B.

COM - II SEMESTER ECONOMIC DEVELOPMENT OF INDIA

Unit I:
Features of Indian economy-characteristics- under developed or developing economy-India as a mixed economy-population in India-causes, consequences and control. Capital formation in India-causes for low rate of capital formation- importance of foreign capital. UNIT II: Primary sector-role of agriculture in Indian economy- causes for low agricultural productivity. Green revolution-nature and effects- food security-agricultural price policy. UNIT III: Secondary sector- industrial policy- industrial policy 1991-role of small scale and cottage industries in Indian economy problems- government measures industrial financeIFC,SFC,IDBI,ICICI. Public sector undertakings-objectives-performance of public sector undertakingsprivatization. UNIT IV: Tertiary sector-commercial banks and economic development RBI & economic development. Indias foreign trade-composition- pattern and direction of Indias export promotion measures-EXIM bank &its ro le in Indias foreign trade. UNIT V: Planning 5s year plans-objectives, achievements and failures-Anti poverty measuresemployment generation schemes-trends in the growth of Nationality.

UNIT I
FEATURES OF INDIAN ECONOM Y (OR) CHARACTERISTICS INTRODUCTION: India is an under developed nation. Poverty is widely prevalent. Te standard of living of the people is low. Population is more. Te natural resources are not fully utilised. 1. Income: The per capita income is very low in Ind ia. It is 340 dollars whereas in Switzerland it is 27500 dollars, in Japan 21020,in the USA 19840. Because of low per capita income, roughly one third of the Indian population is below poverty line. Poverty reduces the quality of human beings. 2. Inequalities in income and wealth: There is concentration of income and wealth in the hands of a few people. Hence there is a wide gap between the rich and the poor. Inequalities are found in rural and urban areas. 3. Predominance of Agriculture: India is predominantly country. It provides employment to 68% of the working population. Agriculture contributes about 36% of national income. Many of the industries are agro based. In spite of the significant contribution of agriculture to the Indian economy. 4. Unde rutilised natural resources: India has vast natural resources. But they are not fully utilised. It is because of lack of capital or because of lack of technical know how or lack of market. For example India as 90 million acres of unused lands and 41 million KW hydro electric resources. Not even 10% of this is used so far. 5. Rapid growth of population: India is faced with the problem of population explosion. The census of 1951 placed population at 360 million. But now we have around 1027 million. The Birth rate has not significantly declined whereas the death rate as fallen due to improvement in medical facilities. 6. Large unemployment: In India labour is abundant. Hence there is large unemployment. But the marginal productivity of labour in agriculture is often negligible. The number of unemployed has exceeded 29 million .Such magnitude of unemployed is a matter of concern for the nation.

7. Low rate of capital formation: Capital is deficient in India. The rate of capital formation is low due to poverty. Hence the capacity of the people to save is very low. This leads to low investment. 8. Poor Quality of Human capital: In India the quality of human capital is poor. This is due to illiteracy, malnutrition, inadequate medical and health facilities. The literacy rate in India is around 52%. 9. Dualistic economy: Dualism is prevalent in India. There are the market economy and the subsistence economy. Market economy is in the rural areas. 10. Backward technology: In India outmoded technologies of production are followed. Lack of education, absence of skilled labour force and paucity of capital resources are responsible for the use of backward technology. Low productivity in Indian agriculture and industry are due to backward tec hnology. INDIA AS A MIXED ECONOM Y: The India economy is a mixed economy. It is a system in which public and private sectors exist side by side. It is a policy of compromise between capitalism and socialism. FEATURES OF MIXED ECONOM Y: 1. Co-Existence of public and private sectors: In India private and sectors function simultaneously. Important sectors like defence,railways,post and telegraph, atomic energy,banking,shipping and civil aviation are under public sector. But the private sector produces and distributes major proportion of the total products of the country. 2. Decisive role of the market mechanis m: Market mechanism dominates in the Indian economy. The prices of most of the commodities and factors of production are determined by the interplay of demand and supply forces. However market mechanism in India is not free from state control. 3. Monopoly trends: Since independence, monopoly houses have grown rapidly. With this trend the concentration of economic power in the country has increased. 4. Economy planning: Economic planning has been an integral part of the Indian Economy for the past five decades. The Indian plans lay down targets for all sectors. For example even though agriculture is in

the private hands, the govt tries to realise the targets for this sector by providing incentives. Thus India continues to be a mixed economy. The ingredients of mixture conform more closely to a capitalist economy than to a socialist pattern.

POPULATION IN INDIA QUANTITATIVE ASPECTS OF INDIAS POPULATION YEAR 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2004 POPULATION IN MILLION 236 252 251 279 319 361 435 547 683 844 1027 1084 PERCENTAGE INCREASE OR DECREASE +5.75 -0.31 +11.00 +14.22 +13.31 +21.51 +24.80 +24.75 +23.5 +21.3 +5.8

BIRTH AND DEATH RATES: Growth of population is a function of birth and death rates. The birth rate has declined from 49.2 per 1000 in 1911 to 20.4 in 2003.But the death rate has declined from 48.6 to 8 per 1000 in the same period. Reasons for high birth rate or causes for growth of population: a. Climatic factors b. Economic factors c. Social factors d. Religious factors a. Climatic factors: India has hot climate. Girls get matured at an early age in such a climate. Their reproductively period starts from 14 years. Hence the reproductively span is large. b. Economic factors: 1.Every child born in a poor family is treated as an asset. 2.The infant mortality rate among the poor people is generally high. In order to ensure that some children do survive, poor people want to have large number of children. 3.Parents expect that their children will help them in their old age.

