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Index

Developmental Issues
1. Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03

2. Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

3. Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4. LPG Reforms in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

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Chapter
01 Population

Introduction
Demography means ‘the scientific study of human population, with respect to size, structure and development’.
The study of Demography is important since human population in terms of its structure, composition and growth, has
significant bearing on economic growth and development. Population is the only and ultimate source of labour supply for
development activities. It is also the ultimate beneficiary of development. Hence, population is both the means and the
end of economic development. In India, the Demographic data is available in the Census Reports which is conducted every
once in ten years. The last such census was conducted in the year 2011. The present unit delves
into the important demographic features of India.

Population of India: Size and Growth

India’s population, as per the 2011 census, was 1211 million (a million is equal to 10,00,000 i.e. 10 lakhs). Stating the
figures in millions, it was 1029 in 2001, 846 in 1991, 683 in 1981, 548 in 1971, 439 in 1961 and 361 in 1951. At present,
India is the second most populous country after China. As per the World Bank data (for 2016), China’s population is 1359
million and India’s population is 1324 million. However, the geographical area of India, in terms of square kilometres, is
much smaller than that of China. The demographic measure that accounts for number of people per square km of land
area is called the Density of Population (DoP). It is measured as:

DoP = (Population of a Geographical Area) ÷ (Land Area in Sq. Km of that Geographical Area)
As per 2011 Census Report, DoP of India is 382. As per World Bank data, for 2016, the DoP of India is 445, of China 147,
USA 35 and Australia 3.
Some states of India are densely populated whereas others are relatively sparsely populated. The states of Bihar (1106),
West Bengal (1028), Uttar Pradesh (829) are densely populated. On the other hand, the states of Himachal Pradesh (123),
Sikkim (86), Mizoram (52) and Arunachal Pradesh (17) are sparsely populated. Broadly speaking, territories with
Mountains, hills, deserts and large dense forest areas are sparsely populated whereas territories having fertile land,
industries, better transport facilities, etc. are densely populated.

Growth of Population
The size of the population of a given area changes over time through: (i) migration and (ii) natural factors like births
and deaths. The change in the size of population over time, expressed as a percentage to its base year value, is called the
growth of population.
The population in India was 1028.5 million in 2001; it increased to 1210.6 million in 2011. The Rate of Growth of
Population over the period 2001 to 2011 is 17.7 (or 18) percent. However, when the decadal rate of population growth is
divided by 10, we get the average annual growth rate of population which in the present case is 1.8 percent. The rate of
decadal growth of India’s population increased from 22 percent in 1951-61 to 25 percent in 1961-71. After that, it has
been declining steadily at a very slow pace at first but at an accelerated rate since 1991. The growth rate of population, as
per 2011 census, is not uniformly the same across the states of India. Some states have exhibited higher average annual
growth rate than the national growth rate. For instance, Meghalaya (2.8 percent), Bihar (2.6 percent), Arunachal Pradesh
(2.6 percent), Jammu & Kashmir (2.4 percent), Rajasthan (2.2 percent), etc. The lowest growth rate is in Nagaland (– 0.6
percent).

To understand the population dynamics, it is important to study the birth (fertility) rate, death (mortality) rate and
migration pattern along with their methods of measurement in a scientific way. The basic demographic equation is:
Pt+1 – Pt = (Births – Deaths) + (In – Out)
i.e. Population Change = Natural Growth of Population + Net Migration.

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Vital Statistics deals with the two demographic fundamentals i.e. births (fertility) and deaths (mortality). It is also
concerned with migration, marriage, longevity, etc. In this section, we shall discuss four types of fertility and four types of
mortality rates.

Vital Statistics

• Fertility Rates
The four important types of fertility measures are: (i) crude birth rate (CBR), (ii) general fertility rate (GFR), (iii)
age specific fertility rate (ASFR) and (iv) total fertility rate (TFR).

i) Crude Birth Rate (CBR): The Crude Birth Rate (CBR) in an area, in any year (or time) is defined as the number of live
births in that area in that year or time per thousand populations. Thus, CBR = (B ÷ P) × 1000, where B is the total
number of live births registered in a defined geographical area (or a social group) within a time frame (usually a
complete year) and P is the mid-year population in the defined space and time. Trend in CBR in India shows that the
CBR has come down from 40 during 1941-51 to about 26 in 1991-2001 and about 22 in 2011. The main reasons for
the decreasing trend in CBR in India are: (i) the promotion of family planning programmes by government, (ii) spread
of literacy and increase in education level of people, (iii) increasing awareness among the people of the benefits of
adopting a small family norm, (iv) more participation of women in paid work and (v) increasing opportunity cost of
child bearing and rearing for women. The CBR in India compares to about 14 in U.S., 12 in China and 9 in Japan. Thus,
compared to developed countries, CBR in India is high. The major factors responsible for this are: (i) high infant
mortality rate; (ii) strong preference for a son; (iii) high economic value of children in traditional agrarian society; (iv)
lack of knowledge about family planning and contraception; (v) low age at marriage and polygamy; (vi) low education
of parents; and (vii) religious norms and practices.
Merits and Demerits of CBR: CBR is easy to understand and estimate. CBR can reasonably compare well the birth
rates at two not very distant points of time of the same region since the age and sex distribution of population
generally, do not change in short term. CBR takes into consideration the total population almost half of which are
males who are not directly involved in child birth. Moreover, only a restricted segment of women population (15-49
year) has the ability of child bearing.

ii) General Fertility Rate (GFR): GFR is the number of births per year per thousand women of childbearing age (aged
15-49).
Merits and Demerits of GFR: GFR overcomes the crude approach adopted in case of CBR. It is more scientific since it
considers total births with reference to women population of child bearing age only. The age of puberty is not the
same for girls coming from cold, temperate and hot climatic regions.
Therefore, before applying the formula, a judicious decision regarding the two limits of child bearing age of women is
required to be decided. Moreover, fertility varies with age i.e. within the two limits of fertility span. Therefore, it is
inappropriate to consider all women segment of age group 15- 49 together.

iii) Age Specific Fertility Rate (ASFR): The ASFR for any age group is the ratio of number of live births per woman to
the mid-year female population of the particular age group
Merits and Demerits: Since it is age-specific, the fertility rate of women belonging to different age groups within 15-
49 is taken into account. Generally, ASFR remains small in early ages of puberty, it rapidly increases till around 30 and
then declines until it comes down to almost zero around the age of 49 years. Not all women belonging to child bearing
age are exposed to the chance of child bearing but only those who are married in that age group and being able to give
birth. ASFR ignores both the marital status as well as the infertility element of some women in the child bearing age-
group.

iv) Total Fertility Rate (TFR): TFR provides a general index of fertility in a population under two assumptions: (i) every
woman who enters the child bearing age gives live births as per the ASFR for each age and (ii) no woman will die
before she leaves the reproductive period.

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Merits and Demerits: TFR is the most frequently used index of birth rate. It takes into account the entire fertility
span of women population and at the same time fertility of women belonging to particular age groups. TFR is less
precise because of the fact that not every woman shall start her reproductive period at age 15 and some would not
bear children.
TFR was estimated to be 5.2 for India in 1971 but is estimated to have come down to 3.6 in 1991 and further to 3.0 in
2002. According to UNDP Human Development Report 2001, TFR for the world population has dropped from 4.5
in 1975 to 2.8 in 1995-2000. In India, TFR has declined from 3.0 in 2002 to 2.4 in 2012. According to NFHS-5 (National
Family Health Survey) 2019-2021, TFR stands at 2.

• Mortality Rates
The Crude Death Rate (CDR) or the Crude Mortality Rate (CMR) in any year in an area is defined as the number of
deaths in the year per thousand populations i.e. CDR = (D ÷ P) × 1000, where D refers to the total number of deaths
from all causes registered in a defined geographical area (or a social group) within a time frame (usually a calendar
year) and P is the midyear population in the defined space and time.
Merits and Demerits: This is the most frequently used and most easily calculated and understood index of mortality.
It gives a general picture of mortality situation prevailing in the entire population under consideration. However, it is
based on the assumption that the risk of dying for every individual (P) is the same. It is not desirable to compare death
rates of two countries, two regions or two communities on the basis of CDR because of this limitation. In 2020, crude
death rate for India was 35.73 deaths per thousand population. Between 1971 and 2020, crude death rate of India
was declining at a moderating rate to shrink from 207.55 deaths per thousand population in 1971 to 35.73 deaths per
thousand population in 2020.

i) Age-Specific Death Rate (ASDR): Death occurs at all ages and the risk of mortality varies with age. It is therefore
necessary to analyse death rates for populations at different ages (or age groups) by calculating age-specific death
rates (ASDR).
Merits and Demerits: ASDR makes comparison between two population groups more meaningful. It reveals whether
persons in some specific age group have the same probability of dying as in the total population. However, estimation
of ASDR is difficult because unless we know accurately the age of the deceased, errors are bound to creep-in.

ii) Infant Mortality Rate: Children face a greater risk of mortality (i.e. deaths) than adults, especially during the first
year of their life. The health status of infants (i.e. those who are less than 12 months old) is an important indicator of
the level of healthcare and medical facilities available in an area. The Infant Mortality Rate (IMR) is defined as the
number of infants dying ‘under one year of age’ in a year in an area per thousand live births.

iii) Expectation of Life at Birth: It is the average number of years a new-born child is expected to live under current
mortality conditions. Expectation of life can be estimated at any age. For instance, expectation of life at age five is the
average number of years a child aged 5 today is expected to live.

• Demographic Transition
Demographic transition is a process by which countries transit from a situation of high birth and death rates to
one of low rates in both. Less Developed countries (LDCs) typically have high birth and death rates: as with
development slowly picking-up, death rates tend to fall earlier than birth rates, resulting in rapid population
increase. Advanced countries tend to have low birth and death rates, and a low or even negative rate of natural
increase.
Theory of demographic transition is based on the actual demographic experience of Western Countries.

C. P. Blacker (1945) identified five distinct phases of demographic transition as follows:

1. High Stationary stage, characterized by high birth rates and high death rates.
2. Early Expanding Stage characterized by falling birth rates with a time lag, for decreasing mortality.
3. Late Expanding Stage characterized by falling birth rates but rapidly decreasing mortality.

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4. Low stationary stage of population characterized by low birth rates balanced by equally low mortality.
5. Declining stage of population with low mortality and deaths exceeding births.

The figures for CBR and CDR in India for the period 1901-2011 is given in Table below. The data indicates that India
has been experiencing a fast decline in death rate since 1931. On the other hand, the birth rate has remained very
high during the period from 1901 to 1951. This, therefore, was the ‘early expanding stage’ of population i.e. the
second stage of demographic transition in India. From 1981, both the birth rate and the death rate has been declining
fast indicating that India is now in ‘late expanding stage’ of demographic transition. In 2010-15, at the World level,
83 countries were experiencing below replacement level fertility i.e. negative natural growth rate of population.
Thus, in spite of including in migration, countries like Japan (– 0.1), Spain (–0.2), Greece (–0.4), Romania (–0.8),
Lithuania (–1.6), etc. have registered negative average annual growth rate of population indicating their present
stage of demographic transition to be in the 5th stage.

