ECONOMICS : CLASS - 9 : CHAPTER - 1

I. There are four requirements for production of goods and services :

A. LAND
B. LABOUR
C. PHYSICAL CAPITAL :
1. FIXED CAPITAL : Tools, machines, buildings can be used in production over many
years, and are called fixed capital.
2. WORKING CAPITAL : Raw materials and money in hand are called working capital.
D. HUMAN CAPITAL
II. Every production is organised by combining land, labour, physical capital and human capital,
which are known as factors of production.
III. During the rainy season (kharif) farmers grow jowar and bajra. These plants are used as cattle
feed. It is followed by cultivation of potatoes between October and December. In the winter
season (rabi), fields are sown with wheat.
IV. Apart from the riverine plains, coastal regions in our country are well-irrigated.
V. Plateau regions such as the Deccan plateau have low levels of irrigation.
VI. The Green Revolution in the late 1960s introduced the Indian farmer to cultivation of wheat
and rice using high yielding varieties (HYVs) of seeds.
VII. Compared to the traditional seeds, the HYV seeds promised to produce much greater amounts
of grain on a single plant. As a result, the same piece of land would now produce far larger
quantities of foodgrains than was possible earlier. HYV seeds, however, needed plenty of
water and also chemical fertilizers and pesticides to produce best results.
VIII. Modern Farming Methods: HYV seeds, chemical fertilizers, FARM MACHINERY, CANALS,
PUMP SETS, IRRIGATION, PESTICIDES, DAMS, ELECTRICITY.
IX. Higher yields were possible only from a combination of HYV seeds, irrigation, chemical
fertilisers, pesticides, etc.
X. Farmers of Punjab, Haryana and Western Uttar Pradesh were the first to try out the modern
farming method in India.
XI. In many areas, Green Revolution is associated with the loss of soil fertility due to increased
use of chemical fertilisers.
XII. Also, continuous use of groundwater for tubewell irrigation has led to the depletion of the
water-table.
XIII. Environmental resources, like soil fertility and groundwater, are built up over years. Once
destroyed it is very difficult to restore them.
XIV. We must take care of the environment to ensure the future development of agriculture.
XV. The consumption of chemical fertilizers in Punjab is highest in the country.
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ECONOMICS : CLASS - 9 : CHAPTER - 2

● Population becomes human capital when there is investment made in the form of education,
training and medical care.
● In fact, human capital is the stock of skill and productive knowledge embodied in them.
● Primary sector includes agriculture, forestry, animal husbandry, fishing, poultry farming, mining
and quarrying.
● Manufacturing is included in the secondary sector.
● Trade, transport, communication, banking, education, health, tourism, services, insurance, etc.
are included in the tertiary sector.
● Economic activities have two parts — market activities and non-market activities.
○ Market activities involve remuneration to anyone who performs i.e., activity performed
for pay or profit. These include production of goods or services, including government
service.
○ Non-market activities are the production for self-consumption. These can be
consumption and processing of primary products and own account production of fixed
assets.
● Education and skill are the major determinants of the earning of any individual in the market.
● The quality of population depends upon the literacy rate, health of a person indicated by life
expectancy and skill formation acquired by the people of the country.
● The quality of the population ultimately decides the growth rate of the country. Literate and
healthy population is an asset.
● The expenditure on education as a percentage of GDP rose from 0.64% in 1951–52 to 3.1% in
2019–20 (B.E.) and has remained stagnant around 3% from the past few years.
● The literacy rates have increased from 18% in 1951 to 85% in 2018.
● Literacy among males is nearly 16.1% higher than females and it is about 14.2% higher in
urban areas as compared to rural areas.
● As per 2011 census, literacy rates varied from 94% in Kerala to 62% in Bihar.
● “Sarva Siksha Abhiyan is a significant step towards providing elementary education to all
children in the age group of 6–14 years by 2010.
● It is a time-bound initiative of the Central government, in partnership with the States, the local
government and the community for achieving the goal of universalisation of elementary
education.”
● Along with it, bridge courses and back-to-school camps have been initiated to increase the
enrolment in elementary education.
● The Mid-day meal scheme has been implemented to encourage attendance and retention of
children and improve their nutritional status.
● The strategy focuses on increasing access, quality, adoption of state-specific curriculum
modification, vocationalisation and networking on the use of information technology.
● There is also focus on distance education, convergence of formal, non-formal, distance and IT
education institutions.
● Over the last five decades, India has built a vast health infrastructure and has also developed
the manpower required at the primary, secondary and tertiary sector in government, as well as,
in the private sector.
● These measures, which have been adopted, have increased the life expectancy to over 69.4
years in 2016.
● Infant mortality rate (IMR) has come down from 147 in 1951 to 36 in 2020.
● Crude birth rates have dropped to 20.0 (2018) and death rates to 6.2 (2018) within the same
duration of time.
● Increase in life expectancy and improvement in childcare are useful in assessing the future
progress of the country.
● Increase in longevity of life is an indicator of good quality of life marked by self-confidence.
● Reduction in infant mortality involves the protection of children from infection, ensuring the
nutrition of both the mother and the child, and childcare.
● There are only 542 medical colleges in the country and 313 dental colleges. Just four states,
like Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu have the maximum number of
medical colleges.
● In the case of rural areas, there is seasonal and disguised unemployment.
● Urban areas have mostly educated unemployment.
 ● Unemployment leads to wastage of manpower resources.
● People who are an asset for the economy turn into a liability.
● There is a feeling of hopelessness and despair among the youth.
● People do not have enough money to support their family.
● Inability of educated people who are willing to work to find gainful employment implies a great
social waste.
● Unemployment tends to increase economic overload.
● The dependence of the unemployed on the working population increases.
● The quality of life of an individual as well as of society is adversely affected.
● When a family has to live on a bare subsistence level there is a general decline in its health
status and rising withdrawal from the school system.
● Hence, unemployment has a detrimental impact on the overall growth of an economy.
● Increase in unemployment is an indicator of a depressed economy.
● It also wastes the resource, which could have been gainfully employed.
● If people cannot be used as a resource they naturally appear as a liability to the economy.
___________________________________________________________________________________________________

ECONOMICS : CLASS - 9 : CHAPTER - 3

● Every fifth person in India is poor. (This means, roughly 270 million (or 27 crore) people in India
lived in poverty 2011-12.)
● India has the largest single concentration of the poor in the world.
● Poverty means hunger and lack of shelter.
● It also is a situation in which parents are not able to send their children to school or a situation
where sick people cannot afford treatment.
● Poverty also means lack of clean water and sanitation facilities.
● It also means lack of a regular job at a minimum decent level.
● Above all it means living with a sense of helplessness.
● Poor people are in a situation in which they are ill-treated at almost every place, in farms,
factories, government offices, hospitals, railway stations etc.
● Mahatma Gandhi always insisted that India would be truly independent only when the poorest
of its people become free of human suffering.
● Social exclusion : According to this concept, poverty must be seen in terms of the poor having
to live only in a poor surrounding with other poor people, excluded from enjoying social
equality of better-off people in better surroundings.
● Vulnerability : Vulnerability to poverty is a measure, which describes the greater probability of
certain communities (say, members of a backward caste) or individuals (such as a widow or a
physically handicapped person) of becoming, or remaining, poor in the coming years.
● Poverty Line : A common method used to measure poverty is based on the income or
consumption levels. A person is considered poor if his or her income or consumption level
falls below a given “minimum level” necessary to fulfill the basic needs.
○ The accepted average calorie requirement in India is 2400 calories per person per day
in rural areas and 2100 calories per person per day in urban areas.
○ For the year 2011–12, the poverty line for a person was fixed at Rs 816 per month for
rural areas and Rs 1000 for urban areas.
● The poverty line is estimated periodically (normally every five years) by conducting sample
surveys. These surveys are carried out by the National Sample Survey Organisation (NSSO).
● However, for making comparisons between developing countries, many international
organisations like the World Bank use a uniform standard for the poverty line: minimum
availability of the equivalent of $1.90 per person per day (2011, ppp).
● Poverty Estimates : There is a substantial decline in poverty ratios in India from about
45 per cent in 1993-94 to 37.2 per cent in 2004–05. The proportion of people below
the poverty line further came down to about 22 per cent in 2011–12.
● Karur town in Tamil Nadu : Karur is famous for its handloom and powerloom fabrics.
● Inter-State Disparities : Poverty in India also has another aspect or dimension. The
proportion of poor people is not the same in every state.
○ The success rate of reducing poverty varies from state to state.
○ Recent estimates show while the all India Head Count Ratio (HCR) was 21.9 percent in
2011-12, states like Madhya Pradesh, Assam, Uttar Pradesh, Bihar and Odisha had above
all India poverty levels.
○ Bihar and Odisha continue to be the two poorest states with poverty ratios of 33.7 and
32.6 percent respectively.
○ Along with rural poverty, urban poverty is also high in Odisha, Madhya Pradesh, Bihar and
Uttar Pradesh.
○ In comparison, there has been a significant decline in poverty in Kerala, Maharashtra,
Andhra Pradesh, Tamil Nadu, Gujarat and West Bengal.
○ States like Punjab and Haryana have traditionally succeeded in reducing poverty with the
help of high agricultural growth rates.
○ Kerala has focused more on human resource development.
○ In West Bengal, land reform measures have helped in reducing poverty.
○ In Andhra Pradesh and Tamil Nadu public distribution of food grains could have been
responsible for the improvement.
● Global Poverty Scenario :
○ The proportion of people in different countries living in extreme economic poverty—
defined by the World Bank as living on less than $1.90 per day—has fallen from 36 per
cent in 1990 to 10 per cent in 2015.
○ Although there has been a substantial reduction in global poverty, it is marked with great
regional differences.
○ Poverty declined substantially in China and Southeast Asian countries as a result of
rapid economic growth and massive investments in human resource development.
○ Number of poor in China has come down from 88.3 per cent in 1981 to 14.7 per cent in
2008 to 0.6 per cent in 2019.
○ In the countries of South Asia (India, Pakistan, Sri Lanka, Nepal, Bangladesh, Bhutan) the
decline has also been rapid 34 per cent in 2005 to 15.2 per cent in 2014.
○ In Sub-Saharan Africa, poverty in fact declined from 51 per cent in 2005 to 40.2 per cent
in 2018.
○ In Latin America, the ratio of poverty has also declined from 10 per cent in 2005 to 4 per
cent in 2018.
○ The new sustainable development goals of the United Nations (UN) proposes ending
poverty of all types by 2030.

● Poverty and Equity Database; World Bank.

● Issues related to poverty:
○ Landlessness ○ Illiteracy
○ Unemployment ○ Child labour
○ Size of families ○ Helplessness
○ Poor health/malnutrition
● Causes of Poverty :
○ Low level of economic development under the British colonial administration : The policies of
the colonial government ruined traditional handicrafts and discouraged development of
industries like textiles.
○ The low rate of growth persisted until the nineteeneighties. This resulted in less job
opportunities and a low growth rate of incomes.
○ This was accompanied by a high growth rate of population.
○ The two combined to make the growth rate of per capita income very low.
○ The failure at both the fronts: promotion of economic growth and population control
perpetuated the cycle of poverty.
○ Another feature of high poverty rates has been the huge income inequalities.
○ One of the major reasons for this is the unequal distribution of land and other resources.
○ In order to fulfil social obligations and observe religious ceremonies, people in India,
including the very poor, spend a lot of money.
○ Since poor people hardly have any savings, they borrow. Unable to repay because of poverty,
they become victims of indebtedness.
○ So the high level of indebtedness is both the cause and effect of poverty.
● Anti-Poverty Measures :
○ The current anti-poverty strategy of the government is based broadly on two planks :
○ (1) promotion of economic growth
○ (2) targeted anti-poverty programmes.
○ Official poverty estimates which were about 45 per cent in the early 1950s remained the
same even in the early eighties.
○ Since the eighties, India’s economic growth has been one of the fastest in the world.
○ The growth rate jumped from the average of about 3.5 per cent a year in the 1970s to about
6 per cent during the 1980s and 1990s.
○ The higher growth rates have helped significantly in the reduction of poverty.
○ Therefore, it is becoming clear that there is a strong link between economic growth and
poverty reduction.
○ Economic growth widens opportunities and provides the resources needed to invest in
human development.
○ There are so many schemes which are formulated to affect poverty directly or indirectly,
some of them are worth mentioning :
○ Mahatma Gandhi National Rural Employment Guarantee Act, 2005 aims to provide 100 days
of wage employment to every household to ensure livelihood security in rural areas. It also
aimed at sustainable development to address the cause of drought, deforestation and soil
erosion. One-third of the proposed jobs have been reserved for women.
○ Prime Minister Rozgar Yozana (PMRY) is another scheme which was started in 1993. The
aim of the programme is to create self-employment opportunities for educated unemployed
youth in rural areas and small towns. They are helped in setting up small businesses and
industries.
○ Rural Employment Generation Programme (REGP) was launched in 1995. The aim of the
programme is to create self employment opportunities in rural areas and small towns. A
target for creating 25 lakh new jobs has been set for the programme under the Tenth Five
Year plan.
○ Swarnajayanti Gram Swarozgar Yojana (SGSY) was launched in 1999. The programme aims
at bringing the assisted poor families above the poverty line by organising them into self help
groups through a mix of bank credit and government subsidy.
○ Under the Pradhan Mantri Gramodaya Yojana (PMGY) launched in 2000, additional central
assistance is given to states for basic services such as primary health, primary education,
rural shelter, rural drinking water and rural electrification.
○ Another important scheme is Antyodaya Anna Yozana (AAY).
 ● Poverty reduction is expected to make better progress in the next ten to fifteen years.
● This would be possible mainly due to :
○ Higher economic growth
○ Increasing stress on universal free elementary education
○ Declining population growth
○ Increasing empowerment of women and the economically weaker sections of society.
● Providing health care, education and job security for all, and achieving gender equality and dignity for
the poor.
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ECONOMICS : CLASS - 9 : CHAPTER - 4

Food Security in India
● Food security means availability, accessibility and affordability of food to all people at all
times.
● Food security depends on the Public Distribution System (PDS) and government vigilance and
action at times, when this security is threatened.
● Food security has following dimensions :
○ (a) availability of food means food production within the country, food imports and the
previous year's stock stored in government granaries.
○ (b) accessibility means food is within reach of every person.
○ (c) affordability implies that an individual has enough money to buy sufficient, safe and
nutritious food to meet one's dietary needs.
● Thus, food security is ensured in a country only if
○ (1) enough food is available for all the persons
○ (2) all persons have the capacity to buy food of acceptable quality and
○ (3) there is no barrier to access to food.
● Why food security?
○ The poorest section of the society might be food insecure most of the time while
persons above the poverty line might also be food insecure when the country faces a
national disaster/calamity like earthquake, drought, flood, tsunami, widespread failure of
crops causing famine, etc.
● How is food security affected during a calamity?
○ Due to a natural calamity, say drought, total production of foodgrains decreases. It
creates a shortage of food in the affected areas. Due to shortage of food, the prices go
up. At the high prices, some people cannot afford to buy food. If such calamity happens
in a very wide spread area or is stretched over a longer time period, it may cause a
situation of starvation. A massive starvation might take a turn of famine.
○ A Famine is characterised by widespread deaths due to starvation and epidemics
caused by forced use of contaminated water or decaying food and loss of body
resistance due to weakening from starvation.
○ The most devastating famine that occurred in India was the FAMINE OF BENGAL in
1943. This famine killed thirty lakh people in the province of Bengal.
○ Natural calamities and pandemics may also lead to food shortage. For example
Covid-19 pandemic had an adverse impact upon food security.
○ Restriction on movement of people and goods and services impacted economic activity.
○ Therefore food security is needed in a country to ensure food at all times, including
calamities and pandemics.
● The 1995 World Food Summit declared, “Food security at the individual, household, regional,
national and global levels exists when all people, at all times, have physical and economic
access to sufficient, safe and nutritious food to meet their dietary needs and food preferences
for an active and healthy life”.
● Who is food-insecure?
○ Although a large section of people suffer from food and nutrition insecurity in India, the
worst affected groups are landless people with little or no land to depend upon,
traditional artisans, providers of traditional services, petty self employed workers and
destitutes including beggars.
○ In the urban areas, the food insecure families are those whose working members are
generally employed in ill-paid occupations and the casual labour market.
○ The SCs, STs and some sections of the OBCs (lower castes among them) who have
either poor land-base or very low land productivity are prone to food insecurity.
○ The people affected by natural disasters, who have to migrate to other areas in search of
work, are also among the most food insecure people.
○ A large proportion of pregnant and nursing mothers and children under the age of 5
years constitute an important segment of the food insecure population.
○ The food insecure people are disproportionately large in some regions of the country,
such as economically backward states with high incidence of poverty, tribal and remote
areas, regions more prone to natural disasters etc.
○ In fact, the states of Uttar Pradesh (eastern and south-eastern parts), Bihar, Jharkhand,
Orissa, West Bengal, Chattisgarh, parts of Madhya Pradesh and Maharashtra account for
the largest number of food insecure people in the country.
● A yellow card is a PDS Card for people below the poverty line.
● HUNGER : Hunger is another aspect indicating food insecurity. Hunger is not just an
expression of poverty, it brings about poverty. The attainment of food security therefore
involves eliminating current hunger and reducing the risks of future hunger.
○ Hunger has chronic and seasonal dimensions.
○ Chronic hunger is a consequence of diets persistently inadequate in terms of quantity
and/or quality. Poor people suffer from chronic hunger because of their very low income
and in turn inability to buy food even for survival.
○ Seasonal hunger is related to cycles of food growing and harvesting. This is prevalent in
rural areas because of the seasonal nature of agricultural activities and in urban areas
because of casual labourers, e.g., there is less work for casual construction labourers
during the rainy season. This type of hunger exists when a person is unable to get work
for the entire year.
● India has been aiming at Self-sufficiency in Food Grains since Independence.
● After Independence, Indian policymakers adopted all measures to achieve self-sufficiency in
food grains. India adopted a new strategy in agriculture, which resulted in the ‘Green
Revolution’, especially in the production of wheat and rice.
● Indira Gandhi, the then Prime Minister of India, officially recorded the impressive strides of the
Green Revolution in agriculture by releasing a special stamp entitled ‘Wheat Revolution’ in July
1968.
● The success of wheat was later replicated in rice.
● The increase in food grains was, however, disproportionate. The highest rate of growth was
achieved in Uttar Pradesh and Madhya Pradesh, which was 44.01 and 30.21 million tonnes in
2015–16. The total foodgrain production was 252.22 Million tonnes in 2015–16 and it has
changed to 275.68 million tonnes in 2016–17.
● Uttar Pradesh and Madhya Pradesh recorded a significant production in wheat which was
26.87 and 17.69 million tonnes in 2015–16, respectively.
● West Bengal and UP, on the other hand, recorded significant production of rice 15.75 and 12.51
Million tonnes in 2015–16 respectively.
● Food Security in India :
○ Since the advent of the Green Revolution in the early-1970s, the country has avoided
famine even during adverse weather conditions.
○ India has become self-sufficient in food grains during the last 30 years because of a
variety of crops grown all over the country. The availability of foodgrains (even in adverse
weather conditions or otherwise) at the country level has further been ensured with a
carefully designed food security system by the government.
○ This system has two components: (a) buffer stock, and (b) public distribution system.
● What is Buffer stock?
○ Buffer Stock is the stock of foodgrains, namely wheat and rice, procured by the
government through the Food Corporation of India (FCI).
○ The FCI purchases wheat and rice from the farmers in states where there is surplus
production. The farmers are paid a pre-announced price for their crops. This price is
called Minimum Support Price (MSP).
○ The MSP is declared by the government every year before the sowing season to provide
incentives to farmers for raising the production of these crops.
○ The purchased food grains are stored in granaries.
○ This buffer stock is created by the government to distribute foodgrains in the deficit
areas and among the poorer strata of the society at a price lower than the market price
also known as Issue Price.
○ This also helps resolve the problem of shortage of food during adverse weather
conditions or during the periods of calamity.
● What is the Public Distribution System?
○ The food procured by the FCI is distributed through government regulated ration shops
among the poorer section of the society. This is called the Public Distribution System
(PDS). Ration shops are now present in most localities, villages, towns and cities.
○ There are about 5.5 lakh ration shops all over the country. Ration shops also, known as
Fair Price Shops, keep stock of foodgrains, sugar, and kerosene for cooking.
○ These items are sold to people at a price lower than the market price. Any family with a
ration card can buy a stipulated amount of these items every month from the nearby
ration shop.
○ There are three kinds of ration cards:
■ (a) Antyodaya cards for the poorest of the poor;
■ (b) BPL cards for those below poverty line; and
■ (c) APL cards for all others.
○ The introduction of Rationing in India dates back to the 1940s against the backdrop of
the Bengal famine.
○ The rationing system was revived in the wake of an acute food shortage during the
1960s, prior to the Green Revolution.
○ In the wake of the high incidence of poverty levels, as reported by the NSSO in the
mid-1970s, three important food intervention programmes were introduced: Public
Distribution System (PDS) for food grains (in existence earlier but strengthened
thereafter); Integrated Child Development Services (ICDS) (introduced in 1975 on an
experimental basis) and Food-for -Work (FFW) (introduced in 1977–78).
○ Employment programmes greatly contribute to food security by increasing the income of
the poor.
○ Rural wage employment programme, Employment Guarantee Scheme, Sampurna
Grameen Rojgar Yojana, Mid Day Meal, Integrated Child Development Services, etc.
● The National Food Security Act, 2013 : This Act provides for food and nutritional security at
affordable prices and enables people to live a life with dignity. Under this act, 75% of the rural
population and 50% of the urban population have been categorised as eligible households for food
security.
● Current Status of the Public Distribution System :
○ Public Distribution System (PDS) is the most important step taken by the Government of
India (GoI) towards ensuring food security.
○ In the beginning, the coverage of PDS was universal with no discrimination between the
poor and the non-poor.
○ Over the years, the policy related to PDS has been revised to make it more efficient and
targeted.
○ In 1992, Revamped Public Distribution System (RPDS) was introduced in 1,700 blocks in
the country. The target was to provide the benefits of PDS to remote and backward
areas.
○ From June 1997, in a renewed attempt, Targeted Public Distribution System (TPDS) was
introduced to adopt the principle of targeting the ‘poor in all areas’.
○ It was for the first time that a differential price policy was adopted for poor and nonpoor.
○ Further, in 2000, two special schemes were launched viz., Antyodaya Anna Yojana (AAY)
and Annapurna Scheme (APS) with special target groups of ‘poorest of the poor’ and
‘indigent senior citizens’, respectively. The functioning of these two schemes was linked
with the existing network of the PDS.
○ The increased food grains procurement at enhanced MSP is the result of the pressure
exerted by leading foodgrain producing states, such as Punjab, Haryana and Andhra
Pradesh. Moreover, as the procurement is concentrated in a few prosperous regions
(Punjab, Haryana, Western Uttar Pradesh, Andhra Pradesh and to a lesser extent in West
Bengal) and mainly of two crops— wheat and rice— increase in MSP has induced
farmers, particularly in surplus states, to divert land from production of coarse grains,
which is the staple food of the poor, to the production of rice and wheat.
○ The intensive utilisation of water in the cultivation of rice has also led to environmental
degradation and fall in the water level, threatening the sustainability of the agricultural
development in these states.
○ The rising Minimum Support Prices (MSP) have raised the maintenance cost of
procuring food grains by the government. Rising transportation and storage costs of the
FCI are other contributing factors in this increase.
○ PDS dealers are sometimes found resorting to malpractices like diverting the grains to
the open market to get better margin, selling poor quality grains at ration shops, irregular
opening of the shops, etc.
○ It is common to find that ration shops regularly have unsold stocks of poor quality grains
left. This has proved to be a big problem.
○ When ration shops are unable to sell, a massive stock of foodgrains piles up with the FCI.
● Antyodaya Anna Yojana (AAY) :
○ AAY was launched in December 2000. Under this scheme one crore of the poorest among
the BPL families covered under the targeted public distribution system were identified.
○ Poor families were identified by the respective state rural development departments through
a Below Poverty Line (BPL) survey.
○ Twenty-five kilograms of foodgrains were made available to each eligible family at a highly
subsidised rate of RS. 2 per kg for wheat and RS. 3 per kg for rice.
○ This quantity has been enhanced from 25 to 35 kg with effect from April 2002.
○ The scheme has been further expanded twice by additional 50 lakh BPL families in June
2003 and in August 2004.
○ With this increase, 2 crore families have been covered under the AAY.
 Some Important Features of PDS : Food Corporation of India

