IED Booklet PDF

### Chapter 1:- Indian economy on the eve of Independence ### **[Agriculture sector on the eve of independence:-]** ### Low productivity  Level of productivity was very low, therefore agriculture was in backward condition.  Lack of technology and irrigational facilities resulted in low level...

### Chapter 1:- Indian economy on the eve of Independence ### **[Agriculture sector on the eve of independence:-]** ### Low productivity  Level of productivity was very low, therefore agriculture was in backward condition.  Lack of technology and irrigational facilities resulted in low level of productivity. ii. ### Lack of means of irrigation iii. ### Owners of the soil were different from tillers of the soil: Tillers of soil were left with very less crops which were hardly enough for their survival iv. ### Small and fragmented land holdings: Subdivision of land made the task of management and supervision difficult i. ### Land revenue system (Zamindari System) ii. ### Commercialization of agriculture: iii. ### Impact of partition on agriculture iv. ### Low investment in agriculture **[Industrial sector on the eve of Independence:-]** ### Decay of Handicrafts:- i. **Discriminatory tariff policy:-**  Heavy export duties on Indian handicrafts.  It led to decline of handicrafts both in domestic as well as in International markets. ### Competition from machine made products ### Lopsided growth of Industries:-  The development was confined to cotton and jute textiles.  Iron and steel industries started to set up and first company was set up in 1907.(TISCO) ii. ### Lack of capital goods industries iii. ### Due to slow progress of industries, its contribution to GDP was less iv. ### Limited area of operation of public sector  The public sector remained confined to railways, power generation, ports, communication etc. **[Foreign trade on the eve of independence:-]** - ### India became Net exporter of primary products and importer of finished goods - ### Opening of Suez canal made British control over India's foreign trade more than 50% of India's trade, remaining trade was allowed with few countries like China, Ceylon and Persia. - ### India's foreign trade generated huge export surplus which was used to complete the expenses of British government. **[Demographic conditions:-]** - **High birth rate and Death rate** - **Infant mortality rate was quite high-218 per thousand.** - **Literacy rate was less than 16% and female literacy rate was less than 7%. It indicates social backwardness.** - **Life expectancy was very low -32 years** ### Demographic transition:- It is the year of great divide in 1921. Before 1921, population growth was moderate. **[Occupational structure on the eve of independence:-]** - - **Secondary sector: 10%** - **Regional variations:-** - **Agriculture sector was the major sector where total workforce was engaged but still there were some regional variations which led to unbalanced growth.** - **Workforce was more in Orissa and Punjab in agriculture sector as compared to Madras and Bombay which witnessed a decline in the dependence of the workforce on the agricultural sector with a commensurate increase in the manufacturing and the services sectors** A. **[Infrastructure on the eve of independence:-]** - ### Roads: shortage of all-weather roads - ### Railways: The British introduced the railways in 1850. - ### Air and water transport: inland trade and sea lanes proved to be uneconomical - ### Communication: The first stamp was released in 1852 and first telegraph line was started in 1853. B. **[Positive impacts of British rule in India:-]** - **Commercialization of agriculture** - **Development of Infrastructure: Development of roads, railways, air and water transport** - **Check on famines: Development of transportation helped in controlling the effects of famines.** - **Effective administration:** They followed effective and efficient administrative system which left good work culture in India. ### Sequence of events Sequence ---------- -- -- 1 2 3 4 5 6 7 **[Economic planning]**. 1. **Long period goal of planning:-**Plans in India were made for five years plan. First five year plan 1951-1956. ### OBJECTIVES: (GEMS) a. **[Growth or increase in GDP:]** It refers to steady increase in the GDP. b. **[Equity:]** Along with growth it is important to ensure that economic development is shared by all citizens to promote social justice. c. **[Modernization:]** Adoption of technology is called modernization. Modernization also refers to change in social outlook. Such as women empowerment. d. **[Self-reliance:]** Five year plans gave importance to self-reliance which means avoiding import of those goods which could be produced in India. This policy was considered necessary in order to reduce our dependence on foreign countries, especially for food. **Agrarian reforms/Reforms in Indian agriculture:-** I. **Institutional or Land Reforms:-** i. **Abolition of intermediaries: S**teps were taken to abolish intermediaries and make the tillers of the soil as the owners of the