Explore comprehensive NCERT economics study materials covering topics from class 9th to 12th, including detailed notes, summaries, and practice questions to help students understand fundamental economic concepts and excel in their studies.

Solved Question for You:

• A. Transfer earning
• B. Future earning
• C. Present earning
• D. None of these

Solution: The correct option is A. Transfer earning. Transfer earning require a minimum payment to keep the factor of its production in its present use. It is an opportunity cost of an individual forgoes when deciding to work in one job rather than the next best alternative.

The Palampur village has around 450 families which belong to different caste and creeds. The main activity of Palampur is farming and 80 families of the upper caste own the majority of land in Palampur. There are other activities in the Palampur like dairy, transport, small-scale manufacturing, etc which also helps run the economy in the Palampur.

The neighboring towns of the village are well connected and all-weather roads are also well connected. There are options for transportation which are available like tongas, bogeys, jeeps, bullock carts, tractors, etc.

Many of the houses in the village are well equipped with electricity. Electricity is also responsible for the tube wells in the fields. Many small businesses also use electricity for their daily purposes. For education, Palampur has two primary schools and 1 high school. Besides this, there is also a primary health care center which is run by the government and also 1 private dispensary.

Production Stages: The main purpose that we have to discuss in this chapter is the various concepts that the village uses for production. For the production of services and goods of any type, there are four factors that are used in the production. They are land, capital, labor, and enterprise. Out of these four factors, the first and the most important factor is land.

Farming in the Village: Farming is the most important activity in Palampur. Almost 75 percent of the working population is involved in farming activities. The story of village Palampur is incomplete without the farming activities. One important to notice in the village is that for a long time there has been an increase in the land area which is under cultivation.

• During winter or Rabi season, people grow wheat and sugarcane.
• During Kharif season people grow bajra and jowar.
• Between the months of October and December, people cultivate potatoes.

Green Revolution and Sustainable Use of Land: In 1960, a record production of food items was witnessed. This marked a turning point in the agriculture which then led to a green revolution in India.

The revolution is called green because due to it there was a tremendous increase in greenery in the entire country. This period from 1960 to 1980 is also known as the golden era due to the record production in food grain. Due to this revolution, our country became salt sufficient and even started having buffer stocks of food items which can be used during the times of natural calamities like floods and droughts.

The land is a natural resource and thus is very necessary to use it carefully. Due to modern methods, it has been overused. With continuous of the groundwater from the tube well, the level of water-table in the ground has been reduced. Due to the green revolution, the fertility in the soil has been reduced as the use of the chemical fertilizers has been increased. The natural resources like soil fertility and groundwater take years to form. Thus, once they are destroyed it is very tough to restore them.

Solved Question for You:
Q. Opportunity cost is also known as _____.

• A. Transfer earning
• B. Future earning
• C. Present earning
• D. None of these

Solution: The correct option is A. Transfer earning. Transfer earning require a minimum payment to keep the factor of its production in its present use. It is an opportunity cost of an individual forgoes when deciding to work in one job rather than the next best alternative.

Solved Question for You: How are human resources different from other resources?

Answer: Human resource is known to be one of the superior resources as compared to the other resources like land and physical capital. It can make use of land and physical capital, however, land and physical capital cannot become useful on its own.

India has the second largest population in the world. And while there are a few drawbacks of this, it is also an advantage. The citizens can be an asset to the country. Their skill and knowledge is a resource that can be utilized for economic activities. Let us see how People as Resource can contribute to our economy.

Human Resource: Human resource refers to the people who are part of the workforce. The human resource plays a significant role in the economy of a country by contributing to productivity. The other resource becomes useful because of the input by the human resource.

Economic Activities: The economic activities can be divided into three types – primary, secondary, and tertiary activities. These activities are further classified based on their production goals as market and non-market activities.

Quality of Population: The prime important aspects that determine the quality of life are literacy rate, health, and skills. The illiterate and unhealthy population can be a liability for the economy whereas the literate and healthy population can be an asset for the economy.

Solved Question for You: How are human resources different from other resources?

Answer: Human resource is known to be one of the superior resources as compared to the other resources like land and physical capital. It can make use of land and physical capital, however, land and physical capital cannot become useful on its own.

Solved Question for You: What is the current minimum income for a person to be considered below poverty line?

Answer: It is earning below 32 rupees in urban areas and 26 rupees in rural areas of India.

Poverty: Poverty in India is the cause and also a consequence of various social and economic problems like beggary, economic exploitation, and lack of access to basic necessities.

Poverty in India: Approximately 22% of the total population in India, around 270 crores, live in poverty. Poverty is characterized by the lack of basic needs such as proper food, water, or shelter.

Measurement of Poverty: The measurement of poverty in India is based on nutrition and income levels. Different criteria are set for urban and rural dwellers, taking into account their caloric needs and minimum income requirements.

Causes of Poverty in India: Historical factors such as the exploitative British colonial rule, and socio-economic factors like population explosion and lack of land resources, contribute to poverty in India.

Government Initiatives: The government has implemented various schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme and the PMRY Scheme to alleviate poverty and provide employment opportunities to the rural and urban population.

Solved Question for You: What is the current minimum income for a person to be considered below poverty line?

Answer: It is earning below 32 rupees in urban areas and 26 rupees in rural areas of India.

Question For You: How has the Green Revolution made India self-sufficient in terms of food grains?

Answer: Specifically in the late 1960s, the introduction of Green Revolution motivated Indian farmers to cultivate HYV (high-yielding varieties) seeds. This trend led to increase in the production of food grains, particularly rice and wheat. Moreover, after the outburst of Green Revolution India has avoided famines even during worse weather conditions.

