Unit-3 PROBLEMS OF ECONOMIC DEVELOPMENT IN THE CONTEXT OF INDIA.ppt

PROBLEMS OF ECONOMIC DEVELOPMENT IN THE CONTEXT OF INDIA

1. Unit-3
PROBLEMS OF ECONOMIC DEVELOPMENT IN THE
CONTEXT OF INDIA

2. India as a developing economy
Developing economy is such where there are
suitable structural changes for economic
development and as a result the process of
economic development is accelerated.
This means that there is increase in national
income and per capita income.
SOURCE: C. JAMNADAS & CO.

3. •India is one of the fastest growing economies of the
world and is poised to continue on this path, with
aspirations to reach high middle income status by
2047, the centenary of Indian independence.
•It is also committed to ensuring that its continued
growth path is equipped to deal with the challenges
of climate change, and in line with its goal of
achieving net-zero emissions by 2070.

4. •The growth of the past two decades has also
led to India making remarkable progress in
reducing extreme poverty.
•Between 2011 and 2019, the country is
estimated to have halved the share of the
population living in extreme poverty - below
$2.15 per person per day

5. •Certain challenges persist. Inequality in
consumption continues, with a Gini index of around
35 over the past two decades.
•Child malnutrition has remained high, with 35.5
percent of children under the age of 5 years being
stunted, with the figure rising to 67 percent for
children in the 6-59 months age group.
 

6. •India’s aspiration to achieve high income status by
2047 will need to be realized through a climate-
resilient growth process that delivers broad-based
gains to the bottom half of the population.
•Growth-oriented reforms will need to be
accompanied by an expansion in good jobs that
keeps pace with the number of labor market
entrants.

7. •The World Bank is partnering with the government
in this effort by helping strengthen policies,
institutions, and investments to create a better
future for the country and its people through green,
strong and inclusive development.

8. •Both the general government fiscal deficit
and public debt to GDP ratio increased
sharply in FY20/21 and have been declining
gradually since then, with the fiscal deficit
falling from over 13 percent in FY20/21 to an
estimated 9.4 percent in FY22/23.
 

9. •At the same time, the government has
remained committed to increasing capital
spending, particularly on infrastructure, to
boost growth and competitiveness.

10. •Public debt has fallen from over 87 percent
of GDP to around 83 percent over the same
period.
•The consolidation has largely been driven by
an increase in revenues and a gradual
withdrawal of pandemic-related stimulus
measures.

11. Basic Characteristics of India as a
Developing Economy
Low Per Capita Income (PCI)
•According to the International Monetary Fund’s Report,
in 2017, India’s PCI was $ 1983 and was ranked 140 out
of 188 countries.
•Further, according to the World Bank’s Report, in 2017,
India’s PCI was $ 1940 and was ranked 138 out of 184
countries.
•Therefore, we can conclude that the per capita income
of an Indian resident is lower than most countries in the
world.

12. •Occupational Pattern – Primary Producing
•One of the fundamental characteristics of India as a
developing economy is that it is majorly primary
producing. What this means is that a majority of the
population is engaged in
 
agriculture 
•However, in 2011-12, the contribution of agriculture
to the national income was only 13.9 percent. This
disparity is slowing India’s progress.
•The reason behind this difference is that agriculture is
a low income earning sector.

13. •Population Pressure
•It is 1.36 billion – the population of India as on
January 17, 2019, 21:30 hours. We are the second
most populated country in the world and our
population is equivalent to around 17.74% of the
total world population.
•In India, the high levels of illiteracy lead to
 a high
level of birth rates. Further, improvement in medical
facilities has increased the average life of an Indian
citizen and led to a decline in the death rates too.

14. •Chronic Unemployment and Under-
Employment in India
•Due to the deficiency of capital in India, it is
difficult to engage the entire population in
gainful employment.
•Therefore, a
 cheap labor force is available in
abundance. As a result, there is chronic
unemployment and under-employment in our
country.

