BBA Indian Economy Notes Motes Important Question Answer

BBA Indian Economy Notes Motes Important Question Answer

BBA Indian Economy Notes Motes Important Question Answer :

BBA Indian Economy Notes Motes Important Question Answer
BBA Indian Economy Notes Motes Important Question Answer

Q. 1. Give the meaning and characteristics (features) of take off stage of economic development.

Ans. Take off Stage of Economic Development : It is also known as the (Stage of Economic Take off’ or the ‘Stage of Systematic Development’. At this stage, the economy gets a break through to enter into the self-sustaining growth. There is an increase in the output devoted to capital investment. Economy witnesses significant changes in industrial organisation, technical progress and infrastructural facilities.

Characteristics or Features : (1) Take off period ranges from 20 to 30 years, (2) Radical changes in the economy, (3) Significant improvement in the production and productivity of agricultural sector, (4) Significant improvement in infrastructural facilities, (5) Development of basic and capital goods industry, (6) Development of entrepreneurial and promotional ability. (7) Reduction in the pressure of population on agriculture, (8) Increase in employment opportunities.

Q. 2. Give the meaning and characteristics (features) of high mass consumption stage.

Ans. High Mass Consumption Stage : Economy is fully developed and self-sustained at this stage. All the goods and services of necessities comforts and luxury are produced in the economy itself. Level of consumption, savings and in Vestment reaches at the maximum. Scientific and technological development reaches at highest stage.

U.S.A., U.K., Canada, Japan, Germany may be said to have achieved this stage,

Characteristics or Features : (1) Economy is’ fully automatic and self-sustained, (2) All the goods and services of necessities, comforts and luxury are produced in the economy itself, (3) Economy is a big power at international scenario.

Q. 3. Which stage of economic growth has been achieved by India?

Ans. India and the Stage of Economic Growth : It is a living controversy as to at which stage on economic growth is India at present. Prof. W.W. Rostow established that India has achieved the take off stage in 1952. Many scholars agree with this statement while many do not. Following arguments support this view : (1) Rate of investment in India is more than 10%, (2) There is a large network of infrastructural facilities, (3) India is almost self-sustained in the production of agricultural products, (4) National income, national output, per capita income etc. are consistently increasing, (5) Scientific and technological research have changed thé economic scenario considerably,

However, dominance of agriculture, wide-spread unemployment, poverty, dependence on foreign aid and shortage of capital are the factors which suggested that India has not yet achieved take off stage.

Q. 4. What is balanced growth? What are its characteristics?

Ans. Balanced Growth : Thought of balanced growth was propounded by Regnar Nurkse and supported by Schumpeter etc. It emphasises upon simultaneous proportionate growth of all the sectors of economy. There should be synchronised allocation of productive resources to agriculture and industry, consumer goods and capital goods, domestic trade and international trade, rural areas and urban areas, labour-intensive technique and capital- intensive technique etc.

Characteristics of Balanced Growth : (1) Simultaneous and proportionate development of all the sectors of economy, (2) Productive resources should be allocated to diverse industries, (3)Proper balance should be maintained between industry and agriculture, consumer goods and capital goods, labour-intensive technique and capital intensive technique, domestic and rural areas and urban areas etc.

Q. 5. What is unbalanced growth ? What are its characteristics?

Ans. Unbalanced Growth : Thought of unbalanced growth has presented by Hanes Singer and supported by W.W. Rostow etc. Doctrine of unbalanced growth emphasises upon concentration on a few selected industries, It envisages that an underdeveloped country, like India, has limited resources with alternative uses. All the requirements of economy Cannot be satisfied -at one time.

Therefore, the need is-to select the sectors in which there greater possibilities of growth and development and to concentrate upon their growth.

Characteristics of Unbalanced Growth : (1) Productive resources are allocated to develop certain strategic industries, in which there are greater possibilities of development, (2) Invest-ment activities of a country are divided as : (i) Direct Productive Activities (DPA), (ii) Social Overhead Capital (SOC), an underdeveloped economy should choosing either activities, (3) Such decision is governed by forward and backward linkages. An economy should try to maximise total linkage,

Q. 6. Which measures should be taken up by underdeveloped countries to promote economic growth?

Ans. Following are the measures to promote economic growth in underdeveloped countries :

1. Control on Population : It should be ensured that rate of growth in population is much less than the rate of economic growth.

2. Expansion of Education and Training Facilities : Best efforts should be made to develop and expand education and training facilities so that the skill of people may be developed.

3. Development of Infrastructural Facilities : Process of economic growth requires a wide network of infrastructural facilities. These facilities should be strengthened.

4. Better Utilisation of National Resources : An important need is to create an atmosphere in which resources may be exploited effectively.

5. Inviting-Foreign Aids Capital : Underdeveloped countries should not hesitate in inviting foreign aid, capital and technology so that the lack may not come in the way of economic growth.

