UNIT 2
ECONOMIC DEVELOPMENT OF INDIA
Economic Development, Planning and Social Change in India!
The economic development in India after independence can truly be described as a revolutionary change. If we compare the economic development within the British period with the one within the Nehru period of about two decades, Indira Nehru Gandhi and Rajiv Gandhi periods of about 20 years , the period of quite six years of V.P. Singh, Chandra Shekhar and Narasimha Rao’s governments, about two years period of United Front governments, and about one year period of BJP-led government, the reality behind the above statement becomes self-evident.
The economic growth within the two centuries of British colonial rule between 1757 and 1947 remained 1 per cent or maybe less-a rate of growth so pathetically low that it reduced India to a mere supplier of raw materials and a gaping market for western exports. The industrial sector was over-whelmingly dominated by British capital.
A fragment of the economic sector owned by Indians was managed by British agencies. Within the agricultural economy, the cultivators were within the clutches of zamindars, jagirdars and native moneylenders (sahukars). Savings and investments were very low. Technology was of inferior level. There was no concept of regional balance through enforced backward area development. Foreign capital wasn't available for building India.
Low incomes cause low savings, which further cause low investment, low growth, and once more to low incomes. The theory of vicious circle of poverty and never-ending cycle quite fitted the economy of the colonial period.
After independence, the task for the new government was two-fold: dismantling the colonial economy and erecting in its place base for a modern, independent and self-reliant economic order. The blueprint for the country’s modern economy and nationhood—the socialist pattern of society—was provided by the Avadi session of Congress in 1955 (during the Nehru era) and by the Bangalore session in 1969 (during the Gandhi era).
There is no denying the very fact that the Nehru model of socialism did improve our economy within the four decades of the 1950s, 1960s, 1970s and 1980s, though there's a faculty which decries its (Nehru model’s) performance as compared with the economic growth in South Korea , Singapore, Hong Kong, Thailand and Taiwan.
We have now millions of recent industrial enterprises where there have been once but a handful; we've an enormous reservoir of technical and entrepreneurial skills; we've big public projects like Bhilai and Rourkela also as big dams like Hirakud; we've the highest rate of savings within the developing world; we've rate of growth of 5 per cent once a year (in 1998-99); we've sustained growth in exports, a twenty-fold increase within the deposits of Non-Resident Indians (NRIs); we've unparalleled credibility in international money market; and that we have dropped the share of population below the poverty-line (from 51 per cent in 1972-73 to 36 per cent in 1997-98, as claimed by the govt after accepting Lakdawala Committee’s recommendations). In spite of all this development, it's also a fact that we are faced with the matter of inflation and high debt. The balance of trade deficit is extremely high and the deficit is in trillions.
The Narasimha Rao’s government discarded the socialist model in 1991-92 and launched a replacement revamped model supported the philosophy of liberalisation, marketisation and privatisation (what is now called Nehruvian capitalism), which the Congress government claimed gave a big boost to our economic development.
The then Congress government maintained that the essence of the new model was that it combined trust within the state also as the private entrepreneurs, and held unflinching faith during a plural democracy and economy . The united front government and therefore the BJP-led government also continued this policy .
The Tirupati session of the Congress in April 1992 adopted a new ideological paradigm which was a shift from left-of-centre to right-of-centre. It was a way of discarding Nehru in Nehru’s name. It focused on reducing subsidies to varied sectors (including agriculture and public distribution system), discarding licence-permit raj, introducing the exit policy, opening the country for multinational corporations, removing import controls, and not treating public sector merely as a job distribution agency characterised by a non-work ethic. Thus, the rhetoric stayed socialist while the content of policies became capitalist with a vengeance.
There are scholars who don't believe that the new economic policy will really rejuvenate the Indian economy. They maintain that our economy are often revived best by imposing curbs on import, promoting exports, widening the tax-net, debureaucratising the public sector, unearthing black money, introducing cuts in defence spending, taking more interest in tapping natural resources, creating a really large market for goods, bringing radical land reforms, and so on. These scholars also believe that country should depend on the internal instead of the external measures.
Sociologically, it should be held that the economic development—both through Nehru and liberal models—has affected our social structures during a direction as we desired it. Whatever sociological model we may use for evaluating our society, viz., evolutionary (assessing evolving of society in series of stages), conflict (emphasising competition and continuous struggle for power), functional (analysing the results of every institutional practice for all other elements within the social structure), etc., it'll be obvious that change has taken place within the network of social relations, social institutions, social systems and social structures, social norms, etc.
People in India are not any longer as conservative as half a century ago. They are doing not cling tenaciously to the moral norms and social values that came down to them from the past. Men individually strive towards individual liberty and peace . There's also change in their outlook and concepts .
They wish for new experiences. They need a curiosity to borrow not only technologies but also cultural elements from other societies. They need a creative urge for innovations. They're not much afraid of the results of the acceptance of innovations and social changes. They'll protest and agitate against the power elite for failing to mitigate the problems of poverty, unemployment, corruption, inflation, nepotism, terrorism, casteism, regionalism, etc., yet they know that social order in India will never be in a state of disequilibrium.
Indian culture, with divergence of interests, won't only survive but develop too. Social change, through economic development, will provide clues and directions to social structures and social behaviour—-traditional also as transitional.
Briefly put these inferences are:
i. Undifferentiated patterns of economic activity;
Ii. Integrated system of living;
Iii. Production need oriented and not for marketing;
Iv. Informal structure of economic relations;
v. Absence of huge specialized groups and collective bargaining;
Vi. Primary techniques of control;
Vii. Barter system of exchange;
Viii. No separation between ownership and management;
Ix. Non-existence of monetary and system .
1. Low per capita income
In India, the value and per capita income individual income is extremely less and it's considered as major features of underdeveloped economy.
As per International Bank for Reconstruction and Development estimates, the per capita income of India was $ 720 in 2005. This per capita income level of India is that the lowest within the world and it's even less than China and Pakistan.
In 2005, the per capita income of Switzerland was nearly 76 times more, in U.S.A. About 61 times more , in Germany about 48 times more and in Japan about 54 times more the per capita income figure in India. Thus the quality of living of Indian people remained right along very low as compared thereto of developed countries of the planet .
