part i 3 indian economy

8/4/2019 Part i 3 Indian Economy

http://slidepdf.com/reader/full/part-i-3-indian-economy 1/70



ECONOMIC ENVIRONMENT OF

BUSINESS {50 MARKS}COURSE CONTENT : 4 PARTS

PART I : The Fundamentals{Before syllabus we would cover in deeper the

meaning of economic environment of business}

• The Scope & Subject Matter of Macroeconomics

• An Introduction to the Economics of Growth & Development

• An Introduction to the Indian Economy - Its Salient Features

• India's Gross Domestic Product & Net National Product (its

components & the significance of the same to growth)

• Inter-Sectoral Distribution of the Gross National Product over

the Five Year Plans Period.



PART II: The Economic Markets:

• The Product Market & How it Affects India's Growth Potential

•

The Money Market & How it Behaves

• The Capital Market & its Variability

• The Money Market & the Role of Central Banking

• How does Commercial Banking Effect Industry & Business

• The Indian Labor Market & Levels of Unemployment &

Inflation since 1990


BUSINESS {50 MARKS}



PART III : Federal Budget

• Objective is to expose the students to the various components of

the national budget and how these impact on the business world.

PART IV: India & the World

• The capitalist world economy and India's position therein

since 1990

• The World Bank, and IMF conditionalities leading to the

liberalisation - privatisation -globalisation exercise and beyond

• India's balance of trade and fluctuations since 1990. How do

er figure in the world order.


BUSINESS {50 MARKS}



• India's balance of payments and how its study can assistcorporate decision making. What is needed to improve the

situation, if at all it is poor.

• The Business Cycle and how it is perceived to behave in theimmediate future. What business decision hinge on this analysis.


BUSINESS {50 MARKS}



MEANING OF UNDER DEVELOPING

ECONOMIES

MEANING OF AN UNDERDEVELOPED ECONOMY:

•Distinction between Underdeveloped and Developed

countries is rather loose.

•UN Experts observed “We have some difficulty in interpreting the term ‘Underdeveloped Countries’.

• We use it to mean .. “countries in which per capita real

income is low when compared with the per capita realincomes of the United States of America, Canada, Australia and

Western Europe. In this sense an adequate synonym would bepoor countries”



U.N. CLASSIFICATION:

•The term ‘Underdeveloped Countries is relative .

•In general those countries which have real per capitaincome less than a quarter of the per capita income of the United States are underdeveloped countries.

•More recently instead of referring to these economies asunderdeveloped, the UN publications prefer to describe them as“Developing Economies”.


ECONOMIES



•Developing countries signifies that though still underdevelopedthe process of development has been initiated inthese countries .

•Thus we have two categories ‘Developing Economics

and Developed Economies’

•World Bank Classification [World Development Rep2009] (Based on Gross National Income per capita)

Categorisation of Developing Countries – •Low Income and Middle Income Countries ($ 936 and

below) and•Middle Income Group (PC GNI $936 and $11,455)

•

Lower Middle Income (PCI $936 to $3,705)•U er Middle Income PCI $3706 to $11 455


ECONOMIES



•High Income Countries [Organisation for Economic

Cooperation and Development (OECD)] and others $11,456 or more.


ECONOMIES



DISTRIBUTION OF WORLD POPULATION & WORLD

GNI AMONG VARIOUS GROUP OF COUNTRIES

COUNTRYGR.

Population GNI ( ex. Ratebasis

GNI PPPbasis

Per capita GNI

Mn. % Bn($) % Bn($) % Ex RateBasis($)

PPPBasis($)

LOW INCOME 1296 19.6 749 1.4 1935 3.0 578 1494

MIDDLEINCOME

4260 64.4 12235 23.2 25,354 38.7 2872 5952

a. Low MiddleIncome

3437 52.0 6485 12.3 15,614 23.8 1887 4543

b. UpperMiddle Income

823 12.4 5750 10.9 9766 14.9 6987 11,868

HIGH INCOME 1056 16.0 39,682 75.4 38,144 58.3 37,566 36,100

WORLD 6612 100. 52,621 100.0 65,144 100 7958 9852

84%

24.6%



DISTRIBUTION OF WORLD POPULATION & WORLD

GNI AMONG VARIOUS GROUP OF COUNTRIES

Country

GR.

