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Posted Date: 31 Jan 2008 Resource Type: Articles/Knowledge Sharing Category: AdSense Revenue Sharing
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Posted By: prakash Member Level: Silver
Rating:  Points: 3
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Writers on economic development of nations generally classify the countries of the world into categories, namely, (i) developed countries, and (ii) underdeveloped countries or backward economies. Of late we use the term developing economies that is again replaced by the term third world countries. Terms like underdeveloped, less developed, backward and developing countries are used interchangeably. It is very difficult to give a precise definition of the term ‘underdevelopment’ as it connotes a variety of features and criteria.
The U.N. experts have defined an underdeveloped country as one “in which per capita real income is low when compared with the per capita real incomes of the U.S.A., Canada, Australia and Western Europe”.
The Indian Planning Commission defined underdevelopment as one “which is characterized by the Co-existence, in greater or less degree, of unutilized and under-utilized manpower, on the one hand, and of unexploited natural resources on the other.” The existence of idle resources in the economy is mainly due to two major causes in the backward economy.
(i) Inadequate capital resources or low capital formation; and
(ii) Lack of skill and technology
Eugene Staley defines underdevelopment as follows: “A country characterized by mass poverty which is chronic and not the result of some temporary misfortune, obsolete methods of production and social organization, which means that the poverty is not entirely due to the poor natural resources and hence could presumably be lessened by methods already proved in other countries.
Underdevelopment should be viewed in 3 aspects
-Incidence of poverty, ignorance and disease
-Mal distribution of national income
-Political and administrative incompetence
CRITERIA OF UNDERDEVELOPMET:
Ratio of Population to land in the country:
This is supposed to be the first criterion of underdevelopment, but really, we cannot correctly assess whether a high or low ratio of population to land area is an indictor of underdevelopment.
There are many underdeveloped countries in Africa and Latin America, where the ratio of population to land is very low. Countries like India, Pakistan, etc., having high ratio of population to land also exhibit signs of underdevelopment.
Ratio of industrial output to total output:
Countries with low ratio of industrial output to total output are considered under developed. The degree of industrialization is taken as the criterion. In countries where agriculture is well developed; the disposable agricultural surplus income will be generally used to subsidize uneconomic urban industries.
Low rate of capital per head of population:
Ragnar Nurkse stated that ‘underdeveloped’ countries are those, which “compared with the advanced countries, are under-equipped with capital in relation to their population and natural resources.”
Low percapita income
The most commonly accepted criterion of underdevelopment is the low per capita income of underdeveloped countries as compared with the advanced countries.
Characteristics of Underdevelopment
Harvey Leibenstein has classified the characteristics of underdevelopment under four major heads, namely (1)Economic; (2)Demographic; (3)Cultural and Political; and (4) Technological and Miscellaneous.
1.Dependence on agriculture
An underdeveloped country is exclusively a primary producing economy. It will mainly depend on the production of agricultural materials and minerals and the industries will be mainly agro-based. The share of the primary sector is larger in the national income of the underdeveloped country.
India is predominantly an agricultural country where more than 70 per cent of the people are engaged in agriculture or in allied occupations. The pressure of population on agriculture is very high. Nearly 40 per cent of the national income is derived from agriculture.
2.Population pressure and underemployment
Another feature of underdeveloped countries is that they are invariable over-populated. The size of the population in these countries is increasing at a faster rate than in advanced countries.
In India, the population is growing at an alarming rate with a birth rate of about 40 per thousand. Excessive pressures on land and poor industrial development have created unemployment problems. The problem of unemployment has resulted in underemployment.
Due to population pressure, more persons are working on land than what is actually required and this is called disguised unemployment. The excess population does not contribute to the productivity of land.
3.Poor income and poor savings
Another important feature of underdevelopment is the low per capita income of the people and less savings in the economy. 15.6 per cent of the world population living in the industrialized countries had GNP per capita of 9,440 dollars. The oil exporting countries of West Asia with only 0.6 per cent of the world population had GNP per 5,470 dollars.
4.Under utilization of resources
The natural resources of the underdeveloped economy are either unutilized or under-utilized. Generally, underdeveloped countries may not be deficient in natural resources like land, water, minerals etc. The main problem would be that these resources are poorly harnessed or improperly used. Poor and improper utilization may be due to various reasons, like inaccessibility, lack of technical knowledge, shortage of capital and limited markets. Many of the African countries have good potential for development, but they remain backward due to under-utilization of resources.
India is a country of vast natural resources. But these have not been fully utilized. It has still about 9 core acres of cultivable wasteland. The waterpower potential of the country has been harnessed only up to 10 per cent. The large forest wealth remains unutilized and the natural mineral wealth of the country has not yet been explored fully.
5.Capital deficiency
Capital occupies a strategic role in production and economic development of a nation. Underdeveloped countries would suffer from capital deficiency. Not only the stock of capital will be small, but also the rate at which it is being formed will be low. For purpose of investment for capital formation, India has to depend on foreign countries like U.S.A., Canada, and Western Europe. More than 20 per cent of the national income will be channel zed for investment. The basic defect of the backward economies would be lack of inducement to invest and the low propensity and capacity to save.
6.Low level of technology
The methods of production will be carried on under primitive methods. Consequently, the productivity either in agriculture or in industries will be very low. Lack of technical know-how and poor scientific advancement and obsolete technique, combined with poor entrepreneurship would result in poor quality products.
