. Therefore, Po is the optimum population. If the population of the country is less than OPo, it will be under-populated and if the population is more than OPo, it will be a case of over population. As a result of technological progress and increase in the stock of resources in the country there will be its impact on the per capita output/income and optimum population (Fig 5). There will be up word shift in the population curve. i.e., the **size of optimum population also increases (OP~1,~ OP~2,~ OP~3~)** along with **increase in the per capita output/income**. **Dalton has given a formula** with which we can judge the extent to which the actual population of a country deviates from the optimum population. The extent of deviation is called mal-adjustment. The formula is Po = A-O / O. Where Po is maladjustment, A is actual population and O is optimum population. If Po is negative, the country is under-populated. If Po is zero, the country has optimum population and if Po is positive, the country is over populated. For instance, if the actual population is 80 crores and the optimum population is 40 crores, then M=80-40 / 40 =1. This indicates that the country is over populated. On the other hand, for instance, if the actual population is 40 crores and the optimum population is 80 crores, then M=40-80 / 80 = - 0.50 This indicates that the country is under populated. **Criticism on Optimum Theory of Population** 1\) It is almost impossible to determine the optimum size of population, as it is very difficult to estimate the level of capital stock available in a country. 2\) As the natural and capital resources continuously change, the size of optimum population is also subject to change. **Malthusian Theory and Optimum Theory of Population** 1\) Malthus focused his attention on food production, whereas the optimum theory takes into consideration of economic development in all its aspects. 2\) Malthus seemed to be thinking of maximum number for a country, which, if exceeded, would bring misery. According to the optimum theory, there is no rigidly fixed maximum population. 3\) According to Malthus, famine, war and disease were the indicators of over population. But the declining trend of per capita output would indicate the over population as per the optimum theory. **Division of Labour** **Meaning of division of labour:** The separation of a total work into a number of tasks, with each task performed by a separate person or group of persons who are trained to do the task. It is most often applied to systems of mass production and is one of the basic organizing principles for increasing the labour efficiency. For example , the process is split up into many different parts. Design, hardware, software, manufacture, marketing, production and assembly When the making of an article is split up into several processes and each process is entrusted to a separate set of workers, it is called division of labour. Division of labour is associated with the labour efficiency and it helps in large scale production. For instance, making the number of chairs will be more, if the process is split up into different parts like making seat, back-rest, and legs and then assembling the parts instead of making the chairs individually. **Forms of Division of labour:** **The following main forms of division of labour may be mentioned** 1. **Occupational or Simple Division of Labour** 2. **Complex Division of Labour** 3. **Territorial or Geographical Division of Labour** **1. Occupational or Simple Division of Labour** When the production of a commodity becomes the occupation of the worker, it is called occupational division of labour. Thus, the production of different goods has created different occupations. The caste system in India is perhaps the best example of the occupational division of labour. The work of farmers, cobblers, carpenters, weavers and blacksmiths is known as occupational division of labour. **2. Complex Division of Labour:** This means division into tasks or complete processes. For example, making of cloth is divided into processes of spinning, sizing, weaving, bleaching, finishing, etc. The work may be further split up into incomplete processes. It is said that making a pin, in a modern factory, is divided into 18 processes. **3.Territorial or Geographical Division of Labour:** This is also known as localization of industries. Certain places, state, or regions come to specialize in the making of certain articles which may be the most suitable geographically for the production of that commodity., e.g., Wool industry at Ludhiana, cotton textiles in Ahmedabad and Bombay, jute industry in Calcutta, Tea industry in Assam, etc. etc. **1) Merits /Advantages of Division of Labour** i\) Increases productivity: As the individual worker concentrates on only one process of the work, he is able to do it quickly and thus, the productivity of labour increases. ii\) Lower costs: Division of labour increases the efficiency of workers. Wasteful duplication of process and tools is avoided. Large scale production offers several economies in the use of materials, machinery and skills. Therefore, costs of operations are reduced. ii\) Increases dexterity and skill: The worker becomes an expert due to repetitive performance of the same work (process). iii\) Large scale production: Division of labour improves production not only in terms of quantity but also in quality since goods are made by specialists. iv\) Right man in the right place: Under division of labour, workers are so distributed among various works that each worker is put according to his ability. v\) Inventions: Greater innovations due to delepment of specific skill among the labour vi\) Greater cooperation: vii\) Better goodwill viii\) Simplified training: Specialization implies that the worker need not learn the entire job. He needs to learn only a part of the whole task. Much time and effort is saved in the training of workers. Physical