soil. ii. ### Consolidation of land holdings: It is a process where farmers were allotted land at one place as a replacement of their scattered land. iii. ### Ceiling on land holdings:- ### Owner was made the tiller of the land II. ### General measures to improve agriculture:- v. **Irrigation facilities:** Construction of multipurpose projects and tube-wells, larger areas have been covered. vi. ### Provision of credit: Provide funds at lower rate of interest. Commercial banks also meet the credit needs of farmers. vii. ### Price support policy:- ### Green Revolution:- i. **Use of HYV seeds:-** ### Use of chemical fertilizers:- ### Use of Insecticides and pesticides:- ### Mechanized means of cultivation:- ### Achievements of agrarian reforms: (Green Revolution) i. **Increase in crop productivity**: The green revolution resulted in multiple times rise in food production. It helped in recovering the country from regular food shortages and end the stagnation period in Indian agriculture. ii. **Decrease in price of food grains** iii. **Buffer stock**: The spread of green revolution technology enabled the government to procure sufficient amount of food grains to build buffer stock which could be used in times of food shortage. iv. **Commercialization of Agriculture**: Green revolution resulted in Marketable surplus. v. **Self -- sufficiency in food grains**: The spread of green revolution technology enabled India to achieve self-sufficiency in food grains. India was no more dependent on foreign countries in this regard. ### Limitations of green revolution:- i. **Limited crops**: The effect of green revolution is confined to limited crops like wheat & rice ii. **Un-even spread**: In the first phase of the Green revolution (approx. mid 1960 upto mid 1970), the use of HYV seeds was restricted to states such as Punjab, Tamil Nadu, and Andhra Pradesh. iii. **Economic divide**: Only big farmers could afford HYV seeds, as it requires various other inputs which are beyond the reach of small farmers. This increased the inequality between small and big farmers. +-----------------------------------------------------------------------+ | **Role of government in ensuring that the green revolution benefitted | | small farmers as well.** | +=======================================================================+ | 1. 2. **The government also provided subsidized fertilizers so that | | small farmers could also have access to the needed inputs.** | +-----------------------------------------------------------------------+ **Subsidies means the help given by government to small or marginal farmers.** -------------------------------------------------------------------------------- -------------------------------------- **Arguments against subsidies** **Arguments in favour of subsidies** C. **Important Role of public sector in industrial development:** iii. **Lack of capital:** ### Low inducement to invest:- ### Growth with social justice:- I. ### IPR-1956 (Industrial policy Resolution) i. **Three fold classification of industries:-** ### Industrial licensing:- ### Industrial concessions:- J. **Development of SSI:-** i. **Labour intensive:-** ### Equity oriented:- ### India's Foreign Trade ### Inward looking trade strategy:- - Tariffs are tax on imported goods, these make imported goods more expensive and thus discourage imports. - Quotas specify the quantity of goods which can be imported. ### Positive impact of Inward looking trade strategy: i. **High rate of industrial growth with structural transformation:** The rise in Industry's share of GDP is an important indicator of development. ii. ### Diversification of Industrial growth: The industrial sector became well diversified by 1990 due to public sector, as they were given high priority in the process of industrialization. ### Opportunities of Investment:- **[Features of Economic Policy:-]** a. **Heavy Reliance on Public sector** b. **Regulated development of Private sector** c. **Protection to small scale Industries** d. **Development of Heavy industries** e. **Thrust on savings and Industries** f. **Focus on Import substitution** g. **Centralized planning** ### Drawbacks of Industrial and Trade policy:- a. **Inefficient functioning of public sector:-** ### Excessive regulation of industries:- ### No incentive for producers:- ### Chapter-3 Economic Reforms since -1991 **[Economic reforms:-]** **[Need for economic reforms:]** i. ### High Fiscal deficit ii. ### Balance of payment crisis- Before 1991, exports were less due to poor quality of domestic goods and imports were more despite of heavy tariff duty and quotas. iii. ### Fall in foreign exchange reserves- There was shortage of foreign exchange to pay the interest. The situation became so serious that the government had to mortgage country's gold reserves with World Bank. iv. ### Prices of essential goods was very high. v. ### Poor performance of PSUs: Public sector continued to operate even in those areas which could be comfortably shifted to private sector. **[Elements of New Economic policy:-]** I. **Liberalization:** Liberalization of the economy means freedom given to producing units from the rules imposed by the government. 