Population GNI (ex.Rate

basis

GNI PPP

basis

Per Capita GNI

Mn. % Bn($) % Bn($) %I Ex RateBasis($)

PPPBasis($)

HIGHINCOME 1056 16.0 39,682 75.4 38,144 58.3 37,566 36,100

WORLD 6612 100. 52,621 100.0 65,144 100 7958 9852

CHINA 1320 20.0 3121 5.9 7084 10.8 2360 5370

INDIA 1123 17 1069 2.0 3079 4.7 950 2740



•Low Income countries comprise nearly 19.6% of worldpopulation (1296 million) but account for only 1.4% of totalworld GNI.

•The middle income countries which are less developedthan the highly developed countries but comparatively

more developed than the low income countries comprise 64.3% of

world population but account for 23.2 % World GNI.

•

These two groups known as developing economiescomprise about 84% of world population but accountfor about 24.6% of the world GNI.•[Most countries of Asia, Africa, Latin America etc.fall under this category]


ECONOMIES



•High Income Economies which comprise only about 16% of

world population account for 75% of world GNI.

•

Thus bulk of poor people reside in the low income and middleincome developing countries.

•AK Cairncross calls that they constitute the slums of theWorld Economy.

•India with its population of 1,123 million in 2007 and with its percapita income of $950 is among the poorest of theeconomies of the world.


ECONOMIES



•It has a share of 17% of World Population but accountsfor only 2.0 % of World GNI on exchange rate basis.

•Though with a per capital GNI of $2,746 India continues

to remain under the group of lower middle incomeeconomies but with the accretion in its growth rate of GDPto an average of 8% India will very soon enter the groupof upper middle income countries.

•3 observations could be made regarding the UN

Classification of the developed and developing countries onthe basis of per capita income.


ECONOMIES



First, there is area of gross inequality of incomes betweenthe rich and the poor countries.

•Second, During last 17 years ( 1990-2007) the rates ofgrowth of GDP in low income economies were higher

than those in high income economies. As a corollary the gapbetween low income and high income economies hasreduced.

•China provides an illustration which is unique in the sense that itsgrowth rate of GDP during 1990-2000 averaged 10.6% and during

2000-2005 averaged 9.6% .


ECONOMIES



•India has also shown a high growth rate of 6% during 1990-2000

and 8% during 2000 – 07 .

•

This implies that two Asian giants are marching forwardon the road to development at a higher pace than thehigh income countries.

•China has already entered the upper middle income group.

•India will follow soon if GDP growth rate which hasreached a level of 9% in 2006-07 is further raised10% by 2010.


ECONOMIES



GROWTH RATE AMONG DIFFERENT GROUPS OF

ECONOMIES

COUNTRIES Average Annual Growth rate of GDP

1999-2000 2004-05

LOW INCOME 4.8 6.1

MIDDLE INCOME 3.8 5.2

a. Lower Middle Income 5.3 6.3

b. Upper Middle Income 2.1 3.5

PAKISTAN 2.7 2.2

CHINA 10.6 9.6

INDIA 6.0 7.0



Third all the high income countries are not necessarilydeveloped countries.

• For instance the oil exporting countries have high per

capita income but this is mainly due to their exports of oil;

really speaking they are not developed countries.

(a) Developing economies are distinguished from the developedeconomies on the basis of their low per capita income. It is

most significant single measure of comparison fordifferent economies.

(b) The central problem of developing economies is the

prevalence of mass poverty which is the cause as well as

consequence of their low level of development.


ECONOMIES



(C) Mass Poverty is the result of low resource base ofthe poor who own a very small portion of the totalassets in the form of land, capital, house propertyetc.

