economics.pdf

UNIT I

ECONOMIC GROWTH AND DEVELOPMENT

Although this course is about economic development in India it is importantthat you understand a few concepts that are used in the realm ofdevelopmental issues in general and to have an idea so that you can followthe debates about our economy and the rest of the world.

Four basic concepts, which we shall discuss in Chapter 1, are:(i) Economic Growth, (ii) Economic Development, (iii) SustainableDevelopment, and (iv) Quality of Life. These concepts have some historicalevolution. We shall try to follow this historical evolution of concepts. Ifthere are important digressions to the text, we shall put them in boxes. Wealso suggest you some activities so that you learn things by doing them.

In Chapter 2, we shall discuss alternative indices for measuring level ofdevelopment reached by a country in a particular year, We shall specificallydeal with Per Capita Income, Physical Quality of Life Index and HumanDevelopment Index.

Introduction

Economies grow and develop, theyexpand and advance, and they progressand prosper. There are phases when theydecline too, and there are economies thatexperience continuous decay. If oneconsiders long stretches of humanhistory, one knows that economies(civilizations) disappeared altogether. Wewill not take into account such longstretches of time. We shall not considertoo distant a past either. We will leavethem to historians, may be, economichistorians.

Let us take a normal view. We shallthen accept decline as an occasional,temporary phenomenon. We shall,therefore, use positive terms only. Of thepositive terms, which have been used todescribe changes as well as to prescribechanges, two have survived. They aregrowth and development. Because weshall primarily look at nations andcountries as economies, and use termssuch as ‘economic growth’ and ‘economicdevelopment’. We shall often try todistinguish ‘economic’ from ‘non-economic’ though there are cases whereit becomes difficult to do so.

In order to accommodate decline inlevel, we use phrase ‘negative growth’and to describe perverse tendencies, we

may use words ‘de-development’ or ‘mal-development’ though, we will not haveoccasions to use them.

You may find that, sometimes inmany scientific treatises and very oftenin colloquy, words ‘growth’ and‘development’ are used in inter-changeable fashion. But, normally adistinction is made between the two,particularly in economics literature. Itis maintained along the following lines.

You might have noticed that theword ‘growth’ is used to describe increasein stature or size. It is used to describea uni-dimensional change, as in thecase of stature of a child or a uniformexpansion in all directions, as in the caseof size of a balloon. Even when we referto development of a child, we refer tovarious dimensions of its personality.

When we do not refer to dimensionalaspects we use the word ‘growth’. Evenschools and institutes, colleges anduniversities, hotels and hospitals grow.But, we are often quick to point outcertain features that are not capturedby word ‘growth’. It is rare, if ever, thatgrowth takes place without developmentor development takes place withoutgrowth. In most cases, they wouldaccompany each other. There may becases when one is dominant and theother is dormant. In such cases, people

CHAPTER 1

Concepts in Development

4 INDIAN ECONOMIC DEVELOPMENT

talk of growth without development ordevelopment without growth. It is,therefore, good to make an analyticaldistinction between the two.Economic GrowthLet us take here a comprehensive viewof the economy, taking all activitiestogether, and call its growth as economicgrowth.

GROWTH

One can talk of growth of labour force orof export or of agriculture or of industry.One can talk of growth of consumptionexpenditure or investment expenditure.One can also talk of growth of banking,insurance or information technologysector. We are, however, restrictingourselves here to the growth of wholeeconomy.

Let us look at it from the view pointof production. The total quantum ofgoods and services produced in aneconomy in a given year is referred toas Gross Domestic Product. Let usmeasure it at factor cost and write it inits abbreviated form GDPFC. The GDPFC

in 2000-01 was around Rs 17,00,000crore. This is a flow of goods and servicesproduced during the year 2000-01,measured in value terms. We may beinterested in knowing whether the flowthis year is larger than the flow last year.If so, we should know the measure ofthe flow last year. In order to see thatwe measure the ‘real’ change in flow,we should compute the magnitude offlows in both the years in the sameprices. The prices may belong to2000-01 or 1999-2000 or to 1993-94;the point is that the prices should relateto only one common year so that wemeasure only the change in flow of

output, not a mix of change in outputand change in prices. Such GDPs aresaid to be measured at constant prices.

Suppose you look into a recent issueof the National Accounts Statisticspublished by the Central StatisticalOrganisation and find that at 1993-94prices, the GDPFC for 1999-2000 and2000-01 are Rs.10,00,000 crore andRs.10,60,000 crore respectively. Thegrowth in flow called GDPFC in absoluteterms is Rs.60,000 crore. In relativeterms it is 6 per cent and it is calledgrowth rate. If we prepare a whole seriesfor 10, 20 or 50 years then we often addwords ‘per annum’ or ‘per year’ to growthrate. The growth rate is often expressedin terms of per cent per annum. This isa positive change; there could be anegative change also.

Suppose, we look at a twenty-yearperiod and use yearly figures for flow ofoutput of goods, which is measured interms of GDPFC at constant prices. Thegrowth rates calculated on yearly basiswould differ from year to year. Shall weuse nineteen year-to-year figures ofgrowth rate, some of which may benegative, to describe the change? Or,should we just compare the initial figurewith the final figure? If we adopt theformer, how to summarise the nineteenfigures? If we adopt the latter, it ispossible that one of these (initial or final)figures is just ‘abnormal’ as it does notfall in line. Would it not be a good ideato speak of general tendency and ignoreabnormal fluctuations around thegeneral tendency of increase? Economicgrowth should, therefore, be taken asa long-term tendency reflected byincrease in flow of final goods andservices produced by the economy.

CONCEPTS IN DEVELOPMENT 5

GROWTH RATE

The growth rate for period t can be definedin the following manner:

Qt – Q

t–1 Qtg

t = = –1... (1)

Qt–1 Q

t–1

wheregt = (relative) growth rate of GDP in

period tQt = GDPFC for period tQt–1 = GDPFC for period t–1

Suppose GDPFC for period 1999-2000 at1993-94 prices is Rs 11,52,000 crore andGDPFC for period 1998-99 at 1993-94 pricesis Rs 10,83,000. We can find out that

Rs 11,52,000–Rs 10,83,000 gt = = 1.0637–1 = 0.0637

Rs 10,83,000

The growth rate is therefore 0.0637.However, numerically growth rate ispresented in terms of ‘per cent’. Growth ratewould therefore be written as 6.37 per cent.

Sometimes, people average such growthrates for a number of periods (decade orquinquennium) and call it as averageannual growth rate (AAGR).

If there is a general tendency ofgrowth but there are occurrences ofdecline, the rates of growth will benegative in certain years. Shall we thensay that, while the potential of economyto produce is continuously increasing,the potential is sometimes not realised?There could be various reasons foroccasional decline. In economiesthat depend to a large extent on externaltrade conditions in other countries mayaffect the realisation. Monsoon maywidely fail in certain years and economymay get derailed for a while. Internaldemand may for a variety of reasons failto make full use of the potential. Someeconomists put too much emphasis onsupply potential and ignore demand

conditions. They define economicgrowth as long-term increase inproduction potential of the economy.

Some economists feel that it isgrowth of per capita GDPFC, not GDPFC,

that should be used to gauge the growthof an economy. But the point to be notedis that economic growth is a long-termphenomenon about the change in totaleconomic activity of an economy.

Economic Development

Some economists hold a view that theeconomic development is not muchdifferent from economic growth. Forthem, both are processes of long-termincrease in per capita income. Someother economists believe thatdevelopment is distinctly differentprocess than growth and covers otherdimensions of change besides growth.Still others hold that, development isnothing but the level of per capita incomeachieved in a particular year.

Whole human history may bethought of as a succession ofdevelopments or changes, largely inpositive direction. Looking from adistance, we find that productionstructure of the economy has changed:from hunting-gathering to settledagriculture, from agriculture tomanufacturing, from manufacturing toautomatic production, from productionof goods to production of services. It doesnot mean services were not produced,say thousand years ago; it only meansthat its relative importance has changedand that this might have occurredwith increase in all activities in a broadsense.

However, economics takes most of itslues from the economic history of the


West during the last two centuries or so.During this period, a variety of sweepingchanges took place in Europe, which maybroadly be categorized as technologicaland institutional. Early economistsworking in the field of developmenteconomics took notice of change in thecomposition of output and deployment oflabour in activities. They called itstructural change. Structural changemeant relative increase in terms ofproportion of non-agriculture/non-primary output and concomitantchanges in proportion of employment oflabour in non-agricultural activities (andalso in that of allocation of capital andland). However, this structural changehas to take place along with increase inoutput of all (or majority of) goods, notwith decrease. They defined economicdevelopment as economic growth withstructural change in favour of non-agricultural activities. And structuralchange was understood in terms ofcomposition of GDP and industrial distri-bution of labour. This was a reflection ofchanging demand for goods and serviceson the one hand and changing demandfor labour by production technology indifferent sectors on the other.

Most of the mainstream economistsbelieved that all economies in the Westtraversed the same path and believedthat other economies would also followthe same path. When they did not findit happening they pointed out thatinstitutional changes are equally impor-tant. Institutional changes could meanemergence of new institutions ingovernance, as also in capital market andmoney market. Some pointed outnecessity of attitudinal changes in people– a leap from traditional value system to

modern value system. In order toaccommodate this thought, economicdevelopment could be defined aseconomic growth plus, that is, somethingmore than economic growth.

There were attempts to emphasizetechnological dimension of development.It was pointed out that economic growthshould be accompanied by rise inproductivity. Then, we could defineeconomic development as economicgrowth accompanied by rise inproductivity.

Development is, however, just notconcerned with description of economichistory. It is to be pursued as a deliberatemechanism of deliverance of the massesfrom poverty and idleness in a relativelyshort period of time. Developments in thefifties and sixties did not perceptiblychange the scene in these crucial areas.Many economists felt disillusioned andstarted showing their anguish. One suchWestern economist who had been dealingwith problems of development assertedin a World Conference in Delhi: “Thequestions to ask about a country’sdevelopment are: What has beenhappening to poverty? What has beenhappening to unemployment? What hasbeen happening to inequality? If all threeof these have declined from high levels,then beyond doubt this has been a periodof development for the countryconcerned. If one or two of these centralproblems have been growing worse,especially if all the three, it would bestrange to call the result ‘development’even if per capita income doubled.”

Indeed, here is a reference toconscious attempts made to develop aneconomy by adopting a strategy. If thestrategy brings in growth in capacity to


produce more and in actual output,transformation in structure of economyin terms of composition of output ofgoods and services or even in deploymentof labour force, emergence of institutionsin terms of variety of banks, andtechnology making use of machines andpower instead of men and cattle, butmakes no significant dent on basicproblems of underdeveloped countries,what use are the efforts or the strategy?

UNDERDEVELOPED ECONOMIES

The poor countries have been variouslydescribed in literature on developmenteconomics : as backward, underdeveloped,developing, low income, and Third Worldcountries. Various terms have their originin objection to some other terms. We donot feel good if someone calls our economybackward as economy is often substitutedfor country or nation; after all we are anancient living civilisation.

The choice of the word largely dependson sensitivity of the audience andsensibility of the analyst, said JagdishBhagwati, a leading economist from India.

Third World was used to describecountries, which were neither in capitalistblock nor in socialist block and membersof non-aligned movement. Some try toclassify countries as least developedcountries, non-oil exporting developingcountries and petroleum-rich OPECcountries (OPEC stands for Organisationof Petroleum Exporting Countries).

The term Fourth World is sometimesused to describe the poor in theunderdeveloped countries and sometimesto least developed countries.

This implies that development hasto be related to welfare of people. It wassuggested much earlier that welfare ofpeople depends on the size of the cake

as well as its distribution. One is entitledto one’s wages when one is employed. Oneshould get adequate wages, if employedor should get remunerative prices forwhat one produces, if self-employed. Masspoverty was one particular problem weattributed to the colonial rule and wantedto secure self-governance in order toeradicate it. If that scourge still persistson a large scale, we have a cause to worryabout. In short, the suggestion is thatthe income should get redistributed infavour of relatively worse-off. Keeping thisin view, some economists prefer to defineeconomic development as economic growthwith redistribution of resources in favourof the relatively worse off. In this concept,it is believed that reduction in inequalitywill reduce poverty and will lead toreduction in unemployment too.

Sustainable Development

In recent years an important issue hasarisen. The issue is whether the level ofdevelopment, even in a developingcountry where it is fairly low, issustainable. In developed countries, themajor cause of worry about sustain-ability of development is supposed to bea wasteful consumption style and inmany developing countries, the cause ofsuch worry is said to be large andincreasing population.

In this context, there are two facts,which are brought to our notice. One,present production technology makes useof non-renewable (exhaustible) naturalresources such as fossil fuels (coal, gasand petroleum) or even of renewablenatural resources (such as forests,animals and water) to such an extent thattheir regeneration becomes difficult.

Two, present production technology


(along with disposal practices of waste)pollutes atmosphere and water bodieswith garbage, litter, smoke and otherpoisonous gases. The more goods youproduce, more non-renewable naturalresources get exhausted and ourenvironment become further polluted.Nature has some assimilative capacity.But, if pollution level is too high, thenature may not be able to assimilate it.Clean air and clean water may not beavailable to us. There may not beenough trees around us to clean ouratmosphere and we may have to sufferfrom various health problems.

If non-renewable natural resourcesdeplete fast, future generations may nothave enough stock for its use. It meansthat if we continue growing oureconomies the way we do, there maycome a point when it may becomeimpossible to continue with the level ofdevelopment reached. Sustainabledevelopment may, therefore, require thepreservation of stocks of resources,including environmental resources andexhaustible natural resources.

A study in 1972 had tried to showthat limits to growth on the planet willbe reached sometime in next hundredyears if present growth trends in worldpopulation, industrialization, pollution,food production and resource depletionwere to continue unchanged. There islittle reliance, in this view, on futuredevelopment of technology, which mayenhance productivity through efficiency.Some do point out that there would thenbe no mining and no industry. However,it is always prudent to be cautious.Before constraints loom large, it is nota bad idea to apply restraint. Themessage is that the pattern of growth

may have to be changed in certaineconomies and in others, the levelreached may have to be maintainedrather than substantially enhanced.

Many analysts do not segregateenvironment; they suggest that it doesnot respect national boundaries.Irrespective of where green house gasesare produced, global warming will takeplace. If ozone layer withers, wholehumanity will suffer from its conse-quences. Concerned with environmentaldegradation, a world commission was setup in the recent past, which produced areport in 1987 under the title ‘OurCommon Future’. This report definessustainable development as that levelwhich takes care of the needs of thepresent generation without compromisingthe needs of the future generations. Wenormally discussed development asprocess not as level. The definition ofsustainable development can, therefore,be modified as a path of development inwhich options of future generations arenot compromised by the path taken by thepresent generation.

It is indeed difficult to determine thepath that is sustainable or to find outwhether the path is unique. It simplymakes us cautious about our choice overconsumption style and efforts ininventing technology and perhapsrestraining growth in population.

Quality of Life

One shred of quality of life is alreadyindicated in earlier section onsustainable development. If quality of air,quality of water and quality of sanitationare not good, the quality of life also willnot be good. If our surroundings are


littered, if the air is polluted or if we donot get safe drinking water, then we willnot have a good life, no matter how muchof many desirable goods we are able tobuy from market. One can addavailability of food, clothing, shelter,education facilities, health care, legal aidand security to the list of clean water,clean air and clean surrounding in orderto define the quality of life.

However, there is another shred ofthinking which is not altogetherunrelated to it. Those who suggest theother line, point out that the items listedabove are determinants of well-being.We can think about quality of life interms of its constituents too. The itemslisted above lead to better health, welfare,freedom of choice, and basic liberties,which are all indices of well-being.

One should also be interested indistribution of well-being along gender,caste, class or regional lines. Manyanalysts hold that a society withsomewhat overall lower literacy rate butequality between male and femaleliteracy rates is better than another thathas somewhat higher overall literacy ratebut has gross inequality between maleand female literacy rates.

Some people also think that certainrights, which people enjoy in certainsocieties, are denied in others. These

rights should also be included in thisset of well-being indicators even thoughthey do not fall in the economic category.This argument is acceptable in thesense that life cannot be separatedinto economic and non-economiccompartments. Most of us would notprefer to be put in prison for anyconsiderable period even if food,clothing, shelter and healthcare providedin the prison is far superior to what wenormally get outside. Therefore, it is saidthat, political rights and civil rights orsome indicators reflecting these rightsshould be added to the quality of life.

With increasing concern for humanrights, it would be a good idea toincorporate these indicators of well-beingand welfare. After all, the whole purposeof consciously developing a society is toraise the level of well-being and welfareof its people.

The idea of ‘quality of life’ enrichesthe concept of ‘standard of living’, whichis generally thought of in terms of richfood, expensive clothing, luxuriant carsand palatial houses, often manifestationof high income. In societal terms, it iscaptured through per capita income. Butthe quality of life idea adds thedimensions, which at times may not becaptured through monetary valuation.

EXERCISES

1. Explain the meaning of economic growth. Does it pertain to growth in shortterm?

2. How do you differentiate two ideas of economic growth?

3. How do we normally measure economic growth?

4. Write about the basic ideas involved in various definitions of economicdevelopment. Is growth an essential condition of development?

5. While concept of economic development in terms of ‘growth with structural


change’ is descriptive, whereas ‘growth with redistribution’ is prescriptive. Doyou agree or not? Explain your answer.

6. How much importance do you assign to institutional and technological factorsin development?

7. What do you mean by sustainable development? Is it a problem of pollutionaffecting present generation or a problem of resource- depletion affecting futuregeneration?

8. What are the essential ingredients of quality of life? If standard of living isunderstood in terms of level of consumption of goods, how would youdistinguish the ‘quality of life’ from the consumption of goods?

9. Match the following:

A. Economic Development A. GDPB. Economic Growth B. HealthC. Sustainable Development C. EnvironmentD. Quality of Life D. Structural Change


A. Economic Development A. Long-termB. Economic Growth B. RedistributionC. Sustainable Development C. Future GenerationsD. Quality of Life D. Structural Change


A. Economic Development A. ProductivityB. Economic Growth B. Increase in GDPC. Sustainable Development C. Basic LibertiesD. Quality of Life D. Non-renewable resources

12. Discuss the evolution of four concepts outlined in this chapter.

ACTIVITIES

1. Prepare a table showing relevant series of GDP at current and constant prices.Calculate growth rate for each year and average growth rate for each decade.

2. Write down things, places, activities and institutions, which are not economic.

INDICATORS OF DEVELOPMENT 11

CHAPTER 2

Indicators of Development

Introduction

You may recall that we have definedeconomic development as a process butalso referred to it as a level. In this sub-unit, our attention would be focussed onthe level of development achieved at agiven point of time (given year). In fact,in this conception, you may note thatgrowth is a quantitative change betweentwo levels of development or levels ofdevelopment at two points of time.Growth is basically an inter-temporalcomparison. For comparison betweentwo economies, which we often resort to,there exists no such term. But such acomparison is often made.

Most people would agree thatdevelopment is a process and the processis multi-dimensional. When any processis conceived as multi-dimensional, itbecomes difficult to adequately capture itscharacter through any index. However,some attempts have been made tomeasure the level. We shall discuss fouralternatives to measure the level ofdevelopment: Per Capita Income, PhysicalQuality of Life Index, Human DevelopmentIndex and Quality of Life Index.

Per Capita Income

Gross domestic product is supposed tomeasure the level of output produced by

the economy during an accountingperiod. However, the command of peopleover goods is somewhat different thanGDP. We have our property outside ourown national economy and some of ournationals work in other countries. As aresult, we earn wage income or propertyincome outside the country. Similarly,foreigners have property in our economyand some foreigners do work here.Adjusting for these incomes, we get grossnational product (GNP). In the case oflarge countries and countries havinglittle interaction with other countries forfactors of production, GDP and GNP arenot very different. But, there areeconomies where GNP and GDP are quitedifferent. In our case, GNP is somewhatless than GDP. It may be noted that GNPbetter represents the entitlement of thenationals of a country (individuals andtheir collectivities) while GDP actuallyshows the output of the activities carriedout within the economic boundaries ofthe country.

Still further, we should take accountof consumption of fixed capital in theprocess of production. We should ensurethat the capital stock is kept intactduring the year; otherwise, we shall, oneday, eat away the whole of our fixedcapital. So, we should subtract thatamount of capital, which we think has


been consumed in the process ofproduction. Then, what we shall get isknown as Net National Product (NNP).Net national product is also known asthe national income. We shall use aparticular version of net national productknown as net national product at factorcost and designate as NNPFC.

Now, if we want to compare thewelfare of people at two points of time orof two economies at the same point oftime, it becomes necessary to find outthe size of population. From the viewpoint of welfare or well-being of thepeople, for which development ispursued, it is suggested that the NNPFC,valued at constant prices, should bedivided by the size of the population.NNP

FC divided by population is popularly

known as per capita income. It helps usto compare the level of developmentof the country in 2001 when we are100 crore with that in 1961 when wewere 43 crore only. In order to renderinternational comparisons meaningful,national incomes should be divided bysizes of their respective populations.Otherwise a country like Canada, whichby all standards, is considered a richcountry, could be found to be poorer thanIndia. The population of India may be30 times that of Canada.

Such a division (deflation/normali-sation) is needed even to assess theprogress over time. For example, ourNNPFC has grown a little more than eightfold over the last fifty years but thepopulation has also almost trebledduring this period. As a result, per capitaincome has grown less than three times.Our living conditions can be expected tohave become better by a factor of threerather than by a factor eight.

GROWTH OF PER CAPITA INCOME

You often read that per capita incomegrows by (a-b) per cent when income (thenumerator) grows by a per cent andpopulation (the denominator) by b percent. It is true only when a and b are small.We can see that (1+0.05)/(1+0.03) = 0.05-0.03 = 0.02 but (1+0.5)/(1+0.3) ≠ 0.2 but= 0.154 only and (1+5)/(1+3) = 1.5 not 2.The reason is that (1+a)/(1+b)�� (a-b) onlywhen a and b are small.

With this in view, per capita nationalincome has come to be increasingly used.In short, it helps us to compare thedevelopment of India with that of theUSA or with that of Pakistan for anygiven year as also our own developmentover time. We may further note that it isthis indicator, which is often used tocategorise countries as developed/underdeveloped countries or high/middle/low income countries. In the caseof international comparison, per capitaincomes of different countries have to bebrought to a common currency.

However, it is very often pointed outthat its scope is quite limited. Most ofthe limitations arise from thenumerator whatever it may be, namely,GDP, GNP or NNP. These concepts donot account for the economic activitiesperformed inside the household, whichare non-marketed. Bulk of women’shousehold work gets ignored, while itis equally important from the point ofview of well-being and welfare of people.It does not adequately capture activitiesperformed even outside household. Asproduction is valued in terms of marketprices, activities for which there doesnot exist market do not adequately getaccounted for. It is also pointed out that


economic welfare, which it canmeasure, even though imperfectly, isnot the total welfare that the peoplelook for.

The following three suggestionshave been made for correcting theweaknesses of the measure of per capitaincome:

1. Distribution of national income overindividuals is an importantdimension, which cannot beignored. National income and itsdistribution, both, have to beconsidered together. It has beenargued that the welfare of a societydepends on what is the size of thecake and how it is distributed overpeople.

2. Over time, people have come toenjoy more leisure, which,according to many, may be theultimate aim of all activities. It has,therefore, been argued that its valueneeds to be added to the nationalincome in order to make it yield abetter measure of welfare.

3. A suggestion was also made todeduct the social cost of harmfuleffects in terms of variety ofpollutions that many economicactivities entail.

Evolution of Alternative Measures

These corrections, however, did not leavemany people satisfied and nationalincome or its per capita variant asindicators of welfare have been in usefor long though with reservations.However, in the last few decades, someattempts have been made to developsome alternative indicators of economicwelfare and of social development.Search for better indicators of socialdevelopment has continued.

We often read in the newspaper thatSri Lanka has a fairly high lifeexpectancy, low infant mortality andgood literacy levels. The levels in SriLanka are comparable to theircounterparts in developed countries.Our own state Kerala has done wonderson literacy front as well as ondemography front. Tamil Nadu is alsofaring well. Therefore, it was natural forresearchers to try to develop such indicesas would capture these socialdimensions.

There is an UN institution calledUnited Nations Research Institute forSocial Development (UNRISD). In thisinstitute, people tried to develop suchindices as would encompass social,political and economic variables

A WELFARE MEASURE : INEQUALITY–ADJUSTED PER CAPITA INCOME

Amartya Sen is an Indian economist who has earned Nobel Prize in Economic Science in1998. He has combined the dimensions of level and distribution of income to produce themeasure of welfare. In mathematical terms,

W = µ(1-G)where W is welfare, µ is per capita income, and G is a measure of inequality. W willincrease when µ grows and G diminishes. When one remembers that µ is NNP divided bypopulation, it is clear that NNP should rise at higher rate than the population. The morethe growth rate of NNP relative to that of population, the better it is.


(indicators) impinging upon industria-lisation, urbanisation and moderni-sation. They went on enlisting indicators,which they thought, reflected some orthe other dimension of development. Atone stage, they listed as many as 73indicators though, finally, they selectedonly 16 as it was found that many of theindicators were reflected through others.

hospital beds and number of doctors perlakh of population. They also includedenrolment rates, electricity consumptionand steel consumption per head. Lengthof metalled roads, number of villageselectrified and availability of post officesalso got their way into it. So did thecharacter of agricultural organisation.These are important indicators and areconsidered by many as the ends inthemselves.

A question was, however, raised:whether inputs can be taken asdevelopment indicators. While enrolmentrate indicates an input, literacy rateshows the output. While hospitalfacilities indicate inputs, life expectancyshows the output. If you have bettersanitation, you have better health andyou require less of hospital facilities.Even income is in a way an input.

Researchers and policy-makers werenot very happy with such alternativesto national income as welfare measuresas they did not find the approach suitableto produce a meaningful social indicator.Attempts were, then, made to developcomposite index of development,purportedly based on aims andobjectives of development or outcomesof the development process rather on themeans thereof.

Quality of Life Indices

We may recall the constituents of qualityof life in the previous chapter. They weregenerally indicated as health, freedom,education, environment, etc., the thingsthat you directly enjoy. Based on theseparameters, attempts have been madein the recent past to construct indices,which may, broadly, be called indices ofquality of life. In fact, longevity and

UNRISD Core Indicators ofSocio-economic Development

Expectation of life at birthPercentage of population in localities of20,000 and overConsumption of animal protein per capitaper dayCombined primary and secondaryenrolmentVocational enrolment ratioAverage number of persons per roomNewspaper circulation per 1000populationPercentage of economically activepopulation with electricity, gas, water, etcAgriculture production per maleagriculture workerPercentage of adult male labour inagricultureElectricity consumption, kwh per capitaSteel consumption per capitaEnergy consumption, kg of coal equivalentper capitaPercentage GDP derived frommanufacturingForeign trade per capita, 1960 US $Percentage of salaried and wage earnersto total economically active population

While at your level, it is not necessaryto go into the nitty-gritty of the ways theindices were developed, an idea of thevariables that were included in suchattempts could be of some interest. Thevariables included are per capita income,


literacy have undisputedly been acceptedas parameters of quality of life. We shallbe studying two popular indices, viz.,Physical Quality of Life Index (PQLI) andHuman Development Index (HDI), whichhave both used longevity and literacy asbasic constituents. There is, indeed, anattempt to measure quality of life and wewill make reference to it towards the end.

It is important to remind at this stagethat these indices were developed in theinternational context and were used forranking different countries according tonumerical value of achievement indescending order. The indices are simplearithmetic averages of normalisedaggregates for society/groups.

Physical Quality of Life Index

Towards the end of the seventies of thepast century, Morris David Morrisperused the variables adopted by severalUN Committees, the UNRISD, and theOECD development economists. Hefound that most of the indicators wereinputs to development process ratherthan result of the development process.These indicators reflected the belief thatthere exists only one course ofdevelopment. It implied thateconomically less developed countriesare simply underdeveloped versions ofindustrialised countries. This view hascertain biases and value-bias of Europe.It overlooks the diversity among theunderdeveloped countries and thedifferences in social organisation indifferent economies. Moreover, suchefforts seem to measure development asan activity rather than as an end. He,therefore, proposed a set of criteria fordeveloping a composite index ofdevelopment. He further proposed that

indicators chosen should reflect resultsand social distribution of results andshould not reflect values of specific(Euro-American) societies. Compositeindex should be simple to construct andeasy to comprehend and should leaditself to international comparison.

Choice of Indicators

Morris, therefore, tried to look for thoseindicators, which were the results of thedevelopment efforts, were not the valuesof particular societies as there could benon-market, non-urban, non-industrialor non-plan ways to develop. They shouldcreate no problems in internationalcomparison. Out of hundred and oddindicators, he could find only three whichcould have universal appeal as ends inthemselves and meet the criteria laiddown. These are:

1. Life Expectancy (LE), 2. Infant Mortality (IM), and 3. Basic Literacy (BL).

These three indicators could beimproved in a variety of ways. Whethera country should attain higher lifeexpectancy through better medicalfacilities or better sanitation or betternutrition, is not really important. But itis universally accepted that a countryshould have high life expectancy.Whether a country should have a higherrate of basic literacy through formalchannels or non-formal channels is notimportant. But a country should try toattempt for higher level of literacy is thepoint. This is also almost universallyaccepted. Whosoever is born will die, isaccepted but those who have been bornshould not die as children in infancy.This is the point generally accepted.


Now, there is a technical issue.Normally, life expectancy at birth is theindex used. Infant mortality refers todeaths before age one. Therefore, Morrissuggested that life expectancy at age oneshould be used instead of life expectancyat birth. In case, the figure for life expec-tancy at age one was not available, it couldbe worked out by using a formula, whichrelates life expectancy at birth, infantmortality and the proportion of children.

Normalisation of Indicators

We know that life expectancy ismeasured in terms of years, infantmortality rate in terms of per thousandand basic literacy rate in terms ofpercentage. They cannot be simplyadded. Further, while basic literacy ratecan have a natural zero for minimumand 100 for maximum, there exist nonatural minimum or maximum valuesfor other indicators. For the purpose ofcomparison, each of the levels should,therefore, be normalised. Morris chosethe best and worst levels in each of thethree cases. In the case of positiveindicators of life expectancy and basicliteracy, the best is denoted by themaximum and the worst by theminimum. But, in the case of negativeindicator of infant morality, the best isrepresented by the minimum and theworst by the maximum. For convertingthe actual levels of a positive variableinto normalised indicators, first the

minimum values are subtracted fromtheir respective actual values and then,the gap so obtained is divided by therange (between the maximum and theminimum). In other words, for positiveindicators:

Actual Value – Minimum ValueAchievement Level= –––––––––––––––––––––––––––––––

Maximum Value–Minimum Value

For the negative indicator of infantmortality, first the actual value has tobe subtracted from the maximum valueand then the gap has to be divided bythe range. In other words,

Maximum Value – Actual ValueAchievement Level=–––––––––––––––––––––––––––––––

Maximum Value–Minimum Value

Index Construction

There are, now, three such indicators.We may call them (i) Life ExpectancyIndicator (LEI), (ii) Infant MortalityIndicator (IMI), and (iii) Basic LiteracyIndicator (BLI). These three indicatorsare averaged to give what is called thePhysical Quality of Life Index (PQLI):

PQLI = (1/3 ) (LEI + IMI + BLI )

Choice of Minimum and MaximumValues

As in the case of life expectancy and infantmortality, there exist no natural minimumand maximum values, one has to choosereasonable values. After a lot ofconsiderations, which need not hold us,Morris chose the following set of values(See Table 2.1). They may need revision

TABLE 2.1Maximum and Minimum Values of Component Indicators

Dimension Max Min RangeBasic Literacy Rate (BLR) 100 0 100Infant Mortality Rate (IMR) 229 9 220Life Expectancy at Age 1 (LEI) 77 38 39


in the light of recent experience ofcountries. For example, maximum lifeexpectancy could now be raised to 85 years.The conversions from values to indicesare linear. Put the actual values of thecountry in the expressions below andobtain the component indices as also thePhysical Quality of Life Index. Theexpressions are given below:

Actual Life Expectancy at Age 1 – 38 LEI = ––––––––––––––––––––––––––––––––––– 39

229 – Actual Mortality Rate IMI = ––––––––––––––––––––––––––––

220

Actual Literacy Rate – 0 BLI = ––––––––––––––––––––––– 100

Suppose for India, life expectancy atage one is 70 years, infant mortality rateis 70 per thousand live births and adultliterates constitute to be 55 per cent ofadult population. Try step by step andyou will find that LEI is 0.82, IMI is 0.72and BLI is 0.55. The PQLI is, therefore,about 0.70.

Human Development Index

Only ten years passed since the PQLI wasdeveloped, another index came intobeing. Since 1990, an agency of theUnited Nations, viz. the United NationsDevelopment Programme (UNDP) hasbeen publishing every year a reportcalled Human Development Report. Thisreport, besides discussing variousaspects of human development, has beenranking various countries according tothe level of human development index.

Before the human development indexis described, it would be an interestingidea to look at the GDP/GNP from a freshangle. It is pointed out that thesemeasures are measures of activity and

they concentrate on production ofcommodities -- goods and services. Weshould, it is suggested, instead focus oncapabilities and measure improvementin capabilities of people. Living long andhealthy life is a capability and so is to beable to read and write. With risingcapabilities, we have wider choices anddevelopment is what if not widening ofchoices! The idea has an addeddimension that these capabilities cannotbe accumulated. In a way it is close toPQLI except that now the theoreticalscaffolding is strong. But at the sametime, a non-physical entity will enter inthe making of index and it will createproblem for international comparison.

The Index

Human Development Index is broadly anaverage of social aggregates/averages oflongevity, knowledge and access toresources. To put it more concretely, itis an equi-weighted average of :

1. Life Expectancy Index (LEI)2. Education Attainment Index (EAI)3. Standard of Living Index (SLI)

where the sub-indices were to becalculated by the same old method of thePQLI. In other words,

HDI=(1/3)(LEI+EAI+SLI)

Components

Life expectancy here refers to lifeexpectancy at birth, not at age one,because infant mortality is not enteringthis index as a separate indicator.Educational attainment is literacy plus.To begin with, it was only adult literacy.Later on, it became a combination ofadult literacy rate and mean years of


schooling. In highly developed countries,adult literacy was complete buteducation level was still rising. This couldbe reflected through mean years ofschooling or enrolment ratio. Now, meanyears of schooling have been replaced bycombined enrolment ratio. The weightassigned to adult literacy rate (ALR) is2/3 while that for combined enrolmentratio (CER) is 1/3. Therefore, educationalattainment index may be given as:

EAI = (2/3) ALR + (1/3) CER

Standard of living is represented hereby a transformation of per capita income.Besides longevity and knowledge, it hasbeen argued, there are many thingswhich people desire. It is difficult tocapture them. For living a decent life,people need resources. Per capitanational income is the simplest measureof resources at the command of people.Since this exercise has basically beenconducted for international comparison,per capita incomes of different nationshave per force to be brought to somecommon denominator. Per capitaincomes are first converted intopurchasing power parity dollars (PPP$).

The second step concerns with thefact that the returns to a dollar of incomeis not the same throughout the wholerange of income. The increase in returnsshould diminish as income increases andshould eventually become zero. This idea

was handled by the UNDP in a variety ofways. Presently, standard of living isbeing captured by the log-transform ofper capita income (PCI) in PPP$. In otherwords,

Standard of living = log (PCI in PPP$)

You know very well that, at base 10,logarithms of 10, 100, 1000, and 10000are 1, 2, 3, and 4 respectively. Thus,returns to additions in income arediminishing as income goes onincreasing. There could be many otherways to accomplish this feature. TheUNDP has tried other formulae in pastbut thought it proper to change to simplelogarithm conversion.

Normalisation

Since we are using only positiveindicators in this index, we can write onlyone formula for computing thecomponent indices (CI):

Actual Value of the Component–Minimum Value of the Component

CI = –––––––––––––––––––––––––––––––––––––Maximum Value of the Component–Minimum Value of the Component

where CI stands for LEI, ALRI, CERI andSLI. It may be noted that ALRI and CERIare just ALR and CER respectively, eachdivided by 100.

Minimum and Maximum Values

After a lot of debate over years andfollowing the norms for various

TABLE 2.2Maximum and Minimum Values of Component Indicators

Component Unit Maximum Minimum

Life Expectancy at Birth (LEB) Years 85 25Adult Literacy Rate (ALR) Percentage 0 100Combined Enrolment Ratio (CER) Percentage 0 100Standard of Living (SL) PPP$ 100 40000Standard of Living (SL) Log PPP$ 2 4+2log2


components, the UNDP has finally fixedthe following minimum and maximumvalues for various components of HumanDevelopment Index (see Table 2.2).

TABLE 2.3

Value of HDI for India and Rank of India in World

HDR Year of Value Rank HDR Year of Value RankYear Data Year Data

1990 1987 0.439 94 (130) 1996 1993 0.436 135 (174)

1991 1988 0.308 123 (160) 1997 1994 0.446 138 (175)

1992 1990 0.297 121 (160) 1998 1995 0.451 139 (175)

1993 1990 0.309 134 (173) 1999 1997 0.458 132 (174)

1994 1992 0.382 135 (173) 2000 1998 0.456 128 (174)

1995 1992 0.439 134 (174) 2001 1999 0.571 115 (162)

HDI and IndiaThe United Nations DevelopmentProgramme (UNDP) has been compilinghuman development indices for differentcountries for which it had access torelevant data. These indices arepublished in Human DevelopmentReport, brought out annually by theUNDP. The position of India in the comityof nations (number given in theparentheses), as given in different HDRs,is shown in Table 2.3.

We can notice that the datacompilation takes time. We can also notice

Between the last two years, we find, India’srank improved by 13 while number ofcountries dropped by 12. It is quite possiblethat most of the countries excluded wereabove India. We should also notice thatIndia’s rank improved by 2 from 123 in 1988to 121 in 1990 while the HDI value actuallyfell. It is possible because of change inmethodology and components used.Despite these weaknesses, we can seethat India’s HDI value is improving since1990 when it recorded its lowest value.

Fortunately, HDR 2001 hascalculated HDI values for different

TABLE 2.4Value of Human Development Index Since 1975 for India

Year 1975 1980 1985 1990 1995 1999

HDI Value 0.406 0.433 0.472 0.510 0.544 0.571

HDI Value* 0.297 0.439 0.571

* From Table 2.3

that the number of countries for whichexercise could be conducted varied fromyear to year. Fluctuation in rank partlyowes to number of countries included.

Source: Human Development Report, Oxford University Press Delhi. Issues from 1990-2001

Source: Human Development Report, Oxford University Press, Delhi, 2001


countries on uniform basis with samemethodology by ensuring comparabilityacross nations and over time, at aninterval of five years since 1975 (SeeTable 2.4).

We should notice that our HDI isimproving since the mid-seventies.Perhaps we are improving on all fronts,life expectancy (reflecting health to someextent), education (including literacy)and general standard of living(represented by per capita income). TheUNDP has been categorising variouscountries as countries with high humandevelopment, with medium humandevelopment and with low humandevelopment, depending upon whethera country had HDI value above 0.8,between 0.5 and 0.8 or below 0.5. Priorto 2000, India was considered as lowhuman development nation. In 2000, ithas become a country with mediumhuman development (see Table 2.3).

It will not be out of place to informthat some scholars have done inter-state comparison for India while somestate governments have come out withstate-level exercises for humandevelopment index. These reports docontain more information on humandevelopment than are available incompilation of HDI. Since March 2002,our Planning commission has also comeout with a report known as NationalHuman Development Report.

Quality of Life Index

Some economists still feel that, thoughhuman development approach talks ofmany dimensions, the humandevelopment index encompasses onlyvery few of them, though important ones.They feel that political and civic

dimensions, if not environmental ones,need to be incorporated in any suchexercise.

In one such contribution ‘OnMeasuring the Quality of Life’, Dasguptaand Weale have considered sixparameters what they have called livingstandards’ indicators or constituents ofwell-being. These are: (i) per capitaincome in PPP$, (ii) life expectancy atbirth in years, (iii) infant mortality ratein per thousand live births, (iv) adultliteracy rate in per cent of adultpopulation, (v) index of political rights inseven-point scale and (vi) index of civilrights in seven-point scale. We may notethat civil rights are rights of individualsvis-a-vis the State, while political rightsare citizens’ right to play a part ingovernance of their country. Governancewill mean who will govern and under whatlaws. While the first four could be called‘socio-economic’ indicators, the last twocould be said to be ‘political and civil’indicators.

These indicators are aggregated in apeculiar way. First, countries are rankedaccording to each of the indicators inascending order from worst to best.Second, the ranks for different indicatorsof country are added and thus for eachcountry a rank-score is obtained. Third,countries are again ranked according totheir rank-scores.

Though, this work was done from late1970s to early 1990s, using the datarelating the results are interesting. Of 48countries listed, Mauritius comes thebest and Sri Lanka, the second best.China and India come 10th and 12thbest from the top, while Bangladeshand Pakistan come 26th and 30th fromthe top. In both the pairs, scores in


‘socio-economic’ indicators are found todiverge from those in ‘political and civil’indicators. In ‘socio-economic’indicators, China scores better thanIndia, Pakistan and Bangladesh but in‘Political and Civil’ indicators, Indiascores better than China, Bangladeshand Pakistan. Though the story is a bitold, it may hold even today.

Concluding Remarks

Intellectuals and policy-makers were notvery happy with the use of GDP or its percapita variant as an indicator of welfareor development. Some economistsdeveloped composite indices taking intoconsideration the distributional aspects.Others did try to modify the GDP byadding the values of those things thatwere left out in the idea of GDP orsubtracting the cost of the items that donot contribute to the welfare.

Some other scholars and agenciesthought that they should directlymeasure the development, particularlysocial development. They considered allpossible variables that impinged uponmodernisation, urbanisation andindustrialisation. Most of the variableswere all on the side of inputs. Theycombined inputs with output. The resultwas not a happy one.

Morris developed what he called thePhysical Quality of Life Index (PQLI). Hethought that it represented the outcomeof developments. He was conscious ofthe fact that many psychological aspects,which are no way less important, werenot covered in this index. He did notdeliberately cover the monetary aspectswhich pose problem for internationalcomparison.

The PQLI had a great technical flaw.Infant mortality and life expectancy bothreferred to the same demographicground. It was further found that theconcept did not include many other aimsand objectives of life except longevity andknowledge. So came HDI, the HumanDevelopment Index, which incorporatedper capita income along with longevityand knowledge (redefined as educationalattainment). There are objections toincorporation of income in HDI on manycounts. Yet, the UNDP considers itprudent to include it as proxy to theuncovered aspects of well-being.

Many scholars are not completelyhappy and have chosen to indicate analternative. Parthasarthy Dasgupta andMartin Weale suggested a way ofcombining some aspects of quality of lifeinto an index, which is called Quality ofLife Index.

EXERCISES

1. What do you mean by per capita income?

2. What are the factors that have to be subtracted from GDPFC in order to getNNPFC? Should we use NNPFC at current prices or at constant prices if we haveto judge the level of development of a country over time?

3. Why should we divide NNPFC by population when we are not making comparisonwith other nations? Explain.


4. What are the weaknesses of the NNP as an index of development? What arethe three suggestions made in order to make up for some of the deficiencies?

5. What are the major problems with the attempts made by the UNRISD?

6. List the three components of Physical Quality of Life Index (PQLI).

7. How is PQLI constructed from ALR, LEI and IMR?

8. Why is PQLI called a physical index?

9. What is the rationale for Human Development Index?

10. Discuss three elements that go into making of HDI.

11. Indices on quality of life insist on inclusion of outcome of development process.Income is an input for well-being. How do you defend its inclusion in HDI?

12. Give the formula for a component index of HDI.

13. Discuss why per capita income should be measured in purchasing power paritydollars.

14. How is PPP$ income converted into standard of living index?

15. List six constituents along with units, which have been considered by theauthors of ‘On Measuring the Quality of Life’.

16. What do you mean by political and civil rights? How strongly do you feel thatthey should be considered indicators of development? Discuss.

17. Discuss the evolution of indices of development.

ACTIVITY

Suppose for a country Utopia, the values of different Components of HumanDevelopment Index for male and female sections are given below:

Component Male Female

Life Expectancy in years 60 65Adult Literacy Rate (%) 66 50Combined Enrolment Ratio (%) 70 60Per Capita Income in PPP $ 2500 2000

Study the data and calculate HDI for male and female sections using maximum andminimum value as given in Table 2.2. Further, suppose your teacher informs you thatwomen are biologically sturdier than men and therefore, their minimum and maximumvalues of life expectancy, can be revised to 30 and 90 respectively. Recalculate yourHDIs and discuss implications with your classmates.

In this unit, you will basically learn the growth of and structural changesin the Indian economy particularly since Independence. As most of thedata are available since 1950-51, the study of changes will mostly confine tothe period since 1950-51. In one case, data is available from 1960-61 only.Towards the end, in a section, we shall use data since 1972-73. The endyear of a series will be determined by the relevant publications givingthe data.

With growth, every economy diversifies itself in terms of contributionof different economic activities. Besides structural changes in the economyin terms of contribution of different sectors, you will have an idea as tohow the labour force is engaged in different economic activities.

As it is felt that growth will be hampered if our economic infrastructurein terms of energy, transport and communication is weak, you shall seehow our economy is faring in this respect. We also feel concerned about oureducation, health and housing and, therefore, you will have an idea aboutthese social sectors as well.

It is understood that there has come a great break in our policies in1991 in terms of what has come to be known as Liberalization, Privatizationand Globalisation (LPG). We shall, therefore, discuss major policy planksbefore and after 1991 and contrast the two sets of policies.

UNIT II

STRUCTURAL CHANGE IN INDIAN ECONOMYSINCE INDEPENDENCE

CHAPTER 3

Growth and Structural Change in theIndian Economy

Introduction

In this chapter you will study the growthof and structural change in the Indianeconomy in the last fifty years since1950-51 for which data on most of themacro aggregates are available on anannual basis. We shall concentrate onthe growth of gross domestic product atfactor cost valued at 1993-94 prices. Weshall consider the growth of per capitanational income, also valued at 1993-94prices, which can be taken as thesimplest indicator of the level of livingor development.

In an earlier chapter, one of thenotions of development was posed interms of structural change along withgrowth. What do we mean by structure?Most people mean by it productionstructure, that is, composition of outputproduced by the economy. Some wouldlike to find out how and where our labouris absorbed. Other factors such as landand capital are not given equalimportance. Some would also like to findout how the production of output isdivided between rural and urban areasof the country or between public andprivate sectors of the economy orbetween organised and unorganisedsectors. We shall discuss all of them.

But we can appreciate developmentssince Independence better once we havea little hint about the scene on the eveof Independence.

Economy on the eve of Independence

We had inherited an economy, which wasbasically geared to the interest of ourcolonial masters. The rate of growth ofper capita income during the hundred-year period before Independence, fromwhatever scanty information is available,was just 0.5 per cent per annum. It hasfurther been noted that there were longspells when the economy actuallystagnated or declined.

In the past, we were known for pro-ducing fine cotton fabric, handicrafts andother merchandise. Even during theearly British Raj, that is, before the onsetof industrial revolution in Britain, oureconomy was an industrial economy bythe standards of those days whereas theEuropean economies had yet to usherin modern civilisation. Yet, by the timewe got Independence, our economy wasprimarily reduced to an agriculturaleconomy and we used to export mainlyraw materials and minerals for theBritish industries and even foodgrainswhile we might have been hungryourselves.


In 1950-51, our per capita incomewas no more than Rs 3,700 at 1993-94prices (while in 1999-2000, it is a littlemore than Rs 10,000). The contributionof agriculture sector (including animalhusbandry and livestock) to the GDP wasaround 54 per cent by current prices and50 per cent by constant prices of 1993-94. If we include forestry and logging andfishing in this sector, then thecontribution turns out to be 57-58 percent. And, if we add mining andquarrying and call the combined sectoras primary sector, the contribution ofprimary sector is found to be about 60per cent. Manufacturing contributedonly around 10 per cent. Contributionof the service sector was thus around

TABLE 3.1Gross Domestic Product at Constant Prices (1993-94) from 1950-51 to 2000-01

Fiscal Year GDP (Rs. Crore) Fiscal Year GDP (Rs. Crore)

1950-51 140466 1980-81 401128

1955-56 167667 1985-86 513990

1960-61 206103 1990-91 692871

1965-66 236306 1995-96 899563

1970-71 296278 2000-01 1211747

1975-76 343924

Sources: National Accounts Statistics: Back Series 1950-51 to 1993-94 and National AccountsStatistics 2001, both published by the Central Statistical Organisation.

30 per cent. Most of the people wereengaged in agriculture — as cultivatorson their own tiny holdings or as wagelabourers on others’ fields.

Growth of GDP since 1950-51

Growth of an economy is reckoned withgrowth in its GDP at constant prices. Wehave now a complete series of gross

are and should be more interested toknow whether growth rate itself has risenover time.

From the series given in theappendix, we can calculate year-to-yeargrowth. We can also calculate rates ofgrowth for different plan-periods ordifferent decades or for periods dividedby significant events. All such breakups

domestic product at 1993-94 pricesfrom 1950-51 onwards but we give herethe GDP series at five yearly interval(Table 3.1). Complete series of GDP atfactor cost at 1993-94 prices is given inan appendix.

However, in order to give you a feelabout the general tendency of rise andoccasional decline in a few years incomparison to their respective precedingyears, we give here a graphical presen-tation of the whole series. We notice fromthe graph that there were occasionaldrops in the GDP which we do not noticein the abridged Table presented here.But, generally it has been rising. Overthe period of last fifty years, it hasincreased more than eight times. But we

GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 27

have been used by scholars. We shallcalculate growth rate per annum bydecades only. We shall use two popularmethods of calculation of annual rate ofgrowth for long periods, viz. averageannual growth and compound annualgrowth rate (discussed in an appendix).

We present below the rates of growthof GDP for each of the decades and forthe half century gone by in the followingtable. From Table 3.2, we notice thatthe rate of growth for the whole durationis conclusively more than 4 per cent perannum. The rate of growth got depressedin seventies but has definitely improvedduring the eighties and nineties.

Presently, it can be safely accepted thatthe rate of growth is close to six per centper annum. Some credit can be given tothe policies adopted in the eighties andnineties on the growth front but creditshould also be given to the base createdduring the fifties, sixties and seventies,which helped change the productivityof the agricultural economy anddiversification of the industrial economyof the country.

Growth of Per Capita Income

Per capita income is the ratio of netnational product to the (mid-year) sizeof population. Net national product is

Fig. 3.1 : Growth of GDP


likely to follow the pattern of grossdomestic product, as the component ofnet factor income from abroad is smallin comparison to the total. Populationhas been secularly rising in the last fiftyyears though, of late, the rate of growthof population has started declining. Wecan remember that, in the case ofpopulation, we have only decennialfigures and, therefore, can calculate onlya single rate of growth of population.Using this technique, population size foreach mid-year is interpolated. Dividingnet national product by the size ofpopulation, per capita income iscalculated. This is presented in Table 3.3at the interval of five years.

You can see that annual per capitaincome has risen a little less than three

times from a little less than Rs 3,700 in1950-51 to over Rs10,000 in 2000-01,at constant prices of 1993-94. In noneof the years shown here, there is adecline over the year in the previous row.But, one can notice that there is hardlyany rise in 1965-66 over 1960-61, thatis, after a gap of five years. Generally,there is some rise in normal years. Itmeans that 1965-66 was a particularlybad year. In fact, 1965-66 and 1966-67were years of severe drought, thoughthey gave us green revolution.

However, with a view to giving youan idea about the wider fluctuations incase of per capita income, we givehere the graphical presentation. Forthe actual data, see appendix of thechapter.

