Module 01 Economic Growth and Development PDF

MODULE 01 ECONOMIC GROWTH AND DEVELOPMENT 1.1) CONCEPT OF ECONOMIC DEVELOPMENT Economic development is the process of improving a country's economy over time. It involves increasing the nation's wealth and standard of living for its people. Economic development...

MODULE 01 ECONOMIC GROWTH AND DEVELOPMENT 1.1) CONCEPT OF ECONOMIC DEVELOPMENT Economic development is the process of improving a country's economy over time. It involves increasing the nation's wealth and standard of living for its people. Economic development includes various factors like growth in income, better job opportunities, improved healthcare, and education. It aims to create a stable and prosperous economy for the well-being of the entire population. It is the development of the social-economic parameters of the economy which raises the standard of living of the population. Development is a long-term process. It is an improvement in both the quantitative and qualitative aspects. Economic development is much related to developing economies. Measurements to arrive at economic development are Green GDP, Gender Inequality Index, Gross Happiness Index, etc. Economic development is defined as a sustained improvement in material well being of society. Economic development is a wider concept than economic growth. Apart from growth of national income, it includes changes – social, cultural, political as well as economic which contribute to material progress. It contains changes in resource supplies, in the rate of capital formation, in size and composition of population, in technology, skills and efficiency, in institutional and organizational set-up. These changes fulfill the wider objectives of ensuring more equitable income distribution, greater employment and poverty alleviation. In short, economic development is a process consisting of a long chain of interrelated changes in fundamental factors of supply and in the structure of demand, leading to a rise in the net national product of a country in the long run. 1.1.2) CONCEPT OF ECONOMIC GROWTH Growth implies not only more output, but also more inputs and more efficiency, i.e., an increase in output per unit of input. Economist’s use two measures — real national income and per capita real national income — to compare how economies grow over time. Essentially, economic growth is an increase in real national income. As more goods and services are produced, the real income of a nation (usually measured in terms of gross national product or gross domestic product) increases and people are able to consume more. Growth of national income is described as an annual rate of percentage change in real GNP or GDP per annum. The term economic growth is defined as the process whereby the country’s real national and per capita income increases over a long period of time. This definition of economic growth consists of the following features of economic growth: * Economic Growth implies a process of increase in National Income and Per- Capita Income. The increase in Per-Capita income is the better measure of Economic Growth since it reflects increase in the improvement of living standards of masses. * Economic Growth is measured by increase in real National Income and not just the increase in money income or the nominal national income. In other words the increase should be in terms of increase of output of goods and services, and not due to a mere increase in the market prices of existing goods. * Increase in Real Income should be Over a Long Period: The increase of real national income and per-capita income should be sustained over a long period of time. The short-run seasonal or temporary increases in income should not be confused with economic growth. * Increase in income should be based on Increase in Productive Capacity: Increase in Income can be sustained only when this increase results from some durable increase in productive capacity of the economy like modernization or use of new technology in production, strengthening of infrastructure like transport network, improved electricity generation etc. 1.2) FEATURES AND INDICATORS OF ECONOMIC DEVELOPMENT Features of Economic Development Economic development is a broad concept encompassing various aspects of improving a country's overall economic health and the well-being of its population. Here are some key features of economic development: 1. Sustained Economic Growth: Long-term increase in the real GDP or GDP per capita, reflecting a continuous improvement in the economy's productive capacity and overall wealth. 2. Poverty Reduction: Significant decreases in poverty rates and improvements in the standard of living for the population. This includes increasing access to basic needs such as food, housing, and healthcare. 3. Improved Quality of Life: Enhancements in overall well-being, including better healthcare, education, and living conditions. Economic development often leads to higher life expectancy, lower infant mortality rates, and better educational outcomes. 4. Diversification of Economic Activities: Shift from dependence on a few sectors or industries to a more diverse economy. This includes the development of various sectors such as manufacturing, services, and technology, reducing vulnerability to economic shocks. 5. Increased Productivity: Growth in the efficiency of production processes, leading to higher outputs with the same or fewer inputs. This is often achieved through technological advancements and improvements in skills and education. 6. Infrastructure Development: Expansion and improvement of physical infrastructure, such as transportation networks, utilities (water, electricity), and communication systems. This supports economic activities and enhances connectivity. 7. Institutional and Governance Improvements: Strengthening of institutions and governance structures, including better regulatory frameworks, effective legal systems, and reduced corruption. Good governance supports economic stability and growth. 8. Human Capital Development: Investment in education and skills training to improve the workforce's capabilities. This includes access to quality education, vocational training, and healthcare, which enhances labor productivity and innovation. 9. Technological Innovation: Adoption and development of new technologies that drive efficiency and create new opportunities for growth. Technological progress often leads to new industries and improves existing ones. 10. Social Inclusion and Equity: Ensuring that all segments of society, including marginalized and disadvantaged groups, benefit from economic growth. This involves reducing income inequality and promoting equal opportunities. 11. Environmental Sustainability: Integration of environmental considerations into economic planning to ensure that growth is sustainable and does not lead to excessive environmental degradation. This includes managing natural resources responsibly and addressing climate change. 12. Expansion of Trade and Investment: Increase in international trade and foreign direct investment (FDI). This often leads to greater market access, technology transfer, and increased capital flows. 13. Cultural and Social Progress: Improvement in cultural and social aspects, including greater access to cultural activities, protection of cultural heritage, and social cohesion. 14. Institutional Capacity Building: Development of the capacity of institutions and organizations to effectively implement policies and deliver  services. This includes training personnel, improving processes, and increasing transparency and accountability. These features collectively contribute to creating an environment where economic growth translates into broader and more sustainable improvements in people's lives. Indicators of economic development o The indicators of economic development are the parameters that economies should be assessed against to determine progress and well-being. o Indicators of economic development o Gross Domestic Product per Capita: GDP per capita refers to the mean value of economic output per individual in a given country. It is obtained by dividing the total GDP by the population. o Literacy Rates: Another important indicator for economic development is literacy rates, which are defined as the percentage that can read and write at a specified age in a population. o Life Expectancy: Life expectancy is the indicator of average years that a person may expect to live on the basis of the current rate of mortality. o Poverty Rate: Poverty rate is the portion of the population below the national poverty line. This reflects the gap between the poor and the rich in a nation and the standards of living. o Access to Essential Services: Access to services such as clean water, sanitation, health care, and education is among the most important indicators of the level of development. o Social and Economic Indicators of Development o Economic Indicators: Economic indicators and qualitative social development indicators are major tools in assessing the complexity of development within a country. o Gross Domestic Product (GDP) per Capita: GDP per capita measures the average economic output for every single person inside the  country. These measures reflect the general productivity and income levels in the economy, hence giving a look at the standard of living. o Unemployment Rate: Unemployment rate is the percentage of labor force unemployment, which defines the number of jobless people in relation to the active job seeker but cannot find any. o Poverty Rate: The poverty rate reflects the approximate share of the population that lives below the poverty line set by the country. o Investment in Infrastructure: Investment in infrastructure, including transportation, energy, and communication systems, is necessary for enabling the overall process of economic development. o Qualitative Social Development Indicators o Literacy Rate: Literacy rate refers to the percentage of ability among individuals to read and, or write. It shows the extent of levels in education and how easily it can be accessed. o Life Expectancy: Life expectancy is the average period within which a person is expected to live, based on current mortality. o Healthcare Access and Quality: This indicator measures the availability and quality of health care services, including access to medical institutions and the quality of care provided by those centers. o Social Inequality: Social inequality measures the relative existence of income and wealth opportunity disparities among different segments of the population. 