Some of the major demographic features in which economies would experience significant shift during the course of
demographic transition are:
(i) Urbanization;
(ii) Changing sex-ratio;
(iii) Structure of population pyramid; and
(iv) Dependency ratio.

Table: CBR and CDR in India – 1901 to 2011

Year CBR CDR
1901 46 44
1911 49 43
1921 48 47
1931 46 36
1941 45 31
1951 40 27
1961 41 23
1971 41 19
1981 37 15
1991 33 11
2001 25 9
2011 22 7

Stages of India’s population growth

Phase 1 (1901-1921)- Period of stagnant population

• This phase is also known as the Primitive Demographic Transition Stage. It is the stage I of Demographic Transition
Model Theory.
• This stage is characterized by the following traits:
▪ Very high Birth Rate and Death Rate (approximately 40/ thousand)
▪ Epidemics, famines, droughts, lakhs of Indian soldiers in World War I.
▪ Low life expectancy.
• 1921 recorded an absolute decline in population numbers. The year 1921 is known as the year of the Demographic
Divide.
• From the view of population studies, India has been divided into 6 zones:
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• During 1901-21, Northern Zone suffered a net loss in population due to famines and epidemics.
• North-East zone witnessed a very high growth rate due to large-scale in-migration (migration of labors in Tea
plantation estates of Assam) and less famines and epidemics.
• The southern zone witnessed a normal Growth Rate since epidemics and famines were less.

Phase 2 (1921-1951)- Period of steady growth

• India entered in 2nd stage of the Demographic Transition Model Theory.
• The birth rate was still high but the death rate reduced (around 20/thousand) therefore, the population due to less
mortality induced growth. Reasons for high growth are:
▪ Intervention by government
▪ Vaccination
▪ Medical revolution
▪ PDS system led to the timely food supply in drought and famine area
• The population increased from 251 million to 361 million.
• Spatial analysis:
▪ North, Eastern, Southern Zone registered growth rates close to the national average.
▪ Central zone registered a low growth rate due to higher mortality and outmigration.
▪ Western zone registered high growth of 56% partially due to national growth and mainly due to in-migration
caused by industrial growth in Mumbai, Ahmadabad, Vadodara, and Surat.

Phase 3 (1951-1981)- Period of rapid population growth

• India still in 2nd phase of Demographic Transition Model Theory
• This stage referred to as the period of population explosion.
• There was a steep fall in mortality rate (12/1000 in 1981) but the fertility rate was still high (40/1000).
• The population increased from 361 million to 683.3 million in 1981.
• This population growth was due to improvements in health facilities and developmental activities. Thus it was called
as fertility-induced growth.
• Northern Zone experienced a high growth rate whereas Southern Zone experienced a low growth rate.

Phase 4 (1981-2011)- Period of high population growth rate with a definite sigh of slowing down
• Although the growth rate was still high but it started declining after 1981 (highest growth rate was in 1971- 2.48%).
• India experienced 3rd phase of Demographic Transition Model Theory.
• North and South zone has highest and lowest growth rate respectively.
• The birth rate declined rapidly from 36/1000 to 22.5/1000 in 2009.
• The death rate also continued to decline.
• Although in 2001 Census India added 182 million people over 1991 Census. In 2011 180 million people was added
over 2001 Census which implies a definite decline in growth rate in percentage and absolute terms.
• Since the 2001 census India continues with consistent irreversible population growth rate.
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• In 2011 there has been decline in child population below 14 years of age.
• The policy objective is to stabilise India’s population at 1.8 billion by 2041 census and India is expected to cross China’s
population by 2028 as per UNFPA report.
• Further trends in population growth in India according to UN Economic and Social Affairs.

• Urbanization
Urbanization is a process by which societies become more urban. It refers to a population shift from rural to urban areas.
Thus, it is a case in which the rate of growth of urban population is more than the rate of growth of rural population.
Two simple measures to gauge the degree of urbanization are the following

i) Percentage of Population in Urban areas (PU):

PU = (Size of urban population/ Total urban population) × 100
Higher the value of PU, higher is the degree of urbanization.
ii) Ratio of Urban-Rural Population (UR):
UR = (Size of Urban population/ Size of rural population) × 100
Higher the value of the ratio UR, higher is the degree of urbanization.

The share of urban population in India (PU) has increased from about 11 percent in 1901 to about 17 percent in 1951 and
further to 31 percent in 2011. There has been a gradual increase in the trend of urbanization in India over the period. The
Urban-Rural ratio (UR), on the other hand, has increased from 21 percent in 1951 to 45 percent in 2011. The rate of
urbanization has, however, been uneven across the states. For instance, the NCT of Delhi is the most urbanized with as
much as 98 percent of its population living in urban areas. Goa is the most urbanized among the states with 62 percent of
its population living in urban areas. The least urbanized states are Himachal Pradesh (10 percent) and Bihar (11 percent).
Census classification treats areas with population above a certain level as Urban Areas. Thus, every census has a potential
for reclassification certain areas into 'urban', though people in those areas continue to live in the same place.

Still urbanization is considered beneficial because of better opportunity for earning higher incomes, better infrastructure
and better awareness and response of people to social issues in general. Urbanization therefore contributes to
modernization and social change, the latter through lower birth rate, lower death rate, lower IMR and lower fertility rates.
These are mainly due to higher levels of education and healthcare facilities which are much better in urban areas than in
rural areas.
The pattern of urbanization in India is characterized by continuous concentration of population in large cities without
adequate expansion of resource base and amenities. As a result, it has generated problems in the areas of housing,
transport, water supply and sanitation, water, air and noise pollution, social infrastructure (schools, hospitals etc.), urban
poverty and unemployment and growth of slum areas.

• Sex Ratio
The gender composition of the population is measured by the sex ratio, defined as the number of females per
thousand males. It has been observed that females outnumber males in developed countries. India’s sex ratio,
however, shows that the society is masculine in respect of this demographic feature. The sex ratio in India has declined
from 972 in 1901 to 933 in 2001 which slightly increased to 943 in 2011. It varies widely across states: from 1084 in
Kerala to 879 in Haryana and among Union Territories, from 1037 in Pondicherry to 618 in Daman & Diu (as per 2011
census). The declining trend in the sex ratio in India has been due to a number of factors like: high Maternal Mortality
Rate (MMR), high IMR among the girls, high Child Mortality rate among the girls, strong son preference prevalent
among the parents, female illiteracy and low level of education, illegal female infanticide and female foeticide, etc.
Efforts to promote gender equality through emphasis on education of girls, empowerment of women, legislation to
prevent domestic violence against women and ban on the use of pre-delivery sex determining technology have been
scaled up to tackle these issues in the recent years in India. The latest initiative launched viz. ‘Beti Bachhao, Beti
Padhao’ is worth noting in this context.

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• Population Pyramid
Population Pyramid or age-sex pyramids are an elegant and useful way of graphically presenting the age-sex
distribution of population. A pyramid comprises of two ordinary histograms placed on their sides. The rules of
drawing pyramids are generally the same as those for plotting histograms, but there are certain conventions and
special features. These are:
first, pyramids are always drawn showing the male population on the left hand side and the female population on the
right hand side. The young are always at the bottom and the old at the top. It is conventional to use single year or 5-
year age groups; though other groupings are also possible.
second, the last open ended age-group is normally omitted, but in some cases it is shown.
third, the vertical scale shows the age groups and the horizontal scale shows the percentage of population or absolute
number of population of each group.
In case of percentages, the percentages are to be calculated using the total population of both sexes combined as the
base.
fourth, the horizontal scale must be uniform for both the sides of the pyramid. The vertical scale must also be uniform
for both the sides while drawing the histograms.

• Dependency Ratio
It is customary to classify age data in five-year age groups, such as 0-4, 5-9, 10-14, 15-19, 20-24 years and so on. Such
presentation of population age group- wise is useful for a wide variety of analytical purposes. Usually, population data
is clubbed for certain age-groups to get an idea on the potential labour force, economically active population, etc. as
follows.

Table: Classification of Population by Age- Group

Age Group Classification
0-14 Children
15-24 Young
25-59 Economically productive
60-79 Elderly
80+ Aged

The age-group wise distribution of population facilitates estimation of the size of population among children, young,
economically productive, elderly and aged segments of the population by country and region. Different indicators of
development can then be estimated among which ‘dependency ratio’ is one important indicator of development.
The UNDP HDR 2016 has defined the ‘dependency ratio’ separately for young age population and old age population
as follows.

(A) Young-age dependency ratio = {(Young Age (0-14) population) ÷ (Population ages (15-64))} ×100
(B) Old-age dependency ratio = {(Old Age (65 and above) population) ÷ (Population ages (15-64))} ×100
In less developed countries, dependency ratio is generally high. In India, the ‘dependency ratio’ is measured by
taking both the 0-14 and 60+ population as follows.
(C) Dependency Ratio = (Population of Children (0-14) + Population of Elderly (60+)) ÷ Population ages (15-59)
Children and elders i.e. those in the age groups of 0–14 and 60+ are expected to be taken care of by the working
age population 15-59. The Dependency ratio at (C) above indicates the responsibility of dependents per member
of the working age group population. A favourable dependency ratio tends to boost savings. This is possible only
if the working age population is productively employed.

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Population Ageing
One of the prominent global demographic events of 21st century is population ageing. Population ageing is a course of
demographic change in which the share of aged people increases in total population with a simultaneous decrease in the
share of younger ages. The main factors behind the incidence of population ageing are decline in mortality rate followed
by decrease in fertility rate along with increase in life expectancy rate. In 1950, the global share of 60+ people was 200
million or 8 percent of the total population. This
percentage has increased to 11 in 2011 and is projected to double to 22 in 2050. More specifically, in 2045, it is projected
that the number of aged persons will exceed the number of children in the world as a whole. In India also the percentage
of 60+ people is increasing steadily. For instance, the percentage of aged population to total population was 5.5 percent
in 1951 but has increased to about 7.5 percent in 2001 and further to 8.6 percent in 2011.
It is projected that the number of elderly population would be about 17 percent of the total population in India by 2051.

• Demographic Dividend
The recent rapid fertility decline in some parts of the world has opened up a new window of opportunity for achieving
faster growth rate in economic and human development. With steady decline in fertility, there will be fewer and fewer
children in the age group 0-14. The past high fertility ensures the growth of the present workforce and the present
low fertility implies smaller size of dependent child population in future. This feature of population trend is called
‘demographic window or dividend’. More specifically, the dividends
that accrue are:
(i) Higher labour supply for larger economic activities;
(ii) Fewer children with better health for women’s health, education and opportunity to join work force
(iii) Larger size of working age adults with larger earnings and larger savings i.e. improved capital supply for economic
activities;
(iv) Less investment will be required on children at both micro and macro level as less number of children will be
there to look after in the country;
(v) Better human development due to larger earnings, more investment in higher education and better health for
women and children (China improved its ranking in HDI by resorting to one-child family planning norm); and
(vi) Because of fertility decline and increase in the population of working age people, the dependency ratio will decline.
Low dependency ratio is helpful in economic development.

