Rajasthan Board RBSE Class 10 Social Science Notes Chapter 16 Challenges Faced by Indian Economy
In India wholesale price index and various consumer price indexes are used for estimating inflation.
Price refers to that monetary unit for which a unit of good or service is exchanged.
Price and value of money have inverse relationship. Due to inflation purchasing power of money decreases.
Fixed income group people are the most affected by inflation.
Value of money refers to purchasing power of money. It represents the purchasing capacity of goods and services by the money.
In 1950’s average rate of inflation in India was 1.7%. In 1960’s it was 6.4%, in 1970’s it was more than 9% and in 2000-2012 it was 4.7%.
Aggregate demand and aggregate supply gives rise to demand pull and cost push inflation.
Aggregate demand refers to the expected value of final goods and services demanded in an economy in a year.
Aggregate supply refers to the total value of final goods and services in the economy.
Disequilibrium in aggregate demand (AD) and aggregate supply (AS) leads to changes in price of a commodity.
Price rise in the economy due to rise in aggregate demand or decrease in aggregate supply or both.
When price rises in the economy due to rise in aggregate demand then it is called as demand pull inflation.
When price rises in the economy due to increase in cost of production then it is called as cost push
inflation.
Inflation is by caused by various reasons such as:
Increase in supply of money.
Low growth of production of agricultural and industrial production.
Rise in public expenditure.
Rise in population.
Government interference in deciding price.
Rise in income level.
Increase in indirect taxes.
Increase in imports.
To control inflation monetary and fiscal measures are used. ‘
For the first time Dadabhai Naoroji estimated poverty in India in 1868.
According to Mr. Suresh Tendulkar 21.92% people were poor in 2011-12.
Poverty has two aspects – Absolute poverty and Relative poverty.
Whenever poverty is referred in economics it refers to Absolute poverty.
Absolute poverty refers to the state in which a person is unable to earn the basic necessities of life.
Absolute poverty mainly exist in underdeveloped or developing countries.
Relative poverty exists in all the countries but mainly in developed nations.
For compilation of data to estimate poverty two types of recall period is used – uniform recall period and mixed recall period.
In uniform recall period data is collected for 30 days and in mixed recall period data is collected for the period of 30 days and 365 days.
Social, economic and political factors are responsible for poverty in India.
Social structure in India is such that it leads to rise in poverty. Various rituals during birth, marriage and death forces a person to take loans which leads to poverty.
Due to economic backwardness Indian people are unable to invest in education and health, which reduces their productivity to low productivity and leads to low income level.
India lacks in political will power due to which benefits of various policies and programs are unable to reach to the targeted ones.
Apart from above mention factors there are certain other factors too which are responsible for poverty in India such as – low standard of education, lack of entrepreneurship, lack of vocational training, weak infrastructure, lack of capital formation, and unavailability of health care.
For the first time Regnar Nurxe explained the viscous circle of poverty. He said that country is poor because it is poor from the starting. Reason for poverty is the poverty and its result is also poverty.
Poverty can be eradicated by – expanding health and education services, increase in employment opportunities, control over social evils, control over population, to make certain that benefits of various policies reaching to the targeted ones.
To minimize the problem of poverty Government of India took various steps. It adopted a multidimensional policy. Various program were started for wage employment and self employment. People living below poverty line were identified and were provided with essential goods and services at low price or free of cost.
Unemployment is a situation of an economy in which people who are willing and able to work are not able to find a gainful job at a prevailing wage rate.
Labor force refers to the population which supplies or seeks to supply labor for production and therefore, includes both employed and unemployed persons. Labor force can be called as economically active population.
Work force is a part to labor force and refers to the population which is employed.
Rate of unemployment is defined as the number of persons unemployed per thousand persons in labor force. Rate of unemployment = number of unemployed people / labor force * 100.
Rate of unemployment is estimated on various basis – general condition, current weekly condition, and current daily condition.
During 2011-12, on the basis of general condition labor force was 395/ 1000 and work force was 386/1000.
Rate of unemployment during 2011-12 was 2.3%.
Various types of unemployment are – seasonal unemployment, structural unemployment, technical unemployment, frictional unemployment, cyclic unemployment, and disguised unemployment.
In India disguised and structural unemployment is most commonly found.
Seasonal unemployment is a situation in which people are employed during shone parts of the year and remain without work during the rest of the year owing to the seasonal nature of the work. It is found in agricultural sector, trade in holiday resorts etc.
Structural unemployment refers to the condition in which people remain unemployed due to structural changes in the economy.
Unemployment arised due to introduction of new machinery, use of improved method of production, labor saving devices etc. is called as technical unemployment.
Frictional unemployment arises when some workers are temporarily out of work while changing jobs. It is a temporary phenomenon.
Trade cycles especially recessionary and depressionary phase causes cyclical unemployment in capitalist and advanced economies.
Disguised unemployment is a situation in which more people are engaged in an activity than the required. In such cases even if the surplus laborers are removed from work, production does not suffers.
NSSO estimates unemployment and poverty in the country.
In India we have jobless growth, it means rapid rise in economic growth without rise in employment opportunities.
Government can control unemployment situation by adopting following measures:
Reduction in leakages in wage and self employment program launched by the government.
Making education employment oriented, encouraging youth by various training and skill development program.
Rise in industrialization to absorb extra labor from agriculture.