Food Security: Food security is the ability to guarantee a nutritionally sufficient food supply for the entire population.

Food Security Scenario in India: India is currently facing a triple affliction of malnutrition, with under-nutrition being a result of multiple factors, food security being a core issue.

How to Ensure Food Security in India: Food security can be ensured by checking upon the availability, accessibility, and affordability of food for all individuals.

National Food Security Mission: The mission aims to augment production of cereals and pulses, particularly in the eastern regions of India.

Sources of Foodgrains Across the Nation: India's food grain regions include areas specializing in the production of rice, wheat, millets, and pulses.

Question For You: How has the Green Revolution made India self-sufficient in terms of food grains?

Answer: Specifically in the late 1960s, the introduction of Green Revolution motivated Indian farmers to cultivate HYV (high-yielding varieties) seeds. This trend led to increase in the production of food grains, particularly rice and wheat. Moreover, after the outburst of Green Revolution India has avoided famines even during worse weather conditions.

Question For You: Why is PCI important to determine development?

Answer: PCI of a country indicates the income per capita or the average income of the country. It gives an idea as to the financial resources of the country. These are important to achieve other development goals such as literacy, healthcare and to provide infrastructure. Thus, PCI is a critical factor in determining development.

Development and its Meaning: Development in economics refers to an improvement in the quality of life and well-being of the people of the economy. It involves different goals such as Per Capita Income, Infant Mortality Rate, Sex Ratio, Life Expectancy, Literacy Rate, and Infrastructure.

Human Development Index (HDI): HDI is a composite index measuring average achievements in a country in three basic dimensions of human development: per capita income, literacy rate, and life expectancy.

Question For You: Why is PCI important to determine development?

Answer: PCI of a country indicates the income per capita or the average income of the country. It gives an idea as to the financial resources of the country. These are important to achieve other development goals such as literacy, healthcare and to provide infrastructure. Thus, PCI is a critical factor in determining development.

Solved Question for You: Explain why the service sector is growing in India with suitable example.

Answer: The service sector in India is growing due to its diverse employment opportunities catering to individuals with varying skill sets. Unlike some sectors that require highly educated and skilled workers, many service sector jobs accommodate individuals with different qualifications. Additionally, self-employment opportunities in this sector provide livelihood options for those unable to secure traditional employment.

Introduction to the Sectors of Indian Economy: India's economy is divided into three main sectors: the primary sector, secondary sector, and tertiary sector. Each sector plays a crucial role in contributing to the overall economic growth of the country.

Primary Sector: This sector relies on natural resources for manufacturing goods and executing various processes. Agriculture is the primary example, although fishing and forestry also fall under this category. Challenges such as underemployment and disguised employment need to be addressed through initiatives like increased funding for irrigation facilities and providing loans for agricultural inputs.

Secondary Sector: The secondary sector uses natural ingredients to create products and services, with examples including transportation and manufacturing. This sector employs 14% of the workforce and contributes 28% to GDP.

Tertiary Sector: The tertiary sector, which encompasses services like IT and consulting, contributes the largest share to GDP. It employs 23% of the workforce but faces challenges such as lower-paying jobs not attracting sufficient employment. Despite this, the service sector continues to grow due to its diverse employment opportunities and self-employment options.

Solved Question for You: Explain why the service sector is growing in India with suitable example.

Answer: The service sector in India is growing due to its diverse employment opportunities catering to individuals with varying skill sets. Unlike some sectors that require highly educated and skilled workers, many service sector jobs accommodate individuals with different qualifications. Additionally, self-employment opportunities in this sector provide livelihood options for those unable to secure traditional employment.

Solved Question for You: When was the Rs 1000 currency note reintroduced by RBI?

Answer: The Rs 1000 currency note was reintroduced by RBI in October 2000 after being discontinued in 1978.

Introduction to Money and Credit: Economics revolves around the circulation of money and the concept of credit. Understanding these fundamentals is essential for comprehending economic principles.

What is Money? Money serves as a medium of exchange for goods and services. It has evolved from traditional coins and paper notes to include plastic cards and digital wallets, reflecting advancements in technology.

Forms of Money: Money exists in various forms, including bank deposits, cheques, and credit cards. Bank deposits allow individuals to save money and earn interest, while cheques facilitate transactions without the need for physical cash. Credit cards offer electronic payment options and act as a form of loan.

Credit: Credit plays a crucial role in lending and borrowing. Banks provide credit to individuals and businesses, generating income through interest on loans. This circulation of credit contributes to economic development and growth.

Solved Question for You: When was the Rs 1000 currency note reintroduced by RBI?

Answer: The Rs 1000 currency note was reintroduced by RBI in October 2000 after being discontinued in 1978.

Question for You: Do you think the impact of globalization hasn’t been uniform?

Answer: Looking at the trend and its uprising since all these years, the answer is yes! To be precise, globalization has proven advantageous to professional and skilled individuals, primarily from urban regions. The unskilled population hasn’t gained enough out of globalization. For example, industries, as well as service firms, have been supported by this scheme more effectively as compared to the agricultural sector. The rise of MNCs has been quite significant after globalization. However, small producers are bound to face tough competition.

Introduction to Globalisation and the Indian Economy: Globalisation has reshaped trade and investments, particularly affecting the Indian economy. Understanding its dynamics is crucial for comprehending its implications.

What is Globalisation? Globalisation entails the free movement of people, goods, and services across borders, promoting a unified global economy governed by organizations like the WTO.

Indian Economy Reacts to Globalisation: India experienced significant economic growth post-globalisation, notably led by figures like Dr. Manmohan Singh, who spearheaded economic liberalisation efforts.

Benefits of Globalisation Impacting India: Globalisation has led to increased employment opportunities, higher compensation levels, and improved standards of living across Indian cities.

