Economics Chapter 1: Development PDF

CHAPTER I DEVELOPMENT The idea of development or progress has always been with us. We have aspirations or desires about what we would like to do and how we would like to live. Similarly, we have ideas about what a country should be like. What are the essential things that we require? Can...

CHAPTER I DEVELOPMENT The idea of development or progress has always been with us. We have aspirations or desires about what we would like to do and how we would like to live. Similarly, we have ideas about what a country should be like. What are the essential things that we require? Can life be better for all? How should people live together? Can there be more equality? Development involves thinking about these questions and about the ways in which we can work towards achieving these goals. This is a complex task and in this chapter we shall make a beginning at understanding development. You will learn more about these issues in greater depth in higher classes. Also, you will find answers to many of these questions not just in economics but also in your course in history and political science. This is because the way we live today is influenced by the past. We can’t desire for change without being aware of this. In the same way, it is only through a democratic political process that these hopes and “Without me they cannot develop... possibilities can be achieved in in this system I cannot develop!” real life. DEVELOPMENT 3 2024-25  WHAT DEVELOPMENT PROMISES — DIFFERENT PEOPLE, DIFFERENT GOALS YOU WANT A CAR CAR? THE WAY OUR COUNTRY IS Let us try to imagine what SET UP ALL YOU CAN HOPE FOR IS MAY BE TO ONE DAY OWN THE RICKSHAW YOU PULL! development or progress is likely to mean to different persons listed in Table 1.1. What are their aspirations? You will find that some columns are partially filled. Try to complete the table. You can also add any other category of persons. TABLE 1.1 DEVELOPMENTAL GOALS OF DIFFERENT CATEGORIES OF PERSONS Category of Person Developmental Goals / Aspirations More days of work and better wages; local school is able to Landless rural labourers provide quality education for their children; there is no social discrimination and they too can become leaders in the village. Assured a high family income through higher support prices for Prosperous farmers from Punjab their crops and through hardworking and cheap labourers; they should be able to settle their children abroad. Farmers who depend only on rain for growing crops A rural woman from a land owning family Urban unemployed youth A boy from a rich urban family She gets as much freedom as her brother and is able to A girl from a rich urban family decide what she wants to do in life. She is able to pursue her studies abroad. An adivasi from Narmada valley Having filled Table 1.1, let us now They seek things that are most examine it. Do all of these persons important for them, i.e., that which have the same notion of development can fulfil their aspirations or desires. or progress? Most likely not. Each In fact, at times, two persons or one of them seeks different things. groups of persons may seek things 4 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25 which are conflicting. A girl expects So, two things are quite clear: one, as much freedom and opportunity as different persons can have her brother, and that he also shares different developmental goals and in the household work. Her brother two, what may be development for may not like this. Similarly, to get one may not be development for more electricity, industrialists may the other. It may even be THOSE PEOPLE want more dams. But this may destructive for the other. DON’T WANT TO submerge the land and disrupt the DEVELOP! lives of people who are displaced – such as tribals. They might resent this and may prefer small check dams or tanks to irrigate their land. INCOME AND OTHER GOALS If you go over Table 1.1 again, you more income or more consumption will notice one common thing: what because material goods are not all people desire are regular work, better that you need to live. wages, and decent price for their crops Money, or material things that one or other products that they produce. can buy with it, is one factor on which In other words, they want more our life depends. But the quality of our income. life also depends on non-material Besides seeking more income, one- things mentioned above. If it is not way or the other, people also seek obvious to you, then just think of the things like equal treatment, freedom, role of your friends in your life. You A demonstration security, and respect of others. They may desire their friendship. Similarly, meeting against resent discrimination. All these are there are many things that are not raising the height important goals. In fact, in some cases, easily measured but they mean a lot of Sardar Sarovar Dam on these may be more important than to our lives. These are often ignored. Narmada River 2024-25  However, it will be wrong to conclude Similarly, for development, that what cannot be measured is not people look at a mix of goals. It is important. true that if women are engaged in paid work, their dignity in the household Consider another example. If you and society increases. However, it is get a job in a far off place, before also the case that if there is respect accepting it you would try to consider for women there would be more many factors, apart from income, sharing of housework and a such as facilities for your family, greater acceptance of women working atmosphere, or opportunity working outside. A safe and secure to learn. In another case, a job may environment may allow more women give you less pay but may offer regular to take up a variety of jobs or run employment that enhances your a business. sense of security. Another job, however, may offer high pay but no Hence, the developmental goals job security and also leave no time for that people have are not only about your family. This will reduce your better income but also about other sense of security and freedom. important things in life. LET’S WORK THESE OUT 1. Why do different persons have different notions of development? Which of the following explanations is more important and why? (a) Because people are different. (b) Because life situations of persons are different. 2. Do the following two statements mean the same? Justify your answer. (a) People have different developmental goals. (b) People have conflicting developmental goals. 3. Give some examples where factors other than income are important aspects of our lives. 4. Explain some of the important ideas of the above section in your own words. NATIONAL DEVELOPMENT If, as we have seen above, individuals different persons could have seek different goals, then their notion different as well as conflicting of national development is also likely notions of a country’s development. to be different. Discuss among However, can all the ideas be yourselves on what India should do considered equally important? Or, if for development. there are conflicts how does one Most likely, you would find that decide? What would be a fair and just different students in the class have given path for all? We also have to think different answers to the above question. whether there is a better way of doing In fact, you might yourself think of things. Would the idea benefit a large many different answers and not be too number of people or only a small sure of any of these. It is very group? National development means important to keep in mind that thinking about these questions. 