SOCIAL SCIENCE : 10 GSEB

ECONOMICS

CHAPTER 15

ECONOMIC DEVELOPMENT
 ECONOMIC DEVELOPMENT
An Introduction

● Basic needs of man: Food, Shelter, Clothes, Education and Health

● Activities to be performed to get modify and use resources
● Need of complimentary requirements: Transportation,
communication, electricity- infrastructure
● A system required to fulfil these needs, where resoources are
managed, produced, distributed, consumed and used – the system
is ‘economy’- a country itself becomes an economy.
● Development, i.e. positive and qualitative changes in economy
aimed to fulfil the requirement of people in the best efficient way.
 ECONOMIC DEVELOPMENT
Meaning

➢ A process of social change which has many faces, like-

● Constant Increase in National Income – Total income of the

country, generated by better use resources or production.

● Increase in Per Capita Income (PCI) – Income per person,

calculated by dividing the National Income by total population

National Income of a country for a year
Total Population of country for a year
● Change in lifestyle or living standard – Increasing capacity to

fulfil the needs in best efficient way.

➢ Income and lifestyle are closely related to each other.
➢ Indian economy is a developing economy.
 ECONOMIC DEVELOPMENT
Economic Progress (Growth) & Development
● Economic progress and economic development are different from each other in
many ways.
 On the basis of development process:
✔ Economic Development: Qualitative change in economy, First stage of an
economy
✔ Economic Progress: Quantitative change in production, second stage of an
economy
 According to changes taking place in economy:
✔ Economic Development: Increase in production due to modernisation of
technology
✔ Economic Progress: Increase in production due to enlargement in the size of
factors of production
 In relation with Developed and developing nations:
✔ Economic Development: Increase in National Income of developing
economy- India
✔ Economic Progress: Increase in National In come of Developed country -
Japan
 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ Country having less than $735 Per Capita Income, accordinng to
World Development Report,2004 of World Bank.

➢ 1. Less Per Capita Income-

 Income less

 Population Growth high

 Living standard low

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 2. Population Growth-
 High population growth rate

 2% Growth Rate in India

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 3. Dependency on agriculture -
 Main occupation – Agriculture

 Two third of more than 60% population in agriculture-India

 Contribution in National Income -26% only in India

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 4. Unequal Distribution of Income -
 Inequality in cities and villages

 20% Richest share 40% in National Income

● 20% Poorest share 10% in National Income

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 5. Unemployment-
 Unemployment is a problem

 3% of total labour unemployed in India

 Different types of unemployment

 Long period of unemployment

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 6. Poverty-
 People unable to satisfy basic needs

 About One third (30%) population in India is poor

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 7. Dual Economy-
 Dual or mixed economy

 One side- old machinery, less production

 Another side- Modern technology, new and more production

 Orthodox social structure versus sophisticated lifestyle

 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 8. Insufficient Infrastructure facilities -
 Lacking infrastructure- Education, Health, Transportation,
Electricity, Banking, etc.
 Hinders development of nation
 ECONOMIC DEVELOPMENT
Features of Developing Economy
➢ 9. Form of International Trade-
 Export agro-products and mineral ores- less price; less profit

 Import industrial products and machinery- High cost; more

expense
 Adverse Foreign trade and increasing Foreign Debt

EXPORT

IMPORT
 ECONOMIC DEVELOPMENT
Economic and Non-Economic Activities
 Economic Activities -
● Activities done to satisfy our basic needs and to support

economy (generate income)

● Earning or spending money for the exchange of commodities

and services
● Example- Farmer, Fishermen, Tailor, Shopkeeper, Teacher.
 ECONOMIC DEVELOPMENT
Economic and Non-Economic Activities
 Non-Economic Activities -
● Activities not aimed to obtain income, things are exchanged

indirectly
● Examples: Mother’s care, Social worker, Priest
 ECONOMIC DEVELOPMENT
Structure of Indian Economy
 Various occupations and activities are classified in three sectors.
 Recognised as ‘ Commercial Structure’
1) Primary Sector
● Activities and occupations directly related to land

● Resources are taken mostly in natural form

● Examples- Agriculture, cattle rearing, fishing, mining,

gathering, etc.
 ECONOMIC DEVELOPMENT
Structure of Indian Economy
2) Secondary Sector
● Activities and occupations related to modification of resources

● Products of primary and secondary sectors are used as raw-

material
● Examples- all types of industries, construction, energy
production, etc.
● Also called ‘Industrial Sector’
 ECONOMIC DEVELOPMENT
Structure of Indian Economy

3) Tertiary Sector (Service Sector)

● Various types of services provided in exchange of money

● Example: Trade, Transportation, Communication, Education,

Health, Banking, Tourism, etc.

 ECONOMIC DEVELOPMENT
Structure of Indian Economy
Question – Board Exam – March, 2020 – 3 Marks

“ Divya’s father works in L.I.C. Bhavya’s father is a farmer.

Preksha’s father manufactures sewing machine. In which sectors
of economy will you place the father of these three girls?
Explain in brief.”
 ECONOMIC DEVELOPMENT
Factors of Production
 Production is done using resources, labour and technology.
 All these required things are called Factors of Production, are
classified in four parts:
1) Land
● Surface of the land in normal sense

● In terms of Economics it means all the natural resources

derived from land

● Land is ‘natural’ tool for production.

● Examples- forests, rivers, mountains, mineral deposits, etc.

