Definition: Colonialism is a general description of the state of subjection political, economic, and intellectual of a non-European society as a result of the process of colonial organization. Colonialism deprives a society of its freedom and its earth and, above all, it leaves its people intellectually and morally disoriented.

Origin of British Rule

The British rule over India changed the course of history in India. The foundation of British Empire in India was laid by battle of palsy, fought in 1757.

Basic Purpose of British rule

The main purpose of the British rule in India was to use Indian economy as feeder economy for the development of the British economy. British colonial rule tempered the Indian economy very badly. They exploited India’s natural as well as human resources for the glory of their own country. Finally, after 200 years of British rule, India gained independence from them on the 15th August 1947.

Basic Chronology of British Rule


Indian Economy before Colonial Rule                                                                                                                    

  • Before the advent of colonial rule, India was a self-sufficient and flourishing economy. Evidently, our country was popularly known as the golden eagle. India had already established itself on the world map with a decent amount of exports. Although primarily it was an agrarian economy, many manufacturing activities were budding in pre-colonial India.
  • Indian craftsmanship was widely popular around the world and garnered huge demands. The economy was well known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works, etc. Such developments lured the British to paralyze our state and use it for their home country’s benefits.


  • During the pre-British era, a major part of India’s population was dependent on agriculture. The farming technologies and irrigation facilities were not satisfactory. However, agriculture in villages was self-sustaining and independent.
  • The village communities either purchased or consumed the raw materials and articles directly. Consequently, starvations and famines were rare if not frequent. Of course, agricultural practices remained primitive, but the villages functioned independently and were self-sufficient. All of this went for a toss when the Britishers set feet on the Indian subcontinent.

Industrial Sector

  • Before the rise of the British Empire in India, it was known for its handicraft industry. Evidently, this industry enjoyed worldwide demand and was held in high regard. Indian craftsmanship was applauded in all parts of the world. The textile industry was among the most important urban handicraft industry. Articles made up of wool, cotton and silk were famous both inside and outside the country’s boundaries.
  • Additionally, various metal industries, stone carving, marble work, shipbuilding, tanning, and leather industries were taking shape. These industries potentially accelerated India’s growth, establishing it on the world map. However, the British Raj took every step to ensure that this was not the case.

Foreign Sector

  • Pre-colonial India enjoyed a worldwide market for its manufactured products. The excellent levels of craftsmanship were held in high regard and enjoyed a global reputation. Notable ones are handicrafts and textile industries. Shawls and carpets from Kashmir and Amritsar, silk sarees of Banaras and silk cloth of Nagpur are some examples.
  • Pre-British India also excelled in the artistic handicraft industry which includes jewelry made of gold and silver, brass, copper and bell metal wares, marble work, carving works in ivory, wood, stone, artistic glassware etc. All of the above-mentioned items including cinnamon, pepper, opium, indigo etc. constituted a major proportion of exports from India. Effectively, India was exporting high-quality manufactured goods to European countries and owned a respectable share in the world economy.



  • During the pre-British period, the condition of Indian Agriculture was not at all satisfactory.
  • Nearly 85% of the country’s population lived mostly in villages and derived livelihood, directly or indirectly from agriculture.
  • Even with this large proportion of the population engaged in agriculture, the country was not self-sufficient in food and raw material for industry.

Agriculture on the Eve of Independence:

  1. Low Production and Productivity:

Production refers to the total output and Productivity refers to output per hectare hand, both were very low at the time of Independence.

  1. High Degree of Uncertainty: Agriculture in India was heavily dependent on rainfall, due to the lack of permanent means of irrigation (dams, wells) and no efforts by Britishers were made to strengthen the agricultural sector.
  2. The dominance of Subsistence Farming: Subsistence farming means farming that is done just to meet the basic needs of the farmer (and his family). In India, subsistence-based farming was done resulting in little or no surplus left for sale meaning that there was a lack of commercial outlook. This lead to the backwardness of the agricultural sector and the nation.
  3. Difference/Gulf between the Owners of the Soil and the Tillers of the Soil: The owners of the soil shared the output with the tillers but they did not share the cost of production. The owners were simply interested in increasing their income in terms of share of output. For tillers agriculture was a source of subsistence and for the owners, it was a source of income without investment creating a wide economical gap between two.
  4. Small and Fragmented Holdings: There were small and fragmented landholdings leading to low output at a high cost of production, therefore, landholdings were uneconomical.
  5. Zamindari System or Land Revenue System under the British Raj:

During the British Rule, a unique land revenue system was introduced in India. Under this system, a triangular relationship was set up between the government, the owners and the tillers of the soil. This system was called “The Zamindari System”. 

Features of the Zamindari system are as follows:

    • Zamindars were recognized as the permanent owners of the soil.
    • Zamindars had to pay a fixed sum or revenue to the government as land revenue and if they were unable to do so, they stood in danger of losing their rights.
    • Zamindars were free to extract as much as they want from the tillers of the soil as they wished and could.

Problems with the Zamindari System:

  • Unlimited exploitation of the tillers of the soil by the zamindars.
  • High rates of land revenue to be paid by tillers.
  • Tillers were reduced to the status of landless laborers resulting in earnings just to meet their basic needs.

Forced Commercialisation of Agriculture:

Commercialization meant that there was Shift from cultivation for SELF- CONSUMPTION to MARKET.

REASON: The British rule in India collided with the Industrial Revolution in Britain; therefore, this commercialization of crops was done to meet the requirement of the Indigo that was used by the textile industry in Britain for the purposes of dying/bleaching.

How was this done?

  • The farmers were forced to accept the advance payments for the cultivation of the Indigo.
  • Earlier farmers grew grain for their family’s consumption but now they needed cash to buy it from the market.
  • There were uncertainties in the market due to which the farmers became indebted.
  • This indebtedness of farmers leads to the stagnation and backwardness of agriculture.

CONCLUSION: All these reasons combined showed that the Agriculture sector on the eve of independence was backward and stagnant.


  • Although agriculture had dominated, the Indian Economy during the pre-British period, some Indian industries like the handicraft industries, enjoyed worldwide reputation.

Industrial Sector on the eve of Independence:

Reasons behind the decay of handicrafts:

1. Discriminatory Tariff (Tax) Policy of the State - Britishers found India's best source of raw materials and best market for their finished goods. They started the following discriminatory tariff policies:

  • The export of raw materials from India tariff-free.
  • The import of British Industrial products to India tariff-free.
  • Heavy duty (taxes) was placed on the export of Indian Handicraft products. British finished products captured Indian markets. Therefore, the decay of the handicrafts was the result.

2Disappearance of the Princely Courts

  • At the time of Independence India was divided into two sets of territories:
  • The law of British India was placed in both the central and the local governments, which means that the Princely states somehow existed under the influence of the law.
  • Local rulers encouraged (patronize) the handicrafts making them reputed worldwide, with the greater influence of British law and their discriminatory policy the decay of handicrafts took place.

3Competition from Machine- made Products-

The machine-made products from Britain were low-cost and gave tough competition to handicrafts products in India. This competition forced the Indian craftsmen to shut their enterprises forever.

4New Patterns of Demand-

The impact of the Britishers can be seen on our culture and thinking too. This led to the emergence of the new class and new patterns of class that preferred British products to Indian products.

5. Introduction of Railways in India-

Railways were introduced in India by the Britishers for their own selfish motives in order to expand their markets for the finished products in India. Their expansion leads to decay in handicrafts.



  1. Net Exporter of Primary Products and Importer of Finished Goods- India under British rule became an exporter of raw materials (cotton, wool, indigo, etc.) and an importer of finished goods. The composition of exports and imports showed the backwardness of the economy.
  2. Monopoly control of India’s Foreign Trade- British government monopolized the exports and imports soft the country in a way that, More than 50% of trade with Britain only. Imports of Britain’s finished goods provided a huge market to British industry in India.
  3. Drain of Indian wealth during British rule-

Despite the exports exceeding our imports, there was mass export of primary goods, which is a sign of economic backwardness. The trade surplus was used for administrative and war expenses of Britishers and not for the growth and development of the country.



Demographic condition during the British rule exhibited all features of a stagnant and backward Indian economy.

  • First official census: The first official census was conducted in the year 1881. Though suffering from certain limitations, the census revealed unevenness in India’s population growth. From 1881 onwards, census operations were carried out after every 10 years.
  • 1921: Year of the great divide: Before 1921, India was in the first stage of demographic transition. The second stage of transition began after 1921. So, the year 1921 is described as the ‘Year of the Great Divide’.

1. Birth Rate and Death Rate- Birth rate refers to number of children born per thousand in a year. Death rate refers to number of people dying per thousand persons in a year. Both were very high, at nearly 48 & 40 per thousand and this suggested a state of massive poverty in the country.

2. Infant Mortality Rate- Infant mortality rate refers to number of infants dying before reaching one year of age per 1000 live birth in a year. The infant mortality rate was about 218 per thousand, in contrast to the infant mortality rate of 44 per thousand in 2011.

3. Life Expectancy- Life expectancy refers to the average number of years for which people are expected to live. The average life of a person living in India at that time was just 32 years, which meant that there were poor medical facilities, and a lack of awareness and means to avail themselves.

4. Literacy Rate- It was as slow as 16% and the female illiteracy rate was even worse reflecting social and economic backwardness along with gender bias. It means the structure of the working population across all three sectors of an economy I.e. primary, secondary and tertiary.

5. Widespread Poverty- Extensive poverty prevailed in India during the colonial period. The overall standard of living of common people in India was very low and there was widespread poverty in the country.

6. Poor Health Facilities: Public health facilities were either unavailable to large mass of population or, when available, were highly inadequate. As a result, water and air-borne diseases were widespread and took a huge toll on life.



Occupational structure refers to the distribution of working persons across different industries and sectors. During the colonial period, the occupational structure of India showed little sign of change.

Occupational structure on the eve of Independence:

1. Agriculture as Principal source of Occupation- With a large number of the working population engaged in agriculture, it became the source of livelihood and their only source of occupation. This shows the backwardness of the country in terms of lack of employment outside agriculture.

2. The industry as an Insignificant Source of Occupation- Very few people were engaged in the industrial sector, this proves the backwardness of the Indian economy on the eve of Independence.

3. Unbalanced Growth- Only when all the sectors of the economy are equally developed there is balanced growth, but in the case of India except for agriculture all the other sectors were in the infant stage leading to the backwardness of the country.



The economic and social elements of Infrastructure remained undeveloped except for the Railways, Ports and a few roads made and introduced by the Britishers for the transportation of raw materials from one place to another smoothly.

The state of infrastructure:

  1. Roads: The colonial administration could not accomplish much on the construction of roads due to scarcity of funds.
  • The roads that were built, primarily served the interests of mobilising the army and shifting raw materials.
  • There always remained an acute shortage of all-weather roads to reach out to rural areas during the rainy season. As a result, people living in these areas suffered badly during natural calamities and famines.
  1. Railways: The most important contribution of British rule was to introduce railways in India in 1850. The railways affected the structure of the Indian economy in two important ways:
  • Railways enabled people to undertake long distance travel. It broke geographical and cultural barriers and promoted national integration.
  • It enhanced the commercialization of Indian agriculture, which adversely affected the comparative self-sufficiency of the village economies in India. Railways also promoted foreign trade but it benefited the Britishers more than the Indians. The construction of railways First Railway Bridge linking led to huge economic losses for the Indian economy.
  1. Air and Water Transport: British Government took measures for developing water and air transport. However, their development was far from satisfactory.
  • Inland waterways proved to be uneconomical, as in the case of the Coast Canal on the Orissa coast. This canal was built at a huge cost, but it failed to compete with the railways, and finally, canal had to be abandoned.
  1. Communication: Posts and telegraphs were the most popular means of communication.
  • The introduction of the expensive system of electric aviation, in 1932 telegraph in India served the purpose of maintaining law and order.
  • The postal services, despite serving a useful public purpose, remained inadequate.

Reasons for Infrastructural Development

The basic objective of the British Government to develop infrastructure was not to provide basic amenities to the people but to serve their own colonial interests.

1. The Roads were built for mobilizing the army within India and for drawing out raw materials from the countryside to the nearest railway station or port and to send these to England or other lucrative foreign destinations.

2. Railways were developed by the Britishers mainly for three reasons:

  • To have effective control and administration over the vast Indian territory;
  • To earn profits through foreign trade by linking railways with major ports.
  • To make a profitable investment of British funds in India.

3. The system of Electric Telegraph was introduced at a high cost to serve the purpose of maintaining law and order



  • Commercial Outlook of Framers- Forced commercialization of agriculture by the Britishers forced the farmers to have a commercial outlook as they started producing more(in terms of quantity and diversity) for the market and not just for subsistence.
  • New Opportunities of Employment- Introduction of railways meant new employment opportunities outside agriculture.
  • Control of Famines- Not more starvation or death due to lack of food grains was there because of rapid means of transport reaching out to different areas.
  • Monetary System of Exchange- Monetary system instead of the barter system was introduced by them, which facilitated the division of labor, specialization, and large-scale production.
  • Efficient Administration- Britishers had a well efficient system of administration that provided a base for the country’s future politicians and planners.


  • India remained an agricultural country throughout the British period and its agricultural sector remained totally backward. There was the commercialization of agriculture, to serve the interests of Great Britain.
  • British rulers never tried to modernize the prevailing industrial structure of India. There was large-scale destruction of world-famous handicrafts and cottage industries of the country.
  • By following the policy of discriminating protection, Britishers gained complete control over the entire Indian market.
  • British rulers gradually transformed the Indian economy into a primary producing country, exporting only agricultural products and raw materials necessary for industries in Britain and importing finished goods from Britain.
  • To promote foreign trade and to exploit the natural resources of India to their advantage, the British ruler's built-up economic infrastructure, which includes roads and railway networks, ports and shipping, irrigation and electricity, etc.
  • The British rulers thoroughly exploited the Indian economy through an economic drain.

Feature of Indian economy on the eve of independence:

    • Stagnant economy: There was very slow or no economic growth in the country. As a result of stagnation, there was unemployment, death, and suffering due to lack of food.
    • Backward economy: Indian economy was backward and per capita income was very low and in India, it was just Rs. 230 from 1947-1948.
    • Agricultural backwardness: With 70% of people engaged in agriculture, its contribution to GDP was only 50%. Productivity and production too were extremely low.
    • Industrial backwardness: Industrial sector was not developed, and there was a lack of basic and heavy industries in the country.
    • Widespread Poverty: The people in the country could not even meet their basic needs i.e. food, shelter and clothing. Unemployment and Illiteracy were other issues faced by the country.
    • Poor Infrastructure: Infrastructure like communication, transport, power or energy was underdeveloped.
    • Major dependence on imports: As a result of industrial backwardness in the country, several consumer goods like medicines were imported from abroad.
    • Limited Urbanisation: The majority of the population lived in villages meaning that they lacked opportunities outside agriculture.
    • Colonial economy: As India was a British colony, Britishers exploited Indian economy for their own benefits.


Economic System

Definition: Economic System refers to an arrangement by which central problems of an economy are solved.

  1. What to Produce - It involves deciding the final combination of goods and services to be produced i.e. it involves a selection of goods and services and the quantity of each, that the economy should produce.
  2. How to Produce - It involves deciding the technique of production i.e. whether selected goods are to be produced with more labor and less capital or with more capital and less labor.
  3. For whom to Produce - It involves deciding the distribution of output among people i.e. it involves the selection of the category of people who will ultimately consume the goods.




Definition: An economy where the means of production are owned by individuals who can freely take their decisions with the motive of profit-maximization is called a capitalist economy.

Features of the Capitalist Economy are:

  • Private ownership of means of production
  • Profit maximization is the primary motive and government is confined to ensuring law and order.


  • Promotes self-interest, profit maximization and acceleration of GDP growth.


  • The collective interest of society is ignored.
  • Production of only high-profit goods.
  • Growth without social justice.


Definition: The economy in which there is the social ownership of means of production and the important decisions are taken by some central authority of the government with a view to maximizing social welfare is called a socialist economy.

Features of a Socialist Economy are:

  • Collective ownership of means of production.
  • Maximized social welfare due to direct participation of the state.


  • Tries to achieve equality in the distribution of income, along with inclusive growth and social justice.


  • Slow GDP growth
  • Profit maximization is replaced by the principle of ‘ Equity and Justice’


Definition: An economy, which has both private and public ownership of means of production, is called a Mixed economy.

Features of a Mixed economy are:

  • Private and government (public) ownership.
  • Profit- maximization is the governing principle in decisions for Private ownership and Social welfare in Government or Public ownership.


  • Combines the best features of both capitalist and socialist economies like GDP growth ensured by Private entrepreneurs and social justice by the government.


  • The government sector is often inflicted with corruption therefore a low level of efficiency.

India adopted a mixed economy.

Some leaders were in favor of a Socialist Economy however in a democratic country like India, complete dilution of private ownership was not possible. The capital economic system did not appeal to our first prime minister, as there would be fewer chances of improvement in the quality of life of people. As a result, the Mixed economy was adopted. (with best features of both socialist and capitalist economy).


Economic Planning 

Definition: Economic planning can be defined as making major economic decisions (what, how and for whom) by the conscious decision of a determinate authority, on the basis of a comprehensive survey of the economy as a whole.

  • A system where a central authority, in this case, the Planning Commission, now NITI Aayog, in India sets a set of targets and mentions programs to be achieved within a specific period of time.
  • For the development of the Indian economy, it was necessary for the government to plan for the economy, known as Economic planning.
  • The purpose of the commission is to carefully assess the human and physical resources of the country and to prepare the plans for the effective use of resources.
  • The planning commission fixed the planning period at 5 years, which began the era of ‘five-year plans’.

Need for Planning:

Owing to the backwardness and stagnation in the economy, it could not be left in the hands of market forces of supply and demand to make way for growth and development. A heavy investment supported by the government was required and therefore Planning in India was needed.

Directive & Comprehensive Planning:

  • Directive Planning: System of planning where planning is used to direct the forces of supply and demand. There is no direct participation of the state in the process of growth; it is solely there for ensuring law and order. This principle is mostly pursued in capitalist economies.
  • Comprehensive Planning:  System in which government participates in the process of growth and development. This planning is mostly pursued in mixed and socialist economies.


  • Long Period Goals- Common to all Five-year plans and studied as Objectives of Planning.
  • Short Period Goals- Plan-Specific and studied as Objectives of Plans.

Long period and short period objectives should not contradict each other and be coordinated.

Long Period Goals/Objectives

  • GDP Growth- An increase in GDP means an increase in the level of output, which further means an increase in the flow of goods and services. A consistent increase in the flow of goods and services in an economy for a long period is called Economic growth; therefore, an increase in GDP is equal to an increase in economic growth. This increase depends upon increasing the resource base of the country and an increase in productivity through innovative technology.
  • Full Employment- it is a situation where people who are willing to work and able to work at the given market wage rate. This leads to ‘inclusive growth’, achieving the motive of growth and social justice together
  • Equitable Distribution or Equity- Economic growth becomes meaningless if only a few people receive its benefits; therefore, it should reach all sections of the society in order to become equitable.
  • Modernization - Means updating and adopting modern technology. For example the Green Revolution, and IT Revolution. Modernization in terms of social outlook as well for example women empowerment.
  • Self-Sufficiency- This means dependence on domestically produced goods, primarily food grains so the country is not exposed to any political pressure from the rest of the world.

Short Period Goals/Objectives

  • This depends on the current needs of the economy.
  • Initially started with First plan focusing on higher agricultural production,
  • The second plan focused on the industry, Third self-sufficiency and fuller utilization of labor and so on.
  • They have to complement the long period goals and objectives, be coordinated with them and not contradict them.


The five-year plans have been concerned with the removal of the economic backwardness of the country and making India a developed economy. The five-year plans have also been taken care of to ensure that the weaker sections of the population benefit from the economic progress of the country.

  • The first five-year plan was launched for a period starting from 1" April 1951 and ending on 31 March 1956.
  • Each five-year plan listed the basic Goals of India's development, which served as the guiding principles of Indian planning.

These basic goals are:

  • Growth
  • Modernization
  • Self-reliance
  • Equity


  • Growth refers to an increase in the country's capacity to produce the output of goods and services within the country.
  • Growth implies:
  • Either a larger stock of productive capital.
  • A larger size of supporting services like transport and banking
  • An increase in the efficiency of productive capital and services.
  • A good indicator of economic growth, in the language of economics, is a steady increase in the Gross Domestic Product (GDP).
  • GDP refers to the market value of all the final goods and services produced in the country during a period of one year. An increase in GDP or availability of goods and services enables people to enjoy a more rich and varied life.
  • In some countries, growth in agriculture contributes more to GDP growth, while in some countries; growth in the service sector contributes more to GDP growth.
  • The contribution of each sector makes up the structural composition of the economy. 


Modernization includes:

  • Adoption of New Technology: Modernisation aims to increase the production of goods and services through the use of new technology. For example, a farmer can increase the output on the farm by using new seed varieties instead of using the old ones. Similarly, a factory can increase output by using a new type of machine.
  • Change in social outlook: Modernisation also requires a change in social outlooks, such as gender empowerment or providing equal rights to women. A society is prosperous if it makes use of the talents of women in the workplace.


  • Self-reliance under Indian conditions means overcoming the need for external assistance. In other words, it means to have developed through domestic resources.
  • To promote economic mote economic growth and modernization, the five-year plans stressed the users own resources, in order to reduce our dependence on foreign countries.
  • The policy of self-reliance was considered a necessity because of two reasons.
    • To reduce foreign dependence: As India was recently freed from foreign control, it is necessary to reduce our dependence on foreign countries, especially for food. Therefore, stress should be given to attain self-reliance.
    • To avoid Foreign Interference: It was feared that dependence on imported food supplies, foreign technology and foreign capital might increase foreign interference in the policies of our country.


  • It is important to ensure that benefits of economic prosperity are availed by all sections (rich as well as poor) of the economy.
  • In addition to the objectives of growth, modernization and self-reliance, equity is also important
  • According to Equity, every Indian should be able to meet his or her basic needs (food, house education and health care) and inequality in the distribution of wealth should be reduced.
  • In short, Equity aims to raise the standard of living of all people and promote social justice.



  • At the time of independence, the land tenure system was characterized by intermediaries (like zamindars) who merely collected rent (Lagaan) from the actual tillers of the soil.
  • The low productivity of the agricultural sector forced India to import food from the United States of America.
  • The agricultural sector accounted for the largest share of the workforce with approximately 70 75 percent. So, agricultural development was focused right from the First Five Year Plan.

Features (or Problems) of Agriculture

  • Low Productivity: Indian agricultural sector was known for its low productivity. Lack of knowledge was responsible for stagnation in this sector.
  • Disguised Unemployment: It refers to a state in which more people are engaged in work than are really needed. There were very high incidents of disguised unemployment in the sector between 1950 and 1990.
  • 3. High dependency on Rainfall: Due to poor agricultural techniques, farmers depended largely on rainfall. There was minimum growth in this sector in the year that receives the least rainfall.
  • Subsistence Farming: It is the practice of growing crops only for one's own use without any surplus for trade. There were also very high incidents of subsistence farming.
  • Outdated Technology: There were many obsolete technologies and harvesting machines. Harvesting was generally done manually and was very tedious.
  • Conflicts between Tenants and Landlords: Farmers were often a part of a critical contract that bound them to their landlords. Landlords used to extract a huge amount of interest from farmers and deprived them of their necessities.

Policies for Growth of Agriculture

The measures undertaken to promote the growth in the agricultural sector can be broadly categorized as 'Land Reforms' and 'Green Revolution

  1. Land Reforms

Definition: Land Reforms primarily refer to changes in the ownership of landholdings, Land reform measures have been introduced by various underdeveloped and developing countries, for attaining a rational land distribution pattern and viable farming structure.

  • There was a great need for land reforms in a country like India, where the majority of its population still depends on agriculture.
  • Land reforms were needed to achieve the objective of Equity in agriculture.

Abolition of Intermediaries

  • The idea behind this step was that ownership of land would give incentives to the actual tillers to make improvements (provided sufficient capital was made available to them).
  • The abolition of intermediaries brought 200 lakh tenants into direct contact with the government.
  • The ownership rights granted to tenants gave them the incentive to increase output and this contributed to growth in agriculture.

However, the goal of equity was not fully served by abolition of intermediaries because of following reasons:

  • In some areas, the former zamindars continued to own large areas of land by making use of some loopholes in the legislation.
  • In some cases, tenants were evicted and zamindars claimed to be self-cultivators:
  • Even after getting the ownership of land, the poorest of the agricultural laborers did not benefit from land reforms.

Land Ceiling

Definition: Land Ceiling refers to fixing the specified limit of land, which could be owned by an individual.

  • Beyond the specified limit, all lands belonging to a particular person would be taken over by the Government and will be allotted to the landless cultivators and small farmers.
  • The purpose of land ceiling was to reduce the concentration of land ownership in a few hands
  • Land ceiling helped to promote equity in the agricultural sector.
  • However, the land ceiling legislation was challenged by the big landlords. They delayed its implementation. This delay time was used by them to get the land registered in the name of close relatives, thereby escaping from the legislation.


Land reforms were successful in Kerala and West Bengal because the governments of these states were committed to the policy of land reforms. Unfortunately, other states did not have the same level of commitment and vast inequality in landholdings continued.

  1. New Agricultural Strategy: Green Revolution
  • The new agricultural strategy was adopted in India during the Third Plan, i.e., during 1960s. The traditional agricultural practices followed in India were gradually being replaced by modern technology and agricultural practices. The aim of this strategy was to raise agricultural production and productivity in selected regions of the country through the introduction of modern inputs like fertilizers, credit, marketing facilities, etc.