This disparity within the per capita income of India and other developed countries has registered an important increase during the last four decades (1960-2005).
Although the per capita income at official exchange rates exaggerated this disparity but after making necessary correction through purchasing power parity figures, the per capita GNP of U.S.A. Was 12.0 times more that of India in 2005 as against 68.0 times more that of India at official exchange rates.
2. Excessive dependence of agriculture and first producing:
Indian economy is characterized by heavy dependence on agriculture and thus it's primary producing. Out of the entire working population of India, a really high proportion of it's involved in agriculture and allied activities, which contributed a more share within the value of India.
In 2004, nearly 58 per cent of the entire working population of India was involved in agriculture and allied activities and was contributing about only 21.0 per cent of the entire income.
In majority of the countries of Asia, Middle East and Africa, from two-thirds to four- fifths of their total population are completely hooked in to agriculture. Within the developed countries like U.K., U.S.A. And Japan, the half of of active population involved in agriculture ranges between 1 to five per cent.Thus our agricultural sector is overburdened because the majority of our working population is counting on agriculture.
3. High rate of increase
India is maintaining a really high rate of growth of population from 1950. Thus the pressure of population in India is extremely heavy. This has resulted from a really high level of birth rates with a falling level of death rates prevailing in India.
In India, the speed of growth of population has been rising from 1.31 per cent yearly during 1941-50 to 2.5 per cent yearly during 1971-81 to 2.11 per cent yearly during 1981-91 then finally to 1.77 per cent during 2001-2011.
The prime cause behind this rapid climb of population is that the more fall in its death rate from 49 per thousand during 1911-20 to 7.1 per thousand in 2011. On the opposite hand, compared to its death rate, the birth rate of our population has gradually reduced from 49 per thousand during 1911-20 to 21.8 per thousand in 2011.Thus whatever development that has been achieved within the country, it's being swallowed up by the increased population. Moreover, this high rate of growth of population necessitates a more rate of economic process only for leveling an equivalent standard of living.
This imposes a more economic burden on the economy of India on maintain such a rapidly growing population we require food, cloth, house, schooling, health facilities etc. in greater magnitude. Population explosion is additionally liable for increase within the labor pool in India.
4. Existence of severe unemployment and under-employment:
Rapid growth of population including in sufficient growth of secondary and tertiary occupations are liable for the occurrence of chronic unemployment and under-employment problem in India. In India, unemployment is structural one, not like in developed countries, which is of cyclical type.Here unemployment in India is that the results of absence of capital. Indian industries aren't getting adequate amount of capital for its necessary expansion so on absorb the whole surplus labor pool into it.
Moreover, larger number of labor pool is participated within the agricultural sector of the Indian economy than what's really needed. This has reduced the marginal product of agricultural labourer either to a negligible rate or to zero or maybe to a negative amount.
There exists disguised unemployment in Indian agricultural sector which has resulted from an excessive amount of dependence of population ashore and absence of other occupations within the rural areas.
Moreover, within the urban areas of India, the matter of educated unemployment has also taken a significant turn. Thus both the agricultural and concrete area of India has been affected by the intense problem of unemployment and under-employment to an outsized extent. Thus the Third Five Year Plan mentioned, “Urban and Rural unemployment actually constitute a serious indivisible problem.”
During the 5 year period of 1990-95, new entrants to the labor pool are estimation of 37 million. To place it in differently we will guess that total burden of unemployment during this Eighth Plan would be around 65 million which may be a matter of great concern for the economy of India.
The incidence of unemployment on CDS basis increased from 7.31 you look after labor pool in 1999-2000 to eight .28 you look after labor pool in 2004-05 year.
Poor rate of capital formation
Capital deficiency is one among the characteristic features of the Indian economy. Both the quantity of capital available per head and therefore the present rate of capital formation in India is extremely low. Consumption of crude steel and energy are the 2 major indicators of low capital per head within the underdeveloped countries like India.
In 1987, the per capita consumption of steel in our county was only 20 kg as against 582 kg for Japan, 417 kg for U.S.A., 259 kg for U.K. And 64 kg for China., the per capita consumption of electricity in 2003 was only 594 for India as against 14,057 for U.S.A., 5,943 for U.K., 8,212 for Japan & 1,440 for China.
Moreover, this low level of capital formation in India is additionally thanks to weakness of the inducement of invest and also thanks to low propensity and capacity to save lots of . As per Colin Clark’s estimate, so as to take care of an equivalent standard of living, India requires minimum 14 per cent level of gross capital formation.
To achieve a more rate of economic process and to enhance the quality of living, a still more rate of capital formation is extremely much required in India. In India the speed of saving as per cent of GDP has gradually increased from 14.2 per cent in 1965-66 to 30.6 per cent in 2013-14 which is moderately high in compared to half-hour in Japan, 23 you bored with Germany, 15 % in U.K. And 17 per cent in USA.
But considering the heavy population pressure and therefore the need for self sustained growth, this rate of saving is insufficient and thus the enhancement of the speed of capital formation is badly needed
Inequality within the distribution of wealth:
Another important characteristic of our county economy is that the mal-distribution of wealth: The report of the Federal Reserve Bank of India reveals that almost 20 per cent of the households owing but Rs 1000 worth of assets have only 0.7 per cent of the entire assets.
Moreover, 51 per cent of the households owing but Rs 5000 worth of assets possessed barely 8 per cent of the entire assets. Lastly, the highest four per cent households having assets worth quite Rs 50,000 held quite 31 per cent of the entire assets.
Mal distribution in income is that the results of inequality within the distribution of assets within the rural areas. On the opposite hand, in respect of commercial front there occurs a high degree of concentration of assets within the hands of only a few big Industrial houses. This shows high degree of assets concentration within the hands of only a few powerful business houses of India.
5. Low level of technology:
Prevalence of low level of technology is one among the important characteristics of an underdeveloped economy like India. The economy of India is thus affected by technological backwardness. Traditional techniques of production are largely being applied in both the agricultural and industrial sectors of India.
Sophisticated modern technology is being applied in productive units at a really lower scale because it is extremely much expensive. Moreover, it's considerably difficult to adopt advance technology in Indian productive system with its untrained, illiterate and unskilled labor.
