BBA 3rd Semester

Heritage of Indian Polity and Economy

(BBA30001)BBA2023
2024-25

Study Material
(Module-III)
(Heritage of Indian Polity and Economy)
(BBA30001)

Table of Contents

Sl. No. Topics Page No.

1 Salient features of Indian economy during the 2-3
golden period of India
2 Sectors of Indian Economy 3-4
3 Economic growth and Economic 4-5
development
4 Impact of foreign invasion and British 6-7
colonization on the Indian economy
5 Concepts of National Income 7-8

6 Human Development Index (HDI) 9-10

7 Latest Monetary policy and Fiscal policy 10-12

8 Current Fiscal Policy Trends 13
9 Trend Analysis of Economic Growth and 14-15
Development

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata 1
2

❖ Salient features of Indian economy during the golden period/colonialism of India

The colonial economy refers to the economic system established during the time of colonization. It
happened when powerful countries, known as colonizers, went to other lands and took control
over them. They exploited the resources and labor of these lands for their own benefit. Colonial
economies were driven by the desire for wealth and power.

Feature of Indian Economy are cited below:

i. Low Per Capita Real Income:

The actual revenue or income of a nation alludes to the buying force or the purchasing power of
the nation overall in a given monetary year, while the per capita actual or real income alludes to
the normal buying force or purchasing power of the nation or the buying force or purchasing
power of a person in a country in that year. Emerging nations share the quality of a low for each
capita real income.

ii. High Rate of Population Growth:

Where there is a high populace, There additionally must be a framework set up to help that
populace. This implies there should be sufficient instructive, educational, and clinical offices,
enough business openings or employment opportunities with great compensations, and so forth.
With a high populace, particularly an undeniably high populace, giving these facilities to every
resident turns into an immense undertaking, and frequently, state-run administrations or the
government can’t carry on with it; in this manner, it leaves the economy in the developing stage.

iii. The Endless Loop of Poverty:

The endless loop of neediness and poverty deals with both the supply side just as the demand
side. On the supply side, since the products and services are not being sold, there is an
insufficiency of capital advancing or lending to low rates on investments, and consequently a low
degree of per capita real or actual income or pay. With this comes the demand side, the endless
loop of poverty alludes to when the buying power based on the real income of the nation is low,
prompting the exorbitance of products and services. This is the way the endless loop of neediness
works, and it is somewhat normal to find in developing economies.

iv. Low per capita income

India is known in the world as a country with low per capita income. Per capita income is defined
as the ratio of national income over population. It gives the idea about the average earning of an
Indian citizen in a year, even though this may not reflect the actual earning of each individual.
India’s per capita income for the year 2012-2013 is estimated at 39,168.
This comes to about 3,264 per month. If we compare India’s per capita income with other
countries of the world then it can be seen that India is well behind many of them. For example, the
per capita income of USA is 15 times more that of India while China’s per capita income is more

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
3

than three times of India.

v. Dependence on Agriculture

Majority of India’s working population depend on agricultural activities to pursue their livelihood.
In spite of this, the contribution of agriculture to India’s gross domestic product is very little.
A major concern of agriculture in India is that productivity in this sector is very less.
There is heavy population pressure on land to sustain huge number. Due to population pressure
on land the per capita availability of land area is very low and not viable for extracting higher
output. Two, since per capita land availability is less, a majority of people are forced to become
agricultural labor working at low wages. Indian agriculture suffers from lack of better technology
and irrigation facilities.

❖ Sectors of Indian Economy

A. Primary Sector

In Primary sector of economy, activities are undertaken by directly using natural resources.
Agriculture, Mining, Fishing, Forestry, Dairy etc. are some examples of this sector.
It is called so because it forms the base for all other products. Since most of the natural products
we get are from agriculture, dairy, forestry, fishing, it is also called Agriculture and allied sector.
People engaged in primary activities are called red-collar workers due to the outdoor nature of
their work.

