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ECONOMICS

Economic Development and
Poliy in India - I
B
...
manishvermanotes
...
What are
the various determinants of economic development?
Or
Distinguish between the concepts of economic growth and economic
development
...

Ans: The concepts of economic growth and economic development:
Economic Growth:
Economic Growth refers to the rise in the value of everything produced in the economy
...
It alludes
to a considerable rise in the per-capita national product, over a period, i
...
the growth
rate of increase in total output, must be greater than the population growth rate
...
It lets us
compare in absolute and percentage change, i
...
how much an economy has progressed
since last year
...

Economic Development:
Economic Development is defined as the process of increase in volume of production
along with the improvement in technology, a rise in the level of living, institutional
changes, etc
...


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3

Human Development Index (HDI) is the appropriate tool to gauge the development in
the economy
...
It considers
the overall development in an economy regarding the standard of living, GDP, living
conditions, technological advancement, and improvement in self-esteem needs, the
creation of opportunities, per capita income, infrastructural and industrial development,
and much more
...
manishvermanotes
...
A point of reference of US$20,000 in 2021
USD nominal GDP per capita for the International Monetary Fund (IMF) is a good point
of departure, it is a similar level of development to the United States in 1960
...
95 trillion
...
72 trillion
...
However, this
definition is not universally agreed upon
...
The World Bank classifies the world's economies into four
groups, based on gross national income per capita: high, upper-middle, lower-middle,
and low income countries
...

An example of a developing nation is Thailand
...


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5

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6

Q- What are the principals of federal finance? Discuss the problem of federal
finance in India
...
Principle of Independence:
• Under the system of federal finance, a Government should be autonomous and free
about the internal financial matters concerned
...

• The Government should normally enjoy autonomy in fiscal matters
...
Principle of Equity:
• From the point of view of equity, the resources should be distributed among the
different states so that each state receives a fair share of the revenue
...
Principle of Uniformity:
• In a federal system, each state should contribute equal tax payments for federal
finance
...
Principle of Adequacy of Resources:
• The principle of adequacy means that the resources of each Government i
...
Central
and State should be adequate to carry out its functions effectively
...


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7

• Besides, the resources should be elastic in order to meet the growing needs and
unforeseen expenditures like war, floods, etc
...
Principle of Fiscal Access:
• In a federal system, there should be the possibility for the Central and State
Governments to develop new sources of revenue within their prescribed fields to meet
the growing financial needs
...

6
...

• There should be perfect coordination among different layers of the financial system of
the country
...

• This should be done in such a way as to promote the overall economic development of
the country
...
Principle of Efficiency:
• The financial system should be well organized and efficiently administered
...

8
...


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8

• That is, the cost of collection should be at the minimum level and the major portion of
revenue should be made available for the other expenditure outlays of the
Governments
...
Principle of Accountability:
• Each Government should be accountable to its own legislature for its financial
decisions i
...
the Central to the Parliament and the State to the Assembly
...
Mounting Vertical Imbalance:
Vertical imbalance emerges because of disproportionate alignment of revenue sources
in relation to increasing expenditure obligations by level of government
...

The process of assigning highly elastic revenue to the center and inelastic taxes to the
states, led to a high degree of concentration in revenue collection
...
Lack of accountability and implementation of populist policies are the major cause
for imbalance in state budgets
...
Horizontal Imbalance:
Various regions and states in India differ in resources endowment, level of development
and per capital income
...


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9

The resources transfer affected through planning commission and Finance Commission
has miserably failed in correcting the horizontal imbalance
...

3
...
Very often in Indian fed-eration the taxes which are assigned to
states are generally less elastic and less productive
...
The matter sometimes becomes worse for
states ruled by a particular political party different from the one in the centre
...
Eroded State Autonomy:
It is usually argued that the framers of our constitution were guided by the mistaken
notion of “strong centre and weak states”
...

In a federation a strong centre without strong states is not feasible
...
At present we can find quali-tative change in the concept of state
autonomy
...
Overlapping of Functions:
A study report of R
...


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10

The revenue gap grant is to be made by the finance commis-sion, the plan assistance by
planning commission and relief grants by the central government
...

6
...
The use of loans and grants by the state has resulted in
financial dependency and indiscipline on the part of the states
...

7
...
The disparity in per-capita in-come has been on an increase
...

Irrespective of concrete efforts by central government, the regional economic disparity
among states could not be removed and inequality of income as between individuals
could not be reduced to a significant extend
...
manishvermanotes
...
One percent growth rate
means an addition of 1 crore people every year but actually speaking 2 crore persons
are being adding every year
...
We know that birth rate is mainly responsible for rapid population growth
...
Widening Gap between Birth and Death Rates:
The average annual birth rate in India which was 42 per thousand populations in 195161 came down to 28
...
The death rate also came down from over
27 per thousand populations in 1951-61 to 9
...
Thus, since birth rate has shown a small decline and the death rate has gone
down rather sharply, the widening gap has increased our population rapidly
...
5 in 1992-93
...
2 children
...
Low Age at Marriage:
Child marriages have been very common in our country
...
Since then, there has been a continuous increase in the mean
age of marriage among both males and females
...
1 in 1901 to 13
...
1 in 1921, 13
...
7 in 1941, 15
...
1 in 1961, 17
...
6 in 1981 and 18
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12

If we relate fertility rates (average number of children born per woman) with age groups,
we find that as the age group increases, the fertility rate decreases
...