6. Government Policies : (i) Banking facilities should be developed, (ii) Taxation policies credit should be made available for industries, (v) Capital market should be developed to mobilize capital resources.

Long Answer Questions)

Q. 1. What is economy? Discuss the main characteristics of Indian economy. Is India a developed country?


Discuss the main characteristics of Indian economy. Is India an underdeveloped economy?


What do you understand by an underdeveloped economy? Describe important characteristics of such an economy.

Ans. Economy : Economy is the wealth and resources of a community and administration or condition of these. The careful management of financial resources is the main target of its study.

Indian economy is presently an underdeveloped economy, almost all important characteristic features of an underdeveloped economy were present in the Indian economy at the time of Independence and have not changed much since then. According to World Development Report 2005, India was one of the 46 low income economies in 2003.

Meaning and Definition of Underdeveloped Economy : On the basis of economic development, all the countries of the world may be-classified into two parts :

Developed countries and underdeveloped countries, developed countries are the countries which are economically advanced and rich. Underdeveloped countries are the countries which are Economically backward and poor. Different economists have defined the term underdeveloped economy on different basis.

“An underdeveloped country is like a giraffe, difficult to describe but you know when you see one.”  —H. W. Singer

Definition of underdeveloped economy may broadly be divided into four parts :

1. On the basis of capital.

2. On the basis of technological level.

3. On the basis of per-capita income.

4. On other basis.

1. On the Basis of Capital : Underdeveloped countries are the Countries in which the level of per capital resources are less than that of developed countries.

“Underdeveloped countries are those which, when compared with advanced countries, are under-equipped with capital in relation to their population and natural resources.” —Ranger Nurkse

2. On the Basis of Technological Level : Underdeveloped countries are the countries in which the level of technology is very lowin comparison to advanced countries.

“An underdeveloped country is a country in which the quantity of technical and monetary resources is less like the real quantity of production and savings, consequently, average remuneration of every worker is much below than what he would have received in the state of high technology.”     —J.R. Hicks

3. On the Basis of Per-Capita Income : Underdeveloped countries are countries in which the level of per capital income is less than that of developed countries.

“Underdeveloped country broadly indicates the countries or states whose level of real income and per capital income is lower than the level of North America, West Europe and Australia.”     —Prof. P. T. Bawer

“We use the term underdeveloped country to mean countries in which per capita real income is low when compared with the per capita real incomes of the United States of America, Canada, Australia and East Europe in this Sense, an adequate synonym would be poor countries.”  —United Nations

4. On other Basis : These definitions describe different characteristics of underdeveloped countries :

“An underdeveloped economy is characterised, by the existence, in greater or less degree, of unutilised or under utilised manpower on one hand and of unexploited natural resources on the other.”         —Indian Planning Commission

“An underdeveloped, country is a country which has good potential prospects for using more capital or more labour or more available natural resources or all of these, to support its present population on a higher level of living or if its per capita income level is already fairly high, to support a large population on a not lower level of living.” —Jacob Viner

“An underdeveloped country is one which is characterised by : (i) mass poverty which is chronic and not the result of some temporary misfortunes and (ii) Obsolete methods of production and social organisation, which means that the poverty is not due to poor natural resources and hence could presumably be lessened by methods already proved in other countries.”                   —Eugen, Staley

Conclusion of all definitions is that an underdeveloped country in a country which is characterised by low per capital income, low level of technology, low rate of capital formation, Under-utilization and under-employment etc. These countries have a great potential of development  and have moved on the path of development but are not developed so far.

Charactoristics of Underdeveloped  Countries
Characteristics of underdeveloped countries may broadly by classified as follows :

A. Economic Characteristics

1. Low Per Capital Income : One the basis of per capital income, India among the few poorest  countries at the time of independence. After Independence the government wanted to give a ’big push’ to the standstill economy and for this purpose, it employed the technique demo crating planning’, with the efforts of the government some development has induced taken place during the five decades of planning, but India still remains one of the most underdeveloped countries, in terms of per capital income, The table below shows it clearly .

Per Capital GNP (in US Dollars)

Switzerland 39,930 Germany 25,670
USA 35,060 India 480
Japan 33,550 China 940

2. Predominance of Agriculture : Occupational distribution of population in India is not at all
satisfactory and clearly reflects the economic backwardness of the economy. In 2004, about 58% of the population of the country was dependent on agriculture.

The table below shows percentage figure of working population in agriculture :

Percentage of Working Population in Agriculture

UK 2% Pakistan 48%
USA 2% India 50%
Japan 5% China 69%


3. Lack of Exploitation of Available Resources : There are vast natural physical and human resources available in underdeveloped countries but most of these resources remain unexploited or under-exploited.

4. Market Imperfections : There are a number of market imperfections in underdeveloped countries such as the lake of mobility of factors of production, inelasticity of demand and supply, lack of market specialisation, ignorance of market conditions etc.