B. Secondary Sector

It includes the industries where finished products are made from natural materials produced in the
primary sector. Industrial production, cotton fabric, sugar cane production etc. activities comes
under this sector.
Hence its the part of a country's economy that manufactures goods, rather than producing raw
materials
Name of the Faculty: Dr. Amrita Nath
Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
4

Since this sector is associated with different kinds of industries, it is also called industrial sector.
People engaged in secondary activities are called blue collar workers.

Examples of manufacturing sector:

Small workshops producing pots, artisan production.
Mills producing textiles,
Factories producing steel, chemicals, plastic, car.
Food production such as brewing plants, and food processing.
Oil refinery.

C. Tertiary Sector/Service Sector

This sector’s activities help in the development of the primary and secondary sectors. By itself,
economic activities in tertiary sector do not produce a goods but they are an aid or a support for
the production.
Goods transported by trucks or trains, banking, insurance, finance etc. come under the sector. It
provides the value addition to a product same as secondary sector.
This sector jobs are called white collar jobs.

Examples of service sector:

Hospital service
Banking service
Shipping service

❖ Economic growth and Economic development

Economic growth can be referred to as the increase that is witnessed in the monetary value of all the
goods and services produced in the economy during a time period. It is a type of quantitative
measure that reflects the potential increase in the number of business transactions taking place in
the economy.
It can be measured in terms of the increase in the aggregate market value of additional goods and
services produced by using economic concepts such as GDP and GNP. Economic growth is a narrow
concept when compared to economic development.

Economic development refers to the process by which the overall health, well-being, and academic
level of the general population of a nation improves. It also refers to the improved production
volume due to the advancements of technology.

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
5

It is the qualitative improvement in the life of the citizens of a country and is most appropriately
determined by the Human Development Index (HDI). The overall development of a country is based on
many parameters such as the creation of job opportunities, technological advancements, standard of
living, living conditions, per capita income, quality of life, improvement in self-esteem needs, GDP,
industrial and infrastructural development, etc.

❖ Difference between Economic Growth and Economic Development

Economic Growth Economic Development

Definition
It refers to the increase in the monetary It refers to the overall development of the
growth of a nation in a particular period. quality of life in a nation, which includes
economic growth.

Span of Concept
It is a narrower concept than that of It is a broader concept than that of economic
economic development. growth.

Scope
It is a uni-dimensional approach that deals It is a multi-dimensional approach that looks
with the economic growth of a nation. into the income as well as the quality of life of a
nation.

Term
Short-term process Long-term process

Measurement
Quantitative Both quantitative and qualitative

Applicable to
Developed economies Developing economies

Government Support
It is an automatic process that may or may It requires intervention from the government as
not require intervention from the government all the developmental policies are formed by
the government

Kind of changes expected

Quantitative changes Quantitative as well as qualitative changes

Examples
GDP, GNP HDI, per capita Income, industrial development

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
6

❖ Impact of foreign invasion and British colonization on the Indian economy

A. Economic Impact:

i. India became an economic colony of industrial England.

ii. Indian handloom weaving industry was hit by the industrialization in England and eventually collapsed.
iii. Indian handicrafts lost both domestic and foreign market.
a. Land revenue experiments mentioned below caused hardship to cultivators:
b. Lord Cornwallis’s Permanent Settlement System
c. Ryotwari & Mahalwari Systems
iv. Commercialization of agriculture hard hit the laborers where numbers of landless laborers increased.
This led to the birth of new money-lending class where peasants were exploited as they had to borrow
money from the money-lenders

B. Social and Cultural Impact:

i. Amid social issues like Sati, Child Marriages, Infanticides; ideas like Liberty, Equality, Freedom, and
human Rights were brought by the British.
ii. To improve the condition of women in society, various legal measures were introduced.
iii. British showed keenness in introducing the English language in Indian society.
The vernacular languages were ignored
iv. The British Parliament issued the Charter Act of 1813 by which a sum of Rupees One lakh was sanctioned
for promoting western sciences in India.