Thus thanks to the appliance of poor technology and lower skills, the productivity- in both the agricultural and industrial sectors of India is extremely less. This has resulted in inefficient and insufficient production leading towards poverty in India.
6. Under-utilization of natural resources:
In respect of natural endowments India is taken into account as a really rich country. Various sorts of natural resources, viz., land, water, minerals, forest and power resources are available in sufficient quantity within the various parts of the country.
But thanks to its various inherent problems like inaccessible region, primitive techniques, shortage of capital and little extent of the market such huge resources remained largely under-utilized. An enormous quantity of mineral and forest resources of India still remains largely unexplored. Until recently, India wasn't in position to develop even 5 per cent of total hydropower potential of the country.
Huge dependence of population on agriculture
Another aspect that reflects the backwardness of the Indian economy is that the distribution of occupations within the country. The Indian agriculture sector has managed to measure up to the stress of the fast-increasing population of the country.
As per to the planet Bank, in 2014, nearly 47 you look after the working population in India was involved in agriculture. Unfortunately, it contributed merely Revolutionary Organization 17 November to the value implying a coffee productivity per person within the sector. The expansion of industries did not attract enough manpower either.
Heavy population pressure
Another factor which contributes to the economic issues in India is population. Today, India is that the second majority-populated country within the world, the primary being China.
We have a high-level of birth rates and a falling level of death rates. So as to take care of a growing population, the administration must lookout of the essential requirements of food, clothing, shelter, medicine, schooling, etc. Hence, there's an increased economic burden on the country.
The existence of chronic unemployment and under-employment
The huge unemployed working population is another aspect which contributes to the economic issues in India. There's an abundance of labor in India which makes it difficult to supply gainful employment to the whole population.
Also, the deficiency of capital has led to the inadequate growth of the secondary and tertiary occupations. This has further contributed to chronic unemployment and under-employment in India.
With nearly half the working population involved in agriculture, the marginal product of an agricultural labourer has become negligible. The matter of the increasing number of educated-unemployed has added to the woes of the country too.
Slow improvement in Rate of Capital Formation
India always had a deficiency of capital. However, in recent years, India has experienced a slow but steady improvement in capital formation. We experienced a increase of 1.6 % during 2000-05 and needed to take a position around 6.4 you must offset the extra burden thanks to the increased population.
Therefore, India requires a gross capital formation of around Bastille Day to offset depreciation and maintain an equivalent level of living. The sole thanks to improve the quality of living is to extend the speed of gross capital formation.
Inequality in wealth distribution
As per to Oxfam’s ‘An economy for the 99 %’ report, 2017, the gap between the rich and therefore the poor within the world is large . Within the world, eight men own an equivalent wealth because the 3.6 billion people that form the poorest half humanity.
In India, merely I Chronicles of the population has 58 you look after the entire Indian wealth. Also, 57 billionaires have an equivalent amount of wealth because the bottom 70 you look after India. Inequal distribution of wealth is certainly one among the main economic issues in India.
Poor Quality of Human Capital
In the broader sense of the term, capital formation includes the utilization of any resource that enhances the capacity of production.
Therefore, the knowledge and training of the population may be a sort of capital. Hence, the expenditure on education, skill-training, research, and improvement in health are a neighborhood of human capital.
To give you a perspective, the United Nations Development Program (UNDP), ranks countries supported the Human Development Index (HDI). This is often supported the anticipation , education, and per-capita income. During this index, India ranked 130 out of 188 countries in 2014.
Low level of technology
New technologies are being developed a day . However, they're expensive and need people with a substantial amount of skill to use them in production.
Any new technology requires capital and trained and skilled personnel. Therefore, the deficiency of human capital and therefore the absence of skilled labor are major hurdles in spreading technology within the economy.
Another aspect that adds to the economic issues in India is that poor farmers cannot even buy essential things like improved seeds, fertilizers, and machines like tractors, investors, etc. Further, majority enterprises in India are micro or small. Hence, they can't afford modern and more productive technologies.
Absence of access to basic amenities
In 2011, as per to the Census of India, nearly 7 you look after India’s population lives in rural and slum areas. Also, only 46.6 % of households in India have access to beverage within their premises. Also, only 46.9 you look after households have toilet facilities within the household premises.
This results in the low efficiency of Indian workers. Also, dedicated and skilled healthcare personnel are required for the efficient and effective delivery of health services. However, ensuring that such professionals are available during a country like India may be a huge challenge.
Demographic characteristics
As per to the 2011 Census, India had a population density of 382 per square kilometer as against the planet population density of 41 per square kilometer.
Further, 29.5 it had been within the age bracket of 0-14 years, 62.5 you bored with the working age bracket of 15-59 years, and around V-E Day within the age bracket of 60 years and above. This proves that the dependency burden of our population is extremely high.
Under-utilization of natural resources
India is rich in natural resources like land, water, minerals, and power resources. However, thanks to problems like inaccessible regions, primitive technologies, and a shortage of capital, these resources are largely under-utilized. This contributes to the economic issues in India.
Absence of infrastructure
The absence of infrastructural facilities may be a significant issue affecting the Indian economy. These include transportation, communication, electricity generation, and distribution, banking and credit facilities, health and academic institutions, etc. Therefore, the potential of various regions of the country remains under-utilized.
1. Subject-Matter:
Today the state has emerged as an energetic participant in the process of economic development in many ways. The doctrine of laissez-faire in dead.
Now the govt has started participating increasingly within the productive activities and thru its monetary and fiscal policies are guiding the direction of economic activities. It also determines the distribution of products and services within the economy.
The process of development in case of developed countries was spread over a long period but under-developed countries today haven't any time to wait and it's essential for them to chop short the period do development. During this case the govt has a crucial role within the process of development.
These countries have remained stagnant and a positive government intervention is important to place them on the trail of the growth. So as to reduce the various rigidities inherent in an under-developed country, the state must play the strategic role.
According to UN Study Group,“In addition to the functions, governments normally perform, there's a large borderland of functions which they need to perform for the simple reason that they're important, and aren't administered sufficiently, by private effort. This borderland can exist in any country, but it's wider in under-developed countries, because private enterprise within the latter is more knowledgeable and more enterprising than within the former.”
In under-developed countries planning isn't limited to intervention but is considered a necessary condition for economic development. Since sources are scarce in under-developed countries, it becomes necessary to plan their distribution among various projects also as plan their utilization in these projects.
