Indian Economy, 5th edition (2 page)
Read Indian Economy, 5th edition Online
Authors: Ramesh Singh
ABOUT THE CIVIL SERVICES EXAMINATION
The Civil Services examination comprises two successive stages:
(i)
Civil Services (Preliminary) Examination (Objective Type) for the selection of candidates for Main Examination; and
(ii)
Civil Services (Main) Examination (Written and Interview) for the selection of candidates for the various services and posts.
Scheme and subjects for the Preliminary and Main Examination.
A.
PRELIMINARY EXAMINATION
The Examination shall comprise of two compulsory Papers of 200 marks each.
Note
:
(i)
Both the question papers will be of the objective type (multiple choice questions).
(ii)
The question papers will be set both in Hindi and English. However, questions relating to English Language Comprehension skills of Class X level will be tested through passages from English language only without providing Hindi translation thereof in the question paper.
B.
Main Examination
The written examination will consist of the following papers:
Qualifying Papers:
Paper A:
(One of the Indian Language to be selected by the candidate from the Languages included in the Eighth Schedule to the Constitution).
300 Marks
Paper B :
English
300 Marks
The papers on Indian Languages and English (Paper A and Paper B) will be of Matriculation or equivalent standard and will be of qualifying nature. The marks obtained in these papers will not be counted for ranking.
Papers to be counted for merit
Paper I:
Essay
250 Marks
Paper II:
General Studies–I
250Marks
(Indian Heritage and Culture, History and Geography of the World and Society)
Paper III:
General Studies –II
250 Marks
(Governance, Constitution, Polity, Social Justice and International relations)
Paper IV:
General Studies –III
250 Marks
(Technology, Economic Development, Bio-diversity, Environment, Security and Disaster Management)
Paper V:
General Studies –IV
250 Marks
(Ethics, Integrity and Aptitude)
Paper VI:
Optional Subject – Paper 1
250 Marks
Paper VII:
Optional Subject – Paper 2
250 Marks
Sub Total (Written test): 1750 Marks
Personality Test: 275 Marks
Grand Total: 2025 Marks
Candidates may choose any one of the optional subjects from amongst the list of subjects given below:
List of optional subjects for Main Examination:
(i)
Agriculture
(ii)
Animal Husbandry and Veterinary Science
(iii)
Anthropology
(iv)
Botany
(v)
Chemistry
(vi)
Civil Engineering
(vii)
Commerce and Accountancy
(viii)
Economics
(ix)
Electrical Engineering
(x)
Geography
(xi)
Geology
(xii)
History
(xiii)
Law
(xiv)
Management
(xv)
Mathematics
(xvi)
Mechanical Engineering
(xvii)
Medical Science
(xviii)
Philosophy
(xix)
Physics
(xx)
Political Science and International Relations
(xxi)
Psychology
(xxii)
Public Administration
(xxiii)
Sociology
(xxiv)
Statistics
(xxv)
Zoology
(xxvi)
Literature of any one of the following
Assamese, Bengali , Bodo, Dogri, Gujarati, Hindi, Kannada, Kashmiri, Konkani, Maithili, Malayalam, Manipuri, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Santhali, Sindhi, Tamil, Telugu, Urdu and English.
Table of contents
About the Civil Services Examination
2.
PROGRESS, GROWTH AND DEVELOPMENT
3.
Evolution of the Indian Economy
7.
Inflation and Business cycle
9.
Indian Industry & Infrastructure
10.
India and the Global Economy
16.
international Economic organisations & India
19.
THE TECHNOLOGY-ENVIRONMENT DILEMMA
20.
Sustainability and Climate Change: India and the World
21.
PREPARING FOR THE DEMOGRAPHIC DIVIDEND
23.
model answers to selected questions
Economics—the Discipline
The study of every discipline starts with the process of defining it. Economics is no exception to this. But the challenge of articulating an over-arching definition of any discipline has never been an easy task and at the end one has to be satisfied with a partial definition. Different economists have seen the discipline with differing perspectives and have been coming up with differing definitions—at times a large number of such definitions became either narrow or incomprehensible. But it is quite necessary to come out with a working definition of the subject one intends to study!
Before coming out with our own working definition of the subject, we may cite here two highly acclaimed and internationally established attempts in this direction:
1. Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.
1a
As per the definition there are two key ideas in economics—that goods are scarce and that society must use its resources efficiently. Indeed, economics is an important subject because of the fact of scarcity and the desire for efficiency.
