Assignment Code: BECC-111/AST/TMA/2022

Course Code: BECC-111

Assignment Name: Indian Economy - I

Year: 2022

Verification Status: Verified by Professor

Maximum Marks: 100

Answer all the questions

A. Long Answer Questions (word limit-500 words) 2 × 20 = 40 marks

1) Discuss the different approaches to development.

Ans) The different approaches to development are:

Market-Based Method: This approach implies that resources are employed best in well-developed, fully competitive markets by minimising costs and maximising profits. Profits, as well as price signals, serve as an incentive to invest in order to achieve faster growth. Perfectly functioning markets with no intervention, in theory, are considered as a technique for faster accumulation and expansion. However, in the post-World War II era, when most former colonies gained independence and began the process of development, these countries faced major market gaps because many of their economies were underdeveloped.

State-led strategy: There was a need for a large push in investment in developing nations with: (i) subsistence agriculture, (ii) limited industrialisation, (iii) massive underemployment, low income, savings, and investment, (iv) bad infrastructure, and so on. Supporters of government involvement believed that by strategically mobilising and allocating resources to the public sector, desired economic transformation in critical areas could be realised. However, in many economies that initially supported this method, it has since gone out of favour due to red tape, corruption (rent seeking), inefficiency, and losses. Based on these reasons, there has been a trend toward limiting the role of the state to select socially important industries and developing the economic infrastructure base.

The Inclusive Growth Approach considers growth and equity to be complementary. In India's Eleventh Five Year Plan, the term 'inclusive growth' became an official development policy (2007-12). However, since the inception of India's First Plan, the concept of 'development with justice' or 'growth with equality' has been part of the planning strategy. The primary premise of 'growth with justice' (i.e. distributional justice) has been that increase of national income without intervention would result in the maintenance of inequities in an economy with large disparities in wealth and assets. In other words, in addition to growth, because one of the goals of development is to reduce inequalities, it is thought important that the growth plan include suitable institutional frameworks to ensure equitable distribution of the gains of growth.

The Sustainable Development Approach believes that the global focus on growth should be replaced with the objective of sustainable development to avoid the 'tragedy of the commons,' which occurs when common resources are overexploited because individual actors lack the motivation to use them responsibly. According to the Brundtland Commission Report, SD is "development that meets current demands without jeopardising future generations' ability to meet their own needs." As a result, it emphasised two key essentials: (i) the need to protect the interests of the world's poor; and (ii) the limitations of technology and social organisations in preventing the exploitation of environmental resources (in order to avoid adversely affecting future generations' needs) should be properly accounted for. The Commission emphasised the need of addressing the needs of the impoverished in any country, as well as the world at large. The rationale behind SD is to enhance the standard of living, particularly for the most disadvantaged elements of society, while taking care to avoid or minimise future "uncompensated" expenses.

2) Explain the role of infrastructure in economic development.

Ans) The role of infrastructure in economic development is as follows:

1. First, physical infrastructure not only helps to increase productivity, but it also aids in the realisation of human capital's potential ability, i.e. it creates conditions in which that potential can completely unfold. It also helps to improve the quality and safety of people's lives, both directly and indirectly.

2. Second, the nature and rate of infrastructure growth determine the direction of a country's development in terms of (i) diversification of production and expansion of trade; (ii) population management; (iii) poverty alleviation; and (iv) environmental protection and enhancement. A 1% increase in infrastructure stock is related with a 1% increase in a country's GDP, according to estimates. A bundle of transportation, telecommunications, and power at the village level has been a key component in China's success with rural enterprise. Externalities are provided through the elements of 'physical infrastructure.' Electricity, for example, aids in the dynamic transformation of all sorts of production units, while the expansion of transportation and communications facilitates the commercialisation of agriculture and trading operations, as well as increasing labour mobility between sectors within a country.

3. Third, the key parts of social infrastructure, education, and health, contribute to economic development through forming human capital. By building a competent labour force base, effective mass education (i.e. universal primary and secondary education) is critical for eliminating poverty and sustaining greater rates of economic growth over lengthy periods of time.

4. Fourth, the elements of 'financial infrastructure,' which include money and capital markets, provide diverse sectors of the economy with short, medium, and long-term credit. While commercial banks mobilise savings and give short-term lending, development banks do the same for agriculture and industry by providing long-term loans.

