Notes

The compilation of this Employment: Growth, Informalisation and Other Issues Notes makes students exam preparation simpler and organised.

Workers and Employment

What is meant by ‘employment’ and what is its connection with the term ‘work’? Is there a difference between the two? This chapter focuses, in length, on the economic definition of work, worker, labour force, workforce, and employment. Let us dive right in.

Economic Definition of Work

To understand the issues of employment, let us first understand the relevance of ‘work’. Work helps us to earn a living. But more importantly, work gives us a sense of worth to be able to do something and lends meaning to our being. It is our way of contributing to the national income of the country.

By that definition, a ‘worker’ is one who is bound by a contractual agreement or one who gets rewards from working or is self-employed. There can be different types of workers defined on the basis of certain parameters.

Types of Workers

Hired Worker:
These are workers who are employed by others (employers) and receive a salary/wage as compensation for work. Hired workers may again be of two types:

Casual Worker:
These are workers who are engaged by employers on a temporary basis for some specific work. They are not permanent and do not receive any social security or other work benefits. Example: Construction workers are contracted only for specific projects and not hired permanently. Seasonal workers such as those engaged on the farm only during the harvest season are also classified as casual workers.

Regular Salaried Worker:
These are workers hired by employers on a permanent basis and are paid regular salaries/wages for their work. Example: Chartered accountants, teachers, sports trainers at a sports club.

Self-Employed:
The other set of workers are those who are not employed by some employer but who own and work for their own enterprise. Example: Proprietors, business persons.

In the urban areas, in India, 41% of workers are self-employed and 59% are hired. In rural areas, 54% are self-employed and 46% are hired. The percentage of self-employed persons is more in the rural areas as the workers there are usually engaged in working on their own farms. Contrarily, in the urban areas, workers tend to be employed in factories or offices in a larger proportion than their rural counterparts.

Employment: Definition and Important Terminologies

The term ‘employment’ refers to the state of being employed. It is the relationship between an employer and employee, usually. Employment for people varies in the sense that some of them are employed for the entire year, while the others are employed for only some portion of the year.

Worker and Workforce
All the persons in a country who are engaged in productive activities i.e. in activities that contribute to the national product of the country constitute the workforce. Statistics on the workforce reveal that 70% of the workforce is constituted in rural areas, while only 30% belong to the urban areas. Out of the rural workforce, only 26% are female workers.

In the urban areas, the figure drops to 14%. The overall female percentage of the workforce is 30%, while the remaining 70% is constituted by males. It is important to note the formula for the workforce participation ratio:

Participation Ratio = (Total Workforce/ Total Population) × 100

Note that the workforce discussed earlier is different from another concept called labour force. It refers to the number of workers willing and able to offer their labour at a wage rate. This is nothing but labour supply. It refers to the work workers are willing and able to do at a given wage rate.

The participation rate in rural areas is 41% and higher than that in urban areas (35% only). The overall participation rate in the country stands at a low figure of slightly over 39%. This means that even while more people may be working, only a small chunk is engaged in productive activity. Even then, the participation rate is higher in rural areas. Even the female participation rate is higher in rural than urban areas.

Sectors of the Economy
Based on the engagement of workers in different kinds of employment, the economy can be broadly divided into three sectors:

Primary: Constitutes agriculture and allied activities. The Primary sector continues to employ the maximum number of workers in our country, even though the number has dropped over the years.

Secondary: Mainly includes the manufacturing activities, along with electricity, gas, water supply, and construction. Workers have shifted from agriculture to other forms of productive activity. This is also followed by rural to urban migration. A country’s transformation in employment from agriculture to secondary and tertiary sectors is called structural transformation.

Tertiary: Comprises the service sector i.e. transport and communication, banking, insurance, trade, storage, etc.

Example:

Question:
What is a worker-population ratio and what is its significance?
Answer:
Worker -population ratio is the ratio of the workers who are contributing to productive activities in a country to its total population. The population figure is the total number of people residing in a country at a point of time. It is useful to give an idea about the employment situation of a country. It indicates what proportion of the population is actually contributing to the production of goods and services in the country. The ratio is usually multiplied by 100 for percentage values.

