Current Affairs UPSC

      Sectors of the Indian Economy   An economy is best understood when we study its components or sectors. Sectoral classification can be done on the basis of several criteria. Here three types of classifications are discussed: primary / secondary / tertiary, organised / unorganised; and public / private. It is important to emphasise the changing roles of sectors. This can be highlighted further by drawing attention of the students to the rapid growth of service sector. While elaborating the ideas provided in the chapter, the students may need to be familiarised with a few fundamental concepts such as Gross Domestic Product, Employment etc. Another important issue to be highlighted is about the problems caused by the changes in the roles of sectors.     Sectors of Economic Activities   There are many activities that are undertaken by directly using natural resources. Take, for example, the cultivation of son. It takes place within a crop season. For the growth of the Cotton plant, we depend mainly, but not entirely, on natural factors like rainfall, sunshine and climate. The product of this activity, Cotton, is a natural product. Similarly, in the case of an activity like dairy we are dependent on the biological process of the animals and availability of fodder etc. The product here, milk, also is a natural product similarly, minerals and ores are also natural products. When we produce a good by exploiting natural resources, it is an activity of the primary sector. Why primary? This is because it forms the base for all other products that we subsequently make. Since most of the natural-products we get are from agriculture, dairy, fishing, forestry, this sector is also called agriculture and related sector.   The secondary sector covers activities in which natural products are changed into other forms through manufacturing that .we associate with industrial activity. It is the next step after primary. The product is not produced by nature but has to be made and therefore some process of manufacturing is essential. This could be in a factory, a workshop or at home. For example, using cotton fibre from the plant, we spin yarn and weave cloth. Using sugarcane as a raw material, we make sugar or gur. We convert use bricks to make houses and buildings. Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector.   After primary and secondary, there is a third category of activities that falls under tertiary sector and is different from the above two. These are activities that help in the development of the primary and secondary sectors. These activities, by themselves, do not produce a good but they are an aid or a support for the production process.   For example, goods that are produced m the primary or secondary sector would need to be transported by more...

  Economy Planning     Planned Economy   Planned economy is one in which the state owns (partly or wholly) and directs the economy. While such a role is assumed by the State in almost every economy, in planned economies, it is pronounced: for example in communist and socialist countries- former USSR and China till the 1970's. In such a case a planned economy is referred to as command economy or centrally planned economy or command and control economy. In command economies, state does the following  

• Control all major sectors of the economy
• Legislate on their use and about the distribution of income
• State decides on what should be produced and how much; sold at what price
• Private property is not allowed

      Market economy   In a market economy, it is the opposite- state has a minimal role in the management of the economy- production, consumption and distribution decisions are predominantly left to the market. State plays certain role in redistribution. State is called the laissez faire state here. It is a French phrase literally meaning "Let do,"     Indicative plan   Indicative plan is one where there is a mixed economy with State and market playing significant roles to achieve targets for growth that they together set. It is operated under a planned economy but not command economy.               Difference between Planned Economy & Command Economy   The difference between planned economy and command economy is that in the former there may be mixed economy and while in the latter Government owns and regulates economy to near monopolistic limit.   Command economies were set up in China and USSR, mainly for rapid economic growth and social and economic justice but have been dismantled in the last two decades as they do not create wealth sustainably and are not conducive for innovation and efficiency. Cuba and North Korea are still command economies.     An overview of History of Economic Planning in India   India being devastated economically after more than two centuries of colonial exploitation resulting in chronic poverty. Eradication of poverty was the driving force for the formulation of various models of growth before Independence.      In 1944 leading businessmen and i industrialists (including Sir Purshotamdas Thakurdas, JRD Tata, GD Birla and others) put forward "A Plan of Economic Development for India" -popularly known as the 'Bombay Plan'. It saw India's future progress based on further expansion of the textile and consumer industries already flourishing in cities like Bombay and Ahmedabad. It saw an important role the State in post-Independent India: to provide infrastructure, invest m basic industries like steel, and protect Indian industry from foreign competition.    Visionary engineer Sir Mokshagundam Visvesvarayya pointed to the success of Japan and more...

  India's Economic Interaction with the World   Nations have been primarily trying to adopt various means which will strengthen their own domestic economies. To this effect, they are forming regional and global economic groupings such as the SAARC, European Union, ASEAN, G-20 etc. In addition, there is also an increasing eagerness on the parts of various nations to try and understand, the developmental processes pursued by their neighboring nations as it allows them to better comprehend their own strengths and weaknesses vis-a-vis their neighbors. In the unfolding process of globalization, this is particularly considered essential by developing countries as they face competition not only form developed nations but also amongst themselves in the relatively limited economic space enjoyed by the developing world. Besides an understanding of the other economies in our neighborhood is also required as all major common economic activities in the region impinge on overall human development in a shared environment.   Here   we   will   compare   the developmental strategies in pursued by India and the largest two of its neighboring economies - Pakistan and China. It has to be remembered, however, that apart from the similarities in their physical endowment, there is little in wedded to a secular and' deeply liberal constitution for over half a century, and the authoritarian militarist political power structure of Pakistan or the command economy of China that has only recently started moving towards a more liberal restructuring.     Developmental Path-a Snapshot View   India, Pakistan and china have many similarities in their developmental strategies? All the three nations have started towards their developmental path at the same time. While India and Pakistan become independent nations in 1947, People's Republic of China was established in 1949. In ï speech at that time, Jawaharlal Nehru had said, "these new and revolutionary changes m China and India, even though they differ m content, symbolize the new spirit of the Asia and new vitality which is finding expression in the countries in Asia.?   All the three countries had started planning their development strategies in similar ways. While India announced its first five Year Plan forl951-56, Pakistan announced its first five year plan, called. The Medium Term Plan, in 1956 China announced its five Year Plan in 1953 till current planning in India s based on Tenth Five Year Plan (2002-07). India and Pakistan adopted similar strategies such as creating a large public sector and raising public expenditure on social development. Till the 1980s, all the three countries had similar growth rates and per capita.   China: After the establishment of People's Republic of china under one party rule, all the critical sector of the economy, enterprises and lands owned and operated by individuals were brought under Government control. The Great Leap Forward (GLF) campaigned to set up industries in their backyards. In rule areas, Communes were started. Under the Commune system, people collectively cultivated lands. 1958, there more...

  Liberalization   Rules and laws which were aimed at regulating the economic activities became major hindrances in growth and development. Liberalization was introduced to put an end to these restrictions and open up various sectors of the economy. Though a few liberalization measures were introduced in 1980s in areas of industrial licensing, export- import policy, technology up gradation, fiscal policy and foreign investment, reform policies initiated in 1991 were more comprehensive. Let us study some important areas such as the industrial sector, financial sector, tax reforms, foreign exchange markets and trade and investment sectors which received greater attention in and after 1991.   Deregulation of industrial Sector: In India, regulatory mechanisms were enforced in various ways (i) industrial licensing under which every entrepreneur had to get Permission from government officials to start a firm, close a firm or to decide the amount of goods that could be produced (ii) private sector was not allowed in many industries (iii) some goods could be produced only in small scale industries and (iv) controls on price fixation and distribution of selected industrial products.   The reform policies introduced in and after 1991 removed many of these restrictions. Industrial licensing was abolished for almost all but product categories - alcohol, cigarettes, hazardous chemicals industrial explosives, electronics, aerospace and drugs and pharmaceuticals. The only industries which are now reserved for the public sector are defence equipment?s, atomic energy generation and railway transport. Many 'goods produced by small scale industries have now been deserved. In many industries, the market has been allowed to determine the prices. Financial Sector Reforms: Financial sector includes financial institutions such as commercial banks, investment banks, stock exchange operations and foreign exchange market.      The financial sector in India is controlled by the Reserve Bank of India (RBI). You may be aware that all the banks and other financial institutions in India are controlled through various norms and regulations of the  RBI. The RBI decides the amount of money that the banks can keep with themselves, fixes interest rates, nature of lending to various sectors etc. One of the major aims of financial sector reforms is to reduce the role of RBI from regulator to facilitator of financial sector. This means that the financial sector may be allowed to take decisions on many matters without consulting the RBI.     Navaratnas and public Enterprise Policies   In 1996, in order to improve efficiency, infuse professionalism and enable them to compete more effectively in the liberalized global environment, the government chose nine PSUs and declared them as navaratnas.  They were given greater managerial and operational autonomy, m taking various decisions to run the company efficiently and thus increase their profits. Greater operational, financial and managerial autonomy had also been granted to 97 other profit-'making enterprises referred to as mini ratnas.   The first set of navaratna companies included Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation more...

  Human Capital and Human Development   The two terms sound similar but there is a clear distinction between them. Human development is based on the idea that education and health are integral to human wellbeing because only when people have the ability to read and write and the ability to lead a long and healthy life, they will be able to make other choices which they value. Human capital treats human beings as a means to an gad end being the increase in productivity. In this view, any investment in education and health is unproductive if it does not enhance output of goods and services. In me human development perspective human beings are ends themselves. Human welfare should be increased through investments in education and health even if such investments do not result in higher labour productivity. Therefore, basic education and basic health are important in themselves, irrespective of their contribution to labour productivity. In such a view, every individual has a right to get basic education and basic health care, that is, every individual has a right to be literate and lead a healthy life.     Human Capital Formation in India : Great Prospects   In this section we are going to analyse human capital formation in India. We have already learnt that human capital formation is the outcome of investments in education, health, on-the-job training, migration and information of these education and health are very important sources of human capital formation. We know that ours is a federal country with a union government, state governments and local governments (Munidpal Corporations, Municipalities and Village Panchayats). The Constitution of India mentions the functions to be carried out by each level of government. Accordingly, expenditures. On both education and health are to be carried out simultaneously by all the three tiers of the government   Do you know who takes car& of education and health in India? Before we take up the analysis of the education sector in India, we will look into the need for government intervention in education and health sectors. We do understand that education and health care services create both private and social benefits and this reason for the existence of both private and public institutions in the education and health service markets. Expenditures on education and health make substantial long-term impact and they cannot be easily reversed; hence, government intervention / essential. For instance, once a child is admitted to a school or health care centre where the required services are not provided, before the decision is taken to shift the child to another institution, substantial amount of damage would have been done.   Moreover, individual consumers of these services do not have complete information about the quality of services and their costs. In this situation, the providers of education and health services acquire monopoly power and are involved in exploitation. The role of government in this situation more...