Class IX NCERT Economics

CONTENTS

FOREWORD iii

CHATPER 1

The Story of Village Palampur 1

CHAPTER 2

People as Resource 16

CHAPTER 3

Poverty as a Challenge 29

CHAPTER 4

Food Security in India 42


Overview

The purpose of the story is to introducesome basic concepts relating to productionand this we do through a story of ahypothetical village called Palampur.

Farming is the main activity inPalampur, whereas several otheractivities such as small scalemanufacturing, dairy, transport, etc. arecarried out on a limited scale. Theseproduction activities need various typesof resources natural resources, man-made items, human effort, money, etc. Aswe read through the story of Palampur,we will learn how various resourcescombine to produce the desired goods andservices in the village.

Palampur is well-connected withneighbouring villages and towns. Raiganj,a big village, is 3 kms from Palampur. Anall weather road connects the village toRaiganj and further on to the nearestsmall town of Shahpur. Many kinds oftransport are visible on this road startingfrom bullock carts, tongas, bogeys (woodencart drawn by buffalos) loaded with jaggery(gur) and other commodities to motorvehicles like motorcycles, jeeps, tractorsand trucks.

This village has about 450 familiesbelonging to several different castes. The80 upper caste families own the majorityof land in the village. Their houses, someof them quite large, are made of brick withcement plastering. The SCs (dalits)comprise one third of the population andlive in one corner of the village and inmuch smaller houses some of which areof mud and straw. Most of the houses have

electric connections. Electricity powersall the tubewells in the fields and is usedin various types of small business.Palampur has two primary schools andone high school. There is a primary healthcentre run by the government and oneprivate dispensary where the sick aretreated. The description above shows that

Palampur has fairly well-developedsystem of roads, transport, electricity,irrigation, schools and health centre.Compare these facilities with those inyour nearby village.

The story of Palampur, an imaginaryvillage, will take us through the differenttypes of production activities in thevillage. In villages across India, farmingis the main production activity. The otherproduction activities, referred to as non-farm activities include smallmanufacturing, transport, shop-keeping,etc. We shall take a look at both thesetypes of activities, after learning a fewgeneral things about production.

The Story of Village PalampurThe Story of Village Palampur1

Chapter

1

Picture 1.1 Scene of a village

2 Economics

Organisation of Production

The aim of production is to produce thegoods and services that we want. Thereare four requirements for production ofgoods and services.

The first requirement is land, andother natural resources such as water,forests, minerals.

The second requirement is labour, i.e.people who will do the work. Someproduction activities require highlyeducated workers to perform thenecessary tasks. Other activities requireworkers who can do manual work. Eachworker is providing the labour necessaryfor production.

The third requirement is physicalcapital, i.e. the variety of inputs requiredat every stage during production. Whatare the items that come under physicalcapital?

(a) Tools, machines, buildings: Tools andmachines range from very simple toolssuch as a farmers plough tosophisticated machines such asgenerators, turbines, computers, etc.Tools, machines, buildings can be usedin production over many years, andare called fixed capital.

(b) Raw materials and money in hand:Production requires a variety of rawmaterials such as the yarn used bythe weaver and the clay used by thepotter. Also, some money is alwaysrequired during production to makepayments and buy other necessaryitems. Raw materials and money inhand are called working capital.Unlike tools, machines and buildings,these are used up in production.

There is a fourth requirement too. Youwill need knowledge and enterprise to beable to put together land, labour andphysical capital and produce an outputeither to use yourself or to sell in themarket. This these days is called human

capital. We shall learn more about humancapital in the next chapter. In the picture, identify the land, labour

and fixed capital used in production.

Picture 1.2 A factory, with several labourersand heavy machines

Every production is organised bycombining land, labour, physical capitaland human capital, which are known asfactors of production. As we read throughthe story of Palampur, we will learn moreabout the first three factors of production.For convenience, we will refer to thephysical capital as the capital in thischapter.

Farming in Palampur

1. Land is fixed

Farming is the main production activityin Palampur. 75 per cent of the peoplewho are working are dependent onfarming for their livelihood. They couldbe farmers or farm labourers. The well-being of these people is closely related toproduction on the farms.

But remember that there is a basicconstraint in raising farm production.Land area under cultivation is practicallyfixed. Since 1960 in Palampur, there hasbeen no expansion in land area under


cultivation. By then, some of thewastelands in the village had beenconverted to cultivable land. There existsno further scope to increase farmproduction by bringing new land undercultivation.

larger areas of land more effectively. Thefirst few tubewells were installed by thegovernment. Soon, however, farmersstarted setting up private tubewells. As aresult, by mid-1970s the entire cultivatedarea of 200 hectares (ha.) was irrigated.

The standard unit of measuring landis hectare, though in the villages youmay find land area being discussedin local units such as bigha, guinthaetc. One hectare equals the area of asquare with one side measuring 100metres. Can you compare the area ofa 1 hectare field with the area of yourschool ground?

2. Is there a way one can grow morefrom the same land?

In the kind of crops grown and facilitiesavailable, Palampur would resemble avillage of the western part of the state ofUttar Pradesh. All land is cultivated inPalampur. No land is left idle. During therainy season (kharif) farmers grow jowarand bajra. These plants are used as cattlefeed. It is followed by cultivation of potatobetween October and December. In thewinter season (rabi), fields are sown withwheat. From the wheat produced, farmerskeep enough wheat for the familysconsumption and sell the surplus wheatat the market at Raiganj. A part of theland area is also devoted to sugarcanewhich is harvested once every year.Sugarcane, in its raw form, or as jaggery,is sold to traders in Shahpur.

The main reason why farmers are ableto grow three different crops in a year inPalampur is due to the well-developedsystem of irrigation. Electricity came earlyto Palampur. Its major impact was totransform the system of irrigation.Persian wheels were, till then, used byfarmers to draw water from the wells andirrigate small fields. People saw that theelectric-run tubewells could irrigate much

Not all villages in India have suchhigh levels of irrigation. Apart fromthe riverine plains, coastal regions inour country are well-irrigated. Incontrast, plateau regions such as theDeccan plateau have low levels ofirrigation. Of the total cultivated areain the country a little less than 40per cent is irrigated even today. Inthe remaining areas, farming islargely dependent on rainfall.

To grow more than one crop on a piece ofland during the year is known as multiplecropping. It is the most common way ofincreasing production on a given piece ofland. All farmers in Palampur growatleast two main crops; many are growingpotato as the third crop in the past fifteento twenty years.

Picture 1.3 Different crops

Lets Discuss

The following Table1.1 shows the landunder cultivation in India in units ofmillion hectares. Plot this on the graphprovided. What does the graph show?Discuss in class.

4 Economics

Cultivated Area

1950 120

1960 130

1970 1401980 140

1990 140

2000 140

1950 1960 1970 1980 1990 20000

20

40

60

80

100

120

140

Name of crop Month sown Month Harvested Source of irrigation (Rain,tanks, tubewells, canals, etc.)

Picture 1.4 Modern Farming Methods: HYV seeds, chemical fertilizer etc.

Table 1.1: Cultivated area over the years

Is it important to increase the areaunder irrigation? Why?

You have read about the crops grownin Palampur. Fill the following tablebased on information on the cropsgrown in your region.

You have seen that one way ofincreasing production from the sameland is by multiple cropping. The otherway is to use modern farming methodsfor higher yield. Yield is measured ascrop produced on a given piece of landduring a single season. Till the mid-1960s, the seeds used in cultivation

were traditional ones with relatively lowyields. Traditional seeds needed lessirrigation. Farmers used cow-dung andother natural manure as fertilizers. Allthese were readily available with thefarmers who did not have to buy them.

The Green Revolution in the late 1960sintroduced the Indian farmer tocultivation of wheat and rice using highyielding varieties (HYVs) of seeds.Compared to the traditional seeds, theHYV seeds promised to produce muchgreater amounts of grain on a single plant.As a result, the same piece of land wouldnow produce far larger quantities offoodgrains than was possible earlier. HYVseeds, however, needed plenty of waterand also chemical fertilizers and


Modern farming methods require thefarmer to start with more cash thanbefore. Why?

Suggested Activity During your field visit talk to some

farmers of your region. Find out:

1. What kind of farming methodsmodern or traditional or mixed dothe farmers use? Write a note.

2. What are the sources of irrigation?3. How much of the cultivated land is

irrigated? (very little/nearly half/majority/all)

4. From where do farmers obtain theinputs that they require?

3. Will the land sustain?

Land being a natural resource, it isnecessary to be very careful in its use.Scientific reports indicate that the modernfarming methods have overused thenatural resource base.

In many areas, Green Revolution isassociated with the loss of soil fertilitydue to increased use of chemicalfertilizers. Also, continuous use ofgroundwater for tubewell irrigation hasreduced the water -table below theground. Environmental resources like soilfertility and groundwater are built up overmany years. Once destroyed it is verydifficult to restore them. We must takecare of the environment to ensure futuredevelopment of agriculture.