c. Social factors: 1.Marriage is a universal phenomenon in India. 2.Child marriage is a rule rather an exception in India. 3.The number of women in the reproductive age is very large.

d. Religious factors: Christianity and Islam are against family planning. Even Mahatma Gandhi did not agree to the idea of family planning. CONSEQUENCES ON ECONOMIC DEVELOPMENT OF INDIA Growth of population leads to enormous consequences as specified below: 1.Disparity between population growth and growth of national income. 2.Overcrowding in agriculture. 3.Adverse Effect on Food Supply. 4.Adverse Effect on consumption. 5.Unemployment problems 6.Reduction in capital formation. 7.Unproductive consumers 8.Energy problem. CAPITAL FORMATION IN INDIA Capital formation in India is calculated in terms of savings and investment as percentage of Gross National Product. The rate of capital formation has been steadily rising since the First Plan. For Example domestic saving as a percentage of GNP was 5.3% in 1951-52;7.5%in 19551956;8.8% in 1968-69;12.2% in 1973-1974;and 24.3 in 1978-79.This is due to rise in per capital income, deepening of financial system and the diminishing share of agriculture in G.D.P. Reasons for the low capital formation in India: The following are the reasons for the low capital formation in India: 1.Low per capita income. 2.Exemption of agricultural income from income tax. 3.Demonstration effect in cities. 4.Lack of Banking facilities. 5.Inflation. 6.Failture of private sector. 7.Failture of public sector. 8.High inventory accumulation. 9.Pattern of investment. 10.Lack of emphasis on Productivity.

IMPORTANCE OF FOREIGN CAPITAL In underdeveloped countries , there is low saving ,low investment and deficiency of capital. There is also technological backwardness. Foreign capital helps these nations in the following ways: 1. It overcomes technological backwardness: Foreign capital brings physical and financial capital. It also brings technical know how, skilled personnel, organizational experience, market information and innovations.

2. Helps in the development of economic ove rhead capital: Foreign capital helps in the provisions of railways ,roads, canals and power projects which require large capital and take much time for completion. 3. It helps in industrialization: Through foreign capital underdeveloped countries can establish steel, machine tools, heavy Electrical and chemical plants. 4. Foreign Capital assumes all risks: Foreign capital opens inaccessible areas, taps new resources and removes regional imbalances. 5. It increases employment: The importation of capital creates more employment in the urban areas. People move from rural to urban sector. The pressure of population on land is reduced and disguised unemployment disappears. 6. Increases revenue of Govt: When private foreign investors invest their capital in industries and projects in underdeveloped countries and other projects in underdeveloped countries they receive profits and royalties. These are taxed by the Government and Govts revenue increases. 7. Reduces inflationary pressure: Foreign capital helps in minimising inflationary pressure because food and other essential consumer goods flow into the country. 8. Other Advantages: Foreign capital increases the marginal productivity of local labour force. New bad quality products are available to consumers. The most important advantage is that foreign capital overcomes the balance of payments difficulties of underdeveloped countries.

UNIT II
PRIMARY SECTOR
THE ROLE OF AGRICULTURE IN THE INDIAN ECONOM Y Introduction: Agriculture forms the backbone of the Indian economy. Agriculture is the primary sector in India. Hence it has a crucial role to play in the economic development of the nation. 1. Largest contribution to national income: Agriculture contributes the largest amount to the national income of a country. But now 33% of the national income in India is derived from agriculture and other allied occupations. No other sector contributes so much. 2. Source of live hood to the majority: Another indicator of the importance of Agriculture in the Indian economy is the proportion of population in India depending on agriculture. According to 2001 census 59% of the working population in India is dependent on agriculture. 3. Supplies food and folder: Agriculture supplies food for the rapidly growing population. During the process of development under planning, incomes of the people increases greatly. Hence the demand for food increases. If the supply of food and raw materials is not adequate ,prices will rise. 4. Provides raw materials to industries: All leading industries of India are Agro-based industries. Cotton, jute, sugar, plantation, vanaspathi and paper industries depend on agriculture directly. Many of the small industries too depend on agriculture, directly or indirectly. 5. Support Trade and Transport and other services: Agriculture is the main support for railways and roadways. Internal trade is mostly in agricultural products. Operational in the agricultural sector supports services like banking, storage etc. 6. Important place in exports: We export mostly agricultural products like jute, cotton textiles, tea, oilseeds, spices, tobacco, wood, timber, and millets. Nearly 70% of Indias exports accounts for agricultural goods.