•The children of the poor by and large are either engaged inunskilled occupations or some semi skilledoccupations.

•

This enables them to earn very low and meagre wagesand thus perpetuate poverty.

(d) Mass poverty in developing economies is not due to

poor natural resources but due to inadequate development

of these resource and exploitative social structure.


ECONOMIES



BASIC CHARACTERISTICS OF THEINDIAN ECONOMY AS DEVELOPING

ECONOMY1. India is a low income developing economy.

2. Nearly one fourth of its population lives in conditionsof misery.

3. Povertyis not only

acutebut

also chronic.4. There exist unutilised natural resources

CHARACTERISTICS OF INDIAN ECONOMY:1. LOW PER CAPITA INCOME

• Per Capita Income in India in 2008 was $1040 .• Barring a few countries the per capita income of the

Indian people is lowest in the world.

• Despite having grown at a faster pace than the developed

economies during 1990-2009, the percapita income in India islower than many countries :



PER CAPITA GNI AT MARKET PRICES (IN US

DOLLARS)

COUNTRIES 2008

EXCHANGERATE BASIS

PURCHASINGPOWER PARITYBASIS

SWITZERLAND 55,510 39,210USA 47,930 46,790

JAPAN 38,130 35,190

GERMANY 42,710 35,950

U.K. 46,040 36,240

INDIA 1040 2,930

CHINA 2,940 6,010

BASIC CHARACTERISTICS OF THE




ECONOMY1. It may be noted that in 2008 the average per capita GNI

of USA at official exchange rates was 46 times that ofIndia, while at the purchasing power pairty rates it was 16

times only.2. Still the difference between the Standard of living of the

average American and an Indian was quite large andsignificant.

2.OCCUPATIONAL PATTERN: PRIMARY PRODUCING:

One of the basic characteristics of an underdeveloped economy isthat it is primary producing .





ECONOMY• In India in 2008, 58% of the working population was

engaged in agriculture and its contribution to national

income was 17.5%

• In Asia, Africa and Middle East countries from 2/3rd.to more than 4/5 th. of the population earn their

livelihood from agriculture and in most Latin

American countries from 2/3rd to 3/4th ofpopulation are dependent on agriculture .





ECONOMY• From occupational point of view Indian Economy is

primary producing because agriculture contributes

18% of national income while 58% of the labourforce is engaged in agriculture.

• Yet Agriculture continues to be a depressed industry as

the productivity per person engaged in it is very low.



PERCENTAGE OF AVERAGE POPULATION ENGAGED

IN AGRICULTURE AND INDUSTRIAL ORIGIN OF GDPIN 2008

COUNTRIES ActivePopulation% engagedin Agricult..

Industrial Origin of GDPPercentage Distribution

Agriculture. Industry ServiceU.K. 1 0.7 23.7 75.6

U.S.A. 4 1.3 21.8 76.9

JAPAN 5 1.4 29.3 69.3

THAILAND 45 11.6 44.2 44.2

PAKISTAN 52 20.4 26.9 52.7

CHINA 47 11.3 48.6 40.1

INDIA 58 17.5 28.8 53.7





ECONOMY3. HEAVY POPULATION PRESSURES:

• Heavy population pressure in India emerged from high level

of birth rates coupled with a falling level of deathrates.

• The rate of growth of population which was about 1.31%during 1941-50 rose to 1.93% during 1991-2001. While

there is a steep fall in death rate from 49 per thousandduring 1911-20 to 7.4 per thousand in 2008, birthrate has declined from about 49 per thousandduring 1911-20 to 22.8 per thousand in 2008. The

annual average rate of growth of population during 2000-2005has further declined to 1.5





ECONOMYThe fast rate of growth of population necessitated a

higher rate of economic growth in order to maintain thesame standard of living.

• For rapidly growing population, the requirementsof food, clothing, shelter ,medicine, schooling etc.all rise.

• A rising population leads to an increase in thelabour force. According to Tenth Plan between2002 and 2007 alone labour force was expected toincrease by about 35 million at an annual average

rate of 1.8%.