The compilation of these Economics Notes makes students exam preparation simpler and organised.

Employment: Growth, Informalisation and Other Issues

One of the most worrying problems our country faces is that of employment. With our ever-growing population and increasing literacy rates, jobs are running out. What are the biggest challenges we face regarding employment? So what can the government do about it? Let us learn more about employment.

• Workers and Employment
• Unemployment and Employment Generation

The compilation of these Development Notes makes students exam preparation simpler and organised.

Development in India

We know all about development in India and its endless scope. But can this development be measured? Yes, economics has measures such as Per Capita Income and Human Development Index that help us put development in quantitative terms. Let us learn all about them.

Development and its Meaning

Development in economics refers to an improvement in the quality of life and well-being of the people of the economy. But to an individual, development can mean something that is distinctive to him/her.

Thus, individuals have different ideas of what development means to them. This is because they come from different backgrounds and perceive different things to be actual quality improvements to their lives and livelihoods. In fact, what might mean ‘development’ to one individual may be destructive to another individual or community.

A classic example of this is the construction of a dam. Industrialists see it as a sign of development. But the people who are resultantly uninhabited and displaced from their homes see it as destructive to their livelihood. This was the case of the Narmada Bachao Andolan in India.

Thus, individuals or communities have different ideas of development in India and that is driven by their development goals. They have certain ideas of what can improve their present condition and it is on this basis that they perceive development.

This creates a concern for the policymaker. He/she must target to achieve that level of development that can encompass everyone. In this, the development goals of everyone must be met fairly enough so that the benefits of development can accrue to one and all.

Goals of Development in India

There are certain things that can be considered as development goals at large. This is because of the universal nature of these factors. This is in the sense that these are goals almost everyone desires and must be strived for. These are:

1. Per Capita Income (PCI)
PCI is the most common constituent of development. It is the total income or national product of the country divided by its total population. It indicates the average income accruing to each individual in the economy. The World Development Report of 2006 indicated that the PCI figure for India was 26,000 crore. Development in India must focus on increasing the PCI in order to ensure a better standard of living to one and all.

Note that PCI differs from GDP in the sense that the Gross Domestic Product gives the total value of final goods and services produced in a country. It excludes the factor income from abroad, which is included in the calculation of Gross National Product (GNP). But in either case, no concern is given to an average value or to population, unlike the case of PCI. High PCI might be due to high GDP or not.

2. Infant Mortality Rate
Also known as the child mortality rate, it is defined as the number of deaths of infants out of every 1000 before completing one year of age. A low figure for IMR is good for development in India because it indicates improved healthcare facilities. The last Census in 2011 revealed the figure to 30.16 for India.

3. Sex Ratio
This indicates the number of females per one thousand males. It is an important figure to indicate the number of females dying in a country due to gender bias in our country or in some cases, owing to female feticide. A high ratio indicates societal progress in removing the gender gap. The figure was 940 females per 1000 males as per the Census, 2011.

4. Life Expectancy
It is defined as the expected life at birth or the number of years an individual is expected to live. The higher the value, the more progress it indicates in health and nutrition facilities. This is important for development in India. As per the 2011 Census, the figure is 67 years for males and 72 years for females.

5. Literacy Rate
One of the most crucial indicators of development is the literacy rate. It indicates the proportion of the population that is literate and able to read and write. The literacy rate in India was 74% according to the Census. While India has progressed, there is still more to achieve in terms of literacy.

6. Infrastructure
Infrastructure refers to roads, railways, construction, bridges, airports, dams, power, telecommunication, etc. These are the building blocks of a country’s path to development. Development in India and the pace at which it is achieved depends a lot on the infrastructure of the country.

Human Development Index

It is seen that PCI or income figures are not enough to indicate actual development. The needs of the people extend beyond just income to other factors that are required for a healthy living. Two other important factors noted for achieving development are literacy rate and life expectancy. These indicate the education level of the people and the healthcare available to them. The combination of these leads to the concept of the Human Development Index.