1. ***Industrial sector reforms: -*** Government introduced industrial policy in 1991. Various measures were taken such as:- i. ### Abolition of Industrial licensing ii. ### Contraction of public sector: The number of industries which were reserved for public sector was reduced from 17 to 3. iii. ### De-reservation of production areas: Goods produced by SSI have been de-reserved. iv. ### Expansion of production capacity 2. ***Financial sector reforms:-*** v. ### Role of RBI was changed from regulator to facilitator. vi. ### Freedom to commercial banks to decide upon interest rates and opening of new branches. vii. ### Establishment of private sector banks, Indian as well as foreign. viii. ### Foreign investment: Foreign institutional investors such as merchant bankers, mutual funds and pension funds are now allowed to invest in Indian Financial markets. 3. ***Fiscal reforms: - (These are the reforms related to tax structure.)*** ix. ### Simplification in filing of taxes and reduction in Direct taxes to avoid tax evasion x. ### Reforms in Indirect taxes: GST has been launched which generates additional tax revenue, increases tax compliance and reduces tax evasion. 4. ***External sector reforms:-*** xi. ### Devaluation of rupee. xii. ### Foreign trade policy:  Tariff on imports was reduced.  Import licensing was abolished.  Export duty has been withdrawn to promote competition. ### Privatization:-  It means greater role to the private sector and reduced role of public sector.  It can be done by two ways:- - By withdrawal of the government ownership and management of public sector companies. - By sale of public sector companies. ### Globalization:-  It is the outcome of policies of liberalization and privatization. i. ### Increase in equity limit of foreign investment ii. ### Partial convertibility of the currency was allowed iii. ### Reduction in Tariffs iv. ### Withdrawal of quantitative restrictions:-  Because of policies of WTO the restriction on imports has been abolished.  To enlarge production and trade of services.  To ensure optimum utilization of resources.  To protect the environment. a. ***Employment*:** For a developing country like India, employment generation is an important objective and outsourcing proves to be a boon for creating more employment opportunities. It leads to generation of newer and higher paying jobs. b. ***Exchange of technical know-how*:** Outsourcing enables the exchange of ideas and technical know- how of sophisticated and advanced technology from developed to developing countries. c. ***Better standard of living*:** By creating more and higher paying jobs, outsourcing improves the standard and quality of living of the people in the developing countries. **Reasons for India being the outsourcing hub:** **1. Low wage rates in India** **2. Large English speaking population** **3. Advanced IT & Communications sector** ### An appraisal of LPG policy:- ***MERITS:-*** ### i. There has been an increase in overall growth rate of the country. ### ii. LPG policy has shown structural changes and it was a great stimulant to industrial production. ### iii. Fiscal deficit now started recovering after the economic reforms. ### iv. A check on inflation ### v. Consumers have ample goods to make choice because of diverse global markets. ### vi. Rise in foreign exchange reserves:- Due to rise in exports, the amount of forex reserves has also increased. ### i. Reforms have not been able to benefit agriculture- Public investment in agriculture sector like irrigation, power, roads etc. has been reduced in the reform period. ### ii. Urban concentration of economic growth: The industries are set up in urban areas because the infrastructural facilities are available there. ### iii. Domestic industries are unable to compete with foreign companies. ### iv. Spread of consumerism ### v. Lopsided growth process: Growth process was incomplete as it did not focus upon all sectors of the economy.  Industrialization is being given more importance and farming sector is being neglected. **a.** --------- -- -- **i.** **ii.** **b.** **i.** **ii.** **c.** i. ii. iii. +-----------------------------------+-----------------------------------+ | **Effect of Reform on Industrial | **Effect of reform on Agriculture | | sector** | sector** | +===================================+===================================+ | \-- Decreasing demand of | \-- Fall in public investment in | | industrial products:- (i) Cheaper | Agriculture:- In the reform | | imports have replaced the demand | period the investment by | | for domestic goods. Domestic | government reduced especially in | | manufacturers are facing | area of irrigation, power roads | | competition from imports. (ii) | etc. | | The infrastructural facilities, | | | including power supply, have | \-- Removal of fertilizer | | remained inadequate due to lack | subsidy:- Removal of subsidy on | | of investment. | fertilizers has adverse effect on | | | small