Suggested Activity

After reading the following reports fromnewspapers/magazines, write a letterto the Agriculture Minister in your ownwords telling him how the use ofchemical fertilizers can be harmful.

pesticides to produce best results. Higheryields were possible only from acombination of HYV seeds, irrigation,chemical fertilisers, pesticides etc.

Farmers of Punjab, Haryana andWestern Uttar Pradesh were the first totry out the modern farming method inIndia. The farmers in these regions setup tubewells for irrigation, and made useof HYV seeds, chemical fertilizers andpesticides in farming. Some of thembought farm machinery like tractors andthreshers, which made ploughing andharvesting faster. They were rewardedwith high yields of wheat.

In Palampur, the yield of wheat grownfrom the traditional varieties was 1300 kgper hectare. With the HYV seeds, the yieldwent up to 3200 kg per hectare. Therewas a large increase in the production ofwheat. Farmers now had greater amountsof surplus wheat to sell in the markets.

Lets Discuss

What is the difference betweenmultiple cropping and modern farmingmethod?

The following table shows theproduction of wheat and pulses inIndia after the Green revolution inunits of million tonnes. Plot this on agraph. Was the Green revolutionequally successful for both the crops?Discuss.

What is the working capital requiredby the farmer using modern farmingmethods?

Production Productionof Pulses of Wheat

1965 - 66 10 10

1970 - 71 12 24

1980 - 81 11 36

1990 - 91 14 55

2000 - 01 11 70

Table 1.2: Production of pulses and wheat

....Chemical fertilizers provideminerals which dissolve in water andare immediately available to plants.But these may not be retained in the

6 Economics

Of the remaining families who ownland, 240 families cultivate small plots ofland less than 2 hectares in size.Cultivation of such plots doesnt bringadequate income to the farmer family.

In 1960, Gobind was a farmer with2.25 hectares of largely unirrigated land.With the help of his three sons Gobindcultivated the land. Though they didntlive very comfortably, the family managedto feed itself with a little bit of extraincome from one buffalo that the familypossessed. Some years after Gobindsdeath, this land was divided among histhree sons. Each one now has a plot ofland that is only 0.75 hectare in size. Evenwith improved irrigation and modernfarming method, Gobinds sons are notable to make a living from their land. Theyhave to look for additional work duringpart of the year.

You can see the large number of smallplots scattered around the village in thepicture. These are cultivated by the smallfarmers. On the other hand, more thanhalf the area of the village is covered byplots that are quite large in size. InPalampur, there are 60 families of mediumand large farmers who cultivate morethan 2 hectares of land. A few of the largefarmers have land extending over 10hectares or more.

Picture 1.5 Palampur village: Distribution of cultivated land

soil for long. They may escape fromthe soil and pollute groundwater,rivers and lakes. Chemical fertilizerscan also kill bacteria and other micro-organisms in the soil. This meanssome time after their use, the soil willbe less fertile than everbefore....(Source: Down to Earth, NewDelhi)

.....The consumption of chemicalfertilizers in Punjab is highest in thecountry. The continuous use of chemicalfertilizers has led to degradation of soilhealth. Punjab farmers are now forcedto use more and more chemicalfertilizers and other inputs to achievethe same production level. This meanscost of cultivation is rising veryfast.....(Source: The Tribune,Chandigarh)

4. How is land distributed betweenthe farmers of Palampur?

You must have realised how importantland is for farming. Unfortunately, not allthe people engaged in agriculture havesufficient land for cultivation. InPalampur, about one third of the 450families are landless, i.e. 150 families,most of them dalits, have no land forcultivation.


Lets Discuss

In the Picture 1.5, can you shade theland cultivated by the small farmers?

Why do so many families of farmerscultivate such small plots of land?

The distribution of farmers in India andthe amount of land they cultivate is givenin the following Graph 1.1. Discuss inthe classroom.

Number of FarmersCultivated Area

Small farmers Medium andLarge farmers

80%

20%

64%

36%

(Less than 2 ha.)(More than 2 ha.)

Graph 1.1: Distribution of Farmers andCultivated Area

Lets Discuss

Would you agree that the distributionof cultivated land is unequal inPalampur? Do you find a similarsituation for India? Explain.

5. Who will provide the labour?

After land, labour is the next necessaryfactor for production. Farming requires agreat deal of hard work. Small farmersalong with their families cultivate theirown fields. Thus, they provide the labourrequired for farming themselves. Mediumand large farmers hire farm labourers towork on their fields.

Lets Discuss

Identify the work being done on thefield in the Pictures 1.6 and arrangethem in a proper sequence.

Farm labourers come either fromlandless families or families cultivatingsmall plots of land. Unlike farmers, farmlabourers do not have a right over the

Picture 1.6 Work onthe fields: Wheat cropploughing by bullocks,sowing, spraying ofinsecticides, cultivationby traditional method,cultivation by modernmethod, and cutting ofcrops.

Source: Agricultural statistics at glance 2003:Dept of agriculture and cooperation,Ministry of agriculture, Govt of India.

8 Economics

crops grown on the land. Instead they arepaid wages by the farmer for whom theywork. Wages can be in cash or in kinde.g. crop. Sometimes labourers get mealsalso. Wages vary widely from region toregion, from crop to crop, from one farmactivity to another (like sowing andharvesting). There is also a wide variationin the duration of employment. A farm

Picture 1.7 The conversation between Dala and Ramkali

labourer might be employed on a dailybasis, or for one particular farm activitylike harvesting, or for the whole year.

Dala is a landless farm labourer whoworks on daily wages in Palampur. Thismeans he must regularly look for work.The minimum wages for a farm labourerset by the government is Rs 60 per day,but Dala gets only Rs 3540. There is


agrees to give Savita the loan at aninterest rate of 24 per cent for fourmonths, which is a very high interest rate.Savita also has to promise to work on hisfield as a farm labourer during the harvestseason at Rs 35 per day. As you can tell,this wage is quite low. Savita knows thatshe will have to work very hard tocomplete harvesting on her own field, andthen work as a farm labourer for TejpalSingh. The harvest time is a very busytime. As a mother of three children shehas a lot of household responsibilities.Savita agrees to these tough conditionsas she knows getting a loan is difficultfor a small farmer

2. In contrast to the small farmers, themedium and large farmers have theirown savings from farming. They arethus able to arrange for the capitalneeded. How do these farmers havetheir own savings? You shall find theanswer in the next section.

The story so far....

We have read about the three factors ofproductionland, labour and capitaland how they are used in farming. Let usfill in the blanks given below.

Among the three factors of production,we found that labour is the mostabundant factor of production. There aremany people who are willing to work asfarm labourers in the villages, whereasthe opportunities of work are limited. Theybelong to either landless families or

. They are paid low wages,and lead a difficult life.

In contrast to labour, is a scarce factor of production. Cultivatedland area is . Moreover,even the existing land is distributed

(equally/unequally) amongthe people engaged in farming. There area large number of small farmers whocultivate small plots of land and live in

heavy competition for work among thefarm labourers in Palampur, so peopleagree to work for lower wages. Dalacomplains about his situation to Ramkali,who is another farm labourer.

Both Dala and Ramkali are among thepoorest people in the village.

Lets Discuss

Why are farm labourers like Dala andRamkali poor?

Gosaipur and Majauli are two villagesin North Bihar. Out of a total of 850households in the two villages, thereare more than 250 men who areemployed in rural Punjab and Haryanaor in Delhi, Mumbai, Surat, Hyderabador Nagpur. Such migration is commonin most villages across India. Why dopeople migrate? Can you describe(based on your imagination) the workthat the migrants of Gosaipur andMajauli might do at the place ofdestination?

6. The capital needed in farming

You have already seen that the modernfarming methods require a great deal ofcapital, so that the farmer now needsmore money than before.

1. Most small farmers have to borrowmoney to arrange for the capital. Theyborrow from large farmers or thevillage moneylenders or the traderswho supply various inputs forcultivation. The rate of interest onsuch loans is very high. They are putto great distress to repay the loan.

Savita is a small farmer. She plans tocultivate wheat on her 1 hectare of land.Besides seeds, fertilizers and pesticides,she needs cash to buy water and repairher farm instruments. She estimates thatthe working capital itself would cost aminimum of Rs 3,000. She doesnt havethe money, so she decides to borrow fromTejpal Singh, a large farmer. Tejpal Singh

10 Economics

conditions not much better than thelandless farm labourer. To make themaximum use of the existing land,farmers use and

. Both these have led toincrease in production of crops.

Modern farming methods require agreat deal of . Smallfarmers usually need to borrow money toarrange for the capital, and are put togreat distress to repay the loan. Therefore,capital too is a scarce factor of production,particularly for the small farmers.

Though both land and capital arescarce, there is a basic difference betweenthe two factors of production.

is a natural resource,whereas is man-made. Itis possible to increase capital, whereasland is fixed. Therefore, it is veryimportant that we take good care of landand other natural resources used infarming.

