Indian Economy

1. I O N O M Y
C H A P T E R
j r
INDIA AS A
EVELOPING
ECONOMY
An underdeveloped economy is
characterised, by the existence, in
greater or less degree, of unutilised
«r underutilised manpower on the
handandofunexploited natural
msources on the other. This state
of affairs may be due to stagnancy of
techniques or to certain inhibiting
soico-economic factors which
prevent the more dynamic forces in
economy from asserting themselves.
- T h e F i r s t F i v e - Y e a r P l a n
1. M E A N I N G O F A N
U N D E R D E V E L O P E D E C O N O M Y
T h e r e i s n o d o u b t that t h e d i s t i n c t i o n b e t w e e n u n d e r d e -
v e l o p e d a n d d e v e l o p e d c o u n t r i e s i s rather l o o s e a n d also
a r b i t r a r y t o a c e r t a i n extent. T h e U n i t e d N a t i o n s g r o u p o f
experts states, " W e h a v e h a d s o m e d i f f i c u l t y i n i n t e r p r e t i n g
the t e r m ' u n d e r d e v e l o p e d countries'. W e u s e i t t o m e a n c o u n -
tries i n w h i c h p e r capita real i n c o m e i s l o w w h e n c o m p a r e d
w i t h t h e p e r capita r e a l i n c o m e s o f t h e U n i t e d States o f
A m e r i c a , C a n a d a , A u s t r a l i a a n d W e s t e r n E u r o p e . I n t h i s
sense, a n adequate s y n o n y m w o u l d b e p o o r c o u n t r i e s " . '
U . N . c l a s s i f i c a t i o n
T h e t e r m ' u n d e r d e v e l o p e d c o u n t r i e s ' i s r e l a t i v e . I n
g e n e r a l , those c o u n t r i e s w h i c h h a v e r e a l p e r capita i n c o m e s
less t h a n a quarter o f t h e p e r capita i n c o m e o f t h e U n i t e d
States, a r e u n d e r d e v e l o p e d c o u n t r i e s . M o r e r e c e n t l y , instead
o f r e f e r r i n g t o these e c o n o m i e s as u n d e r d e v e l o p e d , t h e U N
p u b l i c a t i o n s p r e f e r t o d e s c r i b e t h e m a s ' d e v e l o p i n g
e c o n o m i e s ' . T h e t e r m ' d e v e l o p i n g e c o n o m i e s ' s i g n i f i e s that
t h o u g h still u n d e r d e v e l o p e d , t h e process o f d e v e l o p m e n t
has been i n i t i a t e d i n these countries. T h u s , w e h a v e ' d e v e l o p i n g
e c o n o m i e s ' a n d ' d e v e l o p e d e c o n o m i e s ' .
T h e W o r l d B a n k i n its W o r l d Development Report ( 2 0 1 0 )
c l a s s i f i e d t h e v a r i o u s c o u n t r i e s o n t h e basis o f G r o s s
N a t i o n a l I n c o m e ( G N I ) p e r capita. ( T a b l e 1 o n p . 4 . )
D e v e l o p i n g c o u n t r i e s a r e d i v i d e d i n t o : ( a ) Low income
countries w i t h 2 0 0 9 G N I p e r capita o f $ 9 3 6 a n d b e l o w ; a n d
M i d d l e income countries w i t h G N I p e r capita r a n g i n g
b e t w e e n $ 9 3 6 a n d $ 11,455. A s against t h e m , the H i g h -
income Countries w h i c h are m o s t l y m e m b e r s o f the O r g a n i s a t i o n
for E c o n o m i c C o - o p e r a t i o n and D e v e l o p m e n t ( O E C D ) and s o m e
others h a v e G N I p e r capita o f $ 11,456 o r m o r e .
T w o sub-categories o f m i d d l e i n c o m e c o u n t r i e s are l o w e r -
m i d d l e i n c o m e w i t h p e r capita i n c o m e i n t h e r a n g e o f $ 9 0 6
t o $ 3,705 a n d u p p e r m i d d l e i n c o m e c o u n t r i e s w i t h p e r capita
i n c o m e $ 3 , 7 0 6 t o $ 1 1 , 4 5 5 .
F r o m t h e data g i v e n i n table 1 , i t m a y b e n o t e d that i n
2 0 1 0 l o w i n c o m e c o u n t r i e s c o m p r i s e n e a r l y 11.6 p e r cent o f
the w o r l d p o p u l a t i o n ( 7 9 6 m i l l i o n ) , but a c c o u n t f o r o n l y 0 . 6 7
per cent o f total w o r l d G N I . T h e m i d d l e i n c o m e c o u n t r i e s ,
w h i c h are less d e v e l o p e d t h a n the h i g h l y d e v e l o p e d c o u n t r i e s ,
but c o m p a r a t i v e l y s p e a k i n g , m o r e d e v e l o p e d t h a n t h e l o w
1. U n i t e d N a t i o n s , Measures for the Economic Development of
Underdeveloped Countries, 1 9 5 1 , p . 3 .
3

2. I N D I A A S A D E V E L O P I N G E C O N O M Y
T a b l e 1: D i s t r i b u t i o n o f W o r l d P o p u l a t i o n a n d W o r l d G N I a m o n g V a r i o u s G r o u p s o f C o u n t r i e s (2010)
Country/Group
Population GNI
Exchange Rate Basis
Million Billion
VS$
GNI
PPP Basis
Billion
US$
Per Capita GNI
Exchange
Rate basis $
PPP basis
US$
1. L o w I n c o m e
2. M i d d l e I n c o m e
(a) L o w e r M i d d l e I n c o m e
(b) U p p e r M i d d l e I n c o m e
3. H i g h I n c o m e
4 . W o r l d
C h i n a
I n d i a
7 9 6
4 , 9 7 0
2 , 5 1 8
2 , 4 5 2
1,127
6,894
1,338
1,170
1 1 . 6
7 2 . 1
3 6 . 5
3 5 . 6
16.3
100.0
19.4
17.0
4 2 1
1 8 , 5 2 9
4 , 0 8 7
1 4 , 4 3 3
4 3 , 6 8 3
62,541
5,720
1,553
.67
2 9 . 6
6.53
2 3 . 0
6 9 . 8
100.0
9.1
2.5
1,039
3 3 , 6 5 6
9 , 1 6 0
2 4 , 4 9 6
4 2 , 0 7 3
76,313
10,221
4,159
1.4
4 4 . 1
12.0
3 2 . 1
5 5 . 1
100.0
13.4
5.5
5 2 9
3 , 7 2 6
1,622
5 , 8 8 6
3 8 , 7 4 5
9,071
4,270
1,270
1,305
6 , 7 5 0
3 , 6 3 7
9 , 9 7 1
3 7 , 3 1 8
11,068
7,640
3,400
W o r l d T o t a l G N I figures d o n o t a d d u p t o t h e v a r i o u s c o m p o n e n t s ,
b y W o r l d B a n k .
S o u r c e : W o r l d B a n k ( 2 0 1 1 ) , World Development Report (2011).
i n c o m e c o u n t r i e s c o m p r i s e 7 2 . 1 p e r cent o f w o r l d
p o p u l a t i o n b u t a c c o u n t f o r 2 9 . 6 p e r cent o f w o r l d
G N I . T a k i n g these t w o g r o u p s w h i c h are p o p u l a r l y
described as d e v e l o p i n g e c o n o m i e s , i t m a y b e
stated that t h e y c o m p r i s e a b o u t 8 3 . 7 p e r cent o f t h e
w o r l d p o p u l a t i o n b u t a c c o u n t f o r about 3 0 . 3 p e r cent
o f t h e w o r l d G N I . M o s t c o u n t r i e s o f A s i a , A f r i c a ,
L a t i n A m e r i c a a n d s o m e c o u n t r i e s o f E u r o p e a r e
i n c l u d e d i n t h e m .
A s against t h e m , H i g h I n c o m e e c o n o m i e s w h i c h
c o m p r i s e o n l y a b o u t 16.3 p e r cent o f w o r l d p o p u l a t i o n
a c c o u n t f o r 6 9 . 7 p e r cent o f w o r l d G N I . I n o t h e r
w o r d s , b u l k o f t h e p o o r p e o p l e reside i n t h e l o w
i n c o m e a n d m i d d l e i n c o m e d e v e l o p i n g countries. T h e y ,
to q u o t e A . K . C a i r n c r o s s , c o n s t i t u t e t h e s l u m s o f t h e
w o r l d e c o n o m y .
I n d i a w i t h i t s p o p u l a t i o n o f 1,170 m i l l i o n i n
2 0 1 0 a n d w i t h its p e r capita i n c o m e o f 1 1 8 0 i s a m o n g
the poorest o f t h e e c o n o m i e s o f t h e w o r l d . I t h a d a
share o f 1 7 . 0 p e r cent i n w o r l d p o p u l a t i o n , b u t ac-
counts f o r o n l y 2 . 5 p e r cent o f W o r l d G N I o n e x c h a n g e
rate basis.
T h e figures q u o t e d a b o v e a r e o n e x c h a n g e rate
basis. T h e u s e o f official e x c h a n g e rates t o c o n v e r t
n a t i o n a l c u r r e n c y figures t o t h e U S dollars does n o t
a t t e m p t t o m e a s u r e t h e r e l a t i v e d o m e s t i c p u r c h a s i n g
p o w e r o f currencies. F o l l o w i n g t h e W o r k L B . K r a v i s
and others I n t e r n a t i o n a l C o m p a r i s o n s o f R e a l P r o d u c t
a n d P u r c h a s i n g P o w e r ( 1 9 7 8 ) , t h e U n i t e d N a t i o n s I n -
ternational C o m p a r i s o n P r o g r a m ( I C P ) h a s d e v e l o p e d
measures o f r e a l G D P a n d G N P ( o r G N I ) o n a n inter-
n a t i o n a l l y c o m p a r a b l e scale u s i n g p u r c h a s i n g p o w e r
parities ( P P P s ) instead o f e x c h a n g e rates as c o v e r s i o n
factors.
G N I i s t h e s a m e as G N P ( G r o s s N a t i o n a l P r o d u c t ) used earlier
T a b l e 1 p r o v i d e s data o n e x c h a n g e rate as w e l l as
P P P basis. U s i n g P P P basis, l o w i n c o m e c o u n t r i e s c o m -
p r i s i n g about 1 1 . 6 p e r cent o f p o p u l a t i o n accounted f o r
about 1.4 percent o f w o r l d i n c o m e ; m i d d l e i n c o m e c o u n -
tries w i t h 7 2 . 1 p e r cent o f w o r l d p o p u l a t i o n accounted f o r
about 38.7 p e r cent o f w o r l d i n c o m e a n d the h i g h i n c o m e
countries w i t h about 16.3 p e r cent o f w o r l d p o p u l a t i o n
accounted f o r about 5 5 . 1 p e r cent o f w o r l d i n c o m e :
O b v i o u s l y , g l a r i n g differences b e t w e e n these three groups
o f countries o n e x c h a n g e rate basis get m o d e r a t e d w i t h
P P P basis a n d t h e s i t u a t i o n does n o t appear t o b e s o
g l o o m y . E v e n o n P P P basis, I n d i a w i t h a p e r capita G N I
o f $ 4 , 1 5 9 c o n t i n u e s t o b e i n t h e g r o u p o f l o w e r m i d d l e
i n c o m e e c o n o m i e s , b u t w i t h a n acceleration i n its g r o w t h
rate o f G D P t o a n average o f 8.0 p e r cent d u r i n g 2 0 0 0 a n d
2 0 1 0 , I n d i a w i l l v e r y s o o n enter t h e g r o u p o f upper
m i d d l e i n c o m e countries. C h i n a , h o w e v e r , h a s entered
the upper m i d d l e i n c o m e g r o u p .