Thus the under-developed countries cannot escape planning if they need to develop themselves during a reasonably short span of time which means that time factor is very important.
The problems prevailing within the under-developed countries can't be solved by private enterprises and thus the state action is important for the economic development of those countries.
It controls over production, distribution, consumption of commodities and to perform this the govt has got to devise physical controls and monetary and fiscal measures and these measures are essential for reducing economic and social inequalities that are prevailing in under-developed countries.
“Breaking social chains, and creating a psychological, ideological, social and political situation propitious to economic development becomes the paramount duty of the state in such countries.”
The sphere of state action is extremely vast. It includes, “maintaining public services, influencing the utilization of resources, influencing the distribution of income, controlling the number of cash , controlling fluctuations, ensuring full employment and influencing the extent of investment.”
Thus the state has got to shoulder heavy responsibilities so as to make sure rapid economic development in under-developed countries. This task are often performed by two sorts of measures i.e. (A) Direct and (B) Indirect.
2. Forms of Measures:
(A) Direct Measures:
For the economic development of under-developed countries state has involved itself directly and performs certain vital functions which are enumerated below:
1. Organizational Changes:
The organizational changes play a vital role within the process of economic development. It includes the expansion of the scale of market and therefore the organization of labour market. The state can develop the means of transport and communications for expanding the size of market because private enterprise can't be capable of undertaking such schemes.
Moreover, the state can help the growth of agriculture and industries. The organization of the labour market also falls under the functions of state .
It increases the productivity of labour. The govt helps in organizing labour by recognizing labour unions. It fixes working hours, payment of wages, establishes machinery for the settlement of labour disputes, provides for social securities measures etc.
This establishes relation between the employers and employees which increases efficiency of labour which in turn increases the production and reduces the cost.
The majority of individuals , who live in rural areas are engaged in agricultural operations for a hard and fast period. They're not aware of the employment opportunities in towns and industrial centres. The govt can help them in getting jobs by opening information centres in rural areas. Thus the govt can help in the mobility of labour.
The problem of urbanization arises, when the development labour moves from rural to urban areas and it's solved by the govt . Such problems relate to housing, beverage supply, electricity, slums, transport etc.
2. Social and Economic Overheads:
The main obstacle within the way of economic development of under-developed countries is that the lack of economic overheads like means of communications and transportations, ports, electricity irrigation etc. In industrially advanced countries, these facilities are provided by private enterprises.
But in under-developed countries the private enterprises aren't interested to take a position because the return isn't fruitful and, moreover, such huge investments are beyond the capacity of personal sector.
Besides this, there's dearth of entrepreneurial ability in under-developed countries and therefore the entrepreneurs prefer to invest in trade, housing, gold, jewellery etc. where the speed of return is extremely high. Thus, it becomes the responsibility of state to supply these economic overheads within the under-developed countries.
It must also provide the education and training facilities and health services to accelerate the pace of economic development. Prof. Meier and Baldwin observes that the expansion of educational facilities and public health measures in under-developed countries reduces the obstacle to development.
3. Education:
Education plays an important role within the process of economic development.
According to Myrdal, “To start on a national development programme, while leaving the population largely illiterate seems to be futile. The educational facilities provided in under-developed countries increase their geographic and occupational mobility, raising their productivity and facilitating innovations. The standard of labour is extremely important for economic growth.”
Unskilled workers even working for long hours end in low per capita income. It's through public education that the state can increase the effective labour supply and hence their productivity. There should be free and compulsory provision of primary education and therefore the schools of education should be opened.
Various training institutions should be opened to provide training to mechanics, electricians, artisans, nurses, teachers, etc.
Thus “Programme of education at the base of the effort to forge the bonds of common citizenship to harness the energies of the people and develop the nation and human resources of every a part of the country.” Education is both a consumer and an investment service. Prof. Galbraith regards that investment in educating each and each man is directly productive.
He argues that, to rescue farmers and workers from illiteracy may certainly be a goal in itself, but it's also a primary indispensable step to any sort of agricultural progress. Education so viewed, becomes a highly productive sort of investment.
He further concludes that, “something is both a consumer service and a source of productive capital for the society doesn't detract from its importance as an investment. Rather, it enhances that importance.” Thus education is that the focal point of development.
4. Public Health and Family Planning:
The development and maintenance of public health services are important functions to be performed by the govt . It's necessary that the health of people should be maintained to extend the efficiency and productivity of labour.
Public health measures generally include the improvement of environmental sanitation in both rural and concrete areas, removal of Stagnant and polluted water, better disposal of sewage, control of communicable diseases, provision for medical and health services particularly within the field of maternity and child welfare, health and family planning education and the training of health and medical personnel and all this needs planned efforts on the part of public authorities.
Public health assumes greater significance in under-developed countries for its capacity to enhance the composition of labour and lift its efficiency. But all the event efforts will be futile, if the expansion of population isn't checked.
Meier and Baldwin observe that the general public health measures affect economic development in both ways.
They facilitate development by improving the qualitative composition of labour force. At an equivalent time, they create need for development all the more urgent by increasing the size of population. Improvement in health will decline in death rate which in turn increases the population and it's adverse effect on economic process .
The problem of poverty in under-developed countries can't be checked, unless the rapid increase in population in checked. In highly advanced countries there's got to reduce the fertility rates. For this birth control clinics should be opened in rural areas, in industrial end other backward areas. There should be incentives to encourage parents to possess fewer children.
More emphasis should be laid on removing barriers to birth control, raising the marriageable age etc. the matter of population explosion are often avoided in under-developed countries if the family planning programme is adopted on governmental scale.
To include, Lewis quotes, One must put all the ingredients into this pie, to convert social leaders into seeing the risks of a high birth rate, in order that the taboos and religious sanctions turn against it, rather than favouring it; to boost standards to living and education rapidly, in order that women find it convenient to possess fewer children and to form widespread propaganda about birth control techniques.
Action is required on all fronts simultaneously.
