UNIT I

ECONOMIC GROWTH AND DEVELOPMENT

Although this course is about economic development in India it is important

that you understand a few concepts that are used in the realm of
developmental issues in general and to have an idea so that you can follow
the debates about our economy and the rest of the world.
Four basic concepts, which we shall discuss in Chapter 1, are:
(i) Economic Growth, (ii) Economic Development, (iii) Sustainable
Development, and (iv) Quality of Life. These concepts have some historical
evolution. We shall try to follow this historical evolution of concepts. If
there are important digressions to the text, we shall put them in boxes. We
also suggest you some activities so that you learn things by doing them.
In Chapter 2, we shall discuss alternative indices for measuring level of
development reached by a country in a particular year, We shall specifically
deal with Per Capita Income, Physical Quality of Life Index and Human
Development Index.
 CHAPTER 1

Concepts in Development

Introduction may use words de-development or mal-

Economies grow and develop, they
expand and advance, and they progress
and prosper. There are phases when they
decline too, and there are economies that
experience continuous decay. If one
considers long stretches of human
history, one knows that economies
(civilizations) disappeared altogether. We
will not take into account such long
stretches of time. We shall not consider
too distant a past either. We will leave
them to historians, may be, economic
historians.
Let us take a normal view. We shall
then accept decline as an occasional,
temporary phenomenon. We shall,
therefore, use positive terms only. Of the
positive terms, which have been used to
describe changes as well as to prescribe
changes, two have survived. They are
growth and development. Because we
shall primarily look at nations and
countries as economies, and use terms
such as economic growth and economic
development. We shall often try to
distinguish economic from non-
economic though there are cases where
it becomes difficult to do so.
In order to accommodate decline in
level, we use phrase negative growth
and to describe perverse tendencies, we
development though, we will not have
occasions to use them.
You may find that, sometimes in
many scientific treatises and very often
in colloquy, words growth and
development are used in inter-
changeable fashion. But, normally a
distinction is made between the two,
particularly in economics literature. It
is maintained along the following lines.
You might have noticed that the
word growth is used to describe increase
in stature or size. It is used to describe
a uni-dimensional change, as in the
case of stature of a child or a uniform
expansion in all directions, as in the case
of size of a balloon. Even when we refer
to development of a child, we refer to
various dimensions of its personality.
When we do not refer to dimensional
aspects we use the word growth. Even
schools and institutes, colleges and
universities, hotels and hospitals grow.
But, we are often quick to point out
certain features that are not captured
by word growth. It is rare, if ever, that
growth takes place without development
or development takes place without
growth. In most cases, they would
accompany each other. There may be
cases when one is dominant and the
other is dormant. In such cases, people
4 INDIAN ECONOMIC DEVELOPMENT
talk of growth without development or
development without growth. It is,
therefore, good to make an analytical
distinction between the two.
Economic Growth
Let us take here a comprehensive view
of the economy, taking all activities
together, and call its growth as economic
growth.
GROWTH
One can talk of growth of labour force or
of export or of agriculture or of industry.
One can talk of growth of consumption
expenditure or investment expenditure.
One can also talk of growth of banking,
insurance or information technology
sector. We are, however, restricting
ourselves here to the growth of whole
economy.
Let us look at it from the view point
of production. The total quantum of
goods and services produced in an
economy in a given year is referred to
as Gross Domestic Product. Let us
measure it at factor cost and write it in
its abbreviated form GDPFC. The GDPFC
in 2000-01 was around Rs 17,00,000
crore. This is a flow of goods and services
produced during the year 2000-01,
measured in value terms. We may be
interested in knowing whether the flow
this year is larger than the flow last year.
If so, we should know the measure of
the flow last year. In order to see that
we measure the real change in flow,
we should compute the magnitude of
flows in both the years in the same
prices. The prices may belong to
2000-01 or 1999-2000 or to 1993-94;
the point is that the prices should relate
to only one common year so that we
measure only the change in flow of
output, not a mix of change in output
and change in prices. Such GDPs are
said to be measured at constant prices.
Suppose you look into a recent issue
of the National Accounts Statistics
published by the Central Statistical
Organisation and find that at 1993-94
prices, the GDPFC for 1999-2000 and
2000-01 are Rs.10,00,000 crore and
Rs.10,60,000 crore respectively. The
growth in flow called GDPFC in absolute
terms is Rs.60,000 crore. In relative
terms it is 6 per cent and it is called
growth rate. If we prepare a whole series
for 10, 20 or 50 years then we often add
words per annum or per year to growth
rate. The growth rate is often expressed
in terms of per cent per annum. This is
a positive change; there could be a
negative change also.
Suppose, we look at a twenty-year
period and use yearly figures for flow of
output of goods, which is measured in
terms of GDPFC at constant prices. The
growth rates calculated on yearly basis
would differ from year to year. Shall we
use nineteen year-to-year figures of
growth rate, some of which may be
negative, to describe the change? Or,
should we just compare the initial figure
with the final figure? If we adopt the
former, how to summarise the nineteen
figures? If we adopt the latter, it is
possible that one of these (initial or final)
figures is just abnormal as it does not
fall in line. Would it not be a good idea
to speak of general tendency and ignore
abnormal fluctuations around the
general tendency of increase? Economic
growth should, therefore, be taken as
a long-term tendency reflected by
increase in flow of final goods and
services produced by the economy.
CONCEPTS IN DEVELOPMENT
GROWTH RATE
The growth rate for period t can be defined
in the following manner:
Q Qt1 Qt
gt = t = 1... (1)
Qt1 Qt1
where
gt = (relative) growth rate of GDP in
period t
Qt = GDPFC for period t
Qt1 = GDPFC for period t1
Suppose GDPFC for period 1999-2000 at
1993-94 prices is Rs 11,52,000 crore and
GDPFC for period 1998-99 at 1993-94 prices
is Rs 10,83,000. We can find out that
Rs 11,52,000Rs 10,83,000
gt = = 1.06371 = 0.0637
Rs 10,83,000
The growth rate is therefore 0.0637.
However, numerically growth rate is
presented in terms of per cent. Growth rate
would therefore be written as 6.37 per cent.
Sometimes, people average such growth
rates for a number of periods (decade or
quinquennium) and call it as average
annual growth rate (AAGR).
If there is a general tendency of
growth but there are occurrences of
decline, the rates of growth will be
negative in certain years. Shall we then
say that, while the potential of economy
to produce is continuously increasing,
the potential is sometimes not realised?
There could be various reasons for
occasional decline. In economies
that depend to a large extent on external
trade conditions in other countries may
affect the realisation. Monsoon may
widely fail in certain years and economy
may get derailed for a while. Internal
demand may for a variety of reasons fail
to make full use of the potential. Some
economists put too much emphasis on
supply potential and ignore demand
5
conditions. They define economic
growth as long-term increase in
production potential of the economy.
Some economists feel that it is
growth of per capita GDPFC, not GDPFC,
that should be used to gauge the growth
of an economy. But the point to be noted
is that economic growth is a long-term
phenomenon about the change in total
economic activity of an economy.
Economic Development
Some economists hold a view that the
economic development is not much
different from economic growth. For
them, both are processes of long-term
increase in per capita income. Some
other economists believe that
development is distinctly different
process than growth and covers other
dimensions of change besides growth.
Still others hold that, development is
nothing but the level of per capita income
achieved in a particular year.
Whole human history may be
thought of as a succession of
developments or changes, largely in
positive direction. Looking from a
distance, we find that production
structure of the economy has changed:
from hunting-gathering to settled
agriculture, from agriculture to
manufacturing, from manufacturing to
automatic production, from production
of goods to production of services. It does
not mean services were not produced,
say thousand years ago; it only means
that its relative importance has changed
and that this might have occurred
with increase in all activities in a broad
sense.
However, economics takes most of its
lues from the economic history of the
6 INDIAN ECONOMIC DEVELOPMENT
West during the last two centuries or so.
During this period, a variety of sweeping
changes took place in Europe, which may
broadly be categorized as technological
and institutional. Early economists
working in the field of development
economics took notice of change in the
composition of output and deployment of
labour in activities. They called it
structural change. Structural change
meant relative increase in terms of
proportion of non-agriculture/non-
primary output and concomitant
changes in proportion of employment of
labour in non-agricultural activities (and
also in that of allocation of capital and
land). However, this structural change
has to take place along with increase in
output of all (or majority of) goods, not
with decrease. They defined economic
development as economic growth with
structural change in favour of non-
agricultural activities. And structural
change was understood in terms of
composition of GDP and industrial distri-
bution of labour. This was a reflection of
changing demand for goods and services
on the one hand and changing demand
for labour by production technology in
different sectors on the other.
Most of the mainstream economists
believed that all economies in the West
traversed the same path and believed
that other economies would also follow
the same path. When they did not find
it happening they pointed out that
institutional changes are equally impor-
tant. Institutional changes could mean
emergence of new institutions in
governance, as also in capital market and
money market. Some pointed out
necessity of attitudinal changes in people
a leap from traditional value system to
modern value system. In order to
accommodate this thought, economic
development could be defined as
economic growth plus, that is, something
more than economic growth.
There were attempts to emphasize
technological dimension of development.
It was pointed out that economic growth
should be accompanied by rise in
productivity. Then, we could define
economic development as economic
growth accompanied by rise in
productivity.
Development is, however, just not
concerned with description of economic
history. It is to be pursued as a deliberate
mechanism of deliverance of the masses
from poverty and idleness in a relatively
short period of time. Developments in the
fifties and sixties did not perceptibly
change the scene in these crucial areas.
Many economists felt disillusioned and
started showing their anguish. One such
Western economist who had been dealing
with problems of development asserted
in a World Conference in Delhi: The
questions to ask about a countrys
development are: What has been
happening to poverty? What has been
happening to unemployment? What has
been happening to 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 of these central
problems have been growing worse,
especially if all the three, it would be
strange to call the result development
even if per capita income doubled.
Indeed, here is a reference to
conscious attempts made to develop an
economy by adopting a strategy. If the
strategy brings in growth in capacity to
CONCEPTS IN DEVELOPMENT
produce more and in actual output,
transformation in structure of economy
in terms of composition of output of
goods and services or even in deployment
of labour force, emergence of institutions
in terms of variety of banks, and
technology making use of machines and
power instead of men and cattle, but
makes no significant dent on basic
problems of underdeveloped countries,
what use are the efforts or the strategy?
UNDERDEVELOPED ECONOMIES
The poor countries have been variously
described in literature on development
economics : as backward, underdeveloped,
developing, low income, and Third World
countries. Various terms have their origin
in objection to some other terms. We do
not feel good if someone calls our economy
backward as economy is often substituted
for country or nation; after all we are an
ancient living civilisation.
The choice of the word largely depends
on sensitivity of the audience and
sensibility of the analyst, said Jagdish
Bhagwati, a leading economist from India.
Third World was used to describe
countries, which were neither in capitalist
block nor in socialist block and members
of non-aligned movement. Some try to
classify countries as least developed
countries, non-oil exporting developing
countries and petroleum-rich OPEC
countries (OPEC stands for Organisation
of Petroleum Exporting Countries).
The term Fourth World is sometimes
used to describe the poor in the
underdeveloped countries and sometimes
to least developed countries.
This implies that development has
to be related to welfare of people. It was
suggested much earlier that welfare of
people depends on the size of the cake
7
as well as its distribution. One is entitled
to ones wages when one is employed. One
should get adequate wages, if employed
or should get remunerative prices for
what one produces, if self-employed. Mass
poverty was one particular problem we
attributed to the colonial rule and wanted
to secure self-governance in order to
eradicate it. If that scourge still persists
on a large scale, we have a cause to worry
about. In short, the suggestion is that
the income should get redistributed in
favour of relatively worse-off. Keeping this
in view, some economists prefer to define
economic development as economic growth
with redistribution of resources in favour
of the relatively worse off. In this concept,
it is believed that reduction in inequality
will reduce poverty and will lead to
reduction in unemployment too.
Sustainable Development
In recent years an important issue has
arisen. The issue is whether the level of
development, even in a developing
country where it is fairly low, is
sustainable. In developed countries, the
major cause of worry about sustain-
ability of development is supposed to be
a wasteful consumption style and in
many developing countries, the cause of
such worry is said to be large and
increasing population.
In this context, there are two facts,
which are brought to our notice. One,
present production technology makes use
of non-renewable (exhaustible) natural
resources such as fossil fuels (coal, gas
and petroleum) or even of renewable
natural resources (such as forests,
animals and water) to such an extent that
their regeneration becomes difficult.
Two, present production technology
8 INDIAN ECONOMIC DEVELOPMENT
(along with disposal practices of waste)
pollutes atmosphere and water bodies
with garbage, litter, smoke and other
poisonous gases. The more goods you
produce, more non-renewable natural
resources get exhausted and our
environment become further polluted.
Nature has some assimilative capacity.
But, if pollution level is too high, the
nature may not be able to assimilate it.
Clean air and clean water may not be
available to us. There may not be
enough trees around us to clean our
atmosphere and we may have to suffer
from various health problems.
If non-renewable natural resources
deplete fast, future generations may not
have enough stock for its use. It means
that if we continue growing our
economies the way we do, there may
come a point when it may become
impossible to continue with the level of
development reached. Sustainable
development may, therefore, require the
preservation of stocks of resources,
including environmental resources and
exhaustible natural resources.
A study in 1972 had tried to show
that limits to growth on the planet will
be reached sometime in next hundred
years if present growth trends in world
population, industrialization, pollution,
food production and resource depletion
were to continue unchanged. There is
little reliance, in this view, on future
development of technology, which may
enhance productivity through efficiency.
Some do point out that there would then
be no mining and no industry. However,
it is always prudent to be cautious.
Before constraints loom large, it is not
a bad idea to apply restraint. The
message is that the pattern of growth
may have to be changed in certain
economies and in others, the level
reached may have to be maintained
rather than substantially enhanced.
Many analysts do not segregate
environment; they suggest that it does
not respect national boundaries.
Irrespective of where green house gases
are produced, global warming will take
place. If ozone layer withers, whole
humanity will suffer from its conse-
quences. Concerned with environmental
degradation, a world commission was set
up in the recent past, which produced a
report in 1987 under the title Our
Common Future. This report defines
sustainable development as that level
which takes care of the needs of the
present generation without compromising
the needs of the future generations. We
normally discussed development as
process not as level. The definition of
sustainable development can, therefore,
be modified as a path of development in
which options of future generations are
not compromised by the path taken by the
present generation.
It is indeed difficult to determine the
path that is sustainable or to find out
whether the path is unique. It simply
makes us cautious about our choice over
consumption style and efforts in
inventing technology and perhaps
restraining growth in population.
Quality of Life
One shred of quality of life is already
indicated in earlier section on
sustainable development. If quality of air,
quality of water and quality of sanitation
are not good, the quality of life also will
not be good. If our surroundings are
CONCEPTS IN DEVELOPMENT 9

littered, if the air is polluted or if we do rights should also be included in this

not get safe drinking water, then we will
not have a good life, no matter how much
of many desirable goods we are able to
buy from market. One can add
availability of food, clothing, shelter,
education facilities, health care, legal aid
and security to the list of clean water,
clean air and clean surrounding in order
to define the quality of life.
However, there is another shred of
thinking which is not altogether
unrelated to it. Those who suggest the
other line, point out that the items listed
above are determinants of well-being.
We can think about quality of life in
terms of its constituents too. The items
listed above lead to better health, welfare,
freedom of choice, and basic liberties,
which are all indices of well-being.
One should also be interested in
distribution of well-being along gender,
caste, class or regional lines. Many
analysts hold that a society with
somewhat overall lower literacy rate but
equality between male and female
literacy rates is better than another that
has somewhat higher overall literacy rate
but has gross inequality between male
and female literacy rates.
Some people also think that certain
rights, which people enjoy in certain
societies, are denied in others. These
set of well-being indicators even though
they do not fall in the economic category.
This argument is acceptable in the
sense that life cannot be separated
into economic and non-economic
compartments. Most of us would not
prefer to be put in prison for any
considerable period even if food,
clothing, shelter and healthcare provided
in the prison is far superior to what we
normally get outside. Therefore, it is said
that, political rights and civil rights or
some indicators reflecting these rights
should be added to the quality of life.
With increasing concern for human
rights, it would be a good idea to
incorporate these indicators of well-being
and welfare. After all, the whole purpose
of consciously developing a society is to
raise the level of well-being and welfare
of its people.
The idea of quality of life enriches
the concept of standard of living, which
is generally thought of in terms of rich
food, expensive clothing, luxuriant cars
and palatial houses, often manifestation
of high income. In societal terms, it is
captured through per capita income. But
the quality of life idea adds the
dimensions, which at times may not be
captured through monetary valuation.
EXERCISES

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

term?
2. How do you differentiate two ideas of economic growth?
3. How do we normally measure economic growth?
4. Write about the basic ideas involved in various definitions of economic
development. Is growth an essential condition of development?
5. While concept of economic development in terms of growth with structural
10 INDIAN ECONOMIC DEVELOPMENT

change is descriptive, whereas growth with redistribution is prescriptive. Do

you agree or not? Explain your answer.
6. How much importance do you assign to institutional and technological factors
in development?
7. What do you mean by sustainable development? Is it a problem of pollution
affecting present generation or a problem of resource- depletion affecting future
generation?
8. What are the essential ingredients of quality of life? If standard of living is
understood in terms of level of consumption of goods, how would you
distinguish the quality of life from the consumption of goods?
9. Match the following:
A. Economic Development A. GDP
B. Economic Growth B. Health
C. Sustainable Development C. Environment
D. Quality of Life D. Structural Change
10. Match the following:
A. Economic Development A. Long-term
B. Economic Growth B. Redistribution
C. Sustainable Development C. Future Generations
D. Quality of Life D. Structural Change
11. Match the following:
A. Economic Development A. Productivity
B. Economic Growth B. Increase in GDP
C. Sustainable Development C. Basic Liberties
D. Quality of Life D. Non-renewable resources
12. Discuss the evolution of four concepts outlined in this chapter.

ACTIVITIES
1. Prepare a table showing relevant series of GDP at current and constant prices.
Calculate growth rate for each year and average growth rate for each decade.
2. Write down things, places, activities and institutions, which are not economic.
INDICATORS OF DEVELOPMENT
CHAPTER 2
Indicators of Development
Introduction
You may recall that we have defined
economic development as a process but
also referred to it as a level. In this sub-
unit, our attention would be focussed on
the level of development achieved at a
given point of time (given year). In fact,
in this conception, you may note that
growth is a quantitative change between
two levels of development or levels of
development at two points of time.
Growth is basically an inter-temporal
comparison. For comparison between
two economies, which we often resort to,
there exists no such term. But such a
comparison is often made.
Most people would agree that
development is a process and the process
is multi-dimensional. When any process
is conceived as multi-dimensional, it
becomes difficult to adequately capture its
character through any index. However,
some attempts have been made to
measure the level. We shall discuss four
alternatives to measure the level of
development: Per Capita Income, Physical
Quality of Life Index, Human Development
Index and Quality of Life Index.
Per Capita Income
Gross domestic product is supposed to
measure the level of output produced by
11
the economy during an accounting
period. However, the command of people
over goods is somewhat different than
GDP. We have our property outside our
own national economy and some of our
nationals work in other countries. As a
result, we earn wage income or property
income outside the country. Similarly,
foreigners have property in our economy
and some foreigners do work here.
Adjusting for these incomes, we get gross
national product (GNP). In the case of
large countries and countries having
little interaction with other countries for
factors of production, GDP and GNP are
not very different. But, there are
economies where GNP and GDP are quite
different. In our case, GNP is somewhat
less than GDP. It may be noted that GNP
better represents the entitlement of the
nationals of a country (individuals and
their collectivities) while GDP actually
shows the output of the activities carried
out within the economic boundaries of
the country.
Still further, we should take account
of consumption of fixed capital in the
process of production. We should ensure
that the capital stock is kept intact
during the year; otherwise, we shall, one
day, eat away the whole of our fixed
capital. So, we should subtract that
amount of capital, which we think has
12
been consumed in the process of
production. Then, what we shall get is
known as Net National Product (NNP).
Net national product is also known as
the national income. We shall use a
particular version of net national product
known as net national product at factor
cost and designate as NNPFC.
Now, if we want to compare the
welfare of people at two points of time or
of two economies at the same point of
time, it becomes necessary to find out
the size of population. From the view
point of welfare or well-being of the
people, for which development is
pursued, it is suggested that the NNPFC,
valued at constant prices, should be
divided by the size of the population.
NNPFC divided by population is popularly
known as per capita income. It helps us
to compare the level of development
of the country in 2001 when we are
100 crore with that in 1961 when we
were 43 crore only. In order to render
international comparisons meaningful,
national incomes should be divided by
sizes of their respective populations.
Otherwise a country like Canada, which
by all standards, is considered a rich
country, could be found to be poorer than
India. The population of India may be
30 times that of Canada.
Such a division (deflation/normali-
sation) is needed even to assess the
progress over time. For example, our
NNPFC has grown a little more than eight
fold over the last fifty years but the
population has also almost trebled
during this period. As a result, per capita
income has grown less than three times.
Our living conditions can be expected to
have become better by a factor of three
rather than by a factor eight.
INDIAN ECONOMIC DEVELOPMENT
GROWTH OF PER CAPITA INCOME
You often read that per capita income
grows by (a-b) per cent when income (the
numerator) grows by a per cent and
population (the denominator) by b per
cent. It is true only when a and b are small.
We can see that (1+0.05)/(1+0.03) = 0.05-
0.03 = 0.02 but (1+0.5)/(1+0.3) 0.2 but
= 0.154 only and (1+5)/(1+3) = 1.5 not 2.
The reason is that (1+a)/(1+b); (a-b) only
when a and b are small.
With this in view, per capita national
income has come to be increasingly used.
In short, it helps us to compare the
development of India with that of the
USA or with that of Pakistan for any
given year as also our own development
over time. We may further note that it is
this indicator, which is often used to
categorise countries as developed/
underdeveloped countries or high/
middle/low income countries. In the case
of international comparison, per capita
incomes of different countries have to be
brought to a common currency.
However, it is very often pointed out
that its scope is quite limited. Most of
the limitations arise from the
numerator whatever it may be, namely,
GDP, GNP or NNP. These concepts do
not account for the economic activities
performed inside the household, which
are non-marketed. Bulk of womens
household work gets ignored, while it
is equally important from the point of
view of well-being and welfare of people.
It does not adequately capture activities
performed even outside household. As
production is valued in terms of market
prices, activities for which there does
not exist market do not adequately get
accounted for. It is also pointed out that
INDICATORS OF DEVELOPMENT 13

economic welfare, which it can Evolution of Alternative Measures

measure, even though imperfectly, is
not the total welfare that the people
look for.
The following three suggestions
have been made for correcting the
weaknesses of the measure of per capita
income:
1. Distribution of national income over
individuals is an important
dimension, which cannot be
ignored. National income and its
distribution, both, have to be
considered together. It has been
argued that the welfare of a society
depends on what is the size of the
cake and how it is distributed over
people.
2. Over time, people have come to
enjoy more leisure, which,
according to many, may be the
ultimate aim of all activities. It has,
therefore, been argued that its value
needs to be added to the national
income in order to make it yield a
better measure of welfare.
3. A suggestion was also made to
deduct the social cost of harmful
effects in terms of variety of
pollutions that many economic
activities entail.
These corrections, however, did not leave
many people satisfied and national
income or its per capita variant as
indicators of welfare have been in use
for long though with reservations.
However, in the last few decades, some
attempts have been made to develop
some alternative indicators of economic
welfare and of social development.
Search for better indicators of social
development has continued.
We often read in the newspaper that
Sri Lanka has a fairly high life
expectancy, low infant mortality and
good literacy levels. The levels in Sri
Lanka are comparable to their
counterparts in developed countries.
Our own state Kerala has done wonders
on literacy front as well as on
demography front. Tamil Nadu is also
faring well. Therefore, it was natural for
researchers to try to develop such indices
as would capture these social
dimensions.
There is an UN institution called
United Nations Research Institute for
Social Development (UNRISD). In this
institute, people tried to develop such
indices as would encompass social,
political and economic variables

A WELFARE MEASURE : INEQUALITYADJUSTED PER CAPITA INCOME

Amartya Sen is an Indian economist who has earned Nobel Prize in Economic Science in
1998. He has combined the dimensions of level and distribution of income to produce the
measure of welfare. In mathematical terms,
W = (1-G)
where W is welfare, is per capita income, and G is a measure of inequality. W will
increase when grows and G diminishes. When one remembers that is NNP divided by
population, it is clear that NNP should rise at higher rate than the population. The more
the growth rate of NNP relative to that of population, the better it is.
14
(indicators) impinging upon industria-
lisation, urbanisation and moderni-
sation. They went on enlisting indicators,
which they thought, reflected some or
the other dimension of development. At
one stage, they listed as many as 73
indicators though, finally, they selected
only 16 as it was found that many of the
indicators were reflected through others.
UNRISD Core Indicators of
Socio-economic Development
Expectation of life at birth
Percentage of population in localities of
20,000 and over
Consumption of animal protein per capita
per day
Combined primary and secondary
enrolment
Vocational enrolment ratio
Average number of persons per room
Newspaper circulation per 1000
population
Percentage of economically active
population with electricity, gas, water, etc
Agriculture production per male
agriculture worker
Percentage of adult male labour in
agriculture
Electricity consumption, kwh per capita
Steel consumption per capita
Energy consumption, kg of coal equivalent
per capita
Percentage GDP derived from
manufacturing
Foreign trade per capita, 1960 US $
Percentage of salaried and wage earners
to total economically active population
While at your level, it is not necessary
to go into the nitty-gritty of the ways the
indices were developed, an idea of the
variables that were included in such
attempts could be of some interest. The
variables included are per capita income,
INDIAN ECONOMIC DEVELOPMENT
hospital beds and number of doctors per
lakh of population. They also included
enrolment rates, electricity consumption
and steel consumption per head. Length
of metalled roads, number of villages
electrified and availability of post offices
also got their way into it. So did the
character of agricultural organisation.
These are important indicators and are
considered by many as the ends in
themselves.
A question was, however, raised:
whether inputs can be taken as
development indicators. While enrolment
rate indicates an input, literacy rate
shows the output. While hospital
facilities indicate inputs, life expectancy
shows the output. If you have better
sanitation, you have better health and
you require less of hospital facilities.
Even income is in a way an input.
Researchers and policy-makers were
not very happy with such alternatives
to national income as welfare measures
as they did not find the approach suitable
to produce a meaningful social indicator.
Attempts were, then, made to develop
composite index of development,
purportedly based on aims and
objectives of development or outcomes
of the development process rather on the
means thereof.
Quality of Life Indices
We may recall the constituents of quality
of life in the previous chapter. They were
generally indicated as health, freedom,
education, environment, etc., the things
that you directly enjoy. Based on these
parameters, attempts have been made
in the recent past to construct indices,
which may, broadly, be called indices of
quality of life. In fact, longevity and
INDICATORS OF DEVELOPMENT
literacy have undisputedly been accepted
as parameters of quality of life. We shall
be studying two popular indices, viz.,
Physical Quality of Life Index (PQLI) and
Human Development Index (HDI), which
have both used longevity and literacy as
basic constituents. There is, indeed, an
attempt to measure quality of life and we
will make reference to it towards the end.
It is important to remind at this stage
that these indices were developed in the
international context and were used for
ranking different countries according to
numerical value of achievement in
descending order. The indices are simple
arithmetic averages of normalised
aggregates for society/groups.
Physical Quality of Life Index
Towards the end of the seventies of the
past century, Morris David Morris
perused the variables adopted by several
UN Committees, the UNRISD, and the
OECD development economists. He
found that most of the indicators were
inputs to development process rather
than result of the development process.
These indicators reflected the belief that
there exists only one course of
development. It implied that
economically less developed countries
are simply underdeveloped versions of
industrialised countries. This view has
certain biases and value-bias of Europe.
It overlooks the diversity among the
underdeveloped countries and the
differences in social organisation in
different economies. Moreover, such
efforts seem to measure development as
an activity rather than as an end. He,
therefore, proposed a set of criteria for
developing a composite index of
development. He further proposed that
15
indicators chosen should reflect results
and social distribution of results and
should not reflect values of specific
(Euro-American) societies. Composite
index should be simple to construct and
easy to comprehend and should lead
itself to international comparison.
Choice of Indicators
Morris, therefore, tried to look for those
indicators, which were the results of the
development efforts, were not the values
of particular societies as there could be
non-market, non-urban, non-industrial
or non-plan ways to develop. They should
create no problems in international
comparison. Out of hundred and odd
indicators, he could find only three which
could have universal appeal as ends in
themselves and meet the criteria laid
down. These are:
1. Life Expectancy (LE),
2. Infant Mortality (IM), and
3. Basic Literacy (BL).
These three indicators could be
improved in a variety of ways. Whether
a country should attain higher life
expectancy through better medical
facilities or better sanitation or better
nutrition, is not really important. But it
is universally accepted that a country
should have high life expectancy.
Whether a country should have a higher
rate of basic literacy through formal
channels or non-formal channels is not
important. But a country should try to
attempt for higher level of literacy is the
point. This is also almost universally
accepted. Whosoever is born will die, is
accepted but those who have been born
should not die as children in infancy.
This is the point generally accepted.
16
Now, there is a technical issue.
Normally, life expectancy at birth is the
index used. Infant mortality refers to
deaths before age one. Therefore, Morris
suggested that life expectancy at age one
should be used instead of life expectancy
at birth. In case, the figure for life expec-
tancy at age one was not available, it could
be worked out by using a formula, which
relates life expectancy at birth, infant
mortality and the proportion of children.
Normalisation of Indicators
We know that life expectancy is
measured in terms of years, infant
mortality rate in terms of per thousand
and basic literacy rate in terms of
percentage. They cannot be simply
added. Further, while basic literacy rate
can have a natural zero for minimum
and 100 for maximum, there exist no
natural minimum or maximum values
for other indicators. For the purpose of
comparison, each of the levels should,
therefore, be normalised. Morris chose
the best and worst levels in each of the
three cases. In the case of positive
indicators of life expectancy and basic
literacy, the best is denoted by the
maximum and the worst by the
minimum. But, in the case of negative
indicator of infant morality, the best is
represented by the minimum and the
worst by the maximum. For converting
the actual levels of a positive variable
into normalised indicators, first the
TABLE 2.1
Maximum and Minimum Values of Component Indicators
Dimension
Basic Literacy Rate (BLR)
Infant Mortality Rate (IMR)
Life Expectancy at Age 1 (LEI)
INDIAN ECONOMIC DEVELOPMENT
minimum values are subtracted from
their respective actual values and then,
the gap so obtained is divided by the
range (between the maximum and the
minimum). In other words, for positive
indicators:
Actual Value Minimum Value
Achievement Level=
Maximum ValueMinimum Value
For the negative indicator of infant
mortality, first the actual value has to
be subtracted from the maximum value
and then the gap has to be divided by
the range. In other words,
Maximum Value Actual Value
Achievement Level=
Maximum ValueMinimum Value
Index Construction
There are, now, three such indicators.
We may call them (i) Life Expectancy
Indicator (LEI), (ii) Infant Mortality
Indicator (IMI), and (iii) Basic Literacy
Indicator (BLI). These three indicators
are averaged to give what is called the
Physical Quality of Life Index (PQLI):
PQLI = (1/3 ) (LEI + IMI + BLI )
Choice of Minimum and Maximum
Values
As in the case of life expectancy and infant
mortality, there exist no natural minimum
and maximum values, one has to choose
reasonable values. After a lot of
considerations, which need not hold us,
Morris chose the following set of values
(See Table 2.1). They may need revision
Max Min Range
100 0 100
229 9 220
77 38 39
INDICATORS OF DEVELOPMENT
in the light of recent experience of
countries. For example, maximum life
expectancy could now be raised to 85 years.
The conversions from values to indices
are linear. Put the actual values of the
country in the expressions below and
obtain the component indices as also the
Physical Quality of Life Index. The
expressions are given below:
Actual Life Expectancy at Age 1 38
LEI =
39
229 Actual Mortality Rate
IMI =
220
Actual Literacy Rate 0
BLI = the making of index and it will create
100
Suppose for India, life expectancy at
age one is 70 years, infant mortality rate
is 70 per thousand live births and adult
literates constitute to be 55 per cent of
adult population. Try step by step and
you will find that LEI is 0.82, IMI is 0.72
and BLI is 0.55. The PQLI is, therefore,
about 0.70.
Human Development Index
Only ten years passed since the PQLI was
developed, another index came into
being. Since 1990, an agency of the
United Nations, viz. the United Nations
Development Programme (UNDP) has
been publishing every year a report
called Human Development Report. This
report, besides discussing various
aspects of human development, has been
ranking various countries according to
the level of human development index.
Before the human development index
is described, it would be an interesting
idea to look at the GDP/GNP from a fresh
angle. It is pointed out that these
measures are measures of activity and
17
they concentrate on production of
commodities -- goods and services. We
should, it is suggested, instead focus on
capabilities and measure improvement
in capabilities of people. Living long and
healthy life is a capability and so is to be
able to read and write. With rising
capabilities, we have wider choices and
development is what if not widening of
choices! The idea has an added
dimension that these capabilities cannot
be accumulated. In a way it is close to
PQLI except that now the theoretical
scaffolding is strong. But at the same
time, a non-physical entity will enter in
problem for international comparison.
The Index
Human Development Index is broadly an
average of social aggregates/averages of
longevity, knowledge and access to
resources. To put it more concretely, it
is an equi-weighted average of :
1. Life Expectancy Index (LEI)
2. Education Attainment Index (EAI)
3. Standard of Living Index (SLI)
where the sub-indices were to be
calculated by the same old method of the
PQLI. In other words,
HDI=(1/3)(LEI+EAI+SLI)
Components
Life expectancy here refers to life
expectancy at birth, not at age one,
because infant mortality is not entering
this index as a separate indicator.
Educational attainment is literacy plus.
To begin with, it was only adult literacy.
Later on, it became a combination of
adult literacy rate and mean years of
18
schooling. In highly developed countries,
adult literacy was complete but
education level was still rising. This could
be reflected through mean years of
schooling or enrolment ratio. Now, mean
years of schooling have been replaced by
combined enrolment ratio. The weight
assigned to adult literacy rate (ALR) is
2/3 while that for combined enrolment
ratio (CER) is 1/3. Therefore, educational
attainment index may be given as:
EAI = (2/3) ALR + (1/3) CER
Standard of living is represented here
by a transformation of per capita income.
Besides longevity and knowledge, it has
been argued, there are many things
which people desire. It is difficult to
capture them. For living a decent life,
people need resources. Per capita
national income is the simplest measure
of resources at the command of people.
Since this exercise has basically been
conducted for international comparison,
per capita incomes of different nations
have per force to be brought to some
common denominator. Per capita
incomes are first converted into
purchasing power parity dollars (PPP$).
The second step concerns with the
fact that the returns to a dollar of income
is not the same throughout the whole
range of income. The increase in returns
should diminish as income increases and
should eventually become zero. This idea
TABLE 2.2
Maximum and Minimum Values of Component Indicators
Component
Life Expectancy at Birth (LEB)
Adult Literacy Rate (ALR)
Combined Enrolment Ratio (CER)
Standard of Living (SL)
Standard of Living (SL)
INDIAN ECONOMIC DEVELOPMENT
was handled by the UNDP in a variety of
ways. Presently, standard of living is
being captured by the log-transform of
per capita income (PCI) in PPP$. In other
words,
Standard of living = log (PCI in PPP$)
You know very well that, at base 10,
logarithms of 10, 100, 1000, and 10000
are 1, 2, 3, and 4 respectively. Thus,
returns to additions in income are
diminishing as income goes on
increasing. There could be many other
ways to accomplish this feature. The
UNDP has tried other formulae in past
but thought it proper to change to simple
logarithm conversion.
Normalisation
Since we are using only positive
indicators in this index, we can write only
one formula for computing the
component indices (CI):
Actual Value of the Component
Minimum Value of the Component
CI =
Maximum Value of the Component
Minimum Value of the Component
where CI stands for LEI, ALRI, CERI and
SLI. It may be noted that ALRI and CERI
are just ALR and CER respectively, each
divided by 100.
Minimum and Maximum Values
After a lot of debate over years and
following the norms for various
Unit Maximum Minimum
Years 85 25
Percentage 0 100
Percentage 0 100
PPP$ 100 40000
Log PPP$ 2 4+2log2
INDICATORS OF DEVELOPMENT 19

components, the UNDP has finally fixed that the number of countries for which
the following minimum and maximum exercise could be conducted varied from
values for various components of Human year to year. Fluctuation in rank partly
Development Index (see Table 2.2). owes to number of countries included.

TABLE 2.3

Value of HDI for India and Rank of India in World

HDR Year of Value Rank HDR Year of Value Rank
Year Data Year Data
1990 1987 0.439 94 (130) 1996 1993 0.436 135 (174)
1991 1988 0.308 123 (160) 1997 1994 0.446 138 (175)
1992 1990 0.297 121 (160) 1998 1995 0.451 139 (175)
1993 1990 0.309 134 (173) 1999 1997 0.458 132 (174)
1994 1992 0.382 135 (173) 2000 1998 0.456 128 (174)
1995 1992 0.439 134 (174) 2001 1999 0.571 115 (162)

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

HDI and India
The United Nations Development
Programme (UNDP) has been compiling
human development indices for different
countries for which it had access to
relevant data. These indices are
published in Human Development
Report, brought out annually by the
UNDP. The position of India in the comity
of nations (number given in the
parentheses), as given in different HDRs,
is shown in Table 2.3.
We can notice that the data
compilation takes time. We can also notice
Between the last two years, we find, Indias
rank improved by 13 while number of
countries dropped by 12. It is quite possible
that most of the countries excluded were
above India. We should also notice that
Indias rank improved by 2 from 123 in 1988
to 121 in 1990 while the HDI value actually
fell. It is possible because of change in
methodology and components used.
Despite these weaknesses, we can see
that Indias HDI value is improving since
1990 when it recorded its lowest value.
Fortunately, HDR 2001 has
calculated HDI values for different

TABLE 2.4
Value of Human Development Index Since 1975 for India

Year 1975 1980 1985 1990 1995 1999

HDI Value 0.406 0.433 0.472 0.510 0.544 0.571
HDI Value* 0.297 0.439 0.571
* From Table 2.3
Source: Human Development Report, Oxford University Press, Delhi, 2001
20
countries on uniform basis with same
methodology by ensuring comparability
across nations and over time, at an
interval of five years since 1975 (See
Table 2.4).
We should notice that our HDI is
improving since the mid-seventies.
Perhaps we are improving on all fronts,
life expectancy (reflecting health to some
extent), education (including literacy)
and general standard of living
(represented by per capita income). The
UNDP has been categorising various
countries as countries with high human
development, with medium human
development and with low human
development, depending upon whether
a country had HDI value above 0.8,
between 0.5 and 0.8 or below 0.5. Prior
to 2000, India was considered as low
human development nation. In 2000, it
has become a country with medium
human development (see Table 2.3).
It will not be out of place to inform
that some scholars have done inter-
state comparison for India while some
state governments have come out with
state-level exercises for human
development index. These reports do
contain more information on human
development than are available in
compilation of HDI. Since March 2002,
our Planning commission has also come
out with a report known as National
Human Development Report.
Quality of Life Index
Some economists still feel that, though
human development approach talks of
many dimensions, the human
development index encompasses only
very few of them, though important ones.
They feel that political and civic
INDIAN ECONOMIC DEVELOPMENT
dimensions, if not environmental ones,
need to be incorporated in any such
exercise.
In one such contribution On
Measuring the Quality of Life, Dasgupta
and Weale have considered six
parameters what they have called living
standards indicators or constituents of
well-being. These are: (i) per capita
income in PPP$, (ii) life expectancy at
birth in years, (iii) infant mortality rate
in per thousand live births, (iv) adult
literacy rate in per cent of adult
population, (v) index of political rights in
seven-point scale and (vi) index of civil
rights in seven-point scale. We may note
that civil rights are rights of individuals
vis-a-vis the State, while political rights
are citizens right to play a part in
governance of their country. Governance
will mean who will govern and under what
laws. While the first four could be called
socio-economic indicators, the last two
could be said to be political and civil
indicators.
These indicators are aggregated in a
peculiar way. First, countries are ranked
according to each of the indicators in
ascending order from worst to best.
Second, the ranks for different indicators
of country are added and thus for each
country a rank-score is obtained. Third,
countries are again ranked according to
their rank-scores.
Though, this work was done from late
1970s to early 1990s, using the data
relating the results are interesting. Of 48
countries listed, Mauritius comes the
best and Sri Lanka, the second best.
China and India come 10th and 12th
best from the top, while Bangladesh
and Pakistan come 26th and 30th from
the top. In both the pairs, scores in
INDICATORS OF DEVELOPMENT 21

socio-economic indicators are found to Morris developed what he called the

diverge from those in political and civil
indicators. In socio-economic
indicators, China scores better than
India, Pakistan and Bangladesh but in
Political and Civil indicators, India
scores better than China, Bangladesh
and Pakistan. Though the story is a bit
old, it may hold even today.
Concluding Remarks
Intellectuals and policy-makers were not
very happy with the use of GDP or its per
capita variant as an indicator of welfare
or development. Some economists
developed composite indices taking into
consideration the distributional aspects.
Others did try to modify the GDP by
adding the values of those things that
were left out in the idea of GDP or
subtracting the cost of the items that do
not contribute to the welfare.
Some other scholars and agencies
thought that they should directly
measure the development, particularly
social development. They considered all
possible variables that impinged upon
modernisation, urbanisation and
industrialisation. Most of the variables
were all on the side of inputs. They
combined inputs with output. The result
was not a happy one.
Physical Quality of Life Index (PQLI). He
thought that it represented the outcome
of developments. He was conscious of
the fact that many psychological aspects,
which are no way less important, were
not covered in this index. He did not
deliberately cover the monetary aspects
which pose problem for international
comparison.
The PQLI had a great technical flaw.
Infant mortality and life expectancy both
referred to the same demographic
ground. It was further found that the
concept did not include many other aims
and objectives of life except longevity and
knowledge. So came HDI, the Human
Development Index, which incorporated
per capita income along with longevity
and knowledge (redefined as educational
attainment). There are objections to
incorporation of income in HDI on many
counts. Yet, the UNDP considers it
prudent to include it as proxy to the
uncovered aspects of well-being.
Many scholars are not completely
happy and have chosen to indicate an
alternative. Parthasarthy Dasgupta and
Martin Weale suggested a way of
combining some aspects of quality of life
into an index, which is called Quality of
Life Index.

EXERCISES
1. What do you mean by per capita income?
2. What are the factors that have to be subtracted from GDPFC in order to get
NNPFC? Should we use NNPFC at current prices or at constant prices if we have
to judge the level of development of a country over time?
3. Why should we divide NNPFC by population when we are not making comparison
with other nations? Explain.
22 INDIAN ECONOMIC DEVELOPMENT

4. What are the weaknesses of the NNP as an index of development? What are
the three suggestions made in order to make up for some of the deficiencies?
5. What are the major problems with the attempts made by the UNRISD?
6. List the three components of Physical Quality of Life Index (PQLI).
7. How is PQLI constructed from ALR, LEI and IMR?
8. Why is PQLI called a physical index?
9. What is the rationale for Human Development Index?
10. Discuss three elements that go into making of HDI.
11. Indices on quality of life insist on inclusion of outcome of development process.
Income is an input for well-being. How do you defend its inclusion in HDI?
12. Give the formula for a component index of HDI.
13. Discuss why per capita income should be measured in purchasing power parity
dollars.
14. How is PPP$ income converted into standard of living index?
15. List six constituents along with units, which have been considered by the
authors of On Measuring the Quality of Life.
16. What do you mean by political and civil rights? How strongly do you feel that
they should be considered indicators of development? Discuss.
17. Discuss the evolution of indices of development.

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

Component Male Female

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

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

STRUCTURAL CHANGE IN INDIAN ECONOMY

SINCE INDEPENDENCE

In this unit, you will basically learn the growth of and structural changes
in the Indian economy particularly since Independence. As most of the
data are available since 1950-51, the study of changes will mostly confine to
the period since 1950-51. In one case, data is available from 1960-61 only.
Towards the end, in a section, we shall use data since 1972-73. The end
year of a series will be determined by the relevant publications giving
the data.
With growth, every economy diversifies itself in terms of contribution
of different economic activities. Besides structural changes in the economy
in terms of contribution of different sectors, you will have an idea as to
how the labour force is engaged in different economic activities.
As it is felt that growth will be hampered if our economic infrastructure
in terms of energy, transport and communication is weak, you shall see
how our economy is faring in this respect. We also feel concerned about our
education, health and housing and, therefore, you will have an idea about
these social sectors as well.
It is understood that there has come a great break in our policies in
1991 in terms of what has come to be known as Liberalization, Privatization
and Globalisation (LPG). We shall, therefore, discuss major policy planks
before and after 1991 and contrast the two sets of policies.
 CHAPTER 3
Growth and Structural Change in the
Indian Economy
Introduction
In this chapter you will study the growth
of and structural change in the Indian
economy in the last fifty years since
1950-51 for which data on most of the
macro aggregates are available on an
annual basis. We shall concentrate on
the growth of gross domestic product at
factor cost valued at 1993-94 prices. We
shall consider the growth of per capita
national income, also valued at 1993-94
prices, which can be taken as the
simplest indicator of the level of living
or development.
In an earlier chapter, one of the
notions of development was posed in
terms of structural change along with
growth. What do we mean by structure?
Most people mean by it production
structure, that is, composition of output
produced by the economy. Some would
like to find out how and where our labour
is absorbed. Other factors such as land
and capital are not given equal
importance. Some would also like to find
out how the production of output is
divided between rural and urban areas
of the country or between public and
private sectors of the economy or
between organised and unorganised
sectors. We shall discuss all of them.
But we can appreciate developments
since Independence better once we have
a little hint about the scene on the eve
of Independence.
Economy on the eve of Independence
We had inherited an economy, which was
basically geared to the interest of our
colonial masters. The rate of growth of
per capita income during the hundred-
year period before Independence, from
whatever scanty information is available,
was just 0.5 per cent per annum. It has
further been noted that there were long
spells when the economy actually
stagnated or declined.
In the past, we were known for pro-
ducing fine cotton fabric, handicrafts and
other merchandise. Even during the
early British Raj, that is, before the onset
of industrial revolution in Britain, our
economy was an industrial economy by
the standards of those days whereas the
European economies had yet to usher
in modern civilisation. Yet, by the time
we got Independence, our economy was
primarily reduced to an agricultural
economy and we used to export mainly
raw materials and minerals for the
British industries and even foodgrains
while we might have been hungry
ourselves.
26
In 1950-51, our per capita income
was no more than Rs 3,700 at 1993-94
prices (while in 1999-2000, it is a little
more than Rs 10,000). The contribution
of agriculture sector (including animal
husbandry and livestock) to the GDP was
around 54 per cent by current prices and
50 per cent by constant prices of 1993-
94. If we include forestry and logging and
fishing in this sector, then the
contribution turns out to be 57-58 per
cent. And, if we add mining and
quarrying and call the combined sector
as primary sector, the contribution of
primary sector is found to be about 60
per cent. Manufacturing contributed
only around 10 per cent. Contribution
of the service sector was thus around
TABLE 3.1
Gross Domestic Product at Constant Prices (1993-94) from 1950-51 to 2000-01
Fiscal Year GDP (Rs. Crore)
1950-51 140466
1955-56 167667
1960-61 206103
1965-66 236306
1970-71 296278
1975-76 343924
Sources: National Accounts Statistics: Back Series 1950-51 to 1993-94 and National Accounts
Statistics 2001, both published by the Central Statistical Organisation.
30 per cent. Most of the people were
engaged in agriculture as cultivators
on their own tiny holdings or as wage
labourers on others fields.
Growth of GDP since 1950-51
Growth of an economy is reckoned with
growth in its GDP at constant prices. We
have now a complete series of gross
INDIAN ECONOMIC DEVELOPMENT
domestic product at 1993-94 prices
from 1950-51 onwards but we give here
the GDP series at five yearly interval
(Table 3.1). Complete series of GDP at
factor cost at 1993-94 prices is given in
an appendix.
However, in order to give you a feel
about the general tendency of rise and
occasional decline in a few years in
comparison to their respective preceding
years, we give here a graphical presen-
tation of the whole series. We notice from
the graph that there were occasional
drops in the GDP which we do not notice
in the abridged Table presented here.
But, generally it has been rising. Over
the period of last fifty years, it has
increased more than eight times. But we
Fiscal Year GDP (Rs. Crore)
1980-81 401128
1985-86 513990
1990-91 692871
1995-96 899563
2000-01 1211747
are and should be more interested to
know whether growth rate itself has risen
over time.
From the series given in the
appendix, we can calculate year-to-year
growth. We can also calculate rates of
growth for different plan-periods or
different decades or for periods divided
by significant events. All such breakups
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 27

Fig. 3.1 : Growth of GDP

have been used by scholars. We shall
calculate growth rate per annum by
decades only. We shall use two popular
methods of calculation of annual rate of
growth for long periods, viz. average
annual growth and compound annual
growth rate (discussed in an appendix).
We present below the rates of growth
of GDP for each of the decades and for
the half century gone by in the following
table. From Table 3.2, we notice that
the rate of growth for the whole duration
is conclusively more than 4 per cent per
annum. The rate of growth got depressed
in seventies but has definitely improved
during the eighties and nineties.
Presently, it can be safely accepted that
the rate of growth is close to six per cent
per annum. Some credit can be given to
the policies adopted in the eighties and
nineties on the growth front but credit
should also be given to the base created
during the fifties, sixties and seventies,
which helped change the productivity
of the agricultural economy and
diversification of the industrial economy
of the country.
Growth of Per Capita Income
Per capita income is the ratio of net
national product to the (mid-year) size
of population. Net national product is
28 INDIAN ECONOMIC DEVELOPMENT

TABLE 3.2
Annual Growth Rates of Gross Domestic Product at Factor Cost for Different Decades
(per cent per annum)

Period Average Annual Compound Annual

1950-51 to 1959-60 3.59 3.56
1960-61 to 1969-70 3.95 3.89
1970-71 to 1979-80 2.94 2.86
1980-81 to 1989-90 5.79 5.78
1990-91 to 1999-00 5.80 5.78
1950-51 to 1999-00 4.43 4.11

likely to follow the pattern of gross
domestic product, as the component of
net factor income from abroad is small
in comparison to the total. Population
has been secularly rising in the last fifty
years though, of late, the rate of growth
of population has started declining. We
can remember that, in the case of
population, we have only decennial
figures and, therefore, can calculate only
a single rate of growth of population.
Using this technique, population size for
each mid-year is interpolated. Dividing
net national product by the size of
population, per capita income is
calculated. This is presented in Table 3.3
at the interval of five years.
You can see that annual per capita
income has risen a little less than three
times from a little less than Rs 3,700 in
1950-51 to over Rs10,000 in 2000-01,
at constant prices of 1993-94. In none
of the years shown here, there is a
decline over the year in the previous row.
But, one can notice that there is hardly
any rise in 1965-66 over 1960-61, that
is, after a gap of five years. Generally,
there is some rise in normal years. It
means that 1965-66 was a particularly
bad year. In fact, 1965-66 and 1966-67
were years of severe drought, though
they gave us green revolution.
However, with a view to giving you
an idea about the wider fluctuations in
case of per capita income, we give
here the graphical presentation. For
the actual data, see appendix of the
chapter.

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

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

1950-51 3,687 1980-81 5352
1955-56 4,020 1985-86 6082
1960-61 4,429 1990-91 7321
1965-66 4,459 1995-96 8498
1970-71 5,002 2000-01 10561
1975-76 5,167
Sources: The same as in Table 3.1.
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 29

Table 3.4 shows the annual growth choose to ignore the difference between
rate of per capita income for each of the the two methods at the moment (See
decades and for the whole period of fifty Appendix).
Per Capita Income in Rs.

