## Globalisation and the Indian Economy Class 10 Notes Social Science Economics Chapter 4

### Changing Market Trends

Today, consumers have a wide choice of goods and services before them. Various digital cameras, mobile phones and televisions made by the leading manufacturers of the world can be bought and used. Citizens of any country can buy anything, produced in any country of the world. This transformation and integration in markets is a recent phenomenon.

Until the middle of the twentieth century, production was largely organised within countries. Only raw material, food stuff and finished products were transported back and forth across countries. Colonies such as India exported raw materials and food stuff and imported finished goods.

Earlier, trade was the main channel connecting distant countries. Today, multinational companies have integrated them further. MNCs have set up offices and factories for production in regions with cheap labour and other resources. This helps MNCs earn more profits. MNCs help to sell and produce the goods and services globally. Production is organised in different ways.

The production process is divided into small parts and spread out across the globe.

1. China provides the advantage of being a cheap manufacturing location.
2. Mexico and Eastern Europe are close to markets in the US and Europe.
3. India has highly skilled engineers to aid the technical aspects of production. It also has educated English-speaking youth to provide customer care services.
4. This reduces the cost of production for MNCs.

A multinational corporation or MNC is a company that owns or controls production in more than one nation.
MNCs also set up production jointly with local companies in various countries.

It benefits the local companies in following ways:

• MNCs can provide monay for additional investments.
• MNCs might bring with them the latest technology for production.

MNCs set up production in areas which are:

• Close to the markets,
• Hubs of skilled and unskilled labor available at low costs;
• Other factors like transportation are easily available.
• In addition, MNCs often look for government policies to keep their interests up.
• MNCs set up factories and offices for production.

Important:
The money spent to buy assets such as land, building, machines and other equipment is called investment. The investment made by MNCs is called foreign investment. Any investment is made with the hope that these assets will earn profits.

MNCs invest usually by buying up local companies and then to expand production. This expands its reach to different local markets and increases its production capacity. Richest MNCs around the world have more wealth and greater budgets than the governments of some developing country.

MNCs control production by placing orders for production with small producers. Production is carried out by a large number of small producers around the world. Products are then supplied to the MNCs, which sell them under their own brand names to the customers.

MNCs have tremendous power to determine price, quality, delivery, and labour conditions for these distant producers.

MNCs spread their production through interaction with local producers in various countries across the globe.

MNCs thus exert influence on production at these distant locations by:

1. setting up partnerships with local companies,
2. using the local companies for supplies,
3. closely competing with the local companies

As a result, production in these widely dispersed locations is getting interlinked.

Foreign trade was the main channel connecting countries. Trading interests attracted various trading companies such as the East India Company to India. Foreign trade thus creates an opportunity for the producers to reach beyond their local and domestic markets.

Producers can also compete in markets located in other countries of the world.

For consumers, the import of goods produced in another country helps expand the choice of goods beyond items produced domestically.

Prices of similar goods in the two markets tend to become competitive and producers in the two countries compete against each other despite being separated by miles. Foreign trade integrates or connects the markets of different countries.

MNCs have been boosting foreign trade for the past few decades. They control a significant portion of foreign trade. Foreign investment by MNCs has been rising. Most activities in MNCs involve substantial trade in goods and services. The result of greater foreign investment and greater foreign trade has been greater integration of production and markets across countries. This process comprises rapid integration or interconnection between countries and is called Globalisation.

MNCs play instrumental roles in Globalisation. Goods and services, investments and technology are flowing between countries on a larger scale. Countries are building closer relationships.

Countries are also connected through movement of people in search of better income, better jobs or better education between them. There has not been an exponential rise in movement between countries due to various restrictions.

Example 1.
Chinese manufacturers learn of an opportunity to export toys to India, where toys are sold at a high price. They start exporting plastic toys to India. Buyers in India now have the option of choosing between Indian and the Chinese toys. Because of the cheaper prices and new designs, Chinese toys become more popular in the Indian markets. Within a year, 70 to 80 per cent of the toy shops have replaced Indian toys with Chinese toys. Toys are now cheaper in the Indian markets than earlier.

Let us see the effect of foreign trade through the example of Chinese toys in the Indian markets. What is happening here? As a result of trade, Chinese toys come into the Indian markets. In the competition between Indian and Chinese toys, Chinese toys prove better. Indian buyers have a greater choice of toys and at lower prices. For the Chinese toy makers, this provides an opportunity to expand business. The opposite is true for Indian toy makers. They face losses, as their toys are selling much less.

(A) Which of the following is not the benefit of Chinese producers exporting toys to India?
(a) It gives Indian consumers a variety of people to choose from.
(b) It makes the products cheaper.
(c) It increases the demand of Indian toys.
(d) It increases the competition between manufacturers.
(c) It increases the demand of Indian toys.

Explanation: Chinese toys reduce the demand of Indian toys. Indian Manufacturers have to face loss.

(B) Mention one way to ensure that Indian manufacturers face no loss when Chinese toys are imported.
Taxes or Trade barriers can be imposed on Chinese Toys.

Explanation: Taxes imposed on Chinese toys will provide both products- Indian and Chinese- a level playground in the markets. The customers will then prefer the products of better quality. This can help the Indian toys.

(C) Fill in the blank by choosing the most appropriate option:
The practice of buying toys from China is called the Chinese toys.
(a) Importing
(b) Manufacturing
(c) Exporting
(a) Importing

Explanation: When we buy foreign goods, we are importing goods and when we are seLling goods, we are exporting goods.

(D) Assertion (A): Chinese toys to be cheaper than Indian toys.
Reason (R): Low labour wages and low prices of raw materials in China along with the presence of better technology reduces cost of production of Chinese Toys.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
(c) (A) is correct but (R) is wrong.
(d) (A) is wrong but (R) is correct.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).

Example 2.
Choose the correct option. Globalisation, by connecting countries, shall result in:
(a) lesser competition among producers.
(b) greater competition among producers.
(c) no change in competition among producers.
(b) greater competition among producers.

### Factors That Have Enabled Globalisation

Technology:
Rapid improvement in technology stimulated the globalisation process. Transportation technology has made delivery of goods across long distances faster and cheaper. The developments in information and communication technology has helped in quicker flow of ideas and culture. The internet, telecommunication facilities (telegraph, telephone including mobile phones, fax) facilitated by satellite communication devices have made it easy to communicate, interact even in the remotest areas of the world.

The internet has made it possible for one to obtain and share information. The Internet helps us to send instant electronic mail (e-mail) and talk (voice-mail) across the world at negligible costs.

Information and Communication technology helped spread production of services across countries.

Liberalisation of Foreign Trade and Foreign Investment Policy Tax on imports is an example of a trade barrier. Indian Government used this to protect Indian industries after gaining Independence from foreign competition and continues to use the same today for boosting native enterprises. Governments can use trade barriers to increase or decrease (regulate) foreign trade.

