1

Indian Economy
Introduction:
•Salient Features of Indian Economy
•Indian economy is termed as the developing economy of the world.
Some features like low per capita income, higher population below
poverty line, poor infrastructure, agriculture based economy and
lower rate of capital formation, tagged it as a developing economy in
the world.
•Some features of Indian economy are given below:
1. Low per Capita Income: India’s per capita income is very less as
compare to developed countries. As per the estimates of the Central
Statistics Office (CSO), the per capita net national income of the
country at current prices for the year 2015-16 is estimated to attain
the level of Rs. 93231/-. The per capita net national income at
constant prices (2011-12) for the year 2015-16 is
•Estimated to attain the level of Rs. 77, 431/-. As per the CSO’s
estimates, the per capital net national income at current prices is
•2012-13 ……Rs. 71050/-
•2013-14 …… Rs. 79412/

•2014-15 …….Rs. 86,879/-

•The per capita net national income at constant prices (base year 2011-12)

•2012-13……. Rs. 65,664/-

•2013-14……. Rs. 68867/-

•2014-15. ……Rs. 72889/-

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2. Agriculture Based Economy: Agriculture and allied sectors

provide around 14.2% of Indian GDP while 53% of total Indian
population is based on the agriculture sector.

3. Over population: in every decade Indian population get

increased by about 20% . During the 2001-11 population increased
by 17.6%. Currently India is adding the total population of Australia
every year. India is the possessor of around 17.5% population of the
whole world.

4. Income Disparities: a report released by Credit Suisse revealed

that the richest 1% Indians owned 53% of the country’s wealth,
while the share of the top 10% was 76.30%. To put it differently, in
a manner that conveys the political economy of this stunning
statistic, 90% of India owns less than a quarter of the country’s
wealth.

5. Lack of Capital Formation: Rate of capital formation is low

because of lower level of income. Gross domestic capital formation
was 23.3% in 1993-94 increased up to the level of 38.1% in 2007-08
but declined up to 34.8% in 2012-13.
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6. Backwardness of Infrastructural Development: As per an

recent study, 25% of Indian families don’t have reach of electricity
and 97 million peoples don’t have reach of safe drinking water and
840 million people in India don't have sanitation services. India
needs 100 million dollar for infrastructural development up to 2025.

7. Market Imperfections: Indian economy doesn’t have good

mobility from one place to other which hinders the optimum
utilization of resources. These market imperfections create the
fluctuations in the price of commodities every year.

8. Economy is Trapped in the Vicious Circle of Poverty: Prof.

Ragner Nurkes says that ‘a country is poor because it is poor’. It
means poor countries are trapped in the vicious circle of poverty.

9. Use of Outdated Technology: It is very clear that Indian

production technique is more labour oriented in nature. So it
increases the cost of production of the products made in these
countries.

10. Traditional Set Up of Society: Indian societies are trapped in

the menace like casteism, communalist, male dominated society,
superstitions, lack of entrepreneurship, and ‘chalta hai attitude’ of
the peoples. These all factors hindered the growth of the country as
a whole.
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Structural Changes in Indian Economy

In order to study the structural change in any economy, one have to
analyse the contribution of various sectors to the national output.
We will study the trends in the distribution of national income by
industrial origin at 1980-81 prices.
The analysis of the above table gives us the idea about the structural
changes in Indian economy since 1950-51:

(i) Decreasing Share of Agriculture Sector:

The table shows that the share of agriculture sector to national
income has been constantly decreasing. In 1950-51, the share of this
sector was 55.4% and it decreased to 38.1 percent in 1980-81. In
1999-2000, the share came down to 25.2 percent. The history of
economic development of advanced countries indicates that the
contribution of agricultural sector to national income goes on
decreasing as the country develops.
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The contribution of agriculture sector to national income is 2 to 3

percent in advanced countries like U.S.A., U.K., Germany and Canada.
The decreasing share of agriculture to national income in India
indicates this broad trend. It shows that economy has been on the
path of development. The decreasing share of agriculture shows the
changes in the structure of production.
The share of agriculture to national income is quite high in relation
to advanced countries. Above all 60% of work force is employed in
agriculture while in U.K. and U.S.A. only 2% of their work force is
employed in agriculture. This shows that the occupational structure
in India could not match with the change in structure of production.

(ii) Increasing Share of Industries Sector:

In 1950-51, the share of this sector was 15 percent which increased
to 24.4 percent in 1980-81. In 1999-2000, its share rose to 24.7
percent. The increasing share of industrial sector shows that Indian
economy is on the way of development. The contribution of
industrial sector is very high in developed countries like U.K. and
U.S.A.
According to World Development Report 1995, the share of
industrial sector to national income in the U.K. and the U.S.A. was 33
percent each and in Japan it was 41 percent. In India though the
contribution of industrial sector is increasing, its progress is very
slow. Specially the share of manufacturing within the industrial
sector has been very slow since 1970-71. This is mainly responsible
for the slow rate of economic growth in the country.
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iii) Increasing Share of Service Sector:

The tertiary sector or service sector has been constantly increasing
its share in the national income. It includes transport,
communication, trade and commerce, banking, insurance,
community and personal services. In 1950-51, the share of service
sector in national income was 25.8 percent. It increased to 36
percent in 1980-81 and in 1999-2000 it has gone up to 47.8%.
During the said period, transport, communication and trade have
increased their share from 11 to 21.9 percent. It shows the
development of infrastructure in the economy. In advanced
countries, the contribution of service sector to national income is
the highest.
According to World Development Report 1995, the contribution of
service sector in the U.K. and the U.S.A was 65 percent each and in
Japan 57 percent. The increase in share of tertiary sector in national
income indicates the development of Indian economy.

(iv) Overall Assessment of Structural Change:

From the above discussion of India’s sector wise contribution to
national income, one gets a clear idea regarding the extent of change
in the structure of production in the process of development. The
share of agriculture has declined and that of industry and service
sectors has increased. This is the main structural change but this
change is very slow. It has virtually given a fillip to traditional and
stagnant economy. Now Indian economy is one of the most
promising developing economies of the world.
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Occupational Structure and Economic Development

Meaning:
Simply speaking the occupational structure of a country refers to the
division of its work force engaged in different economic activities.
Otherwise speaking how many of the total working population are
engaged in agriculture and allied activities and how many of them
are engaged in industrial and service sector can be known from the
occupational structure of the country.
While studying the structural change in any economy, it is important
to be familiar with occupational structure of the economy.

Occupational Structure and Economic Development:

Colin Clark in his book “Conditions of Economic Progress” is of the
view that there is a close relationship between economic
development and occupational structure of a country. According to
him, a higher per capita income is always associated with a higher
proportion of the working population employed in tertiary sector or
industries while a low per capita income is always associated with a
low proportion of working force employed in tertiary sector.
Otherwise speaking if the per capita real income of a country is low,
the proportion of working population engaged in agriculture is high.
For instance in the U.S.A. the per capita income was 2500 dollar in
1960. While 7% population was engaged in agriculture, 36% in
industry and 57% in service sector.
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According to the World Development Report 2002, while the per

capita income of the U.S.A increased to 36240 dollar, the percentage
of work force engaged in agriculture declined to 2 percent. In the
same year 26% and 72% of the work force were engaged in
industrial and service sector respectively. In other developed
countries like the U.K., Germany, Japan etc. We find the same
relationship, between the occupational structure and economic
development.
In less developed countries like India, more or less same trend is
observed. For instance the per capita income of India was 60 dollar
in 1960 and out of total work force 74% was engaged in agriculture
11% in industry and 15% in service sector.
In 2000, the per capita income rise to 460 dollar and people
employed in agriculture decreased to 61 percent. The following
table shows comparative picture regarding structural change and
change in the occupational pattern of some selected countries.
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The above table shows the structural changes including change in

occupational structure of both the developed and the under
developed countries.

From the data relating to occupational structure and changing

composition of GDP, the following inferences are drawn:
(a) In the preliminary stage of economic growth, the proportion of
the work force engaged in the agricultural and allied occupations
declines.
(b) In the higher level of economic growth, the decreasing tendency
increases and the absolute number of workers in primary sector
declines.
(c) During the process of economic growth, the increase in work
force in tertiary sector is more than that in secondary sector.
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SECTOR WISE GDP IN INDIA__ YEAR 2020-21

From the above flow chart it can clearly be seen that the
Service sector is the biggest contributing sector to the
GDP of India followed by the Industry sector and finally
the Agriculture sector with their contributing share
roughly being 54%, 26% and 20% respectively.
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Gross Value Added (GVA)

Gross Value Added is the measure of the total value of goods and
services produced in an economy ( area, region or country). The
amount of value-added to a product is taken into account.

What is the difference between GVA and GDP?

The difference between GVA and GDP is that GVA is the value added to
the product to enhance the various aspects of the product whereas
GDP is the total amount of products produced in the country.
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AGRICULTURE

Role of Agriculture in India

Agriculture is an important sector of the Indian economy. In India, about 57% of the
workforce is engaged in agriculture. Agriculture plays an important role in the
economic development of India.

The ROLE of agriculture in Indian economy is stated as follows:

1. Agriculture provides employment directly to about 57% of India's workforce.

2. It facilitates capital formation through savings and investment.
3. It helps in rural development through the creation of social and economic
infrastructure.
4. It contributes to the national income of the country, about 20% of GDP.
5. It boosts the service sector. i.e., banking, transport, etc.
6. It generates social order in the country due to employment.
7. It brings foreign exchange through export of commodities.
8. It facilitates industrial development by providing raw materials and creating
demand for agricultural goods like fertilizers, tractors, etc.
9. It helps to reduce income inequalities, especially in rural areas.

Trends in Agricultural Productivity in India

Agricultural productivity can be measured in terms of yield per hectare and yield per worker.
In other words, agricultural productivity has two dimensions:
● Land Productivity
● Labour Productivity.

LAND PRODUCTIVITY
Land productivity refers to yield per hectare of land. Due to limitations of land area, there is a
need to increase productivity of existing land in India. The land productivity can be improved
through:

● Introducing better inputs, such as High Yielding Varieties (HYV) of seeds and better
quality and quantity of fertilizers and pesticides.
● Introducing better techniques of production, such as better irrigation systems,
advanced machinery including tractors, and tools.
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The following table indicates land productivity between 1960-61 and 2003-04:

From the above table, it is clear that:

- Foodgrains Productivity: The productivity per hectare has increased for total foodgrains. In
1960-61. it was 710 kgs per hectare, which has increased to over 1700 kgs. per hectare in
2003-04. Among the foodgrains, wheat has shown considerable increase in productivity due
to better irrigation, improved inputs, and the use of advanced technology.

- Oil Seeds Productivity: In case of oil seeds, the productivity has increased from 507 kgs.
per hectare in 1960-61 to about 1070 kgs per hectare in 2003-04.

- Cotton Productivity: The productivity of cotton has improved from 1960-61 to 2003-04. It
was 125 kgs per hectare in 1960-61, and it has increased to over 300 kgs per hectare in
2003-04.

- Jute Productivity: The productivity of jute has increased. It was about 1200 kgs per hectare
in 1960-61, and it has increased to over 2200 kgs/ hectare in 2003-04.

International Comparison:
The productivity of all the crops in India is low as compared to other countries. India's
productivity of crops is low as compared to other countries like China. Japan. France, USA.
UK and so on.

The following table gives comparative figures for India and China in respect of two major foo
crops in 1998:
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From the above table, it is clear that:

● The productivity of rice in case of China is higher than that of India by over 2 times.
● The productivity of wheat in case of China is higher than that of India by over 1.4
times.

LABOUR PRODUCTIVITY

Labour productivity can be defined as yield per worker engaged in agriculture. The available
data indicates that Indian agriculture labour productivity is very low as compared to other
countries like China, Japan, USA, UK, Canada, and so on.
For instance, in 1997, according to one study, it was estimated that the output per male
worker in India was 2.2 tones whereas; it was quite high in respect of other countries as
shown in the following table:

The low labour productivity is due to several factors, such as:

● Poor standard of living of Indian agricultural labour, which affects stamina to work.
● Poor farm related education/ knowledge.
● Use of outdated tools and machines, which brings down the overall productivity of
crops, which in turn brings down labour productivity.
● Use of poor quality of inputs like fertilizers and seeds, which also brings down the
overall productivity of crops, which in turn brings down labour productivity.
● Small size of land holding in India, and so on.
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CONSTRAINTS / PROBLEMS OF INDIAN AGRICULTURE

CAUSES OF LOW AGRICULTURAL PRODUCTIVITY

Indian agriculture is affected by low productivity and production due to various problems.
The problems of agriculture can be broadly divided into four groups as shown below.

