Economics

• In 1991, the Government of India initiated the New Economic Policy (NEP) to battle a severe economic crisis
• The NEP was subject to the conditionalities of the World Bank and IMF
• The NEP included stabilisation measures to correct issues like inflation and balance of payments deficits
• Structural reform measures focused on enhancing international competitiveness and efficiency of the economy
• The three major components of the NEP were: Liberalisation, Privatisation, and Globalisation
• Reasons for economic reforms in India included decreasing foreign exchange reserves, poor performance of the public sector, inflationary balance of payments, and government debts
• Liberalisation refers to the relaxation of government regulations to allow private sector enterprises to conduct business activities with fewer limitations
• Under industrial sector reforms, licensing requirements were abolished for most industries except for five specific ones
• Financial sector reforms transformed RBI's role from a regulator to a facilitator of the financial sector
• Tax reforms included reduction in taxes and simplification of tax structures since 1991
• Foreign exchange reforms in 1991 included devaluing the Indian rupee against foreign currencies
• Trade and investment policy reforms involved removing import quotas, reducing tariff rates, and scrapping import licensing
• Privatisation involves involving the private sector in the ownership of state-owned enterprises
• Strategies for privatisation included disinvestment and providing a strong impetus for FDI inflows
• Globalisation refers to the integration of a country's economy with the global economy
• Features of globalisation include liberalisation, economic activity globalisation, trade liberalisation, privatisation, and increased collaborations
• Outsourcing is a result of globalisation where business services are hired from outside the country
• The World Trade Organization (WTO) replaced GATT in 1995 and aims to encourage international trade by lowering tariffs and eliminating non-tariff barriers
• Merits of LPG policies include growth, rise in FDI, increased exports, and a check on inflation
• Demerits of LPG policies include unemployment, neglect of the agricultural sector, slowdown in industrial growth, losses from disinvestment, and limitations in fiscal policies
• Absolute Poverty:

  • Refers to the total number of people living below the poverty line
  • Measured based on two criteria:
  • Minimum Caloric consumption criteria: 2400 calories per person per day in rural areas and 2100 calories in urban areas
  • Minimum Consumption Expenditure Criteria: Monthly per capita consumption expenditure of Rs 972 in rural areas and Rs 1,407 in urban areas in 2011-12, or Rs 12 in rural areas and Rs 47 in urban areas on a per capita daily basis
• Relative Poverty:

  • Refers to poverty in comparison to other people in different regions or nations
  • Does not consider how poor the individuals are or if they are deprived of basic necessities
  • Compares the inequality of income and assets ownership to understand the relative position of different population segments
• Poverty Line:

  • Cutoff point on the line of distribution dividing the population as poor and non-poor
  • People below the poverty line are considered poor, while those above are non-poor
  • Defined based on recommended nutritional requirements of 2400 calories per person in rural areas and 2100 in urban areas
  • Consumption of food is the most important criteria for fixing the poverty line
• Causes of Poverty:

  • Population Explosion
  • High level of unemployment
  • Inequalities of income
  • High illiteracy rates leading to lower education and income
  • Political factors affecting economic progress
• Methods to Remove Poverty:

  • Acceleration of economic growth
  • Reducing inequalities of income
  • Population control
  • Providing more employment opportunities
  • Land reforms
• Measures Adopted by the Government to Remove Poverty:

  • Prime Minister's Rozgar Yojana (PMRY)
  • Swarna Jayanti Shahari Rozgar Yojana (SJSRY)
  • Sampoorna Grameen Rozgar Yojana (SGRY)
  • National Rural Employment Guarantee Act 2005
  • Swarna Jayanti Gram Swarozgar Yojana (SGSY)
• Measuring Number of Poor:

  • Head count ratio (HCR) is calculated by dividing the number of people below the poverty line by the total population
• Agriculture is the backbone of the Indian economy and prosperity
• To maintain ecological balance, there must be balanced sustainable development of agriculture and sectors
• The Five Year Plan (2007-2012) emphasizes that agricultural development is necessary for rapid economic development of the country
• Agriculture is the major source of livelihood for the people and an important source of income for the economy
• Agriculture plays a very important role in India's economic development
• Agricultural development is a precondition for the general development of the Indian economy
• Comprehensive agricultural policy during the Five Year Plans includes:

  • Technological measures
  • Infrastructural facilities
  • Land reforms
  • Policy of fixation of minimum support prices and procurement prices
  • Input subsidies to agriculture
  • Food security system
  • Rural employment programmes
  • Programme of people's participation
• Increase in agricultural output and productivity includes:

  • Growth rate of output
  • Increase in productivity
  • Increase in production of agricultural crops
• Important problem of Indian agriculture is marketing of agricultural produce, involving activities such as collection, storage, transportation, grading, and standardization
• Measures taken by the government for agricultural marketing:

  • Establishment of regulated markets
  • Storage and warehousing facilities
  • Uniform standard weights
  • Grading and standardization
  • State trading in food grains
• Rural credit is essential for the rural population, with types including productive and unproductive credit, short, medium, and long-term credit, and sources from non-institutional and institutional sources
• Formal sources of rural credit include:

  • Government-owned institutions such as commercial banks, regional rural banks, etc.
• Reforms in rural credit include:

  • National Bank for Agriculture and Rural Development
  • Regional Rural Banks
  • Commercial Banks
  • Cooperative Banks
  • Micro Finance Institutions
  • Self Help Groups
  • Green Revolution
  • Introduction of Subsidy