Industries were beginning to establish themselves and the competition from imports at that stage would not have allowed these industries to prosper initially. India allowed imports of only essential items such as machinery, fertilisers, petroleum etc. All countries give or have given protection to domestic producers through a variety of means.

Starting around 1991, Indian government changed their approach because they felt competition would boost these industries and give them greater markets to trade. It would also contribute in terms of quality. Hence barriers were strategically lifted and the Indian market was opened to the world. This meant that goods could be imported and exported easily and also foreign companies could set up factories and offices in India.

Important:
Information and communication technology (or IT in short) has played a major rote in spreading out the production of services across countries

Removing barriers or restrictions set by the government is what is known as liberalisation. With liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export.

The decision to liberalise Indian trade was supported by various International Organisations. They support open economy and restriction-free trade. They say that all countries in the world should liberalise their policies.

The World Trade Organisation (WTO) aims to liberalise international trade. WTO establishes rules regarding international trade and regulates their implementation.

About 164 countries of the world are members of the WTO. In practice, WTO is dominated by Western developed countries. They have unfairly retained trade barriers. WTO rules have forced the developing countries to remove trade barriers. For example, the trade on the agricultural products is one example.

Impact of Globalisation On India:
Globalisation and greater competition among advantageous to consumers especially those who indgenous and foreign producers has been belong to the urban areas. Consumers are able to enjoy improved quality and lower prices for several products. People enjoy higher standards of living today.

However, among producers and workers, the impact of globalisation has not been uniform.
For the past two decades, MNCs have been increasing their investments in India which shows that investing in India has been beneficial for them. They have been interested in fields and industries like mobile phones, automobiles, electronics, soft drinks, fast food or services such as banking in urban areas. These products are popular and have numerous customers. Employment has been created. The local companies supplying raw materials have prospered.

The central and state governments have created special zones to attract foreign investment. Industrial zones called Special Economic Zones (SEZs) have been set up.

SEZs are to have world-class facilities:

1. Electricity and Water
2. Roads, transport, storage, recreational and educational facilities.
3. Companies with production units in the SEZs do not have to pay taxes for an initial period of five years.

Example 3.
Match the following:

 Column A Column B (i) MNCs buy at cheap rates from small producers (a) Automobiles (ii) Quotas and taxes on imports are used to regulate trade (b) Garments, footwear, sports items (iii) Indian companies who have invested abroad (c) Call centres (iv) IT has helped in spreading of production of services (d) Tata Motors, Infosys, Ranbaxy (v) Several MNCs have invested in setting up factories in India for production (e) Trade barriers

 Column A Column B (i) MNCs buy at cheap rates from small producers (b) Garments, footwear, sports items (ii) Quotas and taxes on imports are used to regulate trade (e) Trade barriers (iii) Indian companies who have invested abroad (d) Tata Motors, Infosys, Ranbaxy (iv) IT has helped in spreading of production of services (c) Call centres (v) Several MNCs have invested in setting up factories in India for production (a) Automobiles

Most successful Indian companies have been able to benefit from the increased competition. They have invested in newer technology and production methods and raised their production standards. They have also gained through their foreign collaborations.

Tata Motors (automobiles), Infosys (IT), Ranbaxy (medicines), Asian Paints (paints), Sundaram Fasteners (nuts and bolts) have been successful enough to emerge as MNCs themselves.

Globalization has created new opportunities for companies providing certain services like IT. Services like data entry, accounting, administrative tasks, engineering are now being produced in India and exported to other countries.
Globalisation has posed major challenges for both small and new producers. Producers and manufacturers of batteries, capacitors, plastics, toys, tyres, dairy products, and vegetable oil have been hit hard due to competition. Various units had to be shut down due rendering workers homeless.

Important:

• Small industries in India employ the largest number of workers (20 million) in the country, next only to agriculture.
• MNCs in the garment industry in Europe and America order their products from Indian exporters. These MNCs look for the cheapest goods in order to maximise their profits. To attract these companies, Indian producers try to cut labour costs. They employ workers on a temporary basis to avoid partying them for the entire year.
• Workers put in very long working hours and work night shifts regularly. Wages are low and workers are forced to work overtime. Despite this hard work, the workers are denied their fair share of benefits brought about by globalisation.
• MNCs achieve profits while the workers suffer.

Example 4.
Choose the most appropriate option. The past two decades of globalisation has seen rapid movements in:
(a) goods, services and people between countries.
(b) goods, services and investments between countries.
(c) goods, investments and people between countries.
(b) goods, services and investments between countries.

Example 5.
Choose the most appropriate option. The most common route for investments by MNCs in countries around the world is to:
(a) set up new factories.
(c) form partnerships with local companies.

Example 6.
Choose the most appropriate option: Globalisation has led to improvement in living conditions:
(a) of all the people
(b) of people in the developed countries
(c) of workers in the developing countries
(d) none of the above
(a) of all the people

The conditions of work and the hardships of the workers are common to almost every industry today. Most workers are employed in the unorganised sector. The organised sector have come to resemble the unorganised sector because of the hard conditions. The benefits of the workers are no longer ensured.

Not everyone has benefited from globalisation. People with education, skill and wealth have been able to make the best use of these opportunities.

### Fair Globalisation

Globalisation can be made fair. This would create opportunities for all and help share the benefits of the Globalisation evenly. The government can help achieve that by making policies which protect the interests of the rich and poor alike.

The government can ensure various steps to ensure the effects of Globalisations are shared evenly. For example, it can ensure that:

• Labour laws are properly implemented and the workers get their rights.
• It can support small producers and help them improve their performance.
• It can use trade and investment barriers to support native industries.
• It can negotiate at the WTO for ‘fairer rules’.
• It can align with other countries to fight against the domination of developed countries in the WTO.

Massive campaigns and representation by people’s organisations have helped alter trade and investments related decisions at the WTO. This shows that people also play an important role in the struggle for fair globalisation.

→ Globalisation: Integration and spread of products, technology, information, and jobs across nations.

→ Liberalisation: Removal of trade barriers.

→ Customer Care Services: It is the act of taking care of the customer’s needs by providing and delivering professional, helpful, high quality service and assistance before.

→ Assets: Something that contains an economic value and/or future benefit.

→ Export: Selling goods to foreign countries and markets.

→ Import: Buying goods from foreign countries and markets.

→ Telecommunications: It is the transmission of information by various types of technologies over wire, radio, optical or other electromagnetic systems.

→ Surplus: An extra amount.

→ Consumer: Someone who consumes goods and services.

→ Capacitors: A device used to store an electric charge.

## Money and Credit Class 10 Notes Social Science Economics Chapter 3

### Money as A Medium of Exchange

The use of money spans a very large part of our everyday life. Goods are bought and sold by using money. Services are availed with money. A person holding money can easily exchange it for any commodity or service. Payments in money are thus most sought after.

When money had not been invented, people employed barter systems to buy and sell their items.
The major problem was about finding a willing buyer or seller. To buy and sell products in turn, both parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. This happens only when a person desires to sell is exactly what the other wishes to buy.