Year

Fig. 3.2 : Growth of Per Capita Income

years, by the two methods of average Changes in Production Structure of

annual growth rate and compound the Economy
annual growth rate. We can notice that,
over the fifty years, growth rate was over As an economy grows, its production
2 per cent per annum. The seventies structure changes. It moves from
saw the lowest growth rate. You can agriculture towards manufacturing and
TABLE 3.4
Annual Growth Rates of Per Capita Income at Factor Cost for Different Decades
(per cent per annum)

Period Average Annual Compound Annual

1950-51 to 1959-60 1.53 1.35
1960-61 to 1969-70 1.51 0.94
1970-71 to 1979-80 0.55 0.17
1980-81 to 1989-90 3.89 2.85
1990-91 to 1999-00 3.73 3.37
1950-51 to 1999-00 2.16 2.05
30
structure changes. It moves from
agriculture towards manufacturing and
services. It is understandable. You might
have noticed that relatively well-off
families spend proportionately less on
food items and more on manufactured
items. You may also note in your family
that, as income increases, expenditure
on items other than food increases more
than proportionately. But, you should
note that normally absolute amount of
expenditure does not, broadly speaking,
decline; in fact, increases but less than
proportionately. It implies that
production structure should shift away
from agriculture. Moreover, many
agricultural products, which used to
directly reach the households, will now
reach after some processing and through
long channel of distribution. Bread,
noodles, sauces and juices are good
examples. It means activities of
manufacturing and trade will increase.
So, let us see how the production
structure has changed.
We know that hundreds of
thousands of activities are always in
operation in any modern economy. Many
activities emerge and some of them die
down; some of them even re-emerge, may
be, in a modified form. But, it is difficult
to discuss in terms of each single item.
We often aggregate them on the basis of
similarity of products or nature of
activities.
Our Central Statistical Organisation
uses nine broad categories, called
sectors. Six of them are further
subdivided in two/three/four sub-
categories. Industry as a sector does not
occur in it; industry is accommodated in
mining (and quarrying), manufac-turing
and electricity. In total, there are
INDIAN ECONOMIC DEVELOPMENT
18 categories, sectors and sub-sectors,
in which total economic activity of the
country is presented in the National
Accounts Statistics.
There are, however, two three-fold
classifications in which economists
discuss changes in production structure.
One is agriculture, manufacturing/
industry, and services and the other is
primary, secondary and tertiary. Besides
cultivation of crops, agriculture includes
livestock and animal husbandry. But
forestry and logging and fishing are
clubbed with agriculture to make a broad
sector of agriculture, forestry and fishing.
If we add the sector of mining and
quarrying to this sector, we can call it
primary sector as these activities are
associated with nature.
The manufacturing sector is further
subdivided into registered and
unregistered manufacturing, depending
upon whether manufacturing units are
registered under Factories Act 1948.
Industry may include manufacturing
and mining and quarrying. On the other
hand, if we club the sectors of electricity,
gas and water supply and construction
with manufacturing, we can call it
secondary sector. All activities listed in
the tertiary sector in Tables 3.5 3.8
along with those of electricity, gas and
water supply, and construction also
known as services sector.
This is just a matter of convention.
There may be differences between
countries and within a country changes
in classification may occur over time.
We did not have exactly the same
classification always. While new
products gain entry with each major
revision of national accounts, some
swapping of activities is possible. For
example, earlier LPG gas was included
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 31

SECTOR CLASSIFICATION ADOPTED BY THE CSO

1. Agriculture, Forestry and Fishing
1.1. Agriculture, including livestock and animal husbandry
1.2. Forestry and Logging
1.3. Fishing
2. Mining and Quarrying
3. Manufacturing
3.1. Registered
3.2. Unregistered
4. Electricity, Gas and Water Supply
5. Construction
6. Trade, Hotels and Restaurant
6.1. Trade
6.2. Hotels and Restaurant
7. Transport, Storage and Communication
7.1. Railways
7.2. Transport by Other Means
7.3. Storage
7.4. Communication
8. Financing, Insurance, Real Estate and Business Services
8.1. Banking and Insurance
8.2. Real Estate, Ownership of Dwelling and Business Services
9. Community, Social and Personal Services
9.1. Public Administration, Defence and Quasi-Government Bodies
9.2. Other Services.

in the sector of electricity, gas and water
supply, now it is part of manufacturing.
Table 3.5 presents the contribution
of eleven major sectors, over six points
covering fifty years, to the gross domestic
product at constant prices of 1993-94.
From this Table we shall derive two more
Tables, one presenting the composition
of gross domestic product and the other
presenting the rate of growth of different
sectors for each of the decades and the
half-century as a whole.
While we shall highlight some salient
features of production structure or
composition of output, it would be
interesting for you to do your own
exercises and develop your own views on
contributions of different sectors.
Absolute Contribution of Different
Sectors
It is easy to see that agriculture
production has been continuously on
increase and has increased about four-
fold. Since our Table does not include all
the years, we do not find any drop in
agricultural production. There are many
periods when agricultural production
actually fell. Whenever we notice a fall
in the gross domestic product, a major
reason is likely to be a fall in agricultural
production as its contribution to GDP had
32 INDIAN ECONOMIC DEVELOPMENT

been substantial. We were most severely crore in 1999-2000, almost sixteen-fold

hit in agriculture in the consecutive years
of 1965-66 and 1966-67. These years,
however, gave us green revolution. We are
now quite comfortable with the overall
performance of agriculture. Yet, we had
had two-three years of setback in each
of the decade. We should remember that
agriculture gives us food, milk and meat
and gives to industry the raw material
needed particularly for consumer goods
industries. Compared to agriculture,
other sectors included in primary sectors
are small; the contribution of primary
sector is found to have risen only four
times.
Manufacturing which contributed
about Rs 12,500 crore in 1950-51,
contributed to the tune of Rs. 2,00,000
increase over the period. Annual
construction activity also rose ten times.
Construction does not mean only houses
but also roads and railway lines, dams,
and canals, bridges and flyovers, etc. and
also huts. Electricity, gas and water
supply were in nascent stage in the wee
hours of Independence, contributing less
than Rs 500 crore at 1993-94 prices. Its
contribution rose 60 times in 50 years.
Overall contribution of the secondary
sector rose fifteen-fold.
Trade along with hotel and
restaurant business rose fourteen-fold
over the period while transport along
with storage and communication rose
eighteen-fold. Financial and business
services including insurance and real

TABLE 3.5
Contribution of Different Sectors to Gross Domestic Product at Constant Prices
of 1993-94 for the period between 1950-51 and 1999-00 (Rs Crore)

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

Agriculture 70,456 97,412 1,21,356 1,43,431 2,00,634 2,66,848
Forestry and Logging 9,456 9,704 13,086 11,910 11,751 12,542
Fishing 1,249 2,124 3,197 3,952 6,943 10,944
Mining and Quarrying 2,085 3,594 5,261 8,477 19,819 26,446
PRIMARY SECTOR 83,246 1,12,834 1,42,900 1,67,770 2,39,147 3,16,780
Manufacturing 12,491 22,465 37,389 55,436 1,15,282 1,96,763
Electricity, Gas and 457 1,217 3,501 6,774 16,203 28,225
Water Supply
Construction 5,722 10,558 18,107 24,395 38,218 58,728
SECONDARY SECTOR 18,670 34,240 58,997 86,605 1,69,703 2,83,716
Trade, Hotels and 12,137 20,254 32,324 48,883 86,892 1,68,355
Restaurants
Transport, Storage and 4,645 8,064 13,759 24,963 42,894 84,477
Communication
Financing, Insurance, Real 9,380 12,568 17,588 26,156 66,990 1,46,546
Estate and Business Services
Community, Social and 13,215 18,908 31,660 46,751 84,380 1,52,117
Personal Services
TERTIARY SECTOR 39,377 59,794 95,331 1,46,753 2,81,156 5,51,495
GROSS DOMESTIC PRODUCT 1,40,466 2,06,103 2,96,278 4,23,073 6,92,871 11,51,991
Source: The same as in Table 3.1
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 33

estate also rose fifteen times while 30 per cent over the period.
community, social and personal services, The share of manufacturing in GDP
including public administration and has gradually risen from 9 per cent to 17
defence rose only eleven-fold. Thus, in per cent over the period. The share of
the second half of the twentieth century electricity, gas and water supply, which
while the contribution of primary sector was hardly one third of one per cent rose
to GDP rose to four fold that of secondary to close to 2.5 per cent. The activity of
and tertiary sectors rose by fifteen construction, despite good rise in
fold each. absolute terms, is considered to be
slackening; during the first twenty years,
Relative Contribution of Different while the share rose from 4 per cent to
Sectors 6 per cent, during the last thirty years it
Relative contribution of a sector depends fell back to 5 per cent. Secondary sector
on its own performance as well as that as a whole raised its contribution from
of other sectors. As a result, despite about 14 per cent to more than 24 per
positive contribution, a sector may lose cent. The secondary sector is closely
relative position. Thus, while agriculture contesting the primary sector as far as
contributed 50 per cent to the making of
its contribution to the GDP is concerned.
GDP in 1950-51, it contributes less than
25 per cent at the close of the century Let us look at the tertiary sector. The
despite four-fold increase in its output. share of contribution of activities of
The contribution of primary sector came trade, hotel and restaurant business
down from close to 60 per cent to less than rose from 8-9 per cent to 14-15 per cent
TABLE 3.6
Composition of Output in Terms of Sectoral Output to Gross Domestic
Product valued at Constant Prices of 1993-94 (in Percentage)
SECTOR OF ACTIVITY 1950-51 1960-61 1970-71 1980-81 1990-91 1999-00
Agriculture 50.16 47.26 40.96 35.76 28.96 23.16
Forestry and Logging 6.73 4.71 4.42 2.97 1.70 1.09
Fishing 0.89 1.03 1.08 0.99 1.00 0.95
Mining and Quarrying 1.48 1.74 1.78 2.11 2.86 2.30
PRIMARY SECTOR 59.26 54.75 48.23 41.82 34.52 27.50
Manufacturing 8.89 10.90 12.62 13.82 16.64 17.08
Electricity, Gas and Water Supply 0.33 0.59 1.18 1.69 2.34 2.45
Construction 4.07 5.12 6.11 6.08 5.52 5.10
SECONDARY SECTOR 13.29 16.61 19.91 21.59 24.49 24.63
Trade, Hotels and Restaurant 8.64 9.83 10.91 12.19 12.54 14.61
Transport, Storage and 3.31 3.91 4.64 6.22 6.19 7.33
Communication
Financing, Insurance, Real Estate 6.68 6.10 5.94 6.52 9.67 12.72
and Business Services
Community, Social and 9.41 9.17 10.69 11.65 12.18 13.20
Personal Services
TERTIARY SECTOR 28.03 29.01 32.18 36.59 40.58 47.87
GROSS DOMESTIC PRODUCT 100.00 100.00 100.00 100.00 100.00 100.00

Source: The same as in Table 3.1

34
while that of transport, storage and
communication rose from 3.3 per cent
to 7.3 per cent over half the century. The
contribution of financial and business
services increased from 6.7 per cent to
12.7 per cent while that of community
and personal services increased from 9.4
to 13.4 per cent. It may be noted that,
among the sectors within tertiary sector,
in 1950-51, the contribution of
community and social services
dominated the scene but it gradually
gave way to trade but in the nineties
sector of financial and business services
emerged as close contestant. However,
it may be pointed out that public
administration and defence, which
contributed to the tune of 3 per cent in
1950-51, are now contributing more
than 6 per cent. Within the broad
category of community and social
services, the share of public
administration and defence has risen
from 1/3 to 1/2 over the period (See
Table 3.6).
Growth of Different Sectors
From Table 3.5, we can also derive a
table giving us the rate of growth of
different sectors. We have computed only
compound annual growth rates (Table
3.7). We should take these rates with a
pinch of salt as they crucially depend
upon initial and final figures. Roughly
speaking, agricultural situation during
sixties and seventies can be said to be
bad as the rates of growth fell below that
of population. Foodgrains dominate in
our agriculture and we cannot afford to
import it. Even if we import some
agricultural produce, being a large
country, we ought to produce enough
foodgrains ourselves. During the
INDIAN ECONOMIC DEVELOPMENT
nineties, the growth of foodgrains
production is somewhat slackening. So
long as it does not create bottleneck for
raw material for industry and supply of
foodgrains does not fall short of domestic
demand, we can afford a little lower
growth rate in future. The rate of growth
of primary sector has always been lower
than that of secondary and tertiary
sectors, which is a major reason for
decline in its share.
Manufacturing sector activity grew
at twice the rate of agriculture. The
seventies were bad for all sectors.
Electricity, gas and water supply
accorded a very low rate of growth of 4
per cent per annum during the seventies.
So was the case with construction.
Secondary sector as a whole did pretty
well during the eighties, better than
during the nineties.
The nineties belong to the tertiary
sector, which grew at the rate of 7.8 per
cent per annum. All service sectors are
growing faster in the nineties than they
did in the eighties wherein performance
was better than that in the seventies in
terms of growth. There are, one can see,
a couple of exceptions to this
observation.
The overall movement seems to be
away from primary/agricultural complex
to secondary and tertiary sectors. The
drop in the share of agriculture is shared
between secondary and tertiary sectors;
and as time passes the share of tertiary
sectors is increasing faster than the
share of secondary sectors.
Changes by Other Segregations
of Production
Three important divisions of activities are
often discussed by scholars so far as
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 35

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

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

SECTOR OF ACTIVITY to to to to to to
1960-61 1970-71 1980-81 1990-91 1999-00 1999-00
Agriculture 3.29 2.22 1.68 3.41 3.22 2.70
Forestry and Logging 0.26 3.03 -0.94 -0.13 0.73 0.57
Fishing 5.45 4.17 2.14 5.80 5.19 4.43
Mining and Quarrying 5.59 3.88 4.89 8.86 3.26 5.21
PRIMARY SECTOR 3.09 2.39 1.62 3.61 3.17 2.71
Manufacturing 6.05 5.23 4.02 7.60 6.12 5.67
Electricity, Gas and Water Supply 10.29 11.14 6.82 9.11 6.36 8.56
Construction 6.32 5.54 3.03 4.59 4.89 4.77
SECONDARY SECTOR 6.25 5.59 3.91 6.96 5.88 5.59
Trade, Hotels and Restaurants 5.25 4.78 4.22 5.92 7.62 5.40
Transport, Storage and 5.67 5.49 6.14 5.56 7.82 5.97
Communication
Financing, Insurance, Real 2.97 3.42 4.05 9.86 9.09 5.65
Estate and Business Services
Community, Social and 3.65 5.29 3.97 6.08 6.77 5.01
Personal Services
TERTIARY SECTOR 4.27 4.77 4.41 6.72 7.77 5.42
GROSS DOMESTIC PRODUCT 3.91 3.69 3.07 5.61 5.81 4.30
Population 1.91 2.23 2.30 2.14 1.87 2.05

Source: The same as in Table 3.1

production structure is concerned. One
is the division regarding location of
activities, location being divided between
rural and urban areas. The second is on
the basis of ownership of production
establishments, division being made
between public and private. The third
one is about organised and unorganised
sectors.
Division between Rural and Urban
Areas
Agriculture is the industry of the
country-side and manufacturing is the
industry of the town, said Adam Smith,
father of Economics. As a habitation
diversifies its economic activities, it
changes its status from rural to urban
at some point meeting certain
definitional marks. In India, in last fifty
years, the number of towns has
increased from 2800 to 3600 and
population living in them has increased
from a little over 6 crore to 26 crore.
The proportion of population living in
urban habitation is now well over 25
per cent, which in 1950-51 used to be
around 16 per cent. On the other hand,
the number of villages is now about six
lakh and a village may have more than
one hamlet. The number of rural
habitations is over 10 lakh. Not only
agricultural and pastoral activities are
carried out in rural habitations,
manufacturing (handicrafts), trade
(retail), transportation (bullock carts and
tractors) are also part of rural activities
and rural folk benefit from them.
36
We do not have regular annual
series of production output of the
activities according to rural-urban
division. The CSO has made available
such a division for the years 1970-71,
1980-81 and 1993-94 but only at current
prices and for net domestic product. With
the help of these figures, we gather some
broad idea about the shift in activities.
From the perusal of these statistics,
one would notice that in 1970-71 only
62.5 per cent net domestic product was
generated in the rural area where more
than 80 per cent population resided (and
worked) while in the urban area
population residing (and working) was
less, 20 per cent, the net domestic
product generated was 37.5 per cent.
Thus, per capita net domestic product
in the urban area was 2.45 times that in
the rural area. When we look at the data
for 1993-94, we gather that while
population proportion in rural area has
reduced by about 6.7 per cent points,
its contribution to net domestic product
has reduced by 8.6 per cent points but
just the reverse could be said to be the
case with the urban area. But the loss
of 6.7 points in 80.2 points is not the
same as gain of 6.7 points in 19.8 points.
Therefore, net accretions to the two areas
on per capita basis show that per capita
net domestic product in the urban area
is 2.39 times that in the rural area.
Though this ratio is not deteriorating
over time, it is high enough to make
people move to urban areas even if
unemployment rate is somewhat higher
in urban areas.
Division between Public Sector and
Private Sector
Ever since there has been the state, there
INDIAN ECONOMIC DEVELOPMENT
has been public sector. But the presence
of public sector in production, beyond
public administration and control, was
very little before Independence. It has been
increasing over time as we pursued a
policy of state intervention in various
sectors for variety of reasons. There is not
one broad sector of economic activities
where public sector is altogether absent.
We have firm data on contribution
of public sector in different production
sectors since1960-61. A cursory look
suggests that the importance of public
sector had been on increase with the
passage of time in practically
all sectors. The share of public sector,
which was barely 9 per cent even in
1960-61, has increased close to 27 per
cent though of late the speed of rise has
slackened.
Public administration is purely a
public sector activity and in fishing, it
has just shown its presence. In
agriculture its presence has increased
but it predominantly seems to be
irrigation as this activity is accounted
for within the sector of agriculture. Its
contribution in forestry and logging
sector is drastically reducing. Most of the
mining activity is under public sector and
it is now around 80 per cent. Even in
the sector of manufacturing its share has
gradually increased from around 7 per
cent in 1960-61 to around 20 per cent
in 1998-99. The share in construction
activity has increased from less than 5
per cent in 1960-61 to almost 16 per cent
in 1998-99.
It is in trade that public sector has
withdrawn since 1980-81 when it
participated to an extent of 8.5 per cent.
Its role in transport has also plummeted
to some extent yet it plays a great role.
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY
The railways are completely with the
Government of India. In road transport,
state corporations play a significant role
at least in passenger transport. In
financial sector too, the presence of
public sector rose significantly; it rose
from 6.5 per cent in 1960-61 to 17 per
cent thanks due to nationalisation of 14
major banks. A further dose of
nationalisation in 1975-76 led to its
further rise to 27 per cent by 1980-81.
Even 6.5 per cent in 1960-61 should owe
a great deal to the nationalisation of
Imperial Bank as the State Bank of India.
Division between Organised and
Unorganised Sectors
Organised sector includes all public
sector establishments and private sector
establishments registered under one or
the other act, such as Company Act,
Factory Act, Societies Act or Cooperative
Act, etc. They are supposed to maintain
accounts. Net domestic product was
found divided between organised sector
and unorganised sector in 25:75 ratio
in 1960-61. With passage of time, the
proportion of organised sector went on
increasing, with some fluctuation, and
reached around 30 per cent by 1980-81.
Since then, its share has been rising and
it is expected to be around 40 per cent
by the close of the century. Within
organized sector, manufacturing
accounts for 40 per cent and community
and personal services, 30 per cent while
trade and finance may account for 25
per cent.
Industrial Structure of Employment
All able-bodied persons should work.
Children should not be allowed to work.
Old, sick and infirm should not be
37
permitted to work. Even if production is
almost mechanised, there is a man
behind the machine. People who are
employed and people who employ as well
as people who are self-employed are all
treated as workers. Their numerical
strength is known as work force. People
who are willing to work at the prevailing
wage rate but are not employed, are
treated as unemployed. Despite the
general feeling that a large number of
people are unemployed, the percentage
of people who are unemployed is not very
large. (However, in the composition of the
unemployed, a large number comes from
the educated lot). The reason is that poor
people cannot afford to be unemployed.
They work on somebody elses farm, shop
or factory or engage themselves in some
or the other activity on their own
account. We should, however, remember
that statistics used by us do not include
people engaged in activities carried out
in homes and hearths by the members
of the family/household. The proportion
of people working in total population in
our country is around 40 per cent. This
proportion is higher in the case of male
members and those living in villages.
There is a variety of ways in which
employment data is presented. One
classification is sectoral (or industrial)
and the other is occupational. They are
made for each of basic four categories,
viz., rural male, rural female, urban male
and urban female. Employment data is
available from the census as well as the
NSS. The census data for 2001 is not
yet available in as much detail as we need
them in this chapter. We opt for the NSS
data. However, comparable NSS data is
available from 1972-73 only at an
interval of five years (See Table 3.8).
38 INDIAN ECONOMIC DEVELOPMENT

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

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

2000

Agriculture, etc.* 74.0 72.0 68.4 64.1 63.9 59.8

Mining and Quarrying 0.4 0.5 0.6 0.7 0.7 0.6
PRIMARY SECTOR 74.4 72.5 69.0 64.8 64.6 60.4
Manufacturing 8.8 10.2 10.7 11.3 10.6 12.1
Electricity, Gas and Water Supply 0.2 0.2 0.3 0.4 0.4 0.3
Construction 1.8 1.7 2.3 3.8 3.2 4.4
SECONDARY SECTOR 10.8 12.1 13.3 15.5 14.2 16.8
Trade and Commerce 5.0 5.8 6.9 7.3 7.6 9.4
Transport, Storage and 1.8 1.9 2.5 2.7 2.8 3.7
Communication
Other Services 8.0 7.7 9.2 9.7 10.5 9.6
TERTIARY SECTOR 14.8 15.4 18.6 19.7 20.9 22.7
Total Employment (Cr.) 23.6 27.1 30.3 32.2 37.2 39.7

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

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

It is easy to see that, until early
seventies, as many as three-fourths of the
workers were engaged in agricultural/
primary activities. By the close of the
century, their strength gradually reduced
to three-fifths. In manufacturing, the
proportion of workers rose slowly from less
than 9 per cent to over 12 per cent.
Construction activity picked up fast. As a
result, there is 6 per cent increase over
10.8 during the period under discussion.
Trade and commerce as well as
transportation activities picked up fast;
their share became twice.
It is important to remember that our
total employment also went on
increasing. By multiplying these
percentages with corresponding total
employment (given in the last row of
Table 8), we can get absolute number of
persons employed in each sector. Total
employment rose during this period by
16 crore (about 70 per cent); in the last
six years by 2.5 crore. It would be
discovered that, for the first time in
1999-2000, employment in agriculture
sector has reduced and it reduced by 50
lakh when compared to 1993-94. In these
six years, some 3 crore people were thus
absorbed in non-agriculture sectors.
Trade, manufacturing and construction
were major absorbing sectors.
Concluding Remarks
In this chapter, first, we tried to have
some idea about the economy in the
initial years of our Independence and
emphasised that the first half of the
twentieth century was bad in terms of
growth as well as in terms of
GROWTH AND STRUCTURAL CHANGE IN THE INDIAN ECONOMY 39

diversification of the economy. Then, we
discussed the growth of GDP and PCI.
We noticed that, over the span of fifty
years, the growth rate of GDP was a
little over 4 per cent per annum. The
rate of growth during the seventies was
particularly low. During the eighties and
nineties, we were able to grow at a rate
close to 6.0 per cent per annum. Per
capita income grew at the rate of slightly
more than 2 per cent per annum during
the whole span of fifty years. During
the eighties and nineties, the rate was
found to be more than 3.5 per cent per
annum.
Then, in order to find out as to how
the composition of GDP in terms of
sectoral contribution was changing, we
studied absolute contribution and
relative contribution of different sectors,
as also growth rate of different sectors.
We noticed that contribution of
agriculture to GDP, despite four-fold
increase, reduced from 50 per cent in
1950-51 to less than 24 per cent in 1999-
2000. The contribution of primary sector
came down from 60 per cent to 27.5 per
cent. The contribution of secondary
sector increased from 13 per cent to about
25 per cent while that of tertiary sector,
from around 28 per cent to 48 per cent
during the same period.
We also touched upon the contri-
bution of rural sector vis-a-vis urban
sector, public sector vis-a-vis private
sector and organised sector vis--vis
unorganised sectors. Contribution of
rural sector decreased from over 62 per
cent in 1970-71 to about 54 per cent in
1993-94 while population of the sector
reduced from 80 per cent to 75 per cent.
Contribution of public sector grew from
less than 10 per cent in 1960-61 to well
over 25 per cent in 1998-99.
Contribution of organised sector was
about 25 per cent in 1960-61, which is
expected to have risen to around 40 per
cent.
In the end, we discussed how
labour is being absorbed in different
sectors. The employment in agriculture
has declined from three-fourths in
1972-73 to three-fifths in 1999-2000;
the absolute number reduced for the
first time in 1999-2000. Employment
deceleration in primary sector is evenly
shared between secondary sector and
tertiary sector.

EXERCISES
1. Briefly discuss the conditions of the Indian economy at the time of
Independence or a little after.
2. Discuss the growth of GDP for the whole period of fifty years since 1950-51 as
well as each of the decades. Account for acceleration or deceleration.
3. Give a snapshot picture of growth of per capita income for each of the decades.
Try to reason as to why the growth rate during the seventies by the method
CAGR is so low.
4. What do you mean by structural change in an economy? Explain.
5. Enumerate the activities normally included in primary, secondary and tertiary
40 INDIAN ECONOMIC DEVELOPMENT

sectors.
6. Discuss, with the help of tables, as to why the contribution of agriculture to
GDP reduced so drastically despite the success of green revolution and surplus
of agricultural production, especially foodgrains.
7. How have secondary sector and its sub-sectors fared during post-Independence
period?
8. Give the salient features of growth of tertiary sector and its contribution to
GDP since 1950-51.
9. Discuss the changes in sectoral composition of GDP.
10. How do you define public sector? How has it grown since 1960-61?
11. Discuss the implications of reduction in contribution of rural areas to GDP,
which is higher than reduction of its share in population.
12. How is the contribution profile of organised sector changing?
13. Differentiate between industrial and occupational distributions of employment.
14. Discuss the industrial distribution of workers in the Indian economy since
1972-73.

ACTIVITIES
1. Search the years of decline in per capita income from the Table given in the
appendix. Find out its frequency in each decades. Discuss implications with
your classmates.
2. Locate negative growth rates in Table 3.7. Reason out why from what you read
outside the class.
3. With the help of total employment figures given in the bottom row of Table 3.8
and percentage distribution of workers in other rows, prepare a table of absolute
employment for each sector for each year. With the help of this table, formulate
your ideas as to which sectors are displacing labour and which ones are
absorbing it.
4. Suppose labour productivity of a sector is obtained by dividing absolute
contribution of a sector by the size of employment in that sector. Treat
employment for 1972-73 as if it is for 1970-71, and similarly employment for
1993-94 as if it is for 1990-91 for this limited purpose. Calculate labour
productivity for 1970-71 and 1990-91 for each sector and compare the two
sets of derived figures.
ECONOMIC INFRASTRUCTURE
CHAPTER 4
Economic Infrastructure
Introduction
Infrastructure means structure below,
which means foundation. It can,
therefore, be taken as basic to all
activities in the economy, whether
related to agriculture or industry or even
tourism. Infrastructure refers to some
kind of permanent installations, which
are used over a long period of time for
supply of basic inputs: railway lines,
roads, dams, canal system, power
stations, satellites and pipelines;
schools, colleges, universities and
institutes; dispensaries and hospitals;
and buildings for services of state organs
like police and judiciary.
Most economic activities require
some kind of power for transformation
of inputs into output. Power may be
needed to preserve certain commodities
over time as their use may spread over
long duration while production matures
in short duration of time. One also needs
power to use in homes.
All activities require transportation.
Raw materials may be away from
production premises. Both production
units and consumption units may be
away from markets. A product may be
used in production or consumption. It
may need to be transported from one
production unit to another production
41
unit. People also need to move to different
places for economic and social reasons
as also for leisure. Transportation itself
requires some kind of energy.
Today, we cannot think of living
without being connected through
communication. Besides posts, people
and activities are connected through
various links of telecommunication. We
are passing through a phase of
revolution in telecom much beyond
telegraph and telephone. Whether it is
business or entertainment, information
technology has made a great revolution.
One also sees a lot of banking, finance
and insurance activities around, which
connect savers with investors in one
way or the other. It is difficult to wish
away these activities even when we
read many problems associated with
these activities.
Thus, we find that we need a lot more
power than we directly use in lighting
and warming/cooling our houses and in
using various home appliances.
Transportation vehicles use many
more equipments and machinery
help movement of people and goods. So
is thecase of telecommunication goods.
Business transactions dominate the
scene of banking and financial activities.
And general insurance of property is
much larger business than insurance
of life.
42
Many of these developments in
infrastructure would not have been
possible without development of
manpower, at the base of which is
education. Without health, how do you
enjoy whatever you produce? How do you
produce if you do not stay healthy? An
unhealthy population produces much
less than what technology permits. Every
human being requires reasonable
housing facilities.
Infrastructure is often divided into
two categories: economic and social.
Energy/power, transportation and
communication are categorised as
economic, while education, health and
housing are categorised as social. It may
be noted that this division is not neat
and, therefore, not entirely satisfactory
as the former category often directly
contributes to better living and the latter
category is responsible for higher
productivity. Nevertheless, as education,
health and housing are directly
consumed by the people and are only
indirectly of help in production of
commodities and services, there is some
basis for designating them as social
infrastructure.
In this chapter, we shall deal with
three sectors of economic infrastructure:
energy, transportation and communi-
cation and in the next, with other three
sectors of social infrastructure:
education, health and housing.
Energy
No human activity is possible without
energy. For quite a long time in human
history, human muscle power energy
was increasingly supplemented by
energy of draught animals, which were
domesticated quite early. Many
INDIAN ECONOMIC DEVELOPMENT
agricultural operations and carrying of
agricultural producefoodgrains and
non-food cropsdone with the help of
bullocks, horses, camels and donkeys.
Water streams also helped in many ways,
direct flowing of logs to carrying vessels
boats and ships. Whenever and wherever
feasible, sunshine, wind and falling water
streams were also harnessed.
Let it be made clear that fuelwood,
agricultural waste and animal dung
(dried) are three major energy sources,
which are used in cooking food in our
villages and towns. At present, we are
using around 50 million tonnes of
fuelwood, 66 million tonnes of
agricultural wastes, which have
competing uses of feed, fodder, roofing
material and organic matter for
compost. Our cattle population may be
producing around 325 million tonnes of
dung, of which 75 million tonnes are
used as organic manure and the rest is
used for cooking purpose. These are
normally known as non-commercial
energy resources. It is understood that,
in early fifties, non-commercial energy
constituted 74 per cent of total energy
consumption, which fell to around 34 per
cent by the late nineties. Fuelwood
accounts for about two-thirds of the total
non-commercial energy. It may be noted
that almost whole of the non-
commercial energy is consumed by the
household sector.
Later, we may recall, people learnt
making use of steam power in
manufacturing. Firewood was made use
of in boilers to produce steam, which was
in turn used to generate mechanical
power. When people in Europe ran out of
their forests, they resorted to taking
ECONOMIC INFRASTRUCTURE 43

away firewood from the forests of their
colonies and to digging coal. Till the other
day, trains were run with steam power
using coal. On the one hand, invention
of combustion engine and discovery of
petroleum changed the scene of power
use in transportation, while on the
other, use of electric power transformed
the manufacturing scene.
Pattern of Energy Use
Before we turn to modern commercial
energy sources for detailed discussion,
it would be good to have an idea about
the changes in pattern of energy
consumption. It may be noted that, for
totalling different energy sources, they
have to be converted into common unit.
One such unit is million tonne of oil
equivalent (MTOE). Once they are
converted into a common unit,
percentages can be calculated.
TABLE 4.1
Pattern of Energy Consumption (in per cent of million tonnes of oil equivalent)
sources of commercial energy. We have
already noted that wood, agriculture
residue, and animal waste are now
regarded as non-commercial energy. We
may note that energy based on
sunshine/wind/tide/biomass is consi-
dered commercial. Thus, we provide
below: (i) division of primary energy
into commercial and non-commercial
energy, and (ii) division of final
commercial energy into coal, petroleum
products, natural gas and electricity
(See Table 4.1).
Table 4.1 mainly reflects changes in
technology of energy use over time
though, partly, it reflects process of
modernisation and environmental
concerns and awareness. Use of
commercial energy has risen
considerably even in the relative sense.
Though consumption of coal has increased
ten times since early fifties, its direct final

Primary Energy Final Commercial Energy

Year Commercial Non- Coal Petrolelum Natural Electricity
Commercial Products Gas
1953-54 28.4 71.6 80.1 16.7 - 03.2
1960-61 34.7 65.3 75.3 19.9 - 04.8
1970-71 40.6 59.4 56.1 34.1 0.6 09.2
1980-81 46.9 53.1 47.9 40.3 1.1 10.7
1990-91 59.3 40.7 35.9 43.6 5.5 15.0
1996-97 65.9 34.1 28.9 47.7 6.3 17.1

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

Coal, lignite, petroleum and gas are
the primary sources as they can be
directly used to provide energy to the
manufacturing process as well as in
production of electric power. But along
with power, they are also used as final
consumption has drastically reduced as
a proportion. Further, despite so much
talk about scarcity of petroleum, we may
note, that its use as final commercial
energy is almost 50 per cent of total use
of commercial energy.
44 INDIAN ECONOMIC DEVELOPMENT

We shall, hereafter, deal with consumption of coal increased more than

individual forms of commercial energy,
which include coal (including lignite),
petroleum (and gas) and electricity.
Coal
Commercial exploitation of coal started in
1774 in Raniganj near river Damodar. It
is found in many parts of the country but
mainly in Jharkhand, Orissa, Madhya
Pradesh, West Bengal, and Andhra
Pradesh. We have presently a stock of
2,00,000 million tonnes 80,000 million
tonnes proven, 90,000 million tonnes
indicated and 40,000 million tonnes
inferred.
ten-fold to 332 millions tonnes, including
lignite. Now-a-days, coal is the principal
primary source of commercial energy in
India (See Table 4.2).
Coal is used in many industries both
for meeting process and energy
requirements. For energy requirements,
it is used directly as well as transformed
into coke if it is of good quality. Use of
non-coking coal has increased over time
because of dependence of thermal power
stations on coal as feedstock, which was
a conscious decision taken in early
seventies. While about one-third coal was
coked in early seventies, now it is only

TABLE 4.2
Production of Coal and Lignite (Million Tonnes)
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01
Coal 32.20 55.23 72.95 113.91 211.73 309.63
Lignite - 03.39 5.11 13.77 22.95
Total 32.20 55.23 76.34 119.02 225.50 332.58
Source: Economic Survey 2001-02, Economic Division, Ministry of Finance, Government of India.

With advent of railways in 1853, about one-tenth. Coke (soft and hard)
which used steam engine, coal came to is basically used in metallurgical
be increasingly used as fuel and in the industries such as iron and steel plant
first fifty years, its use increased from (in the production of pig iron) as well as
one million tonne to more than six million in non-metallurgical industries. Non-
tonnes. In the next fifty years (by coking coal is also used in other
1950-51), it increased to 32-33 million industries. It is also used in domestic
tonnes while, in the still next fifty years, and market coking. For consumption
that is after Independence, the statistics, see Table 4.3.
TABLE 4.3
Sector-wise Coal Consumption (Million Tonnes)
Power Steel Cement Railways Others Total
1980-81 34.5 17.6 4.3 10.9 27.7 95.0
1985-86 72.9 24.5 7.9 9.1 40.7 155.1
1990-91 118.6 24.5 10.1 5.0 47.0 205.2
1995-96 184.5 26.4 11.0 0.3 48.9 271.1
2000-01
Source: Annual Report, 2000-01, Ministry of Coal, Government of India.
ECONOMIC INFRASTRUCTURE
Lignite is very similar to coal. Known
as brown coal, it has lower energy content
than coal. Its production is around
20 million tonnes. Thermal power stations
close to lignite pit-head stations use it as
feedstock. A small proportion of lignite is
also used to make briquettes, which are
used as domestic fuel. Lignite is found in
Tamil Nadu and Gujarat.
Coal is consumed by thermal power
stations as feedstock to the extent of
66 per cent. It was a conscious decision
made in the seventies to increasingly use
coal for generating electricity as hydro-
power was found to have certain
limitations. Ten per cent of coke
production is used by coke oven plants
for producing hard coke for use in steel
plants. Railways in early fifties used to
be a major consumer but now, they
hardly use it. Collieries themselves use
coal to an extent of 5 per cent.
One is genuinely worried as to what
will happen when coal stocks are
exhausted. At the present rate of
consumption, the proven stocks may last
for 250 years. However, our demand is likely
to increase and reasonable projections show
that it may not last for more than 125 years.
Petroleum
Though oil was dug in India in Digboi in
1901, its quantity was very small. It was
not needed then as much as it is required
today. Motor transport was not so visible,
which needs so much of petrol/diesel.
Kerosene was of course in use for lighting
homes. Trains were hauled by steam
engine.
Many countries in the Middle East
are rich not because they have developed
their economies but because they have
a lot of oil reserves. Present technology
45
is highly dependent on oil for energy and
to some extent for process. We use many
of the petroleum products without
realising that what they are made of.
Crude petroleum gives us petrol, diesel,
kerosene, gasoline, furnace oil, bitumen,
paraffin wax and also coal tar.
Earlier we thought that we had oil
reserves only in Assam. After
Independence, we set up an Oil and
Natural Gas Directorate in 1956 (later
converted into Oil and Natural Gas
Commission in 1959). The Commission
discovered more reserves in Assam and
struck oil in Ankleshwar (Gujarat) in
1961 and later, in Cambay basin
(Maharashtra). However, even by
1960-61, we produced no more than 0.5
million tonnes. But twenty years later
in 1980-81 we were producing twenty
times more, 10.5 millions tonnes. Twenty
years later, that is, by the close of the
century, our production of crude oil was
still around 32 million tonnes. It is
important to note that our consumption
of oil is increasing at faster pace than
our domestic production of the same.
When we produced 10 million tonnes,
we consumed 25 million tonnes. When
we produced 30 million tonnes, we
consumed 85 million tonnes, forcing an
import of about 50 million tonnes. We
have frozen our own production level
with a view to conserving it for future.
In the first year of the present century,
our import has risen to 74 million tonnes.
Besides crude oil, we also import other
petroleum products. For development in
this sector, in terms of production and
import, see Table 4.4.
Natural gas is our new resource as
adequate technology has developed for
harnessing it. Starting with annual
46
TABLE 4.4
Petroleum Statistics: Production, Availability and Refining (Million Tonnes)
1950-51 1960-61
Production 0.3 0.5
Import 6.0
Availability 6.5
Refinery 0.3 6.6
Throughput
Source: Economic Survey 2001-02, Economic Division, Ministry of Finance, Government of India.
production of 1.5 billion cubic metres in
early seventies, we are producing around
30 billion cubic metres. It is liquefied and
used as cooking gas and is used in some
thermal plants as fuel. Earlier it was just
flared up as there was no technology to
tap it.
It is good to know about reserves of
both crude oil and natural gas. We have
recoverable balance of reserves of crude
oil of 650 million tonnes and of natural
gas of 625 billion cubic metres. At the
current rate of production of crude and
natural gas, our stocks may exhaust in
20-25 years or so. That is why we are
not increasing our production level and
depending on imports. Even while there
is possibility of discovering new oil
reserves, there is a need to develop
alternative technologies and conserve
petroleum.
Electricity
Today we, who live in towns, cities and
metropolises, cannot think of life without
electricity. Much of coal and natural gas
is used in generation of electricity.
Hydroelectricity and nuclear power
usefully supplement the thermal power.
It is produced in billions of kilowatt hours
(KWH). One bulb of 1000 watt burnt for
INDIAN ECONOMIC DEVELOPMENT
1970-71 1980-81 1990-91 2000-01
6.8 10.5 33.0 32.4
11.7 16.2 20.7 74.1
18.5 26.7 53.7 106.5
18.4 25.8 51.8 103.4
an hour consumes one kilowatt-hour
energy. A generator with capacity of
1000 watts, when run on full capacity,
will produce one kilowatt-hour energy
in an hour. In common parlance, it is
known as a unit. In 1950, we generated
6.6 billion KWH of electricity. Today, we
generate as much as 527 billions of
KWH80 times more. Part of electricity
is generated by industries for self-
consumption. Such plants are known as
captive plants and such electricity is said
to be produced in non-utilities.
There are three basic sources of
electricity generation: thermal, hydro
and nuclear. After Independence, we
emphasised on harnessing hydro power,
called hydel (short form for hydro
electricity). But, by mid-seventies, we
decided to make use of coal and generate
thermal electricity. Nuclear power also
makes a little contribution. About ten per
cent electricity is generated by non-
utilities or captive plants of various
industries for their self-consumption
(See Table 4.5).
Who consumes this electricity?
Obviously, electricity generated by
the non-utilities is consumed by
the industry. But, the electricity
generated by utilities is consumed in
ECONOMIC INFRASTRUCTURE 47

TABLE 4.5
Electricity Generated (Gross) in Billion KWH

Utilities Non-utilities Total

Year Thermal Hydro Nuclear Total
1950-51 2.6 2.5 5.1 1.5 6.6
1960-61 9.1 7.8 16.9 3.2 20.1
1970-71 28.2 25.2 2.4 55.8 5.4 61.2
1980-81 61.3 46.5 3.0 110.8 8.4 119.3
1990-91 178.7 71.7 6.1 264.3 25.1 289.4
2001-02 424.4 73.5 19.5 517.4 61.7 579.1
Source : Economic Survey 2001-02, Economic Division, Ministry of Finance, Government of India.

industries, agriculture, railways, industries, the consumption of industry

commercial establishments and homes. would turn out to be about 37 per cent
The consumption of electricity across
different categories is given below in and that of agriculture, less than 30 per
Table 4.6. cent.

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

Year Industrial Agricultural Commercial Traction Domestic Others

1950-51 62.6 3.9 7.5 7.4 12.6 6.0
1960-61 69.4 6.0 6.1 3.3 10.7 4.5
1970-71 67.6 10.2 5.9 3.2 8.8 4.3
1980-81 58.4 17.6 5.7 2.7 11.2 4.4
1990-91 44.2 26.4 5.9 2.2 16.8 4.5
2000-01 33.9 31.2 6.4 2.3 21.2 5.0

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

India.
It may be noted that, use of electricity
in agriculture in its various operations is
growing as the number of agriculture
holdings grow (though they are very
small). Actually, the consumption of
electricity in agricultural operations has
increased 500 times in 50 years.
Domestic use has also tremendously
increased. Consumption by industry has
relatively reduced but it continues to be,
by far, the largest. If we account for non-
utilities, which entirely cater to the
While we may note with some
satisfaction that more than five lakh
villages have been electrified and more
than 1.27 crore pumpsets have been
energised, let us remember that still
60 per cent of rural households and 20
per cent of urban households do not have
a power connection.
Non-conventional Energy
With the rise of problems attendant with
the use of fossil fuel depletion and
48
pollution, a lot of emphasis is being laid
on the development of non-conventional
energy sources. Some of these sources
were traditionally used but with
inefficient old technology. However, most
forms, including solar energy, have to
be first converted into electricity.
Biomass, wind, small hydro, conversion
of waste, tides/waves/ temperature-
gradient over seas, and geothermal
energy, among others, are also such
forms of energy. Their potential is said
to be very great at least as useful
supplement. Chemical sources like fuel
cell and hydrogen burning are also being
mentioned. However, in many cases,
technology has yet to be adequately
developed.
Wind energy is already being
harnessed in quite a few places. There
are 204 sites where wind can be used
for generating electricity. You may see
moving wind turbines in the following
states: Andhra Pradesh, Gujarat,
Karnataka, Kerala, Madhya Pradesh,
Maharashtra, Orissa, Rajasthan and
Tamil Nadu. Success with solar thermal
energy through use of solar cooker has
been limited. Solar photovoltaics is a
great hope again. We are at present
harnessing only 3 per cent of the known
potential.
Transport
Production of goods and consumption of
goods are often at two different locations.
Different raw materials for a production
process are also found at different places.
Some goods are stocked in places
different from points of sales. People
reside at one place and work at another.
But people also move to attend certain
functions, go on pilgrimage or travel for
INDIAN ECONOMIC DEVELOPMENT
pleasure. People have increasingly been
using some or the other means of
transportationfrom bullock-carts to
boats, railways to roads, airways to
ships. We need essentially two things
medium and carrier. Waterwaysrivers,
canals, lake and seasneed boats and
ships; airways need aircrafts or
helicopters; railways need trains; and
these days, roads need trucks, lorries,
buses and cars besides rickshaws,
tongas and carts. On the pattern of water
pipelines, we have now got pipelines for
transporting crude oil, petroleum
products and natural gas.
Railways
Railways are, by far, the most important
means of transportation of goods and
passengers. With modest beginning in
1853 (150 years ago) when the first train
ran for a distance of 20 and odd miles
on April 16 between Bombay (now,
Mumbai) and Thane (a suburb of
Mumbai), it developed into a grand
network in the nineteenth century itself.
By 1900, there were 25000 miles (40000
kilometres) of railway lines in India,
which included present Pakistan,
Bangladesh and Burma. Next fifty years
added only 10000 miles (16000
kilometres). By 1950, railway lines could
measure up to 54000 kilometres in the
present territory of India.
The British, of course, developed the
railways for administrative as well as
commercial reasons. It helped them have
tight control over the territory and open
up the country for collecting food and
raw material for Britain and for selling
their manufactures in India. If one goes
through the construction details of
railways, one would notice that it started
ECONOMIC INFRASTRUCTURE
from port towns and spread towards the
interior with the sole intention of
facilitating export of agriculture produce,
particularly cotton. Its development was
thus geared more towards foreign trade
than internal trade or development of
industry in the country. Development of
the railways also created valuable market
for the British steel and engineering
industries and opportunities for
profitable investment for the British
companies.
EVIDENCE FOR BRITISH INTEREST
You can read the names of British
Companies, which supplied steel girdles
for bridges if your train happens to stop
at some rail bridge and you are sitting in
an ordinary coach by the side of a
window.
The British Government of India gave
many concessions to the private Railway
Companies, like free grant of land,
guarantee of a minimum return on
capital, again with the objective of laying
railway lines in as much area as possible.
However, owing to criticism of private
ownership and management, the
Government of India started taking over
the private companies from 1925the
year in which the first electric engine was
introduced on the Indian track. In fact,
this was the year in which the budget
for railways was separated from the
budget for general finance. Budget for
the railways is presented a few days
before the general budget of the Union
Government in the Parliament. In 1950,
with the taking over of the railways in
former princely States, the process of
nationalisation of the railways was
completed.
49
Indian system of railways is the
largest in the world under a single
management, by its track, stock, and
staff. It is the biggest public undertaking
in the country. It has about 16 lakh
employees on its roll and more than
2 lakh casual workers. It runs daily about
13500 trains, including more than 8500
passenger trains, connecting around
7000 stationsbig and small, halt and
flag ones. It hauls 1.2 crore passengers
and 12 lakh tonnes of goods daily. It is
truly called the life-line of the nation.
In 1950-51, we had a route length of
53600 kilometres, running track of
59300 kilometres and the total track of
77600 kilometres. In 2000-01, we had
route length of 63000 kilometres,
running track of 81200 kilometres and
the total track of 108000 kilometres. It
means that the track density increased
from 1.1 in 1950-51 to 1.7 in 2000-01.
Thus, while route length did not increase
even by 20 per cent, running track rose
by 30 per cent and total track by 40 per
cent. More importantly, the electrified
track, which used to be less than
400 kilometres in 1950-51 and on
suburban sections only, is now more than
15000 kilometres, of which ninety per
cent is on heavy density freight routes.
Except a few sections between Mumbai
and Chennai, and Chennai and Kolkata,
all routes connecting four metropolises
(two between Delhi and Mumbai) have
been electrified. Majority of tracks (65 per
cent) are now in broad gauge and gauge
conversion from metre/narrow gauge to
broad gauge is an important item in the
agenda of development (Gauge means the
distance between two rails of a track).
The number of locomotives increased
from 8200 in 1950-51 to over 11000 in
50 INDIAN ECONOMIC DEVELOPMENT

1970-71 but came down to 7300 (electric
engines only 2800) only. However, earlier
locomotives used to be steam ones and
had slow speed, now they are diesel and
electric ones and run much faster and
tract more load. Similarly coaches and
wagons, which number 40000 and
respectively while the number of
coaches and wagons has risen only 2 and
1.2 times respectively. It is important
to point out that 60 per cent of the
passengers are suburban passengers
who share 20 per cent journey in terms
of passenger kilometers and contribute

TABLE 4.7
Progress of Railways in Post-Independence Period

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

Route length 53596 56247 59790 61240 62367 62759

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

M = Million, MK = Million-kilometres, MT = Million-tonnes, MTK = million tonne-kilometres

Source : Indian Railways Year Book 1999-2000, Ministry of Railways (Railway Board), Government of
India and Economic Survey 2001-2002, Ministry of Finance, Government of India.

