Economic Development And Welfare

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY ECONOMIC DEVELOPMENT AND WELFARE SUMAN CHAKRABORTY Basic characteristics of developed economies:Our previous discussion implies that a country can gradually become a developed country from the state of underdevelopment if some of the features of the underdeveloped economy are phased out in the process of economic growth. Thus, we can now briefly point out some of the basic characteristics of developed economies. These are as follows :i)Developed countries have relatively higher per capita income in comparison with less-developed countries .ii)Dependence of the work-force on agriculture remains at a very low level,and the maximum portion of the work-force depends on the service sector.iii)Rate of growth of population remains at a very low level. (iv)Maximum portion of the Gross Domestic Product (GDP) is contributed by the service sector followed by the industrial sector .(v)Standard of living of the average people remains at a high level.(vi) The quality of human capital also remains at a high level because of better health, nutrition, education and housing facilities. The HDI index remainsvery close to unity in these countries.(vii)Modern techniques of production are applied in all the sectors of the economy.(viii)Factor-productivity remains at a high level, both in the agricultural and(ix)Industrial sectors.Exportable manufacturing items and service goods contribute the most to the export-income of these countries.(x)Adequate infrastructural facilities are also available in these countries (xi)Developed and well-organised money and capital markets are found in these economies.(xii) Disguised or seasonal unemployment are not found in the rural sectors of developed countries. Unemployment in developed countries arises mainly due to lack of effective demand during recession and depressionary phases of the business cycle.(xiii) Absolute poverty is not found in developed countries. However, there may be relative poverty in the sense that a substantial part of the national income may be concentrated in the hands of a few people, while a large part of the total people may have a small share in national income. Thus, there may remain inequality in the distribution of income and wealth.(xiv) Developed countries do not suffer from inadequacy of domestic savings and capital formation. CHARACTERISTICS OF UNDERDEVELOPMENT ECONOMY:Underdevelopment is a stage of economic development where natural resources of the es counremain un-utilised, capital formation is at low level and the quality of human resource is very tor. Prof. Ragnar Nurkse defined underdevelopment in terms of scarcity of capital which restrictedthe utilisation of human and natural resources. It is not proper to explain underdevelopment only in terms of underutilisation of resources. Even developed countries, resources remain underutilised at times of recession and depression. Theoblem with underdeveloped countries is that resources remain un-utilised for a long time and due vicious circle, it is not possible to provide a minimum thrust to bring underdeveloped countries povertyout and deprivation. Characteristics of Underdevelopment:(i) High level of poverty. In underdeveloped countries, people, have low purchasing power as a result of which they are unable to meet over their basic physiological needs like hunger, cloths and sh e lter. In India, 40% of the population are not even getting food grains to meet the 2400 calories y per requirement, which is necessary for leading a healthy life. Still a large section of the population s to go without proper shelter.(ii) Major proportion of people dependent on agriculture. Lack of job opportunities in secondary and tertiary sectors compel people to depend on primary sector even though income derived m agriculture is very low. Increase in population leads to subdivision of land, thereby decreasing productivity in agriculture. Low average size of land per family makes it impossible to use modern technology like harvesters, tractors, etc. Lack of alternative source of livelihood compels people to grate to urban areas which leads to creation of slums. Low income level in agriculture creates difficulty is allocating resources for investment purpose to modernise the methods of farming. Lack adequate investment in agriculture keeps the average productivity at low level.(iii) Lack of adequate capital formation.Due to high rate of growth of population, the rate consumption of (i.e percentage of income devoted to consumption) is very high. Average productivity labour is very low. These factors keep the rate of capital formation at a low level. Even the capital available is not used efficiently. Defects in planning mechanism, wrong choice of technology and selecting projects with long gestation time lead to high capital-output ratio which is undesirable for