7.Foreign trade orientation
Most of the underdeveloped countries depend upon the export of a few traditional commodities, consisting mainly of raw materials and minerals. They will be importing consumer goods and machinery.
8.poor economic organizations
Well-developed economic institutions are vital factors of economic development. In backward economies, the economic institutions would be either ill developed or completely absent. But in underdeveloped economies, absence of these institutions would create problems of development and growth.
9.Lack of Suitable Socio-Economic Set Up:
In underdeveloped countries, the prevailing socio-economic set up would be the greatest impediment to development. Mass poverty and illiteracy combined with caste systems, religious beliefs, etc., would adversely affect the course of economic development.
10.A Dualistic Economy: Another important feature of underdevelopment is ‘Dualism’. What do we mean y ‘Dualism’? It is the presence of dualistic nature of economic activities and this is one of the important characteristic features of any backward economy on the way of development. There will be market economy on one side, where marketing system would have developed exceedingly well, catering to the needs of rich and wealthy class of people, supplying them many amenities of modern life, like radio, T.V., Motor car, telephone, picture houses, tall and multistoried buildings and beauty parlors. There will be excellent transport facilities like tram cars, electric trains, diesel locomotives, speed boats and aero planes, offering comfortable and also luxurious travel to the different parts of the country and also overseas. In short, there will be market towns and cities with factories, banks, business houses, swimming pools, colleges and five-star hotels. On the other hand, there will be subsistence economy with agriculture-oriented activities in rural areas that will be very backward. The standard of living of the people in the rural sector will be far below the standard of living of the people in the urban sector. The rural sector will not have any of the modern facilities and amenities enjoyed by the affluent classes of the urban sector. The rural people will not have even proper roads and they may have to depend on country-carts for their transport. Basic facilities like drinking water, electricity, transport, system and medical-care will be lacking in villages.
11.Mass poverty, Misery and Low-Standard of Living:
Most of the people in underdeveloped countries are economically very backward, poor and leading a miserable life without any norms of standard of living. The backwardness, poverty and poor standard would result in low labor productivity, factor immobility, and lack of entrepreneurship and poor specialization.
Determinants of development and growth
The process of economic growth is determined by two sets of factors. They are economic and non-economic factors
ECONOMIC FACTORS
1.Natural Resources:
The main factor influencing economic development is the natural resources available in the country, particularly ‘Land’. ‘Land’ includes all nature resources, including fertility of land, its situation and composition and forest wealth etc. Existence of natural resources alone cannot initiate economic development, unless the resources are properly harnessed. In underdeveloped countries, the resources are either unutilized or under-utilized. This is one of the reasons of their backwardness.
2.The means of transport and communications
This will initiate economic development. More facilities of transport would reduce the cost of transport and there by increase the external and internal trade of the country. Transport and communications ensure easy mobility of factors of production.
3.The Rate of Capital Formation:
Capital Formation or accumulation is the crux of the problem of economic development and no economy can grow without having produced ‘means of production’. Construction of buildings, dams, factories, extension of roads, railways, waterways and harbours, more irrigation facilities, reclamation of land, and improved methods of agriculture, etc., are essential for capital formation.
Capital formation can take place under private enterprise, as in capitalist economies, or under public enterprise, as in socialistic economies. But the core of the problem in underdeveloped economies will be caught in the vicious circle of poverty and they will continue to remain poor simply because they are poor. According to Arthur Lewis, economic growth is a process of transforming a country from a 5 per cent saver to a 15 per cent saver.
4.Capital output Ratio:
Another determinant of economic development and growth is the capital output ratio. The term capital output ratio refers to the requirements of capital for a definite output in units.
Generally, in the underdeveloped countries, the capital output ratio is higher, i.e, more capital is required for lesser output due to wastage in the process of production, low level of technology and inefficiency of factors, and inadequate infrastructure. The capital-output ratio will vary in different economies and it will also change over a period of time.
Investment Ratio
Rate of Growth of National Income =
Capital-Output Ratio
5.Technological Progress:
Technological changes are the most important factors in the process of economic growth. Technological changes are related to production, processing, marketing and distribution. Changes in technology lead to increase in productivity of labour, capital and other factors of production. The technological changes not only reduce the cost of production, but also increase the quality of the product. Japan stands a typical example to prove that vast economic development could be achieved through improved technology.
NON-ECONOMIC FACTORS
Non-economic factors are much more powerful than economic factors in influencing the extent of economic development and growth. Non-economic factors may be social, cultural, political and climatic which would either accelerate or impede economic development and growth. According to Nurkse, “Economic development has much to do with human endowments, social attitude, political conditions and historical accidents.”
1.Social Factors:
Social and cultural factors have been responsible for economic development and growth. The traditional values like morality, truthfulness, contentment, simple living and non-materialistic attitude, etc., would not be conductive to economic development. If economic development is to take place, social attitudes, values and institutions will have to be changed.
2.Human Factors:
Rate of growth of population has an important factor in modern economic growth. Mere growth in the size of the population would not lead to economic development. It depends on the efficiency of the people. According to Kuznets, the population of Europe increased more than four-fold within a period of two centuries. But in backward economies, increase in population is a great hindrance to the economic development. Hence, family planning and control of population should form part and parcel of economic development and planning in developing countries.
3.Political Factors:
Political and administrative factors also help in modern economic growth. Weak political structure, instability, corrupt politicians, officials, and inefficient administration would be a hindrance to economic development.