I. TECHNICAL/CULTIVATION RELATED PROBLEMS

1. Lack of Irrigation Facilities: Indian agriculture depends upon monsoon to a good

extent. is The irrigated area is comparatively less in India as compared to other
countries like USA, UK, China, Japan, etc. For instance, in 2000-01, only 43.4% of
the total foodgrains crop area was under irrigation. The remaining 56.6% of the
foodgrains crop area had to depend upon monsoon. Also, in India monsoon is quite
erratic, especially in certain states such as Rajasthan, Gujarat, Madhya Pradesh,
Maharashtra, etc., and as such it affects production and productivity of crops.
2. Problem of Fertilizers: Indian agriculture is affected by the problem of fertilizers.
There is inadequate use of fertilizers and alsc poor quality of fertilizers. Even today,
some of the small and marginal farms use only natural fertilizers such as cow-dung,
and leaves as manure or fertilizers. They do not use good quality chemical fertilizers
and in proper quantity, which in turn affects agricultural production.
3. Poor Quality of Seeds: Indian farmers, especially the small and marginal farmers,
use poor quality of seeds. They use farm seeds rather than laboratory developed
seeds. The use of HYV seeds is limited in India. As a result of this, the agricultural
productivity is low in India.
4. Problem of Technology: Indian farmers, especially the small and marginal farmers
use outdated technology. They do not use the latest techniques such as tractors,
land tillers, etc. This is mainly due to financial problems. Only the large farmers do
get loans to purchase tractorsland tillers, etc. As a result of this, the agricultural
productivity of small farmers is affected.
5. Fragmented and Small Land Holdings: Over 90% of the Indian farmers belong to
the marginal and small farmers' category. The average size of land holding in India is
abom 1.5 hectares. Not only are the holdings small but also they are fragmented and
scattered in several places. The fragmented and small land holdings affect
agricultural productivity and production. This is because a good amount of land gets
wasted due to fencing between two plots of land belonging to two different farmers.
Also small land holdings do not max it possible to use farm machines such as
tractors.
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II. FINANCE RELATED PROBLEMS

6. Agricultural Indebtedness: It is said that Indian farmer is born in debt, lives in debt,
and dies in debt. A good number of Indian farmers, especially the small and marginal
farmers are subject to indebtedness. As a result, the production and productivity of
their land get affected, as they continue to repay debts, and are not in a position to
undertake farm development activities.
The small farmers continue to obtain loans from moneylenders at high interest rates
due to the difficulties in obtaining loans or credit from organized sectors like banks.
Some of the farmers are also ignorant about bank facilities.
7. Problem of Moneylenders: The farmers depend upon the unorganized sector, i.e.,
the moneylenders for their credit requirements. They borrow funds at high interest
rates, rangin from 15% to 24% per annum and even more. Again, the moneylenders
manipulate the loan records and cheat the illiterate farmers.
8. Problem of Institutional Credit: Indian farmers find it difficult to obtain institutional
financ due to various formalities in obtaining finance, and also due to inadequacy of
bank branches in rural areas. Some small farmers are not even aware of institutional
finance facilities. However, it is to be noted that over the years, the share of
institutional finance in agriculture credit has increased and that of non-institutional
sources has declined.

III. MARKETING RELATED PROBLEMS

9. Marketing Related Problems: Indian farmers face marketing problems. The

marketing problems indirectly affect agricultural productivity. Due to the
marketing problems. The farmers are not in a position to realize good prices for their
produce and as such there is a lack of incentive to improve production and
productivity. The marketing problems include:
• Inadequate transport facilities.
• Inadequate and poor warehousing facilities.
• Defective packaging, etc
.
10. Problem of Warehousing: Indian farmers face the problem of warehousing. There
are inadequate warehousing facilities. Therefore, the farmers have to go for distress
sale, which in turn results in lower prices to the farmers. Also a good amount of
agricultural produce gets damaged or destroyed due to poor quality of warehousing.

11. Inadequate Transport: Indian agricultural marketing is affected due to inadequate

transport facilities. Farmers face the problem of transportation to move the farm
produce from the farms to the marketplace. Quite often, there is a delay in
transportation, which damages or spoils the perishable agricultural produce.
It is estimated that about 3 lakh villages out of the total 6 lakh villages of India do not
have proper roads and transport facilities. Due to lack of transport facilities, the
farmers are forced to sell their produce in the local markets, and as such they realize
lower prices.
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12. Inadequate Credit Facilities: The farmers require credit facilities, especially during
the busy season (Oct. to June) for marketing purposes, i.e., warehousing,
transportation, etc.Quite often, the farmers do not get the right amount of credit from
the organized sector. Therefore, they have to depend upon the unorganized sector,
i.e ..., moneylenders, who exploit the farmers by charging high interest rates, and
also by manipulating the loan records.

13. Lack of Grading: The Indian farmer does not give much importance to grading. He
sells the farm produce in one lot to the traders. Therefore, the farmers get low prices
for their produce. The traders do the grading or sorting out of farm produce on the
basis of size, shape, weight, etc, and obtain better prices from the customers.

14. Problem of Market Information: Indian farmers find it difficult to get the right market
information in respect of demand, prices, and latest developments in the agricultural
sector, etc. This may be due to lack of proper data generation efforts or the farmers
are not interested in obtaining market information due to ignorance and illiteracy.
Therefore, the farmers may not be able to fix the right prices. They may also find it
difficult to plan their production properly.

15. Malpractices in Unregulated Markets: In India, there are several unregulated

marks There are several malpractices adopted by agents and traders in unregulated
markets. malpractices are:
Fraudulent weights and measures.
• Rigging of prices. • Higher market charges.
Such malpractices are to the disadvantage of the farmers. Even in regulated markets
there are malpractices to the disadvantage of the farmers.

16. Problem of Cooperative Marketing: There is less emphasis on cooperative

marketing. India in respect of agricultural produce. Farmers prefer to sell their
produce individually. The farmers often lack bargaining power. The manipulative
traders cheat the individu farmers by paying lower charges.

17. Problem of Handling: The quantity and quality of agricultural produce gets affected
while handling during transit. The workers are not trained to handle the produce
properly with loading and unloading. As a result, about 10% of the produce gets
damaged or destroyed due to poor handling.

18. Existence of Intermediaries: There are a large number of intermediaries between

the farmer and the consumer. There are agents, wholesalers and retailers. A long
chain of intermediaries increases the marketing costs due to commissions or margins
of the intermediaries. There are also cases where intermediaries provide finance at
the time of cultivation, and the farmers are forced to sell their produce at low prices to
such intermediaries.

19. Inadequate Packing: Indian agricultural marketing is affected due to inadequate or

unscientific packing. Quite often, the agricultural produce is packed unscientifically.
This affects the quantity as well as the quality of the produce. As a result of this the
Indian farmers stand to lose by way of lower prices for his produce.
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IV. GENERAL PROBLEMS

20. Low Labour Productivity: Average Indian farmer is weak both physically and
mentally:
- Physical weakness due to poor nutrition.
- Mental weakness due to poor farm-related education and training.
Therefore. the productivity of farm labour in India is low as compared to other
countries.

21. Problem of Agricultural Research: There is inadequate agricultural research in

India. The amount of morey spent on agricultural research is very low as compared
to other countries. Due to limited research, there is a limited effect both on
productivity and production of agricultural produce.
22. Social Factors: The social environment in rural areas is an important factor of low
agricultural productivity. Indian farmers are illiterate and conservative. They fail to
understand the benefits of technology and modern inputs to improve productivity.
The Indian farmer spends a lot of money on social and religious functions. This
affects savings, and as such they cannot invest in agriculture for better technology
like tractors.

23. Problem of Floods and Droughts: In India, there is a paradox of floods and
droughts. In other words, Indian agriculture is subject to floods as well as droughts. In
certain areas like that of Rajasthan, there is scarcity of rainfall which results in
droughts, and in certain north eastern parts of India like Assam receives heavy
rainfall which results in floods. The floods and droughts affect the productivity and
production of agriculture in India.

MEASURES TO OVERCOME AGRICULTURAL PROBLEMS

The following are the measures undertaken to improve the agricultural productivity:

1. Land Reforms: The government has introduced several land reforms after
independence.
Some of the important land reforms are as follows:
• Abolition of intermediaries.
• Regulation of tenancy rent.
• Ceiling on land holdings.
• Security of land tenure.
• Ownership rights to the tenants, etc.
The land reforms have benefited the farmers. However, the desired results are far
from satisfactory.
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2. Financial Facilities: The government has made efforts to provide financial support
to the agricultural sector. As a result of institutional credit support, the dependence
on unorganized sector has reduced. NABARD is the apex financial institution, which
facilitates agriculture credit through refinancing the banks that provide direct finance
to agriculture. The flow of institutional credit during 2003-04 is estimated as follows:

3. Marketing Facilities:

Regulated Markets: The state governments have set up regulated markets in order to
protect the farmers from the malpractices of traders and brokers. The regulated markets
ensure proper prices to the farmers.

Warehousing Facilities: A number of warehouses have been constructed for storin,

agricultural produce. In most of the states, warehousing corporations have been set up to
provide warehousing facilities to farmers. Due to warehousing facilities, farmers need not go
for distress sales, and as such they can realize better prices for their produce.

Other Marketing Facilities: Apart from regulated markets and warehousing, farmers are
provided with a number of other marketing facilities such as better transport facilities, quality
control laboratories, etc. The marketing facilities have enabled the farmers to solve their
marketing problems, and as such they have realized better prices. The marketing facilities
indirectly helped to improve agricultural productivity.

4. Irrigation Facilities: The government has increased investment in irrigation facilities.

In 1951, only 17% of the total crop area was under irrigation. In 2000-01, the total
foodgrains crop area under irrigation has increased to 44%. Among the food grains
crops, wheat crop area under irrigation is the highest at over 88%, followed by barley
at 63% and rice at 54% However, it is to be noted that in case of certain crops like
jowar and bajra, the total area under irrigation is only 8%, and in case of total pulses
only 13% of the crop area is under irrigation.
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5. Better Varieties of Seeds: India has developed better varieties of seeds in case of
rice wheat, maize, etc. Better varieties of seeds help to improve agricultural
productivity. For instance, the High Yielding Varieties (HYV) of seeds in the case of
foodgrains resulted in the increase of foodgrains production. Efforts are made by the
government to encourage farmers to use HYV of seeds.

6. Better Farm Technology: Farm technology has improved agricultural productivity.

Thi use of tractors and other farm equipment has increased productivity of labour and
land, and at the same time reduces overheads and increases production. Farmers
are encouraged to make use of the latest technology by making available loans at
lower rates of interest.

7. Fertilizers: Proper use of good fertilizers, especially nitrogen, phosphorus, and

potash can improve agricultural productivity. However, in India, the use of fertilizers is
low. It is less than 100 kgs per hectare, whereas it is nearly 4 times more in China.

8. Agricultural Research & Development: In India, Indian Council of Agricultural

Research (ICAR), various agricultural universities, and centers conduct agricultural
research. The research and development has helped to develop improved methods
of cultivation, soil conservation, protection to crop, etc.

Technology led development in agriculture has made India self-sufficient in foodgrains and a
leading producer of several agricultural commodities in the world. Due to contributions of
agriculture research, the following revolutions took place in the field of agriculture and
related areas:
• Green revolution in crops.
• Yellow revolution in oilseeds.
• White revolution in milk production.
• Blue revolution in fish production,
• Golden revolution in horticulture.

9. Water Management and Soil Conservation: Efforts are made to educate the
farmers to use irrigation water more efficiently. Several rural projects have been
undertaken for the purpose of water management, and soil conservation. Now water
management and soil conservation projects are undertaken under Swarnajayanti
Gram Swarozgar Yojana (SGSY).

10. Cooperative Farming: The government is encouraging cooperative farming.

Cooperative farming is a suitable remedy for solving the problem of small and
fragmented land holdings. Through cooperative farming, the small and marginal
farmers can pool their land and other resources, and undertake cultivation jointly.
They can also undertake cooperative marketing of their produce. However, the
progress in this area is very slow.
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GOVERNMENT MEASURES TO SOLVE MARKETING PROBLEMS

In order to solve various agricultural marketing problems, the Government has taken several
measures. These measures are briefly explained as follows:

1. Warehousing Facilities: In 1957, Central Warehousing Corporation was set up to

assist farmers in solving storage problems. A number of states have set up state
warehousing corporations. The warehousing facilities helped the farmers to reduce
distress sale immediately after harvesting. In other words, due to warehousing
facilities, farmers can get better prices for their produce. Again, against the
warehouse receipt, the farmers can obtain short-term loans from the banks, which in
turn help them to avoid distress sale. The Government of India has set up Food
Corporation of India: The FCI buys foodgrains from the farmers, and then stocks
them in its huge godowns spread across all the states in the country.

2. Credit Facilities: Credit facilities are made available to the farmers at village level. A
number of uncooperative credit societies have been set up. There are regional rural
banks, which provide credit facilities to the small and marginal farmers to meet their
working capital and other financial needs. The commercial banks also provide
finance to the farmers in the rural areas. The institutional sources provide credit to
farmers at low interest rates.

The finance provided by the banks in 2003-04 was estimated at Rs. 80,000 crore.
The share of banks in institutional finance in 2003-04 was as follows:
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3. Grading and Standardisation: The government has set up a Central AGMARK

Laboratory at Nagpur, and a number of (22) regional AGMARK labs. Samples of
important agricultural products are analysed for their physical and chemical
properties. After analysing, the Laboratory gives AGMARK.