6 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  LET’S WORK THESE OUT Discuss the following situations: 1. Look at the picture on the right. What should be the developmental goals for such an area? 2. Read this newspaper report and answer the questions that follow: 0 tonnes A vessel dumped 50 st es in to of liq ui d to xic wa in a cit y and open-air dumps This un din g se a. in the surro lle d y ca ha pp en ed in a cit t, a Co as Ab id ja n in Iv or y me s a. Th e fu country in Afric ste gh ly to xic wa fro m th e hi in rashes, caused nausea, sk etc. After a fainting, diarrhoea pe rs on s we re mo nt h se ve n ty in ho sp ita l and dead, twen treated twenty six thousand g. iso nin for symptoms of po mpany A multinational co m an d de al in g in pe tro leu loc al cte d a metals had contra t to e Ivo ry Co as company of th fro m e tox ic wa ste dispose th its ship. (i) Who are the people who benefited and who did not? (ii) What should be the developmental goal for this country? 3. What can be some of the developmental goals for your village, town or locality? ACTIVITY 1 If even the idea of what constitutes development can be varied and conflicting, then certainly there can be differences about ways of developing. If you know of any such controversy, try to find out arguments advanced by different people. You may do so by talking to different persons or you may find it from newspapers and television. DEVELOPMENT 7 2024-25  HOW TO COMPARE DIFFERENT COUNTRIES OR STATES? You might ask if development can more developed than others with less mean different things, how come some income. This is based on the countries are generally called understanding that more income developed and others under - means more of all things that human developed? Before we come to this, beings need. Whatever people like, let us consider another question. and should have, they will be able to get with greater income. So, greater When we compare different things, income itself is considered to be one they could have similarities as well as important goal. differences. Which aspects do we use to compare them? Let us look at Now, what is the income of a students in the class itself. How do country? Intuitively, the income of the we compare different students? They country is the income of all the differ in their height, health, talents residents of the country. This gives and interests. The healthiest student us the total income of the country. may not be the most studious one. However, for comparison between The most intelligent student may not countries, total income is not such an be the friendliest one. So, how do we useful measure. Since, countries have compare students? The criterion we different populations, comparing total may use depends on the purpose of income will not tell us what an average comparison. We use different criterion person is likely to earn. Are people in to choose a sports team, a debate one country better off than others in a team, a music team or a team to different country? Hence, we compare organise a picnic. Still, if for some the average income which is the total purpose, we have to choose the income of the country divided by its criterion for the all-round progress of total population. The average income children in the class, how shall we is also called per capita income. do it? In World Development Reports, Usually we take one or more brought out by the World Bank, this important characteristics of criterion is used in classifying persons and compare them based countries. Countries with per capita on these characteristics. Of income of US$ 49,300 per annum and course, there can be differences about above in 2019, are called high income what are important characteristics or rich countries and those with per that should form the basis of capita income of US$ 2500 or less are comparison: friendliness and spirit of called low-income countries. India cooperation, creativity or marks comes in the category of low middle secured? income countries because its per capita income in 2019 was just This is true of development too. US$ 6700 per annum. The rich For comparing countries, their countries, excluding countries of income is considered to be one of Middle East and certain other small the most important attributes. countries, are generally called Countries with higher income are developed countries. 8 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  Average Income While ‘averages’ are useful for comparison, they also hide disparities For example, let us consider two countries, A and assured of being its fifth citizen B. For the sake of simplicity, we have assumed but if it is a lottery that decides that they have only five citizens each. Based on our citizenship number then data given in Table 1.2, calculate the average perhaps most of us will prefer to income for both the countries. live in country A. Even though both the countries have identical TABLE 1.2 COMPARISON OF TWO average income, country A is COUNTRIES preferred because it has more Monthly incomes of citizens equitable distribution. In this Country (in Rupees) country people are neither very I II III IV V Average rich nor extremely poor. On the other hand most citizens in Country A 9500 10500 9800 10000 10200 country B are poor and one Country B 500 500 500 500 48000 person is extremely rich. Hence, while average income is useful for Will you be equally happy to live in both these comparison it does not tell us how countries? Are both equally developed? Perhaps this income is distributed among some of us may like to live in country B if we are people. COUNTRY WITH NO RICH AND NO POOR COUNTRY WITH RICH AND POOR WE MADE THE CHAIRS AND WE USE THEM. WE LET’S WORK THESE OUT MADE THE CHAIRS 1. Give three examples where an average is used for comparing situations. AND HE TOOK 2. Why do you think average income is an important criterion for development? Explain. THEM. 3. Besides size of per capita income, what other property of income is important in comparing two or more societies? 4. Suppose records show that the average income in a country has been increasing over a period of time. From this, can we conclude that all sections of the economy have become better? Illustrate your answer with an example. 5. From the text, find out the per capita income level of about 10-15 low-income countries as per World Development Reports. 6. Write a paragraph on your notion of what should India do, or achieve, to become a developed country. DEVELOPMENT 9 2024-25  INCOME AND OTHER CRITERIA When we looked at individual aspirations and goals, we found that people not only TABLE 1.3 PER CAPITA INCOME think of better income but OF SELECT STATES also have goals such as State Per Capita Income security, respect for others, for 2018–19 (in Rs) equal treatment, freedom, etc. Haryana 2,36,147 in mind. Similarly, when we Kerala 2,04,105 think of a nation or a region, Bihar 40,982 we may, besides average income, think of other equally Source : Economic Survey 2020–21, P.A 29. important attributes. What could these attributes be? income and Bihar is at the bottom. Let us examine this through an This means that, on an average, example. Table 1.3 gives the per capita a person in Haryana earned income of Haryana, Kerala and Bihar. Rs 2,36,147 in one year whereas, on Actually, these figures are of Per an average, a person in Bihar earned Capita Net State Domestic Product at only around Rs 40,982. So, if per capita income were to be used as the Current Prices for 2018–19. Let us measure of development, Haryana will ignore what this complicated term be considered the most developed exactly means. Roughly, we can take and Bihar the least developed state of it to be the per capita income of the the three. Now, let us look at certain state. We find that of the three, other data pertaining to these states Haryana has the highest per capita given in Table 1.4. TABLE 1.4 SOME COMPARATIVE DATA ON HARYANA, KERALA AND BIHAR State Infant Mortality Literacy Rate % Net Attendance Ratio (per Rate per 1,000 100 persons) secondary stage live births (2018) 2017–18 (age 14 and 15 years) 2017–18 Haryana 30 82 61 Kerala 7 94 83 Bihar 32 62 43 Sources : Economic Survey 2020–21, P.A 157, National Sample Survey Organisation (Report No. 585), National Statistical Office, Government of India. Explanation of some of the terms used in this table: Infant Mortality Rate (or IMR) indicates the number of children that die before the age of one year as a proportion of 1000 live children born in that particular year. Literacy Rate measures the proportion of literate population in the 7-and-above age group. Net Attendance Ratio is the total number of children of age group 14 and 15 years attending school as a percentage of total number of children in the same age group. 