15. •Steady Improvement in the Rate of Capital
Formation
•In 2017, the population growth rate in India was
1.13%. Therefore, the economy needed a high
amount of investment to offset the additional burden
imposed by the rising population.
•This balance is critical to maintaining the costs of
living. Otherwise, there is a risk that we could achieve
growth only at the expense of unacceptable inflation.

16. •Inequality in Wealth/Asset Distribution
•Unequal asset distribution is the primary cause of
inequality in income distribution in rural areas.
•This inequality also highlights the fact that the
resource base of 50 percent of households in India
is weak.
•It is so weak that it can barely provide them with
anything above the subsistence level of income.

17. •Poor Human Capital Quality
•It is a simple equation. Underdeveloped
countries have millions of illiterate citizens.
Also, illiteracy retards growth since an
individual needs a minimum level of education
to acquire skills and/or understand social
issues.

18. •Low-levels of Technology
•India is a country of eclectic mixes. One one
side, a company uses one of the most modern
technologies while another company from the
same industry uses the most primitive one.
•Unfortunately, according to modern scientific
standards, the majority of products are made
with the help of inferior technologies.

19. •Demographic Characteristics
•Demographically speaking, India has a high density of
population with high infant mortality rates and
comparatively lower life expectancy as compared to
the developed countries. This makes it an
underdeveloped economy.
•Further, in India, the population density was 412 per
square kilometer (in 2010). In comparison, the
population density of the USA was 34 per square
kilometer.

20. Other Characteristics
Increase in national income.
Increase in per capita income.
Development oriented structural changes.
Dual economy.
Economic development through mixed economy.
Changing industrial policy.
Private ownership of means of production.
Profit oriented production of goods.
Development through economic planning.
Foreign trade and increase in foreign exchange reserve.
Increase in standard of living.
SOURCE: C. JAMNADAS & CO.

21. Concept of Unemployment
Unemployment in the context of individual:
Voluntary unemployment.
Transitional unemployment.
Compulsory unemployment.
According to Prof. Pigou, “A man is only
unemployed when he is both not employed and
desires to be employed.
SOURCE: C. JAMNADAS & CO.

22. What is Unemployment?
Definition & Meaning
 
•Unemployment in India refers to the condition
where individuals who are capable of working,
actively seeking work, but are unable to find
any form of employment.
•The unemployed are individuals in the labor
force, primarily in the
 
age group of 15 – 59
years, who currently do not have a job or a
steady source of income.

23. •As individuals who are capable and willing to
work are unable to find gainful employment, it
leads to a wastage of manpower resources.
Unemployment and its related metrics are
typically used to measure the health of a
country’s economy.
 

24. •According to National Statistical Office (NSO),
employment and unemployment can be
defined by the following activity statuses of an
individual –
•Employed 
– Individuals engaged in any
economic activity are classified as 'Employed.'
This includes full-time, part-time, and
temporary work, reflecting a broad
understanding of employment.

25. •Unemployed 
– Individuals who are actively seeking
or available for work but are not currently engaged
in any economic activity. This emphasizes the
willingness and ability to work as key criteria.
•Neither working nor willing to work 
– Individuals
who are neither seeking nor available for work fall
outside the labor force, according to NSO. This
category might include students, retirees, or
homemakers.

26. •The first two categories, i.e.,
 
Employed and
Unemployed constitute the Labor Force 
of an
economy. It is typically the individuals
between the age group of 15–59 years.
 
•The following formula can be used to calculate
the unemployment rate of a country –

27. Types of Unemployment
 
•Frictional Unemployment
•Frictional unemployment occurs when
individuals are
 
temporarily without a
job 
while transitioning from one position to
another or entering the workforce for the first
time.

28. •For example, a recent graduate actively
looking for a job or a professional who has
quit one job to find a more suitable one would
fall into this category.
•This type of unemployment is generally short-
term and is often seen as a regular and
healthy part of a dynamic economy.

29. •Structural Unemployment
•Structural unemployment arises when there is
a
 
mismatch between the skills 
that workers in
the economy can offer and the skills
demanded by employers.
 

30. •For instance, the automation of
manufacturing processes may render certain
manual jobs obsolete, leaving those without
the necessary technological skills
unemployed.
•This type of unemployment can be long-term
and may require significant retraining and
education to overcome.