T a b l e 2: G r o w t h R a t e s o f G D P a m o n g d i f f e r e n t
g r o u p s o f E c o n o m i e s
Average Annual Growth
Rate of GDP
1990-2000 2000-08
L o w I n c o m e 4.8 5.8
M i d d l e I n c o m e 3.8 6.4
(a) L o w e r m i d d l e i n c o m e 5 . 3 8 . 3
(b) U p p e r m i d d l e i n c o m e 2 . 1 4.6
H i g h I n c o m e 2.7 2.3
C h i n a 10.6 10.4
I n d i a 6.0 7.9
S o u r c e : W o r l d B a n k , World Development Indicators (2010)
T h r e e o b s e r v a t i o n s m a y b e m a d e here r e g a r d i n g
the U . N . c l a s s i f i c a t i o n o f d e v e l o p e d a n d d e v e l o p i n g
countries o n t h e basis o f p e r capita i n c o m e . First, there is

3. D I A A S A D E V E L O P I N G E C O N O M Y 5
ks i n e q u a l i t y o f i n c o m e s b e t w e e n the r i c h and the
p o o r countries. S e c o n d , d u r i n g the last 19 years ( 1 9 9 0 to
2 0 0 9 ) . the rates o f g r o w t h o f G D P i n l o w i n c o m e e c o n o -
r • ere h i g h e r t h a n those i n h i g h i n c o m e e c o n o m i e s .
A s a n a t u r a l consequence, the sustained increase o f G D P
« i n c o m e e c o n o m i e s , has r e d u c e d the gap b e t w e e n
- n c o m e and h i g h i n c o m e e c o n o m i c s . ( R e f e r T a b l e 2 )
• n a p r o v i d e s a n i l l u s t r a t i o n w h i c h i s u n i q u e i n the
• s e . that its g r o w t h rate o f G D P d u r i n g 1 9 9 0 - 2 0 0 0
a w r a g e d 10.6 per cent and d u r i n g 2 0 0 0 - 2 0 0 5 averaged
96 per cent. I n d i a also s h o w s a h i g h g r o w t h rate o f 6.0
r cent d u r i n g 1 9 9 0 - 2 0 0 0 a n d 8.0 per cent d u r i n g 2 0 0 0 -
7 - - :mplies that the t w o A s i a n giants are m a r c h i n g
ftnard o n the r o a d t o d e v e l o p m e n t at a h i g h e r rate t h a n
B e h i g h i n c o m e countries. C h i n a has already entered the
~ : d d l e i n c o m e g r o u p and I n d i a w i l l f o l l o w soon i f
A c G D P g r o w t h rate w h i c h has reached a l e v e l o f 9 per
i n 2 0 0 0 - 0 8 is f u r t h e r raised t o 10 per cent b y 2 0 1 0 .
M o r e r e c e n t l y , t h e g r o w t h rate a m o n g l o w - i n c o m e
"•• e> has also s h o w n a n increase a n d i f this is
. the gap m a y s h o w a decline o v e r a p e r i o d .
T a e r d . a l l the h i g h i n c o m e c o u n t r i e s are n o t necessar-
i» d e v e l o p e d c o u n t r i e s . F o r instance, the o i l - e x p o r t i n g
- • :-.e> h a v e h i g h per capita i n c o m e b u t t h i s is m a i n l y
a a e r o t h e i r e x p o r t s o f o i l ; r e a l l y s p e a k i n g , t h e y are n o t
a r . e l o p e d e c o n o m i e s .
a i D e v e l o p i n g e c o n o m i e s a r e d i s t i n g u i s h e d
fccn the d e v e l o p e d e c o n o m i e s o n the basis o f t h e i r
I D * p e r capita i n c o m e . T h o u g h per capita i n c o m e i s
• o f the o n l y i n d i c a t o r , i t i s the m o s t s i g n i f i c a n t s i n g l e
o f c o m p a r i s o n f o r d i f f e r e n t e c o n o m i e s .
i b ) T h e c e n t r a l p r o b l e m o f d e v e l o p i n g e c o n o -
mkes i s the p r e v a l e n c e o f 'mass p o v e r t y ' w h i c h i s the
c a a s e as w e l l as c o n s e q u e n c e o f t h e i r l o w l e v e l o f
a e s e i o p m e n t .
: M a s s p o v e r t y ' i s the r e s u l t o f l o w resource
-^>r : f the p o o r w h o o w n a v e r y s m a l l p o r t i o n o f the
- -ssets i n the f o r m o f l a n d , capital, h o u s e p r o p -
a n y , etc. T h e l o w resource base o f t h e p o o r also
c i b i t s t h e m f r o m g i v i n g e d u c a t i o n a n d t r a i n i n g t o
•tear c h i l d r e n . A s a result, the c h i l d r e n o f the p o o r are,
r*. and large, e i t h e r e n g a g e d i n u n s k i l l e d o c c u p a t i o n s
o r s o m e s e m i - s k i l l e d o c c u p a t i o n s . T h i s enables
iaan t o earn v e r y l o w a n d m e a g r e w a g e s a n d thus
x r p e t u a t e p o v e r t y . I n o t h e r w o r d s , i n e q u a l i t y i n the
• t a r i b u t i o n o f assets i s the p r i n c i p a l cause o f u n e q u a l
" • a r i b u t i o n o f i n c o m e o n t h e o n e h a n d and u n e q u a l
j t s n b u t i o n o f o p p o r t u n i t i e s o n t h e other.
(d) M a s s p o v e r t y i n d e v e l o p i n g e c o n o m i c s i s n o t
j u e t o p o o r n a t u r a l resources, b u t due t o inadequate
x-- e l o p m e n t o f these resources a n d e x p l o i t a t i v e social
• r a c t u r e .
2. B A S I C C H A R A C T E R -
W I S T I C S O F T H E I N D I A N
Z- 1 E C O N O M Y A S
D E V E L O P I N G E C O N O M Y
I n d i a i s a l o w i n c o m e d e v e l o p i n g e c o n o m y .
T h e r e i s n o d o u b t that n e a r l y o n e - f o u r t h o f its p o p u -
l a t i o n l i v e s i n c o n d i t i o n s o f m i s e r y . P o v e r t y i s n o t
o n l y acute b u t i s also a c h r o n i c m a l a d y i n I n d i a . A t
the s a m e t i m e , t h e r e e x i s t u n u t i l i s e d n a t u r a l resources.
I t i s , t h e r e f o r e , q u i t e i m p o r t a n t t o u n d e r s t a n d t h e
basic characteristics o f the I n d i a n e c o n o m y , treat-
i n g i t as o n e o f t h e p o o r b u t d e v e l o p i n g e c o n o m i e s
o f the w o r l d .
(1) Low per capita income. D e v e l o p i n g e c o n o -
m i e s a r e m a r k e d b y the e x i s t e n c e o f l o w p e r capita
i n c o m e . T h e per capita i n c o m e o f an I n d i a n i n 2 0 1 0
w a s $ 1 2 7 0 . B a r r i n g a f e w c o u n t r i e s , t h e per capita
i n c o m e o f t h e I n d i a n p e o p l e i s t h e l o w e s t i n t h e
w o r l d . D u r i n g 1 9 6 0 - 8 0 , d e v e l o p e d e c o n o m i e s g r e w a t
a faster rate t h a n t h e I n d i a n e c o n o m y , b u t d u r i n g
1 9 9 0 - 2 0 1 0 , I n d i a n e c o n o m y has g r o w n a t a faster rate
t h a n the d e v e l o p e d e c o n o m i e s . E v e n t h e n t h e differ-
ence i n per capita i n c o m e b e t w e e n I n d i a a n d the d e -
v e l o p e d e c o n o m i e s i s q u i t e large. ( R e f e r table 2 ) .
T A B L E 3. P e r C a p i t a G N I a t M a r k e t P r i c e s
(In US Dollars)
2010
Exchange Purchasing Power
Rate Basis Parity Basis
S w i t z e r l a n d 7 1 , 5 2 0 4 9 , 9 6 0
U S A 4 7 , 3 4 0 4 7 , 3 1 0
J a p a n 4 1 , 8 5 0 3 4 , 6 1 0
G e r m a n y 4 3 , 0 7 0 3 8 , 1 0 0
U . K . 3 8 , 2 0 0 3 5 , 8 4 0
I n d i a 1 , 2 7 0 3 , 4 0 0
C h i n a 4 , 7 7 0 7 , 6 4 0
S O U R C E : T h e w o r l d B a n k , World Development Indicators,
( 2 0 1 1 ) .
I t m a y b e n o t e d that i n 2 0 1 0 the a v e r a g e p e r
capita G N I o f U S A a t o f f i c i a l e x c h a n g e rates w a s 3 7
t i m e s that o f I n d i a , w h i l e a t the p u r c h a s i n g p o w e r
p a r i t y rates, i t w a s 13.9 t i m e s o n l y . I n o t h e r w o r d s ,
per capita i n c o m e a t o f f i c i a l e x c h a n g e rates e x a g -
gerated t h e disparities, w h i l e t h e p u r c h a s i n g p o w e r
p a r i t y f i g u r e s c o r r e c t e d the p o s i t i o n . E v e n after t h i s
a d j u s t m e n t , t h o u g h the per capita i n c o m e differences
got n a r r o w e d d o w n , still the d i f f e r e n c e b e t w e e n t h e
l e v e l o f l i v i n g o f the a n a v e r a g e A m e r i c a n a n d a n
I n d i a n w a s q u i t e large a n d s i g n i f i c a n t .
(2) Occupational pattern : primary producing.
O n e o f the basic characteristics o f an u n d e r d e v e l o p e d

4. I N D I A A S A D E V E L O P I N G E C O N O M Y
N C X A A S A D E V E L O P I N
m y i s that i t i s p r i m a r y p r o d u c i n g . A v e r y
i r o p o r t i o n o f w o r k i n g p o p u l a t i o n i s e n g a g e d i n
lture, w h i c h c o n t r i b u t e s a v e r y large share i n
itional i n c o m e . I n I n d i a , i n 2 0 1 0 , a b o u t 5 8 p e r
f the w o r k i n g population w a s engaged i n agriculture
5 c o n t r i b u t i o n t o national i n c o m e w a s 18.9 per
n A s i a , A f r i c a a n d M i d d l e East countries from
irds t o m o r e than four-fifths o f t h e p o p u l a t i o n
ieir l i v e l i h o o d from agriculture, a n d i n m o s t L a t i n
can countries f r o m t w o - t h i r d s t o three-fourths o f
t i o n a r e dependent o n agriculture. F r o m table 3
ivident that the p r o p o r t i o n o f p o p u l a t i o n engaged
iculture i n developed countries is m u c h less than
>portion o f p o p u l a t i o n e n g a g e d i n a g r i c u l t u r e i n
l e v e l o p e d c o u n t r i e s .