and marginal farmers | | \-- Non-access to developed | because their cost of production | | country's markets:- A developing | has increased. | | country like India does not have | | | access to developed country's | \-- Increased International | | markets due to high non-tariff | competition:- Indian farmers had | | barriers. | to face increased international | | | competition because of reduction | | | of import duties on food grains, | | | removal of minimum support price | | | etc. | | | | | | \-- Export oriented policy:- | | | Prices of food grains increased | | | because of attraction of | | | agricultural products toward | | | exports and because of this, | | | production of cash crops | | | increased. | +-----------------------------------+-----------------------------------+ ### Concept:- - stock of skill and expertise of human beings in the country. Human Capital Formation refers to - addition to the stock of abilities and skills among the population of the country. ### Sources of human capital formation:- i. **Expenditure on education:-** ### Expenditure on health:-  It directly increases the physical and mental ability of human beings and produces healthy labour force. ### On-the job training:-  This type of training is required to enhance skills and expertise of human capital in order to increase the productivity of workers.  This may take different forms:- the workers may be trained in the firm itself under the supervision of skilled labour. ### Expenditure on migration:-  People move from one place to another in search of jobs where they can utilize their skill in an efficient way.  Expenditure done on migration is also considered as source of human capital formation as the earnings are much higher than cost. ### Expenditure on information:-  The information is necessary to make decisions regarding investment in human capital as well as for efficient utilization of resources. ### Role of human capital formation:- vi. **Higher productivity of physical capital:-**  The physical capital can be utilised effectively only by skilled and intelligent work of human capital in the economy. ### Innovative skills:-  The human capital formation stimulates innovation.  Education provides knowledge to understand changes in society and scientific advancements thus facilitating inventions & innovation. ### Higher rate of participation and equality:-  Human capital formation has increased the productivity of individuals which increases employment opportunities and also provides economic and social equality. ### Improvement in quality of life:-  Human capital formation enables them to enjoy a higher standard of living, they are able to generate better remuneration for them ### Problems facing human capital formation:- x. **Rising population:-** ### Brain-drain:-  Loss of resources in terms of ―Brain-Drain is a serious outcome of migration when educated and skilled manpower moves to other countries to work. ### Deficient manpower planning:-  In India, there exists imbalance between the demand and supply of human resources required for different categories of work. ### Reports on the Indian Economy:- Two independent reports on the Indian Economy, in recent times, have identified that India would grow faster due to its strength in human capital formation.  **Deutsche Bank**, a German bank in its report on -Global Growth Centers identified that India will emerge as one among four **major growth centres in the world** by the year 2020.  With reference to India it states, ―Between 2005 and 2020 we expect a 40% rise in the average years of education in India.  **World Bank**, in its recent report, India and the knowledge Economy- Leveraging strengths and opportunities, states that India should make a **transition to the knowledge economy** and if it uses its knowledge as much as Ireland does then the per capita income of India will increase from US\$1000 IN 2002 to US\$3000 in 2020.  It further states that the Indian economy has all the key ingredients for making this transition such as, a critical mass of skilled workers, a well-functioning democracy and diversified science and technology infrastructure. ### Government intervention in Education and health sectors is necessary because:-  Expenditure on education and health makes substantial long term impact and they cannot be easily reversed.  Private providers of these services adhere to the standards stipulated by the government and charge the correct price.  Basic health care and education is a right of the citizens. So it is essential that the government should provide education and health services free of cost for the deserving citizens and those from the socially oppressed classes. ### Growth of education sector in India:- 7.92 to 15.7 and as percentage of GDP increased from 0.64 to 4.13.  In **2009**, the Government of India enacted the **Right to Education Act** to make free education a fundamental right of all children in the age group of **6-14 years**.  