Frequently Asked w In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. In contrast, in an economy where money is used, there is no need for a double coincidence of wants.

Example 1.
How does the use of money make it easier to exchange things?
Money acts as an intermediate in the exchange process and is called a medium of exchange.
Before the introduction of coins, Indians used grains and cattle as money. Other civilisations all across the world also used different objects as a medium of exchange.

With time, metallic coins such as gold, silver, copper coins began to be used as currency. The modern
currency is without any use of its own. It is accepted as a medium of exchange because the currency is authorized by the government of the country.

Modern forms of money include currency – paper notes and coins. Modern currency is not made of precious metals such as gold, silver and copper. They are not everyday objects like grains either.

The Reserve Bank of India issues currency notes on behalf of the central government in India. Indian law does not authorize any other individual or organisation to issue any currency. Indian Constitution and Indian law legalises the use of rupee as a medium of payment that cannot be refused in settling transactions in India.

Digital transactions are the newest forms of currency that are being encouraged and widely used these days. Bank-to-bank transfer through the internet or mobile phones, cheques, ATM cards, Credit Cards and Point of Sale (POS) swipe machines at shops.

Digital transactions are taking over cash in markets because they are hassle free and quick.

Important
No individual in India can legally refuse a payment made in rupees.
In India, during November 2016, currency notes in the denomination ofRs. 500 and Rs. 1,000 were declared invalid. People were asked to surrender these notes to the banks by a specific period and receive new Rs. 500, Rs. 2,000 or other currency notes. This was called ‘demonetisation’.

### Deposits With Banks

The other form in which people hold money is deposits with banks. Most people have a surplus amount of currency after they have used up their wages for their monthly expenditure. This extra cash is deposited by them in banks in an account of their name. Banks accept the deposits and also pay an amount as interest on the deposits to the people.

People can withdraw the money from these accounts as and when they require. These deposits are called demand deposits because they can be withdrawn on demand.

Demand deposits can also serve as a medium of exchange instead of cash. It is this facility which lends it the essential characteristics of money.

Important:
Payment is possible through cheques as well. A cheque is a paper instructing the bank to pay a specific amount from the person’s account to the person in whose name the cheque has been issued.

Demand deposits share the essential features of money making it possible to directly settle payments without the use of cash. They constitute money in the modern economy. Modern currencies are cLosely linked to the working of the modern banking systems.

Banks keep only a small proportion of deposits from people with themselves. Banks in India hold about 15 per cent of their deposits as cash currently as a reserve to pay the depositors who want to withdraw. Banks mediate between depositors and borrowers. Banks charge a higher interest rate on loans than what they offer on deposits. The difference between the two rates is the source of revenue for banks.

Important:
Banks use the major portion of the deposits to extend loans for various economic activities.

### Credit and Its Implications

Most transactional activities involve credit. Credit refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.
Credit might play a vital and positive role or a negative and destructive role in lives depending upon its source and terms.

Credit is mainly required for crop production in rural areas which involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment etc. Farmers take crop loans at the beginning of the season and repay the loan after harvest because of the time period of 3-4 months between crop sowing and harvesting seasons. Repayment of the loan is crucially dependent on the income from farming. Failure of the crop might delay loan payments for which then a person has to sell his assets or even take another loan to repay. This is an example of debt-trap. The usefulness of credit depends upon the risks in the situation and whether there is some support, in case of loss.

### Terms of Credit

Every loan agreement specifies an interest rate. This rate calculates the interest to be paid back to the lender along with the repayment of the principal. Most lenders demand collateral against loans.

Collateral is an asset that the borrower owns (such as land, building, vehicle, livestocks, deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
The lender can sell the collateral to reimburse his loan in case the borrower fails to repay the loan.

Property such as land titles, deposits with banks, livestock are some common examples of collateral.
Interest rate, collateral and documentation requirement, and the mode of repayment together comprise terms of credit. The terms of credit vary substantially from one credit arrangement to another.
Those vary depending upon the lender and the borrower.

Important:
The other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in
certain areas. Some examples of cooperatives are farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc.

Example 2.
Megha has taken a loan of Rs 5 lakhs from the bank to purchase a house. The annual interest rate on the loan is 12 per cent and the loan is to be repaid in 10 years in monthly instalments. Megha had to submit to the bank documents showing her employment records and salary before the bank agreed to give her the loan. The bank retained as collateral the papers of the new house, which will be returned to Megha only when she repays the entire loan with interest.

Fill in the following details of Megha’s housing loan.
1. Loan amount (in Rupees)
2. Duration of loan
3. Documents required
4. Interest rate
5. Mode of repayment
6. Collateral

1. Loan amount (in Rupees) 5 Lakhs
2. Duration of loan-10 years
3. Documents required- Bank documents showing her employment records and salary.
4. Interest rate-12%
5. Mode of repayment- cash and monthly installments
6. Collateral- Papers of new houses

People obtain loans from various sources like employers, agricultural traders, relatives, banks and local money lenders. These loans can be categorised as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc.

The Reserve Bank of India plays multiple roles:

1. The Reserve Bank of India supervises the functioning of formal sources of loans.
2. The RBI monitors the banks in actually maintaining cash balance for emergency purposes.
3. The RBI keeps a check on the banks and ensures they give loans to small cultivators, small scale industries, to small borrowers and not just to traders, merchants etc.
4. Banks have to submit details about their lending practices to the RBI including the interest rates.
Banks and cooperative societies need to lend more. This would lead to higher incomes and it would encourage people to borrow cheaply for their needs.
5. Cheap and affordable credit is crucial for the country’s development.

Example 3.
Should there be a supervisor, such as the Reserve Bank of Indio, that looks into the loan activities of informal lenders? Why would its task be quite difficult?
There is no organization to monitor and regulate the credit activities of lenders in the informal sector. They lend at interest rates of their choice. They can use unfair means to get their money back. Compared to the formal Lenders, they charge a higher interest on loans. Thus borrowers of informal loans have greater chances of falling into a debt trap. It renders the poor people even more vulnerable.

Example 4.
Why do we need to expand formal sources of credit in India?
People hesitate to borrow due to the high rates of interests of the informal sector. Because there are not many formal sector source to give credit, they are unable to depend on anyone to ‘ fulfill their needs hence it needs to be expanded in rural areas Higher cost of borrowing entails that a larger part of the earnings of the borrowers will be used to repay the loan. The amount to be repaid is greater than the income of the borrower. This leads to an increasing debt and debt trap. This makes people hesitant to borrow.

### Formal And Informal Credit

Eighty-five per cent of the loans taken by poor households in the urban areas are from informal sources. Compared to this the rich households borrow only 10 per cent of their loans from informal sources, while they borrow 90 per cent from formal sources.

The formal sector meets only half of the total credit needs of the rural people. The remaining credit needs have to be met by the informal sectors. Most loans from informal sectors do little to increase the income of the borrowers. Banks and cooperatives should increase their lending particularly in the rural areas to reduce the dependence on the informal sector.