Disadvantages of Globalisation in India: Despite its benefits, globalisation has also brought challenges, including exclusion from labor legislation for the informal sector and poor health and working conditions.

Question for You: Do you think the impact of globalization hasn’t been uniform?

Answer: Yes, the impact of globalization has been non-uniform. While it has benefited skilled individuals and urban sectors, the unskilled population and certain sectors like agriculture have not gained as much.

Consumer Forums: Consumer forums assist in representing consumer interests and guiding them in filing complaints.

Solved Example for You: What is the need for consumer awareness?

Answer: Consumer awareness is crucial to educate consumers about their rights, remove illiteracy and lack of education regarding consumer rights, and empower them to seek redressal if exploited by market entities.

Introduction to Consumer Rights: Consumer rights refer to the protection and rights of consumers against exploitation in the market.

Consumer Protection Act, 1986: Enacted on December 24, 1986, the Consumer Protection Act aims to safeguard consumer rights and ensure fair trade practices.

Consumer Rights: The six consumer rights include the right to safety, information, choose, seek redressal, be heard, and consumer education.

Consumer Forums: These organizations assist consumers in representing their interests and filing complaints.

Solved Example for You: What is the need for consumer awareness?

Answer: Consumer awareness is crucial to educate consumers about their rights, remove illiteracy and lack of education regarding consumer rights, and empower them to seek redressal if exploited by market entities.

Solved Example for You: Name some individuals who tried to estimate colonial India’s per capita income.

Answer: Some individuals like – Findlay Shirras, Dadabhai Naoroji, William Digby, V.K.R.V. Rao and R.C. Desai tried to estimate such figures. Although the results were inconsistent, the estimates of V.K.R.V. Rao are considered accurate. An estimate was the best that could be calculated. The estimate was that colonial India’s growth of output was less than 2%.

British Colonial Rule: The British came to India with the motive of colonization. Their plans involved using India as a feeder colony for their own flourishing economy back in Britain. This exploitation continued for about two centuries, rendering India's economy hollow by the time of independence. The colonial rule transformed India into a supplier of raw materials and a consumer of finished goods, while the Indian population suffered from a lack of education and opportunities, reduced to serving British interests.

The Pre-Colonial State: Before British colonization, India was a self-sufficient and flourishing economy, known as the "golden eagle" with significant exports and burgeoning manufacturing activities. However, the British exploited India's resources for their own benefit, leading to a stagnant economy and diminished prospects for Indian citizens.

Solved Question for You: What was the main interest of the zamindars?

Ans: The correct option is “A”. The only interest the Zamindars had was to collect the rent from the farmers. They did not particularly care about the welfare of the farm or the farmer.

The Pre-Colonial Scenario of Agricultural Sector: Before British colonization, India's agricultural sector was self-sufficient and sustainable, primarily producing rice and wheat with rare incidences of famines. Villages were self-sustaining and independent, with minimal occurrences of starvation.

The Colonial Saga: British colonization brought exploitation and loss of self-sufficiency to India's agricultural sector. The British focused on profit extraction, leading to frequent famines and deterioration in agricultural productivity. The zamindari system exacerbated the situation, with profits going to zamindars instead of cultivators.

Stagnation of Agricultural Sector during British Rule: The British introduced negligible reforms and primitive technologies, focusing on cash crops for their own benefit. The shift towards commercialization further worsened the plight of Indian farmers, leaving the agricultural sector in a state of stagnation.

A Solved Question for You: How was the export surplus used?

Ans: The correct option is “D”. Britishers never meant to use the surplus for Indian interests. It was used to make payments for an office set up in Britain, to meet war expenses and import invisible items.

Foreign Trade in the 17th and 18th Century: Pre-colonial India thrived in foreign trade, exporting high-quality manufactured goods worldwide, including textiles, handicrafts, spices, and other commodities.

The Colonisation Effect on Foreign Trade: British colonization diverted India's foreign trade for British benefits, reducing India to a supplier of raw materials and importer of finished goods. India's share in the world economy drastically declined under British rule.

Export Surplus under British Rule: The British controlled India's export surplus, using it for British interests such as office expenses, war, and import of goods, leading to shortages of essential goods in India. The surplus never benefited India's economy.

A Solved Example for Reference: When was the first official census of colonial India recorded?

Ans: The correct option is “D”. The first official census conducted by the British government in India was in 1881, and this was also done after much delay.

Demographic Condition in Colonial India: Colonial rule in India resulted in widespread poverty, illiteracy, and low life expectancy. The first official census was conducted in 1881, revealing the dire conditions faced by the Indian population.

Before 1881, the British showed little interest in Indian demography, with some individuals like Findlay Shirras, Dadabhai Naoroji, and V.K.R.V. Rao attempting to collect data. However, accurate demographic data was not available until the late 19th century.

The colonial rule, marked by exploitation and neglect, led to hunger, disease, and death among the Indian population. Despite the demographic transition beginning around 1921, literacy rates remained low, particularly for women, and public health facilities were scarce.

Life expectancy was recorded to be as low as 32 years, with high infant mortality rates. Poverty was widespread, and Indians lived in constant fear of starvation and diseases. The demographic profile of colonial India was appalling by human standards.

A Solved Example For You: The share of the agricultural sector in the Indian workforce under colonial rule was:

Ans: The correct option is ‘A’. The Indian economy became agrarian with 70-75% of workforce depending on the agricultural sector for livelihood. And this trend continued even post independence. But now our dependence on agriculture is slowly decreasing.