Typically, this window of opportunity, or the availability of the demographic dividend, lasts for 30 to 40 years,
depending upon the country. India reached the point of demographic window in 2011. The proportion of those aged
less than 15 years is still above 30 percent and the proportion of those aged 65 and above is below 15 percent. The
share of the working age population is rising (almost 60.3 percent in 2011) in India. On the other hand, Work
Participation Rate (WPR) is low at 39.8 percent in 2011. Urgent steps are, therefore, required to:
(i) generate employment opportunities on a scale sufficient to eradicate unemployment and underemployment; and
(ii) prioritise skill development among the youths to utilise new avenues of self-employment; and
(iii) extend the reach of the modern educational and training system so as to enable larger sections of the population
to benefit and thereby participate in the development process. Only then can India reap the benefits of
‘demographic dividend’.

• National Population Policy

The National Population Policy, 2000 (NPP 2000) reiterates the commitment of the government towards voluntary
approach in administering family planning services. It provides a policy framework to meet the reproductive and child
health needs of the people to achieve the net replacement levels in terms of TFR. The immediate objective of the NPP
2000 is to address the unmet needs for contraception, healthcare infrastructure and to provide integrated service
delivery for basic reproductive and child health care. The
medium term objective is to bring the TFR to replacement level by 2010 through the implementation of inter-sector
operational strategies. The long term objective of NPP 2000 is to achieve a stable population by 2045 in conformity
with requirements of the country to ensure sustainable economic development. The government has already taken
several steps and initiatives under the immediate objectives of NPP 2000.

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As a result of the Government’s efforts, the successes achieved are enumerated below:
• The Total Fertility Rate (TFR) has declined from 2.9 in 2005 to 2.2 in 2017 (SRS).
• 25 out of 37 States/UTs have already achieved replacement level fertility of 2.1 or less.
• The Decadal growth rate has declined from 21.54% in 1999-2000 to 17.64 % during 2001-11.
• The Crude Birth Rate (CBR) has declined from 23.8 to 20.2 from 2005 to 2017 (SRS).
• The Teenage birth rate has halved from 16 % (NFHS III) to 8 % (NFHS IV).

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Chapter
02 Development
Economic Development
The term economic development can be explained as the process by which the economic well-being and quality of life
of a nation, community, or particular region are improved according to predefined goals and objectives.
Economic development is a combination of market productivity and the welfare values of the nation.

Factors Affecting Economic development

The main factors affecting economic development include
• Levels of infrastructure – e.g. transport and communication.
• Education - Levels and standards of education have a significant influence on labour productivity. Without basic
literacy and numeracy, it is difficult for an economy to develop from manual labour to new higher tech industries in
the service sector. For example, good levels of education in India have given opportunities for growth in service
industries, such as IT and call centres.
• Levels of inward investment – Developing countries that can attract inward investment can see significant growth
in development due to higher levels of capital and benefits of attracting multinational companies into their economy.
For newly industrialised countries (NICs), inward investment has played a significant role in increasing economic
development.
• Levels of savings/capital – In growth models, such as Harod Domar, levels of savings and capital are seen as a key
factor in determining economic growth. Higher savings enables a virtuous circle of increased investment, higher
growth, and therefore, higher savings.
• Political stability / Law and order – Political stability and the protection of private property was ranked as the most
important factors for encouraging firms to invest in developing economies. Any sign of instability increases the
economic and personal risk of investing in developing countries.
• Macroeconomic stability – Similar to political stability, macroeconomic stability encourages investment and
development. This involves low rates of inflation and exchange rate stability. Rapid devaluation can cause capital flight
and a decline in growth.
• Labour mobility – Is labour able to move from relatively unproductive agriculture to more productive
manufacturing?
• Foreign aid – Targeted aid, can help improve infrastructure and living standards. It can be important for developing
economies with low levels of savings and capital investment. Aid depends on how it is used – whether it is tied to trade
deals or used to overcome market failure in areas such as education and health care. There is also some criticism of
foreign aid that it can influence incentives and
• Regional effects – Economic development is strongly influenced by the development of an economies neighbours.
For example, in the 1980s and 1990s, south east Asia showed strong levels of economic growth and development.
However, Sub-Saharan African countries experienced very slow growth. This is partly due to the gravity effect – the
theory that trade is most profitable and efficient with near neighbours. If a neighbour does well, there tends to be
spillover effects, such as increased trade and increased investment.
• Natural resources – Countries with higher levels of natural resources can use this for economic development. For
example, the revenues gained from oil have enabled the Gulf states to develop rapidly gaining high levels of real GDP.
For African and Asian countries, raw materials are an important source of revenue and export earnings which enables
higher development.
However, the link between natural resources and development is not straightforward. One theory suggests raw
materials can lead to a ‘resource curse’ where an economy is stuck in producing primary products with no incentive
to diversify the economy. It can also depend on whether natural resources are owned by developing economy and
actually filter through to different sections of society.

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• Tax rates and levels of corruption – e.g what percentage of tax rates are actually collected and spent on public
services. For foreign multinationals, a low tax rate may be important to encourage investment. However, there needs
to be a balance as the government need to collect tax to fund public services and public infrastructure.
• Free trade vs protectionism – An important debate in economic development is between the benefits of free trade
versus protectionism. Removal of tariff barriers can lead to a rise in exports, which contribute towards economic
development. Asian countries, such as Korea, Taiwan and China have all benefitted from removal in tariffs. However,
for developing economies stuck in producing primary products (where they have static comparative advantage) there
is a strong case for temporary tariffs to enable new infant industries to develop.
• Tourism – For developing economies with an attractive climate and environment, tourism can be an important source
of foreign earnings and incentive to develop infrastructure and new hotels.

Specific Measures of economic development

1. Human Development Index (HDI)
The Human Development Index (HDI) is a statistic composite index of life expectancy, education (mean years of
schooling completed and expected years of schooling upon entering the education system), and per capita income
indicators, which is used to rank countries into four tiers of human development. A country scores a higher level of HDI
when the lifespan is higher, the education level is higher, and the gross national income GNI (PPP) per capita is higher.
It was developed by Pakistani economist Mahbub ul Haq and was further used to measure a country's development
by the United Nations Development Programme (UNDP)'s Human Development Report Office.

The 2010 Human Development Report introduced an Inequality-adjusted Human Development Index (IHDI).
While the simple HDI remains useful, it stated that "the IHDI is the actual level of human development (accounting for
inequality), while the HDI can be viewed as an index of 'potential' human development (or the maximum level of HDI)
that could be achieved if there were no inequality."
The index does not take into account several factors, such as the net wealth per capita or the relative quality of goods
in a country.

1. Life Expectancy Index- Average life expectancy compared to a global expected life expectancy.
2. Education Index
(a) mean years of schooling
(b) expected years of schooling
3. Income Index (GNI at PPP)

2. Index of Human Poverty HPI

The human poverty index (HPI) was introduced by UN Development Programme (UNDP). To measure rates of
economic development for low-income countries it examines education, life expectancy, rates of absolute poverty and
access to health care and safe drinking water. In 2010, it was supplanted by the UN's Multidimensional Poverty
Index.
(HPI-1) It involves combining
1. Probability at birth of not surviving to age 40 (times 100)
2. Adult illiteracy rate
3. Arithmetic average of these three characteristics:

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• The percentage of the population without access to safe water.
• The percentage of population without access to health services.
• The percentage of malnourished children under five.

3. Multidimensional Poverty Index.

The Global Multidimensional Poverty Index (MPI) was developed in 2010 by the Oxford Poverty and Human
Development Initiative (OPHI) and the United Nations Development Programme and uses health, education and
standard of living indicators to determine the incidence and intensity of poverty experienced by a population. It has
since been used to measure acute poverty across over 100 developing countries. The Global MPI is released annually
by UNDP and OPHI and the results published in their websites. The MPI is published along with the Human
Development Index (HDI) in the Human Development Report. It replaced the Human Poverty Index.

Multidimensional Poverty Indices typically use the household as their unit of analysis, though this is not an absolute
requirement. A household is deprived for a given indicator if they fail to satisfy a given 'cutoff' (e.g. having at least one
adult member with at least six years of education). A household is assigned a 'deprivation score' determined by the
number of indicators they are deprived in and the 'weights' assigned to those indicators. Each dimension (health,
education, standard of living, etc.) is typically given an equal weighting, and each indicator within the dimension is also
typically weighted equally. If this household deprivation score exceeds a given threshold (e.g. 1/3) then a household is
considered to be 'multiply deprived', or simply 'poor'. The final 'MPI score' (or 'Adjusted Headcount Ratio') is
determined by the proportion of households deemed 'poor', multiplied by the average deprivation score of 'poor'
households.

4. Genuine Progress Indicator (GPI)

The GPI seeks to take a more accurate account of a nation’s well-being than just GDP (gross domestic product). GPI
starts with GDP as its base but also takes into account environmental and social factors such as
• Pollution
• Poverty rates
• Health standards
• Inequality rates
• Crime rates
• Cost of pollution abatement
• Cost of commuting
• Cost of road accidents
• Value of education
• Value of housework and parenting

The GPI Suggests that as economies gain increased GDP, economic welfare generally increases, however, there comes
a point where GPI starts to grow more slowly and eventually stagnate. In other words, higher GDP does not
automatically lead to economic development because the costs of growth become as high as the benefits.

5. Gross National Happiness Index

Gross national happiness (GNH) is a measure of economic and moral progress that the king of Bhutan introduced in
the 1970s as an alternative to gross domestic product. Rather than focusing strictly on quantitative economic
measures, gross national happiness takes into account an evolving mix of quality-of-life factors.

The concept of GNH has often been explained by its four pillars: good governance, sustainable socio-economic
development, cultural preservation, and environmental conservation. Lately the four pillars have been further
classified into nine domains in order to create widespread understanding of GNH and to reflect the holistic range of
GNH values. The nine domains are: psychological wellbeing, health, education, time use, cultural diversity and
resilience, good governance, community vitality, ecological diversity and resilience, and living standards. The domains

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represent each of the components of wellbeing of the Bhutanese people, and the term wellbeing here refers to fulfilling
conditions of a "good life" as per the values and principles laid down by the concept of Gross National Happiness.

6. Gender Development Index (GDI)

It is an index designed to measure gender equality. GDI, together with the Gender Empowerment Measure (GEM),
was introduced in 1995 in the Human Development Report written by the United Nations Development Program. The
aim of these measurements was to add a gender-sensitive dimension to the Human Development Index (HDI). The first
measurement that they created as a result was the GDI. The GDI is defined as a "distribution-sensitive measure that
accounts for the human development impact of existing gender gaps in the three components of the HDI". Distribution
sensitive means that the GDI takes into account not only the averaged or general level of well-being and wealth within
a given country, but focuses also on how this wealth and well-being is distributed between different groups within
society.

