Economics of Development:

Determinants, major issues of

development India as a developing
economy, Contribution of different
sectors (primary, secondary and
tertiary) to Indian economy, Growth in
tertiary sectors in recent years,
business cycle- features, phases,
{The term economic development refers to
increases over time in a country’s real output of
goods & services (or) more appropriately
product per capita.}

Output is generally measured by gross (or) net

national product.
 Economic development is a complex process. It is
influenced by both economic & non economic
factors. Which are known as determinants of
Economic development.

Non Economic
Economic Factors
Factors
 Economic Capital
System Formation

Conditions of Surplus of
Foreign trade Agriculture
 Capital formation: The strategic role of capital in raising
the level of production. Capital investment in business
enterprises is one of the important factor & determinant
for economic development of the country.

 Marketable surplus of Agriculture: Increase in

agriculture production accompanied by a rise in
productivity is important from the point of view of the
development of a country. (The term marketable surplus
refers to the excess output in the agricultural sector over
& above what is required for the rural population.)
 Conditions in foreign trade: According to this factor
any country to develop its economy it as to produce
that product in which that country finds cost
advantage. And it must specialize in that product.
 Economic system: The economic system & the
historical setting of a country also decide the
development prospects to a grate extent.
 HUMAN
RESOURCES TECHNICAL
ROLE OF NATURAL KNOW- HOW &
RESOURCES GENERAL
EDUCATION

WILL TO POLITICAL
DEVELOP FREEDOM

SOCIAL
CORRUPTION
ORGANISATION
 HUMAN RESOURCES: Population is an important
factor in economic development. Man provides labour
power for production and if in a country labour is
efficient & skilled, its capacity to contribute to growth of
a country.
 TECHNICAL KNOW HOW & GENERAL
EDUCATION: It has been doubted that the level of
technical know how has a direct bearing on the pace of
the development .As the scientific & technological
knowledge advances, man discovers more & more
sophisticated techniques of production which steadily
raise the production levels.
Political freedom: Political policies which influence
highly on the development of the country. For
example: India, srilanka Pakistan, Bangladesh,
Malaysia, Kenya etc., are the countries which is
affected by political policies.
 Social organization: Mass participation in
development programmes is a precondition for
accelerating the growth process. However. People
should show in the interest in the development
activity only when they feel that the fruits of growth
is fairly distributed.
 Corruption: Corruption is more in the developing
countries,untill such countries root out corruption in
their administrative system they cant fulfill their
targets.
 Will to develop: Development activity is not a
mechanical process. The pace of economic growth in
any country depends to a grate extent on people’s
desire to develop.
Whatever be the criteria, the Indian economy is presently
an underdeveloped economy. Almost all important
characteristic features of an underdeveloped economy
are present in the Indian economy even after 60 years
of independence. Underdeveloped economy is
primarily an agricultural economy ,as 60 to 70 % of
the country’s population seek employment in
agriculture.
 Features of underdeveloped
economy:
 Low per capita income.
 Inequitable Distribution of income &
poverty.
 Predominance of Agriculture.
 Rapid Population Growth.
 Unemployment.
 Scarcity of Capital.
India’s economy had suffered a long period of
stagnation under the British rule.After independence,
this long spell of stagnation was broken.
India is progressing toward development therefore it can
be said that India is developing:

Economic development in India has broadly two facets:

(1)Quantitative
(2)Strutural
 Quantitative: Structural changes:
 National income.  Development of
 Per capita income. infrastructure.
 GDP growth rate.  Growth of basic capital

 literacy rate. goods industries.

 Changes in work
 Employment conditions in a
country. conditions of formers
 Growth in capital formation.
CONTRIBUTION OF DIFFERENT SECTORS
(PRIMARY, SECONDARY AND
TERTIARY) TO INDIAN ECONOMY.

Primary
sector i.e.
Agriculture

Secondary
Sector i.e.
Industry

Tertiary
Sector i.e.
services
Role of Agriculture:
About 30 percent of our GDP comes from
agriculture only.
Agriculture is the backbone for Indian economy.
Agriculture has been a major source of livelihood
for our people.
Agriculture plays an important role in our
international trade too.
Role of Industry:
 More employment opportunities.
 Industries will promote agricultural development in India.
 Industries will contribute to the development of tertiary
sector.
 Industrialization contributes to better utilization of natural
resources like minerals, forests, fisheries, etc.,
 Industries will bring about a change in the outlook of the
people. etc.,
Role of Services:
 More employment opportunities.
 More capital formation activities in India.
 It is directly related to development of
infrastructure facilities in India.
 More revenue to the Indian government from
services.
 Services contributes about 10 to 12 % GDP to
the Indian government. Etc.,
 Over the last five years the tertiary sector in
India has developed and it its contribution
towards GDP in increasing year by year.
 More retail outlets.

 More customer care oriented services. For

example: Call centers,BPO’s, KPO’s etc.,
 More telecommunication services,

 Development in financial sector and

insurance sector,
 Development in recreation services like
hotels and pub’s etc.,
 Development in tourism agencies,

 Development in hospitality services such

as hospitals, guest house, etc.,
Meaning: The term ‘business cycle (or) trade cycle refer
to fluctuations in production , employment and
income of the people of a country.
Business fluctuations are the peculiar phenomenon of a
free economy.
A business cycle is a very complex economic
phenomenon and it is associated with alternating
periods of prosperity and depression.
 Definition: Keynes describes the business cycle as “A
trade cycle is composed of periods of good trade
characterized by rising prices and low unemployment
percentages alternating with the periods of bad trade
characterized by falling prices and high unemployment
percentages.”

The cyclical fluctuations cause economic crisis in the

country, damaging all branches of the national
economy.
Sometimes, the cycles may be confined only to individual
industries or individual sectors of the economy.
 Features of Business cycle:
 Business cycles phases occur periodically.
 It affects the entire business world.
 A business cycle is a wave like movement.
 Period of business cycle is longer than a year.
 It explains the whole picture of a economy
 PROSPERITY
AND
BOOM

RECOVERY
PHASES
OF
BUSINESS RECESSION
CYCLES

DEPRESSION
 PHASES OF BUSINESS CYCLE

A typical business cycle is characterized by

five different by phases (or) stages. They
are :
1. Depression.

2. Recovery (revival).

3. Prosperity (or) full employment.

4. Boom (or) over employment.

5. Recession.
 Depression: is characterized by a sharp fall in
production, increase in mass unemployment,
falling prices, falling profits, low wages,
contraction of credit by banks, and high rates of
business failures.

 Recovery (or) revival: is characterized by a slow

increase of production, demand for raw materials
and finished products increases slowly, capital
and labour also slowly increases, improvement
in employment level of the people, Banks will
start functioning etc.,
 Prosperity (or) full employment: The period of
prosperity also is called period of expansion (or)
upswing in the business cycle. It is characterized
as improvement in investment activity, stock
market also start functioning, prices also profits
also rise, full employment to people, etc.,
 Boom (or) overfull employment: Boom is the
final stage of a business cycle where the business
activity expands very rapidly. Economy rises to
new heights. The features are same as prosperity
stage.
 Recession: When profits are decreasing, the
business men stop orders for capital goods. There
is a fall in the level of income and output,
unemployment starts increasing, fall in prices and
profits, decline in bank credit, fall in income and
expenditure etc.,