10 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  What does this table show? The The problem does not end with first column of the table shows that in Infant Mortality Rate. The last column Kerala, out of 1000 children born, 7 of table 1.4 shows that about half of died before completing one year of age the children aged 14-15 in Bihar are but in Haryana the proportion of not attending school beyond Class 8. children dying within one year of birth This means that if you went to school was 30, which is nearly three times in Bihar nearly half of your elementary more than that of Kerala. On the other class friends would be missing. Those hand, the per capita income of who could have been in school are not Haryana is more than that of Kerala there! If this had happened to you, you as shown in Table 1.3. Just think of would not be able to read what you how dear you are to your parents, are reading now. think of how every one is so happy when a child is born. Now, try to think of parents whose children die before they even celebrate their first birthday. How painful it must be to these parents? Next, note the year to which this data pertains. It is 2018. So we are not talking of old times; it is 70 years after independence when our metro cities are full of high rise buildings and shopping malls! Most babies require basic healthcare PUBLIC FACILITIES How is it that the average person in Actually for many of the important Haryana has more income than the things in life the best way, also the average person in Kerala but lags cheapest way, is to provide these behind in these crucial areas? The goods and services collectively. Just reason is — money in your pocket think – will it be cheaper to have cannot buy all the goods and services collective security for the whole that you may need to live well. So, locality or for each house to have its income by itself is not a completely own security staff? What if no one, adequate indicator of material goods other than you, in your village or and services that citizens are able locality is interested in studying? to use. For example, normally, your Would you be able to study? Not money cannot buy you a pollution- unless your parents could afford to free environment or ensure that you send you to some private school get unadulterated medicines, unless elsewhere. So you are actually able you can afford to shift to a to study because many other children community that already has all these also want to study and because many things. Money may also not be able people believe that the government to protect you from infectious should open schools and provide diseases, unless the whole of your other facilities so that all children community takes preventive steps. have a chance to study. Even now, in many areas, children, particularly girls, are not able to go to high school because the government/society has not provided adequate facilities. DEVELOPMENT 11 2024-25  Kerala has a low Infant Mortality Distribution System (PDS) Rate because it has adequate functions well. Health and provision of basic health and nutritional status of people of such educational facilities. Similarly, states is certainly likely to be in some states, the Public better. LET’S WORK THESE OUT 1. Look at data in Tables 1.3 and 1.4. Is Haryana ahead of Kerala in literacy rate etc., as it is in terms of per capita income? 2. Think of other examples where collective provision of goods and services is cheaper than individual provision. 3. Does availability of good health and educational facilities depend only on amount of money spent by the government on these facilities? What other factors could be relevant? 4. In a study, it was found that in Tamil Nadu, 90 per cent of the people living in rural areas used a ration shop, whereas in West Bengal only 35 per cent of rural people did so. Where would people did better off and why? ACTIVITY 2 Study Table 1.5 carefully and fill in the blanks in the following paragraphs. For this, you may need to make calculations based on the table. TABLE 1.5 EDUCATIONAL ACHIEVEMENT OF RURAL POPULATION OF UTTAR PRADESH Category Male Female Literacy rate for rural population 76% 54% Literacy rate for rural children in age group 10-14 years 90% 87% Percentage of rural children aged 10-14 attending school 85% 82% (a) The literacy rate for all age groups, including young and old, is _____ for rural males and _____ for rural females. However, it is not just that these many adults could not attend school but that there are _____ who are currently not in school. (b) It is clear from the table that _____ % of rural girls and _____% of rural boys are not attending school. Therefore, illiteracy among children in the age group 10- 14 is as high as _____% for rural females and _____% for rural males. (c) This high level of illiteracy among __________ age group, even after more than 70 years of our independence, is most disturbing. In many other states also we are nowhere near realisation of the constitutional goal of free and compulsory education for all children up to the age of 14, which was expected to be achieved by 1960. 12 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25 ACTIVITY 3 HUMAN DEVELOPMENT One way to find out if we are properly nourished is to REPOR REPORTT calculate what nutrition scientists call Body Mass Index Once it is realised that even though (BMI). This is easy to calculate. Let each student in the class find out his or her weight and height. Take the the level of income is important, yet weight of each student in kilograms (kg). Then, take it is an inadequate measure of the the height by drawing up a scale on the wall and level of development, we begin to measuring accurately with the head straight. Convert think of other criterion. There could the height recorded in centimeters into meters. Divide be a long list of such criterion but the weight in kg by the square of the height. The number then it would not be so useful. What you get is called BMI. Then, look at the BMI-for-Age we need is a small number of the tables given on pages 90–91. A student’s BMI most important things. Health and could be within the normal education indicators, such as the range or less than that ones we used in comparison of Kerala (underweight) or more and Haryana, are among them. Over (obesity). For example, if the past decade or so, health and a girl student is 14 years education indicators have come to and 8 month old and the BMI is 15.2, then she is be widely used along with income as undernourished. Similarly, a measure of development. For if the BMI of a boy aged instance, Human Development 15 years and 6 months is Report published by UNDP compares 28, then he is overweight. countries based on the educational Discuss the life situation, levels of the people, their health food and exercise habits status and per capita income. It of students, in general, without body shaming would be interesting to look at anyone. certain relevant data regarding India and its neighbours from Human Development Report 2021-22. TABLE 1.6 SOME DATA REGARDING INDIA AND ITS NEIGHBOURS FOR 2021 Country Gross National Life Mean Years of HDI Rank in Income (GNI) Expectancy Schooling of the world per capita at birth People aged 25 (2021-22) (2017 PPP $) and above Sri Lanka 12,578 76.4 10.8 73 India 6,590 67.2 6.7 132 Myanmar 3,851 65.7 6.4 149 Pakistan 4,624 66.1 4.5 161 Nepal 3,877 68.4 5.1 143 Bangladesh 5,472 72.4 7.4 129 Source : Human Development Report, 2021-22, United Nations Development Programme, New York. NOTES 1. HDI stands for Human Development Index. HDI ranks in above table are out of 189 countries in all. 2. Life Expectancy at birth denotes, as the name suggests, average expected length of life of a person at the time of birth. 