264000, respectively, are better equipped
and render better service. Engines,
coaches and wagons, put together, is
known as rolling stock. For judging the
progress, see Table 4.7.
Table 4.7 is meant to help you form
an idea about how our railways are
performing. For example, you can see that
goods originating in million tonnes and
goods carried in million tonne-kilometres
have increased five and seven times
11 per cent of the revenue to railways.
We may further note that while the
number of coaches is not increasing
fast, their seating capacity has
increased particularly because broad
gauge compartments can accommodate
more passengers.
It may be noted that seven bulk
commodities, essential for core sectors
of the economy, viz. coal, foodgrains,
fertilisers, petroleum products, finished
ECONOMIC INFRASTRUCTURE 51

PROGRESS OF RAILWAYS BY CERTAIN PARAMETERS

Passenger traffic rose from 1280 million covering 66500 passenger-kilometres in 1950-51
to 4600 million covering 400000 million passenger-kilometres in 1999-2000. Thus, an
average passenger is now covering 90 kilometres in comparison to 50 kilometres in
1950-51, though people travelling in higher classes travel longer, on an average about
500 kilometres, whereas suburban passengers travel only 30 kilometres. Passenger to
population ratio has increased from 36 per cent to 44 per cent. Despite a lot of qualitative
improvement in railway service, many physical parameters are not very impressive. It is important
to point out that 60 per cent of the passengers are suburban who share 20 per cent journey in
terms of passenger kilometres and contribute 11 per cent to railway revenue. We may further
note that, while number of coaches is not increasing fast, their seating capacity has increased
particularly because broad gauge compartments can accommodate more passengers.
During the last fifty years, wagons increased 2.6 fold, and tonne-kilometres rose
6.25 times. Track utilisation, million tonne-kilometers per route kilometer, rose from
1.5 in 1950-51 to 6.5 in 2000-01. The number of wagons as well as its total capacity has
of course reduced from its peak in 1980-81, average capacity of wagons has increased
from 23 tonnes in 1950-51 to 46 tonnes in 1999-00. Productivity is thus on increase.
Indian Railways produces its own rolling stock: about 2200 passenger coaches,
140 diesel locomotives, 120 electric locomotives and 2000 goods wagons every year.

steel and raw material for steel plants,
contribute most of the freight traffic
(95 per cent). Certain essential
commodities like salt, fruits and
vegetables, sugarcane, certain ores,
livestock, etc. constitute further 3 per cent.
We can recall that the railways were
started by the private companies, which
were supported by the British
Government in India. By 1925, it was
nationalised. Thus, it has completed
75 years under private ownership and
75 years under government ownership.
But accounts of the Department of
Railways are separate from the general
accounts of the Government of India. The
Government of India has provided equity
capital on which it should receive some
dividend. Normally, dividend is based on
the amount of profit but the railways have
been asked to pay 6 per cent on the capital
owned by it, which may be around Rs
20,000-25,000 crore these days.
It may be noted that two-thirds of
the total earnings of railways, which are
around Rs 30,000 crore, come from
goods traffic and only one-third from
passenger traffic. It spends most of its
earnings on material inputs and on
compensation of the employees. The
railways spend around more than
Rs 15,000 crore on employees which is
around 50 per cent of the total expenses.
The following factors suggest that
railways should be duly promoted:
1. Railways are more than six times
energy efficient than roads.
2. Railways are almost four times more
economical in land use.
3. Rail construction costs are six
times lower than roads for
comparable levels of traffic.
4. Social costs in terms of environ-
mental damage are significantly
lower for railways vis-a-vis roads.
52 INDIAN ECONOMIC DEVELOPMENT

5. Rail is the only major transport,
which can use any form of primary
energy.
Roads
Roads can reach the doorsteps. There
are areas, which can be reached through
road only. Vast hinterlands of the
country can be linked only through
roads. We have more than 6 lakh
inhabited villages with more than 10
lakh habitations. We can reach them
only through roads. We have only 7000
railway stations. From railway stations
to cities and within city to ones shop
and residence, one can reach only
through roads. Short distances to
connect railway system have to be
covered through roads only. The railways
have certain limitations in terms of
flexibility.
When major transportation was
carried through carts and camels, we did
not need modern surfaced roads. We
might have had one crore bullock-carts
engaging two crore heads of cattle and
one crore persons engaged in bullock
cart transportation. Only cities had
pucca roads for use by horse carts. Now,
we are having motorised vehicles, which
need pucca roads. Rural-urban link has
also to be served through road network
so that farmers could take their produce
to nearby mandis or perishable
vegetables and milk and milk products
could be collected from rural areas for
consumption in towns and cities.
In Europe, first, a canal system was
developed for cheap transport of goods.
Later on, they developed steam engine and
with that railways became prominent.
Once petroleum was discovered and
internal combustion engine was
developed, road system came to supple-
ment the rail system extensively as it is
quicker, more convenient and more
flexible in comparison to the railways.
Modern material for surfacing roads also
became available because of development
of petroleum products. Modern roads in
India came to draw particular attention
of the Government of India after creation
of the Central Road Fund in 1929, which
is now partly spent on maintenance and
construction of the national highways and
partly on construction of rural roads, inter-
state roads or roads of economic importance.
Indian road network is one of the
largest in the world. In 1950-51, we had
a road network of about four lakh
kilometres of roads1.6 lakh kilometres
surfaced (while railways had only 54,000
route kilometres) and 2.4 lakh kilometres

NAGPUR PLAN FOR ROAD DEVELOPMENT

The Chief Engineers of all the Provinces met at Nagpur in 1943 and evolved a road plan
based on the minimum requirements of the country. This plan, known as the Nagpur Plan
for Post-war Road Development, viewed the road system as part of an integrated
transportation national system, which requires coordination between different categories
of roads on the one hand and between the road network and other modes of transportation
on the other. It classified the roads into four major categories: National Highways, State
Highways, Major and Minor District Roads, and Village Roads. It further suggested that no
village in a well-developed agriculture area should remain more than 8 kilometres away
from the road.
ECONOMIC INFRASTRUCTURE 53

unsurfaced. While surfaced roads are
all-weather ones, unsurfaced ones
become unserviceable during monsoon.
Presently we are having 25 lakh
kilometres of total road length of which
14 lakh kilometres are surfaced (compare
with 63000 kilometres of route length of
railways). For the purpose of
construction, repair and maintenance
the roads have been categorised as the
national highways, state highways and
other roads. While national highways are
the responsibility of the Union
Government, all other roads, including
state highways, are the responsibility of
the government of the respective states
in whose jurisdiction they fall.
By 1950-51, national highways
measured some 20000 kilometres, which
increased to 58000 kilometres in
January 2001 (almost 90 per cent of total
route kilometres of the railways). Many
more roads had been taken over by the
Government of India under National
Highway Act, 1956; 5727 kilometres were
added only in 2000-01. State highways
increased from around 57000 kilometres
in 1970-71 to 1.4 lakh kilometres by 2001.
States also widened the scope of their
highways. Most of these roads are
surfaced. They have also been widened.
But highways, national and state, account
for less than two lakh kilometres and are
now almost surfaced. To see the progress
over time see Table 4.8.
Finally, let us note that, while the
length of our road network has risen
from 4 lakh kilometres to 25 lakh
kilometres, the vehicle population has
grown from 3 lakh to 4 crore, freight
traffic from 600 crore tonne-kilometres
to 45,000 crore tonne-kilometres, and
passenger traffic from 2,300 crore
passenger-kilometres to 1,50,000 crore

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

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

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

Surfaced 1,57,019 2,63,015 3,97,000 6,92,171 10,91,043 14,00,000
All Roads 3,99,942 5,24,478 9,17,880 14,91,301 23,31,086 25,00,000
All Vehicles 3,06,000 6,65,000 18,65,000 53,91,000 2,13,74,000 4,00,00,000
Goods Vehicles 82,000 1,68,000 3,43,000 5,54,000 13,56,000 30,00,000
Buses 34,000 57,000 94,000 1,62,000 3,31,000 6,00,000
% villages with 1000 29 46 75
population connected
with roads

Note : Figures for 2000-01 are rounded ones and somewhat conjectural in nature but based on
government statistics for the late nineties.
Source : Indian Planning Experience: A Statistical Profile, Planning Commission, Government of
India, 2001 and Economic Survey 2001-2002, Ministry of Finance, Government of India.
54 INDIAN ECONOMIC DEVELOPMENT

ROAD USERS
Roads are basically constructed for vehicles to ply on. Motorized vehicles are of two varieties
passenger or bus service and goods or truck service. But, then there are personal cars/
jeeps, taxies, two-wheelers and tractors. According to registration statistics, we can expect
on the roads, about six lakh buses, 25 lakh trucks, 50 lakh cars/jeeps/taxies, 2.8 crore
two-wheelers and 45 lakh other vehicles which may include tractors, trailers, and three-
wheelers (passengers and goods). Total vehicle population is thus around 4.0 crore, some
of which might have become scrap.
However, in order to economize on cost and time as well as to quickly move to a place,
we need better roads and better vehicles, which do not pollute too. This consideration
became more prominent after pollution levels rose to alarming proportions in many cities.

passenger-kilometres. But, we also by mechanically propelled vessels and

should appreciate that, besides length,
quality of roads in terms of strength and
width should have improved over time.
Moreover, our national highways are
catering to 40-50 per cent traffic.
Waterways
There are two major modes of water
transport, viz., inland waterways and
shipping. Shipping may be coastal or
overseas. Inland waterways used to be
of some import before the advent of the
railways and road transport. Besides the
fact that roadways and railways were
superior in terms of speed, inland
waterways became difficult as water was
withdrawn in upper reaches of rivers for
irrigation and other uses. Disuse of water
transport waylaid development of
facilities too. Inland water transport had
been on continuous decline and
presently, its share in total transport is
negligible.
Inland water transport is now
restricted to the Brahmaputra, lower
reaches of the Ganga, canals and deltas
of the Krishna and the Godawari,
backwaters and canals in Kerala. Hardly
2,000 kilometres of rivers are navigable
5,000 kilometres by large country boats.
Though efforts by the Inland Water
Transport Authority of India are afoot, yet
there is little likelihood that it will become
an important mode of transport. Low
speed is one of its crucial weaknesses on
demand side and several natural and
technological impediments on supply
side. However, there are three National
Waterways, which are being developed
and they are carrying some cargo.
Maritime transport is, however, an
important mode of overseas transport
and national transport. India has a long
coastline of over 5,500 kilometres.
Before Independence, Indian shipping
companies faced tough competition from
foreign companies and received no
support from erstwhile rulers.
After Independence, India was left
with five major ports. We added six more.
Besides, all these ports have been
expanded, re-equipped and modernised
from time to time to meet growing and
more difficult demands. For example,
there is a Dredging Corporation of India,
a public sector company, which provides
the dredging facilities for ports.
Individual port trusts, which look after
ECONOMIC INFRASTRUCTURE 55

NATIONAL WATERWAYS
National Waterway No.1 is on Ganga between Allahabad and Haldia (1620 kms), via
Patna, Bhagalpur and Farakka. Depth between 1.5 and 2.0 metres is maintained between
Patna and Haldia for major part of the year.
National Waterway No.2 is on Brahmaputra between Sadia and Dhubri (890 kms),
via Guwahati (Pandu). There exists an Indo-Bangladesh Protocol for connecting the way
to Kolkata.
National Waterway No.3 is on West Coast canal between Kottapuram to Kollam
through Champakara and Udyogmandal Canals (205 kms).

the ports and the Union Government,
pool the resources for expansion, re-
equipment and modernisation.
OUR MAJOR PORTS
Bombay (Mumbai), Calcutta (Kolkata),
Madras (Chennai), Cochin (Kochi), and
Visakhapatnam are important ports in
India that exist prior to India's
Independence. We have added six more:
Haldia near Kolkata, Nhava Sheva (now
named J. L. Nehru) near Mumbai, and
Kandla in Gujarat, and upgraded Paradip
in Orissa, Tuticorin in Tamil Nadu,
and Mangalore in Karnataka.
Marmagao was added after liberation
of Goa.
Our ports handled more than 250
million tonnes of cargo in 2000-01,
loading and unloading included. This is
thirteen times of what they handled in
1950-51 (20 million tonnes). Petroleum
and Oil Lubricants (POL) products, iron
ore, coal, fertilisers and other raw
materials, and some containerised cargo
are the major items transported. There
are virtually no overseas passenger
ships, though there are some services
available for Port Blair (Andaman and
Nicobar). Improvement is needed in
many cases.
There are around 140 minor ports
with limited facilities and hinterland.
They mainly serve the needs of the
coastal shipping. Coastal areas with
inadequate rail and road facilities make
use of these ports. In times of congestion
in major ports, they serve as good
supplement. Minor ports are the
responsibility of the respective State
Governments, which may receive loan
assistance from the Union Government
for development purposes. Besides
handling cargo, the minor ports are also
used for passenger traffic.
At the time of Independence, we had
42 ships with less than 100000 GRT (gross
registered tonnage). Today, the Shipping
Corporation of India alone has a fleet of
160 vessels aggregating four million GRT;
it is rated as one of the largest shipping
companies of the world and operates on
important sea trade routes of the world.
There are 66 shipping companies, of
which 43 are exclusively in overseas
transport, 16 exclusively in coastal
transport and 7 in both.
Air Transport
Air transport is the fastest and costliest
of all the modes of transportation. It is
the newest of all too. Its influence is
so pervasive that distance has came to
be measured in hours rather than in
miles.
Before the two World Wars, the air
transport in India hardly carried any
passengers and cargo and was
56
essentially a mail service. Experiments
apart, the first regular service began in
1932, though the first airmail was lifted
on 18 February 1911 from the exhibition
ground in Allahabad to Naini. Three
domestic airlines came into being in early
thirties with some kind of support from
the Government: Tata Airlines and
Indian National Airways catering to mail
and Air Services of India to passenger
and freight. Their services were diverted
to military traffic and needs of the Indian
Air Force during the second World War.
However, with cheap disposal of
American planes after war, availability
of flying and ground personnel released
from war, newly established aerodromes
and navigational facilities, many
companies became interested in many
routes. With some miscalculation about
demand for air traffic, about a dozen
airlines were given license. Soon they got
into financial trouble. With a view to
ensuring sound and healthy
development of civil aviation and taking
full advantage of the developments in
transport equipment and operational
techniques, it was suggested that the air
transportation should be nationalised.
Two public corporations, viz. Air India
and Indian Airlines were created for
international and domestic services,
respectively. Now there exists an ancillary
of Indian Airlines, which is known as
Alliance Air. Beside these, there are a few
private airlines also, like Jet Airways and
Air Sahara. Recently, we have disinvested
a lot of shares of the two airlines (60 per
cent of Air India and 51 per cent of Indian
Airlines) to financial institutions, private
investors and foreign direct investors. The
purpose is to infuse competitiveness and
run them more efficiently.
INDIAN ECONOMIC DEVELOPMENT
There is an Airport Authority of India,
which maintains about 92 civil airports
and 28 civil enclaves at defence airports.
Five of them are international; many are
likely to be upgraded to international
standards. They provide service to our
airlines as well as to the foreign airlines.
Air transport includes passengers and
cargo (freight and mail). In order to
understand the growth of this transport
sector, some statistics are provided in
Table 4.9. Compared to the other modes,
it is a small elite sector. Domestic cargo,
it seems, is unpopular with the air.
International cargo with our airlines is
also small. Our airports handle 2.5 times
more passengers and 3.5 times more
cargo than our airlines carry.
Air transport is being managed with
a fleet of 25 aircrafts with Air India,
around 50 aircrafts with Indian Airlines
and a small number with other private
airlines. Our aircrafts are somewhat old.
Yet, the load factor, indicating use of
availability, has been 65-70 per cent.
Pipeline Transport
Everybody is aware of the transport of
drinking water through pipelines in
cities. Most of sewerage is also being
carried through pipeline. But in many
difficult areas, drinking water is being
transported from rivers or water heads
to many cities and villages. Of late, it is
being taken advantage of for transport of
crude oil, petroleum products and natural
gas. Pipeline transport has low energy
cost, low transit loss and low overall
running cost. It has heavy initial sunk
cost. It has been found to be the most
economical mode for transporting goods,
which are in liquid and gas form
ECONOMIC INFRASTRUCTURE 57

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

1950 1965 1973 1985 1991 1998

International
Passengers 150.0 270.0 736.0 2207.0 2430.0 3436.0
Cargo (Tonnes) 3.2 10.2 28.0 84.3 101.0 92.0
Domestic
Passengers 303.0 1135.0 2636.0 8617.0 7912.0 11547.0
Cargo (Tonnes) 36.9 26.7 34.3 98.9 97.0 125.0
Handling by Airports
Passengers 10738.0* 17723.0 36974.0
Cargo (Tonnes) 178.7 377.3 699.0
* For the year 1970-71.
Source : Indian Planning Experience: A Statistical Profile, Planning Commission, Government of India,
2001 and Economic Survey 2001-2002, Ministry of Finance, Government of India.

between places needing continuous Natural Gas

traffic for longer period of time. It is,
therefore, a worthy investment. Pipeline
transport is also being used to carry
iron ore in slurry form (fine iron ore in
water). The following are important
pipelines:
Crude
1. Assam crude oil from oil fields to
Guwahati (Assam) and Barauni
(Bihar) refineries.
2. Imported crude oil from the west
coast of Koyali (Gujarat) to Mathura
(Uttar Pradesh) refineries.
3. Imported crude oil from east coast
to Barauni (Bihar) refineries.
4. Imported crude oil from Viramgam
(Gujarat) to Karnal (Haryana)
refineries.
Petroleum Products
1. From Barauni refineries to Kanpur.
2. From Mathura refineries to Delhi,
Ambala (Haryana) and Jalandhar
(Punjab).
3. From Bombay refineries to Pune.
1. From west coast Hazira for gas-
based nitrogenous fertilizer plants
and natural gas-based power plants
in Madhya Pradesh, Rajasthan,
Uttar Pradesh.
While the network of pipelines for
crude and petroleum products have been
built-up and are being managed by the
Indian Oil Corporation, the network of
pipelines for natural gas is being handled
by the Gas Authority of India Limited.
Communication
Development brings changes in
communication system and better
communication helps in development.
In todays world, all spheres of life
public affairs and public administration,
national defence, business management,
agricultural and other extension
services, education, advertisement,
press and media require good
communication. Communication
systems bring the buyers and sellers
closer by providing information about
the market, motivating the consumers
58
and thus helping the economy grow
faster.
This era is said to be an era of
technological revolution. We have taken
advantage of technological development
in telecommunication and information
technology. Still, the old modes of
communication continue to be important.
We identify communication systems with
postal communication and telecommuni-
cation services, though there was a time
when communication meant transport,
particularly air transport.
Postal Service
Postal service still plays a great role and
the Department of Posts promises, in one
of its recent annual reports, high quality
mail, parcel and related services in India
and throughout the world, exceeding the
expectations of the customers, employees
and society.
Number of post offices in India has
increased from 23344 in urban places and
selected villages in 1947-48 to 154551 in
2000-01. In rural areas, the number has
increased four and a half times from
around 31 thousand in 1950-51 to around
138 thousand in 2000-01 and that of urban
post offices around three-times from
5,400 in 1950-51 to 16,400 in
2000-01. These post offices include Head
Post Offices and Sub-Post Offices, run by
TABLE 4.10
Growth of Number of Post Offices by Rural and Urban Division
1951 1961
Rural Post Offices 30810 69513
Urban Post Offices 5424 7624
All Post Offices 36234 77137
Source : Indian Planning Experience: A Statistics Profile, Planning Commission, Government of India
and Annual Report 2000-01, Department of Posts, Ministry of Communication, Government
of India.
INDIAN ECONOMIC DEVELOPMENT
the Department and Branch Post Offices
in rural areas run on contractual basis.
There are more than 5.8 lakh letterboxes
all over the country. The system is said to
be the largest postal network in the world.
Still, there are more than one lakh villages,
which do not have a post office within a
distance of three kilometers. In these
areas, the postal department is utilizing
the services of the existing infrastructure
of gram panchayats and is running the
basic postal service on contractual basis
(See Table 4.10). Each post office on an
average serves 21-22 sq. km. area and
5500 persons.
Acceptance and delivery of money
order is an important service rendered
by postal network. More than Rs 5,000
crores are transacted through money
order service. Twelve cities in India use
satellite mechanism.
Mail route has risen ten times from
2,72,000 km in 1950-51 to 27,20,000 km
in 2000-01. Speed post has been
introduced since 1986. The number of
cities covered by speed post has now
risen to 108 and overseas facility is also
available for 97 countries. The
Government has, in the wake of
liberalisation, accorded formal status to
the private courier services. There are
schemes for linking Delhi with state
capitals and six metropolises.
1971 1981 1991 2001
98835 124689 132646 138149
10224 13535 16073 16402
109059 138224 148719 154551
ECONOMIC INFRASTRUCTURE
Processing, transmission and delivery
system is being modernised.
Besides, postal system also has
savings facilities. There are more than
6 crore accounts. There exists facility
for recurring deposit, term deposit and
public provident fund. The system also
operates postal life insurance.
Telegraph and Telex
Telegraphy is very old in India. Starting
with 8200 in 1951 telegraph offices have
by now increased to around 45000. The
department has introduced phonogram
service for sending and receiving telegram
by telephone and telex service for sending
and receiving printed messages from one
centre to another. Ninety-five per cent
telegrams are delivered in 12 daylight
hours. But these services are getting out
of fashion because of introduction of
phone/fax/e-mail facilities. Telex is
rapidly getting out of fashion.
Telephone
Telephone technology has changed
phenomenally from use of over-ground
wires to use of satellites and under-
ground use of optic fibres and co-axial
cables. Yet, just in terms of numbers,
number of telephone connections has
increased from 1.7 lakh in 1950-51 to
3 crore by 2001. In the recent past, every
year about 50 lakh connections have
been provided. STD (Subscribers Trunk
Dialling) for national dialing is now
available to most of the connections.
ISD (International Subscriber Dialling)
for international dialing was available
for 170 countries. Cellular mobile
phones are getting popular. Around 1.5
crore people are using it. Our public
corporations (MTNL and BSNL) have
59
joined private operators. They are
internet service providers (ISP) too.
There are more than 2 lakh local
public call offices (PCOs) and more than
3.25 lakh STD booths. Under the scheme
called VPT (village public telephone),
around 4 lakh villages have been
connected. The BSNL has planned to
cover all villages by the end of 2002.
Our tele-density has risen from mere
0.6 per cent in 1990-91 to around 3 per
cent in 2000-01. Rural-urban disparity
is high: Rural density is less at 0.8 per
cent while urban density is more than
8.0 per cent. Of course, there is no
reason to argue that tele-density in both
the areas should be equal.
It may be noted that telephone
services and operations have been
corporatised into Bharat Sanchar Nigam
Limited (BSNL) in October 2000.
Telephone service for Mumbai and Delhi
was already corporatised under
Mahanagar Telephone Nigam Limited
(MTNL). BSNL has around 4.21 lakh
employees. Telecom Regulatory Authority
of India has been set up to regulate tariff
and competition in the telecommuni-
cations sector. The Telecommunications
Department will only look after the policy
issues and some technical issues such
as wide spectrum management.
Communication Satellites
There are a variety of satellites in our
space. One of them, INSAT, has been
designed under the Indian National
Satellite Programme with the objective
of strengthening the long-distance
telecommunication (radio, telegraph,
television) links. The geocentric
satellites, numbering six, are able to
link pre-determined earth stations.
60 INDIAN ECONOMIC DEVELOPMENT

Concluding Remarks better. As various forms of infrastructure

We have gone a long way in improving
our economic infrastructure since
Independence. There is multifold
increase and qualitative change in all
spheres. Yet, there is scope for doing
are at the base of economy and determine
the pace of its growth, we must address
the infrastructure issues and redress
bottlenecks. We shall read more about
them in a subsequent chapter.

EXERCISES
1. What is meant by infrastructure? Explain the basic qualities of infrastructure.
2. Indicate two categories of infrastructure. Give examples.
3. Categorise canals, houses, schools, railways, ships, hospitals, banks,
development banks, aerodromes, courts, power plants, transmission lines and
satellites into economic and social infrastructure.
4. Name commercial, non-commercial and non-conventional sources of energy.
5. Differentiate between primary and final sources of energy and show that coal
is both a primary and a final source of energy.
6. Discuss changes in the pattern of consumption of energy over the last fifty
years in respect of primary sources in terms of commercial and non-commercial
energy.
7. Discuss changes in the pattern of consumption of energy over the last fifty
years in respect of final sources in terms of coal, petroleum products, gas and
electricity.
8. Discuss the growth of coal use and changing profile of its use.
9. Oil is an important energy resource which needs to be used efficiently in
India comment.
10. How important is gas as a new resource?
11. What are the three major sources of electricity? Why did we choose to switch
to thermal power knowing fully well that coal combustion causes pollution?
12. Discuss, in brief, the possibility of development of non-conventional energy.
13. Discuss the growth of railways since Independence in terms of tracks,
electrification, composition of locos, etc.
14. Why should we prefer rail transport for long haulage?
15. What are the advantages of roads over railways as a means of transport?
16. Give an account of expansion and improvement of road transport since
Independence.
17. List different types of water transport.
18. Discuss the importance of inland water transport and appreciate its
limitations.
19. Give an account of coastal shipping and overseas shipping.
20. Give out the salient features of civil aviation.
21. Underline the importance of pipeline transport.
22. Discuss the progress of postal services of India since Independence.
ECONOMIC INFRASTRUCTURE 61

23. How has telecommunication improved since 1991?

24. What do you mean by tele-density? Disparity between rural and urban tele
density is one to ten. We agree that it should reduce. Should the disparity be
completely eradicated? Argue the case for your answer.

ACTIVITY
Calculate percentage consumption of different categories of consumers if we take
into account the generation of electricity by non-utilities. Assume the whole of
electricity generation by the non-utilities is consumed by industries only.
62
CHAPTER 5
Social Infrastructure
Introduction
In the last chapter, we have learnt about
the importance of economic infrastruc-
ture in the development of our economy.
But we know that there is always a man
behind the machine. If a man is healthy
and educated, he is likely to contribute
more and in a better manner. How could
people be healthy and educated? If
people eat well, live in clean houses,
enjoy pollution free atmosphere and are
provided proper medical care when they
fall sick, then they will be healthy. Public
health measures help them have clean
surrounding and also check the spread
of communicable diseases.
Similarly, if people, while young, get
enrolled in a school and are taught by
good teachers, they get educated. Later,
when they pursue such studies as make
them employable in productive
vocations, they become responsible
manpower. But the first condition is that
there have to be schools for all boys and
girls; the schools should be approachable
and be at a short distance. Education
and health, besides making people more
productive, make them more capable of
living better.
Housing is now being considered an
important priority as a majority of people
are now reasonably fed and clothed. As
INDIAN ECONOMIC DEVELOPMENT
education, health and housing have
social overtones in that they are not just
instruments for generating productive
human resources but also contribute
directly to the well-being of the people,
they are known as social infrastructure.
In this chapter, we will discuss progress
of three social infrastructures, viz.
education, health and housing.
Education
Literacy
Let us start with literacy, which is not
education per se. People, above a certain
age, who can read and write a simple
passage with understanding in any
language, are considered literate.
Naturally all educated persons are
included in it. According to 1951 census,
one-sixth of the population was literate;
by the turn of the century, nearly two-
thirds are literate. In terms of absolute
numbers, the literate hardly numbered
5.7 crore in 1951. Their number in 2001
is about 57 crore, ignoring those in the
population below 7 years of age. In the
fifty years gone by, the number of
literates has increased ten times and the
literacy rate has risen from less than
20 per cent to over 65 per cent. Study
the trends in levels of literacy since 1951
(Table 5.1).
SOCIAL INFRASTRUCTURE 63

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

Population Number of Literacy

Year All Age 7+ Literates Illiterates Rate (%)
(1) (2) (3) = (4) + (5) (4) (5) = (3) (4) (6) = (4)/(3)
1951 36.1 28.3 5.5 22.8 19.2
1961 43.9 34.4 10.2 24.2 29.8
1971 54.8 43.0 15.6 27.4 36.2
1981 68.4 53.6 23.4 30.2 43.6
1991 84.1 67.6 35.2 32.4 52.1
2001 102.7 86.9 56.7 30.2 65.4
Note: Population aged 7+ and literacy rates are estimated for the years 1951, 1961 and 1971 while
for the years 1981, 1991 and 2001, they are actual ones.
Source: Census of India Series-1 India, Paper 1 of 1981: Provisional Population Totals, Census of India
Series-1 India, Paper 1 of 1991: Provisional Population Totals, and Geeta Chaubey, Literacy in
India: An Examination, IASSI Quarterly, Vol. 16, No. 2.

Female literacy rate in India is still concentrating on adult literacy,

less than 55 per cent, while the male
literacy rate is more than 75 per cent.
We have still to cover some ground in
literacy in general and female literacy
in particular. But, it should be a matter
of satisfaction that the number of
literates, which was rising till 1991 has
started coming down. In some States
like Kerala and Mizoram, literacy rate
is more than 85 per cent although, in
some other States like Bihar, it is not
even 35 per cent.
Similarly, our rural areas have less
than 60 per cent literacy compared to
the urban literacy rate of over 80 per
cent. When we consider rural females,
the rate falls to 47 per cent. While the
urban male literacy rate is 86.7 per
cent, the rural female literacy rate is
just 46.7 per cent. The difference in
literacy rates of various social groups is,
thus, up to forty per cent points.
School Education
While people can become literate at any
stage and there are programmes
enduring and meaningful literacy comes
only through schools. Our Constitution
enjoins upon the State to provide
universal education to all children up to
age 14. It was interpreted as education
for eight years in the early fifties. It
meant, therefore, that every boy or girl,
having attained age 6, must be in school.
And, we had promised to ourselves to
accomplish it by 1960. It was perhaps
too ambitious to achieve it in all towns
and villages, numbering more than 6
lakh and spread in 10 lakh habitations,
many of which are widely scattered,
dotted in vast expanse and small in size.
A child of age six or seven has limitation
of walking a long distance and that too
everyday.
Elementary Education
It will pay us to remember that Lok
Sabha has passed on 18 November 2001,
an Act through 93rd Amendment to the
Constitution, declaring the right to free
and compulsory education for children
64 INDIAN ECONOMIC DEVELOPMENT

of 6-14 years of age a fundamental right.
It has also made a fundamental duty of
the parents/guardians to provide
opportunities for education to children
in the age group of 6-14 years.
Elementary education is normally
divided in our country in two parts:
Classes I-V, known as primary school
and Classes VI-VIII, upper primary
(middle) school. Corresponding age
groups of children may be considered as
6-11 years and 11-14 years. We had
around three lakh primary schools and
13.5 thousand upper primary schools in
1950-51. In the year 1999-2000, we
had over 6.4 lakh primary schools
(including primary sections of higher
level schools) and about 2 lakh upper
primary schools.
In 1950-51, the enrolment in primary
schools was less than 2 crore. Today, it is
more than 11 crore (Population of the
children has increased 3 times while
enrolment rose by 5.5 times). It is
customary to divide the enrolment by the
population of the relevant age group so
that a valid comparison could be made
over time. This is known as gross
enrolment ratio. The gross enrolment
ratio was hardly 43 per cent in 1950-51
but now it is more than 100 per cent.
You may wonder how such a ratio could
be more than 100! It simply means that
children enrolled in primary classes may
not be strictly from the age group 6-11
years. We know most schools in towns
and cities admit children with age 5 in
Class I. We should also know that many
children beyond age 11 might be
studying in village primary schools in
many remote areas. This swells the
numerator. That is why there is an
adjective gross, yet, there are children
in this age group who are not going to
school. Non-enrolment is more preva-
lent among girl children (See Table 5.2).
Enrolment in upper primary classes
in 1950-51 was just 13 per cent 21 per
cent for boys and 5 per cent for girls.
Today, about 70 per cent boys and 50
per cent girls are estimated to be
attending upper primary classes. The
number of upper primary schools has
risen from less than 14000 to
2 lakh in the last fifty years.
Number of students rose from 33 lakh

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

Unit 1951 1961 1971 1981 1991 2000

Primary
Enrolment Lakh 186.8 336.3 570.4 737.7 973.7 1136.0
Schools Lakh 2.1 3.3 4.1 4.9 5.3 6.4
Teachers Lakh 5.5 7.4 10.6 13.6 16.2 19.2
Enrolment Ratio Per cent 42.6 62.4 78.6 80.5 100.1 104.1
Upper Primary
Enrolment Lakh 33.0 74.8 133.1 207.2 273.1 420.6
School Lakh 0.14 0.5 0.9 1.2 1.5 1.98
Teachers Lakh 0.9 3.5 6.4 8.5 9.7 13.0
Enrolment Ratio Per cent 12.9 22.5 34.2 41.9 60.1 58.8
Source : India Yearbook 2001: Manpower Profile, Institute of Applied Manpower Research,
New Delhi.
SOCIAL INFRASTRUCTURE
in 1950-51 to about 4.2 crore in 1999-2000.
But, the disparity between male and female
enrolment, though narrowing, still persists.
Proportion of trained teachers is
increasing and so is the proportion of
female teachers. It is believed that at
school level, trained teachers,
particularly the female teachers, prove
to be better teachers.
Majority of primary schools in India
are run by government. State
governments play a major role in
providing education in their respective
territories. But, there are also schools
run by societies/associations/ trusts.
These are known as public schools.
PUBLIC SCHOOLS IN INDIA
Public schools in our country are not
owned and managed by the government.
They are open to public without
discrimination on the basis of divisions
in society. Our public schools are public
in the sense that they are owned by
societies, association or trusts rather than
the government. There may be
discrimination on other grounds; merit
may be one of them.
An important issue that deserves our
attention is that there exists a
phenomenon of drop-out. Students
enrolled in Class I (or VI) leave education
before completing Class V (or VIII). Ratio
of such students to total enrolment in
the beginning is called drop-out ratio.
Only 60 per cent students who enroll in
Class I pass out Class V. Of those, who
enroll in Class VI, only 50 per cent pass
out from Class VIII.
65
About fifty per cent of educational
expenditure is incurred on elementary
education in India. There are areas
where it is difficult to provide facilities of
education as population is very thinly
spread or people move to different places
in different seasons to make both ends
meet. There are areas where people are
too poor to afford sending their children
to school; boys may be tending cattle and
girls may be taking care of siblings
while parents are working in their own
or somebody elses field. In some areas,
girls beyond a certain age are disallowed
to go to school by the parents. It means
that, in some areas, access is denied
and in some other areas, access is not
availed of.
In order to overcome these problems,
a scheme known as non-formal education
for the age group of 6-14 years was
launched with the assistance of the Union
Government. Non-formal schools were
opened, to begin with in 1986-87, in rural,
tribal, desert, hilly and remote areas and
urban slums in nine educationally
backward states. Around 500 voluntary
organisations were also involved
wherever possible in this task and around
3 lakh non-formal schools were opened,
of which 1 lakh were exclusively for girls,
which enrolled 75 lakh children. Average
enrolment per non-formal school comes
out to be 25. Adult education programme,
originally meant for 15-35 illiterate age
group was also extended to enroll children
of age group 6-14 years who were not
going to school.
State Governments have, with a view
to universalising primary education, also
66 INDIAN ECONOMIC DEVELOPMENT

started many supplementary schemes to X. Normal opening for professional

enlist the children who are still outside
schools. This is partly to fulfil constitutional
obligations, made more explicit by recent
pronouncements of the Supreme Court
and constitutional amendments, which
have made elementary education a
fundamental right of the child. Many
scholars view these supplementary efforts
as dilution of primary education; in their
view, each child, irrespective of caste,
colour, culture, creed, sex and domicile,
is entitled to uniform education. They
suggest that the Government should
adopt a common school system to be
operated through admissions in a
neighbourhood school.
However, education up to Class VIII
prepares a ground which the people can
build upon to acquire specific skills to
be able to work for themselves and be
more productive for the society. While
some of the children, after completing
education up to Class VIII, can enter the
labour force of the economy, many of
them could still pursue education in
vocational branches.
Besides a few industrial training
institutes (ITIs), polytechnics and nursing
schools, there is very little opening for
those who pass out Class VIII or even Class
courses is beyond Class XII. Then, what
is the position of secondary education?
This requires serious consideration.
Secondary Education
Secondary level education (for age
group14-18) prepares the student for
entry into higher education as well as
for the world of work.
There was a time when we had
10+2+3 or 10+2+2 system. Then came a
time when we had11+3 system. Then we
reverted to 10+2+3 system. This
transition is now over. So far as non-
professional education is concerned, it
is10+2+3 and for professional education
it is 10+2+4. In any case, education up
to Class XII is now a part of the school
system and education for Classes IX-X
is called secondary education and
education for Classes XI-XII is called
senior secondary or higher secondary
education.
In 1950-51, number of such schools/
colleges/sections was about 7300 with
1,26,000 teachers and 32 lakh students.
By now, we have about 1.17 lakh
schools, 17 lakh teachers and 180 lakh
students (See Table 5.3).

TABLE 5.3
Statistics related to Secondary Education: Enrolment, Schools and Teachers
Unit 1950 1961 1971 1981 1991 2000
Enrolment Lakh 12.2 34.63 65.80 88.07 143.65 185.82
School Lakh 0.07 0.17 0.37 0.51 0.80 1.17
Teachers Lakh 1.26 2.96 6.29 9.12 13.34 17.20
Enrolment Ratio Per cent 5.30 10.60 19.00 17.30 24.00*
*For the year 1990.
Source: India 1985: A Reference Manual, Publications Division, Ministry of Information and
Broadcasting, Government of India and India Yearbook 2001: Manpower Profile, Institute of
Applied Manpower Research, New Delhi.
SOCIAL INFRASTRUCTURE
Efforts were made to vocationalise
secondary education. In the late eighties,
under a scheme, Government of India
proposed that 10 per cent of senior
secondary students should be diverted
to vocational stream by 1995 and 25 per
cent by 2000. So far, it seems we have
succeeded in creating a capacity of over
10 lakh, which is about 5 per cent of
the total enrolment. There are around
4000 ITIs with a seating capacity of 6-7
lakh in different trades.
Higher Education
Being at the apex of the educational
pyramid, higher education has a key role
to play in the education system. It is
expected to provide people an opportunity
to reflect on the critical social,
economic, cultural and spiritual issues
facing humanity. At the same time there
is another side of higher education,
which caters to technical education
(including management education),
medical education, agricultural
education (including veterinary
science), and forestry education.
The higher education system
witnessed, since 1950-51, a twelve-fold
increase in the number of universities,
twenty-three-fold increase in the
number of colleges and twenty-nine-fold
increase in the enrolment. There are
now a little less than 250 universities/
deemed universities/institutes of
national importance and around 11000
colleges, including polytechnics,
technical colleges and management
institutes. There may be around 3.5
lakh teachers for general education
(arts, science, commerce, etc.), including
67
80 thousand in university-like institutes.
There are other institutions catering to
higher education in a variety of ways,
which do not have formal status of
awarding a degree or diploma.
Roughly speaking, 75 lakh students
are studying for some or the other course
beyond senior secondary and 15 lakh in
other professional courses. However, it
is quickly pointed out that our education
is heavily tilted towards general
education (arts with 40 per cent
enrolment, commerce with 22 per cent
enrolment and science with19 per cent
enrolment).
Educational Finance
Finance gives some hint about the efforts
we make, although it is much more
important to know how and where the
money is spent, and who spends the
money. Since 1976, education is a
concurrent subject, causing both the
levels of Governments, Union and States,
to spend resources. However, major
responsibility is borne by the States.
Besides Governments, parents also
spend resources on their children and
philanthropists on others children.
The States, at both levels of
Governments put together, spent
nearly Rs 60,000 crore towards the
close of the centurymore than Rs
50,000 crore by the State Governments
and about Rs 7,000-8,000 crore by
the Union Government. Various state
governments spend between 10 and
30 per cent of their respective budgets,
making it an average of 20 per cent.
The Union Government, on the other
hand, annually spends less than 3 per
cent of its budget on education. The
68
Government, as a whole, thus, spends
about 4 per cent of the GDP. Of the total
institutional expenditure, Government
expenditure comes out to be 80-90 per
cent, the rest being contributed by local
bodies (7 per cent), fees (4-5 per cent) and
endowments (3 per cent).
How is the Government expenditure
allocated between different levels of
education? About fifty per cent on
elementary education, 30 per cent on
secondary education and 20 per cent on
higher education, out of which 12-14 per
cent is on general education and the rest
4-5 per cent on technical education. This
is the position in recent years.
Health
There are two ways whereby we can study
the health conditions of a population.
One, how long we live and how healthily.
Two, how much care of ours is taken.
First, we shall see the state of our vital
statistics. Then, we shall see how our
health is taken care about and to what
extent.
Vital Statistics
Given the mortality conditions/rates at
different ages, we should know how long
a child is expected to live when it is born?
This is known as life expectancy at birth.
In the beginning of the century, we were
expected to live, at the time of birth,
hardly for 25 years. On the basis of
mortality rates, which prevailed in the
years before 1921, our life expectancy
dropped to 20 years (See Table 5.4). The
mortality conditions improved later on,
and our life expectancy at birth slowly
INDIAN ECONOMIC DEVELOPMENT
surged towards 32 years in 1951. After
Independence, we took many steps on
food, nutrition and health fronts and our
life expectancy at birth has reached
65 years by the close of the century.
Demographers and actuary
statisticians calculate life expectancy at
different ages, say at 1, 5, 10, 20, 30,
40, 50, 60 and 70 also. We all know that
different people die at different ages.
Different people born in a given year will
die in different years. Life expectancy of
a group (cohort) is the average life-span
(number of years) expected to be lived
by the group.
Life expectancy at age 10 improves
for a while as chances of death decline
during the childhood as age increases.
Chances of mortality are highest at
birth, followed by those in the first day,
first week, first month, and first year in
the decreasing order. For example, life
expectancy at age one is four years more
than life expectancy at birth, while
children, who survived, have already
lived a year. However, this trend does
not continue for ever and after a certain
age, say 10, chances of mortality start
increasing. As a result, life expectancy
at age 10 is somewhat more than life
expectancy at birth. As can be seen from
the top rows in Table 5.4, life expectancy
at age 10 is more than life expectancy at
birth by about 10 years (while these
people have already lived for 10 years).
That was the position in the beginning
of the century. After Independence, as
we can see from the bottom rows of Table
5.4, the life expectancy at 10 is becoming
equal to life expectancy at birth as life
expectancies have improved.
SOCIAL INFRASTRUCTURE 69

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

At Birth Age 10 Age 30 Age 50 Age 60

Year Male Female Male Female Male Female Male Female Male Female
1901 23.6 24.0 34.7 33.9 22.9 23.8 13.6 14.5 09.5 10.0
1911 22.6 23.3 33.4 33.7 22.5 23.0 14.0 14.3 10.0 10.1
1921 19.4 20.9 29.6 29.2 21.6 21.8 14.3 15.0 10.7 11.7
1931 26.9 26.6 36.4 33.6 23.6 22.3 14.3 14.7 10.3 10.8
1941 32.1 31.4 41.2 38.6 29.0 27.9 17.8 18.2 12.6 13.7
1951 32.5 31.7 39.0 39.5 26.6 26.2 14.9 16.1 10.1 11.3
1961 41.9 40.5 45.2 43.8 29.0 27.9 16.5 17.5 11.8 13.0
1971 46.4 44.7 48.8 47.7 33.5 32.0 19.2 19.7 13.6 13.8
Source : Health Information of India 1997 & 1998, Central Bureau of Health Intelligence, Director
General of Health Services, Ministry of Health and Family Welfare, Government of India, 2000.

Figures in Table 5.4 were prepared expectancy is found to be higher than

with the use of census data. Since 1970 male life expectancy. All this is a good
onward, we have data from the sample sign. The latest projections tell us that
registration system. Life expectancy female life expectancy is 65.3 years while
figures based on this database are given male life expectancy is 62.3 years.
in Table 5.5. The ages at which life All of us want to live as long as
expectancy of the two sexes have been possible (of course with good health) but
measured, are not quite the same as in we also know that we cannot live
Table 5.4. indefinitely long. However, if people die
The inferences from Table 5.5 one during infancy or childhood mean their
can draw, are as follows: (i) Life right to life is denied. It is also considered
expectancy has increased over time as wastage of resources particularly that
across age and sex, (ii) as age advances, of mothers in terms of time and
female life expectancy is found to expenditure incurred on rearing them.
increase more than male life expectancy, So there is a need to reduce mortality
and (iii) from eighties onwards female life particularly infant mortality.
TABLE 5.5
Life Expectancy at Different Ages Based on Sample Registration System

At Birth Age 1 Age 5 Age 50 Age 60

Year Male Female Male Female Male Female Male Female Male Female
1970-75 50.5 49.0 57.0 55.6 57.5 57.7 19.8 21.3 13.4 14.3
1976-80 52.5 52.1 58.6 58.6 58.8 60.2 20.5 23.0 14.1 15.9
1981-85 55.4 55.7 60.8 61.1 60.1 61.8 21.4 23.8 14.6 16.4
1986-90 57.7 58.1 62.2 62.6 60.9 62.5 21.7 23.7 14.7 16.1
1991-95 59.7 60.9 63.9 65.1 61.8 63.9 22.3 24.8 15.3 17.1

Source : Compendium of Indias Fertility and Mortality Indicators 1971-1997, based on the SRS, Registrar
General of India, New Delhi, 1999.
70 INDIAN ECONOMIC DEVELOPMENT

We notice that, over the century gone
by, while death rate (per thousand
population) has reduced from around 45
in the beginning, dropping to 25 in the
middle to 9 at the close, infant mortality
rate (per thousand live births) has reduced
from over 200 in the beginning, dropping
to 145 in the middle, and to 70 at the
close. We may further note that in the
urban areas, while general death rate is
6.5, infant mortality is 45. However, there
is still scope for reduction in infant
mortality and we plan to reduce it to 30
in next ten years or so.
It has to be remembered that births
are necessary to carry forward the society
but too many of them, by all reckoning,
may pose problems in the short run and
moderate our attainments and
achievements. Nevertheless, once a child
is born, human society wants it to
survive, to contribute and to enjoy.
Public Health
How is it possible that people live long,
live a healthy and productive life and do
not die in infancy or childhood? First,
babies should be born healthy, which
requires mothers to be healthy. Second,
they should receive all immunisation
vaccines, etc. Third, they should enjoy a
clean surrounding. Fourth, they should
get nutritive food in adequate quantity.
Fifth, they should have adequate access
to medical cure in case they fall ill. Even
adult population should enjoy a clean
surrounding, get nutritive food and
should have access to medical care,
should they fall ill. (Everyone should
have adequate clothing and shelter.) In
addition, while children should have
chance to learn and play and should not
be forced to work, the adult should have
the chance to work and must work. First,
three observations fall in the category of
public health. It is because of our
ventures in the public health that our
conditions of life, mentioned above, have
improved.
In order to avoid total wastage of life
in childhood by death or partial wastage
by crippling impairment, we should take
full care of our children and their
mothers. If you are in a village, you might
have noticed camps for various
immunisations for children and writings
on walls regarding immunisation
programmes. If you are living in a town

PUBLIC HEALTH
Impact of industrial revolution on health was bad. It became a matter of community concern
requiring government action on a continuing basis. It was realised that the human cost of
industrial revolution and urbanisation in terms of ill health and pre-mature death was
enormous. It was discovered that communicable diseases spread because of filthy
environmental conditions. An important study on health conditions was published in 1842.
After a struggle for six years, a Public Health Act was passed in 1848 in the British
Parliament. The movement led finally to establishment of Ministry of Health in Britain
in1919.
It may be recorded that Kautilya was particular about public hygiene and sanitation.
He made it a part of civic duties that people should not spoil public places, parks and
streets. He also made spoiling an act of punishable offence. In his days, perhaps industrial
pollution did not exist.
SOCIAL INFRASTRUCTURE
or city, you might have seen hoardings
displaying dates for mass immunisation
for children. In fact, compared to earlier
days, expectant mothers and children
are getting much better attention.
Pregnant mothers should receive
Tetanus Toxoid (TT) injections twice to
avoid tetanus infection. Even in 1980-
81, only 53 lakh mothers received TT; in
1996-97 their number reached 2 crore
30 lakh. Mothers, particularly expectant
and nursing ones, should be given
prophylaxis against anaemia.
Unfortunately, most Indian women
suffer from anaemia because of poor
nutrition. Children born of such mothers
are also prone to suffer from anaemia.
Children should be protected against
diphtheria, pertussis (whooping cough)
and tetanus by DPT vaccine, polio by oral
polio vaccine (OPV), measles, basillus
calimette guerin by BCG vaccine,
blindness (for deficiency of vitamin A),
etc. Most of these vaccines are now
being manufactured in India and
companies belong to both public and
private sector. The Department of
Family Welfare (of Ministry of Health and
Family Welfare of the Government of
India) is making efforts to cover all
children against such illnesses under
its universal immunisation programme.
Earlier epidemics such as plague
and kala-azar used to occasionally break
out and take a heavy toll. Once in a
while they occur even now, basically due
to lack of cleanliness. In recent past
(1994), plague broke out in Surat
(Gujarat). Bihar and West Bengal still
report cases of kala-azar and deaths due
to it. Cholera and small pox used to be
other two major curses, killing thousands.
Since 1977, small pox has stopped
71
visiting us. Number of cholera patients
which, earlier, used to be in tens of
thousand, has reduced to a few
thousands and a few deaths still occur.
But, acute diarrhoeal diseases still affect
one per cent of our population and cause
a few thousand deaths. Unfortunately,
incidence of malaria is still large and
lakhs of people suffer from it and a few
hundreds even die. Equal toll is reported
due to Japanese encephalitis. National
anti-malaria programme (earlier called
national malaria eradication programme)
is taking care of malaria, kal-a-azar,
encephalitis, and filaria. About 40 per
cent population carries the risk of filaria
through carrier persons and diseased
persons are also in crores. Similarly, we
have in place now a national leprosy
eradication programme taking care of
more than 5 lakh patients, a national
T.B. control programme, national goiter
control programme, and national
programme for control of blindness.
There exists a national AIDS control
organization for taking care of
prevention and treatment of STD, HIV
positive and AIDS, which impair not only
health but make the patient vulnerable
for other diseases.
STD, HIV AND AIDS
STD = Sexually Transmitted Diseases
HIV = Human Immunodeficiency Virus
AIDS = Acquired Immune Deficiency
Syndrome
What about clean surrounding and
nutritive food? Let us go with still
moderate agenda. One is the use of
contaminated drinking water causing a
lot of morbidity and some mortality. The
diseases are listed as diarrhoea,
72 INDIAN ECONOMIC DEVELOPMENT

trachoma, intestinal worms, hepatitis,
typhoid and malaria. Most of these are
water bome diseases. These diseases
result in temporary disability and
unnecessary treatment, permanent
disability, and loss of preventable life.
Of all patients, 50 per cent suffer from
communicable diseases, 20 per cent of
which are water-borne. Twenty-five per
cent children below five, die due to
diarrhoea. Crores of man-days are lost
due to water-borne diseases. We must,
therefore, ensure safe drinking water to
everybody. However, in the last fifteen
years, the coverage of safe drinking water
has improved quite a bit. It is said to have
improved in rural areas from 56 per cent
in 1985 to 82 per cent in 1999.
Much of surrounding can be
improved if sanitation facilities are
provided at least in urban areas. Despite
much effort made in urban areas, only
50 per cent population has access to
sanitation facilities in 1997 as against
around 30 per cent in 1985. In rural
areas, this facility is now available to
8 per cent population in comparison to
less than 0.8 per cent in 1985.
Health Care System
The best thing to hope is that we do not
fall ill. We should prevent illness through
sanitation measures, public health
measures and pieces of advice on health,
nutrition and cleanliness. Should we fall
ill at all, we should be cured. This means
that we should have hospitals,
dispensaries and health centres and also
doctors, nurses, pharmacists, coun-
sellors and health guides. However, we
know that besides allopathy, medical
practitioners also adopt ayurveda,
homoeopathy, unani, siddha,

MORBIDITY
It is a state of ill health. It makes you feel bad about yourself or cause others to worry
about you. You may be suffering from an acute or chronic ailment. It affects your work by
making you temporarily disabled. Prolonged morbidity may lead to mortality.
In our country, acute respiratory infection (1.5 crore) and diarrhoel diseases (80 lakh)
are two major causes of morbidity, leading to a few thousand deaths.
According to a recent survey conducted by the NSSO, number of persons per thousand,
reporting illness preceding the date of survey was found to be 118 and 88 as against 18
and 12 in Mizoram in rural and urban areas respectively. These are the most literate
states of the country. In Uttar Pradesh, Madhya Pradeh, Bihar and Rajasthan they are
found to be 61, 41, 36 and 28, respectively, in rural areas and 72, 38, 41 and 33,
respectively, in urban areas. These figures defy easy interpretation.
Much of the morbidity could be prevented if our population had good nutrition
standards. According to a survey conducted in a few States, in all categories of boys or
girls, between 1-3 and 16-18, whether males or females with moderate work or sedentary
work, calorie deficiency and protein deficiency are found to be 10-30 per cent. Only exception
is the category of females doing sedentary work where average calorie intake per day is
found to be 1954 kcal as against recommended 1875 kcal and average protein intake per
day, 50 grams as against recommended 50 grams. However, this is an average picture. If
some of them are over-eating, others must be under-eating.
SOCIAL INFRASTRUCTURE
naturopathy, and yoga. Hospitals are
also run by Ministries other than Health
Ministry (such as the Ministry of
Railways for their employees, Labour
Ministry in certain mines, Energy
Ministry in coal mines). Hospitals are
also run by various councils,
universities, and State Governments, but
more importantly by private
establishments. There are hospitals to
admit patients. There are dispensaries
to distribute medical aid and medicines.
There are health centres in rural areas.
We have more information about
allopathic institutions. Despite the fact
that 75 per cent population lives in
villages, hospitals in rural areas are only
one-third of the total and beds are not
even one-fourth. Again, hospitals under
Government management are just 30 per
cent of the total, though they have more
than 60 per cent beds. Naturally,
Government hospitals are bigger ones,
if not better ones. In the case of
dispensaries, the distribution in favour
of rural areas is slightly better. Beds are
equally divided. Forty per cent
dispensaries are under the Government.
Local bodies, like municipal authorities,
are also participating in medical care
system to a limited extent.
Let us now also have a look at health-
care system prevailing in rural areas.
Besides hospitals and dispensaries noted
above, we have the following structure:
1. Community Health Centre, at
district (and sub-district) level,to
cater to about one lakh population,
with 30 beds, specialised medical
care services in gynaecology,
paediatrics, surgery and medicine.
2. Primary Health Centre, at block
level, to cater to a population of
73
30000 (20000 in hilly and tribal
areas), which provide general
medical care with family planning
advice. In relation to community
health centres these centres are
referred to as subsidiary health
centres.
3. Health Sub-Centre, to cater to a
population of about 5,000 (3,000 in
hilly and tribal areas) basically for
family planning services and
supplies. In some States like
Kerala, a health sub-centre covers
only half a village while in some
other States like Nagaland it covers
10 villages.
Right from the First Plan, we
launched the scheme of primary health
centres. Later, in the mid-sixties, we
added to it the idea of health sub-centres
and still later, that of community
centres. It is understandable, for we
require resources to set up these
facilities. The more we are developed, the
more we are provided for. At the close of
the century, we have 3,000 community
health centres, 24,000 primary health
centres and 1,40,000 sub-centres. As per
norms laid down, we need minimum
7,000-8,000 community health centres
and 25,000-30,000 primary health
centres. We may not be much deficient
in the case of sub-centres. But we may
have to improve the working of these
centres. We learn from newspapers that
our doctors do not stay in villages, nurses
commute and health workers and guides
are invisible (See Table 5.6).
Medical Personnel
When you fall ill, you need not only
hospital or dispensary but also doctor,
74 INDIAN ECONOMIC DEVELOPMENT