The AGMARK creates confidence in the minds of consumers. As such, the

consumers would be willing to pay better prices for agricultural products with
AGMARK. So far AGMARK standards have been framed and notified in respect of
163 commodities which include food grains, fruits, vegetables, spices, oil seeds,
livestock, dairy and poultry products.

4. Market Information: A good deal of market information is supplied to the farmers

through radio, press, etc., in respect of prices and other matters. The government
authorities conduct market surveys from time to time. Information collected from such
surveys is passed on to the farmers

5. Regulated Markets: Regulated markets have been set up in most of the states in
order to protect the farmers against malpractices of traders and brokers.

The regulated markets perform the following functions:

- Fixing of market charges or costs.
- Fixing of prices for farm products.
- Ensures correct weights and measures, etc.

6. Use of Standard Weights: The government has introduced uniform weights and
measures throughout the country. Any trader found with defective weights and
measures is punished under the law. The regulated markets ensure the use of
correct weights and measures.

7. Fixation of Minimum Support Prices: In order to solve the problem of fluctuations

in agricultural prices, the government has set up the Commission for Agricultural
Costs and "Prices (CACP). The CACP announces minimum support prices for almost
all agricultural crops. Every year, there has been an increase in minimum support
crops. This has helped the farmers to secure better prices for their produce even
during bumper crops.

8. Cooperative Marketing: Government is encouraging cooperative farming and

cooperative marketing throughout the country. The small and marginal farmers are
encouraged to form cooperatives in order to market their produce. The cooperative
society assembles the agricultural produce from the members, and sells at better
prices in the market. Due to the cooperative societies, the farmers are in a better
position to get better prices.
 24

9. Directorate of Marketing and Inspection: The Directorate of Marketing and

Inspection has been set up by the Government of India in order to assist the Central
and StateGovernment to solve agricultural marketing problems.

This Directorate plays an important role in agricultural marketing. The role includes:

• Fixes grades and standards for agricultural products.

• Regulates market practices.
• Undertakes marketing research and surveys.
• Undertakes inspection of quality of agricultural produce.

10. Transport Facilities: Indian railways assist farmers in transporting the produce from
the farms to the markets in towns and cities.

The banks provide loans to the farmers or cooperatives to purchase trucks, tempos,
etc., to transport the farm produce.

Nowadays, private transport operators are provided loans by banks to purchase and
operate vehicles, which can be used to transport agricultural items from villages to
markets.

11. Commodity Boards: The Government of India has set up about nine commodity
boards to assist farmers in production and marketing of commodities. The boards
advice the farmers in respect to production, and provide assistance to promote and
market the commodities. The commodity boards include:

● Coffee Board. • Spices Board. • Central Silk Board

● Coir Board . • Tea Board. • Coconut Development Board
● Rubber Board. • Tobacco Board. • National Horticulture Board.

12. National Institute of Agricultural Marketing: The NIAM was set in 1988. This
institute plays an important role in agricultural pricing. The role of NIAM is as follows:
• It conducts training programmes in respect of agricultural marketing.
 25
CHAPTER - 8 : POVERTY IN INDIA

Multi-dimensional Poverty :
Concept of poverty in the conventional sense
was limited only to basic needs of life. However,
in modern times, the scope of the concept of
poverty has been enlarged. Of late, the concept
of multi-dimensional poverty has emerged.
Multi-dimensional poverty refers to
deprivation in terms of both material and non
material dimensions. Material dimensions relate
to deprivation in terms of food, clothing, shelter,
health, education, road connectivity, electricity,
access to safe drinking water and sanitation
facilities etc. The non material dimensions are
Fig. 8.1 : Poverty
associated with social discrimination.
Introduction :
Poverty is one of the major challenges faced You should know :
by Indian economy. It is a socio- economic According to Prof. Amartya Sen,
phenomenon. Poverty is perceived as ‘social “Poverty is not just a lack of money, it is not
exclusion’ of a certain section of people in the having the capability to realize one’s full
society. Deprivation of basic needs and denial of potential as a human being”. Capabilities
opportunities has led to social exclusion. refer to economic, social and political
Fig. 8.1 gives an idea about the concept
freedom. Lack of substantive freedom such as
of poverty.
freedom to satisfy hunger, lack of nutrition,
Poverty in India has a long history. healthcare and educational facilities, denial
Economic drain of resources, decline of of political and civil liberties lead to poverty.
handicraft and cottage industries, oppressive
economic policies, recurrence of famines etc.
were responsible for mass poverty among the Do you know?
people during the British period. Noted Indian Economist
and recipient of Bharat
Elimination of poverty has been the
Ratna, Prof. Amartya
top agenda of the Indian Government since
Independence. Policy measures such as Sen was awarded the
economic planning, economic reforms and anti- Nobel Memorial Prize in
poverty programmes such as 'garibi hatao' have Economic Science(1998)
helped in greater reduction of poverty . Prof. Amartya Sen for his contribution to
welfare economics and social choice theory
Meaning of Poverty : as well as for his interest in the problems
In the conventional sense, poverty refers to a of the society’s poorest members. In his
situation in which a major section of the people book, ‘Poverty and Famines: An Essay on
in the society are unable to fulfil even the basic Entitlement and Deprivation (1981)’, Prof. Sen
needs of life such as food, clothing and shelter revealed that declining wage, unemployment,
due to lack of sufficient income.
50
 26
rising food prices and poor food distribution Find out :
systems led to starvation among certain groups Prepare a list of 5 Countries in the World
in the society. His views encouraged policy having Absolute Poverty with reference to
makers to pay attention not only to alleviating the latest World Bank Report.
immediate suffering but also finding ways
to replace the lost income of the poor. For b) Relative Poverty : It is difficult to define
economic growth to be achieved, he argued the concept of relative poverty.
that social reforms such as improvements It is judged on the basis of comparison
of relative standards of living of different
in education and public health must precede
sections of the people. Relative poverty
economic reforms.
is measured with respect to differences in
the levels of income, wealth, consumption,
Can you tell : economic inactivity (unemployment, old
Express your opinion on the following : age) etc. Such poverty is found in all the
• There is a thick line of rural-urban countries of the world. It is an universal
economic divide in India . phenomenon. Relative poverty cannot be
• There is an equitable distribution of income completely eradicated. However, it can be
and wealth in the country. reduced to some extent through appropriate
• All the citizens have equal access to policy measures.
education, health, energy and drinking
water. Poverty Line :
• There is no hunger, starvation or Poverty line is an imaginary line that
malnutrition in the country. divides the poor and non-poor. It is determined
• There is lack of sanitation facilities in the in terms of per capita household expenditure.
country. Various Committees and Study Groups have
• Poverty ratio is uniform across all the states. defined poverty line in different ways.
As per the Task Force on Eliminating
Concepts of Poverty : Poverty constituted by the NITI Aayog,
Poverty is multifaceted. The major concepts Poverty line is defined as "the threshold
of poverty in India include absolute poverty and expenditure or the amount necessary to
relative poverty. purchase a basket of goods and services that
a) Absolute Poverty : Absolute poverty is are considered necessary to satisfy basic human
measured in terms of minimum calorie needs at socially acceptable levels".
intake. Earlier, Planning Commission Poverty line helps to fulfil the following
determined per capita daily calorie objectives :
requirement of 2400 calories for a person 1) To determine the population living above
living in the rural area and 2100 calories poverty line (APL) and below poverty line
for a person living in the urban area. (BPL).
On an average, the per capita daily calorie 2) To identify the poor on the basis of the
requirement amounts to 2250 calories. household consumption expenditure.
Absence of minimum income to satisfy the
3) To track poverty in a region over a period
desired level of calorie intake of food leads
of time and compare it across regions.
to absolute poverty. It is mostly found in the
developing countries like India. Absolute 4) To provide an estimate of the required
poverty can be eradicated through effective expenditure on poverty alleviation
poverty alleviation measures. programmes.

51
 27
Poverty line differs from country to and informal sector as well as it creates law and
country. According to World Bank, "Poverty order problems in the society.
line was defined at $1.90 per capita per day
at 2011 prices on purchasing power parity Find out :
basis (PPP)". On this basis, 21.2% of India’s Information about the informal sector and
population lived below poverty line. list a few activities related to it as per your
observation.
Can you tell :
Place the following individuals as per Do you know?
their income in the pyramid as given below: Following are some of the food and non-
1) Contract labourer food items required to be on the poverty line.
2) Salesman in a shop
3) CEO of a Multinational Company
4) Executive in a Company Food Items Non Food Items
Cereals, pulses, milk Fuel and light,
and milk products, salt medical,
High and sugar, edible oil, entertainment, durable
Income egg, fish and meat, goods, rent, clothing,
vegetables, fruits, bedding, footwear,
Upper Middle spices, beverages, education, toilet
Income processed food articles, conveyance

Middle
Income
Try this :
Low 1) Given the number of members in your
Income family prepare a list of food items and
non-food items purchased monthly.
Income Pyramid
2) Calculate the total monthly consumption
Types of Poverty : expenditure of your family’s consumption
1) Rural poverty : Deprivation of basic needs basket as per the current prevailing prices.
among certain section of the people living in the 3) What is the per capita monthly expenditure?
villages is termed as rural poverty.
It is found among small and marginal farmers, Extent of Poverty in India :
agricultural labourers, contractual workers and Extent of poverty is measured by the
landless labourers. Low agricultural productivity, poverty ratio. It is the ratio of the number of poor
drought, poor rural infrastructure, illiteracy, to the total population. Studies were conducted
lack of alternative jobs, rural indebtedness have by individual economists as well as research
aggravated the problem of rural poverty. institutions to ascertain the extent of poverty in
India. Since 1962, the Planning Commission had
2) Urban Poverty : Absence of basic needs
appointed several working groups, task force
among certain section of the population living
and expert committees for estimation of poverty.
in towns and cities is termed as urban poverty.
Urban poverty is largely attributed to the Estimates of Poverty :
spillover effects of migration among the rural Earlier, poverty lines were based on calorie
poor, lack of affordable housing, illiteracy, slow intake. It did not include the non food components
industrial growth, lack of infrastructure etc. such as education, health etc. Government of
Urban poverty has led to the growth of slums India had appointed various Committees to
52
 28
review poverty line from time to time. In 2012, Causes of poverty : Following are the major
an Expert Group, under the Chairmanship of Dr. causes of poverty in India :
C. Rangrajan, was constituted. This Committee 1) Population explosion : Unequal distribution
submitted its report in 2014. As per the report of resources among the rapidly growing
approved by this Committee, a new poverty line population has led to deprivation of basic
has been decided for rural and urban areas. facilities causing widespread poverty.
Table 8.1 provides estimates of poverty by 2) Slow Economic Growth : Due to slow
the Rangarajan Committee. agricultural and industrial growth, the
Poverty Estimates (2011-12) growth rate of national income and per
capita income has been slow over the
Poverty Line (in Rs.) years. This has resulted in poverty and low
Poverty Ratio (%)
(Consumption Expenditure)
standard of living among the people.
Rural Urban Rural Urban Total
3) Unemployment and Underemployment :
Rs. 972/- Rs. 1407/- 30.9% 26.4% 29.5% Poverty in the rural and urban areas has
Per month Per month also increased due to unemployment and
(Rs. 32/- (Rs. 47/- underemployment.
per day per per day per
4) Economic inequalities : Wide inequalities
person) person )
have been observed in the distribution of
Table 8.1 income, assets, consumption expenditure,
Source : Government of India, Planning Commission credit facilities, agricultural landholdings
Report, (June, 2014) etc. This has also led to a high incidence of
State-wise Poverty Ratios (2011-12) poverty.
5) Inaccessibility to infrastructural
State Ratio Poverty State Ratio Poverty
Ratio Ratio facilities : Due to lack of purchasing power
(2011-12) (2011-12) infrastructural facilities such as energy,
in in
Percent Percent transport, communication, health and
Andhra 9.20 Kerala 7.1 education are inaccessible to the poor. This
Pradesh perpetuates poverty.
Assam 31.9 Madhya 31.7 6) Inflation : Inflation refers to a continuous
Pradesh rise in the price level of essential
Bihar 33.7 Maharashtra 17.4 commodities especially the food items.
Chhatisgarh 39.9 Odisha 32.6 Growing demand for food and its
Gujarat 16.6 Punjab 8.3 insufficient supply causes the prices to
Haryana 11.2 Rajasthan 14.7 rise tremendously. This results in low
Himachal 8.1 Tamil Nadu 11.3 purchasing power making the poor still
Pradesh poorer. Food crisis has led to malnutrition,
Jammu and 10.4 Uttar Pradesh 29.4 hunger and starvation among the people.
Kashmir 7) Regional imbalance : Regional imbalance
Jharkhand 36.9 Uttarakhand 11.3 is also one of the causes of poverty. States
Karnataka 20.9 West Bengal 19.9 such as Orissa, Bihar, Madhya Pradesh,
Table 8.2   Source : Economic Survey 2017-18 Chhatisgarh, Jharkhand, Sikkim, Arunachal
Pradesh, Assam etc. lag behind in terms of
Find out : economic development and therefore have
From the above data on poverty ratios, find a high poverty ratio.
out Q3 and P10 and name the states as per the
8) Vicious Circle of Poverty : This concept
derived partition values.
is given by Prof. Ragnar Nurkse. The