5. Fifth, infrastructure services that benefit the poor also serve to ensure the long-term viability of the environment. Clean water and sanitation, non-polluting energy sources, safe solid waste disposal, better traffic management in urban areas, and other environmental benefits benefit individuals from all walks of life. Because they are concentrated in settlements with filthy conditions, toxic emissions, and accident hazards, the urban poor often directly benefit from good infrastructure services.

6. Sixth, infrastructure plays a critical role in the growth of tourism. However, in regions where visitors come for the natural scenery (such as hilly areas, seashores, woods, and so on), physical infrastructure development must be done in such a way that environmental issues are adequately addressed.

B. Medium Answer Questions (word limit-250 words) 3 × 10= 30 marks

3) Outline the concepts of ‘population ageing’ and ‘demographic dividend’.

Ans) Population Aging: Population ageing is one of the most notable global demographic events of the twenty-first century. Population ageing is a process in which the proportion of persons above the age of 65 increases and the proportion of people under the age of 65 decreases. The fall in mortality rate, followed by a decrease in fertility rate and an increase in life expectancy rate, are the main causes of population ageing. In 1950, there were 200 million persons aged 60 and up in the world, accounting for 8% of the total population. This ratio has risen to 11 percent in 2011 and is expected to treble to 22 percent by 2050. More specifically, it is estimated that by 2045, the number of elderly people would outnumber children worldwide. In India, the number of people aged 60 and up is continuously increasing.

Demographic Dividend: In some parts of the world, recent rapid fertility drop has opened up a fresh window of opportunity for achieving greater economic and human development growth rates. There will be less and fewer children in the age group 0-14 as fertility declines. High fertility in the past ensured the growth of the current workforce, but low fertility today means a smaller dependent kid population in the future. The 'demographic window or dividend' is a feature of population trends.

4) Critique the performance of ‘education sector’ in India in terms of its gender and quality dimensions.

Ans) For the period 2007-13, the GPI in India reveals that elementary and secondary education has surpassed the level of 1. Furthermore, there has been a considerable improvement in gender parity for three out of four levels of education, namely basic, secondary, and senior secondary education, in terms of dropout rate. In relative terms, only at the 'upper primary' level of education is the dropout rate for girls (4.5) larger than it is for boys (3.1). Given that the dropout rate in 1960-61 was as high as 65 percent, this is a significant improvement. The 'number of female teachers per 100 male teachers' is one factor that could influence the success of enhancing girls' enrolment. In 1951, this figure was as low as 20. By 2011-12, this has climbed to a range of 65-80 for various levels of education. While there has been progress in this area, there is still room to increase the number of female teachers at all levels of education, both to achieve more gender parity and to reduce female child dropout rates.

In India, the quality of higher education has long been a key concern. The development of certification agencies is a key component of India's National Policy on Education, which places a strong emphasis on enhancing the quality of higher education in the country. Despite the fact that we have 13 higher education governing agencies, the quality of education is rather low, and programme material is less relevant to the 'needs of the individual and society.' Only 24.4 percent of the 3,674 colleges rated by NAAC received an A. The educational system suffers from a condition known as 'diploma illness,' in which it is more preoccupied with certification and credentialing than with transferring knowledge and skills. As a result, it makes a negligible contribution to human capital growth and is unable to meet the growing demand for trained workers.

5) Analyse the linkage between poverty and the ‘factors influencing its alleviation’.

Ans) The linkages between poverty and the ‘factors influencing its alleviation’ are:

Nutrition: Poverty limits income and, as a result, spending, resulting in food deprivation and malnutrition. There is a loss of mental and physical growth due to starvation. Through the public distribution system in India, the poor have had access to subsidised food. As a result, famines have been eradicated, yet areas of food scarcity still exist.

Credit: Microfinance services have grown in popularity since financial liberalisation. Initially, this was seen as a beneficial development, but it has now been discovered that the higher interest rates imposed are burdening the poorer parts of society. There is evidence, however, that improving poor people's access to finance allows them to lift themselves out of poverty by allowing them to engage in their human capital and start microbusinesses that have the potential to alleviate their suffering.