toil is also reduced. **2. Demerits/Disadvantages of Division of Labour** i. **Monotony:** As the worker repeats the same work for a long time, it becomes monotonous to the worker and soon he lacks interest in his work. ii. **Risk of unemployment:** If a worker (specialist) happens to lose his present job, he may not be able to get similar job elsewhere immediately. iii. iv. v. vi. vii. viii. ix. **Mobility of Labour** Since the labour has to be delivered by labourer himself, he has to move from one place to another in order to get employment. There are different kinds of mobility of labour. i\) **Geographical mobility:** It is the movement of labourer from one place to another. This is also called migration. If labourers move out of the country (India), it is called emigration. If they enter in to the country (India), it is called immigration. ii\) **Vertical mobility:** This implies a change in occupation from a lower to a higher order. (E.g.) An Assistant Professor is promoted as Associate Professor. iii\) **Horizontal mobility:** This means mobility from one occupation to another without any change in the occupational status. (E.g.) A stenographer shifting from one department/firm to another without any promotion or change in his/her occupational status. **Efficiency of labour:** Efficiency of labour implies the quality and quantity of product which can be produced within a given time and under certain conditions. In other words, productive capacity of a worker is termed as efficiency of labour. It is the productive capacity or productivity of labour or is the amount of work which a labourer can do within a given time. **For determining the efficiency of labour, following three aspects are kept in view:\ ** \(1) The quantity or amount of a product is produced by a worker,\ (2) The quality of the product produced by a worker, and\ (3) The time spent by a worker in producing that product. **The efficiency of labour depends on the following factors:\ ** **1. Racial Characteristics:** The efficiency of labour depends upon the racial quality and the heredity of labour. People of some regions are physically sturdy and hard-working as compared to other places. As such, they are very enterprising and comparatively more efficient in jobs where physical labour is involved. **2. Climatic factors:** Climatic differences also affect the efficiency of labour. Working under extreme climatic conditions is always more difficult than working in the temperature zones. Generally, cold climate is more conducive to hard work than the hotter one. **3. Geographical differences:** Locational differences also sometimes play a significant role. A person who has born and brought up in the plains, will find it hard to display much efficiency if he is forced to work at high altitudes hilly areas. **4. Mental abilities and experience:** Educational background and general training helps a worker in assimilating new skills and technical knowledge. Moral qualities also play a role in this connection. A worker is likely to be more efficient, the greater is his sense of discipline, self respect, self-sufficiency, punctuality etc. An experienced worker is usually more efficient than an inexperienced one. **5. Personal Qualities:** The worker possessing good moral character and having qualities like honesty, intelligence, perseverance, resourcefulness, sense of responsibility and ability to take correct decision (judgment) will definitely be more efficient than those who do not possess the above qualities. **6. Favorable working conditions:** A healthy and conducive work environment increases the level of efficiency. The facilities enjoyed by the worker determine labour efficiency to a significant extent. Employer-employee relations also plays an important part of the work-environment. An employer, therefore, can contribute to labour efficiency by building a cordial relationship with his workers. **7. Standard of Living :**The standard of living enjoyed by the worker also affects his efficiency. **8. Duration of Work:** The working hours influence efficiency. The duration of work is generally 8 hours per day and a weekly holiday. Long working hours make the worker feel fatigue. The worker under such circumstances always feels fresh and attends to his work whole heartedly and sincerely. **Extra /Additional** Causes of low efficiency of labour in India ------------------------------------------- Causes of low efficiency of labour in India:\ (1) Hot and Enervating Climate\ (2) Low Wages\ (3) Inadequacy of Machinery, Equipments and Raw Materials\ (4) Uncongenial Factory Environment\ (5) Worker\'s Habit and Socio-religious Factors\ (6) Migratory Character\ (7) Education and Training\ (8) Inefficient Management suggestions for improving the efficiency of labour in india ----------------------------------------------------------- Following are some suggestions, which will definitely help in improving the efficiency of workers.\ (1) The payment of wages should be fair and prompt.\ (2) A part of profit, earned by the concern, must be paid to workers as an incentive.\ (3) Working conditions in the factories should be improved.\ (4) The total period of work per day should not be more than eight hours.\ (5) Social security network should be built up to protect the workers.\ (6) Benefits like housing facilities, medical aid, group insurance, etc. should be provided to the workers. Capital -- characteristics -- process of capital formation; forms of capital in agriculture, **Capital** Capital in a man-made material. But, in economics, capital does not mean mere cash or money.( If means wealth that is used for producing additional wealth.) it refers to all man- made wealth or goods which are used for further production of wealth. If includes cash, raw materials, tools, implements, machines, vehicles, furniture, buildings, etc. which are used for production of goods. However, it does **not include land** that is used for production, as land is **a free gift of nature**, and is not produced by man. **Definition of capital:** Capital therefore, is defined as **"the produced means of further production".