Occupational Structure: The occupational structure of India underwent significant changes before and during colonial rule. Pre-colonial India had a diverse range of employment opportunities in both the industrial and agricultural sectors, with skilled craftsmen forming the majority of the workforce. However, colonial exploitation led to a transformation into a primarily agrarian economy, with a large portion of the workforce diverted towards plantations and agricultural activities.

Under colonial rule, agriculture accounted for 70-75% of the workforce, while the manufacturing and services sectors saw a decline in workforce participation. Regional variations also emerged, with some areas experiencing a decline in agriculture and an increase in manufacturing and services, while others saw the opposite trend.

The selfish interests of the colonizers led to a drastic change in the occupational structure of India, with agriculture dominating the workforce.

A Solved Example For You: Why did the colonial government invest in a railway system?

Ans: The correct option is “D”. The Britishers had very greedy motives to develop railways in India. They ultimately only looked after their own needs of transporting raw materials and mobilization of their army with ease.

Infrastructure: Infrastructure development in colonial India, particularly under British rule, saw significant changes aimed at serving colonial interests rather than fulfilling the basic needs of the population.

Infrastructure in Pre-colonial India: Pre-colonial India lacked proper infrastructure, with poor transportation and communication lines, inadequate roads, and reliance on traditional modes of transport such as animal-drawn carriages.

Infrastructure Development in British India: British colonial rule witnessed infrastructure development initiatives primarily aimed at serving colonial interests, including the introduction of railways, roads, telegraphs, ports, and water transport systems. These developments facilitated the transportation of raw materials and goods to ports for export, while also enabling the mobilization of the British army. However, the benefits of these developments largely accrued to the British, with limited impact on improving the quality of life for the Indian population.

A Solved Example For You: One of the biggest limitations of a free market economy is which of the following?

Ans: The correct answer is option D. In a market economy the government cannot interfere to stop monopoly or concentration of wealth in the hand of a few. So this often leads to uneven distribution of resources as people with money hold all the cards.

Types of Economy: Economists have identified four different types of economy – traditional, command, market, and mixed economy, each with its unique characteristics and features.

Traditional Economy: Based on ancient customs and beliefs, traditional economies focus on agriculture and rely on barter systems with no concept of currency.

Command Economy: In a command economy, the government makes all economic decisions, determining what goods and services are produced, their quantities, and prices. Examples include communist countries like China and Cuba.

Market Economy: Market economies rely entirely on free market forces, with prices and production determined by supply and demand. Examples include the United States and Hong Kong.

Mixed Economy: Mixed economies combine elements of both command and market economies. While private businesses operate freely, the government regulates specific sectors to protect public interests. Examples include India and France.

A Solved Question For You: In which year was the first five year plan passed?

Ans: The correct option is D. India became independent in 1947 but our first economic plan came out in 1951 under the guidance of the PM and chairman of the Planning Commision Jawarhalal Nehru.

Five Year Plan: The Indian government introduced the concept of five year plans after independence to systematically allocate resources and achieve specific economic and social goals over a five year period.

Goals of the Five Year Plans: Each five year plan aims to promote growth, modernization, self-reliance, equity, and stability within the economy and society, with a focus on specific objectives tailored to the needs of the nation.

First Five Year Plan: Launched in 1951 under the guidance of Prime Minister Jawaharlal Nehru, the first five year plan focused on jumpstarting economic development in post-independence India, laying the foundation for subsequent plans.

A Solved Question For You: Bhoodan movement was started in India by _______.

Ans: The correct option is A. Vinoba Bhave initiated this movement in 1951. It was also known as the Land Gift Movement. This was a voluntary form of land reform where they collected surrendered land from landowners and gifted them to the poor landless farmers.

Land Reforms: Land reforms in India aimed to rectify the inequities of the zamindari system inherited from British rule by redistributing land ownership to farmers, abolishing intermediaries, and promoting equity and social justice.

Objectives of the Land Reforms: The objectives included systemic changes in the agrarian structure, abolition of intermediaries, promotion of equity, prevention of tenant farmer exploitation, and increased agricultural productivity.

Steps Implemented under the Land Reforms: Land reforms involved passing legislation to abolish zamindari, seizure of surplus land, imposition of land ceiling laws, promotion of consolidation of holdings, and encouragement of cooperative farming.

Importance of Land Reforms: Land reforms incentivized farmers, boosted agricultural output, fostered a closer relationship between farmers and the government, and facilitated social justice and equity.

A Solved Question For You: Which of the following grains were produced the most during the Indian green revolution?

Ans: The correct option is C. The two grains that benefitted the most in the Green Revolution were Wheat and Rice. In fact, many believe rather than Green Revolution, Grain Revolution is the more suited name.

Green Revolution: The Green Revolution in India aimed to achieve self-sufficiency in food production through the introduction of High Yielding Variety (HYV) seeds, improved irrigation, increased use of fertilizers and pesticides, and adoption of modern technology and machinery.

Market Surplus: The Green Revolution resulted in market surplus, leading to lower food prices, creation of food reserves, and overall economic benefits.

Impact of the Green Revolution: The Green Revolution brought about increased agricultural production, higher per acre yield, reduced dependence on imports, creation of employment opportunities, and improved income for farmers.

A Solved Question For You: What was the contribution of the industrial sector in 1950?

Ans: The correct option is A. During the post-independence era, the contribution of the industrial sector was only 11.8% of the GDP. We saw some development of this in the coming years and by 1991 it had become around 25%.

Industrial Policy: India's industrial policy aimed to promote industrial development, with a focus on state control, promotion of small-scale industries, infrastructure development, and the capital goods industry.

Control of the State: The state played a significant role in promoting industrial growth, with key sectors reserved exclusively for state control.

Industrial Policy Resolution 1956: Introduced a classification of industries into three categories and aimed to regulate and promote industrial growth through state intervention.