The Human Development Report of 2010 introduced this concept to rank countries on the basis of their PCI, life expectancy, and literacy rates. Currently, India ranks 131 out of 193 countries in HDI and still has a long way to go in achieving development.

Example:

Question:
Why is PCI important to determine development?
Answer:
PCI of a country indicates the income per capita or the average income of the country. It gives an idea as to the financial resources of the country. These are important to achieve other development goals such as literacy, healthcare and to provide infrastructure. Thus, PCI is a critical factor in determining development.

The compilation of these Economics Notes makes students exam preparation simpler and organised.

Development

In the world economy, India has been dubbed a “Developing Country”. It simply means we are on our way to being a developed country but are not quite there yet. While the financial sectors have shown tremendous development over the years, we still lag behind on quality of life and other human development indexes. Let us take an in-depth look at development indicators, such as the human development index, and the scope for further development in our country.

• Development in India

The compilation of these Correlation Notes makes students exam preparation simpler and organised.

Correlation in a Whole

Correlation in a Whole
We know that when the price of a product increases its demand will decrease. And to the contrary quality supplied will increase with the increase of price. These are nothing but positive correlations and negative correlations. Statistical correlation, its meaning, and types and examples are defined in this lesson.

Correlation: Definition and Types

Correlation can be defined as a statistical tool that defines the relationship between two variables. For, eg: correlation may be used to define the relationship between the price of a good and its quantity demanded. It explains how two variables are related but do not explain any cause-effect relation. It only gives an understanding as to the direction and intensity of the relation between two variables. Correlation can be of two types:

1. Positive Correlation:
Two variables are positively correlated when they move together in the same direction. In economics, quantity supplied increases as the price increases. This is because sellers find it profitable to sell when the prices are high, so they will sell more. Thus, we can call price and quantity supplied to be positively correlated. This is also called the law of supply.

2. Negative Correlation:
Two variables are negatively correlated if they move in opposite directions. For instance, as the price of increases, the quantity demanded declines as the good becomes more expensive relative to when the price had not increased. Thus, we can say that price and quantity demanded are negatively correlated. Note that this is the famous law of demand.

Correlation Estimation

There are different ways of calculating or estimating the correlation between variables.

1. Scatter Diagram
This is a diagrammatic method of correlation estimation. Here, the x-values are depicted on the horizontal axis and y-values are on the vertical axis. The degree of closeness between the coordinates would indicate the correlation. If the trend is downward sloping from right to left, it means a negative correlation.

If it is upward sloping from left to right, it is upward sloping. And if the points are scattered all around with no trend, then the variables are said to be uncorrelated.

2. Karl Pearson’s Correlation Coefficient
This is a quantitative method of correlation estimation. The formula is:
r = cov(x, y)/σx . σy
where, cov(x, y) is the covariation between the two variables. And, σx and σy are the standard deviations of x and y variables, respectively. Properties of ‘r’:

• It has no unit.
• It lies between -1 and +1, both included. In both the extreme cases, there is either a perfect negative or perfect positive correlation, respectively.
• A value of zero means no correlation.
• A high value of ‘r’ indicates a strong linear relationship, and vice versa.
• A positive value indicates a positive correlation.
• The value of ‘r’ is unaffected by a change of origin or change of scale.

3. Spearman’s Rank Correlation
This method is a non-parametric method of correlation estimation. It is used to determine the correlation between the ranks of different variables. These variables are usually qualitative in nature, such as beauty, honesty, intelligence, wisdom, etc. Ranks such as first, second, third, etc. are assigned and then the correlation is calculated using a formula.

Degree of Correlation

• +1 – Perfect Positive
• -1 – Perfect Negative
• 0 – Uncorrelated

In other cases (positive or negative), if the value of ‘r’ is 0.50, it is called a moderate correlation. When it lies between 0.50 and 0.75, the degree of correlation is high and when it lies between 0.25 and 0.50, the degree of correlation is low.