The formal sector needs to diversify its lending activities because it is only the rich households who receive formal credit; whereas the poor have to depend on informal sources. It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans.

Example 5.
In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
Banks fear that because of the unstable nature of earning of farmers- they might not be able to pay.

(b) What are the other sources from which the small farmers can borrow?
Farmers borrow through informal sectors- money lenders, relatives or through formal sectors- cooperatives.

(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
Lenders do not have proper documentation before lending and tend to change the interest rates and time periods. This can be unfavourable for farmers.

(d) Suggest some ways by which small farmers can get cheap credit.
Farmers can borrow from Cooperatives.

### Self-Help Groups For The Poor

Rural areas are heavily dependent upon informal Sectors for lending. This is because banks are not present everywhere. Lending from formal sectors is a little complicated as well. Bank loans require proper documents and collateral. Absence of collateral prevents the poor from borrowing from the bank. Informal lenders know the borrowers personally and give loans without collateral or paperwork. Moneylenders are ready to give more loans to these people without repaying any prior loans. Moneylenders charge very high rates of interest, manipulate the borrowers and have no documentation for proof.

Another way to Lend more money through the formal sector is to organise rural poor, in particular women, into small Self Help Groups (SHGs) and pool their savings. A typical Self Help Group has 15-20 members, usually belonging to one neighbourhood, who meet and save regularly. Saving per member varies from Rs. 25 to Rs. 100 or more, depending on the ability of the people to save. Members can take small Loans from the group itself to meet their needs. The group charges interest on these loans but less than what the moneylender charges. The group becomes eligible for availing Loan from the bank if they have been regular in paying back and saving.

Loan is sanctioned in the name of the group. It helps in creating some self employment opportunities for the members. Small loans are lent for releasing mortgaged land, for meeting working capital needs, for housing materials and acquiring logistics like sewing machines, handlooms, cattle, etc.

All important decisions are taken by the members. The group judges the purpose, amount, interest to be charged, repayment schedule and grants the loans. The group is also responsible for the repayment of the loan.

Defaulters are taken and dealt with seriously in the group. This makes banks willing to lend to the poor women when organised in SHGs, even without collaterals. SHGs help these borrowers to borrow without any collateral. Timely loans at a reasonable interest rate are facilitated through this.

Example 6.
Why is it so? Banks are not present everywhere in rural India. Even when they are present, getting a loan from a bank is much more difficult than taking a loan from informal sources. As we saw for Megha, bank loans require proper documents and collateral.

Absence of collateral is one of the major reasons which prevents the poor from getting bank loans. Informal lenders such as moneylenders, on the other hand, know the borrowers personally and hence are often willing to give a loan without collateral.
(A) Fill in the blank by choosing the most appropriate option:
………….. are not present everywhere; hence people depend on moneylenders.
(a) Relatives
(b) Mahajans
(c) Shops and Companies
(d) Banks
(d) Banks

(B) Which of the following institutions necessary require Collateral?
(a) Formal Sectors
(b) Informal Sector
(c) Semi-formal Sector
(d) Organised Sector
(a) Formal Sectors

(C) Why are moneylenders willing to Lend without collateral?
To encourage moneylending, Moneylenders provide loans without collateral.

(D) Assertion (A): Credit is good for people.
Reason (R): It helps in development of the people.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
(c) (A) is correct but (R) is wrong.
(d) (A) is wrong but (R) is correct.
(d) (A) is wrong but (R) is correct. Explanation: Easily available credit with low interest rates is good for people.

SHGs are the building blocks of organisation of the rural poor. Not only does it help women to become financially self-reliant, the regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.

Important:
Started in the 1970s as a project, Grameen Bank in 2018 had over 9 million members in about 81,600 villages spread across Bangladesh. Majority borrowers are women from the poorest sections of society.

→ Cooperatives: Cooperative society refers to that type of business organization, wherein people work together, for a common goal, i.e. welfare of its members.

→ Currency: System of money

→ Transactions: Act of buying and selling

→ Authorise: Officially approve something

→ Terms of Credit: Terms on which credit is given

→ Debt trap: A trap where debt keeps increasing

→ Mortgage: A legal agreement by which a formal sector financing institution lends money against a collateral

→ Self-reliant: Self dependent.

## Sectors of Indian Economy Class 10 Notes Social Science Economics Chapter 2

### Sectors of Economic Activities

Various economic activities include activities producing goods and services. These activities happen every minute around us. They can be grouped into sectors. There are many activities that are undertaken by directly using natural resources. If we take the example of cotton, which we obtain after processing a plant, we depend mainly, but not entirely, on natural factors like rainfall, sunshine and climate. Producers are dependent on the biological process of the animals and availability of fodder for the natural product that is milk. Minerals and ores are also natural products.

Important:
When we produce goods by exploiting natural resources, it is an activity of the primary sector. It forms the base for all other products that we subsequently make.
Most natural products are obtained through agriculture, dairy, fishing, forestry and hence this sector is also called agriculture and related sector.

The secondary sector covers activities in which naturaL products are processed into other forms through manufacturing associated with industrial activity. The product is artificially created or processed and the process of manufacturing becomes essential. This is the next step after the primary sector.

This could be in a factory, a workshop or at home. For example, yarn could be spun by using cotton fibres obtained through the primary sector. Sugarcane is processed to make jaggery or sugar.

Important:

• This sector gradually become associated with the different kinds of industries that came up, it is also called the industrial sector.
• The third category of activities is called tertiary sector. It is different from the production of goods. This kind produces services which help in the development of the primary and secondary sectors.
• They do not produce goods but they are an aid or a support for the production process. For example, cotton clothes after finishing would need to be transported by trucks or trains and then sold in wholesale and retail shops.

Important:
Transport, storage, communication, banking, trade are some examples of tertiary activities. This sector is also called the service sector because it produces services.

The service sector also includes some essential services that may not directly help in the production of goods. Service people like teachers, doctors, and those who provide personal services such as washermen, barbers, cobblers, lawyers, and people to do administrative and accounting works are also parts of this sector.

In recent times, certain new services based on information technology such as internet cafes, ATM booths, call centers, software companies etc have become important.

Important
Economic activities, though, are grouped into three different categories, are highly interdependent.

Example 1.

 Examples of Economic Activities Example What does this show? (A) Imagine what would happen if farmers refuse to sell sugarcane to a particular sugar mill. The mill will have to shut down. This is an example of the secondary or industrial sector being dependent on the primary. (B) Imagine what would happen to cotton cultivation if companies decide not to buy from the Indian market and import all cotton they need from other countries. Indian cotton cultivation will become less profitable and the farmers may even go bankrupt if they cannot quickly switch to other crops. Cotton prices will fall. (C) Farmers buy many goods such as tractors, pump sets, electricity, pesticides and fertilizers. Imagine what would happen if the price of fertilizers or pump sets go up. Cost of cultivation of the farmers will rise and their profits will be reduced. (D) People working in industrial and service sectors need food. Imagine what would happen if there is a strike by transporters and lorries refuse to take vegetables, milk, etc. from rural areas. Food will become scarce in urban areas whereas farmers will be unable to sell their products.