4.Climate Factors:
Among the non-economic factors, climate conditions stand foremost in determining economic development. If we make a study of the geographical and climate conditions of the countries of the world in relation to development, we may find that most of the countries in the North and South Temperate Zones of the world had succeeded in becoming rich or nearly rich with per capita GNP over 1,000 or ranging from 300 to 1,000, whereas most of the tropical countries were poor or very poor with per capita GNP under 100. The climatic factors severely hamper development through their impact on man and agriculture.
Climate conditions affect human beings but also agriculture, soil, food supply, etc. Research is urgently needed to combat the climate obstacles of the tropics.
OBSTACLES TO ECONOMIC DEVELOPMENT
Features of underdevelopment and determinants of development studied above will give a fair idea of obstacles to development, as the same points may hold good in analyzing the obstacles to economic development of a country. However, the general characteristics of underdevelopment are not common to all underdeveloped countries. But in most cases, there are some characteristic features that are both cause and consequence of poverty that is the basic cause for underdevelopment. As we have studied already, the economy will be caught in the vicious circle of poverty and it will continue to remain poor, simply because, it is poor. This means there will be circular relationship between cause and consequence, which will perpetuate poverty and inhibit development. In other words, the economy will be in the ‘Poverty trap’ .
1.Vicious Circle of Poverty:
According of Prof. Nurkse, vicious circle of poverty implies “A circular constellation of forces tending to act and react upon one another in such a way as to keep a poor country in a state of poverty. A Country is poor because it is poor. A poor man may not have adequate food to eat and consequently he will be undernourished and weak. Consequent on his physical weakness, his capacity to work will be very low, which means poor earning power. This poor earning power perpetuates his poverty inadequate food, leading to poor health and productivity, etc. This concept holds good for a poor country. The basic cause of underdeveloped country is its low productivity due to capital deficiency.”
Let us take the demand side first. In a poor country, the level of productivity will be very low and consequently the income of the people will also be very low, and they may not have adequate purchasing power even to fulfill basic necessaries of life. Hence, scope for business and industries are practically absent. Since the rate of investment is very low or nil, the productivity will also be very low, leading to very low income and thus the vicious circle will get completed. Let us take the supply side. Poor investment and low capital formation will result in low productivity of the economy and low income of the people, thus completing the vicious circle.
VICIOUS CIRCLE OF BACKWARDNESS
Apart from these two vicious circles of poverty, there is also a third vicious circle, according to Meier and Baldwin. This relates to natural resources and human resources. Economic development of a country depends upon the exploitation of natural resources and developing them for human betterment. But development of natural resources depends upon the productive capacity and efficiency of the people of the country. If the people are illiterate, ignorant and inert, lacking technical knowledge and skill with very little entrepreneurial activity, the natural resources of the country will remain either dormant or underutilized or even mis-utilized. On the other hand, the people in an economy will remain backward if they do not develop the natural resources.
2.Market Imperfections:
Another important obstacle to economic development is market imperfections. According to Meier and Baldwin, market imperfections relate to immobility of factors, price rigidity, ignorance of market conditions, rigid social structure and lack of specialization.
Due to these market imperfections, the efficiency of production in the economy becomes very low and the country’s natural resources may remain unutilized or underutilized, the employment will get misdirected. The country’s resources will remain unutilized and sectoral expansion becomes impossibility.
3.Low-rate of capital Formation:
We have studied already that in backward economies there will be deficiency of capital and poor capital formation. This low-rate of capital formation results in of the vicious circle of poverty. This poverty is the cause and consequence of a country’s low capital formation. Even the available capital will not be utilized for productive purposes. They will be invested in gold, jewellery, real estate and commodity hoards. The expenditure pattern in underdeveloped countries will be mostly on ‘value-retaining’ objects and durable consumer goods with conspicuous consumption, during the time of festivities.
Lack of well-developed capital market, stock market, credit institutions and banking system, particularly in rural areas, will pose a formidable problem in mobilizing savings for capital formation. The State will confine itself to elementary functions of maintaining law and order.
4.Socio – cultural obstacles
:In backward economies, there will be obstacles due to social ad cultural attitudes. The existing social institutions would create maximum resistance to economic development and social change. Hence, a radical change in the minds and attitudes of the people is indispensable in the process of economic development.
5.International trade:
Apart from the above stated local obstacles, exposure of underdeveloped economies to world trade has resulted in destabilizing factors due to disequalising forces. According to these economists, the gains of international trade have become much impoverished. These backward economies have seriously exposed themselves to international fluctuations and suffer due depression or the boom period.
The backward economies could not remove imperfections; provide adequate overhead capital and change structural defects. Foreign investments have adversely affected the backward countries. In backward economies incomes and living standards of primary sector of these countries have not increased proportionately due to foreign investment.
6.Administrative incompetence and corruption
In many of the underdeveloped countries, administrative incompetence and appalling, corruption have become the major obstacle to economic development. A well-trained and honest and dedicated administrative set up is very essential for proper economic development of the country.
CONCEPTS OF DEVELOPMENT
Writers on ‘Economic Growth’ and ‘Economic Development’ make use of these two terms as interchangeable and also synonymous. But there are a few writers who make specific distinctions between these two expressions and concepts. For a layman, Economic Development, Economic Growth and Economic Progress may mean the same thing. But there are certain subtle differences based on scientific scrutiny of the concepts.
What is Economic Development?
All these improvements put together is referred to as economic development of the country.
According to Meier and Baldwin, we can define economic development as “a process whereby an economy’s real national income increases over a long period of time.”