5. Technological Backwardness : While technological progress is the heart of development process, over a wide range of productive activity, technique of production are backward in India. Agriculture which provides subsistence to about two-thirds of the population is even now characterized by highly backward techniques.

6. Unemployment : Widespread unemployment is perhaps the most striking symptom of inadequate development in India, The nature of unemployment in India is different from that in developed countries. Most of the unemployment to be found in the developed countries of the West is of cyclical. In contrast, unemployment in India is chronic and result from the structural defects in the economy.

7. Inequalities in the Distribution of Income and Wealth : Distribution of income and wealth is highly unequal in under developed countries. In India, top 20% persons get 41.3% of total income while lowest 20% persons get only 8.8% income.

8. Faulty Structure of Foreign Trade : Exports of these countries constitute mainly agriculture products and raw materials, import of these countries constitute heavy machinery, vehicles a defense goods. It causes unfavorable balance of trade.

9. Low rate of Savings and Investments : An problem for underdeveloped Countries is the low rate of savings, investments and capital formation. Though there is remarkable progress in India during recent years, yet it is not adequate in the context of rising population. It is made clear in the following table :

Gross Domestic Investments and Savings
(At % of Gross Domestic Product)



Gross Domestic Investment Gross Domestic Savings Country


Gross Domestic Investment Gross Domestic Savings
Japan 29% 30% USA 19% 17%
Australia 22% 21% UK 16% 15%
Germany 21% 23% India 26% 24%

10. Composition of G.N.P. : In underdeveloped countries, contribution of agriculture is highest to Gross National Product (GNP) while it is very low in developed countries. It is clear from the following table :

Country   Agriculture Industry Service Country Agriculture Industry service
UK 1% 25% 74% India 26% 24% 50%
USA 2% 27% 71% China 16% 49% 35%
Japan 7% 32% 61% Pakistan 26% 24% 50%

11. Other Characteristics

(a) Vicious economic circle.(b) Trade cycles and fluctuations.(c) Lack of infrastructural facilities.(d) Low level of communication.

B. Demographic Characteristics

(i) Excessive pressure of population.(ii) Low death rate and high birth rate.(iii) Excess of non-working population.(iv) Excess of rural population.(v) Unskilled and untrained manpower.(vi) Low life expectancy,

C. Technological Characteristics

(i) Lack of technical education. (ii) Primitive production techniques.(iii) Low level of efficiency and productivity.(iv) Lack of research and’ development facilities,

D. Social Charactoristics

(i) Low social level for women.(ii) Dependence on luck.(iii) Illiteracy, inefficiency and lack of enthusiasm.(iv) Dominance of social traditions and customs.(v) Dominance of caste system and class-struggle.

E. Political Characteristics

(i) Dominance of political corruption.(ii) Lack of capable and efficiency administrations.(iii) Lack of national feeling among people.

F. Other Characteristics

(i) Lack of cooperation of people.(ii) Dominance of developed countries.

Is Indian Economy an Underdeveloped Economy? : There is a living controversy on the question whether India is a developed country or developing country ? Actually speaking the characteristics of Indian economy are so controversial that it becomes really difficult to decide this question. According to United Nations groups of experts “the countries in which per capital real income is low when compared with the per capita real incomes of United States of America, Canada, Australia and Western Europe are underdeveloped.

But the recent publications of U.N. have termed these countries as ‘developing economics’. Developing Economics mean though still they are underdeveloped the process of development has been initiated in these countries, thus the world economics are grouped in developing economics and developed economies. Indian economy is also an underdeveloped but developing economy.

A. India is a Developed Country

1. Planned Economy : After independlence, India adopted the path of planned economic development to solve there economic problems. Eighth five years plans have since been completed and ninth plan is in progress.

2. Growth of Heavy Industries : A large number of basic and heavy industries have been set up in India. India ranks among top ten industria I developed countries of the world.

3. Increasing Role of Public Sector : India stressed upon public sector solve its social -economic problems. In 1951, there were only 5 public sector enterprises involving a capital outlay OR 29 crore. This number has increased to 240 on 31st March, 2002, involving the capital outlay of crore.

4. A More Forwards Socialistic Pattern of Society : Government of India is engaged in achieving the object of social welfare. There is a wide network of education facilities, medical facilities recreation facilities, insurance, facilities law and order arrangements etc., in spite of this, government has launched a number of schemes for the welfare of poor and weaker sections of society.

5. Development of Infrastructural Facilities : There is a wide network of infrastructural facilities such as : communication, transportation, Warehousing banking etc.

B. India as a Developing Country

1. Low Per Capital Income : Indian economy has grown at a faster rate than the developed economics, however the difference in per capital income between India and developed economics is getting still wider. In 2003-04 national income Of India at 1993-94 praic was 12,66,005 crore and per capital income was 11,7987 crore.

2. Dominance of Agriculture : India is an agricultural country. According to world development report 2002, 58%, part of working population is still engaged in agriculture. Agriculture contributes about 30% in national income.