31. •Cyclical Unemployment
•Cyclical unemployment is related to the
 
fluctuations in the
economy 
over the course of the business cycle. During
recessions, many industries can suffer, leading to layoffs
and thus, higher unemployment.
•An example would be the increase in unemployment during
the global financial crisis of 2008. Cyclical unemployment
will decrease when the economy starts to improve.
•

32. •Institutional Unemployment
•Institutional unemployment results from
 
long-
term or permanent institutional factors 
and
incentives in the economy.
•Government policies, such as high minimum
wage floors or restrictive occupational
licensing laws, can contribute to this type of
unemployment.
 

33. •For example, if a government sets the
minimum wage too high, it might lead to
employers being unable or unwilling to hire
workers at that wage, leading to increased
unemployment.

34. •Demand Deficient Unemployment
•Demand deficient unemployment, or demand-deficit
unemployment, occurs when there is
 
not enough demand
for workers that are available.
•This is often a result of a general downturn in the economy
and is closely related to cyclical unemployment. For
example, during a severe recession, consumer demand falls,
leading to reduced production and, consequently, a
reduction in the workforce.
•

35. •Voluntary Unemployment
•Voluntary unemployment happens
 
when a worker
decides to leave a job because it is no longer
financially compelling or satisfying.
•An example might be a worker whose take-home pay
is less than his or her cost of living or someone who
leaves a job to pursue a hobby or other personal
interests. While it's a personal choice, it can still
contribute to the overall unemployment rate.

36. •Involuntary Unemployment
•Involuntary unemployment occurs when
 
individuals
who are willing and able to work at the prevailing
wage rate are unable to find employment.
•This type of unemployment is not a result of a
personal choice or voluntary decision to leave a job;
rather, it's a situation where individuals are actively
seeking employment but are unable to secure a
position.
 

37. •An example might be factory workers who
lose their jobs due to a factory closure and are
unable to find new employment despite their
best efforts.
•Involuntary unemployment can be particularly
distressing as it's often beyond the control of
the individual and may require broader
economic or policy interventions to address.
 

38. •Disguised Unemployment
•Disguised unemployment refers to a situation
where
 
more people are employed in a job
than is actually required.
•It is often prevalent in the agricultural sector,
especially in developing countries like India. For
example, a farm may need only three workers,
but the entire family of five may be working.

39. •The extra two workers appear to be
employed, but their contribution to
productivity is minimal or nil.
•Disguised unemployment represents an
inefficient allocation of labor, where
individuals are underemployed rather than
completely unemployed.

40. •Seasonal Unemployment
•Seasonal unemployment occurs
when
 
individuals are unemployed during
certain seasons or times of the year 
when their
skills or labor are not in demand.
•This type of unemployment is common in
industries that are dependent on particular
seasons, such as agriculture, tourism, and
construction.
 

41. •For example, agricultural workers may face
unemployment after the harvest season, while
ski resort employees might be without work
during the summer months.
•Governments and industries often address
seasonal unemployment through temporary
employment opportunities and unemployment
benefits tailored to these fluctuations.

42. •Vulnerable Unemployment
•Vulnerable unemployment refers to individuals
who are employed in precarious or insecure
conditions, often lacking legal protections,
benefits, or job security.
•This type of unemployment is prevalent in the
informal sector, where workers might be
engaged in low-paying, temporary, or part-time
jobs without contracts.
 

43. •For example, street vendors, daily wage
laborers, and domestic workers often fall into
this category in many developing countries,
including India.
•Vulnerable unemployment highlights the need
for comprehensive labor laws and social
protections to ensure the well-being and
rights of these workers.

44. •Technological Unemployment
•Technological unemployment arises
when
 
advancements in technology render
certain jobs or skills obsolete, leading to job
losses in affected industries. Automation,
artificial intelligence, and digitalization are
common drivers of technological
unemployment.
 

45. •For instance, the introduction of automated teller
machines (ATMs) has reduced the need for bank
tellers, while automation in manufacturing has
replaced many manual labor positions.
•While technological unemployment can lead to
increased efficiency and productivity, it also raises
concerns about retraining, education, and social
support for displaced workers, emphasizing the need
for a balanced approach to technological progress.