L E 4. P e r c e n t a g e o f A c t i v e P o p u l a t i o n
i g a g e d i n A g r i c u l t u r e a n d I n d u s t r i a l
O r i g i n o f G D P i n 2010.
y Active Industrial origin of GDP
population Percentage Distribution
engaged in
agriculture* Agri. Industry Services
d
1 0.7 2 1 . 6 7 7 . 6
4 1.0 2 0 . 0 7 8 . 9
5 1.4 2 6 . 6 7 1 . 9
4 5 12.3 4 4 . 6 4 2 . 9
5 2 2 1 . 1 2 5 . 4 5 3 . 3
4 7 1 0 . 1 4 6 . 7 4 3 . 1
5 8 1 8 . 9 2 6 . 3 5 4 . 7
W o r l d B a n k , World Development Indicators,
2 0 1 1 . ( * 2 0 0 9 )
F r o m t h e p o i n t o f v i e w o f o c c u p a t i o n a l pattern,
i i a n e c o n o m y i s p r i m a r y p r o d u c i n g because
ture c o n t r i b u t e s 18 p e r cent o f n a t i o n a l i n c o m e
i8 p e r cent o f t h e l a b o u r f o r c e i s e n g a g e d i n
ture. Y e t o n e c a n n o t e a s i l y escape t h e c o n -
i t h a t a g r i c u l t u r e c o n t i n u e s t o b e a depressed
y as t h e p r o d u c t i v i t y p e r p e r s o n e n g a g e d i n i t
i l o w .
3) Heavy P o p u l a t i o n pressure. T h e m a i n p r o b -
I n d i a i s t h e h i g h l e v e l o f b i r t h rates c o u p l e d
falling l e v e l o f death rates. T h e rate o f g r o w t h
i l a t i o n w h i c h w a s about 1.31 p e r cent p e r a n -
t i n g 1 9 4 1 - 5 0 has r i s e n t o 1.93 p e r cent d u r i n g
0 0 1 . T h e a n n u a l average rate o f g r o w t h o f
i o n d u r i n g 2 0 0 1 - 1 1 h a s f u r t h e r d e c l i n e d t o
:rcent. T h e c h i e f cause o f this r a p i d spurt t o
ion g r o w t h i s t h e steep fall i n death rate f r o m
t h o u s a n d d u r i n g 1 9 1 1 - 2 0 t o 7 . 4 p e r t h o u s a n d
1 as c o m p a r e d t o t h i s , t h e b i r t h rate h a s d e -
f o m about 4 9 p e r t h o u s a n d d u r i n g 1 9 1 1 - 2 0 t o
r t h o u s a n d i n 2 0 1 0 .
h e fast rate o f g r o w t h o f p o p u l a t i o n necessi-
higher rate o f e c o n o m i c g r o w t h i n o r d e r t o
n t h e s a m e standard o f l i v i n g o f t h e p o p u -
l a t i o n . T o m a i n t a i n a r a p i d l y g r o w i n g p o p u l a t i o n , t h e
r e q u i r e m e n t s o f f o o d , c l o t h i n g , shelter, m e d i c i n e ,
s c h o o l i n g , e t c . a l l rise. T h u s , a r i s i n g p o p u l a t i o n
i m p o s e s greater e c o n o m i c burdens a n d , c o n s e q u e n t l y ,
society has t o m a k e a m u c h greater e f f o r t t o i n i t i a t e
the process o f g r o w t h . M o r e o v e r , a rising p o p u l a t i o n
leads t o a n increase i n t h e l a b o u r force. A c c o r d i n g t o
t h e T e n t h P l a n , b e t w e e n 2 0 0 2 a n d 2 0 0 7 alone, l a b o u r
f o r c e i s expected t o increase b y about 3 5 m i l l i o n i.e.,
at a n a n n u a l average rate o f 1.8 p e r cent. T h i s r a p i d
g r o w t h o f l a b o u r f o r c e creates a h i g h e r s u p p l y o f
l a b o u r t h a n i t s d e m a n d l e a d i n g t o u n e m p l o y m e n t .
(4) Prevalence of c h r o n i c unemployment a n d
underemployment. I n I n d i a l a b o u r i s a n a b u n d a n t
factor a n d , c o n s e q u e n t l y , i t is v e r y d i f f i c u l t t o p r o v i d e
g a i n f u l e m p l o y m e n t t o t h e e n t i r e w o r k i n g p o p u l a t i o n .
I n d e v e l o p e d countries, u n e m p l o y m e n t is o f a c y c l i c a l
nature a n d occurs d u e t o l a c k o f e f f e c t i v e d e m a n d .
I n I n d i a u n e m p l o y m e n t i s structural a n d i s t h e result
o f a d e f i c i e n c y o f capital. T h e I n d i a n e c o n o m y does
not f i n d s u f f i c i e n t capital t o e x p a n d its industries t o
such a n e x t e n t that t h e e n t i r e l a b o u r f o r c e is absorbed.
M o r e o v e r , i n t h e a g r i c u l t u r a l sector o f t h e
I n d i a n e c o n o m y , a m u c h larger n u m b e r o f labourers
are e n g a g e d i n p r o d u c t i o n t h a n are r e a l l y needed.
A c c o r d i n g l y , t h e m a r g i n a l p r o d u c t o f l a b o u r i n a g r i -
c u l t u r e i s o f t e n n e g l i g i b l e ; i t m a y b e z e r o o r m a y
e v e n b e n e g a t i v e . T h u s , there exists 'disguised' o r
'concealed' u n e m p l o y m e n t i n a g r i c u l t u r e . E v e n i f t h e
surplus p o p u l a t i o n i s s i p h o n e d o f f , t h e t o t a l o u t p u t
f r o m a g r i c u l t u r e w i l l n o t f a l l because those persons
w h o w e r e w o r k i n g b e l o w capacity, b e g i n t o b e u t i l -
ised t o t h e f u l l . D i s g u i s e d u n e m p l o y m e n t i n r u r a l
areas i s t h e r e s u l t o f h e a v y pressure o f p o p u l a t i o n o n
l a n d a n d t h e absence o f a l t e r n a t i v e e m p l o y m e n t o p -
p o r t u n i t i e s i n o u r v i l l a g e s .
T h o u g h there is n o doubt that u n e m p l o y m e n t
exists i n a greater degree i n the urban areas, the rural
areas t o o suffer from the p r o b l e m o f u n e m p l o y m e n t a n d
u n d e r e m p l o y m e n t . O n this point the T h i r d F i v e - Y e a r
P l a n stated : " I n t h e rural areas b o t h u n e m p l o y m e n t a n d
u n d e r e m p l o y m e n t exist side b y side; t h e distinction
b e t w e e n t h e m i s b y n o means sharp. I n t h e villages
u n e m p l o y m e n t o r d i n a r i l y takes the f o r m o f u n d e r e m -
p l o y m e n t . U r b a n a n d r u r a l u n e m p l o y m e n t i n fact
constitute a n i n d i v i s i b l e p r o b l e m . " 5 T h e P l a n n i n g C o m -
m i s s i o n o n the basis o f t h e N S S data has estimated that
d u r i n g 2 0 0 4 - 0 5 , t h e rate o f u n e m p l o y m e n t has risen t o
8 . 3 6 % as against 7 . 3 2 % i n 1999-00. T h e E l e v e n t h P l a n
( 2 0 0 7 - 1 2 ) w i l l h a v e a b a c k l o g o f 3 7 m i l l i o n u n e m -
p l o y e d . T h e r e v i s e d estimates o f t h e P l a n n i n g C o m -
m i s s i o n r e v e a l that 4 5 m i l l i o n are l i k e l y t o b e t h e n e w
entrants t o t h e l a b o u r force d u r i n g t h e E l e v e n t h P l a n .
T h u s , t h e t o t a l j o b r e q u i r e m e n t s o f t h e 1 1 t h P l a n
w o r k o u t t o b e 8 2 m i l l i o n ( 3 7 m i l l i o n b a c k l o g plus 4 5
5. Planning Commission, Third Five-Year Plan, p . 1 5 4 .
• f l l i o o n e w entrants) T h u s .
• K i i t t o those s u f f e r i n g fron
• • d e r - e m p l o y m e n t b e c o m e s
• • K process i n I n d i a .
(5) Steadily improvi
tmm. D u r i n g t h e fifties a n
c e n t u r y , basic characteristii
was t h e existence o f c a p
•effected i n t w o w a y s — f i r s t
per head a v a i l a b l e w a s l o
o f c a p i t a l f o r m a t i o n w a s a h
cat or o f l o w capital p e r I
v e l o p e d c o u n t r i e s i s t h e c o i
• r e s g i v e n i n table 5 clearly
c o n s u m p t i o n o f e n e r g y i n
c o m p a r e d t o t h e advanced
T A B L E 5 : E n e r g y I
E q u i v a
V S . A .
U J L
Japan
China
S O U R C E : World Developmen
*2009
T a b l e 6 reveals tha
m a t i o n i n I n d i a i s h i g h e r t
countries. P r o f e s s o r C o l i n
m order t o m a i n t a i n t h e sam
requires a n a d d i t i o n a l i n v e
a n n u m , i f its p o p u l a t i o n inc
cent p e r a n n u m . I n a c o
rate o f p o p u l a t i o n g r o w t h
2000-05), about 6 . 4 p e r
to offset t h e a d d i t i o n a l bur
p o p u l a t i o n . T h u s , I n d i a r
cent l e v e l o f gross capital
T a b l e 6: G r o s s C a p i t a l
D o m e s t i c S a v i n g a
D o m e s t i c
Gross
Country For
1990
U . S . A . 1 8
U K 2 0
J a p a n 3 3
G e r m a n y 2 4
C h i n a 3 5
I n d i a ( 2 0 0 7 ) 2 4
SOURCE : W o r l d B a n k . World D
* 2 0 0 9

5. I - - 5 A D E V E L O P I N G E C O N O M Y 7
c n e w entrants) T h u s , the p r o v i s i o n o f e m p l o y -
ee those s u f f e r i n g f r o m o p e n u n e m p l o y m e n t and
r - e m p l o y m e n t b e c o m e s a m a j o r task o f the p l a n -
process i n I n d i a .
5 Steadily improving rate of capital f o r m a -
D u r i n g t h e fifties a n d t h e sixties o f t h e 2 0 t h
basic characteristic o f t h e I n d i a n e c o n o m y
-. e v i d e n c e o f capital d e f i c i e n c y w h i c h is
T " r : : r : : n » o w a y s — f i r s t l y the a m o u n t o f capital
—•• a v a i l a b l e w a s l o w : a n d secondly, the rate
.-: - f o r m a t i o n w a s also l o w . A n i m p o r t a n t i n d i -
- • : i o u capital per head a v a i l a b l e i n underde-
: T ; : o u n t r i e s is the c o n s u m p t i o n o f energy. F i g -
in table 5 c l e a r l y indicate that p e r capita
. - r : : o n o f e n e r g y i n I n d i a is e x t r e m e l y l o w as
to the a d v a n c e d c o u n t r i e s .
T A B L E 5 : E n e r g y U s e ( K i l o g r a m O i l
E q u i v a l e n t )
Energy use
(Kg of oil
equivalent
Per capita)
(2010)
I S A 7 , 2 2 5
C K 3 , 2 8 2
3 , 8 8 3
1 , 6 9 5 *
5 6 0 *
World Development Indicators (2010).