Over the last half-century, the study of economics has included such varied topics that the subject serves different purposes to different students of economics. Some study it to make money (basically, most of its students in the developed world do study economics to enrich themselves. But the same is not correct in the case of the developing world. The truth is that here economics has only been read and taught, not applied—if we do a sweeping generalisation). Others study economics to know about poverty, unemployment, human development, shares and debentures, banking norms, prices and their movements, e-commerce, etc. Still others might be studying the discipline to enhance their knowledge of economics!
2. Economics studies how individuals, firms, government, and other organisations within our society make choices and how these choices determine society’s use of its resources.
1b
Human life depends on consumption of various materials which are made up of the resources available on earth. As there is no limit to human wants, we need infinite resources to gratify our needs and wants. But the resources are limited! Now it is upto the individual and humanity at large as to how they try to satisfy their competing needs to get fulfilled by the limited resources. It means we need to make for some choices before we utilise the scarce resources by prioritising some of our needs. In this process, some needs might never get fulfilled. At the same time there might be some needs which may be fulfilled again and again with the available resources.
Economics is the discipline which studies how the individual, a society, a government is making their prioritised choices in the process of using the scarce resources to gratify the various needs and wants of life. Making such choices is an art as well as a science. As time changes the choices change. As space changes human needs change and so modify the choices. After studying and surveying the various choices made by humanity at large in differing time and space, there developed the discipline of economics. As economics is an exercise in the
space-time continuum
and it deals with living human beings it is a very dynamic subject and should only be read in this perspective to have the real feel.
A Working Definition
It is essential to feel the subject one intends to study. The fundamental way of doing this is starting with the definition of the subject. But the definition, at times or better say most of the times becomes, very abstract, jargon-laden and technical. Such a definition might not give a proper feel and understanding of the subject to a person who does not belong to economics. Most of the students of economics face difficulty in making out a complete meaning of the definition. That is why a very
general
and
layman
’
s
definition is needed.
Human beings in their day-to-day lives are busy doing so many things. There are different activities we are involved in throughout our lives. These activities fall under different categories.
Economics studies the economic activities of mankind. Similarly, political, social and administrative activities of mankind are studied by
p
olitical
s
cience,
s
ociology and
p
ublic
a
dministration, respectively. That is why these disciplines are broadly categorised as
humanities
as all of them study human activities.
There are many more specialised human activities which are studied under many more disciplines.
Which activities of mankind are the
economic activities?
The activities which involve profit, loss, livelihood, occupation, wage, employment, etc. all are economic activities. Economics studies all these activities. Today, economics has many branches and studies highly diverse subject matters right at the global, macro and micro levels.
Why some people go for fuel-efficient cars while others go for fuel-guzzling sports cars? Why the poor are poor? Is capitalism doomed to intensify economic inequality?
W
ill the process of globalisation be able to bridge the poor–rich divide and have a universal homogenising impact on the world? Such varied and many more questions fall under the domain of economics. These days we also can see information technology giving a typically new dimension to economics.
Economics and Economy
The relation between economics and the economy, simply saying, is that of theory and practice.
W
hile the former is a discipline studying economic behaviour of human beings, the latter is a still-frame picture of it. Economics will come out with theories of market, employment, etc. and an economy is the real picture of the things which emerge after the follow-up to the same theories in certain areas.
Economy is economics at play in a certain region. This region is best defined today as a country, a nation—the Indian Economy, the Russian Economy, the French Economy, etc. Economy as such means nothing. It gets meaning once it is preceded by the name of a country, a region, a block, etc. When we say developed economies, we mean economies of the developed countries.
Countries of the world might be facing some common economic challenges. At the same time, they might be facing some highly specific challenges. Economists, during the period of evolution of economics, have suggested some fixed number of theories and methods of solving those economic challenges. Now it depends upon the choice of the countries as to which set of principles and theories they select for solving their economic challenges. Now many countries selecting same remedy and tools to fight the same problems might have similar or dissimilar results during a given period. At the same time, two economies selecting different tools to solve the same economic problems might experience the same results or completely different results. Why this is so?
Basically, economic theories are expectations of human behaviour about their economic activities and as human behaviour depends greatly on many internal and external factors, the results are likely to show diversities. The level and quality of natural resources, the quantity and quality of human resources, the socio-political milieu, the historical background, the psychic make of the human resource, etc. are some of the factors which individually as well as collectively impact an economy while carrying out economic activities. These things make it highly difficult for economists to say and forecast the kind of impact a particular economic policy will have on a particular economic setting. Ultimately, implementation and delivery system, all play a highly vital role in solving economic challenges in a country, which economists started studying after the 1960s. Therefore, it is correct to say that economics has less diversity than the economies. There will not be any exaggeration if we say that no two economies of the world are exactly the same, though we might classify them into broader terms like developed and developing, agrarian and industrial, etc.