53
 29
operation of vicious circle of poverty has • Poor people become vulnerable to diseases,
trapped Indians into miseries which in misery and economic hardships.
turn leads to low national income, low per
• Poverty also leads to environmental
capita income, low capital formation, low-
deterioration.
savings, low production, less employment.
Fig 8.2 explains the vicious circle of poverty.
Low You should know :
National Income

Less Low per

employment capita income

Low Low
production Savings

Low Low capital

investments formation

Fig. 8.2 : Vicious Circle of Poverty

9) Other Factors :
• Recurrence of natural disasters
The UN Sustainable Development Goals
• Caste, religious, racial and gender (SDGs) was adopted by the international
discrimination community in September 2015 to
• Administrative inefficiency and corruption comprehensively cover social, economic
and environmental dimensions. The SDGs
• Leakages in the public distribution system
constitute a universal agreement to end
poverty in all its forms and dimensions. There
You should know : are 17 SDGs which have 169 targets to be
Effects of Poverty : achieved by 2030. India played an important
• Poverty retards the economic progress of role in shaping SDGs.
a country. India being one of the signatories of United
• It leads to low national income and low Nations Sustainable Development Goals, it is
committed towards eradication of poverty by
per capita income.
2030 (SDG1).
• It leads to low standard of living.
• It results in low savings, investment and General measures to eradicate poverty :
capital formation. Policy measures undertaken for eradication
• It leads to concentration of economic of poverty are as follows :
power and unequal opportunities. 1) Control of population : Family Welfare
• It results in class conflicts between the rich Programme and population policies have
and poor. been introduced to keep a check over the
• Anti-social and anti- national activities population growth.
are on a rise due to poverty. 2) Agriculture : Farmers are provided with
• Increase in subsidies have increased cheap credit facilities to purchase agricultural
government expenditure on welfare inputs. The Government also announces
programmes resulting in misallocation of Minimum Support Prices for selected crops
resources. to ensure stable agricultural income.
54
 30
3) Rural Works : Employment opportunities inspire people towards entrepreneurship or
are provided to the poor through construction self employment.
of rural roads, irrigation projects, rural
electrification etc. Try this :
4) Rural industrialization : To promote To ensure food security, the Government
employment in the rural areas, emphasis of Maharashtra has introduced Tri Colour
has been laid on setting up of small scale Family Ration Card. Find out the income
and cottage industries. criteria of each ration card on the basis of
information provided by the Food, Civil
5) Minimum Wages : Minimum Wages Act Supplies and Consumer Protection Dept.,
was passed in 1948 to provide fair wages to GoM.
agricultural and industrial workers. It has
been revised from time to time. WHITE   SAFFRON YELLOW

6) Public Distribution System : To ensure

food security, food-grains are made
available to the poor people at highly
subsidized rates through ration shops under
the public distribution system.
7) Nationalization of Banks : To ensure
financial inclusion, credit facilities are made
available to the poor people at low rates of Try this :
interest. For this purpose nationalization of Correlate the following Poverty Alleviation
banks was undertaken in 1969 and 1980. Programmes with the given points : food
8) Progressive Tax Measures : To reduce security, wage employment, self employment,
inequalities in the distribution of income, education, health, sanitation, financial
progressive income tax system has been inclusion, housing.
introduced. • Employment Guarantee Scheme (EGS)
• Swarnajayanti Gram Swarozgaar Yojana
9) Education : To increase the enrolment ratio, (SGSY)
primary education has been made free and • Jan Dhan Yojana (JDY)
compulsory for all. Free education for girls, • Swachch Bharat Mission (SBM)
mid-day meal programmes, sanitation and • Sarva Shiksha Abhiyaan (SSA)
safe drinking water etc. have also been • Antyodaya Anna Yojana (AAY)
provided. • Mahatma Gandhi National Rural Employment
10) Affordable Housing : Slum rehabilitation Guarantee Scheme (MGNREGS)
• Pradhan Mantri Awaas Yojana (PMAY)
programmes and affordable housing
• National Health Mission (NHM)
facilities are provided to the rural and
urban poor.
Do you know?
11) Health facilities : Primary health centres,
17th October is observed as International
government hospitals have been established
Day for Eradication of Poverty.
to provide medical treatment at subsidized
rates to the poor people.
Poverty retards the economic progress of
12) Skill development and self employment : the country. Therefore, anti-poverty programmes
Skill development is considered one of the introduced by the government needs to be
important aspects for job creation in India. monitored from time to time. Leakages and
For this purpose opportunities need to be bottlenecks need to be identified for its effective
provided for skill based training. This will implementation.
55
 31

Causes of Poverty in India

(i) Heavy pressure of population:
Population has been rising in India at a rapid speed. This rise is
mainly due to fall in death rate and more birth rate.
India’s population was 84.63 crores in 1991 and became 102.87
crores in 2001. This pressure of population proves hindrance in the
way of economic development.

(ii) Unemployment and under employment:

Due to continuous rise in population, there is chronic
unemployment and under employment in India. There is educated
unemployment and disguised unemployment. Poverty is just the
reflection of unemployment.

(iii) Capital Deficiency:

Capital is needed for setting up industry, transport and other
projects. Shortage of capital creates hurdles in development.

(iv) Under-developed economy:

The Indian economy is under developed due to low rate of growth. It
is the main cause of poverty.
 32

(v) Increase in Price ( Inflation)

The steep rise in prices has affected the poor badly. They have
become more poor. Inflation refers to a continues rise in the price
level of essentially the food items.

(vi) Net National Income:

The net national income is quite low as compared to size of
population. Low per capita income proves its poverty. The per
capita income in 2003-04 was Rs. 20989 which proves India is one
of the poorest nations.

(vii) Rural Economy:

Indian economy is rural economy. Indian agriculture is backward. It
has great pressure of population. Income in agriculture is low and
disguised unemployment is more in agriculture.

(viii) Lack of Skilled Labour:

In India, unskilled labour is in abundant supply but skilled labour is
less due to insufficient industrial education and training.
 33

(ix) Deficiency of efficient Entrepreneurs:

For industrial development, able and efficient entrepreneurs are
needed. In India, there is shortage of efficient entrepreneurs. Less
industrial development is a major cause of poverty.

(x) Lack of proper Industrialisation:

Industrially, India is a backward state. 3% of total working
population is engaged in industry. So industrial backwardness is
major cause of poverty.

(xi) Low rate of growth:

The growth rate of the economy has been 3.7% and growth rate of
population has been 1.8%. So compared to population, per capita
growth rate of economy has been very low. It is the main cause of
poverty.

(xii) Outdated Social institutions:

The social structure of our country is full of outdated traditions and
customs like caste system, laws of inheritance and succession. These
hamper the growth of economy.

(xiii) Improper use of Natural Resources:

India has large natural resources like iron, coal, manganese, mica
etc. It has perennial flowing rivers that can generate hydro
electricity. Man power is abundant. But these sources are not put in
proper use.
 34

(xiv) Lack of Infrastructure:

The means of transport and communication have not been properly
developed. The road transport is inadequate and railway is quite
less. Due to lack of proper development of road and rail transport,
agricultural marketing is defective. Industries do not get power
supply and raw materials in time and finished goods are not
properly marketed.

(XV) Regional imbalances-

Regional imbalances is also one of the causes of poverty. States such
as Orissa, Bihar, Madhya Pradesh, Chhatisgarh, Jharkhand, Sikkim,
Arunachal Pradesh, Assam etc. lag behind in terms of economic
development and therefore have a high poverty ratio.

(XVI) Vicious circle of poverty-

This concept is given by Prof. Ragner Nurkse.the operation of
vicious circle of poverty has trapped Indians into miseries which in
tern leads to low national income, low per capita income, low per
capital formation, low savins ,low production, less employment.
 35
CHAPTER - 6 : POPULATION IN INDIA

between 1865 and 1872 in different parts

of the country. However 1872 has been
popularly labelled as the first population
census of India.
• On 11th July 1987, world population crossed
500 crores. Hence, 11th July is observed as
'World Population Day'.
Source : Censusindia.gov.in

Stimulate your memory :

Find out the basic features of India’s
Fig. 6.1 : Population in India population that you have studied in Std.
Introduction : VIII and Std. X in the subject of Geography.
(e.g. Sex Ratio, Density of Population, Age
India is a developing country. The rate of
Composition, Urbanisation etc.)
economic development of a country depends on
its quantitative and qualitative growth which Trends in Population Growth :
can be measured in terms of population, national
India’s population is very large in size. It
income, per capita income etc.
is growing rapidly. Information regarding the
Population refers to the number of people size, structure and other characterstics of India's
living in an area at a given point of time. population is obtained through Census Survey.
Population of India is measured once in every
Table 6.1 reviews the trends in population growth:
ten years through a census survey. According
to 2011 census, India’s population was 121.02 Growth of Population in India
crores. India ranks second in the world next to Year Population Average Annual Growth
China. (In Crores) Rate (Percent)
India has 17.5% of the world population 1911 25.2 -
but it occupies only 2.4% of the world's land 1921 25.1 -0.03
area. Population stastistics are compiled and
1931 27.9 1.0
published by the Office of the Registrar General
and Census Commissioner of India. 1941 31.9 1.3
1951 36.1 1.3
You should know :
1961 43.9 2.0
Population Facts
1971 54.8 2.2
• Kautilya wrote ‘Arthashastra’ in the third
century B. C. It prescribed the collection of 1981 68.3 2.2
population statistics as a measure of state 1991 84.6 2.1
policy for taxation. 2001 102.7 1.9
• A systematic and modern population 2011 121.02 1.4
census in its present form was conducted
Table 6.1    Source : Census of India Reports

36
 36
1) Marginal Decline in population (1911- Malthus states that correction of the
1921) : There was a marginal decline in imbalance can be done by introducing
population from 25.2 crores in 1911 to 25.1 'preventive checks' such as late marriage,
crores in 1921. Thus, there was negative moral restraint etc. He also mentions about
growth rate due to spread of epidemics such 'positive or natural checks' such as natural
as influenza, cholera, plague, malaria etc. calamities. Natural checks operate and wash
2) Year of Great Divide : The decadal out the excess population and thus balance is
growth of population was negative during maintained. However, preventive checks are
the period 1911 to 1921. After 1921, there more dependable out of the two.
was a continuous increase in population.
Concepts related to population growth :
Hence, then Census Commissioner of India
had designated the year 1921 as the 'Year 1) Birth rate : Birth rate means the number
of Great Divide'. of births occurring per thousand of the
living population during a year. It is also
3) Positive growth rate (1931-1941) : India known as fertility rate .
recorded an annual growth rate around 1 to
1.3% during this period. 2) Death rate : The number of deaths per
thousand of the living population during
4) Increase in population (1951 onwards) : a year is called death rate. It is also called
Between 1951 to 1971 population increased mortality rate.
from 36.1 crores to 54.8 crores. This
3) Survival rate : The difference between
shows that after Independence, there was
the birth rate and death rate is known as
tremendous rise in population.
the survival rate. This shows the actual
5) Population Explosion (1971-2001) : During rate of population growth.
this period, India experienced 'population
Survival rate = Birth rate – Death rate.
explosion' because during these three
decades, annual population growth rate
2) Theory of Demographic Transition : The
was more than 2%.
theory of demographic transition was given
6) Slow down in population growth rate by A. J. Coale and E. M. Hoover, in the book,
(2001-2011) : There is an indication of "Population growth and Economic Development
slow down in growth rate of population in low-income countries" (1958).
from 1.9% in 2001 to 1.4% in 2011. This According to this theory, every country
shows that the average annual growth rate passes through three stages of demographic
is declining. transition. This theory explains the transition
Theories of Population Growth : from high to low birth rates and death rates.
1) Malthusian theory of population growth : Stages of Demographic Transition :
Thomas Robert Malthus propounded this The theory shows a three stage relationship
theory in his book, "An Essay on the Principle between economic development and population
of Population" in 1798 and modified some growth. According to this theory, as a country
of its conclusions in the next edition in 1803. advances economically, its population passes
According to Malthus, population increases through three stages as follows :
in geometric progression (2, 4, 8, 16, 32, 64 A) First stage (Low growth of population) :
etc.) and food supply increases in Arithmetic It is pre-industrialised and primitive stage.
progression (1, 2, 3, 4, 5, 6, 7, 8, 9 etc.), This creates The birth rate and death rate both are
imbalance between population and food supply. very high. All underdeveloped countries
37
 37
have passed through this stage. Social and Birth rate and Death rate in India
60
economic conditions such as mass illiteracy,
superstitions, mass poverty, orthodoxy, lack 50