NAME OF SCHEME YEAR OF INTRODUCTION COVERAGE TARGET GROUP

PDS Up to 1992 UNIVERSAL

RPDS 1992 Backward blocks

TPDS 1997 Poor and non-poor

LAUNCHED IN BPL
2000 APL

AAY 2002 Poorest of the poor

APS 2000 Indigent senior citizens

NATIONAL FOOD 2013 Priority households

SECURITY ACT
(NFSA)

● Subsidy is a payment that a government makes to a producer to supplement the market price
of a commodity. Subsidies can keep consumer prices low while maintaining a higher income
for domestic producers.
● Role of cooperatives in food security :
○ The cooperatives are also playing an important role in food security in India especially in
the southern and western parts of the country.
○ The cooperative societies set up shops to sell low priced goods to poor people. For
example, out of all fair price shops running in Tamil Nadu, around 94 percent are being
run by the cooperatives.
○ In Delhi, Mother Dairy is making strides in provision of milk and vegetables to the
consumers at a controlled rate decided by the Government of Delhi.
○ Amul is another success story of cooperatives in milk and milk products from Gujarat. It
has brought about the White Revolution in the country.
○ These are a few examples of many more cooperatives running in different parts of the
country ensuring food security of different sections of society.
○ Similarly, in Maharashtra, Academy of Development Science (ADS) has facilitated a
network of NGOs for setting up grain banks in different regions.
○ ADS organises training and capacity building programmes on food security for NGOs.
○ Grain Banks are now slowly taking shape in different parts of Maharashtra.
○ ADS efforts to set up Grain Banks, to facilitate replication through other NGOs and to
influence the Government’s policy on food security are thus paying rich dividends.
○ The ADS Grain Bank programme is acknowledged as a successful and innovative food
security intervention.
● Production of Foodgrains in India (Million Tonnes) : YEAR BY YEAR DATA TO BE UPDATED.
OTHER FACTS ALSO TO REMEMBER FOR PRELIMS & MAINS.
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 ECONOMICS : CLASS - 10 : CHAPTER - 1 : DEVELOPMENT
● Per Capita Income, Literacy Rate, Infant Mortality Rate, Attendance Ratio, Life Expectancy, Gross
Enrolment Ratio, and Human Development Index.
● Purchasing Power Parity is used to calculate per capita income.
● Sources for Information :
○ (Economic Survey, Report of the National Family Health Survey and Handbook of Statistics
on the Indian Economy).
○ United Nations Development Programme (Human Development Report).
○ World Bank (World Development Indicators).
○ ( www.budgetindia.nic.in , www.undp.org , www.worldbank.org ).
○ Reserve Bank’s Handbook of Statistics on Indian Economy (available at www.rbi.org).
● INCOME AND OTHER GOALS :
○ More income
○ Equal treatment, freedom, security, and respect of others.
● Average income is the total income of the country divided by its total population. The average
income is also called per capita income.
● World Development Reports, brought out by the World Bank.
● Countries with per capita income of US$ 49,300 per annum and above in 2019, are called high
income or rich countries and those with per capita income of US$ 2500 or less are called
low-income countries.
● India comes in the category of low middle income countries because its per capita income in
2019 was just US$ 6700 per annum.
● Infant Mortality Rate (or IMR) 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 measures the proportion of literate population in the 7-and-above age group.
● Net Attendance Ratio is the total number of children of age group 14 and 15 years attending
school as a percentage of total number of children in the same age group.
● Kerala has a low Infant Mortality Rate because it has adequate provision of basic health and
educational facilities.
● One way to find out if we are properly nourished is to calculate what nutrition scientists call
Body Mass Index (BMI).
● Divide the weight in kg by the square of the height. The number you get is called BMI.
● HUMAN DEVELOPMENT REPORT :
○ Human Development Report published by UNDP compares countries based on the
educational levels of the people, their health status and per capita income.
○ It would be interesting to look at certain relevant data regarding India and its
neighbours from the Human Development Report.
QUESTION & ANSWER :
● 1. What is the main criterion used by the World Bank in classifying different countries? What
are the limitations of this criterion, if any?
● The World Bank uses the country’s per capita income as the main criterion in classifying different
countries.
● Limitations of using this method to classify different countries:
○ A country’s growth and prosperity cannot be determined solely by its per capita income.
○ It disregards other growth indicators such as freedom, education, equality, liberty, security,
health, pollution levels, etc.
○ Unless the total of your community takes preventive measures, money may be unable to
rescue a person from infectious diseases.
 ● 2. In what respects is the criterion used by the UNDP for measuring development different
from the one used by the World Bank?
● UNDP uses the Human Development Index, whereas the World Bank uses per capita income to
measure development.
● The UNDP uses the Human Development Index. HDI has three indicators: life expectancy,
education, and per capita income.
● 3. Find out the present sources of energy that are used by the people in India. What could be
the other possibilities fifty years from now?
● Present sources of energy used by people in India are-coal, lignite, petroleum, natural gas,
LPG, electricity, etc.
● Fifty years from now there is a possibility that people will be making more use of
non-conventional sources of energy, nuclear energy, energy from motion, etc.
● 4. Why is the issue of sustainability important for development?
● Sustainable development refers to using natural resources in a manner so that they can be
used by the present and future generations.
● The issue of sustainability is important for development because if the natural resources are
not used carefully, they may not be available for future generations. The depleting resources
of a country may ultimately result in a lack of development of the country.
● 5. List a few examples of environmental degradation that you may have observed around you.
● Deforestation, falling levels of groundwater, soil erosion, water pollution, burning of fossil
fuels, the hole in the ozone layer and combustion from automobiles causing extreme air
pollution especially in urban areas are some of the examples of environmental degradation.
_________________________________________________________________________________

ECONOMICS : CLASS - 10 : CHAPTER - 2 : SECTORS OF THE INDIAN ECONOMY

● Real Time Handbook of Statistics on Indian Economy.
● National Sample Survey Organisation (NSSO) now known as National Statistical Office (NSO).
● NSO is an organisation under the Ministry of Statistics and Programme Implementation,
Government of India.
● When we produce a good by exploiting natural resources, it is an activity of the primary sector.
● Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this
sector is also called agriculture and related sector.
● The secondary sector covers activities in which natural products are changed into other forms
through ways of manufacturing that we associate with industrial activity.
● For example, using cotton fibre from the plant, we spin yarn and weave cloth. Using sugarcane
as a raw material, we make sugar or gur. We convert earth into bricks and use bricks to make
houses and buildings. Since this sector gradually became associated with the different kinds
of industries that came up, it is also called the industrial sector.
● Tertiary sector : These are activities that help in the development of the primary and
secondary sectors.
● Transport, storage, communication, banking, trade are some examples of tertiary activities.
● Since these activities generate services rather than goods, the tertiary sector is also called the
service sector.
● Teachers, doctors, and those who provide personal services such as washermen, barbers,
cobblers, lawyers, and people to do administrative and accounting works.
● Internet cafe, ATM booths, call centres, software companies, etc.
● The value of final goods and services produced in each sector during a particular year
provides the total production of the sector for that year.
● The sum of production in the three sectors gives what 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.
● 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. As a result, in
the year 2013-14, the tertiary sector has emerged as the largest producing sector in
India replacing the primary sector.
● Why is the tertiary sector becoming so important in India? There could be several reasons.
○ First, in any country several services such as hospitals, educational institutions, post
and telegraph services, police stations, courts, village administrative offices, municipal
corporations, defence, transport, banks, insurance companies, etc. are required. These
can be considered as basic services. In a developing country the government has to
take responsibility for the provision of these services.
○ Second, the development of agriculture and industry leads to the development of
services such as transport, trade, storage and the like, as we have already seen.
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. You can see this change quite sharply in cities, especially in
big cities.
○ 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.
● GDP by Primary, Secondary and Tertiary Sectors.
● Share of Sectors in GDP (%).
● Share of Sectors in Employment (%).
● Workers in the agricultural sector are underemployed.
● Underemployment : Where people are apparently working but all of them are made to work
less than their potential.
● Underemployment is hidden in contrast to someone who does not have a job and is clearly
visible as unemployed. Hence, it is also called disguised unemployment.
● Cold storage.
● Honey collection centres.
● Provident fund.
● Every state or region has potential for increasing the income and employment for people in
that area. It could be tourism, or the regional craft industry, or new services like IT.
● The central government in India made a law implementing the Right to Work in about 625
districts of India. It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005
(MGNREGA 2005).
● Under MGNREGA 2005, all those who are able to, and are in need of, work in rural areas are
guaranteed 100 days of employment in a year by the government. If the government fails in its
duty to provide employment, it will give unemployment allowances to the people. The types of
work that would in future help to increase the production from land will be given preference
under the Act.
● Organised sector covers those enterprises or places of work where the terms of employment
are regular and therefore, people have assured work.
● They are registered by the government and have to follow its rules and regulations which are
given in various laws such as the Factories Act, Minimum Wages Act, Payment of Gratuity Act,
Shops and Establishments Act, etc.
● It is called organised because it has some formal processes and procedures. Some of these
people may not be employed by anyone but may work on their own but they too have to
register themselves with the government and follow the rules and regulations.
● Workers in the organised sector enjoy security of employment. They are expected to work only
a fixed number of hours. If they work more, they have to be paid overtime by the employer.
They also get several other benefits from their employers.
● They get paid leave, payment during holidays, provident fund, gratuity etc. They are supposed
to get medical benefits and, under the laws, the factory manager has to ensure facilities like
drinking water and a safe working environment. When they retire, these workers get pensions
as well.

● The unorganised sector is characterised by small and scattered units which are largely
outside the control of the government.
● There are rules and regulations but these are not followed.
● Jobs here are low-paid and often not regular.
● There is no provision for overtime, paid leave, holidays, leave due to sickness etc.
● Employment is not secure. People can be asked to leave without any reason.
● When there is less work, such as during some seasons, some people may be asked to leave.
● A lot also depends on the whims of the employer.
● This sector includes a large number of people who are employed on their own doing small
jobs such as selling on the street or doing repair work.
● Similarly, farmers work on their own and hire labourers as and when they require.

● 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.
● In the urban areas, the unorganised sector comprises mainly of workers in small-scale
industry, casual workers in construction, trade and transport etc., and those who work as
street vendors, head load workers, garment makers, rag pickers etc.
● Small-scale industry also needs government’s support for procuring raw material and
marketing of output.
● The casual workers in both rural and urban areas need to be protected.
● Majority of workers from scheduled castes, tribes and backward communities find themselves
in the unorganised sector.
● Besides getting irregular and low paid work, these workers also face social discrimination.
● Protection and support to the unorganised sector workers is thus necessary for both
economic and social development.

● In the public sector, the government owns most of the assets and provides all the services.
● In the private sector, ownership of assets and delivery of services is in the hands of private
individuals or companies.
● Railways or post offices are examples of the public sector whereas companies like 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.
● To get such services we have to pay money to these individuals and companies.
● The purpose of the public sector is not just to earn profits.
● Governments raise money through taxes and other ways to meet expenses on the services
rendered by it.
● Modern day governments spend on a whole range of activities.
● Examples are construction of roads, bridges, railways, harbours, generating electricity,
providing irrigation through dams etc.
● Thus, governments have to undertake such heavy spending and ensure that these facilities are
available for everyone.
● There are a large number of activities which are the primary responsibility of the government.
The government must spend on these.
● Providing health and education facilities for all is one example.
● Running proper schools and providing quality education, particularly elementary education, is
the duty of the government. India’s size of illiterate population is one of the largest in the
world.
● Similarly, we know that nearly half of India’s children are malnourished and a quarter of them
are critically ill.
● The infant mortality rate of Odisha (40) or Madhya Pradesh (48) is higher than some of the
poorest regions of the world.
● Government also needs to pay attention to aspects of human development such as availability
of safe drinking water, housing facilities for the poor and food and nutrition.
● It is also the duty of the government to take care of the poorest and most ignored regions of
the country through increased spending in such areas.
___________________________________________________________________________________________________

ECONOMICS : CLASS - 10 : CHAPTER - 3 : MONEY AND CREDIT

● Demand deposits.
● Bank-to-Bank transfer through the internet or mobile phones, cheques, ATM cards, credit
cards, and Point of Sale (POS) swipe machines at shops.
● Data on self-help groups is provided on the website of the National Bank for Agriculture and
Rural Development (NABARD) (www.nabard.org).
● Since money acts as an intermediate in the exchange process, it is called a medium of
exchange.
● In India, the Reserve Bank of India issues currency notes on behalf of the central government.
● As per Indian law, no other individual or organisation is allowed to issue currency.
● Banks in India these days hold about 15 percent of their deposits as cash.
● Debt-trap : A situation in which a debt is difficult or impossible to repay, typically because high
interest payments prevent repayment of the principal.
● 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.
● Interest rate, collateral and documentation requirement, and the mode of repayment together
comprise what is called the terms of credit.
● Besides banks, 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. There are
several types of cooperatives possible such as farmers cooperatives, weavers cooperatives,
industrial workers cooperatives, etc.
● Sources of Credit :
○ Among the formal are loans from banks and cooperatives.
○ The informal lenders include moneylenders, traders, employers, relatives and friends,
etc.
● 85 per cent of the loans taken by poor households in the urban areas are from informal
sources.
● Rich urban households : Only 10 percent of their loans are from informal sources, while 90
percent are from formal sources.

● Most loans from informal lenders carry a very high interest rate and do little to increase the
income of the borrowers.
● Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural
areas, so that the dependence on informal sources of credit reduces.
● Secondly, while formal sector loans need to expand, it is also necessary that everyone receives
these loans.
● At present, it is the richer 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.

● SELF-HELP GROUPS FOR THE POOR :

○ 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.
○ 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.
○ The borrowers can, if necessary, approach the moneylenders even without repaying
their earlier loans. However, the moneylenders charge very high rates of interest, keep
no records of the transactions and harass the poor borrowers.
○ In recent years, people have tried out some newer ways of providing loans to the poor.
The idea is to organise rural poor, in particular women, into small Self Help Groups
(SHGs) and pool (collect) their savings.
○ A typical SHG has 15-20 members, usually belonging to one neighbourhood, who meet
and save regularly.
○ Members can take small loans from the group itself to meet their needs. The group
charges interest on these loans but this is still less than what the moneylender
charges.
○ After a year or two, if the group is regular in savings, it becomes eligible for availing
loan from the bank.
○ Loan is sanctioned in the name of the group and is meant to create self employment
opportunities for the members.
○ For instance, small loans are provided to the members for releasing mortgaged land,
for meeting working capital needs (e.g. buying seeds, fertilisers, raw materials like
bamboo and cloth), for housing materials, for acquiring assets like sewing machines,
handlooms, cattle, etc.
○ Most of the important decisions regarding the savings and loan activities are taken by
the group members.
○ The group decides as regards the loans to be granted — the purpose, amount, interest
to be charged, repayment schedule etc.
 ○ Also, it is the group which is responsible for the repayment of the loan.
○ Any case of non repayment of loan by any one member is followed up seriously by
other members in the group.
○ Because of this feature, banks are willing to lend to the poor women when organised in
SHGs, even though they have no collateral as such.
○ Thus, the SHGs help borrowers overcome the problem of lack of collateral.
○ They can get timely loans for a variety of purposes and at a reasonable interest rate.
○ Moreover, 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.
● Professor Muhammad Yunus, the founder of Grameen Bank, and recipient of the 2006 Nobel
Prize for Peace : Grameen Bank of Bangladesh.

● 1. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is
this necessary?
● Functioning of Banks – Supervision by Reserve Bank of India (RBI) :
● The banks have to maintain a certain cash balance out of the total deposits it receives and
this is monitored by the Reserve bank of India (RBI).
● The functioning of formal sources of loans is supervised by the Reserve Bank of India (RBI).
● Information has to be submitted to the Reserve Bank of India (RBI), on a periodic basis, by the
banks.
● Banks have to provide information related to interest rates, to whom the loans are given, how
much the banks are lending etc.
● Reserve Bank of India Monitors Banks – Why is this Necessary :
● This monitoring done by the Reserve Bank of India (RBI) is necessary because for the
development of the nation, cheap and affordable credit is a necessity.
● Reserve Bank of India (RBI) makes sure that banks not only provide loans to traders and profit
making businesses but also to small borrowers, small scale industries and small cultivators.
● To make sure that the poor can benefit from the cheaper loans, it is important that the formal
credit is distributed more equally.
● Usually the poor have to depend on informal sources of credit and it is the richer households
who receive formal credit.
● Most loans from informal lenders do very little to increase the income of borrowers as they
carry a very high interest rate.
___________________________________________________________________________________________________

ECONOMICS : CLASS - 10 : CHAPTER - 4 :

GLOBALISATION AND THE INDIAN ECONOMY
● Globalisation is the integration between countries through foreign trade and foreign
investments by multinational corporations (MNCs).
● Portfolio investment.
● Globalisation has been facilitated by several factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation of trade and investment policies and,
pressures from international organisations such as the WTO.

● International Labour Organisation — www.ilo.org.

● WTO website http://www.wto.org.
● www.corporatewatch.org.uk.
● A MNC is a company that owns or controls production in more than one nation.
● MNCs set up offices and factories for production in regions where they can get cheap labour
and other resources.
● This is done so that the cost of production is low and the MNCs can earn greater profits.
● INTERLINKING PRODUCTION ACROSS COUNTRIES :
○ In general, MNCs set up production where it is close to the markets; where there is skilled
and unskilled labour available at low costs; and where the availability of other factors of
production is assured.
○ In addition, MNCs might look for government policies that look after their interests.
○ The money that is spent to buy assets such as land, building, machines and other
equipment is called investment.
○ Investment made by MNCs is called foreign investment. Any investment is made with the
hope that these assets will earn profits.
○ At times, MNCs set up production jointly with some of the local companies of these
countries.
○ The benefit to the local company of such joint production is two-fold.
○ First, MNCs can provide money for additional investments, like buying new machines for
faster production.
○ Second, MNCs might bring with them the latest technology for production.
○ Large MNCs in developed countries place orders for production with small producers.
○ Garments, footwear, sports items are examples of industries where production is carried
out by a large number of small producers around the world.
○ The products are supplied to the MNCs, which then sell these under their own brand names
to the customers.
○ These large MNCs have tremendous power to determine price, quality, delivery, and labour
conditions for these distant producers.
● Ford Motors, an American company, is one of the world’s largest automobile manufacturers
with production spread over 26 countries of the world. Ford Motors came to India in 1995 and
spent Rs. 1700 crore to set up a large plant near Chennai. This was done in collaboration with
Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks.
● By the year 2017, Ford Motors was selling 88,000 cars in the Indian markets, while another
1,81,000 cars were exported from India to South Africa, Mexico, Brazil and the United States of
America.
● The company wants to develop Ford India as a component supplying base for its other plants
across the globe.
● FOREIGN TRADE AND INTEGRATION OF MARKETS :
○ Foreign trade creates an opportunity for the producers to reach beyond the domestic
markets, i.e., markets of their own countries.
○ Producers can sell their produce not only in markets located within the country but can also
compete in markets located in other countries of the world.
○ Similarly, for the buyers, import of goods produced in another country is one way of
expanding the choice of goods beyond what is domestically produced.
○ Foreign trade thus results in connecting the markets or integration of markets in different
countries.
● The result of greater foreign investment and greater foreign trade has been greater integration
of production and markets across countries.
● Globalisation is this process of rapid integration or interconnection between countries.
● More and more goods and services, investments and technology are moving between
countries.
● FACTORS THAT HAVE ENABLED GLOBALISATION :
○ Technology : Transportation technology has made much faster delivery of goods across
long distances possible at lower costs. Developments in information and communication
technology. In recent times, technology in the areas of telecommunications, computers, and
the Internet has been changing rapidly. Telecommunication facilities (telegraph, telephone
including mobile phones, fax) are used to contact one another around the world, to access
information instantly, and to communicate from remote areas. This has been facilitated by
satellite communication devices.
○ Liberalisation of foreign trade and foreign investment policy : Tax on imports is an
example of a trade barrier. It is called a barrier because some restriction has been set up.
Governments can use trade barriers to increase or decrease (regulate) foreign trade and to
decide what kinds of goods and how much of each, should come into the country.
Removing barriers or restrictions set by the government is what is known as liberalisation.
● WORLD TRADE ORGANISATION :
○ World Trade Organisation (WTO) is one such organisation whose aim is to liberalise
international trade.
○ Started at the initiative of the developed countries, WTO establishes rules regarding
international trade, and sees that these rules are obeyed.
○ About 160 countries of the world are currently members of the WTO.
○ Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed
countries have unfairly retained trade barriers.
○ On the other hand, WTO rules have forced the developing countries to remove trade
barriers.
○ An example of this is the current debate on trade in agricultural products.
● IMPACT OF GLOBALISATION IN INDIA :
○ Globalisation and greater competition among producers - both local and foreign producers -
has been of advantage to consumers, particularly the well-off sections in the urban areas.
○ There is greater choice before these consumers who now enjoy improved quality and lower
prices for several products.
○ As a result, these people today, enjoy much higher standards of living than was possible
earlier.
○ Among producers and workers, the impact of globalisation has not been uniform.
○ Firstly, MNCs have increased their investments in India over the past 20 years, which means
investing in India has been beneficial for them. MNCs have been interested in industries
such as cell phones, automobiles, electronics, soft drinks, fast food or services such as
banking in urban areas. These products have a large number of well-off buyers. In these
industries and services, new jobs have been created. Also, local companies supplying raw
materials, etc. to these industries have prospered.
○ Secondly, several of the top 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. Some have gained from successful collaborations with foreign
companies.
○ Moreover, globalisation has enabled some large Indian companies to emerge as
multinationals themselves! Tata Motors (automobiles), Infosys (IT), Ranbaxy (medicines),
Asian Paints (paints), Sundaram Fasteners (nuts and bolts) are some Indian companies
which are spreading their operations worldwide.
○ Besides, a host of services such as data entry, accounting, administrative tasks, engineering
are now being done cheaply in countries such as India and are exported to the developed
countries.
 ● Steps to Attract Foreign Investment :
○ In recent years, the central and state governments in India are taking special steps to
attract foreign companies to invest in India.
○ Industrial zones, called Special Economic Zones (SEZs), are being set up. SEZs are to have
world class facilities: electricity, water, roads, transport, storage, recreational and
educational facilities.
○ Companies who set up production units in the SEZs do not have to pay taxes for an initial
period of five years.
○ Government has also allowed flexibility in the labour laws to attract foreign investment.
○ The companies in the organised sector have to obey certain rules that aim to protect the
workers’ rights. In recent years, the government has allowed companies to ignore many of
these.
○ Instead of hiring workers on a regular basis, companies hire workers ‘flexibly’ for short
periods when there is intense pressure of work.
○ This is done to reduce the cost of labour for the company.
○ However, still not satisfied, foreign companies are demanding more flexibility in labour
laws.
● Capacitors are used in many electronic home appliances including tube lights, television etc.
● Recent studies point out that small producers in India need three things to compete better in
the market
○ (a) better roads, power, water, raw materials, marketing and information network
○ (b) improvements and modernisation of technology
○ (c) timely availability of credit at reasonable interest rates.
● STRUGGLE FOR A FAIR GLOBALISATION :
○ Government can ensure that labour laws are properly implemented and the workers get
their rights.
○ It can support small producers to improve their performance till the time they become
strong enough to compete.
○ If necessary, the government can use trade and investment barriers.
○ It can negotiate at the WTO for ‘fairer rules’.
○ It can also align with other developing countries with similar interests to fight against the
domination of developed countries in the WTO.
● 1. What are the various ways in which MNCs set up, control or produce in other countries?
● The various ways in which MNCs set up or control production in other countries are :
○ (a) Buy up a local production company.
○ (b) Place orders for production with small producers, i.e. Contract manufacturing.
○ (c) By setting up a partnership (joint venture) with a local company.
○ (d) Setting up their wholly owned subsidiary in the other country.
○ (e) By licensing or franchising their own brand to a local Company.
___________________________________________________________________________________________________

