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ECONOMIC DEVELOPMENT in INDIA Prepared As Per the Syllabus Prescribed by Karnataka State Law University (KSLU), Hubballi

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ECONOMIC DEVELOPMENT in INDIA Prepared As Per the Syllabus Prescribed by Karnataka State Law University (KSLU), Hubballi KLE LAW ACADEMY BELAGAVI (Constituent Colleges: KLE Society’s Law College, Bengaluru, Gurusiddappa Kotambri Law College, Hubballi, S.A. Manvi Law College, Gadag, KLE Society’s B.V. Bellad Law College, Belagavi, KLE Law College, Chikodi, and KLE College of Law, Kalamboli, Navi Mumbai) STUDY MATERIAL for ECONOMIC DEVELOPMENT IN INDIA Prepared as per the syllabus prescribed by Karnataka State Law University (KSLU), Hubballi Compiled by Reviewed by Sarala Vaidya, Asst. Prof. Sarala Vaidya, Asst. Prof. Jayanth Kashyap, Asst. Prof. K.L.E. Society's Law College, Bengaluru This study material is intended to be used as supplementary material to the online classes and recorded video lectures. It is prepared for the sole purpose of guiding the students in preparation for their examinations. Utmost care has been taken to ensure the accuracy of the content. However, it is stressed that this material is not meant to be used as a replacement for textbooks or commentaries on the subject. This is a compilation and the authors take no credit for the originality of the content. Acknowledgement, wherever due, has been provided. KLE Society’s Law College , Bengaluru Economic Development in India Objectives: The course is developed keeping in view the dynamics of economic principles in legal system. The Course intends to describe economic development in relation to Agriculture, Industry and Banking, the national income and the functions of the Central Bank i.e., RBI and the impact of globalization on the economy. UNIT – I Economic Development in India in relation to Agriculture- Marketing and Finance Industry: Capital formation and FDI. Service Sector: Banking, Insurance and Other Services like tourism, medical services and software services since 1990. UNIT – II National Income: meaning, measurement and difficulties. Parallel Economy: meaning, magnitude & consequences, Factors responsible for the generation of black money. Policy to control parallel economy. UNIT – III Functions and role of RBI and monetary policy: Quantitative and Qualitative methods of Credit Control, Working of the Indian monetary system, Chakravarthy Committee Report. UNIT – IV New Industrial policy: changing role of public sector, small sector industrial policy. Abid Hussein Committee Report on SSI. UNIT – V Globalization and its impact on Indian Economy, Emerging trends in India’s Foreign Trade, Exim Policy, India and WTO, World Bank and IMF. 1 Reference Books: 1. Indian Economy – A. N. Agarwal 2. Indian Economics – Shankaran 3. Indian Economy – Rudradutt, KPM Sundaram 4. Indian Economy – S. M. Mishra, V. K. Puri 2 Table of Contents UNIT – I Page Number 1. Features of Indian Economy 5-11 2. India as an Developing Economy 12-14 3. Major Issues Hampering growth of Indian economy 15-17 4. Agriculture-Its role 18-25 5. Green Revolution 26-34 6. Agricultural Labour 35-39 7. Agricultural Market 40-46 8. Agricultural Finance 47-54 9. Industry 55-61 10. Information Technology 62-66 11. Emergence of Banking in India 67-75 UNIT – II 1. National Income: meaning and definitions 76-79 2. Concepts of National Income 80-82 3. Methods to calculate National Income 83-89 4. Difficulties in calculation of NI 90-91 5. Capital Formation 92-98 6. Parallel Economy 99-108 UNIT – III 1. Functions RBI 109-112 2. Credit Control Measures- Quantitative Credit Control and 113-122 Qualitative measures 3. Monetary Policy-Objectives and its role 123-127 4. Chakravarthy Committee Report on Banking Reforms 128-132 3 UNIT – IV 1. New Industrial Policy 1991 133-136 2. Public Sector Industries 137-144 3. Small Scale Industries- contribution and problems 145-147 4. MSME Act and New Small Scale Industrial Policy 1991 148 5. Abid Hussain Committe Report on SSI 149-153 UNIT – V 1. Globalization and its impact on Indian Economy 154-162 2. MNCs 163-168 3. FDI 169-172 4. Emerging trends in India’s Foreign Trade 173-178 5. EXIM Policy 179-202 6. GATT 203-212 7. WTO 213-229 8. India and WTO 230-232 9. IMF 233-244 10. SDR 245-249 11. World Bank 250-260 Bibliography 261 4 Features of Indian Economy In the 21st century, India has been an emerging economic power with vast human and natural resources, and a huge knowledge base. Since 1991, continuing economic liberalization has moved the economy towards a market-based system. A revival of economic reforms and better economic policy in 2000s accelerated India’s economic growth rate. By 2008, India had established itself as the world’s second-fastest growing major economy. However, the year 2009 saw a significant slowdown in India’s official GDP growth rate to 6.1%as well as the return of