7. Sale of Surplus Farm Products

Let us suppose that the farmers haveproduced wheat on their lands using thethree factors of production. The wheatis harvested and production is complete.What do the farmers do with the wheat?They retain a part of the wheat for thefamilys consumption and sell thesurplus wheat. Small farmers l ikeSavita and Gobinds sons have littlesurplus wheat because their totalproduction is small and from this asubstantial share is kept for their ownfamily needs. So it is the medium andlarge farmers who supply wheat to themarket. In the Picture 1.1, you can see thebullock cart streaming into the marketeach carrying loads of wheat. The tradersat the market buy the wheat and sell itfurther to shopkeepers in the towns andcities.

Tejpal Singh, the large farmer, has asurplus of 350 quintals of wheat from allhis lands! He sells the surplus wheat atthe Raiganj market and has good earnings.

What does Tejpal Singh do with hisearnings? Last year, Tejpal Singh had putmost of the money in his bank account.Later he used the savings for lending tofarmers like Savita who were in need of aloan. He also used the savings to arrangefor the working capital for farming in thenext season. This year Tejpal Singh plansto use his earnings to buy another tractor.Another tractor would increase his fixedcapital.

Like Tejpal Singh, other large andmedium farmers sell the surplus farmproducts. A part of the earnings is savedand kept for buying capital for the nextseason. Thus, they are able to arrangefor the capital for farming from their ownsavings. Some farmers might also use thesavings to buy cattle, trucks, or to set upshops. As we shall see, these constitutethe capital for non-farm activities.

Non-Farm Activities in Palampur

We have learnt about farming as the mainproduction activity in Palampur. We shallnow take a look at some of the non-farmproduction activities. Only 25 per centof the people working in Palampur areengaged in activities other thanagriculture.

1. Dairy the other commonactivity

Dairy is a common activity in many familiesof Palampur. People feed their buffalos onvarious kinds of grass and the jowar andbajra that grows during the rainy season.The milk is sold in Raiganj, the nearby largevillage. Two traders from Shahpur townhave set up collection cum chilling centresat Raiganj from where the milk istransported to far away towns and cities.


Optional Exercise

Let us take three farmers. Each has grown wheat on his field though theproduction is different (see Column 2). The consumption of wheat by eachfarmer family is the same (Column 3). The whole of surplus wheat this yearis used as capital for next years production. Also suppose, production istwice the capital used in production. Complete the tables.

Farmer 1

Production Consumption Surplus = Capital for theProduction next yearConsumption

Year 1 100 40 60 60

Year 2 120 40

Year 3 40

Farmer 2

Production Consumption Surplus Capital for thenext year

Year 1 80 40

Year 2 40

Year 3 40

Farmer 3

Production Consumption Surplus Capital for thenext year

Year 1 60 40

Year 2 40

Year 3 40

Lets Discuss

Compare the production of wheat by the three farmers over the years. What happens to Farmer 3 in Year 3? Can he continue production? What

will he have to do to continue production?

2. An example of small-scalemanufacturing in Palampur

At present, less than fifty people areengaged in manufacturing in Palampur.

Unlike the manufacturing that takesplace in the big factories in the townsand cities, manufacturing in Palampurinvolves very simple production methods

12 Economics

Mishrilal has purchased amechanical sugarcane crushingmachine run on electricity and hasset it up on his field. Sugarcanecrushing was earlier done with thehelp of bullocks, but people prefer todo it by machines these days.Mishrilal also buys sugarcane fromother farmers and processes it intojaggery. The jaggery is then sold totraders at Shahpur. In the process,Mishrilal makes a small profit.

and are done on a small scale. They arecarried out mostly at home or in the fieldswith the help of family labour. Rarely arelabourers hired.

Lets Discuss

What capital did Mishrilal need to setup his jaggery manufacturing unit?

Who provides the labour in this case? Can you guess why Mishrilal is unable

to increase his profit? Could you think of any reasons when

he might face a loss? Why does Mishrilal sell his jaggery to

traders in Shahpur and not in hisvillage?

3. The shopkeepers of Palampur

People involved in trade (exchange ofgoods) are not many in Palampur. Thetraders of Palampur are shopkeepers whobuy various goods from wholesalemarkets in the cities and sell them inthe village. You will see small generalstores in the village selling a wide rangeof items like rice, wheat, sugar, tea, oil,biscuits, soap, toothpaste, batteries,candles, notebooks, pen, pencil, evensome cloth. A few of the families whosehouses are close to the bus stand haveused a part of the space to open smallshops. They sell eatables.

Lets Discuss

In what ways is Kareems capital andlabour different from Mishrilals?

Why didnt someone start a computercentre earlier? Discuss the possiblereasons.

4. Transport: a fast developingsector

There are variety of vehicles on the roadconnecting Palampur to Raiganj.Rickshawallahs, tongawallahs, jeep,tractor, truck drivers and people drivingthe traditional bullock cart and bogey arepeople in the transport services. Theyferry people and goods from one place toanother, and in return get paid for it. Thenumber of people involved in transporthas grown over the last several years.

Kareem has opened a computer classcentre in the village. In recent yearsa large number of students have beenattending college in Shahpur town.Kareem found that a number ofstudents from the village are alsoattending computer classes in thetown. There were two women in thevillage who had a degree in computerapplications. He decided to employthem. He bought computers and setup the classes in the front room oftheir house overlooking the market.High school students have startedattending them in good numbers.

Kishora is a farm labourer. Like othersuch labourers, Kishora found itdifficult to meet his familys needs fromthe wages that he received. A few yearsback Kishora took a loan from thebank. This was under a governmentprogramme which was giving cheaploans to poor landless households.Kishora bought a buffalo with thismoney. He now sells the buffalos milk.


Lets Discuss

What is Kishoras fixed capital? What do you think would be his

working capital? In how many production activities is

Kishora involved? Would you say that Kishora has

benefitted from better roads inPalampur?

Further, he has attached a wooden cartto his buffalo and uses it to transportvarious items. Once a week, he goes tothe river Ganga to bring back clay forthe potter. Or sometimes he goes toShahpur with a load of jaggery or othercommodities. Every month he gets somework in transport. As a result, Kishorais able to earn more than what he usedto do some years back.

Summary

Farming is the main production activity in the village. Over the years there havebeen many important changes in the way farming is practiced. These have allowedthe farmers to produce more crops from the same amount of land. This is animportant achievement, since land is fixed and scarce. But in raising productiona great deal of pressure has been put on land and other natural resources.

The new ways of farming need less land, but much more of capital. The mediumand large farmers are able to use their own savings from production to arrangefor capital during the next season. On the other hand, the small farmers whoconstitute about 80 per cent of total farmers in India, find it difficult to obtaincapital. Because of the small size of their plots, their production is not enough.The lack of surplus means that they are unable to obtain capital from their ownsavings, and have to borrow. Besides the debt, many of the small farmers haveto do additional work as farm labourers to feed themselves and their families.

Labour being the most abundant factor of production, it would be ideal ifnew ways of farming used much more labour. Unfortunately, such a thing hasnot happened. The use of labour on farms is limited. The labour, looking foropportunities is thus migrating to neighbouring villages, towns and cities. Somelabour has entered the non-farm sector in the village.

At present, the non-farm sector in the village is not very large. Out of every100 workers in the rural areas in India, only 24 are engaged in non-farm activities.Though there is a variety of non-farm activities in the villages (we have onlyseen a few examples), the number of people employed in each is quite small.

In the future, one would like to see more non-farm production activities in thevillage. Unlike farming, non-farm activities require little land. People with someamount of capital can set up non-farm activities. How does one obtain this capital?One can either use his own savings, but more often has to take a loan. It isimportant that loan be available at low rate of interest so that even people withoutsavings can start some non-farm activity. Another thing which is essential forexpansion of non-farm activities is to have markets where the goods and servicesproduced can be sold. In Palampur, we saw the neighbouring villages, towns andcities provide the markets for milk, jaggery, wheat, etc. As more villages getconnected to towns and cities through good roads, transport and telephone, it ispossible that the opportunities for non-farm activities production in the villagewould increase in the coming years.

14 Economics

Exercises

1. Every village in India is surveyed once is ten years during the Census andsome of details are presented in the following format. Fill up the following basedon information on Palampur.a. LOCATION:b. TOTAL AREA OF THE VILLAGE:c. LAND USE (in hectares):

d. FACILITIES:

2. Modern farming methods require more inputs which are manufactured inindustry. Do you agree?

3. How did the spread of electricity help farmers in Palampur?

4. Is it important to increase the area under irrigation? Why?

5. Construct a table on the distribution of land among the 450 families ofPalampur.

6. Why are the wages for farm labourers in Palampur less than minimum wages?

7. In your region, talk to two labourers. Choose either farm labourers or labourersworking at construction sites. What wages do they get? Are they paid in cashor kind? Do they get work regularly? Are they in debt?

8. What are the different ways of increasing production on the same piece ofland? Use examples to explain.

9. Describe the work of a farmer with 1 hectare of land.

10. How do the medium and large farmers obtain capital for farming? How is itdifferent from the small farmers?

11. On what terms did Savita get a loan from Tajpal Singh? Would Savitas conditionbe different if she could get a loan from the bank at a low rate of interest?