TABLE 3.2Annual Growth Rates of Gross Domestic Product at Factor Cost for Different Decades

(per cent per annum)

Period Average Annual Compound Annual

1950-51 to 1959-60 3.59 3.56

1960-61 to 1969-70 3.95 3.89

1970-71 to 1979-80 2.94 2.86

1980-81 to 1989-90 5.79 5.78

1990-91 to 1999-00 5.80 5.78

1950-51 to 1999-00 4.43 4.11

TABLE 3.3Per Capita Income at Constant Prices (1993-94) from 1950-51 to 2000-01

Fiscal Year PCI (Rs) Fiscal Year PCI (Rs)

1950-51 3,687 1980-81 5352

1955-56 4,020 1985-86 6082

1960-61 4,429 1990-91 7321

1965-66 4,459 1995-96 8498

1970-71 5,002 2000-01 10561

1975-76 5,167

Sources: The same as in Table 3.1.


Table 3.4 shows the annual growthrate of per capita income for each of thedecades and for the whole period of fifty

Fig. 3.2 : Growth of Per Capita Income

years, by the two methods of averageannual growth rate and compoundannual growth rate. We can notice that,over the fifty years, growth rate was over2 per cent per annum. The seventiessaw the lowest growth rate. You can

Changes in Production Structure ofthe Economy

As an economy grows, its productionstructure changes. It moves fromagriculture towards manufacturing and

TABLE 3.4Annual Growth Rates of Per Capita Income at Factor Cost for Different Decades

(per cent per annum)

Period Average Annual Compound Annual

1950-51 to 1959-60 1.53 1.351960-61 to 1969-70 1.51 0.941970-71 to 1979-80 0.55 0.171980-81 to 1989-90 3.89 2.851990-91 to 1999-00 3.73 3.371950-51 to 1999-00 2.16 2.05

choose to ignore the difference betweenthe two methods at the moment (SeeAppendix).

Year

Per

Cap

ita

Inco

me

in R

s.


structure changes. It moves fromagriculture towards manufacturing andservices. It is understandable. You mighthave noticed that relatively well-offfamilies spend proportionately less onfood items and more on manufactureditems. You may also note in your familythat, as income increases, expenditureon items other than food increases morethan proportionately. But, you shouldnote that normally absolute amount ofexpenditure does not, broadly speaking,decline; in fact, increases but less thanproportionately. It implies thatproduction structure should shift awayfrom agriculture. Moreover, manyagricultural products, which used todirectly reach the households, will nowreach after some processing and throughlong channel of distribution. Bread,noodles, sauces and juices are goodexamples. It means activities ofmanufacturing and trade will increase.So, let us see how the productionstructure has changed.

We know that hundreds ofthousands of activities are always inoperation in any modern economy. Manyactivities emerge and some of them diedown; some of them even re-emerge, maybe, in a modified form. But, it is difficultto discuss in terms of each single item.We often aggregate them on the basis ofsimilarity of products or nature ofactivities.

Our Central Statistical Organisationuses nine broad categories, calledsectors. Six of them are furthersubdivided in two/three/four sub-categories. Industry as a sector does notoccur in it; industry is accommodated in‘mining (and quarrying), manufac-turingand electricity’. In total, there are

18 categories, sectors and sub-sectors,in which total economic activity of thecountry is presented in the NationalAccounts Statistics.

There are, however, two three-foldclassifications in which economistsdiscuss changes in production structure.One is agriculture, manufacturing/industry, and services and the other isprimary, secondary and tertiary. Besidescultivation of crops, agriculture includeslivestock and animal husbandry. Butforestry and logging and fishing areclubbed with agriculture to make a broadsector of ‘agriculture, forestry and fishing’.If we add the sector of mining andquarrying to this sector, we can call it‘primary sector’ as these activities areassociated with nature.

The manufacturing sector is furthersubdivided into registered andunregistered manufacturing, dependingupon whether manufacturing units areregistered under Factories Act 1948.Industry may include manufacturingand mining and quarrying. On the otherhand, if we club the sectors of electricity,gas and water supply and constructionwith manufacturing, we can call it‘secondary’ sector. All activities listed inthe tertiary sector in Tables 3.5 – 3.8along with those of electricity, gas andwater supply, and construction alsoknown as services sector.

This is just a matter of convention.There may be differences betweencountries and within a country changesin classification may occur over time.We did not have exactly the sameclassification always. While newproducts gain entry with each majorrevision of national accounts, someswapping of activities is possible. Forexample, earlier LPG gas was included


in the sector of electricity, gas and watersupply, now it is part of manufacturing.

Table 3.5 presents the contributionof eleven major sectors, over six pointscovering fifty years, to the gross domesticproduct at constant prices of 1993-94.From this Table we shall derive two moreTables, one presenting the compositionof gross domestic product and the otherpresenting the rate of growth of differentsectors for each of the decades and thehalf-century as a whole.

While we shall highlight some salientfeatures of production structure orcomposition of output, it would beinteresting for you to do your own

exercises and develop your own views oncontributions of different sectors.

Absolute Contribution of DifferentSectors

It is easy to see that agricultureproduction has been continuously onincrease and has increased about four-fold. Since our Table does not include allthe years, we do not find any drop inagricultural production. There are manyperiods when agricultural productionactually fell. Whenever we notice a fallin the gross domestic product, a majorreason is likely to be a fall in agriculturalproduction as its contribution to GDP had

SECTOR CLASSIFICATION ADOPTED BY THE CSO

1. Agriculture, Forestry and Fishing

1.1. Agriculture, including livestock and animal husbandry1.2. Forestry and Logging1.3. Fishing

2. Mining and Quarrying

3. Manufacturing

3.1. Registered3.2. Unregistered

4. Electricity, Gas and Water Supply

5. Construction

6. Trade, Hotels and Restaurant

6.1. Trade6.2. Hotels and Restaurant

7. Transport, Storage and Communication

7.1. Railways7.2. Transport by Other Means7.3. Storage7.4. Communication

8. Financing, Insurance, Real Estate and Business Services

8.1. Banking and Insurance8.2. Real Estate, Ownership of Dwelling and Business Services

9. Community, Social and Personal Services

9.1. Public Administration, Defence and Quasi-Government Bodies9.2. Other Services.


been substantial. We were most severelyhit in agriculture in the consecutive yearsof 1965-66 and 1966-67. These years,however, gave us green revolution. We arenow quite comfortable with the overallperformance of agriculture. Yet, we hadhad two-three years of setback in eachof the decade. We should remember thatagriculture gives us food, milk and meatand gives to industry the raw materialneeded particularly for consumer goodsindustries. Compared to agriculture,other sectors included in primary sectorsare small; the contribution of primarysector is found to have risen only fourtimes.

Manufacturing which contributedabout Rs 12,500 crore in 1950-51,contributed to the tune of Rs. 2,00,000

crore in 1999-2000, almost sixteen-foldincrease over the period. Annualconstruction activity also rose ten times.Construction does not mean only housesbut also roads and railway lines, dams,and canals, bridges and flyovers, etc. andalso huts. Electricity, gas and watersupply were in nascent stage in the weehours of Independence, contributing lessthan Rs 500 crore at 1993-94 prices. Itscontribution rose 60 times in 50 years.Overall contribution of the secondarysector rose fifteen-fold.

Trade along with hotel andrestaurant business rose fourteen-foldover the period while transport alongwith storage and communication roseeighteen-fold. Financial and businessservices including insurance and real

TABLE 3.5Contribution of Different Sectors to Gross Domestic Product at Constant Prices

of 1993-94 for the period between 1950-51 and 1999-00 (Rs Crore)

SECTOR OF ACTIVITY 1950-51 1960-61 1970-71 1980-81 1990-91 1999-00

Agriculture 70,456 97,412 1,21,356 1,43,431 2,00,634 2,66,848Forestry and Logging 9,456 9,704 13,086 11,910 11,751 12,542Fishing 1,249 2,124 3,197 3,952 6,943 10,944Mining and Quarrying 2,085 3,594 5,261 8,477 19,819 26,446

PRIMARY SECTOR 83,246 1,12,834 1,42,900 1,67,770 2,39,147 3,16,780

Manufacturing 12,491 22,465 37,389 55,436 1,15,282 1,96,763Electricity, Gas and 457 1,217 3,501 6,774 16,203 28,225Water SupplyConstruction 5,722 10,558 18,107 24,395 38,218 58,728

SECONDARY SECTOR 18,670 34,240 58,997 86,605 1,69,703 2,83,716

Trade, Hotels and 12,137 20,254 32,324 48,883 86,892 1,68,355RestaurantsTransport, Storage and 4,645 8,064 13,759 24,963 42,894 84,477CommunicationFinancing, Insurance, Real 9,380 12,568 17,588 26,156 66,990 1,46,546Estate and Business ServicesCommunity, Social and 13,215 18,908 31,660 46,751 84,380 1,52,117Personal Services

TERTIARY SECTOR 39,377 59,794 95,331 1,46,753 2,81,156 5,51,495

GROSS DOMESTIC PRODUCT 1,40,466 2,06,103 2,96,278 4,23,073 6,92,871 11,51,991

Source: The same as in Table 3.1


estate also rose fifteen times whilecommunity, social and personal services,including public administration anddefence rose only eleven-fold. Thus, inthe second half of the twentieth centurywhile the contribution of primary sectorto GDP rose to four fold that of secondaryand tertiary sectors rose by fifteenfold each.

Relative Contribution of DifferentSectors

Relative contribution of a sector dependson its own performance as well as thatof other sectors. As a result, despitepositive contribution, a sector may loserelative position. Thus, while agriculturecontributed 50 per cent to the making ofGDP in 1950-51, it contributes less than25 per cent at the close of the centurydespite four-fold increase in its output.The contribution of primary sector camedown from close to 60 per cent to less than

30 per cent over the period.The share of manufacturing in GDP

has gradually risen from 9 per cent to 17per cent over the period. The share ofelectricity, gas and water supply, whichwas hardly one third of one per cent roseto close to 2.5 per cent. The activity ofconstruction, despite good rise inabsolute terms, is considered to beslackening; during the first twenty years,while the share rose from 4 per cent to6 per cent, during the last thirty years itfell back to 5 per cent. Secondary sectoras a whole raised its contribution fromabout 14 per cent to more than 24 percent. The secondary sector is closelycontesting the primary sector as far asits contribution to the GDP is concerned.

Let us look at the tertiary sector. Theshare of contribution of activities oftrade, hotel and restaurant businessrose from 8-9 per cent to 14-15 per cent

TABLE 3.6Composition of Output in Terms of Sectoral Output to Gross Domestic

Product valued at Constant Prices of 1993-94 (in Percentage)

SECTOR OF ACTIVITY 1950-51 1960-61 1970-71 1980-81 1990-91 1999-00

Agriculture 50.16 47.26 40.96 35.76 28.96 23.16Forestry and Logging 6.73 4.71 4.42 2.97 1.70 1.09Fishing 0.89 1.03 1.08 0.99 1.00 0.95Mining and Quarrying 1.48 1.74 1.78 2.11 2.86 2.30PRIMARY SECTOR 59.26 54.75 48.23 41.82 34.52 27.50Manufacturing 8.89 10.90 12.62 13.82 16.64 17.08Electricity, Gas and Water Supply 0.33 0.59 1.18 1.69 2.34 2.45Construction 4.07 5.12 6.11 6.08 5.52 5.10SECONDARY SECTOR 13.29 16.61 19.91 21.59 24.49 24.63Trade, Hotels and Restaurant 8.64 9.83 10.91 12.19 12.54 14.61Transport, Storage and 3.31 3.91 4.64 6.22 6.19 7.33CommunicationFinancing, Insurance, Real Estate 6.68 6.10 5.94 6.52 9.67 12.72and Business ServicesCommunity, Social and 9.41 9.17 10.69 11.65 12.18 13.20Personal ServicesTERTIARY SECTOR 28.03 29.01 32.18 36.59 40.58 47.87GROSS DOMESTIC PRODUCT 100.00 100.00 100.00 100.00 100.00 100.00



while that of transport, storage andcommunication rose from 3.3 per centto 7.3 per cent over half the century. Thecontribution of financial and businessservices increased from 6.7 per cent to12.7 per cent while that of communityand personal services increased from 9.4to 13.4 per cent. It may be noted that,among the sectors within tertiary sector,in 1950-51, the contribution ofcommunity and social servicesdominated the scene but it graduallygave way to trade but in the ninetiessector of financial and business servicesemerged as close contestant. However,it may be pointed out that publicadministration and defence, whichcontributed to the tune of 3 per cent in1950-51, are now contributing morethan 6 per cent. Within the broadcategory of community and socialservices, the share of publicadministration and defence has risenfrom 1/3 to 1/2 over the period (SeeTable 3.6).

Growth of Different Sectors

From Table 3.5, we can also derive atable giving us the rate of growth ofdifferent sectors. We have computed onlycompound annual growth rates (Table3.7). We should take these rates with apinch of salt as they crucially dependupon initial and final figures. Roughlyspeaking, agricultural situation duringsixties and seventies can be said to bebad as the rates of growth fell below thatof population. Foodgrains dominate inour agriculture and we cannot afford toimport it. Even if we import someagricultural produce, being a largecountry, we ought to produce enoughfoodgrains ourselves. During the

nineties, the growth of foodgrainsproduction is somewhat slackening. Solong as it does not create bottleneck forraw material for industry and supply offoodgrains does not fall short of domesticdemand, we can afford a little lowergrowth rate in future. The rate of growthof primary sector has always been lowerthan that of secondary and tertiarysectors, which is a major reason fordecline in its share.

Manufacturing sector activity grewat twice the rate of agriculture. Theseventies were bad for all sectors.Electricity, gas and water supplyaccorded a very low rate of growth of 4per cent per annum during the seventies.So was the case with construction.Secondary sector as a whole did prettywell during the eighties, better thanduring the nineties.

The nineties belong to the tertiarysector, which grew at the rate of 7.8 percent per annum. All service sectors aregrowing faster in the nineties than theydid in the eighties wherein performancewas better than that in the seventies interms of growth. There are, one can see,a couple of exceptions to thisobservation.

The overall movement seems to beaway from primary/agricultural complexto secondary and tertiary sectors. Thedrop in the share of agriculture is sharedbetween secondary and tertiary sectors;and as time passes the share of tertiarysectors is increasing faster than theshare of secondary sectors.

Changes by Other Segregationsof Production

Three important divisions of activities areoften discussed by scholars so far as


production structure is concerned. Oneis the division regarding location ofactivities, location being divided betweenrural and urban areas. The second is onthe basis of ownership of productionestablishments, division being madebetween public and private. The thirdone is about organised and unorganisedsectors.

Division between Rural and UrbanAreas

Agriculture is the industry of thecountry-side and manufacturing is theindustry of the town, said Adam Smith,father of Economics. As a habitationdiversifies its economic activities, itchanges its status from rural to urbanat some point meeting certain

definitional marks. In India, in last fiftyyears, the number of towns hasincreased from 2800 to 3600 andpopulation living in them has increasedfrom a little over 6 crore to 26 crore.The proportion of population living inurban habitation is now well over 25per cent, which in 1950-51 used to bearound 16 per cent. On the other hand,the number of villages is now about sixlakh and a village may have more thanone hamlet. The number of ruralhabitations is over 10 lakh. Not onlyagricultural and pastoral activities arecarried out in rural habitations,manufacturing (handicrafts), trade(retail), transportation (bullock carts andtractors) are also part of rural activitiesand rural folk benefit from them.

TABLE 3.7Annual Rate of Growth of Different Sectors over the Decades (in per cent)

1950-51 1960-61 1970-71 1980-81 1990-91 1950-51SECTOR OF ACTIVITY to to to to to to

1960-61 1970-71 1980-81 1990-91 1999-00 1999-00

Agriculture 3.29 2.22 1.68 3.41 3.22 2.70Forestry and Logging 0.26 3.03 -0.94 -0.13 0.73 0.57Fishing 5.45 4.17 2.14 5.80 5.19 4.43Mining and Quarrying 5.59 3.88 4.89 8.86 3.26 5.21PRIMARY SECTOR 3.09 2.39 1.62 3.61 3.17 2.71Manufacturing 6.05 5.23 4.02 7.60 6.12 5.67Electricity, Gas and Water Supply 10.29 11.14 6.82 9.11 6.36 8.56Construction 6.32 5.54 3.03 4.59 4.89 4.77SECONDARY SECTOR 6.25 5.59 3.91 6.96 5.88 5.59Trade, Hotels and Restaurants 5.25 4.78 4.22 5.92 7.62 5.40Transport, Storage and 5.67 5.49 6.14 5.56 7.82 5.97CommunicationFinancing, Insurance, Real 2.97 3.42 4.05 9.86 9.09 5.65Estate and Business ServicesCommunity, Social and 3.65 5.29 3.97 6.08 6.77 5.01Personal ServicesTERTIARY SECTOR 4.27 4.77 4.41 6.72 7.77 5.42GROSS DOMESTIC PRODUCT 3.91 3.69 3.07 5.61 5.81 4.30Population 1.91 2.23 2.30 2.14 1.87 2.05



We do not have regular annualseries of production output of theactivities according to rural-urbandivision. The CSO has made availablesuch a division for the years 1970-71,1980-81 and 1993-94 but only at currentprices and for net domestic product. Withthe help of these figures, we gather somebroad idea about the shift in activities.

From the perusal of these statistics,one would notice that in 1970-71 only62.5 per cent net domestic product wasgenerated in the rural area where morethan 80 per cent population resided (andworked) while in the urban areapopulation residing (and working) wasless, 20 per cent, the net domesticproduct generated was 37.5 per cent.Thus, per capita net domestic productin the urban area was 2.45 times that inthe rural area. When we look at the datafor 1993-94, we gather that whilepopulation proportion in rural area hasreduced by about 6.7 per cent points,its contribution to net domestic producthas reduced by 8.6 per cent points butjust the reverse could be said to be thecase with the urban area. But the lossof 6.7 points in 80.2 points is not thesame as gain of 6.7 points in 19.8 points.Therefore, net accretions to the two areason per capita basis show that per capitanet domestic product in the urban areais 2.39 times that in the rural area.Though this ratio is not deterioratingover time, it is high enough to makepeople move to urban areas even ifunemployment rate is somewhat higherin urban areas.

Division between Public Sector andPrivate Sector

Ever since there has been the state, there

has been public sector. But the presenceof public sector in production, beyondpublic administration and control, wasvery little before Independence. It has beenincreasing over time as we pursued apolicy of state intervention in varioussectors for variety of reasons. There is notone broad sector of economic activitieswhere public sector is altogether absent.

We have firm data on contributionof public sector in different productionsectors since1960-61. A cursory looksuggests that the importance of publicsector had been on increase with thepassage of time in practicallyall sectors. The share of public sector,which was barely 9 per cent even in1960-61, has increased close to 27 percent though of late the speed of rise hasslackened.

Public administration is purely apublic sector activity and in fishing, ithas just shown its presence. Inagriculture its presence has increasedbut it predominantly seems to beirrigation as this activity is accountedfor within the sector of agriculture. Itscontribution in forestry and loggingsector is drastically reducing. Most of themining activity is under public sector andit is now around 80 per cent. Even inthe sector of manufacturing its share hasgradually increased from around 7 percent in 1960-61 to around 20 per centin 1998-99. The share in constructionactivity has increased from less than 5per cent in 1960-61 to almost 16 per centin 1998-99.

It is in trade that public sector haswithdrawn since 1980-81 when itparticipated to an extent of 8.5 per cent.Its role in transport has also plummetedto some extent yet it plays a great role.


The railways are completely with theGovernment of India. In road transport,state corporations play a significant roleat least in passenger transport. Infinancial sector too, the presence ofpublic sector rose significantly; it rosefrom 6.5 per cent in 1960-61 to 17 percent thanks due to nationalisation of 14major banks. A further dose ofnationalisation in 1975-76 led to itsfurther rise to 27 per cent by 1980-81.Even 6.5 per cent in 1960-61 should owea great deal to the nationalisation ofImperial Bank as the State Bank of India.

Division between Organised andUnorganised Sectors

Organised sector includes all publicsector establishments and private sectorestablishments registered under one orthe other act, such as Company Act,Factory Act, Societies Act or CooperativeAct, etc. They are supposed to maintainaccounts. Net domestic product wasfound divided between organised sectorand unorganised sector in 25:75 ratioin 1960-61. With passage of time, theproportion of organised sector went onincreasing, with some fluctuation, andreached around 30 per cent by 1980-81.Since then, its share has been rising andit is expected to be around 40 per centby the close of the century. Withinorganized sector, manufacturingaccounts for 40 per cent and communityand personal services, 30 per cent whiletrade and finance may account for 25per cent.

Industrial Structure of Employment

All able-bodied persons should work.Children should not be allowed to work.Old, sick and infirm should not be

permitted to work. Even if production isalmost mechanised, there is a manbehind the machine. People who areemployed and people who employ as wellas people who are self-employed are alltreated as workers. Their numericalstrength is known as work force. Peoplewho are willing to work at the prevailingwage rate but are not employed, aretreated as unemployed. Despite thegeneral feeling that a large number ofpeople are unemployed, the percentageof people who are unemployed is not verylarge. (However, in the composition of theunemployed, a large number comes fromthe educated lot). The reason is that poorpeople cannot afford to be unemployed.They work on somebody else’s farm, shopor factory or engage themselves in someor the other activity on their ownaccount. We should, however, rememberthat statistics used by us do not includepeople engaged in activities carried outin homes and hearths by the membersof the family/household. The proportionof people working in total population inour country is around 40 per cent. Thisproportion is higher in the case of malemembers and those living in villages.

There is a variety of ways in whichemployment data is presented. Oneclassification is sectoral (or industrial)and the other is occupational. They aremade for each of basic four categories,viz., rural male, rural female, urban maleand urban female. Employment data isavailable from the census as well as theNSS. The census data for 2001 is notyet available in as much detail as we needthem in this chapter. We opt for the NSSdata. However, comparable NSS data isavailable from 1972-73 only at aninterval of five years (See Table 3.8).


It is easy to see that, until earlyseventies, as many as three-fourths of theworkers were engaged in agricultural/primary activities. By the close of thecentury, their strength gradually reducedto three-fifths. In manufacturing, theproportion of workers rose slowly from lessthan 9 per cent to over 12 per cent.Construction activity picked up fast. As aresult, there is 6 per cent increase over10.8 during the period under discussion.Trade and commerce as well astransportation activities picked up fast;their share became twice.

It is important to remember that ourtotal employment also went onincreasing. By multiplying thesepercentages with corresponding totalemployment (given in the last row ofTable 8), we can get absolute number of

persons employed in each sector. Totalemployment rose during this period by16 crore (about 70 per cent); in the lastsix years by 2.5 crore. It would bediscovered that, for the first time in1999-2000, employment in agriculturesector has reduced and it reduced by 50lakh when compared to 1993-94. In thesesix years, some 3 crore people were thusabsorbed in non-agriculture sectors.Trade, manufacturing and constructionwere major absorbing sectors.

Concluding Remarks

In this chapter, first, we tried to havesome idea about the economy in theinitial years of our Independence andemphasised that the first half of thetwentieth century was bad in terms ofgrowth as well as in terms of

TABLE 3.8 Industrial Classification of Workers from 1972-73 to 1999-2000 (in per cent)

SECTOR OF ACTIVITY 1972-73 1977-78 1983 1987-88 1993-94 1999-2000

Agriculture, etc.* 74.0 72.0 68.4 64.1 63.9 59.8

Mining and Quarrying 0.4 0.5 0.6 0.7 0.7 0.6

PRIMARY SECTOR 74.4 72.5 69.0 64.8 64.6 60.4

Manufacturing 8.8 10.2 10.7 11.3 10.6 12.1

Electricity, Gas and Water Supply 0.2 0.2 0.3 0.4 0.4 0.3

Construction 1.8 1.7 2.3 3.8 3.2 4.4

SECONDARY SECTOR 10.8 12.1 13.3 15.5 14.2 16.8

Trade and Commerce 5.0 5.8 6.9 7.3 7.6 9.4

Transport, Storage and 1.8 1.9 2.5 2.7 2.8 3.7Communication

Other Services 8.0 7.7 9.2 9.7 10.5 9.6

TERTIARY SECTOR 14.8 15.4 18.6 19.7 20.9 22.7

Total Employment (Cr.) 23.6 27.1 30.3 32.2 37.2 39.7

*Including Livestock, Forestry, Fishing, Hunting, Plantations, etc.

Source : Manpower Profile of India 1999, Institute of Applied Manpower Research, New Delhi. For1999-2000 from the absolute data provided in Report of Task Force on EmploymentOpportunities, Planning Commission, Government of India, June 2001.


diversification of the economy. Then, wediscussed the growth of GDP and PCI.We noticed that, over the span of fiftyyears, the growth rate of GDP was alittle over 4 per cent per annum. Therate of growth during the seventies wasparticularly low. During the eighties andnineties, we were able to grow at a rateclose to 6.0 per cent per annum. Percapita income grew at the rate of slightlymore than 2 per cent per annum duringthe whole span of fifty years. Duringthe eighties and nineties, the rate wasfound to be more than 3.5 per cent perannum.

Then, in order to find out as to howthe composition of GDP in terms ofsectoral contribution was changing, westudied absolute contribution andrelative contribution of different sectors,as also growth rate of different sectors.We noticed that contribution ofagriculture to GDP, despite four-foldincrease, reduced from 50 per cent in1950-51 to less than 24 per cent in 1999-2000. The contribution of primary sectorcame down from 60 per cent to 27.5 percent. The contribution of secondarysector increased from 13 per cent to about

25 per cent while that of tertiary sector,from around 28 per cent to 48 per centduring the same period.

We also touched upon the contri-bution of rural sector vis-a-vis urbansector, public sector vis-a-vis privatesector and organised sector vis-à-visunorganised sectors. Contribution ofrural sector decreased from over 62 percent in 1970-71 to about 54 per cent in1993-94 while population of the sectorreduced from 80 per cent to 75 per cent.Contribution of public sector grew fromless than 10 per cent in 1960-61 to wellover 25 per cent in 1998-99.Contribution of organised sector wasabout 25 per cent in 1960-61, which isexpected to have risen to around 40 percent.

In the end, we discussed howlabour is being absorbed in differentsectors. The employment in agriculturehas declined from three-fourths in1972-73 to three-fifths in 1999-2000;the absolute number reduced for thefirst time in 1999-2000. Employmentdeceleration in primary sector is evenlyshared between secondary sector andtertiary sector.

EXERCISES

1. Briefly discuss the conditions of the Indian economy at the time ofIndependence or a little after.

2. Discuss the growth of GDP for the whole period of fifty years since 1950-51 aswell as each of the decades. Account for acceleration or deceleration.

3. Give a snapshot picture of growth of per capita income for each of the decades.Try to reason as to why the growth rate during the seventies by the methodCAGR is so low.

4. What do you mean by structural change in an economy? Explain.5. Enumerate the activities normally included in primary, secondary and tertiary


sectors.6. Discuss, with the help of tables, as to why the contribution of agriculture to

GDP reduced so drastically despite the success of green revolution and surplusof agricultural production, especially foodgrains.

7. How have secondary sector and its sub-sectors fared during post-Independenceperiod?

8. Give the salient features of growth of tertiary sector and its contribution toGDP since 1950-51.

9. Discuss the changes in sectoral composition of GDP.10. How do you define public sector? How has it grown since 1960-61?11. Discuss the implications of reduction in contribution of rural areas to GDP,

which is higher than reduction of its share in population.12. How is the contribution profile of organised sector changing?13. Differentiate between industrial and occupational distributions of employment.14. Discuss the industrial distribution of workers in the Indian economy since

1972-73.

ACTIVITIES

1. Search the years of decline in per capita income from the Table given in theappendix. Find out its frequency in each decades. Discuss implications withyour classmates.

2. Locate negative growth rates in Table 3.7. Reason out why from what you readoutside the class.

3. With the help of total employment figures given in the bottom row of Table 3.8and percentage distribution of workers in other rows, prepare a table of absoluteemployment for each sector for each year. With the help of this table, formulateyour ideas as to which sectors are displacing labour and which ones areabsorbing it.

4. Suppose labour productivity of a sector is obtained by dividing absolutecontribution of a sector by the size of employment in that sector. Treatemployment for 1972-73 as if it is for 1970-71, and similarly employment for1993-94 as if it is for 1990-91 for this limited purpose. Calculate labourproductivity for 1970-71 and 1990-91 for each sector and compare the twosets of derived figures.

ECONOMIC INFRASTRUCTURE 41

CHAPTER 4

Economic Infrastructure

Introduction

Infrastructure means structure below,which means foundation. It can,therefore, be taken as basic to allactivities in the economy, whetherrelated to agriculture or industry or eventourism. Infrastructure refers to somekind of permanent installations, whichare used over a long period of time forsupply of basic inputs: railway lines,roads, dams, canal system, powerstations, satellites and pipelines;schools, colleges, universities andinstitutes; dispensaries and hospitals;and buildings for services of state organslike police and judiciary.

Most economic activities requiresome kind of power for transformationof inputs into output. Power may beneeded to preserve certain commoditiesover time as their use may spread overlong duration while production maturesin short duration of time. One also needspower to use in homes.

All activities require transportation.Raw materials may be away fromproduction premises. Both productionunits and consumption units may beaway from markets. A product may beused in production or consumption. Itmay need to be transported from oneproduction unit to another production

unit. People also need to move to differentplaces for economic and social reasonsas also for leisure. Transportation itselfrequires some kind of energy.

Today, we cannot think of livingwithout being connected throughcommunication. Besides posts, peopleand activities are connected throughvarious links of telecommunication. Weare passing through a phase ofrevolution in telecom much beyondtelegraph and telephone. Whether it isbusiness or entertainment, informationtechnology has made a great revolution.One also sees a lot of banking, financeand insurance activities around, whichconnect savers with investors in oneway or the other. It is difficult to wishaway these activities even when weread many problems associated withthese activities.

Thus, we find that we need a lot morepower than we directly use in lightingand warming/cooling our houses and inusing various home appliances.Transportation vehicles use manymore equipments and machineryhelp movement of people and goods. Sois thecase of telecommunication goods.Business transactions dominate thescene of banking and financial activities.And general insurance of property ismuch larger business than insuranceof life.


Many of these developments ininfrastructure would not have beenpossible without development ofmanpower, at the base of which iseducation. Without health, how do youenjoy whatever you produce? How do youproduce if you do not stay healthy? Anunhealthy population produces muchless than what technology permits. Everyhuman being requires reasonablehousing facilities.

Infrastructure is often divided intotwo categories: economic and social.Energy/power, transportation andcommunication are categorised aseconomic, while education, health andhousing are categorised as social. It maybe noted that this division is not neatand, therefore, not entirely satisfactoryas the former category often directlycontributes to better living and the lattercategory is responsible for higherproductivity. Nevertheless, as education,health and housing are directlyconsumed by the people and are onlyindirectly of help in production ofcommodities and services, there is somebasis for designating them as socialinfrastructure.

In this chapter, we shall deal withthree sectors of economic infrastructure:energy, transportation and communi-cation and in the next, with other threesectors of social infrastructure:education, health and housing.

Energy

No human activity is possible withoutenergy. For quite a long time in humanhistory, human muscle power energywas increasingly supplemented byenergy of draught animals, which weredomesticated quite early. Many

agricultural operations and carrying ofagricultural produce—foodgrains andnon-food crops—done with the help ofbullocks, horses, camels and donkeys.Water streams also helped in many ways,direct flowing of logs to carrying vessels—boats and ships. Whenever and whereverfeasible, sunshine, wind and falling waterstreams were also harnessed.

Let it be made clear that fuelwood,agricultural waste and animal dung(dried) are three major energy sources,which are used in cooking food in ourvillages and towns. At present, we areusing around 50 million tonnes offuelwood, 66 million tonnes ofagricultural wastes, which havecompeting uses of feed, fodder, roofingmaterial and organic matter forcompost. Our cattle population may beproducing around 325 million tonnes ofdung, of which 75 million tonnes areused as organic manure and the rest isused for cooking purpose. These arenormally known as non-commercialenergy resources. It is understood that,in early fifties, non-commercial energyconstituted 74 per cent of total energyconsumption, which fell to around 34 percent by the late nineties. Fuelwoodaccounts for about two-thirds of the totalnon-commercial energy. It may be notedthat almost whole of the non-commercial energy is consumed by thehousehold sector.

Later, we may recall, people learntmaking use of steam power inmanufacturing. Firewood was made useof in boilers to produce steam, which wasin turn used to generate mechanicalpower. When people in Europe ran out oftheir forests, they resorted to taking


away firewood from the forests of theircolonies and to digging coal. Till the otherday, trains were run with steam powerusing coal. On the one hand, inventionof combustion engine and discovery ofpetroleum changed the scene of poweruse in transportation, while on theother, use of electric power transformedthe manufacturing scene.

Pattern of Energy Use

Before we turn to modern commercialenergy sources for detailed discussion,it would be good to have an idea aboutthe changes in pattern of energyconsumption. It may be noted that, fortotalling different energy sources, theyhave to be converted into common unit.One such unit is million tonne of oilequivalent (MTOE). Once they areconverted into a common unit,percentages can be calculated.

TABLE 4.1Pattern of Energy Consumption (in per cent of million tonnes of oil equivalent)

Primary Energy Final Commercial EnergyYear Commercial Non- Coal Petrolelum Natural Electricity

Commercial Products Gas

1953-54 28.4 71.6 80.1 16.7 - 03.2

1960-61 34.7 65.3 75.3 19.9 - 04.8

1970-71 40.6 59.4 56.1 34.1 0.6 09.2

1980-81 46.9 53.1 47.9 40.3 1.1 10.7

1990-91 59.3 40.7 35.9 43.6 5.5 15.0

1996-97 65.9 34.1 28.9 47.7 6.3 17.1

Source: Ninth Five-Year Plan 1997-2002, Volume II, Planning Commission, Government of India.

Coal, lignite, petroleum and gas arethe primary sources as they can bedirectly used to provide energy to themanufacturing process as well as inproduction of electric power. But alongwith power, they are also used as final

consumption has drastically reduced asa proportion. Further, despite so muchtalk about scarcity of petroleum, we maynote, that its use as final commercialenergy is almost 50 per cent of total useof commercial energy.

sources of commercial energy. We havealready noted that wood, agricultureresidue, and animal waste are nowregarded as non-commercial energy. Wemay note that energy based onsunshine/wind/tide/biomass is consi-dered commercial. Thus, we providebelow: (i) division of primary energyinto commercial and non-commercialenergy, and (ii) division of finalcommercial energy into coal, petroleumproducts, natural gas and electricity(See Table 4.1).

Table 4.1 mainly reflects changes intechnology of energy use over timethough, partly, it reflects process ofmodernisation and environmentalconcerns and awareness. Use ofcommercial energy has risenconsiderably even in the relative sense.Though consumption of coal has increasedten times since early fifties, its direct final


We shall, hereafter, deal withindividual forms of commercial energy,which include coal (including lignite),petroleum (and gas) and electricity.

Coal

Commercial exploitation of coal started in1774 in Raniganj near river Damodar. Itis found in many parts of the country butmainly in Jharkhand, Orissa, MadhyaPradesh, West Bengal, and AndhraPradesh. We have presently a stock of2,00,000 million tonnes — 80,000 milliontonnes proven, 90,000 million tonnesindicated and 40,000 million tonnesinferred.

TABLE 4.2Production of Coal and Lignite (Million Tonnes)

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01

Coal 32.20 55.23 72.95 113.91 211.73 309.63Lignite — —- 03.39 5.11 13.77 22.95Total 32.20 55.23 76.34 119.02 225.50 332.58

Source: Economic Survey 2001-02, Economic Division, Ministry of Finance, Government of India.

With advent of railways in 1853,which used steam engine, coal came tobe increasingly used as fuel and in thefirst fifty years, its use increased fromone million tonne to more than six milliontonnes. In the next fifty years (by1950-51), it increased to 32-33 milliontonnes while, in the still next fifty years,that is after Independence, the

about one-tenth. Coke (soft and hard)is basically used in metallurgicalindustries such as iron and steel plant(in the production of pig iron) as well asin non-metallurgical industries. Non-coking coal is also used in otherindustries. It is also used in domesticand market coking. For consumptionstatistics, see Table 4.3.

TABLE 4.3Sector-wise Coal Consumption (Million Tonnes)

Power Steel Cement Railways Others Total

1980-81 34.5 17.6 4.3 10.9 27.7 95.01985-86 72.9 24.5 7.9 9.1 40.7 155.11990-91 118.6 24.5 10.1 5.0 47.0 205.21995-96 184.5 26.4 11.0 0.3 48.9 271.12000-01

Source: Annual Report, 2000-01, Ministry of Coal, Government of India.

consumption of coal increased more thanten-fold to 332 millions tonnes, includinglignite. Now-a-days, coal is the principalprimary source of commercial energy inIndia (See Table 4.2).

Coal is used in many industries bothfor meeting process and energyrequirements. For energy requirements,it is used directly as well as transformedinto coke if it is of good quality. Use ofnon-coking coal has increased over timebecause of dependence of thermal powerstations on coal as feedstock, which wasa conscious decision taken in earlyseventies. While about one-third coal wascoked in early seventies, now it is only


Lignite is very similar to coal. Knownas brown coal, it has lower energy contentthan coal. Its production is around20 million tonnes. Thermal power stationsclose to lignite pit-head stations use it asfeedstock. A small proportion of lignite isalso used to make briquettes, which areused as domestic fuel. Lignite is found inTamil Nadu and Gujarat.

Coal is consumed by thermal powerstations as feedstock to the extent of66 per cent. It was a conscious decisionmade in the seventies to increasingly usecoal for generating electricity as hydro-power was found to have certainlimitations. Ten per cent of cokeproduction is used by coke oven plantsfor producing hard coke for use in steelplants. Railways in early fifties used tobe a major consumer but now, theyhardly use it. Collieries themselves usecoal to an extent of 5 per cent.

One is genuinely worried as to whatwill happen when coal stocks areexhausted. At the present rate ofconsumption, the proven stocks may lastfor 250 years. However, our demand is likelyto increase and reasonable projections showthat it may not last for more than 125 years.

Petroleum

Though oil was dug in India in Digboi in1901, its quantity was very small. It wasnot needed then as much as it is requiredtoday. Motor transport was not so visible,which needs so much of petrol/diesel.Kerosene was of course in use for lightinghomes. Trains were hauled by steamengine.

Many countries in the Middle Eastare rich not because they have developedtheir economies but because they havea lot of oil reserves. Present technology

is highly dependent on oil for energy andto some extent for process. We use manyof the petroleum products withoutrealising that what they are made of.Crude petroleum gives us petrol, diesel,kerosene, gasoline, furnace oil, bitumen,paraffin wax and also coal tar.

Earlier we thought that we had oilreserves only in Assam. AfterIndependence, we set up an Oil andNatural Gas Directorate in 1956 (laterconverted into Oil and Natural GasCommission in 1959). The Commissiondiscovered more reserves in Assam andstruck oil in Ankleshwar (Gujarat) in1961 and later, in Cambay basin(Maharashtra). However, even by1960-61, we produced no more than 0.5million tonnes. But twenty years laterin 1980-81 we were producing twentytimes more, 10.5 millions tonnes. Twentyyears later, that is, by the close of thecentury, our production of crude oil wasstill around 32 million tonnes. It isimportant to note that our consumptionof oil is increasing at faster pace thanour domestic production of the same.When we produced 10 million tonnes,we consumed 25 million tonnes. Whenwe produced 30 million tonnes, weconsumed 85 million tonnes, forcing animport of about 50 million tonnes. Wehave frozen our own production levelwith a view to conserving it for future.In the first year of the present century,our import has risen to 74 million tonnes.Besides crude oil, we also import otherpetroleum products. For development inthis sector, in terms of production andimport, see Table 4.4.

Natural gas is our new resource asadequate technology has developed forharnessing it. Starting with annual


production of 1.5 billion cubic metres inearly seventies, we are producing around30 billion cubic metres. It is liquefied andused as cooking gas and is used in somethermal plants as fuel. Earlier it was justflared up as there was no technology totap it.

It is good to know about reserves ofboth crude oil and natural gas. We haverecoverable balance of reserves of crudeoil of 650 million tonnes and of naturalgas of 625 billion cubic metres. At thecurrent rate of production of crude andnatural gas, our stocks may exhaust in20-25 years or so. That is why we arenot increasing our production level anddepending on imports. Even while thereis possibility of discovering new oilreserves, there is a need to developalternative technologies and conservepetroleum.

Electricity

Today we, who live in towns, cities andmetropolises, cannot think of life withoutelectricity. Much of coal and natural gasis used in generation of electricity.Hydroelectricity and nuclear powerusefully supplement the thermal power.It is produced in billions of kilowatt hours(KWH). One bulb of 1000 watt burnt for

an hour consumes one kilowatt-hourenergy. A generator with capacity of1000 watts, when run on full capacity,will produce one kilowatt-hour energyin an hour. In common parlance, it isknown as a unit. In 1950, we generated6.6 billion KWH of electricity. Today, wegenerate as much as 527 billions ofKWH—80 times more. Part of electricityis generated by industries for self-consumption. Such plants are known ascaptive plants and such electricity is saidto be produced in non-utilities.

There are three basic sources ofelectricity generation: thermal, hydroand nuclear. After Independence, weemphasised on harnessing hydro power,called hydel (short form for hydroelectricity). But, by mid-seventies, wedecided to make use of coal and generatethermal electricity. Nuclear power alsomakes a little contribution. About ten percent electricity is generated by non-utilities or captive plants of variousindustries for their self-consumption(See Table 4.5).

Who consumes this electricity?Obviously, electricity generated bythe non-utilities is consumed bythe industry. But, the electricitygenerated by utilities is consumed in

TABLE 4.4Petroleum Statistics: Production, Availability and Refining (Million Tonnes)

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01

Production 0.3 0.5 6.8 10.5 33.0 32.4Import 6.0 11.7 16.2 20.7 74.1Availability 6.5 18.5 26.7 53.7 106.5Refinery 0.3 6.6 18.4 25.8 51.8 103.4Throughput

Source: Economic Survey 2001-02, Economic Division, Ministry of Finance, Government of India.


industries, agriculture, railways,commercial establishments and homes.The consumption of electricity acrossdifferent categories is given below inTable 4.6.

TABLE 4.5Electricity Generated (Gross) in Billion KWH

Utilities Non-utilities Total

Year Thermal Hydro Nuclear Total

1950-51 2.6 2.5 5.1 1.5 6.61960-61 9.1 7.8 16.9 3.2 20.11970-71 28.2 25.2 2.4 55.8 5.4 61.21980-81 61.3 46.5 3.0 110.8 8.4 119.31990-91 178.7 71.7 6.1 264.3 25.1 289.42001-02 424.4 73.5 19.5 517.4 61.7 579.1

Source : Economic Survey 2001-02, Economic Division, Ministry of Finance, Government of India.

TABLE 4.6Consumption of Electricity from Utilities by Categories of Consumers (in per cent)

Year Industrial Agricultural Commercial Traction Domestic Others

1950-51 62.6 3.9 7.5 7.4 12.6 6.01960-61 69.4 6.0 6.1 3.3 10.7 4.51970-71 67.6 10.2 5.9 3.2 8.8 4.31980-81 58.4 17.6 5.7 2.7 11.2 4.41990-91 44.2 26.4 5.9 2.2 16.8 4.52000-01 33.9 31.2 6.4 2.3 21.2 5.0

Source : Economic Survey 2001-02, Economic Division, Ministry of Finance, Government ofIndia.

It may be noted that, use of electricityin agriculture in its various operations isgrowing as the number of agricultureholdings grow (though they are verysmall). Actually, the consumption ofelectricity in agricultural operations hasincreased 500 times in 50 years.Domestic use has also tremendouslyincreased. Consumption by industry hasrelatively reduced but it continues to be,by far, the largest. If we account for non-utilities, which entirely cater to the

While we may note with somesatisfaction that more than five lakhvillages have been electrified and morethan 1.27 crore pumpsets have beenenergised, let us remember that still60 per cent of rural households and 20per cent of urban households do not havea power connection.

Non-conventional Energy

With the rise of problems attendant withthe use of fossil fuel—depletion and

industries, the consumption of industry

would turn out to be about 37 per cent

and that of agriculture, less than 30 percent.


pollution, a lot of emphasis is being laidon the development of non-conventionalenergy sources. Some of these sourceswere traditionally used but withinefficient old technology. However, mostforms, including solar energy, have tobe first converted into electricity.Biomass, wind, small hydro, conversionof waste, tides/waves/ temperature-gradient over seas, and geothermalenergy, among others, are also suchforms of energy. Their potential is saidto be very great at least as usefulsupplement. Chemical sources like fuelcell and hydrogen burning are also beingmentioned. However, in many cases,technology has yet to be adequatelydeveloped.

Wind energy is already beingharnessed in quite a few places. Thereare 204 sites where wind can be usedfor generating electricity. You may seemoving wind turbines in the followingstates: Andhra Pradesh, Gujarat,Karnataka, Kerala, Madhya Pradesh,Maharashtra, Orissa, Rajasthan andTamil Nadu. Success with solar thermalenergy through use of solar cooker hasbeen limited. Solar photovoltaics is agreat hope again. We are at presentharnessing only 3 per cent of the knownpotential.

Transport

Production of goods and consumption ofgoods are often at two different locations.Different raw materials for a productionprocess are also found at different places.Some goods are stocked in placesdifferent from points of sales. Peoplereside at one place and work at another.But people also move to attend certainfunctions, go on pilgrimage or travel for

pleasure. People have increasingly beenusing some or the other means oftransportation—from bullock-carts toboats, railways to roads, airways toships. We need essentially two things—medium and carrier. Waterways—rivers,canals, lake and seas—need boats andships; airways need aircrafts orhelicopters; railways need trains; andthese days, roads need trucks, lorries,buses and cars besides rickshaws,tongas and carts. On the pattern of waterpipelines, we have now got pipelines fortransporting crude oil, petroleumproducts and natural gas.

Railways

Railways are, by far, the most importantmeans of transportation of goods andpassengers. With modest beginning in1853 (150 years ago) when the first trainran for a distance of 20 and odd mileson April 16 between Bombay (now,Mumbai) and Thane (a suburb ofMumbai), it developed into a grandnetwork in the nineteenth century itself.By 1900, there were 25000 miles (40000kilometres) of railway lines in India,which included present Pakistan,Bangladesh and Burma. Next fifty yearsadded only 10000 miles (16000kilometres). By 1950, railway lines couldmeasure up to 54000 kilometres in thepresent territory of India.

The British, of course, developed therailways for administrative as well ascommercial reasons. It helped them havetight control over the territory and openup the country for collecting food andraw material for Britain and for sellingtheir manufactures in India. If one goesthrough the construction details ofrailways, one would notice that it started


from port towns and spread towards theinterior with the sole intention offacilitating export of agriculture produce,particularly cotton. Its development wasthus geared more towards foreign tradethan internal trade or development ofindustry in the country. Development ofthe railways also created valuable marketfor the British steel and engineeringindustries and opportunities forprofitable investment for the Britishcompanies.

EVIDENCE FOR BRITISH INTEREST

You can read the names of BritishCompanies, which supplied steel girdlesfor bridges if your train happens to stopat some rail bridge and you are sitting inan ordinary coach by the side of awindow.

The British Government of India gavemany concessions to the private RailwayCompanies, like free grant of land,guarantee of a minimum return oncapital, again with the objective of layingrailway lines in as much area as possible.However, owing to criticism of privateownership and management, theGovernment of India started taking overthe private companies from 1925—theyear in which the first electric engine wasintroduced on the Indian track. In fact,this was the year in which the budgetfor railways was separated from thebudget for general finance. Budget forthe railways is presented a few daysbefore the general budget of the UnionGovernment in the Parliament. In 1950,with the taking over of the railways informer princely States, the process ofnationalisation of the railways wascompleted.

Indian system of railways is thelargest in the world under a singlemanagement, by its track, stock, andstaff. It is the biggest public undertakingin the country. It has about 16 lakhemployees on its roll and more than2 lakh casual workers. It runs daily about13500 trains, including more than 8500passenger trains, connecting around7000 stations—big and small, halt andflag ones. It hauls 1.2 crore passengersand 12 lakh tonnes of goods daily. It istruly called the life-line of the nation.

In 1950-51, we had a route length of53600 kilometres, running track of59300 kilometres and the total track of77600 kilometres. In 2000-01, we hadroute length of 63000 kilometres,running track of 81200 kilometres andthe total track of 108000 kilometres. Itmeans that the track density increasedfrom 1.1 in 1950-51 to 1.7 in 2000-01.Thus, while route length did not increaseeven by 20 per cent, running track roseby 30 per cent and total track by 40 percent. More importantly, the electrifiedtrack, which used to be less than400 kilometres in 1950-51 and onsuburban sections only, is now more than15000 kilometres, of which ninety percent is on heavy density freight routes.Except a few sections between Mumbaiand Chennai, and Chennai and Kolkata,all routes connecting four metropolises(two between Delhi and Mumbai) havebeen electrified. Majority of tracks (65 percent) are now in broad gauge and gaugeconversion from metre/narrow gauge tobroad gauge is an important item in theagenda of development (Gauge means thedistance between two rails of a track).

The number of locomotives increasedfrom 8200 in 1950-51 to over 11000 in


1970-71 but came down to 7300 (electricengines only 2800) only. However, earlierlocomotives used to be steam ones andhad slow speed, now they are diesel andelectric ones and run much faster andtract more load. Similarly coaches andwagons, which number 40000 and

TABLE 4.7Progress of Railways in Post-Independence Period

Route/Track (kms) 1950-51 1960-61 1970-71 1980-81 1990-91 1999-00

Route length 53596 56247 59790 61240 62367 62759Route electrified 388 748 3706 5345 9968 14261Rolling StockLocomotives 8209 10624 11158 10908 8417 7517Diesel 17 181 1169 2403 3759 4651Electric 72 131 602 1036 1743 2810Coaches 19628 28439 35145 38333 38511 41349Wagons 205596 307907 383990 400946 346102 244419Throughout (MT/MTK/M/MK)Goods traffic originating (MT) 93 156 196 220 341 450Goods carried (MTK) 44117 87680 127358 158474 242699 301510Passenger originating (M) 1284 1594 2431 3613 3858 4411Passengers carried (MK) 66517 77665 118120 208558 295648 403088Productivity (kms)Average lead (passenger) 51.8 48.7 48.6 57.7 76.6 91.6Average lead (freight) 470 561 648 720 711 644

M = Million, MK = Million-kilometres, MT = Million-tonnes, MTK = million tonne-kilometresSource : Indian Railways Year Book 1999-2000, Ministry of Railways (Railway Board), Government of

India and Economic Survey 2001-2002, Ministry of Finance, Government of India.

264000, respectively, are better equippedand render better service. Engines,coaches and wagons, put together, isknown as rolling stock. For judging theprogress, see Table 4.7.

Table 4.7 is meant to help you forman idea about how our railways areperforming. For example, you can see thatgoods originating in million tonnes andgoods carried in million tonne-kilometreshave increased five and seven times

11 per cent of the revenue to railways.We may further note that while thenumber of coaches is not increasingfast, their seating capacity hasincreased particularly because broadgauge compartments can accommodatemore passengers.

It may be noted that seven bulkcommodities, essential for core sectorsof the economy, viz. coal, foodgrains,fertilisers, petroleum products, finished

respectively while the number ofcoaches and wagons has risen only 2 and1.2 times respectively. It is importantto point out that 60 per cent of thepassengers are suburban passengerswho share 20 per cent journey in termsof passenger kilometers and contribute


steel and raw material for steel plants,contribute most of the freight traffic(95 per cent). Certain essentialcommodities like salt, fruits andvegetables, sugarcane, certain ores,livestock, etc. constitute further 3 per cent.