3
...
According to the 1991 census, the overall literacy
percentage in India is 52
...
56 ten years ago
...
86 while the female literacy percentage is 39
...

Education makes a person liberal, broad-minded, open to new ideas, and rational
...

4
...
There are women who disfavour family plan-ning on the plea that they
cannot go against the wishes of God
...
Other women adopt a passive attitude
...


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13

5
...

Many poor parents produce children not because they are ignorant but because they
need them
...
If families stop those chil-dren from working, their family funds will be
ruined
...
Poverty is both the cause and ef-fect of the
population growth
...
These measures
can be classified into 3 heads:
Measure of Population Control:
A
...
So efforts
must be done to remove the social evils in the country
...
Minimum age of Marriage:
As fertility depends on the age of marriage
...
In India minimum age for marriage is 21 years for men and 18 years for women
has been fixed by law
...


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14

2
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They are confined to four walls of house
...
So women should be given
opportunities to develop socially and economically
...

3
...
The educated men prefer to
delay marriage and adopt small family norms
...

4
...
It is advisable
that they should adopt orphan children
...

5
...
Marriage should no longer be
considered a social binding
...

6
...
So that they
do not depend upon others in the event of old age, sickness, unemployment etc
...


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15

B
...
More employment opportunities:
The first and foremost measure is to raise, the employment avenues in rural as well as
urban areas
...
So efforts should
be made to migrate unemployed persons from rural side to urban side
...

2
...
When their income is increased they would improve their standard of
living and adopt small family norms
...
Standard of Living:
Improved standard of living acts as a deterrent to large family norm
...
According
to A
...
Das Gupta those who earn less than Rs
...
4 children and those who earn more than Rs
...
8 children
...
Urbanisation:
It is on record that people in urban areas have low birth rate than those living in rural
areas
...


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16

C
...
Late Marriage:
As far as possible, marriage should be solemnized at the age of 30 years
...
The
govt
...
for males and 18 yrs
...

2
...
It is an ideal and healthy approach and people should be provided to follow
...

3
...
By applying preventive
measures, people can regulate birth rate
...
According to Chander Shekher, “Hurry for the first child, Delay the second child
and avoid the third
...
Recreational Facilities:
Birth rate will likely to fall if there are different recreational facilities like cinema; theatre,
sports and dance etc
...


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17

5
...
V
...

6
...
can give various types of incentives to the people to adopt birth control
measures
...

7
...
Women
should be given incentive to give services in different fields
...
As a result their number in teaching, medical and
banking etc
...


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18

Q- Examine the nature and causes of unemployment in India
...
Weekly Status Approach: This approach highlights the record
of those persons who did not have gainful work or were unemployed even for an hour
on any day of the week preceding the date of the survey
...
It is now almost universally recognized that the chronic
unemployment and under-employment in less developed countries are not due to the
lack of aggregate effective demand which, according to J
...
Keynes, was responsible for
unemployment in developed countries in times of depression
...

Causes of Unemployment in India:
The Caste System
a) The caste system, a structure of social stratification that can potentially pervade
virtually every aspect of life in India is a major factor in generating
unemployment
...
This also leads to the result that work is often given to members of a
certain community, rather than to those who truly deserve the job those who
have the right skills
...


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19

Inadequate Economic Growth
a) Indian economy is underdeveloped and role of economic growth is inadequate
...

c) This means that as the population increases, the economy cannot keep up with
demands for employment and an increasing share of people are unable to find
work
...

Increase in Population
a) India’s population is predicted to exceed China’s by the year 2024; it will,
furthermore, probably be the most populous country for the entirety of the 21st
century
...

Agriculture is a Seasonal Occupation
a) Agriculture offers unemployment for a large segment of the population, but only
for several months out of the year
...

Loss of Small-Scale/Cottage Industries
a) Industrial development has made cottage and small-scale industries considerably
less economically attractive, as they do not offer the economies of scale
generated by large-scale mass production of goods
...
manishvermanotes
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c) The result is that the cottage and small-scale industry have significantly declined,
and artisans have become unemployed as a result
...
Likewise, savings are low and the
result is that investment—which depends on savings—is also low
...

Ineffective (or absent) Economic Planning
a) Problematically, there have been no nationwide plans to account for the
significant gap between labor supply (which is abundant) and labor demand
(which is notably lower)
...

Labor Immobility
a) Culturally, attachment and maintenance of proximity to family is a major priority
for many Indian citizens
...

b) Additionally, language, religion, and climate can also contribute to low mobility
of labor
...


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21

Job Specialization
Jobs in the capitalist world have become highly specialised, but India’s education system
does not provide the right training and specialisation needed for these jobs
...

Lack of essential skilling
a) A study reveals that 33% of educated youth in India are unemployed due to a
lack of future skills
...