7. Provides market for manufactured goods: Most of the people in India derive income from agriculture. If the income of the agriculturists increase, the demand for manufactured goods like cloth, sugar and cycles will increases. If the incomes of the farmers fall, the demand will also fall. So the prosperity of many industries in the country depends on the prosperity of the farmers. 8. Capital formation: Savings are important for investment. In agriculture there is much saving. This can be seen from the fact that commercial banks are able to mobilise more savings from agriculture. Such savings are spent for investment purposes in industries in the towns. CAUSES FOR LOW AGRICULTURAL PRODUCTIVITY

The factors that contribute to the low productivity can be grouped under four headings. a)Natural factors b)Institutional factors c)Technological factors d)Socio-economic factors. a) Natural factors: Agriculture in India is dominated by Nature especially rainfall. Agriculture is a gamble in the monsoon. Only 19% of the cultivated area has been irrigated by means of canals, tanks etc and the remaining 81% depend only on monsoons. The monsoons are generally uncertain. That is why productivity is low. b) Institutional factors: i) Size of the holdings: The most serious defect is the extremely small size of the land which are cultivated. Not only the holdings are small, but also they are fragmented. As a result of this, scientific cultivation with improved implements is not possible. ii) Pattern of land tenure: Nearly 50% of the cultivated area is in the hands of big landlords. Even though intermediaries have been abolished, the position of the tenants is rather bad. Due to smallness of holdings and absence of non-forms services like credit and marketing facilities, the tiller has no incentive to improve the land. c)Technological factors: i) Supe rfluous manpower: There is overcoming in India. Nearly 67% of people are engaged in agriculture and allied activities. The per capita net sown area has declined. The net result is low productivity.

ii) Inadequacy of non-farm services: The inadequacy of non- farm services like finance and marketing have contributed to low agricultural productivity. Money lenders who charge more interest are still advancing a great proportion of agricultural finance.

d) Socio-economic factors: The following socio-economic factors have also contributed to the low agricultural productivity in India. 1.lliteracy and ignorance 2.Individualistic operation 3. Lack of subsidiary occupation.

GREEN REVOLUTION
Meaning: Green Revolution refers to the breakthrough in agricultural production as a result of the adoption of the New Agricultural Strategy since 1967-68.The Green Revolution is the result of a Package of practices. Main Features of the Green Revolution: 1.Wonder Seeds. 2.Fertilizer. 3.Mutiple Cropping. 4.Modern Equipments. 5.Increased Water Supply. 6.Price incentives. 7.Extensive use of Credit.

FOOD SECURITY
Meaning: Food security refers to the system of distribution of food grains to people. To distribute food grains efficiently the Food Corporation of India was started in 1965.The FCI carries out procurement of food grains at support prices.

AGRICULTURAL PRICE POLICY

Instruments of price policy: The major instruments of agricultural price policy are given below: 1.Minimum support prices . 2.procurement prices. 3.Issue prices

4.Buffer stocks. 5.Import of Food grains.

UNIT - III
SECONDARY SECTOR :Every one knows that private sector will not spend much money on basic industries and industries useful to the masses. Hence, the effort has to come from the government in developing industries. Industrial Policy : The government wanted to adopt a permanent industrial policy. The result was the Industrial Policy Resolution of 1948. The 1948 industrial policy laid a solid foundation for a mixed economy in India. In the second plan emphasis was laid on heavy industries. Hence a new policy was necessary. The following are the features of 1956 policy . This policy divided industries into three categories : In the category A, industries which are government monopolies are mentioned. In category B, 12 industries are mentioned. Rest of the industries are included in category C. This policy emphasised on the development of backward areas. It emphasised on creation of men with managerial ability. Working conditions of labour will be improved. 1977 and 1980 Industrial Policies: 1977 policy was implemented by Janatha Government. It extended the number of industries allotted to small scale sector. This policy gave special place to tiny sector. The 1980 Industrial policy was framed by congress government. It wanted to control inflation and encourage export and import substitution. Industrial Policy of 1991 : The new Industrial Policy was announced by the government on July 24,1991.This is different from the old policy in a big way. The New Policy released the industrial economy from controls. The New Industrial Policy expressed several paths of effort. We shall see them below : 1. Removal of Industrial Licensing : The government wanted to liberalise the Indian economy. Hence the Industrial licensing system. 2. Reduction of the role of public sector : The new industrial policy referred to a few defects in the functioning of public sector undertakings. These are : less returns for the money invested, non- increase of productivity, inefficient administration. Certain guidelines are given for the functioning of public sector. 3. Foreign investment plays an important role : Formerly, governments prior approval was necessary for foreign investment and foreign technology. In the new industrial policy in industries which require more investment and better techno logy, foreign share may be used up to 51%. 4. Developing s mall institutions : Necessary raw materials will be exported through SIDO. Measures are taken to produce quality in larger quantity. Role of Cottage and Small Scale Industries in Indian Economy :Cottage and small scale industries have an important role in Indian economy. This will be clear from the following discussion. 1.Expansion of small scale industries :The number of small units stood at 20.82 lakhs in 1991-92. It increased to 32.25 lakhs in 2001-2002. It is also interesting to note that SSI units today produce more than 5000 items.