3. Low Race of Savings and Investment : Though there is substantial increase in the rate of savings, investments and capital formation during Lecent years, yet is quite low in the context of rising population. In 2003-04, Gross Domestic Savings woke 28.1% and Gross Domestic Capital formation was 26.3% of GDP.

4. Chronic Unemployment and Underemployment : In India Unemployment is structural and is the result of a deficiency of capital. Deficiency of capital leads to lack of expansion of industries to provide additional employment opportunities. Besides, in the agricultural sector of Indian economy a much larger number of labour force is engaged in the production than is really needed. There is a heavy pressure of population in agriculture which have resulted into disguised unemployment inrural areas.

5. Economic Disparties : The roots of economic disparities in India are very deep. In India, poor has become more poorer and rich has become more richer. There is a group having crores of income whereas another group has no income the distribution of wealth is also uneven.

6. Foreign Debt Burden : Pressure of foreign debt is continuously increasing on Indian economy. According to the information of finance ministry, per capita debt burden in India in year 2001-02 was ‘13,384 crore out of which 8,766 crore was foreign debt and 4,618 crore was domestic loan.

7. Abundance of Natural Resources : There are vast natural resources in India, water, resources, forest resources, mineral resources are comparable with any country of the world. Most of the land is highly fertile or weather and climate are highly favourable.

8. Under-Exploitation of Resources : A great un fortunate of India is that India is not capable in exploiting her resources. According to a rough estimate, nearly 40% of our resources remain unexploited.

9. Lack of Entrepreneural and Promotional Ability : Entrepreneurial and promotional ability available in the country is not sufficient to meet national requirements.

10. Low level of Efficiency and Productivity : Thought there is abundant manpower available in the country but the level of efficiency and productivity is very low.

11. Other Characteristics :

(i) Market imperfections.

(ii) Low standard of living.

(iii) Political instability.

(iv) Dominance of social and religious traditions and customs.

(v) Lack of national feeling among people.

(vi) Political corruption.

(vii) Unequal distribution of income and wealth.

On the basis of above discussion, it may be concluded that India is a developing country. Congenial atmosphere for economic development has I peen created. Much has been done on the path of economic development. Much more is yet to be done.

Q. 2. What is economic growth and development ? How these differ from each other?

Ans. Economic Growth : Economic growth is a rate of expansion that can move an underdeveloped country from a near subsistence mode of living to substantially higher levels in a comparatively short period of time, i.e. in decades rather than countries for nations’ already advanced economically, it will mean a continuation of existing rates of growth. The process of economic growth can be described in terms of greater commercialisation of economic activities. Economic growth is difficult to measure.

“Economic growth is a process whereby an economy’s Gross National Product (GNP) increases over a long period of time.”      —Gerold M. Meier and Robert E Baldwin

“Rise in per capita product. A cross-section of economists believes that the essence of economic growth is an increase in product per head of population.”  —Paul A, Baran

“Economic growth is a long-term rise in capacity to supply increasingly diverse economic goods to its population this growing capacity based on advancing technology and the institutional and ideological adjustments that it demands.”               —Simon Kuznets

This definition of economic growth by Kuznets underlines three main points. These are :

1. Sustained increase in national product per capital is a manifestation of economic growth.

2. Advancing technology provides the basis for sustained economic growth.

3. Institutional and ideological adjustments must be made, failing which growth potential that is created by growing productive forces will not be realized.

Economic growth is not an end in itself. It is rather a means to an end which should be precisely defined. A necessary requirement of economic growth is an increased output of goods and services. Gross Domestic Product (GDP) will give a more accurate picture of economic growth as compared to Gross National Product (GNP). But in Indian context, the distinction is not very meaningful, because the two are almost same.

Economic Development : Till the 1960 the term ‘economic development’ was often used as a synonym of ‘economic growth’ -in economic literature. Now its mean growth plus progressive changes in certain cruciai variables which determine the well-being of the people.

Traditional approach defines development strictly in economic terms. Economic development implies a sustained annual increase in GNP (or GDP) at rates varying from 5 to 7 per cent or more together with such alternation in the structure of production and employment that the share of agriculture declines in both, whereas that of the manufacturing and tertiary sections increases.

“The questions to ask about a country’s development are therefore : What has been happening to poverty, unemployment and inequality ? If all three of these have declined from high levels, then beyond doubt this has been a period of development for the country concerned. If one or two or these central problems have been growing worse, specially if all three have, it would be strange to call the result ‘development’ even if per capita income doubled.”   —Dudley Surs

Economic development is thus a process with noble ideals and backward countries without exception are endeavouring to make it successful, Development in all socities must have atleast the following objectives :

1. To increase the availability and widen the distribution of basic life sustaining goods.

2. To raise levels of living, by ensuring higher incomes, more jobs and greater attention to culture.

3. To expand the range of economic and social choices : available to both individuals and nations.

Difference between Economic Growth and Development

Economic growth refers to increases over time in a countries real output of goods and services : or more appropriately product per capital. Output is generally measured by gross or net national product, though other measures could also be employed.

