ISSUES IN INDIAN ECONOMY
Indian economy is the Seventh largest economy of the world. Being one of the top listed
countries. In terms of industrialization and economic growth, India holds a robust
position with an average growth rate of 7%. Indian economy is fastest growing
economy in the world. But it has met many problems
1. Large Population
2. Inequality and poverty
3. Increasing Prices of Essential Goods
4. Weak Infrastructure
5. Inadequate Employment Generation
6. Outdated technology
7. Low per capita income
POVERTY AND INEQUALITY
The World Bank (1990) has defined poverty as “the inability to attain a minimal
standard of living”.
Types of poverty
1. Absolute poverty
When people do not have adequate food, clothing and shelter, we say they are in
absolute poverty.
2. Relative poverty
It refers to differences in income among different classes of people or people within
the same group or among people of different countries. If we divide the population
of a country into different class intervals based on income and if we compare say, the
top 20 percent of population with the bottom 20 percent of population.
3. Temporary or chronic poverty
In countries like India, when there is poor rainfall, the crops fail and the farmers
temporarily enter into a poverty sample. But when they are poor for long, then we
call it chronic or structural poverty. For example, when agriculturists in many poor

countries are dependent upon rain and when agriculture is marked by low
productivity, we say farmers are in chronic poverty.
Primary Poverty
Primary poverty refers to “families whose total earnings are insufficient to obtain the
minimum necessities for the maintenance of merely physical efficiency”.
Secondary Poverty
Secondary poverty refers to a condition in which earnings would be sufficient for the
maintenance for merely physical efficiency were it not that some portion of it is
absorbed by other expenditure, either useful or wasteful such as drink, gambling and
inefficient housekeeping.
Urban Poverty
On the basis of recommended nutritional intake, persons consuming less than 2,100
calories per day in urban areas are treated as they are under urban poverty. When
people in urban areas don’t find their work anymore gainful, they leave their villages in
the hope of getting some work in urban areas. But once they reach the big cities, they
find it difficult to meet their ends, leading to the situation of poverty. Even the welldeveloped cities are not immune to poverty. Slums in cities like Mumbai is an example
Rural poverty
On the basis of recommended nutritional intake, persons consuming less than 2,400
calories per day in rural areas are treated as they are under rural poverty.
Poverty Line
Poverty Line refers to the minimum income, consumption or more generally access to
goods and services below which individuals are considered to be poor. The poverty line
is the expenditure level at which a minimum calorie intake and indispensable non-food
purchases are assured.
Causes of poverty:
1. Rapidly Rising Population
2. Lack of Non-farm Employment
3. Lack of Public Sector Investment
4. Inflation
5. Low Productivity in Agriculture
6. Unequal Benefit of Growth
7. Low Rate of Economic Growth

Poverty Estimation in India
1. Earliest estimation of poverty in India was done by Dadabhai Naoroji in his book of
POVERTY UN BRITISH RULE OF INDIA published in 1905.
2. National Planning Committee 1938, Congress president Subhash Chandra Bose set
up the National Planning Committee (NPC) with Jawaharlal Nehru as a chairman
The Committee regarded the irreducible minimum income between ₹15 to ₹25 per
capita per month at Pre-war prices. However, this was also not tagged something as
a poverty line of the country.
3. First Planning Commission working group
The concept of the poverty line was first introduced by a working group of the
Planning Commission in 1962 and Recommended the income minimum for each
household of five persons should not be less than ₹100 per month on rural and ₹125
for urban at 1960-1961 prices. The estimates also excluded the expenditure on health
and education.
4. Dr.V.M. Dandekar and Rath (1968-1969)
Fixed desired minimum level of per capita-nutrition 2250 calories/day. In rural
money required to purchase this amount of nutrition ₹180/year. Urban ₹270.
5. Y.K.Alagh Committee (1979)
Till 1979 the approach of estimation of poverty was traditional i.e. lack of income. It
was later decided to measure poverty precisely as starvation i.e. in terms of how
much people eat. This approach was first of all adopted by Y.K.Alagh .the people
consuming less than 2400 calories in rural and less than 2100 calories in urban are
poor. state can take care of health and education of the people.So even defined as
first poverty line in India.
6. Lakdawala Committee (1989)
Submitted report in 1993.Daily consumption fixed by the committee in rural 2400
calories per day and urban 2100 per day. Later total people were under BPL in 1993-
94 was 36% and Total people were BPL in 2004-2005 was 27.5%.
Reserve bank of India report 2012
1. State having least poverty is goa-5.09%
2. Union territory having least poverty-Andaman and Nicobar-1%
3. State having highest poverty is CHATTISGARH 39.93%

4. Union territory having highest poverty DADRA and NAGAR HAVELI-39.31%
WORLD BANK REPORT 2015
In 2011 India had 12.4% people below poverty line.
NITI Aayog’s task force on elimination of poverty
Under the chairmanship of Panagariya, the current poverty estimates are based on the
methodology recommended by the expert group under the chairmanship of Suresh D
Tendulkar in 2009. According to the Tendulkar committee methodology, those whose
daily consumption of goods and services exceeds ₹33.33 in cities and ₹27.20 in villages
are not poor. As per the numbers, only 22 per cent of the people can be classified as
poor in the country. While rural areas need to be developed sustainability, migration
shouldn’t be treated negatively.
Global MPI 2018 Report
It was prepared by the United Nations Development Programme (UNDP) and
the Oxford Poverty and Human Development Initiative. The report, covering 105
countries, dedicates a chapter to India because of this remarkable progress. However,
India still had 364 million poor in 2015-16, the largest for any country, although it is
down from 635 million in 2005-06.
Remedial Measures to Poverty
1. Population Control
2. Increase in Employment
3. Equal distribution of Income
4. Fulfilment of minimum needs of the Poor
5. Increase in the productivity of the Poor
6. Changes in techniques of Production
7. Stability in Price Level
8. Development of Agriculture
INEQUALITY
Inequality as “the state of not being equal, especially in status, rights and
opportunities”. Inequality can be broadly classified in to:

Economic inequality:
Economic inequality is the unequal distribution of income and opportunity between
individuals or different groups in society.
Social inequality:
1. It occurs when resources in a given society are distributed unevenly based on
norms of a society that creates specific patterns along lines of socially defined
categories e.g. religion, kinship, prestige, race, caste, ethnicity, gender etc. have
different access to resources of power, prestige and wealth depending on the
norms of a society.
2. Both these categories are deeply intertwined and inequality of one type affects the
inequality in another e.g. Social Inequality due to gender have large impact on
income of women. In patriarchal societies large gender wage gap tends to exist.
Dimensions of Inequality in India
In India, following are distinctive forms of social inequality:
Gender
Gender inequality refers to unequal treatment or perceptions of individuals wholly or
partly due to their gender. It arises from differences in socially constructed gender.
Global gender gap report by the world economic forum since 2006. Global gender gap
index is a part of this which measures gender equality across four pillars– they are
economic opportunity, political empowerment, educational attainment and health
and survival. India has been ranked at 108.
Caste
Caste is significant factor for determining access to resources like education, income,
health valued by individuals.
Religion
Religious identities are significant for an individual’s ability to mobilize resources.
Religious identities can cause prejudices which may lead to economic exclusion and
other forms of discrimination which can impact jobs and livelihood opportunities.
While minorities such as Christians, Parsis and Jains have a larger share of

