Assignment Code: BECE-145/AST/TMA/2022-23

Course Code: BECE-145

Assignment Name: INDIAN ECONOMY I

Year: 2022-2023

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 trends in the ‘sectoral growth/changes’ in India over the period 1951-2019.

Ans) For the first time, Simon Kuznets showed that the true effects of growth are evidenced by changes in sectoral compositions, i.e., over the agriculture, industry, and services sectors for both supply and demand reasons. The same line of thinking had been advanced by Fisher and Clerk.

Following are significant trends that can be drawn from the data.

Savings

Investment, both public and private, is a prerequisite for employment creation. Savings is crucial for this. Through its Central Statistics Office (CSO), the Ministry of Statistics and Programme Implementation (MSPI) publishes information on savings by the economy's three main sectors: the household sector, the private corporate sector, and the public sector. Recent trends in savings show that "gross domestic savings" have been steadily declining.

Investment

Three institutional sectors save and invest money. Households, private corporations, and the public sector are among them. Government and public corporations make up the public sector. Over the years 1991 to 2004, the total rate of investment (also known as the investment to GDP ratio) averaged 24.5 percent. This reached 30 percent in 2004–2005, and over the eight years between 2005 and 2013, or from 2005 to 2013, it averaged 35.4%. Other sources like FDI, foreign remittances, etc. bridge the gap between domestic savings and total investment. Due to the declining trend in domestic savings and the rising trend in investment, more foreign capital has been coming into the country in recent years. The public sector savings have steadily decreased among the three components of domestic savings. For instance, in the early 1980s, the share of public sector savings was between 4 and 5 percent, but by 2015, it had fallen to just over 1 percent. Therefore, household, and private corporate sectors—where foreign remittances and FDI have come to play a significant role—have accounted for the majority of savings and investment. Leaving aside this portion, the household sector makes up about 45 percent of the three constituents, and the corporate sector makes up about 35 percent, with some variations over time. The remaining 20 percent comes from the public sector or the government.

Employment

As was stated at the outset, structural change describes a significant change in the relative shares of employment and income that transfers the advantages of growth to those at the bottom of society. Additionally, it alludes to the transition of jobs from agriculture to industry. Such a change would occur over lengthy time horizons, for which the longest time series should ideally be used. Despite this, it is illustrative for the purposes of the current section to first examine the employment situation after 1991 and then compare it to that in the earlier period (i.e., 1951-2000). This would not only provide us with the post-reform scenario but also a total for all of the initiatives made during the nearly eight plan periods long pre-liberalization decades. This shift is distributed 8 percent to the industrial sector and 3 percent to the services sector. This demonstrates that, in contrast to expectations, the industry has absorbed more labour in the post-2000 period than the services sector. Keep in mind that we are looking at an overall picture of India (i.e., a combination of skilled and unskilled labour), whereas the picture might have been different if we had only looked at the "educated workforce only."

2) Discuss the importance of ‘Governance Indicators’ outlining its significance for development.

Ans) There are primarily two categories of governance metrics. One consists of "objective measures," while the other is made up of "subjective measures." The primary objective measures of governance are the nature of the institutional system (democracy or dictatorship), the degree of political instability and violence, and the existence of executive restraints (checks and balances). The POLITY database and The Economist Intelligence Unit's "Democracy Index" are the data sources for these measurements. The main flaw in these objective measures is that they only offer a limited view of governance without addressing the calibre of institutions that are crucial for evaluating governance. Subjective measures of governance that are based on expert opinions and perception polls offer an alternative to the aforementioned objective measures. It makes use of the World Bank and Brookings Institution's jointly maintained database of "Worldwide Governance Indicators" (WGI). From the perspective of "traditions and institutions by which authority in a country is exercised," the WGI approaches governance.

According to this definition, governance has three key components: (a) the method by which governments are chosen, evaluated, and replaced; (b) the ability of the government to successfully develop and implement sound policies; and (c) the respect of citizens and the state for the institutions that regulate their interactions in the social and economic spheres. The WGI database offers a few composite governance indicators. They concern I voice and accountability (VA), (ii) political stability and the absence of terrorism/violence (PV), (iii) government effectiveness (GE), (iv) regulatory quality (RQ), and (v) corruption control (CC). The remainder of this section compares India's performance across each of these five "Governance Indicators" (Table 14.2) using the most recent results (or rankings) for the year 2019 based on the WGI database. The WGI data used in this study is presented as a percentile, with a range of 0 to 100, where 100 represents the best performance.