Green Revolution

  • India's agriculture vitally depends on the monsoon and in case of a shortage of monsoon, the farmers had to face a lot of Green Revolution troubles.
  • Moreover, the productivity in the agricultural sector was very low due to the use of outdated technology and absence of required infrastructure.
  • As a result of intensive and continued efforts of many agricultural scientists, this stagnation in agriculture was permanently broken by the 'Green Revolution'

Green Revolution refers to the large increase in production of food grains due to the use of high-yielding variety (HYV) seeds. Green Revolution is a spectacular advancement in the field of agriculture.

  • HYV Seeds: Main Reason for Agricultural Revolution
  • These seeds can be used in those places where there are adequate facilities for drainage and water supply.
  • As compared to other ordinary seeds, these seeds need heavy doses of chemical fertilizers (4 to 10 times more fertilizers) to get the largest possible production.
  • So, to derive benefit from HYV seeds, Indian farmers need seeds, the yield multiplied to have:
    • Reliable irrigation facilities
    • Financial resources (to purchase fertilizers and pesticides).

Important Effects of Green Revolution

The spread of Green Revolution technology-enabled India to achieve self-sufficiency in food grains. India was no longer at the mercy of America, or any other nation, regarding the food requirements.

  • Attaining Marketable Surplus: Green Revolution resulted in 'Marketable Surplus’. Marketable surplus refers to that part of agricultural produce that is sold in the market to farmers after meeting their own consumption requirement
  • Growth in agricultural output makes a difference to the economy only when proportion of this increase is sold in the market.
    • Fortunately, a good proportion of rice and wheat produced during the green revolution period was sold by the farmers in the market.
    • Buffer Stock of Food Grains: The green revolution enabled the government to procure a sufficient amount of food grains to build a stock, which could be used in times of shortage.
  • Benefit to low-income groups: As a large proportion of food grains was sold by the farm in the market, their prices declined relative to other items of consumption. The low-income groups, who spend a large percentage of their income on food, benefited from this decline in relative prices.

Risks involved Under Green Revolution

  • Risk of Pest Attack: The HYV crops were more prone to attack by pests. Therefore, there was a risk that small farmers who adopted this technology could lose everything in a pest attack. However, this risk was considerably reduced by the services rendered by research institutes established by the government.
  • Risk of Increase in Income Inequalities: There was a risk HYV Crops were prone to that costly inputs (HYV seeds, fertilizers, etc.) required attack by Posts under green revolution will increase the disparities between small and big farmers since only the big farmers could afford the required inputs.

Favorable steps taken by the government led to the eradication of these fears:

  • True access to the needed inputs. The government provided loans at a low-interest rate to small farmers so that they could also have access to the needed inputs.
  • Since the small farmers could obtain the required inputs, the output on small farms equaled the output on large farms in the course of time. As a result, the green revolution benefited small as well as rich farmers.

Subsidies to Agriculture

Definition: Subsidy, in the context of agriculture, means that the farmers get inputs at prices lower than the market prices.

 Economists in Favour of Subsidies

  • The government should continue with agricultural subsidies as farming in India continues to be a risky business.
  • Majority of the farmers are very poor and they will not be able to afford the required inputs without the subsidies.
  • Eliminating subsidies will increase the income inequality between rich and poor farmers and will violate the ultimate goal of equity.

Economists against the Subsidies

  • According to some economists, subsidies were granted by the Government to provide an incentive for adoption of the new HYV technology. Therefore, after the wide acceptance of technology, subsidies should be phased out as their purpose has been served.
  • Subsidies do not benefit the poor and small farmers (target group) as benefits of a substantial amount of subsidy go to the fertilizer industry and prosperous farmers.

Critical Appraisal of Agricultural Development (1950-1990)

  • The Land Reform measures and Green Revolution' were the greatest achievements of the Indian Government, in enhancing agricultural production and productivity.
  • Between 1950 and 1990, there had been a substantial increase in agricultural productivity. As a result of Green revolution, India became self-sufficient in food production. Land Reforms resulted in abolition of zamindari system.
  • The Proportion of GDP between 1950 and 1990 contributed by agriculture declined significantly, but not the population depending on it.
  • Around 65% of the country's population continued to be employed in agriculture, even till 1990. Agricultural output could have been grown with much less people working in the sector, but industrial and service sectors were unable to absorb the extra people involved in agriculture.


 Role of Public Sector in Industrial Development

There was a need for a leading role in the Public Sector due to the following reasons:

  • Shortage of Capital in Private Sector: Private entrepreneurs did not have the capital to undertake investment in industrial ventures, required for the development of the Indian economy. At the time of independence, Tatas and Birlas were the only well-known Private entrepreneurs. As a result, the Government had to make an industrial investment through Public Sector Undertakings (PSUs).
  • Lack of Incentive for the Private Sector: The Indian market was not big enough to encourage private industrialists to undertake major projects, even if they had the capital to do so. Due to the limited size of the market, there was a low level of demand for industrial goods.
  • Objective of Social Welfare: The objective of equity and social welfare of the Government could be achieved only through direct participation of the state in the process of industrialization As a result; the state had complete control over those industries that were vital for the economy.

Industrial Policy Resolution 1956

Industrial Policy is a comprehensive package of policy measures, which covers various issues, and connects with different industrial enterprises of the country.

  • Industrial Policy is essential for devising various procedures, principles, rules and regulations for controlling the industrial enterprise of the country.
  • After the Industrial Policy, of 1948, the Indian economy had to face a series of economic and political changes, which necessitated the need for a fresh industrial policy for the country. So, on 30 April 1956, a second Industrial Policy Resolution was adopted in India.

Classification of Industries

According to Industrial Policy Resolution 1956, the industries were reclassified into three categories, viz., Schedule A, Schedule B and Schedule C:

  • Schedule A: This first category comprised industries that would be exclusively owned by the state. In this schedule, 17 industries were included, like arms and ammunitions; atomic energy; heavy and core industries; aircraft, oil; railways, shipping, etc.
  • Schedule B: In this schedule, 12 industries were placed, which would be progressively state-owned. The state would take the initiative of setting up industries and the private sector will supplement the efforts of the state. This schedule includes industries like aluminum, other mining industries, machine tools, fertilizers, etc.
  • Schedule C: This schedule consisted of the remaining industries which were to be in the private sector. The state would facilitate and encourage the development of all these industries These industries were controlled by the state through a system of licenses, enforced under the Industries (Development and Regulation) Act, 1951.

Industrial Licensing

Definition: An industrial license is written permission from the government, to an industrial unit to manufacture goods. The government can issue licenses for:

  • Setting up of new industries;
  • Expansion of existing ones; and
  • Diversification of products.
  • According to Industrial Licensing, No new industry was allowed unless a license is obtained from the government.
  • It was easier to obtain a license if the industrial unit was established in an economically backward area. In addition, such units were given certain concessions, such as tax benefits and electricity at a lower tariff. The purpose of this policy was to promote regional quality.
  • License was needed even if an existing industry wants to expand output or diversify production. License to expand production was given only if the government was convinced that there is a need for a larger quantity of goods in the economy.

Small-Scale Industry (SSI)

Definition: A small-scale industry is defined with reference to the maximum investment allowed on the assets of a unit. This limit has changed from rupees five lakh in 1950 to the present limit of rupees one crore.

  • Employment Generation: Small-scale industries are more labor-intensive, i.e., they use more labor than large-scale industries and, therefore, generate more employment. After agriculture, small-scale industries provide employment to the largest number of people in India.
  • Need for Protection from Big Firms: Small-scale industries cannot compete with big industrial firms. They can flourish only when they are protected from large firms. Therefore, the government for their growth took various steps.
    • Reservation of Products: Government reserved production of a number of products for the small-scale industry. The criterion for reserving the products depended on the ability of these units to manufacture the goods.
    • Various Concessions: Small-scale industries were also given concessions, such as lower excise duty and bank loans at lower interest rates.


  1. The proportion of GDP contributed by the industrial sector increased in the period from 11.8% in 1950-51 to 24.6% in 1990-91. This rise in the industry's share of GDP is an important indicator of development. The 6% annual growth rate of the industrial sector during the period is also admirable.
  2. Indian industry was no longer restricted to cotton textiles and jute. It also included engineering goods and a wide range of consumer goods. The industrial sector became well-diversified by 1990, largely due to the public sector.
  3. The promotion of small-scale industries gave opportunities to people with small capital to get into business. New investment opportunities helped in generating more employment It promoted growth with equity.
  4. Protection from foreign competition (through Import Substitution) enabled the development of indigenous industries in the areas of electronics and automobile sectors, which otherwise could not have developed. However, this protection had two drawbacks:
    • Inward Looking Trade Strategy: Our policies were 'inward oriented' and so we failed to develop a strong export sector.
    • Lack of Competition: Due to restrictions on imports, some domestic producers made sincere efforts to improve the quality of their goods and it forced the Indian consumer to purchase, whatever they produce. The domestic industry failed to achieve international standards of product quality.
  5. Licensing Policy helped the government to monitor and control the industrial production However, excessive regulation by the government created two difficulties:
    • Misuse: It was misused by industrial houses. Some big industrialists would get a license, not for starting a new firm, but to prevent competitors from starting new firms.
    • Time-Consuming: The cumbersome and complex procedure for obtaining a license was very time-consuming. Industrialists in trying to obtain a license spent a lot of time.
  6. Public sector made a remarkable contribution by creating a strong industrial base, developing infrastructure and promoting development of backward areas.
    • However, the public sector continued to monopolize (that too ineffectively) in certain non-essential areas, which could be well handled by the private sector. For Examples, telecommunication, hotel industry, production of goods (like Modern Bread).
    • As a result, precious funds of public sector were channelized into areas, where private sector could have been easily engaged.
    •  Many public sector firms also incurred huge losses but continued to function because of difficulty in closing a government undertaking.
    • Many scholars criticized the monopoly of public sector in such non-essential areas. According to them, the role of public sector should be limited to strategic other non-essential areas. Areas (like national defense) and private sector should be given the opportunity for other non-essential areas. 



Foreign trade in India includes all imports and exports to and from India. In 1950, India's share in the total world trade was 1.78%

Trade Policy: Import Substitution

  • In order to be self-reliant in vital sectors, India has followed the strategy of replacing many imports by domestic production. .
  • In the first seven plans, trade was characterised by an inward-looking Trade Strategy This strategy is called 'Import Substitution'.
  • Import Substitution refers to a policy of replacement or substitution of imports by domestic production. . For example, instead of importing vehicles made in a foreign country, domestic industries would be encouraged to produce them in India itself.
  • The basic aim of the policy was to protect domestic industries from foreign competition.
  • The policy of Import Substitution can serve 2 definite objectives: (1) Savings of precious foreign exchanges and (ii) Achieving self-reliance.

Protection from Imports through Tariffs' and 'Quotas

1. Tariffs: Tariffs refer to taxes levied on imported goods. The basic aim of imposing a heavy duty on imported goods was to make them more expensive and discourage their use.

 2. Quotas: Quotas refer to fixing the maximum limit on the imports of a commodity by a domestic producer. The tariff on imported goods and fixation of quotas helped in restricting the level of imports. As a result, the domestic firms could expand without fear of competition from the foreign market.

Reason for Import Substitution

1. The policy of protection (in the form of Import Substitution) is based on the notion that industries of developing countries, like India, are not in a position to compete against the goods produced by more developed economies. With protection, they will be able to compete in the due course of time.

2. Restriction on imports was necessary, as there was a risk of the drain of foreign exchange reserves on the import of luxury goods.



The need for reform of economic policy was widely felt in the context of changing global economic scenario. So, the New Economic Policy (NEP) was initiated in 1991, to make the economy more efficient. 


Economic Reforms

Meaning: Economic reforms refer to the fundamental changes that were launched in 1991 with the plan of liberalizing the economy and quickening its rate of economic growth. The Narasimha Rao Government, 1991, started the economic reforms to rebuild internal and external faith in the Indian economy.

In other words, ‘“economic reforms’” normally indicate deregulation or at times, a decrease in the size of government, to eliminate deformities caused by the management or the presence of administration, rather than current or raised regulations or government plans to lessen the perversions created by market failure.

Reasons for Economic Reforms

  1. Poor performance of the public sector
  • Public sector was given an important role in development policies from 1951–to 1990.
  • However, the performance of the majority of public enterprises was disappointing.
  • They were incurring huge losses because of inefficient management.
  1. Adverse BoP or imports exceed exports
  • Imports grew at a very high rate without matching the growth of exports.
  • Government could not restrict imports even after imposing heavy tariffs and fixing quotas.
  • On the other hand, exports were very less due to the low quality and high prices of our goods as compared to that of foreign goods.
  1. Fall in foreign exchange reserves
  • Foreign exchange (foreign currencies) reserves, which the government generally maintains to import petrol and other important items, dropped to the levels that were not sufficient for even a fortnight.
  • The government was not able to repay its borrowings from abroad.
  1. Huge debts to government
  • Government expenditure on various developmental works was more than its revenue from taxation.
  • As a result, the government borrowed money from banks, public and international financial institutions like the IMF, etc.
  1. Inflationary pressure
  • There was a consistent rise in the general price level of essential goods in the economy.
  • To control inflation, a new set of policies were required.
  1. Inefficient Management
  • The government was not able to generate sufficient revenue from internal sources such as taxation, running of public sector enterprises, etc.
  • Government expenditure began to exceed its revenue by such large margins that it became unsustainable.
  • At times, the foreign exchange borrowed from other countries and international financial institutions was spent on meeting consumption needs.


Crisis of 1991

  • India faced the Balance of Payment crisis in 1991 due to a huge macroeconomic imbalance. Balance of Payment (BoP) Crisis is also called a currency crisis. It occurs when a nation is unable to pay for essential imports or service its external debt payments.
  • The effects of the Balance of Payment Crisis are mentioned below.
  • Imports were restricted.
  • The price of fuels was raised.
  • Bank rates were raised.
  • Government had to cut its spending.
  • India had to secure an emergency loan of $ 2.2 billion from the International Monetary Fund by pledging 67 tonnes of Gold as collateral security.
  • In May 1991, India sent 20 tonnes of Gold to the Union Bank of Switzerland, Zurich and in July, 47 tonnes of Gold was given to Bank of England to raise a total of $ 600 million.
  • India was forced to get financial help from IMF and World Bank.
  • To manage the economic crisis of 1991, Indian Government approached the International Bank for Reconstruction and Development (IBRD), popularly known as World Bank and the International Monetary Fund (IMF) and received $ 7 billion as a loan.
  • For availing of the loan, these international agencies expected India to liberalize and open up the economy by:
  • Removing restrictions on the private sector;
  • Reducing the role of the government in many areas, and
  • Removing trade restrictions.

India agreed to the conditions of World Bank and IMF and announced the New Economic Policy.


Major Policies of 1991 Reforms


The New Economic Policy (NEP) was announced in July 1991. It consisted of a wide range of economic reforms. The main aim of the policy was to create a more competitive environment in the economy and remove the barriers to entry and growth of firms. The New Economic Policy can be broadly classified into two kinds of measures:

1. Stabilisation Measures: They refer to short-term measures which aim at:

  • Correcting weaknesses of the balance of payments by maintaining sufficient foreign exchange reserves; and
  • Controlling inflation by keeping the rising prices under control.

2. Structural Reform Measures: They refer to long-term measures, which aim at:

  • Improving the efficiency of the economy; and
  • Increasing international competitiveness by removing the rigidities in various segments of the Indian economy.

Main Policies of New Economic Policy

The government initiated a variety of policies, which fall under three heads:

  • Liberalization
  • Privatization
  • Globalization

Liberalization, Privatisation and Globalisation or 'LPG' are the supporting pillars, on which the structure of the new economic policy of our Government has been erected and implemented since 1991.



Definition: Liberalization means the removal of entry and growth restrictions on the private sector.

  • Liberalization involves deregulation and reduction of government controls and greater autonomy (freedom) of private investment, to make the economy more competitive.
  • Under this process, business is given free hand and is allowed to run on commercial lines.
  • The purpose of liberalization was:
    • To unlock the economic potential of the country by encouraging private sector and multinational corporations to invest and expand.
    • To introduce much more competition into the economy and create incentives for increasing efficiency of operations.
  • The economic reforms taken by the Government under liberalization include the following
    • Industrial Sector Reforms
    • Financial Sector Reforms
    • Tax Reforms
    • Foreign Exchange Reforms
    • Trade and Investment Policy Reforms

Industrial Sector Reforms

  1. Reduction in Industrial Licensing: The Monopolies new policy abolished industrial licensing and was Restrictive for all the projects, except for a shortlist of Trade Practices (MRTP) Act industries (like liquor, defence equipment’s, industrial explosives, etc.).
  • No licences were needed (i) To set up new units; or (ii) Expand or diversify the existing line of manufacture.
  • However, license is required for certain industries, related to security and a Decrease in strategic considerations.
  1. Decrease in role of Public Sector: One of Sector the striking features was the substantive reduction in the role of the public sector in the future industrial development of the country. The number of industries, exclusively reserved for the public sector, was reduced from 17 to the following 3 industries: (1) Defence equipment; (ii) Atomic energy generation; and (iii) Railway Transport
  2. De-reservation under small-scale industries: Many goods produced by small-scale industries have now been de-reserved.
  • The investment ceiling on plant and machinery for small undertakings was enhanced to rupees one crore.
  • In many industries, the market was allowed to determine the prices through forces of the market (and not by directive policy of the government).
  1. Monopolies and Restrictive Trade Practices (MRTP) Act: With the introduction of liberalization and expansion schemes, the requirement for large companies, to seek prior approval for expansion, establishment of new undertakings, mergers, amalgamations, etc. were eliminated.

Financial Sector Reforms

  • Change in Role of RBI: The role of RBI was reduced from regulator to facilitator of financial sector. As a result, financial sector was allowed to take decisions on many matters, without consulting the RBI.
  • Origin of Private Banks: The reform policies led to the establishment of private sector banks, Indian as well as foreign. For example, Indian banks like ICICI and foreign banks like HSBC increased the competition and benefitted the consumers through lower interest rates and better services.
  • Increase in limit of foreign investment: The limit of foreign investment in banks was raised to around 51%. Foreign Institutional Investors (FII) such as merchant bankers, mutual funds and pension funds were now allowed to invest in Indian financial markets.
  • Ease in Expansion Process: Banks were given freedom to set up new branches after fulfillment of certain conditions) without the approval of the RBI.

Tax reforms

Definition: Tax reforms refer to reforms in government's taxation and public expenditure policies, which are collectively known as its 'Fiscal Policy'.

Taxes are of two types:

• Direct Taxes consist of taxes on incomes of individuals as well as profits of business enterprises. For Example, Income tax (taxes on individual incomes) and Corporate tax (taxes on profits of companies).

 • Indirect Taxes refer to those taxes, which affect the income and property of persons through their consumption expenditure Indirect taxes are generally imposed on goods and services. For example, Goods and Services Tax (GST).

The major Tax Reforms made are:

1. Reduction in Taxes: Since 1991, there has been a continuous reduction in income and corporate tax as high tax rates were an important reason for tax evasion. It is now widely accepted that moderate rates of income tax encourage savings and voluntary disclosure of income

 2. Reforms in Indirect Taxes. Considerable reforms have been made in indirect taxes to facilitate the establishment of the common national market for goods and commodities.

 3. Simplification of Process: In order to encourage better compliance on the part of taxpayers many procedures have been simplified.

Foreign Exchange Reforms

  1. Devaluation of Rupee: Devaluation refers to a reduction in the value of the domestic currency by the government. To overcome the Balance of Payments crisis, the rupee was devalued again by foreign currencies. This led to an increase in the inflow of foreign exchange.
  2. Market Determination of Exchange Rate: The Government allowed rupee value to be free from its control. As a result, market forces of demand and supply determine the exchange value of the Indian rupee in terms of foreign currency.

Trade and Investment Policy Reforms

The reforms in the trade and investment policy were initiated:

  • To increase the international competitiveness of industrial production
  • To promote foreign investments and technology into the economy.
  • To promote efficiency of local industries and adoption of modern technologies.

The important trade and investment policy reforms include:

  1. Removal of Quantitative restrictions on Imports and Exports: Under the New Economic Policy, quantitative restrictions on imports and exports were greatly reduced. For example, quantitative restrictions on imports of manufactured consumer goods and agricultural products were fully removed from April 2001.
  2. Removal of Export Duties: Export duties were removed to increase the competitive position of Indian goods in the international markets.
  3. Reduction in Import Duties: Import duties were reduced to improve the position of domestic goods in the foreign market.
  4. Relaxation in Import Licensing System: Import licensing was abolished, except in the case of hazardous and environmentally sensitive industries. This encouraged domestic industries to import raw materials at better prices, which raised their efficiency and made them more competitive.



Definition: Privatisation means the transfer of ownership, management and control of public sector enterprises to the entrepreneurs in the private sector.

Privatization implies the greater role of the private sector in the economic activities of the country. Over the years, the Indian Government has diluted its stake in several public enterprises, including IPCL, IBP, Maruti Udyog, etc.

Privatization can be done in two ways:

  • Transfer of ownership and management of public sector companies from the government to the Private Sector;
  • Privatization of the public sector undertakings (PSU) by selling off part of the equity of PSUs to the public. This process is known as disinvestment.

The purpose of privatization was mainly to improve financial discipline and facilitate modernization. It was also believed that private capital and managerial capabilities will help in improving the performance of the PSU’s.

Disinvestment refers to the immediate or direct sale or liquidation of assets of publicly owned enterprises to the private sector. The government adopts the disinvestment process primarily to minimize the financial burden, or to raise money for specific needs. Although in some cases, disinvestment is done to privatize the assets, not all disinvestment involves complete privatization. Following are a few advantages of the disinvestment process: 

  • It enables the company or government to minimize the fiscal burden on the depository.
  • It enhances the long-term growth of the company.
  • It encourages private ownership of the company.
  • The process of disinvestment and promoting competition in the market.


Navaratnas and Mini Ratnas

The government also made attempts to improve the efficiency of public sector undertakings by giving them autonomy in taking managerial decisions.

  • For instance, some PSUs have been granted special status as navaratnas and mini ratnas.
  • In order to infuse professionalism and enable PSU's to compete more effectively in the liberalised global environment; government started granting 'Navaratnas' status to PSUs.
  • They were given greater managerial and operational autonomy in taking various decisions, to run the company efficiently and to increase their profits.
  • The granting of navaratna status resulted in better performance of these companies.
  • Apart from this, other profit-making enterprises were granted greater operational, financial and managerial autonomy and they were referred as ‘Mini Ratnas'. As on 13th September, 2017, there are 8 Maharatnas, 16 Navratnas and 74 Miniratnas.

A few examples of public enterprises with their status are as follows:

  1. Maharatnas – (a) Indian Oil Corporation Limited, and (b) Steel Authority of India Limited,
  2. Navratnas – (a) Hindustan Aeronautics Limited, (b) Mahanagar Telephone Nigam Limited; and
  3. Miniratnas – (a) Bharat Sanchar Nigam Limited; (b) Airport Authority of India and (c) Indian Railway Catering and Tourism Corporation Limited.

Many of these profitable PSEs were originally formed during the 1950s and 1960s when self-reliance was an important element of public policy.



Definition: Globalisation means integrating the national economy with the world economy through removal of barriers ot international trade and capital movements.

  • Globalization is generally understood to mean the integration of the economy of the co with the world economy.
  • However, it is a complex phenomenon. It is an outcome of the set of various policies that aim to transform the world towards greater interdependence and integration.
  • It involves creation of networks and activities transcending economic and social geographical boundaries. In short, globalization aims to create a borderless world.

Changes made by the Globalisation of the Indian Economy

  • The New Economic Policy prepared a specified list of high technology and high investment priority industries, in which automatic permission will be available for foreign direct investment up to 51 per cent of foreign equity.
  • In respect of foreign technology agreements, automatic permission is provided in high-priority industries up to a sum of rupees 1 crore. No permission is now required for hiring foreign technicians or for testing indigenously developed technology abroad.
  • In order to make international adjustments to the Indian currency, the rupee was devalued in July 1991 by nearly 20 percent. It stimulated exports, discouraged imports and raised the influx of foreign capital.
  • To integrate the Indian economy with the world, the Union Budget 1992-93 made the Indian rupee partially convertible and then the rupee was made fully convertible in the 1993-94 budget.
  • A new five-year export-import policy (1992-97) was announced by the Government to establish the framework for globalization of India's foreign trade. The policy removed all restrictions and controls on the external trade and allowed market forces to play a greater role in respect of exports and imports.
  • In order to bring the Indian economy within the ambit of global competition, the government has modified the customs duty to a considerable extent. Accordingly, the peak rate of customs duty has been reduced from 250 per cent to 10 per cent in 2007-2008 budget.

Positive and Negative Traits of Globalisation

In Favour of Globalisation:

  • Greater access to global markets;
  • Advanced technology:
  • Better future prospects for large industries of developing countries to become important players in the international arena.

Against Globalisation

  • Benefits of globalization accrue more to developed countries, as they are able to expand their markets in other countries.
  • Globalization compromises the welfare and identity of people belonging to poor countries.
  • Market-driven globalization increases the economic disparities among nations and people.


Definition: Outsourcing refers to contracting out some of its activities to a third party, which were earlier performed by the organisation. For example, many companies have started outsourcing security services to outside agencies on a contractual basis.

  • Outsourcing is one of the important outcomes of the globalization process. 
  • It has intensified in recent times because of the growth of fast modes of communication, particularly the growth of Information Technology (IT).
  • With the help of modern telecommunication links, the text, voice and visual data in respect of these services is digitized and transmitted in real-time over continents and national boundaries. IT Industry is seen as a major
  • India has become a favorite destination of outsourcing for most contributor to India's exports of the MNC's because of love age rates and availability of skilled labor. For example, Indian Business Process Outsourcing (BPO) companies are already gaining prominence and earning precious foreign exchange.
  • Some of the services outsourced to India include:
    • Voice-based business processes (known as BPO or Call Centres);
    • Record keeping: The age of outsourcing
    • Accountancy; has generated employment
    • Banking services; opportunities through Call Centres
    • Music Recording;
    • Film editing
    • Book transcription;
    • Clinical advice, etc.