Positive and Negative Impacts of British Rule in India

Broadly, the impact of British rule can be divided into negative and positive aspects.

C. Impact of British Rule – Positive Aspects

i. New Job Opportunities: The British introduce new job opportunities that were especially beneficial to the
members of the lower caste. With these opportunities, there was a better chance of upward social mobility for
them

ii. Rise of the modern middle class in India: British rule led to the rise of an influential middle-class who
would become pioneers of Indian industrialization in the post-independent era.

iii. Development of Infrastructure: The British authorities built many important infrastructures such as
hospital schools and the most important of all, railways. Of course, this was done not to enhance the lives of
the local Indians but rather to facilitate their exploitation. Regardless these infrastructures laid the foundation
of India becoming a major economic powerhouse.

D. Impact of British Rule – Negative Aspects

i. Destruction of Indian Industry: When Britain took over, they forced the governments to import goods
from the British Isles rather than create their own products. This led to the local cloth, metal and carpentry
Name of the Faculty: Dr. Amrita Nath
Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
7

industries to fall into disarray. It made India a virtual hostage of Britains economic machinations which

meant breaking away from it would destroy India’s economy.

ii. British mismanagement led to famines: The British rule placed more emphasis on the cultivation of cash
crops rather than growing crops that would feed India’s huge population. They imported food from other parts
of the empire to feed its citizens. This policy, combined with the unequal distribution of food, led to 24 famines
killing millions between 1850 and 1899 alone. The first and if not the worst of this lot was the Bengal Famine
of 1770.

iii. The Divide and Rule Policy: The British realised that they could never rule a vast territory like India
without breaking up strong kingdoms into small easily conquerable segments. The British Empire also made
it a policy to pay religious leaders to speak out against each other, slowly poisoning relations between different
faiths. The hostile relationship between India and Pakistan can be attributed as a direct result of this policy.

❖ Definition of National Income

National income refers to the total monetary value of all goods and services produced within a country's
borders in a specific time period, usually a year. It is a key measure of a country's economic performance and
is used to gauge the overall health and growth of an economy. National income is often used interchangeably
with the term "Gross National Income" (GNI) or "Gross National Product" (GNP), although there are subtle
differences between these concepts.

❖ Different Concepts of National Income

There are several ways to measure national income, each capturing a different aspect of an economy's
production. Some common measures include:

[Link] Domestic Product (GDP): GDP represents the total value of all goods and services produced within
a country's borders, regardless of whether the production is done by domestic or foreign entities. It is often
divided into three main categories: consumer spending, business investment, and government spending, plus
net exports (exports minus imports).

GDP= GNP+NFIA
Where NFIA= Net Factor Income from Abroad

2. Gross National Income (GNI): GNI takes into account not only the value of production within a country
but also includes income earned from abroad and subtracts income earned by foreign entities within the
country. GNI is calculated as GDP plus net income from abroad (including factors like remittances and foreign
investment income).

GNP= GDP-NFIA

3. Net National Income (NNI): NNI is calculated by subtracting depreciation (wear and tear on capital goods)
from GNI. This adjustment accounts for the fact that some of the income generated is needed to replace capital
that has been used up during the production process.

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
8

NNI= GNI - Depreciation

4. National Disposable Income (NDI): This measure represents the total income available to the residents of
a country after deducting taxes and adding government transfers (such as social benefits).

5. Per Capita Income (PCI): Per capita income is the average income per person in a specific area. It is an
indicator to show the living standard of people in a country and is obtained by dividing the national income
by the population of a country.

Per capita Income =National Income/Total Population

[Link] Income (PI): Personal income refers to the total amount of money an individual receives from all
sources within a given time period, typically a year. This includes various forms of income, such as wages
and salaries, rental income, interest, dividends, social security benefits, pensions, and other forms of
government transfers. It represents the gross inflow of funds into an individual's possession during a specified
period before accounting for taxes and other deductions.