2. Employment generation : The small scale sector provides employment opportunities to a large number of people. It is evident from the fact that the number of people employed by the small-scale sector increased from 129.80 lakhs in 1991-92 to 178.50 lakhs in 20012002. 3.Efficiency of small scale industries :Small-scale units are more efficient than large-scale units. It is reported that a worth of fixed assets produces almost seven times the output in the small-scale sector as compared to large-industries. 4. Equitable distribution of national income :Small scale industries ensure a more equitable distribution of national income and wealth. This is seen from the two facts viz. 1. The ownership of small-scale industries is more wide-spread. 2. They possess a greater employment potential. 5.Mobilisation of Capital and Entrepreneurial skill :The entrepreneurs are spread over small towns and villages. If necessary credit, power and technical knowledge are give n, a large quantity of hidden resources of the economy can be mobilised. 6.Decentralization of industries : small scale industries are mostly set up in small towns and villages to satisfy local demand. They leads to decentralisation of industrial of industrial enterprises. Decentralisation helps to tap local resources such as raw materials, idle savings, local talents etc. 7.Industrial peace :The relations between the workers and employers are cordial. As a result, the SSI sector maintains peace. Proble ms of cottage and s mall scale industries :Small scale industries confronted with a number of problems.The important problems are discussed below: 1.Financial Problems :Lack of finance is one of the major obstacles in the development of SSI. Hence their internal resources are small. The credit provided by the various institutional agencies such as State Finance Corporations, Commercial Banks, SIDBI etc is inadequate. 2.Problems of Raw materials :Scarcity of raw materials affect the capacity utilization of small scale industries. The raw materials allotted by government is enough only to work 30% to 40% of the installed capacity of SSI units. 3.Problems of Marketing :SSI do not have the resources and expertise to market their products effectively. Further their products are not standardized and they vary in quality. They have to face stiff competition from large scale industries. 4.Technological Problems :The growth of SSI units is hampered by the old and out-dated technology which they use. As a result, their cost of production is high and the quality is inferior when compared to the production of large scale units. 5.Problems of Sickness :A large number of units are sick and non-viable. Again the potentially viable units have to be rehabilitated. Measures taken by the Government : The Central and the State Governments to provide the growth of small scale industries to protect them from the onslaught of large scale sector.The following are the measures.

Reservation Financial Assistance Excise concessions Price preference Technical consultancy services Infrastructure facilities Industrial Finance :Industries require finance for long term, medium term, and Short term.The following are the specialised institutions for providing finance. Industrial Finance Corporation Of India (IFCI): Industrial Finance Corporation was established in 1948 with the object of providing medium long term credit to industry. Functions of IFCI : Granting loans both in rupee and foreign currencies repayable within 25 years. Guaranteeing rupee loans floated in the open market by industrial concerns. Underwriting of shares and debentures of industrial concerns. Guaranteeing deferred payments in respect of imports of machinery, Foreign currency loans etc. State Financial Corporations (SFC) : The government passed the SFCs Act in 1951.The first SFC was set up in Punjab in 1953. Now there are 18 SFCs in India. Functions of SFCs : Grant of loans and advances to industrial concerns for periods not exceeding 20 years. Subscription to debentures repayable within a period of 20 years. Guarantee of deferred payment for purchase of plant and machinery Underwriting the issue of stocks, shares, bonds and debentures by industrial undertakings It can also act as an agent of Central & State governments for grant of loans and advances etc. Industrial Development Bank of India (IDBI) : The IDBI was started in 1964 as a subsidiary of RBI. It acts as an apex institution to coordinate the activities of other financial institutions. Functions of IDBI : 1.The IDBI assists other financial institutions. 2.It provides direct assistance to industrial concerns. 3.It operates a Technical Consultancy organisation. 4.The IDBI provides training in project evaluation and development in entrepreneurship. 5.The IDBI supported a number of inter-institutional groups which provided a forum of discussions on industrial development. Working of IDBI : IDBIs performance is impressive. Till March 1995 it sanctioned Rs.97,020 cores and disburses Rs.65,690 crorses.It introduced new services under direct finance. Even though its performance in 2000-2001 was good, in 2003-04, it merely sanctioned Rs.3100 cores. The slow down was due to low investments and due to heavy accumulation of Non-performing Assets.

Industrial Credit and Investment Corporation of India (ICICI): The ICICI was a private sector developmental finance institution started in 1995. Assistance of ICICI : Long term or medium term loans or equity participation. Guaranteeing loans from other private investment sources. Subscription to ordinary or preference share capital and underwriting securities. Rendering consultancy to Indian industry by way of managerial and technical advice. Lending operations of ICICI :The major portion of its assistance has gone to private sector. It lays emphasis on financing projects in backward areas. The total financial assistance sanctioned by ICICI up to March 1995 was Rs.52,740 crores while disbursements amounted to Rs.29850 crores. Chemicals, pharmaceuticals,paper,electrical equipment,textiles,sugar,glass,cement etc benefitted much. In 2001-2002,ICICI was the top provider of developmental finance. Public Sector Undertakings : Indian economy is a mixed economy . That is production is divided among private sector and public sector. Before independence the role of public sector undertakings is less. But after independence public sector has grown as an important sector in our planned development. Performance and importance of public sector : 1. Creation of Social Overheads : The private sector is not willing to enter such fields like electricity, irrigation, power, transport and communication. Since these have been set up in public sector, private sector also benefitted. 2. Role of public sector in capital sector :In India, the public sector invested more and resorted to capital formation. Nationalized banks, State Bank of India, IDBI,IFC,SFCs,LIC,Unit Trust etc have functioned very well in mobilising savings. 3. Helping Strong industrial base : The public sector undertakings have invested in capital goods production. Due to this productivity in India increased. The public sector has helped to improve modern technology. 4. Controlling dominant sectors of the Economy : Public sector has extended its activities. 90% of electricity production is in the hands of public sector.In tin,lignite,crude oil,public sector has monopoly. 5. Improving Social Gains : Public sector has provided houses, medical facilities, retirement pension, gratuity. It undertakes sick units and protects investors and consumers. The training programmes of public sector have helped the private sector.The knowledge and experience of public sector percolates non- government institutions. 6. Empolyme nt : The number of persons employment in the central public sector enterprises are about 2 million. The average wage per worker in public sector enterprises is higher than the private sector.