We can recall that the railways werestarted by the private companies, whichwere supported by the BritishGovernment in India. By 1925, it wasnationalised. Thus, it has completed75 years under private ownership and75 years under government ownership.But accounts of the Department ofRailways are separate from the generalaccounts of the Government of India. TheGovernment of India has provided equitycapital on which it should receive somedividend. Normally, dividend is based onthe amount of profit but the railways havebeen asked to pay 6 per cent on the capitalowned by it, which may be around Rs20,000-25,000 crore these days.

It may be noted that two-thirds ofthe total earnings of railways, which arearound Rs 30,000 crore, come fromgoods traffic and only one-third frompassenger traffic. It spends most of itsearnings on material inputs and oncompensation of the employees. Therailways spend around more thanRs 15,000 crore on employees which isaround 50 per cent of the total expenses.

The following factors suggest thatrailways should be duly promoted:

1. Railways are more than six timesenergy efficient than roads.

2. Railways are almost four times moreeconomical in land use.

3. Rail construction costs are sixtimes lower than roads forcomparable levels of traffic.

4. Social costs in terms of environ-mental damage are significantlylower for railways vis-a-vis roads.

PROGRESS OF RAILWAYS BY CERTAIN PARAMETERS

Passenger traffic rose from 1280 million covering 66500 passenger-kilometres in 1950-51to 4600 million covering 400000 million passenger-kilometres in 1999-2000. Thus, anaverage passenger is now covering 90 kilometres in comparison to 50 kilometres in1950-51, though people travelling in higher classes travel longer, on an average about500 kilometres, whereas suburban passengers travel only 30 kilometres. Passenger topopulation ratio has increased from 36 per cent to 44 per cent. Despite a lot of qualitativeimprovement in railway service, many physical parameters are not very impressive. It is importantto point out that 60 per cent of the passengers are suburban who share 20 per cent journey interms of passenger kilometres and contribute 11 per cent to railway revenue. We may furthernote that, while number of coaches is not increasing fast, their seating capacity has increasedparticularly because broad gauge compartments can accommodate more passengers.

During the last fifty years, wagons increased 2.6 fold, and tonne-kilometres rose6.25 times. Track utilisation, million tonne-kilometers per route kilometer, rose from1.5 in 1950-51 to 6.5 in 2000-01. The number of wagons as well as its total capacity hasof course reduced from its peak in 1980-81, average capacity of wagons has increasedfrom 23 tonnes in 1950-51 to 46 tonnes in 1999-00. Productivity is thus on increase.

Indian Railways produces its own rolling stock: about 2200 passenger coaches,140 diesel locomotives, 120 electric locomotives and 2000 goods wagons every year.


5. Rail is the only major transport,which can use any form of primaryenergy.

Roads

Roads can reach the doorsteps. Thereare areas, which can be reached throughroad only. Vast hinterlands of thecountry can be linked only throughroads. We have more than 6 lakhinhabited villages with more than 10lakh habitations. We can reach themonly through roads. We have only 7000railway stations. From railway stationsto cities and within city to one’s shopand residence, one can reach onlythrough roads. Short distances toconnect railway system have to becovered through roads only. The railwayshave certain limitations in terms offlexibility.

When major transportation wascarried through carts and camels, we didnot need modern surfaced roads. Wemight have had one crore bullock-cartsengaging two crore heads of cattle andone crore persons engaged in bullockcart transportation. Only cities hadpucca roads for use by horse carts. Now,we are having motorised vehicles, whichneed pucca roads. Rural-urban link has

also to be served through road networkso that farmers could take their produceto nearby mandis or perishablevegetables and milk and milk productscould be collected from rural areas forconsumption in towns and cities.

In Europe, first, a canal system wasdeveloped for cheap transport of goods.Later on, they developed steam engine andwith that railways became prominent.Once petroleum was discovered andinternal combustion engine wasdeveloped, road system came to supple-ment the rail system extensively as it isquicker, more convenient and moreflexible in comparison to the railways.Modern material for surfacing roads alsobecame available because of developmentof petroleum products. Modern roads inIndia came to draw particular attentionof the Government of India after creationof the Central Road Fund in 1929, whichis now partly spent on maintenance andconstruction of the national highways andpartly on construction of rural roads, inter-state roads or roads of economic importance.

Indian road network is one of thelargest in the world. In 1950-51, we hada road network of about four lakhkilometres of roads—1.6 lakh kilometressurfaced (while railways had only 54,000route kilometres) and 2.4 lakh kilometres

NAGPUR PLAN FOR ROAD DEVELOPMENT

The Chief Engineers of all the Provinces met at Nagpur in 1943 and evolved a road planbased on the minimum requirements of the country. This plan, known as the Nagpur Planfor Post-war Road Development, viewed the road system as part of an integratedtransportation national system, which requires coordination between different categoriesof roads on the one hand and between the road network and other modes of transportationon the other. It classified the roads into four major categories: National Highways, StateHighways, Major and Minor District Roads, and Village Roads. It further suggested that novillage in a well-developed agriculture area should remain more than 8 kilometres awayfrom the road.


unsurfaced. While surfaced roads areall-weather ones, unsurfaced onesbecome unserviceable during monsoon.Presently we are having 25 lakhkilometres of total road length of which14 lakh kilometres are surfaced (comparewith 63000 kilometres of route length ofrailways). For the purpose ofconstruction, repair and maintenancethe roads have been categorised as thenational highways, state highways andother roads. While national highways arethe responsibility of the UnionGovernment, all other roads, includingstate highways, are the responsibility ofthe government of the respective statesin whose jurisdiction they fall.

By 1950-51, national highwaysmeasured some 20000 kilometres, whichincreased to 58000 kilometres inJanuary 2001 (almost 90 per cent of totalroute kilometres of the railways). Many

more roads had been taken over by theGovernment of India under NationalHighway Act, 1956; 5727 kilometres wereadded only in 2000-01. State highwaysincreased from around 57000 kilometresin 1970-71 to 1.4 lakh kilometres by 2001.States also widened the scope of theirhighways. Most of these roads aresurfaced. They have also been widened.But highways, national and state, accountfor less than two lakh kilometres and arenow almost surfaced. To see the progressover time see Table 4.8.

Finally, let us note that, while thelength of our road network has risenfrom 4 lakh kilometres to 25 lakhkilometres, the vehicle population hasgrown from 3 lakh to 4 crore, freighttraffic from 600 crore tonne-kilometresto 45,000 crore tonne-kilometres, andpassenger traffic from 2,300 crorepassenger-kilometres to 1,50,000 crore

TABLE 4.8Roads by Broad Classification (in Kilometres) and Vehicles (in Number)

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01

National Highways 9,800 21,000 23,300 31,500 33,400 57,700

Surfaced 1,57,019 2,63,015 3,97,000 6,92,171 10,91,043 14,00,000

All Roads 3,99,942 5,24,478 9,17,880 14,91,301 23,31,086 25,00,000

All Vehicles 3,06,000 6,65,000 18,65,000 53,91,000 2,13,74,000 4,00,00,000

Goods Vehicles 82,000 1,68,000 3,43,000 5,54,000 13,56,000 30,00,000

Buses 34,000 57,000 94,000 1,62,000 3,31,000 6,00,000

% villages with 1000 — — — 29 46 75population connectedwith roads

Note : Figures for 2000-01 are rounded ones and somewhat conjectural in nature but based ongovernment statistics for the late nineties.

Source : Indian Planning Experience: A Statistical Profile, Planning Commission, Government ofIndia, 2001 and Economic Survey 2001-2002, Ministry of Finance, Government of India.


passenger-kilometres. But, we alsoshould appreciate that, besides length,quality of roads in terms of strength andwidth should have improved over time.Moreover, our national highways arecatering to 40-50 per cent traffic.

Waterways

There are two major modes of watertransport, viz., inland waterways andshipping. Shipping may be coastal oroverseas. Inland waterways used to beof some import before the advent of therailways and road transport. Besides thefact that roadways and railways weresuperior in terms of speed, inlandwaterways became difficult as water waswithdrawn in upper reaches of rivers forirrigation and other uses. Disuse of watertransport waylaid development offacilities too. Inland water transport hadbeen on continuous decline andpresently, its share in total transport isnegligible.

Inland water transport is nowrestricted to the Brahmaputra, lowerreaches of the Ganga, canals and deltasof the Krishna and the Godawari,backwaters and canals in Kerala. Hardly2,000 kilometres of rivers are navigable

by mechanically propelled vessels and5,000 kilometres by large country boats.Though efforts by the Inland WaterTransport Authority of India are afoot, yetthere is little likelihood that it will becomean important mode of transport. Lowspeed is one of its crucial weaknesses ondemand side and several natural andtechnological impediments on supplyside. However, there are three NationalWaterways, which are being developedand they are carrying some cargo.

Maritime transport is, however, animportant mode of overseas transportand national transport. India has a longcoastline of over 5,500 kilometres.Before Independence, Indian shippingcompanies faced tough competition fromforeign companies and received nosupport from erstwhile rulers.

After Independence, India was leftwith five major ports. We added six more.Besides, all these ports have beenexpanded, re-equipped and modernisedfrom time to time to meet growing andmore difficult demands. For example,there is a Dredging Corporation of India,a public sector company, which providesthe dredging facilities for ports.Individual port trusts, which look after

ROAD USERS

Roads are basically constructed for vehicles to ply on. Motorized vehicles are of two varieties—passenger or bus service and goods or truck service. But, then there are personal cars/jeeps, taxies, two-wheelers and tractors. According to registration statistics, we can expecton the roads, about six lakh buses, 25 lakh trucks, 50 lakh cars/jeeps/taxies, 2.8 croretwo-wheelers and 45 lakh other vehicles which may include tractors, trailers, and three-wheelers (passengers and goods). Total vehicle population is thus around 4.0 crore, someof which might have become scrap.

However, in order to economize on cost and time as well as to quickly move to a place,we need better roads and better vehicles, which do not pollute too. This considerationbecame more prominent after pollution levels rose to alarming proportions in many cities.


the ports and the Union Government,pool the resources for expansion, re-equipment and modernisation.

OUR MAJOR PORTS

Bombay (Mumbai), Calcutta (Kolkata),Madras (Chennai), Cochin (Kochi), andVisakhapatnam are important ports inIndia that exist prior to India'sIndependence. We have added six more:Haldia near Kolkata, Nhava Sheva (nownamed J. L. Nehru) near Mumbai, andKandla in Gujarat, and upgraded Paradipin Orissa, Tuticorin in Tamil Nadu,and Mangalore in Karnataka.Marmagao was added after liberationof Goa.

Our ports handled more than 250million tonnes of cargo in 2000-01,loading and unloading included. This isthirteen times of what they handled in1950-51 (20 million tonnes). Petroleumand Oil Lubricants (POL) products, ironore, coal, fertilisers and other rawmaterials, and some containerised cargoare the major items transported. Thereare virtually no overseas passengerships, though there are some servicesavailable for Port Blair (Andaman andNicobar). Improvement is needed inmany cases.

There are around 140 minor portswith limited facilities and hinterland.They mainly serve the needs of thecoastal shipping. Coastal areas with

inadequate rail and road facilities makeuse of these ports. In times of congestionin major ports, they serve as goodsupplement. Minor ports are theresponsibility of the respective StateGovernments, which may receive loanassistance from the Union Governmentfor development purposes. Besideshandling cargo, the minor ports are alsoused for passenger traffic.

At the time of Independence, we had42 ships with less than 100000 GRT (grossregistered tonnage). Today, the ShippingCorporation of India alone has a fleet of160 vessels aggregating four million GRT;it is rated as one of the largest shippingcompanies of the world and operates onimportant sea trade routes of the world.There are 66 shipping companies, ofwhich 43 are exclusively in overseastransport, 16 exclusively in coastaltransport and 7 in both.

Air TransportAir transport is the fastest and costliestof all the modes of transportation. It isthe newest of all too. Its influence isso pervasive that distance has came tobe measured in hours rather than inmiles.

Before the two World Wars, the airtransport in India hardly carried anypassengers and cargo and was

NATIONAL WATERWAYS

National Waterway No.1 is on Ganga between Allahabad and Haldia (1620 kms), viaPatna, Bhagalpur and Farakka. Depth between 1.5 and 2.0 metres is maintained betweenPatna and Haldia for major part of the year.

National Waterway No.2 is on Brahmaputra between Sadia and Dhubri (890 kms),via Guwahati (Pandu). There exists an Indo-Bangladesh Protocol for connecting the wayto Kolkata.

National Waterway No.3 is on West Coast canal between Kottapuram to Kollamthrough Champakara and Udyogmandal Canals (205 kms).


essentially a mail service. Experimentsapart, the first regular service began in1932, though the first airmail was liftedon 18 February 1911 from the exhibitionground in Allahabad to Naini. Threedomestic airlines came into being in earlythirties with some kind of support fromthe Government: Tata Airlines andIndian National Airways catering to mailand Air Services of India to passengerand freight. Their services were divertedto military traffic and needs of the IndianAir Force during the second World War.

However, with cheap disposal ofAmerican planes after war, availabilityof flying and ground personnel releasedfrom war, newly established aerodromesand navigational facilities, manycompanies became interested in manyroutes. With some miscalculation aboutdemand for air traffic, about a dozenairlines were given license. Soon they gotinto financial trouble. With a view toensuring sound and healthydevelopment of civil aviation and takingfull advantage of the developments intransport equipment and operationaltechniques, it was suggested that the airtransportation should be nationalised.

Two public corporations, viz. Air Indiaand Indian Airlines were created forinternational and domestic services,respectively. Now there exists an ancillaryof Indian Airlines, which is known asAlliance Air. Beside these, there are a fewprivate airlines also, like Jet Airways andAir Sahara. Recently, we have disinvesteda lot of shares of the two airlines (60 percent of Air India and 51 per cent of IndianAirlines) to financial institutions, privateinvestors and foreign direct investors. Thepurpose is to infuse competitiveness andrun them more efficiently.

There is an Airport Authority of India,which maintains about 92 civil airportsand 28 civil enclaves at defence airports.Five of them are international; many arelikely to be upgraded to internationalstandards. They provide service to ourairlines as well as to the foreign airlines.Air transport includes passengers andcargo (freight and mail). In order tounderstand the growth of this transportsector, some statistics are provided inTable 4.9. Compared to the other modes,it is a small elite sector. Domestic cargo,it seems, is unpopular with the air.International cargo with our airlines isalso small. Our airports handle 2.5 timesmore passengers and 3.5 times morecargo than our airlines carry.

Air transport is being managed witha fleet of 25 aircrafts with Air India,around 50 aircrafts with Indian Airlinesand a small number with other privateairlines. Our aircrafts are somewhat old.Yet, the load factor, indicating use ofavailability, has been 65-70 per cent.

Pipeline Transport

Everybody is aware of the transport ofdrinking water through pipelines incities. Most of sewerage is also beingcarried through pipeline. But in manydifficult areas, drinking water is beingtransported from rivers or water headsto many cities and villages. Of late, it isbeing taken advantage of for transport ofcrude oil, petroleum products and naturalgas. Pipeline transport has low energycost, low transit loss and low overallrunning cost. It has heavy initial sunkcost. It has been found to be the mosteconomical mode for transporting goods,which are in liquid and gas form


between places needing continuoustraffic for longer period of time. It is,therefore, a worthy investment. Pipelinetransport is also being used to carryiron ore in slurry form (fine iron ore inwater). The following are importantpipelines:

Crude

1. Assam crude oil from oil fields toGuwahati (Assam) and Barauni(Bihar) refineries.

2. Imported crude oil from the westcoast of Koyali (Gujarat) to Mathura(Uttar Pradesh) refineries.

3. Imported crude oil from east coastto Barauni (Bihar) refineries.

4. Imported crude oil from Viramgam(Gujarat) to Karnal (Haryana)refineries.

Petroleum Products

1. From Barauni refineries to Kanpur.2. From Mathura refineries to Delhi,

Ambala (Haryana) and Jalandhar(Punjab).

3. From Bombay refineries to Pune.

Natural Gas

1. From west coast Hazira for gas-based nitrogenous fertilizer plantsand natural gas-based power plantsin Madhya Pradesh, Rajasthan,Uttar Pradesh.

While the network of pipelines forcrude and petroleum products have beenbuilt-up and are being managed by theIndian Oil Corporation, the network ofpipelines for natural gas is being handledby the Gas Authority of India Limited.

Communication

Development brings changes incommunication system and bettercommunication helps in development.In today’s world, all spheres of life —public affairs and public administration,national defence, business management,agricultural and other extensionservices, education, advertisement,press and media — require goodcommunication. Communicationsystems bring the buyers and sellerscloser by providing information aboutthe market, motivating the consumers

TABLE 4.9Growth of Civil Aviation in Terms of Passengers/Cargo Services (in Thousand)

1950 1965 1973 1985 1991 1998

InternationalPassengers 150.0 270.0 736.0 2207.0 2430.0 3436.0Cargo (Tonnes) 3.2 10.2 28.0 84.3 101.0 92.0DomesticPassengers 303.0 1135.0 2636.0 8617.0 7912.0 11547.0Cargo (Tonnes) 36.9 26.7 34.3 98.9 97.0 125.0Handling by AirportsPassengers 10738.0* 17723.0 36974.0Cargo (Tonnes) 178.7 377.3 699.0

* For the year 1970-71.Source : Indian Planning Experience: A Statistical Profile, Planning Commission, Government of India,

2001 and Economic Survey 2001-2002, Ministry of Finance, Government of India.


and thus helping the economy growfaster.

This era is said to be an era oftechnological revolution. We have takenadvantage of technological developmentin telecommunication and informationtechnology. Still, the old modes ofcommunication continue to be important.We identify communication systems withpostal communication and telecommuni-cation services, though there was a timewhen communication meant transport,particularly air transport.

Postal Service

Postal service still plays a great role andthe Department of Posts promises, in oneof its recent annual reports, high qualitymail, parcel and related services in Indiaand throughout the world, exceeding theexpectations of the customers, employeesand society.

Number of post offices in India hasincreased from 23344 in urban places andselected villages in 1947-48 to 154551 in2000-01. In rural areas, the number hasincreased four and a half times fromaround 31 thousand in 1950-51 to around138 thousand in 2000-01 and that of urbanpost offices around three-times from5,400 in 1950-51 to 16,400 in2000-01. These post offices include HeadPost Offices and Sub-Post Offices, run by

the Department and Branch Post Officesin rural areas run on contractual basis.There are more than 5.8 lakh letterboxesall over the country. The system is said tobe the largest postal network in the world.Still, there are more than one lakh villages,which do not have a post office within adistance of three kilometers. In theseareas, the postal department is utilizingthe services of the existing infrastructureof gram panchayats and is running thebasic postal service on contractual basis(See Table 4.10). Each post office on anaverage serves 21-22 sq. km. area and5500 persons.

Acceptance and delivery of moneyorder is an important service renderedby postal network. More than Rs 5,000crores are transacted through moneyorder service. Twelve cities in India usesatellite mechanism.

Mail route has risen ten times from2,72,000 km in 1950-51 to 27,20,000 kmin 2000-01. Speed post has beenintroduced since 1986. The number ofcities covered by speed post has nowrisen to 108 and overseas facility is alsoavailable for 97 countries. TheGovernment has, in the wake ofliberalisation, accorded formal status tothe private courier services. There areschemes for linking Delhi with statecapitals and six metropolises.

TABLE 4.10Growth of Number of Post Offices by Rural and Urban Division

1951 1961 1971 1981 1991 2001

Rural Post Offices 30810 69513 98835 124689 132646 138149Urban Post Offices 5424 7624 10224 13535 16073 16402All Post Offices 36234 77137 109059 138224 148719 154551

Source : Indian Planning Experience: A Statistics Profile, Planning Commission, Government of Indiaand Annual Report 2000-01, Department of Posts, Ministry of Communication, Governmentof India.


Processing, transmission and deliverysystem is being modernised.

Besides, postal system also hassavings facilities. There are more than6 crore accounts. There exists facilityfor recurring deposit, term deposit andpublic provident fund. The system alsooperates postal life insurance.

Telegraph and Telex

Telegraphy is very old in India. Startingwith 8200 in 1951 telegraph offices haveby now increased to around 45000. Thedepartment has introduced phonogramservice for sending and receiving telegramby telephone and telex service for sendingand receiving printed messages from onecentre to another. Ninety-five per centtelegrams are delivered in 12 daylighthours. But these services are getting outof fashion because of introduction ofphone/fax/e-mail facilities. Telex israpidly getting out of fashion.

Telephone

Telephone technology has changedphenomenally from use of over-groundwires to use of satellites and under-ground use of optic fibres and co-axialcables. Yet, just in terms of numbers,number of telephone connections hasincreased from 1.7 lakh in 1950-51 to3 crore by 2001. In the recent past, everyyear about 50 lakh connections havebeen provided. STD (Subscribers TrunkDialling) for national dialing is nowavailable to most of the connections.ISD (International Subscriber Dialling)for international dialing was availablefor 170 countries. Cellular mobilephones are getting popular. Around 1.5crore people are using it. Our publiccorporations (MTNL and BSNL) have

joined private operators. They areinternet service providers (ISP) too.

There are more than 2 lakh localpublic call offices (PCOs) and more than3.25 lakh STD booths. Under the schemecalled VPT (village public telephone),around 4 lakh villages have beenconnected. The BSNL has planned tocover all villages by the end of 2002.

Our tele-density has risen from mere0.6 per cent in 1990-91 to around 3 percent in 2000-01. Rural-urban disparityis high: Rural density is less at 0.8 percent while urban density is more than8.0 per cent. Of course, there is noreason to argue that tele-density in boththe areas should be equal.

It may be noted that telephoneservices and operations have beencorporatised into Bharat Sanchar NigamLimited (BSNL) in October 2000.Telephone service for Mumbai and Delhiwas already corporatised underMahanagar Telephone Nigam Limited(MTNL). BSNL has around 4.21 lakhemployees. Telecom Regulatory Authorityof India has been set up to regulate tariffand competition in the telecommuni-cations sector. The TelecommunicationsDepartment will only look after the policyissues and some technical issues suchas wide spectrum management.

Communication Satellites

There are a variety of satellites in ourspace. One of them, INSAT, has beendesigned under the Indian NationalSatellite Programme with the objectiveof strengthening the long-distancetelecommunication (radio, telegraph,television) links. The geocentricsatellites, numbering six, are able tolink pre-determined earth stations.


Concluding RemarksWe have gone a long way in improvingour economic infrastructure sinceIndependence. There is multifoldincrease and qualitative change in allspheres. Yet, there is scope for doing

better. As various forms of infrastructureare at the base of economy and determinethe pace of its growth, we must addressthe infrastructure issues and redressbottlenecks. We shall read more aboutthem in a subsequent chapter.

EXERCISES

1. What is meant by infrastructure? Explain the basic qualities of infrastructure.2. Indicate two categories of infrastructure. Give examples.3. Categorise canals, houses, schools, railways, ships, hospitals, banks,

development banks, aerodromes, courts, power plants, transmission lines andsatellites into economic and social infrastructure.

4. Name commercial, non-commercial and non-conventional sources of energy.5. Differentiate between primary and final sources of energy and show that coal

is both a primary and a final source of energy.6. Discuss changes in the pattern of consumption of energy over the last fifty

years in respect of primary sources in terms of commercial and non-commercialenergy.

7. Discuss changes in the pattern of consumption of energy over the last fiftyyears in respect of final sources in terms of coal, petroleum products, gas andelectricity.

8. Discuss the growth of coal use and changing profile of its use.9. Oil is an important energy resource which needs to be used efficiently in

India – comment.10. How important is gas as a new resource?11. What are the three major sources of electricity? Why did we choose to switch

to thermal power knowing fully well that coal combustion causes pollution?12. Discuss, in brief, the possibility of development of non-conventional energy.13. Discuss the growth of railways since Independence in terms of tracks,

electrification, composition of locos, etc.14. Why should we prefer rail transport for long haulage?15. What are the advantages of roads over railways as a means of transport?16. Give an account of expansion and improvement of road transport since

Independence.17. List different types of water transport.18. Discuss the importance of inland water transport and appreciate its

limitations.19. Give an account of coastal shipping and overseas shipping.20. Give out the salient features of civil aviation.21. Underline the importance of pipeline transport.22. Discuss the progress of postal services of India since Independence.


23. How has telecommunication improved since 1991?24. What do you mean by tele-density? Disparity between rural and urban tele

density is one to ten. We agree that it should reduce. Should the disparity becompletely eradicated? Argue the case for your answer.

ACTIVITY

Calculate percentage consumption of different categories of consumers if we takeinto account the generation of electricity by non-utilities. Assume the whole ofelectricity generation by the non-utilities is consumed by industries only.


CHAPTER 5

Social Infrastructure

Introduction

In the last chapter, we have learnt aboutthe importance of economic infrastruc-ture in the development of our economy.But we know that there is always a manbehind the machine. If a man is healthyand educated, he is likely to contributemore and in a better manner. How couldpeople be healthy and educated? Ifpeople eat well, live in clean houses,enjoy pollution free atmosphere and areprovided proper medical care when theyfall sick, then they will be healthy. Publichealth measures help them have cleansurrounding and also check the spreadof communicable diseases.

Similarly, if people, while young, getenrolled in a school and are taught bygood teachers, they get educated. Later,when they pursue such studies as makethem employable in productivevocations, they become responsiblemanpower. But the first condition is thatthere have to be schools for all boys andgirls; the schools should be approachableand be at a short distance. Educationand health, besides making people moreproductive, make them more capable ofliving better.

Housing is now being considered animportant priority as a majority of peopleare now reasonably fed and clothed. As

education, health and housing havesocial overtones in that they are not justinstruments for generating productivehuman resources but also contributedirectly to the well-being of the people,they are known as social infrastructure.In this chapter, we will discuss progressof three social infrastructures, viz.education, health and housing.

Education

LiteracyLet us start with literacy, which is noteducation per se. People, above a certainage, who can read and write a simplepassage with understanding in anylanguage, are considered literate.Naturally all educated persons areincluded in it. According to 1951 census,one-sixth of the population was literate;by the turn of the century, nearly two-thirds are literate. In terms of absolutenumbers, the literate hardly numbered5.7 crore in 1951. Their number in 2001is about 57 crore, ignoring those in thepopulation below 7 years of age. In thefifty years gone by, the number ofliterates has increased ten times and theliteracy rate has risen from less than20 per cent to over 65 per cent. Studythe trends in levels of literacy since 1951(Table 5.1).

SOCIAL INFRASTRUCTURE 63

Female literacy rate in India is stillless than 55 per cent, while the maleliteracy rate is more than 75 per cent.We have still to cover some ground inliteracy in general and female literacyin particular. But, it should be a matterof satisfaction that the number ofliterates, which was rising till 1991 hasstarted coming down. In some Stateslike Kerala and Mizoram, literacy rateis more than 85 per cent although, insome other States like Bihar, it is noteven 35 per cent.

Similarly, our rural areas have lessthan 60 per cent literacy compared tothe urban literacy rate of over 80 percent. When we consider rural females,the rate falls to 47 per cent. While theurban male literacy rate is 86.7 percent, the rural female literacy rate isjust 46.7 per cent. The difference inliteracy rates of various social groups is,thus, up to forty per cent points.

School Education

While people can become literate at anystage and there are programmes

concentrating on adult literacy,enduring and meaningful literacy comesonly through schools. Our Constitutionenjoins upon the State to provideuniversal education to all children up toage 14. It was interpreted as educationfor eight years in the early fifties. Itmeant, therefore, that every boy or girl,having attained age 6, must be in school.And, we had promised to ourselves toaccomplish it by 1960. It was perhapstoo ambitious to achieve it in all townsand villages, numbering more than 6lakh and spread in 10 lakh habitations,many of which are widely scattered,dotted in vast expanse and small in size.A child of age six or seven has limitationof walking a long distance and that tooeveryday.

Elementary Education

It will pay us to remember that LokSabha has passed on 18 November 2001,an Act through 93rd Amendment to theConstitution, declaring the right to freeand compulsory education for children

TABLE 5.1Population Size and Number of Literates (in crore) and Literacy Rate (in per cent)

Population Number of Literacy

Year All Age 7+ Literates Illiterates Rate (%)

(1) (2) (3) = (4) + (5) (4) (5) = (3) – (4) (6) = (4)/(3)

1951 36.1 28.3 5.5 22.8 19.21961 43.9 34.4 10.2 24.2 29.81971 54.8 43.0 15.6 27.4 36.21981 68.4 53.6 23.4 30.2 43.61991 84.1 67.6 35.2 32.4 52.12001 102.7 86.9 56.7 30.2 65.4

Note: Population aged 7+ and literacy rates are estimated for the years 1951, 1961 and 1971 whilefor the years 1981, 1991 and 2001, they are actual ones.

Source: Census of India Series-1 India, Paper 1 of 1981: Provisional Population Totals, Census of IndiaSeries-1 India, Paper 1 of 1991: Provisional Population Totals, and Geeta Chaubey, Literacy inIndia: An Examination, IASSI Quarterly, Vol. 16, No. 2.


of 6-14 years of age a fundamental right.It has also made a fundamental duty ofthe parents/guardians to provideopportunities for education to childrenin the age group of 6-14 years.

Elementary education is normallydivided in our country in two parts:Classes I-V, known as primary schooland Classes VI-VIII, upper primary(middle) school. Corresponding agegroups of children may be considered as6-11 years and 11-14 years. We hadaround three lakh primary schools and13.5 thousand upper primary schools in1950-51. In the year 1999-2000, wehad over 6.4 lakh primary schools(including primary sections of higherlevel schools) and about 2 lakh upperprimary schools.

In 1950-51, the enrolment in primaryschools was less than 2 crore. Today, it ismore than 11 crore (Population of thechildren has increased 3 times whileenrolment rose by 5.5 times). It iscustomary to divide the enrolment by thepopulation of the relevant age group sothat a valid comparison could be madeover time. This is known as gross

enrolment ratio. The gross enrolmentratio was hardly 43 per cent in 1950-51but now it is more than 100 per cent.You may wonder how such a ratio couldbe more than 100! It simply means thatchildren enrolled in primary classes maynot be strictly from the age group 6-11years. We know most schools in townsand cities admit children with age 5 inClass I. We should also know that manychildren beyond age 11 might bestudying in village primary schools inmany remote areas. This swells thenumerator. That is why there is anadjective ‘gross’, yet, there are childrenin this age group who are not going toschool. Non-enrolment is more preva-lent among girl children (See Table 5.2).

Enrolment in upper primary classesin 1950-51 was just 13 per cent–21 percent for boys and 5 per cent for girls.Today, about 70 per cent boys and 50per cent girls are estimated to beattending upper primary classes. Thenumber of upper primary schools hasrisen from less than 14000 to2 lakh in the last fifty years.Number of students rose from 33 lakh

TABLE 5.2Statistics related to Elementary Education: Enrolment, Schools and Teachers

Unit 1951 1961 1971 1981 1991 2000

Primary

Enrolment Lakh 186.8 336.3 570.4 737.7 973.7 1136.0Schools Lakh 2.1 3.3 4.1 4.9 5.3 6.4Teachers Lakh 5.5 7.4 10.6 13.6 16.2 19.2Enrolment Ratio Per cent 42.6 62.4 78.6 80.5 100.1 104.1Upper PrimaryEnrolment Lakh 33.0 74.8 133.1 207.2 273.1 420.6School Lakh 0.14 0.5 0.9 1.2 1.5 1.98Teachers Lakh 0.9 3.5 6.4 8.5 9.7 13.0Enrolment Ratio Per cent 12.9 22.5 34.2 41.9 60.1 58.8

Source : India Yearbook 2001: Manpower Profile, Institute of Applied Manpower Research,New Delhi.


in 1950-51 to about 4.2 crore in 1999-2000.But, the disparity between male and femaleenrolment, though narrowing, still persists.

Proportion of trained teachers isincreasing and so is the proportion offemale teachers. It is believed that atschool level, trained teachers,particularly the female teachers, proveto be better teachers.

Majority of primary schools in Indiaare run by government. Stategovernments play a major role inproviding education in their respectiveterritories. But, there are also schoolsrun by societies/associations/ trusts.These are known as public schools.

PUBLIC SCHOOLS IN INDIA

Public schools in our country are notowned and managed by the government.They are open to public withoutdiscrimination on the basis of divisionsin society. Our public schools are ‘public’in the sense that they are owned bysocieties, association or trusts rather thanthe government. There may bediscrimination on other grounds; meritmay be one of them.

An important issue that deserves ourattention is that there exists aphenomenon of drop-out. Studentsenrolled in Class I (or VI) leave educationbefore completing Class V (or VIII). Ratioof such students to total enrolment inthe beginning is called drop-out ratio.Only 60 per cent students who enroll inClass I pass out Class V. Of those, whoenroll in Class VI, only 50 per cent passout from Class VIII.

About fifty per cent of educationalexpenditure is incurred on elementaryeducation in India. There are areaswhere it is difficult to provide facilities ofeducation as population is very thinlyspread or people move to different placesin different seasons to make both endsmeet. There are areas where people aretoo poor to afford sending their childrento school; boys may be tending cattle andgirls may be taking care of siblingswhile parents are working in their ownor somebody else’s field. In some areas,girls beyond a certain age are disallowedto go to school by the parents. It meansthat, in some areas, access is deniedand in some other areas, access is notavailed of.

In order to overcome these problems,a scheme known as non-formal educationfor the age group of 6-14 years waslaunched with the assistance of the UnionGovernment. Non-formal schools wereopened, to begin with in 1986-87, in rural,tribal, desert, hilly and remote areas andurban slums in nine educationallybackward states. Around 500 voluntaryorganisations were also involvedwherever possible in this task and around3 lakh non-formal schools were opened,of which 1 lakh were exclusively for girls,which enrolled 75 lakh children. Averageenrolment per non-formal school comesout to be 25. Adult education programme,originally meant for 15-35 illiterate agegroup was also extended to enroll childrenof age group 6-14 years who were notgoing to school.

State Governments have, with a viewto universalising primary education, also


started many supplementary schemes toenlist the children who are still outsideschools. This is partly to fulfil constitutionalobligations, made more explicit by recentpronouncements of the Supreme Courtand constitutional amendments, whichhave made elementary education afundamental right of the child. Manyscholars view these supplementary effortsas dilution of primary education; in theirview, each child, irrespective of caste,colour, culture, creed, sex and domicile,is entitled to uniform education. Theysuggest that the Government shouldadopt a common school system to beoperated through admissions in aneighbourhood school.

However, education up to Class VIIIprepares a ground which the people canbuild upon to acquire specific skills tobe able to work for themselves and bemore productive for the society. Whilesome of the children, after completingeducation up to Class VIII, can enter thelabour force of the economy, many ofthem could still pursue education invocational branches.

Besides a few industrial traininginstitutes (ITIs), polytechnics and nursingschools, there is very little opening forthose who pass out Class VIII or even Class

X. Normal opening for professionalcourses is beyond Class XII. Then, whatis the position of secondary education?This requires serious consideration.

Secondary Education

Secondary level education (for agegroup14-18) prepares the student forentry into higher education as well asfor the world of work.

There was a time when we had10+2+3 or 10+2+2 system. Then came atime when we had11+3 system. Then wereverted to 10+2+3 system. Thistransition is now over. So far as non-professional education is concerned, itis10+2+3 and for professional educationit is 10+2+4. In any case, education upto Class XII is now a part of the schoolsystem and education for Classes IX-Xis called secondary education andeducation for Classes XI-XII is calledsenior secondary or higher secondaryeducation.

In 1950-51, number of such schools/colleges/sections was about 7300 with1,26,000 teachers and 32 lakh students.By now, we have about 1.17 lakhschools, 17 lakh teachers and 180 lakhstudents (See Table 5.3).

TABLE 5.3Statistics related to Secondary Education: Enrolment, Schools and Teachers

Unit 1950 1961 1971 1981 1991 2000

Enrolment Lakh 12.2 34.63 65.80 88.07 143.65 185.82School Lakh 0.07 0.17 0.37 0.51 0.80 1.17Teachers Lakh 1.26 2.96 6.29 9.12 13.34 17.20Enrolment Ratio Per cent 5.30 10.60 19.00 17.30 24.00*

*For the year 1990.Source: India 1985: A Reference Manual, Publications Division, Ministry of Information and

Broadcasting, Government of India and India Yearbook 2001: Manpower Profile, Institute ofApplied Manpower Research, New Delhi.


Efforts were made to vocationalisesecondary education. In the late eighties,under a scheme, Government of Indiaproposed that 10 per cent of seniorsecondary students should be divertedto vocational stream by 1995 and 25 percent by 2000. So far, it seems we havesucceeded in creating a capacity of over10 lakh, which is about 5 per cent ofthe total enrolment. There are around4000 ITIs with a seating capacity of 6-7lakh in different trades.

Higher Education

Being at the apex of the educationalpyramid, higher education has a key roleto play in the education system. It isexpected to provide people an opportunityto reflect on the critical social,economic, cultural and spiritual issuesfacing humanity. At the same time thereis another side of higher education,which caters to technical education(including management education),medical education, agriculturaleducation (including veterinaryscience), and forestry education.

The higher education systemwitnessed, since 1950-51, a twelve-foldincrease in the number of universities,twenty-three-fold increase in thenumber of colleges and twenty-nine-foldincrease in the enrolment. There arenow a little less than 250 universities/deemed universities/institutes ofnational importance and around 11000colleges, including polytechnics,technical colleges and managementinstitutes. There may be around 3.5lakh teachers for general education(arts, science, commerce, etc.), including

80 thousand in university-like institutes.There are other institutions catering tohigher education in a variety of ways,which do not have formal status ofawarding a degree or diploma.

Roughly speaking, 75 lakh studentsare studying for some or the other coursebeyond senior secondary and 15 lakh inother professional courses. However, itis quickly pointed out that our educationis heavily tilted towards generaleducation (arts with 40 per centenrolment, commerce with 22 per centenrolment and science with19 per centenrolment).

Educational Finance

Finance gives some hint about the effortswe make, although it is much moreimportant to know how and where themoney is spent, and who spends themoney. Since 1976, education is aconcurrent subject, causing both thelevels of Governments, Union and States,to spend resources. However, majorresponsibility is borne by the States.Besides Governments, parents alsospend resources on their children andphilanthropists on others’ children.

The States, at both levels ofGovernments put together, spentnearly Rs 60,000 crore towards theclose of the century—more than Rs50,000 crore by the State Governmentsand about Rs 7,000-8,000 crore bythe Union Government. Various stategovernments spend between 10 and30 per cent of their respective budgets,making it an average of 20 per cent.The Union Government, on the otherhand, annually spends less than 3 percent of its budget on education. The


Government, as a whole, thus, spendsabout 4 per cent of the GDP. Of the totalinstitutional expenditure, Governmentexpenditure comes out to be 80-90 percent, the rest being contributed by localbodies (7 per cent), fees (4-5 per cent) andendowments (3 per cent).

How is the Government expenditureallocated between different levels ofeducation? About fifty per cent onelementary education, 30 per cent onsecondary education and 20 per cent onhigher education, out of which 12-14 percent is on general education and the rest4-5 per cent on technical education. Thisis the position in recent years.

Health

There are two ways whereby we can studythe health conditions of a population.One, how long we live and how healthily.Two, how much care of ours is taken.First, we shall see the state of our vitalstatistics. Then, we shall see how ourhealth is taken care about and to whatextent.

Vital StatisticsGiven the mortality conditions/rates atdifferent ages, we should know how longa child is expected to live when it is born?This is known as life expectancy at birth.In the beginning of the century, we wereexpected to live, at the time of birth,hardly for 25 years. On the basis ofmortality rates, which prevailed in theyears before 1921, our life expectancydropped to 20 years (See Table 5.4). Themortality conditions improved later on,and our life expectancy at birth slowly

surged towards 32 years in 1951. AfterIndependence, we took many steps onfood, nutrition and health fronts and ourlife expectancy at birth has reached65 years by the close of the century.

Demographers and actuarystatisticians calculate life expectancy atdifferent ages, say at 1, 5, 10, 20, 30,40, 50, 60 and 70 also. We all know thatdifferent people die at different ages.Different people born in a given year willdie in different years. Life expectancy ofa group (cohort) is the average life-span(number of years) expected to be livedby the group.

Life expectancy at age 10 improvesfor a while as chances of death declineduring the childhood as age increases.Chances of mortality are highest atbirth, followed by those in the first day,first week, first month, and first year inthe decreasing order. For example, lifeexpectancy at age one is four years morethan life expectancy at birth, whilechildren, who survived, have alreadylived a year. However, this trend doesnot continue for ever and after a certainage, say 10, chances of mortality startincreasing. As a result, life expectancyat age 10 is somewhat more than lifeexpectancy at birth. As can be seen fromthe top rows in Table 5.4, life expectancyat age 10 is more than life expectancy atbirth by about 10 years (while thesepeople have already lived for 10 years).That was the position in the beginningof the century. After Independence, aswe can see from the bottom rows of Table5.4, the life expectancy at 10 is becomingequal to life expectancy at birth as lifeexpectancies have improved.


Figures in Table 5.4 were preparedwith the use of census data. Since 1970onward, we have data from the sampleregistration system. Life expectancyfigures based on this database are givenin Table 5.5. The ages at which lifeexpectancy of the two sexes have beenmeasured, are not quite the same as inTable 5.4.

The inferences from Table 5.5 onecan draw, are as follows: (i) Lifeexpectancy has increased over timeacross age and sex, (ii) as age advances,female life expectancy is found toincrease more than male life expectancy,and (iii) from eighties onwards female life

expectancy is found to be higher thanmale life expectancy. All this is a goodsign. The latest projections tell us thatfemale life expectancy is 65.3 years whilemale life expectancy is 62.3 years.

All of us want to live as long aspossible (of course with good health) butwe also know that we cannot liveindefinitely long. However, if people dieduring infancy or childhood mean theirright to life is denied. It is also consideredas wastage of resources particularly thatof mothers in terms of time andexpenditure incurred on rearing them.So there is a need to reduce mortalityparticularly infant mortality.

TABLE 5.4Life Expectancy at Selected Ages for Years of Census (in Years)

At Birth Age 10 Age 30 Age 50 Age 60

Year Male Female Male Female Male Female Male Female Male Female

1901 23.6 24.0 34.7 33.9 22.9 23.8 13.6 14.5 09.5 10.01911 22.6 23.3 33.4 33.7 22.5 23.0 14.0 14.3 10.0 10.11921 19.4 20.9 29.6 29.2 21.6 21.8 14.3 15.0 10.7 11.71931 26.9 26.6 36.4 33.6 23.6 22.3 14.3 14.7 10.3 10.81941 32.1 31.4 41.2 38.6 29.0 27.9 17.8 18.2 12.6 13.71951 32.5 31.7 39.0 39.5 26.6 26.2 14.9 16.1 10.1 11.31961 41.9 40.5 45.2 43.8 29.0 27.9 16.5 17.5 11.8 13.01971 46.4 44.7 48.8 47.7 33.5 32.0 19.2 19.7 13.6 13.8

Source : Health Information of India 1997 & 1998, Central Bureau of Health Intelligence, DirectorGeneral of Health Services, Ministry of Health and Family Welfare, Government of India, 2000.

TABLE 5.5Life Expectancy at Different Ages Based on Sample Registration System

At Birth Age 1 Age 5 Age 50 Age 60

Year Male Female Male Female Male Female Male Female Male Female

1970-75 50.5 49.0 57.0 55.6 57.5 57.7 19.8 21.3 13.4 14.31976-80 52.5 52.1 58.6 58.6 58.8 60.2 20.5 23.0 14.1 15.91981-85 55.4 55.7 60.8 61.1 60.1 61.8 21.4 23.8 14.6 16.41986-90 57.7 58.1 62.2 62.6 60.9 62.5 21.7 23.7 14.7 16.11991-95 59.7 60.9 63.9 65.1 61.8 63.9 22.3 24.8 15.3 17.1

Source : Compendium of India’s Fertility and Mortality Indicators 1971-1997, based on the SRS, RegistrarGeneral of India, New Delhi, 1999.


We notice that, over the century goneby, while death rate (per thousandpopulation) has reduced from around 45in the beginning, dropping to 25 in themiddle to 9 at the close, infant mortalityrate (per thousand live births) has reducedfrom over 200 in the beginning, droppingto 145 in the middle, and to 70 at theclose. We may further note that in theurban areas, while general death rate is6.5, infant mortality is 45. However, thereis still scope for reduction in infantmortality and we plan to reduce it to 30in next ten years or so.

It has to be remembered that birthsare necessary to carry forward the societybut too many of them, by all reckoning,may pose problems in the short run andmoderate our attainments andachievements. Nevertheless, once a childis born, human society wants it tosurvive, to contribute and to enjoy.

Public HealthHow is it possible that people live long,live a healthy and productive life and donot die in infancy or childhood? First,babies should be born healthy, whichrequires mothers to be healthy. Second,

they should receive all immunisationvaccines, etc. Third, they should enjoy aclean surrounding. Fourth, they shouldget nutritive food in adequate quantity.Fifth, they should have adequate accessto medical cure in case they fall ill. Evenadult population should enjoy a cleansurrounding, get nutritive food andshould have access to medical care,should they fall ill. (Everyone shouldhave adequate clothing and shelter.) Inaddition, while children should havechance to learn and play and should notbe forced to work, the adult should havethe chance to work and must work. First,three observations fall in the category ofpublic health. It is because of ourventures in the public health that ourconditions of life, mentioned above, haveimproved.

In order to avoid total wastage of lifein childhood by death or partial wastageby crippling impairment, we should takefull care of our children and theirmothers. If you are in a village, you mighthave noticed camps for variousimmunisations for children and writingson walls regarding immunisationprogrammes. If you are living in a town

PUBLIC HEALTH

Impact of industrial revolution on health was bad. It became a matter of community concernrequiring government action on a continuing basis. It was realised that the human cost ofindustrial revolution and urbanisation in terms of ill health and pre-mature death wasenormous. It was discovered that communicable diseases spread because of filthyenvironmental conditions. An important study on health conditions was published in 1842.After a struggle for six years, a Public Health Act was passed in 1848 in the BritishParliament. The movement led finally to establishment of Ministry of Health in Britainin1919.

It may be recorded that Kautilya was particular about public hygiene and sanitation.He made it a part of civic duties that people should not spoil public places, parks andstreets. He also made spoiling an act of punishable offence. In his days, perhaps industrialpollution did not exist.


or city, you might have seen hoardingsdisplaying dates for mass immunisationfor children. In fact, compared to earlierdays, expectant mothers and childrenare getting much better attention.Pregnant mothers should receiveTetanus Toxoid (TT) injections twice toavoid tetanus infection. Even in 1980-81, only 53 lakh mothers received TT; in1996-97 their number reached 2 crore30 lakh. Mothers, particularly expectantand nursing ones, should be givenprophylaxis against anaemia.Unfortunately, most Indian womensuffer from anaemia because of poornutrition. Children born of such mothersare also prone to suffer from anaemia.

Children should be protected againstdiphtheria, pertussis (whooping cough)and tetanus by DPT vaccine, polio by oralpolio vaccine (OPV), measles, basilluscalimette guerin by BCG vaccine,blindness (for deficiency of vitamin A),etc. Most of these vaccines are nowbeing manufactured in India andcompanies belong to both public andprivate sector. The Department ofFamily Welfare (of Ministry of Health andFamily Welfare of the Government ofIndia) is making efforts to cover allchildren against such illnesses underits universal immunisation programme.

Earlier epidemics such as plagueand kala-azar used to occasionally breakout and take a heavy toll. Once in awhile they occur even now, basically dueto lack of cleanliness. In recent past(1994), plague broke out in Surat(Gujarat). Bihar and West Bengal stillreport cases of kala-azar and deaths dueto it. Cholera and small pox used to beother two major curses, killing thousands.Since 1977, small pox has stopped

visiting us. Number of cholera patientswhich, earlier, used to be in tens ofthousand, has reduced to a fewthousands and a few deaths still occur.But, acute diarrhoeal diseases still affectone per cent of our population and causea few thousand deaths. Unfortunately,incidence of malaria is still large andlakhs of people suffer from it and a fewhundreds even die. Equal toll is reporteddue to Japanese encephalitis. Nationalanti-malaria programme (earlier callednational malaria eradication programme)is taking care of malaria, kal-a-azar,encephalitis, and filaria. About 40 percent population carries the risk of filariathrough carrier persons and diseasedpersons are also in crores. Similarly, wehave in place now a national leprosyeradication programme taking care ofmore than 5 lakh patients, a nationalT.B. control programme, national goitercontrol programme, and nationalprogramme for control of blindness.

There exists a national AIDS controlorganization for taking care ofprevention and treatment of STD, HIVpositive and AIDS, which impair not onlyhealth but make the patient vulnerablefor other diseases.

STD, HIV AND AIDSSTD = Sexually Transmitted Diseases

HIV = Human Immunodeficiency Virus

AIDS = Acquired Immune Deficiency Syndrome

What about clean surrounding andnutritive food? Let us go with stillmoderate agenda. One is the use ofcontaminated drinking water causing alot of morbidity and some mortality. Thediseases are listed as diarrhoea,


trachoma, intestinal worms, hepatitis,typhoid and malaria. Most of these arewater bome diseases. These diseasesresult in temporary disability andunnecessary treatment, permanentdisability, and loss of preventable life.Of all patients, 50 per cent suffer fromcommunicable diseases, 20 per cent ofwhich are water-borne. Twenty-five percent children below five, die due todiarrhoea. Crores of man-days are lostdue to water-borne diseases. We must,therefore, ensure safe drinking water toeverybody. However, in the last fifteenyears, the coverage of safe drinking waterhas improved quite a bit. It is said to haveimproved in rural areas from 56 per centin 1985 to 82 per cent in 1999.

Much of surrounding can beimproved if sanitation facilities areprovided at least in urban areas. Despite

much effort made in urban areas, only50 per cent population has access tosanitation facilities in 1997 as againstaround 30 per cent in 1985. In ruralareas, this facility is now available to8 per cent population in comparison toless than 0.8 per cent in 1985.

Health Care System

The best thing to hope is that we do notfall ill. We should prevent illness throughsanitation measures, public healthmeasures and pieces of advice on health,nutrition and cleanliness. Should we fallill at all, we should be cured. This meansthat we should have hospitals,dispensaries and health centres and alsodoctors, nurses, pharmacists, coun-sellors and health guides. However, weknow that besides allopathy, medicalpractitioners also adopt ayurveda,homoeopathy, unani, siddha,

MORBIDITY

It is a state of ill health. It makes you feel bad about yourself or cause others to worryabout you. You may be suffering from an acute or chronic ailment. It affects your work bymaking you temporarily disabled. Prolonged morbidity may lead to mortality.

In our country, acute respiratory infection (1.5 crore) and diarrhoel diseases (80 lakh)are two major causes of morbidity, leading to a few thousand deaths.

According to a recent survey conducted by the NSSO, number of persons per thousand,reporting illness preceding the date of survey was found to be 118 and 88 as against 18and 12 in Mizoram in rural and urban areas respectively. These are the most literatestates of the country. In Uttar Pradesh, Madhya Pradeh, Bihar and Rajasthan they arefound to be 61, 41, 36 and 28, respectively, in rural areas and 72, 38, 41 and 33,respectively, in urban areas. These figures defy easy interpretation.