Example:

Question:
Can the value of ‘r’ lie outside the range of -1 to 1?
Answer:
No, whatever the kind of data, ‘r’ must always lie between -1 and 1. The extreme cases depict perfect correlation (positive or negative), while r = 0 implies no correlation. Other values within this range are permitted. Any value outside this range is not permitted and is due to an error in estimation.

The compilation of these Economics Notes makes students exam preparation simpler and organised.

Correlation

Let us take a scenario. On a hot summer day, it is a given that the sales of ice creams will see a boom. This is nothing but a positive correlation! In economics, they are more sophisticated principles of this same concept of correlation. Let us study how to calculate correlation and its types.

• Correlation in a Whole

The compilation of these Consumer Rights Notes makes students exam preparation simpler and organised.

Rights of Consumers

A consumer is an important participant in the market. In case of consumer exploitation, the rights of the consumer must be protected. There are six consumer rights as mentioned in the regulatory Consumer Protection Act of 1986. The concept of consumer protection and the meaning of the rights is explained in simple terms in this lesson.

Who is a Consumer?

A person who buys a good or service for his own personal use and not for further manufacture is called a consumer. Consumers play an important role in the market. The market for a good or service constitutes all the consumers and producers of that good or service. If there is no consumer, producers will have no one to provide the goods.

However, there are regularly reported cases of exploitation of the consumer. Often less than the actual weight of foodstuff is sold to consumers, or many retailers sell products that are not certified. Many cases happen were more than the market price is charged to the consumer. In light of this, consumer protection holds an important role.

Consumer Protection Act, 1986

Till the 1960s, India was plagued with cases of black marketeering, hoarding, inadequate weighing and food adulteration. These were problems that affected the well-being of the consumer and amount to consumer exploitation.

The consumer movement began in the 1960s and gained momentum in the 1970s. Consumer dissatisfaction started to be demonstrated through the written word and in articles and newspapers.

The level of dissatisfaction with sellers and manufacturers and their practices resulted in consumers raising their voices. Resultantly, the government decided to give recognition to consumer protection by enacting the Consumer Protection Act on 24th December 1986. The Act was aimed at protecting the rights of the consumers and ensuring free trade in the market, competition, and accurate information to be available. This day is now observed as National Consumers’ Day.

Consumer Rights

There are six broad consumer rights defined as per the Consumer Protection Act, 1986. These are:

Right to Safety:
The Consumer Protection Act defines this right as a protection against goods and services that are ‘hazardous to life and property. This particularly applies to medicines, pharmaceuticals, foodstuffs, and automobiles. The right requires all such products of critical nature to life and property to be carefully tested and validated before being marketed to the consumer.

Right to Information:
This right mentions the need for consumers to be informed about the quality and quantity of goods being sold. They must be informed about the price of the product and have access to other information specific to the product that they wish to consume.

Right to Choose:
The consumer must have the right to choose between different products at competitive prices. Thus, the concept of a competitive market where many sellers sell similar products must be established to ensure that the consumer can actually choose what to consume and in what quantity. This is to avoid a monopoly in the market.

Right to Seek Redressal:
When a consumer feels exploited, he/she has the right to approach a consumer court to file a complaint. A consumer court is a forum that hears the complaint and provides justice to the party that has been hurt. Thus, if the consumer feels he/she has been exploited, they can approach the court using this right.

Right to be Heard:
The purpose of this right is to ensure that the consumer gets due recognition in consumer courts or redressal forums. Basically, when a consumer feels exploited, he has the right to approach a consumer court to voice his complaint. This right gives him/her due respect that his/her complaint will be duly heard. The right empowers consumers to fearlessly voice their concerns and seek justice in case they are exploited.

Right to Consumer Education:
Consumers must be aware of their rights and must have access to enough information while making consumption decisions. Such information can help them to choose what to purchase, how much to purchase, and at what price. Many consumers in India are not even aware that they are protected by the Act. Unless they know, they cannot seek justice when they are actually hurt or exploited.

Consumer Forums
Consumer forums or consumer protection councils are organizations that help represent consumer interests. They guide consumers in the process of filing complaints in court when they are exploited and also help in spreading consumer protection awareness.

A consumer court is where the cases are actually presented and heard. It follows a three-tier quasi-judicial system. District courts deal with cases up to 20 lakhs. A state-level court deals with cases between 20 lakhs and 1 crore, while a national consumer court deals with claims that exceed the value of 1 crore.

Example:

Question:
What is the need for consumer awareness?
Answer:
Consumer awareness is important to educate consumers about their rights. It is required to remove illiteracy and lack of education regarding the rights that enhance the status of consumers and protect them from exploitation. It allows them to be less ignorant of their rights and seek redressal if they are exploited by sellers, retailers or manufacturers in the market.

The compilation of these Economics Notes makes students exam preparation simpler and organised.

Consumer Rights

Have you ever heard the phrase “Customer is King”? It is a general belief that a happy customer is the best marketing tool. However in India during the 1950s and 1960s, the customer was largely ignored. Then started the consumer rights movement. And now in India consumers have protection from the law. Let us study the consumer rights movement of India.

• Rights of Consumers

The compilation of these Comparative Development Experiences of India and its Neighbours Notes makes students exam preparation simpler and organised.

Development Path

Any country pursues a development path, keeping in mind that of its neighbours. The performance of its neighbours gives a country an idea of its strengths and weaknesses. It can tweak its development policy depending on developments in the neighbouring countries, which is of significant importance in an increasingly globalized world. This lesson will compare the development path of India with Pakistan and China.

Development Path of India & its Neighbours

We study the development path of India in comparison with Pakistan and China because of the similarities these countries exhibit with India in the sense that all the three countries set out on their respective development paths roughly around the same time. India and Pakistan became independent countries in 1947, while the People’s Republic of China came into existence in 1949.

All these countries followed the process of economic planning in the initial years of their development planning. India undertook its first Five Year Plan from 1951-56. Pakistan announced its first plan, called the Medium Term Plan in 1956. China announced its first plan in the year 1953. India and Pakistan placed a similar thrust on the relative importance of the public sector and social expenditure.

All three countries had similar growth rates till the 1980s. their per capita incomes were nearly around the same figure. India undertook economic reforms in 1991. Pakistan implemented reforms in 1988, while China did so in 1978.

Development Strategy of India
In the development path of India, it first undertook the policy of closed trade. This was to give a thrust to domestic industries and reduce dependence on foreign products and companies. Thus, India followed what is called the import substitution strategy. Trade and interaction with the outside world remained limited. This outlook continued till 1991 when India finally decided to open its borders to free trade and liberalized its economy by allowing foreign companies to enter the Indian economy.

A thrust was given to employment generation under the Five Year Plans. This was to make up for a rising population and lacking jobs to absorb the increased workforce size. Rural development was also given importance in India, for the important constituent it was of the Indian landscape.

Poverty alleviation came as a corollary of rural development and a part of the development path of India. India inherited a poverty-stricken economy from British rule, which had destroyed its resource base completely. Therefore, poverty alleviation programmes and policies formed a major part of election campaigns and party promises.

The public sector was given significant importance, Private companies and industries were subject to strict regulations and standards. It was believed that the government was the sole protector of the people and would work towards social welfare.

Development Strategy of China
One of the key highlights of China’s development strategy is its Great Leap Forward (GLF). The strategy aimed at the high-scale industrialization of the economy. Rural communities were allowed to undertake collective cultivation. Urban communities were encouraged to undertake industrialization by even setting up industrial workshops in their backyards.

China has always followed a communist ideology. Severely critical of the free market forces and capitalism, the Great Proletarian Cultural Revolution was launched in 1966-76 under the leadership of Mao Tse Tung. Following the revolution, China reformed its economy in 1978.