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

1

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY underdeveloped countries. (iv) High rate of growth of population. In the underdeveloped countries, usually both birth s and death rate were high leading to low rate of growth of population. But due to advancement dical technology in me in developed countries, which has also been made available to underdeveloped ntries,cou death rate has decreased rapidly. Birth rate decline has not kept pace with the decline in death rate, thereby creating problem of rapid population growth in underdeveloped countries. M ore ources res have to be devoted for consumption purpose and less resources are left for investment pose.(v)O verdependence on natural resource. U nderdeveloped countries have low

proportion incom e generated from service sector and high proportion of incom e generated from prim ary sectors like agriculture, m ining , etc. M ost of these natural resources are non-renew able ploitation and their ex can reduce the incom e earning capability of the people dependent on natural future resources tim e. Cutting of forest for using as fuel is the case in point. This is leading to de-forestration and reducing the incom e earning capability of people dependent on forest. Som e of the natural resources are not fully utilised because of lack of technology like w ater, land, etc. which otherw is could provide lot m ore benefit for theInequality country.(vi) of incom e.Inequality of incom e is higher in the case of underdeveloped countries as com pared to developed countries. The main reason for this is because underdeveloped countries depend m ore on tangible w ealth to generate incom e, like land or capital where as developed countries depend m ore on intangible wealth like hum an capital to generate w ealth. H um an capital is m ore equitably distributed in the econom y as com pared to land or capital. (vii) Underdeveloped infrastructure. In case of underdeveloped countries, infrastructure like transportation, com m unication, energy, education system s are underdeveloped. Thislem creates s in the prob sm ooth functioning of the econom y. Even, w hat ever infrastructure is available is under the control of government, w hich create further inefficiency in providing (viii) services. Export of traditional products.Underdeveloped countries export prim ary products like agricultural products and m inerals. They depend on only one or two products to generate foreign! exchange. Generally, the dem and elasticity and incom e elasticity of such products is lessone,! thanW hen underdeveloped countries try to increase the quantity of exports, their export revenue declines! because of decrease in price by larger percentage than the increase in quantity of export.(ix) D ualistic econom Even y. though underdeveloped countries rem ain backward, but som e! part of the econom y m ay becom e successful in developing, w hich creates dualism. This creates a! situation of co-existence of developed and underdeveloped sectors together D ualismlem creates of itsprob own. For example, we have modern textile companies like Reliance using latest as technology! well as lakhs of handicraft units using outdated technology. G overnm ent faces problem s of form ulating policies in a dualistic econom y giving due im portance to both the sectors. There is a possibility that one sector m ay contradict the other sector and both sectors end up working atroads. cross( x) H igh level of illiteracy. U nderdeveloped country has a high rate of illiteracy as a result* which, it is difficult to develop the hum an resources. (xi) Lack of entrepreneurial initiative. Lack of social security system com pels people tofor look security j and stability in life. Socially also, entrepreneurs enjoy low respect. In order to develop economthe; y, it is necessary to broaden the entrepreneurial base. (xii) Outdated culture. People are oriented towards past tim e and are not willing to adopt new ideas. This creates problem or religious fundam entalism , com m unalism and regional chauvianismIn . order to develop, people should adopt m odern outlook. Money market and capital

market:Tthe money market is usually defined as the market in which short-term debt instruments are transacted.In contrast, the capital market is defined as the market in which both longterm debt instruments and equities are transacted. How long is 'long-term' Although there is no hard and fast distinction between short-term and long-term it is .The usual practice to treat a loan for a period of time less than or equal to one year as a short-term loan. Loans for longer periods a re c a lle d lo n g te rm lo a n s Both debt instruments and equities transacted in the capital market: It should also be noted that, while banks and other money market institutions deal only with (short-term) debt instruments, capital market institutions deal with both. (long-term) debt instruments and equities (i.e., shares). Moreover, the debt instruments here are issued not only by the financial institutions on the Government but by companies. Debt instruments issued by companies are called bonds or debenture.