income/consumption than their population share, Muslim and Buddhist populations
have significantly lower access to economic resources.
Ethnicity
Tribal communities in India have been identified as ethnic group on the basis of their
unique culture, language, dialect, geographical location, customs etc. The National
Family Health Survey 2015-16 (NFHS-4) showed that 45.9% of ST population were in
the lowest wealth bracket as compared to 26.6% of SC population, 18.3% of OBCs, 9.7%
of other castes.
Economic Inequality
The 2019 report by Oxfam, titled “Public good or Private Wealth?” showed that India’s
top 10% holds 77.4% of the total national wealth, while the top 1% holds 51.53% of the
wealth. The bottom 60% population holds only 4.8% of the national wealth. 13.6 crore
Indians, who make up the poorest 10% of the country, have continued to remain in
debt for the past 15 years. The Gini coefficient of wealth in India in 2017 is at 0.83,
which puts India among the countries with highest inequality countries.
Consequences of Inequalities
1. Inequalities tend to produce social conflict among the social groups e.g. caste
groups like Jaats, Maratha, Patels are demanding reservations but this demand
is opposed by caste groups already claiming the benefits of reservations, such
clash of interest due to perceived inequality tend to produce violent conflicts
between opposing caste groups.
2. Inequalities among ethnic groups have led to various ethnic
movements demanding separate states or autonomous regions or even
outright secession from India. North East has been rocked by numerous such
ethnic movement e.g. by Nagas for greater Nagalim etc.
3. Religious inequality tends to generate feeling of exclusion among religious
minority groups. This reduces their participation in mainstream, in India
religious minorities have large population their economic exclusion
compromises the GDP growth of nation as whole.

4. Poor development indicators like IMR, MMR, low per capita income, lower
education and learning outcomes at schools, high rate of population growth can
be traced to existing socio-economic inequalities.
Measures to Deal with Inequalities
Constitutional Provision
Enforcement of Constitutional Guarantee of equality as enshrined in fundamental
rights. Articles 14, 15 and 16 form part of a scheme of the Constitutional Right to
Equality. Article 15 and 16 are incidents of guarantees of Equality, and gives effect to
Article 14.
Promoting Civil Society
Provide a greater voice to traditionally oppressed and suppressed groups, including by
enabling civil society groups like unions and association with in these groups. Scheduled
castes and Scheduled tribes should be motivated to become entrepreneurs, schemes like
Stand-up India need to be expanded to widen its reach by increasing funding.
Women Empowerment
For gender equality policies like affirmative action by reserving seats in legislatures,
increasing reservation at Local self-government both at Urban and village level to 50%
in all states, strict implementation of The Equal Remuneration act,1976 to remove wage
gap, making education curriculum gender sensitive, raising awareness about women
right, changing social norms through schemes like Beti Bachao Beti Padhao etc.
Inclusion of Religious Minorities
Religious minority groups need special attention through representation in government
jobs, provision of institutional credit, improvement of their education access, protection
of their human rights by empowering National commission for Minority, strengthening
rule of law etc.
Progressive Taxes
Additional public resources for public services by progressive taxes on wealthy and by
increasing the effective taxation on corporations, more importantly broadening the tax
base through better monitoring of financial transactions.

Economic Policies
By ensuring universal access to public funded high-quality services like Public health
and education, social security benefits, employment guarantee schemes; inequality can
be reduced to great extent.
Employment Generation
The failure to grow manufacturing sectors like Textile, Clothing, automobiles, consumer
goods etc. is the important reason of rising inequalities. The Labour-intensive
manufacturing has the potential to absorb millions of people who are leaving farming
while service sector tends to benefit majorly urban middle class.
POVERTY ALLEVIATION PROGRAMMES AND NEW WELFARE
PROGRAMMES FOR RURAL POVERTY
1.TWENTY POINT PROGRAMME:
The Twenty Point Programme was initially launched by Prime Minister Indira Gandhi
in 1975 and was subsequently restructured in 1982 and again on 1986 and again on
2006.TPP-2006 has Points for the benefit of the rural and urban people. Its thrust is
towards programmes for eradicating poverty and improving the quality of life of the
poor and the under-privileged people all over the country. The restructured TPP-2006
contains of 20 Points and 65 monitorable items. The Ministry of Statistics &
Programme Implementation, Government of India, is the Nodal Department at the
centre.
20 POINTS
The 20 points of the Programme and its 66 items have been carefully designed and
selected to achieve the above objectives.
The 20 Point Program Consisted following:
1. Attack on rural poverty
2. Strategy for Rained agriculture
3. Better use of irrigation water
4. Bigger harvest
5. Enforcement of Land Reforms
6. Special Programs for rural labour

7. Clean drinking water
8. Health for all
9. Two child norm
10. Expansion of education
11. Justice for SC / ST
12. Equality for women
13. New Opportunities for women
The programmes/schemes covered under TPP-2006 are as under:
1. Poverty Eradication
2. Power of People
3. Support to Farmers
4. Labour Welfare
5. Food Security
6. Housing for All
7. Clean Drinking Water
8. Health for All
9. Education for All
10. Welfare of Scheduled Castes, Scheduled Tribes, Minorities and OBCs
11. Women Welfare
2.INTEGRATED RURAL DEVELOPMENT PROGRAMME (IRDP)
The Integrated Rural Development Programme (IRDP), which was introduced in 1978-
79 and universalized from 2nd October, 1980, aimed at providing assistance to the rural
poor in the form of subsidy and bank credit for productive employment opportunities
through successive plan periods. On 1st April, 1999, the IRDP and allied programmes
were merged into a single programme known as Swarna Jayanti Gram Swarozgar
Yojana (SGSY).
3.FOOD FOR WORK PROGRAMME:1977
This programme was introduced in April 1977 as a non-plan scheme. As some surplus
food stocks were available with the government, they planned to use it in this
employment administration directly, without any help from labour contractors. One
special advantage of the Food for Work Programme was its part wage payment in food-

grains at subsidized prices, which assured minimum nutrition to the beneficiaries. The
Food for Work Programme was evaluated by the Programme Evaluation Organization
of the Planning Commission.
4.TRAINING TO RURAL YOUTH FOR SELF EMPLOYMENT (TRYSEM) –
1979 TRYSEM was launched in 1979 as a separate national scheme for training rural
youth for self-employment. To provide rural youth (18-35 years) from families below
the poverty line with training and technical skills to enable them to take up selfemployment in agriculture, industry, services and business activities. Training is
perceived not only in terms of provision of physical skills. But also change in attitude,
enhancement of motivation and skills in human relations etc., are also ought to be
imparted. TRYSEM became the “self-employment for youth” component of IRDP and
was introduced in all the 5000 blocks in the country. DRDA is responsible for the
implementation of TRYSEM.
Beneficiaries of TRYSEM
1. Members of the poorest family first
2. Priority should be given to members of SC’s and ST’s.
3. At least 1/ 3 of candidates should be women.
4. Preference should be given to persons who have completed the
5. 12-month course under the national Adult Education programme
5.NATIONAL RURAL EMPLOYMENT PROGRAMME IN OCTOBER 1980
The NREP was launched in 1980 with a view to significantly increase employment
opportunities in rural areas. This was viewed as a major step towards poverty
alleviation. The NREP replaced the food for work (FFW) programme.
Objectives
1. Generation of Additional gainful employment for unemployed and under
employed persons (Both men and women) in rural areas.
2. Creation of productive community assets for direct and continuing benefits to
the poor.
3. Improvement in the overall quality of life in the rural areas.

Two main functions of NREP
1. Creation of a large quantum of man days of work per year for the unemployed
and under employed in rural areas.
2. Creation of durable community assets to strengthen infrastructural facilities in
rural areas.
Features of NREP
In all works under NREP, preference was given to landless labour. Among landless
labour, preference was given to SC’s/ST’s for employment. Main provisions relating to
works under NREP was that it was not permitted to engage contractors. Wages were
paid partly in cash and partly in food grain 1-2 kg/day/head. DRDA were responsible
for the entire works relating to planning, implementation, coordination and monitoring
of NREP. NREP was a centrally sponsored programmes with equal sharing of the
expenditure by the centre and the status. NREP provide training to the personnel in the
implementation of the programmes.
8.MGNREGA-2005
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is an
employment guarantee act. It was introduced in 2005 through the National Rural
Employment Guarantee Act, 2005. In 2010, NREGA renamed as MGNREGA.
Aim: To enhance livelihood security of household in rural areas of India
Objectives:
1. To provide guaranteed 100 days of wage employment per year to each rural
household.
2. Creation of durable rural assets
3. Social inclusion of women, SCs and STs
4. Strengthen the Panchayati Raj Institutions.
Coverage:
The Act currently covers all districts with the exception of those that have a 100%
urban population.
Key Features:
1. Demand driven scheme: Worker to be hired when he demands and not when the
Government wants it.