In comparison to high-scoring nations like Norway (90.5) and Sweden (80.5), as well as Nepal (23.2) and Sri Lanka, India's score on this front (14.8) paints a very dismal picture of stability for the region (40.5). The indicator for "government effectiveness" captures opinions about the standard of the civil service, the standard of public services, and the degree of political pressure resistance. It also reflects the effectiveness of policy development and execution, as well as the legitimacy of the government's adherence to such policies. India received the highest score (63.9) in the analysis of the five governance indicators for "government effectiveness." 'Regulatory Quality' (RQ) is yet another crucial metric that measures how capable the government is. It encapsulates public perceptions of the government's capacity to develop sensible laws and regulations that support and encourage the growth of the private sector. The indicator demonstrates that the majority of developing and lower-middle income countries have weak regulatory standards. With a score between 48 and 56, Bangladesh, Pakistan, and Nepal are outperformed by India, China, and Sri Lanka. Regulation capture, corruption, and inequality may be caused by the state's limited ability to regulate the private sector.

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

3) Analyse the growth in the National Income of India over the different plan periods.

Ans)

The Period of 1951-1980

Setting an achievement target and comparing the actual achievement to the target has long been a practise in India's planned development programmes. Table 3.1 displays the results for this score. Only twice during the three decades from 1951 to 1979 (the first and fifth plan periods) were we able to achieve the goal. India experienced a modest growth rate during this time period, so to speak. The three wars with neighbouring nations fought in the years 1962, 1965, and 1971, as well as the three significant droughts that occurred in the years 1966, 1972, and 1979, are the two main causes of the target's failure to be met. The first two of these three had an estimated 50 million population impact each, while the third had an estimated 200 million.

The Period of 1980s Onwards

Compared to the slow growth rate experienced during the 1960s and 1970s, India's national income growth accelerated during the 1980s. The growth rates in NI that were attained during the sixth and seventh plan periods of the 1980s, as well as the following eighth plan period, were higher than the targeted growth rates. However, there was once more a decline in the growth rates of NI registered with reference to the targeted growth rates during the following three plan periods, namely the ninth, tenth, and eleventh plan periods. This performance decline is attributed to two main factors: I a global slowdown following the East Asian crisis of 1997; and (ii) a poor monsoon and the lack of momentum behind the pace of initiated reforms.

4) Explain the trends in ‘demographic transition’ in India.

Ans) Countries move through the demographic transition process from having high birth and death rates to having low rates for both. High birth and death rates are typical in LDCs; as development slowly accelerates, death rates tend to decline before birth rates, leading to rapid population growth. Advanced nations typically have low rates of birth, death, and natural increase that is either very low or even negative. The demographic experience of Western countries serves as the basis for the theory of demographic transition.

The following are the five distinct demographic transition phases that C. P. Blacker identified:

1. High birth and death rates are indicators of a high stationary stage.

2. Early Expanding Stage is characterised by declining birth rates with a lag in mortality decline.

3. During the Late Expanding Stage, mortality is rapidly declining while birth rates are declining.

4. Low birth rates and low mortality rates are characteristics of the low stationary stage of the population.

5. Population decline stage with low mortality and an increase in deaths over births.

Urbanisation

Societies become more urban through the process of urbanisation. It alludes to a shift in the population from rural to urban areas. The rate of growth of the urban population is therefore greater than that of the rural population in this instance.

Sex Ratio

The sex ratio, or the number of females per thousand males, is a way to quantify how gendered the population is. In developed nations, it has been noted that there are more females than males. The sex ratio in India, however, demonstrates that the culture is masculine with regard to this demographic.

5) Outline the measures initiated to combat poverty in India during the post-2010 years.

Ans)

National Food Security Act, 2013

India has long maintained a public distribution system (PDS) whereby the government provides citizens with food grains at subsidised prices. The system was initially universal but was later made selective to favour the underprivileged. According to the National Food Security Act (NFSA) of 2013, 50% of urban residents and 75% of rural residents are each entitled to five kilogrammes of food grain per person per month at discounted prices. Under the programme, a small subset of extremely poor households receives seven kilogrammes of food grain.