Some steps have been taken by the government to solve the unemployment in
India:

(i) Opening schools in villages: Opening vocational and elementary schools in villages
create employment opportunities for people living these
...

(ii) Small scale manufacturing: Opening opportunities of self-employment in the form
of small scale manufacturing units like basket weaving, etc
...

(iii) Introduction to modern farming methods: Use of modern farming methods gave
the surplus members of the family to get involved in other employment opportunities
...


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22

(v) NREGA 2005: According to this Act the NREGA was launched in February 2006
...


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23

Q- Explain the internal and external sources of finance in India’s five year plan
...

Understandably the government makes all possible efforts to raise resources from both
domestic and external sources
...

There are broadly two concepts of public expenditure
...
The plan does not include expenditures on the continued maintenance of
institutions and services which may have already come into existence at its
commencement
...
Non-plan
expenditures are estimated and only the balance of the resources available (at existing
level of taxation) is taken into account in relation to the finance of the plan
...
'Investment' is defined as expenditure
on the creation of physical assets e
...
building, plant and equipment including
expenditure on personnel required for putting up these assets
...

These are expenditures other than those classified as 'investment
...
manishvermanotes
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Balance from current revenues which mean revenue receipts (mainly tax yields) at
existing rates minus non-plan revenue expenditures of the center and the states, which
may even be a negative figure plus additional resource mobilization (ARM)
...
Since the Fifth Plan
Share of additional taxation in additional resource mobilization is going down and that
of 'reduction in subsidies' and 'internal resources of public sector enterprises' is going
up
...
Surpluses of public enterprises: (a) Contribution of railways, (b) Surplus of other public
enterprises
...
Capital receipts include: (a) Market loans (net), (b) Small savings (net), (c) Annuity
deposits, (d) Provident funds (net), (e) Steel equalization fund (net), 6) Balance of
miscellaneous capital receipts over non-plan disbursements
...
Budgetary receipts corresponding to external assistance
...

5
...
It
is actually the balancing factor which shows the shortfall of all the Sources, and,
therefore, has a special place in total resources
...
An analysis of these sources does not
show any regular trend in the pattern of financing economic plans
...
From the
observations it is seen that (1) For most of the plans the internal financing has been close to 90 per com was so in
the case of the First Plan (90
...
1%), the Fifth PL (87
...
manishvermanotes
...
3%), the Seventh Plan (90
...

However, in the Second and Third Plans into financing constituted 77
...
7
percent of the total plan financial outlay respectively
...
6%, 22
...
3%, 36
...
9%, 12
...
6%, 7
...
1%,5
...
9% respectively
...

In the Seventh Plan it again rose to 9
...
7% in the Sixth Plan In the Eighth Plan it
again came down to 5
...
0%
...
While this need persisted throughout all the plans,
there were also imports of maintenance goods, intermediaries, etc
...

(iii) Surplus of the public sector enterprises which should have been an important
contributor exhibited very poor performance
...
6 per
cent in the Second Plan and 39
...
Surplus from public
enterprises as percentage of aggregate resources was very insignificant in First, Second
and Third Plans being only 5
...
6% and 5
...
It increased to 8
...
3% in the Fifth Plan
...


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26

(iv)The trend in respect of 'current revenue balance' (i
...
revenue surplus on the basis of
existing tax rates) is very unhappy
...
"Among the tax revenues, while the indirect tax revenue
exceeded the LTFP (long term fiscal Policy) projections, direct tax revenue has fallen
short of the projection by a wide margin
...
The shift in favour of indirect taxes though inflationary and regressive in nature
is continuing unabated"
...
It is
seen that deficit financing has been kept at zero level in the Ninth Five Year Plan
...
manishvermanotes
...
What factors have
impeded the achievement of the objective of poverty alleviation?
Ans: The major objectives can be divided into following groups:
(a) Economic Growth:
Attainment of higher rate of economic growth received topmost priority in almost all
the Five Year Plans of the country
...

(b) Attaining Economic Equality and Social Justice:
Reduction of economic inequalities and eradication of poverty are the second group of
objective of almost all the Five Year Plans of our country particularly since the Fourth
Plan
...

Thus to achieve the target, various poverty alleviation programmes like the National
Rural Employment Programme (NREP), Composite Rural Training and Technology
Centre (CRTTC), Crash Scheme for Rural Employment Programme (CSREP), Rural
Landless Employment Guarantee Programme (RLEGP) etc
...
But the
performance of these programmes is not up to the satisfaction
...
The generation of more employment opportunities was considered as an
objective of both the Third and Fourth Plan of our country
...


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28

To achieve this target the major programmes which were introduced during this Plan
were Integrated Rural Development Programme (IRDP), the National Rural Employment
Programme (NREP), the Operation Flood II Dairy Development Project, schemes in the
villages and small industries sector the national Scheme of Training Rural Youth for Self
Employment (TRYSEM) and various other components of the Minimum Needs
Programme
...
But this objective attained its importance only since the Fourth Plan, when the
plan aimed at elimination of the import of food-grains under PL480
...

Thus this plan aimed at achieving self-sufficiency in the production of food-grains, raw
materials and other essential consumption goods
...