Small Scale Industries: Promoted for rural development, small-scale industries received support through reserved products, financial aid, and encouragement from committees like the Karve Committee.

Infrastructure Development: Government policies focused on strengthening infrastructure like transportation, rail, banking, and communication to support industrial growth, primarily through the public sector.

Promotion of Capital Goods Industry: The Mahalanobis model emphasized heavy industries, especially those producing capital goods, to create a robust industrial base and meet the capital requirements.

A Solved Example For You: The government gives subsidies in various sectors. Which of the following are the special effects of subsidies?

Ans: b) 2 only. There is no straight relation between subsidies given and inflation. It may increase inflation (eg. subsidies on LPG helping people save more, as a result, increasing their capacity which can cause demand-pull inflation.) or decrease inflation by making easy to get to low cost subsidized goods. Subsidies certainly increase the fiscal deficit. Subsidies increases do not decrease the export competitiveness of goods, as a result, it decreases their cost of production.

Subsidies: Subsidies, as a fiscal policy instrument, aim to influence consumption or production decisions by creating a gap between consumer prices and producer costs. They have various effects on the economy and are administered through different means, targeting specific groups or sectors.

Transfers and Subsidy: Subsidies differ from transfers as they aim to influence the consumption or distribution decisions in favor of subsidized goods, rather than directly supplementing income.

Mode of Administering a Subsidy: Subsidies can be provided to producers or consumers, through public enterprises, cross-subsidization, or targeting specific groups based on selected criteria.

Effects of a Subsidy: Subsidies have allocative, redistributive, fiscal, and trade effects on the economy, which can lead to both positive and negative consequences.

Subsidy Issues in India: India faces challenges with subsidies due to the vastness of governmental activities, weak cost recovery efforts, and low efficiency levels.

Methodology for Estimation of Subsidies in India: Different approaches and conventions are used to measure the magnitude of subsidies, with examples including food, electricity, and health subsidies.

A Solved Question For You: What was the Permit License Raj? How did it affect our economy?

Ans: During 1960-1980, to open any company or business in India, industrialists had to obtain many permits from associated authorities. This system led to delays, increased corruption, and misuse by certain industrialists to stifle competition. The government needed to change its trade policy to promote ease of doing business in the country.

Trade Policy: India's trade policy post-independence focused on boosting domestic production and protecting domestic industries through inward-looking strategies such as import substitution.

Trade Policies and Industrial Development: These policies led to the growth and diversification of the industrial sector by protecting it from foreign competition and promoting indigenous industries.

Public Sector Enterprises: The development of public sector enterprises aimed to provide essential services to the public. However, criticisms arose over time regarding their inefficiency and monopolistic tendencies, leading to calls for reforms.

Solved Question: The Permit License Raj was a system during 1960-1980 where industrialists had to obtain numerous permits to start a business in India, leading to delays, corruption, and stifling of competition. This affected the economy negatively, prompting the government to reform its trade policies to promote ease of doing business.

A Solved Question For You: How are public sector undertakings classified with respect to their performance and professionalism?

Ans: Public sector undertakings (PSUs) in India are classified based on their performance and professionalism into Maharatnas, Navratnas, and Miniratnas.

Introduction to LPG: LPG stands for Liberalization, Privatization, and Globalization, representing the economic reforms undertaken by India in 1991.

Liberalization: It aimed to remove restrictions hindering economic growth, promote competition, and encourage foreign trade and investment.

Privatization: This policy involved transferring ownership and management of government-owned enterprises to the private sector, leading to improved efficiency and competition.

Globalization: It focused on integrating the Indian economy with the global economy, emphasizing foreign trade and investments.

Solved Question: Public sector undertakings (PSUs) in India are classified based on their performance and professionalism into Maharatnas, Navratnas, and Miniratnas.

A Solved Question For You: What were the economic reforms during Liberalization?

Ans: Economic Reforms during Liberalization. Many sectors were impacted during the course of Liberalization. They were: Industrial Sector Reforms, Financial Sector Reforms, Tax Reforms / Fiscal Reforms, Foreign Exchange Reforms / External Sector Reforms.

Liberalization: Economic Reforms during Liberalization

• Industrial Sector Reforms: Abolition of industrial licensing, contraction of public sector, de-reservation of production areas, expansion of production capacity, freedom to import capital goods.
• Financial Sector Reforms: Reduction of various ratios (SLR, CRR), competition from new private banks, change in the role of RBI, deregulation on interest rates.
• Tax Reforms / Fiscal Reforms: Simplification of tax structure, reduction in taxation rates, increased tax revenue for the government, reduction of tax evasion.
• Foreign Exchange Reforms / External Sector Reforms: Devaluation of Rupee, abolition of quota system on imports, reduction of import duties, withdrawal of export duties.

A Solved Question For You: What were the economic reforms during Liberalization?

Ans: Economic Reforms during Liberalization. Many sectors were impacted during the course of Liberalization. They were: Industrial Sector Reforms, Financial Sector Reforms, Tax Reforms / Fiscal Reforms, Foreign Exchange Reforms / External Sector Reforms.

A Solved Question For You: In what two groups can the reforms be categorized?

Answer: The reforms can be categorized into Stabilization Measures and Structural Reform Policies. Stabilization measures are short-term in nature and attempt to control the crisis situation, while structural reform policies are long-term policies aimed at improving the overall economic condition.

Economic Reforms in India

• The Crisis of 1991 and the Reforms: Crisis due to inefficient management, need for new economic policies, emergence of liberalization, privatization, and globalization.
• Liberalization: End of restrictions hindering development, opening up of economic borders for foreign investment, expansion of production capacity, abolishing industrial licensing, de-reservation of producing areas, freedom to import goods.
• Privatization: Reduction of public sector role, objectives include reducing public sector workload, providing better goods/services, improving government's financial condition, allowing entry of foreign direct investments and healthy competition.
• Globalization: Integration of Indian economy with world economy, encouraging private and foreign investment, foreign trade, establishing global links.