Much of the morbidity could be prevented if our population had good nutritionstandards. According to a survey conducted in a few States, in all categories of boys orgirls, between 1-3 and 16-18, whether males or females with moderate work or sedentarywork, calorie deficiency and protein deficiency are found to be 10-30 per cent. Only exceptionis the category of females doing sedentary work where average calorie intake per day isfound to be 1954 kcal as against recommended 1875 kcal and average protein intake perday, 50 grams as against recommended 50 grams. However, this is an average picture. Ifsome of them are over-eating, others must be under-eating.


naturopathy, and yoga. Hospitals arealso run by Ministries other than HealthMinistry (such as the Ministry ofRailways for their employees, LabourMinistry in certain mines, EnergyMinistry in coal mines). Hospitals arealso run by various councils,universities, and State Governments, butmore importantly by privateestablishments. There are hospitals toadmit patients. There are dispensariesto distribute medical aid and medicines.There are health centres in rural areas.

We have more information aboutallopathic institutions. Despite the factthat 75 per cent population lives invillages, hospitals in rural areas are onlyone-third of the total and beds are noteven one-fourth. Again, hospitals underGovernment management are just 30 percent of the total, though they have morethan 60 per cent beds. Naturally,Government hospitals are bigger ones,if not better ones. In the case ofdispensaries, the distribution in favourof rural areas is slightly better. Beds areequally divided. Forty per centdispensaries are under the Government.Local bodies, like municipal authorities,are also participating in medical caresystem to a limited extent.

Let us now also have a look at health-care system prevailing in rural areas.Besides hospitals and dispensaries notedabove, we have the following structure:1. Community Health Centre, at

district (and sub-district) level,tocater to about one lakh population,with 30 beds, specialised medicalcare services in gynaecology,paediatrics, surgery and medicine.

2. Primary Health Centre, at blocklevel, to cater to a population of

30000 (20000 in hilly and tribalareas), which provide generalmedical care with family planningadvice. In relation to communityhealth centres these centres arereferred to as subsidiary healthcentres.

3. Health Sub-Centre, to cater to apopulation of about 5,000 (3,000 inhilly and tribal areas) basically forfamily planning services andsupplies. In some States likeKerala, a health sub-centre coversonly half a village while in someother States like Nagaland it covers10 villages.

Right from the First Plan, welaunched the scheme of primary healthcentres. Later, in the mid-sixties, weadded to it the idea of health sub-centresand still later, that of communitycentres. It is understandable, for werequire resources to set up thesefacilities. The more we are developed, themore we are provided for. At the close ofthe century, we have 3,000 communityhealth centres, 24,000 primary healthcentres and 1,40,000 sub-centres. As pernorms laid down, we need minimum7,000-8,000 community health centresand 25,000-30,000 primary healthcentres. We may not be much deficientin the case of sub-centres. But we mayhave to improve the working of thesecentres. We learn from newspapers thatour doctors do not stay in villages, nursescommute and health workers and guidesare invisible (See Table 5.6).

Medical Personnel

When you fall ill, you need not onlyhospital or dispensary but also doctor,


TABLE 5.6Institutional Statistics of Curative Health Care System

Period Hospitals Dispensaries CHC PHC HSC

1951-56 2694 6515 — 7251961 3094 9406 — 25651971 3862 12180 — 5112 284891981 6804 16751 214 5740 514051991-92 13692 27403 2070 20433 1309641998 15128 25670 2913 23179 137006

CHC = Community Health Centre; PHC = Primary Health Centre; HSC = Health Sub-Centres.Source : Health Information of India 1997 & 1998, Central Bureau of Health Intelligence, Director

General of Health Services, Ministry of Health and Family Welfare, Government ofIndia, 2000.

nurse and pharmacist, and, may be, alaboratory technician too. Some diseasesrequire specialists, besides physiciansand surgeons. In case of birth, onerequires a midwife. Doctors are countedas medical personnel; others assistingthem in treatment are known as para-medical personnel. There are many non-medical personnel in large hospitals.Compared to 1951, when we had only60,000 medical practitioners, we haveabout 5 lakh today, majority of whom workin Government run institutions. Numberof dentists has risen from 3,300 to 29,000.Number of nurses is now close to 6.0 lakhcompared to 15,000 in 1951. The numberof midwives, auxiliary nurse-cum-midwives (ANM) and health workers, hasrisen from 8,000 to over 3 lakh.

Average practitioners-populationratio per one lakh of population hasimproved from 17 in 1951 to 52 in 1998.Average nurse-population ratio hasimproved from less than 5 in 1951 to 62in 1998.

Housing

After availing the minimum of food andclothing, people want a roof over theirheads to save themselves from the

elements. To begin with, people mighthave hid under caves. Settlementactually meant domestication of animals,cultivation of crops and construction ofhuts. As our food and clothing improved,we improved our houses too.

We require not only residentialhouses but also houses for commercialactivities and premises for industrialactivities. We shall concern ourselveswith the residential houses, though weshall take cognizance of the fact thathouses are used for other purposes aswell—separately or jointly. A shop maybe run in a part of a house. Cows maybe kept in a part of a house or they mayoccupy an altogether separate house.Thus, a house may be residential,non-residential, or partly residential andpartly non-residential. However, housespartly residential are treated asresidential in aggregate statistics as ourconcentration is on deficits in residentialaccommodation.

Census House

According to the census, a census houseis a building or part of a building having (i)a separate main entrance from the road,(ii) a common courtyard, or (iii) a staircase.


This census house may be vacant oroccupied. In case, it is occupied, it mightbe used for residential purpose or non-residential purposes or partly forresidential purpose and partly for non-residential purposes. However, for ourpurpose, we can club residential and partlyresidential units as residential units.

Housing Stock

We have kutcha, semi-pucca and puccahousing units. Depending upon thematerial of walls and roofs, houses aredeclared kutcha, semi-pucca and pucca.A house with walls and roofs with puccamaterial is pucca whereas a house withboth of them in kutcha material is kutcha.In other cases, a house is called semi-pucca. Kutcha houses are further dividedinto two types—serviceable and non-serviceable. Serviceable houses stay foryears with marginal servicing of walls androofs. They have generally solid mud wallsbut thatch roofs. Non-serviceable oneshave to be rebuilt or replaced every seasonor year and cannot be serviced as theirwalls and roofs are made of the materialssuch as grass, leaves, reeds or bamboos.We may agree that we need, at theminimum, serviceable kutcha houses atthe present level of development of oureconomy. At a future point indevelopment, we may hold the view thatwe need pucca house for everybody unlesssomebody decides otherwise.

In 1951, there were 6.4 crorehouses — 5.4 crore counted in rural areasand about 1.0 crore houses in urbanareas. What was the quality of housescan be guessed from a statement madein 1961 about rural houses: About 5.0crore houses in rural areas wererequired to be replaced or substantially

improved. Naturally, they were all kutcha,even if serviceable. So far as urban areasare concerned, an estimate suggesteddeficit of 55 lakh without taking intoaccount of depreciation (deterioration/dilapidation) or obsolescence of houses.Taking all this into account plus increasein population as well as of slum dwellings(estimated to be about 10 lakh), anestimate suggested the need foradditional 80 lakh houses over existing1.0 crore. Housing deficit was thusprecarious.

If we segregate data by rural-urbandivision, the following picture emergesin respect of total stock, vacant stock,occupied houses and division ofoccupied houses into residential andnon-residential categories. Though thetotal stock in the seventies and eightiesgrew at a slightly higher rate than thepopulation, it is insufficient in view ofthe backlog. Moreover, during theeighties, vacant stock grew by morethan 40 per cent. It may partly be areflection of the condition of stock andpartly of affluence/fear of insecurity ofowners. One should also look at rural-urban division for better insight (SeeTable 5.7). Data for 2001 census is notyet available.

We should further note that one-sixth to one-fifth of the total stock isoccupied, both in rural and urban areas,for exclusively non-residential purposes.Rarely do we talk about shortage of stockfor non-residential purposes. We are verymuch concerned with shortage ofhousing units for residential purpose.

Housing Shortage

If each household should have at leastone house and no household should be


TABLE 5.7Characteristics of Housing Stock by Rural-Urban Division 1951-1991 (in lakh)

1951 1961 1971 1981 1991

All India

Total 1045 1189 1499 1903Vacant 61 75 79 112Occupied 644 984 1114 1420 1791Non-residential Units 222 219 305 349Residential Units 762 892 1107 1432

Rural


Urban


Source : India 1962 : A Reference Manual, Publications Division, Ministry of Information andBroadcasting, Government of India and Census of India 1991, Series-1 India, Paper 2 of 1993,Registrar General of India, New Delhi.

having more than one house, then for agiven habitation, the difference betweenthe number of households and the numberof houses would show the deficit. If onehousehold can occupy more than onehouse or can keep them vacant, thenshortage would still be larger. It wouldimply that (i) some of the households areshelterless, staying in raiyn-basera orliving on pavement, and (ii) some of thehouseholds are sharing single house/dwelling. We should remember thatjhuggi-jhopris are houses!

Total national shortage, which used tobe 55 lakh in 1961, is now (1991) only 38lakh — with 31 lakh in rural areas andaround 8 lakh in urban areas. As aproportion, it is but 2.5 per cent. But, isthis the total picture?

In fact, this estimate considers thosehouseholds, which are sharing house withothers but does not consider those, whichare completely shelterless. If we add thetwo, the shortage reckons at 44 lakh. If wetake a view that each household should notonly have a house to live in but the houseshould also not be a non-serviceable(kutcha) one, then we should also find outthe number of such houses. Such housesare more than 1.14 crore, including morethan 11 lakh in urban areas. Most of thegovernment officials and analysts aretolerant of serviceable kutcha house inrural areas but not in urban areas. Theyfeel that kutcha houses in urban areas,even if serviceable, should be replaced bypucca houses. Then, one should also findout the number of such houses in urban


areas. Their number is more than 26lakh. Adding all numbers, governmentalpublications show that total shortage isabout 1.85 crore. We should perhaps notadd rural and urban shortage, as manypublications do, because replacement ofnon-serviceable kutcha houses byserviceable kutcha houses in rural areasis considered acceptable.

Other Dimensions

Do you know the proportion of Kutchaand Pucca houses or households livingin rented accommodation in rural andurban areas in India?

A comparison between 1971 and1991 shows that proportion of puccahouses has increased from 18 per centto 31 per cent in rural areas and from 64per cent to 73 per cent in urban areas.As expected, in rural areas, around 6-7per cent households rent house whereasin urban areas, the percentage ofhouseholds renting in accommodationmay be as high as 54 per cent. However,that was the scenario in 1961 and 1971.In 1981, 46.5 per cent and in 1991, 36.5per cent households were rentingaccommodation in urban areas.

Concluding Remarks

Going through the chapter, you maydevelop an impression that, in the last

fifty years, we have been marching aheadin the development of social sectors ofeducation, health and housing with theassistance of the Governments at Unionand State levels. In education, we haveyet to universalise primary education. Invocationalisation of secondary education,we find that it is much below the targetedlevel. In higher education, there may bean excess of general education and deficitof technical education.

Similarly, in health sector, we findthat our vital statistics have improved toa significant extent thanks to publichealth measures and programmes ofnutrition. We note with some concern thatour infant mortality rates have to declinefurther and efforts need to be taken toimprove the nutritional requirements ofchildren and adolescents. Immunisationshould cover all children and mothers.Rural health care system needs to beimproved in quality terms; medicalpersonnel have to be appointed andappointed personnel must be inattendance in place of their duty.

In case of shelter, our deficiency isin terms of number and quality ofhousing stock though there arecompletely shelterless people as well.Over time, proportion of pucca houses hasimproved. Renting-in phenomenonseems to be reducing.

TABLE 5.8Dimensions of Housing Shortage for 1991

Rural Urban Total

Homeless Households 3,05,000 2,17,000 5,22,000Sharing Households 31,13,000 7,79,000 38,92,000Non-serviceable Kutcha Houses 1,03,06,000 11,40,000 1,14,40,000Serviceable Kutcha Houses in Urban Areas — 26,40,000 26,40,000Total 1,37,24,000 47,76,000 1,85,00,000

Source : Census of India 1991, Series-1 India, Paper 2 of 1993, Registrar General of India,New Delhi.


EXERCISES

1. What do you mean by social infrastructure and how do you distinguish itfrom economic infrastructure?

2. Housing is a social infrastructure - comment.3. Whom do you call literate? How is literacy different from education?4. How is literacy rate calculated in India now?5. Give an account of development of literacy in India over the last fifty years

and bring out the problem areas where we should concentrate on in future.6. What is the new development that has taken place with the Census 2001 so

far as the number of illiterates is concerned?7. How is gross enrolment ratio calculated? Can it exceed 100 in terms of

percentage?8. Discuss the progress of elementary education and how far are we away from

the universalisation of elementary education.9. Discuss the progress of secondary education and point out the areas of limited

success.10. What do you mean by tertiary/higher education? Discuss its salient features.11. Discuss how life expectancy at birth has improved before Independence and

after Independence.12. Bring out the salient features of life expectancy across age and sex.13. Describe the meaning of public health. Discuss major public health measures

undertaken by the state in recent years to control diseases.14. Discuss the role of sanitation in urban areas.15. How has the public health care system evolved in post-Independence India?16. Describe the rural health care system in India.17. What do you mean by a census house and housing stock?18. Define pucca, kutcha and semi-pucca houses.19. Define serviceable kutcha house and unserviceable kutcha house.20. Discuss various uses a house could be put to. Why are certain houses found

vacant?21. Give an account of housing scene in the rural areas as evolved since 1961.22. Give an account of housing scene in the urban areas as evolved since 1961.23. Discuss various aspects of housing stock.24. Discuss the nature of housing shortage in India.

ACTIVITY

Find out in your locality, vicinity or village:

(i) how many boys and girls have not enrolled in school,(ii) how many boys and girls dropped out of school (after enrolment) from

different classes; and(iii) what are the factors that led to non-enrolment and drop out of (a) boys

and (b) girls.(iv) Talk to parents, boys and girls who have not gone to school.

CHAPTER 6

Development Strategies till 1991

Introduction

Economies grow and develop of theirown accord. Some philosophersthought that they should be allowedto function without much intervention.Market will decide their course.However, in all economies, the Stateshave been finding it necessary tointervene for one reason or another,including, sometimes, in the interestof market. The manner, the extent andthe pace differed in differenteconomies, depending upon nature ofthe State, the level of development andideological orientation of the peopleand the government they chose.Demonstration effect of developmentin other economies and thinking ofmultilateral/international agenciesmay have no less impact.

When India got Independence andbecame a Republic, she chose to followthe path of ‘planning by social andeconomic development’, which meantthat the State would play a proactiverole in deciding the levels and methodsof production, distribution, andconsumption of economic and socialactivities while respecting institutionsof private property and market. OurConstitution itself gave scope for the

market to function; yet, asked the Stateto intervene in its functioning. Itdirected the State to frame its policieswith a view to, among others, securing,1. that the ownership and control of

the material resources of thecommunity are so distributed as tosubserve the common good, and

2. that the operation of the economicsystem does not result in theconcentration of wealth and meansof production to the commondetriment.

Admittedly, in our Constitution, thereis no elaborate direction for institutions,which will carry out the activity ofplanning economic and socialdevelopment, except that there exists anentry in the concurrent list of the seventhschedule, which reads as ‘economic andsocial planning’. Yet, within fifty days ofpromulgation of the Constitution, thePlanning Commission was set up on 15March 1950 by a resolution of theCabinet. Jawaharlal Nehru was madeits Chairman. Since then, we find thatthe Prime Minister is the ex-officioChairman of the Planning Commission.It has a few Minister members and a fewindependent, normally full time,members.


History of Planning beforeIndependence

A little history of State planning may be inorder. Political independence wasconsidered important from the point ofview of economic emancipation of themasses. We started making preparationsafter we were allowed to form thegovernments in provinces underGovernment of India Act, 1935. Beforethat, we had only three models: one inoperation in the then USSR since 1928,another, a book, by engineer-statesmanM. Visvesvaraya written in 1934, and thethird, ideas promoted by an eminenteconomist, J.M. Keynes. Planning hadshown immense success in industrialisingthe economy of Russia in ten years thathad gone by. Proposing doubling of

national income in ten years, Visvesvarayawrote: “The Indian problem isfundamentally industrial and should besolved by the same methods as haveproved efficacious in countries like theUnited States of America, Japan andCanada and latterly with startling successin Soviet Russia…India cannot prosperexcept through rapid industrialisation…industrialisation has to be organised,planned and worked for…India may be anindustrially developed country or it maybe a market for manufactured goods fromoutside and not both.” Keynes had shownthat the days of Laissez faire were over andthat the State could play a positive roleeven in a capitalistic country throughmeaningful fiscal intervention,particularly on expenditure side.

NATIONAL PLANNING COMMITTEE

Towards the end of 1938, the then President of the Indian National Congress SubhasChandra Bose constituted the National Planning Committee with Jawaharlal Nehru as theChairman at the conclusion of conference of the Ministers of Industries from the eightCongress ruled provinces.

The Committee itself constituted 29 sub-committees to work on different areas/subjects,which did commendable work. However, before it could bring out its deliberations, the warbroke out and subsequently, several members of the Committee (including JawaharlalNehru in October 1940) were put behind the bars.

Subsequently, four general and 25 subject-wise reports were published during1946-49 in the name of K. T. Shah who was the secretary of the Committee. The Committeerecommended the State to play a vital role in development of infrastructure and setting upof basic industries under its aegis, to promote growth of cottage and village industriesunder protection, and to abolish all intermediary interests in land with a view to unleashingthe forces of growth.

It hoped to raise national income two to three times in a span of 10 years with a viewto providing balanced diet having calorific value of 2400-2800 units to an adult worker, 30yards of cloth per person and housing with at least 100 square feet per capita.

Industrialization with emphasis on promotion of heavy engineering and machine makingindustries, electric power and scientific research institutes, accommodation of cottageand small scale industries, dominant role of the State and of public sector in industrialdevelopment, national self-sufficiency to the extent possible were held out as the majorplank of the policy.

DEVELOPMENT STRATEGIES TILL 1991 81

A conference of Ministers ofIndustries from the Congress-ruledprovinces was held in October 1938 anda decision was taken to constitute aNational Planning Committee withJawaharlal Nehru as the Chairman. TheCommittee recommended the State toplay a vital role in development ofinfrastructure and setting up of basicindustries under its aegis, to promotegrowth of cottage and village industriesunder protection, and to abolish allintermediary interests in land with a viewto unleashing the forces of growth.

Towards the end of the War,respecting the sentiments of industryand other sections, the Government ofIndia established a Department ofPlanning and Development in 1944. TheDepartment stimulated the preparationof post-war reconstruction plans bydifferent departments of the CentralGovernment, provincial Governmentsand larger princely states. It also soughtplans for development from industry andlabour. Three plans were submitted to itfor consideration, all in 1944: viz.,Bombay Plan, People’s Plan andGandhian Plan. Sectoral plans foreducation and health were also preparedby the Government of India.

Further, when an interimgovernment was formed with Indian

premier Jawaharlal Nehru in 1946, theGovernment of India constituted anAdvisory Planning Board. The AdvisoryBoard recommended, besides otherthings, the formation of a NationalPlanning Commission, which wasconstituted on 15 March 1950, well afterIndependence. From late sixties, StateLevel Planning Commissions or Boardsalso started functioning.

Meaning of Economic Planning

Planning is resorted to by individuals,by organisations, by firms, by farmers,and by nations so that a well-thoughtout set of actions could be carried outin future for securing a particularobjective or a set of objectives. Planningis the anti-thesis of purposeless drift. Itis a deliberate choice of action. It isabout consciously organising humanactivity.

Planning is a conscious design forshaping the socio-economic processeswith a view to achieving an objective or amultiplicity of objectives; it is a path ofaction in terms of policy measures to befollowed in future in pursuance of pre-determined goals. It needs to beemphasised that goals have to bemutually consistent and proper planningshould ensure that means and measuresare also consistent. It has to be noted

WORD ‘PLANNING’

The word ‘planning’ in a manager’s language and the management books or planning cellsin corporations has little different meaning. ‘Planning’ is also used by town planners forphysical and spatial planning. Today, environmentalists talk of resources planning. Peoplealso talk of retirement plan.

Planning in our context is different. It is related with welfare of people; it is related withState action and initiative; and its sphere is economic and social development. By the way,other planning strategies, such as town and country planning are now getting integrated withnational planning.


that means are autonomous in the sensethey are selected by the planners. Butthere exists a fundamental restriction onselection of means, which is therequirement of mutual consistency.

Since uncoordinated marketprocesses cannot be fully trusted topursue the objectives the State sets outfor its people, it was suggested in manyquarters that economic planning shouldbe resorted to by the State. Economicplanning is thus concerned withpursuance of economic development,with economic well-being in mind,through all means at the hands of theState, including persuasive ones. We,in India, are, however, concerned withplanning of economic and socialdevelopment. Naturally goals andmeans of this planning are somewhatdifferent.

Since the word ‘planning’ hadacquired economic overtones by the timeour country thought of planning, westated in very clear terms, right in thebeginning, that our planning would coverboth economic and social spheres.Economic sphere refers to agriculture,industry, transportation, etc. while socialsphere refers to education, health,shelter, etc. The nature of work in theeconomic sphere includes thedevelopment of irrigation, dams, mining,forestry, rail, roads, warehousing, etc.whereas the development of schools,colleges, universities, hospitals,dispensaries, health centres, familyplanning centres, broadcasting, etc. areincluded in the social sphere. You maysee many works in economic sphere havesomething to do with the ‘social’ and viceversa. There may be sectors whichmay be as much social as economic.

Therefore, division of heads as social andeconomic is a proposition of conveniencerather than a proposition ofprinciple. Since we cover almost allactivities which by choice we seek todevelop, we call it comprehensivedevelopment planning.

We do spend a lot in modernising ourarmed forces, equipping law and ordermachinery, improving judicial system,and in bettering other state organs butwe do so in the interest of running thesystem smoothly or we feel compelled todo so. We, therefore, do not call themeither developmental activities ordesignate them as economic or socialactivities, though all of them are almostexclusively taken care of by the State.

While covering many social andeconomic activities, the State may choosejust to advise and coordinate, encourageand discourage through indirect fiscaland financial mechanisms and throughenacting laws. It may choose to produceand distribute all goods and services.India chose to use a (judicious) mix ofdirect and indirect means: enacting lawsfor distributing/ allocating agriculturaland non-agricultural land to differentsections of people or different activities;restricting, banning or proscribingcertain activities; opening specialfinancial institutions and manipulatinginterest rates and/or credit limits fordifferent categories of activities; makingfiscal provisions for taxing or subsidisingcertain activities in certain areas;undertaking production/distribution asa supplementary mechanism with acertain social objectives in view; andundertaking production and distributionof certain goods and services (naturalmonopolies). Engagement of direct


OBJECTIVES AND MEANS

Some people compiled objectives listed in various plans of different countries. They foundobjectives ranging from full employment to price stability, from increase in privateconsumption to size and structure of population, from increase in mobility of labour toincrease in mobility of capital, from improvement in distribution of income and wealth tosatisfaction of collective needs, from export of production to improvement in balance ofpayments, from protection of industries to security of supply, from promotion of internalcompetition to promotion of coordination, and reduction in working hours.

When it comes to counting instruments, they recounted more than 60 instruments:17 instruments of public finance, 16 instruments of money, credit and foreign exchange,16 instruments of direct control and 11 types of changes in institutional framework. Seealso the list of objectives lifted from our plan documents, given in one of the appendices.

production and distribution through aMinistry of Union or State Governmentor through an agency of the Governmentis considered an activity in public sector.We have seen that undertakings inpublic sector have assumed a significantproportion in total manufacturing,processing and financing activities. Infact, we gave a significant role to publicsector and allowed it to have comman-ding heights.

Five Year Plans

The Planning Commission wasconstituted on 15 March 1950 by aresolution of the Union Cabinet. TheCommission was asked to prepare ablueprint of the First Five Year Plan atthe earliest, so as to implement it in April1951. The Commission submitted theDraft Outline, which was meant toarouse a lively debate in the countryamong different sections and interestswith the belief that planning in ademocratic state is a social rather thanjust a technical matter. It is significantthat it was in this Draft Outline that theformation of the National DevelopmentCouncil was suggested, which was

constituted by a resolution of the Cabineton 6 August 1952.

It is, however, said that the First Planstitched together projects, which werealready on shelf of different departmentsof the Government of India. The finalreport, called First Five Year Plan, cameonly in December 1952 after 21 monthssince the formal beginning of the Plan.

Every five year plan is set in aperspective of a longer period. In fact,every five year plan document containsthe plan for the quinquennium proper(medium-term plan) and a perspectiveplan, in which the plan proper is set.Though we have been facing a few crises,now and then, we had first three five yearplans uninterrupted. Towards the endof the Third Five Year Plan, we faced awar with Pakistan in late 1965 and twoconsecutive bad years for agriculture1965-66 and 1966-67 and foreignexchange crisis leading to devaluation ofrupee. The Fourth Five Year Plan,prepared for 1966-1971, was thereforewithdrawn after its launch. A view wastaken that the Fourth Plan should belaunched when normalcy returns back.The Fourth Five Year Plan was, then,


prepared for 1969-74 and executed. Inthe interregnum, three Annual Planswere implemented. During the Fifth Planperiod (1974-79), certain politicaldevelopments took place: internalemergency was clamped, new electionstook place, and newly constituted JanataParty won the elections. The newGovernment decided to cut the running(Fifth) Plan short by a year (1978-79). Anew Five Year Plan 1978-83 waslaunched. However, political develop-ments forced its abandonment in 1980when the new Government, again theCongress, came in power. A new SixthFive Year Plan was launched for 1980-85. The year of 1978-79 is now includedin the Fifth Plan, as was originallyenvisaged, and the year of 1979-80 istreated as an Annual Plan in mostcompilations including those by thePlanning Commission. The Seventh Planwent uninterrupted. Again there wereunstable political developments, short-life Governments, assassination of RajivGandhi, and economic crisis related withprecarious shortage of foreign exchange.The Eighth Five Year Plan was, therefore,launched after return of normalcy in1992. Though the Governments changedmidway, the plan was not abandoned orcut short. We are now through the TenthFive Year Plan. The duration details ofall plans, which were formulated, alongwith their perspective plans are providedin an appendix.

Main Objectives

Planning is a means, an effective means,to achieving something. It has to havecertain objectives. State planning, in ademocracy, cannot have any otherobjectives but the ones that are given in

the Constitution. If an institution is madein-charge of the planning economic andsocial development of the country, it canat best delimit its scope and be morespecific.

The purpose of planning is toaccelerate the process of developmentand keep it on track. India suffered forlong a slow growth, if not stagnation. So,we wanted high growth. Indianworkforce is also affected byunderemployment, if not openunemployment. So there is a need toincrease the employment opportunities.We thought maximum production wouldcreate more opportunities — enough toabsorb everybody. So, we wantedmaximum production (growth) and fullemployment. The Indian societysuffered from inequity/inequality. So, weopted for reduction in inequality ofincome and wealth. Perhaps, realisingthe contradictions inherent insimultaneously achieving all theseobjectives, the Report of the First Plansaid, ‘None of these objectives can bepursued to the exclusion of others, aplan of development must place balancedemphasis on all of these’.

Objectives can be divided as long-term and medium-term/short-term.Long term objectives do not much differfrom plan to plan but short-term objectivesmay differ quite a bit. Long-termobjectives are couched in more generalterms while short-term ones are morespecific. All plans, for example, set atarget of growth rate but some of themwrote it under the heading of objectiveswhile others did not. Other plans mixedup long-term objectives with shortterm ones. Still others mixed up


the objectives with instruments. TheSecond and Third Plans, in particular,dwelt a great deal on creation ofsocialistic pattern of society. Later plansdid not distinguish between objectives,targets and instruments.

We can call, if we so wish, long-termobjectives as the planning objectives andshort-term ones as the objectives of aparticular plan. Long-term planobjectives/ development objectivescontinue, for all fifty years:

1. To increase production to themaximum possible extent so as toachieve higher level of national andper capita income.

2. To achieve full employment.3. To reduce inequalities of income and

wealth and concentration ofeconomic power.

These may be considered as mainobjectives. While some authors add tothis list the objective of self-reliance orself-sufficiency in foodgrains, othersinclude expansion of basic and heavyindustries as an objective. Some assignto planning, the task of establishingsocialistic pattern of society, free fromexploitation. Still others point to the needof balanced regional development. Someconsider that containing inflation andimproving balance of payments deservesspecific mention. There is truth in all

these assertions; it is a matter of pickingup significant ones according to one’sown judgement based on the particularplan document.

It may be mentioned in passing that,according to some, planning is aboutdismantling the existing structure and re-assembling constituents in an altogether thedifferent, new and desirable manner.

Main Features of Economic Policy

There is a lot of confusion in the use ofwords ‘policy’ and ‘strategy’ in writing. Ifone adheres to dictionary meanings, onewould define ‘policy’ as a coordinated planof action from a set of alternatives whilestrategy provides maximum support tothe chosen policy. First major plank ofthe policy to be followed was that thecountry, though under planning, wouldpursue a policy of mixed economy. Mixedeconomy, as the term suggests, signifiesthe co-existence of public sector andprivate sector with respect to businessenterprises--industrial, commercial andfinancial. Beyond co-existence, theunderstanding is that while public sectorenterprises shall primarily be guided bypublic interest/good, private sectorenterprises will not be solely guided byprofit consideration. They shall notassume antagonistic posture but shallcooperate in the endeavour to boost theeconomic potential of the country.

MIXED ECONOMY

Paul A. Samuelson, a Nobel Laureate in Economic Science and William D. Nordhus, intheir very popular textbook Economics, define mixed economy as one, which primarilyrelies ‘on price mechanism for economic organisation but uses a variety of governmentinterventions such as taxes, spending and regulation to handle macroeconomic instabilityand market failures’.

Prior to these economists, Joseph E.Stigtitz defined the concept in a much more simplemanner. Stigtitz defines it as a mixture of public and private decision making.


During the first forty years we cannotclaim to have followed one single policy;in fact, we find, it had been evolving. Butthere are some common features:expansion of public sector, industrialisa-tion and import substitution, self-sufficiency in foodgrains, state control onfinancial resources, control on foreigncapital, protection of small scaleindustries, regulation of large scaleindustry, curb on monopolistic practices,provision of public health measures andspread of education and literacy.However, the dominant features thatdeserve special mention may be listed as:interventionist state, centralisedplanning, expansion of public sector,development of heavy industries,emphasis on import substitution. We maynote that the last three are all in theindustrial area.Interventionist State: State willintervene in the market processes so thatit secures adequate livelihood for the poorand brings down disparity amongclasses. It will make laws wherebyintermediary interests in land areabolished and concentration of wealth isprevented. It will create institutions,which will promote agriculture, industryand trade. It will adopt fiscal policy, whichwould promote growth and social justice.It will have monetary policy to makeadequate funds available to theindustries, which are essential for theeconomy. It would not allow free flow offoreign capital investment and will directits use, in case it allows foreigninvestment to come. Keeping differentinterests in mind it will determine theownership, scale, and use of funds--particularly in industrial sphere. In

short, the State will influence, if notcompletely control, much of the economicactivities of the private sector throughvarious instruments like license andallocation of critical inputs, includingforeign exchange, under its control.Centralised Planning: States willpromote centralised planning so thatinterests of different regions and differentsections are promoted. Sub-nationalplans would be dovetailed/integratedwith the national plan. It had to bebasically formulated at the level of thenational Planning Commission. Even tilldate, while there are state level(provincial) planning commissions inexistence, there are no independent Stateplans. Planning in our country is quitecentralised.Expansion of Public Sector : Role of theState particularly in relation to theindustries was debated in the thirtiesitself. While there was unanimity in theNational Planning Committee thatdefence industries should be owned andcontrolled by the State, it was suggestedin the case of other key industries evena control of the State would be sufficient.Much before we thought of formulating aplan, an Industrial Policy (Resolution,1948) was already in place, whichdelimited the scope of public ownershipof certain industries.

We may note that at the time ofIndependence, except the railways, therewas nothing spectacular in economicsphere, which could be said to be in thepublic sector. Industrial PolicyResolution, 1956 clearly stated that ‘theState will progressively assumepredominance and direct responsibilityfor setting up new industrial under-


takings and for developing transportfacilities’. It was widely believed that theprivate sector would be interested inquick-yielding industries, which wouldgive the owners large profits in a shorttime as well as industries which areless risky and have short gestationperiod. Moreover, the indigenousprivate sector did not have adequatecapital either. In order to initiate andaccelerate the process of development,large-scale investment was needed inbasic and key industries and ininfrastructure. Public sector wasassigned to undertake this role. Inshort, the basic strategy was that thepublic sector assumes the responsibilityof developing heavy and basicindustries (steel, fuel and power,machine-building and chemicalindustries) and social and economicinfrastructure (such as banks and otherfinancial institutions, railways andairways, power, etc.) while the privatesector is given the right to developconsumer goods industries and trade--almost the whole of internal trade andmost of external trade, besidesagriculture, livestock, plantation andfishing, etc. As public sector throughits undertakings, belonging to theUnion and the State Governments both,was supposed to give a lead to theprivate sector, it was supposed/expected to have the position ofcommanding heights.Development of Heavy Industries : Onemay recall that almost all ‘plans’formulated before Independence, withdiffering emphasis, had suggested thatplanned development of Indian economyshould ensure that heavy engineeringand machine-making industries,

universal intermediaries like electricity,basic industries such as cement, heavychemicals including fertilisers,metallurgy like iron and steel, aluminiumand manganese, must be accorded apriority. It was understood that much ofindustrial development of India gothampered because of absence of basicand heavy industries. Since theformulation of the Second Plan began,it was increasingly suggested that weshould cease to be exporters of primaryproduce and importers of machinery andshould develop our own machine-makingcapability.Import Substitution : Under the policy,imported goods and machinery will haveto be substituted with those producedwithin the country. We shouldindigenously produce both capital goodsand consumer goods. If development ofsome of these industries requireprotection from foreign goods for sometime, then we should provide it. It willsave us from pressure for export on theone hand and unnecessary borrowing onthe other.

Main Achievements and Failures

Even though all achievements could notbe attributed to the strategies adoptednor could it be said that the strategiesdid not change mid-way, it is a good ideato recount what we achieved in the fortyyears since planning. In fact, to say thatwe achieved this and failed in that, israther difficult. The position cannot beseen as only black or only white. We canat best, say that we achieved certainobjectives, to some extent, while we couldnot achieve others fully. And we cannotattribute success or failure wholly to thepolicy of planning.


We refer, for this purpose, first to ourlong-term basic objectives of maximumproduction, full employment, reduction ininequality in income and wealth, andconcentration of economic power. We,then, refer to some other areas too, whichare more or less elaborations of theseobjectives.Maximum Production : During the firstthree decades of planning, we did notachieve a rate of growth beyond 3.5 percent per annum on a long run basis andnever met the targets set for a particularplan, which were normally more than 5per cent per annum. It is difficult to assertthat we did not fully exploit the potentialor to say that our targets were realisticor reasonable. For example, for the FirstPlan we had set a very low target (1.8 percent per annum) for rate of growth andachieved twice of it thanks to goodmonsoon (This growth owes to un-planned quarters). During the SecondPlan we did better on growth front thanduring the First Plan but we wereunhappy as we could achieve only 4.0-4.2 per cent per annum while the originaltarget being 5.0 per cent per annum.During the Third Plan period, weachieved only annual average growth rateof 2.4 per cent against the target of 5.0per cent. Again, this is due to the warswith China in 1962 and with Pakistanin 1965 and the failure of monsoon in1965-66. From the mid-seventiesonwards, and definitely after 1979-80, onefinds that the growth trajectory of theIndian economy got shifted from the pathof 3.5 per cent per annum to the path of5.5 per cent per annum.

On the whole, our rate of growth overthe long stretch of 40 years was around 4per cent per annum. Taking the rate ofgrowth of population as 2 per cent perannum, our per capita income could be saidto have risen by 2 per cent per annum.Thus, on an average, the people around1990 were living twice better in comparisonto their parents in their age in the wee hourof Independence.

Perhaps more important is to knowwhat was it that grew at whatever rate itdid? If people are hungry, we ought to knowwhether we grew enough food. In 1951, wehad in net terms less than 50 million tonnesof foodgrains, including all cereals andpulses. Around the close of 1980s, weproduced as much as 150 million tonnes.In 1951, we imported around 5 milliontonnes to feed ourselves. Normally thesituation was not that bad; our imports onlyimproved food availability. While in earlyfifties, we had less than 400 grams offoodgrains per person, by 1990, thanks tothe continued rise in domestic productionover time, the per person availability roseto nearly 500 grams. This simply meansthat our production in foodgrains grew atmuch faster pace than our population.

However, we should remember thatwe faced very bad days in the mid-sixtieswhen we had to import more than 10million tonnes and we received food aidfrom other countries, chiefly the US. TheUS once threatened to monitor food-aidon monthly basis. This forced us to usherin green revolution in the late sixties, aterm for use of high-yielding varietyseeds, intensive irrigation, chemicalfertilisers, pesticides, etc. Thanks to itssuccess our imports of foodgrains havebeen nominal. We even exported, on netbasis, though at nominal scale.


As far as other items of massconsumption are concerned, duringthese forty years under review, weimproved our per capita consumption ofmany items such as edible oils andvanaspati, sugar, clothing, milk, eggs,fish and tea and of electricity. However,except foodgrains, we were behind ourtargets and are behind many otherdeveloping countries. We needed toimprove further.

Production should be limited by oneof the following factors: shortage ofcapacity or deficiency of demand.Unfortunately in many sectors we facedneither. Is it a failure of implementationor fault in design? Most people say--implementation. Our view is that evenimplementation constraints should beconsidered in the formulation of a plan.

Full Employment : In our economy, withminor variations, between one-third totwo-fifths of people are working. Majorityof them are self-employed, though overtime, their proportion has beendeclining even during this period--sayfrom over 70 per cent to around 55 percent. Most of them are farmers orcultivators but there are such people inurban areas working in informal sector.The rest of them are wage labourers.Some of them get regular salary andothers are casually employed. Evenamong the regular salaried there maybe workers on farms with low wages.They may be working in factory, shop orhome. Many employers will be workingshoulder to shoulder with theiremployees, numbering in one or two.While the proportion of those gettingregular salary has also fallen somewhat,the proportion of casually employed has

been swelling. The proportion of casuallyemployed in late eighties was about 30per cent. Most commentators do not takethese developments kindly. Obviously, intheir view, regular wages even ifsomewhat lower are better than casualwages even if they are high. Employmentfor full time at reasonable wagesensuring income sufficient for two-threepersons dependent on the worker shouldbe the minimum norm.

What should we expect whensomebody claims that there exists asituation of full employment? All thosewho are aged between 15 – 60 are to beemployed. If they are wage employed,they should get adequate wages and ifthey are self-employed, they shouldget remunerative prices for theirproducts. ‘Willingness’, ‘adequate’ and‘remunerative’ are very imprecise words.Willingness is associated with wage levelon the one hand and availability of othersupport for living. Even compulsion towork may appear as willingness to work.Getting remunerative price will dependon what the products are and who thebuyers are. In the case of widespreadpoverty, there is little probability that amajority of self-employed will getremunerative prices. Widely prevailinglow productivity will not permit ‘adequate’wages. The matter is a bit complicated.

Since the wages are found to be low,laws have to be made to ensure minimumwages. Most of the establishments andfarms are so small that in some occasionsthese laws serve no better thanharassment to both of them – employersand employees.

During the period under review, theabsolute levels of employment didnot grow at a rate higher than thatof population, resulting in the samerate of growth of the unemployed.


The rate of unemployment, on a long runbasis, continued to be the same with widefluctuations over years, depending uponthe peculiar circumstances. There wasnever a year when the level of economicactivities in the economy demanded somuch labour that we felt shortage,barring harvest seasons.

Data on comparable basis isavailable from 1972-73 only. Thefollowing findings deserve our attention:(i) unemployment on usual status basisfluctuated between 1.6 per cent in 1972-73 and 3.9 per cent in 1977-78, being2.5 per cent in 1983 and 3.7 per cent in1987-88, (ii) unemployment reducedfrom over 8.0 per cent person-days inearly seventies to 6.0 per cent person-days in late eighties, (iii) poverty in termsof absolute number continued to bearound 32 crore from 1973-74 to 1987-88, (iv) poverty in terms of people belowpoverty line reduced from around 55 percent in 1973-74 to 39 per cent in 1987-88, and (v) proportion of unemployedamong the poor is less than theproportion of unemployed among thenon-poor.

Supposing that the trends weresimilar in the fifties and sixties, we caninfer that, despite fluctuations inemployment/unemployment by usualstatus, per person per day employmentand wages improved. As a result, povertyhas declined to some extent. However,low unemployment rate among the poorshows that the poor cannot remainunemployed as there is no other way theycan get their livelihood. There were notenough employment opportunities for allso that wages could rise adequately.Many people refer to such situation asjobless growth.

That our growth pattern did notcreate enough job opportunities isevident from the fact that thegovernment had to run an umpteennumber of programmes for creatingsupplementary self-employmentopportunities or wage employment.Some of these programmesconcentrated on small farmer/manufacturer/trader so that they couldemploy themselves and earn theirlivelihood by producing things orproviding service.

Reduction in Inequality : We wanted toreduce inequality in the distribution ofincome and consumption as well asconcentration of wealth. It is believedthat, in the initial stages ofdevelopment, inequality tends toincrease while the lot of everybodyimproves. We do not have practically anydata on distribution of income overhouseholds. What we know is that thepercentage of income tax payers hasincreased over the years and poverty,as percentage of people below povertyline, has reduced. By 1993-94, which isthe year closest to the period underreview, while the proportion of poor hadreduced, their absolute numberremained the same. In the case ofincome tax payers, both the proportionand the absolute number of income taxpayers rose, though slightly. The size ofthe middle class has also risen both inproportion and number.

However, unless we show that incomeof top x percent has reduced from y1 percent to y2 per cent during a long period oftime, we cannot say much. In the case oftotal private consumption expenditureincurred by the households, it appearsthat the share of bottom 40 per cent inrural areas, for each of its deciles, has


improved. On the other hand, the shareof bottom 80 per cent in urban areas, foreach of its deciles, has worsened in thecase of total private consumptionexpenditure incurred by the households.Even then, the rural-urban disparity inconsumption is on the rise.

So far as wealth is concerned, weknow something about agriculturalholdings. First, the intermediaryinterests have been abolished. Ceilingsfor ownership were fixed twice in allStates (in mid-fifties and early seventies)for dry, one-crop irrigated and two-cropirrigated lands. Surplus land wasdeclared and taken possession of andfinally distributed to small farmers,evicted tenants or landless agriculturallabourers. Of the total 14 crore hectaresof net sown area, we find that in the fortyyears since 1951, after stringent ceilinglaws formulated in 1972, not even 20lakh hectares were found to be surplusand only a little more than 10 lakhhectares were distributed to about 44lakh persons–on an average a little overone acre. However, time has resolved theissue to a great extent. In 1951, therewere 72 million households of which 60million were in the villages and 50 millionmight have had land. By 1991, therewere 170 million households in thecountry of which, say 125 million, wouldhave been in the villages with 100 millionholders. Average holding size is just 1.4hectare. Thus, over time increase inpopulation leading to furtherfragmentation of holdings has hardly left2 per cent holdings, which are in sizebigger than 10 hectares. Those whopossess such large land holdings arecalled large farmers. Of course, theypossess almost 20 per cent total land.

MNEMONIC TO REMEMBER AREALMEASUREMENT

100 Hectares =1 sq km =1000000 sq m;Hectare =100 ares =100 × (10 × 10) sq m10 Acres = 1 sq furlong = 220 × 220 sq yd;Acre = 4840 sq yd = 4000 sq m (approx.)Hectare = 2.47 acre (approx.)

Let us have a look at the concen-tration of economic power in industrial(non-agricultural) sector, which wewanted to check while promotingindustrial development. We know thatthere are government companies andthere are private sector companies andin the latter case, public limited andprivate limited. Paid up capital used ingovernment companies is found to be asmuch as in the non-governmentcompanies. Out of lakhs of companies(with 2.5 lakh registered factories), 1690might be considered very big in 1991.Companies with less than Rs 100 crore,with average assets worth Rs 27 crore,accounted for 83.7 per cent with totalassets about 30 per cent whereascompanies with more than Rs1,000crore, with average assets worthRs 1,823 crore, accounted for less than1 per cent and controlled assets worth20 per cent.

In 1965, it was found that 75business houses controlled 1500companies. Top twenty industrial housesin 1989-90 were: Tata, Birla, Reliance(which came up in the late seventiesonly), Thapar, JK, L&T, Modi, Bajaj,Mafatlal, M.A. Chidambaram, HindustanLever, United Brewaries, TVS Iyengar,ITC, Shri Ram, ACC, Oswal, Mahindra& Mahindra, Essar, Kirloskar. The firstfive controlled 60 per cent of the totalassets of 20 industrial houses.


OBSERVATION BY MONOPOLYENQUIRY COMMITTEE, 1965

In the period immediately followingIndependence, the very forces which areharnessed to produce the quickindustrialisation of the country worked atthe same time to concentrate power inindustry in a few individuals or familieswho were already wealthy andpowerful…The allocation of resources andthe settlement of priorities which planningnecessarily involves have necessitated asystem of licensing for starting newindustries or expanding the oldestablished units or starting new units inexisting industries; capital issues had alsoto be controlled…Everyone of thesecircumstances tended to produceconcentration of economic power.

While allocation priorities wereprimarily responsible for thisconcentration, the industrial housesmanipulated to secure things in theirfavour. Before 1969, when banks werenationalised, banking industry wascontrolled by these big houses. ACommittee to inquire industrial licensingpolicy found that 56 per cent of totalassistance from specialised financialinstitutions such as IFCI, ICICI and IDBI,70 per cent of term-loan by the LIC and62 per cent of term-loan by the SBI weresecured by the big industrial houses.This is how the economic power gotconcentrated in a few hands in theindustrial sector. They did not evenemploy more than 80 lakh persons.

Now, we discuss, in short, some ofthe other objectives, which were explicitlystated in later plans.Reduction in Poverty : To begin with,the idea was that mass poverty wouldbe automatically removed with thestrategy of growth along with

redistribution of wealth (like land), ofincome through fiscal instruments oftaxation, and of consumption byintervention in market of essentialcommodities through price control andpublic distribution. Despite modestgrowth and operation of redistributioninstruments, it was discovered thatpoverty was not declining to a significantextent. The Fifth Plan started with theremoval of poverty as its prime objective,though a few supplementaryprogrammes for poor sections of thesociety were launched during theFourth Plan itself. Rigorous exerciseswere carried out. Controversy aftercontroversy took place on methods ofestimation of poverty. We find thatpoverty, as proportion of people belowpoverty line, did not reduce on asustained basis till 1973-74 but reducedthereafter from 56 per cent to 36 percent by 1993-94. Those who remainedbelow the poverty line came closer tothe poverty line. However, the absolutenumber of poor remained 32 crore.Diversification of Economic ActivitiesOur industrial base, contributed by thepublic sector and supplemented by theprivate sector, got quite diversified by1991 even though our growth rate wasnot considered very high. Many things,which we can produce, were not to beimported by necessity. Petroleum and

FINANCIAL INSTITUTIONSICICI = Industrial Credit and Investment

Corporation of IndiaIDBI = Industrial Development Bank of IndiaIFCI = Industrial Finance Corporation of

IndiaLIC = Life Insurance Corporation of IndiaSBI = State Bank of India


petroleum products were being importedin order to conserve our own reserves. Inany case we cannot do much in the area.

Many chemicals and fertilizers,which we had to import earlier, werebeing produced domestically. We are doingquite well in heavy engineering. In fact,there are technological feats to our credit,particularly in the areas where we weredenied technology.Achievements : Many things havehappened which do not get captured inwhat we have discussed above. You mayrecall that our life expectancy at birth hasalmost doubled and at other ages,considerably improved. Our infantmortality rate considerably reduced from140 per thousand in the fifties to 80 perthousand by the close of eighties thoughit was yet very high in comparison to othercountries. Our death rate came down toabout 10 per thousand in 1991 fromaround 23 in 1951. By the way birth ratetoo reduced to 30 per thousand by 1991as against 45 per thousand in 1950s.

Concluding Remarks

We learnt about the rationale forresorting to planning, and somethoughts on planning during pre-independence. We also tried tounderstand the generic meaning ofplanning and then the specific context

of national planning by the State. Wealso learnt that we adoptedcomprehensive planning for ourselves,encompassing economic and socialspheres. Then, we had a glimpse athistory of our plans.

Next, we discussed the objectives anddifferentiated them between planningobjectives and plan objectives. Planningobjectives, which could be said to be long-term goals were delineated as growth,employment and reduction in inequality.Main features of economic policy wereoutlined as interventionist state,centralised planning, expansion of publicsector, and import substitution.

Finally, we discussed achievementsand failures of policy of planning aspursued in the forty years since 1951. Weemphasised that we improved on allcounts. Our achievements have been lessthan what we wanted to achieve. But ourachievements were definitelycommendable when we compared themwith what had been happening beforeIndependence. And, this owes a greatdeal to our policy of planning for socialand economic development. But, wefailed to some extent in reducing povertyand unemployment. We also failed inreducing concentration of wealth oreconomic power in a few hands and thusperpetuated as well.

EXERCISES

1. Which are the factors determining the manner, the extent and the pace of stateintervention in an economy?

2. The Constitution of India allows ownership and control of material resources to exist aswell as market to function yet it seeks to intervene. Why?

3. Where is the provision for economic and social planning in the Constitution?4. What were the three models that prompted Indian leaders for deciding in favour of

planning in the late thirties?


5. Who formed the National Planning Committee and when? Who were the Chairman andSecretary of the National Planning Committee?

6. What were the key recommendations of the National Planning Committee?7. What do you mean by economic planning?8. What do you mean by comprehensive development planning?9. List some of the economic spheres and the social spheres separately.10. List some of the methods of intervention by the State in functioning of the economy.11. Write a brief history of our plans, mentioning the reasons why a five year plan was

not formulated when it was due.12. Distinguish between planning (long-term) objectives and plan objectives. Write out

planning objectives and provide rationale for the same.13. What is our major framework of planning? Is it existence of mixed economy? What do

you mean by the mixed economy?14. What are the important features of our economic policy as pursued till 1991? Discuss

in detail each of them, justifying the background.15. Discuss our achievement/failure in maximising production, particularly in the case of

foodgrains.16. What do you mean by self-employment and wage-employment?17. What do you mean by person day?18. Discuss our achievement/failure in the matter of employment before the onset of new

economic policy.19. What is our record during 1951-1991, about reduction of inequality in (i) distribution

of income, (ii) distribution of consumption expenditure in rural and urban areas, and(iii) distribution of land holdings?

20. What is our record in the matter of concentration of economic power particularly inthe context of industrial wealth?

21. Write a short essay on our achievements during 1951-1991, highlighting relativesuccess in different objectives.

ACTIVITIES

1. If we do not want to depend on imports for our food, how much foodgrains we shouldproduce at home if each one of us must consume foodgrains @ 500 grams per day andmust ensure 12.5 per cent of foodgrains grown for seed, feed and wastage? You canremember that net output is reckoned at 87.5 per cent of gross output.

2. Supposing that there are 40 crore people working for the total person days availableduring a particular year is 14600 crore person days (=40 cr * 365 days). Taking 10 percent as the unemployment rate, we need to create 1460 crore person days =14600million person days, taking due care of composition profile of labour force along withregional dimensions. Try to find out how much employment was generated in terms ofperson days by various schemes of employment. Was it half of the requirement?

3. Group Activity: Look at the Constitution. Try to find out in how many senses the word‘State’ has been used in the Constitution. Discuss among yourselves in the presence ofyour teacher.

BackgroundWe had indicated in the last chapter thatwe did not follow a single set of policiesin the forty years since 1951. We mademany changes in many spheres but theywere all perhaps in the same direction:interventionist state, centralisedplanning and expansion of public sectorwithin the framework of mixed economy.In fact, we were following no charted pathbut were experimenting in a big way. Werecount here some major developmentsduring the forty years before the onsetof current spate of reforms.