Insurance: Tertiary healthcare is sometimes prohibitively expensive for low-income individuals. As a result, persons in need of tertiary care are frequently left untreated or face crippling hospital expenses, both of which increase poverty. Furthermore, incidences of heart disease and cancer requiring tertiary care are on the rise in many countries, particularly in those with a greater poverty rate, such as India. To address this demand, many Indian governments have implemented social insurance programmes that give free tertiary healthcare to families living below the poverty level.

Informal Economy: There is a rising percentage of workers around the world who work in the official sector but do not receive any social security benefits. This trend has to be recognised for its vulnerability to catastrophic healthcare costs, which would further marginalise the poor.

Discrimination: Poverty and discrimination are frequently associated with one another. Discrimination based on ethnicity, colour, gender, and other factors has a direct impact on economic opportunity in families, schools, and workplaces through a complex set of institutional impacts. Discrimination can be a source of poverty as well as a barrier to its alleviation.

C. Short Answer Questions (word limit 100 words) 2 × 3 × 5 = 30 marks

6) Differentiate between:

(a) Natural Resources and Manmade Resources.

Ans) The differences between Natural Resources and Manmade Resources are:

1. Natural Resources are resources that we find in nature and use without any modification. Manmade Resources are resources that have been developed by humans.

2. Natural resources include air, water, soil, sunlight, minerals, flora, and fauna, and so on. Buildings, roads, and other manmade resources are examples.

3. All natural resources are unrestricted gifts from nature that can be utilised right away. Technology is a man-made resource as well.

(b) Preventive and curative healthcare needs.

Ans) The differences between Preventive and curative healthcare needs are:

1. Preventive care is a discipline of medicine that tries to enhance and preserve people's health by preventing them from becoming sick in the first place. Curative care, on the other hand, restores and preserves health by treating patients after they become ill.

2. Curative care refers to the treatment of a medical pathology in such a way that the patient is no longer affected by the disease/pathology process and its symptoms. Antibiotics in bacterial infections, surgery for an excisable tumour, or chemotherapy for other curable diseases are examples of preventive care, whereas curative care refers to preventing the occurrence of a disease or the sequelae of a disease that has already happened.

(c) WFPR and LFPR.

Ans) The differences between WFPR and LFPR are:

1. The WFPR (workforce participation rate) is the proportion of the working population to the total population in a country. As a result, it's also known as the 'worker population ratio' (WPR).

2. The LFPR (labour force participation rate) is defined as the proportion of the total population that is made up of 'working plus job-seeking population' between the ages of 16 and 64. In NSSO reports, it's commonly represented as the number of people who are "employed plus unemployed" per 1000 people.

7) Write short notes on the following.

(a) Informal Economy.

Ans) The segment of any economy that is neither taxed nor monitored by any kind of government is known as the informal economy (informal sector or grey economy). Despite the fact that the informal sector accounts for a large share of the economies of developing nations, it is often viewed as bothersome and uncontrollable. However, the informal sector, which has been steadily developing since the 1960s, provides crucial economic prospects for the impoverished. The formalisation of the informal economy is a significant policy challenge. The term was first used to describe self-employment in tiny, unregistered businesses. It has been broadened to cover paid work in non-protected positions.

(b) Limitations of PCI for international comparison.

Ans) The limitations of PCI for international comparison are:

1. The standard of living of the population is not reflected in per capita income. As a result, per capita income cannot be used as a reliable metric of development unless national revenue is divided equitably.

2. The population problem may be resurrected if per capita income is used as the metric, because the population has already been divided. As a result, the scope of the investigation is narrowed unnecessarily.

3. An rise in per capita income may not boost people's real living standards. While per capita real income rises, it's possible that per capita consumption of goods and services declines.

(c) Current Account Deficit: International Comparative Profile.

Ans) The saving gap, or the excess of investment over savings, is measured by CAD. This chasm is filled by a net transfer of resources from the rest of the world to the deficit-ridden country. This means that a higher CAD cannot be harmful to an economy if it has a significant flow of foreign cash. Developing countries, on the other hand, require push-through investment, and if it comes in large amounts from the rest of the globe, it means that they will be unable to fund new investments with their own savings.

In the end, an economy's ability to absorb and service capital inflows determines its success. A high CAD to GDP ratio could be sustainable if the resources are dispersed in a way that improves the ability to repay (via production). This is why every economy strives to keep its CAD under control, i.e., to preserve a healthy or long-term balance. It's crucial to remember that a high CAD isn't always a disadvantage to a country's economic success.