TABLE 5.6
Institutional Statistics of Curative Health Care System

Period Hospitals Dispensaries CHC PHC HSC

1951-56 2694 6515 725
1961 3094 9406 2565
1971 3862 12180 5112 28489
1981 6804 16751 214 5740 51405
1991-92 13692 27403 2070 20433 130964
1998 15128 25670 2913 23179 137006
CHC = Community Health Centre; PHC = Primary Health Centre; HSC = Health Sub-Centres.
Source : Health Information of India 1997 & 1998, Central Bureau of Health Intelligence, Director
General of Health Services, Ministry of Health and Family Welfare, Government of
India, 2000.

nurse and pharmacist, and, may be, a
laboratory technician too. Some diseases
require specialists, besides physicians
and surgeons. In case of birth, one
requires a midwife. Doctors are counted
as medical personnel; others assisting
them in treatment are known as para-
medical personnel. There are many non-
medical personnel in large hospitals.
Compared to 1951, when we had only
60,000 medical practitioners, we have
about 5 lakh today, majority of whom work
in Government run institutions. Number
of dentists has risen from 3,300 to 29,000.
Number of nurses is now close to 6.0 lakh
compared to 15,000 in 1951. The number
of midwives, auxiliary nurse-cum-
midwives (ANM) and health workers, has
risen from 8,000 to over 3 lakh.
Average practitioners-population
ratio per one lakh of population has
improved from 17 in 1951 to 52 in 1998.
Average nurse-population ratio has
improved from less than 5 in 1951 to 62
in 1998.
Housing
After availing the minimum of food and
clothing, people want a roof over their
heads to save themselves from the
elements. To begin with, people might
have hid under caves. Settlement
actually meant domestication of animals,
cultivation of crops and construction of
huts. As our food and clothing improved,
we improved our houses too.
We require not only residential
houses but also houses for commercial
activities and premises for industrial
activities. We shall concern ourselves
with the residential houses, though we
shall take cognizance of the fact that
houses are used for other purposes as
wellseparately or jointly. A shop may
be run in a part of a house. Cows may
be kept in a part of a house or they may
occupy an altogether separate house.
Thus, a house may be residential,
non-residential, or partly residential and
partly non-residential. However, houses
partly residential are treated as
residential in aggregate statistics as our
concentration is on deficits in residential
accommodation.
Census House
According to the census, a census house
is a building or part of a building having (i)
a separate main entrance from the road,
(ii) a common courtyard, or (iii) a staircase.
SOCIAL INFRASTRUCTURE
This census house may be vacant or
occupied. In case, it is occupied, it might
be used for residential purpose or non-
residential purposes or partly for
residential purpose and partly for non-
residential purposes. However, for our
purpose, we can club residential and partly
residential units as residential units.
Housing Stock
We have kutcha, semi-pucca and pucca
housing units. Depending upon the
material of walls and roofs, houses are
declared kutcha, semi-pucca and pucca.
A house with walls and roofs with pucca
material is pucca whereas a house with
both of them in kutcha material is kutcha.
In other cases, a house is called semi-
pucca. Kutcha houses are further divided
into two typesserviceable and non-
serviceable. Serviceable houses stay for
years with marginal servicing of walls and
roofs. They have generally solid mud walls
but thatch roofs. Non-serviceable ones
have to be rebuilt or replaced every season
or year and cannot be serviced as their
walls and roofs are made of the materials
such as grass, leaves, reeds or bamboos.
We may agree that we need, at the
minimum, serviceable kutcha houses at
the present level of development of our
economy. At a future point in
development, we may hold the view that
we need pucca house for everybody unless
somebody decides otherwise.
In 1951, there were 6.4 crore
houses 5.4 crore counted in rural areas
and about 1.0 crore houses in urban
areas. What was the quality of houses
can be guessed from a statement made
in 1961 about rural houses: About 5.0
crore houses in rural areas were
required to be replaced or substantially
75
improved. Naturally, they were all kutcha,
even if serviceable. So far as urban areas
are concerned, an estimate suggested
deficit of 55 lakh without taking into
account of depreciation (deterioration/
dilapidation) or obsolescence of houses.
Taking all this into account plus increase
in population as well as of slum dwellings
(estimated to be about 10 lakh), an
estimate suggested the need for
additional 80 lakh houses over existing
1.0 crore. Housing deficit was thus
precarious.
If we segregate data by rural-urban
division, the following picture emerges
in respect of total stock, vacant stock,
occupied houses and division of
occupied houses into residential and
non-residential categories. Though the
total stock in the seventies and eighties
grew at a slightly higher rate than the
population, it is insufficient in view of
the backlog. Moreover, during the
eighties, vacant stock grew by more
than 40 per cent. It may partly be a
reflection of the condition of stock and
partly of affluence/fear of insecurity of
owners. One should also look at rural-
urban division for better insight (See
Table 5.7). Data for 2001 census is not
yet available.
We should further note that one-
sixth to one-fifth of the total stock is
occupied, both in rural and urban areas,
for exclusively non-residential purposes.
Rarely do we talk about shortage of stock
for non-residential purposes. We are very
much concerned with shortage of
housing units for residential purpose.
Housing Shortage
If each household should have at least
one house and no household should be
76 INDIAN ECONOMIC DEVELOPMENT

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

1951 1961 1971 1981 1991

All India
Total 1045 1189 1499 1903
Vacant 61 75 79 112
Occupied 644 984 1114 1420 1791
Non-residential Units 222 219 305 349
Residential Units 762 892 1107 1432
Rural
Total 860 947 1138 1391
Vacant 47 58 56 78
Occupied 541 813 889 1082 1313
Non-residential Units 188 178 242 262
Residential Units 624 711 840 1050
Urban
Total 185 239 354 512
Vacant 13 18 23 44
Occupied 103 172 281 321 468
Non-residential Units 34 41 64 87
Residential Units 138 181 268 382
Source : India 1962 : A Reference Manual, Publications Division, Ministry of Information and
Broadcasting, Government of India and Census of India 1991, Series-1 India, Paper 2 of 1993,
Registrar General of India, New Delhi.

having more than one house, then for a
given habitation, the difference between
the number of households and the number
of houses would show the deficit. If one
household can occupy more than one
house or can keep them vacant, then
shortage would still be larger. It would
imply that (i) some of the households are
shelterless, staying in raiyn-basera or
living on pavement, and (ii) some of the
households are sharing single house/
dwelling. We should remember that
jhuggi-jhopris are houses!
Total national shortage, which used to
be 55 lakh in 1961, is now (1991) only 38
lakh with 31 lakh in rural areas and
around 8 lakh in urban areas. As a
proportion, it is but 2.5 per cent. But, is
this the total picture?
In fact, this estimate considers those
households, which are sharing house with
others but does not consider those, which
are completely shelterless. If we add the
two, the shortage reckons at 44 lakh. If we
take a view that each household should not
only have a house to live in but the house
should also not be a non-serviceable
(kutcha) one, then we should also find out
the number of such houses. Such houses
are more than 1.14 crore, including more
than 11 lakh in urban areas. Most of the
government officials and analysts are
tolerant of serviceable kutcha house in
rural areas but not in urban areas. They
feel that kutcha houses in urban areas,
even if serviceable, should be replaced by
pucca houses. Then, one should also find
out the number of such houses in urban
SOCIAL INFRASTRUCTURE
areas. Their number is more than 26
lakh. Adding all numbers, governmental
publications show that total shortage is
about 1.85 crore. We should perhaps not
add rural and urban shortage, as many
publications do, because replacement of
non-serviceable kutcha houses by
serviceable kutcha houses in rural areas
is considered acceptable.
Other Dimensions
Do you know the proportion of Kutcha
and Pucca houses or households living
in rented accommodation in rural and
urban areas in India?
A comparison between 1971 and
1991 shows that proportion of pucca
houses has increased from 18 per cent
to 31 per cent in rural areas and from 64
per cent to 73 per cent in urban areas.
As expected, in rural areas, around 6-7
per cent households rent house whereas
in urban areas, the percentage of
households renting in accommodation
may be as high as 54 per cent. However,
that was the scenario in 1961 and 1971.
In 1981, 46.5 per cent and in 1991, 36.5
per cent households were renting
accommodation in urban areas.
Concluding Remarks
Going through the chapter, you may
develop an impression that, in the last
TABLE 5.8
Dimensions of Housing Shortage for 1991
Homeless Households
Sharing Households
Non-serviceable Kutcha Houses
Serviceable Kutcha Houses in Urban Areas
Total
Source : Census of India 1991, Series-1 India, Paper 2 of 1993, Registrar General of India,
New Delhi.
77
fifty years, we have been marching ahead
in the development of social sectors of
education, health and housing with the
assistance of the Governments at Union
and State levels. In education, we have
yet to universalise primary education. In
vocationalisation of secondary education,
we find that it is much below the targeted
level. In higher education, there may be
an excess of general education and deficit
of technical education.
Similarly, in health sector, we find
that our vital statistics have improved to
a significant extent thanks to public
health measures and programmes of
nutrition. We note with some concern that
our infant mortality rates have to decline
further and efforts need to be taken to
improve the nutritional requirements of
children and adolescents. Immunisation
should cover all children and mothers.
Rural health care system needs to be
improved in quality terms; medical
personnel have to be appointed and
appointed personnel must be in
attendance in place of their duty.
In case of shelter, our deficiency is
in terms of number and quality of
housing stock though there are
completely shelterless people as well.
Over time, proportion of pucca houses has
improved. Renting-in phenomenon
seems to be reducing.
Rural Urban Total
3,05,000 2,17,000 5,22,000
31,13,000 7,79,000 38,92,000
1,03,06,000 11,40,000 1,14,40,000
26,40,000 26,40,000
1,37,24,000 47,76,000 1,85,00,000
78 INDIAN ECONOMIC DEVELOPMENT

EXERCISES
1. What do you mean by social infrastructure and how do you distinguish it
from economic infrastructure?
2. Housing is a social infrastructure - comment.
3. Whom do you call literate? How is literacy different from education?
4. How is literacy rate calculated in India now?
5. Give an account of development of literacy in India over the last fifty years
and bring out the problem areas where we should concentrate on in future.
6. What is the new development that has taken place with the Census 2001 so
far as the number of illiterates is concerned?
7. How is gross enrolment ratio calculated? Can it exceed 100 in terms of
percentage?
8. Discuss the progress of elementary education and how far are we away from
the universalisation of elementary education.
9. Discuss the progress of secondary education and point out the areas of limited
success.
10. What do you mean by tertiary/higher education? Discuss its salient features.
11. Discuss how life expectancy at birth has improved before Independence and
after Independence.
12. Bring out the salient features of life expectancy across age and sex.
13. Describe the meaning of public health. Discuss major public health measures
undertaken by the state in recent years to control diseases.
14. Discuss the role of sanitation in urban areas.
15. How has the public health care system evolved in post-Independence India?
16. Describe the rural health care system in India.
17. What do you mean by a census house and housing stock?
18. Define pucca, kutcha and semi-pucca houses.
19. Define serviceable kutcha house and unserviceable kutcha house.
20. Discuss various uses a house could be put to. Why are certain houses found
vacant?
21. Give an account of housing scene in the rural areas as evolved since 1961.
22. Give an account of housing scene in the urban areas as evolved since 1961.
23. Discuss various aspects of housing stock.
24. Discuss the nature of housing shortage in India.

ACTIVITY
Find out in your locality, vicinity or village:
(i) how many boys and girls have not enrolled in school,
(ii) how many boys and girls dropped out of school (after enrolment) from
different classes; and
(iii) what are the factors that led to non-enrolment and drop out of (a) boys
and (b) girls.
(iv) Talk to parents, boys and girls who have not gone to school.
 CHAPTER 6
Development Strategies till 1991
Introduction
Economies grow and develop of their
own accord. Some philosophers
thought that they should be allowed
to function without much intervention.
Market will decide their course.
However, in all economies, the States
have been finding it necessary to
intervene for one reason or another,
including, sometimes, in the interest
of market. The manner, the extent and
the pace differed in different
economies, depending upon nature of
the State, the level of development and
ideological orientation of the people
and the government they chose.
Demonstration effect of development
in other economies and thinking of
multilateral/international agencies
may have no less impact.
When India got Independence and
became a Republic, she chose to follow
the path of planning by social and
economic development, which meant
that the State would play a proactive
role in deciding the levels and methods
of production, distribution, and
consumption of economic and social
activities while respecting institutions
of private property and market. Our
Constitution itself gave scope for the
market to function; yet, asked the State
to intervene in its functioning. It
directed the State to frame its policies
with a view to, among others, securing,
1. that the ownership and control of
the material resources of the
community are so distributed as to
subserve the common good, and
2. that the operation of the economic
system does not result in the
concentration of wealth and means
of production to the common
detriment.
Admittedly, in our Constitution, there
is no elaborate direction for institutions,
which will carry out the activity of
planning economic and social
development, except that there exists an
entry in the concurrent list of the seventh
schedule, which reads as economic and
social planning. Yet, within fifty days of
promulgation of the Constitution, the
Planning Commission was set up on 15
March 1950 by a resolution of the
Cabinet. Jawaharlal Nehru was made
its Chairman. Since then, we find that
the Prime Minister is the ex-officio
Chairman of the Planning Commission.
It has a few Minister members and a few
independent, normally full time,
members.
80 INDIAN ECONOMIC DEVELOPMENT

History of Planning before national income in ten years, Visvesvaraya

Independence
A little history of State planning may be in
order. Political independence was
considered important from the point of
view of economic emancipation of the
masses. We started making preparations
after we were allowed to form the
governments in provinces under
Government of India Act, 1935. Before
that, we had only three models: one in
operation in the then USSR since 1928,
another, a book, by engineer-statesman
M. Visvesvaraya written in 1934, and the
third, ideas promoted by an eminent
economist, J.M. Keynes. Planning had
shown immense success in industrialising
the economy of Russia in ten years that
had gone by. Proposing doubling of
wrote: The Indian problem is
fundamentally industrial and should be
solved by the same methods as have
proved efficacious in countries like the
United States of America, Japan and
Canada and latterly with startling success
in Soviet RussiaIndia cannot prosper
except through rapid industrialisation
industrialisation has to be organised,
planned and worked forIndia may be an
industrially developed country or it may
be a market for manufactured goods from
outside and not both. Keynes had shown
that the days of Laissez faire were over and
that the State could play a positive role
even in a capitalistic country through
meaningful fiscal intervention,
particularly on expenditure side.

NATIONAL PLANNING COMMITTEE

Towards the end of 1938, the then President of the Indian National Congress Subhas
Chandra Bose constituted the National Planning Committee with Jawaharlal Nehru as the
Chairman at the conclusion of conference of the Ministers of Industries from the eight
Congress ruled provinces.
The Committee itself constituted 29 sub-committees to work on different areas/subjects,
which did commendable work. However, before it could bring out its deliberations, the war
broke out and subsequently, several members of the Committee (including Jawaharlal
Nehru in October 1940) were put behind the bars.
Subsequently, four general and 25 subject-wise reports were published during
1946-49 in the name of K. T. Shah who was the secretary of the Committee. The Committee
recommended the State to play a vital role in development of infrastructure and setting up
of basic industries under its aegis, to promote growth of cottage and village industries
under protection, and to abolish all intermediary interests in land with a view to unleashing
the forces of growth.
It hoped to raise national income two to three times in a span of 10 years with a view
to providing balanced diet having calorific value of 2400-2800 units to an adult worker, 30
yards of cloth per person and housing with at least 100 square feet per capita.
Industrialization with emphasis on promotion of heavy engineering and machine making
industries, electric power and scientific research institutes, accommodation of cottage
and small scale industries, dominant role of the State and of public sector in industrial
development, national self-sufficiency to the extent possible were held out as the major
plank of the policy.
DEVELOPMENT STRATEGIES TILL 1991 81

A conference of Ministers of premier Jawaharlal Nehru in 1946, the

Industries from the Congress-ruled
provinces was held in October 1938 and
a decision was taken to constitute a
National Planning Committee with
Jawaharlal Nehru as the Chairman. The
Committee recommended the State to
play a vital role in development of
infrastructure and setting up of basic
industries under its aegis, to promote
growth of cottage and village industries
under protection, and to abolish all
intermediary interests in land with a view
to unleashing the forces of growth.
Towards the end of the War,
respecting the sentiments of industry
and other sections, the Government of
India established a Department of
Planning and Development in 1944. The
Department stimulated the preparation
of post-war reconstruction plans by
different departments of the Central
Government, provincial Governments
and larger princely states. It also sought
plans for development from industry and
labour. Three plans were submitted to it
for consideration, all in 1944: viz.,
Bombay Plan, Peoples Plan and
Gandhian Plan. Sectoral plans for
education and health were also prepared
by the Government of India.
Further, when an interim
government was formed with Indian
Government of India constituted an
Advisory Planning Board. The Advisory
Board recommended, besides other
things, the formation of a National
Planning Commission, which was
constituted on 15 March 1950, well after
Independence. From late sixties, State
Level Planning Commissions or Boards
also started functioning.
Meaning of Economic Planning
Planning is resorted to by individuals,
by organisations, by firms, by farmers,
and by nations so that a well-thought
out set of actions could be carried out
in future for securing a particular
objective or a set of objectives. Planning
is the anti-thesis of purposeless drift. It
is a deliberate choice of action. It is
about consciously organising human
activity.
Planning is a conscious design for
shaping the socio-economic processes
with a view to achieving an objective or a
multiplicity of objectives; it is a path of
action in terms of policy measures to be
followed in future in pursuance of pre-
determined goals. It needs to be
emphasised that goals have to be
mutually consistent and proper planning
should ensure that means and measures
are also consistent. It has to be noted

WORD PLANNING
The word planning in a managers language and the management books or planning cells
in corporations has little different meaning. Planning is also used by town planners for
physical and spatial planning. Today, environmentalists talk of resources planning. People
also talk of retirement plan.
Planning in our context is different. It is related with welfare of people; it is related with
State action and initiative; and its sphere is economic and social development. By the way,
other planning strategies, such as town and country planning are now getting integrated with
national planning.
82
that means are autonomous in the sense
they are selected by the planners. But
there exists a fundamental restriction on
selection of means, which is the
requirement of mutual consistency.
Since uncoordinated market
processes cannot be fully trusted to
pursue the objectives the State sets out
for its people, it was suggested in many
quarters that economic planning should
be resorted to by the State. Economic
planning is thus concerned with
pursuance of economic development,
with economic well-being in mind,
through all means at the hands of the
State, including persuasive ones. We,
in India, are, however, concerned with
planning of economic and social
development. Naturally goals and
means of this planning are somewhat
different.
Since the word planning had
acquired economic overtones by the time
our country thought of planning, we
stated in very clear terms, right in the
beginning, that our planning would cover
both economic and social spheres.
Economic sphere refers to agriculture,
industry, transportation, etc. while social
sphere refers to education, health,
shelter, etc. The nature of work in the
economic sphere includes the
development of irrigation, dams, mining,
forestry, rail, roads, warehousing, etc.
whereas the development of schools,
colleges, universities, hospitals,
dispensaries, health centres, family
planning centres, broadcasting, etc. are
included in the social sphere. You may
see many works in economic sphere have
something to do with the social and vice
versa. There may be sectors which
may be as much social as economic.
INDIAN ECONOMIC DEVELOPMENT
Therefore, division of heads as social and
economic is a proposition of convenience
rather than a proposition of
principle. Since we cover almost all
activities which by choice we seek to
develop, we call it comprehensive
development planning.
We do spend a lot in modernising our
armed forces, equipping law and order
machinery, improving judicial system,
and in bettering other state organs but
we do so in the interest of running the
system smoothly or we feel compelled to
do so. We, therefore, do not call them
either developmental activities or
designate them as economic or social
activities, though all of them are almost
exclusively taken care of by the State.
While covering many social and
economic activities, the State may choose
just to advise and coordinate, encourage
and discourage through indirect fiscal
and financial mechanisms and through
enacting laws. It may choose to produce
and distribute all goods and services.
India chose to use a (judicious) mix of
direct and indirect means: enacting laws
for distributing/ allocating agricultural
and non-agricultural land to different
sections of people or different activities;
restricting, banning or proscribing
certain activities; opening special
financial institutions and manipulating
interest rates and/or credit limits for
different categories of activities; making
fiscal provisions for taxing or subsidising
certain activities in certain areas;
undertaking production/distribution as
a supplementary mechanism with a
certain social objectives in view; and
undertaking production and distribution
of certain goods and services (natural
monopolies). Engagement of direct
DEVELOPMENT STRATEGIES TILL 1991 83

OBJECTIVES AND MEANS

Some people compiled objectives listed in various plans of different countries. They found
objectives ranging from full employment to price stability, from increase in private
consumption to size and structure of population, from increase in mobility of labour to
increase in mobility of capital, from improvement in distribution of income and wealth to
satisfaction of collective needs, from export of production to improvement in balance of
payments, from protection of industries to security of supply, from promotion of internal
competition to promotion of coordination, and reduction in working hours.
When it comes to counting instruments, they recounted more than 60 instruments:
17 instruments of public finance, 16 instruments of money, credit and foreign exchange,
16 instruments of direct control and 11 types of changes in institutional framework. See
also the list of objectives lifted from our plan documents, given in one of the appendices.

production and distribution through a constituted by a resolution of the Cabinet

Ministry of Union or State Government
or through an agency of the Government
is considered an activity in public sector.
We have seen that undertakings in
public sector have assumed a significant
proportion in total manufacturing,
processing and financing activities. In
fact, we gave a significant role to public
sector and allowed it to have comman-
ding heights.
Five Year Plans
The Planning Commission was
constituted on 15 March 1950 by a
resolution of the Union Cabinet. The
Commission was asked to prepare a
blueprint of the First Five Year Plan at
the earliest, so as to implement it in April
1951. The Commission submitted the
Draft Outline, which was meant to
arouse a lively debate in the country
among different sections and interests
with the belief that planning in a
democratic state is a social rather than
just a technical matter. It is significant
that it was in this Draft Outline that the
formation of the National Development
Council was suggested, which was
on 6 August 1952.
It is, however, said that the First Plan
stitched together projects, which were
already on shelf of different departments
of the Government of India. The final
report, called First Five Year Plan, came
only in December 1952 after 21 months
since the formal beginning of the Plan.
Every five year plan is set in a
perspective of a longer period. In fact,
every five year plan document contains
the plan for the quinquennium proper
(medium-term plan) and a perspective
plan, in which the plan proper is set.
Though we have been facing a few crises,
now and then, we had first three five year
plans uninterrupted. Towards the end
of the Third Five Year Plan, we faced a
war with Pakistan in late 1965 and two
consecutive bad years for agriculture
1965-66 and 1966-67 and foreign
exchange crisis leading to devaluation of
rupee. The Fourth Five Year Plan,
prepared for 1966-1971, was therefore
withdrawn after its launch. A view was
taken that the Fourth Plan should be
launched when normalcy returns back.
The Fourth Five Year Plan was, then,
84
prepared for 1969-74 and executed. In
the interregnum, three Annual Plans
were implemented. During the Fifth Plan
period (1974-79), certain political
developments took place: internal
emergency was clamped, new elections
took place, and newly constituted Janata
Party won the elections. The new
Government decided to cut the running
(Fifth) Plan short by a year (1978-79). A
new Five Year Plan 1978-83 was
launched. However, political develop-
ments forced its abandonment in 1980
when the new Government, again the
Congress, came in power. A new Sixth
Five Year Plan was launched for 1980-
85. The year of 1978-79 is now included
in the Fifth Plan, as was originally
envisaged, and the year of 1979-80 is
treated as an Annual Plan in most
compilations including those by the
Planning Commission. The Seventh Plan
went uninterrupted. Again there were
unstable political developments, short-
life Governments, assassination of Rajiv
Gandhi, and economic crisis related with
precarious shortage of foreign exchange.
The Eighth Five Year Plan was, therefore,
launched after return of normalcy in
1992. Though the Governments changed
midway, the plan was not abandoned or
cut short. We are now through the Tenth
Five Year Plan. The duration details of
all plans, which were formulated, along
with their perspective plans are provided
in an appendix.
Main Objectives
Planning is a means, an effective means,
to achieving something. It has to have
certain objectives. State planning, in a
democracy, cannot have any other
objectives but the ones that are given in
INDIAN ECONOMIC DEVELOPMENT
the Constitution. If an institution is made
in-charge of the planning economic and
social development of the country, it can
at best delimit its scope and be more
specific.
The purpose of planning is to
accelerate the process of development
and keep it on track. India suffered for
long a slow growth, if not stagnation. So,
we wanted high growth. Indian
workforce is also affected by
underemployment, if not open
unemployment. So there is a need to
increase the employment opportunities.
We thought maximum production would
create more opportunities enough to
absorb everybody. So, we wanted
maximum production (growth) and full
employment. The Indian society
suffered from inequity/inequality. So, we
opted for reduction in inequality of
income and wealth. Perhaps, realising
the contradictions inherent in
simultaneously achieving all these
objectives, the Report of the First Plan
said, None of these objectives can be
pursued to the exclusion of others, a
plan of development must place balanced
emphasis on all of these.
Objectives can be divided as long-
term and medium-term/short-term.
Long term objectives do not much differ
from plan to plan but short-term objectives
may differ quite a bit. Long-term
objectives are couched in more general
terms while short-term ones are more
specific. All plans, for example, set a
target of growth rate but some of them
wrote it under the heading of objectives
while others did not. Other plans mixed
up long-term objectives with short
term ones. Still others mixed up
DEVELOPMENT STRATEGIES TILL 1991 85

the objectives with instruments. The these assertions; it is a matter of picking

Second and Third Plans, in particular,
dwelt a great deal on creation of
socialistic pattern of society. Later plans
did not distinguish between objectives,
targets and instruments.
We can call, if we so wish, long-term
objectives as the planning objectives and
short-term ones as the objectives of a
particular plan. Long-term plan
objectives/ development objectives
continue, for all fifty years:
1. To increase production to the
maximum possible extent so as to
achieve higher level of national and
per capita income.
2. To achieve full employment.
3. To reduce inequalities of income and
wealth and concentration of
economic power.
These may be considered as main
objectives. While some authors add to
this list the objective of self-reliance or
self-sufficiency in foodgrains, others
include expansion of basic and heavy
industries as an objective. Some assign
to planning, the task of establishing
socialistic pattern of society, free from
exploitation. Still others point to the need
of balanced regional development. Some
consider that containing inflation and
improving balance of payments deserves
specific mention. There is truth in all
up significant ones according to ones
own judgement based on the particular
plan document.
It may be mentioned in passing that,
according to some, planning is about
dismantling the existing structure and re-
assembling constituents in an altogether the
different, new and desirable manner.
Main Features of Economic Policy
There is a lot of confusion in the use of
words policy and strategy in writing. If
one adheres to dictionary meanings, one
would define policy as a coordinated plan
of action from a set of alternatives while
strategy provides maximum support to
the chosen policy. First major plank of
the policy to be followed was that the
country, though under planning, would
pursue a policy of mixed economy. Mixed
economy, as the term suggests, signifies
the co-existence of public sector and
private sector with respect to business
enterprises--industrial, commercial and
financial. Beyond co-existence, the
understanding is that while public sector
enterprises shall primarily be guided by
public interest/good, private sector
enterprises will not be solely guided by
profit consideration. They shall not
assume antagonistic posture but shall
cooperate in the endeavour to boost the
economic potential of the country.

MIXED ECONOMY
Paul A. Samuelson, a Nobel Laureate in Economic Science and William D. Nordhus, in
their very popular textbook Economics, define mixed economy as one, which primarily
relies on price mechanism for economic organisation but uses a variety of government
interventions such as taxes, spending and regulation to handle macroeconomic instability
and market failures.
Prior to these economists, Joseph E.Stigtitz defined the concept in a much more simple
manner. Stigtitz defines it as a mixture of public and private decision making.
86
During the first forty years we cannot
claim to have followed one single policy;
in fact, we find, it had been evolving. But
there are some common features:
expansion of public sector, industrialisa-
tion and import substitution, self-
sufficiency in foodgrains, state control on
financial resources, control on foreign
capital, protection of small scale
industries, regulation of large scale
industry, curb on monopolistic practices,
provision of public health measures and
spread of education and literacy.
However, the dominant features that
deserve special mention may be listed as:
interventionist state, centralised
planning, expansion of public sector,
development of heavy industries,
emphasis on import substitution. We may
note that the last three are all in the
industrial area.
Interventionist State: State will
intervene in the market processes so that
it secures adequate livelihood for the poor
and brings down disparity among
classes. It will make laws whereby
intermediary interests in land are
abolished and concentration of wealth is
prevented. It will create institutions,
which will promote agriculture, industry
and trade. It will adopt fiscal policy, which
would promote growth and social justice.
It will have monetary policy to make
adequate funds available to the
industries, which are essential for the
economy. It would not allow free flow of
foreign capital investment and will direct
its use, in case it allows foreign
investment to come. Keeping different
interests in mind it will determine the
ownership, scale, and use of funds--
particularly in industrial sphere. In
INDIAN ECONOMIC DEVELOPMENT
short, the State will influence, if not
completely control, much of the economic
activities of the private sector through
various instruments like license and
allocation of critical inputs, including
foreign exchange, under its control.
Centralised Planning: States will
promote centralised planning so that
interests of different regions and different
sections are promoted. Sub-national
plans would be dovetailed/integrated
with the national plan. It had to be
basically formulated at the level of the
national Planning Commission. Even till
date, while there are state level
(provincial) planning commissions in
existence, there are no independent State
plans. Planning in our country is quite
centralised.
Expansion of Public Sector : Role of the
State particularly in relation to the
industries was debated in the thirties
itself. While there was unanimity in the
National Planning Committee that
defence industries should be owned and
controlled by the State, it was suggested
in the case of other key industries even
a control of the State would be sufficient.
Much before we thought of formulating a
plan, an Industrial Policy (Resolution,
1948) was already in place, which
delimited the scope of public ownership
of certain industries.
We may note that at the time of
Independence, except the railways, there
was nothing spectacular in economic
sphere, which could be said to be in the
public sector. Industrial Policy
Resolution, 1956 clearly stated that the
State will progressively assume
predominance and direct responsibility
for setting up new industrial under-
DEVELOPMENT STRATEGIES TILL 1991
takings and for developing transport
facilities. It was widely believed that the
private sector would be interested in
quick-yielding industries, which would
give the owners large profits in a short
time as well as industries which are
less risky and have short gestation
period. Moreover, the indigenous
private sector did not have adequate
capital either. In order to initiate and
accelerate the process of development,
large-scale investment was needed in
basic and key industries and in
infrastructure. Public sector was
assigned to undertake this role. In
short, the basic strategy was that the
public sector assumes the responsibility
of developing heavy and basic
industries (steel, fuel and power,
machine-building and chemical
industries) and social and economic
infrastructure (such as banks and other
financial institutions, railways and
airways, power, etc.) while the private
sector is given the right to develop
consumer goods industries and trade-
-almost the whole of internal trade and
most of external trade, besides
agriculture, livestock, plantation and
fishing, etc. As public sector through
its undertakings, belonging to the
Union and the State Governments both,
was supposed to give a lead to the
private sector, it was supposed/
expected to have the position of
commanding heights.
Development of Heavy Industries : One
may recall that almost all plans
formulated before Independence, with
differing emphasis, had suggested that
planned development of Indian economy
should ensure that heavy engineering
and machine-making industries,
87
universal intermediaries like electricity,
basic industries such as cement, heavy
chemicals including fertilisers,
metallurgy like iron and steel, aluminium
and manganese, must be accorded a
priority. It was understood that much of
industrial development of India got
hampered because of absence of basic
and heavy industries. Since the
formulation of the Second Plan began,
it was increasingly suggested that we
should cease to be exporters of primary
produce and importers of machinery and
should develop our own machine-making
capability.
Import Substitution : Under the policy,
imported goods and machinery will have
to be substituted with those produced
within the country. We should
indigenously produce both capital goods
and consumer goods. If development of
some of these industries require
protection from foreign goods for some
time, then we should provide it. It will
save us from pressure for export on the
one hand and unnecessary borrowing on
the other.
Main Achievements and Failures
Even though all achievements could not
be attributed to the strategies adopted
nor could it be said that the strategies
did not change mid-way, it is a good idea
to recount what we achieved in the forty
years since planning. In fact, to say that
we achieved this and failed in that, is
rather difficult. The position cannot be
seen as only black or only white. We can
at best, say that we achieved certain
objectives, to some extent, while we could
not achieve others fully. And we cannot
attribute success or failure wholly to the
policy of planning.
88
We refer, for this purpose, first to our
long-term basic objectives of maximum
production, full employment, reduction in
inequality in income and wealth, and
concentration of economic power. We,
then, refer to some other areas too, which
are more or less elaborations of these
objectives.
Maximum Production : During the first
three decades of planning, we did not
achieve a rate of growth beyond 3.5 per
cent per annum on a long run basis and
never met the targets set for a particular
plan, which were normally more than 5
per cent per annum. It is difficult to assert
that we did not fully exploit the potential
or to say that our targets were realistic
or reasonable. For example, for the First
Plan we had set a very low target (1.8 per
cent per annum) for rate of growth and
achieved twice of it thanks to good
monsoon (This growth owes to un-
planned quarters). During the Second
Plan we did better on growth front than
during the First Plan but we were
unhappy as we could achieve only 4.0-
4.2 per cent per annum while the original
target being 5.0 per cent per annum.
During the Third Plan period, we
achieved only annual average growth rate
of 2.4 per cent against the target of 5.0
per cent. Again, this is due to the wars
with China in 1962 and with Pakistan
in 1965 and the failure of monsoon in
1965-66. From the mid-seventies
onwards, and definitely after 1979-80, one
finds that the growth trajectory of the
Indian economy got shifted from the path
of 3.5 per cent per annum to the path of
5.5 per cent per annum.
INDIAN ECONOMIC DEVELOPMENT
On the whole, our rate of growth over
the long stretch of 40 years was around 4
per cent per annum. Taking the rate of
growth of population as 2 per cent per
annum, our per capita income could be said
to have risen by 2 per cent per annum.
Thus, on an average, the people around
1990 were living twice better in comparison
to their parents in their age in the wee hour
of Independence.
Perhaps more important is to know
what was it that grew at whatever rate it
did? If people are hungry, we ought to know
whether we grew enough food. In 1951, we
had in net terms less than 50 million tonnes
of foodgrains, including all cereals and
pulses. Around the close of 1980s, we
produced as much as 150 million tonnes.
In 1951, we imported around 5 million
tonnes to feed ourselves. Normally the
situation was not that bad; our imports only
improved food availability. While in early
fifties, we had less than 400 grams of
foodgrains per person, by 1990, thanks to
the continued rise in domestic production
over time, the per person availability rose
to nearly 500 grams. This simply means
that our production in foodgrains grew at
much faster pace than our population.
However, we should remember that
we faced very bad days in the mid-sixties
when we had to import more than 10
million tonnes and we received food aid
from other countries, chiefly the US. The
US once threatened to monitor food-aid
on monthly basis. This forced us to usher
in green revolution in the late sixties, a
term for use of high-yielding variety
seeds, intensive irrigation, chemical
fertilisers, pesticides, etc. Thanks to its
success our imports of foodgrains have
been nominal. We even exported, on net
basis, though at nominal scale.
DEVELOPMENT STRATEGIES TILL 1991
As far as other items of mass
consumption are concerned, during
these forty years under review, we
improved our per capita consumption of
many items such as edible oils and
vanaspati, sugar, clothing, milk, eggs,
fish and tea and of electricity. However,
except foodgrains, we were behind our
targets and are behind many other
developing countries. We needed to
improve further.
Production should be limited by one
of the following factors: shortage of
capacity or deficiency of demand.
Unfortunately in many sectors we faced
neither. Is it a failure of implementation
or fault in design? Most people say--
implementation. Our view is that even
implementation constraints should be
considered in the formulation of a plan.
Full Employment : In our economy, with
minor variations, between one-third to
two-fifths of people are working. Majority
of them are self-employed, though over
time, their proportion has been
declining even during this period--say
from over 70 per cent to around 55 per
cent. Most of them are farmers or
cultivators but there are such people in
urban areas working in informal sector.
The rest of them are wage labourers.
Some of them get regular salary and
others are casually employed. Even
among the regular salaried there may
be workers on farms with low wages.
They may be working in factory, shop or
home. Many employers will be working
shoulder to shoulder with their
employees, numbering in one or two.
While the proportion of those getting
regular salary has also fallen somewhat,
the proportion of casually employed has
89
been swelling. The proportion of casually
employed in late eighties was about 30
per cent. Most commentators do not take
these developments kindly. Obviously, in
their view, regular wages even if
somewhat lower are better than casual
wages even if they are high. Employment
for full time at reasonable wages
ensuring income sufficient for two-three
persons dependent on the worker should
be the minimum norm.
What should we expect when
somebody claims that there exists a
situation of full employment? All those
who are aged between 15 60 are to be
employed. If they are wage employed,
they should get adequate wages and if
they are self-employed, they should
get remunerative prices for their
products. Willingness, adequate and
remunerative are very imprecise words.
Willingness is associated with wage level
on the one hand and availability of other
support for living. Even compulsion to
work may appear as willingness to work.
Getting remunerative price will depend
on what the products are and who the
buyers are. In the case of widespread
poverty, there is little probability that a
majority of self-employed will get
remunerative prices. Widely prevailing
low productivity will not permit adequate
wages. The matter is a bit complicated.
Since the wages are found to be low,
laws have to be made to ensure minimum
wages. Most of the establishments and
farms are so small that in some occasions
these laws serve no better than
harassment to both of them employers
and employees.
During the period under review, the
absolute levels of employment did
not grow at a rate higher than that
of population, resulting in the same
rate of growth of the unemployed.
90
The rate of unemployment, on a long run
basis, continued to be the same with wide
fluctuations over years, depending upon
the peculiar circumstances. There was
never a year when the level of economic
activities in the economy demanded so
much labour that we felt shortage,
barring harvest seasons.
Data on comparable basis is
available from 1972-73 only. The
following findings deserve our attention:
(i) unemployment on usual status basis
fluctuated between 1.6 per cent in 1972-
73 and 3.9 per cent in 1977-78, being
2.5 per cent in 1983 and 3.7 per cent in
1987-88, (ii) unemployment reduced
from over 8.0 per cent person-days in
early seventies to 6.0 per cent person-
days in late eighties, (iii) poverty in terms
of absolute number continued to be
around 32 crore from 1973-74 to 1987-
88, (iv) poverty in terms of people below
poverty line reduced from around 55 per
cent in 1973-74 to 39 per cent in 1987-
88, and (v) proportion of unemployed
among the poor is less than the
proportion of unemployed among the
non-poor.
Supposing that the trends were
similar in the fifties and sixties, we can
infer that, despite fluctuations in
employment/unemployment by usual
status, per person per day employment
and wages improved. As a result, poverty
has declined to some extent. However,
low unemployment rate among the poor
shows that the poor cannot remain
unemployed as there is no other way they
can get their livelihood. There were not
enough employment opportunities for all
so that wages could rise adequately.
Many people refer to such situation as
jobless growth.
INDIAN ECONOMIC DEVELOPMENT
That our growth pattern did not
create enough job opportunities is
evident from the fact that the
government had to run an umpteen
number of programmes for creating
supplementary self-employment
opportunities or wage employment.
Some of these programmes
concentrated on small farmer/
manufacturer/trader so that they could
employ themselves and earn their
livelihood by producing things or
providing service.
Reduction in Inequality : We wanted to
reduce inequality in the distribution of
income and consumption as well as
concentration of wealth. It is believed
that, in the initial stages of
development, inequality tends to
increase while the lot of everybody
improves. We do not have practically any
data on distribution of income over
households. What we know is that the
percentage of income tax payers has
increased over the years and poverty,
as percentage of people below poverty
line, has reduced. By 1993-94, which is
the year closest to the period under
review, while the proportion of poor had
reduced, their absolute number
remained the same. In the case of
income tax payers, both the proportion
and the absolute number of income tax
payers rose, though slightly. The size of
the middle class has also risen both in
proportion and number.
However, unless we show that income
of top x percent has reduced from y1 per
cent to y2 per cent during a long period of
time, we cannot say much. In the case of
total private consumption expenditure
incurred by the households, it appears
that the share of bottom 40 per cent in
rural areas, for each of its deciles, has
DEVELOPMENT STRATEGIES TILL 1991
improved. On the other hand, the share
of bottom 80 per cent in urban areas, for
each of its deciles, has worsened in the
case of total private consumption
expenditure incurred by the households.
Even then, the rural-urban disparity in
consumption is on the rise.
So far as wealth is concerned, we
know something about agricultural
holdings. First, the intermediary
interests have been abolished. Ceilings
for ownership were fixed twice in all
States (in mid-fifties and early seventies)
for dry, one-crop irrigated and two-crop
irrigated lands. Surplus land was
declared and taken possession of and
finally distributed to small farmers,
evicted tenants or landless agricultural
labourers. Of the total 14 crore hectares
of net sown area, we find that in the forty
years since 1951, after stringent ceiling
laws formulated in 1972, not even 20
lakh hectares were found to be surplus
and only a little more than 10 lakh
hectares were distributed to about 44
lakh personson an average a little over
one acre. However, time has resolved the
issue to a great extent. In 1951, there
were 72 million households of which 60
million were in the villages and 50 million
might have had land. By 1991, there
were 170 million households in the
country of which, say 125 million, would
have been in the villages with 100 million
holders. Average holding size is just 1.4
hectare. Thus, over time increase in
population leading to further
fragmentation of holdings has hardly left
2 per cent holdings, which are in size
bigger than 10 hectares. Those who
possess such large land holdings are
called large farmers. Of course, they
possess almost 20 per cent total land.
91
MNEMONIC TO REMEMBER AREAL
MEASUREMENT
100 Hectares =1 sq km =1000000 sq m;
Hectare =100 ares =100 (10 10) sq m
10 Acres = 1 sq furlong = 220 220 sq yd;
Acre = 4840 sq yd = 4000 sq m (approx.)
Hectare = 2.47 acre (approx.)
Let us have a look at the concen-
tration of economic power in industrial
(non-agricultural) sector, which we
wanted to check while promoting
industrial development. We know that
there are government companies and
there are private sector companies and
in the latter case, public limited and
private limited. Paid up capital used in
government companies is found to be as
much as in the non-government
companies. Out of lakhs of companies
(with 2.5 lakh registered factories), 1690
might be considered very big in 1991.
Companies with less than Rs 100 crore,
with average assets worth Rs 27 crore,
accounted for 83.7 per cent with total
assets about 30 per cent whereas
companies with more than Rs1,000
crore, with average assets worth
Rs 1,823 crore, accounted for less than
1 per cent and controlled assets worth
20 per cent.
In 1965, it was found that 75
business houses controlled 1500
companies. Top twenty industrial houses
in 1989-90 were: Tata, Birla, Reliance
(which came up in the late seventies
only), Thapar, JK, L&T, Modi, Bajaj,
Mafatlal, M.A. Chidambaram, Hindustan
Lever, United Brewaries, TVS Iyengar,
ITC, Shri Ram, ACC, Oswal, Mahindra
& Mahindra, Essar, Kirloskar. The first
five controlled 60 per cent of the total
assets of 20 industrial houses.
92
OBSERVATION BY MONOPOLY
ENQUIRY COMMITTEE, 1965
In the period immediately following
Independence, the very forces which are
harnessed to produce the quick
industrialisation of the country worked at
the same time to concentrate power in
industry in a few individuals or families
who were already wealthy and
powerfulThe allocation of resources and
the settlement of priorities which planning
necessarily involves have necessitated a
system of licensing for starting new
industries or expanding the old
established units or starting new units in
existing industries; capital issues had also
to be controlledEveryone of these
circumstances tended to produce
concentration of economic power.
While allocation priorities were
primarily responsible for this
concentration, the industrial houses
manipulated to secure things in their
favour. Before 1969, when banks were
nationalised, banking industry was
controlled by these big houses. A
Committee to inquire industrial licensing
policy found that 56 per cent of total
assistance from specialised financial
institutions such as IFCI, ICICI and IDBI,
70 per cent of term-loan by the LIC and
62 per cent of term-loan by the SBI were
secured by the big industrial houses.
This is how the economic power got
concentrated in a few hands in the
industrial sector. They did not even
employ more than 80 lakh persons.
Now, we discuss, in short, some of
the other objectives, which were explicitly
stated in later plans.
Reduction in Poverty : To begin with,
the idea was that mass poverty would
be automatically removed with the
strategy of growth along with
INDIAN ECONOMIC DEVELOPMENT
FINANCIAL INSTITUTIONS
ICICI = Industrial Credit and Investment
Corporation of India
IDBI = Industrial Development Bank of India
IFCI = Industrial Finance Corporation of
India
LIC = Life Insurance Corporation of India
SBI = State Bank of India
redistribution of wealth (like land), of
income through fiscal instruments of
taxation, and of consumption by
intervention in market of essential
commodities through price control and
public distribution. Despite modest
growth and operation of redistribution
instruments, it was discovered that
poverty was not declining to a significant
extent. The Fifth Plan started with the
removal of poverty as its prime objective,
though a few supplementary
programmes for poor sections of the
society were launched during the
Fourth Plan itself. Rigorous exercises
were carried out. Controversy after
controversy took place on methods of
estimation of poverty. We find that
poverty, as proportion of people below
poverty line, did not reduce on a
sustained basis till 1973-74 but reduced
thereafter from 56 per cent to 36 per
cent by 1993-94. Those who remained
below the poverty line came closer to
the poverty line. However, the absolute
number of poor remained 32 crore.
Diversification of Economic Activities
Our industrial base, contributed by the
public sector and supplemented by the
private sector, got quite diversified by
1991 even though our growth rate was
not considered very high. Many things,
which we can produce, were not to be
imported by necessity. Petroleum and
DEVELOPMENT STRATEGIES TILL 1991 93

petroleum products were being imported of national planning by the State. We

in order to conserve our own reserves. In
any case we cannot do much in the area.
Many chemicals and fertilizers,
which we had to import earlier, were
being produced domestically. We are doing
quite well in heavy engineering. In fact,
there are technological feats to our credit,
particularly in the areas where we were
denied technology.
Achievements : Many things have
happened which do not get captured in
what we have discussed above. You may
recall that our life expectancy at birth has
almost doubled and at other ages,
considerably improved. Our infant
mortality rate considerably reduced from
140 per thousand in the fifties to 80 per
thousand by the close of eighties though
it was yet very high in comparison to other
countries. Our death rate came down to
about 10 per thousand in 1991 from
around 23 in 1951. By the way birth rate
too reduced to 30 per thousand by 1991
as against 45 per thousand in 1950s.
Concluding Remarks
We learnt about the rationale for
resorting to planning, and some
thoughts on planning during pre-
independence. We also tried to
understand the generic meaning of
planning and then the specific context
also learnt that we adopted
comprehensive planning for ourselves,
encompassing economic and social
spheres. Then, we had a glimpse at
history of our plans.
Next, we discussed the objectives and
differentiated them between planning
objectives and plan objectives. Planning
objectives, which could be said to be long-
term goals were delineated as growth,
employment and reduction in inequality.
Main features of economic policy were
outlined as interventionist state,
centralised planning, expansion of public
sector, and import substitution.
Finally, we discussed achievements
and failures of policy of planning as
pursued in the forty years since 1951. We
emphasised that we improved on all
counts. Our achievements have been less
than what we wanted to achieve. But our
achievements were definitely
commendable when we compared them
with what had been happening before
Independence. And, this owes a great
deal to our policy of planning for social
and economic development. But, we
failed to some extent in reducing poverty
and unemployment. We also failed in
reducing concentration of wealth or
economic power in a few hands and thus
perpetuated as well.

EXERCISES
1. Which are the factors determining the manner, the extent and the pace of state
intervention in an economy?
2. The Constitution of India allows ownership and control of material resources to exist as
well as market to function yet it seeks to intervene. Why?
3. Where is the provision for economic and social planning in the Constitution?
4. What were the three models that prompted Indian leaders for deciding in favour of
planning in the late thirties?
94 INDIAN ECONOMIC DEVELOPMENT

5. Who formed the National Planning Committee and when? Who were the Chairman and
Secretary of the National Planning Committee?
6. What were the key recommendations of the National Planning Committee?
7. What do you mean by economic planning?
8. What do you mean by comprehensive development planning?
9. List some of the economic spheres and the social spheres separately.
10. List some of the methods of intervention by the State in functioning of the economy.
11. Write a brief history of our plans, mentioning the reasons why a five year plan was
not formulated when it was due.
12. Distinguish between planning (long-term) objectives and plan objectives. Write out
planning objectives and provide rationale for the same.
13. What is our major framework of planning? Is it existence of mixed economy? What do
you mean by the mixed economy?
14. What are the important features of our economic policy as pursued till 1991? Discuss
in detail each of them, justifying the background.
15. Discuss our achievement/failure in maximising production, particularly in the case of
foodgrains.
16. What do you mean by self-employment and wage-employment?
17. What do you mean by person day?
18. Discuss our achievement/failure in the matter of employment before the onset of new
economic policy.
19. What is our record during 1951-1991, about reduction of inequality in (i) distribution
of income, (ii) distribution of consumption expenditure in rural and urban areas, and
(iii) distribution of land holdings?
20. What is our record in the matter of concentration of economic power particularly in
the context of industrial wealth?
21. Write a short essay on our achievements during 1951-1991, highlighting relative
success in different objectives.