12. Talk to some old residents in your region and write a short report on the changesin irrigation and changes in production methods during the last 30 years.(Optional)

Cultivated Land Land not available for cultivation

Irrigated Unirrigated(Area covering dwellings, roads,ponds, grazing ground)

26 hectares

Educational

Medical

Market

Electricity Supply

Communication

Nearest Town


13. What are the non-farm production activities taking place in your region? Makea short list.

14. What can be done so that more non-farm production activities can be startedin villages?

References

ETIENNE, GILBERT. 1985. Rural Development in Asia: Meetings with Peasants, SagePublications, New Delhi.

ETIENNE, GILBERT. 1988. Food and Poverty: Indias half won battle, Sage Publications,New Delhi.

RAJ, K.N. 1991. Village India and its Political Economy in C.T. Kurien (Edited) Economy,Society and Development, Sage Publications.

THORNER, DANIEL AND ALICE THORNER. 1962. Land and Labour in India, Asia PublishingHouse, Bombay.

16 Economics

OverviewThe chapter 'People as Resource' is aneffort to explain population as an assetfor the economy rather than a liability.Population becomes human capital whenthere is investment made in the form ofeducation, training and medical care.In fact, human capital is the stock ofskill and productive knowledge embodiedin them.

'People as Resource' is a way ofreferring to a countrys working peoplein terms of their existing productiveskills and abilities. Looking at thepopulation from this productive aspectemphasises its ability to contribute tothe creation of the Gross NationalProduct. Like other resources populationalso is a resource a 'human resource'.This is the positive side of a largepopulation that is often overlooked whenwe look only at the negative side,considering only the problems ofproviding the population with food,education and access to health facilities.When the existing 'human resource' isfurther developed by becoming moreeducated and healthy, we call it 'humancapital formation' that adds to theproductive power of the country just like'physical capital formation'.

Investment in human capital(through education, training, medicalcare) yields a return just like investmentin physical capital. This can be seendirectly in the form of higher incomesearned because of higher productivityof the more educated or the better trainedpersons, as well as the higherproductivity of healthier people.

People as Resource2Chapter

Indias Green Revolution is adramatic example of how the inputof greater knowledge in the form ofimproved production technologies canrapidly increase the productivity ofscarce land resources. Indias ITrevolution is a striking instance ofhow the importance of human capitalhas come to acquire a higher positionthan that of material plant andmachinery.

Source: Planning Commission, Govt. of India.

People as Resource2


Not only do the more educated and thehealthier people gain through higherincomes, society gains also in other indirectways because the advantages of a moreeducated or a healthier population spreadsto those also who themselves were notdirectly educated or given health care. Infact, human capital is in one way superiorto other resources like land and physicalcapital: human resource can make use ofland and capital. Land and capital cannotbecome useful on its own!

For many decades in India, a largepopulation has been considered a liabilityrather than an asset. But a large

Lets Discuss

Looking at the photograph can youexplain how a doctor, teacher, engineerand a tailor are an asset to theeconomy?

population need not be a liability. It canbe turned into a productive asset byinvestment in human capital (for example,by spending resources on education andhealth for all, training of industrial andagricultural workers in the use of moderntechnology, useful scientific researchesand so on).

The two following cases illustrate howpeople can try to become a more productiveresource:

Story of Sakal

There were two friends Vilas andSakal living in the same villageSemapur. Sakal was a twelve-year-old boy. His mother Sheela lookedafter domestic chores. His father ButaChaudhary worked in an agriculturalfield. Sakal helped his mother indomestic chores. He also looked afterhis younger brother Jeetu and sisterSeetu. His uncle Shyam had passedthe matriculation examination, but,was sitting idle in the house as hehad no job. Buta and Sheela wereeager to teach Sakal. They forced himto join the village school which hesoon joined. He started studying andcompleted his higher secondaryexamination. His father persuadedhim to continue his studies. He raiseda loan for Sakal to study a vocationalcourse in computers. Sakal wasmeritorious and interested in studiesfrom the beginning. With great vigourand enthusiasm he completed hiscourse. After some time he got a jobin a private firm. He even designed anew kind of software. This softwarehelped him increase the sale of thefirm. His boss acknowledged hisservices and rewarded him with apromotion.

Picture 2.1

18 Economics

Story of Vilas

Vilas was an eleven-year old boyresiding in the same village as Sakal.Vilass father Mahesh was afisherman. His father passed awaywhen he was only two years old. Hismother Geeta sold fish to earn moneyto feed the family. She bought fishfrom the landowners pond and soldit in the nearby mandi. She couldearn only Rs 20 to 30 a day by sellingfish. Vilas became a patient ofarthritis. His mother could not affordto take him to the doctor. He couldnot go to school either. He was notinterested in studies. He helped hismother in cooking and also lookedafter his younger brother Mohan.After some time his mother fell sickand there was no one to look afterher. There was no one in the familyto support them. Vilas, too, was forcedto sell fish in the same village. Helike his mother earned only a meagreincome.

Lets Discuss

Do you notice any difference betweenthe two friends? What are those?

Picture 2.2 Stories of Vilas and Sakal

Activity

Visit a nearby village or a slum areaand write down a case study of a boyor girl of your age facing the samecondition as Vilas or Sakal.

In the two case studies we saw Sakalwent to school and Vilas did not go. Sakalwas physically strong and healthy. He didnot need to visit the doctor frequently.Vilas was a patient of arthritis. He lackedthe means to visit the doctor. Sakalacquired a degree in computers. Sakalfound a job in the private firm while Vilascontinued with the same work as hismother. He earned a meagre income likehis mother to support a family.

In the case of Sakal, several years ofeducation added to the quality of labour.This enhanced his total productivity.Total productivity adds to the growth ofthe economy. This in turn pays an


individual through salary or in some otherform of his choice. In case of Vilas, therecould not be any education or health carein the early part of his life. He spends hislife selling fish like his mother.Henceforth, he draws the same salary ofunskilled labour as his mother.

Investment in human resource (viaeducation and medical care) can give highrates of return in the future. Thisinvestment on people is the same asinvestment in land and capital. Oneinvests in shares and bonds expectinghigher return in the future.

A child, too, with investments madeon her education and health, can yield ahigh return in the future in the form ofhigher earnings and greater contributionto society. Educated parents are found toinvest more heavily on the education oftheir child. This is because they haverealised the importance of education forthemselves. They are also conscious ofproper nutrition and hygiene. Theyaccordingly look after their childrensneeds for education at school and goodhealth. A virtuous cycle is thus createdin this case. In contrast, a vicious cyclemay be created by disadvantaged parentswho, themselves uneducated and lackingin hygiene, keep their children in asimilarly disadvantaged state.

Countries like Japan have invested inhuman resource. They did not have anynatural resource. These countries aredeveloped/rich countries. They import thenatural resource needed in their country.How did they become rich/developed?They have invested on people especiallyin the field of education and health. Thesepeople have made efficient use of otherresource like land and capital. Efficiencyand the technology evolved by people havemade these countries rich/developed.

Economic Activities by Men and WomenLike Vilas and Sakal people have beenengaged in various activities. We saw Vilassold fish and Sakal got a job in the firm.The various activities have been classifiedinto three main sectors i.e., primary,secondary and tertiary. Primary sectorincludes agriculture, forestry, animalhusbandry, fishing, poultry farming, andmining. Quarrying and manufacturing isincluded in the secondary sector. Trade,transport, communication, banking,education, health, tourism, services,insurance etc. are included in the tertiarysector. The activities in this sector resultin the production of goods and services.These activities add value to the nationalincome. These activities are calledeconomic activities. Economic activitieshave two parts market activities andnon-market activities. Market activitiesinvolve remuneration to any one whoperforms i.e., activity performed for payor profit. These include production of goodsor services including government service.Non-market activities are the productionfor self-consumption. These can be

Picture 2.3 Based on the picture can you classify these activities into three sectors?

20 Economics

consumption and processing of primaryproduct and own account production offixed assets.

helps individual to make better use of theeconomic opportunities available beforehim. Education and skill are the majordeterminants of the earning of anyindividual in the market. A majority ofthe women have meagre education andlow skill formation. Women are paid lowcompared to men. Most women workwhere job security is not there. Variousactivities relating to legal protection ismeagre. Employment in this sector ischaracterised by irregular and low income.In this sector there is an absence of basicfacilities like maternity leave, childcareand other social security systems.However, women with high education andskill formation are paid at par with themen. Among the organised sector,teaching and medicine attract them themost. Some women have entered theadministrative and other servicesincluding those, which need high levelsof scientific and technological service. Askyour sister or your classmate what shewould like to take up as a career?

Quality of Population

The quality of population depends uponthe literacy rate, health of a personindicated by life expectancy and skillformation acquired by the people of thecountry. The quality of the poulationultimately decides the growth rate of thecountry. Illiterate and unhealthypopulation are a liability for the economy.Literate and healthy population are anasset.

EducationSakals education in the initial years ofhis life bore him the fruits in the lateryears in terms of a good job and salary.We saw education was an importantinput for the growth of Sakal. It openednew horizon for him, provided newaspiration and developed values of life.Not only for Sakal, education contributes

Due to historical and cultural reasonsthere is a division of labour between menand women in the family. Womengenerally look after domestic chores andmen work in the fields. Sakals motherSheela cooks food, cleans utensils, washesclothes, cleans the house and looks afterher children. Sakals father Butacultivates the field, sells the produce inthe market and earns money for the family.