(B) This is an example of the primary sector being dependent upon the Secondary sector
(C) This is an example of the Secondary and primary sectors being dependent upon the tertiary sector.
(D) This is an example of the tertiary sector being dependent on the primary sector.

### Comparison of The Three Sectors

The various production activities in the primary, secondary and tertiary sectors produce a very large number of goods and services. They employ a huge workforce. To calculate how many people work in each sector individually and their individual production, economists suggest that the values of final goods and services should be added together.

For total production by a country, the value of goods and services in the three sectors are calculated, and then added up.

Not every good (or service) that is produced and sold is counted to calculate the production of each sector. Only the final goods and services are added to avoid double addition and inaccurate sums.

To understand why, consider this example- a farmer sells corn and chickpeas to a mill for Rs. 20 per kg. The mill grinds the grains and sells the flour to a noodle factory for Rs. 30 per kg. The flour is then converted into ten packs of noodles by using oil, water, salt etc and then sold in the market to the consumers for Rs. 10 in the markets. Noodles are the final goods, i.e., goods that reach the consumers.

It is only the cost of these packets of noodles which should be added up. The prices of intermediary products have already been adjusted in those prices.

One or more sectors could dominate an economy in terms of total production and employment, while other sectors are relatively small in size.

The sum of production of all three sectors is called the Gross Domestic Product (GDP) of a country. It is the value of all final goods and services produced within a country during a particular year. GDP indicates the size of an economy.

Important:
GDP is measured by a Central government ministry in India- it is currently the fifth largest economy in the world in terms of GDP. This Ministry, with the help of various government departments of all the Indian states and union territories, collects information relating to total volume of goods and services and their prices and then estimates the GDP.

Example 2.
Correct and arrange the important aspects for calculating GDP from this jumble.
To count goods and services we add the numbers that are produced. We count all those that were produced in the last five years. Since we shouldn’t leave out anything we add up all these goods and services. [NCERT]
This can be arranged in steps.

1. To count goods and services, we add the numbers that are produced.
2. Since we shouldn’t leave out anything we add up all these goods and services.
3. We count all those that were produced in the last five years.

### Historical Change In Sectors

It has been reported that in most countries, the primary sector was the most important sector of economic activity during the initial, stages of their development. With growth and advancement in technology, the agriculture sector began to prosper. People were encouraged to take up new activities. There were an increasing number of craftsmen, traders, transporters, administrators and soldiers. Markets grew larger. Most of the goods produced were natural products from the primary sector and most people were also employed in this sector.

With time, new methods of manufacturing were introduced, factories came up and started expanding.

People were attracted to it. People began to use many more goods that were produced in factories at cheap rates. The secondary sector gradually became the most important in total production and employment.
These trends show that the importance of the sectors has changed over time.

In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries. The service sector has become the most important in terms of total production. Most of the working people are also employed in the service sector.

Example 3.
Match the following:

 Problems faced by the farming sector Some possible measures (1) Unirrigated land (a) Setting up agro-based mills (2) Low prices for crops (b) Cooperative marketing societies (3) Debt burden (c) Procurement of food grains by government (4) No job in the off season (d) Construction of canals by the government (5) Compelled to sell their grains to the local traders soon after harvest (e) Banks to provide credit with low interest

 Problems faced by the farming sector Some possible measures (1) Unirrigated land (d) Construction of canals by the government (2) Low prices for crops (c) Procurement of food grains by government (3) Debt burden (e) Banks to provide credit with low interest (4) No job in the off season (a) Setting up agro-based mills (5) Compelled to sell their grains to the local traders soon after harvest (b) Cooperative marketing societies

Example 4.
Find the odd one out and say why.
(A) Tourist guide, dhobi, tailor, potter
Tourist guide

Explanation: He is appointed by a Government Department. Rest are self employed.

(B) Teacher, doctor, vegetable vendor, lawyer
Vegetable vendor

Explanation: He works in the primary sector, while jobs of teacher, lawyer and doctor come under the tertiary sector.

(C) Postman, cobbler, soldier, police constable
Cobbler

Explanation: He works in the private sector while the postman, soldier and poLice constable work for the public sector or the organised sector.

(D) MTNL, Indian Railways, Air India, Jet Airways, All India Radio
Jet Airways

Explanation: All the others are public sector- enterprises.

Example 5.
A study in Ahmedabad found that out of 15,00,000 workers in the city, 11,00,000 worked in the unorganised sector. The total income of the city in this year (1997-1998) was Rs. 60,000 million. Out of this Rs. 32,000 million was generated in the organised sector. What kind of ways should be thought of for generating more employment in the city?
Despite a lesser number of workers in the organised sector, more revenue was produced. Ways have to be created to offer people jobs in the organised sector. More industries, factories and markets should be opened up. More companies should be set up.

Example 6.
A research scholar looked at the working people in the city of Surat and found the following.

 Place of Work Nature of Employment Percentage of Working People (A) In offices and factories registered with the government. Organized 15 (B) Own shops, office, clinics in marketplaces with formal license. 15 (C) People working on the street, construction workers, domestic workers. 20 (D) Working in small workshops is usually not registered with the government.

Complete the table. What is the percentage of workers in the unorganized sector in this city?
(B) Unorganised
(C) Unorganised
(D) Unorganised, 50

Explanation: People who work in firms recognized by the government or are self-employed but still have themselves registered belong to organised sectors.

All other forms of firms, companies, self-employed workers are unorganised sector workers.

Rising Importance Of The Tertiary Sector In Production

Over the forty years between 1973-74 and 2013-14, while production in all the three sectors has increased, it has increased the most in the tertiary sector.

The tertiary sector has emerged as the largest producing sector in India replacing the primary sector in 2013-14.

In all countries, basic services like the hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defence, transport, banks, insurance companies, etc. are essential. The Governments have to take responsibility for the provision of these services in developing countries.

The second reason is because the development of agriculture and industry leads to the development of services such as transport, trade, storage.

Greater the development of the primary and secondary sectors, more would be the demand for such services. Third, as income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training etc.

Fourth, over the past decade or so, certain new services such as those based on information and communication technology have become important and essential.

The production of these services has been rising rapidly. Service sector in India employs many different kinds of people but the entire service sector is not growing in significance together. There are a limited number of services that employ highly skilled and educated workers.

There are also a very large number of workers engaged in services such as small shopkeepers, repair persons, transport persons, etc. They have to provide these services due to lack of alternative opportunities for work.

While there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment. The primary sector continues to be the largest employer despite its decreasing share in performance.

For example, the production of goods or industrial output increased by more than nine times during the period, employment rose only by three times. While production in the service sector rose by 14 times, employment in the service sector rose around five times. 50% workers are employed in the primary sector, mainly in agriculture, producing only about one sixth of the GDP. The secondary and tertiary sectors employ less than 50% of the people and manage to produce about five sixth of the total produce.