World Trade Organisation (WTO)

  • Prior to WTO, General Agreement on Trade and Tariff (GATT) was established as global trade organization, in 1948 with 20 countries.
  • GATT was set up to administer all multilateral trade agreements by providing equal opportunities to all countries in the international market. WTO was founded in 1995 as the successor organization to the GATT.
  • The WTO agreements cover trade in goods as well as services, to facilitate international trade.
  • At present, there are 164 member countries of WTO, The World Trade Organization (WTO) intends to supervise, all the members are required to abide by laws, and policies to liberalize international trade framed under WTO rules.
  • As an important member of WTO, India has been at the forefront of framing fair global rules, and regulations and advocating the interests of the developing world.
  • India has kept its commitments made to the WTO. India has taken reasonable steps to liberalize trade by removing quantitative restrictions on imports and reducing tariff rates
  • Some Major Functions of WTO:
    • To facilitate international trade (both bilateral and multilateral trade) through the removal of the tariff as well as non-tariff barriers;
    • To establish a rule-based trading regime, in which nations cannot place arbitrary restrictions on trade;
    • To enlarge production and trade of services;
    • To ensure optimum utilization of world resources; and
    • To protect the environment.

Important Terms

  • Bilateral Trade: Trade between two countries is known as Bilateral Trade.
  • Multi-lateral Trade: Trade between more than two countries is known as Multi-lateral Trade.
  • Tariff Barriers: The barriers which are imposed on imports to make them relatively costly and to protect domestic production, are known as Tariff Barriers.
  • Non-Tariff Barriers: The barriers, which are imposed on the number of imports and exports, are known as Non-Tariff Barriers.



Arguments in Favour of Economic Reforms:

  • Increase in rate of Economic Growth: The growth in GDP was 5.6% during 1980-91. During 2018-19, growth in GDP is estimated at 7.2% as compared to growth rate of 6.7% in 2017-18.
    • During the reform period, the growth of agriculture has declined and industrial sector reported fluctuation, whereas, growth of service sector has gone up. This indicates that the growth is mainly driven by the growth in the service sector.
    • Since 2012-to 15, there has been a setback in the growth rates of different sectors. Agriculture recorded a high growth rate during 2013–14 but witnessed a negative growth rate in the subsequent year. The service sector witnessed the highest ever growth rate of 10.3% in 2014-15. The industrial sector witnessed a steep decline during 2012–13 but began to show growth thereafter.
  • The inflow of Foreign Investment: The opening up of the economy has led to the rapid increase in foreign direct investment (FDI). The foreign investment (FDI and foreign institutional investment) increased from about US $ 100 million in 1990-91 to US $ 73.5 billion in 2014-15. With the launch of the 'Make in India initiative in September 2014, Foreign Direct Investment (FDI) Policy was further liberalized. Due to this reason, FDI inflow in India increased by 48%.
  • Rise in Foreign Exchange Reserves: There has been an increase in the foreign exchange reserves from about US $ 6 billion in 1990-91 to about US $ 321 billion in 2014-15. India is one of the largest foreign exchange reserve holders in the world.
  • Rise in Exports: During the reform period, India experienced a considerable increase in exports of auto parts, engineering goods, IT software and textiles.
  • Control on Inflation: Increase in production, tax reforms and other reforms helped in controlling the inflation. The annual rate of inflation reduced from the peak level of 17% in 1991 to around 5.48% in 2015-16.
  • Increase in the role of the Private sector: Abolition of licensing system and removal of restrictions on the entry of the private sector, in areas earlier reserved for the public sector, have enlarged the area of operation of the private sector.

Criticism of Economic Reforms

  • Growing Unemployment: Though the GDP growth rate has increased in the reform period, such growth failed to generate sufficient employment opportunities in the country.
  • Neglect of Agriculture: The new economic policy has neglected the agricultural sector compared to the industry, trade and services sectors.
    • Reduction of public investment: Public investment in agriculture sector, especially: infrastructure, which includes irrigation, power, roads, market linkages and research and extension (which played a crucial role in the Green Revolution), has been reduced in the reform period.
    • Removal of subsidy: Removal of fertilizer subsidy increased the cost of production which adversely affected the small and marginal farmers.
    • Liberalization and reduction in import duties: This sector has been experiencing a number of policy changes such as (a) Reduction in import duties on agricultural products (b) Removal of minimum support price, and (c) Lifting of quantitative restrictions on agricultural products. All these policies adversely affected the Indian farmers as they now have to face increased international competition.
    • Shift towards cash crops: Due to Export-oriented policy strategies in agriculture, the production shifted from food grains to cash crops for the export market. It led to a rise in the prices of food grains.
  • Low level of Industrial Growth: Industrial growth recorded a slowdown due to the following reasons:
    • Cheaper Imported Goods: Due to globalization, there was a greater flow of goods and capital from developed countries and as a result, domestic industries were exposed to imported goods. Cheaper imports replaced the demand for domestic goods and domestic manufacturers started facing competition from imports. For example, cheaper Chinese goods pose a big threat to Indian manufacturers.
    • Lack of infrastructure facilities: The infrastructure facilities, including power supply, have remained inadequate due to a lack of investment.
    • Non-Tariff Barriers by Developed countries: All quota restrictions on exports of textiles and clothing have been removed from India. But some developed countries, like the USA, have not removed their quota restrictions on the import of textiles from India.
  • Ineffective Disinvestment Policy: The government has always fixed a target for disinvestment of Public Sector Enterprises (PSES). For instance, in 2014-15, the target was 56,000 crore, whereas, the achievement was about 34,500 crore. However, according to some scholars, the disinvestment policy of government was not successful because:
    • The assets of PSEs were undervalued and sold to the private sector.
    • Moreover, such proceeds from disinvestment were used to compensate shortage of government revenues rather than using it for the development of PSEs and building social infrastructure in the country.
  • Ineffective Tax Policy: The tax reduction in the reform period was done to generate larger revenue and curb tax evasion. But, it did not result in an increase in tax revenue for the government
    • Tariff reduction decreased the scope for raising revenue through customs duties.
    • Tax incentives provided to foreign investors to attract foreign investment further reduced the scope for raising tax revenues.
  • Spread of Consumerism: The new policy has been encouraging a dangerous trend of consumerism by encouraging the production of luxuries and items of superior consumption.
  • Unbalanced Growth: Growth has been concentrated only in some select areas in the services sector, such as telecommunication, information technology, finance, entertainment, travel and hospitality services, real estate and trade, rather than vital sectors, such as agriculture and industry, which provide a livelihood to millions of people in the country.



 On the 8th of November, 2016, the Government of India made an announcement with profound implications for the Indian economy. It was decided to demonetize high-value currency notes of denominations of 3 500 and 1,000 with immediate effect, ceasing to be legal tender, except for a few specified purposes.

Definition: Demonetisation is the act of removing a currency unit of its status as a Legal Tender.

The aim of demonetization was to curb corruption, counterfeiting the use of high denomination notes for illegal activities and especially the accumulation of black money generated by income that has not been declared to the tax authorities.

Features of Demonetisation

1. Demonetisation is viewed as a “Tax Administration Measure'. Cash holdings arising from declared income were readily deposited in banks and exchanged for new notes. However, people holding black money had to declare their unaccounted wealth and pay taxes at a penalty rate.

2. Demonetisation is also interpreted as a shift on the part of the government indicating that Tax Evasion will no longer be tolerated or accepted.

3. Demonetisation also led to channelizing savings into the formal financial system. However, much of the cash deposited in the banking system is bound to be withdrawn. However, some of the new deposits schemes offered by the banks will continue to provide base loans, at lower interest rates.

4. Demonetisation also aims to create a less-cash or cash-lite economy, i.e., channeling more savings through the formal financial system and improving tax compliance.

  • However, digital transactions require internet connectivity, as they need a cell phone, customers and Point-of-Sale (PoS) machines for merchants.
  • On the contrary, these disadvantages are counterbalanced by an understanding that helps people into the formal economy, thereby increasing financial savings and reducing tax evasion.

Impact of Demonetisation

1. Money/Interest rates

  • Decline in cash transactions.
  • Bank deposits increased.
  • Increase in financial savings.

2. Private wealth

  • Declined since some high-demonetized notes were not returned and real estate prices fell.

3. Public sector wealth

  • No effect.

 4. Digitisation

  • Digital transactions amongst new users and the use of RuPay Cards and Aadhar Enabled Payment System (AEPS) increased.

 5. Real estate

  • Prices declined.

 6. Tax collection

  • Rise in income tax collection because of increased disclosure.



Digitalization has broadly impacted three sections of society:

  • The poor, who are largely outside the digital economy;
  • The less affluent, who are becoming part of the digital economy who have been covered under Jan Dhan Accounts and RuPay cards; and
  • The affluent, are fully conversant with digital transactions.

Why Digitization is the need of the hour:

  • Corruption today is the biggest problem in developing countries. In fact, corruption is a problem we have faced for ages.
  • It is said, a parallel economy flourishes side by side with our main economy. This economy is run by those who avoid paying taxes to the Government.
  • One of the prominent reasons for the parallel economy is the dependency on cash-based businesses.
  • The culprits running the parallel economy do not feel like having bank accounts and other business books, which simply means no tax payment to Govt.
  • With Digitalisation Initiatives like Taxation being bought online and steps like Demonetisation, the government is trying to weed out corruption from our system which is expected to lead to a positive impact on Indian Economy.



  • GST or "Goods and Services Tax" is a comprehensive Indirect Tax, which has replaced many Indirect Taxes in India.
  • The Goods and Service Tax Act was passed in Parliament on 29 March 2017. The Act came into effect on 1st July 2017.
  • It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST has been identified as one of the most important tax reforms post-independence.
  • Tax apart from being a source of revenue for growth also plays a key role in making the State accountable to its taxpayers. Effective taxation ensures that public funds are effectively employed in fulfilling social objectives for sustainable development.
  • Among other benefits, GST is expected to improve the ease of doing business in tam compliance, reduce the tax burden by eliminating tax-on-tax, improve tax administration mitigate tax evasion, broaden the organized segment of the economy and boost tax revenues
  • GST has replaced 17 indirect taxes (like Value Added Tax, Service Tax, Excise Duty, Sales Tax, etc.) and 23 cesses of the Centre and the States, thereby eliminating the need for filing multiple returns and assessments. It has rationalized the tax treatment of goods and services along the supply chain from producers to consumers.
  • GST is charged at each stage of value addition and the supplier offsets the levy on inputs in the previous stages of value chain through the tax credit mechanism.
  • The last dealer in the supply chain passes on the added GST to the consumer, making GST a destination-based consumption tax.
  • The provision of availing input credit at each stage of value chain helps in avoiding the cascading effect (tax on tax) under GST, which is expected to reduce prices of commodities and benefit the consumers.

Types of Taxes under GST

The types of taxes levied under GST are:

  • Central Goods and Services Tax (CGST): It is the GST levied on the 'Intra-State' supply of goods or services by the Centre.
  • State Goods and Services Tax (SGST): It is the GST levied on the ‘Intra-State' supply of goods or services by the State (including Union Territories with legislature).
  • Integrated Goods and Services Tax (IGST): It is the GST levied on the 'Inter-State supply of goods or services and is collected by the Centre. IGST is equivalent to the sum total of CGST and SGST.

Some Facts about GST

  • Single Tax Structure: GST aims to subsume multiple taxes into one single tax across the country and make goods uniformly priced across India. However, in this process, some goods become costly and some become cheaper.
  • Effect on Prices: With the implementation of GST, luxury goods have become costlier, while items of mass consumption have become cheaper.
  • Consumption-Based Tax: GST is a 'Consumption-Based Tax', i.e. the tax is received by the state in which the goods or services are consumed and not by the state in which such goods are manufactured. For example, if a product is manufactured in Tamil Nadu and travels through the country before it reaches Delhi, where the buyer or consumer pays tax for it. Both the Centre and the State have their share of this tax.
  • Invoice Matching: The Indian GST will have a mechanism for matching invoices. Input Tax Credit of purchased services and goods will be available only when the inward supply details filed in by the buyer match the outward supplies details filed in by the supplier. GST network is a self-regulating mechanism, which not only checks tax frauds and tax evasion but also brings in more and more businesses into the formal economy.
  • Anti-Profiteering Measure: It is one of the key features of the recently implemented GST law. These measures prevent entities from making excessive profits. As per the Anti-Profiteering rules, the benefit of reduced GST tax rates and increased input tax credit should be passed on to the consumer in the form of reduced price. A National Anti-Profiteering Auth (NAA) has been constituted for the efficient administration of these provisions.
  • Registration under GST: A business whose aggregate turnover in a financial year exceeds * 20 lakhs has to compulsorily register under Goods and Services Tax. This limit is at Rs.10 lakhs for North Eastern and hilly states flagged as special category states.

Input Tax Credit under GST

Definition:  Input Tax Credit means reducing the taxes paid on inputs from taxes to be paid on output. When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax.

The supplier at each stage is permitted to avail credit of GST paid on the purchase of goods and services and can set off this credit against the GST payable on the supply of goods and services to be made by him. Thus, the final consumer bears the GST charged by the last supplier in this supply chain, with set-off benefits at all the previous stages. Hence, the tax will be levied on the value-added, which results in avoiding double taxation.

For example, if the tax payable by a manufacturer on the output, i.e. final product is 450 and he has already paid tax of 300 on input, i.e. purchases, then he can claim 'Input Credit of 30 and he needs to deposit only 150 in taxes

Benefits of GST

  • Reduction in overall tax burden.
  • No hidden taxes.
  • Development of a harmonized national market for goods and services.
  • Higher disposable income in hand, education and essential needs.
  • Customers have a wider choice.
  • Increased economic activity.
  • More employment opportunities.

Key Features of GST

  • Applicability of GST: The territorial spread of GST is the whole country, including Jammu and Kashmir.
  • Applicable on Supply of Goods and Services: GST is applicable to the supply of goods or services as against the earlier concept of tax on the manufacture or sale of goods or on the provision of services.
  • Consumption-Based Tax: It is based on the principle of destination-based consumption tax against the earlier principle of origin-based taxation.
  • GST on Imports: Import of goods and services is treated as inter-State supplies and would be subject to IGST in addition to the applicable customs duties.
  • GST Rates: CGST, SGST and IGST are levied at rates mutually agreed upon by the Centre and the States under the aegis of the GST Council. There are four tax slabs namely 5%, 12%, 18% and 28% for all goods or services. Exports and supplies to SEZ are zero-rated.
  • Payment of GST: There are various modes of payment of tax available to the taxpayer, including Internet banking, debit/credit card and National Electronic Funds Transfer (NEFT)/Real Time Gross Settlement (RTGS).

GST Council

Definition: Goods and Services Tax Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax.

  1. Constitution: As per Article 279A of the amended Constitution, the GST Council which will be a joint forum of the Centre and the States, shall consist of the following members:
    • Chairperson: Finance Minister.
    • Vice Chairperson: Chosen amongst the Ministers of State Government.
    • Members: MoS (Finance) and all Ministers of Finance / Taxation of each State.
  2. Quorum: 50% of the total number of Members of the Goods and Services Tax Council shall constitute the quorum at its meetings.
  3. Majority required for taking Decisions: Every decision of the GST Council shall be taken at a meeting, by a majority of not less than 75% of the weighted votes of the members present and voting, in accordance with the following principles, namely:
    • Vote of the Central Government shall have a weightage of one-third of the total votes cast, and
    • Votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.


Poverty Alleviation Programmes in India

The government was not successful in poverty alleviation through the three-dimensional approach because of the following reasons:

  • Although various initiatives were taken by the government to alleviate poverty, hunger and malnourishment, many regions of India lack basic amenities and educational facilities.
  • The number of resources allocated for poverty alleviation programs was not sufficient to cope with the magnitude of poverty in India.
  • Unequal distribution of income, corruption and mismanagement of poverty alleviation programs created obstacles in the process of removing poverty in India.
  • Thus, government programs for employment generation, economic growth and poverty alleviation failed to alleviate poverty in India. In addition, government policies failed to tackle the majority of vulnerable groups.

Poverty Alleviation Programmes:

  1. Prime Minister Rozgar Yojana (PMRY)
  • It provides financial assistance to set up any kind of enterprise.
  • It generates employment opportunities for the educated unemployed from low-income families in rural and urban areas.
  1. Rural Employment Generation Programme (REGP)
  • It is implemented through the Khadi and Village Industries Commission to assist eligible entrepreneurs to set up village industry units.
  • It creates employment opportunities in villages including small towns with a population of up to 20,000.
  1. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
  • In this scheme, the state governments provide at least 100 days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual work.
  • If work is not provided within a 15-day period, then the applicant is eligible for unemployment allowance by the state government.
  1. Swarna Jayanti Gram Swarozgar Yojana (SJGSY)
  • This was launched in 2000 to reduce the levels of poverty in India.
  • The central government provided financial assistance to the states for the fulfillment of necessities such as primary health and education.
  • It also aims to provide clean drinking water in rural areas and provide shelter to the poor.

Wage Employment Programmes

  1. Sampoorna Grameen Rozgar Yojana (SGRY): The scheme aims to provide additional and supplementary wage employment by undertaking labor-intensive work, thereby providing food security and increasing nutritional levels.
    • Wages were paid as a combination of food grains and cash.
    • The scheme of SGRY is open to all rural poor who need wage employment and desire to do manual and unskilled work in and around their village or habitat.
  2. National Food for Work Programme (NFFWP): This program was launched in 2004 with the objective of intensifying the generation of supplementary wage employment.
    • NFFWP was initially implemented in 150 most backward districts of the country, to provide additional resources apart from the resources available under SGRY
    • The program was implemented as a 100% Centrally Sponsored Scheme.
    • Wage Employment under This program was incorporated in Mahatma Gandhi's "Food for Work" Programme National Rural Employment Guarantee Act (MGNREGA) in 2005.
    • MGNREGA aims at enhancing the livelihood security of people in rural areas by guaranteeing 100 days of wage employment in a financial year to a rural household whose adult members volunteer to do unskilled manual work.
    • All those among the poor who are ready to work at the minimum wage can report for work in areas, where this program is implemented.
    • In 2013-14, nearly five crore households got employment opportunities under this law.

A critical assessment of poverty alleviation programs

  • Due to unequal distribution of land and other assets, the benefits from alleviation programs have been appropriated by the non-poor.
  • Compared to the magnitude of poverty, the amount of resources allocated for these programs are not sufficient.
  • Resources are inefficiently used and wasted because the officials involved in the implementation of the program are ill-motivated, inadequately trained, corrupt and vulnerable to pressure from a variety of local elites.
  • Government policies have also failed to address the vast majority of vulnerable people who are living on or just above the poverty line.



Meaning: Poverty refers to a state in which an individual is unable to fulfill even the necessities of life.

Poverty is the inability to secure minimum human needs such as food, clothing, housing, education and health. When a person is unable to fulfill these basic needs, it leads to pain and distress. The poor are people who reside in kutcha hutments with walls made of baked mud and roofs made of bamboo, grass and wood. They are illiterate with low skills and possess few assets for their day-to-day requirement. Based on the occupation and the ownership of assets, the poor can be identified in the rural and urban areas.

Common Characteristics of Poor People

  1. Hunger, starvation and malnutrition: Starvation and hunger are the basic problems of the poorest households. Malnutrition is alarmingly high among the poor.
  2. Poor Health: They are generally physically weak due to ill health, disability, or serious illness. Their children are less likely to survive or be born healthy.
  3. Limited Economic Opportunities: They have Bigger Families very limited economic opportunities due to a lack of literacy and skills. Therefore, they face unstable employment.
  4. Debt Trap: They borrow from moneylenders, who charge high rates of interest that push them into chronic indebtedness.
  5. Lack of facilities for electricity and water: Most poor households do not have access to electricity. Their primary cooking fuel is firewood and cow dung cake. A large section of poor people does not even have access to safe drinking water.
  6. Gender Inequality: Gender inequality prevails within the family in regard to the participation in gainful employment, education and in decision-making. Poor women receive less care on their way to motherhood.
  7. Bigger Families: The poor families are bigger in size, which makes their economic condition worse.

Causes of Poverty

  1. Inequality in the distribution of income and wealth
    • During the plan periods, the national income of India has been increasing, but it has not been distributed properly among the different sections of people.
    • Majority of the income of the economy has been enjoyed by the rich.
    • These inequalities in the distribution of wealth and income have worsened the problem of poverty in India.
  2. Underdevelopment of an economy
    • Physical and natural resources are underutilized because of a lack of technology, capital and entrepreneurial ability.
    • Therefore, the productive capacity and gross domestic product of the economy are low.
    • Primitive technology of production occurs in the agricultural sector.
    • They lack irrigation facilities, fertilizers and a high-yielding variety of seeds.
    • This backwardness in agriculture has given rise to rural poverty.
  3. Indebtedness
    • Poor people take loans from the rich section of society to meet their basic needs.
    • In return, they pay a high rate of interest for the amount borrowed from moneylenders.
    • Moneylenders exploit them, and they thus live below the poverty line from one generation to another.
  4. Price inflation
    • Upward trends in the consumer price index during the plan periods led to a fall in the real income of fixed and low-income earners.
    • Inflation decreases the purchasing power, and hence, there is a low standard of living and a high incidence of poverty.
  5. High rate of population growth
    • Because of an increase in population, the dependency burden has increased.
    • Hence, the provision for their minimum needs becomes a crucial problem.
    • This high growth rate of the population also signifies lower availability of health facilities and other amenities and therefore a lower standard of living.
  6. Unemployment
    • The poverty level increases with the rise in the number of unemployed.
    • Because of unemployment, the number of dependents on the employed population increases.
    • This results in a decline in the consumption expenditure per head and a majority of people are living in poverty.
  7. Illiteracy
    • Because of a lack of literacy, Indian farmers fail to learn new methods of cultivation or adopt new tools for production.
    • In addition, village moneylenders succeed in cheating them more easily.
    • On the other hand, urban people are employed as unskilled workers and receive very low wages in return.
    • They mostly live in slums and lead miserable lives.
  8. Social causes
    • Many social factors such as the caste system, religious faith and beliefs, and joint family system have hindered the process of economic growth.
  9. Political causes
    • Policies of the colonial government have ruined traditional handicrafts and discouraged the development of textile industries.
    • Even after Independence, the government failed to protect the interests of the poor.

Global Hunger Index

The Global Hunger Index aims to track hunger at the world, regional and country levels. It is an annual report (peer-reviewed) published by Concern Worldwide of Ireland and Welthungerhilfe (a German non-profit organization). 

Global Hunger Index Scoring

GHI ranks countries on a 100 point scale, with 0 representing zero/no hunger. The GHI scores are based on four indicators. Taken together, the component indicators reflect deficiencies in calories as well as in micronutrients. Thus, the GHI reflects both aspects of hunger (undernutrition and malnutrition).

  1. UNDERNOURISHMENT: the share of the population whose caloric intake is insufficient.
  2. CHILD STUNTING the share of children under the age of five who have low height for their age.
  3. CHILD WASTING is the share of children under the age of five who have low weight for their height.
  4. CHILD MORTALITY: the mortality rate of children under the age of five (a reflection of the fatal mix of inadequate nutrition and unhealthy environments).

India ranks 101st out of 116 countries in the GHI 2021 rankings. With a score of 27.5, India has a level of hunger that is ‘serious’.


Types of Poverty

Poor in Urban and Rural Areas:

  • In Urban Areas, poor people include pushcart vendors, street cobblers, rag pickers, beggars, etc.
    • They possess few assets.
    • They reside in kutcha hutments with walls made of baked mud and roofs made of grass, thatch, bamboo and wood.
    • The poorest of them do not even have such dwellings.
    • The urban poor is largely the overflow of the rural poor who had migrated to urban areas in search of alternative employment and livelihood.
  • In Rural Areas, poor people include landless agricultural labourers, cultivators with very small landholdings, landless labourers engaged in a variety of non-agricultural jobs or tenant cultivators with small land holdings.
    • Many of the rural people are landless. Even if some of them possess land, it is only dry or wasteland.
    • Many rural people do not get to have even two meals a day.


There are two measures to determine the extent of poverty:

  • Relative Poverty
  • Absolute Poverty

Relative poverty refers to poverty of people, in comparison to other people, regions or nations. For example, If Ram has a lower income in comparison to Sham, and then we can say that Ram is relatively poor. It helps in understanding the relative position of different segments of the population. It only reflects the relative position of different segments of the population in the income hierarchy. It does not consider, how poor the person is or whether he is deprived of the basic minimum requirements of life or not.

Absolute Poverty refers to the total number of people living below poverty line. According to absolute measures, around 22% of India's population is below the poverty line. The concept of absolute poverty is relevant for the less developed countries like India, where there is abundance of poverty. It helps to measure the number of poor people. The method of "Poverty Line" used to measure absolute poverty does differentiate between the very poor and the other poor. Moreover, it does not consider social factors that generate and are responsible for poverty, illiteracy, ill-health, lack of access to resources, discrimination, or lack of civil and political freedoms.