ECONOMY• Such addition in labour force without enough

employment opportunities will lead to higher

unemployment.





ECONOMY4. PREVALENCE OF CHRONIC UNEMPLOYMENT AND

UNDEREMPLOYMENT :

• Due to abundance in labour it is very difficult to provide

gainful employment to the entire working population.

• In developed countries unemployment is of acyclical nature and occurs due to lack of demand .

• In India unemployment is structural in nature and isthe result of a deficiency of capital.





ECONOMY• There is disguised or concealed unemployment inAgriculture.

• Thus even if the surplus population is siphoned off , the

total output from agriculture will not fall because thosepersons who were working below capacity begin to be utilisedto the full.

•The Planning Commission on the basis of the NSS data hasestimated that during 2004-05 the rate of unemployment hasrisen to 8.36% as against 7.32% in 1999-00.

• The Eleventh Plan (2007-12) will have a backlog of 37million unemployed.





ECONOMY• The revised estimates of the Planning Commission reveals that

45 million are likely to be the new entrants to the

labour force during the Eleventh Plan .

• Thus the total job requirements of the 11th plan work out to82 million.





ECONOMY5. STEADILY IMPROVING RATE OF CAPITAL

FORMATION.

• During 50s and 60s basic characteristic of the Indian economywas the capital deficiency which is reflected in two ways:

• Firstly, the amount of capital per head availablewas low and

• The rate of capital formation was also low.

• An important indicator of low capital per head

available in underdeveloped countries is the consumptionof ener .





ECONOMY• Per Capita Consumption of electricity in India is

extremely low as compared to the advanced countries.

COUNTRIES Energy use (Kg. of oil equivalent Per Capital(2007)

U.S.A. 7,766

U.K. 3,464

JAPAN 4,019

CHINA 1,484

INDIA 529





ECONOMY• Gross Capital Formation in India is higher than that of

important developed economies.

• Professor Colin Clark has estimated that in order to maintain thesame standard of living a country requires anadditional investment of 4% per annum.

• In a country like India where population growth is 1.5%(2000-2005) about 6% investment is needed to offsetthe additional burden imposed by the rising population.



GROSS CAPITAL FORMATION & GROSSDOMESTIC SAVING AS % OF GDP

Gross Capital

Formation

Gross Domestic

Savings

1990 2008 1990 2008

U.S.A 18 18.3 16 13.7

U.K. 20 16.8 18 15.6

JAPAN 33 24.1 34 28.9

GERMANY 24 19.3 24 25.8

CHINA 35 44.4 38 54.3

INDIA 24 39.7 23 38.0





ECONOMY• India requires as high as 14% of Gross capital

formation so that it may cover depreciation and

maintain the same level of living.

• India has reached a Saving rate of 22% in 2003 which issufficiently high .

• More recently Gross Domestic Saving in 2008 reacheda high level of 38% and Gross capital formation washigh at 39.7%.





ECONOMY6. MAL DISTRIBUTION OF WEALTH/ASSETS:

• RBI Survey of assets of Rural and Urbanhouseholds for the period July 1991- June 1992 brings

out the existence of sharp inequalities in assetdistribution.

• In Rural areas 51% of bottom households owned just10% of total assets.

• As against this 9.6% of rich households accounted for

nearly 49% of total assets.





ECONOMY• In Urban area the position is much worse: 50.7%of the Urban households owning less than Rs. 50,000

worth of assets accounted for barely 5.3% total assets.

• As against them nearly 66% of the total assets of allurban households were held by 14.2% of thehouseholds each owning Rs. 2.5 lakhs and above.

•Inequality in asset distribution is the principal causeof unequal distribution of income in the ruralareas.

BASIC CHARACTERISTICS OF THE INDIAN



BASIC CHARACTERISTICS OF THE INDIANECONOMY AS DEVELOPING ECONOMY

• It signifies that the resource base of 50% of thehouseholds is so weak that it can hardly provide themanything above the subsistence level of income.