[Link] Disposable Income (PDI): Personal disposable income, on the other hand, takes into account
the taxes and other mandatory deductions that an individual must pay. It's the amount of money that an
individual has available for spending or saving after subtracting all applicable taxes (such as income taxes
and Social Security taxes) and social security contributions.

Mathematically, the relationship between personal income (PI), personal taxes (PT), and personal disposable
income (PDI) can be expressed as:

Personal Disposable Income (PDI) = Personal Income (PI) - Personal Taxes (PT)

PDI is a more accurate measure of an individual's actual spending power, as it considers the impact of taxation
on the income received. It represents the amount of money a person or household has at their disposal for
consumption, savings, and investment after accounting for the necessary tax payments.

❖ Difference between GNP and GDP

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
9

❖ Human Development Index

The HDI is a summary composite measure of a country's average achievements in three basic aspects of
human development: health, knowledge and standard of living. In the year 1990, the human development
index was first used by the Pakistani Economist Mahbub Ul Haque.

The index is further used by the United Nation Development Program to rank countries and is considered as
one of the best tools to assess the country’s development on the basis of its economic and social measurements.
It is a measure of a country's average achievements in three dimensions of human development:

i. a long and healthy life, as measured by life expectancy at birth;

ii. knowledge, as measured by mean years of schooling and expected years of schooling; and
iii. a decent standard of living, as measured by GNI per capita in PPP terms in US$.

The HDI sets a minimum and a maximum for each dimension, called "goalposts", then shows where each
country stands in relation to these goalposts. This is expressed as a value between 0 and 1. The higher a
country's human development, the higher its HDI value.

According to the 2023-24 Human Development Report (HDR), titled 'Breaking the Gridlock: Reimagining
Cooperation in a Polarised World,' India ranks 134 on the global Human Development Index (HDI).
Switzerland has been ranked number one. The report has been released by the United Nations Development
Programme (UNDP).

❖ Indicators of the Human Development Index

The three indicators or factors that represent the different aspects of life include the following:

i. Longevity: The human’s longevity is measured by life expectancy at birth. The life expectancy at
Name of the Faculty: Dr. Amrita Nath
Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
10

birth means how many years a newly born person is expected to survive in this world. This indicated
the element of health in the Human Development Index.

ii. Education: It is measured by the expected years of schooling life of a child at the school entry age
and the mean years of schooling of the adult population.

a. Mean years of schooling: It determines the average number of years of total schooling adults (aged
25 years and above) have received.

b. Expected Years of Schooling: It estimates the number of years of schooling that a child of school
entrance age can expect to get if the present age- specific enrollment rates survive through the child's
life by country.

v. Standard of Living: The standard of living of people is measured by Gross National Income per
capita adjusted for the price level of the country.

❖ Importance of Human Development Index

The importance of the human development index is that it is an essential indicator of the overall
socio-economic conditions of a nation and its residents. Since it takes into account various
parameters to determine the development of those areas, it is an effective way to evaluate the
performance of every nation.

Consequently, after the survey, every country is awarded a rank by the United Nations
Development Programme annually. A higher rank is allocated to the one that has performed well
in all or most of the parameters. Likewise, nations that have not fared well in all or most of the
parameters attain a lower rank. As a result, HDI acts as a measuring tool that helps in gauging
socio-economic conditions of nations every year and also keeps track of the same.

❖ Latest Monetary policy and Fiscal policy

The monetary policy is a policy formulated by the central bank, i.e., RBI (Reserve Bank of India)
and relates to the monetary matters of the country. The policy involves measures taken to
regulate the supply of money, availability, and cost of credit in the economy.

The policy also oversees distribution of credit among users as well as the borrowing and lending
rates of interest. In a developing country like India, the monetary policy is significant in the
promotion of economic growth.

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
11

Key Indicators

Indicator Current rate

CRR 4.50%

SLR 18.00%

Repo rate 6.50%

Reverse repo rate 3.35%

Marginal Standing facility rate 6.75%

Bank Rate 6.75%

The various instruments of monetary policy include variations in bank rates, other interest rates,
selective credit controls, supply of currency, variations in reserve requirements and open market
operations.