Measurement of Poverty: Pre and Post Independent India

  • In the Pre-independent India, DadabhaiNaoroji was the first person to discuss the concept of Poverty Line. He used the 'Jail Cost of Living' to calculate the poverty line.
  • He used the menu for a prisoner and used appropriate prevailing prices, to arrive at the cost of consumption of an adult prisoner.
  • He termed this consumption cost as 'jail cost of living'. As only adults stay in jail, he divided the population into two parts:
  • He assumed that one-third of total population consist of children. One-half of them (i.e. 1/2 of 1/3 - 1/6) consumed very little, while the other half (i.e. 1/2 of 1/3 = 1/6 consumed half of the adult diet.
  • Two-third population consisted of adults and they consume full diet.
  • Weighted Average of consumption of the three segments: The average poverty line comes out to be three-fourth of the adult jail cost of living.
  • 1/6 x Nil Diet + 1/6 x Half-Diet + 2/3 x Full Diet = 1/6 x 0+ 1/6 x 1/2 + 2/3 x 1= ¾.



Meaning: The poverty Line is a cut-off point on the line of distribution, which usually divides the population of the country into poor and non-poor.

  • The concept of the poverty line is used to measure the extent of poverty in a country.
  • People having income below the poverty line are called "Poor; and.
  • People with income above the poverty line are called "Non-Poor".
  • Poverty line tries to capture the socially acceptable minimum living standards, which the society tries to fulfill.

Determination of Poverty Line in India

  • In India, the "Monthly Per Capita Expenditure or MPCE" method is used to determine the poverty line. According to this method, the monetary value (per capita expenditure) of the minimum calorie intake is calculated.
  • Minimum Calorie Intake: The Planning Commission has defined the poverty line based on recommended nutritional requirements of 2400 calories per person per day for rural areas and 2100 calories per person per day in urban areas. Higher calorie intake has been fixed for rural areas because the rural worker has to do greater physical work as compared to the urban worker.
  • The monetary value of minimum calorie intake: According to the Planning Commission (Tendulkar Methodology), the minimum Monthly Per Capita Consumption Expenditure (MPCE) in 2011-12 is worked out to be 816 per person in rural areas and 1,000 in urban areas.
  • Poverty Line Divides the Poor from the Non-Poor: There are many kinds of poor; the poor, the very poor and the poor. Similarly, there are various kinds of non-poor: the middle class, the upper-middle class, the rich, the very rich and the absolutely rich. The poverty line divides the poor from the non-poor.



Global Multi-Dimensional Poverty Index

  • The Global MPI stands for Multidimensional Poverty Index which is released by Oxford Poverty and Human Development Initiative (OPHI).
  • The idea behind this index is to measure acute multidimensional poverty across developing countries using various indicators.
  • It was developed by OPHI with the United Nations Development Programme (UNDP) in 2010. It is a part of UNDP’s Human Development Report (HDR) and is released annually.
  • MPI 2021 was released in September 2021.
  • India ranked 62 in the Global MPI 2020, which ranked 107 countries. The MPI 2022 is to be released in July, which is the month the index is released every year.

Brief Facts about the Multidimensional Poverty Index (MPI)

Dimensions and Indicators of Global MPI

There are three dimensions and 10 indicators using which countries’ performances are measured.



The number of poor in India.

When the number of poor is estimated as the proportion of people below the poverty line, it is known as the 'Head Count Ratio'. In other words, Head count ratio is calculated by dividing the number of people below the poverty line by the total population.

Number and Proportion of People Below Poverty Line:

  • Number of People Below Poverty Line: In 1973-74, more than 320 million people were below the poverty line. In 2011-12, this number has come down to about 270 million.
  • The proportion of People Below Poverty Line: In terms of proportion, in 1973-74, about 55% of the total population was below the poverty line. In 2011-12, it has fallen to 22%
  • From 1973-74 to 2011-12, there has been a considerable decline in the number of poor and their proportion, but the nature of the decline in the two parameters is not encouraging. The rate is declining much slower than the absolute number of poor in the country.

The extent of Urban-Rural Poverty

  • In 1973-74, more than 80% of the poor reside in rural areas and this situation has not changed even in 2011-12. It means, of the poor in India still reside in villages. In addition, poverty, which was prevailing predominantly in rural areas, has shifted to urban areas.
  • In the 1990s, the absolute number of poor in rural areas had declined, whereas the number of their urban counterparts increased marginally. The poverty ratio declined continuously for both urban and rural areas.
  • The gap between the absolute number of poor in rural and urban areas got reduced, where in the case of ratio, the gap has remained the same until 1999-2000 and has widened from 2011-12

State-Level Trends in Poverty

  • Five states (Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Odisha) account for about 70% of India's poor. During 1973-74, about of the population in most of these large states was living below the poverty line.
  • The diagram reveals that six states (Tamil Nadu, Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Orissa) contained a large section of the poor in 1973-74.
  • During 1973-to 2012, many Indian states (like West Bengal and Tamil Nadu) reduced the poverty levels to a considerable extent.


British Rule: Adverse Effect on Living Standard of Indians

1. British Government systematically destroyed Indian industries. Their primary motive behind the de-industrialization was two-fold:

  • To get raw materials (like cotton, jute, etc.) from India at cheap rates to be used by upcoming modern industries in Britain.
  • To sell finished products (like cotton cloth) of British industries in the Indian market at higher prices.

2. More than 70% of Indians were engaged in agriculture throughout the British Raj period. British policies raised rural taxes, which enabled merchants and moneylenders to become large landowners.

3. Under British rule, India began to export food grains. It was responsible for frequent famines and as many as 26 million people died in famines between 1875 and 1900.

4. In short, the British Raj made the miserable conditions for people in India. Their main goal was to provide a market for British exports, to have India service its debt payments to Britain, and for India to provide labor for the British imperial armies.

Agriculture: Still the Principal Means of Livelihood

  1. Low success rate of Land Ceiling: Since independence, the government has opted to redistribute land through the land ceiling. Land Ceiling refers to fixing the specified limited land, which could be owned by an individual. Beyond the specified limit, all lands belonging to a particular person would be taken over by the Government and will be allotted to landless cultivators and small farmers. However, this move was successful only to a limited extent because
    • Large sections of agricultural workers were not able to farm the smallholdings dues lack of money or skills, and
    • Landholdings were too small to be viable.
    • Most of the Indian states failed to implement land redistribution policies.
  2. Majority of small and marginal farmers: A large section of the rural poor in India is the small farmers. personal consumption.
    • The land that they have is generally less fertile and dependent on rains.
    • Their survival depends on subsistence crops like wheat and sometimes on livestock Subsistence agriculture is self-sufficiency farming in which the farmers focus on growing enough food to feed themselves and their families.
  3. Fragmentation of land holdings: With the rapid growth of population and without alternative sources of employment, the per-head availability of land for cultivation has steadily declined
  • It has led to fragmentation of land holdings.
  • The income from these small land holdings is not sufficient to meet the family's bus requirements. It has led to distress among the farmers.



Definition: The development of human resources means an increase in the quality of human beings, which helps in the process of growth and development of the economy.

Physical Capital and Human Capital

  • Physical Capital: It includes all those inputs, which are required for further production, like plant and machinery, factory, buildings, raw materials, etc.
  • Physical capital is needed to make use of physical resources.
  • Its accumulation is quite important for the economic growth of a country.
  • The ownership of physical capital is the outcome of the conscious decision of the owner the entrepreneur possesses the knowledge to calculate the expected rates of return to the range of investments and then rationally decides which one of the investments should be made.
  • Physical capital formation is mainly an economic and technical process
  • Human Capital: It refers to the stock of skill, ability, expertise, education and knowledge embodied in the people.
  • Human Capital is needed to make effective use of physical capital.
  • There is a need for investment in human capital to produce more human capital out of human resources.
  • Societies need sufficient human capital in the form of competent people who have themselves been educated and trained as professors and other professionals. In other words, we need good human capital to produce other human capital (say, doctors, engineers, etc.)
  • A country can turn physical resources like land into physical capital like factories. Similarly, it can also turn human resources like students into human capital like engineers and doctors. Both forms of capital formation are outcomes of conscious investment decisions.

Human Capital creates both Private and Social Benefits

  • The nature of benefits from human capital is different from that of physical capital.
  • Human Capital benefits not only the owner but also the society in general. For example, an educated person can effectively take part in a democratic process and contribute to the socio-economic progress of a nation. Similarly, a healthy person prevents the spreading of contagious diseases and epidemics by maintaining personal hygiene and sanitation. Thus, human capital creates both private and social benefits.
  • On the other hand, Physical Capital creates only private benefits. It happens because benefits from a capital good flow to those who pay the price for the product and services produced by it.


Human Capital Formation

People become resources by using their skills, knowledge, productivity and abilities. When human resources is further developed b is further developed by becoming more educated and healthy, we call it 'Human Capital Formation.


Human Capital Formation refers to the development of abilities and skills among the population of the country.

  • It is the process of acquiring and increasing the number of persons, who have the skills, education and experience.
  • Human capital formation is associated with an investment in man and his development as creative and productive resources.


  1. Expenditure on Education: Proper utility of manpower depends on the system of education and training of people.
    • Labour skill of an educated person is more than that of an uneducated person, which enables him to generate more income than the uneducated person. Economists have stressed the need for expanding educational opportunities in a nation as it accelerates the development process.
    • Spending on education by individuals is similar to spending on capital goods by companies. Individuals Education invest in education to increase their future income and raise their living standard.
    • Education contributes to economic growth because:
  • Education confers higher earning capacity on people;
  • It gives better social standing and pride; o
  • It enables one to make better choices in life;
  • It provides knowledge to understand the changes taking place in society;
  • It also stimulates innovations;
  • It facilitates adaptation of new technologies.
  1. Expenditure on Health: Health expenditure is a source of human capital formation as it directly increases the supply of healthy labor force.
    • Poor health and undernourishment adversely affect the quality of manpower. Sick labor, without access to medical facilities, is compelled to abstain from work and there is a loss of productivity.
    • Therefore, expenditure on health is important to build and maintain a productive labor force and to improve the quality of life of people in society.
    • Adequate food and proper nourishment to people, along with adequate health and sanitation facilities leads to qualitative improvement in human capital.
    • Forms of Health Expenditure: The various forms of health expenditures include:
      • Preventive Medicine is known as vaccination;
      • Curative medicine, i.e. medical intervention during illness;
      • Social Medicine, i.e. spread of health literacy;
      • Provision of clean drinking water;
      • Good Sanitation facilities.
  2. On-the-Job-Training: Productivity of physical capital is substantially enhanced with the improvement in human capital. Due to this reason, many firms provide on-the-job training to their workers.
    • Such training has the advantage that it can be provided fast and without much cost.
    • It increases the skill and efficiency of the workers and | the Employees' Provident Fund leads to an increase in production and productivity. Organization conducting
    • On-the-job-training may take different forms: Intensive training to enhance the skill sets of employees for
      • Workers may be trained in the firm itself under the desired performance supervision of a skilled worker;
      • Workers may be sent for off-campus training.
    • After on-the-job training of employees, firmly insists that the workers should work for a specific period so that they can recover the benefits of the enhanced productivity owing to the training.
    • It is a source of human capital formation as the return of expenditure on such training, the form of enhanced labor productivity, is more than the cost of it.
  3. Expenditure on Migration: People migrate from one place to another in search of jobs that fetch them higher salaries.
    • Unemployed people from rural areas migrate to urban areas in search of jobs.
    • Technically qualified persons (like engineers, doctors, etc.) migrate to other countries because of the higher salaries that they may get in such countries.
    • Migration in both these cases involves two kinds of cost:
      • Cost of transportation from one place to another; and
      • Higher cost of living in the migrated places.
    • Expenditure on migration is a source of human capital formation as enhanced earnings in the migrated place are more than the increase in costs due to migration.
  4. Expenditure on Information: Expenditure is incurred to acquire information relating to labor market and other markets.
  • It involves amount spent on seeking information about educational institutions, their educational standards and the cost of education.
  • For example, people want to know the level of salaries associated with various types of jobs, whether the educational institutions provide the right type of employable skills and at what cost.
  • Information is necessary to make decisions regarding investments in human capital as well as for efficient utilization of the acquired human capital stock.



  • The contribution of an educated person to economic growth is more than that of an illiterate person.
  • Similarly, a healthy person also contributes to economic growth by providing an uninterrupted labor supply for a longer period of time.
  • Thus, both education and health, along with many other factors Scientific and technical like on-the-job training, job market information and migration, manpower: Rich ingredients of human capital increase the income-generating capacity of an individual.

HCF promotes inventions, innovations and technological improvements.

  • Human capital formation (HCF) not only increases the productivity of human resources but also stimulates innovations and creates the ability to absorb new technologies.
  • Education provides knowledge to understand changes in society and scientific advancements, thus, facilitating inventions and innovations.
  • Similarly, the availability of an educated labor force facilitates adaptation to new technologies.

Difficult to Prove Cause and Effect relation between Human Capital and Economic Growth

  • Due to measurement problems, it is difficult to prove that increase in human capital causes economic growth.
  • For example, education measured in terms of years of schooling, teacher-pupil ratio and enrolment rates may not reflect the quality of education.
  • Similarly, health services measured in monetary terms, life expectancy and mortality rates may not reflect the true health status of the people in a country.
  • It means, it is difficult to establish a relationship between cause and effect from the growth of human capital (education and health) to economic growth. However, growth in each sector has reinforced the growth of every other sector.
  • The relationship between human capital and economic growth flows in either direction.
  • Higher income causes building of high level of human capital; and
  • High level of human capital causes growth of income.

Development Indicators in Education and Health Sectors

The analysis of the indicators mentioned above shows that the human capital growth (as shown by improvement in education and health sectors) in developing countries has been faster but the growth of per capita real income has not been that fast.

Report by Deutsche Bank and World Bank

Two independent reports on the Indian economy have identified that India would grow faster due to its strength in human capital formation.

  1. Report by Deutsche Bank: The Deutsche Bank (a German bank), in its report on "Globe Growth Centres", identified that India will emerge as one of four major growth centers in the world by the year 2020.
    1. It further states that human capital is the most important factor of production in today's economies. An increase in human capital is crucial to achieving an increase in GDP.
    2. With reference to India, it states that between 2005 and 2020, a 40% rise in the average years of education in India is expected.
  2. Report by World Bank: The recent report of World Bank "India and the Knowledge Economy - Leveraging Strengths and Opportunities", states that India should make a transition (changeover) to the knowledge economy.
    1. If the Indian economy uses its knowledge effectively (as used by Ireland), then it is per capita income will increase from a little over US$1,000 in 2002 to US $3,000 in 2020.
    2. The reports further state that the Indian economy has all the key ingredients for making this transition. It has a large number of skilled workers, a well-functioning democracy and a diversified science and technology infrastructure.
  3. Thus, the two reports point out the fact that further human capital formation in India will move its economy to a higher growth path.
  4. India recognized the importance of human capital in economic growth long ago. According to the 7th Five Year Plan, Human capital must be assigned a key role in any development strategy, particularly in a country with a large population. Trained and educated population can become an asset in accelerating economic growth and in ensuring social change in desired directions.

India as a knowledge Economy

  • The Indian software industry has been showing an impressive record over the past decade.
  • Entrepreneurs, bureaucrats and politicians are now advancing views about how India can transform itself into a knowledge-based economy by using information technology (IT). Likewise, e-governance is being projected as the way of the future.
  • The value of IT depends greatly on the existing level of economic development. It can make existing assets and processes more effective and efficient. However, for this, basic infrastructure needs to be developed.

HCF (Importance and Problem)


  • Effective use of Physical Capital: The growth and productivity of physical capital depend extensively on human capital formation.
  • Physical capital can be created only by means of hard and intelligent work of human beings in the economy.
  • Hence, human skill and their efforts help in Modernization of Attitudes effective utilisation of physical capital.
  • . Higher productivity and production: Human capital raises the productivity and production as knowledgeable and skilled worker makes better use the resources.
  • Increase in productivity and quality production depends on technical skill of the people, which can be acquired only by means of education, training and maintaining the he of the people.
  • Investment in human capital helps in acquiring new skills and knowledge relating to management of resources, technology and production.
  • Inventions, innovations and technological improvement: The human capital formation stimulates innovations and creates ability to absorb new technologies.
  • Education provides knowledge to understand changes in society and scientific advancements, which facilitates inventions and innovations.
  • Similarly, the availability of an educated labor force facilitates adaptation to new technologies.
  • Modernization of attitudes: The knowledgeable, skilled and physically fit people are powerful instruments of change in society.
  • Economic development of a country depends on the minds of the people and their changing attitudes towards creating a 'will' for development.
  • Investment in human capital helps in changing mental outlook and promotes development of the economy.
  • Increases life expectancy: Formation of human capital raises life expectancy of the people. Health facilities and availability of nutritive food enable people to live a healthy and long life. This, in turn, adds to the quality of life.
  • Improves Quality of Life: The quality of population depends upon the level of education, health of a person and skill formation acquired by the people.
  • Human capital formation not only makes people productive and creative, but also transforms the lives of the people.
  • People start living and enjoying higher incomes and life that is more satisfying.
  • Control of population growth: It has been observed that educated persons have smaller families as compared to illiterate families. Therefore, spread of education is necessary to control the population growth rate.



  1. Insufficient resources: The resources allocated to the formation of human capital have been much less than the resources required. Due to this reason, the facilities for the formation of human capital have remained grossly inadequate.
  2. Serious inefficiencies: There is a lot of wastage of society's resources as the capabilities of educated people are either not made use of (in case of unemployment) or are underutilized (in case of underemployment). Massive illiteracy, non-education of many children, and poor health facilities are other inefficiencies, which have not been attended to adequately and properly.
  3. Brain Drain: People migrate from one place to another in search of better job opportunities Care and handsome salaries. It leads to the loss of quality people like doctors, engineers, etc. who have a high caliber and are rare in a developing country. The cost of such loss of quality human capital is very high.
  4. High growth of Population: The continuous rise in population has adversely affected mic quality of human capital. It reduces per head availability of the facilities.
  5. Several imbalances: A greater proportion of resources have been diverted towards higher education, which is meant for few people as compared to primary and secondary education. Due to this reason, the general productivity of the economy has remained low.
  6. Lack of proper manpower planning: There is an imbalance between the demand and supply of human resources of various categories, especially in the case of highly skilled personnel. The absence of such balancing has resulted in the wastage of resources.
  7. Weak science and technology: In respect of education, the performance is particularly unsatisfactory in the fields of science and development of modern technology.



  • Human capital considers education and health as a means to increase labor productivity. On the other hand, according to human development, education and health are integral to human well-being because only when people have the ability to read and write and the ability to lead a long and healthy life, they will be able to make other choices, which they value.
  • Human capital treats human beings as a means to increase productivity. Any investment in education and health is unproductive if it does not enhance the output of goods and services. However, according to human development, human beings are ends in themselves. Human welfare should be increased through investments in education and health even if such investments do not result in higher labor productivity.


  • Ours is a federal country with a union government, and state government’s local governments (Municipal Corporations, Municipalities and Village Panchayats). The Constitution of India mentions the functions to be carried out by each level of government.
  • Accordingly, expenditures on both education and health are to be carried out simultaneously by all the three tiers of the government.
  • Education and health care services create both private and social benefits. As a result, bout private and public institutions exist in the education and health service markets.

Need for Government Intervention:

  • The expenditures on education and health make a substantial long-term impact and they cannot be easily reversed. For example, if a child is admitted to a school or health care center and required services are not provided in such an institute, then a substantial amount of damage would have been done before the decision is taken to shift the child to another institution.
  • Individual consumers of these services do not have complete information about the quality of services and their costs.
  • The providers of education and health services may acquire monopoly power and may get involved in exploitation. So, the role of the government is important to ensure that the private providers of these services adhere to the standards stipulated by the government and charge the correct price

Regulatory Authority

  • In Education, the ministries of education at the union and state level and departments of education and various organizations like the National Council of Educational Research and Training (NCERT), University Grants Commission (UGC) and All India Council of Technical Education (AICTE) regulate the education sector.
  • In Health, the ministries of health at the union and state level, departments of health and various organizations like the Indian Council for Medical Research (ICMR) regulate the health sector.



The expenditure by the government on education is expressed in two ways:

  • As a percentage of total government expenditure: It indicates the importance of education in the scheme of things before the government. During 1952-2014, it increased from 7.92 to 15.7.
  • As a percentage of Gross Domestic Product (GDP): It expresses the proportion of income spent on the development of education in the country. During 1952-2014, it increased from 0.64 to 4.13.
  • The increase in education expenditure has not been uniform and there has been irregular rise and fall. However, if we include the private expenditure incurred by individuals and by philanthropic (charitable) institutions, the total education expenditure will be much higher.

Important Points about Government Expenditure

  • The government spends more on Elementary Education: Elementary Education (primary and middle school education) takes a major share of total education expenditure. Share of higher or tertiary education (institutions of higher learning like colleges, polytechnics and universities) is the least
  • Expenditure on Tertiary Education is important: On average, the government spends less on tertiary education. However, 'expenditure per student in tertiary education is higher than that of elementary education. However, it does not mean that financial resources should be transferred from tertiary to elementary education. As we expand school education, we need more teachers who are trained in higher educational institutions. Therefore, expenditure on all levels of education should be increased.
  • The difference in Educational Opportunities across States: In 2014-15, the per capita education expenditure differs considerably across states from as high as 34,651 in Himachal Pradesh to as low as 4,088 in Bihar. This leads to differences in educational opportunities and attainments across states.

Provision of Free and Compulsory Education

The Tapas Majumdar Committee, appointed by the Indian Government in 1998, estimated an expenditure of around 1.37 lakh crore over 10 years (1998-99 to 2006-07) to bring all Indian children in the age group 6-14 years under the purview of school education.

  • In 2009, the Government of India enacted the Right to Education Act to make free education a fundamental right of all children in the age group of 6-14 years.
  • The government of India has also started levying a 2% education cess on all Union taxes. The revenues from education cess have been earmarked for spending on elementary education
  • In addition to this amount, the government-sanctioned a large outlay for the promotion of higher education and new loan schemes for students to pursue higher education.


  • Adult Literacy Rate: The adult literacy rate refers to the ratio of the literate adult population to the total adult population in a country.
    •  In the case of males, the adult literacy rate increased from 61.9% in 1990 to 81% in 2015.
    • In the case of females, the literacy rate was just 37.9% in 1990, which increased to 63% in 2015, which is still far below the satisfaction level.
  • Primary Completion rate: It is the percentage of students completing the last year of primary school.
    • In the case of males, the primary completion rate increased from 78% in 1990 to 94% in 2015.
    • In the case of females, the rate increased from 61% in 1990 to 99% in 2015.
  • Youth Literacy Rate: It is the percentage of people aged 15-24 who can, with understanding, read and write a short, simple statement on their everyday life.
    • In the case of males, there was a marginal increase in the youth literacy rate from 76.6% in 1990 to 92% in 2015.
    • In the case of females, the youth literacy rate increased from 54.2% in 1990 to 87% in 2015.


  • The literacy rates for both adults as well as youth have increased. However, the absolute number of illiterates is still as much as India's population was at the time of independence.
  • In 1950, it was noted in the Directives of the Constitution that the government should provide free and compulsory education for all children up to the age of 14 years. Had we done this, we would have achieved 100% literacy by now.

Gender Equity:

  • The differences in literacy rates between males and females are narrowing. It indicates a positive development in gender equity. However, women's education needs to be promoted:
  • To improve the economic independence and social status of women; and
  • Women's education makes a favorable impact on the fertility rate and health care of women and children.
  • Therefore, we cannot be satisfied with the upward movement in the literacy rates, until 100%, the literacy rate is achieved.

Higher Education:

  • The Indian education pyramid is steep indicating a lesser and lesser number of people reaching the higher education level.
  • As per NSSO data, in the year 2011-12, the rate of unemployment among youth males who studied graduation and above in rural areas was 19%. Their urban counterparts had a relatively less level of unemployment at 16%. The most severely affected ones were young rural female graduates as nearly 30% of them are unemployed. In contrast to this, only about 3-6% of primary-level educated youth in rural and urban areas were unemployed.
  • Therefore, the government needs to increase allocation for higher education and higher education institutions, so that students are imparted employable skills in such institutions.


The economic and social benefits of human capital formation and human development are well known. The union and state governments have been allocating substantial amounts for the development of the education and health sectors.

The spread of education and health services across different sectors of society should be ensured so as to simultaneously attain economic growth and equity. India has a rich stock of scientific and technical labor in the world. We need to improve it qualitatively and provide such conditions so that they are utilized in our own country


Rural Development& Agriculture

  • Agriculture, with a maximum share of the rural economy, has grown at a meager rate of 2.7% in the last fifty years. During 2007-12, agriculture output has grown by 3.2%.
  • The share of the agriculture sector to GDP was on a decline and there has been increasing in the share of the industrial and service sector. However, the population dependent on the agricultural sector did not show any significant change.
  • Moreover, after the economic reforms of 1991, the growth rate of the agriculture sector decelerated to 3% p.a. during 1991-2012, which was lower than the earlier years.

Meaning of Rural Development

Definition: Rural Development refers to the continuous and comprehensive socio-economic process, of attempting to improve all aspects of rural life.

  • In India, agriculture is the major source of livelihood in the rural sector, with more than two-thirds of India's population depending on it. Therefore, development in agriculture will contribute to the betterment of rural areas and rural people. However, the term rural development includes not only agricultural development, but it involves all those aspects, which improve the quality of life of people. It aims at improving the economic and social conditions of people living in villages.
  • Rural people account for about 34% of the total population. However, they have always lagged much behind the overall progress of the economy.
  • In order to overcome this undesirable trend, special programs for rural development began to be designed in the seventies, in addition to provisions of the Five-Year Plans of the country.