UNIT -IV
TERTIARY SECTOR COMMERCIAL BANKS AND ECONOMIC DEVELOPMENT

For a nation agriculture is the backbone, industries are its heart, transport its nerves and banks are its blood circulation. Banks help in several ways for the economic development of a nation. The following are their functions in developing nations : 1.Helps in Capital Formation :Commercial Banks have opened many places and helped in mobilising peoples savings. Commercial banks have introduced many savings schemes and induced people to save. 2.Help in Business and trade :Banks give short term loans to businessmen. They help exporters and importers. Banks help the producers to buy machines from foreign nations in instatements. 3.Help in financial allocation among different regions :Banks help in transferring funds from places where they are not wanted to places where there is need for giving loans. 4.Create Credit ;Transform Credit into money :When a bank lends to a customer it does not give in cash. The bank credits the loan amount in customers account. Without getting money,bank has created deposit. Banks transform credit into money. Industries develop from such credit created by banks. Several industries are started and the economy of a nation develops. 5.Banks resort to change in interest rates. They help to regularise the nations economy. 6.Banks encourage industries that are helpful to nation. Bank credit is given for those industries whose products are greatly demanded. Due to this correct production is possible. 7.In India banks help the farmers in getting seed,insecticides,fertilizers and install pump sets. They help in modernization of agriculture. 8.The foreign branches of Indian banks give information regarding the economic status of nations and the possibility of marketing our goods. This helps in the export of our nation. Banks give export credit. 9.Banks help in establishing branches in remote areas and ensure banking habit. Banks start branches in rural areas also. 10.banks help the consumers. For example banks help in housing construction, house purchase, purchase of Two wheelers,Cars,Fans,Refrigirators,Television set etc. 11.Banks help students in studying engineering, medical and computer courses. They give credit to self employed people and technical hands. They help self help Groups 12.Banks expect hard work, integrity and time consciousness from businessman. That is why banks are called the public institutions that safeguard commercial virtues. of late, Certain banks publish the names of defaulters with photos. This is a warning to all. 13.Banks have resorted to pro-poor banking. Banking institutions contribute to ensuring growth with equity. Banks in recent years, give micro finance to the small scale sector. Role of RBI in Economic Development : The Reserve Bank is the Central Bank of our country.It started functioning from 1 st April 1935. Originally it was a Shareholders bank. It

controls the supply of money and credit in the country. Its main aim is not to earn profit but to work for the good of the people and the country. Functions :The following are the functions of the RBI : Monopoly of Note issue :The reserve bank is given the sole right to issue currency notes.No other bank is allowed to issue currency notes. The currency is issued on the principle of minimum reserves in gold and foreign exchange equivalent to 200 crores(Rs.115 corers of gold and Rs.85 crores of foreign exchange. Banker to Government :As a banker to the government, the Reserve Bank keeps accounts of the central and state governments. It makes and receives payments on behalf of the government. It floats public loans for the government. It advises on monetary and economic matters. Bankers to Banks :Reserve Banks serves as the bank for all scheduled banks. All commercial banks must keep 3% of their total deposits in cash with the RBI. According to Banking Companies Regulation Act, the bank which wants to run banking industry must get the licence from Reserve Bank. Custodian of foreign balances of the country : The RBI keeps the value of Indian Rupee stable. Reserve Banks exchange cont rol department controls and administers foreign exchange. Lenders of Last Resort :The RBI extents financial accommodation to the commercial banks in times of emergencies. Rediscounting encourages the elasticity and liquidity of the entire credit structure. Central clearance, settlement and transfer :The RBI acts as a clearing house of transfer and settlement of mutual claims of commercial banks. Clearing House system leads to economy in the use of money and reduces inconvenience. Controller of Credit :Central Bank used quantitative credit control methods like Bank rate, Open market operations, Variable reserve ratio, net liquidity ratio and controls credit. Also it uses direct methods like margin requirement, issuing orders etc. Agricultural Credit :Central Bank cannot provide direct loans to farmers. The RBI coordinates the functions of cooperative banks and other institutions which are giving agricultural credit. Industrial Credit : The RBI has helped in the formation of industrial finance corporation,SFCs. These institutions are started to extend financial help to industries. Information and Research : The RBI through research, publishes useful statistical details regarding public finance and banking industry development. Indias Foreign Trade : Foreign trade is important for a nations development. For, no nation is self-sufficient. All nations depend on other nations for their export and import. Because of this, international specialisation arises. Indias foreign trade accounts for only 0.8% of world trade. Still forms a prime place in the Indian economy. For India imports several important inputs required for agriculture and industry. Also imports help for running many industries. Composition of Trade :Composition of Indias Exports : Upto 15 years since planning started, our exports included three important goods-tea, jute and textile goods. Other goods exported were tobacco,cashenut,leather and iron ore. These are called traditional exports of India. In the second part of 40 years the composition of exports changed. Due to this our exports grew up rapidly. Engineering goods formed a greater part in Indias exports. Exports of traditional goods increased. Iron are exports accounted for Rs.117 crores in 1970-71. This increased to Rs.2034 crores in 2001-02.