5. Changes in Institutional Frame Work:
Economic development cannot happen in static institutional frame work. The rigid institutional frame work may be a positive hindrance within the path of development in UDC. Prof. Paul Streeten has rightly observed that, “The difference between economic growth in advanced countries… and development in so called developing countries is that within the former attitudes and institutions are by and enormous , adopted to a change and therefore the society has innovations and progress built into the system, while into the latter attitudes and institutions and even policies are stubborn obstacles to development.”
The people of a rustic must desire progress and their social, economic, legal and political institutions must be favourable thereto but in UDC these conditions are largely absent and there's an excellent need of social and cultural revolution. UNO has rightly observed that, “the people of a rustic must desire progress and their social economic, legal and political institutions must be favourable thereto .”
These conditions are largely absent in under-developed countries and in many of them a social and Cultural Revolution is needed. A United Nations Report observes during this connection that, “there may be a sense during which rapid economic progress is impossible without painful adjustments.
Ancient philosophies need to be scrapped, old social institutions need to disintegrate, bonds of caste, creed and race need to be burst and enormous number of persons, who cannot continue with progress, need to have their expectations of a cushty life frustrated.”
Economic change isn't caused by institutional changes alone. It's caused by both economic and non-economic factors. Thus, there must be an off-the-cuff relationship between economic and the institutional changes or these changes could also be independent of every other.
The government plays a vital role in changing the institutional structure in developing countries and creating conditions for evolution of latest institutions. “New inventions may create new commodities or reduce the costs of manufacturing old commodities.
New roads, new shipping routes or other improvements in communications may open up new opportunities for trade. War or inflation may create new demands. Foreigners may arrive within the country, bringing new trades, investing new capital or offering new changes of employment.”
Such new opportunities cause changes in institution. The institutional changes are often led by the state within the sort of land reforms, improvement within the laws of inheritance, regulation and control of monopolies, regulation for the control of money market, improvement within the distribution system etc.
According to Lewis, “Every government has got to take an attitude on such questions as whether it favours large or small scale enterprise, competition or monopoly, private entrepreneurship, co-operatives or public co-operation and whether its attitude is to be backed by legislation and by administrative action. Additionally to helping the evolution of suitable economic institutions, the govt also can do tons in moulding the social and political institutions of a rustic .”
6. Stepping up Rate of Investment:
The process of development is accelerated by increasing the speed of investment. The speed of savings in UDC is very inadequate as compared to their investment requirements. Thus, it becomes essential for state to accelerate the speed of capital formation in these countries and therefore the government are able to do this through taxation or inflation.
The socialist economies have also been ready to save and invest a really high percentage of their national income due to their government’s active role within the field of capital formation.
7. Agricultural Development:
In UDC majority of people depend on agriculture for their livelihood. Lack of irrigation and credit facilities are main hurdles within the way of economic development. If the agriculture remains backward, the opposite sectors of the economy cannot develop because agriculture is that the basic industry and the other industries depend on it for staple .
Shriman Narayan has given the subsequent main elements within the preparation of agricultural production plans at the village level:
(i) Full utilization of irrigation facilities, including maintenance of field channels in good conditions for the beneficiaries, repairs and maintenance of community irrigation works;
(ii) Increase within the area under multiple cropping;
(iii) Multiplication within the village of improved seed and its distribution to all cultivators;
(iv) Supply of fertilizers;
(v) Programmes for compost and green manure ;
(vi) Adoption of improved agricultural practices e.g., soil conservation, contour bonding, dry farming, drainages, land reclamation, plant protection etc.;
(vii) Programmes for new minor irrigation works to be undertaken within the village, both through community participation and on a private basis;
(viii) Programme for the introduction of improved agricultural implements;
(ix) Programme for development of poultry, fish and dairy products;
(x) Programme for increasing production of vegetables and fruits;
(xi) animal husbandry e.g., supply of stud bulls, establishment of AI centres and castration of scrub bulls etc. and
(xii) Programme for the event of the village fuel plantations and pastures.
The success of the agricultural development programmes depends upon reform measures taken by the govt .
The main objectives of reform measures consistent with IPC are twofold:
(i) to get rid of such impediments to extend in agricultural productivity as arise from the agrarian structure inherited from the past. This could help to make conditions for evolving as speedily as possible an agricultural economy with high levels of efficiency and productivity and
(ii) To eliminate all elements of exploitation and social injustice within the agrarian system, to supply security for the tiller and assure equality of status and opportunity to all or any sections of all rural population.
Land reforms measures include:
(1) Abolition of intermediaries;
(2) Security of tenure as tenants;
(3) Right to buy land which tenants cultivate;
(4) Compensation for permanent improvements made onto land by tenants;
(5) To limit the rent charged by landowners;
(6) Fixation of ceilings on agricultural holdings; and
(7) Consolidation of holdings.
Thus the agrarian policy of state consists of organisation of agriculture on co-operative lines, provisions of irrigation and credit facilities, establishment of subsidiary industries etc.
8. Industrial Development:
In LDC, the natural resources are under- developed or less developed. This is because of the very fact that these countries remained under the colonial rule for an extended period and their natural resources were mercilessly exploited for their selfish ends. After attaining their freedom there was no logic to go away the event of those resources within the hands of foreign dominating countries.
Furthermore, these poor countries lack in basic and key industries like iron, steel, cement, heavy engineering etc. the very fact is that these industries required heavy capital investment, technical knowledge. These basic amenities are beyond the reach of personal investors in these countries. In addition to the present , private entrepreneur is completely reluctant to enter in these areas of production.
Therefore, it becomes the prime duty to start out basic and key industries to boost the economic development of the country. Again these big industries need long gestation period. On the opposite hand no doubt these countries have some basic consumers goods industries are primitive and superstitious.
Few manufactures control the whole economic structure and industries are confined during a few big cities while remainder of the country remains backward facing variety of problems.
It is therefore the urgent need of the hour is that the state should come to the fore and take measures to formulate and implement a judicious industrial policy. This industrial policy should specialise in decentralisation of industries which can spread everywhere the country with none political interference.
A policy should be framed to promote exports which can substitute import which in turn are going to be helpful for rapid economic development. Special measures should be taken to establish cottage and little scale industries in rural areas in order that the local resources may be used. It must provide larger opportunities of employment to the rural folks.
In addition to the present state should try and prevent the emergence of monopolistic organisations and concentration of wealth in few pockets. The state can go a long way within the growth of personal industries by importing capital equipment machinery and technical knowhow and even raw materials.