(e) Modernisation of Various Sectors:
Another very important objective of Five Year Plans of our country was the
modernisation of various sectors and more specifically the modernisation of agricultural
and industrial sectors
...
The successive plans also continued their efforts in the
same direction but at a reduced rate
...
In
the mean time some sort of modernisation always gone against employment generation

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29

thus the country is facing a conflict between the objective of modernisation and the
objective of removal of unemployment and poverty
...
Thus by regional development we
mean economic development of all the regions by exploiting various natural and human
resources and by increasing their per capita income and living standards
...
Integrated Rural Development Programme (IRDP): It's a flagship programme
...

Subsidies are provided to identify families so as to enable them to acquire an incomeearning asset
...

2
...
The aim is to provide technical and entrepreneurial skills to rural youths
from families below poverty line to enable them to take up self employment in
agriculture, allied activities, industries, services and business (ISB) activities
...
Jawahar Rozgar Yojana (JRY): It was launched in 1989
...
The target group of the JRY to those below
poverty line
...

4
...
It aims at providing
1 million jobs annually
...
It
consists of the following schemes:
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30

(a) Scheme of Urban Wage Employment (SUWE);
(b) Scheme of Housing and Shelter Upgradation (SHASU);
(c) Scheme of Urban Micro Enterprises (SUME)
...
Employment Assurance Scheme (EAS): It aims at providing at least 10 days of
unskilled manual work for each of two members of the family seeking it
...
Part of the wages may be
paid in the form of grains
...
Prime Minister's Rozgar Yojana: It was launched on 2nd October, 1993
...

7
...
It provides
self-employment through skills development
...

8
...
It aims to provide subsidy and technical assistance to individuals as well as
groups of beneficiaries for developing assured irrigation
...
Swarn Jayanti Shahri Rozgar Yojana: It came into effect from December, 1997 by
integrating three PAP's, JRY, Urban Basic Services for the poor and the PMIUPEP
...
Swarn Jayanti Gram Swarozgar Yojana: It comprises the following PAP's, IRDP,
DWCRA, TRYSEM, Ganga Kalyan Yojana and million wells scheme
...
manishvermanotes
...
Jawahar Gram Samridhi Yojana: It was launched on 23rd June 1999
...

12
...

13
...

14
...


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32

Q- What are the conditions that warranted the need of Indian economic reforms of
1991? Discuss the main features of the new Economic Policy of 1991
...

Economic liberalization, in general, refers to a government applying a series of
deregulation measures, reducing the amount of government control, allowing foreign
capital in, allowing greater privatization, lowering taxes (and other economic barriers),
etc to allow room for private players to enter its market
...

In countries like India and China, the term is used mainly in the context of opening up
the economy to foreign investments, capital, service providers, etc and allow room for
international players to enter its economy
...
We suffered a Balance of Payment (payments for export and import
of goods, services and capital) crisis
...
Since her independence, India had only been able to maintain a growth rate
of 3-3
...
3%
...
Since the partition,
India drove a centralized economic planning model (inspired by the Soviet Union), in
place of distributing out controls
...
India's protectionist policies, Nehru's five
year plans, several failed reform policies like Indira Gandhi's “GaribiHatao" program,

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33

License Raj driven economic planning and a failure to open up our markets to foreign
investments, all contributed to our economy stagnating at dismal growth rates
...
India faced food shortages and there was mass starvation in
states like Bihar
...
The state intervened with
industrialization, businesses, labour and financial markets, leading to a *huge* public
sector
...
The “Oil Shock”
of 1979, combined with agricultural subsidies and a consumption based strategy pushed
the fiscal deficit up even higher
...

The current account deficit averaged 2
...

India dealt with this in the worst possible way - borrow from external sources to finance
the deficit
...
External debt grew to as much as 38
...
Finally, we
reached a Balance of Payments crisis and Prime Minister Chandra Sekhar pawned gold
(airlifted to London), as collateral for IMF bailouts
...


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34

With just three weeks left until completely depleting the last loan from the IMF, PV
Narasimha Rao took over as India's Prime Minister and announced India's liberalization
...
·
Rao's ability to steer tough reform measures through the Parliament enabled India to
move quickly through the financial crisis
...

The following steps were taken: In a brilliant move, he instituted Dr Manmohan Singh
(an economist rather than a politician) as Finance Minister, and began India's Economic
Reforms (New India) by first devaluing the Rupee
...
Industrialists could finally breathe
free of the License Raj
...

Before anyone knew it, industrial licensing was abolished
...

• Gradual reduction of import duties followed, allowing foreign investments to slowly
start flowing in
...

• Slowly, taxes were lowered (income and corporate taxes) and Foreign Technology
Agreements started getting signed
...
manishvermanotes
...

• The threats of massive layoffs were avoided by legislating judiciously and exercising
regulations carefully
...
Every industry (except two) was
opened to private sectors
...
The monopoly laws were
revised and there were no more restrictions on companies wanting to grow big
...

They had to continually assure every worker striking (from the banking sector to
farmers, from opposition Yatras led by the BJP to the trade unions) that there wouldn't
be layoffs and that workers would be protected
...

The result of this was that the Indian economy grew to 7
...