Sheela is not paid for the servicesdelivered for upbringing of the family.Buta earns money, which he spends onrearing his family. Women are not paidfor their service delivered in the family.Their work is not accounted in thenational income which is a sum total ofgoods and services produced in a country.

Geeta, mother of Vilas, earned anincome by selling fish. Thus women arepaid for their work when they enter thelabour market. Their earning like that oftheir male counterpart is determined onthe basis of education and skill. Education

Activity

Visit a village or colony located nearto your residential area and notedown the various activitiesundertaken by the people of thatvillage or colony.

If this is not possible, ask yourneighbour what is their profession?In which of the three sectors will youcategorise their work?

Say whether these activities areeconomic or non-economic activities:

Vilas sells fish in the village market.Vilas cooks food for his family.Sakal works in the private firm.Sakal looks after his younger brotherand sister.


...human being is a positive asset anda precious national resource whichneeds to be cherished, nurtured anddeveloped with tenderness and care,coupled with dynamism. Eachindividuals growth presents adifferent range of problems andrequirements. ... The catalytic actionof education in this complex anddynamic growth process needs to beplanned meticulously and executedwith great sensitivity.

Lets DiscussStudy the graph and answer the followingquestions:1. Has the literacy rates of the population

increased since 1951?2. In which year India has the highest

literacy rates?3. Why literacy rate is high among the

males of India?4. Why are women less educated than men?5. How would you calculate literacy rate

in India?6. What is your projection about Indias

literacy rate in 2010?

Source: National Education Policy, 1986.

0

10

20

30

40

50

60

70

19611951 1971 1981

80

1991 2001

for providing universal access, retentionand quality in elementary education witha special emphasis on girls. There is alsoan establishment of pace setting ofschools like Navodaya Vidyalaya in eachdistrict. Vocational streams have beendeveloped to equip large number of highschool students with occupations relatedto knowledge and skills. The plan outlayon education has increased from Rs 151crore in the first plan to Rs 43,825 crorein the tenth plan. The expenditure oneducation as a percentage of GDP rosefrom 0.64% in 195152 to 3.98% in 2002

Source: Census of India 2001, Series I India, Paper 1 of 2001.

Graph 2.1: Literacy rates in India

male

person

woman

Picture 2.4 School children

towards the growth of society also. Itenhances the national income, culturalrichness and increases the efficiency ofgovernance. There is a provision made

22 Economics

ActivityCount the number of boys and girlsstudying in your class or in yourneighbouring co-ed school.

Ask the school administrator toprovide you with the data of boys andgirls studying in your class below fiveyears and ten years. Study thedifference if any and explain it in theclassroom.

03 (Budgetary estimate). The literacyrates have increased from 18% in 1951to 65% in 2001. Literacy is not only aright, it is also needed if the citizen areto perform their duties and enjoy theirright properly. However, a vast differenceis noticed across different sections ofpopulation. Literacy among males isnearly 50% higher than females and itis about 50% higher in urban areas ascompared to the rural areas. Literacyrates vary from 96% in some district ofKerala to a below 30% in some parts ofMadhya Pradesh. The primary schoolsystem has expanded to over 5,00,000villages in India. Unfortunately, this hugeexpansion of schools has been diluted bythe poor quality of schooling and highdropout rates. Sarva Siksha Abhiyan isa significant step towards providingelementary education to all children inthe age group of six to fourteen years by

2010 .... It is a time bound initiative ofthe central Government, in partnershipwith the states, the local Governmentand the community for achieving the goalof universalisation of elementaryeducation. Along with it, bridge coursesand back-to-school camps have beeninitiated to increase the enrollment inelementary education. Mid-day mealscheme has been implemented toencourage attendance and retention ofchildren and improve their nutritionalstatus. These policies could add to theliterate population of India.

The tenth plan endeavoured toincrease the enrollment in highereducation of the 18 to 23 years age groupfrom the present 6% to 9% by the end ofthe plan period. The strategy focuses onincreasing access, quality, adoption ofstates-specific curriculum modification,vocationalisation and networking on theuse of information technology. The planalso focuses on distant education,convergence of formal, non-formal, distantand IT education institutions. Over thepast fifty years, there has been asignificant growth in the number ofuniversity and institutions of higherlearning in specialised areas. Let us readthe table to see the increase in numberof college, universities, enrollment ofstudents and recruitment of teacherssince 1951 to 1999.

Table 2.1: Number of Institutions of Higher Education, Enrolment and Faculty

Year Number of Number of Students TeachersColleges Universities

195051 750 30 2,63,000 24,000

199091 7,346 177 49,25,000 2,72,000

199697 9,703 214 67,55,000 3,21,000

199899 11,089 238 74,17,000 3,42,000

Source: UGC Annual Report 199697 and 199899 and Selected EducationalStatistics, Ministry of HRD.


Lets Discuss

Discuss this table in the classroom andanswer the following questions.

1. Is the increase in number of collegesadequate to admit the increasingnumber of students?

2. Do you think we should have morenumber of Universities?

3. What is the increase noticed amongthe teachers in the year 199899.

4. What is your idea about future collegeand Universities?

HealthFirm maximise profit: Do you think anyfirm would be induced to employ peoplewho might not work efficiently as ahealthy worker because of ill health?

The health of a person helps him torealise his potential and the ability tofight illness. An unhealthy personbecomes a liability for an organisationindeed; health is an indispensable basisfor realising ones well being. Henceforth,

Picture 2.5 Children standing in queue forhealth check-up

improvement in the health status of thepopulation has been the priority of thecountry. Our national policy, too, aimedat improving the accessibility of healthcare, family welfare and nutritionalservice with special focus on under-privileged segment of population. Over thelast five decades India has built up a vasthealth infrastructure and man powerrequired at primary secondary andtertiary care in Government as well as inthe private sector.

These measures adopted haveincreased the life expectancy to over64 years in 2000. *Infant mortalityrate (IMR) has come down from 147in 1951 to 75 in 2000. **Crude birthrates have dropped to 26.1 and***death rates to 8.7 within the sameduration of time. Increase in lifeexpectancy and improvement inchildcare are useful in assessing thefuture progress of the country.Increase in longevity of life is anindicator of good quality of lifemarked by self-confidence. Reductionin infant mortality involves theprotection of children from infection,ensuring nutrition along with motherand childcare.

Source: National Health Policy, 2002.

* Infant mortality rate is the death of a child under one year of age.** Birth rates is the number of babies born there for every 1,000 people during a particular period of time.

*** Death rate is the number of people per 1,000 who die during a particular period of time.

Lets Discuss

Study the Table 2.2 and answer thefollowing questions.

1. What is the percentage increase indispensaries from 1951 to 2001?

2. What is the percentage increase indoctors and nursing personnel from1951 to 2001?

24 Economics

UnemploymentSakals mother Sheela looked after thedomestic chores, children and helped herhusband Buta in the field. Sakalsbrother, Jeetu and sister Seetu spendtheir time playing and roaming. Can youcall Sheela or Jeetu or Seetuunemployed? If not, why?

Unemployment is said to exist whenpeople who are willing to work at the goingwages cannot find jobs. Sheela is notinterested in working outside her

ActivityVisit a nearby hospital, eithergovernment or private and note downthe following details.

How many beds are there in thehospital you have visited?

3. Do you think the increase in thenumber of doctor and nurses adequatefor India? If not, why?

4. What other facilities would you like toprovide in a hospital?

5. Discuss about the hospital you havevisited?

6. Can you draw graph using this table.

There are many places in India whichdo not have even these basic facilities.Just four states like Karnataka, AndhraPradesh, Tamil Nadu, Maharashtra have81 out of 181 medical colleges. On theother hand states like Bihar and UttarPradesh have poor health indices and fewmedical colleges.

H1951 1981 2001

SC/PHC/CHC 725 57,363 1,63,181

Dispensaries and Hospitals 9.209 23,555 43,322

Beds 1,17,198 5,69,495 8,70,161

Doctors (Allopathy) 61,800 2,68,700 5,03,900

Nursing Personnel 18,054 1,43,887 7,37,000

SC: Sub centre, PHC: Primary Health Centre, CHC: Community Health Centre.Source: National Health Policy, 2002.

Table 2.2: Health infrastructure over the years

How many doctors are there in thehospital?

How many nurses work in thathospital?

Besides, try to gather the followingadditional information:

How many hospitals are there in yourlocality?

How many dispensaries are there inyour locality?


domestic domain. Jeetu and Seetu are toosmall to be counted in the work forcepopulation. Neither Jeetu, Seetu or Sheelacan be counted as unemployed. Theworkforce population includes people from15 years to 59 years. Sakals brother andsister do not fall within this age group sothey cannot be called unemployed. Sakalsmother Sheela works for the family. Sheis not willing to work outside her domesticdomain for payment. She too cannot becalled unemployed. Sakals grandparents(although not mentioned in the story)cannot be called unemployed.