The term economic development, in contrast, is more comprehensive. It implies progressive changes in the social-economic structure of a country, Viewed in this way, economic development involves a steady decline in agriculture’s share in GNP and a corresponding increase in the share of industries, trade, banking, construction and services.

Economic growth merely refers to a rise in output, economic-development implies changes in technology and institutional organisation of production as well as in distributive pattern of income. Compared to the objective of development, economic growth is easy to realise, By mobilising larger resources and raising their productivity, output can be raised.

The process of development is far more extensive. Apart from a rise in output, it involves changes in the composition of output as well as a shift in the allocation of productive resources so as to ensure social justice.

In some of the underdeveloped countries the process of economic growth has been accompanied by economic development. This, however is not necessary. It is quite probable that a country produces more of the same type of goods and services, to keep up with a growing population, while basic structure of the economy remains intact.

Development without growth is inconceivable. A substantial rise in a country’s GNP is required before it can hope to expand its industries, financial institutions, trade public utilities and government administration, Now here in the world has the occupational distribution of population changed in the absence of growth. But in some of the Latin American countries, where GNP per capital is already high, development can take place even if the output level does not rise for some years. For example, countries like Argentina, Brazil, Chili, Venezuela and Mexico can wipe out poverty completely at their existing levels of national income. So we can say that economic growth alone is not enough for underdeveloped countries it must be accompanied by development.

Q. 3. What are the factors which affect economic development?

Ans. There are two types of factors which affects economic development :

A. Economic Factors : The role of economic factors is decisive in a country’s economic development. The stock of capital and the rate of capital accumulation in most cases settle the question whether at a given point of time a country will grow or not. There are few other economic factors which also have some bearing on development but their importance is hardly comparable to that of capital formation. The economic factors are :

1. Capital Formation : The strategic role of capital in raising the level of production has traditionally been acknowledged in economics. With the development of growth economics in the post-world War Il period its in economic progress has been increasingly emphasised. Infact the Harrod-Domar model of growth has treated capital as the crucial factor in ecpnomic growth. It is now universally admitted that a country which wants to accelerate the pace of growth, has no choice but to save a high ratio of its income, with the objectives of raising the level of investment.

Economists rightly assert that lack of capital is the principal obstacle to growth and no development plan will succeed unless adequate supply of capital is forthcoming.

Whatever be the economic system a country cannot hope to achieve economic progress unless a certain minimum rate of capital accumulation is realised. However, if some country wishes to make spectacular sterides, it will have to raise its rate of capital formation still higher.

2. Marketable Surplus of Agriculture : Increase in agricultural production accompanied by a rise in productivity is important from the point of view of the development of a country, But what is more important is that the marketable surplus of agriculture increases, The term ‘Marketable surplus’ refers to the excess of output in the agriculture sector over and above what is required to allow the rural population to subsist. The importance of the marketable surplus in a developing economy emanates from the fact that the urban industrial population subsists on it. With the development of an economy the ratio of the urban population increases and increasing demands are made on agriculture rood grains, These demands must be met adequately, otherwise the consequent scarcity food in urban areas Will arrest growth.

In ease a country fails to produce a sufficient marketable surplus, it will be left with no choice except to import food grains which may cause a balance of payments problems. Marketed surplus of agriculture which plays the vital role in the underdeveloped country in setting the limits to the possible rate of industrialization.

3. Conditions in Foreign Trade : The classical theory of trade has been used by economists for a long time to argue that trade between nations is always beneficial to them. In the existing context to the theory suggests that the presently less developed countries should specialise in production of pritnary products as they have comparative cost advantage in their production. The developed countries on the country have a comparative cost advantages in manufactures including machines and equipment and should accordingly specialise in them.

Foreign trade has proved to be beneficial to countries which have been able to set up industries in a relatively short period. These countries sooner or later captured international markets for their industrial products, Therefore, a developing country should not only try to become self-reliant in capital equipment as well as other industrial products as early as possible, but it should also attempt to push the development of its industries to such a high level that in course of time manufactured goods replace the primary products as the country’s principal exports.

4. Economic System : The economic system and the historical setting of a country also decide the development prospects to a great extent. There was a time when country could have a laissez faire economy and yet face no difficulty in making economic progress. The third world countries of the present times will have to find their own path of development. They cannot hope to make much progress by adopting a laissez faire economy. Further, these countries cannot raise necessary resources required for development either through colonial exploitation or by foreign trade. They now have only two choices before them. First they can follow a capitalist path or of development Which will require an efficient market system supported by a rational interventionist role of the state. The other course open to them is that of economic planning. The latest experiments in economic planning in China have shown impressive results.