Process of Rural Development

  • Development of Human Resources: The quality of the human resource needs to be improved through the following measures:
    • Proper attention to literacy (specifically on female literacy), education and skill development; and
    • Better Health facilities for physical growth.
  • Development of Infrastructure: It involves:
    • Improvement in electricity, irrigation, credit, marketing and transport facilities (including the construction of village roads and feeder roads to nearby highways);
    • Better facilities for agriculture research and extension and information dissemination.
  • Land Reforms: It includes the following objectives:
    • Elimination of exploitation in land relations;
    • Actualization of the goal of 'land to the tiller';
    • Improvement of socio-economic conditions of rural poor by widening their land base;
    • Increasing agricultural productivity and production.
  • Alleviation of Poverty: Around 30% of the total population is still below the poverty line. So, there is a serious need for taking serious steps for alleviation and bringing significant improvement in living conditions of weaker sections. –
  • Development of the productive resources of each locality to enhance opportunities for employment (particularly other than farming).


Rural Credit

  • Growth of the rural economy depends on the timely infusion of capital, to realize higher productivity in agriculture and non-agriculture sectors.
  • In agriculture, farmers are in strong need of creant due to the long time gap between crop sowing and realization of income.
  • Farmers borrow from various sources to meet initial investments on seeds, fertilizers, implements and other family expenses of marriage, death, religious ceremonies, etc.
  • So, credit is one of the important factors, which contribute to agricultural production. An efficient and effective rural credit delivery system is crucial for raising agricultural productivity and incomes.

Sources of Rural Credit

There are two sources, from which the farmers can raise loans:

  • Non-Institutional Sources
  • Institutional Sources

Non-Institutional Sources

Non-institutional sources have been the traditional source of agricultural credit in India. Major non-institutional sources are:

  1. Moneylenders: From the very beginning, moneylenders have been advancing a major sh. of farm credit. The peasants are exploited through exorbitant (very high) rates of interest. Quite frequently, their accounts are manipulated without their knowledge.
  2. Relatives: Cultivators borrow funds from their own relatives in times of crisis. These loans are a kind of informal loans and carry no interest and are normally returned after harvest.
  3. Traders and commission agents: They provide credit to the peasants on the mortgage crops at high rates of interest, on the condition, that the crops will be sold to them at low prices.
  4. Rich Landlords: Small as well as marginal farmers and tenants take loans from landlords for meeting their financial requirements. Landlords also charge high rates of interest on such loans and exploit the peasants, particularly small farmers and tenants.

Institutional Sources

The various non-institutional sources were used to exploit small and marginal farmers by lending to them at high-interest rates and by manipulating the accounts to keep them in a debt-trap.Ă major change occurred after 1969 when India adopted the institutional credit approach through various agencies.

Government established the institutional sources with the following objectives:

  • To provide adequate credit to farmers at a cheaper interest rate
  • To assist small and marginal farmers in raising their agricultural productivity and maximizing their income. Some of the important institutional sources of agricultural credit are:
  1. Co-operative Credit: The primary objective of the co-operatives is to liberate the Indian peasantry from the clutches of moneylenders and to provide them credit at low rates of interest.
  2. Land Development Banks: They provide credit to the farmers against the mortgage of their lands. Loans are provided for permanent improvement of land, purchasing agricultural implements and repaying old debts.
  3. Commercial Bank Credit: Initially, commercial banks played a marginal role in advancing; rural credit. However, after nationalization in 1969, they expanded their branches in rural areas and started directly financing the farmers.
  4. Regional Rural Banks: They are opened up in those areas where there are no bank facilities. Their main objective is to provide credit and other facilities, especially to small and marginal farmers, agricultural laborers, artisans and small entrepreneurs in rural areas.
  5. The Government: The loans provided by the government are known as taccavi loans and are lent during emergencies or distress, like famines, floods, etc. The rate of interest charged against such a loan is as low as 6%.
  6. National Bank for Agricultural and Rural Development (NABARD): It is the Apex Bank that coordinates the functioning of different financial institutions, working for the expansion of rural credit.
    1. Its objective is to promote the health and strength of credit institutions (namely, cooperatives, commercial banks and regional rural banks).
    2. Besides providing finance to credit institutions, NABARD also provides financial assistance to the non-farm sector, to promote integrated rural development and prosperity of backward rural areas.
  7. Self-Help Group (SHG) Bank Linkages Programme for Micro Finance: SHG has emerged as the major microfinance program in the country in recent years.
    1. Their focus is largely on those rural poor, who have no sustainable access to the formal banking system.
    2. So, their target groups comprise small and marginal farmers, agricultural and nonagricultural laborers, artisans, etc.
    3. SHGs promote thrift in small proportions by a minimum contribution from each member. • From the pooled money, credit is given to the needy members at reasonable interest rates, which is to be repaid in small installments
    4. By March 2012. more than forty-three lakh SHGs had reportedly been credit-linked.
    5. SHGs have also helped in the empowerment of women. However, the borrowings are mainly confined to consumption purposes and a negligible proportion is borrowed for productive purposes.

Critical Appraisal of Rural Banking

Rapid expansion of the banking system had a positive effect on a rural farm and non-farm output, income and employment. After the green revolution, credit facilities helped famines avail a variety of loans for meeting their production needs. With buffer stocks of grains, famines became events of the past.

Some of the problems faced in rural banking are:

  1. Insufficiency: The volume of rural credit in the country is still insufficient in comparison to its demand.
  2. Inadequate Coverage of institutional sources: The institutional credit arrangement continues to be inadequate as they have failed to cover the entire rural farmers of the country.
  3. Inadequate Amount of Sanction: The amount of loan sanctioned to the farmers is also inadequate. As a result, farmers often divert such loans for unproductive purposes, which dilute the very purpose of such loans.
  4. Less attention to poor or marginal farmers: Lesser attention has been given to the credit requirements of needy (small and marginal) farmers. On the other hand, well-to-do farmers are getting more attention due to better creditworthiness.
  5. Growing Overdue: The problem of overdue agricultural credit continues to be an area of concern.
    1. The basic reason for growing overdue is the poor repaying capacity of farmers. As a result, credit agencies are becoming cautious about granting loans to farmers.
    2. Agriculture loan default rates have been chronically high. It is alleged that farmers are deliberately refusing to pay back loans. It is a threat to the smooth functioning of banking system and needs to be controlled.
  1. Except the commercial banks, other formal institutions failed to develop a culture of deposit mobilization, lending to needy borrowers and effective loan recovery.

To improve the situation:

  1. Banks need to change their approach from just being lenders to building up relationship banking with the borrowers; and
  2. Farmers should also be encouraged to inculcate the habit of thrift (saving) and efficient utilization of financial resources.


Agricultural Market System

Meaning of Agricultural

Definition: Marketing Agricultural marketing is a process that involves assembling, storage, processing, transportation, packaging, grading and distributing different agricultural commodities across the country.

Agricultural marketing system is an efficient way by which the farmers can dispose of their surplus produce at a fair and reasonable price. It involves different activities for the movement of farm produce from the producer to the ultimate consumer.

Problems faced by Farmers

  • Manipulations by Big Traders: Prior to independence, farmers suffered from faulty weighing and manipulation of accounts while selling their produce to traders.
  • Lack of Market Information: Farmers were often forced to sell at low prices due to a lack of required information on prices prevailing in markets
  • Lack of Storage Facilities: They also did not have proper storage facilities to keep back their produce for selling later at a better price. Even today, more than 10% of goods produced on farms are wasted due to a lack of storage.

Therefore, government intervention became necessary to regulate the activities of private traders.

Measures to Improve Agricultural Marketing:

  1. Regulated Markets: The first measure was the regulation of markets, to create orderly and transparent marketing conditions. Regulated markets have been organized with a view to protecting the farmers from the malpractices of sellers and brokers. This policy benefitted farmers as well as consumers.
  2. Infrastructural Facilities: The Government aims to provide physical infrastructure facilities like roads, railways, warehouses, godowns, cold storage and processing units. The current infrastructure facilities are quite inadequate to meet the growing demand and need to be improved
  3. Cooperative Marketing: The aim of cooperative marketing is to realize fair prices for farmer’s products. Under this, marketing societies are formed by farmers to sell the output collectively and to take advantage of collective bargaining, in order to obtain a better price. Milk Cooperatives Gujarat has been very successful in transforming the social and economic conditions in Gujarat and some other parts of the country. However, cooperatives have received a setback in the recent past because of:
    1. Inadequate coverage of farmer members;
    2. Lack of appropriate link between marketing and processing cooperatives;
    3. Inefficient financial management
  4. Different Policy Instruments: In order to protect the farmers, the government has initiated the following policies:
  1. Minimum Support Prices (MSP): To safeguard the interest of farmers, government the minimum support prices of agricultural products, like wheat, rice, maize, cotton, sugarcane, pulses, etc. Such a price may be regarded as an offer price, at which Government is willing to buy any amount of grains from the farmers.
  2. Maintenance of Buffer Stocks: The Food Corporation of India (FCI) purchases wheat and rice at the procurement prices, to maintain buffer stock. Buffer stock is created CS years of surplus production and is used during shortages. It helps to ensure regularity in supply and stability in prices.
  3. Public Distribution System (PDS): The public distribution system in our country operates through a network of ration shops and fair price shops. Fair price shops offer essential commodities like wheat, rice, kerosene, etc. at a price below the market price, to the weaker sections of the society.


  • Agricultural markets are still dominated by private traders like moneylenders, rural political leaders, big merchants and rich farmers.
  • The quantity of agricultural products, handled by the government agencies and consumer cooperatives, constitutes only 10%, while the rest is handled by the private sector.
  • It is often argued by some scholars that the commercialization of agriculture offers tremendous scope for farmers to earn higher incomes provided the government intervention is restricted.

Emerging Alternate Marketing Channels

  1. Origin of Farmers Market: Farmers can increase their incomes if they directly sell their products to consumers. As a result, the concept of "Farmers Market" was started, to give a boost to the small farmers by providing them direct access to the consumers and eliminating the middlemen Some examples of these channels are:
    • Apni Mandi in Punjab, Haryana and Rajasthan;
    • Hadapsar Mandi in Pune; "Apni Mandi" is an initiative to encourage farmers to directly
    • Rythu Bazars in Andhra Pradesh; and market their products without being exploited by middlemen or traders
    • Uzhavar Sandies (farmers market in Tamil Nadu).
  2. Alliance with National and Multinational Companies: Several national and multinational fast-food chains are increasingly entering into contracts/alliances with farmers.
    • They encourage the farmers to cultivate farm products (vegetables, fruits, etc.) of the desired quality.
    • They provide them with not only seeds and other inputs but also assure procurement of the produce at pre-decided prices.
    • It is argued that such arrangements will help in reducing the price risk of farmers and expand the market for farm products.



Reason for Diversification

The need for diversification arises because:

  • There is a greater risk of depending exclusively on farming for livelihood; and
  • To provide productive sustainable livelihood options to rural people.

Benefits of Diversification

Much of the agricultural employment activities are concentrated in the Kharif season. During the Rabi season, it becomes difficult to find gainful employment in areas where there are inadequate irrigation facilities. Therefore, diversification into other sectors is essential:

  • To provide supplementary gainful employment;
  • To enable them to earn higher levels of income; and
  • To enable rural people to overcome poverty and other troubles.

Types of Diversification

Diversification includes two aspects:

  • Diversification of Crop Production (Change in Cropping Pattern);
  • Diversification of Productive Activities (shift of workforce from agriculture to other allied activities and non-agriculture sectors).

Diversification of Crop Production

  • It involves a shift from a single-cropping system to a multi-cropping system.
  • Diversification involves a shift in cropping patterns from food grains to cash crops. The main aim is to promote a shift from subsistence farming to commercial farming.
  • In India, agriculture is still dominated by subsistence farming and farmers give prime importance to the cereals in the cropping system.
  • Multi-cropping system reduces the dependence of farmers on one or two crops as they are engaged in growing a wide variety of crops.
  • There is a need to encourage farmers to take up the cultivation of a wide variety of crops. It will also raise their income.

Diversification of Productive Activities

  • It would provide alternative avenues of sustainable livelihood and would raise the level of income.
  • Non-farm Activities have several segments. Some segments of non-farm activities possess dynamic linkages that permit healthy growth, while others are in subsistence, low productivity propositions.
  • The dynamic sub-sectors include agro-processing industries, food processing industries, leather industry, tourism, etc.
  • Those sectors, which have the potential but seriously lack infrastructure and other support, include traditional household-based industries, like pottery, crafts, handlooms, etc.



Animal Husbandry and Dairying

Animal Husbandry

Meaning: Animal Husbandry (or Livestock farming) is that branch of agriculture, which is concerned with the breeding, rearing and caring of farm animals.

  • Under livestock farming, cattle, goats and fowls (duck, goose, etc.) are the widely held species.
  • India owns one of the largest livestock populations in the Sheep Rearing is an important Income augmenting activity in rural areas world.
  • Livestock production provides increased stability in income, food security, transport, fuel and nutrition for the family, without disrupting other food-producing activities.
  • The livestock sector provides alternate livelihood options to over 70 million small and marginal farmers, including landless laborers.
  • A significant number of women also find employment in the livestock sector.
  • In India, poultry accounts for the largest share of 58%, followed by others (camels, asses, horses, ponies and mules). Poultry has the largest share of total livestock in India.


Meaning: Dairying is that branch of agriculture, which involves breeding, raising and utilization of dairy animals for the production of milk, and the various dairy products processed from it.

  • Dairying is the business of producing, storing and distributing milk and its products.
  • The performance of the Indian dairy sector over the last three decades has been quite impressive.
  • Due to the successful implementation of Operation Flood', India ranks first in the world in milk production. India's milk production increased from 17 million tonnes in 1950-51 to 102.6 million tonnes in 2006-07 and increased to 165.4 million tonnes in 2016-17.
  • Operation Flood (or White Revolution) was started by National Dairy Development Board (NDDB) in 1970 under the expert guidance of then-chairperson, Dr. Verghese Kurien. The objective of this program was to create a nationwide milk grid.
    • Under the Operation Flood system, all the farmers pool their milk produce according to different grades and the same is processed and marketed to urban centers through cooperatives. The farmers are assured of a fair price and income.
    • Gujarat state is held as a success story in the efficient implementation of milk cooperatives, which has been followed by many states.
  • Meat, eggs, wool and other by-products are also emerging as important productive sectors for diversification.

Evaluation of Livestock Farming

  1. In terms of numbers, our livestock population is quite impressive. However, its productivity is quite low as compared to other countries.
  2. (ii) There is a need for improved technology and the promotion of good breeds of animals, to enhance productivity.
  3. (ii) Improved veterinary care and credit facilities for small and marginal farmers and landless laborers would enhance sustainable livelihood options through livestock production.


Meaning: Fisheries refer to the occupation devoted to the catching, processing, or selling of fish and other aquatic animals.

Important Points about Fishing

  • Fishing community regards water bodies as 'mother': The water bodies (sea, oceans, rivers, lakes, natural aquatic ponds, streams) are considered as 'mother' or 'provider' as they provide a life-giving source to the fishing community.
  • The volume of Fish Production: Presently, fish production from inland sources contributes shout 64% of the total fish production and the balance of 36% comes from the marine sector (sea and oceans).
  • Share of Fishing in GDP: The total fish production accounts for 0.8% of the total GDP. In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are major fish-producing states.
  • Women Participation in Fishing: Even though women are not involved in active fishing, still, 60% of the workforce in export marketing and 40% in internal marketing are women. There is a need to increase credit facilities in the form of cooperatives and self-house groups (SHG) for fisherwomen to meet their working capital requirements for marketing.
  • Problems faced in Fishing: A large share of fish worker families are poor. Some of the major problems faced by these communities include:
    • Widespread Underemployment;
    • Low per capita earnings;
    • Absence of mobility of labor to other sectors;
    • High Illiteracy rate and indebtedness.

Evaluation of Fishing

  • Problems like over-fishing and pollution need to be regulated and controlled.
  • Welfare programs for the fishing community have to be reoriented in a manner, which can provide long-term gains and sustenance of livelihoods.


Meaning: Horticulture refers to the science or art of cultivating fruits, vegetables, tuber crops, flowers, medicinal and aromatic plants, spices and plantation crops.

  • India has adopted horticulture as it is blessed with varying climate and soil conditions.
  • It is an important sector for potential diversification and Emphasis on Horticulture value addition in agriculture. is on a continuous increase in the country

Important Points about Horticulture

  • Contribution: The horticulture sector contributes nearly one-third of the value of agricultural output and 6% of the Gross Domestic Product of India.
  • Share in World's Production: India has emerged as a world leader in producing a variety of fruits, like mangoes, bananas, coconuts, cashew nuts and a number of spices. With the production of 74.877 million tonnes of fruits and 146.554 million tonnes of vegetables in 2010-11, India is the second-largest producer of both fruits and vegetables in the world.
  • Improvement in Economic Condition: Horticulture has improved the economic condition of many farmers and has become a means of improving livelihood for many unprivileged classes too.
  • Great Scope for Women Employment: Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of fruits and flowers and food processing are highly remunerative employment options for women in rural areas.

Evaluation of Horticulture

Horticulture has emerged as a successful sustainable livelihood option and needs to be encouraged significantly. Enhancing its role requires investment in infrastructure, like electricity, cold storage systems, marketing linkages, small-scale processing units and technology improvement and dissemination.

Information Technology

Meaning: Information Technology (IT) refers to that branch of engineering that deals with the use of computers and telecommunications to retrieve and store and transmit information.

Important points about Information Technology.

  • Through appropriate information and software tools, the government has been able to predict areas of food insecurity and vulnerability, to prevent or reduce the likelihood of an emergency.
  • It also has a positive impact on the agriculture sector as it circulates information regards emerging technologies and their application applications, prices, weather and soil conditions for growing different crops, etc.
  • It acts as a tool for releasing the creative potential and knowledge embedded in society. It also has the potential for employment generation in rural areas.
  • The aim of increasing the role of Information Technology is to make every village a knowledge center; it provides a sustainable option for employment and livelihood.



Conventional agriculture relies heavily on chemical fertilizers and toxic pesticides etc., which enter the food supply, penetrate the water sources, harm the livestock, deplete the soil and devastate natural ecosystems. So, efforts have been made to evolve technologies, which are eco-friendly and are essential for sustainable development. One such eco-friendly technology is ‘Organic Farming'.

Meaning of Organic Farming

Meaning: Organic farming is the form of agriculture that relies on techniques such as crop rotation, green manure, compost and biological pest control.

  • Organic farming is the process of producing safe and healthy food, without leaving any adverse impact on the environment.
  • In short, organic agriculture is a whole system of farming that restores, maintains and enhances the ecological balance.
  • There is an increasing demand for organically grown food, to enhance food safety throughout the world.

Benefits of Organic Farming

  • Economical Farming: Organic Farming offers a means to substitute costlier agricultural inputs (such as HYV seeds, chemical fertilizers, pesticides, etc.) with locally prod cheaper organic inputs.
  • Generates income through exports: It generates income through international export demand for organically grown crops is on a rise.
  • Provides Healthy Food: It provides healthy food as organically grown food has more nutritional value than food grown through chemical farming.
  • Source of Employment: Organic farming generates more employment opportunities as requires more labor input than conventional farming.
  • Safety of environment: The produce of organic farming is pesticide-free and is produced in an environmentally sustainable way.

Challenges before Organic Farming

  • Less Popular: Organic farming needs to be popularized by creating awareness willingness on the part of farmers, to the adoption of new technology. There is a serious for an appropriate agriculture policy to promote organic farming.
  • Lack of infrastructure and marketing facilities: Organic farming faces problems with inadequate infrastructure and marketing facilities.
  • Low Yield: Organic farming has a lesser yield in the initial years as compared to modern agricultural farming. As a result, small and marginal farmers find it difficult to adapt to large-scale production.
  • A Shorter food life: Organic produce has a shorter shelf life as compared to sprayed produce.
  • Five-Limited choice of crops: The choice in the production of off-season crops is quite limited in organic farming. Inspire of all these limitations, organic farming helps in the sustainable development of agriculture


Evaluation of Rural Development

  • The rural sector will continue to remain backward until and unless some spectacular changes occur. Some of the changes which need to be taken for the development of the rural sector are outlined below:
  • Stress on Diversification: There is a need to make rural areas more vibrant through diversification into dairying, poultry, fisheries, vegetables and fruits.
  • Rural and Urban Linkage: Efforts should be made to link up the rural production centers with the urban and foreign (export) markets to realize higher returns on the investment for the products.
  • Better facilities: Proper efforts should be made to develop:
    • Infrastructure elements like credit and marketing;
    • State agricultural departments;
    • Farmer-friendly agricultural policies;
    • Constant appraisal and dialogue between farmer's groups.
  • The aim is to achieve the full potential of the rural sector.
  • More emphasis on Sustainable Development: There is a need to invent or procure alternate sets of eco-friendly technologies that lead to sustainable development in different circumstances.


  • Work plays an important role in our lives, as individuals and as members of society.
  • Every rational man aims to be engaged in certain work to earn a living.
  • Some work on farms, in factories, banks, and shops and a few others work at home.
  • Work at Home includes not only traditional work like weaving, lace making, or a variety of handicrafts but also modern jobs like programming work in the IT industry.
  • Earlier factory work meant working in factories located in cities, whereas, now technology has enabled people to produce those factory-based goods at home in villages.

Important Points about Work

  • People work to 'earn' a living. Employment is an activity from which a person earns means of livelihood.
  • Some people get money by inheriting it. However, it does not completely satisfy anybody. Being employed in work gives us a sense of self-worth and enables us to relate ourselves meaningfully with others.
  • Every working person contributes to national income by engaging in various economic activities.
  • We work not only for ourselves but also for those who depend on us as if our family gives us a sense of accomplishment when we work to meet their requirements.
  • The study of working people gives us insights into the quality and nature of employment in our country and helps in understanding and planning our human resources.
  • It helps in analyzing the contribution made by different industries and sectors toward national income.
  • It also helps us to address many social issues such as exploitation of marginalized sections of society, child labor, etc.


Meaning: A worker is an individual, who is involved in some economic activity, to earn a living.

• A worker contributes to the process of gross domestic product (GDP) by rendering his productive activities.

• Some examples of workers are farmers, managers, laborers, doctors, barbers, professors, etc.

Gross Domestic Product and Gross National Product Gross Domestic Product (GDP): GDP refers to the total money value of all goods and services produced in a country in a year. Gross National Product (GNP): When net earnings** are added to GDP, we get GNP. Those activities which contribute to GNP are called economic activities. **Net Earnings: The difference between imports payments and exports receipts is termed net earnings for the country. Net Earnings can be • Positive when receipts from exports are more than payments for imports. • Zero, when receipts from exports are equal to payments for imports. 1. Negative, when receipts from exports are less than payments for imports.

Who all are included in ‘Workers'?

  • It is generally believed that people who are paid by an employer are workers. However, this is not true.
  • It also includes so includes self-employed persons, like shopkeepers, barbers, cobblers, etc.
  • It also includes those people who remain temporarily absent from work due to illness, injury, or other physical disability, bad weather, festivals, social or religious functions, or some other reasons.
  • It also includes those people who help the main workers. It means, that all those who are engaged in economic activities, in whatever capacity, are workers.
  • in terms, workers include all those people, who are engaged in work, whether for others (paid workers) or for themselves (self-employed workers).

Nature of Employment in India is Multifaceted.

  • Some get employment throughout the year, while others get employed for only a few months in a year, like seasonal workers.
  • Many workers do not get fair wages for their work.
  • While estimating the number of workers, all those who are engaged in economic activities are included as employed.

Number of Workers

  • During 2011-12, the total number of workers in India was 473 million persons. Since the majority of our people reside in rural areas, the proportion of the workforce residing there is higher. Therefore, out of 473 million workers, nearly three-fourths were rural workers.
  • Around 70% of total workers are male workers and the rest are female workers.
  • Rural women participate in a larger number of productive activities as compared to urban women. Among the rural workers, the share of female workers is more than one-third, whereas the share is around one-fifth in the case of urban workers.
  • In rural areas, many women carry out works like cooking, fetching water, fuelwood, and participating in farm labor. They are either not paid wages in cash or are paid in the form of grains. For this reason, these women are not categorized as workers. However, it is often argued that these women should also be called workers.

Labour Force

Meaning: All persons, who are working (have a job) and though not working, are seeking and are available for work, are deemed to be in the labor force.

Labour Force = Persons working + Persons seeking and/or available for work.

In other words, Labour Force is the total of employed and unemployed persons.

How to calculate labor force?

Subtract the following from the total population:

  1. Unfit People like old or handicapped persons;
  2. People who are not willing to work;
  3. People who are not available for work.

Labour Force Participation Rate (Or Work Force Participation Rate)

Meaning: The ratio of labor force to total population is called Labour Force Participation Rate. It is used for analyzing the situation of a country.

Work Force

The number of persons, who are actually employed at a particular time, is known as work force. It includes all those persons who are actually engaged in productive activities.

Calculation of Number of Unemployed People

With the help of labor force and workforce, we can calculate the number of unemployed people. If we subtract the workforce from the labor force, we get a number of unemployed people.

Unemployed People = Labour Force - Work Force


Worker Population Ratio


Meaning: "Worker-Population ratio" is an indicator, which is used to analyze the employment situation du the country. The worker-Population ratio is calculated by dividing the total number of workers in India by the population in India and multiplying it by 100.

Important Points about Worker-Population Ratio

  • The worker-Population ratio is very useful in determining the proportion of the population contributing to the production of goods and services of a country.
  • Higher ratio indicates that a high proportion of its population is involved in economic activities.
  • Medium or lower ratio indicates that less people are involved in economic activities.
  • The worker-population ratio indicates the status of workers in society and their working conditions.
  • By knowing the status with which a worker is placed in an enterprise, it may be possible to determine the quality of employment in a country.
  • It also enables us to know the attachment, which a worker has with his job and the authority possessed by him over the enterprise and over other co-workers.