Government of India has also started levying a 2 % **Education Cess** on all Union taxes. The revenues from education cess have been earmarked for spending on elementary education. S. No ------- -- -- -- 1 2 3 ### Chapter -5 Rural development **Rural development:-**process which targets improvement of rural areas, it focuses on the action plan for the development of rural areas that are lagging behind in the overall development of the country. - Development of human resources - Land reforms - Infrastructure development - Finance for land reforms and agriculture marketing ### [Rural Credit] ### Need for credit: a. The challenge of rural credit:  The need for credit arises because poor farmers do not have surplus to invest in the improvement of agriculture.  There is time difference between sowing and harvesting of the crops. Farmers borrow in between sowing and harvesting of the crops. ### Sources of Rural credit:- i. **Non-institutional sources:-**  traditional sources of rural credit in India. These sources include money-lenders, landlords, and traders. ii. ### Institutional sources:- a. **Cooperative credit societies:-**  These societies advance credit to the farmers at reasonable rate of interest. - free the farmers from the hands of money lenders. - advance credit at low rates of interest. - ensure timely and continuous flow of credit to the rural areas. b. ### RRBs and land development bank c. ### Commercial banks: ### NABARD:-  NABARD means National bank for agriculture and rural development. It was set up in 1982 as an apex body to coordinate the activities of other financial institutions. ### Self-Help groups  from the pooled money, credit is given to needy members to be repayable in small installments at reasonable rate of interest.  For eg. Kudumbashree is a women oriented community based self-help group implemented in Kerala in 1955. ### Rural banking-A critical evaluation:-  Banking credit facility is available by keeping something as collateral security because of this poor and marginal farmers are left out.  There is relaxed policy relating to recovery of loans and because of this sometimes bank may fall in problem. ### [Agricultural Marketing] ### The challenge of agriculture marketing:-  It is a process that involves the assembling, storage processing, transportation, packaging, grading and distribution of different agricultural commodities across the country. ### Measures initiated by government to improve marketing system: i. **Regulated markets:**  ensure that the farmers get reasonable price of their produce.  use of proper scales and weighs. ### Cooperative agricultural marketing societies: ### Provision of warehousing facilities:  Government has provided storage facilities in the view to help farmers for storing the goods. ### Minimum support price:  govt. fixes minimum support price to encourage the farmers to sell their produce. ### Emerging alternate marketing channels for agricultural marketing:  examples of these channels are - Apni Mandi (Punjab, Haryana, Rajasthan) - Hadaspur (Pune) - Rythu Bazars ( vegetables and fruit markets in Andhra Pradesh and Telangana) - Uzhavar Sandies (farmers market in Tamil Nadu) ### Benefits : - It will help in reducing the risks of farmers. - It would also expand the markets for farm products. - It would help in providing proper prices to farmers. - It will help in protecting interest of consumers also. ### [Agriculture diversification] ### Why is agricultural diversification essential for sustainable livelihoods? 1. There is greater risk in depending exclusively on farming for livelihood. 2. It reduces the risk from agriculture sector, provides productive sustainable livelihood options to rural people. 3. It becomes difficult to find gainful employment during non-sowing season. 4. Therefore, expansion into other sectors is essential to provide supplementary gainful employment and in realizing higher levels of income for rural people to overcome poverty. ### Animal husbandry: - Farmers can pool their production of milk - Transported to milk cooperatives at fair price. - Gujarat state is held as a success story in the efficient implementation of milk cooperatives ### Fisheries:- ### Horticulture:- ### [Organic farming and sustainable development] ### Advantages: ### Problems and Limitations of organic farming: ### [6. Employment] **Who is a worker?**  All those persons who are engaged in various economic activities and hence contribute to gross national product are workers. **[Workforce participation rate: -]**  It is defined as the percentage of population that is actively contributing to the production of goods and services of a country. **[Unemployment]** Unemployment refers to a situation where people are willing to work at existing wage rate but they are not getting work. ### Worker and its types: - **Self-employed workers** ### Hired workers ### Casual workers ### Informalization of workforce: - It is the situation where percentage of workforce in the formal sector tends to decline and that in the informal sector tends to rise. It is classified into Formal sector and Informal sector. ### Formal sector: - These workers form trade unions and have strong bargaining power, as their rights are protected by various labour laws. ### Informal sector: - These workers cannot form trade unions and have weak bargaining power as their rights are protected by various labour laws. **Causes of Informalization of workforce in India:** 1.Dereservation of small-Scale Industries 2\. Inability of PSUs to create more job. 3.Use of capital-intensive technology led to job less growth. 