Difference between Economic Growth and Economic Development

Economic Growth Economic Development

Economic growth is the increase in the inflation- Economic development is the process by which a nation
adjusted market value of the goods and services improves the economic, political, and social well-being of
produced by an economy over time. its people.

Narrow concept Normative concept i.e. it applies in the context of people's

sense of morality.
An aspect of Economic Development It has many aspects. One aspect is Economic Growth.

Increase in real national income / national output. Improvement in quality of life and living standards, e.g.
measures of literacy, life-expectancy and health care.

Gross domestic product (GDP) GDP per capita – Growing development population, Income
distribution, Literacy and education, Access to Healthcare,
Social security and pensions, Modern transportation etc.

It is measured by Quantitative factors such as The qualitative measures such as Human Development
increases in real GDP or per capita income. Index (HDI), Gender- Related Index (GDI), Human Poverty
Index (HPI), Infant Mortality, Literacy Rate etc. are used to
measure economic development.

It brings qualitative changes in the economy. It leads to qualitative as well as quantitative changes in the
economy.

History of Economic development in India

The economic development in India followed socialist-inspired politicians for most of its independent history,
including state-ownership of many sectors; India's per capita income increased at only around 1% annualized rate in
the three decades after its independence. Since the mid-1980s, India has slowly opened up its markets through
economic liberalization. After more fundamental reforms since 1991 and their renewal in the 2000s, India has
progressed towards a free market economy.

In the late 2000s, India's growth reached 7.5%, which will double the average income in a decade. IMF says that if India
pushed more fundamental market reforms, it could sustain the rate and even reach the government's 2011 target of

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10%. States have large responsibilities over their economies. The average annual growth rates (2007–12) for Gujarat
(13.86%), Uttarakhand (13.66%), Bihar (10.15%) or Jharkhand (9.85%) were higher than for West Bengal (6.24%),
Maharashtra (7.84%), Odisha (7.05%), Punjab (11.78%) or Assam (5.88%). India is the Fifth largest economy in the
world by nominal basis and the third largest by purchasing power parity adjusted exchange rates (PPP). On per capita
basis, it ranks 140th in the world or 129th by PPP.

The economic growth has been driven by the expansion of the services that have been growing consistently faster than
other sectors. It is argued that the pattern of Indian development has been a specific one and that the country may be
able to skip the intermediate industrialization-led phase in the transformation of its economic structure. Serious
concerns have been raised about the jobless nature of the economic growth.

Favourable macroeconomic performance has been a necessary but not sufficient condition for the significant
improvement in the human development indicators. Although the rate of poverty declined after economic reforms of
1991, the improvement in human development has been less than satisfactory. For instance, child malnutrition has
continued to persist (46% in 2005–6).

The progress of economic changes in India is followed closely. The World Bank suggests that the most important
priorities are public sector reform, infrastructure, agricultural and rural development, removal of labour regulations,
reforms in lagging states, and HIV/AIDS. For 2018, India ranked 77 th in Ease of Doing Business Index. According to
Index of Economic Freedom World Ranking an annual survey on economic freedom of the nations, India ranks 123 rd
as compared with China and Russia which ranks 138th and 144th respectively in 2014.

At the turn of the century India's GDP was at around US$480 billion. As economic reforms picked up pace, India's GDP
grew five-fold to reach US$2.2 trillion in 2015 (as per IMF estimates).

India's GDP growth during January–March period of 2015 was at 7.5% compared to China's 7%, making it the fastest
growing major economy. During 2014–15, India's GDP growth recovered marginally to 7.3% from 6.9% in the previous
fiscal. During 2014–15, India's services sector grew by 10.1%, manufacturing sector by 7.1% and agriculture by 0.2%.
Indian Economy grew at 7.6 and 7.1 in FY 2015–16 and FY 2016–17 respectively as major reforms had taken place like
Demonetization and implementation of GST in FY 2016–17.

Sustainable Development
Sustainable development is development that meets the needs of the present without compromising the ability of
future generations to meet their own needs. Sustainable development includes the protection of future economic
growth and future development. In other words, it means a better quality of life for everyone, now and for generations
to come. Sustainable development includes the protection of future economic growth and future development. Growth
is essential, but sustainable development requires it to be different. It must become more concerned about the physical
environment not only to present generation, but to the future generation also. It means that the current consumption
cannot be financed for long by increasing economic debt and ecological imbalance which future generation will pay.
Sustainable development constantly seeks to achieve social and economic progress in ways that will not exhaust the
earth’s finite natural resources. Sustainable development is a process of development in which economic and other
policies are designed to bring about development which is economically, socially and ecologically sustainable. The
concept thus is pro-people, pro-job and pro-nature. It gives highest priority to poverty reduction, productive
employment, social integration and environmental regeneration.
The sustainable development thus requires
• Preservation of Ecological Resources and greater use of renewable resources.
• Encouragement to the use of environmentally-safe technologies for development purposes i.e. focus on reduction
of all kinds of pollution involved in the economic activities.
• Formulation and implementation of policy framework for people-security and human justice, including ecological
and economic security.

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Common features of Underdeveloped Countries:
1. Low per Capita Income: The level of per capita income is very low in underdeveloped countries.
2. Poor Level of Living: The vast majority of people in underdeveloped nations lie under the conditions of poverty,
malnutrition, disease, illiteracy, etc. Even basic necessities of life such as minimum food clothing and shelter are not
easily accessible to the poor masses.
3. High Rate of Growth of Population: Population growth in underdeveloped countries neutralizes economic growth.
High population implies greater consumption expenditure and lower investments in productive activities and slows
down the economic development.
4. Highly Unequal Income Distribution: The income inequality between the rich and the poor people within the
underdeveloped countries is also very high.
5. Prevalence of Mass Poverty: Low level of per capita income combined with high degree of inequalities in its
distribution leads to widespread poverty in underdeveloped countries.
6. Low Levels of Productivity: The Productivity level (i.e. output produced per person) tends to be very low in an
underdeveloped country which is mainly due to: (i) inefficient workforce which itself is a consequence of poverty, ill
health and lack of education (ii) Low work culture (iii) Low use of capita in the form of machinery and equipment.
7. Low Rate of Capital Formation: The saving rate in an underdeveloped country is quite low and rate of capital
formation is also very slow.
8. Technological Backwardness: In most of the sectors, an underdeveloped economy the techniques of production
employed are generally obsolete mainly due to low saving rate.
9. High Level of Unemployment: Unemployment levels are very high in the underdeveloped countries mainly due to
lack of capital and low level of development in various economic sectors, these countries are not able to absorb the
rising labor supply.
10. Low Social Indicators of Development: The under-developed countries have very low social indicators such as low
literacy rate, high infant mortality rate, low expectancy of life, etc. as compared to the developed countries.

Various Developmental programs of the Government

• Pradhan Mantri Jan Dhan Yojana (PMJDY):
Financial inclusion and access to financial services for all households in the country is the main objective of PMJDY.
Pradhan Mantri Jan Dhan Yojana is a national mission to bring comprehensive financial inclusion of all the households
in the country. Under the PMJDY, any individual above the age of 10 years and does not have a bank account can open
a bank account without depositing any money.
The scheme was to ensure the access to financial services such as banking / savings & deposit Accounts, remittance,
credit, debit cards, insurance and pension in affordable manner. The scheme was mostly targeted to the people
belonging to the Below Poverty Line but is beneficial to everyone who does not have a bank account. Jan Dhan Yojana
has seen a great success, about 21 crore accounts have been opened in just about one and half year under the scheme.
Out of the total 12.87 crore in rural area and 8.13 crore accounts have been opened in urban areas. Despite of zero
minimum balance, there is 33074.89 crore rupees balance in these accounts with 28.88% accounts opened with zero
balance.

• Sukanya Samriddhi Yojana:

The main aim of this scheme is to encourage parents to build a fund for the future education and marriage expenses
for their female child.
Sukanya Samriddhi Yojana is an ambitious small deposit savings scheme for a girl child. Under the scheme, a saving
account can be opened in the name of girl child and deposits can be made for 14 years. After the girl reaches 18 years
of age, she can withdraw 50% of the amount for marriage or higher study purposes.
After the girl completes 21 years of age, the maturity amount can be withdrawn including the interest at rates decided
by Government every investments and returns are exempt from section 80C of Indian income tax act. The maximum
investment of Rs. 1.5 Lakh per year can be made while minimum deposit is Rs. 1000/- per year. In case of more than

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one girl child, parents can open another account on the different name but only for two girl child. Only exception is
that the parents have twins and another girl child.

• Pradhan Mantri Mudra Yojana (PMMY):

The main objective is to provide financial support for growth of micro enterprises sector.
Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana was launched with the purpose to
provide funding to the non-corporate small business sector. Pradhan Mantri Mudra Yojana (PMMY) is open and
is available from all Bank branches across the country.
The small businesses/startups or entrepreneurs can avail loans from Rs. 50 thousand to 10 Lakh to start/grow their
business under the three, Shishu, Kishore and Tarun categories of the scheme.

• Pradhan Mantri Suraksha Bima Yojana (PMSBY):

The main objective is to provide accidental insurance cover to all Indian citizens Pradhan Mantri Suraksha Bima
Yojana which is also a government backed accident insurance scheme in India aimed at increasing the penetration of
accidental insurance cover in India.
The scheme is open and available to all Indian citizens between the ages of 18 to 70 years. Under the scheme, the
policy holder can get a life insurance cover of Rs. 2 Lakh with an annual premium of just Rs. 12 excluding service tax.
All the Indian citizens between 18-70 years of age with a saving bank account are eligible to avail the scheme.

• Atal Pension Yojana (APY):

The main objective is to Increase the number of people covered under any kind of pension scheme. Atal Pension Yojana
is one of the three Jan Suraksha schemes launched by PM Narendra Modi. APY is aimed at increasing the number of
pension scheme beneficiaries across the country. The scheme is especially targeted to the private unorganized sector
and is open to all Indian citizens between the age of 18 to 40 years.

• Pradhan Mantri Awas Yojana (PMAY):

Achieve housing for all by the year 2022, 2 crore in Urban and 3 crore homes in Rural areas is the main objective.
Pradhan Mantri Awas Yojana is an ambitious scheme of Narendra Modi Government. Under the PMAY, the government
aims to provide about 5 Crore affordable homes to the people belonging to EWS and LIG categories by the year 2022.
There is a target of building 2 crore homes in urban area and 3 crore in rural areas across the country. Under the
scheme, the government will provide financial assistance to the poor home buyers, interest subsidy on home loan and
direct subsidy on homes bought under the scheme.