PERCENTAGE DISTRIBUTION OFHOUSEHOLDS & ASSETS IN INDIA (1991-92)

Rural (%) Urban (%)

Household

Assets Households

Assets

Less than Rs.20,000 27.0 2.4 33.5 1.4

Rs.20,000-50,000 23.8 7.5 17.2 3.9

Rs. 50,000-1,00,000 20.9 14.0 16.0 8.0

Rs. 1,00,000- 2,50,000 18.8 27.3 19.0 20.8

Rs. 2,50,000 & above 9.6 48.8 14.2 65.8

All Classes 100 100 100 100




BASIC CHARACTERISTICS OF THE INDIANECONOMY AS DEVELOPING ECONOMY

7. POOR QUALITY OF HUMAN RESOURCES:

• Under the United Nations Development Programme (UNDP)countries have been ranked on the basis of Human

Development Index ( HDI) . This index is based on lifeexpectancy, adult literacy, combined enrolment ratio- first second

and third level and real GDP per capita in US dollars.

• It is distressing to note that India has been ranked at

134. on the basis of HDI in 2007. while China is ahead usat 92.

HUMAN DEVELOPMENT INDEX 2007



COUNTRY LIFEEXPECT

ANCY2007

ADULT

LITERACY

(%) 2007

COMBINEDENROLMENT RATIO(%) 2007

PERCAPITAREAL GDP$PPP2007

HDI RANK

CANADA 80.6 99.0 99.3 35,812 4

U.S.A. 79.1 99.0 92.4 45,592 13

JAPAN 82.7 99.0 86.6 33,632 10

FRANCE 81.0 99.0 95.4 33,674 8

U.K. 79.3 99.0 89.2 35,130 21

CHINA 72.9 93.3 68.7 5383 92

INDIA 63.4 66.0 61.0 2,753 134





ECONOMY8. LOW LEVEL OF LIVING OF THE AVERAGE INDIAN:

• Failure to secure a balanced diet manifests in India is

the low calorie intake and low level of consumption of protein.

• In 1999 the average calorie intake of foods is only 2496

as compared to over 3,400 calories per day in most ofthe developed countries.

• This is again slightly above the minimum intake forsustaining life estimated at 2100 calories.





ECONOMY

• About 28% of population in India lived below thepoverty line in 2004-05 (getting calorie intake

lower than 2100 ).

• According to World Development Indicators, 46% of thechild population in India suffers from malnutrition.

• According to Census data (2001) 52% of households wereliving in permanent, about 30% in semi permanentand 18% in temporary homes.



DISTRIBUTION OF HOUSEHOLDS BY TYPE OFHOUSES (2001) [ In Million]

Total Rural UrbanPERMANENT 99.4 56.8 42.6

(51.8) (41.1) (79.3)

SEMI PERMANENT 57.7 49.4 8.3

(30.0) (35.7) (15.4)TEMPORARY 34.9 32.1 2.8

(18.1) (23.2) (5.2)

TOTAL

192.0 138.3 53.7(100) (100) (100)





ECONOMY

9. DEMOGRAPHIC CHARACTERISTICS OF ANUNDERDEVELOPED COUNTRY:

•

High population density (373 per sq Km. as against 33in US, Canada and Australia – 2-4 per sq km) . In

China 141 and World level 50 – 2006 data)

• Low expectation of life

• High infant mortality




ECONOMY

10.SOCIO ECONOMIC INDICATORS OFCONSUMPTION ARE CHARACTERISTIC OFUNDERDEVELOPED ECONOMY IN INDIA:

• Underdevelopment finds expression through several socioeconomic indicators such as per capita intake ofcalories, fats and proteins, population per TV setand physician .

• India remains far behind the developed countries so

far as these indicators of standard of living areconcerned.