2. Gram Panchayat is mandated to provide employment with 15 days of work
application, failing which worker is entitled to unemployment allowance.
3. Payment of wages within 15 days of competition of work, failing which worker is
entitled to delay compensation of 0.05%/ day of wages earned.
4. Minimum one-third of the workers should be women.
5. Wages to be paid according to the Minimum Wages Act 1948 for agricultural
labourers in the State.
6. Social Audit to be done by Gram Sabha.
7. Recent developments:
1. Direct Benefit Transfer: Wages are electronically transferred to the worker’s
bank/ post office accounts through National Electronic Fund Management
System (NEFMS)
2. Geo MGNREGA: Geo-tagging all assets created under MGNREGA
Achievements:
1. MGNREGA has been a powerful instrument for empowerment of poor women
through its effect on livelihood security and social protection. In FY 2015-16 out
of the total employment through MGNREGA, 56% was generated for women.
2. Reduced distressed rural to urban migration and also seasonal migration
by providing work closer to home and decent working conditions.

3.Has helped in the upliftment of SCs and STs through creation of livelihood
opportunities. The percentage of Scheduled Caste workers has consistently been
about 20% and Scheduled Tribe workers has been about 17%
4. Sustainable assets have been created linked to conservation of natural resources
and has helped in overall development of Gram Panchayats.
5. Payment of wages through bank accounts/ post office has led to large financial
inclusion of the poor.
6. The average daily wage rate of farm workers has grown sharply after MGNREGA
Issues:
1. Insufficient budget allocation:
1. Increase in nominal budget but actual budget (after adjusting inflation)
decreased over years
2. Though allocated 55,000 crore, the actual value of budget allocation of 2018-19
is much lower than that of 2010-11
3. In 2018, ₹7,000 crore has been allocated from “Extra Budgetary Resources
(EBR)”. Annual outlay remains same as 2017-18
2. Shift to Supply-driven programme:
1. State submits Labour Budget to the Centre- A labour budget contains anticipated
labour demand for the next financial year.
2. The Centre through the arbitrary “Approved Labour Budget” has reduced the
number of days of work and put a cap on funds through the National Electronic
Fund Management System
3. According to Ne-FMS guidelines, states won’t be allowed to generate
employment above the limits agreed by Approved labour Budget
4. This has made the programme supply-driven
3. Poor wages rate:
1. Stagnation of wage rate due to delinking MGNREGA wage rates from Minimum
Wages Act, 1948
2. MGNREGA wages are lower than minimum wages in most states
3. This could push marginalized section to take up vulnerable and hazardous jobs.

4. Delay in wage payments:
1. Delayed payments increased from 39% in 2012-13 to 73% in 2014-15
2. 32% of payments in first 2 quarters of FY17-18 were on time
3. As of 2016-17, total amount of wage pending is ₹11000 crore
4. In current financial year, 25% of Funds Transfer Order (FTOs) pertaining to
wage payment from January to April is pending to be processed by Centre
5. Non-payment of unemployment allowance
6. Partial compensation for delayed payment
7. Distortion in labour market
8. Fabrication of job cards: Payments to fictitious workers
Measures to be taken:
1. Proper and timely allocation of funds
2. Ensuring minimum wages for workers
3. Effective monitoring of projects
4. Ensuring employment to rural households as per demand for work.
5. Proper job card verification
6. Ensuring efficient grievance redressal mechanism
UNEMPLOYMENT
Unemployment is a situation in which a person is actively searching for employment
but unable to find work at the prevailing wage rate. It is a tragic waste of manpower
and under 14OC using size of human resources.
Number of unemployed= labour force-workforce
Measurement of Unemployment in India
National Sample Survey Office (NSSO), an organization under Ministry of Statistics
and Programme Implementation (MoSPI) measures unemployment in India on
following approaches:
1. Usual Status Approach: This approach estimates only those persons as
unemployed who had no gainful work for a major time during the 365 days preceding
the date of survey.

2.Weekly Status Approach: This approach records only those persons as
unemployed who did not have gainful work even for an hour on any day of the
week preceding the date of survey.
3.Daily Status Approach: Under this approach, unemployment status of a person is
measured for each day in a reference week. A person having no gainful work even for 1
hour in a day is described as unemployed for that day.
Unemployment status (based on findings from CMIE’s latest data):
1. The unemployment rate in India rose to 7.2 percent in February 2019, the highest
since September 2016, and up from 5.9 percent in February 2018.
2. The total number of employed persons in February 2019 is estimated at 400
million against 406 million in the year-ago period and 407.5 million employed in
February 2017.
3. The labour participation rate fell from 43.2% in January 2019 to 42.7% in February
2019.
Causes of Unemployment
1. Large population.
2. Low or no educational levels and vocational skills of working population.
3. Inadequate state support, legal complexities and low infrastructural, financial
and market linkages to small/ cottage industries or small businesses, making
such enterprises unviable with cost and compliance overruns.
4. Huge workforce associated with informal sector due to lack of required
education/ skills, which is not captured in any employment data. For ex:
domestic helpers, construction workers etc.
5. The syllabus taught in schools and colleges, being not as per the current
requirements of the industries. This is the main cause of structural
unemployment.
6. Inadequate growth of infrastructure and low investments in manufacturing
sector, hence restricting employment potential of secondary sector.
Types of unemployment:
In developing countries like India, the nature of unemployment is different from that of
developed countries.

1. Cyclical Unemployment
This unemployment exists during the downturn phase of trade cycle in the economy. In
a business cycle during the period of recession and depression, income and output fall
leading to widespread unemployment. It is caused by deficiency of effective demand.
Cyclical unemployment can be cured by public investment or expansionary monetary
policy.
2. Seasonal Unemployment
This type of unemployment occurs during certain seasons of the year. In agriculture and
agro-based industries like sugar, production activities are carried out only in some
seasons. These industries offer employment only during that season in a year. Therefore,
people may remain unemployed during the off season. Seasonal unemployment happens
from demand side also; for example, ice cream industry, holiday resorts etc.
3. Frictional Unemployment (Temporary Unemployment)
Frictional unemployment arises due to imbalance between supply of labour and demand
for labour. This is because of immobility of labour, lack of necessary skills, breakdown of
machinery, shortage of raw materials etc. The persons who lose jobs and in search of
jobs are also included under frictional unemployment.
4. Educated Unemployment
Sometimes educated people are underemployed or unemployed when qualification does
not match the job. Faulty education system, lack of employable skills, mass student
turnout and preference for white collar jobs are highly responsible for educated
unemployment in India.
5. Technical Unemployment
Modern technology being capital intensive requires less labourers and contributes to
technological unemployment. Now a days, invention and innovations lead to the
adoption of new techniques there by the existing workers are retrenched. Labour saving
devices are responsible for technological unemployment.
6. Structural Unemployment
Structural unemployment is due to drastic change in the structure of the society. Lack of
demand for the product or shift in demand to other products cause this type of
unemployment. For example, rise in demand for mobile phones has adversely affected