3. Per Capita Income is calculated in dollars for all countries so that it can be compared. It is also done in a way so that every dollar would buy the same amount of goods and services in any country. DEVELOPMENT 13 2024-25  Isn’t it surprising that a small many new components have been country in our neighbourhood, Sri added to the Human Development Lanka, is much ahead of India in every Report but, by pre-fixing Human to respect and a big country like ours has Development, it has made it very clear such a low rank in the world? Table that what is important in development is what is happening to citizens of a 1.6 also shows that though Nepal and country. It is people, their health, their Bangladesh have low per capita well being, that is most important. income than that of India, yet they are better than India in life expectancy. Do you think there are certain other aspects that should be Many improvements have been considered in measuring human suggested in calculating HDI and development? SUSTAINABILITY OF DEVELOPMENT Suppose for the present that a particular country is quite developed. “We have not inherited We would certainly like this level of the world from our development to go up further or at forefathers — we have least be maintained for future borrowed it from our generations. This is obviously children.” desirable. However, since the second half of the twentieth century, a number of scientists have been warning that the present type, and levels, of development are not sustainable. ND WHY LET’S UNDERSTA IS IS SO TH RO UGH THE TH PLE: FOLLOWING EXAM Example 1: Groundwater in India “Recent evidence suggests that the groundwater is under serious threat of overuse in many parts of the country. About 300 districts have reported a water level decline of over 4 metres during the past 20 years. Nearly one-third of the country is overusing their groundwater reserves. In another 25 years, 60 per cent of the country would be doing the same if the present way of using this resource continues. Groundwater overuse is particularly found in the agriculturally prosperous regions of Punjab and Western U.P., hard rock plateau areas of central and south India, some coastal areas and the rapidly growing urban settlements.” (a) Why groundwater is overused? (b) Can there be development without overuse? 14 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  Groundwater is an example of Non-renewable resources are those renewable resources. These resources which will get exhausted after a few are replenished by nature as in the years of use. We have a fixed stock on case of crops and plants. However, earth which cannot be replenished. We even these resources may be do discover new resources that we did overused. For example, in the case of not know of earlier. New sources in groundwater, if we use more than this way add to the stock. However, what is being replenished by rain then over time, even this will get exhausted. we would be overusing this resource. UDE OIL THAT WE FOR EXAMPLE, CR E EARTH IS A NON- EXTRACT FROM TH URCE. HOWEVER WE RENEWABLE RESO DID CE OF OIL THAT WE MAY FIND A SOUR ION S RLIER. EXPLORAT NOT KNOW OF EA E TIM E. RTAKEN ALL TH ARE BEING UNDE Example 2: Exhaustion of Natural Resources Look at the following data for crude oil. TABLE 1.7 CRUDE OIL RESERVES Region/Country Reserves (2017) Number of Years (Thousand Million Barrels) Reserves will last Middle East 808 70 United States of America 50 10.5 World 1697 50.2 Source : BP Statistical Review of World Energy, June 2018, P.12. The table gives an estimate of reserves of crude oil (column1). More important, it also tells us for how many years the stock of crude oil will last if people continue to extract it at the present rate. The reserves would last only 50 years more. This is for the world as a whole. However, different countries face different situations. Countries like India depend on importing oil from abroad because they do not have enough stocks of their own. If prices of oil increase this becomes a burden for everyone. There are countries like USA which have low reserves and hence want to secure oil through military or economic power. The question of sustainability of development raises many fundamentally new issues about the nature and process of development. (a) Is crude oil essential for the development process in a country? Discuss. (b) India has to import crude oil. What problems do you anticipate for the country looking at the above situation? DEVELOPMENT 15 2024-25  Consequences of environmental social scientists are working degradation do not respect national together. or state boundaries; this issue is In general, the question of no longer region or nation specific. development or progress is perennial. Our future is linked together. At all times as a member of society Sustainability of development is and as individuals we need to ask comparatively a new area of where we want to go, what we wish to knowledge in which scientists, become and what our goals are. So economists, philosophers and other the debate on development continues. EXERCISES 1. Development of a country can generally be determined by (i) its per capita income (ii) its average literacy level (iii) health status of its people (iv) all the above 2. Which of the following neighbouring countries has better performance in terms of human development than India? (i) Bangladesh (ii) Sri Lanka (iii) Nepal (iv) Pakistan 3. Assume there are four families in a country. The average per capita income of these families is Rs 5000. If the income of three families is Rs 4000, Rs 7000 and Rs 3000 respectively, what is the income of the fourth family? (i) Rs 7500 (ii) Rs 3000 (iii) Rs 2000 (iv) Rs 6000 4. What is the main criterion used by the World Bank in classifying different countries? What are the limitations of this criterion, if any? 5. In what respects is the criterion used by the UNDP for measuring development different from the one used by the World Bank? 6. Why do we use averages? Are there any limitations to their use? Illustrate with your own examples related to development. 7. Kerala, with lower per capita income has a better human development ranking than Haryana. Hence, per capita income is not a useful criterion at all and should not be used to compare states. Do you agree? Discuss. 8. Find out the present sources of energy that are used by the people in India. What could be the other possibilities fifty years from now? 9. Why is the issue of sustainability important for development? 16 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  CHAPTER 2 SECTORS OF THE INDIAN ECONOMY SECTORS OF ECONOMIC ACTIVITIES Let us look at these pictures. You will find that people are engaged in various economic activities. Some of these are activities producing goods. Some others are producing services. These activities are happening around us every minute even as we speak. How do we understand these activities? One way of doing this is to group them (classify them) using some important criterion. These groups are also called sectors. 