• Sansad Adarsh Gram Yojana (SAGY):

Sansad Adarsh Gram Yojana (SAGY) is a rural development scheme launched in 2014 by the Central Government in
which every Member of Parliament (MP) will have the responsibility of the development of three villages, including
personal, human, social, environmental and economic development of the villages. Its main objective is to achieve
better standard of living as well as the quality of life in the villages. Funding of this scheme is taken from the existing
schemes.

• Pradhan Mantri Fasal Bima Yojana (PMFBY):

The main aim is to provide insurance cover to Rabi and Kharif crops and financial support to farmers in case of damage
of crops.
In order to make crop insurance simpler and cheaper for the farmers. In order to make crop insurance simpler and
cheaper for the farmers and to provide them with better insurance services, a Central Sector Scheme of Pradhan
Mantri Fasal Bima Yojana (PMFSY) was launched by the Government of India replacing NAIS and MNAIS.

• Pradhan Mantri Gram Sinchai Yojana (PMGSY):

The main objective is irrigating the field of even farmer and improving water use efficiency to provide ‘Per Drop More
Crop’.

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The scheme is aimed to attract investments in irrigation system at field level, develop and expand cultivable land in
the country, enhance ranch water use in order to minimize wastage of water, enhance crop per drop by implementing
water-saving technologies and precision irrigation. All the States and Union Territories including North Eastern States
are covered under the programme.

• Pradhan Mantri Garib Kalyan Yojana (PMGKY):

The main objective is to implement the pre-poor welfare schemes in more effective way and reaches out to more poor
population across the country.
Garib Kalyan Yojana is a Poverty Alleviation Scheme, which is primarily a work shop that you can pay and attend.
The effort of the campaign and workshop is to motive and apprise the member of parliaments to help them effectively
implement the government run schemes for the welfare of poor in the country.

• Pradhan Mantri Jan Aushadhi Yojana (PMJAY):

Providing drugs/medicines at affordable cost across the country is the main objective.
Under the scheme, over 500 medicines will be sold through Jan Aushadhi stores at price less than the market price.
Private hospitals, NGO’s, and other social groups are eligible to open the Jan Aushadhi stores with a one-time
assistance of Rs. 2.5 Lakh from the central Government.

• Make in India:
The main objective is to encourage multi-national, as well as domestic companies to manufacture their products in
India and create jobs and skill enhancement in 25 sectors.
The major objective behind the initiative is to focus on job creation and skill enhancement in 25 sectors of the
economy. The initiative also aims at high quality standards and minimizing the impact on the environment. The
initiative hopes to attract capital and technological investment in India.

• Swachh Bharat Abhiyan:

The main objective is to fulfill Mahatma Gandhi’s dream of a clean and hygienic India.
Swachh Bharat Mission is being implemented by the Ministry of Urban Development (UD) and by the Ministry of
Drinking Water and Sanitation (DWS) for urban and rural areas respectively.

• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA):

This is one of the most important and effective scheme for rural development. Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA) of 2005 guarantees100 days of employment to any rural household adult
who wants to do unskilled manual work in a financial year. The Act seeks to provide employment opportunity to the
working people in order to fulfill their fundamental right to live life with dignity. Under this act, if a person does not
get a job within 15 days, he is eligible for getting unemployment allowance.

• Kisan Vikas Patra:

The main objective is to provide safe and secure investment avenues to the small investors.
Unlike in PPF the Kisan Vikas Patra certificates would be available in the denominations of Rs 1,000, 5,000, 10,000
and 50,000 and there is no upper limit on investment in KVPs.

• Soil Health Card Scheme:

The main objective is to help farmers to improve productivity from their farms by letting them know about
nutrient/fertilizer requirements for their farms.
The soil health card studies and reviews the health of soil or rather we can say a complete evaluation of the quality of
soil right from its functional characteristics, to water and nutrients content and other biological properties. It will also
contain corrective measures that a farmer should adopt to obtain a better yield.

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• Digital India:
The main objective is to deliver Government services to citizens electronically by improving online infrastructure and
by increasing Internet connectivity.
The Digital India programme is a flagship programme of the Government of India with a vision to transform India into
a digitally empowered society and knowledge economy. The vision of Digital India programme is to transform India
into a digitally empowered society and knowledge economy.

• Skill India:
Train over 40 crore people in India in different skills by 2022 is the main objective.
The main goal of Skill India Program is to create opportunities, space and scope for the development of talents of the
Indian youth. The scheme also targeted to identify new sectors for skill development and develop more of those
sectors.

• Beti Bachao, Beti Padhao Yojana:

To generate awareness and improving the efficiency of welfare services meant for women are the main objectives.
The scheme is to have as focused intervention and multi-section action in almost 100 districts with low Child Sex Ratio
(CSR).

• Mission Indradhanush:
The main objective is to immunize all children as well as pregnant women against seven vaccine preventable
diseases namely diphtheria, whooping cough (Pertussis), tetanus, polio, tuberculosis, measles and hepatitis ‘B’ by
2020.
The aim of Mission Indradhanush is to achieve full immunization in 352 districts which includes 279 mid priority
districts, 33 districts from the North East states and 40 districts from phase one where huge number of missed out
children were detected.

• Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY):

Electric supply feeder separation (rural households & agricultural) and strengthening of sub-transmission &
distribution infrastructure including metering at all levels in rural areas.
DDUGJY will help in providing round the clock power to rural households and adequate power to agricultural
consumers. The earlier scheme for rural electrification viz. Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) has
been subsumed in the new scheme as its rural electrification component.

• Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDUGKY):

Achieving inclusive growth, by developing skills and productive capacity of the rural youth from poor families are the
main objectives.
DDUGKY aims to train rural youth who are poor and provide them with jobs is having regular monthly wages. It is
one of the cluster initiatives of the Ministry of Rural Development that seeks to promote rural livelihoods. It is a part
of the National Rural Livelihood Mission (NRLM) – the Mission for poverty reduction called Aajeevika.

• Pandit Deendayal Upadhyay Shramev Jayate Yojana (PDUSJY):

The main objective is to consolidate information of Labour Inspection and its enforcement through a unified web
portal, this will lead to transparency and accountability in inspections. A Unified Labour Portal, known as the Shram
Suvidha portal was launched under the scheme as a platform to facilitate the implementation of a transparent system
for information and data base management.

• Atal Mission for Rejuvenation and Urban Transformation (AMRUT):

The main aim is to provide basic services (e.g. water supply, sewerage, urban transport) to households and build
amenities in cities which will improve the quality of life for all, especially the poor and the disadvantaged.
The purpose of Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is to-
(i) ensure that every household has access to a tap with assured supply of water and a sewerage connection;
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(ii) increase the amenity value of cities by developing greenery and well maintained open spaces (e.g. parks); and
(iii) reduce pollution by switching to public transport or constructing facilities for non-motorized transport (e.g.
walking and cycling).

• Swadesh Darshan Yojana:

The main aim is to develop world class tourism infrastructure. As part of the Swadesh Darshan Scheme, Theme Based
Tourism Circuits (TBCT) around specific themes such as religion, culture, ethnicity, niche, etc. are identified for
infrastructure development across the country.

• Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD):

The main aim to develop world class tourism infrastructure in Amritsar, Ajmer, Amaravati, Dwaraka, Gaya,
Kanchipuram, Kedarnath, Kamakhya, Mathura, Puri, Varanasi and Vellankani.
PRASAD scheme aims to create spiritual centres for tourism development within the nation. As part of mission
strategy, religious destinations that have potential to be show-cased as world-class tourism products are identified
and infrastructure is developed on a priority basis.

• National Heritage City Development and Augmentation Yojana (HRIDAY):

The main objective is bringing together urban planning, economic growth and heritage conservation in an inclusive
manner to preserve the heritage character of each Heritage City. The Scheme is being implemented in 12 identified
Cities namely, Ajmer, Amaravati, Amritsar, Badami, Dwarka, Gava, Kanchipuram, Mathura, Puri, Varanasi, Velankanni
and Warangal.

• Udaan Scheme:
The main objective is encouraging girls for higher technical education and aims to provide a platform that empowers
girl students and provides them with better learning opportunities.
It is a mentoring and scholarship scheme to enable meritorious girl students to transit from schools to technical
education without much difficulty and also aims to enrich and enhance teaching and learning of mathematics and
science at senior secondary school level by providing free online resources for all.

• National Bal Swachhta Mission:

The main objective is to provide hygienic and clean environment, food, drinking water, toilets, schools and other
surroundings to the children.
The Bal Swachhta Mission is a part of the nationwide sanitation initiative of ‘Swachh Bharat Mission’ launched by the
Prime Minister on 2nd October, 2014.

• One Rank One Pension (OROP) Scheme:

The main objective is to provide same pension, for same rank, for same length of service, irrespective of the date of
retirement.
This is not a Modi Government scheme; however, the government is making its efforts to implement the long pending
scheme.

• Smart City Mission:

The main objective is to develop 100 cities all over the country making them citizen friendly and sustainable. Under
the mission, the NDA Government aims to develop smart equipped with basic infrastructure and offer a good quality
of life through smart solutions. Assured water and power supply, sanitation and solid waste management, efficient
urban mobility and public transport, robust IT connectivity, e-governance and citizen participation along with safety
of its citizens are some of the likely attributes of these smart cities.

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• Gold Monetisation Schemes:
The main objective is to reduce the reliance on gold imports over time. The programme is to lure tonnes of gold from
households into the banking system. Under the scheme, people can deposit gold into the banks and earn interest based
on the value of the gold.

• Startup India, Standup India:

The main objective is to provide support to all start-up businesses in all aspects of doing business in India. Under the
scheme, the start-ups will adopt self-certification to reduce the regulatory liabilities. An online portal, in the shape of
a mobile application, will be launched to help start-up founders to easily register. The app is scheduled to be launched
on April 1.

• Digi Locker:
The main objective is to provide a secure dedicated personal electronic space for storing the documents of resident
Indian citizens. It is a part of Digital India programme, Digital Locker has been designed to reduce the administrative
overhead of government departments and agencies created due to paper work. It will also make it easy for the
residents to receive services by saving time and effort as their documents will now be available anytime, anywhere
and can be shared electronically.
The Government of India will provide financial support of Rs. 45,800 crore over the entire implementation period of
IPDS under which strengthening of sub-transmission network, metering, IT application, customer care Services,
provisioning of solar panels will be implemented.

• Shyama Prasad Mukherji Rurban Mission:

The main objective is to create 300 rural clusters across the country and strengthen financial, job, and lifestyle
facilities in rural areas.
Urban Mission is a solution for both villages and cities in the country- that would promote growth of villages and its
residents at the place where they are. Under the mission, the government will identify and develop 300 rural clusters
with urban like facilities in the next 3 years.

• Sagarmala Project:
The main objective is to transform the existing ports into modern world class ports.
The prime objective of the Sagarmala project is to promote port-led direct and indirect development and to provide
infrastructure to transport goods to and from ports quickly, efficiently and cost effectively. The Sagarmala Project,
aimed at port-led development in coastal areas, is bound to boost the country’s economy and the government has
lined up about Rs 70,000 crore for its 12 major ports only.