Birth rate / Death rate

of medical facilities, spread of epidemics 40

etc. led to low growth of population. 30

Before 1921, India was in the first stage of 20

BR
demographic transition. 10 DR
0
B) Second stage (High growth of population) : 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011
Introduction of industrialisation and Years
Birth rate         Death rate
beginning of the process of economic
development is the indicator of the second Fig. 6.2 : Demographic transition
stage. Due to economic development death
rate started falling rapidly, but the birth Try this :
rate continued to remain high. This led Based on the table 6.2, explain how
to population explosion. All developing demographic transition theory is applicable
countries, including India are in the second to India.
stage of demographic transition. India is on
the verge of entering into the third stage. Population Explosion in India :
C) Third stage (Low or Stable population) :
Rapid industrialisation and urbanisation,
result in the spread of education and
consciousness about standard of living.
With economic development, both birth rate
as well as death rate tend to decline. All
developed countries are in this stage.
1961
Fig. 6.2 helps to understand the theory of
demographic transition.
Birth rate and Death rate in India
Year Birth rate Death rate
1901 49.2 42.6
1911 48.1 47.2
1921 46.3 36.3
1931 45.2 31.2
1941 39.9 27.4
1951 41.7 22.8
1961 41.2 19.0
1971 37.2 15.0
1981 32.5 15.0 2011
1991 29.5 9.8
2001 28.3 9.0
2011 20.97 7.48
Table 6.2    Source : Census of India Reports Fig. 6.3 : Population Explosion
38
 38
Can you tell : 8) Lack of awareness about family welfare
services : Most of the people are ignorant
Observe Fig. 6.3 and draw inferences
about the availability of various means and
from it.
techniques of family planning.
Population explosion is a situation where
Find out :
the growth of population is faster than the growth
and development of the economy. Population Legal age of marriage for males and
explosion in India is due to a high birth rate females in different countries.
followed by a low death rate.
Causes of high birth rate : You should know :

1) Illiteracy : The percentage of illiterates in • Underpopulation : Natural resources

the country is reasonably high. The attitude exceed the population growth.
of illiterate people towards marriage and • Overpopulation : Population growth
child birth has remained rigid . Low level of exceeds availability of natural resources
literacy among females is also responsible
• Optimum Population : There is a balance
for a high birth rate.
between population growth and avilability
2) Universalization of marriage : In India, of natural resources.
marriage is considered as both religious
and social obligation. Even with the spread Causes of low death rate :
of education, the attitude of people towards 1) Improvement in medical and health
marriage remains unchanged at large.
facilities : Due to widespread increase in
3) Age of marriage : In India, the legal age medical and health facilities, epidemics
of marriage is relatively lower compared to like plague, cholera, malaria, small
other countries. It is 18 years for females and pox, tuberculosis etc. have almost been
21 years for males. Low age of marriage has eradicated.
also resulted in a high birth rate.
2) Decline in Maternal Mortality Rate :
4) Preference for male child : Many Indian
Over a period of time, death rate of women
parents are opting to continue having children
dying during maternity has declined due to
until they have a son or desired numbers of
improvement in medical facilities.
sons. This is known as son meta-preference.
3) Fall in infant mortality rate : Due to
5) Joint family system :There is no individual
better medical facilities there has been a
financial responsibility in a joint family.
Hence, existence of joint family is also decline in infant mortality rate from 146
responsible for high birth rate in India. per 1000 in 1951 to 64 per 1000 in 2002
and 47 per 1000 in 2011. Improvement in
6) Dependence on Agriculture : Indian
literacy among women has also resulted in
agriculture is driven by manpower. In India,
better care for infants and as such there is a
there is overdependence on agriculture.
decline in infant mortality rate.
More number of children in the family
implies more labour force available for 4) Increase in literacy : Better education will
field work. help the people to take care of their life and
7) Widespread Poverty : Poor people prefer the needs of their children in a better way.
large families because they feel that more Education has helped the people to come out
children means greater economic support. of their blind faith, beliefs and ignorance.

39
 39
5) Use of nutritious food : Education has B) Social Measures : Population explosion
created awareness about health and is a socio-economic problem. It is related
nutrition. Percentage of children and women to illiteracy, superstition, orthodoxy, low
dying due to malnutrition and ill health was status of women. The following are the
quite high.These deaths are now brought social measures :
under control by providing nutritious diet. • Spread of education
• Improving the status of women
e.g. Mid-day meal programme in schools.
• Raising the minimum age of marriage
6) Disaster management : The National
C) Population Policy of India : Population
Disaster Management Authority (NDMA)
policy was implemented through the
was constituted in 2005. This helps to
following programmes.
mitigate all types of disasters thereby
reducing the loss of lives.
7) Other factors : Education, social reforms,
rapid urbanization, improvement in standard
of living, publicity campaigns are also
responsible for creating awareness among
the people.

You should know :

Effects of population explosion
• Increased pressure on land
• Increased pressure on agriculture
• Pressure on infrastructure and basic
amenities Fig. 6.4 : Small family
• Imbalance between demand for and supply 1) Family Planning Programme : It was
of food launched in 1952 with the objective of
• Inflation reducing the birth rate. Family planning
• Environmental problems refers to planned parenthood. It is a measure
• Social problems in which birth of a child is determined by
choice and not by chance. Family planning
• Low national income
programme was not successful due to lack
Measures to check population explosion : of awareness among the people, false
religious beliefs and inconsistent policies of
To control the problem of population
the government.
explosion in India, the following measures need
to be undertaken : 2) Family Welfare Programme : Family
Planning Programme was renamed as
A) Economic measures : Economic measures Family Welfare Programme in 1979. It
can raise the standard of living of the people attempted to integrate family planning
and help to reduce population growth. Some services with those of maternal, child health
of the important economic measures are as and nutrition.
follows : 3) National Population Policy, 2000 : In
• Expansion of industrial sector. the year 2000, the Government introduced
• Creation of employment opportunities. National Population Policy (NPP) to control
• Removal of poverty population and to improve its quality. Some
• Equitable distribution of income and wealth. of the important features of NPP, 2000 are :

40
 40
1) Free and compulsory school education upto – economic, social, cultural or political.
the age of 14 years. 4) Human resource development occurs through
2) Reduce infant mortality rate to below provision of educational facilities. Increase
30/1000 live births. in literacy rate, especially among women,
3) Reduce Maternal Mortality Rate (MMR) to tends to reduce birth rate and infant mortality
below 100 per 1,00,000 live births. rate. This contributes to population control.
4) Universal immunization of children against 5) Human resource development contributes to
all vaccine preventable diseases. improvement in life expectancy and literacy
5) Delayed marriage for girls, not earlier than rate. This further improves the quality of life.
18 and preferably after 20 years of age. 6) Human resource development helps to
6) Prevention and control of communicable bring about research and development. It
diseases. motivates research in various educational
institutions.
7) Achieve a stable population by 2045.
7) Human development leads to increase
Population as a Human Resource in human productivity, i.e. investment in
Introduction : nutrition, health and education which results
Population constitutes a nation’s valuable in higher productivity.
resource. Nature’s bounty becomes significant 8) Concept of human development is universal
only when people find it useful. It is people with by nature. It applies to less developed as
their demands and abilities that turn them into well as highly developed countries. In short,
resources. Hence, human resource is the ultimate human development embraces the entire
resource. Healthy, educated and motivated people society.
develop resources as per their requirements.
Do you know?
Human resources like other resources are not
equally distributed all over the world. They differ Population Education : It is essentially
in their educational levels, age and sex. Their related to human resource development. It
numbers and characterisitcs also keep changing. aims not only at creating awareness about
The United Nations Development the population but also with developing
Programme (UNDP) has introduced the concept values and attitudes which take care of
of 'Human Development' in 1990. quality and quantity of population. According
to UNESCO ‘‘Population Education is an
Human Development embraces enlargement
educational programme which provides for
of all human choices – economic, social, cultural
a study of population situation of the family,
or political. It is the enrichment of human lives
the community, nation and world with the
which is the real wealth of the society.
purpose of developing in the students rational
Role of human resources in economic and responsible attitude and behaviour
development : towards the situation’’.
1) Human development is an end while
economic growth is a means to achieve You should know :
this end. So, human conditions should be
Demographic Dividend : One of India’s
improved.
competitive advantages is its demographic
2) Human development can contribute to dividend. Demographic dividend occurs
reduction in civil disturbances in a society when the proportion of working people to
and increased political stability. the total population is high. This indicates a
3) Human development is concerned with high potential of human resources which can
widening not merely income choices but contribute to economic growth.
covering all aspects of human development
41
 41

Causes of Population Explosion in India.

Population Explosion In India

The fastest rise in the population of India was during the period of
1951 to 1981, in which the population from 36 crores in 1951 was
reached around to 70 crores in 1981. During this period of 30 years,
population increased around 34 crores, which is the fastest rise in
the history of population statistics. Death rate has become
controlled due to modern health and medical facilities and it has
reduced to become 15 persons per thousand whereas; birth rate has
not got any significant reduction. That is why; this period from 1951
to 1981 is known in India as the period of Population Explosion.

Child Marriage and Multi Marriage System

In India the tradition of child marriage and multi-marriage system is
prevalent. Marriage of around 80% girls of the country is took place
at their young age of between 15 to 20 years. Thus, the result of long
married life comes in the farm of excessive childbirth. Tradition of
multi-marriage system increases the rotation of childbirth. Apart
from it, the increasing tendency of widow marriage, due to the social
reforms is also increasing childbirth up to some extent.

Religious Superstitions
Our religious Gurus say that if a Hindu person does not has son, then
who will perform the religious ritual in its absence. Due to this,
 42

person remains engage in the continuous process of giving birth,

one by one, in search of male baby. In the same manner, in Muslims
both male and female child is a boon (gift) sent by Allah, prevention
of their birth by using any means of family planning is a sin. Due to
these reasons, population is continuously increasing.

Illiteracy and Unawareness

In India around 36% males and 61% females are illiterate. Neither
they have full knowledge of family planning nor they know about
the consequences of excessive childbirth. This is one of the reasons
of rising population and the situation of Population Explosion’ is
emerged.

Poverty
Due to poverty, population is increased of the poor families of our
country. People lives in slum, uses their children as a tool, to earn
money, hence they always try to increase the number of children in
their families.

Birth Rate
In India the average age for marriage is very low, comparatively
other nations of the world. This is also a reason for population
explosion.
 43

Death Rate
In India the death rate from the year 1900 to 1910 was around 35 to
50 persons per thousand, which is now reduced to only 7 to 8
persons per thousand. This become ‘possible in the country by good
and hygienic food, pure drinking water, facilities of hospitals, good
cleanness, medical facilities at affordable rates and control over
Malnutrition, Pneumonia, Cholera, Epidemic etc. Along with, child
death rate has reduced to 69 per thousand, comparatively around
218 per thousand in between the years 1916 to 1920. Due to this
also, the position of Population Explosion occurred.

Indifferent towards Family Planning

Illiterate persons and people living in rural areas are indifferent
towards family planning. They feel fear even by the name of
‘Operation’. They are not interested even in the use of simplest and
cheapest means of family planning.

Lack of Social Security

Due to lack of social security system in India, every parent seeks.
shelter at the time of crises and for their old age, in childbirth.
Whether this would be son or daughter. In the fear of death of their
child at childhood, they give birth too many children, so that any of
them would be support of their old age.
 44

Causes of Unemployment:

1. High Growth rate of Population

In developing country like India, population growth rate tended to
be high due to social, economic and religious reasons. Due to high
growth rate of population, there is a tremendous increase in the size
of population every year.
But with the continues increase in workforce, employment
opportunities are increasing at slower rate in the labour market
which cannot create enough employment. So, lack of employment
opportunities creates the problem of unemployment and
underemployment.
According to United Nations Population Fund, India’s population
grew at an average annual rate of 1.2 percent between 2010 and
2019 to 136 crores.

2. Slow rise in Employment opportunities

Increase in employment and economic growth rate has strong
relationship which means economic growth increase investment
and production which create more employment opportunities in the
economy.
During the planning periods, India attained an average of almost 7
percent of economic growth. But employment opportunities cannot
be created for old and new entrant workforce which increased
unemployment.
 45

3. Low rate of Savings and Investments

Over the period, national income of country increased but at the
same time population also increased. As a result, per capita income
increased but at a lower rate than national income. Due to low per
capita income, rate of savings remained low in the economy which
resulted in low investments in industry, agriculture and other
sectors and increased the problem of unemployment.

4. Capital Intensive Production Technique

There is a scarcity of capital and abundance of labour in India. So,
considering such circumstances, the problem of unemployment can
be solved adopting labor-intensive techniques of production. But
initially, planning commission emphasized on development of heavy
and basic industries which had given more importance to capital
intensive technique than labour intensive technique.
Industrial sector had also adopted capital intensive production
technique to increase productivity and to get security against
organized labour unions.

5. Lack of Vocational Education

In modern time, labourers are required specialization, special skills,
knowledge and technical know-how to get a job and education
system has failed to prepare them for that. So, due to lack of skills
and knowledge they have to remain unemployed; they can even
become self-employed.
 46

6. Lack of Proper Manpower Planning

There was a lack of proper manpower planning during planning
period in India. Education and training of labour was not properly
planned as per the future requirement and industrial demand. It
means the available labour was ineligible to meet its demand.
The outdated education system in India only able to produce clerk
minded workforce or employees which only increase the problem of
unemployment. Even, people with higher degrees have to remain
unemployed in the country which encourage them to go abroad for
the sake of job.

