T4-NCERT-X-Understanding Economic Development

Economic development can be measured and income is the most common method for measuring development. However, the income method, though useful, has several weaknesses. Hence, we need newer ways of looking at development using indicators of quality of life and environmental sustainability. 

Chapter 1

Development

The idea of development or progress has always been with us. We have aspirations or desires about what we would like to do and how we would like to live. Similarly, we have ideas about what a country should be like. What are the essential things that we require? Can life be better for all? How should people live together? Can there be more equality? Development involves thinking about these questions and about the ways in which we can work towards achieving these goals. This is a complex task .

You will find answers to many of these questions not just in economics but also in your course in history and political science. This is because the way we live today is influenced by the past. We can’t desire for change without being aware of this. In the same way, it is only through a democratic political process that these hopes and possibilities can be achieved in real life. 

WHAT DEVELOPMENT PROMISES — DIFFERENT PEOPLE, DIFFERENT GOALS 

Two things are quite clear: 

one, different persons can have different developmental goals and two, what may be development for one may not be development for the other. It may even be destructive for the other. 

Ex:To get more electricity, industrialists may want more dams. But this may submerge the land and disrupt the lives of people who are displaced – such as tribals. They might resent this and may prefer small check dams or tanks to irrigate their land. 

NATIONAL DEVELOPMENT 

It is very important to keep in mind that 

different persons could have different as well as conflicting notions of a country’s development. 

HOW TO COMPARE DIFFERENT COUNTRIES OR STATES? 

For comparing countries, their income is considered to be one of the most important attributes. Countries with higher income are more developed than others with less income. 

Now, what is the income of a country? Intuitively, the income of the country is the income of all the residents of the country. This gives us the total income of the country. 

we compare the average income which is the total income of the country divided by its total population. The average income is also called per capita income. 

In World Development Reports, brought out by the World Bank, this criterion is used in classifying countries. Countries with per capita income of US$ 12616 per annum and above in 2012, are called rich countries and those with per capita income of US$ 1035 or less are called low-income countries. India comes in the category of low middle income countries because its per capita income in 2012 was just US$ 1530 per annum. The rich countries, excluding countries of Middle East and certain other small countries, are generally called developed countries. 

Time required to start a business in India was 29 days in June 2015 against the global average of 20 days. 

In 2015, only 40% of Indians had access to improved sanitation facilities, against the world average of 68%. 

Average Income 

While ‘averages’ are useful for comparison, they also hide disparities. 

Infant Mortality Rate (or IMR) indicates the number of children that die before the age of one year 

as a proportion of 100 live children born in that particular year.
Literacy Rate measures the proportion of literate population in the 7 and above age group. 

Net Attendance Ratio is the total number of children of age group 14 and 15 years attending school as a percentage of total number of children in the same age group. 

PUBLIC FACILITIES 

How is it that the average person in Punjab has more income than the average person in Kerala but lags behind in these crucial areas? The reason is — money in your pocket cannot buy all the goods and services that you may need to live well. So, income by itself is not a completely adequate indicator of material goods and services that citizens are able to use. For example, normally, your money cannot buy you a pollution-free environment or ensure that you get unadulterated medicines, unless you can afford to shift to a community that already has all these things. Money may also not be able to protect you from infectious diseases, unless the whole of your community takes preventive steps. 

One way to find out if adults are undernourished is to calculate what nutrition scientists call Body Mass Index (BMI). This is easy to calculate. Take the weight of the person in kg. Then take the height in metres. Divide the weight by the square of the height. If this figure is less than 18.5 then the person would be considered undernourished. However, if this BMI is more than 25, then a person is overweight. Do remember that this criterion is not applicable to growing children. 

 Human Development Report published by UNDP compares countries based on the educational levels of the people, their health status and per capita income. 

About Human Development Index The HDI is an average measure of basic human development achievements in a country measured by UNDP. It is an average of long-term progress in three basic dimensions of human development viz. a long and healthy life, access to knowledge and a decent standard of living.

The HDI was developed by the Pakistani economist Mahbub ul Haq working alongside Indian economist Amartya Sen, often framed in terms of whether people are able to "be" and "do" desirable things in their life, and was published by the United Nations Development Programme.

India has been placed at 130th position in the 2015 Human Development Index (HDI) among the 188 countries.

However, since the second half of the twentieth century, a number of scientists have been warning that the present type, and levels, of development are not sustainable. 

Consequences of environmental degradation do not respect national or state boundaries; this issue is no longer region or nation specific. Our future is linked together. Sustainability of development is comparatively a new area of knowledge in which scientists, economists, philosophers and other 

social scientists are working together. 

In general, the question of development or progress is perennial. At all times as a member of society and as individuals we need to ask where we want to go, what we wish to become and what our goals are. So the debate on development continues. 