Benjamin Higgins defines economic development as “a increase on national income and per capita income of a country, widely diffused throughout occupational and income groups, and continuing long enough to become cumulative.”
From these definitions, we can deduce some features of economic development. (i) It is a process leading to certain positive results in the economy. (ii)The process involves the working of certain forces that bring about a change in the economy. (iii) The development process results in increase in real national income (i.e. net national product) must be a sustained one for a prolonged period of time. (v) Temporary increase in national income due to boom in business cycle should not be considered as economic development. Economic development covers a structural change in the economy.
Economic development “is a process whereby an economy’s real national income increase”. From this it is clear that economic development is the process and increase in national income is the result. The sustained increase in national income is the indicator of the growth of the economy. Economic growth is the end-product of the long process of development.
Economic development is a conscious and comprehensive action based on a preplanned strategy so as to lift the country from the stagnation and put it on the rails of growth. Hence, the concept ‘economic development’ is related to only underdeveloped or less developed countries. On the other hand, economic growth is associated with developed countries that aim at increasing their growth-rate higher and higher, i.e., the net national product should be ever increasing.
The difference between economic development and economic growth can be illustrated by means of a simple analogy, though it is only a rough and approximate example. Suppose, a particular region does not have the railway system at all and transports is carried on by human porters and animals. To introduce the railway system in that region is not an easy task. Lands have to be acquired, railway lines have to be planned and laid, stations have to be constructed, signaling system has to be installed, rolling stock should be got ready, men should be trained to make the first train move on the rails. For this, enormous money, material and labour should be utilized to introduce the railway system is introduced. This is analogous to economic development. This results in easy transport of men and materials. Thereafter the aim of the railway system is to increase the passenger traffic and goods traffic and earn more and more so as to expand the railway system with fast moving trains and express goods service, larger amenities to passengers, greater help to trade and commerce. This is analogous to growth of the system. Thus, development is the cause and growth is the result.
Economic development requires and also involves some direction, regulation and guidance to generate forces of expansion in the economy and maintains them. This is true of the most of the underdeveloped countries, whereas spontaneous nature of growth is the characteristic feature of advanced economies.
A Maddison simplifies the distinction between development and growth in the following words: “The raising of income levels is generally called economic growth in rich countries, and in poor countries, it is called economic development.” This is rather over-simplification.
ROSTOW” STAGES OF ECONOMIC GROWTH
Prof. W.W.Rostow has divided the economic development and growth into five different and distinct stages and explained them on the basis of an analogy of an aeroplane. The five stages envisaged by this economist are (i) The Traditional Society; (ii) The Pre-conditions for take-off; (iii) The Take-off; (iv) Drive to Maturity; and (v) The Age of High Mass Consumption. He has expounded the concept of Self-sustained Growth or Self-generating economy as the ultimate goal.
The Traditional Society functions with limited production due to inaccessibility to modern techniques. The output per head is limited, though the area under cultivation can be increased. Political power is mainly confined to those who own the land.
The Pre-condition for take-off is the second stage in which the outlook of the people changes due to spread of education and technical knowledge. People start feeling about the possibility of economic progress. Modern science is applied in production. Banks and other financial institutions appear. But development moves at a very low speed.
The take-off is a stage in which the obstacles and resistance for growth are almost overcome and forces of economic progress start moving at a reasonable speed. It is a period in which investment and per capita output raise enough to change production techniques so that the upward trend in per capita output is perpetuated. In other words, growth becomes a normal condition for society.
According to Rostow, the take-off stage is characterized by a high rate of saving and investment; not less than 10 per cent of national income.
Drive to maturity is the resultant of take-off and in this stage the new leading sectors gather momentum. This leads to an increased output surpassing the increase in population. The economy finds its position in the international economy. Goods that were imported earlier are produced in the country.
The age of high mass consumption is the final stage in which the per capita real income is increasing. The masses get the fruits of economy. The economy demonstrates its technological and entrepreneurial superiority. It is the age of automobiles, durable consumer goods and electronic gadgets. Poverty and hunger are something that could be read only in books. This stage is the last stage denoting the attainment of ultimate goal.
Only U.S.A. and U.K. and some of the western countries have reached his stage of high mass consumption. United States was the first country to reach this stage in 1920 followed by Great Britain.
UNIT II
HUMAN RESOURCES AND POPULATION
PREPARED BY T.N.GEETHA
SR LECTURER IN ECONOMICS
DEPT OF COMMERECE
KSRCAS
TIRUCHENGODE
INTRODUCTION
In Western European countries, population growth had helped the growth of economies, because they were wealthy, had abundant capital and there was scarcity of labour. In such a condition the supply curve of labour would be to the industrial sector so that even a high growth rate of population would lead a rapid increase in productivity. In fact, every increase in population would lead to more than proportionate increase in the gross national product. But in backward economies capital is scarce, labour is abundant and population growth would be an obstacle to economic development.
In underdeveloped countries, rapid population growth would increase the pressure of population on land, leading to mass unemployment and underemployment, The basic requirements like drinking water, housing, health, sanitation and hygiene would not be adequately met. There would be problems of getting food, consumer goods, raw materials, capital equipment, etc. Public expenditure would be diverted to many welfare activities without creating any tangible assets. Finally, the balance of payments position would become extremely critical. The rapid growth of population would depress per capita income, lower the standard of living of the people and bring down the rate of capital formation.