SOCIOECONOMIC INDICATORS OF STANDARD OF



O O O O O O OLIVING (1999)

COUNTRY PER CAPITA DAILY INTAKE PER 1000 PERSONS

FATS(gms)

PROTEIN(gms)

CALORIES TV SETS PHYSICIANS (1998)

INDIA 45 59 2496 69 0.4

CHINA 71 77 2,897 272 2.0

JAPAN 83 96 2,932 707 7.3

U.S.A. 143 112 3,699 847 2.5

U.K. 141 93 3,276 645 1.5





ECONOMY

• TO SUM UP INDIAN ECONOMY HAS MADECOMMENDABLE PROGRESS ON MANY FRONTS BUT

IT HAS MILES TO GO TO REMOVE POVERTY,MALNUTRITION AND PROVIDING THE DRINKINGWATER TO ITS ENTIRE POPULATION.





ECONOMY

MAJOR ISSUES/CHALLENGES OF DEVELOPMENTS ININDIA

1. LOW PER CAPITA INCOME AND LOW RATE OFECONOMIC GROWTH:

• Barring a few countries in the World, the per capitaincome of the Indian people is lowest in the world.

• However due to faster development after reform thegap of per capita GDP with developed countrieshas been reduced.





ECONOMY

2.. HIGH PROPORTION OF PEOPLE BELOW THEPOVERTY LINE:

•

According to the Planning Commission, in 2004-05 nearly 302million people ( 27.5% of total population) were living belowthe poverty line – 221million in rural area and 81million in Urban area

• The burden of poverty is massive.

• Rapid reduction and eventually the elimination ofpoverty is therefore the most important issue of

development.





ECONOMY3. LOW LEVEL OF PRODUCTIVE EFFICIENCY DUE TO

INADEQUATE NUTRITION AND MALNUTRITION:

• Nutrition influence economic development via raising thelevel of productivity, efficiency and intelligence ofthe community.

• The National Sample Survey has estimated that about 56% of

the urban population and about 49% of the ruralpopulation suffers from inadequate nutrition as they

do not get a calorie intake of 2,400 per dayconsidered as a reasonable level of nutrition.





ECONOMY

• The level of malnutrition in all expenditure groups was

higher in the urban areas than in the rural areas.

• This is partly due to the relative lower prices of food

production and their relative easy availability in

rural areas.

• Thus there is a clear cut need for an integrated policywith regard to prices, production and distribution

of various food grains coupled with a programme

for raising the output of such non cereals as milk

products, poultry, fish, meat, pulses, vegetablesand fruits.





ECONOMY

4. IMBALANCE BETWEEN POPULATION SIZE ,RESOURCES AND CAPITAL:

•

Economic growth is adversely affected by a rapidgrowth of population.

• The rate of growth of population of India at 1.5% perannum is still higher.

• A rising population imposes greater economicburdens and consequently society has to make greaterefforts to initiate the process of growth





ECONOMY

• More over with the increase rising population per capita

availability of land and such other resources fixed in supply

declines.

• Consequently society has to make greater efforts to

eke out more output per unit of land.

• Similarly significant proportion of the capital formation isutilised to provide basic facilities to the additional population at

the present level of living.





ECONOMY

5. PROBLEM OF UNEMPLOYMENT:

• A major development issue in India is to eliminate

unemployment and provide gainful employment tomillion of people without work.

• In 2001-02, India had an incidence of unemploymentunderemployment of the order of 9.2% . In other

words the development plans in India failed toabsorb even the normal increase in labour forceduring this period not to speak of reducing thebacklog of unemployment.




ECONOMY

• The expansion of infrastructure and social services i.e. road

construction , rural electrification , water supply rural schools

and community health schemes besides irrigation , power and

housing programmes will help to generate massive employmentthrough expansion in construction activity and their secondary

and tertiary effects in raising agricultural productivity and

income of the poor.




S C C C S CS OINDIAN ECONOMY AS DEVELOPING

ECONOMY

6.. INSTABILITY OF OUTPUT OF AGRICULTURE AND

RELATED SECTORS:

• Uncertainty of agricultural production is one ofthe major problems of Indian economy sinceagriculture is still a gamble in the monsoons.