7. Inefficiency of Public Sector

After independence, public sector was given more importance than
private sector for the development of all classes. Government
invested huge amounts in public sectors under five-year planning.
But the productivity of labourers in public sector units was low
which resulted in underutilization of resources and losses.
So, public sector units were not able to generate more employment
because of its low productivity which increases the problem of
unemployment.
 47

8. Negligence of Private Sector

The development of private sectors was controlled and only a few
sectors kept reserved for them by the government. So, which
created less employment opportunities and unemployment
increased.

9. Negligence towards Agriculture Sector

India is an agriculture based economy and most of its population
dependent on agriculture for employment. So, agriculture sector
should be planned in such a way that maximum employment can be
generated.
But during planning period, industrial sector given more importance
than agriculture sector which resulted in failure of agriculture in
generating more employment.
Uncertainty of monsoon, burden of population, lack of irrigation
facilities, lack of agricultural finance and lack of use of machines are
also responsible for poor development of agriculture which resulted
in seasonal and disguised unemployment.

10. Low Mobility of Workers

The mobilization of labour is low due to some social reasons, family
relations, language, religion, casteism, culture, lack of information,
lack of transportation facilities and problem of housing which
restrain them to mobilize and increase problem of unemployment.
 48

People with higher education are not interested in going to

backward or rural areas even they get employment as they don’t
want to lower their standard of living for the sake of employment
and prefer to remain unemployed.

11. Lack of Infrastructural facilities

India is developing country and major portion of the country still
lacks the basic infrastructural facilities like transportation,
electricity, banking, means of communication, insurance and health.
These are the reasons of low generation of employment
opportunities as it become difficult for the industries to survive in
such environment without basic facilities of development.
Apart from the above reasons, lack of national employment policy,
lack of conducive environment for development of industries and
trade, underutilization of natural resources etc. are also responsible
for unemployment in India.
 49

NITI Aayog

NITI Aayog Evolution

- The NITI Aayog was formed on January 1, 2015.

In Sanskrit, the word “NITI” means morality, behaviour, guidance, etc. But, in the
present context, it is a policy and the abbreviation NITI stands for “National Institution
for Transforming India”.

It is the country’s premier policy-making institution that is expected to support and

strengthen the economic growth of the country. It aims to construct a strong state that
will help to create a dynamic and strong nation. This helps India to emerge as a major
economy in the world.

The NITI Aayog’s creation has two hubs called “Team India Hub” and “Knowledge and
Innovation Hub”.

- Team India Hub: Team India Hub leads to the participation of Indian states with
the central government.

- Knowledge and Innovation Hub: The Knowledge and Innovation Hub builds the
institution’s think tank capabilities.

NITI Aayog is additionally creating itself as a State of the Art Resource Center, with the
essential resources, knowledge, and skills that will empower it to act with speed,
advance research and innovation, bestow crucial policy vision to the government and
manage unforeseen issues.

The reason for setting up the NITI Aayog is that people had expectations for growth and
development in the administration through their participation. This required institutional
changes in administration and active strategy shifts that could seed and foster
substantial scale change.
 50

Objectives of NITI Aayog

- The active participation of States in the light of national objectives and to provide
a framework ‘national agenda’.
- To promote cooperative federalism through well-ordered support initiatives and
mechanisms with the States on an uninterrupted basis.
- To construct methods to formulate a reliable strategy at the village level and
aggregate these gradually at higher levels of government.
- Act as an economic policy that incorporates national security interests.
- To pay special consideration to the sections of the society that may be at risk of
not profiting satisfactorily from economic progress.
- To propose strategic and long-term policy and programme frameworks and
initiatives, and review their progress and their effectiveness.
- To grant advice and encourage partnerships between important stakeholders
and national-international Think Tanks, as well as educational and policy
research institutions.
- To generate knowledge, innovation, and entrepreneurial support system through
a shared community of national and international experts, etc.
- To provide a platform for resolution of inter-sectoral and inter-departmental
issues to speed up the accomplishment of the progressive agenda.
- To preserve a state-of-the-art Resource Centre, be a repository of research on
good governance and best practices in sustainable and equitable development
as well as help their distribution to participants.
- To effectively screen and assess the implementation of programmes and
initiatives, including the identification of the needed resources to strengthen the
likelihood of success.
- To pay attention to technology improvement and capacity building for the
discharge of programs and initiatives.
- To undertake other necessary activities to the implementation of the national
development agenda, and the objectives.
 51

NITI Aayog Composition

The NITI Aayog will comprise the following:

1. Chairperson being the Prime Minister of India

2. Governing Council consisting of the Chief Ministers of all the States and Lt.
Governors of Union Territories in India.
3. Regional Councils will be created to address particular issues and possibilities
affecting more than one state. These will be formed for a fixed term. It will be
summoned by the Prime Minister. It will consist of the Chief Ministers of States
and Lt. Governors of Union Territories. These will be chaired by the Chairperson
of the NITI Aayog or his nominee.
4. Special invitees: Eminent experts, specialists with relevant domain knowledge,
which will be nominated by the Prime Minister.

The full-time organizational framework will include, in addition to the Prime Minister as
the Chairperson:
- Vice-Chairperson (appointed by the Prime Minister)
- Members (which include):
a) Full-time members
b) Part-time members: Maximum of 2 members from foremost universities, leading
research organizations, and other innovative organizations in an ex-officio
capacity. Part-time members will be on a rotational basis.
c) Ex Officio members: Maximum of 4 members of the Council of Ministers which is
to be nominated by the Prime Minister.
d) Chief Executive Officer: CEO will be appointed by the Prime Minister for a fixed
tenure. He will be in the rank of Secretary to the Government of India.

7 pillars of effective governance envisaged by NITI Aayog

The NITI Aayog is based on the 7 pillars of effective governance:

Pro-people: It fulfils the aspirations of society as well as individuals

Pro-activity: In anticipation of and response to citizen needs
Participation: Involvement of the citizenry
Empowering: Empowering, especially women in all aspects
Inclusion of all: Inclusion of all people irrespective of caste, creed, and gender
Equality: Providing equal opportunity to all especially for youth
Transparency: Making the government visible and responsive
 52

Food Security and Recent Trends

India has experienced remarkable economic growth in recent years and

remains one of the fastest growing economies in the world. However, poverty
and food insecurity in India are still areas of concern in spite of many strides.
Food is considered as a basic amenity essential for the sustenance,
development and growth of an individual.

India has ranked 101 among the 116 countries on the Global Hunger Index,
2021. According to the Food and Agriculture Organisation, the Food Price
Index has increased by 30% in the year 2021-22.

Although the Government of India has been actively addressing food security
at households for a long time through the Public Distribution System and the
National Food Security Act (NFSA) 2013, there are still concerns related to
Food Security in India amidst increasing population, climate change and
global supply chain disruption (Russia-Ukraine War) that need to be
addressed.

What is Food Security?

The concept of Food Security is multifaceted. Food is as essential for living as

air is for breathing. But food security means something more than getting two
square meals. It has following dimensions:

Availability: It means food production within the country, food imports and the
stock stored in government granaries.
Accessibility: It means food is within reach of every person without any
discrimination.

Affordability: It implies that having enough money to buy sufficient, safe and
nutritious food to meet one's dietary needs.
Thus, Food security is ensured in a country only when sufficient food is
available for everyone, if everyone has the means to purchase food of
acceptable quality, and if there are no barriers to access.
 53

What is the Current Framework for Food Security in India?

Constitutional Provision: Though the Indian Constitution does not have any
explicit provision regarding right to food, the fundamental right to life enshrined
in Article 21 of the Constitution can be interpreted to include the right to live
with human dignity, which may include the right to food and other basic
necessities.

Buffer Stock: Food Corporation of India (FCI) has the prime responsibility of
procuring the food grains at minimum support price (MSP) and stored in its
warehouses at different locations and from there it is supplied to the state
governments in terms of requirement.

Public Distribution System: Over the years, Public Distribution System has
become an important part of Government’s policy for management of the food
economy in the country. PDS is supplemental in nature and is not intended to
make available the entire requirement of any of the commodity.
Under the PDS, presently the commodities namely wheat, rice, sugar and
kerosene are being allocated to the States/UTs for distribution.
Some States/UTs also distribute additional items of mass consumption
through the PDS outlets such as pulses, edible oils, iodized salt, spices, etc.

National Food Security Act, 2013 (NFSA): It marks a paradigm shift in the
approach to food security from welfare to rights based approach.
NFSA covers 75% of the rural population and 50% of the urban population
under:

- Antyodaya Anna Yojana: It constitute the poorest of-the-poor, are

entitled to receive 35 kg of foodgrains per household per month.
- Priority Households (PHH): Households covered under PHH category
are entitled to receive 5 kg of foodgrains per person per month. The
eldest woman of the household of age 18 years or above is mandated
to be the head of the household for the purpose of issuing ration
cards.In addition, the act lays down special provisions for children
between the ages of 6 months and 14 years old, which allows them to
receive a nutritious meal for free through a widespread network of
Integrated Child Development Services (ICDS) centres, known as
Anganwadi Centres.
 54

What are the Challenges Related to Food Security in India?

Deteriorating Soil Health: A key element of food production is healthy soil

because nearly 95% of global food production depends on soil.
Soil degradation due to excessive or inappropriate use of agrochemicals,
deforestation and natural calamities is a significant challenge to sustainable
food production. About one-third of the earth’s soil is already degraded.
Invasive Weed Threats: In the past 15 years, India has faced more than 10
major invasive pest and weed attacks.
Fall Armyworm (Pest) destroyed almost the entire maize crop in the country in
2018. India had to import maize in 2019 due to the damage caused by the
pest in 2018.
In 2020, locust attack was reported in districts of Rajasthan and Gujarat.

Lack of Efficient Management Framework: India lacks strict management

framwork for food security. Public Distribution System faces challenges like
leakages and diversion of food-grains, inclusion/exclusion errors, fake and
bogus ration cards, and weak grievance redressal and social audit
mechanism.

Faults in Procurement: Farmers have diverted land from producing coarse

grains to the production of rice and wheat due to a minimum support price.
Further, there is a tremendous wastage of around Rs.50,000 crore annually by
both improper accounting and inadequate storage facilities

Climate Change: The monsoon accounts for around 70% of India's annual
rainfall and irrigates 60% of its net sown area. Changing precipitation patterns
and growing frequency and intensity of extreme weather events such as
heatwaves, floods are already reducing agricultural productivity in India,
posing a serious threat to food security.
To increase domestic availability amid low Kharif Crop productivity this year
(2022), the Government of India has banned the export of broken rice.

Supply Chain Disruption Due to Unstable Global Order: At a time when

the Covid-19 Pandemic had already impacted food supply around the world in
2020, Russia-Ukraine War in 2022 has disrupted the global supply chain and
resulted in food scarcity and food inflation.
Russia and Ukraine represent 27% of the world market for wheat, 26
countries, mainly in Africa, West Asia and Asia, depend on Russia and
Ukraine for more than 50% of their wheat imports.
 55

What Should be the Way Forward?

Moving Towards Sustainable Farming: For ensuring Food Security in India ,

improvement in productivity through greater use of biotechnology, intensifying
watershed management, use of nano-urea and access to micro-irrigation
facilities and bridging crop yield gaps across States through collective
approach should be at priority.
There is also a need to look forward towards establishing Special Agriculture
Zones through ICT based crop monitoring.
Towards Precision Agriculture: There is need to increase the use information
technology (IT) in agriculture to ensure that crops and soil receive exactly
what they need for optimum health and productivity.
By adopting precision agriculture with high-tech farming practices, farmers'
incomes will increase, input cost of production will be reduced, and many
other issues of scale will be addressed.

Revitalising Aadhaar Seeding of Ration Cards: To speed up the process of

Aadhaar linking to ration cards, ground monitoring measures must be taken
that will ensure no valid beneficiary is left out of their share of food grains that
can give thrust to the aim of zero hunger (Sustainable Development Goal- 2).
Direct Benefit Transfer (DBT) Through JAM: There is a need to streamline
food and fertiliser subsidies into direct benefit transfers to accounts of
identified beneficiaries through the JAM trinity platform (Jan Dhan, Aadhaar,
and Mobile) that will reduce huge physical movement of foodgrains, provide
greater autonomy to beneficiaries to choose their consumption basket and
promote financial inclusion.

Ensuring Transparency in Food Stock Holdings: Using IT to improve

communication channels with farmers can help them to get a better deal for
their produce while improving storage houses with the latest technology is
equally important to deal with natural disasters.
Further, foodgrain banks can be deployed at block/village level, from which
people may get subsidised food grains against food coupons ( that can be
provided to Aadhar linked beneficiaries).

Addressing Issues With an Umbrella Approach: By looking at diverse

issues from a common lens, such as inequality, food diversity, indigenous
rights, and environmental justice, India can look forward to a sustainable
green economy.
 56

NEW INDUSTRIAL POLICY, 1991

- The Goverrment of India announced the New Industrial Policy (NIP) on

24th July, 1991. The NIP aimed at liberalization of Indian industry.

- The main objectives of the NIP are:

(a) Attainment of international competitiveness through emphasis on
technology upgradation.
(b) Development of Backward Areas.
(c) Encouraging competition in the Indian industry.
(d) Improvementin industrial efficiency and productivity
(e) Full utilization of capabilities of Indian firms to generate employment.
(f) Revival of weak units.