*2009
T a b l e 6 reveals that rate o f gross capital f o r -
• a h o n i n I n d i a i s h i g h e r t h a n that o f d e v e l o p e d
.:«_:-_-.es Professor C o l i n C l a r k has e s t i m a t e d that
it o r d e r t o m a i n t a i n t h e s a m e l e v e l o f l i v i n g a c o u n t r y
an a d d i t i o n a l i n v e s t m e n t o f 4 p e r cent p e r
a m . i f its p o p u l a t i o n increases a t the rate o f 1 p e r
e c u per a n n u m . I n a c o u n t r y l i k e I n d i a w h e r e the
race o f p o p u l a t i o n g r o w t h i s 1.6 per cent ( d u r i n g
'. 5 about 6 . 4 p e r cent i n v e s t m e n t i s n e e d e d
x offset the a d d i t i o n a l b u r d e n s i m p o s e d b y a r i s i n g
p o p u l a t i o n . T h u s , I n d i a requires as h i g h as 1 4 p e r
e e l o f gross capital f o r m a t i o n s o that she m a y
T a b l e 6: G r o s s C a p i t a l F o r m a t i o n a n d G r o s s
D o m e s t i c S a v i n g a s p e r c e n t o f G r o s s
D o m e s t i c P r o d u c t
Gross Capital Gross Domestic
Ctrnmry Formation SavingCtrnmry
1990 2010 1990 2010
L - S . A . 18 15 16 11.5
p i 2 0 1 5 . 4 18 12.9
itptn 3 3 2 0 . 2 3 4 2 1 . 3
G e r m a n y 2 4 17.3 2 4 2 2 . 8
C h i n a 3 5 4 7 . 7 3 8 5 1 . 7
feba ( 2 0 0 7 ) 2 4 3 6 . 4 * 2 3 3 1 . 5
— A i m i n r v ^ A l 1
cover depreciation a n d m a i n t a i n t h e s a m e l e v e l o f
l i v i n g . A h i g h e r rate o f gross capital f o r m a t i o n alone
can p a v e t h e w a y f o r e c o n o m i c g r o w t h t o i m p r o v e
l i v i n g standard o f the p o p u l a t i o n . I t i s g r a t i f y i n g t o
n o t e that I n d i a has reached a s a v i n g rate o f 2 2 per cent
in 2 0 0 3 w h i c h is s u f f i c i e n t l y h i g h . M o r e recently. G r o s s
D o m e s t i c S a v i n g i n 2 0 1 0 has reached a h i g h l e v e l o f
31.5 per cent a n d G r o s s capital f o r m a t i o n w a s h i g h at
3 6 . 4 per cent. T h i s i s a w e l c o m e d e v e l o p m e n t .
(6) M a l d i s t r i b u t i o n of Wealth/Assets - R B I
S u r v e y o f assets o f r u r a l a n d u r b a n h o u s e h o l d s f o r the
p e r i o d J u l y 1 9 9 1 t o June 1 9 9 2 brings o u t the existence o f
sharp inequalities i n asset d i s t r i b u t i o n . I n r u r a l areas 2 7
per cent o f h o u s e h o l d s o w n i n g less t h a n ? 2 0 , 0 0 0 w o r t h
of assets accounted f o r 2 . 4 p e r cent o f t o t a l assets.
S i m i l a r l y , a b o u t 2 4 per cent o f h o u s e h o l d s i n the asset
range o f ? 2 0 , 0 0 0 - 5 0 , 0 0 0 o w n e d barely 7.5 per cent o f
total assets. T h i s i m p l i e s that n e a r l y 5 1 per cent o f the
b o t t o m h o u s e h o l d s o w n e d j u s t 10 per cent o f the t o t a l
assets. A s against it, 9.6 per cent o f the r i c h h o u s e h o l d s
o w n i n g assets w o r t h ? 2.5 l a k h s a n d above accounted f o r
n e a r l y 4 9 per cent o f t o t a l assets.
T A B L E 7: P e r c e n t a g e D i s t r i b u t i o n o f H o u s e h o l d s
a n d A s s e t s i n I n d i a ( 1 9 9 1 - 9 2 )
Rural (%) Urban (%)
Asset Group Households Assets Households Assets
L e s s t h a n ? 2 0 , 0 0 0
? 2 0 , 0 0 0 - 5 0 , 0 0 0
? 5 0 , 0 0 0 - 1 , 0 0 , 0 0 0
? 1 , 0 0 , 0 0 0 - 2 , 5 0 , 0 0 0
? 2 , 5 0 , 0 0 0 & a b o v e
All Classes
2 7 . 0 2 . 4 3 3 . 5 1.4
2 3 . 8 7.5 1 7 . 2 3.9
2 0 . 9 1 4 . 0 1 6 . 0 8.0
1 8 . 8 2 7 . 3 1 9 . 0 2 0 . 8
9 . 6 4 8 . 8 1 4 . 2 6 5 . 8
100.0 100.0 100.0 100.0
S o u r c e : R e s e r v e B a n k o f I n d i a , A l l - I n d i a D e b t a n d
I n v e s t m e n t S u r v e y , 1 9 9 1 - 9 2 , RBI Bulletin, May 1999.
H o w e v e r , the s i t u a t i o n i n u r b a n areas w a s m u c h
w o r s e . 5 0 . 7 per cent of the u r b a n h o u s e h o l d s o w n i n g less
t h a n ? 5 0 , 0 0 0 w o r t h o f assets accounted f o r b a r e l y 5.3
per cent o f t o t a l assets. A s against t h e m , n e a r l y 6 6 per
cent o f the t o t a l assets o f a l l u r b a n h o u s e h o l d s w e r e h e l d
b y 14.2 per cent o f the h o u s e h o l d s , each o w n i n g ? 2.5
l a k h s o f above. T h i s i m p l i e s that u r b a n h o u s e h o l d s
i n d i c a t e d m u c h w o r s e asset d i s t r i b u t i o n t h a n r u r a l
h o u s e h o l d s .
I n e q u a l i t y i n asset d i s t r i b u t i o n i s the p r i n c i p a l
cause o f u n e q u a l d i s t r i b u t i o n o f i n c o m e i n the r u r a l
areas. I t also signifies that the resource base o f 5 0 per
cent o f the h o u s e h o l d s i s s o w e a k that i t c a n h a r d l y
p r o v i d e t h e m a n y t h i n g a b o v e the subsistence l e v e l o f
i n c o m e . T h i s f i n d i n g o f the R e s e r v e B a n k i s also
supported b y t h e N a t i o n a l S a m p l e S u r v e y w h i c h r e -
veals that 6 0 p e r cent o f the p o o r r u r a l households

6. 8 I N D I A A S A D E V E L O P I N G E C O N O M Y
o n l y 14 p e r cent o f cattle heads a n d j u s t 1 0 p e r cent
o f w o o d e n p l o u g h s .
(7) Poor quality of h u m a n capital. A g l a r i n g
feature o f a n u n d e r d e v e l o p e d e c o n o m y i s t h e p o o r
q u a l i t y o f h u m a n capital. M o s t o f t h e u n d e r d e v e l -
o p e d c o u n t r i e s suffer f r o m m a s s i l l i t e r a c y . I l l i t -
eracy retards g r o w t h . A m i n i m u m l e v e l o f e d u c a t i o n
is necessary t o acquire s k i l l s as also t o c o m p r e h e n d
social p r o b l e m s . R u r a l areas w h e r e i l l i t e r a c y i s a
r u l e , a r e t h e b a c k - w a t e r s o f c i v i l i z a t i o n a n d t h e
centres o f s u p e r s t i t i o n , s o c i a l taboos a n d c o n s e r v a -
t i s m . F a t a l i s m a n d acceptance o f m i s e r y as a part o f
life a n d b e l i e f i n a pre-destined o r d e r a r e a l l a c c o m -
p a n i e d b y m a s s i l l i t e r a c y .
B u t i f w e enlarge t h e d e f i n i t i o n o f capital f o r -
m a t i o n t o i n c l u d e t h e u s e o f a n y resource that e n -
h a n c e s p r o d u c t i v e capacity, t h e n besides p h y s i c a l
capital t h e k n o w l e d g e a n d t r a i n i n g o f t h e p o p u l a t i o n
w i l l also f o r m a part o f capital. A s a result, t h e e x p e n -
d i t u r e o n e d u c a t i o n , s k i l l f o r m a t i o n , research a n d i m -
p r o v e m e n t s i n h e a l t h a r e i n c l u d e d i n h u m a n capital.
T h e I n d i a n p u b l i c e x p e n d i t u r e o n p r i m a r y t o h i g h e r
e d u c a t i o n a n d research a n d d e v e l o p m e n t i n 2 0 0 2 - 0 4
w a s a 3.3 p e r cent o f G D P . T h e c o r r e s p o n d i n g f i g u r e
for t h e U S A . w a s 5 . 9 p e r cent o f G D P . P u b l i c e x p e n -
d i t u r e o n h e a l t h i n I n d i a w a s m i s e r a b l y l o w a t 1 . 1 %
o f G D P i n 2 0 0 7 .
U n d e r t h e U n i t e d N a t i o n s D e v e l o p m e n t
P r o g r a m m e ( U N D P ) , countries h a v e been r a n k e d o n the
basis o f H u m a n D e v e l o p m e n t I n d e x ( H D I ) . T h i s i n d e x
is based o n life expectancy, adult literacy, c o m b i n e d
e n r o l m e n t r a t i o - first, second a n d t h i r d l e v e l a n d real
G D P p e r capita ( P u r c h a s i n g P o w e r P a r i t y basis) i n U S
D o l l a r s . I t i s v e r y distressing t o n o t e that I n d i a h a s been
r a n k e d a t N o . 1 3 4 o n t h e basis o f H D I i n 2 0 0 7 w h i l e
C h i n a stands at N o . 9 2 . O b v i o u s l y , I n d i a h a s still t o g o
a l o n g w a y before i t reaches t h e levels o f d e v e l o p e d
countries i n t e r m s o f h u m a n d e v l e o p m e n t i n d e x .
T A B L E 8 : H u m a n D e v e l o p m e n t I n d e x ( 2 0 0 7 )
Country Life Adult Combined Per capita HDI
Expec- Literacy Enrolment real GDP Rank
tancy (%) Ratio (%) $ (PPP)
2007 2007 2007 2007
C a n a d a 8 0 . 6 99.0* 9 9 . 3 3 5 , 8 1 2 4
U S A 7 9 . 1 9 9 . 0 * 9 2 . 4 4 5 , 5 9 2 13
J a p a n 8 2 . 7 9 9 . 0 * 8 6 . 6 3 3 , 6 3 2 1 0
F r a n c e 8 1 . 0 9 9 . 0 * 9 5 . 4 3 3 , 6 7 4 8
U K 7 9 . 3 9 9 . 0 * 8 9 . 2 3 5 , 1 3 0 21
C h i n a 72.9 93.3 68.7 5,383 92
I n d i a 63.4 66.0 61.0 2,753 134
S o u r c e : U N D P , Human Development Report (2009) *2004
(8) Prevalence of low level of technology.