ACTIVITIES
1. If we do not want to depend on imports for our food, how much foodgrains we should
produce at home if each one of us must consume foodgrains @ 500 grams per day and
must ensure 12.5 per cent of foodgrains grown for seed, feed and wastage? You can
remember that net output is reckoned at 87.5 per cent of gross output.
2. Supposing that there are 40 crore people working for the total person days available
during a particular year is 14600 crore person days (=40 cr * 365 days). Taking 10 per
cent as the unemployment rate, we need to create 1460 crore person days =14600
million person days, taking due care of composition profile of labour force along with
regional dimensions. Try to find out how much employment was generated in terms of
person days by various schemes of employment. Was it half of the requirement?
3. Group Activity: Look at the Constitution. Try to find out in how many senses the word
State has been used in the Constitution. Discuss among yourselves in the presence of
your teacher.
 CHAPTER 7
Economic Reforms since 1991
Background
We had indicated in the last chapter that
we did not follow a single set of policies
in the forty years since 1951. We made
many changes in many spheres but they
were all perhaps in the same direction:
interventionist state, centralised
planning and expansion of public sector
within the framework of mixed economy.
In fact, we were following no charted path
but were experimenting in a big way. We
recount here some major developments
during the forty years before the onset
of current spate of reforms.
In the late 1960s, many things came
into notice as a result of certain
committees formed to investigate the
working of many policies. It was found
that the industrial licensing policy that
was followed in practice was not in tune
with the Industrial Policy Resolution of
1956. It was, therefore, tightened. It was
also discovered that the large industrial
houses were in control of financial
resources because they owned the
commercial banks. Fourteen major
banks were, therefore, nationalised in
1969 (and six in 1980) so as to make
funds available for development of
agriculture and small and cottage
industries. It was further discovered
that many industrial houses were
monopolising certain activities and were
adopting practices restricting trade
(competition); an Act (MRTP ) against
such practices was, therefore, put in
place and, with a view to discouraging
such practices, a Commission (MRTPC )
was set up.
In the late 1970s, a movement
towards further promotion of cottage,
tiny and small-scale industries,
enlargement of responsibility of public
sector for decentralised development,
and making sick industries taken over
from private sector to show results, was
suggested. But, it could not be pursued
much.
Towards the end of the seventies,
however, it came to be widely perceived,
particularly by the industrialists, that
the Government has been unnecessarily
restricting industrial activities of private
sector in the name of protecting small
scale industries (from competition by
reserving items, ensuring availability of
raw material, purchasing products and
subsidizing sale), putting high tariffs,
restricting flow of foreign capital and
technology, and pampering public sector
undertakings that were actually
incurring huge losses.
Foreign interests expressed a view
that the government had been checking
foreign trade by imposing quota (though
96
necessitated by limitation of foreign
exchange) and high custom tariffs and
choking flow of foreign capital except aid
and debt. Middle class consumer thought
that domestic industry was overpro-
tected from foreign competition by high
tariff wall and public sector undertakings
were doing no good to the economy.
In order to address some of these
issues, a little opening was made in the
eighties itself. A new industrial policy
statement was announced in 1980. The
1956 resolution, it was clearly stated in
this statement, formed the basis of the
present statement but the new policy
accepted the erosion of governments
faith in the efficiency of its own public
sector. The statement of 1980, in fact,
accepted, to an extent, the direction
given in the statement of 1977. It
adopted a liberal approach and, instead
of punishing the industrialists for
installing excess capacity, it suggested
regularisation of unlicensed excess
capacity (except in cases of items that
were reserved for the small sector or in
cases where companies were registered
for MRTPA or FERA). During the course
of the eighties, a number of relaxations
were made in the licensing policy :
1. Industries with fixed assets worth
Rs 15 crore were completely de-
licensed and if they were located in
an area declared backward by the
Government of India, the limit was
Rs 50 crore.
2. Keeping in mind the economies of
scale due to modernisation of
technology, licensed capacity was
raised by 49 per cent.
3. Threshold limit for registration with
MRTP Commission was raised from
Rs 20 crore to Rs 100 crore.
INDIAN ECONOMIC DEVELOPMENT
4. FERA rules were liberalised to
attract foreign investment.
5. Concessions were made under
corporate income rules.
In addition, foreign capital from all
channels was liberally borrowed. The
NRIs showed a lot of patriotism and
contributed a great deal to the kitty of
forex reserves through their deposits.
During the two plans (Sixth and
Seventh), in the course of eighties, the
annual average growth rate rose from
3.5 per cent during 1950-70s to 5.5
per cent. Amount of foreign exchange,
which was needed for imports, was
comfortable.
However, it may be noted that during
the eighties:
(a) fiscal deficit rose from 5 per cent to
over 8.5 per cent of the GDP
(b) revenue deficit from 0.2 per cent (in
1981-82) to 3.5 per cent of the GDP
(c) current account deficit in external
balance rose from 1.2 per cent to
2.5 per cent.
These facts reflect the weaknesses in
the policies, pursued during the eighties,
which promoted growth, yet, depended
on borrowings -- internal and external.
Sustainability of growth rate achieved
during the eighties was, therefore,
doubtful. But the result came sooner
than expected.
Immediate Crisis
Change in international economic
scenario associated with the gulf crisis
created a severe external liquidity crisis.
We lost our exports to gulf countries,
reducing the flow of foreign exchange (in
terms of hard currencies). Remittances,
which we were receiving from the NRIs
ECONOMIC REFORMS SINCE 1991 97

HOW MUCH FOREIGN EXCHANGE RESERVE WE NEED

You may remember that one always needs certain level of reserve stock of certain things to
sustain for days ahead: vegetables/fruits/sweets for a few days, sugar/tea/coffee for a
few weeks, rice/wheat for a few months/a season. Your scooter and car also have some
reserve for covering emergency needs. The Government keeps some amount of foodgrains
as buffer stock should the crops fail drastically.
Similarly, we need foreign exchange reserve. We do not keep them in any amount or
for years together. We need foreign exchange reserve at a level, which would be sufficient
for imports for eleven-twelve weeks.
We do not lock up our resources in building up extra reserves because resources have
alternative uses. Similarly, we need not have foreign exchange reserves for years together.
These have to be paid back along with interest.

in the gulf dried up. Import bill of external credit. A default on

petroleum, oil and lubricants, increased.
The combined effect of all these factors
reduced our foreign exchange reserves
to a low of $1 billion.
Perceived political instability created
a situation in which a big flight of capital
took place, drying our foreign exchange
kitty. International commercial banks
refused to extend new credits. Credit
rating agencies played their business
tricks and rated Indias entities very low.
This made the NRIs withdraw their
deposits all of a sudden. By the middle
of 1991, we came to the brink of default
in paying our instalments; we did not
have foreign exchange reserves enough
to pay for two weeks imports. Earnings
from exports and foreign exchange
reserves fell short of settling our
obligations. Said the Economic Survey
1991-92:
By June 1991, the balance of
payments crisis had become over-
whelmingly a crisis of confidence in
the Governments ability to manage
the balance of payments. The loss of
confidence had itself undermined the
Governments capability to deal with
the crisis by closing off all recourse to
payments, for the first time in our
history, had become a serious
possibility in June 1991.
With a view to restoring internal and
external confidence, there was an urgent
need for initiating macro-economic
stabilization measures. It is important
to note that macro-economic stabilisa-
tion measures are pervasive and affect
the whole economy, not a particular
sector. Changes in fiscal policy,
monetary policy, exchange rate policy
and wage-income policy are measures,
which may stabilise/destabilise macro-
economic balances -- internal and
external. With a view to bringing
stabilisation, reforms in these major
policies were suggested to be the dire
need.
But the opportunity was also seized
upon to correct many micro-economic
(sectoral) policies too. Or, one could say
that without concomitant changes
(reforms) in micro-economic policies,
reforms in stabilisation measures would
have not been sufficiently effective.
There existed a perception at the national
level and international level that our
policies were distorting prices of goods
98
and thereby allocation of resources. We
thought that our policies were
discriminatory; but it was pointed out
that our policies were actually distorting
allocation of resources (via distortion in
prices). The package of reforms in this
sphere came to be known as Structural
Adjustment Programme. Reforms in
trade policy, industrial policy, public
sector policy, administered price policy,
tariff policy and factor market policy may
be specifically mentioned in this context.
According to some authorities,
stabilisation refers to measures
concerning the aggregate demand while
structural adjustment concerns the
aggregate supply. But, according to other
authorities, stabilisation refers to short-
term measures to correct macro-
economic imbalances and structural
adjustment to measures relating to
improvement in productivity of labour
and capital. The Government of India has
accepted the second view. Changes, for
example, in industrial policy, labour
policy and trade policy, are pointers in
that direction. Attempts to bring changes
in fiscal policy, monetary policy, and
foreign exchange policy are all meant to
correct macro-economic imbalances. In
our case, at this juncture, both sets of
measures were initiated together.
Main Features of Reforms
As suggested above, the nineties saw the
replacement of license, quota, permit
(LQP) raj by liberalisation, privatisation
and globalisation (LPG) regime. There are
many areas of reforms besides industry
and trade, but we shall focus only on
these as these crucially affect all other
areas. The main features of economic
reforms in microeconomic area are listed
INDIAN ECONOMIC DEVELOPMENT
as the following three: liberalisation,
globalisation, and privatisation.
Liberalisation
If restrictions are imposed on economic
activities by Government policies, the
regime may be said to be following a
policy of restrictions or a restrictive
policy. By contrast, if the Government
has put no restrictions, the regime may
be said to be following a policy of laissez-
faire. However, no real economy is ever
completely free of restrictions. When
some of these restrictions are removed
or are slackened, the regime is said to
be following/pursuing a policy of
liberalisation. On the contrary, if more
restrictions are imposed, the regime is
said to be following a policy of stricter
regulations. In fact, it is possible that in
some areas, more restrictive and in some
areas more liberal policies are adopted.
On our industrial scene, we were
seen as over-restricting the expansion of
industrial activities by putting physical
control on output, imposing price
restrictions under one or the other act,
restricting the level of investment by big
industrial houses, rationing of credit by
the financial institutions, controlling
capital issues (shares/debentures),
checking foreign investment/ technology
issuing import licenses, restricting even
exit of the industry or its labour. Many
felt that this restricted the initiative and
enterprise of the people on the one hand
and competition in the market on the
other.
It was further pointed out that big
industrialists could still circumvent
almost all of these restrictions with the
connivance of bureaucracy. Those who
could circumvent the restrictions
ECONOMIC REFORMS SINCE 1991
developed vested interests in
continuance of the regime so that they
did not have to face competition. Thus,
the end result was corruption and
delays. This promoted neither growth
nor social justice. It was argued that a
low growth rate lowered the capacity of
the economy to promote social justice.
In one word, intervention turned into
interference.
INTERVENTION AND INTERFERENCE
These words are very often used
synonymously. But, the use of intervention
is better than interference in the context
of relationship between market and state.
People are often seen saying kindly
intervene when they want some conflict
to be resolved amicably through
involvement of a third party.
People are also seen saying please do
not interfere when they do not want
involvement of a third party in the matter
to be resolved.
Under these circumstances, a new
industrial policy was announced by the
then Finance Minister Dr Manmohan
Singh in July-August 1991 and, later in
April 1993, which had liberal provisions
or promotional features in the following
areas:
(a) licensing business
(b) foreign investment
(c) foreign technology agreements
(d) establishment, merger, amalgama-
tion, takeover of units and
appointment of certain directors
(e) simpler exit policies
Licensing was originally limited to
only 18 commodities. Later three
commodities were de-listed: refrigerator,
washing machine and air conditioner.
99
Foreign investment, particularly direct
foreign investment, was invited and
approval for direct foreign investment
was made simpler. Foreign collaboration
for technology was encouraged.
Restrictions on merger/acquisition/
takeover were sought to be removed.
Labour laws were made a bit easy to
permit exit.
However, the issue is, as one
economist puts it, whether liberalisation
would mean de-bureaucratisation or
marketisation. Many of us feel that we
have been less successful in de-
bureaucratisation and promoted
marketisation. Many of the policies had
to be changed as we found that practices
were overdoing or underdoing than the
policies actually intended for.
Privatisation
The new ethos expressed in the phrase
that government has no business to do
business became the new mantra. This
was in tune with the privatisation wave
across the world. There was a time when
many private industries (and trade) were
nationalised even in the so-called
capitalist world. Now is a time when the
thinking is just the opposite and
denationalisation became the fashion.
Many public enterprises in our country
have provided that opportunity by their
lacklustre performance.
It was felt, in our context, that the
government was directly operating in
many areas where it ought not to be and
that many of its enterprises were not
performing at a level they ought to. In
the former case, the Government could
simply withdraw. It meant that such
enterprises were to be sold out. It came
to be known as disinvestment. In the
100
latter case, the undertakings are so
reformed that they perform well even if it
means partnership with the private sector.
The issue to be considered here was as to
who would buy non-performing, loss
making enterprises and if some parties
choose to do so, why should they pay large
sums? A government starving of funds
could then think of selling shares of their
performing enterprises so that it could
balance its budget a bit better.
If privatisation has some intrinsic
value, we should not mind promoting it.
We are trying various models of
privatisation. The simple one relates to
the issue of ownership. Complete sell-
off, retaining 26 per cent stocks with veto
power, retaining 51 per cent stocks and
retaining 75 per cent stocks have all been
tried in one or the other case. Which form
should be adopted depended upon the
nature of product/service a particular
enterprise was manufacturing/
providing. Divestment, which is total sell-
off, could be thought of in an area, which
has no reason to be in the public sector.
If good/service produced falls in the
category reserved for public sector, the
Government should retain at least 51 per
cent holding and should not disinvest
beyond 49 per cent of total stock (If the
last three options are resorted to, it
means that the enterprises will turn into
joint ventures). Selling out shares to the
employees and running the enterprise
on cooperative principle is another
option. Later, the Government of India
experimented with bundling shares of
profit making and loss making
enterprises without much success.
There are other views on
privatisation. Instilling commercial spirit
in public sector enterprises is one such.
INDIAN ECONOMIC DEVELOPMENT
Railways are being suggested for
corporatisation; which means the
Railway Board should be converted into
a public corporation, which has some
autonomy. This could be called
privatisation in operational sense. There
are no disinvestments involved, however.
Another view suggests lease of a public
enterprise to a private party or
contracting out many of the services
needed as inputs. This has been regarded
as privatisation in organisational sense.
But properly speaking, it is a matter of
ownership. With ownership comes control.
Without privatisation also, government
can still bestow organisational and
operational autonomy and have a
memorandum of understanding with the
management.
Let us finally note that our
programme of privatisation through
disinvestments has succeeded to the
extent of 50 per cent only.
Globalisation
The term globalisation has yet to gain
a definite meaning. One economist
defined it to mean exposure to
competition with the world leader in a
particular industry. Another thinks
that it is about free trade in goods
and services among nations together
with free international mobility of
factors of production. Let us just talk
of globalisation of Indian economy.
This means more/better integration of
Indian economy with world economy.
How could the two economies integrate?
Not by aid, which is a unilateral flow
but by trade, which is a bilateral flow.
Not by economic relations between
governments, but by interface of our
markets with the world market.
ECONOMIC REFORMS SINCE 1991
How does one sell in a country if the
government bans import of the goods,
puts a quota restriction (while we
are willing to supply and the people of
the country of import are willing to
buy) or creates a high tariff barrier by
imposing 300 per cent import duty? We
become uncompetitive by such devices
and the Government protects
inefficiencies of domestic producers. If
the Government removes such barriers,
the domestic producers will either
improve efficiency in that line or
will switch over to other lines of
production.
If you agree with this argument, you
would advocate dismantling of tariff and
non-tariff barriers both. But there may
be good reasons to differ with this kind
of argument. After all, no Government
does it for pleasure. Protection of
domestic industry from competition may
be desirable in certain areas.
Would you like to produce in your
country and sell everywhere? Multi-
national corporations and trans-national
corporations have plants in several
countries. Production in a host country
saves them from transportation cost and
labour cost in many cases. Then, you
should permit movement of capital too.
So, factor markets also get integrated.
Once the producer has a stake in the
country, he will perhaps bring in better
technology and managerial practices and
entrepreneurial skills as well. This will
have spillover effects.
However, many of us are concerned
to know whether movement of labour
and manpower would be equally easy.
And we know that it is not easy.
In short, the globalisation means
pursuing :
101
(a) reduction of trade barriers with a
view to allowing freer flow of goods
to (and from) the country;
(b) free flow of foreign capital in terms
of investment (direct and portfolio)
by ensuring conducive atmosphere
and easy approval of proposals;
(c) free flow of technology; and
(d) free movement of labour and
manpower.
(e) FDI
(f) Pravasi Bhartiya Fund
The present WTO regime is working
for free (if not free) trade through
unprotected competition by removal of
non-tariff barriers and substantial
reduction in tariff barriers as also by
removal/reduction of subsidies. It has
extended the areas traditionally negotiated
in the GATT by including what are known
as GATS (General Agreement on Trade on
Services), TRIPS (Trade Related Intellectual
Property Rights) and TRIMS (Trade Related
Investment Measures).
Concluding Remarks
We started this chapter with a
background charting evolution of policies
and developments in industrial economy
of India. First, we found that practices
followed were not true to the spirit of the
policies. Concentration of power did rise
despite intentions to the contrary. In the
seventies, worsening foreign exchange
position prompted for tighter controls.
So, loose ends were tightened. But by
1980, it was learnt that our policies have
become too restrictive. License, permit
and quota raj became pervasive.
Restrictions were then softened quite a
bit. Funds were liberally borrowed from
international market, partly because aid-
pool was drying. Imports were made
102 INDIAN ECONOMIC DEVELOPMENT

liberal. There was tremendous adjustment. It is said that we rolled back

improvement in growth trajectory.
However, the programme had inherent
weaknesses as is clear from bad macro-
economic scenario, which is revealed by
worsening revenue deficit, fiscal deficit
and deficit in current account in balance
of payments.
In 1991, the gulf war reduced
remittances to the economy. Political
instability caused a big flight of capital.
Our foreign exchange reserves shrunk
to a level, which could hardly cover two
weeks import requirements. We were
advised to undertake policy reforms on
both the fronts--macro-economic stabili-
sation and micro-economic structural
the state. Some say that we only changed
the texture of intervention, not the level.
Last, we tried to discuss the nuances
of three basic features of economic
reforms, viz., liberalisation, privatisation
and globalisation. We pursued some of
the reforms and succeeded to some
extent. Some of them, known as second
generation reforms, were delayed.
Difference between the two sets of
reforms is said to be in the fact that,
while the first generation reforms could
be carried through executive and
administrative machinery, the second
generation reforms require legislative
action.

EXERCISES
1. Discuss the developments in the Indian economy, particularly in its industrial
sphere during 1960-90.
2. Mention good points and major weaknesses of the policies pursued during the
eighties.
3. Why do we put restrictions on some activities? Illustrate with examples.
4. What was the basic problem that forced us to have a U-turn in our policies?
5. What was the level of foreign exchange reserves in 1991?
6. What do you mean by macro-economic stabilisation programme? Mention its
characteristics in terms of its instruments and coverage.
7. What do you mean by micro-economic adjustment programme? Mention its
characteristics in terms of its instruments and coverage.
8. What are the main features of economic reforms?
9. What do you mean by laissez-faire? Discuss the difference between policy of
laissez-faire and policy of liberalisation.
10. Differentiate between policy of restriction and policy of liberalisation.
11. What you mean by privatisation? Discuss how it is different from
denationalisation.
12. What do you mean by disinvestment? How far did we succeed in this
programme?
13. What do you mean by globalisation?
14. How do you react to asymmetric treatment to capital market and labour market
by the WTO?
15. What is the WTO? What is it supposed to do?
 UNIT III

CURRENT CHALLENGES FACING INDIAN ECONOMY

In this unit, you will be exposed to some of the challenges that the Indian
economy is facing. Needless to mention, we shall be discussing three
perennial problems that we have been struggling with. These are population,
poverty and unemployment.
It is often emphasised that much of economic development is hampered
because of lack of quality infrastructure. We have already learnt about the
progress we have made in the last fifty years in some of infrastructure
services. Here, we shall review them from the angle of the kind of challenges
they are facing. The infrastructure covered shall, however, be only energy,
transport, communication, health and education.
In the last chapter we shall be concerned with some other emerging
issues. The issues that have been identified are environment, gender
and migration.
 CHAPTER 8
Population in India
Introduction
There was a time when growth in
population was considered desirable.
There are societies--both developed and
undeveloped--where growth of popula-
tion is still considered desirable. Many
European nations have instituted
incentives for larger families. There are,
however, occasions, when societies
considered the population growth
undesirable, particularly if the growth is
rapid. In India, the growth in population
has been considered high and
undesirable, right from the thirties
when it was discovered that population
between 1921 and 1931 increased by
more than 10 per cent. Thereafter, it
rose at still higher rates and in the
second half of the century, at more than
twice this rate.
Population provides workforce to
produce on one hand and market for the
produce on the other. A small size
population may not promote innovation
and thereby productivity. It may not
promote specialisation and division of
labour. A large size population may
provide too many hands that may not
be absorbed. It may also create problems
for environment and resources.
Whenever the issue of overpopulation is
raised, some either do not accept it or,
if they accept, they put the blame on the
system, its institutions and technology.
In fact, whether a given population is
large or small is in relation to the
resources and technology that the
people have command over, on the one
hand, and the levels of living enjoyed and
expected by the people, on the other.
Anyway, as long as the system is in
place, we may need to reduce the rate
of growth of population.
Size is one aspect. There are other
aspects of population, which are equally
important. One is of course the growth
in size. Another that should interest us
is the composition of population in terms
of sex and age. Whether there are too
many children or too few? Whether there
are too many old persons or too few?
Whether we have too many adult hands
for work or there is shortage of them?
Whether our population has too many
women or has too few of them? Whether
deficiency of women occurs across all age
groups or is confined to particular age
groups?
We should, however, note that the
use of too many or too few always
relates to something else. We shall
discuss these issues in this chapter.
106 INDIAN ECONOMIC DEVELOPMENT

HOW LARGE WE ARE IN NUMBER

You often encounter popular beliefs and clichs, which have no scientific basis. They
unnecessarily create fear psychosis. One such example is: We are one-sixth of the world
population while the land with us is 2.4 or 2.5 per cent. Another example is: India is the
second country in the world after China to cross the one billion mark and if the current
trends continue, we may soon overtake China.
The facts are correct but the tone of asserting gravity and purpose of assorting these
figures is the issue.
We would have been the largest country if Pakistan and Bangladesh (leave Myanmar)
could have continued to be a part of the country. Note the populations of China, Pakistan
and Bangladesh, as counted sometime in 2000: China, 127.76 crore (1 Februay 2000),
Pakistan, 15.65 crore (1 July 2000) and Bangladesh, 12.92 crore (1 July 2000). The
population of India, Pakistan and Bangladesh, put together, comes to be 131.33 crore,
which is greater than Chinas. Is it not, then, a matter of political boundaries? The area
with China (96 lakh sq km) is three times that of India (33 lakh sq km) and would be more
than twice as large as the area of three South Asian countries, put together. Pakistans
area is 8 lakh sq km and Bangladeshs, 1.45 lakh sq km.
The idea lurking behind such assertions is to suggest that we are very densely populated.
Surely we are more densely populated than China but less densely populated than Japan
and most of the European countries. Think of Europe if their people had no chance to
migrate to and settle in the New World and Australia.
If we consider arable area only we find our arable land is equal to that of China.
However, there are countries totally dependent on imports for their food requirements but
they have something else to offer in exchange.
The story is unending. The short point is that mentioning a few facts without proper
comparisons is not adequate.

Size of Population Table 8.1 presents the population

The size of population is measured in
terms of the number of persons. If we
consider the present boundaries of the
country, we were less than 25 crore in
the beginning of the century and we are
more than 100 crore at the end of the
century. During the century we became
four-fold. Our growth was thus three
times the size in the beginning. At the
middle of the century, we were 36 crore.
While our growth in the first half of the
century was, roughly speaking, less than
50 per cent, that in the second half of
the century was more than 150 per cent.
It was indeed 180 per cent in the second
half of the century.
counts by censuses, as presented in the
latest publication by the Registrar
General of India. The figures written here
are in units (but you can round off to
crores or millions). Some of the other
Tables will be derived from this basic
table.
It will be noticed from Table 8.1 that
the population of the country (within
present boundaries) in 1921 was less
than that in 1911. Demographers point
out the catastrophe of influenza
epidemic, which broke out in 1918 in
many parts of the country. Though, on
the face of it, the population decreased
by about 8 lakh, the actual toll should
POPULATION IN INDIA 107

TABLE 8.1 have been no less than 1.5 crore. During

Population of India according to Census the twentieth century, it was the only
during the Twentieth Century
period when the number of deaths
Year Population exceeded the number of births during a
1901 23,83,96,327
decade. Since 1921, the period has been
1911 25,20,93,390 one of secular rise in Indias population;
1921 25,13,21,213 there was no let up thereafter (See
1931 27,89,77,238 Fig. 8.1).
1941 31,86,60,580 We added more people in every
1951 36,10,88,090
1961 43,92,34,771 decade than in the preceding decade
1971 54,81,59,652 from 1921 onwards. Earlier, we were said
1981 68,33,29,097 to be adding an Australia every year.
1991 84,33,87,888 During the nineties we are said to have
2001 102,70,15,247
added an Argentina, which is the fifth
Source : Census of India 2001 Series 1 India: largest country of the world. Our
Provisional Population Totals-Paper 1 of population in the nineties rose by 18
2001, Registrar General & Census
Commissioner, India. crore (See Table 8.2). Since the base of
E

POPULATION IN CRORES

1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001

CENSUS YEARS

Fig. 8.1: Population of India

108 INDIAN ECONOMIC DEVELOPMENT

population is now higher, we may note TABLE 8.3

that the growth in population by absolute Growth of Population in Different
numbers is very high and is still Decades of the Century (per cent)
increasing. But, if you care to notice, you Decade Growth Rate
will find that difference between two Per Decade Per Annum
absolute growths is diminishing. 1901-1911 05.74 00.56
1911-1921 (-)00.31 (-)00.03
TABLE 8.2
Absolute Growth in Decades of 1921-1931 11.00 01.05
Twentieth Century 1931-1941 14.22 01.34
1941-1951 13.31 01.26
Decade Absolute Growth
1951-1961 21.64 01.98
1901-1911 1,36,97,063 1961-1971 24.80 02.24
1911-1921 -7,72,177 1971-1981 24.66 02.23
1921-1931 2,76,56,025
1981-1991 23.42 02.13
1931-1941 3,96,83,342
1991-2001 21.77 01.99
1941-1951 4,24,27,510
Source: Based on Table 8.1.
1951-1961 7,81,46,681
1961-1971 10,89,24,881 life in the aftermath of the partition.
1971-1981 13,51,69,445
Therefore, the year of 1921 is
considered the year of great divide in
1981-1991 16,30,58,791
Indian demography, as it ended the
1991-2001 18,06,27,359
phase of fluctuations in population size.
Source: Based on Table 8.1. From 1951, one finds that growth
rate per decade exceeded 20 per cent
Rate of Growth mark. The year of 1951 may be duly
Decadal Growth considered as the year of small divide.
Let us compute the growth rate for the However, the highest of 24.8 per cent
decade as a whole. It means dividing the decadal growth was reached by 1971.
absolute growth by the base population But there was no perceptible decline in
and multiply the quotient by 100. growth rate during the seventies. The
Growth rate will be in terms of per cent year 1981 is considered as the end of
per decade. In Table 8.3, we have also another phase. Growth rates during the
given growth rate per annum for each eighties and nineties show clear decline.
decade. In fact, growth rate during the nineties
is almost equal to that in the fifties (while
Great and Small Divides we are considering a decade long period).
During 1921-31, 1931-41 and 1941-51, Downturn has indeed set in (See Fig 8.2).
the population growth was 11, 14 and 13
Demographic Phases
per cent, respectively. Slight decline in
growth rate during the forties is seen Based on the growth pattern of
as an impact of migration to erstwhile population, as depicted in Fig. 8.2,
Pakistan after partition as also of loss of demographic history of India is said to
POPULATION IN INDIA
29
Phase I
24
)
Stagnation
GROWTH RATE (PER CENT)
19
14
-1
1901-11 1911-21 1921-31 1931-41 1941-51 1951-61 1961-71 1971-81 1981-91 1991-2001
Fig. 8.2: Decadal Growth of Population
be having four phases. The dip between
1941 and 1951 is ignored as it is
considered an aberration. Population
was not rising before 1921 but
fluctuating. The period before 1921 is,
therefore, considered a phase of
stagnation (or fluctuation). During 1901-
1921, population rose by 1.3 crore and
growth was just 5.4 per cent for the
period as a whole. Between the years of
great divide (1921) and small divide
(1951), population grew by 11 crore in
absolute number and by 44 per cent.
This period is known as the phase of
steady growth. During each decade in
this period, we have seen the growth rate
was above 10 per cent and below 15 per
cent. Then, there was a quantum jump.
In all five decades after Independence,
decadal growth rate was above 20 per
109
Phase II Phase III Phase IV
Study Growth Rapid Growth Decelerating
growth
INTERCENSAL PERIOD
cent but it accelerated and then
decelerated. Researchers take 1981 as
the dividing year. The period 1951-1981,
denoting rise of population by 34 crore
or 89 per cent, is called the phase of rapid
growth. We can also call it the phase of
high and accelerating growth. By
contrast, the period since 1981 may be
called the phase of high but decelerating
growth. Population has risen by 50 per
cent during 1981-2001.
Annual Growth Rates
Many people rely more on growth rate
expressed in terms of per cent per
annum. Since, there are only two figures
available initial and final, we have to
use only compound interest formula to
calculate rate of growth per annum (See
Table 8.3). Starting with a little more
110
than one per cent per annum, the rate
of growth rose around two per cent per
annum during the fifties and touched
the level of 2.25 per cent per annum
during the sixties and seventies. During
the eighties, it came down to 2.13 per
cent per annum and during the nineties,
it came to the other side of two per cent
per annum.
While our growth rates have been
twice the highest rates ever achieved in
Europe, they have been two-thirds and
three-fourths of the rates witnessed in
many developing countries. Our growth
rates are considered high. There is,
therefore, no scope for complacence in
making attempts to moderate the rate
of growth.
Basic Factors for High Growth
The growth of population depends on
four basic factors: birth, death, in-
migration and out-migration. For a
country as large as ours, the factors of
migration are not very significant. (For
smaller units, particularly border states,
we cannot ignore these factors). There
are, therefore, only two factors, which
account for growth--positive contribution
of births and negative contribution of
deaths. Growth rate is, therefore, often
expressed as the difference between birth
rate and death rate. This growth rate is
often called the rate of natural growth or
natural increase as birth and death are
considered natural phenomena in
comparison to migration, which is social
or economic in nature. All these rates
are expressed by demographers in terms
of per thousand rather than per hundred
(cent). Earlier, the birth rates and death
rates were calculated by our demogra-
INDIAN ECONOMIC DEVELOPMENT
phers, using census data. Now, they are
using data collected by the Sample
Registration System (SRS). In Table 8.4,
we provide information on birth and
death rates for the first seven decades
of the twentieth century, which are based
on census and then years at the distance
of a quinquennium, which are based on
the SRS (See also Fig. 8.3).
Trends in Vital Rates
Death rate and birth rate, as revealed by
1911 and 1921 censuses, were very close
in the beginning of the twentieth century.
The rate of natural growth during
1911-21 was just 0.09 per cent per
annum. This was the decade of actual
decline of population. Then there was
decline in both birth rate and death rate.
However, differential in declines would
determine whether there was decrease or
increase in growth rate. Compared to
decline in birth rate, the decline in death
rate has been normally higher, which
resulted in increase in growth rate. The
reduction in birth rate between the thirties
and forties was, however, higher than that
in death rate despite some deaths during
the partition. But the general trend was
of increasing growth rate, which basically
owes itself to drastic reduction in the
death rate. Thus, it is not because of
increase in birth rate but because of
decrease in death rate that caused rapid
rise in growth rate. See Fig. 8.3 for birth
rate, death rate and growth rate.
This graph shows how steep was the
reduction in death rate as compared to
the reduction in birth rate. But the birth
rate was declining too. Now that the
death rate is reaching a plateau, we can
hope for a reduction in birth rate.
POPULATION IN INDIA 111

TABLE 8.4
Birth Rate, Death Rate and Rate of Natural Growth (Per Thousand)

Decades Birth Death Rate of Year Birth Death Rate of

Rate Rate Natural Rate Rate Natural
Growth Growth

1901-1911 49.2 42.6 6.6 1971 36.9 14.9 22.0

1911-1921 48.1 47.2 0.9 1976 34.4 15.0 19.4
1921-1931 46.4 36.3 10.1 1981 33.9 12.5 21.4
1931-1941 45.2 31.2 14.0 1986 32.6 11.1 21.5
1941-1951 39.9 27.4 12.5 1991 29.5 9.8 19.7
1951-1961 41.7 22.8 18.9 1996 27.5 9.0 18.5
1961-1971 41.7 18.9 22.2 1998 26.5 9.0
Source : Compendium of Indias Fertility and Mortality Indicators 1971-1997 based on the Sample
Registration System, Registrar General India, 1999 and India Yearbook Manpower Profile,
Institute of Applied Manpower Research, 2001.

Demographic Transition as a consequence growth rate acce-

Based on the demographic history of
Western countries, it has been argued
that birth rate and death rate are both
high before the onset of transition, giving
low, often fluctuating, rate of growth.
With development, first death rate falls
while birth rate remains the same and
lerates. In the next phase, both birth rate
and death rate both fall in parallel,
keeping growth rate high and steady. In
the still next phase, while death rate
becomes low and stagnates, birth rate
continues to fall. In this phase, growth
rate declines. Finally, birth rate also

60
= Birth rate = Death rate = Rate of Natural Growth
50

40
VITAL RATES

30

20

10

0
1901-11 11-21 21-31 31-41 41-51 51-61 61-71 1971 1976 1981 1986 1991 1996 1998
YEARS

Fig 8.3: Trends of Birth, Death and Growth Rates.

112
becomes low and steady and the result
is low growth rate. We are in the third
phase of demographic transition.
We may however note that life
expectancy after transition is high while,
before transition, it is low.
Matter of Life and Death
However, if our birth rates were low, it
could be argued that the rise would have
been lower. If birth rate could decline
faster than death rate, then it was
possible that growth rate could actually
decline. But that has never happened.
Theory of demographic transition
explains that reduction in birth rate has
always followed reduction in death rate.
Compared to 7.5 per thousand points
reduction in birth rate in seventy years
till 1971, reduction of 10 per thousand
points since 1971 is creditable.
Compared to 25 per thousand points
reduction in death rate during seventy
years till 1971, the reduction of 6 per
thousand points since 1971 is quite low.
However, we should accept the
proposition that once the rates approach
their limits, it becomes difficult to reduce
them any further. The rates, particularly
death rate, are fast approaching the
limits.
However, human beings would
always love to live as long as possible.
We should, therefore, try to save as many
lives from death as possible. We are doing
it. We may not mind preventing birth but
once a life comes into being, we consider
it sacrosanct to prevent it from death and
abhor infanticide if it is committed.
Regarding high birth rate, we wish
to point out that total fertility rate, which
roughly speaking is the number of births
per woman, has declined from more than
INDIAN ECONOMIC DEVELOPMENT
8 to almost 3, yet the birth rate has
increased because there are more women
(and men) around low death rates.Even
when a couple starts replacing itself, it
will take about seventy years for
population to stabilise in terms of
number because the couple will, on an
average, live seventy years.
One major incentive for parents to
choose smaller number of children is
lower infant mortality. A lot of reduction
in death rate is due to reduction in infant
mortality. It is bound to lead to further
reduction in the birth rate. Death rate is
close to the lowest possible. The lowest
death rate is 7 per thousand anywhere
in the world. Further reduction in death
rate becomes difficult as in the face of
low birth rate, the population actually
becomes older. Reduction in birth rate
also requires improvement in economic
conditions and in spread of education.
Diversification of economy and of job
profile of female work would further
contribute to reduction in birth rate.
Composition of Population
Sex Ratio
Any real organic population has to have
both the sexes. There should be balance
in their numbers. Nature is found to give
a few more male births than female births.
But nature has also made women
sturdier. If there is no discrimination on
the part of the society, the two numbers
should be more or less in balance. Neither
too many or nor too few members of any
sex would be desirable as they are
complementary to each other in certain
respects. There are a few countries, like
the Russian Federation (1140), Japan
(1041), the USA (1029) and Indonesia
(1004), where the sex ratio is in favour of
POPULATION IN INDIA
women and there are many others in
which it is in favour of men. Similar is
the case within our own country.
In India, sex ratio is normally
defined as the number of women per
1000 men. Sex ratio for the country as
a whole has not been in favour of women
throughout the twentieth century. It
declined from 972 in the beginning of
the century to 927 in 1991 though there
were a few hiccups. In this perspective,
sex ratio of 933 in 2001 is considered a
welcome improvement. The highest
decline was observed in the sixties (See
Table 8.5).
It may be noted that in the
beginning of the century, many states
had sex ratio of more than 1000. Among
the large states, for example, Bihar had
sex ratio of 1061 and Tamil Nadu of 1044
whereas Kerala had only 1004. At the
close of century, while Kerala surged
towards 1058, Bihar and Tamil Nadu
reached 921 and 986, respectively.
Punjab and Haryana always had it bad.
But more important is to note that
sex ratio for the age group 0-6 has
decreased from 945 in 1991 to 927 in
2001. In Punjab, it has gone down from
875 in 1991 to 793 in 2001 and, in
Haryana, from 879 to 820 during the
same period. This shows some kind of
neglect of girls and the denial of right to
life to them.
Age Composition
Do we have more children playing in
the field or more old people walking with
TABLE 8.5
Sex Ratio in India during Twentieth Century (females per thousand males)
Year 1901 1911 1921 1931
Sex Ratio 972 964 955 950
Source: Census of India 2001 Series 1 India: Provisional Population Totals-Paper 1 of 2001, Registrar
General and Census Commissioner, India.
113
stick in the park or more adults
working on the farm or in the factory?
We do not yet have age composition data
from the Census 2001. With division
between three groups of people, viz.
children (0-14), adults (15-60) and
old people (60+), we provide age
composition data for selected years in
Table 8.6. It may be noted that the
proportion of children, which was slowly
rising and crossed the mark of 41 per
cent in 1971, has slid back and was
the lowest ever in 1991. Proportion of
the old went on increasing and is six
times in terms of proportion. If the
proportion of children had inverted-U
movement, the proportion of adults has
U-shape movement.
The changes are clear reflection of
high birth rates till seventies and
decreasing death rates across ages. The
decline in proportion of children is again
reflection of decreasing birth rate. The
rising proportion of old people may give
rise to certain problems.
Implications for Development
Contrasting Arguments
There are people arguing that population
is not a problem. You could argue in their
favour by pointing out that, during the
last two centuries since Malthus who
gave alarm, world population has become
more than six-fold from less than one
1941 1951 1961 1971 1981 1991 2001
945 946 941 930 934 927 933
114
hundred crore to six hundred crore and
yet, most people in most countries are
living three-times longer and living at
least twice better.
There are people arguing that
population is the only problem. You
could argue, as many do, that all
social ills of poverty, malnutrition, ill-
health, of environmental degradation
and even of crime owe basically to the
large size of population. There have
been people using such terms as
population bomb and population
explosion. Indeed, there have been
predictions that population rise, if not
controlled, would lead to food
catastrophes and ecological disasters.
Demographic Investment
A more sober view would be to accept
that a slower growth through reduction
in birth rate would leave better scope for
non-demographic investment.
Death takes place at every age
though its incidence is higher at lower
age (childhood) as well as at higher age.
A high birth rate means more children.
A lower infant mortality, which we always
aspire, means that more children will
remain alive. Larger the number of
children, the more we require schools
and health facilities. This has been called
as demographic investment. Planners
TABLE 8.6
Age Composition of Population for Selected Years by Broad Groups
(per cent)
Group Age Group 1911 1921
Children 0-14 38.8 39.2
Adults 15-60 60.2 59.6
Old 60+ 1.0 1.2
Source: India Yearbook Manpower Profile, Institute of Applied Manpower Research, 2001
INDIAN ECONOMIC DEVELOPMENT
sometime argue that higher investment
in demographic issues may reduce the
amount meant for developmental
activities.
Dependency Burden
The same has been couched in terms of
dependency burden. As children, during
their childhood, are pure and simple
consumers, they are considered as a
burden on the society. Larger the burden
for consumption, lower the scope for
saving for capital formation. It leads to
lower deepening of capital.
Expenditure on children has, in this
argument, not been considered
investment in human capital formation.
There are also people to argue that
population growth, in due course, adds
to labour force and the larger labour force
requires more capital in terms of existing
tools and equipment. This leads to less
capital for investment in new techniques,
which would help raise productivity per
worker. There are people to argue that:
1. population pressure, resulting from
high growth, was a major stimulus
for green revolution;
2. younger the population, the more
amenable is it to change, receptive
to new ideas, willing to shift
resources from low productive areas
1931 1961 1971 1981 1991
38.3 41.0 41.4 39.7 36.5
60.2 53.3 53.4 54.1 57.1
1.5 5.7 5.2 6.2 6.4
POPULATION IN INDIA
to high productive areas; and
3. population growth increases the
supply of decision-makers, expands
markets and leads to development
via shortages (that is, increase in
demand).
One may argue why many developed
countries are seeking a growth in their
population, why many others are
encouraging in-migration and why some
developing countries argue that
population growth will spur
development. A more sober view would
therefore be that a stagnant population
requires some growth and rapidly growing
population requires slowing down.
Measures to Check High Rate of
Growth
Analysis
Analysis based on recent all-India
surveys suggests that three factors
contribute to high fertility:
1. Large proportion of women in
reproductive age group contributes
to the extent of 60 per cent.
2. Unmet needs for contraception
contributes to the extent of 20 per
cent.
3. Fertility behaviour due to high
infant mortality again contributes
to the extent of 20 per cent.
We may not and should not control
number of women in any way but we may
control effective reproductive span by
raising the age of marriage. Then, we are
left with only two real options: one,
contraceptive devices must be made
available to the couples at affordable
prices and two, infant mortality be
further reduced in order to induce
115
couples who go for higher order births
in order to ensure that they are finally
left with the desired number. This
desired number may also reduce in the
next generation if infant mortality
reduces considerably.
One popular notion is that, in order
to get a son, some couples become
parents of several daughters and others
indulge in infanticide of female child or
abortion of female foetus. Begetting more
daughters may be preferable to other
practices. This desire for son contributes
to around 12 per cent extra births. People
are being educated about equality of
genders and right to life for girl chidren.
Factors for Decline in Fertility
Reducing the rate of growth finally
revolves round reducing birth rate. Birth
rate depends on age-specific birth
(fertility) rates and the number of women
in the specific ages. We may not directly
control the number of women; rather
their number is likely to swell as life
expectancy improves. So, it is the age
specific fertility rates, which we may have
to control. Slow reduction in birth rate
owes a great deal to availability of more
married women in reproductive age
group. Let us see what is the position.
See Table 8.7 for age-specific fertility for
reproductive ages by five-yearly age
groups. The data is based on SRS and
is, therefore, from 1971 only.
First thing we should note is that,
during the last three decades, the total
fertility rate has fallen by 40 per cent from
5.2 to 3.2. We should further note that
fertility rates have considerably declined
for early age groups as well as for late age
groups. At other ages also, there is
reduction. Reduction in age-specific
116 INDIAN ECONOMIC DEVELOPMENT

fertility may not be too drastic but it is
definitely significant. Considerable
pregnancy occurs at the age groups of 20-
24, 25-29 and 30-34. These may be cases
of first or second births. Yet, there is
considerable reduction particularly in the
age group of 30-34. Contraception should
have played no insignificant role as
women, at this prime age span, must
have been married. Hopefully, they are
avoiding higher order births.
Similarly, we also find that the mean
age at marriage of male and female, and
in rural and urban areas, has been rising
and that proportion of married persons
in lower age group has considerably
declined.
General Guiding Principles for
Further Reduction
Women reproduce during age span of
15 years to 45/49 years. Postponement
of marriage, say till the age of 20 years,
will help avoid some of the births, which
are, otherwise, not very healthy ones. Age
group between 20 to 35 years is the most
fertile period but marriages take place
for various individual requirements and
social reasons mostly in twenties.
Therefore, there is a need to make
couples in this age group feel that they
opt for fewer children and there is
availability of artificial means to control
pregnancy. As couples, particularly
women, get more educated, take to non-
agricultural jobs and are aware of
increasing survival of children, they are
likely to go for having smaller number of
children.
For couples, who find it economic to
have more children, there has to be a
programme of education to make them
aware that it is not in their interest.
Simultaneously, there have to be
possibility of visible improvement in
their standard of living -- a ray of hope
for better living.
There are various schemes of the
Government, which have contributed to
the reduction of birth rate, more so in
that of total fertility rate, along with

TABLE 8.7
Age-specific Fertility by Age Groups of Reproductive Period (per thousand)

Age Group 1971 1981 1991 1998

15-19 100.8 90.4 76.1 54.0
20-24 250.8 246.9 234.0 220.3
25-29 254.8 232.1 191.3 182.8
30-34 202.2 167.7 117.0 104.2
35-39 137.8 102.5 66.8 54.3
40-44 62.2 44.0 30.6 25.0
45-49 24.2 19.6 12.1 9.0
TFR* 5.2 4.5 3.6 3.2
*TFR = Total Fertility Rate;
Note : Bihar and West Bengal are excluded in 1971 and Jammu & Kashmir is excluded in 1991
and 1998.
Source : Compendium of Indias Fertility and Mortality Indicators 1971-1997, based on the Sample
Registration System, Registrar General India, 1999 and India Yearbook Manpower Profile,
Institute of Applied Manpower Research, 2001.
POPULATION IN INDIA
general improvement in living and
efforts in reduction in death rate,
particularly of infant mortality rate.
Specific Measures
Just after Independence, it was sugges-
ted to the Government that a population
policy should be formulated and a
population commission should be set up.
We went half way. We put in place a
family planning programme, which was
later converted into family welfare
programme. We have now got a National
Commission on Population.
Despite the fact we have been
somewhat slow in achieving low
population growth, it is important to note
that our approach was always more
holistic than just birth control
programme. Health of mother and child,
even at the risk of increase in population,
was always part of our agenda. Ours had
been an integrated approach and we
believed in more indirect influence.
Therefore, our main planks of family
welfare continue to be :
1. Motivating couples to adopt family
planning practices (through
contraceptive devices);
2. Spreading knowledge about
contraception through various
media devices, health workers/
family welfare workers, and
community processes;
3. Supplying contraceptives through
primary health centres and health
sub-centres and dispensaries;
4. Popularising terminal methods such
as vasectomy and tubectomy; and
5. Reducing infant mortality rates and
improving health status of mother.
117
Yet, said once Indira Gandhi,
development is the best contraceptive!
And we see that, with development, there
has been perceptive reduction in birth
rate, death rate and growth rate. The
Government is making massive efforts
to reduce death rate, particularly infant
mortality rate, and people are adopting
family planning now on their own.
Concluding Remarks
From the census data available for the
twentieth century, we tried to gauge the
trend of rise in population and studied
ever-rising increase by absolute number
in population. Turning this increase into
growth rate, we discover that the growth
rate has crossed its peak somewhere in
the seventies. We also analysed growth
pattern and on that basis, delineated two
divides and four phases in demographic
history.
Resolving the growth rate into factors
of birth rate and death rate, we studied
the pattern of birth rate and death rate
over the century. In terms of
demographic transition theory, we found
that we are in the throes of a phase in
which, while death rate stabilises, birth
rate continues to decline.
Our next step is to study the age and
sex composition of population over the
century. While our overall sex ratio has
shown improvement in 2001 over 1991,
the sex ratio for children (0-6) has
drastically worsened. As expected, the
proportion of children in population first
increased as birth rate was high but later
decreased as birth rate started declining.
The proportion of old people is rising,
which may give rise to certain problems
in the days to come.
118 INDIAN ECONOMIC DEVELOPMENT

We, then, shifted our attention to of the age-specific fertility rates, we

implications of large and growing
population. Posing the contrasting views
about whether population is a problem
in the days to come, we gave our view
for moderating the growth rate of
population. We discussed the
implications in terms of demographic
investment and dependency burden of
increasing population. We also provided
arguments in favour of having large
young population.
Finally, we discussed the ideas about
checking high growth rate of population.
Given the fact the death rate has to be
further reduced, measures for birth
control become important. From the study
discover that there was satisfactory
reduction in fertility rates. By promoting
the idea of a little late marriage may help
curtail overall fertility rate to some extent.
Meeting the unmet demand for
contraceptives will go a long way. With a
view to inducing certain couples to adopt
small family norm, further reduction in
infant mortality rate is still important.
Integrated health service has done a good
job and should continue to build up
confidence and rapport. Community
should be involved as much as possible.
We also noted Indira Gandhis prescription
that development is the best pill.

EXERCISES
1. What should be the considerations for judging whether the population of a
country is large?
2. Using round figures, discuss the growth of population of India during the last
hundred years.
3. What future scenario do you see for population in India?
4. Why are certain years called years of the great divide and the small divide?
5. Discuss the characteristics of four demographic phases of Indian population
in terms of levels and trends of population growth.
6. Briefly discuss the idea behind demographic transition.
7. Discuss the trends of birth rate and death rate over the century and its impact
on growth rate.
8. Do you consider that reduction in birth rate in India is commendable?
9. What had been the basic cause of dramatic rise in population: high birth rate
or low death rate or a combination of both?
10. Discuss trends of sex ratio and its social implication.
11. Discuss the changes in age structure of population over the century.
12. Argue: (i) Population is the only problem, and (ii) population is not a problem
at all.
13. Discuss the implications of increasing population for the economy in terms of:
(i) demographic investment, and (ii) dependency burden. Give the contrary
views also.
POPULATION IN INDIA 119

14. What are the major factors contributing to the fertility?

15. What are general guiding principles for checking high birth rate?
16. What are specific measures, which have been instrumental in checking
population growth in India?
17. Differentiate between birth control, population control, family planning and
family welfare.
18. How do you view the idea that reduction in infant mortality which would
immediately increase population needs to be promoted in order to bring growth
rate down in the long run?