The main features of IP, 1991 can be broadly divided into five groups as follows:

1. Industrial Licensing.
2. Foreign Investment.
3. Foreign Technology.
4. Public Sector Policy.
5. MRTP Act.

1. Industrial Licensing: The most important feature of NIP 1991 was in respect of
industry licensing. In this context, the following points are to be noted:

(a) Abolition of Industrial Licensing: The NIP 1991 delicensed all industries
except 18. The licensing was further reduced to six industries. Delicensing was
intended improve the efficiency and productivity of Indian industries. In respect of
delicensed industry, no approval is required from Government authorities for setting
up new projects or for expansion of existing capacities. However, entrepreneurs
were required to submit an Industrial Entrepreneur Memorandum (IEM) to the
Secretariat for Industrial Approvals (SIA).

At present, the six industries that are subject to licensing include:

● Alcohol
● Cigarettes
● Industrial Explosives
● Defense Products
● Drugs and Pharmaceutical
● Hazardous chemicals.
 57

(b) Abolition of Phased Manufacturing Programme: The NIP 1991 has suggested
for abolition of PMP, which was in force in engineering and electronic industries.
Under PMP, there was a need for domestic content (raw materials, components,
etc.) in production. The NIP abolished such programmes in future due to liberalised
import policy, and also due to devaluation of rupee.

(c) Liberalization of Industrial Location: The NIP 1991 stated that there is no need
to obtain approval from the Central Government to locate industries in areas 25 km
away from the cities having a population of more than one million. However,
industries subject to compulsory licensing, approval needs to be obtained. Industries
of non-polluting nature can be located within 25 km. of the periphery of cities of more
than 1 million population.

(d) Broad Banding of Industries: The broad banding of industries would be

permitted existing units, if it was done without additional investment. Broad banding
enables firms to club together related products into generic categories. It helps the
manufacturers to change the product-mix depending upon market demand or
situation without any procedural delays and costs involved in seeking changes in
their industrial licenses.

(e) Automatic Licence for Import of Capital Goods: Projects requiring import of
capital goods, automatic licence would be given in the following cases:

● Where availability of foreign exchange is ensured through foreign equity.

● If CIF value of the required imported capital goods is less than 25 percent of
the total value of plant and equipment, automatic licences upto maximum
value of Rs. 2 crore would be provided.

2. Foreign Investment: Prior to this policy, it was necessary to obtain approval from
the government in respect of foreign investment. This often caused delays and
bureaucratic hurdles. The NIP, 1991 liberalized foreign investment in India. In this
connection, the following points are to be noted:

(a) Automatic Approval: The NIP, 1991 specified a list of high investment and high
tech priority industries wherein automatic permission was to be given for direct
foreign investment up to 51% of equity. In 1997-98, equity investment up to 100% by
NRIs and Overseas Corporate Bodies was permitted in high priority industries such
as infrastructure industries. The foreign direct investment under the automatic route
was subsequently expanded to include a large number of Industries. At present, FDI
up to 100% is permitted under the automatic route in most of the sectors. Entry
under the automatic route only requires post-entry notification and no prior approval.
 58

(b) Guidelines for Foreign Investment: In 1997, the Government announced the
first ever guidelines for FDI in India for quick approval of foreign investment in areas
not covered under the automatic approval route. Priority areas for FDI were listed in
the guidelines which include infrastructure industries, export oriented units, large
scale employment generation industries, especially in rural areas, social sector areas
like hospitals, drugs and pharmaceuticals, and so on.

(c) Setting up of Foreign Investment Promotion Board: The Government has set
up FIPB. The FIPB plays an important role relating to FDI. The role of FDI is as
follows:
● To approve FDI in India.
● To negotiate with foreign firms to invest in India.

3. Foreign Technology Agreements: The NIP 1991 liberalised the import of foreign
technology. The foreign technology not only helps to improve the quality of products
and services, but also it helps to reduce the cost of production. Keeping in view the
objective of attaining international competitiveness. the NIP liberalized foreign
technology agreements. In this connection, the following points to be noted:

(a) Automatic approval to be given for import of foreign technology in high priority
industries up to a lump sum payment of 2 million US dollars, 5% royalty for domestic
sales and 8 per cent for exports, subject to a total payment of 8% of sales over a 10
year period from the date of agreement or 7 years from the commencement of
production.

(b) In industries other than high priority industries, automatic approval for import of
technology would be given if no foreign exchange is required for any payment.

(c) No permission required for hiring foreign technicians and for foreign testing of
indigenously developed technologies.

4. Public Sector Policy: On account of poor performance of the public sector, the NIP
1991 reduced the role of the public sector, and placed more focus on the role of the
private sector. In this connection the following points are to be noted:

(a) Dereservation of Public Sector: The NIP 1991 dereserved the public sector. Pr
1991, seventeen industries were reserved for public sector, which were reduced
industries which include:
● Defence ● Mining of Iron Ore, Manganese
● Atomic Energy Ore,
● Railways ● Specified Minerals
● Coal and Lignite ● Mining of Copper, Zinc, etc.
● Mineral Oils
 59

At present, there are only three items reserved for public sector which include:
● Railways
● Atomic Energy
● Specified Minerals

(b) Weak/Sick Units: The policy aimed at making public sector healthy and growth
oriented. For this purpose, it was proposed to refer the sick public sector units to the
Board for Industrial and Financial Reconstruction (BIFR). The BIFR would
recommend revival package for weak units, and for closure of non-viable units. A
social security mechanism was to be created to protect the interests of the workers
who would be affected by the rehabilitation process.

(c) Autonomy: The NIP 1991 stated the management of public sector units would be
provided greater degree of autonomy to improve managerial effectiveness in
decision making. The management autonomy would be granted through the system
of memorandum of understanding (MOU).

(d) Disinvestment: The Government also announced the disinvestment of selective

public sector units. The disinvestment would take place by offering a part of the
Government shareholding in the public sector units to mutual funds, financial
institutions, private investors, workers and to other corporate firms. The process of
disinvestment was started in 1991-92.

5. Other Features: Some of the other important clauses of the NIP 1991 were as
follows:

(a) Removal of Mandatory Conversion Clause (MCC): In India, banks and FIs
provide a large part of industrial finance. The banks and Fls had a clause in the loan
agreement to convert the loans into equity, if so required. This would create a threat
of takeover by FIs. Therefore, the NIP 1991 abolished MCC.

(b) Modification of MRTP Act: The new policy scrapped the threshold limit of
assets of Rs. 100 crore in respect of MRTP firms. Now there is no limit.

Prior approval of the central government for expansion, merger, appointment of

directors. etc., is not required. The focus would be on controlling the restrictive and
unfair trade practices by large firms. The MRTP Act has been replaced by the
Competition Act, 2002. The Competition Act, 2002 is a landmark legislation that aims
at promoting competition through prohibition of anti-competitive practices, abuse of
dominance and through regulation of companies beyond a particular size.
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EVOLUTION OF NEW INDUSTRIAL POLICY 1991

The Government of India announced the new industrial policy (NIP) on July 24,
1991. The NIP aimed at liberalisation of the Indian industry, so as to improve the
efficiency and accelerate industrial growth in the country.

The NIP 1991 is evaluated by analysing the failures and achievements. The main
failures and achievements of NIP 1991 are as follows:

- CRITICISMS/FAILURES OF NIP, 1991:

1. No Clear Evidence of Positive Impact on Growth: The NIP 1991 liberalised the
Indian industry with the main objective to accelerate industrial growth in the country.
However, there is no clear evidence of a positive impact of the policy on industrial
growth. Although, the Indian industry showed good growth from 1993 to 1996.
However, there was sharp decline in industrial growth since 1996. Also, there were
wide fluctuations in growth of the various sub-sectors of the industry.

2. Problem of Unemployment: The unemployment is on the increase due to

restructuring of large industries. For instance, there has been negative growth in
unemployment in the public sector as well as in the organised private sector since
2001. The employment in the public sector has dropped from 192 lakh in 1992 to
186 lakh in 2003.

3. Problem for Domestic Firms: The liberalised entry of foreign MNCs in the Indian
market can have serious consequences on the domestic industries. The domestic
firms may find it difficult to compete with high tech and highly professional foreign
MNCs.
However, this is the right time for the Indian firms to up-date and compete globally
with or without the support of foreign collaborations. It is the survival of the fittest, the
basic law of nature. The Indian firms will have to improve their efficiency if they want
to compete with foreign MNCs.

4. Problem of Delicensing: The NIP 1991 recommended the automatic expansion of

production capacities without government approval in all industries, except six
industries. This has resulted in heavy expansion of capacities in the 1990s in all
sectors of the industry. The expansion in capacities has resulted in recession as
supply far exceeded demand.

5. Problem of Foreign Technology: Critics point out that the foreign technology may
not suit to Indian conditions. Again, there is a possibility of overdependence on
foreign technology rather than developing indigenous technology.
 61

6. Problem of Foreign Investment: The NIP 1991 liberalised foreign investment in

India. At present FDI is allowed in several sectors. However, the MNCs are not very
much interested in infrastructural development projects involving long gestation
period. Also FDI results in outflow of foreign exchange due to payment of dividends
and royalties.

7. Problem of Dereservation of Public Sector: The NIP 1991 has dereserved

industries of public sector in favour of private sector. This has resulted in expansion
of capacities in the private sector, which in turn has resulted in recession in the
industrial sector.

8. Problem of Disinvestment: The NIP, 1991 advocated disinvestment of public

sector.
Accordingly, the Government of India started the process of disinvestment of public
sector. units on selective basis. However, disinvestment is criticized on several
grounds, such as:
● Disinvestment may be disadvantageous to the customers as the private
companies may tend to exploit customers by charging high prices.
● Disinvestment may also lead the reduction in employment, as private
companies would try to reduce overheads by downsizing the manpower.

- ACHIEVEMENTS

1. Recovery of Industrial Growth: The Indian industry, which was under severe
crisis in 1991-92, has been revived to a certain extent, in spite of global recession
during the 1990s.

In 1991-92, the industrial growth was miserably low of about 0.6%. The industrial
growth reached a high of 13% in 1995-96. However, it came down in subsequent
years, due to recession in the world economy and consequently in the Indian
economy. The industrial growth rate in 2003-04 was 7%.

2. Foreign Investment: The NIP 1991 liberalised foreign direct investment.

Automatic approval of foreign direct investment (FDI) was allowed upto 51% of
equity and even upto 100% in certain cases. FDI gives opportunities to Indian
industry for technological upgradation, gaining access to global managerial skills and
practices, to make optimum use of resources, and to attain international
competitiveness through higher efficiency.

The foreign direct investment has generated capital resources in the country. The
foreign direct investment has increased from US dollars 97 million in 1990-91 to a
high of 4734 million US dollars in 2000-01. Thereafter, FDI was on a decline. In
2003-04 India received FDI worth 3420 million US dollars.
 62

3. Foreign Technology: The NIP 1991 has liberalised foreign technology

agreements. Automatic permission is being granted for the import of foreign
technology with a lump sum payment of upto 2 million US dollars. This enabled the
import of foreign technology. The import of foreign technology has helped to improve
the international competitiveness of Indian firms. Again, the domestic consumers are
at an advantage due to improved quality of goods and services, and that too at
reduced prices.

4. Benefits of Delicensing: The NIP 1991 abolished licensing, except for 18

industries, which subsequently brought down to 6 industries. Due to delicensing.
Indian industrialists were freed from bureaucratic hassles and such they could
concentrate on production activities more effectively.

5. Benefits of Dereservation: The NIP 1991 dereserved public sector. At present,

there are only three units reserved for public sector units which include railways,
atomic energy and specified minerals. The dereservation has enabled the private
sector to enter in those areas which were earlier reserved exclusively for the public
sector. The dereservation has enabled the private firms to compete effectively, which
in turn improved the industrial efficiency and productivity.

6. Benefits of Disinvestment: The process of disinvestment of the public sector has

been started since 1991. The disinvestment of public sector is intended to achieve
certain objectives such as:

● Better service to the customers.

● Responsibility on the part of management of disinvested companies.
● Improvement in efficiency and productivity of disinvested units.
● Reduction in Government deficits.
● Effective utilisation of disinvestment funds by the Government, etc.
 63

MSME (Micro, Small, and Medium Enterprise)

Introduction

The year 2023 has started on an optimistic note. The economy seems to be on the
path of recovery post the challenges posed by the COVID-19 pandemic and the
Russia-Ukraine War, although global uncertainties remain. The Industrial sector has
received much attention especially the role of large businesses in economic
recovery. However the Micro, Small and Medium Enterprises (MSME) sector is more
crucial as MSMEs are the largest employers in India outside of agriculture. The
Union Budget 2023-24 has introduced several enabling provisions for the growth of
the MSMEs. However, MSMEs continue to face several challenges. Addressing
these challenges can ensure not only faster overall economic growth, but also make
the growth process more sustainable and inclusive.

What are the MSMEs?