A Solved Question For You: In what two groups can the reforms be categorized?

Answer: The reforms can be categorized into Stabilization Measures and Structural Reform Policies. Stabilization measures are short-term in nature and attempt to control the crisis situation, while structural reform policies are long-term policies aimed at improving the overall economic condition.

A Solved Question For You: What is Education? What are its objectives?

Solution: Education in India means the process of teaching, learning, and training of human capital in schools and colleges. Its objectives include the development of science and technology, utilization of natural resources and human capital across all regions, enhancement of human thinking, and fostering good citizenship.

Education in India

• Human Capital: Human capital and economic growth are interdependent, skilled workers increase productivity, innovation drives growth, higher employment leads to economic development, positive societal changes.
• Growth in Government Expenditure on Education: Increased expenditure on education as percentage of government expenditure and GDP, irregular growth during 1952-2010, disparities in expenditure among states.
• Expenditure on Elementary Education: Major share of expenditure on elementary education, variations in expenditure per student among states, free and compulsory education for children aged 6-14, educational opportunities disparities.
• Educational Achievement in India: Improvement in adult literacy rate, primary completion rate, and youth literacy rate, gender equity issues, future prospects for education for all, improving gender equity, challenges in higher education.

A Solved Question For You: What is Education? What are its objectives?

Solution: Education in India means the process of teaching, learning, and training of human capital in schools and colleges. Its objectives include the development of science and technology, utilization of natural resources and human capital across all regions, enhancement of human thinking, and fostering good citizenship.

Solved Example for You: Which are the two types of Human Resource Capital?

Answer: There are two types of Human Resource Capitals. They are:

• Physical Capital: Tangible assets like buildings, machinery.
• Human Capital: Intangible assets like skills, knowledge, expertise.

Sources of Human Capital

Human Resource Capital: The conversion of human resources into human assets, including physical and human capital.

Differences Between Physical Capital and Human Capital:

• Characteristics: Physical capital is tangible and tradable, while human capital is intangible and not salable.
• Ownership: Physical capital can be separated from its owner, but human capital cannot.
• Formation: Physical capital can be built through imports, whereas human capital is developed internally.
• Benefits: While the benefits of physical capital are primarily private, human capital provides both social and private benefits.
• Mobility: Physical capital is transportable between countries, but human capital is not transferable due to cultural and national restrictions.

Solved Example for You: Which are the two types of Human Resource Capital?

Answer: There are two types of Human Resource Capitals. They are:

• Physical Capital: Tangible assets like buildings, machinery.
• Human Capital: Intangible assets like skills, knowledge, expertise.

Problems of Human Capital Formation in India:

1. Growing Population
2. Brain Drain
3. Inept Manpower Planning
4. Longstanding Process
5. High Poverty Levels

Solved Question for You: Why is 'growing population' a factor in the state of human capital in India?

Answer: Growing population unfavorably influences the quality of human capital by reducing per capita availability of resources such as sanitation, jobs, education, healthcare, etc.

What is Human Capital State in India?

Human Capital: The advancement of human resources through education, health, migration, job training, and information.

State of Human Capital in India: India recognizes the significance of human capital in financial development. The Seventh Five Year Plan emphasizes the importance of human resource improvement due to reasons such as higher productivity of physical capital, innovative skills leading to economic growth, higher employment rate, reduced wealth inequalities, and a positive outlook in the workforce.

Problems of Human Capital Formation in India:

1. Growing Population: Increasing population negatively impacts the quality of human capital by reducing per capita availability of resources.
2. Brain Drain: Migration of highly talented workers hinders human capital formation in the home country.
3. Inept Manpower Planning: Lack of adequate planning in training and skill development leads to wastage of local talent.
4. Longstanding Process: Skill development is a slow process, affecting competitiveness in the global market.
5. High Poverty Levels: Poverty restricts access to education and healthcare, hindering human capital formation.

Solved Question for You: Why is 'growing population' a factor in the state of human capital in India?

Answer: Growing population unfavorably influences the quality of human capital by reducing per capita availability of resources such as sanitation, jobs, education, healthcare, etc.

Scope for Improvement:

• Improving employment opportunities
• Enhancing productivity in the agricultural sector
• Improving rural infrastructure and connectivity
• Addressing social issues like caste system and gender disparities
• Implementing modern technologies like organic farming
• Improving access to credit and banking services

Rural Development in India

Rural Development: Focuses on the upliftment and development of rural economies to address poverty issues and enhance productivity.

Key Issues in Rural Development:

• Development of alternate occupations other than agriculture: To reduce dependency on agriculture and provide diverse income sources.
• Investment in Human Capital in rural areas: To improve education, health, and skill development among rural populations.
• Land Reforms: To ensure equitable distribution of land and enhance agricultural productivity.
• Development of Infrastructure in rural areas: To improve connectivity, access to basic amenities, and overall quality of life.
• Availability of affordable credit: To facilitate investment in agriculture, small businesses, and other rural enterprises.

Scope for Improvement:

• Improving employment opportunities
• Enhancing productivity in the agricultural sector
• Improving rural infrastructure and connectivity
• Addressing social issues like caste system and gender disparities
• Implementing modern technologies like organic farming
• Improving access to credit and banking services

Spectrum of Change:

• Rural banks need to establish a banking relationship with the people and scrap away the image of just money lenders.
• Reform in the banking system considering the difference in livelihoods of urban and rural people.
• Educating people about thrift generation and efficient utilization of financial resources.