2024-25  spin yarn and weave cloth. Using at different We begin by looking sugarcane as a raw material, we make ities. kind of economic activ sugar or gur. We convert earth into bricks and use bricks to make houses There are many activities that are and buildings. Since this sector undertaken by directly using gradually became associated with the natural resources. Take, for different kinds of industries that came Primary example, the cultivation of cotton. It (Agriculture) up, it is also called as industrial sector. takes place within a crop season. For Sector the growth of the cotton plant, we After primary and secondary, there depend mainly, but not entirely, is a third category of activities that falls on natural factors like rainfall, under tertiary sector and is different sunshine and climate. The product from the above two. These are of this activity, cotton, is a natural activities that help in the development product. Similarly, in the case of an of the primary and secondary sectors. activity like dairy, we are dependent These activities, by themselves, do not on the biological process of produce a good but they are an aid the animals and availability or a support for the production Tertiary (Service) of fodder etc. The product process. For example, goods that are Sector here, milk, also is a natural produced in the primary or secondary product. Similarly, minerals sector would need to be transported and ores are also natural by trucks or trains and then sold in products. When we produce wholesale and retail shops. At times, a good by exploiting natural it may be necessary to store these in produces resources, it is an activity of godowns. We also may need to talk to natural others over telephone or send letters the primary sector. Why goods (communication) or borrow money primary? This is because it forms the base for all from banks (banking) to help other products that we production and trade. Transport, subsequently make. Since storage, communication, banking, most of the natural trade are some examples of tertiary helps to develop products we get are from activities. Since these activities Secondary other sectors generate services rather than goods, agriculture, dairy, fishing, (Industrial) the tertiary sector is also called the forestry, this sector is also Sector called agriculture and related service sector. sector. Service sector also includes some The secondary sector covers essential services that may not directly activities in which natural products help in the production of goods. For are changed into other forms through example, we require teachers, doctors, ways of manufacturing that we and those who provide personal associate with industrial activity. It is services such as washermen, barbers, the next step after primary. The cobblers, lawyers, and people to do product is not produced by nature administrative and accounting works. but has to be made and therefore In recent times, certain new services some process of manufacturing is based on information technology such produces essential. This could be in a factory, a as internet cafe, ATM booths, call manufactured centres, software companies etc have goods workshop or at home. For example, using cotton fibre from the plant, we become important. 20 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  t categories, , th ou gh , ar e grouped into three differen Economic activities ples. terdepen de nt. Le t us look at some exam are highly in TABLE 2.1 EXAMPLES OF ECONOMIC ACTIVITIES EXAMPLE WHAT DOES THIS SHOW? Imagine what would happen if farmers This is an example of the secondary or refuse to sell sugarcane to a particular industrial sector being dependent on sugar mill. The mill will have to shut the primary. down. Imagine what would happen to cotton cultivation if companies decide not to buy from the Indian market and import all cotton they need from other countries. Indian cotton cultivation will become less profitable and the farmers may even go bankrupt, if they cannot quickly switch to other crops. Cotton prices will fall. Farmers buy many goods such as tractors, pumpsets, electricity, pesticides and fertilisers. Imagine what would happen if the price of fertilisers or pumpsets go up. Cost of cultivation of the farmers will rise and their profits will be reduced. People working in industrial and service sectors need food. Imagine what would happen if there is a strike by transporters and lorries refuse to take vegetables, milk, etc. from rural areas. Food will become scarce in urban areas whereas farmers will be unable to sell their products. LET’S WORK THESE OUT 1. Complete the above table to show how sectors are dependent on each other. 2. Explain the difference between primary, secondary and tertiary sectors using examples other than those mentioned in the text. 3. Classify the following list of occupations under primary, secondary and tertiary sectors: Tailor Workers in match factory Basket weaver Moneylender Flower cultivator Gardener Milk vendor Potter Fishermen Bee-keeper Priest Astronaut Courier Call centre employee 4. Students in a school are often classified into primary and secondary or junior and senior. What is the criterion that is used? Do you think this is a useful classification? Discuss. S ECTORS OF THE I NDIAN E CONOMY 21 2024-25  COMPARING THE THREE SECTORS The various production activities in the primary, secondary and tertiary sectors produce a very large number of goods and services. Also, the three sectors have a large number of people working in them to produce these goods and services. The next step, therefore, is to see how much goods and services are produced and how many people work in each sector. In an economy there could be one or more sectors which are dominant in terms of total production and employment, while other sectors are relatively small in size. How do we count the various goods and services and know the total production in each sector? With so many thousands of goods and services produced, you might think this is an impossible task! Not only would the task be enormous, you might also wonder how we can add up cars and computers and nails and furniture. It won’t make sense!!! You are right in thinking so. To get around this problem, economists suggest that the values of goods and services should be used rather than adding up the actual numbers. For example, if 10,000 kgs of wheat is sold at Rs 20 per kg, the value of wheat will be Rs 2,00,000. The value of 5000 coconuts at Rs 15 per coconut will be Rs 75,000. Similarly, the value of goods and services in the three sectors are calculated, and then added up. Remember, there is one precaution one has to take. Not every good (or service) that is produced and sold needs to be counted. It makes sense only to include the final goods and services. Take, for instance, a farmer who sells wheat to a flour mill for Rs 20 per kg. The mill grinds the wheat and sells the flour to a biscuit company for Rs 25 per kg. The biscuit company uses the flour and things such as sugar and oil to make four packets of biscuits. It sells biscuits in the market to the consumers for Rs 80 (Rs 20 per packet). Biscuits are the final goods, i.e., goods that reach the consumers. Why are only ‘final goods and services’ counted? In contrast to final goods, goods such as wheat and the wheat flour in this example are intermediate goods. Intermediate goods are used up in producing final goods and services. The value of final goods already includes the value of all the intermediate goods that are used in making the final...BUT I SHOULD BE PAID THE good. Hence, the value of Rs 80 for the biscuits (final good) FULL VALUE OF THE WHEAT already includes the value of flour (Rs 25). Similarly, the THAT I PRODUCE ! value of all other intermediate goods would have been included. To count the value of the flour and wheat 22 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25 separately is therefore not correct Over a long time (more than because then we would be counting hundred years), and especially the value of the same things a number because new methods of of times. First as wheat, then as flour manufacturing were introduced, and finally as biscuits. factories came up and started The value of final goods and expanding. Those people who had services produced in each sector earlier worked on farms now began during a particular year provides to work in factories in large