We can conclude that there are more people in agriculture than what is required. Even if some of them were removed from jobs, the production would not be affected. This means workers in the agricultural sector are underemployed.

On small pieces of lands, numerous people, sometimes an entire family works. Their labour effort gets divided. No one is fully emploued. This is the situation of underemployment, Wiiere people are apparently working but all of them are made to work less than their potential. This kind of underemployment is hidden as opposed to someone who is unemployed. Hence, it is also called disguised unemployment.

If underemployed people from the agricultural sector were provided with proper work elsewhere, agricultural production will not suffer. Their family income would increase. This underemployment is not restricted to the agricultural sector.

There are casual workers in the service sector such as painters, plumbers, repair persons in urban areas who search for daily employment. Street vendors also work very hard but earn very little. This is due to lack of employment opportunities.

Example 7.
Underemployment occurs when people
(a) do not want to work
(b) are working in a lazy manner
(c) are working less than what they are capable of doing
(d) are not paid for their work
(c) are working Less than what they are capable of doing.

Creation of More Employment Opportunities:
In creating more employment, only the government can help the citizens. The government provides money through schemes and the banks are encouraged to lend more money to the impoverished, to provide these workers with the kind of support they require.

Constructing better dams, provision of subsidized fertilisers and seeds can lead to a lot of employment generation within the agricultural sector itself reducing the problem of underemployment. To help in the transportation of the produce, the government can help construct better infrastructure and help store the crops. This activity can help create employment to those in services like transport or trade.

If the local bank gives these workers easy credit at a reasonable rate of interest, workers can buy any items of input required for their work easily.

Another way to tackle the problem of underemployment is to identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed.

Important:
About 60 percent of the population in India belongs to the age group 5-29 years. Out of this, only about 51 percent are attending educational institutions.

Many children are forced to work as child laborers to support their families. If these children are to attend schools, we will require more buildings, more teachers and other staff.

NITI Aayog, earlier known as the Planning Commission estimated that about 20 lakh jobs can be created in the education sector alone. A similar scope could be created in the Health sector. Every state or region has the potential for increasing the income and employment for people in that area in fields like tourism, native craft industry or the IT industry.

It requires government support. If tourism as a sector is improved, it can provide additional employment to 35 lakh people every year. However, these are long-term reforms. For quick reformation, the central government of India implemented the Right to Work in about 625 districts of India through Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005). Under this, all those who want to and can work in rural areas are guaranteed 100 days of employment in a year by the government. If the government fails to provide employment, it will give unemployment allowances to the people. Production-enhancing land activities are the main provider of work under the Act.

Division of Sectors: Organised And Unorganised Organised sector covers those enterprises or places of work where:

1. Terms of employment are regular
2. People have assured work
3. They are registered by the government and are bound to follow its rules and regulations which are given in-laws like the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishments Act etc.
4. Workers in the organized sector enjoy the security of employment.
5. They are expected to work only a fixed number of hours. If they work more, they have to be paid overtime by the employer.
6. They also get several other benefits from the employers like medical leaves, paid leaves, payment during holidays, provident fund, gratuity etc.
7. Factory manager has to ensure facilities like drinking water and a safe working environment.
8. These workers get pensions upon retirement as well.

It is called organized because it has some formal processes and procedures. Some of these people may be self-employed but they still have to register themselves with the government and follow the rules and regulations.

The unorganized sector is characterized by small and scattered units:

1. Which are largely outside the control of the government.
2. Rules and regulations are not followed.
3. Jobs here are low-paid and often not regular.
4. There is no provision for overtime, paid leave, holidays, leave due to sickness etc.
5. Employment is not secure. People can be fired anytime, sometimes according to the whims of the employer.
6. Employment is seasonal.

This sector includes a large number of self-employed in doing small jobs such as repair work. Farmers and farm laborers are both workers of the unorganized sector.

Workers of the Unorganised Sector:
The organized sector offers fascinating jobs but the employment opportunities grow very slowly. It is also common to find many organized sector enterprises in the unorganised sector. These strategies are adopted so as to evade taxes and refuse to follow laws that protect labourers. Workers are forced to enter the low paying unorganized sectorjobs. Earnings are insecure and irregular.

Organized workers upon losing jobs find them in unorganized sectors. Thus, there is also a need for the protection and support of the workers in the unorganized sector.

The unorganized sector comprises landless agricultural labourers, small and marginal farmers, sharecroppers and artisans (such as weavers, blacksmiths, carpenters and goldsmiths). Almost 80 per cent of rural households in India has small and marginal farmers. These farmers need to be supported through adequate facilities for timely delivery of seeds, agricultural inputs, credit, storage facilities and marketing outlets.

The urban unorganized sector comprises mainly workers in small-scale industry, casual workers in construction, trade and transport workers, street vendors, head load workers, garment makers, rag pickers etc. These small scale industries also require Government’s support for procuring raw material and marketing of output.

Important:
Majority of workers from scheduled castes, tribes and backward communities find themselves in the unorganised sector. Besides irregular and low paid work, these workers also face social discrimination.

Protection and support to the unorganised sector workers is essential for both economic and social development

Example 8.
These workers are forced to take up jobs in the unorganised sector with low earnings. Hence, besides the need for more work, there is also a need for protection and support of the workers in the unorganised sector.
Who are these vulnerable people who need protection? In the rural areas, the unorganised sector mostly comprises landless agricultural labourers, small and marginal farmers, sharecroppers and artisans (such as weavers, blacksmiths, carpenters and goldsmiths). Nearly 80 per cent of rural households in India are in the small and marginal farmer category. These farmers need to be supported through adequate facilities for timely delivery of seeds, agricultural inputs, credit, storage facilities and marketing outlets.
(A) Which of the following is a reason for the need of protection for vulnerable people?
(I) They do not have job security
(II) They are paid less
(III) They have less opportunities for work
(a) (I) only
(b) (II) only
(c) (III) only
(d) (I), (II) & (III)
(d) (I), (II) & (III)

(B) Which of the following can be a way to help these vulnerable sections?
(a) They should be offered clothes
(b) They should be sent to another country
(c) They should be given more food
(d) They should be offered greater, safer and varied opportunities to work.
(d) They should be offered greater, safer and varied opportunities to work.

(C) Mention one type of work which can be categorised under the Unorganised sector.
Farming

(D) Assertion (A): Most families in India have people working in Unorganised sectors.
Reason(R): Organised sectors have less opportunities to offer.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
(c) (A) is correct but (R) is wrong.
(d) (A) is wrong but (R) is correct.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).

Sectors In Terms of Ownership: Public And Private Sectors

Economic activities could also be classified into two categories on the basis of who owns assets and is responsible for the delivery of services.

1. Public Sector: the government owns most of the assets and provides all the services. Example: Railways or post office.
2. Private Sector: private ownership of assets and delivery of services. Example: Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited (RIL) are privately owned.

Activities in the private sector are guided by the motive to earn profits. The purpose of the public sector is not just to earn profits.