ACTIVITY

Note down arguments which people in your vicinity give in favour of large
families as well as in favour of small families. Analyse these statements with
respect to socio-economic profile of the people giving the arguments.
120
CHAPTER 9
Poverty in India
Introduction
Poverty is perhaps the greatest challenge
that the societies like ours are facing.
Poverty, in any society, is intimately
associated with inequality. Everybody
may have worked for himself/herself.
Such societies may not have had the
system of private property nor would
people therein have produced to sell to
others and thereby exchange goods. But
we have had, by now for thousands of
years, societies with poverty, both in
absolute sense and relative sense. There
were always sensible people who wanted
to alleviate, if not abolish, poverty and
there were people who wanted to do away
with inequalities of various varieties.
We shall have, however, a limited
agenda to understand the present
position of our own poverty and
inequality and measures being
undertaken to alleviate them.
We shall concentrate more on
measurement of poverty and its estimates
for India. Towards the end of the Chapter,
we shall narrate some of the specific
measures undertaken by the
Government of India to alleviate poverty.
Absolute and Relative Poverty
There are poor societies and rich
societies. Within a given society also,
INDIAN ECONOMIC DEVELOPMENT
there are poor people and rich people.
Governments all over the world use many
criteria to identify the poor so that they
can be given special attention that may
lead to improvement in their livelihood
status.
When we speak in terms of relatively
poor or rich, we make pair-wise
comparison. Person A may be poorer
than or richer than or equal to person B
by the scale of income criterion which
we take into account for comparison. Call
it relative poverty or inequality. We need
not fix a level or point on the scale of
criterion. It is a comparison between two
persons. If there are n persons, there
are n (n-1)/2 pairs if ones comparison
with oneself is not done; otherwise pairs
are n2/2. Inequality for each pair may
be thought of in terms of the absolute
difference between incomes of the
persons of a given pair. For measuring
the level of inequality in the society as a
whole, these comparisons have to be
condensed in some way. One such
measure is known as Gini coefficient,
which is very popular among
researchers.
Instead of considering all pairs, one
can compare ones position vis-a-vis
some parameter (say, the mean) of the
distribution. Now there are n
POVERTY IN INDIA
comparisons. For measuring the level
of inequality, these comparisons, again
measured by the difference of ones
income from the mean income, have to
be condensed into one single number.
Standard deviation (or its division by
the mean) is one such measure of
inequality.
Some attempts have also been made
to choose only some values of the
distribution. Range, for example, is one
such measure. Range is defined as the
difference between maximum and
minimum value. Some people prefer to
divide the range by the mean.
In short, the point is that inequality
concerns with the pair-wise comparison
or comparison with some parameter of
the distribution in whose respect we are
considering inequality. Poverty, on the
other hand, concerns with the
comparison with respect to a fixed line,
called poverty line. It is to be noted that
the distribution parameter like mean
goes on changing as distribution goes on
changing. But poverty line is fixed
extraneously and, therefore, remains
fixed.
Poverty Line
Poverty is normally defined with
respect to poverty line. But what is
the poverty line and how is it fixed?
Poverty line is a cut-off point on the line
of distribution, which divides the
population as poor and non-poor. For
simplicity, we consider distribution of
income. People with income below
poverty line are poor and people with
income above poverty line are non-
poor. Suppose we are considering
distribution of income per month or
per year. Suppose there are ten
121
persons with income 10, 17, 23, 30,
40, 50, 60, 70, 80, 90 units (Rupees,
Hundreds of Rupees or Thousands of
Rupees). Further, suppose, poverty line
is 50 units. Obviously, five persons are
below poverty line. In other words,
50 per cent people are below poverty
line. We shall see that this measure of
poverty, percentage of people below
poverty line, is known as head count
ratio. But how do we fix this number,
which is known as poverty line? Before
we try to answer this question, let us
see the implications of fixing a very
high or very low poverty line.
High/Low Poverty Line
People often argue that our poverty line
is too low and that a particular poverty
line tells us that more than 90 per cent
of people in India are actually poor. There
are others who argue that the poverty
lines could be fixed at a particular level
by persons who are interested in showing
a high proportion of people as poor so
that they go on formulating and
implementing poverty alleviating
programmes and keep themselves
engaged. Let us understand the
implications of these propositions.
Suppose, for the example given above
poverty line is 100 units, then everybody
is poor and everybody is in queue for
assistance. Wherefrom do you get
resources (money) to give assistance?
You have to wait and see that people
grow out of poverty on their own, if they
can. The same will be the case when
there are too few on the other side of the
poverty line. On the other hand, if
poverty line is just 5 units, then
everybody is above poverty line and
poverty is not an issue as no one or very
122 INDIAN ECONOMIC DEVELOPMENT

few people deserve assistance. They are
very few poor simply because we have
deliberately fixed a very low poverty line.
Therefore, neither high nor low
poverty line is desirable; it has to be
reasonable from the feasibility of policy/
schemes. It should have some
relationship with the capacity of the
nation, which may roughly be taken as
the per capita income.
Poverty Line in Terms of
Consumption or Income
We have already pointed out that many
criteria including income and consumption
are used to define poverty line. Among
them, income is the most comprehensive
criterion. Income is suggested to be a better
measure as it is considered as potential
consumption and permits long-term choice
through saving. But income is likely to
fluctuate in larger degree than
consumption. Consumption is said to be
steadier as it is maintained through
accumulation or spending of savings if
income were to fluctuate. We may note that
the difference between income and
consumption is called saving. Saving may
be positive or negative. Negative saving is
also known as dissaving.
In countries where data on income
distribution is not available, data on
consumption distribution is accepted as
proxy for income distribution. India is
one such country. It, however, means
that the people on poverty line are
considered neither savers nor dissavers
-- neither lenders nor borrowers! In India,
we have another reason to consider
consumption, which is that we have a
long series of consumption data collected
through sampling surveys conducted
by the National Sample Survey
Organisation (NSSO).
Fixing Poverty Line
How is the poverty line fixed then? It has
been fixed in various ways. Consumption
of food is considered the most important
as food is essential for life. Fix the diet
with minimum quantities of essential
items. Calculate the cost of this diet.
Increase this food cost, say by 50 per
cent, to allow consumption of other (non-
food) items such as clothing, shelter,
lighting, etc. for we know that nobody,
in a civilised society, lives by food alone.
You may like to add certain expenditure
on medical care if it is not provided free.
This is consumption expenditure line of

DOLLAR POVERTY LINES

International organizations often refer to $1 a day and $2 a day poverty lines for some
estimates they wish to make for the world as a whole. People with income below $2 are
considered poor and people with income below $1, very poor.
If per capita income of a rich country in terms of dollars at exchange rate comes out to
be $30,000 per annum, there is no problem for them to consider the poverty line at $350
or $700 a year.
We in developing countries very often refer to such poverty lines without
understanding its implications. If everyone of us were to live at poverty line level of $1 a
day, total national income required would be Rs 19,00,000 crore at present exchange
rate, which may be just around the total national income ! Think of $2 a day poverty line,
after complete redistribution, we shall all be poor !
POVERTY IN INDIA 123

DADABHAI NAOROJI AND POVERTY LINE

Dadabhai Naoroji, the grand old man of India, was perhaps the first to employ the idea of
poverty line. He used the menu for a prisoner and used appropriate prevailing prices to
arrive at what may be called jail cost of living.
However, only adults stay in jail whereas in an actual society, there are children too.
He therefore appropriately adjusted this cost of living to arrive at poverty line. For this
adjustment, he assumed that one-third population consisted of children and half of whom
consumed very little and the other half of whom consumed half of the adult diet.
Thus, the weighted average of consumption of the three segments gives the average
poverty line, which comes out to be three-fourths of the adult jail cost of living. You can see
from below how the factor of three-fourths can be arrived.
(1/6)(Nil) + (1/6)(Half) + (2/3)(Full) = (3/4) (Full)

poverty, which takes into account food Procedure

and non-food items both.
Some would suggest that such
calculations should be made at
household level as food, though
consumed individually, is cooked for all
members of the family and consumption
of many other items is also shared.
Dividing the household poverty line by
the size of the household, per capita
household poverty line can be obtained.
You may then like to add expenditure on
education of children also. Some may like
to give some allowance for wastages. Of
course, we preserve the right to educate
people on all such matters as wastage.
Present Practice of Fixing Poverty
Line in India
Some people find the present method of
fixation of poverty line by the
Government quite confusing. It requires
some patience to understand. We shall
provide here a very simplified account
of the actual procedure. It has already
been noted that we settle for private
consumption expenditure instead of
income, partly because data on income
distribution is not available.
First, we confine ourselves with
measuring private final consumption
expenditure, which is neither
consumption expenditure on food alone
nor full-blown income. We do not include
public consumption expenditure either.
We incur this expenditure to buy both
food items and non-food items. Nobody
actually buys clothes or burns lights only
after having prescribed food; they buy
food and non-food items almost
simultaneously. Those who smoke beedi,
for example, do not necessarily do so only
after they had food worth so much of
calories. And we treat people as people
and allow them to choose their own
pattern of expenditure.
Second, for each of the group of
people, classified according to household
consumption per capita, we write down
quantities consumed of food and non-
food items in a tabular form.
Third, using calorie content of a unit
of a particular food item, we can calculate
the total calories consumed per capita.
Fourth, starting from the lowest
expenditure class, we move upward and
locate the consumption expenditure
class in which case, the recommended
124
calorie needs are satisfied. As the
quantities written against the
consumption classes are average
quantities, we can associate these
calories with the mid-values of the
respective consumption classes.
Calorie Norms
But how are the calorie needs fixed?
Some are children, some are adults and
some are old. Some are men and some
are women. Some are sedentary workers
and some do hard work, even if we ignore
climatic differences of the areas of
residence. Nutritionists, when asked to
suggest the minimum amount of calories
that people should consume in order to
remain fit for life and to carry on normal
productive activity they perform,
recommend different amounts of calories
for different groups of people. Groups are
usually defined according to age, sex and
activity. Our nutritionists categorize
population into sixteen categories
defined by age, sex and activity, and
recommended minimum calories varying
from 300 calories for children below 1
year of either sex to 3600 calories for
young man engaged in heavy work.
Population Composition
When the first attempt was made to
estimate the poverty line in the 1970's,
the population data provided by census
1971 was used. To start with, the whole
population was split and grouped into
16 categories. For example, female non-
workers in urban areas are around 23
per cent of total urban population
whereas males working in rural areas
constitute 22 per cent of total rural
population. This is estimated for all 16
INDIAN ECONOMIC DEVELOPMENT
categories of people, separately for rural
areas and urban areas.
Average Calorie Norms for Rural
and Urban Areas
Multiplying calorie requirement of a
certain group by its proportion in the
population and adding all such products,
we get the average calorie requirement
of the population. This exercise was
made separately for rural areas and
compared to persons living in urban
areas a greates proportion of these who
engaged in heavy work were found in
rural areas. As a result, average
requirements for rural and urban person
was found to be 2435 calories and 2095
calories respectively, which are
approximated to 2400 and 2100 calories
and which are reported in most of the
writings. If population composition were
to change, these average calorie
requirements would also change. But
this change would be nominal.
Thus, in India, poverty line is the level
of private consumption expenditure,
which ensures a food basket that would
supply the required amount of calories.
It should be noted that it is not just the
cost of food items giving the prescribed
calories. Peoples normal purchase is
accepted and expenditure at which
people buy food items in such amounts,
besides other items, that ensures the
required amount of calories, is accepted
as poverty line. The required amount of
calories calculated in this way is the
minimum amount. The people are
allowed to enjoy other items in such
amounts as they choose under the
circumstances.
At the time of the official exercise,
survey of consumption expenditure
POVERTY IN INDIA 125

carried out by the NSS for the year 1973-
74 was available. The consumption
survey data is tabulated by per capita
household consumption expenditure.
Against a class-interval of per capita
household consumption expenditure,
items of consumption by amount are
written down. Therefore, for an interval,
one can calculate the amount of calories
if we know the number of calories that
consumption of a unit of certain food
item provides to human beings. The
required amount of calories would
coincide with one of the class-interval
or will fall between two intervals. Using
inverse interpolation, one can find with
ease the amount of consumption
expenditure at which minimum calorie
requirement is met. This is poverty line.
Rural poverty line was found to be
Rs 49.09 and urban poverty line,
Rs 56.64 per month at 1973-74 prices.
Estimation of Poverty in India
We may remember that the data with us
is actually sample data. Sample
percentage is accepted as population
percentage. Multiplying these percen-
tages with appropriate population sizes,
we obtain absolute number of poor
persons in rural and urban areas of each
state. These numbers can be added in a
variety of combinations. For finding out
total number of the poor in a particular
state, add the number of rural poor and
urban poor in that state. For finding out
total number of the poor in a particular
group of states, say southern states, add
rural and urban poor in all states in the
group. For finding out rural (urban) poor
in the country, add rural (urban) poor of
all states. For finding out total number
of poor in the country, add rural poor in
the country with urban poor in the
country. Divide these aggregates of the
poor by appropriate aggregates of
population, we get percentage of people
below poverty line. Percentage of people
below poverty line is also known as head
count ratio or poverty incidence ratio.
Poverty Estimates for India
Most of the estimates of poverty in India
are in terms of head count ratio. Many
scholars have delved into the estimation
business. The Government of India and
the World Bank made estimates of
poverty for India. Many of these series
start right from the mid-fifties. However,
we are providing the estimates of poverty,
which have been made with common
methodology and comparable sample
surveys of consumption expenditure
since 1973-74. The Planning Commi-
ssion has prepared these estimates (See
Table 9.1).
Between any two years reported, you
can notice that there is reduction in
poverty. It is possible that there might
be a year or two in any duration when
this might not have happened. On the
basis of smaller samples, some scholars
TABLE 9.1
Head Count Ratio Estimates of Poverty:
Rural, Urban and India (in percentage)
Year Rural Urban India
1973-74 56.4 49.0 54.9
1977-78 53.1 45.2 51.3
1983 45.7 40.8 44.5
1987-88 39.1 38.2 38.9
1993-94 37.3 32.4 36.0
1999-00 27.1 23.6 26.1
Source: Economic Survey 2001-2002, Economic
Division, Ministry of Finance,
Government of India.
126
did infer that. Yet, on a long-term basis,
there is an inescapable conclusion that
poverty had been reducing over time. (It
is in contrast to the period between 1956-
57 and 1973-74 when poverty ratio just
fluctuated). You can further note that in
the six years since 1993-94, there was
10 per cent point reduction in rural and
urban areas both. From Table 9.1, one
can make out a few more generalisations:
1. Poverty, which was more than 50
per cent in the mid-seventies,
reduced almost to 25 per cent by
the end of the century;
2. Rural poverty has always been
slightly higher than its urban
counterpart;
3. The first significant reduction took
place between 1977-78 and 1983;
4. The reduction in poverty between
1993-94 and 1999-2000 has been
spectacular.
However, when we try to find out the
absolute number of the poor, the picture
is not so satisfactory. Let us multiply
these percentage figures with absolute
size of the relevant populations (and
divide by 100) in order to obtain the
absolute number of poor. We shall obtain
the figures presented in Table 9.2.
You can see that, except for the year
1999-2000, there is no significant
change in number for the country as a
whole. The number of the poor in the
country as a whole was around 32 crore;
it rose and fell between 31 crore and 33
crore. The story is the same in the rural
area; there is a little reduction. In the
case of urban area the rise is secular,
only the size of rise fluctuated. A little
reduction in rural areas is offset by
increase in urban areas. The number of
INDIAN ECONOMIC DEVELOPMENT
TABLE 9.2
Head Count Estimates of Poverty: Rural,
Urban and India (in crore)
Year Rural Urban India
1973-74 26.1 6.0 32.1
1977-78 26.4 6.5 32.9
1983 25.2 7.1 32.3
1987-88 23.2 7.5 30.7
1993-94 24.4 7.6 32.0
1999-00 19.3 6.7 26.0
Source: Economic Survey 2001-2002, Economic
Division, Ministry of Finance,
Government of India.
poor in 1999-2000 is about two-thirds of
that in 1973-74. The size of urban poor
in 1999-2000 is bigger than what it was
in 1977-78. Rise in population might
have contributed to some extent to this
situation. But the fact remains that we
still have miles to go!
Poverty Alleviation Programmes
If overall growth leads to growth of all
sections, households or persons, the
people below poverty line will get closer
to it and will cross the poverty threshold
at some stage. In the beginning of
planning period, it was widely believed
that growth would percolate down
through better wages, better employment
opportunities, better productivity and
higher production. It was termed as
trickle down theory or percolation theory.
It was though, admitted, that there will
be a very small section not well
connected with the economy through
productive channels, say 10 per cent of
population, for whom special efforts will
have to be made.
It does not mean that no efforts were
made in the direction of redistribution.
Redistribution of assets (particularly
land), taxing of the rich and middle
POVERTY IN INDIA
classes for property and income, taxing
commodities of luxury consumption items
at higher rate, subsidising essential
items like foodgrains, and providing free
education and mid-day meals were all
redistributive measures adopted with
this purpose. But, their success was very
limited. Or, one could say that, but for
these attempts, situation would have
perhaps been worse. These measures
have lost much of their significance.
It became clear by the mid-sixties
that success of growth and redistributive
measures will remain limited if some
special, supplementary programmes not
started to help certain occupational
categories and social sections. We are
confining to programmes started by the
Government of India. These programmes
were intended to be of two types:
(i) encouraging self-employment, and
(ii) providing supplementary wage
employment. These programmes are
mostly confined to rural areas as
numerically four times more poor stay
in rural areas than in urban areas. We
shall confine ourselves to rural
programmes only.
We shall concentrate on (i) self-
employment programmes, (ii) wage
employment programme, (iii) social
security programme (in brief), and
(iv) public distribution system. It may be
noted that these programmes are in
some sense entitlement programmes
while those helping the poor in
education, health or housing are
capability enhancing programmes.
Self-employment Programmes
Most important of all self-employment
generating programmes is the Integrated
Rural Development Programme (IRDP),
127
which has now been re-christened as
Swarnajayanti Gram Swarojgar Yojana
(SGSY). This is a centrally sponsored
scheme, which is in operation in all 5000
development blocks of the country since
1980. The grant/subsidy part is shared
between the Union Government and the
State Government on 50:50 basis. But the
scheme is, now, executed by the district
administration with the involvement of
Panchayati Raj representatives.
Under this scheme, the families
below poverty line (basically small and
marginal farmers, agricultural labourers
and rural artisans) are provided financial
assistance to acquire productive assets.
The purpose is that the families are able
to generate additional income on a
sustained basis. Assistance is provided
in the form of subsidy and bank credit.
The proportion of subsidy in the
assistance differs from category to
category: small farmer, 25 per cent,
marginal farmer, agricultural labourer
33.33 per cent and SC/ST/PH, 50 per
cent respectively. Coverage percentage
for various categories is also fixed.
There is a ceiling to the subsidy given.
More than five crore families have
been given assistance. Total assistance,
over twenty years since inception, might
be somewhere around Rs 40,000 crore,
of which no less than Rs 15,000 crore
form the subsidy. This total is the sum
of expenditure incurred over different
years, which obviously had different
prices. Average assistance, actually
investment from the viewpoint of
assisted family, comes out to be Rs
7,500-8,000. It has been suggested that
the investment is too low and it was too
thinly spread to generate sufficient
income on a sustained basis. The
128
families, which were extremely poor,
could not fare well with one time
assistance. The suggestion is that, if
amount for disbursal is low, fewer
families should have been assisted but
adequately assisted. By the same token,
it could also be suggested that relatively
better off within the poor should have
been assisted so that at least these
families could stand on their legs. There
would be others to suggest the opposite
because relatively worse off among the
poor deserve better deal.
The IRDP had several allied
programmes such as TRYSEM, DWCRA,
GKY, MWS and SITRA. According to an
assessment, accepted by the Planning
Commission, though they presented
together a matrix of multiple programmes
they had no desired linkages. For example,
TRYSEM is a training programme for self-
employment but less than 25 per cent of
TRYSEM trainees were assisted under
IRDP. Similarly, IRDP beneficiaries, if they
had training for meaningful self-employ-
ment could generate adequate income but
not even 5 per cent beneficiaries were
given training under TRYSEM.
There are studies reporting
corruption and assistance to non-
deserving families. Lukewarm attitude
of district officials and bank managers
for the fear of non-recovery is also
responsible for part of the failure of the
ACRONYMS
TRYSEM = Training of Rural Youth for Self-employment
DWCRA = Development of Women and Children in Rural Areas
GKY = Ganga Kalyan Yojana
MWS = Million Well Scheme
SITRA = Supply of Improved Toolkits to Rural Artisans
INDIAN ECONOMIC DEVELOPMENT
scheme. If the number of poor in the
rural areas continued to be 25 crore
(5 crore families) despite assistance to
more than 5 crore families (25 crore
persons), what could be the explanation?
One could well guess:
1. Assistance might not have gone to
the poor at all;
2. Assistance might have been too
small to start any meaningful self-
employment generating productive
activity;
3. Incorrect selection of projects
(purchase of milch cattle was quite
popular but there was little care for
finding out availability of feed,
fodder or veterinary services on the
one hand and milk market on the
other); and
4. Assistance for productive purposes
gets eaten into consumption
activities such as meeting expenses
on marriages.
The SGSY, mentioned earlier claims
to be holistic programme, taking care of
infrastructure facilities, technology,
credit and marketing arrangements. Let
us hope.
Wage Employment Programmes
For people, who had no assets of their
own (like land and cattle), simultaneously
with IRDP, a wage employment
POVERTY IN INDIA
programme, viz. National Rural
Employment Programme (NREP) was
launched in 1980 as a centrally
sponsored scheme with 50 per cent
funding from the Union Government.
Supplementing the above scheme,
another wage employment programme
was launched on 15 August 1983. The
scheme, known as Rural Landless
Employment Guarantee Programme
(RLEGP), was again a centrally sponsored
scheme but with 100 per cent funding by
the Union Government. However, in
1989, the two schemes were merged and
the merged scheme was called Jawahar
Rojgar Yojana (JRY) to be funded by the
Union Government to the tune of 80 per
cent, the rest 20 per cent being provided
by the respective States. People below
poverty line were to be given work at the
rate notified and execution of the
programme was to be done by the village
Panchayats themselves.
The objective of the programme was
generation of gainful employment for the
unemployed and underemployed men
and women in rural areas. But there
were other objectives too. We can
mention two significant ones:
1. Creating community and social
assets such as social forestry, soil
conservation works, minor
irrigation works, renovation of
village wells, rural roads,
dispensary, school, Panchayat
Ghar, market yard, bus stand,
Anganwadi/Balwadi, etc., and
2. Producing positive impact on wage
level.
Two schemes, earlier sub-schemes of
NREP/RLEGP, were made part of JRY.
These are Million Well Scheme (MWS) to
129
provide open irrigation wells, free of cost,
to poor small and marginal farmers
belonging to SC/ST category and Indira
Awas Yojana (IAY) to provide houses, free
of cost, to SC/ST families--now extended
for other poor from other social groups
as well.
The scheme has created some
infrastructure and has given employ-
ment to some people for some days. But
the way the programme was run did not
either generate sufficient employment
to make any dent on poverty or create
relevant infrastructure. In the year
1998-99, employment created was less
than 40 crore man-days at total
expenditure of Rs 2,500 crore. Taking
material component at 40 per cent,
one can find that Rs 1,500 crore were
paid as wages. Thus, average wage rate
comes out to be less than Rs 40. Even
if we take 4 crore persons to be in the
queue for work, a person on an average
got work for 10 days in a year. Total
help to a family, with work to both man
and wife, would be at the most Rs 800
in a year. This is too paltry a sum for
any family. In such a scenario, the
charges that Panchayat officials
favour their kith and kin get some
validity.
Now, it is understood that the
scheme emphasised too much on
employment creation and neglected
development of village infrastructure.
Jawahar Rojgar Yojana (JRY) has
been replaced by Jawahar Gram
Samaridhi Yojana (JGSY). It aims
at creation of demand-driven
community village infrastructure and
employment generation is only
secondary objective.
130
Social Security
There is very little worth the name by
way of social security. However, there
are centrally sponsored schemes, 100
per cent funded; (i) for old age persons
without support; (ii) for poor bereaved
families on death of primary
breadwinner; and (iii) for women of poor
households on pregnancy. A beginning
has been made in right direction, though
sums to be paid are too small to
materially change their conditions. The
scheme for the pension for old age
persons is said to be quite successful
whereas awareness about two other
schemes is said to be lacking.
Food Security
Food security to poor people is envisaged
through public distribution system (PDS)
for poor families, integrated child
development scheme (ICDS), and mid-
day meals at schools (MDMS).
The per capita availability of
foodgains in the country during the last
fifty years has risen from less than 400
grams to nearly 500 grams by the close
of the century. However, a lot many
people remain hungry, undernourished
and malnourished due to their low
purchasing power.
We needed to have a buffer stock so
as to ensure price stability of foodgrains,
production of which is subject to vagaries
of nature. As support price for agricultural
commodities were found to be good
incentive to encourage production, our
Government went on building up stock
which is much in excess of needed buffer
stock. While we hardly need 20 million
tonnes, we have 60 million tonnes.
Co-existence of underfed people and
overstocked warehouses of FCI (Food
INDIAN ECONOMIC DEVELOPMENT
Corporation of India) is a dilemma,
difficult to resolve. Anyway, foodgrains
were made available at cheaper rates
to the poor (and to the non-poor as well)
as a measure of food security through
four lakh Fair Price Shops (FPS) in the
country--through better arrangement in
urban areas everywhere and in all areas
in some States. At the present juncture
it is operating a business of Rs.15,000
crore and reaching in some or the other
way to 16 crore families. The operation
involves a subsidy to the tune of
Rs 8,000-9,000 crore, equivalent to
2.5-3.0 per cent of the Union budget
expenditure. Whole of the subsidy is not
reaching the poor because part of the
subsidy is just the cost of over-holding
of stocks at high cost. Whatever little the
poor can afford to buy from FPS at
convenience, is not bought because of
inherent weakness in the system and
also because it is usually insisted that
the poor must buy the whole of his
entitlement.
The PDS has definitely helped the
poor to some extent. In addition, under
ICDS (Integrated Child Development
Scheme), mothers and children below 6
are provided some help. Similarly, under
mid-day meals, children in some states
are given free cooked food in the school.
Concluding Remarks
We began by trying to understand the
difference between absolute poverty and
relative poverty. We tried to understand
the implications for a policy of assistance
of fixing the poverty line at too high a
level or at too low a level. We, then, tried
to gauge whether we should consider
distribution of income or consumption
in estimation of poverty.
POVERTY IN INDIA 131

Next, we provided a very simplified
account of poverty line which is fixed at
the national level in India and what were
the rural and urban poverty lines. As
poverty estimates based on a common
methodology and comparable surveys
are available for six points between 1973-
74 and 1999-2000, we presented and
analysed them for salient trends in terms
of poverty percentage and absolute
number.
Last, we noted that while growth and
general redistributive policy are necessary
for poverty alleviation, they could not be
fully trusted for fast alleviation. With this
in view, many focussed schemes, though
supplementary in nature, were launched
since the late seventies. We discussed
mainly those, which were implemented in
rural areas. While these programmes
generating self-employment and wage
employment might have lifted a few lakh
families above the poverty line and
brought others closer to the poverty line,
their success is rated as limited. Massive
non-farm activities in rural areas,
commensurate with the needs of the
people, are expected to click.

EXERCISES
1. What do you understand by poverty?
2. Explain the difference between relative poverty and absolute poverty?
3. Give a hint as to how relative poverty (inequality) in terms of income can be
measured.
4. What is the difference between a distribution parameter and the poverty line?
5. Define poverty line. Explain implications of fixing a high poverty line for policy
making.
6. Explain implications of fixing a low poverty line for making policy of assistance.
7. In what terms should the poverty line be defined: income or consumption?
Explain your answer.
8. How is calorie consumption of different consumption expenditure classes
obtained in India?
9. How calorie norms are fixed for average rural person and average urban person
in India?
10. How is poverty line fixed in India at the national level?
11. Discuss poverty estimates since 1973-74 for country as a whole and draw out
salient trends for rural and urban areas.
12. What is the level of poverty in India and in its rural and urban areas? How do
you view the reduction in percentage and number between 1993-94 and 1999-
2000?
13. Why was there a need for launching poverty alleviation programmes? Why
were they not launched earlier?
14. List some of the poverty alleviation programmes operating in rural areas.
15. Discuss the nature, working and result of self employment generating schemes.
16. Discuss the nature, working and result of wage employment generating
schemes.
132 INDIAN ECONOMIC DEVELOPMENT

17. Discuss in brief the food security measures adopted in India.

18. What do you mean by social security? For which groups do we have such
schemes?
19. What should be done, in your view, to alleviate poverty in India?

ACTIVITY
Group Activity : Try to find out how beneficiaries are selected for various poverty
alleviation programmes in your village/locality in your vicinity. Discuss your
observations with your teacher.
 CHAPTER 10
Unemployment
Introduction
Unemployment is a great problem. You
might have seen or met people who
are not having a job and you might
have noted anguish in their utterances.
The phenomenon shakes the
confidence of the people in the system.
The basic premise for many of us is
that all able-bodied persons above a
certain age (say 15 years) and below a
certain age (say 60 years) must work
if they are not pursuing any other
useful avocation like higher studies (or
engaged in home-making) and the
system should permit them to work.
There are others who think that all
those, from the above set of people,
who are willing to work must be
allowed by the system to work. There
are still others who think that at least
those, who are actively seeking work,
must get work.
The basic idea is that a person who
is just a consumer without being a
producer simultaneously will not be a
good and responsible citizen. From each
according to ones capacity must be a
dictum for a good healthy society as
should be to each according to his
needs. For being a producer, one need
not be a worker in ordinary sense of the
term or work under somebody. One can
employ others or employ oneself or get
employed under somebody. They are all
considered employed as they are
usefully engaged. Workers are either
self-employed when they produce goods
and services and sell their produce
themselves to the customer or wage-
employed when they sell their service
to others who sell their produce to
customers.
Some Important Observations
Children and Adults
Unfortunately, while a few below the
age of 15 and many above the age of 60
and not fully fit are compelled to work,
many people in their prime age
(between 15 and 60) and seeking work
(or willing to work) are forced to stay
idle. As a society grows in civilisation,
it should stop using its children. Use of
children in work is equivalent to
denying them childhood and stunting
their youth. It should be taken as a sin;
the right of the children not to work,
even if it amounts to playing rather than
schooling, must be respected. But, when
it comes to youth, they must participate
in a useful economic activity and
the society must allow them to do so. It
is through such engagement that
their energy and creativity finds
134
expression. It is criminal on the part
of the society not to make good use of
its youth force. It is doubly criminal to
turn them into dull adults and old
persons. The scene is quite perplexing
as there exists employment of children
whose rightful place is school and
playground and non-employment of
able-bodied adults.
Implications of High Unemployment
High unemployment is both economic
and, social problem. It is an economic
problem as non-utilisation of this
resource involves double cost of
maintenance and loss of output. During
the period of the Great Depression,
industrialised economies, including the
UK and the USA, suffered from
unemployment rate of around 20 per
cent and a loss of 40 per cent potential
output. They occasionally reach a very
high level of unemployment rate. It is a
major social problem as it causes
enormous suffering to unemployed
workers who have to struggle with
reduced income. During periods of high
unemployment, economic distress spills
over to affect peoples emotions and
family lives.
Women Work
Do you to know that much of the useful
work that non-working mothers do is not
recognised as work in economics?
Rearing of children, care for the elderly
people are no less considered as useful
activities. The logic that is employed by
mainstream economics is that these
activities are not taken into account in
the estimation of GDP and hence they
are not considered as work..
INDIAN ECONOMIC DEVELOPMENT
Types of Unemployment
There are always some unemployed
people in all economies, not always
because of their choice. Those who are
not working by choice are known as
voluntarily unemployed. We do not worry
much about them though they may have
good reasons for opting out as also good
circumstances permitting them to do so.
There are said to be countless reasons
why people might voluntarily choose not
to work. They may prefer leisure to work
at the going wage rate. They may be
searching for their first job. Low-
productivity workers may choose welfare
or unemployment insurance to low-paid
work, which defeats the purpose for
which such schemes are instituted.
Besides the people who are
voluntarily unemployed, there are people
who are visibly employed but actually
unemployed. This phenomenon is known
as disguised/hidden unemployment.
There may be three persons doing a job,
in agriculture or in a household
enterprise, while two could do it with
ease. If one of them is withdrawn there
is found to be no reduction in output.
Thus, there are two types of
unemployment, viz. open unemployment
and disguised unemployment, which
actually worry us. The concepts may be
elaborated as follows:
Open Unemployment occurs when
persons who are able-bodied, willing to
work or seeking work, and above a
certain age but are not engaged in
any economic activity. Disguised
Unemployment occurs when persons who
are actually engaged and, therefore, seen
employed, are not fully employed as a
part of it could be withdrawn without
causing any diminution of output. In the
UNEMPLOYMENT
example given above, you can see that
one-third of the labour force is only
superficially engaged. Engagement is not
co-terminus with employment. It is
entirely possible in a household
enterprise such as activity on a small
farm, whether owned and rented, where
work requirement for labour is less than
the labour available within the
household. There are many other
informal activities, in rural as well as in
urban habitations, where such a
situation exists. But is it not because of
lack of opportunities outside the
household activity/enterprise that forces
the household members to share the
inadequate amount of work?
Redundancy of engagement of a part
of total household labour in terms of
productivity has always been referred to
in literature. It has also been referred to
as the case in which a part of labour is
not gainfully engaged/employed. Still
further, we have indicated that they are
not fully engaged in terms of time
disposition. All these three criteria of
productivity, income/remuneration and
time-disposition are co-extensive in the
example of self-employment in household
economic activity. There is a hidden
belief in the productivity theory that
remuneration to a factor is given
according to its productivity. In fact,
income, productivity, and time-disposition
are three dimensions of employment and,
in labour market, they may not converge.
When governments talk of overstaffing
and plan to retrench people from
government offices or are not recruiting
people in place of those who retire, the
employees are considered redundant
from the angles of production and time-
disposition. So is the case with a director
135
on the board of a private company where
he or she get salary for signing only two
letters a day. The term was however
coined by Joan Robinson to refer to the
phenomenon of engagement of very
productive workers into shoe shining.
In a country like India, where more
than 50 per cent workers are still self-
employed, this hidden unemployment is
much larger. This is one reason that
some of these disguisedly unemployed
move to urban areas and become openly
unemployed. In this sense, open
employment is just the tip of the iceberg.
Open unemployment is often
categorised as cyclical, structural, and
frictional unemployment. If one so
wishes, one can first categorise open
employment into secular and cyclical
unemployment and then, secular
unemployment into structural and
frictional unemployment.
When aggregate demand for goods
and services in the economy falls far
below its capacity, a large chunk of
labour force gets unemployed. This is
known as cyclical unemployment. Under
the belief in a capitalist system, the
economy will pass through different
phases of a cycle around some secular
trend. These phases are known as boom,
recession, depression and recovery.
Boom is the phase of the highest
economic activity while depression is
that of the lowest economic activity.
While, in the case of depression, a lot of
people are thrown out of job, in the phase
of boom, many people, not normally in
labour market, are drawn into it. War
period is unfortunately similar to boom
insofar as total economic activity is
concerned. Many women were drawn
into labour force in Western countries
136
during the war periods and men were
thrown out during the depressions.
As time passes, some new economic
activities emerge, some existing
economic activities gain in importance
and some other lose in importance. As a
consequence, change in the demand
pattern for goods necessitates change in
the demand pattern for labour. This is
actually a change in structure in the
economic activities. But, labour force
cannot immediately metamorphose,
matching the change in demand pattern.
So, there shall be vacancies in one corner
of the economy and there shall be people
searching jobs in the other corner of the
economy. This is known as structural
unemployment. There is no overall
shortage of work but there is mismatch
between demand pattern and supply
structure. Some retraining and
redeployment may help people to some
extent. Structural imbalances occur
across occupations or across regions as
certain sectors grow while others decline.
High real wages, welfare benefits and tax
concessions can create high levels of
structural unemployment for entire
economies.
Further, labour market is not as
smooth as markets for other
commodities. There are many
institutional interventions. But, more
than that, some people are always on the
look out for better job prospects. Some
of them leave their present job before
picking up the next job. They engage in
some educational pursuit or training and
come back in the labour market. Many
women in urban area work for sometime
before marriage but leave the job after
marriage, beget children and come back
to labour market when children have
INDIAN ECONOMIC DEVELOPMENT
grown. They do not immediately get
absorbed in their preferred jobs at
expected wage. Such unemployment is
known as frictional unemployment.
Sometimes, this may be caused by
technological changes. Frictional
unemployment is, for many, one of
voluntary unemployment, people
searching their first job.
However, within a given year itself,
the overall level of economic activities in
many economies like ours may have
seasonal fluctuations. Some of you may
recall Gandhi telling rural populace to
engage in spinning as supplement to
work and income as he had discovered
that agriculture did not provide enough
work to people, particularly in the rainy
season. During the harvest season, there
is, though, some shortage of labour and
people usually not working are drawn to
labour force. And, some rickshaw
pullers/ construction workers, who move
from rural habitations to urban
habitations in dull season, move back
during the harvest. Such unemployment
is said to be seasonal unemployment.
Measurement of Unemployment
Irrespective of the reasons for which
people are unemployed, we may be
interested in knowing the extent of
unemployment in any given year. In fact,
we know many facts about a person who
is employed: where he is employed, at
what wage, at what position and so on--
all economic aspects. However, when it
comes to the unemployed, we know more
about his demographic/social
characteristics. So, unemployment is
studied in terms of rural/urban division,
male/female division, division by age,
and division by educational status, etc.
UNEMPLOYMENT
Labour Force and Work Force
Before we do so, there are some
particular terms used in this context,
which we ought to know. Instead of
labour supply which has to be
necessarily related to wages, here, we
talk of labour force. At best, we can refer
to labour force in terms of number of
persons usually employed or willing to
be employed (for major part of the year)
while labour supply can be referred to
as available mandays (actually working
for or willing to work). We also
distinguish between labour force and
work force.
All members of a population are not
supposed to be engaged in economically
productive activities. You have to begin
with the view that the very young and
the very old as well as the physically
or mentally challenged (infirm/
handicapped) are to be excluded. Thus,
those who can (and perhaps should)
produce goods and services can
constitute labour force. This is potential
labour force. A further deduction has
to be made for the people who are
engaged otherwise (in household
activities) or are not willing to work. It
implies that those who are actually
engaged in economically productive
activities as well as those, who can be
so engaged, constitute the labour force.
Those, who are actually engaged,
constitute only work force. The balance
between the labour force and the work
force is said to be the unemployed
labour force. In other words, employed
labour force is called work force.
When we divide labour force/work
force by the size of the population, we
get labour force/work force participation
rate. Rates are usually expressed in
137
terms of percentage, sometimes in terms
of per thousand.
Usual, Weekly and Daily Status
However, this is all in terms of usual
status. If you are a student and also work
in a shop, you are a member of the labour
force only when you spend majority of
your time in work. Your usual status is
then of worker. If the case is otherwise,
your status is of non-worker. If you are
available for work for more than 183 days
(>1/2 year) but you get work for less than
183 days, then you are unemployed by
usual status concept.
Survey people who come to you for
finding out about your employment/
unemployment status, may ask certain
questions and may find out whether,
during the week before the survey, you
could be said to be employed or
unemployed. This relates to the weekly
status to determine whether you were part
of the labour force or not, and if you are
declared to be in the labour force, whether
you were employed or unemployed. This
relates to weekly status employment/
unemployment. Knowing further details
regarding your daily status about
membership in the labour force and
whether you were working or not, the
average daily status employment and
unemployment can be worked out.
In short, usual status unemploy-
ment refers to number of persons who
were willing to work for major part of the
year (>183 days) but did not get work for
even 183 days. This is the size of
unemployment. Dividing it by the size of
the labour force, we get unemployment rate
by usual status. Similarly, daily status
unemployment refers to number of
mandays people were willing to work but
138 INDIAN ECONOMIC DEVELOPMENT

did not get work. This is the size of
unemployment by daily status. Dividing
it by the number of mandays available,
we get unemployment rate by daily status.
Unemployment In India
We have already suggested that
unemployment is studied in terms of
rural or urban division, male or female
division, division by age, and division by
educational status, etc. We shall confine
our discussion to rural or urban and
male or female divisions. We shall also
provide an idea about the size of the
labour focre and work force and their
rates since 1972-73 (See Table 10.1 for
labour force, work force and unemployed
labour force). Remember the NSS data is
based on sampling. Absolute figures are
obtained by multiplying participation
rates obtained from sampling data and
population figures obtained by
interpolation or projections.
We can note from the table that
during 1972-2000 our labour force has
increased from 24 crore to 41 crore, that
is by two-thirds. While the rural labour
force has risen from 20 crore to 30 crore,
a little more than 50 per cent, urban
labour force has risen from 4 crore to
10 crore, that is by 150 per cent.
Migration from rural to urban areas
must have played a great role. As you
can see that the urban females in labour

TABLE 10.1
Labour Force, Work Force and Unemployed Labour Force by Male/Female
and Rural/Urban Divisions (in crores)

Year Rural Male Rural Female Urban Male Urban Female Total

Labour Force
1972-73 12.87 7.09 3.29 0.77 24.02
1977-78 14.45 8.36 41.4 1.21 28.16
1983 15.59 9.13 5.02 1.30 31.04
1987-88 16.50 9.51 5.85 1.58 33.44
1993-94 18.93 10.47 6.73 1.84 37.97
1999-00 20.02 10.50 8.07 2.00 40.67
Work Force
1972-73 12.72 7.06 3.18 0.72 23.68
1977-78 14.14 8.01 3.88 1.04 27.07
1983 15.27 9.04 4.73 1.23 30.27
1987-88 16.05 9.20 5.50 1.45 32.20
1993-94 18.66 10.37 6.45 1.73 37.21
1999-00 19.68 10.40 7.71 1.89 39.68
Unemployed
Labour Force
1972-73 0.15 0.03 0.16 0.05 0.39
1977-78 0.31 0.35 0.26 0.17 1.09
1983 0.32 0.09 0.29 0.07 0.77
1987-88 0.45 0.31 0.35 0.13 1.24
1993-94 0.37 0.10 0.36 0.12 0.95
1999-00 0.32 0.10 0.29 0.09 0.80
Source : India Year Book 2001 Manpower Profile, Institute of Applied Manpower Research, New Delhi, 2001.
UNEMPLOYMENT
force have risen by 200 per cent though
they are still only 5 per cent of the total
labour force. It means more and more
women in urban areas are now willing
to work outside their homes. Rural
women are already working outside. Very
similar is the case for work force, needing
no extra comments.
When it comes to unemployed labour
force, we note wide fluctuations across
periods and across categories. For
example, in 1977-78 over 1973-74,
unemployment in all categories rose, and,
for women, in larger proportions. In the
next interval, while unemployment of men
does not decline, that of women drops
drastically, and this pattern gets repeated.
Unemployment in 1999-2000 is lower
than or at least higher when compared to
1993-94 or 1987-88. Yet, in absolute
number unemployment in 1999-2000 is
twice as large as in 1972-73.
However, as we try to find out what
proportion of labour force is unemployed,
we find that never has the rate of
unemployment in the labour force been
more than 4 per cent, the lowest rate
being just 1.6 per cent. When we
segregate it into different categories, we
notice that unemployment of women in
urban areas is the highest though it widely
fluctuated but even in 1999-2000 it is the
TABLE 10.2
Usual Status Unemployment Rates by Rural/Urban and Male/Female Division
(as per cent of labour force in the category)
Year Rural Male Rural Female
1972-73 1.2 0.5
1977-78 2.2 5.5
1983 2.1 1.4
1987-88 2.8 3.5
1993-94 2.0 1.4
1999-00 2.1 1.0
Source : Based on Table 10.1
139
highest among all categories (See Table
10.2).
Are these rates small enough to be
ignored? Are we justified to say that
unemployment is not a problem in India?
Compared to western countries, it
appears plausible to argue that our
unemployment rates are low. We can
perhaps say that our problem is poverty
while theirs is unemployment.
However, when we refer to daily
status unemployment rates, we find that
they are twice/thrice as high as usual
status unemployment. It means that,
though the people may not be
unemployed for major part of year, they
are unemployed on days they are
available and willing to work.
Unemployment rates in 1999-2000 for
different categories are about 7 per cent
except in case of urban female in which
case it is 0.4 per cent. When we try to
find out the position of the educated in
employment, we discover that, while
unemployment for urban male is 6-7 per
cent, that for rural female is as high as
30 per cent for graduates and 15 per cent
for matric-passed. Hence, higher the
education, higher the rate of
unemployment.
To conclude, we may note that low
unemployment rate may be a reflection
Urban Male Urban Female Total
4.8 6.0 1.6
6.5 17.8 3.9
5.9 6.9 2.5
6.1 8.5 3.7
4.5 8.2 2.5
4.5 5.7 2.0
140 INDIAN ECONOMIC DEVELOPMENT

of poverty. Poor cannot stay away from
work for long, irrespective of wages. But
there exists considerable mismatch
between the requirements of the
economy and availability of manpower.
This is structural unemployment. Some
new entrants to the labour force may be
searching for more jobs than are
available. Besides frustration that the
youth gets when he finds no job, it is a
wastage of national resources invested
in his/her upbringing and education.

EXERCISES
1. Bring out the importance of employment.
2. How is unemployment an economic as well as a social problem?
3. Why is womens household work not recognised as work?
4. What do you mean by voluntary employment? Is it totally voluntary?
5. Explain the meaning of involuntary unemployment.
6. Distinguish between open unemployment and disguised unemployment.
Explain it by examples.
7. Is disguised unemployment prevalent in agriculture alone? Where else do you
notice it?
8. Explain the meaning of cyclical and structural unemployment.
9. Explain the difference between structural unemployment and frictional
unemployment.
10. What do you mean by seasonal unemployment?
11. Explain the concepts of labour force, work force and unemployment and the
relationship among the three.
12. What do you mean by usual status employment and unemployment?
13. How do you find out labour force/work force participation rate?
14. What is unemployment rate by usual staus?
15. Try to explain unemployment rate by daily status.
16. What is present size of labour force and how is it distributed across categories?
17. How has unemployment grown over time by absolute number?
18. Discuss the pattern of and changes in unemployment rates.
19. What is the relationship between poverty and unemployment?

ACTIVITY
Note down efforts made by the people who are in search of a job. Try to
analyse whether their conditions can be understood in terms of categories
discussed in this chapter.
 CHAPTER 11
Infrastructural Challenges
Introduction
Infrastructure and its services play a key
role in economic development. Slow
growth of infrastructure impede the
growth of the economy. Development of
quality infrastructure, which is efficient
and low cost to users, however, requires
high upfront cost and often has long
gestation period. Heavy investment
requirement involved in its development
suggests that participation of all sectors
public, private and foreignmay be
needed.
Since many infrastructure services
operate at fairly large scale, they assume
monopolistic character. In such cases,
some regulatory framework is instituted
irrespective of its ownership in public or
in private sectors. The regulator should
be such that it has no vested interest in
running the service, or running it
inefficiently and/or pricing the service
at much higher level than its efficient
cost.
We have earlier suggested that
infrastructure services can be divided
into two categories economic and
social. We propose to discuss in this
chapter three economic and two
infrastructure services. These are:
energy, transport, communication,
education and health.
Energy
As we have seen in a previous chapter,
energy is a critical input for most of the
production processes and consumption
activities. Modern economic growth in all
countries is found to be associated with
a massive use of energy. In the last fifty
years, we have had more than four-fold
increase in total energy use for less than
three-fold population. It increased from
90 MOTE (million tonnes of oil
equivalent) in 1953-54 to 375 MOTE in
1996-97. But, if we concentrate only on
commercial energy, the increase is ten-
fold from 25 MOTE to 250 MOTE. It is
obvious that most of the increase
accounts for the shift from non-
commercial energy to commercial
energy. The share of commercial energy
in total energy consumption has
increased from 28 per cent in the early
fifties to 66 per cent in the late nineties.
While use of commercial energy has risen
ten-fold, that of non-commercial energy
rose only two-fold. Our per capita energy
consumption has increased by about 50
per cent from 0.25 OTE in 1953-54 to
0.36 OTE in 1996-97. It is considered
pretty low. While we will have to put
efforts to optimise availability of energy,
in view of limited potential of primary
142
ENERGY
Non-Commercial
Fuelwood
Conventional
Animal Dung
Coal
Biogas/Biomass
Petroleum/Gas
Crop Residue
Hydro
Nuclear
resources we will also be called upon to
conserve energy wherever and as much
as possible.
There is subtle distinction between
primary energy resources and final
energy resources. When coal is
consumed by electricity generation and
electricity is consumed by industry, we
call coal as primary energy resource and
electricity as the final one [By this
resource distinction, wood converted to
charcoal, used for boilers is a primary
resource and charcoal is a final
resource]. Coal, petroleum products, and
natural gas are all both primary
resources and final resources as they are
consumed directly as well as indirectly
while electricity is, by and large, the
only final energy resource. Major users
of the commercial energy are: industry
(50 per cent), transport (22 per cent),
household (12 per cent), agriculture
(9 per cent), and commercial
establishments (1 per cent).
Plan expenditure on development of
energy sector has been rising from plan
to plan from around 20 per cent in the
First Plan to 30 per cent during the Ninth
Plan, exception being the Second Plan
during which the share was just 12.5
per cent. With increase in efficiency,
elasticity of energy use with respect to
GDP has been declining.
INDIAN ECONOMIC DEVELOPMENT
Commercial
Non Conventional
Solar/Wind
Small Hydro
Ocean Thermal/
Wave
We shall concentrate only on
electricity as it is the prime mover of
manufacturing industry. Now, agriculture
also depends considerably on it.
Electricity
Electricity is really the power. Present
technology uses electricity extensively in
production of goods and services. Most
of domestic chores require it. Agriculture
has become heavily dependent on
electricity for many of its operations.
After industry, agriculture is the most
significant consumer of electricity. Bulk
of railway freight and passenger is
carried on electrified tracks. It is
considered a clean energy in comparison
with oil-based energy. We require reliable
and quality service of electricity at
economic cost.
All of us have seen some kind of failure
in electricity supply. Notwithstanding
significant progress in capacity addition in
electricity sector, we continue to be
deficient in electricity availability. While
overall deficiency in 1996-97 was about 12
per cent, peaking deficiency was around
18 per cent. The principal reason is that
demand for electricity continues to outstrip
increase in supply. Inefficient running of
plants is also partly responsible.
In India, there are three types of
generating plants hydroelectric, thermal
INFRASTRUCTURAL CHALLENGES
and nuclear. Nuclear plants have just 3
per cent of installed capacity and 4 per
cent of electricity supply. Plants using
non-conventional resources (solar, gobar
gas and wind) are insignificant in terms
of total supply. Once electricity has been
generated, that can be transmitted
through the same network. At local
level, electricity is downloaded and
distributed. Thus, there are three
phases of electricity supply: generation,
transmission and distribution. Private
investors are encouraged to enter the
areas of generation and distribution, not
transmission.
Our total installed capacity of
generating power increased from less than
1,500 megawatt to over one lakh
megawatts (1,00,000 MW) in the last fifty
years. Of the present capacity, 72 per
cent is in thermal sector and 25 per cent
in hydel sector. We are adding roughly
4000 MW each year. In terms of
generation of power, thermal is
contributing 80 per cent and hydel, 16
per cent. Hydel power projects, with
storage facilities, provide peak time
support to the power system. Where
peaking support from the hydel is poor,
as in the Western and Eastern regions,
thermal plants have to undertake this
task as well.
The Union Government, State
Governments and Private Sector are all
in power generation business through
plants using dams, steam and gas. In
addition, the Union Government has
plants, that use nuclear fission
technology. The Union Government
operates Power generation companies
such as NTPC (National Thermal Power
Corporation), NHPC (National
Hydroelectric Power Corporation) and
143
Nuclear Power Corporation of India Ltd.
(NPCIL). State Governments have their
State Electricity Boards. There also exist
Central Electricity Authority and Central
Electric Regulatory Commission.
Plant Load Factor
In order to judge the operational
efficiency of a thermal plant, an index
called plant load factor is used. If total
capacity is continuously used over a
year, that is, all 24 hours and 365 days,
total electricity generated would be
72,000 million watts (24 365) hours
= 63,07,20,000 million watt-hours,
which is equal to 6,30,720 million
kilowatt-hours or 630 billion kwh.
However, some allowance is made for
technical factors and we can accept 600
billion kwh as the maximum
generation. But we are actually
producing around 400 billion kwh.
Thus, combined plant load factor is
around 66 per cent.
However, if one tries to find out its
regional pattern, one finds that it
varies from 18 per cent in the North-
East to 80 per cent in the South. While
the North and the West finish with 72
per cent each, the East is around 50
per cent. Plants in private sector show
a load factor above 75 per cent and in
the Central (government) sector 72-73
per cent but in the State (government)
sector just about 64 per cent. Analysis
shows that State and Central sectors
are equally efficient if the State sector
plants in the East and the North-East
are not taken into account. Yet, it
should be mentioned that in recent years
we have improved plant load factor
considerably, particularly when management
of many thermal plants went into the
144
hands of NTPC. But we still need to
improve it further. Information
regarding coal-based thermal
generation suggests that overall plant
load factor is now close to 70 per cent.
In oil-based thermal plants, specific
oil consumption has reduced from
7.8 ml/kwh to 5.8 ml/kwh during the
nineties. The PLF in case of nuclear power
stations has improved from 52 per cent
in 1992-93 to 56 per cent in 1998-99.
Power Grids
It may be noted that as primary sources
for electricity power are unevenly
distributed, locations of generation plants
are also unevenly distributed. Consumers
are not necessarily located near
generating plants. Thus, bulk
transmission of electric power over long
distances becomes necessary. There was
no synchronous development between
generation capacity and transmission
network. Transmission lines were
overloaded (even for under loaded plants),
resulting into frequent breakdowns and
loss of surplus power, if any State had.
It is suggested that transmission
synchronous with generation requires
investment to the tune of 50 per cent of
that in generation. Till the late eighties it
was just 20 per cent.
A Power Grid Corporation was
established in 1989. It has organised the
countrys power transmission system
into five regional grids, each of which is
well-integrated. With a view to deriving
further economies and increasing
reliability, a national grid with
networking of regional grids is being
planned. The dream of one nation
should have one grid may be realised
by 2012.
INDIAN ECONOMIC DEVELOPMENT
Transmission and Distribution Losses
One major problem, which we often
read in the newspapers, is about
transmission and distribution (T&D)
losses. National average of this loss is
about 23 per cent while in some States
it is much more. In Delhi, it is 50 per
cent. This loss is more than the total
deficiency. Saving this loss would mean
less pressure on new capacity. Part of
the reason for T&D losses is technical
and part of it is simple pilferage and
theft with the connivance of line
personnel. It is suggested that
privatisation of distribution part would
check much of this theft.
There also exists some cross-
subsidisation of tariff between different
users of electricity. Railways are charged
the highest and in many States, farmers
are charged nothing.
Rural Electrification
The story would not be complete without
reference to rural electrification. By the
end of March 1996, 85 per cent of
5,87,288 villages (1991 census) were
said to be electrified. As many as 13
States were said to have 100 per cent
village electrification. But how do you
define village electrification? A village
was considered electrified if electricity
was used for any purpose within the
revenue boundary of that village. Thus,
a tube-well connection within the
revenue boundary of the village will
declare the village as electrified even
though not a single house is lighted or
home-based industries remain without
power. In many so-called electrified
villages power connection may not be
available on demand. Now, it has been
decided that a village would be
INFRASTRUCTURAL CHALLENGES
considered electrified only if electricity
is used in the inhabited locality, within
the boundary of the village for any
purpose whatsoever.
Total number of pump sets may
have increased to around 2 crore but
those energised by power may not at
present exceed 1.2 crore. While the
Government talks of this deficiency, it
quickly points out that most of these
pump sets are energy guzzlers partly
because of low tariffs charged from the
farmers as well as that in many places
energisation of pump sets by power may
lead to over exploitation of ground
water.
OUR OFFICIAL VILLAGE
The number of villages as per census 2001
in our country is 6.38 lakhs. You may be
knowing that our villages are officially
referred to as revenue villages which are
parcels of land and many have inhabited
portion(s). A village will definitely have
agricultural field and many other
establishments and may not have any
house or household. This village is known
as uninhabited village. Such villages
number around 50,000. But a village may
also have more than one inhabited areas
or hamlets, which may not be contiguous.
Total number of hamlets is more than
10,00,000.
Transport
The railways and the roadways are the
two modes of transport carrying the
bulk of freight and passenger traffic.
Coastal shipping and inland water
transport hardly contribute 2 per cent
of the total traffic. We have noted earlier
that the railways are eco-friendly and
more energy efficient, and have better
safety. Keeping this in mind, the
145
National Transport Policy Committee
(1980) and our Plans have been
emphasizing that the railways should
have the lead role in the transport
sector. However, the fact of the matter
is that the share of railways in freight
traffic plummeted from around 90 per
cent in 1950-51 to 60 per cent by 1995-
96 and that in passenger traffic, from
about 70 per cent to 20 per cent during
the same period. In most developed
countries it is found that traffic from
railways shifted away to highways and
airways [which got better of the
railways]. But the shift was not so
dramatic. Further, in countries of
continental size such as the USA, China
and erstwhile Russia, the railways have
maintained their dominance.
In India, the railways have been
starved of sufficient funds for raising
their capacity pari passu with demand.
On the other hand, transporters on roads
have been liberally permitted to cover
nation-wide distances, diesel was made
cheap through subsidies, and banking
sector came forward to support the
purchase of vehicles. This is sometimes
made out to be the result of ownership,
railways being completely in public
ownership, while road transportation,
particularly goods transportation, being
largely in the hands of private
entrepreneurs. This is a relative picture;
otherwise both the sectors have
improved over last fifty years.
Railways
You have already known that the Indian
Railways are the largest or the second
largest railway system in the world. This
extensive network comprises over 63,000
RKM (route kilometres) of around 45,000
RKM in broad gauge, 15,000 RKM in
146 INDIAN ECONOMIC DEVELOPMENT

metre gauge and 3000 RKM in narrow
gauge. Around one-fourth of total route
(and one-third of broad gauge) is
electrified. Electrified routes are in fact all
double or triple or even quadruple at
places and thus carry much more freight
and many more passengers. Railways are
said to have played an integrating role in
social and economic development of the
country.
Despite the fact that Railways are
less energy intensive and more
environment friendly, the Railways have
been losing their market share in the
total transport sector. Efforts are now
on to improve its share. In recent years
total net tonne-kilometres of goods
carried by the Railways has been over
30,000 crore and passenger-kilometres,
above 45,000 crore. But, more important
part is that the Railways transport all
heavy, bulk raw materials/ores
(including coal and POL) and essential
items of fertilisers and foodgrains,
wherever they exist.
It is important to remember that, for
quite sometime now, the Indian Railways
have been consistently pursuing the uni-
gauge policy by converting metre gauge
lines into broad gauge ones and
programme of electrification of important
sections. Hopefully, the electrification of
golden quadrilateral is complete. There
is less emphasis on new lines but
multiplexing of track in busy corridors
is receiving some attention. Renewal and
upgra-dation of track is equally
important as our tracks are quite old and
outdated.
The Indian Railways, with 15.5 lakh
employees, are the largest employer
among the public sector undertakings
and in all undertakings. But this asset
is now being considered a burden as the
wage-bill, including pension liabilities,
constitutes the major portion of
operating cost. The Railways are now
introducing a plan of right-sizing the
manpower. As you know under the
Railways establishment, we also have
certain production units. It has been
decided that many departments
concerned with the running (like