In the late 1960s, many things cameinto notice as a result of certaincommittees formed to investigate theworking of many policies. It was foundthat the industrial licensing policy thatwas followed in practice was not in tunewith the Industrial Policy Resolution of1956. It was, therefore, tightened. It wasalso discovered that the large industrialhouses were in control of financialresources because they owned thecommercial banks. Fourteen majorbanks were, therefore, nationalised in1969 (and six in 1980) so as to makefunds available for development ofagriculture and small and cottageindustries. It was further discoveredthat many industrial houses weremonopolising certain activities and were

adopting practices restricting trade(competition); an Act (MRTP ) againstsuch practices was, therefore, put inplace and, with a view to discouragingsuch practices, a Commission (MRTPC )was set up.

In the late 1970s, a movementtowards further promotion of cottage,tiny and small-scale industries,enlargement of responsibility of publicsector for decentralised development,and making sick industries taken overfrom private sector to show results, wassuggested. But, it could not be pursuedmuch.

Towards the end of the seventies,however, it came to be widely perceived,particularly by the industrialists, thatthe Government has been unnecessarilyrestricting industrial activities of privatesector in the name of protecting smallscale industries (from competition byreserving items, ensuring availability ofraw material, purchasing products andsubsidizing sale), putting high tariffs,restricting flow of foreign capital andtechnology, and pampering public sectorundertakings that were actuallyincurring huge losses.

Foreign interests expressed a viewthat the government had been checkingforeign trade by imposing quota (though

CHAPTER 7

Economic Reforms since 1991


necessitated by limitation of foreignexchange) and high custom tariffs andchoking flow of foreign capital except aidand debt. Middle class consumer thoughtthat domestic industry was overpro-tected from foreign competition by hightariff wall and public sector undertakingswere doing no good to the economy.

In order to address some of theseissues, a little opening was made in theeighties itself. A new industrial policystatement was announced in 1980. The1956 resolution, it was clearly stated inthis statement, formed the basis of thepresent statement but the new policyaccepted the erosion of government’sfaith in the efficiency of its own publicsector. The statement of 1980, in fact,accepted, to an extent, the directiongiven in the statement of 1977. Itadopted a liberal approach and, insteadof punishing the industrialists forinstalling excess capacity, it suggestedregularisation of unlicensed excesscapacity (except in cases of items thatwere reserved for the small sector or incases where companies were registeredfor MRTPA or FERA). During the courseof the eighties, a number of relaxationswere made in the licensing policy :

1. Industries with fixed assets worthRs 15 crore were completely de-licensed and if they were located inan area declared backward by theGovernment of India, the limit wasRs 50 crore.

2. Keeping in mind the economies ofscale due to modernisation oftechnology, licensed capacity wasraised by 49 per cent.

3. Threshold limit for registration withMRTP Commission was raised fromRs 20 crore to Rs 100 crore.

4. FERA rules were liberalised toattract foreign investment.

5. Concessions were made undercorporate income rules.

In addition, foreign capital from allchannels was liberally borrowed. TheNRIs showed a lot of patriotism andcontributed a great deal to the kitty offorex reserves through their deposits.During the two plans (Sixth andSeventh), in the course of eighties, theannual average growth rate rose from3.5 per cent during 1950-70s to 5.5per cent. Amount of foreign exchange,which was needed for imports, wascomfortable.

However, it may be noted that duringthe eighties:

(a) fiscal deficit rose from 5 per cent toover 8.5 per cent of the GDP

(b) revenue deficit from 0.2 per cent (in1981-82) to 3.5 per cent of the GDP

(c) current account deficit in externalbalance rose from 1.2 per cent to2.5 per cent.

These facts reflect the weaknesses inthe policies, pursued during the eighties,which promoted growth, yet, dependedon borrowings -- internal and external.Sustainability of growth rate achievedduring the eighties was, therefore,doubtful. But the result came soonerthan expected.

Immediate Crisis

Change in international economicscenario associated with the gulf crisiscreated a severe external liquidity crisis.We lost our exports to gulf countries,reducing the flow of foreign exchange (interms of hard currencies). Remittances,which we were receiving from the NRIs

ECONOMIC REFORMS SINCE 1991 97

HOW MUCH FOREIGN EXCHANGE RESERVE WE NEED

You may remember that one always needs certain level of reserve stock of certain things tosustain for days ahead: vegetables/fruits/sweets for a few days, sugar/tea/coffee for afew weeks, rice/wheat for a few months/a season. Your scooter and car also have somereserve for covering emergency needs. The Government keeps some amount of foodgrainsas buffer stock should the crops fail drastically.

Similarly, we need foreign exchange reserve. We do not keep them in any amount orfor years together. We need foreign exchange reserve at a level, which would be sufficientfor imports for eleven-twelve weeks.

We do not lock up our resources in building up extra reserves because resources havealternative uses. Similarly, we need not have foreign exchange reserves for years together.These have to be paid back along with interest.

in the gulf dried up. Import bill ofpetroleum, oil and lubricants, increased.The combined effect of all these factorsreduced our foreign exchange reservesto a low of $1 billion.

Perceived political instability createda situation in which a big flight of capitaltook place, drying our foreign exchangekitty. International commercial banksrefused to extend new credits. Creditrating agencies played their businesstricks and rated India’s entities very low.This made the NRIs withdraw theirdeposits all of a sudden. By the middleof 1991, we came to the brink of defaultin paying our instalments; we did nothave foreign exchange reserves enoughto pay for two weeks’ imports. Earningsfrom exports and foreign exchangereserves fell short of settling ourobligations. Said the Economic Survey1991-92:

By June 1991, the balance ofpayments crisis had become over-whelmingly a crisis of confidence inthe Government’s ability to managethe balance of payments. The loss ofconfidence had itself undermined theGovernment’s capability to deal withthe crisis by closing off all recourse to

external credit. A default onpayments, for the first time in ourhistory, had become a seriouspossibility in June 1991.With a view to restoring internal and

external confidence, there was an urgentneed for initiating macro-economicstabilization measures. It is importantto note that macro-economic stabilisa-tion measures are pervasive and affectthe whole economy, not a particularsector. Changes in fiscal policy,monetary policy, exchange rate policyand wage-income policy are measures,which may stabilise/destabilise macro-economic balances -- internal andexternal. With a view to bringingstabilisation, reforms in these majorpolicies were suggested to be the direneed.

But the opportunity was also seizedupon to correct many micro-economic(sectoral) policies too. Or, one could saythat without concomitant changes(reforms) in micro-economic policies,reforms in stabilisation measures wouldhave not been sufficiently effective.There existed a perception at the nationallevel and international level that ourpolicies were distorting prices of goods


and thereby allocation of resources. Wethought that our policies werediscriminatory; but it was pointed outthat our policies were actually distortingallocation of resources (via distortion inprices). The package of reforms in thissphere came to be known as StructuralAdjustment Programme. Reforms intrade policy, industrial policy, publicsector policy, administered price policy,tariff policy and factor market policy maybe specifically mentioned in this context.

According to some authorities,stabilisation refers to measuresconcerning the aggregate demand whilestructural adjustment concerns theaggregate supply. But, according to otherauthorities, stabilisation refers to short-term measures to correct macro-economic imbalances and structuraladjustment to measures relating toimprovement in productivity of labourand capital. The Government of India hasaccepted the second view. Changes, forexample, in industrial policy, labourpolicy and trade policy, are pointers inthat direction. Attempts to bring changesin fiscal policy, monetary policy, andforeign exchange policy are all meant tocorrect macro-economic imbalances. Inour case, at this juncture, both sets ofmeasures were initiated together.

Main Features of Reforms

As suggested above, the nineties saw thereplacement of ‘license, quota, permit(LQP) raj’ by ‘liberalisation, privatisationand globalisation’ (LPG) regime. There aremany areas of reforms besides industryand trade, but we shall focus only onthese as these crucially affect all otherareas. The main features of economicreforms in microeconomic area are listed

as the following three: liberalisation,globalisation, and privatisation.

Liberalisation

If restrictions are imposed on economicactivities by Government policies, theregime may be said to be following apolicy of restrictions or a restrictivepolicy. By contrast, if the Governmenthas put no restrictions, the regime maybe said to be following a policy of laissez-faire. However, no real economy is evercompletely free of restrictions. Whensome of these restrictions are removedor are slackened, the regime is said tobe following/pursuing a policy ofliberalisation. On the contrary, if morerestrictions are imposed, the regime issaid to be following a policy of stricterregulations. In fact, it is possible that insome areas, more restrictive and in someareas more liberal policies are adopted.

On our industrial scene, we wereseen as over-restricting the expansion ofindustrial activities by putting physicalcontrol on output, imposing pricerestrictions under one or the other act,restricting the level of investment by bigindustrial houses, rationing of credit bythe financial institutions, controllingcapital issues (shares/debentures),checking foreign investment/ technologyissuing import licenses, restricting evenexit of the industry or its labour. Manyfelt that this restricted the initiative andenterprise of the people on the one handand competition in the market on theother.

It was further pointed out that bigindustrialists could still circumventalmost all of these restrictions with theconnivance of bureaucracy. Those whocould circumvent the restrictions


developed vested interests incontinuance of the regime so that theydid not have to face competition. Thus,the end result was corruption anddelays. This promoted neither growthnor social justice. It was argued that alow growth rate lowered the capacity ofthe economy to promote social justice.In one word, intervention turned intointerference.

INTERVENTION AND INTERFERENCE

These words are very often usedsynonymously. But, the use of interventionis better than interference in the contextof relationship between market and state.

People are often seen saying ‘kindlyintervene’ when they want some conflictto be resolved amicably throughinvolvement of a third party.

People are also seen saying ‘please donot interfere’ when they do not wantinvolvement of a third party in the matterto be resolved.

Under these circumstances, a newindustrial policy was announced by thethen Finance Minister Dr ManmohanSingh in July-August 1991 and, later inApril 1993, which had liberal provisionsor promotional features in the followingareas:

(a) licensing business(b) foreign investment(c) foreign technology agreements(d) establishment, merger, amalgama-

tion, takeover of units andappointment of certain directors

(e) simpler exit policies

Licensing was originally limited toonly 18 commodities. Later threecommodities were de-listed: refrigerator,washing machine and air conditioner.

Foreign investment, particularly directforeign investment, was invited andapproval for direct foreign investmentwas made simpler. Foreign collaborationfor technology was encouraged.Restrictions on merger/acquisition/takeover were sought to be removed.Labour laws were made a bit easy topermit exit.

However, the issue is, as oneeconomist puts it, whether liberalisationwould mean de-bureaucratisation ormarketisation. Many of us feel that wehave been less successful in de-bureaucratisation and promotedmarketisation. Many of the policies hadto be changed as we found that practiceswere overdoing or underdoing than thepolicies actually intended for.

Privatisation

The new ethos expressed in the phrasethat ‘government has no business to dobusiness’ became the new mantra. Thiswas in tune with the privatisation waveacross the world. There was a time whenmany private industries (and trade) werenationalised even in the so-calledcapitalist world. Now is a time when thethinking is just the opposite anddenationalisation became the fashion.Many public enterprises in our countryhave provided that opportunity by theirlacklustre performance.

It was felt, in our context, that thegovernment was directly operating inmany areas where it ought not to be andthat many of its enterprises were notperforming at a level they ought to. Inthe former case, the Government couldsimply withdraw. It meant that suchenterprises were to be sold out. It cameto be known as disinvestment. In the


latter case, the undertakings are soreformed that they perform well even if itmeans partnership with the private sector.The issue to be considered here was as towho would buy non-performing, lossmaking enterprises and if some partieschoose to do so, why should they pay largesums? A government starving of fundscould then think of selling shares of theirperforming enterprises so that it couldbalance its budget a bit better.

If privatisation has some intrinsicvalue, we should not mind promoting it.We are trying various models ofprivatisation. The simple one relates tothe issue of ownership. Complete sell-off, retaining 26 per cent stocks with vetopower, retaining 51 per cent stocks andretaining 75 per cent stocks have all beentried in one or the other case. Which formshould be adopted depended upon thenature of product/service a particularenterprise was manufacturing/providing. Divestment, which is total sell-off, could be thought of in an area, whichhas no reason to be in the public sector.If good/service produced falls in thecategory reserved for public sector, theGovernment should retain at least 51 percent holding and should not disinvestbeyond 49 per cent of total stock (If thelast three options are resorted to, itmeans that the enterprises will turn intojoint ventures). Selling out shares to theemployees and running the enterpriseon cooperative principle is anotheroption. Later, the Government of Indiaexperimented with bundling shares ofprofit making and loss makingenterprises without much success.

There are other views onprivatisation. Instilling commercial spiritin public sector enterprises is one such.

Railways are being suggested forcorporatisation; which means theRailway Board should be converted intoa public corporation, which has someautonomy. This could be calledprivatisation in operational sense. Thereare no disinvestments involved, however.Another view suggests lease of a publicenterprise to a private party orcontracting out many of the servicesneeded as inputs. This has been regardedas privatisation in organisational sense.But properly speaking, it is a matter ofownership. With ownership comes control.Without privatisation also, governmentcan still bestow organisational andoperational autonomy and have amemorandum of understanding with themanagement.

Let us finally note that ourprogramme of privatisation throughdisinvestments has succeeded to theextent of 50 per cent only.

GlobalisationThe term ‘globalisation’ has yet to gaina definite meaning. One economistdefined it to mean exposure tocompetition with the world leader in aparticular industry. Another thinksthat it is about free trade in goodsand services among nations togetherwith free international mobility offactors of production. Let us just talkof ‘globalisation of Indian economy’.This means more/better integration ofIndian economy with world economy.How could the two economies integrate?Not by aid, which is a unilateral flowbut by trade, which is a bilateral flow.Not by economic relations betweengovernments, but by interface of ourmarkets with the world market.


How does one sell in a country if thegovernment bans import of the goods,puts a quota restriction (while weare willing to supply and the people ofthe country of import are willing tobuy) or creates a high tariff barrier byimposing 300 per cent import duty? Webecome uncompetitive by such devicesand the Government protectsinefficiencies of domestic producers. Ifthe Government removes such barriers,the domestic producers will eitherimprove efficiency in that line orwill switch over to other lines ofproduction.

If you agree with this argument, youwould advocate dismantling of tariff andnon-tariff barriers both. But there maybe good reasons to differ with this kindof argument. After all, no Governmentdoes it for pleasure. Protection ofdomestic industry from competition maybe desirable in certain areas.

Would you like to produce in yourcountry and sell everywhere? Multi-national corporations and trans-nationalcorporations have plants in severalcountries. Production in a host countrysaves them from transportation cost andlabour cost in many cases. Then, youshould permit movement of capital too.So, factor markets also get integrated.Once the producer has a stake in thecountry, he will perhaps bring in bettertechnology and managerial practices andentrepreneurial skills as well. This willhave spillover effects.

However, many of us are concernedto know whether movement of labourand manpower would be equally easy.And we know that it is not easy.

In short, the globalisation meanspursuing :

(a) reduction of trade barriers with aview to allowing freer flow of goodsto (and from) the country;

(b) free flow of foreign capital in termsof investment (direct and portfolio)by ensuring conducive atmosphereand easy approval of proposals;

(c) free flow of technology; and(d) free movement of labour and

manpower.

(e) FDI

(f) Pravasi Bhartiya Fund

The present WTO regime is workingfor free (if not free) trade throughunprotected competition by removal ofnon-tariff barriers and substantialreduction in tariff barriers as also byremoval/reduction of subsidies. It hasextended the areas traditionally negotiatedin the GATT by including what are knownas GATS (General Agreement on Trade onServices), TRIPS (Trade Related IntellectualProperty Rights) and TRIMS (Trade RelatedInvestment Measures).

Concluding Remarks

We started this chapter with abackground charting evolution of policiesand developments in industrial economyof India. First, we found that practicesfollowed were not true to the spirit of thepolicies. Concentration of power did risedespite intentions to the contrary. In theseventies, worsening foreign exchangeposition prompted for tighter controls.So, loose ends were tightened. But by1980, it was learnt that our policies havebecome too restrictive. License, permitand quota raj became pervasive.Restrictions were then softened quite abit. Funds were liberally borrowed frominternational market, partly because aid-pool was drying. Imports were made


liberal. There was tremendousimprovement in growth trajectory.However, the programme had inherentweaknesses as is clear from bad macro-economic scenario, which is revealed byworsening revenue deficit, fiscal deficitand deficit in current account in balanceof payments.

In 1991, the gulf war reducedremittances to the economy. Politicalinstability caused a big flight of capital.Our foreign exchange reserves shrunkto a level, which could hardly cover twoweeks’ import requirements. We wereadvised to undertake policy reforms onboth the fronts--macro-economic stabili-sation and micro-economic structural

adjustment. It is said that we rolled backthe state. Some say that we only changedthe texture of intervention, not the level.

Last, we tried to discuss the nuancesof three basic features of economicreforms, viz., liberalisation, privatisationand globalisation. We pursued some ofthe reforms and succeeded to someextent. Some of them, known as secondgeneration reforms, were delayed.Difference between the two sets ofreforms is said to be in the fact that,while the first generation reforms couldbe carried through executive andadministrative machinery, the secondgeneration reforms require legislativeaction.

EXERCISES

1. Discuss the developments in the Indian economy, particularly in its industrialsphere during 1960-90.

2. Mention good points and major weaknesses of the policies pursued during theeighties.

3. Why do we put restrictions on some activities? Illustrate with examples.4. What was the basic problem that forced us to have a U-turn in our policies?5. What was the level of foreign exchange reserves in 1991?6. What do you mean by macro-economic stabilisation programme? Mention its

characteristics in terms of its instruments and coverage.7. What do you mean by micro-economic adjustment programme? Mention its

characteristics in terms of its instruments and coverage.8. What are the main features of economic reforms?9. What do you mean by laissez-faire? Discuss the difference between policy of

laissez-faire and policy of liberalisation.10. Differentiate between policy of restriction and policy of liberalisation.11. What you mean by privatisation? Discuss how it is different from

denationalisation.12. What do you mean by disinvestment? How far did we succeed in this

programme?13. What do you mean by globalisation?14. How do you react to asymmetric treatment to capital market and labour market

by the WTO?15. What is the WTO? What is it supposed to do?

UNIT III

CURRENT CHALLENGES FACING INDIAN ECONOMY

In this unit, you will be exposed to some of the challenges that the Indianeconomy is facing. Needless to mention, we shall be discussing threeperennial problems that we have been struggling with. These are population,poverty and unemployment.

It is often emphasised that much of economic development is hamperedbecause of lack of quality infrastructure. We have already learnt about theprogress we have made in the last fifty years in some of infrastructureservices. Here, we shall review them from the angle of the kind of challengesthey are facing. The infrastructure covered shall, however, be only energy,transport, communication, health and education.

In the last chapter we shall be concerned with some other emergingissues. The issues that have been identified are environment, genderand migration.

CHAPTER 8

Population in India

Introduction

There was a time when growth inpopulation was considered desirable.There are societies--both developed andundeveloped--where growth of popula-tion is still considered desirable. ManyEuropean nations have institutedincentives for larger families. There are,however, occasions, when societiesconsidered the population growthundesirable, particularly if the growth israpid. In India, the growth in populationhas been considered high andundesirable, right from the thirtieswhen it was discovered that populationbetween 1921 and 1931 increased bymore than 10 per cent. Thereafter, itrose at still higher rates and in thesecond half of the century, at more thantwice this rate.

Population provides workforce toproduce on one hand and market for theproduce on the other. A small sizepopulation may not promote innovationand thereby productivity. It may notpromote specialisation and division oflabour. A large size population mayprovide too many hands that may notbe absorbed. It may also create problemsfor environment and resources.Whenever the issue of overpopulation is

raised, some either do not accept it or,if they accept, they put the blame on thesystem, its institutions and technology.In fact, whether a given population islarge or small is in relation to theresources and technology that thepeople have command over, on the onehand, and the levels of living enjoyed andexpected by the people, on the other.Anyway, as long as the system is inplace, we may need to reduce the rateof growth of population.

Size is one aspect. There are otheraspects of population, which are equallyimportant. One is of course the growthin size. Another that should interest usis the composition of population in termsof sex and age. Whether there are toomany children or too few? Whether thereare too many old persons or too few?Whether we have too many adult handsfor work or there is shortage of them?Whether our population has too manywomen or has too few of them? Whetherdeficiency of women occurs across all agegroups or is confined to particular agegroups?

We should, however, note that theuse of ‘too many’ or ‘too few’ alwaysrelates to something else. We shalldiscuss these issues in this chapter.


Size of Population

The size of population is measured interms of the number of persons. If weconsider the present boundaries of thecountry, we were less than 25 crore inthe beginning of the century and we aremore than 100 crore at the end of thecentury. During the century we becamefour-fold. Our growth was thus threetimes the size in the beginning. At themiddle of the century, we were 36 crore.While our growth in the first half of thecentury was, roughly speaking, less than50 per cent, that in the second half ofthe century was more than 150 per cent.It was indeed 180 per cent in the secondhalf of the century.

Table 8.1 presents the populationcounts by censuses, as presented in thelatest publication by the RegistrarGeneral of India. The figures written hereare in units (but you can round off tocrores or millions). Some of the otherTables will be derived from this basictable.

It will be noticed from Table 8.1 thatthe population of the country (withinpresent boundaries) in 1921 was lessthan that in 1911. Demographers pointout the catastrophe of influenzaepidemic, which broke out in 1918 inmany parts of the country. Though, onthe face of it, the population decreasedby about 8 lakh, the actual toll should

HOW LARGE WE ARE IN NUMBER

You often encounter popular beliefs and clichés, which have no scientific basis. Theyunnecessarily create fear psychosis. One such example is: We are one-sixth of the worldpopulation while the land with us is 2.4 or 2.5 per cent. Another example is: India is thesecond country in the world after China to cross the one billion mark and if the currenttrends continue, we may soon overtake China.

The facts are correct but the tone of asserting gravity and purpose of assorting thesefigures is the issue.

We would have been the largest country if Pakistan and Bangladesh (leave Myanmar)could have continued to be a part of the country. Note the populations of China, Pakistanand Bangladesh, as counted sometime in 2000: China, 127.76 crore (1 Februay 2000),Pakistan, 15.65 crore (1 July 2000) and Bangladesh, 12.92 crore (1 July 2000). Thepopulation of India, Pakistan and Bangladesh, put together, comes to be 131.33 crore,which is greater than China’s. Is it not, then, a matter of political boundaries? The areawith China (96 lakh sq km) is three times that of India (33 lakh sq km) and would be morethan twice as large as the area of three South Asian countries, put together. Pakistan’sarea is 8 lakh sq km and Bangladesh’s, 1.45 lakh sq km.

The idea lurking behind such assertions is to suggest that we are very densely populated.Surely we are more densely populated than China but less densely populated than Japanand most of the European countries. Think of Europe if their people had no chance tomigrate to and settle in the New World and Australia.

If we consider arable area only we find our arable land is equal to that of China.However, there are countries totally dependent on imports for their food requirements butthey have something else to offer in exchange.

The story is unending. The short point is that mentioning a few facts without propercomparisons is not adequate.

POPULATION IN INDIA 107

TABLE 8.1Population of India according to Census

during the Twentieth Century

Year Population

1901 23,83,96,3271911 25,20,93,3901921 25,13,21,2131931 27,89,77,2381941 31,86,60,5801951 36,10,88,0901961 43,92,34,7711971 54,81,59,6521981 68,33,29,0971991 84,33,87,8882001 102,70,15,247

Source : Census of India 2001 Series 1 India:Provisional Population Totals-Paper 1 of2001, Registrar General & CensusCommissioner, India.

Fig. 8.1: Population of India

have been no less than 1.5 crore. Duringthe twentieth century, it was the onlyperiod when the number of deathsexceeded the number of births during adecade. Since 1921, the period has beenone of secular rise in India’s population;there was no let up thereafter (SeeFig. 8.1).

We added more people in everydecade than in the preceding decadefrom 1921 onwards. Earlier, we were saidto be adding an Australia every year.During the nineties we are said to haveadded an Argentina, which is the fifthlargest country of the world. Ourpopulation in the nineties rose by 18crore (See Table 8.2). Since the base of

E

1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001

CENSUS YEARS

PO

PU

LAT

ION

IN

CR

OR

ES


population is now higher, we may notethat the growth in population by absolutenumbers is very high and is stillincreasing. But, if you care to notice, youwill find that difference between twoabsolute growths is diminishing.

TABLE 8.2Absolute Growth in Decades of

Twentieth Century

Decade Absolute Growth

1901-1911 1,36,97,063

1911-1921 -7,72,177

1921-1931 2,76,56,025

1931-1941 3,96,83,342

1941-1951 4,24,27,510

1951-1961 7,81,46,681

1961-1971 10,89,24,881

1971-1981 13,51,69,445

1981-1991 16,30,58,791

1991-2001 18,06,27,359

Source: Based on Table 8.1.

TABLE 8.3Growth of Population in DifferentDecades of the Century (per cent)

Decade Growth RatePer Decade Per Annum

1901-1911 05.74 00.56

1911-1921 (-)00.31 (-)00.03

1921-1931 11.00 01.05

1931-1941 14.22 01.34

1941-1951 13.31 01.26

1951-1961 21.64 01.98

1961-1971 24.80 02.24

1971-1981 24.66 02.23

1981-1991 23.42 02.13

1991-2001 21.77 01.99

Source: Based on Table 8.1.

Rate of Growth

Decadal GrowthLet us compute the growth rate for thedecade as a whole. It means dividing theabsolute growth by the base populationand multiply the quotient by 100.Growth rate will be in terms of per centper decade. In Table 8.3, we have alsogiven growth rate per annum for eachdecade.

Great and Small DividesDuring 1921-31, 1931-41 and 1941-51,the population growth was 11, 14 and 13per cent, respectively. Slight decline ingrowth rate during the forties is seenas an impact of migration to erstwhilePakistan after partition as also of loss of

life in the aftermath of the partition.Therefore, the year of 1921 isconsidered the year of great divide inIndian demography, as it ended thephase of fluctuations in population size.

From 1951, one finds that growthrate per decade exceeded 20 per centmark. The year of 1951 may be dulyconsidered as the year of small divide.However, the highest of 24.8 per centdecadal growth was reached by 1971.But there was no perceptible decline ingrowth rate during the seventies. Theyear 1981 is considered as the end ofanother phase. Growth rates during theeighties and nineties show clear decline.In fact, growth rate during the ninetiesis almost equal to that in the fifties (whilewe are considering a decade long period).Downturn has indeed set in (See Fig 8.2).

Demographic Phases

Based on the growth pattern ofpopulation, as depicted in Fig. 8.2,demographic history of India is said to


be having four phases. The dip between1941 and 1951 is ignored as it isconsidered an aberration. Populationwas not rising before 1921 butfluctuating. The period before 1921 is,therefore, considered a phase ofstagnation (or fluctuation). During 1901-1921, population rose by 1.3 crore andgrowth was just 5.4 per cent for theperiod as a whole. Between the years ofgreat divide (1921) and small divide(1951), population grew by 11 crore inabsolute number and by 44 per cent.This period is known as the phase ofsteady growth. During each decade inthis period, we have seen the growth ratewas above 10 per cent and below 15 percent. Then, there was a quantum jump.In all five decades after Independence,decadal growth rate was above 20 per

cent but it accelerated and thendecelerated. Researchers take 1981 asthe dividing year. The period 1951-1981,denoting rise of population by 34 croreor 89 per cent, is called the phase of rapidgrowth. We can also call it the phase ofhigh and accelerating growth. Bycontrast, the period since 1981 may becalled the phase of high but deceleratinggrowth. Population has risen by 50 percent during 1981-2001.

Annual Growth RatesMany people rely more on growth rateexpressed in terms of ‘per cent perannum’. Since, there are only two figuresavailable — initial and final, we have touse only compound interest formula tocalculate rate of growth per annum (SeeTable 8.3). Starting with a little more

Fig. 8.2: Decadal Growth of Population

)

1901-11 1911-21 1921-31 1931-41 1941-51 1951-61 1961-71 1971-81 1981-91 1991-2001

INTERCENSAL PERIOD

GR

OW

TH

RA

TE

(P

ER

CE

NT

)

-1

4

9

14

19

24

29Phase I Phase II Phase III Phase IV

Stagnation Study Growth Rapid Growth Decelerating

growth


than one per cent per annum, the rateof growth rose around two per cent perannum during the fifties and touchedthe level of 2.25 per cent per annumduring the sixties and seventies. Duringthe eighties, it came down to 2.13 percent per annum and during the nineties,it came to the other side of two per centper annum.

While our growth rates have beentwice the highest rates ever achieved inEurope, they have been two-thirds andthree-fourths of the rates witnessed inmany developing countries. Our growthrates are considered high. There is,therefore, no scope for complacence inmaking attempts to moderate the rateof growth.

Basic Factors for High Growth

The growth of population depends onfour basic factors: birth, death, in-migration and out-migration. For acountry as large as ours, the factors ofmigration are not very significant. (Forsmaller units, particularly border states,we cannot ignore these factors). Thereare, therefore, only two factors, whichaccount for growth--positive contributionof births and negative contribution ofdeaths. Growth rate is, therefore, oftenexpressed as the difference between birthrate and death rate. This growth rate isoften called the rate of natural growth ornatural increase as birth and death areconsidered natural phenomena incomparison to migration, which is socialor economic in nature. All these ratesare expressed by demographers in termsof per thousand rather than per hundred(cent). Earlier, the birth rates and deathrates were calculated by our demogra-

phers, using census data. Now, they areusing data collected by the SampleRegistration System (SRS). In Table 8.4,we provide information on birth anddeath rates for the first seven decadesof the twentieth century, which are basedon census and then years at the distanceof a quinquennium, which are based onthe SRS (See also Fig. 8.3).

Trends in Vital Rates

Death rate and birth rate, as revealed by1911 and 1921 censuses, were very closein the beginning of the twentieth century.The rate of natural growth during1911-21 was just 0.09 per cent perannum. This was the decade of actualdecline of population. Then there wasdecline in both birth rate and death rate.However, differential in declines woulddetermine whether there was decrease orincrease in growth rate. Compared todecline in birth rate, the decline in deathrate has been normally higher, whichresulted in increase in growth rate. Thereduction in birth rate between the thirtiesand forties was, however, higher than thatin death rate despite some deaths duringthe partition. But the general trend wasof increasing growth rate, which basicallyowes itself to drastic reduction in thedeath rate. Thus, it is not because ofincrease in birth rate but because ofdecrease in death rate that caused rapidrise in growth rate. See Fig. 8.3 for birthrate, death rate and growth rate.

This graph shows how steep was thereduction in death rate as compared tothe reduction in birth rate. But the birthrate was declining too. Now that thedeath rate is reaching a plateau, we canhope for a reduction in birth rate.


Demographic TransitionBased on the demographic history ofWestern countries, it has been arguedthat birth rate and death rate are bothhigh before the onset of transition, givinglow, often fluctuating, rate of growth.With development, first death rate fallswhile birth rate remains the same and

as a consequence growth rate acce-lerates. In the next phase, both birth rateand death rate both fall in parallel,keeping growth rate high and steady. Inthe still next phase, while death ratebecomes low and stagnates, birth ratecontinues to fall. In this phase, growthrate declines. Finally, birth rate also

TABLE 8.4Birth Rate, Death Rate and Rate of Natural Growth (Per Thousand)

Decades Birth Death Rate of Year Birth Death Rate ofRate Rate Natural Rate Rate Natural

Growth Growth

1901-1911 49.2 42.6 6.6 1971 36.9 14.9 22.01911-1921 48.1 47.2 0.9 1976 34.4 15.0 19.41921-1931 46.4 36.3 10.1 1981 33.9 12.5 21.41931-1941 45.2 31.2 14.0 1986 32.6 11.1 21.51941-1951 39.9 27.4 12.5 1991 29.5 9.8 19.71951-1961 41.7 22.8 18.9 1996 27.5 9.0 18.51961-1971 41.7 18.9 22.2 1998 26.5 9.0

Source : Compendium of India’s Fertility and Mortality Indicators 1971-1997 based on the SampleRegistration System, Registrar General India, 1999 and India Yearbook Manpower Profile,Institute of Applied Manpower Research, 2001.

Fig 8.3: Trends of Birth, Death and Growth Rates.

= Birth rate = Death rate = Rate of Natural Growth

VIT

AL

RA

TE

S

YEARS

1901-11 11-21 21-31 31-41 41-51 51-61 61-71 1971 1976 1981 1986 1991 1996 1998

60

50

40

30

20

10

0


becomes low and steady and the resultis low growth rate. We are in the thirdphase of demographic transition.

We may however note that lifeexpectancy after transition is high while,before transition, it is low.

Matter of Life and Death

However, if our birth rates were low, itcould be argued that the rise would havebeen lower. If birth rate could declinefaster than death rate, then it waspossible that growth rate could actuallydecline. But that has never happened.Theory of demographic transitionexplains that reduction in birth rate hasalways followed reduction in death rate.

Compared to 7.5 per thousand pointsreduction in birth rate in seventy yearstill 1971, reduction of 10 per thousandpoints since 1971 is creditable.Compared to 25 per thousand pointsreduction in death rate during seventyyears till 1971, the reduction of 6 perthousand points since 1971 is quite low.However, we should accept theproposition that once the rates approachtheir limits, it becomes difficult to reducethem any further. The rates, particularlydeath rate, are fast approaching thelimits.

However, human beings wouldalways love to live as long as possible.We should, therefore, try to save as manylives from death as possible. We are doingit. We may not mind preventing birth butonce a life comes into being, we considerit sacrosanct to prevent it from death andabhor infanticide if it is committed.

Regarding high birth rate, we wishto point out that total fertility rate, whichroughly speaking is the number of birthsper woman, has declined from more than

8 to almost 3, yet the birth rate hasincreased because there are more women(and men) around low death rates.Evenwhen a couple starts replacing itself, itwill take about seventy years forpopulation to stabilise in terms ofnumber because the couple will, on anaverage, live seventy years.

One major incentive for parents tochoose smaller number of children islower infant mortality. A lot of reductionin death rate is due to reduction in infantmortality. It is bound to lead to furtherreduction in the birth rate. Death rate isclose to the lowest possible. The lowestdeath rate is 7 per thousand anywherein the world. Further reduction in deathrate becomes difficult as in the face oflow birth rate, the population actuallybecomes older. Reduction in birth ratealso requires improvement in economicconditions and in spread of education.Diversification of economy and of jobprofile of female work would furthercontribute to reduction in birth rate.

Composition of Population

Sex RatioAny real organic population has to haveboth the sexes. There should be balancein their numbers. Nature is found to givea few more male births than female births.But nature has also made womensturdier. If there is no discrimination onthe part of the society, the two numbersshould be more or less in balance. Neithertoo many or nor too few members of anysex would be desirable as they arecomplementary to each other in certainrespects. There are a few countries, likethe Russian Federation (1140), Japan(1041), the USA (1029) and Indonesia(1004), where the sex ratio is in favour of


women and there are many others inwhich it is in favour of men. Similar isthe case within our own country.

In India, sex ratio is normallydefined as the number of women per1000 men. Sex ratio for the country asa whole has not been in favour of womenthroughout the twentieth century. Itdeclined from 972 in the beginning ofthe century to 927 in 1991 though therewere a few hiccups. In this perspective,sex ratio of 933 in 2001 is considered awelcome improvement. The highestdecline was observed in the sixties (SeeTable 8.5).

It may be noted that in thebeginning of the century, many stateshad sex ratio of more than 1000. Amongthe large states, for example, Bihar hadsex ratio of 1061 and Tamil Nadu of 1044whereas Kerala had only 1004. At theclose of century, while Kerala surgedtowards 1058, Bihar and Tamil Nadureached 921 and 986, respectively.Punjab and Haryana always had it bad.

But more important is to note thatsex ratio for the age group 0-6 hasdecreased from 945 in 1991 to 927 in2001. In Punjab, it has gone down from875 in 1991 to 793 in 2001 and, inHaryana, from 879 to 820 during thesame period. This shows some kind ofneglect of girls and the denial of right tolife to them.

Age Composition

Do we have more children playing inthe field or more old people walking with

stick in the park or more adultsworking on the farm or in the factory?We do not yet have age composition datafrom the Census 2001. With divisionbetween three groups of people, viz.children (0-14), adults (15-60) andold people (60+), we provide agecomposition data for selected years inTable 8.6. It may be noted that theproportion of children, which was slowlyrising and crossed the mark of 41 percent in 1971, has slid back and wasthe lowest ever in 1991. Proportion ofthe old went on increasing and is sixtimes in terms of proportion. If theproportion of children had inverted-Umovement, the proportion of adults hasU-shape movement.

The changes are clear reflection ofhigh birth rates till seventies anddecreasing death rates across ages. Thedecline in proportion of children is againreflection of decreasing birth rate. Therising proportion of old people may giverise to certain problems.

Implications for Development

Contrasting Arguments

There are people arguing that populationis not a problem. You could argue in theirfavour by pointing out that, during thelast two centuries since Malthus whogave alarm, world population has becomemore than six-fold from less than one

TABLE 8.5Sex Ratio in India during Twentieth Century (females per thousand males)

Year 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001

Sex Ratio 972 964 955 950 945 946 941 930 934 927 933

Source: Census of India 2001 Series 1 India: Provisional Population Totals-Paper 1 of 2001, Registrar General and Census Commissioner, India.


hundred crore to six hundred crore andyet, most people in most countries areliving three-times longer and living atleast twice better.

There are people arguing thatpopulation is the only problem. Youcould argue, as many do, that allsocial ills of poverty, malnutrition, ill-health, of environmental degradationand even of crime owe basically to thelarge size of population. There havebeen people using such terms aspopulation bomb and populationexplosion. Indeed, there have beenpredictions that population rise, if notcontrolled, would lead to foodcatastrophes and ecological disasters.

Demographic Investment

A more sober view would be to acceptthat a slower growth through reductionin birth rate would leave better scope fornon-demographic investment.

Death takes place at every agethough its incidence is higher at lowerage (childhood) as well as at higher age.A high birth rate means more children.A lower infant mortality, which we alwaysaspire, means that more children willremain alive. Larger the number ofchildren, the more we require schoolsand health facilities. This has been calledas demographic investment. Planners

sometime argue that higher investmentin demographic issues may reduce theamount meant for developmentalactivities.

Dependency Burden

The same has been couched in terms ofdependency burden. As children, duringtheir childhood, are pure and simpleconsumers, they are considered as aburden on the society. Larger the burdenfor consumption, lower the scope forsaving for capital formation. It leads tolower deepening of capital.

Expenditure on children has, in thisargument, not been consideredinvestment in human capital formation.

There are also people to argue thatpopulation growth, in due course, addsto labour force and the larger labour forcerequires more capital in terms of existingtools and equipment. This leads to lesscapital for investment in new techniques,which would help raise productivity perworker. There are people to argue that:

1. population pressure, resulting fromhigh growth, was a major stimulusfor green revolution;

2. younger the population, the moreamenable is it to change, receptiveto new ideas, willing to shiftresources from low productive areas

TABLE 8.6Age Composition of Population for Selected Years by Broad Groups

(per cent)

Group Age Group 1911 1921 1931 1961 1971 1981 1991

Children 0-14 38.8 39.2 38.3 41.0 41.4 39.7 36.5

Adults 15-60 60.2 59.6 60.2 53.3 53.4 54.1 57.1

Old 60+ 1.0 1.2 1.5 5.7 5.2 6.2 6.4

Source: India Yearbook Manpower Profile, Institute of Applied Manpower Research, 2001


to high productive areas; and3. population growth increases the

supply of decision-makers, expandsmarkets and leads to developmentvia shortages (that is, increase indemand).

One may argue why many developedcountries are seeking a growth in theirpopulation, why many others areencouraging in-migration and why somedeveloping countries argue thatpopulation growth will spurdevelopment. A more sober view wouldtherefore be that a stagnant populationrequires some growth and rapidly growingpopulation requires slowing down.

Measures to Check High Rate ofGrowth

Analysis

Analysis based on recent all-Indiasurveys suggests that three factorscontribute to high fertility:

1. Large proportion of women inreproductive age group contributesto the extent of 60 per cent.

2. Unmet needs for contraceptioncontributes to the extent of 20 percent.

3. Fertility behaviour due to highinfant mortality again contributesto the extent of 20 per cent.

We may not and should not controlnumber of women in any way but we maycontrol effective reproductive span byraising the age of marriage. Then, we areleft with only two real options: one,contraceptive devices must be madeavailable to the couples at affordableprices and two, infant mortality befurther reduced in order to induce

couples who go for higher order birthsin order to ensure that they are finallyleft with the desired number. Thisdesired number may also reduce in thenext generation if infant mortalityreduces considerably.

One popular notion is that, in orderto get a son, some couples becomeparents of several daughters and othersindulge in infanticide of female child orabortion of female foetus. Begetting moredaughters may be preferable to otherpractices. This desire for son contributesto around 12 per cent extra births. Peopleare being educated about equality ofgenders and right to life for girl chidren.

Factors for Decline in Fertility

Reducing the rate of growth finallyrevolves round reducing birth rate. Birthrate depends on age-specific birth(fertility) rates and the number of womenin the specific ages. We may not directlycontrol the number of women; rathertheir number is likely to swell as lifeexpectancy improves. So, it is the agespecific fertility rates, which we may haveto control. Slow reduction in birth rateowes a great deal to availability of moremarried women in reproductive agegroup. Let us see what is the position.See Table 8.7 for age-specific fertility forreproductive ages by five-yearly agegroups. The data is based on SRS andis, therefore, from 1971 only.

First thing we should note is that,during the last three decades, the totalfertility rate has fallen by 40 per cent from5.2 to 3.2. We should further note thatfertility rates have considerably declinedfor early age groups as well as for late agegroups. At other ages also, there isreduction. Reduction in age-specific


fertility may not be too drastic but it isdefinitely significant. Considerablepregnancy occurs at the age groups of 20-24, 25-29 and 30-34. These may be casesof first or second births. Yet, there isconsiderable reduction particularly in theage group of 30-34. Contraception shouldhave played no insignificant role aswomen, at this prime age span, musthave been married. Hopefully, they areavoiding higher order births.

Similarly, we also find that the meanage at marriage of male and female, andin rural and urban areas, has been risingand that proportion of married personsin lower age group has considerablydeclined.

General Guiding Principles forFurther ReductionWomen reproduce during age span of15 years to 45/49 years. Postponementof marriage, say till the age of 20 years,will help avoid some of the births, whichare, otherwise, not very healthy ones. Age

group between 20 to 35 years is the mostfertile period but marriages take placefor various individual requirements andsocial reasons mostly in twenties.Therefore, there is a need to makecouples in this age group feel that theyopt for fewer children and there isavailability of artificial means to controlpregnancy. As couples, particularlywomen, get more educated, take to non-agricultural jobs and are aware ofincreasing survival of children, they arelikely to go for having smaller number ofchildren.

For couples, who find it economic tohave more children, there has to be aprogramme of education to make themaware that it is not in their interest.Simultaneously, there have to bepossibility of visible improvement intheir standard of living -- a ray of hopefor better living.

There are various schemes of theGovernment, which have contributed tothe reduction of birth rate, more so inthat of total fertility rate, along with

TABLE 8.7Age-specific Fertility by Age Groups of Reproductive Period (per thousand)

Age Group 1971 1981 1991 1998

15-19 100.8 90.4 76.1 54.020-24 250.8 246.9 234.0 220.325-29 254.8 232.1 191.3 182.830-34 202.2 167.7 117.0 104.235-39 137.8 102.5 66.8 54.340-44 62.2 44.0 30.6 25.045-49 24.2 19.6 12.1 9.0TFR* 5.2 4.5 3.6 3.2

*TFR = Total Fertility Rate;Note : Bihar and West Bengal are excluded in 1971 and Jammu & Kashmir is excluded in 1991

and 1998.Source : Compendium of India’s Fertility and Mortality Indicators 1971-1997, based on the Sample

Registration System, Registrar General India, 1999 and India Yearbook Manpower Profile,Institute of Applied Manpower Research, 2001.


general improvement in living andefforts in reduction in death rate,particularly of infant mortality rate.

Specific Measures

Just after Independence, it was sugges-ted to the Government that a populationpolicy should be formulated and apopulation commission should be set up.We went half way. We put in place afamily planning programme, which waslater converted into family welfareprogramme. We have now got a NationalCommission on Population.

Despite the fact we have beensomewhat slow in achieving lowpopulation growth, it is important to notethat our approach was always moreholistic than just birth controlprogramme. Health of mother and child,even at the risk of increase in population,was always part of our agenda. Ours hadbeen an integrated approach and webelieved in more indirect influence.Therefore, our main planks of familywelfare continue to be :

1. Motivating couples to adopt familyplanning practices (throughcontraceptive devices);

2. Spreading knowledge aboutcontraception through variousmedia devices, health workers/family welfare workers, andcommunity processes;

3. Supplying contraceptives throughprimary health centres and healthsub-centres and dispensaries;

4. Popularising terminal methods suchas vasectomy and tubectomy; and

5. Reducing infant mortality rates andimproving health status of mother.

Yet, said once Indira Gandhi,development is the best contraceptive!And we see that, with development, therehas been perceptive reduction in birthrate, death rate and growth rate. TheGovernment is making massive effortsto reduce death rate, particularly infantmortality rate, and people are adoptingfamily planning now on their own.

Concluding Remarks

From the census data available for thetwentieth century, we tried to gauge thetrend of rise in population and studiedever-rising increase by absolute numberin population. Turning this increase intogrowth rate, we discover that the growthrate has crossed its peak somewhere inthe seventies. We also analysed growthpattern and on that basis, delineated twodivides and four phases in demographichistory.

Resolving the growth rate into factorsof birth rate and death rate, we studiedthe pattern of birth rate and death rateover the century. In terms ofdemographic transition theory, we foundthat we are in the throes of a phase inwhich, while death rate stabilises, birthrate continues to decline.

Our next step is to study the age andsex composition of population over thecentury. While our overall sex ratio hasshown improvement in 2001 over 1991,the sex ratio for children (0-6) hasdrastically worsened. As expected, theproportion of children in population firstincreased as birth rate was high but laterdecreased as birth rate started declining.The proportion of old people is rising,which may give rise to certain problemsin the days to come.


We, then, shifted our attention toimplications of large and growingpopulation. Posing the contrasting viewsabout whether population is a problemin the days to come, we gave our viewfor moderating the growth rate ofpopulation. We discussed theimplications in terms of demographicinvestment and dependency burden ofincreasing population. We also providedarguments in favour of having largeyoung population.

Finally, we discussed the ideas aboutchecking high growth rate of population.Given the fact the death rate has to befurther reduced, measures for birthcontrol become important. From the study

of the age-specific fertility rates, wediscover that there was satisfactoryreduction in fertility rates. By promotingthe idea of a little late marriage may helpcurtail overall fertility rate to some extent.Meeting the unmet demand forcontraceptives will go a long way. With aview to inducing certain couples to adoptsmall family norm, further reduction ininfant mortality rate is still important.Integrated health service has done a goodjob and should continue to build upconfidence and rapport. Communityshould be involved as much as possible.We also noted Indira Gandhi’s prescriptionthat development is the best pill.

EXERCISES

1. What should be the considerations for judging whether the population of acountry is large?

2. Using round figures, discuss the growth of population of India during the lasthundred years.

3. What future scenario do you see for population in India?4. Why are certain years called years of the great divide and the small divide?5. Discuss the characteristics of four demographic phases of Indian population

in terms of levels and trends of population growth.6. Briefly discuss the idea behind demographic transition.7. Discuss the trends of birth rate and death rate over the century and its impact

on growth rate.8. Do you consider that reduction in birth rate in India is commendable?9. What had been the basic cause of dramatic rise in population: high birth rate

or low death rate or a combination of both?10. Discuss trends of sex ratio and its social implication.11. Discuss the changes in age structure of population over the century.12. Argue: (i) Population is the only problem, and (ii) population is not a problem

at all.13. Discuss the implications of increasing population for the economy in terms of:

(i) demographic investment, and (ii) dependency burden. Give the contraryviews also.


14. What are the major factors contributing to the fertility?15. What are general guiding principles for checking high birth rate?16. What are specific measures, which have been instrumental in checking

population growth in India?17. Differentiate between birth control, population control, family planning and

family welfare.18. How do you view the idea that reduction in infant mortality which would

immediately increase population needs to be promoted in order to bring growthrate down in the long run?

ACTIVITY

Note down arguments which people in your vicinity give in favour of largefamilies as well as in favour of small families. Analyse these statements withrespect to socio-economic profile of the people giving the arguments.


CHAPTER 9

Poverty in India

Introduction

Poverty is perhaps the greatest challengethat the societies like ours are facing.Poverty, in any society, is intimatelyassociated with inequality. Everybodymay have worked for himself/herself.Such societies may not have had thesystem of private property nor wouldpeople therein have produced to sell toothers and thereby exchange goods. Butwe have had, by now for thousands ofyears, societies with poverty, both inabsolute sense and relative sense. Therewere always sensible people who wantedto alleviate, if not abolish, poverty andthere were people who wanted to do awaywith inequalities of various varieties.

We shall have, however, a limitedagenda to understand the presentposition of our own poverty andinequality and measures beingundertaken to alleviate them.

We shall concentrate more onmeasurement of poverty and its estimatesfor India. Towards the end of the Chapter,we shall narrate some of the specificmeasures undertaken by theGovernment of India to alleviate poverty.

Absolute and Relative Poverty

There are poor societies and richsocieties. Within a given society also,

there are poor people and rich people.Governments all over the world use manycriteria to identify the poor so that theycan be given special attention that maylead to improvement in their livelihoodstatus.

When we speak in terms of relativelypoor or rich, we make pair-wisecomparison. Person A may be poorerthan or richer than or equal to person Bby the scale of income criterion whichwe take into account for comparison. Callit relative poverty or inequality. We neednot fix a level or point on the scale ofcriterion. It is a comparison between twopersons. If there are n persons, thereare n (n-1)/2 pairs if one’s comparisonwith oneself is not done; otherwise pairsare n2/2. Inequality for each pair maybe thought of in terms of the absolutedifference between incomes of thepersons of a given pair. For measuringthe level of inequality in the society as awhole, these comparisons have to becondensed in some way. One suchmeasure is known as Gini coefficient,which is very popular amongresearchers.

Instead of considering all pairs, onecan compare one’s position vis-a-vissome parameter (say, the mean) of thedistribution. Now there are n

POVERTY IN INDIA 121

comparisons. For measuring the levelof inequality, these comparisons, againmeasured by the difference of one’sincome from the mean income, have tobe condensed into one single number.Standard deviation (or its division bythe mean) is one such measure ofinequality.

Some attempts have also been madeto choose only some values of thedistribution. Range, for example, is onesuch measure. Range is defined as thedifference between maximum andminimum value. Some people prefer todivide the range by the mean.

In short, the point is that inequalityconcerns with the pair-wise comparisonor comparison with some parameter ofthe distribution in whose respect we areconsidering inequality. Poverty, on theother hand, concerns with thecomparison with respect to a fixed line,called poverty line. It is to be noted thatthe distribution parameter like ‘mean’goes on changing as distribution goes onchanging. But poverty line is fixedextraneously and, therefore, remainsfixed.

Poverty Line

Poverty is normally defined withrespect to poverty line. But what isthe poverty line and how is it fixed?Poverty line is a cut-off point on the lineof distribution, which divides thepopulation as poor and non-poor. Forsimplicity, we consider distribution ofincome. People with income belowpoverty line are poor and people withincome above poverty line are non-poor. Suppose we are consideringdistribution of income per month orper year. Suppose there are ten

persons with income 10, 17, 23, 30,40, 50, 60, 70, 80, 90 units (Rupees,Hundreds of Rupees or Thousands ofRupees). Further, suppose, poverty lineis 50 units. Obviously, five persons arebelow poverty line. In other words,50 per cent people are below povertyline. We shall see that this measure ofpoverty, percentage of people belowpoverty line, is known as head countratio. But how do we fix this number,which is known as poverty line? Beforewe try to answer this question, let ussee the implications of fixing a veryhigh or very low poverty line.