Objectives of Monetary Policy

While the main objective of the monetary policy is economic growth as well as price and
exchange rate stability, there are other aspects that it can help with as well.

i. Promotion of saving and investment: Since the monetary policy controls the rate of interest
and inflation within the country, it can impact the savings and investment of the people. A higher
rate of interest translates to a greater chance of investment and savings, thereby, maintaining a
healthy cash flow within the economy.

ii. Controlling the imports and exports: By helping industries secure a loan at a reduced rate of
interest, monetary policy helps export-oriented units to substitute imports and increase exports.
This, in turn, helps improve the condition of the balance of payments.

iii. Managing business cycles: The two main stages of a business cycle are boom and depression.
The monetary policy is the greatest tool using which the boom and depression of business cycles
can be controlled by managing the credit to control the supply of money. The inflation in the
market can be controlled by reducing the supply of money. On the other hand, when the money
Name of the Faculty: Dr. Amrita Nath
Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
12

supply increases, the demand in the economy will also witness a rise.

iv. Generation of employment: As the monetary policy can reduce the interest rate, small and
medium enterprises (SMEs) can easily secure a loan for business expansion. This can lead to
greater employment opportunities.

Fiscal policy in India refers to the government's use of taxation and public spending to influence
the overall economy. It is a tool for economic management and involves government revenue
and expenditure decisions to achieve specific economic objectives.

Fiscal policy is employed alongside monetary policy (controlled by central banks) to achieve
macroeconomic stability and promote economic growth.

Objectives of fiscal policy in India

The primary objectives of fiscal policy in India include:

i. Economic growth: Fiscal policy aims to stimulate and sustain economic growth by deploying
measures encouraging investment, consumption, and overall economic activity. This includes
targeted government spending on infrastructure, education, and healthcare.
Price stability: Controlling inflation and maintaining price stability are crucial objectives of fiscal
policy in India.

ii. Full employment: Fiscal policy seeks to generate employment opportunities by fostering
economic growth. The government does so by initiating projects and programs that create jobs
and reduce unemployment rates.

iii. Equitable income distribution: Fiscal measures, such as progressive taxation and social
welfare programs, are implemented to promote an equitable allocation of resources and
opportunities.

iv. External stability: Fiscal policy aims to balance the country's external trade and payments.

In RE 2023-24, the Government had revised its Fiscal Deficit target lower to 5.8 per cent. Further,
in line with the commitment made in the Budget Speech for FY 2021-22, the Government is
pursuing a broad path of fiscal consolidation to attain a level of Fiscal Deficit lower than 4.5 per
cent of GDP by FY 2025-26.

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
13

❖ Current Fiscal Policy Trends (2024)

1. Increased Government Spending

i. Stimulus Measures: Governments have been increasing spending on infrastructure,
healthcare, and social programs to stimulate economic recovery and address post-pandemic
challenges. This includes investments in green energy and technology.
ii. Focus on Recovery: Spending is directed towards economic recovery efforts, including support
for affected industries and populations.

2. Tax Reforms
i. Corporate Taxation: Some countries are revising corporate tax rates to attract investment
and boost economic activity. This includes adjustments to tax incentives and deductions for
businesses.
ii. Income Tax Changes: Reforms to personal income tax brackets and rates are being
implemented to address income inequality and increase government revenue. Progressive
taxation and wealth taxes are also being explored.

3. Debt Management
i. Public Debt Levels: Many countries are managing high levels of public debt accumulated during
the pandemic. Strategies include fiscal consolidation measures, reducing deficits, and controlling
public expenditure.
ii. Debt Sustainability: Governments are focusing on maintaining sustainable debt levels while
balancing growth and fiscal responsibility.

4. Social Welfare Programs

i. Expansion of Social Safety Nets: Governments are expanding social welfare programs to
support vulnerable populations, including unemployment benefits, direct transfers, and housing
assistance.
ii. Focus on Equity: Programs are designed to reduce income inequality and provide targeted
support to low-income households.