ABBREVIATIONS EXPANDED AND WORK INDICATED

CLW Chittaranjan Locomotive Works at Chittaranjan (West Bengal): Manufactures
electric locomotives
DLW Diesel Locomotive Works at Varanasi (Uttar Pradesh): Manufactures diesel
locomotives
WAP Wheel and Axle Plants at Yelahanka (Karnataka): Manufactures wheels and axles
RCF Rail Coach Factory at Kapurthala (Punjab): Manufactures all types of coaches,
including 3-tier airconditioned coaches
ICF Integral Coach Factory at Chennai (Tamil Nadu): Manufactures EMUs, DMUs,
airconditioned coaches for all trains including those for Palace-on-Wheels
DCW Diesel Components Works at Patiala (Punjab): Manufactures components for diesel
locomotives
INFRASTRUCTURAL CHALLENGES 147

traffic commercial and transportation, disation. Within freight sector, there

engineering, mechanical, electrical,
stores, loco, signalling and telecom,
accounts, etc.) will have no greater yearly
intake than one per cent of their
respective strengths and production
units (such as CLW, DLW, WAP, RCF,
ICF, DCW, etc.) will have no more intake
than 0.5 per cent of their respective
strengths.
The Railways are basically a
commercial undertaking. However, they
are in the public sector and no public
sector undertaking is expected to operate
with a profit motive alone. They have
undertaken certain social obligations too.
There exists therefore certain degree of
cross-subsidisation as well as subsi-
exists cross-subsidisation between
different categories and within passenger
sector, there exists cross-subsidisation
between different classes of passengers
and between suburban and non-
suburban sections. There also exists
some cross-subsidisation between
passenger and freight sectors. There are
certain uneconomic services, like some
branch lines and some suburban lines,
which are undertaken in larger social
interest. The cost of such obligations is
estimated to be around Rs 4,000 crore.
Under-funding of the railways, owing
to resource constraints or failure to be
innovative, led to quantitative and
qualitative under-supply of railway

RAKESH MOHAN COMMITTEE

The Ministry of Railways (Railway Board) had constituted an Expert Group (with Rakesh
Mohan as Chairman) on 31 December 1998:
To study the railway sector in order to estimate the financing requirements of an expansion
and upgrading programme for the Indian Railways.
To identify sources of funding of estimated investments over 15-year period,
To study models of structure and ownership of rail transport facilities in developed countries.
To recommend suitable regulatory arrangements that would facilitate orderly expansion
of the system, promote desired degree of competition and protect users right to quality
service.
The Expert Group has found that increase in real wages have far exceeded the increase in
productivity and that is the root cause of the financial problem confronting the Railways.
It has made the following salient recommendations:
1. Achievement of high growth through expansion of capacity and modernization and
upgradation of facilities and yet to explore avenues to economize costs.
2. Rationalisation of freight structure and tariff rebalancing with a view to removing
distortion.
3. Increase in speed of freight trains, expansion of capacity for upper classes, upgradation
of rolling stock, improvement of signalling and communication system.
4. The Indian Railways should be reorganized. The government of India should be only
in charge of setting policy direction. The Indian Railways must ultimately be corporatised
into the Indian Railways Corporation. Indian Railways Regulatory Authority should
be set up to regulate tariffs.
148
service. Due to its limited capacity, the
railways concentrated on bulk freight
from the core sector and ignored high
value non-bulk sectors and thus lost
valuable revenue. General policy of
cross-subsidisation of passenger traffic
by freight traffic, unduly raising freight
charges, made the railways lose goods
traffic.
The Railways are now realising that,
by hiking freight charges and restraining
hike in passenger fares, they have, over the
years, out-priced themselves in the goods
sector and have, therefore, lost traffic. They
are now considering correction of this
imbalance through reduction in the level
of cross-subsidisation. They are
venturing out to have partnership with
private sector for better connectivity with
ports. They are trying to improve their
parcel services.
The Ministry of Railways had
constituted an Expert Group on the last
day of 1998 to study the railways system
and make recommendation for
reorganization, if needed. It has
recommended for corporatisation of the
Railway Board into the Indian Railway
Corporation and suggested that an
Indian Railway Regulatory Authority
should be set up to regulate tariff
structure.
Road and Road Transport
India has about 35 lakh kilometres of road
network allowing plying of 5 lakh
passenger buses and 20 lakh goods
vehicles. It is one of the largest in the world
but its quality is too poor to meet the need
of modern fast moving vehicular traffic.
In fact, standard paved roads constitute
hardly a little over 50 per cent of the total.
Road density in terms of paved roads per
INDIAN ECONOMIC DEVELOPMENT
one crore persons is just 0.15 kilometres.
It is comparable to Brazil, Thailand and
Korea and little better than Bangladesh,
Nepal and Sri Lanka. Still further, in
comparison to 30 per cent in Brazil,
50 per cent in Thailand, 70 per cent in
South Korea and 85 per cent in the USA,
in India only 20 per cent of the paved roads
are in good condition.
Before we discuss about modern
motorized transportation, a word about
non-motorised transport. Manual
rickshaws, cycle rickshaws, handcarts
(both goods and passengers), tongas,
carts driven by bullocks, buffaloes and
camels, and pack animals are major non-
motorised transport modes. There may
be around 50 lakh cycle rickshaws
(contrast with 5 lakh buses and 20 lakh
goods vehicles) and 850 lakh draught
animals and they haul significantly
high/short distance goods and
passenger traffic. Inexpensive,
environment-friendly and simple in
technology as the non-motorised modes
are, they also represent stagnant
technology and drudgery for human
beings.
You have already noted, in a previous
chapter, that we have classified our
roads into National Highways, State
Highways and other roads. National
Highways measure around 58,000 kms
while state highways put together
measure about 1,58,000 kms. National
Highways are, however, the prime
arterial routes as they cater to about 45
per cent of total road transport though
their length is just 4 5 per cent of the
total surfaced roads. Till a few years ago
(1996) only 3 4 per cent of National
Highways were multi-laned though
75 per cent were standard double laned
INFRASTRUCTURAL CHALLENGES 149

and 12-13 per cent, standard single-
laned. State Highways were hardly multi-
laned while only 20 per cent were double-
laned. Only 36 per cent of state highways
were single-laned and another 36 per
cent of State Highways, below standard.
It may be noted that on some of the state
highways traffic is as high as on national
highways. Laning or over-bridging a rail-
road crossing is decided upon number of
vehicles (measured in passenger car units)
that pass per day.
Large sections of National Highways
and some sections of State Highways are
being used well over 100 per cent of their
intended capacity, leading to slow speed,
high vehicle operating costs,
environmental pollution and high
incidence of accidents. Construction of
missing links and bypasses and bridges,
strengthening of weak roads, and
widening of single lanes to two-lanes and
two-lanes to four-lanes have therefore,
been the major programmes in the recent
years.
The National Highways network has
two major networks, which have to be
four-laned. They are: (i) 6,000 kms long
Golden Quadrilateral connecting four
metros, viz. Delhi, Mumbai, Chennai,
and Kolkata, and (ii) 7,000 kms long
North-South and East-West corridors,
connecting Srinagar with Kanyakumari
(via Delhi, Jhansi and Bangalore) and
Silchar with Porbandar (via Kanpur,
Jhansi and Udaipur) respectively. The
National Highways Development Project
(NHDP), launched in 1998, is expected
to complete the Golden Quadrilateral by
2003 and the two corridors by 2007.
Rural Roads
Our villages are not well connected with
national/state/district roads. For want
of funds, we have a gradual approach
which first seeks to provide accessibility
to villages with larger population, say
over 1000/1500. In order to give a fillip
to this infrastructure, a Pradhan Mantri
Gram Sadak Pariyojana has recently
been announced. It intends to provide
connectivity to all villages of more than
500 persons through good all-weather
road.
Water Transport
Water transport has three components:
Shipping through 11 major ports and
139 minor ports, handling 90 per cent
of our foreign trade; coastal shipping
along 5,560 kms coastal line, ferrying
bulk cargo of coal, POL, iron coastal line
ore; and inland water transport with
15,000 kms navigable waterways, hardly
contributing one per cent to transport
in terms of tonne-kms.
Overseas Shipping
Over 90 per cent of international trade
in terms of volume and 80 per cent in
terms of value is carried out by our ships
owned by 80 companies. The major items

HIGH DENSITY CORRIDORS OF NATIONAL HIGHWAYS

Delhi-Mumbai : via Jaipur, Ajmer, Udaipur, Ahmedabad
Mumbai-Chennai : via Pune, Satara, Belgaum, Chitradurga, Bangalore
Chennai-Kolkata : via Vijayawada, Visakhapatnam, Bhubaneswar, Bangriposi
Delhi-Kolkata : via Agra, Kanpur, Allahabad, Varanasi, Barhi
150
comprising 250 million- tonnes of goods,
are POL, iron ore, coal, fertilisers and
containers.
Coastal Shipping
It is a very cheap and energy-efficient
mode for movement of bulk
commodities over long distances as it
requires no extra investment, besides
navigational aids and terminal facilities.
It offers an effective alternative means
of transport for parallel on-land
transports. For easing congestion of
other means and/or saving fuel
consumption, rail/road cargo, for
example, could easily be diverted to sea
route between Chennai and
Visakhapatnam on the east coast.
Coastal shipping at the moment is
handling thermal coal and POL.
Unfortunately, because of complex
customs procedures, time-consuming
port clearance, high manning scales at
par with overseas shipping and poor
infrastructure at minor ports put off
the shipowners, it is alleged to engage
in this activity on an extensive scale,
despite the fact that whole of coastal
shipping is reserved for Indian vessels.
Inland Water Transport
It is a cheap and energy efficient mode
for transport of bulk commodities if they
originate and terminate on a particular
navigable stream. Though India has total
navigable waterways of 14544 kms but
only 5,200 kms on major rivers and 500
kms on canals are suitable for
mechanized crafts. However, during dry
season waters are shallow and widths
are narrow. Bank erosion, siltation, poor
terminal facilities and navigational aids
make it further difficult.
INDIAN ECONOMIC DEVELOPMENT
A Central Inland Water Transport
Corporation Ltd. was set up in 1967 to
look after this sector. It has been
incurring losses while some private
operators in Goa and Kolkata had shown
remarkable progress. In 1986 an Inland
Waterways Authority of India was set up
to coordinate and implement various
central schemes for development of
waterways. Nothing spectacular took
place except declaration of three national
waterways. Now, a view is emerging that
inland water transport has to be
integrated with coastal shipping. Five big
ports could easily be integrated with
coastal shipping on the one hand and
inland waterways systems on the other.
Civil Aviation
Operational, infrastructural and
developmental activities are three parts in
civil aviation sector. The first is the
operational. Domestic air services are
provided by Indian Airlines Ltd. A few
private airlines, some of which are
scheduled (like Sahara India and Jet
Airways) and some of which are non-
scheduled (about 35 in number) also
provide the service. Domestic air traffic,
around 150 lakh passengers, is almost
equally divided between Indian Airlines
and private operators. Pawan Hans
Helicopters Ltd. provides helicopter
support service to petroleum sector
(ONGC and OIL), governments of states
and union territories, public sector
undertakings and private sector
companies and connects inaccessible and
remote areas of the North Eastern region.
International air services are handled by
the Air India Ltd. and a lot of foreign
airlines. Some international services are
also handled by the Indian Airlines Ltd.
INFRASTRUCTURAL CHALLENGES
The second is related to
infrastructure facilities. Airport
Authority of India manages 92 airports,
including five international airports at
Delhi, Mumbai, Kolkata, Chennai and
Thiruvananthapuram, and 28 civil
enclaves at the defence airports.
The third is related to regulatory-
cum-developmental aspects. The
Department of Civil Aviation,
Government of India, is basically
responsible for it. It is planning to have a
new Civil Aviation Policy. The Government
of India has already sold a part of its
holding of shares in Indian Airlines and
Air India. It is also planning to set up new
international airports at Bangalore,
Hyderabad and Goa.
Communication
The importance of communication in
modern life could hardly be denied. It has
remained important ever since family
members (close ones) have stayed in two
places and manufacturing and market
centres for different purposes came up.
Communication usefully replaces or
supplements transportation of people and
goods. For long, our ubiquitous postal
network did this service, sending messages
and money. Later, physical movement
could be avoided and through some tele
method communication could be made
easier and instantaneous. The
technological advancement has led to
radical changes in communication services
such as telephone, telegraph, fax and
internet. advancement. But, slowly telex
and telegraph are getting out of fashion.
Postal Communication
Nevertheless the importance of post office
does not diminish. Our postal network
151
is the largest in the world. In the
beginning of the new century, we are
having around 155000 post offices, of
which around 140000, necessarily small
ones, are in the rural areas. On an
average, our post offices serve 5500
persons and 21 sq kms area per post
office. But there are areas, which are
inadequately serviced. We find it
necessary to open new post officessub
post offices or branch post offices. During
the year 2000-01, around 400 post
offices were added. In order to economise
on cost and serve people better, 2000
Panchayat Sanchar Seva Kendras are
expected to be opened soon.
Modernisation of postal services has
been on card for quite some time. Speed
post, business post, express parcel post,
media post, greeting post and data post
have been introduced. With a view to
connecting rural interiors with the rest
of the world, E-post has been introduced
in August 2001 in five states of Andhra
Pradesh, Maharashtra Gujarat, Kerala
and Goa. With a view to improving the
speed and volume of moneyorder
transmission, 140 VSATs (Very Small
Aperture Terminal) connecting 1550 post
offices have been set up by the
Department of Posts. They handle more
than one million moneyorders in a
month.
Telecommunication
Undoubtedly, today, telecommunication is
playing a great role and in future, it will play
still greater role in view of the fact that we
are trying to integrate the Indian economy
with the world economy in a big way.
Keeping this in mind, the Government of
India has recently introduced the Ministry
of Communications and Information
152
Technology with three additional
departments viz., Departments of Telecom,
Information Technology and Posts.
During the nineties and particularly
since 1995, a great spurt in telecom
sector has taken place. Connections are
now being provided by the two
corporations under the Telecom
Department, viz. BSNL and MTNL and
more than two dozen private sector
companies. While the Mahanagar
Telephone Nigam Ltd. (MTNL), which
caters to two metropolises of Mumbai and
Delhi is somewhat old, Bharat Sanchar
Nigam Ltd. (BSNL) has just come about. The
two corporations have more than 32500
exchanges and capacity of 4.25 crore lines.
Both public and private sectors are providing
fixed lines as well cellular as services. At
the end of 2001, around four crore
connections, including 55 lakh celluar (12-
13 per cent), are in existence. The Cellular
mobile service is however available in
1,400 cities/towns. While the use of
microwave network (2 lakh route
kilometres) and optical fibre network (2.5
lakh route kilometers) is on the increase,
the use of hand held wireless access (WLL
= Wireless Local Loop) system is on anvil.
We may further note that about 10
lakh PCOs are working all over the
country. Thus, there exists one PCO for
1000 population. In urban areas, this
ratio is just 300. At the moment, out of
6 lakh villages in the country, 4.28 lakh
villages have at least one public
telephone connection each. It is expected
that, with the cooperation of private
sector companies, it will be possible to
provide at least one public telephone to
all the villages by December 2002.
Earlier, as per Telecom Policy 1994,
private companies were granted licenses
INDIAN ECONOMIC DEVELOPMENT
based on prescribed fee. According to the
new Telecom Policy 1999, private
companies will share revenue and will
pay it in advance. With a view to giving
benefit of reduction in cost of operation
to the customer, rates for long distance
calls have been substantially reduced.
Internet services, E-mail and
websites facilitate communication
services through use of telephone lines
and computers using modem.
Education
The role of education is well recognised
in the development of human resources,
which are essential inputs in any societal
activitieseconomic or otherwise. While
it improves quality of life, manifested
through improvement in nutrition
status, better hygiene, reduced infant
mortality, improved life expectancy,
higher birth control practice, etc. it
directly contributes to economic growth
through rise in productivity and
innovations (involving research and
development activities).
Our Constitution had directed, you
may recall, the State to secure free and
compulsory education, by 1960, to all
the children below 14. You may also note
that we are not able to enroll all children
even today. You can easily calculate that
persons who were children in 1960 are
now all old, say over 55. Thus, many
innocent children of 1950s and 1960s
have already turned into ignorant
parents and grandparents. The
Government tried to make many of these
parents literate through adult literacy
programmes but not with much success.
Our educational policies, adopted in
1968 and 1986, redirected that
education be expanded and improved in
INFRASTRUCTURAL CHALLENGES
all sectors and also suggested that
disparity in access to education, whether
rural-urban or male-female, be
eliminated. It means: (a) free and
compulsory education to children in age
group of 6-14, (b) total eradication of
illiteracy, (c) vocationalisation of
education, and (d) focus on education of
women, weaker sections and minorities.
In deference to the Supreme Court
judgement declaring right to education as
fundamental right, the Lok Sabha has
passed the Ninety Third Amendment Bill
of the Constitution which makes the
right to free and compulsory education
for children in the age group of 6-14 a
Fundamental Right and for parents/
guardian a Fundamental Duty to provide
opportunities for their children. But, the
Government accepts that its success
would be limited in the absence of a
strong social movement for universal
elementary education.
According to the Sixth All India
Educational Survey, organised by the
NCERT in 1993, 94 per cent of the rural
population and 83 per cent of the rural
habitations have access to primary
schools/sections within a distance of 1
km.; 85 per cent of the rural population
and 76 per cent of the rural habitations
have access to upper primary schools or
sections. It is understood that, in the
years gone by, the access level should
have improved. At this stage, we are
having about 6,50,000 primary schools/
sections, about 2,00,000 upper primary
schools/sections and 1,16,000
secondary schools as against 2,10,000
primary schools/sections, 13,600 upper
primary schools and 7,400 secondary
schools in 1950-51. We have by now
around 300 universities, including
153
deemed ones, 1,2000 colleges (including
1,500 exclusively for women) and a host
of unrecognised institutions particularly
in the higher education sector.
Yet, it would be good to have a glimpse
on physical educational statistics. These
days, total enrolment of boys and girls, in
primary schools is over 11 crore and in
upper primary schools, over 4.2 crore and
about 2.8 crore in high/higher secondary/
inter/pre-degree schools and colleges. Thus,
over 18 crore students are studying in some
or the other class/stage of school education.
Up to Class VIII, the students are around
16 crore while population in the age-group
6-14 is over 20 crore. Thus, about 80 per
cent children, 90 per cent boys and 70 per
cent girls, are attending schools. The drop-
out rates of boys declined from 55 per cent
in primary level and 68 per cent in upper
primary level in 1980-81 to less than 40 and
a little above 50 per cent respectively, in
1999-2000. Similarly, the drop-out rates
of girls, from 65 per cent at primary level
and nearly 80 per cent at upper primary
level have reduced to 40 per cent and 55
per cent, respectively. But they are indeed
very high. In fact, hardly 60 per cent
students who enroll in Class I reach
Class V.
Gross enrolment ratios for women
with respect to relevant age-groups, are
consistently lower than those for men at
all levels but at the same time one can
notice that the differential between male
and female enrolment ratios has
substantially reduced over time (See
Table 11.1).
Outcome is always more important
than inputs into a process; yet, inputs
are also of some consequence. We have
seen to some extent what our
educational system is giving to us. But
how much effort do we make? Some of
154 INDIAN ECONOMIC DEVELOPMENT

TABLE 11.1
Gross Enrolment Ratios (in per cent)

Primary (I-V) Upper Primary (VIVIII) Elementary (I-VIII)

Year Boys Girls Boys Girls Boys Girls
1950-51 60.6 24.8 20.6 04.6 46.4 17.7
1960-61 82.6 41.4 33.2 11.3 65.2 30.9
1970-71 95.5 60.5 46.5 20.8 75.5 44.4
1980-81 95.8 64.1 54.3 28.6 82.2 52.1
1990-91 114.0 85.5 76.6 47.0 100.0 70.8
1999-00 104.1 85.2 67.2 49.7 90.1 72.0
Source: Selected Educational Statistics, 1999-2000, Department of Education, Ministry of Human
Resource Development, Government of India.

these efforts can be inferred in terms of
money we spend on the system. The
Government, Union and States put
together, is spending more than Rs
45,000 crore, around Rs 40,000 as non-
plan revenue expenditure and Rs 5,000-
6,000 crore as plan expenditure. But this
constitutes to be no more than 3.8 per
cent of our GDP. It is considered very low
as the Government of India had been
promising for the last 35 years to annually
spend 6 per cent of GDP. Of the total plan
expenditure by all governments,
expenditure on education, which was
about 7.0 per cent during the Third Plan
and came down to 2.7 per cent during
the Sixth Plan, slowly rose to about 6.0
per cent towards the close of the Ninth
Plan. The Union Government
supplements the efforts of the State
Governments through its schemes:
(i) Operation Black Board for improving
school infrastructure, including additional
teacher, (ii) National Programme of
Nutritional Support, proving mid-day meal
to students, (iii) Minimum Levels of
Learning, involving development of
competencies in Language, Mathematics
and Environmental Studies, (iv) DPEP/
BEP/UPEP, (v) Non-formal Education,
and (vi) Mahila Samakhya, for
empowerment of women.
Health
Undoubtedly, over fifty years, our health
conditions have improved. While crude
death rate has reduced from around 25-
27 in 1951 to less than 9 in 2000, infant
mortality rate has halved from about 145
to 70 and child mortality rate from 57 to
22 over the same period. As a result, life
expectancy at birth has improved from
around 36-37 years to 61-62 years
during this period. Our women now live
longer by about three years.
Yet, burden of disease continues to
be significant. Communicable diseases
still dominate the causes of mortality and
morbidity but their incidence over time
has significantly reduced.
EPIDEMIOLOGICAL TRANSITION
As life expectancy of a population improves
the relative incidence of communicable
and non-communicable diseases changes.
Earlier, before the onset of the transition
the major cause for mortality and
morbidity used to be communicable
diseases, after the transition the major
cause happens to be non-communicable
diseases.
INFRASTRUCTURAL CHALLENGES 155

It is true that a substantial infras- Three, there is lack of an appropriate

tructure for providing for primary health
care has been created in both rural and
urban areas. There are, however, three
major weaknesses. One, distribution of
existing institutions and manpower is
inequitable. Two, there exists mismatch
between personnel and infrastructure.
referral system.
Malaria, Kala-Azar, Tuberculosis,
Leprosy, Blindness and HIV/AIDS are
being tackled as national programmes.
Medical help, public health and family
planning activities claim as much as 3.0
per cent of total plan expenditure.

EXERCISES
1. Bring out the importance of infrastructure in development.
2. Why do we need contribution of all sectorsprivate, public, and foreign in
development of infrastructure?
3. Why do we need independent regulatory authorities in infrastructure sector
between the service provider and government?
4. Discuss consumption of energy in India since Independence in terms of total
and per capita consumption, as also shift in composition of energy sources.
5. Distinguish between primary and final sources; between commercial and non-
commercial sources; and between conventional and non-conventional sources
of energy.
6. Discuss the role of three services needed in supply of electricity. Should they
be in different hands? Attempt your answer.
7. What are the three basic sources of generating power?
8. What do you mean by plant load factor? How could it be improved?
9. Why do we require grid for transmission of electricity?
10. What do you mean by transmission and distribution losses? How could they
be reduced?
11. Discuss the division of traffic between road and rail transport.
12. Why did road sector do relatively better than the railways?
13. Discuss electrification of tracks and unification of gauge programmes and
how they are going to help us in transport sector.
14. What are the major items carried by the Indian Railways?
15. What is the size of manpower in the Indian Railways? Why has it turned into
a liability?
16. It is alleged that freight traffic is paying for passengers, higher class passengers
are paying for lower class passengers, and non-suburban passengers are paying
for suburban passengers. Give your views.
17. What should the Indian Railways do to increase their share of traffic?
18. What are the changes proposed in the functioning of Indian Railway?
19. Discuss the road network in India and its condition.
20. How do you assess the importance of National Highways?
21. What is your assessment about rural road network?
156 INDIAN ECONOMIC DEVELOPMENT

22. What are three modes of water transport?

23. Describe the contribution of overseas shipping in international trade.
24. What future do you hold for inland water transport?
25. What role can coastal shipping play in decongesting traffic on roads/rails?
Give an example.
26. What is the relationship between communication and transportation?
27. Comment on the postal communication network.
28. Discuss main trends in the telephony.
29. What is the importance of education in economic development?
30. Discuss the constitutional provision with regard to elementary education and
recent constitutional amendment in this respect.
31. Describe the enrolment scene and dropout scene by sexes.
32. What are the main programmes through which the Union Government is
helping the States which are primarily responsible for elementary education?
33. Discuss the progress of health programmes.
 CHAPTER 12
Other Emerging Issues
Introduction
Many issues are emerging as major
challenges for quite some time. We will
discuss here only three of them:
Environment, Gender and Migration.
Environment
Development was, for long, associated
with under-exploitation of natural
resources. It was little realised that
obsession with under-exploitation may
lead to over-exploitation. We believe that
natural resources are indefinitely large,
if not infinite. At the same time, we are
finding that our present technology
produces harmful elements along with
useful products (such as electricity or
transportation). We are also producing
many non-degradable materials. In
short, we are said to be using nature
beyond its carrying capacity, both
productive and assimilative. Blame is
apportioned to rising human population
(in underdeveloped countries), affluent
consumption style (in developed
countries), and misuse of technology
(everywhere). Some put the blame on the
poor people, not on their poverty, for some
of the environmental problems such as
deforestation. Even the development
framework proposed by the governments
are also blamed.
We can categorise our environmental
issues into two broad groups. The first
relates to pollution issues, which largely
concern urban and industrial areas, and
are connected with air, water and solid
waste. The second relates to degradation
of resources issues, which largely concern
agriculture, forestry, livestock and bio-
diversity. We shall consider them below.
Pollution Issues
Pollutants are substances foreign to the
medium in which they are present. They
do not get sufficiently dissolved and
cause problems to the animal world.
These are classified as air pollution,
water pollution, noise pollution, etc.
Air Pollution
India now has 35 cities which have
population in excess of one million.
Ambient air pollution levels exceed WHO
health standards in many of these.
Increasing power consumption,
increasing industrialisation, increasing
vehicular traffic, along with burning of
refuse, are worsening air quality of these
cities. Ahmedabad, Delhi, Kanpur,
Kolkata, Mumbai and Nagpur are worst
affected by pollution.
Excessive presence of certain gases
and suspended material particulates
158
(SPM) pollute air. As air is the carrier of
oxygen for human beings and other
animals, they suffer from various
ailments causing disability which affects
work and leisure. Gases like CO, CO2,
NO2, SO2, and ozone, and suspended
particulates, including lead particulates
are major pollutants causing diseases
which often results in early death. These
diseases include respiratory, cardio-
vascular, hyper-tension, asthma, eye
irritation, and neurological problems.
Diseases cause morbidity leading to
loss of work to the individuals and loss
of output to the society and cost of
treatment to the individuals/society.
Instead of baking bread, some people
are engaged developing and
manufacturing chemprox! (Chemprox
is not a real drug. It is a word coined
to give a flavour of unnecessary
activities we indulge in because of our
misdoings or inadequate precaution.)
One would not be manufacturing many
odd drugs but for the fact that pollution
is causing many a disease. Death itself
is a heavy cost. These problems get
accentuated in a country like India
where general nutrition level is fairly
low. Cost of prevention would be found
to be too low in comparison to cost of
consequences.
Water Pollution
It is said that all surface and a lot of
ground water in India, in rural and urban
areas both, is so contaminated that it is
unfit for direct consumption by human
beings. Diarrhoea, trachoma, intestinal
worms, and hepatitis are caused by poor
quality water, poor sanitation and poor
hygiene. Ten per cent of all diseases and
twenty per cent of all communicable
INDIAN ECONOMIC DEVELOPMENT
diseases in India are found to be water-
related. A good percentage of infant
mortality is associated with it.
Water quality gets damaged due to
three major factors, viz. domestic and
human waste water, industrial waste
water and agricultural runoff. Domestic
and human waste water is the most
problematic and the principal cause of
many severe water-borne diseases.
Disposal of untreated sewage water (as is
done in many cities) as irrigation water
for crops, particularly vegetables, is not
good. Some vegetables are washed in these
dirty nallahs and some of which are some-
times eaten raw. Sewage and wastewater
and also industrial wastewater find their
way into rivers and streams beyond the
latters assimilative capacities. Major
water polluting industries are chemicals,
pharmaceuticals, textiles, cement,
electrical and electronic equipments, glass
and ceramics, pulp and paperboard,
leather tanning, food processing and
petroleum refining. Indiscriminate use of
chemicalsfertilisers and pesticidesin
agriculture does finally result into conta-
mination of surface and ground water.
Demand for water is rising and will
further rise, particularly in urban areas,
due to rise in population but more than
that, due to rise in income leading to
higher per capita demand for water. Its
demand, to some extent, can be curtailed
by better pricing of water supply. Proper
collection of user charges is equally
important. Water supply is getting more
and more expensive as raw water needs
to be treated for pollutants.
Degradation of Resources
Degradation of resources saps their
productive capacity. Long-term
OTHER EMERGING ISSUES
implications of degradations are that the
yield level goes down permanently. Thus,
the base of development gets eroded.
Here, we shall discuss two most
important degradations. One is related
to the forests and the other is related to
the land in general and agricultural land
in particular.
Deforestation
Our developmental activities and lavish
life-style exploited forest wealth beyond
its regenerative capacity. It is significant
to note that India is one of the few
countries, which had a Forest Policy as
back as 1854. Between 1854 and 1952,
when we had our first Forest Policy
declaration after Independence, our forest
cover is estimated to have reduced from
40 per cent to 22 per cent, obviously
because of reckless exploitation for raw
materials for industries, timber for
buildings and firewood. We had roughly
680 lakh square hectares of forest in 1952.
PRODUCTIVITY OF FOREST
Our growing stock per hectare is just 28
cubic metres and annual increment, just
0.5 cubic metres as against the world
average of 110 cubic metres total stock
with 2.0 cubic metres increment.
With fast growing valuable species, proper
care, tending and protection, our forest
produce could be raised to 5.0 cubic
metres per hectare per year.
The Forest Policy of 1952 recommen-
ded that we should have a forest cover
of 1,000 lakh hectares, that is 33 per
cent of total land surface, with the
stipulation that hill areas could be
covered to the extent of 66 per cent. In
order to meet growing demand,
159
afforestation measures were adopted
with three important schemes:
(a) plantation of quickly growing species,
(b) plantation of economic species (teak,
shisham, sal, etc.), and (c) rehabilitation
of degraded forests. But all these
measures could bring no more than 50
lakh hectares over these fifty years. Total
forest cover is now said to be 750 lakh
hectares. But using new techniques of
survey, the National Remote Sensing
Agency has indicated that we have good
green cover of only 360 lakh hectares,
which means the rest of the area is just
designated as forest and just does not
have trees on it. Information available
shows that we have lost dense forest even
between 1972-75 and 1980-82. Since
then, our dense forest cover is more or
less stable (See Table 12.1).
TABLE 12.1
Area of Dense Forest Cover in India
(lakh hectares)
Survey Years Cover
1972-75 46.42
1980-82 36.14
1985-87 37.85
1987-89 38.50
1989-91 38.56
1991-93 38.58
1995-97 36.73
We cannot completely deny users of
forest produce without facing its impact
on the economy and we cannot allow
present practices of forest exploitation
with endangering the prospects of future
generations. In fact, it is now being
suggested that forests should be allowed
to perform their environmental functions
rather than be exploited for industry and
urban users. In addition, forests satisfy
the subsistence needs of forest dwellers.
160
We may briefly note some of the steps
that have been undertaken to improve
the scene. The Government of India has
accepted the recommendations on social
forestry made by the National
Commission on Agriculture (1976).
Social forestry has three components,
viz. farm forestry, public woodlots and
community woodlots. Under farm
forestry schemes, farmers are
encouraged to plant trees on their farms
with free or subsidized seedlings supplied
by the state forest departments. Under
public woodlots, the forest departments
have undertaken to plant fast growing
trees along roads and canals and in other
public lands. Under community
woodlots, local communities are
supposed to plant trees on village
commons. The purpose is obviously to
1. increase green cover;
2. produce raw materials for paper;
rayon and match industries;
3. meet the requirements of the poor
for fuelwood/firewood and fodder;
4. grow small timber and minor forest
produce; and
5. create more employment in rural
areas through afforestation.
In some areas of the country, you
would notice some success in this area;
though admittedly much more needs to
be done. Many of these trees do little to
conserve water and, therefore, should be
grown in areas of water-logging.
It was found that, besides industri-
alists, State Governments were also
unmindful of these odd developments as
forest exploitation gave them revenue.
So much so, that many industries were
given timber at nominal prices.
INDIAN ECONOMIC DEVELOPMENT
A New Forest Policy was announced
by the Ministry of Environment and
Forests in December 1988. There is little
new in this policy in terms of targets but
its focus and orientation in strategy is
important. It lays down that forest-based
industries would not be allowed to
plunder forests and would no longer be
permitted to get forest produce at
concessional rate and they must get their
raw materials from woods raised through
farm forestry. According to this policy,
the industries are advised to motivate
farmers, through incentive measures, for
farm forestry. Private contractors will not
be permitted to collect forest produce and
various government agencies and tribal
cooperatives would be set up to replace
them. Forestland would not be diverted
for non-forest use including cultivation
of tea, coffee, spices, rubber, palm, oil-
bearing plants, horticultural plants and
medicinal plants.
Yet it is understood that there is a
lot of under-hand dealing between the
timber merchants and forest officials.
Multiple purpose big dams also
swallow a lot of forest-land. The poor are
said to be stealing wood and other minor
forest produce. However, our view is that
the poor may be collecting only fallen
dead pieces and may not be cutting green
trees. Fallen dead pieces of woods, in any
case, have to be collected.
Land Degradation
Our land is suffering from a variety of
degradations. Degradations make it unfit
for cultivation. Erosion of topsoil due to
water and wind, and salinity and
alkalinity due to water logging or flooding
with marine water are our great
problems. Our lands are either flood-
OTHER EMERGING ISSUES
prone or drought prone. Flood causes
greater erosion if soil is without trees and
grass. This soil goes to silt dams,
reservoirs, tanks, rivers and streams.
The reduction in depth further spreads
the area affected by flood. Thus, there
exists a small vicious circle.
Grass may be overgrazed and trees
may be cut without replacement. In some
areas we still practise shifting cultivation
by slash and burn method. Such soil is
drought-prone too. Areas which for long
have been denuded lose humus and do
not have vegetative cover, do not retain
water and, therefore, loose topsoil which
erodes with wind too. In this process, the
topsoil loses major nutrients such as
nitrogen, phosphorous and potassium.
In some cases, on the other hand,
we find that there is excessive water near
the topsoil, which sucks such minerals
upturning soil either alkaline or saline.
This type of soil is not suitable for
cultivation. Then there is some area,
which remains perennially submerged
under water. From Table 12.2, we can
see that more than 50 per cent area
suffers from serious degradations.
Every year, it is estimated, 80 lakh
hectares, with 40 lakh hectares cropped
TABLE 12.2
Details of Areas Suffering from Various Degradations
Total geographical area
Area with serious degradations
Area suffering from water/wind erosion
Area suffering from salinity/alkalinity/water-logging/ravines
Ravenous area
Area with salinity
Area suffering from alkalinity
Water-logged area
Drought-prone area
161
area, gets affected by flood while 40 lakh
hectares gets damaged due to shifting
cultivation. Ravines encroach as much
as 8,000 hectares every year. An old
authoritative estimate of the problem is:
One-third of our land under forest, two-
thirds land under agriculture and nearly
all cultivable waste lands, permanent
pastures and grazing lands are in urgent
need of soil conservation measures.
Thereafter many conservation measures
have been undertaken but it seems, on
balance, that we could not succeed much
in containing further degradations.
Gender
There exist biological differences between
the two genders. Division of certain roles
between the two genders is, therefore,
considered natural. For example, only
female can bear children. Perhaps, she
can do better in rearing too.
However, in all societies, it is found
that there exist many other differentials,
which in no way could be ascribed to
biological differences. It is now believed
that human society has, for ages, been
discriminating between the two genders
and, on balance, has been favouring
male section. In our society, the level of
3290 lakh hectares
1750 lakh hectares
1400 lakh hectares
350 lakh hectares
200 lakh hectares
55 lakh hectares
25 lakh hectares
60 lakh hectares
2500 lakh hectares
162
discrimination is considered to be rather
high. It does not, however, mean that
we are the worst people in this respect.
POLITICAL DISCRIMINATION
IN THE WEST
Women were denied political rights in so-
called developed countries. It was only
after the first World War that the US
(1920), the UK (1928), Spain (1931) and
France (1944) granted women right to
electoral franchise while their men-folk
enjoyed it for long. It is rather surprising
that Switzerland, one of the oldest
democracies, denied this right to their
women until 1971. Women were denied
educational opportunities with legal
restrictions in many countries till very
recently.
Does it mean that we ought to do
nothing to ameliorate the situation in our
country? No. For the last couple of
centuries, we have been progressively
trying to improve the situation. The cases
in point are widow remarriage,
prevention of sati, and ban on child
marriage. Just after Independence, when
we were framing our Constitution, we
decided to give almost all due political
rights. We prohibited all kinds of
discrimination on the ground of sex.
However, dejure equality was not enough
and, therefore, we also instituted
provisions for positive discrimination. As
a result, there is some improvement in
certain respects. For example, female life
expectancy at birth has overtaken its
male counterpart.
It is often found that women are
denied economic opportunities and, if
they get job, they are paid lower wages
than men for the same work. It is alleged
that women are discriminated in
INDIAN ECONOMIC DEVELOPMENT
treatment within family and outside in
market for job. We can discuss these
issues in terms of sex ratio, literacy, work
participation rates and wages.
Sex Ratio
Too many females or too few females for
any society are not desirable. Their
number should be more or less equal to
that of males. In most societies, male
births for every 1,000 female births are
reported to be around 1,050-1,060.
However, women are found to live longer
than men if both enjoy the same level
life opportunities. As a result, in societies
where men and women are treated alike
in matters related to life, sex ratio is
found to be in favour of women: Brazil,
1,025; the USA, 1,030; Japan, 1,040;
and Russian Federation, 1,140. In our
own country, Kerala is an example where
overall sex ratio is 1,060, better than
Japans. For the country as a whole, the
sex ratio for the twentieth century is
reported in Table 12.3. It is a sad
commentary that sex ratio went on
continuously declining with increase in
life expectancy and the sharpest decline
took place during the sixties. It is now
hovering around 930.
Earlier, we were tabulating popu-
lation age data by age-groups like 0-4,
5-9, etc. For the last two censuses we
have information about population below
7 and above 7. Sex ratio for age group 0-
6 will depend crucially on two things:
sex ratio at birth and differential infant
mortality in the age group 0-6. Sex ratio
for 7+ will depend on sex ratio at 7 and
differential mortality conditions beyond
seven (or, its counter-image life
expectancy). For the country as a whole,
we find that the reason for improvement
OTHER EMERGING ISSUES 163

TABLE 12.3 should reduce from 875 in 1991 to 793

Sex Ratio of Indian Population during in 2001 and Haryanas from 879 in 1991
the Past Century (1901-2001)
to 820 in 2001 while Kerala sex ratio for
Year Sex Ratio 0-6 should improve from 958 to 963. [By
the way, Kerala is the only large State in
1901 972
the country to have shown this
1911 964
improvement and Punjab and Haryana
1921 955
have always had very bad sex ratio.]
1931 950
Census does not throw data on sex
1941 945
1951 946
ratio at birth. Sample Registration
1961 941 System suggests sex ratio at birth to
1971 930 fluctuate between 800 and 915 during
1981 934 1982-98, suggesting that it is too low
1991 927 when compared to natural sex ratio at
2001 933 birth, which is around 940-960. Sex ratio
at birth around 900 is the national
Source: Census of India 2001 Series 1 India,
Provisional Population Totals, Registrar average, suggesting that in some states
and Census Commissioner, India. the situation is pretty bad. It is suspected
that female foetus is wasted at some
in overall sex ratio is not sex ratio for stage. Another inference, not
0-6 but that for 7+, which is a reflection implausible, is that female birth is
on higher improvement in life expectancy under-reported. Female infanticide is
of women (See Table 12.4). prevalent in some parts of the country
Reduction in sex ratio for 0-6 age even in these modern days.
group is a serious reflection on our While we are improving in many
treatment of girl foetus or girl child or respects as far as our female population
both. Even if we consider sex ratio for is concerned, it is a sordid fact of life
0-6 for 1991 as natural, it is a shame that we are avoiding female births,
that it should reduce so drastically sometimes in the name of small family.
during the nineties. If we could have had, Life expectancy of female population has
in 2001, the same sex ratio as in 1991, been improving for a few decades and it
our overall sex ratio would have been is now higher than that of male
close to 940. There is no reason to population. The gap between male-
explain that Punjabs sex ratio for 0-6 female infant mortality rates is negligible.

TABLE 12.4
Sex Ratio for Age Groups 0-6 and 7+ for 1991 and 2001

Year Sex Ratio for 0-6 Sex Ratio for 7+ Sex ratio for All
1991 945 923 927
2001 927 935 933
Source: Census of India 2001 Series 1 India, Provisional Population Totals, Registrar and Census
Commissioner, India.
164
Mean age at marriage has improved from
around 15 years in 1951 to around 20
years by the end of the century.
Literacy Rate
One spectacular achievement that we
have had is in the case of literacy where
the gaps are closing fast (See Table 12.5).
In the last fifty years, while overall female
literacy rate improved from around 9 per
cent to 54 per cent, that of rural areas
from less than 5 per cent to over 45 per
cent. While the gap in 1951 was 18 per
cent points on 9 per cent female literacy,
in 2001 it is 21 per cent points on
54 per cent literacy.
But, there is no reason to be
complacent on the matter. This is an
aspect where both the sexes should enjoy
a hundred per cent literacy. In fact,
rural-urban differential in female literacy
is staggering by any standard. And rural
female is the only section, which has
literacy rate less than 50 per cent.
Political Empowerment
On political front, one-third seats have
been reserved for women at local level
political bodies and there are more than
10 lakh mahila panchs. This is
considered to be one major step of
TABLE 12.5
Male and Female literacy Rates by Rural-Urban Division (in percent)
Year Rural Male Rural Female
1951 19.02 04.87
1961 34.30 10.10
1971 48.60 15.50
1981 49.60 21.70
1991 57.90 30.60
2001 71.40 46.70
Source : Economic Survey 2001-2002, Economic Division, Ministry of Finance, Government of India.
INDIAN ECONOMIC DEVELOPMENT
empowering women. However, the
legislatures, which reserved seats for
women in local bodies, have not done so
in respect of their own seats (See Table
12.6).
From the Table12.6, we can see that
representation of people through women
in Lok Sabha has been fluctuating but
rising. In Rajya Sabha, it is constant.
The representation is to the Parliament
rather low. Similar should be the case
with State Legislatures.
Work Participation and Wages
Women are subjected to work in
homestead as well as at work place. Their
work in home is not recognised as work.
Work outside home is recognised as
work. If we consider the ratio of workers
to corresponding populations, we would
find that male work participation rate is
about 55 per cent irrespective of the area
of residence while female participation
rate is about 12 per cent in urban areas
but 25 per cent in rural areas. Many
think that it is a serious reflection on
societys refusal to allow women to work
outside home. No doubt, generally,
women who work outside home, earn
money and are slightly more
independent than their counterpart who
Urban Male Urban Female Male Female
45.60 22.33 27.10 08.86
66.00 40.50 40.40 15.35
69.80 48.80 45.96 21.97
76.70 56.30 56.38 29.76
81.10 64.00 64.13 39.29
86.70 73.20 75.85 54.16
OTHER EMERGING ISSUES 165

Table 12.6
Representation by Women in Lok Sabha and Rajya Sabha

Lok Sabha Rajya Sabha

Year Lok Seats Women Percent Year Seats Women Percent
Sabha Members age Members age
1952 I 499 22 4.4 1952 216 15 6.9
1957 II 500 27 5.4 1984 233 24 10.3
1962 III 503 34 6.8 1990 245 24 9.8
1967 IV 523 31 5.9 1992 245 17 6.9
1971 V 521 22 4.2 1994 245 20 8.2
1977 VI 544 19 3.5 1996 245 18 7.3
1980 VII 544 28 5.1 1997 245 18 7.3
1984 VIII 544 44 8.1 1998 245 19 7.8
1989 IX 517 27 5.2 1999 245 19 7.8
1991 X 544 39 7.2 2000 245 22 9.0
1996 XI 544 40 7.4
1998 XII 543 43 7.9
1999 XIII 543 49 9.0
Source : Indian Planning Experience: A Statistical Profile, Planning Commission, Government of India,
2001 and India Yearbook 2001 Manpower Profile, Institute of Applied Manpower Research,
New Delhi.

work only inside home. Many analysts,
therefore, advocate that their
participation should be raised. Those
who are familiar with Indian situation
would perhaps disagree with this view
because higher participation of rural
women in work outside does not show
that their standing is better in any sense
than their urban counterpart. The point
is whether females of a house are
working outside home, particularly on
farms, because of compulsion of poverty
or by sweet choice to supplement income.
However, it has to be noted that they
are often low paid as well. This is where
the discrimination exists. We are providing
here information on wages for man and
women with same qualifications (See
Table 12.7). Except in two cases, i.e.
workers with education up to Class VIII
in rural areas and all workers in urban
areas, everywhere we find that average
wage rate received by women is less. All
workers category in urban areas can be
dismissed as, in each sub-category, do
women get paid low. In rural areas,
women with education up to eighth
standard seem to be better placed, say as
Class III employees and they may be
belonging to urban areas (for regular jobs
in rural areas are in the government).
Among the casual workers, womens wage
is about two-thirds of the wage for the
male.
It could well be argued by the
employer that women perform different,
often low skilled, jobs; otherwise equal
pay for equal job is available. There are
scholars to suggest so. For example, let
us take the case of medical profession.
There are more women nurses and more
male doctors.
Migration
People move for a variety of reasons from
one place to another and for different
166
TABLE 12.7
Average Wage/Salary Received by Employees Per Day in 1999-2000 (Rs.)
Rural Male Female
Regular
Not literate 71.23 40.32
Educated upto VIII 91.63 161.48
Secondary 148.23 126.09
Graduate + 220.93 159.92
All 127.32 114.01
Casual 44.84 29.01
Source : India Yearbook 2001 Manpower Profile, Institute of Applied Manpower Research, New Delhi.
durations, viz. from attending social calls
such as marriage functions to buying raw
material, to holidaying with spouse and
children, from moving maternal place to
marital place in case of women, to going
from village to town for higher studies, to
join service at a place different from the
place of present stay. When one moves
from one place to another with no clear
intentions to come back in a relatively
short period, the movement is called
migration and the person is called
migrant. The place from where the person
migrates is known as place of origin and
the place where he migrates to is known
as place of destination. In case, the places
of origin and destination fall in two
different countries, the migration is
known as international migration,
otherwise it is known as internal
migration.
It is easy to see that, in internal
migration, there could be intra-district,
inter-district, and inter-state migrations.
Within each category as well as outside
these categories, there could be rural-
rural, rural-urban, urban-rural and
urban-urban migrations. These are the
categories in which much of migration,
statistics is compiled and analysed.
INDIAN ECONOMIC DEVELOPMENT
Urban Male Female
Regular
Not literate 87.63 51.83
Educated upto VIII 105.08 64.41
Secondary 168.16 145.73
Graduate + 261.55 234.74
All 169.71 295.00
Casual 62.26 37.71
Internal Migration
Migration may, according to motivation,
broadly be divided into two categories,
social and economic. Most women move
from one place to another because of
marriage and married women are
expected to live in their husband's
houses. Economic migration may be
associated with availability of economic
opportunities for some persons in
places different from their respective
places of present stay. This movement
may broadly be called migration of
labour. Even those who move with a
view to setting up some business
establish-ment or opening some factory
are broadly considered workers; workers
include employees, employers and
self-employed.
People just do not move across places
but also across occupations. Mobility
across occupations within the same
place is not considered migration. But it
so happens that places also specialize
in economic activities. For example,
agriculture is the main activity in rural
areas while manufacturing or services
like banking abound in towns. Adam
Smith said that agriculture is the
industry of the country and
OTHER EMERGING ISSUES
manufacturing is the industry of the
towns.
Economic migration, it was
understood, is basically diagonal that
is across places and across
occupation/economic activity. In
Europe, during the phase of
industrialisation, productivity in
agriculture was also rising, needing
absorption of less labour in
agriculture. Industry was requiring
more hands. Hands released from
agriculture were being readily absorbed
in industry. Despite the fact that
agricultural productivity was rising
and wages were improving, agriculture
was pushing out a part of labour and
not absorbing new labour emerging
from rise in population. Growth of
industry was tremendous and it was
able to absorb many more hands.
Industry was definitely using more
machinery per person than agriculture.
Yet, you can notice that the word
manufacture means goods produced
with hand or manufacturing means a
process of production using hands.
Since most of the manufacturing units
were being established in towns,
already existent or emerging, movement
of labour was from countryside to
towns. Today we call it rural-to-urban
or rural-urban migration. More and
more people were moving from rural
areas to urban areas, followed by their
family members. Existing towns were
expanding and new towns were
emerging. Population was rising with
rising prosperity and a greater
proportion of population was found to
be living in urban areas.
However, today the migration takes
place not just because of pull of town for
167
economic and educational opportunities
or urban life but also because of push
from villages lacking in such oppor-
tunities or security. One also notes that
this migration is very selective. People
are moving to metropolises, which are
now facing a lot of congestion and
are turning into conglomeration of
slums. Schemes distracting people from
moving to metropolises have not
succeeded to a significant extent.
Schemes intended to develop satellite
towns as counter-magnates too are not
doing quite well.
In our censuses, migration is
classified according to reasons for
migration. The following reasons are
listed: employment, education,
movement of family, marriage, and
others. We provide here information for
1981 and 1991 in Table 12.8.
The Table 12.8 shows that a
preponderant majority of women move
because of marriagenot for employment
or education. They have to move when
family moves. Women thus move
exclusively for social reasons. On the
other hand, men move for employment,
not so much for education, and also
because family moved.
International Migration
Migration from one nation to another is
known as international migration. People
have moved as free citizens from Europe,
as indentured labour from Asia, and as
slaves from Africa to European colonies
in North America and South America.
Population pressure on the one hand and
green pastures of the new world on the
other, made this movement possible.
However, today the world is a lot more
different.
168 INDIAN ECONOMIC DEVELOPMENT

TABLE 12.8
Distribution of Migration by Reason (percentage)

1981 1991
Reasons Female Male Female Male
Employment 1.9 31.8 1.8 27.0
Education 1.0 5.1 0.8 4.8
Family Moved 14.3 30.3 11.0 26.6
Marriage 73.4 3.3 76.1 4.0
Others 9.4 29.5 10.3 37.6
Total Migration (crore) 14.52 6.25 16.78 6.43
Source: India Yearbook 2001 Manpower Profile, Institute of Applied Manpower Research, New Delhi.