B. Non-Economic Factors in Economic Development : Non-economic factors are as much important in development as economic factors. These factors are :

1. Human Resources : Human resources are an important factor in economic development. Economists often see population as an obstacle to growth rather than as a factor which will assist the development activity. Nevertheless, man makes positive contribution to growth. Man provides labour power for production and if in a country labour is efficient and skilled, its capacity to contribute to growth will decidedly be high. The productivity of illiterate, unskilled, disease ridden and repetitious people is generally low and they do not provide any hope to development work in a country. If a country can manage to use its manpower properly, it will prove to be an important factor ill development. But in case human resources remain either unutilised or the manpower management remains defective, the same people who could have made a positive contribution to growth activity to prove to be a burden on the economy.

2. Technical know-how and General Education : The scientific and technological knowledge advances, man discovers more and more sophisticated techniques of production which steadily raise the productivity levels. So it has never been doubted that the level of technical _know-how has a direct bearing on the pace of development.

Schumpeter was deeply impressed by the innovations done by the entrepreneurs and he attributed much of the capitalist development to this role of the entrepreneurial class. Since technology has now become highly sophisticated, still greater attention has to be given to research and development for further advancement. If a country in modern times neglects this activity it will have to pay a heavy price in terms of industrial underdevelopment.

3. Political Freedom : Looking to the world history of modern times one learns that the Processes of development and underdevelopment are interlinked and it is wrong to view them in isolation. We all know that the underdevelopment of India, Pakistan, Bangladesh, Sri Lanka, Malaysia, Kenya and a few other countries which were in the past British Colonies, was linked with the development of England, England risklessly exploited them and appropriated a large portion of their economics surplus. This made a significant contribution to Britain’s economic development. The colonies, however, were forced to remain backward in the process.

4. Social Organisation : Mass participation in development programmes is a pre-condition for accelerating the growth process. However, people show interest in the development activity only when they feel that the fruits of growth will be fairly distributed. Experiences from a number of countries suggest that whenever the defective social organisation allow some elite groups to appropriate the benefits of growth, the general mass of people develop apathy towards state’s development programmes. Under the circumstances, it is futile to hope that masses will participate in the development projects undertaken by the state.

5. Desire to Develop : Development activity is not a mechanical process. The pace of economic growth in any country depends to a great extent on people’s desire to develop. If in some country level of consciousness is low and the general mass of people has accepted poverty as its fate, then there will be little hope for development.

“The point is that economic development is not a mechanical process; it is not a simple adding up ‘ of assorted factors. Ultimately, it is a human enterprise, its outcome will depend finally on the skill, quality and attitudes of the men who undertake.”  —Richard T, Gill

6. Corruption : Corruption is a very serious problem in developing countries at various levels and its operates as a negative factor in their growth process. Until and unless these countries root out corruption in their administrative system, it is most natural that the capitalists, traders and other powerful economic classes will continue to exploit national resources in their personal interests. The regulatory system is also often misused and the licences are not always granted on merit, the art of tax evasion has been perfected in the less developed countries by certain sections of the society and often taxes are evaded with the connivance of the government officials.

“Two main reasons are responsible for such a state of affairs. In the first place, there is diplomacy in economic research. Secondly, the use of Western models which do not represent the concrete rpality in developing countries has blowered the perspective.”  —Mydral

It is, however, surprising that one finds hardly any reference to corruption as a growth arresting factor in the literature that has appeared on development and underdevelopment in recent years.

Q. 4. What is human development ? Give the essential components of human development’ Why human development is necessary ?


An economy cannot develop without the development of human capital.” Discuss. Also explains the policy of the government of India regarding human development in the country.

Ans. Human Development : The term ‘Human development’ launch in 1990, the human development report has defined human development as the process of enlarging people’s choices The most critical ones are to lead a long and healthy life, to be educated and to enjoy a decent standard of living, Additional choices include political freedom, other guaranteed human rights and various ingredients of self respect. These are among the essential choices the absence of which can block many other opportunities.

“Human development is thus, process of widening people’s choices as well as raising the level of well-being achieved.”   —united Nations Developrnent Programme, lluman Development Report, 1997

Paul Streem noted that the concept of human development puts people back at center stage, after decades in which a man of technical concepts had obscured this fundamental vision.

“The defining difference between the economic growth and the human development schools is that first choice is ‘income’ while the second embraces the enlargement of all human choices : whether economic, social, cultural or political. Sometimes the expansion of income can enlarge all other choices as well. This may happen but generally, does not, on account of a variety of reasons.”  —Mahabub UI Haq

First, income may be unevenly distributed within a society. The choices of those people who have either no access to income or a very limited access, are very much limited. Thus economic growth does not ‘trickle’ down.

Second, and more importantly the national priorities chosen by the society or its rules and the political structure prevalent in the society may not allow the income expansion to enlarge human options.