numbers. the total production of the sector They were forced to do so as you read for that year. And the sum of in history chapters. People began to production in the three sectors gives use many more goods that were what is called the Gross Domestic produced in factories at cheap rates. Product (GDP) of a country. It is the Secondary sector gradually became value of all final goods and services the most important in total production produced within a country during a and employment. Hence, over time, a particular year. GDP shows how big shift had taken place. This means that the economy is. the importance of the sectors had changed. In India, the mammoth task of measuring GDP is undertaken by a In the past 100 years, there has central government ministry. This been a further shift from secondary to Ministry, with the help of various tertiary sector in developed countries. government departments of all the The service sector has become the most Indian states and union territories, important in terms of total production. collects information relating to total Most of the working people are also volume of goods and services and their employed in the service sector. This is prices and then estimates the GDP. the general pattern observed in developed countries. Historical Change in Sectors What is the total production and Generally, it has been noted from the employment in the three sectors in histories of many, now developed, India? Over the years have there been countries that at initial stages of changes similar to the pattern development, primary sector was the observed for the developed countries? most important sector of economic We shall see in the next section. activity. As the methods of farming changed and agriculture sector began LET’S WORK THESE OUT to prosper, it produced much more food than before. Many people could 1. What does the history of developed countries indicate now take up other activities. There about the shifts that have taken place between sectors? were increasing number of craft- 2. Correct and arrange the important aspects for calculating persons and traders. Buying and GDP from this Jumble. selling activities increased many times. To count goods and services we add the numbers that Besides, there were also transporters, are produced. We count all those that were produced in administrators, army etc. However, at the last five years. Since we shouldn’t leave out anything this stage, most of the goods produced we add up all these goods and services. were natural products from the 3. Discuss with your teacher how you could calculate the primary sector and most people were total value of a good or service by using the method of also employed in this sector. value added at each stage. S ECTORS OF THE I NDIAN E CONOMY 23 2024-25  PRIMARY, SECONDARY AND TERTIARY SECTORS IN INDIA Graph 1 shows the production of goods and Graph 1 : GDP by Primary, Secondary and services in the three sectors. Tertiary Sectors This is shown for two years, 1973-74 and 2013-14. We have used the data for these two years because the data are comparable and authentic. You can see how the total production has grown over the forty years. LET’S WORK THESE OUT Answer the following questions by looking at the graph: 1. Which was the largest producing sector in 1973-74? 2. Which is the largest producing sector in 2013-14? 3. Can you say which sector has grown the most over forty years? 4. What was the GDP of India in 2013-14? Why is the tertiary sector becoming so important in India? There could be rison between What does the compa several reasons. 4 show? 1973-74 and 2013-1 n we draw What conclusions ca First, in any country several ? from the comparison services such as hospitals, Let’s find ou t. educational institutions, post and telegraph services, police stations, courts, village administrative offices, Rising Importance of the municipal corporations, defence, Tertiary Sector in Production transport, banks, insurance companies, etc. are required. These Over the forty years between 1973-74 can be considered as basic services. and 2013-14, while production in all In a developing country the the three sectors has increased, it has government has to take responsibility increased the most in the tertiary sector. for the provision of these services. As a result, in the year 2013-14, the tertiary sector has emerged as the Second, the development of largest producing sector in India agriculture and industry leads to the replacing the primary sector. development of services such as 24 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25 transport, trade, storage and the like, as we have already seen. Greater the Graph 2 : Share of Sectors in GDP (%) development of the primary and secondary sectors, more would be the demand for such services. Third, as income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training etc. You can see this change quite sharply in cities, especially in big cities. Fourth, over the past decade or so, certain new services such as those based on information and communication technology have A remarkable fact about India is become important and essential. The that while there has been a change production of these services has been in the share of the three sectors in rising rapidly. In Chapter 4, we shall GDP, a similar shift has not taken see examples of these new services place in employment. Graph 3 and the reasons for their expansion. shows the share of employment in the three sectors in 1977-78 and However, you must remember that 2017-18. T h e p r i m a r y s e c t o r not all of the service sector is growing continues to be the largest equally well. Service sector in India employer even now. employs many different kinds of people. At one end there are a limited number of services that employ highly Graph 3 : Share of Sectors in Employment (%) skilled and educated workers. At the other end, there are a very large number of workers engaged in services such as small shopkeepers, repair persons, transport persons, etc. These people barely manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them. Hence, only a part of this sector is growing in importance. You shall read more about this in the next section. Where are most of the people employed? Why didn’t a similar shift out of Graph 2 presents percentage share of primary sector happen in case of the three sectors in GDP. Now you can employment? It is because not directly see the changing importance enough jobs were created in the of the sectors over the forty years. secondary and tertiary sectors. Even S ECTORS OF THE I NDIAN E CONOMY 25 2024-25  though industrial output or the underemployment is hidden in production of goods went up by contrast to someone who does not more than nine times during the have a job and is clearly visible as period, employment in the industry unemployed. Hence, it is also went up by around three times. The called disguised unemployment. same applies to the tertiary sector as well. While production in the Now, supposing a landlord, service sector rose by 14 times, Sukhram, comes and hires one or employment in the service sector two members of the family to work rose around five times. on his land. Laxmi’s family is now able to earn some extra income As a result, more than half of the through wages. Since you do not workers in the country are working need five people to look after that in the primary sector, mainly in small plot, two people moving out agriculture, producing only about does not affect production on their one sixth of the GDP. In contrast to farm. In the above example, two this, the secondary and tertiary people may move to work in a sectors produce the rest of the factory. Once again the earnings of produce whereas they employ less the family would increase and they about half the people. Does this mean would also continue to produce as that the workers in agriculture much from their land. are not producing