1.3) CHALLENGES OF DEVELOPMENT ECONOMICS Development economics is a field focused on improving the economic and social conditions in developing countries. It deals with a range of challenges that can vary significantly from one country to another. Here are some key challenges faced in development economics: 1. Poverty Alleviation: Despite progress, many countries still face high levels of poverty. Addressing this requires comprehensive strategies that include economic growth, social protection, and equitable distribution of resources. 2. Income Inequality: Economic growth often benefits certain segments of the population more than others. Reducing inequality requires policies that ensure fair distribution of income and opportunities. 3. Infrastructure Development: Many developing countries lack essential infrastructure such as roads, electricity, and water supply. Building and maintaining this infrastructure is critical for economic growth and improving quality of life. 4. Education and Skills Development: Access to quality education and vocational training is crucial for economic development. Improving education systems and ensuring that they meet labor market needs are ongoing challenges. 5. Healthcare Access: Health is both a driver and a consequence of economic development. Many developing countries struggle with inadequate healthcare systems, which affect productivity and overall well-being. 6. Institutional and Governance Issues: Effective institutions and governance are essential for development. Issues such as corruption, weak legal systems, and poor public administration can hinder progress. 7. Sustainability and Environment: Balancing economic development with environmental sustainability is a significant challenge. Developing countries often face the dilemma of pursuing economic growth while managing environmental degradation. 8. Globalization and Trade: Integrating into the global economy presents opportunities and challenges. Developing countries may face difficulties in competing internationally and managing the impacts of global market fluctuations. 9. Economic Diversification: Many developing economies rely heavily on a few sectors or commodities. Diversifying the economy to reduce dependency and build resilience is a key challenge. 10. Political Instability and Conflict: Political instability and conflict can derail development efforts and lead to economic setbacks. Building stable and peaceful environments is crucial for sustainable development. 11. Technology and Innovation: Keeping up with technological advancements and fostering innovation are essential for growth. Developing countries may struggle with technology gaps and the ability to harness new technologies effectively. 12. Climate Change: Developing countries are often more vulnerable to the impacts of climate change, such as extreme weather events and rising sea levels. Adapting to and mitigating these effects is crucial for long-term development. 13. Access to Finance: Limited access to finance for individuals and businesses can stifle economic activity and growth. Improving financial inclusion and access to capital is important for development. 14. Social Inclusion: Ensuring that marginalized groups, including women, ethnic minorities, and people with disabilities, have equal access to opportunities and resources are a key challenge in development. Addressing these challenges requires a multifaceted approach, involving both domestic policies and international cooperation. Each country’s unique context means that solutions must be tailored to its specific needs and circumstances. 1.4) CONTEMPORARY APPROACHES TO ECONOMIC GROWTH AND DEVELOPMENT A. CONTEMPORARY APPROACHES TO ECONOMIC GROWTH B. CONTEMPORARY APPROACHES TO ECONOMIC DEVELOPMENT (will provide in class) MODULE 02.PROBLEMS OF DEVELOPMENTAL ECONOMICS 21.) POVERTY-CONCEPT, DETERMINATION AND POLICY MAKING CONCEPT OF POVERTY ▪ Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. Poverty means that the income level from employment is so low that basic human needs can't be met. ▪ According to World Bank, Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one's life. ▪ In India, 21.9% of the population lives below the national poverty line in 2011. ▪ In 2018, almost 8% of the world’s workers and their families lived on less than US$1.90 per person per day (international poverty line). Types of Poverty: There are two main classifications of poverty: o Absolute Poverty: A condition where household income is below a necessary level to maintain basic living standards (food, shelter, housing). This condition makes it possible to compare between different countries and also over time. It was first introduced in 1990, the “dollar a day” poverty line measured absolute poverty by the standards of the world's poorest countries. In October 2015, the World Bank reset it to $1.90 a day. ▪ Relative Poverty: It is defined from the social perspective that is living standard compared to the economic standards of population living in surroundings. Hence it is a measure of income inequality. o Usually, relative poverty is measured as the percentage of the population with income less than some fixed proportion of median income.  DETERMINATION OF POVERTY POVERTY LINE DETERMINATION Poverty Line Estimation or calculating the number of poor in India was done by several committees on basis of calorific consumption or per capita expenditure. VM Dandekar and N Rath Based on the data from the National Sample Survey (NSS) data VM Dandekar and N Rath made a systematic assessment of poverty in 1971. While the previous estimations had stressed on subsistence living or basic minimum needs as a criterion for the poverty line, VM Dandekar and N Rath suggested that the poverty line’s criteria must be based on the expenditure that would provide 2250 calories per day both in rural and urban areas. Alagh Committee (1979) The Taskforce constituted by the Planning Commission under the direction of YK Alagh, constructed a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure. The estimates in the ensuing years would be adjusted taking into account the price level for inflation. Lakdawala Committee (1993) The Lakdawala committee based their findings on the assumption that the basket used to calculate Consumer Price Index-Industrial Workers (CPI-IW) and Consumer Price Index-Agricultural Labourers (CPI-AL) reflected the consumption pattern of the poor Expert Group on ‘Estimation of Proportion and Number of Poor’ – Chaired by Prof DT Lakdawala (former Deputy Chairman Planning Commission) The Lakdawala Committee submitted the report in 1993 and recommended:  Poverty Line approach can be continued based on calorie consumption (fixed consumption basket) State-specific poverty lines should be constructed and these should be updated using the CPI-IW in urban areas and CPI-AL in rural areas Scaling of poverty estimates should not be based on National Accounts Statistics. The Expert Group recommended only NSS data should be relied upon. The Indian Government accepted the Lakdawala Committee recommendations with minor modifications in 1997. To know more about CPI (Consumer Price Index), visit the linked article. Tendulkar Committee (2009) This committee chaired by Suresh Tendulkar gave the following recommendations 1. A shift away from calorie consumption-based poverty estimation 2. A uniform poverty line basket (PLB) across rural and urban India 3. A change in the price adjustment procedure to correct spatial and temporal issues with price adjustment 4. Incorporation of private expenditure on health and education while estimating poverty The committee used the Mixed Reference Period as opposed to Universal Reference Period used by earlier committees. Using this method the committee arrived at a conclusion that the poverty line was at Rs. 446.68 per capita per month in rural areas and Rs. 578.80 per capita per month in urban areas from 2004-2005. In 2009-2010 it was Rs. 859.6 in urban areas while