I n a d e v e l o p i n g e c o n o m y l i k e I n d i a , t h e m o s t m o d e r n
t e c h n i q u e exists side b y side w i t h t h e m o s t p r i m i t i v e
i n t h e s a m e i n d u s t r y , b u t there i s n o g a i n s a y i n g t h e
fact that t h e m a j o r i t y o f t h e p r o d u c t i v e u n i t s a n d a
m a j o r part o f t h e o u t p u t i s p r o d u c e d w i t h t h e h e l p
o f t e c h n i q u e s w h i c h c a n b e described as i n f e r i o r
j u d g e d b y m o d e r n scientific standards. T h e sharp
differences i n p r o d u c t i v i t y b e t w e e n d e v e l o p e d a n d
u n d e r d e v e l o p e d n a t i o n s c a n b e traced t o a consider-
able degree t o t h e a p p l i c a t i o n o f s u p e r i o r techniques
b y t h e f o r m e r .
S i n c e n e w t e c h n i q u e s a r e e x p e n s i v e a n d r e -
q u i r e a considerable degree o f s k i l l f o r t h e i r applica-
t i o n i n p r o d u c t i o n , t h e t w i n r e q u i r e m e n t s f o r t h e a b -
s o r p t i o n o f n e w t e c h n o l o g y a r e t h e a v a i l a b i l i t y o f
capital a n d t r a i n i n g o f a n adequate n u m b e r o f p e r s o n -
nel. I t i s necessary t o h a v e a basic m i n i m u m l e v e l o f
e d u c a t i o n a m o n g t h e actual producers i n order that
the e c o n o m y c a n absorb n e w t e c h n o l o g y . D e f i c i e n c y
o f capital h i n d e r s t h e process o f scrapping o f f t h e o l d
techniques a n d t h e i n s t a l l a t i o n o f t h e up-to-date a n d
m o d e r n techniques. I l l i t e r a c y a n d t h e absence o f a
s k i l l e d l a b o u r force a r e t h e o t h e r m a j o r h u r d l e s i n t h e
spread o f t e c h n o l o g y i n t h e e c o n o m y .
T h e I n d i a n e c o n o m y suffers f r o m t h i s basic
w e a k n e s s . T h e l o w p r o d u c t i v i t y p e r hectare i n I n d i a n
a g r i c u l t u r e a n d the l o w l e v e l o f p r o d u c t i v i t y p e r w o r k e r
i n a g r i c u l t u r e a n d i n d u s t r y are l a r g e l y a c o n s e q u e n c e
o f t e c h n o l o g i c a l b a c k w a r d n e s s . I n I n d i a , t h e v a s t
m a j o r i t y o f f a r m e r s a r e t o o p o o r t o b u y e v e n t h e e s -
sential inputs, such as i m p r o v e d seeds, f e r t i l i s e r s a n d
insecticides, n o t t o speak o f a f f o r d i n g t h e m o r e e x -
p e n s i v e producers' g o o d s l i k e harvesters, tractors,
s o w i n g m a c h i n e s , etc. I n m a n u f a c t u r e also, t h e vast
m a j o r i t y o f t h e enterprises i n I n d i a a r e r u n either o n
a n i n d i v i d u a l o r o n a p a r t n e r s h i p basis; a n d i t i s
b e y o n d t h e means o f s m a l l enterprises t o e m p l o y m o d -
ern and m o r e productive techniques. H o w e v e r , w i t h t h e
l i b e r a l i s a t i o n o f t h e e c o n o m y , n e w t e c h n o l o g y i s b e -
ing adopted b y a large n u m b e r o f enterprises f o r t h e i r
s u r v i v a l .
(9) Low level of living of the average I n d i a n .
F a i l u r e t o secure a balanced diet m a n i f e s t s i n I n d i a i n
the l o w c a l o r i e i n t a k e a n d l o w l e v e l o f c o n s u m p t i o n
o f p r o t e i n . I n 1 9 9 9 t h e average c a l o r i e i n t a k e o f f o o d
is o n l y 2 , 4 9 6 as c o m p a r e d t o o v e r 3 , 4 0 0 calories p e r
d a y i n m o s t o f t h e d e v e l o p e d c o u n t r i e s . T h i s i s ,
s l i g h t l y a b o v e t h e m i n i m u m i n t a k e f o r s u s t a i n i n g life
e s t i m a t e d at 2 , 1 0 0 calories. S i n c e n e a r l y 2 8 p e r cent
o f t h e p o p u l a t i o n i n I n d i a l i v e d b e l o w t h e p o v e r t y
l i n e i n 2 0 0 4 - 0 5 , i t i s v e r y d o u b t f u l w h e t h e r t h e p o o r
get a m i n i m u m i n t a k e o f e v e n 2 , 1 0 0 calories. A n o t h e r
factor that h a s a n i m p o r t a n t b e a r i n g o n t h e h e a l t h o f
the p e o p l e i s that i n I n d i a cereals p r e d o m i n a t e , b u t

7. A S A D E V E L O P I N G E C O N O M Y 9
the diet i n t h e a d v a n c e d c o u n t r i e s i s r i c h
! because i t i n c l u d e s fruits, f i s h , m e a t , butter
r T h e p r o t e i n i n t a k e i s n e a r l y less t h a n h a l f
l e v e l p r e v a l e n t i n a d v a n c e d c o u n t r i e s .
A c c o r d i n g t o W o r l d D e v e l o p m e n t Indicators, 4 6
: o f t h e c h i l d p o p u l a t i o n i n I n d i a suffers f r o m
cn. T h e average p r o t e i n c o n t e n t o f the I n d i a n
i o n l y 5 9 g r a m s per day as against m o r e t h a n d o u b l e
l e v e l i n d e v e l o p e d countries. T h e p e r capita
lity o f m i l k w h i c h w a s 4 8 kgs. i n 1 9 6 0 h a s g o n e
-C • • • i n 2 0 0 3 - 0 4 . t h o u g h it is still m u c h l o w e r
r. developed countries p e r a n n u m . N e a r l y 6 0
per ce-.: o f the m o t h e r s are m a l n o u r i s h e d . A c c o r d i n g t o
l i e census o f 2 0 0 1 , o n l y 3 6 p e r cent o f the h o u s e h o l d s
• c j t c e s s t o safe d r i n k i n g water, i m p l y i n g t a p water.
> results i n d e v e l o p i n g less strength t o f i g h t diseases
so p a r t l y responsible f o r t h e l o w l e v e l o f e f f i -
o f the I n d i a n w o r k e r s .
T h e picture r e g a r d i n g h o u s i n g i s e q u a l l y bleak.
. ~r :o the Census o f I n d i a ( 2 0 0 1 ) , o n l y about 5 2
r~: o f t h e h o u s e h o l d s w e r e l i v i n g i n p e r m a n e n t
sc*ses. about 3 0 p e r cent w e r e l i v i n g i n s e m i - p e r m a n e n t
• i n d 18 p e r cent w e r e l i v i n g i n t e m p o r a r y houses.
: c o n d i t i o n i n t h e r u r a l areas w a s m u c h w o r s e w h e r e
4 ! p e r cent o f t h e p o p u l a t i o n l i v e d i n p e r m a n e n t
and 5 9 p e r cent l i v e d i n s e m i - p e r m a n e n t o r
houses. C o m p a r a t i v e l y , the s i t u a t i o n i n u r b a n
n u c h better w h e r e 7 9 p e r cent h o u s e h o l d s
I i n p e r m a n e n t houses, 15 p e r cent i n s e m i - p e r m a -
- : r . h 5 per cent i n t e m p o r a r y houses.
T A B L E 8 : D i s t r i b u t i o n o f H o u s e h o l d s b y
T y p e o f H o u s e s ( 2 0 0 1 )
(In m i l l i o n )
T o t a l R u r a l U r b a n
i P e r m a n e n t 9 9 . 4 5 6 . 8 4 2 . 6
( 5 1 . 8 ) ( 4 1 . 1 ) ( 7 9 . 3 )
~ 5»mi-permanent 5 7 . 7 4 9 . 4 8.3
( 3 0 . 0 ) ( 3 5 . 7 ) ( 1 5 . 4 )
: ~t~. p o r a r y 3 4 . 9 3 2 . 1 2 . 8
( 1 8 . 1 ) ( 2 3 . 2 ) ( 5 . 2 )
T o t a l 192.0 138.3 53.7
(100.0) (100.0) (100.0)
F i g u r e s i n brackets a r e percentages o f t o t a l
houses i n respective c o l u m n .
Permanent houses a r e those w h o s e w a l l s a n d
r o o f a r e m a d e o f p e r m a n e n t m a t e r i a l s l i k e g a l -
v a n i z e d i r o n sheets, b u r n t bricks, tiles, slates,
stones o r concrete.
Semi-permanent houses i n w h i c h either t h e
w a l l o r t h e r o o f m a y b e m a d e o f p e r m a n e n t
m a t e r i a l a n d t h e o t h e r o f t e m p o r a r y m a t e r i a l .
Temporary houses i n w h i c h b o t h w a l l s a n d
r o o f a r e m a d e o f m a t e r i a l s , w h i c h h a v e t o be
replaced f r e q u e n t l y . T h e s e m a t e r i a l s i n c l u d e
grass, thatch, b a m b o o , plastic, p o l y t h e n e , m u d ,
u n b u r n t bricks o r w o o d .
S O U R C E : C o m p i l e d a n d c o m p u t e d f r o m C e n s u s o f I n d i a
( 2 0 0 1 ) , Tables on Households, Household
Amenities and Assets.
I t i s i m p l i e s t h a t 9 2 m i l l i o n h o u s e s n e e d
u p g r a d a t i o n — 8 1 m i l l i o n i n t h e r u r a l areas a n d 1 1 m i l -
l i o n i n t h e u r b a n areas.
T h e W o r k i n g G r o u p o n H o u s i n g f o r t h e T e n t h
P l a n h a s o b s e r v e d that a r o u n d 9 0 p e r cent o f the h o u s i n g
shortage pertains t o w e a k e r sections. T h e G o v e r n m e n t
s h o u l d , therefore, c o m e i n a b i g w a y t o m a k e a p r o g r a m m e
f o r h o u s i n g f o r the w e a k e r sections. 34.8 m i l l i o n h o u s e -
h o l d s o c c u p y i n g t e m p o r a r y h o u s e s a l m o s t e n t i r e l y b e -
l o n g t o t h e w e a k e r sections o f t h e society w h o r e q u i r e
u r g e n t a t t e n t i o n b y t h e G o v e r n m e n t .
T h e W o r k i n g G r o u p o f the T e n t h P l a n o n H o u s i n g
has e s t i m a t e d a shortage o f 2 2 . 4 4 m i l l i o n h o u s e s d u r i n g
the T e n t h P l a n p e r i o d , o u t o f w h i c h 8 . 8 9 m i l l i o n i s t h e
shortage o f u r b a n h o u s i n g a n d 1 3 . 5 5 m i l l i o n o f r u r a l
h o u s i n g . T h i s appears t o b e a n u n d e r - e s t i m a t e i f w e
consider 3 4 . 8 m i l l i o n t e m p o r a r y houses, especially 1 2 . 7
m i l l i o n t e m p o r a r y unserviceable houses t o be b u i l t afresh.