Governments raise money through taxes and reimburse the expenses of the services used through it.
Several basic and essential items are required by all sections of societies- some of them are not able to afford even those items. The private sector will not provide these at a reasonable cost. Some of these need spending large sums of money, which is beyond the capacity of the private sector.

The collection of money is a long process and cannot be carried out by private individuals. Construction of roads, bridges, railways, harbours, generating electricity, providing irrigation through dams, etc are such activities. Governments thus undertake these activities and ensure their availability to everyone.

Activities which the private sector may not continue their production or business unless the government encourages it, essentially needs the government’s support. Providing electricity, water and other resources at subsidized rates is an example. Grains are provided at a fair price to the underprivileged through government intervention and support. The government has to bear some of the cost. Through this, the government supports both farmers and consumers.

Providing health and education facilities are some of the most important activities which have to be provided by the government. Running proper schools and providing quality education, particularly elementary education, is the duty of the government.

Important:

• India’s size of illiterate population is one of the largest in the world.
• Nearly half of India’s children are malnourished and a quarter of them are critically ill.
• The infant mortality rate of Odisha (41) or Madhya Pradesh (47) is higher than some of the most backward nations of the world.
• the Government also needs to pay attention to indicators of human development like availability of safe drinking water, housing facilities for the poor and food and nutrition. It is the responsibility of the government to pay attention to the remotest and weakest areas of the country.
• The government should increase its spending upon various facilities to help develop these areas.

→ Food Security: Food security is a measure of the availability of food and individuals’ ability to access it.

→ Subsidy: A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government.

→ Sharecroppers: A sharecropper is a member of a low social class of farm workers who receive a share of the value of the crop. They pay their farm owners for their shelter and food.

→ Gratuity: An amount given by an employer to his/her employee for the services rendered by him during the period of employment.

→ Provident Fund: A retirement savings scheme introduced by the government.

→ Enterprises: A business or a firm

→ 2005: Mahatma Gandhi National Rural Employment Guarantee Act was passed.

## Development Class 10 Notes Social Science Economics Chapter 1

### The Story of Development

Development involves thinking about equality, better lifestyle through better administration and principles, more equitable distribution of resources and how these goals to be achieved. The way we live today is influenced by the past. Any change in the conditions has to be implemented keeping that in mind. Only through democratic political processes, these hopes and possibilities can be achieved in real life.

Different people have different aspirations for and notions of development. Each person seeks a different goal. They seek things that are most important for them, i.e., that which can fuLfil their aspirations or desires. Two persons or groups of persons may also seek things which are conflicting.

Important:
Examples of conflicting interests: A girl expects as much freedom and opportunity as her brother, and that he also shares in the household work. Her brother may not like this.

Similarly, to get more electricity, industrialists may want more dams. This may submerge the land and disrupt the lives of people who are displaced – such as tribals. w They may prefer small check dams or tanks to irrigate their land.

Two lessons are: different persons can have different developmental goals and what may be development for one may not be developed for the other. It may be destructive for other groups.

### Income and Other Goals

People desire regular work, better wages, and decent prices for their crops or other products that they produce. People also seek things like equal treatment, freedom, security, and respect of others. They resent discrimination. Some people might also think that these may be more important than more income or more consumption. Material goods are not all that you need to live.

Money or material things are very crucial for our lives.
The quality of our life also depends on non-material things. Various values like freedom, equality and justice do not have material value and cannot be measured but are very important for our lives.

If you get a job in o fiar off place. before accepting it you would try to consider many factors, apart from income, such as facilities for your family, working atmosphere, or opportunity to learn. In another case, a job may give you less pay but may offer regular employment that enhances your sense of security. Another job, however, may offer high pay but no job security and also leave no time for your family. This will reduce your sense of security and freedom.

For development, people look at a mix of goals. For example, women are respected more in their houses if they are engaged in paid work. Women also expect help in household work. Along with that, they expect a safe and secure work environment which might encourage women to take up a variety of jobs or run a business. This proves that developmental goals that people have are not just about better income but also about other important things in life.

Example 1.
Complete the table given below:

 Developmental Goals of Different Categories of Persons Category of Person Developmental Goals Aspirations (A) Landless rural Labourers More days of work and better wages; Local school is able to provide quality education for their children; there is no social discrimination and they too can become leaders in the village. (B) Prosperous farmers from Punjab Assured a high family income through higher support prices for their crops and through hardworking and cheap Labourers they should be able to settle their children abroad. (C) Farmers who depend only on rain for growing crops (D) A rural woman from a landowning family (E) Urban unemployed youth (F) A boy from a rich urban family (G) A girt from a rich urban family She gets as much freedom as her brother and ¡s able to decide what she wants to do in life. She is able to pursue her studies abroad. (H) An adivasi from Narmada valley

(C) Farmers who depend only on rain for growing crops: Artificial irrigation technologies, better seeds and more water from canals.
(D) A rural woman from a landowning family: opportunities to work, higher education
(E) Urban employed youth: better employment opportunities
(F) A boy from a rich urban family: Opportunities to study in abroad, better jobs
(H) An Adivasi from Narmada valley: rights to the products of the forest, rights to their native lands, opportunities to preserve their culture

Example 2.
Why do different persons have different notions of development? Which of the following explanations is more important and why?
(a) Because people are different.
(b) Because the life situations of people are different.
(b) Because the Life situations of people are different.

Explanation: Different people have different life situations which make them aspire for different development goals.

Example 3.
Statement (I): People have different developmental goals.
Statement (II): People have conflicting developmental goals.
No

Explanation: They do not mean the same because different does not necessarily mean conflicting interests.

### National Development

The notion of national development is different among different people. People could have different as well as conflicting notions of a country’s development.
National development means thinking about various questions about conflicting ideas, chalking out a common path for holistic development of all.

### Comparison of Development Among Countries

Different criteria are used to compare different things. Between students, the primary basis of comparison
is upon their friendliness and spirit of cooperation, creativity or marks secured.

For comparing countries, their income is considered to be one of the most important attributes. Countries with higher income are more developed than those with less income. It is based on the assumption that more income means development and a better lifestyle. Greater income will help people buy more. Hence, greater income itself is considered to be one important goal.

Important:
The income of the country is the income of all the residents of the country. This gives us the total income of the country.

Example 1.
Write a paragraph on your notion of what should India do, or achieve, to become a developed country.
India has a huge demographic where more than 60% of our population belongs to the age group of 18-40 years. Thus to achieve development, Indian government should begin capacity building exercises for these young people and offer employment opportunities.

Education has to be more diverse and vocational. More workshops will have to be set up for industrial training. Capacity has to be built up for the agricultural sector.

However, for comparison between countries, total income is not such a useful measure. Comparing total income doesn’t tell us what a person is likely to earn since each country has a different population. Thus, it is wiser to compare the average income which is the total income of the country divided by its total population. The average income is also called per capita income. In World Development Reports, brought out by the World Bank, this criterion is used in classifying countries.