Cities started to grow and became centres of post-liberalization industrialization
...
Manmohan Singh's government in 2004 again continued with
market liberalization and a larger role for enterprises
...
The number of listed companies grew
and resulted in a healthy trend of development in India
...
manishvermanotes
...

The main features of the New Economic Policy of 1991 are as follows:
1
...
Previously,
the public sector has given reservation especially in the capital goods and key industries
...
Deregulation of the industrial sector allowed private sector operation in most
of these sectors except in eight selected areas including atomic energy, mining and
railways
...
Industrial delicensing policy: The most important part of the new industrial policy of
1991 was the end of the industrial licensing or the license raj or red tapism
...
This has created long delays in the start-up of industries
...
It has reduced
industrial licensing to fifteen sectors
...
Opening up of the economy to foreign competition: Another major feature of the
economic reform measure was that it has given welcome to foreign investment and
foreign technology
...

4
...
Different
banking sector reforms including removal of control on interest rate and branch

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37

licensing policy liberalisation were launched
...

5
...
The public sector will
be concentrating in key and strategic sectors
...

6
...
In 2010, the Competition Commission
emerged as the watchdog in monitoring competitive practices in the economy
...
A major
feature of economic reforms was that it was implemented in a gradual manner
...
The new industrial
policy introduced in 1991 is the central point of the economic reforms
Over the last twenty-five years, as a result of the launch of the new economic policy and
its continuation, the Indian economy has undergone significant improvement and now
is one of the fastest growing economies in the world
...
At present, India is
categorized as an Emerging Market Economy (EME) along with China, Brazil, and Russia
etc
...


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38

Q- What are the causes of poverty? Why have anti-poverty programmes not been
able to achieve desired results in India?
Ans: Poverty is a state or condition in which a person or community lacks the financial
resources and essentials for a minimum standard of living
...
Povertystricken people and families might go without proper housing, clean water, healthy
food, and medical attention
...
This rise is mainly due to fall in
death rate and more birth rate
...
63 crores in 1991 and became 102
...
This
pressure of population proves hindrance in the way of economic development
...
There is educated unemployment and disguised unemployment
...

(iii) Capital Deficiency:
Capital is needed for setting up industry, transport and other projects
...

(iv) Under-developed economy:
The Indian economy is under developed due to low rate of growth
...


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39

(v) Increase in Price:
The steep rise in prices has affected the poor badly
...

(vi) Net National Income:
The net national income is quite low as compared to size of population
...
The per capita income in 2003-04 was Rs
...

(vii) Rural Economy:
Indian economy is rural economy
...
It has great pressure of
population
...

(viii) Lack of Skilled Labour:
In India, unskilled labour is in abundant supply but skilled labour is less due to
insufficient industrial education and training
...
In India, there
is shortage of efficient entrepreneurs
...

(x) Lack of proper Industrialisation:
Industrially, India is a backward state
...
So, industrial backwardness is major cause of poverty
...
manishvermanotes
...
7% and growth rate of population has been
1
...
So compared to population, per capita growth rate of economy has been very low
...

Despite rapid growth and development, an unacceptably high proportion of our
population continues to suffer from severe and multidimensional deprivation
...
The need to “end poverty,
ignorance, disease and inequality of opportunity” was stressed in speeches during the
Constituent Assembly meetings
...
The day we attained Independence, Rajendra Prasad, the country’s
first president, asked for a commitment “to create the conditions to enable each
individual to develop and rise to their fullest stature, such that poverty, squalor,
ignorance and ill-health would vanish, along with any distinction between high and low
and between rich and poor”
...
For instance, former Prime Minister
Manmohan Singh made a commitment to ensure that the “struggle for the removal of
chronic poverty, ignorance and disease will register major gains in the Eleventh (five
year) Plan”
...
”
At the turn of the century, the Millennium Development Goals sought to “eliminate
extreme poverty and hunger”
...
Clearly, there is recognition at national and global
levels of the importance of reducing or eliminating poverty
...

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41

Q- Explain the poverty line
...

Ans: Poverty line is the level of income to meet the minimum living conditions
...
It is defined
as the money value of the goods and services needed to provide basic welfare to an
individual
...
In developed countries, where there
is advanced standard of living and welfare concepts, poverty line is high as basic
standard to live include higher consumption requirements and accessibility to many
goods and services
...
This means that
poverty line is set by the welfare standard in a particular society (economy)
...
The Indian government is
dealing the same with two methods – by promoting economic growth and by antipoverty programmes
...
of India are as
follows:
1
...
The
main aim is to provide support to the rural poor in the form of subsidy and bank credit
for productive work opportunities through successive plan periods
...
manishvermanotes
...
Jawahar Rozgar Yojana /Jawahar Gram Samriddhi Yojana (JGSY):
Two new schemes, namely, National Rural Employment Programme (NREP) and Rural
Landless Employment Guarantee Programme (RLEGP) were merged in the year1989,
under Jawahar Rozgar Yojana (JRY)
...
From the year 1999, this old scheme started again with a new name as
Jawahar Gram Samriddhi Yojana (JGSY), mainly for rural economic infrastructure
programme with the purpose of employ¬ment generation
...
Employment Assurance Scheme:
This scheme was launched in the year 1993
...
In the year1997-98, it extended to several other blocks
...
It was expected to lead to
the creation of robust economic and social infrastruc¬ture and address the needs of
people
...
Food for Work Programme:
In the year 2000, the Food for Work Programme was started as a component of EAS
...
The main
aim is to enhance food security through wage employment
...
manishvermanotes
...
Sampoorna Gramin Rozgar Yojana:
The new Sampoorna Gramin Rozgar Yojana (SGRY) Scheme started in 2001 was the mix
of old JGSY, EAS and Food for Work Programme
...