ECONOMICS : CLASS - 10 : CHAPTER - 5 : CONSUMER RIGHTS

● (https://consumeraffairs.nic.in)
● www.cuts-international.org
● CONSUMER MOVEMENT :
○ In India, the consumer movement as a ‘social force’ originated with the necessity of
protecting and promoting the interests of consumers against unethical and unfair trade
practices.
 ○ Rampant food shortages, hoarding, black marketing, adulteration of food and edible oil
gave birth to the consumer movement in an organised form in the 1960s.
○ Until the 1970s, consumer organisations were largely engaged in writing articles and
holding exhibitions. They formed consumer groups to look into the malpractices in ration
shops and overcrowding in the road passenger transport.
○ More recently, India witnessed an upsurge in the number of consumer groups.
● Consumers International :
○ In 1985 the United Nations adopted the UN Guidelines for Consumer Protection. This was a
tool for nations to adopt measures to protect consumers and for consumer advocacy
groups to press their governments to do so.
○ At the international level, this has become the foundation for consumer movement.
○ Today, Consumers International has become an umbrella body to over 200 member
organisations from over 100 countries.
● CONSUMER RIGHTS :
○ Right to Safety. ○ Right to be Heard
○ Right to be Informed ○ Right to Seek redressal
○ Right to Choose ○ Right to Consumer Education
● In October 2005, the Government of India enacted a law, popularly known as RTI (Right to
Information) Act, which ensures its citizens all the information about the functions of
government departments.
● The consumer can file a complaint before the appropriate consumer forum on his/her own
with or without the services of lawyers.

● The consumer movement in India has led to the formation of various organisations, locally
known as consumer forums or consumer protection councils.
● They guide consumers on how to file cases in the Consumer Disputes Redressal
Commissions.
● On many occasions, they also represent individual consumers in these commissions.
● These voluntary organisations also receive financial support from the government for creating
awareness among people.
● Under COPRA, a three-tier quasi-judicial machinery at the district, state and national levels was
set up for redressal of consumer disputes.
● The district-level authority called District Consumer Disputes Redressal Commission deals
with the cases involving claims up to Rs 1 crore, the state-level Consumer Disputes Redressal
Commissions called State Commission between Rs 1 crore and Rs 10 crore and the
national-level commission — National Commission — deals with cases involving claims
exceeding Rs 10 crore.
● If a case is dismissed in district-level commission, a consumer can also appeal in the state
and then in national-level commissions.
● Thus, the Act has enabled us as consumers to have the right to represent in the Consumer
Disputes Redressal Commissions.
● The enactment of COPRA has led to the setting up of separate Departments of Consumer
Affairs in central and state governments.
● ISI and Agmark :
○ While buying many commodities, on the cover, you might have seen a logo with the letters
ISI, Agmark, Hallmark or +F. These logos and certification help consumers get assured of
quality while purchasing the goods and services. The organisations that monitor and issue
these certificates allow producers to use their logos provided they follow certain quality
standards.
 ○ Though these organisations develop quality standards for many products, it is not
compulsory for all the producers to follow standards.
○ However, for some products that affect the health and safety of consumers or of products
of mass consumption like LPG cylinders, food colours and additives, cement, packaged
drinking water, it is mandatory on the part of the producers to get certified by these
organisations.
● TAKING THE CONSUMER MOVEMENT FORWARD :
○ India has been observing 24 December as the National Consumers’ Day. It was on this day that
the Indian Parliament enacted the Consumer Protection Act in 1986. India is one of the
countries that have exclusive authority for consumer redressal.
○ The consumer movement in India has made some progress in terms of numbers of organised
groups and their activities. There are today more than 2000 consumer groups in the country of
which only about 50-60 are well organised and recognised for their work.
○ However, the consumer redressal process is becoming cumbersome, expensive and time
consuming. Many times, consumers are required to engage lawyers.
○ These cases require time for filing and attending the commission proceedings etc.
○ The COPRA was amended in the year 2019 to further strengthen consumers in India. Buying
through the internet is now included.
● Availing details of ingredients of a product : Right to information.
● Agmark : Certification of edible oil and cereals.
● Accident due to faulty engine in a scooter : Right to safety.
● District Consumer Commission : Dealing with consumer cases.
● Bureau of Indian Standards : Agency that develops standards for goods and services.
● Food fortification : Addition of key nutrients to staple foods.
● Consumers International : Global level institution of consumer welfare organisations.
● Hallmark is the certification maintained for standardisation of jewellery.

● 1. What is the difference between consumer protection council and Consumer

Disputes Redressal Commission?
● Consumer protection council is a non-government organisation, spreading awareness among
common people and helping them to file cases in the court and get justice for the consumers.
They represent individuals in the consumer courts.
● Consumer courts are government organizations that provide redressal for consumer
grievances by passing orders which are enforceable by law. Consumer courts are established
at district, state and national level.
● 2. Find out the details of who provides Hallmark and ISO certification.
● ISO certification is a globally recognized mark of quality, indicating that an organization has
met the standards set forth by the ISO. Hallmark certification is a quality certification system
developed by the Bureau of Indian Standards (BIS).
● Hallmark certifies gold products and is provided by the Gold Council of India. ISO certification
is given by the International Standardisation Organisation headquartered in Geneva.
_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Government Publications : Economic Survey, Ministry of Finance, Government of India. National

●
Sample Survey Organisation, Ministry of Statistics and Programme Implementation, Govt of India,
New Delhi. National Human Development Report , Planning Commission, Government of India,
New Delhi. National Family Health Survey 4 (2015–16), Ministry of Health and Family Welfare, New
Delhi and International Institute of Population Studies, Mumbai.
● Other Reports : Handbook of Statistics on Indian Economy, Reserve Bank of India, Mumbai. Human
Development Report, United Nations Development Programme, New York. World Development
Indicators, The World Bank, Washington.
________________________________________________________________________________________________________
________________________________________________________________________________________________________
 ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 1

● “India is the pivot of our Empire... If the Empire loses any other part of its Dominion we can
survive, but if we lose India, the sun of our Empire will have set.”
— Victor Alexander Vruce, the Viceroy of British India in 1894

● Textile Industry in Bengal :

● Muslin is a type of cotton textile which had its origin in Bengal, particularly, places in and
around Dhaka (spelled during the pre-independence period as Dacca), now the capital city
of Bangladesh.
● ‘Daccai Muslin’ has gained worldwide fame as an exquisite type of cotton textile.
● The finest variety of muslin was called malmal.
● Sometimes, foreign travellers also used to refer to it as malmal shahi or malmal khas
implying that it was worn by, or fit for, the royalty.

● Obviously, the colonial government never made any sincere attempt to estimate India’s
national and per capita income.
● Some individual attempts which were made to measure such incomes yielded conflicting
and inconsistent results.
● Among the notable estimators — Dadabhai Naoroji, William Digby, Findlay Shirras,
V.K.R.V. Rao and R.C. Desai — it was Rao, whose estimates during the colonial period
were considered very significant.

● The French traveller, Bernier.

● Zamindari system which was implemented in the then Bengal Presidency comprising parts
of India’s present-day eastern states, the profit accruing out of the agriculture sector went
to the zamindars instead of the cultivators.
● Higher yield of cash crops in certain areas of the country due to commercialisation of
agriculture.

● Dr Rajendra Prasad’s book, India Divided.

● The cotton textile mills, mainly dominated by Indians, were located in the western parts of
the country, namely, Maharashtra and Gujarat, while the jute mills dominated by the
foreigners were mainly concentrated in Bengal.
● Subsequently, the iron and steel industries began coming up in the beginning of the
twentieth century.
● The Tata Iron and Steel Company (TISCO) was incorporated in 1907.
● A few other industries in the fields of sugar, cement, paper etc. came up after the Second
World War.

● Significant drawback of the new industrial sector was the very limited area of operation of
the public sector.
● This sector remained confined only to the railways, power generation, communications,
ports and some other departmental undertakings.

● FOREIGN TRADE :
● India has been an important trading nation since ancient times.
● But the restrictive policies of commodity production, trade and tariff pursued by the
colonial government adversely affected the structure, composition and volume of India’s
foreign trade.
 ● Consequently, India became an exporter of primary products such as raw silk, cotton,
wool, sugar, indigo, jute etc. and an importer of finished consumer goods like cotton, silk
and woollen clothes and capital goods like light machinery produced in the factories of
Britain.
● The most important characteristic of India’s foreign trade throughout the colonial period
was the generation of a large export surplus.
● But this surplus came at a huge cost to the country’s economy.
● Several essential commodities—food grains, clothes, kerosene etc. — were scarcely
available in the domestic market.
● Furthermore, this export surplus did not result in any flow of gold or silver into India.
● Rather, this was used to make payments for the expenses incurred by an office set up by
the colonial government in Britain, expenses on war, again fought by the British
government, and the import of invisible items, all of which led to the drain of Indian
wealth.

● Trade Through the Suez Canal :

● Suez Canal: Used as a highway between India and Britain.
● Suez Canal is an artificial waterway running from north to south across the Isthmus of
Suez in north-eastern Egypt.
● It connects Port Said on the Mediterranean Sea with the Gulf of Suez, an arm of the Red
Sea.
● The canal provides a direct trade route for ships operating between European or American
ports and ports located in South Asia, East Africa and Oceania by doing away with the
need to sail around Africa.
● Strategically and economically, it is one of the most important waterways in the world.
● Its opening in 1869 reduced the cost of transportation and made access to the Indian
market easier.

● DEMOGRAPHIC CONDITION :
● Before 1921, India was in the first stage of demographic transition.
● The second stage of transition began after 1921.
● However, neither the total population of India nor the rate of population growth at this
stage was very high.
● Amartya Sen’s book, Poverty and Famines.

● Parts of the then Madras Presidency (comprising areas of the present-day states of Tamil
Nadu, Andhra Pradesh, Kerala and Karnataka), Bombay and Bengal witnessed a decline in
the dependence of the workforce on the agricultural sector with a commensurate increase
in the manufacturing and the services sectors.
● However, there had been an increase in the share of the workforce in agriculture during
the same time in states such as Orissa, Rajasthan and Punjab.
● The British introduced the railways in India in 1850 and it is considered as one of their
most important contributions.

● Tata Airlines, a division of Tata and Sons, was established in 1932 inaugurating the
aviation sector in India.

● Some efforts were made by the colonial regime to improve infrastructure facilities but
these efforts were spiced with selfish motives. However, the independent Indian
government had to build on this base through planning.

___________________________________________________________________
 ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 2

● The central objective of Planning in India... is to initiate a process of development which

will raise the living standards and open out to the people new opportunities for a richer
and more varied life.
— First Five Year Plan

● Market forces of supply and demand.

● In a market economy, also called capitalism, only those consumer goods will be produced
that are in demand, i.e., goods that can be sold profitably either in the domestic or in the
foreign markets.
● In a capitalist society the goods produced are distributed among people not on the basis of
what people need but on the basis of Purchasing Power—the ability to buy goods and
services.
● A socialist society answers the three questions in a totally different manner. In a socialist
society the government decides what goods are to be produced in accordance with the
needs of society.
● Most economies are mixed economies, i.e. the government and the market together
answer the three questions of what to produce, how to produce and how to distribute what
is produced.
● In a mixed economy, the market will provide whatever goods and services it can produce
well, and the government will provide essential goods and services which the market fails
to do.

● The ‘Industrial Policy Resolution’ of 1948.

● In 1950, the Planning Commission was set up with the Prime Minister as its Chairperson.
The era of five year plans had begun.

● Mahalanobis: the Architect of Indian Planning :

● Planning, in the real sense of the term, began with the Second Five Year Plan.
● The Second Plan, a landmark contribution to development planning in general, laid down
the basic ideas regarding goals of Indian planning; this plan was based on the ideas of
Mahalanobis.
● In that sense, he can be regarded as the architect of Indian planning.
● Mahalanobis established the Indian Statistical Institute (ISI) in Calcutta and started a
journal, Sankhya, which still serves as a respected forum for statisticians to discuss their
ideas.
● Both, the ISI and Sankhya, are highly regarded by statisticians and economists all over the
world to this day.

● THE GOALS OF FIVE YEAR PLANS :

● A plan should have some clearly specified goals.
● The goals of the five year plans were: growth, modernisation, self-reliance and equity.
● This does not mean that all the plans have given equal importance to all these goals.
● Due to limited resources, a choice has to be made in each plan about which of the goals is
to be given primary importance.
● Growth: It refers to increase in the country’s capacity to produce the output of goods and
services within the country. A good indicator of economic growth, in the language of
economics, is steady increase in the Gross Domestic Product (GDP).
● Modernisation: To increase the production of goods and services the producers have to
adopt new technology. For example, a farmer can increase the output on the farm by using
new seed varieties instead of using the old ones. Adoption of new technology is called
modernisation. However, modernisation does not refer only to the use of new
technology but also to changes in social outlook such as the recognition that women
should have the same rights as men.
● Self-reliance: A nation can promote economic growth and modernisation by using its
own resources or by using resources imported from other nations. The first seven five year
plans gave importance to self-reliance which means avoiding imports of those goods which
could be produced in India itself. This policy was considered a necessity in order to reduce
our dependence on foreign countries, especially for food.
● Equity: Now growth, modernisation and self-reliance, by themselves, may not improve
the kind of life which people are living. A country can have high growth, the most modern
technology developed in the country itself, and also have most of its people living in
poverty. It is important to ensure that the benefits of economic prosperity reach the poor
sections as well instead of being enjoyed only by the rich. So, in addition to growth,
modernisation and self-reliance, equity is also important. Every Indian should be able to
meet his or her basic needs such as food, a decent house, education and health care and
inequality in the distribution of wealth should be reduced.

● AGRICULTURE :
● Land Reforms: At the time of independence, the land tenure system was characterised
by intermediaries (variously called zamindars, jagirdars etc.) who merely collected rent
from the actual tillers of the soil without contributing towards improvements on the farm.
The low productivity of the agricultural sector forced India to import food from the United
States of America (U.S.A.). Equity in agriculture called for land reforms which primarily
refer to change in the ownership of landholdings. Just a year after independence, steps
were taken to abolish intermediaries and to make the tillers the owners of land. The idea
behind this move was that ownership of land would give incentives to the tillers to invest
in making improvements provided sufficient capital was made available to them.
● Land ceiling was another policy to promote equity in the agricultural sector. This means
fixing the maximum size of land which could be owned by an individual. The purpose of
the land ceiling was to reduce the concentration of land ownership in a few hands. The
abolition of intermediaries meant that some 200 lakh tenants came into direct contact
with the government — they were thus freed from being exploited by the zamindars. The
ownership conferred on tenants gave them the incentive to increase output and this
contributed to growth in agriculture. However, the goal of equity was not fully served by
abolition of intermediaries. In some areas the former zamindars continued to own large
areas of land by making use of some loopholes in the legislation; there were cases where
tenants were evicted and the landowners claimed to be self cultivators (the actual tillers),
claiming ownership of the land; and even when the tillers got ownership of land, the
poorest of the agricultural labourers (such as sharecroppers and landless labourers) did
not benefit from land reforms.
● Land reforms were successful in Kerala and West Bengal because these states had
governments committed to the policy of land to the tiller. Unfortunately other states did
not have the same level of commitment and vast inequality in landholding continues to
this day.
 ● Ownership and Incentives :
● The policy of ‘land to the tiller’ is based on the idea that the cultivators will take more
interest — they will have more incentive — in increasing output if they are the owners of
the land.
● This is because ownership of land enables the tiller to make profit from the increased
output. Tenants do not have the incentive to make improvements on land since it is the
landowner who would benefit more from higher output.
● Industrial Policy Resolution 1956 (IPR 1956):
● In accordance with the goal of the state controlling the commanding heights of the
economy, the Industrial Policy Resolution of 1956 was adopted.
● This resolution formed the basis of the Second Five Year Plan, the plan which tried to
build the basis for a socialist pattern of society.
● This resolution classified industries into three categories.
● The first category comprised industries which would be exclusively owned by the
government; the second category consisted of industries in which the private sector
could supplement the efforts of the public sector, with the government taking the sole
responsibility for starting new units; the third category consisted of the remaining
industries which were to be in the private sector.
● Small-Scale Industry:
● In 1955, the Village and Small-Scale Industries Committee, also called the Karve
Committee, noted the possibility of using small-scale industries for promoting rural
development.
● A ‘small-scale industry’ is defined with reference to the maximum investment allowed
on the assets of a unit.
● This limit has changed over a period of time. In 1950 a small -scale industrial unit was
one which invested a maximum of rupees five lakh; at present the maximum
investment allowed is rupees one crore.
● It is believed that small-scale industries are more ‘labour intensive’ i.e., they use more
labour than the large-scale industries and, therefore, generate more employment.
● TRADE POLICY: IMPORT SUBSTITUTION :
● The industrial policy that India adopted was closely related to the trade policy.
● In the first seven plans, trade was characterised by what is commonly called an inward
looking trade strategy.
● Technically, this strategy is called import substitution.
● This policy aimed at replacing or substituting imports with domestic production.
● For example, instead of importing vehicles made in a foreign country, industries
would be encouraged to produce them in India itself.
● In this policy the government protected the domestic industries from foreign
competition.
● Protection from imports took two forms: tariffs and quotas.
● Public Sector Undertakings (PSUs).
● Protection from foreign competition enabled the development of indigenous industries in
the areas of electronics and automobile sectors which otherwise could not have developed.
● After independence, India envisaged an economic system which combines the best
features of socialism and capitalism—this culminated in the mixed economy model.
● The major policy initiatives in agriculture sector were land reforms and green revolution.
These initiatives helped India to become self-sufficient in food grains production.
___________________________________________________________________
 ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 3

● After forty years of planned development, India has been able to achieve a strong
industrial base and become self-sufficient in the production of food grains. Nevertheless, a
major segment of the population continues to depend on agriculture for its livelihood. In
1991, a crisis in the balance of payments led to the introduction of economic reforms in
the country.

● Since independence, India followed the mixed economy framework by combining the
advantages of the capitalist economic system with those of the socialist economic system.
● When expenditure is more than income, the government borrows to finance the deficit
from banks and also from people within the country and from international financial
institutions.
● When we import goods like petroleum, we pay in dollars which we earn from our exports.

● In the late 1980s, government expenditure began to exceed its revenue by such large
margins that meeting the expenditure through borrowings became unsustainable.
● India approached the International Bank for Reconstruction and Development (IBRD),
popularly known as World Bank and the International Monetary Fund (IMF), and
received $7 billion as loan to manage the crisis.
● For availing the loan, these international agencies expected India to liberalise and open up
the economy by removing restrictions on the private sector, reduce the role of the
government in many areas and remove trade restrictions between India and other
countries.
● India agreed to the conditions of the World Bank and IMF and announced the New
Economic Policy (NEP). The NEP consisted of wide ranging economic reforms.
● This set of policies can broadly be classified into two groups: the stabilisation
measures and the structural reform measures :
● Stabilisation measures are short term measures, intended to correct some of the
weaknesses that have developed in the balance of payments and to bring inflation
under control. In simple words, this means that there was a need to maintain
sufficient foreign exchange reserves and keep the rising prices under control.
● On the other hand, structural reform policies are long-term measures, aimed at
improving the efficiency of the economy and increasing its international
competitiveness by removing the rigidities in various segments of the Indian economy.
● The government initiated a variety of policies which fall under three heads viz.,
liberalisation, privatisation and globalisation.