46. •According to the World Economic Forum Future of Jobs
Report 2020,
 
85 million jobs may be displaced by
machines by 2025, but
 
97 million new roles may emerge.
 
•As computers take over high-repetitive tasks typically
assigned to entry-level employees, they pave the way for
more complex, intellectually stimulating roles with
competitive salaries.
 
• The challenge lies in ensuring that the workforce is
equipped with the skills to embrace these new
opportunities.

47. The causes of increase in Unemployment
Defective investment system.
Rapid increase in population.
Defective education system and manpower planning.
Underdevelopment of agricultural sector.
Underdevelopment of non agricultural sector.
Lack of harmony between objectives of planning and reality.
Poverty.
Slow progress of economic development.
Want of national employment policy.
Inadequate use of productive capacity.
SOURCE: C. JAMNADAS & CO.

48. India’s Unemployment Rate
Month Unemployment Rate (%)
  India Urban Rural
Aug 2020 8.35 9.83 7.65
Jul 2020 7.40 9.37 6.51
Jun 2020 10.18 11.68 9.49
May 2020 21.73 23.14 21.11
Apr 2020 23.52 24.95 22.89
Mar 2020 8.75 9.41 8.44
Feb 2020 7.76 8.65 7.34
Jan 2020 7.22 9.70 6.06
Dec 2019 7.60 9.02 6.93
Nov 2019 7.23 8.88 6.45
Oct 2019 8.10 8.27 8.02
Sep 2019 7.14 9.58 5.99

49. India’s Unemployment Rate

50. Effects of Unemployment
Overall adverse impact of unemployment:
 From the view of the person.
 From the view point of national production.
 From the view point of distribution and consumption.
 From the view of society and political view.
Adverse impact of unemployment on different economic fields:
 Effect on agriculture profession.
 Effects on trade and commerce.
 Effects on industry.
 Effects on the transportation.
SOURCE: C. JAMNADAS & CO.

51. •I care for my job.
•I care for my family.
•I care for my sister.
•I care for my car.
•I care for you.
•I care for my country.
•I care for my health.

52. •Physics
•Physics is interesting.
•Physics is very useful.
•Physics is an easy subject.
•Physics is my favourite subject.
•Physicsinterestingusefuleasy
•Subjectfavouritemy

53. •Maths is difficult.
•Maths is a difficult subject.

54. •Science is easy.
•Science is an easy subject.

55. •Biology is difficult.
•Biology is a difficult subject.

56. We
learn
computer
together.
Nous

66. https://www.youtube.com/@Liste
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https://www.youtube.com/@Fren
chFairyTales

68. Family
Family

69. is
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70. big
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71. My
family
is
big
My
family
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big

72. Brother
Family

73. Sister
Family

74. I
have
two
brothers.
My
family
is
big

75. I
have
one
sister.
My
family
is
big

76. We
live
together.
.
My
family
is
big

77. elder
Family

78. younger
Family

79. I
have
a younger
sister.
My
family
is
big

80. I
have
an elder
sister.
My
family
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big

81. Father
Family

82. Mother
Family

83. My
father
is
doctor.
My
family
is
big

84. My
mother
is
lawyer.
My
family
is
big

88. Uncle
Family

89. Aunt
Family

90. My
uncle
is
pilot.
My
family
is
big

91. My
aunt
is
house wife.
My
family
is
big

92. Son
Family

93. Daughter
Family

94. My
uncle
has one
son.
My
family
is
big

95. My
uncle
has one
daughter
.
My
family
is
big

96. I have
two
cousins.
My
family
is
big

97. We
live
in
France.
My
family
is
big

98. My
brother
is
married.
My
family
is
big

99. My
sister
is
unmarried.
My
family
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big

100. My
cousin
is
athlete.
My
family
is
big

101. My
mother
sings
well.
My
family
is
big

102. My
father
drives
a car.
My
family
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big

103. We
sister
drives
a bike.
My
family
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big