6
...
A similar scheme for urban poor was launched in 2015 as Housing for
All
...


7
...
Providing pension to old people above
now 60, who does not have any means of subsistence is the main aim of this project
...
Implementation of this scheme in places is given
to Panchayats and municipalities
...
National Family Benefit Scheme (NFBS):
NFBS was started in the year 1995 and is sponsored state governments, under
community and rural department
...


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44

9
...
The women must be
older than 19 years
...
And in case of the death of the child, the women can still avail it
...
manishvermanotes
...
Also, discuss the tools and
limitations of using a monetary policy, with special reference to India
...
It is a powerful tool to regulate macroeconomic
variables such as inflation and unemployment
...
The central bank or a similar regulatory organization is
responsible for formulating these policies
...

1
...
A low level of inflation is considered to be
healthy for the economy
...

2
...
For
example, an expansionary monetary policy generally decreases unemployment because
the higher money supply stimulates business activities that lead to the expansion of the
job market
...
Currency exchange rates

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...
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46

Using its fiscal authority, a central bank can regulate the exchange rates between
domestic and foreign currencies
...
In such a case, the domestic currency becomes
cheaper relative to its foreign counterparts
...
The widely utilized
policy tools include:
1
...
The discount
rate (base rate) is an interest rate charged by a central bank to banks for short-term
loans
...
Subsequently, the banks will increase the interest rate they
charge their customers
...

2
...
By changing the required amount, the central bank can influence the
money supply in the economy
...

Commercial banks can’t use the reserves to make loans or fund investments into new
businesses
...
manishvermanotes
...
The interest is known as IOR or IORR (interest
on reserves or interest on required reserves)
...
Open market operations
The central bank can either purchase or sell securities issued by the government to
affect the money supply
...

As a result, banks will obtain more money to increase the lending and money supply in
the economy
...
Restricted Scope of Monetary Policy in Economic Development:
In reality the monetary policy has been assigned only a minor role in the process of
economic development
...

The role assigned to the Reserve Bank is minor indeed
...

2
...
It has not succeeded in achieving the objective of growth with
stability
...
G
...
manishvermanotes
...
In India, however, the
monetary policy of the Reserve Bank is not appropriately integrated with fiscal, foreign
exchange and income policies
...
Unfavourable Banking Habits:
An important limitation of the monetary policy is unfavourable banking habits of Indian
masses
...
This means that
a major portion of the cash generally continues to circulate in the economy without
returning to the banks in the form of deposits
...

Moreover in India there is predominance of currency in the money supply
...
Due to high proportion of currency in money
supply, banks have to face the problem of large withdrawals of currency every time they
create credit
...
It
is expected to make money policy more effective
...
Underdeveloped Money Market:
Another limitation of monetary policy in India is underdeveloped money market
...

The money market comprises of the parts, the organised money market and
unorganised money market
...
It
fails to achieve the desired results in unorganised money market
...
manishvermanotes
...
Existence of Black Money:
The existence of black money in the economy limits the working of the monetary policy
...
Consequently the supply and demand of money also not remain as
desired by the monetary policy
...
Pandit, ‘Black money is rightly
regarded as a threat to the official money credit policy mechanism to manage demand
and price in several sectors of the economy
...
Conflicting Objectives:
An important limitation of monetary policy arises from its conflicting objectives
...
The monetary policy
generally fails to achieve a proper coordination between these two objectives
...
Influence of Non-Monetary Factors:
An important limitation of monetary policy is its ignorance of non-monetary factors
...

The Reserve Bank has no control over deficit financing
...

8
...
There are limitations regarding frequent and sharp
changes in the bank rate, as these are supposed to conflict with the development

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50

objectives
...

The margin requirements have tended to be so high for most of time due to prolonged
inflation, that the scope for further increase in them is limited
...
These
limitations of monetary instruments hamper the smooth working of monetary policy
...
manishvermanotes
...
Read here to know the causes, effects,
and significance of it on the world
...
It is the process through which cities grow as higher percentages of the
population come to live in the city
...

Urbanization is often discussed in countries that are currently in the process of
industrializing and urbanizing, but all industrialized nations have experienced
urbanization at some point in their history
...


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52

Following leads to urbanization:
Industrialization: Industrialization has improved job prospects by allowing individuals
to work in contemporary sectors in occupations that contribute to economic progress
...