as much as they could? There are lakhs of farmers like Laxmi in India. This means that even What it means is that there if we remove a lot of people from are more people in agriculture than agricultural sector and provide them is necessary. So, even if you move with proper work elsewhere, a few people out, production will agricultural production will not not be affected. In other words, suffer. The incomes of the people who workers in the agricultural sector are underemployed. take up other work would increase the total family income. For instance, take the case of a small farmer, Laxmi, owning about This underemployment can also two hectares of unirrigated land happen in other sectors. For dependent only on rain and example there are thousands of growing crops, like jowar and arhar. casual workers in the service All five members of her family work sector in urban areas who search in the plot throughout the year. for daily employment. They are Why? They have nowhere else to go employed as painters, plumbers, for work. You will see that everyone repair persons and others doing is working, none remains idle, but odd jobs. Many of them don’t find in actual fact, their labour effort work everyday. Similarly, we see gets divided. Each one is doing other people of the service sector some work but no one is fully on the street pushing a cart or employed. This is the situation of selling something where they may underemployment, where people spend the whole day but earn are apparently working but all very little. They are doing this of them are made to work less work because they do not have than their potential. This kind of better opportunities. 26 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  LET’S WORK THESE OUT 1. Complete the table using the data given in Graphs 2 and 3 and answer the question that follows. Ignore if data are not available for some years. TABLE 2.2 SHARE OF PRIMARY SECTOR IN GDP AND EMPLOYMENT 1973-74 1977-78 2013-14 2017-18 Share in GDP Share in employment What are the changes that you observe in the primary sector over a span of forty years? 2. Choose the correct answer: Underemployment occurs when people (i) do not want to work (ii) are working in a lazy manner (iii) are working less than what they are capable of doing (iv) are not paid for their work 3. Compare and contrast the changes in India with the pattern that was observed for developed countries. What kind of changes between sectors were desired but did not happen in India? 4. Why should we be worried about underemployment? How to Create More Employment? From the above discussion, we can see that there continues to be considerable underemployment in agriculture. There are also people who are not employed at all. In what ways can one increase employment for people? Let us look at some of them. Take the case of Laxmi with her two-hectare plot of unirrigated land. The government can spend some money or banks can provide a loan, to construct a well for her family to irrigate the land. Laxmi will then be able to irrigate her land and take a second crop, wheat, during the rabi season. Let us suppose that one hectare of wheat can provide employment to two people for 50 days (including sowing, watering, fertiliser S ECTORS OF THE I NDIAN E CONOMY 27 2024-25  application and harvesting). So, two interest. If the local bank gives her more members of the family can be credit at a reasonable rate of interest, employed in her own field. Now she will be able to buy all these in time suppose a new dam is constructed and cultivate her land. This means that and canals are dug to irrigate many along with water, we also need to such farms. This could lead to a lot of provide cheap agricultural credit to the employment generation within the farmers for farming to improve. We will agricultural sector itself reducing the look at some of these needs in Chapter problem of underemployment. 3, Money and Credit. Now, suppose Laxmi and other Another way by which we can farmers produce much more than tackle this problem is to identify, before. They would also need to sell some promote and locate industries and of this. For this they may be required to services in semi-rural areas where a transport their products to a nearby large number of people may be town. If the government invests some employed. For instance, suppose money in transportation and storage of many farmers decide to grow arhar crops, or makes better rural roads so and chickpea (pulse crops). Setting that mini-trucks reach everywhere up a dal mill to procure and process several farmers like Laxmi, who now these and sell in the cities is one such have access to water, can continue to example. Opening a cold storage could grow and sell these crops. This activity give an opportunity for farmers to can provide productive employment to store their products like potatoes and not just farmers but also others such as onions and sell them when the price those in services like transport or trade. is good. In villages near forest areas, we can start honey collection centres Laxmi’s need is not confined to where farmers can come and sell wild water alone. To cultivate the land, she honey. It is also possible to set up also needs seeds, fertilisers, industries that process vegetables and agricultural equipment and pumpsets agricultural produce like potato, to draw water. Being a poor farmer, sweet potato, rice, wheat, tomato, she cannot afford many of these. So, fruits, which can be sold in outside she will have to borrow money from Gur Making in markets. This will provide Haryana moneylenders and pay a high rate of employment in industries located in semi-rural areas and not necessarily in large urban centres. What groups of peop le do you think are unemplo yed or underemployed in your ar ea ? Ca n yo u th in k of some measures that could be taken up for them ? Do you know that in India about 60 per cent of the population belongs to the age group 5-29 years? Out of this, only about 51 per cent are attending educational institutions. The rest and particularly those aged less than 18 years may be at home or 2024-25 many of them may be working as child labourers. If these children are to attend schools, we will require more buildings, more teachers and other staff. A study conducted by the erstwhile Planning Commission (now known as NITI Aayog) estimates that nearly 20 lakh jobs can be created in the education sector alone. Similarly, if we are to improve the health situation, we need many more doctors, nurses, health workers etc. to work in rural areas. These are some ways by which jobs would be created and we would also be able to address the important aspects of development talked about in Chapter 1. Every state or region has potential for increasing the income and employment for people in that area. It could be tourism, or regional craft industry, or new services like IT. Some in about 625 districts of India. It is of these would require proper called Mahatma Gandhi National planning and support from the Rural Employment Guarantee Act government. For example, the same 2005 (MGNREGA 2005). Under study by the Planning Commission MGNREGA 2005, all those who are says that if tourism as a sector is able to, and are in need of, work in improved, every year we can give rural areas are guaranteed 100 days additional employment to more than 35 lakh people. of employment in a year by the government. If the government fails in We must realise that some of the its duty to provide employment, it will suggestions discussed above would give unemployment allowances to the take a long time to implement. For the people. The types of work that would short-term, we need some quick measures. Recognising this, the in future help to increase the central government in India made a production from land will be given law implementing the Right to Work preference under the Act. LET’S WORK THESE OUT 1. Why do you think MGNREGA 2005 is referred to as ‘ Right to work’ ? 