Export of readymade garments was of the order of Rs.9 crores in 1970-71. This increased to Rs.23877 crores in 2001-02. Export of electronic and computer software goods accounted for Rs.827 crores in 1980-81. This rose to Rs.33093 crores in 2001-02.Our electronic goods exports increased due to of development of roads, ports, telecommunications facilities, train services in the middle east nations and developed nations. India has possibilities to utilise the demand and price advantages. Composition of Indias Imports :In imports, the importance of industrial raw materials, middle goods and other raw materials increased. The importance of produced consumer good declined. Important among our imports are petroleum,foodgrains,machines,chemicals,fertilizers,iron,steel,oil,gems and pearls etc. Import of foodgrain was of the order of Rs.129 crores in the first plan.This increased to Rs.1061 crores in 1997-98.This got reduced to Rs.87 crores in 2001-02. Mineral oil import was of Rs.77 crores in 1951-61.This rose to Rs.66760 crores in 2001-02. Imports of chemicals and medical goods increased from 1868 crores to Rs.18630 crores between-1985 and 2002. Direction of Trade :Direction of Indias Exports: Significant changes have occurred in Indias export to nations.After independence many nations buy Indias goods. In 1950 -51, 40% of our exports went to U.K and U.S.A. But their share has declined to 23% now. Still America is the nation which imports more from India.In 2002-03 our exports to America was more than of $ 10 billion. A sizable part of our exports have gone to OECD countries (Organization for Economic Cooperation and Development). Our trade with Thailand (FTA),Korea,Indonesia has increased. Belgium has entered into bilateral agreements. Our trade with China has increased.Washington Times stated India has emerged as the fourth powerful nation in the world next to U.S.A.,China and Japan. Direction of Imports :Thus in the last 56 years, Indias trade in terms of magnitude, content and direction has undergone a sea change. That is firstly every year there is increase trade balance (shortage).Secondly our share in world trade is continuously going down. This position must be changed. Export Promotion Measures of the Government : Export promotion includes various activities of government. This refers to export production, export credit, export incentives and export organizational development. A.Export Production : Export considered as priority :Priority is given to primary export institutions in their need for things like steel and diesel. Those institutions which are not primary will also be helped in their exports. Creation of Export Zones & Export Institutions :Further, Export zones were set up as in Singapor and HongKong.Every zone creates roads,developed lands,buildings,factories,electricity facilities,drainage facilities and financial incentives. There are now six export zones functioning in India. Creation of Industrial parks :In 1994,with the help of Central government industrial export development park scheme was introduced. State governments entered into these schemes. State governments have been directed to create necessary infrastructural facilities for exports. Imported input supply : As per the policy announced in 1993, it is decided to increase the supply of raw materials,spare parts and give them to exporters and producers when needed.

Quality Control :Indian goods must be good cent percent. As per Export Act of 1983,goods must be scrutinised before being sent in ships. To ensure quality control, the Export Inspection Council was set up. Export inspection has been provided to 800 products. Packages :Just like quality, packages are also important. To ensure attractive and effective packaging the government has created the India Institute of Packaging. B.Export Credit and Finance :Export credit is given, Before commodities being sent in ships After shipment C.Export Incentives and Assistance :Fiscal assistance has been given by offering income tax concession, return of excise revenue, exemption in sales etc. Again cash award has been given to best exports. Permitting 25% of export earnings to be kept as foreign exchange in the export accouts of exporters, permitting industries to be started in foreign nations under joint industry system etc are the incentives given to exports. D.Organisational set up :The State Trading Corporation(STC) started in 1956 raised the limit for exports and paved the way for imports. This National Centre for Trade information has been created for informing about trade. All trade barriers are sought to be removed through WTO now. Role of EXIM Bank :The Exim Bank gives long term loans and refinance to export machinery, plans technological services and construction materials. The functions that have been done by IDBI are discharged by Exim Bank.This is Functioning from 1982. Its Functions : The Bank can give credit to foreign nations and institutions to import from India plans to factories, construction contracts and suggestions. This Bank handles when government loans and commercial credit are given exports. This Bank guarantees along with commercial banks when industrial plans contracts are exported from India. This buys export bills, discounts them and bargains. This offers finance and refinance to commercial banks which help for exporters. This gives letters of credit to exporters and signs them. This keeps foreign exchange accounts. This buys and sells foreign exchange. This undertakes and finances the researches relating to international trade,survey techno-economic studies. Whenever any exporter in India wants to develop any industry or trade administer it, this bank provide with technical,administrative and financial helps. the for and

and and

UNIT - V

Planning :Planning is a technique, a means to an end,the end being the realisation of certain pre-determined and well-defined aims and objectives laid down by a central planning authority. Definition :Prof. Robbins defines economic planning as,Collective control or super session of private activities of production and exchange.

India is now at the xi plan. The details of objectives, size and achievements of each plan is given below : First Five Plan(1951-56):Even though planning has been thought of in India several times before independence, planning started in the real sense only in 1950.The following were the objectives of the I five year plan : 1.To rejuvenate the economy affected by II world War and India-Pakistan partition. 2.To solve the food problem, to take measures to make raw materials available. 3.To establish social justice. Rs. 1960 crores have been spent in the I five Year Plan in the public sector. Successful Plan :The I plan was a successful plan. National income increased by 18%. But the target in this direction was only 11%. Per capita income increased by 10.5%.Foodgrains production increased by 3 million tons more than the expected level. Second Five Year Plan (1956-61):This plan was started with the objective of establishment of a Socialistic pattern of society. The following are the objectives: 1.To increase the National income considerably in order to improve the standard of living of the people 2.To achieve rapid industrialisation, particularly development of basic and key industries and heavy industries. 3.To increase the employment opportunities. 4.To reduce inequalities in income and wealth and to decentralise economic power. Achivements : 1.National income increased by 19.5% during this period. 2.Production increased in several directions. 3.Improvement occurred in transport sector and social welfare services. Defects : This plan was considered an unlucky plan: 1.Prices rose. 2.Food imports increased. 3.Foreign exchange reserves depleted. Third Five Year Plan(1960-61-1965-66): This plan stated agricultural production must be increased. Objectives : 1.To increase the national income by 5%. 2.To develop basic industries. 3.To reduce inequalities in income and wealth. 4.To utilise manpower to the fullest extent. Appraisal : 1.Several targets have not been reached in this plan. The Chinese Aggression in 1962 and the conflict with Pakistan in 1965 were the reasons. All production was directed towards defence. 2.National income did not increase to the expected level. 3.The wholesale price index increased by 136.4%. 4.Employment didnt increase to the specified level, Nearly 10 million people had no employment. 5.There was co-ordination and good relation between Centre and States. Annual Plans(1966-1969):