Reforms in agriculture allowed cultivators to keep the income from their lands after paying taxes. Industrial reforms were aimed at promoting collective local production. The public enterprises were exposed to foreign competitors as a result of the reforms. The goal was to generate enough surpluses to finance the modernization of mainland China. To this end, China set up Special Economic Zones (SEZs) to invite investors to set up economic units in its territory.

China was able to develop a strong healthcare system for its population. There were decentralized planning and equitable distribution of resources. However, development was slow under Maoist rule. The rate of foodgrain production growth remained nearly the same in the 1970s as it was in the mid-1950.

Development Strategy of Pakistan
Like the development path of India, Pakistan also followed the import substitution strategy. This was achieved through tariffs and other trade barriers that restricted foreign competition. The motive was to make foreign products expensive relative to domestic ones, thereby giving a thrust to domestic industries.

Pakistan follows a mixed economy system, where the public and private sectors co-exist. The green revolution was aimed to increase domestic food grain production in Pakistan. Until the 1970s, domestic industries were given priority. In the 1980s, importance was given to the private sector. New investment was invited and the economy opened up to the rest of the world.

Both India and Pakistan have benefited from a mixed economic system, in that they have been able to maintain high economic growth rates despite high rates of growth of population. The countries have been able to develop a service sector and have used technology increasingly in their production processes. Poverty remains to plague their economies, however. Unemployment is a major concern in India and Pakistan, as the working population is on the rise and commensurate jobs are less in number.

Analysis

Pakistan has been able to show an easier structural shift of its workforce from agriculture to industry, and its people from rural to urban areas than India. It is working towards reducing the number of people below the poverty line. India has a clear edge over Pakistan in its research and development. India boasts of a skilled labour force as compared to Pakistan. Also, India is known worldwide for its scientists and technology, its discoveries in space culture, aviation, and defence.

China ranks above India in its global exposure. It liberalized its economy earlier than India and has been able to reap the benefits thus forth. China has become an export manufacturer and is a leading FDI hub for economies over the world, as India struggles only to find a marginal share in the international market. China has also successively reduced poverty levels and has controlled its population growth rate through the One Child Policy programme.

Comparative Indicators

Demographics:
Population density is the lowest in China despite its largest area among all three countries. Pakistan has a population, only one-tenth that of India or China. All three countries have poor sex ratio figures and are working towards improving the situation. The fertility rate is the highest in Pakistan and the lowest in China. China has been able to control its population growth rate through its One Child Policy.

Gross Domestic Product:
China has the second-largest GDP adjusted for PPP, standing at USD 10.1 trillion. The corresponding figures for India and China are USD 4.2 trillion and USD 0.47 trillion respectively. In both, Pakistan and India, agriculture employs the largest proportion of the population. But, it is the service sector that contributes to the GDP the most in these countries. In the case of China, it is the manufacturing sector. A structural shift is underway in India and Pakistan but the shift is directly from the primary to the tertiary sector. Thus, in these countries, the service sector is emerging as a major propellant of development.

Human Development Index:
HDI takes into consideration three parameters to judge a country’s development performance. These are PCI, literacy levels, and nutritional levels. Trends show that China is overtaking both, India and Pakistan in HDI ranking. Pakistan is ahead of India in alleviating poverty. India is poorer also in terms of access to safe drinking water. The infant mortality rate, however, is the worst in Pakistan.

Example:

Question:
Mention one similarity and one difference in the development path of India and Pakistan.
Answer:
India and Pakistan are similar in the orientation of their economies. Both are mixed economic systems that allow both, the public and private sectors to co-exist. The countries differ in their political systems. India is the largest democracy in the world, with a multi-party system in place. Pakistan, on the other hand, follows an authoritarian military rule of power.

The compilation of these Economics Notes makes students exam preparation simpler and organised.

Comparative Development Experiences of India and its Neighbours

We all know about India’s rivalry with Pakistan and China. But this rivalry is not just political, it is an economic rivalry too. In a global economy, every nation is competing for resources and capital. Let us take a look at the development of India’s economy and its comparison with those of Pakistan and China.

• Development Path