In case of India we have unemploymentin rural and urban areas. However, thenature of the unemployed differs in ruraland urban areas. In case of rural areas,there is seasonal and disguisedunemployment. Urban areas have mostlyeducated unemployment.

Seasonal unemployment happenswhen people are not able to find jobsduring some months of the year. Peopledependant upon agriculture usually facesuch kind of problem. There are certainbusy seasons when sowing, harvesting,weeding, threshing is done. Certainmonths do not provide much work to thepeople dependant on agriculture.

In case of disguised unemploymentpeople appear to be employed. They haveagricultural plot where they find work.This usually happens among familymembers engaged in agricultural activity.The work requires the service of fivepeople but engages eight people. Threepeople are extra. These three people alsowork in the same plot as five people. Thecontribution made by the three extrapeople does not add to the contributionmade by the five people. If three peopleare removed the productivity of the fieldwill not decline. The field requires theservice of five people and the three extrapeople are disguisedly employed.

In case of urban areas educatedunemployment has become a common

phenomenon. Many youth withmatriculation, graduation and postgraduation degrees are not able to findjob. A study showed that unemploymentof graduate and post-graduate hasincreased faster than amongmatriculates. A paradoxical manpowersituation is witnessed as surplus ofmanpower in certain categories coexistwith shortage of manpower in others.There is unemployment amongtechnically qualified person on one hand,while there is a dearth of technical skillsrequired for economic growth.

Unemployment leads to wastage ofmanpower resource. People who are anasset for the economy turn into a liability.There is a feeling of hopelessness anddespair among the youth. People do nothave enough money to support theirfamily. Inability of educated people whoare willing to work to find gainfulemployment implies a great social waste.

Unemployment tends to increaseeconomic overload. The dependence of theunemployed on the working populationincreases. The quality of life of anindividual as well as of society is adverselyaffected. When a family has to live on abare subsistence level there is a generaldecline in its health status and risingwithdrawal from the school system.

Hence, unemployment has detrimentalimpact on the overall growth of aneconomy. Increase in unemployment is anindicator of a depressed economy. It alsowastes the resource, which could havebeen gainfully employed. If people cannotbe used as a resource they naturallyappear as a liability to the economy.

In case of India, statistically, theunemployment rate is low. A largenumber of people represented with lowincome and productivity are counted asemployed. They appear to workthroughout the year but in terms of theirpotential and income, it is not adequatefor them. The work that they are pursuing

26 Economics

seems forced upon them. They maytherefore want other work of their choice.Poor people cannot afford to sit idle. Theytend to engage in any activity irrespectiveof its earning potential. Their earningkeeps them on a bare subsistence level.

the secondary sector, small scalemanufacturing is the most labour -absorbing. In case of the tertiary sector,various new services are now appearinglike biotechnology, information technologyand so on.

Let us read a story to know how peoplecould become an asset for the economy ofa village.

Story of a Village

There was a village inhabited byseveral families. Each familyproduced enough to feed its members.Each family met its needs by themembers making their own clothesand teaching their own children. Oneof the families decided to send one ofits sons to an agriculture college. Theboy got his admission in the nearbycollege of agriculture. After some timehe became qualified in agro-engineering and came back to thevillage. He proved to be so creativethat he could design an improved typeof plough, which increased the yieldof wheat. Thus a new job of agro-engineer was created and filled in thevillage. The family in the village soldthe surplus in a nearby neighbouringvillage. They earned good profit,which they shared amongthemselves. Inspired by this successall the families after some time helda meeting in the village. They allwanted to have a better future fortheir children too. They requested thepanchayat to open a school in thevillage. They assured the panchayatthat they would all send theirchildren to school. The panchayat,with the help of government, openeda school. A teacher was recruitedfrom a nearby town. All the childrenof this village started going to school.After sometime one of the familiesgave training to his daughter in

Picture 2.6 Can you remember how much didyou pay when you asked him to

mend your shoes or slippers?

Moreover, the employment structureis characterised by self-employment in theprimary sector. The whole familycontributes in the field even though noteverybody is really needed. So there isdisguised unemployment in theagriculture sector. But all the family alsohave a share in what has been produced.This concept of sharing of work in the fieldand the produce raised reduces thehardship of unemployment in the ruralsector. But this does not reduce thepoverty of the family, gradually surpluslabour from every household tends tomigrate from the village in search of jobs.

Let us discuss about the employmentscenario in the three sectors mentionedearlier. Agriculture, is the most labourabsorbing sector of the economy. In recentyears, there has been a decline in thedependence of population on agriculturepartly because of disguised unemploymentdiscussed earlier. Some of the surpluslabour in agriculture has moved to eitherthe secondary or the tertiary sector. In


tailoring. She started stitching clothesfor all the families of the village foreveryone now wanted to buy and wearwell-tailored clothes. Thus anothernew job, that of a tailor was created.This had another positive effect. Thetime of the farmers in going far forbuying clothes was saved. As thefarmers spent more time in the field,the yield of the farms went up. Thiswas the beginning of prosperity. Thefarmers had more than they could

consume. Now they could sell whatthey produced to others who came totheir village markets. Over time, thisvillage, which formally had no jobopportunities in the beginning, hadmany like teacher, tailor, agroengineer and many more. This wasthe story of a simple village wherethe rising level of human capitalenabled it to evolve into a place richwith complex and modern economicactivities.

Summary

You have seen how inputs like education and health helped in making people anasset for the economy. The chapter also discusses about the economic activitiesundertaken in the three sectors of the economy. We also study about the problemassociated with unemployment. Finally the chapter ends with the story of a villagewhich formally had no job but later had plenty.

Exercises

1. What do you understand by 'people as a resource'?

2. How is human resource different from other resources like land and physicalcapital?

3. What is the role of education in human capital formation?

4. What is the role of health in human capital formation?

5. What part does health play in the individuals working life?6. What are the various activities undertaken in the primary sector, secondary

sector and tertiary sector?

7. What is the difference between economic activities and non-economic activities?

8. Why are women employed in low paid work?

9. How will you explain the term unemployment?10. What is the difference between disguised unemployment and seasonal

unemployment?

11. Why is educated unemployed, a peculiar problem of India?

12. In which field do you think India can build the maximum employmentopportunity?

13. Can you suggest some measures in the education system to mitigate the problemof the educated unemployed?

14. Can you imagine some village which initially had no job opportunities butlater came up with many?

15. Which capital would you consider the best land, labour, physical capitaland human capital? Why?

28 Economics

References

GARY, S. BECKER. 1966. Human Capital: A theoretical and Empirical Analysis, with SpecialReference to Education, General Series. Number 80. New York. National Bureauof Economic Research.

THEODORE W. SCHULTZ. Investment in Human Capital American Economic Review.March 1961.

Economic Survey 20042005. Ministry of Finance, Government of India, New Delhi.

India Vision 2020. The Report. Planning Commission. Government of India, NewDelhi.

Mid-Term Appraisal of the Tenth Five Year Plan (20022007). Planning Commission,Part II. New Delhi.

Tenth Five Year Plan ( 20022007). Planning Commission, New Delhi.


OverviewThis chapter deals with one of the mostdifficult challenges faced by independentIndiapoverty. After discussing thismulti-dimensional problem throughexamples, the chapter discusses the waypoverty is seen in social sciences. Povertytrends in India and the world areillustrated through the concept of thepoverty line. Causes of poverty as well asanti-poverty measures taken by thegovernment are also discussed. Thechapter ends with broadening the officialconcept of poverty into human poverty.

IntroductionIn our daily life, we come across manypeople who we think are poor. They couldbe landless labourers in villages or peopleliving in overcrowded jhuggis in cities. Theycould be daily wage workers atconstruction sites or child workers in

Poverty as a ChallengeChapter

dhabas. They could also be beggars withchildren in tatters. We see poverty allaround us. In fact, every fourth person inIndia is poor. This means, roughly 260million (or 26 crore) people in India livein poverty. This also means that India hasthe largest single concentration of the poorin the world. This illustrates theseriousness of the challenge.

Two Typical Cases of Poverty

Urban Case

Thirty-three year old Ram Saran worksas a daily-wage labourer in a wheatflour mill near Ranchi in Jharkhand.He manages to earn around Rs 1,500a month when he finds employment,which is not often. The money is notenough to sustain his family of sixthat includes his wife and four childrenaged betweem 12 years to six months.

Poverty as a Challenge33

Picture 3.1 Story of Ram Saran

30 Economics

He has to send money home to his oldparents who live in a village nearRamgarh. His father a landlesslabourer, depends on Ram Saran andhis brother who lives in Hazaribagh,for sustenance. Ram Saran lives in aone-room rented house in a crowdedbasti in the outskirts of the city. Its atemporary shack built of bricks andclay tiles. His wife Santa Devi, worksas a part time maid in a few housesand manages to earn another Rs 800.They manage a meagre meal of dal andrice twice a day, but theres neverenough for all of them. His elder sonworks as a helper in a tea shop tosupplement the family income andearns another Rs 300, while his 10-year-old daughter takes care of theyounger siblings. None of the childrengo to school. They have only two pairsof hand-me-down clothes each. Newones are bought only when the oldclothes become unwearable. Shoes area luxury. The younger kids areundernourished. They have no accessto healthcare when they fall ill.