CAUESES FOR GROWTH OF POPULATION IN INDIA
1. The practice of early marriage
2. People are not aware of the magnitude of the population problem and necessity of family planning due to illiteracy
3. People are not aware of the various family planning measures due to illiteracy
4. Prevalence of joint family system, polygamy, widow remarriage, orthodox notions, religious beliefs is yet another cause
5. The tropical climate is also responsible for early puberty and high fertility
6. Development of science and medicine has reduced the death rate when compared to the birth rate
7. prevalence of mass poverty is yet another reason
The various consequences of rapid increase in population in underdeveloped countries are
1.REDUCES PERCAPITA INCOME
The growth of population, particularly in underdeveloped and developing counties, will retard the per capita income in many ways. It increases the pressure of population on land and reduces the productivity of land. In underdeveloped countries, the life expectancy will be very low. The economy will be having only a few able bodied and healthy adults to produce and earn in the economy, while the number of dependants consuming without producing will be large. This will result in low per capita income.
2.POOR STANDARD OF LIVING
Since the per capita income determines the living standards of the people, poor per capita income will result in poor standard of living. The people will be caught in the vicious circle of poverty.
3.LACK OF AGRICULTURAL DEVELOPMENT
The land-man ratio will become high. It adds to disguised unemployment and low productivity in agriculture. Low per capita income and poor productivity will result in poor savings and investments. Capital formation in agriculture cannot take place and there will not be any agricultural development. Agriculture will be carried on at subsistence level, as a way of living without any improvement or modernization.
4.MASS UNEMPLOYMENT
A rapid increase in population will result in mass unemployment and underemployment in the economy. With the increase in labour force, it may be possible to expand job opportunities; the remedy is not only increasing job opportunities in the economy, but also reducing the population through appropriate controls.
5.RETARDS CAPITAL FORMATION
Unplanned population growth retards capital formation. The per capita income will be very poor and consequently the people will be making hand-to-mouth existence. They will not have anything left by way of savings for investment. Domestic savings for capital formation will be very poor.
POPULATION IN INDIA
India is a rich country with a poor people.
Sex Ratio: The Sex Ratio is defined as the number of females per thousand males in the population. In India the sex ratio has been adverse to females that is the number of females per thousand has been generally less than thousand. Kerala is the only state where women outnumber men.
The density of population tells the number of people on a average, living in one square kilometer of the area. It is derived by dividing the number of persons by the total land area of the region of the country.
The number of years for which people of a country expect to live at the time of birth is the average life expectancy of that country.
The rate of literacy now stands at 52.11 %. Kerala tops among Indian states in literacy. Bihar is the least literacy state.
Urbanization –With the increase in population and increase in the density of population urbanization takes place with nodal towns connecting the nearby places or villages. India is essentially a land of villages.
CAUSES FOR INTER STATE DIFFERENCES IN DENSITIES
India is an agricultural country with differences in climate, fertility of soil, geographical differences and irrigational facilities. There are lots of regional disparities in economic development. When the soil is very productive with good irrigational facilities, records high densities of population. Rajasthan has sandy soil with little fertility where the density is low. In Punjab it is exactly the opposite. More productive regions invite lot of population and leads to higher density of population. Industrial centers, religious centers, educational centers cultural and historic centers attract large number of people that results in differences in densities.
USA density is 22
Brazil density is 12
Australia density is 2 . But Brazil and Australia not developed like US>
THEORY OF DEMOGRAPHICTRANSITION
Demographers state that India is now passing through the Second Stage of Demographic Transition. Demographic transition tells about the relationship between the birth rate and the death-rate of the country.
FIRST STAGE:
According to demographic theory, in the first stage, the economy would be at the primitive and agrarian level when there would be high death rate and also high birth rate. High death rate, during this stage would be due to poor diet, prevalence of many types of diseases in an epidemic form, absence of medical help, poor progress in science and lack of scientific cure for diseases and also the attitude of the people.
SECOND STAGE:
In the second stage of demographic transition, there would be high birth rate, but lesser death rate. Due to economic development, spread of education and scientific knowledge, many diseases would be controlled or cured. Developments in the field of science, surgery and medicines would result in controlling or curing the diseases; consequently, the death rate will get reduced.
THIRD STAGE:
Only in the third stage of demographic transition, the birth-rate will also be reduced due to industrialization, urbanization, awareness of family planning programmes, wise parenthood, extended economic roles for women outside their homes, and the consciousness of small family norms and higher standard of life etc. Thus in the third stage, the birth and death rates will become stable and the population will remain more or less static or the growth will be very small. Advanced countries of the world are in the third stage of demographic transition.
It is evident that India India has crossed the first stage and it is now it is Second Stage of Demographic transition with higher birth rates and lower death rates and hence India is over-populated.
INDICATORS OF REAL DEVELOPMENT
1.Income Index –The real indication of an economy’s growth lies in increasing its real national income.
2.Non-Income Index-PQLI (Physical Quality life index) is a non- income index .The components are average life expectancy, Infant mortality rate, Literacy of people.
3.Basic Needs approach – Organizations like ILO, UNESCO advocates basic needs. This objective helps to remove poverty, reduce inequalities, create more employment, provision of food, clothing. Shelter, drinking water, sanitation, health, transportation, and education.
4.Human development index (HDI) This is a composite index of health status, education, percapita GDP.In SAARC ranking India is in 84th position.