Commerce: Commercialization and commerce are associated with the belief that towns
and cities provide better business possibilities and returns than rural regions
...
Better
educational facilities, higher living standards, improved sanitation and housing,
improved health care, improved recreation facilities, and improved social life are only a
few examples
...
manishvermanotes
...
According to him, a higher per capita income is always associated with a higher
proportion of the working population employed in tertiary industries while a low per
capita income is always associated with a low proportion of working force employed in
tertiary sector
...
For instance in the U
...
A
...
While 7% population was engaged in agriculture,
36% in industry and 57% in service sector
...
S
...
In the same year 26% and 72% of the work force were engaged in
industrial and service sector respectively
...
K
...
We find the same relationship, between the occupational
structure and economic development
...
For instance
the per capita income of India was 60 dollar in 1960 and out of total work force 74% was
engaged in agriculture 11% in industry and 15% in service sector
...
manishvermanotes
...
The following table shows comparative picture regarding
structural change and change in the occupational pattern of some selected countries
...


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55

(c) Income inequality is at an all-time high and is growing unabated
...

In the global level where 82% of the wealth generated last year worldwide went to the
1%, while 3
...
Also, Billionaire wealth has risen by an average
of 13% a year since 2010 – six times faster than the wages of ordinary workers, which
have increased by a yearly average of just 2%
...

Reasons for Income Inequality


There a many reasons for the rise in income equality in India some of them are as
follows:



The rise of a rentier class that seeks to maximize its leverage in fixed assets such as
lands and property to extract as much as income as possible



With a 2019 study by the Reserve Bank confirming that housing affordability has
significantly deteriorated over the last four years, it is unsurprising how millennial
now choose to rent rather than bear the increasingly unaffordable burden of high
EMIs
...
It is a fact that inequality, poverty and unemployment are
related to each other
...




During inflation, less profit is made and wage earners are the ones who bear the
losses
...


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...
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56

Also, while money income rises, real income falls, leading to a decrease in the overall
standard of living
...
This is due to undue concentra-tion of incomes in a few hands caused by
large- scale tax evasion
...




Regional imbalances will pose a serious threat to cooperative federalism
...




It must also explore introducing inheritance tax for the super-rich
...




According to Oxfam erosion of workers’ rights; excessive influence of big
business over government policymaking and the relentless corporate drive to
minimize costs to maximize returns to shareholders are major causes of income
inequality
...




Quality of public services like health and education is also a great leveler and the
government must also focus in this regard
...
manishvermanotes
...




A comprehensive plan to promote inclusive growth is the only solution to
address the income inequality problem in India
...
manishvermanotes
...
However, the Indian Constitution does
not make a clear cut distribution of the financial resources and leaves much to be
decided by the Central Government from time to time
...
This article throws light on the
distribution of financial resources in India
...
, corporation tax, taxes on the capital value of assets of
individuals and companies; Estate duty and succession duty in respect of the property
and other than agricultural land; and income from the earning departments like the
railways and postal departments have been exclusively assigned to the Union
Government by the Constitution
...
has been assigned to the
States
...
manishvermanotes
...
;
(ii) Excise duties on medicinal toilet preparation containing alcohol or opium or Indian
hemp or other narcotic drugs
...

Such taxes included duties in respect of succession to property other than agricultural
land; state duty in respect of property other than agricultural land terminal taxes on
goods or passengers carried by railways, sea or air, taxes on railway freights and fares;
taxes other than stamp duties on transactions in stock exchanges and futures markets;
taxes on the sale or purchase of newspapers and advertisements published therein;
taxes on purchase or sale of goods other than newspapers where such sale or purchases
take place in the course of interstate trade or commerce
...
manishvermanotes
...
"
The concept of sustainable development can be interpreted in many different ways, but
at its core is an approach to development that looks to balance different, and often
competing, needs against an awareness of the environmental, social and economic
limitations we face as a society
...
We are already seeing the damage this kind of approach
can cause, from large-scale financial crises caused by irresponsible banking, to changes
in global climate resulting from our dependence on fossil fuel-based energy sources
...

But the focus of sustainable development is far broader than just the environment
...
This means meeting the diverse
needs of all people in existing and future communities, promoting personal wellbeing,
social cohesion and inclusion, and creating equal opportunity
...
We might need to change the way we work and live now, but
this doesn't mean our quality of life will be reduced
...


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61

Health & Transport - Instead of driving, switches to walking or cycling for short
journeys will save you money, improve your health and is often just as quick and
convenient
...
The impacts of our decisions as a
society have very real consequences for people's lives
...
(Relying on
imports rather than growing food locally puts the UK at risk of food shortages)
...
By incorporating health plans into the planning of new
communities, for instance, we can ensure that residents have easy access to healthcare
and leisure facilities
...

We all have a part to play
...

However, to achieve sustainability in the UK, we believe the Government needs to take
the lead
...


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62

(f) When the revenue of the government is shorter than its expenditure then this
situation is dealt by printing more currency, buying from public and foreign institution
...

Meaning of Deficit Financing:
Former Planning Commission of India has defined deficit financing as; "The direct
addition to gross national expenditure through budget deficits, whether the deficits are
on capital or on revenue account
...
So the temporary arrangement of the funds
through various methods is known as deficit financing
...
Printing new currency notes
2
...
)
3
...

