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Concept of Economic development:

Till the 1960’s, the term economic development and economic growth
were used synonymously. However, the term economic development is no
longer considered as economic growth.

Economic development is taken to mean growth plus progressive changes

in certain crucial variables which determines the well being of the people.
Economic development is much more than growth. It typically refers to
improvements in literacy rates, life expectancy, and poverty rates.
Whereas, the term economic growth refers to the increase /growth of a
specific measure such as real national income, gross domestic product,
or per capita income.

There are various indicators of economic development which are as


• Literacy rates,

• Poverty,

• Life expectancy,

• Natural resources,

• Infrastructure, etc.

Literacy and economic development:

A simple definition of the literate person is one who can with
understanding both read and write a simple statement relevant to
everyday life.

Growth of literacy: During the British period, progress of education was

rather tardy. Between 1881-82and 1946-47, the numbers of school grew
from 82,916 to 134,866 and the number of students grew from 2,061,451
to 10,525,943. Total enrollment at the primary level has increased from
19,200,000 in 1950-51 to 109,800,000 in 2001-02.The number of high
schools in 2000-01 was higher than the primary schools at the time of

The provision of universal and compulsory education for all children in the
age group of 6-14 was a cherished national ideal and had been given
overriding priority by incorporation as a directive policy in article 45 of the
commission, but it is still to be achieved more than half of the century

since the constitution was adopted. Parliament has passed the
constitution 86th amendment act, 2002, to make elementary education a
fundamental right for children in the age group of 6-14 years

The table below shows the position of literacy in India at various years:

Year Literacy rate (%)

1881 3.2
1931 7.2
1947 12.2
1951 18.33
1961 28.3
1971 34.45
1981 43.57
1991 52.21
2001 68.84

The diagram below shows the line representation of literacy rate:

Government schemes to reduce illiteracy:
The Sarva Siksha Abhiyan was launched in 2001 to ensure that all
children in the age group 6-14 years attend school and complete eight
years of schooling by 2010. Important components of this scheme are the
Education guarantee scheme and alternative and innovative education
meant primarily for children where there is no formal school within a
radius of one kilometre.

The centrally sponsored District education programme launched in

1994 has so far opened more than 160,000 new schools, including almost
84,000 alternative schools. Of the estimated population of 205 million in
the age group 6-14 years on March 1, 2002, nearly 82.5%. The high drop
rate has been adopted to attract children to schools is a matter of major
concern. One of the most popular schemes adopted to attract children to
schools in the mid-day meals program launched in 1995.

Poverty and economic development:

Poverty generally refers to failing to reach certain minimum consumption
standard. Large numbers of India’s people live in abject poverty. Wealth
distributation in India is improving since the liberalization and with the
end of the socialist rule termed as the license raj. While poverty in India
has reduced significantly, official figures estimate that 27.5% of Indians
still lived below the national poverty line in 2004-05. A 2007 report by the
state-run national commission for enterprises in the unorganized sector
found that 65% of the Indians, or 750 million people, lived on less than 20
rupees per day with most working in informal labor sector no job or social
security, living in abject poverty. As per data, 27.5% of Indians still lived
below the national poverty line in 2004-05, 75% of the people living below
poverty line are in rural areas, and Wealth distribution is fairly uneven in
India, with the top 10% of income groups earning 33% of the income.

Historical trends of poverty statistics:

Year Poverty rate


1951 47.0
1954-55 64.0
1960-61 45.0
1977-78 51.3
1983 44.5
1987-88 38.9
1993-94 36.0
2004-05 27.5

The Line representation of poverty rate table is shown in diagram

below as:

Government strategies to alleviate poverty:
Eradication of poverty has always been one of the key objectives of
governments in its five-year plan. To reduce poverty, the
government has given importance to education, reservation of seats
in government jobs, and increasing empowerment of women. After
liberalization in 1991, India is adding 60-70 million people in its
middle class every year.

Some of the important programs that were brought by the

government to eradicate poverty were as follows:

• Rural employment program & Food for work program:

Launched in 1980’s, which attempt to use the unemployed people

to generate productive assets and build rural infrastructure.