it was Rs.672.8 in rural areas. In 2010-2011 it was Rs. 1000 for urban and Rs. 816 for rural areas. C Rangarajan Committee (2012) The Planning commission created a new panel on poverty estimation that would 1. Provide an alternate method to identify poverty levels  2. Examine divergences between the consumption data provided by the NSSO and the National Accounts aggregates 3. Review of international poverty estimation methods 4. Recommend how these methods can be linked to eligibility for various poverty elimination schemes created by the government of India The committee submitted its final report on 2014. The report dismissed the Tendulkar Committees estimation of the poverty level in India. The report said that was much higher in 2011-2012 at 29.5% of the population, which means that three out of 10 people in India were poor. FOLLOWING ARE THE DIFFERENT METHODS OF DETERMINING POVERTY 1.Income-Based Measures Absolute Poverty: Defined by a fixed income threshold below which individuals or households are considered to lack the minimum necessary to maintain a basic standard of living. For example, the World Bank's international poverty line is set at $2.15 per day (adjusted for purchasing power parity). Relative Poverty: Assessed in relation to the overall income distribution within a specific country or community. Individuals are considered poor if their income is significantly below the average, affecting their ability to participate in normal societal activities. 2. Consumption-Based Measures Consumption Poverty: Measures the consumption levels of households rather than income. This approach can provide a clearer picture of living standards as it reflects actual spending on goods and services necessary for well-being. Basic Needs Approach: Evaluates whether individuals or households can meet essential needs such as food, shelter, and clothing. Surveys and household consumption data are used to assess adequacy in meeting these needs. 3. Multidimensional Measures Multidimensional Poverty Index (MPI): Considers multiple factors beyond income, such as education, health, and living standards. The MPI measures deprivations in various dimensions to provide a comprehensive view of poverty. Human Poverty Index (HPI): Developed by the United Nations, this index includes indicators such as life expectancy, literacy rates, and access to clean water and sanitation. 4. Socioeconomic Indicators Educational Attainment: Low levels of education are often associated with poverty, as education can influence earning potential and access to better job opportunities. Employment Status: Unemployment or underemployment can be a significant indicator of poverty. Assessing job stability, job quality, and income levels helps in understanding poverty. 5. Health Indicators Access to Healthcare: Poor access to healthcare services can exacerbate poverty, as it affects overall well-being and the ability to work and earn a living. Nutritional Status: Malnutrition and food insecurity are direct indicators of poverty, reflecting inadequate access to sufficient and nutritious food. POLICY MAKING Addressing poverty effectively requires a variety of targeted policies that tackle different dimensions of poverty and its underlying causes. Here’s a comprehensive overview of key policies that can be implemented to reduce poverty: 1. Social Protection Policies - Unconditional Cash Transfers (UCTs): Provide financial support without conditions, as seen in various universal basic income (UBI) trials. This helps reduce poverty by providing a safety net for all citizens or targeted groups. - Social Safety Nets: Programs such as unemployment benefits, pensions, and disability assistance offer financial support to individuals during periods of economic hardship or incapacity. 2. Employment and Economic Development Policies - Job Creation Programs: Initiatives that focus on creating employment opportunities, such as public works programs, can help reduce poverty by providing jobs and income. - Skills Training and Education: Investing in vocational training and adult education programs helps improve employability and earning potential, addressing skills gaps and enhancing job prospects. - Support for Small and Medium Enterprises (SMEs): Providing financial assistance, microloans, and business development services to SMEs can stimulate economic growth and create jobs. 3. Education Policies - Universal Access to Education: Ensuring that all children have access to quality primary and secondary education. Policies may include free school tuition, provision of textbooks, and school meal programs. - Early Childhood Education: Investing in early childhood education to give children from low-income families a strong start, improving long-term educational and economic outcomes. 4. Healthcare Policies - Universal Health Coverage: Providing access to affordable and quality healthcare services to reduce the financial burden of medical expenses on low- income families. - Public Health Programs: Implementing vaccination programs, maternal and child health services, and disease prevention initiatives to improve health outcomes and reduce poverty-related health disparities. 5. Housing and Infrastructure Policies - Affordable Housing: Developing and subsidizing affordable housing to ensure low-income families have access to safe and adequate living conditions. This may include rent control measures and housing vouchers. - Infrastructure Development: Investing in essential infrastructure such as clean water, sanitation, and transportation, which can improve living standards and facilitate economic activities. 6. Income Support and Tax Policies - Minimum Wage Laws: Setting a legal minimum wage to ensure that workers earn a fair income that can support basic needs. - Progressive Taxation: Implementing tax policies that increase the tax burden on higher income earners and use the revenue to fund social programs and services. 7. Food Security Policies - Food Assistance Programs: Providing food aid or subsidies to low-income households to ensure access to nutritious food. Programs may include food stamps, school meal programs, and food banks. - Agricultural Support: Supporting smallholder farmers and rural communities with access to technology, markets, and resources to improve agricultural productivity and food security. 8. Social Inclusion and Anti-Discrimination Policies - Gender Equality Initiatives: Promoting policies that address gender disparities, such as equal pay, anti-discrimination laws, and support for women’s entrepreneurship. - Support for Marginalized Groups: Implementing policies that specifically address the needs of marginalized groups, including ethnic minorities, disabled individuals, and refugees, to ensure their full participation in society. 9. Financial Inclusion Policies - Access to Banking Services: Expanding access to financial services for low- income individuals, including savings accounts, credit, and insurance, to help them manage financial risks and build assets. - Microfinance: Providing small loans and financial services to low-income individuals and small businesses to promote entrepreneurship and economic development. 11. Participatory Governance and Policy Making - Community Involvement: Engaging communities in the policy-making process to ensure that poverty reduction programs are responsive to their needs and priorities. - Transparency and Accountability: Implementing measures to ensure that poverty reduction programs are effectively managed and that resources are used efficiently and equitably. 12. Economic and Structural Reforms - Land Rights: Securing land tenure for smallholder farmers and marginalized communities to enable them to invest in their land and improve their livelihoods. - Trade and Investment Policies: Creating an environment that supports fair trade practices and attracts investment, which can drive economic growth and job creation. Implementing these policies requires a coordinated approach involving government, civil society, and the private sector. Effective poverty reduction strategies are often context-specific, taking into account the unique challenges and opportunities of each country or community. 