Chapter 2

SECTORS OF INDIAN ECONOMY

When we produce a good by exploiting natural resources, it is an activity of the primary sector. Why primary? This is because it forms the base for all other products that we subsequently make. Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this sector is also 

called agriculture and related sector. 

The secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity. 

These are activities that help in the development of the primary and secondary sectors. These activities, by themselves, do not produce a good but they are an aid or a support for the production process. For example, goods that are produced in the primary or secondary sector would need to be transported by trucks or trains and then sold in wholesale and retail shops. At times, it may be necessary to store these in godowns. We also may need to talk to others over telephone or send letters (communication) or borrow money from banks (banking) to help production and trade. Transport, storage, communication, banking, trade are some examples of tertiary activities. Since these activities generate services rather than goods, the tertiary sector is also called the service sector. 

Service sector also includes some essential services that may not directly help in the production of goods. For example, we require teachers, doctors, and those who provide personal services such as washermen, barbers, cobblers, lawyers, and people to do administrative and accounting works. In recent times, certain new services based on information technology such as internet cafe, ATM booths, call centres, software companies etc have become important. 

The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year. And the sum of production in the three sectors gives what is called the Gross Domestic Product (GDP) of a country. It is the value of all final goods and services produced within a country during a particular year. GDP shows how big the economy is. 

Rising Importance of the Tertiary Sector in Production 

Over the forty years between 1970-71 and 2010-11, while production in all the three sectors has increased, it has increased the most in the tertiary sector. As a result, in the year 2010-11, the tertiary sector has emerged as the largest producing sector in India replacing the primary sector. 

More than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP. In contrast to this, the secondary and tertiary sectors produce three-fourth of the produce whereas they employ less than half the people. Does this mean that the workers in agriculture are not producing as much as they could? 

What it means is that there are more people in agriculture than is necessary. So, even if you move a few people out, production will not be affected. In other words, workers in agricultural sector are under- employed. 

Situation of underemployment, where people are apparently working but all of them are made to work less than their potential. This kind of underemployment is hidden in contrast to someone who does not have a job and is clearly visible as unemployed. Hence, it is also called disguised unemployment. 

How to Create More Employment? 

If the government invests some money in transportation and storage of crops, or makes better rural roads so that mini-trucks reach everywhere several farmers like Laxmi, who now have access to water, can continue to grow and sell these crops. This activity can provide productive employment to not just farmers but also others such as those in services like transport or trade. 

Do you know that in India 46.9 per cent of the population belongs to the age group 5-29 years? Out of this, only about 52 per cent are attending educational institutions. The rest are not— they may be at home or many of them may be working as child labourers. If these children are to attend schools, we will require more buildings, more teachers and other staff. A study conducted by the Planning Commission estimates that nearly 20 lakh jobs can be created in the education sector alone. Similarly, if we are to improve the health situation, we need many more doctors, nurses, health workers etc. to work in rural areas. These are some ways by which jobs would be created and we would also be able to address the important aspects of development 

Every state or region has potential for increasing the income and employment for people in that area. It could be tourism, or regional craft industry, or new services like IT. Some of these would require proper planning and support from the government. For example, the same study by the Planning Commission says that if tourism as a sector is improved, every year we can give additional employment to more than 35 lakh people. 

DIVISION OF SECTORS AS ORGANISED AND UNORGANISED 

Let us examine another way of classifying activities in the economy. This looks at the way people are employed. What are their conditions of work? Are there any rules and regulations that are followed as regards their employment? 

Organised sector covers those enterprises or places of work where the terms of employment are regular and therefore, people have assured work. They are registered by the government and have to follow its rules and regulations which are given in various laws such as the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishments Act etc. It is called organised because it has some formal processes and procedures. Some of these people may not be employed by anyone but may work on their own but they too have to register themselves with the government and follow the rules and regulations. 

The unorganised sector is characterised by small and scattered units which are largely outside the control of the government. There are rules and regulations but these are not followed. Jobs here are 

low-paid and often not regular. There is no provision for overtime, paid leave, holidays, leave due to sickness etc. Employment is not secure. People can be asked to leave without any reason. 

Activities in the private sector are guided by the motive to earn profits. 

The purpose of the public sector is not just to earn profits. Governments raise money through taxes and other ways to meet expenses on the services rendered by it. 

Chapter 3

Money and credit

Collateral is an asset that the borrower owns (such as land, building, vehicle, livestocks, deposits with banks) and uses this as a guarantee to a lender until the loan is repaid. 

If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment. Property such as land titles, deposits with banks, livestock are some common examples of collateral used for borrowing. 

Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc. 