2. Imagine that you are the village head. In that capacity suggest some activities that you think should be taken up under this Act that would also increase the income of people? Discuss. 3. How would income and employment increase if farmers were provided with irrigation and marketing facilities? 4. In what ways can employment be increased in urban areas? S ECTORS OF THE I NDIAN E CONOMY 29 2024-25  DIVISION OF SECTORS AS ORGANISED AND UNORGANISED Let us examine another way of classifying activities in the economy. This looks at the way people are employed. What are their conditions of work? Are there any rules and regulations that are followed as regards their employment? Ka n ta nds her office from Kanta works in an office. She atte s her salary regularly 9.30 a.m. to 5.30 p.m. She get ition to the salary, at the end of every month. In add as per the rules laid she also gets provident fund also gets medical and down by the government. She s not go to office on other allowances. Kanta doe y. When she joined Sundays. This is a paid holida tment letter stating work, she was given an appoin work. all the terms and conditions of Kamal Kamal is Kanta’s neighbour. He is a da ily wa ge lab our er in a nea rby grocery shop. He goes to the shop at 7:30 in the morning and works till 8:00 p.m. in the evening. He gets no other allowances apart from his wa ges. He is not paid for the days he doe s not work. He has therefore no leave or paid holidays. Nor was he given any formal let ter say ing tha t he ha s bee n employed in the shop. He can be asked to leave anytime by his emplo yer. differences in Do you see the s of w or k th e co n d it io n organised because it has some formal and Kamal? between Kanta processes and procedures. Some of these people may not be employed by Kanta works in the organised anyone but may work on their own sector. Organised sector covers those but they too have to register enterprises or places of work where themselves with the government and the terms of employment are regular follow the rules and regulations. and therefore, people have assured work. They are registered by the Workers in the organised sector government and have to follow its enjoy security of employment. They rules and regulations which are are expected to work only a fixed given in various laws such as the number of hours. If they work more, Factories Act, Minimum Wages Act, they have to be paid overtime by the Payment of Gratuity Act, Shops and employer. They also get several other Establishments Act etc. It is called benefits from the employers. What are 30 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25 these benefits? They get paid leave, low-paid and often not regular. There payment during holidays, provident is no provision for overtime, paid fund, gratuity etc. They are supposed leave, holidays, leave due to sickness to get medical benefits and, under the etc. Employment is not secure. People laws, the factory manager has to can be asked to leave without any ensure facilities like drinking water reason. When there is less work, such and a safe working environment. as during some seasons, some people When they retire, these workers get may be asked to leave. A lot also pensions as well. depends on the whims of the In contrast, Kamal works in the employer. This sector includes a large unorganised sector. The unorganised number of people who are employed sector is characterised by small and on their own doing small jobs such scattered units which are largely as selling on the street or doing repair outside the control of the government. work. Similarly, farmers work on their There are rules and regulations but own and hire labourers as and when these are not followed. Jobs here are they require. LET’S WORK THESE OUT 1. Look at the following examples. Which of these are unorganised sector activities? (i) A teacher taking classes in a school (ii) A headload worker carrying a bag of cement on his back in a market (iii) A farmer irrigating her field (iv) A doctor in a hospital treating a patient (v) A daily wage labourer working under a contractor (vi) A factory worker going to work in a big factory (vii) A handloom weaver working in her house 2. Talk to someone who has a regular job in the organised sector and another who works in the unorganised sector. Compare and contrast their working conditions in all aspects. 3. How would you distinguish between organised and unorganised sectors? Explain in your own words. 4. The table below shows the estimated number of workers in India in the organised and unorganised sectors. Read the table carefully. Fill in the missing data and answer the questions that follow. TABLE 2.3 WORKERS IN DIFFERENT SECTORS (IN MILLIONS) Sector Organised Unorganised Total Primary 1 232 Secondary 41 74 115 Tertiary 40 88 128 Total 82 Total in Percentage 100% · What is the percentage of people in the unorganised sector in agriculture? · Do you agree that agriculture is an unorganised sector activity? Why? · If we look at the country as a whole, we find that ———% of the workers in India are in the unorganised sector. Organised sector employment is available to only about ———% of the workers in India. S ECTORS OF THE I NDIAN E CONOMY 31 2024-25  How to Protect Workers in Who are these vulnerable people the Unorganised Sector? who need protection? In the rural areas, the unorganised sector mostly The organised sector offers jobs that comprises of landless agricultural are the most sought-after. But the labourers, small and marginal employment opportunities in the farmers, sharecroppers and artisans organised sector have been expanding (such as weavers, blacksmiths, very slowly. It is also common to find carpenters and goldsmiths). Nearly many organised sector enterprises in 80 per cent of rural households in the unorganised sector. They adopt India are in small and marginal such strategies to evade taxes and farmer category. These farmers need refuse to follow laws that protect to be supported through adequate labourers. As a result, a large number facility for timely delivery of seeds, of workers are forced to enter the agricultural inputs, credit, storage unorganised sector jobs, which pay a facilities and marketing outlets. very low salary. They are often exploited and not paid a fair wage. In the urban areas, unorganised Their earnings are low and not sector comprises mainly of workers in regular. These jobs are not secure and small-scale industry, casual workers have no other benefits. in construction, trade and transport etc., and those who work as street Since the 1990s, it is also common vendors, head load workers, garment to see a large number of workers makers, rag pickers etc. Small-scale losing their jobs in the organised industry also needs government’s sector. These workers are forced to support for procuring raw material take up jobs in the unorganised and marketing of output. The casual sector with low earnings. Hence, workers in both rural and urban besides the need for more work, there areas need to be protected. is also a need for protection and support of the workers in the We also find that majority of unorganised sector. workers from scheduled castes, tribes and backward communities find themselves in the unorganised sector. Besides getting the irregular and low paid work, these workers also face social discrimination. Protection and support to the unorganised sector workers is thus necessary for both economic and social development. When factories close down, many once regular workers are found selling goods or pushing a cart or doing some other odd job 32 U NDERST ANDING E CONOMIC D EVEL NDERSTANDING OPMENT EVELOPMENT 2024-25  LET’S RECALL With so many activities taking place around us, one needs to use the process of classification to think in a useful manner. The criterion for classification could be many depending on what we desire to f