We are now talking of free movement Concluding Remarks

of finance capital but not of labour. Entry
of very selective manpower is allowed.
Once upon a time we termed this
movement of skilled manpower from
underdeveloped countries to developed
countries as brain drain. Individuals
involved in the movement justified their
departure as their home countries could
not provide them jobs commensurate
with their qualifications.
In certain sectors there is a lot of
demand for personnel from so-called
underdeveloped countries as they are
young, energetic and have requisite
skills. Since population stock in many
European countries is pretty old, they
need young persons from countries like
India. People in countries like India have
started calling it export from education
industry. But the world is far away from
free movement of men, of labour.
There were three issues we discussed in
this chapter: environment, gender, and
migration. Environment is concerned
with forestry, abatement of pollution,
conservation, bio diversity, etc. We
confined our discussion to pollution of
air and water, and degradation of soil
and forestry.
In the matter of gender, starting from
our commitment to gender equality, we tried
to understand as to how much we have
achieved and where we have failed. We did
it by analysing sex ratio, particularly sex ratio
for 0-6 age group, literacy, political
participation, and economic participation (in
work force) and wages.
Delineating the history and theory
of migration, we discussed both internal
migration and international migration.
Reasons for migration were also
discussed.
OTHER EMERGING ISSUES 169

EXERCISES
1. Contrast past and present thinking with regard to relationship between nature
and development.
2. What are the important environmental issues, which should receive our
attention?
3. What are the major causes of air pollution?
4. How do you justify cost of prevention/abatement of pollution?
5. Discuss the major causes of water pollution.
6. What do you mean by degradations of resources?
7. What proportion of land should be covered under forest? What is the suggestion
for hilly areas?
8. Discuss the programme of social forestry.
9. Discuss the salient provisions of Forest Policy 1988.
10. What is the level of land degradations in India?
11. What are the causes of land degradations?
12. What do you mean by gender issues?
13. Discuss the trend of sex ratio over the century.
14. What are the factors determining sex ratio?
15. Why do you think child sex ratio has declined in the nineties?
16. Discuss the progress of female literacy vis-a-vis male literacy in the last fifty
years.
17. What is the provision for representation by female in panchayati raj
institutions? Why is there no such provision for the parliament and state
legislatures?
18. What is work participation scene and average wage position for female workers?
19. Give an historical account of migration to the New World.
20. What do you mean by economic migration?
21. What are pull and push factors of migration?
22. What is the migration pattern of women in India by reasons?
23. What is the migration pattern of men in India by reasons?
24. What do you mean by brain drain?
25. Argue in favour of and against the new thinking that education is an industry
and that we should export its product.
 APPENDICES

CHAPTER 1
Economy
One can safely say that the field of study of economics is economy. But what is an
economy? Looking around, one may feel like saying that an economy is the collection
of farms, factories, workshops, mines, shops; roads, railways, ships, aeroplanes,
pipelines conveying gas and oil or even water; offices, banks, schools and colleges;
cinema, theatre and opera houses; and dispensaries and hospitals. They all produce
goods and services, which have economic value and are consumed directly or
indirectly by the people. This view of the economy is simple, descriptive and
straightforward. It should be acceptable.
However, there are people who point towards the variety of usage of word
economy: national economy, world economy, and international economy; village
economy, rural economy and urban economy; slave economy, feudal economy,
capitalist economy and socialist economy; even household economy. What is the
common feature in all these definitions of economy? Erudite scholars point out
that it is actually a set of relationships, which could be abstracted from, to a large
extent, from other forms of social relationships. These relationships manifest in
use of labour power and provisioning of material needs.
An attempt has also been made to define economy as a structure of relationships
among a group of people in terms of the manner in which they exercise control over
resources, use of resources, and labour for production of goods and services and
define and settle the claims of the members over what is produced.
Modern Economic Growth
Human societies have been increasing production by using natural resources in
more productive manner, improving production techniques, producing more and
more and more varied goods and services and living better lives. But there might
have been long periods when some societies actually declined. There might have
been periods when increase in population exceeded the growth in quantum of goods
and services (In good old days, goods might have meant foodstuff foodgrains and
other eatables). Per capita product might not have had a sustained increase.
Population too might not have had sustained increase.
The history of last two hundred years in the West is, however, considered to be
peculiar. This is the period when population had sustained increase. But increase
in quantum of goods and services exceeded that in population. As a result, there
was sustained increase in per capita product (as well as in per worker output).
The same could be said about the last fifty years in the case of many so-called
developing countries. Here too, population rose more rapidly than it did in the West
in any stretch of fifty years. But total quantum of goods and services rose still
faster. As a result, there was sustained increase in per capita product.
Character of Growth Rate Series
If growth rate remains the same as time changes, we can call it steady growth. A
series of 100, 110, 121, 133.1, 146.41. shows a steady growth of 10 per cent. If
182 INDIAN ECONOMIC DEVELOPMENT

we instead find that as time passes, growth rate increases, we can call it a case of
accelerating growth. A series of 100, 110, 122, 135, and 150 portrays a case of
accelerating growth. On the other hand, if growth rate decreases as time passes, we
can call it a case of decelerating growth. A series of 100, 110, 120, 130, and 140
is a case of decelerating growth.
But what happens in reality is that no economy shows such a neat pattern.
There are fluctuations, sometimes very wide. There exists a possibility that these
fluctuations are around a rising or declining or steady trend/path. But there is a
sustained rise in the GDP when considered over long period, say, decade after decade.

CHAPTER 2
Computation of HDI for India for 1999
Suppose we are given the following data for India for the year 1999:

Life Expectancy at Birth 62.9 years

Adult Literacy Ratio 56.5 per cent
Combined Enrolment Ratio 56.0 per cent
Per Capita Income PPP $ 2,248

Let us first combine Adult Literacy Ratio (ALR) and Combined Enrolment Ratio
(CER) into Education Attainment (EA). Giving two-thirds as weight to ALR and one-
third as weight to CER, we find
EA = (2/3)*56.5 per cent + (1/3)*56.0 per cent = 56.13 per cent
Now let us find out logarithm of per capita income to make it reflect standard of
living (SL)
SL = log (PPP $ 2,284) = 3.352
Let us now invoke the formula for component index (CI), which is
Actual Value of the Component Value of the Component
CL =
Maximum Value of the Component Minimum Value of The Component
Let us use actual values from the above and the maximum and minimum
values from Table 2.2 and obtain

62.9 25.0 37.9

LEI = = = 0.632
85.0 25.0 60.0
56.13 0.0
EAI = = 0.561
100.0 0.0
3.252 2.0 1.352
SLI = = = 0.520
4.602 2.0 2.602

Using the simple arithmetic average the three component indices, it is easy to
compute HDI. Putting these figures, we find
HDI = (1/3)(LEI + EAI + SLI) = (1/3) (0.632 + 0.561 + 0.520) = 0.571.
APPENDICES 183

CHAPTER 3

Estimation of Macroeconomic Aggregates in India

Macro-economic aggregates have been prepared in India on a regular basis only after
Independence. First sets of estimates of national income were prepared by the National
Income Committee consisting of P.C. Mahalanobis, D.R. Gadgil, and V.K.R.V. Rao.
This series started with year 1948-49 and continued until 1967 when it was replaced
by another series with the base year 1960-61. This series was replaced in 1977 by
still another series with the base year 1970-71. In 1988, another series with the base
year 1980-81 was started, which was replaced in 1999 by the latest one with the year
1993-94. Since 1948-49 was the very first full financial year for the independent
country, one could see a justification in choosing it as the base year. What is the
justification for choosing 1993-94 instead of 1990-91 as the base year for the latest
series? The year 1993-94 was chosen as the base year, partly because the years of
1990-91 and 1992-93 were not considered normal and partly, because the massive
data from the NSS was available from its round conducted in 1993-94.
Central Statistical Organisation took over the work of preparing estimates from
the National Income Committee, which submitted its final report in 1954. With
every round of revision in base, the CSO went on adding to its list of aggregates. It
now prepares many other national accounts for the country, including national
income.
Methods of Computation of Growth Rate
There are three ways to calculate the rate of growth for any given period. One, pick
up the initial (I) and final figures (F) and use compound interest formula for rate of
interest r and time-periods t, which is F = P (1+r)t. Substituting the values for F, P
and t, one can find out r which we call rate of growth per period. Usually our period
is a year. Often this figure r is multiplied by 100, and growth rate is expressed in
terms of per cent per annum. In this method, we ignore the performance in the
intervening years. In case, final or initial years that are picked up are out of line,
growth rate will not be representative of the period. This rate is known CAGR,
compound annual growth rate. Two, the pair-wise year-to-year growth rates are
computed and the sum of these rates is averaged by the number of rates. It is
known as AAGR (average annual growth rate). This method uses all figures but the
method is an amalgamation of geometric and arithmetic approaches as growth rate
is basically a geometric idea whereas averaging is arithmetic. Three, through
regression method (statistical method) using semi-log function we can estimate a
representative r for the period as a whole. All methods are used. Many scholars do
not sufficiently warn the reader about the method they have employed. One should
therefore try to find out the method actually used in case one wants to make valid
comparison.
You may notice Table 3.2 and 3.4 that CAGR gives too low a figure for the
seventies; CAGR is not even one-third of AAGR in case of Table 3.4.
Gross Domestic Product since 1950-51 at Constant Prices
Gross domestic product, one can see from the following Table A, failed to rise only in 1957-
58, 1965-66, 1972-73 and 1979-80 though there were a few years when growth
184 INDIAN ECONOMIC DEVELOPMENT

TABLE A
Gross Domestic Product at Constant Prices of 1993-94
from 1950-51 to 1999 - 2000 (Rs. Crore)

Year GDP Year GDP Year GDP Year GDP Year GDP

1950-51 140466 1960-61 206103 1970-71 296278 1980-81 401128 1990-91 692871

1951-52 143745 1961-62 212499 1971-72 299269 1981-82 425073 1991-92 701863

1952-53 147824 1962-63 216994 1972-73 298316 1982-83 438079 1992-93 737792

1953-54 156822 1963-64 227980 1973-74 311894 1983-84 471742 1993-94 781345

1954-55 163479 1964-65 245270 1974-75 315514 1984-85 492077 1994-95 838031

1955-56 167667 1965-66 236306 1975-76 343924 1985-86 513990 1995-96 899563

1956-57 177211 1966-67 238710 1976-77 348223 1986-87 536257 1996-97 970083

1957-58 175068 1967-68 258137 1977-78 374235 1987-88 556778 1997-98 1016266

1958-59 188354 1968-69 264873 1978-79 394828 1988-89 615098 1998-99 1083047

1959-60 192476 1969-70 282134 1979-80 374291 1989-90 656331 1999-00 1151991

rates were very close to one per cent per annum, which was lower than the rate of
growth of population.
We can see for the Table B that per capita income declined in as many as
twelve years out of the fifty years while GDP had declined only in four. It simply
means that, in eight other years, the rate of growth of GDP was lower than the rate
of growth of population (accepted by us). While the rate of growth of population has
started declining in the eighties and nineties, the rate of growth of economic activity
is on rise.

TABLE B
Per Capita Income at Constant Prices of 1993-94 from 1950 - 51 to 1999-2000 (Rs.)

Year PCI Year PCI Year PCI Year PCI Year PCI

1950-51 3687 1960-61 4429 1970-71 5002 1980-81 5352 1990-91 7321

1951-52 3714 1961-62 4449 1971-72 4914 1981-82 5555 1991-92 7212

1952-53 3747 1962-63 4425 1972-73 4763 1982-83 5548 1992-93 7433

1953-54 3909 1963-64 4546 1973-74 4880 1983-84 5854 1993-94 7698

1954-55 3994 1964-65 4781 1974-75 4830 1984-85 5956 1994-95 8088

1955-56 4020 1965-66 4459 1975-76 5167 1985-86 6082 1995-96 8498

1956-57 4159 1966-67 4392 1976-77 5103 1986-87 6189 1996-97 9036

1957-58 4007 1967-68 4653 1977-78 5375 1987-88 6260 1997-98 9288

1958-59 4222 1968-69 4657 1978-79 5551 1988-89 6777 1998-99 9733

1959-60 4216 1969-70 4865 1979-80 5092 1989-90 7087 1999-00 10204
APPENDICES 185

CHAPTER 6
Three Plans submitted to GOI before Independence
A Plan of Economic Development for India, known as Bombay Plan was prepared by
eight leading industrialists of the country, which accepted the role of the State
within the framework of capitalistic framework.
Peoples Plan for Economic Development of India, known as Peoples Plan prepared
by B. N. Banerjee, G. D. Parekh, and V. M. Tarkunde but released by M. N. Roy,
General Secretary of the Indian Federation of Labour, recommended creation of
State capitalism.
The Gandhian Plan of Economic Development for India, known as Gandhian
Plan by Shriman Narayan Agarwal, which recommended building up of a self-
reliant rural economy.
The Bombay Plan proposed a doubling of per capita income over fifteen years,
excluding preparatory time taking 3 to 5 years, amounting to trebling of national
income at the given rate of population rise, which would necessitate twice of
agriculture production, five times industrial production, creation of industries for
production of power and capital goods but confining production of essential
consumption goods with small scale and cottage industries. All this needed Rs
10,000 crore over 15 years, which was found feasible. The Peoples Plan, on the
other hand, proposed an outlay of Rs 15,000 crore, found feasible, over
10 years leading four times increase in agriculture and six times increase in
industry. Gandhian Plan proposed doubling of per capita income in ten years
through rejuvenation of village economy though accepting basic structure as it
existed then.

Plan Investment Years Agriculture Industry Per Capita

(Rs.Cr) Income
Bombay Plan 10,000 15 Twice Five Times Three times
Peoples Plan 15,000 10 Four times Six Times
Gandhian Plan 3,500 10

It may be surprising that, despite substantial ideological differences, there

existed a broad convergence on many issues as who should develop and control
basic industries, electricity should be used in variety of manufacturing units, landed
interests be abolished and every citizen should have balanced diet.

Resolution constituting Planning Commission

The Planning Commission has guaranteed certain Fundamental Rights to the
citizens of India and enunciated certain Directive Principles of State Policy, in
particular, that the State shall strive to promote the welfare of people by securing
and protecting as effectively as it may a social order in which justice, social, economic
and political, shall inform all the institutions of the national life, and shall direct
its policy towards securing, among other things
186 INDIAN ECONOMIC DEVELOPMENT

(a) that the citizens, men and women equally have the right to an adequate means
of livelihood;
(b) that the ownership and control of the material resources of the community are
so distributed as best to subserve the common good; and
(c) that the operation of the economic system does not result in the concentration
of wealth and means of production to the common detriment.
Having regard to these rights and in furtherance of these principles as well as
of the declared objective of the Government to promote a rapid rise in the
standard of living of the people by efficient exploitation of the resources of the
country, increasing production, and offering opportunities to all employment in
the service of the community,
The Planning Commission will
1. make an assessment of the material, capital and human resources of the
country, including technical personnel, and investigate the possibilities of
augmenting such of these resources as are found to be deficient in relation to
the nations requirements;
2. formulate a Plan for the most effective and balanced utilisation of the countrys
resources;
3. on a determination of priorities, define the stages in which the Plan should be
carried out and propose the allocation of resources for the due completion of
each stage;
4. indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political situation,
should be established for the successful execution of the Plan;
Plans Prepared by the Planning Commission

Plan Period Perspective Plan Remarks

First Five Year Plan 1951-1956 1951-1981 (30)
Second Five Year Plan 1956-1961 1956-1976 (20)
Third Five Year Plan 1961-1966 1961-1976 (15)
3 Annual Plans 1966-1969 Fourth Plan withdrawn
Fourth Five Year Plan 1969-1974 1968-1981 (12)
Fifth Five Year Plan 1974-1979 1974-1986 (12) Perspective extended to 15
Annual Plan 1979-1980
Sixth Five Year Plan 1980-1985 1978-1988 (10) Perspective extended to 15
Seventh Five Year Plan 1985-1990 1985-2000 (15)
2 Annual Plans 1990-1992
Eighth Five Year Plan 1992-1997 1992-2007 (15)
Ninth Five Year Plan 1997-2002 1997-2012 (15)
Tenth Five Year Plan 2002-2007 2002-2012 (10)

Fourth Five Year Plan 1966-1971 1961- 1976 (15) Abandoned in June 1966
(Sixth) Five Year Plan* 1978-1983 1978-1988 (10) Perspective extended to 15
*Subsequently scrapped; Note: Figures within parentheses denote number of years.
APPENDICES 187

5. determine the nature of the machinery which will be necessary for securing
the successful implementation of each stage of the Plan in all its aspects;
6. appraise from time to time the progress achieved in the execution of each
stage of the Plan and recommend the adjustments of policy and measures that
such appraisal may show to be necessary; and
7. make such interim or ancillary recommendations as appear to it to be
appropriate either for facilitating the discharge of the duties assigned to it; or,
on a consideration of the prevailing economic conditions, current policies,
measures and develoment programmes; or on an examination of such specific
problems as may be referred to it for advice by Central or State Govenments.
(Emphasis has been added by the Author)

Plan Objectives from the Plan Documents

First Plan

Maximum Production
Full employment and
Removal of economic inequalities.

Second Plan

Sizeable increase in national income so as to raise level of living in the country.

Rapid industrialization with particular emphasis on development of basic and
heavy industries.
Large expansion of employment opportunities.
Reduction of inequalities in income and wealth and more even distribution of
economic power.

Third Plan

Equal opportunities
Distribution of economic powers
Reduction in disparities in income

Fourth Plan

Rapid increase in standard of living of people

Greater equality in income and wealth
Progressive reduction of income, wealth and economic power
More Benefits to Relatively Less Privileged Classes

Fifth Plan

Removal of poverty
Attainment of Self Reliance
Growth Rate of 5.5 per cent per annum
188 INDIAN ECONOMIC DEVELOPMENT

Sixth Plan 1978-83

Removal of unemployment and significant unemployment
Appreciable rise in standard of living of poorest sections
Provision of basic needs by the State: Clean drinking water, elementary education,
health care, adult literacy, rural roads, rural housing for landless, minimum
services to urban slums
Growth rate higher than attained in the past
Significant reduction in present disparities of income and wealth
Continued progress towards self-reliance
Sixth Plan (1980-85)
Significant step-up in rate of growth, promotion of efficiency in resource-use and
improved productivity
Strengthening modernisation-impulses for economic and technological self-
reliance
Progressive reduction in incidence of poverty and achievement of self-reliance
Speedy development of indigenous sources of energy with emphasis on
conservation and efficiency in energy-use
Improvement in quality of life of economically amd socially handicapped population
through MNP with national coverage within prescribed period and accepted
standards
Strengthening redistributive biases of public policies and services in favour of
poor leading to reduction of inequality in income and wealth
Progressive reduction in regional inequalities with increase in pace of development
and diffusion of technological benefits
Promotion of policies for control of population growth through voluntary acceptance
of small family norm
Harmony between long-term and short-term goals of development by promoting
protection and improvement of ecological and environmental assets
Promotion of active involvement of all sections in development process through
appropriate education, communication and institutional strategies
Seventh Plan
Growth in foodgrains production
Increase in employment opportunities
Rise in productivity
Growth
Modernisation
Self-reliance and social justice

Eighth Plan
Generation of adequate employment for near full employment by turn of the
century
Containment of population growth through peoples cooperation and scheme of
incentives and disincentives
Universalisation of elementary education and eradication of illiteracy among people
in the age group 15-35
APPENDICES 189

Provision of safe drinking water and primary health care facilities, elimination of
scavenging
Growth and diversification of agriculture to achieve self-sufficiency in food and to
generate surpluses for exports
Strengthening infrastructure to support growth process on a sustained basis
Ninth Plan
Priority to agriculture and rural development for generating adequate productive
employment and eradication of poverty
Acceleration in growth rate with stable prices
Food and nutritional security for all, especially vulnerable sections
provision of safe drinking water, PHC facilities, UPE, shelter and connectivity to
all in a time bound manner
Containment of population growth
Environmental sustainability of development process through social mobilisation
and peoples participation from all sections
Empowerment of women and socially disadvantaged groups (SC, ST, OBC,
minorities) as agents of change and development
Promotion and development of peoples participatory institutions like PRIs,
cooperatives, and SHGs
Strengthening efforts to build self-reliance
Tenth Plan
Indicative target growth rate of 8.0 per annum
Enhancement of well being
Availability of food and other consumption items
Access to basic social services of education, health, drinking water and sanitation
Expansion of social and economic opportunities for all individuals and groups
reduction in disparities
Participation in decision-making
Substantial allocation of resources to social sector and major improvement in
governance for effective use of resources
Acceleration in growth rates of slowly growing states
Poverty to be reduced to 15 per cent by 2007 and to 5 per cent by 2012
High quality employment to additional labour force during the plan
All children to be in school by 2003 and all children to complete Class V by 2007
Gender gap in literacy and wage rate to be reduced to 50 per cent by 2007
Population growth to be decelerated to 16.2 per cent during 2001-2011
Literacy rate to be raised to 75 per cent by 2007
Infant mortality rate to be reduced 45 by 2007 and to 28 by 2012
Maternal mortality rate to be reduced to 2 by 2007 and to 1 by 2012
Forest cover to be raised to 25 per cent by 2007 and 33 per cent by 2012
All villages to be given sustained access to drinking water by 2007
Cleaning of major polluted rivers by 2007 and other notified stretches by 2012.
190 INDIAN ECONOMIC DEVELOPMENT

CHAPTER 7
Industrial Policy
We may recall, that in the tumultuous days of partition, there was a lot of confusion.
But there was a clear need for a statement particularly about the direction in which
industrial sphere is likely to move. The Government responded with a resolution on
Industrial Policy in April 1948. Reserving arms/ammunitions, atomic energy, railway
transport were to be exclusively in control of the Government of India and new
ventures in coal, iron and steel, aircraft, ship-building, apparatuses for telephone,
telegraphs and wireless, were to be in exclusively in State sector. It means existing
units in these areas were left in the hands of private sector; no nationalisation of
these units was proposed. All other industries, basic and heavy (mining, metallurgy,
cement), capital goods (machinery, transport, electrical), chemical (fertilisers, other
heavy chemicals), and consumer goods industries (textiles, food-processing) were
left for private sector, including cooperative units.
The Industrial Policy Resolution adopted in April 1956 spread the phalanx of
the State by reserving 17 industries for exclusive monopoly, listing 12 industries
for progressive State ownership, by putting restrictions on private sector in all
other industries with regard to scale, volume, technology, and foreign capital. It
was adopted in the back-drop of resolution adopted by the Parliament for establishing
a socialistic pattern of society in India. The Constitution itself, while guaranteeing
fundamental rights, had enunciated directive principles of state policy. Expanding
public sector, strengthening cooperative sector and protecting cottage and small-
scale industry were three major planks. Partly the reason for expansion of public
sector was inability of private sector to come to the fore and partly private sector
could not be trusted to run public utility services in the interest of the consumer.
However, linkages between the two sectors were mooted. Differential taxation,
provision of subsidies and restriction on volume were to be invoked, small sector
had to compete with large sector. It was emphasised that the decentralised sector
would promote employment, mobilisation of resources, equitable distribution and
would check haphazard growth of urbanisation. The policy emphasised on regulated
inflow of foreign capital (announced in April 1949).
According to the Industrial Policy Statements made in 1991, licensing was to
be abolished for all projects except for a short list of industries related to: (i) security
and strategic concerns, (ii) social reasons, (iii) hazardous chemicals and overriding
environmental reasons, and (iv) items for elitists consumption. Even substantial
expansion would not need any permission. But industries reserved for small sector
would continue to be reserved for them and if such units intended to enter the
restricted list of industries, there would be no need for license. Imports of capital
goods would get automatic clearance in case foreign exchange availability is ensured
through foreign equity participation. Broad-banding (diversification) would be
permitted to existing units without encumbrances.
Public sector has to work in essential infrastructure goods and services and in
manufacturing of products where strategic considerations dominate such as defence
equipments, in exploration and exploitation of oil and mineral resources, and in
technology development and building of manufacturing capabilities in areas which
are crucial in the long-term development of the economy and where private sector
investment is inadequate.
APPENDICES 191

What we expect in an industrial policy?

Division of industries according to ownership: public, private, joint, both
Reservation according to level of scale: cottage, small, medium, large
Use of technology: traditional/village, modern
Use of foreign capital - where, how, how much
Cap on capacity for an individual unit
Responsibility of State for sensitive matters
Check on concentration
Protection of livelihood of those dependent on traditional industry

CHAPTER 8
Power of Continuous Exponential Growth
Human population has not been ever rising with the slightest of rate of growth.
This is clear from the following.
A population of one crore in the beginning of the era, rising at the rate of 1
percent per annum would have become about 44,00,00,000 crore. Even half a per
cent growth per annum would have multiplied the population by a factor of 21,000
in a span of 2,000 years.
Human history is much older. It simply means that population(s) rose and
declined; civilisations arose and vanished. The same has been the case in India.

Importance of Infant Mortality Reduction

Observe in your family, families of your relations, families of your friends in your
neighbourhood about the death of children in infancy. Talk with parents and uncles
about their brothers and sisters who died in infancy. Also talk with your grandparents
about death of their brothers, sisters, and children. You will discover a general
pattern that in each successive generation the number of children who died in
infancy has been reducing. Try to find out the number of children women of your
grandmothers generation and women of your parents generation gave birth.
Compare with the number of brothers and sisters you and friends have. You will
discover that each successive generation has been having fewer children.
Which way lies the causality? Reduction in infant mortality encourages at least
parents of next generation to beget fewer children.

CHAPTER 9
Contribution of Amartya Sen
Suppose the poverty line is 50 units. Suppose there are two societies, with ten persons
each. Suppose in one society, there are five persons, each with 20 units and five
persons with more than 50 units; in the other, there are five persons, each with 45
units and five persons more than 50 units. You will say, if you were asked, that each
society has 50 per cent population below poverty line. Some people will call it incidence.
But, you will perhaps not reconcile as you will find that poor people in one society face
much more penury as they are far away from the poverty line than in the other. The
average distance from the poverty line, in the first case, is 30 units and in the other,
it is just 5 units. So, you may suggest that this distance, call it average poverty gap,
192 INDIAN ECONOMIC DEVELOPMENT

should be taken into consideration in any good measure of poverty. This absolute gap
may be divided by the poverty line to yield the intensity of poverty.
Suppose further, that there are two societies, each with 5 persons out of 10 below
poverty line and each with the same poverty gap of 30 units. In one case, all five poor
have the same 20 units and in the other the distribution is 10, 10, 20, 30, 30. Shall
we still say that poverty situation is the same in both the societies? No, perhaps you
will say that we should take into account the level of inequality among the poor.
Thus, we come to the conclusion that we should consider (i) incidence which
means what proportion of population is below the poverty line, (ii) intensity which
means how much below the poor are from the poverty line, and (iii) inequality among
the peer group of the poor. If you can meaningfully combine the three dimensions,
you will be an Amartya Sen and could win a Nobel Prize! Not a bad idea!

CHAPTER 11
Electric Power: Generation, Transmission and Distribution
Electricity is generated in one of the plants whether they are thermal, hydro or
nuclear or one based on non-conventional energy sources.
If amount generated is large, it is not locally consumed. It is transmitted on
high voltage through transmission lines from generating plants to power stations
or substation. You might have seen big iron-fabricated high towers connected
through heavy wires. This is transmission network.
From power station or sub-station, it is distributed to the end-user or consumer-
industry, agriculture, commercial establishments, households, and railways. City
poles and city wiring constitutes the distribution network in the city. Similar would
be the case in rural areas, with difference of scale, etc.
In order to match aggregate supply with aggregate demand, mechanisms of
grids are being developed.
This description is not accurate picture of the total network. Its purpose is to
provide a background of the issue and to appreciate the problem.
Rural Urban Disparities in Literacy
Rural-Urban Break-up of Male And Female Literacy Rates (in percentage)
Year Male Female Person Year Male Female Person
1951 1981
Rural 19.02 04.87 12.10 Rural 49.60 21.70 36.00
Urban 45.60 22.33 34.59 Urban 76.70 56.30 67.20
Total 27.10 08.86 18.33 Total 56.38 29.76 43.57
1961 1991
Rural 34.30 10.10 22.50 Rural 57.90 30.60 44.70
Urban 66.00 40.50 54.40 Urban 81.10 64.00 73.10
Total 40.40 15.35 28.30 Total 64.13 39.29 52.21
1971 2001
Rural 48.60 15.50 27.90 Rural 71.40 46.70 59.40
Urban 69.80 48.80 60.20 Urban 86.70 73.20 80.30
Total 45.96 21.97 34.45 Total 75.85 54.16 65.38
Note : For 1951, 1961 and 1971, population group refers to age group 5+ while for
1981, 1991 and 2001, it refers to 7+.
Source : Census of India Series 1 India, Provisional Population Totals, Paper 1 of 2001.
 GLOSSARY

Accounting Period It is usually a year. But besides the calendar year, we have
a fiscal year or a financial year, academic year, agriculture year, etc. Calendar year
obviously runs from 1 January to 31 December. In our country, the fiscal year runs
from 1 April of a calendar year to 31 March of the next calendar year while academic
year runs from 1 July of a calendar year to 30 June of the next calendar year.
Agriculture year is the same as the academic year. While calendar year is presented
as 2001, fiscal and academic years are written as 2000-01. Our macro-economic
aggregates refer to fiscal year while enrolments in schools refer to academic year.
However, many businessmen use diwali to diwali as their business year.
Age-specific Fertility Number of births given by women in a particular age
group in any given year divided by the number of women in that age group, when
multiplied by 1000, is called age specific fertility of that age group in that particular
year.
Basic Literacy Rate Percentage of literates among persons above 15 to the total
size of population above 15 in a society is known as basic literacy rate. It is called
basic because the minimum requirement of being literate is that the person should
be able to read and write in any language. It is the same as adult literacy rate in our
country.
Birth Rate and Death Rate Birth is live parturition of a human baby from
mothers womb. Stillbirths, miscarriages and abortions are not counted as (live)
births. Birth rate is defined as number of live births per thousand of population in
a given year. By convention birth of twins is counted as one birth. Death is final
departure of a human being. Death rate is defined as number of deaths per thousand
of population in a given year. Though twins are born together, they die apart. While
their births are counted as one, their deaths are counted as two.
Civic and Political Rights Political rights relate to a citizens rights of playing a
part in determining as to who governs their public affairs and how they are governed.
Civic rights concern the rights of the individual vis-a-vis the State.
Cohort A group of people, who have a synchronous/simultaneous start by a
significant event, is known as cohort. It is similar to a generation except that, in the
case of a generation, the interval of happening of a particular event is not precise.
In this case, an interval is fixed. Normally, it is a year. People born in a particular
year, say 2001, constitute birth cohort of that year. There can be a marriage cohort
or a recruitment cohort too. How the attrition in the group takes place is the basic
interest in the analysis, using the concept of cohort.
Combined Enrolment Ratio Enrolment ratio, for any given level of education, is
obtained by dividing size of enrolment by size of population of corresponding
(assumed) age group. For example, enrolment ratio for primary level of education in
India, is obtained by dividing size of enrolment in primary classes by size of
population of age group 6 -11. Enrolment ratios for primary, secondary and tertiary
172 INDIAN ECONOMIC DEVELOPMENT

level of education are usually calculated. In combine enrolment ratio, we should

divide the total studentship by size of the population of age group 6-23.
Comprehensive Development Planning Planning which covers all spheres of
development and encompasses whole of the economy is called comprehensive
development planning. It does not restrict itself to public sector or to economic
spheres alone.
CSO and NAS The Central Statistical Organisation, set up in May1951 in the
Cabinet Secretariat, but now a part of the Department of Statistics, is charged with
coordinating the statistical activities in the country, laying down standards in terms
of concepts, definitions and procedures, providing consultancy and advisory support
to other statistical agencies and keeping liaison with international statistical agencies.
With the transfer of work of estimation of national income in 1954 from the Ministry
of Finance, it is also charged with the activity of preparing the national accounts,
including macro-economic aggregates, accounts of the public sector, and
consolidated accounts of the nation. The National Accounts Statistics is the annual
publication of the CSO, giving details of different measures of different economic
activities.
Current Account Deficit Balance of payments accounts are a record of the
international transactions of an economy. It has two parts: current account and
capital account. The current account records trade in goods and services, as well
as transfer payments. The capital accounts records purchases and sales of assets
(like stocks, bonds, land, etc.) and bank deposits. Trade in goods means purchase
and sale of goods, such as oil, scrape and jute and trade in services means payments
like freight, royalty, and interest. Payments made or received on account of
remittances, gifts and grants, known as transfer payments, are included in the
current accounts. If, under the head of current account (trade in goods, trade in
services and transfer payments), the total payments exceed the total receipts, there
exists current account deficit. On the contrary, it is considered a surplus.
Current Daily Status Employment/Unemployment Such an inquiry is made
for each day of the week, the number of person-days employed/unemployed divided
by seven is taken as average daily employment/ unemployment of the labour force.
Dividing this number by the size of labour force (actually working or available for
work) yields the current daily status.
Demographic Investment Investment necessitated by births of children till
they enter the labour force on education and health (including public health) is
called demographic investment. This has public overtones and suggests investment
on schools and teachers, and hospitals and doctors. It is understood that this is
drain on development investment.
Dependency Burden Expenditure on children while they are unproductive, on
their bringing up, education and medicare is called dependency burden. This has
parental overtones.
Development Economics It is a distinctive branch of economics, which concerns
with both the theory of development and policy for development with a view to
improving the lot of poor people in developing countries.
GLOSSARY 173

FERA and FEMA In order to regulate foreign controlled companies in India

Foreign Exchange Regulation Act was enacted in 1947. When our foreign exchange
resources fell below $1billion, the Act was amended in 1973 for conserving precious
foreign exchange. But, it also had provisions to issue guidelines to the foreign
investors to divert their funds, which employ sophisticated technology. As it led to
some harassment, it was further amended in 1976. Finally, when we are somewhat
comfortable with level of foreign exchange reserves, we have got FEMA (Foreign
Exchange Management Act) which deals with issues of foreign exchange and foreign
securities.
Fiscal Deficit Total expenditure (revenue expenditure and capital expenditure
including loan) revenue receipts plus other receipts (which do not create liability
on the Government). Other receipts include sale of Government property, and shares
and disinvestment proceeds.
Flight of Capital When, on account of unsettled conditions of economic
conditions, especially, if the Government is in financial difficulties, or in an extreme
case, there is fear of serious depreciation of the currency, large numbers of those
who have investments in that country will probably wish to transfer them elsewhere.
If occurred on a large scale, it would be known as a flight of capital. The effect, of
course, is only to increase the difficulties of the country from which the flight takes
place.
Foreign Investment Foreign investment is of two types. The first is investment
of foreign capital into new productive activity. This is known as direct foreign
investment. The other is foreign capital purchasing the shares of Indian companies.
This is known as portfolio investment. Both of them give foreign exchange to the
latter. While the foreign direct investment creates additional capacity and contributes
to additional production, the latter does not. Both earn profit. It will depend on the
nature of production, the foreign direct investor engages in, whether the product
will be exported and earn foreign exchange for the country. Portfolio investor would
have some claim over profit and some control over production.
Forex Reserve Foreign exchange reserves consist of foreign currency assets,
SDRs and gold reserves held by the RBI. They provide a cover for imports. They are
however contributed by foreign investment, foreign aid, foreign borrowings and
foreign grants, including those from IMF, and deposits by the NRIs all in hard
currency.
Green Revolution A quantum jump in productivity in agriculture sector achieved
through a combination of scientifically developed hybrid seeds, fertilisers, herbicides
and controlled irrigation, is called green revolution. While it raises the yield of a
particular crop, it permits a number of crops to be grown annually on a particular
plot.
Gross Domestic Product It is a measure in monetary terms of the volume of all
goods and services produced in an economy during a given period of time, usually
a year, accounted without duplication. Since different units of production (tonnes,
metres and litres) of goods and different measures of services (number of orthopaedic
operations, number of stage shows and tonne-kilometres of transport) cannot be
174 INDIAN ECONOMIC DEVELOPMENT

added, the measure of volume of all goods and services has, perforce, to be in value
terms. We add up contribution of all activity of production, whether of goods or of
services. While measuring contribution of a particular activity, we should subtract
the value of inputs from the value of inputs, so that there is no duplication for parts
of many goods and services enter as inputs into production of other activities.
Prices in different periods for many goods and services are different. In order to
measure the real change in total volume of all activities between two different periods,
care should be exercised to use GDP at constant prices. [Suppose, all that an
economy produces could be measured in kilograms (apples, wheat, eggs and pearls)
should we add them up? If not, think why not?].
Gross Enrolment Ratio The ratio of number of students enrolled in a particular
level of education, say primary level, to the size of population of children of relevant
age group, say age group 6-11, is called gross enrolment ratio. The ratio is often
expressed in terms of percentage. However, we know that many students enrolled
in the primary section (Classes I-V) do not strictly come from the age group of 6-11.
There are children below age 6 and also above age 11. Gross enrolment ratio may,
therefore, turn out to be more than 100 per cent. Indeed in the case some states, it
turned out to be as high as 150! If we exclude overage and underage children from
the numerator, then the enrolment ratio should be called net enrolment ratio.
Human Capital Formation As against physical capital, which is a machine, a
building, a road, when human beings are made more productive through education
and training and through better health and nutrition facilities, capital is formed in
human form. It is believed that its contribution to productivity is enormous.
Infant Mortality Rate Death before age one is called infant mortality. Infant
mortality rate is the number of infant deaths in a particular year per 1000 live
births during that year. Live births exclude stillbirths, miscarriages and induced
abortion. In cases where infant deaths widely fluctuate from year to year,
demographers take notice of the fact that infant death that occur in a particular
year also include death of infants born in the preceding year and babies born this
year may die next year as infants.
In-migration and Out-migration A movement to a place with no immediate
intention to return is called in-migration and a movement from a place with no
immediate intention to return is called out-migration. When such a movement takes
place between two countries, for the country receiving it is immigration and for
country deporting it is emigration.
Intellectual Property Rights Laws governing patents, copyrights, trade secrets,
electronic media and other commodities, comprised primarily of information. These
laws generally provide the original creator the right to control and be compensated
for reproduction of the work.
Laissez-faire A French phrase expressing leave us alone. It denotes the view
that Government should interfere as little as possible in economic activity and
leave decisions to the market. The role of Government, according to this view, should
be limited to maintenance of law and order, national defence, provision of certain
public goods like public health and sanitation, which private business would not
undertake.
GLOSSARY 175

Life Expectancy Life expectancy at age x is measured in terms of average number

of years which are yet to be lived by the people at age x (at a given point of time). Life
expectancy at birth is, therefore, the average number of years to be lived by the
babies born in any given year. Life expectancy at age one is naturally the number of
years expected to be lived by babies who have survived the first year of their existence.
Live Birth The birth of a child who is alive at the time of parturition. Stillbirths,
miscarriages and induced abortions are not counted as births because the children
coming out of womb are already dead.
Long-term/Short-term Objectives Long-term objectives are very much
associated with our wishes for the kind of life people should lead. Short-term
objectives may be the need of the hour. For example, there may be good reasons for
having good amount of foreign exchange. But, accumulation of foreign exchange
would not be our long-term objective. Containing inflation may be a short-term
objective but lower income inequality is a long-term objective.
Mean Years of Schooling Multiply a given number of years of schooling with the
number of persons who had it. Add all such products. Divide the sum by the total
number of persons. All persons with primary education may be taken as persons
with five years of schooling. So multiply the number of persons (with primary
education) by 5. Do the same for other levels.
Million Tonne of Oil Equivalent Wood, coal, oil, gas and electricity are different
forms of energy. Some forms can be substituted by other forms with ease, for
example, wood by coal. Some forms can be converted into other forms, for example,
coal, oil and gas can be converted into electricity. Use of various sources of energy
depends on use and development of technology. Nevertheless, in order to form a
basis for judging relative contribution of various forms, they have to be converted
into some common unit. British Thermal Unit, Joule, and Calories are energy units.
Since oil is now commonly used in many operations, the presently accepted way is
to express energy content of every form in terms of its equivalence in oil form.
Million is an internationally accepted unit for large numbers.
MRTPA and MRTPC Following the recommendations of Monopoly Inquiry
Committee (1965), an Act was passed in 1970. The Act was called Monopolies and
Restricted Trade Practices Act (MRTPA). Under this Act, Monopolies and Restricted
Trade Practices Commission (MRTPC) was set up to investigate, case by case, whether
a given firm or a cartel of firms were resorting to such practices, obviously with a
view to charging higher prices from the customers for their products. A company
with paid up capital of Rs 20 crore was brought within its jurisdiction. In 1985, this
limit was raised to Rs 100 crore.
National Sample Survey Organisation (NSSO) It is a central government
organisation is responsible for most of the large scale sample surveys carried out in
the country. Using a scientific design, it collects sample data on regular intervals on
various issues including consumption employment, unemployment, debt and
investment. It collects data on variety of other subjects suggested to it.
Natural Monopoly A monopoly, which emerges for technological reasons, not
because of barriers to entry. Technology makes it cheaper for one producer to
produce a product for or provide a service to whole of the market. In terms of
176 INDIAN ECONOMIC DEVELOPMENT

resource cost, it is cheaper for the society too. If two plants try to meet the demand,
with the same technology, for the same market, the resource cost will increase as
they will not be exploiting the economies of scale. However, such firms need
regulation, or else they would reap huge profits.
Non-renewable Resources Resources that cannot be easily renewed. They
have finite, even if large, stock. The stocks of fossil fuels (such as oil and coal)
and mineral resources (such as iron, lead, aluminium, uranium) are the same
today as they were millions of years ago. To convert CO2 and H2O back into fossil
fuel will take as much energy as we got from it.
Normalisation It is a modern term used for division by such factor as makes
the numerator comparable. Sometimes, the numerator is also modified by
subtracting something from it or subtracting it from something. See resemblance
with normalisation and standardisation of a variable, which is considered normally
distributed.
NRI Non-resident Indian. An Indian who does not normally live and work in
India but lives and works in some other country. He holds Indian citizenship and
Indian passport.
Occupational Classification of Employment As against where you are employed,
which defines your industrial status, how you are employed defines your occupational
status. Occupational classification is in terms of professional workers,
administrative/managerial workers, clerks/stenographers, sales workers, service
workers, farmers, fishermen, drivers, labourers, etc.
Organised Sector All the public sector enterprises and those private enterprises
registered legislation like Factories Act, companies Act and cooperatives Act are
included in organised sector. Maintenance of accounts is the main criterion for the
inclusion of enterprises in this sector.
Passenger-kilometre/Tonne-kilometre A person (a tonne of goods) carried for
one kilometre is one passenger-kilometre (tonne-kilometre).
Percent Points The absolute difference between two percentages is known as
per cent points. For example, the absolute difference between 50 per cent and 60
per cent is (60 per cent 50 per cent =) 10 per cent points whereas relative difference
is [{(60 per cent-50 per cent)/50 per cent} 100=]20 per cent.
Per Thousand Points Difference between two levels of rates expressed in terms
of per thousand is to be expressed as per thousand points. It is similar to per cent
points. Since many rates in demography are expressed in terms of per thousand, it
becomes important to remember it.
Perpetual Resources Resources, which will always exist in relatively constant
supply, no matter how and how much they are used. Solar energy is one such
example. Perhaps, geothermal energy or wind energy could be other examples.
Person-day A person working for a day works for a person-day. Two persons
working half-day each will amount to working for a person-day. Multiplying the
number of persons with the number of days they have been working and aggregating
all such multiplication products will yield the total number of person-days worked.
GLOSSARY 177

Perspective Plan Perspective plan is a long-term plan, which forms the backdrop
of the medium-term plan. While the medium-term plan is usually formulated for
four/five/six years (in our country for five years), the long-term perspective plan is
usually for ten/fifteen/twenty years. Long-term perspective plan thinks in terms
of long-term goals of sustained increase in capacity matching likely demands ten
years later or basic problems of poverty, unemployment or illiteracy, which one
cannot solve in a day, or alternative technological possibilities. Medium-term plans
bother about harnessing present technology, making a dent on poverty, improving
balance of payments, controlling inflation. There are short-term or annual plans,
which take care of immediate needs. Plans help one in moving in the correct direction.
If there is a reason for deviating from the path, one knows that one has to come
back to the long-term path.
Postal Services Postal services can be divided as basic postal services and other
postal services. Basic postal services concern with sale of stamps and stationery,
acceptance of registered and insured articles and parcels, value payable articles
and parcels, money orders and postal orders. Other postal services include speed
post, business post, media post (public and private corporate sectors advertisement
on postal stationery), satellite post, express post, retail post (acceptance of telephone
bills and electricity bills).
Potential Resources Many of the resources we know today were not considered
resources once upon a time. Either we did not have taste for marine food or the
technology was not ripe for using petroleum or natural gas. Economic, cultural and
technological conditions of a society may find use for existing matters or discover
new matters for use. Waste water and earthworms are now considered resources.
Public Utilities Public utilities are business enterprises, often allowed to run as
monopolies supplying essential public services, such as electricity, railways,
communication, gas pipelines, water supply, sewerage, sanitation and irrigation.
They are granted power of eminent domain (licence) to lay down spatial network in
public interest. Whether in public sector or in private sector, they are regulated for
price, quantity and timely supply.
Purchasing Power Parity Exchange Rate In order to get one US $, you need to
give around Rs 50 at the market exchange rate. Let us take an example of simple
packet of bread, which is an essential item. Suppose it is available for Rs 15 in
India and for US $ 3 in the US, then in terms of bread one US $ is equivalent to Rs
5. So would be the case if we hire a residential flat of the same size and standard in
two comparable cities. Most of the essential items are home-made where market
exchange is found to underestimate the value in the so-called underdeveloped
countries. When purchasing power equivalence is applied, GDP of India becomes
four-times and that of China becomes five-times but that of Japans becomes 0.6
times only. At market exchange rates, Japans and Chinas per capita GDPs in
1994 are found to be US $4600 and US $ 520, respectively, but in terms of
purchasing power parity equivalence, they are found to be PPP $ 2800 and PPP $
2475, respectively!
Quota Restriction on quantity of a commodity, which could be imported during
a given period. Though it is adopted by many countries for conserving their scarce
178 INDIAN ECONOMIC DEVELOPMENT

foreign exchange, it is considered a form of protection(ism) for domestic industries

against foreign competition.
Rate of Natural Increase/Growth Difference between birth rate and death
rate is known as rate of natural increase or rate of natural growth. This is to
contrast with (total) growth rate, which considers net migration in its reckoning
as well.
Registered Manufacturing Units Under the Factory Act, a manufacturing
establishment, including activities of repair and maintenance, has to be registered
if it has 10 or more employees and uses power or has 20 or more employees but
does not use power.
Registered Tonne Cubical content of 100 cubic feet is called registered tonne.
Renewable Resources Resources that can get easily renewed through natural
processes once they are used. Forests, animals and fishes, if not overexploited,
get easily renewed. Water is put in that category.
Resources Objects, materials and commodities that are of use to the human
society are reckoned as resources. The relative importance of resources may
change over time because of changes in technology or tastes. Wood may be replaced
by coal, and coal by oil or electricity as resource for energy. Waste products of
some processes may be resource for other processes. The resources may broadly
be divided into the following four, not necessarily exclusive, categories.
Revenue Deficit The excess of Governments revenue expenditure over revenue
receipts constitutes revenue deficit of the Government. Revenue receipts include
proceeds of taxes and other duties as also interest and dividends on investment
made by the Government, fees and other receipts for services rendered by the
Government. Revenue (recurring) expenditure is incurred on normal running of
the Government departments and various services, interest charges on debt
incurred by the Government, subsidies, etc. Normally, revenue expenditure is
not supposed to result in creation of assets; but grants given to the States by the
Union, treated as revenue expenditure, may result in creation of assets.
Route and Track Kilometres Distance between any two points, whether
covered with one track or two tracks or three/four tracks, is called route distance,
measured in route kilometres. When all tracks are measured, double as two and
triple as three, it is total track. However, there are a few extra lines in sidings
and yards to carry out technical operations. When these extra lines are subtracted,
we get the running track.
Sample Registration System We have civil registration system (CRS) for record
of births, deaths and marriages. These events are recorded by panchayat agencies,
police agencies and revenue agencies in rural areas of different states and through
municipal authorities in urban areas. Even though registration of birth and death
is compulsory by law, many births and deaths go unregistered. As a result, vital
statistics rates based on civil registration system cannot be trusted. The Office of
the Registrar General of India started a special registration system on a sample
basis, viz., sample registration system on an experimental basis in 1964-65, which
became fully operational during 1969-70. Now most of the vital statistics is based
on SRS.
GLOSSARY 179

Subsidisation and Cross-Subsidisation When loss due to recovery being

less than the cost that is made up by the general revenue of the Government, the
help is known as subsidisation. When one product is overpriced to under-price
some other product, the practice is known as cross-subsidisation.
Tariff A tax or levy imposed on each unit of a commodity imported into the
country.
Tonne and Ton Tonne a metre unit of weight is metric Ton equivalent to
1000 Kgs. It is about 1.6' per cent shorter than Ton which is equal to 2240 pounds.
One pound is about 453.6 grams.
When figures are in thousands of millions, no great harm will be caused if Tonne
and Ton are taken as equal.
Total Fertility Rate Roughly speaking, average number of children that could
be born to a group of women when exposed to all age specific fertilities.
Usual Status Employment/Unemployment A person may be employed today
and unemployed tomorrow. So he/she is taken as usually employed/unemployed
depending whether he/she was employed/unemployed for a major part of the year
of inquiry. The number of persons, who are usually employed/unemployed, gives
the extent of employment in that year. Dividing this number by the sum of all those
who were employed or seeking work yields the usual status unemployment rate.
Vital Statistics Statistics related to birth and death. There are many ratios to
describe the phenomena connected with birth and death. Infant mortality or child
mortality is given special importance. Life expectancy is an important vital statistics.
WTO The World Trade Organisation (WTO) came into being in 1995 purportedly
to raising living standards through substantial reduction of tariffs and other barriers
to trade and elimination of discriminatory treatment in international commerce. It
is the successor to GATT. At Uruguay Round, after negotiation for seven long years,
nations agreed to constitute WTO. The WTO has increased its sphere of operation
by including trade in services, trade related intellectual property rights and trade
related investment measures.