the demand for cameras, tape recorders etc. So, this kind of unemployment results from
massive and deep-rooted changes in economic structure.
7. Disguised Unemployment
Disguised unemployment occurs when more people are there than what is actually
required. Even if some workers are withdrawn, production does not suffer. This type of
unemployment is found in agriculture. A person is said to be disguisedly by unemployed
if his contribution to output is less than what he can produce by working for normal
hours per day. In this situation, marginal productivity of labour is zero or less or
negative.
Impact
1. The problem of unemployment gives rise to the problem of poverty.
2. Young people after a long time of unemployment indulge in illegal and wrong
activities for earning money. This also leads to increase in crime in the country.
3. Unemployed persons can easily be enticed by antisocial elements. This makes
them lose faith in democratic values of the country.
4. It is often seen that unemployed people end up getting addicted to drugs and
alcohol or attempts suicide, leading losses to the human resources of the
country.
5. It also affects economy of the country as the workforce that could have been
gainfully employed to generate resources actually gets dependent on the
remaining working population, thus escalating socio-economic costs for the
State. For instance, 1 percent increase in unemployment reduces the GDP by 2
percent.
Measures to Solve Unemployment Problem in India
1. A close reading of the Five-Year Plans reveals that in every Five- Years Plan,
2. employment expansion has been emphasized as an objective of development.
Despite all the plan pronouncements, the backlog of unemployment has
increased. This is because each Plan was not even able to absorb the new
entrants in the labour force.
3. The following measures have been suggested for solving the unemployment
problem in our country:

1. A Change in the pattern of investment
The planning process in the initial stages gave importance to an investment allocation
pattern with a high capital-labour ratio. Therefore, a shift in the emphasis to mass
consumer goods industries would generate more employment to absorb the
unemployed labour force. Moreover, increase in the supply of such goods may help
arrest the rising price-level and increase the economic welfare of the people.
2. Encouragement to small enterprises as against big enterprises
The employment objective and the output objective can be achieved, if greater
investment is directed to small enterprises rather than to large enterprises. Now that
the Government wants to undertake decentralised development with emphasis on
small-scale enterprises, it would be desirable to reorient credit, licensing, raw material
allocation and other policies in such a manner that both employment and output are
enlarged simultaneously.
3. Problem of Choice of technique
It would be better to switch over to intermediate technologies till the process of
industrialisation gets such a powerful momentum that the new entrants to labour force
can be absorbed. During the period of rapid growth in the labour force, it would be
advisable to adjust the choice of techniques consistent with the employment objective.
Intermediate technology would be more suited to Indian conditions.
4. Encouragement of New Growth Centres in Small Towns and Rural Areas
Experience of planning has revealed that the overcrowded metropolitan centres have
received a large share of investment. Therefore, the smaller towns should be developed
as new growth centres for the future. The establishment of small industrial complexes
can increase employment opportunities and provide flexibility to the economy.
5. Subsidies on the Basis of Employment
All schemes of subsidies and incentives to large and small industries have helped
output maximisation and greater use of capital resources. The pattern of subsides
should be altered. Creation of more employment should be treated as the basis for the
grant of subsides and incentives. This will shift the entire structure of government
support from the large-scale producer to the small-scale producer as this is more

consistent with the objective of employment generation and achieving equality and
social justice.
6. Reorientation of Educational Policy
One great defect of our educational system is that it leads one to take up the
professional degree only. The high degree of unemployment among the educated
signifies the urgent need to reorient our educational system to greater employment
opportunities. Education system should be more diversified.
7. Underemployment in Rural Areas
N.S.S. data have revealed the existence of a high degree of underemployment in India.
The total number of underemployed persons available and willing to take up additional
work is estimated to be more than two crores. It is necessary to organize the Rural
works Programme. Failure of implementation of Rural Works Programme underlines
the relatively low importance given to the rural sector to provide additional
employment to millions of landless labourers and small and marginal farmers.
EMPLOYMENT GENERATION SCHEMES
1. Pradhan Mantri Employment Generation programme
Ministry: Ministry of Micro, Small and Medium Enterprises
Objective:
Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked
subsidy programme aimed at generating self-employment opportunities through
establishment of micro-enterprises in the non-farm sector by helping traditional
artisans and unemployed youth.
Year of Launch:
The Scheme was launched during 2008-09.
Implementation:
Khadi and Village Industries Commission (KVIC) is nodal implementation agency at
national level. At State and district level, State offices of KVIC, Khadi and Village
Industries Boards (KVIBs) and District Industry Centres (DIC) are the implementing
agencies.

Qualification:
1. Any individual above 18 years of age is eligible.
2. For setting up of projects costing above Rs.10 lakh in the manufacturing sector
and above ₹5 lakh in the business /service sector,
3. the beneficiaries should possess at least VIII standard pass educational
qualification.
4. General category beneficiaries can avail of margin money subsidy of 25 % of the
project cost in rural areas and 15% in urban areas.
5. For beneficiaries belonging to special categories such as scheduled
caste/scheduled tribe/OBC /minorities/women, ex-serviceman, physically
handicapped, NER, Hill and Border areas etc.
6. the margin money subsidy is 35% in rural areas and 25% in urban areas.
There is no income ceiling for setting up the project.
2. Pradhan Mantri Rozgar Protosahan Yojana
The scheme “Pradhan Mantri Rozgar Protosahan Yojana” (PMRPY) was announced in
the Budget for 2016-17.
Implementation
The scheme is being implemented by the Ministry of Labour and Employment.
Aim and objective
The objective of the scheme is to promote employment generation. Under the
scheme employers would be provided an incentive for enhancing employment by
reimbursement of the 8.33% EPS contribution made by the employer in respect of new
employment. The PMRPY scheme is targeted for workers earning wages up to ₹
15,000/- per month.
Significance of the scheme:
PMRPY has a dual benefit –
1. The employer is focusing used for increasing the employee base in the
establishment through payment of EPF contribution of 12% of wage, which
otherwise would have been borne by the employer.
2. A large number of workers find jobs in such establishments.

A direct benefit of the scheme is that these workers have access to social security
benefit through Provident Fund, Pension and Death Linked Insurance.
2. Scheme for Higher Education Youth in Apprenticeship and Skills
(SHREYAS)
Aim:
To enhance the employability of Indian youth by providing ‘on the job work exposure’
and earning of stipend.
Target:
In all the tracks together, it is proposed to cover 50 lakh students by 2022.
Implementation:
SHREYAS is a programme basket comprising the initiatives of three Central Ministries,
namely the Ministry of Human Resource Development, Ministry of Skill Development
& Entrepreneurship and the Ministry of Labour & Employment viz the National
Apprenticeship Promotion Scheme (NAPS), the National Career Service (NCS)and
introduction of BA/BSc/B.Com (Professional) courses in the higher educational
institutions
Following are the objectives of SHREYAS:
1. To improve employability of students by introducing employment relevance into
the learning process of the higher education system.
2. To forge a close functional link between education and industry/service sectors
on a sustainable basis.
3. To provide skills which are in demand, to the students in a dynamic manner.
4. To establish an ‘earn while you learn’ system into higher education.
5. To help business/industry in securing good quality manpower.
6. To link student community with employment facilitating efforts of the
Government.