• ‘Prakash Path’ – ‘Way to Light’ – The National LED Programme:

The main objective is to distribute LED bulbs and decrease the power consumption.
This is one of the many schemes launched by Narendra Modi government India. The programme has been launched
to distribute and encourage the use of LED light bulbs to save both cost and consumption.

• UJWAL Discom Assurance Yojana (UDAY):

The main objective is to obtain operational and financial turnaround of State owned Power Distribution Companies
(DISCOMs).
The Scheme aims to reduce the interest burden, reduce the cost of power, reduce power losses in Distribution sector,
and improve operational efficiency of DISCOMs.

• National Sports Talent Search Scheme (NSTSS):

The main objective is to identify sporting talent among students in the age group of 8-12 years. The scheme is being
implemented by the Sports Authority of India (SAI), under the Ministry of Youth Affairs & Sports for spotting talented
young children in the age group of 8-14 years from schools and nurturing them by providing scientific training.

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• Rashtriya Gokul Mission:
The main objective is to conserve and develop indigenous bovine breeds.
Rashtriya Gokul Mission aims to conserve and develop indigenous breeds in a focused and scientific manner. It is a
focused project under National Programme for Bovine Breeding and Dairy Development, with an outlay of Rs 500
crore during the 12th Five Year Plan.

• PAHAL-Direct Benefits Transfer for LPG (DBTL) Consumers Scheme:

The main objective is to send the subsidy money of LPG cylinders directly into the bank accounts of the consumers
and increase efficiency & transparency in the whole system.
Under the scheme, the LPG consumer can now receive subsidy in his bank account by two methods. Such a consumer
will be called CTC (Cash Transfer Compliant) once he joins the scheme and is ready to receive subsidy in the bank
account.

• The National Institution for Transforming India (NITI AAYOG):

The main objective is to foster involvement and participation in the economic policy-making process by the State
Governments of India.
The National Institution for Transforming India (NITI) which replaced 65-year-old Planning Commission will act more
like a think tank or forum, in contrast with the Commission which imposed five- year-plans and allocated resources
to hit set economic targets.

• Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY):

The main objective is to Safeguard Health, Environment and Economic Conditions of the Tribals. Pradhan Mantri
Khanij Kshetra Kalyan Yojana (PMKKKY) is meant to provide for the welfare of areas and people affected by mining
related operations, using the funds generated by District Mineral Foundations (DMFs).

• Namami Gange Project:

The main objective is to integrates the efforts to clean and protect the Ganga River in a comprehensive manner.
Namami Gange approaches Ganga Rejuvenation by consolidating the existing ongoing efforts and planning for a
concrete action plan for future. The interventions at Ghats and River fronts will facilitate better citizen connect and
set the tone for river centric urban planning process.

• Pradhan Mantri Ujjwala Yojana:

The main objective is to distribute free LPG connections to the women belonging to 5 Crore BPL families across the
country.
According the estimates, about 1.50 Crore BPL families will be benefitted under the scheme in the year 2016-17. The
scheme will cover 3.5 Crore more BPL families in the next two years. The scheme provides a financial support of Rs
1600 for each LPG connection to the BPL households. This is the first ever welfare scheme by the Ministry of Petroleum
and Natural Gas which would benefit crores of women belonging to the poorest households.

• Rashtriya Gram Swaraj Abhiyan:

The main objective is to help Panchayat Raj Institutions deliver Sustainable Development Goals.

• National Mission for Clean Ganga:

The National Mission for Clean Ganga (NMCG) was implemented by the National Council for Rejuvenation, Protection
and Management of River Ganga also known as the National Ganga Council. This mission was established in 12th
August 2011 under the Societies Registration Act,1860 as a registered society. The National Mission for Clean Ganga
(NMCG) under National Ganga Council is supported by the State level Programme Management Groups (SPMGs) in
the state of Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, and West Bengal. It is an initiative taken by the Government
of India to address the pollution of the river Ganga by providing financial and technical assistance.

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• Ayushman Bharat Yojana:
Ayushman Bharat or “Healthy India” is a national initiative launched by Prime Minister Narendra Modi as the part of
National Health Policy 2017, in order to achieve the vision of Universal Health Coverage (UHC). This initiative has
been designed on the lines as to meet SDG and its underlining commitment, which is “leave no one behind”. Ayushman
Bharat is an attempt to move from sectoral and segmented approach of health service delivery to a comprehensive
need-based health care service. Ayushman Bharat aims to undertake path breaking interventions to holistically
address health (covering prevention, promotion and ambulatory care), at primary, secondary and tertiary level.
Ayushman Bharat adopts a continuum of care approach, comprising of two inter-related components, which are -
Establishment of Health and Wellness Centres
Pradhan Mantri Jan Arogya Yojana (PM-JAY)

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Chapter
03 Globalization
The Concept and definition of Globalization
In very simple terms globalization can be depicted as increasing global interconnectedness. It is a process rather than an
outcome, which refers to the trend toward the growing interconnectedness of different parts of the world, not to their
being interconnected. It primarily is an interchange of economic, social, cultural, political, technological attributes that
takes place between societies when different societies come into contact with each other. Though this interchange is going
on for times immemorial, this process was termed as “globalization” for the first time around the second half of 20th
century while much of the literature on this has appeared since the late 1970s and 1980s.

Globalization as an idea of modernization within the global market was mentioned in the writings of Marx and Saint-
Simon also. Certain scholars even argue that this process of globalization has been going on since the beginning of
mankind and it has affected all cultures, even remote and isolated, though in varying degrees. The contemporary
globalization differs from the process that could be observed in the past primarily in terms of the quantum of interchange
and inter connectedness. Everything happens much faster today than it did in previous eras. The current process of
globalization, which is popularly described as gradual removal of barriers to trade and investment between nations, was
started towards the end of the 20th century. It is said to aim to achieve economic efficiency through competitiveness, while
seeking the broader objectives of economic and social development. It touches all spheres of human life; economic, social,
cultural, political and environmental.

The most common definition of present day globalization refers to the growing integration of various countries
to the world economy. It results mostly from a freer movement of capital, products and information, which affects not
just the economy, but also, as we said earlier, the political, cultural, social and environmental arenas. Different disciplines
such as Economics, History, Political Science, Sociology, etc. employ different criteria for elaborating and defining the
concept of globalization. Anthony Giddens, a sociologist, defined globalization as an intensification of worldwide social
relations, via which faraway places are linked together in such a way that events in one place are affected by a process
taking place many miles away and vice versa. David Henderson (1999), an economist, views globalization as a model of
fully internationally integrated markets meeting the two conditions of i) the free movement of goods, services, labour and
capital resulting in a single market in inputs and outputs, and ii) full national treatment for foreign investors as well as
nationals working oversees, so that economically speaking there are no
foreigners.

Keniichi Ohmae’s phrase “the borderless world” captures the sense of radical progress and modernity and of life
beyond the constraints of the traditional nation-state, which infuses much of the popular writing about globalization
(Ohmae 1990). For Richard O’Brian (1992), globalization essentially refers to a mixture of international, multinational,
offshore and global activities and involves a general progression from the domestic to the global. Malcolm Waters (1995)
finds globalization as a social process in which the constraints of geography on social and cultural arrangements recede
and in which people become increasingly aware that they are receding. For him globalization merely implies greater
connectedness and de-territorialisation. Scholte (1999) too understands globalization as a process of de-territorialisation
and global relations as supra territorial.

For some others globalization essentially means an intensification of multinational, international and transnational
linkages in all spheres of human activity, including trade and commerce, governance and non-government lobbying as a
consequence of new communication technology of the contemporary period (Galligan et al 2001). Pieterse (2001) calls
the contemporary globalization as accelerated globalization. Current accelerated globalization is shorthand for several
major interwoven trends. According to him current accelerated globalization comes in a package together with i)
informatisation,
which means the role of information and communication technologies ii) flexibilisation that means changes in production
systems towards flexible production, and iii) reconfiguration of states and regionalization.

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From the above account, it can be concluded that globalization is a multifaceted, multidimensional and comprehensive
phenomenon having its potential impact on a whole range of contemporary social, political, cultural and economic
relationships.

Core features of Globalization

Admittedly, these different definitions reflect the variations in the range of phenomena
encompassing the tern1 "globalization". Based on these variations in the characterization of globalization. it is possible to
identify at least five distinct features of the term:
1. It is most usefully employed as a descriptive rather than a prescriptive term. It does not designate some desirable or
undesirable end to be accepted or avoided. It merely reflects a set of social, political, economic and technological forces
that have recently become distinctly pronounced.
2. The term in its usage is perhaps relatively new whereas the phenomenon that it designates could by no means be
treated as new. The past has also experienced the phenomena that the term "globalization" entails.
3. The institutions that have emerged as a consequence of the globalization process extend beyond the power and
authority of nation-states. So much so, in the "globalizing" international affairs, nation-states are no longer exclusive
actors as in the past but besides there are other actors too which, among others, include non-government
organizations (NGOs), environmental movements, transnational corporations, ethnic nationalities and multi-state
regional organizations.
4. In the 'globalizing" world, the role performance of the new actors encompasses a relatively large field because of the
growing number of economic, political and communication networks. To that extent, these networks have made
nation-state boundaries porous and permeable to tile movement of people, goods, services, ideas and information.
5. The globalization process has not only made international relations more expansive but also intensive because there
are not only greater number of actors and networks influencing one another, but more importantly. the impact each
one makes on the other is qualitatively greater than in the past. Global media networks, the products of transnational
corporations and the large migration of people from one part of the world to the other have greatly influenced the
social and cultural moorings of people across the world.

Economic Dimensions of globalization

Globalization is a complex and multidimensional phenomenon. Although it makes an impact in all spheres of human life,
the economic dimension of globalization is more prominent and far-reaching than any others. The most important
dimensions of the current phase of economic globalization are the breaking down of national economic barriers;
international spread of trade, financial and production activities and the growing power of transnational corporations and
international financial institutions. Here in this section the economic dimensions of globalization are discussed in terms
of liberalization and privatization; free flow of trade and services, which includes the origin and functioning of
WTO, multilateral trading system and end of national economies; foreign direct investment which includes globalization
of financial markets, transnational integrated production and functioning of multinational and transnational companies;
liberalization in investment; growth of global economy; infrastructural development; development of information and
communication technologies (ICTs); outsourcing of services; and Trade Related Intellectual
Property Rights (TRIPs).

a. Liberalization
In general, liberalization refers to a relaxation of restrictions, usually in areas of social or economic policy. Most often,
the term is used to refer to economic liberalization, especially trade liberalization or capital market liberalization;
the policies often referred to as neo-liberalism. A major revolution in the policy environment caused by the current
phase of globalization is liberalization of economic policy, which included the freeing up of markets and reduction in
the role of national governments in terms of ownership and control over production of goods and services.