● LIBERALISATION :
● Though a few liberalisation measures were introduced in the 1980s in areas of
industrial licensing, export-import policy, technology upgradation, fiscal policy
and foreign investment, reform policies initiated in 1991 were more comprehensive.
● Some important areas, such as the industrial sector, financial sector, tax reforms,
foreign exchange markets and trade and investment sectors which received
greater attention in and after 1991.
● Deregulation of Industrial Sector : In India, regulatory mechanisms were
enforced in various ways (i) industrial licensing under which every entrepreneur had
to get permission from government officials to start a firm, close a firm or decide the
amount of goods that could be produced (ii) private sector was not allowed in many
industries (iii) some goods could be produced only in small-scale industries, and (iv)
controls on price fixation and distribution of selected industrial products.
● The reform policies introduced in and after 1991 removed many of these restrictions.
Industrial licensing was abolished for almost all but product categories — alcohol,
cigarettes, hazardous chemicals, industrial explosives, electronics, aerospace and
drugs and pharmaceuticals.
● The only industries which are now reserved for the public sector are a part of atomic
energy generation and some core activities in railway transport.
● Many goods produced by small-scale industries have now been dereserved.
● In most industries, the market has been allowed to determine the prices.
● Financial Sector Reforms: Financial sector includes financial institutions, such as
commercial banks, investment banks, stock exchange operations and foreign exchange
markets. The financial sector in India is regulated by the Reserve Bank of India (RBI).
● The RBI decides the amount of money that the banks can keep with themselves, fixes
interest rates, nature of lending to various sectors, etc.
● One of the major aims of financial sector reforms is to reduce the role of RBI from
regulator to facilitator of the financial sector.
● This means that the financial sector may be allowed to take decisions on many matters
without consulting the RBI.
● The reform policies led to the establishment of private sector banks, Indian as well as
foreign.
● Foreign investment limit in banks was raised to around 74 per cent.
● Those banks which fulfil certain conditions have been given freedom to set up new
branches without the approval of the RBI and rationalise their existing branch
networks.
● Though banks have been given permission to generate resources from India and
abroad, certain managerial aspects have been retained with the RBI to safeguard the
interests of the account-holders and the nation.
● Foreign Institutional Investors (FII), such as merchant bankers, mutual funds
and pension funds, are now allowed to invest in Indian financial markets.
● Tax Reforms: Tax reforms are concerned with the reforms in the government’s
taxation and public expenditure policies, which are collectively known as its fiscal
policy.
● There are two types of taxes: direct and indirect.
● Direct taxes consist of taxes on incomes of individuals, as well as, profits of business
enterprises.
● Since 1991, there has been a continuous reduction in the taxes on individual incomes
as it was felt that high rates of income tax were an important reason for tax evasion.
● It is now widely accepted that moderate rates of income tax encourage savings and
voluntary disclosure of income.
● The rate of corporation tax, which was very high earlier, has been gradually reduced.
● Efforts have also been made to reform the indirect taxes, taxes levied on
commodities, in order to facilitate the establishment of a common national market for
goods and commodities.
● In 2016, the Indian Parliament passed a law, Goods and Services Tax Act 2016, to
simplify and introduce a unified indirect tax system in India.
● This law came into effect from July 2017.
● This is expected to generate additional revenue for the government, reduce tax evasion
and create ‘one nation, one tax and one market’.
● Another component of reform in this area is simplification.
● In order to encourage better compliance on the part of taxpayers, many procedures
have been simplified and the rates also substantially lowered.
 ● Foreign Exchange Reforms: The first important reform in the external sector
was made in the foreign exchange market.
● In 1991, as an immediate measure to resolve the balance of payments crisis, the rupee
was devalued against foreign currencies.
● This led to an increase in the inflow of foreign exchange.
● It also set the tone to free the determination of rupee value in the foreign exchange
market from government control.
● Now, more often than not, markets determine exchange rates based on the demand
and supply of foreign exchange.
● Trade and Investment Policy Reforms: Liberalisation of trade and investment
regime was initiated to increase international competitiveness of industrial production
and also foreign investments and technology into the economy. The aim was also to
promote the efficiency of local industries and adoption of modern technologies.

● The trade policy reforms aimed at :

● (i) dismantling of quantitative restrictions on imports and exports
● (ii) reduction of tariff rates and
● (iii) removal of licensing procedures for imports.
● Import licensing was abolished except in case of hazardous and environmentally
sensitive industries.
● Quantitative restrictions on imports of manufactured consumer goods and
agricultural products were also fully removed from April 2001.
● Export duties have been removed to increase the competitive position of Indian goods
in the international markets.

● PRIVATISATION :
● It implies shedding of the ownership or management of a government owned
enterprise.
● Government companies are converted into private companies in two ways :
● (i) by withdrawal of the government from ownership and management of public
sector companies and or
● (ii) by outright sale of public sector companies.
● Privatisation of the public sector enterprises by selling off part of the equity of PSEs to
the public is known as disinvestment.
● The purpose of the sale, according to the government, was mainly to improve financial
discipline and facilitate modernisation.
● It was also envisaged that private capital and managerial capabilities could be
effectively utilised to improve the performance of the PSUs.

● GLOBALISATION :
● Although globalisation is generally understood to mean integration of the economy of
the country with the world economy, it is a complex phenomenon.
● It is an outcome of the set of various policies that are aimed at transforming the world
towards greater interdependence and integration.
● It involves creation of networks and activities transcending economic, social and
geographical boundaries.
● Globalisation attempts to establish links in such a way that the happenings in India
can be influenced by events happening miles away.
● It is turning the world into one whole or creating a borderless world.
● Outsourcing:
● This is one of the important outcomes of the globalisation process.
● In outsourcing, a company hires regular service from external sources, mostly from
other countries, which was previously provided internally or from within the country
(like legal advice, computer service, advertisement, security — each provided by
respective departments of the company).

● The Central Public Sector Enterprises are designated with different status.
● A few examples of public enterprises with their status are as follows:
● (i) Maharatnas – (a) Indian Oil Corporation Limited, and (b) Steel Authority of India
Limited,
● (ii) Navratnas – (a) Hindustan Aeronautics Limited, (b) Mahanagar Telephone Nigam
Limited; and
● (iii) Miniratnas – (a) Bharat Sanchar Nigam Limited; (b) Airport Authority of India and
(c) Indian Railway Catering and Tourism Corporation Limited.

● Global Footprint :
● Owing to globalisation, you might find many Indian companies have expanded their
wings to many other countries. For example, ONGC Videsh, a subsidiary of the Indian
public sector enterprise, Oil and Natural Gas Corporation engaged in oil and gas
exploration and production has projects in 16 countries.
● Tata Steel, a private company established in 1907, is one of the top ten global steel
companies in the world which have operations in 26 countries and sell its products in
50 countries. It employs nearly 50,000 persons in other countries.
● HCL Technologies, one of the top five IT companies in India has offices in 31
countries and employs about 15,000 persons abroad.
● Dr Reddy's Laboratories, initially was a small company supplying pharmaceutical
goods to big Indian companies, today has manufacturing plants and research centres
across the world.

● World Trade Organisation (WTO):

● The WTO was founded in 1995 as the successor organisation to the General Agreement
on Trade and Tariff (GATT).
● GATT was established in 1948 with 23 countries as the global trade organisation to
administer all multilateral trade agreements by providing equal opportunities to all
countries in the international market for trading purposes.
● WTO is expected to establish a rule-based trading regime in which nations cannot place
arbitrary restrictions on trade.
● In addition, its purpose is also to enlarge production and trade of services, to ensure
optimum utilisation of world resources and to protect the environment.
● The WTO agreements cover trade in goods as well as services to facilitate international
trade (bilateral and multilateral) through removal of tariff as well as non-tariff barriers
and providing greater market access to all member countries.
● As an important member of WTO, India has been in the forefront of framing fair global
rules, regulations and safeguards and advocating the interests of the developing world.
● India has kept its commitments towards liberalisation of trade, made in the WTO, by
removing quantitative restrictions on imports and reducing tariff rates.

● Since 1991, India has been seen as a successful exporter of auto parts, pharmaceutical
goods engineering goods, IT software and textiles.
● Rising prices have also been kept under control.
 ● Reforms in Agriculture:
● Since 1991, public investment in the agriculture sector especially in infrastructure,
which includes irrigation, power, roads, market linkages and research and extension
(which played a crucial role in the Green Revolution), has fallen.
● Further, the partial removal of the fertiliser subsidy has led to an increase in the cost
of production, which has severely affected the small and marginal farmers.
● This sector has been experiencing a number of policy changes such as reduction in
import duties on agricultural products, low minimum support price and lifting of
quantitative restrictions on the imports of agricultural products.
● These have adversely affected Indian farmers as they now have to face increased
international competition.

● Reforms in Industry:
● Industrial growth has also recorded a slowdown.
● This is because of decreasing demand for industrial products due to various reasons
such as cheaper imports, inadequate investment in infrastructure etc.
● Globalisation is, thus, often seen as creating conditions for the free movement of
goods and services from foreign countries that adversely affect the local industries and
employment opportunities in developing countries.

● Reforms and Fiscal Policies:

● Economic reforms have placed limits on the growth of public expenditure, especially
in social sectors.
● The tax reductions in the reform period, aimed at yielding larger revenue and curbing
tax evasion, have not resulted in increase in tax revenue for the government.
● In order to attract foreign investment, tax incentives are provided to foreign investors
which further reduces the scope for raising tax revenues.
● This has a negative impact on developmental and welfare expenditures.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 4

● Some of the most challenging issues facing India today are poverty, development of rural
India and building infrastructure. We are a billion-strong country today and our human
capital is the biggest asset; it needs investment in health and education.
● No society can surely be flourishing and happy, of which the far greater part of the
members are poor and miserable. — Adam Smith.
● While addressing the Constituent Assembly in 1947, Jawaharlal Nehru had said, “This
achievement (Independence) is but a step, an opening of opportunity, to the great
triumphs and achievements that await us… the ending of poverty and ignorance and
disease and inequality of opportunity”.

● Starvation and hunger are the key features of the poorest households.
● The poor lack basic literacy and skills and hence have very limited economic opportunities.
● Poor people also face unstable employment.
● Malnutrition is alarmingly high among the poor.
● Ill health, disability or serious illness makes them physically weak.
● The poor are highly vulnerable.
● They are not able to negotiate their legal wages from employers and are exploited.
● Most poor households have no access to electricity.
● Their primary cooking fuel is firewood and cow dung cake.
● A large section of poor people do not even have access to safe drinking water.
● There is evidence of extreme gender inequality in the participation of gainful employment,
education and in decision-making within the family.
● Poor women receive less care on their way to motherhood.
● Their children are less likely to survive or be born healthy.
● POVERTY : Poverty is hunger. Poverty is being sick and not being able to see a doctor.
Poverty is not being able to go to school and not knowing how to read. Poverty is not
having a job. Poverty is fear for the future, having food once in a day. Poverty is losing a
child to illness, brought about by unclear water. Poverty is powerlessness, lack of
representation and freedom.
● In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a
Poverty Line.
● In post-independent India, there have been several attempts to work out a mechanism to
identify the number of poor in the country.
● For instance, in 1962, the Planning Commission now called NITI Aayog formed a Study
Group.
● In 1979, another body called the ‘Task Force on Projections of Minimum Needs and
Effective Consumption Demand’ was formed.
● In 1989 and 2005, ‘Expert Groups’ were constituted for the same purpose.
● Besides the Planning Commission, many individual economists have also attempted to
develop such a mechanism.
● Categorising Poverty:
● There are many ways to categorise poverty.
● In one such way people who are always poor and those who are usually poor but who
may sometimes have a little more money (example: casual workers) are grouped
together as the chronic poor.
● Another group are the churning poor who regularly move in and out of poverty
(example: small farmers and seasonal workers) and the occasionally poor who are
rich most of the time but may sometimes have a patch of bad luck. They are called the
transient poor.
● And then, there are those who are never poor and they are the non-poor.

● The aim of poverty alleviation schemes should be to improve human lives by expanding
the range of things that a person could be and could do, such as to be healthy and
well-nourished, to be knowledgeable and participate in the life of a community.
● THE NUMBER OF POOR IN INDIA :
● When the number of poor is estimated as the proportion of people below the poverty
line, it is known as ‘Head Count Ratio’.
● The official data on poverty is now made available to the public by the NITI Aayog.
● It is estimated on the basis of consumption expenditure data collected by the National
Sample Survey Organisation (NSSO) now called the National Statistical Office.
● In the 1990s, the absolute number of poor in rural areas had declined whereas the
number of their urban counterparts increased marginally.
● The main victims of caste, religious and other discriminatory practices are
poor. These can be caused as a result of :
● (i) social, economic and political inequality
● (ii) social exclusion ● (iii) unemployment ● (iv) indebtedness
● (v) unequal distribution of wealth.
● Aggregate poverty is just the sum of individual poverty.
● Poverty is also explained by general, economy-wide problems, such as :
● (i) low capital formation ● (iii) lack of demand
● (ii) lack of infrastructure ● (iv) pressure of population
● (v) lack of social/ welfare nets.

● Under the British, India began to export food grains and, as a result, as many as 26 million
people died in famines between 1875 and 1900.
● Even today agriculture is the principal means of livelihood and land is the primary asset of
rural people; ownership of land is an important determinant of material well-being and
those who own some land have a better chance to improve their living conditions.

● A large section of the rural poor in India are the small farmers.
● The land that they have is, in general, less fertile and dependent on rains.
● Their survival depends on subsistence crops and sometimes on livestock.
● With the rapid growth of population and without alternative sources of employment, the
per-head availability of land for cultivation has steadily declined leading to fragmentation
of land holdings.
● The income from these small land holdings is not sufficient to meet the family’s basic
requirements.

● The urban poor are either unemployed or intermittently employed as casual labourers.
● Casual labourers are among the most vulnerable in society as they have no job security, no
assets, limited skills, sparse opportunities and no surplus to sustain them.
● Indebtedness is one of the significant factors causing poverty.

● Many small land owning farmers and farming households and weavers are descending
into poverty due to globalisation related shock and lack of perceived income earning
opportunities in relatively well performing states in India.
● Since 2001, more than 12,000 farmers committed suicides in India and mainly in states
such as Maharashtra and Andhra Pradesh.
● India has the largest area under cotton cultivation in the world covering 125 lakh hectares
in 2017–18. The low yield of 476 kg per hectare pushes it into third position in production.
● High production costs, low and unstable yields, decline in world prices, global glut in
production due to subsidies by the U.S.A. and other countries, and opening up of the
domestic market due to globalisation have increased the exposure of farmers and led to
agrarian distress and suicides especially in the cotton belt of Andhra Pradesh and
Maharashtra.
● Scholars cite several factors that have led farmers to commit suicides :
● (i) the shift from traditional farming to the farming of high yielding commercial crops
without adequate technical support combined with withdrawal of the state in the area of
agricultural extension services in providing counselling on farm technologies, problems
faced, immediate remedial steps and lack of timely advice to farmers
● (ii) decline in public investment in agriculture in the last two decades
● (iii) low rates of germination of seeds provided by large global firms, spurious seeds and
pesticides by private agents
● (iv) crop failure, pest attack and drought
● (v) debt at very high interest rate of 36 per cent to 120 per cent from private money
lenders
● (vi) cheap imports leading to decline in pricing and profits
● (vii) lack of access to water for crops which forced the farmers to borrow money at
exorbitant rates of interest to sink borewells that failed.
● The unequal distribution of income and assets has also led to the persistence of poverty in
India.

● POLICIES AND PROGRAMMES TOWARDS POVERTY ALLEVIATION :

● The Indian Constitution and five year plans state social justice as the primary objective of
the developmental strategies of the government. To quote the First Five Year Plan
(1951-56), “the urge to bring economic and social change under present conditions comes
from the fact of poverty and inequalities in income, wealth and opportunity”.
● The Second Five Year Plan (1956-61) also pointed out that “the benefits of economic
development must accrue more and more to the relatively less privileged classes of
society”.
● One can find, in all policy documents, emphasis being laid on poverty alleviation and that
various strategies need to be adopted by the government for the same.
● The government’s approach to poverty reduction was of three dimensions.
● The first one is a growth oriented approach. It is based on the expectation that the effects
of economic growth — rapid increase in gross domestic product and per capita income —
would spread to all sections of society and will trickle down to the poor sections also. This
was the major focus of planning in the 1950s and early 1960s. It was felt that rapid
industrial development and transformation of agriculture through green revolution in
select regions would benefit the underdeveloped regions and the more backward sections
of the community.
● Population growth has resulted in a very low growth in per capita incomes.
● The Green Revolution exacerbated the disparities regionally and between large and small
farmers.
● While looking for alternatives to specifically address the poor, policy makers started
thinking that incomes and employment for the poor could be raised through the creation
of additional assets and by means of work generation.
● This could be achieved through specific poverty alleviation programmes. This
second approach has been initiated from the Third Five Year Plan (1961-66) and
progressively enlarged since then. One of the noted programmes initiated in the 1970s
was Food for Work.
● Most poverty alleviation programmes implemented prior to 2015 were based on the
perspective of the Five Year Plans.
● Expanding self employment programmes and wage employment programmes are being
considered as the major ways of addressing poverty.
● Examples of self employment programmes implemented are the Prime Minister’s Rozgar
Yojana (PMRY) and Swarna Jayanti Shahari Rozgar Yojana (SJSRY).
● This kind of programme aimed at creating self employment opportunities in urban areas.
● The Khadi and Village Industries Commission was implementing it.
● Under this programme, one could get financial assistance in the form of bank loans to set
up small industries.
● The educated unemployed from low income families in rural and urban areas could get
financial help to set up any kind of enterprise that generates employment under PMRY.
● Some programmes aim at creating employment opportunities—both self employment and
wage employment— in urban areas.
● Earlier, under self-employment programmes, financial assistance was given to families or
individuals. Since the 1990s, this approach has been changed. Now those who wish to
benefit from these programmes are encouraged to form self-help groups.
● The government has a variety of programmes to generate wage employment for the poor
unskilled people living in rural areas.
● In August 2005, the Parliament passed a new Act to provide guaranteed wage employment
to every rural household whose adult volunteer is to do unskilled manual work for a
minimum of 100 days in a year. This is known as Mahatma Gandhi National Rural
Employment Guarantee Act (MNREGA).
● Under this Act all those among the poor who are ready to work at the minimum wage can
report for work in areas where this programme is implemented.
● Nearly five crore households get employment opportunities under this law.
● The third approach to addressing poverty is to provide minimum basic amenities to the
people.
● India was among the pioneers in the world to envisage that through public expenditure on
social consumption needs — provision of food grains at subsidised rates, education,
health, water supply and sanitation—people’s living standard could be improved.
● Programmes under this approach are expected to supplement the consumption of the
poor, create employment opportunities and bring about improvements in health and
education.
● One can trace this approach from the Fifth Five Year Plan, “even with expanded
employment opportunities, the poor will not be able to buy for themselves all the essential
goods and services. They have to be supplemented up to at least certain minimum
standards by social consumption and investment in the form of essential food grains,
education, health, nutrition, drinking water, housing, communications and electricity.”
● Three major programmes that aim at improving the food and nutritional status of the poor
are Public Distribution System, Poshan Abhiyan and Midday Meal Scheme.
● Pradhan Mantri Gram Sadak Yojana and Valmiki Ambedkar Awas Yojana are
also attempts in developing infrastructure and housing conditions.
● It may be essential to briefly state that India has achieved satisfactory progress in many
aspects.
● The government also has a variety of other social security programmes to help a few
specific groups.
● The National Social Assistance Programme is one such programme initiated by the central
government. Under this programme, elderly people who do not have anyone to take care
of them are given pension to sustain themselves. Poor women who are destitute and
widows are also covered under this scheme.
● The government has also introduced a few schemes to provide health insurance to poor
people.
● From 2014, a scheme called Pradhan Mantri Jan-Dhan Yojana is available in which
people in India are encouraged to open bank accounts. Besides promoting savings habits,
this scheme intends to transfer all the benefits of government schemes and subsidies to
account holders directly. Each bank account holder is also entitled to Rs. 1- 2 lakh
accidental insurance cover.

● Poverty can effectively be eradicated only when the poor start contributing to growth by
their active involvement in the growth process.
● This is possible through a process of social mobilisation, encouraging poor people to
participate and get them empowered.
● This will also help create employment opportunities which may lead to increase in levels of
income, skill development, health and literacy.
● Moreover, it is necessary to identify poverty stricken areas and provide infrastructure such
as schools, roads, power, telecom, IT services, training institutions etc.
● The per capita consumption expenditure level which meets the average per capita daily
requirement of 2,400 calories in rural areas and 2,100 calories in urban areas, along with a
minimum of non-food expenditure, is called poverty line or absolute poverty.
 ● Majority of the poor reside in rural areas and engage themselves in casual and unskilled jobs.
● Over the years, the government has been following three approaches to reduce poverty in
India: growth oriented development, specific poverty alleviation programmes and meeting
the minimum needs of the poor.
● Government initiatives are yet to transform the ownership of assets, processes of
production and meet the basic amenities of the poor.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 5

● SOURCES OF HUMAN CAPITAL :
● Investment in education is considered as one of the main sources of human capital.
● There are several other sources as well.
● Investments in health, on- the-job training, migration and information are the other
sources of human capital formation.
● Like education, health is also considered as an important input for the development of a
nation as much as it is important for the development of an individual.
● Physical capital is tangible and can be easily sold in the market like any other commodity.
Human capital is intangible; it is endogenously built in the body and mind of its owner.
● Human capital creates both private and social benefits, whereas physical capital creates
only private benefit.
● India recognised the importance of human capital in economic growth long ago.
● The Seventh Five Year Plan says, “Human resources development (read human capital)
has necessarily to be assigned a key role in any development strategy, particularly in a
country with a large population. Trained and educated on sound lines, a large population
can itself become an asset in accelerating economic growth and in ensuring social change
in desired directions.”
● The National Education Policy 2020 states that the world is undergoing rapid changes in
the knowledge landscape.
● With various dramatic scientific and technological advances, such as the rise of big data,
machine learning, and artificial intelligence, many unskilled jobs worldwide may be taken
over by machines, while the need for a skilled workforce, particularly involving
mathematics, computer science, and data science, in conjunction with multidisciplinary
abilities across the sciences and social sciences, and humanities, will be increasingly in
greater demand.
● With climate change, increasing pollution, and depleting natural resources, there will be a
sizeable shift in how we meet the world’s energy, water, food, and sanitation needs, again
resulting in the need for new skilled labour, particularly in biology, chemistry, physics,
agriculture, climate science, and social science.
● HUMAN CAPITAL AND HUMAN DEVELOPMENT :
● The two terms sound similar but there is a clear distinction between them.
● Human capital considers education and health as a means to increase labour
productivity.
● Human development is based on the idea that education and health are integral to
human well-being because only when people have the ability to read and write and the
ability to lead a long and healthy life, they will be able to make other choices which they
value.