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

2

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY Structure of the capital market: The capital market can be divided into two constituents :(a)The financial

institutions like Industrial Finance Corporation of India (IFC1),Industrial Development Bank of India(IDBI), etc, which provide long-term and medium-term credit facilities ;and (b)The securities market where the securities issued by the firms (shares,,bonds, debentures)can be bought & sold freely.It consists of the new issues market.i,e, primary market,or the secondary market (stock exchange market)Major distinctions: The major distinctions between the money and capital markets are as follows : (i)The money market deals only in debts instruments while the capital market deals in both debt instruments and equities. (The major instruments traded in the money market are bills of exchange, treasury bills, etc) (ii) While the money market deals mainly in debt instruments with maturity less than or equal to one year, the capital market deals in instruments with longer maturities. (In fact, company shares do not have any maturity date ). (iii)Comrnercial banks constitute the most important part of the money market,while the most important parts of the capital market are the stock exchange & the term –lending institution. (iv)The money market caters to the working capital needs of the producers and b usinessmen, while the capital market caters to the needs of fixed capital.(v)A related distinction, therefore, is that the money market is concerned with the short-run economic problems of the country, (for example the problems of liquidity adjustments of firms) while the problems of growth and productivity are the concerns of the capital market. (vi)Since long-term loans are obviously riskier than short : term loans capital market instruments are usually riskier than money market instruments. (vii)The money market is usually subjected to a greater degree of Govt : control than the capital market. (viii) However, the Government does not control the money market directly. It controls this market through the Reserve Bank of India. In contrast, whatever little control is exerted by the Government on the capital market is administered by the Government itself. Importance of the capital market :The importance of the capital market in a modern economy should be obvious : 1.Growth: The capital market performs the vital function of supplying fixed capital to producers. The importance of fixed capital in a modern production system can hardly be over-emphasised. In the absence of fixed capital, only very primitive methods of production can be employed. Modern techniques of production are mechanised. Hence, the producers must buy machines. Machines constitute fixed capital. Thus, the capital market helps the process of economic growth by making possible the adoption of modern technology. 2. Stability: In some crucial respects, the capital market also promotes stability. For instance, the stock exchange is an institution of the capital market. If the stock exchange did not exist, the sale and purchase of company shares would take place in an unsystematic manner. This would create economic instability in the country. 3.Reduction in risk:Although long-term debt instruments are intrinsically riskier than short-term instruments, the existence of the capital market makes the instruments considerably less risky than they, otherwise, would have been. The daily movement of share prices in the stock exchange help the shareholders keep track of their investments and to sell off their shares when it becomes unprofitable to hold on to them.This would not have been possible in the absence of the capital market. 4. Avenue of productive investment : The very existence of the capital market gives savers an opportunity to put their savings to good use (for instance, by purchasing shares or company bonds). If there was no capital market, they would have been forced to keep their savings either in the money market (which, as we have already said, supplies only short-term liquidity to the producers) or, even worse, in unproductive lines such as holdings of gold, land, etc.(5)Greater flexibility for borrowers : Borrowers of funds have a greater degree of flexibility in the capital market than in the money market. For instance, companies needing funds have a choice between issuing shares and bonds. Role of capital market in India: The role of capital is self-evident in a less-developed country like India, which is plagued by the paucity of resources and increasing demand for investments. The role of capital market in India can be understood from the following points : (a) Helping the process of the mobilisation of savings and formation of capital :Various types of securities in the capital market help in mobilising saving from various sections of the population, who often invest their small savings in purchasing such securities. This also helps in accelerating the pro cess of capital formation in the country. (b)Helping the companies to raise long-term capital : The capital market also enables different companies to raise long-term capital for their growth. The investors want to invest for a short-term but the companies want capital for a long-term. This conflict in their interests can be resolved by the capital market by offering an opportunity to investors to buy or sell their securities, while the capital flow to the companies remain unaffected.(c)Creating a continuous and ready market for capital : The stock exchange provides a convenient place where the buyers and sellers can easily purchase and sell securities. At present,

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

3

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY however, these transactions can also be made through the internet service (using the personal computers at home). Thus, easy marketability of securities make them more liquid as compared to other assets. (d)Helping the process of allocation of resource to the most efficient use : An efficient capital market also helps in the process of proper allocation of investible funds to the most efficient use. The prevailing market price of securities and their relative yields act as guiding factors for the investors to channelise their funds in the proper direction. Conditions for successful working of the capital market If a capital market is to work satisfactorily, a number of conditions must be fulfilled:(1) Protection of investors' interests : Since long-term lendings or investments are risky, lenders or investors must be given protection. For instance, before allowing a joint stock company to issue either bonds or shares, the Government should scrutinise the plans and the economic soundness of the company.(2) Reasonable long-term interest rates : In view of the greater risk associated with long-term loans, some lenders (for instance, financial institutions \\hich give term loans) sometimes charge exhorbitantly high interest rates for such loans. While this is good for the lenders, it prevents the producers from procuring funds for long-term investments. Thus, the Government should, by acting as guarantors, try to reduce the riskiness of the loans. (Needless to say, in order to do this, the Government must satisfy itself about the economic viability of the proposed projects). This would help in reducing long-term interest rates. (3) Policies conducive to long-term investments : Apart from a high rate of interest, there are a number of other factors that discourage long-term investments in a less-developed country like India. If the capital market has to function satisfactorily in such a country, the Government has to play a much more active role in encouraging long-term investments in such a country than in an advanced economy (for instance, by giving subsidies and tax benefits to producers, building infrastructural facilities, etc. ECONOMIC WELFARE:A.C. Pigou's definition :

The British economist Arthur Cecil Pigou, in his

book "The Economics of Welfare" has defined economic welfare as that part of general welfare which "can be brought directly or indirectly into relation with the measuring rod of money". Economic welfare, in this sense, means the satisfaction derived from the use of exchangeable goods arid services. National income and national welfare: National income is usually taken as a good index of economic development. There are several reasons for this. Among these, the following two may be mentioned : 1).The higher is the national income of a country, the greater is the value of goods and services in the country (because national income equals national product) and economic development primarily means an jncrease production of goods and services.2). An increase in national income is also u sually associated with a rise in the over-all standard of living in any society .This is because a country with a high national income can afford to incur expenditure on various social projects like education, health, etc. However, modern economists do not consider the national income or the per capita income as the true ndicator of national welfare of a country because of the following reasons: a)The national income or per capita income cannot be regarded as the accurate measurement of the improvement in the standard of living of the majority of the people in a society, because the pattern of income distribution among different sections of people may be quite unequal.Thus, higher level of national income may not imply reduced income inequalities.b) The national income or the per capita income cannot also be regarded as.an index of poverty because of some Conceptual and statistical reasons. Conceptually the standard of living in a society depends more on the per capita consumption expenditure "rather than national income. Again Statistically,the per capita income is only a simple arithmetic mean which we get dividing national income by total population of a country. So it is not a true reflection of the level of living in a society. Thus, higher level of national income does not necessarily mean lower level of poverty .(c)National income of any country does not even reflect the level of unemployment in that country. National income can be increased by following a technology which is labour-saving in nature.

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

4

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY (d) National income of a country also tells us little about the content of the Gross National Product (GNP). The GNP may reach at a high level just because of the production of some high-valued luxury items which satisfy the needs of only a handful of rich persons in a society.(e)National income of a country may reach at a high level due to greater industrialisation. Rapid industrialisation, however, brings with it higher pace of urbanisation, deforestation and environmental pollution. If national income is thus increased at the cost of ecological imbalance, this cannot be regarded as an indicator of higher economic welfare.Due to all those reasons stated above, national income or per capita income of a country cannot be regarded as the true indicator of national or economic welfare. What are the conditions other than national income which can affect the level of wellbeing of the country ? We can classify such conditions into two broad groups : economic conditions and non-economic conditions.(A) Economic conditions : There are several economic conditions (other than national income) which affect national welfare:1.Inequality: First of all, the degree of the inequality of the distribution of income among the people of the country is an important consideration. It is possible that a country has a high level of national income but most of the national incomes are concentrated in the hands of a few. The vast majority lives in poverty. In this case, the nation's well-being cannot be said to be at a high level despite the high level of national income.2.Inflation : Again, consider, a situation where real production of goods and services are stagnant but prices are increasing fast. Since national income is expressed in money terms, the national income of the country will increase fast. But the real standard of living (welfare) cannot be said to be increasing. Thus, the degree of price, stability— is also an important condition affecting national welfare.3.Balance of payments: The balance of payments situation in the country is also an important consideration in this respect. A high level of national income can sometimes co-exist with an unfavourable balance of payments position (where the country must pay to other countries more than what it receives from them through international trade). Such a situation indicates a high level of external dependence of the domestic Economy. National welfare cannot be said to be a high level under such unfavourable balance of payments condition, despite the high level of national income.(B) Non-economic conditions : National welfare also depends on a number of non-economic factors. Welfare (i.e., well-being) is not just a matter of economic well-being. It has many other aspects. 1.Health : Health is one of the most important non economic conditions affecting welfare. A country's national income may be high, but the citizens may not be in goodhealth. 2.Education: National welfare also depends on education, the majority of the people are illiterate the nation will be bogged down in irrationality and superstition. Such a nation cannot be happy, however high its national income may be. 3. Environment : National welfare also depends on the purityof the environment .Economic development often increases national income at the cost of environmental pollution. It is doubtful whether such development increases the nation's well-being. :4. Social tranquility : It is also an important condition. If a society is torn by unrest & tension (viz, because of criminal activities), it cannot be said to enjoy a high level of well-being, what ever be the level of national income may be.5.Political stability : The tranquility of the country also depends on political stability. If there are frequent changes of Government or political unrest then nation's welfare is hampered.6.Welfare of the aged or the senior citizen : Aged people constitute a significant part of a country's population. National welfare, therefore depends significantly on the welfare of these persons. Rapid socio economic changes often leave old people unhappy. This detracts from national welfare even if the changes bring about an increase in national income. 7. Other conditions : Finally, we should mention the collection of other conditions which also have a bearing on national welfare. For instance, treatment of children, degree of religious tolerance, better understanding between parents and children and between husbands and wives, the degree of equality of opportunity, etc. Thus, a high level of national income is by no means a sufficient condition guaranteeing a high level of national welfare. A large number of conditions determine a nation's well-being.

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

5

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY Net Economic Welfare : Initially in calculating economic welfare and distinguishing it from national income, economists had thought only of environmental pollution. They defined Net Economic Net Economic Welfare= National Income - Cost of Removing Environmental Pollution.. Modern definition : The modern definition of net economic welfare is the following : Net Economic Welfare - National Income -All External (or Social) Costs of Producing The National Income. Net Economic Welfare (NEW) is not a measure of national welfare which is a much broader concept and includes all the factors affecting the nation's well-being. NEW is a measure of the economic part of the nation's welfare. INDICATOR Economic Welfare:The lowest level of inequalities and high per capita income are the signs of economic growth and economic welfare. The goods produced in the economy must satisfy the demand of common people. The luxurious goods for specific class of people do not increase the welfare in general. Thus, per capita income is not the proper indicator of growth. Which desires are satisfied are more important than just total output of an economy. PaulStreeten has given four major points to explain the basic requirements of an economy. 1. To raise the purchasing capacity of poor.2. To increase the amount and quality of goods produced for poor people.3. That type of commodity should be increased which is useful for the common mass only. 4. It is necessary to take help of poor people to produce the goods for common people.This type of policy may yield exact results e.g., When the latest Hospital is constructed and latest equipments are installed and very costly drugs are prescribed then it will not be useful to the common people. Better quality of food, pure drinking water, nice residential housing facilities etc. should be promoted. On the other hand if five star hotels, luxurious apartments and big buildings are constructed then it will not be useful for the common people. The common people will die due to hunger and the rich people will have unnecessary stock of commodities. This does not lead to welfare of people. DEVELOPMENT PLANNING.:(i)Growth in national product : We have already indicated that

econon growth meaured in terms of the growth in Gross Domestic Product (GDP has always remained one of the principal objectives of Indian five ye plans. Table-12 shows that the value of GDP at factor cost (at 1980-81 prices)! increased from Rs. 42,871 crore in 1950-51 to about Rs. 2,96,845 crore in 1996-1 97. Gross National Product (GNP), Net National Product (NNP) and peri capita NNP also indicated similar trends. The annual compound growth i rate of NNP (at 1980-81 prices) and per capita NNP also increased from 3-6J per cent and 1-7 per cent per annum respectively during First Plan (1951-56)1 to 6-8 per cent and 4-9 per cent per annum respectively during the Eighth 1 Plan (1992-97).

Growth in GDP, GNP, NNP and Per capita NNP in India during Plan Period (at 1980-81 prices) G D PYear GNP at factor NNP at factor cost Per capitaat factor NNP cost (Rs. (Rs. Crore) cost(Rs. Crore) (R s.) Crore) 1950-51 1960-61 1970-71 1980-81 1990-91 1996-97

42871 62904 90426 122427 212253 296845

42644 62532 89465 122772 208481 291883

40454 58602 82211 110685 186446 258465

1126-90 1350-30 1519-60 1630-10 2222-20 2761-40

Source: Economic Survey (Government of India), 1997-98.

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

6

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY (ii) Growth in domestic savings and capital formation: At the beginning of the plan period, gross domestic savings (as a per cent of GDP) and gross domestic capital formation (as a per cent of GDP) remained only 10-4 per cent and 10-2 per cent respectively in 1950-51. In 1996-97, i.e., at the end of Eighth Plan, these rates increased to about 26 per cent and 27 per cent respectively.(iii) Growth in agricultural and industrial production : In 1950-51, total production of foodgrains in India was only 50-8 million tonnes and this increasd to 199-3 million tonnes in 1996-97. The index of agricultural production (with a base of triennium ending 198182) also increased from 46-2 in 1950-51 to 175-7 during the same period. The average yield of foodgrains per hectare also increased from 872 kg. to 1,601 kg. during that period. In the case of wheat, this yield per hectare grew from 851 kg. to 2,671 kg. during the same period, area under high yielding varieties of seeds was 15-4 million hectares in 1970-71 and it grew to 75 million hectares in 1995-96. The consumption of chemical fertilisers (nitrogenous, phosphatic, potassic) in Indian agriculture was only 2-2 million tonnes and it became about 14-3 million tonnes in 1996-97. Per capita net availability of foodgrains per day increased from about 395 grams in 1951 to about 512 grams in 1997.The index of industrial production (with a base period of 1980-81) also indicated substantial improvement from only about 18-0 in 1950-51 to about 304 in 1996-97. Output of finished steel was only 1-04 million tonnes in 1950-51 and grew to about 23 million tonnes in 1996-97. Similar trends have also been observed in the production of cement, coal, crude oil, etc. For example, in 1950-51, the productions of cement, coal and crude oil were 2-7 million tonnes, 32-3 million tonnes and 0-3 million tonnes, respectively. In 1996-97, these productions grew up to 76-2 million tonnes, 308-2 million tonnes and 32-9 million tonnes, respectively. Thus, the Sixth Plan document (1978-83), while appreciating the process of industrialisation, stated : "A major achievement has been the diversification and expansion of India's industrial capacity with the public sector playing a leading role. The country is self-sufficient in consumer goods and in basic commodities like steel and cement, while the capacity of other industries like fertilisers, is rapidly expanding".(iv) Improvement in economic infrastructure : A strong infrastructural base in the fields of transport and communications, generation of electricity and its distribution, irrigation, etc. is needed for the rapid growth, both in industry and agricultural production in India. Indian planners also gave priority to the development of infrastructural facilities during the plan period. For example, about 5-1 billion kwh. of electricity could be j in 1950-51 and this figure increased to 376-2 billion kwh. ki 1996-97. road length also increased from 4 lakh km. in 1950-51 to about 30 km. in 1994-95. Currently, 80 per cent of the passenger movement and ( cent of the freight movement depend on roads. The railway route le expanded from 0-54 lakh km. in 1950-51 to about 0-63 lakh km. in 19 Substantial improvement has also been achieved in the telecommunications sector. In April, 1948, India had only 321 telephone exchanges with about 82,000 working connections. In 1997, there were 22,212 telephone exchanges with equipped capacity of 177-42 lakh lines and 145-43 lakh direct teleph connections. The country's remote areas are also now linked to the micro wave tele-link through 209 satellite earth stations. With regard to the expansion of irrigational facilities, we observe that the irrigated area under different crops increased from about 34 million hectares in 1970-71 to about 63 million hectares in 1994-95. (v)Remarkable progress towards economic self-reliance : Though India can not be regarded as a completely self-reliant economy, yet her progress towards self-reliance in foodgrains, capital equipment, science and techno1ogy is quite significant. India had to import huge amounts of food from abroad to tackle the problem of food crisis. However, she became s reliant in foodgrain production since 1977-78. Our country was also able to build up large buffer stocks of foodgrains to successfully handle the food problem during periods of bad harvest.(vi)Again, our country has considerably moved towards self-reliance in machinery, plant and other capital equipment with the establishment of different heavy and medium-scale industries during the plan period. Improvement in technology plays a crucial role in determining the long-run growth prospects of an economy. India's competence in industrial technology has reached such a level that she has now emerged as a leading Third World Exporter of industrial know-how, technical consultancy services and turn key projects.(vi) Diversification of exportable and production of import substitutes: With rapid industrialisation during the plan periods, India's