We have seen in the above examples that people obtain loans from  various sources. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks  and cooperatives. The informal lenders include moneylenders, traders,
employers, relatives and friends, etc.

The Reserve Bank of India supervises the functioning of formal sources of loans. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc. 

There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. 

85 per cent of the loans taken by poor households in the urban areas are from informal sources. Compare this with the rich urban households. What do you find? Only 10 per cent of their loans are from informal sources, while 90 per cent are from formal sources. A similar pattern is also found in rural areas.

Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that the dependence on informal sources of credit reduces. 

Secondly, while formal sector loans need to expand, it is also necessary that everyone receives these loans. At present, it is the richer households who receive formal credit whereas the poor have to depend on the informal sources. It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans. 

Bank loans require proper documents and collateral. Absence of collateral is one of the major reasons which prevents the poor from getting bank loans. Informal lenders such as moneylenders, on the other hand, know the borrowers personally and hence are often willing to give a loan without collateral. 

In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self Help Groups (SHGs) and pool (collect) their savings. A typical SHG has 15-20 members, usually belonging to one neighbourhood, who meet and save regularly. Saving per member varies from Rs 25 to Rs 100 or more, depending on the ability of the people to save. Members can take small loans from the group itself to meet their needs. The group charges interest on these loans but this is still less than what the moneylender charges. After a year or two, if the group is regular in savings, it becomes eligible for availing loan from the bank.
Loan is sanctioned in the
name of the group and is
meant to create self- employment opportunities
for the members. Any case of non- repayment of loan by any one member is followed up seriously by other members in the group. Because of this feature, banks are willing to lend to the poor women when organised in SHGs, even though they have no collateral as such. 

Thus, the SHGs help borrowers overcome the problem of lack of collateral. They can get timely loans for a variety of purposes and at a reasonable interest rate. Moreover, SHGs are the building blocks of organisation of the rural poor. Not only does it help women to become financially self-reliant, the regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc. 

Grameen Bank of Bangladesh is one of the biggest success stories in reaching the poor to meet their credit needs at reasonable rates. Started in the 1970s as a small project, Grameen Bank in 2012 has over 8.37 million borrowers in about 81,000 villages spread across Bangladesh. Almost all of the borrowers are women and belong to poorest sections of the society. These borrowers have proved that not only are poor women reliable borrowers, but that they can start and run a variety of small income- generating activities successfully. 

Chapter 4

Globalisation and Indian Economy

A MNC is a company that owns or controls production in more than one nation. MNCs set up offices and factories for production in regions where they can get cheap labour and other resources. This is done so that the cost of production is low and the MNCs can earn greater profits. 

In this example the MNC is not only selling its finished products globally, but more important, the goods and services are produced globally. As a result, production is organised in increasingly complex ways. The production process is divided into small parts and spread out across the globe. In the above example, China provides the advantage of being a cheap manufacturing location. Mexico and Eastern Europe are useful for their closeness to the markets in the US and Europe. India has highly skilled engineers who can understand the technical aspects of production. It also has educated English speaking youth who can provide customer care services. And all this probably can mean 50-60 per cent cost-savings for the MNC! The advantage of spreading out production across the borders to the multinationals can be truly immense. 

Remember that it was trading interests which attracted various trading companies such as the East India Company to India. 

Foreign trade thus results in connecting the markets or integration of markets in different countries. 

Tax on imports is an example of trade barrier. It is called a barrier because some restriction has been set up. Governments can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much of each, should come into the country. 

The Indian government, after Independence, had put barriers to foreign trade and foreign investment. This was considered necessary to protect the producers within the country from foreign competition. Industries were just coming up in the 1950s and 1960s, and competition from imports at that stage would not have allowed these industries to come up. Thus, India allowed imports 

of only essential items such as machinery, fertilisers, petroleum etc. Note that all developed countries, during the early stages of development, have given protection to domestic producers through a variety of means. 

Starting around 1991, some far- reaching changes in policy were made in India. The government decided that the time had come for Indian producers to compete with producers around the globe. It felt that competition would improve the performance of producers within the country since they would have to improve their quality. This decision was supported by powerful international organisations. 

Thus, barriers on foreign trade and foreign investment were removed to a large extent. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices here. 

Removing barriers or restrictions set by the government is what is known as liberalisation. With liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export. The government imposes much less restrictions than before and is therefore said to be more liberal. 

World Trade Organisation (WTO) is one such organisation whose aim is to liberalise international trade. Started at the initiative of the developed countries, WTO establishes rules regarding international trade, and sees that these rules are obeyed. Nearly 164 countries of the world are currently members of the WTO (2016). Afghanistan has become 164th member nation of the World Trade Organisation ( WTO), global trade body after 11 years of negotiations.