Facts and figures about worker-population ratio:

  • For every 100 persons, 38.6% are workers in India.
  • Higher Proportion of Rural People: In urban areas, the proportion is 35.5%, whereas in rural India, the ratio is about 39.9%.
  • Employment Opportunities: Rural people have limited resources and participate more in the employment market. On the other hand, urban people have a variety of employment opportunities. They look for the appropriate job to suit their qualifications and skills.
  • Education Level: In rural areas, many do not go to schools or colleges and even if some go, they discontinue in the middle to join the workforce. In urban areas, a considerable section is able to study in various educational institutions.
  • Higher Proportion of Male Workers: As compared to females (21.9%), more males (54.4%) are found to be working. Men are able to earn high incomes and, therefore, families discourage female members from taking up jobs.
  • More Women Workers in rural areas: The ratio of women workers in rural areas (24.8%) is more than the number of women workers in urban areas (14.7%). It happens because people in rural areas cannot stay at home due to their poor economic conditions.
  • Underestimation of Women Workers: The number of women workers in our country is generally underestimated because many activities undertaken by them are not recognized as productive work. For example, many women are actively engaged in activities within the house and at family farms, but are neither paid for such work, nor are counted as a worker.


Meaning of Employment

Meaning: Employment is an activity, which enables a person to earn means of living. It refers to an arrangement, by which a person earns income or means of livelihood. Employment can be in form of:

  • Self-employment
  • Wage employment.


Meaning: An arrangement, in which a worker uses his own resources to make a living, is known as self-employment.

  • Workers who own and operate an enterprise to earn their livelihood are known as self-employed.
  • About 52% of workforce in India belongs to this category.
  • Self-employment is a major source of livelihood for both men and women.
  • In the case of self-employment, a person makes use of his own land, labor, capital and entrepreneurship, to make a living.
  • For example, shopkeepers, traders, businesspersons, etc.

Wage Employment

Meaning: An arrangement in which a worker sells his labor and earns wages in return, is known as wage employment.

  • Under wage employment, the worker is known as an employee (or hired worker) and the buyer of labor is termed as an employer.
  • Workers do not have any other resources (land, capital and entrepreneurship), except their own labor.
  • They offer their labor services to others and in return get wages.
  • For example, a doctor running his own clinic is an example of self-employment. However, if the doctor is employed by a hospital, then it will be wage employment.
  • Wage employment is of two types:
  • Regular Workers;
  • Casual Workers.

Regular Workers

Meaning: When a worker is engaged by someone or by an enterprise and is paid wages on a regular basis, then such a worker is known as a regular salaried employee.

  • Workers are hired on a permanent basis and get social security benefits (like pension, provident fund, etc.).
  • Regular workers account for just 18% of India's workforce.
  • For example, Professors, Teachers, Civil engineers working in the construction company, etc.

Casual Workers

Meaning: Workers who are casually engaged and, in return, get remuneration for up work done, are termed as casual workers.

  • Casual workers are not hired on a permanent basis. It means they do not have: (i) Regular income; (ii) Protection or regulation from the government; (iii) Job security; and (iv) Social benefits.
  • Casual workers account for 30% of India's workforce.

Distribution of Employment

From the Pie diagrams, the following points are noticed:

  • Self-employment is a major source of livelihood for both men (51%) and women (5601
  • Casual workers account for the second major source for both men (29%) and women (310
  • In the case of regular salaried employment, men are found in greater proportion (20%), whereas women form only 13%. The reason for this could be skill requirements as regular salaried jobs require skills and a higher level of literacy.

Distribution of Employment by Region.

  • Self-Employment: It is a major source of livelihood in both urban areas (43%) and rural from (56%). However, in the case of rural areas, self-employed workers are greater as a majority of rural people are engaged in farming on their own plots of land.
  • Casual Workers: In the case of rural areas, casual workers account for the second major source of employment with 35% of the workforce. Casual workers in urban areas account for 15%.
  • Regular Salaried Employees: In urban areas, it is the second major source with 42% of work force. Urban people have a variety of employment opportunities because of their educational attainments and skills. In urban areas, the nature of work is different and enterprises require workers on a regular basis. However, only 9% of rural people are engaged as regular salaried employees due to illiteracy and lack of skills.

Distribution of Employment in Different sectors

 In the course of the economic development of a country, labor flows from agriculture and other related activities to industry and services. In this process, workers migrate from rural to urban areas. Eventually, at a much later stage, the industrial sector begins to lose its share of total employment as the service sector enters a period of rapid expansion. Generally, we divide all economic activities into the following 8 different industrial divisions:

Distribution of Rural-Urban Employment in different sectors.

Employment in Rural Areas

  • 64.1% of the workforce in rural areas are engaged in the primary sector. (Agriculture, mining, and quarrying).
  • 20.4% of rural workers are working in the secondary sector. (Manufacturing industries, construction and other divisions).
  • The service sector or Tertiary sector provides employment for 15.5% of rural workers.

Employment in Urban Areas

  • In the case of urban areas, the primary sector has the least share with just 6.7%. Therefore, activities like agriculture or mining are not the major source of employment in urban areas.
  • The secondary sector gives employment to about 35% of the urban workforce.
  • People are mainly engaged in the service sector with 58.3% of urban workers.

Distribution of Employment (Male-Female) in Different sectors



Changing Structure of Employment

  • A major section of our population lives in rural areas and is dependent on agriculture as their main livelihood.
  • The developmental strategies in many countries, including India, have always aimed at reducing the proportion of people depending on agriculture.
  • Following is the effect on different sections of workforce, due to growth pattern of employment and GDP:

  • In 1972-73, 74.3% of workforce was in 2011-12. It shows a substantial decline to 48.9% in 2011-12. It shows a substantial shift from farm work to non-farm work.
  • Secondary and service sectors are showing promising, as shares of these sectors have increased from 10.9% to 24.37 respectively.

Casualization of Workforce

  • Over the last three decades (1972-2012), there has been considerable. In addition, regular salaried employed to casual wage work.
  • The process of moving from self-employment and regular salaried employment to casual wage work is known as casualization of workforce.

  • Self-Employment: Although, it continues to be the major employment provider, its share declined from 61.4% in 1972-73 to 52% in 2011-12.
  • Regular Salaried Employees: Its share has stagnated at around 14%. There is a marginal increase from 15.4% in 1972-73 to 18% in 2011-12.
  • Casual Workers: Their share has increased from 23.2% in 1972-73 to 30% in 2011-12.


  • Even after 55 years of planned development, three-fifth of Indian depends on agriculture as the major source of livelihood.
  • Over the years, the quality of employment has also deteriorated. Even others do not get maternity benefit, provident fund, gratuity more than 10-20 years, some workers do not get maternity benefit or and pension.
  • Employees in the private sector get a lower salary as compared to employees doing the same work in the public sector.
  • The employment structure in India can be studied with respect to two kinds of sectors. (I) Formal or Organised Sector; (ii) Informal or Unorganised Sector.

Formal or Organised Sector

  • All the public enterprises and private establishments, employ 10 or more hired workers. are called formal sector establishments.
  • Workers who work in such establishments are known as formal sector workers.
  • Formal workers enjoy social security benefits and earn more than those in the informal sector earn.
  • The government protects them in various ways through its labor laws and they can form 'Trade Unions' to protect their interests.
  • However, the organized sector provides work to just 7% of the total work force.

Informal or Unorganised Sector

  • Informal sector includes all those private enterprises, which hire less than 10 workers.
  • Workers who work in such enterprises are known as informal sector workers. For example, farmers, agricultural laborers, owners of small enterprises, etc.
  • It also includes all non-farm casual wage laborers who work for more than one employer such as construction workers and headload workers.
  • In India, over 90% of employment is found in the unorganized sector, viz., small farms, household industries, shops and other self-employment units.
  • In the informal sector, male workers account for 69% of the workforce.
  • Workers and enterprises in the informal sector do not get regular income. They do not have any protection or regulation from the government. Such workers have the risk of being dismissed without any compensation.
  • Workers of this sector live in slums and are squatters (persons who unlawfully occupy an uninhabited building or unused land).
  • Informal sector uses outdated technology and does not maintain any accounts.

Distribution of Workforce in Formal and Informal Sectors

As the economy grows, more and more workers should become formal sector workers and the proportion of workers engaged in the informal sector should decrease.

Formal Vs Informal:

  • Out of a total of 473 million workers in the country.
  • 30 million workers are in the formal sector and the remaining 443 mills in the informal sector.
  • It means, only 6% of people are employed in the formal sector and the rest in the informal sector.

Male Vs Female

  • In the formal sector, out of 30 million workers, 24 million (80%) are male workers and only 6 million (20%) are women.
  • In the informal sector, out of 443 million workers, male workers account for 306 million (69%) and the remaining 137 million (31%) are women.

Realizing the Importance of the Informal Sector

Due to the failure of the formal sector in generating employment, India started paying attention to enterprises and workers in the informal sector. With the efforts of the International Labour Organisation (ILO), the Indian government has initiated the modernization of informal sector enterprises and the provision of social security measures to informal sector workers.


Meaning of Unemployment

  • According to NSSO, Unemployment is a situation in which all those who, owing to lack of work, are not working but either seek work through employment exchanges, intermediaries, friends, or relatives or by making applications to prospective employers or express their willingness or availability for work under the prevailing condition of work and remunerations.
  • In short, Unemployment refers to a situation in which people are willing and able to work at the existing wage rate, but do not get work. Unemployment is confined not only to unskilled workers, rather a sizeable number of skilled workers fail to get jobs for long periods.

Unemployment is Temporary even in India

  • In India, people cannot remain completely unemployed for very long because of their desperate economic condition. As a result, they are forced to accept unpleasant, dangerous jobs in unclean or unhealthy surroundings.

Sources of Unemployment Data

  • Reports of Census of India: The population census collects information on the economic activity of people.
  • National Sample Survey Organisation (NSSO): The NSSO collects data through sample surveys and gives annual estimates of employment and unemployment.
  • Directorate General of Employment and Training (DGET) has been implementing the Employment Market Information (EMI) scheme over the last 30 years. EMI provides information about the structure of employment, occupational compositions and educational profile of employees.
  • All three sources of data give different estimates of unemployment. However, they provide us with the attributes of the unemployed and the variety of unemployment prevailing in our country.

Types of Unemployment in India

  1. Disguised Unemployment (Hidden Unemployment).

Meaning: Disguised Unemployment refers to a state in which more people are engaged in work than are really needed.

  • For example, if two workers are needed on a piece of land and five workers are engaged in the same job, then three workers are disguised as unemployed.
  • It is the most predominant form of unemployment in the agricultural sector of developing countries like India.
  • In the late 1950s, about one-third of agriculture workers in India were disguisedly unemployed.
  • The main problem of disguised unemployment is that apparently, all seem to be employed, but marginal productivity of the surplus labor is zero, i.e. contribution of the extra workforce is zero. Disguised Unemployment is common in the case of sugarcane cutters.
  1. Seasonal Unemployment

Meaning: Unemployment that occurs at certain seasons of the year is known as seasonal unemployment.

  • In India, seasonal unemployment is predominantly associated with agriculture.
  • In agriculture, work is seasonal and there are no employment opportunities in the village for all months of the year. Therefore, when there is no work to do on farms, men go to urban areas and look for jobs. They come back to their home villages as soon as the rainy season begins.
  • The period of seasonal unemployment varies from state to state, depending upon the methods of farming, the condition of soil, the type and number of crops grown, etc.
  1. Open Unemployment

Meaning: Open Unemployment refers to that economic phenomenon in which persons are able and to work at the prevailing wage rate, but fail to get work.

  •  It is called open unemployment such unemployment can be seen and counted in terms of the number of unemployed people.
  • Open Unemployment is different from Disguised Unemployment. In the case of open Unemployment, workers are very idle. However, in the case of disguised unemployment, workers appear to be working and do not seem to be idling away their time.

Causes of Unemployment

  1. Slow Rate of Economic Growth: The actual growth rate always Population Explosion lies far below the rate targeted in the five decades of planning. Employment opportunities created under the plans could not keep pace with the additions to the labor force.
  2. Population Explosion: The rapid rate of population growth has been another cause of increasing unemployment in the country. It has not been possible to generate so many employment opportunities to absorb the large growing labor force.
  3. Underdeveloped Agriculture: Heavy pressure of population on land and the primitive methods of agricultural operations are responsible for massive rural unemployment and underemployment in the country.
  4. Defective Educational System: The prevailing education system in India is full of defects as it fails to make any provision for imparting technical and vocational education. As a result, educated people are unable to meet the requirements of the firm.
  5. Slow Growth of Industry: Due to a shortage of capital and lack of modern and advanced technology, the industrial sector could not gain momentum and could not generate sufficient employment opportunities in the country.
  6. The decline of Cottage and Small-scale Industries: The number of traditional villages and cottage industries has declined over the years due to changes in the demand preferences is the emergence of more efficient modern industries. As a result, a large number of people become unemployed.
  7. Faulty Planning: The plans could not stop the migration of the rural population to urban areas. The plans were unable to encourage the use of labor-intensive technic agricultural and industrial production. The plans have failed to put due emphasis on employment-generating programs like the development of dairies, fisheries and poultry farming. Insufficient infrastructure facilities (power, transportation, communication, etc.) have greatly hampered the expansion of work opportunities.
  8. Inadequate Employment Planning: Low priority has been given to employment objective plans. There has been a complete absence of any legal provision to implement employment-generating schemes.
  9. Low Capital Formation: Low rate of capital formation has hampered the growth potential in the agricultural and industrial sectors. Consequently, the job-creation capabilities of both sectors have been affected adversely.

Remedial Measures for Unemployment

  1. Accelerating growth rate of GDP: The aggregate employment problem can be solved through the process of accelerated growth. Growth rates of GDP between 8% and 9% are needed over the next ten years, to achieve a significant improvement in the employment situation.
  2. Control of population growth: The rapid growth rate of the population should be slowed down so that the additional jobs created do not fall short of new entrants to the labor market. Therefore, it is necessary to adopt an effective and meaningful population control policy, like family planning programs.
  3. Development of agricultural sector: Acceleration of agricultural growth is important to increase labor productivity and quality of employment for large numbers of the existing force. There is a need for an agricultural revolution through improved techniques, an extension of irrigation facilities, reform of land laws, an increase in public investment, etc.
  4. Encouragement to small-scale enterprises: The small-scale sector needs to be encouraged by multiple initiatives like liberal finance, technical training, and supply of raw materials, infrastructural facilities and marketing of their products.
  5. Improvements in Infrastructure: The infrastructural facilities like health, education, electricity, roads, etc. are critical for the overall development of the economy. Better cultural facilities enable the agriculture and industry sectors to produce to their full capacity. This will generate more employment.
  6. Special Employment Programs: Special employment programs, which aim at providing employment or self-employment opportunities, should be implemented.
  7. Improvement of Employment Exchanges: The employment exchanges spread all over the country are of great assistance in directing the job seekers to the possible areas of employment. The functioning of such employment exchanges should be improved
  8. Creation of self-employment opportunities: Government should provide various facilities like financial assistance, training of skills, supply of inputs, marketing of products, etc. to generate more self-employment opportunities.
  9. Reform of Educational System: The present system of the educational system should be ma vocational and work-oriented. Educational facilities should be more diversified and a sustained program of training is necessary, to develop skills among the educated unemployed through special training or apprenticeship courses.
  10. Labour Planning: The future requirements of educated labor should be forecasted and accordingly, intake into different professional courses should be determined. As a result, excess manpower in market of educated labor will be eliminated.



  • Government has taken many initiatives to generate acceptable employment, ensuring at least minimal safety and job satisfaction. Since independence, the Union and State Governments have played an important role in generating employment or creating opportunities for employment generation. Their efforts can be broadly categorized into two aspects:
  • Government provides 'Direct Employment by employing people in various departments for administrative purposes. It also runs industries, hotels, and transport companies, and hence provides employment directly to workers.
  • With increase in output of goods and services of government enterprises, private enterprises providing raw material to government enterprises will also raise their output. As a result, the number of employment opportunities in the economy will increase. This increase in employment is known as 'Indirect Employment by the government. 

Employment Generation Programmes

  • The government has also implemented a number of “Employment Generation Programmes” like the National Rural Employment Guarantee, Prime Minister's Rozgar Yojana, Swaran Jayanti Shahri Rozgar Yojana, etc.
  • Government aims to alleviate poverty through such employment programs.
  • All these programs aim at providing employment, services in primary health, education, rural shelter, etc.
  • These programmes also aim to assist people in buying income and employment generating assets, developing community assets and construction of houses and sanitation.



  1. Service Sector – Emerging as a prospective employer: With the expansion of the service sector, newly emerging jobs are found mostly in this sector.
  2. Technological Advancement: Due to the advent of high technology, now efficient small-scale enterprises and individual enterprises work along with MNCs.
  3. Outsourcing of Work: Outsourcing involves contracting out an activity to an outside specialized agency (sometimes situated even in other countries), which undertakes complete responsibility to handle it using its own manpower. For example, many companies have started outsourcing sanitation and housekeeping functions, which were earlier performed by their in-house staff.
  4. Work at Home: Due to changes in work methods, it has now become a common practice for many people to work from their homes. The Internet has become an amazing means for work at home opportunities.
  5. More Employment in Informal Sector: The nature of employment has become more informal with only limited availability of social security measures to the workers.
  6. Growth in GDP, but not in employment opportunities: In the last two decades, there has been rapid growth in the gross domestic product (GDP), but without a simultaneous increase in employment opportunities. It has forced the government to take up initiatives in generating employment opportunities, particularly in the rural areas.



  • Infrastructure plays an important role in the economic growth of a country.
  • Agriculture, industry and now increasingly the services sector, depend heavily on the infrastructural facilities for their growth.
  • Infrastructure development is also crucial for the social development of a country.
  • Since the economic reforms of 1991 in India, infrastructure development has been accorded high priority by the Government.
  • Some states in India are performing much better than others in certain areas. For instance:
    • Punjab, Haryana and Himachal Pradesh prosper in agriculture and horticulture. Maharashtra and Gujarat have better industrial development as compared to others.
    • Kerala has excelled in literacy, health care and sanitation and attracts tourists in large numbers.
    • Karnataka's information technology industry attracts world attention as they provide world-class communication facilities.
    • It is all because these states have better infrastructure in the areas they excel in than other states of India. Some have better irrigation facilities. Others have better transportation facilities or are located near ports, which makes easy access to raw materials required for various manufacturing industries.
    • All these support structures, which facilitate the development of a country, constitute its infrastructure.


Meaning: Infrastructure refers to all such activities, services and facilities, which are needed to provide different kinds of services in an economy.

  • Infrastructure provides supporting services' in the main areas of industrial and agricultural production, domestic and foreign trade and commerce.
  • Infrastructural services include:
    • Roads, railways, ports, airports, dams, power stations, oil and gas pipelines, telecommunication facilities, etc.
    • Educational system includes schools and colleges.
    • Health systems including hospitals.
    • Sanitary system including clean drinking water facilities.
    • Monetary system includes banks, insurance and other financial institutions.
  • Some of these services have a direct impact on the working of the system of production, while others give indirect support, by building the social sector of the economy.

Types of Infrastructure

  1. Economic Infrastructure:
    • It includes infrastructure associated with energy, transportation and communication.
    • Economic infrastructure is important to promote economic activities, i.e., production and trade of goods and services.

2. Social Infrastructure:

    • It includes infrastructure associated with education, health and housing.
    • Social infrastructure consists of the provision of all those services, which improve the quality of human resources.
  • Economic development is not a mere growth in the gross domestic product but has its social dimensions too. Therefore, both economic and social infrastructure projects have a strong bearing on the process of economic development.
  • Economic and Social Infrastructure together helps in the overall development of the economy.
  • Economic Infrastructure improves productivity levels in productive sectors such as agriculture and industry, by providing support services such as energy, transport, communication, etc.
  • Social Infrastructure improves human productivity and efficiency through facilities of education, health, housing, etc.
  • Hence, both are supplementary and complementary to each other.

Importance of Infrastructure

  1. Facilitates functioning of the Economy: The functioning of an economy depends on the existence of infrastructural facilities. Agriculture, industry and service sectors depend heavily on infrastructural facilities for their growth.
  2. Agricultural Development: The development of modern agriculture depends on infrastructural facilities (roadways, railways and shipping) for speedy and large-scale transport of seeds, pesticides, fertilizers, etc. There is also a need for insurance and banking facilities so that agriculture can operate on a large scale.
  3. Economic Development: Development of infrastructure and economic development go hand in hand.
  • Agriculture depends on the adequate expansion and development of irrigation facilities.
  • Industrial progress depends on the development of power and electricity generation, transport and communications.
  • Infrastructure contributes to the economic development of a country both by increasing the productivity of the factors of production and improving the quality of life of its people.
  1. Better Quality of Life: Well-developed infrastructure leads to a better quality of life.
  • Improvements in water supply and sanitation have a large impact by reducing 'morbidity' (meaning proneness to fall ill) from major waterborne diseases and reducing the severity of the disease.
  • The quality of transport and communication infrastructure can affect access to health care. However, air pollution and safety hazards connected to transportation also affect morbidity, particularly in densely populated areas.
  1. Provides Employment: Infrastructure helps in generating employment. Many people get employment in infrastructural projects like the construction and maintenance of roads railways, electricity plants, etc. Many more people are able to find employment in industry and trade, after the development of strong infrastructure.
  2. Facilitates Outsourcing: A country with advanced infrastructure facilities is able to read benefits from the outsourcing work. India is emerging as a global destination for BPO'S, KPO's, and call centers, etc. due to its IT support system and sound infrastructure.

State of Infrastructure in India

  • Earlier, the government has been solely responsible for developing the country's infrastructure. However, due to the inadequacy of the government's investment in infrastructure, the private sector in joint partnership with the public sector has started playing a very important role in infrastructure development.
  • A majority of our people live in rural areas. Despite so much technical progress in the world, rural women still use bio-fuels such as crop residues, dung and fuelwood to meet their energy requirements. About 90% of rural households use bio-fuels for cooking.
  • Rural people have to travel long distances to fetch fuel, water and other basic needs. As per the census 2001, only 56% of the rural households had electricity connections.
  • Tap water availability is limited to only 24% of rural households and the remaining households make use of water from open sources (like wells, tanks, ponds, etc.). Access to improved sanitation in rural areas was only 20%.
  • It is widely understood that infrastructure is the foundation of development India invests very less on infrastructure. Therefore, India needs to boost its infrastructure development.
  • Unless proper attention is paid to the development of infrastructure, it is likely to act as a severe constraint on economic development.
  • For low-income countries, basic infrastructure services like irrigation, transport and power are more important.
  • As economies mature and most of their basic consumption demands are met, the share of agriculture in the economy shrinks and more service-related infrastructure is required. This is why the share of power and telecommunication infrastructure is greater in high-income countries.



  • There exist a positive correlation between economic growth and demand for energy. It happens because growth is an index of increasing productive activity, which requires a  larger quantity of energy.
  • In India, energy is used on a large-scale in agriculture and related areas, like production and transportation of fertilizers, pesticides and farm equipment.
  • Energy is required in houses for cooking, household lighting and heating.

Commercial Energy

  • Commercial Energy refers to those sources of energy, which those sources of energy, which command a price and the users, have to pay a price for them.
  • For example, coal, petroleum and electricity.
  • Commercial sources of energy are generally exhaustible (except hydropower).

Non-Commercial Energy

  • Non-Commercial energy consists of those sources of energy, which generally do not command a price.
  • For example, firewood, agricultural waste and dried dung.
  • Non-commercial sources are generally renewable.
  • These are generally available free of cost as they are found in nature or forests.
  • More than 60% of Indian households depend on traditional sources of energy for meeting their regular cooking and heating needs.

Commercial Energy Vs Non-Commercial Energy

Conventional Sources of Energy

  • Conventional sources of energy refer to the sources of energy, which are in use for a long and can be stored. For example, coal and oil.
  • Such sources are non-renewable resources of energy.
  • Even today, most of the industries of the world make use of coal and oil in industries.
  • Both commercial and non-commercial sources of energy are known as conventional sources of energy.

Non-Conventional Sources of Energy

  • Non-Conventional sources of energy refer to the sources of energy, which have come into use only recently. For example, solar energy, wind energy, geothermal energy, bio-gas, and tidal power.
  • Such sources are renewable resources of energy.
  • Being a tropical country, India has almost unlimited potential for producing these types of energy, if some appropriate cost-effective technologies, that are already available, are used.
  • However, these types of energy resources are inexhaustible; many problems are faced in harnessing them and storing them, besides the problems of heavy cost and management. As a result, they are not generally used in industries.

Conventional Vs Non-Conventional Sources of Energy

Primary and Secondary Sources of Energy

  • Primary Sources: Primary or direct sources of energy are gifts of nature and they do not need any transformation for using them. For example, Coal, petroleum, or gas are primary sources as they can be directly used for work by burning.
  • Secondary Sources: Secondary or indirect sources of energy result from the transformation of primary sources. For example, Electricity is a secondary form of energy produced from Primary energy resources including coal, hydrocarbons, hydro energy, nuclear energy, etc.

Consumption Pattern of Energy in India

  • Commercial energy consumption makes up about 74% of the total energy consumed in India. This includes coal with the largest share of 54%, followed by oil at 32%, natural gas at 10% and hydro energy at 2%.
  • Non-commercial energy sources consisting of firewood, cow dung and agricultural wastes, account for over 26% of the total energy consumption.
  • India depends on imports for crude and petroleum products, which is likely to grow rapidly in the near future.