A n o t h e r v e r y r e v e a l i n g feature o f t h e C e n s u s
( 2 0 0 1 ) i s that 34.5 per cent o f h o u s e h o l d d i d n o t o w n a n y
o f t h e specified assets, i.e., radio, transistor, t e l e v i s i o n ,
telephone, b i c y c l e , scooter, m o t o r cycle o r m o p e d .
( 1 0 ) Demographic characteristics of an u n -
derdeveloped country. A m o n g t h e d e m o g r a p h i c char-
acteristics associated w i t h u n d e r d e v e l o p m e n t a r e h i g h
d e n s i t y o f p o p u l a t i o n . B e s i d e s t h i s , t h e average e x -
p e c t a t i o n o f l i f e i s l o w a n d i n f a n t m o r t a l i t y rates a r e
h i g h . I t w o u l d b e p r o p e r t o e x a m i n e these character-
istics.
T h e d e n s i t y o f p o p u l a t i o n i n I n d i a i n 2 0 0 6 w a s
3 7 3 p e r sq. k m . A s c o m p a r e d w i t h t h i s t h e average
d e n s i t y o f p o p u l a t i o n i n t h e w o r l d i s 5 0 p e r sq. k m . i n
2 0 0 5 . H o w e v e r , i n U . S . A . , t h e d e n s i t y o f p o p u l a t i o n
is 3 3 , i n C a n a d a a n d A u s t r a l i a , i t i s b a r e l y 3 - 4 p e r sq.
k m . E v e n i n C h i n a , d e n s i t y i s 1 4 1 p e r sq. k m . O b v i -
o u s l y , a h i g h e r d e n s i t y i m p o s e s greater b u r d e n s o n
l a n d a n d o t h e r n a t u r a l resources.
A c c o r d i n g t o 2 0 0 1 census, 3 3 . 5 p e r cent o f t h e
t o t a l p o p u l a t i o n i s i n t h e a g e g r o u p 0—14, 6 1 . 5 p e r
cent i s i n t h e w o r k i n g a g e g r o u p , i . e . , 15—64 a n d
o n l y 5 . 0 p e r cent i n t h e a g e g r o u p 6 5 a n d a b o v e . I n
o t h e r w o r d s , t h e p r o p o r t i o n o f c h i l d r e n i s h i g h e r i n
I n d i a t h a n i n t h e a d v a n c e d c o u n t r i e s . O b v i o u s l y ,

8. 1 0 I N D I A A S A D E V E L O P I N G E C O N O M Y
this s i t u a t i o n increases the d e p e n d e n c y load, because
the p r o p o r t i o n a n d size o f the n o n - p r o d u c t i v e p o p u -
l a t i o n i s higher. S u c h a s i t u a t i o n persists d u r i n g
a p e r i o d o f h i g h p o p u l a t i o n g r o w t h rate but w i l l alter
i n f a v o u r o f p r o d u c t i v e p o p u l a t i o n as the rate o f p o p u -
l a t i o n g r o w t h s l o w s d o w n . T h e existence o f a greater
p r o p o r t i o n o f the p o p u l a t i o n i n the l o w e r age g r o u p
acts against p r o d u c t i o n , but f a v o u r s a h i g h e r l e v e l o f
c o n s u m p t i o n . T h e h i g h e r d e p e n d e n c y l o a d o f t h e
p o p u l a t i o n i s a t y p i c a l characteristic o f u n d e r d e v e l o p -
m e n t .
H o w e v e r , d e m o g r a p h i c c h a n g e i s t a k i n g place
in I n d i a . T h e percentage o f c h i l d r e n ( B e l o w 15 years)
w h i c h w a s 3 5 . 5 % o f i n 2 0 0 1 has d e c l i n e d t o 3 2 . 1 % i n
2 0 0 6 a n d i s l i k e l y t o d e c l i n e f u r t h e r t o 2 3 . 3 % b y
2 0 2 6 . C o n s e q u e n t l y , t h e p o p u l a t i o n i n t h e w o r k i n g
age g r o u p (15 t o 6 4 years) i s e x p e c t e d t o increase
f r o m about 6 3 % i n 2 0 0 6 t o 6 8 . 4 % b y 2 0 2 6 . D e m o g -
raphers e x p e c t a decline i n the d e p e n d e n c y l o a d o f the
p o p u l a t i o n . A s a c o n s e q u e n c e o f the l i k e l y increase i n
the w o r k i n g age g r o u p , I n d i a w i l l experience a d e m o -
graphic d i v i d e n d d u r i n g t h e n e x t three decade. T h e
m a j o r p r o b l e m f o r I n d i a i s t o harness t h e g r o w i n g
w o r k i n g a g e p o p u l a t i o n i n e m e r g i n g areas o f t h e
e c o n o m y , b o t h i n i n d u s t r y a n d services. T h i s w i l l re-
q u i r e the d e v e l o p m e n t o f n e w s k i l l s a m o n g the y o u t h
to enable t h e m t o take part i n occupations r e q u i r i n g
better s k i l l s a n d t r a i n i n g . T h e i s referred t o as t h e
challenge o f d e m o g r a p h i c d i v i d e n d f a c i n g the I n d i a n
e c o n o m y .
( 1 1 ) T h e Socio-economic indicators of
consumption a r e characteristic of underdeveloped
economy i n I n d i a . U n d e r d e v e l o p m e n t a l s o f i n d s
e x p r e s s i o n t h r o u g h several s o c i o - e c o n o m i c indicators,
such as per capita i n t a k e o f calories, fats a n d proteins,
p o p u l a t i o n per T V set and p h y s i c i a n . I n T a b l e 8, figures
for a f e w selected countries indicate that I n d i a i s f a r
b e h i n d t h e d e v e l o p e d c o u n t r i e s s o f a r a s these
indicators o f standard o f l i v i n g are concerned. I l l i t e r a c y
rate is also v e r y h i g h i n I n d i a — 3 5 % i n 2 0 0 1 , as against
less t h a n 5 per cent i n d e v e l o p e d countries.
T A B L E 9. S o c i o - e c o n o m i c I n d i c a t o r s o f
S t a n d a r d o f L i v i n g (1999)
Country Per capita daily intake Per 1000 persons
Fats
(gms)
Protein
(gms)
Calories TV
Sets
Physician
(1998)
I n d i a 4 5 5 9 2 , 4 9 6 6 9 0 . 4
C h i n a 7 1 7 7 2 , 8 9 7 2 7 2 2 . 0
J a p a n 8 3 9 6 2 , 9 3 2 7 0 7 7.3
U S A 143 1 1 2 3 , 6 9 9 8 4 7 2.5
U K 1 4 1 9 3 3 , 2 7 6 6 4 5 1.5
S O U R C E : T a t a S e r v i c e s L t d . , Statistical Outline of India,
( 1 9 9 9 - 2 0 0 0 ) .
A s a d e v e l o p i n g e c o n o m y , d u r i n g the last o v e r
f i v e decades o f d e v e l o p m e n t , I n d i a h a s b e e n able t o
i m p r o v e its G D P g r o w t h rate w h i c h w a s o n l y 3.5 per cent
d u r i n g 1 9 5 0 - 5 1 t o 1 9 7 0 - 7 1 t o a l e v e l o f n e a r l y 7 per cent
d u r i n g 2 0 0 0 - 0 1 t o 2 0 0 4 - 0 5 . I t has b e e n able t o reduce
p o v e r t y f r o m a l e v e l o f about 5 4 per cent i n 1 9 6 0 - 6 1 t o a
l e v e l o f 2 6 p e r cent i n 1999-00. I t h a s b e e n able t o
i m p r o v e literacy f r o m a l e v e l o f 17 per cent i n 1 9 5 1 t o
about 65 per cent i n 2 0 0 1 . I t has been able t o raise the rate
o f capital f o r m a t i o n f r o m about 10 per cent o f G D P i n
1 9 6 0 - 6 1 t o 3 0 percent i n 2 0 0 4 - 0 5 . Its life expectancy has
i m p r o v e d f r o m 3 2 years i n 1 9 5 1 t o 63.3 years i n 2 0 0 3 .
H o w e v e r , there a r e g l a r i n g failures o n m a n y fronts.
A c c o r d i n g t o H u m a n D e v e l o p m e n t R e p o r t ( 2 0 0 5 ) , I n d i a
ranks at N o . 127 i n the w o r l d . Its record i n t e r m s o f
r e m o v i n g m a l n u t r i t i o n is poor, as 4 6 per cent o f the c h i l d
p o p u l a t i o n suffers f r o m it. A c c o r d i n g t o 2 0 0 1 census,
o n l y 5 2 per cent o f the p o p u l a t i o n has p e r m a n e n t houses
a n d o n l y 3 6 p e r cent p o p u l a t i o n h a s access t o safe
d r i n k i n g water. A l t h o u g h p o v e r t y has b e e n reduced t o a
l e v e l o f 2 6 per cent, but still 2 6 0 m i l l i o n persons are still
p o o r a n d the b u r d e n o f p o v e r t y is quite m a s s i v e . T h e rate
o f u n e m p l o y m e n t at a l e v e l o f 9.2 per cent i n 2 0 0 1 - 0 2 i s
v e r y h i g h . T o s u m up, I n d i a n e c o n o m y has m a d e c o m -
m e n d a b l e progress o n m a n y fronts, but it has m i l e s t o go
to r e m o v e p o v e r t y , m a l n u t r i t i o n a n d p r o v i d i n g shelter
a n d d r i n k i n g w a t e r t o its entire p o p u l a t i o n .
Wr 3. M A J O R I S S U E S O F
y r D E V E L O P M E N T
I n d i a i s a n u n d e r d e v e l o p e d t h o u g h a d e v e l o p -
ing e c o n o m y . B u l k o f the p o p u l a t i o n l i v e s i n c o n d i -
tions o f m i s e r y . P o v e r t y is not o n l y acute but also chronic.
A t t h e same t i m e , there exist unutilised natural r e -
sources. T h e co-existence o f the v i c i o u s circle o f
p o v e r t y w i t h the v i c i o u s circle o f affluence perpetu-
ates m i s e r y a n d f o i l s a l l attempts a t r e m o v a l o f
p o v e r t y . I t i s i n this c o n t e x t that an u n d e r s t a n d i n g o f
the m a j o r issues o f d e v e l o p m e n t s h o u l d b e m a d e . T h e
f o l l o w i n g are the m a j o r d e v e l o p m e n t issues i n I n d i a .
( 1 ) Low per capita income a n d low rate of
economic g r o w t h . B a r r i n g a f e w c o u n t r i e s i n t h e
w o r l d , the per capita i n c o m e o f the I n d i a n people i s
the l o w e s t i n t h e w o r l d . D u r i n g 1 9 9 0 - 2 0 0 5 , I n d i a n
e c o n o m y has g r o w t h a t the rate o f o v e r 6 % per a n n u m
i n G D P . T h i s i s h e l p i n g I n d i a t o r e d u c e the gap o f per
capita G D P w i t h d e v e l o p e d countries.
(2) H i g h proportion of people below the pov-
erty line. A m a j o r d e v e l o p m e n t issue i s the r e m o v a l
o f m a s s p o v e r t y . I n d i a n e c o n o m y indicates a v e r y
h i g h p r o p o r t i o n o f people b e l o w t h e p o v e r t y line.