** The word **'capital'** in the ordinary sense is often **interchangeably used** for concepts like **money** or cash**, wealth and land**. Silverman- "**capital is wealth set aside** for the production of **further wealth**". S. Evelyn Thomas- capital is **that part of wealth** of individuals and communities **other than land**, which is **used to assist** in the **production of goods**." J.L. Hanson- To the economist **capital is** a factor of production, or as it is sometimes said, **wealth used for the production of further wealth**". In the words of Bohme bewark-"**Capital is produced means of production."** [Capital V/s money:] In the ordinary sense capital means money and hence are one and the same. But, in economics, **capital and money are not the same**. Capital include (money but it **does not include all money**) only **that part of money** which is **used for production**. It does not include money which is used for consumption (I.e. used for buying consumer goods) and money which is hoarded. [Capital V/s wealth: ] All capital is wealth. But all wealth is not capital. Only that part of wealth which is used for further production is capital. wealth used for consumption and wealth hoarded cannot be considered as capital. E.g. Building used for production is capital on the other hand, building used for the residential purpose of the owner cannot be regarded as capital similarly, a motor vehicle used by an entrepreneur for business purposes is capital. And if it is used for his person purpose or pleasure is not capital. **[Capital V/s income: ]** 1. Capital is a source of income. Income is the the result or contribution of capital or capital is the means, whereas income is end. 2. Capital is a fund (I.e. a fixed stock of wealth) income is a flow (I.e. an addition to existing stock of wealth.) **Characteristics of Capital** a\) Capital is man-made (Artificial) b\) Capital is used in production : It increases the productivity of resources and helps in the production of wealth or goods c\) Supply of capital is elastic. It can be produced in large quantity when its requirement increases. d\) Capital is perishable as it can be destroyed and can be exhausted or used up. e\) Capital is highly mobile: it moves easily from one place to another f\) Capital is Separable: unlike labour, capital can be separated from its owner **Process of capital formation** Capital formation or capital accumulation means the increase in the stock of real capital in a country. In other words, capital formation involves making of more capital goods such as machines, tools, etc, which are all used for further production of goods. Capital formation creates employment at two stages. First, when the capital is produced, some workers have to be employed to make capital goods like machineries, tools, etc. Secondly, more labour has to be employed when capital has to be used for producing other goods. **Phases of capital formation:** There are three phases in the process of capital formation or capital accumulation. **i) Creation of savings:** In order to accumulate capital goods some current consumption has to be sacrificed. If people are willing to reduce their present consumption, they can devote more resources to build up capital goods in the form of savings for the use in future. The level of savings in a country depends upon the power to save and the will to save. The power to save depends upon the level of income of people. The higher the level of income, the greater will be the amount of saving. Apart from the power to save, the total amount of savings also depends upon the willingness to save. Savings may be either voluntary or forced. Voluntary savings are those, which people do of their own free will. Voluntary savings depend upon the interest rate, power to save and will to save. On the other hand, taxes by the Government represent forced savings. Savings may be done not only by households but also by business enterprises and government. Government savings constitute the money collected as taxes and the profits of public undertakings. Foreign capital also forms another source of investment. **Foreign capital can be of** 1\) direct private investment by foreigners, 2\) loans or grants by foreign governments and 3\) loans by international agencies like the World Bank, International Monetary Fund(IMF), etc. **ii) Mobilization of capital:** The savings must be mobilized and transferred to businessmen or entrepreneurs who require them for making investment. In the capital market, funds are supplied by the individual investors (share holders), banks, investment trusts, insurance companies, government, etc. **iii) Investment of savings in real capital:** Investment is done by entrepreneurs. The level of investment or capital accumulation is determined by the cost or supply price of capital (interest and other cost of acquiring capital), the expectations of profits and the size of market for goods to be produced. **iv) Enterprise or Organization** An entrepreneur is the co-coordinator of all other factors of production. He has to plan, organize and direct other factors of production, arrange for marketing the produce and take risks and uncertainties. Forms of capital in agriculture **a) Fixed capital and working capital:** Fixed capital can be used many times in the production process. The level of fixed capital does not vary with the level of production in a very short period, (E.g.) farm buildings, tractors, farm tools, etc. Working capital or variable capital or circulating capital can be used only once and they are not available for further use. The level of working capital increases (decreases) with the increase (decrease) in the level of production, (E.g.) raw cotton or lint used to spin yarn, fertilizer used to produce paddy, etc. **b) Sunk capital and floating capital:** Sunk capital is meant only for a specific purpose, (E.g.) cane crusher, paddy thrasher etc. They cannot be used for any other purpose. Floating capital can be employed for any use, (E.g.) money. **c) Social capital and private capital:** Private capital is owned by individuals and the income or benefit derived from these assets are available only to the individuals who own them (E.g.) tractors, private factories etc. Social capital is owned by the society as a whole and the benefits derived from these assets are shared among the members of the society, E.g. bridge, dam, government owned factories, etc. **Organization of business firms -- Forms of business organizations and their characteristics.