a large projected fiscal deficit of 6.8% of GDP which would be among the highest in the world. India has emerged as the fastest growing major economy in the world though considered as agrarian economy. India with time has undergone itself with economic socio transformation. The share of agricultural sector in the National Income has reduced considerably. Agriculture contributes to 15.4% to the NI, while industry contributes to29.9% and service sector 54.4% as of 2017-18. India is termed as a fastest growing developing nation. India’s nominal GDP growth rate is estimated at 12 per cent in 2019- 20. The estimate for 2018-19 was 11.5 per cent. During Q2 of 2019-20, GDP (at constant 2011-12 prices), GDP stood at Rs 33.16 lakh crore (US$ 474.46 billion) showing a growth rate of 4.3 percent over the corresponding quarter of previous year. India has retained its position as the third largest startup base in the world with over 8,900-9,300 startups, with about 1,300 new start-ups being founded in 2019, according to a report by NASSCOM. India also witnessed the addition of 7 unicorns in 2019 till August, taking the total tally up to 24. The features of Indian Economy are as follows- 1. Low Per capita Income India’s per capital income is very low as compared to the advanced countries. India's per capita income was $1670 per year in 2016, ranked at 112th out of 164 countries as reported by the World Bank. The growth of 8.6 percent in per capita income is the lowest in six years in nominal terms for India in 2017-18. And according to 2005 statistics, the per capita 5 income figure in Switzerland was nearly 76 times, in U.S.A. about 61 times, in Germany about 48 times and in Japan about 54 times the per capita income figure in India. Thus the standard of living of Indian people remained all along very low in comparison to that of developed countries of the world. According to the World Bank’s Report, in 2017, India’s PCI was $ 1940 and was ranked 138 out of 184 countries. India not only shows cases low per capita income but also the distribution of income is unequal. The mal-distribution of income and wealth makes the problem of poverty as one of the critical and acute problem acting as an obstacle in the process of economic progress and development. 6 2. Dependency on Agriculture Indian economy is characterized by too much dependence on agriculture and thus it is primary producing. A very high proportion of population is engaged in agriculture and allied activities even now, thus contributing a large share in the national income of our country. The latest statistics reveal that 50% of people in India are dependent on agriculture for employment. It is also marked by low agricultural productivity, lack of modernization and lack of diversification in its output. Thus agricultural sector is overburdened as the majority of the active population is depending on agriculture. 3. Heavy Population pressure India has a very high rate of growth of population since 1950. Thus the pressure of population on the country is very heavy. This has resulted from a very high level of birth rates coupled with a falling level of death rates. The rate of growth of population was 1.31 per cent annually during 1941-50 to 2.5 per cent annually during 1971-81 to 2.11 per cent annually during 1981-91 and then finally to 1.77 per cent during 2001-2011 and is at 1.1% in 2017. 4. Prevalence of Chronic unemployment and underemployment Rapid growth of population coupled with inadequate growth of secondary and tertiary occupations are responsible for the occurrence of chronic unemployment and under- employment problem in our country. India also has the problem of cyclical unemployment. Unemployment Rate in India increased to 6.10 percent in 2018 from 3.52 percent in 2017. Unemployment Rate in India averaged 4.12 percent from 1983 until 2018, reaching an all time high of 8.30 percent in 1983 and a record low of 3.41 percent in 2014. Lack of market for industrial goods, leads to disincentive for growth of industrial sector, poverty, lack of effective demand, unskilled labour with lack of opportunities for employment, dominance of traditional industries with lower productivity are all factors for prevalence of unemployment in the country. 7 5. Improving capital formation In India, the rate of capital formation is also low. Capital formation mainly depends on the ability and willingness of the people to save. With low per capita income and mal-distribution of income in the country, the ability of the people to save is very low for which capital formation will be considerably less. 6. Inequality in the distribution of wealth Unequal distribution in income is the result of inequality in the distribution of assets in the rural areas. On the other hand, in respect of industrial front there occurs a high degree of concentration of assets in the hands of very few big business houses.
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