Population problem in India
The population and economic development are closely related, as the latter depends on the former. Abnormal size and increase in population lead to the problem of food scarcity and equitable supply of food to the millions. It reduces the growth of national income and per capita income retarding the economic growth of the nation. Rising population leads to various types of unemployment problems and the burden of unproductive consumers has to be borne in the economy. The problem of increasing births demands higher expenditure by the Government for medical care, education, housing, clothing, etc. All these factors urge the necessity of reducing the birth rate in India.
Hence the population of India presents the following problems:
(i) The population in our country is very large;
(ii) The rate of increase of population is very high;
(iii) Even the existing population could not maintain a decent minimum standard of living and they are in abject poverty;
(iv) Efforts of planning and developments are completely nullified by the increasing population; and
(v) How to control the increasing number and cater to the needs of the existing number?
There had been a controversy whether India is over populated or not. It had been contended that India is a vast country with plenty of natural resources that could have been properly exploited. It was argued that if all the resources were fully utilized, India could maintain even a larger population in better comfort. In other words, it was believed that the population of India had into exceeded the optimum limit, and the failure of the Government to properly utilize the resources had been covered by the over-population stigma.
Remedial Measures
Many methods suggested for solving the population problems are: (1) Migration; (2) Redistribution; (3) Economic development; and (4) Family planning through effective population policy.
Migration:
This solution has only historical importance and in the present day this cannot be prescribed as an effective method. Many European countries solved the problem of over-population in the middle ages and after, through migration to foreign countries like U.S.A., Canada and South America. There was even migration from India to Ceylon, Burma and the East Indies in those days. But nowadays the high cost of transportation, difficulties of language and customs, and the stringent immigration laws, growing national feeling, etc., prevent Indians from moving to foreign lands and permanently settling down there.
Redistribution:
Redistribution of population between thickly and thinly – populated regions of India is also suggested as one of the measures to tackle the population problem in a humble way. The distribution does not offer a direct solution because the total number will remain the same. But this may create economic and sociological changes that may have some influence on the population.
Economic Development
The only best method of solving out over-population problem is rapid economic development. Illiteracy, ignorance, old customs, beliefs and poverty are the obstacles in effectively solving the problems. The poor enjoy a better standard of life by hard work. Women’s education goes a long way to reduce the problem. A minimum national standard should be employment and educations have a direct bearing on the size of the families. In Europe, it was found that a rise in the standard of living was accompanied by a fall in the birth rate.
Population Policy and Family Planning:
Population policy may be defined as a policy formulated and implemented by the Government with the principal object of reducing the rate of growth of population through reduction in the rate of fertility. This can be achieved by (i) moral, (ii) legal, (iii) contraceptual, and (iv) clinical methods.
(i) Moral:
Family planning or limited families is achieved through limiting the number of births in each family by moral restraint, postponement of marriage, rising the age of marriage.
(ii) Legal:
The Government, in order to reduce the period of fertility and to check the rising population, has taken up many statutory measures, viz. Prohibiting child marriage, increase the age of marriage to 18 in the case of girls and to 21 in the case of boys. The Government of India has legalized ‘abortions’ to reduce the number of births, if family planning methods adopted by the couple failed.
(iii) Contraception Methods:
The Government has been making efforts to spread the message of family planning and the knowledge of contraceptive methods.
(iv) Clinical Methods:
Clinical methods prevent births on a permanent basis, while the previous ones avoid the occurrence of pregnancies. Sterilization can be effected either on male or female by surgical operations. In order to encourage people to take up to sterilization, many sterilization camps have been organized in the rural areas and incentives are given to persons who successfully take up to family planning.
POPULATION POLICY OF INDIA (1976)
(1) Rising the minimum age of marriage by three years, i.e., from 15 years to 18 years for girls, and from 18 years to 21 years for boys.
(2) There will be no central legislation for compulsory sterilization and it is left to the States to have their own legislation if they feel necessary.
(3) The limitation will be only after three children that will be uniformly applicable to all Indian Citizens without distinction of caste, creed or community.
(4) Representation for States in the Lok Sabha will be linked to the population of 1971 census and reduction in population of the States will not result in reduction of the number of seats in the Parliament. This will be for another 25 years to come.
(5) Similarly, plan assistance to States will be linked to the 1971 population level for the next 25 years.
(6) Increase in monetary compensation for sterilization and group incentives are among the measures announced by the Central Government.
The National Health Policy: 1983
The National Health policy approved by Parliament in 1983 is committed to achieving the goals of Health for all the people by the year 2000 AD and a ‘Net Reproduction Rate of Unity by the year 2000 AD’.
In specific terms, these goals are to be attained by achieving het following targets by 2000 AD:
(i) Birth Rate: 21 per thousand (ii) Death Rate : 9 per thousand (iii) Infant mortality rate: Below 60 per thousand live births. (iv) Effective Couple Protection Rate: 60 percent (v) Life expectancy at Birth: 64 years.
What is family Planning?
By family planning, we mean Planned Parenthood, which is nothing but conscious limitation of children or spacing of children within economic limits of the family, so as to create happier homes, through healthier children and better parents.
Family planning, as an official programme, was adopted in India in 1952. In the first two plans (1951 to 1961), the stress was mainly on research in the field of motivation, communication demography, and physiology of reproduction and on the extension of central and state organizations in providing clinical services. There was, therefore, not much progress in the adoption of family planning.
A full-fledged Department of Family Planning was created in 1966 in the Ministry of Health, Family Planning and Urban Development.
Aims and targets: The Programme aimed at reducing the annual birthrate.