● National Council of Educational Research and Training (NCERT), University Grants

Commission (UGC) and All India Council of Technical Education (AICTE).
 ● National Medical Commission and Indian Council for Medical Research (ICMR).

● The Education Commission (1964–66) had recommended that at least 6 percent of GDP
be spent on education so as to make a noticeable rate of growth in educational
achievements.
● The Tapas Majumdar Committee, appointed by the Government of India in 1999,
estimated an expenditure of around Rs 1.37 lakh crore over 10 years (1998-99 to 2006-07)
to bring all Indian children in the age group of 6-14 years under the purview of school
education.
● In 2009, the Government of India enacted the Right of Children to Free and Compulsory
Education Act to make free education a fundamental right of all children in the age group
of 6-14 years.
● Generally, educational achievements in a country are indicated in terms of adult literacy
level, primary education completion rate and youth literacy rate.

● Periodic Labour Force Survey.

● Investments in education convert human beings into human capital; human capital
represents enhanced labour productivity, which is an acquired ability and an outcome of
deliberate investment decisions with an expectation that it will increase future income
sources.
● Investments in education, on-the-job training, health, migration and information are the
sources of human capital formation.
● Investment in human capital formation is considered as efficient and growth enhancing.
● Human development is based on the idea that education and health are integral to human
well-being because only when people have the ability to read and write and the ability to
lead a long and healthy life, will they be able to make other choices which they value.
● The percentage of expenditure on education of the total government expenditure indicates
the importance of education in the scheme of things for the government.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 6

● Some of the areas which are challenging and need fresh initiatives for
development in rural India include :
● Development of human resources including – literacy, more specifically, female
literacy, education and skill development – health, addressing both sanitation and
public health.
● Land reforms.
● Development of the productive resources of each locality.
● Infrastructure development like electricity, irrigation, credit, marketing, transport
facilities including construction of village roads and feeder roads to nearby highways,
facilities for agriculture research and extension, and information dissemination.
● Special measures for alleviation of poverty and bringing about significant
improvement in the living conditions of the weaker sections of the population
emphasising access to productive employment opportunities.

● Role of organic farming in promoting sustainable development.

● The Poor Women’s Bank : ‘Kudumbashree’ is a women-oriented community-based

poverty reduction programme being implemented in Kerala. In 1995, a thrift and credit
society was started as a small savings bank for poor women with the objective to
encourage savings.
● National Bank for Agriculture and Rural Development (NABARD) was set up in
1982 as an apex body to coordinate the activities of all institutions involved in the rural
financing system.
● The Green Revolution was a harbinger of major changes in the credit system as it led to
the diversification of the portfolio of rural credit towards production oriented lending.
● The institutional structure of rural banking today consists of a set of multi-agency
institutions, namely, commercial banks, regional rural banks (RRBs), cooperatives and
land development banks.
● They are expected to dispense adequate credit at cheaper rates.
● Recently, Self-Help Groups (henceforth SHGs) have emerged to fill the gap in the formal
credit system because the formal credit delivery mechanism has not only proven
inadequate but has also not been fully integrated into the overall rural social and
community development.
● The SHGs promote thrift in small proportions by a minimum contribution from each
member.

● Community Investment Support Fund (CISF).

● Micro-credit programmes.
● SHGs have helped in the empowerment of women.

● Agriculture loan default rates have been chronically high.

● In recent years, all adults are encouraged to open bank accounts as a part of a scheme
known as JanDhan Yojana. Those bank holders can get Rs. 1-2 lakh accidental
insurance coverage and overdraft facilities for Rs. 10,000 and get their wages, old age
pension and other social security payments of the government transferred to bank
accounts. There is no need to keep a minimum bank balance.

● AGRICULTURAL MARKET SYSTEM :

● Agricultural marketing is a process that involves the assembling, storage, processing,
transportation, packaging, grading and distribution of different agricultural commodities
across the country.
● Four measures that were initiated to improve the marketing aspect.
● The first step was regulation of markets to create orderly and transparent marketing
conditions.
● Second component is provision of physical infrastructure facilities like roads, railways,
warehouses, godowns, cold storages and processing units.
● Cooperative marketing, in realising fair prices for farmers’ products, is the third aspect
of government initiative. The success of milk cooperatives in transforming the social
and economic landscape of Gujarat and some other parts of the country is testimony
to the role of cooperatives. However cooperatives have received a setback during the
recent past due to inadequate coverage of farmer members, lack of appropriate link
between marketing and processing cooperatives and inefficient financial management.
● The fourth element is the policy instruments like
● (i) assurance of minimum support prices (MSP) for agricultural products
● (ii) maintenance of buffer stocks of wheat and rice by Food Corporation of India
and
● (iii) distribution of food grains and sugar through PDS.
● These instruments are aimed at protecting the income of the farmers and providing
food grains at a subsidised rate to the poor.
● However, despite government intervention, private trade (by moneylenders, rural
political elites, big merchants and rich farmers) predominates agricultural markets.
● Emerging Alternative Marketing Channels:
● It has been realised that if farmers directly sell their produce to consumers, it increases
their incomes.
● Some examples of these channels are Apni Mandi (Punjab, Haryana and Rajasthan);
Hadapsar Mandi (Pune); Rythu Bazars (vegetable and fruit markets in Andhra Pradesh
and Telangana) and Uzhavar Sandies (farmers markets in Tamil Nadu).
● Further, several national and multinational fast food chains are increasingly entering into
contracts/ alliances with farmers to encourage them to cultivate farm products
(vegetables, fruits, etc.) of the desired quality by providing them with not only seeds and
other inputs but also assured procurement of the produce at pre-decided prices. It is
argued that such arrangements will help in reducing the price risks of farmers and would
also expand the markets for farm products.

● Tamil Nadu Women in Agriculture (TANWA) :

● Tamil Nadu Women in Agriculture (TANWA) was a project initiated in the late 1980s
in Tamil Nadu to train women in the latest agricultural techniques and in organic
farming.
● It encouraged women to actively participate in raising agricultural productivity and
family income.
● At a Farm Women’s Group in Tiruchirapalli, run by Anthoniammal, trained women
are successfully making and selling vermicompost and earning money from this
venture.

● DIVERSIFICATION INTO PRODUCTIVE ACTIVITIES :

● Animal Husbandry:
● In India, the farming community uses the mixed crop-livestock farming system
—cattle, goats, fowl are the widely held species. Livestock production provides
increased stability in income, food security, transport, fuel and nutrition for the family
without disrupting other food-producing activities.
● Performance of the Indian dairy sector over the last three decades has been quite
impressive. Milk production in the country has increased by about ten times between
1951-2016. This can be attributed mainly to the successful implementation of
‘Operation Flood’.
● It is a system whereby all the farmers can pool their milk produced according to
different grading (based on quality), processed and marketed to urban centres through
cooperatives. In this system the farmers are assured of a fair price and income from
the supply of milk to urban markets.
● Fisheries:
● The fishing community regards the water body as ‘mother’ or ‘provider’. The water
bodies consisting of sea, oceans, rivers, lakes, natural aquatic ponds, streams etc. are,
therefore, an integral and life-giving source for the fishing community.
● In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu
are major fish producing states.
● Horticulture:
● Blessed with a varying climate and soil conditions, India has adopted growing of
diverse horticultural crops such as fruits, vegetables, tuber crops, flowers, medicinal
and aromatic plants, spices and plantation crops.
● The Horticulture sector contributes nearly one-third of the value of agriculture output
and six per cent of Gross Domestic Product of India.
 ● India has emerged as a world leader in producing a variety of fruits like mangoes,
bananas, coconuts, cashew nuts and a number of spices and is the second largest
producer of fruits and vegetables.
● Flower harvesting, nursery maintenance, hybrid seed production and tissue culture,
propagation of fruits and flowers and food processing are highly remunerative
employment options for women in rural areas.
● Electricity, cold storage systems, marketing linkages, small-scale processing units and
technology improvement and dissemination.
● Other Alternate Livelihood Options:
● IT has revolutionised many sectors in the Indian economy. There is broad consensus
that IT can play a critical role in achieving sustainable development and food security
in the twenty-first century.
● It also has a positive impact on the agriculture sector as it can disseminate
information regarding emerging technologies and its applications, prices, weather and
soil conditions for growing different crops etc.

● Adoption of Village by Parliamentarians :

● In October, 2014, The Government of India introduced a new scheme called Saansad
Adarsh Gram Yojana (SAGY).
● Under this scheme, Members of India's Parliament need to identify and develop one
village from their constituencies.
● To begin with, MPs can develop one village as a model village by 2016, and two more by
2019, covering over 2,500 villages in India.
● According to the scheme, the village can have a population of 3,000-5,000 in the plains and
1,000-3,000 in the hills and should not be MPs' own or their spouse's village.
● MPs are expected to facilitate a village development plan, motivate villagers to take up
activities and build infrastructure in the areas of health, nutrition and education.

● Organic Food :
● Organic food is growing in popularity across the world. Many countries have around 10
percent of their food system under organic farming.
● There are many retail chains and supermarkets which are accorded with green status to
sell organic food.
● Moreover, organic foods command a higher price of around 10-100 per cent than
conventional ones.

● Benefits of Organic Farming:

● Organic agriculture offers a means to substitute costlier agricultural inputs (such as
HYV seeds, chemical fertilisers, pesticides etc.) with locally produced organic inputs
that are cheaper and thereby generate good returns on investment.
● Organic agriculture also generates income through exports as the demand for
organically grown crops is on a rise.
● Studies across countries have shown that organically grown food has more nutritional
value than chemical farming thus providing us with healthy foods.
● Since organic farming requires more labour input than conventional farming, India
will find organic farming an attractive proposition.
● Finally, the produce is pesticide-free and produced in an environmentally sustainable way.
● Organic produce may also have more blemishes and a shorter shelf life than sprayed
produce.
● Moreover, choice in production of off-season crops is quite limited in organic farming.
 ● There is a greater need today to make rural areas more vibrant through diversification into
dairying, poultry, fisheries, vegetables and fruits and linking up the rural production
centres with the urban and foreign (export) markets to realise higher returns on the
investments for the products.
● Moreover, infrastructure elements like credit and marketing, farmer friendly agricultural
policies and a constant appraisal and dialogue between farmers’ groups and state
agricultural departments are essential to realise the full potential of the sector.

● There is a need for improving the quantity and quality of infrastructure in rural areas such
as banking, marketing, storage, transport and communications etc. to realise its true
potential.
● The importance of organic farming as an environmentally sustainable production process
is on a rise and needs to be promoted.
● ‘Golden Revolution’.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 7

● What I object to, is the ‘craze’ for machinery, not machinery as such. The craze is for what
they call labour-saving machinery. Men go on ‘saving labour’ till thousands are without
work and thrown on the open streets to die of starvation...
— Mahatma Gandhi.

● Workers who own and operate an enterprise to earn their livelihood are known as
self-employed.
● The construction workers are known as casual wage labourers.
● When a worker is engaged by someone or an enterprise and paid his or her wages on a
regular basis, they are known as regular salaried employees.

● Generally, we divide all economic activities into eight different industrial divisions. They
are :
● (i) Agriculture ● (v) Construction
● (ii) Mining and Quarrying ● (vi) Trade
● (iii) Manufacturing ● (vii) Transport and Storage and
● (iv) Electricity, Gas and Water Supply ● (viii) Services.
● During the period 1950–2010, Gross Domestic Product (GDP) of India grew positively and
was higher than the employment growth.
● However, there was always fluctuation in the growth of GDP.
● During this period, employment grew at the rate of not more than 2 per cent.
● Labour laws. ● Trade unions.
● The information relating to employment in the formal sector is collected by the Union
Ministry of Labour through employment exchanges located in different parts of the
country.
● International Labour Organisation (ILO).
● The National statistical office (Previously it was known as National Sample Survey
Organisation) defines unemployment as a situation in which all those who, owing to lack
of work, are not working but either seek work through employment exchanges,
intermediaries, friends or relatives or by making applications to prospective employers or
express their willingness or availability for work under the prevailing condition of work
and remunerations.
 ● There are three sources of data on unemployment : Reports of Census of India, National
Statistical Office’s Reports of Employment and Unemployment Situation, Annual Reports
of Periodic Labour Force Survey, and Directorate General of Employment and Training
data of Registration with Employment Exchanges.

● All those persons who are engaged in various economic activities and hence contribute to
gross national product are workers.
● Men, particularly rural men, form the major section of the workforce in India.
● Government is the major formal sector employer in the country.
● Disguised unemployment is a common form of unemployment in rural India.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 8

● Kerala, popularly known as ‘God’s own country.

● Some divide infrastructure into two categories — economic and social. Infrastructure
associated with energy, transportation and communication are included in the former
category whereas those related to education, health and housing are included in the latter.
● In recent times, agriculture also depends on insurance and banking facilities because of its
need to operate on a very large scale.
● Infrastructure contributes to economic development of a country both by increasing the
productivity of the factors of production and improving the quality of life of its people.
● Today, the private sector by itself and also in joint partnership with the public sector, has
started playing a very important role in infrastructure development.
● Bharat Nirman, Special Purpose Vehicle (SPV), Special Economic Zones (SEZ), Build
Operate Transfer (BOT), Private Public Partnership (PPP).
● The share of power and telecommunication infrastructure is greater in high-income
countries.

● Sources of Energy:
● There are commercial and non-commercial sources of energy.
● Commercial sources are coal, petroleum and electricity as they are bought and
sold.
● Non-commercial sources of energy are fuelwood, agricultural waste and dried
dung. These are non-commercial as they are not available in the market on a large
scale.
● While commercial sources of energy are generally exhaustible (with the exception of
hydropower), non-commercial sources or traditional sources are generally renewable.

● Non-conventional Sources of Energy:

● Both commercial and non-commercial sources of energy are known as conventional
sources of energy.
● There are three other sources of energy which are commonly termed as
non-conventional sources — solar energy, wind energy and tidal power.
● Coal and lignite.
● The transport sector was the largest consumer of commercial energy in 1953-54. However,
there has been a continuous fall in the share of the transport sector while the shares of the
household, agriculture and ‘others’ have been increasing. The share of oil and gas is the
highest among all commercial energy consumption. With the rapid rate of economic
growth, there has been a corresponding increase in the use of energy.
● In India, in 2018, thermal sources accounted for 82 per cent of the power generation
capacity.
● India’s energy policy encourages three energy sources — solar, hydel, and wind — as
they do not rely on fossil fuel and, hence, avoid carbon emissions.
● Atomic energy is an important source of electric power, it has economic advantages.

● Bureau of Energy Efficiency (BEE).

● The LED bulb uses one-tenth energy as an incandescent bulb and half as much as a CFL to
produce the same amount of light.

● Generally, scholars assess people’s health by taking into account indicators, like infant
mortality and maternal mortality rates, life expectancy and nutrition levels, along with the
incidence of communicable and noncommunicable diseases.

● State of Health Infrastructure:

● The government has the constitutional obligation to guide and regulate all health
related issues, such as medical education, adulteration of food, drugs and poisons,
medical profession, vital statistics, mental deficiency and lunacy. The Union
Government evolves broad policies and plans through the Central Council of Health
and Family Welfare.
● In recent times, the private sector has been playing a dominant role in medical
education and training, medical technology and diagnostics, manufacture and sale of
pharmaceuticals, hospital construction and the provision of medical services.

● Health System in India :

● India’s health infrastructure and health care is made up of a three-tier system —primary,
secondary and tertiary.
● Primary health care includes education concerning prevailing health problems and
methods of identifying, preventing and controlling them; promotion of food supply and
proper nutrition and adequate supply of water and basic sanitation; maternal and child
health care; immunisation against major infectious diseases and injuries; promotion of
mental health and provision of essential drugs.
● Hospitals which have better facilities for surgery, X-ray, Electrocardiogram (ECG) are
called secondary health care institutions. They function both as primary health care
providers and also provide better healthcare facilities.
● All those hospitals which have advanced level equipment and medicines and undertake all
the complicated health problems, which could not be managed by primary and secondary
hospitals, come under the tertiary sector.

● Community and Non-profit Organisations in Healthcare :

● One of the important aspects of a good healthcare system is community participation.
● It functions with the idea that the people can be trained and involved in the primary
healthcare system.
● This method is already being used in some parts of our country.
● SEWA in Ahmedabad and ACCORD in the Nilgiris could be the examples of some such
NGOs working in India.
● Trade unions have built alternative healthcare services for their members and also to give
low-cost healthcare to people from nearby villages.
● Tribal people’s organisation, Kashtakari Sangathan.
 ● Indian Systems of Medicine (ISM): It includes six systems—
● Ayurveda ● Siddha
● Yoga ● Naturopathy
● Unani ● Homoeopathy (AYUSH).

● Health is a vital public good and a basic human right. All citizens can get better health
facilities if public health services are decentralised.

● Infrastructure is a network of physical facilities and public services and with this social
infrastructure is equally important to support it. It is an important base for economic
development of the country.
● Infrastructure needs to be upgraded from time to time to maintain a high economic
growth rate. Better infrastructural facilities have attracted more foreign investments and
tourists to India recently.
● Health is a yardstick of human well-being, physical as well as mental.
● Women’s health across the country has become a matter of great concern with reports of
increasing cases of female foeticide and mortality.
● Natural systems of medicine have to be explored and used to support public health. There
is a great scope of advancement of medical tourism in India.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 9

● ENVIRONMENT — DEFINITION AND FUNCTIONS :

● Environment is defined as the total planetary inheritance and the totality of all resources.
It includes all the biotic and abiotic factors that influence each other.

● Functions of the Environment: The environment performs four vital functions :

● (i) it supplies resources: resources here include both renewable and non-renewable
resources. Renewable resources are those which can be used without the possibility of
the resource becoming depleted or exhausted. That is, a continuous supply of the
resource remains available. Examples of renewable resources are the trees in the
forests and the fishes in the ocean. Non-renewable resources, on the other hand, are
those which get exhausted with extraction and use, for example, fossil fuel
● (ii) it assimilates waste
● (iii) it sustains life by providing genetic and bio diversity and
● (iv) it also provides aesthetic services like scenery etc.

● Global Warming :
● Global warming is a gradual increase in the average temperature of the earth’s lower
atmosphere as a result of the increase in greenhouse gases since the Industrial Revolution.
● Much of the recent observed and projected global warming is human-induced.
● It is caused by man-made increases in carbon dioxide and other greenhouse gases through
the burning of fossil fuels and deforestation.
● Adding carbon dioxide, methane and such other gases (that have the potential to absorb
heat) to the atmosphere with no other changes will make our planet’s surface warmer.
● Some of the longer-term results of global warming are melting of polar ice with a resulting
rise in sea level and coastal flooding; disruption of drinking water supplies dependent on
snow melts; extinction of species as ecological niches disappear; more frequent tropical
storms; and an increased incidence of tropical diseases.
● Among factors that may be contributing to global warming are the burning of coal and
petroleum products (sources of carbon dioxide, methane, nitrous oxide, ozone);
deforestation, which increases the amount of carbon dioxide in the atmosphere; methane
gas released in animal waste; and increased cattle production, which contributes to
deforestation, methane production, and use of fossil fuels.
● A UN Conference on Climate Change, held in Kyoto, Japan, in 1997, resulted in an
international agreement to fight global warming which called for reductions in emissions
of greenhouse gases by industrialised nations.

● Global warming and Ozone depletion.

● Ozone Depletion :
● Ozone depletion refers to the phenomenon of reductions in the amount of ozone in the
stratosphere.
● The problem of ozone depletion is caused by high levels of chlorine and bromine
compounds in the stratosphere.
● The origins of these compounds are chlorofluorocarbons (CFC), used as cooling
substances in air conditioners and refrigerators, or as aerosol propellants, and
bromofluorocarbons (halons), used in fire extinguishers.
● As a result of depletion of the ozone layer, more ultraviolet (UV) radiation comes to Earth
and causes damage to living organisms.
● UV radiation seems responsible for skin cancer in humans; it also lowers production of
phytoplankton and thus affects other aquatic organisms.
● It can also influence the growth of terrestrial plants.
● A reduction of approximately 5 per cent in the ozone layer was detected from 1979 to
1990.
● Since the ozone layer prevents most harmful wavelengths of ultraviolet light from passing
through the Earth’s atmosphere, observed and projected decreases in ozone have
generated worldwide concern.
● This led to the adoption of the Montreal Protocol banning the use of
chlorofluorocarbon (CFC) compounds, as well as other ozone depleting chemicals such as
carbon tetrachloride, trichloroethane (also known as methyl chloroform), and bromine
compounds known as halons.

● Damodar Valley is one of India’s most industrialised regions. Pollutants from the heavy
industries along the banks of the Damodar river are converting it into an ecological
disaster.

● The black soil of the Deccan Plateau is particularly suitable for cultivation of cotton,
leading to concentration of textile industries in this region.
● The Indo-Gangetic plains — spread from the Arabian Sea to the Bay of Bengal — are one of
the most fertile, intensively cultivated and densely populated regions in the world.
● India accounts for nearly 8 percent of the world’s total iron-ore reserves.
● Bauxite, copper, chromate, diamonds, gold, lead, lignite, manganese, zinc, uranium, etc.
are also available in different parts of the country.
● Air pollution, water contamination, soil erosion, deforestation and wildlife extinction are
some of the most pressing environmental concerns of India.
● The priority issues identified are :
● (i) land degradation ● (ii) biodiversity loss
● (iii) air pollution with special reference to vehicular pollution in urban cities
● (iv) management of freshwater ● (v) solid waste management.
● Some of the factors responsible for land degradation are :
● (i) loss of vegetation occurring due to deforestation
● (ii) unsustainable fuel wood and fodder extraction
● (iii) shifting cultivation
● (iv) encroachment into forest lands
● (v) forest fires and overgrazing
● (vi) non-adoption of adequate soil conservation measures
● (vii) improper crop rotation
● (viii) indiscriminate use of agro-chemicals such as fertilisers and pesticides
● (ix) improper planning and management of irrigation systems
● (x) extraction of ground water in excess of the recharge capacity
● (xi) open access resource and
● (xii) poverty of the agriculture-dependent people.