Operation of the Scheme:
1. The primary scheme will be operated in conjunction with National
Apprenticeship Promotion Scheme (NAPS) which provides for placing of
apprentices upto 10% of the total work force in every business/industry.
2. The scheme will be implemented by the Sector Skill Councils (SSCs), initially the
Banking Finance Insurance Services (BFSI), Retail, Health care, Telecom,
Logistics, Media, Management services, ITeS and Apparel. More sectors would
be added over time with emerging apprenticeship demand and curriculum
adjustments.
Significance of the scheme:
Education with skills is the need of the hour and the SHREYAS will be a major effort in
this direction to make degree students more skilled, capable, employable and aligned to
the needs of our economy so that they contribute to country’s progress and also obtain
gainful employment.
3.The Pradhan Mantri Mudra Yojana (PMMY) Scheme:
The PMMY Scheme was launched in April, 2015.Under ministry of MSME
Objective
1. To refinance collateral-free loans given by the lenders to small borrowers.
2. The scheme, which has a corpus of ₹20,000 crore, can lend between ₹50,000
and ₹10 lakh to small entrepreneurs.
3. Banks and MFIs can draw refinance under the MUDRA Scheme after becoming
member-lending institutions of MUDRA.
4. Mudra Loans are available for non-agricultural activities upto ₹10 lakh and
activities allied to agriculture such as Dairy, Poultry, Bee Keeping etc, are also
covered.
5. Mudra’s unique features include a Mudra Card which permits access to Working
Capital through ATMs and Card Machines.
There are three types of loans under PMMY:
1. Shishu (up to ₹50,000).
2. Kishore (from ₹50,001 to ₹5 lakh).
3. Tarun (from ₹500,001 to ₹10,00,000).

Objectives of the scheme:
Fund the unfunded: Those who have a business plan to generate income from a
non-farm activity like manufacturing, processing, trading or service sector but don’t
have enough capital to invest can take loans up to ₹10 lakh.
Micro finance institutions (MFI) monitoring and regulation: With the help of
MUDRA bank, the network of microfinance institutions will be monitored. New
registration will also be done.
Promote financial inclusion: With the aim to reach Last mile credit delivery to
micro businesses taking help of technology solutions, it further adds to the vision of
financial inclusion.
Reduce jobless economic growth: Providing micro enterprises with credit facility
will help generate employment sources and an overall increase in GDP.
Integration of Informal economy into Formal sector: It will help India also
grow its tax base as incomes from the informal sector are non-taxed.
4. Deen Dayal Upadhyaya Grameen Kaushalya Yojana :
The Vision of DDU-GKY is to “Transform rural poor youth into an economically
independent and globally relevant workforce”. It aims to target youth, in the age group
of 15–35 years. DDU-GKY is a part of the National Rural Livelihood Mission (NRLM),
tasked with the dual objectives of adding diversity to the incomes of rural poor families
and cater to the career aspirations of rural youth.
Objectives:
1. Enable Poor and Marginalized to Access Benefits.
2. Mandatory coverage of socially disadvantaged groups (SC/ST 50%; Minority
15%; Women 33%).
3. Shifting Emphasis from Training to Career Progression.
4. Post-placement support, migration support and alumni network.
5. Proactive Approach to Build Placement Partnerships.
6. Guaranteed Placement for at least 75% trained candidates.
7. Enhancing the Capacity of Implementation Partners
8. Nurturing new training service providers and developing their skills.

9. Greater emphasis on projects for poor rural youth in Jammu and Kashmir
(HIMAYAT).
4. Pradhan Mantri Kaushal Vikas Yojana
Ministry: Ministry of Skill Development and Entrepreneurship
Objective: To impart skill training to youth, focusing on improved curricula, better
pedagogy and trained instructors
Scheme:
1. It is a skill certification and monetary reward scheme.
2. National Skill Development Corporation (NSDC) is the implementing agency
3. The training includes soft skills, personal grooming, behavioural change et al.
4. The Skill training would be based on the National Skill Qualification Framework
(NSQF) and industry led standards
5. Under the scheme, a monetary reward is given to trainees on assessment and
certification by third party assessment bodies. The average monetary reward is
around ₹8,000 per trainee
6. Focus on improved curricula, better pedagogy and better trained instructors
7. Besides catering to domestic skill needs, the scheme will also focus on skill
training aligned to international standards for overseas employment in
European and Gulf countries etc
Factual Information:
1. We have 605 million people below the age of 25
2. Scheme started in 2015
3. It will cover 24 lakh youths.
INFLATION
Inflation is taxation without legislation-Milton Friedman.
Inflation is the rate at which the general level of prices for goods and services is rising
and consequently the purchasing power of currency is falling. The reason for price rise
can be classified under two main heads:
1. Increase in demand
2. Reduced supply.

How it is measured?
Inflation is measured by price indexes.
1. Wholesale price index
WPI, amounts to the average change in prices of commodities at wholesale level.
Published by Office of Economic Advisor (Ministry of Commerce & Industry).
Measures goods only at first stage of transactions. Base year 2011-2012.697 items are
covered including power, fuel and power, manufactured growth. Data released on
overall monthly basis since 2012
Consumer Price Index (CPI)
CPI, indicates the average change in the prices of commodities, at the retail level.
Published by Central Statistics Office (Ministry of Statistics and Programme
Implementation). Measures both Goods and Services at Final stage of transaction. Base
year 2011-2012. Items covered under 448(Rural Basket) 460 (Urban Basket) basket of
consumer goods and services, such as transportation, food and medical care. Data
released on monthly basis.
Now India inflation measured by using CPI combined.
Types of Inflation
On the basis of price rise
1. Creeping Inflation: Creeping inflation is slow-moving and very mild. The rise
in prices will not be perceptible but spread over a long period. This type of
inflation is in no way dangerous to the economy. This is also known as mild
inflation or moderate inflation.
2. Walking Inflation: When prices rise moderately and the annual inflation rate
is a single digit (3% – 9%), it is called walking or trolling inflation.
3. Running Inflation: When prices rise rapidly like the running of a horse at a
rate of speed of 10% – 20% per annum, it is called running inflation.
4. Galloping inflation: Galloping inflation or hyperinflation points out to
unmanageably high inflation rates that run into two or three digits. By high
inflation the percentage of the same is almost 20% to 100% from an overall
perspective.

On the basis of causes
1. Demand-Pull Inflation:
Demand and supply play a crucial role in deciding the inflation levels in the society at
all points of time. For instance, if the demand is high for a product and supply is low,
the price of the products increases.
Factors affecting demand
1. increase money supply
2. increase in disposable income
3. cheap monetary policy
4. increase in public expenditure
5. repayment of public debt.
2. Cost-Push Inflation:
When the cost of raw materials and other inputs rises inflation results. Increase in
wages paid to labour also leads to inflation.
Factors affecting supply
1. shortage of factors of production
2. industrial disputes
3. natural calamities
4. artificial scarcities
5. increase in exports on the basis of inducement
1. Currency inflation: The excess supply of money in circulation causes rise in
price level.
2. Credit inflation: When banks are liberal in lending credit, the money supply
increases and thereby rising prices.
3. Deficit induced inflation: The deficit budget is generally financed through
printing of currency by the Central Bank. As a result, prices rise.
4. Profit induced inflation: When the firms aim at higher profit, they fix the
price with higher margin. So, prices go up.
5. Scarcity induced inflation: Scarcity of goods happens either due to fall in
production (e.g. Farm goods) or due to hoarding and black marketing. This also
pushes up the price. (This has happened is Venezula in the year 2018)On the basis of causes
1. Demand-Pull Inflation:
Demand and supply play a crucial role in deciding the inflation levels in the society at
all points of time. For instance, if the demand is high for a product and supply is low,
the price of the products increases.
Factors affecting demand
1. increase money supply
2. increase in disposable income
3. cheap monetary policy
4. increase in public expenditure
5. repayment of public debt.
2. Cost-Push Inflation:
When the cost of raw materials and other inputs rises inflation results. Increase in
wages paid to labour also leads to inflation.
Factors affecting supply
1. shortage of factors of production
2. industrial disputes
3. natural calamities
4. artificial scarcities
5. increase in exports on the basis of inducement
1. Currency inflation: The excess supply of money in circulation causes rise in
price level.
2. Credit inflation: When banks are liberal in lending credit, the money supply
increases and thereby rising prices.
3. Deficit induced inflation: The deficit budget is generally financed through
printing of currency by the Central Bank. As a result, prices rise.
4. Profit induced inflation: When the firms aim at higher profit, they fix the
price with higher margin. So, prices go up.
5. Scarcity induced inflation: Scarcity of goods happens either due to fall in
production (e.g. Farm goods) or due to hoarding and black marketing. This also
pushes up the price. (This has happened is Venezula in the year 2018)