Example 2.
Suppose records show that the average income in a country has been increasing over a period of time. From this, can we conclude that all sections of the economy have become better? Illustrate your answer with an example.
No, it does not guarantee that all the groups are progressing at the same pace. The average income of any country is an average of how all the sections are performing together not individually. Cumulative growth does not convey the performance of individual sections on the correct parameters of growth.

For example, despite growth, agriculture is still stagnant. Despite the growth, high-income inequality also does not talk about the pitiable condition of lower classes.

Important:
Countries with per capita income of US$12,056 per annum and above in 2017, are called rich countries and those with per capita income of US$ 955 or less are called low-income countries. India comes in the category of low-middle-income countries because its per capita income in 2017 was just US\$ 1820 per annum.

### Public Facilities

The rich countries, excluding countries of the Middle East and certain other small countries, are generally called developed countries.

People also think of ideals such as security, respect for others, equal treatment, freedom, etc. as criteria for development.

There is more to a nation’s development than just the average income of its people.

1. Money cannot buy all the goods and services required to live well and hence income by itself is not a completely adequate indicator of material goods and services that citizens are able to use.
2. Money cannot buy a pollution-free environment or unadulterated medicines, it can only buy you a house in a better community.
3. Money may also not be able to protect people from infectious diseases unless mass prevention and precautions are in practice.

The cheapest and best way to ensure the provision of goods and services to people is to provide them collectively. It will be cheaper to have collective security for the whole locality or for each house to have its own security. However, the same cannot be said for basic amenities like education, public health services, medical facilities, food, water etc.

Some people are not willing to study while many other children want to study. Many people believe that the government should open schools and provide other facilities so that all children have a chance to study. Despite that, children, particularly girls, are not able to go to high school because the government/society has not provided adequate facilities.

Important:
Kerala has a low Infant Mortality Rate (IMR) because it has the adequate provision of basic health and educational facilities.

Example 1.
Lets look at the figures of Per Capita Net State Domestic Product at Current Prices for 2016-17. Let us ignore what this complicated term exactly means. Roughly, we can take it to be the per capita income of the state. We find that of the three, Haryana has the highest per capita State Per Capita Income (in Rs.) Haryana 1,80,174, Kerala 1,63,475 and Bihar 34,409 income and Bihar is at the bottom.

This means that, on an average, a person in Haryana earned Rs. 1,80,174 in one year whereas, on an average, a person in Bihar earned only around Rs. 34,409. In Kerala, out of 1000 children born, 10 died before completing one year of age but in Haryana the proportion of children dying within one year of birth was 30, which is two times more than that of Kerala. On the other hand, the per capita income of Haryana is more than that of Kerala as shown in Table.

 Table: Per Capita Income of Selected States State Per Capita Income (in Rs.) 1. Haryana 1,80,174 2. Kerala 1,63,475 3. Bihar 34,409

(A) Which of the following states are most developed on the basis of per capita income?
(a) Kerala
(b) Haryana
(c) Bihar
(d) All three are equally developed because income does not decide development.
(b) Haryana

Explanation: On average, a person in Haryana earned Rs. 1,80,174 in one year, which is greater than Kerala. Hence, on the basis of this, Haryana is the most developed.

(B) Which of the following states have richer citizens?
(a) Kerala
(b) Haryana
(c) Bihar
(d) All three are equal.
(b) Haryana

Explanation: It’s per capita income is the highest, which means it has richer people than average.

(C) What is per capita income?
Per capita income is the average income of a citizen in a state/city/country.

(D) Assertion (A): Haryana is more developed because it has more number of children dying within one year of birth.
Reason (R): People in Haryana are not as educated.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
(c) (A) is correct but (R) is wrong.
(d) (A) is wrong but (R) is correct.
(d) (A) is wrong but (R) is correct.

Explanation: People in Haryana are less developed because they do not have appropriate medical facilities to save their infants, which makes Haryana less developed. That is, if you look at development from the perspective of child mortality rate.

The Public Distribution System (PDS) ensures the provision of food grains to underprivileged people at subsidized rates. The Health and nutritional status of people in such states is certainly likely to be better.

Sri Lanka, a smaller country than India, is much ahead of India in every respect and a big country like ours has such a low rank in the World Development Index. Though Nepal and Bangladesh have a lower per capita income than that of India, yet they are better than India in life expectancy. Many improvements have been suggested in calculating HDI and many new components have been added to the Human Development Report the name makes it very clear that the development of people, their health, their well-being, is the most important thing for a country.

Maintenance of development and growth is desirable. However, since the second half of the twentieth century, a number of scientists have been warning that the present type, and levels, of development, are not sustainable.

Important:
Health and education indicators are important indicators used by certain commissions to measure development. The Human Development Report published by UNDP compares countries based on the educational levels of the people, their health status and per capita income.

Body Mass Index (BMI) measures our nutrition levels. To calculate weight and height are necessary. Weight is to be calculated in Kgs. The height recorded is to be converted from centimeters into meters. Divide the weight in kg by the square of the height. This is used to check whether a student is malnourished or not.

Example 2.
The development of a country can generally be determined by:
(a) its per capita income
(b) its average literacy level
(c) health status of its people
(d) all of the above
(d) all of the above

Example 3.
Which of the following neighboring countries has better performance in terms of human development than India?
(b) Sri Lanka
(c) Nepal
(d) Pakistan
(b) Sri Lanka

Example 4.
Assume there are four families in a country. The average per capita income of these families is Rs. 5000. If the income of three families is Rs. 4000, Rs. 7000 and Rs. 3000 respectively, what is the income of the fourth family?
(a) Rs. 7500
(b) Rs. 3000
(c) Rs. 2000
(d) Rs. 6000
(d) Rs. 6000

### Sustainability of Development

Groundwater is an example of renewable resources. These resources are replenished by nature as in the case of crops and plants but even these resources may be overused. Non-renewable resources are those which will get exhausted after years of use. We have a fixed stock on earth that cannot be replenished. We do discover new resources. New sources in this way add to the stock of resources discovered already. However, even these resources will get exhausted.

Consequences of environmental degradation do not respect national or state boundaries; this issue is no longer region or nation-specific. Our future is linked together.

Sustainability of development is comparatively a new area of knowledge in which scientists, economists, philosophers and other social scientists are working together.

In general, the question of development or progress is perennial. The debate on development is incessant.

→ HDI: Human Development Index.

→ Life Expectancy: This between birth denotes, as the name suggests, average expected length of life of a person at the time of birth.

→ Per Capita Income: Average income of each person in a country/state.

→ BMI: Body Mass Index

→ Sustainability: It is the ability to exist constantly without harming the current condition.

→ Infant Mortality Rate: Infant Mortality Rate indicates the number of children that die before the age of one year as a proportion of 1000 live children born in that particular year.

→ Literacy Rate: It measures the proportion of the literate population in the 7-and-above age group.

→ Net Attendance Ratio: It is the total number of children of age group 14 and 15 years attending school as a percentage of a total number of children in the same age group.

→ Perennial: Permanent