● Pollution Control Boards :

● In order to address two major environmental concerns in India, viz. water and air
pollution, the government set up the Central Pollution Control Board (CPCB) in 1974.
● This was followed by states establishing their own state level boards to address all the
environmental concerns.
● They investigate, collect and disseminate information relating to water, air and land
pollution, lay down standards for sewage/trade effluent and emissions.
● The PCBs prepare manuals, codes and guidelines relating to treatment and disposal of
sewage and trade effluents.
● They assess the air quality through regulation of industries.
● In fact, state boards, through their district level officials, periodically inspect every
industry under their jurisdiction to assess the adequacy of treatment measures provided to
treat the effluent and gaseous emissions.
● It also provides background air quality data needed for industrial siting and town
planning.
● The pollution control boards collect, collate and disseminate technical and statistical data
relating to water pollution.
● They monitor the quality of water in 125 rivers (including the tributaries), wells, lakes,
creeks, ponds, tanks, drains and canals.

● India is one of the ten most industrialised nations of the world. But this status has brought
with it unwanted and unanticipated consequences such as unplanned urbanisation,
pollution and the risk of accidents.

● SUSTAINABLE DEVELOPMENT :
● Environment and economy are interdependent and need each other. Hence, development
that ignores its repercussions on the environment will destroy the environment that
sustains life forms.
● The concept of sustainable development was emphasised by the United Nations
Conference on Environment and Development (UNCED), which defined it as:
‘Development that meets the needs of the present generation without compromising the
ability of the future generation to meet their own needs’.

● The Brundtland Commission emphasises on protecting the future generation.

● The present generation can promote development that enhances the natural and built
environment in ways that are compatible with :
● (i) conservation of natural assets
● (ii) preservation of the regenerative capacity of the world’s natural ecological system
● (iii) avoiding the imposition of added costs or risks on future generations.

● In 2015, the UN formulated 17 Sustainable Development Goals (SDGs) intended to be

achieved by the year 2030.

● STRATEGIES FOR SUSTAINABLE DEVELOPMENT :

● Use of Non-conventional Sources of Energy: Thermal power plants emit large
quantities of carbon dioxide which is a greenhouse gas.
● LPG, Gobar Gas in Rural Areas: Households in rural areas generally use wood, dung
cake or other biomass as fuel. This practice has several adverse implications like
deforestation, reduction in green cover, wastage of cattle dung and air pollution. To rectify
the situation, subsidised LPG is being provided. In addition, gobar gas plants are being
provided through easy loans and subsidies.
● CNG in Urban Areas: In Delhi, the use of Compressed Natural Gas (CNG) as fuel in the
public transport system has significantly lowered air pollution and the air has become
cleaner.
● Wind Power: Wind turbines move with the wind and electricity is generated. No doubt,
the initial cost is high. But the benefits are such that the high cost gets easily absorbed.
● Solar Power through Photovoltaic Cells: With the help of photovoltaic cells, solar
energy can be converted into electricity. These cells use special kinds of materials to
capture solar energy and then convert the energy into electricity. This technology is
extremely useful for remote areas and for places where supply of power through grid or
power lines is either not possible or proves very costly. This technique is also totally free
from pollution. In recent years India is taking efforts to increase the power generation
through solar. India is also leading an International body called International Solar
Alliance (ISA).
● Mini-hydel Plants: In mountainous regions, streams can be found almost everywhere. A
large percentage of such streams are perennial. Mini-hydel plants use the energy of such
streams to move small turbines. The turbines generate electricity which can be used
locally. Such power plants are more or less environment-friendly as they do not change the
land use pattern in areas where they are located; they generate enough power to meet local
demands. This means that they can also do away with the need for large scale transmission
towers and cables and avoid transmission loss.
● Traditional Knowledge and Practices: India is very much privileged to have about
15,000 species of plants which have medicinal properties. About 8,000 of these are in
regular use in various systems of treatment including the folk tradition.
● Biocomposting: Dung which is an important fertiliser and soil conditioner. Earthworms
can convert organic matter into compost faster than the normal composting process. This
process is now being widely used. Indirectly, the civic authorities are benefited too as they
have to dispose of a reduced quantity of waste.
● Biopest Control.
● Environment performs four functions: supplies resources, assimilates wastes, sustains life
by providing genetic and bio diversity and provides aesthetic services.
● Population explosion, affluent consumption and production have placed a huge stress on
the environment.
 ● The threat to India’s environment is of two dimensions —threat of poverty induced
environmental degradation and the threat of pollution from affluence and a rapidly
growing industrial sector.
● Promotion of natural resources, conservation, preserving regenerative capacity of the
ecological system and avoiding the imposition of environmental risks on future
generations would lead to sustainable development.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : CHAPTER - 10

● SAARC, European Union, ASEAN, G-8, G-20, BRICS.

● While India and Pakistan became independent nations in 1947, the People's Republic of
China was established in 1949.
● Dumping of Goods.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 1 : GLOSSARY

● The Association of South-East Asian Nations (ASEAN) : It is a political, economic,

and cultural organisation of countries located in South-east Asia—Thailand, Indonesia,
Malaysia, Singapore, the Philippines, Brunei Darussalam, Cambodia, Laos, Myanmar and
Vietnam.
● Better Compliance : Obeying or complying with the Government regulation. It is
referred to usually in case of payment of taxes and dues to the Government.
● Bureau of Energy Efficiency (BEE) : It is a government organisation that aims to
develop policies and strategies with a thrust on self regulation and market principles. It
promotes energy conservation in different sectors of the economy and undertakes
measures against the wasteful uses of electricity.
● Business Process Outsourcing (BPO) : Outsourcing of business processes (activities
constituting a service) by companies to other companies. This term is frequently
associated with outsourcing of such activities (e.g. receiving and making calls on behalf of
other companies popularly known as call centres), by foreign companies to Indian
companies in the field of IT-enabled services.
● Cascading Effect : When tax imposition leads to a disproportionate rise in prices, i.e. by
an extent more than the rise in the tax, it is known as cascading effect.
● Cash Reserve Ratio (CRR) : A proportion of the total deposits and reserves of the
commercial banks that is to be kept with the central bank (RBI) in liquid form. It is used
as a measure of control of RBI over the commercial banks.
● Commercialisation of Agriculture : It implies production of crops for the market
rather than for self-consumption i.e. family consumption. During British rule, the
commercialisation of agriculture acquired a different meaning —it became basically
commercialisation of crops. The British started offering higher prices to farmers for
producing cash crops rather than for food crops. They used these cash crops as raw
materials for industries in Britain.
● Deficit Financing : A situation where the expenditure of the government exceeds its
revenue.
● Dereservation : Allowing an individual or group of enterprises to produce goods and
services which were hitherto produced by a particular individual or group of enterprises.
In India, it refers to allowing large-scale industries to produce goods and services which
were produced only by the small-scale industries.
● Disinvestment : A deliberate sale of a part of the capital stock of a company to raise
resources and change the equity and/or management structure of a company.
● Enterprise : An undertaking owned and operated by an individual or by a group of
individuals to produce and/or distribute goods and/or services mainly for the purpose of
sale, whether fully or partly.
● Equities : Shares in the paid up capital or stock of a company whose holders are
considered as owners of the company with voting rights and dividends in the profit.
● European Union : It is a union of twenty-five independent states founded to enhance
political, economic and social cooperation within the European continent. The member
countries of the European Union are Austria, Belgium, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom, Malta, Poland,
Slovakia and Slovenia.
● Export Duties : Taxes imposed on goods exported from a country.
● Export Promotion : A set of measures (including fiscal and commercial support
measures and steps aimed at removal of trade barriers) taken by a government to promote
the export of goods with a view to achieve higher economic growth and accumulation of
foreign exchange earnings.
● Export-Import Policy : The economic policies of the government relating to its exports
and imports.
● Financial Institutions : Institutions that engage in mobilisation and allocation of
savings. They include commercial banks, cooperative banks, developmental banks and
investment institutions.
● Fiscal Management : The use of taxation and government expenditure to regulate
economic activities.
● Fiscal Policy : All the planned actions of a government in mobilising financial resources
for meeting its expenditure and regulating the economic activities in a country.
● Foreign Direct Investment : Investment of foreign assets into domestic structures,
equipment and organisations. It does not include foreign investment into the stock
markets. Foreign direct investment is thought to be more useful to a country than
investments in the equity of its companies because equity investments are potentially ‘hot
money’ which can leave at the first sign of trouble, whereas FDI is durable and generally
useful whether things go well or badly.
● Foreign Exchange : Currency or bonds of another country.
● Foreign Exchange Markets : A market in which currencies are bought and sold at rates
of exchange fixed now, for delivery at specific dates in the future.
● Foreign Institutional Investment : Foreign investments which come in the form of
stocks, bonds, or other financial assets. This form of investment does not entail active
management or control over the firms or investors.
● Foreign Institutional Investors (FIIs) : Banking and non-banking financial
institutions of foreign origin e.g. commercial banks, investment banks, mutual funds,
pension funds or other such institutional investors (as distinct from the domestic financial
institutions investing) whose investment in stocks and bonds in the country through stock
markets have significant influence.
● G-20 : A forum of countries that intents to promote global economic stability and
sustainable growth. This forum brings together finance ministers and central bank
governors from 19 countries: Argentina, Australia, Brazil, Canada, China, France,
Germany, India, Indonesia, Italy, Japan, The Republic of Korea, Mexico, Russia, Saudi
Arabia, South Africa, Turkey, The United Kingdom, The United States of America. The
European Union is also a member of G-20 and is represented by the President of the
European Council and by the Head of the European Central Bank.
● G-8 : The Group of Eight (G-8) consists of Canada, France, Germany, Italy, Japan, the
United Kingdom of Great Britain and Northern Ireland, the United States of America, and
the Russian Federation. The hallmark of the G-8 is an annual economic and political
summit meeting of the heads of government with international officials, though there are
numerous subsidiary meetings and policy research.The Presidency of the group rotates
every year. For the year 2006 it was held by Russia.
● Gratuity : An amount of money given by the employer to the employee at the time of
retirement for services rendered by the employee.
● Gross Value Added: The sum of a country’s GDP and net of subsidies and taxes in the
economy (GVA=GDP+Subsidies–indirect taxes).
● Household : A group of persons normally living together and taking food from a
common kitchen. The word ‘normally’ means that temporary visitors are excluded and
those who temporarily stay away are included.
● Import Licensing : Permission required from the government to import goods into a
country.
● Import Substitution : A policy of the state for development of the economy in which
import of goods is generally substituted by domestic production (through import controls,
tariffs and other restrictions) with a view to encourage domestic industry on grounds of
self-sufficiency and domestic employment.
● Integration of Domestic Economy : A situation where the policies of the government
facilitate free trade and investment with other countries making the domestic economy
work together with other economies in an efficient and mutually interdependent way.
● Invisibles : Various items enter in the current account of the balance of payments, some
of which are not visible goods. Invisibles are mainly services, like tourism, transport by
shipping or by airways, and financial services such as insurance and banking. They also
include gifts sent abroad or received from abroad and private transfer of funds,
government grants and interests, profits and dividends.
● Labour Laws : All the rules and regulations framed by the government to protect the
interests of the workers.
● Land/Revenue Settlement : With the British acquired territorial rights in different
parts of India, administration of territories was formulated on the basis of survey of land.
It was decided in the interests of the government in terms of revenues to be collected from
each parcel of land in possession of either a ryot (means peasant) or a mahal (revenue
village) or a zamindar (a proprietary land holder). Decision in each of these cases was
meant for the rights of the latter over land for the purposes of either ownership of land or
rights to cultivation. This system is known as land/revenue settlement. There were
different land settlements formulated in India. They are (i) system of permanent
settlement, which is also known as the zamindari system (ii) ryotwari system (a system of
revenue settlement entered into by the government with individual tenants) (iii)
mahalwari system (a system of revenue settlement entered into by the government with a
mahal).
● Merchant Bankers : Banks or financial institutions, also known as investment bankers,
that specialise in advising the companies and managing their equity and debt requirement
(often referred to as portfolio management) through floatation and sale/purchase of stocks
and bonds.
● Morbidity : It is the propensity to fall ill. It affects a person’s work by making him or her
temporarily disabled. Prolonged morbidity may lead to mortality. In our country, acute
respiratory infections and diarrhoea are two major causes of morbidity.
● MRTP Act : An Act (Monopolies Restrictive Trade Practices Act) framed to prevent
monopolistic practices and regulate the conduct or business practices of firms that are not
in public interest.
● Multilateral Trade Agreements : Trade agreements made by a country with more
than two nations to exchange goods and services.
● National Product/Income : Total value of goods and services produced in a country
plus income from abroad.
● Non-renewable Resources : Resources that cannot be renewed. They have a finite,
even if large, stock. Some examples are fossil fuels such as oil and coal and mineral
resources—iron, lead, aluminium, uranium.
● Non-tariff Barriers : All the restrictions on imports by a government in the form other
than taxes. They mainly include restrictions on quantity and quality of goods imported.
● Opportunity Cost : It is defined with respect to a particular value or action and is equal
to the value of the foregone alternative choice or action.
● Permit License Raj : A term used to denote the rules and regulations framed by the
government to start, run and operate an enterprise for production of goods and services in
India.
● Planning Commission : An organisation set up by the Government of India. It is
responsible for making assessment of all resources of the country, augmenting deficient
resources, formulating plans for the most effective and balanced utilisation of resources
and determining priorities.
● Provident Fund : A savings fund in which both employer and employee contribute
regularly in the interest of the employee. It is maintained by the government and given to
the employee when he or she resigns or retires from work.
● Renewable Resources : Resources that can be renewed through natural processes if
they are used wisely. Forests, animals and fishes, if not overexploited, get easily renewed.
Water is also in that category.
● South Asian Association for Regional Cooperation (SAARC) : It is an association
of eight countries of South Asia — Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan,
Sri Lanka and Afghanistan. SAARC provides a platform for the peoples of South Asia to
work together in a spirit of friendship, trust and understanding. It aims to accelerate the
process of economic and social development in member countries.
● Social Security : A government or privately established system of measures, which
ensures material security for the elderly, disabled, destitute, widows and children. It
includes pension, gratuity, provident fund, maternal benefits, health care etc.
● Special Economic Zone (SEZ) : It is a geographical region that has economic laws
different from a country’s typical economic laws. Usually the goal is to increase foreign
investment. Special Economic Zones have been established in several countries, including
the People’s Republic of China, India, Jordan, Poland, Kazakhstan, the Philippines and
Russia.
● Stabilisation Measures : Fiscal and monetary measures adopted to control fluctuations
in the balance of payments and high rate of inflation.
● Statutory Liquidity Ratio (SLR) : A minimum proportion of the total deposits and
reserves to be maintained by the banks in liquid form as per the regulations of the central
bank (RBI). Maintenance of SLR, in addition to the Cash Reserve Ratio (CRR), is an
obligation of the banks.
● Stock Exchange : A market in which the securities of governments and public
companies are traded. It provides the facilities for stock brokers to trade company stocks
and other securities.
● Stock Market : An institution where stocks and shares are traded.
● Structural Reform Policies : Long-term measures like liberalisation, deregulation and
privatisation aimed to improve the efficiency and competitiveness of the economy.
 ● Tariff : A tax on imports, which can be levied either on physical units, e.g. per tonne
(specific) or on value. Tariffs may be imposed for a variety of reasons including: to raise
government revenue, to protect domestic industry from subsidised or low-wage imports,
to boost domestic employment, or to ease a deficit on the balance of payments. Apart from
the revenue that they raise, tariffs achieve little good—they reduce the volume of trade and
increase the price of the imported commodity to consumers.
● Tariff Barriers : All the restrictions on imports by a government in the form of taxes.
● Trade Union : An organisation of workers formed for the purpose of addressing its
members’ interests in respect of wages, benefits, and working conditions.
● Urbanisation : Expansion of a metropolitan area, namely the proportion of total
population or area in urban localities or areas (cities and towns), or the increase of this
proportion over time. It can thus represent a level of urban population relative to total
population of the area, or the rate at which the urban proportion is increasing. Both can be
expressed in percentage terms, the rate of change expressed as a percentage per year,
decade or period between censuses.
● Worker-Population Ratio : Total number of workers divided by the population. It is
expressed in percentage.
___________________________________________________________________
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 2 : CHAPTER - 1

● “Economics is the study of how people and society choose to employ scarce resources that
could have alternative uses in order to produce various commodities that satisfy their
wants and to distribute them for consumption among various persons and groups in
society.”
● Scarcity is the root of all economic problems.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 2 : CHAPTER - 2

● There are some agencies both at the national and state level to collect, process and
tabulate the statistical data.
● Some of the agencies at the national level are Census of India, National Sample Survey
(NSS), Central Statistics Office (CSO), Registrar General of India (RGI), Directorate
General of Commercial Intelligence and Statistics (DGCIS), Labour Bureau, etc.

● The Census has been regularly conducted every ten years since 1881.
● The first Census after Independence was conducted in 1951.
● The Census officials collect information on various aspects of population such as the size,
density, sex ratio, literacy, migration, rural-urban distribution, etc.
● Census data is interpreted and analysed to understand many economic and social issues in
India.

● The data collected by NSS are released through reports and its quarterly journal
Sarvekshana.
● NSS provides periodic estimates of literacy, school enrolment, utilisation of educational
services, employment, unemployment, manufacturing and service sector enterprises,
morbidity, maternity, child care, utilisation of the public distribution system etc.
 ● The NSS also collects details of industrial activities and retail prices for various goods.
They are used by the Government of India for planning purposes.
● Census of India and National Sample Survey are two important agencies at the national
level, which collect, process and tabulate data on many important economic and social
issues.
___________________________________________________________________

ECONOMICS : CLASS - 11 : PART - 2 : CHAPTER - 9

● The weather man is never wrong. Suppose he says that there’s an 80% chance of rain. If it
rains, the 80% chance comes up, if it doesn’t, the 20% chance comes up.
— Saul Barron

● The death of one man is a tragedy. The death of millions is a statistic. — Joseph Stalin

● Why is a physician held in much higher esteem than a statistician? A physician makes an
analysis of a complex illness whereas a statistician makes you ill with a complex analysis!
— Gary C. Ramseyer
___________________________________________________________________
___________________________________________________________________

ECONOMICS : CLASS - 12 : PART - 1 : CHAPTER - 1

● Adam Smith is regarded as the founding father of modern economics (it was known as
political economy at that time).
● Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI).
● Macroeconomics, as a separate branch of economics, emerged after the British economist
John Maynard Keynes published his celebrated book The General Theory of Employment,
Interest and Money in 1936.
● In a capitalist country production activities are mainly carried out by capitalist enterprises.
● A typical capitalist enterprise has one or several entrepreneurs (people who exercise
control over major decisions and bear a large part of the risk associated with the
firm/enterprise). They may themselves supply the capital needed to run the enterprise, or
they may borrow the capital.
● In short, a capitalist economy can be defined as an economy in which most of the
economic activities have the following characteristics (a) there is private ownership of
means of production (b) production takes place for selling the output in the market (c)
there is sale and purchase of labour services at a price which is called the wage rate (the
labour which is sold and purchased against wages is referred to as wage labour).
● The external sector is the fourth important sector in our study.
● Trade with the external sector can be of two kinds
● 1. The domestic country may sell goods to the rest of the world. These are called exports.
● 2. The economy may also buy goods from the rest of the world. These are called imports.
● Besides exports and imports, the rest of the world affects the domestic economy in other
ways as well.
● 3. Capital from foreign countries may flow into the domestic country, or the domestic
country may be exporting capital to foreign countries.
● Macroeconomics sees an economy as a combination of four sectors, namely households,
firms, government and external sector.
___________________________________________________________________
 ECONOMICS : CLASS - 12 : PART - 1 : CHAPTER - 2

● Three ways to calculate the national income; namely product method, expenditure method
and income method.
● Different price indices like GDP deflator, Consumer Price Index, Wholesale Price Indices.
● An item that is meant for final use and will not pass through any more stages of
production or transformations is called a final good.
● Of the final goods, we can distinguish between consumption goods and capital goods.
● Goods like food and clothing, and services like recreation that are consumed when
purchased by their ultimate consumers are called consumption goods or consumer goods.
(This also includes services which are consumed but for convenience we may refer to them
as consumer goods.)
● Then there are other goods that are of durable character which are used in the production
process. These are tools, implements and machines. While they make production of other
commodities feasible, they themselves don’t get transformed in the production process.
They are also final goods yet they are not final goods to be ultimately consumed.
● Unlike the final goods that we have considered above, they are the crucial backbone of any
production process, in aiding and enabling the production to take place.
● These goods form a part of capital, one of the crucial factors of production in which a
productive enterprise has invested, and they continue to enable the production process to
go on for continuous cycles of production. These are capital goods and they gradually
undergo wear and tear, and thus are repaired or gradually replaced over time.

● Flows are defined over a period of time.

● Net Investment = Gross investment – Depreciation
● There may fundamentally be four kinds of contributions that can be made during the
production of goods and services :
● (a) contribution made by human labour, remuneration for which is called wage
● (b) contribution made by capital, remuneration for which is called interest
● (c) contribution made by entrepreneurship, remuneration of which is profit
● (d) contribution made by fixed natural resources (called ‘land’), remuneration for
which is called rent.

● The Product or Value Added Method :

● In the product method we calculate the aggregate annual value of goods and services
produced (if a year is the unit of time).
● The term that is used to denote the net contribution made by a firm is called its value
added.
● The raw materials that a firm buys from another firm which are completely used up in the
process of production are called ‘intermediate goods’.
● Therefore the value added of a firm is, value of production of the firm – value of
intermediate goods used by the firm.
● The value added of a firm is distributed among its four factors of production, namely,
labour, capital, entrepreneurship and land.
● Therefore wages, interest, profits and rents paid out by the firm must add up to the value
added of the firm. Value added is a flow variable.
● If we include depreciation in value added then the measure of value added that we obtain
is called Gross Value Added.
● If we deduct the value of depreciation from gross value added we obtain Net Value Added.
● In economics, the stock of unsold finished goods, or semi-finished goods, or raw materials
which a firm carries from one year to the next is called inventory. Inventory is a stock
variable.
● Change of inventories of a firm during a year ≡ production of the firm during the year –
sale of the firm during the year.
● Inventories are treated as capital.
● Addition to the stock of capital of a firm is known as investment.
● Therefore, change in the inventory of a firm is treated as investment.
● There can be three major categories of investment.
● First is the rise in the value of inventories of a firm over a year which is treated as
investment expenditure undertaken by the firm.
● The second category of investment is the fixed business investment, which is defined as
the addition to the machinery, factory buildings and equipment employed by the firms.
● The last category of investment is residential investment, which refers to the addition of
housing facilities.