6. Tax induced inflation: Increase in indirect taxes like excise duty, custom duty
and sales tax may lead to rise in price (e.g. Petrol and diesel). This is also called
taxflation.
Causes of Inflation
The main causes of inflation in India are as follows:
1. Increase in Money Supply:
Inflation is caused by an increase in the supply of money which leads to increase in
aggregate demand. The higher the growth rate of the nominal money supply, the higher
is the rate of inflation.
2. Increase in Disposable Income:
When the disposable income of the people increases, it raises their demand for goods
and services. Disposable income may increase with the rise in national income or
reduction in taxes or reduction in the saving of the people.
3. Increase in Public Expenditure:
Government activities have been expanding due to developmental activities and social
welfare programmes. This is also a cause for price rise.
4. Increase in Consumer Spending:
The demand for goods and services increases when they are given credit to buy goods
on hire-purchase and installment basis.
5. Cheap Money Policy:
Cheap money policy or the policy of credit expansion also leads to increase in the
money supply which raises the demand for goods and services in the economy.
6. Deficit Financing:
In order to meet its mounting expenses, the government resorts to deficit financing by
borrowing from the public and even by printing more notes. This raises aggregate
demand in relation to aggregate supply, thereby leading to inflationary rise in prices.
7. Black Assets, Activities and Money:
The existence of black money and black assets due to corruption, tax evasion etc.,
increase the aggregate demand. People spend such money, lavishly. Black marketing
and hoarding reduce the supply of goods. These trends tend to raise the price level
further.

8.Repayment of Public Debt:
Whenever the government repays its past internal debt to the public, it leads to
increase in the money supply with the public. This tends to raise the aggregate demand
for goods and services.
9. Increase in Exports:
hen exports are encouraged, domestic supply of goods decline. So, prices rise.
Effects of Inflation
Inflation impact on all economic units.it is favourable impact on some and
unfavourable impact on some others.
The effects of inflation can be classified into two heads:
1. Effects on Production
When the inflation is very moderate, it acts as an incentive to traders and producers.
This is particularly prior to full employment when resources are not fully utilized. The
profit due to rising prices encourages and induces business class to increase their
investments in production, leading to generation of employment and income.
1. Hyper-inflation results in a serious depreciation of the value of money and it
discourages savings on the part of the public.
2. When the value of money undergoes considerable depreciation, this may even
drain out the foreign capital already invested in the country.
3. With reduced capital accumulation, the investment will suffer a serious set-back
which may have an adverse effect on the volume of production in the country.
This may discourage entrepreneurs and business men from taking business risk.
4. Inflation also leads to hoarding of essential goods both by the traders as well as
the consumers and thus leading to still higher inflation rate.
5. Inflation encourages investment in speculative activities rather than productive
purposes.
2. Effects on Distribution:
1. Redistribution of income and wealth
Redistributes the income from one group to another.it results loss of one group
income and gain of other groups.
a. Debtors and Creditors:
During inflation, debtors are the gainers while the creditors are losers. The
reason is that the debtors had borrowed when the purchasing power of money

was high and now repay the loans when the purchasing power of money is low
due to rising prices.
b. Fixed-income Groups vs flexible income groups:
The fixed income groups are the worst hit during inflation because their
incomes being fixed do not bear any relationship with the rising cost of living.
Examples are wage, salary, pension, interest, rent etc. flexible income group
like sellers self-employed, and employers of private concerns whose salary is
adjusted according to inflation get affected.
c. Entrepreneurs:
Inflation is the boon to the entrepreneurs whether they are manufacturers,
traders, merchants or businessmen, because it serves as a tonic for business
enterprise. They experience windfall gains as the prices of their inventories
(stocks) suddenly go up.
d. Investors:
The investors, who generally invest in fixed interest yielding bonds and
securities have much to lose during inflation. On the contrary those who invest
in shares stand to gain by rich dividends and appreciation in value of shares.
e. Producers vs consumers
Producer stand to gain and their profit will increase as a result of inflation.
Consumers stands to lose because the purchasing power of money held by
consumer falls.
Other effects
1. Balance of payments
2. exchange rate and social effects.
Measures to Control Inflation
Three measures to prevent and control of inflation.
1. Monetary measures.
2. Fiscal measures.
3. Other measures.
1. Monetary Measures:
These measures are adopted by the Central Bank of the country. They are
1. Increase in Bank rate
2. Sale of Government Securities in the Open Market
3. Higher Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)

4. Consumer Credit Control and
5. Higher margin requirements
6. Higher Repo Rate and Reverse Repo Rate.
2. Fiscal Measures:
Fiscal policy is now recognized as an important instrument to tackle an inflationary
situation. The major anti-inflationary fiscal measures are
1. Reduction of Government Expenditure,
2. Public Borrowing and Enhancing taxation.
3. increases in direct taxes and decreases in indirect taxes.
3. Trade Measures
Export and import of goods and services from foreign countries with nill or
minimum import duties for shortage of goods in domestic countries. The higher
supply helps to bring down the price.
4. Administrative measures:
a. Rationing wage policy
Helps to keep the cost of production under control
b. Price control
Direct price control by means of fixing maximum price limits through
administered price system and subsidy from the government.
c. Rationing
Rationing of goods in short supply keeps the demand under control so that price
comes under control.
5. Other Measures:
These measures can be divided broadly into short-term and long-term measures
1. Short-term measures
It can be in regard to public distribution of scarce essential commodities through
fair price shops (Rationing). In India whenever shortage of basic goods has been
felt, the government has resorted to import so that inflation may not get
triggered.

2. Long-term measures
It will require accelerating economic growth especially of the wage goods which
have a direct bearing on the general price and the cost of living. Some
restrictions on present consumption may help in improving saving and
investment which may be necessary for accelerating the rate of economic growth
in the long run.
INFLATION TARGETING
1. Inflation targeting is basically a monetary policy wherein the central bank of a
country (RBI in India) has a specific target inflation rate for the medium-term
and publicizes this rate.
2. After declaration of target, the central bank attempts to steer actual inflation
towards the target through the use of interest rate changes and other monetary
tools.
3. Primary objective of monetary policy is to maintain price stability
4. To maintain price stability, inflation needs to be controlled.
Tools to control Inflation:
1. Interest rates
1. Hike interest rates when inflation goes above the target. Increasing interest rates
generally slows the economy to curb inflation.
2. Decrease the interest rates when inflation below the target. Reducing the interest
rates will accelerate the economy, thus, augmenting inflation.
2. Changing tax and spending levels in order to influence the level of Aggregate
Demand.
3. Inflation Targeting Mechanism
1. Authority: Inflation target to be set by the Government of India,
in consultation with the Reserve Bank, once every five years which is
authorized by the amended RBI Act.
2. Current Inflation Target: The Central Government has notified 4 percent
Consumer Price Index (CPI) inflation as the target for the period from August
5, 2016, to March 31, 2021, with the upper and lower tolerant limits of 6% and
2%

3. RBI to publish the operating target and establish an operating procedure of
monetary policy to achieve the target. any change in the target and procedure in
response to evolve macro financial conditions shall also be published.
4. Every six months the RBI to publish a document
• source of inflation
• forecasts inflation for the period between 6 to 18 months from the date of
publication of the document.
5. Any disputes regarding interpretation and implementation of agreement to
resolved between governor RBI, government.
Advantages
1. Discouraging consumers from borrowing
2. Reduce consumer spending
3. Sustain price stability
4. Support growth
5. Recognise the short run trade-offs between inflation and growth.
OTHER TERMS
Philips curve:
The Phillips curve states that inflation and unemployment have an inverse relationship.
Higher inflation is associated with lower unemployment and vice versa. The Phillips
curve was a concept used to guide macroeconomic policy in the 20th century, but was
called into question by the stagflation of the 1970’s.
Disinflation
Disinflation is the slowing down the rate of inflation by controlling the amount of credit
(bank loan, hire purchase) available to consumers without causing more
unemployment. Disinflation may be defined as the process of reversing inflation
without creating unemployment or reducing output in the economy.
Deflation:
The essential feature of deflation is falling prices, reduced money supply and
unemployment. Though falling prices are desirable at the time of inflation, such a fall
should not lead to the fall in the level of production and employment. But if prices fall
from the level of full employment both income and employment will be adversely
affected.