D a n d e k a r a n d R a t h s h o w e d that 4 0 per cent o f r u r a l
p o p u l a t i o n a n d 5 0 per cent o f the u r b a n p o p u l a t i o n
l i v e d b e l o w the p o v e r t y l i n e i n 1 9 6 7 - 6 8 . T a k e n
together 2 1 5 m i l l i o n persons c o n s t i t u t e d t h e poor,

9. N C M A A S A D E V E L O P I N G E C O N O M Y 1 1
^ c o u n t i n g f o r 4 1 per cent o f the t o t a l p o p u l a t i o n i n
M 6 7 - 6 8 . D e f i n i n g p o v e r t y l i n e o n the basis o f
a o r m s o f n u t r i t i o n a l r e q u i r e m e n t s , i.e., 2 , 4 0 0 calo-
rves per person per day f o r the r u r a l areas a n d 2 , 1 0 0
a i o r i e s f o r the u r b a n areas, the S i x t h P l a n ( 1 9 8 0 - 8 5 )
^ m a t e d the t o t a l n u m b e r o f persons l i v i n g b e l o w
i s e p o v e r t y l i n e as 3 1 7 m i l l i o n f o r 1 9 7 9 - 8 0 , that
48 per cent o f the t o t a l p o p u l a t i o n . A c c o r d i n g t o
~ t P l a n n i n g C o m m i s s i o n , i n 2 0 0 4 - 0 5 n e a r l y 3 0 2
r j l l i o n people ( 2 7 . 5 per cent o f t o t a l p o p u l a t i o n ) w e r e
ig b e l o w the p o v e r t y l i n e — 2 2 1 m i l l i o n i n r u r a l
areas a n d 8 1 m i l l i o n i n u r b a n areas. T h e b u r d e n o f
poverty is v e r y m a s s i v e . R a p i d r e d u c t i o n a n d e v e n t u -
ally the e l i m i n a t i o n o f p o v e r t y is, therefore, the
it i m p o r t a n t issue o f d e v e l o p m e n t .
(3) L o w level of productive efficiency due to
mmdequate nutrition a n d m a l n u t r i t i o n . N u t r i t i o n
influences e c o n o m i c d e v e l o p m e n t v i a r a i s i n g the l e v e l
•:: p r o d u c t i v i t y , e f f i c i e n c y a n d i n t e l l i g e n c e o f the
c o m m u n i t y . T h e N a t i o n a l S a m p l e S u r v e y has esti-
m a t e d that about 5 6 per cent o f the u r b a n p o p u l a t i o n
a n d about 4 9 per cent o f the r u r a l p o p u l a t i o n suffer
r o m inadequate n u t r i t i o n as t h e y d o n o t get a c a l o r i e
intake o f 2 , 4 0 0 per day considered as a reasonable
el o f n u t r i t i o n . T h e l e v e l o f m a l n u t r i t i o n i n a l l
: penditure g r o u p s w a s h i g h e r i n the u r b a n areas
than i n the r u r a l areas. T h i s is p a r t l y due t o the
r e l a t i v e l y l o w e r prices o f f o o d products a n d t h e i r rela-
easy a v a i l a b i l i t y i n the r u r a l areas.
A m i t a b h K u n d u has h i g h l i g h t e d the deteriora-
_on i n basic f o o d a v a i l a b i l i t y : " I t is i m p o r t a n t that the
per capita c o n s u m p t i o n o f cereals has gone d o w n f r o m
5 4 kgs t o 14.4 k g s per m o n t h d u r i n g 1 9 7 0 - 8 9 i n
rural areas, as per the N S S data. T h e c o r r e s p o n d i n g
e r e s f o r u r b a n areas are 11.4 a n d 11.0 respectively.
T h e average c a l o r i e i n t a k e per c o n s u m e r u n i t i n r u r a l
areas has also d e c l i n e d f r o m 2 , 8 5 8 to 2 , 7 8 4 d u r i n g
1973-83. T h e i n f o r m a t i o n f r o m the N a t i o n a l N u t r i t i o n
M o n i t o r i n g B u r e a u ( N N M B ) also c o n f i r m s t h i s t r e n d . "
A r e l a t i v e l y m o r e detailed e x a m i n a t i o n o f f o o d
r e q u i r e m e n t a n d actual c o n s u m p t i o n reveals that ( i )
• I n d i a , a h i g h p r o p o r t i o n o f c a l o r i e i n t a k e is de-
r i v e d f r o m cereals w h i c h indicates a l o w l e v e l o f
l i v i n g . A s against the r e q u i r e m e n t s o f 4 0 0 calories
per day per adult, actual c o n s u m p t i o n o f cereals is o f
the order o f 4 7 0 calories, ( i i ) A s against this, actual
c o n s u m p t i o n o f non-cereal such as vegetables, fruits,
m i l k a n d m i l k products, sugar, fish, m e a t a n d eggs
and vegetable o i l s is far short o f their r e q u i r e m e n t s .
T h i s o n l y u n d e r l i n e s the u n b a l a n c e d nature o f the diet
o f an average I n d i a n .
T h e f o r e g o i n g analysis b r i n g s o u t the clear need
for an integrated p o l i c y w i t h regard t o prices, p r o d u c -
t i o n a n d d i s t r i b u t i o n o f v a r i o u s f o o d g r a i n s , c o u p l e d
w i t h a p r o g r a m m e f o r r a i s i n g the o u t p u t o f such
non-cereals as m i l k p r o d u c t s , p o u l t r y , f i s h , m e a t ,
pulses, vegetables a n d fruits. T h e highest p r i o r i t y has,
h o w e v e r , t o be g i v e n t o r a i s i n g the o u t p u t o f pulses
w i t h o u t necessarily d i v e r t i n g the l a n d f r o m cereal
p r o d u c t i o n .
(4) I m b a l a n c e between p o p u l a t i o n size, re-
sources a n d c a p i t a l . A v e r y i m p o r t a n t p r o b l e m w h i c h
affects e c o n o m i c d e v e l o p m e n t is the r a p i d g r o w t h o f
p o p u l a t i o n . A s m e n t i o n e d already, the rate o f g r o w t h
o f p o p u l a t i o n 1.5 per cent per a n n u m b y d u r i n g 2 0 0 0 -
0 5 w h i c h is still h i g h . A r i s i n g p o p u l a t i o n i m p o s e s
greater e c o n o m i c burdens and, c o n s e q u e n t l y , society
has t o m a k e a m u c h greater e f f o r t t o i n i t i a t e the
process o f g r o w t h . M o r e o v e r , w i t h a rising p o p u l a -
t i o n , per capita a v a i l a b i l i t y o f l a n d a n d such o t h e r
resources f i x e d i n s u p p l y , declines. C o n s e q u e n t l y ,
society has t o m a k e greater efforts t o e k e o u t m o r e
o u t p u t per u n i t o f l a n d . S i m i l a r l y , a s i g n i f i c a n t
p r o p o r t i o n o f the capital f o r m a t i o n is u t i l i z e d t o
p r o v i d e basic facilities t o the a d d i t i o n a l p o p u l a t i o n
at the present l e v e l o f l i v i n g . O b v i o u s l y , c h e c k i n g the
fast g r o w t h o f p o p u l a t i o n has a close r e l a t i o n s h i p
w i t h e c o n o m i c d e v e l o p m e n t .
(5) P r o b l e m of unemployment : A m a j o r de-
v e l o p m e n t issue i n I n d i a is t o e l i m i n a t e u n e m p l o y -
m e n t a n d p r o v i d e g a i n f u l e m p l o y m e n t t o m i l l i o n s o f
people w i t h o u t w o r k . I n 2 0 0 1 - 0 2 , I n d i a h a d an i n c i -
dence o f u n e m p l o y m e n t u n d e r - e m p l o y m e n t o f the or-
der o f 9.2 per cent. I n o t h e r w o r d s , the d e v e l o p m e n t
plans i n I n d i a f a i l e d t o a b s o r b e v e n the n o r m a l
increase i n l a b o u r force d u r i n g t h i s p e r i o d , n o t t o
speak o f r e d u c i n g the b a c k l o g o f u n e m p l o y m e n t .
E c o n o m i c d e v e l o p m e n t i n the sense o f rise i n
real G N P a n d per capita r e a l i n c o m e is b y i t s e l f o f
not m u c h significance i n I n d i a unless w e r e m o v e
u n e m p l o y m e n t a n d u n d e r e m p l o y m e n t also. T h e e m -
p l o y m e n t strategy o f p l a n n e d d e v e l o p m e n t w i l l h a v e
to be directed (a) t o adopt a n e m p l o y m e n t - i n t e n s i v e
sectoral p l a n n i n g , (b) t o regulate t e c h n o l o g i c a l c h a n g e
to protect a n d e n h a n c e e m p l o y m e n t , a n d (c) t o p r o -
m o t e area p l a n n i n g f o r f u l l e m p l o y m e n t . T h e focus
s h o u l d be t o e x p a n d e m p l o y m e n t t h r o u g h l a b o u r -
absorbing technologies.
T h e e x p a n s i o n o f infrastructure a n d social serv-
ices i.e., r o a d c o n s t r u c t i o n , r u r a l e l e c t r i f i c a t i o n , w a -
ter s u p p l y , r u r a l schools a n d c o m m u n i t y h e a l t h
s c h e m e s , besides, i r r i g a t i o n , p o w e r a n d h o u s i n g
p r o g r a m m e s w i l l h e l p t o generate m a s s i v e e m p l o y -
m e n t t h r o u g h e x p a n s i o n i n c o n s t r u c t i o n a c t i v i t y a n d
t h e i r secondary a n d t e r t i a r y effects i n r a i s i n g a g r i c u l -
tural p r o d u c t i v i t y a n d i n c o m e o f the poor.
(6) Instability of output of a g r i c u l t u r e a n d
related sectors : O n e o f the m a j o r p r o b l e m s o f I n d i a n
e c o n o m y is the u n c e r t a i n t y o f a g r i c u l t u r a l p r o d u c t i o n ,
since a g r i c u l t u r e is still a g a m b l e i n the m o n s o o n s .
S i n c e Independence, there has been considerable
increase i n the p r o d u c t i o n o f the a g r i c u l t u r a l sector.
F o r e x a m p l e , b e t w e e n 1 9 5 0 - 5 1 a n d 2 0 0 3 - 0 4 p r o d u c -
t i o n o f f o o d g r a i n s increased f r o m 5 4 m i l l i o n tonnes
to 2 1 3 m i l l i o n tonnes. B e t w e e n 1 9 6 1 a n d 2 0 0 3 - 0 4 ,

10. 1 2 I N D I A A S A D E V E L O P I N G E C O N O M Y
p r o d u c t i o n o f w h e a t has increased spectacularly f r o m
11 m i l l i o n t o n n e s t o 7 2 m i l l i o n tonnes. I n spite o f
this spectacular g r o w t h , f o o d g r a i n s o u t p u t has been
f l u c t u a t i n g f r o m y e a r t o year. T h i s is also t r u e o f
oilseeds, sugarcane, c o t t o n a n d j u t e — t h e m a j o r
c o m m e r c i a l crops. I n s t a b i l i t y o f o u t p u t o f a g r i c u l t u r e
also results i n c a u s i n g i n s t a b i l i t y i n the related sec-
tors. F o r instance, a f a l l i n the p r o d u c t i o n o f sugar-
cane o r j u t e leads t o a s m a l l a v a i l a b i l i t y o f r a w m a -
t e r i a l f o r t h e sugar a n d t e x t i l e i n d u s t r y . S i m i l a r l y a
cut-back i n a g r i c u l t u r a l p r o d u c t i o n also results i n
r e d u c t i o n o f e m p l o y m e n t i n a g r i c u l t u r e a n d this i n
t u r n , reduces aggregate d e m a n d i n the e c o n o m y as
the p u r c h a s i n g p o w e r o f the peasants falls. T h u s , a
m a j o r d e v e l o p m e n t issue f o r the I n d i a n e c o n o m y is
to devise a strategy o f a g r i c u l t u r a l d e v e l o p m e n t
w h i c h can p r o m i s e a steady g r o w t h o f a g r i c u l t u r a l
o u t p u t .