• Since Independence, there has been considerableincrease in the production of the agriculturalsector.




INDIAN ECONOMY AS DEVELOPINGECONOMY

• For example between 1950-51 and 2003-04 production of

food grains increased from 54 million tonnes to 213 million

tonnes Between 1961 and 2003-04 production of wheat has

increased spectacularly from 11 million tonnes to 72 milliontonnes.

• Inspite of this spectacular growth food grains output has been

fluctuating from year to year.

• This is also true of oilseeds, sugarcane, cotton and jute the major

commercial crops.

•

Instability of output of agriculture also results in causing





• For example a fall in the production of sugar cane orjute leads to a small availability of raw material

for the sugar and textile industry.

• Similarly a cut back in agricultural production alsoresults in reduction of employment in agriculture

and this in turn reduces aggregate demand in the

economy as the purchasing power of the peasantsfalls.

• Thus a major development issue for the Indian

economy is to devise a strategy of agricultural

development which can promise a steady growth





• IM1 to 31% in 1974-75.

8. IMBALANCE BETWEEN HEAVY INDUSTRY AND WAGE

GOODS:

• In the post independence period, as a matter of deliberatepolicy Government had decided to set up heavy industries

to build the industrial base of the economy.

• In the aftermath of 1962 debacle Government hasdecided to pay attention on defence industrieswhich resulted into massive investment in heavyindustries.





•Following stepping up of investment in the heavy industry sector,as was rightly done it was quite natural that share ofwage goods sector in the total investment fell from

41% in 1950-51 to 31% in 1974-75.

•A study of Indian Economy during 1963-76 by Prof. Brahmanandarevealed that supply of wage goods rose at smallerpace than the supply of non wage goods, the growth

rate of supply of wage goods sector was just 2% perannum as against over 4% in the non wage goodsector.

•This resulted in a sharp increase in the prices of wage goods at theannual rate of 8 er annum.





• Thus the increase in real wages of workers that hadtaken place during the early phase of planning was wiped out by the increase in the prices ofwage goods during 1963-76.

• Now that country has been able to build a reasonable industrialbase it is imperative that the imbalance betweenthe heavy industry and wage good sector be

corrected by shifting investment policies infavour of wage goods.

• This path of balanced growth will help to improve

the level of living of the masses.




ECONOMY AS DEVELOPING ECONOMY

17. IMBALANCES ON DISTRIBUTION AND GROWING

INEQUALITIES:

• There have been growing inequalities of income andwealth in India during the last 5 decades of planned

economic development; redistribution of income infavour of the less privileged classes has nottaken place.

18. CONCENTRATION OF INCOME AND WEALTH HAS

INCREASED .

• The condition of bottom 20% of the population hasdefinitely deteriorated and the next 20% of the

population has remained stagnant.





• A leading issue of economic development is to assurecontinuous growth with justice through betterdistribution of a national wealth produced in thecountry.





1. LOW PER CAPITA INCOME2. Occupational pattern: Primary Producing3. Heavy Population Pressure

4. Prevalence of Chronic Unemployment andUnderemployment5. Steadily Improving rate of Capital Formation6. Mal Distribution of Wealth/Assets7. Poor Quality of Human Capital

8. Low Level of Living of Average Indian9. Demographic Characteristics of an UnderdevelopedCountry10. Socio Economic indicators of Consumption are

Characteristics of Underdeveloped Economy in India.

MAJOR ISSUES IN DEVELOPMENT OF



INDIAN ECONOMY

1. Low Per Capita Income and Low rate of EconomicGrowth

2. High proportion of people below the poverty line3. Low level of productive efficiency due to inadequate nutrition and

malnutrition4. Imbalances between population size, resources and Capital5. Problem of high Unemployment6. Instability of output of agriculture and related sectors7. Imbalance between heavy industry and wage goods

8. Imbalance in distribution and growing inequalities.

part i 3 indian economy

Documents