Stagflation: Stagflation is a combination of stagnant economic growth, high
unemployment and high inflation.
Inflationary gap
The spending of government above the national income called inflationary gap. This is
intended to increase the production ultimately increase prices up due to extra-creation
of money during the process.
Deflationary gap
The shortfall in total spending of the government (i.e. fiscal surplus) over the national
income creates deflationary gap in the economy. This is a situation of producing more
than the demand and the economy usually heads for a general slowdown in the level of
demand. This is also known as the output gap.
Inflation Spiral
Wage-price spiral is used to explain the cause and effect relationship between rising
wages and rising prices. When wages press prices up and prices pull wages up.
The inflation Tax
Inflation erodes the value of money and the people who hold currency suffer in this
process. As the governments have authority of printing currency and circulating it into
the economy this act functions as an income to the governments. This is a situation of
sustaining government expenditure at the cost of people’s income. This looks as if
inflation is working as a tax. That is how the term inflation tax is also known as
seignories. It means inflation is always the level to which the government may go for
deficit financing—level of deficit financing is directly reflected by the rate of inflation.
Inflation Accounting
It is popular in the area of corporate profit accounting. Basically, due to inflation the
profit of firms/companies gets overstated. When a firm calculates its profits after
adjusting the effects of current level of inflation, this process is known as inflation
accounting. Such profits are the real profit of the firm which could be compared to a
historic rate of inflation (inflation of the base year), too.

Bottleneck inflation
This inflation takes place when the supply falls drastically and the demand remains at
the same level. Such situations arise due to supply-side accidents, hazards or
mismanagement which is also known as ‘structural inflation’. This could be put in the
‘demand-pull inflation’ category.
Trade Cycle
A Trade cycle refers to oscillations in aggregate economic activity particularly in
employment, output, income, etc. It is due to the inherent contraction and expansion of
the elements which energize the economic activities of the nation. The fluctuations are
periodical, differing in intensity and changing in its coverage.
Phases of Trade Cycle
1. Boom or Prosperity Phase: The full employment and the movement of the
economy beyond full employment is characterized as boom period. During this
period, there is hectic activity in economy. Money wages rise, profits increase and
interest rates go up. The demand for bank credit increases and there is all-round
optimism.
2. Recession: The turning point from boom condition is called recession. This
happens at higher rate, than what was earlier. Generally, the failure of a company
or bank bursts the boom and brings a phase of recession. Investments are
drastically reduced; production comes down and income and profits decline.
There is panic in the stock market and business activities show signs of dullness.
Liquidity preference of the people rises and money market becomes tight.
3. Depression: During depression the level of economic activity becomes
extremely low. Firms incur losses and closure of business becomes a common
feature and the ultimate result is unemployment. Interest prices, profits and
wages are low. The agricultural class and wage earners would be worst hit.
Banking institutions will be reluctant to advance loans to businessmen.
Depression is the worst phase of the business cycle. Extreme point of depression
is called as “trough”, because it is a deep point in business cycle. Any person fell
down in deeps could not come out from that without other’s help. Similarly, an
economy fell down in trough could not come out from this without external help.
4. Recovery: After a period of depression, recovery sets in. This is the turning point
from depression to revival towards upswing. It begins with the revival of demand

for capital goods. Autonomous investments boost the activity. The demand slowly
picks up and in due course the activity is directed towards the upswing with more
production, profit, income, wages and employment. Recovery may be initiated by
innovation or investment or by government expenditure (autonomous
investment).
SUSTAINABLE ECONOMIC GROWTH
Sustainable economic growth means a rate of growth which can be maintained without
creating other significant economic problems, especially for future generations. There
is clearly a trade-off between rapid economic growth today, and growth in the future.
Rapid growth today may exhaust resources and create environmental problems for
future generations, including the depletion of oil and fish stocks, and global warming.
1. Growth based on debt
In terms of sustainability, it may be argued that growth based on short-term public
debt, rather than long term productivity, is unsustainable – hence worries about the
build-up of sovereign debt in Europe.
2. PPFs and economic growth
For an economy to continue to grow in the future, it needs to increase its capacity to
grow. An increase in an economy’s productive potential can be shown by an outward
shift in the economy’s PPF.
3. Standards of living
Gross domestic product per capita is often regarded as the key indicator of the
standards of living of the citizens of an economy, and of their economic welfare,
though broader measures of economic welfare are increasingly used in preference to
narrow GDP measures.
Why is stable growth an economic objective?
If growth rises significantly above or below the trend rate, the economy is experiencing
excessive growth or low growth. If the rate becomes negative for at least 2 quarters in
succession, the economy is in recession.

The trade (growth) cycle
Changes in real national income tend to be cyclical, but it is desirable that this cycle is
stable rather than unstable. Unstable growth is popularly called ‘boom’ and ‘bust’.
Excessive growth can lead to:
1. Goods and service inflation
2. House price inflation
3. Wage inflation
4. Labour shortages
5. Falling savings
6. Excessive credit
7. Trade difficulties
Low or negative growth can lead to:
1. Goods deflation
2. House price deflation
3. Labour surpluses
4. Unemployment
5. Excessive debt burden
6. Public sector debt
The advantages of growth
Economic growth is associated with a number of material benefits which increase
economic welfare. These include the following:
Higher GDP per capita
A rise in real national income means that wages and profits are likely to rise. Assuming
a stable population, this will raise GDP per capita.
More public and merit goods
A growing economy means that the public sector can receive more tax revenue and
more resources can be allocated to public and merit goods, such as more roads,
hospitals and schools.

Positive externalities
Public and merit goods generate considerable external benefits. More hospitals and
schools mean a healthier and better-educated population, which generates other
economic benefits in terms of the effectiveness of the labour force, and increases in
long-term aggregate supply.
More employment
Growth is clearly likely to stimulate demand for labour, and it is likely that more people
will be employed and fewer unemployed. The disadvantages of growth
Economic growth also brings some costs which reduce economic welfare, including:
Negative externalities
As production and consumption increase, negative externalities, such as pollution and
congestion, are likely to arise. There is also the likelihood of increased depletion of
non-renewable resources, such as fossil fuels.
Inflation and balance of payments difficulties
Too rapid a rate of growth can also lead to two significant economic problems:
inflationary pressure and a balance of payments deficit, as imports rise to satisfy an
increasingly active household sector.
Widening income gap
Growth can also widen the distribution of income, because some groups may benefit
much more than others.
Limitations of using GDP per capita over time
There are several limitations of using GDP statistics for comparing changes in
economic well-being over time, including:
Changes in the distribution of income
Average GDP per capita may rise over time, but the distribution of income may widen
Differences in hours worked
People may be working longer hours, in which case some of the growth may be through
increased work, rather than through increased efficiency.
Unpaid work is not recorded
People may undertake unpaid work, and this may not be officially recorded.