Implementation: the State Government implements the programme with the full financial assistance of the Centre. The Central Family Planning Council advises on family planning at the national level. A number of central committees, like the Research co-ordination Committee, have been set to study the progress of the research programmes.
CAUSES OF FAILURE OF POPULATION CONTROL POLICY AND DRAWBACKS OF FAMILY PLANNING PROGRAMME
India was the first country in the world to have a government-level programme of family planning and population control. What are the causes for the failures?
1. The family Planning Programme suffers from serious defect of poor management. The FP measures cannot be considered as merely a medical activity. It is a social and national activity.
2. There is lack of consensus on goals to be achieved. The cultural gaps between rural and urban people cause a great impediment at the field-level implementation. of the programme.
3. In out country, the majority of people live in rural areas and most of them are ignorant and illiterate to understand the full dimension of this alarming population problem. Most of the people in rural areas consider this as a government activity and also a medical activity.
4. Politicians and political leaders of out country are least bothered about the population problem and effective control of the same.
5. As there is no proper leadership for this programme, the feed-back of the problems met with at the filed-level is rather much lacking.
6. Democracy and Secularism in our country are much maligned concepts in the hands of self-centered and power-seeking politicians. Hence, no problem is viewed at the national perspective and everything is viewed with religious and communal bias.
7. Most of the Indian households are very poor and they cannot adopt family planning measures as a continuous process.
8. The problem has great relationship with women education. Apart from general education, instructions relating to maternal and child care and family planning should be imparted as an integral part of the curriculum; besides adult female-literacy campaign.
9. Further, there is inadequacy of population research in our country. There is no mechanism to transmit the results of research to the policy-makers and legislators. There are many unanswered questions in the field of population control and family planning: (a) why is it the marriage age of females does not raise, inspite of increase in female literacy? (b) Why do married women do not avail the many facilities for acquiring literacy? (c) Why do many eligible couples in rural areas fail to avail the FP facilities extended to them? (d) What sort of inducement will make the majority of eligible couples adopt small-family norms? (e) Many social and economic benefits are extended to poorer sections of the society – Have they resulted in adopting small – family norms or otherwise? (f) Is not allowing polygamy in some sections of the society against the population control policy of the nation? Etc.
SUGGESTIONS FOR EFFECTIVE IMPLEMENTATION OF FAMILY PLANNING PROGRAMME
1. Higher incentives should be considered to couples that maintain the number of children at the stipulated level, and maternity benefits to females to whichever religion or community they may belong should be completely stopped, if the number of children is not maintained at the stipulated level.
2. Age of marriage for men and women should be considerable raised and beyond this age, bachelors and spinsters should be given incentives to enthuse further postponement of marriages.
3. The programme should be effectively carried out in minority communities too, who generally do not prefer family limitation for obvious reasons. In this connection, enforcing uniform civil code, Bigamy Act for all Indian citizens and altogether prohibiting any type of ruse, political or religious towards increasing the number of people in the family must be strictly observed.
4. Effective mass education, particularly for women in rural areas, should be attempted. Compulsion should be avoided. Pursuations and legislative measures alone would prove effective.
5. Economic upliftment is the ultimate answer for all family planning problems.
NATIONAL INCOME
Introduction
NI refers to the money value of the flow of goods and services available annually in an economy. There are three different ways of defining national income. First individual consumers have defined it as the value of output of the period, which is available for direct utilization. Secondly, NI has been defined as the sum of the income earned during the period from the supplying factor units for the use of production. Thirdly, it has been defined as equal to the total consumption and savings of all persons and institutions during a given period.
Definition
According to the national Income Committee, “A national income estimate measures the volume of commodities and services turned out during a given period, counted without duplication”
NI is a flow and not a stock.
Under social accounting the concepts of national income have become integral parts of the national analysis.
WEALTH AND INCOME
Wealth consists of material economic possessions such as buildings, automobiles, business inventories etc. There is a close relationship between wealth and income. Oil is wealth when it is refined and sold it becomes income. Wealth accumulates physically through conversion of savings.
STOCK AND FLOW
Wealth is stock and income is flow.
1. Gross National Product (GNP)
GNP is defined as the money value of the national production.
2. Net National Product (NNP)
NNP is the net production of goods and services in a country during the year. NNP = GNP minus depreciation .NNP is also called National income at market prices.
On the earning side
NNP = wages + Profit + Interest + Rent
= National income
On the spending side
National income = consumption + savings
=Consumption + Net investment
=NNP
3. GROSS Domestic Product (GDP)
It is measure of domestic income or output (the value of total output of goods and services produced within a country) during a year before net income from abroad has been added and depreciation has been deducted.
4. GDP per capita is a measure of domestic income or output (the value of total output of goods and services produced within a country) during a year before net income from abroad is added and depreciation is deducted divided by population.
5. Real GDP is a measure of the purchasing power of the nominal GDP before net income from abroad has been added and depreciation has been deducted.
6. Real GDP per capita is a measure of the purchasing power of gross domestic product before net income from abroad has been added and depreciation has been deducted divided by population.
7. GNP per capita is a measure of a national income or output including net property income from abroad but before deducting depreciation allowance divided by population.
8. Real GNP is a measure of the purchasing power of gross national product i.e. the quantity of goods and services GNP will buy including net income from abroad but before deducting depreciation.
9. Personal Income is the actual income received by the individuals in the country from all sources.
10. Disposable personal Income is the amount available for an individual after paying the taxes, insurance payment etc.
Measuring National Income
There are three methods of measuring National Income
Output Method / Product Method / Census Method:
According to this method National Income is calculated as an output total. In other words, national income refers to the sum of the value of all the output produced in the country.