It should also provide various facilities and concessions for the promotion of basic and key industries. They will provide cheap credit facilities, tax rebate, cheap power, water, transport facilities etc., specially to those that are engaged for consumer goods industries for domestic consumption.
1. Low Level of Income:
Underdeveloped countries are maintaining a very low level of income in comparison thereto of developed countries. The per capita incomes of those groups of countries are extremely low if we compare it with that of developed countries. Moreover, inequality in the distribution of income along side this low level of income worsens things in these economies to a disastrous level.
2. Mass Poverty:
Existence of chronic mass poverty is another characteristic of underdeveloped economies. This problem of poverty arises undue to any temporary economic maladjustment but arises mainly because of existence of orthodox methods of production and social institutions. The degree of poverty in these economies gradually increases because of increase in its size of population, growing inequality in income and increasing price level.
Nearly 76.8 per cent of the world populations live in those underdeveloped or developing countries of the planet , enjoying only 15.6 per cent of total world GNP.’ Iii these countries, majority of the population live below the poverty level .
3. Lack of Capital Formation:
Developing or underdeveloped countries of the world are affected by poor rate of capital formation. Because the level of per capita income in these countries is extremely low thus their volume and rate of savings also are very poor. This has resulted lack of capital formation and which is again responsible for low rate of investment in these countries.
As for example, the speed of investment in countries like India and Pakistan is less than even 10 per cent but, on the opposite hand, an equivalent rate is ranging between 15 to 30 per cent in developed countries like U.S.A., Canada etc. Thus this poor rate of capital formation is one among the main obstacles towards the trail of development of those underdeveloped countries of the world.
4. Heavy Population Pressure:
The underdeveloped countries also are characterised by heavy population pressure. The natural rate of growth of population in these countries is very high because of its prevailing high birth rate and falling death rate. This excessive population pressure has been creating the problem of low standard of living and reduction within the average size of holding.
This has also resulted in low rate of capital formation in these countries. The population in these countries is increasing by 2 to 3 per cent every year which has created various problems like scarcity of agricultural land, small size of holding, problem of unemployment, food crisis, poverty etc.
5. Agricultural Backwardness:
The underdeveloped countries also are affected by agricultural backwardness. Although being the foremost important sector, agricultural sector in these countries remains totally underdeveloped. But what's more peculiar is that these countries are depending too much on this agricultural sector.
Nearly 60 to 70 per cent of the entire population of those countries is counting on agriculture and about 30 to 40 per cent of the entire GNP of those countries is generated from agricultural production. Agricultural productivity in these countries remained still very poor in spite of its great importance.
In these underdeveloped countries, agriculturists are still following traditional methods and are applying modernised techniques on a really limited scale.
6. Unemployment Problem:
Excessive population pressure and lack of other occupations have resulted in huge unemployment and underemployment problem in these underdeveloped countries. Within the absence of growth of other occupations both within the secondary and tertiary sector of those countries, this increasing number of population is being thrown on land to eke out their living from agricultural sector.
This sort of accelerating dependence on agricultural sector results in disguised unemployment or under-employment in these economies to a large scale. Moreover, problem of educated unemployment in these economies is additionally increasing gradually day by day thanks to lack of industrial development.
7. Unexploited Natural Resources:
For maintaining a rapid pace of economic growth in these underdeveloped countries, possession of various sorts of natural resources in sufficient quantity and its utilisation are vital . But under-developed countries are either affected by scarcity of raw materials or from un-exploited natural resources of its own.
If we look at the endowment position of those countries then we will see that a number of the underdeveloped countries are having natural resources like land, water, minerals, forest etc. in sufficient quantity but these resources remain largely under-utilized or maybe untapped thanks to various difficulties faced by these countries.
These difficulties include inaccessibility of the region, shortage of capital, lack of proper attention, primitive technology, transport bottlenecks and little extent of the market. Thus by utilising its natural resources, underdeveloped countries can develop their economies with minimum initiative of their own.
8. Shortage of Technology and Skills:
Underdeveloped countries face low level of technology and acute shortage of skilled manpower’s. Poor technology and lower skills are liable for inefficient and insufficient production which results in poverty of masses. The pace of economic growth in these countries is extremely slow thanks to application of poor technologies.
But the appliance of modern sophisticated technology both in agricultural and industrial sector is of utmost need in these countries. This needs sufficient amount of capital, technological advancement and training.
9. Lack of Infrastructural Development:
Lack of infrastructural development may be a common feature of underdeveloped countries. In respect of transportation, communication, generation and distribution of electricity, credit facilities, social overheads etc. these countries are significantly backward than most of the developed countries. Thus because of inadequate infrastructural facilities, the pace of economic development in these countries are very slow.
10. Lack of Industrialization:
Underdeveloped countries are characterized by lack of industrial development. The pace of industrialisation in these countries is extremely slow thanks to lack of capital formation, paucity within the supply of machinery and tools and also because of lack of initiative and enterprise on the a part of people of those countries.
In spite of getting huge potential for industrial development, these countries couldn't develop the industrial sector on a sound footing. Moreover, whatever industrial development that has been achieved by these countries are considerably restricted only to some limited areas.
11. Lack of Proper Market:
Underdeveloped countries also are affected by lack of properly developed market. Whatever market these countries have developed, these are affected by number of limitations viz. Lack of market information, lack of diversification, lack of proper relation or connection between markets, lack of adequate demand etc.
12. Mass Illiteracy:
Underdeveloped countries are mostly characterised by the existence of mass illiteracy. Thanks to illiteracy the people in these countries are considerably superstitious and conservative which is again responsible for lack of initiative and enterprise on the a part of people of those countries.
13. Poor Socio-Economic Condition:
Underdeveloped countries also are affected by totally poor socio-economic conditions. The trail of economic development in these countries is being obstructed by various socio-economic factors like-joint family system, universal marriage, costly social customs and therefore the law of inheritance.
14. Inefficient Administrative Set Up:
Underdeveloped countries also are suffering from its existing inefficient administrative set up. Within the absence of efficient and sound administrative found out , these countries are affected by lack of proper economic organisation, lack of investments and lack of appropriate decisions resulting in total mismanagement of those economies.