2.2) UNERMPLOYMENT-CONCEPT,DETERMINATION AND POLICY MAKING Unemployment is an adverse condition where individuals who are capable of working and actively seeking employment are unable to find suitable jobs. It is a multifaceted socio-economic issue that stems from factors such as population growth, economic opportunities, education and individual skills. In a developing country such as India, where even the steady rate of economic growth is unable to match the requirements of its educated, qualified youth looking for employment, unemployment is a peculiar phenomenon. With a young and burgeoning workforce, the challenge of unemployment in India is not merely a statistical concern but a social and economic imperative in order to balance the rapid growth with the welfare of the country’s vast population. Types of Unemployment The various types of unemployment refer to the different categories of unemployment based on the underlying causes and characteristics. The following are the major types of unemployment witnessed in India – o Frictional Unemployment Frictional unemployment occurs when individuals are temporarily without a job while transitioning from one position to another or entering the workforce for the first time. For example, a recent graduate actively looking for a job or a professional who has quit one job to find a more suitable one would fall into this category. This type of unemployment is generally short-term and is often seen as a regular and healthy part of a dynamic economy. o Structural Unemployment Structural unemployment arises when there is a mismatch between the skills that workers in the economy can offer and the skills demanded by employers. For instance, the automation of manufacturing processes may render certain manual jobs obsolete, leaving those without the necessary technological skills unemployed. This type of unemployment can be long-term and may require significant retraining and education to overcome. o Cyclical Unemployment Cyclical unemployment is related to the fluctuations in the economy over the course of the business cycle. During recessions, many industries can suffer, leading to layoffs and thus, higher unemployment. An example would be the increase in unemployment during the global financial crisis of 2008. Cyclical unemployment will decrease when the economy starts to improve. o Institutional Unemployment Institutional unemployment results from long-term or permanent institutional factors and incentives in the economy. Government policies, such as high minimum wage floors or restrictive occupational licensing laws, can contribute to this type of unemployment. For example, if a government sets the minimum wage too high, it might lead to employers being unable or unwilling to hire workers at that wage, leading to increased unemployment. o Demand Deficient Unemployment Demand deficient unemployment, or demand-deficit unemployment, occurs when there is not enough demand for workers that are available. This is often a result of a general downturn in the economy and is closely related to cyclical unemployment. For example, during a severe recession, consumer demand falls, leading to reduced production and, consequently, a reduction in the workforce. o Voluntary Unemployment Voluntary unemployment happens when a worker decides to leave a job because it is no longer financially compelling or satisfying. An example might be a worker whose take-home pay is less than his or her cost of living or someone who leaves a job to pursue a hobby or other personal interests. While it's a personal choice, it can still contribute to the overall unemployment rate. o Involuntary Unemployment Involuntary unemployment occurs when individuals who are willing and able to work at the prevailing wage rate are unable to find employment. This type of unemployment is not a result of a personal choice or voluntary decision to leave a job; rather, it's a situation where individuals are actively seeking employment but are unable to secure a position. An example might be factory workers who lose their jobs due to a factory closure and are unable to find new employment despite their best efforts. Involuntary unemployment can be particularly distressing as it's often beyond the control of the individual and may require broader economic or policy interventions to address. It can encompass aspects of structural, cyclical, and demand deficient unemployment, reflecting broader economic challenges and trends. o Disguised Unemployment Disguised unemployment refers to a situation where more people are employed in a job than is actually required. It is often prevalent in the agricultural sector, especially in developing countries like India. For example, a farm may need only three workers, but the entire family of five may be working. The extra two workers appear to be employed, but their contribution to productivity is minimal or nil. Disguised unemployment represents an inefficient allocation of labor, where individuals are underemployed rather than completely unemployed. o Seasonal Unemployment Seasonal unemployment occurs when individuals are unemployed during certain seasons or times of the year when their skills or labor are not in demand. This type of unemployment is common in industries that are dependent on particular seasons, such as agriculture, tourism, and construction. For example, agricultural workers may face unemployment after the harvest season, while ski resort employees might be without work during the summer months. Governments and industries often address seasonal unemployment through temporary employment opportunities and unemployment benefits tailored to these fluctuations. DETERMINATION OF UNEMPLOYMENT 1. Unemployment Rate Definition: The unemployment rate is the percentage of the labor force that is actively seeking work but is unable to find employment. Calculation: Unemployment Rate=Number of Unemployed/Labor Force×100. 2. Measurement Methods Labor Force Surveys: National statistical agencies conduct regular surveys (e.g., the Current Population Survey (CPS) in the U.S.) to collect data on employment status. Surveys typically ask respondents about their employment status, job search activities, and availability for work. Administrative Data: Data from unemployment insurance claims, job placement services, and other administrative records are used to estimate the number of unemployed individuals. Census Data: Periodic censuses can provide comprehensive data on employment and unemployment, though they are less frequent than surveys. Other Related Indicators Long-Term Unemployment: Refers to individuals who have been unemployed for an extended period, typically longer than 27 weeks. Long- term unemployment can indicate deeper issues in the labor market or economy. Underemployment: Includes individuals who are working part-time but desire full-time work or those whose skills are underutilized in their current job. Labor Force Participation Rate: Measures the proportion of the working- age population that is either employed or actively seeking employment. It provides context for understanding changes in the unemployment rate. 5. Challenges in Measurement Discouraged Workers: Individuals who have stopped looking for work due to a belief that no jobs are available are not counted as unemployed. This can lead to an underestimation of unemployment. Informal Sector: Workers in the informal sector or those who are self- employed may not be fully captured in official unemployment statistics. Underreporting: Some individuals may not report their unemployment status accurately, affecting the reliability of data. 6. Policy Implications and Responses  Job Creation Programs: Governments may implement programs aimed at creating new job opportunities, such as infrastructure projects, subsidies for businesses, or incentives for hiring. Training and Education: Providing job training and educational opportunities to help individuals acquire skills that match labor market demands and reduce structural unemployment. Unemployment Benefits: Offering financial assistance to unemployed individuals to provide temporary support while they search for new employment and to stabilize the economy during downturns. Economic Stimulus: Implementing economic policies to stimulate demand and mitigate cyclical unemployment, such as monetary policy adjustments or fiscal stimulus packages. POLICY MAKING 1. Integrated Rural Development Programme (IRDP) Launched in 1980, this initiative aims to create employment opportunities in rural areas, focusing on full employment and economic development. 2. Training of Rural Youth for Self-Employment (TRYSEM) This program focuses on providing skills for self-employment opportunities to unemployed rural youth, especially among SC/ST Youth and Women. 3. RSETI/RUDEST Established in 1982, this initiative aims to mitigate unemployment among youth through Rural Development and Self Employment Training Institutes (RUDSETI). 4. Jawahar Rozgar Yojana (JRY) Launched in 1989, JRY focuses on generating meaningful employment opportunities in rural areas through community and social development projects. 5. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) A landmark scheme from 2005, MGNREGA guarantees 100 days of paid employment to individuals willing to do unskilled labor- intensive work, emphasizing the right to work. 6. Pradhan Mantri Kaushal Vikas Yojana (PMKVY) Started in 2015, Pradhan Mantri Kaushal Vikas Yojana scheme aims to enable Indian youth to take up industry-relevant skill training, enhancing employability and livelihood prospects. 7. Start-Up India Scheme Launched in 2016, this initiative promotes and supports entrepreneurship across the country, fostering innovation and job creation  8. Stand-Up India Scheme This banking scheme provides loans to SC/ST and women borrowers for setting up greenfield enterprises, encouraging entrepreneurship among marginalized communities. 9. National Skill Development Mission Introduced in 2014, the National Skill Development Mission aims to consolidate and coordinate skilling efforts across the country, improving the scale and quality of skill development programs. 10. Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) The Pradhan Mantri Rojgar Protsahan Yojana scheme incentivizes employers for the generation of new employment, where the Government pays the full employer's contribution towards EPF and EPS for new employment. 11. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU- GKY) Focusing on rural youth, Deen Dayal Upadhyaya Grameen Kaushalya Yojana scheme aims to provide them with skill training and placement in various industries. 12. Self-Employment and Talent Utilization (SETU) This initiative is aimed at supporting all aspects of the startup ecosystem, including financial assistance, incubation, and mentorship. 13. National Career Service (NCS) A one-stop solution that provides information, counseling, and guidance on various employment and training opportunities. These measures reflect the government’s multifaceted approach to tackling unemployment, focusing on rural development, skill enhancement, entrepreneurship promotion, and targeted support for marginalized communities. The combination of these initiatives aims to create a more inclusive and robust employment landscape in India, addressing the underlying challenges and leveraging the country's human capital potential. 1.3) INEQUALITY-CONCEPT, DETERMINATION AND POLICY MAKING Inequality refers to the unequal distribution of resources, opportunities, and privileges within a society or between different societies. It can manifest in various forms and affect different aspects of life, including economic resources, social status, and access to opportunities. Here’s a detailed look at the concept of inequality: 1. Types of Inequality 1. Economic Inequality o Income Inequality: The disparity in earnings among individuals or groups within an economy. This includes differences in wages, salaries, and other forms of income. Measures of income inequality include the Gini coefficient and income quintiles. o Wealth Inequality: The uneven distribution of assets, such as property, investments, and savings, among individuals or households. Wealth inequality often exceeds income inequality because wealth accumulates over time and can generate additional income. 2. Social Inequality o Educational Inequality: Differences in access to quality education and educational resources based on socioeconomic status, geography, or other factors. This impacts individuals’ future opportunities and earning potential. o Healthcare Inequality: Variations in access to healthcare services and health outcomes among different groups. This can be influenced by factors such as income, location, and education. 3. Gender Inequality o Economic Gender Inequality: Disparities in earnings, job opportunities, and career advancement between men and women. Women often earn less than men for similar work and are underrepresented in leadership roles. o Social Gender Inequality: Differences in social roles, responsibilities, and expectations based on gender, which can affect various aspects of life, including family dynamics and societal participation. 4. Racial and Ethnic Inequality o Economic Disparities: Differences in income and wealth among different racial or ethnic groups. Systemic racism and historical factors often contribute to these disparities. o Social Disparities: Variations in access to resources and opportunities based on race or ethnicity, including education, healthcare, and housing. 5. Geographic Inequality o Regional Inequality: Disparities in economic and social conditions between different regions or areas within a country. This can include differences in income levels, infrastructure, and access to services.  o Global Inequality: Differences in wealth, health, and living standards between countries. Wealthier nations generally have higher standards of living compared to poorer nations. DETERMINATION Income Inequality Measurement Methods: o Income Distribution Data: Gather data on the income of different segments of the population. This data is typically collected through national surveys or tax records. o Gini Coefficient: A statistical measure of income distribution within a population. It ranges from 0 (perfect equality) to 1 (perfect inequality). A higher Gini coefficient indicates greater inequality.Definition: The Gini coefficient measures income inequality within a population. It ranges from 0 (perfect equality, where everyone has the same income) to 1 (perfect inequality, where one person has all the income). o Calculation: Based on the Lorenz Curve, which plots the cumulative percentage of total income received by the cumulative percentage of the population. o Lorenz Curve: A graphical representation of income distribution. It plots the cumulative percentage of total income earned by the cumulative percentage of the population, showing how income is distributed. Definition: A graphical representation of income distribution. It plots the cumulative percentage of total income earned by the cumulative percentage of the population. o Interpretation: The further the Lorenz Curve is from the line of perfect equality (45-degree line), the higher the level of income inequality. o Quantile Ratios: Compare income levels at different points in the distribution, such as the ratio of income between the top 10% and the bottom 10%. 2. Wealth Inequality Measurement Methods: o Wealth Surveys: Collect data on the distribution of assets like property, stocks, and savings.  o Wealth Gini Coefficient: Similar to the income Gini coefficient but measures the distribution of wealth. o Wealth Quintiles: Divide the population into five equal parts (quintiles) based on wealth and compare the share of total wealth held by each quintile. 3. Educational Inequality Measurement Methods: o Educational Attainment Data: Collect data on the highest level of education completed by different groups. o Access to Education: Analyze disparities in access to quality education based on factors such as income, geographic location, and social background. o Educational Outcomes: Measure differences in academic achievement and educational attainment across different demographic groups. 4.Data Sources and Challenges Surveys and Censuses: National surveys and censuses provide comprehensive data on income, education, health, and other indicators. Administrative Records: Tax records, social security data, and employment records can provide insights into economic and social disparities. POLICY MAKING Policy-making for inequality- involves designing and implementing strategies to address and reduce disparities in income, wealth, and access to opportunities. Effective policies aim to promote fairness and improve social and economic outcomes across all segments of society. Here’s a comprehensive approach to policy-making for inequality: 1. Economic Policies Progressive Taxation To reduce income inequality by taxing higher incomes at higher rates. Increase tax rates for high-income earners and ensure the tax system is fair and equitable. Consider implementing wealth taxes on significant assets. Social Safety Nets To provide financial assistance and support to low-income and vulnerable populations.Expand social welfare programs such as unemployment benefits, food assistance, and housing subsidies. Ensure that these programs are accessible and adequately funded..Minimum Wage Laws To ensure that all workers earn a living wage. Set and periodically adjust minimum wage levels to reflect the cost of living. Consider regional variations to account for differences in living expenses. Universal Basic Income (UBI) To provide a basic level of income to all citizens regardless of their employment status. Pilot UBI programs and evaluate their impact on poverty and inequality. Assess the feasibility of scaling up based on results. 2. Education and Skills Development Access to Quality Education To reduce educational disparities and improve opportunities for all students. Invest in early childhood education, improve funding for schools in underserved areas, and provide scholarships and financial aid for higher education. Vocational Training and Adult Education To equip individuals with the skills needed for the labor market and lifelong learning. Develop and fund vocational training programs and adult education initiatives that are aligned with market needs. 3. Healthcare Policies Universal Health Coverage To ensure that all individuals have access to affordable and quality healthcare. Expand public health insurance programs, regulate healthcare costs, and ensure that healthcare services are accessible to low-income populations. Preventive Health Programs To improve overall health outcomes and reduce health disparities. Invest in preventive health measures such as vaccination programs, health education, and early detection and treatment of diseases. 4. Housing and Urban Development Affordable Housing To provide safe and affordable housing options for low-income families.Increase the availability of affordable housing through subsidies, rent control measures, and investment in public housing projects. Urban Renewal and Infrastructure Development To improve living conditions and access to services in underserved areas. Invest in infrastructure improvements such as transportation, sanitation, and public spaces in disadvantaged neighborhoods. 