The “liberalization revolution” challenges the legitimacy of many of the activities nation-state governments have
performed in the modern (post-1914) world such as running nationalized industries, trade exchange and price
controls and monopoly over infrastructure and public services.

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Free market economic policies advocated by neo-liberals in the Western countries, put into practice by Margaret
Thatcher in Britain and Ronald Reagan in the U.S. during the 1980s, soon became the official policy of International
Financial Institutions (IFIs), which started insisting on the deregulation of national economies and liberalization in
the trade and investment sectors as conditions for the grant of financial assistance or loans to countries the world
over. Since the movement of economic forces in the contemporary world is
beyond the control of national governments, neo-liberals call for a fundamental restructuring of relations between the
state and civil society with the state maintaining a low profile in the area of economic activities which should be
governed by the free play of market forces. They advocated free trade, which in modern usage means trade or
commerce carried on without such restrictions as import duties, export bounties, domestic production subsidies,
trade quotas, or import licences. The basic argument for free trade is based on the economic theory of “comparative
advantage” that means,
each region should concentrate on what it can produce most cheaply and efficiently and should exchange its products
for those it is less able to produce economically.

In India, the pace of globalization gathered momentum when the then central government (Narasimha Rao
government) introduced the package of reforms at the behest of IMF and World Bank aimed at economic liberalization
in June 1991. The roots of the liberalization programme in India, in fact, may be traced to earlier periods of
liberalization of trade regime in the late 1970s under the Janata government initiative as well as in the industrial policy
reforms of the early 1980s introduced by Indira Gandhi and finally in the New Economic Policy fashioned by the Rajiv
Gandhi government in the mid-1980s. But these earlier initiatives and their implementation were rather slow
compared to Narasimha
Rao’s initiative in 1991, which was more ambitious and aimed at freeing the economy from state intervention.

The reforms introduced by Rao’s government included short-term stabilization measures encompassing devaluation
of the rupee, restraint on public expenditure (by reducing subsidies on fertilizer and petroleum), a plan for the
reduction of the fiscal deficit and removal of restrictions on the flow of foreign capital to Indian markets. The medium
and long term Structural Adjustment Programme (SAP) included a series of measures aimed at liberalisation of
trade and deregulation of industry, restricting the ambit of the public sector including disinvestment of equities in
profit making concerns and withdrawal of subsidies for the loss making ones, reforms of the financial sector and the
tax systems and measures to facilitate foreign capital flows.

The main features of the liberalization policy of Indian government have been:
• General reduction in the role of the state in economic governance;
• Withdrawal by the State from some economic sectors and its replacement
by the private sector;
• Decline in the government/public sectors in basic and key industries,
banking, insurance and other public sector undertakings;
• Decline in the role of the State in provision of public social services like
education, housing and health;
• Future development through wider participation of the private sector
and hence more dependence on the market for the exchange of goods.

b. Privatization
Along with the liberalization of the economy in the 1980s the neo-liberals of the U.K. and the U.S also advocated the
privatization of industries and services to make enterprises more competitive and efficient so as to meet the
challenges of the global economy. The U.K. privatized 80% of its public sector by the 1980s. Privatization largely
means selling of public owned assets to private ownership by stages.

Privatization can be done using any or all of the following techniques:

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• Public offering of shares – all or part of the shares of public limited company are offered for sale to the public;
• Private sale of shares – all or part of the state-owned enterprise is sold to private individual or a group of
purchasers;
• New private investment in a state-owned enterprise – private share issues are subsidized by the private sector
or the public;
• Entry of the private sector into public sector – private groups allowed to get into areas reserved for the public
sector, such as the power and telecommunications sectors in India;
• Contracting out the services and utilities to private operators or contractors for operation and maintenance, while
retaining ownership with the government. Like water supply, sewage treatment, etc.;
• Sale of government or state enterprises’ assets as private sale instead of shares;
• Reorganization or fragmentation of subsidiary units of a company;
• Management/employee buy-out – in which the management or the employees acquire the controlling interest in
which shares are purchased on credit extended by the government.

With the aim of privatizing the economy, the Indian government adopted various measures in the 1990s. Initiatives
such as abolition of license raj for deregulation of the industries, scrapping of legislations such as MRTP and FERA,
approval for 100% equity for NRIs, streamlining of approval committees, disinvestment in Public Sector Undertakings
(PSUs), and reference of sick industrial units to Board of Industrial and Financial Reconstruction for rationalization
were meant for more and more privatization of the Indian economy.

c. Foreign Direct Investment (FDI) and Globalisation of Financial Market

Foreign Direct Investment (FDI) is money invested in production by a foreign party rewarded with part-ownership
of production. Of the three important aspects of liberalization – finance, trade and investment – financial
liberalization has been the most pronounced. During this globalisation era there has been progressive and extensive
liberalization of controls on financial flows and markets leading to economic globalisation. Economic globalization
and financial liberalization centres on the movement of capital of which FDI was a major form.

From the beginning of the 1980s, FDI flows have grown much faster than the world output or trade or domestic fixed
investment. The growth of FDI in the 1990s was enormous. The initial burst of FDI in the late 1980s was almost
entirely in developed countries (over 80% of the total) and predominantly from five leading developed countries (over
two thirds). In the 1990s developing countries began to attract substantial FDI and there has been genuine
geographical broadening of FDI. Since early 1990s, FDI flows to the developing
countries have raised relatively averaging 32% of the total in 1991-1995 compared to the 17% in 1981-1990. This
was due to the liberalization of foreign investment policies in most of the developing countries during the 1990s.

Private capital flows for direct investment and portfolio investment for developing countries have grown from $ 25
billion in 1990 to $150 billion in 1997. Also, during this period there have been qualitative and quantitative changes
in the world of international integration of global markets through the medium of FDI. The FDI explosion of the 1980s
characterized by the investment inflows within the triad of EU, Japan and North America shifted in the 1990s to the
non-OECD (Organization of Economic Cooperation and Development) countries as well. The flows were accounted by
Asian countries (China, Singapore, Malaysia, Thailand, Indonesia), Latin American countries (especially Mexico, Chile,
Argentina and Brazil) and Eastern European countries. There had also been a growth of major corporate alliances at
global level during this period. FDI remained mainly market driven and they dominated service sector. However, the
flow of FDI even among developing nations was not uniform.

Much of this FDI has centered on only a few developing countries. Least developed countries in particular were
receiving only very small FDI despite having liberalized their policies. There were some negative impacts of these
private capital flows. There was a general and increasing concern about the fragility and vulnerability of the system
due to the interconnectedness of financial markets and systems and the vast amounts of financial flows. These were
the risk of a breakdown in some critical parts or in the general system

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itself, as a fault developing in one part of the world or in the system can have widespread repercussions. These
concerns were heightened by the East Asian financial crisis that began in the second half of 1997 and spread to Russia,
Brazil and other countries, causing the worst financial turmoil and economic recession in the post-World War II
period.
Nonetheless in the 1990s a consensus gradually emerged around the globe that foreign capital, if utilised properly,
can contribute significantly to economic development. The same was true with India. The largest proportion of FDI
approvals in India has been in the infrastructure and core sectors such as power, telecommunications, energy
exploration, and chemical and metallurgical industries. India followed a case-by-case approach in approving FDI. FDI
in India depends on the assessment of India relative to other countries on several fronts. The main considerations are
the political stability and credibility of
reforms, the state of the infrastructure, especially power, transport and communication, national policy regime, speed
and transparency in implementation of government policies, labour market conditions and the intellectual property
rights issue (Ray 2000).

FDI in India is permitted under the following forms of investments.

• through financial collaboration;
• through joint ventures and technical collaboration;
• through the capital market via Euro issues;
• through private placements or preferential allotment.

FDI is not a one-way process. In the open market system Indian companies are also going global through joint ventures
abroad. India’s export in the year 2001-02 was to the extent of 32,572 million. Many Indian companies have started
becoming respectable players in the international scene. Agricultural products, marine products, cereals, oilseeds, tea,
and coffee are some prominent products that India has been exporting.

d) International Trade Regulatory Body – WTO

After the Second World War, steps were taken by countries around the globe to regulate world trade by proposing to
set up an International Trade Organization (ITO) along the lines of the International Monetary Fund (IMF) – a
world body to facilitate international liquidity; and the World Bank – a sectoral lending institution. When ITO could
not materialize due to various reasons, 23 nations around the globe agreed to continue trade negotiations that were
eventually incorporated in the General Agreement on Tariffs and Trade (GATT), which formally came into existence
in October 1947. This increased the role of trade during the post-World War II period. This was accompanied by the
reduction in tariff barriers gradually both in developing and developed countries due partly to autonomous policies
and partly to the series of multilateral trade rounds under GATT. In the eighth round of GATT negotiations popularly
known as Uruguay Round, the contracting parties agreed to establish the World Trade Organization (WTO) to
undertake multilateral trade negotiations.

The World Trade Organization, which came into being on 1st January 1995 replacing GATT, is an international
organization setting out the global rules of trade between nations. Whereas GATT was a bilateral agreement WTO is
an organizational set up, which means any decision of the organization is applicable to all the member nations. The
stated aim of WTO is to provide a global decision making structure of setting and enforcing rules in relation to
international trade. The WTO secretariat is based in Geneva. Its main function is to ensure that international trade
flows smoothly, predictably and as freely as possible. In 2005, 148 countries are members of WTO accounting for 97%
of the world trade and more and more countries are compelled to be members of WTO. Decisions are made by the
entire membership of WTO and the agreements have to be ratified by the parliament of each and every member nation.
The WTO’s top-level decision-making body is the Ministerial Conference, which meets at least once every two years.
The fifth WTO ministerial conference was held in Cancun, Mexico, in September 2003.

The main functions of WTO are:

• Administering trade agreements;

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• Maintaining a forum for trade negotiations;
• Handling trade disputes;
• Monitoring national trade policies;
• Technical assistance and training for developing countries; and
• Cooperation with other international organizations.

WTO became an important player in regulating global trade. It became more significant to have a world trade
regulatory body as trade liberalization gradually increased during the 1990s. The share of world exports in world GDP
rose from about 6% in 1950 to 12% in 1973 and to 16% in 1992.

WTO trade agreements are mainly in goods, services, intellectual property, dispute settlement and policy review.
Trade agreements in goods deal with all aspects such as lower customs duty rates and other trade barriers as well as
with specific sectors such as agriculture and textiles and specific issues such as state trading, product standards,
subsidies and actions taken against dumping.

The service sector includes banks, insurance firms, telecommunications, tour operators, hotel chains and transport
companies. All these now enjoy freer and fairer trade. The intellectual property agreement amounts to rules for trade
and investment in ideas and creativity. The WTO system encourages countries to settle differences through
consultations. Countries bring disputes to WTO if they think their rights under the agreements are being infringed.