● Expenditure Method :
● An alternative way to calculate the GDP is by looking at the demand side of the products.
This method is referred to as the expenditure method.

● Factor Cost, Basic Prices and Market Prices :

● In India, the most highlighted measure of national income has been the GDP at factor
cost.
● The Central Statistics Office (CSO) of the Government of India has been reporting the GDP
at factor cost and at market prices.
● In its revision in January 2015 the CSO replaced GDP at factor cost with the GVA at
basic prices, and the GDP at market prices, which is now called only GDP, is now the
most highlighted measure.
● The idea of GVA has already been discussed: it is the value of total output produced in the
economy less the value of intermediate consumption (the output which is used in
production of output further, and not used in final consumption).
● The distinction between factor cost, basic prices and market prices is based on the
distinction between net production taxes (production taxes less production subsidies) and
net product taxes (product taxes less product subsidies).
● Factor cost includes only the payment to factors of production, it does not include any tax.
● In order to arrive at the market prices, we have to add to the factor cost the total indirect
taxes less total subsidies.
● The basic prices lie in between: they include the production taxes (less production
subsidies) but not product taxes (less product subsidies).
● Therefore in order to arrive at market prices we have to add product taxes (less product
subsidies) to the basic prices.
● As stated above, now the CSO releases GVA at basic prices.
● Thus, it includes the net production taxes but not net product taxes.
● In order to arrive at the GDP (at market prices) we need to add net product taxes to GVA
at basic prices.

● Thus,
● GVA at factor costs + Net production taxes = GVA at basic prices
● GVA at basic prices + Net product taxes = GVA at market prices
● GNP ≡ GDP + Factor income earned by the domestic factors of production employed in the
rest of the world – Factor income earned by the factors of production of the rest of the
world employed in the domestic economy.
● Hence, GNP ≡ GDP + Net factor income from abroad.
● NNP ≡ GNP – Depreciation.

● Market price includes indirect taxes. When indirect taxes are imposed on goods and
services, their prices go up.
● Indirect taxes accrue to the government.
● We have to deduct them from NNP evaluated at market prices in order to calculate that
part of NNP which actually accrues to the factors of production.
● Similarly, there may be subsidies granted by the government on the prices of some
commodities (in India petrol is heavily taxed by the government, whereas cooking gas is
subsidised).
● So we need to add subsidies to the NNP evaluated at market prices.
● The measure that we obtain by doing so is called Net National Product at factor cost or
National Income.
● Thus, NNP at factor cost ≡ National Income (NI ) ≡ NNP at market prices – (Indirect taxes
– Subsidies) ≡ NNP at market prices – Net indirect taxes (Net indirect taxes ≡ Indirect
taxes – Subsidies).

● Personal Income (PI) ≡ NI – Undistributed profits – Net interest payments made by

households – Corporate tax + Transfer payments to the households from the government
and firms.
● However, even PI is not the income over which the households have complete say.
● They have to pay taxes from PI.
● If we deduct the Personal Tax Payments (income tax, for example) and Non-tax Payments
(such as fines) from PI, we obtain what is known as the Personal Disposable Income.
● Thus Personal Disposable Income (PDI ) ≡ PI – Personal tax payments – Non-tax
payments.

● National Disposable Income and Private Income :

● Apart from these categories of aggregate macroeconomic variables, in India, a few other
aggregate income categories are also used in National Income accounting
● • National Disposable Income = Net National Product at market prices + Other current
transfers from the rest of the world.
● The idea behind National Disposable Income is that it gives an idea of what is the
maximum amount of goods and services the domestic economy has at its disposal. Current
transfers from the rest of the world include items such as gifts, aids, etc.
● • Private Income = Factor income from net domestic product accruing to the private sector
+ National debt interest + Net factor income from abroad + Current transfers from
government + Other net transfers from the rest of the world.

● NOMINAL AND REAL GDP :

● In order to compare the GDP figures (and other macroeconomic variables) of different
countries or to compare the GDP figures of the same country at different points of time, we
cannot rely on GDPs evaluated at current market prices.
● For comparison we take the help of real GDP. Real GDP is calculated in a way such that
the goods and services are evaluated at some constant set of prices (or constant prices).
● Since these prices remain fixed, if the Real GDP changes we can be sure that it is the
volume of production which is undergoing changes.
 ● Nominal GDP, on the other hand, is simply the value of GDP at the current prevailing
prices.
● The ratio of nominal to real GDP is a well known index of prices. This is called GDP
Deflator.
● Thus if GDP stands for nominal GDP and gdp stands for real GDP then :
GDP deflator = GDP/gdp .

● There is another way to measure change of prices in an economy which is known as the
Consumer Price Index (CPI).
● This is the index of prices of a given basket of commodities which are bought by the
representative consumer.
● CPI is generally expressed in percentage terms.
● We have two years under consideration – one is the base year, the other is the current
year.
● We calculate the cost of purchase of a given basket of commodities in the base year.
● We also calculate the cost of purchase of the same basket in the current year.

● It is worth noting that many commodities have two sets of prices. One is the retail price
which the consumer actually pays. The other is the wholesale price, the price at which
goods are traded in bulk. These two may differ in value because of the margin kept by
traders. Goods which are traded in bulk (such as raw materials or semi-finished goods) are
not purchased by ordinary consumers. Like CPI, the index for wholesale prices is called
Wholesale Price Index (WPI).
● CPI (and analogously WPI) may differ from GDP deflator because :
● 1. The goods purchased by consumers do not represent all the goods which are
produced in a country. GDP deflator takes into account all such goods and services.
● 2. CPI includes prices of goods consumed by the representative consumer, hence it
includes prices of imported goods. GDP deflator does not include prices of imported
goods.
● 3. The weights are constant in CPI – but they differ according to production level of
each good in GDP deflator.

● We can calculate the aggregate value of goods and services produced in the economy by
any of the three methods :
● (a) measuring the aggregate value of factor payments (income method)
● (b) measuring the aggregate value of goods and services produced by the firms
(product method)
● (c) measuring the aggregate value of spending received by the firms (expenditure
method).
● In the product method, to avoid double counting, we need to deduct the value of
intermediate goods and take into account only the aggregate value of final goods and
services.
___________________________________________________________________

ECONOMICS : CLASS - 12 : PART - 1 : CHAPTER - 3

● In India the government has been consistently investing in various reforms for greater
financial inclusion.
● During the last few years’ initiatives such as Jan Dhan accounts, Aadhar enabled payment
systems, e –Wallets, National financial Switch (NFS) and others have strengthened the
government resolve to go cashless.
● Today, financial inclusion is seen as a realistic dream because of mobile and smartphone
penetration across the country.

● Central bank :
● The Central Bank is a very important institution in a modern economy.
● Almost every country has one central bank. India got its central bank in 1935.
● Its name is the ‘Reserve Bank of India’.
● Central bank has several important functions. It issues the currency of the country. \
● It controls the money supply of the country through various methods, like bank rate,
open market operations and variations in reserve ratios.
● It acts as a banker to the government.
● It is the custodian of the foreign exchange reserves of the economy.
● It also acts as a bank to the banking system.
● From the point of view of money supply, we need to focus on its function of issuing
currency.
● This currency issued by the central bank can be held by the public or by the
commercial banks, and is called the ‘high-powered money’ or ‘reserve money’ or
‘monetary base’ as it acts as a basis for credit creation.

● Commercial Banks :
● Commercial banks are the other type of institutions which are a part of the
money-creating system of the economy.
● They accept deposits from the public and lend out part of these funds to those who
want to borrow.
● The interest rate paid by the banks to depositors is lower than the rate charged from
the borrowers.
● This difference between these two types of interest rates, called the ‘spread’ is the
profit appropriated by the bank.

● Reserves are deposits which commercial banks keep with the Central bank, Reserve Bank
of India (RBI) and its cash.
● These reserves are kept partly as cash and partly in the form of financial instruments
(bonds and treasury bills) issued by the RBI.
● Reserves are similar to deposits we keep with banks.
● We keep deposits and these deposits are our assets, they can be withdrawn by us.
● Similarly, commercial banks like State Bank of India (SBI) keep their deposits with RBI
and these are called Reserves.
● Assets = Reserves + Loans.
● Liabilities for any firm are its debts or what it owes to others. For a bank, the main liability
is the deposits which people keep with it.
● Liabilities = Deposits.
● Net Worth = Assets – Liabilities.
● The RBI decides a certain percentage of deposits which every bank must keep as reserves.
This is done to ensure that no bank is ‘over lending’. This is a legal requirement and is
binding on the banks. This is called the ‘Required Reserve Ratio’ or the ‘Reserve
Ratio’ or ‘Cash Reserve Ratio’ (CRR).
● Cash Reserve Ratio (CRR) = Percentage of deposits which a bank must keep as cash
reserves with the bank.
● Apart from the CRR, banks are also required to keep some reserves in liquid form in the
short term. This ratio is called Statutory Liquidity Ratio or SLR.
 ● POLICY TOOLS TO CONTROL MONEY SUPPLY :
● The Reserve Bank is the only institution which can issue currency.
● When commercial banks need more funds in order to be able to create more credit, they
may go to market for such funds or go to the Central Bank.
● Central bank provides them funds through various instruments. This role of RBI, that of
being ready to lend to banks at all times is another important function of the central bank,
and due to this central bank is said to be the lender of last resort.
● The RBI controls the money supply in the economy in various ways.
● The tools used by the Central bank to control money supply can be quantitative or
qualitative.
● Quantitative tools control the extent of money supply by changing the CRR, or bank rate
or open market operations.
● Qualitative tools include persuasion by the Central bank in order to make commercial
banks discourage or encourage lending which is done through moral suasion, margin
requirement, etc.
● Another important tool by which the RBI also influences money supply is Open Market
Operations.
● Open Market Operations refers to buying and selling of bonds issued by the Government
in the open market.
● This purchase and sale is entrusted to the Central bank on behalf of the Government.
● When RBI buys a Government bond in the open market, it pays for it by giving a cheque.
● This cheque increases the total amount of reserves in the economy and thus increases the
money supply.
● Selling of a bond by RBI (to private individuals or institutions) leads to reduction in
quantity of reserves and hence the money supply.
● There are two types of open market operations: outright and repo.
● Outright open market operations are permanent in nature: when the central bank buys
these securities (thus injecting money into the system), it is without any promise to sell
them later. Similarly, when the central bank sells these securities (thus withdrawing
money from the system), it is without any promise to buy them later. As a result, the
injection/absorption of the money is of permanent nature.
● However, there is another type of operation in which when the central bank buys the
security, this agreement of purchase also has specification about date and price of resale of
this security. This type of agreement is called a repurchase agreement or repo. The interest
rate at which the money is lent in this way is called the repo rate. Similarly, instead of
outright sale of securities the central bank may sell the securities through an agreement
which has a specification about the date and price at which it will be repurchased. This
type of agreement is called a reverse repurchase agreement or reverse repo. The rate at
which the money is withdrawn in this manner is called the reverse repo rate.
● The Reserve Bank of India conducts repo and reverse repo operations at various
maturities: overnight, 7-day, 14- day, etc. This type of operations have now become the
main tool of monetary policy of the Reserve Bank of India.
● The RBI can influence money supply by changing the rate at which it gives loans to the
commercial banks. This rate is called the Bank Rate in India.
● By increasing the bank rate, loans taken by commercial banks become more expensive;
this reduces the reserves held by the commercial bank and hence decreases money supply.
● A fall in the bank rate can increase the money supply.

● Typically, bonds are papers bearing the promise of a future stream of monetary returns
over a certain period of time. These papers are issued by governments or firms for
borrowing money from the public and they are tradable in the market.
 ● In India currency notes are issued by the Reserve Bank of India (RBI), which is the
monetary authority in India. However, coins are issued by the Government of India.

● Currency notes and coins are therefore called fiat money. They do not have intrinsic
value like a gold or silver coin.
● They are also called legal tenders as they cannot be refused by any citizen of the country
for settlement of any kind of transaction.
● Cheques drawn on savings or current accounts, however, can be refused by anyone as a
mode of payment. Hence, demand deposits are not legal tenders.

● Demonetisation :
● Demonetisation was a new initiative taken by the Government of India in November 2016
to tackle the problem of corruption, black money, terrorism and circulation of fake
currency in the economy.
● Old currency notes of Rs 500, and Rs 1000 were no longer legal tender.
● New currency notes in the denomination of Rs 500 and Rs 2000 were launched.
● The public were advised to deposit old currency notes in their bank account till 31
December 2016 without any declaration and upto 31 March 2017 with the RBI with
declaration.
● Demonetisation could also help tax administration in another way, by shifting transactions
out of the cash economy into the formal payment system.
● Households and firms have begun to shift from cash to electronic payment technologies.

● In a modern economy, people hold money broadly for two motives – transaction motive
and speculative motive.
___________________________________________________________________

ECONOMICS : CLASS - 12 : PART - 1 : CHAPTER - 4

● Ex-ante depicts what has been planned, and Ex-post depicts what has actually happened.
● Marginal propensity to consume (MPC): it is the change in consumption per unit
change in income.
● Marginal propensity to save (MPS): it is the change in savings per unit change in
income.
● Average propensity to consume (APC): it is the consumption per unit of income.
● Average propensity to save (APS): it is the savings per unit of income.
● Investment is defined as addition to the stock of physical capital (such as machines,
buildings, roads etc., i.e. anything that adds to the future productive capacity of the
economy) and changes in the inventory (or the stock of finished goods) of a producer.
● Note that ‘investment goods’ (such as machines) are also part of the final goods – they are
not intermediate goods like raw materials.
● Machines produced in an economy in a given year are not ‘used up’ to produce other goods
but yield their services over a number of years.

● The inventory investment can take place due to two reasons:

● (i) the firm decides to keep some stocks for various reasons (this is called planned
inventory investment)
● (ii) the sales differ from the planned level of sales, in which case the firm has to add
to/run down existing inventories (this is called unplanned inventory investment).
 ● The ratio of the total increment in equilibrium value of final goods output to the initial
increment in autonomous expenditure is called the investment multiplier of the
economy.
● When, at a particular price level, aggregate demand for final goods equals aggregate
supply of final goods, the final goods or product market reaches its equilibrium.
● Aggregate demand for final goods consists of ex ante consumption, ex ante investment,
government spending etc.
___________________________________________________________________

ECONOMICS : CLASS - 12 : PART - 1 : CHAPTER - 5

● GOVERNMENT BUDGET — MEANING AND ITS COMPONENTS :
● There is a constitutional requirement in India (Article 112) to present before the
Parliament a statement of estimated receipts and expenditures of the government in
respect of every financial year which runs from 1 April to 31 March.
● This ‘Annual Financial Statement’ constitutes the main budget document of the
government.
● Although the budget document relates to the receipts and expenditure of the government
for a particular financial year, the impact of it will be there in subsequent years.
● There is a need therefore to have two accounts- those that relate to the current financial
year only are included in the revenue account (also called revenue budget) and those
that concern the assets and liabilities of the government into the capital account (also
called capital budget).
● Objectives of Government Budget :
● Allocation Function of Government Budget :
● Government provides certain goods and services which cannot be provided by the
market mechanism i.e. by exchange between individual consumers and producers.
Examples of such goods are national defence, roads, government administration etc.
which are referred to as public goods.
● Private goods such as clothes, cars, food items etc.
● Public goods may be produced by the government or the private sector. When goods
are produced directly by the government it is called public production.
● Stabilisation Function of Government Budget :
● The intervention of the government whether to expand demand or reduce it
constitutes the stabilisation function.
● Classification of Receipts :
● Revenue Receipts:
● Revenue receipts are those receipts that do not lead to a claim on the government.
● They are therefore termed non-redeemable.
● They are divided into tax and non-tax revenues.
● Tax revenues, an important component of revenue receipts, have for long been divided
into direct taxes (personal income tax) and firms (corporation tax), and indirect taxes
like excise taxes (duties levied on goods produced within the country), customs duties
(taxes imposed on goods imported into and exported out of India) and service tax.
● Other direct taxes like wealth tax, gift tax and estate duty (now abolished) have never
brought in a large amount of revenue and thus have been referred to as ‘paper taxes’.
● Non-tax revenue of the central government mainly consists of interest receipts on
account of loans by the central government, dividends and profits on investments
made by the government, fees and other receipts for services rendered by the
government.
 ● Cash grants-in-aid from foreign countries and international organisations are also
included.
● The estimates of revenue receipts take into account the effects of tax proposals made
in the Finance Bill.
● Capital Receipts:
● The government also receives money by way of loans or from the sale of its assets.
● Loans will have to be returned to the agencies from which they have been borrowed.
● Thus they create liability.
● Sale of government assets, like sale of shares in Public Sector Undertakings (PSUs)
which is referred to as PSU disinvestment, reduce the total amount of financial assets
of the government.
● All those receipts of the government which create liability or reduce financial assets
are termed as capital receipts.
● When the government takes fresh loans it will mean that in future these loans will
have to be returned and interest will have to be paid on these loans.
● Similarly, when the government sells an asset, then it means that in future its earnings
from that asset will disappear.
● Thus, these receipts can be debt creating or non-debt creating.

● A Finance Bill, presented along with the Annual Financial Statement, provides details on
the imposition, abolition, remission, alteration or regulation of taxes proposed in the
Budget.

● Classification of Expenditure :
● Revenue Expenditure :
● Revenue Expenditure is expenditure incurred for purposes other than the creation of
physical or financial assets of the central government.
● It relates to those expenses incurred for the normal functioning of the government
departments and various services, interest payments on debt incurred by the
government, and grants given to state governments and other parties (even though
some of the grants may be meant for creation of assets).
 ● Budget documents classify total expenditure into plan and non-plan expenditure.
● According to this classification, plan revenue expenditure relates to central Plans (the
Five-Year Plans) and central assistance for State and Union Territory plans.
● Non-plan expenditure, the more important component of revenue expenditure, covers
a vast range of general, economic and social services of the government.
● The main items of non-plan expenditure are interest payments, defence services,
subsidies, salaries and pensions.
● Interest payments on market loans, external loans and from various reserve funds
constitute the single largest component of non-plan revenue expenditure.
● Capital Expenditure :
● There are expenditures of the government which result in creation of physical or
financial assets or reduction in financial liabilities. This includes expenditure on the
acquisition of land, building, machinery, equipment, investment in shares, and loans
and advances by the central government to state and union territory governments,
PSUs and other parties.
● Capital expenditure is also categorised as plan and non-plan in the budget documents.
● Plan capital expenditure, like its revenue counterpart, relates to central plan and
central assistance for state and union territory plans.
● Non-plan capital expenditure covers various general, social and economic services
provided by the government. The budget is not merely a statement of receipts and
expenditures.
● Along with the budget, three policy statements are mandated by the Fiscal
Responsibility and Budget Management Act, 2003 (FRBMA).
● The Medium-term Fiscal Policy Statement sets a three year rolling target for specific
fiscal indicators and examines whether revenue expenditure can be financed through
revenue receipts on a sustainable basis and how productively capital receipts including
market borrowings are being utilised.
● The Fiscal Policy Strategy Statement sets the priorities of the government in the fiscal
area, examining current policies and justifying any deviation in important fiscal
measures.
● The Macroeconomic Framework Statement assesses the prospects of the economy
with respect to the GDP growth rate, fiscal balance of the central government and
external balance.

● BALANCED, SURPLUS AND DEFICIT BUDGET :

● The government may spend an amount equal to the revenue it collects. This is known
as a balanced budget.
● If it needs to incur higher expenditure, it will have to raise the amount through taxes
in order to keep the budget balanced. When tax collection exceeds the required
expenditure, the budget is said to be in surplus.
● However, the most common feature is the situation when expenditure exceeds
revenue. This is when the government runs a budget deficit.

● Revenue Deficit : The revenue deficit refers to the excess of government’s revenue
expenditure over revenue receipts :
Revenue deficit = Revenue expenditure – Revenue receipts.
● The revenue deficit includes only such transactions that affect the current income and
expenditure of the government.
● When the government incurs a revenue deficit, it implies that the government is dissaving
and is using up the savings of the other sectors of the economy to finance a part of its
consumption expenditure.
● This situation means that the government will have to borrow not only to finance its
investment but also its consumption requirements.
● This will lead to a build up of stock of debt and interest liabilities and force the
government, eventually, to cut expenditure.
● Since a major part of revenue expenditure is committed expenditure, it cannot be reduced.
● Often the government reduces productive capital expenditure or welfare expenditure.
● This would mean lower growth and adverse welfare implications.

● Fiscal Deficit : Fiscal deficit is the difference between the government’s total expenditure
and its total receipts excluding borrowing.
● Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital
receipts).
● Non-debt creating capital receipts are those receipts which are not borrowings and,
therefore, do not give rise to debt. Examples are recovery of loans and the proceeds from
the sale of PSUs.
● Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from
abroad.
● Net borrowing at home includes that directly borrowed from the public through debt
instruments (for example, the various small savings schemes) and indirectly from
commercial banks through Statutory Liquidity Ratio (SLR).
● The gross fiscal deficit is a key variable in judging the financial health of the public sector
and the stability of the economy.
● (Fiscal Deficit = Revenue Deficit + Capital Expenditure - non-debt creating capital
receipts).
● A large share of revenue deficit in fiscal deficit indicated that a large part of borrowing is
being used to meet its consumption expenditure needs rather than investment.

● Primary Deficit : We must note that the borrowing requirement of the government
includes interest obligations on accumulated debt. The goal of measuring primary deficit is
to focus on present fiscal imbalances. To obtain an estimate of borrowing on account of
current expenditures exceeding revenues, we need to calculate what has been called the
primary deficit. It is simply the fiscal deficit minus the interest payments.
● Gross primary deficit = Gross fiscal deficit – Net interest liabilities.

● Net interest liabilities consist of interest payments minus interest receipts by the
government on net domestic lending.

● Proportional taxes help to stabilise the economy against upward and downward
movements. Welfare transfers also help to stabilise income.

● Debt :
● Budgetary deficits must be financed by either taxation, borrowing or printing money.
● Governments have mostly relied on borrowing, giving rise to what is called
government debt.
● The concepts of deficits and debt are closely related.
● Deficits can be thought of as a flow which add to the stock of debt.
● If the government continues to borrow year after year, it leads to the accumulation of
debt and the government has to pay more and more by way of interest. These interest
payments themselves contribute to the debt.
 ● Traditionally, it has been argued that when a government cuts taxes and runs a budget
deficit, consumers respond to their after-tax income by spending more.
● Any debt that is owed to foreigners involves a burden since we have to send goods abroad
corresponding to the interest payments.