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

7

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY dependence on foreign countries for the import of capital goods has declined to a large extent. Different types of capital and consumer goods, which were to be imported could be produced indigenously. This shows the achievement in the field of import-substitution. On the other hand, India was able to produce me and more non-traditional export items like engineering goods, jewellery, ready-made garments and other manufactured items. [The traditional export items of India consisted of jute and cotton, tea, coffee and sugar.](vii) Modernisation : While analysing the broad objectives of Indian planning, we have already indicated that the term 'modernisation' connotes a variety of structural and institutional changes in the framework of economic activity. It not only implies a shift in the sectoral composition of national income but also an advancement in technology and institutional innovation.So far as the shift in the sectoral composition of national income is concerned, we observe that the share of the primary sector (consisting of agriculture, forestry, fishery and mining) in Gross Domestic Product (GDP) declined from about 56 per cent in 1950-51 to about 28 per cent in 1996-97. On the other hand, the share of the secondary sector (consisting of manufacturing, construction, electricity, gas and water supply) increased from 15 per cent in 1950-51 to about 29 per cent in 1996-97. The share of the tertiary sector (consisting of banking and insurance, public administration and defence, trade and commerce, etc.) also increased from about 29 per cent to about 43 per cent during the same period. Thus, the sectoral composition of national income moved in favour of industrial and service activities. In fact, there has been a spectacular increase in the banking and insurance activities in the country during the plan periods.Again, modernisation refers to technological advances, both in agriculture and industry. Technological break-through in Indian agriculture took place in the form of application of high yielding varieties of seeds, chemical fertilisers, modernised agricultural implements, etc. since the first half of 1960 and our country experienced a 'Green Revolution, (i.e., substantial rise in agricultural output, particularly wheat crop) during 1966-67.In the industrial sector also, increasing application of computers and sophisticated machines, improvement in fuel efficiency of prime movers and improvement in the commercial use of non-conventional energy, have enhanced the productive capacity of different factors during the plan periods.(viii)Progress in health and educational facilities : Several steps were undertaken by the Government of India to extend health facilities to the maximum number of people. For example, there were only 725 primary health centres in 1951, but in 1997 there were 2,619 community health centres, 22,002 primary health centres and 14 lakh sub-centres in the rural areas of India. Further, there were only 2,694 hospitals in 1951 and this number had increased to 13,692 in 1992. As a consequence, the death rate (per 1,000 population) declined from about 23 in 1951 to about 9 in 1991. Though higher than the death rate, yet the birth rate (per 1,000 population) also declined from about 42 to 27 during the same period. The average life expentancy at birth increased from 41 years in 1951 to 61 years in 1991.Various programmes were also undertaken by the Government of India to promote educational facilities. These efforts led to a continuous growth in the number of both educational institutions and the number of students at different stages of education. For example, the number of primary schools has increased from about 2-2 lakh in 1951 to about 74 lakh in 1995. The number of students enrolment at the primary level also increased from about 19 million to 109 million during the said period. In 1951, the average literacy rate was only 18-3 per cent and it had improved to 52-2 per cent in 1991.

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

8

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

ECONOMIC DEVELOPMENT AND WELFARE//SUMAN CHAKRABORTY

9