Credit System in Rural Areas

Credit System: Important for rural development, provides capital infusion for productivity enhancement.

Development of Present Credit System:

• NABARD (National Bank For Agricultural And Rural Development): Established to provide easy credit to rural areas and regulate rural banking activities.
• Self-Help Groups (SHGs): Bridge the gap between formal credit system and rural poor through micro-credit programmes.
• Rural Banks: Provide credit at low-interest rates and promote productivity in agriculture and other rural activities.

Spectrum of Change:

• Rural banks need to establish a banking relationship with the people and scrap away the image of just money lenders.
• Reform in the banking system considering the difference in livelihoods of urban and rural people.
• Educating people about thrift generation and efficient utilization of financial resources.

Loopholes:

• Slow improvement in infrastructure leading to wastages and problems.
• Inadequate coverage and connectivity of cooperatives.
• Control of a significant share of trade by the private sector.

The Hurdles against Improvement:

• Lack of knowledge and vigilance leading to farmer exploitation.
• Selling produce at lower rates due to misinformation.
• Lack of proper storage facilities.
• Lack of easy access to formal credit, pushing farmers into debt traps.

Emerging Alternate Marketing Channels:

• Apni Mandi (Punjab, Rajasthan, Haryana)
• Hadapsar Mandi (Pune)
• Rythu Bazars (vegetable and fruit markets in Arunachal Pradesh and Telangana)
• Uzhavar Sandies (Tamil Nadu)

Agricultural Market System

History of Agricultural Market System: In the pre-independence era, farmers were exploited by traders and middlemen, leading to the need for state intervention to improve efficiency.

Measures of Improvement:

• Regulation of markets: For transparent and orderly marketing conditions.
• Improvement in transport infrastructure: To enhance connectivity.
• Development of infrastructure: Like storages, processing units, and warehouses.
• Formation of cooperatives: To provide farmers with a common voice and fair prices.
• Government policies: Such as MSP, buffer stocks, and PDS.

Loopholes:

• Slow improvement in infrastructure leading to wastages and problems.
• Inadequate coverage and connectivity of cooperatives.
• Control of a significant share of trade by the private sector.

The Hurdles against Improvement:

• Lack of knowledge and vigilance leading to farmer exploitation.
• Selling produce at lower rates due to misinformation.
• Lack of proper storage facilities.
• Lack of easy access to formal credit, pushing farmers into debt traps.

Emerging Alternate Marketing Channels:

• Apni Mandi (Punjab, Rajasthan, Haryana)
• Hadapsar Mandi (Pune)
• Rythu Bazars (vegetable and fruit markets in Arunachal Pradesh and Telangana)
• Uzhavar Sandies (Tamil Nadu)

Diversification through Shift into other Productive Streams

• Animal Husbandry: Provides livelihood alternatives with benefits like transport, income, food security, and nutrition.
• Fisheries: Emerging alternative contributing to GDP growth, especially in states like Kerala, West Bengal, and Andhra Pradesh.
• Horticulture: Accounts for 6% share in GDP, offers opportunities for diversification due to India's diverse climate and soil conditions.
• Information Technology: Provides employment opportunities in rural areas and aids in sustainable development and food security.

Problems faced by Alternative Industries:

• Livestock productivity below par due to lack of infrastructure and good breed of animals.
• Fishing sector hindered by pollution, illiteracy, and lack of credit facilities for fisherwomen.
• Promotion of horticulture hindered by infrastructural, market linkage, and technological challenges.

Why the call for Diversification?

• Limit to absorption of workforce in agriculture.
• Risk reduction from agriculture.
• Alternatives to make ends meet.
• Steady income throughout the year.
• Improvement in yields and rural development.

Diversification through Shift into other Productive Streams

• Animal Husbandry: Provides livelihood alternatives with benefits like transport, income, food security, and nutrition. Livestock productivity below par due to lack of infrastructure and good breed of animals.
• Fisheries: Emerging alternative contributing to GDP growth, especially in states like Kerala, West Bengal, and Andhra Pradesh. Hindered by pollution, illiteracy, and lack of credit facilities for fisherwomen.
• Horticulture: Accounts for 6% share in GDP, offers opportunities for diversification due to India's diverse climate and soil conditions. Promotion hindered by infrastructural, market linkage, and technological challenges.
• Information Technology: Provides employment opportunities in rural areas and aids in sustainable development and food security.

Problems faced by Alternative Industries:

• Livestock productivity below par due to lack of infrastructure and good breed of animals.
• Fishing sector hindered by pollution, illiteracy, and lack of credit facilities for fisherwomen.
• Promotion of horticulture hindered by infrastructural, market linkage, and technological challenges.

The Downsides of Organic Farming

• Lower output compared to traditional methods.
• Requires good infrastructure and farmer awareness.
• Financial prospects relatively low for small and marginal farmers.

Green VS. Golden Revolution

• Green Revolution: Led to increased food grain production with techniques like HYV seeds, fertilizers, and pesticides.
• Golden Revolution: Focused on horticultural crops, making India a leading producer in the international market.

Information Technology and Sustainable Development

• IT aids in planning farming activities without altering the ecosystem by providing weather, soil, and crop information.
• It informs about emerging technologies for increased productivity and profits, in line with sustainable development goals.

The Need of Organic Farming

• Ecological balance maintenance.
• Cheaper and locally grown.
• Healthier and more nutritional output.
• Favourable in labor-abundant countries like India.
• High prices in export market due to health benefits.
• Eco-friendly, preventing soil degradation.

The Downsides of Organic Farming

• Lower output compared to traditional methods.
• Requires good infrastructure and farmer awareness.
• Financial prospects relatively low for small and marginal farmers.