** **4. Enterprise or Organization** An entrepreneur is the co-coordinator of all other factors of production. He has to plan, organize and direct other factors of production, arrange for marketing the produce and take risks and uncertainties. **a) Functions of an Entrepreneur: Performs several functions** **1) Function of initiation:** An entrepreneur makes proper assessment of markets (both input and output markets) and decides upon what, when and how with regard to production and marketing of a commodity. **2) Function of choice of location:** He decides upon the particular place to locate the concern or unit where facilities regarding production and marketing are available. **3) Function of co-ordination:** The entrepreneur has to co-ordinate, direct and supervise the functioning of other factors of production. **4) Function of innovation:** The entrepreneur has to introduce new technologies, machineries and tools in order to increase the labour productivity and also to reduce the cost of production. **5) Function of bearing risk and uncertainty:** Taking risks means accepting a probability that things will turn out badly. Under risk the occurrence of future events can be predicted fairly accurately by specifying the level of probability, E.g. prediction on monsoon rain, storm, etc. In the case of uncertainty, the future occurrences of an event cannot be predicted accurately. E.g. price fluctuation. In both cases, the entrepreneur may likely to incur losses. So, he has to anticipate risk and uncertainties and provide necessary alternatives to face them. **b) Forms of Business Organization** Business organization is a trading concern or producing unit. A business organization may be owned either by a single person or by many people. The primary aim of a business organization may be either earning profit or promotion of general welfare of the people. On the basis of the above two criteria, business organizations can be classified into five categories as follows: **a) Individual Entrepreneur (Individual Proprietary System)** A business organization owned by a single person is known as the individual proprietary system. In this case, personal attention on all consumers by the proprietor is possible. He himself takes the entire risks and hence, wastage of all kinds is eliminated. However, large-scale business is not possible, as the capital at the command of the sole proprietor is generally meagre. In the event of failure, not only the assets of business but also the other private assets and properties of the proprietor can be claimed against by creditors. E.g. Retail shops. **b) Partnership** In this case, two or more persons join together; contribute share capital and share profit or loss in agreed proportions. It establishes wider personal contacts and hence, large-scale production is possible. The existence of unlimited liability curbs the speculative or risky tendencies of the partners and prevents the starting of risky enterprises. However, unlimited liability makes the business unenterprising, because all partners are liable for the firm's debts irrespective of the amount of capital each has invested. Further, in actual practice, partners behave in a selfish manner, i.e., doing the minimum and trying to get the maximum out of the business. Any action taken by one partner is legally binding on all other partners and this makes the business more complex. E.g. Small transport operators, textiles business firms, etc. **c) Joint - Stock Company** The joint-stock company is owned by a large number of share holders who contribute to the share capital. They are entitled to get the profits (dividends) of the company. The share holders elect a board of directors among themselves. The board appoints one of its members as the managing director. The board directs and supervises the affairs of the company. The joint stock company is based on the principle of limited liability. That is, each share holder is liable for the debts of the company only upto the value of the share he has bought from the company. His other properties cannot be attached by the creditors of the company. Hence, the word 'Limited' (Ltd) is written after the name of any joint stock company. (E.g.) Karur Vysya Bank Ltd. Shares are transferable from one person to another through stock exchanges. In general, there are two types of shares: 1\) ordinary share and 2\) preference share. There is no special privilege attached to the ordinary share and the ordinary share holder gets a dividend out of the net profits of the company. The preference shares are guaranteed by a certain fixed dividend, which is paid out of the net profits before dividends are paid on any other kind of shares. Joint stock companies are of two kinds, viz., private and public. A private company has to satisfy the following conditions: i\) neither share holders nor debenture holders exceed fifty in number; ii\) Shares are not offered for sales by public issue; iii\) directors can disapprove any proposed transfer of shares; and iv\) no body outside the company is in a position to control its policies. Besides the shares, the companies usually