(7) I m b a l a n c e between heavy industry and
wage goods : D u r i n g t h e B r i t i s h p e r i o d , as a m a t t e r
o f p o l i c y , t h e a l i e n g o v e r n m e n t d i d n o t e n c o u r a g e
t h e g r o w t h o f h e a v y i n d u s t r y . B u t i n the post-
i n d e p e n d e n c e p e r i o d , as a m a t t e r o f deliberate p o l i c y ,
t h e G o v e r n m e n t decided t o g i v e a b o o s t t o h e a v y
i n d u s t r y so as t o b u i l d the i n d u s t r i a l base o f the
e c o n o m y . O n account o f t h e C h i n e s e i n v a s i o n i n
1 9 6 2 I n d i a realised her w e a k n e s s i n defence
preparedness a n d t h u s s w i t c h e d o v e r t o i n v e s t m e n t i n
f a v o u r o f defence industries w h i c h w a s l a r g e l y i n the
n a t u r e o f h e a v y industries.
A s a result o f the stepping u p o f i n v e s t m e n t i n
the h e a v y i n d u s t r y sector, as w a s r i g h t l y d o n e , i t w a s
q u i t e n a t u r a l that the share o f w a g e g o o d s sector i n
total i n v e s t m e n t f e l l f r o m 4 1 p e r c e n t i n 1 9 5 0 - 5 1 t o
3 1 per cent i n 1 9 7 4 - 7 5 . A n a n a l y s i s o f the I n d i a n
e c o n o m y d u r i n g 1 9 6 3 - 7 6 m a d e b y P r o f e s s o r P . R .
B r a h m a n a n d a r e v e a l e d that s u p p l y o f w a g e g o o d s
rose at s m a l l e r pace t h a n the s u p p l y o f n o n - w a g e
goods, t h e g r o w t h rate o f s u p p l y o f w a g e g o o d s sector
w a s j u s t 2 per cent per a n n u m as against o v e r 4 per
cent i n the n o n - w a g e g o o d s sector. T h i s resulted i n a
sharp increase i n the prices o f w a g e g o o d s at the
a n n u a l rate o f 8 per cent per a n n u m . T h u s , the increase
i n real wages o f w o r k e r s that h a d t a k e n place d u r i n g
the early phase o f p l a n n i n g w a s w i p e d o u t b y the
increase i n the prices o f w a g e g o o d s d u r i n g 1 9 6 3 - 7 6 .
B u t t h e n i n the u l t i m a t e analysis, the i m p a c t o f
e c o n o m i c d e v e l o p m e n t has t o be j u d g e d b y a n
increase i n the a v a i l a b i l i t y o f w a g e g o o d s t o the
masses. T w o t h i n g s are essential. F i r s t l y , the s u p p l y
o f w a g e g o o d s s h o u l d g r o w at a faster rate t h a n that
o f n o n - w a g e goods; and, secondly, the price o f w a g e
g o o d s s h o u l d be stabilised.
N o w that the e c o n o m y has been able t o b u i l d
a reasonable i n d u s t r i a l base, i t is i m p e r a t i v e that the
i m b a l a n c e b e t w e e n the h e a v y i n d u s t r y a n d w a g e g o o d s
sector be corrected b y s h i f t i n g i n v e s t m e n t polices i n -
f a v o u r o f w a g e goods. T h i s is n o t t o say that t h e
c o u n t r y has reached t h e g o a l o f self-reliance i n h e a v y
i n d u s t r y , b u t t o e m p h a s i s e that s i m u l t a n e o u s d e v e l o p -
m e n t o f h e a v y i n d u s t r y a n d w a g e g o o d s sector can
b r i n g a b o u t balanced d e v e l o p m e n t o f the e c o n o m y .
T h i s p a t h o f g r o w t h w i l l h e l p t o i m p r o v e the l e v e l o f
l i v i n g o f the masses.
(8) I m b a l a n c e in distribution and growing
inequalities : T h e r e h a v e been g r o w i n g i n e q u a l i t i e s
o f i n c o m e a n d w e a l t h i n I n d i a d u r i n g t h e last f i v e
d e c a d e s o f p l a n n e d e c o n o m i c d e v e l o p m e n t ,
r e d i s t r i b u t i o n o f i n c o m e i n f a v o u r o f the less p r i v i l e g e d
classes has n o t t a k e n p l a c e . O n t h e o t h e r h a n d ,
c o n c e n t r a t i o n o f i n c o m e a n d w e a l t h has increased.
V a r i o u s studies and s u r v e y s h a v e c l e a r l y i n d i c a t e d
that e v e n the s m a l l gains o f d e v e l o p m e n t o v e r t h e
y e a r s h a v e n o t b e e n e q u i t a b l y d i s t r i b u t e d . T h e
c o n d i t i o n o f the b o t t o m 2 0 per cent o f t h e p o p u l a t i o n
has d e f i n i t e l y d e t e r i o r a t e d a n d the n e x t 2 0 per cent o f
t h e p o p u l a t i o n has r e m a i n e d stagnant. A l e a d i n g
issue o f e c o n o m i c d e v e l o p m e n t is t o assure c o n t i n u e d
g r o w t h w i t h j u s t i c e t h r o u g h b e t t e r d i s t r i b u t i o n o f
n a t i o n a l w e a l t h p r o d u c e d i n the c o u n t r y .
W e h a v e m e n t i o n e d the m a j o r issues o f d e v e l -
o p m e n t i n the I n d i a n e c o n o m y . A l l these can be
r e s o l v e d i n t e r m s o f three l e a d i n g issues v i z . , p o v -
erty, u n e m p l o y m e n t a n d i n e q u a l i t y . S o m e o f t h e
issues are i n the n a t u r e o f strategies t o f i n d a s o l u t i o n
to the basic p r o b l e m o f p o v e r t y a n d i n e q u a l i t y .
T h e R e s e a r c h S t u d y o f the W o r l d B a n k about
eight h i g h p e r f o r m i n g A s i a n E c o n o m i e s ( H P A E s ) : Ja-
pan, the " F o u r T i g e r s " - H o n g K o n g , the R e p u b l i c o f
K o r e a , S i n g a p o r e a n d T a i w a n ( C h i n a ) a n d the three
n e w l y i n d u s t r i a l i s i n g e c o n o m i e s ( N I E s ) o f South-east
A s i a , I n d o n e s i a , M a l a y s i a a n d T h a i l a n d has recorded
that these economies grew faster than a l l other regions o f
the w o r l d . " I n large m e a s u r e the H P A E s a c h i e v e d h i g h
g r o w t h b y getting the basics right. P r i v a t e d o m e s t i c
i n v e s t m e n t a n d r a p i d l y g r o w i n g h u m a n capital w e r e t h e
p r i n c i p a l engines o f g r o w t h . A n d s o m e o f these e c o n o -
m i e s also g o t a head start because t h e y h a d a better-
e d u c a t e d l a b o u r force a n d a m o r e e f f e c t i v e s y s t e m o f
p u b l i c a d m i n i s t r a t i o n . I n t h i s sense, there is little that is
" m i r a c u l o u s " a b o u t t h e H P A E s ' s u p e r i o r r e c o r d o f
g r o w t h ; i t is l a r g e l y due t o s u p e r i o r a c c u m u l a t i o n o f
p h y s i c a l a n d h u m a n c a p i t a l . "

11. A S A D E V E L O P I N G E C O N O M Y 1 3
" B u t these f u n d a m e n t a l s d o n o t tell t h e entire
j - I n m o s t o f these e c o n o m i e s ; i n o n e f o r m o r
* e r . the g o v e r n m e n t i n t e r v e n e d — s y s t e m a t i c a l l y
t h r o u g h m u l t i p l e c h a n n e l s — t o foster d e v e l o p -
• a n d i n s o m e cases t h e d e v e l o p m e n t o f specific
p s u m up, i t i s q u i t e possible that m e r e e m -
ail G . N . P . a p p r o a c h t o d e v e l o p m e n t m a y
increases o f n a t i o n a l i n c o m e b y t h e m a -
tron o f c a p i t a l - o u t p u t ratios b u t i n the process,
e c o n o m y m a y b e faced w i t h t h e p r o b l e m o f
u n e m p l o y m e n t . I t i s , t h e r e f o r e , o f v i t a l
ce that t h e pattern o f i n v e s t m e n t s h o u l d b e
so designed that c e r t a i n areas such as defence e q u i p -
m e n t , e n g i n e e r i n g a n d m e t a l l u r g i c a l industries, h e a v y
industries, s h i p p i n g , etc., m a y b e p e r m i t t e d t o u s e
sophisticated c a p i t a l - i n t e n s i v e t e c h n o l o g y b u t b u l k o f
t h e c o n s u m e r g o o d s i n d u s t r i e s a n d v a r i o u s
p r o g r a m m e s o f a g r i c u l t u r a l d e v e l o p m e n t s h o u l d
e m p h a s i z e l a b o u r - a b s o r b i n g t e c h n o l o g i e s w i t h l o w
doses o f capital. S u c h a course i s v i t a l l y necessary i n
the e a r l y p h a s e o f d e v e l o p m e n t i n w h i c h p o p u l a t i o n
pressures a r e h e a v y o n account o f a fast decline i n
death rate. T h e h a r m o n i z a t i o n o f t h e o b j e c t i v e o f
e x p a n d i n g p r o d u c t i o n w i t h that o f s e c u r i n g f u l l e m -
p l o y m e n t i s a l o g i c a l necessity i n I n d i a .
S E L E C T R E F E R E N C E S
Economic Development, C h s . 1 a n d 2 .
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opment of Underdeveloped Countries.
al a n d S i n g h : Approaches to the Problem of
I nderdevelopment.
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Staley : F u t u r e of Underdeveloped Countries.
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T a t a Services L t d . : Statisical Outline of I n d i a ( 1 9 9 9 -
2 0 0 0 ) , ( 2 0 0 1 - 0 2 ) a n d ( 2 0 0 3 - 0 4 ) .
W o r l d B a n k ( 1 9 9 3 ) , T h e East Asian M i r a c l e —
Economic Growth and P u b l i c Policy, C h . 1 and 2.
U N D P , H u m a n Development Report ( 1 9 9 6 ) , ( 2 0 0 5 ) ,
2 0 0 6 a n d 2 0 0 7 / 2 0 0 8 . .
W o r l d B a n k ( 1 9 9 3 ) , The East Asian Miracle
Economic Growth and Public Policy, p . 5 .