Green VS. Golden Revolution

• Green Revolution: Led to increased food grain production with techniques like HYV seeds, fertilizers, and pesticides.
• Golden Revolution: Focused on horticultural crops, making India a leading producer in the international market.

Information Technology and Sustainable Development

• IT aids in planning farming activities without altering the ecosystem by providing weather, soil, and crop information.
• It informs about emerging technologies for increased productivity and profits, in line with sustainable development goals.

Worker - Population Ratio

The ratio of workers who are contributing to productive activities in a country to its total population. It gives an idea about the employment situation of a country, indicating what proportion of the population is actually contributing to the production of goods and services. The ratio is usually multiplied by 100 for percentage values.

Worker Types

The workforce can be categorized into different types based on their employment status. Hired workers are employed by others, while self-employed individuals own and work for their own enterprises. Within hired workers, casual workers are engaged temporarily, while regular salaried workers are employed on a permanent basis.

Sectors of the Economy

The economy can be broadly divided into three sectors based on the engagement of workers in different kinds of employment. The primary sector includes agriculture and allied activities, the secondary sector comprises manufacturing activities, and the tertiary sector encompasses service-related industries.

Unemployment: Definition and Calculation

Unemployment refers to the state of being out of work despite being able and willing to work. It is calculated as the percentage of unemployed persons in the total labor force using the formula (No. of Unemployed Persons / Total Labor Force) x 100.

Types of Unemployment

Rural unemployment is prevalent in areas where agriculture is the main occupation, characterized by open, seasonal, or disguised unemployment. Urban unemployment includes industrial, educated, and technological unemployment, primarily found in urban areas with a high concentration of industries and service sectors.

Causes of Unemployment

Unemployment is caused by factors such as slow economic growth, rapid population growth, technological dependency, and ineffective government policies.

Employment Generation

Employment generation initiatives include the National Rural Employment Guarantee Act (NREGA) providing guaranteed wage employment, along with various government initiatives aimed at providing unemployment allowances, conducting training programs, and enacting social security programs.

Economics and the Environment

Environmental degradation caused by economic activities poses a threat to sustainable development. The environment, comprising biotic and abiotic components, performs vital functions such as resource supply, waste assimilation, sustenance of life, and aesthetic value.

Environmental Degradation

Economic activities lead to environmental degradation, characterized by over-utilization of resources, pollution, and depletion of non-renewable resources, causing adverse effects such as poor air and water quality, deforestation, and climate change.

Global Environmental Crisis

Global warming and ozone layer depletion are critical issues resulting from greenhouse gas emissions and release of substances like chlorofluorocarbons (CFCs). These phenomena lead to melting polar ice caps, rising temperatures, and increased exposure to harmful ultraviolet rays.

Measures to Save the Environment

Pollution control measures, forest conservation efforts, social awareness campaigns, waste management, water management, and implementation of policy programmes are essential to combat environmental degradation and address global environmental crises.

Sustainable Development

Sustainable development emphasizes meeting present needs without compromising the ability of future generations to meet their own needs. It advocates rational resource usage, pollution control, population stabilization, and reliance on renewable energy sources to ensure environmental sustainability.

Comparative Development Experiences of India and its Neighbours

We examine the development paths of India, Pakistan, and China, considering their similarities and differences. All three nations embarked on their development journeys around the same time, with India and Pakistan gaining independence in 1947 and China in 1949.

Initially, all three countries followed economic planning, with India's first Five Year Plan starting in 1951, Pakistan's Medium Term Plan in 1956, and China's first plan in 1953. They emphasized the importance of the public sector and social expenditure.

India initially pursued a policy of closed trade to boost domestic industries, while Pakistan also followed import substitution. China, under Mao's leadership, implemented the Great Leap Forward to industrialize the economy.

In terms of social development, India focused on rural development, employment generation, and poverty alleviation. Pakistan prioritized rural development, poverty alleviation, and the Green Revolution, while China developed a strong healthcare system, focused on poverty reduction and population control.

The importance of the public and private sectors varied, with India placing significant emphasis on the public sector, Pakistan adopting a mixed economy approach, and China shifting towards liberalization and promoting private enterprises.

People in any society require various goods and services for their daily lives, including food, clothing, shelter, transportation, and services such as education and healthcare.

Each individual or decision-making unit in society produces some goods or services and wants a combination of many goods and services, not all of which are produced by them.

Production, exchange, and consumption of goods and services are fundamental economic activities.

Every economy faces the problem of allocating scarce resources to the production of different goods and services and distributing the produced goods and services among individuals.

1.3.1 The Centrally Planned Economy

In a centrally planned economy, the government controls major economic activities.

The central authority makes all important decisions regarding production, exchange, and consumption of goods and services.

1.3.2 The Market Economy

In a market economy, economic activities are organized through market mechanisms.

Prices of goods and services play a crucial role in coordinating economic activities in a market system.

Positive economics involves the objective analysis of economic phenomena, while normative economics deals with value judgments.

Both positive and normative analyses are essential in understanding economic issues and policy decisions.

Microeconomics focuses on individual economic units, while macroeconomics studies aggregate economic phenomena.

Microeconomics analyzes the behavior of consumers and producers in specific markets, while macroeconomics examines the economy as a whole, including measures like GDP, inflation, and unemployment.

This book introduces basic concepts in microeconomics, focusing on consumer and producer behavior, market equilibrium, and various forms of market structures.

Chapter 2 discusses consumer behavior, Chapter 3 covers production and cost analysis, and Chapter 4 explores producer behavior.

Chapter 5 examines market equilibrium in perfectly competitive markets, while Chapter 6 addresses alternative market structures.