Rural case

Lakha Singh belongs to a small villagenear Meerut in Uttar Pradesh. Hisfamily doesnt own any land, so theydo odd jobs for the big farmers. Workis erratic and so is income. At timesthey get paid Rs 50 for a hard dayswork. But often its in kind like a fewkilograms of wheat or dal or evenvegetables for toiling in the farmthrough the day. The family of eightcannot always manage two squaremeals a day. Lakha lives in a kuchhahut on the outskirts of the village.The women of the family spend theday chopping fodder and collectingfirewood in the fields. His father aTB patient, passed away two yearsago due to lack of medication. Hismother now suffers from the samedisease and life is slowly ebbing away.Although, the village has a primaryschool, Lakha never went there. Hehad to start earning when he was 10years old. New clothes happen oncein a few years. Even soap and oil area luxury for the family.

Study the above cases of povertyand discuss the following issuesrelated to poverty:

Landlessness

Unemployment

Size of families

Illiteracy

Poor health/malnutrition

Child labour

Helplessness

Picture 3.2 Story of Lakha Singh

Poverty as a challenge 31

These two typical cases illustrate manydimensions of poverty. They show thatpoverty means hunger and lack of shelter.It also is a situation in which parents arenot able to send their children to schoolor a situation where sick people cannotafford treatment. Poverty also means lackof clean water and sanitation facilities. Italso means lack of a regular job at aminimum decent level. Above all it meansliving with a sense of helplessness. Poorpeople are in a situation in which theyare ill-treated at almost every place, infarms, factories, government offices,hospitals, railway stations etc. Obviously,nobody would like to live in poverty.

One of the biggest challenges ofindependent India has been to bringmillions of its people out of abject poverty.Mahatama Gandhi always insisted thatIndia would be truly independent onlywhen the poorest of its people become freeof human suffering.

Poverty as seen by social scientistsSince poverty has many facets, socialscientists look at it through a variety ofindicators. Usually the indicators usedrelate to the levels of income andconsumption. But now poverty is lookedthrough other social indicators likeilliteracy level, lack of general resistancedue to malnutrition, lack of access tohealthcare, lack of job opportunities, lackof access to safe drinking water,sanitation etc. Analysis of poverty basedon social exclusion and vulnerability isnow becoming very common (see box).

both a cause as well as aconsequence of poverty in the usualsense. Broadly, it is a process throughwhich individuals or groups areexcluded from facilities, benefits andopportunities that others (theirbetters) enjoy. A typical example isthe working of the caste system inIndia in which people belonging tocertain castes are excluded fromequal opportunities. Social exclusionthus may lead to, but can cause moredamage than, having a very lowincome.

Vulnerability

Vulnerability to poverty is a measure,which describes the greaterprobability of certain communities(say, members of a backward caste)or individuals (such as a widow or aphysically handicapped person) ofbecoming, or remaining, poor in thecoming years. Vulnerability isdetermined by the options availableto different communities for findingan alternative living in terms ofassets, education, health and jobopportunities. Further, it is analysedon the basis of the greater risks thesegroups face at the time of naturaldisasters (earthquakes, tsunami),terrorism etc. Additional analysis ismade of their social and economicability to handle these risks. In fact,vulnerability describes the greaterprobability of being more adverselyaffected than other people when badtime comes for everybody, whether aflood or an earthquake or simply afall in the availability of jobs!

Social exclusion

According to this concept, povertymust be seen in terms of the poorhaving to live only in a poorsurrounding with other poor people,excluded from enjoying social equalityof better -off people in bettersurroundings. Social exclusion can be

Poverty LineAt the centre of the discussion on povertyis usually the concept of the poverty line.A common method used to measurepoverty is based on the income or

32 Economics

consumption levels. A person isconsidered poor if his or her income orconsumption level falls below a givenminimum level necessary to fulfill basicneeds. What is necessary to satisfy basicneeds is different at different times andin different countries. Therefore, povertyline may vary with time and place. Eachcountry uses an imaginary line that isconsidered appropriate for its existing levelof development and its accepted minimumsocial norms. For example, a person nothaving a car in the United States may beconsidered poor. In India, owning of a caris still considered a luxury.

While determining the poverty line inIndia, a minimum level of foodrequirement, clothing, footwear, fuel andlight, educational and medicalrequirement etc. are determined forsubsistence. These physical quantities aremultiplied by their prices in rupees. Thepresent formula for food requirementwhile estimating the poverty line is basedon the desired calorie requirement. Fooditems such as cereals, pulses, vegetable,milk, oil, sugar etc. together provide theseneeded calories. The calorie needs varydepending on age, sex and the type ofwork that a person does. The acceptedaverage calorie requirement in India is2400 calories per person per day in ruralareas and 2100 calories per person perday in urban areas. Since people livingin rural areas engage themselves in morephysical work, calorie requirements inrural areas are considered to be higherthan urban areas. The monetaryexpenditure per capita needed for buyingthese calorie requirements in terms offood grains etc. is revised periodicallytaking into consideration the rise inprices.

On the basis of these calculations, forthe year 2000, the poverty line for a personwas fixed at Rs 328 per month for therural areas and Rs 454 for the urbanareas. Despite less calorie requirement,

the higher amount for urban areas hasbeen fixed because of high prices of manyessential products in urban centres. Inthis way in the year 2000, a family of fivemembers living in rural areas andearning less than about Rs 1,640 permonth will be below the poverty line. Asimilar family in the urban areas wouldneed a minimum of Rs 2,270 per monthto meet their basic requirements. Thepoverty line is estimated periodically(normally every five years) by conductingsample surveys. These surveys arecarried out by the National Sample SurveyOrganisation (NSSO). However, formaking comparisons between developingcountries, many internationalorganisations like the World Bank use auniform standard for the poverty line:minimum availability of the equivalent of$1 per person per day.

Lets DiscussDiscuss the following:

Why do different countries use differentpoverty lines?

What do you think would be theminimum necessary level in yourlocality?

Poverty Estimates

It is clear from the Table 3.1 that there issubstantial decline in poverty ratios inIndia from about 55 per cent in 1973 to36 per cent in 1993. The proportion ofpeople below poverty line further camedown to about 26 per cent in 2000. If thetrend continues, people below poverty linemay come down to less than 20 per centin the next few years. Although thepercentage of people living under povertydeclined in the earlier two decades (19731993), the number of poor remained stablearound 320 million for a fairly long period.The latest estimates indicate a significantreduction in the number of poor to about260 million.


Lets Discuss

Study the Table 3.1 and answer thefollowing questions: Even if poverty ratio declined between

197374 and 199394, why did thenumber of poor remain at about 320million?

Are the dynamics of poverty reductionthe same in rural and urban India?

Vulnerable GroupsThe proportion of people below poverty lineis also not same for all social groups andeconomic categories in India. Socialgroups which are most vulnerable topoverty are scheduled caste andscheduled tribe households. Similarly,

Table 3.1: Estimates of Poverty in India

Poverty ratio (%) Number of poor (in millions)

Year Rural Urban Combined Rural Urban Combined

197374 56.4 49.0 54.9 261 60 321

199394 37.3 32.4 36.0 244 76 320

199900 27.1 23.6 26.1 193 67 260

Source: Economic Survey 200203, Ministry of Finance, Government of India.

among the economic groups, the mostvulnerable groups are the ruralagricultural labour households and theurban casual labour households. Thefollowing Graph 3.1 shows the percentageof poor people in all these groups.Although the average for people belowpoverty line for all groups in India is 26,51 out of 100 people belonging toscheduled tribes are not able to meet theirbasic needs. Similarly, 50 per cent ofcasual workers in urban areas are belowpoverty line. About 50 per cent of landlessagricultural workers and 43 per cent ofscheduled castes are also poor. The doubledisadvantage, of being a landless casualwage labour household in the sociallydisadvantaged social groups of the

Graph 3.1: Poverty in India 2000: Most Vulnerable Groups

Nu

mber

of

poo

r ou

t of

eve

ry100 p

erso

n f

r om

th

e ca

tego

ry

0

10

20

30

40

50

60

Scheduledtribes

Urban casuallabourers

Rural agriculturelabourers

Scheduledcastes

Average Indianpoverty ratio

51 5047

43

26

Social Groups and Economic CategoriesSource: Reports on Employment and Unemployment among Social Groups in India No. 469,472,

NSSO, Ministry of Statistics, Programme Implementation, Govt of India.

34 Economics

Picture 3.3 Story of Sivaraman

scheduled caste or the scheduled tribepopulation highlights the seriousness ofthe problem. Some recent studies haveshown that except for the scheduled tribehouseholds, all the other three groups (i.e.scheduled castes, rural agriculturallabourers and the urban casual labourhouseholds) have seen a decline in povertyin the 1990s.