Globalisation and greater competition among producers - both local and foreign producers - has been of advantage to consumers, particularly the well-off sections in the urban areas. There is greater choice before these consumers who now enjoy improved quality and lower prices for several products. As a result, these people today, enjoy much higher standards of living than was possible earlier. 

Steps to attract Foreign Investment

In recent years, the central and state governments in India are taking special steps to attract foreign companies to invest in India. Industrial zones, called Special Economic Zones (SEZs), are being set up. SEZs are to have world class facilities: electricity, water, roads, transport, storage, recreational and educational facilities. Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years. 

Government has also allowed flexibility in the labour laws to attract foreign investment. 

Organised sector have to obey certain rules that aim to protect the workers’ 

rights. In the recent years, the government has allowed companies to ignore many of these. Instead of hiring workers on a regular basis, companies hire workers ‘flexibly’ for short periods when there is intense pressure of work. This is done to reduce the cost of labour for the company. However, still not satisfied, foreign companies are demanding more flexibility in labour laws. 

THE STRUGGLE FOR A FAIR GLOBALISATION 

The above evidence indicates that not everyone has benefited from globalisation. People with education, skill and wealth have made the best use of the new opportunities. On the other hand, there are many people who have not shared the benefits. 

Since globalisation is now a reality, the question is how to make globalisation more ‘fair’? Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are shared better. 

The government can play a major role in making this possible. Its policies must protect the interests, not only of the rich and the powerful, but all the people in the country. You have read about some of the possible steps that the government can take. For instance, the government can ensure that labour laws are properly implemented and the workers get their rights. It can support small producers to improve their performance till the time they become strong enough to compete. If necessary, the government can use trade and investment barriers. It can negotiate at the WTO for ‘fairer rules’. It can also align with other developing countries with similar interests to fight against the domination of developed countries in the WTO. 

In the past few years, massive campaigns and representation by people’s organisations have influenced important decisions relating to trade and investments at the WTO. This has demonstrated that people also can play an important role in the struggle for fair globalisation. 

While globalisation has benefited well-off consumers and also producers with skill, education and wealth, many small producers and workers have suffered as a result of the rising competition. Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are shared better.

CHAPTER 5 : CONSUMER RIGHTS 

 CONSUMER MOVEMENT 

The consumer movement arose out of dissatisfaction of the consumers as many unfair practices were being indulged in by the sellers. There was no legal system available to consumers to protect them from exploitation in the marketplace. 

In 1985 United Nations adopted the UN Guidelines for Consumer Protection. This was a tool for nations to adopt measures to protect consumers and for consumer advocacy groups to press their governments to do so. At the international level, this has become the foundation for consumer movement. Today, Consumers International has become an umbrella body to over 220 member organisations from over 115 countries. 

In 1986 by the Indian government was the enactment of the Consumer Protection Act 1986, popularly known as COPRA. 

In recent times, the right to information has been expanded to cover various services provided by the Government. In October 2005, the Government of India enacted a law, popularly known as RTI (Right to Information) Act, which ensures its citizens all the information about the functions of government departments. 

Where should these consumers go to get justice? 

Consumers have the right to seek redressal against unfair trade practices and exploitation. If any damage is done to a consumer, she has the right to get compensation 

depending on the degree of damage. There is a need to provide an easy and effective public system by which this can be done. 

The consumer movement in India has led to the formation of various organisations locally known as consumer forums or consumer protection councils. They guide consumers on how to file cases in the consumer court. On many occasions, they also represent individual consumers in the consumer courts. These voluntary organisations also receive financial support from the government for creating awareness among the people. 

Under COPRA, a three-tier quasi- judicial machinery at the district, state and national levels was set up for redressal of consumer disputes. The district level court deals with the cases involving claims upto Rs 20 lakhs, the state level courts between Rs 20 lakhs and Rs 1 crore and the national level court deals with cases involving claims exceeding Rs 1 crore. If a case is dismissed in district level court, the consumer can also appeal in state and then in National level courts. 

Thus, the Act has enabled us as consumers to have the right to represent in the consumer courts. 

LEARNING TO BECOME WELL-INFORMED CONSUMERS 

When we as consumers become conscious of our rights, while purchasing various goods and services, we will be able to discriminate and make informed choices. This calls for acquiring the knowledge and skill to become a well-informed consumer. 

India has been observing 24 December as the National Consumers’ Day. It was on this day that the Indian Parliament enacted the Consumer Protection Act in 1986. India is one of the countries that have exclusive courts for consumer redressal. 

There are today more than 700 consumer groups in the country of which only about 20-25 are well organised and recognised for their work. 

However, the consumer redressal process is becoming cumbersome, expensive and time consuming. Many a time, consumers are required to engage lawyers 

. After more than 25 years of the enactment of COPRA, consumer awareness in India is spreading but slowly.