• Rural employment guarantee bill:

Passed in august 2005 by Parliament of India, this is the biggest

program to alleviate poverty in terms of cost and coverage, which
promises 100 days of minimum wage employment to every rural
household in 200 of India's 600 districts.

Life expectancy and economic development:

According to the Population Reference Bureau’s 2000 World Data
Sheets, life expectancy at birth for Indians is between 60 to 61
years. This was also confirmed by recent census of India in 2001.

Region Life Population>65

expectancy years
at Birth
World 66 years 7%

India 60-61 years 4%

The life expectancy of various states of India is shown in table below:

State Total Male Female

Andhra Pradesh 63.1 61.6 64.1

Assam 57.2 57.1 57.6
Bihar 60.2 60.7 58.9
Gujarat 62.8 61.9 63.7
Haryana 64.5 64.1 65.0
Himachal Pradesh 65.6 65.1 65.8
Karnataka 64.0 62.4 65.5
Kerala 73.5 70.6 76.1
Madhya Pradesh 56.4 56.5 56.2
Maharashtra 65.8 64.5 67.0
Orissa 57.7 57.6 57.8
Punjab 68.1 66.9 69.1
Rajasthan 60.5 59.8 60.9
Tamilnadu 58.4 63.7 65.7
Uttar Pradesh 63.4 58.9 57.7
West Bengal 61.7 62.8 64.3

Infrastructure and economic development:

At the past, after independence, development of infrastructure was
completely in the hands of the public sector and was plagued by
corruption, bureaucratic inefficiencies, urban-bias and an ability to scale
investment. India’s low spending on power, construction, transportation,
telecommunications, and real estate at 6% of GDP of 2002 had prevented
India from sustaining higher growth rates. This had promoted the
government to partially open up infrastructure to the private sector
allowing foreign investment which has helped in sustained growth rate
close to 9% for the past six quarters. India holds the second position in the
world in roadways construction, more than twice of china. At present,
infrastructure has been expanding at a rapid pace to support the
economic growth at nearly 9%. The six core infrastructure industries
registered a robust increase of 9.6% during March 2008.

Some of the major infrastructure project planned by the Indian
government for the future is as follows:

• 40,000 MW hydro power generation capacities during the 12th and

13th plan.

• Constructing freight corridors between Mumbai-Delhi and Ludhiana-


• Modernization and redevelopment of 21 railway stations.

• Modernization and redevelopment of 4 metro and 35 non-metro


• Six laning 6500 km of golden quadrilateral and selected national


• Constructing 165,244 km of new rural roads.

Economic planning in India:
The pattern of economic development in India is very significantly
affected by government planning. The direction of the development
pattern of the various sectors and the relative priorities with in each
sector are determined by the five year plans.

The planning machinery consists of planning commission, National

development council and state planning councils.

The planning commission

The planning commission was set up in March 1950, by a resolution of the
government of India with the following functions:

• To make an assessment of the material, capital and human

resources of the country, including technical personnel, and
investigate and possibilities of augmenting such of these resources
as are found to be deficient in relation to the nations requirements.

• To formulate a plan for the most effective and balanced utilization of

the country’s resources.

• To indicate those factors to the government whose prove an

obstacle in the economic development.

• To evaluate the from time to time the progress achieved in every

stage of plan and also to suggest remedial measures.

• To advise the centre and the state government from time to time on
special matters referred to the commission.

National Development council

The national development council is headed by the prime minister and is
composed of union cabinet ministers, chief ministers of states and union
territories and members of planning commission. The secretary of the
planning commission acts as secretary of the NDC, and the commission is
expected to provide such administrative and other support as necessary.
The major functions of the NDC are as follows:

• To prescribe guidelines for the formulation of the national plan
including the assessment of the resources of the plan.

• To consider the national plan as formulated by the planning


• To consider important questions of social and economic policy

affecting national development.

• To review the working of the plan from time to time and to

recommend such measures as are necessary for achieving the aims
and targets set out in the national plan.