Price changes
Prices are unlikely to remain constant over time, so GDP figures must be converted
to constant prices and measured from a base year. This process is called ‘indexing’ and
is required to avoid the distorting effects of inflation.
Negative externalities
The quality of life may suffer as GDP increases, although this is not included in GDP
statistics. For example, more driving raises GDP, but also adds to CO2emissions, which
can reduce the quality of life.
Changes in the quality of products
Over time the quality of products tends to increase, so a given amount of income per
capita in 2010 may purchase a higher quality product than it did in 2000. This is
certainly true with high-technology consumer products, like PCs, laptops and mobile
phones.
Limitations of using GDP statistics for international comparisons
Differences in the distribution of income
Although two countries may have similar GDP per capita figures, the distribution of
income in each country may be very different.
Differences in hours worked
As when comparing a country over time, the number of hours worked to generate a
given level of income may be quite different.
International price differences
International prices will also vary. This is significant because an individual’s
purchasing power is based on price in relation to income. To solve this problem, GDP
statistics can be re-calculated in terms of purchasing power.
Difficulty of assessing true values
The true value of public goods and merit goods, such as defence, education and
transport infrastructure are largely unknown. This means that it is difficult to compare
two countries with very different levels of spending on these goods and assets.

GENDER ISSUES
1. Gender inequality refers to unequal treatment or perceptions of individuals
wholly or partly due to their gender. It arises from differences in socially
constructed gender.
2. “Gender equality is a critical component of economic growth”. “Women are half
of the world’s population and have role to play in creating a more prosperous
world. But we won’t succeed in playing it if the laws are holding us back.” The
global economy could be enriched by about $160tn (£120tn) if women earned as
much as men. “It is clear that giving space to women leads to richer societies,”
3. A country with high GDP growth — but which has a problems of a wide gender
gap, a large number of women committing suicides in the countryside in some of
India’s prosperous southern states and the growing wage difference between
men and women — cannot continue its development programmes for long. The
serious social problems will affect GDP growth.
4. According to the ILO, the wage gap in India is highest and women are paid 34
per cent less than men. Their real wage growth has been the lowest since 2008.
Gender issues in India:
India is still a lagging when it comes to gender equality, and changing this situation is
an urgent task. Need for policy initiatives to empower women as gender disparities in
India persist even against the backdrop of economic growth. Improvements in labour
market prospects also have the potential to empower women. This will also lead to
increase in marriage age and school enrolment of younger girls. Feminism could be a
powerful tool that lets children shed stereotypes that they may hold and question those
of others. A world free of prejudice and generalisation would be amenable to progress
in the truest sense. The need of the hour is to introduce feminism in schools, both in
terms of curriculum and practice. Sessions on principles of mutual respect and equality
must be made a regular affair in schools. Inculcating gender equality in children could
go a long way towards ridding society of regressive mindsets, attitudes, and behaviours.
Educating Indian children from an early age about the importance of gender equality
could be a meaningful start in that direction.

The reasons for gender issues in India
1. The Cultural institutions in India, particularly those of patrilineality (inheritance
through male descendants) and patrilocality (married couples living with or near the
husband’s parents), play a crucial role in perpetuating gender inequality.
2. Preference for sons:
A culturally ingrained parental preference for sons – emanating from their
importance as caregivers for parents in old age – is linked to poorer consequences for
daughters.
3. Dowry system:
The dowry system, involving a cash or in-kind payment from the bride’s family to the
grooms at the time of marriage, is another institution that disempowers women. The
incidence of dowry has been steadily rising over time across all region and
socioeconomic classes.
4. Patriarchal mindset:
Patriarchy is a social system of privilege in which men are the primary authority
figures, occupying roles of political leadership, moral authority, control of prosperity
and authority over women and children.
5. Poverty and lack of education:
Extreme poverty and lack of education are also some of the reasons for women’s low
status in society. Poverty and lack of education derives countless women to work in
low paying domestic service, organized prostitution or as migrant laborers.
6.Women
1. PINK COLOUR JOBS: The women are mostly deemed fit for “pink collar
jobs” only, such as teachers, nurses, receptionist, baby sitter, lecturer etc. which
have been stereotyped for women. This denies them opportunities in other
fields.
2. Many women due to family pressures have to retreat from work force.
3. Companies are interested in hiring more number of young women because it has
been generally seen that the work and the family environment, marriage and
maternity generally forces a married woman for resignation.
4. Women receive lower amount of wages compared to men for the same work.

CHALLENGES:
1. Cultural values limited role as homemaker with status of mother, sister and wife
2. Partnership and industries= not considered capable enough to handle it.
3. Gender equality studied in isolation= The crime against boys and men go
unreported, even this group should be studied.
4. The laws made are gender biased rather than gender neutral laws.
From International Labour Organisation’s (ILO) Report, 2019:
1. 1.3 billion women were in work in 2018 as compared to 2 billion men – a less
than two per cent improvement in last 27 years.
2. Women’s pay is 20 per cent lower than men’s, as a global average.
3. Women remain underrepresented at the top, a situation that has changed very
little in the last 30 years. Less than one-third of managers are women.
4. This is despite the fact that women are likely to be better educated than their
male counterparts. Education is not the main reason for lower employment rates
and lower pay of women, but rather women do not receive the same dividends
for education as men.
5. Motherhood Leadership Penalty: Only 25 percent of managers with children
under six years of age are women. Women’s share rises to 31 per cent for
managers without young children.
6. In India, women make up about 10.2 percent of managers with children under
the age of six and 16.3 percent with no children.
Potential Areas of Focus
1. The private sector and business community will be crucial in helping bridge the
gap between skills and jobs and enable access to decent work for women.
2. Vocational and technical training, life skills and financial literacy programmes
for women to help them develop marketable skills and better decision-making
abilities.
3. Companies can also invest in women entrepreneurs through microfinance, and
bring their goods and services into supply chains.
4. Enhancing women’s access to the internet and ICT can create a market of
connected women who can be linked to business opportunities.
5. Increasing representation of women in the public spheres is important.

Sector wise issues
Agriculture and womens:
1. Women as farmers, labourers and entrepreneurs are the driving force of India’s
farmland. According to OXFAM 2018, agriculture sector employs 80% of all
economically active women in India, they comprise 33% of the agriculture labour
force and 48% of the self-employed farmers. In spite of their large contribution
women continue to remain invisible in the rural economy of India.
2. The agony of the women farmers needs to be heard both at the policy and
implementation level. In order to make women farmers capable, access to
information on advanced agricultural practices is needed. Women bear the
burden of getting paid with low wages compared to men. Policy emphasis must
be to recognise the work of female farmers and grant equal pay to them.
3. Lack of land rights is one of the crippling issues for women farmers. There is an
urgent need to change the inheritance practices and give land rights to daughters
as well. Further, to increase efficiency and promote sustainable agricultural
practices, skill development training needs to be delivered to women farmers.
Skill development programs will train women farmers in areas of field
operations, organic farming etc.
4. Technological advancements in designing tools can play an important role in
making farm equipment easy to use for women. Majority of women in the rural
sector are involved in animal husbandry, hence imparting veterinary knowledge
to women can result in better results.
Self help groups:
1. Self-help groups have been playing a crucial role in improving the status of
women in rural villages. Such self-help groups can help women farmers by
providing financial support in terms of loans and promote best agricultural
practices through training. Fair support price has been the major demand of
farmers all over the country. In order to provide a fair price and direct market
linkages, Mahila Kisan mandis should be promoted for women farmers where
they can sell their produce without any hassle.
2. According to the United Nations Food and Agricultural Organisation, if women
had the same access to productive resources as men, they could increase yields

on their farms by 20-30%. If we want the agricultural sector to thrive in the
country, acknowledging the contribution of women farmers becomes an absolute
necessity. We need to provide them with opportunities and upgrade their skills
through collective training and capacity building programs.
Questions:
1. What is poverty and types of poverty? Explain poverty estimation in India since
independence.
2. What is inequality? Write about consequence of inequality and measures to
reduce inequality.
3. Gives short notes on poverty alleviation programmes.
4. What is inflation and Inflation targeting? Explain the measures to control
inflation.