This diversity makes economics a highly interesting discipline. And via the diverse faces of the economies the economists have been able to modify and remodify their ideas on the subject of economics. The evolutionary history of economics is nothing but modifications in the past theories on the basis of contemporary results and experiences of the economies. It is right to say that economics has developed out of real life practices and it is from the practice to theory. As the practices will be having newer dimensions, the theories of economics will also have newer and more imaginative dimensions.
Focus of Economics
What is the real purpose that economics has been trying to serve? What ultimately economists have been trying to articulate? And what has been the focus of economics and the economists since the birth of the discipline?
Though economics today studies a wide range of issues and topics, if we take an overall picture, its essence has been very simple—the betterment of human life on earth. Improving living conditions of the humanity at large has been the real and the ultimate goal of the discipline. In this process, the economists have been articulating a number of theories and propositions as to how an economy may maximise its economic potential and worth. The first and the most famous work in this direction was by the
s
cottish philosopher-economist, Adam Smith in
The Wealth of Nations
(1776). We trace the origin of the classical school to this work. Similarly, in the following years and centuries many masterpieces were produced by a great many economists who were trying to improvise better ways of maximising the fruits of economic activities. Economics and the economists have common goals, searching for possible alternatives for the betterment of human life.
Challenge of the Economies
The main challenge of any economy is to fulfill the needs of its population. Every population needs to be supplied some
goods
and
services
for its survival and well-being. These goods might include basic needs such as food, shelter, garments, etc. while it might also consist of refrigerators, air conditioners, cars, medicines, computers, etc. Similarly, the services people need may range from healthcare, drinking water supply, education to advanced and highly sophisticated services like banking, insurance, airways, telephones, internet, etc. As an economy moves on the ladder of development, the process of fulfilling the needs of the population becomes a never-ending phenomenon. As an economy achieves success in supplying one set of goods and services to its population, the population starts demanding another set of goods and services which are of a higher order. And thus goes on the struggle of the economy—solving one challenge and focusing on another. Standard of living of one set of population varies from another depending upon the attempts and the successes of the concerned economies as to which comparative extent they have been able to fulfill the needs of their population.
There are two aspects of this challenge. First, the availability of the goods and services required by the population and second, the presence of the supply network. Every economy has to guarantee required level of goods and services out of its production process at first.
F
or this, proper level of production capacity is built up which requires a particular level of capital formation or investment. From where the investible funds will be managed is altogether a separate question.
W
hether the investment will come from the government, the domestic private sector or the foreigners? Once these details are cleared and selected as per the socio-economic conditions of the economy, a proper distribution network for the goods and services produced is assured.
Distribution Network Models
In the arena of
distribution network,
we have three historically existing models—
state
,
market
and
state–market mix.
In the first kind of distribution system, the state (i.e. the government) takes the sole responsibility of supplying the goods and services required by the population with no payments being done by the consumer—
T
he former Soviet Union and
c
ommunist
c
hina being the best examples. In the second categorys comes the market mode of distribution which functions on the basis of price mechanism. In this system, goods and services are made available in the market and on the basis of their demand and supply, their prices are determined in the open market and finally they get distributed to the population. This was the distribution system of the capitalist economies—the whole Euro-America till 1930s. The third and the most prevalent mode of distribution developed out of the experiences of the former two systems is the state–market mix. This distribution system has certain goods and services which might be made available to the population freely or at the subsidised prices by the state and some might be supplied by the market for which consumers need to pay. Almost all economies of the world today follow one or the other kinds of distribution system. As the socio-economic composition of the population of an economy changes the mixture of the goods and services to be supplied by the state and the market get redefined in the economies from time to time.
Organising an Economy
Any one issue which has affected civilised history of mankind the most and has been a contentious issue is as to how the production process in an economy should be organised. Whether the production should be the sole responsibility of the
s
tate/Government or should it be left altogether to the private sector? Again, will it be better to carry on production with a joint effort—a mixture of state and private enterprises?
Depending upon the dominant view of the time in a particular country, different forms of production patterns evolved and different economic systems finally came up, providing alternative ways of organising an economy. The three models of economic systems which we see coming up are basically the different stages in the evolutionary process of our experiments which define a better way of organising our economy. We must have a concise overview of this evolutionary process:
