Q. Write a note on educated unemployment.

ANS. An important aspect of urban unemployment is the lack of job opportunities for the educated people. With increasing literacy level, the problem of educated unemployment is becoming severe. University degree holders and even professionally trained people are finding it difficult to get jobs. Unemployment among the educated is mainly due to over emphasis on theoretical aspects of various subjects. The education system is cut-off from ground realities of the Indian economy.

The unemployment rates on the usual status basis among the educated youth are given in the table below. The unemployment rate for the educated (secondary and above) persons in the age group 15-19 in 1993-94 was as high as 18.5%. The unemployment rate on the persons in the age group 15-19 who have any form of technical education was even higher at 27.3% in 1993-94. However, according to the NSS, the incidence of unemployment among the educated youth, both for general and technical education, declined sharply between 1913-94 and 1999-2000. Unemployment rates for educated youth in 1999-2000 are still higher at 14.8% for secondary education and above and 23.7% for all types of technical education, but they are significantly lower than in earlier years.

Table: unemployment rates among educated youth (15-29 years) on Usual

Status Basis

Year Secondary education and above

All types of technical education

1993-94

1999-2000

18.5

14.8

27.3

23..7

Source: planning commission report on labour and employment.

The high rate of unemployment among the educated youth is the core of the problem because it creates a sense of despair across a wide section of the population including not only the educated youth but their parents and families. The problem of unemployment in this category can only be solved if high quality employment is created.

Causes: Educated unemployment in India is of high degree because of many reasons like

1) population growth – which leads to less job opportunities and more labour force

2) lack of infrastructure – which results into less development of industry and service sector resulting into unemployment

3) Lack of manpower planning – education is given without considering need of the economy.

Conclusion: In order to reduce the problem many measures have been taken by the government from time to time like training youth for self employment, introduction of professional training etc.

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Q. Explain various measures taken to reduce unemployment in India.

Ans. The government has been financing various types of special programmes designed to create additional employment opportunities in the economy. Some of these programmes are targeted to provide wage employment or self-employment to specific target groups such as the poor in urban and rural areas, women, scheduled caste and scheduled tribes. The individual programmes of wage employment and self-employment have modified from time to time. Some of the important programmes are explained below.

1. Employment programme for the rural poor:The major ongoing employment for rural poor are the following:

i. Self employment for the rural poor: from IRDP to SGSYPromotion for self employment for rural poor has been an important element in the overall employment strategy. The integrated rural development programme started in 1980-81 has been major instrument for this purpose.

Swarnajayanti gram swarozgar yojana:All rural self employment programmes was merged into the SGSY on 1st April 1999. It aims at bringing the self-employed above the poverty line by providing them income generating assets through bank credit and government subsidy.

ii. Wage employment for rural area: from EAS to SGRY.Employment assurance scheme was launched in 1993 as a major wage employment programme for the rural areas. It was initially limited to the 1778 economically most backward blocks. In 1997, the programme was extended to all blocks converting it to a geographically universal programme.

Sampoorna grameen rozgar yojana:It was launched in September 2001 by integrating JGSY and EAS scheme. The objective of SGRY is to provide additional wage employment alongwith food security, creation of durable community, social and economic assets and infrastructure development in rural areas. It envisages generation of 100 crore mandays in a year. The cost is shared between the centre and state in the ratio of 75:25. In 2007-08, upto December 31, 2007, 11.60 crore person-days of employment was generated.

iii. National food for work programme(NFFWP):This programme was launched on November 14, 2004 in 150 most backward districts of the country for the generation of supplementary wage employment. This programme is open to all rural poor who are in need of wage employment and desire to do manual unskilled work.

iv. Rural employment generation programme (REGP):It was launched in 1995. It aims to create self-employment opportunities in the rural area and small towns. It is being implemented by the khadi and village industries commission(KVIC). Under REGP entrepreneurs can establish village industries by availing money assistance from the KVIC and bank loans.

2. Employment programme for the urban poor:Along with the efforts in rural areas, there have been special employment programmes for urban areas focusing on both wage employment as well as self-employment for the urban poor.

a. The urban self- employment programme(USEP):It targets individual urban poor for setting up of micro enterprises.

b. The urban women self-help programme (UWSP):It targets urban poor women self-help groups enterprises and providing them assistance.

c. Skill training for employment promotion among urban poor(STEP-UP):It targets urban poor for providing quality training so as to improve employment.

3. Self- employment for educated youth:In addition to the above programmes which are targeted to benefit the poor in rural and urban areas the employment strategy was also tried to provide employment opportunities for growing number of educated youth who may not be from poor families but who face severe difficulties in finding gainful employment.To meet this objective self- employment for educated urban youth (SEEUY) programme was launched during 1983-84. This was later incorporated into the prime minister’s rozgar yojna(PMRY) which was launched on 2nd October 1993. In aimed at setting up 7 lakh micro enterprises during the eight plan (1992-97) providing employment to more than a million persons over the period.

4. Other programmes:

a) National minorities finance and development corporationb) National backward classes finance and development corporationc) National sc/st finance and development corporationd) National handicapped finance and development corporatione) Training cum production centre (NORAD)

There is need to shift resources from programmes perceived to be less Effective to those perceived to be more effective on the basis of current monitoring and evaluation.

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Q. EXPLAIN THE NATURE OF UNEMPLOYMENT IN INDIA.

India being a developing economy the nature of unemployment differs from the one that prevails in developed countries. In the developed countries the unemployment is due to deficiency of effective demand and it is mostly returning in nature. In India the unemployment is a multi-dimensional phenomenon.

The nature of unemployment in the country is analyses by classifying the unemployment into-

1. Rural employment

And

2. Urban employment

1. RURAL EMPLOYMENT:

Large percentage of Indian population reside in the rural sector with the main occupation as agriculture and allied activities, it gives rise to the problem of rural unemployment. The rural unemployment is generally divided into

a) Disguised unemployment

b) Seasonal unemployment

c) Open unemployment.

a) Disguised unemployment:

There is considerable disguised unemployment in the agricultural sector. It is a state of unemployment in which more people are engaged in agricultural operations that required. The

marginal productivity of such workers is zero. It means that all the workers are not needed to maintain the existing level of production.

b) Seasonal unemployment:

Another dimension of rural unemployment is the problem of seasonal unemployment among the farmers. Agriculture by its very nature is a seasonal activity. For a significant part of the year Indian farmers are out of work. In the absence of supplementary sources of employment, they remain unemployed during the slack agricultural season.

c) Open unemployment:

Those who do not have any work come under this category. They are able and willing to work, but there is no work for them. Such unemployment is in the nature of involuntary idleness. There is considerable open unemployment among the landless agricultural workers.

The main causes responsible for rural unemployment are:

i) High growth rate of population,

ii) Illiteracy,

iii) Dependency on monsoon,

iv) Lack of rural development and infrastructural facilities,

v) Lack of mobility of people.

2. URBAN EMPLOYMENT:

In Urban areas, the main occupations are related to secondary and tertiary sectors in which generally semi skilled and skilled labourers are engaged. The main two types of unemployment in the urban sector are

a) Industrial unemployment

b) Educated unemployment

a) Industrial unemployment:

Industrial unemployment is the result of slow growth of industrial development vis-à-vis growth of labour force. There has been a tendency for the rural people to migrate to urban areas in search of employment. Further, unemployment in the industrial sector has increased due to low growth of employment in the organized sector. Sectoral employment elasticity with respect to GDP as well as aggregate employment elasticity has come down.

The important factors responsible for industrial unemployment are

i) slow industrial growth,

ii) Decay of small scale and cottage industries, and

iii) Deceleration in the public sector employment including government employment.

b) Educated unemployment:

An important aspect of urban unemployment is the lack of job opportunities for the educated people. With increasing literacy level, the problem of educated unemployment is becoming harsh. University degree holders and even professionally trained people are finding it difficult to get jobs. The education system is cut-off from ground realities of the Indian economy.

In addition to these types we also find structural, cyclical, Frictional unemployment in India.

Conclusion: Government is introducing many measures to reduce unemployment in India which has limited success due to lack of proper implementation of such programmes.

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Short note of nationalization of commercial Banks

Introduction: Commercial banks are the oldest, largest and fastest growing financial intermediaries in India. They are also the most important depositories of public saving and the most important disbursers of finance.

Nationalization of commercial banks :

Nationalization of commercial banks was an important development in commercial banking in India. On July 19, 1969, 14 commercial banks with deposits of Rs. 50 crore or more were nationalized. Nationalization was resorted to on the ground that the commercial banks did not play proper role in the planned development of the economy. Again in 1980, the government nationalized 6more commercial banks. The main objectives of nationalization of commercial banks were as follows:

i- To achieve social objectives i.e diversion of funds at concessional rates to weaker sections for productive purposes

ii- To prevent monopoles arising from the use of major share by few private entrepreneurs

iii- To promote banking facilities to un-banked under banked areasiv- To direct and utilize funds in accordance to plan prioritiesv- To expand the role of commercial banking in agricultural creditvi- To reduce regional disparities in branch expansion and growth of banking business in

the country

Achievements of nationalization of commercial banking in India:

Branch expansion:

A planned and progressive reduction in regional imbalances was aimed at the time of nationalization. Branch expansion policy, thus, aimed at reducing the lop sided banking facilities. To ensure continuity in the matter of branch expansion, banks prepared a rolling plan for the three years at a time

Bank lending:

Bank credit increased tremendously from Rs3,339cr in 1969 to Rs. 27,52,056 in 2009.

Advances to priority sector:

. The share of priority sector advances in total bank advances increased from 14% in 1969 to about 33% in March 2008-09. As on March 2008, outstanding advances to priority sector, worked out to be 44.6%, 47.5% and 39.5%for public sector, private sector and foreign banks respectively.

Contribution to employment generation and poverty eradication:

Commercial banks contributed to employment generation & poverty eradication by giving loans to agriculture, allied activities, small scale industries and services and micro enterprises and so on.

Indian Banks abroad:

The total number of offices of Indian banks outside India has increased from 93 to 106 in 2006

Regional balance:

In 1969, 5 states (Maharashtra, Gujarat, Tamil Nadu, west Bengal and Punjab) accounted for little under half of the total number of bank offices. By 1990, the share of other states has risen to nearly 80% reflecting greater emphasis placed on opening offices in hitherto under banked regions of the country.

Limitations of commercial bank prior to 1991:

In spite of above achievements the commercial banking in India had a number of limitations prior to 1991.

Inadequate banking facilities:

Even though, population per bank office is reduced during the period 1969 to 1991, the extension of banking facilities has not been sufficient enough as compared to population. The national average population per bank office is 12000, which needs to be brought down. In states like Madhya Pradesh, Bihar, Orissa, west Bengal, etc. the population per bank office is greater than the national average.

Regional imbalances:

There are regional imbalances in the spread of bank offices. The concentration of bank offices has been found in the states like Maharashtra, Gujarat, Tamil Nadu, Kerala. In rural areas also, the increase in banking institutions remained confined to the well banked states.

Inadequate to mobilization and allocation of resources:

The amount of deposits mobilized are insufficient and still there is a large scope for expansion of deposits

Lower efficiency and profitability:

There has been reduction in productivity of commercial banks services and quality of customer service due to staff indiscipline and lack of effective management. Profitability also has been declining due to rapid branch expansion, provision of concessional facilities, unfavorable deposit structure, higher CRR and SLR and large over dues.

Political and administrative interference:

The most serious damage to the public sector banks was the political and administrative interference in giving credit. For example loan melas organized by political leaders to direst bank credit to their supporters in urban and rural areas were against the principle of sound banking.

Increasing expenditure of banks:

Expenditure of public sector banks increased phenomenally since 1969. The reasons were as follows:

i- Substantial increase in branches without any relation to need and viability.ii- Rapid growth in staff and in accelerated promotions leading to lower quality of

manpower and over staffing at all levels.iii- Increased role of trade unions leading to salary hikes which were not related to

productivity of individuals; inefficient customer service was the consequence.

Conclusion: thus a number of reforms were introduced in banking sector by Narasimham committee to overcome these problems

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Q2. DISCUSS THE EXTENT OF UNEMPLOYMENT IN INDIA. (TYPE WITH DATA)

Introduction: unemployment refers to the situation in which a person is able and willing to a job but still is not able to get the job. In India nature of unemployment is mainly Rural and Urban.

The extent of unemployment in India is explained below:

1. Magnitude Of Unemployment :The magnitude of unemployment has brought out by various rounds of NSSO Surveys in shown in below in table. The total number of unemployed in terms of CDS has increased from 24.34 million in 1983 to 34.74 million in 2004-05. Further, the unemployment rate (by CDS) as a proportion of labour force has also increased from 6.06 percent in 1993-94 to 8.28 percent in 2004-05.

Magnitude of Unemployment in India (by CDS basis)

Year Number of unemployed

(in millions)

Unemployment rate as a proportion of labour force (percent)

1983 24.34 9.22

1993-94 20.27 6.06

2004-05 34.74 8.28

2. Higher And Increasing Unemployment Incidence Among Females:

The incidence of unemployment is significantly higher among females then males, both in rural and urban areas. The unemployment rate (UPS) among the females in the rural areas has increased from 1.4% in 1993-94 to 3.1% in 2004-05. Similarly the female’s unemployment rates in the urban areas have increased from 8.3% to 9.1% during the same period.

Unemployment rates (by UPS)

Rural Urban

Year Male Female Male Female

1993-94 2.0 1.4 4.5 8.3

2004-05 2.1 3.1 4.4 9.1

3. Higher Unemployment Rates In Urban Areas :

Unemployment rates are traditionally higher in urban areas than in rural areas. This pattern is observed in 1993-94 and 2004-05 both for males and females. In the urban areas the greater dominance of the organized sector forces. In the urban areas the greater dominance of the organized sector forces people to be either employed or unemployed. There are fewer opportunities to engage in low productivity subsidiary employment.

4. Unemployment Across Age Group:

Unemployment rates are significantly higher in the younger age groups. The Unemployment rates on CDS for different age group shows that the Unemployment rates for the 15-39 age groups was high as 12.1 percent in 1999-2000 against 7.3 percent for the population as a whole.

Unemployment rates on CDS basis across age groups

(Percentage of labour force)

Age (years) 1993-1994 1999-2000

15-29 10.1 12.1

All age group 6.0 7.3

5. Unemployment By The Level Of Education :

According to NSSO, compared to 1993-94, unemployment rates for persons of personas of higher education level has declined in rural areas both for males and females in 1999-2000, and it has further declined in 2004-05 compared to 1999-2000, and it has further declined in 2004-05 compared to 1999-2000. Unemployment rate of graduate and above female population is much higher in rural areas than in urban areas. This indicates lack of opportunities in rural India and lack of mobility of this population segment.

6. Unemployment Among Educate Youth:

The unemployment rates on the usual status basis among the educated youth are given in table. According to the NSS, the indicates of unemployment for the educated youth, both the general and technical education, decline sharply between 1993-94 and 1999-2000. Unemployment rates for educated youth in 1999-2000 are still higher at 14.8 percent fir secondary education and above and 23.7 percent for all types of technical education, but they are significantly lower than in earlier years. The problem of Unemployment in educated youth category can be solved if high quality employment is created.

Unemployment rates among Educated Youth (15-29 years) on Usual Status Basis

(Percentage)

Year Secondary Education and above All types of Technical Education

1993-1994 18.5 27.3

1999-2000 14.8 23.7

7. Wide Variations In Unemployment Across States:

The rate of unemployment varies sharply across state. The Unemployment rates for 1999-2000 varies from low levels around 3% in Himachal Pradesh and Rajasthan to above 12% in Tamil Nadu, 15% in West Bengal and almost 21% in Kerala. These instate variation are consistent over time and the same state had high Unemployment rates in 1993-94.

Conclusion: various measures are adopted by Government to reduce unemployment.

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Q.1. DEMOGRAPHIC FEATURES OF INDIS’S POPULATION

India and an overpopulated economy ie, second largesr populous country.

The important demographic features of Indian’s Population are discussed below:

SIZE AND GROWTH RATE OF POPULATION :

As per the Population Census of India, 2011, The population of India in March 2011 was 1.21 billion. Males constitute 623.7 million and females 586.5 million in 2001. Next to China, India has the largest population. It is now estimated that by 2050, India will most likely overtake China to become the most populous country on the earth.

DENSITY OF POPULATION :

The term density of population refers to the average number of persons living per square km. The density of population has increased from 117 in 1951 to reach 382 persons per sq.km. in 2011. Among major states West Bengal is the most thickly populated, followed by Bihar, Kerala, U.P., Punjab and Tamil Nadu. Region wise the Easter region has the highest density and the North eastern Region, the lowest.

SEX RATIO :

It shows the number of females per 1000 males. The sex ratio of the country as a whole was 940 females per 1,000 males as per census 2011. This shows some improvement over the sex ratio of 927 recorded in 1991. However, the long term trend has been a declining one, from 946 in 1951 to 940 in 2001. The states that have recorded a decline in overall sex ratio, are U.P., Bihar, Orissa, MP and Tamil Nadu. Only Kerala and Pondicherry have above parity sex ratios of 1,084 and 1,038 respectively. The persistent tendency towards low sex ratios in India can be attributed in the following factors:

Sex Selective Female abortions Neglect of the Girl Child Female infanticide High Maternal Mortality

AGE COMPOSITION :

Age Composition indicates the proportion of the labour force and of the dependent population (i.e. Children and old people) in total population. The Age Composition of Population in 2001 was as follows:

Age Group Percent

0 - 14 30.8%

15 -59 64.3%

60 and above 4.9%

URBANISATION :

As per Census 2011, out of the population of 1.21 billion , about 72% live in rural areas and 28% live in Urban areas. The net addition to the population from 20o1 to 2011 was 9% in rural areas and 9.1% in urban areas.

LIFE EXPECTANCY AND LITERACY RATE :

The quality of population can be judged from life expectancy and literacy rate. The life expectancy at birth in the country for males and females has gone up from 32.2 and 31.7 years respectively in 1950 – 1951 to  65.77 year and  67.95 year respectively in 2011. It is still quiet low compared to high income countries where it is 78 years in 1999.

Kerala has the highest literacy rate of 93.92% and it occupies the top slot in both male and female literacy rates , at 96% and 92% respectively in 2011. Bihar has the lowest literacy rate of 63% percent, along with lowest literacy rates for males at 73% and for females at 53% in 2011.

Despite rise in Literacy rate in India, India continues to lag behind several other developing countries in the literacy rate.

Conclusion: through National Population Policy, many efforts are taken to improve the quality of Indian population

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Q.2. REASONS FOR HIGH GROWTH/BIRTH RATE IN INDIA :

Birth Rate refers to the number of births per thousand population per year. One of the reason behind Indian population is significantly high birth rate. Reasons of high birth rate are….

Socio-Cultural Factors:(i) Universal and Early Marriage System:

In India universal marriage is a social custom. 76 percent of ladies between the age group 15-44 are married. Since marriage among women is almost universal, birth rate becomes higher. Further, Indian women marry comparatively, at an early age. The average marriage age of women is about 16 years. As the child-bearing capacity is more at an early age, birth rate tends to be higher.

(ii) Craze for a male child:

In Indian society, more importance is given to the male child as certain religious duties have to be performed only by sons. So they go for more and more child expecting a son to come. This lades to a high birth rate.

(iii) Joint-family System :

In India there is joint family system, which induces the young couples to have more children though they are individually not able to support them. An additional child brings no immediate hardship to parents. This is another factor responsible for high birth rate.

3. Economic Factors:(i) Poverty :Some demographers establish a casual relationship between poverty and high birth rate. In poor families children are considered an asset as they add to family income from an early age. Further, a large family acts as a social security for the old age. Besides, it is believed that the reproductive capacity of the poor is intense as sex is the only form of entertainment for them. According to one economist, sexual play is the national play of India. Thus a high birth rate is always associated with poverty of the people.(ii) Illiteracy and Unemployment:In India people are illiterate and ignorant. In 1991, 60 percent of Indian women were illiterate. Further, 68 percent of women were unemployed and confined to four corners of the house. They did not know the benefit of family planning measures. This results in high birth rate.(iii) Partial success of Birth Control Measures:

Birth control measures have not been fully successful in India. This is evident from the fact that in 1981, every Indian women in the age group of 15 - 49 years gave birth to 5 children on an

average. This partial success of birth control measures is regarded as one of the causes of high birth rate.

Conclusion: In order to overcome these problems various efforts are being taken to reduce birth rate through National Population Policy.

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Q. Explain various poverty alleviation programme undertaken by government.

Introduction : - poverty eradication is major objective of planned economic development. Direct poverty alleviation programme are considered necessary to eradicate poverty. India’s anti-poverty programmes are mainly run by the central government. The major poverty alleviation programmes are such as:-

1. SWARNAJAYANTI GRAM SWAROZGAR YOJANA :- SGSY was introduced in April 1, 1999. It aims at encouraging the self-employment for the people falling below poverty-line by providing them income, generating assets through bank credit and Government subsidy. This scheme was sponsored by cost sharing ratio of 75:25 between the central Government and the State Government.

2. SAMPOORNA GRAMEEN ROZGAR YOJANA. (SGRY ):- It was introduced from 2001.The scheme envisages generation of 100 crore man days of employment in a year. The objective of SGRY is to :

I. Provide additional wage employment along withII. Food security

III. Creation of durable community, social and economic assets andIV. Infrastructure development in the rural areas. The cost of the scheme is to

be shared between the Central Government and the State Government in the ratio of 75:25.

3. PRADHAN MANTRI GRAMODAYA YOJANA (PMGY ):- This scheme was launched on the 25th December 2000. It is a programme to provide road connectivity through good all weather roads to all the eligible unconnected rural inhabitants. It aims at the connectivity by 2009 all the habitants with the population of 1000 or more in plains and of 500 or more in the hilly areas, deserts and the tribal areas.

4. ANTYODAYA ANNA YOJANA : - This scheme was launched by the Prime Minister on the 25th December 2000. It provides food grains at a highly subsidized rate of rs.2 per kg for wheat and rs.3 per kg for the rice to the poor families under the targeted public distribution system. Initially, 25 kg. Of food grains were, made available to each family per month. This quantity has increased to 35 kgs. With effect from April 2002.

5. SWARNAJAYANTI SHAHARI ROZGAR YOJANA (SJSRY ): -It came into operation from 1997. It aims to provide gainful employment to urban unemployed or unemployed poor by encouraging the setting up of self – employment. It is funded on 75:25 bases between central and the states. It comprises of the two special schemes. Urban self – employment Programme (USEP) and urban wage Employment programme (UWEP).

6. INDIRA AWAAS YOJANA (IAY): - It was operational from 1999-2000. It aims at providing dwelling units free of cost to the poor people of schedule castes; schedule tribes freed bonded labourers and the rural areas. The scheme is funded on the cost sharing bases of 75:25 between the central and the states.

7. ANNAPURNA : -This scheme was introduced in April 1, 2000. It aims at providing food security to meet the requirement of those senior citizens who’s, though eligible for pension under the National Old Age Pension Scheme are not getting the same. Food grains are provided at subsidized rate. It is 100% centrally sponsored scheme.

8. VALMIKI AMBEDKAR AWASS YOJANA : - This scheme was introduced on 2nd December 2001. It seeks to improve the condition of the urban slums dwellers living below the poverty line who do not posses adequate shelter. The objective of this scheme is to facilitates construction and up gradation of dwelling units for the slum dwellers. The central Government provides a subsidy of 50% and the balance 50% is arranged by the State Government.

9. NATIONAL FOOD FOR WORKS PROGRAMME (NFFWP) : - This scheme was launched on November 14, 2004 in 15 most backward districts of the country for the generation of supplementary wage employment. This programme is open to all rural poor who are in need of wage employment and desire to do the manual work. It is implemented as a 100% centrally sponsored scheme and food grains are provided to the state free of cost.

10. RURAL EMPLOYMENT GENERATION PROGRAMME (REGP) : - It was launched in 1955. The objectives of this scheme are of creating self –employment opportunities in the rural areas and small towns.

11. PRIME MINISTER’S ROZGAR YOJANA (PMRY) : - It was started in 1993. The objectives were of creating self – employment opportunities to the educated unemployed youth by assisting them to set up any economically viable activity.

12. DROUGHT PRONE AREA PROGRAMME (DPAP), DESERT DEVELOPMENT PROGRAMME (DDP) and INTEGRATED WASTELAND DEVELOPMENT PROGRAMME (IWDP): - These programmes are being developed for the up gradation of the Wastelands/degraded lands. All these programmes are based on nationalization and better targeting.

Conclusion: however improper implementation of these measures is the main reason behind limited success of these measures

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Q. Discuss the suggestions to reduce inequality in India.

INTRODUCTION :-Income inequality in India is a historical fact. Distribution of income is unequal in India. It is necessary for the Government to formulate and implement certain policy measures to mitigate inequality in income distribution. The measures may be in the form of ;1. FISCAL MEASURES :-Fiscal policy through its budgetary instruments can attempt

to re-distribute income. These are as such :-I. PROGRESSIVE DIRECT TAXES :-When direct taxes are levied in a

progressive manner, it helps to withdraw more money from rich. The poor will be exempted from these taxes..

II. SUBSIDIES : -Cost of agricultural inputs such as fertilizers, water supply, electricity plumpest can be subsidizes so that small and marginal farmers can produce more. Educated unemployed from poorer families who seek self employment may be helped by the subsidizing their projects. Education and medical service can be provided to those who are below poverty line at a highly subsidized rate or almost free. Measures should be taken to safeguard the misuse of subsidies.

III. INDIRECT TAXES :-Taxes on commodities and services may turn out regressive if they are levied indiscriminately. They may help to reduce inequality if such taxes are selective. Luxurious consumers are durable when taxed heavily helps to mop up the excess income of the rich. Income from such sources can be used to provide employment or social measures to the low income group.

2. MONETARY MEASURES : - Monetary policy through discriminatory rate of interest can provide the minimum required money capital at a very low rate of interest.

3. PUBLIC DISTRIBUTION SYSTEM : - The real income of the bottom income group could increase if they are supplied with essential consumer items through ration and fair prices shops. Such public distribution should be confined only to the lowest income group.

4. SOCIAL SECURITIES MEASURES : - Social security measures go a long way in providing either minimum or some additional income to supplement their meager income. The social security may comprise of ;

a. OLD AGE PENSION : - Old people with no source of income can be provided a regular monthly income by the Government to enable them to subsist.

b. UMEMPLOYMENT BENIFITES : - With the increasing number of unemployed vis-à-vis limited employment opportunities the Government is

expected to support the jobless. However, unemployment benefit, if provided, will certainly help in reducing poverty as well as the inequality.

c. SOCIAL SECURITY INSURANCE : -under this scheme, workers and their dependents are covered. Medical disablement and maternity benefits are provided under this scheme. These benefits help the poor household to improve their welfare.

5. EMPLOYMENT SCHEME : -Labour is the assets of the India with large majority of the people passed and is the only source of their income. Employment in Rural and urban areas are provided through various schemes like, National food for works programme, Swarnajayanti Gram Swarozgar Yojana (SGSY). Sampoorna Grameen Rozgar Yojana (SGRY) and many other.

6. INSTITUTIONAL CHANGES : - Land reforms are the example of the institutional changes. Land is distributed among the landless and ownership is given to the tiller. Such institutional reforms bring a change in the distribution of the income earning assets in favor of poor.

7. SELF – EMPLOYMENT : - Promoting self employment scheme beside s providing employment reduce inequalities too. Financial assistance also to be provided by the banks norms and rules.

8. RURAL DEVELOPMENT : - Rural India has more than 70% population. It has a large share of unemployment and poverty. Promoting rural development through providing infrastructure and rural industrialization would help for preventing migration, providing employment and reduction in inequalities. Such measures would induce changes in the attitude and help controlling the population too.

9. MINIMUM WAGES ACT : - The Government passed The Minimum Wages Act, 1948 to ensure fair wages to the workers. This measures help to stop exploitation of the workers to the certain extent in Indian economy.CONCLUSIUON: -

Despite above measures taken by the Government the inequalities in the income is the still very wide in India. This is because of the poor implementation of the various anti-poverty and employment schemes and laws passed by the Government.

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Q. Discuss the extent of poverty India.

A: Introduction- According to the definition of World Bank, “Poverty as the inability of people to attain a minimum standard of living. Poverty is multidimentional in nature.

The incidence of Poverty is measured in terms of the percentage of the total population living below the poverty line. It brings out the extent of poverty in India in the recent years is explained as below-

a) Planning commissions estimates-1. Poverty rate in 1999 to 2000 - The poverty ratio is estimated at 27.1% in rural

areas,23.6% in urban areas and 26.1% for the country as a whole in 1999-2000. The planning commission projects of poverty to fall to 21.2% and 15.1% respectively in rural and urban areas in 2007.

2. Steady Decline in poverty - The incidence of poverty has a steady decline from 51.3% in 1997-78 to 26% in 1999-2000. It is projected to decline to 19.3% in 2007.

3. Wide rural-urban and interstate disparities - Wide interstate disparities are visible in the poverty ratio between rural and urban areas as also the rate in decline of poverty. In 1999-2000, 20 state and Union Territories had poverty ratio below the National average.

4. Fall in State level poverty - The incidence of poverty at the state levels has witnessed a secular decline during the period 1973-74 and 1999-2000.

5. Tenth five year plans poverty reduction target - The important target of planning commission for the tenth plan(2002-07) is to reduce poverty ratio to 19.3 for the country as whole, 21.1% for the rural and 15.1% for the urban areas by 2007.

b) World Bank study- World Bank has two types of data such as1. Estimates of poverty based on International poverty line- World Banks

international poverty concepts are based on a composite measure of total household consumption per member. The population living in India below $1 a day is 35.3% and below $2 a day is 80.6% in 1999-2000.

2. Estimates of poverty based on National Poverty line - The World Banks study on poverty in India(based on National poverty line) uses the poverty line as defined by 1993 planning commission experts groups on estimation of the poor and NSS data.

I. Fluctuations in poverty rate- The poverty rate in India fluctuated without clear trend from the early 1950s to the mid 1970s i.e. about 53%.

II. Steady decline in the poverty incidence- The incidence of poverty decline steadily i.e. from 54% in 1974 to 38% in 1987 i.e. mid 1980s.

III. Poverty in India predominantly rural- Poverty in India remains predominantly poor. The incidence of poverty is the highest among agricultural labour household.

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Q. What are the causes of poverty in India?

A. Introduction- In Indian economy there are various economic problems out of which poverty is one of the important obstacles in the process of economic development of country. The main causes of poverty in India are as follows-

1. Increase in population - In Indian economy day-by-day population is increasing but at the same time country’s national income is not increasing in the same proportion. Therefore, many people are getting very less income which is not sufficient to satisfy their basic needs. The population of India in 1951 was 361 million which has increased to 1027 million in March 2001. This has resulted in low per capita income and poverty.

2. Unemployment - In India unemployment is on very large scale. There were about 26 million people unemployed in 1999-2000. Besides, there are large numbers of underemployed, disguisedly unemployed persons in India. This has resulted in massive poverty in India.

3. Illiteracy - Low level of education in India is another major cause of massive poverty. According to census of 2001 about 35% of people in India are still illiterate. This has resulted into cultural backwardness, lack of employment opportunities and inability to receive benefits from the Government.

4. Economic inequalities - There is a wide inequality in distribution of income in India. This has resulted in rich becoming richer and poorer section of society becoming more poorer. An important factor responsible for this is inequalities in ownership of assets like land.

5. Low growth in agricultural sector - About 2/3rd of India’s work force is directly engaged in agriculture for its livelihood while the share of agriculture in national income has been declining. Low productivity in agriculture has resulted low Indian economy.

6. Slow industrial growth - The rate of growth of industries in Indian economy is quite modest as compared with rise in population growth. The slow growth of industry failed to create enough job opportunities for millions of surplus labour force. This has resulted in massive poverty in Indian economy.

7. Natural calamities - Natural calamities like floods, famines frequently reoccurred in certain part of India. This has resulted in increasing poverty in India.

8. Shortage of economic and social overheads - There are shortages of economics and social overheads such as roads, railways, schools, hospitals, damns, irrigated land, supply of electricity etc. This has also added to the problem of wide spread poverty in India.

9. Inflation - In India, the prices of essential commodities have been increasing continuously. Hence, the people have to pay more and more for same quantity of good. Since, the income of the people has not increased in proportion to rise in prices. They are forced to reduced the consumption of essential goods.

10. Administrative inefficiency- The implementation of various poverty alleviation programmes is in the hands of bureaucrats. However, due to wide spread corruption, lack of accountability and indifference of the Government officers many programmes are not implemented properly. Thus, the benefits of these programmes have not reached all the segments of the population.

Conclusion- This are the main causes of poverty in India and slow development of Indian economy. Thus various steps are taken by Government to improve country’s infrastructure, to improve education and health facilities.

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QUESTION: 1. DISCUSS THE VARIOUS INSTRUMENTS OF CREDIT CONTROL OF RBI

2. WRITE A NOTE ON QUANTITATIVE CREDIT CONTROL

RBI being the central bank of the country has to perform all the functions of a monetary authority of the country for which it frames its Monitory Policies. One such function performed by RBI is management of credit.

To achieve its objectives and to implement its policies RBI makes use of certain instruments.

These instruments are of two types: Quantitative (general) and Qualitative (selective).

Quantitative credit control methods:

These instruments are used to control the quantity of money supply in the market.

1. Bank rate(discount rate):

Bank rate is the minimum rate at which the central bank gives loans to the commercial banks. It is also known as discount rate as the central bank rediscounts the bills of exchange to provide finance to the commercial banks. Higher the bank rate lower is the money supply in the economy as the commercial banks will charge higher rate to its customers and vice versa.Current bank rate = 6% (RBI)

2. Open market operations: Buying and selling of government securities/bonds by the central bank is known as open market operations.To increase the money supply the central bank buys the securities/bonds and to reduce the supply its sells the securities/bonds.

3. Variable reserve requirements: It is the mandatory regulations for banks to maintain a minimum amount of reserves as against the deposits.The RBI uses two components of reserve requirements:a. Cash reserve ratio (CRR):

It is the certain amount of deposits to be kept with the central bank in cash.Increase in CRR leads to reduction in credit as banks have less loans to give and a decrease in CRR leads to increase in credit. Current CRR = 6% (RBI)

b. The statutory liquidity reserve ratio (SLR):

It is the amount of deposits that the banks are required to invest in government securities as a part of SLR. The government securities (gilt-edged securities or gilts) are bonds issued by central government to meet its revenue requirements. Current SLR = 24% (RBI)

NOTE: SLR is changed very infrequently as compared to CRR.