High/Low Poverty Line

People often argue that our poverty lineis too low and that a particular povertyline tells us that more than 90 per centof people in India are actually poor. Thereare others who argue that the povertylines could be fixed at a particular levelby persons who are interested in showinga high proportion of people as poor sothat they go on formulating andimplementing poverty alleviatingprogrammes and keep themselvesengaged. Let us understand theimplications of these propositions.

Suppose, for the example given abovepoverty line is 100 units, then everybodyis poor and everybody is in queue forassistance. Wherefrom do you getresources (money) to give assistance?You have to wait and see that peoplegrow out of poverty on their own, if theycan. The same will be the case whenthere are too few on the other side of thepoverty line. On the other hand, ifpoverty line is just 5 units, theneverybody is above poverty line andpoverty is not an issue as no one or very


few people deserve assistance. They arevery few poor simply because we havedeliberately fixed a very low poverty line.

Therefore, neither high nor lowpoverty line is desirable; it has to bereasonable from the feasibility of policy/schemes. It should have somerelationship with the capacity of thenation, which may roughly be taken asthe per capita income.

Poverty Line in Terms ofConsumption or Income

We have already pointed out that manycriteria including income and consumptionare used to define poverty line. Amongthem, income is the most comprehensivecriterion. Income is suggested to be a bettermeasure as it is considered as potentialconsumption and permits long-term choicethrough saving. But income is likely tofluctuate in larger degree thanconsumption. Consumption is said to besteadier as it is maintained throughaccumulation or spending of savings ifincome were to fluctuate. We may note thatthe difference between income andconsumption is called saving. Saving maybe positive or negative. Negative saving isalso known as dissaving.

In countries where data on incomedistribution is not available, data onconsumption distribution is accepted asproxy for income distribution. India isone such country. It, however, meansthat the people on poverty line areconsidered neither savers nor dissavers-- neither lenders nor borrowers! In India,we have another reason to considerconsumption, which is that we have along series of consumption data collectedthrough sampling surveys conductedby the National Sample SurveyOrganisation (NSSO).

Fixing Poverty Line

How is the poverty line fixed then? It hasbeen fixed in various ways. Consumptionof food is considered the most importantas food is essential for life. Fix the dietwith minimum quantities of essentialitems. Calculate the cost of this diet.Increase this food cost, say by 50 percent, to allow consumption of other (non-food) items such as clothing, shelter,lighting, etc. for we know that nobody,in a civilised society, lives by food alone.You may like to add certain expenditureon medical care if it is not provided free.This is consumption expenditure line of

DOLLAR POVERTY LINES

International organizations often refer to $1 a day and $2 a day poverty lines for someestimates they wish to make for the world as a whole. People with income below $2 areconsidered poor and people with income below $1, very poor.

If per capita income of a rich country in terms of dollars at exchange rate comes out tobe $30,000 per annum, there is no problem for them to consider the poverty line at $350or $700 a year.

We in developing countries very often refer to such poverty lines withoutunderstanding its implications. If everyone of us were to live at poverty line level of $1 aday, total national income required would be Rs 19,00,000 crore at present exchangerate, which may be just around the total national income! Think of $2 a day poverty line,after complete redistribution, we shall all be poor !


poverty, which takes into account foodand non-food items both.

Some would suggest that suchcalculations should be made athousehold level as food, thoughconsumed individually, is cooked for allmembers of the family and consumptionof many other items is also shared.Dividing the household poverty line bythe size of the household, per capitahousehold poverty line can be obtained.You may then like to add expenditure oneducation of children also. Some may liketo give some allowance for wastages. Ofcourse, we preserve the right to educatepeople on all such matters as wastage.

Present Practice of Fixing PovertyLine in India

Some people find the present method offixation of poverty line by theGovernment quite confusing. It requiressome patience to understand. We shallprovide here a very simplified accountof the actual procedure. It has alreadybeen noted that we settle for privateconsumption expenditure instead ofincome, partly because data on incomedistribution is not available.

Procedure

First, we confine ourselves withmeasuring private final consumptionexpenditure, which is neitherconsumption expenditure on food alonenor full-blown income. We do not includepublic consumption expenditure either.We incur this expenditure to buy bothfood items and non-food items. Nobodyactually buys clothes or burns lights onlyafter having prescribed food; they buyfood and non-food items almostsimultaneously. Those who smoke beedi,for example, do not necessarily do so onlyafter they had food worth so much ofcalories. And we treat people as peopleand allow them to choose their ownpattern of expenditure.

Second, for each of the group ofpeople, classified according to householdconsumption per capita, we write downquantities consumed of food and non-food items in a tabular form.

Third, using calorie content of a unitof a particular food item, we can calculatethe total calories consumed per capita.

Fourth, starting from the lowestexpenditure class, we move upward andlocate the consumption expenditureclass in which case, the recommended

DADABHAI NAOROJI AND POVERTY LINE

Dadabhai Naoroji, the grand old man of India, was perhaps the first to employ the idea ofpoverty line. He used the menu for a prisoner and used appropriate prevailing prices toarrive at what may be called ‘jail cost of living’.

However, only adults stay in jail whereas in an actual society, there are children too.He therefore appropriately adjusted this cost of living to arrive at poverty line. For thisadjustment, he assumed that one-third population consisted of children and half of whomconsumed very little and the other half of whom consumed half of the adult diet.

Thus, the weighted average of consumption of the three segments gives the averagepoverty line, which comes out to be three-fourths of the adult jail cost of living. You can seefrom below how the factor of three-fourths can be arrived.

(1/6)(Nil) + (1/6)(Half) + (2/3)(Full) = (3/4) (Full)


calorie needs are satisfied. As thequantities written against theconsumption classes are averagequantities, we can associate thesecalories with the mid-values of therespective consumption classes.

Calorie Norms

But how are the calorie needs fixed?Some are children, some are adults andsome are old. Some are men and someare women. Some are sedentary workersand some do hard work, even if we ignoreclimatic differences of the areas ofresidence. Nutritionists, when asked tosuggest the minimum amount of caloriesthat people should consume in order toremain fit for life and to carry on normalproductive activity they perform,recommend different amounts of caloriesfor different groups of people. Groups areusually defined according to age, sex andactivity. Our nutritionists categorizepopulation into sixteen categoriesdefined by age, sex and activity, andrecommended minimum calories varyingfrom 300 calories for children below 1year of either sex to 3600 calories foryoung man engaged in heavy work.

Population Composition

When the first attempt was made toestimate the poverty line in the 1970's,the population data provided by census1971 was used. To start with, the wholepopulation was split and grouped into16 categories. For example, female non-workers in urban areas are around 23per cent of total urban populationwhereas males working in rural areasconstitute 22 per cent of total ruralpopulation. This is estimated for all 16

categories of people, separately for ruralareas and urban areas.

Average Calorie Norms for Ruraland Urban Areas

Multiplying calorie requirement of acertain group by its proportion in thepopulation and adding all such products,we get the average calorie requirementof the population. This exercise wasmade separately for rural areas andcompared to persons living in urbanareas a greates proportion of these whoengaged in heavy work were found inrural areas. As a result, averagerequirements for rural and urban personwas found to be 2435 calories and 2095calories respectively, which areapproximated to 2400 and 2100 caloriesand which are reported in most of thewritings. If population composition wereto change, these average calorierequirements would also change. Butthis change would be nominal.

Thus, in India, poverty line is the levelof private consumption expenditure,which ensures a food basket that wouldsupply the required amount of calories.It should be noted that it is not just thecost of food items giving the prescribedcalories. People’s normal purchase isaccepted and expenditure at whichpeople buy food items in such amounts,besides other items, that ensures therequired amount of calories, is acceptedas poverty line. The required amount ofcalories calculated in this way is theminimum amount. The people areallowed to enjoy other items in suchamounts as they choose under thecircumstances.

At the time of the official exercise,survey of consumption expenditure


carried out by the NSS for the year 1973-74 was available. The consumptionsurvey data is tabulated by per capitahousehold consumption expenditure.Against a class-interval of per capitahousehold consumption expenditure,items of consumption by amount arewritten down. Therefore, for an interval,one can calculate the amount of caloriesif we know the number of calories thatconsumption of a unit of certain fooditem provides to human beings. Therequired amount of calories wouldcoincide with one of the class-intervalor will fall between two intervals. Usinginverse interpolation, one can find withease the amount of consumptionexpenditure at which minimum calorierequirement is met. This is poverty line.Rural poverty line was found to beRs 49.09 and urban poverty line,Rs 56.64 per month at 1973-74 prices.

Estimation of Poverty in India

We may remember that the data with usis actually sample data. Samplepercentage is accepted as populationpercentage. Multiplying these percen-tages with appropriate population sizes,we obtain absolute number of poorpersons in rural and urban areas of eachstate. These numbers can be added in avariety of combinations. For finding outtotal number of the poor in a particularstate, add the number of rural poor andurban poor in that state. For finding outtotal number of the poor in a particulargroup of states, say southern states, addrural and urban poor in all states in thegroup. For finding out rural (urban) poorin the country, add rural (urban) poor ofall states. For finding out total numberof poor in the country, add rural poor in

the country with urban poor in thecountry. Divide these aggregates of thepoor by appropriate aggregates ofpopulation, we get percentage of peoplebelow poverty line. Percentage of peoplebelow poverty line is also known as headcount ratio or poverty incidence ratio.

Poverty Estimates for India

Most of the estimates of poverty in Indiaare in terms of head count ratio. Manyscholars have delved into the estimationbusiness. The Government of India andthe World Bank made estimates ofpoverty for India. Many of these seriesstart right from the mid-fifties. However,we are providing the estimates of poverty,which have been made with commonmethodology and comparable samplesurveys of consumption expendituresince 1973-74. The Planning Commi-ssion has prepared these estimates (SeeTable 9.1).

Between any two years reported, youcan notice that there is reduction inpoverty. It is possible that there mightbe a year or two in any duration whenthis might not have happened. On thebasis of smaller samples, some scholars

TABLE 9.1Head Count Ratio Estimates of Poverty:Rural, Urban and India (in percentage)

Year Rural Urban India

1973-74 56.4 49.0 54.91977-78 53.1 45.2 51.31983 45.7 40.8 44.51987-88 39.1 38.2 38.91993-94 37.3 32.4 36.01999-00 27.1 23.6 26.1

Source: Economic Survey 2001-2002, EconomicDivision, Ministry of Finance,Government of India.


did infer that. Yet, on a long-term basis,there is an inescapable conclusion thatpoverty had been reducing over time. (Itis in contrast to the period between 1956-57 and 1973-74 when poverty ratio justfluctuated). You can further note that inthe six years since 1993-94, there was10 per cent point reduction in rural andurban areas both. From Table 9.1, onecan make out a few more generalisations:

1. Poverty, which was more than 50per cent in the mid-seventies,reduced almost to 25 per cent bythe end of the century;

2. Rural poverty has always beenslightly higher than its urbancounterpart;

3. The first significant reduction tookplace between 1977-78 and 1983;

4. The reduction in poverty between1993-94 and 1999-2000 has beenspectacular.

However, when we try to find out theabsolute number of the poor, the pictureis not so satisfactory. Let us multiplythese percentage figures with absolutesize of the relevant populations (anddivide by 100) in order to obtain theabsolute number of poor. We shall obtainthe figures presented in Table 9.2.

You can see that, except for the year1999-2000, there is no significantchange in number for the country as awhole. The number of the poor in thecountry as a whole was around 32 crore;it rose and fell between 31 crore and 33crore. The story is the same in the ruralarea; there is a little reduction. In thecase of urban area the rise is secular,only the size of rise fluctuated. A littlereduction in rural areas is offset byincrease in urban areas. The number of

poor in 1999-2000 is about two-thirds ofthat in 1973-74. The size of urban poorin 1999-2000 is bigger than what it wasin 1977-78. Rise in population mighthave contributed to some extent to thissituation. But the fact remains that westill have miles to go!

Poverty Alleviation Programmes

If overall growth leads to growth of allsections, households or persons, thepeople below poverty line will get closerto it and will cross the poverty thresholdat some stage. In the beginning ofplanning period, it was widely believedthat growth would percolate downthrough better wages, better employmentopportunities, better productivity andhigher production. It was termed astrickle down theory or percolation theory.It was though, admitted, that there willbe a very small section not wellconnected with the economy throughproductive channels, say 10 per cent ofpopulation, for whom special efforts willhave to be made.

It does not mean that no efforts weremade in the direction of redistribution.Redistribution of assets (particularlyland), taxing of the rich and middle

TABLE 9.2Head Count Estimates of Poverty: Rural,

Urban and India (in crore)

Year Rural Urban India

1973-74 26.1 6.0 32.11977-78 26.4 6.5 32.91983 25.2 7.1 32.31987-88 23.2 7.5 30.71993-94 24.4 7.6 32.01999-00 19.3 6.7 26.0

Source: Economic Survey 2001-2002, EconomicDivision, Ministry of Finance,Government of India.


classes for property and income, taxingcommodities of luxury consumption itemsat higher rate, subsidising essentialitems like foodgrains, and providing freeeducation and mid-day meals were allredistributive measures adopted withthis purpose. But, their success was verylimited. Or, one could say that, but forthese attempts, situation would haveperhaps been worse. These measureshave lost much of their significance.

It became clear by the mid-sixtiesthat success of growth and redistributivemeasures will remain limited if somespecial, supplementary programmes notstarted to help certain occupationalcategories and social sections. We areconfining to programmes started by theGovernment of India. These programmeswere intended to be of two types:(i) encouraging self-employment, and(ii) providing supplementary wageemployment. These programmes aremostly confined to rural areas asnumerically four times more poor stayin rural areas than in urban areas. Weshall confine ourselves to ruralprogrammes only.

We shall concentrate on (i) self-employment programmes, (ii) wageemployment programme, (iii) socialsecurity programme (in brief), and(iv) public distribution system. It may benoted that these programmes are insome sense entitlement programmeswhile those helping the poor ineducation, health or housing arecapability enhancing programmes.

Self-employment Programmes

Most important of all self-employmentgenerating programmes is the IntegratedRural Development Programme (IRDP),

which has now been re-christened asSwarnajayanti Gram Swarojgar Yojana(SGSY). This is a centrally sponsoredscheme, which is in operation in all 5000development blocks of the country since1980. The grant/subsidy part is sharedbetween the Union Government and theState Government on 50:50 basis. But thescheme is, now, executed by the districtadministration with the involvement ofPanchayati Raj representatives.

Under this scheme, the familiesbelow poverty line (basically small andmarginal farmers, agricultural labourersand rural artisans) are provided financialassistance to acquire productive assets.The purpose is that the families are ableto generate additional income on asustained basis. Assistance is providedin the form of subsidy and bank credit.The proportion of subsidy in theassistance differs from category tocategory: small farmer, 25 per cent,marginal farmer, agricultural labourer33.33 per cent and SC/ST/PH, 50 percent respectively. Coverage percentagefor various categories is also fixed.There is a ceiling to the subsidy given.

More than five crore families havebeen given assistance. Total assistance,over twenty years since inception, mightbe somewhere around Rs 40,000 crore,of which no less than Rs 15,000 croreform the subsidy. This total is the sumof expenditure incurred over differentyears, which obviously had differentprices. Average assistance, actuallyinvestment from the viewpoint ofassisted family, comes out to be Rs7,500-8,000. It has been suggested thatthe investment is too low and it was toothinly spread to generate sufficientincome on a sustained basis. The


families, which were extremely poor,could not fare well with one timeassistance. The suggestion is that, ifamount for disbursal is low, fewerfamilies should have been assisted butadequately assisted. By the same token,it could also be suggested that relativelybetter off within the poor should havebeen assisted so that at least thesefamilies could stand on their legs. Therewould be others to suggest the oppositebecause relatively worse off among thepoor deserve better deal.

The IRDP had several alliedprogrammes such as TRYSEM, DWCRA,GKY, MWS and SITRA. According to anassessment, accepted by the PlanningCommission, though they presentedtogether a matrix of multiple programmesthey had no desired linkages. For example,TRYSEM is a training programme for self-employment but less than 25 per cent ofTRYSEM trainees were assisted underIRDP. Similarly, IRDP beneficiaries, if theyhad training for meaningful self-employ-ment could generate adequate income butnot even 5 per cent beneficiaries weregiven training under TRYSEM.

There are studies reportingcorruption and assistance to non-deserving families. Lukewarm attitudeof district officials and bank managersfor the fear of non-recovery is alsoresponsible for part of the failure of the

scheme. If the number of poor in therural areas continued to be 25 crore(5 crore families) despite assistance tomore than 5 crore families (25 crorepersons), what could be the explanation?One could well guess:

1. Assistance might not have gone tothe poor at all;

2. Assistance might have been toosmall to start any meaningful self-employment generating productiveactivity;

3. Incorrect selection of projects(purchase of milch cattle was quitepopular but there was little care forfinding out availability of feed,fodder or veterinary services on theone hand and milk market on theother); and

4. Assistance for productive purposesgets eaten into consumptionactivities such as meeting expenseson marriages.

The SGSY, mentioned earlier claimsto be holistic programme, taking care ofinfrastructure facilities, technology,credit and marketing arrangements. Letus hope.

Wage Employment Programmes

For people, who had no assets of theirown (like land and cattle), simultaneouslywith IRDP, a wage employment

ACRONYMS

TRYSEM = Training of Rural Youth for Self-employmentDWCRA = Development of Women and Children in Rural AreasGKY = Ganga Kalyan YojanaMWS = Million Well SchemeSITRA = Supply of Improved Toolkits to Rural Artisans


programme, viz. National RuralEmployment Programme (NREP) waslaunched in 1980 as a centrallysponsored scheme with 50 per centfunding from the Union Government.Supplementing the above scheme,another wage employment programmewas launched on 15 August 1983. Thescheme, known as Rural LandlessEmployment Guarantee Programme(RLEGP), was again a centrally sponsoredscheme but with 100 per cent funding bythe Union Government. However, in1989, the two schemes were merged andthe merged scheme was called JawaharRojgar Yojana (JRY) to be funded by theUnion Government to the tune of 80 percent, the rest 20 per cent being providedby the respective States. People belowpoverty line were to be given work at therate notified and execution of theprogramme was to be done by the villagePanchayats themselves.

The objective of the programme wasgeneration of gainful employment for theunemployed and underemployed menand women in rural areas. But therewere other objectives too. We canmention two significant ones:

1. Creating community and socialassets such as social forestry, soilconservation works, minorirrigation works, renovation ofvillage wells, rural roads,dispensary, school, PanchayatGhar, market yard, bus stand,Anganwadi/Balwadi, etc., and

2. Producing positive impact on wagelevel.

Two schemes, earlier sub-schemes ofNREP/RLEGP, were made part of JRY.These are Million Well Scheme (MWS) to

provide open irrigation wells, free of cost,to poor small and marginal farmersbelonging to SC/ST category and IndiraAwas Yojana (IAY) to provide houses, freeof cost, to SC/ST families--now extendedfor other poor from other social groupsas well.

The scheme has created someinfrastructure and has given employ-ment to some people for some days. Butthe way the programme was run did noteither generate sufficient employmentto make any dent on poverty or createrelevant infrastructure. In the year1998-99, employment created was lessthan 40 crore man-days at totalexpenditure of Rs 2,500 crore. Takingmaterial component at 40 per cent,one can find that Rs 1,500 crore werepaid as wages. Thus, average wage ratecomes out to be less than Rs 40. Evenif we take 4 crore persons to be in thequeue for work, a person on an averagegot work for 10 days in a year. Totalhelp to a family, with work to both manand wife, would be at the most Rs 800in a year. This is too paltry a sum forany family. In such a scenario, thecharges that Panchayat officialsfavour their kith and kin get somevalidity.

Now, it is understood that thescheme emphasised too much onemployment creation and neglecteddevelopment of village infrastructure.Jawahar Rojgar Yojana (JRY) hasbeen replaced by Jawahar GramSamaridhi Yojana (JGSY). It aimsat creation of demand-drivencommunity village infrastructure andemployment generation is onlysecondary objective.


Social Security

There is very little worth the name byway of social security. However, thereare centrally sponsored schemes, 100per cent funded; (i) for old age personswithout support; (ii) for poor bereavedfamilies on death of primarybreadwinner; and (iii) for women of poorhouseholds on pregnancy. A beginninghas been made in right direction, thoughsums to be paid are too small tomaterially change their conditions. Thescheme for the pension for old agepersons is said to be quite successfulwhereas awareness about two otherschemes is said to be lacking.

Food Security

Food security to poor people is envisagedthrough public distribution system (PDS)for poor families, integrated childdevelopment scheme (ICDS), and mid-day meals at schools (MDMS).

The per capita availability offoodgains in the country during the lastfifty years has risen from less than 400grams to nearly 500 grams by the closeof the century. However, a lot manypeople remain hungry, undernourishedand malnourished due to their lowpurchasing power.

We needed to have a buffer stock soas to ensure price stability of foodgrains,production of which is subject to vagariesof nature. As support price for agriculturalcommodities were found to be goodincentive to encourage production, ourGovernment went on building up stockwhich is much in excess of needed bufferstock. While we hardly need 20 milliontonnes, we have 60 million tonnes.

Co-existence of underfed people andoverstocked warehouses of FCI (Food

Corporation of India) is a dilemma,difficult to resolve. Anyway, foodgrainswere made available at cheaper ratesto the poor (and to the non-poor as well)as a measure of food security throughfour lakh Fair Price Shops (FPS) in thecountry--through better arrangement inurban areas everywhere and in all areasin some States. At the present junctureit is operating a business of Rs.15,000crore and reaching in some or the otherway to 16 crore families. The operationinvolves a subsidy to the tune ofRs 8,000-9,000 crore, equivalent to2.5-3.0 per cent of the Union budgetexpenditure. Whole of the subsidy is notreaching the poor because part of thesubsidy is just the cost of over-holdingof stocks at high cost. Whatever little thepoor can afford to buy from FPS atconvenience, is not bought because ofinherent weakness in the system andalso because it is usually insisted thatthe poor must buy the whole of hisentitlement.

The PDS has definitely helped thepoor to some extent. In addition, underICDS (Integrated Child DevelopmentScheme), mothers and children below 6are provided some help. Similarly, undermid-day meals, children in some statesare given free cooked food in the school.

Concluding Remarks

We began by trying to understand thedifference between absolute poverty andrelative poverty. We tried to understandthe implications for a policy of assistanceof fixing the poverty line at too high alevel or at too low a level. We, then, triedto gauge whether we should considerdistribution of income or consumptionin estimation of poverty.


Next, we provided a very simplifiedaccount of poverty line which is fixed atthe national level in India and what werethe rural and urban poverty lines. Aspoverty estimates based on a commonmethodology and comparable surveysare available for six points between 1973-74 and 1999-2000, we presented andanalysed them for salient trends in termsof poverty percentage and absolutenumber.

Last, we noted that while growth andgeneral redistributive policy are necessaryfor poverty alleviation, they could not be

fully trusted for fast alleviation. With thisin view, many focussed schemes, thoughsupplementary in nature, were launchedsince the late seventies. We discussedmainly those, which were implemented inrural areas. While these programmesgenerating self-employment and wageemployment might have lifted a few lakhfamilies above the poverty line andbrought others closer to the poverty line,their success is rated as limited. Massivenon-farm activities in rural areas,commensurate with the needs of thepeople, are expected to click.

EXERCISES

1. What do you understand by poverty?2. Explain the difference between relative poverty and absolute poverty?3. Give a hint as to how relative poverty (inequality) in terms of income can be

measured.4. What is the difference between a distribution parameter and the poverty line?5. Define poverty line. Explain implications of fixing a high poverty line for policy

making.6. Explain implications of fixing a low poverty line for making policy of assistance.7. In what terms should the poverty line be defined: income or consumption?

Explain your answer.8. How is calorie consumption of different consumption expenditure classes

obtained in India?9. How calorie norms are fixed for average rural person and average urban person

in India?10. How is poverty line fixed in India at the national level?11. Discuss poverty estimates since 1973-74 for country as a whole and draw out

salient trends for rural and urban areas.12. What is the level of poverty in India and in its rural and urban areas? How do

you view the reduction in percentage and number between 1993-94 and 1999-2000?

13. Why was there a need for launching poverty alleviation programmes? Whywere they not launched earlier?

14. List some of the poverty alleviation programmes operating in rural areas.15. Discuss the nature, working and result of self employment generating schemes.16. Discuss the nature, working and result of wage employment generating

schemes.


17. Discuss in brief the food security measures adopted in India.18. What do you mean by social security? For which groups do we have such

schemes?19. What should be done, in your view, to alleviate poverty in India?

ACTIVITY

Group Activity : Try to find out how beneficiaries are selected for various povertyalleviation programmes in your village/locality in your vicinity. Discuss yourobservations with your teacher.

CHAPTER 10

Unemployment

Introduction

Unemployment is a great problem. Youmight have seen or met people whoare not having a job and you mighthave noted anguish in their utterances.The phenomenon shakes theconfidence of the people in the system.The basic premise for many of us isthat all able-bodied persons above acertain age (say 15 years) and below acertain age (say 60 years) must workif they are not pursuing any otheruseful avocation like higher studies (orengaged in home-making) and thesystem should permit them to work.There are others who think that allthose, from the above set of people,who are willing to work must beallowed by the system to work. Thereare still others who think that at leastthose, who are actively seeking work,must get work.

The basic idea is that a person whois just a consumer without being aproducer simultaneously will not be agood and responsible citizen. ‘From eachaccording to one’s capacity’ must be adictum for a good healthy society asshould be ‘to each according to hisneeds’. For being a producer, one neednot be a worker in ordinary sense of theterm or work under somebody. One can

employ others or employ oneself or getemployed under somebody. They are allconsidered employed as they areusefully engaged. Workers are eitherself-employed when they produce goodsand services and sell their producethemselves to the customer or wage-employed when they sell their serviceto others who sell their produce tocustomers.

Some Important Observations

Children and AdultsUnfortunately, while a few below theage of 15 and many above the age of 60and not fully fit are compelled to work,many people in their prime age(between 15 and 60) and seeking work(or willing to work) are forced to stayidle. As a society grows in civilisation,it should stop using its children. Use ofchildren in work is equivalent todenying them childhood and stuntingtheir youth. It should be taken as a sin;the right of the children not to work,even if it amounts to playing rather thanschooling, must be respected. But, whenit comes to youth, they must participatein a useful economic activity andthe society must allow them to do so. Itis through such engagement thattheir energy and creativity finds


expression. It is criminal on the partof the society not to make good use ofits youth force. It is doubly criminal toturn them into dull adults and oldpersons. The scene is quite perplexingas there exists employment of childrenwhose rightful place is school andplayground and non-employment ofable-bodied adults.

Implications of High Unemployment

High unemployment is both economicand, social problem. It is an economicproblem as non-utilisation of thisresource involves double cost ofmaintenance and loss of output. Duringthe period of the Great Depression,industrialised economies, including theUK and the USA, suffered fromunemployment rate of around 20 percent and a loss of 40 per cent potentialoutput. They occasionally reach a veryhigh level of unemployment rate. It is amajor social problem as it causesenormous suffering to unemployedworkers who have to struggle withreduced income. During periods of highunemployment, economic distress spillsover to affect people’s emotions andfamily lives.

Women Work

Do you to know that much of the usefulwork that ‘non-working’ mothers do is notrecognised as ‘work’ in economics?Rearing of children, care for the elderlypeople are no less considered as usefulactivities. The logic that is employed bymainstream economics is that theseactivities are not taken into account inthe estimation of GDP and hence theyare not considered as work..

Types of Unemployment

There are always some unemployedpeople in all economies, not alwaysbecause of their choice. Those who arenot working by choice are known asvoluntarily unemployed. We do not worrymuch about them though they may havegood reasons for opting out as also goodcircumstances permitting them to do so.There are said to be countless reasonswhy people might voluntarily choose notto work. They may prefer leisure to workat the going wage rate. They may besearching for their first job. Low-productivity workers may choose welfareor unemployment insurance to low-paidwork, which defeats the purpose forwhich such schemes are instituted.

Besides the people who arevoluntarily unemployed, there are peoplewho are visibly employed but actuallyunemployed. This phenomenon is knownas disguised/hidden unemployment.There may be three persons doing a job,in agriculture or in a householdenterprise, while two could do it withease. If one of them is withdrawn thereis found to be no reduction in output.Thus, there are two types ofunemployment, viz. open unemploymentand disguised unemployment, whichactually worry us. The concepts may beelaborated as follows:

Open Unemployment occurs whenpersons who are able-bodied, willing towork or seeking work, and above acertain age but are not engaged inany economic activity. DisguisedUnemployment occurs when persons whoare actually engaged and, therefore, seenemployed, are not fully employed as apart of it could be withdrawn withoutcausing any diminution of output. In the

UNEMPLOYMENT 135

example given above, you can see thatone-third of the labour force is onlysuperficially engaged. Engagement is notco-terminus with employment. It isentirely possible in a householdenterprise such as activity on a smallfarm, whether owned and rented, wherework requirement for labour is less thanthe labour available within thehousehold. There are many otherinformal activities, in rural as well as inurban habitations, where such asituation exists. But is it not because oflack of opportunities outside thehousehold activity/enterprise that forcesthe household members to share theinadequate amount of work?

Redundancy of engagement of a partof total household labour in terms ofproductivity has always been referred toin literature. It has also been referred toas the case in which a part of labour isnot gainfully engaged/employed. Stillfurther, we have indicated that they arenot fully engaged in terms of timedisposition. All these three criteria ofproductivity, income/remuneration andtime-disposition are co-extensive in theexample of self-employment in householdeconomic activity. There is a hiddenbelief in the productivity theory thatremuneration to a factor is givenaccording to its productivity. In fact,income, productivity, and time-dispositionare three dimensions of employment and,in labour market, they may not converge.When governments talk of overstaffingand plan to retrench people fromgovernment offices or are not recruitingpeople in place of those who retire, theemployees are considered redundantfrom the angles of production and time-disposition. So is the case with a director

on the board of a private company wherehe or she get salary for signing only twoletters a day. The term was howevercoined by Joan Robinson to refer to thephenomenon of engagement of veryproductive workers into shoe shining.

In a country like India, where morethan 50 per cent workers are still self-employed, this hidden unemployment ismuch larger. This is one reason thatsome of these disguisedly unemployedmove to urban areas and become openlyunemployed. In this sense, openemployment is just the tip of the iceberg.

Open unemployment is oftencategorised as cyclical, structural, andfrictional unemployment. If one sowishes, one can first categorise openemployment into secular and cyclicalunemployment and then, secularunemployment into structural andfrictional unemployment.

When aggregate demand for goodsand services in the economy falls farbelow its capacity, a large chunk oflabour force gets unemployed. This isknown as cyclical unemployment. Underthe belief in a capitalist system, theeconomy will pass through differentphases of a cycle around some seculartrend. These phases are known as boom,recession, depression and recovery.Boom is the phase of the highesteconomic activity while depression isthat of the lowest economic activity.While, in the case of depression, a lot ofpeople are thrown out of job, in the phaseof boom, many people, not normally inlabour market, are drawn into it. Warperiod is unfortunately similar to boominsofar as total economic activity isconcerned. Many women were drawninto labour force in Western countries


during the war periods and men werethrown out during the depressions.

As time passes, some new economicactivities emerge, some existingeconomic activities gain in importanceand some other lose in importance. As aconsequence, change in the demandpattern for goods necessitates change inthe demand pattern for labour. This isactually a change in structure in theeconomic activities. But, labour forcecannot immediately metamorphose,matching the change in demand pattern.So, there shall be vacancies in one cornerof the economy and there shall be peoplesearching jobs in the other corner of theeconomy. This is known as structuralunemployment. There is no overallshortage of work but there is mismatchbetween demand pattern and supplystructure. Some retraining andredeployment may help people to someextent. Structural imbalances occuracross occupations or across regions ascertain sectors grow while others decline.High real wages, welfare benefits and taxconcessions can create high levels ofstructural unemployment for entireeconomies.

Further, labour market is not assmooth as markets for othercommodities. There are manyinstitutional interventions. But, morethan that, some people are always on thelook out for better job prospects. Someof them leave their present job beforepicking up the next job. They engage insome educational pursuit or training andcome back in the labour market. Manywomen in urban area work for sometimebefore marriage but leave the job aftermarriage, beget children and come backto labour market when children have

grown. They do not immediately getabsorbed in their preferred jobs atexpected wage. Such unemployment isknown as frictional unemployment.Sometimes, this may be caused bytechnological changes. Frictionalunemployment is, for many, one ofvoluntary unemployment, peoplesearching their first job.

However, within a given year itself,the overall level of economic activities inmany economies like ours may haveseasonal fluctuations. Some of you mayrecall Gandhi telling rural populace toengage in spinning as supplement towork and income as he had discoveredthat agriculture did not provide enoughwork to people, particularly in the rainyseason. During the harvest season, thereis, though, some shortage of labour andpeople usually not working are drawn tolabour force. And, some rickshawpullers/ construction workers, who movefrom rural habitations to urbanhabitations in dull season, move backduring the harvest. Such unemploymentis said to be seasonal unemployment.

Measurement of Unemployment

Irrespective of the reasons for whichpeople are unemployed, we may beinterested in knowing the extent ofunemployment in any given year. In fact,we know many facts about a person whois employed: where he is employed, atwhat wage, at what position and so on--all economic aspects. However, when itcomes to the unemployed, we know moreabout his demographic/socialcharacteristics. So, unemployment isstudied in terms of rural/urban division,male/female division, division by age,and division by educational status, etc.

UNEMPLOYMENT 137

Labour Force and Work Force

Before we do so, there are someparticular terms used in this context,which we ought to know. Instead oflabour supply which has to benecessarily related to wages, here, wetalk of labour force. At best, we can referto labour force in terms of number ofpersons usually employed or willing tobe employed (for major part of the year)while labour supply can be referred toas available mandays (actually workingfor or willing to work). We alsodistinguish between labour force andwork force.

All members of a population are notsupposed to be engaged in economicallyproductive activities. You have to beginwith the view that the very young andthe very old as well as the physicallyor mentally challenged (infirm/handicapped) are to be excluded. Thus,those who can (and perhaps should)produce goods and services canconstitute labour force. This is potentiallabour force. A further deduction hasto be made for the people who areengaged otherwise (in householdactivities) or are not willing to work. Itimplies that those who are actuallyengaged in economically productiveactivities as well as those, who can beso engaged, constitute the labour force.Those, who are actually engaged,constitute only work force. The balancebetween the labour force and the workforce is said to be the unemployedlabour force. In other words, employedlabour force is called work force.

When we divide labour force/workforce by the size of the population, weget labour force/work force participationrate. Rates are usually expressed in

terms of percentage, sometimes in termsof per thousand.

Usual, Weekly and Daily Status

However, this is all in terms of usualstatus. If you are a student and also workin a shop, you are a member of the labourforce only when you spend majority ofyour time in work. Your usual status isthen of worker. If the case is otherwise,your status is of non-worker. If you areavailable for work for more than 183 days(>1/2 year) but you get work for less than183 days, then you are unemployed byusual status concept.

Survey people who come to you forfinding out about your employment/unemployment status, may ask certainquestions and may find out whether,during the week before the survey, youcould be said to be employed orunemployed. This relates to the weeklystatus to determine whether you were partof the labour force or not, and if you aredeclared to be in the labour force, whetheryou were employed or unemployed. Thisrelates to weekly status employment/unemployment. Knowing further detailsregarding your daily status aboutmembership in the labour force andwhether you were working or not, theaverage daily status employment andunemployment can be worked out.

In short, usual status unemploy-ment refers to number of persons whowere willing to work for major part of theyear (>183 days) but did not get work foreven 183 days. This is the size ofunemployment. Dividing it by the size ofthe labour force, we get unemployment rateby usual status. Similarly, daily statusunemployment refers to number ofmandays people were willing to work but


did not get work. This is the size ofunemployment by daily status. Dividingit by the number of mandays available,we get unemployment rate by daily status.

Unemployment In IndiaWe have already suggested thatunemployment is studied in terms ofrural or urban division, male or femaledivision, division by age, and division byeducational status, etc. We shall confineour discussion to rural or urban andmale or female divisions. We shall alsoprovide an idea about the size of thelabour focre and work force and theirrates since 1972-73 (See Table 10.1 forlabour force, work force and unemployed

labour force). Remember the NSS data isbased on sampling. Absolute figures areobtained by multiplying participationrates obtained from sampling data andpopulation figures obtained byinterpolation or projections.

We can note from the table thatduring 1972-2000 our labour force hasincreased from 24 crore to 41 crore, thatis by two-thirds. While the rural labourforce has risen from 20 crore to 30 crore,a little more than 50 per cent, urbanlabour force has risen from 4 crore to10 crore, that is by 150 per cent.Migration from rural to urban areasmust have played a great role. As youcan see that the urban females in labour

TABLE 10.1Labour Force, Work Force and Unemployed Labour Force by Male/Female

and Rural/Urban Divisions (in crores)

Year Rural Male Rural Female Urban Male Urban Female Total

Labour Force1972-73 12.87 7.09 3.29 0.77 24.021977-78 14.45 8.36 41.4 1.21 28.161983 15.59 9.13 5.02 1.30 31.041987-88 16.50 9.51 5.85 1.58 33.441993-94 18.93 10.47 6.73 1.84 37.971999-00 20.02 10.50 8.07 2.00 40.67Work Force1972-73 12.72 7.06 3.18 0.72 23.681977-78 14.14 8.01 3.88 1.04 27.071983 15.27 9.04 4.73 1.23 30.271987-88 16.05 9.20 5.50 1.45 32.201993-94 18.66 10.37 6.45 1.73 37.211999-00 19.68 10.40 7.71 1.89 39.68UnemployedLabour Force1972-73 0.15 0.03 0.16 0.05 0.391977-78 0.31 0.35 0.26 0.17 1.091983 0.32 0.09 0.29 0.07 0.771987-88 0.45 0.31 0.35 0.13 1.241993-94 0.37 0.10 0.36 0.12 0.951999-00 0.32 0.10 0.29 0.09 0.80

Source : India Year Book 2001 Manpower Profile, Institute of Applied Manpower Research, New Delhi, 2001.

UNEMPLOYMENT 139

force have risen by 200 per cent thoughthey are still only 5 per cent of the totallabour force. It means more and morewomen in urban areas are now willingto work outside their homes. Ruralwomen are already working outside. Verysimilar is the case for work force, needingno extra comments.

When it comes to unemployed labourforce, we note wide fluctuations acrossperiods and across categories. Forexample, in 1977-78 over 1973-74,unemployment in all categories rose, and,for women, in larger proportions. In thenext interval, while unemployment of mendoes not decline, that of women dropsdrastically, and this pattern gets repeated.Unemployment in 1999-2000 is lowerthan or at least higher when compared to1993-94 or 1987-88. Yet, in absolutenumber unemployment in 1999-2000 istwice as large as in 1972-73.

However, as we try to find out whatproportion of labour force is unemployed,we find that never has the rate ofunemployment in the labour force beenmore than 4 per cent, the lowest ratebeing just 1.6 per cent. When wesegregate it into different categories, wenotice that unemployment of women inurban areas is the highest though it widelyfluctuated but even in 1999-2000 it is the

highest among all categories (See Table10.2).

Are these rates small enough to beignored? Are we justified to say thatunemployment is not a problem in India?Compared to western countries, itappears plausible to argue that ourunemployment rates are low. We canperhaps say that our problem is povertywhile theirs is unemployment.

However, when we refer to dailystatus unemployment rates, we find thatthey are twice/thrice as high as usualstatus unemployment. It means that,though the people may not beunemployed for major part of year, theyare unemployed on days they areavailable and willing to work.Unemployment rates in 1999-2000 fordifferent categories are about 7 per centexcept in case of urban female in whichcase it is 0.4 per cent. When we try tofind out the position of the educated inemployment, we discover that, whileunemployment for urban male is 6-7 percent, that for rural female is as high as30 per cent for graduates and 15 per centfor matric-passed. Hence, higher theeducation, higher the rate ofunemployment.

To conclude, we may note that lowunemployment rate may be a reflection

TABLE 10.2Usual Status Unemployment Rates by Rural/Urban and Male/Female Division

(as per cent of labour force in the category)

Year Rural Male Rural Female Urban Male Urban Female Total

1972-73 1.2 0.5 4.8 6.0 1.61977-78 2.2 5.5 6.5 17.8 3.91983 2.1 1.4 5.9 6.9 2.51987-88 2.8 3.5 6.1 8.5 3.71993-94 2.0 1.4 4.5 8.2 2.51999-00 2.1 1.0 4.5 5.7 2.0

Source : Based on Table 10.1


of poverty. Poor cannot stay away fromwork for long, irrespective of wages. Butthere exists considerable mismatchbetween the requirements of theeconomy and availability of manpower.This is structural unemployment. Some

new entrants to the labour force may besearching for more jobs than areavailable. Besides frustration that theyouth gets when he finds no job, it is awastage of national resources investedin his/her upbringing and education.

EXERCISES

1. Bring out the importance of employment.2. How is unemployment an economic as well as a social problem?3. Why is women’s household work not recognised as work?4. What do you mean by voluntary employment? Is it totally voluntary?5. Explain the meaning of involuntary unemployment.6. Distinguish between open unemployment and disguised unemployment.

Explain it by examples.7. Is disguised unemployment prevalent in agriculture alone? Where else do you

notice it?8. Explain the meaning of cyclical and structural unemployment.9. Explain the difference between structural unemployment and frictional

unemployment.10. What do you mean by seasonal unemployment?11. Explain the concepts of labour force, work force and unemployment and the

relationship among the three.12. What do you mean by usual status employment and unemployment?13. How do you find out labour force/work force participation rate?14. What is unemployment rate by usual staus?15. Try to explain unemployment rate by daily status.16. What is present size of labour force and how is it distributed across categories?17. How has unemployment grown over time by absolute number?18. Discuss the pattern of and changes in unemployment rates.19. What is the relationship between poverty and unemployment?

ACTIVITY

Note down efforts made by the people who are in search of a job. Try toanalyse whether their conditions can be understood in terms of categoriesdiscussed in this chapter.

CHAPTER 11

Infrastructural Challenges

Introduction

Infrastructure and its services play a keyrole in economic development. Slowgrowth of infrastructure impede thegrowth of the economy. Development ofquality infrastructure, which is efficientand low cost to users, however, requireshigh upfront cost and often has longgestation period. Heavy investmentrequirement involved in its developmentsuggests that participation of all sectors—public, private and foreign—may beneeded.

Since many infrastructure servicesoperate at fairly large scale, they assumemonopolistic character. In such cases,some regulatory framework is institutedirrespective of its ownership in public orin private sectors. The regulator shouldbe such that it has no vested interest inrunning the service, or running itinefficiently and/or pricing the serviceat much higher level than its efficientcost.

We have earlier suggested thatinfrastructure services can be dividedinto two categories — economic andsocial. We propose to discuss in thischapter three economic and twoinfrastructure services. These are:energy, transport, communication,education and health.

Energy

As we have seen in a previous chapter,energy is a critical input for most of theproduction processes and consumptionactivities. Modern economic growth in allcountries is found to be associated witha massive use of energy. In the last fiftyyears, we have had more than four-foldincrease in total energy use for less thanthree-fold population. It increased from90 MOTE (million tonnes of oilequivalent) in 1953-54 to 375 MOTE in1996-97. But, if we concentrate only oncommercial energy, the increase is ten-fold from 25 MOTE to 250 MOTE. It isobvious that most of the increaseaccounts for the shift from non-commercial energy to commercialenergy. The share of commercial energyin total energy consumption hasincreased from 28 per cent in the earlyfifties to 66 per cent in the late nineties.While use of commercial energy has risenten-fold, that of non-commercial energyrose only two-fold. Our per capita energyconsumption has increased by about 50per cent from 0.25 OTE in 1953-54 to0.36 OTE in 1996-97. It is consideredpretty low. While we will have to putefforts to optimise availability of energy,in view of limited potential of primary


ENERGY

Non-Commercial CommercialFuelwoodAnimal DungBiogas/BiomassCrop Residue

resources we will also be called upon toconserve energy wherever and as muchas possible.

There is subtle distinction betweenprimary energy resources and finalenergy resources. When coal isconsumed by electricity generation andelectricity is consumed by industry, wecall coal as primary energy resource andelectricity as the final one [By thisresource distinction, wood converted tocharcoal, used for boilers is a primaryresource and charcoal is a finalresource]. Coal, petroleum products, andnatural gas are all both primaryresources and final resources as they areconsumed directly as well as indirectlywhile electricity is, by and large, theonly final energy resource. Major usersof the commercial energy are: industry(50 per cent), transport (22 per cent),household (12 per cent), agriculture(9 per cent), and commercialestablishments (1 per cent).

Plan expenditure on development ofenergy sector has been rising from planto plan from around 20 per cent in theFirst Plan to 30 per cent during the NinthPlan, exception being the Second Planduring which the share was just 12.5per cent. With increase in efficiency,elasticity of energy use with respect toGDP has been declining.

We shall concentrate only onelectricity as it is the prime mover ofmanufacturing industry. Now, agriculturealso depends considerably on it.

Electricity

Electricity is really the power. Presenttechnology uses electricity extensively inproduction of goods and services. Mostof domestic chores require it. Agriculturehas become heavily dependent onelectricity for many of its operations.After industry, agriculture is the mostsignificant consumer of electricity. Bulkof railway freight and passenger iscarried on electrified tracks. It isconsidered a clean energy in comparisonwith oil-based energy. We require reliableand quality service of electricity ateconomic cost.

All of us have seen some kind of failurein electricity supply. Notwithstandingsignificant progress in capacity addition inelectricity sector, we continue to bedeficient in electricity availability. Whileoverall deficiency in 1996-97 was about 12per cent, peaking deficiency was around18 per cent. The principal reason is thatdemand for electricity continues to outstripincrease in supply. Inefficient running ofplants is also partly responsible.

In India, there are three types ofgenerating plants— hydroelectric, thermal

Conventional Non ConventionalCoal Solar/WindPetroleum/Gas Small HydroHydro Ocean Thermal/Nuclear Wave

INFRASTRUCTURAL CHALLENGES 143

and nuclear. Nuclear plants have just 3per cent of installed capacity and 4 percent of electricity supply. Plants usingnon-conventional resources (solar, gobargas and wind) are insignificant in termsof total supply. Once electricity has beengenerated, that can be transmittedthrough the same network. At locallevel, electricity is downloaded anddistributed. Thus, there are threephases of electricity supply: generation,transmission and distribution. Privateinvestors are encouraged to enter theareas of generation and distribution, nottransmission.

Our total installed capacity ofgenerating power increased from less than1,500 megawatt to over one lakhmegawatts (1,00,000 MW) in the last fiftyyears. Of the present capacity, 72 percent is in thermal sector and 25 per centin hydel sector. We are adding roughly4000 MW each year. In terms ofgeneration of power, thermal iscontributing 80 per cent and hydel, 16per cent. Hydel power projects, withstorage facilities, provide peak timesupport to the power system. Wherepeaking support from the hydel is poor,as in the Western and Eastern regions,thermal plants have to undertake thistask as well.

The Union Government, StateGovernments and Private Sector are allin power generation business throughplants using dams, steam and gas. Inaddition, the Union Government hasplants, that use nuclear fissiontechnology. The Union Governmentoperates Power generation companiessuch as NTPC (National Thermal PowerCorporation), NHPC (NationalHydroelectric Power Corporation) and

Nuclear Power Corporation of India Ltd.(NPCIL). State Governments have theirState Electricity Boards. There also existCentral Electricity Authority and CentralElectric Regulatory Commission.

Plant Load Factor

In order to judge the operationalefficiency of a thermal plant, an indexcalled plant load factor is used. If totalcapacity is continuously used over ayear, that is, all 24 hours and 365 days,total electricity generated would be72,000 million watts × (24 × 365) hours= 63,07,20,000 million watt-hours,which is equal to 6,30,720 millionkilowatt-hours or 630 billion kwh.However, some allowance is made fortechnical factors and we can accept 600billion kwh as the maximumgeneration. But we are actuallyproducing around 400 billion kwh.Thus, combined plant load factor isaround 66 per cent.

However, if one tries to find out itsregional pattern, one finds that itvaries from 18 per cent in the North-East to 80 per cent in the South. Whilethe North and the West finish with 72per cent each, the East is around 50per cent. Plants in private sector showa load factor above 75 per cent and inthe Central (government) sector 72-73per cent but in the State (government)sector just about 64 per cent. Analysisshows that State and Central sectorsare equally efficient if the State sectorplants in the East and the North-Eastare not taken into account. Yet, itshould be mentioned that in recent yearswe have improved plant load factorconsiderably, particularly when managementof many thermal plants went into the


hands of NTPC. But we still need toimprove it further. Informationregarding coal-based thermalgeneration suggests that overall plantload factor is now close to 70 per cent.

In oil-based thermal plants, specificoil consumption has reduced from7.8 ml/kwh to 5.8 ml/kwh during thenineties. The PLF in case of nuclear powerstations has improved from 52 per centin 1992-93 to 56 per cent in 1998-99.

Power Grids

It may be noted that as primary sourcesfor electricity power are unevenlydistributed, locations of generation plantsare also unevenly distributed. Consumersare not necessarily located neargenerating plants. Thus, bulktransmission of electric power over longdistances becomes necessary. There wasno synchronous development betweengeneration capacity and transmissionnetwork. Transmission lines wereoverloaded (even for under loaded plants),resulting into frequent breakdowns andloss of surplus power, if any State had.It is suggested that transmissionsynchronous with generation requiresinvestment to the tune of 50 per cent ofthat in generation. Till the late eighties itwas just 20 per cent.

A Power Grid Corporation wasestablished in 1989. It has organised thecountry’s power transmission systeminto five regional grids, each of which iswell-integrated. With a view to derivingfurther economies and increasingreliability, a national grid withnetworking of regional grids is beingplanned. The dream of ‘one nationshould have one grid’ may be realisedby 2012.

Transmission and Distribution Losses

One major problem, which we oftenread in the newspapers, is abouttransmission and distribution (T&D)losses. National average of this loss isabout 23 per cent while in some Statesit is much more. In Delhi, it is 50 percent. This loss is more than the totaldeficiency. Saving this loss would meanless pressure on new capacity. Part ofthe reason for T&D losses is technicaland part of it is simple pilferage andtheft with the connivance of linepersonnel. It is suggested thatprivatisation of distribution part wouldcheck much of this theft.

There also exists some cross-subsidisation of tariff between differentusers of electricity. Railways are chargedthe highest and in many States, farmersare charged nothing.

Rural Electrification

The story would not be complete withoutreference to rural electrification. By theend of March 1996, 85 per cent of5,87,288 villages (1991 census) weresaid to be electrified. As many as 13States were said to have 100 per centvillage electrification. But how do youdefine village electrification? A villagewas considered electrified if electricitywas used for any purpose within therevenue boundary of that village. Thus,a tube-well connection within therevenue boundary of the village willdeclare the village as electrified eventhough not a single house is lighted orhome-based industries remain withoutpower. In many so-called electrifiedvillages power connection may not beavailable on demand. Now, it has beendecided that a village would be


considered ‘electrified only if electricityis used in the inhabited locality, withinthe boundary of the village for anypurpose whatsoever’.

Total number of pump sets mayhave increased to around 2 crore butthose energised by power may not atpresent exceed 1.2 crore. While theGovernment talks of this deficiency, itquickly points out that most of thesepump sets are energy guzzlers partlybecause of low tariffs charged from thefarmers as well as that in many placesenergisation of pump sets by power maylead to over exploitation of groundwater.