“Use of income, by a society is just as important as ‘generation of income’ itself as would be clear from the fact the income expansion leads to much less human satisfaction in a virtual political person or cultural void, than in a more liberal political and economic environment. Accumulation of wealth may not be necessary for the fulfillment of several kinds of human choices. ‘In fact, many choices do not require any wealth at all. For instance, “a society does not have to be rich to afford democracy. A family does not have to be wealthy to respect the right of each member. A nation does not have to be affluent to treat women and men equally. Valuable social and cultural traditions can be maintained at all levels of income”.  —Mahabub UI Haq

There are many human choices that extend for beyond economic well-being. Knowledge, health clean physical environment, political freedom and simple pleasures of life are not dependent on income. Accumulation of wealth can expand people’s choices in these areas but this is not necessary. It is the use of wealth and not wealth itself that is decisive.

“Unless societies recognise their real wealth is their peoples an excessive obssession with creating material wealth can obscure the goal of enriching human life.”  —Mahabub UI Haq

Essential Components of Human Development

According to Mahabub UI Haq there are four essential components in the human development paradigm :

1. Equity : If development is to enlarge people’s choices, people must enjoy equitable access to opportunities. Equity in access to opportunities demands a fundamental restructuring of power in many societies and changes along the following lines :

(i) Change in the distribution of production assets especially through land reforms,

(ii) Major restructuring in the distribution of income through progressive fiscal policy, aimed at transferring income from the rich to the poor,

(iii) Overhauling of the credit systems so that the credit requirements of the poor people are satisfactorily met,

(iv) Equalisation of political opportunities through voting rights reforms, campaign finance reform and other actions aimed at limiting the excessive political power of a fecidal minority, and

(v) Undertaking steps to remove social and legal barriers that limit the access of women or of certain minorities or ethinic minorities to some of the key economic and political opportunities.

2. Sustainability : The next generation’s right to enjoy the same well being that are new enjoy makes sustainability an essential component of the human development paradigm. At times the concept of sustainability is confused with the renewal of natural resources, which is just one aspect of sustainable development. It is the sustainability of human opportunities that must lie at the center of our concerns. This in turn, requires, sustaining all forms of capital physical, human, financial and environmental conditions. Sustainability is a matter of distributional equity of sharing development opportunities between present and future generations and ensuring, intra-generational and inter-generational equity in access to opportunities. What must be sustained are worth while life opportunities not human deprivation. Not only this, sustainability also means that wide disparities in the life styles within and between nations must be re-examined and efforts undertaken to reduce them. This is due to the reasons that an unjust words is inherently unsustainable—both politically and economically. It may be environmentally unsustainable as well.

3. Productivity : Productivity is essential part of human development paradigm is productivity, which requires investments in people or an enabling macroeconomic environment for them to achieve their maximum potential. Economic growth is, therefore, a subset of human development models : an essential part but not the entire structure. Many East Asian economics like Japan and South Korea have accelerated their growth through termendous investments in human capital. In fact most of the development literature has focused on the productivity of human endavour. Many recent models of development are based primarily of human capital. However, as correctly pointed out by Haq this approach treated people only or a means of development and observe the certainty of people as the ultimate end of development.

4. Empowerment : Human development paradigm envisages full empowerment of the people. Empowerment means that people are in a position to exercise choices of their own free will. It implies a political democracy in which people can influence decisions about their lines. It requires economic liberalism so that people are free from excessive economic controls and regulations. It means that will members of civil society, particularly non governmental organisations, participate fully in making and implementing decisions.

The empowerment of people requires action on various fronts :

(i) It requires investing in the education and health of the people so that they can take advantage of market opportunities.

(ii) It requires ensuring and enabling environment that gives everyone access to credit and productive assets so that they playing fields of life are more even

(iii) It implies empowering both human and men so that they can compete on an equal footings

Human Development is Necessary

According to Paul Stress human development is necessary on account of the following reasons :

1. Human Development is the End While Economic Growth is Only a Means to this End : The ultimate purpose of the entries exercise of development is to treat men, women and children present and future generations as ends, to improve the human conditions to enlarge people’s choices.

2. Human Development is a Means to Higher Productivity : A well nourished, healthy, educated, skilled, alert labour force is the most important productive asset. Thus, investments in nutrition, health services and education are justified on grands of productivity.

3. It Helps in Lowering the Family Size by Slowing Human Reproduction : It is the experience of all developed countries that improvement in education levels (particularly of girls), better health facilities and reduction in infant mortality rates leads to a lowering of the birth rates,

while improved education facilities make people aware of the benefits of a small family (a higher income level, better standard of living etc.) reduction in infant mortality rates reduces the incentive of having large families as fewer child deaths are now feared.

4. Human Development is Good for Physical Environment : Reforestation, desertification and soil erosion decline when poverty declines. How population growth and population density affect the environment is a subject of contraversy. The contraventional view is that they have a deterimental effect. However, Paul Streetan cities recent research to show that not accelerating) population growth of high population density (particularly if combined with secure land rights) can be good for soil and forest conservation.