We must be careful not to double count. Suppose a firm sells flour of $50 to a bakery, which uses the flour to make bread of worth $100. If we include the output of both firms in national income, we should get $150 altogether. In this case, we would be counting the output of the flour industry twice. However, in order to avoid the double counting error, economists have suggested the value added method where only the value added at each stage is being counted.
Income Method
Here we consider the national income as an income total. According to this method, the value of the national output is measured by adding up the entire factor incomes like wages, salaries, interests, profits etc which have been paid out during the course of production.
It has to be noted that only the incomes earned in producing goods and services are counted in the national income. Transfer payments such as pensions and social security benefits are not included in the national income and therefore have to be deducted.
Expenditure Method:
Here we measure the value of the national output by adding up the expenditure on the goods and services produced. Expenditure is measured in terms of the price paid by consumers, which includes taxes and subsidies. Taxes raise the prices of goods and services when they are produced. Similarly subsidies reduce the prices below the value of goods and services when they are produced. If we have to get a correct measure of the national income, all taxes will have to be deducted and all subsidies should be added. In the same way, the value of all exports will have to be added and all imports have to be deducted. It is clear that all the three measures of total output of an economy are the same.
National Income = National Expenditure = National Output
Reasons for measuring National Income
-To provide government with essential information
National income data helps the government to have a bird’s eye view of the economy. It gives an idea regarding the contributions made by different sectors of production towards national output. National income figures will help the government to bring about changes in resource allocation, if necessary.
-To indicate changes in the standard of living
National income and per capita income statistics show changes in the standard of living of the people between two years. If the amount of goods and services produced in an economy has increased over time and therefore national income is higher, it is assumed that most people are better off.
-To compare the standard of living in different countries
National income figures allow us to compare our standard of living with other countries. Dividing national income by the country’s population would give the per capita. This gives an indication of how much each person earns on an average.
Difficulties of computation of NI
-Conceptual Difficulties – In India non-monetized sector and barter system creates a problem leading to guesswork and approximations of the estimators. In the calculation of National Income, the term Nation has to be defined exactly, whether it is the geographical entity to be taken up for computing National Income, or the income earned by the national including those residing abroad.
-Besides there is an overlapping of occupation in rural India which makes it difficult to know the income, a worker during the peak season works in his farm, drives a cart during off – seasons, another e.g. is money lending and cultivating his own farm in the village.
-In backward areas, particularly in the rural sector, the cultivator, artisans, etc do not have a fair idea of the expenses of their occupation and net value of their products cannot be estimated precisely.
-Non-availability of data is another difficulty of computing National Income. Village officials and block officials are not trained to keep current data. In agricultural sector cost of production, price data’s are totally incomplete.
Only in big units output and cost data are available small units do not maintain the data correctly. Village moneylenders and indigenous bankers maintain absolute secrecy of their transactions.
-The machinery for collecting statistical data may not be efficient. The investigators may be ill-equipped.
-The error of double counting is an obstacle in computation of national income. Steel an industrial production should not be included while calculating the value of machines, motor cars etc.
Factors determining National Income
Quantity and Quality of factors of production – The Quality of Land, Quantity of land, climate, and rainfall determine the quantity and quality of agricultural production and size of national income. The quality of labour, education, and training influences the volume of industrial production. The quality of entrepreneurial ability also determines the size of National income of a country.
State of Technical know-how. A country with poor technical knowledge cannot have a large-sized NI. The extent of technical know-how and technology determines the national income.
Political stability – This is a prerequisite for maintaining production. Countries like Africa are hindered by the political instability.
National Income and General Welfare
Increase in national income is not satisfactory index of general welfare for the following reasons:
If the population rises faster than the national income, then there will be fewer goods for each person in the population. Real national income per head is a better measure of the welfare of a country than the total national income figures.
A rise is national income may make just a few people better off, without helping the majority of the population. This means that national income is not fairly distributed.
The national income is measured in money terms, if prices are rising, the national income will rise even if the country is not producing any more goods and services.
The national income will raise as a result of the production of goods and services which do not directly make us feel better off, for example, investment goods for industry or weapons for the armed forces. Standard of living depends mainly on the output and consumption of consumer goods and services.
Two countries may have the same income per head, but their standard of living will not be the same if people in one country have to work much longer hours than those in the other country thus sacrificing their leisure time.
An increase in national income would not result in an improvement in standard of living if it increases social costs like pollution, more traffic congestion, more noise etc.
The national income is very difficult to measure accurately, so a small change in the national income may simply be due to inaccurate measurement. Also the figures exclude production of the black money, which is not officially recorded, for example, cash payment for services, which are not recorded, to evade taxes.
Uses of National Income
1. National income helps to study the rate of growth of an economy.
2. National income estimates helps to study inter sectoral growth.
3. National incomes estimates help us to study inter class income distribution.
4. National income estimates enable us to make international comparisons and standard o living of the people.
5. It is helpful in formulating and evaluating plan progress.
6. It is an indicator of total productive capacity of an economy.
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Responses
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| Author: Jose Mathew 31 Jan 2008 | Member Level: Platinum Points : 3 | Hi Prakash,
Your heading for the articlew is National Income and you posted a vast area of Indian economy and theories of development. What is the need for these type of work. Please post good articles made by you.You are welcome with good resources.
With regards,
Jose Mathew
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