State plans
State plans account for about one half of the total outlay of the
government under a five year plan. The subjects that come under state
jurisdiction include such vital sectors of development as agriculture, small
industries, irrigation and power, roads and road transport, and education
and social services. The successful implementation of the major national
policy objectives depends upon the successful implementation of the state
level plans.

Major Objectives of the Indian plans:

• Proper utilization of the national resources in accordance of the
national priorities and fast development of the economy.

• Alleviation and ultimate removal of unemployment and poverty.

• Improvements in the standard of living in general.

• Reduce inequalities of income and wealth.

• Increase production to the maximum possible extent so as to

achieve higher level of national and per capita income.

Five year plans with their emphasis:

5 year plan Year Emphasis

First 1951-56 Agricultural sector

Second 1956-61 Basic and heavy industries
Third 1961-66 Export promotion
Fourth 1969-74 Self-reliance
Fifth 1974-79 Growth with social justice
Sixth 1980-85
Seventh 1985-90 Food, work , and productivity
Eighth 1992-97 Human development
Ninth 1997-2002
Tenth 2002-07 Growth with equity & distributive
Eleventh 2007-12

Tenth five year plan (2002-07):

The tenth five year plan (2002-2007) approach paper has proposed
that the plan should aim at an indicative target of 8.7% GDP growth
for 2002-07. The major objectives of the tenth five year plan are as

• Reduction of poverty ratio to 20% percent.

• Universal access to primary education.

• Increase in literacy to 72 percent.

• Reduction of IMR to 45 per 1000.

• Reduction of MMR to 20 per 1000.

• Increase in forest and tree cover by 25 percent.

• Clearing of major polluted rivers by 2007

The growth performance of the tenth five year plan is as follows:

Target Actual 2002-07


Growth rate 8.00 7.80

Growth in 4.00 3.42

Growth in 8.9 8.74
Domestic 23.31 26.62
Average 5.00 5.02

Growth performance of several five year plans:

S.N. 5 year Target Actual


1 First 2.1 3.61

2 Second 4.5 4.27
3 Third 5.6 2.84
4 Fourth 5.7 3.30
5 Fifth 4.4 4.80
6 Sixth 5.2 5.66
7 Seventh 5.0 6.01
8 Eighth 5.6 6.68
9 Ninth 6.5 5.35
10 Tenth 8.0 7.8

11th five year plan(2007-2012):

The major objective of the eleventh five year plan is to reduce poverty.
Other objectives are as follows:

• Growth rate of 10% p.a.

• Agriculture growth at 4%per year.

• Growth of industrial sector to 10% and manufacturing sector to 12%


• Double per capita income by 2016-17.

• Reduce educated unemployment rate to below 5%.

• Reduce dropout rate of school children to 20% from 52% now.

• Literacy rate to be increased to 80%clean drinking water to all by


• Electricity connection to all by 2009.

• A telephone in every village by November 2007.

• Broad band connectivity to all villages by 2011-2012.

• Achieve WHO standard air quality in major cities by 2011-12.

India-vision 2020:
Planning commission has released India vision -2020 on January 23, 2003
which presents pre-assessment of the progress of Indian economy for the
Indian economy for the next two decades. This document is prepared by
Mr. Shyam Prasad gupta, a member of planning commission. The salient
point s of the document are:

• Expected annual growth rate to be 9%.

• Full elimination of unemployment, illiteracy, & poverty.

• Per capita income to get doubled by 2020.

• 1.35 billion Population of the country to have better living conditions

by 2020.

• With 2% annual employment generation rate, 20 crore new
employment opportunities to be created by 2020.

• Cent percent registration of the children (age group 6-14) in schools.

• Environment situation to be remain as unbalanced as present.

• Unorganised sector to create more additional employment


• Urban population percentage to get increased from existing 25.5%

to 40%.

• Water problem in metropolitan cities to continue as such.


Business Environment-Text and cases, 7th Edition, Francis

Cherunilam, Himalaya publishing House.

Pratiyogita Darpan, Exam oriented series

Managerial Economics, Sixth revised edition, DN Dwivedi, Vikas

Publishing House