Annual Plans were formulated due to the Indo-Pakistan conflict of 1965, the continuous drought for two years, devaluation of Indian rupee and rise in price s. Appraisal :Food grains production could not reach the target. Recession occurred in industrial sector. Hence unemployment increased. Fourth Five Year Plan: (1969-70 to 1973-74):It was decided to increase the standard of living of people. Appraisal : 1.National income increased by 3.3% and per capita income increased by 1.2%. 2.Defence expenditure increased 3.The aid for drought relief given to states increased. 4.Improvement happened in cotton textile industry. 5.But shortage appeared in steel and fertilizer. Fifth Five Year Plan : The V plan started in 1974-75 and ended in March 1978 after 4 years. Appraisal : 1.The average growth rate in the four year period has been o nly 3.9%. 2.Due to irregular rain, agriculture production has not been steady. 3.Great shortage occurred in energy sector. 4.Development was not found in transport. 5.Shortage was found in the sphere of health. Sixth Five Year Plan :(1980-85):This plan emphasized on removal of poverty. This plan underlined the development of basic facilities required for agriculture and industries. Appraisal : 1.National income and per capita income did not increase as expected. 2.Prices rose enormously. At the 154 million tons as expected. The targets in other agricultural commodities were also reached. 3.Great shortage occurred in electricity. Seventh Five Year Plan: (1985-90) :The basic objectives of VI five year Plan are,Growth,Modernization,Self sufficiency and Social justice. Success: 1.Agricultural production increased by 45 up to 1989. 2.Industrial production increased by 8%. 3.Transport by 8.7%. 4.But construction activities increased by only 3.7%. Demerits or failure: Low capital formation Unsatisfactory financial resources Decline in agricultural production Shortage in industrial growth Foreign exchange problem Eighth Five Year Plan : (1992-97): Due to political circumstances the 8th plan started only in 1992. Objectives : 1.Creation of employment opportunities. 2.Controlling population with peoples help.

3.To make primary education compulsory. 4.To make the fields of energy,communication,transport and irrigation very strong. Success: 1.The eighth plan has achieved 6.5% average growth rate per year. 2.In agricultural sphere, there is an average development of 3.8% per year. 3.Industries have strengthened. 4In India, Foreign exchange resource, has raised. Shortcomings: 1.Employment did not increase sufficiently. 2.Energy, transport and communication did not increase sufficiently. 3.Agriculture still depended on monsoon. 4.More amount spent on petroleum. Ninth Five Year Plan : (1997-2002) :The main focus of the Ninth Plan is on, growth with social justice and equality. The following objectives have been approved by the National Development Council. Objectives: 1.Priority to agricultural and rural development. 2.Accelerating the growth rate of the economy with stable prices. 3.Containing the growth of population. 4.Ensuring participation people at all levels and ensuring environment. 5.Employment of women and scheduled castes and scheduled tribes and other backward class and minorities. 6.Taking efforts to build self-reliance. Means of Special Importance : Govt. Will try to improve the quality of life of disadvantages groups of people. The Govt. Will try to generate employment opportunities using labour intensive methods. Public investment will be made in the sphere of infrastructure to correct large regional imbalance. Agricultural sector gets importance. Critical Appraisal : Decline in the share of public sector Role of deficit financing Question of fiscal discipline Unrealistic export target Tenth Five Year Plan :(2002-07) :Progress is seen in all the states. Faster development was witnessed in computer field and competitive strength in India improved. Objectives : 1.To achieve 8% average annual growth rate. 2.To reduce the population growth. 3.Economic opportunities to individuals and group should up expanded. 4.Big rivers must be made utility oriented. 5.To increase the literacy rate to 20% by 2007.