OBSTACLES TO ECONOMIC DEVELOPMENT IN INDIA
The basic obstacles acknowledged by A.R. Desai (1959:130) are:
(a) The social and institutional framework and values inherited from the past (i.e., caste system); and
(b) Persistence of backward kinds of loyalties.
The caste system though has been theoretically and juridical abolished by the Constitution of India, yet its significance in reality, its influence on the economic development, its effect upon the patterns of property relations and patterns of consumption, and its impress upon the configurations of power structure within the economic, political, social and cultural fields are still not properly comprehended and hence gravely underestimated.
Caste prevents mobility of individuals so essential for dynamic economic development. It prevents certain groups from taking to certain vocations, certain patterns of economic behaviour, and certain sorts of consumption.
It has been found that the majority of the controlling positions in economy, administration and cultural pursuits are monopolised by a couple of castes everywhere India. In fact, many castes control the destiny of most people of the country, resulting in caste and regional tensions and social unrest. This unrest becomes the explanation for and keeps alive a bitter competitive struggle among the privileged groups themselves also as between them and therefore the underprivileged groups. This features a detrimental effect on the development of a healthy economy .
Besides caste (which inhibits occupational and social mobility), some important barriers in economic development of India are identified as joint family system, communalism, regionalism and linguism. It's also come to be accepted that changes within the caste system have made development possible. Since Gunnar Myrdal had not given importance to changes in social institutions like caste, family, etc., as also to their functional aspects within the analysis of development, his analysis of economic development has been described as negative, patchy and disjointed.
Another sociological implication is that the persistence of backward sorts of loyalties resulting into factionalism and division of the Indian people into groups with petty egos, to the detriment of the expansion of a highly developed national consciousness.
Some sorts of loyalties that considerably persist (besides the caste loyalty) in India are kinship loyalties, regional identifications and non secular attachment. These divisions tend to inhibit the development of a sense of unity within the society and of identify among its members. The normative pressure rooted in such an environment profoundly affects the conduct of the individual in external situations and relations.
A. R. Desai further holds that this parochial mentality, along side the old outmoded institutions, obstructs the right economic development during a number of ways:
(i) It results in nepotism;
(ii) It results into the expansion of the harmful practices of unproductive investment patterns and wrong consumption patterns;
(iii) It generates distorted attitudes to work, efficiency, vocations and allocation of resources; and
(iv) It obstructs the expansion of these mores and sanctions which are basic to a developing economy in times , namely, mores and sanctions founded on law, respect for personality, concept of equal citizenship, etc.
The barriers to economic development in India as given by Yogendra Singh (1973) are:
(i) Transcendence (according to which legitimation of traditional values can't be challenged);
(ii) Holism (according to which the relation between individual and society (or group) is such individual subordinates his rights and aspirations thereto of society’s welfare; it also means precedence to collectivity over the individual);
(iii) Hierarchy (stratification in caste occupation and social status); and
(iv) Continuity (belief in rebirth and karma, etc.).
Stages in Economic Development:
Rostow has stated five stages within the economic development. These are:
(i) Traditional society,
(ii) Preconditions for takeoff,
(iii) The lake off,
(iv) The drive to technological maturity, and
(v) Age of high mass consumption.
A traditional society is essentially agricultural. Its members are fatalistic, superstitious and unaware of the world outside their community. The units of loyalty in such a society are family, village, caste or ethnos . Traditional (peasant) communities aren't self-sufficient but dependent on towns for markets, and for religion, philosophy and even government, as leadership is poorly developed within the communities.
The decisions for the peasants are made up of the outside. Often they are doing not even skills or why these decisions are made. Try though they could , they'll have no part within the making of those basic decisions which affect them from the surface . This produces not only a fatalistic outlook towards life but also a suspicion of outsiders and a wariness of latest ideas.
The distrust of the surface world doesn't unite them with their neighbours. The extended family draws together to defend itself against the dishonesty of its neighbours. This is often one segment of unity with the normal society. Production within the traditional society is limited because of limited resources, especially land.
Then comes the method of gradual transition. During this stage, the preconditions for take-off are developed. Generally, these pre-conditions arise from external intrusion by a complicated society. These intrusions stimulate new ideas and feelings and people begin to believe that economic progress is nice also as possible. Some people choose education, some leaders emerge, and a few new areas of investments like trade and commerce appear.
All this happens slowly because conventional social structures and old values are difficult to vary . Before the transition in institutions and values happen, certain prerequisites of social change and economic growth must be present. These are: an awareness of purpose, an eye fixed to the future, a sense of urgency, the necessity for sort of opportunities and roles, an intellectual appreciation of and an emotional preparedness for self-imposed tasks and sacrifices, and therefore the emergence of a dynamic leadership.
In the take-off stage, resistances to steady growth are overcome and growth becomes a traditional condition. There's accumulation of capital, technological development in industry and agriculture, and therefore the emergence of a political group which takes up the modernisation of the economy as a significant business. New industries expand rapidly and profits are reinvested to yield more expansion. The amount of workers increases then do their wages.
A long interval of sustained growth follows the take-off. During this interval, there's a drive to spread modern technology through an economic activity. New industries accelerate their rate of expansion and production. a crucial aspect of the drive to maturity is that goods formerly imported are now produced at home. Maturity is typically reached forty years after the take-off.
In the age of high mass consumption, there's a shift towards durable consumers’ goods and services. America has emerged from this stage while Western Europe and Japan are beginning to experience its joys. Since no country has developed beyond this stage, it's impossible to mention what subsequent stage will be.
MEASURES OF ECONOMIC DEVELOPMENT
1. Rise in Real per Capita Income
One of the factors that measure the economic development of a nation is that the rise in real per capita income.
There’s a perception that whenever the income of individual increases than it’s real income increases.
And when this happens the person is happy and prosperous. But there are some limitations to the present .
These limitations through per capita income don't determine whether the increase is thanks to equal distribution or unequal distribution.
Same is that the case with the quality of goods and services being provided and consumed. Further, the standard of public goods also affects economic welfare.
2. Quality of Life and Expectancy
When the essential facilities like water, electricity, and housing are available to anyone that the standard of life is taken into account as good in that nation.
Here the measuring factor is that the needs of the people. These needs are basic needs like access to health, sanitation, education, nutrition, etc.