4\. Economic reform **[Rural Unemployment: -]** **Disguised unemployment:** It is a situation when more than actually required numbers of workers are engaged in work. If some of them are withdrawn from the job, the total output will remain unaffected. **Seasonal unemployment:** ### ### Other types of unemployment: - **Open unemployment: -** ### Structural unemployment: -This may be due to change in technology. **Frictional unemployment:** It occurs when workers leave one job and need some time to wind up the previous job. In this process they are not working for some time, and hence will be called frictionally unemployed. **[7. Environment and Sustainable Development]** ### Concept of environment: - ### Function of environment ### 2. Environment sustains life ### 3.Environment assimilates (absorbs) waste ### 4.Environment enhances quality of life ### Current environmental crisis: - 1. **[Land degradation: -]** 2. **[Soil erosion: -]** 3. **[Deforestation: -]** 4. **[Pollution:]** ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### [SUSTAINABLE DEVELOPMENT]  It refers to the development strategy to meet the needs of present generation without compromising the needs of future generations. ### Strategies for sustainable development **1.  Use of non-conventional sources for energy** **2.Cleaner fuel use in both rural and urban regions** **3.Organic farming** **4.Utilisation of bio-compost** **5.Establishing/installing Mini-hydel Plants** ### 6.Strict law on the disposal of chemical effluents **[Strategy of growth of India, Pakistan and China:-]** ### Growth story of China:-  The **Great Leap Forward** campaign was initiated in **1958** to foster industrialization.  In rural areas, communes were started. Under the commune system, people collectively cultivated land. In 1958 there were 26000 communes covering almost all the farm population.  In **1965, Mao introduced the Great Proletarian Cultural Revolution** (1966-76) under which students and professionals were sent to work and learn from country side. **Initial phase** ------------------- -- - Demand of Chinese products has reduced in global economies. - Chinese economy slowed down because of less domestic investment. - Chinese people were migrating to other countries in search of skilled job opportunities. ### Growth story of Pakistan:  In the late 1950's and 1960's Pakistan introduced **tariff protection** for manufacturing of consumer goods together with direct import controls on competing imports.  Introduction of **Green Revolution** led to a rise in the production of food grains.  In the 1970's **nationalization of capital goods** industries took place. Pakistan then shifted its policy and introduced denationalization.  Received **financial support from western countries** and also financial support to private sector from government. **[Economic Development Indicators of India, China and Pakistan:]** ### Salient Demographic Indicators of India, China and Pakistan  If we look at the global population, out of every six persons in the world one is Indian and another is Chinese. The population of Pakistan is very small accounts for roughly about one-tenth of China or India.  The population growth is highest in Pakistan followed by India and China. Major **reason for low population growth in China was One Child Policy** norm initiated in late 1970's.  Sex ratio is low in all the three countries. Preference for sons, in all these countries is the reason for low sex ratio. ### GDP growth rate trends in India, China and Pakistan:-Annual growth of GDP (in %), 1980-2017  China has the second largest GDP in the world  China was able to maintain near double digit growth rate for one decade.  In the 1980's, Pakistan was ahead of India, China was having double-digit growth and India was at the bottom.  In recent years, there has been a decline in China's growth rates whereas, Pakistan met with drastic decline. Some scholars hold economic reforms in 1988 and political instability responsible behind the trend. ### Sectoral contribution towards GDP in India, China and Pakistan  Share of agriculture sector: Highest in Pakistan and lowest in India  Share of Manufacturing and service sector: In all three economies, service sector. ### Sectoral share of employment in India, China and Pakistan  Proportion of workforce that works in agriculture is highest in India.  In all three countries workforce in Industry and Services sectors is less.  In China, workforce in service sector is high as compared to India and Pakistan. ### Development of India, China and Pakistan with respect to indicators of human development: ### ###