6.To offer education for all. 7.To establish drinking water facilities to all villages by 2012. Growth Rate and Plan Level : The growth rate will be 8% per annum. The capital-output ratio should be reduced to 4.5%. Import will increase by 17% Exports will go up by 12.4% per year. Eleventh Five Year Plan :(2007-12): Poverty: It is very difficult to define the term poverty. The concept is a relative one. Poverty can be defined as a social phenomenon in which a section of the society is unable to fulfil even its basic necessities of life. It is a human condition. Poverty Terms :Studies of poverty conducted in the world have identified two types of poverty: Absolute Poverty Relative Poverty Poverty Alleviation Measures :The real solution lies in increasing the income of the poor people and giving adequate employment opportunities. We shall see the following poverty alleviation schemes in details : Integrated Rural Development Programme (IRDP) : The IRDP was started in 1978-79 in selected blocks in India. The aims of IBRD are to reduce unemployment in the rural areas and provide assets and inputs to the rural poor. Families having five members with an annual income of Rs.3500 were considered eligible to come under this scheme. Targets and Achievements :Under this scheme, Govt will give as 25% as subsidy to small farmers and Agricultural labourers and 50% to Hill Area people and Sc heduled castes.The Poorest of the poor will be assisted first. National Rural Employment Programme :( NREP ) : The NREP was started in the VI plan. It was continued in the VII plan. On April 1,1986 it was merged into the Jawa har Rozhar Yojana. The NREP has the following Objectives : Generation of additional employment. Creation of durable community assets and improvement in the living standards of rural people. An efficient public distribution for essential commodities. Jawahar Rozgar Yojana ( JRY ) :NREP , RLEGP were merged into a single rural employment programme viz, Jawahar Rozhar Yojana on April 1, 1989. This is a wage employment scheme. Features : All rural works result in creation of durable community assets are being covered. Preferences to be given to works having the possibility of offering direct and continuing benefits to poor people. Reservation of e,ployment opportunities has been made for women. Works relating to drainage,field channels etc are to be undertaken. Expenture under the programme will be shared by the centre and the states on 80 : 20 basis.

Rural Landless Employment Guarantee Programme : (RLEGP) : This programme was set up in 1983 to assist rural employment scheme. The Central govt allotted Rs.300 crores for this. The following are the objectives of the scheme: To increase employment opportunities in rural areas where there is less opportunity in agriculture. To create permanent assets in order to improve rural infrastructure. Training For Rural Youth For Self Employme nt: (TRYSEM ) : This is a scheme created by Central Govt. This is started in 15 th Augest 1979. This helps IRDP. Under this mans experience and efficiency are improved. The aim of this scheme is to give training in technology to young people who are below the poverty line in rural areas and meke them entrepreneurs. Negru Rozgar Yojana : (NRY ) : This is implemented from October 11, 1989. Under this scheme giving employment to one million people is emphasized. The urban poor who are below poverty line will be benefitted. Under this The The The scheme the Scheme of Scheme of Scheme of following three things will be there : Urban Micro Enterprises : Urban Wage Employment : Housing and Shelter Up gradation :

Prime Ministe rs Rojgar Yojana : (PMRY) :This is implemented on October 2, 1993. In this upto Rs.7 lakhs credit is given. Subsidy limit is 15 %. In families with less than Rs.24,000 annual income, people between 18 and 35 years old a re eligible to be benefitted. Giving employment to educated youth in urban areas has been undertaken. Nehru Rozgar Yojana has been included in the Urban Employment Scheme. Employme nt Assurance Sche me : (EAS) : This is functioning from October 2,1993.This is functioning in 3206 backward unions. This is extended from 1997-98 to other areas. Besides these, the following schemes have also been formulated : Million Wells Scheme : This was launched in 1988-89 to provide open irrigation wells, free of cost to poor and small and marginal formers. Swarna Jayanthi Shahkari Yojana (SJSRY) : This substituted all other programmes of employment generation and poverty alleviation. Up to 2000,Rs. 353 crores were spent.21.8 million mandays of employment was generated. Swarna Jayanthi Gram Swarozgar Yojana (SGSY): This was launched in 1999 as a selfemployment programme for the rural poor. It replaces the e arlier self employment programmes.SGSY aims at establishing a large number of micro enterprises in the rural areas. Samporna Grameen Rojgar Yojana (SGRY) : This scheme was launched in Sep 2001.The schemes of Jawahar Gram Samridi Yojana And Assurance Scheme have been integrated with SGRY.The objective of the scheme is to provide additional wage employment with food security, creation of economic assets in rural areas. Pradhan Manthiri Gramodaya Yojana (PMGY) : This scheme was launched in 2000-01 to develop human beings at the village level. PMGY emphasized 5 areas viz Primary Health,

Primary Education, Rural Shelter, Rural Drinking Water & Nutrition. Rural Electrification is also added now. Rs.2800 crores have been provided for this scheme in 2002-03. Pradhan Mantri Gram Sadak Yojana (PMGSY) : This was launched in Dec. 2000. This programme aims at connecting all Panchayat Headquarters and places of tourist interest. Restructured 20 Point Programme : The Central Govt has recently decided to restructure the 20 point programme for the poor. It is decided to bring back Garibi Hatao. The programme will add five points- Panjayat Raj, Child Welfare. Infrastructure Development, Social Security and development of backward areas. Due to these measures, poverty has been reduced in India but not eradicated as the former Finance Minister Chidambaram Stated.

National Income Estimates In India - Trends :The following table shows National Income and Per capita Income at 1993-94 prises (base year): YEAR NATIONAL INCOME(NNP) (RS.CRS) 132,379 192,253 270,623 363,451 614,386 787,809 948,982 10,11,224 PER CAPITA INCOME (RS) 3687 4430 5002 5353 7323 8499 9733 10,204

1950-51 1960-61 1970-71 1980-81 1990-91 1995-96 1998-99 1999-2000

RATES OF GROWTH YEAR 1950-51 to 60-61 1960-61 to 70-71 1970-71 to 80-81 1980-81 to 90-91 1990-91 to 98-99 2001 to 2002 NATIONAL INCOME 3.8% 3.5% 3.0% 5.4% 5.6% 6.2% PER CAPITA INCOME 1.8% 1.2% 0.7% 3.1% 3.6% 4.2%