 ECONOMIC DEVELOPMENT
Factors of Production
2) Capital
● Capital generally means money

● But it includes everything that can be made after investing

money, especially technology

● Examples: Instruments and tools, machines, property, money.
 ECONOMIC DEVELOPMENT
Factors of Production
3) Labour
● Any physical and/or mental activity (Economic activity) done

to obtain monetary gain.

● Labour is a ‘living’ factor of production.

● Example: Farm labourers, industrial workers, bureaucrats

(officers), service providers.
 ECONOMIC DEVELOPMENT
Factors of Production
4) Entrepreneurship:
● Entrepreneur- A person, efficiently combines the first three

factors of production i.e. land, capital and labour.

● Entrepreneurship- A process of combining three factors of

production in profit making process.

ECONOMIC DEVELOPMENT
Factors of Production
 ECONOMIC DEVELOPMENT
Distribution of Factors of Production
 Wants are unlimited, Resources are limited.
 Resources have to be used efficiently.
 Nations have to decide What to produce? How much to
produce? For whom to produce?
 ECONOMIC DEVELOPMENT
Distribution of Factors of Production
➢ Challenges against distribution

1) Unlimited wants:
● Unlimited and uncountable wants of human

● Many wants arise from one want, some wants have to be

fulfilled again and again

● Wants also arise with development of science and technology

2) Limited Resources:
● Resources, natural and man-made both are limited

● We have to use resources judiciously, doing production for

selected wants
 ECONOMIC DEVELOPMENT
Distribution of Factors of Production
➢ Solution to the problem

1) Order of Priority:
● Resources are limited, want are unlimited.

● Necessary to give order of priority.

● Basic needs have to be satisfied first and than others.

2) Alternative use of resources:

● Resources have alternative and multiple usages

● A resource can be used for one purpose only, at a time.

● Many resources can be used for one purpose

● Renewable resources should be used instead of Non-

renewable resources.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources
 Allocation of resources means to allocate (distribute) resources for
production. (As factors of production).
 There are different methods of allocating resources.
 Every nation has to adopt one or another method to develop,
according to their needs.
 Mainly two methods of resource allocation are there: 1. Market
System and 2. Socialist System.(opposite to each other).
 Mixed System originates as the co-ordination of both first and
second.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources
(A) Market System:
 Meaning:

➢ A system where decisions related with the distribution of factors

of production and production are taken and resources are owned

by the market (producers) is called a Market System.
➢ USA and Japan are its examples

➢ This system is also called ‘Capitalist System’ or ‘Free Economy’

 Features:
➢ Ownership of resources of production is with private sector.
➢ All decisions related with production and using resources are
taken by an individual or private firm.
➢ Government interference is very less or absent in such economy.
➢ Profit is at the centre of all economic activities.
➢ Competition plays vital role, like an ‘invisible hand’.
➢ Economic decisions are taken price and profit in the centre.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources

(A) Market System:

 Benefits:

➢ Economic freedom of an individual is protected.

➢ Factors of production (resources) are utilized efficiently.
➢ Abundant production may be done, so consumers get more
opportunities.
➢ Competition leads to new explorations, which makes
development faster.
➢ Quality of goods and services improves due to competition.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources

(A) Market System:

 Limitations:

➢ Production of luxurious good is done, production of

commodities of basic needs is neglected.
➢ There is no role of the state (government) in making any
economic policy, hence natural resources are wasted.
➢ Consumers are exploited, having less awareness and knowledge.
➢ Disparity of income and property is getting increased due to
centralisation of resources.
➢ Fear of monopoly, economic instability, exploitation of labour,
etc.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources
(B) Socialist System:
 Meaning:

➢ A system where decisions related with the distribution of factors

of production and production are taken and resources are owned

by the state (government) is called a Socialist System.
➢ Countries like China and Russia achieved fast development by it

 Features:
➢ Ownership of resources of production is with the state (govt).
➢ All decisions related with production and using resources are
taken by the state (government).
➢ Social welfare is at the centre of all economic activities, rather
profit.
➢ People work behalf of the state, labourers are paid wages
according to their ability and work.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources

(B) Socialist System:

 Benefits:

➢ Production of commodities of basic needs is done, production of

luxurious goods avoided.
➢ Decisions are taken by the state (government), hence resources
are not wasted.
➢ Consumers are not exploited.
➢ Disparity of income and property is removed.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources
(B) Socialist System:

 Limitations:

➢ No economic freedom to an individual.

➢ Factors of production (resources) are owned by the state, people
don’t get encouragement to increase production.
➢ Due to lack of competition, new explorations and researches do
not get momentum.
➢ Quality of goods and services do not improves due to lack of
competition.
➢ There is fear of bureaucracy, because of complete interference of
state.
 ECONOMIC DEVELOPMENT
Methods of Allocation of Resources

(C) Mixed Economy:

 Meaning:

➢ Mixed economy is such a type of economic system in which

public and private sectors co-exist, as complimentary to each
other rather competitor.
➢ It attempts to remove limitations of Market and Socialist system,
and assimilates the good elements of the two.
➢ It is also called “Controlled Economic System”, India is example
of Mixed economy.
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Methods of Allocation of Resources

(C) Mixed Economy:

 Features:

➢ Public and Private sectors work together, as supporters.

➢ Ownership of some resources of production (agriculture, trade,

small industries, etc.) is with an individual or private company.

➢ Ownership on basic key resources of production (heavy

industries, defence, railway, electricity, roads, irrigation, etc.) is

with the state (government).
➢ Market is not completely free, neither completely closed.

➢ Economic planning is important part under economic policies.

 Economic instability, lack of coordination, inconsistent

economic policy, low rate of economic development, etc. are
some drawbacks of Mixed economy.