Sectoral Pattern of Consumption of Commercial Energy

  • The industrial sector has the largest share of 44% of the total consumption of commercial energy.
  • Share of the transport sector in consumption of commercial energy decreased from 44% in 1953 54 to just 2% in 2014-15. There has been a continuous fall in the share of the transport sector, while the shares of the household, agriculture and industrial sector have been increasing.
  • Consumption of commercial energy by the agricultural sector is very less (18%). It shows the dependence of the agriculture sector on traditional methods of farming.
  • The share of oil and gas is the highest among all commercial energy consumption.
  • With the rapid rate of economic growth, there has been a corresponding increase in the use of energy.


  • Power or electricity is a critical component of infrastructure, which is often identified with progress in modern civilization.
  • In order to attain economic development, power is required in every step.
  • With the gradual development of various sectors of the economy, the demand for power is increasing year after year.
  • The growth rate of demand for power is generally higher than the GDP growth rate. In order to have an 8% GDP growth per annum, the power supply needs to grow around 12% annually.
  • In order to meet this increasing power requirement, a huge amount of investment is regularly being made in the development of power projects.

Sources of Power Generation

  1. Thermal Power: When power is generated out of coal, oil and natural gas, it is termed thermal power. It is the major source of electricity and accounts for 67% in 2016) of total power generation.
  2. Hydro-electric Power: When power is generated from the waters of fast-flowing rivers or high dams, it is termed hydroelectric power. It is the cheapest among all the three sources and it has no pollution agent. It is a renewable source of energy.
  3. Nuclear or Atomic Power: When power is generated from radioactive elements like uranium, thorium and plutonium, it is termed nuclear or atomic power. It is the next most up-to-date source of power, whose generation has started mostly from 1970-71. Atomic energy has environmental advantages and is also likely to be economical in the long run.

Power Generation Capacity of Various Sources

In order to keep pace with the growing demand for power from various sectors, a number of steps have been taken to increase power generation. As a result, the generation of power in thermal, hydroelectric and nuclear projects has increased considerably. The installed power generation capacity increased from 1,700 Megawatts (MW) in 1950-51 to 1,24, 300 MW at the end of 2005-2006.

  1. Thermal Power: In India, the biggest source of power generation is thermal power. 679 of the power generation capacity comes from thermal sources.
  2. Hydro-electric Power: Hydroelectric power accounts for 13.60% of total power generation capacity.
  3. Nuclear Power: Nuclear Power accounts for only 2.10% of the total installed capacity of electricity (against the global average of 13%). Some scholars suggest generating more electricity through atomic (nuclear) sources, while few others object to this, from the viewpoint of environment and sustainable development.

Challenges in the Power Sector

  1. Inadequate adequate Electricity Generation: India’s installed capacity to generate electricity is sufficient to feed an annual economic growth of 7-8%. In order to meet the growing demand for electricity, India's commercial energy supply needs to grow at about 7%. At present, India is able to - Limited Role of Private and Foreign Entrepreneurs L Lack of Public Cooperation add only 2, 00,000 MW a year.
  2. Underutilisation of installed capacity: The installed capacity is underutilized, as plants are not run properly. During excess demand, the operational efficiency of power projects is reflected by the ‘Plant Load Factor (PLF). In India, the PLF is very poor and inadequate attention is paid to improving it.
  3. Poor performance of State Electricity Boards (SEBs): State Electricity Boards (SEBs), which distribute electricity, incur losses, which exceed 500 billion. This is due to transmission and distribution losses, wrong pricing of electricity and other operational inefficiencies. A large portion of these losses is due to theft of power and the free supply of power to agriculture.
  4. Shortage of inputs: Thermal power plants, which are the foundation of India's power sector, are facing a shortage of raw material and coal supplies.
  5. Limited role of Private and Foreign Entrepreneurs: Private sector power generators and foreign investors are yet to play their role in a major way.
  6. Lack of Public Cooperation: There is general public unrest due to high power tariffs and prolonged power cuts in different parts of the country.

The Delhi Electric Supply Power Distribution:

  • The Delhi State Electricity Board (DSEB) was set up in 1951. This was succeeded by Delhi Electric Supply Undertaking (DESU) in 1958 and by Delhi Vidyut Board (DVB) in 1997. After the privatization of the DVB, it rests with two leading Private players:
    • Reliance Energy Ltd. (BSES), which manages the power distribution of two-thirds of Delhi:
    • Tata Power (TPDDL), which distributes power to the remaining one-third.
  • The tariff structure and other regulatory issues are monitored by the Delhi Electricity Regulatory Commission (DERC). It was expected that there will be a greater improvement in power distribution and the consumers will benefit in a major way. However, there are unsatisfactory results until now.

Measures to meet Power Crisis:

  1. Improvement in Plant Load Factor Factor (PLF): The Plant Load Factor is an important indicator of the operational efficiency of thermal. Improvement in PLF will help better the utilization of the capacity of the plant.
  2. Control of Transmission and Distribution Losses: To solve the power crisis, transmission and distribution losses should be effectively controlled as they adversely affect the financial health of power utilities.
  3. Increase in Productive Capacity: In India, there is an underutilization of the productive capacity of thermal power stations. Its productive capacity should be increased to control the power crisis.
  4. Promote the role of the Private Sector: Although the private sector has made some progress, it is necessary to tap this sector to come forward and produce power on a large scale. India is the world's fifth-largest producer of wind power, with more than 95% of investments coming from the private sector.
  5. Encourage the use of renewable sources: The use of renewable energy sources can ensure an additional supply of electricity. With the large availability of biomass in India, there is significant potential for meeting energy needs, particularly in rural and remote areas. Greater reliance on renewable energy resources offers enormous economic, social and environmental benefits.
  6. Development of Hydro Potential: India is quite rich in Hydropower potential with an estimated hydropower potential of more than 1, 50,000 MW. However, only 21.14% of the potential has been developed to date. So, there is a serious need to fully expose the potential of hydropower.
  7. Other Measures: Other measures which can help in meeting the power crisis are: (i) an increase in public investment; (ii) Better research and development efforts; and (iii) Technological innovation.


In the words of WHO, ‘Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.'

Important Points about Health and Health Infrastructure

  • Health is not only the absence of disease but also the ability to realize one's potential. It is a yardstick of one's well-being.
  • Health is the holistic process related to the overall growth and development of the nation.
  • Health improves the efficiency and productivity of a person and he is able to contribute more to the economic development of a country.
  • It is the responsibility of the government to ensure that health facilities are accessible to all people.
  • It is difficult to define the health status of a nation in terms of a single set of measures. The health status is usually measured in terms of life expectancy at birth, infant mortality rates, maternal mortality rates and nutrition levels, along with the incidence of communicable and non-communicable diseases.
  • Development of health infrastructure ensures a country of healthy manpower for the production of goods and services.
  • Health infrastructure includes hospitals, doctors, nurses and other paramedical professionals, beds, equipment required in hospitals and a well-developed pharmaceutic industry. Mere presence of health infrastructure is not sufficient to have healthy people. It should be accessible to all the people.
  • Health Infrastructure is an important indicator to understand the healthcare delivery provisions and mechanisms in a country. It also signifies the investments and priority accorded to the creation of infrastructure in the public and private sectors.

Health Status after Independence

  • The Union Government evolves broad policies and plans through the Central Council of Health and Family Welfare.
  • It collects information and renders financial and technical assistance to state governments, union territories and other Health Infrastructure bodies, for the implementation of important health programs lacking in large parts of the country.
  • It is a well-known fact that India is the second-largest populated country in the world. But the health status of a great majority of the people is far from satisfactory as compared to China and other developed countries.
  • However, over the last five decades, India has built up a health infrastructure and made considerable progress in improving the health of its population.

Expansion of Public Health Infrastructure

  • At the village level, a variety of hospitals, technically known as Primary Health Com (PHC), have been set up by the government
  • India also has a large number of hospitals run by voluntary agencies and the private hospitals are manned by professionals and para-medical professional trainee medical, pharmacy and nursing colleges.
  • Since independence, there has been a significant expansion in the physical provision of health services. During 1951-2015:
    • Number of hospitals and dispensaries increased from 9,294 to 45,978.
    • Nursing personnel increased from 18,054 to 23.44 lakh;
    • Allopathic Doctors increased from 61,800 to 9.2 lakh.

Three-tier system of health infrastructure:

  1. Primary Health Care: Primary Health Care includes:
    • Education concerning prevailing health problems and methods of identifying, preventing and controlling them;
    • Promotion of food supply and proper nutrition and adequate supply of water and was water and basic sanitation;
    • Maternal and child health care;
    • Immunization against major infectious diseases and injuries;
    • Promotion of mental health and provision of essential drugs.
    • In order to provide primary health care. Primary Health Centres (PHC), Community Health Centres (CHC) and Sub-centres (SC) have been set up in villages and small towns. They are generally manned by a single doctor, a nurse and a limited quantity of medicines. When the condition of a patient is not managed by such centers, they are referred to secondary or tertiary hospitals.
  2. Secondary Health Care: Hospitals, which have better facilities for surgery, Electro Cardio Gram (ECG), is called secondary health care institutions. They provide primary health care and also provide better healthcare facilities. They are mostly located in district headquarters and in big towns.
  3. Tertiary Health Care: Hospitals that have advanced level equipment and medicines and undertake all the complicated health problems, which could not be managed by primary and secondary hospitals, come under ‘Tertiary Health Care'. The tertiary sector also includes many premier institutes, which not only impart quality medical education and conduct research but also provide specialized health care. For example, AIIMS in Delhi.

Role of the Private Sector

  • In recent times, the role of private sector, in providing health services, has considerably grown.
  • More than 70% of the hospitals in India are run by the private sector.
  • Private sector control nearly two-fifth of beds available in the hospitals.
  • Nearly 60% of dispensaries are run by the private sector.
  • Private sector provides healthcare to 80% of outpatients and 46% of in-patients.
  • Private sector plays a dominant role in medical education and training, medical technol. and diagnostics, manufacture and sale of pharmaceuticals, hospital construction and provision of medical services. In 2001-02, there was more than 13 lakh medical enterprises employing 22 lakh people.
  • Many NRIs and industrial and pharmaceutical companies have set up super-special hospitals to attract India's rich and medical tourists.
  • However, the private sector in India has grown independently, without any major regulation. Some private practitioners are not even registered doctors and are known as quacks. The role of government in providing healthcare is still very important as poor people can depend only on government hospitals, due to huge expenses in private health services.

Community and Non-Profit Organisations in Healthcare

  • It functions with the idea that people can be trained and involved in the primary healthcare system. For example, NGOs like SEWA in Ahmedabad and ACCORD in Nilgiris are working in India.
  • Trade unions have built alternative health care services for their members, to give low cost and rational care to people from nearby villages. For example, Shahid Hospital, built-in 1983, is maintained by workers of Chhattisgarh Mines Shramik Sangh in Durg, Madhya Pradesh.
  • Some rural organizations (like Kashtakari Sangathan in Thane, Maharashtra) have also made attempts to build alternative health-care initiatives.

Medical Tourism in India

  • Health services in India combine the latest medical technologies with qualified professionals. Moreover, health services are cheaper in India as compared to the costs of similar health care services in other countries.
  • As a result, foreigners come to India for surgeries, liver transplants, dental and even cosmetic care. In 2016, around 2, 01,000 foreigners visited India for medical treatment and by 2020, India could earn more than 500 billion rupees through such 'Medical Tourism'. However, India needs to upgrade its health infrastructure to attract more foreigners to India.


Indian Systems of Medicine (ISM)

  • India has its own well-developed alternate system of health care, namely: AYUSH, consisting of six systems - Ayurveda, Yoga, Unani, Siddha, Naturopathy and Homeopathy.
  • At present, there are 3,167 ISM hospitals, 26,000 dispensaries and as many as 7 lakh registered practitioners in India.
  • ISM has huge potential and can solve a large part of our health ca. are effective, safe and inexpensive.
  • However, little effort has been done to set up a framework to standardize education or promote research.

Indicators of Health and Health Infrastructure

  • Expenditure on the health sector is just 4.7% of total GDP. It is extremely low as con d to other developed and developing countries.
  • India has about 17% of the world's population but it bears a frightening 20% of the Global burden of diseases (GBD).
  • Every year, around 5 lakh children die of water-borne diseases. The danger of AIDS is also looming large.
  • Malnutrition and inadequate supply of vaccines lead to the death of 2.2 million children every year.
  • At present, less than 20% of the population utilizes public health facilities and only 38% of the PHCs have the required number of doctors and only 30% of the PHCs have sufficient stock of medicines.

Rural-Urban Divide (Poor-Rich Divide)

  • 70% of India's population live in rural areas, but only 20% of total hospitals and 500 total dispensaries are located in rural areas. Out of about 6.3 lakh beds in government hospitals, only 30% of beds are available in rural areas.
  • There are only 0.36 hospitals for every one lakh people in rural areas, while urban are have 3.6 hospitals for the same number of people.
  • The PHCs located in rural areas do not even offer X-ray or blood testing facilities, which constitutes basic healthcare. States like Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh are relatively lagging behind in health care facilities.
  • In the rural areas, the percentage of people, who have no access to proper healthcare facilities, has increased over the last few years.
  • Villagers have no access to any specialized medical care, like pediatrics, gynecology, anesthesia and obstetrics.
  • Even though 380 recognized medical colleges produce 44,000 medical graduates every year, the shortage of doctors in rural areas persists. 20% of these graduates leave the country for better monetary prospects and many opt for private hospitals, located in the urban areas.
  • The poorest 20% of Indians living in both urban and rural areas spend 12% of their income on healthcare while the rich spend only 2%.

Women Health

  • Women constitute about half the total population in India. They suffer many disadvantages as compared to men, in the areas of education, participation in economic activities and health care.
  • The child sex ratio declined from 927 in 2001 to 914 in 2011. It indicates a growing incidence of female foeticide in the country.
  • Around 3 lakh girls below 15 years of age are not only married but have already borne children at least once.
  • More than 50% of married women between the age group of 15 and 49 have anaemia and nutritional anaemia, caused by iron deficiency, which has contributed to 19% cent of maternal deaths.
  • Abortions are also a major cause of maternal morbidity and mortality in India.

Health: A basic Human Right.

  • All citizens can get better health facilities if public health services are decentralized.
  • Success in the long-term battle against diseases depends on education and efficient health infrastructure. Therefore, it is important to create awareness of health and hygiene and provide efficient systems.
  • Telecom and IT sectors can play an important role in improving the health process of the economy.
  • The effectiveness of healthcare programs rests on primary healthcare. Therefore, serious steps should be taken to improve them.
  • Private-Public Partnership (PPP) can effectively ensure reliability, quality and affordability of both drugs and medicare.

Critical assessment of Health Infrastructure

  • Inequitable distribution of Health Services: The existing health system suffers from inequitable distribution of institutions and manpower. About 70% of India's population lives in rural areas, but only 20% of total hospitals are located in rural areas. Most modern health facilities are available only in urban areas.
  • Communicable Diseases: Increasing attention is urgently needed for the prevention of Communicable diseases like AIDS (Acquired Immune Deficiency Syndrome), HIV (Human Immuno Deficiency Virus) and SARS (Severe Acute Respiratory Syndrome), through effective control measures.
  • Poor Sanitation Facilities: Sanitation facilities are extremely poor in both rural and urban areas. About 30% of the houses in urban areas do not have toilet facilities and the condition in rural areas is even worse. Improvement in sanitation facilities is immediately needed for the good health of the people.
  • Lack of Manpower: Even though India produces 12,000 medical graduates every year, still there is a huge shortage of manpower.
  • Malnutrition: Widespread malnutrition poses a major threat to lives, especially in the case of children.
  • Role of Private Sector: Public sector has not been so successful in providing adequate health structure. There is a need to increase the collaboration of the public sector with the private sector to meet the health care needs of people. The government should take serious steps to overcome these deficiencies, as improvement in the health status is necessary for increasing the productivity and growth of the economy.


Infrastructure: Essential for Economic Development

  • Infrastructure acts as a support system. It directly influences all economic activities by increasing the productivity of the factors of production and improving the quality of life.
  • In the last six decades, India has made considerable progress in building its infrastructure. However, its distribution has been uneven, in terms of the rural-urban divide.
  • Many parts of rural India are yet to get good roads, telecommunication facilities, electricity, schools and hospitals.
  • As India is moving towards modernization, there is an increasing demand for quality infrastructure.
  • After the economic reforms of 1991, various concessions and incentives are provided to the private sector and foreign investors in order to attract them for investing in infrastructural Facilities.


  • The economic development that we have achieved so far has come at a very heavy price at the cost of environmental quality.
  • Liberalization, Privatisation and Globalisation (LPG) have resulted in the development of the economy but with adverse consequences on our environment.
  • Therefore, we have to bear in mind the adverse consequences of the past development path on our environment and consciously choose a path of sustainable development.


Definition: Environment is defined as the total planetary inheritance and the totality of all resources.

  • Environment is the sum total of external forces which surround us.
  • It includes all the biotic and abiotic factors that influence each other.
  • Biotic Elements: Biotic elements include all living elements like birds, animals and plants, forests, fisheries, etc.
  • Abiotic Elements: Abiotic elements include non-living elements like air, water, land, etc.

Functions of the Environment

  1. Provides resources for production: The environment supplies renewable and non-renewable resources.
    • Renewable resources are those which can be used without the possibility of the resource becoming depleted or exhausted, like trees, fish, etc.
    • Non-renewable resources are those, which get exhausted with extraction and use, like fossil fuels.
    • The natural resources provided by the environment are used as inputs for production.
  2. Environment assimilates waste: The process of production and consumption activities generates a lot of wastage, which is absorbed by the environment.
  3. Environment sustains life: Some necessities of life (sun, soil, water and air) are part of the environment. Therefore, the environment sustains life by providing these essential elements.
  4. It provides aesthetic services: The environment includes land, forests, water bodies, rainfall, air, atmosphere, etc. People enjoy the scenic beauty of these elements (like that of hill stations). Such elements help in improving the quality of life. The environment is able to perform these functions without any interruption as long as the demand for these functions is within its "Carrying Capacity.

​​​​​​​'Carrying Capacity' implies two things:

  • Resource extraction should remain below the rate of resource regeneration.
  • The generation of waste should remain within the absorption capacity of the environment.
  • If these two conditions are not fulfilled, then the environment fails to perform its vital function of life sustenance and it leads to the situation of 'Environmental Crisis

Reasons for Environmental Crisis

  1. The population explosion and the advent of the industrial revolution have increased the demand for environmental resources, but their supply is limited due to overuse and misuse.
  2. The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some of the vital resources. Due to this, a huge amount of money is spent on technology and research to explore new resources.
  3. Extinction of many resources and continuous rise in population has also resulted in an environmental crisis.
  4. Due to affluent consumption and production standards of the developed world, the wastes generated are beyond the absorptive capacity of the environment.
  5. The development process has polluted the atmosphere and waters and there is a decline in air and water quality (70% of water in India is polluted). It has resulted in an increased incidence of respiratory and water-borne diseases.
  6. The expenditure on health is also rising. Global environmental issues such as global warming and ozone depletion also contribute to the increased financial commitments of the government.
  7. Thus, it is clear that the opportunity costs of negative environmental impacts are high and environmental issues of waste generation and pollution have become critical today.

Reversal of Supply-Demand relationship: Reason for Environment Degradation

  • In the Past, Demand was less than Supply In the early days of civilization, demand for environmental resources and services was much less than their supply.
    • Pollution was within the absorptive capacity of the environment; and
    • Rate of resource extraction was less than the rate of regeneration of these resources.
  • As a result, environmental problems did not arise.
  • Presently, Demand is more than Supply
  • In the present period, the demand for resources is in far excess of supply, i.e. demand is beyond the rate of regeneration of the resources. With the population explosion and with the advent of the industrial revolution, the pressure on the absorptive capacity of the environment has increased tremendously.
  • Thus, a reversal of supply-demand relationship is responsible for the degradation of the quality of the environment.


Global Warming

Global warming is the observed and projected increase in the average temperature of the earth's atmosphere and oceans. During the past century, the atmospheric temperature has risen by 1.1°F (0.6°C) and the sea level has risen several inches.

Cause of Global Warming

  • Global warming is due to an increase in greenhouse gas concentrations, like water vapor, carbon dioxide, methane and ozone in the atmosphere.
  • Burning of coal and petroleum products (sources of carbon dioxide, methane, nitrous oxide, ozone);
  • Deforestation increases the amount of carbon dioxide in the atmosphere
  • Methane gas released in animal waste;
  • Increased cattle production, contributes to deforestation, methane production and the use of fossil fuels.
  • The atmospheric concentrations of carbon dioxide and methane (CH) have increased by 41 % and 160% respectively above pre-industrial levels since 1750.

Main Effects of Global Warming

  • Ice is melting worldwide, especially at the earth's poles. It has led to a steep rise in sea level and coastal flooding.
  • Hurricanes and other tropical storms are likely to become stronger.
  • Increased incidence of tropical diseases, like malaria, cholera, dengue, chikungunya, etc.

There are thousands of species (like polar bears) in danger of becoming extinct forever.


Ozone Depletion

Definition: Ozone depletion refers to the destruction of ozone in the ozone layer due to the presence of chlorine from manmade chlorofluorocarbons (CFCs) and other forces.

Cause of Ozone

  • The problem of ozone depletion is caused by high levels of chlorine and bromine compounds in the stratosphere.
  • The origin of these compounds is: CFC, which is used as cooling substances in AC and refrigerators; or and refrigerators; or
    • Aerosol propellants and Bromofluoro carbons (halons), which is used in fire extinguishers.

Main Effects of Ozone Depletion

  • Because of the depletion of the ozone layer, more ultraviolet (UV) radiation comes to earth and causes damage to living organisms.
    • UV radiation seems to be responsible for skin cancer in human beings.
    • UV radiation lowers the production of phytoplankton, which affects other aquatic organisms.
    • UV radiation can also influence the growth of terrestrial plants.

Montreal Protocol

  • As the ozone layer prevents most harmful wavelengths of ultraviolet light from passing through the earth's atmosphere, its depletion has generated worldwide concern. It has led to the adoption of the “Montreal Protocol".
  • Montreal Protocol is a historical treaty designed by the members of the United Nations to protect the ozone layer by phasing out CFC, which is supposed to be the main reason for ozone depletion.
  • Under the Montreal Protocol, all the signing members agreed to freeze the consumption and production of CFC by the year 2013.
  • India signed the Montreal Protocol along with its London Amendment on 17.09.1992.
  • The Montreal Protocol has significantly reduced the burden of CFCs in the stratosphere and helped in ozone recovery.



  • The black soil of the Deccan Plateau is particularly suitable for the cultivation of cotton, leading to a concentration of textile industries in this region.
  • The Indo-Gangetic plains spread from the Arabian Sea to the Bay of Bengal are one of the most fertile, intensively cultivated and densely populated regions in the world.
  • India's forests, though unevenly distributed, provide green cover for a majority of its population and natural cover for its wildlife.
  • Large deposits of iron ore, coal and natural gas are found in the country. India alone accounts for nearly 20% of the world's total iron-ore reserves.
  • Bauxite, copper, chromate, diamonds, gold, lead, lignite, manganese, zinc, uranium, etc. are also available in different parts of the country.

India's environmental problems pose a “Dichotomy" (contrast between two things that are or are represented as being entirely different):

  • Poverty is causing environmental degradation through cutting down of trees (to use fuelwood), overgrazing of animals, pollution of water resources, and encroachment into forest land.
  • Affluence in living standards is causing environmental degradation because with affluence (wealth), the demand for goods and services increases. Higher demand necessitates the need for an increase in production. For increasing production, the demand for finite natural resources increases. It raises the pollution resulting from more vehicles and industries. 


Air pollution, water contamination, soil erosion, deforestation and wildlife extinction are some of the most pressing environmental concerns of India. The priority issues identified are:


Land Degradation

  • Meaning: Land degradation refers to a decline in the overall quality of soil, water, or vegetation conditions, commonly caused by human activities.
  • It occurs through natural and man-made processes of wind erosion, water erosion and water logging.
  • In India, land suffers from different types of degradation, mainly because of unstable use and inappropriate management practices.
  • Such kind of degradation leads to the loss of invaluable nutrients and lower food grain production.
  • Poor land use practices are responsible for the rapid land degradation in India.

Causes of Land Degradation

  1. Loss of vegetation due to deforestation.
  2. Overgrazing, i.e. grazing of natural pastures at stocking intensities above the livestock carrying capacity.
  3. Encroachment into forestlands.
  4. Non-adoption of adequate soil conservation measures.
  5. Unsustainable fuelwood and fodder extraction.
  6. Improper crop rotation.
  7. Indiscriminate use of agrochemicals, such as fertilizers and pesticides.
  8. Improper planning and management of irrigation systems.
  9. Extraction of groundwater in excess of the recharge capacity.
  10. Poverty of the agriculture-dependent people.
  11. Shifting cultivation.

Some Facts and Figures about Land Degradation

  • According to Indian Agriculture in Brief, 27th edition, 2000, about 174 million hectares (i.e., 53 per cent of the total land area) of land in India is facing the serious problem of land degradation. Out of 174 million hectares:
  • 144 million hectares are subjected to soil erosion through water and wind; and
  • A Balance of 30 million hectares is subjected to other problems.