For this, the most factor is that the infant deathrate rate. This is often the death rate of a child who is less than a year old. While life expectancy is that the average life of the population that lives.
3. Real Gross National Product
As mentioned above, GNP, also as GDP, are the measuring factors for economic development of a nation. Increase in both of those ensures that the larger availability of the good and services therein country. If this supports the quality of living of the people than it increases the economic conditions of the nation.
But there are some limitations to the present also . Like the increase within the size of GDP doesn't directly means the more availability of services and goods.
Whenever the GDP is calculated for the present prices, there could also be an increase because of price rise. This doesn't mean the supply of goods and services have increased.
4. Human Development Index
It includes several factors like long and healthy living, the welfare of the people, etc. This index also includes the quality of living of individuals , literacy rate, and purchasing power parity in terms of real income.
5. Gender-related development index
This is popularly referred to as GDI. This is often used to measure gender inequalities by measuring three basic dimensions of human development. They're education, health, and economic resources.
They measure education by calculating expectancy years for schooling for males and females. While health measures the male and female life expectancy during the time of birth.
While economic resources are the command over them is measured by income earned by males also as females. This index is beneficial to show the inequality between male and female within the above-mentioned dimensions.
6. Poverty Index
The poverty index which is otherwise called multidimensional poverty index aka MPI helps in identifying various factors. These various factors are health, the quality of living, and education.
For this index, the microdata which is available from surveys is employed . This data is collected on the idea of deprivation of loo , water, cooking fuel, assets, etc. based on the availability of those factors everyone is termed as poor and nonpoor.
The indicators are decided on this basis. For education, they consider two factors, school attainment, and faculty attendance. School attainment is to work out when no member of the family has attended at least 6 years of schooling.
While school attendance is determined when the child is of the school age isn't attending the school. Similarly, for health, the factors are child mortality and health.
While for the standard of living the factors are drinking water, electricity, sanitation, and cooking fuel.
PHYSICAL AND ECONOMIC FACTORS:
Economic environment is functioning as a vital determinant of economic development of a country. Economic environment can determine the pace of economic development also because the rate of growth of the economy. This economic environment is influenced by the economic factors like— population and manpower resources, natural resources and its utilization, capital formation and accumulation, capital output ratio, occupational structure, external resources, extent of the market, investing pattern, technological advancement, development planning, infrastructural facilities, suitable industrial relations etc.
1. Population and Manpower Resources:
Population is taken into account as a vital determinant of economic growth. In this respect population is working both as a stimulant and hurdles to economic growth. Firstly, population provides labour and entrepreneurship as a crucial factor service.
Natural resources of the country are often properly exploited with manpower resources. With proper human capital formation, increasing mobility and division of labour, manpower resources can provide useful support to economic development.
On the opposite hand, higher rate of growth of population increases demand for goods and services as a way of consumption resulting in increasing consumption requirements, lesser balance for investment and export, lesser capital formation, adverse balance of trade, increasing demand for social and economic infrastructural facilities and higher unemployment problem.
Accordingly, higher rate of population growth can put serious hurdles on the trail of economic development. Moreover, growth of population at a better rate usually eats up all the advantages of economic development resulting in a slow growth of per capita income because it is seen just in case of India.
But it's also been argued by some modern economists that with the growing momentum of economic development, standard of living of the general masses increases which might ultimately create a far better environment for the control of increase .
Moreover, Easterlin argued that population pressure may favourably affect individual motivation and this might again cause changes in production techniques. Thus whether growing population during a country practically retards economic process or contributes thereto that solely depends on the prevailing situation and balance of varied other factors determining the expansion in an economy.
2. Natural Resources and Its Utilization:
Availability of natural resources and its proper utilization are considered as a crucial determinant of economic development. If the countries are rich in natural resources and adopted modern technology for its utilization, then they will attain higher level of development at a quicker pace. Mere possession of natural resources cannot work as a determinant of economic development.
In spite of getting huge sort of natural resources, countries of Asia and Africa couldn't attain a better level of development because of lack of its proper utilization. But countries like Britain and France have modernized their agriculture in spite of shortage of land and therefore the country like Japan has developed a solid industrial base despite its deficiency in natural resources. Similarly, Britain has developed its industrial sector by importing some minerals and raw materials from abroad.
However, an economy having deficiency in natural resources is forced to depend upon foreign country for the availability of minerals and other raw materials so as to run its industry. Thus last it are often observed that availability of natural resources and its proper utilization remains working as a crucial determinant of economic process . As India has sufficient natural resources, thus it's helped the country to take care of economic environment for attaining development.
3. Capital Formation and Capital Accumulation:
Capital formation and capital accumulation are playing a vital role within the process of economic development of the country. Here capital means the stock of physical reproducible factors required for production.
The increase within the volume of capital formation results in capital accumulation. Thus it's quite important to boost the speed of capital formation so on accumulate an outsized stock of machines, tools and equipment by the community for gearing up production.
In an economy, capital accumulation can help to achieve faster economic development within the following manner:
(a) Capital plays a diversified role in raising the quantity of national output through changes within the scale or technology of production.
(b) Capital accumulation is sort of essential to provide necessary tools and inputs for raising the quantity of production and also to extend employment opportunities for the growing number of labour force.
(c) Increase in capital accumulation at a faster rate results increased supply of tools and machinery per worker.
Various developed countries like Japan are ready to attain higher rate of capital formation to trigger rapid economic process . Normally, the speed of capital formation in under-developed countries like India is extremely poor.
Therefore, they need to take proper steps, viz., introduction of compulsory deposit schemes, curtailing the consumption , putting curbs on imports of consumption goods, inflow of foreign capital etc. so as to attain a rapid economic process , the speed of domestic savings and investment must be raised to twenty per cent.
Naturally, within the initial period, it's impossible to intensify the rate of capital formation at the specified rate by domestic savings alone. Initially, to step up the speed of investment within the economy, inflow of foreign capital to some extent is vital .
But with the gradual growth of domestic savings within the subsequent years of development, the dependence on foreign capital must gradually be diminished. Being a technologically backward country, India has decided to allow foreign direct investment so as to imbibe advanced technology for attaining international competitiveness under this world trade and industrial scenario.