OUR OFFICIAL VILLAGEThe number of villages as per census 2001in our country is 6.38 lakhs. You may beknowing that our villages are officiallyreferred to as revenue villages which areparcels of land and many have inhabitedportion(s). A village will definitely haveagricultural field and many otherestablishments and may not have anyhouse or household. This village is knownas uninhabited village. Such villagesnumber around 50,000. But a village mayalso have more than one inhabited areasor hamlets, which may not be contiguous.Total number of hamlets is more than10,00,000.

Transport

The railways and the roadways are thetwo modes of transport carrying thebulk of freight and passenger traffic.Coastal shipping and inland watertransport hardly contribute 2 per centof the total traffic. We have noted earlierthat the railways are eco-friendly andmore energy efficient, and have bettersafety. Keeping this in mind, the

National Transport Policy Committee(1980) and our Plans have beenemphasizing that the railways shouldhave the lead role in the transportsector. However, the fact of the matteris that the share of railways in freighttraffic plummeted from around 90 percent in 1950-51 to 60 per cent by 1995-96 and that in passenger traffic, fromabout 70 per cent to 20 per cent duringthe same period. In most developedcountries it is found that traffic fromrailways shifted away to highways andairways [which got better of therailways]. But the shift was not sodramatic. Further, in countries ofcontinental size such as the USA, Chinaand erstwhile Russia, the railways havemaintained their dominance.

In India, the railways have beenstarved of sufficient funds for raisingtheir capacity pari passu with demand.On the other hand, transporters on roadshave been liberally permitted to covernation-wide distances, diesel was madecheap through subsidies, and bankingsector came forward to support thepurchase of vehicles. This is sometimesmade out to be the result of ownership,railways being completely in publicownership, while road transportation,particularly goods transportation, beinglargely in the hands of privateentrepreneurs. This is a relative picture;otherwise both the sectors haveimproved over last fifty years.

RailwaysYou have already known that the IndianRailways are the largest or the secondlargest railway system in the world. Thisextensive network comprises over 63,000RKM (route kilometres) of around 45,000RKM in broad gauge, 15,000 RKM in


ABBREVIATIONS EXPANDED AND WORK INDICATED

CLW – Chittaranjan Locomotive Works at Chittaranjan (West Bengal): Manufactureselectric locomotives

DLW – Diesel Locomotive Works at Varanasi (Uttar Pradesh): Manufactures diesellocomotives

WAP – Wheel and Axle Plants at Yelahanka (Karnataka): Manufactures wheels and axles

RCF – Rail Coach Factory at Kapurthala (Punjab): Manufactures all types of coaches,including 3-tier airconditioned coaches

ICF – Integral Coach Factory at Chennai (Tamil Nadu): Manufactures EMUs, DMUs,airconditioned coaches for all trains including those for Palace-on-Wheels

DCW – Diesel Components Works at Patiala (Punjab): Manufactures components for diesellocomotives

metre gauge and 3000 RKM in narrowgauge. Around one-fourth of total route(and one-third of broad gauge) iselectrified. Electrified routes are in fact alldouble or triple or even quadruple atplaces and thus carry much more freightand many more passengers. Railways aresaid to have played an integrating role insocial and economic development of thecountry.

Despite the fact that Railways areless energy intensive and moreenvironment friendly, the Railways havebeen losing their market share in thetotal transport sector. Efforts are nowon to improve its share. In recent yearstotal net tonne-kilometres of goodscarried by the Railways has been over30,000 crore and passenger-kilometres,above 45,000 crore. But, more importantpart is that the Railways transport allheavy, bulk raw materials/ores(including coal and POL) and essentialitems of fertilisers and foodgrains,wherever they exist.

It is important to remember that, forquite sometime now, the Indian Railways

have been consistently pursuing the uni-gauge policy by converting metre gaugelines into broad gauge ones andprogramme of electrification of importantsections. Hopefully, the electrification ofgolden quadrilateral is complete. Thereis less emphasis on new lines butmultiplexing of track in busy corridorsis receiving some attention. Renewal andupgra-dation of track is equallyimportant as our tracks are quite old andoutdated.

The Indian Railways, with 15.5 lakhemployees, are the largest employeramong the public sector undertakingsand in all undertakings. But this assetis now being considered a burden as thewage-bill, including pension liabilities,constitutes the major portion ofoperating cost. The Railways are nowintroducing a plan of right-sizing themanpower. As you know under theRailways establishment, we also havecertain production units. It has beendecided that many departmentsconcerned with the running (like


RAKESH MOHAN COMMITTEE

The Ministry of Railways (Railway Board) had constituted an Expert Group (with RakeshMohan as Chairman) on 31 December 1998:

To study the railway sector in order to estimate the financing requirements of an expansionand upgrading programme for the Indian Railways.

To identify sources of funding of estimated investments over 15-year period,

To study models of structure and ownership of rail transport facilities in developed countries.

To recommend suitable regulatory arrangements that would facilitate orderly expansionof the system, promote desired degree of competition and protect users’ right to qualityservice.

The Expert Group has found that increase in real wages have far exceeded the increase inproductivity and that is the root cause of the financial problem confronting the Railways.It has made the following salient recommendations:

1. Achievement of high growth through expansion of capacity and modernization andupgradation of facilities and yet to explore avenues to economize costs.

2. Rationalisation of freight structure and tariff rebalancing with a view to removingdistortion.

3. Increase in speed of freight trains, expansion of capacity for upper classes, upgradationof rolling stock, improvement of signalling and communication system.

4. The Indian Railways should be reorganized. The government of India should be onlyin charge of setting policy direction. The Indian Railways must ultimately be corporatisedinto the Indian Railways Corporation. Indian Railways Regulatory Authority shouldbe set up to regulate tariffs.

traffic — commercial and transportation,engineering, mechanical, electrical,stores, loco, signalling and telecom,accounts, etc.) will have no greater yearlyintake than one per cent of theirrespective strengths and productionunits (such as CLW, DLW, WAP, RCF,ICF, DCW, etc.) will have no more intakethan 0.5 per cent of their respectivestrengths.

The Railways are basically acommercial undertaking. However, theyare in the public sector and no publicsector undertaking is expected to operatewith a profit motive alone. They haveundertaken certain social obligations too.There exists therefore certain degree ofcross-subsidisation as well as subsi-

disation. Within freight sector, thereexists cross-subsidisation betweendifferent categories and within passengersector, there exists cross-subsidisationbetween different classes of passengersand between suburban and non-suburban sections. There also existssome cross-subsidisation betweenpassenger and freight sectors. There arecertain uneconomic services, like somebranch lines and some suburban lines,which are undertaken in larger socialinterest. The cost of such obligations isestimated to be around Rs 4,000 crore.

Under-funding of the railways, owingto resource constraints or failure to beinnovative, led to quantitative andqualitative under-supply of railway


service. Due to its limited capacity, therailways concentrated on bulk freightfrom the core sector and ignored highvalue non-bulk sectors and thus lostvaluable revenue. General policy ofcross-subsidisation of passenger trafficby freight traffic, unduly raising freightcharges, made the railways lose goodstraffic.

The Railways are now realising that,by hiking freight charges and restraininghike in passenger fares, they have, over theyears, out-priced themselves in the goodssector and have, therefore, lost traffic. Theyare now considering correction of thisimbalance through reduction in the levelof cross-subsidisation. They areventuring out to have partnership withprivate sector for better connectivity withports. They are trying to improve theirparcel services.

The Ministry of Railways hadconstituted an Expert Group on the lastday of 1998 to study the railways systemand make recommendation forreorganization, if needed. It hasrecommended for corporatisation of theRailway Board into the Indian RailwayCorporation and suggested that anIndian Railway Regulatory Authorityshould be set up to regulate tariffstructure.

Road and Road Transport

India has about 35 lakh kilometres of roadnetwork allowing plying of 5 lakhpassenger buses and 20 lakh goodsvehicles. It is one of the largest in the worldbut its quality is too poor to meet the needof modern fast moving vehicular traffic.In fact, standard paved roads constitutehardly a little over 50 per cent of the total.Road density in terms of paved roads per

one crore persons is just 0.15 kilometres.It is comparable to Brazil, Thailand andKorea and little better than Bangladesh,Nepal and Sri Lanka. Still further, incomparison to 30 per cent in Brazil,50 per cent in Thailand, 70 per cent inSouth Korea and 85 per cent in the USA,in India only 20 per cent of the paved roadsare in good condition.

Before we discuss about modernmotorized transportation, a word aboutnon-motorised transport. Manualrickshaws, cycle rickshaws, handcarts(both goods and passengers), tongas,carts driven by bullocks, buffaloes andcamels, and pack animals are major non-motorised transport modes. There maybe around 50 lakh cycle rickshaws(contrast with 5 lakh buses and 20 lakhgoods vehicles) and 850 lakh draughtanimals and they haul significantlyhigh/short distance goods andpassenger traffic. Inexpensive,environment-friendly and simple intechnology as the non-motorised modesare, they also represent stagnanttechnology and drudgery for humanbeings.

You have already noted, in a previouschapter, that we have classified ourroads into National Highways, StateHighways and other roads. NationalHighways measure around 58,000 kmswhile state highways put togethermeasure about 1,58,000 kms. NationalHighways are, however, the primearterial routes as they cater to about 45per cent of total road transport thoughtheir length is just 4 — 5 per cent of thetotal surfaced roads. Till a few years ago(1996) only 3 — 4 per cent of NationalHighways were multi-laned though75 per cent were standard double – laned


HIGH DENSITY CORRIDORS OF NATIONAL HIGHWAYS

Delhi-Mumbai : via Jaipur, Ajmer, Udaipur, AhmedabadMumbai-Chennai : via Pune, Satara, Belgaum, Chitradurga, BangaloreChennai-Kolkata : via Vijayawada, Visakhapatnam, Bhubaneswar, BangriposiDelhi-Kolkata : via Agra, Kanpur, Allahabad, Varanasi, Barhi

and 12-13 per cent, standard single-laned. State Highways were hardly multi-laned while only 20 per cent were double-laned. Only 36 per cent of state highwayswere single-laned and another 36 percent of State Highways, below standard.It may be noted that on some of the statehighways traffic is as high as on nationalhighways. Laning or over-bridging a rail-road crossing is decided upon number ofvehicles (measured in passenger car units)that pass per day.

Large sections of National Highwaysand some sections of State Highways arebeing used well over 100 per cent of theirintended capacity, leading to slow speed,high vehicle operating costs,environmental pollution and highincidence of accidents. Construction ofmissing links and bypasses and bridges,strengthening of weak roads, andwidening of single lanes to two-lanes andtwo-lanes to four-lanes have therefore,been the major programmes in the recentyears.

The National Highways network hastwo major networks, which have to befour-laned. They are: (i) 6,000 kms longGolden Quadrilateral connecting fourmetros, viz. Delhi, Mumbai, Chennai,and Kolkata, and (ii) 7,000 kms longNorth-South and East-West corridors,connecting Srinagar with Kanyakumari(via Delhi, Jhansi and Bangalore) andSilchar with Porbandar (via Kanpur,Jhansi and Udaipur) respectively. The

National Highways Development Project(NHDP), launched in 1998, is expectedto complete the Golden Quadrilateral by2003 and the two corridors by 2007.

Rural Roads

Our villages are not well connected withnational/state/district roads. For wantof funds, we have a gradual approachwhich first seeks to provide accessibilityto villages with larger population, sayover 1000/1500. In order to give a fillipto this infrastructure, a Pradhan MantriGram Sadak Pariyojana has recentlybeen announced. It intends to provideconnectivity to all villages of more than500 persons through good all-weatherroad.

Water Transport

Water transport has three components:Shipping through 11 major ports and139 minor ports, handling 90 per centof our foreign trade; coastal shippingalong 5,560 kms coastal line, ferryingbulk cargo of coal, POL, iron coastal lineore; and inland water transport with15,000 kms navigable waterways, hardlycontributing one per cent to transportin terms of tonne-kms.

Overseas Shipping

Over 90 per cent of international tradein terms of volume and 80 per cent interms of value is carried out by our shipsowned by 80 companies. The major items


comprising 250 milliontonnes of goods,are POL, iron ore, coal, fertilisers andcontainers.

Coastal Shipping

It is a very cheap and energy-efficientmode for movement of bulkcommodities over long distances as itrequires no extra investment, besidesnavigational aids and terminal facilities.It offers an effective alternative meansof transport for parallel on-landtransports. For easing congestion ofother means and/or saving fuelconsumption, rail/road cargo, forexample, could easily be diverted to searoute between Chennai andVisakhapatnam on the east coast.Coastal shipping at the moment ishandling thermal coal and POL.Unfortunately, because of complexcustoms procedures, time-consumingport clearance, high manning scales atpar with overseas shipping and poorinfrastructure at minor ports put offthe shipowners, it is alleged to engagein this activity on an extensive scale,despite the fact that whole of coastalshipping is reserved for Indian vessels.

Inland Water Transport

It is a cheap and energy efficient modefor transport of bulk commodities if theyoriginate and terminate on a particularnavigable stream. Though India has totalnavigable waterways of 14544 kms butonly 5,200 kms on major rivers and 500kms on canals are suitable formechanized crafts. However, during dryseason waters are shallow and widthsare narrow. Bank erosion, siltation, poorterminal facilities and navigational aidsmake it further difficult.

A Central Inland Water TransportCorporation Ltd. was set up in 1967 tolook after this sector. It has beenincurring losses while some privateoperators in Goa and Kolkata had shownremarkable progress. In 1986 an InlandWaterways Authority of India was set upto coordinate and implement variouscentral schemes for development ofwaterways. Nothing spectacular tookplace except declaration of three nationalwaterways. Now, a view is emerging thatinland water transport has to beintegrated with coastal shipping. Five bigports could easily be integrated withcoastal shipping on the one hand andinland waterways systems on the other.

Civil Aviation

Operational, infrastructural anddevelopmental activities are three parts incivil aviation sector. The first is theoperational. Domestic air services areprovided by Indian Airlines Ltd. A fewprivate airlines, some of which arescheduled (like Sahara India and JetAirways) and some of which are non-scheduled (about 35 in number) alsoprovide the service. Domestic air traffic,around 150 lakh passengers, is almostequally divided between Indian Airlinesand private operators. Pawan HansHelicopters Ltd. provides helicoptersupport service to petroleum sector(ONGC and OIL), governments of statesand union territories, public sectorundertakings and private sectorcompanies and connects inaccessible andremote areas of the North Eastern region.International air services are handled bythe Air India Ltd. and a lot of foreignairlines. Some international services arealso handled by the Indian Airlines Ltd.


The second is related toinfrastructure facilities. AirportAuthority of India manages 92 airports,including five international airports atDelhi, Mumbai, Kolkata, Chennai andThiruvananthapuram, and 28 civilenclaves at the defence airports.

The third is related to regulatory-cum-developmental aspects. TheDepartment of Civil Aviation,Government of India, is basicallyresponsible for it. It is planning to have anew Civil Aviation Policy. The Governmentof India has already sold a part of itsholding of shares in Indian Airlines andAir India. It is also planning to set up newinternational airports at Bangalore,Hyderabad and Goa.

Communication

The importance of communication inmodern life could hardly be denied. It hasremained important ever since familymembers (close ones) have stayed in twoplaces and manufacturing and marketcentres for different purposes came up.Communication usefully replaces orsupplements transportation of people andgoods. For long, our ubiquitous postalnetwork did this service, sending messagesand money. Later, physical movementcould be avoided and through some ‘tele’method communication could be madeeasier and instantaneous. Thetechnological advancement has led toradical changes in communication servicessuch as telephone, telegraph, fax andinternet. advancement. But, slowly telexand telegraph are getting out of fashion.

Postal Communication

Nevertheless the importance of post officedoes not diminish. Our postal network

is the largest in the world. In thebeginning of the new century, we arehaving around 155000 post offices, ofwhich around 140000, necessarily smallones, are in the rural areas. On anaverage, our post offices serve 5500persons and 21 sq kms area per postoffice. But there are areas, which areinadequately serviced. We find itnecessary to open new post offices—subpost offices or branch post offices. Duringthe year 2000-01, around 400 postoffices were added. In order to economiseon cost and serve people better, 2000Panchayat Sanchar Seva Kendras areexpected to be opened soon.

Modernisation of postal services hasbeen on card for quite some time. Speedpost, business post, express parcel post,media post, greeting post and data posthave been introduced. With a view toconnecting rural interiors with the restof the world, E-post has been introducedin August 2001 in five states of AndhraPradesh, Maharashtra Gujarat, Keralaand Goa. With a view to improving thespeed and volume of moneyordertransmission, 140 VSATs (Very SmallAperture Terminal) connecting 1550 postoffices have been set up by theDepartment of Posts. They handle morethan one million moneyorders in amonth.

Telecommunication

Undoubtedly, today, telecommunication isplaying a great role and in future, it will playstill greater role in view of the fact that weare trying to integrate the Indian economywith the world economy in a big way.Keeping this in mind, the Government ofIndia has recently introduced the Ministryof Communications and Information


Technology with three additionaldepartments viz., Departments of Telecom,Information Technology and Posts.

During the nineties and particularlysince 1995, a great spurt in telecomsector has taken place. Connections arenow being provided by the twocorporations under the TelecomDepartment, viz. BSNL and MTNL andmore than two dozen private sectorcompanies. While the MahanagarTelephone Nigam Ltd. (MTNL), whichcaters to two metropolises of Mumbai andDelhi is somewhat old, Bharat SancharNigam Ltd. (BSNL) has just come about. Thetwo corporations have more than 32500exchanges and capacity of 4.25 crore lines.Both public and private sectors are providingfixed lines as well cellular as services. Atthe end of 2001, around four croreconnections, including 55 lakh celluar (12-13 per cent), are in existence. The Cellularmobile service is however available in1,400 cities/towns. While the use ofmicrowave network (2 lakh routekilometres) and optical fibre network (2.5lakh route kilometers) is on the increase,the use of hand held wireless access (WLL= Wireless Local Loop) system is on anvil.

We may further note that about 10lakh PCOs are working all over thecountry. Thus, there exists one PCO for1000 population. In urban areas, thisratio is just 300. At the moment, out of6 lakh villages in the country, 4.28 lakhvillages have at least one publictelephone connection each. It is expectedthat, with the cooperation of privatesector companies, it will be possible toprovide at least one public telephone toall the villages by December 2002.

Earlier, as per Telecom Policy 1994,private companies were granted licenses

based on prescribed fee. According to thenew Telecom Policy 1999, privatecompanies will share revenue and willpay it in advance. With a view to givingbenefit of reduction in cost of operationto the customer, rates for long distancecalls have been substantially reduced.

Internet services, E-mail andwebsites facilitate communicationservices through use of telephone linesand computers using modem.

Education

The role of education is well recognisedin the development of human resources,which are essential inputs in any societalactivities—economic or otherwise. Whileit improves quality of life, manifestedthrough improvement in nutritionstatus, better hygiene, reduced infantmortality, improved life expectancy,higher birth control practice, etc. itdirectly contributes to economic growththrough rise in productivity andinnovations (involving research anddevelopment activities).

Our Constitution had directed, youmay recall, the State to secure free andcompulsory education, by 1960, to allthe children below 14. You may also notethat we are not able to enroll all childreneven today. You can easily calculate thatpersons who were children in 1960 arenow all old, say over 55. Thus, manyinnocent children of 1950s and 1960shave already turned into ignorantparents and grandparents. TheGovernment tried to make many of theseparents literate through adult literacyprogrammes but not with much success.

Our educational policies, adopted in1968 and 1986, redirected thateducation be expanded and improved in


all sectors and also suggested thatdisparity in access to education, whetherrural-urban or male-female, beeliminated. It means: (a) free andcompulsory education to children in agegroup of 6-14, (b) total eradication ofilliteracy, (c) vocationalisation ofeducation, and (d) focus on education ofwomen, weaker sections and minorities.

In deference to the Supreme Courtjudgement declaring right to education asfundamental right, the Lok Sabha haspassed the Ninety Third Amendment Billof the Constitution which makes theright to free and compulsory educationfor children in the age group of 6-14 aFundamental Right and for parents/guardian a Fundamental Duty to provideopportunities for their children. But, theGovernment accepts that its successwould be limited in the absence of astrong social movement for universalelementary education.

According to the Sixth All IndiaEducational Survey, organised by theNCERT in 1993, 94 per cent of the ruralpopulation and 83 per cent of the ruralhabitations have access to primaryschools/sections within a distance of 1km.; 85 per cent of the rural populationand 76 per cent of the rural habitationshave access to upper primary schools orsections. It is understood that, in theyears gone by, the access level shouldhave improved. At this stage, we arehaving about 6,50,000 primary schools/sections, about 2,00,000 upper primaryschools/sections and 1,16,000secondary schools as against 2,10,000primary schools/sections, 13,600 upperprimary schools and 7,400 secondaryschools in 1950-51. We have by nowaround 300 universities, including

deemed ones, 1,2000 colleges (including1,500 exclusively for women) and a hostof unrecognised institutions particularlyin the higher education sector.

Yet, it would be good to have a glimpseon physical educational statistics. Thesedays, total enrolment of boys and girls, inprimary schools is over 11 crore and inupper primary schools, over 4.2 crore andabout 2.8 crore in high/higher secondary/inter/pre-degree schools and colleges. Thus,over 18 crore students are studying in someor the other class/stage of school education.Up to Class VIII, the students are around16 crore while population in the age-group6-14 is over 20 crore. Thus, about 80 percent children, 90 per cent boys and 70 percent girls, are attending schools. The drop-out rates of boys declined from 55 per centin primary level and 68 per cent in upperprimary level in 1980-81 to less than 40 anda little above 50 per cent respectively, in1999-2000. Similarly, the drop-out ratesof girls, from 65 per cent at primary leveland nearly 80 per cent at upper primarylevel have reduced to 40 per cent and 55per cent, respectively. But they are indeedvery high. In fact, hardly 60 per centstudents who enroll in Class I reachClass V.

Gross enrolment ratios for womenwith respect to relevant age-groups, areconsistently lower than those for men atall levels but at the same time one cannotice that the differential between maleand female enrolment ratios hassubstantially reduced over time (SeeTable 11.1).

Outcome is always more importantthan inputs into a process; yet, inputsare also of some consequence. We haveseen to some extent what oureducational system is giving to us. Buthow much effort do we make? Some of


TABLE 11.1Gross Enrolment Ratios (in per cent)

Primary (I-V) Upper Primary (VI–VIII) Elementary (I-VIII)

Year Boys Girls Boys Girls Boys Girls

1950-51 60.6 24.8 20.6 04.6 46.4 17.71960-61 82.6 41.4 33.2 11.3 65.2 30.91970-71 95.5 60.5 46.5 20.8 75.5 44.41980-81 95.8 64.1 54.3 28.6 82.2 52.11990-91 114.0 85.5 76.6 47.0 100.0 70.81999-00 104.1 85.2 67.2 49.7 90.1 72.0

Source: Selected Educational Statistics, 1999-2000, Department of Education, Ministry of HumanResource Development, Government of India.

these efforts can be inferred in terms ofmoney we spend on the system. TheGovernment, Union and States puttogether, is spending more than Rs45,000 crore, around Rs 40,000 as non-plan revenue expenditure and Rs 5,000-6,000 crore as plan expenditure. But thisconstitutes to be no more than 3.8 percent of our GDP. It is considered very lowas the Government of India had beenpromising for the last 35 years to annuallyspend 6 per cent of GDP. Of the total planexpenditure by all governments,expenditure on education, which wasabout 7.0 per cent during the Third Planand came down to 2.7 per cent duringthe Sixth Plan, slowly rose to about 6.0per cent towards the close of the NinthPlan. The Union Governmentsupplements the efforts of the StateGovernments through its schemes:(i) Operation Black Board for improvingschool infrastructure, including additionalteacher, (ii) National Programme ofNutritional Support, proving mid-day mealto students, (iii) Minimum Levels ofLearning, involving development ofcompetencies in Language, Mathematicsand Environmental Studies, (iv) DPEP/BEP/UPEP, (v) Non-formal Education,

and (vi) Mahila Samakhya, forempowerment of women.

Health

Undoubtedly, over fifty years, our healthconditions have improved. While crudedeath rate has reduced from around 25-27 in 1951 to less than 9 in 2000, infantmortality rate has halved from about 145to 70 and child mortality rate from 57 to22 over the same period. As a result, lifeexpectancy at birth has improved fromaround 36-37 years to 61-62 yearsduring this period. Our women now livelonger by about three years.

Yet, burden of disease continues tobe significant. Communicable diseasesstill dominate the causes of mortality andmorbidity but their incidence over timehas significantly reduced.

EPIDEMIOLOGICAL TRANSITION

As life expectancy of a population improvesthe relative incidence of communicableand non-communicable diseases changes.Earlier, before the onset of the transitionthe major cause for mortality andmorbidity used to be communicablediseases, after the transition the majorcause happens to be non-communicablediseases.


It is true that a substantial infras-tructure for providing for primary healthcare has been created in both rural andurban areas. There are, however, threemajor weaknesses. One, distribution ofexisting institutions and manpower isinequitable. Two, there exists mismatchbetween personnel and infrastructure.

EXERCISES

1. Bring out the importance of infrastructure in development.2. Why do we need contribution of all sectors—private, public, and foreign in

development of infrastructure?3. Why do we need independent regulatory authorities in infrastructure sector

between the service provider and government?4. Discuss consumption of energy in India since Independence in terms of total

and per capita consumption, as also shift in composition of energy sources.5. Distinguish between primary and final sources; between commercial and non-

commercial sources; and between conventional and non-conventional sourcesof energy.

6. Discuss the role of three services needed in supply of electricity. Should theybe in different hands? Attempt your answer.

7. What are the three basic sources of generating power?8. What do you mean by plant load factor? How could it be improved?9. Why do we require grid for transmission of electricity?10. What do you mean by transmission and distribution losses? How could they

be reduced?11. Discuss the division of traffic between road and rail transport.12. Why did road sector do relatively better than the railways?13. Discuss electrification of tracks and unification of gauge programmes and

how they are going to help us in transport sector.14. What are the major items carried by the Indian Railways?15. What is the size of manpower in the Indian Railways? Why has it turned into

a liability?16. It is alleged that freight traffic is paying for passengers, higher class passengers

are paying for lower class passengers, and non-suburban passengers are payingfor suburban passengers. Give your views.

17. What should the Indian Railways do to increase their share of traffic?18. What are the changes proposed in the functioning of Indian Railway?19. Discuss the road network in India and its condition.20. How do you assess the importance of National Highways?21. What is your assessment about rural road network?

Three, there is lack of an appropriatereferral system.

Malaria, Kala-Azar, Tuberculosis,Leprosy, Blindness and HIV/AIDS arebeing tackled as national programmes.Medical help, public health and familyplanning activities claim as much as 3.0per cent of total plan expenditure.


22. What are three modes of water transport?23. Describe the contribution of overseas shipping in international trade.24. What future do you hold for inland water transport?25. What role can coastal shipping play in decongesting traffic on roads/rails?

Give an example.26. What is the relationship between communication and transportation?27. Comment on the postal communication network.28. Discuss main trends in the telephony.29. What is the importance of education in economic development?30. Discuss the constitutional provision with regard to elementary education and

recent constitutional amendment in this respect.31. Describe the enrolment scene and dropout scene by sexes.32. What are the main programmes through which the Union Government is

helping the States which are primarily responsible for elementary education?33. Discuss the progress of health programmes.

CHAPTER 12

Other Emerging Issues

Introduction

Many issues are emerging as majorchallenges for quite some time. We willdiscuss here only three of them:Environment, Gender and Migration.

Environment

Development was, for long, associatedwith under-exploitation of naturalresources. It was little realised thatobsession with under-exploitation maylead to over-exploitation. We believe thatnatural resources are indefinitely large,if not infinite. At the same time, we arefinding that our present technologyproduces harmful elements along withuseful products (such as electricity ortransportation). We are also producingmany non-degradable materials. Inshort, we are said to be using naturebeyond its carrying capacity, bothproductive and assimilative. Blame isapportioned to rising human population(in underdeveloped countries), affluentconsumption style (in developedcountries), and misuse of technology(everywhere). Some put the blame on thepoor people, not on their poverty, for someof the environmental problems such asdeforestation. Even the developmentframework proposed by the governmentsare also blamed.

We can categorise our environmentalissues into two broad groups. The firstrelates to pollution issues, which largelyconcern urban and industrial areas, andare connected with air, water and solidwaste. The second relates to degradationof resources issues, which largely concernagriculture, forestry, livestock and bio-diversity. We shall consider them below.

Pollution Issues

Pollutants are substances foreign to themedium in which they are present. Theydo not get sufficiently dissolved andcause problems to the animal world.These are classified as air pollution,water pollution, noise pollution, etc.

Air Pollution

India now has 35 cities which havepopulation in excess of one million.Ambient air pollution levels exceed WHOhealth standards in many of these.Increasing power consumption,increasing industrialisation, increasingvehicular traffic, along with burning ofrefuse, are worsening air quality of thesecities. Ahmedabad, Delhi, Kanpur,Kolkata, Mumbai and Nagpur are worstaffected by pollution.

Excessive presence of certain gasesand suspended material particulates


(SPM) pollute air. As air is the carrier ofoxygen for human beings and otheranimals, they suffer from variousailments causing disability which affectswork and leisure. Gases like CO, CO2,NO2, SO2, and ozone, and suspendedparticulates, including lead particulatesare major pollutants causing diseaseswhich often results in early death. Thesediseases include respiratory, cardio-vascular, hyper-tension, asthma, eyeirritation, and neurological problems.

Diseases cause morbidity leading toloss of work to the individuals and lossof output to the society and cost oftreatment to the individuals/society.Instead of baking bread, some peopleare engaged developing andmanufacturing ‘chemprox’! (Chemproxis not a real drug. It is a word coinedto give a flavour of unnecessaryactivities we indulge in because of ourmisdoings or inadequate precaution.)One would not be manufacturing manyodd drugs but for the fact that pollutionis causing many a disease. Death itselfis a heavy cost. These problems getaccentuated in a country like Indiawhere general nutrition level is fairlylow. Cost of prevention would be foundto be too low in comparison to cost ofconsequences.

Water Pollution

It is said that all surface and a lot ofground water in India, in rural and urbanareas both, is so contaminated that it isunfit for direct consumption by humanbeings. Diarrhoea, trachoma, intestinalworms, and hepatitis are caused by poorquality water, poor sanitation and poorhygiene. Ten per cent of all diseases andtwenty per cent of all communicable

diseases in India are found to be water-related. A good percentage of infantmortality is associated with it.

Water quality gets damaged due tothree major factors, viz. domestic andhuman waste water, industrial wastewater and agricultural runoff. Domesticand human waste water is the mostproblematic and the principal cause ofmany severe water-borne diseases.Disposal of untreated sewage water (as isdone in many cities) as irrigation waterfor crops, particularly vegetables, is notgood. Some vegetables are washed in thesedirty nallahs and some of which are some-times eaten raw. Sewage and wastewaterand also industrial wastewater find theirway into rivers and streams beyond thelatter’s assimilative capacities. Majorwater polluting industries are chemicals,pharmaceuticals, textiles, cement,electrical and electronic equipments, glassand ceramics, pulp and paperboard,leather tanning, food processing andpetroleum refining. Indiscriminate use ofchemicals–fertilisers and pesticides–inagriculture does finally result into conta-mination of surface and ground water.

Demand for water is rising and willfurther rise, particularly in urban areas,due to rise in population but more thanthat, due to rise in income leading tohigher per capita demand for water. Itsdemand, to some extent, can be curtailedby better pricing of water supply. Propercollection of user charges is equallyimportant. Water supply is getting moreand more expensive as raw water needsto be treated for pollutants.

Degradation of Resources

Degradation of resources saps theirproductive capacity. Long-term

OTHER EMERGING ISSUES 159

implications of degradations are that theyield level goes down permanently. Thus,the base of development gets eroded.Here, we shall discuss two mostimportant degradations. One is relatedto the forests and the other is related tothe land in general and agricultural landin particular.

Deforestation

Our developmental activities and lavishlife-style exploited forest wealth beyondits regenerative capacity. It is significantto note that India is one of the fewcountries, which had a Forest Policy asback as 1854. Between 1854 and 1952,when we had our first Forest Policydeclaration after Independence, our forestcover is estimated to have reduced from40 per cent to 22 per cent, obviouslybecause of reckless exploitation for rawmaterials for industries, timber forbuildings and firewood. We had roughly680 lakh square hectares of forest in 1952.

PRODUCTIVITY OF FOREST

Our growing stock per hectare is just 28cubic metres and annual increment, just0.5 cubic metres as against the worldaverage of 110 cubic metres total stockwith 2.0 cubic metres increment.With fast growing valuable species, propercare, tending and protection, our forestproduce could be raised to 5.0 cubicmetres per hectare per year.

The Forest Policy of 1952 recommen-ded that we should have a forest coverof 1,000 lakh hectares, that is 33 percent of total land surface, with thestipulation that hill areas could becovered to the extent of 66 per cent. Inorder to meet growing demand,

afforestation measures were adoptedwith three important schemes:(a) plantation of quickly growing species,(b) plantation of economic species (teak,shisham, sal, etc.), and (c) rehabilitationof degraded forests. But all thesemeasures could bring no more than 50lakh hectares over these fifty years. Totalforest cover is now said to be 750 lakhhectares. But using new techniques ofsurvey, the National Remote SensingAgency has indicated that we have goodgreen cover of only 360 lakh hectares,which means the rest of the area is justdesignated as forest and just does nothave trees on it. Information availableshows that we have lost dense forest evenbetween 1972-75 and 1980-82. Sincethen, our dense forest cover is more orless stable (See Table 12.1).

TABLE 12.1Area of Dense Forest Cover in India

(lakh hectares)

Survey Years Cover

1972-75 46.421980-82 36.141985-87 37.851987-89 38.501989-91 38.561991-93 38.581995-97 36.73

We cannot completely deny users offorest produce without facing its impacton the economy and we cannot allowpresent practices of forest exploitationwith endangering the prospects of futuregenerations. In fact, it is now beingsuggested that forests should be allowedto perform their environmental functionsrather than be exploited for industry andurban users. In addition, forests satisfythe subsistence needs of forest dwellers.


We may briefly note some of the stepsthat have been undertaken to improvethe scene. The Government of India hasaccepted the recommendations on socialforestry made by the NationalCommission on Agriculture (1976).Social forestry has three components,viz. farm forestry, public woodlots andcommunity woodlots. Under farmforestry schemes, farmers areencouraged to plant trees on their farmswith free or subsidized seedlings suppliedby the state forest departments. Underpublic woodlots, the forest departmentshave undertaken to plant fast growingtrees along roads and canals and in otherpublic lands. Under communitywoodlots, local communities aresupposed to plant trees on villagecommons. The purpose is obviously to

1. increase green cover;

2. produce raw materials for paper;rayon and match industries;

3. meet the requirements of the poorfor fuelwood/firewood and fodder;

4. grow small timber and minor forestproduce; and

5. create more employment in ruralareas through afforestation.

In some areas of the country, youwould notice some success in this area;though admittedly much more needs tobe done. Many of these trees do little toconserve water and, therefore, should begrown in areas of water-logging.

It was found that, besides industri-alists, State Governments were alsounmindful of these odd developments asforest exploitation gave them revenue.So much so, that many industries weregiven timber at nominal prices.

A New Forest Policy was announcedby the Ministry of Environment andForests in December 1988. There is littlenew in this policy in terms of targets butits focus and orientation in strategy isimportant. It lays down that forest-basedindustries would not be allowed toplunder forests and would no longer bepermitted to get forest produce atconcessional rate and they must get theirraw materials from woods raised throughfarm forestry. According to this policy,the industries are advised to motivatefarmers, through incentive measures, forfarm forestry. Private contractors will notbe permitted to collect forest produce andvarious government agencies and tribalcooperatives would be set up to replacethem. Forestland would not be divertedfor non-forest use including cultivationof tea, coffee, spices, rubber, palm, oil-bearing plants, horticultural plants andmedicinal plants.

Yet it is understood that there is alot of under-hand dealing between thetimber merchants and forest officials.

Multiple purpose big dams alsoswallow a lot of forest-land. The poor aresaid to be stealing wood and other minorforest produce. However, our view is thatthe poor may be collecting only fallendead pieces and may not be cutting greentrees. Fallen dead pieces of woods, in anycase, have to be collected.

Land Degradation

Our land is suffering from a variety ofdegradations. Degradations make it unfitfor cultivation. Erosion of topsoil due towater and wind, and salinity andalkalinity due to water logging or floodingwith marine water are our greatproblems. Our lands are either flood-


prone or drought prone. Flood causesgreater erosion if soil is without trees andgrass. This soil goes to silt dams,reservoirs, tanks, rivers and streams.The reduction in depth further spreadsthe area affected by flood. Thus, thereexists a small vicious circle.

Grass may be overgrazed and treesmay be cut without replacement. In someareas we still practise shifting cultivationby slash and burn method. Such soil isdrought-prone too. Areas which for longhave been denuded lose humus and donot have vegetative cover, do not retainwater and, therefore, loose topsoil whicherodes with wind too. In this process, thetopsoil loses major nutrients such asnitrogen, phosphorous and potassium.

In some cases, on the other hand,we find that there is excessive water nearthe topsoil, which sucks such mineralsup–turning soil either alkaline or saline.This type of soil is not suitable forcultivation. Then there is some area,which remains perennially submergedunder water. From Table 12.2, we cansee that more than 50 per cent areasuffers from serious degradations.

Every year, it is estimated, 80 lakhhectares, with 40 lakh hectares cropped

area, gets affected by flood while 40 lakhhectares gets damaged due to shiftingcultivation. Ravines encroach as muchas 8,000 hectares every year. An oldauthoritative estimate of the problem is:One-third of our land under forest, two-thirds land under agriculture and nearlyall cultivable waste lands, permanentpastures and grazing lands are in urgentneed of soil conservation measures.Thereafter many conservation measureshave been undertaken but it seems, onbalance, that we could not succeed muchin containing further degradations.

Gender

There exist biological differences betweenthe two genders. Division of certain rolesbetween the two genders is, therefore,considered natural. For example, onlyfemale can bear children. Perhaps, shecan do better in rearing too.

However, in all societies, it is foundthat there exist many other differentials,which in no way could be ascribed tobiological differences. It is now believedthat human society has, for ages, beendiscriminating between the two gendersand, on balance, has been favouringmale section. In our society, the level of

TABLE 12.2Details of Areas Suffering from Various Degradations

Total geographical area 3290 lakh hectares

Area with serious degradations 1750 lakh hectares

Area suffering from water/wind erosion 1400 lakh hectares

Area suffering from salinity/alkalinity/water-logging/ravines 350 lakh hectares

Ravenous area 200 lakh hectares

Area with salinity 55 lakh hectares

Area suffering from alkalinity 25 lakh hectares

Water-logged area 60 lakh hectares

Drought-prone area 2500 lakh hectares


discrimination is considered to be ratherhigh. It does not, however, mean thatwe are the worst people in this respect.

POLITICAL DISCRIMINATIONIN THE WEST

Women were denied political rights in so-called developed countries. It was onlyafter the first World War that the US(1920), the UK (1928), Spain (1931) andFrance (1944) granted women right toelectoral franchise while their men-folkenjoyed it for long. It is rather surprisingthat Switzerland, one of the oldestdemocracies, denied this right to theirwomen until 1971. Women were deniededucational opportunities with legalrestrictions in many countries till veryrecently.

Does it mean that we ought to donothing to ameliorate the situation in ourcountry? No. For the last couple ofcenturies, we have been progressivelytrying to improve the situation. The casesin point are widow remarriage,prevention of sati, and ban on childmarriage. Just after Independence, whenwe were framing our Constitution, wedecided to give almost all due politicalrights. We prohibited all kinds ofdiscrimination on the ground of sex.However, dejure equality was not enoughand, therefore, we also institutedprovisions for positive discrimination. Asa result, there is some improvement incertain respects. For example, female lifeexpectancy at birth has overtaken itsmale counterpart.

It is often found that women aredenied economic opportunities and, ifthey get job, they are paid lower wagesthan men for the same work. It is allegedthat women are discriminated in

treatment within family and outside inmarket for job. We can discuss theseissues in terms of sex ratio, literacy, workparticipation rates and wages.

Sex Ratio

Too many females or too few females forany society are not desirable. Theirnumber should be more or less equal tothat of males. In most societies, malebirths for every 1,000 female births arereported to be around 1,050-1,060.However, women are found to live longerthan men if both enjoy the same levellife opportunities. As a result, in societieswhere men and women are treated alikein matters related to life, sex ratio isfound to be in favour of women: Brazil,1,025; the USA, 1,030; Japan, 1,040;and Russian Federation, 1,140. In ourown country, Kerala is an example whereoverall sex ratio is 1,060, better thanJapan’s. For the country as a whole, thesex ratio for the twentieth century isreported in Table 12.3. It is a sadcommentary that sex ratio went oncontinuously declining with increase inlife expectancy and the sharpest declinetook place during the sixties. It is nowhovering around 930.

Earlier, we were tabulating popu-lation age data by age-groups like 0-4,5-9, etc. For the last two censuses wehave information about population below7 and above 7. Sex ratio for age group 0-6 will depend crucially on two things:sex ratio at birth and differential infantmortality in the age group 0-6. Sex ratiofor 7+ will depend on sex ratio at 7 anddifferential mortality conditions beyondseven (or, its counter-image lifeexpectancy). For the country as a whole,we find that the reason for improvement


in overall sex ratio is not sex ratio for0-6 but that for 7+, which is a reflectionon higher improvement in life expectancyof women (See Table 12.4).

Reduction in sex ratio for 0-6 agegroup is a serious reflection on ourtreatment of girl foetus or girl child orboth. Even if we consider sex ratio for0-6 for 1991 as ‘natural’, it is a shamethat it should reduce so drasticallyduring the nineties. If we could have had,in 2001, the same sex ratio as in 1991,our overall sex ratio would have beenclose to 940. There is no reason toexplain that Punjab’s sex ratio for 0-6

should reduce from 875 in 1991 to 793in 2001 and Haryana’s from 879 in 1991to 820 in 2001 while Kerala’ sex ratio for0-6 should improve from 958 to 963. [Bythe way, Kerala is the only large State inthe country to have shown thisimprovement and Punjab and Haryanahave always had very bad sex ratio.]

Census does not throw data on sexratio at birth. Sample RegistrationSystem suggests sex ratio at birth tofluctuate between 800 and 915 during1982-98, suggesting that it is too lowwhen compared to ‘natural’ sex ratio atbirth, which is around 940-960. Sex ratioat birth around 900 is the nationalaverage, suggesting that in some statesthe situation is pretty bad. It is suspectedthat female foetus is wasted at somestage. Another inference, notimplausible, is that female birth isunder-reported. Female infanticide isprevalent in some parts of the countryeven in these modern days.

While we are improving in manyrespects as far as our female populationis concerned, it is a sordid fact of lifethat we are avoiding female births,sometimes in the name of small family.Life expectancy of female population hasbeen improving for a few decades and itis now higher than that of malepopulation. The gap between male-female infant mortality rates is negligible.

TABLE 12.3Sex Ratio of Indian Population during

the Past Century (1901-2001)

Year Sex Ratio

1901 9721911 9641921 9551931 9501941 9451951 9461961 9411971 9301981 9341991 9272001 933

Source: Census of India 2001 Series 1 India,Provisional Population Totals, Registrarand Census Commissioner, India.

TABLE 12.4Sex Ratio for Age Groups 0-6 and 7+ for 1991 and 2001

Year Sex Ratio for 0-6 Sex Ratio for 7+ Sex ratio for All

1991 945 923 9272001 927 935 933

Source: Census of India 2001 Series 1 India, Provisional Population Totals, Registrar and Census Commissioner, India.


Mean age at marriage has improved fromaround 15 years in 1951 to around 20years by the end of the century.

Literacy Rate

One spectacular achievement that wehave had is in the case of literacy wherethe gaps are closing fast (See Table 12.5).In the last fifty years, while overall femaleliteracy rate improved from around 9 percent to 54 per cent, that of rural areasfrom less than 5 per cent to over 45 percent. While the gap in 1951 was 18 percent points on 9 per cent female literacy,in 2001 it is 21 per cent points on54 per cent literacy.

But, there is no reason to becomplacent on the matter. This is anaspect where both the sexes should enjoya hundred per cent literacy. In fact,rural-urban differential in female literacyis staggering by any standard. And ruralfemale is the only section, which hasliteracy rate less than 50 per cent.

Political Empowerment

On political front, one-third seats havebeen reserved for women at local levelpolitical bodies and there are more than10 lakh mahila panchs. This isconsidered to be one major step of

empowering women. However, thelegislatures, which reserved seats forwomen in local bodies, have not done soin respect of their own seats (See Table12.6).

From the Table12.6, we can see thatrepresentation of people through womenin Lok Sabha has been fluctuating butrising. In Rajya Sabha, it is constant.The representation is to the Parliamentrather low. Similar should be the casewith State Legislatures.

Work Participation and Wages

Women are subjected to work inhomestead as well as at work place. Theirwork in home is not recognised as work.Work outside home is recognised aswork. If we consider the ratio of workersto corresponding populations, we wouldfind that male work participation rate isabout 55 per cent irrespective of the areaof residence while female participationrate is about 12 per cent in urban areasbut 25 per cent in rural areas. Manythink that it is a serious reflection onsociety’s refusal to allow women to workoutside home. No doubt, generally,women who work outside home, earnmoney and are slightly moreindependent than their counterpart who

TABLE 12.5Male and Female literacy Rates by Rural-Urban Division (in percent)

Year Rural Male Rural Female Urban Male Urban Female Male Female

1951 19.02 04.87 45.60 22.33 27.10 08.861961 34.30 10.10 66.00 40.50 40.40 15.351971 48.60 15.50 69.80 48.80 45.96 21.971981 49.60 21.70 76.70 56.30 56.38 29.761991 57.90 30.60 81.10 64.00 64.13 39.292001 71.40 46.70 86.70 73.20 75.85 54.16

Source : Economic Survey 2001-2002, Economic Division, Ministry of Finance, Government of India.


work only inside home. Many analysts,therefore, advocate that theirparticipation should be raised. Thosewho are familiar with Indian situationwould perhaps disagree with this viewbecause higher participation of ruralwomen in work outside does not showthat their standing is better in any sensethan their urban counterpart. The pointis whether females of a house areworking outside home, particularly onfarms, because of compulsion of povertyor by sweet choice to supplement income.

However, it has to be noted that theyare often low paid as well. This is wherethe discrimination exists. We are providinghere information on wages for man andwomen with same qualifications (SeeTable 12.7). Except in two cases, i.e.workers with education up to Class VIIIin rural areas and all workers in urbanareas, everywhere we find that averagewage rate received by women is less. All

workers’ category in urban areas can bedismissed as, in each sub-category, dowomen get paid low. In rural areas,women with education up to eighthstandard seem to be better placed, say asClass III employees and they may bebelonging to urban areas (for regular jobsin rural areas are in the government).Among the casual workers, women’s wageis about two-thirds of the wage for themale.

It could well be argued by theemployer that women perform different,often low skilled, jobs; otherwise equalpay for equal job is available. There arescholars to suggest so. For example, letus take the case of medical profession.There are more women nurses and moremale doctors.

Migration

People move for a variety of reasons fromone place to another and for different

Table 12.6Representation by Women in Lok Sabha and Rajya Sabha

Lok Sabha Rajya SabhaYear Lok Seats Women Percent Year Seats Women Percent

Sabha Members age Members age

1952 I 499 22 4.4 1952 216 15 6.91957 II 500 27 5.4 1984 233 24 10.31962 III 503 34 6.8 1990 245 24 9.81967 IV 523 31 5.9 1992 245 17 6.91971 V 521 22 4.2 1994 245 20 8.21977 VI 544 19 3.5 1996 245 18 7.31980 VII 544 28 5.1 1997 245 18 7.31984 VIII 544 44 8.1 1998 245 19 7.81989 IX 517 27 5.2 1999 245 19 7.81991 X 544 39 7.2 2000 245 22 9.01996 XI 544 40 7.41998 XII 543 43 7.91999 XIII 543 49 9.0

Source : Indian Planning Experience: A Statistical Profile, Planning Commission, Government of India,2001 and India Yearbook 2001 Manpower Profile, Institute of Applied Manpower Research,New Delhi.


durations, viz. from attending social callssuch as marriage functions to buying rawmaterial, to holidaying with spouse andchildren, from moving maternal place tomarital place in case of women, to goingfrom village to town for higher studies, tojoin service at a place different from theplace of present stay. When one movesfrom one place to another with no clearintentions to come back in a relativelyshort period, the movement is calledmigration and the person is calledmigrant. The place from where the personmigrates is known as place of origin andthe place where he migrates to is knownas place of destination. In case, the placesof origin and destination fall in twodifferent countries, the migration isknown as international migration,otherwise it is known as internalmigration.

It is easy to see that, in internalmigration, there could be intra-district,inter-district, and inter-state migrations.Within each category as well as outsidethese categories, there could be rural-rural, rural-urban, urban-rural andurban-urban migrations. These are thecategories in which much of migration,statistics is compiled and analysed.

Internal Migration

Migration may, according to motivation,broadly be divided into two categories,social and economic. Most women movefrom one place to another because ofmarriage and married women areexpected to live in their husband'shouses. Economic migration may beassociated with availability of economicopportunities for some persons inplaces different from their respectiveplaces of present stay. This movementmay broadly be called migration oflabour. Even those who move with aview to setting up some businessestablish-ment or opening some factoryare broadly considered workers; workersinclude employees, employers andself-employed.

People just do not move across placesbut also across occupations. Mobilityacross occupations within the sameplace is not considered migration. But itso happens that places also specializein economic activities. For example,agriculture is the main activity in ruralareas while manufacturing or serviceslike banking abound in towns. AdamSmith said that agriculture is theindustry of the country and

TABLE 12.7Average Wage/Salary Received by Employees Per Day in 1999-2000 (Rs.)

Rural Male Female Urban Male Female

Regular Regular

Not literate 71.23 40.32 Not literate 87.63 51.83Educated upto VIII 91.63 161.48 Educated upto VIII 105.08 64.41Secondary 148.23 126.09 Secondary 168.16 145.73Graduate + 220.93 159.92 Graduate + 261.55 234.74All 127.32 114.01 All 169.71 295.00Casual 44.84 29.01 Casual 62.26 37.71

Source : India Yearbook 2001 Manpower Profile, Institute of Applied Manpower Research, New Delhi.


manufacturing is the industry of thetowns.

Economic migration, it wasunderstood, is basically diagonal thatis across places and acrossoccupation/economic activity. InEurope, during the phase ofindustrialisation, productivity inagriculture was also rising, needingabsorption of less labour inagriculture. Industry was requiringmore hands. Hands released fromagriculture were being readily absorbedin industry. Despite the fact thatagricultural productivity was risingand wages were improving, agriculturewas pushing out a part of labour andnot absorbing new labour emergingfrom rise in population. Growth ofindustry was tremendous and it wasable to absorb many more hands.

Industry was definitely using moremachinery per person than agriculture.Yet, you can notice that the word‘manufacture’ means goods producedwith hand or manufacturing means aprocess of production using hands.Since most of the manufacturing unitswere being established in towns,already existent or emerging, movementof labour was from countryside totowns. Today we call it rural-to-urbanor rural-urban migration. More andmore people were moving from ruralareas to urban areas, followed by theirfamily members. Existing towns wereexpanding and new towns wereemerging. Population was rising withrising prosperity and a greaterproportion of population was found tobe living in urban areas.