  1. Degradation of Forests or Deforestation
  • Deforestation involves the permanent destruction of indigenous forests and woodlands. It refers to the cutting, clearing and removal of rainforest, where land is thereafter converted to a non-forest use.
  • 'Deforestation is rising at such a rapid scale that it has totally disturbed the ecological balance of the country.
  • The per capita forestland in the country is only 0.08 hectare against the requirement of 0.47 hectare to meet basic needs.
  • There are very serious and dangerous consequences of forest depletion, like chances of more floods, soil erosion, heavy siltation of dams and changes in climate.
  1. Soil Erosion
  • Definition: Soil erosion takes place when the surface soil is washed away through excessive rains and floods.
  • Deforestation is one of the major reason for soil erosion.
  • As per the estimates, soil is being eroded at a rate of 5.3 billion tonnes a year, which is in excess of the recharge capacity. As a result, country loses 0.8 million tonnes of nitrogen 1.8 million tonnes of phosphorus and 26.3 million tonnes of potassium every year.
  • The quantity of nutrients lost due to erosion each year ranges from 5.8 to 8.4 million tonnes.
  1. Biodiversity Loss
  • Definition: Biodiversity is defined as the variability among living organisms from all sources, including terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are a part.
  • Conservation and sustainable use of biodiversity is fundamental to ecologically sustainable development
  • Biodiversity loss has serious economic and social costs for any country as many plant and animal species are severely threatened by the destruction of their habitat and over exploitation of resources. So, there is an immediate need for biodiversity conservation.
  1. Air Pollution
  • Air pollution is the presence of materials in the  air in such concentrations, which are harmful to man and the environment.
  • In India, air pollution is widespread in urban areas where vehicles are the major contributors, and in a few other areas, which have a high concentration of industries and thermal power plants.
  • Vehicular emissions are of particular concern as these are ground level sources and have the maximum impact on the general population.
  • The number of motor vehicles increased from 3 lakh in 1951 to 6.7 crores in 2003 and 14.18 crores in 2011. Personal transport vehicles (two-wheeler vehicles and cars only).
  • Constitute about 80% of the total number of registered vehicles, thus, contributing significantly to the total air pollution load.
  • India is one of the ten most industrialised nations of the world. However, this achievement comes with unwanted and unanticipated consequences like unplanned urbanization, pollution and the risk of accidents. The CPCB (Central Pollution Control Board) has identified 17 categories of industries (large and medium scale) as significantly polluting

Some Ways to Control Air Pollution

  • Air pollution causes health problems and causes damage to the environment and property. It has resulted in ozone depletion, which is leading to climate change. Therefore, there is a serious need for intake steps to control it. Some of the ways to control air pollution are:
  • Promotion of public transport like the use of Delhi Metro instead of private vehicles. Steps should be taken for effective traffic planning and management.
  • Promotion of cleaner fuels in vehicles, like the use of CNG instead of petrol and diesel.
  • Use of cleaner fuels such as LPG in households to reduce indoor air pollution.
  • Promotion of cleaner technologies, strengthening of emission standards, introducing economic incentives and strengthening of the monitoring and reporting system.

Pollution Control Boards

In order to address water and air pollution in India, the government set up the Central Pollution Control Board (CPCB) in 1974. This was followed by states establishing their own state-level boards to address all the environmental concerns.

Main Functions of Pollution Control Boards

  • They investigate, collect and disseminate information relating to water, air and land pollution, and lay down standards for sewage/trade effluent and emissions.
  • These boards provide technical assistance to governments in promoting cleanliness of streams and wells by prevention, control and abatement of water and air pollution in the country.
  • These boards also carry out and sponsor investigations and research, relating to problems of water and air pollution and for their prevention, control, or abatement.
  • They also organise, through mass media, a comprehensive mass awareness programme for the same.
  • They also prepare manuals, codes and guidelines relating to treatment and disposal of sewage and trade effluents.
  • They assess the air quality through regulation of industries.
  • State boards periodically inspect every industry under their jurisdiction, through district-level officials, to assess the adequacy of treatment measures provided to treat effluent and gaseous emissions.
  • They also provide background air quality data needed for industrial siting and town planning
  • They monitor the quality of water in 125 rivers (including the tributaries), wells, lakes creeks, ponds, tanks, drains and canals.



  • Definition: Sustainable development is the development, which will allow all future generations to have a potential average quality of life, that is, at least as high, as what is being enjoyed by the current generation.
  • The basic aim of sustainable development is to ensure that the present generation should leave a stock of 'quality of life for the next generation, which is no less than what we have inherited.
  • Environmentalists have used the term 'sustainability' in an attempt to clarify the desired balance between economic growth on one hand and environmental preservation on the other.
  • For economists, a development path is sustainable, if the ability of future generations to the stock of overall capital assets remains constant or rises over time.
  • The term 'sustainable development has its origin in the International Union for the Conservation of Natural Resources (IUCN) 1980 World Commission Strategy report.
  • According to the commission, sustainable development refers to the development that meets the need of the present, without compromising the ability of future generations, to meet their own needs.
    • Sustainable development is a development, that:
    • Meets the basic needs (employment, food, energy, water, housing) of all people, particularly the poor people; and
  • Ensures growth of agriculture, manufacturing and service sector, to meet these needs

Sustainable Development aims:

  • Sustainable and equitable use of resources, to meet the needs of the present and the future generations without causing damage to the environment.
  • To prevent further damage to our life-support systems;
  • To Conserve and nurture biodiversity and other resources for long-term food security.

How do achieve Sustainable Development?

  1. Restrict use of renewable resources: Renewable resources should be extracted on a sustainable basis. It means the rate of extraction should not exceed the rate of regeneration.
  2. Substitute non-renewable with renewable resources: As non-renewable resources are depleted, renewable substitutes must be developed, to maintain the flow of services over time. It means the rate of depletion of non-renewable resources should not exceed the rate of creation of renewable substitutes.
  3. Become Input Efficient: Technological progress should be made to become input efficient and not input consuming. It means efforts should be made to produce more per unit of input. It will reduce the exploitation of resources.
  4. Control Pollution: Pollution emissions should be limited to the absorption capacity of the environment.
  5. Control the growth of population: The growth of the human population should be controlled to a level, which is within the carrying capacity of the environment.

Strategies for Sustainable Development

  1. Use of Non-conventional sources of energy: India is hugely dependent on thermal and hydropower plants to meet its power needs. However, both these sources have adverse environmental impacts.
    • Non-conventional sources like wind Energy power and solar rays are cleaner and greener energy sources but are not yet been explored on a large scale due to a lack of technological devices.
    • In areas with a high speed of the wind, windmills can provide electricity without any adverse impact on the environment. In areas with high speed of wind, windmills can provide electricity without any adverse impact on the environment.
    • India is naturally endowed with a large quantity of solar energy in the form of sunlight. With the help of photovoltaic cells, solar energy can be converted into electricity
    • Both the sources (wind power and solar rays) are very free from pollution. Although their initial cost is high, the benefits are, such that the high cost gets easily absorbed.
  1. Use of cleaner fuels
  • In Urban areas, use of Compressed Natural Gas (CNG) is being promoted to be used fuel. In Delhi, use of CNG in public transport has significantly lowered air pollution.
  • In Rural areas, households generally use wood, dung cake or biomass as fuel. The fuels have several adverse implications like deforestation, reduction in green cover wastage of cattle dung and air pollution. To overcome this problem, the use of LPG and gobar gas is being promoted, as they are cleaner fuels and help in reducing household pollution largely.
  1. Establishment of Mini-Hydel Plants: In mountainous regions, perpetual streams can be found almost everywhere.
  • These streams can be used to generate electricity (via turbines) through Mini-hydel plants.
  • Such power plants are more or less environment-friendly and generate enough power to meet local demands.
  • Moreover, large-scale transmission towers and cables are also not required in such plants.
  1. Traditional Knowledge and Practices: Traditionally, Indian people have been close to their environment. All practices relating to the agriculture system, healthcare system, housing, transport, etc. used to be environment friendly.
    • The shift from the traditional systems has caused large-scale damage to the environment and to our rural heritage.
    • For example, India is well known for its AYUSH treatment with about 15,000 species of plants, which have medicinal properties.
  • However, with the advent of westerthe n system of treatment, we ignore our traditional systems of Ayurveda, Unani, etc.
  • These old systems are environment friendly, relatively free from side effects and do not involve large-scale industrial and chemical processing.
  1. Use of Bio-compost: The use of chemical fertilizers to increase agricultural production has not only adversely affected the large areas of productive land but also contaminated the water bodies.
  • Due to use of chemical fertilizers, demand for irrigation has been going up year after years.
  • With the rise in demand for organic food, farmers have again started using compass made from organic wastes of different types.
  • In certain parts of the country, cattle’s are maintained only because they produce dung, which is an important fertilizer and soil conditioner.
  1. Control of Bio pest: The advent of green revolution has increased the use of chemical pesticides, which not only contaminates the food products, but also pollutes the water bodies.
  • To meet this challenge, better methods of pest control are promoted. For example, neem based pesticides are environment friendly and free from side effects. .
  • In addition, awareness is being created for use of various animals and birds (like snakes lizards, owls, peacocks) as natural pest controllers.
  • Mixed cropping and growing different crops in consecutive years on the same land have also helped farmers.
  1. Change in unsustainable patterns of consumption and production: With increasing purchasing power, wasteful consumption, linked to market driven consumerism, is stressing the resource base of developing countries further.
  • It is important to counter this through education and public awareness.
  • In several areas, desirable limits and standards for consumption and production need to be established and applied through appropriate mechanisms, including education incentives and legislation.


Comparative Development Experiences of India and its Neighbours

Development Path of India, Pakistan and China

  • India, Pakistan and China have many similarities in their developmental strategies.
  • All three nations started their developmental path at the same time.
  • India and Pakistan got independence in 1947 and the People's Republic of China were established in 1949.
  • All the-three countries had started planning their development strategies in similar ways. India announced its first Five Year Plan in 1951, Pakistan announced in 1956 and China in 1253.
  • Since 2013, Pakistan is working on the basis of 11th Five Year Development Plan (2013-18), while China is working on 13th Five Year Plan (2016-20). Until March 2017, India has been following Five Year Plan-based development model.
  • India and Pakistan adopted similar strategies, such as creating a large public sector and raising public expenditure on social development.
  • Till 1980s, all the three countries had similar growth rates and per capita incomes. All the three countries have performed differently. India and Pakistan have made slow and irregular progress as compared to China, which has made miraculous progress.



  • Historical Background: China has one of the world's oldest people and continuous civilizations, consisting of states and cultures dating back more than six millennia. The People's Republic of China (PRC), commonly known as China, was established in 1949.
  • Geography: China is situated in eastern Asia, bounded by the Pacific in the east. It is the third-largest country in the world, next to Canada and Russia, with an area of 9.6 million square kilometers.
  • Population and Language: China is the most populous country in the world with 1,371 million people (as per 2015 estimates) and a growth rate of 0.5% per annum. Most languages in China belong to the Sino-Tibetan language family, spoken by 29 ethnicities. There are also several major dialects within the Chinese language itself.
  • Economy:  Being one of the oldest civilizations in the world, China has been the world's largest economy. After the establishment of the People's Republic of China under one-party rule, all the critical sectors of the economy, enterprises and lands owned and operated by individuals, were brought under government control.
  1. Great Leap Forward (GLF) campaign:
  • In 1958, a program named 'The Great Leap 42...Forward (GLF)' campaign was initiated by Mao to modernize China's economy.
  • The aim of this campaign was to transform the agrarian economy into a modern economy through the process of rapid industrialization.
  • Under this program, people were encouraged to set up industries in their backyards.
  • In rural areas, communes were started. Under the Commune system, people collectively cultivated lands.
  • 1958, there were 26,000 communes, covering almost all the farm population.
  • GLF campaign met with many problems. A severe drought caused havoc in China killing about 30 million people.
  1. Great Proletarian Cultural Revolution:
  • In 1965, Mao introduced the Great Proletarian Cultural Revolution (1966-76), under which students and professionals were sent to work and learn from the countryside. However, when Russia had conflicts with China, it withdrew its professionals, who had earlier been sent to China to help in the industrialization process.
  1. Reforms Introduced in China:
  • In the initial phase, reforms were initiated in agriculture, foreign trade and investment sectors.
    • In agriculture, commune lands were divided into small plots which were allocated (only for the use and not as ownership) to the individual households.
    • They were allowed to keep all income from the land after paying stipulated taxes.
  • In the later phase, reforms were initiated in the industrial sector.
    • Private sector firms and township and village enterprises (enterprises that were owned and operated by local collectives) were allowed to produce goods.
    • At this stage, enterprises owned by the government (known as State-Owned Enterprises or SOEs), were made to face competition.
  1.  Dual Pricing in the Reforms Process:

 The reform process also involved dual pricing. This means fixing the prices in two ways:

  • Farmers and industrial units were required to buy and sell fixed quantities of inputs and outputs on the basis of prices fixed by the government.
  • For other transactions, the inputs and outputs were purchased and sold at market prices.
  1. Special Economic Zones (SEZ):

In order to attract foreign investors, special economic zones were set up.



Historical Background:

Pakistan, officially the Islamic Republic of Pakistan, gained independence on 14 August 1947. In 1971, a civil war in East Pakistan resulted in the independence of Bangladesh. Pakistan's history has been characterized by periods of economic growth, military rule and political instability.


Pakistan is located in South Asia and borders Central Asia and the Middle East. Its borders are with China in the North and towards the West and Northwest are Iran and Afghanistan and towards the East and South East, its borders are with India. The country has an area of 7,96,095 square kilometers. The total cultivated area is 2,21,300 square kilometers, whereas the area under forest is 42,300 square kilometers.

Population and Language:

Pakistan is the sixth most populous country in the world with 188 million people (as per 2015 estimates) with a growth rate of 2.1% per annum. One-third of the total population lives below the official poverty line. It has the second-largest Muslim population in the world after Indonesia. The national language is Urdu and English is the official language.


  • Mixed Economic System: Pakistan follows the mixed economy model with the co-existence of public and private sectors.
  • Introduction of Various Policies: In the late 1950s and 1960s, Pakistan introduced a variety of regulated policy frameworks for the growth of domestic industries. The policy combined tariff Protection for manufacturing of consumer goods, together with direct import controls on competing imports.
  • Green Revolution: In the case of agriculture, the introduction of the Green Revolution and increase in public investment in infrastructure led to a rise in the production of food grains. This changed the agrarian structure dramatically.
  • Importance to Role of Public Sector in the early 1970s: In the early 1970s, the nationalization of capital goods industries took place.
  • Importance of Role of Private Sector in the late 1970s: In the late 1970s, there was a shift in the government policy, when it adopted the policy of denationalization. The government encouraged the private sector and also offered various incentives to them. All this created a conducive climate for new investments.
  • Financial Support during the late 1970s: During this period, Pakistan also received financial support from (i) Western nations; and (ii) Remittances from emigrants to the Middle-east. This helped the country in stimulating economic growth.
  • Reforms: In 1988, reforms were initiated in the country.



Demographic Indicators

  • Population: China is the most populous country in the world with 1,371 million people and India is the second most populated country with 1,311 million people. As compared to China or India, the population of Pakistan is very less (188 million people). If we look at the global population, out of every six persons living in this world, one is an Indian and another Chinese. The population of Pakistan is very small and accounts for roughly one-tenth of China or India.
  • Growth Rate of Population: Though China is the most populated country, its annual growth rate population is the lowest (0.5%) as compared to India (1.2%) and Pakistan (2.1%). The reason for the low growth of population is the 'One-Child policy' introduced in China in the late 1970s. 'One-Child Policy" of China has successfully reduced the growth rate of population and provides a better health service for women and has reduced the risk of death and injury associated with Pregnancy. However, this policy has some other implications also. For instance, after a few decades, there will be more elderly people in proportion to young people in China. This will force China to take steps to provide social security measures with fewer workers.
  • Density of Population: China is the third-largest country in the world and growth rate of Population is lowest in China as compared to India and Pakistan. As a result, density of population of China is the lowest (146 persons per sq. km) as compared to India (441 Persons per sq. km) and Pakistan (245 persons per sq. km).
  • Sex Ratio: Due to the preference for sons, the sex ratio is low and biased against females in all the three countries. Sex ratio is the lowest in India with 929 females per 1,000 males. In China and Pakistan, the corresponding figures are 941 and 947. In recent times, all three countries are adopting various measures to improve the situation.
  • Fertility Rate: Fertility Rate is calculated as the number of children borne by a woman of the reproductive age (15-45 years), on average. Since the introduction of the one-child policy, the fertility rate in China has fallen from over 3 births per woman in 1980 to approximately 1.6 births. Fertility rate is the highest in Pakistan at 3.7 births per woman and India comes second with 2.3 births per woman
  • Urbanization: Urbanisation is the highest in China (56%, In India and Pakistan, the corresponding figures are 3,3% and 39%.

Growth Indicators

Growth Rate of Gross Domestic Product (GDP)

GDP growth rate is considered the single most important indicator of an economy during the period. China with the second-largest GDP, as measured by purchasing power parity (PPP), is estimated to be $ 19.8 trillion. India, GDP (PPP) is 8.07 trillion and Pakistan, GDP is roughly about 12% of India’s GDP.

During 1980-90:

  • China was having double-digit growth of 10.3%;
  • Pakistan’s growth rate was 6.3%;
  • India was at the bottom with just a 5.7% growth rate.

During 2011-15:

  • There was a drastic fall in China's growth rate from 10.3% to 7.9%.
  • Pakistan also met with a drastic decline in growth rate from 6.3% to 4%. As per some scholars, reform processes introduced in 1988 and political instability were the main reasons behind this decline.
  • India recorded an increase from 5.7% to 6.7%

Sectoral Contribution

Agriculture (Primary Sector)

In China

  • Due to topographic and climatic conditions, the area suitable for cultivation is just 10% of its total land area.
  • The total cultivable area in China accounts for 40% of the cultivable area in India.
  • Till 1980, more than 80% of its population was dependent on farming as their sole source of livelihood.
  • Since then, the government encouraged people to leave their fields and pursue other &lefties, such as handicrafts, commerce and transport.
  • As a result, proportion of workforce engaged in agriculture reduced to 28% in 2014-15, with a contribution to GDP of 9%.

In India

  • The contribution of agriculture to GDP was 17%. The proportion of workforce engaged in agriculture was 50%.

In Pakistan

The contribution of agriculture to GDP was the same at 25%, but the proportion of workforce engaged in agriculture was 43% as compared to 50% of India.

Industry (Secondary Sector)

  • Contribution to GDP: In China, manufacturing and service sectors contribute the highest to GDP at 43 and 48 per cent, respectively whereas in India and Pakistan, it is the service sector that contributes the highest by more than 50 percent of GDP.
  • In China, secondary sector contributed 43% to China's GDP, whereas in India and Pakistan, the share of secondary sector was 30% and 21% respectively.
  • Proportion of Workforce: In the normal course of development, China has been shifting employment and output from agriculture to manufacturing and then to services. In India and Pakistan, the shift is taking place directly in the service sector.
  • The proportion of workforce engaged in manufacturing sector, in India and Pakistan in 21101715, was low at 21% and 23% respectively, whereas 29% of population was engaged in China.

Service (Tertiary Sector)

  • Contribution to GDP: In both India and Pakistan, the service sector is emerging as a major player in development. Service sector contributes the highest to their GDP, with contribution of 53% in case of India and 54% for Pakistan.
  • The contribution of service sector to the GDP in China was 32%.
  • Proportion of workforce: In the 1980s, Pakistan was faster in shifting its workforce to service sector than India and China.
  • The proportion of workforce engaged in service sector in 1980 for India, China and Pakistan were 17%, 12% and 27%. It reached the level of 29%, 43% and 34% respectively in 2014.


  • In the last two decades, the contribution of agriculture sector to GDP, which employs the largest proportion of workforce in all the three countries, has declined.
  • In the industrial sector, China has maintained a double-digit growth rate, whereas, for India and Pakistan, growth rate has declined.
  • In case of service sector, China was able to raise its rate of growth during 1980-2015, while growth. India and Pakistan stagnated with their service sector growth.
  • So, China's growth is mainly contributed by the manufacturing sector and India's growth by the service sector. During this period, Pakistan has shown deceleration in all three sectors.

Human Development Indicators

  • Human Development Index (HD1):
  • HDI is an important indicator to study the human development. Higher value of HDI shows the higher level of growth and development of a country.
  • In 2016, HDI for India, China and Pakistan was estimated to be 0.624, 0.738 and 0.550 respectively.
  • According to their HDI, Global ranks accorded were found to be 131, 91 and 148 respectively.
  • Life Expectancy at Birth:
  • Life expectancy refers to the average number of years for which people are expected to live. A higher life expectancy indicates longer and a more active average life span. China has the highest life expectancy of 76 years. India and Pakistan have the life expectancy of 68.3 and 66.4 years respectively.
  • Mean years of Schooling:
  • It is highest in case of China with 7.6%, while the corresponding figures for India and Pakistan are 6.3% and 5.1% respectively.
  • Infant Mortalitv Rate (IMR):
  • Infant mortality rate refers to number of infants dying before reaching one year of age per 1,000 live births in a year. Low IMR shows better health and sanitation facilities as most of the infants die due to unhygienic and insanitary environments. It is lowest in China with 9 infants and highest in Pakistan with 66 infants. IMR in India is 38.
  • People below Poverty Line:
  • People below the poverty line are the people who do not even have that level of income and expenditure, which is necessary to meet specified minimum levels of calorie intake. For the proportion of people below the international poverty rate of $ 3.10 a day, people below poverty line are 37%, 32% and 44% for India, China and Pakistan respectively.
  • Maternal Mortality Rate:
  • Both India and Pakistan have not been able to save women from maternal mortality. In China, for one lakh births, only 27 women die, whereas in India and Pakistan, maternal mortality rate is 174 and 178 respectively.
  • GDP per capita (PPP US $):
  • Higher ranking of China in HDI is mainly due to higher GDP per capita. In 2016, China's GDP per capita was estimated to be US $ 14,400, while it was just US $ 6,092 for India and US $ 4,866 for Pakistan.
  • Access to improved Wafer Sources:
  • It refers to the percentage of population which has a reasonable access to water (from tap, hand pump or protected well) and is able to obtain at least 20 liters per person per day. China (96%) is ahead of India (94%) and Pakistan (91%), in providing improved water sources.
  • Access to improved Sanitation:
  • Pakistan's performance in providing sanitation is better than India and China. China has provided improved sanitation to 77% of population, whereas corresponding figures for Pakistan and India are 64% and 40% respectively.
  • Population undernourished:
  • The percentage of population, which is not able to obtain adequante diet, is termed an undernourished population. China has the lowest percentage of population (9%), which is being undernourished. In India, 39% and in Pakistan, 45% of the population was undernourished.

Liberty Indicators:

  • Human development indicators are all extremely important, but not sufficient. Along with these, we also need liberty indicators.
  • Liberty Indicator may be defined as the measure of the extent of demographic participation in social and political decision making.
  • Examples of liberty indicators: (i) Measures of the extent of the Constitutional Protection Rights given to the citizens; (ii) Extent of the Constitutional Protection of the independence of the Judiciary and Rule of Law. Human development index may be said to be incomplete unless such indicators are included.


Appraisal of Development Strategies

 Developmental strategies of a country act as a model to others for lessons and guidance for their own development.


China did not have any compulsion to introduce reforms as dictated by the World Bank and International Monetary Fund to India and Pakistan. But, some adverse situations in the economy prior to 1978, forced China to go for reforms.

Pre Reforms Period:

  • There had been a massive extension of basic health services in rural areas.
  • Through the commune system, there was a more equitable distribution of food grains.
  • Despite extensive land reforms, collectivization, the Great Leap Forward and other initiatives, the per capita grain output in 1978 was the same as it was in the mid-1950s.
  • In 1978, the then Government of China was not satisfied with the slow pace of the economy and lack of modernization under Maoist rule. They felt that the Maoist vision of economic development had failed. As a result, a number of reform measures were introduced in 1978.

Post Reforms Period:

  • Each reform measure was first implemented at a smaller level and then extended on a massive scale.
  • Development of infrastructural facilities in the areas of education and health, land reforms, long existence of decentralized planning and existence of small enterprises helped positively in improving the social and income indicators.
  • Agricultural reforms (handing over plots of land to individuals for cultivation) brought prosperity to a vast number of poor people. It created conditions for the subsequent phenomenal growth in rural industries and built up a strong support base for more reforms.


In Pakistan, the reform process led to a worsening of all the economic indicators. As compare• to 1980s, the growth rate of GDP and its sectoral constituents decreased in the 1990s. The proportion of poor in 1960s was more than 40 percent which declined to 25 percent in 1980sand started rising again in 1990s.

The reasons for the slow-down of growth and re-emergence of poverty in Pakistan's economy are:

  • Agricultural growth and food supply situation was based on good harvest and not the institutionalized process of technical change. When there was a good harvest, the economy was in good condition when it was not, the economic indicators showed stagnation.
  • Foreign exchange is an essential component for any country and it is always to build foreign exchange reserves through exports of manufactured goods. However, in Pakistan, most of the foreign exchange earnings came from remittances from Pakistani workers in the middle east and the exports of highly volatile agricultural products.
  • There was a growing dependence on foreign loans on the one hand and increasing difficulty in paying back the loans on the other.
  • However, during the last few years, Pakistan has recovered its economic growth and has been sustaining.




  • Indian economy performed moderately, but the majority of its people still depend on agriculture.
  • Infrastructure is lacking in many parts of the country.
  • It is yet to raise the standard of living of more than one-fourth of its population that lives below the poverty line.


  • Political instability, over-dependence on remittances and foreign aid along with the volatile performance of the agriculture sector are the reasons for the slowdown of the Pakistan economy.
  • In the recent past, it is hoping to improve the situation by maintaining high rates of GDP growth.
  • Many macroeconomic indicators began showing positive and higher growth rates reflecting the economic recovery.


  • In China, the lack of political freedom and its implications for human rights are major concerns.
  • However, in the last three decades, it used the 'market system without losing political commitment' and succeeded in raising the level of growth along with alleviation of poverty.
  • China has used the market mechanism to create additional social and economic opportunities
  • By retaining collective ownership of land and allowing individuals to cultivate land, China has ensured social security in a rural area
  • Public intervention in providing social infrastructure brought positive results in human development indicators in China.

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