5. Human Development and Reduced Poverty Contributes to a Healthy Civil Society, Increased Democracy and Greater Social Stability : Moreover human development can help in reducing civil disturbances in a society and in increasing political stability. Till these shows that human development embraces the entire society not just the economy. The political, cultural and social factors are given as much importance as the economic factors, What is more, a careful distinction is maintained between ends and means. While people are regarded as the end of development, the means are not forgotten. In this context,’ the expansion of GNP becomes an essential means for expanding many human options. However, the characters and distribution of economic growth are measured in terms of enriching the lives of lives people, People do not just remain the instruments for producing commodities but acquire the center stage. Production processes are not treated in an abstract vacuum but acquire a ‘human’ context.

Q. 5. “Nature has showered her bounties on India with a liberal hand but the man has failed to exploit the natural resources.” Comment.


“India is a rich country inhabited by the poor.” Explain the statement.

Ans. A. India as a Rich Country : There are vast natural physical and human resources which  can put India in the series of developed countries.

1. Geographical Situation : India is a vast country having a total geographical area of about 329 million hectares, seacoast of about 6100 kms. India is surrounded by seacoast on three sides and great Himalayas in the north. Geographically, India is the 7th largest country in the world.

2. Mineral Resources : India is well placed in respect of mineral resources. India has large reserves of coal expected to last over 600 years. India’s iron ore reserves are estimated at 2,160 crore tonnes which is roughly 1/4 of total reserves in the world. India ranks 3rd in Manganese ore deposits in the world. India produces about 70%-8()% of the world’s total production of Mica. India is rich in high grade Bauxite. India enjoys largest resources of Titanium in the World. In addition, India has large reserves of Thorium, Uranium, Chromite, Gypsum. However there is a shortage of Petroleum, Zinc, Copper, lead, Gold, Sulphur etc.

3. Forest Resources : There are vast forest resources in India. India possesses an infinite variety, covering 750 lakh hectares, about 23% of total geographical area of the country.

4. Power Resources : Principal sources of power are coal, water, petroleum and nuclear energy. During recent years, significant initiatives have been taken in the country to develop new and renewable sources of energy, namely Bio-energy, Solar energy and Wind energy.

5. Climate and Weather : India enjoys best climate in the world. All the climates of world are found in India. These climates and changing weather are boom for agriculture.

6. Water Resources : Water resources of India are unlimited. India is the only country in the world which is surrounded by sea coasts on three sides and enriched with a number of rivers. It provides a large base for hydro-electric power.

7. Cattle Wealth : India has largest cattle wealth ih the world. There are about 36 crore cattles in India. However, the productivity and quality of cattle is very poor.  8. Fisheries : There are vast resources of fish, mainly due to vast water resources. It provides base of exports of fish and fish preparations.

9. Manpower : India is the second most populated country of the world. Presently the to population of India is 125 crore nearly 17% of total population of world.

B. India is an Underdeveloped Country : India is still an underdeveloped country. It implie that India has-not been able in exploring her resources.

1. Low Per Capita Income : National income and per capita income India are very low in the context of rising population. In 2003-04, national income of, India was 12,66,005 crore and percapita income was 11,798.7 at 1993-94 prices.

2. High Birth Rate and Low Death Rate : In 2002, birth rate was 25.8 and death rate was 8.5. It aggravates the problem of population.

3. Unemployment : There is a vast unemployment, under-employment, disguised unemploy- ment in India economy.

4. Low Technological Level : Level of technology is quite low in India. Most of the machines and equipments are obsolete and out-dated.

5. Under Exploitation of Resources : India is unable in exploiting its vast and natural resources. According to an estimate, about 40% of our resources remain unexploited.

6. Low Level of Entrepreneurial and Promotional Ability : Though there is abundant manpower available in the country but the level of efficiency and productivity is quite low.

7. Low Level of Consumption : In 2003-04, average consumption of edible oil was 7.2. kg., vanaspati 1.4 kg., sugar 16.3 kg., cloth 31.4 mts., tea 596 gms which is quite low in comparison to other countries of the world.

8. Low Level of Education : In India only 65.4% persons are educated. This ratio is also quite
low in comparison to developed countries.

9. Low Level of Health : Average life expectancy in India is only 65.3 years. There are only 5.6
doctors per 10000 persons.

10. Poverty : India is a poor country. Still one thirds of population is living under below povertyline.

11. Heavy Foreign Debt : India is under a high burden of foreign debt. It has increased more than 100 times during planning era. India is the eighth most indebted country of the world.

12. Inequalities in the Distribution of Income and Wealth : Top 1% families of our country own 14% part of total assets while 50% poor families own just 7% of total assets.

Conclusion : India economy represents a paradoxical picture. It is a rich country because it has

vast resources. It is a poor country because its people are poor. India manifests great potentialities of development but these potentialities are unexplored and unexploited: It has remained poor and underdeveloped in spite of rich natural endowments. Thus, it may well be concluded that India is a rich country inhabited by poor.

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Montey Parjapati



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