5. Labor Market Policies Employment Support Programs To help individuals find and maintain employment. Offer job placement services, career counseling, and support for entrepreneurship. Implement public works programs to create job opportunities. Anti-Discrimination Measures To ensure equal opportunities in the workplace. Enforce anti-discrimination laws and promote diversity and inclusion practices within organizations. 6. Social Inclusion and Anti-Discrimination Gender Equality Initiatives-To address disparities between men and women in the labor market and other areas. Promote equal pay for equal work, support women’s entrepreneurship, and ensure equal access to education and career opportunities. Support for Marginalized Groups To address the needs of ethnic minorities, disabled individuals, and other marginalized groups. Develop targeted policies to improve access to education, employment, and healthcare for these groups. 7. Economic and Structural Reforms Land and Property Rights To secure land tenure and property rights for marginalized communities. Implement land reform policies that provide secure property rights and access to land for smallholder farmers and disadvantaged communities. Trade and Investment Policies To promote fair trade and investment practices that benefit all segments of society.Ensure that trade agreements and investment policies consider the impact on income distribution and support equitable economic growth. 8. Participatory Governance  Community Involvement – To ensure that policies are responsive to the needs and priorities of local communities. Involve community representatives in decision-making processes and conduct consultations to gather input from affected populations. Transparency and Accountability To improve the effectiveness of policies and prevent corruption.Implement measures to ensure transparency in policy implementation and hold policymakers accountable for outcomes. 10. Monitoring and Evaluation Data Collection and Analysis To assess the impact of policies on income inequality and adjust strategies as needed. Collect and analyze data on income distribution, poverty rates, and the effectiveness of inequality-reducing measures. Policy Evaluation To determine the success of implemented policies and make evidence-based adjustments. Conduct regular evaluations of policies aimed at reducing inequality and use the findings to inform future policy decisions. Conclusion-Addressing income inequality requires a comprehensive and multi-dimensional approach. Effective policy-making involves implementing targeted measures across various sectors, ensuring equitable access to resources and opportunities, and continuously monitoring and evaluating the impact of these policies. By focusing on economic fairness, social inclusion, and participatory governance, policymakers can work towards reducing inequality and fostering a more equitable society. 1.4) PROBLEM OF SUSTAINABILITY-SDGs Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development includes the protection of future economic growth and future development. In other words, it means a better quality of life for everyone, now and for generations to come. Sustainable development includes the protection of  future economic growth and future development. Growth is essential, but sustainable development requires it to be different. It must become more concerned about the physical environment not only to present generation, but to the future generation also. It means that the current consumption cannot be financed for long by increasing economic debt and ecological imbalance which future generation will pay. Sustainable development constantly seeks to achieve social and economic progress in ways that will not exhaust the earth’s finite natural resources. Sustainable development is a process of development in which economic and other policies are designed to bring about development which is economically, socially and ecologically sustainable. The concept thus is pro-people, pro-job and pronature. It gives highest priority to poverty reduction, productive employment, social integration and environmental regeneration. SUSTAINABLE DEVELOPMENT GOALS (ALREADY IN ASSIGNMENT) 1.5) VARIOUS INDICES IN MEASURING DEVELOPMENT MULTIDIMENSIONAL POVERTY INDEX The Oxford Poverty and Human Development Initiative publishes the Global Multidimensional Poverty Index (MPI). The goal of this index is to use a variety of variables to evaluate acute multidimensional poverty in emerging countries. It was created in 2010 by OPHI in collaboration with the United Nations Development Programme (UNDP). It is published annually as part of the UNDP's Human Development Report (HDR). In September 2021, MPI 2021 was issued. India was placed 62 out of 107 nations in the Global MPI 2020. The global Multidimensional Poverty Index (global MPI) is a poverty indicator that takes into account the numerous disadvantages that impoverished people endure in terms of education, health, and living conditions. The Global MPI measures both the occurrence (the percentage of people in a population that are multidimensionally poor) and degree of  multidimensional poverty (the average number of deprivations that each poor person experiences). It enables for comparisons between countries, regions, and the world, as well as within countries by ethnic group, urban/rural location, and other features of households and communities. Dimensions and Indicators of Global MPI Components of the MPI The MPI typically includes three broad dimensions: 1. Education o Indicators: School attendance and educational attainment. o Examples: Lack of schooling, children not attending school. 2. Health o Indicators: Access to healthcare services and health outcomes. o Examples: Child mortality rates, lack of access to clean drinking water or adequate sanitation. 3. Living Standards o Indicators: Access to basic services and living conditions. o Examples: Electricity, cooking fuel, housing quality, and access to clean water. Each dimension may include several specific indicators, which together provide a detailed picture of deprivation. Interpreting MPI Results Headcount Ratio: The proportion of the population that is multidimensionally poor. Intensity of Poverty: The average number of deprivations experienced by those who are multidimensionally poor. MPI Score: A composite index that reflects both the proportion of people who are multidimensionally poor and the average intensity of their deprivations. Advantages of the MPI Holistic View: Provides a more comprehensive measure of poverty by capturing various deprivations beyond income.  Policy-Relevant: Helps in identifying specific deprivations and guiding targeted interventions. Comparative: Allows for comparison across regions and countries, and over time. HAPPINESS INDEX 1. Definition and Purpose The Happiness Index aims to measure how individuals or populations experience and evaluate their lives. It provides insights into subjective well-being and overall life satisfaction, beyond mere economic indicators. The purpose is to assess the quality of life and identify factors that contribute to or detract from happiness. 2. Components of the Happiness Index a. Life Satisfaction: Definition: Reflects an individual’s overall assessment of their life. Measurement: Typically measured through surveys where individuals rate their life satisfaction on a scale (e.g., 0-10). Influencing Factors: Can be influenced by economic conditions, personal achievements, and life circumstances. b. Emotional Well-Being: Definition: Includes the balance of positive and negative emotions experienced by individuals. Measurement: Surveys often ask about frequency and intensity of emotions such as joy, stress, sadness, and anxiety. Influencing Factors: Personal relationships, job satisfaction, and daily experiences. c. Social Support: Definition: The extent and quality of support individuals receive from their social networks. Measurement: Assessed through questions about the availability of help in times of need and the quality of social interactions. Influencing Factors: Family ties, friendships, and community engagement. d. Economic Factors: Definition: Economic stability and income levels play a significant role in overall happiness.  Measurement: Includes data on income, employment status, economic security, and financial satisfaction. Influencing Factors: Wealth distribution, cost of living, and employment opportunities. e. Health: Definition: Encompasses both physical and mental health. Measurement: Assessed through self-reports of health status, frequency of illness, and access to healthcare. Influencing Factors: Access to medical services, lifestyle choices, and mental health support. f. Education: Definition: Educational attainment and access to learning opportunities. Measurement: Data on years of schooling, educational attainment, and perceived value of education. Influencing Factors: Quality of education, opportunities for lifelong learning, and educational resources. g. Work-Life Balance: Definition: The ability to balance professional and personal life. Measurement: Assessed through questions about job satisfaction, stress levels, and time spent on personal versus professional activities. Influencing Factors: Work hours, job flexibility, and personal commitments. 