- MSME (Micro, Small, and Medium Enterprise) are regulated under the Micro,
Small & Medium Enterprises Development (MSMED) Act, 2006.
- MSMEs are managed under the Ministry of MSME.
- Earlier, MSMEs were categorised based on the amount invested in plant and
machinery/equipment. With revised regulations effective from July 2020,
annual turnover has also been added as a criteria.

The classification criteria are:

(a) Micro Enterprise:

Investment in Plant and Machinery or Equipment is less than INR 1 crore and Annual
Turnover is less than INR 5 crore;

(b) Small Enterprise:

Investment in Plant and Machinery or Equipment is less than INR 10 crore and
Annual Turnover is less than INR 50 crore;

(c) Medium Enterprise:

Investment in Plant and Machinery or Equipment is less than INR 50 crore and
Annual Turnover is less than INR 250 crore.
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Statutory Bodies

- The Ministry of MSME heads 5 statutory bodies

- These bodies are responsible for aiding MSMEs with respect to Government
schemes and policies.

Khadi and Village Industries Commission (KVIC):

It is a statutory organisation engaged in promoting and developing khadi and village
industries for providing employment opportunities in rural areas, thereby
strengthening the rural economy.

The Coir Board:

It is a statutory body established for promoting overall development of the coir
industry and improving living conditions of workers in the industry.

National Small Industries Corporation Limited (NSIC):

It was established in 1955. It is responsible for promoting, aiding and fostering
growth of micro and small enterprises in the country, generally on commercial basis.

National Institute for Micro, Small and Medium Enterprises, (NI-MSME):

It was established in 1960. It is responsible for enterprise promotion and
entrepreneurship development, enabling enterprise creation, performing diagnostic
development studies for policy formulation, etc.

Mahatma Gandhi Institute for Rural Industrialisation (MGIRI):

The objectives of the Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)
are to accelerate rural industrialisation for sustainable village economy, empower
traditional artisans, encourage innovation through pilot study and R&D for alternative
technology using local resources.
 65

What is the significance of MSMEs?

Contribution to GDP and Exports: In 2020-21, MSMEs accounted for 26.8% of

Gross Value Added (GVA). The contribution of MSMEs in exports stood at 42.6%
(April 2022-August 2022).The contribution of Manufacturing MSME Gross Value
Added (GVA) contributed 38.4% of India’s total Manufacturing GVA (2020–21).

As Indian economy is poised to reach US$ 5 trillion status, the Ministry of MSME has
set a goal of increasing its contribution to GDP to 50% by 2025.

Rural Development: 51% of MSMEs are located in rural areas. In contrast to large
corporations, MSMEs have aided in the industrialization of rural areas at a low
capital cost. The sector has made significant contributions to the rural socioeconomic
growth while also supplementing major industries.

Creation of Employment: MSMEs are India’s largest employer outside of

agriculture. They employ over 11.1 crore people, or 45% of all workers, and have low
capital and technology requirements. MSMEs are key to the Make in India mission.

Simple Structure: Given India’s middle-class economy, MSMEs offers the flexibility
of starting with limited resources under the owner’s control. As a result, making
decisions becomes easier and more efficient . A large corporation, on the other
hand, requires a specialist for every departmental function due to its complex
organisational structure.

Innovation Promotion: They support local resource mobilisation, capacity building,

industrial development in rural areas, and give aspiring entrepreneurs a chance to
develop innovative products. It has enormous potential for connecting India’s MSME
base with large corporations. Multinational corporations are increasingly purchasing
semi-finished and auxiliary products from small businesses.

Social Inclusion: According to the Annual Report of The Ministry of MSMEs (2021-
22), the socially backward groups owned almost 66.27% of MSMEs. In rural areas,
almost 73.67% of MSMEs were owned by socially backward groups.

MSMEs can play a significant role in creating an inclusive and sustainable society.
They encourage balanced regional development, gender equity, and the use of
banking services and products. In light of the information presented above, MSMEs
can become the ‘growth engine of the nation’.
 66

What are the challenges faced by MSMEs?

Financial Constraints: This is a significant impediment for the MSME sector. Only
16% of SMEs have timely access to finance, forcing small and medium-sized
businesses to rely on their own resources.

Lack of Formalisation: Almost 86% of the country’s manufacturing MSMEs are

unregistered. Only about 1.1 crore of the 6.3 crore MSMEs are registered with the
Goods and Services Tax (GST) regime, and the number of income tax filers is even
lower. As a result of limited availability and access to data, as well as legacy
underwriting methods, the credit requirement of Indian MSMEs’ have largely gone
unmet.

Access to Technology: Majority of MSMEs use outdated technology that prevents

them from keeping up with the modern world. Adoption of new technology and
training employees is difficult and expensive, especially in manufacturing where both
physical equipment and software are involved. Lack of access to IT education
contributes to the technological gap. Another significant factor is a lack of
awareness, which reduces willingness to invest in advanced technology solutions.

Skill Development: Skilled employees are critical for business growth. Multinational
corporations (MNCs) recognise this and place on-the-job training at the heart of their
operations. Unfortunately, small-scale businesses fail to upskill their workforce,
causing them to suffer unknowingly.

Creativity: Businesses are becoming more knowledge-based, and their success and
survival are inextricably linked to their creativity, and innovation. To remain
competitive, MSMEs must learn and incorporate the process of innovation into their
daily operations. However, they lack the resources and capacity to undertake
innovations.

Competition: Because of increased competition, Indian MSMEs are finding it difficult

to sell their products in both domestic and international markets. Small-scale
enterprises face stiff competition from global counterparts as well as domestic giants
due to their massive scale of operation (large corporations). While the government
does provide protection for such small-scale businesses, competition remains largely
one-sided.

Red-Tapism: MSMEs require various approvals and entrepreneurs are forced to

navigate various government departments in order to obtain construction permits,
enforce contracts, pay taxes, start a business, and trade across borders. In addition,
regulatory risks and policy uncertainty limit scaling-up of MSMEs.
 67

What steps have been taken to support MSMEs?

Credit and Financial:

Prime Minister’s Employment Generation Programme: The scheme,

implemented by the KVIC, aims to generate employment opportunities in rural and
urban areas by setting up new self-employment ventures/projects/micro enterprises.
The programme also aims to provide continuous sustainable employment to
prospective artisans and unemployed youth and increase the wage-earning capacity
of artisans and contribute to the growth of rural and urban employment.

Credit Linked Capital Subsidy Scheme: Its objective is to facilitate technology

upgrade among MSEs (Micro and Small) by providing capital subsidy of 15% (on
institutional finance of up-to Rs 1 crore availed by them) for induction of well-
established and improved technology in the specified 51 sub-sectors/products.

Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE): It
provides collateral-free credit to the micro and small enterprise sector.

Special Credit Linked Capital Subsidy Scheme (SCLCSS): This scheme will help
enterprises in the services sector meet various technology requirements. It also has
a provision to grant 25% capital subsidy for procurement of plant & machinery and
service equipments through institutional credit to MSMEs owned by SC/ST
entrepreneurs without any sector specific restrictions on technology upgradation.

Raising and Accelerating MSME Performance (RAMP): The scheme aims at

strengthening institutions and governance at the Centre and State, improving
Centre-State linkages and partnerships and improving access of MSMEs to market
and credit, technology upgradation and addressing issues of delayed payments and
greening of MSMEs..

Mudra Loan Scheme: It was launched in April, 2015 for providing loans up to INR
10 lakh to the non-corporate, non-farm small/micro enterprises. It encompasses 3
financing loans: Tarun (loans up to INR 10 Lakhs), Kishore (loan up to INR 5 Lakhs),
Shishu (loan up to INR 50,000).

Skill Development and Training

A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship

(ASPIRE): The objectives of this scheme are to create new jobs, promote
entrepreneurship culture in the country, promote innovation in the MSME sector.
 68

Entrepreneurship and Skill Development Programmes (ESDP): Under this, the

Ministry of MSME has been organising several programmes focussing on the
process of improving skills and knowledge of entrepreneur, and enhancing the
capacity to develop, manage and organise a business venture.

Infrastructure

Scheme of Fund for Regeneration of Traditional Industries (SFURTI): The

objectives are to organise traditional industries and artisans into clusters to make
them competitive and provide support for their long-term sustainability, enhance
marketability of products of such clusters, build innovative products, improve
technologies etc. The scheme cover three types of interventions, e.g., soft
intervention wherein activities are held to build general awareness, counselling, skill
development, etc.; hard intervention which includes creating common facility centers,
raw material banks, etc.; and thematic intervention on brand building, new media
marketing, e-commerce initiatives, research and development, etc.

Scheme for Micro & Small Enterprises Cluster Development Programme (MSE-
CDP): The Ministry of MSME has adopted the cluster development approach as a
key strategy for enhancing productivity and competitiveness as well as capacity
building of Micro and Small Enterprises (MSEs). The programme includes activities
such as support funding for setting up Common Facility Centres (CFC) and
Infrastructure Development Projects (IDP).

Technology Upgrade and Competitiveness

Financial Support to MSMEs in ZED Certification: The scheme promotes Zero

Defect and Zero Effect (ZED) manufacturing among MSMEs. It provides ZED
Assessment for their certification to encourage MSMEs to constantly upgrade their
quality standards in products and processes, promote adaptation of quality
tools/systems and energy-efficient manufacturing, and drive manufacturing by
adopting the Zero Defect production processes and without impacting the
environment.

Support for Entrepreneurial and Managerial Development of SMEs through

Incubators: The objective of the scheme is to promote and support the creativity of
MSME enterprises and encourage adoption of the latest technologies in
manufacturing as well as knowledge-based innovative MSMEs.

Digitalisation: Government initiatives such as the Digital Saksham and the

interlinking of the Udyam, e-Shram, National Career Service (NCS), and Atmanirbhar
Skilled Employee-Employer Mapping (ASEEM) portals show the promise of targeted
digitalisation schemes.
 69

Services

Building Awareness on Intellectual Property Rights (IPR) for MSMEs: It has

been launched to promote awareness about IPRs among MSMEs by assisting them
in technology upgrade and enhancing competitiveness and effective utilisation of IPR
tools.

Trade, Import and Export for MSMEs: MSME support and development
organisation, National Small Industries Corporation (NSIC), will assist MSMEs
working with the Agricultural and Processed Food Products Export Development
Authority (APEDA) across multiple areas. APEDA members will get access to NSIC
schemes, which would help them address issues pertaining to technology adoption,
skills, product quality and market access.

Miscellaneous

In June 2022, the Union Government announced a new initiative called ‘Promotion of
MSMEs in North Eastern Region and Sikkim‘. Its main purpose is to stimulate
MSMEs in the North East by establishing mini-technological centres, developing new
and existing industrial estates, and promoting tourism.

In November 2021, NITI Aayog released a discussion paper to introduce new

financial entities called ‘Digital Banks‘ that would fundamentally aim to bridge the
current credit gap among India’s MSMEs and get them into the formal financial fold.

Support by Private Sector

The Small Industries Development Bank of India (SIDBI) has inked a pact with
Google to pilot social impact lending with financial assistance up to INR 1 crore at
subsidised interest rates to micro enterprises. To reinvigorate the Indian MSME
sector, Google India Pvt. Ltd. GIPL, will bring a corpus of US$ 15 million for micro
enterprises as a crisis response related to COVID-19.

Digital freight forwarder Freightwalla, launched a shipment tracking service for

MSME exporters and importers based on predictive analytics to help businesses
tackle risks associated with shipment delays and improve supply chain efficiency.

Bombay Stock Exchange (BSE) announced that it has collaborated with the All-India
MSME Association (AIMA MSME) to encourage and promote the listing of MSMEs
and start-ups.

Meta India has announced the launch of online resource centre ‘Grow Your Business
Hub‘, to help MSMEs find relevant information, tools and solutions curated to cater to
their business goals.
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What more should be done to support MSMEs?

First, There is a need to push for for Digitisation of MSMEs. Owing to problems like
the dearth of proper infrastructure, finance, and limited knowledge, the MSME sector
has been slow in going digital. Digitising the sector could help in enhancing efficiency
and reliability, cutting costs, and keeping up with latest technological trends.

Second, The National Logistics Policy can also be used to boost the competitiveness
of MSMEs. The NLP aims to reduce logistics costs as a percentage of GDP from 13-
14 percent to 8%, putting the country on par with developed nations. While lower
costs will encourage more MSMEs to use logistics services powered by technology.

Third, with the advent of online e-commerce platforms, MSMEs have got access to a
channel to expand their markets. However, to meet the growing demand for e-
commerce in suburban and rural areas, they will require assistance. To that end, the
Government could enlist India Post as a technologically advanced last-mile delivery
partner capable of facilitating cash-on-delivery transactions at competitive rates.

Fourth, similarly, the unparalleled reach of Indian Railways can be leveraged to

quickly and cost-effectively ship goods to the most remote parts of the country. This
can expand the reach of products manufactured by MSMEs.

Conclusion

MSMEs can play a vital role in growth of the economy as India enters the Amrit Kaal
phase. They can help in inclusive and balanced development and make India a
global manufacturing hub. The Government has been supporting the MSMEs
through various initiatives, the need is to focus on the implementation and realizing
the outcomes.