However, today the migration takesplace not just because of pull of town for

economic and educational opportunitiesor urban life but also because of pushfrom villages lacking in such oppor-tunities or security. One also notes thatthis migration is very selective. Peopleare moving to metropolises, which arenow facing a lot of congestion andare turning into conglomeration ofslums. Schemes distracting people frommoving to metropolises have notsucceeded to a significant extent.Schemes intended to develop satellitetowns as counter-magnates too are notdoing quite well.

In our censuses, migration isclassified according to reasons formigration. The following reasons arelisted: employment, education,movement of family, marriage, andothers. We provide here information for1981 and 1991 in Table 12.8.

The Table 12.8 shows that apreponderant majority of women movebecause of marriage–not for employmentor education. They have to move whenfamily moves. Women thus moveexclusively for social reasons. On theother hand, men move for employment,not so much for education, and alsobecause family moved.

International Migration

Migration from one nation to another isknown as international migration. Peoplehave moved as free citizens from Europe,as indentured labour from Asia, and asslaves from Africa to European coloniesin North America and South America.Population pressure on the one hand andgreen pastures of the new world on theother, made this movement possible.However, today the world is a lot moredifferent.


TABLE 12.8Distribution of Migration by Reason (percentage)

1981 1991Reasons Female Male Female Male

Employment 1.9 31.8 1.8 27.0Education 1.0 5.1 0.8 4.8Family Moved 14.3 30.3 11.0 26.6Marriage 73.4 3.3 76.1 4.0Others 9.4 29.5 10.3 37.6Total Migration (crore) 14.52 6.25 16.78 6.43

Source: India Yearbook 2001 Manpower Profile, Institute of Applied Manpower Research, New Delhi.

We are now talking of free movementof finance capital but not of labour. Entryof very selective manpower is allowed.Once upon a time we termed thismovement of skilled manpower fromunderdeveloped countries to developedcountries as brain drain. Individualsinvolved in the movement justified theirdeparture as their home countries couldnot provide them jobs commensuratewith their qualifications.

In certain sectors there is a lot ofdemand for personnel from so-calledunderdeveloped countries as they areyoung, energetic and have requisiteskills. Since population stock in manyEuropean countries is pretty old, theyneed young persons from countries likeIndia. People in countries like India havestarted calling it export from educationindustry. But the world is far away fromfree movement of men, of labour.

Concluding RemarksThere were three issues we discussed inthis chapter: environment, gender, andmigration. Environment is concernedwith forestry, abatement of pollution,conservation, bio diversity, etc. Weconfined our discussion to pollution ofair and water, and degradation of soiland forestry.

In the matter of gender, starting fromour commitment to gender equality, we triedto understand as to how much we haveachieved and where we have failed. We didit by analysing sex ratio, particularly sex ratiofor 0-6 age group, literacy, politicalparticipation, and economic participation (inwork force) and wages.

Delineating the history and theoryof migration, we discussed both internalmigration and international migration.Reasons for migration were alsodiscussed.


EXERCISES

1. Contrast past and present thinking with regard to relationship between natureand development.

2. What are the important environmental issues, which should receive ourattention?

3. What are the major causes of air pollution?4. How do you justify cost of prevention/abatement of pollution?5. Discuss the major causes of water pollution.6. What do you mean by degradations of resources?7. What proportion of land should be covered under forest? What is the suggestion

for hilly areas?8. Discuss the programme of social forestry.9. Discuss the salient provisions of Forest Policy 1988.10. What is the level of land degradations in India?11. What are the causes of land degradations?12. What do you mean by gender issues?13. Discuss the trend of sex ratio over the century.14. What are the factors determining sex ratio?15. Why do you think child sex ratio has declined in the nineties?16. Discuss the progress of female literacy vis-a-vis male literacy in the last fifty

years.17. What is the provision for representation by female in panchayati raj

institutions? Why is there no such provision for the parliament and statelegislatures?

18. What is work participation scene and average wage position for female workers?19. Give an historical account of migration to the New World.20. What do you mean by economic migration?21. What are pull and push factors of migration?22. What is the migration pattern of women in India by reasons?23. What is the migration pattern of men in India by reasons?24. What do you mean by brain drain?25. Argue in favour of and against the new thinking that education is an industry

and that we should export its product.

Economy

One can safely say that the field of study of economics is economy. But what is aneconomy? Looking around, one may feel like saying that an economy is the collectionof farms, factories, workshops, mines, shops; roads, railways, ships, aeroplanes,pipelines conveying gas and oil or even water; offices, banks, schools and colleges;cinema, theatre and opera houses; and dispensaries and hospitals. They all producegoods and services, which have economic value and are consumed directly orindirectly by the people. This view of the economy is simple, descriptive andstraightforward. It should be acceptable.

However, there are people who point towards the variety of usage of word‘economy’: national economy, world economy, and international economy; villageeconomy, rural economy and urban economy; slave economy, feudal economy,capitalist economy and socialist economy; even household economy. What is thecommon feature in all these definitions of economy? Erudite scholars point outthat it is actually a set of relationships, which could be abstracted from, to a largeextent, from other forms of social relationships. These relationships manifest inuse of labour power and provisioning of material needs.

An attempt has also been made to define economy as a structure of relationshipsamong a group of people in terms of the manner in which they exercise control overresources, use of resources, and labour for production of goods and services anddefine and settle the claims of the members over what is produced.

Modern Economic Growth

Human societies have been increasing production by using natural resources inmore productive manner, improving production techniques, producing more andmore and more varied goods and services and living better lives. But there mighthave been long periods when some societies actually declined. There might havebeen periods when increase in population exceeded the growth in quantum of goodsand services (In good old days, goods might have meant foodstuff — foodgrains andother eatables). Per capita product might not have had a sustained increase.Population too might not have had sustained increase.

The history of last two hundred years in the West is, however, considered to bepeculiar. This is the period when population had sustained increase. But increasein quantum of goods and services exceeded that in population. As a result, therewas sustained increase in per capita product (as well as in per worker output).

The same could be said about the last fifty years in the case of many so-calleddeveloping countries. Here too, population rose more rapidly than it did in the Westin any stretch of fifty years. But total quantum of goods and services rose stillfaster. As a result, there was sustained increase in per capita product.

Character of Growth Rate Series

If growth rate remains the same as time changes, we can call it steady growth. Aseries of 100, 110, 121, 133.1, 146.41…. shows a steady growth of 10 per cent. If

APPENDICES

CHAPTER 1


we instead find that as time passes, growth rate increases, we can call it a case ofaccelerating growth. A series of 100, 110, 122, 135, and 150… portrays a case ofaccelerating growth. On the other hand, if growth rate decreases as time passes, wecan call it a case of decelerating growth. A series of 100, 110, 120, 130, and 140…is a case of decelerating growth.

But what happens in reality is that no economy shows such a neat pattern.There are fluctuations, sometimes very wide. There exists a possibility that thesefluctuations are around a rising or declining or steady trend/path. But there is asustained rise in the GDP when considered over long period, say, decade after decade.

CHAPTER 2

Computation of HDI for India for 1999

Suppose we are given the following data for India for the year 1999:

Life Expectancy at Birth 62.9 yearsAdult Literacy Ratio 56.5 per centCombined Enrolment Ratio 56.0 per centPer Capita Income PPP $ 2,248

Let us first combine Adult Literacy Ratio (ALR) and Combined Enrolment Ratio(CER) into Education Attainment (EA). Giving two-thirds as weight to ALR and one-third as weight to CER, we find

EA = (2/3)*56.5 per cent + (1/3)*56.0 per cent = 56.13 per centNow let us find out logarithm of per capita income to make it reflect standard of

living (SL)SL = log (PPP $ 2,284) = 3.352Let us now invoke the formula for component index (CI), which is

ComponentTheofValueMinimumComponenttheofValueMaximum

ComponenttheofValueComponenttheofValueActualCL

−−=

Let us use actual values from the above and the maximum and minimumvalues from Table 2.2 and obtain

0.5202.602

1.352

2.04.602

2.03.252

0.5610.0100.0

0.056.13

0.63260.0

37.9

25.085.0

25.062.9

==−

−=

=−

−=

==−

−=

SLI

EAI

LEI

Using the simple arithmetic average the three component indices, it is easy tocompute HDI. Putting these figures, we findHDI = (1/3)(LEI + EAI + SLI) = (1/3) (0.632 + 0.561 + 0.520) = 0.571.

APPENDICES 183

CHAPTER 3

Estimation of Macroeconomic Aggregates in India

Macro-economic aggregates have been prepared in India on a regular basis only afterIndependence. First sets of estimates of national income were prepared by the NationalIncome Committee consisting of P.C. Mahalanobis, D.R. Gadgil, and V.K.R.V. Rao.This series started with year 1948-49 and continued until 1967 when it was replacedby another series with the base year 1960-61. This series was replaced in 1977 bystill another series with the base year 1970-71. In 1988, another series with the baseyear 1980-81 was started, which was replaced in 1999 by the latest one with the year1993-94. Since 1948-49 was the very first full financial year for the independentcountry, one could see a justification in choosing it as the base year. What is thejustification for choosing 1993-94 instead of 1990-91 as the base year for the latestseries? The year 1993-94 was chosen as the base year, partly because the years of1990-91 and 1992-93 were not considered normal and partly, because the massivedata from the NSS was available from its round conducted in 1993-94.

Central Statistical Organisation took over the work of preparing estimates fromthe National Income Committee, which submitted its final report in 1954. Withevery round of revision in base, the CSO went on adding to its list of aggregates. Itnow prepares many other national accounts for the country, including nationalincome.

Methods of Computation of Growth Rate

There are three ways to calculate the rate of growth for any given period. One, pickup the initial (I) and final figures (F) and use compound interest formula for rate ofinterest r and time-periods t, which is F = P (1+r)t. Substituting the values for F, Pand t, one can find out r which we call rate of growth per period. Usually our periodis a year. Often this figure r is multiplied by 100, and growth rate is expressed interms of per cent per annum. In this method, we ignore the performance in theintervening years. In case, final or initial years that are picked up are out of line,growth rate will not be representative of the period. This rate is known CAGR,compound annual growth rate. Two, the pair-wise year-to-year growth rates arecomputed and the sum of these rates is averaged by the number of rates. It isknown as AAGR (average annual growth rate). This method uses all figures but themethod is an amalgamation of geometric and arithmetic approaches as growth rateis basically a geometric idea whereas averaging is arithmetic. Three, throughregression method (statistical method) using semi-log function we can estimate arepresentative r for the period as a whole. All methods are used. Many scholars donot sufficiently warn the reader about the method they have employed. One shouldtherefore try to find out the method actually used in case one wants to make validcomparison.

You may notice Table 3.2 and 3.4 that CAGR gives too low a figure for theseventies; CAGR is not even one-third of AAGR in case of Table 3.4.

Gross Domestic Product since 1950-51 at Constant Prices

Gross domestic product, one can see from the following Table A, failed to rise only in 1957-58, 1965-66, 1972-73 and 1979-80 though there were a few years when growth


TABLE AGross Domestic Product at Constant Prices of 1993-94

from 1950-51 to 1999 - 2000 (Rs. Crore)

Year GDP Year GDP Year GDP Year GDP Year GDP

1950-51 140466 1960-61 206103 1970-71 296278 1980-81 401128 1990-91 692871

1951-52 143745 1961-62 212499 1971-72 299269 1981-82 425073 1991-92 701863

1952-53 147824 1962-63 216994 1972-73 298316 1982-83 438079 1992-93 737792

1953-54 156822 1963-64 227980 1973-74 311894 1983-84 471742 1993-94 781345

1954-55 163479 1964-65 245270 1974-75 315514 1984-85 492077 1994-95 838031

1955-56 167667 1965-66 236306 1975-76 343924 1985-86 513990 1995-96 899563

1956-57 177211 1966-67 238710 1976-77 348223 1986-87 536257 1996-97 970083

1957-58 175068 1967-68 258137 1977-78 374235 1987-88 556778 1997-98 1016266

1958-59 188354 1968-69 264873 1978-79 394828 1988-89 615098 1998-99 1083047

1959-60 192476 1969-70 282134 1979-80 374291 1989-90 656331 1999-00 1151991

TABLE BPer Capita Income at Constant Prices of 1993-94 from 1950 - 51 to 1999-2000 (Rs.)

Year PCI Year PCI Year PCI Year PCI Year PCI

1950-51 3687 1960-61 4429 1970-71 5002 1980-81 5352 1990-91 7321

1951-52 3714 1961-62 4449 1971-72 4914 1981-82 5555 1991-92 7212

1952-53 3747 1962-63 4425 1972-73 4763 1982-83 5548 1992-93 7433

1953-54 3909 1963-64 4546 1973-74 4880 1983-84 5854 1993-94 7698

1954-55 3994 1964-65 4781 1974-75 4830 1984-85 5956 1994-95 8088

1955-56 4020 1965-66 4459 1975-76 5167 1985-86 6082 1995-96 8498

1956-57 4159 1966-67 4392 1976-77 5103 1986-87 6189 1996-97 9036

1957-58 4007 1967-68 4653 1977-78 5375 1987-88 6260 1997-98 9288

1958-59 4222 1968-69 4657 1978-79 5551 1988-89 6777 1998-99 9733

1959-60 4216 1969-70 4865 1979-80 5092 1989-90 7087 1999-00 10204

rates were very close to one per cent per annum, which was lower than the rate ofgrowth of population.

We can see for the Table B that per capita income declined in as many astwelve years out of the fifty years while GDP had declined only in four. It simplymeans that, in eight other years, the rate of growth of GDP was lower than the rateof growth of population (accepted by us). While the rate of growth of population hasstarted declining in the eighties and nineties, the rate of growth of economic activityis on rise.

APPENDICES 185

Plan Investment Years Agriculture Industry Per Capita(Rs.Cr) Income

Bombay Plan 10,000 15 Twice Five Times Three times

People’s Plan 15,000 10 Four times Six Times

Gandhian Plan 3,500 10

CHAPTER 6

Three Plans submitted to GOI before Independence

A Plan of Economic Development for India, known as Bombay Plan was prepared byeight leading industrialists of the country, which accepted the role of the Statewithin the framework of capitalistic framework.

People’s Plan for Economic Development of India, known as People’s Plan preparedby B. N. Banerjee, G. D. Parekh, and V. M. Tarkunde but released by M. N. Roy,General Secretary of the Indian Federation of Labour, recommended creation ofState capitalism.

The Gandhian Plan of Economic Development for India, known as GandhianPlan by Shriman Narayan Agarwal, which recommended building up of a self-reliant rural economy.

The Bombay Plan proposed a doubling of per capita income over fifteen years,excluding preparatory time taking 3 to 5 years, amounting to trebling of nationalincome at the given rate of population rise, which would necessitate twice ofagriculture production, five times industrial production, creation of industries forproduction of power and capital goods but confining production of essentialconsumption goods with small scale and cottage industries. All this needed Rs10,000 crore over 15 years, which was found feasible. The People’s Plan, on theother hand, proposed an outlay of Rs 15,000 crore, found feasible, over10 years — leading four times increase in agriculture and six times increase inindustry. Gandhian Plan proposed doubling of per capita income in ten yearsthrough rejuvenation of village economy though accepting basic structure as itexisted then.

It may be surprising that, despite substantial ideological differences, thereexisted a broad convergence on many issues as who should develop and controlbasic industries, electricity should be used in variety of manufacturing units, landedinterests be abolished and every citizen should have balanced diet.

Resolution constituting Planning Commission

The Planning Commission has guaranteed certain Fundamental Rights to thecitizens of India and enunciated certain Directive Principles of State Policy, inparticular, that the State shall strive to promote the welfare of people by securingand protecting as effectively as it may a social order in which justice, social, economicand political, shall inform all the institutions of the national life, and shall directits policy towards securing, among other things —


Plans Prepared by the Planning Commission

Plan Period Perspective Plan Remarks

First Five Year Plan 1951-1956 1951-1981 (30)

Second Five Year Plan 1956-1961 1956-1976 (20)

Third Five Year Plan 1961-1966 1961-1976 (15)

3 Annual Plans 1966-1969 Fourth Plan withdrawn

Fourth Five Year Plan 1969-1974 1968-1981 (12)

Fifth Five Year Plan 1974-1979 1974-1986 (12) Perspective extended to 15

Annual Plan 1979-1980

Sixth Five Year Plan 1980-1985 1978-1988 (10) Perspective extended to 15

Seventh Five Year Plan 1985-1990 1985-2000 (15)

2 Annual Plans 1990-1992

Eighth Five Year Plan 1992-1997 1992-2007 (15)

Ninth Five Year Plan 1997-2002 1997-2012 (15)

Tenth Five Year Plan 2002-2007 2002-2012 (10)

Fourth Five Year Plan 1966-1971 1961- 1976 (15) Abandoned in June 1966

(Sixth) Five Year Plan* 1978-1983 1978-1988 (10) Perspective extended to 15

*Subsequently scrapped; Note: Figures within parentheses denote number of years.

(a) that the citizens, men and women equally have the right to an adequate meansof livelihood;

(b) that the ownership and control of the material resources of the community areso distributed as best to subserve the common good; and

(c) that the operation of the economic system does not result in the concentrationof wealth and means of production to the common detriment.

Having regard to these rights and in furtherance of these principles as well asof the declared objective of the Government to promote a rapid rise in thestandard of living of the people by efficient exploitation of the resources of thecountry, increasing production, and offering opportunities to all employment inthe service of the community,

The Planning Commission will—1. make an assessment of the material, capital and human resources of the

country, including technical personnel, and investigate the possibilities ofaugmenting such of these resources as are found to be deficient in relation tothe nation’s requirements;

2. formulate a Plan for the most effective and balanced utilisation of the country’sresources;

3. on a determination of priorities, define the stages in which the Plan should becarried out and propose the allocation of resources for the due completion ofeach stage;

4. indicate the factors which are tending to retard economic development, anddetermine the conditions which, in view of the current social and political situation,should be established for the successful execution of the Plan;

APPENDICES 187

5. determine the nature of the machinery which will be necessary for securingthe successful implementation of each stage of the Plan in all its aspects;

6. appraise from time to time the progress achieved in the execution of eachstage of the Plan and recommend the adjustments of policy and measures thatsuch appraisal may show to be necessary; and

7. make such interim or ancillary recommendations as appear to it to beappropriate either for facilitating the discharge of the duties assigned to it; or,on a consideration of the prevailing economic conditions, current policies,measures and develoment programmes; or on an examination of such specificproblems as may be referred to it for advice by Central or State Govenments.(Emphasis has been added by the Author)

Plan Objectives from the Plan Documents

First Plan

● Maximum Production● Full employment and● Removal of economic inequalities.

Second Plan

● Sizeable increase in national income so as to raise level of living in the country.● Rapid industrialization with particular emphasis on development of basic and

heavy industries.● Large expansion of employment opportunities.● Reduction of inequalities in income and wealth and more even distribution of

economic power.

Third Plan

● Equal opportunities● Distribution of economic powers● Reduction in disparities in income

Fourth Plan

● Rapid increase in standard of living of people● Greater equality in income and wealth● Progressive reduction of income, wealth and economic power● More Benefits to Relatively Less Privileged Classes

Fifth Plan

● Removal of poverty● Attainment of Self Reliance● Growth Rate of 5.5 per cent per annum


Sixth Plan 1978-83

● Removal of unemployment and significant unemployment● Appreciable rise in standard of living of poorest sections● Provision of basic needs by the State: Clean drinking water, elementary education,

health care, adult literacy, rural roads, rural housing for landless, minimumservices to urban slums

● Growth rate higher than attained in the past● Significant reduction in present disparities of income and wealth● Continued progress towards self-reliance

Sixth Plan (1980-85)

● Significant step-up in rate of growth, promotion of efficiency in resource-use andimproved productivity

● Strengthening modernisation-impulses for economic and technological self-reliance

● Progressive reduction in incidence of poverty and achievement of self-reliance● Speedy development of indigenous sources of energy with emphasis on

conservation and efficiency in energy-use● Improvement in quality of life of economically amd socially handicapped population

through MNP with national coverage within prescribed period and acceptedstandards

● Strengthening redistributive biases of public policies and services in favour ofpoor leading to reduction of inequality in income and wealth

● Progressive reduction in regional inequalities with increase in pace of developmentand diffusion of technological benefits

● Promotion of policies for control of population growth through voluntary acceptanceof small family norm

● Harmony between long-term and short-term goals of development by promotingprotection and improvement of ecological and environmental assets

● Promotion of active involvement of all sections in development process throughappropriate education, communication and institutional strategies

Seventh Plan

● Growth in foodgrains production● Increase in employment opportunities● Rise in productivity● Growth● Modernisation● Self-reliance and social justice

Eighth Plan

● Generation of adequate employment for near full employment by turn of thecentury

● Containment of population growth through people’s cooperation and scheme ofincentives and disincentives

● Universalisation of elementary education and eradication of illiteracy among peoplein the age group 15-35

APPENDICES 189

● Provision of safe drinking water and primary health care facilities, elimination ofscavenging

● Growth and diversification of agriculture to achieve self-sufficiency in food and togenerate surpluses for exports

● Strengthening infrastructure to support growth process on a sustained basis

Ninth Plan

● Priority to agriculture and rural development for generating adequate productiveemployment and eradication of poverty

● Acceleration in growth rate with stable prices● Food and nutritional security for all, especially vulnerable sections● provision of safe drinking water, PHC facilities, UPE, shelter and connectivity to

all in a time bound manner● Containment of population growth● Environmental sustainability of development process through social mobilisation

and people’s participation from all sections● Empowerment of women and socially disadvantaged groups (SC, ST, OBC,

minorities) as agents of change and development● Promotion and development of people’s participatory institutions like PRIs,

cooperatives, and SHGs● Strengthening efforts to build self-reliance

Tenth Plan

● Indicative target growth rate of 8.0 per annum

● Enhancement of well being

● Availability of food and other consumption items

● Access to basic social services of education, health, drinking water and sanitation

● Expansion of social and economic opportunities for all individuals and groupsreduction in disparities

● Participation in decision-making

● Substantial allocation of resources to social sector and major improvement ingovernance for effective use of resources

● Acceleration in growth rates of slowly growing states

● Poverty to be reduced to 15 per cent by 2007 and to 5 per cent by 2012

● High quality employment to additional labour force during the plan

● All children to be in school by 2003 and all children to complete Class V by 2007

● Gender gap in literacy and wage rate to be reduced to 50 per cent by 2007

● Population growth to be decelerated to 16.2 per cent during 2001-2011

● Literacy rate to be raised to 75 per cent by 2007

● Infant mortality rate to be reduced 45 by 2007 and to 28 by 2012

● Maternal mortality rate to be reduced to 2 by 2007 and to 1 by 2012

● Forest cover to be raised to 25 per cent by 2007 and 33 per cent by 2012

● All villages to be given sustained access to drinking water by 2007

● Cleaning of major polluted rivers by 2007 and other notified stretches by 2012.


CHAPTER 7

Industrial Policy

We may recall, that in the tumultuous days of partition, there was a lot of confusion.But there was a clear need for a statement particularly about the direction in whichindustrial sphere is likely to move. The Government responded with a resolution onIndustrial Policy in April 1948. Reserving arms/ammunitions, atomic energy, railwaytransport were to be exclusively in control of the Government of India and newventures in coal, iron and steel, aircraft, ship-building, apparatuses for telephone,telegraphs and wireless, were to be in exclusively in State sector. It means existingunits in these areas were left in the hands of private sector; no nationalisation ofthese units was proposed. All other industries, basic and heavy (mining, metallurgy,cement), capital goods (machinery, transport, electrical), chemical (fertilisers, otherheavy chemicals), and consumer goods industries (textiles, food-processing) wereleft for private sector, including cooperative units.

The Industrial Policy Resolution adopted in April 1956 spread the phalanx ofthe State by reserving 17 industries for exclusive monopoly, listing 12 industriesfor progressive State ownership, by putting restrictions on private sector in allother industries with regard to scale, volume, technology, and foreign capital. Itwas adopted in the back-drop of resolution adopted by the Parliament for establishinga socialistic pattern of society in India. The Constitution itself, while guaranteeingfundamental rights, had enunciated directive principles of state policy. Expandingpublic sector, strengthening cooperative sector and protecting cottage and small-scale industry were three major planks. Partly the reason for expansion of publicsector was inability of private sector to come to the fore and partly private sectorcould not be trusted to run public utility services in the interest of the consumer.However, linkages between the two sectors were mooted. Differential taxation,provision of subsidies and restriction on volume were to be invoked, small sectorhad to compete with large sector. It was emphasised that the decentralised sectorwould promote employment, mobilisation of resources, equitable distribution andwould check haphazard growth of urbanisation. The policy emphasised on regulatedinflow of foreign capital (announced in April 1949).

According to the Industrial Policy Statements made in 1991, licensing was tobe abolished for all projects except for a short list of industries related to: (i) securityand strategic concerns, (ii) social reasons, (iii) hazardous chemicals and overridingenvironmental reasons, and (iv) items for elitists consumption. Even substantialexpansion would not need any permission. But industries reserved for small sectorwould continue to be reserved for them and if such units intended to enter therestricted list of industries, there would be no need for license. Imports of capitalgoods would get automatic clearance in case foreign exchange availability is ensuredthrough foreign equity participation. Broad-banding (diversification) would bepermitted to existing units without encumbrances.

Public sector has to work in essential infrastructure goods and services and inmanufacturing of products where strategic considerations dominate such as defenceequipments, in exploration and exploitation of oil and mineral resources, and intechnology development and building of manufacturing capabilities in areas whichare crucial in the long-term development of the economy and where private sectorinvestment is inadequate.

APPENDICES 191

What we expect in an industrial policy?

● Division of industries according to ownership: public, private, joint, both● Reservation according to level of scale: cottage, small, medium, large● Use of technology: traditional/village, modern● Use of foreign capital - where, how, how much● Cap on capacity for an individual unit● Responsibility of State for sensitive matters● Check on concentration● Protection of livelihood of those dependent on traditional industry

CHAPTER 8

Power of Continuous Exponential Growth

Human population has not been ever rising with the slightest of rate of growth.This is clear from the following.

A population of one crore in the beginning of the era, rising at the rate of 1percent per annum would have become about 44,00,00,000 crore. Even half a percent growth per annum would have multiplied the population by a factor of 21,000in a span of 2,000 years.

Human history is much older. It simply means that population(s) rose anddeclined; civilisations arose and vanished. The same has been the case in India.

Importance of Infant Mortality Reduction

Observe in your family, families of your relations, families of your friends in yourneighbourhood about the death of children in infancy. Talk with parents and unclesabout their brothers and sisters who died in infancy. Also talk with your grandparentsabout death of their brothers, sisters, and children. You will discover a generalpattern that in each successive generation the number of children who died ininfancy has been reducing. Try to find out the number of children women of yourgrandmother’s generation and women of your parents’ generation gave birth.Compare with the number of brothers and sisters you and friends have. You willdiscover that each successive generation has been having fewer children.

Which way lies the causality? Reduction in infant mortality encourages at leastparents of next generation to beget fewer children.

CHAPTER 9

Contribution of Amartya Sen

Suppose the poverty line is 50 units. Suppose there are two societies, with ten personseach. Suppose in one society, there are five persons, each with 20 units and fivepersons with more than 50 units; in the other, there are five persons, each with 45units and five persons more than 50 units. You will say, if you were asked, that eachsociety has 50 per cent population below poverty line. Some people will call it incidence.But, you will perhaps not reconcile as you will find that poor people in one society facemuch more penury as they are far away from the poverty line than in the other. Theaverage distance from the poverty line, in the first case, is 30 units and in the other,it is just 5 units. So, you may suggest that this distance, call it average poverty gap,


should be taken into consideration in any good measure of poverty. This absolute gapmay be divided by the poverty line to yield the intensity of poverty.

Suppose further, that there are two societies, each with 5 persons out of 10 belowpoverty line and each with the same poverty gap of 30 units. In one case, all five poorhave the same 20 units and in the other the distribution is 10, 10, 20, 30, 30. Shallwe still say that poverty situation is the same in both the societies? No, perhaps youwill say that we should take into account the level of inequality among the poor.

Thus, we come to the conclusion that we should consider (i) incidence whichmeans what proportion of population is below the poverty line, (ii) intensity whichmeans how much below the poor are from the poverty line, and (iii) inequality amongthe peer group of the poor. If you can meaningfully combine the three dimensions,you will be an Amartya Sen and could win a Nobel Prize! Not a bad idea!

CHAPTER 11

Electric Power: Generation, Transmission and Distribution

Electricity is generated in one of the plants whether they are thermal, hydro ornuclear or one based on non-conventional energy sources.

If amount generated is large, it is not locally consumed. It is transmitted onhigh voltage through transmission lines from generating plants to power stationsor substation. You might have seen big iron-fabricated high towers connectedthrough heavy wires. This is transmission network.

From power station or sub-station, it is distributed to the end-user or consumer-industry, agriculture, commercial establishments, households, and railways. Citypoles and city wiring constitutes the distribution network in the city. Similar wouldbe the case in rural areas, with difference of scale, etc.

In order to match aggregate supply with aggregate demand, mechanisms ofgrids are being developed.

This description is not accurate picture of the total network. Its purpose is toprovide a background of the issue and to appreciate the problem.

Rural Urban Disparities in LiteracyRural-Urban Break-up of Male And Female Literacy Rates (in percentage)

Year Male Female Person Year Male Female Person1951 1981Rural 19.02 04.87 12.10 Rural 49.60 21.70 36.00Urban 45.60 22.33 34.59 Urban 76.70 56.30 67.20Total 27.10 08.86 18.33 Total 56.38 29.76 43.571961 1991Rural 34.30 10.10 22.50 Rural 57.90 30.60 44.70Urban 66.00 40.50 54.40 Urban 81.10 64.00 73.10Total 40.40 15.35 28.30 Total 64.13 39.29 52.211971 2001Rural 48.60 15.50 27.90 Rural 71.40 46.70 59.40Urban 69.80 48.80 60.20 Urban 86.70 73.20 80.30Total 45.96 21.97 34.45 Total 75.85 54.16 65.38Note : For 1951, 1961 and 1971, population group refers to age group 5+ while for

1981, 1991 and 2001, it refers to 7+.Source : Census of India Series 1 India, Provisional Population Totals, Paper 1 of 2001.

GLOSSARY

Accounting Period — It is usually a year. But besides the calendar year, we havea fiscal year or a financial year, academic year, agriculture year, etc. Calendar yearobviously runs from 1 January to 31 December. In our country, the fiscal year runsfrom 1 April of a calendar year to 31 March of the next calendar year while academicyear runs from 1 July of a calendar year to 30 June of the next calendar year.Agriculture year is the same as the academic year. While calendar year is presentedas 2001, fiscal and academic years are written as 2000-01. Our macro-economicaggregates refer to fiscal year while enrolments in schools refer to academic year.However, many businessmen use diwali to diwali as their business year.

Age-specific Fertility — Number of births given by women in a particular agegroup in any given year divided by the number of women in that age group, whenmultiplied by 1000, is called age specific fertility of that age group in that particularyear.

Basic Literacy Rate — Percentage of literates among persons above 15 to the totalsize of population above 15 in a society is known as basic literacy rate. It is calledbasic because the minimum requirement of being literate is that the person shouldbe able to read and write in any language. It is the same as adult literacy rate in ourcountry.

Birth Rate and Death Rate — Birth is live parturition of a human baby frommother’s womb. Stillbirths, miscarriages and abortions are not counted as (live)births. Birth rate is defined as number of live births per thousand of population ina given year. By convention birth of twins is counted as one birth. Death is finaldeparture of a human being. Death rate is defined as number of deaths per thousandof population in a given year. Though twins are born together, they die apart. Whiletheir births are counted as one, their deaths are counted as two.

Civic and Political Rights — Political rights relate to a citizen’s rights of playing apart in determining as to who governs their public affairs and how they are governed.Civic rights concern the rights of the individual vis-a-vis the State.

Cohort — A group of people, who have a synchronous/simultaneous start by asignificant event, is known as cohort. It is similar to a generation except that, in thecase of a generation, the interval of happening of a particular event is not precise.In this case, an interval is fixed. Normally, it is a year. People born in a particularyear, say 2001, constitute birth cohort of that year. There can be a marriage cohortor a recruitment cohort too. How the attrition in the group takes place is the basicinterest in the analysis, using the concept of cohort.

Combined Enrolment Ratio — Enrolment ratio, for any given level of education, isobtained by dividing size of enrolment by size of population of corresponding(assumed) age group. For example, enrolment ratio for primary level of education inIndia, is obtained by dividing size of enrolment in primary classes by size ofpopulation of age group 6-11. Enrolment ratios for primary, secondary and tertiary


level of education are usually calculated. In combine enrolment ratio, we shoulddivide the total studentship by size of the population of age group 6-23.

Comprehensive Development Planning — Planning which covers all spheres ofdevelopment and encompasses whole of the economy is called comprehensivedevelopment planning. It does not restrict itself to public sector or to economicspheres alone.

CSO and NAS — The Central Statistical Organisation, set up in May1951 in theCabinet Secretariat, but now a part of the Department of Statistics, is charged withcoordinating the statistical activities in the country, laying down standards in termsof concepts, definitions and procedures, providing consultancy and advisory supportto other statistical agencies and keeping liaison with international statistical agencies.With the transfer of work of estimation of national income in 1954 from the Ministryof Finance, it is also charged with the activity of preparing the national accounts,including macro-economic aggregates, accounts of the public sector, andconsolidated accounts of the nation. The National Accounts Statistics is the annualpublication of the CSO, giving details of different measures of different economicactivities.

Current Account Deficit — Balance of payments accounts are a record of theinternational transactions of an economy. It has two parts: current account andcapital account. The current account records trade in goods and services, as wellas transfer payments. The capital accounts records purchases and sales of assets(like stocks, bonds, land, etc.) and bank deposits. Trade in goods means purchaseand sale of goods, such as oil, scrape and jute and trade in services means paymentslike freight, royalty, and interest. Payments made or received on account ofremittances, gifts and grants, known as transfer payments, are included in thecurrent accounts. If, under the head of current account (trade in goods, trade inservices and transfer payments), the total payments exceed the total receipts, thereexists current account deficit. On the contrary, it is considered a surplus.

Current Daily Status Employment/Unemployment — Such an inquiry is madefor each day of the week, the number of person-days employed/unemployed dividedby seven is taken as average daily employment/ unemployment of the labour force.Dividing this number by the size of labour force (actually working or available forwork) yields the current daily status.

Demographic Investment — Investment necessitated by births of children tillthey enter the labour force on education and health (including public health) iscalled demographic investment. This has ‘public’ overtones and suggests investmenton schools and teachers, and hospitals and doctors. It is understood that this isdrain on development investment.

Dependency Burden — Expenditure on children while they are unproductive, ontheir bringing up, education and medicare is called dependency burden. This has‘parental’ overtones.

Development Economics — It is a distinctive branch of economics, which concernswith both the theory of development and policy for development with a view toimproving the lot of poor people in developing countries.

GLOSSARY 173

FERA and FEMA — In order to regulate foreign controlled companies in IndiaForeign Exchange Regulation Act was enacted in 1947. When our foreign exchangeresources fell below $1billion, the Act was amended in 1973 for conserving preciousforeign exchange. But, it also had provisions to issue guidelines to the foreigninvestors to divert their funds, which employ sophisticated technology. As it led tosome harassment, it was further amended in 1976. Finally, when we are somewhatcomfortable with level of foreign exchange reserves, we have got FEMA (ForeignExchange Management Act) which deals with issues of foreign exchange and foreignsecurities.

Fiscal Deficit — Total expenditure (revenue expenditure and capital expenditureincluding loan) – revenue receipts plus other receipts (which do not create liabilityon the Government). Other receipts include sale of Government property, and sharesand disinvestment proceeds.

Flight of Capital — When, on account of unsettled conditions of economicconditions, especially, if the Government is in financial difficulties, or in an extremecase, there is fear of serious depreciation of the currency, large numbers of thosewho have investments in that country will probably wish to transfer them elsewhere.If occurred on a large scale, it would be known as a flight of capital. The effect, ofcourse, is only to increase the difficulties of the country from which the flight takesplace.

Foreign Investment — Foreign investment is of two types. The first is investmentof foreign capital into new productive activity. This is known as direct foreigninvestment. The other is foreign capital purchasing the shares of Indian companies.This is known as portfolio investment. Both of them give foreign exchange to thelatter. While the foreign direct investment creates additional capacity and contributesto additional production, the latter does not. Both earn profit. It will depend on thenature of production, the foreign direct investor engages in, whether the productwill be exported and earn foreign exchange for the country. Portfolio investor wouldhave some claim over profit and some control over production.

Forex Reserve — Foreign exchange reserves consist of foreign currency assets,SDRs and gold reserves held by the RBI. They provide a cover for imports. They arehowever contributed by foreign investment, foreign aid, foreign borrowings andforeign grants, including those from IMF, and deposits by the NRIs — all in hardcurrency.

Green Revolution — A quantum jump in productivity in agriculture sector achievedthrough a combination of scientifically developed hybrid seeds, fertilisers, herbicidesand controlled irrigation, is called green revolution. While it raises the yield of aparticular crop, it permits a number of crops to be grown annually on a particularplot.

Gross Domestic Product — It is a measure in monetary terms of the volume of allgoods and services produced in an economy during a given period of time, usuallya year, accounted without duplication. Since different units of production (tonnes,metres and litres) of goods and different measures of services (number of orthopaedicoperations, number of stage shows and tonne-kilometres of transport) cannot be


added, the measure of volume of all goods and services has, perforce, to be in valueterms. We add up contribution of all activity of production, whether of goods or ofservices. While measuring contribution of a particular activity, we should subtractthe value of inputs from the value of inputs, so that there is no duplication for partsof many goods and services enter as inputs into production of other activities.Prices in different periods for many goods and services are different. In order tomeasure the real change in total volume of all activities between two different periods,care should be exercised to use GDP at constant prices. [Suppose, all that aneconomy produces could be measured in kilograms (apples, wheat, eggs and pearls)should we add them up? If not, think why not?].

Gross Enrolment Ratio — The ratio of number of students enrolled in a particularlevel of education, say primary level, to the size of population of children of relevantage group, say age group 6-11, is called gross enrolment ratio. The ratio is oftenexpressed in terms of percentage. However, we know that many students enrolledin the primary section (Classes I-V) do not strictly come from the age group of 6-11.There are children below age 6 and also above age 11. Gross enrolment ratio may,therefore, turn out to be more than 100 per cent. Indeed in the case some states, itturned out to be as high as 150! If we exclude overage and underage children fromthe numerator, then the enrolment ratio should be called net enrolment ratio.

Human Capital Formation — As against physical capital, which is a machine, abuilding, a road, when human beings are made more productive through educationand training and through better health and nutrition facilities, capital is formed inhuman form. It is believed that its contribution to productivity is enormous.

Infant Mortality Rate — Death before age one is called infant mortality. Infantmortality rate is the number of infant deaths in a particular year per 1000 livebirths during that year. Live births exclude stillbirths, miscarriages and inducedabortion. In cases where infant deaths widely fluctuate from year to year,demographers take notice of the fact that infant death that occur in a particularyear also include death of infants born in the preceding year and babies born thisyear may die next year as infants.

In-migration and Out-migration — A movement to a place with no immediateintention to return is called in-migration and a movement from a place with noimmediate intention to return is called out-migration. When such a movement takesplace between two countries, for the country receiving it is immigration and forcountry deporting it is emigration.

Intellectual Property Rights — Laws governing patents, copyrights, trade secrets,electronic media and other commodities, comprised primarily of information. Theselaws generally provide the original creator the right to control and be compensatedfor reproduction of the work.

Laissez-faire — A French phrase expressing ‘leave us alone’. It denotes the viewthat Government should interfere as little as possible in economic activity andleave decisions to the market. The role of Government, according to this view, shouldbe limited to maintenance of law and order, national defence, provision of certainpublic goods like public health and sanitation, which private business would notundertake.

GLOSSARY 175

Life Expectancy — Life expectancy at age x is measured in terms of average numberof years which are yet to be lived by the people at age x (at a given point of time). Lifeexpectancy at birth is, therefore, the average number of years to be lived by thebabies born in any given year. Life expectancy at age one is naturally the number ofyears expected to be lived by babies who have survived the first year of their existence.

Live Birth — The birth of a child who is alive at the time of parturition. Stillbirths,miscarriages and induced abortions are not counted as births because the childrencoming out of womb are already dead.

Long-term/Short-term Objectives — Long-term objectives are very muchassociated with our wishes for the kind of life people should lead. Short-termobjectives may be the need of the hour. For example, there may be good reasons forhaving good amount of foreign exchange. But, accumulation of foreign exchangewould not be our long-term objective. Containing inflation may be a short-termobjective but lower income inequality is a long-term objective.

Mean Years of Schooling — Multiply a given number of years of schooling with thenumber of persons who had it. Add all such products. Divide the sum by the totalnumber of persons. All persons with primary education may be taken as personswith five years of schooling. So multiply the number of persons (with primaryeducation) by 5. Do the same for other levels.

Million Tonne of Oil Equivalent — Wood, coal, oil, gas and electricity are differentforms of energy. Some forms can be substituted by other forms with ease, forexample, wood by coal. Some forms can be converted into other forms, for example,coal, oil and gas can be converted into electricity. Use of various sources of energydepends on use and development of technology. Nevertheless, in order to form abasis for judging relative contribution of various forms, they have to be convertedinto some common unit. British Thermal Unit, Joule, and Calories are energy units.Since oil is now commonly used in many operations, the presently accepted way isto express energy content of every form in terms of its equivalence in oil form.Million is an internationally accepted unit for large numbers.

MRTPA and MRTPC — Following the recommendations of Monopoly InquiryCommittee (1965), an Act was passed in 1970. The Act was called Monopolies andRestricted Trade Practices Act (MRTPA). Under this Act, Monopolies and RestrictedTrade Practices Commission (MRTPC) was set up to investigate, case by case, whethera given firm or a cartel of firms were resorting to such practices, obviously with aview to charging higher prices from the customers for their products. A companywith paid up capital of Rs 20 crore was brought within its jurisdiction. In 1985, thislimit was raised to Rs 100 crore.

National Sample Survey Organisation (NSSO) — It is a central governmentorganisation is responsible for most of the large scale sample surveys carried out inthe country. Using a scientific design, it collects sample data on regular intervals onvarious issues including consumption employment, unemployment, debt andinvestment. It collects data on variety of other subjects suggested to it.

Natural Monopoly — A monopoly, which emerges for technological reasons, notbecause of barriers to entry. Technology makes it cheaper for one producer toproduce a product for or provide a service to whole of the market. In terms of


resource cost, it is cheaper for the society too. If two plants try to meet the demand,with the same technology, for the same market, the resource cost will increase asthey will not be exploiting the economies of scale. However, such firms needregulation, or else they would reap huge profits.

Non-renewable Resources — Resources that cannot be easily renewed. Theyhave finite, even if large, stock. The stocks of fossil fuels (such as oil and coal)and mineral resources (such as iron, lead, aluminium, uranium) are the sametoday as they were millions of years ago. To convert CO2 and H2O back into fossilfuel will take as much energy as we got from it.

Normalisation — It is a modern term used for division by such factor as makesthe numerator comparable. Sometimes, the numerator is also modified bysubtracting something from it or subtracting it from something. See resemblancewith normalisation and standardisation of a variable, which is considered normallydistributed.

NRI — Non-resident Indian. An Indian who does not normally live and work inIndia but lives and works in some other country. He holds Indian citizenship andIndian passport.

Occupational Classification of Employment — As against where you are employed,which defines your industrial status, how you are employed defines your occupationalstatus. Occupational classification is in terms of professional workers,administrative/managerial workers, clerks/stenographers, sales workers, serviceworkers, farmers, fishermen, drivers, labourers, etc.

Organised Sector — All the public sector enterprises and those private enterprisesregistered legislation like Factories Act, companies Act and cooperatives Act areincluded in organised sector. Maintenance of accounts is the main criterion for theinclusion of enterprises in this sector.

Passenger-kilometre/Tonne-kilometre — A person (a tonne of goods) carried forone kilometre is one passenger-kilometre (tonne-kilometre).

Percent Points — The absolute difference between two percentages is known asper cent points. For example, the absolute difference between 50 per cent and 60per cent is (60 per cent – 50 per cent =) 10 per cent points whereas relative differenceis [{(60 per cent-50 per cent)/50 per cent} ××××× 100=]20 per cent.

Per Thousand Points — Difference between two levels of rates expressed in termsof ‘per thousand’ is to be expressed as per thousand points. It is similar to per centpoints. Since many rates in demography are expressed in terms of per thousand, itbecomes important to remember it.

Perpetual Resources — Resources, which will always exist in relatively constantsupply, no matter how and how much they are used. Solar energy is one suchexample. Perhaps, geothermal energy or wind energy could be other examples.

Person-day — A person working for a day works for a person-day. Two personsworking half-day each will amount to working for a person-day. Multiplying thenumber of persons with the number of days they have been working and aggregatingall such multiplication products will yield the total number of person-days worked.

GLOSSARY 177

Perspective Plan — Perspective plan is a long-term plan, which forms the backdropof the medium-term plan. While the medium-term plan is usually formulated forfour/five/six years (in our country for five years), the long-term perspective plan isusually for ten/fifteen/twenty years. Long-term perspective plan thinks in termsof long-term goals of sustained increase in capacity matching likely demands tenyears later or basic problems of poverty, unemployment or illiteracy, which onecannot solve in a day, or alternative technological possibilities. Medium-term plansbother about harnessing present technology, making a dent on poverty, improvingbalance of payments, controlling inflation. There are short-term or annual plans,which take care of immediate needs. Plans help one in moving in the correct direction.If there is a reason for deviating from the path, one knows that one has to comeback to the long-term path.

Postal Services — Postal services can be divided as basic postal services and otherpostal services. Basic postal services concern with sale of stamps and stationery,acceptance of registered and insured articles and parcels, value payable articlesand parcels, money orders and postal orders. Other postal services include speedpost, business post, media post (public and private corporate sectors’ advertisementon postal stationery), satellite post, express post, retail post (acceptance of telephonebills and electricity bills).

Potential Resources — Many of the resources we know today were not consideredresources once upon a time. Either we did not have taste for marine food or thetechnology was not ripe for using petroleum or natural gas. Economic, cultural andtechnological conditions of a society may find use for existing matters or discovernew matters for use. Waste water and earthworms are now considered resources.

Public Utilities — Public utilities are business enterprises, often allowed to run asmonopolies supplying essential public services, such as electricity, railways,communication, gas pipelines, water supply, sewerage, sanitation and irrigation.They are granted power of eminent domain (licence) to lay down spatial network inpublic interest. Whether in public sector or in private sector, they are regulated forprice, quantity and timely supply.

Purchasing Power Parity Exchange Rate — In order to get one US $, you need togive around Rs 50 at the market exchange rate. Let us take an example of simplepacket of bread, which is an essential item. Suppose it is available for Rs 15 inIndia and for US $ 3 in the US, then in terms of bread one US $ is equivalent to Rs5. So would be the case if we hire a residential flat of the same size and standard intwo comparable cities. Most of the essential items are ‘home-made’ where marketexchange is found to underestimate the value in the so-called underdevelopedcountries. When purchasing power equivalence is applied, GDP of India becomesfour-times and that of China becomes five-times but that of Japan’s becomes 0.6times only. At market exchange rates, Japan’s and China’s per capita GDPs in1994 are found to be US $4600 and US $ 520, respectively, but in terms ofpurchasing power parity equivalence, they are found to be PPP $ 2800 and PPP $2475, respectively!

Quota — Restriction on quantity of a commodity, which could be imported duringa given period. Though it is adopted by many countries for conserving their scarce


foreign exchange, it is considered a form of protection(ism) for domestic industriesagainst foreign competition.

Rate of Natural Increase/Growth — Difference between birth rate and deathrate is known as rate of natural increase or rate of natural growth. This is tocontrast with (total) growth rate, which considers net migration in its reckoningas well.

Registered Manufacturing Units — Under the Factory Act, a manufacturingestablishment, including activities of repair and maintenance, has to be registeredif it has 10 or more employees and uses power or has 20 or more employees butdoes not use power.

Registered Tonne — Cubical content of 100 cubic feet is called registered tonne.

Renewable Resources — Resources that can get easily renewed through naturalprocesses once they are used. Forests, animals and fishes, if not overexploited,get easily renewed. Water is put in that category.

Resources — Objects, materials and commodities that are of use to the humansociety are reckoned as resources. The relative importance of resources maychange over time because of changes in technology or tastes. Wood may be replacedby coal, and coal by oil or electricity as resource for energy. Waste products ofsome processes may be resource for other processes. The resources may broadlybe divided into the following four, not necessarily exclusive, categories.

Revenue Deficit — The excess of Government’s revenue expenditure over revenuereceipts constitutes revenue deficit of the Government. Revenue receipts includeproceeds of taxes and other duties as also interest and dividends on investmentmade by the Government, fees and other receipts for services rendered by theGovernment. Revenue (recurring) expenditure is incurred on normal running ofthe Government departments and various services, interest charges on debtincurred by the Government, subsidies, etc. Normally, revenue expenditure isnot supposed to result in creation of assets; but grants given to the States by theUnion, treated as revenue expenditure, may result in creation of assets.

Route and Track Kilometres — Distance between any two points, whethercovered with one track or two tracks or three/four tracks, is called route distance,measured in route kilometres. When all tracks are measured, double as two andtriple as three, it is total track. However, there are a few extra lines in sidingsand yards to carry out technical operations. When these extra lines are subtracted,we get the running track.

Sample Registration System — We have civil registration system (CRS) for recordof births, deaths and marriages. These events are recorded by panchayat agencies,police agencies and revenue agencies in rural areas of different states and throughmunicipal authorities in urban areas. Even though registration of birth and deathis compulsory by law, many births and deaths go unregistered. As a result, vitalstatistics rates based on civil registration system cannot be trusted. The Office ofthe Registrar General of India started a special registration system on a samplebasis, viz., sample registration system on an experimental basis in 1964-65, whichbecame fully operational during 1969-70. Now most of the vital statistics is basedon SRS.

GLOSSARY 179

Subsidisation and Cross-Subsidisation — When loss due to recovery beingless than the cost that is made up by the general revenue of the Government, thehelp is known as subsidisation. When one product is overpriced to under-pricesome other product, the practice is known as cross-subsidisation.

Tariff — A tax or levy imposed on each unit of a commodity imported into thecountry.

Tonne and Ton — Tonne a metre unit of weight is metric Ton equivalent to1000 Kgs. It is about 1.6' per cent shorter than Ton which is equal to 2240 pounds.One pound is about 453.6 grams.

When figures are in thousands of millions, no great harm will be caused if Tonneand Ton are taken as equal.

Total Fertility Rate — Roughly speaking, average number of children that couldbe born to a group of women when exposed to all age specific fertilities.

Usual Status Employment/Unemployment — A person may be employed todayand unemployed tomorrow. So he/she is taken as usually employed/unemployeddepending whether he/she was employed/unemployed for a major part of the yearof inquiry. The number of persons, who are usually employed/unemployed, givesthe extent of employment in that year. Dividing this number by the sum of all thosewho were employed or seeking work yields the usual status unemployment rate.

Vital Statistics — Statistics related to birth and death. There are many ratios todescribe the phenomena connected with birth and death. Infant mortality or childmortality is given special importance. Life expectancy is an important vital statistics.

WTO — The World Trade Organisation (WTO) came into being in 1995 purportedlyto raising living standards through substantial reduction of tariffs and other barriersto trade and elimination of discriminatory treatment in international commerce. Itis the successor to GATT. At Uruguay Round, after negotiation for seven long years,nations agreed to constitute WTO. The WTO has increased its sphere of operationby including trade in services, trade related intellectual property rights and traderelated investment measures.