Apart from these social groups, thereis also inequality of incomes within afamily. In poor families all suffer, but somesuffer more than others. Women, elderlypeople and female infants aresystematically denied equal access toresources available to the family.Therefore women, children (especially thegirl child) and old people are poorest ofthe poor (see box).

Story of Sivaraman

Sivaraman lives in a small villagenear Karur town in Tamil Nadu. Karuris famous for its handloom andpowerloom fabrics. There are a 100families in the village. Sivaraman anAryunthathiyar (cobbler) by caste nowworks as an agricultural labourer forRs 50 per day. But thats only for fiveto six months in a year. At othertimes, he does odd jobs in the town.His wife Sasikala too works with him.But she can rarely find work thesedays, and even if she does, shes paidRs 25 per day for the same work thatSivaraman does. There are eightmembers in the family. Sivaramans65 year old widowed mother is ill and

Poverty as a challenge 35

Lets Discuss

Observe some of the poor familiesaround you and try to find the following: Which social and economic group do

they belong to?

Who are the earning members in thefamily?

What is the condition of the old peoplein the family?

Are all the children (boys and girls)attending schools?

Although state level poverty has witnesseda secular decline from the levels of earlyseventies, the success rate of reducingpoverty varies from state to state. Recentestimates show that in 20 states andunion territories, the poverty ratio is lessthan the national average. On the otherhand, poverty is still a serious problemin Orissa, Bihar, Assam, Tripura andUttar Pradesh. As the Graph 3.2 shows,Orissa and Bihar continue to be the twopoorest states with poverty ratios of 47and 43 per cent respectively. Along withrural poverty urban poverty is also highin Orissa, Madhya Pradesh, Bihar andUttar Pradesh.

In comparison, there has been asignificant decline in poverty in Kerala,Jammu and Kashmir, Andhra Pradesh,Tamil Nadu, Gujarat and West Bengal.States like Punjab and Haryana havetraditionally succeeded in reducingpoverty with the help of high agriculturalgrowth rates. Kerala has focused more onhuman resource development. In WestBengal, land reform measures havehelped in reducing poverty. In AndhraPradesh and Tamil Nadu publicdistribution of food grains could have beenresponsible for the improvement.

Global Poverty ScenarioThe proportion of people in developingcountries living in extreme economicpoverty defined by the World Bank asliving on less than $1 per dayhas fallenfrom 28 per cent in 1990 to 21 per cent in2001. Although there has been asubstantial reduction in global poverty, itis marked with great regional differences.Poverty declined substantially in Chinaand Southeast Asian countries as a resultof rapid economic growth and massiveinvestments in human resourcedevelopment. Number of poors in Chinahas come down from 606 million in 1981to 212 million in 2001. In the countries ofSouth Asia (India, Pakistan, Sri Lanka,Nepal, Bangladesh, Bhutan) the decline has

needs to be helped with her dailychores. He has a 25-year -oldunmarried sister and four childrenaged between 1 year to 16 years.Three of them are girls, the youngestis a son. None of the girls go to school.Buying books and other things forschool-going girls is a luxury hecannot afford. Also, he has to get themmarried at some point of time so hedoesnt want to spend on theireducation now. His mother has lostinterest in life and is just waiting todie someday. His sister and elderdaughter take care of the household.Sivaraman plans to send his son toschool when he comes of age. Hisunmarried sister does not get alongwith his wife. Sasikala finds her aburden but Sivaraman cant find asuitable groom due to lack of money.Although the family has difficulty inarranging two meals a day,Sivaraman manages to buy milk oncein a while, but only for his son.

Inter-State DisparitiesPoverty in India also has another aspector dimension. The proportion of poorpeople is not the same in every state.

36 Economics

not been as rapid. Despite decline in thepercentage of the poor, the number of poorhas declined marginally from 475 millionin 1981 to 428 million in 2001. Because ofdifferent poverty line definition, poverty inIndia is also shown higher than thenational estimates.

In Sub-Saharan Africa, poverty in factrose from 41 per cent in 1981 to 46 percent in 2001 (see graph 3.3). In LatinAmerica, the ratio of poverty remained thesame. Poverty has also resurfaced insome of the former socialist countries likeRussia, where officially it was non-existent earlier. Table 3.2 shows theproportion of people living under povertyin different countries as defined by theinternational poverty line (meanspopulation below $1 a day). The MillenniumDevelopment Goals of the United Nations

Lets DiscussStudy the Graph 3.2 and do the following: Identify the three states where the

poverty ratio is the highest. Identify the three states where poverty

ratio is the lowest.

calls for reducing the proportion of peopleliving on less than $1 a day to half the1990 level by 2015.

Lets Discuss

Study the Graph 3.4 and do the following: Identify the areas of the world, where

poverty ratios have declined.

Identify the area of the globe which hasthe largest concentration of the poor.

45

50

40

35

30

25

20

15

10

5

0

Per

cen

tage

of

peo

ple

bel

ow p

over

ty lin

e

47.2

42.6

37.436.1

34.431.2

27.1 26.125

21.1 20

15.8 15.3 1412.7

8.7 8.2 7.66.2

3.5

Orissa

Biha

r

Mad

hya pr

ades

h

Assa

m

Trip

ura

Tam

il Na

du

Utta

r Pra

desh

All I

ndia

Wes

t Ben

gal

Mah

aras

htra

Hary

ana

Jam

mu

& Ka

shm

ir

Andh

ra P

rade

sh

Karn

atak

a

Rajast

han

Him

acha

l Pra

desh

Gujara

t

Kera

la

Punj

ab

Delh

i

Graph 3.2: Poverty Ratio in Selected Indian States, 19992000

Source: Economic Survey 200102, Ministry of Finance, Government of India

Table 3.2: Poverty: Comparison among Some Selected Countries

Country % of Population below$1 a day

1. Nigeria 70.82. Bangladesh 36.03. India 35.34. Pakistan 17.05. China 16.66. Brazil 8.27. Indonesia 7.58. Sri Lanka 5.6

Source: World Development Report, 2001.


Source: World Development Indicators 2005, The World Bank.

Source: World Development Indicators 2005, The World Bank.

Graph 3.3: Share of people living on $1 a day, 19802001

0

10

40

20

50

30

60

70

1981 1990 2001

China

East Asia &Pacific

South Asia

Sub-Saharan Africa Sub-Saharan Africa

South Asia

China

Latin American & Carribean

Latin American & Carribean

East Asia &Pacific

Per

centa

ge

Years

1981

China

East Asia &Pacific

others

Sub-Saharan Africa

South Asia

1984 1987 1990 1993 1996 1999 20010

500

1000

1500

2000

Mil

lions

2500

Years

Graph 3.4: Number of poor by region ($ 1 per day) in millions

38 Economics

Causes of PovertyThere were a number of causes for thewidespread poverty in India. Onehistorical reason is the low level ofeconomic development under the Britishcolonial administration. The policies ofthe colonial government ruined traditionalhandicrafts and discouraged developmentof industries like textiles. The low rate ofgrowth persisted until the nineteen-eighties. This resulted in less jobopportunities and low growth rate ofincomes. This was accompanied by a highgrowth rate of population. The twocombined to make the growth rate of percapita income very low. The failure at boththe fronts: promotion of economic growthand population control perpetuated thecycle of poverty.

With the spread of irrigation and theGreen revolution, many job opportunitieswere created in the agriculture sector. Butthe effects were limited to some parts ofIndia. The industries, both in the publicand the private sector, did provide somejobs. But these were not enough to absorball the job seekers. Unable to find properjobs in cities, many people started workingas rickshaw pullers, vendors,construction workers, domestic servantsetc. With irregular small incomes, thesepeople could not afford expensive housing.They started living in slums on theoutskirts of the cities and the problemsof poverty, largely a rural phenomenonalso became the feature of the urbansector.

Another feature of high poverty rateshas been the huge income inequalities.One of the major reasons for this is theunequal distribution of land and otherresources. Despite many policies, we havenot been able to tackle the issue in ameaningful manner. Major policyinitiatives like land reforms which aimedat redistribution of assets in rural areashave not been implemented properly and

effectively by most of the stategovernments. Since lack of land resourceshas been one of the major causes ofpoverty in India, proper implementationof policy could have improved the life ofmillions of rural poor.

Many other socio-cultural andeconomic factors also are responsible forpoverty. In order to fulfil social obligationsand observe religious ceremonies, peoplein India, including the very poor, spend alot of money. Small farmers need moneyto buy agricultural inputs like seeds,fertilizer, pesticides etc. Since poor peoplehardly have any savings, they borrow.Unable to repay because of poverty, theybecome victims of indebtedness. So thehigh level of indebtedness is both thecause and effect of poverty.

Anti-Poverty MeasuresRemoval of poverty has been one of themajor objectives of Indian developmentalstrategy. The current anti-povertystrategy of the government is basedbroadly on two planks (1) promotion ofeconomic growth (2) targeted anti-povertyprogrammes.

Over a period of thirty years lastingup to the early eighties, there were littleper capita income growth and not muchreduction in poverty. Official povertyestimates which were about 45 per centin the early 1950s remained the same evenin the early eighties. S

Class IX NCERT Economics

Documents

Transcript of Class IX NCERT Economics