● One of the main criticisms of deficits is that they are inflationary.

● This is because when the government increases spending or cuts taxes, aggregate demand
increases.
● Firms may not be able to produce higher quantities that are being demanded at the
ongoing prices.
● Prices will, therefore, have to rise.
● However, if there are unutilised resources, output is held back by lack of demand.
● A high fiscal deficit is accompanied by higher demand and greater output and, therefore,
need not be inflationary.

● Deficit Reduction: Government deficit can be reduced by an increase in taxes or

reduction in expenditure.
● Cutting back government programmes in vital areas like agriculture, education, health,
poverty alleviation, etc. would adversely affect the economy.

● The three functions of allocation, redistribution and stabilisation operate through the
expenditure and receipts of the government.
● The budget, which gives a statement of the receipts and expenditure of the government, is
divided into the revenue budget and capital budget to distinguish between current
financial needs and investment in the country’s capital stock.
● The growth of revenue deficit as a percentage of fiscal deficit points to a deterioration in
the quality of government expenditure involving lower capital formation.
● Proportional taxes reduce the autonomous expenditure multiplier because taxes reduce
the marginal propensity to consume out of income.
● Public debt is burdensome if it reduces future growth in output.

● Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) :

● In a multi-party parliamentary system, electoral concerns play an important role in
determining expenditure policies.
● A legislative provision, it is argued, that is applicable to all governments – present and
future – is likely to be effective in keeping deficits under control.
● The enactment of the FRBMA, in August 2003, marked a turning point in fiscal reforms,
binding the government through an institutional framework to pursue a prudent fiscal
policy.
● The central government must ensure intergenerational equity and long-term
macro-economic stability by achieving sufficient revenue surplus, removing fiscal
obstacles to monetary policy and effective debt management by limiting deficits and
borrowing.
● The rules under the Act were notified with effect from July, 2004.
________________________________________________________________

ECONOMICS : CLASS - 12 : PART - 1 : CHAPTER - 6

● An open economy is one which interacts with other countries through various channels.
● There are three ways in which these linkages are established :
● 1. Output Market: An economy can trade in goods and services with other countries.
This widens choice in the sense that consumers and producers can choose between
domestic and foreign goods.
● 2. Financial Market: Most often an economy can buy financial assets from other
countries. This gives investors the opportunity to choose between domestic and
foreign assets.
● 3. Labour Market: Firms can choose where to locate production and workers to
choose where to work. There are various immigration laws which restrict the
movement of labour between countries.

● Foreign trade, therefore, influences Indian aggregate demand in two ways.

● First, when Indians buy foreign goods, this spending escapes as a leakage from the
circular flow of income decreasing aggregate demand.
● Second, our exports to foreigners enter as an injection into the circular flow,
increasing aggregate demand for goods produced within the domestic economy.

● THE BALANCE OF PAYMENTS : The balance of payments (BoP) records the

transactions in goods, services and assets between residents of a country with the rest of
the world for a specified time period typically a year. There are two main accounts in the
BoP — the current account and the capital account.
● There is a new classification in which the balance of payments have been divided into
three accounts — the current account, the financial account and the capital account.
● This is as per the new accounting standards specified by the International Monetary Fund
(IMF) in the sixth edition of the Balance of Payments and International Investment
Position Manual (BPM6).
● India has also made the change but the Reserve Bank of India continues to publish data
accounting to the old classification.

● Current Account :
● Current Account is the record of trade in goods and services and transfer payments.
● Trade in goods includes exports and imports of goods.
● Trade in services includes factor income and non-factor income transactions.
● Transfer payments are the receipts which the residents of a country get for ‘free’,
without having to provide any goods or services in return.
● They consist of gifts, remittances and grants. They could be given by the government
or by private citizens living abroad.
● Balance on Current Account : Current Account is in balance when receipts on current
account are equal to the payments on the current account. A surplus current account
means that the nation is a lender to other countries and a deficit current account means
that the nation is a borrower from other countries.
● Balance on Current Account has two components:
● • ·Balance of Trade or Trade Balance
● • Balance on Invisibles
● Balance of Trade (BOT) is the difference between the value of exports and value of
imports of goods of a country in a given period of time.
● Net Invisibles is the difference between the value of exports and the value of imports of
invisibles of a country in a given period of time.
● Invisibles include services, transfers and flows of income that take place between
different countries.
 ● Services trade includes both factor and non-factor income.
● Factor income includes net international earnings on factors of production (like labour,
land and capital).
● Non-factor income is net sale of service products like shipping, banking, tourism, software
services, etc.

● Capital Account :
● Capital Account records all international transactions of assets.
● An asset is any one of the forms in which wealth can be held, for example: money,
stocks, bonds, Government debt, etc.
● Foreign Direct Investments (FDIs), Foreign Institutional Investments (FIIs), external
borrowings and assistance.
● Components of Capital Account :

● Balance on Capital Account :

● Capital account is in balance when capital inflows (like receipt of loans from abroad,
sale of assets or shares in foreign companies) are equal to capital outflows (like
repayment of loans, purchase of assets or shares in foreign countries).
● Surplus in capital accounts arises when capital inflows are greater than capital
outflows, whereas deficit in capital account arises when capital inflows are lesser than
capital outflows.

● Autonomous and Accommodating Transactions :

● International economic transactions are called autonomous when transactions are made
due to some reason other than to bridge the gap in the balance of payments, that is, when
they are independent of the state of BoP. One reason could be to earn profit. These items
are called ‘above the line’ items in the BoP. The balance of payments is said to be in
surplus (deficit) if autonomous receipts are greater (less) than autonomous payments.
● Accommodating transactions (termed ‘below the line’ items), on the other hand, are
determined by the gap in the balance of payments, that is, whether there is a deficit or
surplus in the balance of payments. In other words, they are determined by the net
consequences of the autonomous transactions. Since the official reserve transactions are
made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP
(all others being autonomous).
● It is difficult to record all international transactions accurately. Thus, we have a third
element of BoP (apart from the current and capital accounts) called errors and
omissions.

● According to the new classification, the transactions are divided into three accounts:
current account, financial account and capital account.
● The most important change is that almost all the transactions arising on account of trade
in financial assets such as bonds and equity shares are now placed in the financial account.
● However, RBI continues to publish the balance of payments accounts as per the old system
also.

● The market in which national currencies are traded for one another is known as the
foreign exchange market. The major participants in the foreign exchange market are
commercial banks, foreign exchange brokers and other authorised dealers and monetary
authorities.
● Foreign Exchange Rate (also called Forex Rate) is the price of one currency in terms of
another.
● It links the currencies of different countries and enables comparison of international costs
and prices.

● Determination of the Exchange Rate :

● Different countries have different methods of determining their currency’s exchange rate.
It can be determined through Flexible Exchange Rate, Fixed Exchange Rate or Managed
Floating Exchange Rate.
● Flexible Exchange Rate : This exchange rate is determined by the market forces of
demand and supply. It is also known as Floating Exchange Rate.
● Fixed Exchange Rates : In this exchange rate system, the Government fixes the
exchange rate at a particular level.
● In a fixed exchange rate system, when some government action increases the exchange
rate (thereby, making domestic currency cheaper) is called Devaluation.
● On the other hand, a Revaluation is said to occur, when the Government decreases the
exchange rate (thereby, making domestic currency costlier) in a fixed exchange rate
system.

● Merits and Demerits of Flexible and Fixed Exchange Rate Systems :

● The main feature of the fixed exchange rate system is that there must be credibility that
the government will be able to maintain the exchange rate at the level specified.
● Often, if there is a deficit in the BoP, in a fixed exchange rate system, governments will
have to intervene to take care of the gap by using its official reserves.
● If people know that the amount of reserves is inadequate, they would begin to doubt the
ability of the government to maintain the fixed rate.
● This may give rise to speculation of devaluation.
● When this belief translates into aggressive buying of one currency thereby forcing the
government to devalue, it is said to constitute a speculative attack on a currency.
● Fixed exchange rates are prone to these kinds of attacks, as has been witnessed in the
period before the collapse of the Bretton Woods System.
● The flexible exchange rate system gives the government more flexibility and they do not
need to maintain large stocks of foreign exchange reserves.
● The major advantage of flexible exchange rates is that movements in the exchange rate
automatically take care of the surpluses and deficits in the BoP.
 ● Also, countries gain independence in conducting their monetary policies, since they do not
have to intervene to maintain exchange rates which are automatically taken care of by the
market.

● Managed Floating :
● Without any formal international agreement, the world has moved on to what can be
best described as a managed floating exchange rate system.
● It is a mixture of a flexible exchange rate system (the float part) and a fixed rate
system (the managed part).
● Under this system, also called dirty floating, central banks intervene to buy and sell
foreign currencies in an attempt to moderate exchange rate movements whenever they
feel that such actions are appropriate.
● Official reserve transactions are, therefore, not equal to zero.

● The Bretton Woods System: The Bretton Woods Conference held in 1944 set up the
International Monetary Fund (IMF) and the World Bank and re-established a system of
fixed exchange rates. This was different from the international gold standard in the choice
of the asset in which national currencies would be convertible. A two-tier system of
convertibility was established at the centre of which was the dollar.

● The current account balance is the sum of the balance of merchandise trade, services and
net transfers received from the rest of the world. The capital account balance is equal to
capital flows from the rest of the world, minus capital flows to the rest of the world.
● A current account deficit is financed by net capital flows from the rest of the world, thus by
a capital account surplus.
● The nominal exchange rate is the price of one unit of foreign currency in terms of domestic
currency.
● The real exchange rate is the relative price of foreign goods in terms of domestic goods. It
is equal to the nominal exchange rate times the foreign price level divided by the domestic
price level. It measures the international competitiveness of a country in international
trade. When the real exchange rate is equal to one, the two countries are said to be in
purchasing power parity.
● An increase in foreign income leads to increased exports and increases domestic output. It
also improves the trade balance.
● Trade deficits need not be alarming if the country invests the borrowed funds yielding a
rate of growth higher than the interest rate.

● In march 1992, the Liberalised Exchange Rate Management System (LERMS) involving
dual exchange rates was introduced.
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ECONOMICS : CLASS - 12 : PART - 1 : GLOSSARY

● Bank rate : The rate of interest payable by commercial banks to RBI if they borrow
money from the latter in case of a shortage of reserves.
● Bonds : A paper bearing the promise of a stream of future monetary returns over a
specified period of time. Issued by firms or governments for borrowing money from the
public.
● Capital goods : Goods which are bought not for meeting immediate need of the
consumer but for producing other goods.
● Cash Reserve Ratio (CRR) : The fraction of their deposits which the commercial banks
are required to keep with RBI.
 ● Capitalist firms : These are firms with the following features (a) private ownership of
means of production (b) production for the market (c) sale and purchase of labour at a
price which is called the wage rate (d) continuous accumulation of capital.
● Consumer durables : Consumption goods which do not get exhausted immediately but
last over a period of time are consumer durables.
● Consumer Price Index (CPI) : Percentage change in the weighted average price level.
We take the prices of a given basket of consumption goods.
● Corporate tax : Taxes imposed on the income made by the corporations (or private
sector firms).
● Currency deposit ratio : The ratio of money held by the public in currency to that held
as deposits in commercial banks.
● Deficit financing through central bank borrowing : Financing of budget deficit by
the government through borrowing money from the central bank. Leads to increase in
money supply in an economy and may result in inflation.
● Effective demand principle : If the supply of final goods is assumed to be infinitely
elastic at constant price over a short period of time, aggregate output is determined solely
by the value of aggregate demand. This is called the effective demand principle.
● Fiat money : Money with no intrinsic value.
● Fiscal policy : The policy of the government regarding the level of government spending
and transfers and the tax structure.
● Lender of last resort : The function of the monetary authority of a country in which it
provides guarantee of solvency to commercial banks in a situation of liquidity crisis or
bank runs.
● Liquidity trap : A situation of very low rate of interest in the economy where every
economic agent expects the interest rate to rise in future and consequently bond prices to
fall, causing capital loss. Everybody holds her wealth in money and speculative demand for
money is infinite.
● Narrow money : Currency notes, coins and demand deposits held by the public in
commercial banks.
● Nominal (GDP) : GDP evaluated at current market prices.
● Open market operation : Purchase or sales of government securities by the central
bank from the general public in the bond market in a bid to increase or decrease the
money supply in the economy.
● Purchasing power parity : A theory of international exchange which holds that the
price of similar goods in different countries is the same.
● Real exchange rate : The relative price of foreign goods in terms of domestic goods.
● Real GDP : GDP evaluated at a set of constant prices.
● Reserve deposit ratio : The fraction of their total deposits which commercial banks
keep as reserves.
● Speculative demand : Demand for money as a store of wealth.
● Statutory Liquidity Ratio (SLR) : The fraction of their total demand and time deposits
which the commercial banks are required by RBI to invest in specified liquid assets.
● Sterilisation : Intervention by the monetary authority of a country in the money market
to keep the money supply stable against exogenous or sometimes external shocks such as
an increase in foreign exchange inflow.
● Wholesale Price Index (WPI) : Percentage change in the weighted average price level.
We take the prices of a given basket of goods which is traded in bulk.

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 ECONOMICS : CLASS - 12 : PART - 2 : CHAPTER - 1

● The collection of all possible combinations of the goods and services that can be produced
from a given amount of resources and a given stock of technological knowledge is called
the production possibility set of the economy.
● There is always a cost of having a little more of one good in terms of the amount of the
other good that has to be forgone. This is known as the opportunity cost of an additional
unit of the goods.
● Opportunity cost is also called the economic cost.
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ECONOMICS : CLASS - 12 : PART - 2 : CHAPTER - 2

● Law of Demand : Law of Demand states that other things being equal, there is a negative
relation between demand for a commodity and its price. In other words, when price of the
commodity increases, demand for it falls and when price of the commodity decreases,
demand for it rises, other factors remaining the same.
● For most goods, the quantity that a consumer chooses, increases as the consumer’s income
increases and decreases as the consumer’s income decreases. Such goods are called normal
goods.
● Thus, a consumer’s demand for a normal good moves in the same direction as the income
of the consumer.
● However, there are some goods the demands for which move in the opposite direction of
the income of the consumer. Such goods are called inferior goods.
● As the income of the consumer increases, the demand for an inferior good falls, and as the
income decreases, the demand for an inferior good rises.
● Examples of inferior goods include low quality food items like coarse cereals.
● A good can be a normal good for the consumer at some levels of income and an inferior
good for her at other levels of income.
● At very low levels of income, a consumer’s demand for low quality cereals can increase
with income.
● But, beyond a level, any increase in income of the consumer is likely to reduce her
consumption of such food items as she switches to better quality cereals.
● Giffen good : A Giffen good is a low-income, non-luxury product for which demand
increases as the price increases and vice versa.

● Factors Determining Price Elasticity of Demand for a Good :

● The price elasticity of demand for a good depends on the nature of the good and the
availability of close substitutes of the good.
● Consider, for example, necessities like food. Such goods are essential for life and the
demands for such goods do not change much in response to changes in their prices.
● Demand for food does not change much even if food prices go up.
● On the other hand, demand for luxuries can be very responsive to price changes.
● In general, demand for a necessity is likely to be price inelastic while demand for a luxury
good is likely to be price elastic.
● Though demand for food is inelastic, the demands for specific food items are likely to be
more elastic.
● For example, think of a particular variety of pulses.
 ● If the price of this variety of pulses goes up, people can shift to some other variety of pulses
which is a close substitute.
● The demand for a good is likely to be elastic if close substitutes are easily available.
● On the other hand, if close substitutes are not available easily, the demand for a good is
likely to be inelastic.

● The demand for a normal good increases (decreases) with increase (decrease) in the
consumer’s income.
● The demand for an inferior good decreases (increases) as the income of the consumer
increases (decreases).
● The price elasticity of demand for a good is defined as the percentage change in demand
for the good divided by the percentage change in its price.
● Elasticity of demand for a good and total expenditure on the good are closely related.
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ECONOMICS : CLASS - 12 : PART - 2 : CHAPTER - 3

● In order to acquire inputs a firm has to pay for them. This is called the cost of
production.
● Once output has been produced, the firm sells it in the market and earns revenue.
● The difference between the revenue and cost is called the firm’s profit.

● THE SHORT RUN AND THE LONG RUN :

● In the short run, at least one of the factors – labour or capital – cannot be varied, and
therefore, remains fixed.
● In order to vary the output level, the firm can vary only the other factor.
● The factor that remains fixed is called the fixed factor whereas the other factor which
the firm can vary is called the variable factor.
● In the long run, all factors of production can be varied.
● A firm in order to produce different levels of output in the long run may vary both the
inputs simultaneously.
● So, in the long run, there is no fixed factor.
● For any particular production process, long run generally refers to a longer time
period than the short run.
● For different production processes, the long run periods may be different.
● It is not advisable to define short run and long run in terms of say, days, months or
years.
● We define a period as long run or short run simply by looking at whether all the inputs
can be varied or not.

● TOTAL PRODUCT, AVERAGE PRODUCT AND MARGINAL PRODUCT :

● Total Product : Suppose we vary a single input and keep all other inputs constant. Then
for different levels of that input, we get different levels of output. This relationship
between the variable input and output, keeping all other inputs constant, is often referred
to as Total Product (TP) of the variable input. This is also sometimes called total return to
or total physical product of the variable input.
● Average Product : Average product is defined as the output per unit of variable input.
● Marginal Product : Marginal product of an input is defined as the change in output per
unit of change in the input when all other inputs are held constant.
● Average product of an input at any level of employment is the average of all marginal
products up to that level.
 ● Average and marginal products are often referred to as average and marginal returns,
respectively, to the variable input.
● When a proportional increase in all inputs results in an increase in output by the same
proportion, the production function is said to display Constant returns to scale (CRS).
● When a proportional increase in all inputs results in an increase in output by a larger
proportion, the production function is said to display Increasing Returns to Scale
(IRS).
● Decreasing Returns to Scale (DRS) holds when a proportional increase in all inputs
results in an increase in output by a smaller proportion.
● The short run average cost (SAC) incurred by the firm is defined as the total cost per
unit of output.
● The average variable cost (AVC) is defined as the total variable cost per unit of
output.
● The short run marginal cost (SMC) is defined as the change in total cost per unit of
change in output.
● In the long run, all inputs are variable. There are no fixed costs. The total cost and the total
variable cost therefore, coincide in the long run. Long run average cost (LRAC) is defined
as cost per unit of output.
● In the short run, some inputs cannot be varied. In the long run, all inputs can be varied.
● Total product is the relationship between a variable input and output when all other inputs
are held constant.
● For any level of employment of an input, the sum of marginal products of every unit of that
input up to that level gives the total product of that input at that employment level.
● Total cost is the sum of total variable cost and the total fixed cost.
● Average cost is the sum of average variable cost and average fixed cost.
● In the short run, for any level of output, the sum of marginal costs up to that level gives us
the total variable cost.
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ECONOMICS : CLASS - 12 : PART - 2 : CHAPTER - 4

● A perfectly competitive market has the following defining features:
● 1. The market consists of a large number of buyers and sellers
● 2. Each firm produces and sells a homogenous product. i.e., the product of one firm
cannot be differentiated from the product of any other firm.
● 3. Entry into the market as well as exit from the market are free for firms.
● 4. Information is perfect.
● The average revenue ( AR ) of a firm is defined as total revenue per unit of output.
● The marginal revenue (MR) of a firm is defined as the increase in total revenue for a
unit increase in the firm’s output.
● The minimum level of profit that is needed to keep a firm in the existing business is
defined as normal profit.
● Profit that a firm earns over and above the normal profit is called the super-normal profit.
● The total revenue of a firm is the market price of the good multiplied by the firm’s output
of the good.
● For a price-taking firm, average revenue is equal to market price.
● For a price-taking firm, marginal revenue is equal to market price.
● The price elasticity of supply of a good is the percentage change in quantity supplied due to
one percent change in the market price of the good.
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 ECONOMICS : CLASS - 12 : PART - 2 : CHAPTER - 5
● An equilibrium is defined as a situation where the plans of all consumers and firms in the
market match and the market clears.
● In equilibrium, the aggregate quantity that all firms wish to sell equals the quantity that all
the consumers in the market wish to buy; in other words, market supply equals market
demand.
● The price at which equilibrium is reached is called equilibrium price and the quantity
bought and sold at this price is called equilibrium quantity.
● From the time of Adam Smith (1723-1790), it has been maintained that in a perfectly
competitive market an ‘Invisible Hand’ is at play which changes price whenever there is
imbalance in the market.
● Free entry and exit of the firms would imply that under all circumstances equilibrium price
will be equal to the minimum average cost of the existing firms.
● Under this condition, even if the market demand curve shifts in either direction, at the new
equilibrium, the market will supply the desired quantity at the same price.
● The government imposed a lower limit on the price that may be charged for a particular
good or service called price floor.
● Most well-known examples of imposition of price floor are agricultural price support
programmes and the minimum wage legislation.
● In a perfectly competitive market, equilibrium occurs where market demand equals
market supply.
● The equilibrium price and quantity are determined at the intersection of the market
demand and market supply curves when there is a fixed number of firms.
● Each firm employs labour upto the point where the marginal revenue product of labour
equals the wage rate.
● In a perfectly competitive market with identical firms, if the firms can enter and exit the
market freely, the equilibrium price is always equal to the minimum average cost of the
firms.
● With free entry and exit, the shift in demand has no impact on equilibrium price but
changes the equilibrium quantity and number of firms in the same direction as the change
in demand.
● Imposition of price ceiling below the equilibrium price leads to an excess demand.
● Imposition of price floor above the equilibrium price leads to an excess supply.
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ECONOMICS : CLASS - 12 : PART - 2 : CHAPTER - 6

● The perfect competition market structure is approximated by a market satisfying the
following conditions:
● (i) there exist a very large number of firms and consumers of the commodity, such that the
output sold by each firm is negligibly small as compared to the total output of all the firms
combined, and similarly, the amount purchased by each consumer is extremely small in
comparison to the quantity purchased by all consumers together;
● (ii) firms are free to start producing the commodity or to stop production; i.e., entry and
exit is free
● (iii) the output produced by each firm in the industry is indistinguishable from the others
and the output of any other industry cannot substitute this output; and
● (iv) consumers and firms have perfect knowledge of the output, inputs and their prices.
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