Direct Benefit Transfer

The Direct Benefit Transfer (DBT) method will replace the current leaky distribution of benefits under various schemes, and two key instruments, namely Jan Dhan bank accounts and biometric identity cards (Aadhar), are intended to revolutionise anti-poverty programmes. In accordance with MGNREGA, where direct wage transfers have already started, the employer enters information about a worker's employment into a central database using the Aadhar identity. This guarantees the transfer of the wage payment from the worker's bank account to a central government account. The employee can then use a banking correspondent or a mobile device to access that account.

Housing for All, 2016

Housing for All (Rural and Urban), a new programme that combines the two rural-urban housing programmes Indira Awash Yojana (IAY) and Rajiv Awash Yojana (RAY), was introduced in 2016. The programme aims to provide basic amenities like water, sanitization, electricity, and broadband to all pucca houses by 2022. The programme has the potential to increase investment and generate much-needed decent jobs across the nation if it is successfully implemented.

C. Short Answer Questions (word limit 100 words) 3 × 5=15 marks

6) Differentiate between the following.

(a) Absolute Poverty and Relative Poverty.

Ans) A person who is unable to provide for their most basic needs is said to be in absolute poverty. This means that if you live in complete poverty, you cannot afford the bare necessities of food, clothing, and shelter. In other words, your situation is desperate. "A situation in which people are deprived of safe drinking water, food, sanitation facilities, health care, shelter, and clothing," is how the World Bank defines absolute poverty. Contrarily, relative poverty describes a situation in which your income is less than a specific proportion of the median income for the country. This indicates that you are considered to be in relative poverty if the median income in your nation is $100 and you earn $60.

(b) Horizontal Inequality and Vertical Inequality.

Ans) From the viewpoint of intra-group (i.e., within a group) and inter-group (i.e., between groups) inequality, inequality can be distinguished. This allows for the separation of inequality into two categories: vertical inequality and horizontal inequality. Vertical inequality is the term used to describe inequality between people or households. For a variety of reasons, the type and degree of vertical inequality are significant. One is to build a just society because egalitarian or more equal societies typically have higher levels of happiness. Second, the degree of poverty is determined by the degree of inequality for any given national income per capita. The number of people living in poverty around the world is a concern of the millennium development goals (MDGs).

(c) Physical and Social Infrastructure.

Ans) Agriculture, industry, and trade are all production-related sectors with direct connections to physical infrastructure. It includes things like transportation, telecommunication, irrigation, and power. In India's economy, physical infrastructure has performed inconsistently. India's "soft infrastructure" has expanded more quickly over time. In contrast, given the country's population density, the growth and performance of the "hard infrastructure" have been modest. Education, healthcare, nutrition, housing, and access to clean water are all components of social infrastructure that play a key role in advancing human development, which in turn speeds up economic growth. The process of increasing people's options and level of wellbeing is known as human development.

7) Write short notes on the following.

(a) Bop.

Ans) International money is necessary for international trade. A country can build up surplus foreign currency reserves if its exports are high. However, there is always a foreign exchange deficit when imports are higher than exports in a developing country. To have the surplus necessary to pay for essential imports, there must be a balance in global trade. An accounting statement that provides an accurate profile of the country's transactions with other countries in a financial year is prepared in order to keep tabs on foreign exchange reserves. This is referred to as a country's "balance of payments" (Bop).

(b) Limitations of Per Capita Income.

Ans) A rise in prices is the cause of the increase in per capita income. Physical output growth has no bearing on economic development, so it is not a valid indicator. Due to the distribution of the per capita, the wealthy get richer while the poor get poorer. When calculating the per capita, non-marketed goods and services are not taken into account. The average annual income of people living in a given area is referred to as per capita income. There are many restrictions on the rise in per capita income. Income per capita rises when commodity prices fall, not because of increased productivity.

(c) Social Progress Index and World Happiness Index.

Ans) The Social Progress Imperative is a global civil society organisation that publishes the Social Progress Index (SPI). The ability of a society to satisfy the fundamental needs of its members is how it defines social progress. By laying the foundations for citizens and communities to improve and sustain the quality of their lives, it outlines how this will be accomplished. The UN General Assembly adopted a historic resolution in July 2011. It invited members to conduct surveys of their citizens' happiness and use the results to inform public policy. Guidelines for the Measurement of Subjective Well-being were then published by the OECD.