3. Measurement Methods a. Surveys and Questionnaires: Examples: World Happiness Report, Gallup World Poll, OECD surveys. Design: These surveys use standardized questions to assess various aspects of well-being and happiness. b. Subjective Well-Being (SWB): Definition: Measures based on individuals' self-reports about their own happiness and life satisfaction. Challenges: Subjectivity in responses and cultural differences in interpreting questions. c. Objective Indicators: Definition: Quantitative data that indirectly reflects well-being. Examples: GDP per capita, life expectancy, unemployment rates, and crime rates. 5. Applications a. Policy Making: Helps governments and organizations create policies aimed at improving citizens' quality of life. Examples: Policies on healthcare, education, and economic development. b. Business: Companies use happiness metrics to improve employee satisfaction and productivity. Examples: Employee engagement surveys, workplace wellness programs. c. Research: Academics and researchers study happiness to understand its determinants and impacts. Examples: Studies on the correlation between happiness and productivity, health outcomes, and social behavior. 6. Challenges a. Cultural Differences: Issue: Different cultures have varying definitions of happiness and well-being. Solution: Use culturally sensitive approaches and interpretations when analyzing data. b. Subjectivity: Issue: Personal interpretations of happiness can vary, affecting survey results. Solution: Combine subjective measures with objective indicators for a more comprehensive view. c. Economic Inequality: Issue: Economic disparities can skew happiness measurements. Solution: Analyze data across different income groups and regions to understand disparities. GENDER INEQUALITY INDEX The Gender Inequality Index (GII) is a measure used to assess gender-based disparities in various aspects of society. It was introduced by the United Nations Development Programme (UNDP) in 2010 as part of the Human Development Report. The GII evaluates inequalities between women and men in three main dimensions: reproductive health, empowerment, and economic activity. Here’s a more detailed overview: 1. Definition and Purpose Definition: The Gender Inequality Index (GII) quantifies gender disparities in key areas and reflects the extent to which gender inequalities are present in a given country or region. Purpose: To provide a composite measure of gender inequality. To highlight disparities and inform policy-making aimed at promoting gender equality. To track progress over time and compare gender inequality across different countries. 2. Components of the Gender Inequality Index a. Reproductive Health: o Maternal Mortality Ratio (MMR): The number of maternal deaths per 100,000 live births. o Adolescent Birth Rate: The number of births per 1,000 women aged 15-19. Measures health outcomes related to reproductive health, which are often influenced by gender inequalities. b. Empowerment: o Educational Attainment: ▪ Secondary Education: The percentage of women aged 25 and older with at least some secondary education. ▪ Tertiary Education: The percentage of women aged 25 and older with at least some tertiary education. o Political Representation: ▪ Share of Seats in Parliament: The percentage of seats held by women in national parliaments or similar legislative bodies. Assesses the level of empowerment through educational attainment and political representation, reflecting opportunities for women to influence decision-making processes. c. Economic Activity: Labor Market Participation: The ratio of female to male labor force participation rates.Measures economic participation and access to economic opportunities, which are often influenced by gender norms and discrimination. 3. Calculation The GII is calculated using the geometric mean of the normalized values for each of the three dimensions (reproductive health, empowerment, and economic activity). Each dimension is normalized on a scale from 0 to 1, where 0 indicates perfect equality and 1 indicates extreme inequality. The final GII value ranges from 0 to 1, with higher values indicating greater gender inequality. Low GII Values: Indicate a lower level of gender inequality, with more equal opportunities and outcomes for men and women. High GII Values: Reflect greater gender inequality, with significant disparities in health, education, and economic participation. Non-governmental organizations (NGOs) and advocacy groups use GII data to raise awareness about gender inequality and push for reforms. 6. Challenges and Limitations a. Data Availability: Reliable data for some indicators, especially in less developed regions, can be limited or outdated. b. Cultural Variations: Gender norms and inequalities vary widely across cultures, and the GII may not fully capture all aspects of gender inequality in different contexts. c. Intersectionality: The GII focuses primarily on gender disparities but may not account for intersecting forms of discrimination based on factors such as race, ethnicity, or socioeconomic status INCOME INEQUALITY INDEX In economics, the Gini coefficient, also known as the Gini index or Gini ratio, is a measure of demographic distribution with the aim of projecting the income of a nation’s populace. The Gini coefficient is the most commonly used estimation of inequality. The Gini Coefficient is named after Italian statistical and sociologist Corrado Gini who developed the coefficient. ▪ The distribution of Income in an economy is represented by the Lorenz Curve and the degree of income inequality is measured through the Gini Coefficient. ▪ One of the five major and common macroeconomic goals of a government is the equitable (fair) distribution of income. ▪ The Lorenz Curve (the actual distribution of income curve), a graphical distribution of wealth developed by Max Lorenzin 1906, shows the proportion of income earned by any given percentage of the population. The line at the 45º angle shows perfectly equal income distribution, while the other line shows the actual distribution of income. The further away from the diagonal, the more unequal the size of the distribution of income. Gini Coefficient ▪ The Gini Coefficient, which is derived from the Lorenz Curve, can be used as an indicator of economic development in a country. ▪ The Gini Coefficient measures the degree of income equality in a population. ▪ The Gini Coefficient can vary from 0 (perfect equality) to 1 (perfect inequality). ▪ A Gini Coefficient of zero means that everyone has the same income, while a Coefficient of 1 represents a single individual receiving all the income. Gini Coefficient Significance Gini coefficient is useful because it projects negative values for income and wealth which standard measures of inequality are unable to provide. But it does have its fair share of limitations. For example, it samples people at random points of their lives, which means that it can’t separate those whose financial futures are reasonably secure from those who do not have prospects, even in a large sample. Other reasons why it is important is as follows: An increase in the Index implies that the government’s policies benefit the rich more than the poor and are not inclusive enough. So, a higher ratio may encourage the government to spend more on social welfare schemes and also increase the tax burden on the rich. It is important that the government tries to maintain a good ratio so that the rich-poor divide can be kept in check. MODULE 03 STRATEGIES TO ACHIEVE ECONOMIC GROWTH AND DEVELOPMENT 3.1) BIG PUSH THEORY INTRODUCTION The theory states that proceeding “bit by bit” will not launch the economy successfully on the development path; rather a minimum amount of investment is a necessary condition for success. It necessitates the obtaining of external economies that arise from the simultaneous establishment of technically interdependent industries. Thus, the indivisibilities and external economies flowing from a minimum quantum of investment are a prerequisite for launching economic development of underdeveloped countries successfully. In underdeveloped countries, there is little scope in investing in modern industries which need large investment. If the modern methods of production and distribution are applied, the profit will be large. On the other hand, to invest individually will not be beneficial if it is done separately and privately. It will be beneficial only if they are organized together. To quote Prof. Benjamin Higgins, ―Leaning on a stalled car with gradually increasing weight will not get it started, for example, it needs a big push. He further makes clear, ―Insistence on slow evolution is defeatist and indeed dangerous because it precisely slows down the evolution that cannot succeed in the face of all obstacles Indivisibilities: Rodan says the need for big push in underdeveloped countries arises from the following three kinds of indivisibilities and external economies which are considered foremost in getting the path of economic development: a) Indivisibilities in the Production Function. b) Indivisibility of Demand. c) Indivisibility of the Supply of Savings. a) Indivisibilities in Production Function: According to Rosenstein Rodan, indivisibilities in Production function refer to the indivisibilities of inputs, outputs and process of production etc. they lead to increasing returns, i.e., the increase in output, income