Qualitative credit control methods:These instruments are used to control the quality of money supply in the economy.

1. Margin requirements: Margin requirement is the difference between the amount of loan sanctioned and the market price of the asset.Credit is controlled by raising or lowering the margin requirements.

2. Consumer credit regulations: It refers to control of credit demands by regulating the minimum down payment and the number of installments for repayment of the loan. Higher initial down payment and less number of installments will decrease the demand for credit and vice versa.

3. Directives: The RBI has the rights to issue written or oral directives to the banks to follow certain rules and regulations. it may ask the banks to be more rigid or liberal as per the requirement. Its success depends on the power and prestige of the RBI

4. Moral suasion: Moral suasion means the RBI pursues the banks to follow certain regulations. It is just a notice given to the banks. It may be in the form of meeting or letters etc.

5. Rationing of credit: Under this method the RBI may impose ceiling on loans and advances. It means the RBI can tell banks to not to lend credit for certain specific purposes.

6. Direct action: RBI can take direct action against the defaulting banks i.e. the once who do not follow the rules. It may include denial of financial accommodations, penalty, cancellation of license etc.For short run liquidity management the RBI uses the following instruments:

1. Liquidity adjustment facility (LAF):It adjusts the liquidity in the banking system on a daily basis. It is used to correct short term liquidity mismatches by regulating short term interest rates and through proceeds by daily auction.

2. Repo rate:Repo or repurchase agreement refers to agreement for a transaction between RBI and commercial banks via which RBI supplies money against govt. securities and simultaneously agrees to repurchase the same after a specified time (1–14 days).

3. Reverse repo rate:

It is the rate at which banks can park surplus liquidity with the RBI. It is also carried out on a daily basis under LAF.

4. Market stabilization scheme (MSS):This scheme was introduced in april 2004 to deal with surging capital inflows. Under this RBI issues through auctions treasury bills and government of india securities.

Conclusion:Though these instruments are being used by the RBI there are certain limitations to their implementation and success such as unorganized money market, lack of trust in banks, lack of banking habits, lower prestige of RBI etc.--------------------------------------------------------------------------------------------

Factors responsible for the growth of capital markets in India

The financial markets ,especially, the capital markets have grown to a great extent in India.

The following factors are responsible for the growth of capital markets

1. growth of stock exchange in Indiathe origin of capital markets in India can be traced back in 1875 with the setting up of Bombay stock exchange. This was followed by the formation of stocke exchanges in Ahmedabad in 1894, and Calcutta (1908) and Madras (1937).

The stock exchanges facilitate the growth of capital markets as they facilitate

a) listing of shares of public companiesb) trading of shares

2. growth of financial institutions the financial institutions borrow funds by way of bomds and other securities and then lend such funds to corporate firms. They participate in the primary markets by subscribing to the issues of shares and debentures. They also trade in the secondary markets.

3. growth of mutual funds the first mutual fund to be set up in India was the Unit Trust of India in 1964. the mutual funds collect funds from the public and other investors and invest the same in the primary

and secondary markets. The investment by mutual funds have boosted the growth of capital markets.

4. growth of merchant banking in India merchant banking services play an important role in capital market. Apart from capital issue management, merchant banking divisions provide a number of other services including provisions of consultancy services relating to promotion of projects, corporate restructuring etc.

5. development of venture capital funds the economic liberalization in India post 1991 have provided a boost to the

venture capital movement in India,which in turn has made possible to provide

medium and long term funds to those firms , which find it difficult to raise funds

from the primar markets , and by way of loans from FIs and banks.

6. development of credit rating agenciesthe development of credit rating agencies gave a boost to capital markets in India

investors rely on credit ratings and invest in the companies, and thus firms can obtain medium and long term funds.

7. setting up of SEBI SEBI plays an important role in the growth of capital markets in India , SEBI has the power to regulate the activities connected with marketing of securities and investments in capital markets.

8. national securities clearing corporationthe NSCC was set up in 1996 to guarantee all trades on National Stock Exchange. NSCC interposes between the parties to the trade at the NSC.

9. Corporate governance

The introduction of corporate governance in India would go a long way in developing capital markets. Corporate governance calls for proper governance on the part of Board of Directors and good management on the part of management of companies to protect the interest of its stakeholders, with special reference to shareholders and other investors.

10. growth of multinationalsthere has been good growth of MNCs in India during the planning period both Indian and foreign. The MNCs require long term and medium term loans for setting up new projects or for expansion and modernization.

11. general awarenessthere is growing awareness among the middle class and rich class about the capital markets. This awareness is due to the massive publicity campaigns of the FIs and also of the companies coming out with public issue of shares and debentures.

12. growing public confidencea good number of the members of the public have started to develop confidence and trust in the capital markets .they purchase bonds issued by financial institutions.they also invest in primary and secondary markets.

The growth of the capital market in the recent times is a positive indicator. This will help the economy to spurt industrial growth and bring about overall development.

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