5. Climate and Green Investments

Environmental Policies: Increased allocation towards green investments and climate action is
a significant trend. This includes funding for renewable energy projects, energy efficiency
programs, and climate resilience initiatives.

❖ TRENDS ANALYSIS OF ECONOMIC GROWTH AND DEVELOPMENT

Trends in Economic Growth

1. Global Economic Growth Patterns

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
14

i. Advanced Economies: Growth in developed countries has generally slowed compared to

emerging markets. Factors contributing to slower growth include ageing populations, slower
productivity gains, and high levels of debt.
ii. Emerging Markets: Emerging economies, such as those in Asia and Africa, have experienced
higher growth rates due to rapid industrialization, urbanization, and a rising middle class.
Countries like China and India continue to drive significant global economic growth.
iii. Post-Pandemic Recovery: The global economy has been recovering from the COVID-19
pandemic with varying success. Some regions have seen robust rebounds, while others face
ongoing challenges due to supply chain disruptions, inflation, and geopolitical tensions.

2. Technological Advancements
i. Innovation and Productivity: Technological advancements in areas such as artificial
intelligence (AI), automation, and digitalization are driving productivity growth. Sectors like
technology, biotechnology, and renewable energy are leading this transformation.
ii. Digital Economy: The rise of the digital economy, including e-commerce, fintech, and digital
platforms, is reshaping economic activities and contributing to growth. The pandemic has
accelerated the adoption of digital technologies across various sectors.

3. Trade Dynamics
i. Global Trade Shifts: Trade dynamics have shifted due to geopolitical tensions, trade wars, and
the reconfiguration of supply chains. Countries are diversifying their trade partners and focusing
on regional trade agreements.
ii. Sustainable Trade Practices: There is a growing emphasis on sustainable and ethical trade
practices, with an increasing focus on environmental and social governance (ESG) criteria.

4. Demographic Changes
i. Aging Populations: In many developed countries, ageing populations are affecting labour
markets, productivity, and economic growth. Policies to manage the economic impacts of an
ageing workforce are becoming increasingly important.
ii. Youthful Populations: Conversely, many developing countries have young and growing
populations, which can drive economic growth but also pose challenges related to education,
employment, and infrastructure.

Trends in Economic Development

1. Sustainable Development
i. Environmental Sustainability: There is a heightened focus on environmental sustainability and
climate change mitigation. Governments and businesses are investing in renewable energy,
energy efficiency, and green technologies.
ii. Sustainable Development Goals (SDGs): The United Nations’ SDGs provide a framework for
sustainable development, addressing issues such as poverty, inequality, and environmental
degradation. Progress towards these goals varies across regions.

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata
15

2. Human Development
i. Education and Health: Investments in education and healthcare are critical for improving
human development indicators. Countries are focusing on expanding access to quality education
and healthcare services to enhance overall well-being.
ii. Human Development Index (HDI): The HDI, which combines indicators of health, education,
and income, is used to measure and compare human development across countries. There is an
ongoing effort to improve HDI scores through targeted policies and programs.

3. Income Inequality and Poverty Reduction

i. Addressing Inequality: Efforts to reduce income inequality include progressive taxation, social
welfare programs, and policies aimed at increasing economic opportunities for marginalized
groups.
ii. Poverty Alleviation: Programs aimed at poverty reduction, such as direct transfers,
microfinance, and rural development initiatives, are crucial for improving living standards and
economic inclusion.

4. Urbanization and Infrastructure Development

i. Rapid Urbanization: Urbanization continues to grow, particularly in developing countries. This
trend drives demand for infrastructure development, including transportation, housing, and
utilities.
ii. Smart Cities: The concept of smart cities, which integrates technology and data to improve
urban living, is gaining traction. Investments in smart infrastructure aim to enhance efficiency
and quality of life in urban areas.

_______________

Name of the Faculty: Dr. Amrita Nath

Designation and Department: Assistant Professor/ Management
Brainware University, Kolkata