and employment and lowering the capital output ratio. He showed that law of increasing returns had played an important role in reducing the output capital ration from 4:1 to 3:1. He considers social overhead capital such as, power, transport, communications, housing, education etc., as the most important examples of indivisibility and of external economies on the supply side. These services of social overhead capital are indirectly productive and have a long gestation period. They require heavy investments. According to Rosenstein Rodan, an underdeveloped country needs a capital investment of about 30-40 percent of its total investment on the development of social overhead capital. The social overhead capital is characterized by four indivisibilities. Firstly, it is irreversible in time, therefore, must precede other directly productive investments, secondly, it has minimum durability, this making it very lumpy. Thirdly, it has a long gestation period. Fourthly, it has an irreducible minimum industry mix of different kinds of public utilities. Most of the underdeveloped countries have been suffering from the shortage of social overhead capital, and it is one of the chief obstacles to development in such economies. In this way, the rapid economic development in underdeveloped economies would require a high initial investment in social overhead capital. b) Indivisibility of Demand: Rosenstein Rodan stressed the importance of indivisibility of demand in his original article, and later it was given wide publicity by Prof. Ragnar Nurkse in his book ―Problems of capital Formation in Underdeveloped Countries. The importance of indivisibility of demand lies in expanding the size of the market. The underdeveloped countries are characterized by the small markets, which in turn limit the investment opportunities and obstruct the process of development. Investment in any single project will have a high degree of risk because of the uncertainty as to whether their product will find a market. This indivisibility of demand requires simultaneous investment in different industries. In other words, the indivisibility of demand stresses the complementarily of investment. Rodan uses his example of shoe factory to explain his point. Assuming a closed economy, let us suppose that a hundred disguised unemployed workers (whose marginal productivity is equal to zero) are employed in shoe factory. Their wages would constitute additional income. If newly employed workers spend all of their additional income for the purchase of shoes they product, the shoe factory will find a market, thus it would expand. In fact new workers do not spend their entire additional income on shoes and the shoe factory will not find the market. The risk of not finding a market would reduce the incentive to invest and the result would be the colure of the factory. In this way the investment in a single project cannot widen the extent of the market. Now we shall change the example and suppose ten thousand workers are employed in hundred industries (instead of hundred workers in one industry) and they produce the bulk of consumer goods on which the newly employed workers will spend their wages. This would enlarge the extent of demand and the size of the market. What is not true in case of a single industry will become true in complementary system of one hundred industries. In a complementary system of industries, the risk of not finding the new market reduces and incentive to investment increases. Hence the indivisibility of demand necessarily implies a high quantum of investment in complementary industries for enlarging the size of market and increasing the incentives to invest without which the development proves gets stuck up. c) Indivisibility in the Supply of Savings: The third indivisibility in the Rosenstein Rodan Theory is the indivisibility in the supply of savings which means a high income elasticity of savings, hence a high quantum of investment is needed for establishing complementary industries and this will require huge savings. But in underdeveloped countries, savings are low because income is low. To reduce the gap between income and expenditure, the rate of saving should be increase. To overcome this crisis, Rosenstein Rodan suggests to the underdeveloped countries that with their enhancing incomes due to an increase in investment, they should have their marginal rate of savings much higher than the average rate of savings. If we want to initiate the process of growth in underdeveloped countries, we must increase income and saving considerably. The large increase in income requires large investments in underdeveloped countries. According to Rosenstein Rodan, ―A high minimum quantum of investment requires a high volume of savings, which is difficult to achieve in low income in underdeveloped countries. The way out of the vicious circle is to have first increase in income and to provide mechanism which assures that at the second stage, the marginal rate of saving would be very much higher than average rate of saving. Giving much importance to these three indivisibilities and external economies, the underdeveloped countries can successfully solve their problems of development only by a ―big push or a minimum quantum of investment. Rosenstein observes: ―There may be finally a phenomenon of indivisibility in the vigour and drive required for a successful development policy. In other words, favorable environment for development may be created in underdeveloped countries by a big push or a minimum quantum of investment, and not by an isolated and small way. Criticisms- Despite the above, big push theory has been criticized on several grounds by number of leading economists like H. Myint, Jacab Viner and H. S. Ellis etc. It has been argued that this theory creates more problems than it solves. The main pillars of criticism are as follows: 1. More Emphasis on Indivisibilities: The big theory lays too much stress on the problem of indivisibilities of both the demand and supply sides. According to Celso Furtado, ―The recognition and identification of these necessary reforms is of fundamental practical importance both for countries which are anxious to emerge from stagnation and for those who are desirous of intensifying their development. 2. Lack of Historical support: The big push theory seems to suggest that whenever a large-scale influence is exerted on the process of capital formation, stationary economy probably begins to develop. As noted by Furtado this is not confirmed by History. Furtado gives the example of Bolivia where large investments were made in social and economic overheads. Yet the economy of this country remained stationary and per capita income low. The progress of the advanced countries does not lend support to the big push theses. 3. Institutional and Administrative Difficulties: As a matter of fact, the big push theory cannot be adopted without active state participation, guidance and control. However, in underdeveloped countries the government administrative and institutional machinery is very weak and inefficient. Further, underdeveloped countries lack statistical knowledge, technical know-how, trained personnel and problem coordination between different departments. Beside this, there is gross re- tapism and corruption. This hampers the smooth working of Big Push. 4. Not consider for Mixed Economy: The concept of Big-Push ignores the difficulties faced in a mixed economy. The mixed economy, in underdeveloped countries, provides coexistence for both private and public sectors. If these are complementary in nature then it faces no constraints. The problems become acute when two sectors become competitive, e.g., when government sets up its own factor in public sector. A situation of ‗ Cold War‘ is a common feature between these two sectors in underdeveloped countries. According to Prof. H. Myint, ―the government departments tend to keep their plans and intentions secret from the private businessmen because they fear speculative activities which will disrupt their plans. On the other hand, private enterprise is inhibited by uncertainties not only about the general economic situation but also about the future changes in government regulation. 5. Neglect the Promotion of Further Investment: By concentrating on the acceleration of investment through planned action, the big push theory has neglected the important tasks of providing proper environment for further investment. Firstly, there is no provision for inducing further investment in the economy. Secondly, it has not provided a proper place to the private sector. By depending on the public sector, t has simply bypassed the private sector which can play important role both in savings and investments. 6. Ignore the Importance of Techniques: Celso Furtado points out that the big push theory neglects the importance of techniques in its over enthusiasm for capital formation. The fact is that although capital formation has been the main vehicle of the assimilation of new techniques it is, in itself, responsible for only a relatively small fraction of the increase in the productivity of labour. Is the historical context of today,development depends increasingly upon technique and less on direct capital-formation in the production processes.