raise funds by floating 'debentures'. Debentures or security bonds are not shares of the company but they are promissory notes on the basis of which the company raises additional funds in the form of loans. The debenture holders are the company's creditors and they must be paid the agreed rate of interest whether the company makes profit or not. **d) Co-operative Enterprises** Co-operation is a form of economic organization where people voluntarily work together for a business purpose on the basis of mutual benefit. It is a voluntary organization designed to promote economic interests of its members. Members have equal rights and responsibilities. The co-operative society has the motto of 'each for all and all for each'. Co-operation is supposed to teach virtues like self-sacrifice, discipline, honesty and fairness in dealings, mutual help and self-reliance. However, co-operative enterprise suffers from the following defects: i\) There is a lack of incentive and initiative. ii\) Business leadership is lacking in co-operatives. iii\) In general, members do not have honesty. E.g. Primary Agricultural Co-operative Credit Society. **e) State Enterprises** A commercial undertaking owned by the government is public undertaking or state enterprise. Public undertakings have been started for the following reasons: i\) It brings about rapid economic development. ii\) It ensures that the benefits of development are shared by all the people. iii\) The state can raise huge capital, which could not be raised by the private sector. iv\) As a monopoly enterprise, it enjoys several advantages. **Disadvantages:** (i) State enterprise when compared with private enterprise is not run and managed efficiently. ii\) Red-tapism and lack of initiative are prevalent. iii\) Inefficient management of the administrators results in loss of under utilization of resources. E.g. Tamil Nadu State Transport Corporation. **(This Chapter on Land reforms will be modified as per course outline & send later. You can go through what is included on Land Reforms)** **Land reforms:** Land tenure systems- Zamindari system, Ryotwari System, Mahalwari System; land reforms- meaning and objectives, abolition of intermediaries, tenancy reforms, recent polices on land reforms and the progress achieved, Concepts of agricultural land holdings in India, Factors determining size of farms, **The pre-British scenario** Traditionally, before the British came, the private ownership of land was an unfamiliar idea. **Land was generally** **owned by the village community collectively**. A proper land revenue system was **initiated by Todar Mal during the reign of Akbar**. **Under this system, land was measured, classified, and the rent was fixed accordingly**. The British made a sea-change in the pattern of ownership of land in India. **Land tenure systems** 1. **Emergence of Zamindari System** Lord Cornwallis introduced the Permanent Settlement in 1793. Under this system, a class of landlords called Zamindars was created whose responsibility it was to pay a fixed rent to the government for the lands they owned. They gave out parcels of land to farmers who became their tenants. Their title/ownership land by **Zamindars** was hereditary. Later the **Zamindari System** soon turned out to be exploitative? The State was only concerned with maximising revenue to the government with minimum effort. The Zamindars too wanted maximum rent from his tenants irrespective of the land's true potential. Zamindars **were expected to pay fixed land revenue to the British government and they** were able to increase their own wealth by exploiting his farmer tenants. It lead to emergence of several intermediaries between the Zamindar and the tenants adding burden to the tenant farmers. The landless and labourers class suffered greatly due to increasing poverty. This lead to the creation of a group of rich Indians whose loyalty was more towards the British. The Permanent Settlement gave rise to the emergence of Zamindari system of tenancy in Bengal first and soon was adopted in other regions of the country. 2. **Jagirdari system :** Another system was called the **Jagirdari system** which was **similar to the Zamindari system.** 3. **Ryotwari System** Under this system, the owner/proprietor of land gave the rent and taxes directly to the government in the absence of any middlemen. This started in Madras and was later adopted in Bombay as well. 4. **Mahalwari System** This system was introduced by **William Bentinck's government** under which **landlords were responsible** for the **payment of revenue to the State**. These **landlords or Zamindars had** **a whole village or a group of villages under their control**. The **Mahalwari system** prevailed in Uttar Pradesh, the North Western Province, Punjab and parts of Central India. ### **Outcomes of land ownership systems during British era** - Extreme peasant indebtedness due to sky-high tax rates. - Creation of a class of a few rich who mostly exploited the poor peasant. - Peasants lived in constant fear of eviction from land from cultivation as tenants. - Poverty was entrenched into the farmer class. These systems at the time of independence created a **class of landlords** who owned large stretches of land and innumerable peasants who owned nothing and lived in dire poverty and misery. The following figures will reveal this. 7% of the land owners owned 54% of land. In contrast, only 6% of land was owned by 28% of land owners **(with marginal and sub-marginal holdings).** **Land reforms in India:** **Concept of land reforms** **Land reforms in India** usually refer to **redistribution of** **land** from the **rich to the poor.** Or from those who have had access land to the landless. **Land reforms** include regulation of ownership, operation, leasing, sales, and **inheritance of** **land.** In simple terms, land reforms mean equitable red

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