The WTO has a range of rules designed to prohibit “trade-related investment measures” (TRIMs), including many
of the ways in which national governments might seek to develop industry and investment policies to assist the
development of industries and firms. The WTO rules in relation to “trade related intellectual property” (TRIPs)
provide unprecedented protection in the areas of copyright and intellectual property rights.
The existing agreements of the national governments with WTO require domestic
legislation and policies of member states to be altered and brought into line with it. Non-compliance can result in trade
sanctions being imposed against a country’s exports through the dispute settlement system, thus giving WTO a strong
enforcement mechanism. Thus national governments have to comply with the disciplines and obligations in the wide
range of issues under the purview of WTO. The functioning of WTO promotes the empowerment of the market or the
minimal role for the State and rapid liberalization.

India is a founder member of GATT and its successor the WTO. India's participation in an increasingly rule based
system in the governance of international trade is claimed to ensure more stability and predictability, which may lead
to more trade and prosperity. By being a member of WTO India automatically avails most favored nation and national
treatment for its exports to all WTO nations. India made necessary legislative changes to implement WTO standard
intellectual property laws in the year 2005, although after showing initial resistance.

e) Multinational and Transnational Companies and their Functioning

The deregulation of economies and financial markets led to a sharp increase in financial transactions across national
boundaries. The process of globalization has brought to the fore a new set of international actors – the multinational
corporations (MNCs). The MNCs are often described as corporate giants. The annual turnover of certain MNCs is equal
to the combined GDP of a few countries. These institutions have financial activities in different countries
simultaneously. During the 1990s the process of globalization intensified the activities of the MNCs across the world.

This process further intensified towards the end of the 20th century resulting in a larger concentration and
monopolization of economic resources and power by transnational corporations, a process Martin Khor calls
transnationalisation. Here fewer and fewer transnational corporations are gaining a large and rapidly increasing
proportion of world economic resources, production and market shares. Where a multinational company used to
dominate the market of a single product, a big transnational company now typically produces or trades in multitude

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of products, services and sectors. Through mergers and acquisitions, fewer and fewer of these TNCs now control a
larger and larger share of the global market, whether in commodities, manufactures or services.

Other than liberalization, privatization and other trade related aspects there are some additional economic avenues,
which reflect the impact of globalization process like Infrastructure development, Expansion of Information and
Communication Technologies (ICTs) and Birth of Information Age, Outsourcing of Services, Trade Related Intellectual
Property Rights (TRIPS).

Social Dimension of Globalization

It is strongly refuted that the current pace of globalization reflects on the economic front only. The ramifications of
globalization process reflect directly in the social and cultural arena of human life as well. Consequently,
understanding social and cultural dimensions of the phenomenon of globalization is essential to the development of
a rational and considered response to it.

The social dimension of globalization refers to the impact of globalization on the life and work of people, on their
families and their societies. Concerns and issues are often raised about the impact of globalisation on employment,
working conditions, income and social protection. Beyond the world of work, the social dimension encompasses
security, culture and identity, inclusion or exclusion and the cohesiveness of families and communities etc.

Some of the social dimensions of globalisation are:

a) Withdrawal of National Government from Social Sector

The liberalization of the economy resulted in a general reduction in the role of the State in economic governance. The
reduction in the government’s economic role reflected in a decline in the public spending. Total government
expenditure in India in public spending increased at a per annum rate of 11.0% during the 1960s, 7.1% in the 1970s,
6.46% in the 1980s, but it declined to a per annum rate of 4.7% in the 1990s. The consequence of the reduction in the
role of the government and the public sector and its replacement with private sector means that the access of people
to employment, capital and social services like education, housing and health services will be much less. The structural
adjustment policies of the national government involving the relinquishing of economic activities from the public
sector into the hands of the private sector, i.e., the state moving away from economic planning and leaving economic
decisions to the market, will result in the withdrawal of social protection to the public. Reducing social benefits in
order to reduce payroll fringe costs to increase competitive ability leads to “social dumping” which means a process
that lowers production costs through low wages and substandard social conditions.

b) Labour Reforms and Deteriorating Labour Welfare

Deregulation and privatization of state enterprises have been key components of structural adjustment programmes
introduced by International Financial Institutions as conditionalities attached to aid packages to developing countries
and for the acceleration of economic liberalization. Labour market deregulation has been an important feature of the
structural adjustment programme. There has been explicit deregulation, whereby formal regulations have been
eroded or abandoned by legislative means, and implicit deregulation whereby remaining regulations have been made
less effective through inadequate implementation or systematic bypassing. Such deregulation has been based on the
belief that excessive government intervention in the labour market through such measures as public sector wage and
employment policies, minimum wage fixing, and employment security rules are a serious impediment to adjustment
and should therefore, be removed or relaxed. States around the world has felt compelled to ease labour standards,
modify tax regulations and generally relax standards of security and oversight in the bid to attract more and more
FDI. This progressively lowered labour standards. The big corporate companies like TNCs and MNCs have evolved a
vendor system of subcontracting for their production.
The companies give out their work to labourers, through contractors, who in turn deliver the output to the company.
This results in job insecurity of the labourer and worsening of labour welfare since there is no checking system for
their welfare.

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The current pace of globalisation also results in casualization or informalisation of the work force causing low wages
for labourers and less job security, although it created employment opportunities to some of the work force. The
growth of the informal sector means that the traditional employment related benefits and mechanisms of protection
are not available to those employed in this sector. Increased mechanization and use of new technology demand more
skilled labour and displace unskilled labour. The new technologies and fast changing market – the resultant features
of globalisation – also tend to make existing skills obsolete and require upgradation, new skills and multi-skilling. It
also opens up new markets, which workers can reach by adapting existing or traditional skills.

c) Feminization of Labour
Women have entered the labour force in large numbers in countries that have embraced liberal economic policies.
Industrialization in the context of globalisation is as much female-led as it is export-led (UN 1999). The overall
economic activity rate of women for the age group 20-54 approached 70% in1996. The highest absorption of women
has been witnessed in the export oriented industrial sector. This is especially the case in the export processing zones
and special economic zones and in those labour intensive industries that have relocated to developing countries in
search of cheap labour.
Investors have demonstrated a preference for women in the soft industries such as apparel, shoe- and toy-making,
data processing, semi-conductor assembling industries that require unskilled to semi-skilled labour.
Nevertheless, this did not ensure a better status for women in any way. The informal sector where women were
absorbed in large numbers along with globalisation offer very poor labour conditions. Such industries where women
were mostly engaged happened to be highly labour intensive, service oriented and poorly paid. In many countries
workers in the export processing zones find unionization and collective bargaining nearly impossible. In call centres
in India women comprise an estimated 40% of the workforce.

d) Poverty
Opening up of economies was primarily visualized as a mechanism where trade would function as “an engine of
growth” and the fruits of growth would “trickle down” to the poor. However, the results have been mixed, with many
countries observing widening inequalities in their economies, contrary to the conventional trade theory prescriptions.

The internalizations of trade have opened up vistas for globalisation of production, creating profound changes in the
labour market, such as widening wage disparity, increasing contractualisation of work, skill-based segregation of
work, etc. The globalisation and liberalization policies resulted in impoverishing more and more people of the lower
strata the world around. Industrialization and genetic engineering of food and globalisation of trade in agriculture
accelerated poverty in the agriculture-based nations of the world. The globalisation of non-sustainable industrial
agriculture adversely affected the incomes of the farmers of the developing and least developed countries through a
combination of devaluation of currencies, increase in costs of production and a collapse of commodity prices, all
resulting from the liberalization of the economy.

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Chapter LPG Reforms in India
04 (1991)
Factors that led to LPG reforms of 1991

• Rise in Prices: The inflation rate increased from around 6% to 16% and the country’s economic position became
worse.
• Rise in Fiscal Deficit: Government’s fiscal deficit increased due to increase in non-development expenditure. Due to
the rise in fiscal deficit, there was a rise in public debt and interest to be paid. In 1991, interest liability became 36.4%
of total government expenditure.
• Adverse Balance of Payments: In 1980-81, current account deficit was Rs. 2214 crore and rose to Rs. 17,367 crores
in 1990- 91. To cover this deficit, government took a large amount of foreign loans, which further increased the
interest payments.
• Iraq War: In 1990-91, war in Iraq broke out, which led to a rise in petrol prices. The flow of foreign currency from
Gulf countries stopped and this further aggravated the problem.
• Dismal Performance of PSUs: PSUs were not performing well due to number of reasons, including political
interference and unprofessionalism in operations.
• Fall in Foreign Exchange Reserves: India’s foreign exchange reserve fell to its record lowest in 1990-91 and it was
insufficient to pay for an import bill even for 2 weeks.

LPG Reforms in India: LPG meaning

• Liberalization– Liberalization is a broad term that refers to the practice of making laws, systems, or opinions less
severe, usually in the sense of eliminating certain government regulations or restrictions.
• Privatization– It refers to the transfer of ownership of property or business from a government to a privately owned
entity.
• Globalization– It refers to the expansion of economic activities, transcending political boundaries of nation states.

Features of LPG Policy 1991

• Abolition of Industrial licensing/ Permit Raj
• Public sector role diluted
• Beginning of privatization
• Free entry to foreign investment and technology
• Industrial location policy liberalized
• Abolition of phased manufacturing programmes for new projects
• Removal of mandatory convertibility clause
• Reduction in import tariffs
• Deregulation of markets
• Reduction of taxes

LPG Reforms in India: Positive outcomes

• Increase in India’s GDP growth rate: During 1990-91, India’s GDP growth rate was only 1.1% but after LPG reforms
of 1991, GDP growth rate increased year by year and in 2015-16 it was estimated to be 7.5% by the IMF.
• Foreign investment destination: Since 1991, India has firmly established itself as a lucrative foreign investment
destination and FDI equity inflows in India in 2019-20 (till August) stood at US$ 19.33 billion.

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• Decrease in unemployment rate: In 1991, the unemployment rate was high. However, LPG reforms of 1991 led to
arrival of new foreign companies and more jobs got generated thus leading to decrease in unemployment rate.
• Per Capita income increased due to an increase in employment.
• Exports have increased and stood at USD 26.38 billion as of October, 2019.

LPG Reforms in India: Challenging outcomes

• Decrease in agriculture GVA: In 1991, agriculture provided employment to 72% of the population and contributed
29.02 percent of the GDP. Now, the share of agriculture in the GDP has gone down drastically to 18%. This has resulted
in decrease in per capita income of the farmers and increase in the rural indebtedness.
• MNC vs local business: Due to opening up of the Indian economy to foreign competition, more MNCs started
competing with local businesses. This led to highly unequal business competition.
• Globalization has also contributed to the destruction of the environment through pollution by emissions from
manufacturing plants and clearing of vegetation cover.
Widening income gaps: LPG reforms of 1991 have led to widening income gaps within the country. The higher
growth rate was achieved at the cost of declining incomes of majority of people, thus leading to increase in inequality..

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