Deficit Financing in India
In India, when the total income of the government (revenue account + capital account)
falls below its total expenditure, then;
1
...
manishvermanotes
...
Borrows loan from the central bank and commercial banks and even state
governments through Ad-hoc Treasury Bills
...
Borrows from the general public in the form of Bonds and other securities or
4
...

Purposes of Deficit Financing:
1
...

2
...

3
...

4
...

5
...

Impacts of the Deficit financing on the country:
1
...

2
...

3
...

4
...


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64

In fact it is not possible for the people to maintain the previous rate of saving due to
rising prices
...
Adverse Impact on Investment: - Deficit financing effects investment adversely
...

If their demands are accepted it increases the cost of production which de-motivates
the investors
...

In essence it can be said that the deficit in the country is not as bad as it looks like
...


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65

(g) The lack of real capital is so characteristic a feature of all under-developed
economies that they are often called “capital-poor economies”
...

Not only is the existing stock of capital very small, but the current rate of capital
formation is also very low
...

The low rate of capital formation in under-developed countries is due to the following
reasons:
(a) Low Level of Domestic Savings:
In under-developed countries, the level of savings is very low
...
In most of the
underdeveloped countries the rate of savings is between 5% and 10% in India, the level
of domestic savings has in- Teased to about 20% of the national income in recent years,
only because of the sti-mulus provided by the planned development under the FiveYear Plans
...
As a result much of the income is
consumed and little is left for investment purposes
...


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66

Apart from the low level of absolute income, the low relative level of real income in
under-developed countries as compared with the advanced and rich countries also
reduces their capacity to save
...
Increasing
awareness of these inequalities have pushed tip the general propensity to consume of
the under-developed countries
...
This tendency of the people of under-developed
countries to copy the higher levels of consumption prevailing in the advanced countries
has been called “international demonstration effect”
...
This should have resulted in a greater volume of savings available
for capital formation
...

(b) Lack of Entrepreneurship:
Another factor responsible for the low rate of investment in under-developed countries
is the lack of good entrepreneurs who can invest the savings and carry out innovations
...

The entrepreneurs in under-developed countries are interested in quick returns and are
not daring enough to bear large risks involved in making capital goods
...


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67

(c) Weak Inducement to Invest:
Another reason why investment and capital formation are low has been advanced by
Nurkse
...
The size of the
market in under-developed countries is very small due to the low incomes of the
people
...

The use of capital equipment in the’ production of goods and services for the domestic
market is discouraged by the small size of the market
...
“The inducement to invest may be low
because of the small buying power of the people, which is due to their small real
income, which, again is due to low productivity
...
”

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68

(h) Post-independence India had adopted a very conservative economy that was
practically shut to the outside world
...
So in 1991, India went through
some very major economic reforms
...
There were
stagnation and slow growth in the economy
...
Manmohan Singh introduced
some major economic reforms
...

Privatization has a very broad meaning in economics
...

As the definition of privatization is so very diverse, the three main features of
privatization:


Ownership Measures: The ownership of all public enterprises ultimately shifts to
private owners
...




Organizational Measures: This is where we limit the control of the state in public
companies
...




Operational Measures: Public organizations and companies were running into huge
losses
...


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69

Conceptualization of Privatization in India:
1] Delegation: Here via a contract or franchise or lease or grant etc
...

But the private company will handle the daily activities and deliver the product or
service
...

2] Divestment: The government will sell a majority stake of the enterprise to one or
more private companies
...

3] Displacement: The first step here will be deregulation
...
And slowly and gradually the private company will displace the
public enterprise
...

4] Disinvestment: Directly selling a portion or whole of a public enterprise to private
parties
...
The
managers and officials of a private company have skin in the game, i
...
their
income is related to the performance of the company
...
So privatization usually leads to higher efficiency in
the company
...
This may dissuade the
company from taking economically beneficial decisions
...

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70



In public companies, at times the government can only think about the upcoming
elections
...
But a private company does not have such
restrictions
...




Privatization will also increase competition in the market
...
Healthy competitiveness in an
economy will push efficiency and performances
...
manishvermanotes
...
In
recent times, the importance of fiscal policy has been increasing to achieve economic
growth swiftly, both in India and across the world
...
Fiscal policy,
along with monetary policy, plays a crucial role in managing a country’s economy
...
If the government receives more
revenue than it spends, it runs a surplus, while if it spends more than the tax and nontax receipts, it runs a deficit
...
Alternatively, the government may also choose to
draw upon its foreign exchange reserves or print additional money
...
The aim is to help make more of productive money available to the
people, free up some cash with the people so that they can spend it elsewhere, and
encourage businesses to make investments
...

Main objectives of Fiscal Policy in India:
Economic growth: Fiscal policy helps maintain the economy’s growth rate so that
certain economic goals can be achieved
...


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72

Full employment: It aims to achieve full employment, or near full employment, as a
tool to recover from low economic activity
...




Through taxation, the fiscal policy helps mobilise considerable amount of resources
for financing its numerous projects
...




The fiscal policy gives adequate incentives to the private sector to expand its
activities
...


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